<PAGE> 1
LOGO
PROSPECTUS
JANUARY 4, 1999
O TOUCHSTONE EMERGING GROWTH FUND
O TOUCHSTONE INTERNATIONAL EQUITY FUND
O TOUCHSTONE INCOME OPPORTUNITY FUND
O TOUCHSTONE VALUE PLUS FUND
O TOUCHSTONE GROWTH & INCOME FUND
O TOUCHSTONE BALANCED FUND
O TOUCHSTONE BOND FUND
O TOUCHSTONE STANDBY INCOME FUND
Neither the Securities and Exchange Commission nor any state securities
commission has approved any Fund's shares as an investment or determined whether
this prospectus is accurate or complete. Anyone who tells you otherwise is
committing a crime.
<PAGE> 2
Touchstone Family of Funds
The Touchstone Family of Funds is a group of mutual funds. Each Fund has a
different investment goal and risk level and is a part of the Touchstone Series
Trust (the Trust).
<PAGE> 3
TABLE OF CONTENTS
3
TABLE OF CONTENTS [ICON]TOUCHSTONE FAMILY OF FUNDS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Touchstone Emerging Growth Fund............................ 4
Touchstone International Equity Fund....................... 9
Touchstone Income Opportunity Fund......................... 13
Touchstone Value Plus Fund................................. 17
Touchstone Growth & Income Fund............................ 20
Touchstone Balanced Fund................................... 24
Touchstone Bond Fund....................................... 30
Touchstone Standby Income Fund............................. 34
Investment Strategies And Risks............................ 38
The Funds' Management...................................... 44
Investing With Touchstone.................................. 48
Distributions And Taxes.................................... 60
Financial Highlights....................................... 61
For More Information....................................... 68
</TABLE>
<PAGE> 4
TOUCHSTONE EMERGING
GROWTH FUND
4
[ICON]TOUCHSTONE FAMILY OF FUNDS
TOUCHSTONE EMERGING GROWTH FUND
The Fund's Investment Goal
The Emerging Growth Fund seeks to increase the value of Fund shares as a
primary goal and to earn income as a secondary goal.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goals.
Its Principal Investment Strategies
The Fund invests primarily (at least 65% of total assets) in the common stocks
of smaller, rapidly growing (emerging growth) companies. In selecting its
investments, the portfolio managers focus on those companies they believe will
grow faster than the U.S. economy in general. They also choose companies they
believe are priced lower in the market than their true value.
When the portfolio managers believe the following securities offer a good
potential for capital growth or income, up to 35% of the Fund's assets may be
invested in:
O Larger company stocks
O Preferred stocks
O Convertible bonds
O Other debt securities, including:
collateralized mortgage obligations (CMOs), stripped U.S. government
securities (Strips) and mortgage-related securities, all of which will
be rated investment grade
The Fund may also invest in:
O Securities of foreign companies traded mainly outside the U.S. (up to
20%)
O American Depositary Receipts (ADRs) (up to 20%)
O Emerging market securities (up to 10%)
The Key Risks
The Fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
O If the stock market as a whole goes down
O Because securities of small cap companies may be more thinly traded and
may have more frequent and larger price changes than securities of larger
cap companies
O If the market continually values the stocks in the Fund's portfolio lower
than the portfolio managers believe they should be valued
<PAGE> 5
TOUCHSTONE EMERGING
GROWTH FUND
5
[ICON]TOUCHSTONE FAMILY OF FUNDS
O If the stocks in the Fund's portfolio are not undervalued as expected
O If the companies in which the Fund invests do not grow as rapidly as
expected
O If interest rates go up, causing the value of any debt securities held by
the Fund to decline
O Because CMOs, Strips and mortgage-related securities may lose more value
due to changes in interest rates than other debt securities and are
subject to prepayment
O Because investments in foreign securities may have more frequent and
larger price changes than U.S. securities and may lose value due to
changes in currency exchange rates and other factors
O Because emerging market securities involve unique risks, such as exposure
to economies less diverse and mature than that of the U.S. and economic
or political changes may cause larger price changes in emerging market
securities than other foreign securities
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
Who May Want to Invest
This Fund is most appropriate for you if you are an aggressive investor and are
willing to assume a relatively high amount of risk. You should be comfortable
with extreme levels of volatility, and safety of principal in the short term
should not be a high priority for you. This Fund's approach may be appropriate
for you if you are many years from retirement and are comfortable with wide
market fluctuations.
The Fund's Performance
The following bar chart indicates the risks of investing in the Emerging Growth
Fund. It shows changes in the performance of the Fund's Class A shares from year
to year since the Fund started. The chart does not reflect any sales charges.
Sales charges will reduce return.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The return for other classes of shares offered by the Fund will differ from the
Class A returns shown in the bar chart, depending on the expenses of that class.
<PAGE> 6
TOUCHSTONE EMERGING
GROWTH FUND
6
[ICON]TOUCHSTONE FAMILY OF FUNDS
EMERGING GROWTH FUND -- CLASS A PERFORMANCE
<TABLE>
<CAPTION>
YEARS TOTAL RETURN
<S> <C>
1995 22.56%
1996 10.56%
1997 32.20%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 17.69% (for the quarter ended June 30, 1997) and the lowest
quarterly return was -4.07% (for the quarter ended March 31, 1997).
The following table shows how the Fund's average annual returns for the periods
shown compare to those of the Russell 2000 Index and to the Wiesenberger Small
Cap -- MF. The Russell 2000 Index is a widely recognized unmanaged index of
small cap stock performance. The Wiesenberger Small Cap -- MF is a composite
index of the annual returns of mutual funds that have an investment style
similar to that of the Emerging Growth Fund. The table shows the effect of the
Class A sales charge.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
PAST 12 SINCE
MONTHS FUND STARTED
<S> <C> <C>
EMERGING GROWTH FUND -- CLASS A 24.7% 18.5%
- ------------------------------------------------------------------------
EMERGING GROWTH FUND -- CLASS C 30.7% 19.4%
- ------------------------------------------------------------------------
RUSSELL 2000 INDEX 22.4% 19.8%
- ------------------------------------------------------------------------
WIESENBERGER SMALL CAP -- MF 21.6% 22.2%
- ------------------------------------------------------------------------
</TABLE>
<PAGE> 7
TOUCHSTONE EMERGING
GROWTH FUND
7
[ICON]TOUCHSTONE FAMILY OF FUNDS
The Fund's Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID
DIRECTLY FROM YOUR INVESTMENT)
CLASS A SHARES CLASS C SHARES
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON
PURCHASES (AS A PERCENTAGE OF OFFERING
PRICE) 5.75%(1) None
- ------------------------------------------------------------------------------
MAXIMUM DEFERRED SALES CHARGE (LOAD)
(AS A PERCENTAGE OF AMOUNT REDEEMED) None 1.00%(2)
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
MANAGEMENT FEES 0.80% 0.80%
- ------------------------------------------------------------------------------
DISTRIBUTION (12B-1) FEES 0.25% 1.00%
- ------------------------------------------------------------------------------
OTHER EXPENSES 3.15% 3.15%
- ------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 4.20% 4.95%
- ------------------------------------------------------------------------------
FEE WAIVER AND/OR EXPENSE REIMBURSEMENT(3) 2.70% 2.70%
- ------------------------------------------------------------------------------
NET EXPENSES 1.50% 2.25%
- ------------------------------------------------------------------------------
</TABLE>
(1) You may pay a reduced sales charge on very large purchases. There is no
sales charge at the time of purchase for purchases of $1 million or more but
a sales charge of 1.00% will be assessed on shares redeemed within one year
of purchase. There is also no initial sales charge on certain purchases in a
Roth IRA, a Roth Conversion IRA or a qualified retirement plan.
(2) The 1.00% is waived for benefits paid to you through a qualified pension
plan.
(3) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of each Class of the Fund (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least December 31, 1999.
The following example should help you compare the cost of investing in the
Emerging Growth Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same.
<PAGE> 8
TOUCHSTONE EMERGING
GROWTH FUND
8
[ICON]TOUCHSTONE FAMILY OF FUNDS
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS C SHARES
<S> <C> <C>
1 YEAR $ 719 $ 228
- ------------------------------------------------------------------------------
3 YEARS $1,545 $1,246
- ------------------------------------------------------------------------------
5 YEARS $2,384 $2,265
- ------------------------------------------------------------------------------
10 YEARS $4,542 $4,816
- ------------------------------------------------------------------------------
</TABLE>
O The example for the 3, 5 and 10-year periods is calculated using the Total
Fund Operating Expenses before the limits agreed to under the Sponsor
Agreement for periods after year 1.
<PAGE> 9
TOUCHSTONE INTERNATIONAL
EQUITY FUND
9
[ICON]TOUCHSTONE FAMILY OF FUNDS
TOUCHSTONE INTERNATIONAL EQUITY FUND
The Fund's Investment Goal
The International Equity Fund seeks to increase the value of Fund shares over
the long-term.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goal.
Its Principal Investment Strategies
The Fund invests primarily (at least 80% of total assets) in equity securities
of foreign companies and will invest in at least three countries outside the
United States. A large portion of those non-U.S. equity securities may be
issued by companies active in emerging market countries (up to 40% of total
assets).
The Fund may also invest in certain debt securities issued by U.S. and
non-U.S. entities (up to 20%), including non-investment grade debt securities
rated as low as B.
The portfolio manager uses a growth oriented style to choose investments for
the Fund. This includes the use of both qualitative and quantitative analysis
to identify markets and companies that offer solid growth prospects at
reasonable prices. The portfolio manager's investment process seeks to add
value by making good regional and country allocations as well as by selecting
individual stocks within a region.
The Key Risks
The Fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
O If the stock market as a whole goes down
O Because investments in foreign securities may have more frequent and
larger price changes than U.S. securities and may lose value due to
changes in currency exchange rates and other factors
O Because emerging market securities involve unique risks, such as exposure
to economies less diverse and mature than that of the U.S. and economic
or political changes may cause larger price changes in emerging market
securities than other foreign securities
O If the stocks in the Fund's portfolio do not grow over the long term as
expected
O If interest rates go up, causing the value of any debt securities held by
the Fund to decline
O Because issuers of non-investment grade securities held by the Fund are
more likely to be unable to make timely payments of interest or principal
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
<PAGE> 10
TOUCHSTONE INTERNATIONAL
EQUITY FUND
10
[ICON]TOUCHSTONE FAMILY OF FUNDS
Who May Want to Invest
This Fund is most appropriate for you if you are an aggressive investor and are
willing to assume a relatively high amount of risk. You should be comfortable
with extreme levels of volatility, and safety of principal in the short term
should not be a high priority for you. This Fund's approach may be appropriate
for you if you are many years from retirement and are comfortable with wide
market fluctuations.
The Fund's Performance
The bar chart shown below indicates the risks of investing in the International
Equity Fund. It shows changes in the performance of the Fund's Class A shares
from year to year since the Fund started. The chart does not reflect any sales
charges. Sales charges will reduce return.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The return for other classes of shares offered by the Fund will differ from the
Class A returns shown in the bar chart, depending on the expenses of that class.
INTERNATIONAL EQUITY FUND --
CLASS A PERFORMANCE
BAR CHART
<TABLE>
<CAPTION>
YEARS TOTAL RETURN
<S> <C>
1995 5.29%
1996 11.61%
1997 15.57%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 11.96% (for the quarter ended June 30, 1997) and the lowest
quarterly return was -3.95 (for the quarter ended March 31, 1995).
<PAGE> 11
TOUCHSTONE INTERNATIONAL
EQUITY FUND
11
[ICON]TOUCHSTONE FAMILY OF FUNDS
The table below shows how the Fund's average annual returns for the periods
shown compare to those of the MSCI EAFE Index and the Wiesenberger Non-US
Equity -- MF index. The MSCI EAFE Index is a Morgan Stanley index that includes
stocks traded on 16 exchanges in Europe, Australia and the Far East. The
Wiesenberger Non-US Equity -- MF is a composite index of the annual returns of
mutual funds that have an investment style similar to that of the International
Equity Fund. The table shows the effect of the Class A sales charge.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
PAST 12 SINCE
MONTHS FUND STARTED
<S> <C> <C>
INTERNATIONAL EQUITY FUND -- CLASS A 8.9% 4.9%
- -------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND -- CLASS C 14.7% 6.0%
- -------------------------------------------------------------------------
MSCI EAFE INDEX 2.1% 5.8%
- -------------------------------------------------------------------------
WIESENBERGER NON-US EQUITY -- MF -2.0% 3.2%
- -------------------------------------------------------------------------
</TABLE>
The Fund's Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID
DIRECTLY FROM YOUR INVESTMENT)
CLASS A SHARES CLASS C SHARES
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON
PURCHASES (AS A PERCENTAGE OF OFFERING
PRICE) 5.75%(1) None
- ------------------------------------------------------------------------------
MAXIMUM DEFERRED SALES CHARGE (LOAD)
(AS A PERCENTAGE OF AMOUNT REDEEMED) None 1.00%(2)
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
MANAGEMENT FEES 0.95% 0.95%
- ------------------------------------------------------------------------------
DISTRIBUTION (12B-1) FEES 0.25% 1.00%
- ------------------------------------------------------------------------------
OTHER EXPENSES 2.63% 2.63%
- ------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 3.83% 4.58%
- ------------------------------------------------------------------------------
FEE WAIVER AND/OR EXPENSE REIMBURSEMENT(3) 2.23% 2.23%
- ------------------------------------------------------------------------------
NET EXPENSES 1.60% 2.35%
- ------------------------------------------------------------------------------
</TABLE>
(1) You may pay a reduced sales charge on very large purchases. There is no
sales charge at the time of purchase for purchases of $1 million or more but
a sales charge of 1.00% will be assessed on shares redeemed within one year
of purchase. There is also no initial sales charge on certain purchases in a
Roth IRA, a Roth Conversion IRA or a qualified retirement plan.
(2) The 1.00% is waived for benefits paid to you through a qualified pension
plan.
(3) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of each Class of the Fund (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least December 31, 1999.
<PAGE> 12
TOUCHSTONE INTERNATIONAL
EQUITY FUND
12
[ICON]TOUCHSTONE FAMILY OF FUNDS
The following example should help you compare the cost of investing in the
International Equity Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS C SHARES
<S> <C> <C>
1 YEAR $ 728 $ 238
- ------------------------------------------------------------------------------
3 YEARS $1,484 $1,182
- ------------------------------------------------------------------------------
5 YEARS $2,257 $2,135
- ------------------------------------------------------------------------------
10 YEARS $4,270 $4,550
- ------------------------------------------------------------------------------
</TABLE>
O The example for the 3, 5 and 10-year periods is calculated using the Total
Fund Operating Expenses before the limits agreed to under the Sponsor
Agreement for periods after year 1.
<PAGE> 13
TOUCHSTONE INCOME
OPPORTUNITY FUND
13
[ICON]TOUCHSTONE FAMILY OF FUNDS
TOUCHSTONE INCOME OPPORTUNITY FUND
The Fund's Investment Goal
The Income Opportunity Fund seeks to achieve a high level of current income as
its main goal. The Fund may also seek to increase the value of Fund shares, if
consistent with its main goal.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goal.
Its Principal Investment Strategies
The Fund invests primarily in debt securities. These debt securities will
generally be more risky non-investment grade corporate and government
securities (up to 100% of total assets). Non-investment grade debt securities
are often referred to as "junk bonds" and are considered speculative.
The Fund's investments may include:
O Securities of foreign companies (up to 100%), but only up to 30% of its
assets in securities of foreign companies that are denominated in a
currency other than the U.S. dollar
O Debt securities that are emerging market securities (up to 65%)
O Mortgage-related securities, loans and loan participations
O Currency futures and option contracts
The Key Risks
The Fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
O If interest rates go up, causing the value of any debt securities held by
the Fund to decline
O Because issuers of non-investment grade securities held by the Fund are
more likely to be unable to make timely payments of interest or principal
O Because investments in foreign securities may have more frequent and
larger price changes than U.S. securities and may lose value due to
changes in currency exchange rates and other factors
O Because emerging market securities involve unique risks, such as exposure
to economies less diverse and mature than that of the U.S. and economic
or political changes may cause larger price changes in emerging market
securities than other foreign securities
O Because mortgage-related securities may lose more value due to changes in
interest rates than other debt securities and are subject to prepayments
O Because loans and loan participations may be more difficult to sell than
other investments and subject to the risk of borrower default
O If the stock market as a whole goes down
<PAGE> 14
TOUCHSTONE INCOME
OPPORTUNITY FUND
14
[ICON]TOUCHSTONE FAMILY OF FUNDS
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
Who May Want to Invest
This Fund is most appropriate for you if you are an aggressive investor and are
willing to assume a relatively high amount of risk. You should be comfortable
with extreme levels of volatility, and safety of principal in the short term
should not be a high priority for you. This Fund's approach may be appropriate
for you if you are many years from retirement and are comfortable with wide
market fluctuations.
The Fund's Performance
The following bar chart indicates the risks of investing in the Equity Fund. It
shows changes in the performance of the Fund's Class A shares from year to year
since the Fund started. The chart does not reflect any sales charges. Sales
charges will reduce return.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The return for other classes of shares offered by the Fund will differ from the
Class A returns shown in the bar chart, depending on the expenses of that class.
<PAGE> 15
TOUCHSTONE INCOME
OPPORTUNITY FUND
15
[ICON]TOUCHSTONE FAMILY OF FUNDS
INCOME OPPORTUNITY FUND --
BAR CHART CLASS A PERFORMANCE
<TABLE>
<CAPTION>
YEARS TOTAL RETURN
<S> <C>
1995 23.19%
1996 26.66%
1997 9.49%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 16.15% (for the quarter ended June 30, 1995) and the lowest
quarterly return was -5.44% (for the quarter ended March 31, 1995).
The table below shows how the Fund's average annual returns for the periods
shown compare to those of the Lehman Brothers Corporate Bond Index, the
Wiesenberger Corp - High Yield - MF and the Wiesenberger Global Income -- MF.
The Lehman Brothers Corporate Bond Index is based on all publicly issued
intermediate fixed-rate, non-convertible investment grade domestic corporate
debt. The Wiesenberger Corp - High Yield -- MF index and the Wiesenberger Global
Income -- MF index are composite indexes of the annual returns of mutual funds
that have an investment style similar to the Income Opportunity Fund. The table
shows the effect of the Class A sales charge.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
PAST 12 SINCE FUND
MONTHS STARTED
<S> <C> <C>
INCOME OPPORTUNITY FUND -- CLASS A 4.3% 13.5%
- -------------------------------------------------------------------------
INCOME OPPORTUNITY FUND -- CLASS C 8.6% 14.4%
- -------------------------------------------------------------------------
LEHMAN BROTHERS CORPORATE BOND INDEX 10.2% 10.9%
- -------------------------------------------------------------------------
WIESENBERGER CORP -- HIGH YIELD -- MF 12.6% 12.5%
- -------------------------------------------------------------------------
WIESENBERGER GLOBAL INCOME -- MF 3.3% 8.3%
- -------------------------------------------------------------------------
</TABLE>
<PAGE> 16
TOUCHSTONE INCOME
OPPORTUNITY FUND
16
[ICON]TOUCHSTONE FAMILY OF FUNDS
The Fund's Fees and Expenses
These tables describe the fees and expenses that you may pay if you buy and hold
shares of the Fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID
DIRECTLY FROM YOUR INVESTMENT)
CLASS A SHARES CLASS C SHARES
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON
PURCHASES (AS A PERCENTAGE OF OFFERING
PRICE) 4.75%(1) None
- -----------------------------------------------------------------------------
MAXIMUM DEFERRED SALES CHARGE (LOAD)
(AS A PERCENTAGE OF AMOUNT REDEEMED) None 1.00%(2)
- -----------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
MANAGEMENT FEES 0.65% 0.65%
- -----------------------------------------------------------------------------
DISTRIBUTION (12B-1) FEES 0.25% 1.00%
- -----------------------------------------------------------------------------
OTHER EXPENSES 2.43% 2.43%
- -----------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 3.33% 4.08%
- -----------------------------------------------------------------------------
FEE WAIVER AND/OR EXPENSE REIMBURSEMENT(3) 2.13% 2.13%
- -----------------------------------------------------------------------------
NET EXPENSES 1.20% 1.95%
- -----------------------------------------------------------------------------
</TABLE>
(1) You may pay a reduced sales charge on very large purchases. There is no
sales charge at the time of purchase for purchases of $1 million or more but
a sales charge of 1.00% will be assessed on shares redeemed within one year
of purchase. There is also no initial sales charge on certain purchases in a
Roth IRA, a Roth Conversion IRA or a qualified retirement plan.
(2) The 1.00% is waived for benefits paid to you through a qualified pension
plan.
(3) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of each Class of the Fund (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least December 31, 1999.
The following example should help you compare the cost of investing in the
Equity Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
CLASS C
CLASS A SHARES SHARES
<S> <C> <C>
1 YEAR $ 591 $ 198
- -----------------------------------------------------------------------------
3 YEARS $1,261 $1,047
- -----------------------------------------------------------------------------
5 YEARS $1,953 $1,911
- -----------------------------------------------------------------------------
10 YEARS $3,787 $4,142
- -----------------------------------------------------------------------------
</TABLE>
O The example for the 3, 5 and 10-year periods is calculated using the Total
Fund Operating Expenses before the limits agreed to under the Sponsor
Agreement for periods after year 1.
<PAGE> 17
TOUCHSTONE VALUE PLUS FUND
17
[ICON]TOUCHSTONE FAMILY OF FUNDS
TOUCHSTONE VALUE PLUS FUND
The Fund's Investment Goal
The Value Plus Fund seeks to increase the value of Fund shares over the
long-term.
As with any mutual fund, there is no guarantee that it will achieve its goals.
Its Principal Investment Strategies
The Fund invests primarily (at least 65% of total assets) in common stock of
larger companies that the portfolio manager believes are undervalued. In
choosing undervalued stocks, the portfolio manager looks for companies that
have proven management and unique features or advantages but are believed to
be priced lower than their true value. These companies may not pay dividends.
The Fund may also invest in common stocks of rapidly growing companies to
enhance the Fund's return and vary its investments to avoid having too much of
the Fund's assets subject to risks specific to undervalued stocks.
Up to 70% of total assets may be invested in large cap companies and up to 30%
may be invested in mid cap companies.
The Fund may invest in:
O Preferred stocks (up to 35%)
O Investment grade debt securities
O Convertible securities
In addition, the Fund may invest in:
O Cash equivalent investments (up to 10%)
O Short-term debt securities
The Key Risks
The Fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
O If the stock market as a whole goes down
O If the market continually values the stocks in the Fund's portfolio lower
than the portfolio manager believes they should be valued
O If the stocks in the Fund's portfolio are not undervalued as expected
O If interest rates go up, causing the value of any debt securities held by
the Fund to decline
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
<PAGE> 18
TOUCHSTONE VALUE PLUS FUND
18
[ICON]TOUCHSTONE FAMILY OF FUNDS
Who May Want to Invest
This Fund will be most appealing to you if you are a moderate, or risk tolerant
investor. You should be comfortable with a fair degree of volatility. Capital
appreciation may be important to you, but you may not want to take extreme risks
in order to achieve it. This Fund's approach may be most appropriate for you if
you are many years from retirement and are comfortable with a moderate level of
risk.
Performance Note
Performance information is only shown for those Funds which have had a full
calendar year of operations. Since the Value Plus Fund started on May 1, 1998,
there is no performance information included in this Prospectus.
The Fund's Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID
DIRECTLY FROM YOUR INVESTMENT)
CLASS A SHARES CLASS C SHARES
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON
PURCHASES (AS A PERCENTAGE OF OFFERING
PRICE) 5.75%(1) None
- -----------------------------------------------------------------------------
MAXIMUM DEFERRED SALES CHARGE (LOAD)
(AS A PERCENTAGE OF AMOUNT REDEEMED) None 1.00%(2)
- -----------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
MANAGEMENT FEES 0.75% 0.75%
- -----------------------------------------------------------------------------
DISTRIBUTION (12B-1) FEES 0.25% 1.00%
- -----------------------------------------------------------------------------
OTHER EXPENSES 1.14% 1.14%
- -----------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 2.14% 2.89%
- -----------------------------------------------------------------------------
FEE WAIVER AND/OR EXPENSE REIMBURSEMENT(3) 0.84% 0.84%
- -----------------------------------------------------------------------------
NET EXPENSES 1.30% 2.05%
- -----------------------------------------------------------------------------
</TABLE>
(1) You may pay a reduced sales charge on very large purchases. There is no
sales charge at the time of purchase for purchases of $1 million or more but
a sales charge of 1.00% will be assessed on shares redeemed within one year
of purchase. There is also no initial sales charge on certain purchases in a
Roth IRA, a Roth Conversion IRA or a qualified retirement plan.
(2) The 1.00% is waived for benefits paid to you through a qualified pension
plan.
(3) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of each Class of the Fund (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least December 31, 1999.
<PAGE> 19
TOUCHSTONE VALUE PLUS FUND
19
[ICON]TOUCHSTONE FAMILY OF FUNDS
The following examples should help you compare the cost of investing in the
Value Plus Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
CLASS C
CLASS A SHARES SHARES
<S> <C> <C>
1 YEAR $ 700 $ 208
- -----------------------------------------------------------------------------
3 YEARS $1,130 $ 816
- -----------------------------------------------------------------------------
</TABLE>
O The example for the 3-year period is calculated using the Total Fund Operating
Expenses before the limits agreed to under the Sponsor Agreement for periods
after year 1.
<PAGE> 20
TOUCHSTONE GROWTH &
INCOME FUND
20
[ICON]TOUCHSTONE FAMILY OF FUNDS
TOUCHSTONE GROWTH & INCOME FUND
The Fund's Investment Goal
The Growth & Income Fund seeks to increase the value of Fund shares over the
long-term, while receiving dividend income.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goals.
Its Principal Investment Strategies
The Fund invests primarily (at least 65% of total assets) in dividend-paying
common stocks, preferred stocks and convertible securities in a variety of
industries. The portfolio manager may choose to purchase securities which do
not pay dividends (up to 35%) but which are expected to increase in value or
produce high income payments in the future.
In choosing securities for the Fund, the portfolio manager will follow a value
oriented style, generally buying securities with yields that are at least 20%
higher than the average yield of companies in the S&P 500. The portfolio
manager focuses on investing in companies that have a market capitalization of
at least $1 billion, but may invest in companies of any size.
The Fund may also invest up to 20% of its total assets in debt
securities -- and within this 20% limitation, the Fund may invest the full 20%
in investment grade debt securities or up to 5% in non-convertible
non-investment grade debt securities.
The Fund may also invest in:
O Securities of foreign companies including American Depository Receipts
(ADRs) (up to 20%)
O Real estate investment trusts (REITs) (up to 10%)
The Key Risks
The Fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
O If the stock market as a whole goes down
O If any of the stocks in the Fund's portfolio do not increase in value as
expected
O If earnings of companies the Fund invests in are not achieved and income
available for interest or dividend payments is reduced
O If interest rates go up, causing the value of any debt securities held by
the Fund to decline
O Because investments in foreign securities may have more frequent and
larger price changes than U.S. securities and may lose value due to
changes in currency exchange rates and other factors
O Because investments in REITs are more sensitive to changes in interest
rates and other factors that affect real estate values
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
<PAGE> 21
TOUCHSTONE GROWTH &
INCOME FUND
21
[ICON]TOUCHSTONE FAMILY OF FUNDS
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
Who May Want to Invest
This Fund will be most appealing to you if you are a moderate or risk tolerant
investor. You should be comfortable with a fair degree of volatility. Capital
appreciation of your investment capital may be important to you, however, you
may be uncomfortable taking extreme risk in order to achieve it. This Fund's
approach may be most appropriate for you if you are many years from retirement
and are comfortable with a moderate level of risk.
The Fund's Performance
The bar chart shown below indicates the risks of investing in the Growth &
Income Fund. It shows changes in the performance of the Fund's Class A shares
from year to year since the Fund started. The chart does not reflect any sales
charges. Sales charges will reduce return.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The return for other classes of shares offered by the Fund will differ from the
Class A returns shown in the bar chart, depending on the expenses of that class.
GROWTH & INCOME FUND -- CLASS A PERFORMANCE
<TABLE>
<CAPTION>
YEARS TOTAL RETURN
<S> <C>
1995 35.14%
1996 16.95%
1997 20.70%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 11.77% (for the quarter ended June 30, 1997) and the lowest
quarterly return was -4.35% (for the quarter ended March 31, 1997).
<PAGE> 22
TOUCHSTONE GROWTH &
INCOME FUND
22
[ICON]TOUCHSTONE FAMILY OF FUNDS
The table below shows how the Fund's average annual returns for the periods
shown compare to those of the S&P 500 Index and to the Wiesenberger Growth &
Income -- MF Index. The S&P 500 Index is a widely recognized unmanaged index of
stock performance. The Wiesenberger Growth & Income -- MF Index is a composite
index of the annual returns of mutual funds that have an investment style
similar to the Growth & Income Fund. The table shows the effect of the Class A
sales charge.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
PAST 12 SINCE
MONTHS FUND STARTED
<S> <C> <C>
GROWTH & INCOME FUND -- CLASS A 13.7% 19.9%
- -------------------------------------------------------------------------
GROWTH & INCOME FUND -- CLASS C 19.2% 21.3%
- -------------------------------------------------------------------------
S&P 500 INDEX 33.4% 28.4%
- -------------------------------------------------------------------------
WIESENBERGER GROWTH & INCOME -- MF 26.4% 22.8%
- -------------------------------------------------------------------------
</TABLE>
The Fund's Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID
DIRECTLY FROM YOUR INVESTMENT)
CLASS A SHARES CLASS C SHARES
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON
PURCHASES (AS A PERCENTAGE OF OFFERING
PRICE) 5.75%(1) None
- -----------------------------------------------------------------------------
MAXIMUM DEFERRED SALES CHARGE (LOAD)
(AS A PERCENTAGE OF AMOUNT REDEEMED) None 1.00%(2)
- -----------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
MANAGEMENT FEES 0.80% 0.80%
- -----------------------------------------------------------------------------
DISTRIBUTION (12B-1) FEES 0.25% 1.00%
- -----------------------------------------------------------------------------
OTHER EXPENSES 1.40% 1.40%
- -----------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 2.45% 3.20%
- -----------------------------------------------------------------------------
FEE WAIVER AND/OR EXPENSE REIMBURSEMENT(3) 1.15% 1.15%
- -----------------------------------------------------------------------------
NET EXPENSES 1.30% 2.05%
- -----------------------------------------------------------------------------
</TABLE>
(1) You may pay a reduced sales charge on very large purchases. There is no
sales charge at the time of purchase for purchases of $1 million or more but
a sales charge of 1.00% will be assessed on shares redeemed within one year
of purchase. There is also no initial sales charge on certain purchases in a
Roth IRA, a Roth Conversion IRA or a qualified retirement plan.
(2) The 1.00% is waived for benefits paid to you through a qualified pension
plan.
(3) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of each Class of the Fund (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least December 31, 1999.
<PAGE> 23
TOUCHSTONE GROWTH &
INCOME FUND
23
[ICON]TOUCHSTONE FAMILY OF FUNDS
The following example should help you compare the cost of investing in the
Growth & Income Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS C SHARES
<S> <C> <C>
1 YEAR $ 700 $ 208
- ---------------------------------------------------------------------------
3 YEARS $1,191 $ 879
- ---------------------------------------------------------------------------
5 YEARS $1,708 $1,574
- ---------------------------------------------------------------------------
10 YEARS $3,119 $3,424
- ---------------------------------------------------------------------------
</TABLE>
O The example for the 3, 5 and 10-year periods is calculated using the Total
Fund Operating Expenses before the limits agreed to under the Sponsor
Agreement for periods after year 1.
<PAGE> 24
TOUCHSTONE BALANCED FUND
24
TOUCHSTONE BALANCED FUND[ICON]TOUCHSTONE FAMILY OF FUNDS
The Fund's Investment Goal
The Balanced Fund seeks to achieve both an increase in the value of Fund
shares and current income.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goals.
Its Principal Investment Strategies
The Fund invests in both equity securities (generally about 60% of total
assets) and debt securities (generally about 40%, but at least 25%). The debt
securities will be rated investment grade or at the highest level of
non-investment grade.
The Fund may invest in:
O Warrants
O Preferred stocks
O Convertible securities
The Fund may also invest up to one-third of its assets in securities of
foreign companies, and up to 15% in emerging market securities.
In choosing equity securities for the Fund, the portfolio manager will seek
out companies that are in a strong position within their industry, are owned
in part by management and are selling at a price lower than the company's
intrinsic value. Debt securities are also chosen using a value style. The
portfolio manager will focus on higher yielding securities, but will also
consider expected movements in interest rates and industry position.
The Key Risks
The Fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
O If the stock market as a whole goes down
O If the stocks in the Fund's portfolio do not increase in value as
expected
O If earnings of companies the Fund invests in are not achieved and income
available for interest or dividend payments is reduced
O If interest rates go up, causing the value of any debt securities held by
the Fund to decline
O Because investments in foreign securities may have more frequent and
larger price changes than U.S. securities and may lose value due to
changes in currency exchange rates and other factors
O Because emerging market securities involve unique risks, such as exposure
to economies less diverse and mature than that of the U.S. and economic
or political changes may cause larger price changes in emerging market
securities than other foreign securities
<PAGE> 25
TOUCHSTONE BALANCED FUND
25
[ICON]TOUCHSTONE FAMILY OF FUNDS
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
Who May Want to Invest
This Fund is most appropriate for you if you are a risk neutral or moderately
conservative investor. You may typically take a relatively low risk approach to
investing and may be comfortable with a low level of volatility in your
investments. While safety may be important to you, you may also value
appreciation of your investments. If you invest in this Fund, you should be
willing to accept some risk. This Fund's approach may be appropriate for you if
you are several years from retirement.
The Fund's Performance
The following bar chart indicates the risks of investing in the Balanced Fund.
It shows changes in the performance of the Fund's Class A shares from year to
year since the Fund started. The chart does not reflect any sales charges. Sales
charges will reduce return.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The return for other classes of shares offered by the Fund will differ from the
Class A returns shown in the bar chart, depending on the expenses of that class.
<PAGE> 26
TOUCHSTONE BALANCED FUND
26
[ICON]TOUCHSTONE FAMILY OF FUNDS
BALANCED FUND -- CLASS A PERFORMANCE
BAR CHART
<TABLE>
<CAPTION>
YEARS TOTAL RETURN
<S> <C>
1995 23.24%
1996 16.86%
1997 19.25%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 10.71% (for the quarter ended June 30, 1997) and the lowest
quarterly return was -0.32% (for the quarter ended March 31, 1997).
<PAGE> 27
TOUCHSTONE BALANCED FUND
27
[ICON]TOUCHSTONE FAMILY OF FUNDS
The table which follows shows how the Fund's average annual returns for the
periods shown compare to those of the Standard & Poor's Composite Index of 500
Stocks, the Lehman Brothers Government/Corporate Index and to the Wiesenberger
Balanced Domestic -- MF index. The Lehman Brothers Government/Corporate Index is
composed of 5,400 publicly issued corporate and U.S. government debt rated Baa
or better with at least one year to maturity and at least $25 million par
outstanding. The Wiesenberger Balanced Domestic -- MF index is a composite index
of the annual returns of mutual funds that have an investment style similar to
the Balanced Fund. The table shows the effect of the Class A sales charge.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
PAST 12 SINCE FUND
MONTHS STARTED
<S> <C> <C>
BALANCED FUND -- CLASS A 12.4% 16.1%
- -------------------------------------------------------------------------
BALANCED FUND -- CLASS C 18.4% 17.4%
- -------------------------------------------------------------------------
S&P 500 INDEX 33.4% 28.4%
- -------------------------------------------------------------------------
LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX 9.8% 9.7%
- -------------------------------------------------------------------------
WIESENBERGER BALANCED DOMESTIC -- MF 18.6% 16.8%
- -------------------------------------------------------------------------
</TABLE>
<PAGE> 28
TOUCHSTONE BALANCED FUND
28
[ICON]TOUCHSTONE FAMILY OF FUNDS
The Fund's Fees and Expenses
The following tables describe the fees and expenses that you may pay if you buy
and hold shares of a Fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID
DIRECTLY FROM YOUR INVESTMENT)
CLASS A SHARES CLASS C SHARES
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON
PURCHASES (AS A PERCENTAGE OF OFFERING
PRICE) 5.75%(1) None
- -----------------------------------------------------------------------------
MAXIMUM DEFERRED SALES CHARGE (LOAD)
(AS A PERCENTAGE OF AMOUNT REDEEMED) None 1.00%(2)
- -----------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
MANAGEMENT FEES 0.80% 0.80%
- -----------------------------------------------------------------------------
DISTRIBUTION (12B-1) FEES 0.25% 1.00%
- -----------------------------------------------------------------------------
OTHER EXPENSES 3.62% 3.62%
- -----------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 4.67% 5.42%
- -----------------------------------------------------------------------------
FEE WAIVER AND/OR EXPENSE REIMBURSEMENT(3) 3.32% 3.32%
- -----------------------------------------------------------------------------
NET EXPENSES 1.35% 2.10%
- -----------------------------------------------------------------------------
</TABLE>
(1) You may pay a reduced sales charge on very large purchases. There is no
sales charge at the time of purchase for purchases of $1 million or more but
a sales charge of 1.00% will be assessed on shares redeemed within one year
of purchase. There is also no initial sales charge on certain purchases in a
Roth IRA, a Roth Conversion IRA or a qualified retirement plan.
(2) The 1.00% is waived for benefits paid to you through a qualified pension
plan.
(3) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of each Class of the Fund (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least December 31, 1999.
<PAGE> 29
TOUCHSTONE BALANCED FUND
29
[ICON]TOUCHSTONE FAMILY OF FUNDS
The following example should help you compare the cost of investing in the
Balanced Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
CLASS C
CLASS A SHARES SHARES
<S> <C> <C> <C>
1 YEAR $ 705 $ 213
- -----------------------------------------------------------------------------
3 YEARS $1,620 $1,324
- -----------------------------------------------------------------------------
5 YEARS $2,541 $2,425
- -----------------------------------------------------------------------------
10 YEARS $4,872 $5,139
- -----------------------------------------------------------------------------
</TABLE>
O The example for the 3, 5 and 10-year periods is calculated using the Total
Fund Operating Expenses before the limits agreed to under the Sponsor
Agreement for periods after year 1.
<PAGE> 30
TOUCHSTONE BOND FUND
30
TOUCHSTONE BOND FUND [ICON]TOUCHSTONE FAMILY OF FUNDS
The Fund's Investment Goal
The Bond Fund seeks to provide a high level of current income.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goals.
Its Principal Investment Strategies
The Fund invests primarily in higher quality investment grade debt securities
(at least 65% of total assets). The Fund's investment in debt securities may
be determined by the direction in which interest rates are expected to move
because the value of these securities generally moves in the opposite
direction from interest rates. The Fund expects to have an average maturity
between five and fifteen years.
The Fund invests in:
O Mortgage-related securities
O Asset-backed securities
O Preferred stocks
The Fund also invests in U.S. or foreign debt securities which are rated
non-investment grade (up to 35%).
In addition, the Fund may invest in:
O Debt securities denominated in foreign currencies (20% or less)
The Key Risks
The Fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
O If interest rates go up, causing the value of any debt securities held by
the Fund to decline
O Because investments in foreign securities may have more frequent and
larger price changes than U.S. securities and may lose value due to
changes in currency exchange rates and other factors
O Because issuers of non-investment grade securities held by the Fund are
more likely to be unable to make timely payments of interest or principal
O Because mortgage-related securities and asset-backed securities may lose
more value due to changes in interest rates than other debt securities
and are subject to prepayment
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
<PAGE> 31
TOUCHSTONE BOND FUND
31
[ICON]TOUCHSTONE FAMILY OF FUNDS
Who May Want to Invest
This Fund is most appropriate for you if you prefer to take a relatively low
risk approach to investing. Safety of your investment may be the most important
factor to you. You may be willing to accept potentially lower returns in order
to maintain a lower, more tolerable level of risk. This Fund's approach may be
most appropriate for you if you are nearing retirement.
The Fund's Performance
The following bar chart indicates the risks of investing in the Bond Fund. It
shows changes in the performance of the Fund's Class A shares from year to year
since the Fund's inception. The chart does not reflect any sales charges. Sales
charges will reduce return.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The return for other classes of shares offered by the Fund will differ from the
Class A returns shown in the bar chart, depending on the expenses of that class.
BOND FUND -- CLASS A PERFORMANCE
<TABLE>
<CAPTION>
YEARS TOTAL RETURN
<S> <C>
1995 16.95%
1996 2.85%
1997 7.30%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 5.21% (for the quarter ended December 31, 1997) and the lowest
quarterly return was -2.10% (for the quarter ended March 31, 1997).
<PAGE> 32
TOUCHSTONE BOND FUND
32
[ICON]TOUCHSTONE FAMILY OF FUNDS
The table below shows how the Fund's average annual returns for the periods
shown compare to those of the Lehman Brothers Aggregate Index and to the
Wiesenberger Corp -- Investment Grade -- MF index. The Lehman Brothers Aggregate
Index is comprised of approximately 6000 publicly traded bonds with an average
maturity of about 10 years. The Wiesenberger Corp -- Investment Grade -- MF
index is a composite index of the annual returns of mutual funds that have an
investment style similar to the Bond Fund. The table shows the effect of the
Class A sales charge.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
PAST 12 SINCE FUND
MONTHS STARTED
<S> <C> <C>
BOND FUND -- CLASS A 2.2% 6.7%
- -------------------------------------------------------------------------
BOND FUND -- CLASS C 6.4% 7.5%
- -------------------------------------------------------------------------
LEHMAN BROTHERS AGGREGATE INDEX 9.7% 9.7%
- -------------------------------------------------------------------------
WIESENBERGER CORP -- INVESTMENT GRADE -- MF 8.9% 9.2%
- -------------------------------------------------------------------------
</TABLE>
The Fund's Fees and Expenses
These tables describe the fees and expenses that you may pay if you buy and hold
shares of the Fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID
DIRECTLY FROM YOUR INVESTMENT)
CLASS A SHARES CLASS C SHARES
<S> <C> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON
PURCHASES (AS A PERCENTAGE OF OFFERING
PRICE) 4.75%(1) None
- -----------------------------------------------------------------------------
MAXIMUM DEFERRED SALES CHARGE (LOAD)
(AS A PERCENTAGE OF AMOUNT REDEEMED) None 1.00%(2)
- -----------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
MANAGEMENT FEES 0.55% 0.55%
- -----------------------------------------------------------------------------
DISTRIBUTION (12B-1) FEES 0.25% 1.00%
- -----------------------------------------------------------------------------
OTHER EXPENSES 1.49% 1.49%
- -----------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 2.29% 3.04%
- -----------------------------------------------------------------------------
FEE WAIVER AND/OR EXPENSE REIMBURSEMENT(3) 1.39% 1.39%
- -----------------------------------------------------------------------------
NET EXPENSES 0.90% 1.65%
- -----------------------------------------------------------------------------
</TABLE>
(1) You may pay a reduced sales charge on very large purchases. There is no
sales charge at the time of purchase for purchases of $1 million or more but
a sales charge of 1.00% will be assessed on shares redeemed within one year
of purchase. There is also no initial sales charge on certain purchases in a
Roth IRA, a Roth Conversion IRA or a qualified retirement plan.
(2) The 1.00% is waived for benefits paid to you through a qualified pension
plan.
<PAGE> 33
TOUCHSTONE BOND FUND
33
[ICON]TOUCHSTONE FAMILY OF FUNDS
(3) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of each Class of the Fund (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least December 31, 1999.
The following example should help you compare the cost of investing in the Bond
Fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the Fund for the time periods indicated and then sell all
of your shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
CLASS C
CLASS A SHARES SHARES
<S> <C> <C>
1 YEAR $ 562 $ 168
- -----------------------------------------------------------------------------
3 YEARS $1,029 $ 809
- -----------------------------------------------------------------------------
5 YEARS $1,521 $1,475
- -----------------------------------------------------------------------------
10 YEARS $2,873 $3,258
- -----------------------------------------------------------------------------
</TABLE>
O The example for the 3, 5 and 10-year periods is calculated using the Total
Fund Operating Expenses before the limits agreed to under the Sponsor
Agreement for periods after year 1.
<PAGE> 34
TOUCHSTONE STANDBY
INCOME FUND
34
[ICON]TOUCHSTONE FAMILY OF FUNDS
TOUCHSTONE STANDBY INCOME FUND
The Fund's Investment Goal
The Standby Income Fund seeks to provide a higher level of current income than
a money market fund, while also seeking to prevent large fluctuations in the
value of your initial investment. The Fund does not try to keep a constant
$1.00 per share net asset value.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goals.
Its Principal Investment Strategies
The Fund invests mostly in various types of money market instruments. All
investments will be rated at least investment grade. On average, the
securities held by the Fund will mature in less than one year.
The Fund's investments may include:
O Short-term government securities
O Mortgage-related securities
O Asset-backed securities
O Repurchase agreements
The Fund may invest up to 50% of total assets in:
O Securities denominated in U.S. dollars and issued in the U.S. by foreign
issuers (known as Yankee bonds)
O Eurodollar Certificates of Deposit
In addition, the Fund may invest in:
O Debt securities denominated in foreign currencies (up to 20%)
O Corporate bonds, commercial paper, certificates of deposit, and bankers'
acceptances
The Key Risks
The Fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
O If interest rates go up, causing the value of any debt securities to
decline
O Because mortgage-related securities and asset-backed securities may lose
more value due to changes in interest rates than other debt securities
and are subject to prepayment
O Because investments in foreign securities may have more frequent and
larger price changes than U.S. securities and may lose value due to
changes in currency exchange rates and other factors
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
<PAGE> 35
TOUCHSTONE STANDBY
INCOME FUND
35
[ICON]TOUCHSTONE FAMILY OF FUNDS
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
Who May Want to Invest
This Fund is most appropriate for you if you take a relatively low risk approach
to investing. Safety of your investment is of key importance to you.
Additionally, you are willing to accept potentially lower returns in order to
maintain a lower, more tolerable level of risk. This Fund's approach may be most
appropriate for you if you are nearing retirement, or if you have a longer time
horizon, but nevertheless, have a lower risk tolerance. This Fund is also
appropriate for you if you want the added convenience of writing checks directly
from your account.
The Fund's Performance
The bar chart shown below indicates the risks of investing in the Standby Income
Fund. It shows changes in the performance of the Fund's shares from year to year
since the Fund's inception.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
STANDBY INCOME FUND PERFORMANCE
<TABLE>
<CAPTION>
YEARS TOTAL RETURN
<S> <C>
1995 5.71%
1996 4.80%
1997 5.21%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 1.57% (for the quarter ended December 31, 1995) and the lowest
quarterly return was 1.07% (for the quarter ended March 31, 1996).
<PAGE> 36
TOUCHSTONE STANDBY
INCOME FUND
36
[ICON]TOUCHSTONE FAMILY OF FUNDS
The table below shows how the Fund's average annual returns for the periods
shown compare to those of the Merrill Lynch 91-Day Treasury Index and to the
30-Day Money Market Yield Index. The Merrill Lynch 91-Day Treasury Index
consists of short-term U.S. Treasury securities, maturing in 91 days. The 30-Day
Money Market Yield Index is an index of money market funds based on 30-day
yields.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
PAST 12 SINCE
MONTHS FUND STARTED
<S> <C> <C>
STANDBY INCOME FUND 5.2% 5.2%
- -------------------------------------------------------------------------
MERRILL LYNCH 91-DAY TREASURY INDEX 5.3% 5.5%
- -------------------------------------------------------------------------
30-DAY MONEY MARKET YIELD INDEX 5.1% 5.1%
- -------------------------------------------------------------------------
</TABLE>
The Fund's Fees and Expenses
These tables describe the fees and expenses that you may pay if you buy and hold
shares of the Fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID
DIRECTLY FROM YOUR
INVESTMENT)
<S> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON
PURCHASES (AS A PERCENTAGE OF OFFERING PRICE) None
- ----------------------------------------------------------------------------
MAXIMUM DEFERRED SALES CHARGE (LOAD)
(AS A PERCENTAGE OF AMOUNT REDEEMED) None
- ----------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
MANAGEMENT FEES 0.25%
- ----------------------------------------------------------------------------
DISTRIBUTION (12B-1) FEES None
- ----------------------------------------------------------------------------
OTHER EXPENSES 3.26%
- ----------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 3.51%
- ----------------------------------------------------------------------------
FEE WAIVER AND/OR EXPENSE REIMBURSEMENT(1) 2.76%
- ----------------------------------------------------------------------------
NET EXPENSES 0.75%
- ----------------------------------------------------------------------------
</TABLE>
(1) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of the Fund (the "Sponsor
Agreement"). The Sponsor Agreement will remain in place until at least
December 31, 1999.
The following example should help you compare the cost of investing in the
Standby Income Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual
<PAGE> 37
TOUCHSTONE STANDBY
INCOME FUND
37
[ICON]TOUCHSTONE FAMILY OF FUNDS
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<S> <C>
1 YEAR $ 77
- ----------------------------------------------------------------------------
3 YEARS $ 819
- ----------------------------------------------------------------------------
5 YEARS $1,584
- ----------------------------------------------------------------------------
10 YEARS $3,599
- ----------------------------------------------------------------------------
</TABLE>
O The example for the 3, 5 and 10-year periods is calculated using the Total
Fund Operating Expenses before the limits agreed to under the Sponsor
Agreement for periods after year 1.
<PAGE> 38
INVESTMENT STRATEGIES
AND RISKS
38
[ICON]TOUCHSTONE FAMILY OF FUNDS
INVESTMENT STRATEGIES AND RISKS
Can a Fund Depart From its Normal Strategies?
Each Fund may depart from its investment strategies by taking temporary
defensive positions in response to adverse market, economic or political
conditions. During these times, a Fund may not achieve its investment goals.
Do the Funds Engage in Active Trading of Securities?
The International Equity Fund, Income Opportunity Fund and Bond Fund may engage
in active trading to achieve their investment goals. This may cause the Fund to
realize higher capital gains which would be passed on to you. Higher capital
gains could increase your tax liability. Frequent trading also increases
transaction costs, which would lower the Fund's performance.
Can a Fund Change its Investment Goal?
A Fund's investment goal(s) may be changed by a vote of the Board of Trustees
without shareholder approval. You would be notified at least 30 days before any
such change took effect.
Year 2000 Risk
Touchstone has implemented steps intended to assure that its major computer
systems and processes are capable of Year 2000 processing. We are also examining
the third parties with whom we work to assess their readiness and are developing
contingency plans to assure that any problems in their systems will not
materially affect Touchstone's operations.
Companies or governmental entities in which Touchstone Funds invest could also
be affected by the Year 2000 issue, but at this time the Funds cannot predict
the degree of impact.
Computer systems failure of Touchstone, a Fund Sub-Advisor or that of any Fund
service provider could impair Fund services and have a negative impact on a
Fund's operations and returns.
The Funds at a Glance
The following two tables can give you a quick basic understanding of the types
of securities a Fund tends to invest in and some of the risks associated with a
Fund's investments. You should read all of the information about a Fund and its
risks before deciding to invest.
<PAGE> 39
INVESTMENT STRATEGIES
AND RISKS
39
[ICON]TOUCHSTONE FAMILY OF FUNDS
How Can I Tell, at a Glance, Which Types of Securities a Fund
Might Invest in?
The following table shows the main types of securities in
which each Fund generally will invest. Some of the Funds'
investments are described in detail below:
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME GROWTH STANDBY
GROWTH EQUITY OPPORTUNITY VALUE PLUS & INCOME BALANCED BOND INCOME
FUND FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL INSTRUMENTS
------------------------------
Invests in U.S. stocks -- -- -- -- --
----------------------------
Invests in foreign stocks -- -- -- --
----------------------------
Invests in investment grade
debt securities -- -- -- -- -- -- -- --
----------------------------
Invests in non-investment
grade debt securities -- -- -- -- --
----------------------------
Invests in foreign debt
securities -- -- -- -- -- --
----------------------------
Invests in futures contracts --
----------------------------
Invests in forward currency
contracts --
----------------------------
Invests in asset-backed
securities -- --
----------------------------
Invests in mortgage-related
securities -- -- -- --
----------------------------
Invests in real estate
investment trusts (REITs) --
----------------------------
INVESTMENT TECHNIQUES
------------------------------
Emphasizes securities of
small cap companies --
----------------------------
Emphasizes securities of mid
cap companies --
----------------------------
Emphasizes securities of
large cap companies -- -- --
----------------------------
Emphasizes undervalued
stocks -- -- --
----------------------------
Invests in securities of
emerging markets countries -- -- -- -- --
----------------------------
Emphasizes dividend-paying
common stocks --
----------------------------
Invests in short-term
debt securities -- --
----------------------------
</TABLE>
Additional Information About Fund Investments
FOREIGN COMPANIES. A foreign company is organized under the
laws of a foreign country and:
O Has the principal trading market for its stock in a
foreign country
O Derives at least 50% of its revenues or profits from
operations in foreign countries or has at least 50% of
its assets located in foreign countries
<PAGE> 40
INVESTMENT STRATEGIES
AND RISKS
40
[ICON]TOUCHSTONE FAMILY OF FUNDS
AMERICAN DEPOSITORY RECEIPTS. American Depository Receipts (ADRs) are
securities that represent an ownership interest in a foreign security. They are
generally issued by a U.S. bank to U.S. buyers as a substitute for direct
ownership of the foreign security and are traded on U.S. exchanges.
INVESTMENT GRADE SECURITIES. Investment grade securities are generally rated
BBB or better by Standard & Poor's Rating Service (S&P) or Baa or better by
Moody's Investor Service, Inc. (Moody's).
NON-INVESTMENT GRADE SECURITIES. Non-investment grade securities are higher
risk, lower quality securities, often referred to as "junk bonds" and are
considered speculative. They are rated by S&P as less than BBB or by Moody's as
less than Baa.
ASSET-BACKED SECURITIES. Asset-backed securities represent groups of other
assets, for example credit card receivables, that are combined or pooled for
sale to investors.
MORTGAGE-RELATED SECURITIES. Mortgage-related securities represent groups of
mortgage loans that are combined for sale to investors. The loans may be grouped
together by:
O The Government National Mortgage Association (GNMA)
O The Federal National Mortgage Association (FNMA)
O The Federal Home Loan Mortgage Corporation (FHLMC)
O Commercial banks
O Savings and loan institutions
O Mortgage bankers
O Private mortgage insurance companies
REAL ESTATE INVESTMENT TRUSTS. Real estate investment trusts (REITs) pool
investors' money to invest primarily in income-producing real estate or real
estate-related loans or interests.
"LARGE CAP" AND "MID CAP" COMPANIES. A large cap company has a market
capitalization of more than $5 billion. A mid cap company has a market
capitalization of between $1 billion and $5 billion.
EMERGING GROWTH COMPANIES. Emerging Growth Companies are companies that have:
O A total market capitalization less than that of the average of the
companies in the Standard & Poor's 500 Composite Stock Price Index (S&P
500)
O Earnings that the portfolio managers believe may grow faster than the
U.S. economy in general due to new products, management changes at the
company or economic shocks such as high inflation or sudden increases or
decreases in interest rates
<PAGE> 41
INVESTMENT STRATEGIES
AND RISKS
41
[ICON]TOUCHSTONE FAMILY OF FUNDS
EMERGING MARKET SECURITIES. Emerging Market Securities are
issued by a company that:
O Is organized under the laws of an emerging market
country (any country other than Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany,
Holland, Italy, Japan, Luxembourg, New Zealand,
Norway, Spain, Sweden, Switzerland, the United Kingdom
and the United States)
O Has its principal trading market for its stock in an
emerging market country
O Derives at least 50% of its revenues or profits from
operations within emerging market countries or has at
least 50% of its assets located in emerging market
countries
UNDERVALUED STOCKS. A stock is considered undervalued if the
portfolio manager believes it should be trading at a higher
price than it is at the time of purchase. Factors considered
are:
O Price relative to earnings
O Price relative to cash flow
O Price relative to financial strength
REPURCHASE AGREEMENTS. Repurchase Agreements are
collateralized by obligations issued or guaranteed as to both
principal and interest by the U.S. Government, its agencies,
and instrumentalities. A repurchase agreement is a
transaction in which a security is purchased with a
simultaneous commitment to sell it back to the seller (a
commercial bank or recognized securities dealer) at an agreed
upon price on an agreed upon date. This date is usually not
more than seven days from the date of purchase. The resale
price reflects the purchase price plus an agreed upon market
rate of interest, which is unrelated to the coupon rate or
maturity of the purchased security.
How Can I Tell, at a Glance, a Fund's Key Risks?
The following table shows some of the main risks to which
each Fund is subject. Each risk is described in detail below:
<TABLE>
<CAPTION>
EMERGING INTERNATIONAL INCOME GROWTH STANDBY
GROWTH EQUITY OPPORTUNITY VALUE PLUS & INCOME BALANCED BOND INCOME
FUND FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MARKET RISK -- -- -- -- --
------------------------------
Emerging Growth Companies --
----------------------------
Real Estate Investment
Trusts --
----------------------------
INTEREST RATE RISK -- -- -- -- -- -- -- --
------------------------------
Mortgage-Related Securities -- -- -- --
----------------------------
CREDIT RISK -- -- -- -- -- -- -- --
------------------------------
Non-Investment Grade
Securities -- -- -- -- --
----------------------------
FOREIGN INVESTING RISK -- -- -- -- -- -- --
------------------------------
Emerging Market Risk -- -- -- -- --
----------------------------
Political Risk -- --
----------------------------
</TABLE>
<PAGE> 42
INVESTMENT STRATEGIES
AND RISKS
42
[ICON]TOUCHSTONE FAMILY OF FUNDS
Risks of Investing in the Funds
MARKET RISK. A Fund that invests in common stocks is subject to stock market
risk. Stock prices in general may decline over short or even extended periods,
regardless of the success or failure of a particular company's operations. Stock
markets tend to run in cycles, with periods when stock prices generally go up
and periods when they generally go down. Common stock prices tend to go up and
down more than those of bonds.
O Emerging Growth Companies. Investment in Emerging Growth Companies is
subject to enhanced risks because such companies generally have limited
product lines, markets or financial resources and often exhibit a lack of
management depth. The securities of such companies can be difficult to
sell and are usually more volatile than securities of larger, more
established companies.
O Real Estate Investment Trusts (REITs). Investment in REITs is subject to
risks similar to those associated with the direct ownership of real
estate (in addition to securities markets risks). REITs are sensitive to
factors such as changes in real estate values and property taxes,
interest rates, cash flow of underlying real estate assets, supply and
demand, and the management skill and creditworthiness of the issuer.
REITs may also lose value due to changes in tax or other regulatory
requirements.
INTEREST RATE RISK. A Fund that invests in debt securities is subject to the
risk that the market value of the debt securities will decline because of rising
interest rates. The prices of debt securities are generally linked to the
prevailing market interest rates. In general, when interest rates rise, the
prices of debt securities fall, and when interest rates fall, the prices of debt
securities rise. The price volatility of a debt security also depends on its
maturity. Generally, the longer the maturity of a debt security the greater its
sensitivity to changes in interest rates. To compensate investors for this
higher risk, debt securities with longer maturities generally offer higher
yields than debt securities with shorter maturities.
O Mortgage-Related Securities. Payments from the pool of loans underlying a
mortgage-related security may not be enough to meet the monthly payments
of the mortgage-related security. If this occurs the mortgage-related
security will lose value. Also, prepayments of mortgages or mortgage
foreclosures will shorten the life of the pool of mortgages underlying a
mortgage-related security and will affect the average life of the
mortgage-related securities held by a Fund. Mortgage prepayments vary
based on several factors including the level of interest rates, general
economic conditions, the location and age of the mortgage and other
demographic conditions. In periods of falling interest rates, there are
usually more prepayments. The reinvestment of cash received from
prepayments will, therefore, usually be at a lower interest rate than the
original investment, lowering a Fund's yield. Mortgage-related securities
may be less likely to increase in value during periods of falling
interest rates than other debt securities.
<PAGE> 43
INVESTMENT STRATEGIES
AND RISKS
43
[ICON]TOUCHSTONE FAMILY OF FUNDS
CREDIT RISK. The debt securities in a Fund's portfolio are subject to credit
risk. Credit risk is the possibility that an issuer will fail to make timely
payments of interest or principal. Securities rated in the lowest category of
investment grade securities have some risky characteristics and changes in
economic conditions are more likely to cause issuers of these securities to be
unable to make payments.
O Non-Investment Grade Securities. Non-investment grade securities are
sometimes referred to as junk bonds and are very risky with respect to
their issuers' ability to make payments of interest and principal. There
is a high risk that a Fund which invests in non-investment grade
securities could suffer a loss caused by the default of an issuer of such
securities. Part of the reason for this high risk is that, in the event
of a default or bankruptcy, holders of non-investment grade securities
generally will not receive payments until the holders of all other debt
have been paid. In addition, the market for non-investment grade
securities has, in the past, had more frequent and larger price changes
than the markets for other securities. Non-investment grade securities
can also be more difficult to sell for good value.
FOREIGN INVESTING. Investing in foreign securities poses unique risks such as
fluctuation in currency exchange rates, market illiquidity, price volatility,
high trading costs, difficulties in settlement, regulations on stock exchanges,
limits on foreign ownership, less stringent accounting, reporting and disclosure
requirements, and other considerations. In the past, equity and debt instruments
of foreign markets have had more frequent and larger price changes than those of
U.S. markets.
O Emerging Markets Risk. Investments in a country that is still relatively
underdeveloped involves exposure to economic structures that are
generally less diverse and mature than in the U.S. and to political and
legal systems which may be less stable. In the past, markets of
developing countries have had more frequent and larger price changes than
those of developed countries.
O Political Risk. Political risk includes a greater potential for revolts,
and the taking of assets by governments. For example, a Fund may invest
in Eastern Europe and former states of the Soviet Union. These countries
were under communist systems that took control of private industry. This
could occur again in this region or others in which a Fund may invest, in
which case the Fund may lose all or part of its investment in that
country's issuers.
<PAGE> 44
THE FUNDS' MANAGEMENT
44
THE FUNDS' MANAGEMENT [ICON]TOUCHSTONE FAMILY OF FUNDS
Investment Advisor
Touchstone Advisors, Inc., (the Advisor or Touchstone Advisors) located at 311
Pike Street, Cincinnati, Ohio 45202 is the investment advisor of the Funds.
Touchstone Advisors has been registered as an investment advisor under the
Investment Advisers Act of 1940, as amended (the Advisers Act) since 1994. As of
June 30, 1998, Touchstone Advisors had $361 million in assets under management.
Touchstone Advisors is responsible for selecting Fund Sub-Advisors who have
shown good investment performance in their areas of expertise. The Board of
Trustees of the Trust reviews and must approve the Advisor's selections.
Touchstone considers various factors in evaluating Fund Sub-Advisors, including:
O Level of knowledge and skill
O Performance as compared to its peers or benchmark
O Consistency of performance over five years or more
O Level of compliance with investment rules and strategies
O Employees, facilities and financial strength
O Quality of service
Touchstone will also continually monitor each Fund Sub-Advisor's performance
through various analyses and through in-person, telephone and written
consultations with the Fund Sub-Advisors.
Touchstone discusses its expectations for performance with each Fund Sub-
Advisor. Touchstone provides written evaluations and recommendations to the
Board of Trustees, including whether or not each Fund Sub-Advisor's contract
should be renewed, modified or terminated.
Touchstone is also responsible for running all of the operations of the Funds,
except for those that are subcontracted to the Fund Sub-Advisors, custodian,
transfer agent and administrator.
Two or more Fund Sub-Advisors may manage a Fund, with each managing a portion of
the Fund's assets. If a Fund has more than one Fund Sub-Advisor, Touchstone
allocates how much of a Fund's assets are managed by each Sub-Advisor.
Touchstone may change these allocations from time to time, often based upon the
results of the evaluations of the Fund Sub-Advisors.
Each Fund pays Touchstone a fee for its services. Out of this fee Touchstone
pays each Fund Sub-Advisor a fee for its services.
<PAGE> 45
THE FUNDS' MANAGEMENT
45
[ICON]TOUCHSTONE FAMILY OF FUNDS
The fee paid to Touchstone by each Fund is shown in the table below:
<TABLE>
<CAPTION>
FEE TO TOUCHSTONE
(AS % OF AVERAGE
DAILY NET ASSETS)
<S> <C> <C>
EMERGING GROWTH FUND 0.80%
- ----------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND 0.95%
- ----------------------------------------------------------------------------
INCOME OPPORTUNITY FUND 0.65%
- ----------------------------------------------------------------------------
VALUE PLUS FUND 0.75%
- ----------------------------------------------------------------------------
GROWTH & INCOME FUND 0.80%
- ----------------------------------------------------------------------------
BALANCED FUND 0.80%
- ----------------------------------------------------------------------------
BOND FUND 0.55%
- ----------------------------------------------------------------------------
STANDBY INCOME FUND 0.25%
- ----------------------------------------------------------------------------
</TABLE>
Fund Sub-Advisors
The Fund Sub-Advisors make the day-to-day decisions regarding buying and selling
specific securities for a Fund. Each Fund Sub-Advisor manages the investments
held by the Fund it serves according to the applicable investment goals and
strategies.
David L. Babson & Company, Inc. (Babson)
One Memorial Drive, Cambridge, MA 02142-1300
Fund Sub-Advisor to the Emerging Growth Fund
Babson has been registered as an investment advisor under the Advisers Act since
1940. Babson provides investment advisory services to individual and
institutional clients. As of June 30, 1998, Babson and affiliates had assets
under management of $21.1 billion. Babson has been managing the Emerging Growth
Fund since the Fund's inception.
Dennis J. Scannell , Peter C. Schliemann and Lance F. James have primary
responsibility for the day-to-day management of the Fund. Mr. Scannell has been
with the firm since 1993, Mr. Schliemann has been with Babson since 1979, and
Mr. James has been with the firm since 1986.
Westfield Capital Management Company, Inc. (Westfield)
One Financial Center, Boston, MA 02111
Fund Sub-Advisor to the Emerging Growth Fund
Westfield has been registered as an investment advisor under the Advisers Act
since 1989. Westfield provides investment advisory services to individual and
institutional clients. As of June 30, 1998, Westfield had assets under
management of $1.5 billion. Westfield has been managing the Emerging Growth Fund
since the Fund's inception.
Michael J. Chapman has managed the portion of the Emerging Growth Fund's assets
allocated to Westfield by the Advisor since October, 1994. Mr. Chapman (CFA) has
been with Westfield since 1990.
<PAGE> 46
THE FUNDS' MANAGEMENT
46
[ICON]TOUCHSTONE FAMILY OF FUNDS
Credit Suisse Asset Management (Credit Suisse)
One Citicorp Center, 153 East 53rd Street, New York, NY 10022
Fund Sub-Advisor to the International Equity Fund
Credit Suisse has been registered as an investment advisor under the Advisers
Act since 1968. Credit Suisse provides investment advisory services to
individual and institutional clients. As of June 30, 1998, Credit Suisse had
assets under management of $35.6 billion. Credit Suisse has been managing the
International Equity Fund since the Fund's inception.
The Fund is managed by the Credit Suisse International Equity Management Team.
The team consists of William Sterling, Richard Watt, Steven D. Bleiberg, Susan
Boland, Emily Alejos and Robert B. Hrabchak.
Alliance Capital Management L.P. (Alliance)
1345 Avenue of the Americas, New York, NY 10105
Fund Sub-Advisor to the Income Opportunity Fund
Alliance has been registered as an investment advisor under the Advisers Act
since 1971. Alliance provides investment advisory services to individual and
institutional clients. As of June 30, 1998, Alliance had assets under management
of $263 billion. Alliance has been managing the Income Opportunity Fund since
the Fund's inception.
Wayne Lyski and Vicki Fuller have primary responsibility for the day-to-day
management of the Fund. Mr. Lyski has been with Alliance since 1983. Ms. Fuller
(CPA) has been with Alliance, and its predecessors, since 1985.
Fort Washington Investment Advisors, Inc. (Fort Washington)
420 East Fourth Street, Cincinnati, OH 45202
Fund Sub-Advisor to the Value Plus Fund, Bond Fund, and Standby Income Fund
Fort Washington has been registered as an investment advisor under the Advisers
Act since 1990. Fort Washington provides investment advisory services to
individual and institutional clients. As of June 30, 1998, Fort Washington had
assets under management of $9.8 billion. Fort Washington has been managing the
Value Plus Fund, the Bond Fund and the Standby Income Fund since each Fund's
inception.
VALUE PLUS FUND: John C. Holden has managed the Value Plus Fund since May 1998.
Mr. Holden (CFA) joined Fort Washington in May 1997 and is Vice President and
Senior Portfolio Manager. Mr. Holden previously served as senior portfolio
manager with Mellon Private Asset Management in Pittsburgh, senior portfolio
manager and investment analyst for Star Bank's Stellar Performance Group in
Cincinnati, and senior employee benefit portfolio manager for First Kentucky
Trust Company in Louisville.
BOND FUND: Roger Lanham and Brendan White have managed the Bond Fund since
October, 1994. Mr. Lanham is a CFA and has been with Fort Washington since 1980.
Mr. White is a CFA and has been with Fort Washington since 1993.
<PAGE> 47
THE FUNDS' MANAGEMENT
47
[ICON]TOUCHSTONE FAMILY OF FUNDS
STANDBY INCOME FUND: Christopher J. Mahony has managed the Standby Income Fund
since October 1994. Mr. Mahony joined Fort Washington in 1994 after eight years
of investment experience with Neuberger & Berman.
Fort Washington is an affiliate of Touchstone. Therefore, Touchstone may have a
conflict of interest when making decisions to keep Fort Washington as a Fund
Sub-Advisor. The Board of Trustees reviews all of Touchstone's decisions to
reduce the possibility of a conflict of interest situation.
Scudder Kemper Investments, Inc. (Scudder Kemper)
345 Park Avenue, New York, NY 10154
Fund Sub-Advisor to the Growth & Income Fund
Scudder Kemper and its predecessors have provided investment advisory services
to mutual fund investors, retirement and pension plans, institutional and
corporate clients, insurance companies, and private family and individual
accounts since 1943. As of June 30, 1998, Scudder Kemper had assets under
management of $235 billion. Scudder Kemper has been managing the Growth & Income
Fund since June 1997.
Robert T. Hoffman, Lori Ensinger, Benjamin W. Thorndike and Kathleen T. Millard
have primary responsibility for the day-to-day management of the Fund. Mr.
Hoffman, Lead Product Manager, joined Scudder in 1990. He has 13 years of
experience in the investment industry, including several years of pension fund
management experience. Lori Ensinger, Lead Portfolio Manager, focuses on stock
selection and investment strategy. She has been a portfolio manager since 1983
and joined Scudder in 1993. Benjamin W. Thorndike, Portfolio Manager, is the
Fund's chief analyst and strategist for convertible securities. Mr. Thorndike,
who has 18 years of investment experience, joined Scudder in 1983. Kathleen T.
Millard, Portfolio Manager, has worked as a portfolio manager since 1986. Ms.
Millard, who joined Scudder in 1991, focuses on strategy and stock selection.
OpCap Advisors (OpCap)
Oppenheimer Tower, One World Financial Center, New York, NY 10281
Fund Sub-Advisor to the Balanced Fund
OpCap is a subsidiary of Oppenheimer Capital. Oppenheimer Capital has been
registered as an investment advisor under the Advisers Act since 1968 and its
employees perform all investment advisory services provided to the Fund. As of
June 30, 1998, Oppenheimer Capital and its subsidiaries had assets under
management of $67.3 billion. OpCap has been managing the Balanced Fund since May
1997.
Alan Gutmann has managed the equity portion of the Balanced Fund since 1997.
Robert J. Bluestone and Matthew Greenwald have managed the fixed-income portion
of the Balanced Fund since 1997. Mr. Gutmann joined Oppenheimer Capital in 1991
and is Vice President. Mr. Bluestone joined Oppenheimer Capital in 1986 and is
Managing Director. Mr. Greenwald joined Oppenheimer Capital in 1989 and is Vice
President.
<PAGE> 48
INVESTING WITH TOUCHSTONE
48
[ICON]TOUCHSTONE FAMILY OF FUNDS
INVESTING WITH TOUCHSTONE
Opening An Account
CHOOSING THE APPROPRIATE FUNDS TO MATCH YOUR
GOALS. Investing well requires a plan. We recommend that you
meet with your financial advisor to plan a strategy that will
best meet your financial goals.
You should read this Prospectus carefully and then determine
how much you want to invest. Check below to find the minimum
investment amount required for each Class of shares as well
as to learn about the various ways you can purchase your
shares:
<TABLE>
<CAPTION>
CLASS A CLASS C
INITIAL ADDITIONAL INITIAL ADDITIONAL
INVESTMENT INVESTMENT INVESTMENT INVESTMENT
<S> <C> <C> <C> <C>
REGULAR ACCOUNT $500 $50 $1,000 $50
- ---------------------------------------------------------------------------------------------------------
RETIREMENT PLAN ACCOUNT OR CUSTODIAL ACCOUNT UNDER A
UNIFORM GIFTS/TRANSFERS TO MINORS ACT ("UGTMA") $250 $50 $ 250 $50
- ---------------------------------------------------------------------------------------------------------
INVESTMENTS THROUGH THE AUTOMATIC INVESTMENT PLAN
OR THROUGH THE DIRECT DEPOSIT PLAN $ 50 $50 $ 50 $50
- ---------------------------------------------------------------------------------------------------------
</TABLE>
O Investor Alert: Touchstone could change these initial
and additional investment minimums at any time.
Investing in the Funds
You can contact your financial advisor to purchase shares of
the Funds.
You may also purchase shares of any Fund directly from
Touchstone. In any event, you must complete a New Account
Application Form. You may obtain account applications from
Touchstone or your financial advisor.
O Investor Alert: Touchstone may choose to refuse any
purchase order.
Pricing of Fund Shares
Each Fund's share price, also called net asset value (NAV),
is determined as of the close of trading (normally 4:00 p.m.
Eastern time) every day the New York Stock Exchange (NYSE) is
open. The fund calculates the NAV per share, generally using
market prices, by dividing the total value of each class' net
assets by the number of the class shares outstanding. Shares
are purchased at the next offering price determined after
your purchase or sale order is received in proper form by
Touchstone. The offering price is the NAV plus a sales
charge, if applicable.
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[ICON]TOUCHSTONE FAMILY OF FUNDS
The Fund's investments are valued based on market value or, if no market value
is available, based on fair value as determined by the Board of Trustees (or
under their direction). All assets and liabilities initially expressed in
foreign currency values will be converted into U.S. dollar values. Some specific
pricing strategies follow:
O All short-term dollar-denominated investments that mature in 60 days or
less are valued on the basis of amortized cost which the Board of
Trustees has determined represents fair value.
O Securities mainly traded on a U.S. exchange are valued at the last sale
price on that exchange or, if no sales occurred during the day, at the
current quoted bid price.
O Securities mainly traded on a non-U.S. exchange are generally valued
according to the preceding closing values on that exchange. However, if
an event which may change the value of a security occurs after the time
that the closing value on the non-U.S. exchange was determined, the Board
of Trustees might decide to value the security based on fair value. This
may cause the value of the security on the books of the fund to be
significantly different from the closing value on the non-U.S. exchange
and may affect the calculation of the NAV.
O Because portfolio securities that are primarily listed on a non-U.S.
exchange may trade on weekends or other days when a Fund does not price
its shares, a Fund's NAV may change on days when shareholders will not be
able to buy or sell shares.
Choosing a Class of Shares
Each of the Funds (other than the Standby Income Fund) offers Class A shares and
Class C shares. Each class of shares charges different sales charges and
distribution or service fees. The amount of sales charges and other fees you pay
will depend on which class of shares you decide to purchase.
Each Fund also offers Class Y shares. Class Y shares are only available for
purchase by pension plans.
The Standby Income Fund does not have share classes and it does not charge sales
charges, distribution fees or service fees. The Standby Income Fund may be
purchased by all investors.
Class A Shares
The offering price of each Class A share of a Fund is equal to its NAV plus a
front-end sales charge that you pay when you buy your shares. The front-end
sales charge is generally deducted from the amount of your investment.
The following tables show the amounts of the front-end sales charge you will pay
on purchases of Class A shares of each Fund as a percentage of (1) offering
price and (2) the net amount invested after the charge has been
<PAGE> 50
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[ICON]TOUCHSTONE FAMILY OF FUNDS
subtracted. Note that the front-end sales charge gets lower as your investment
amount gets larger.
For Emerging Growth Fund, International Equity Fund, Value Plus Fund, Growth &
Income Fund and Balanced Fund
<TABLE>
<CAPTION>
SALES CHARGE AS % OF SALES CHARGE AS % OF
AMOUNT OF YOUR INVESTMENT OFFERING PRICE NET AMOUNT INVESTED
<S> <C> <C>
UNDER $50,000 5.75% 6.10%
- ----------------------------------------------------------------------------------
$50,000 BUT LESS THAN $100,000 4.50% 4.71%
- ----------------------------------------------------------------------------------
$100,000 BUT LESS THAN $250,000 3.50% 3.63%
- ----------------------------------------------------------------------------------
$250,000 BUT LESS THAN $500,000 2.50% 2.56%
- ----------------------------------------------------------------------------------
$500,000 BUT LESS THAN $1
MILLION 2.00% 2.04%
- ----------------------------------------------------------------------------------
$1 MILLION OR MORE 0.00% 0.00%
- ----------------------------------------------------------------------------------
</TABLE>
For Income Opportunity Fund and Bond Fund
<TABLE>
<CAPTION>
SALES CHARGE AS % OF SALES CHARGE AS % OF
AMOUNT OF YOUR INVESTMENT OFFERING PRICE NET AMOUNT INVESTED
<S> <C> <C>
UNDER $25,000 4.75% 4.99%
- ----------------------------------------------------------------------------------
$25,000 BUT LESS THAN $50,000 4.50% 4.71%
- ----------------------------------------------------------------------------------
$50,000 BUT LESS THAN $100,000 4.00% 4.17%
- ----------------------------------------------------------------------------------
$100,000 BUT LESS THAN $250,000 3.50% 3.63%
- ----------------------------------------------------------------------------------
$250,000 BUT LESS THAN $500,000 2.50% 2.56%
- ----------------------------------------------------------------------------------
$500,000 BUT LESS THAN $1
MILLION 2.00% 2.04%
- ----------------------------------------------------------------------------------
$1 MILLION OR MORE 0.00% 0.00%
- ----------------------------------------------------------------------------------
</TABLE>
There is no front-end sales charge if you invest $1 million or more in the
Funds. This includes large total purchases made through programs such as
Aggregation, Concurrent Purchases, Letters of Intent and Rights of Accumulation.
These programs are described more fully in the Statement of Additional
Information (SAI). In addition, there is no front-end sales charge on purchases
by certain persons related to the Fund or its service providers and certain
other persons listed in the Statement of Additional Information.
If you redeem shares that you purchased as part of the $1 million purchase
within one year, you will pay a contingent deferred sales charge (a sales charge
you pay when you redeem your shares) of 1% on the shares redeemed.
Each Fund (other than the Standby Income Fund) has adopted a distribution and
service plan under Rule 12b-1 of the Investment Company Act of 1940, as amended
(the 1940 Act) for its Class A shares. This plan allows each
<PAGE> 51
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[ICON]TOUCHSTONE FAMILY OF FUNDS
Fund to pay distribution and other fees for the sale and distribution of its
Class A shares and for services provided to holders of Class A shares.
Under the plan, each Fund pays an annual fee of up to 0.25% of the average daily
net assets of the Fund that are attributable to Class A shares. Because these
fees are paid out of the Fund's assets on an ongoing basis, these fees will
increase the cost of your investment.
Class C Shares
The offering price of each Class C share is equal to its NAV. No front-end sales
charge is applied at the time of purchase. All of your investment money goes to
work for you immediately. However, a contingent deferred sales charge of 1% of
the offering price will be charged on shares redeemed within one year after you
purchased them.
No contingent deferred sales charge is applied if:
O The shares which you redeem were acquired through the reinvestment of
dividends or capital gains distributions
O The amount redeemed resulted from increases in the value of the account
above the amount of the total purchase payments
When we determine whether a contingent deferred sales charge is payable on a
redemption, we assume that:
O The redemption is made first from amounts free of any contingent deferred
sales charge; then
O From the earliest purchase payments(s) that remain invested in the Funds
When we determine if amounts are available for redemption free of any contingent
deferred sales charge, we:
O Add together all of your original purchase payments
O Subtract any amounts previously withdrawn; then
O Check if there is any remaining amount free of any contingent deferred
sales charge that can be applied to the total of the current value of the
shares you have asked to redeem
There is no contingent deferred sales charge on purchases by certain persons
related to the Fund or its service providers and certain other parties.
Each Fund (other than the Standby Income Fund) has adopted a distribution and
service plan under Rule 12b-1 of the 1940 Act for its Class C shares. This plan
allows each Fund to pay distribution and other fees for the sale and
distribution of its Class C shares and for services provided to holders of Class
C shares.
Under the plan, each Fund pays an annual fee of up to 1.00% of the average daily
net assets of the Fund that are attributable to Class C shares. Because these
fees are paid out of the Fund's assets on an ongoing basis, these fees will
increase the cost of your investment and over time may cost you more than paying
other types of sales charges.
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[ICON]TOUCHSTONE FAMILY OF FUNDS
Purchasing Your Shares
You can invest in the Fund shares in the following ways:
<TABLE>
<CAPTION>
OPENING AN ACCOUNT
<C> <S>
- Please make your check (in U.S. dollars) payable to the
Touchstone Family of Funds.
- Send your check with the completed account application to
the address shown on the application or to your financial
advisor. Your application will be processed subject to
BY CHECK your check clearing.
- ----------------------------
- First, telephone Touchstone at 800.669.2796 (PRESS 1)
between the hours of 8:00 a.m. and 4:00 p.m. Eastern time on
a day when the NYSE is open for regular trading. When you
call, you will receive an account number.
- Instruct your bank to transfer funds by wire to Touchstone
at the following address: Touchstone Family of Funds, c/o
State Street Bank and Trust Company, P.O. Box 8518,
Boston, Massachusetts 02266-8518, ABA Number 011000028,
DDA Number 9905-036-1, Attention: Mutual Funds Division.
- Specify in the wire: (1) the name of the Fund, (2) the
account number which Touchstone assigned to you, and (3)
your name. If Touchstone receives the federal funds before
the close of regular trading of the NYSE on a day the NYSE
is open for regular trading, you may purchase Fund shares
BY WIRE as of that day.
- ----------------------------
- First, you should follow the procedures under "By Check"
or "By Wire" in order to get an account number for Fund(s)
which you do not currently own shares of, but which you
desire to exchange shares into.
- You may exchange your Fund shares for shares of the same
Class of another Fund (or of the Standby Income Fund)
described in this Prospectus at their respective NAVs.
- You do not have to pay any exchange fee for these
exchanges.
- You should review the disclosure provided in this
Prospectus relating to the exchanged-for shares carefully
BY EXCHANGE before making an exchange of your Fund shares.
- ----------------------------
You can begin the process of purchasing shares by wire or
arrange for an exchange of shares by calling Touchstone
In-Touch, Touchstone's automated response system, at
1.800.669.2796 and speaking to a customer service
representative (PRESS 1,1,3).
Touchstone In-Touch can also provide you with other
BY TELEPHONE information about the Funds such as daily share prices.
- ----------------------------
- You may invest in each Fund through various Retirement
Plans. The Funds' shares are designed for use with certain
types of tax qualified retirement plans including defined
benefit and defined contribution plans.
- For further information about any of the plans,
agreements, applications and annual fees, contact Touchstone
THROUGH RETIREMENT PLANS or your financial advisor.
- ----------------------------
</TABLE>
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[ICON]TOUCHSTONE FAMILY OF FUNDS
<TABLE>
<CAPTION>
ADDING TO YOUR ACCOUNT
<C> <S>
- Complete the investment form provided at the bottom of a
recent account statement.
- Make your check payable to the Touchstone Family of Funds.
- Write your account number and asset allocation model
number, if applicable, on the check.
- Either: (1) Mail the check with the investment form in the
envelope provided with your account statement; or (2) Mail
your check directly to your financial advisor at the
address printed on your account statement. Your financial
advisor is responsible for forwarding payment promptly to
BY CHECK Touchstone.
- ----------------------------
- Refer to wire instructions for opening an account.
- Specify in the wire: (1) the name of the Fund, (2) the
account number which Touchstone assigned to you, and (3)
your name. If Touchstone receives the federal funds before
the close of regular trading of the New York Stock
Exchange (NYSE) on a day the NYSE is open for regular
BY WIRE trading, you may purchase Fund shares as of that day.
- ----------------------------
- You may exchange your Fund shares for shares of the same
Class of another Fund (or of the Standby Income Fund)
described in this Prospectus at their respective NAVs.
- You do not have to pay any exchange fee for these
exchanges.
- You should review the disclosure provided in this
Prospectus relating to the exchanged-for shares carefully
BY EXCHANGE before making an exchange of your Fund shares.
- ----------------------------
You can arrange for an exchange of shares by calling
Touchstone In-Touch, Touchstone's automated response system,
at 1.800.669.2796 and speaking to a customer service
representative (PRESS 1,1,3).
Touchstone In-Touch can also provide you with other
BY TELEPHONE information about the Funds such as daily share prices.
- ----------------------------
- You may add to your account in each Fund through various
Retirement Plans. For further information contact Touchstone
THROUGH RETIREMENT PLANS or your financial advisor.
- ----------------------------
</TABLE>
More Information About Wire Transfers.
You may invest in the Funds directly by wire transfers.
Contact your bank and request it to wire federal funds to
Touchstone. Banks may charge a fee for handling wire
transfers. You should contact Touchstone or your financial
advisor for further instructions.
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[ICON]TOUCHSTONE FAMILY OF FUNDS
???SPECIAL TAX CONSIDERATION
- ---------------------------
For federal income tax purposes, an exchange of shares is treated as a sale
of the shares and a purchase of the shares you receive in exchange.
Therefore, you may incur a taxable gain or loss in connection with the
exchange.
???SPECIAL TAX CONSIDERATION
- ---------------------------
To determine which type of Retirement Plan is appropriate for you, please
contact your tax advisor.
More Information About Exchanges.
For exchanges from the Standby Income Fund, which has no sales charge associated
with it, the applicable sales charges on the Fund being purchased will apply.
The exception would be if those Standby Income Fund shares were acquired by an
exchange from a Fund which does have a sales charge or by reinvestment or
cross-reinvestment of dividends or capital gains distributions.
More Information About Retirement Plans.
Retirement Plans may include the following:
Individual Retirement Plans
O Traditional Individual Retirement Accounts (IRAs)
O Savings Incentive Match Plan for Employees (SIMPLE) IRAs
O Roth Individual Retirement Accounts (Roth IRAs)
O Education Individual Retirement Accounts (Education IRAs)
O Simplified Employee Pension Plan (SEP IRAs)
O 403(b) Tax Sheltered Accounts that employ as custodian a bank acceptable
to the Distributor
Employer Sponsored Retirement Plans
O Defined benefit plans
O Defined contribution plans (including 401K plans, profit sharing plans
and money purchase plans)
O 457 Plans
Automatic Investment Options
The various ways that you can invest in the Funds are outlined below. Touchstone
does not charge any fees for these services.
AUTOMATIC INVESTMENT PLAN. You can pre-authorize monthly or quarterly
investments of $50 or more in each Fund to be processed electronically from a
checking or savings account. You will need to complete the appropriate forms to
do this. See the account application for further details about this service or
call Touchstone at 800.669.2796 (press 1).
REINVESTMENT/CROSS REINVESTMENT. Dividends and capital gains can be
automatically reinvested in the Fund that pays them or another Fund within the
same class of shares without a fee or sales charge. Dividends and capital gains
will be reinvested in the Fund that pays them, unless you indicate otherwise on
your account application. You may also choose to have your dividends or capital
gains paid to you in cash.
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[ICON]TOUCHSTONE FAMILY OF FUNDS
DIRECT DEPOSIT PURCHASE PLAN. You may automatically invest Social Security
checks, private payroll checks, pension payouts or any other pre-authorized
government or private recurring payments in our Funds. This occurs on a monthly
basis and the minimum investment is $50.
DOLLAR COST AVERAGING. Touchstone's Dollar Cost Averaging program allows you to
diversify your investments by investing the same amount on a regular basis. You
can set up periodic automatic transfers of at least $50 from one Touchstone Fund
to any other. The applicable sales charge, if any, will be assessed.
PROCESSING ORGANIZATIONS. You may also purchase shares of the Funds through a
"Processing Organization", (e.g. a mutual fund supermarket) which is a
broker-dealer, bank or other financial institution that purchases shares for its
customers. Some of the Funds have authorized certain Processing Organizations to
receive purchase and sales orders on their behalf. Before investing in the Funds
through a Processing Organization, you should read any materials provided by the
Processing Organization in conjunction with this Prospectus.
When shares are purchased this way, there may be various differences. The
Processing Organization may:
O Charge a fee for its services
O Act as the shareholder of record of the shares
O Set different minimum initial and additional investment requirements
O Impose other charges and restrictions
O Designate intermediaries to accept purchase and sales orders on the
Funds' behalf
Touchstone considers a purchase or sales order as received when an authorized
Processing Organization, or its authorized designee, receives the order in
proper form. These orders will be priced based on the Fund's NAV next computed
after such order is received in proper form.
Shares held through a Processing Organization may be transferred into your
name following procedures established by your Processing Organization and
Touchstone. Certain Processing Organizations may receive compensation from the
Funds, Touchstone, the Advisor or their affiliates.
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[ICON]TOUCHSTONE FAMILY OF FUNDS
Selling Your Shares
You may sell some or all of your Fund shares on any day that the Fund calculates
its NAV. If your request is received in proper form before the close of regular
trading on the NYSE, you will receive a price based on that day's NAV for the
shares you sell. Otherwise, the price you receive will be based on the NAV that
is next calculated.
<TABLE>
<C> <S> <C>
- You can sell or exchange your shares over the
telephone, unless you have specifically
declined this option. If you do not wish to
have this ability, you must mark the
appropriate section of the New Account
Application Form.
- To sell your Fund shares by telephone call
Touchstone at 800.669.2796 (PRESS 1) or, from
outside the United States, 617.483.5000 ext.
6518. You can also send us a fax at
617.483.2354 between the hours of 8:00 a.m. and
4:00 p.m. Eastern time on a day when the NYSE
BY TELEPHONE is open for regular trading.
- ------------------------------------------------------------------------
- Write to Touchstone.
- Specify the name of the Fund.
- Indicate the number of shares or dollar amount
to be sold.
BY MAIL - Include your name and account number.
- ------------------------------------------------------------------------
- Complete the appropriate information on the New
Account Application Form or fill out a
Touchstone Wire Transfer Form.
- If your proceeds are $1,000 or more, you may
request that the Transfer Agent wire them to your
bank account.
- You may also request wire transfer of your
proceeds in writing. Written requests should
include the name, location and ABA or bank
routing number (if known) of your designated
BY WIRE bank and your account number.
- ------------------------------------------------------------------------
- If a corporation, partnership, trust or
fiduciary requests the sale of shares, Touchstone
will require proof of their authority before
BY A THIRD PARTY shares are sold.
- ------------------------------------------------------------------------
- You may also sell shares by contacting your
financial advisor, who may charge you a fee for
this service. Shares held in street name must
THROUGH YOUR be sold through your financial advisor or, if
FINANCIAL ADVISOR applicable, the Processing Organization.
- -----------------
</TABLE>
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[ICON]TOUCHSTONE FAMILY OF FUNDS
???SPECIAL TAX CONSIDERATION
- ---------------------------
Selling your shares may cause you to incur a taxable gain or loss.
O INVESTOR ALERT: Unless otherwise specified, proceeds will be sent to the
record owner at the address shown on Touchstone's records.
SIGNATURE GUARANTEES. Some circumstances require that the request for the sale
of shares have a signature guarantee. A signature guarantee helps protect you
against fraud. You can obtain one from most banks or securities dealers, but not
from a notary public. Some circumstances requiring a signature guarantee
include:
O Proceeds from the sale of shares that exceeds $50,000
O Proceeds to be paid to a person other than the record owner
O Proceeds to be sent to an address other than the address on the Transfer
Agent's records
O Proceeds to be paid to a corporation, partnership, trust or fiduciary
TELEPHONE SALES. If we receive your share sale request before 4:00 p.m. Eastern
Time on a day when the NYSE is open for regular trading, the sale of your shares
will be processed that day. Otherwise it will occur on the next business day.
Interruptions in telephone service could prevent you from selling your shares in
this manner when you want to. When you have difficulty making telephone sales,
you should mail (or send by overnight delivery) a written request for sale of
your shares to Touchstone.
In order to protect your investment assets, Touchstone intends to only follow
instructions received by telephone that it reasonably believes to be genuine.
However, there is no guarantee that the instructions relied upon will always be
genuine and the Trust will not be liable for those cases. The Trust has certain
procedures to confirm that telephone instructions are genuine. If it does not
follow such procedures in a particular case it may be liable for any losses due
to unauthorized or fraudulent instructions. Some of these procedures include:
O Requiring personal identification
O Making checks payable only to the owner(s) of the account shown on the
Trust's records
O Mailing checks only to the account address shown on the Trust's records
O Directing wires only to the bank account shown on the Trust's records
O Providing written confirmation for transactions requested by telephone
O Tape recording instructions received by telephone
SYSTEMATIC WITHDRAWAL PLAN. You may elect to receive or send to a third party
monthly, quarterly or annual withdrawals of $50 or more if your account value is
at least $5,000. There is no special fee for this service and no minimum value
is required for retirement plans.
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???SPECIAL TAX CONSIDERATION
- ---------------------------
If you exercise the Reinstatement Privilege, you should contact your tax
advisor.
???SPECIAL TAX CONSIDERATION
- ---------------------------
Involuntary sales may result in the sale of your Fund shares at a loss or may
result in taxable investment gains.
REINSTATEMENT PRIVILEGE. You may reinvest proceeds from a sale of Fund shares
or a dividend or capital gain distribution on Fund shares without a sales charge
in any of the Funds. You may do so by sending a written request and a check to
Touchstone within 90 days after the date of the sale, dividend or distribution.
Reinvestment will be at the next NAV calculated after Touchstone receives your
request.
Low Account Balances
Touchstone may sell your Fund shares if your account balance falls below $500 as
a result of redemptions that you have made (as opposed to a reduction from
market changes). This involuntary sale does not apply to retirement accounts or
custodian accounts under the Uniform Gift to Minors Act (UGTMA). Touchstone will
let you know that your shares are about to be sold and you will have 30 days to
increase your account balance to more than $500.
Receiving Sale Proceeds
Touchstone will forward the proceeds of your sale to you (or to your financial
advisor) within seven days.
Proceeds Sent to Financial Advisors
Proceeds which are sent to your financial advisor will not usually be re-
invested for you unless you provide specific instructions to do so. Therefore,
the financial advisor may benefit from the use of your money.
Fund Shares Purchased by Check
If you purchase Fund shares by personal check, the proceeds of a sale of those
shares will not be sent to you until the check has cleared, which may take up to
15 days. If you may need your money more quickly, you should purchase shares by
federal funds, bank wire, or with a certified or cashier's check.
It is possible that the payments of your sale proceeds could be postponed or
your right to sell your shares could be suspended during certain circumstances.
These circumstances can occur:
O When the NYSE is closed for other than customary weekends and holidays
O When trading on the NYSE is restricted
O When an emergency situation causes a Fund Sub-Advisor to not be
reasonably able to dispose of certain securities or to fairly determine
the value of its net assets
O During any other time when the SEC, by order, permits.
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Check Writing -- Standby Income Fund Only
You may establish check writing privileges from your investment in the Standby
Income Fund. To do so, complete the New Account Application Form and pay the $5
fee per checkbook. You will then receive checks that you may use to draw against
your account. You will be charged $1 for each check presented for payment.
Checks may be payable to anyone you designate in the amount of $500 or more.
Checks must be signed as indicated on your Checking Account Signature Card
contained in the account application. You cannot write a check for an amount
larger than the value of your account (at the time the check is written).
Otherwise your check will be returned. You will continue to earn monthly
dividends on the funds until the check is presented for payment.
Checks cannot be presented in person to Touchstone. When a check is presented
for payment, Touchstone will sell a sufficient number of shares in your account
to cover the amount of the check. The check writing option can provide you with
easy access to your money, but it is not meant to be used as a regular checking
account.
O SPECIAL TAX CONSIDERATION: Since the share price of the Standby Income Fund
may fluctuate daily, use of the check writing privilege can result in the
sale of your shares at a profit or a loss from the time of your purchase.
These sales of your Fund share may be considered a taxable event.
O INVESTOR ALERT: You should use the telephone or mail redemption procedures,
rather than a check, to close your account.
O INVESTOR ALERT: The check writing privilege may be modified or terminated
at any time by the Trust or Transfer Agent upon notice to shareholders.
<PAGE> 60
DISTRIBUTIONS AND TAXES
60
DISTRIBUTIONS AND TAXES [ICON]TOUCHSTONE FAMILY OF FUNDS
???SPECIAL TAX CONSIDERATION
- ---------------------------
You should consult with your tax advisor to address your own tax situation.
Each Touchstone Fund intends to distribute to its shareholders substantially all
of its income and capital gains. The table below outlines when dividends are
declared and paid for each Fund:
<TABLE>
<CAPTION>
DIVIDENDS DECLARED DIVIDENDS PAID
------------------ --------------
<S> <C> <C>
STANDBY INCOME FUND Daily Monthly
- ----------------------------------------------------------------------------
GROWTH & INCOME FUND,
INCOME OPPORTUNITY FUND
AND BOND FUND Monthly Monthly
- ----------------------------------------------------------------------------
VALUE PLUS FUND
AND BALANCED FUND Quarterly Quarterly
- ----------------------------------------------------------------------------
EMERGING GROWTH FUND
AND INTERNATIONAL EQUITY FUND Annually Annually
- ----------------------------------------------------------------------------
</TABLE>
Distributions of any capital gains earned by a Fund will be made at least
annually.
Tax Information
DISTRIBUTIONS. Each Fund will make distributions that may be taxed as ordinary
income or capital gains (which may be taxed at different rates depending on the
length of time a Fund holds its assets). Each Fund's distributions may be
subject to federal income tax whether you reinvest such dividends in additional
shares of a Fund or choose to receive cash.
ORDINARY INCOME. Income and short-term capital gains that are distributed to
you are taxable as ordinary income for federal income tax purposes regardless of
how long you have held your Fund shares.
LONG-TERM CAPITAL GAINS. Long-term capital gains distributed to you are taxable
as long-term capital gains for federal income tax purposes regardless of how
long you have held your Fund shares.
STATEMENTS AND NOTICES. You will receive an annual statement outlining the tax
status of your distributions. You will also receive written notices of certain
foreign taxes paid by the Funds and certain distributions paid by the Funds
during the prior taxable year.
<PAGE> 61
FINANCIAL HIGHLIGHTS
61
FINANCIAL HIGHLIGHTS [ICON]TOUCHSTONE FAMILY OF FUNDS
These financial highlights tables are intended to help you
understand the Funds' financial performance for the past 5 years
or, if shorter, the period of a Fund's operations. Certain
information reflects financial results for a single Fund share.
The total returns in the table represent the rate that an investor
would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information
has been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, are incorporated by
reference in the Statement of Additional Information, which is
available upon request.
The Emerging Growth Fund -- Class A
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
PERIOD ENDED 12/31/94(A) 12/31/95 12/31/96 12/31/97 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
- -------------------------------------------
Net Asset Value, Beginning of Period $10.00 $10.11 $11.52 $11.55 $13.85
- -------------------------------------------
Income From Investment Operations
- -------------------------------------------
Net Investment Income 0.16 (0.01) 0.01 (0.03) (0.02)
- -------------------------------------------
Net Gains or Losses on Securities (both
realized and unrealized) 0.11 2.29 1.20 3.71 0.73
- -------------------------------------------
Total from Investment Operations 0.27 2.28 1.21 3.68 0.71
- -------------------------------------------
Less Distributions
- -------------------------------------------
Dividends (from net investment income) (0.15) (0.03) (0.01) -- --
- -------------------------------------------
Distributions (from capital gains) (0.01) (0.84) (1.17) (1.38) --
- -------------------------------------------
Total Distributions (0.16) (0.87) (1.18) (1.38) --
- -------------------------------------------
Net Asset Value, End of Period $10.11 $11.52 $11.55 $13.85 $14.56
- -------------------------------------------
Total Return (b) 2.72% 22.56% 10.56% 32.20% 5.13%
- -------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (000s) $1,038 $2,520 $2,873 $4,949 $8,842
- -------------------------------------------
Ratio of Expenses to Average Net Assets
(c) 1.75%(e) 1.50% 1.50% 1.50% 1.50%(e)
- -------------------------------------------
Ratio of Net Income to Average Net Assets
(c) 6.10%(e) (0.05%) (0.12%) (0.30%) (0.36%)(e)
- -------------------------------------------
Portfolio Turnover Rate 150% 109% 117% 101% 33%
- -------------------------------------------
</TABLE>
<PAGE> 62
FINANCIAL HIGHLIGHTS
62
[ICON]TOUCHSTONE FAMILY OF FUNDS
The International Equity Fund -- Class A
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
PERIOD ENDED 12/31/94(A) 12/31/95 12/31/96 12/31/97 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
- -------------------------------------------
Net Asset Value, Beginning of Period $10.00 $ 9.12 $ 9.58 $10.63 $11.41
- -------------------------------------------
Income From Investment Operations
- -------------------------------------------
Net Investment Income -- 0.21 0.05 0.02 0.05
- -------------------------------------------
Net Gains or Losses on Securities (both
realized and unrealized) (0.88) 0.47 1.06 1.64 2.59
- -------------------------------------------
Total from Investment Operations (0.88) 0.68 1.11 1.66 2.64
- -------------------------------------------
Less Distributions
- -------------------------------------------
Dividends (from net investment income) -- (0.22) (0.06) (0.02) --
- -------------------------------------------
Distributions (from capital gains) -- -- -- (0.86) --
- -------------------------------------------
Total Distributions -- (0.22) (0.06) (0.88) --
- -------------------------------------------
Net Asset Value, End of Period $ 9.12 $ 9.58 $10.63 $11.41 $14.05
- -------------------------------------------
Total Return (b) (8.80%) 5.29% 11.61% 15.57% 23.14%
- -------------------------------------------
Ratios/Supplemental Data
- -------------------------------------------
Net Assets, End of Period $2,282 $2,617 $3,449 $4,761 $6,663
- -------------------------------------------
Ratio of Expenses to Average Net Assets
(c) 1.85%(e) 1.60% 1.60% 1.60% 1.60%(e)
- -------------------------------------------
Ratio of Net Income to Average Net Assets
(c) (0.36%)(e) 0.11% 0.42% 0.17% 0.74%(e)
- -------------------------------------------
Portfolio Turnover Rate 7% 90% 86% 151% 55%
- -------------------------------------------
</TABLE>
The Income Opportunity Fund -- Class A
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
PERIOD ENDED 12/31/94(A) 12/31/95 12/31/96 12/31/97 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
- -------------------------------------------
Net Asset Value, Beginning of Period $10.00 $ 9.08 $ 9.83 $10.90 $ 9.89
- -------------------------------------------
Income From Investment Operations
- -------------------------------------------
Net Investment Income 0.22 1.19 1.12 1.24 0.51
- -------------------------------------------
Net Gains or Losses on Securities (both
realized and unrealized) (0.94) 0.77 1.38 (0.23) (0.47)
- -------------------------------------------
Total from Investment Operations (0.72) 1.96 2.50 1.01 0.04
- -------------------------------------------
Less Distributions
- -------------------------------------------
Dividends (from net investment income) (0.20) (1.21) (1.12) (1.22) (0.47)
- -------------------------------------------
Distributions (from capital gains) -- -- (0.31) (0.80) --
- -------------------------------------------
Total Distributions (0.20) (1.21) (1.43) (2.02) (0.47)
- -------------------------------------------
Net Asset Value, End of Period $ 9.08 $ 9.83 $10.90 $ 9.89 $ 9.46
- -------------------------------------------
Total Return (b) (7.20%) 23.19% 26.66% 9.49% 0.33%
- -------------------------------------------
Ratios/Supplemental Data
- -------------------------------------------
Net Assets, End of Period (000s) $ 926 $1,369 $4,579 $7,009 $7,475
- -------------------------------------------
Ratio of Expenses to Average Net Assets
(c) 1.45%(e) 1.20% 1.20% 1.20% 1.20%(e)
- -------------------------------------------
Ratio of Net Income to Average Net Assets
(c) 8.60%(e) 12.42% 11.29% 11.19% 10.60%(e)
- -------------------------------------------
Portfolio Turnover Rate 144% 120% 222% 270% 184%
- -------------------------------------------
</TABLE>
<PAGE> 63
FINANCIAL HIGHLIGHTS
63
[ICON]TOUCHSTONE FAMILY OF FUNDS
The Value Plus Fund -- Class A
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED
JUNE 30,
1998(f)
PERIOD ENDED (UNAUDITED)
<S> <C>
Per Share Operating Performance
- ------------------------------------------------------------
Net Asset Value, Beginning of Period $ 10.00
- ------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------------------------
Net Investment Income --
- ------------------------------------------------------------
Net Gains or Losses on Securities (both realized and
unrealized) (0.13)
- ------------------------------------------------------------
Total from Investment Operations (0.13)
- ------------------------------------------------------------
Less Distributions
- ------------------------------------------------------------
Dividends (from net investment income) --
- ------------------------------------------------------------
Distributions (from capital gains) --
- ------------------------------------------------------------
Total Distributions --
- ------------------------------------------------------------
Net Asset Value, End of Period $ 9.87
- ------------------------------------------------------------
Total Return (b) (1.30)%
- ------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------
Net Assets, End of Period $24,932
- ------------------------------------------------------------
Ratio of Expenses to Average Net Assets (c) 1.30%(e)
- ------------------------------------------------------------
Ratio of Net Income to Average Net Assets (c) 0.48%(e)
- ------------------------------------------------------------
Portfolio Turnover Rate 7%
- ------------------------------------------------------------
</TABLE>
The Growth & Income Fund -- Class A
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
PERIOD ENDED 12/31/94(A) 12/31/95(D) 12/31/96 12/31/97 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
- --------------------------------------------
Net Asset Value, Beginning of Period $10.00 $10.02 $13.14 $14.03 $15.06
- --------------------------------------------
Income From Investment Operations
- --------------------------------------------
Net Investment Income 0.86 0.05 0.12 0.09 0.09
- --------------------------------------------
Net Gains or Losses on Securities (both
realized and unrealized) (0.84) 3.46 2.12 2.78 1.39
- --------------------------------------------
Total from Investment Operations 0.02 3.51 2.24 2.87 1.48
- --------------------------------------------
Less Distributions
- --------------------------------------------
Dividends (from net investment income) -- (0.16) (0.12) (0.11) (0.10)
- --------------------------------------------
Distributions (from capital gains) -- (0.23) (1.23) (1.73) --
- --------------------------------------------
Total Distributions -- (0.39) (1.35) (1.84) (0.10)
- --------------------------------------------
Net Asset Value, End of Period $10.02 $13.14 $14.03 $15.06 $16.44
- --------------------------------------------
Total Return (b) 0.20% 35.14% 16.95% 20.70% 9.79%
- --------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------
Net Assets, End of Period (000s) $ 20 $1,500 $3,659 $5,980 $15,664
- --------------------------------------------
Ratio of Expenses to Average Net Assets (c) 1.55%(e) 1.30% 1.30% 1.30% 1.30%(e)
- --------------------------------------------
Ratio of Net Income to Average Net Assets
(c) 0.56%(e) 0.56% 0.55% 0.67% 1.48%(e)
- --------------------------------------------
Portfolio Turnover Rate 10% 102% 92% 170% 31%
- --------------------------------------------
</TABLE>
<PAGE> 64
FINANCIAL HIGHLIGHTS
64
[ICON]TOUCHSTONE FAMILY OF FUNDS
The Balanced Fund -- Class A
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
PERIOD ENDED 12/31/94(A) 12/31/95 12/31/96 12/31/97 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
- -------------------------------------------
Net Asset Value, Beginning of Period $10.00 $ 9.97 $11.34 $12.48 $12.42
- -------------------------------------------
Income From Investment Operations
- -------------------------------------------
Net Investment Income 0.08 0.31 0.30 0.27 0.13
- -------------------------------------------
Net Gains or Losses on Securities (both
realized and unrealized) (0.05) 1.99 1.59 2.09 0.79
- -------------------------------------------
Total from Investment Operations 0.03 2.30 1.89 2.36 0.92
- -------------------------------------------
Less Distributions
- -------------------------------------------
Dividends (from net investment income) (0.06) (0.33) (0.30) (0.30) (0.10)
- -------------------------------------------
Distributions (from capital gains) -- (0.60) (0.45) (2.12) --
- -------------------------------------------
Total Distributions (0.06) (0.93) (0.75) (2.42) (0.10)
- -------------------------------------------
Net Asset Value, End of Period $ 9.97 $11.34 $12.48 $12.42 $13.24
- -------------------------------------------
Total Return (b) (0.30%) 23.24% 16.86% 19.25% 7.41%
- -------------------------------------------
Ratios/Supplemental Data
- -------------------------------------------
Net Assets, End of Period $1,001 $1,502 $2,085 $3,316 $4,452
- -------------------------------------------
Ratio of Expenses to Average Net Assets
(c) 1.60%(e) 1.35% 1.35% 1.35% 1.35%(e)
- -------------------------------------------
Ratio of Net Income to Average Net Assets
(c) 2.75%(e) 2.39% 2.19% 2.07% 2.26%(e)
- -------------------------------------------
Portfolio Turnover Rate 7% 121% 88% 120% 21%
- -------------------------------------------
</TABLE>
<PAGE> 65
FINANCIAL HIGHLIGHTS
65
[ICON]TOUCHSTONE FAMILY OF FUNDS
The Bond Fund -- Class A
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
PERIOD ENDED 12/31/94(A) 12/31/95(D) 12/31/96 12/31/97 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
- -------------------------------------------
Net Asset Value, Beginning of Period $10.00 $ 9.88 $10.61 $10.17 $10.22
- -------------------------------------------
Income From Investment Operations
- -------------------------------------------
Net Investment Income 1.15 0.56 0.71 0.61 0.27
- -------------------------------------------
Net Gains or Losses on Securities (both
realized and unrealized) (1.12) 1.07 (0.43) 0.11 0.16
- -------------------------------------------
Total from Investment Operations 0.03 1.63 0.28 0.72 0.43
- -------------------------------------------
Less Distributions
- -------------------------------------------
Dividends (from net investment income) (0.15) (0.86) (0.70) (0.66) (0.24)
- -------------------------------------------
Distributions (from capital gains) -- (0.04) (0.02) (0.01) --
- -------------------------------------------
Total Distributions (0.15) (0.90) (0.72) (0.67) (0.24)
- -------------------------------------------
Net Asset Value, End of Period $ 9.88 $10.61 $10.17 $10.22 $10.41
- -------------------------------------------
Total Return (b) 0.28% 16.95% 2.85% 7.30% 4.25%
- -------------------------------------------
Ratios/Supplemental Data
- -------------------------------------------
Net Assets, End of Period (000s) $ 16 $ 523 $ 821 $1,685 $4,267
- -------------------------------------------
Ratio of Expenses to Average Net Assets
(c) 1.15%(e) 0.90% 0.90% 0.90% 0.90%(e)
- -------------------------------------------
Ratio of Net Income to Average Net Assets
(c) 5.58%(e) 6.21% 6.01% 6.08% 5.82%(e)
- -------------------------------------------
Portfolio Turnover Rate 11% 78% 64% 88% 76%
- -------------------------------------------
</TABLE>
<PAGE> 66
FINANCIAL HIGHLIGHTS
66
[ICON]TOUCHSTONE FAMILY OF FUNDS
The Standby Income Fund
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, 1998
PERIOD ENDED 12/31/94(a) 12/31/95 12/31/96 12/31/97 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
- -------------------------------------------
Net Asset Value, Beginning of Period $10.00 $10.03 $10.01 $ 9.98 $ 9.57
- -------------------------------------------
Income From Investment Operations
- -------------------------------------------
Net Investment Income 0.11 0.55 0.46 0.51 0.25
- -------------------------------------------
Net Gains or Losses on Securities (both
realized and unrealized) 0.03 (0.02) 0.01 (0.00) 0.01
- -------------------------------------------
Total from Investment Operations 0.14 0.53 0.47 0.51 0.26
- -------------------------------------------
Less Distributions
- -------------------------------------------
Dividends (from net investment income) (0.11) (0.55) (0.50) (0.52) (0.26)
- -------------------------------------------
Net Asset Value, End of Period $10.03 $10.01 $ 9.98 $ 9.97 $ 9.97
- -------------------------------------------
Total Return (b) 1.40% 5.71% 4.80% 5.21% 2.63%
- -------------------------------------------
Ratios/Supplemental Data
- -------------------------------------------
Net Assets, End of Period $5,048 $5,910 $6,456 $8,603 $11,585
- -------------------------------------------
Ratio of Expenses to Average Net Assets
(g) 1.00%(e) 0.75% 0.75% 0.75% 0.75%(e)
- -------------------------------------------
Ratio of Net Income to Average Net Assets 4.54%(e) 5.32% 4.88% 5.14% 5.12%(e)
- -------------------------------------------
Portfolio Turnover Rate 0% 142% 20% 285% 583%
- -------------------------------------------
</TABLE>
<TABLE>
<C> <S> <C>
* The outstanding shares of each series of Touchstone Series Trust (formerly named Select Advisors
Trust A), other than the Standby Income Fund, were redesignated as Class A shares
effective at the close of business on December 31, 1998.
(a) The Fund commenced operations on October 3, 1994.
(b) Total 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 periods shown. Total return
figures are not annualized.
(c) Includes the Fund's proportionate share of the corresponding Portfolio's expenses. If the waiver and
reimbursement had not been in place for the periods listed and after consideration of state expense
limitations, the ratios of expenses to average net assets would have been higher.
(d) Per share amounts have been calculated using the average share method.
(e) Ratios are annualized.
(f) The Fund commenced operations on May 1, 1998.
(g) 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 higher.
</TABLE>
<PAGE> 67
[THIS PAGE INTENTIONALLY LEFT BLANK]
67
[ICON]TOUCHSTONE FAMILY OF FUNDS
<PAGE> 68
FOR MORE INFORMATION
68
FOR MORE INFORMATION [ICON]TOUCHSTONE FAMILY OF FUNDS
For investors who want more
information about the Funds, the
following documents are available
free upon request:
STATEMENT OF ADDITIONAL INFORMATION
(SAI): The SAI provides more
detailed information about the Funds
and is legally a part of this
prospectus.
ANNUAL/SEMI-ANNUAL REPORTS: The
Funds' annual and semi-annual
reports provide additional
information about the Funds'
investments. In each Fund's annual
report, you will find a discussion
of the market conditions and
investment strategies that
significantly affected the Fund's
performance during its last fiscal
year.
You can get free copies of the SAI,
the reports, other information and
answers to your questions about the
Funds by contacting your financial
advisor, or the Funds at:
Touchstone Family of Funds
311 Pike Street
Cincinnati, Ohio 45202
800.669.2796 (Press 3)
http://www.touchstonefunds.com
You can view the Funds' SAI and the
reports at the Public Reference Room
of the Securities and Exchange
Commission.
For a fee, you can get text-only
copies by writing to the Public
Reference Room of the SEC, 450 Fifth
Street N.W., Washington, D.C.
20549-6009. You can also call
1.800.SEC.0330.
You can also view the SAI and the
reports free from the SEC's Internet
website at http://www.sec.gov.
Investment Company Act file no. 811-8380
TOUCHSTONE FAMILY OF FUNDS
O TOUCHSTONE EMERGING
GROWTH FUND
O TOUCHSTONE INTERNATIONAL
EQUITY FUND
O TOUCHSTONE INCOME
OPPORTUNITY FUND
O TOUCHSTONE VALUE
PLUS FUND
O TOUCHSTONE GROWTH &
INCOME FUND
O TOUCHSTONE BALANCED FUND
O TOUCHSTONE BOND FUND
O TOUCHSTONE STANDBY
INCOME FUND
Class A and Class C
Shares are Offered by
this Prospectus
<PAGE> 69
TOUCHSTONE FAMILY OF FUNDS
PROSPECTUS
JANUARY 4, 1999
TOUCHSTONE EMERGING GROWTH FUND
TOUCHSTONE INTERNATIONAL EQUITY FUND
TOUCHSTONE INCOME OPPORTUNITY FUND
TOUCHSTONE VALUE PLUS FUND
TOUCHSTONE GROWTH & INCOME FUND
TOUCHSTONE BALANCED FUND
TOUCHSTONE BOND FUND
TOUCHSTONE STANDBY INCOME FUND
Neither the Securities and Exchange Commission nor any state securities
commission has approved any Fund's shares as an investment or determined whether
this prospectus is accurate or complete. Anyone who tells you otherwise is
committing a crime.
<PAGE> 70
TOUCHSTONE FAMILY OF FUNDS
The Touchstone Family of Funds is a group of mutual funds. Each Fund has a
different investment goal and risk level and is a part of the Touchstone Series
Trust (the Trust).
2
<PAGE> 71
Table of Contents Page
- ----------------- ----
Touchstone Emerging Growth Fund
Touchstone International Equity Fund
Touchstone Income Opportunity Fund
Touchstone Value Plus Fund
Touchstone Growth & Income Fund
Touchstone Balance Fund
Touchstone Bond Fund
Touchstone Standby Income Fund
Investment Strategies And Risks
The Funds' Management
Investing With Touchstone
Distributions and Taxes
For More Information
3
<PAGE> 72
TOUCHSTONE EMERGING GROWTH FUND
THE FUND'S INVESTMENT GOAL
The Emerging Growth Fund seeks to increase the value of Fund shares as a primary
goal and to earn income as a secondary goal.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goal.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily (at least 65% of total assets) in the common stocks
of smaller, rapidly growing (emerging growth) companies. In selecting its
investments, the portfolio managers focus on those companies they believe will
grow faster than the U.S. economy in general. They also choose companies they
believe are priced lower in the market than their true value.
When the portfolio managers believe the following securities offer a good
potential for capital growth or income, up to 35% of the Fund's assets may be
invested in:
Larger company stocks
Preferred stocks
Convertible bonds
Other debt securities, including:
collateralized mortgage obligations (CMOs), stripped U.S.
government securities (Strips) and mortgage-related
securities, all of which will be rated investment grade
The Fund may also invest in:
- Securities of foreign companies traded mainly outside the U.S. (up to
20%)
- American Depositary Receipts (ADRs) (up to 20%)
- Emerging market securities (up to 10%).
4
<PAGE> 73
THE KEY RISKS
The Fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
- - If the stock market as a whole goes down.
- - Because securities of small cap companies may be more thinly traded and may
have more frequent and larger price changes than securities of larger cap
companies.
- - If the market continually values the stocks in the Fund's portfolio lower than
the portfolio managers believe they should be valued.
- - If the stocks in the Fund's portfolio are not undervalued as expected.
- - If the companies in which the Fund invests do not grow as rapidly as expected.
- - If interest rates go up, causing the value of any debt securities held by the
Fund to decline.
- - Because CMOs, Strips and mortgage-related securities may lose more value due
to changes in interest rates than other debt securities and are subject to
prepayment.
- - Because investments in foreign securities may have more frequent and larger
price changes than U.S. securities and may lose value due to changes in
currency exchange rates and other factors.
- - Because emerging market securities involve unique risks, such as exposure to
economies less diverse and mature than that of the U.S. and economic or
political changes may cause larger price changes in emerging market
securities than other foreign securities.
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
5
<PAGE> 74
WHO MAY WANT TO INVEST
This Fund is most appropriate for you if you are an aggressive investor and are
willing to assume a relatively high amount of risk. You should be comfortable
with extreme levels of volatility, and safety of principal in the short term
should not be a high priority for you. This Fund's approach may be appropriate
for you if you are many years from retirement and are comfortable with wide
market fluctuations.
6
<PAGE> 75
THE FUND'S PERFORMANCE
The bar chart shown below indicates the risks of investing in the Emerging
Growth Fund. It shows changes in the performance of the Fund's Class A shares
from year to year since the Fund started. The chart does not reflect any sales
charges. Sales charges will reduce return.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The return for other classes of shares offered by the Fund will differ from the
Class A returns shown in the bar chart, depending on the expenses of that class.
[BAR GRAPH]
EMERGING GROWTH FUND -- CLASS A PERFORMANCE(1)
<TABLE>
<CAPTION>
YEARS TOTAL RETURN
----- ------------
<S> <C>
1995 22.56%
1996 10.56%
1997 32.20%
</TABLE>
During the period shown in the Bar Chart, the highest quarterly return
was 17.69% (for the quarter ended June 30, 1997) and the lowest
quarterly return was -4.07% (for the quarter ended March 31, 1997).
(1) The returns shown are for Class A shares. Class A shares are not
offered in this Prospectus. Class Y shares would have substantially
similar annual returns because the shares are invested in the same
portfolio of securities. The annual returns would differ only to the
extent that the Classes do not have the same expenses.
The table below shows how the Fund's average annual returns for the periods
shown compare to those of the Russell 2000 Index and to the Wiesenberger Small
Cap - MF. The Russell 2000 Index is a widely recognized unmanaged index of small
cap stock performance. The Wiesenberger Small Cap - MF is a composite index of
the annual returns of mutual funds that have an investment style similar to that
of the Emerging Growth Fund. The table shows the effect of the Class A sales
charge.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
Past 12 Months Since Fund Started
- --------------------------------------------------------------------------------
<S> <C> <C>
Emerging Growth Fund -- Class A* 24.7% 18.5%
- --------------------------------------------------------------------------------
Russell 2000 Index 22.4% 19.8%
- --------------------------------------------------------------------------------
Wiesenberger Small Cap - MF 21.6% 22.2%
- --------------------------------------------------------------------------------
</TABLE>
* The table shows performance for the Fund's Class A shares because the Class Y
shares have not yet been in existence for a full calendar year.
7
<PAGE> 76
THE FUND'S FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM Class Y Shares
YOUR INVESTMENT)
- --------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering None
price)
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as a
percentage of amount redeemed) None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES
THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
Management Fees 0.80%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees None
- --------------------------------------------------------------------------------
Other Expenses 3.15%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 3.95%
- --------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement(1) 2.70%
- --------------------------------------------------------------------------------
Net Expenses 1.25%
- --------------------------------------------------------------------------------
</TABLE>
- ---------------------
(1) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of each Class of the Fund (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least December 31, 1999.
The following example should help you compare the cost of investing in the
Emerging Growth Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
- ----------------------------------------------
Class Y Shares
- ----------------------------------------------
<S> <C>
1 Year $ 127
- ----------------------------------------------
3 Years $ 397
- ----------------------------------------------
5 Years $ 686
- ----------------------------------------------
10 Years $1,511
- ----------------------------------------------
</TABLE>
- - The example for the 3, 5 and 10-year periods is calculated using the Total
Fund Operating Expenses before the limits agreed to under the Sponsor
Agreement for periods after year 1.
8
<PAGE> 77
TOUCHSTONE INTERNATIONAL EQUITY FUND
THE FUND'S INVESTMENT GOAL
The International Equity Fund seeks to increase the value of Fund shares over
the long-term.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goal.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily (at least 80% of total assets) in equity securities
of foreign companies and will invest in at least three countries outside the
United States. A large portion of those non-U.S. equity securities may be issued
by companies active in emerging market countries (up to 40% of total assets).
The Fund may also invest in certain debt securities issued by U.S. and non-U.S.
entities (up to 20%), including non-investment grade debt securities rated as
low as B.
The portfolio manager uses a growth oriented style to choose investments for the
Fund. This includes the use of both qualitative and quantitative analysis to
identify markets and companies that offer solid growth prospects at reasonable
prices. The portfolio manager's investment process seeks to add value by making
good regional and country allocations as well as by selecting individual stocks
within a region.
THE KEY RISKS
The Fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
- - If the stock market as a whole goes down.
- - Because investments in foreign securities may have more frequent and larger
price changes than U.S. securities and may lose value due to changes in
currency exchange rates and other factors.
- - Because emerging market securities involve unique risks, such as exposure to
economies less diverse and mature than that of the U.S. and economic or
political changes may cause larger price changes in emerging market securities
than other foreign securities.
- - If the stocks in the Fund's portfolio do not grow over the long term as
expected.
- - If interest rates go up, causing the value of any debt securities held by the
Fund to decline.
- - Because issuers of non-investment grade securities held by the Fund are more
likely to be unable to make timely payments of interest or principal.
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
WHO MAY WANT TO INVEST
This Fund is most appropriate for you if you are an aggressive investor and are
willing to assume a relatively high amount of risk. You should be comfortable
with extreme levels of volatility, and safety of principal in the short term
should not be a high priority for you. This Fund's approach may be appropriate
for you if you are many years from retirement and are comfortable with wide
market fluctuations.
9
<PAGE> 78
THE FUND'S PERFORMANCE
The bar chart shown below indicates the risk of investing in the International
Equity Fund. It shows changes in the performance of the Fund's Class A shares
from year to year since the Fund started. The chart does not reflect any sales
charges. Sales charges will reduce return.
The Fund's past performance does not necessarily indicate how it will perform
in the future.
The return for other classes of shares offered by the Fund will differ from the
Class A returns shown in the bar chart, depending on the expenses of that class.
INTERNATIONAL EQUITY FUND -- CLASS A PERFORMANCE(1)
<TABLE>
<CAPTION>
YEARS TOTAL RETURN
----- ------------
<C> <C>
1995 5.29%
1996 11.61%
1997 15.57%
</TABLE>
During the period shown in the Bar Chart, the highest quarterly return
was 11.96% (for the quarter ended June 30, 1997) and the lowest
quarterly return was -3.95% (for the quarter ended March 31, 1995).
(1) The returns shown are for Class A shares. Class A shares are not
offered in this Prospectus. Class Y shares would have substantially
similar annual returns because the shares are invested in the same
portfolio of securities. The annual returns would differ only to the
extent that the Classes do not have the same expenses.
The table below shows how the Fund's average annual returns for the periods
shown compare to those of the MSCI EAFE Index and the Wiesenberger Non-US Equity
- - MF index. The MSCI EAFE Index is a Morgan Stanley index that includes stocks
traded on 16 exchanges in Europe, Australia and the Far East. The Wiesenberger
Non-US Equity - MF is a composite index of the annual returns of mutual funds
that have an investment style similar to that of the International Equity Fund.
The table shows the effect of the Class A sales charge.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Past 12 Months Since Fund Started
- --------------------------------------------------------------------------------
<S> <C> <C>
International Equity Fund - Class A* 8.9% 4.9%
- --------------------------------------------------------------------------------
MSCI EAFE Index 2.1% 5.8%
- --------------------------------------------------------------------------------
Wiesenberger Non-US Equity - MF -2.0% 3.2%
- --------------------------------------------------------------------------------
</TABLE>
* The table shows performance for the Fund's Class A shares because the Class Y
shares have not yet been in existence for a full calendar year.
10
<PAGE> 79
THE FUND'S FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR Class Y Shares
INVESTMENT)
- --------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price) None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as a
percentage of amount redeemed) None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT
ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
Management Fees 0.95%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees None
- --------------------------------------------------------------------------------
Other Expenses 2.63%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 3.58%
- --------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement(1) 2.23%
- --------------------------------------------------------------------------------
Net Expenses 1.35%
- --------------------------------------------------------------------------------
</TABLE>
(1) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of each Class of the Fund (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least December 31, 1999.
The following example should help you compare the cost of investing in the
International Equity Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
- -------------------------------------------
Class Y Shares
- -------------------------------------------
<S> <C>
1 Year $ 137
- -------------------------------------------
3 Years $ 428
- -------------------------------------------
5 Years $ 739
- -------------------------------------------
10 Years $1,624
- -------------------------------------------
</TABLE>
- - The example for the 3, 5 and 10-year periods is calculated using the Total
Fund Operating Expenses before the limits agreed to under the Sponsor
Agreement for periods after year 1.
11
<PAGE> 80
TOUCHSTONE INCOME OPPORTUNITY FUND
THE FUND'S INVESTMENT GOAL
The Income Opportunity Fund seeks to achieve a high level of current income as
its main goal. The Fund may also seek to increase the value of Fund shares, if
consistent with its main goal.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goal.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in debt securities. These debt securities will
generally be more risky non-investment grade corporate and government securities
(up to 100% of total assets). Non-investment grade debt securities are often
referred to as "junk bonds" and are considered speculative.
The Fund's investments may include:
- Securities of foreign companies (up to 100%), but only up to 30% of
its assets in securities of foreign companies that are denominated in
a currency other than the U.S. dollar.
- Debt securities that are emerging market securities (up to 65%).
- Mortgage-related securities and loans and loan participations.
- Currency futures and option contracts.
THE KEY RISKS
The Fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
- - If interest rates go up, causing the value of any debt securities held by the
Fund to decline.
- - Because issuers of non-investment grade securities held by the Fund are more
likely to be unable to make timely payments of interest or principal.
- - Because investments in foreign securities may have more frequent and larger
price changes than U.S. securities and may lose value due to changes in
currency exchange rates and other factors.
- - Because emerging market securities involve unique risks, such as exposure to
economies less diverse and mature than that of the U.S. and economic or
political changes may cause larger price changes in emerging market securities
than other foreign securities.
- - Because mortgage-related securities may lose more value due to changes in
interest rates than other debt securities and are subject to prepayment.
- - Because loans and loan participations may be more difficult to sell than other
investments and are subject to the risk of borrower default.
- - If the stock market as a whole goes down.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or by any other government entity.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
WHO MAY WANT TO INVEST
This Fund is most appropriate for you if you are an aggressive investor and are
willing to assume a relatively high amount of risk. You should be comfortable
with extreme levels of volatility, and safety of principal in the short term
should not be a high priority for you. This Fund's approach may be appropriate
for you if you are many years from retirement and are comfortable with wide
market fluctuations.
12
<PAGE> 81
THE FUND'S PERFORMANCE
The bar chart shown below indicates the risks of investing in the Income
Opportunity Fund. It shows changes in the performance of the Fund's Class A
shares from year to year since the Fund started. The chart does not reflect any
sales charges. Sales charges will reduce return.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The return for other classes of shares offered by the Fund will differ from the
Class A returns shown in the bar chart, depending on the expenses of that class.
[BAR CHART]
INCOME OPPORTUNITY FUND -- CLASS A PERFORMANCE(1)
<TABLE>
<CAPTION>
YEARS TOTAL RETURN
----- ------------
<S> <C>
1995 23.19%
1996 26.66%
1997 9.49%
</TABLE>
During the period shown in the Bar Chart, the highest quarterly return
was 16.15% (for the quarter ended June 30, 1995) and the lowest
quarterly return was -5.44% (for the quarter ended March 31, 1995).
(1) The returns shown are for Class A shares. Class A shares are not
offered in this Prospectus. Class Y shares would have substantially
similar annual returns because the shares are invested in the same
portfolio of securities. The annual returns would differ only to the
extent that the Classes do not have the same expenses.
The table below shows how the Fund's average annual returns for the periods
shown compare to those of the Lehman Brothers Corporate Bond Index, the
Wiesenberger Corp - High Yield - MF and the Wiesenberger Global Income - MF. The
Lehman Brothers Corporate Bond Index is based on all publicly issued
intermediate fixed-rate, non-convertible investment grade domestic corporate
debt. The Wiesenberger Corp - High Yield - MF index and the Wiesenberger Global
Income - MF index are composite indexes of the annual returns of mutual funds
that have an investment style similar to the Income Opportunity Fund. The table
shows the effect of the Class A sales charge.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Past 12 Months Since Fund Started
- --------------------------------------------------------------------------------
<S> <C> <C>
Income Opportunity Fund - Class A* 4.3% 13.5%
- --------------------------------------------------------------------------------
Lehman Brothers Corporate Bond Index 10.2% 10.9%
- --------------------------------------------------------------------------------
Wiesenberger Corp - High Yield - MF 12.6% 12.5%
- --------------------------------------------------------------------------------
Wiesenberger Global Income - MF 3.3% 8.3%
- --------------------------------------------------------------------------------
</TABLE>
* The table shows performance for the Fund's Class A shares because the Class Y
shares have not yet been in existence for a full calendar year.
13
<PAGE> 82
THE FUND'S FEES AND EXPENSES
These tables describe the fees and expenses that you may pay if you buy and hold
shares of the Fund:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) Class Y Shares
- --------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as a percentage of
amount redeemed) None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
- --------------------------------------------------------------------------------
Management Fees 0.65%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees None
- --------------------------------------------------------------------------------
Other Expenses 2.43%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 3.08%
- --------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement(1) 2.13%
- --------------------------------------------------------------------------------
Net Expenses 0.95%
- --------------------------------------------------------------------------------
</TABLE>
(1) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of each Class of the Fund (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least December 31, 1999.
The following example should help you compare the cost of investing in the
Income Opportunity Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
- -----------------------------------
Class Y Shares
- -----------------------------------
<S> <C>
1 Year $ 97
- -----------------------------------
3 Years $ 303
- -----------------------------------
5 Years $ 525
- -----------------------------------
10 Years $1,166
- -----------------------------------
</TABLE>
- - The example for the 3, 5 and 10-year periods is calculated using the Total
Fund Operating Expenses before the limits agreed to under the Sponsor
Agreement for periods after year 1.
14
<PAGE> 83
TOUCHSTONE VALUE PLUS FUND
THE FUND'S INVESTMENT GOAL
The Value Plus Fund seeks to increase the value of Fund shares over the
long-term.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goal.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily (at least 65% of total assets) in common stock of
larger companies that the portfolio manager believes are undervalued. In
choosing undervalued stocks, the portfolio manager looks for companies that have
proven management and unique features or advantages but are believed to be
priced lower than their true value. These companies may not pay dividends. The
Fund may also invest in common stocks of rapidly growing companies to enhance
the Fund's return and vary its investments to avoid having too much of the
Fund's assets subject to risks specific to undervalued stocks.
Up to 70% of total assets may be invested in large-cap companies and up to 30%
may be invested in mid-cap companies.
The Fund may invest in:
- Preferred stocks (up to 35%)
- Investment grade debt securities
- Convertible securities.
In addition, the Fund may invest in:
- Cash equivalent investments (up to 10%)
- Short-term debt securities.
15
<PAGE> 84
THE KEY RISKS
The Fund's share price could fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
- - If the stock market as a whole goes down.
- - If the market continually values the stocks in the Fund's portfolio lower than
the portfolio manager believes they should be valued.
- - If the stocks in the Fund's portfolio are not undervalued as expected.
- - If interest rates go up, causing the value of any debt securities held by the
Fund to decline.
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
WHO MAY WANT TO INVEST
This Fund will be most appealing to you if you are a moderate, or risk tolerant
investor. You should be comfortable with a fair degree of volatility. Capital
appreciation may be important to you, but you may not want to take extreme risks
in order to achieve it. This Fund's approach may be most appropriate for you if
you are many years from retirement and are comfortable with a moderate level of
risk.
PERFORMANCE NOTE
Performance information is only shown for those Funds which have had a full
calendar year of operations. Since the Value Plus Fund started on May 1, 1998,
there is no performance information included in this Prospectus.
16
<PAGE> 85
THE FUND'S FEES AND EXPENSES
These tables describe the fees and expenses that you may pay if you buy and hold
shares of the Fund:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR Class Y Shares
INVESTMENT)
- --------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as
a percentage of offering price) None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as a percentage
of amount redeemed) None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
Management Fees 0.75%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees None
- --------------------------------------------------------------------------------
Other Expenses 1.14%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.89%
- --------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement(1) 0.84%
- --------------------------------------------------------------------------------
Net Expenses 1.05%
- --------------------------------------------------------------------------------
</TABLE>
(1) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of each Class of the Fund (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least December 31, 1999.
The following examples should help you compare the cost of investing in the
Value Plus Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
- ---------------------------------
Class Y Shares
- ---------------------------------
<S> <C>
1 Year $107
- ---------------------------------
3 Years $334
- ---------------------------------
</TABLE>
- - The example for the 3-year period is calculated using the Total Fund Operating
Expenses before the limits agreed to under the Sponsor Agreement for periods
after year 1.
17
<PAGE> 86
TOUCHSTONE GROWTH & INCOME FUND
THE FUND'S INVESTMENT GOAL
The Growth & Income Fund seeks to increase the value of Fund shares over the
long-term, while receiving dividend income.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goal.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily (at least 65% of total assets) in dividend-paying
common stocks, preferred stocks and convertible securities in a variety of
industries. The portfolio manager may choose to purchase securities which do not
pay dividends (up to 35%) but which are expected to increase in value or produce
high income payments in the future.
In choosing securities for the Fund, the portfolio manager will follow a value
oriented style, generally buying securities with yields that are at least 20%
higher than the average yield of companies in the S&P 500. The portfolio manager
focuses on investing in companies that have a market capitalization of at least
$1 billion, but may invest in companies of any size.
The Fund may also invest up to 20% of its total assets in debt securities - and
within this 20% limitation, the Fund may invest the full 20% in investment grade
debt securities or up to 5% in non-convertible non-investment grade debt
securities.
The Fund may also invest in:
- Securities of foreign companies including American Depository
Receipts (ADRs) (up to 20%).
- Real estate investment trusts (REITs) (up to 10%).
THE KEY RISKS
The fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
- - If the stock market as a whole goes down.
- - If any of the stocks in the Fund's portfolio do not increase in value as
expected.
- - If earnings of companies the Fund invests in are not achieved and income
available for interest or dividend payments is reduced.
- - If interest rates go up, causing the value of any debt securities held by the
Fund to decline.
- - Because investments in foreign securities may have more frequent and larger
price changes than U.S. securities and may lose value due to changes in
currency exchange rates and other factors.
- - Because investments in REITs are more sensitive to changes in interest rates
and other factors that affect real estate values.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other government entity.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
18
<PAGE> 87
WHO MAY WANT TO INVEST
This Fund will be most appealing to you if you are a moderate or risk tolerant
investor. You should be comfortable with a fair degree of volatility. Capital
appreciation of your investment capital may be important to you, however, you
may be uncomfortable taking extreme risk in order to achieve it. This Fund's
approach may be most appropriate for you if you are many years from retirement
and are comfortable with a moderate level of risk.
19
<PAGE> 88
THE FUND'S PERFORMANCE
The bar chart shown below indicates the risks of investing in the Growth &
Income Fund. It shows changes in the performance of the Fund's Class A shares
from year to year since the Fund started. The chart does not reflect any sales
charges. Sales charges will reduce return.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The return for other classes of shares offered by the Fund will differ from the
Class A returns shown in the bar chart, depending on the expenses of that class.
[BAR CHART]
GROWTH & INCOME FUND -- CLASS A PERFORMANCE(1)
<TABLE>
<CAPTION>
YEARS TOTAL RETURN
----- ------------
<S> <C>
1995 35.14%
1996 16.95%
1997 20.70%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 11.77% (for the quarter ended June 30, 1997) and the lowest
quarterly return was -4.35% (for the quarter ended March 31, 1997).
(1) The returns shown are for Class A shares. Class A shares are not
offered in this Prospectus. Class Y shares would have substantially
similar annual returns because the shares are invested in the same
portfolio of securities. The annual returns would differ only to the
extent that the Classes do not have the same expenses.
The table below shows how the Fund's average annual returns for the periods
shown compare to those of the S&P 500 Index and to the Wiesenberger Growth &
Income - MF Index. The S&P 500 Index is a widely recognized unmanaged index of
stock performance. The Wiesenberger Growth & Income - MF Index is a composite
index of the annual returns of mutual funds that have an investment style
similar to the Growth & Income Fund. The table shows the effect of the Class A
sales charge.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Past 12 Months Since Fund Started
- --------------------------------------------------------------------------------
<S> <C> <C>
Growth & Income Fund -- Class A* 13.7% 19.9%
- --------------------------------------------------------------------------------
S&P 500 Index 33.4% 28.4%
- --------------------------------------------------------------------------------
Wiesenberger Growth & Income - MF 26.4% 22.8%
- --------------------------------------------------------------------------------
</TABLE>
* The table shows performance for the Fund's Class A shares because the Class Y
shares have not yet been in existence for a full calendar year.
20
<PAGE> 89
THE FUND'S FEES AND EXPENSES
These tables describe the fees and expenses that you may pay if you buy and hold
shares of the Fund:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR Class Y Shares
INVESTMENT)
- --------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as a
percentage of amount redeemed) None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
Management Fees 0.80%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees None
- --------------------------------------------------------------------------------
Other Expenses 1.40%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.20%
- --------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement(1) 1.15%
- --------------------------------------------------------------------------------
Net Expenses 1.05%
- --------------------------------------------------------------------------------
</TABLE>
(1) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of each Class of the Fund (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least December 31, 1999.
The following example should help you compare the cost of investing in the
Growth & Income Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
- -------------------------------
Class Y Shares
- -------------------------------
<S> <C>
1 Year $ 107
- -------------------------------
3 Years $ 334
- -------------------------------
5 Years $ 579
- -------------------------------
10 Years $1,283
- -------------------------------
</TABLE>
The example for the 3, 5 and 10-year periods is calculated using the Total Fund
Operating Expenses before the limits agreed to under the Sponsor Agreement for
periods after year 1.
21
<PAGE> 90
TOUCHSTONE BALANCED FUND
THE FUND'S INVESTMENT GOAL
The Balanced Fund seeks to achieve both an increase in the value of Fund shares
and current income.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goal.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in both equity securities (generally about 60% of total assets)
and debt securities (generally about 40%, but at least 25%). The debt securities
will be rated investment grade or at the highest level of non-investment grade.
The Fund may invest in:
- Warrants
- Preferred stocks
- Convertible securities.
The Fund may also invest up to one-third of its assets in securities of foreign
companies, and up to 15% in emerging market securities.
In choosing equity securities for the Fund, the portfolio manager will seek out
companies that are in a strong position within their industry, are owned in part
by management and are selling at a price lower than the company's intrinsic
value. Debt securities are also chosen using a value style. The portfolio
manager will focus on higher yielding securities, but will also consider
expected movements in interest rates and industry position.
THE KEY RISKS
The Fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
- - If the stock market as a whole goes down.
- - If the stocks in the Fund's portfolio do not increase in value as expected.
- - If earnings of companies the Fund invests in are not achieved and income
available for interest or dividend payments is reduced.
- - If interest rates go up, causing the value of any debt securities held by the
Fund to decline.
- - Because investments in foreign securities may have more frequent and larger
price changes than U.S. securities and may lose value due to changes in
currency exchange rates and other factors.
- - Because emerging market securities involve unique risks, such as exposure to
economies less diverse and mature than that of the U.S. and economic or
political changes may cause larger price changes in emerging market securities
than other foreign securities.
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
WHO MAY WANT TO INVEST
This Fund is most appropriate for you if you are a risk neutral or moderately
conservative investor. You may typically take a relatively low risk approach to
investing and may be comfortable with a low level of volatility in your
investments. While safety may be important to you, you may also value
appreciation of your investments. If you invest in this Fund, you should be
willing to accept some risk. This Fund's approach may be appropriate for you if
you are several years from retirement.
22
<PAGE> 91
THE FUND'S PERFORMANCE
The bar chart shown below indicates the risks of investing in the Balanced Fund.
It shows changes in the performance of the Fund's Class A shares from year to
year since the Fund started. The chart does not reflect any sales charges. Sales
charges will reduce return.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The return for other classes of shares offered by the Fund will differ from the
Class A returns shown in the bar chart, depending on the expenses of that class.
[BAR CHART]
BALANCED FUND -- CLASS A PERFORMANCE(1)
<TABLE>
<CAPTION>
YEARS TOTAL RETURN
----- ------------
<S> <C>
1995 23.24%
1996 16.88%
1997 19.25%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 10.71% (for the quarter ended June 30, 1997) and the lowest
quarterly return was -0.32% (for the quarter ended March 31, 1997).
(1) The returns shown are for Class A shares. Class A shares are not
offered in this Prospectus. Class Y shares would have substantially
similar annual returns because the shares are invested in the same
portfolio of securities. The annual returns would differ only to the
extent that the Classes do not have the same expenses.
The table below shows how the Fund's average annual returns for the periods
shown compare to those of the Standard & Poor's Composite Index of 500 Stocks,
the Lehman Brothers Government/Corporate Index and to the Wiesenberger Balanced
Domestic - MF index. The Lehman Brothers Government/Corporate Index is composed
of 5,400 publicly issued corporate and U.S. government debt rated Baa or better
with at least one year to maturity and at least $25 million par outstanding. The
Wiesenberger Balanced Domestic - MF index is a composite index of the annual
returns of mutual funds that have an investment style similar to the Balanced
Fund. The table shows the effect of the Class A sales charge.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Past 12 Months Since Fund Started
- --------------------------------------------------------------------------------
<S> <C> <C>
Balanced Fund - Class A* 12.4% 16.1%
- --------------------------------------------------------------------------------
S&P 500 Index 33.4% 28.4%
- --------------------------------------------------------------------------------
Lehman Brothers Government/Corporate Index 9.8% 9.7%
- --------------------------------------------------------------------------------
Wiesenberger Balanced Domestic - MF 18.6% 16.8%
- --------------------------------------------------------------------------------
</TABLE>
* The table shows performance for the Fund's Class A shares because the Class Y
shares have not yet been in existence for a full calendar year.
23
<PAGE> 92
THE FUND'S FEES AND EXPENSES
These tables describe the fees and expenses that you may pay if you buy and hold
shares of a Fund:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR Class Y Shares
INVESTMENT)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as a percentage
of amount redeemed) None
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
Management Fees 0.80%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees None
- --------------------------------------------------------------------------------
Other Expenses 3.62%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 4.42%
- --------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement(1) 3.32%
- --------------------------------------------------------------------------------
Net Expenses 1.10%
- --------------------------------------------------------------------------------
</TABLE>
(1) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of each Class of the Fund (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least December 31, 1999.
The following example should help you compare the cost of investing in the
Balanced Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
- ------------------------------
Class Y Shares
- ------------------------------
<S> <C>
1 Year $ 112
- ------------------------------
3 Years $ 350
- ------------------------------
5 Years $ 606
- ------------------------------
10 Years $1,340
- ------------------------------
</TABLE>
- - The example for the 3, 5 and 10-year periods is calculated using the Total
Fund Operating Expenses before the limits agreed to under the Sponsor
Agreement for periods after year 1.
24
<PAGE> 93
TOUCHSTONE BOND FUND
THE FUND'S INVESTMENT GOAL
The Bond Fund seeks to provide a high level of current income.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goal.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in higher quality investment grade debt securities
(at least 65% of total assets). The Fund's investment in debt securities may be
determined by the direction in which interest rates are expected to move because
the value of these securities generally moves in the opposite direction from
interest rates. The Fund expects to have an average maturity between five and
fifteen years.
The Fund invests in:
- Mortgage-related securities
- Asset-backed securities
- Preferred stocks.
The Fund also invests in U.S. or foreign debt securities which are rated
non-investment grade (up to 35%).
In addition, the Fund may invest in :
- Debt securities denominated in foreign currencies (20% or less)
THE KEY RISKS
The Fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
- - If interest rates go up, causing the value of any debt securities held by the
Fund to decline.
- - Because investments in foreign securities may have more frequent and larger
price changes than U.S. securities and may lose value due to changes in
currency exchange rates and other factors.
- - Because issuers of non-investment grade securities held by the Fund are more
likely to be unable to make timely payments of interest or principal.
- - Because mortgage-related securities and asset-backed securities may lose more
value due to changes in interest rates than other debt securities and are
subject to prepayment.
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government entity.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
WHO MAY WANT TO INVEST
This Fund is most appropriate for you if you prefer to take a relatively low
risk approach to investing. Safety of your investment may be the most important
factor to you. You may be willing to accept potentially lower returns in order
to maintain a lower, more tolerable level of risk. This Fund's approach may be
most appropriate for you if you are nearing retirement.
25
<PAGE> 94
THE FUND'S PERFORMANCE
The bar chart shown below indicates the risks of investing in the Bond Fund. It
shows changes in the performance of the Fund's Class A shares from year to year
since the Fund's inception. The chart does not reflect any sales charges. Sales
charges will reduce return.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
The return for other classes of shares offered by the Fund will differ from the
Class A returns shown in the bar chart, depending on the expenses of that class.
[BAR GRAPH]
BOND FUND -- CLASS A PERFORMANCE(1)
<TABLE>
<CAPTION>
YEARS TOTAL RETURN
----- ------------
<S> <C>
1995 16.95%
1996 2.85%
1997 7.30%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 5.21% (for the quarter ended December 31, 1997) and the lowest
quarterly return was -2.10% (for the quarter ended March 31, 1997).
(1) The returns shown are for Class A shares. Class A shares are not
offered in this Prospectus. Class Y shares would have substantially
similar annual returns because the shares are invested in the same
portfolio of securities. The annual returns would differ only to the
extent that the Classes do not have the same expenses.
The table below shows how the Fund's average annual returns for the periods
shown compare to those of the Lehman Brothers Aggregate Index and to the
Wiesenberger Corp - Investment Grade - MF index. The Lehman Brothers Aggregate
Index is comprised of approximately 6000 publicly traded bonds with an average
maturity of about 10 years. The Wiesenberger Corp - Investment Grade - MF index
is a composite index of the annual returns of mutual funds that have an
investment style similar to the Bond Fund. The table shows the effect of the
Class A sales charge.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Past 12 Months Since Fund Started
- --------------------------------------------------------------------------------
<S> <C> <C>
Bond Fund - Class A* 2.2% 6.7%
- --------------------------------------------------------------------------------
Lehman Brothers Aggregate Index 9.7% 9.7%
- --------------------------------------------------------------------------------
Wiesenberger Corp - Investment Grade - 8.9% 9.2%
MF
- --------------------------------------------------------------------------------
</TABLE>
* The table shows performance for the Fund's Class A shares because the Class Y
shares have not yet been in existence for a full calendar year.
26
<PAGE> 95
THE FUND'S FEES AND EXPENSES
These tables describe the fees and expenses that you may pay if you buy and hold
shares of the Fund:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR CLASS Y SHARES
INVESTMENT)
- --------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as
a percentage of offering price) None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as a
percentage of amount redeemed) None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
Management Fees 0.55%
- --------------------------------------------------------------------------------
Distribution (12b-1) Fees None
- --------------------------------------------------------------------------------
Other Expenses 1.49%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.04%
- --------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement(1) 1.39%
- --------------------------------------------------------------------------------
Net Expenses 0.65%
- --------------------------------------------------------------------------------
</TABLE>
(1) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of each Class of the Fund (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least December 31, 1999.
The following example should help you compare the cost of investing in the Bond
Fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the Fund for the time periods indicated and then sell all
of your shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
- ----------------------------------
Class Y Shares
- ----------------------------------
<S> <C>
1 Year $ 66
- ----------------------------------
3 Years $208
- ----------------------------------
5 Years $362
- ----------------------------------
10 Years $810
- ----------------------------------
</TABLE>
- - The example for the 3, 5 and 10-year periods is calculated using the Total
Fund Operating Expenses before the limits agreed to under the Sponsor
Agreement for periods after year 1.
27
<PAGE> 96
TOUCHSTONE STANDBY INCOME FUND
THE FUND'S INVESTMENT GOAL
The Standby Income Fund seeks to provide a higher level of current income than a
money market fund, while also seeking to prevent large fluctuations in the value
of your initial investment. The Fund does not try to keep a constant $1.00 per
share net asset value.
As with any mutual fund, there is no guarantee that the Fund will achieve its
goal.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests mostly in various types of money market instruments. All
investments will be rated at least investment grade. On average, the securities
held by the Fund will mature in less than one year.
The Fund's investments may include:
- Short-term government securities
- Mortgage-related securities
- Asset-backed securities
- Repurchase agreements.
The Fund may invest up to 50% of total assets in:
- Securities denominated in U.S. dollars and issued in the U.S. by
foreign issuers (known as Yankee bonds),
- Eurodollar Certificates of Deposit.
In addition, the Fund may invest in:
- Debt securities denominated in foreign currencies (up to 20%).
- Corporate bonds, commercial paper, certificates of deposit, and
bankers' acceptances.
THE KEY RISKS
The Fund's share price will fluctuate and you could lose money on your
investment in the Fund. The Fund could also return less than other investments:
- - If interest rates go up, causing the value of any debt securities to decline.
- - Because mortgage-related securities and asset-backed securities may lose more
value due to changes in interest rates than other debt securities and are
subject to prepayment.
- - Because investments in foreign securities may have more frequent and larger
price changes than U.S. securities and may lose value due to changes in
currency exchange rates and other factors.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other government entity.
You can find more information about certain securities in which the Fund may
invest and a more detailed description of risks under the heading Investment
Strategies and Risks later in this Prospectus.
WHO MAY WANT TO INVEST
This Fund is most appropriate for you if you take a relatively low risk approach
to investing. Safety of your investment is of key importance to you.
Additionally, you are willing to accept potentially lower returns in order to
maintain a lower, more tolerable level of risk. This Fund's approach may be most
appropriate for you if you are nearing retirement, or if you have a longer time
horizon, but nevertheless, have a lower risk tolerance. This Fund is also
appropriate for you if you want the added convenience of writing checks directly
from your account.
28
<PAGE> 97
THE FUND'S PERFORMANCE
The bar chart shown below indicates the risks of investing in the Standby Income
Fund. It shows changes in the performance of the Fund's shares from year to year
since the Fund's inception.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
[BAR GRAPH]
STANDBY INCOME FUND PERFORMANCE
<TABLE>
<CAPTION>
YEARS TOTAL RETURN
----- ------------
<S> <C>
1995 5.71%
1996 4.83%
1997 5.21%
</TABLE>
During the period shown in the bar chart, the highest quarterly return
was 1.57% (for the quarter ended December 31, 1995) and the lowest
quarterly return was 1.07% (for the quarter ended March 31, 1996).
The table below shows how the Fund's average annual returns for the periods
shown compare to those of the Merrill Lynch 91-Day Treasury Index and to the
30-Day Money Market Yield Index. The Merrill Lynch 91-Day Treasury Index
consists of short-term U.S. Treasury securities, maturing in 91 days. The 30-Day
Money Market Yield Index is an index of money market funds based on 30-day
yields.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------- --------------------------- ----------------------------
Past 12 Months Since Fund Started
- -------------------------------------------------- --------------------------- ----------------------------
<S> <C> <C>
Standby Income Fund 5.2% 5.2%
- -------------------------------------------------- --------------------------- ----------------------------
Merrill Lynch 91-Day Treasury Index 5.3% 5.5%
- -------------------------------------------------- --------------------------- ----------------------------
30-Day Money Market Yield Index 5.1% 5.1%
- -------------------------------------------------- --------------------------- ----------------------------
</TABLE>
29
<PAGE> 98
THE FUND'S FEES AND EXPENSES
These tables describe the fees and expenses that you may pay if you buy and hold
shares of the Fund:
- ------------------------------------------------------------ -------------------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- ------------------------------------------------------------ -------------------
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) None
- ------------------------------------------------------------ -------------------
Maximum Deferred Sales Charge (Load) (as a percentage of
amount redeemed) None
- ------------------------------------------------------------ -------------------
- ------------------------------------------------------------ -------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
- ------------------------------------------------------------ -------------------
Management Fees 0.25%
- ------------------------------------------------------------ -------------------
Distribution (12b-1) Fees None
- ------------------------------------------------------------ -------------------
Other Expenses 3.26%
- ------------------------------------------------------------ -------------------
Total Annual Fund Operating Expenses 3.51%
- ------------------------------------------------------------ -------------------
Fee Waiver and/or Expense Reimbursement(1) 2.76%
- ------------------------------------------------------------ -------------------
Net Expenses 0.75%
- ------------------------------------------------------------ -------------------
(1) Touchstone Advisors has contractually agreed to waive or reimburse certain
of the Total Annual Fund Operating Expenses of the Fund (the "Sponsor
Agreement"). The Sponsor Agreement will remain in place until at least
December 31, 1999.
The following example should help you compare the cost of investing in the
Standby Income Fund with the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
---------------------------------------- ----------------------
<S> <C>
1 Year $ 77
---------------------------------------- ----------------------
3 Years $ 819
---------------------------------------- ----------------------
5 Years $1,584
---------------------------------------- ----------------------
10 Years $3,599
---------------------------------------- ----------------------
</TABLE>
The example for the 3, 5 and 10-year periods is calculated using the Total
Fund Operating Expenses before the limits agreed to under the Sponsor
Agreement for periods after year 1.
30
<PAGE> 99
INVESTMENT STRATEGIES AND RISKS
CAN A FUND DEPART FROM ITS NORMAL STRATEGIES?
Each Fund may depart from its investment strategies by taking temporary
defensive positions in response to adverse market, economic or political
conditions. During these times, a Fund may not achieve its investment goals.
DO THE FUNDS ENGAGE IN ACTIVE TRADING OF SECURITIES?
The International Equity Fund, Income Opportunity Fund and Bond Fund may engage
in active trading to achieve their investment goals. This may cause the Fund to
realize higher capital gains which would be passed on to you. Higher capital
gains could increase your tax liability. Frequent trading also increases
transactions costs, which would lower the Fund's performance.
CAN A FUND CHANGE ITS INVESTMENT GOAL?
A Fund's investment goal(s) may be changed by a vote of the Board of Trustees
without shareholder approval. You would be notified at least 30 days before any
such change took effect.
YEAR 2000 RISK.
Touchstone has implemented steps intended to assure that its major computer
systems and processes are capable of Year 2000 processing. We are also examining
the third parties with whom we work to assess their readiness and are developing
contingency plans to assure that any problems in their systems will not
materially affect Touchstone's operations.
Companies or governmental entities in which Touchstone Funds invest could also
be affected by the Year 2000 issue, but at this time the Funds cannot predict
the degree of impact.
Computer systems failure of Touchstone, a Fund Sub-Advisor or that of any Fund
service provider could impair Fund services and have a negative impact on a
Fund's operations and returns.
THE FUNDS AT A GLANCE.
The following two tables can give you a quick basic understanding of the types
of securities a Fund tends to invest in and some of the risks associated with a
Fund's investments. You should read all of the information about a Fund and its
risks before deciding to invest.
31
<PAGE> 100
HOW CAN I TELL, AT A GLANCE, WHICH TYPES OF SECURITIES A FUND MIGHT INVEST IN?
The following table show the main types of securities in which each
Fund generally will invest. Some of the Funds' investments are described in
detail below.
<TABLE>
<CAPTION>
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
EMERGING INTERNATIONAL INCOME VALUE PLUS GROWTH & BALANCED FUND BOND FUND STANDBY
GROWTH EQUITY FUND OPPORTUNITY FUND INCOME FUND INCOME
FUND FUND FUND
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL INSTRUMENTS
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
INVESTS IN U.S. STOCKS o o o o o
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
INVESTS IN FOREIGN STOCKS o o o o
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
INVESTS IN INVESTMENT GRADE DEBT o o o o o o o o
SECURITIES
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
INVESTS IN NON-INVESTMENT GRADE DEBT o o o o o
SECURITIES
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
INVESTS IN FOREIGN DEBT SECURITIES o o o o o o
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
INVESTS IN FUTURES CONTRACTS
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
INVESTS IN FORWARD CURRENCY CONTRACTS o
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
INVESTS IN ASSET-BACKED SECURITIES o o
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
INVESTS IN MORTGAGE-RELATED SECURITIES o o o o
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
INVESTS IN REAL ESTATE INVESTMENT o
TRUSTS (REITS)
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
INVESTMENT TECHNIQUES
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
EMPHASIZES SECURITIES OF SMALL CAP o
COMPANIES
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
EMPHASIZES SECURITIES OF MID CAP o
COMPANIES
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
EMPHASIZES SECURITIES OF LARGE CAP o o o
COMPANIES
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
EMPHASIZES UNDERVALUED STOCKS o o o
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
INVESTS IN SECURITIES OF EMERGING o o o o o
MARKETS COUNTRIES
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
EMPHASIZES DIVIDEND-PAYING COMMON o
STOCKS
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
INVESTS IN SHORT-TERM DEBT SECURITIES o o
- ----------------------------------------- -------- ------------- ----------- ---------- ----------- ------------- --------- --------
</TABLE>
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS
FOREIGN COMPANIES
A foreign company is organized under the laws of a foreign country and:
- - Has the principal trading market for its stock in a foreign country
- - Derives at least 50% of its revenues or profits from operations in foreign
countries or has at least 50% of its assets located in foreign countries
ADRs
ADRs are securities that represent an ownership interest in a foreign security.
They are generally issued by a U.S. bank to U.S. buyers as a substitute for
direct ownership and are traded on U.S. exchanges
INVESTMENT GRADE SECURITIES
Investment grade securities are generally rated BBB or better by Standard &
Poor's Rating Service (S&P) or Baa or better by Moody's Investor Service, Inc.
(Moody's).
NON-INVESTMENT GRADE SECURITIES
Non-investment grade securities are higher risk, lower quality securities, often
referred to as "junk bonds" and are considered speculative. They are rated by
S&P as less than BBB or by Moody's as less than Baa.
ASSET-BACKED SECURITIES.
Asset-backed securities represent groups of other assets, for example credit
card receivables, that are combined or pooled for sale to investors.
MORTGAGE-RELATED SECURITIES
Mortgage-related securities represent groups of mortgage loans that are combined
for sale to investors. The loans may be grouped together by:
- - the Government National Mortgage Association (GNMA)
- - the Federal National Mortgage Association (FNMA)
- - the Federal Home Loan Mortgage Corporation (FHLMC)
- - commercial banks
- - savings and loan institutions
- - mortgage bankers
- - private mortgage insurance companies
REAL ESTATE INVESTMENT TRUSTS
Real estate investment trusts (REITs) pool investors' money to invest primarily
in income-producing real estate or real estate-related loans or interests.
"LARGE-CAP" AND "MID-CAP" COMPANIES
A large-cap company has a market capitalization of more than $5 billion. A
mid-cap company has a market capitalization of between $1 billion and $5
billion.
EMERGING GROWTH COMPANIES
Emerging Growth Companies are companies that have:
- - a total market capitalization less than that of the average of the companies
in the Standard & Poor's 500 Composite Stock Price Index (S&P 500)
- - earnings that the portfolio managers believe may grow faster than the
U.S. economy in general due to new products, management changes at the company
or economic shocks such as high inflation or sudden increases or decreases in
interest rates.
EMERGING MARKET SECURITIES
Emerging Market Securities are issued by a company that:
- - Is organized under the laws of an emerging market country (any country other
than Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Holland, Italy, Japan, Luxembourg, New Zealand, Norway, Spain, Sweden,
Switzerland, the United Kingdom and the United States).
- - Has its principal trading market for its stock in an emerging market country
- - Derives at least 50% of its revenues or profits from operations within
emerging market countries or has at least 50% of its assets located in emerging
market countries.
UNDERVALUED STOCKS
A stock is considered undervalued if the portfolio manager believes it should be
trading at a higher price than it is at the time of purchase. Factors considered
are:
- price relative to earnings
- price relative to cash flow
- price relative to financial strength
REPURCHASE AGREEMENTS
Repurchase Agreements are collateralized by obligations issued or guaranteed as
to both principal and interest by the U.S. Government, its agencies, and
instrumentalities. A repurchase agreement is a transaction in which a security
is purchased with a simultaneous commitment to sell it back to the seller (a
commercial bank or recognized securities dealer) at an agreed upon price on an
agreed upon date. This date is usually not more than seven days from the date
of purchase. The resale price reflects the purchase price plus an agreed upon
market rate of interest, which is unrelated to the coupon rate or maturity of
the purchased security.
HOW CAN I TELL, AT A GLANCE, A FUND'S KEY RISKS?
The following table shows some of the main risks to which each Fund is
subject. Each risk is described in detail below.
<TABLE>
<CAPTION>
- ---------------------------------- ---------- ------------- ----------- ---------- ----------- -------------- ---------- -----------
EMERGING INTERNATIONAL INCOME VALUE PLUS GROWTH & BALANCED FUND BOND FUND STANDBY
GROWTH EQUITY FUND OPPORTUNITY FUND INCOME FUND INCOME FUND
FUND FUND
- ---------------------------------- ---------- ------------- ----------- ---------- ----------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MARKET RISK o o o o o
- ---------------------------------- ---------- ------------- ----------- ---------- ----------- -------------- ---------- -----------
EMERGING GROWTH COMPANIES o
- ---------------------------------- ---------- ------------- ----------- ---------- ----------- -------------- ---------- -----------
REAL ESTATE INVESTMENT TRUSTS o
- ---------------------------------- ---------- ------------- ----------- ---------- ----------- -------------- ---------- -----------
INTEREST RATE RISK o o o o o o o o
- ---------------------------------- ---------- ------------- ----------- ---------- ----------- -------------- ---------- -----------
MORTGAGE-RELATED SECURITIES o o o o
- ---------------------------------- ---------- ------------- ----------- ---------- ----------- -------------- ---------- -----------
CREDIT RISK o o o o o o o o
- ---------------------------------- ---------- ------------- ----------- ---------- ----------- -------------- ---------- -----------
NON-INVESTMENT GRADE SECURITIES o o o o o
- ---------------------------------- ---------- ------------- ----------- ---------- ----------- -------------- ---------- -----------
FOREIGN INVESTING RISK o o o o o o o
- ---------------------------------- ---------- ------------- ----------- ---------- ----------- -------------- ---------- -----------
EMERGING MARKET RISK o o o o o
- ---------------------------------- ---------- ------------- ----------- ---------- ----------- -------------- ---------- -----------
POLITICAL RISK o o
- ---------------------------------- ---------- ------------- ----------- ---------- ----------- -------------- ---------- -----------
</TABLE>
32
<PAGE> 101
RISKS OF INVESTING IN THE FUNDS
Market Risk. A Fund that invests in common stocks is subject to stock market
risk. Stock prices in general may decline over short or even extended periods,
regardless of the success or failure of a particular company's operations. Stock
markets tend to run in cycles, with periods when stock prices generally go up
and periods when they generally go down. Common stock prices tend to go up and
down more than those of bonds.
- Emerging Growth Companies. Investment in Emerging Growth Companies is
subject to enhanced risks because such companies generally have limited
product lines, markets or financial resources and often exhibit a lack
of management depth. The securities of such companies can be difficult
to sell and are usually more volatile than securities of larger, more
established companies.
- Real Estate Investment Trusts (REITs). Investment in REITs is subject
to risks similar to those associated with the direct ownership of real
estate (in addition to securities markets risks). REITs are sensitive
to factors such as changes in real estate values and property taxes,
interest rates, cash flow of underlying real estate assets, supply and
demand, and the management skill and creditworthiness of the issuer.
REITs may also lose value due to changes in tax or other regulatory
requirements.
Interest Rate Risk. A Fund that invests in debt securities is subject to the
risk that the market value of the debt securities will decline because of rising
interest rates. The prices of debt securities are generally linked to the
prevailing market interest rates. In general, when interest rates rise, the
prices of debt securities fall, and when interest rates fall, the prices of debt
securities rise. The price volatility of a debt security also depends on its
maturity. Generally, the longer the maturity of a debt security the greater its
sensitivity to changes in interest rates. To compensate investors for this
higher risk, debt securities with longer maturities generally offer higher
yields than debt securities with shorter maturities.
- Mortgage-Related Securities. Payments from the pool of loans
underlying a Mortgage-Related Security may not be enough to meet the
monthly payments of the Mortgage-Related Security. If this occurs the
Mortgage-Related Security will lose value. Also, prepayments of
mortgages or mortgage foreclosures will shorten the life of the pool of
mortgages underlying a Mortgage-Related Security and will affect the
average life of the Mortgage-Related Securities held by a Fund.
Mortgage prepayments vary based on several factors including the level
of interest rates, general economic conditions, the location and age of
the mortgage and other demographic conditions. In periods of falling
interest rates, there are usually more prepayments. The reinvestment of
cash received from prepayments will, therefore, usually be at a lower
interest rate than the original investment, lowering a Fund's yield.
Mortgage-Related Securities may be less likely to increase in value
during periods of falling interest rates than other debt securities.
Credit Risk. The debt securities in a Fund's portfolio are subject to credit
risk. Credit risk is the possibility that an issuer will fail to make timely
payments of interest or principal. Securities rated in the lowest category of
Investment Grade securities have some risky characteristics and changes in
economic conditions are more likely to cause issuers of these securities to be
unable to make payments.
33
<PAGE> 102
- - Non-Investment Grade Securities. Non-Investment Grade securities are
sometimes referred to as junk bonds and are very risky with respect to
their issuers' ability to make payments of interest and principal.
There is a high risk that a Fund which invests in Non-Investment Grade
securities could suffer a loss caused by the default of an issuer of
such securities. Part of the reason for this high risk is that, in the
event of a default or bankruptcy, holders of Non-Investment Grade
securities generally will not receive payments until the holders of all
other debt have been paid. In addition, the market for Non-Investment
Grade securities has, in the past, had more frequent and larger price
changes than the markets for other securities. Non-Investment Grade
securities can also be more difficult to sell for good value.
Foreign Investing. Investing in foreign securities poses unique risks such as
fluctuation in currency exchange rates, market illiquidity, price volatility,
high trading costs, difficulties in settlement, regulations on stock exchanges,
limits on foreign ownership, less stringent accounting, reporting and disclosure
requirements, and other considerations. In the past, equity and debt instruments
of foreign markets have had more frequent and larger price changes than those of
U.S. markets.
- - Emerging Markets Risk. Investments in a country that is still
relatively underdeveloped involves exposure to economic structures that
are generally less diverse and mature than in the U.S. and to political
and legal systems which may be less stable. In the past, markets of
developing countries have had more frequent and larger price changes
than those of developed countries.
- - Political Risk. Political risk includes a greater potential for
revolts, and the taking of assets by governments. For example, a Fund
may invest in Eastern Europe and former states of the Soviet Union.
These countries were under communist systems that took control of
private industry. This could occur again in this region or others in
which a Fund may invest, in which case the Fund may lose all or part of
its investment in that country's issuers.
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<PAGE> 103
THE FUNDS' MANAGEMENT
INVESTMENT ADVISOR
Touchstone Advisors, Inc., (the Advisor or Touchstone Advisors) located at 311
Pike Street, Cincinnati, Ohio 45202 is the investment advisor of the Funds.
Touchstone Advisors has been registered as an investment advisor under the
Investment Advisers Act of 1940, as amended (the Advisers Act) since 1994. As of
June 30, 1998, Touchstone Advisors had $361 million in assets under management.
Touchstone Advisors is responsible for selecting Fund Sub-Advisors who have
shown good investment performance in their areas of expertise. The Board of
Trustees of the Trust reviews and must approve the Advisor's selections.
Touchstone considers various factors in evaluating Fund Sub-Advisors, including:
- level of knowledge and skill
- performance as compared to its peers or benchmark
- consistency of performance over five years or more
- level of compliance with investment rules and strategies
- employees, facilities and financial strength
- quality of service
Touchstone will also continually monitor each Fund Sub-Advisor's performance
through various analyses and through in-person, telephone and written
consultations with the Fund Sub-Advisors.
Touchstone discusses its expectations for performance with each Fund
Sub-Advisor. Touchstone provides written evaluations and recommendations to the
Board of Trustees, including whether or not each Fund Sub-Advisor's contract
should be renewed, modified or terminated.
Touchstone is also responsible for running all of the operations of the Funds,
except for those that are subcontracted to the Fund Sub-Advisors, custodian,
transfer agent and administrator.
Two or more Fund Sub-Advisors may manage a Fund, with each managing a portion of
the Fund's assets. If a Fund has more than one Fund Sub-Advisor, Touchstone
allocates how much of a Fund's assets are managed by each Sub-Advisor.
Touchstone may change these allocations from time to time, often based upon the
results of the evaluations of the Fund Sub-Advisors.
Each Fund pays Touchstone a fee for its services. Out of this fee Touchstone
pays each Fund Sub-Advisor a fee for its services.
The fee paid to Touchstone by each Fund is shown in the table below.
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<PAGE> 104
------------------------------- ----------------------------
FUND FEE TO TOUCHSTONE
(AS % OF AVERAGE DAILY NET
ASSETS)
------------------------------- ----------------------------
Emerging Growth Fund 0.80%
------------------------------- ----------------------------
International Equity Fund 0.95%
------------------------------- ----------------------------
Income Opportunity Fund 0.65%
------------------------------- ----------------------------
Value Plus Fund 0.75%
------------------------------- ----------------------------
Growth & Income Fund 0.80%
------------------------------- ----------------------------
Balanced Fund 0.80%
------------------------------- ----------------------------
Bond Fund 0.55%
------------------------------- ----------------------------
Standby Income Fund 0.25%
------------------------------- ----------------------------
FUND SUB-ADVISORS
The Fund Sub-Advisors make the day-to-day decisions regarding buying and selling
specific securities for a Fund. Each Fund Sub-Advisor manages the investments
held by the Fund it serves according to the applicable investment goals and
strategies.
DAVID L. BABSON & COMPANY, INC. (Babson)
One Memorial Drive, Cambridge, Massachusetts 02142-1300
A FUND SUB-ADVISOR TO THE EMERGING GROWTH FUND
Babson has been registered as an investment advisor under the Advisers Act since
1940. Babson provides investment advisory services to individual and
institutional clients. As of June 30, 1998, Babson and affiliates had assets
under management of $21.1 billion. Babson has been managing the Emerging Growth
Fund since the Fund's inception.
Dennis J. Scannell , Peter C. Schliemann and Lance F. James have primary
responsibility for the day-to-day management of the Fund. Mr. Scannell has been
with the firm since 1993, Mr. Schliemann has been with Babson since 1979, and
Mr. James has been with the firm since 1986.
WESTFIELD CAPITAL MANAGEMENT COMPANY, INC. (Westfield)
One Financial Center, Boston, Massachusetts 02111
A FUND SUB-ADVISOR TO THE EMERGING GROWTH FUND
Westfield has been registered as an investment advisor under the Advisers Act
since 1989. Westfield provides investment advisory services to individual and
institutional clients. As of June 30, 1998, Westfield had assets under
management of $1.5 billion. Westfield has been managing the Emerging Growth Fund
since the Fund's inception.
Michael J. Chapman has managed the portion of the Emerging Growth Fund's assets
allocated to Westfield by the Advisor since October, 1994. Mr. Chapman (CFA) has
been with Westfield since 1990.
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<PAGE> 105
CREDIT SUISSE ASSET MANAGEMENT (Credit Suisse)
One Citicorp Center, 153 East 53rd Street, New York, New York 10022
FUND SUB-ADVISOR TO THE INTERNATIONAL EQUITY FUND
Credit Suisse has been registered as an investment advisor under the Advisers
Act since 1968. Credit Suisse provides investment advisory services to
individual and institutional clients. As of June 30, 1998, Credit Suisse had
assets under management of $35.6 billion. Credit Suisse has been managing the
International Equity Fund since the Fund's inception.
The Fund is managed by the Credit Suisse International Equity Management Team.
The team consists of William Sterling, Richard Watt, Steven D. Bleiberg, Susan
Boland, Emily Alejos and Robert B. Hrabchak.
ALLIANCE CAPITAL MANAGEMENT L.P. (Alliance)
1345 Avenue of the Americas, New York, New York 10105
FUND SUB-ADVISOR TO THE INCOME OPPORTUNITY FUND
Alliance has been registered as an investment advisor under the Advisers Act
since 1971. Alliance provides investment advisory services to individual and
institutional clients. As of June 30, 1998, Alliance had assets under management
of $263 billion. Alliance has been managing the Income Opportunity Fund since
the Fund's inception.
Wayne Lyski and Vicki Fuller have primary responsibility for the day-to-day
management of the Fund. Mr. Lyski has been with Alliance since 1983. Ms. Fuller
(CPA) has been with Alliance, and its predecessors, since 1985.
FORT WASHINGTON INVESTMENT ADVISORS, INC. (Fort Washington)
420 East Fourth Street, Cincinnati, Ohio 45202
FUND SUB-ADVISOR TO THE VALUE PLUS FUND, BOND FUND, AND STANDBY INCOME FUND
Fort Washington has been registered as an investment advisor under the Advisers
Act since 1990. Fort Washington provides investment advisory services to
individual and institutional clients. As of June 30, 1998, Fort Washington had
assets under management of $9.8 billion. Fort Washington has been managing the
Value Plus Fund, the Bond Fund and the Standby Income Fund since each Fund's
inception.
VALUE PLUS FUND: John C. Holden has managed the Value Plus Fund since May 1998.
Mr. Holden (CFA) joined Fort Washington in May 1997 and is Vice President and
Senior Portfolio Manager. Mr. Holden previously served as senior portfolio
manager with Mellon Private Asset Management in Pittsburgh, senior portfolio
manager and investment analyst for Star Bank's Stellar Performance Group in
Cincinnati, and senior employee benefit portfolio manager for First Kentucky
Trust Company in Louisville.
BOND FUND: Roger Lanham and Brendan White have managed the Bond Fund since
October, 1994. Mr. Lanham is a CFA and has been with Fort Washington since 1980.
Mr. White is a CFA and has been with Fort Washington since 1993.
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<PAGE> 106
STANDBY INCOME FUND: Christopher J. Mahony has managed the Standby Income Fund
since October, 1994. Mr. Mahony joined Fort Washington in 1994 after eight years
of investment experience with Neuberger & Berman.
Fort Washington is an affiliate of Touchstone. Therefore, Touchstone may have a
conflict of interest when making decisions to keep Fort Washington as a Fund
Sub-Advisor. The Board of Trustees reviews all of Touchstone's decisions to
reduce the possibility of a conflict of interest situation.
SCUDDER KEMPER INVESTMENTS, INC. (Scudder Kemper)
345 Park Avenue, New York, New York
FUND SUB-ADVISOR TO THE GROWTH & INCOME FUND
Scudder Kemper and its predecessors have provided investment advisory services
to mutual fund investors, retirement and pension plans, institutional and
corporate clients, insurance companies, and private family and individual
accounts since 1943. As of June 30, 1998, Scudder Kemper had assets under
management of $235 billion. Scudder Kemper has been managing the Growth &
Income Fund since June 1997.
Robert T. Hoffman, Lori Ensinger, Benjamin W. Thorndike and Kathleen T. Millard
have primary responsibility for the day-to-day management of the Fund. Mr.
Hoffman, Lead Product Manager, joined Scudder in 1990. He has 13 years of
experience in the investment industry, including several years of pension fund
management experience. Lori Ensinger, Lead Portfolio Manager, focuses on stock
selection and investment strategy. She has been a portfolio manager since 1983
and joined Scudder in 1993. Benjamin W. Thorndike, Portfolio Manager, is the
Fund's chief analyst and strategist for convertible securities. Mr. Thorndike
has 18 years of investment experience, joined Scudder in 1983. Kathleen T.
Millard, Portfolio Manager and has worked as a portfolio manager since 1986. Ms.
Millard, who joined Scudder in 1991, focuses on strategy and stock selection.
OPCAP ADVISORS (OpCap)
Oppenheimer Tower, One World Financial Center, New York, NY 10281
FUND SUB-ADVISOR TO THE BALANCED FUND
OpCap is a subsidiary of Oppenheimer Capital. Oppenheimer Capital has been
registered as an investment advisor under the Advisers Act since 1968 and its
employees perform all investment advisory services provided to the Fund. As of
June 30, 1998, Oppenheimer Capital and its subsidiaries had assets under
management of $67.3 billion. OpCap has been managing the Balanced Fund since May
1997.
Alan Gutmann has managed the equity portion of the Balanced Fund since June,
1997. Robert J. Bluestone and Matthew Greenwald have managed the fixed-income
portion of the Balanced Fund since June, 1997. Mr. Gutmann joined Oppenheimer
Capital in 1991 and is Vice President. Mr. Bluestone joined Oppenheimer Capital
in 1986 and is Managing Director. Mr. Greenwald joined Oppenheimer Capital in
1989 and is Vice President.
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<PAGE> 107
INVESTING WITH TOUCHSTONE
INVESTING IN THE FUNDS
Class Y shares of each Fund are currently offered only to The Western and
Southern Life Insurance Company Separate Account A.
- - INVESTOR ALERT: Touchstone may choose to refuse any purchase order.
PRICING OF FUND SHARES
Each Fund's share price, also called net asset value (NAV), is determined as of
the close of trading (normally 4:00 p.m., Eastern time) every day the New York
Stock Exchange (NYSE) is open. The fund calculates the NAV per share, generally
using market prices, by dividing the total value of each class' net assets by
the number of the class shares outstanding. Shares are purchased at the next
offering price determined after your purchase or sale order is received in
proper form by Touchstone. The offering price is the NAV plus a sales charge, if
applicable.
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<PAGE> 108
The Fund's investments are valued based on market value or, if no market value
is available, based on fair value as determined by the Board of Trustees (or
under their direction). All assets and liabilities initially expressed in
foreign currency values will be converted into U.S. dollar values. Some specific
pricing strategies follow:
- - All short-term dollar-denominated investments that mature in 60 days or less
are valued on the basis of amortized cost which the Board of Trustees has
determined represents fair value.
- - Securities mainly traded on a U.S. exchange are valued at the last sale price
on that exchange or, if no sales occurred during the day, at the current quoted
bid price.
- - Securities mainly traded on a non-U.S. exchange are generally valued according
to the preceding closing values on that exchange. However, if an event which
may change the value of a security occurs after the time that the closing value
on the non-U.S. exchange was determined, the Board of Trustees might decide to
value the security based on fair value. This may cause the value of the
security on the books of the fund to be significantly different from the
closing value on the non-U.S. exchange and may affect the calculation of NAV.
- - Because portfolio securities that are primarily listed on non-U.S. exchange
may trade on weekends or other days when a Fund does not price its shares, a
Fund's NAV may change on days when shareholders will not be able to buy or sell
shares.
CHOOSING A CLASS OF SHARES
Each of the Funds (other than the Standby Income Fund) offers three classes of
shares - Class A shares, Class C shares and Class Y shares. This Prospectus only
offers Class Y shares. Each class of shares charges different sales charges and
distribution or service fees. The amount of sales charges and other fees you pay
will depend on which class of shares you decide to purchase.
Class Y shares are only available for purchase by pension plans.
The Standby Income Fund does not have share classes and it does not charge sales
charges, distribution fees or service fees. The Standby Income Fund may be
purchased by all investors.
CLASS Y SHARES
The offering price of each Class Y share is equal to its NAV. No sales charge is
applied at any time.
No distribution or service fees are charged on Class Y Shares.
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<PAGE> 109
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
Each Touchstone Fund intends to distribute to its shareholders substantially all
of its income and capital gains. The table below outlines when dividends are
declared and paid for each Fund.
41
<PAGE> 110
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FUND DIVIDENDS DECLARED DIVIDENDS PAID
- --------------------------------------------------------------------------------
<S> <C> <C>
Standby Income Fund Daily Monthly
- --------------------------------------------------------------------------------
Growth & Income Fund, Income Opportunity Monthly Monthly
Fund and Bond Fund
- --------------------------------------------------------------------------------
Value Plus Fund and Balanced Fund Quarterly Quarterly
- --------------------------------------------------------------------------------
Emerging Growth Fund and International Annually Annually
Equity Fund
- --------------------------------------------------------------------------------
</TABLE>
Distributions of any capital gains earned by a Fund will be made at least
annually.
TAX INFORMATION
DISTRIBUTIONS: Each Fund will make distributions that may be taxed as ordinary
income or capital gains (which may be taxed at different rates depending on the
length of time a Fund holds its assets). Each Fund's distributions may be
subject to federal income tax whether reinvested in additional shares of a Fund
or received in cash.
SPECIAL TAX CONSIDERATION: Selling your shares may cause you to incur a taxable
gain or loss.
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<PAGE> 111
FOR MORE INFORMATION
For investors who want more information about the Funds, the following documents
are available free upon request:
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds and is legally a part of this prospectus.
ANNUAL/SEMI-ANNUAL REPORTS: The Funds' annual and semi-annual reports provide
additional information about the Funds' investments. In each Fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during its last
fiscal year.
You can get free copies of the SAI, the reports, other information and answers
to your questions about the Funds by contacting your financial advisor, or the
Funds at:
Touchstone Family of Funds
311 Pike Street
Cincinnati, Ohio 45202
(800) 669-2796 (Press 3)
http://www.touchstonefunds.com
You can view the Funds' SAI and the reports at the Public Reference Room of the
Securities and Exchange Commission.
For a fee, you can get text-only copies by writing to the Public Reference Room
of the SEC, 450 Fifth Street N.W., Washington, D.C. 20549-6009. You can also
call 1-800-SEC-0330.
You can also view the SAI and the reports free from the SEC's Internet website
at http://www.sec.gov.
Investment Company Act file no. 811-8380
TOUCHSTONE FAMILY OF FUNDS
Touchstone Emerging Growth Fund
Touchstone International Equity Fund
Touchstone Income Opportunity Fund
Touchstone Value Plus Fund
Touchstone Growth & Income Fund
Touchstone Balanced Fund
Touchstone Bond Fund
Touchstone Standby Income Fund
Class Y Shares are
Offered by this
Prospectus
