<PAGE> 1
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TOUCHSTONE
LOGO
VARIABLE SERIES TRUST
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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
TABLE OF CONTENTS
3
TABLE OF CONTENTS [ICON]TOUCHSTONE VARIABLE SERIES TRUST
<TABLE>
<CAPTION>
PAGE
<S> <C>
Information About The Funds................................ 4
Touchstone Emerging Growth Fund............................ 5
Touchstone International Equity Fund....................... 8
Touchstone Income Opportunity Fund......................... 11
Touchstone Value Plus Fund................................. 14
Touchstone Growth & Income Fund............................ 16
Touchstone Balanced Fund................................... 18
Touchstone Bond Fund....................................... 22
Touchstone Standby Income Fund............................. 24
Investment Strategies and Risks............................ 27
The Funds' Management...................................... 34
Investing With Touchstone.................................. 38
Distributions and Taxes.................................... 40
Financial Highlights....................................... 41
For More Information....................................... 45
</TABLE>
<PAGE> 3
INFORMATION ABOUT THE FUNDS
4
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
INFORMATION ABOUT THE FUNDS
Touchstone Variable Series Trust
Touchstone Variable Series Trust (TVST) is a group of mutual funds. Each Fund
has a different investment goal and risk level.
Shares of each Fund described in this Prospectus can be purchased by insurance
company separate accounts.
You can invest indirectly in the Funds through your purchase of a Touchstone
variable annuity contract. When you purchase a Touchstone variable annuity
contract, you decide how to invest your purchase payments by selecting from the
available investment options. The investment options include the following
Sub-Accounts: Emerging Growth, International Equity, Income Opportunity, Value
Plus, Growth & Income, Balanced, Bond and Standby Income. Each Sub-Account
invests in the corresponding Fund.
You should read the prospectus for the Touchstone variable annuity contract that
you want to purchase to learn about purchasing a contract and selecting your
investment options. That prospectus also contains information about the
contract, your investment options, the Sub-Accounts and expenses related to
purchasing a variable annuity contract.
<PAGE> 4
TOUCHSTONE EMERGING
GROWTH FUND
5
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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:
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
<PAGE> 5
TOUCHSTONE EMERGING
GROWTH FUND
6
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
O If the market continually values the stocks in the Fund's portfolio lower
than the portfolio managers believe they should be valued
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 collateralized mortgage obligations (CMOs), stripped U.S.
government securities (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 bar chart which follows indicates the risks of investing in the Emerging
Growth Fund. It shows changes in the performance of the Fund's shares from year
to year since the Fund started.
<PAGE> 6
TOUCHSTONE EMERGING
GROWTH FUND
7
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
The Fund's past performance does not necessarily indicate how it will perform in
the future.
EMERGING GROWTH FUND PERFORMANCE
TOTAL RETURN
35% 33.67%
30%
25%
20% 19.57%
15% 11.16%
10%
5%
0%
1995 1996 1997
YEARS
During the period shown in the bar chart, the highest quarterly return
was 18.63% (for the quarter ended June 30, 1997) and the lowest
quarterly return was -2.79% (for the quarter ended March 31, 1997).
The performance information shown here does not reflect fees that are paid by
the separate accounts through which shares of the Fund are sold. Inclusion of
those fees would reduce the total return figures for all periods.
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.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
PAST 12 SINCE
MONTHS FUND STARTED
<S> <C> <C>
EMERGING GROWTH FUND 33.7% 20.7%
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RUSSELL 2000 INDEX 22.4% 22.7%
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WIESENBERGER SMALL CAP - MF 21.6% 24.5%
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</TABLE>
<PAGE> 7
TOUCHSTONE INTERNATIONAL
EQUITY FUND
8
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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.
<PAGE> 8
TOUCHSTONE INTERNATIONAL
EQUITY FUND
9
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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 bar chart shown below indicates the risks of investing in the International
Equity Fund. It shows changes in the performance of the Fund's shares from year
to year since the Fund started.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
INTERNATIONAL EQUITY FUND PERFORMANCE
TOTAL RETURN
20%
15% 15.46% 14.76%
10% 11.47%
5%
0%
1995 1996 1997
YEARS
During the period shown in the bar chart, the highest quarterly return
was 11.30% (for the quarter ended June 30, 1997) and the lowest
quarterly return was -3.89 (for the quarter ended March 31, 1995).
<PAGE> 9
TOUCHSTONE INTERNATIONAL
EQUITY FUND
10
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
The performance information shown here does not reflect fees that are paid by
the separate accounts through which shares of the Fund are sold. Inclusion of
those fees would reduce the total return figures for all periods.
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.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
PAST 12 SINCE
MONTHS FUND STARTED
<S> <C> <C>
INTERNATIONAL EQUITY FUND 14.8% 8.3%
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MSCI EAFE INDEX 2.1% 6.6%
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WIESENBERGER NON-US EQUITY - MF -2.0% 4.8%
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</TABLE>
<PAGE> 10
TOUCHSTONE INCOME
OPPORTUNITY FUND
11
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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 prepayment
O Because loans and loan participations may be more difficult to sell than
other investments and are subject to the risk of borrower default
O If the stock market as a whole goes down
<PAGE> 11
TOUCHSTONE INCOME
OPPORTUNITY FUND
12
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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 bar chart shown below indicates the risks of investing in the Income
Opportunity Fund. It shows changes in the performance of the Fund's shares from
year to year since the Fund started.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
INCOME OPPORTUNITY FUND PERFORMANCE
TOTAL RETURN
30% 27.37%
25%
20% 23.35%
15%
10% 12.03%
5%
0%
1995 1996 1997
YEARS
During the period shown in the bar chart, the highest quarterly return
was 15.38% (for the quarter ended June 30, 1995) and the lowest
quarterly return was -4.56% (for the quarter ended March 31, 1995).
<PAGE> 12
TOUCHSTONE INCOME
OPPORTUNITY FUND
13
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
The performance information shown here does not reflect fees that are paid by
the separate accounts through which shares of the Fund are sold. Inclusion of
those fees would reduce the total return figures for all periods.
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.
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
PAST 12 SINCE
MONTHS FUND STARTED
<S> <C> <C>
INCOME OPPORTUNITY 12.0% 17.7%
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LEHMAN BROTHERS CORPORATE BOND INDEX 10.2% 11.6%
- -------------------------------------------------------------------------
WIESENBERGER CORP - HIGH YIELD - MF 12.6% 13.7%
- -------------------------------------------------------------------------
WIESENBERGER GLOBAL INCOME - MF 3.3% 8.7%
- -------------------------------------------------------------------------
</TABLE>
<PAGE> 13
TOUCHSTONE VALUE PLUS FUND
14
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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:
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> 14
TOUCHSTONE VALUE PLUS FUND
15
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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.
<PAGE> 15
TOUCHSTONE GROWTH &
INCOME FUND
16
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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:
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
<PAGE> 16
TOUCHSTONE GROWTH &
INCOME FUND
17
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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.
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.
Performance Note
Performance information is only shown for those Funds which have had a full
calendar year of operations. Since the Growth & Income Fund started on January
4, 1999, there is no performance information included in this Prospectus.
<PAGE> 17
TOUCHSTONE BALANCED FUND
18
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
TOUCHSTONE BALANCED FUND
The Fund's Investment Goal
The Balanced Fund seeks to achieve both an increase in share price 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 also 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
<PAGE> 18
TOUCHSTONE BALANCED FUND
19
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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 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 bar chart shown on the following page indicates the risks of investing in
the Balanced Fund. It shows changes in the performance of the Fund's shares from
year to year since the Fund started.
The Fund's past performance does not necessarily indicate how it will perform in
the future.
<PAGE> 19
TOUCHSTONE BALANCED FUND
20
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
BALANCED FUND PERFORMANCE
TOTAL RETURN
25% 24.56%
20% 18.61%
15% 16.78%
10%
5%
0%
1995 1996 1997
YEARS
During the period shown in the bar chart, the highest quarterly return
was 10.08% (for the quarter ended June 30, 1997) and the lowest
quarterly return was -0.62% (for the quarter ended March 31, 1997).
The performance information shown here does not reflect fees that are paid by
the separate accounts through which shares of the Fund are sold. Inclusion of
those fees would reduce the total return figures for all periods.
The table on the following page 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 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.
<PAGE> 20
TOUCHSTONE BALANCED FUND
21
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
PAST 12 SINCE
MONTHS FUND STARTED
<S> <C> <C>
BALANCED FUND 18.6% 19.8%
- -------------------------------------------------------------------------
S&P 500 INDEX 33.4% 30.8%
- -------------------------------------------------------------------------
LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX 9.8% 10.4%
- -------------------------------------------------------------------------
WIESENBERGER BALANCED DOMESTIC - MF 18.6% 18.6%
- -------------------------------------------------------------------------
</TABLE>
<PAGE> 21
TOUCHSTONE BOND FUND
22
TOUCHSTONE BOND FUND [ICON]TOUCHSTONE VARIABLE SERIES TRUST
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:
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> 22
TOUCHSTONE BOND FUND
23
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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.
Performance Note
Performance information is only shown for those Funds which have had a full
calendar year of operations. Since the Bond Fund started on January 4, 1999,
there is no performance information included in this Prospectus.
<PAGE> 23
TOUCHSTONE STANDBY
INCOME FUND
24
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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 the investment made by a separate account. 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:
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> 24
TOUCHSTONE STANDBY
INCOME FUND
25
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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
TOTAL RETURN
6% 5.90%
5% 5.18% 5.41%
4%
3%
2%
1%
0%
1995 1996 1997
YEARS
During the period shown in the bar chart, the highest quarterly return
was 1.61% (for the quarter ended December 31, 1995) and the lowest
quarterly return was 1.09% (for the quarter ended September 30, 1995).
<PAGE> 25
TOUCHSTONE STANDBY
INCOME FUND
26
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
The performance information shown here does not reflect fees that are paid by
the separate accounts through which shares of the Fund are sold. Inclusion of
those fees would reduce the total return figures for all periods.
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 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 5.4% 5.5%
- -------------------------------------------------------------------------
MERRILL LYNCH 91-DAY TREASURY INDEX 5.3% 5.6%
- -------------------------------------------------------------------------
30-DAY MONEY MARKET YIELD INDEX 5.1% 5.2%
- -------------------------------------------------------------------------
</TABLE>
<PAGE> 26
INVESTMENT STRATEGIES
AND RISKS
27
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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> 27
INVESTMENT STRATEGIES
AND RISKS
28
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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
AMERICAN DEPOSITORY RECEIPTS (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 of the foreign security and
are traded on U.S. exchanges.
<PAGE> 28
INVESTMENT STRATEGIES
AND RISKS
29
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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 (REITS). 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
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
<PAGE> 29
INVESTMENT STRATEGIES
AND RISKS
30
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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.
<PAGE> 30
INVESTMENT STRATEGIES
AND RISKS
31
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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>
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.
<PAGE> 31
INVESTMENT STRATEGIES
AND RISKS
32
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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> 32
INVESTMENT STRATEGIES
AND RISKS
33
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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> 33
THE FUNDS' MANAGEMENT
34
THE FUNDS' MANAGEMENT[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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> 34
THE FUNDS' MANAGEMENT
35
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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>
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> 35
THE FUNDS' MANAGEMENT
36
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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> 36
THE FUNDS' MANAGEMENT
37
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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> 37
INVESTING WITH TOUCHSTONE
38
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
INVESTING WITH TOUCHSTONE
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. Your
financial advisor can help you buy a Touchstone variable annuity contract that
would allow you to choose the Funds.
Purchasing Shares
You cannot buy shares of the Funds directly. You can invest indirectly in the
Funds through your purchase of a Touchstone variable annuity contract. You
should read this prospectus and the prospectus of the Touchstone variable
annuity contract carefully before you choose your investment options.
The Touchstone variable annuity contracts are issued by separate accounts of
Western-Southern Life Assurance Company. The separate accounts buy Fund shares
based on the instructions that they receive from the contract owners.
O Investor Alert: Touchstone may refuse any purchase order.
Selling Shares
To meet various obligations under the contracts, the separate accounts may sell
Fund shares to generate cash. For example, a separate account may sell Fund
shares and use the proceeds to pay a contract owner who requested a partial
withdrawal or who canceled a contract. Proceeds from the sale are usually sent
to the separate account on the next business day. The Fund may suspend sales of
shares or postpone payment dates when the New York Stock Exchange (NYSE) is
closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as otherwise permitted by the SEC.
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 NYSE is
open. The fund calculates the NAV per share, generally using market prices, by
dividing the total value of its net assets by the number of its shares
outstanding. Shares are purchased at the NAV next determined after a purchase or
sale order is received in proper form by Touchstone.
A 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.
<PAGE> 38
INVESTING WITH TOUCHSTONE
39
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
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 NAV.
O Because portfolio securities that are primarily listed on non-U.S.
exchanges 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.
<PAGE> 39
DISTRIBUTIONS AND TAXES
40
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
DISTRIBUTIONS AND TAXES
***You should consult with your tax advisor to address your own tax
situation.
Dividends and Other 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:
<TABLE>
<CAPTION>
DIVIDENDS DECLARED DIVIDENDS PAID
------------------ --------------
<S> <C> <C>
STANDBY INCOME FUND Daily Monthly
- ----------------------------------------------------------------------------
GROWTH & INCOME FUND Monthly Monthly
- ----------------------------------------------------------------------------
INCOME OPPORTUNITY FUND Monthly Monthly
- ----------------------------------------------------------------------------
BOND FUND Monthly Monthly
- ----------------------------------------------------------------------------
VALUE PLUS FUND Quarterly Quarterly
- ----------------------------------------------------------------------------
BALANCED FUND Quarterly Quarterly
- ----------------------------------------------------------------------------
EMERGING GROWTH FUND Annually Annually
- ----------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND Annually Annually
- ----------------------------------------------------------------------------
</TABLE>
Distributions of any net realized long-term and short-term capital gains earned
by a Fund will be made at least annually.
Tax Information
Because you do not own shares of the Funds directly, your tax situation is not
likely to be affected by a Fund's distributions. The separate accounts in which
you own a variable annuity contract, as the owner of the Funds' shares, may be
affected.
Each Fund's distributions may be taxed as ordinary income or capital gains
(which may be taxable at different rates depending on the length of time the
Fund holds its assets). Each Fund's distributions may be subject to federal
income tax whether distributions are reinvested in Fund shares or received as
cash.
<PAGE> 40
FINANCIAL HIGHLIGHTS
41
FINANCIAL HIGHLIGHTS [ICON]TOUCHSTONE VARIABLE SERIES TRUST
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.
Touchstone Emerging Growth Fund
<TABLE>
<CAPTION>
12/31/94(a) 12/31/95 12/31/96 12/31/97 6/30/98
PERIOD ENDED (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of
Period $10.00 $10.10 $11.27 $ 12.20 $ 15.40
- --------------------------------
Income From Investment
Operations
- --------------------------------
Net Investment Income 0.04 0.11 0.04 0.03 0.01
- --------------------------------
Net Gains or Losses on
Securities (both realized and
unrealized) 0.06 1.87 1.22 4.06 0.87
- --------------------------------
Total from Investment
Operations 0.10 1.98 1.26 4.09 0.88
- --------------------------------
Less Distributions
- --------------------------------
Dividends (from net investment
income) -- (0.15) (0.04) (0.03) --
- --------------------------------
Distributions (from capital
gains) -- (0.66) (0.29) (0.86) --
- --------------------------------
Total Distributions -- (0.81) (0.33) (0.89) --
- --------------------------------
Net Asset Value, End of Period $10.10 $11.27 $12.20 $ 15.40 $ 16.28
- --------------------------------
Total Return (b) 1.00% 19.57% 11.16% 33.67% 5.71%
- --------------------------------
Ratios/Supplemental Data (c)
- --------------------------------
Net Assets, End of Period
(000s) $2,020 $2,615 $5,771 $19,417 $28,837
- --------------------------------
Ratio of Expenses to Average
Net Assets 1.15% 1.15% 1.15% 1.15% 1.15%
- --------------------------------
Ratio of Net Income to Average
Net Assets 3.67% 1.09% 0.50% 0.27% 0.19%
- --------------------------------
Portfolio Turnover Rate 0% 101% 89% 88% 32%
- --------------------------------
</TABLE>
<PAGE> 41
FINANCIAL HIGHLIGHTS
42
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
Touchstone International Equity Fund
<TABLE>
<CAPTION>
12/31/94(a) 12/31/95 12/31/96 12/31/97 6/30/98
PERIOD ENDED (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $ 9.51 $10.00 $ 11.07 $ 12.01
- ---------------------------------------
Income From Investment Operations
- ---------------------------------------
Net Investment Income -- 0.04 0.06 0.07 0.13
- ---------------------------------------
Net Gains or Losses on Securities
(both realized and unrealized) (0.49) 0.48 1.08 1.56 2.70
- ---------------------------------------
Total from Investment Operations (0.49) 0.52 1.14 1.63 2.83
- ---------------------------------------
Less Distributions
- ---------------------------------------
Dividends (from net investment income) -- (0.03) (0.07) (0.05) 0.00
- ---------------------------------------
Distributions (from capital gains) -- -- -- (0.64) 0.00
- ---------------------------------------
Total Distributions -- (0.03) (0.07) (0.69) 0.00
- ---------------------------------------
Net Asset Value, End of Period $ 9.51 $10.00 $11.07 $ 12.01 $ 14.84
- ---------------------------------------
Total Return (b) (4.90)% 15.45% 11.47% 14.76% 23.56%
- ---------------------------------------
Ratios/Supplemental Data (c)
- ---------------------------------------
Net Assets, End of Period $4,757 $5,215 $8,758 $19,703 $32,202
- ---------------------------------------
Ratio of Expenses to Average Net
Assets 1.25% 1.25% 1.25% 1.25% 1.25%
- ---------------------------------------
Ratio of Net Income to Average Net
Assets 1.23% 0.46% 0.86% 0.71% 1.40%
- ---------------------------------------
Portfolio Turnover Rate 0% 86% 90% 149% 53%
- ---------------------------------------
</TABLE>
Touchstone Income Opportunity Fund
<TABLE>
<CAPTION>
12/31/94(a) 12/31/95 12/31/96 12/31/97 6/30/98
PERIOD ENDED (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $ 9.42 $10.09 $ 11.21 $ 11.02
- ---------------------------------------
Income From Investment Operations
- ---------------------------------------
Net Investment Income 0.12 1.22 1.17 1.20 0.54
- ---------------------------------------
Net Gains or Losses on Securities
(both realized and unrealized) (0.70) 0.79 1.45 0.11 (0.42)
- ---------------------------------------
Total from Investment Operations (0.58) 2.01 2.62 1.31 0.12
- ---------------------------------------
Less Distributions
- ---------------------------------------
Dividends (from net investment income) -- (1.34) (1.17) (1.19) (0.48)
- ---------------------------------------
Distributions (from capital gains) -- -- (0.33) (0.31) 0.00
- ---------------------------------------
Total Distributions -- (1.34) (1.50) (1.50) (0.48)
- ---------------------------------------
Net Asset Value, End of Period $ 9.42 $10.09 $11.21 $ 11.02 $ 10.66
- ---------------------------------------
Total Return (b) (5.80)% 23.35% 27.37% 12.03% 0.82%
- ---------------------------------------
Ratios/Supplemental Data (c)
- ---------------------------------------
Net Assets, End of Period (000s) $1,883 $2,602 $8,268 $26,879 $37,064
- ---------------------------------------
Ratio of Expenses to Average Net
Assets 0.85% 0.85% 0.85% 0.85% 0.85%
- ---------------------------------------
Ratio of Net Income to Average Net
Assets 11.24% 12.81% 11.85% 10.93% 10.14%
- ---------------------------------------
Portfolio Turnover Rate 45% 104% 213% 189% 104%
- ---------------------------------------
</TABLE>
<PAGE> 42
FINANCIAL HIGHLIGHTS
43
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
Touchstone Value Plus Fund
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
JUNE 30, 1998(d)
(UNAUDITED)
<S> <C>
Per Share Operating Performance
- ------------------------------------------------------------
Net Asset Value, Beginning of Period $10.00
- ------------------------------------------------------------
Income From Investment Operations
- ------------------------------------------------------------
Net Investment Income 0.01
- ------------------------------------------------------------
Net Gains or Losses on Securities (both realized and
unrealized) (0.17)
- ------------------------------------------------------------
Total from Investment Operations (0.16)
- ------------------------------------------------------------
Less Distributions
- ------------------------------------------------------------
Dividends (from net investment income) --
- ------------------------------------------------------------
Distributions (from capital gains) --
- ------------------------------------------------------------
Total Distributions --
- ------------------------------------------------------------
Net Asset Value, End of Period $ 9.84
- ------------------------------------------------------------
Total Return (b) (1.60)%
- ------------------------------------------------------------
Ratios/Supplemental Data (c)
- ------------------------------------------------------------
Net Assets, End of Period $1,800
- ------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.15%
- ------------------------------------------------------------
Ratio of Net Income to Average Net Assets 1.02%
- ------------------------------------------------------------
Portfolio Turnover Rate 3%
- ------------------------------------------------------------
</TABLE>
Touchstone Balanced Fund
<TABLE>
<CAPTION>
12/31/94(a) 12/31/95 12/31/96 12/31/97 6/30/98
PERIOD ENDED (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
- -------------------------------------------
Net Asset Value, Beginning of Period $10.00 $10.17 $11.48 $ 12.84 $ 13.99
- -------------------------------------------
Income From Investment Operations
- -------------------------------------------
Net Investment Income 0.05 0.32 0.30 0.31 0.17
- -------------------------------------------
Net Gains or Losses on Securities (both
realized and unrealized) 0.12 2.15 1.60 2.05 0.87
- -------------------------------------------
Total from Investment Operations 0.17 2.47 1.90 2.36 1.04
- -------------------------------------------
Less Distributions
- -------------------------------------------
Dividends (from net investment income) -- (0.37) (0.30) (0.32) (0.16)
- -------------------------------------------
Distributions (from capital gains) -- (0.79) (0.24) (0.89) 0.00
- -------------------------------------------
Total Distributions -- (1.16) (0.54) (1.21) (0.16)
- -------------------------------------------
Net Asset Value, End of Period $10.17 $11.48 $12.84 $ 13.99 $ 14.87
- -------------------------------------------
Total Return (b) 1.70% 24.56% 16.78% 18.61% 7.44%
- -------------------------------------------
Ratios/Supplemental Data (c)
- -------------------------------------------
Net Assets, End of Period $2,034 $2,895 $6,695 $22,287 $35,960
- -------------------------------------------
Ratio of Expenses to Average Net Assets 0.90% 0.90% 0.90% 0.90% 0.90%
- -------------------------------------------
Ratio of Net Income to Average Net Assets 4.26% 2.87% 2.76% 2.61% 2.79%
- -------------------------------------------
Portfolio Turnover Rate 3% 124% 75% 86% 16%
- -------------------------------------------
</TABLE>
<PAGE> 43
FINANCIAL HIGHLIGHTS
44
[ICON]TOUCHSTONE VARIABLE SERIES TRUST
Touchstone Standby Income Fund
<TABLE>
<CAPTION>
12/31/94(a) 12/31/95 12/31/96 12/31/97 6/30/98
PERIOD ENDED (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
- ----------------------------------------
Net Asset Value, Beginning of Period $10.00 $10.03 $10.02 $ 10.01 $ 10.00
- ----------------------------------------
Income From Investment Operations
- ----------------------------------------
Net Investment Income 0.05 0.56 0.52 0.54 0.27
- ----------------------------------------
Net Gains or Losses on Securities (both
realized and unrealized) 0.03 (0.01) (0.01) (0.01) 0.00
- ----------------------------------------
Total from Investment Operations 0.08 0.55 0.51 0.53 0.27
- ----------------------------------------
Less Distributions
- ----------------------------------------
Dividends (from net investment income) (0.05) (0.56) (0.52) (0.54) (0.27)
- ----------------------------------------
Net Asset Value, End of Period $10.03 $10.02 $10.01 $ 10.00 $ 10.00
- ----------------------------------------
Total Return (b) 0.30% 5.90% 5.18% 5.41% 2.71%
- ----------------------------------------
Ratios/Supplemental Data (c)
- ----------------------------------------
Net Assets, End of Period $5,013 $5,790 $9,105 $17,562 $21,762
- ----------------------------------------
Ratio of Expenses to Average Net Assets 0.50% 0.50% 0.50% 0.50% 0.50%
- ----------------------------------------
Ratio of Net Income to Average Net
Assets 4.90% 5.59% 5.15% 5.42% 5.40%
- ----------------------------------------
Portfolio Turnover Rate 56% 159% 143% 251% 245%
- ----------------------------------------
</TABLE>
<TABLE>
<C> <S>
(a) The Fund commenced operations on November 21, 1994.
(b) 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) Ratios are annualized. Portfolio turnover is not annualized.
(d) The Fund commenced operations on May 1, 1998.
</TABLE>
<PAGE> 44
FOR MORE INFORMATION
45
FOR MORE INFORMATION [ICON]TOUCHSTONE VARIABLE SERIES TRUST
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 Variable Annuity
Service Center
400 Broadway
Cincinnati, Ohio 45202
800.669.2796 (Press 2)
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 Commission,
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 Commission's
Internet website at
http://www.sec.gov.
Investment Company Act file no. 811-8380.
TOUCHSTONE VARIABLE SERIES TRUST
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
