N-CSRS 1 v402607_ncsrs.htm N-CSRS

 

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 - June 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:  June 30

 

Date of reporting period:  December 31, 2014

 

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.

December 31, 2014

(Unaudited)

 

Semi-Annual Report

 

Touchstone Strategic Trust

Touchstone Capital Growth Fund

Touchstone International Small Cap Fund

Touchstone Large Cap Fund

Touchstone Small Cap Value Opportunities Fund

Touchstone Value Fund

 

 

 
 

 

Table of Contents

 

  Page  
Tabular Presentation of Portfolios of Investments 3 - 4  
Portfolio of Investments:    
Touchstone Capital Growth Fund 5  
Touchstone International Small Cap Fund 7  
Touchstone Large Cap Fund 11  
Touchstone Small Cap Value Opportunities Fund 13  
Touchstone Value Fund 15  
Statements of Assets and Liabilities 18 - 21  
Statements of Operations 22  
Statements of Changes in Net Assets 24 - 25  
Statements of Changes in Net Assets - Capital Stock Activity 26 - 29  
Financial Highlights 30 - 39  
Notes to Financial Statements 40 - 51  
Other Items 52 - 62  
Privacy Protection Policy 63  

 

This report identifies the Funds' investments on December 31, 2014. These holdings are subject to change. Not all investments in each Fund performed the same, nor is there any guarantee that these investments will perform as well in the future. Market forecasts provided in this report may not occur.

 

2
 

 

Tabular Presentation of Portfolios of Investments (Unaudited)

December 31, 2014

 

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 Capital Growth Fund    
Sector Allocation*  (% of Net Assets) 
Information Technology   27.0%
Consumer Discretionary   17.9 
Health Care   16.5 
Industrials   14.9 
Consumer Staples   9.1 
Energy   5.8 
Financials   5.8 
Investment Funds   3.5 
Materials   1.0 
Other Assets/Liabilities (Net)   (1.5)
Total   100.0%
      
Touchstone Large Cap Fund    
Sector Allocation*  (% of Net Assets) 
Information Technology   19.5%
Financials   18.8 
Consumer Discretionary   16.0 
Consumer Staples   11.6 
Health Care   9.3 
Materials   8.8 
Industrials   6.4 
Energy   6.4 
Telecommunication Services   1.8 
Investment Funds   1.9 
Other Assets/Liabilities (Net)   (0.5)
Total   100.0%
      
Touchstone International Small Cap Fund    
Geographic Allocation   (% of Net Assets) 
Common Stocks     
Japan   23.9%
United Kingdom   12.5 
Germany   7.3 
Canada   6.3 
Australia   5.5 
Sweden   4.8 
Spain   3.6 
France   3.2 
Ireland   3.1 
Italy   3.0 
Hong Kong   2.8 
Norway   2.1 
South Korea   2.1 
New Zealand   1.9 
Belgium   1.8 
Switzerland   1.8 
Austria   1.8 
Denmark   1.7 
Portugal   1.3 
Thailand   1.2 
Singapore   1.1 
Jersey   1.1 
Bermuda   1.0 
Luxembourg   0.9 
Israel   0.7 
Exchange Traded Fund   1.9 
Investment Funds   7.9 
Other Assets/Liabilities (Net)   (6.3)
Total   100.0%

 

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

 

3
 

 

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

 

Touchstone Small Cap Value Opportunities Fund    
Sector Allocation*  (% of Net Assets) 
Financials   33.4%
Consumer Discretionary   16.5 
Industrials   15.1 
Information Technology   9.7 
Health Care   6.7 
Materials   4.7 
Energy   4.6 
Utilities   2.7 
Consumer Staples   2.2 
Telecommunication Services   0.9 
Investment Funds   19.4 
Other Assets/Liabilities (Net)   (15.9)
Total   100.0%
     
Touchstone Value Fund    
Sector Allocation*  (% of Net Assets) 
Financials   24.8%
Health Care   20.0 
Information Technology   11.1 
Consumer Discretionary   10.5 
Industrials   9.2 
Energy   8.4 
Consumer Staples   6.5 
Telecommunications Services   3.8 
Investment Funds   3.2 
Materials   2.4 
Utilities   1.4 
Other Assets/Liabilities (Net)   (1.3)
Total   100.0%

 

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

 

4
 

 

Portfolio of Investments

Touchstone Capital Growth Fund – December 31, 2014 (Unaudited)

 

       Market 
   Shares   Value 
           
Common Stocks — 98.0%          
           
Information Technology — 27.0%          
Adobe Systems, Inc.*   58,105   $4,224,234 
Alibaba Group Holding Ltd., ADR*   23,925    2,486,764 
Analog Devices, Inc.   77,915    4,325,841 
Apple, Inc.   72,415    7,993,168 
ARM Holdings PLC, ADR   43,115    1,996,224 
EMC Corp.   72,085    2,143,808 
Google, Inc. - Class C*   6,895    3,629,528 
Google, Inc. - Class A*   6,895    3,658,901 
LinkedIn Corp. - Class A*   12,080    2,774,897 
Microsoft Corp.   60,625    2,816,031 
Palo Alto Networks, Inc.*   26,700    3,272,619 
Qualcomm, Inc.   23,855    1,773,142 
Splunk, Inc.*   50,640    2,985,228 
Stratasys Ltd.*†   13,815    1,148,165 
Visa, Inc. - Class A   24,905    6,530,091 
         51,758,641 
           
Consumer Discretionary — 17.9%          
Amazon.com, Inc.*   10,740    3,333,159 
BorgWarner, Inc.   73,610    4,044,870 
Harman International Industries, Inc.   35,975    3,838,892 
Michael Kors Holdings Ltd. (British Virgin Islands)*   39,525    2,968,328 
Priceline Group, Inc. (The)*   1,715    1,955,460 
Restoration Hardware Holdings, Inc.*†   33,630    3,228,816 
Starbucks Corp.   46,415    3,808,351 
Starwood Hotels & Resorts Worldwide, Inc.   46,500    3,769,755 
VF Corp.   59,720    4,473,028 
Walt Disney Co. (The)   29,390    2,768,244 
         34,188,903 
           
Health Care — 16.5%          
Biogen Idec, Inc.*   14,510    4,925,420 
Celgene Corp.*   50,065    5,600,271 
Cerner Corp.*   66,388    4,292,648 
Grifols SA, ADR   79,225    2,692,858 
Henry Schein, Inc.*   23,770    3,236,286 
Novartis AG, ADR   40,760    3,776,822 
Shire PLC, ADR   14,835    3,153,031 
Thermo Fisher Scientific, Inc.   30,745    3,852,041 
         31,529,377 
           
Industrials — 14.9%          
Danaher Corp.   41,165    3,528,252 
Flowserve Corp.   40,650    2,432,090 
Fluor Corp.   33,395    2,024,739 
HD Supply Holdings, Inc.*   139,835    4,123,734 
Precision Castparts Corp.   14,055    3,385,568 
Union Pacific Corp.   44,280    5,275,076 
United Rentals, Inc.*   37,940    3,870,259 
United Technologies Corp.   33,710    3,876,650 
         28,516,368 
           
Consumer Staples — 9.1%          
Anheuser-Busch InBev N.V., ADR   32,000    3,594,240 
Costco Wholesale Corp.   29,615    4,197,926 
Estee Lauder Cos., Inc. (The) - Class A   28,865    2,199,513 
Hain Celestial Group, Inc. (The)*   87,290    5,088,134 
Walgreens Boots Alliance, Inc.   31,745    2,418,969 
         17,498,782 
           
Energy — 5.8%          
Anadarko Petroleum Corp.   48,580    4,007,850 
Pioneer Natural Resources Co.   25,970    3,865,634 
Schlumberger Ltd. (Curacao)   38,210    3,263,516 
         11,137,000 
           
Financials — 5.8%          
Ameriprise Financial, Inc.   45,877    6,067,233 
BlackRock, Inc.   13,900    4,970,084 
         11,037,317 
           
Materials — 1.0%          
Monsanto Co.   16,475    1,968,268 
Total Common Stocks       $187,634,656 
           
Investment Funds — 3.5%          
Invesco Government & Agency          
Portfolio, Institutional Class, 0.01%**∞Ω   2,428,723    2,428,723 
Touchstone Institutional Money Market Fund, 0.01%^∞Ω   4,132,615    4,132,615 
Total Investment Funds       $6,561,338 
           
           
Total Investment Securities —101.5%          
(Cost $127,974,084)       $194,195,994 
           
Liabilities in Excess of Other Assets — (1.5%)        (2,783,129)
           
Net Assets — 100.0%       $191,412,865 

 

*Non-income producing security.

 

**Represents collateral for securities loaned.

 

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

 

†All or a portion of the security is on loan. The total market value of the securities on loan as of December 31, 2014 was $2,388,123.

 

∞Open-End Fund.

 

ΩRepresents the 7-day SEC yield as of December 31, 2014.

 

5
 

 

Touchstone Capital Growth Fund (Unaudited) (Continued)

 

Portfolio Abbreviations:

 

ADR - American Depositary Receipt

 

PLC - Public Limited Company

 

Other Information:

 

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

 

Valuation inputs at Reporting Date:
Description  Level 1   Level 2   Level 3   Total 
Common                    
Stocks  $187,634,656   $—   $—   $187,634,656 
Investment                    
Funds   6,561,338    —    —    6,561,338 
                  $194,195,994 

 

See accompanying Notes to Financial Statements.

 

6
 

 

Portfolio of Investments

Touchstone International Small Cap Fund – December 31, 2014 (Unaudited)

 

       Market 
   Shares   Value 
         
Common Stocks — 96.5%          
           
Japan — 23.9%          
           
Consumer Discretionary — 3.8%          
Calsonic Kansei Corp.   188,000   $1,042,025 
Daiichikosho Co. Ltd.   40,500    1,098,086 
HIS Co. Ltd.   57,300    1,617,627 
Seria Co. Ltd.   33,600    1,119,329 
Sumitomo Rubber Industries Ltd.   67,200    999,000 
           
Consumer Staples — 2.0%          
NH Foods Ltd.   70,000    1,531,481 
Pola Orbis Holdings, Inc.†   40,700    1,626,700 
           
Energy — 0.6%          
Japan Petroleum Exploration Co. Ltd.   31,600    992,783 
           
Financials — 3.4%          
Leopalace21 Corp.*   278,300    1,755,675 
Nomura Real Estate Office Fund, Inc. REIT   340    1,685,994 
Zenkoku Hosho Co. Ltd.   63,100    1,790,619 
           
Health Care — 0.7%          
Message Co. Ltd.   36,600    1,005,310 
           
Industrials — 6.5%          
COMSYS Holdings Corp.   78,200    1,069,758 
Hoshizaki Electric Co. Ltd.   41,800    2,014,256 
Kanamoto Co. Ltd.   58,500    1,581,833 
Kyowa Exeo Corp.   99,500    1,061,138 
Minebea Co. Ltd.   119,000    1,757,380 
Sankyu, Inc.   262,000    1,063,437 
Sanwa Holdings Corp.   205,000    1,429,088 
           
Information Technology — 3.3%          
Alps Electric Co. Ltd.   82,300    1,555,667 
Iriso Electronics Co. Ltd.   22,600    1,199,466 
Japan Aviation Electronics Industry Ltd.   63,000    1,376,372 
Kakaku.com, Inc.   73,000    1,044,390 
           
Materials — 3.6%          
Daicel Corp.   163,000    1,903,920 
Nippon Paint Holdings Co. Ltd.   82,000    2,376,196 
Tokyo Ohka Kogyo Co. Ltd.   42,700    1,306,429 
Total Japan        37,003,959 
           
United Kingdom — 12.5%          
           
Consumer Discretionary — 3.5%          
Halfords Group PLC   206,700    1,508,353 
Howden Joinery Group PLC   333,397    2,079,979 
Taylor Wimpey PLC   820,640    1,750,769 
           
Financials — 2.0%          
Jupiter Fund Management PLC   289,513    1,634,837 
Savills PLC   141,783    1,499,827 
           
Health Care — 1.3%          
Synergy Health PLC   62,872    2,038,844 
           
Industrials — 3.1%          
Berendsen PLC   100,468    1,717,224 
Northgate PLC   172,824    1,638,464 
WS Atkins PLC   67,937    1,438,811 
           
Information Technology — 1.9%          
Micro Focus International PLC   108,821    1,831,769 
Optimal Payments PLC*   195,591    1,038,192 
           
Materials — 0.7%          
Elementis PLC   284,704    1,154,039 
Total United Kingdom        19,331,108 
           
Germany — 7.3%          
           
Consumer Discretionary — 1.3%          
Stroeer Media SE   67,865    2,013,084 
           
Financials — 2.1%          
Aurelius AG   51,047    1,931,937 
Patrizia Immobilien AG*   88,400    1,298,083 
           
Industrials — 2.7%          
Indus Holding AG   25,007    1,144,859 
KUKA AG†   23,300    1,648,065 
Norma Group SE   28,293    1,350,455 
           
Telecommunication Services — 1.2%          
Freenet AG   65,921    1,874,289 
Total Germany        11,260,772 
           
Canada — 6.3%          
           
Consumer Discretionary — 0.8%          
Entertainment One Ltd.   238,754    1,193,067 
           
Energy — 0.6%          
Pason Systems, Inc.   47,500    894,968 
           
Financials — 1.3%          
Element Financial Corp.*   158,487    1,928,909 
           
Industrials — 2.2%          
Stantec, Inc.   54,200    1,489,590 
WestJet Airlines Ltd.   67,000    1,942,296 
           
Materials — 1.4%          
Intertape Polymer Group, Inc.   139,339    2,231,967 
Total Canada        9,680,797 
           
Australia — 5.5%          
           
Consumer Discretionary — 2.1%          
Slater & Gordon Ltd.   334,057    1,732,477 
Spotless Group Holdings Ltd.*   1,031,354    1,597,602 
Financials — 1.6%          
Magellan Financial Group Ltd.   183,745    2,447,368 

 

7
 

 

Touchstone International Small Cap Fund (Unaudited) (Continued)

 

       Market 
   Shares   Value 
         
Common Stocks — 96.5% (Continued)          
           
Australia — (Continued)          
           
Health Care — 0.7%          
Estia Health Ltd.*   287,919   $1,114,171 
           
Materials — 1.1%          
CSR Ltd.   522,930    1,652,161 
Total Australia        8,543,779 
           
Sweden — 4.8%          
           
Consumer Discretionary — 0.9%          
JM AB   42,101    1,334,541 
           
Financials — 1.8%          
Fastighets AB Balder, Class B*   204,185    2,867,629 
           
Industrials — 2.1%          
Haldex AB   131,034    1,698,340 
Loomis AB, Class B   54,000    1,559,932 
Total Sweden        7,460,442 
           
Spain — 3.6%          
           
Financials — 1.2%          
Bankinter SA   229,140    1,840,850 
           
Health Care — 1.0%          
Almirall SA*   93,298    1,539,622 
           
Industrials — 0.7%          
Prosegur Cia de Seguridad SA   197,831    1,127,101 
           
Materials — 0.7%          
Tubacex SA   275,200    1,026,142 
Total Spain        5,533,715 
           
France — 3.2%          
           
Consumer Discretionary — 0.9%          
Plastic Omnium SA   50,304    1,365,146 
           
Health Care — 1.1%          
Ipsen SA   34,300    1,775,422 
           
Information Technology — 1.2%          
UBISOFT Entertainment*   99,919    1,821,574 
Total France        4,962,142 
           
Ireland — 3.1%          
           
Consumer Staples — 2.0%          
Greencore Group PLC   717,210    3,185,754 
           
Materials — 1.1%          
Smurfit Kappa Group PLC   73,707    1,657,558 
Total Ireland        4,843,312 
           
Italy — 3.0%          
           
Financials — 0.8%          
Banca Generali SpA   43,896   1,220,891 
           
Health Care — 1.0%          
Recordati SpA   102,092    1,582,772 
           
Industrials — 1.2%          
Interpump Group SpA   133,700    1,876,001 
Total Italy        4,679,664 
           
Hong Kong — 2.8%          
           
Financials — 1.0%          
Dah Sing Banking Group Ltd.   942,000    1,505,895 
           
Information Technology — 0.8%          
PAX Global Technology Ltd.*†   1,221,000    1,250,677 
           
Utilities — 1.0%          
China Power International          
Development Ltd.   3,077,000    1,552,614 
Total Hong Kong        4,309,186 
           
Norway — 2.1%          
           
Consumer Staples — 1.1%          
Salmar ASA   103,612    1,763,840 
           
Materials — 1.0%          
Borregaard ASA   210,642    1,558,046 
Total Norway        3,321,886 
           
South Korea — 2.1%          
           
Consumer Discretionary — 1.4%          
Hanssem Co. Ltd.†   20,700    2,151,625 
           
Information Technology — 0.7%          
AfreecaTV Co. Ltd.†   45,300    1,091,973 
Total South Korea        3,243,598 
           
New Zealand — 1.9%          
           
Consumer Discretionary — 0.9%          
SKY Network Television Ltd.   274,598    1,289,145 
           
Utilities — 1.0%          
Meridian Energy Ltd.†   1,158,406    1,582,491 
Total New Zealand        2,871,636 
           
Belgium — 1.8%          
           
Health Care — 1.8%          
Fagron NV   37,769    1,578,321 
Ion Beam Applications*   72,200    1,252,826 
Total Belgium        2,831,147 

 

8
 

 

Touchstone International Small Cap Fund (Unaudited) (Continued)

 

       Market 
   Shares   Value 
         
Common Stocks — 96.5% (Continued)          
           
Switzerland — 1.8%          
           
Consumer Staples — 1.0%          
Aryzta AG   20,378   $1,566,040 
           
Financials — 0.8%          
Cembra Money Bank AG   22,459    1,234,431 
Total Switzerland        2,800,471 
           
Austria — 1.8%          
           
Industrials — 0.9%          
Oesterreichische Post AG   28,794    1,406,931 
           
Information Technology — 0.9%          
ams AG   38,148    1,379,050 
Total Austria        2,785,981 
           
Denmark — 1.7%          
           
Consumer Staples — 1.7%          
Royal UNIBREW A/S*   15,085    2,644,450 
           
Portugal — 1.3%          
           
Industrials — 1.3%          
CTT-Correios de Portugal SA   200,700    1,938,390 
           
Thailand — 1.2%          
           
Utilities — 1.2%          
TTW PCL   2,807,002    987,507 
TTW PCL- Foreign Shares   2,457,298    864,481 
Total Thailand        1,851,988 
           
Singapore — 1.1%          
           
Consumer Staples — 1.1%          
First Resources Ltd.   706,000    992,575 
Sino Grandness Food Industry Group Ltd.*†   2,305,000    779,990 
Total Singapore        1,772,565 
           
Jersey — 1.1%          
           
Financials — 1.1%          
Henderson Group PLC   500,156    1,653,663 
           
Bermuda — 1.0%          
           
Financials — 1.0%          
Catlin Group Ltd.   144,820    1,508,573 
           
Luxembourg — 0.9%          
           
Financials — 0.9%          
Grand City Properties SA*†   98,500    1,452,399 
           
Israel — 0.7%          
           
Financials — 0.7%          
Mizrahi Tefahot Bank Ltd.*   102,692   1,074,713 
Total Common Stocks       $149,360,336 
           
Exchange Traded Fund — 1.9%          
           
United States — 1.9%          
iShares MSCI EAFE Small Cap Index Fund†   64,474    3,011,581 
           
Investment Funds — 7.9%          
Invesco Government & Agency Portfolio, Institutional Class, 0.01%**∞Ω   10,067,164    10,067,164 
Touchstone Institutional Money Market Fund, 0.01%^∞Ω   2,172,299    2,172,299 
Total Investment Funds       $12,239,463 
           
Total Investment Securities —106.3%          
(Cost $143,466,439)       $164,611,380 
           
Liabilities in Excess of Other Assets — (6.3%)        (9,781,910) 
           
Net Assets — 100.0%       $154,829,470 

 

*Non-income producing security.

 

**Represents collateral for securities loaned.

 

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

 

†All or a portion of the security is on loan. The total market value of the securities on loan as of December 31, 2014 was $9,358,930.

 

∞Open-End Fund.

 

ΩRepresents the 7-day SEC yield as of December 31, 2014.

 

Portfolio Abbreviations:

 

PCL - Public Company Limited

 

PLC - Public Limited Company

 

REIT- Real Estate Investment Trust

 

9
 

 

Touchstone International Small Cap Fund (Unaudited) (Continued)

 

Other Information:

 

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

 

Valuation inputs at Reporting Date: 
   Level 1   Level 2   Level 3   Total 
Common                    
Stocks                    
Japan  $—   $37,003,959   $—   $37,003,959 
United                    
Kingdom   1,831,769    17,499,339    —    19,331,108 
Germany   —    11,260,772    —    11,260,772 
Canada   8,487,730    1,193,067    —    9,680,797 
Australia   1,114,171    7,429,608    —    8,543,779 
Sweden   —    7,460,442    —    7,460,442 
Spain   —    5,533,715    —    5,533,715 
France   —    4,962,142    —    4,962,142 
Ireland   —    4,843,312    —    4,843,312 
Italy   —    4,679,664    —    4,679,664 
Hong                    
Kong   —    4,309,186    —    4,309,186 
Norway   —    3,321,886    —    3,321,886 
South                    
Korea   —    3,243,598    —    3,243,598 
New                    
Zealand   —    2,871,636    —    2,871,636 
Belgium   1,252,826    1,578,321    —    2,831,147 
Switzerland   —    2,800,471    —    2,800,471 
Austria   1,406,931    1,379,050    —    2,785,981 
Denmark   —    2,644,450    —    2,644,450 
Portugal   —    1,938,390    —    1,938,390 
Thailand   —    1,851,988    —    1,851,988 
Singapore   —    1,772,565    —    1,772,565 
Jersey   —    1,653,663    —    1,653,663 
Bermuda   —    1,508,573    —    1,508,573 
Luxembourg   —    1,452,399    —    1,452,399 
Israel   —    1,074,713    —    1,074,713 
Exchange Traded Fund   3,011,581    —    —    3,011,581 
Investment                    
Funds   12,239,463    —    —    12,239,463 
                  $164,611,380 

 

At December 31, 2014, securities valued at $93,917,009 were transferred from Level 1 to Level 2. Transfers from Level 1 to Level 2 are due to the closure of several foreign markets.

 

See accompanying Notes to Financial Statements.

 

10
 

 

Portfolio of Investments

Touchstone Large Cap Fund – December 31, 2014 (Unaudited)

 

       Market 
   Shares   Value 
         
Common Stocks — 98.6%          
           
Information Technology — 19.5%          
Cisco Systems, Inc.   72,870   $2,026,879 
Corning, Inc.   119,230    2,733,945 
EMC Corp.   85,040    2,529,090 
Intel Corp.   64,360    2,335,624 
International Business Machines Corp.   9,150    1,468,026 
Microsoft Corp.   31,370    1,457,136 
Visa, Inc. - Class A   13,500    3,539,700 
         16,090,400 
           
Financials — 18.8%          
Alleghany Corp.*   5,325    2,468,138 
Bank of America Corp.   134,850    2,412,466 
Berkshire Hathaway, Inc. - Class B*   27,510    4,130,626 
BlackRock, Inc.   8,580    3,067,866 
Wells Fargo & Co.   62,820    3,443,792 
         15,522,888 
           
Consumer Discretionary — 16.0%          
Bed Bath & Beyond, Inc.*   34,830    2,653,001 
CarMax, Inc.*   61,600    4,101,328 
Carnival Corp. (Panama)   74,470    3,375,725 
Lowe's Cos., Inc.   45,010    3,096,688 
         13,226,742 
           
Consumer Staples — 11.6%          
Altria Group, Inc.   52,320    2,577,806 
Brown-Forman Corp. - Class B   10,050    882,792 
Coca-Cola Co. (The)   42,000    1,773,240 
Energizer Holdings, Inc.   20,420    2,625,195 
Wal-Mart Stores, Inc.   19,990    1,716,741 
         9,575,774 
           
Health Care — 9.3%          
Bristol-Myers Squibb Co.   55,120    3,253,734 
Eli Lilly & Co.   42,000    2,897,580 
Pfizer, Inc.   50,090    1,560,304 
         7,711,618 
           
Materials — 8.8%          
Albemarle Corp.†   37,080    2,229,620 
Mosaic Co. (The)   43,160    1,970,254 
NewMarket Corp.   7,554    3,048,266 
         7,248,140 
           
Industrials — 6.4%          
FedEx Corp.   9,540    1,656,716 
General Dynamics Corp.   26,370    3,629,039 
         5,285,755 
           
Energy — 6.4%          
Apache Corp.   17,110    1,072,284 
Chevron Corp.   19,980    2,241,356 
ConocoPhillips   28,510    1,968,901 
         5,282,541 
           
Telecommunication Services — 1.8%          
Verizon Communications, Inc.   32,080    1,500,702 
Total Common Stocks       $81,444,560 
           
Investment Funds — 1.9%          
Invesco Government & Agency Portfolio, Institutional Class, 0.01%**∞Ω   464,012    464,012 
Touchstone Institutional Money Market Fund, 0.01%^∞Ω   1,076,514    1,076,514 
Total Investment Funds       $1,540,526 
           
Total Investment Securities —100.5%          
(Cost $80,954,285)       $82,985,086 
           
Liabilities in Excess of Other Assets — (0.5%)        (392,405)
           
Net Assets — 100.0%       $82,592,681 

 

*Non-income producing security.

 

**Represents collateral for securities loaned.

 

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

 

†All or a portion of the security is on loan. The total market value of the securities on loan as of December 31, 2014 was $448,209.

 

∞Open-End Fund.

 

ΩRepresents the 7-day SEC yield as of December 31, 2014.

 

11
 

 

Touchstone Large Cap Fund (Unaudited) (Continued)

 

Other Information:

 

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

 

Valuation inputs at Reporting Date:
Description  Level 1   Level 2   Level 3   Total 
Common                    
Stocks  $81,444,560   $—   $—   $81,444,560 
Investment                    
Funds   1,540,526    —    —    1,540,526 
                  $82,985,086 

 

See accompanying Notes to Financial Statements.

 

12
 

 

Portfolio of Investments

Touchstone Small Cap Value Opportunities Fund – December 31, 2014 (Unaudited)

 

       Market 
   Shares   Value 
         
Common Stocks — 96.5%          
           
Financials — 33.4%          
Altisource Portfolio Solutions SA (Luxembourg)*†   28,800   $973,152 
American Equity Investment Life Holding Co.   128,900    3,762,591 
Bancorp, Inc. (The)*   189,100    2,059,299 
Bofi Holding, Inc.*†   34,600    2,692,226 
Chatham Lodging Trust REIT   67,800    1,964,166 
Columbia Banking System, Inc.   133,300    3,680,413 
Cowen Group, Inc. - Class A*   305,900    1,468,320 
Customers Bancorp, Inc.*   134,120    2,609,975 
Encore Capital Group, Inc.*†   71,400    3,170,160 
Endurance Specialty Holdings Ltd.   54,100    3,237,344 
First Cash Financial Services, Inc.*   37,300    2,076,491 
Greenlight Capital Re Ltd. (Cayman Island)*   58,200    1,900,230 
Home Loan Servicing Solutions Ltd. (Cayman Island)†   122,500    2,391,200 
Horace Mann Educators Corp.   76,500    2,538,270 
Iberiabank Corp.   41,800    2,710,730 
Infinity Property & Casualty Corp.   25,800    1,993,308 
Lexington Realty Trust REIT   241,300    2,649,474 
Maiden Holdings Ltd.   193,800    2,478,702 
New Senior Investment Group, Inc. REIT   143,016    2,352,613 
Newcastle Investment Corp. REIT   403,716    1,812,685 
Popular, Inc.*   82,700    2,815,935 
Radian Group, Inc.†   139,300    2,329,096 
Stewart Information Services Corp.   91,100    3,374,344 
Stifel Financial Corp.*   63,900    3,260,178 
Texas Capital Bancshares, Inc.*   50,000    2,716,500 
Wintrust Financial Corp.   52,400    2,450,224 
         65,467,626 
           
Consumer Discretionary — 16.5%          
Children's Place Retail Stores, Inc. (The)†   50,500    2,878,500 
EW Scripps Co. - Class A*   107,600    2,404,860 
Gentherm, Inc.*   52,200    1,911,564 
Jamba, Inc.*   148,600    2,242,374 
Libbey, Inc.*   63,000    1,980,720 
LifeLock, Inc.*   150,300    2,782,053 
M I Homes, Inc.*   64,300    1,476,328 
Media General, Inc.*†   48,009    803,191 
Motorcar Parts of America, Inc.*   88,500    2,751,465 
New Media Investment Group, Inc.   96,387    2,277,625 
Shutterfly, Inc.*   50,800    2,118,106 
Skullcandy, Inc.*   211,200    1,940,928 
Smith & Wesson Holding Corp.*†   129,500    1,226,365 
Stage Stores, Inc.   89,100    1,844,370 
Vera Bradley, Inc.*†   89,900    1,832,162 
World Wrestling Entertainment, Inc. - Class A†   145,900    1,800,406 
         32,271,017 
           
Industrials — 15.1%          
Acacia Research Corp.†   82,200    1,392,468 
Celadon Group, Inc.   100,500    2,280,345 
Covanta Holding Corp.   93,600    2,060,136 
DigitalGlobe, Inc.*   116,000    3,592,520 
DXP Enterprises, Inc.*   28,300    1,429,999 
Exelis, Inc.   105,900    1,856,427 
GenCorp, Inc.*†   93,900    1,718,370 
Generac Holdings, Inc.*†   35,800    1,674,008 
Greenbrier Cos., Inc.†   37,100    1,993,383 
H&E Equipment Services, Inc.   41,800    1,174,162 
JetBlue Airways Corp.*†   74,100    1,175,226 
Mueller Water Products, Inc. - Class A   283,600    2,904,064 
Quality Distribution, Inc.*   118,600    1,261,904 
Tutor Perini Corp.*   86,600    2,084,462 
Wabash National Corp.*   242,300    2,994,828 
         29,592,302 
           
Information Technology — 9.7%          
AVG Technologies N.V. (Netherlands)*   119,500    2,358,930 
Chipmos Technologies Bermuda Ltd.   65,302    1,522,843 
DST Systems, Inc.   19,800    1,864,170 
Epiq Systems, Inc.   114,000    1,947,120 
Harmonic, Inc.*   207,300    1,453,173 
InvenSense, Inc.*†   100,800    1,639,008 
Methode Electronics, Inc.   66,200    2,416,962 
NeuStar, Inc. - Class A*†   61,300    1,704,140 
Silicon Image, Inc.*   322,300    1,779,096 
SS&C Technologies Holdings, Inc.   38,600    2,257,714 
         18,943,156 
           
Health Care — 6.7%          
Air Methods Corp.*†   38,200    1,681,946 
Anika Therapeutics, Inc.*   48,900    1,992,186 
Cynosure, Inc. - Class A*   81,100    2,223,762 
Kindred Healthcare, Inc.   88,700    1,612,566 
Molina Healthcare, Inc.*   51,400    2,751,442 
Providence Service Corp. (The)*   67,100    2,445,124 
Triple-S Management Corp. (Puerto Rico) - Class B*   17,400    416,034 
         13,123,060 
           
Materials — 4.7%          
Ferro Corp.*   220,900    2,862,864 
FutureFuel Corp.   123,150    1,603,413 
Headwaters, Inc.*   109,200    1,636,908 
PH Glatfelter Co.   117,450    3,003,196 
         9,106,381 
           
Energy — 4.6%          
Delek U.S. Holdings, Inc.   67,300    1,835,944 
Energy XXI Bermuda Ltd. (Bermuda)†   103,600    337,736 
Helix Energy Solutions Group, Inc.*   95,300    2,068,010 
Newpark Resources, Inc.*   158,100    1,508,274 
PBF Energy, Inc. - Class A   67,400    1,795,536 
World Fuel Services Corp.   30,600    1,436,058 
         8,981,558 

 

13
 

 

Touchstone Small Cap Value Opportunities Fund (Unaudited) (Continued)

 

       Market 
   Shares   Value 
         
Common Stocks — 96.5% (Continued)          
           
Utilities — 2.7%          
NorthWestern Corp.   52,000   $2,942,160 
PNM Resources, Inc.   80,700    2,391,141 
         5,333,301 
           
Consumer Staples — 2.2%          
Andersons, Inc. (The)   27,600    1,466,664 
TreeHouse Foods, Inc.*   33,200    2,839,596 
         4,306,260 
           
Telecommunication Services — 0.9%          
FairPoint Communications, Inc.*   130,400    1,852,984 
Total Common Stocks       $188,977,645 
           
Investment Funds — 19.4%          
Invesco Government & Agency          
Portfolio, Institutional Class, 0.01%**∞Ω   31,043,701    31,043,701 
Touchstone Institutional Money Market Fund, 0.01%^∞Ω   6,861,646    6,861,646 
Total Investment Funds       $37,905,347 
           
Total Investment Securities —115.9%          
(Cost $209,741,761)       $226,882,992 
           
Liabilities in Excess of Other Assets — (15.9%)        (31,135,011)
           
Net Assets — 100.0%       $195,747,981 

 

*Non-income producing security.

 

**Represents collateral for securities loaned.

 

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

 

†All or a portion of the security is on loan. The total market value of the securities on loan as of December 31, 2014 was $28,818,985.

 

∞Open-End Fund.

 

ΩRepresents the 7-day SEC yield as of December 31, 2014.

 

Portfolio Abbreviations:

 

REIT - Real Estate Investment Trust

 

Other Information:

 

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

 

Valuation inputs at Reporting Date:
Description  Level 1   Level 2   Level 3   Total 
Common                
Stocks  $188,977,645   $—   $—   $188,977,645 
Investment                    
Funds   37,905,347    —    —    37,905,347 
                  $226,882,992 

 

See accompanying Notes to Financial Statements.

 

14
 

 

Portfolio of Investments

Touchstone Value Fund – December 31, 2014 (Unaudited)

 

       Market 
   Shares   Value 
         
Common Stocks — 98.1%          
           
Financials — 24.8%          
American Express Co.   133,879   $12,456,102 
American International Group, Inc.   77,800    4,357,578 
Bank of America Corp.   582,343    10,418,116 
Capital One Financial Corp.   157,638    13,013,017 
Citigroup, Inc.   201,546    10,905,654 
JPMorgan Chase & Co.   232,261    14,534,893 
Navient Corp.   212,719    4,596,858 
PNC Financial Services Group, Inc. (The)   140,178    12,788,439 
State Street Corp.   143,887    11,295,130 
Wells Fargo & Co.   279,914    15,344,885 
         109,710,672 
           
Health Care — 20.0%          
Anthem, Inc.   46,403    5,831,465 
Johnson & Johnson   107,334    11,223,916 
Medtronic, Inc.   210,751    15,216,222 
Merck & Co., Inc.   164,785    9,358,140 
Pfizer, Inc.   435,186    13,556,044 
Sanofi ADR   303,570    13,845,828 
Teva Pharmaceutical Industries Ltd. ADR   178,770    10,281,063 
UnitedHealth Group, Inc.   88,924    8,989,327 
         88,302,005 
           
Information Technology — 11.1%          
Intel Corp.   325,475    11,811,488 
Microsoft Corp.   290,987    13,516,346 
Oracle Corp.   336,700    15,141,399 
Texas Instruments, Inc.   162,803    8,704,262 
         49,173,495 
           
Consumer Discretionary — 10.5%          
Carnival Corp. (Paraguay)   101,228    4,588,665 
Delphi Automotive PLC (United Kingdom)   101,020    7,346,174 
Ford Motor Co.   588,100    9,115,550 
Johnson Controls, Inc.   217,700    10,523,618 
Target Corp.   197,274    14,975,069 
         46,549,076 
           
Industrials — 9.2%          
Emerson Electric Co.   136,355    8,417,194 
General Dynamics Corp.   65,700    9,041,634 
Honeywell International, Inc.   78,076    7,801,354 
Raytheon Co.   75,941    8,214,539 
Stanley Black & Decker, Inc.   72,007    6,918,433 
         40,393,154 
           
Energy — 8.4%          
BP PLC ADR   259,393    9,888,061 
California Resources Corp.*   47,295    260,595 
ConocoPhillips   170,453    11,771,484 
Occidental Petroleum Corp.   118,238    9,531,165 
Phillips 66   51,090    3,663,153 
Seadrill Ltd. (Bermuda)†   155,200    1,853,088 
         36,967,546 
Consumer Staples — 6.5%          
Altria Group, Inc.   163,348    8,048,156 
Philip Morris International, Inc.   142,520    11,608,254 
Wal-Mart Stores, Inc.   104,629    8,985,539 
         28,641,949 
           
Telecommunication Services — 3.8%          
AT&T, Inc.   146,846    4,932,557 
Verizon Communications, Inc.   251,252    11,753,569 
         16,686,126 
           
Materials — 2.4%          
CRH PLC ADR†   433,700    10,413,137 
           
Utilities — 1.4%          
Entergy Corp.   48,311    4,226,246 
Public Service Enterprise Group, Inc.   50,300    2,082,923 
         6,309,169 
Total Common Stocks       $433,146,329 
           
Investment Funds — 3.2%          
Invesco Government & Agency Portfolio, Institutional Class, 0.01%**∞Ω   6,288,115    6,288,115 
Touchstone Institutional Money Market Fund, 0.01%^∞Ω   7,788,280    7,788,280 
Total Investment Funds       $14,076,395 
           
Total Investment Securities —101.3%          
(Cost $334,087,965)       $447,222,724 
           
Liabilities in Excess of Other Assets — (1.3%)        (5,550,505)
           
Net Assets — 100.0%       $441,672,219 

 

*Non-income producing security.

 

**Represents collateral for securities loaned.

 

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

 

†All or a portion of the security is on loan. The total market value of the securities on loan as of December 31, 2014 was $6,160,070.

 

∞Open-End Fund.

 

ΩRepresents the 7-day SEC yield as of December 31, 2014.

 

Portfolio Abbreviations:

 

ADR - American Depositary Receipt

 

PLC - Public Limited Company

 

15
 

 

Touchstone Value Fund (Unaudited) (Continued)

 

Other Information:

 

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

 

Valuation inputs at Reporting Date:
Description  Level 1   Level 2   Level 3   Total 
Common                    
Stocks  $433,146,329   $—   $—   $433,146,329 
Investment                    
Funds   14,076,395    —    —    14,076,395 
                  $447,222,724 

 

See accompanying Notes to Financial Statements.

 

16
 

 

This page intentionally left blank.

 

 
 

 

Statements of Assets and Liabilities

December 31, 2014 (Unaudited)

 

   Touchstone   Touchstone     
   Capital   International   Touchstone 
   Growth   Small Cap   Large Cap 
   Fund   Fund   Fund 
Assets               
Investments, at cost  $127,974,084   $143,466,439   $80,954,285 
Affiliated securities, at market value  $4,132,615   $2,172,299   $1,076,514 
Non-affiliated securities, at market value   190,063,379    162,439,081    81,908,572 
Investments, at market value (A)  $194,195,994   $164,611,380   $82,985,086 
Cash   —    —    — 
Foreign currency (B)   —    312,898    — 
Dividends and interest receivable   103,009    196,527    65,135 
Receivable for capital shares sold   111,168    143,236    50,000 
Receivable for investments sold   —    —    — 
Receivable for securities lending income   313    10,981    68 
Tax reclaim receivable   1,588    104,045    — 
Other assets   19,512    24,907    — 
Total Assets   194,431,584    165,403,974    83,100,289 
                
Liabilities               
Payable for return of collateral for securities on loan   2,428,723    10,067,164    464,012 
Payable for capital shares redeemed   349,419    245,012    — 
Payable for investments purchased   —    —    — 
Payable to Investment Advisor   104,564    119,452    20,146 
Payable to other affiliates   20,501    10,200    394 
Payable to Trustees   6,147    6,147    5,853 
Payable to Transfer Agent   96,359    63,014    5,680 
Payable for professional services   11,102    26,025    497 
Other accrued expenses and liabilities   1,904    37,490    11,026 
Total Liabilities   3,018,719    10,574,504    507,608 
                
Net Assets  $191,412,865   $154,829,470   $82,592,681 
                
Net assets consist of:               
Paid-in capital  $116,298,376   $145,953,693   $80,575,622 
Accumulated net investment income (loss)   (71,608)   (67,633)   26 
Accumulated net realized gains (losses) on investments, foreign currency transactions and payment by affiliates   8,964,187    (12,178,654)   (13,768)
Net unrealized appreciation on investments and foreign currency transactions   66,221,910    21,122,064    2,030,801 
Net Assets  $191,412,865   $154,829,470   $82,592,681 
(A) Includes market value of securities on loan of:  $2,388,123   $9,358,930   $448,209 
(B) Cost of foreign currency:  $—   $321,775   $— 

 

See accompanying Notes to Financial Statements.

 

18
 

 

Statements of Assets and Liabilities (Unaudited) (Continued)

 

Touchstone     
Small Cap     
Value   Touchstone 
Opportunities   Value 
Fund   Fund 
      
$209,741,761   $334,087,965 
$6,861,646   $7,788,280 
 220,021,346    439,434,444 
$226,882,992   $447,222,724 
 —    379,469 
 —    — 
 248,202    601,015 
 510,964    355,734 
 60,691    164,775 
 37,943    521 
 —    — 
 33,326    30,928 
 227,774,118    448,755,166 
        
        
 31,043,701    6,288,115 
 643,660    432,210 
 114,629    — 
 148,611    239,692 
 17,977    15,589 
 6,147    6,147 
 —    — 
 10,539    12,137 
 40,873    89,057 
 32,026,137    7,082,947 
        
$195,747,981   $441,672,219 
        
        
$174,753,884   $343,985,553 
 (397,888)   (3,297)
        
 4,250,754    (15,444,796)
 17,141,231    113,134,759 
$195,747,981   $441,672,219 
$28,818,985   $6,160,070 
$—   $— 

 

19
 

 

Statements of Assets and Liabilities (Unaudited) (Continued)

 

   Touchstone   Touchstone     
   Capital   International   Touchstone 
   Growth   Small Cap   Large Cap 
   Fund   Fund   Fund 
             
Pricing of Class A Shares               
Net assets applicable to Class A shares  $2,339,871   $7,983,617   $202,706 
Shares of beneficial interest outstanding               
(unlimited number of shares authorized, no par value)   84,283    545,871    18,852 
Net asset value price per share*  $27.76   $14.63   $10.75 
Maximum offering price per share  $29.45   $15.52   $11.41 
                
Pricing of Class C Shares               
Net assets applicable to Class C shares  $252,274   $984,000   $10,073 
Shares of beneficial interest outstanding               
(unlimited number of shares authorized, no par value)   9,277    68,013    939 
Net asset value, offering price per share**  $27.19   $14.47   $10.73 
                
Pricing of Class Y Shares               
Net assets applicable to Class Y shares  $188,166,545   $114,529,376   $1,154,727 
Shares of beneficial interest outstanding               
(unlimited number of shares authorized, no par value)   6,631,591    7,647,947    107,346 
Net asset value, offering price and redemption price per share  $28.37   $14.98   $10.76 
                
Pricing of Institutional Class Shares               
Net assets applicable to Institutional Class shares  $654,175   $31,332,477   $81,225,175 
Shares of beneficial interest outstanding               
(unlimited number of shares authorized, no par value)   22,888    2,083,123    7,548,497 
Net asset value, offering price and redemption price per share  $28.58   $15.04   $10.76 

 

* 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.

 

20
 

 

Statements of Assets and Liabilities (Unaudited) (Continued)

 

Touchstone     
Small Cap Value   Touchstone 
Opportunities   Value 
Fund   Fund 
      
        
$16,193,341   $60,791,893 
        
 892,117    6,268,274 
$18.15   $9.70 
$19.26   $10.29 
        
        
$1,683,741   $6,346,042 
        
 94,106    656,201 
$17.89   $9.67 
        
        
$151,843,635   $111,852,050 
        
 7,939,144    11,495,602 
$19.13   $9.73 
        
        
$26,027,264   $262,682,234 
        
 1,344,972    27,054,640 
$19.35   $9.71 

 

21
 

 

Statements of Operations

For the Six Months Ended December 31, 2014 (Unaudited)

 

   Touchstone   Touchstone     
   Capital   International   Touchstone 
   Growth   Small Cap   Large Cap 
   Fund   Fund   Fund(B) 
Investment Income               
Dividends from affiliated securities  $140   $199   $117 
Dividends from non-affiliated securities(A)   905,704    1,236,499    156,677 
Income from securities loaned   3,981    90,535    84 
Total Investment Income   909,825    1,327,233    156,878 
Expenses               
Investment advisory fees   684,481    758,939    57,161 
Administration fees   156,314    127,712    13,050 
Compliance fees and expenses   854    854    818 
Custody fees   4,099    34,940    2,173 
Professional fees   13,778    20,455    11,300 
Transfer Agent fees, Class A   722    5,843    125 
Transfer Agent fees, Class C   182    398    129 
Transfer Agent fees, Class Y   121,081    79,606    128 
Transfer Agent fees, Institutional Class   45    119    970 
Registration Fees, Class A   7,014    7,220    1,522 
Registration Fees, Class C   1,165    1,397    1,448 
Registration Fees, Class Y   8,152    8,549    1,448 
Registration Fees, Institutional Class   5,822    5,936    1,617 
Reports to Shareholders, Class A   2,137    2,245    2,483 
Reports to Shareholders, Class C   2,130    2,077    2,384 
Reports to Shareholders, Class Y   12,624    6,614    2,869 
Reports to Shareholders, Institutional Class   2,099    2,107    4,139 
Distribution expenses, Class A   2,748    10,301    68 
Distribution and shareholder servicing expenses, Class C   957    4,522    42 
Trustee fees   6,098    6,098    5,853 
Other expenses   51,594    50,593    8,812 
Total Expenses   1,084,096    1,136,525    118,539 
Fees waived and/or reimbursed by the Advisor and/or Affiliates(C)   (102,663)   (101,960)   (55,382)
Net Expenses   981,433    1,034,565    63,157 
Net Investment Income (Loss)   (71,608)   292,668    93,721 
Realized and Unrealized Gains (Losses) on Investments               
Net realized gains (losses) on investments from non-affiliated securities   15,917,679    5,905,660    (13,768)
Net realized losses on foreign currency   —    (73,719)   — 
Net change in unrealized appreciation (depreciation) on investments   (12,606,119)   (14,454,386)   2,030,801 
Net change in unrealized appreciation (depreciation) on foreign currency transactions   —    (30,999)   — 
Net Realized and Unrealized Gains (Losses) on Investments   3,311,560    (8,653,444)   2,017,033 
Change in Net Assets Resulting from Operations  $3,239,952   $(8,360,776)  $2,110,754 
(A)Net of foreign tax withholding of:  $13,112   $61,973   $— 

(B)Represents the period from commencement of operations (July 9, 2014) through December 31, 2014.

(C)See Note 4 in Notes to Financial Statements.

 

See accompanying Notes to Financial Statements.

 

22
 

 

Statements of Operations (Unaudited) (Continued)

 

Touchstone     
Small Cap Value   Touchstone 
Opportunities   Value 
Fund   Fund 
        
$294   $406 
 3,741,660    5,412,887 
 134,963    7,541 
 3,876,917    5,420,834 
        
 874,414    1,419,131 
 147,138    349,027 
 854    854 
 7,814    4,957 
 13,012    18,954 
 9,097    52,081 
 491    2,893 
 36,372    51,379 
 2,551    7,638 
 6,924    7,610 
 491    1,889 
 8,759    15,104 
 18,070    11,906 
 2,203    4,830 
 2,099    2,370 
 3,761    4,806 
 2,414    7,285 
 17,950    80,463 
 5,611    26,932 
 6,098    6,098 
 13,307    28,719 
 1,179,430    2,104,926 
 (84,370)   (389,446)
 1,095,060    1,715,480 
 2,781,857    3,705,354 
        
 7,831,644    12,756,624 
 —    — 
 (10,090,845)   1,653,578 
 —    — 
 (2,259,201)   14,410,202 
$522,656   $18,115,556 
$—   $18,935 

 

23
 

 

Statements of Changes in Net Assets

 

   Touchstone   Touchstone 
   Capital   International 
   Growth Fund   Small Cap Fund 
   For the       For the     
   Six Months       Six Months     
   Ended       Ended     
   December 31,   For the Year   December 31,   For the Year 
   2014   Ended   2014   Ended 
   (Unaudited)   June 30, 2014   (Unaudited)   June 30, 2014 
From Operations                    
Net investment income (loss)  $(71,608)  $17,266   $292,668   $1,463,348 
Net realized gains (losses) on investments and foreign currency transactions   15,917,679    21,947,963    5,831,941    8,587,676 
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions   (12,606,119)   24,617,123    (14,485,385)   18,843,788 
Change in Net Assets from Operations   3,239,952    46,582,352    (8,360,776)   28,894,812 
                     
Distributions to Shareholders from:                    
Net investment income, Class A   —    —    (37,754)   (44,598)
Net investment income, Class C   —    —    (2,327)   (1,662)
Net investment income, Class Y   —    (104,219)   (785,500)   (1,419,428)
Net investment income, Institutional Class   —    (105)   (256,268)   (442,867)
Net realized gains, Class A   (48,763)   —    —    — 
Net realized gains, Class C   (4,143)   —    —    — 
Net realized gains, Class Y   (3,898,983)   —    —    — 
Net realized gains, Institutional Class   (13,235)   —    —    — 
Total Distributions   (3,965,124)   (104,324)   (1,081,849)   (1,908,555)
                     
Net Increase (Decrease) from Share Transactions(A)   (7,961,112)   (18,864,530)   2,179,423    28,247,518 
                     
Total Increase (Decrease) in Net Assets   (8,686,284)   27,613,498    (7,263,202)   55,233,775 
Net Assets                    
Beginning of period   200,099,149    172,485,651    162,092,672    106,858,897 
End of period  $191,412,865   $200,099,149   $154,829,470   $162,092,672 
Accumulated Net Investment Income (Loss)  $(71,608)  $—   $(67,633)  $721,548 

(A) For details on share transactions, by class, see Statements of Changes in Net Assets - Capital Stock Activity on pages 26-29.

(B)Represents the period from commencement of operations (July 9, 2014) through December 31, 2014.

 

See accompanying Notes to Financial Statements.

 

24
 

 

Statements of Changes in Net Assets (Continued)

 

Touchstone   Touchstone   Touchstone 
Large Cap   Small Cap   Value 
Fund   Value Opportunities Fund   Fund 
For the   For the       For the     
Period   Six Months       Six Months     
Ended   Ended       Ended     
December 31,   December 31,   For the Year   December 31,   For the Year 
2014(B)   2014   Ended   2014   Ended 
(Unaudited)   (Unaudited)   June 30, 2014   (Unaudited)   June 30, 2014 
                       
$93,721   $2,781,857   $326,007   $3,705,354   $8,986,049 
                       
 (13,768)   7,831,644    25,334,532    12,756,624    15,695,457 
                       
 2,030,801    (10,090,845)   11,521,337    1,653,578    48,490,892 
 2,110,754    522,656    37,181,876    18,115,556    73,172,398 
                       
                       
 (133)   (269,502)   (3,917)   (442,901)   (1,193,286)
 —    (24,922)   —    (28,935)   (59,554)
 (1,110)   (2,673,760)   (336,255)   (982,789)   (2,363,426)
 (92,452)   (467,019)   (31,300)   (2,460,215)   (5,163,594)
 —    (1,781,329)   (313,414)   (1,056,528)   — 
 —    (179,372)   (14,880)   (98,205)   — 
 —    (16,418,203)   (17,996,689)   (1,898,093)   — 
 —    (2,756,438)   (1,318,126)   (4,392,373)   — 
 (93,695)   (24,570,545)   (20,014,581)   (11,360,039)   (8,779,860)
                       
 80,575,622    38,750,144    57,853,792    5,070,824    22,607,785 
                       
 82,592,681    14,702,255    75,021,087    11,826,341    87,000,323 
                       
 —    181,045,726    106,024,639    429,845,878    342,845,555 
$82,592,681   $195,747,981  $181,045,726   $441,672,219   $429,845,878 
$26   $(397,888)  $255,458   $(3,297)  $206,189 

 

25
 

 

Statements of Changes in Net Assets - Capital Stock Activity

 

   Touchstone 
   Capital Growth Fund 
   For the Six Months     
   Ended   For the Year 
   December 31, 2014   Ended 
   (Unaudited)   June 30, 2014 
   Shares   Dollars   Shares   Dollars 
Class A                    
Proceeds from Shares issued   19,534   $541,166    48,923   $1,286,009 
Reinvestment of distributions   1,762    48,275    —    — 
Cost of Shares redeemed   (10,367)   (290,347)   (26,050)   (645,860)
Change from Class A Share Transactions   10,929    299,094    22,873    640,149 
Class C                    
Proceeds from Shares issued   2,275    62,409    4,689    121,085 
Reinvestment of distributions   145    3,879    —    — 
Cost of Shares redeemed   (1)   (30)   (1)   (15)
Change from Class C Share Transactions   2,419    66,258    4,688    121,070 
Class Y                    
Proceeds from Shares issued   73,828    2,077,165    121,971    3,146,792 
Reinvestment of distributions   133,637    3,741,244    3,668    98,960 
Cost of Shares redeemed   (521,432)   (14,702,894)   (874,602)   (22,876,413)
Change from Class Y Share Transactions   (313,967)   (8,884,485)   (748,963)   (19,630,661)
Institutional Class                    
Proceeds from Shares issued   19,821    549,329    383    10,000 
Reinvestment of distributions   462    13,021    3    91 
Cost of Shares redeemed   (150)   (4,329)   (208)   (5,179)
Change from Institutional Class Share Transactions   20,133    558,021    178    4,912 
Change from Share Transactions   (280,486)  $(7,961,112)   (721,224)  $(18,864,530)

 

See accompanying Notes to Financial Statements.

 

26
 

 

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

 

Touchstone 
International Small Cap Fund 
For the Six Months     
Ended   For the Year 
December 31, 2014   Ended 
(Unaudited)   June 30, 2014 
Shares   Dollars   Shares   Dollars 
                  
 115,033   $1,720,906    690,059   $10,199,935 
 2,509    36,956    2,877    41,895 
 (264,346)   (4,018,152)   (39,141)   (590,033)
 (146,804)   (2,260,290)   653,795    9,651,797 
                  
 36,948    552,083    39,387    588,357 
 160    2,327    115    1,662 
 (9,057)   (127,793)   (80)   (1,108)
 28,051    426,617    39,422    588,911 
                  
 1,231,138    19,063,609    1,139,319    17,615,548 
 50,521    761,863    92,341    1,375,877 
 (1,233,465)   (18,692,202)   (649,791)   (9,556,736)
 48,194    1,133,270    581,869    9,434,689 
                  
 320,569    4,964,839    1,212,871    16,971,950 
 16,915    256,268    29,603    442,867 
 (150,220)   (2,341,281)   (605,074)   (8,842,696)
 187,264    2,879,826    637,400    8,572,121 
 116,705   $2,179,423    1,912,486   $28,247,518 

 

27
 

 

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

 

   Touchstone 
   Large Cap Fund(A) 
   For the Period 
   Ended 
   December 31, 2014 
   (Unaudited) 
   Shares   Dollars 
Class A          
Proceeds from Shares issued   20,160   $211,874 
Reinvestment of distributions   12    133 
Cost of Shares redeemed   (1,320)   (13,880)
Change from Class A Share Transactions   18,852    198,127 
Class C          
Proceeds from Shares issued   939    9,411 
Reinvestment of distributions   —    — 
Cost of Shares redeemed   —    — 
Change from Class C Share Transactions   939    9,411 
Class Y          
Proceeds from Shares issued   107,312    1,138,738 
Reinvestment of distributions   102    1,110 
Cost of Shares redeemed   (68)   (740)
Change in Net Assets from Class Y Share Transactions   107,346    1,139,108 
Institutional Class          
Proceeds from Shares Issued   7,540,304    79,139,547 
Reinvestment of distributions   8,474    92,452 
Cost of Shares redeemed   (281)   (3,023)
Change from Institutional Class Share Transactions   7,548,497    79,228,976 
Change from Share Transactions   7,675,634   $80,575,622 

(A)Represents the period from commencement of operations (July 9, 2014) through December 31, 2014.

 

See accompanying Notes to Financial Statements.

 

28
 

 

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

 

Touchstone Small Cap   Touchstone 
Value Opportunities Fund   Value Fund 
For the Six Months       For the Six Months     
Ended   For the   Ended   For the 
December 31, 2014   Year Ended   December 31, 2014   Year Ended 
(Unaudited)   June 30, 2014   (Unaudited)   June 30, 2014 
Shares   Dollars   Shares   Dollars   Shares   Dollars   Shares   Dollars 
                                      
 489,117   $9,862,832    694,263   $14,086,155    379,064   $3,643,273    1,360,322   $12,296,352 
 111,089    2,002,265    16,104    302,907    123,905    1,202,667    103,476    967,643 
 (345,306)   (6,848,882)   (142,999)   (2,926,793)   (1,136,009)   (11,055,772)   (1,221,370)   (10,869,290)
 254,900    5,016,215    567,368    11,462,269    (633,040)   (6,209,832)   242,428    2,394,705 
                                      
 66,824    1,301,685    26,415    529,335    198,301    1,926,596    224,263    2,036,663 
 8,041    142,680    633    11,799    7,741    74,721    3,548    33,419 
 (7,727)   (143,178)   (1,993)   (41,800)   (96,355)   (930,796)   (58,418)   (519,254)
 67,138    1,301,187    25,055    499,334    109,687    1,070,521    169,393    1,550,828 
                                      
 1,163,499    24,092,439    1,281,068    26,940,927    1,149,806    11,163,055    2,484,897    22,624,307 
 963,156    18,315,097    918,330    18,084,643    239,710    2,337,502    174,625    1,635,689 
 (610,645)   (12,757,917)   (742,017)   (15,866,089)   (1,677,990)   (16,297,190)   (3,226,088)   (28,595,982)
 1,516,010    29,649,619    1,457,381    29,159,481    (288,474)   (2,796,633)   (566,566)   (4,335,986)
                                      
 74,155    1,550,934    957,175    20,689,646    2,870,067    27,122,455    7,075,862    64,437,527 
 167,478    3,223,457    67,787    1,349,426    600,877    5,851,781    469,954    4,400,212 
 (92,383)   (1,991,268)   (241,883)   (5,306,364)   (2,064,294)   (19,967,468)   (5,178,939)   (45,839,501)
 149,250    2,783,123    783,079    16,732,708    1,406,650    13,006,768    2,366,877    22,998,238 
 1,987,298   $38,750,144    2,832,883   $57,853,792    594,823   $5,070,824    2,212,132   $22,607,785 

 

29
 

 

Financial Highlights

 

Touchstone Capital Growth Fund—Class A
Selected Data for a Share Outstanding Throughout Each Period

 

   Six Months           Three             
   Ended           Months             
   December 31,       Ended     
   2014   Year Ended June 30,   June 30,   Year Ended March 31, 
   (Unaudited)   2014   2013   2012   2012   2011   2010 
Net asset value at beginning of period  $27.91   $21.86   $18.96   $20.49   $18.95   $15.98   $11.01 
Income (loss) from investment operations:                                   
Net investment income (loss)   (0.04)   (0.06)(A)   (0.03)(A)   —(A)(B)    (0.03)(A)   (0.01)(A)   —(A)
Net realized and unrealized gains (losses) on investments   0.48    6.11    2.93    (1.53)   1.57    2.98    4.98 
Total from investment operations   0.44    6.05    2.90    (1.53)   1.54    2.97    4.98 
Distributions from:                                   
Net investment income   —    —    —    —    —    —    (0.01)
Realized capital gains   (0.59)   —    —    —    —    —    — 
Total distributions   (0.59)   —    —    —    —    —    (0.01)
Net asset value at end of period  $27.76   $27.91   $21.86   $18.96   $20.49   $18.95   $15.98 
Total return(C)   1.60%(D)   27.68%   15.30%   (7.47)%(D)   8.13%   18.59%   45.22%
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $2,340   $2,047   $1,104   $559   $705   $1,111   $1,066 
Ratio to average net assets:                                   
Net expenses   1.25%(E)   1.25%   1.25%   1.23%(E)   1.14%   1.23%   1.36%
Gross expenses   2.09%(E)   2.66%   3.43%   7.09%(E)   2.93%(F)   2.70%(F)   0.36%(F)
Net investment income (loss)   (0.32%)(E)   (0.24)%   (0.15)%   0.01%(E)   (0.15)%   (0.07)%   0.01%
Portfolio turnover rate   21%(D)   30%   38%   6%(D)   27%   33%   99%

 

Touchstone Capital Growth Fund—Class C
Selected Data for a Share Outstanding Throughout Each Period

 

   Six Months         
   Ended       Period 
   December 31,       Ended 
   2014   Year Ended June 30,   June 30, 
   (Unaudited)   2014   2013   2012(G) 
Net asset value at beginning of period  $27.46   $21.66   $18.93   $20.06 
Income (loss) from investment operations:                    
Net investment loss   (0.11)   (0.25)(A)   (0.19)(A)   (0.03)(A)
Net realized and unrealized gains (losses) on investments   0.43    6.05    2.92    (1.09)
Total from investment operations   0.32    5.80    2.73    (1.12)
Distributions from:                    
Net investment income   —    —    —(B)   (0.01)
Realized capital gains   (0.59)   —    —    — 
Total distributions   (0.59)   —    —    (0.01)
Net asset value at end of period  $27.19   $27.46   $21.66   $18.93 
Total return(C)   1.23%(D)   26.78%   14.42%   (5.59)%(D)
Ratios and supplemental data:                    
Net assets at end of period (000's)  $252   $188   $47   $2 
Ratio to average net assets:                    
Net expenses   2.00%(E)   2.00%   2.00%   2.00%(E)
Gross expenses   5.57%(E)   8.91%   23.11%   962.52%(E)
Net investment loss   (1.07)%(E)   (0.99)%   (0.90)%   (0.76)%(E)
Portfolio turnover rate   21%(D)   30%   38%   6%(D)

 

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

(B) Less than $0.005 per share.

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

(D) Not annualized.

(E) Annualized.

(F) Legal, printing and/or compliance audit expenses relating to civil litigation and certain regulatory actions in connection with market timing allegations were incurred, and the former advisor paid these expenses on behalf of the Funds. Had the former advisor not paid these expenses, the expenses for the Funds would have been higher than what is reflected in the financial highlights for the years ended March 31, 2012, 2011 and 2010.

(G) Represents the period from commencement of operations (April 16, 2012) through June 30, 2012.

 

See accompanying Notes to Financial Statements.

 

30
 

 

Financial Highlights (Continued)

 

Touchstone Capital Growth Fund—Class Y
Selected Data for a Share Outstanding Throughout Each Period

   Six Months           Three             
   Ended           Months             
   December 31,           Ended             
   2014   Year Ended June 30,   June 30,   Year Ended March 31, 
   (Unaudited)   2014   2013   2012   2012   2011   2010 
Net asset value at beginning of period  $28.48   $22.26   $19.29   $20.83   $19.24   $16.21   $11.18 
Income (loss) from investment operations:                                   
Net investment income (loss)   (0.01)   —(A)(B)    0.02(B)   0.01(B)   0.02(B)   0.03(B)   0.04(B)
Net realized and unrealized gains (losses) on investments   0.49    6.23    2.98    (1.55)   1.59    3.04    5.05 
Total from investment operations   0.48    6.23    3.00    (1.54)   1.61    3.07    5.09 
Distributions from:                                   
Net investment income   —    (0.01)   (0.03)   —(A)   (0.02)   (0.04)   (0.05)
Realized capital gains   (0.59)   —    —    —    —    —    — 
Return of capital   —    —    —    —    —    —    (0.01)
Total distributions   (0.59)   (0.01)   (0.03)   —(A)   (0.02)   (0.04)   (0.06)
Net asset value at end of period  $28.37   $28.48   $22.26   $19.29   $20.83   $19.24   $16.21 
Total return   1.71%(C)   28.01%   15.61%   (7.42)%(C)   8.39%   18.93%   45.52%
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $188,167   $197,785   $171,277   $164,589   $182,828   $188,671   $178,941 
Ratio to average net assets:                                   
Net expenses   1.00%(D)   1.00%   1.00%   0.98%(D)   0.89%   0.98%   1.08%
Gross expenses   1.09%(D)   1.10%   1.14%   1.27%(D)   1.30%(E)   1.32%(E)   1.44%(E)
Net investment income (loss)   (0.07)%(D)   0.01%   0.10%   0.26%(D)   0.13%   0.18%   0.27%
Portfolio turnover rate   21%(C)   30%   38%   6%(C)   27%   33%   99%

 

Touchstone Capital Growth Fund—Institutional Class
Selected Data for a Share Outstanding Throughout Each Period

   Six Months           Three             
   Ended           Months             
   December 31,           Ended             
   2014   Year Ended June 30,   June 30,   Year Ended March 31, 
   (Unaudited)   2014   2013   2012   2012   2011   2010 
Net asset value at beginning of period  $28.66   $22.40   $19.38   $20.95   $19.35   $16.31   $11.25 
Income (loss) from investment operations:                                   
Net investment income   —(A)   0.03(B)   0.04(B)   0.02(B)   0.04(B)   0.05(B)   0.06(B)
Net realized and unrealized gains (losses) on investments   0.51    6.27    3.00    (1.58)   1.60    3.04    5.07 
Total from investment operations   0.51    6.30    3.04    (1.56)   1.64    3.09    5.13 
Distributions from:                                   
Net investment income   —    (0.04)   (0.02)   (0.01)   (0.04)   (0.05)   (0.05)
Realized capital gains   (0.59)   —    —    —    —    —    — 
Return of capital   —    —    —    —    —    —    (0.02)
Total distributions   (0.59)   (0.04)   (0.02)   (0.01)   (0.04)   (0.05)   (0.07)
Net asset value at end of period  $28.58   $28.66   $22.40   $19.38   $20.95   $19.35   $16.31 
Total return   1.81%(C)   28.13%   15.71%   (7.44)%(C)   8.51%   18.99%   45.69%
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $654   $79   $58   $152   $14,636   $19,423   $26,977 
Ratio to average net assets:                                   
Net expenses   0.90%(D)   0.90%   0.90%   0.88%(D)   0.79%   0.88%   0.90%
Gross expenses   6.67%(D)   24.91%   24.29%   1.83%(D)   0.90%(E)   0.85%(E)   0.79%(E)
Net investment income   0.03%(D)   0.11%   0.20%   0.36%(D)   0.20%   0.28%   0.41%
Portfolio turnover rate   21%(C)   30%   38%   6%(C)   27%   33%   99%

 

(A) Less than $0.005 per share.

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

(C) Not annualized.

(D) Annualized.

(E) Legal, printing and/or compliance audit expenses relating to civil litigation and certain regulatory actions in connection with market timing allegations were incurred, and the former advisor paid these expenses on behalf of the Funds. Had the former advisor not paid these expenses, the expenses for the Funds would have been higher than what is reflected in the financial highlights for the years ended March 31, 2012, 2011 and 2010.

 

See accompanying Notes to Financial Statements.

 

31
 

 

Financial Highlights (Continued)

 

Touchstone International Small Cap Fund—Class A
Selected Data for a Share Outstanding Throughout Each Period

 

   Six Months           Three             
   Ended           Months             
   December 31,       Ended     
   2014   Year Ended June 30,   June 30,   Year Ended March 31, 
   (Unaudited)   2014   2013   2012   2012   2011   2010 
Net asset value at beginning of period  $15.48   $12.58   $10.21   $11.12   $11.88   $9.25   $6.25 
Income (loss) from investment operations:                                   
Net investment income (loss)   0.01    0.11(A)   0.11    0.09(A)    0.03(A)   (0.10)(A)   (0.08)(A)
Net realized and unrealized gains (losses) on investments   (0.79)   3.00    2.43    (0.90)   (0.84)   2.73    3.09(B)
Total from investment operations   (0.78)   3.11    2.54    (0.81)   (0.81)   2.63    3.01 
Distributions from:                                   
Net investment income   (0.07)   (0.21)   (0.17)   (0.10)   (0.15)   —    (0.01)
Capital contribution   —    —    —    —    0.20(C)   —    — 
Net asset value at end of period  $14.63   $15.48   $12.58   $10.21   $11.12   $11.88   $9.25 
Total return(D)   (4.98)%(E)   24.74%   24.99%   (7.28)%(E)   (4.96)%(C)   28.43%   48.12%(B)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $7,984   $10,721   $489   $199   $143   $207   $918 
Ratio to average net assets:                                   
Net expenses   1.55%(F)   1.55%   1.55%   1.55%(F)    1.55%   1.55%   1.55%
Gross expenses   1.87%(F)   2.12%   7.77%   19.37%(F)    10.50%(G)   3.23%(G)   0.44%(G)
Net investment income (loss)   0.11%(F)   0.76%   1.41%   3.36% (F)   0.26%   (1.02)%   (0.97)%
Portfolio turnover rate   36%(E)   60%   79%   21%(E)    207%   152%   172%

 

Touchstone International Small Cap Fund—Class C
Selected Data for a Share Outstanding Throughout Each Period

 

   Six Months             
   Ended           Period 
   December 31,           Ended 
   2014   Year Ended June 30,   June 30, 
   (Unaudited)   2014   2013   2012(H) 
Net asset value at beginning of period  $15.33   $12.54   $10.19   $10.94 
Income (loss) from investment operations:                    
Net investment income (loss)   (0.03)   —(A)(I)   0.14    0.05(A)
Net realized and unrealized gains (losses) on investments   (0.80)   2.99    2.31    (0.69)
Total from investment operations   (0.83)   2.99    2.45    (0.64)
Distributions from:                    
Net investment income   (0.03)   (0.20)   (0.10)   (0.11)
Net asset value at end of period  $14.47   $15.33   $12.54   $10.19 
Total return(D)   (5.39)%(E)   23.94%   24.08%   (5.84)%(E)
Ratios and supplemental data:                    
Net assets at end of period (000's)  $984   $613   $7   $2 
Ratio to average net assets:                    
Net expenses   2.30%(F)   2.30%   2.30%   2.30%(F)
Gross expenses   3.11%(F)   7.28%   94.29%   968.58%(F)
Net investment income (loss)   (0.64)%(F)   0.01%   0.66%   2.12%(F)
Portfolio turnover rate   36%(E)   60%   79%   21%(E)

 

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

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

(C) Impact of one time distribution of settlement funds from the Bank of America Fair Fund. If the distribution had not occurred the total return would have been lower.

(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) Annualized.

(G) Legal, printing and/or compliance audit expenses relating to civil litigation and certain regulatory actions in connection with market timing allegations were incurred, and the former advisor paid these expenses on behalf of the Funds. Had the former advisor not paid these expenses, the expenses for the Funds would have been higher than what is reflected in the financial highlights for the years ended March 31, 2012, 2011 and 2010.

(H) Represents the period from commencement of operations (April 16, 2012) through June 30, 2012.

(I) Less than $0.005 per share.

 

See accompanying Notes to Financial Statements.

 

32
 

 

Financial Highlights (Continued)

 

Touchstone International Small Cap Fund—Class Y
Selected Data for a Share Outstanding Throughout Each Period

   Six Months           Three             
   Ended           Months             
   December 31,           Ended             
   2014   Year Ended June 30,   June 30,   Year Ended March 31, 
   (Unaudited)   2014   2013   2012   2012   2011   2010 
Net asset value at beginning of period  $15.86   $12.84   $10.40   $11.32   $12.14   $9.44   $6.37 
Income (loss) from investment operations:                                   
Net investment income (loss)   0.02    0.16(A)   0.21    0.10(A)   0.07(A)   (0.08)(A)   (0.05)(A)
Net realized and unrealized gains (losses) on investments   (0.80)   3.07    2.40    (0.92)   (0.88)   2.80    3.14(B)
Total from investment operations   (0.78)   3.23    2.61    (0.82)   (0.81)   2.72    3.09 
Distributions from:                                   
Net investment income   (0.10)   (0.21)   (0.17)   (0.10)   (0.21)   (0.02)   (0.02)
Capital contribution   —    —    —    —    0.20(C)   —    — 
Net asset value at end of period  $14.98   $15.86   $12.84   $10.40   $11.32   $12.14   $9.44 
Total return   (4.90)%(D)   25.16%   25.38%   (7.22)%(D)   (4.81)%(C)   28.82%   48.56%(B)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $114,529   $120,537   $90,125   $80,754   $90,029   $118,679   $107,478 
Ratio to average net assets:                                   
Net expenses   1.30%(E)   1.25%   1.24%   1.30%(E)   1.30%   1.30%   1.30%
Gross expenses   1.41%(E)   1.44%   1.53%   1.74%(E)   1.69%(F)   1.59%(F)   1.74%(F)
Net investment income (loss)   0.36%(E)   1.06%   1.71%   3.61%(E)   0.60%   (0.80)%   (0.65)%
Portfolio turnover rate   36%(D)   60%   79%   21%(D)   207%   152%   172%

 

Touchstone International Small Cap Fund—Institutional Class
Selected Data for a Share Outstanding Throughout Each Period

   Six Months           Three             
   Ended           Months             
   December 31,           Ended             
   2014   Year Ended June 30,   June 30,   Year Ended March 31, 
   (Unaudited)   2014   2013   2012   2012   2011   2010 
Net asset value at beginning of period  $15.94   $12.90   $10.45   $11.37   $12.20   $9.49   $6.39 
Income (loss) from investment operations:                                   
Net investment income (loss)   0.04    0.18(A)   0.23    0.10(A)   0.13(A)   (0.06)(A)   (0.03)(A)
Net realized and unrealized gains (losses) on investments   (0.82)   3.09    2.42    (0.91)   (0.93)   2.81    3.16(B)
Total from investment operations   (0.78)   3.27    2.65    (0.81)   (0.80)   2.75    3.13 
Distributions from:                                   
Net investment income   (0.12)   (0.23)   (0.20)   (0.11)   (0.24)   (0.04)   (0.03)
Capital contribution   —    —    —    —    0.21(C)   —    — 
Net asset value at end of period  $15.04   $15.94   $12.90   $10.45   $11.37   $12.20   $9.49 
Total return   (4.87)%(D)   25.38%   25.59%   (7.13)%(D)   (4.55)%(C)   29.00%   49.05%(B)
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $31,332   $30,223   $16,238   $3,869   $6,288   $1,173   $3,168 
Ratio to average net assets:                                   
Net expenses   1.18%(E)   1.08%   1.05%   1.05%(E)   1.05%   1.05%   1.05%
Gross expenses   1.30%(E)   1.33%   1.50%   2.05%(E)   1.46%(F)   2.22%(F)   1.14%(F)
Net investment income (loss)   0.48%(E)   1.23%   1.90%   3.86%(E)   1.15%   (0.61)%   (0.35)%
Portfolio turnover rate   36%(D)   60%   79%   21%(D)   207%   152%   172%

 

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

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

(C) Impact of one time distribution of settlement funds from the Bank of America Fair Fund. If the distribution had not occurred the total return would have been lower.

(D) Not annualized.

(E) Annualized.

(F) Legal, printing and/or compliance audit expenses relating to civil litigation and certain regulatory actions in connection with market timing allegations were incurred, and the former advisor paid these expenses on behalf of the Funds. Had the former advisor not paid these expenses, the expenses for the Funds would have been higher than what is reflected in the financial highlights for the years ended March 31, 2012, 2011 and 2010.

 

See accompanying Notes to Financial Statements.

 

33
 

 

Financial Highlights (Continued)

 

Touchstone Large Cap Fund—Class A
Selected Data for a Share Outstanding Throughout Each Period

   Period 
   Ended 
   December 31, 
   2014 (A) 
   (Unaudited) 
Net asset value at beginning of period  $10.00 
Income from investment operations:     
Net investment income   —(B)
Net realized and unrealized gains on investments   0.75 
Total from investment operations   0.75 
Distributions from:     
Net investment income   —(B)
Net asset value at end of period  $10.75 
Total return(C)   7.57%(D)
Ratios and supplemental data:     
Net assets at end of period (000's)  $203 
Ratio to average net assets:     
Net expenses   1.12%(E)
Gross expenses   16.66%(E)
Net investment income   0.81%(E)
Portfolio turnover rate   4%(D)

 

Touchstone Large Cap Fund—Class C
Selected Data for a Share Outstanding Throughout Each Period

   Period 
   Ended 
   December 31, 
   2014 (A) 
   (Unaudited) 
Net asset value at beginning of period  $10.00 
Income from investment operations:     
Net investment income   —(B)
Net realized and unrealized gains on investments   0.73 
Total from investment operations   0.73 
Net asset value at end of period  $10.73 
Total return(C)   7.30%(D)
Ratios and supplemental data:     
Net assets at end of period (000's)  $10 
Ratio to average net assets:     
Net expenses   1.87%(E)
Gross expenses   96.91%(E)
Net investment income   0.05%(E)
Portfolio turnover rate   4%(D)

 

(A) Represents the period from commencement of operations (July 9, 2014) through December 31, 2014.

(B) Less than $0.005 per share.

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

(D) Not annualized.

(E) Annualized.

 

See accompanying Notes to Financial Statements.

 

34
 

 

Financial Highlights (Continued)

 

Touchstone Large Cap Fund—Class Y
Selected Data for a Share Outstanding Throughout Each Period

   Period 
   Ended 
   December 31, 
   2014(A) 
   (Unaudited) 
Net asset value at beginning of period  $10.00 
Income from investment operations:     
Net investment income   0.02 
Net realized and unrealized gains on investments   0.75 
Total from investment operations   0.77 
Distributions from:     
Net investment income   (0.01)
Net asset value at end of period  $10.76 
Total return   7.70%(B)
Ratios and supplemental data:     
Net assets at end of period (000's)  $1,155 
Ratio to average net assets:     
Net expenses   0.87%(C)
Gross expenses   3.63%(C)
Net investment income   1.05%(C)
Portfolio turnover rate   4%(B)

 

Touchstone Large Cap Fund—Institutional Class
Selected Data for a Share Outstanding Throughout Each Period

   Period 
   Ended 
   December 31, 
   2014(A) 
   (Unaudited) 
Net asset value at beginning of period  $10.00 
Income from investment operations:     
Net investment income   0.01 
Net realized and unrealized gains on investments   0.76 
Total from investment operations   0.77 
Distributions from:     
Net investment income   (0.01)
Net asset value at end of period  $10.76 
Total return   7.72%(B)
Ratios and supplemental data:     
Net assets at end of period (000's)  $81,225 
Ratio to average net assets:     
Net expenses   0.77%(C)
Gross expenses   1.30%(C)
Net investment income   1.15%(C)
Portfolio turnover rate   4%(B)

 

(A) Represents the period from commencement of operations (July 9, 2014) through December 31, 2014.

(B) Not annualized.

(C) Annualized.

 

See accompanying Notes to Financial Statements.

 

35
 

 

Financial Highlights (Continued)

 

Touchstone Small Cap Value Opportunities Fund—Class A
Selected Data for a Share Outstanding Throughout Each Period

   Six Months           Three             
   Ended           Months             
   December 31,           Ended             
   2014   Year Ended June 30,   June 30,   Year Ended March 31, 
   (Unaudited)   2014   2013   2012   2012   2011   2010 
Net asset value at beginning of period  $20.92   $18.75   $16.97   $18.08   $19.06   $16.43   $11.05 
Income (loss) from investment operations:                                   
Net investment income (loss)   0.23    (0.05)   0.09(A)   (0.01)   (0.06)(A)    (0.08)(A)    (0.01)(A)
Net realized and unrealized gains (losses) on investments   (0.32)   5.88(B)   3.66    (0.57)   0.04    2.71    5.39 
Total from investment operations   (0.09)   5.83    3.75    (0.58)   (0.02)   2.63    5.38 
Distributions from:                                   
Net investment income   (0.31)   (0.02)   (0.09)   —    —    —    — 
Realized capital gains   (2.37)   (3.64)   (1.88)   (0.53)   (0.96)   —    — 
Total distributions   (2.68)   (3.66)   (1.97)   (0.53)   (0.96)   —    — 
Net asset value at end of period  $18.15   $20.92   $18.75   $16.97   $18.08   $19.06   $16.43 
Total return(C)   (0.18)%(D)   33.35%(B)   24.31%   (3.09)%(D)   0.60%   16.01%   48.71%
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $16,193   $13,332   $1,309   $2,023   $2,251   $3,068   $4,815 
Ratio to average net assets:                                   
Net expenses   1.48%(E)   1.50%   1.50%   1.50%(E)   1.50%   1.50%   1.50%
Gross expenses   1.66%(E)   1.93%   2.46%   3.31%(E)   2.27%(F)    2.10%(F)    1.47%(F)
Net investment income (loss)   2.74%(E)   (0.09)%   0.53%   (0.16)%(E)   (0.34)%   (0.46)%   (0.08)%
Portfolio turnover rate   30%(D)   73%   95%   18%(D)   49%   55%   83%

 

Touchstone Small Cap Value Opportunities Fund—Class C
Selected Data for a Share Outstanding Throughout Each Period

   Six Months             
   Ended           Period 
   December 31,           Ended 
   2014,   Year Ended June 30,   June 30, 
   (Unaudited)   2014   2013   2012(G) 
Net asset value at beginning of period  $20.70   $18.69   $16.95   $17.58 
Income (loss) from investment operations:                    
Net investment income (loss)   0.16    (0.14)   (0.04)(A)   (0.03)
Net realized and unrealized gains (losses) on investments   (0.33)   5.79(B)   3.66    (0.07)
Total from investment operations   (0.17)   5.65    3.62    (0.10)
Distributions from:                    
Net investment income   (0.27)   —    —    — 
Realized capital gains   (2.37)   (3.64)   (1.88)   (0.53)
Total distributions   (2.64)   (3.64)   (1.88)   (0.53)
Net asset value at end of period  $17.89   $20.70   $18.69   $16.95 
Total return(C)   (0.57)%(D)   32.43%(B)   23.44%   (0.51)%(D)
Ratios and supplemental data:                    
Net assets at end of period (000's)  $1,684   $558   $36   $2 
Ratio to average net assets:                    
Net expenses   2.22%(E)   2.25%   2.25%   2.25%(E)
Gross expenses   2.70%(E)   5.09%   25.27%   942.58%(E)
Net investment income (loss)   1.99%(E)   (0.84)%   (0.22)%   (0.95)%(E)
Portfolio turnover rate   30%(D)   73%   95%   18%(D)

 

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

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

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

(D) Not annualized.

(E) Annualized.

(F) Legal, printing and/or compliance audit expenses relating to civil litigation and certain regulatory actions in connection with market timing allegations were incurred, and the former advisor paid these expenses on behalf of the Funds. Had the former advisor not paid these expenses, the expenses for the Funds would have been higher than what is reflected in the financial highlights for the years ended March 31, 2012, 2011 and 2010.

(G) Represents the period from commencement of operations (April 16, 2012) through June 30, 2012.

 

See accompanying Notes to Financial Statements.

 

36
 

 

Financial Highlights (Continued)

 

Touchstone Small Cap Value Opportunities Fund— Class Y
Selected Data for a Share Outstanding Throughout Each Period

   Six Months           Three             
   Ended           Months             
   December 31,           Ended             
   2014   Year Ended June 30,   June 30,   Year Ended March 31, 
   (Unaudited)   2014   2013   2012   2012   2011   2010 
Net asset value at beginning of period  $21.90   $19.45   $17.51   $18.62   $19.55   $16.80   $11.29 
Income (loss) from investment operations:                                   
Net investment income (loss)   0.27    0.04    0.15(A)   0.01(A)   (0.02)(A)   (0.04)(A)   0.03(A)
Net realized and unrealized gains (losses) on investments   (0.33)   6.11(B)   3.77    (0.59)   0.05    2.79    5.51 
Total from investment operations   (0.06)   6.15    3.92    (0.58)   0.03    2.75    5.54 
Distributions from:                                   
Net investment income   (0.34)   (0.06)   (0.10)   —    —    —    (0.03)
Realized capital gains   (2.37)   (3.64)   (1.88)   (0.53)   (0.96)   —    — 
Total distributions   (2.71)   (3.70)   (1.98)   (0.53)   (0.96)   —    (0.03)
Net asset value at end of period  $19.13   $21.90   $19.45   $17.51   $18.62   $19.55   $16.80 
Total return   (0.01)%(C)   33.80%(B)   24.68%   (3.05)%(C)   0.85%   16.37%   49.10%
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $151,844   $140,689   $96,584   $82,861   $87,984   $98,269   $86,737 
Ratio to average net assets:                                   
Net expenses   1.17%(D)   1.17%   1.19%   1.22%(D)   1.25%   1.25%   1.25%
Gross expenses   1.22%(D)   1.24%   1.29%   1.40%(D)   1.27%(E)   1.26%(E)   1.30%(E)
Net investment income (loss)   3.04%(D)   0.24%   0.84%   0.12%(D)   (0.09)%   (0.23)%   0.18%
Portfolio turnover rate   30%(C)   73%   95%   18%(C)   49%   55%   83%

 

Touchstone Small Cap Value Opportunities Fund—Institutional Class
Selected Data for a Share Outstanding Throughout Each Period

   Six Months           Three             
   Ended           Months             
   December 31,           Ended             
   2014   Year Ended June 30,   June 30,   Year Ended March 31, 
   (Unaudited)   2014   2013   2012   2012   2011   2010 
Net asset value at beginning of period  $22.13   $19.62   $17.63   $18.75   $19.65   $16.87   $11.32 
Income (loss) from investment operations:                                   
Net investment income (loss)   0.30    0.04    0.17(A)   0.01    0.01(A)   (0.01)(A)   0.05(A)
Net realized and unrealized gains (losses) on investments   (0.36)   6.18(B)   3.82    (0.60)   0.05    2.79    5.54 
Total from investment operations   (0.06)   6.22    3.99    (0.59)   0.06    2.78    5.59 
Distributions from:                                   
Net investment income   (0.35)   (0.07)   (0.12)   —    —    —    (0.04)
Realized capital gains   (2.37)   (3.64)   (1.88)   (0.53)   (0.96)   —    — 
Total distributions   (2.72)   (3.71)   (2.00)   (0.53)   (0.96)   —    (0.04)
Net asset value at end of period  $19.35   $22.13   $19.62   $17.63   $18.75   $19.65   $16.87 
Total return   (0.01)%(C)   33.90%(B)   24.82%   (3.04)%(C)   1.00%   16.48%   49.46%
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $26,027   $26,466   $8,096   $7,023   $19,066   $20,119   $26,915 
Ratio to average net assets:                                   
Net expenses   1.10%(D)   1.10%   1.10%   1.10%(D)   1.10%   1.10%   1.10%
Gross expenses   1.33%(D)   1.37%   1.46%   1.60%(D)   1.18%(E)   1.18%(E)   1.16%(E)
Net investment income (loss)   3.11%(D)   0.31%   0.93%   0.24%(D)   0.06%   (0.08%)   0.34%
Portfolio turnover rate   30%(C)   73%   95%   18%(C)   49%   55%   83%

 

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

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

(C) Not annualized.

(D) Annualized.

(E) Legal, printing and/or compliance audit expenses relating to civil litigation and certain regulatory actions in connection with market timing allegations were incurred, and the former advisor paid these expenses on behalf of the Funds. Had the former advisor not paid these expenses, the expenses for the Funds would have been higher than what is reflected in the financial highlights for the years ended March 31, 2012, 2011 and 2010.

 

See accompanying Notes to Financial Statements.

 

37
 

 

Financial Highlights (Continued)

 

Touchstone Value Fund—Class A
Selected Data for a Share Outstanding Throughout Each Period

   Six Months           Three             
   Ended           Months             
   December 31,           Ended             
   2014   Year Ended June 30,   June 30,   Year Ended March 31, 
   (Unaudited)   2014   2013   2012   2012   2011   2010 
Net asset value at beginning of period  $9.56   $8.02   $6.95   $7.14   $6.67   $6.17   $4.00 
Income (loss) from investment operations:                                   
Net investment income   0.07    0.19    0.15(A)   0.03(A)   0.12(A)   0.08(A)   0.09(A)
Net realized and unrealized gains (losses) on investments   0.31    1.53    1.30    (0.16)   0.45    0.50    2.17 
Total from investment operations   0.38    1.72    1.45    (0.13)   0.57    0.58    2.26 
Distributions from:                                   
Net investment income   (0.07)   (0.18)   (0.15)   (0.06)   (0.10)   (0.08)   (0.09)
Realized capital gains   (0.17)   —    (0.23)   —    —    —    — 
Total distributions   (0.24)   (0.18)   (0.38)   (0.06)   (0.10)   (0.08)   (0.09)
Net asset value at end of period  $9.70   $9.56   $8.02   $6.95   $7.14   $6.67   $6.17 
Total return(B)   3.85%(C)   21.50%   21.56%   (1.83)%(C)   8.77%   9.59%   57.05%
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $60,792   $66,000   $53,433   $1,583   $1,606   $2,325   $2,514 
Ratio to average net assets:                                   
Net expenses   1.08%(D)   1.07%   1.00%   1.20%(D)   1.20%   1.20%   1.26%
Gross expenses   1.29%(D)   1.31%   1.51%   3.49%(D)   1.96%(E)   2.04%(E)   1.76%(E)
Net investment income   1.40%(D)   2.13%   1.96%   1.68%(D)   1.84%   1.31%   1.72%
Portfolio turnover rate   19%(C)   26%   110%(F)   13%(C)   15%   13%   25%

 

Touchstone Value Fund—Class C
Selected Data for a Share Outstanding Throughout Each Period

   Six Months             
   Ended           Period 
   December 31,           Ended 
   2014   Year Ended June 30,   June 30, 
   (Unaudited)   2014   2013   2012(G) 
Net asset value at beginning of period  $9.55   $8.02   $6.95   $6.90 
Income from investment operations:                    
Net investment income   0.03    0.11    0.09(A)   0.01(A)
Net realized and unrealized gains on investments   0.30    1.54    1.30    0.10 
Total from investment operations   0.33    1.65    1.39    0.11 
Distributions from:                    
Net investment income   (0.04)   (0.12)   (0.09)   (0.06)
Realized capital gains   (0.17)   —    (0.23)   — 
Total distributions   (0.21)   (0.12)   (0.32)   (0.06)
Net asset value at end of period  $9.67   $9.55   $8.02   $6.95 
Total return(B)   3.37%(C)   20.61%   20.62%   1.56%(C)
Ratios and supplemental data:                    
Net assets at end of period (000's)  $6,346   $5,218   $3,025   $3 
Ratio to average net assets:                    
Net expenses   1.83%(D)   1.82%   1.75%   1.95%(D)
Gross expenses   2.10%(D)   2.19%   2.30%   929.36%(D)
Net investment income   0.65%(D)   1.38%   1.21%   0.93%(D)
Portfolio turnover rate   19%(C)   26%   110%(F)   13%(C)

 

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

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

(C) Not annualized.

(D) Annualized.

(E) Legal, printing and/or compliance audit expenses relating to civil litigation and certain regulatory actions in connection with market timing allegations were incurred, and the former advisor paid these expenses on behalf of the Funds. Had the former advisor not paid these expenses, the expenses for the Funds would have been higher than what is reflected in the financial highlights for the years ended March 31, 2012, 2011 and 2010.

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

(G) Represents the period from commencement of operations (April 16, 2012) through June 30, 2012.

 

See accompanying Notes to Financial Statements.

 

38
 

 

Financial Highlights (Continued)

 

Touchstone Value Fund—Class Y
Selected Data for a Share Outstanding Throughout Each Period

   Six Months           Three             
   Ended           Months             
   December 31,           Ended             
   2014   Year Ended June 30,   June 30,   Year Ended March 31, 
   (Unaudited)   2014   2013   2012   2012   2011   2010 
Net asset value at beginning of period  $9.59   $8.05   $6.97   $7.16   $6.69   $6.19   $4.01 
Income (loss) from investment operations:                                   
Net investment income   0.09    0.21    0.16(A)   0.03(A)   0.12(A)   0.09(A)   0.10(A)
Net realized and unrealized gains (losses) on investments   0.31    1.53    1.32    (0.15)   0.47    0.51    2.19 
Total from investment operations   0.40    1.74    1.48    (0.12)   0.59    0.60    2.29 
Distributions from:                                   
Net investment income   (0.09)   (0.20)   (0.17)   (0.07)   (0.12)   (0.10)   (0.11)
Realized capital gains   (0.17)   —    (0.23)   —    —    —    — 
Total distributions   (0.26)   (0.20)   (0.40)   (0.07)   (0.12)   (0.10)   (0.11)
Net asset value at end of period  $9.73   $9.59   $8.05   $6.97   $7.16   $6.69   $6.19 
Total return   3.99%(B)   21.71%   21.91%   (1.69)%(B)   9.01%   9.86%   57.65%
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $111,852   $113,055   $99,398   $51,447   $87,546   $86,659   $88,766 
Ratio to average net assets:                                   
Net expenses   0.80%(C)   0.80%   0.77%   0.95%(C)   0.95%   0.95%   1.00%
Gross expenses   0.96%(C)   0.99%   1.09%   1.23%(C)   1.03%(D)   1.04%(D)   1.07%(D)
Net investment income   1.68%(C)   2.39%   2.19%   1.93%(C)   1.90%   1.58%   1.87%
Portfolio turnover rate   19%(B)   26%   110%(E)   13%(B)   15%   13%   25%

 

Touchstone Value Fund—Institutional Class
Selected Data for a Share Outstanding Throughout Each Period

   Six Months           Three             
   Ended           Months             
   December 31,           Ended             
   2014   Year Ended June 30,   June 30,   Year Ended March 31, 
   (Unaudited)   2014   2013   2012   2012   2011   2010 
Net asset value at beginning of period  $9.57   $8.03   $6.96   $7.15   $6.68   $6.18   $4.01 
Income (loss) from investment operations:                                   
Net investment income   0.08    0.21    0.17(A)   0.03(A)   0.13(A)   0.10(A)   0.11(A)
Net realized and unrealized gains (losses) on investments   0.32    1.54    1.31    (0.16)   0.46    0.51    2.18 
Total from investment operations   0.40    1.75    1.48    (0.13)   0.59    0.61    2.29 
Distributions from:                                   
Net investment income   (0.09)   (0.21)   (0.18)   (0.06)   (0.12)   (0.11)   (0.12)
Realized capital gains   (0.17)   —    (0.23)   —    —    —    — 
Total distributions   (0.26)   (0.21)   (0.41)   (0.06)   (0.12)   (0.11)   (0.12)
Net asset value at end of period  $9.71   $9.57   $8.03   $6.96   $7.15   $6.68   $6.18 
Total return   4.06%(B)   21.92%   21.92%   (1.62)%(B)   9.13%   9.99%   57.64%
Ratios and supplemental data:                                   
Net assets at end of period (000's)  $262,682   $245,573   $186,990   $69,549   $33,727   $42,106   $51,274 
Ratio to average net assets:                                   
Net expenses   0.68%(C)   0.67%   0.67%   0.85%(C)   0.85%   0.85%   0.87%
Gross expenses   0.86%(C)   0.87%   0.99%   1.09%(C)   0.88%(D)   0.89%(D)   0.90%(D)
Net investment income   1.80%(C)   2.52%   2.29%   2.04%(C)   2.00%   1.67%   2.01%
Portfolio turnover rate   19%(B)   26%   110%(E)   13%(B)   15%   13%   25%

 

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

(B) Not annualized.

(C) Annualized.

(D) Legal, printing and/or compliance audit expenses relating to civil litigation and certain regulatory actions in connection with market timing allegations were incurred, and the former advisor paid these expenses on behalf of the Funds. Had the former advisor not paid these expenses, the expenses for the Funds would have been higher than what is reflected in the financial highlights for the years ended March 31, 2012, 2011 and 2010.

(E) Portfolio turnover excludes the purchases and sales of the Acquired Fund. If these transactions were included, portfolio turnover would have been higher.

 

See accompanying Notes to Financial Statements.

 

39
 

 

Notes to Financial Statements

December 31, 2014 (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 eighteen funds including the following five funds (individually, a “Fund”, and collectively, the “Funds”):

 

Touchstone Capital Growth Fund (“Capital Growth Fund”)

Touchstone International Small Cap Fund (“International Small Cap Fund”)

Touchstone Large Cap Fund (“Large Cap Fund”)

Touchstone Small Cap Value Opportunities Fund (“Small Cap Value Opportunities Fund”)

Touchstone Value Fund (“Value Fund”)

 

Each Fund is diversified, with the exception of the Capital Growth Fund and the Value Fund, each of which is non-diversified.

 

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 — Generally accepted accounting principles in the United States (“U.S. GAAP”) defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. All investments in securities are recorded at their estimated fair value.The Fund defines the term “market value”, as used throughout this report, as the estimated fair value. The Fund uses various methods to measure fair value of its portfolio securities on a recurring basis. U.S. GAAP fair value measurement standards require disclosure of a hierarchy that prioritizes inputs to valuation methods. These inputs are summarized in the three broad levels listed below:

 

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

 

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

 

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

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. 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 December 31, 2014, for the Funds’ 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 the Funds’ Portfolio of Investments, which also includes a breakdown of the Funds’ investments

 

40
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

by geographic or sector allocation. The Funds did not hold any Level 3 categorized securities during the six months ended December 31, 2014.

 

Changes in valuation techniques may result in transfers into or out of an investment’s assigned level within the hierarchy. All transfers in and out of the levels are recognized at the value at the end of the period. During the six months ended December 31, 2014, there were no transfers between Levels 1, 2 and 3 for all Funds, except as shown in the Portfolio of Investments for the International Small Cap Fund.

 

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 reported sale price, official close price, or last bid price if no sales are reported. Portfolio securities quoted by NASDAQ are valued at the NASDAQ Official Closing Price (“NOCP”) or from the primary exchange on which the security trades. To the extent these securities are actively traded, they are categorized in Level 1 of the fair value hierarchy. 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. Money market instruments and other debt securities with a remaining maturity of less than 60 days are valued at amortized cost, provided such amount approximates market value and are categorized in Level 2. While this method provides consistency in valuation (and may only be used if it approximates market value), it may result in periods during which value, as determined by amortized cost, is higher or lower than the price that would be received if the Fund sold the investment.

 

Securities mainly traded on a non-U.S. exchange or denominated in foreign currency are generally valued according to the preceding closing values on that exchange, translated to U.S. dollars using currency exchange rates as of the close of regular trading on the NYSE, and generally categorized in Level 1. However, if an event that may change the value of a security occurs after the time that the closing value on the non-U.S. exchange was determined, but before the close of regular trading on the NYSE, the security may be priced based on fair value and generally categorized in Level 2. This may cause the value of the security, if held on the books of the Fund to be different from the closing value on the non-U.S. exchange and may affect the calculation of that Fund’s NAV. The Funds may use fair value pricing under the following circumstances, among others:

 

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

 

•If the exchange on which a portfolio security is principally traded closes early or if trading in a particular portfolio security was halted during the day and did not resume prior to the Funds’ NAV calculation.

 

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

 

•If the validity of market quotations is not reliable.

 

Securities held by the Funds that do not have readily available market quotations, significant observable inputs, or securities for which the available market quotations are not reliable, are priced at their estimated fair value using procedures approved by the Funds’ Board of Trustees and are generally categorized in Level 3.

 

Investment companies— Certain Funds may invest in securities of other investment companies, including exchange-traded funds (“ETFs”), open-end funds, and closed-end funds. Open-end funds are investment companies that issue new shares continuously and redeem shares daily. Closed-end funds are investment companies that typically issue a fixed number of shares that trade on a securities exchange or over-the-counter. 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

 

41
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

in ETFs and closed-end funds are subject to the additional risk that their shares may trade at a premium or discount to their NAV. When a Fund invests in another investment company, shareholders of the Fund indirectly bear their proportionate share of the other investment company’s fees and expenses, including operating, registration, trustee, licensing and marketing, as well as their share of the Fund’s fees and expenses.

 

Foreign currency translation — The books and records of the Funds are maintained in U.S. dollars and translated into U.S. dollars on the following basis:

 

(1) market value of investment securities, assets and liabilities at the current rate of exchange on the valuation date; and

 

(2) purchases and sales of investment securities, income, and expenses at the relevant rates of exchange prevailing on the respective dates of such transactions.

 

The Funds do not isolate that portion of gains and losses on investments in equity securities that is due to changes in the foreign exchange rates from that which is due to changes in market prices of equity securities.

 

Real Estate Investment Trusts — The Funds may invest in real estate investment trusts (“REITs”) that involve risks not associated with investing in stocks. Risks include declines in the value of real estate, general and economic conditions, changes in the value of the underlying property and defaults by borrowers. The value of assets in the real estate industry may go through cycles of relative underperformance and outperformance in comparison to equity securities markets in general. Dividend income is recorded using management’s estimate of the income included in distributions received from REIT investments. The actual amounts of income, return of capital and capital gains are only determined by each REIT after its fiscal year-end and may differ from the estimated amount. Estimates of income are adjusted in the Funds to the actual amounts when the amounts are determined.

 

Portfolio securities loaned — Each Fund may lend its portfolio securities. Lending portfolio securities exposes a Fund to the risk that the borrower may fail to return the loaned securities or may not be able to provide additional collateral or that the Funds may experience delays in recovery of the loaned securities or loss of rights in the collateral if the borrower fails financially. To minimize these risks, the borrower must agree to maintain cash collateral with the Funds’ custodian. The loaned securities are secured by collateral valued at least equal, at all times, to the market value of the loaned securities plus accrued interest, if any. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the security lending agreement. The cash collateral is reinvested by the Funds’ custodian into an approved investment vehicle. The approved investment vehicle is subject to market risk.

 

As of December 31, 2014, the following Funds loaned securities and received collateral as follows:

 

   Market   Market 
   Value of   Value of 
   Securities   Collateral 
Fund  Loaned   Received 
Capital Growth Fund  $2,388,123   $2,428,723 
International Small Cap Fund   9,358,930    10,067,164 
Large Cap Fund   448,209    464,012 
Small Cap Value Opportunities Fund   28,818,985    31,043,701 
Value Fund   6,160,070    6,288,115 

 

All cash collateral is received, held, and administered by the Funds’ custodian for the benefit of the lending Fund in its custody account or other account established for the purpose of holding collateral.

 

42
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

Funds participating in securities lending receive compensation in the form of fees. Securities lending income is derived from lending long securities from the Funds to creditworthy approved borrowers at rates that are determined based on trading volumes, float, short-term interest rates and market liquidity. A lending Fund retains the interest or dividends on the investment of any cash received as collateral. The lending Fund continues to receive interest or dividends on the loaned securities.

 

Unrealized gain or loss on the market value of the loaned securities that may occur during the term of the loan is recognized by the lending Fund. The lending Fund has the right under the lending agreement to recover the securities from the borrower on demand.

 

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

 

The maximum offering price per share of Class A shares of the Funds is equal to the NAV per share plus a sales load equal to 6.10% of the NAV (or 5.75% of the offering price). There is no sales load on purchases of $1 million or more of Class A shares. The maximum offering price per share of Classes C, 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 1.00% 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%. The CDSC will be assessed on an amount equal to the lesser of (1) the NAV at the time of purchase of the shares being redeemed or (2) the NAV of such shares being redeemed 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. Each Fund, except the Value Fund, declares and distributes net investment income, if any, annually, as a dividend to shareholders. The Value Fund declares and distributes net investment income, if any, semi-annually, as a dividend to shareholders. Each Fund makes distributions of capital gains, if any, at least annually, net of applicable capital loss carryforwards. Income distributions and capital gain distributions are determined in accordance with income tax regulations. Recognition of the Funds’ net investment income that invest in underlying funds is affected by the timing of dividend declarations by underlying funds.

 

Allocations — Investment income earned, realized capital gains and losses, and unrealized appreciation and depreciation for a Fund are allocated daily to each class of shares based upon its proportionate share of total net assets of the Fund. Class-specific expenses are charged directly to the class incurring the expense. Common expenses, which are not attributable to a specific class, are allocated daily to each class of shares based upon their proportionate share of total net assets of the Fund. Expenses not directly billed to a Fund are allocated proportionally among all Funds in the Trust, and, if applicable, in Touchstone Investment Trust, Touchstone Institutional Funds Trust, Touchstone Variable Series Trust, Touchstone Funds Group Trust, and Touchstone Tax-Free Trust (collectively with the Trust, “Touchstone Fund Complex”), daily in relation to net assets of each Fund or another reasonable measure.

 

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

 

43
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

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

 

3. Investment Transactions

 

Investment transactions (excluding short-term investments and U.S. Government securities) were as follows for the six months ended December 31, 2014:

 

       International     
   Capital Growth   Small Cap   Large Cap 
   Fund   Fund   Fund 
Purchases of investment securities  $39,864,702   $61,242,793   $79,897,894 
Proceeds from sales and maturities  $51,686,155   $55,575,667   $470,367 

 

   Small Cap     
   Value     
   Opportunities   Value 
   Fund   Fund 
Purchases of investment securities  $69,504,062   $39,463,175 
Proceeds from sales and maturities  $53,537,295   $41,176,187 

 

There were no purchases or proceeds from sales and maturities of U.S. Government securities by the Funds for the six months ended December 31, 2014.

 

4. Transactions with Affiliates and Other Related Parties

 

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

 

On behalf of the Funds, the Advisor pays each Independent Trustee a quarterly retainer plus additional retainers to the Lead Independent Trustee and the chairs of each standing committee. Interested Trustees do not receive compensation from the Funds. Each Independent Trustee also receives compensation for each board meeting and committee meeting attended. Each standing committee chair receives additional compensation for each committee meeting that he or she oversees. The Advisor is reimbursed by the Funds for the Independent Trustees’ compensation and out-of-pocket expenses relating to their services. The Funds accrued Trustee-related expenses of $30,245 for the six months ended December 31, 2014.

 

Management & Expense Limitation 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.

 

Touchstone Capital Growth Fund 0.70% on the first $300 million
  0.685% on the next $200 million
  0.675% on the next $500 million
  0.625% on the next $500 million
  0.575% on the next $500 million
  0.525% on such assets over $2 billion

 

44
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

Touchstone International Small Cap Fund 0.95% on the first $300 million
  0.90% on the next $200 million
  0.85% on the next $250 million
  0.80% on the next $250 million
  0.75% on the next $500 million
  0.70% on the next $500 million
  0.65% on such assets over $2 billion
Touchstone Large Cap Fund 0.70% on the first $500 million
  0.64% on the next $500 million
  0.60% on such assets over $1 billion
Touchstone Small Cap Value Opportunities Fund 0.95% on the first $300 million
  0.90% on the next $200 million
  0.85% on such assets over $500 million
Touchstone Value Fund 0.65%

 

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

 

Ashfield Capital Partners, LLC The London Company
Capital Growth Fund Large Cap Fund
   
Barrow, Hanley, Mewhinney & Strauss, LLC Thompson Siegel & Walmsley LLC
Value Fund Small Cap Value Opportunities Fund

 

Copper Rock Capital Partners LLC

 

International Small Cap Fund

 

The Advisor, not the Funds, pays the 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 and interest 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 expenses, advisory fees and 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 
Capital Growth Fund   1.25%   2.00%   1.00%   0.90%
International Small Cap Fund   1.55%   2.30%   1.30%   1.18%
Large Cap Fund   1.12%   1.87%   0.87%   0.77%
Small Cap Value                    
Opportunities Fund*   1.43%   2.18%   1.18%   1.10%
Value Fund   1.08%   1.83%   0.83%   0.68%

 

* Prior to October 30, 2014 the expense limitations for Classes A, C, Y and Institutional Class shares were 1.50%, 2.25%, 1.25% and 1.10%, respectively.

 

These expense limitations will remain in effect for all Funds through at least October 29, 2015.

 

45
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

During the six months ended December 31, 2014, the Advisor or its affiliates waived investment advisory fees and administration fees or reimbursed expenses, including distribution fees, of the Funds as follows:

 

           Other     
   Investment       Operating     
   Advisory   Administration   Expenses     
Fund  Fees Waived   Fees Waived   Reimbursed   Total 
Capital Growth Fund  $—   $68,285   $34,378   $102,663 
International Small Cap Fund   —    58,151    43,809    101,960 
Large Cap Fund   24,905    13,050    17,427    55,382 
Small Cap Value Opportunities Fund   —    49,603    34,767    84,370 
Value Fund   —    343,608    45,838    389,446 

 

Under the terms of the Expense Limitation Agreement, the Advisor is entitled to recover, subject to approval by the Funds’ Board, such amounts waived or reimbursed for a period of up to three years from the 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 in effect at the time of the waiver or reimbursement.

 

As of December 31, 2014, the Advisor may seek recoupment of previously waived fees and reimbursed expenses as follows:

 

   Expiration   Expiration   Expiration   Expiration     
   June 30,   June 30,   June 30,   June 30,     
Fund  2015   2016   2017   2018   Total 
Capital Growth Fund  $118,022   $283,206   $223,052   $98,957   $723,237 
International Small Cap Fund   99,781    346,008    277,489    88,337    811,615 
Large Cap Fund   —    —    —    55,273    55,273 
Small Cap Value Opportunities Fund   59,559    132,190    129,267    72,638    393,654 
Value Fund   81,083    897,689    712,405    370,339    2,061,516 

 

The Advisor did not recoup any amounts it previously waived or reimbursed during the six months ended December 31, 2014.

 

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 (the “SEC”) and state securities authorities, as well as materials for meetings of the Board; calculating the daily NAV per share; and maintaining the financial books and records of each Fund.

 

For its services through December 31, 2014, the Advisor’s annual administrative fee was:

 

0.20% on the first $6 billion of the aggregate average daily net assets;

 

0.16% of the next $4 billion of aggregate average daily net assets; and

 

0.12% of the aggregate average daily net assets of all such assets in excess of $10 billion.

 

The fee was computed and allocated among 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.

 

Beginning January 1, 2015, the Advisor’s annual administrative fee is:

 

0.145% on the first $20 billion of the aggregate average daily net assets;

 

46
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

0.11% on the next $10 billion of aggregate average daily net assets;

 

0.09% on the next $10 billion of aggregate average daily net assets; and

 

0.07% on the aggregate average daily net assets over $40 billion.

 

The fee is computed and allocated among the Touchstone Fund Complex (excluding Touchstone Institutional Funds Trust) on the basis of relative daily net assets.

 

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.

 

The Funds may reimburse the Advisor for fees paid to intermediaries such as banks, broker-dealers, financial advisors or other financial institutions for sub-transfer agency, sub-administration and other services provided to investors whose shares of record are held in omnibus, other group accounts, retirement plans or accounts traded through registered securities clearing agents. These fees may vary based on, for example, the nature of services provided, but generally range up to 0.15% of the assets of the class serviced or maintained by the intermediary or up to $22 per sub-account maintained by the intermediary. Prior to December 1, 2014, the Funds reimbursed the Advisor up to $17 per sub-account maintained by the intermediary.

 

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 is 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. The fees charged to the Funds are limited to the actual expenses incurred. Under the Class A plan, each Fund offering Class A shares pays an annual fee of up to 0.25% of average daily net assets that are attributable to Class A shares. Under the Class C plan, each Fund 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).

 

47
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

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 December 31, 2014:

 

Fund  Amount 
Capital Growth Fund  $2,024 
International Small Cap Fund   959 
Large Cap Fund   387 
Small Cap Value Opportunities Fund   2,423 
Value Fund   4,936 

 

In addition, the Underwriter collected CDSC on the redemption of Class C shares of the Funds listed below during the six months ended December 31, 2014:

 

Fund  Amount 
Small Cap Value Opportunities Fund  $179 

 

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 each Fund’s investment, as applicable, in the Touchstone Institutional Money Market Fund for the six months ended December 31, 2014, is as follows:

 

Fund  Share Activity         
                       Market 
   Balance           Balance       Value 
   06/30/14   Purchases   Sales   12/31/14   Dividends   12/31/14 
Capital Growth Fund   13    26,826,733    (22,694,131)   4,132,615   $140   $4,132,615 
International Small Cap Fund   4,837,156    32,684,220    (35,349,077)   2,172,299    199    2,172,299 
Large Cap Fund   —    80,504,915    (79,428,401)   1,076,514    117    1,076,514 
Small Cap Value Opportunities Fund   3,423,077    42,154,873    (38,716,304)   6,861,646    294    6,861,646 
Value Fund   9,606,140    30,449,311    (32,267,171)   7,788,280    406    7,788,280 

 

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.

 

48
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

The tax character of distributions paid for the years ended June 30, 2014 and June 30, 2013 is as follows:

 

   Capital Growth Fund   International Small Cap Fund 
   Year Ended   Year Ended   Year Ended   Year Ended 
   June 30,   June 30,   June 30,   June 30, 
   2014   2013   2014   2013 
From ordinary income  $104,324   $218,632   $1,908,555   $1,525,830 
Total Distributions  $104,324   $218,632   $1,908,555   $1,525,830 
         
   Small Cap Value Opportunities Fund   Value Fund 
   Year Ended   Year Ended   Year Ended   Year Ended 
   June 30,   June 30,   June 30,   March 31, 
   2014   2013   2014   2013 
From ordinary income  $9,922,007   $1,230,862   $8,779,860   $9,968,846 
From long-term capital gains   10,092,574    9,185,252    —    5,851,644 
Total Distributions  $20,014,581   $10,416,114   $8,779,860   $15,820,490 

 

The following information is computed on a tax basis for each item as of June 30, 2014:

 

           Small Cap     
   Capital   International   Value     
   Growth   Small Cap   Opportunities   Value 
   Fund   Fund   Fund   Fund 
Tax cost of portfolio investments  $121,399,412   $131,593,580   $186,694,234   $328,710,038 
Gross unrealized appreciation   80,826,901    38,505,001    32,088,518    112,268,073 
Gross unrealized depreciation   (2,150,914)   (3,078,492)   (5,010,579)   (3,127,600)
Net unrealized appreciation on investments   78,675,987    35,426,509    27,077,939    109,140,473 
Net unrealized appreciation on foreign currency transactions   —    8,122    —    — 
Accumulated capital and other losses   (6,801,435)   (17,937,717)   (541,070)   (20,824,529)
Undistributed ordinary income   —    821,488    9,440,865    206,189 
Undistributed long-term capital gains   3,965,109    —    9,064,252    2,409,016 
Accumulated earnings (deficit)  $75,839,661   $18,318,402   $45,041,986   $90,931,149 

 

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 (“PFIC”) adjustments.

 

As of June 30, 2014, the Funds had the following capital loss carryforwards for federal income tax purposes:

 

                   No   No     
   Short Term Expiring On*   Expiration   Expiration     
   2015   2016   2017   2018   Short Term*   Long Term*   Total 
Capital Growth Fund**  $2,882,786   $2,882,786   $1,035,863   $—   $—   $—   $6,801,435 
International Small Cap                                   
Fund**   8,530,086    4,523,327    4,884,304    —    —    —    17,937,717 
Small Cap Value                                   
Opportunities Fund   541,070    —    —    —    —    —    541,070 
Value Fund**   —    —    20,543,868    280,661    —    —    20,824,529 

 

*The Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted on December 22, 2010. The Act made changes to several tax rules impacting the Funds. The provisions of the Act first became effective for the Funds’ fiscal year ended June 30, 2012 and are applicable to all subsequent fiscal years. 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.

 

49
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

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 March 31, 2011 through June 30, 2014) and have concluded that no provision for income tax is required in their financial statements.

 

As of December 31, 2014 the Trust had the following federal tax cost resulting in net unrealized appreciation (depreciation) as follows:

 

       Gross   Gross   Net 
   Federal Tax   Unrealized   Unrealized   Unrealized 
Fund  Cost   Appreciation   Depreciation   Appreciation 
Capital Growth Fund  $127,974,084   $67,541,554   $(1,319,644)  $66,221,910 
International Small Cap Fund   143,466,439    28,252,911    (7,107,970)   21,144,941 
Large Cap Fund   80,954,285    2,253,426    (222,625)   2,030,801 
Small Cap Value Opportunities Fund   209,741,761    28,050,299    (10,909,068)   17,141,231 
Value Fund   334,087,965    120,105,039    (6,970,280)   113,134,759 

 

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.

 

7. Risks Associated with Foreign Investments

 

Some of the Funds may invest in the securities of foreign issuers. Investing in securities issued by companies whose principal business activities are outside the U.S. may involve significant risks not present in domestic investments. For example, there is generally less publicly available information about foreign companies, particularly those not subject to the disclosure and reporting requirements of the U.S. securities laws. Foreign issuers are generally not bound by uniform accounting, auditing, and financial reporting requirements and standards of practice comparable to those applicable to domestic issuers. Investments in foreign securities also involve the risk of possible adverse changes in investment or exchange control regulations, expropriation or confiscatory taxation, limitations on the removal of funds or other assets of the Fund, political or financial instability or diplomatic and other developments which could affect such investments. Foreign stock markets, while growing in volume and sophistication, are generally not as developed as those in the U.S., and securities of some foreign issuers (particularly those located in developing countries) may be less liquid and more volatile than securities of comparable U.S. companies. In general, there is less overall governmental supervision and regulation of foreign securities markets, broker-dealers, and issuers than in the U.S.

 

8. Risks Associated with Concentration

 

Certain Funds may invest a high percentage of their assets in specific sectors of the market in order to achieve a potentially greater investment return. As a result, these Funds may be more susceptible to economic, political, and regulatory developments in a particular sector of the market, positive or negative, and may experience increased volatility on the Funds’ NAVs and magnified effect on the total return.

 

50
 

 

Notes to Financial Statements (Unaudited) (Continued)

 

9. Subsequent Events

 

Subsequent events occurring after the date of this report have been evaluated for potential impact to this report through the date financial statements were issued.

 

At a meeting of the Board of Trustees (the “Board”) of Touchstone Strategic Trust (the “Trust”) held on February 12, 2015, the Board approved several proposals relating to the Touchstone Capital Growth Fund, a series of the Trust (the “Capital Growth Fund”).

 

The Board approved replacing the Capital Growth Fund’s current sub-advisor, Ashfield Capital Partners, LLC, with Russell Implementation Services, Inc. as interim sub-advisor on the portfolio. Effective at close of business on April 30, 2015, the Board approved replacing Russell with a new sub-advisor, The London Company of Virginia, LLC d/b/a The London Company (“The London Company”).

 

The Board also approved, subject to approval by the shareholders of the Capital Growth Fund, the reorganization (the “Reorganization”) of the Capital Growth Fund into the Touchstone Large Cap Fund, a series of the Trust (the “Large Cap Fund”), pursuant to an agreement and plan of reorganization. The Large Cap Fund is currently sub-advised by The London Company. The Reorganization, if approved, is expected to take place before the end of the third quarter.

 

There were no other subsequent events that necessitated recognition or disclosure in the Funds’ financial statement.

 

51
 

 

Other Items (Unaudited)

 

Proxy Voting Guidelines and Proxy Voting Records

 

The Sub-Advisors are responsible for exercising the voting rights associated with the securities purchased and held by the Funds. A description of the policies and procedures that the Sub-Advisors use in fulfilling this responsibility is available as an appendix to the most recent Statement of Additional Information, which can be obtained without charge by calling toll free 1.800.543.0407 or by visiting the Touchstone website at www.touchstoneinvestments.com or on the Securities and Exchange Commission’s (the “Commission”) website 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 (July 1, 2014 through December 31, 2014).

 

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 December 31, 2014” 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 of 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.

 

52
 

 

Other Items (Unaudited) (Continued)

 

Schedule of Shareholder Expenses

 

                  Expenses 
      Net Expense   Beginning   Ending   Paid During 
      Ratio   Account   Account   the Six Months 
      Annualized   Value   Value   Ended 
      December 31,   July 1,   December 31,   December 31, 
      2014   2014   2014   2014* 
Touchstone Capital Growth Fund                       
Class A  Actual   1.25%  $1,000.00   $1,016.00   $6.35 
Class A  Hypothetical   1.25%  $1,000.00   $1,018.90   $6.36 
                        
Class C  Actual   2.00%  $1,000.00   $1,012.30   $10.14 
Class C  Hypothetical   2.00%  $1,000.00   $1,015.12   $10.16 
                        
Class Y  Actual   1.00%  $1,000.00   $1,017.10   $5.08 
Class Y  Hypothetical   1.00%  $1,000.00   $1,020.16   $5.09 
                        
Institutional Class  Actual   0.90%  $1,000.00   $1,018.10   $4.58 
Institutional Class  Hypothetical   0.90%  $1,000.00   $1,020.67   $4.58 
                        
Touchstone International Small Cap Fund               
Class A  Actual   1.55%  $1,000.00   $950.20   $7.62 
Class A  Hypothetical   1.55%  $1,000.00   $1,017.39   $7.88 
                        
Class C  Actual   2.30%  $1,000.00   $946.10   $11.28 
Class C  Hypothetical   2.30%  $1,000.00   $1,013.61   $11.67 
                        
Class Y  Actual   1.30%  $1,000.00   $951.00   $6.39 
Class Y  Hypothetical   1.30%  $1,000.00   $1,018.65   $6.61 
                        
Institutional Class  Actual   1.18%  $1,000.00   $951.30   $5.80 
Institutional Class  Hypothetical   1.18%  $1,000.00   $1,019.26   $6.01 
                        
Touchstone Large Cap Fund                       
Class A(A)  Actual   1.12%  $1,000.00   $1,075.70   $5.54 
Class A  Hypothetical   1.12%  $1,000.00   $1,019.56   $5.70 
                        
Class C(A)  Actual   1.87%  $1,000.00   $1,073.00   $9.24 
Class C  Hypothetical   1.87%  $1,000.00   $1,015.78   $9.50 
                        
Class Y(A)  Actual   0.87%  $1,000.00   $1,077.00   $4.31 
Class Y  Hypothetical   0.87%  $1,000.00   $1,020.82   $4.43 
                        
Institutional Class(A)  Actual   0.77%  $1,000.00   $1,077.20   $3.80 
Institutional Class  Hypothetical   0.77%  $1,000.00   $1,021.32   $3.92 
                        
Touchstone Small Cap Value Opportunities Fund               
Class A  Actual   1.48%  $1,000.00   $998.20   $7.45**
Class A  Hypothetical   1.48%  $1,000.00   $1,017.74   $7.53**
                        
Class C  Actual   2.22%  $1,000.00   $994.30   $11.16**
Class C  Hypothetical   2.22%  $1,000.00   $1,014.01   $11.27**
                        
Class Y  Actual   1.17%  $1,000.00   $999.90   $5.90**
Class Y  Hypothetical   1.17%  $1,000.00   $1,019.31   $5.96**
                        
Institutional Class  Actual   1.10%  $1,000.00   $999.90   $5.54**
Institutional Class  Hypothetical   1.10%  $1,000.00   $1,019.66   $5.60**

 

53
 

 

Other Items (Unaudited) (Continued)

 

Schedule of Shareholder Expenses (Continued)

 

                  Expenses 
      Net Expense   Beginning   Ending   Paid During 
      Ratio   Account   Account   the Six Months 
      Annualized   Value   Value   Ended 
      December 31,   July 1,   December 31,   December 31, 
      2014   2014   2014   2014* 
Touchstone Value Fund                       
Class A  Actual   1.08%  $1,000.00   $1,038.53   $5.55 
Class A  Hypothetical   1.08%  $1,000.00   $1,019.76   $5.50 
                        
Class C  Actual   1.83%  $1,000.00   $1,033.70   $9.38 
Class C  Hypothetical   1.83%  $1,000.00   $1,015.98   $9.30 
                        
Class Y  Actual   0.80%  $1,000.00   $1,039.90   $4.16 
Class Y  Hypothetical   0.80%  $1,000.00   $1,021.12   $4.13 
                        
Institutional Class  Actual   0.68%  $1,000.00   $1,040.60   $3.50 
Institutional Class  Hypothetical   0.68%  $1,000.00   $1,021.78   $3.47 

 

(A)Represents the period from commencement of operations (July 9, 2014) through December 31, 2014. Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 174/365.

 

*Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half period).

 

**The expense limitations of the Small Cap Value Opportunities Fund was changed effective 10/30/2014. Had the new expense limitations been in place for the full six months the Actual expenses paid during the period ended 12/31/2014 would have been $7.20, $10.96, $5.90 and $5.55 for Class A, Class C, Class Y and the Institutional Class shares, respectively. The Hypothetical expenses for the same time period would have been $7.21, $10.99, $5.90 and $5.55 for Class A, Class C, Class Y and the Institutional Class shares, respectively.

 

Advisory and Sub-Advisory Agreement Approval Disclosure

 

At a meeting held on February 13, 2014, the Board of Trustees (the “Board” or “Trustees”) of the Touchstone Strategic Trust (the “Trust”), and by a separate vote, the Independent Trustees of the Trust, approved an amendment to the Investment Advisory Agreement between the Trust and the Advisor adding the Touchstone Large Cap Fund (the “Fund”) and also initially approved the Sub-Advisory Agreement with respect to the Fund between the Advisor and The London Company of Virginia d/b/a The London Company (the “Sub-Advisor”).

 

In determining whether to approve the amendment to the Investment Advisory Agreement and the Sub-Advisory Agreement, the Advisor furnished information necessary for a majority of the Independent Trustees to make the determination that approval of the amendment to the Investment Advisory Agreement and the Sub-Advisory Agreement was in the best interests of the Fund and its shareholders. The Board also took into account information provided to the Board in its meetings throughout the year with respect to the services provided by the Advisor and the Sub-Advisor to the other Touchstone Funds managed by the Sub-Advisor that used the same bottom-up investment process that the Sub-Advisor proposed to use in managing the Fund (the “Other Touchstone Funds”). In addition, the Board took into consideration certain information and materials that the Board had received and considered in connection with its approval of the renewal in November 2013 of the Investment Advisory and Sub-Advisory Agreements with respect to the Other Touchstone Funds. Those approvals, on which the Board voted at its meeting held in person on November 21, 2013, followed a lengthy process during which the Board considered a variety of factors. The information considered by the Board at the February 2014 meeting included: (1) a comparison of the Fund’s proposed advisory fee and other fees and anticipated total expense ratio with those of comparable funds; (2) performance information for the Sub-Advisor’s Large Cap Core separately managed account (“Large Cap SMA”); (3) the Advisor’s and its affiliates’ estimated revenues and costs of providing services to the Fund; and (4) information about the Advisor’s and Sub-Advisor’s personnel.

 

54
 

 

Other Items (Unaudited) (Continued)

 

Prior to voting, the Independent Trustees reviewed the proposed approval of the amendment to the Investment Advisory Agreement and the Sub-Advisory Agreement with management and with experienced independent legal counsel and received materials from such counsel discussing the legal standards for their consideration of the proposed approval of the amendment to the Investment Advisory Agreement and the Sub-Advisory Agreement. The Independent Trustees also reviewed the proposed approval of the amendment to the Investment Advisory Agreement and the Sub-Advisory Agreement in a private session with independent legal counsel at which no representatives of management were present.

 

In approving the amendment to the Investment Advisory Agreement, the Board considered various factors, among them: (1) the nature, extent and quality of services to be provided to the Fund, including the personnel who would be providing such services; (2) the Advisor’s anticipated compensation and profitability; (3) the level of the Fund’s proposed advisory fees and expenses; (4) anticipated economies of scale; and (5) the terms of the Investment Advisory Agreement. The Board’s analysis of these factors is set forth below. The Independent Trustees were advised by independent legal counsel throughout the process.

 

Nature, Extent and Quality of Advisor’s Services. The Board considered the level and depth of knowledge of the Advisor, including the professional experience and qualifications of senior personnel. In evaluating the quality of services to be provided by the Advisor, the Board took into account its familiarity with the Advisor’s senior management through Board meetings, discussions and reports during the preceding year. The Board also took into account the Advisor’s compliance policies and procedures. The quality of administrative and other services of comparable funds managed by the Advisor, including the Advisor’s role in coordinating the activities of those funds’ other service providers, was also considered. The Board also considered the Advisor’s relationship with its affiliates and the resources available to them, as well as any potential conflicts of interest.

 

The Board discussed the Advisor’s effectiveness in monitoring the performance of sub-advisors, including the Sub-Advisor, and the Advisor’s timeliness in responding to any performance issues. The Board considered the Advisor’s process for monitoring the Sub-Advisor, which includes an examination of both qualitative and quantitative elements of the Sub-Advisor’s organization, personnel, procedures, investment discipline, infrastructure and performance. The Board considered that the Advisor conducts regular on-site compliance visits with the Sub-Advisor, during which the Advisor examines a wide variety of factors, such as the financial condition of the Sub-Advisor, the quality of the Sub-Advisor’s systems, the effectiveness of the Sub-Advisor’s disaster recovery programs, trade allocation and execution procedures, compliance with the Sub-Advisor’s policies and procedures, results of regulatory examinations and any other factors that might affect the quality of services to be provided by the Sub-Advisor to the Fund. The Board noted that the Advisor’s compliance monitoring processes also include quarterly reviews of compliance reports, and that any issues arising from such reports and the Advisor’s compliance visits to the Sub-Advisor are reported to the Board.

 

The Trustees concluded that they were satisfied with the nature, extent and quality of services to be provided to the Fund by the Advisor under the Investment Advisory Agreement.

 

Advisor’s Compensation and Profitability. The Board took into consideration the financial condition and anticipated level of profitability of the Advisor and its affiliates and the direct and indirect benefits to be derived by the Advisor and its affiliates from the Advisor’s relationship with the Fund. The Board noted that the Advisor had contractually agreed to waive fees and/or reimburse expenses in order to limit the Fund’s total operating expenses for at least a year following the date on which the Fund commenced operations. The Board also noted that the Advisor would pay the Sub-Advisor’s sub-advisory fee out of the advisory fee the Advisor would receive from the Fund. The Board reviewed the anticipated level of profitability of the Advisor’s relationship with the Fund and whether the Advisor has the financial wherewithal to provide services to the Fund, noting the ongoing

 

55
 

 

Other Items (Unaudited) (Continued)

 

commitment of the Advisor’s parent company with respect to providing support and resources as needed. The Board also noted that the Advisor would derive benefits to its reputation and other benefits from its association with the Fund.

 

The Board recognized that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it would provide to the Fund and the entrepreneurial risk that it would assume as Advisor. Based upon their review, the Trustees concluded that the Advisor’s and its affiliates’ anticipated level of profitability, if any, from their relationship with the Fund was reasonable and not excessive.

 

Expenses and Performance. The Board compared the Fund’s proposed advisory fee and total expense ratio net of applicable fee waivers and/or expense reimbursements with those of comparable funds. The Board noted that the advisory fee proposed for the Fund was in the third quintile of the Fund’s expense universe and at the median of the Morningstar Large Blend Category, and the Fund’s total expenses, net of fee waivers and/or reimbursements, were in the second quintile of the Fund’s expense universe. The Board also noted the Advisor’s explanation for pricing the Fund’s total expenses in the second quintile. The Board took into consideration the performance of the Large Cap SMA and the Other Touchstone Funds. The Board noted that the portfolio managers who would be involved in the management of the Fund were the same individuals involved in the management of the Large Cap SMA and the Other Touchstone Funds. The Board also noted that the Board reviews on a quarterly basis detailed information about the Other Touchstone Funds performance results, portfolio composition and investment strategies. In addition, the Board took into consideration certain differences between how the Large Cap SMA and the Other Touchstone Funds are managed and how the Fund will be managed as well as the impact these differences are expected to have on the Fund’s performance.

 

The Board noted that the Advisor had contractually agreed to waive a portion of its fees and/or reimburse certain Fund expenses in order to limit the Fund’s operating expenses to targeted levels. The Board further noted that the sub-advisory fees under the Sub-Advisory Agreement would be paid by the Advisor out of the advisory fee it receives from the Fund and noted the impact of such sub-advisory fee on the profitability of the Advisor. In reviewing the proposed expense ratios and the performance of the Other Touchstone Funds, the Board also took into account the nature, extent and quality of the services to be provided to the Fund by the Advisor and its affiliates. Based upon their review, the Trustees concluded that the proposed advisory fee was reasonable in light of the services to be received by the Fund from the Advisor.

 

Economies of Scale. The Board considered the effect of the Fund’s potential growth and size on its performance and expenses. The Board took into account management’s discussion of the proposed advisory fee structure. The Board noted that the proposed advisory fee schedule for the Fund contains breakpoints that would reduce the advisory fee rate on assets above specified levels as the Fund’s assets increased. The Board also noted that if the Fund’s assets increase over time, the Fund might realize economies of scale if assets increase proportionally more than certain other expenses.

 

Conclusion. In considering the approval of the amendment to the Investment Advisory Agreement, the Board, including the Independent Trustees, did not identify any single factor as controlling, and each Trustee may have attributed different weights to the various factors. The Trustees evaluated all information available to them. The Board reached the following conclusions regarding the amendment to the Investment Advisory Agreement, among others: (a) the Advisor demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Advisor maintains an appropriate compliance program; and (c) the Fund’s proposed advisory fee is reasonable in relation to the fees of similar funds and the services to be provided by the Advisor. Based on their conclusions, the Trustees determined that approval of the amendment to the Investment Advisory Agreement was in the best interests of the Fund and its shareholders.

 

56
 

 

Other Items (Unaudited) (Continued)

 

In initially approving the Fund’s 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 with respect to its management of the Large Cap SMA and the Other Touchstone Funds; and (4) the terms of the Sub-Advisory Agreement. The Board’s analysis of these factors is set forth below. The Independent Trustees were advised by independent legal counsel throughout the process.

 

Nature, Extent and Quality of Services Provided; Investment Personnel. The Board considered information provided by the Advisor regarding the services to be provided by the Sub-Advisor. The Board noted that, on a periodic basis, the Board meets with the portfolio managers of the Sub-Advisor to discuss their performance and investment processes and strategies with respect to the Other Touchstone Funds. The Board considered the Sub-Advisor’s level of knowledge and investment style. The Board reviewed the experience and credentials of the investment personnel who would be responsible for managing the investment of portfolio securities with respect to the Fund. The Board also noted its familiarity with the Sub-Advisor, owing to the Sub-Advisor’s management of the Other Touchstone Funds. The Board also considered the Sub-Advisor’s regulatory and compliance history. The Board noted that the Advisor’s compliance monitoring includes quarterly reviews of compliance reports and annual compliance reviews of the Sub-Advisor and that compliance issues, if any, are reported to the Board. The Board also noted the Sub-Advisor’s brokerage practices.

 

Sub-Advisor’s Compensation, Profitability and Economies of Scale. The Board took into consideration the financial condition of the Sub-Advisor and any direct and indirect benefits to be derived by the Sub-Advisor and its affiliates from the Sub-Advisor’s relationship with the Fund. In considering the anticipated level of profitability to the Sub-Advisor and its affiliates of the Sub-Advisor’s relationship with the Fund, the Board noted the proposed contractual undertaking of the Advisor to maintain expense limitations for the Fund and also noted that the sub-advisory fee under the Sub-Advisory Agreement would be paid by the Advisor out of the advisory fee that it would receive from the Fund under the Investment Advisory Agreement, and that the sub-advisory fee is negotiated at arm’s length. As a consequence, the anticipated level of profitability to the Sub-Advisor of its relationship with the Fund was not a substantial factor in the Board’s deliberations. For similar reasons, the Board did not consider potential economies of scale in the Sub-Advisor’s management of the Fund to be a substantial factor in its consideration, although the Board noted that the proposed sub-advisory fee schedule for the Fund contained breakpoints that would reduce the sub-advisory fee rate above specified levels as the Fund’s assets increased.

 

Sub-Advisory Fee and Fund Performance. The Board considered that the Fund would pay an advisory fee to the Advisor and that the Advisor would pay a sub-advisory fee to the Sub-Advisor out of the advisory fees it receives from the Fund. The Board also compared the Sub-Advisor’s proposed sub-advisory fee to the sub-advisory fees paid to the Sub-Advisor for managing the Other Touchstone Funds. The Board considered the amount of the advisory fee to be retained by the Advisor and the amount to be paid to the Sub-Advisor with respect to the various services to be provided by the Advisor and the Sub-Advisor.

 

The Board considered the Sub-Advisor’s long-term performance record in managing the Large Cap SMA and the Other Touchstone Funds, certain differences between how the Sub-Advisor manages the Large Cap SMA and the Other Touchstone Funds and how it will manage the Fund, as well as the impact these differences are expected to have on the Fund’s performance. The Board also noted the Advisor’s expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Sub-Advisor with respect to the Other Touchstone Funds. The Board was mindful of the Advisor’s focus on the performance of sub-advisors, including the Sub-Advisor, and the Advisor’s ways of addressing underperformance. Based upon their review, the Trustees concluded that the Fund’s proposed sub-advisory fee was reasonable in light of the services to be received by the Fund from the Sub-Advisor.

 

57
 

 

Other Items (Unaudited) (Continued)

 

Conclusion. In considering the initial approval of the Sub-Advisory Agreement, the Board, including the Independent Trustees, did not identify any single factor as controlling, and each Trustee may have attributed different weights to the various factors. The Board reached the following conclusions regarding the Sub-Advisory Agreement, among others: (a) the Sub-Advisor is qualified to manage the Fund’s assets in accordance with the Fund’s investment goal and policies; (b) the Sub-Advisor maintains an appropriate compliance program; (c) the Fund’s proposed advisory fee is reasonable in relation to the fees of similar funds and to the services to be provided by the Advisor and the Sub-Advisor; and (d) the Sub-Advisor’s proposed investment strategies are appropriate for pursuing the investment goal of the Fund. Based on its conclusions, the Board determined that approval of the Sub-Advisory Agreement was in the best interests of the Fund and its shareholders.

 

At a meeting held on November 20, 2014, the Board of Trustees (the “Board” or “Trustees”) of the Touchstone Strategic Trust (the “Trust”), and by a separate vote, the Independent Trustees of the Trust, approved the continuance of the Investment Advisory Agreement between the Trust and the Advisor with respect to each Fund of the Trust, and the continuance of the Sub-Advisory Agreement between the Advisor and each Fund’s respective Sub-Advisor.

 

In determining whether to approve the continuation of the Investment Advisory Agreement and the Sub-Advisory Agreements, the Advisor furnished information necessary for a majority of the Independent Trustees to make the determination that the continuance of the Investment Advisory Agreement and each Sub-Advisory Agreement were in the best interests of the respective Funds and their shareholders. The information provided to the Board included: (1) industry data comparing advisory fees and expense ratios of comparable investment companies; (2) comparative performance information; (3) the Advisor’s and its affiliates’ revenues and costs of providing services to the Funds; and (4) information about the Advisor’s and Sub-Advisors’ personnel. Prior to voting, the Independent Trustees reviewed the proposed continuance of the Investment Advisory Agreement and the Sub-Advisory Agreements with management and experienced independent legal counsel and received materials from such counsel discussing the legal standards for their consideration of the proposed continuation of the Investment Advisory Agreement and each Sub-Advisory Agreement. The Independent Trustees also reviewed the proposed continuation of the Investment Advisory Agreement and each Sub-Advisory Agreement with independent legal counsel in private sessions at which no representatives of management were present.

 

In approving the Funds’ Investment Advisory Agreement, the Board considered various factors, among them: (1) the nature, extent and quality of services provided to the Funds, including the personnel providing such services; (2) the Advisor’s compensation and profitability; (3) a comparison of fees and performance with other advisers; (4) economies of scale; and (5) the terms of the Investment Advisory Agreement. The Board’s analysis of these factors is set forth below. The Independent Trustees were advised by independent legal counsel throughout the process.

 

Nature, Extent and Quality of Advisor Services. The Board considered the level and depth of knowledge of the Advisor, including the professional experience and qualifications of senior personnel. In evaluating the quality of services provided by the Advisor, the Board took into account its familiarity with the Advisor’s senior management through Board meetings, discussions and reports during the preceding year. The Board also took into account the Advisor’s compliance policies and procedures. The quality of administrative and other services, including the Advisor’s role in coordinating the activities of the Funds’ other service providers, was also considered. The Board also considered the Advisor’s relationship with its affiliates and the resources available to them, as well as any potential conflicts of interest.

 

The Board discussed the Advisor’s effectiveness in monitoring the performance of each Sub-Advisor, and the Advisor’s timeliness in responding to performance issues. The Board considered the Advisor’s process for monitoring each of the Sub-Advisors, which includes an examination of both qualitative and quantitative elements of the Sub-Advisor’s organization, personnel, procedures, investment discipline, infrastructure and performance. The

 

58
 

 

Other Items (Unaudited) (Continued)

 

Board considered that the Advisor conducts regular on-site compliance visits with each Sub-Advisor, during which the Advisor examines a wide variety of factors, such as the financial condition of the Sub-Advisor, the quality of the Sub-Advisor’s systems, the effectiveness of the Sub-Advisor’s disaster recovery programs, trade allocation and execution procedures, compliance with the Sub-Advisor’s policies and procedures, results of regulatory examinations and any other factors that might affect the quality of services that the Sub-Advisor provides to the applicable Fund. The Board noted that the Advisor’s compliance monitoring processes also include quarterly reviews of compliance reports, and that any issues arising from such reports and the Advisor’s compliance visits to the Sub-Advisors are reported to the Board.

 

The Trustees concluded that they were satisfied with the nature, extent and quality of services provided to each Fund by the Advisor under the Investment Advisory Agreement.

 

Advisor’s Compensation and Profitability. The Board took into consideration the financial condition and profitability of the Advisor and its affiliates and the direct and indirect benefits derived by the Advisor and its affiliates from the Advisor’s relationship with the Funds. The information considered by the Board included operating profit margin information for the Advisor’s business as a whole. The Board noted that the Advisor had waived a portion of advisory fees and administrative fees and/or reimbursed expenses in order to limit the Funds’ net operating expenses. The Board also noted that the Advisor pays the Sub-Advisors’ sub-advisory fees out of the advisory fees the Advisor receives from the Funds. The Board reviewed the profitability of the Advisor’s relationship with the Funds both before and after tax expenses, and also considered whether the Advisor has the financial wherewithal to continue to provide services to the Funds, noting the ongoing commitment of the Advisor’s parent company with respect to providing support and resources as needed. The Board also considered that the Funds’ distributor, an affiliate of the Advisor, receives Rule 12b-1 distribution fees from the Funds and receives a portion of the sales charges on sales or redemptions of certain classes of shares. The Board also noted that the Advisor derives benefits to its reputation and other benefits from its association with the Funds.

 

The Board recognized that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to each Fund and the entrepreneurial risk that it assumes as Advisor. Based upon their review, the Trustees concluded that the Advisor’s and its affiliates’ level of profitability, if any, from their relationship with each Fund was reasonable and not excessive.

 

Expenses and Performance. The Board compared the respective advisory fees and total expense ratios for each of the Funds with various comparative data, including the median and average advisory fees and total expense ratios of each Fund’s respective peer group. The Board also considered, among other data, the Funds’ respective performance results during the six-month, twelve-month and thirty-six-month periods ended June 30, 2014, and noted that the Board reviews on a quarterly basis detailed information about each Fund’s performance results, portfolio composition and investment strategies. The Board also took into account current market conditions and their effect on the Funds’ performance.

 

The Board also considered the effect of each Fund’s growth and size on its performance and expenses. The Board noted that the Advisor had waived a portion of the fees and/or reimbursed expenses of the Funds in order to reduce those Funds’ respective operating expenses to targeted levels. The Board noted that the sub-advisory fees under the Sub-Advisory Agreement with respect to each Fund were paid by the Advisor out of the advisory fees it receives from the Fund and considered the impact of such sub-advisory fees on the profitability of the Advisor. In reviewing the respective expense ratios and performance of each of the Funds, the Board also took into account the nature, extent and quality of the services provided to the Funds by the Advisor and its affiliates.

 

The Board considered, among other data, the specific factors and related conclusions set forth below with respect to each Fund:

 

59
 

 

Other Items (Unaudited) (Continued)

 

Touchstone Capital Growth Fund. The Fund’s advisory fee and total expense ratio (net of applicable expense waivers and reimbursements) were at the median and above the median, respectively, of its peer group. The Board noted that the Advisor was currently waiving a portion of the Fund’s fees. The Fund’s performance for the six- and thirty-six-month periods ended June 30, 2014 was in the 3rd quintile of its peer group. The Fund’s performance for the twelve-month period ended June 30, 2014 was in the 2nd quintile of its peer group. Based upon their review, the Trustees concluded that the Fund’s overall performance was satisfactory relative to the performance of funds with similar investment objectives and relevant indices, and that the advisory fee was reasonable in light of the services received by the Fund from the Advisor and the other factors considered.

 

Touchstone International Small Cap Fund. The Fund’s advisory fee and total expense ratio (net of applicable expense waivers and reimbursements) were below the median of its peer group. The Board noted that the Advisor was currently waiving a portion of the Fund’s fees. The Fund’s performance for the six-month period ended June 30, 2014 was in the 3rd quintile of its peer group. The Fund’s performance for the twelve- and thirty-six-month periods ended June 30, 2014 was in the 2nd quintile of its peer group. Based upon their review, the Trustees concluded that the Fund’s overall performance was satisfactory relative to the performance of funds with similar investment objectives and relevant indices, and that the advisory fee was reasonable in light of the services received by the Fund from the Advisor and the other factors considered.

 

Touchstone Small Cap Value Opportunities Fund. The Fund’s advisory fee and total expense ratio (net of applicable expense waivers and reimbursements) were above the median of its peer group. The Board noted that the Advisor was currently waiving a portion of the Fund’s fees and that the expense limits for certain of the shares were reduced effective October 30, 2014. The Fund’s performance for the six-, twelve- and thirty-six-month periods ended June 30, 2014 was in the 1st quintile of its peer group. Based upon their review, the Trustees concluded that the Fund’s overall performance was satisfactory relative to the performance of funds with similar investment objectives and relevant indices, and that the advisory fee was reasonable in light of the services received by the Fund from the Advisor and the other factors considered.

 

Touchstone Value Fund. The Fund’s advisory fee and total expense ratio (net of applicable expense waivers and reimbursements) were below the median of its peer group. The Board noted that the Advisor was currently waiving a portion of the Fund’s fees. The Fund’s performance for the six- and twelve-month periods ended June 30, 2014 was in the 3rd quintile of its peer group. The Fund’s performance for the thirty-six-month period ended June 30, 2014 was in the 2nd quintile of its peer group. Based upon their review, the Trustees concluded that the Fund’s overall performance was satisfactory relative to the performance of funds with similar investment objectives and relevant indices, and that the advisory fee was reasonable in light of the services received by the Fund from the Advisor and the other factors considered.

 

Economies of Scale. The Board considered the effect of each Fund’s current size and potential growth on its performance and expenses. The Board took into account management’s discussion of the Funds’ advisory fee structure. The Board considered the effective advisory fees under the Investment Advisory Agreement as a percentage of assets at different asset levels and possible economies of scale that might be realized if the assets of each Fund increase. The Board noted that the advisory fee schedules for some of the Funds contain breakpoints that would reduce the respective advisory fee rate on assets above specified levels as the respective Fund’s assets increased and considered the necessity of adding breakpoints with respect to the Fund that did not currently have such breakpoints in its advisory fee schedule. The Board determined that adding breakpoints at specified levels to the advisory fee schedule of the Fund that currently did not have such breakpoints was not appropriate at that time. The Board also noted that if a Fund’s assets increase over time, the Fund might realize other economies of scale if assets increase proportionally more than certain other expenses. The Board also considered the fact that, under the Investment Advisory Agreement, the advisory fee payable to the Advisor by a Fund was reduced by the total sub-advisory fee paid by the Advisor to the Fund’s Sub-Advisor.

 

60
 

 

Other Items (Unaudited) (Continued)

 

Conclusion. In considering the renewal of the Funds’ Investment Advisory Agreement, the Board, including the Independent Trustees, did not identify any single factor as controlling, and each Trustee may have attributed different weights to the various factors. The Trustees evaluated all information available to them on a Fund-by-Fund basis, and their determinations were made separately with respect to each Fund. The Board reached the following conclusions regarding the Funds’ Investment Advisory Agreement with the Advisor, among others: (a) the Advisor demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Advisor maintains an appropriate compliance program; (c) the overall performance of each Fund is satisfactory relative to the performance of funds with similar investment objectives and relevant indices; and (d) each Fund’s advisory fee is reasonable in light of the services received by the Fund from the Advisor and the other factors considered. Based on their conclusions, the Trustees determined with respect to each Fund that continuation of the Investment Advisory Agreement was in the best interests of the Fund and its shareholders.

 

In approving the Funds’ respective Sub-Advisory Agreements, the Board considered various factors with respect to each Fund and the applicable Sub-Advisory Agreement, among them: (1) the nature, extent and quality of services provided to the Fund, including the personnel providing such services; (2) the Sub-Advisor’s compensation; (3) a comparison of the sub-advisory fee and performance with other advisers; and (4) the terms of the Sub-Advisory Agreement. The Board’s analysis of these factors is set forth below. The Independent Trustees were advised by independent legal counsel throughout the process.

 

Nature, Extent and Quality of Services Provided; Investment Personnel. The Board considered information provided by the Advisor regarding the services provided by each Sub-Advisor, including information presented periodically throughout the previous year. The Board noted that, on a periodic basis, the Board meets with portfolio managers of the Sub-Advisors to discuss their respective performance and investment processes and strategies. The Board also considered each Sub-Advisor’s level of knowledge and investment style. The Board reviewed the experience and credentials of the applicable investment personnel who are responsible for managing the investment of portfolio securities with respect to the Funds. The Board also noted each Sub-Advisor’s brokerage practices.

 

Sub-Advisor’s Compensation, Profitability and Economies of Scale. The Board also took into consideration the financial condition of each Sub-Advisor and any indirect benefits derived by each Sub-Advisor and its affiliates from the Sub-Advisor’s relationship with the Funds. In considering the profitability to each Sub-Advisor of its relationship with the Funds, the Board noted the undertaking of the Advisor to maintain expense limitations for the Funds and also noted that the sub-advisory fees under the Sub-Advisory Agreements were paid by the Advisor out of the advisory fees that it receives under the Investment Advisory Agreement and are negotiated at arm’s-length. As a consequence, the profitability to each Sub-Advisor of its relationship with a Fund was not a substantial factor in the Board’s deliberations. For similar reasons, the Board did not consider the potential economies of scale in each Sub-Advisor’s management of the applicable Fund to be a substantial factor in its consideration, although the Board noted that the sub-advisory fee schedule for some of the Funds contained breakpoints that would reduce the sub-advisory fee rate on assets above specified levels as the applicable Fund’s assets increased.

 

Sub-Advisory Fees and Fund Performance. The Board considered that each Fund pays an advisory fee to the Advisor and that the Advisor pays the sub-advisory fee to the Sub-Advisor out of the advisory fee it receives from the respective Fund. The Board also compared the sub-advisory fees paid by the Advisor to fees charged by each Sub-Advisor to manage comparable institutional separate accounts. The Board considered the amount retained by the Advisor and the sub-advisory fee paid to each Sub-Advisor with respect to the various services provided by the Advisor and the Sub-Advisor. The Board also noted that the Advisor negotiated the sub-advisory fee with each of the Sub-Advisors at arm’s-length. The Board reviewed the sub-advisory fee for each Fund in relation to various comparative data, including the median and average sub-advisory fees of each Fund’s peer group, and considered the following information:

 

61
 

 

Other Items (Unaudited) (Continued)

 

Touchstone Capital Growth Fund. The Fund’s sub-advisory fee was below the median of its peer group. Based upon their review, the Trustees concluded that the sub-advisory fee was reasonable in light of the services received by the Fund from the Sub-Advisor and the other factors considered.

 

Touchstone International Small Cap Fund. The Fund’s sub-advisory fee was at the median of its peer group. Based upon their review, the Trustees concluded that the sub-advisory fee was reasonable in light of the services received by the Fund from the Sub-Advisor and the other factors considered.

 

Touchstone Small Cap Value Opportunities Fund. The Fund’s sub-advisory fee was above the median of its peer group. Based upon their review, the Trustees concluded that the sub-advisory fee was reasonable in light of the services received by the Fund from the Sub-Advisor and the other factors considered.

 

Touchstone Value Fund. The Fund’s sub-advisory fee was below the median of its peer group. Based upon their review, the Trustees concluded that the sub-advisory fee was reasonable in light of the services received by the Fund from the Sub-Advisor and the other factors considered.

 

Conclusion. In considering the renewal of the Sub-Advisory Agreement with respect to each Fund, the Board, including the Independent Trustees, did not identify any single factor as controlling, and each Trustee may have attributed different weights to the various factors. The Board reached the following conclusions regarding each Sub-Advisory Agreement, among others: (a) the Sub-Advisor is qualified to manage each Fund’s assets in accordance with the Fund’s investment goals and policies; (b) the Sub-Advisor maintains an appropriate compliance program; (c) the overall performance of each Fund is satisfactory relative to the performance of funds with similar investment objectives and relevant indices; (d) each Fund’s sub-advisory fee is reasonable in light of the services received by the Fund from the Sub-Advisor and the other factors considered; and (e) the Sub-Advisor’s investment strategies are appropriate for pursuing the investment goals of each Fund. Based on its conclusions, the Board determined that approval of the Sub-Advisory Agreement with respect to each Fund was in the best interests of the Fund and its shareholders.

 

62
 

 

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.

 

63
 

 

303 Broadway, Suite 1100
Cincinnati, OH 45202-4203

 

 

Go paperless, sign up today at:

www.touchstoneinvestments.com

 

Touchstone Investments

 

Distributor

Touchstone Securities, Inc.*

303 Broadway

Cincinnati, Ohio 45202-4203 800.638.8194

www.touchstoneinvestments.com

 

Investment Advisor

Touchstone Advisors, Inc.*

303 Broadway

Cincinnati, Ohio 45202-4203

 

Transfer Agent

BNY Mellon Investment Servicing (US) Inc.

4400 Computer Drive

Westborough, MA 01581

 

Shareholder Service

800.543.0407

 

* A Member of Western & Southern Financial Group

 

TSF-54BB-TST-SAR-1412

 

 
 

 

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  02/26/15  

 

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 02/26/15  

 

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

 

Date 02/26/15  

  

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