Semi-Annual Report
June 30, 2000
Emerging Growth Fund
International Equity Fund
Value Plus Fund
Bond Fund
[PHOTO OF COLUMNED STRUCTURE]
The Mark of ExcellenceSM
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Income o Total Return
<PAGE>
Letter from the President
Dear Fellow Shareholders:
Touchstone is pleased to present this semi-annual report for the six months
ended June 30, 2000. This report provides financial data and performance
information for the Emerging Growth Fund, International Equity Fund, Value Plus
Fund and Bond Fund.
At Touchstone, we believe you deserve nothing less than excellence in the
financial products and services you select, as well as in the results you enjoy.
Our goal has always been to provide our customers with a wide variety of
products and services. Touchstone's expanded offering now includes U.S. and
international equity funds, taxable and tax-free bond funds and money market
funds.
The stock market experienced a wild ride during the second quarter of 2000. A
sharp April correction took the S&P 500 down over 11% from the March record
high. The tech-heavy NASDAQ Composite fell a dramatic 36% from its peak before
some relief came in late May. For the quarter, the S&P 500 lost 2.7% and the
NASDAQ Composite declined 13.3%. The bond market, while also volatile, was
modestly higher in the quarter as the Lehman Aggregate Bond Index rose 1.7%.
The spring stock market correction served as a healthy consolidation of the huge
gains in technology stocks over the previous six months. The pullback dampened
speculative enthusiasm and should be beneficial in the long run.
The correction and subsequent rebound also reflect investors' adjustment to the
changing economic outlook. Strong first quarter growth raised fears that the
Federal Reserve would have to get tougher to slow the economy, a negative for
stock and bond valuations and profit potential. Indeed, the Fed raised the fed
funds rate by 50 basis points at its May monetary policy meeting. Now, with
signs of a slowing economy, investors are hopeful that the Fed may be out of the
picture as the economy eases to a soft landing. This outlook has helped stocks
and fixed income securities continue to rally into July.
We believe the Fed is close to ending its credit tightening campaign. However,
the Fed will remain diligent in its desire to keep inflation risks contained.
Meanwhile, investors can shift their focus to earnings. Overall, we expect
earnings growth to ease along with the economy but remain at a healthy pace.
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 McGruder
Jill McGruder
President
Touchstone Family of Funds
[JILL MCGRUDER PHOTO HERE]
TOUCHSTONE FAMILY OF FUNDS
1
<PAGE>
EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
June 30, 2000 (unaudited)
Value
Shares (Note 1)
Common Stocks - 92.6%
Advertising - 1.0%
2,700 Advo* $ 113,400
1,200 True North Communications Inc. 52,800
------------------------------------------------------------
166,200
------------------------------------------------------------
Automotive - 0.2%
4,100 Exide 32,800
------------------------------------------------------------
Banking - 2.7%
800 Commerce Bancorp NJ 36,800
4,900 Dime Bancorp 77,175
17,500 East West Bancorp Inc. 251,563
5,600 Golden State Bancorp* 100,800
------------------------------------------------------------
466,338
------------------------------------------------------------
Beverages, Food & Tobacco - 0.1%
1,700 Ralcorp Holdings* 20,825
------------------------------------------------------------
Building Materials - 0.9%
10,200 Dal-Tile International* 84,150
1,900 Martin Marietta Materials 76,831
------------------------------------------------------------
160,981
------------------------------------------------------------
Commercial Services - 15.5%
5,700 Administaff* 361,950
3,800 A.C. Nielson* 83,600
6,000 Career Education* 291,000
10,000 DeVry* 264,375
4,000 Diamond Technology Partners* 351,000
9,000 Forrester Research* 655,313
11,000 Media Metrix* 279,813
15,000 Stericycle* 360,000
2,200 Wallace Computer Services 21,725
------------------------------------------------------------
2,668,776
------------------------------------------------------------
Communications - 9.3%
7,000 Advanced Fibre Communications* 317,188
3,000 Belden 76,875
900 Cable Design Technologies* 30,150
5,900 Carrier Access* 311,963
800 Commscope* 32,800
4,200 Ditech Communications* 397,163
3,300 Powerwave Technologies* 145,200
5,000 Tut Systems* 286,875
------------------------------------------------------------
1,598,214
------------------------------------------------------------
Computer Software & Processing - 5.3%
4,900 Natural MicroSystems* 550,944
13,000 Scientific Learning* 287,625
7,900 Ziff-Davis (ZDNet)* 71,100
------------------------------------------------------------
909,669
------------------------------------------------------------
Computers & Information - 0.5%
4,000 Gerber Scientific 46,000
5,800 Unova* 42,413
------------------------------------------------------------
88,413
------------------------------------------------------------
Electrical Equipment - 0.3%
6,600 Magnetek* 52,800
------------------------------------------------------------
Value
Shares (Note 1)
Electronics - 3.3%
1,550 Benchmark Electronics Inc.* $ 56,672
1,500 PerkinElmer 99,188
8,500 SmartForce, ADR* 408,000
------------------------------------------------------------
563,860
------------------------------------------------------------
Financial Services - 4.0%
19,100 Bedford Property Investors 354,544
13,000 Mack-Cali Realty Corp. 333,938
------------------------------------------------------------
688,482
------------------------------------------------------------
Food Retailers - 0.1%
2,500 Pantry (The)* 23,125
------------------------------------------------------------
Forest Products & Paper - 0.3%
3,038 Albany International* 44,051
------------------------------------------------------------
Health Care Providers - 7.4%
30,600 Hooper Holmes 244,800
6,870 Laboratory Corporation
of America Holdings* 529,849
6,900 Syncor International* 496,800
------------------------------------------------------------
1,271,449
------------------------------------------------------------
Heavy Construction - 0.3%
6,200 Foster Wheeler 53,475
------------------------------------------------------------
Heavy Machinery - 0.3%
1,900 Cuno Incorporated* 43,938
------------------------------------------------------------
Home Construction, Furnishings & Appliances - 0.5%
1,800 Herman Miller 46,575
2,300 LA-Z-Boy Chair 32,200
------------------------------------------------------------
78,775
------------------------------------------------------------
Household Products - 1.0%
2,800 Snap-on 74,550
2,200 Tupperware 48,400
2,400 Rayovac Corp* 53,700
------------------------------------------------------------
176,650
------------------------------------------------------------
Industrial - Diversified - 0.8%
1,000 Carlisle Companies 45,000
1,900 Roper Industries 48,688
3,800 Scitex* 42,038
------------------------------------------------------------
135,726
------------------------------------------------------------
Insurance - 0.9%
4,800 HCC Insurance Holdings 90,600
2,200 HSB Group 68,475
------------------------------------------------------------
159,075
------------------------------------------------------------
Media - Broadcasting & Publishing - 8.2%
8,000 American Tower Systems, Class A* 333,500
2,200 Central Newspapers, Class A 139,150
2,000 Hollinger International 27,250
13,500 Information Holdings* 499,500
1,700 Penton Media Inc. 59,500
31,100 Sinclair Broadcast Group, Class A* 343,100
------------------------------------------------------------
1,402,000
------------------------------------------------------------
Medical Supplies - 9.2%
15,600 Advanced Neuromodulation
Systems* 261,300
15,000 Aradigm* 262,500
3,600 Arthocare* 191,700
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
2
<PAGE>
EMERGING GROWTH FUND
Schedule of Investments continued
Value
Shares (Note 1)
Common Stocks - Continued
Medical Supplies - Continued
8,900 Biosite Diagnostics* $ 428,869
9,600 Varian* 442,800
------------------------------------------------------------
1,587,169
------------------------------------------------------------
Metals - 0.5%
2,100 Harsco 53,550
3,000 Ryerson Tull 31,125
------------------------------------------------------------
84,675
------------------------------------------------------------
Oil & Gas - 13.3%
2,500 Equitable Resources 120,625
13,800 Hanover Compressor* 524,400
7,100 Helmerich & Payne 265,363
1,600 Nabors Industries* 66,500
6,600 Newpark Resources* 62,288
12,000 R&B Falcon* 282,750
24,200 Santa Fe Snyder* 275,275
3,600 Stolt Comex Seaway* 50,850
22,400 Superior Energy Services* 232,400
17,065 Varco International Inc.* 396,761
------------------------------------------------------------
2,277,212
------------------------------------------------------------
Pharmaceuticals - 4.9%
6,200 Albany Molecular Research* 337,513
5,900 ILEX Oncology* 207,975
6,700 Titan Pharmaceuticals* 288,100
------------------------------------------------------------
833,588
------------------------------------------------------------
Real Estate - 0.4%
3,100 Prentiss Properties Trust, REIT 74,400
------------------------------------------------------------
Value
Shares (Note 1)
Restaurants - 0.3%
2,200 CEC Entertainment* $ 56,366
------------------------------------------------------------
Retailers - 0.4%
2,300 BJ's Wholesale Club* 75,900
------------------------------------------------------------
Textiles, Clothing & Fabrics - 0.4%
5,200 Unifi* 64,350
------------------------------------------------------------
Transportation - 0.3%
5,800 Fritz Companies* 59,813
------------------------------------------------------------
Total Common Stocks
(Cost $11,201,155) $15,919,095
------------------------------------------------------------
Total Investments At Market Value - 92.6%
(Cost $11,201,151) (a) $15,919,095
Other assets in excess
of liabilities - 7.4% 1,265,816
------------------------------------------------------------
Net Assets - 100.0% $17,184,911
------------------------------------------------------------
Notes to the Schedule of Investments:
* Non-income producing security.
(a) The aggregate identified cost for federal income tax purposes is
$11,201,151, resulting in gross unrealized appreciation and
depreciation of $5,787,860 and $1,069,916, respectively, and net
unrealized appreciation of $4,717,944.
ADR - American Depository Receipt
REIT - Real Estate Investment Trust
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
3
<PAGE>
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
June 30, 2000 (unaudited)
Value
Shares (Note 1)
Common Stocks - 97.9%
Australia - 2.1%
4,497 Broken Hill Proprietary $ 53,121
17,600 Cable & Wireless Optus* 52,422
5,727 Lend Lease 72,987
3,986 News Corporation Limited (The) 54,833
9,702 Westpac Banking 69,923
-----------------------------------------------------------
303,286
-----------------------------------------------------------
Finland - 3.5%
6,074 Nokia Oyj 310,630
2,775 Sonera Group 126,782
3,066 UPM-Kymmene 76,272
-----------------------------------------------------------
513,684
-----------------------------------------------------------
France - 17.1%
4,129 Alcatel 271,408
4 Aventis 293
1,103 AXA 174,133
3,636 Banque Nationale de Paris 350,676
517 Canal Plus 87,061
405 Cap Gemini SA-New* 71,494
1,228 Groupe Danone 163,318
986 Pinault-Printemps-Redoute 219,530
2,604 Renault 118,596
4,910 STMicroelectronics* 310,061
688 Suez Lyonnaise Des Eaux-Dumex 120,794
2,825 Total Fina, B 434,095
2,280 Vivendi 201,680
-----------------------------------------------------------
2,523,139
-----------------------------------------------------------
Germany - 9.2%
1,839 Bayerische Vereinsbank 119,826
5,507 Deutsche Bank 455,250
958 Deutsche Telekom 54,630
1,829 E.On 89,949
842 Muenchener Rueckversicherungs-
Gasellschaft 267,871
2,461 Preussag 79,588
678 SAP 100,161
1,266 Siemens 190,781
-----------------------------------------------------------
1,358,056
-----------------------------------------------------------
Great Britain - 13.3%
18,425 BP Amoco 176,810
12,701 British Telecommunications 164,175
6,458 Glaxo Wellcome 188,361
17,357 Legal & General Group 40,590
11,051 Lloyds TSB Group 104,375
13,233 Marconi 172,253
4,450 Peninsular and Oriental
Steam Navigation 38,123
4,568 Reuters Group 77,922
26,982 Shell Transport & Trading 225,232
13,877 SmithKline Beecham 181,687
1 Unilever 6
128,611 Vodafone Group 519,757
4,769 WPP Group 69,657
-----------------------------------------------------------
1,958,948
-----------------------------------------------------------
Value
Shares (Note 1)
Hong Kong - 0.0%
21 Sunevision Holdings* $ 17
-----------------------------------------------------------
Italy - 4.5%
7,459 Assicurazione Generali 256,567
13,439 Concessioni e Costruzioni
Autostrade 100,039
10,159 Istituto Bancario
San Paolo di Torino 180,503
34,922 Tecnost* 132,651
-----------------------------------------------------------
669,760
-----------------------------------------------------------
Japan - 28.5%
4,000 Ajinomoto 51,292
6,000 Bank of Tokyo 72,468
1,000 Bridgestone 21,167
2,000 Canon 99,566
3,000 Chugai Pharmaceutical 56,713
3,000 Dai Nippon Printing 52,866
4,000 Daikin Industries 92,966
3,000 Daiwa Securities 39,600
17 DDI 163,492
3,000 Denso 72,978
500 Fanuc 50,867
5,000 Fuji Bank Limited (The) 37,997
1,500 Fuji Photo Film 61,380
4 Fuji Television Network 62,606
1,000 Fujisawa Pharmaceutical 40,449
3,000 Fujitsu 103,809
5,000 Fukuyama Transporting 31,350
2,500 Hitachi Credit 67,650
3,000 Hitachi 43,277
2,000 House Foods 30,926
1,400 ITO Yokado 84,216
5,000 Kaneka 55,110
1,000 Kao 30,549
4,000 Kirin Brewery 49,972
18,000 Kubota 65,340
700 Kyocera 118,735
3,000 Marui 57,420
241 Matsushita Communication
Industrial 28,593
3,000 Matsushita Electric 77,786
5,000 Mitsubishi 45,210
6,900 Mitsui Chemicals 48,208
2,000 NEC 62,795
4,000 Nikko Securities Co. (The) 39,600
200 Nintendo 35,074
3,000 Nippon Meat Packers 43,843
9 Nippon Telegraph & Telephone 119,649
1,500 Nissin Food Products 38,186
6 NTT Data 61,663
5 NTT Mobile Communication
Network 135,301
2,000 Olympus Optical 35,848
2,000 Omron 54,309
700 Orix 103,291
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
4
<PAGE>
INTERNATIONAL EQUITY FUND
Schedule of Investments continued
Value
Shares (Note 1)
Common Stocks - Continued
Japan - Continued
1,000 Pioneer Corp $ 38,940
200 Rohm Company 58,457
8,000 Sakura Bank 55,289
3,000 Sanwa Bank (The) 23,930
1,000 Secom 73,072
400 Seven Eleven Japan- UNSP ADR 33,534
2,000 Shin-Etsu Chemical 101,452
300 SMC 56,430
100 Softbank 13,577
200 Softbank, New* 29,794
400 Sony 37,337
6,000 Sumitomo Bank 73,543
10,000 Sumitomo Chemical 60,155
3,000 Sumitomo Electric Industries 51,424
7,000 Sumitomo Trust & Banking 49,830
1,000 Taisho Pharmaceutical 35,829
2,000 Takara Shuzo Company Ltd. 49,877
1,000 Takeda Chemical Industries 65,623
500 TDK 71,846
1,000 Terumo 33,849
2,000 Tokio Marine & Fire Insurance 23,081
2,000 Tokyo Broadcasting System 86,366
900 Tokyo Electric Power 21,936
6,000 Toshiba 67,716
2,000 Tostem 32,623
3,428 Toyota Motor 156,112
600 WORLD 25,797
3,000 Yakult Honsha 39,855
1,000 Yamanouchi Pharmaceutical 54,592
1,000 Yamato Transport 24,844
-----------------------------------------------------------------
4,190,827
-----------------------------------------------------------------
Mexico - 0.0%
28 Cemex SA de CV,ADR 653
-----------------------------------------------------------------
Netherlands - 8.2%
1,548 Akzo Nobel 65,910
3,118 Fortis 90,961
3,844 ING Groep 260,398
3,714 Koninklijke Ahold 109,556
1,688 Koninklijke KPN 75,669
885 Koninklijke Numico 42,087
844 KPN* 0
7,317 Philips Electronics 345,845
207 Unilever, CVA 9,517
1,966 United Pan Europe
Communications* 51,522
1,596 Verenigde Nederlandse 82,614
5,406 World Online International* 65,173
-----------------------------------------------------------------
1,199,252
-----------------------------------------------------------------
Value
Shares (Note 1)
Portugal - 0.5%
6,972 Portugal Telecom $ 78,449
-----------------------------------------------------------------
Spain - 2.7%
13,116 Banco Santander Central Hispano 138,671
12,202 Telefonica* 262,685
-----------------------------------------------------------------
401,356
-----------------------------------------------------------------
Sweden - 2.4%
11,581 Ericsson LM-B 229,777
4,662 Skandia Forsakrings 123,507
-----------------------------------------------------------------
353,284
-----------------------------------------------------------------
Switzerland - 5.6%
930 ABB 111,510
14 Givaudan* 4,269
46 Nestle 92,232
87 Novartis 138,055
15 Roche Holding 146,279
1,352 Union Bank of Switzerland 198,433
264 Zurich Allied 130,671
-----------------------------------------------------------------
821,449
-----------------------------------------------------------------
Taiwan - 0.3%
1,280 Taiwan Semiconductor
Manufacturing, ADR* 49,600
-----------------------------------------------------------------
Total Common Stocks
(Cost $13,401,502) $14,421,760
-----------------------------------------------------------------
Preferred Stocks - 0.8%
Germany - 0.8%
600 SAP,Preferred $ 111,084
-----------------------------------------------------------------
Total Preferred Stocks
(Cost $89,713) $ 111,084
-----------------------------------------------------------------
Warrants - 0.0%
France - 0.0%
390 Banque Nationale
de Paris, Warrants* $ 2,015
-----------------------------------------------------------------
Total Warrants
(Cost $0) $ 2,015
-----------------------------------------------------------------
Total Investments At Market Value - 98.7%
(Cost $13,491,213) (a) $14,534,859
Other assets in excess
of liabilities - 1.3% 194,069
-----------------------------------------------------------------
Net Assets - 100.0% $14,728,928
-----------------------------------------------------------------
Notes to the Schedule of Investments:
* Non-income producing security.
(a) The aggregate identified cost for federal income tax purposes is
$13,491,213, resulting in gross unrealized appreciation and
depreciation of $1,992,528 and $948,882, respectively, and net
unrealized appreciation of $1,043,646
ADR - American Depository Receipt
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
5
<PAGE>
INTERNATIONAL EQUITY FUND
Schedule of Investments continued
Industry sector diversification of the International Equity
Fund's investments as a percentage of net assets as of
June 30, 2000 was as follows:
Industry Percentage
Sector Net Assets
Banking 14.9%
Communications 9.4%
Telephone Systems 8.9%
Electronics 6.9%
Pharmaceuticals 6.2%
Commercial Services 5.8%
Electrical Equipment 5.7%
Oil & Gas 5.7%
Insurance 4.9%
Beverages, Food & Tobacco 3.8%
Financial Services 3.1%
Media - Broadcasting & Publishing 3.0%
Chemicals 2.6%
Retailers 2.4%
Automotive 2.4%
Multiple Utilities 2.3%
Heavy Machinery 2.2%
Computer Software & Processing 1.9%
Transportation 1.9%
Food Retailers 1.3%
Entertainment & Leisure 0.9%
Forest Products & Paper 0.5%
Advertising 0.5%
Mining 0.4%
Industrial - Diversified 0.4%
Medical Supplies 0.2%
Metals 0.2%
Textiles, Clothing & Fabrics 0.2%
Electric Utilities 0.1%
Building Materials 0.0%
Other assets in excess of liabilities 1.3%
------------------------------------------------------------------
100.00%
------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
6
<PAGE>
VALUE PLUS FUND
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
June 30, 2000 (unaudited)
Value
Shares (Note 1)
Common Stocks - 88.3%
Advertising - 1.1%
12,100 Interpublic Group
of Companies (The) $ 520,300
-------------------------------------------------------------
Aerospace & Defense - 1.3%
17,800 Honeywell International 599,638
-------------------------------------------------------------
Automotive - 1.3%
13,000 Magna International, Class A 614,250
-------------------------------------------------------------
Banking - 7.9%
11,500 Bank of America 494,500
8,900 Bank One 236,406
16,650 Chase Manhattan 766,941
18,350 Citigroup 1,105,588
23,900 North Fork Bancorporation 361,488
34,500 US Bancorp 664,125
-------------------------------------------------------------
3,629,048
-------------------------------------------------------------
Beverages, Food & Tobacco - 5.2%
15,800 McCormick & Company 513,500
37,100 Pepsico 1,648,631
11,000 Ralston-Ralston Purina Group 219,313
-------------------------------------------------------------
2,381,444
-------------------------------------------------------------
Building Materials - 1.3%
32,900 Masco 594,256
-------------------------------------------------------------
Chemicals - 1.6%
16,301 Du Pont (E.I.) De Nemours 713,169
-------------------------------------------------------------
Computer Software & Processing - 5.2%
29,500 Ceridian * 709,844
24,800 Computer Associates
International 1,269,450
14,800 Compuware * 153,550
5,400 First Data 267,975
-------------------------------------------------------------
2,400,819
-------------------------------------------------------------
Computers & Information - 9.7%
19,400 Compaq Computer 495,913
18,500 Gateway* 1,049,875
6,400 Hewlett-Packard 799,200
6,700 International Business Machines 734,069
12,100 Lexmark International
Group, Class A* 813,725
6,200 Sun Microsystems* 563,813
-------------------------------------------------------------
4,456,595
-------------------------------------------------------------
Electric Utilities - 2.2%
17,000 Alliant Energy 442,000
26,100 CMS Energy 577,463
-------------------------------------------------------------
1,019,463
-------------------------------------------------------------
Electrical Equipment - 2.5%
2,440 Agilent Technologies* 179,950
9,400 Emerson Electric 567,525
5,800 Nortel Networks Corp. 395,850
-------------------------------------------------------------
1,143,325
-------------------------------------------------------------
Electronics - 4.2%
3,200 Applied Materials* 290,000
8,200 Intel 1,096,238
6,000 Micron Technology* 528,375
-------------------------------------------------------------
1,914,613
-------------------------------------------------------------
Value
Shares (Note 1)
Financial Services - 6.6%
22,000 Federal National Mortgage
Association $ 1,148,125
3,800 Morgan Stanley Dean Witter 316,350
42,000 SLM Holding 1,572,375
-------------------------------------------------------------
3,036,850
-------------------------------------------------------------
Food Retailers - 1.6%
21,823 Albertson's 725,615
-------------------------------------------------------------
Forest Products & Paper - 1.2%
21,800 Mead 550,450
-------------------------------------------------------------
Health Care Providers - 0.1%
7,700 Manor Care* 53,900
-------------------------------------------------------------
Heavy Machinery - 0.8%
9,400 Ingersoll-Rand 378,350
-------------------------------------------------------------
Home Construction, Furnishings & Appliances - 0.7%
6,300 General Electric 333,900
-------------------------------------------------------------
Household Products - 2.6%
20,400 Kimberly-Clark 1,170,450
-------------------------------------------------------------
Insurance - 0.8%
10,900 AXA Financial 370,600
-------------------------------------------------------------
Medical Supplies - 1.7%
11,000 Baxter International 773,438
-------------------------------------------------------------
Oil & Gas - 9.6%
40,200 Conoco, Class A 884,400
14,497 Exxon Mobil 1,138,015
12,600 Schlumberger 940,275
17,300 Tosco 489,806
8,829 Transocean Sedco Forex 471,800
11,000 Williams Companies (The) 458,563
-------------------------------------------------------------
4,382,859
-------------------------------------------------------------
Pharmaceuticals - 7.8%
23,900 Abbott Laboratories 1,065,044
7,600 Bristol-Myers Squibb 442,700
11,900 Cardinal Health 880,600
8,200 Merck 628,325
10,900 Schering-Plough 550,450
-------------------------------------------------------------
3,567,119
-------------------------------------------------------------
Retailers - 0.6%
8,500 Federated Department Stores* 286,875
-------------------------------------------------------------
Telephone Systems - 10.3%
9,600 Alltel 594,600
26,100 Bell Atlantic 1,326,206
12,900 Broadwing* 334,594
38,032 SBC Communications 1,644,877
16,000 Sprint 816,000
-------------------------------------------------------------
4,716,277
-------------------------------------------------------------
Transportation - 0.4%
7,400 US Freightways 181,763
-------------------------------------------------------------
Total Common Stocks
(Cost $40,662,902) $40,515,366
-------------------------------------------------------------
Convertible Preferred Stocks - 0.6%
Media - Broadcasting & Publishing - 0.6%
7,400 MediaOne Group,
Convertible Preferred $ 299,700
-------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
7
<PAGE>
VALUE PLUS FUND
Schedule of Investments continued
Value
Shares (Note 1)
Convertible Preferred Stocks - Continued
Total Convertible Preferred Stocks
(Cost $399,254) $ 299,700
--------------------------------------------------------------
Total Investments At Market Value - 88.9%
(Cost $41,062,156) (a) $40,815,066
Other assets in excess
of liabilities - 11.1% 5,076,862
--------------------------------------------------------------
Net Assets - 100.0% $45,891,928
--------------------------------------------------------------
Notes to the Schedule of Investments:
* Non-income producing security.
(a) The aggregate identified cost for federal income tax purposes is
$41,062,156, resulting in gross unrealized appreciation and
depreciation of $4,872,474 and $5,119,564, respectively, and net
unrealized depreciation of $247,090.
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
8
<PAGE>
BOND FUND
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
June 30, 2000 (unaudited)
Principal Interest Maturity Value
Amount Rate Date (Note 1)
Agency for International Development Bonds - 2.8%
Central America - 1.7%
$ 115,000 Central America
International
Development,
Series F
(restricted) 10.00% 12/01/11 $ 127,802
115,000 Central America
International
Development,
Series G
(restricted) 10.00% 12/01/11 127,802
115,000 Central America
International
Development,
Series H
(restricted) 10.00% 12/01/11 127,802
--------------------------------------------------------------
383,406
--------------------------------------------------------------
Honduras - 1.1%
100,000 Republic of Honduras
International
Development,
Series C
(restricted) 13.00% 06/01/06 116,429
100,000 Republic of Honduras
International
Development,
Series D
(restricted) 13.00% 06/01/11 133,590
--------------------------------------------------------------
250,019
--------------------------------------------------------------
Total Agency for International Development Bonds
(Cost $666,852) $ 633,425
--------------------------------------------------------------
Asset-Backed Securities - 4.4%
Automotive - 1.2%
$ 41,910 Navistar Financial Corp.
Owner Trust,
Series 1996-A,
Class A2 6.350% 11/15/02 $ 41,855
244,983 World Omni
Auto Lease,
Series 1997-B,
Class A3 6.180% 11/25/03 244,839
--------------------------------------------------------------
286,694
--------------------------------------------------------------
Financial Services - 3.2%
12,158 Chase Manhattan
Grantor Trust,
Series 1996-A,
Class A 5.20% 02/15/02 12,114
750,000 Chemical Credit
Card Master Trust,
Series 1996-2,
Class A 5.98% 09/15/08 710,648
--------------------------------------------------------------
722,762
--------------------------------------------------------------
Total Asset-Backed Securities
(Cost $1,050,806) $ 1,009,456
--------------------------------------------------------------
Principal Interest Maturity Value
Amount Rate Date (Note 1)
Corporate Bonds - 39.7%
Automotive - 1.6%
$ 375,000 Navistar
International,
Series B 7.00% 02/01/03 $ 358,125
-------------------------------------------------------------
Banking - 0.1%
33,807 Mercantile Safe
Deposit
(restricted) 12.125% 01/02/01 33,892
-------------------------------------------------------------
Beverages, Food & Tobacco - 2.9%
700,000 Coca-Cola
Enterprises 5.75% 11/01/08 619,701
35,000 Kraft Inc. 8.50% 02/15/17 35,548
-------------------------------------------------------------
655,249
-------------------------------------------------------------
Chemicals - 3.8% 900,000 Du Pont (E.I.)
De Nemours 6.875% 10/15/09 875,277
-------------------------------------------------------------
Communications - 2.2%
500,000 Harris
Corporation 6.65% 08/01/06 493,077
-------------------------------------------------------------
Electric Utilities - 4.2%
500,000 Consumers
Energy,
Series B 6.50% 06/15/18 466,062
500,000 Virginia Electric
Power 7.625% 07/01/07 492,586
-------------------------------------------------------------
958,648
-------------------------------------------------------------
Electronics - 4.1%
1,000,000 Raytheon 5.70% 11/01/03 941,496
-------------------------------------------------------------
Financial Services - 3.7%
225,000 Credit Suisse
First Boston-
London, 144A,
FLIRB 7.90% 05/01/07 208,485
750,000 Safeco Capital 8.072% 07/15/37 634,559
-------------------------------------------------------------
843,044
-------------------------------------------------------------
Forest Products & Paper - 1.1%
250,000 Georgia-Pacific 9.50% 05/15/22 250,408
-------------------------------------------------------------
Health Care Providers - 2.9%
650,000 Columbia/HCA
Health 6.73% 07/15/45 600,751
Kaiser Found
Hospital 9.55% 07/15/05 72,136
-------------------------------------------------------------
672,887
-------------------------------------------------------------
Heavy Machinery - 0.7%
150,000 Deer & Co. 8.95% 06/15/19 163,969
-------------------------------------------------------------
Household Products - 3.0%
750,000 Owens-Illinois 7.15% 05/15/05 679,573
-------------------------------------------------------------
Insurance - 0.2%
50,000 Berkley (Wr)
Corporation 9.875% 05/15/08 50,732
-------------------------------------------------------------
Media - Broadcasting & Publishing - 1.1%
250,000 News America
Holdings 10.125% 10/15/12 261,945
-------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
9
<PAGE>
BOND FUND
Schedule of Investments continued
Principal Interest Maturity Value
Amount Rate Date (Note 1)
Corporate Bonds - Continued
Telephone Systems - 3.8%
$ 500,000 AT&T Capital
Corp 5.625% 03/15/04 $ 470,441
400,000 MCI WorldCom 8.875% 01/15/06 412,172
-------------------------------------------------------------
882,613
-------------------------------------------------------------
Transportation - 4.3%
250,000 Burlington
Northern
Santa Fe 7.875% 04/15/07 252,934
750,000 Norfolk
Southern 7.35% 05/15/07 728,423
-------------------------------------------------------------
981,357
-------------------------------------------------------------
Total Corporate Bonds
(Cost $9,653,313) $ 9,102,292
-------------------------------------------------------------
Mortgage-Backed Securities - 26.2%
$ 401,141 Federal Home
Loan Mortgage
Corporation 6.00% 08/01/10 $ 384,876
33,565 Federal Home
Loan Mortgage
Corporation 6.00% 10/01/10 32,204
114,246 Federal Home
Loan Mortgage
Corporation 6.00% 05/01/09 109,741
1,144,037 Federal Home
Loan Mortgage
Association 6.50% 07/01/28 1,078,505
946,305 Federal Home
Loan Mortgage
Association 7.00% 08/01/29 913,559
947,883 Federal Home
Loan Mortgage
Corporation 6.00% 02/01/29 863,462
865,986 Federal Home
Loan Mortgage
Association 7.00% 03/01/12 849,667
236,432 Government
National
Mortgage
Association 6.50% 09/15/28 224,367
263,311 Government
National
Mortgage
Association 6.50% 01/15/24 251,337
761,764 Government
National
Mortgage
Association 7.00% 05/15/28 740,879
328,907 Government
National
Mortgage
Association 7.00% 06/15/09 326,675
Principal Interest Maturity Value
Amount Rate Date (Note 1)
Mortgage-Backed Securities - Continued
$ 68,620 Government
National
Mortgage
Association 7.50% 12/15/27 $ 68,178
-------------------------------------------------------------
159,192 Government
National
Mortgage
Association 9.00% 08/15/19 165,185
-------------------------------------------------------------
Total Mortgage-Backed Securities
(Cost $6,285,572) $ 6,008,635
-------------------------------------------------------------
Sovereign Government Obligations - 4.4%
Canada - 4.4%
$1,000,000 Province of
Ontario 7.375% 01/27/03 $ 1,004,375
-------------------------------------------------------------
Total Sovereign Government Obligations
(Cost $1,081,178) $ 1,004,375
-------------------------------------------------------------
U.S. Agency Obligations - 8.5%
$1,000,000 Federal
Home Loan
Mortgage 6.25% 10/15/02 $ 985,658
-------------------------------------------------------------
1,000,000 Federal National
Mortgage
Association 5.75% 04/15/03 968,993
-------------------------------------------------------------
Total U.S. Agency Obligations
(Cost $2,002,976) $ 1,954,651
-------------------------------------------------------------
U.S. Treasury Obligations - 10.1%
$ 930,000 U.S. Treasury
Bond 9.125% 05/15/18 $ 1,213,360
-------------------------------------------------------------
120,000 U.S. Treasury
Bond 6.125% 08/15/29 121,275
-------------------------------------------------------------
1,000,000 U.S. Treasury
Note 5.875% 10/31/01 991,875
-------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $2,287,676) $ 2,326,510
-------------------------------------------------------------
Value
Shares (Note 1)
Preferred Stocks - 1.0%
Electric Utilities - 1.0%
9,600 Appalachian Power, 8.25%
Cumulative $ 226,800
-------------------------------------------------------------
Total Preferred Stocks
(Cost $247,347) $ 226,800
-------------------------------------------------------------
Total Investments At Market Value - 97.1%
(Cost $23,275,721) (a) $22,266,144
Other assets in excess
of liabilities - 2.9% 670,234
-------------------------------------------------------------
Net Assets - 100.0% $22,936,378
-------------------------------------------------------------
Notes to the Schedule of Investments:
(a) The aggregate identified cost for federal income tax purposes is
$23,275,721, resulting in gross unrealized appreciation and
depreciation of $52,405 and $1,061,982, respectively, and net
unrealized depreciation of $1,009,577.
144A - Securities restricted for resale to qualified institutional buyers
with registration rights.
FLIRB - Front-Load Interest Reduction Bonds
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
10
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2000
<TABLE>
<CAPTION>
TOUCHSTONE TOUCHSTONE TOUCHSTONE
EMERGING INTERNATIONAL VALUE TOUCHSTONE
GROWTH EQUITY PLUS BOND
FUND FUND FUND FUND
Assets:
<S> <C> <C> <C> <C>
Investments, at value (Note 1)(a) $15,919,095 $14,534,859 $40,815,066 $22,266,144
Cash 1,249,790 304,676 3,301,252 548,125
Foreign currency (b) -- 152,540 -- --
Receivables for:
Investments sold 50,667 261,208 32,688 --
Fund shares sold -- -- 1,785,125 --
Dividends 11,499 9,117 40,489 --
Foreign tax reclaims -- 16,612 4,535 --
Interest 3,342 1,063 14,785 325,565
Reimbursement receivable from Sponsor (Note 3) 11,510 22,392 28,576 18,413
---------------------------------------------------------------------------------------------------------------------------------
Total assets 17,245,903 15,302,467 46,022,516 23,158,247
---------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for:
Investments purchased -- 497,015 -- --
Distributions -- -- -- 110,186
Payable to Affiliates (Note 3) 11,587 12,085 23,143 10,359
Other accrued expenses 49,405 64,439 107,445 101,324
---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 60,992 573,539 130,588 221,869
---------------------------------------------------------------------------------------------------------------------------------
Net assets (c) $17,184,911 $14,728,928 $45,891,928 $22,936,378
---------------------------------------------------------------------------------------------------------------------------------
Computation of Net Asset Value, Redemption Value and Offering Price per Share:
Net Assets - Class A 12,561,524 8,902,364 43,691,994 22,003,338
Shares outstanding - Class A 614,087 570,377 3,828,458 2,341,459
Net asset value and redemption price per share - Class A 20.46 15.61 11.41 9.40
Offering price per share - Class A (d) 21.71 16.56 12.11 9.87
Net Assets - Class C 4,623,387 5,826,564 2,199,934 933,040
Shares outstanding - Class C 235,981 389,725 196,454 103,660
Net asset value and redemption price per share - Class C 19.59 14.95 11.20 9.00
---------------------------------------------------------------------------------------------------------------------------------
(a) Cost of investments of: $11,201,151 $13,491,213 $41,062,156 $23,275,721
(b) Cost of foreign currency of: $ -- $ 154,523 $ -- $ --
(c) See the Statements of Changes in Net Assets for components of net assets.
(d) The offering price per share is calculated as follows: Net Asset Value Per Share/(1-maximum sales load).
</TABLE>
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
11
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2000
<TABLE>
<CAPTION>
TOUCHSTONE TOUCHSTONE TOUCHSTONE
EMERGING INTERNATIONAL VALUE TOUCHSTONE
GROWTH EQUITY PLUS BOND
FUND FUND FUND FUND
Investment Income
(Note 1):
<S> <C> <C> <C> <C>
Interest $ 35,027 $ 7,127 $ 48,611 $ 694,484
Dividends (a) 35,381 108,365 300,103 21,964
---------------------------------------------------------------------------------------------------------------------------------
Total investment income 70,408 115,492 348,714 716,448
---------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees (Note 3) 63,229 70,219 149,094 55,562
Custody, administration and fund accounting fees 41,500 88,235 57,658 53,064
Sponsor fees (Note 3) 15,807 14,783 39,758 20,204
Transfer agent fees 61,001 57,179 54,715 44,774
Registration fees 9,704 9,484 10,212 10,039
Professional Fees 2,807 2,909 4,357 4,123
Printing Fees 2,131 4,961 9,969 2,284
Distribution fees - Class A 14,372 10,957 48,719 12,662
Distribution fees - Class C 21,551 30,087 3,915 4,803
Trustee fees (Note 3) 488 477 1,332 815
Miscellaneous 863 884 1,775 444
---------------------------------------------------------------------------------------------------------------------------------
Total expenses 233,453 290,175 381,504 208,774
Waiver of Sponsor fee (Note 3) (15,807) (14,783) (39,758) (20,204)
Reimbursement from Sponsor (Note 6) (82,927) (134,564) (80,380) (163,389)
---------------------------------------------------------------------------------------------------------------------------------
Net expenses 134,719 140,828 261,366 25,181
---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (64,311) (25,336) 87,348 691,267
---------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss): Net realized gain (loss) on:
Investments 2,027,074 1,762,909 1,345,563 (161,527)
Foreign currency -- (33,257) -- --
---------------------------------------------------------------------------------------------------------------------------------
2,027,074 1,729,652 1,345,563 (161,527)
---------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 1,183,083 (2,596,040) (3,574,153) (18,753)
Foreign currency -- (2,232) -- --
---------------------------------------------------------------------------------------------------------------------------------
1,183,083 (2,598,272) (3,574,153) (18,753)
---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss): 3,210,157 (868,620) (2,228,590) (180,280)
---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $3,145,846 $ (893,956) $(2,141,242) $ 510,987
---------------------------------------------------------------------------------------------------------------------------------
(a) Net of foreign tax withholding of: $ -- $ 16,731 $ 4,254 $ --
The accompanying notes are an integral part of the financial statements.
</TABLE>
TOUCHSTONE FAMILY OF FUNDS
12
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TOUCHSTONE EMERGING TOUCHSTONE INTERNATIONAL
GROWTH FUND EQUITY FUND
------------------------ --------------------------
FOR THE FOR THE
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED YEAR
JUNE 30, ENDED JUNE 30, ENDED
2000 DECEMBER 31, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) $ (64,311) $ (104,518) $ (25,336) $ (47,964)
Net realized gain (loss ) 2,027,074 2,394,962 1,729,652 2,764,463
Net change in unrealized appreciation
(depreciation) 1,183,083 2,521,564 (2,598,272) 1,712,851
---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 3,145,846 4,812,008 (893,956) 4,429,350
---------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders from:
Net investment income
Class A -- -- -- (16,101)
Class C -- -- -- --
Class Y -- -- -- --
Realized capital gains
Class A -- (1,429,950) -- (690,064)
Class C -- (532,042) -- (511,346)
Class Y -- -- -- --
Distributions in excess of net investment income
Class A -- -- -- (14,483)
Class C -- -- -- --
Class Y -- -- -- --
Return of capital distributions
Class A -- -- -- --
Class C -- -- -- --
Class Y -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions -- (1,961,992) -- (1,231,994)
---------------------------------------------------------------------------------------------------------------------------------
Share Transactions:
Capital Contribution - Class C (Note 7) -- 3,284,020 -- 5,226,105
Capital Contribution - Class Y (Note 7) -- -- -- --
Proceeds from shares sold 15,805,389 1,738,718 11,197,906 1,242,946
Reinvestment of dividends and distributions -- 1,716,110 -- 1,227,418
Cost of shares redeemed (16,474,025) (3,216,309) (11,093,189) (2,251,174)
---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions (668,636) 3,522,539 104,717 5,445,295
---------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 2,477,210 6,372,555 (789,239) 8,642,651
---------------------------------------------------------------------------------------------------------------------------------
Net assets
Beginning of period 14,707,701 8,335,146 15,518,167 6,875,516
---------------------------------------------------------------------------------------------------------------------------------
End of period $ 17,184,911 $14,707,701 $14,728,928 $15,518,167
---------------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Paid-in capital $ 10,233,218 $10,901,854 $10,547,547 $10,442,829
Undistributed (distributions in excess of) net
investment income (64,311) -- 10,253 35,589
Accumulated net realized gain (loss) on investments 2,298,060 270,986 3,130,557 1,400,906
Net unrealized appreciation (depreciation) on investments 4,717,944 3,534,861 1,040,571 3,638,843
---------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 17,184,911 $14,707,701 $14,728,928 $15,518,167
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
13
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
Statements of Changes in Net Assets continued
<TABLE>
<CAPTION>
TOUCHSTONE VALUE TOUCHSTONE
PLUS FUND BOND FUND
------------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED YEAR
JUNE 30, ENDED JUNE 30, ENDED
2000 DECEMBER 31, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) $ 87,348 $ 21,281 $ 691,267 $ 1,197,916
Net realized gain (loss ) 1,345,563 2,709,639 (161,527) (347,955)
Net change in unrealized appreciation
(depreciation) (3,574,153) 1,607,624 (18,753) (1,153,862)
---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (2,141,242) 4,338,544 510,987 (303,901)
---------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders from:
Net investment income
Class A (79,248) (33,255) (409,834) (314,128)
Class C -- -- (30,655) (63,775)
Class Y -- -- (193,100) (832,231)
Realized capital gains
Class A -- (638,617) -- (31)
Class C -- (11,183) -- (7)
Class Y -- -- -- (73)
Distributions in excess of net investment income
Class A -- -- -- (1,716)
Class C -- -- -- (348)
Class Y -- -- -- (4,547)
Return of capital distributions
Class A -- -- -- (33,705)
Class C -- -- -- (8,180)
Class Y -- -- -- (78,615)
---------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (79,248) (683,055) (633,589) (1,337,356)
---------------------------------------------------------------------------------------------------------------------------------
Share Transactions:
Capital Contribution - Class C (Note 7) -- 318,185 -- 1,139,586
Capital Contribution - Class Y (Note 7) -- -- -- 14,150,014
Proceeds from shares sold 35,173,586 1,447,308 34,067,293 1,713,920
Reinvestment of dividends and distributions 40,403 674,160 517,683 1,327,271
Cost of shares redeemed (19,457,572) (806,675) (30,782,135) (2,356,902)
---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions 15,756,417 1,632,978 3,802,841 15,973,889
---------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 13,535,927 5,288,467 3,680,239 14,332,632
---------------------------------------------------------------------------------------------------------------------------------
Net assets
Beginning of period 32,356,001 27,067,534 19,256,139 4,923,507
---------------------------------------------------------------------------------------------------------------------------------
End of period $ 45,891,928 $32,356,001 $ 22,936,378 $19,256,139
---------------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Paid-in capital $ 43,352,024 $27,595,607 $ 24,402,744 $20,599,903
Undistributed (distributions in excess of) net
investment income 8,100 -- 57,678 --
Accumulated net realized gain (loss) on investments 2,778,894 1,433,331 (514,467) (352,940)
Net unrealized appreciation (depreciation) on investments (247,090) 3,327,063 (1,009,577) (990,824)
---------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 45,891,928 $32,356,001 $ 22,936,378 $19,256,139
---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
TOUCHSTONE FAMILY OF FUNDS
14
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
FINANCIAL HIGHLIGHTS
Class A
SELECTED DATA FOR A SHARE OUTSTANDING:
<TABLE>
<CAPTION>
TOUCHSTONE EMERGING GROWTH FUND
-----------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE FOR THE FOR THE FOR THE
ENDED YEAR YEAR YEAR YEAR YEAR
6/30/00 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.96 $ 13.40 $13.85 $11.55 $11.52 $10.11
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) -- (0.09) (0.04) (0.03) 0.01 (0.01)
Net realized and unrealized gain (loss) on investments 3.50 6.18 0.37 3.71 1.20 2.29
---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.50 6.09 0.33 3.68 1.21 2.28
---------------------------------------------------------------------------------------------------------------------------------
Less: dividends and distributions to shareholders from:
Net investment income -- -- -- -- (0.01) (0.03)
Realized capital gains -- (2.53) (0.78) (1.38) (1.17) (0.84)
Return of capital -- -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions -- (2.53) (0.78) (1.38) (1.18) (0.87)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 20.46 $ 16.96 $13.40 $13.85 $11.55 $11.52
---------------------------------------------------------------------------------------------------------------------------------
Total return(a) 20.64% 45.85% 2.57% 32.20% 10.56% 22.56%
Ratios and supplemental data:
Net assets at end of period (000s) $12,562 $10,743 $8,335 $4,949 $2,873 $2,520
Ratios to average net assets:
Net Expenses (b) 1.50%(c) 1.50% 1.50% 1.50% 1.50% 1.50%
Net investment income (loss) (1.12)%(c) (0.66)% (0.41)% (0.30)% (0.12)% (0.05)%
Portfolio Turnover 63% 97% 78% 101% 117% 109%
---------------------------------------------------------------------------------------------------------------------------------
(a)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. (Note 6)
(b)If the waiver and reimbursement had not been in place for the periods listed,
the ratios of expenses to average net assets would have been as follows:
4.06%(c) 3.29% 4.11% 5.94% 6.58% 7.09%
(c)Ratios are annualized.
</TABLE>
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
15
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
Financial Highlights continued
Class A - continued
SELECTED DATA FOR A SHARE OUTSTANDING:
<TABLE>
<CAPTION>
TOUCHSTONE INTERNATIONAL EQUITY FUND
-----------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE FOR THE FOR THE FOR THE
ENDED YEAR YEAR YEAR YEAR YEAR
6/30/00 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.52 $12.89 $11.41 $10.63 $9.58 $ 9.12
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08) -- 0.00(c) 0.02 0.05 0.21
Net realized and unrealized gain (loss) on investments (0.83) 5.06 2.27 1.64 1.06 0.47
---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.91) 5.06 2.27 1.66 1.11 0.68
---------------------------------------------------------------------------------------------------------------------------------
Less: dividends and distributions to shareholders from:
Net investment income -- (0.06) (0.05) (0.02) (0.06) (0.22)
Realized capital gains -- (1.37) (0.74) (0.86) -- --
Return of capital -- -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions -- (1.43) (0.79) (0.88) (0.06) (0.22)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.61 $16.52 $12.89 $11.41 $10.63 $ 9.58
---------------------------------------------------------------------------------------------------------------------------------
Total return (a) (5.51)% 39.50% 19.94% 15.57% 11.61% 5.29%
Ratios and supplemental data:
Net assets at end of period (000s) $8,902 $9,043 $6,876 $4,761 $3,449 $2,617
Ratios to average net assets:
Net Expenses (b) 1.60%(d) 1.60% 1.60% 1.60% 1.60% 1.60%
Net investment income (loss) (0.58)%(d) (0.08)% (0.03)% 0.17% 0.42% 0.11%
Portfolio Turnover 70% 155% 138% 151% 86% 90%
---------------------------------------------------------------------------------------------------------------------------------
(a)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. (Note 6)
(b)If the waiver and reimbursement had not been in place for the periods listed,
the ratios of expenses to average net assets would have been as follows:
6.62%(d) 4.11% 5.18% 7.07% 6.63% 7.30%
(c)Amount rounds to less than $0.01.
(d)Ratios are annualized.
</TABLE>
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
16
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
Financial Highlights continued
Class A - continued
SELECTED DATA FOR A SHARE OUTSTANDING:
<TABLE>
<CAPTION>
TOUCHSTONE VALUE PLUS FUND
--------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE
ENDED YEAR PERIOD
6/30/00 ENDED ENDED (E)
(UNAUDITED) 12/31/99 12/31/98
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.77 $ 10.41 $ 10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.03 0.01 0.02
Net realized and unrealized gain (loss) on investments (0.36) 1.60 0.41
---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.33) 1.61 0.43
---------------------------------------------------------------------------------------------------------------------------------
Less: dividends and distributions to shareholders from:
Net investment income (0.03) (0.01) (0.02)
Realized capital gains -- (0.24) --
Return of capital -- -- 0.00(c)
---------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.03) (0.25) (0.02)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.41 $ 11.77 $ 10.41
---------------------------------------------------------------------------------------------------------------------------------
Total return (a) (2.85)% 15.51% 4.29%
Ratios and supplemental data:
Net assets at end of period (000s) $43,692 $31,808 $27,068
Ratios to average net assets:
Net Expenses (b) 1.30%(d) 1.30% 1.30%(d)
Net investment income (loss) 0.45%(d) 0.08% 0.25%(d)
Portfolio Turnover 53% 60% 34%
---------------------------------------------------------------------------------------------------------------------------------
(a)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. (Note 6)
(b)If the waiver and reimbursement had not been in place for the periods listed,
the ratios of expenses to average net assets would have been as follows:
1.96%(d) 2.02% 2.25%(d)
(c)Amount rounds to less than $0.01.
(d)Ratios are annualized.
(e)The Fund commenced operations on May 1, 1998.
</TABLE>
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
17
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
Financial Highlights continued
Class A - continued
SELECTED DATA FOR A SHARE OUTSTANDING:
<TABLE>
<CAPTION>
TOUCHSTONE BOND FUND
-----------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE FOR THE FOR THE FOR THE
ENDED YEAR YEAR YEAR YEAR YEAR
6/30/00 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.47 $10.39 $10.22 $10.17 $10.61 $ 9.88
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) 0.59 0.55 0.61 0.71 0.56
Net realized and unrealized gain (loss) on investments 0.29 (0.76) 0.30 0.11 (0.43) 1.07
---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.26 (0.17) 0.85 0.72 0.28 1.63
---------------------------------------------------------------------------------------------------------------------------------
Less: dividends and distributions to shareholders from:
Net investment income (0.33) (0.68) (0.57) (0.66) (0.70) (0.86)
Realized capital gains -- -- (0.11) (0.01) (0.02) (0.04)
Return of capital -- (0.07) -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (0.33) (0.75) (0.68) (0.67) (0.72) (0.90)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.40 $ 9.47 $10.39 $10.22 $10.17 $10.61
---------------------------------------------------------------------------------------------------------------------------------
Total return (a) 2.78% (1.68)% 8.56% 7.30% 2.85% 16.95%
Ratios and supplemental data:
Net assets at end of period (000s) $22,003 $4,310 $4,924 $1,685 $ 821 $ 523
Ratios to average net assets:
Net Expenses (b) 0.90%(c) 0.90% 0.90% 0.90% 0.90% 0.90%
Net investment income (loss) 0.00%(c) 5.92% 5.68% 6.08% 6.01% 6.21%
Portfolio Turnover 13% 57% 170% 88% 64% 78%
---------------------------------------------------------------------------------------------------------------------------------
(a)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. (Note 6)
(b)If the waiver and reimbursement had not been in place for the periods listed,
the ratios of expenses to average net assets would have been as follows:
2.98%(c) 4.11% 4.13% 7.13% 13.61% 29.29%
(c)Ratios are annualized.
</TABLE>
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
18
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
FINANCIAL HIGHLIGHTS
Class C (a)
SELECTED DATA FOR A SHARE OUTSTANDING:
<TABLE>
<CAPTION>
TOUCHSTONE EMERGING TOUCHSTONE INTERNATIONAL
GROWTH FUND EQUITY FUND
------------------------- -------------------------
FOR THE FOR THE
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED YEAR
JUNE 30, ENDED JUNE 30, ENDED
2000 DECEMBER 31, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999
<S> <C> <C> <C> <C>
Net asset value, beginning of period $16.29 $13.04 $15.92 $12.51
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.28) (0.19) (0.09) (0.11)
Net realized and unrealized gain (loss) on investments 3.58 5.97 (0.88) 4.89
---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.30 5.78 (0.97) 4.78
---------------------------------------------------------------------------------------------------------------------------------
Less: dividends and distributions to shareholders from:
Net investment income -- -- -- --
Realized capital gains -- (2.53) -- (1.37)
Return of capital -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions -- (2.53) -- (1.37)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $19.59 $16.29 $14.95 $15.92
---------------------------------------------------------------------------------------------------------------------------------
Total return (b) 20.26% 44.86% (6.09)% 38.44%
Ratios and supplemental data:
Net assets at end of period (000s) $4,623 $3,964 $5,827 $6,475
Ratios to average net assets:
Net Expenses (c) 2.25%(d) 2.25% 2.35%(d) 2.35%
Net investment income (loss) (1.36)%(d) (1.41)% (0.81)%(d) (0.81)%
Portfolio Turnover 63% 97% 70% 155%
---------------------------------------------------------------------------------------------------------------------------------
(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. (Note 6)
(c)If the waiver and reimbursement had not been in place for the periods listed,
the ratios of expenses to average net assets would have been as follows:
3.49%(d) 4.03% 4.37%(d) 4.86%
(d)Ratios are annualized.
</TABLE>
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
19
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
Financial Highlights continued
Class C (a) - continued
SELECTED DATA FOR A SHARE OUTSTANDING:
<TABLE>
<CAPTION>
TOUCHSTONE VALUE TOUCHSTONE
PLUS FUND BOND FUND
-----------------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE SIX MONTHS FOR THE
ENDED YEAR ENDED YEAR
JUNE 30, ENDED JUNE 30, ENDED
2000 DECEMBER 31, 2000 DECEMBER 31,
(UNAUDITED) 1999 (UNAUDITED) 1999
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.48 $10.26 $ 9.15 $10.08
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) (0.07) 2.44 0.51
Net realized and unrealized gain (loss) on investments (0.25) 1.53 (2.30) (0.75)
---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.28) 1.46 0.14 (0.24)
---------------------------------------------------------------------------------------------------------------------------------
Less: dividends and distributions to shareholders from:
Net investment income -- -- (0.29) (0.62)
Realized capital gains -- (0.24) -- --
Return of capital -- -- -- (0.07)
---------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions -- (0.24) (0.29) (0.69)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.20 $11.48 $ 9.00 $ 9.15
---------------------------------------------------------------------------------------------------------------------------------
Total return (b) (2.44)% 14.24% 1.59% (2.41)%
Ratios and supplemental data:
Net assets at end of period (000s) $2,200 $ 548 $ 933 $ 998
Ratios to average net assets:
Net Expenses (c) 2.05%(d) 2.05% 1.65%(d) 1.65%
Net investment income (loss) (0.28)%(d) 0.65% 5.42%(d) 5.18%
Portfolio Turnover 53% 60% 13% 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. (Note 6)
(c)If the waiver and reimbursement had not been in place for the periods listed,
the ratios of expenses to average net assets would have been as follows:
2.65%(d) 2.76% 3.47%(d) 3.01%
(d)Ratios are annualized.
</TABLE>
The accompanying notes are an integral part of the financial statements.
TOUCHSTONE FAMILY OF FUNDS
20
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies
Touchstone Emerging Growth Fund ("Emerging Growth Fund"), Touchstone
International Equity Fund ("International Equity Fund") and Touchstone Value
Plus Fund ("Value Plus Fund") are each a separate series of Touchstone Strategic
Trust ("Strategic Trust"), formerly Countrywide Strategic Trust, a group of 8
equity mutual funds. Touchstone Bond Fund ("Bond Fund"), formerly the
Countrywide Intermediate Bond Fund, is a series of Touchstone Investment Trust
("Investment Trust"), formerly Countrywide Investment Trust, a group of 6
taxable bond and money market funds. The Strategic Trust and Investment Trust
(each, a "Trust" and collectively, the "Trusts") are registered under the
Investment Company Act of 1940, as amended ("the Act"), as open-end management
investment companies. The Trusts were organized as Massachusetts business trusts
under Declarations of Trust dated December 7, 1980. The Emerging Growth Fund,
International Equity Fund, Value Plus Fund and Bond Fund (each a "Fund" and
collectively, the "Funds") each have distinct investment objectives and
policies.
Prior to May 1, 2000, the Funds were part of the Touchstone Series Trust
("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 Emerging Growth Fund, International Equity Fund and
Value Plus Fund were merged into series of the Strategic Trust. Effective May 1,
2000, the Bond Fund was merged into a series of the Investment Trust and the
Touchstone Series Trust was dissolved (See Note 7).
Each Fund, other than the Bond Fund, is divided into two classes of shares:
class A shares ("Class A Shares") and class C shares ("Class C Shares"). Each
class of shares charges a different sales charge and distribution or service
fees. The amount of the sales charges and other fees that you pay will depend on
which class of shares you own. The Bond Fund also offers Class Y shares ("Class
Y Shares"), which are not available for sale to the public.
As of June 30, 2000, Touchstone Advisors, Inc. an indirect subsidiary of the
Western-Southern Life Assurance Company ("Western-Southern"), and
Western-Southern together owned 28.5%, 55.7%, 83.3% and 69.7% of the outstanding
Class A Shares and 67.0%, 79.6%, 23.3%, and 16.7% of the outstanding Class C
Shares of the Emerging Growth Fund, the International Equity Fund, the Value
Plus Fund, and the Bond Fund, respectively.
The accounting policies are in conformity with generally accepted accounting
principles ("GAAP") for investment companies. The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the related amounts and disclosures in the financial
statements. Actual results could differ from these estimates.
The following is a summary of the significant accounting policies of the Funds.
INVESTMENT VALUATION. Securities for which market quotations are readily
available are valued at the last sale price on a national securities exchange,
or, in the absence of recorded sales, at the readily available closing bid price
in the over-the-counter market. Securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate. Debt securities are
valued by a pricing service which determines valuations based upon market
transactions for normal, institutional-size trading units of similar securities.
Securities or other assets for which market quotations are not readily available
are valued at fair value in good
TOUCHSTONE FAMILY OF FUNDS
21
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
Notes to Financial Statements continued
faith under consistently applied procedures in accordance with procedures
established by the Trustees of the Trusts. Such procedures include the use of
independent pricing services, which use prices based upon yields or prices of
securities of comparable quality, coupon, maturity and type; indications as to
values from dealers; and general market conditions. All portfolio securities
with a remaining maturity of less than 60 days are valued at amortized cost,
which approximates market.
FOREIGN CURRENCY VALUE TRANSLATION. The accounting records of the Funds are
maintained in U.S. dollars. The market value of investment securities, other
assets and liabilities and forward contracts denominated in foreign currencies
are translated into U.S. dollars at the prevailing exchange rates at the end of
the period. Purchases and sales of securities, income receipts, and expense
payments are translated at the exchange rate prevailing on the respective dates
of such transactions. Reported net realized gains and losses on foreign currency
transactions represent net gains and losses from sales and maturities of forward
currency contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions and
the difference between the amount of net investment income accrued and the U.S.
dollar amount actually received.
The effects of changes in foreign currency exchange rates on investments in
securities are not segregated in the Statement of Operations from the effects of
changes in market prices of these securities, but are included with net realized
and unrealized gain or loss on investments.
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date except
that certain dividends from foreign securities where the ex-dividend date has
passed are recorded as soon as the Trusts are informed of the ex-dividend date.
Interest income, which includes the amortization of premium and accretion of
discount, if any, is recorded on an accrual basis. Dividend and interest income
is recorded net of foreign taxes where recovery of such taxes is not assured.
DIVIDENDS AND DISTRIBUTIONS. Substantially all of the net investment income of
the Bond Fund is declared as dividends and paid monthly. Substantially all of
the net investment income of the Value Plus Fund is declared as dividends and
paid quarterly. Substantially all of the net investment income of the Emerging
Growth Fund and the International Equity Fund are declared as dividends and paid
annually. Distributions to shareholders of net realized capital gains, if any,
are declared and paid annually. Dividends and distributions are recorded on the
ex-dividend date and are reinvested at net asset value.
Income and realized capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to non-deductible organization costs,
passive foreign investment companies, foreign currency transactions, losses
deferred due to wash sales, and excise tax regulations.
Permanent book and tax basis differences relating to shareholder distributions
will result in reclassifications to paid-in capital. Undistributed net
investment income and accumulated net realized gain or loss from the Funds may
include temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
TOUCHSTONE FAMILY OF FUNDS
22
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
FEDERAL TAXES. Each Fund of the Trusts are treated as a separate entities for
federal income tax purposes. Each Fund's policy is to comply with the provisions
of the Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to distribute substantially all of its income, and net
realized capital gains, if any, within the prescribed time periods. Therefore,
no provision has been made for federal income taxes. It is intended that each
Fund's assets will be managed in such a way that an investor in the Fund will be
able to satisfy the requirements of Subchapter M of the Internal Revenue Code of
1986, as amended.
WRITTEN OPTIONS. Each Fund may enter into written option agreements. The premium
received for a written option is recorded as an asset with an equivalent
liability. The liability is marked-to-market based on the option's quoted daily
settlement price. When an option expires or the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of the
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security
and the liability related to such option is eliminated. When a written call
option is exercised, the Fund realizes a gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received. If a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security which the Fund
purchased.
FORWARD FOREIGN CURRENCY AND SPOT CONTRACTS. Each Fund may enter into forward
foreign currency and spot contracts to protect securities and related
receivables and payables against fluctuations in foreign currency rates. A
forward contract is an agreement to buy or sell currencies of different
countries on a specified future date at a specified rate.
Risks associated with such contracts include the movement in the value of the
foreign currency relative to the U.S. dollar and the ability of the counterparty
to perform. The market value of the contract will fluctuate with changes in
currency exchange rates. Contracts are valued daily based on procedures
established by and under the general supervision of the Trustees of the Trusts
and the change in the market value is recorded by the Funds as unrealized
appreciation and depreciation of forward foreign currency contracts. As of June
30, 2000, no Funds held open forward foreign currency or spot contracts.
REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements, which are
agreements pursuant to which securities are acquired by the Fund from a third
party with the commitment that they will be repurchased by the seller at a fixed
price on an agreed upon date. Each Fund may enter into repurchase agreements
with banks or lenders meeting the creditworthiness standards established by the
Trustees of the Trusts. The Fund, through its custodian, receives as collateral,
delivery of the underlying securities, whose market value is required to be at
least 100% of the resale price at the time of purchase. The resale price
reflects the purchase price plus an agreed upon rate of interest. In the event
of counterparty default, the Fund has the right to use the collateral to offset
losses incurred.
TOUCHSTONE FAMILY OF FUNDS
23
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
Notes to Financial Statements continued
SECURITY TRANSACTIONS. Securities transactions are recorded on a trade date
basis. For financial and tax reporting purposes, realized gains and losses are
determined on the basis of specific lot identification.
EXPENSES. Expenses incurred by a Trust with respect to any two or more Funds in
the Trust are prorated to each Fund in the Trust, except where allocations of
direct expenses to each Fund can otherwise be made fairly. Expenses directly
attributable to a Fund are charged to that Fund. Expenses directly attributable
to a class are charged to that class. Other expenses of each Fund are further
allocated to each class of shares based on their relative net asset values.
2. Risks Associated with Foreign Investments
Some of the Funds may invest in securities of foreign issuers. Investing in
securities issued by companies whose principal business activities are outside
the United States may involve significant risks not present in domestic
investments. For example, there is generally less publicly available information
about foreign companies, particularly those not subject to the disclosure and
reporting requirements of the U.S. securities laws. Foreign issuers are
generally not bound by uniform accounting, auditing, and financial reporting
requirements and standards of practice comparable to those applicable to
domestic issuers. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of the Fund, political or financial instability or diplomatic and
other developments which could affect such investments. Foreign stock markets,
while growing in volume and sophistication, are generally not as developed as
those in the United States, and securities of some foreign issuers (particularly
those located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies. In general, there is less overall
governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the U.S.
3. Transactions with Affiliates
INVESTMENT ADVISOR. The Trusts have investment advisory agreements with
Touchstone Advisors, Inc. (the "Advisor"), an indirect subsidiary of
Western-Southern Life Assurance Company ("Western-Southern"). Under the terms of
the investment advisory agreements, each Fund pays an investment advisory fee
that is computed daily and paid monthly. For the six months ended June 30, 2000,
each Fund incurred the following investment advisory fees equal on an annual
basis to the following percentages of the average daily net assets of the Fund.
Emerging International Value
Growth Equity Plus Bond
Fund Fund Fund Fund
Rate 0.80% 0.95% 0.65% 0.75%
--------------------------------------------------------------------------------
TOUCHSTONE FAMILY OF FUNDS
24
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
Subject to review and approval by the Boards of Trustees, the Advisor may enter
into certain sub-advisory agreements for the investment advisory services in
connection with the management of each of the Funds. The Advisor pays each
sub-advisor a fee for services provided using an annual rate, as specified
below, that is computed daily and paid monthly based on average daily net
assets. As of June 30, 2000, the following sub-advisory agreements were in
place:
Emerging Growth Fund
David L. Babson & Company, Inc. 0.50%
Westfield Capital Management Company, Inc. 0.45% on the first $10 million
0.40% on the next $40 million
0.35% thereafter
International Equity Fund
Credit Suisse Asset Management LLC 0.85% on the first $30 million
0.80% on the next $20 million
0.70% on the next $20 million
0.60% thereafter
Value Plus Fund
Fort Washington Investment Advisors, Inc. 0.45%
Bond Fund
Fort Washington Investment Advisors, Inc. 0.30%
Fort Washington Investment Advisors, Inc., is an affiliate of the Advisor.
DISTRIBUTION AND SERVICE PLAN. Under the Distribution and Service Plans of the
Trusts, in accordance with Rule 12b-1 under the Act, the Trusts retain
Touchstone Securities, Inc. ("Distributor"), an indirect subsidiary of
Western-Southern, as a service agent of the Trusts and as the principal
underwriter of the shares of each Fund. Under the Distribution Plan, Class C
Shares of each Fund pay a fee to the Distributor in an amount computed at an
annual rate of 0.75% of the average daily net assets of the Fund to finance
activity that is principally intended to result in the sale of Class C Shares of
the Fund. Under the Service Plan, Class A Shares and Class C Shares of each Fund
pay a fee to the Distributor in an amount computed at an annual rate of 0.25% of
the average daily net assets of the Fund for the provision of certain services
to the holders of Class A Shares and Class C Shares.
SPONSOR. The Trusts, on behalf of each Fund, have entered into Sponsor
Agreements with the Advisor. The Advisor provides oversight of the various
service providers to the Trusts, including the Trusts' administrator, custodian
and transfer agent. The Advisor receives a fee from each Fund equal on an annual
basis to 0.20% of the average daily net assets of that Fund. The Advisor waived
all fees under the Sponsor Agreement through June 30, 2000. In the last
amendment to the Sponsor Agreements, the Advisor also agreed to continue to
waive all fees until December 31, 2000. The Sponsor Agreements may be terminated
by the Sponsor or by either of the Trusts on not less than 30 days prior written
notice.
TRUSTEES. Each Trustee who is not an "interested person" (as defined in the Act)
of the Trusts receives an aggregate of $5,000 annually plus $1,000 per meeting
attended, as well as reimbursement for reasonable out-of-pocket expenses from
the Strategic Trust, from Investment Trust and from Touchstone Variable Series
Trust, which is included in a separate report. For the six months ended June 30,
2000, the Funds included in this report from Strategic Trust and Investment
Trust incurred $3,112 in Trustee fees which was prorated to each Fund.
TOUCHSTONE FAMILY OF FUNDS
25
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
Notes to Financial Statements continued
4. Purchases and Sales of Investment Securities
Investment transactions (excluding purchases and sales of U.S. government agency
obligations and excluding short-term investments) for the six months ended June
30, 2000 were as follows:
Cost of Purchases Proceeds from Sales
Emerging Growth Fund $ 9,099,201 $10,310,941
International Equity Fund 10,269,043 10,278,493
Value Plus Fund 19,240,075 30,725,642
Bond Fund 5,592,648 14,552,898
The following Funds had transactions in U.S. government and U.S. government
agency obligations:
Cost of Purchases Proceeds from Sales
Value Plus Fund $ -- $ 255,207
Bond Fund 1,920,364 --
5. 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 June 30, 2000,
the Bond Fund held restricted securities valued by the trustees of the Trust at
$667,317, representing 2.91% of net assets. Acquisition date and cost of each
are as follows:
Acquisition Date Cost
Mercantile Safe Deposit 3/28/85 $ 33,804
Central America, Series F 8/1/86 115,000
Central America, Series G 8/1/86 115,000
Central America, Series H 8/1/86 115,000
Republic of Honduras, Series C 5/1/88 100,000
Republic of Honduras, Series D 5/1/88 100,000
The Bond II Portfolio of Select Advisors Portfolios 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 II Portfolio. As
part of a subsequent reorganization, these securities were redeemed in kind and
acquired by the Bond Fund.
TOUCHSTONE FAMILY OF FUNDS
26
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
6. Expense Reimbursements
The Sponsor has agreed to reimburse each Fund so that, following such
reimbursement, the aggregate total operating expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) of each Fund are not
greater, on an annual basis, than the percentage of average daily net assets of
the Fund listed below. The resulting aggregate amount of reimbursement to each
Fund for the six months ended June 30, 2000 is shown below.
Emerging International Value
Growth Equity Plus Bond
Fund Fund Fund Fund
Voluntary Expense Limit - Class A 1.50% 1.60% 1.30% 0.90%
Voluntary Expense Limit - Class C 2.25% 2.35% 2.05% 1.65%
Voluntary Expense Limit - Class Y -- -- -- 0.65%
Aggregate Amount of
Reimbursement to Fund $82,927 $134,564 $80,380 $163,389
--------------------------------------------------------------------------------
7. Fund Mergers and Terminations
On February 15, 2000, the Board of Trustees of the Touchstone Series Trust
approved an Agreement and Plan of Reorganization ("CST Agreement") between the
Series Trust and the Strategic Trust. Pursuant to the CST Agreement, Emerging
Growth Fund ("Old Emerging Growth Fund") and International Equity Fund ("Old
International Equity Fund) of Series Trust were merged into separate series of
the Strategic Trust. In addition, Value Plus Fund ("Old Value Plus Fund") and
Touchstone Growth & Income Fund ("Growth & Income Fund") of Series Trust merged
into the Touchstone Value Plus Fund ("New Value Plus Fund") of the Strategic
Trust. On the same date, the Series Trust's Board of Trustees approved an
Agreement and Plan of Reorganization ("CIT Agreement") between the Series Trust
and Investment Trust. Pursuant to the CIT Agreement, Touchstone Bond Fund ("Old
Bond Fund") of Series Trust was merged into the Intermediate Bond Fund of the
Investment Trust. Simultaneously, the Intermediate Bond Fund of the Investment
Trust was renamed the Touchstone Bond Fund ("New Bond Fund"). The remaining
series of the Series Trust, the Touchstone Income Opportunity Fund, Touchstone
Balanced Fund and Touchstone Standby Income Fund were terminated effective April
28, 2000.
The mergers described above were approved by shareholders of each Fund at
special meetings of shareholders held on April 19, 2000 (See Note 9).
Pursuant to the CST Agreement described above, on May 1, 2000, New Value Plus
Fund acquired all of the assets and assumed liabilities of Old Value Plus Fund
and Growth & Income Fund, in an exchange for Class A shares and Class C shares
of New Value Plus Fund.
Pursuant to the CIT Agreement described above, on May 1, 2000, the New Bond
Fund, formerly the Countrywide Intermediate Bond Fund, acquired all of the
assets and assumed liabilities of Old Bond Fund, in an exchange for Class A
shares and Class C shares of New Bond Fund.
TOUCHSTONE FAMILY OF FUNDS
27
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
Notes to Financial Statements continued
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 Fund
of Strategic or Value of Number of Unrealized Net Assets
Investment Acquired Fund Net Assets Shares Gain or After
Trust of Series Trust Acquired Issued Loss Acquisition
-------------- ----------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
New Emerging Old Emerging
Growth Fund Growth Fund $21,922,346 1,233,880 -- $21,922,346
New Old
International International
Equity Fund Equity Fund 14,619,896 960,029 -- 14,619,896
New Value Old Value
Plus Fund Plus Fund 35,741,033 2,262,931 -- 65,310,052
New Value Growth &
Plus Fund Income Fund 29,569,019 2,548,643 $(1,341,172) 65,310,052
New Bond Fund Old Bond Fund 3,704,761 398,361 (153,525) 24,260,647
</TABLE>
8. Capital Share Transactions
Transactions in capital stock were as follows for the following periods and
classes of each Fund:
<TABLE>
<CAPTION>
Touchstone Emerging Growth Fund
Six Months Ended Year Ended
June 30, 2000 (unaudited) December 31, 1999
Shares Amount Shares Amount
Shares Outstanding (Class A):
<S> <C> <C> <C> <C>
Shares sold 596,433 $ 10,917,952 97,013 $ 1,411,794
Reinvestment of dividends
and distributions -- -- 71,583 1,184,076
---------------------------------------------------------------------------------------------------------
596,433 10,917,952 168,596 2,595,870
Shares redeemed (504,882) (11,397,807) (157,019) (2,291,937)
---------------------------------------------------------------------------------------------------------
Net increase (decrease) 91,551 $ (479,855) 11,577 $ 303,933
---------------------------------------------------------------------------------------------------------
Shares Outstanding (Class C):
Shares sold 273,103 $ 4,908,268 23,001 $ 326,924
Reinvestment of dividends
and distributions -- -- 33,503 532,034
---------------------------------------------------------------------------------------------------------
27,103 4,908,268 56,504 858,958
Shares redeemed (208,514) (5,0087,593) (64,997) (924,372)
---------------------------------------------------------------------------------------------------------
Net increase (decrease) (7,411) $ (179,325) (8,493) $ (65,414)
---------------------------------------------------------------------------------------------------------
</TABLE>
TOUCHSTONE FAMILY OF FUNDS
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<PAGE>
TOUCHSTONE FAMILY OF FUNDS
<TABLE>
<CAPTION>
Touchstone International Equity Fund
Six Months Ended Year Ended
June 30, 2000 (unaudited) December 31, 1999
Shares Amount Shares Amount
Shares Outstanding (Class A):
<S> <C> <C> <C> <C>
Shares sold 405,837 $ 6,448,167 70,684 $ 940,653
Reinvestment of dividends
and distributions -- -- 44,305 716,077
---------------------------------------------------------------------------------------------------------
405,837 6,448,167 114,989 1,656,730
Shares redeemed (376,817) (6,144,763) (100,888) (1,381,046)
---------------------------------------------------------------------------------------------------------
Net increase (decrease) 29,020 $ 303,404 14,101 $ 275,684
---------------------------------------------------------------------------------------------------------
Shares Outstanding (Class C):
Shares sold 321,530 $ 4,917,743 23,528 $ 302,293
Reinvestment of dividends
and distributions -- -- 32,842 511,341
---------------------------------------------------------------------------------------------------------
321,530 4,917,743 56,370 813,634
Shares redeemed (337,915) (5,162,308) (67,408) (870,128)
---------------------------------------------------------------------------------------------------------
Net increase (decrease) (16,385) $ (244,565) (11,038) $ (56,494)
---------------------------------------------------------------------------------------------------------
<CAPTION>
Touchstone Value Plus Fund
Six Months Ended Year Ended
June 30, 2000 (unaudited) December 31, 1999
Shares Amount Shares Amount
Shares Outstanding (Class A):
<S> <C> <C> <C> <C>
Shares sold 2,745,328 $ 33,153,886 88,299 $ 988,307
Reinvestment of dividends
and distributions 3,498 40,403 56,984 663,608
---------------------------------------------------------------------------------------------------------
2,748,826 33,194,289 145,283 1,651,915
Shares redeemed (1,622,907) (19,180,009) (43,587) (508,020)
---------------------------------------------------------------------------------------------------------
Net increase (decrease) 1,125,919 $ 14,014,280 101,696 $ 1,143,895
---------------------------------------------------------------------------------------------------------
Shares Outstanding (Class C):
Shares sold 172,741 2,109,961 43,709 $ 459,000
Reinvestment of dividends
and distributions -- -- 928 10,553
---------------------------------------------------------------------------------------------------------
172,741 2,109,961 44,637 469,553
Shares redeemed (24,046) (366,831) (27,892) (298,655)
---------------------------------------------------------------------------------------------------------
Net increase (decrease) 148,695 $ 1,743,130 16,745 $ 170,898
---------------------------------------------------------------------------------------------------------
<CAPTION>
Touchstone Bond Fund
Six Months Ended Year Ended
June 30, 2000 (unaudited) December 31, 1999
Shares Amount Shares Amount
Shares Outstanding (Class A):
<S> <C> <C> <C> <C>
Shares sold 3,625,180 $ 34,935,751 137,197 $ 1,368,199
Reinvestment of dividends
and distributions 19,938 186,050 34,756 341,765
---------------------------------------------------------------------------------------------------------
3,645,118 35,121,801 171,953 1,709,964
Shares redeemed (1,758,945) (16,482,395) (190,712) (1,898,035)
---------------------------------------------------------------------------------------------------------
Net increase (decrease) 1,886,173 $ 18,639,406 (18,759) $ (188,071)
---------------------------------------------------------------------------------------------------------
Shares Outstanding (Class C):
Shares sold 10,265 289,577 35,660 $ 345,721
Reinvestment of dividends
and distributions 2,355 21,287 7,353 70,040
---------------------------------------------------------------------------------------------------------
12,620 310,864 43,013 415,761
Shares redeemed (18,040) (163,547) (47,002) (458,867)
---------------------------------------------------------------------------------------------------------
Net increase (decrease) (5,420) $ 147,317 (3,989) $ (43,106)
---------------------------------------------------------------------------------------------------------
</TABLE>
TOUCHSTONE FAMILY OF FUNDS
29
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
Notes to Financial Statements continued
9. Supplementary Data
Special meetings of the shareholders of the Touchstone Series Trust ("Series
Trust") were held on April 19, 2000 to vote on proposals to approve agreements
and plans of reorganization to merge the assets and liabilities of certain
series of the Series Trust into series of either Countrywide Strategic Trust
(subsequently renamed Touchstone Strategic Trust) or Countrywide Investment
Trust (subsequently renamed Touchstone Investment Trust), as shown below, in
exchange for shares of the corresponding series of the Countrywide Strategic
Trust or the Countrywide Investment Trust and the distribution of these shares
to the shareholders of the corresponding series of Series Trust. The results of
the votes taken are shown below.
TOUCHSTONE SERIES TRUST COUNTRYWIDE STRATEGIC TRUST
------------------------- -----------------------------
Touchstone Emerging Growth Fund New Emerging Growth Fund
Touchstone International Equity Fund New International Equity Fund
Touchstone Value Plus Fund New Value Plus Fund
Touchstone Growth & Income Fund New Value Plus Fund
480,113.678 shares of the Touchstone Emerging Growth Fund were represented in
person or by proxy, representing 55.54% of the outstanding shares of the Fund.
702,778.905 shares of the Touchstone International Equity Fund were represented
in person or by proxy, representing 72.69% of the outstanding shares of the
Fund.
2,630,771.720 shares of the Touchstone Value Plus Fund were represented in
person or by proxy, representing 96.25% of the outstanding shares of the Fund.
1,604,544.508 720 shares of the Touchstone Growth & Income Fund were represented
in person or by proxy, representing 81.19% of the outstanding shares of the
Fund.
MERGER OF TOUCHSTONE EMERGING GROWTH FUND
# of Shares Voted % of Shares Voted
Affirmative 477,665.061 99.49%
Against 0.000 0.00%
Abstain 2,448.617 0.51%
TOTAL 480,113.678 100.00%
MERGER OF TOUCHSTONE INTERNATIONAL EQUITY FUND
# of Shares Voted % of Shares Voted
Affirmative 686,179.049 97.64%
Against 6,971.692 0.99%
Abstain 9,628.164 1.37%
TOTAL 702,778.905 100.00%
TOUCHSTONE FAMILY OF FUNDS
30
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
MERGER OF TOUCHSTONE VALUE PLUS FUND
# of Shares Voted % of Shares Voted
Affirmative 2,630,771.720 99.16%
Against 19,393.612 0.73%
Abstain 2,838.908 0.11%
TOTAL 2,653,004.240 100.00%
MERGER OF TOUCHSTONE GROWTH & INCOME FUND
# of Shares Voted % of Shares Voted
Affirmative 1,530,064.230 95.36%
Against 48,501.843 3.02%
Abstain 25,978.435 1.62%
TOTAL 1,604,554.508 100.00%
TOUCHSTONE SERIES TRUST COUNTRYWIDE INVESTMENT TRUST
-------------------------- --------------------------------
Touchstone Bond Fund Intermediate Bond Fund
279,625.566 Class A shares of the Touchstone Bond Fund, representing 64.83% of
the outstanding Class A shares of the Fund, were present by proxy.
57,154.519 Class C shares of the Touchstone Bond Fund, representing 52.39% of
the outstanding Class C shares of the Fund, were present by proxy.
1,082,691.862 Class Y shares of the Touchstone Bond Fund, representing 100.00%
of the outstanding Class Y shares of the Fund, were present by proxy. (Note that
Class Y Shares were subsequently converted to Class A Shares.)
MERGER OF TOUCHSTONE BOND FUND
CLASS A
# of Shares Voted % of Shares Voted
Affirmative 265,218.530 94.85%
Against 6,168.926 2.21%
Abstain 8,238.110 2.94%
TOTAL 279,625.566 100.00%
CLASS C AND CLASS Y
# of Shares Voted % of Shares Voted
Affirmative 1,109,046.437 97.30%
Against 4,137.867 0.36%
Abstain 26,662.077 2.34%
TOTAL 1,139,846.381 100.00%
A special meeting of the shareholders of the Countrywide Investment Trust
("Investment Trust") was also held on April 19, 2000 to vote on transactions
relating to the consolidation of the Touchstone and Countrywide mutual fund
complexes. At the meeting, the shareholders of the Intermediate Bond Fund of
Investment Trust, which merged with the Touchstone Bond Fund of Touchstone
TOUCHSTONE FAMILY OF FUNDS
31
<PAGE>
TOUCHSTONE FAMILY OF FUNDS
Notes to Financial Statements continued
Series Trust and was renamed the Touchstone Bond Fund, voted on proposals to
approve an investment advisory agreement with Touchstone Advisors, Inc. and to
approve a sub-advisory agreement with Fort Washington Investment Advisors, Inc.
At the meeting, the shareholders of the Investment Trust, including the
shareholders of the Intermediate Bond Fund, also voted on a proposal to ratify
the selection of Ernst & Young LLP as Investment Trust's independent public
accountants. The results of the votes taken on the proposals are show below.
307,600.090 shares of the Intermediate Bond Fund, representing 65.33% of the
outstanding shares of the Fund, were present by proxy.
131,640,807.293 shares of the Investment Trust, representing 63.06% of the
outstanding shares of the Trust, were present by proxy.
INVESTMENT ADVISORY AGREEMENT WITH TOUCHSTONE ADVISORS, INC.
# of Shares Voted % of Shares Voted
Affirmative 297,392.122 96.68%
Against 5,661.422 1.84%
Abstain 4,546.546 1.48%
TOTAL 307,600.090 100.00%
SUB-ADVISORY AGREEMENT WITH FORT WASHINGTON INVESTMENT ADVISORS, INC.
# of Shares Voted % of Shares Voted
Affirmative 297,392.122 96.68%
Against 5,661.422 1.84%
Abstain 4,546.546 1.48%
TOTAL 307,600.090 100.00%
RATIFICATION OF SELECTION OF ERNST & YOUNG LLP
# of Shares Voted % of Shares Voted
Affirmative 300,402.916 97.66%
Against 2,246.221 0.73%
Abstain 4,950.953 1.61%
TOTAL 307,600.090 100.00%
TOUCHSTONE FAMILY OF FUNDS
32
<PAGE>
Touchstone Family of Funds
DISTRIBUTOR
Touchstone Securities, Inc.
311 Pike Street
Cincinnati, Ohio 45202-4094
800.638.8194
www.touchstonefunds.com
Investment AdvisOr
Touchstone Advisors, Inc.
311 Pike 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
[TOUCHSTONE LOGO HERE]
FORM TSF-104-0007
