ANNUAL
REPORT
September 30, 2000 [GRAPHIC OMITTTED]
Short Term Government The Mark of Excellence
Income Fund
Institutional Government
Income Fund
Money Market Fund
Bond Fund
High Yield Fund
Intermediate Term Government
Income Fund
[GRAPHIC OMITTED] TOUCHSTONE
----------------------------------------------------
Family of Funds
<PAGE>
TABLE OF CONTENTS
================================================================================
Page
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Letter from the President 3
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Management Discussion and Analysis 4-5
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Statements of Assets and Liabilities 6-7
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Statements of Operations 8-9
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Statements of Changes in Net Assets 10-13
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Financial Highlights 14-21
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Notes to Financial Statements 22-29
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Portfolios of Investments:
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Short Term Government Income Fund 30
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Institutional Government Income Fund 31-32
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Money Market Fund 33-34
--------------------------------------------------------------------------------
Bond Fund 35-36
--------------------------------------------------------------------------------
High Yield Fund 37-38
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Intermediate Term Government Income Fund 39
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Notes to Portfolios of Investments 40
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Report of Independent Auditors 41-42
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TOUCHSTONE FAMILY OF FUNDS
2
<PAGE>
LETTER FROM THE PRESIDENT
================================================================================
[PHOTO]
Dear Fellow Shareholders:
Touchstone is pleased to present Touchstone Investment Trust's annual report for
the fiscal year ended September 30, 2000. This report provides financial data
and performance information for the Short Term Government Fund, Institutional
Government Fund, Money Market Fund, Bond Fund, High Yield Fund and Intermediate
Term Government Income Fund. These Funds represent the six taxable bond and
money market products currently offered among the 20 mutual funds which comprise
the Touchstone Family of Funds.
A confluence of uncertainties has created confusion, heightened investor anxiety
and increased volatility for the financial markets. Foremost among the
uncertainties is the extent of the slowdown of the U.S. economy. Investors want
a clearer understanding of whether we are gliding into a desirable "soft
landing" or something worse. The stock market experienced a particularly
difficult September, erasing most of August's strong gains. For the third
quarter, the S&P 500 Index decreased 1.0% and the NASDAQ Composite fell 7.4%.
Weakness was concentrated in large capitalization technology stocks.
Bonds performed well during the third quarter. It seems that stock market pain
resulted in bond market gain. The Lehman Aggregate Bond Index rose 3.0% for the
quarter and was up 7.1% through September, easily beating the return of stocks
year to date.
Bond investors have been encouraged by the belief that inflationary pressures
are easing. With less inflation risk, the Federal Reserve has stopped raising
interest rates, ending the upward pressure on short-term yields. Reflecting this
brighter inflation outlook, the yield on 2-year Treasuries has fallen to 6.0%
from its May high of 6.9%.
Bonds may continue to benefit as global economies slow and inflationary
pressures diminish. Credit risks could increase for companies exposed to the
economic cycle, however, making bond selection more important. Bond investors
will closely monitor fiscal initiatives undertaken by the next President and
Congress. Major new spending programs or large tax cuts likely will have a
negative impact on interest rates. In the near term, a heavy calendar of new
bond offerings may temporarily increase yields as this supply is digested. These
events will present inefficiencies in the bond markets and opportunities for
investors.
Touchstone remains committed to providing products and services that help
investors meet their financial goals. Our success has been built on the
confidence investors have extended to us. We thank you for your support and look
forward to offering continued service to you in the future.
Sincerely,
/s/ Jill T. McGruder
Jill T. McGruder
President
Touchstone Family of Funds
TOUCHSTONE FAMILY OF FUNDS
3
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
BOND FUND
The severe gyrations in the bond market presented an extremely difficult
environment in which to manage bonds. The sharp reversal in the general
direction of interest rates, together with an inverted yield curve and sharply
wider yield spreads were all contributing factors. To perform well during the
year, it was imperative to own long-term U.S. Treasury securities at the expense
of similar maturity corporate bonds, particularly during the January to June
period. For the year ended September 30, 2000, the Fund's total return
(excluding the impact of applicable sales loads) was 5.50% as compared to 6.99%
for the Lehman Brothers Aggregate Bond Index.
When the fiscal year began, interest rates were rising due to the resolve of the
Federal Reserve to slow very strong economic growth. The Fed funds rate rose
from 5.25% to 6.50% throughout the year in four separate steps. The ten year
U.S. Treasury began the fiscal year with a yield-to-maturity of 5.88% and
quickly rose to 6.79% by late January. With the economy still strong and the Fed
tightening credit, interest rates were widely expected to continue moving
higher. Instead, they staged a dramatic reversal instigated by a drop in yield
of long-term U.S. Treasury bonds. By fiscal year-end, the ten year yield had
returned to approximately the same level as the start of the year. Rising short
rates and lower long rates resulted in what is known as an inverted yield curve.
Typically, short rates are lower, but on May 1, 2000, the two year U.S. Treasury
yielded 0.73% more than the thirty year. Finally, spread sectors continued to
face difficulty as they have for the past three years. The preferred strategy
during the year was to have a bias toward U.S. Treasury securities.
Much of the year has been spent increasing liquidity in the portfolio. During
times of general market unease, liquid bonds tend to perform better. We have
also instituted a more systematic approach to our investment decision-making
process. Our philosophy is to position the portfolio for incremental returns and
reduce the risk of staying with a losing position. The increased liquidity will
also allow us to be nimble in what appears to be an increasingly volatile
market.
As we begin a new fiscal year, we are, indeed, seeing signs that the work of the
Federal Reserve has paid off. The economy is slowing. Higher oil prices, along
with a falling stock market, have also helped slow the economy. With interest
rates poised to fall, we will lean toward a duration target longer than the
index. Typically associated with lower rates is a steeper yield curve. To
position for this, we will overweight intermediate maturity bonds. Finally, with
an increasing number of companies reporting negative earnings and a general
feeling of risk aversion, yield spreads are likely to remain at very wide
levels. We will monitor spreads closely for a clue as to when to increase our
exposure to Agency, corporate and MBS securities.
HIGH YIELD FUND
The Touchstone High Yield Fund began operation on May 1, 2000 resulting in a
partial year's performance. Since inception, the Fund has generated a total
return of 4.20%, which compares favorably to the return of the Merrill Lynch
High Yield Master Index of 2.45%. Positive relative performance resulted from a
higher quality bias and a reasonably large underweight of telecom and steel
paper, which performed poorly. Relative performance was further aided by an
overweight of healthcare and utility credits while exposure to the auto sector
detracted from performance.
The difficulties in the High Yield market continued throughout fiscal 2000 as
spreads widened further due to an increasing level of defaults, poor liquidity
and reduced access to capital for issuers. The average spread on the Merrill
Lynch High Yield Master Index widened by over 180 basis points throughout the
year and ended the year at +661, the widest level seen in nearly ten years. At
the end of September, 2000, Moody's trailing 12 month default rate stood at 5.1%
of issuers and 5.5% of principal, down from recent peaks of 6.0% of issuers
(September, 1999) and 8.2% of principal (November, 1999), respectively. Concerns
over a slowing economy have added additional uncertainty to a somewhat fragile
market.
TOUCHSTONE FAMILY OF FUNDS
4
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================
In general, the Touchstone High Yield Fund maintains a higher quality bias
de-emphasizing deferred pay securities and emerging market debt. The portfolio
will continue to emphasize quality and maintain an underweight with respect to
telecommunications and cyclicals. These sectors have been and will continue to
be extremely volatile resulting in inadequate return for the inherent risk.
Reduced access to capital will continue to plague telecommunications issuers
while a softening economy will be unkind to cyclicals. We will continue to
overweight industries that tend to be more stable and predictable and provide
adequate compensation for risk borne. We believe that our style is ideally
positioned given the current state of uncertainty in the High Yield market.
The outlook for the High Yield market remains difficult since the issues present
in 2000 will likely continue through 2001. In fact Moody's anticipates a sharp
rise in the default rate over the next 12 months, perhaps as high as 6.0% of
issuers by year-end and 8.4% of issuers by September, 2001. Continued lack of
liquidity and limited access to capital may prevent significant returns beyond
the yields offered in the market. These issues notwithstanding, yields available
in the market appear to adequately discount most reasonable expectations and
should provide an attractive return profile. Although many strategists see
significant opportunity for material capital appreciation over the next twelve
months, we remain somewhat more cautious but believe the market to be
appropriately valued.
INTERMEDIATE TERM GOVERNMENT INCOME FUND
Fiscal 2000 was another volatile year in the fixed income markets. The interest
rate on the benchmark 10-year Treasury bond vacillated in a 120 basis point (bp)
range, only to end the fiscal year 8 bps lower than where it began. Not only did
we see substantial day-to-day volatility in 10-year rates, but we also
experienced dramatic changes in the shape of the yield curve. The difference in
yield between the 30-year Treasury bond and the 2-year Treasury note (a proxy
for the slope of the yield curve) began the year at +45 bps, inverted to 76 bps
by mid-year, then ended the year at 9 bps. For the fiscal year ended September
30, 2000, the Fund's total return (excluding the impact of applicable sales
loads) was 5.29% as compared to 6.21% for the Lehman Brothers Intermediate
Government Bond Index.
During the year we witnessed dramatic changes in the basis, or spread, of
mortgage-backed securities, asset-backed securities, corporate securities and
agency debentures. Mortgage- and asset-backed securities generated positive
excess returns versus Treasury securities while agency debentures and corporate
securities underperformed Treasuries. The intra-month swings in sector valuation
made sector positioning a critical component of performance.
The Fund's sector allocation positively impacted performance as our mortgage
exposure made a significant contribution to the Fund's return. We reduced our
agency debenture position and bolstered or Treasury component before mid-year,
again aiding performance. Our weakness was duration positioning. Midway through
the fiscal year we shortened the Fund's duration (decreased its risk profile).
Subsequently, the yield on the 10-year Treasury rallied almost 100 bps before we
covered our short duration position. This impact of our duration positioning
eroded the positive performance generated by our sector positioning and caused
us to underperform versus our peers.
We have recently been working to enhance our total return portfolio management
process, melding the best ideas of three total return managers from different
backgrounds. We are excited about the changes and feel that we have greatly
improved the portfolio management process, incorporating a multi-faceted
strategy for capturing excess returns. This strategy employs an enhanced level
of detail and greater discipline and should work to generate superior relative
returns over the coming quarters.
TOUCHSTONE FAMILY OF FUNDS
5
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
==========================================================================================================
SHORT TERM INSTITUTIONAL MONEY
GOVERNMENT GOVERNMENT MARKET
(000's) INCOME FUND INCOME FUND FUND
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment securities:
At amortized cost .................................................. $ 16,036 $ 38,176 $ 42,549
================================
At market value (Note 2) ........................................... $ 16,036 $ 38,176 $ 42,549
Repurchase agreements (Note 2) ........................................ 63,531 19,593 --
Cash .................................................................. 17 10 57
Interest receivable ................................................... 282 560 327
Other assets .......................................................... 76 5 21
--------------------------------
TOTAL ASSETS .......................................................... 79,942 58,344 42,954
--------------------------------
LIABILITIES
Dividends payable ..................................................... 5 24 7
Payable to affiliates (Note 4) ........................................ 60 11 8
Other accrued expenses and liabilities ................................ 7 3 4
--------------------------------
TOTAL LIABILITIES ..................................................... 72 38 19
--------------------------------
NET ASSETS ............................................................ $ 79,870 $ 58,306 $ 42,935
================================
NET ASSETS CONSIST OF:
Paid-in capital ....................................................... $ 79,874 $ 58,328 $ 42,946
Accumulated net realized losses from security transactions ............ (4) (22) (11)
--------------------------------
NET ASSETS ............................................................ $ 79,870 $ 58,306 $ 42,935
================================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) (Note 5) ..... 79,874 58,328 42,946
================================
Net asset value, offering price and redemption price per share (Note 2) $ 1.00 $ 1.00 $ 1.00
================================
</TABLE>
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
6
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
=====================================================================================================
INTERMEDIATE
HIGH TERM
BOND YIELD GOVERNMENT
(000's) FUND FUND INCOME FUND
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment securities:
At amortized cost ............................................. $ 22,892 $ 7,199 $ 35,898
===============================
At market value (Note 2) ...................................... $ 22,619 $ 7,253 $ 35,417
Cash ............................................................. 2,617 116 5
Interest and principal paydowns receivable ....................... 319 180 514
Receivable for capital shares sold ............................... 2 -- 5
Receivable from affiliates (Note 4) .............................. 15 -- --
Other assets ..................................................... -- 35 21
-------------------------------
TOTAL ASSETS ..................................................... 25,572 7,584 35,962
-------------------------------
LIABILITIES
Dividends payable ................................................ 4 -- 21
Payable for securities purchased ................................. 2,393 240 --
Payable for capital shares redeemed .............................. -- -- 19
Payable to affiliates (Note 4) ................................... -- -- 24
Other accrued expenses and liabilities ........................... 97 5 2
-------------------------------
TOTAL LIABILITIES ................................................ 2,494 245 66
-------------------------------
NET ASSETS ....................................................... $ 23,078 $ 7,339 $ 35,896
===============================
NET ASSETS CONSIST OF:
Paid-in capital .................................................. $ 25,888 $ 7,277 $ 39,211
Undistributed net investment income .............................. 29 -- --
Accumulated net realized gains (losses) from security transactions (2,566) 8 (2,834)
Net unrealized appreciation (depreciation) on investments ........ (273) 54 (481)
-------------------------------
NET ASSETS ....................................................... $ 23,078 $ 7,339 $ 35,896
===============================
PRICING OF CLASS A SHARES
Net assets attributable to Class A shares ........................ $ 22,086 $ 7,327 $ 35,896
===============================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) (Note 5) 2,325 726 3,495
===============================
Net asset value and redemption price per share (Note 2) .......... $ 9.50 $ 10.09 $ 10.27
===============================
Maximum offering price per share (Note 2) ........................ $ 9.97 $ 10.59 $ 10.78
===============================
PRICING OF CLASS C SHARES
Net assets attributable to Class C shares ........................ $ 992 $ 12
====================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) (Note 5) 109 1
====================
Net asset value (Note 2) ......................................... $ 9.07 $ 10.11
====================
Maximum offering price per share* (Note 2) ....................... $ 9.18 $ 10.24
====================
</TABLE>
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
7
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
================================================================================
SHORT TERM INSTITUTIONAL MONEY
GOVERNMENT GOVERNMENT MARKET
(000's) INCOME FUND INCOME FUND FUND
--------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income .............................. $ 6,035 $ 3,401 $ 2,171
-------------------------------
EXPENSES
Investment advisory fees (Note 4) ............ 493 111 170
Transfer agent fees (Note 4) ................. 185 20 74
Distribution expenses (Note 4) ............... 116 7 9
Postage and supplies ......................... 48 9 30
Accounting services fees (Note 4) ............ 34 28 24
Custodian fees ............................... 44 28 28
Registration fees ............................ 28 9 19
Professional fees ............................ 15 15 15
Standard & Poor's rating expense ............. 4 4 --
Trustees' fees and expenses .................. 6 6 6
Reports to shareholders ...................... 8 2 3
Amortization of organization costs (Note 2) .. -- -- 6
Other expenses ............................... 7 1 --
-------------------------------
TOTAL EXPENSES ............................... 988 240 384
Fees waived by the Adviser (Note 4) .......... -- (18) (163)
-------------------------------
NET EXPENSES ................................. 988 222 221
-------------------------------
NET INVESTMENT INCOME ........................ 5,047 3,179 1,950
-------------------------------
NET REALIZED LOSSES FROM SECURITY TRANSACTIONS (4) -- --
===============================
NET INCREASE IN NET ASSETS FROM OPERATIONS ... $ 5,043 $ 3,179 $ 1,950
===============================
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
8
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
======================================================================================================
INTERMEDIATE
HIGH TERM
BOND YIELD GOVERNMENT
FUND FUND INCOME FUND
------------------------------------------------------------------------------------------------------
PERIOD YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED
SEPT. 30, DEC. 31, SEPT. 30, SEPT. 30,
(000's) 2000(A) 1999 2000(A) 2000
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest income ...................................... $ 1,099 $ 1,262 $ 263 $ 2,561
Dividend Income ...................................... 25 86 -- --
-------------------------------------------
Total Investment Income .............................. 1,124 1,348 263 2,561
-------------------------------------------
EXPENSES
Investment advisory fees (Note 4) .................... 83 109 18 187
Accounting services fees (Note 4) .................... -- -- 14 24
Sponsor fees (Note 4) ................................ 32 39 -- --
Distribution expenses, Class A (Note 4) .............. 27 12 -- 44
Distribution expenses, Class C (Note 4) .............. 7 10 -- --
Transfer agent fees, Common (Note 4) ................. 41 75 -- --
Transfer agent fees, Class A (Note 4) ................ -- -- 5 34
Transfer agent fees, Class C (Note 4) ................ -- -- 5 --
Professional fees .................................... 4 15 2 14
Registration fees, Common ............................ 32 21 -- 17
Registration fees, Class A ........................... -- -- 3 1
Registration fees, Class C ........................... -- -- 3 --
Postage and supplies ................................. -- -- -- 21
Trustees' fees and expenses .......................... 4 2 2 6
Custodian fees ....................................... 86 105 2 13
Amortization of organization costs ................... -- 7 -- --
Reports to shareholders .............................. 7 23 -- 4
Other expenses ....................................... 12 1 -- 6
-------------------------------------------
TOTAL EXPENSES ....................................... 335 419 54 371
Fees waived and/or common expenses reimbursed by the
Adviser (Note 4) .................................. (197) (269) (18) --
Class A expenses reimbursed by the Adviser (Note 4) .. -- -- (4) --
-------------------------------------------
NET EXPENSES ......................................... 138 150 32 371
-------------------------------------------
NET INVESTMENT INCOME ................................ 986 1,198 231 2,190
-------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) from security transactions (646) (348) 8 (480)
Net change in unrealized appreciation/depreciation
on investments .................................... 872 (1,154) 54 193
-------------------------------------------
NET REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS .................................... 226 (1,502) 62 (287)
-------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ........... $ 1,212 $ (304) $ 293 $ 1,903
===========================================
</TABLE>
(A) Represents the period from January 1, 2000 through September 30, 2000 and
the High Yield Fund which represents the period from May 1, 2000 for the
Bond Fund and May 23, 2000 for Class A and Class C shares, respectively,
through September 30, 2000.
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
9
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
======================================================================================================
SHORT TERM INSTITUTIONAL
GOVERNMENT GOVERNMENT
INCOME FUND INCOME FUND
------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
(000's) 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income ............................ $ 5,047 $ 4,364 $ 3,179 $ 2,134
Net realized losses from security transactions ... (4) -- -- --
------------------------------------------------
Net increase in net assets from operations ....... 5,043 4,364 3,179 2,134
------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ....................... (5,047) (4,364) (3,179) (2,134)
------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Proceeds from shares sold ........................ 536,534 354,333 135,318 83,427
Reinvested distributions ......................... 4,816 4,260 2,851 1,889
Payments for shares redeemed ..................... (571,536) (351,014) (129,711) (80,265)
------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS ............................ (30,186) 7,579 8,458 5,051
------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .......... (30,190) 7,579 8,458 5,051
NET ASSETS
Beginning of year ................................ 110,060 102,481 49,848 44,797
------------------------------------------------
End of year ...................................... $ 79,870 $ 110,060 $ 58,306 $ 49,848
================================================
</TABLE>
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
10
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
=======================================================================================
MONEY
MARKET
FUND
---------------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
SEPT. 30, SEPT. 30,
(000's) 2000 1999
---------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income ....................................... $ 1,950 $ 1,272
Net realized losses from security transactions .............. -- (5)
----------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ....... 1,950 1,267
----------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income .................................. (1,950) (1,272)
------------------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Proceeds from shares sold ................................... 125,641 68,597
Reinvested distributions .................................... 1,860 781
Payments for shares redeemed ................................ (107,764) (64,667)
----------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 19,737 4,711
----------------------
TOTAL INCREASE IN NET ASSETS ................................ 19,737 4,706
----------------------
NET ASSETS
Beginning of period ......................................... 23,198 18,492
----------------------
End of period ............................................... $ 42,935 $ 23,198
======================
</TABLE>
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
11
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
=========================================================================================================
BOND FUND
---------------------------------------------------------------------------------------------------------
NINE MONTHS YEAR YEAR
ENDED ENDED ENDED
SEPT. 30, DEC. 31, DEC. 31,
(000's) 2000 1999 1998
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income ............................................... $ 986 $ 1,198 $ 218
Net realized losses from security transactions ...................... (646) (348) 67
Net change in unrealized appreciation/depreciation on investments ... 872 (1,154) 37
--------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............... 1,212 (304) 322
--------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A ................................. (752) (314) (220)
From net investment income, Class C ................................. (44) (64) --
From net investment income, Class Y ................................. (193) (832) --
Distributions in excess of net investment income, Class A ........... -- (2) (4)
Distributions in excess of net investment income, Class Y ........... -- (5) --
From net realized capital gains, Class A ............................ -- -- (53)
Return of capital distributions, Class A ............................ -- (34) --
Return of capital distributions, Class C ............................ -- (8) --
Return of capital distributions, Class Y ............................ -- (79) --
--------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ........... (989) (1,338) (277)
--------------------------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
CLASS A
Proceeds from shares sold ........................................... 16,302 1,368 4,528
Capital contribution from acquisition (Note 7) ...................... 3,705 -- --
Capital contribution from Class Y (Note 7) .......................... 14,078 -- --
Reinvested distributions ............................................ 733 342 272
Payments for shares redeemed ........................................ (17,333) (1,898) (1,606)
--------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS 17,485 (188) 3,194
--------------------------------
CLASS C
Proceeds from shares sold ........................................... 211 346 --
Capital contribution (Note 7) ....................................... -- 1,140 --
Reinvested distributions ............................................ 41 70 --
Payments for shares redeemed ........................................ (252) (459) --
--------------------------------
NET INCREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS .......... -- 1,097 --
--------------------------------
CLASS Y
Capital contribution (Note 7) ....................................... -- 14,150 --
Reinvested distributions ............................................ 192 915 --
Payments for capital contribution to Class A (Note 7) ............... (14,078) -- --
--------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CLASS Y SHARE TRANSACTIONS (13,886) 15,065 --
--------------------------------
TOTAL INCREASE IN NET ASSETS ........................................ 3,822 14,332 3,239
--------------------------------
NET ASSETS
Beginning of period ................................................. 19,256 4,924 1,685
--------------------------------
End of period ....................................................... $ 23,078 $ 19,256 $ 4,924
================================
</TABLE>
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
12
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
=========================================================================================================
HIGH INTERMEDIATE TERM
YIELD GOVERNMENT
FUND INCOME FUND
---------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR
ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30,
(000's) 2000(A) 2000 1999
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income ............................................... $ 231 $ 2,190 $ 2,585
Net realized gains (losses) from security transactions .............. 8 (480) 390
Net change in unrealized appreciation/depreciation on investments ... 54 193 (3,884)
--------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............... 293 1,903 (909)
--------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income .......................................... (231) (2,190) (2,585)
--------------------------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
CLASS A
Proceeds from shares sold ........................................... 7,038 7,236 12,477
Reinvested distributions ............................................ 231 1,906 2,271
Payments for shares redeemed ........................................ (3) (18,019) (17,362)
--------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS 7,266 (8,877) (2,614)
--------------------------------
CLASS C
Proceeds from shares sold ........................................... 12 -- --
Reinvested distributions ............................................ -- -- --
Payments for shares redeemed ........................................ (1) -- --
--------------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS .......... 11 -- --
--------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................. 7,339 (9,164) (6,108)
NET ASSETS
Beginning of period ................................................. -- 45,060 51,168
--------------------------------
End of period ....................................................... $ 7,339 $ 35,896 $ 45,060
================================
</TABLE>
(A) Represents the period from the initial public offering of shares (May 1,
2000 and May 23, 2000) for Class A and Class C shares, respectively,
through September 30, 2000.
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
13
<PAGE>
SHORT TERM GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
==================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
------------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------------------------------------------------
Net investment income ........................ 0.049 0.040 0.046 0.044 0.044
----------------------------------------------------------------
Dividends from net investment income ......... (0.049) (0.040) (0.046) (0.044) (0.044)
----------------------------------------------------------------
Net asset value at end of year ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
================================================================
Total return ................................. 5.02% 4.02% 4.74% 4.53% 4.51%
================================================================
Net assets at end of year (000's) ............ $ 79,870 $ 110,060 $ 102,481 $ 96,797 $ 91,439
================================================================
Ratio of net expenses to average net assets(A) 0.95% 0.95% 0.91% 0.97% 0.99%
Ratio of net investment income to average
net assets ................................ 4.86% 3.95% 4.63% 4.43% 4.42%
</TABLE>
(A) Absent fee waivers by the Adviser, the ratio of expenses to average net
assets would have been 0.94% for the year ended September 30, 1998 (Note
4).
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
14
<PAGE>
INSTITUTIONAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
==================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
------------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------------------------------------------------
Net investment income ........................ 0.057 0.047 0.052 0.051 0.051
----------------------------------------------------------------
Dividends from net investment income ......... (0.057) (0.047) (0.052) (0.051) (0.051)
----------------------------------------------------------------
Net asset value at end of year ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
================================================================
Total return ................................. 5.83% 4.78% 5.30% 5.17% 5.18%
================================================================
Net assets at end of year (000's) ............ $ 58,306 $ 49,848 $ 44,797 $ 61,248 $ 39,382
================================================================
Ratio of net expenses to average net assets(A) 0.40% 0.40% 0.40% 0.40% 0.40%
Ratio of net investment income to average
net assets ................................ 5.73% 4.68% 5.17% 5.07% 5.06%
</TABLE>
(A) Absent fee waivers by the Adviser, the ratios of expenses to average net
assets would have been 0.43%, 0.47%, 0.45%, 0.45% and 0.49% for the years
ended September 30, 2000, 1999, 1998, 1997 and 1996, respectively (Note 4).
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
15
<PAGE>
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
====================================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
------------------------------------------------------------------------------------------------------------------------------------
ONE
YEAR YEAR YEAR MONTH YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, AUG. 31, AUG. 31,
2000 1999 1998 1997(A) 1997 1996(B)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------------
Net investment income .............................. 0.056 0.046 0.050 0.004 0.050 0.046(C)
---------------------------------------------------------------------------
Dividends from net investment income ............... (0.056) (0.046) (0.050) (0.004) (0.050) (0.046)
---------------------------------------------------------------------------
Net asset value at end of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===========================================================================
Total return ....................................... 5.79% 4.74% 5.07% 4.99%(E) 5.14% 4.70%
===========================================================================
Net assets at end of period (000's) ................ $ 42,935 $ 23,198 $ 18,492 $ 73,821 $ 94,569 $ 76,363
===========================================================================
Ratio of net expenses to average net assets(D) ..... 0.65% 0.65% 0.79% 0.80%(E) 0.65% 0.65%(E)
Ratio of net investment income to average net assets 5.75% 4.63% 4.95% 4.99%(E) 5.03% 4.94%(E)
</TABLE>
(A) Effective as of the close of business on August 29, 1997, the Fund was
reorganized and its fiscal year-end, subsequent to August 31, 1997, was
changed to September 30.
(B) Represents the period from the commencement of operations (September 29,
1995) through August 31, 1996.
(C) Calculated using weighted average shares outstanding during the period.
(D) Absent fee waivers and/or expense reimbursements, the ratios of expenses to
average net assets would have been 1.13%, 1.11%, 0.79% and 0.99%(E) for the
periods ended September 30, 2000, 1999 and August 31, 1997 and 1996,
respectively (Note 4).
(E) Annualized.
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
16
<PAGE>
BOND FUND -- CLASS A
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
=================================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
---------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
2000(E) 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period ............. $ 9.47 $ 10.39 $ 10.22 $ 10.17 $ 10.61 $ 9.88
-------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income ........................... 0.48 0.59 0.55 0.61 0.71 0.56
Net realized and unrealized gains (losses)
on investments ............................... 0.03 (0.76) 0.30 0.11 (0.43) 1.07
-------------------------------------------------------------------------
Total from investment operations ................... 0.51 (0.17) 0.85 0.72 0.28 1.63
-------------------------------------------------------------------------
Less distributions:
Dividends from net investment income ............ (0.48) (0.68) (0.57) (0.66) (0.70) (0.86)
Distributions from net realized gains ........... -- -- (0.11) (0.01) (0.02) (0.04)
Return of capital ............................... -- (0.07) -- -- -- --
-------------------------------------------------------------------------
Total distributions ................................ (0.48) (0.75) (0.68) (0.67) (0.72) (0.90)
-------------------------------------------------------------------------
Net asset value at end of period ................... $ 9.50 $ 9.47 $ 10.39 $ 10.22 $ 10.17 $ 10.61
=========================================================================
Total return(A) .................................... 5.50%(D) (1.68%) 8.56% 7.30% 2.85% 16.95%
=========================================================================
Net assets at end of period (000's) ................ $ 22,086 $ 4,310 $ 4,924 $ 1,685 $ 821 $ 523
=========================================================================
Ratio of net expenses to average net assets(B) ..... 0.90%(C) 0.90% 0.90% 0.90% 0.90% 0.90%
Ratio of net investment income to average net assets 6.16%(C) 5.92% 5.68% 6.08% 6.01% 6.21%
Portfolio turnover rate ............................ 126%(C) 57% 170% 88% 64% 78%
</TABLE>
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Absent fee waivers and/or expense reimbursements, the ratios of expenses to
average net assets would have been 2.14%(C) for the nine months ended
September 30, 2000, 2.26%, 4.13%, 7.13%, 13.61% and 29.29% for the years
ended December 31, 1999, 1998, 1997, 1996 and 1995, respectively (Note 4).
(C) Annualized.
(D) Not annualized.
(E) Effective after the close of business on September 30, 2000, the Fund
changed its fiscal year-end to September 30.
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
17
<PAGE>
BOND FUND -- CLASS C
FINANCIAL HIGHLIGHTS
================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
--------------------------------------------------------------------------------
NINE MONTHS YEAR
ENDED ENDED
SEPT. 30, DEC. 31,
2000 1999(A)
--------------------------------------------------------------------------------
Net asset value at beginning of period ............. $ 9.15 $ 10.08
------------------------
Income from investment operations:
Net investment income ........................... 0.37 0.51
Net realized and unrealized loss on investments . (0.03) (0.75)
------------------------
Total from investment operations ................... 0.34 (0.24)
------------------------
Less distributions:
Dividends from net investment income ............ (0.42) (0.62)
Return of capital ............................... -- (0.07)
------------------------
Total distributions ................................ (0.42) (0.69)
------------------------
Net asset value at end of period ................... $ 9.07 $ 9.15
========================
Total return(B) .................................... 3.87%(E) (2.41%)
========================
Net assets at end of period (000s) ................. $ 992 $ 998
========================
Ratio of net expenses to average net assets(C) ..... 1.65%(D) 1.65%
Ratio of net investment income to average net assets 5.41%(D) 5.18%
Portfolio turnover rate ............................ 126%(D) 120%
(A) The Class commenced operations on January 1, 1999.
(B) The return is calculated without the effects of a sales charge. Total
Returns would have been lower had certain expenses not been reimbursed or
waived during the period shown.
(C) Absent fee waivers and/or reimbursements, the ratios of expenses to average
net assets would have been 2.89%(D) and 3.01% for the nine months end
September 30, 2000 and the year ended December 31, 1999.
(D) Annualized.
(E) Not annualized.
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
18
<PAGE>
HIGH YIELD FUND -- CLASS A
FINANCIAL HIGHLIGHTS
================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
--------------------------------------------------------------------------------
PERIOD
ENDED
SEPT. 30,
2000(A)
--------------------------------------------------------------------------------
Net asset value at beginning of period .......................... $ 10.00
---------
Income from investment operations:
Net investment income ........................................ 0.33
Net realized and unrealized gains on investments ............. 0.09
---------
Total from investment operations ................................ 0.42
---------
Less distributions:
Dividends from net investment income ......................... (0.33)
---------
Net asset value at end of period ................................ $ 10.09
=========
Total return(B) ................................................. 4.20%
=========
Net assets at end of period (000's) ............................. $ 7,327
=========
Ratio of net expenses to average net assets(c) .................. 1.04%(D)
Ratio of net investment income to average net assets ............ 7.77%(D)
Portfolio turnover rate ......................................... 13%(D)
(A) Represents the period from the initial public offering (May 1, 2000)
through September 30, 2000.
(B) Total return shown excludes the effect of applicable sales loads and is not
annualized.
(C) Absent fee waivers and/or expense reimbursements, the ratio of expenses to
average net assets would have been 1.78%(D) for the period ended September
30, 2000.
(D) Annualized.
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
19
<PAGE>
HIGH YIELD FUND -- CLASS C
FINANCIAL HIGHLIGHTS
================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
--------------------------------------------------------------------------------
PERIOD
ENDED
SEPT. 30,
2000(A)
--------------------------------------------------------------------------------
Net asset value at beginning of period ......................... $ 10.00
----------
Income from investment operations:
Net investment income ....................................... 0.27
Net realized and unrealized gains on investments ............ 0.15
----------
Total from investment operations ............................... 0.42
----------
Less distributions:
Dividends from net investment income ........................ (0.27)
Distributions in excess of net investment income ............ (0.04)
----------
Total distributions ............................................ (0.31)
----------
Net asset value at end of period ............................... $ 10.11
==========
Total return(B) ................................................ 4.21%
==========
Net assets at end of period (000's) ............................ $ 12
==========
Ratio of net expenses to average net assets .................... 1.80%(D)
Ratio of net investment income to average net assets ........... 7.91%(D)
Portfolio turnover rate ........................................ 13%(D)
(A) Represents the period from the initial public offering (May 23, 2000)
through September 30, 2000.
(B) Total return shown excludes the effect of applicable sales loads and is not
annualized.
(C) Absent fee waivers and/or expense reimbursements, the ratio of expenses to
average net assets would have been 2.82%(D) for the period ended September
30, 2000.
(D) Annualized.
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
20
<PAGE>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
==================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
------------------------------------------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year ........ $ 10.34 $ 11.15 $ 10.67 $ 10.49 $ 10.73
-----------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .................... 0.59 0.60 0.61 0.61 0.61
Net realized and unrealized gains (losses)
on investments ........................ (0.07) (0.81) 0.48 0.18 (0.24)
-----------------------------------------------------------------
Total from investment operations ............ 0.52 (0.21) 1.09 0.79 0.37
-----------------------------------------------------------------
Dividends from net investment income ........ (0.59) (0.60) (0.61) (0.61) (0.61)
-----------------------------------------------------------------
Net asset value at end of year .............. $ 10.27 $ 10.34 $ 11.15 $ 10.67 $ 10.49
=================================================================
Total return(A) ............................. 5.29% (1.93%) 10.54% 7.74% 3.55%
=================================================================
Net assets at end of year (000's) ........... $ 35,896 $ 45,060 $ 51,168 $ 53,033 $ 56,095
=================================================================
Ratio of net expenses to average net assets . 0.99% 0.99% 0.99% 0.99% 0.99%
Ratio of net investment income to
average net assets ....................... 5.87% 5.59% 5.64% 5.78% 5.75%
Portfolio turnover rate ..................... 27% 58% 29% 49% 70%
</TABLE>
(A) Total returns shown exclude the effect of applicable sales loads.
See accompanying notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
================================================================================
1. ORGANIZATION
The Short Term Government Income Fund, Institutional Government Income Fund,
Money Market Fund, Bond Fund, High Yield Fund and Intermediate Term Government
Income Fund (individually, a Fund and, collectively, the Funds) are each a
series of Touchstone Investment Trust (the Trust). The Trust is registered under
the Investment Company Act of 1940 (the Act) as an open-end management
investment company. The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated December 7, 1980. The Declaration of Trust,
as amended, permits the Trustees to issue an unlimited number of shares of each
Fund.
The Short Term Government Income Fund seeks high current income, consistent with
protection of capital, by investing primarily in short-term obligations issued
or guaranteed as to principal and interest by the U.S. Government, its agencies
or instrumentalities and backed by the "full faith and credit" of the United
States.
The Institutional Government Income Fund seeks high current income, consistent
with protection of capital, by investing primarily in short-term obligations
issued or guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities. The Fund is designed primarily for institutions
as an economical and convenient means for the investment of short-term funds.
The Money Market Fund seeks high current income, consistent with liquidity and
stability of principal. The Fund invests primarily in high-quality U.S.
dollar-denominated money market instruments.
The Bond Fund seeks high current income consistent with the preservation of
capital, by investing in investment grade debt securities in corporate debt
securities, U.S. Government securities and asset-backed securities. The Fund
expects to have an average effective maturity between 5 and 15 years.
The High Yield Fund seeks to achieve a high level of income as its main goal.
Capital appreciation is a secondary consideration.
The Intermediate Term Government Income Fund seeks high current income,
consistent with protection of capital, by investing primarily in U.S. Government
obligations having an effective maturity of twenty years or less with a
dollar-weighted effective average portfolio maturity under normal market
conditions of between three and ten years. To the extent consistent with the
Fund's primary objective, capital appreciation is a secondary objective.
Prior to May 1, 2000, the Bond Fund was part of the Touchstone Series Trust, a
Massachusetts Business trust organized on February 7, 1994 and registered under
the Act as an open-end management investment company. Effective May 1, 2000, the
Bond Fund was merged into the Investment Trust and the Touchstone Series Trust
was dissolved (Note 7).
The Bond Fund, High Yield Fund and Intermediate Term Government Income Fund are
each authorized to offer two classes of shares: Class A shares (sold subject to
a maximum 4.75% front-end sales load and a distribution fee of up to 0.35% of
average daily net assets) and Class C shares (sold subject to a 1.25% front-end
sales load, a 1% contingent deferred sales load for a one-year period and a
distribution fee of up to 1% of average daily net assets). Each Class A and
Class C share of the Fund represents identical interests in the Fund's
investment portfolio and has the same rights, except that (i) Class C shares
bear the expenses of higher distribution fees, which will cause Class C shares
to have a higher expense ratio and to pay lower dividends than those related to
Class A shares; (ii) certain
TOUCHSTONE FAMILY OF FUNDS
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
other class specific expenses will be borne solely by the class to which such
expenses are attributable; and (iii) each class has exclusive voting rights with
respect to matters relating to its own distribution arrangements.
The Bond Fund's custodian fees presented on the Statement of Operations include
expenses for administration and accounting and pricing services provided for the
Fund by Investors Bank & Trust Company, the Bond Fund's administrator, custodian
and fund accounting services provider. The fee is a unified rate and therefore
each expense can not be broken out separately.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Funds' significant accounting policies:
Securities valuation -- Investment securities in the Short Term Government
Income Fund, Institutional Government Income Fund and Money Market Fund are
valued on the amortized cost basis, which approximates market value. This
involves initially valuing a security at its original cost and thereafter
assuming a constant amortization to maturity of any discount or premium. This
method of valuation is expected to enable these Funds to maintain a constant net
asset value per share. Investment securities in the Bond Fund, High Yield Fund
and Intermediate Term Government Income Fund for which market quotations are
readily available are valued at their most recent bid prices as obtained from
one or more of the major market makers for such securities by an independent
pricing service. Securities for which market quotations are not readily
available are valued at their fair values as determined in good faith in
accordance with consistently applied procedures approved by and under the
general supervision of the Board of Trustees.
Repurchase agreements -- Repurchase agreements, which are collateralized by U.S.
Government obligations, are valued at cost which, together with accrued
interest, approximates market. At the time each Fund enters into a repurchase
agreement, the seller agrees that the value of the underlying securities,
including accrued interest, will at all times be equal to or exceed the face
amount of the repurchase agreement.
Share valuation -- The net asset value per share of each class of shares of the
Bond Fund and the High Yield Fund are calculated daily by dividing the total
value of the Fund's assets attributable to that class, less liabilities
attributable to that class, by the number of shares of that class outstanding.
The net asset value per share of the Short Term Government Income Fund,
Institutional Government Income Fund, Money Market Fund and the Intermediate
Term Government Income Fund is calculated daily by dividing the total value of a
Fund's assets, less liabilities, by the number of shares outstanding.
The offering price per share of the Short Term Government Income Fund,
Institutional Government Income Fund and the Money Market Fund is equal to the
net asset value per share. The maximum offering price per share of Class A
shares of the Bond Fund and the High Yield Fund and shares of the Intermediate
Term Government Income Fund is equal to the net asset value per share plus a
sales load equal to 4.99% of the net asset value (or 4.75% of the offering
price). The maximum offering price per share of Class C shares of the Bond Fund
and the High Yield Fund is equal to the net asset value per share plus a sales
load equal to 1.27% of the net asset value (or 1.25% of the offering price).
TOUCHSTONE FAMILY OF FUNDS
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
The redemption price per share of a Fund, or of each class of shares of a Fund,
is equal to the net asset value per share. However, Class C shares of the Bond
Fund and High Yield Fund are subject to a contingent deferred sales load of
1.00% of the original purchase price if redeemed within a one-year period from
the date of purchase.
Investment income -- Interest income is accrued as earned. Discounts and
premiums on securities purchased are amortized in accordance with income tax
regulations which approximate generally accepted accounting principles.
Distributions to shareholders -- Dividends arising from net investment income
are declared daily and paid on the last business day of each month to
shareholders of each Fund. With respect to each Fund, net realized short-term
capital gains, if any, may be distributed throughout the year and net realized
long-term capital gains, if any, are distributed at least once each year. Income
dividends and capital gain distributions are determined in accordance with
income tax regulations.
Allocations between classes -- Investment income earned, realized capital gains
and losses, and unrealized appreciation and depreciation for the Bond Fund and
the High Yield 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 its proportionate share of total net assets of the Fund.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are determined on a specific identification basis.
Organization costs -- Costs incurred by the Money Market Fund in connection with
the organization and registration of shares, net of certain expenses, have been
capitalized and are being amortized on a straight-line basis over a five year
period beginning with the Fund's commencement of operations.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is each Fund's policy 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 taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
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 as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
As of September 30, 2000, the Institutional Government Income Fund, Money Market
Fund, Intermediate Term Government Income Fund and Bond Fund had capital loss
carryforwards for federal income tax purposes of $22,343, $11,344 and
$2,353,349, respectively, none of which expire prior to September 30, 2002. In
addition, the Short Term Government Income Fund and Intermediate Term Government
Income Fund elected to defer until its subsequent tax year $ 3,469, $481,364 and
$959,059, respectively, of capital losses incurred after October 31, 1999. These
capital loss carryforwards and "post-October" losses may be utilized in current
and future years to offset net realized capital gains, if any, prior to
distributing such gains to shareholders.
TOUCHSTONE FAMILY OF FUNDS
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
The following information is based upon the federal income tax cost of portfolio
investments as of September 30, 2000:
--------------------------------------------------------------------------------
INTERMEDIATE
HIGH TERM
BOND YIELD GOVERNMENT
(000's) FUND FUND INCOME FUND
--------------------------------------------------------------------------------
Gross unrealized appreciation .............. $ 199 $ 177 $ 127
Gross unrealized depreciation .............. $ (472) (123) (608)
--------------------------------
Net unrealized appreciation (depreciation) . $ (273) $ 54 $ (481)
================================
Federal income tax cost .................... $ 22,892 $ 7,199 $ 35,898
================================
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) were as follows for
the period ended September 30, 2000:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
INTERMEDIATE
HIGH TERM
BOND YIELD GOVERNMENT
(000's) FUND FUND INCOME FUND
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases of investment securities ........................... $ 19,517 $ 7,226 $ 9,462
------------------------------
Proceeds from sales and maturities of investment securities .. $ 18,851 $ 303 $ 18,640
------------------------------
------------------------------------------------------------------------------------------------
</TABLE>
4. TRANSACTIONS WITH AFFILIATES
The President and certain other officers of the Trust are also officers of
Touchstone Advisors, Inc. (the Adviser), the Trust's investment adviser,
Touchstone Securities, Inc. (the Underwriter) the Trust's principal underwriter
and Integrated Fund Services, Inc. (IFS), the Trust's administrator, transfer
agent and accounting services agent. The Adviser, Underwriter and IFS are each a
wholly-owned subsidiary of The Western and Southern Life Insurance Company.
MANAGEMENT AGREEMENT
Each Fund's investments are managed by the Adviser under the terms of a
Management Agreement. Under the Management Agreement, the Short Term Government
Income Fund, Money Market Fund and Intermediate Term Government Income Fund each
pay the Adviser a fee, which is computed and accrued daily and paid monthly, at
an annual rate of 0.50% of its respective average daily net assets up to $50
million; 0.45% of such net assets from $50 million to $150 million; 0.40% of
such net assets from $150 million to $250 million; and 0.375% of such net assets
in excess of $250 million. The Institutional Government Income Fund, Bond Fund
and High Yield Fund each pay the Adviser a fee, which is computed and accrued
daily and paid monthly, at an annual rate of 0.20%, 0.50% and 0.60% of its
respective average daily net assets.
In order to voluntarily reduce operating expenses during the year ended
September 30, 2000, the Adviser waived $17,803 of its advisory fees for the
Institutional Government Income Fund; waived $162,682 of its advisory fees for
the Money Market Fund; waived $31,708 of sponsor fees and reimbursed other
operating expenses of $165,781 for the Bond Fund; and waived its advisory fees
of $17,711 and reimbursed other operating expenses of $4,230 for the High Yield
Fund.
TOUCHSTONE FAMILY OF FUNDS
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement between the Trust and IFS, IFS 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, IFS receives a monthly fee at an annual
rate of $25 per shareholder account from each of the Short Term Government
Income Fund, Institutional Government Income Fund and Money Market Fund and $21
per shareholder account from the Bond Fund, High Yield Fund and Intermediate
Term Government Income Fund subject to a $1,000 minimum monthly fee for each
Fund or for each class of shares of a Fund, as applicable. In addition, each
Fund pays IFS out-of-pocket expenses including, but not limited to, postage and
supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement between the Trust and IFS,
IFS calculates the daily net asset value per share and maintains the financial
books and records of each Fund. For these services, IFS receives a monthly fee,
based on current net asset levels, of $2,500 from the Short Term Government
Income Fund and Institutional Government Income Fund, $2,000 from each of the
Money Market Fund and Intermediate Term Government Income Fund and $3,000 from
the High Yield Fund. In addition, each Fund pays IFS certain out-of-pocket
expenses incurred by IFS in obtaining valuations of such Fund's portfolio
securities.
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 Adviser, the Underwriter earned
$955, $62 and $9,010 from underwriting and broker commissions on the sale of
shares of the Bond Fund, High Yield Fund and Intermediate Term Government Income
Fund, respectively, for the year ended September 30, 2000.
PLANS OF DISTRIBUTION
The Trust has a Plan of Distribution under which shares of each Fund may
directly incur or reimburse the Adviser for expenses related to the distribution
and promotion of shares. The annual limitation for payment of such expenses
under the Plan is 0.35% of average daily net assets attributable to such shares,
except for the Institutional Government Income Fund for which the annual
limitation is 0.10% of average daily net assets.
SPONSOR AGREEMENT
The Trust, on behalf of the Bond Fund, has entered into a Sponsor Agreement with
the Adviser. The Adviser provides oversight of the various service providers to
the Bond Fund, including the Bond Fund's administrator and custodian. The
Adviser receives a fee from the Bond Fund equal on an annual basis to 0.20% of
the average daily net assets of the Fund. The Adviser waived all fees under the
Sponsor Agreement through September 30, 2000.
TOUCHSTONE FAMILY OF FUNDS
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
5. CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold and payments for shares redeemed as shown in the
Statements of Changes in Net Assets are the result of the following capital
share transactions for the periods shown:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
BOND BOND BOND
FUND FUND FUND
CLASS A CLASS C CLASS Y
--------------------------------------------------------------------------------------------------------------------
NINE MONTHS YEAR YEAR NINE MONTHS YEAR NINE MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
SEPT. 30, DEC. 31, DEC. 31, SEPT. 30, DEC. 31, SEPT. 30, DEC. 31,
(000's) 2000 1999 1998 2000 1999 2000 1999
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital contribution (Note 7) ... -- -- -- -- 113 -- 1,000
Shares sold ..................... 1,733 137 437 23 36 -- --
Issued in acquisition ........... 399 -- -- -- -- -- --
Shares reinvested ............... 78 35 26 5 7 15 68
Class Y contribution to
Class A (Note 7) ............. 1,509 -- -- -- -- (1,083) --
Shares redeemed ................. (1,849) (191) (154) (28) (47) -- --
------------------------------------------------------------------------------
Net increase (decrease) in shares
outstanding .................. 1,870 (19) 309 -- (4) (1,068) 68
------------------------------------------------------------------------------
Shares outstanding, beginning
of period .................... 455 474 165 109 -- 1,068 --
------------------------------------------------------------------------------
Shares outstanding, end
of period .................... 2,325 455 474 109 109 -- 1,068
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
HIGH YIELD HIGH YIELD INTERMEDIATE TERM
FUND FUND GOVERNMENT
CLASS A CLASS C INCOME FUND
------------------------------------------------------------------------------------------
PERIOD PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
(000's) 2000(A) 2000(A) 2000 1999
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................. 703 1 713 1,170
Issued in acquisition ....................... -- -- -- --
Shares reinvested ........................... 23 --(B) 187 213
Shares redeemed ............................. -- --(B) (1,762) (1,614)
----------------------------------------
Net increase (decrease) in shares outstanding 726 1 (862) (231)
Shares outstanding, beginning of period ..... -- -- 4,357 4,588
----------------------------------------
Shares outstanding, end of period ........... 726 1 3,495 4,357
------------------------------------------------------------------------------------------
</TABLE>
(A) Represents the period from the initial public offering of Class A and Class
C shares (May 1, 2000 and May 23, 2000, respectively) through September 30,
2000.
(B) Rounds to less than 1.
TOUCHSTONE FAMILY OF FUNDS
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
6. RESTRICTED SECURITIES
Restricted securities may be difficult to dispose of and involve time-consuming
negotiation and expense. Prompt sale of these securities may involve the seller
taking a discount to the security's stated market value. As of September 30,
2000, Bond Fund held restricted securities valued by the trustees of the Trust
at $658,000 representing 2.85% of net assets. Acquisition date and cost of each
are as follows:
--------------------------------------------------------------------------------
ACQUISITION
DATE COST
--------------------------------------------------------------------------------
Mercantile Safe Deposit ............................ 3/28/85 $ 17,497
Central America, Series F .......................... 8/1/86 134,864
Central America, Series G .......................... 8/1/86 134,864
Central America, Series H .......................... 8/1/86 134,864
Republic of Honduras, Series C ..................... 5/1/88 122,571
Republic of Honduras, Series D ..................... 5/1/88 139,689
--------------------------------------------------------------------------------
The Bond Fund received these securities from the Western & Southern Life
Insurance Company Separate Account A on October 4, 1994, in exchange for a
proportionate interest in the Bond Portfolio. As part of a subsequent
reorganization, these securities were redeemed in kind and acquired by the Bond
Fund.
7. FUND MERGERS
On February 15, 2000, the Board of Trustees of the Touchstone Series Trust
approved an Agreement and Plan of Reorganization known as the Countrywide
Investment Trust Agreement ("CIT Agreement") between the Series Trust and
Investment Trust. Pursuant to the CIT Agreement, Countrywide Intermediate Bond
Fund was merged into the Touchstone Bond Fund of the Series Trust.
The mergers described above were approved by shareholders of each Fund at
special meetings of shareholders held on April 19, 2000.
Pursuant to the CIT Agreement described above, on May 1, 2000, the Bond Fund,
formerly the Touchstone Bond Fund, acquired all of the assets and assumed
liabilities of the Countrywide Intermediate Bond Fund of the Investment Trust,
in an exchange for Class A shares of Bond Fund.
The above acquisitions were accomplished by a tax-free exchange of shares of
each respective fund. The value of assets acquired, number of shares issued,
unrealized gain or loss acquired and the aggregate net assets of each Fund
immediately after the acquisition are as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Acquiring Acquired Value of Number of Unrealized Realized Loss Net Assets
Fund Fund Net Assets Shares Issued Loss Acquired After
Acquired Acquisition
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bond Fund Countrywide $ 3,705,000 399,000 $ (154,000) $ (822,000) $ 22,917,000
Intermediate
Bond Fund
-------------------------------------------------------------------------------------------------------
</TABLE>
TOUCHSTONE FAMILY OF FUNDS
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
Effective immediately after the close of business on December 31, 1998, certain
related mutual funds (Select Advisors Trust C and Select Advisors Trust A)
entered into a series of transactions which resulted in the Western & Southern
Life Insurance Company, an affiliated entity, making an initial capital
contribution to the Class C and Class Y shares of the Bond Fund. The following
is a summary of unrealized appreciation acquired from Select Advisors Trust C as
of the acquisition date, as well as the number of shares issued from each class
from the transaction:
--------------------------------------------------------------------------------
Touchstone Series
Trust Fund Unrealized Class C Class Y
(Survivor Fund) Appreciation Shares Issued Shares Issued
--------------------------------------------------------------------------------
Bond $ 21,000 113,000 1,000,000
--------------------------------------------------------------------------------
On April 28, 2000, all of Class Y shares outstanding of the Bond Fund were
transferred into Class A shares of the Bond Fund. This transfer was a
non-taxable event to shareholders.
TOUCHSTONE FAMILY OF FUNDS
29
<PAGE>
<TABLE>
<CAPTION>
SHORT TERM GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
==========================================================================================================
PAR MARKET
VALUE VALUE
(000's) U.S. TREASURY OBLIGATIONS-- 20.1% (000's)
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 4,000 U.S. Treasury Notes, 5.750%, 11/15/00 ............................................. $ 3,998
2,000 U.S. Treasury Notes, 5.625%, 11/30/00 ............................................. 1,998
6,000 U.S. Treasury Notes, 7.750%, 2/15/01 .............................................. 6,027
2,000 U.S. Treasury Notes, 6.375%, 3/31/01 .............................................. 1,999
2,000 U.S. Treasury Notes, 8.000%, 5/15/01 .............................................. 2,014
--------- ---------
$ 16,000 TOTAL U.S. TREASURY OBLIGATIONS
========= (Amortized Cost $16,036) .......................................................... $ 16,036
---------
----------------------------------------------------------------------------------------------------------
FACE MARKET
AMOUNT VALUE
(000's) REPURCHASE AGREEMENTS (NOTE A)-- 79.5% (000's)
----------------------------------------------------------------------------------------------------------
$ 11,000 Morgan Stanley Dean Witter, Inc., 6.62%, dated 9/29/00, due 10/02/00,
repurchase proceeds $11,006 (Collateralized by $11,000 GNMA 7.375%,
01/20/25, fair value $11,161) .................................................. $ 11,000
19,000 Prudential Securities, Inc., 6.55%, dated 9/29/00, due 10/02/00
repurchase proceeds $19,010 (Collateralized by $19,010 GNMA 6.50%,
05/15/29, fair value $19,506) .................................................. 19,000
16,000 Nesbitt Burns Securities, Inc., 6.50%, dated 9/29/00, due 10/02/00,
repurchase proceeds $16,009 (Collateralized by $16,000 U.S. Treasury Notes 8.125%,
08/15/19, fair value $16,314) .................................................. 16,000
2,531 Nesbitt Burns Securities, Inc., 6.40%, dated 9/29/00, due 10/02/00,
repurchase proceeds $2,532 (Collateralized by $2,531 U.S. Treasury Notes 6.375%,
04/30/02, fair value $2,587) ................................................... 2,531
7,000 Bank One N.A., 6.40%, dated 9/29/00, due 10/02/00,
repurchase proceeds $7,004 (Collateralized by $7,000 U.S. Treasury Notes 5.75%,
08/15/03, fair value $7,141) ................................................... 7,000
8,000 Morgan Stanley Dean Witter, Inc., 6.47%, dated 9/19/00, due 10/03/00,
--------- repurchase proceeds $8,020 (Collateralized by $8,000 GNMA 7.00% - 8.00%,
08/20/25 through 03/20/28, fair value $8,181) .................................. 8,000
---------
$ 63,531 TOTAL REPURCHASE AGREEMENTS
========= (Cost $63,531) ................................................................. $ 63,531
---------
TOTAL INVESTMENT SECURITIES AND REPURCHASE AGREEMENTS-- 99.6% ..................... $ 79,567
(Amortized Cost $79,567)
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.4% ...................................... 303
---------
NET ASSETS-- 100.0% ............................................................... $ 79,870
=========
See accompanying notes to portfolios of investments and notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
30
<PAGE>
INSTITUTIONAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
==========================================================================================================
PAR MARKET
VALUE VALUE
(000's) INVESTMENT SECURITIES-- 65.5% (000's)
----------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT & Agency Obligations-- 55.8%
$ 275 FNMA, 6.30%, 10/2/00 .............................................................. $ 275
350 FNMA, 6.20%, 10/4/00 .............................................................. 350
300 FNMA, 4.45%, 10/16/00 ............................................................. 300
200 FHLB, 5.30%, 10/16/00 ............................................................. 200
1,000 SLMA, 6.43%, 10/19/00 ............................................................. 1,000
110 FNMA, 6.35%, 10/20/00 ............................................................. 110
250 FHLMC, 6.30%, 10/20/00 ............................................................ 250
200 FHLB, 6.60%, 10/25/00 ............................................................. 200
600 TVA, 6.30%, 11/1/00 ............................................................... 600
1,000 FNMA, 6.45%, 11/20/00 ............................................................. 999
485 FHLB, 6.55%, 11/24/00 ............................................................. 484
1,250 FHLB, 6.78%, 12/1/00 .............................................................. 1,246
1,500 FHLMC, 5.99%, 12/6/00 ............................................................. 1,499
1,500 FNMA, 6.39%, 12/7/00 .............................................................. 1,498
500 FHLB, 6.80%, 12/7/00 .............................................................. 499
1,000 FHLB, 6.67%, 12/15/00 ............................................................. 998
2,500 FNMA, 6.40%, 12/18/00 ............................................................. 2,508
660 SLMA, 6.35%, 12/18/00 ............................................................. 658
650 FNMA, 5.55%, 1/17/01 .............................................................. 647
1,950 FNMA, 6.38%, 1/23/01 .............................................................. 1,942
250 FNMA, 6.68%, 1/24/01 .............................................................. 249
300 PEFCO, 6.65%, 1/31/01 ............................................................. 301
2,400 FNMA, 6.40%, 2/2/01 ............................................................... 2,390
500 FHLB, 6.90%, 2/13/01 .............................................................. 497
340 FHLB, 6.50%, 2/15/01 .............................................................. 339
500 FHLMC, 5.375%, 3/1/01 ............................................................. 497
750 FHLB, 6.75%, 3/2/01 ............................................................... 745
500 SLMA, 6.66%, 8/9/01 ............................................................... 500
1,000 FNMA, 6.60%, 3/15/01 .............................................................. 996
250 FNMA, 6.90%, 4/3/01 ............................................................... 249
1,000 FHLB, 6.60%, 4/17/01 .............................................................. 992
1,000 FNMA, 6.85%, 4/23/01 .............................................................. 998
2,000 FHLB, 6.57%, 4/26/01 .............................................................. 1,999
2,000 FNMA, 6.58%, 5/10/01 .............................................................. 2,000
1,000 SLMA, 6.68%, 7/26/01 .............................................................. 1,000
500 SLMA FRN, 6.63%, 8/9/01 ........................................................... 500
--------- ---------
$ 32,570 TOTAL U.S. GOVERNMENT AGENCY ISSUES
--------- (Amortized Cost $32,511) .......................................................... $ 30,515
---------
TOUCHSTONE FAMILY OF FUNDS
31
<PAGE>
INSTITUTIONAL GOVERNMENT INCOME FUND
(CONTINUED)
==========================================================================================================
PAR MARKET
VALUE VALUE
(000's) INVESTMENT SECURITIES-- 65.5% (CONTINUED) (000's)
----------------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (NOTE C)-- 9.7%
$ 2,165 Jersey City, NJ, Redevelopment MFH Auth. Rev.,
Ser. B, 11/15/05, Guarantor SLMA ............................................... $ 2,165
2,500 Illinois Student Loan Assistance Commission, Student Loan Rev.,
Ser. C, 6.10%, 12/1/22, Guarantor SLMA ......................................... 2,500
1,000 Milipitas, CA, MFH Rev., Crossing A-T.,
--------- 8/15/23, Guarantor FNMA ........................................................ 1,000
---------
$ 5,665 TOTAL VARIABLE RATE DEMAND NOTES
--------- (Amortized Costs $5,665) .......................................................... $ 5,665
---------
COMMERCIAL PAPER-- 0.3%
$ 2,000 NEBHELP 10/11/00
--------- (Amortized cost $1,996) ........................................................... $ 1,996
---------
TOTAL INVESTMENT SECURITIES
(Amortized Cost $38,176) .......................................................... $ 38,176
---------
----------------------------------------------------------------------------------------------------------
FACE MARKET
VALUE VALUE
(000's) REPURCHASE AGREEMENTS (NOTE A)-- 33.6% (000's)
----------------------------------------------------------------------------------------------------------
$ 6,000 Morgan Stanley Dean Witter, Inc. 6.48%, dated 9/19/00, due 10/03/00,
repurchase proceeds $6,015 (Collateralized by $6,000 GNMA 6.00% - 8.00%,
06/20/25 through 08/20/29, fair value $6,118) .................................. $ 6,000
7,000 Morgan Stanley Dean Witter, Inc. 6.63%, dated 9/29/00, due10/02/00,
repurchase proceeds $7,004 (Collateralized by $7,000 MCDB 99-08 6.125%,
09/16/08, fair value $7,159) ................................................... 7,000
1,593 Nesbitt Burns Securities, Inc., 6.40%, dated 9/29/00, due 10/02/00,
repurchase proceeds $1,594(Collateralized by $1,593 U.S. Treasury Notes 5.625%,
09/30/01, fair value $1,630) ................................................... 1,593
5,000 Prudential Securities, Inc., 6.55%, dated 9/29/00, due 10/02/00,
--------- repurchase proceeds $5,003 (Collateralized by $5,003 GNMA 7.00%,
08/15/23, fair value $5,129) ................................................... $ 5,000
---------
$ 19,593 TOTAL REPURCHASE AGREEMENTS
========= (Cost $19,593) .................................................................... $ 19,593
---------
TOTAL INVESTMENT SECURITIES AND REPURCHASE AGREEMENTS-- 99.1% ..................... $ 57,769
(Amortized cost $57,769)
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.9% ...................................... 537
---------
NET ASSETS-- 100.0% ............................................................... $ 58,306
=========
See accompanying notes to portfolios of investments and notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
32
<PAGE>
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
==========================================================================================================
PAR MARKET
VALUE VALUE
($000's) INVESTMENT SECURITIES-- 99.1% ($000's)
----------------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (NOTE C)-- 74.1%
$ 1,840 Denver, Ser. 2000, 6.72%, 05/17/01, guarantor Huntington Bank ..................... $ 1,840
665 HDR Power Systems, Inc. (Ohio Semitronics), 5.59%, 6/01/03, guarantor Bank One .... 665
170 Geneva, NY, Housing Auth. (DePaul Comm.), Ser. B, 7.00%, 07/01/03, guarantor FHLB . 170
890 Tell-Schipper Properties, 6.85%, 10/01/03, guarantor Bank One ..................... 890
245 Payne Co., OK, EDA (Collegiate Housing Foundation), 7.10%, 06/01/04, guarantor
First Union .................................................................... 245
1,370 Nassau Co., NY, IDA Rev.(kiss NA:1 Products), 5.50%, 5/17/05, guarantor Key Bank .. 1,370
610 Monroe Co., NY, IDR Ser. B (Rochester Inst.), 7.37%, 06/01/08, guarantor First Union 610
700 Diamond Development Group, Inc., Ser. 1996, 5.62%, 9/01/08, guarantor Firth Third
Bank ........................................................................... 700
755 Vista Funding Corp., 5.54%, 9/01/11, guarantor Huntington Bank .................... 755
350 Columbia Ridge Orchards, LLC, Ser. 1998, 6.70%, 06/01/13, guarantor US Bancorp .... 350
1,763 Watts Brothers Frozen Foods, 6.70%, 07/01/13, guarantor US Bancorp ................ 1,763
1,605 Century Motors Acura (Elizabeth Connelley Trust), 6.75%, 09/01/15, guarantor Firstar 1,605
1,430 Century Motors VW (Elizabeth Connelley Trust), 6.75%, 09/01/15, guarantor Firstar . 1,430
1,000 Clinton Co., NY, IDR, (MMARS 2nd Prog-Bombardier) Series A, 6.70%, 12/01/10,
guarantor HSBC ................................................................. 1,000
850 St. Louis Park, MN, Tax Increment Ser. B, 6.70%, 02/01/18, guarantor Wells Fargo .. 850
1,975 Harris Co., TX , IDR (Parrot Ice Drink), 6.70%, 05/01/20, guarantor Bank One ...... 1,975
1,260 Employers Resource Associates, Inc., Ser. 2000, 6.75%, 09/01/20, guarantor Fifth
Third Bank ..................................................................... 1,260
700 Washington State, MFA Rev., (Brittany Park Proj.) Ser. B, 6.70%, 11/01/21, US
Bancorp ........................................................................ 700
2,500 Cuyahoga Co., OH, EDR (Gateway Arena Proj.), Ser. B, 6.75%, 06/01/22, guarantor
First Union .................................................................... 2,500
1,600 Westwood Baptist Church, OH, 5.49%, 5/01/24, guarantor Firstar .................... 1,600
600 Los Angeles, CA, IDR (Apparel Production Services, Inc.), 6.80%, 07/01/25,
guarantor Mellon Bank .......................................................... 600
1,100 Waukesha, WI, Health Systems Rev., 5.45%, 8/15/26, guarantor Bank of America ...... 1,100
420 Ontario, CA, Rev. (Mission Oaks), 5.60%, 10/01/26, guarantor Calstrs .............. 420
655 Washington State, MFA Rev.(Sherwood Springs) Ser. B, 6.70%, 09/01/27guarantor US
Bancorp ........................................................................ 655
1,500 ABAG Fin. Auth. for Nonprofit Corp., CA, COP, Ser. D, 5.55%, 10/01/27, guarantor
Banque PariBas ................................................................. 1,500
1,000 Lexington Financial Services, 6.60%, 12/01/28, guarantor LaSalle National Bank .... 1,000
690 American Healthcare Funding, 6.60%, 03/01/29, guarantor LaSalle National Bank ..... 690
375 Associates Corp., NA, 5.96%, 5/15/37 .............................................. 372
500 California Statewide Cmntys. Dev. Auth. Rev.(Park David) Ser. B, 5.50%, 5/01/29,
guarantor FHLB ................................................................. 500
1,190 Washington State, HFA Rev. (Summer Ridge), 6.65%, 12/01/29, guarantor US Bancorp .. 1,190
380 Bexar Co., Tx, HFA, MFA, Rev. (Mitchell Village), 6.75%, 02/15/30, guarantor FNMA . 380
540 California Statewide Cmntys. Dev. Auth. Rev. (Cypress Villas), 6.75%, 05/15/33,
guarantor FNMA ................................................................. 540
975 Corp Grove Management, LLC, Ser. 1998, 6.65%, 12/01/48, guarantor Huntington Bank . 975
--------- ---------
$ 31,828 TOTAL VARIABLE RATE DEMAND NOTES
--------- (Amortized Cost $31,828) .......................................................... $ 31,828
---------
FIXED RATE REVENUE BONDS-- 23.1%
CORPORATE NOTES-- 18.3%
$ 190 Ford Motor Credit Co., 6.375%, 10/06/00 ........................................... $ 190
100 Merrill Lynch & Co., 6.375%, 10/17/00 ............................................. 100
200 Firstar, 5.45%, 10/23/00 .......................................................... 200
400 BP America, Inc., 9.375%, 11/01/00 ................................................ 401
225 Bear Stearns & Co., Inc., 6.25%, 12/1/00 .......................................... 225
TOUCHSTONE FAMILY OF FUNDS
33
<PAGE>
MONEY MARKET FUND (CONTINUED)
==========================================================================================================
PAR MARKET
VALUE VALUE
($000's) INVESTMENT SECURITIES-- 99.1% ($000's)
----------------------------------------------------------------------------------------------------------
FIXED RATE REVENUE BONDS-- 23.1% (CONTINUED)
CORPORATE NOTES-- 18.3%
$ 300 Daimler-Chrysler Finance, 6.12%, 12/04/00 ......................................... $ 300
255 American General Finance, 6.26%, 12/15/00 ......................................... 255
140 Southern California Edison, 5.875%, 01/15/01 ...................................... 140
255 Huntington Bancshares, 5.875%, 01/15/01 ........................................... 254
335 Citicorp, 6.875%, 01/16/01 ........................................................ 335
150 Ford Motor Credit Co., 5.75%, 01/25/01 ............................................ 149
100 GTE, 5.625%, 02/01/01 ............................................................. 100
224 Wells Fargo Corporation, 5.625%, 02/05/01 ......................................... 223
200 Daimler-Chrysler Finance, 5.875%, 02/07/01 ........................................ 199
135 Bank of America, 6.70%, 02/13/01 .................................................. 136
700 MBIA, 9.00%, 02/15/01 ............................................................. 705
1,000 Goldman Sachs, 6.20%, 02/15/01 .................................................... 997
150 Wells Fargo Corporation, 6.20%, 02/15/01 .......................................... 149
315 Bear Stearns & Co., Inc., 5.75%, 02/15/01 ......................................... 313
250 Citicorp, 5.625%, 02/15/01 ........................................................ 248
750 Bank of America, NA, 7.25%, 02/16/01 .............................................. 751
525 New Jersey Sports & Exposition Authority, 7.00%, 03/01/01 ......................... 525
125 Household International, 6.45%, 03/15/01 .......................................... 125
147 Bank of America, 5.75%, 03/15/01 .................................................. 146
150 Wells Fargo Corporation, 10.875%, 04/15/01 ........................................ 153
100 Bear Sterns & Co. Inc., 6.75%, 05/01/01 ........................................... 100
100 Duke Energy Corp., 5.875%, 06/01/01 ............................................... 99
--------- ---------
$ 7,896 TOTAL CORPORATE NOTES
--------- (Amortized Cost $7,890) ........................................................... $ 7,890
---------
MUNICIPAL BONDS-- 4.8%
$ 1,500 Lawrence Twp., IN, Metro School District GO, 7.50%, 12/29/00 ...................... $ 1,501
200 Jefferson Co., AL, Sewer Rev. Bond, 6.46%, 02/01/01 ............................... 200
330 Hamilton, OH, Parking Garage Rev. BANS, Ser. 2000, 7.22%, 03/21/01 ................ 330
---------
$ 2,030 TOTAL MUNICIPAL OBLIGATIONS
--------- (Amortized Cost $2,031) ........................................................... $ 2,031
---------
TOTAL FIXED RATE REVENUE BONDS
(Amortized Cost $9,921) ........................................................... $ 9,921
---------
COMMERCIAL PAPER-- 1.9%
$ 800 Cooper Association of Tractor Dealers, 10/02/00, guarantor AmBac
--------- (Amortized Cost $800) ............................................................. $ 800
---------
TOTAL INVESTMENT SECURITIES-- 99.1%
(Amortized Cost $42,549) .......................................................... $ 42,549
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.9% ...................................... 386
---------
NET ASSETS-- 100.0% ............................................................... $ 42,935
=========
See accompanying notes to portfolios of investments and notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
34
<PAGE>
BOND FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
==========================================================================================================
PAR MARKET
VALUE VALUE
(000's) INVESTMENT SECURITIES-- 98.0% (000's)
----------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES-- 3.2%
$ 6 Chase Manhattan Grantor Trust, Series 1996-A, Class A, 5.20%, 02/15/02 ............ $ 6
750 CNH Equipment Trust, Ser. 2000-B, Class A4, 0.00%, 09/15/07 ....................... 741
--------- ---------
$ 756 TOTAL ASSET-BACKED SECURITIES
--------- (Amortized Cost $756) ............................................................. $ 747
---------
CORPORATE BONDS-- 31.6%
$ 500 AT&T Corp., 6.00%, 03/15/09 ....................................................... $ 450
50 Berkley (W.R.) Corp., 9.88%, 05/15/08 ............................................. 51
250 Burlington Northern Santa Fe, 7.88%, 04/15/07 ..................................... 257
700 Coca-Cola Enterprises, 5.75%, 11/01/08 ............................................ 633
650 Columbia/HCA Health, 6.73%, 07/15/45 .............................................. 623
500 Consumers Energy, Series B, 6.50%, 06/15/18 ....................................... 480
150 Deer & Co., 8.95%, 06/15/19 ....................................................... 161
500 Harris Corporation, 6.65%, 08/01/06 ............................................... 496
66 Kaiser Found Hospital, 9.55%, 07/15/05 ............................................ 73
35 Kraft Inc., 8.50%, 02/15/17 ....................................................... 36
400 MCI WorldCom, 8.88%, 01/15/06 ..................................................... 413
17 Mercantile Safe Deposit (Note B), 12.12%, 01/02/01 ................................ 17
375 Navistar International, Series B, 7.00%, 02/01/03 ................................. 358
250 News America Holdings, 10.12%, 10/15/12 ........................................... 271
750 Norfolk Southern, 7.35%, 05/15/07 ................................................. 739
750 Owens-Illinois, 7.15%, 05/15/05 ................................................... 639
1,000 Raytheon, 5.70%, 11/01/03 ......................................................... 960
750 Safeco Capital, 8.07%, 07/15/37 ................................................... 636
--------- ---------
$ 7,693 TOTAL CORPORATE BONDS
--------- (Amortized Cost $7,687) ........................................................... $ $7,293
---------
U.S. GOVERNMENT AGENCY ISSUES-- 13.1%
$ 115 Central America International Development, Series F (Note B), 10.00%, 12/01/11 .... $ 130
115 Central America International Development, Series G (Note B), 10.00%, 12/01/11 .... 130
115 Central America International Development, Series H (Note B), 10.00%, 12/01/11 .... 130
2,500 Federal National Mortgage Association, 6.50%, 09/01/30 ............................ 2,392
100 Republic of Honduras International Development, Series C (Note B), 13.00%, 06/01/06 116
100 Republic of Honduras International Development, Series D (Note B), 13.00%, 06/01/11 135
--------- ---------
$ 3,045 TOTAL U.S. GOVERNMENT AGENCY ISSUES
--------- (Amortized Cost $3,053) ........................................................... $ $3,033
---------
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<PAGE>
BOND FUND (CONTINUED)
==========================================================================================================
PAR MARKET
VALUE VALUE
(000's) INVESTMENT SECURITIES-- 98.0% (CONTINUED) (000's)
----------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (NOTE D)-- 23.3%
$ 1,471 FNMA #529271, 7.00%, 07/01/30 ..................................................... $ 1,442
936 FNMA #535149, 7.00%, 02/01/30 ..................................................... 917
1,803 FNMA #535290, 8.00%, 05/01/30 ..................................................... 1,828
158 GNMA #277667, 9.00%, 08/15/19 ..................................................... 166
998 GNMA #434792, 8.00%, 07/15/30 ..................................................... 1,017
--------- ---------
$ 5,366 U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
--------- (Amortized Cost $5,272) ........................................................... $ 5,370
---------
U.S. TREASURY OBLIGATIONS-- 26.8%
$ 850 U.S. Treasury Note, 6.75%, 05/15/05 ............................................... $ 881
2,830 U.S. Treasury Note, 6.00%, 08/15/09 ............................................... 2,841
930 U.S. Treasury Bond, 9.12%, 05/15/18 ............................................... 1,227
1,200 U.S. Treasury Bond, 6.12%, 08/15/29 ............................................... 1,227
--------- ---------
$ 5,810 TOTAL U.S. TREASURY OBLIGATIONS
--------- (Amortized Cost $6,124) ........................................................... $ 6,176
---------
TOTAL INVESTMENT SECURITIES-- 98.0%
(Amortized Cost $22,892) .......................................................... $ 22,619
OTHER ASSETS IN EXCESS OF LIABILITIES-- 2.0% ...................................... 459
---------
NET ASSETS-- 100.0% ............................................................... $ 23,078
=========
See accompanying notes to portfolios of investments and notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
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<PAGE>
HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
==========================================================================================================
PAR MARKET
VALUE VALUE
(000's) INVESTMENT SECURITIES-- 98.8% (000's)
----------------------------------------------------------------------------------------------------------
CORPORATE BONDS-- 95.4%
$ 200 Healthsouth Corp., 3.25%, 04/01/2003 .............................................. $ 167
100 Armstrong Holdings, Inc., 6.35%, 08/15/2003 ....................................... 90
150 Gulf Canada Resources Ltd., 9.25%, 01/15/2004 ..................................... 152
100 Kaufman & Broad Home Corp., 7.75%, 10/15/2004 ..................................... 95
100 Tenet Healthcare Corp., 8.00%, 01/15/2005 ......................................... 99
100 American Standard, Inc., 7.375%, 04/15/2005 ....................................... 96
200 Tembec Finance Corp., 9.875%, 9/30/2005 ........................................... 203
150 Csc Holding Inc, 9.25%, 11/1/2005 ................................................. 151
100 Be Aerospace, Inc., 9.875%, 02/01/2006 ............................................ 98
100 Collins & Aikman Products, 11.50%, 04/15/2006 ..................................... 96
100 Medpartners, Inc., 7.375%, 10/01/2006 ............................................. 89
200 Hs Resources, Inc., 9.25%, 11/15/2006 ............................................. 200
50 Newport News Ship Building, 9.25%, 12/1/2006 ...................................... 50
150 Mcleodusa, Inc., 10.50%, 03/01/2007 ............................................... 123
200 Lyondell Chemical Co., 9.875%, 05/01/2007 ......................................... 195
60 Amphenol Corp., 9.875%, 5/15/2007 ................................................. 61
75 Young Broadcasting, Inc., 8.75%, 06/15/2007 ....................................... 71
200 Columbia/Hca Healthcare, 7.00%, 7/1/2007 .......................................... 185
100 Nortek, Inc., 9.125%, 9/01/2007 ................................................... 95
200 Sc Intl Svcs Inc, 9.25%, 9/1/2007 ................................................. 195
115 Omnicare, 5.0%, 12/01/2007 ........................................................ 85
100 American Lawyer Media, 9.75%, 12/15/2007 .......................................... 95
100 Accuride Corp., 9.25%, 02/01/2008 ................................................. 82
150 Navistar International, 8.00%, 02/01/2008 ......................................... 139
100 Nuevo Energy Co., 9.50%, 06/01/2008 ............................................... 100
150 American Communication Lines Llc, 10.25%, 06/30/2008 .............................. 128
300 Hmh Properties, 7.875%, 08/01/2008 ................................................ 276
200 Felcor Lodging Lp, 9.50%, 9/15/2008 ............................................... 199
125 Federal-Mogul Corp., 7.50%, 1/15/2009 ............................................. 48
100 Intergrated Elec Services, 9.375%, 2/01/2009 ...................................... 90
100 Willis Corroon Corp., 9.00%, 02/01/2009 ........................................... 92
100 Rbf Finance Co, 11.375, 03/15/2009 ................................................ 115
100 California Steel Industry, 8.50%, 4/01/2009 ....................................... 91
200 Susquehanna Media Co., 8.50%, 8/15/2009 ........................................... 195
100 Aes Corp., 9.50%, 06/01/2009 ...................................................... 102
100 Allied Waste North America, 10.00%, 08/01/2009 .................................... 87
200 William Community, 10.875%, 10/01/2009 ............................................ 183
100 Primus Telecommunications Group, 12.75%, 10/15/2009 ............................... 52
100 Adelphia Communications, 9.375%, 11/15/2009 ....................................... 91
350 Nextel Communications, 9.375%, 11/15/2009 ......................................... 342
100 Alliance Atlantis Comm, 13.00%, 12/15/2009 ........................................ 104
200 Charter Communications Holdings, 10.25%, 01/15/2010 ............................... 196
TOUCHSTONE FAMILY OF FUNDS
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<PAGE>
HIGH YIELD FUND (CONTINUED)
==========================================================================================================
PAR MARKET
VALUE VALUE
(000's) INVESTMENT SECURITIES-- 98.8% (Continued) (000's)
----------------------------------------------------------------------------------------------------------
$ 200 Level 3 Communications, 11.25%, 03/15/2010 ........................................ $ 191
100 Orion Power Holdings Inc., 12.0%, 5/10/2000 ....................................... 107
250 Lennar Corp, 9.95%, 5/01/2010 ..................................................... 257
200 Flextronica Intl, 9.875%, 7/01/2010 ............................................... 206
200 Aes Drax Energy Ltd., 11.50%, 8/30/2010 ........................................... 212
245 Ntl Communications, 11.875%, 10/01/2010 ........................................... 240
210 Crown Castle Int Corp, 10.75%, 8/1/2011 ........................................... 216
180 Husky Oil Ltd, 8.900%, 08/15/2028 ................................................. 171
--------- ---------
$ 7,410 TOTAL CORPORATE BONDS
--------- (Amortized Cost $6,950) ........................................................... $ 7,003
---------
U.S. GOVERNMENT & AGENCY OBLIGATIONS-- 3.4%
$ 250 FHLB, 6.31%, 10/2/2000 (Amortized Cost $250) ...................................... $ 250
--------- ---------
TOTAL INVESTMENT SECURITIES-- 98.8%
(Amortized Cost $7,199) ........................................................... $ 7,253
OTHER ASSETS IN EXCESS OF LIABILITIES-- 1.2% ...................................... 86
---------
NET ASSETS-- 100.0% ............................................................... $ 7,339
=========
See accompanying notes to portfolios of investments and notes to financial statements.
TOUCHSTONE FAMILY OF FUNDS
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<PAGE>
INTERMEDIATE TERM GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
==========================================================================================================
PAR MARKET
VALUE VALUE
(000's) INVESTMENT SECURITIES-- 98.7% (000's)
----------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS-- 21.9%
$ 2,000 U.S. Treasury Note, 7.50%, 11/15/01 ............................................... $ 2,026
2,000 U.S. Treasury Note, 5.875%, 11/15/04 .............................................. 1,997
1,000 U.S. Treasury Note, 6.00%, 08/15/09 ............................................... 1,005
2,500 U.S. Treasury Bond, 7.50%, 11/15/16 ............................................... 2,851
--------- ---------
$ 7,500 TOTAL U.S. TREASURY OBLIGATIONS (Amortized Cost $7,839) ........................... $ 7,879
--------- ---------
U.S. GOVERNMENT & AGENCY OBLIGATIONS-- 50.3%
$ 472 FNMA, 6.31%, 10/2/00 .............................................................. $ 472
1,000 SLMA Medium Term Notes, 7.50%, 7/2/01 ............................................. 1,006
2,000 FHLB Medium Term Notes, 8.43%, 8/1/01 ............................................. 2,029
2,000 FNMA Notes, 7.550%, 4/22/02 ....................................................... 2,028
2,000 FNMA CB, 6.74%, 11/15/02 .......................................................... 1,989
1,400 FNMA Notes, 7.56%, 1/24/06 ........................................................ 1,352
2,500 FNMA Notes, 6.21%, 1/26/06 ........................................................ 2,411
2,000 FNMA Notes, 7.550%, 2/3/06 ........................................................ 1,918
1,000 FHLMC Notes, 6.345%, 2/15/06 ...................................................... 968
2,000 FNMA Notes, 6.38%, 6/15/09 ........................................................ 1,944
2,000 FNMA Notes, 7.55%, 9/5/12 ......................................................... 1,925
--------- ---------
$ 18,372 TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Amortized Cost $18,222) ............... $ 18,042
--------- ---------
MORTGAGE BACKED SECURITIES-- 26.5%
$ 2,658 FNMA DUS #381464, 6.11%, 4/1/09 ................................................... $ 2,531
961 GNMA 1995-6 Class B, 7.15%, 7/20/21 ............................................... 959
1,667 GNMA #455136, 7.0%, 6/15/28 ....................................................... 1,642
1,789 FHLMC GOLD #C19286, 6%, 12/1/28 ................................................... 1,675
2,790 GNMA #482725, 6/5%, 3/15/29 ....................................................... 2,689
--------- ---------
$ 9,865 TOTAL MORTGAGE BACKED SECURITIES (Amortized Cost $9,837) .......................... $ 9,496
--------- ---------
TOTAL INVESTMENT SECURITIES-- 98.7%
(Amortized Cost $35,898) .......................................................... $ 35,417
OTHER ASSETS IN EXCESS OF LIABILITIES-- 1.3% ...................................... 479
---------
NET ASSETS-- 100.0% ............................................................... $ 35,896
=========
See accompanying notes to portfolios of investments and notes to financial statements.
</TABLE>
TOUCHSTONE FAMILY OF FUNDS
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<PAGE>
NOTES TO PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000
================================================================================
A. REPURCHASE AGREEMENTS
Repurchase agreements are fully collateralized by U.S. Government obligations.
B. RESTRICTED SECURITIES
These restricted securities have no readily available market quotation. Their
fair value is determined in good faith in accordance with consistently applied
procedures approved by and under the general supervision of the Board of
Trustees.
C. VARIABLE RATE DEMAND NOTES
A variable rate demand note is a security payable on demand at par whose terms
provide for the periodic readjustment of its interest rate on set dates and
which, at any time, can reasonably be expected to have a market value that
approximates its par value. The interest rates shown represent the effective
rates as of the report date. The dates shown represent the scheduled maturity
dates.
D. ADJUSTABLE RATE U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
Adjustable rate U.S. Government agency mortgage-backed securities are
mortgage-related securities created from pools of adjustable rate mortgages
which are issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities. Such adjustable rate mortgage
securities have interest rates that reset at periodic intervals based on a
specified interest rate index. The interest rates shown represent the effective
rates as of the report date. The dates shown represent the scheduled maturity
date.
PORTFOLIO ABBREVIATIONS:
BANS - Bond Anticipation Notes
EDR - Economic Development Revenue
FFCB - Federal Farm Credit Bank
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority
IDA - Industrial Development Authority
IDR - Industrial Development Revenue
SLMA - Student Loan Marketing Association
TVA - Tennessee Valley Authority
TOUCHSTONE FAMILY OF FUNDS
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<PAGE>
REPORT OF INDEPENDENT AUDITORS
================================================================================
To the Board of Trustees and Shareholders of the Touchstone Investment Trust
We have audited the accompanying statements of assets and liabilities, including
the schedules of portfolio investments, of Touchstone Investment Trust
(comprised of Short Term Government Income Fund, Institutional Government Income
Fund, Money Market Fund, Bond Fund, High Yield Fund and Intermediate Term
Government Income Fund) (the Funds) as of September 30, 2000, and for the Short
Term Government Income Fund, Institutional Government Income Fund, Money Market
Fund and Intermediate Term Government Income Fund the related statements of
operations, the statements of changes in net assets, and the financial
highlights for the year then ended, and for the Bond Fund the related statements
of operations, the statements of changes in net assets, and the financial
highlights for the year ended December 31, 1999 and the period from January 1,
2000 to September 30, 2000, and for the High Yield Fund the related statements
of operations, the statements of changes in net assets, and the financial
highlights for the period from May 1, 2000 to September 30, 2000. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
statements of changes in net assets presented herein for the Short Term
Government Income Fund, Institutional Government Income Fund, Money Market Fund
and Intermediate Term Government Income Fund for the year ended September 30,
1999 and the financial highlights presented herein for each of the four years
ended September 30, 1999 for the Short Term Government Fund, Institutional
Government Income Fund, and Intermediate Government Income Fund and the
financial highlights presented herein for the Money Market Fund for the two
years ended September 30, 1999, the one-month period ended September 30, 1997
and the year ended August 31, 1997 were audited by other auditors whose report
dated October 27, 1999 expressed an unqualified opinion. The statement of
changes in net assets presented herein for the Bond Fund for the year ended
December 31, 1998 and the financial highlights presented for each of the four
years in the period ended December 31, 1998 were audited by other auditors whose
report dated February 18, 1999 expressed an unqualified opinion. The financial
highlights for the Money Market Fund for the period ended August 31, 1996 were
audited by other auditors whose report dated October 18, 1996, expressed an
unqualified opinion.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 2000, by correspondence
with the custodian and others. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
TOUCHSTONE FAMILY OF FUNDS
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<PAGE>
REPORT OF INDEPENDENT AUDITORS
(CONTINUED)
================================================================================
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios comprising Touchstone Investment Trust at September
30, 2000, and for the Short Term Government Income Fund, Institutional
Government Income Fund, Money Market Fund and Intermediate Term Government
Income Fund the results of their operations, the changes in their net assets,
and the financial highlights for the year then ended, and for the Bond Fund the
results of its operations, the changes in its net assets, and its financial
highlights for the year ended December 31, 1999 and the period from January 1,
2000 to September 30, 2000, and for the High Yield Fund the results of its
operations, the changes in its net assets, and its financial highlights for the
period from May 1, 2000 to September 30, 2000, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Cincinnati, Ohio
November 17, 2000
TOUCHSTONE FAMILY OF FUNDS
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<PAGE>
[GRAPHIC OMITTED]
<PAGE>
================================================================================
TOUCHSTONE FAMILY OF FUNDS
DISTRIBUTOR
Touchstone Securities, Inc.
221 East Fourth Street
Cincinnati, Ohio 45202-4094
800.638.8194
www.touchstonefunds.com
INVESTMENT ADVISOR
Touchstone Advisors, Inc.
221 East Fourth Street
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
Integrated Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
SHAREHOLDER SERVICE
800.543.0407
------------------
PRESORTED
FIRST CLASS
U.S. POSTAGE PAID
SOUTH SUBURBAN, IL
PERMIT #3600
------------------
[GRAPHIC OMITTED] TOUCHSTONE
--------------------------------------------------------------------------------
Family of Funds
