497 1 a13-6339_1497.htm 497

 

Touchstone Funds Group Trust

303 Broadway, Suite 1100

Cincinnati, Ohio 45202

(800) 543-0407

 

April 17, 2013

 

Dear Shareholder:

 

We wish to provide you with some important information concerning your investment. As a shareholder of the Touchstone Focused Equity Fund (the “Acquired Fund”), a series of Touchstone Funds Group Trust (“TFGT”), we wish to inform you that the Board of Trustees of TFGT, after careful consideration, has approved the reorganization of the Acquired Fund into the Touchstone Focused Fund (the “Acquiring Fund” together with the “Acquired Fund,” the “Funds”), a series of the Touchstone Strategic Trust (“TST”) (the “Reorganization”).  The Funds have the same investment goal and investment strategies, and are managed by the same portfolio management team.

 

The Reorganization is designed to eliminate the offering of overlapping funds with the same investment goals and investment strategies. The Reorganization may lead to potential efficiencies and economies of scale for shareholders.  Shareholder approval is NOT required to effect the Reorganization.  You do not need to take any action regarding your account.

 

Pursuant to an agreement and plan of reorganization, the Acquired Fund will transfer all of its assets and liabilities to the Acquiring Fund.  As a result of the Reorganization, you will receive shares of the Acquiring Fund, which will have an aggregate net asset value (“NAV”) equal to the aggregate NAV of your shares in the Acquired Fund.  The Acquired Fund will then cease operations and dissolve as a separate series of the Trust.  The Reorganization is expected to occur on or about May 17, 2013.

 

The following table shows the Acquired Fund and the Acquiring Fund, as well as the share class of the Acquiring Fund that will be issued to each corresponding share class of the Acquired Fund.

 

Acquired Fund and Share Classes

 

Acquiring Fund and Share Classes

Touchstone Focused Equity Fund, a series of TFGT

 

Touchstone Focused Fund, a series of TST

Class A

 

Class A

Class C

 

Class C

Class Y

 

Class Y

Institutional Class

 

Institutional Class

 

We have enclosed a Prospectus/Information Statement that describes the Reorganization in greater detail and contains important information about the Acquiring Fund.

 

 

Sincerely,

 

 

 

 

 

Jill T. McGruder

 

President

 

Touchstone Funds Group Trust

 


 

QUESTIONS & ANSWERS

 

We recommend that you read the Prospectus/Information Statement. The following questions and answers provide an overview of key features of the Reorganization and of the information contained in this Prospectus/Information Statement.

 

Q.                                   Why are we sending you this Prospectus/Information Statement?

 

A.                                    This Prospectus/Information Statement provides you with information about the Reorganization between Touchstone Focused Equity Fund, a series of TFGT, and Touchstone Focused Fund, a series of the TST.

 

On February 21, 2013, the Board of Trustees of TFGT approved the reorganization of the Acquired Fund into the Acquiring Fund.  The Reorganization does not require approval by shareholders.

 

Q.                                   What will happen to my existing shares?

 

A.                                    Immediately after the Reorganization, you will own shares of the Acquiring Fund that are equal in value to the shares of the Acquired Fund that you held immediately prior to the closing of the Reorganization (although the number of shares and the net asset value per share may be different).

 

Q.                                   How do the fees and expenses compare?

 

A.                                    Each Fund has the same investment advisory fee.  Class A shares of each Fund are subject to the same 12b-1 fees and front-end sales charges.  Class C shares of each Fund are subject to the same 12b-1 fees and contingent deferred sales charges.  Class Y shares and Institutional shares of each Fund are not subject to any 12b-1 fees or sales charges.

 

In addition, each Fund has entered into an expense limitation agreement with Touchstone Advisors, Inc. (“Touchstone Advisors”).  Touchstone Advisors has contractually agreed to waive a portion of its fees and/or reimburse certain Fund expenses in order to limit annual fund operating expenses for each Fund. The expense limitations for each Fund are limited to 1.20%, 1.95%, 0.95%, and 0.80% for Class A shares, Class C shares, Class Y shares, and Institutional Class shares, respectively.  The expense limitation agreement for the Focused Equity Fund (the “Acquired Fund”) is effective through January 29, 2014.  The expense limitation agreement for the Focused Fund (the “Acquiring Fund”) is effective through May 19, 2014. The section entitled “How do the Funds’ fees and expenses compare?” of the Prospectus/Information Statement compares the fees and expenses of the Funds in detail and the section entitled “Comparison of Investment Advisory Fees” provides additional information regarding the expense limitation agreements.

 

Q.                                   How do the investment goals and principal investment strategies of the Acquired Fund and the Acquiring Fund compare?

 

A.                                    Each Fund has the same investment goal and principal investment strategies.  The section of the Prospectus/Information Statement entitled “How do the Funds’ investment goals and principal investment strategies compare?” describes the investment goal and principal investment strategies of each Fund.

 

Q.                                   Will I have to pay federal income taxes as a result of the Reorganization?

 

A.                                    Shareholders are not expected to recognize gain or loss for federal income tax purposes on the exchange of their shares of the Acquired Fund for shares of the Acquiring Fund.  The Reorganization is intended to qualify as a tax-free reorganization for federal income tax purposes.  The section entitled “Federal Income Tax Consequences” of the Prospectus/Information Statement provides additional information regarding the federal income tax consequences of the Reorganization.

 


 

Q.                                   Who will manage the Acquiring Fund after the Reorganization?

 

A.                                    The same portfolio management team who currently manages the Acquired Fund will manage the Acquiring Fund after the Reorganization.  Touchstone Advisors will continue to serve as the investment advisor to the Acquiring Fund, and Fort Washington Investment Advisors, Inc. (“Fort Washington”), an affiliate of Touchstone Advisors, will continue to serve as the investment sub-advisor to the Acquiring Fund.  For more information on Touchstone Advisors and Fort Washington, please see the sections of the Prospectus/Information Statement entitled “Who will be the Advisor, Sub-Advisor and Portfolio Manager of my Fund after the Reorganization?” and “Management of the Funds.”

 

Q.                                   Will I have to pay any sales load, commission or other similar fee in connection with the Reorganization?

 

A.                                    No, you will not pay any sales load, commission, or other similar fee in connection with the Reorganization.

 

Q.                                   Who will pay for the Reorganization?

 

A.                                    Touchstone Advisors will pay the costs of the Reorganization.

 

Q.                                   What if I redeem my shares before the Reorganization takes place?

 

A.                                    If you choose to redeem your shares before the Reorganization takes place, then the redemption will be treated as a normal sale of shares and, generally, will be a taxable transaction and may be subject to any applicable contingent deferred sales charge (“CDSC”).

 

Q.                                   Why is no shareholder action necessary?

 

A.                                    TFGT’s Declaration of Trust provides that any series may be merged into another series by a vote of a majority of the Trustees of TFGT without the approval of shareholders.  In addition, the Reorganization of the Acquired Fund into the Acquiring Fund satisfies the requisite conditions of Rule 17a-8 under the Investment Company Act of 1940, as amended (the “1940 Act”) such that shareholder approval is not required by the 1940 Act.

 

Q.                                   When will the Reorganization occur?

 

A.                                    The Reorganization is expected to occur on or about May 17, 2013.

 

Q.                                   Who should I contact for more information?

 

A.                                    You can contact shareholder services at 1.800.543.0407.

 


 

PROSPECTUS/INFORMATION STATEMENT

 

April 17, 2013

 

Touchstone Funds Group Trust

303 Broadway, Suite 1100

Cincinnati, OH  45202

(800) 543-0407

 

We Are Not Asking You for a Proxy and You are Requested Not To Send Us a Proxy

 

This Prospectus/Information Statement is being furnished to shareholders of the Touchstone Focused Equity Fund (the “Acquired Fund”), a series of Touchstone Funds Group Trust (“TFGT”), in connection with an Agreement and Plan of Reorganization (the “Reorganization Agreement”) that has been approved by the Board of Trustees of TFGT (the “Board”). The Reorganization Agreement provides for the following:

 

·                                          the transfer of all of the assets of the Acquired Fund to the Touchstone Focused Fund (the “Acquiring Fund”), a series of the Touchstone Strategic Trust (“TST”), in exchange for shares of the Acquiring Fund (the “Reorganization”);

 

·                                          the assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund;

 

·                                          the termination of the Acquired Fund subsequent to the distribution of shares of the Acquiring Fund to the Acquired Fund’s shareholders in complete liquidation of the Acquired Fund; and

 

·                                          the structuring of the Reorganization as a tax-free reorganization for federal income tax purposes.

 

The Reorganization is expected to be completed on or about May 17, 2013.  The following table shows the Acquired Fund and the Acquiring Fund, as well as the share class of the Acquiring Fund that will be issued to each corresponding share class of the Acquired Fund.

 

Acquired Fund and Share Classes

 

Acquiring Fund and Share Classes

Touchstone Focused Equity Fund, a series of TFGT

 

Touchstone Focused Fund, a series of TST

Class A

 

Class A

Class C

 

Class C

Class Y

 

Class Y

Institutional Class

 

Institutional Class

 

The Acquired Fund and the Acquiring Fund (the “Funds”) are a series of TFGT and TST, respectively, each a registered open-end management investment company (i.e., a mutual fund).

 

This Prospectus/Information Statement, which you should read carefully and retain for future reference, sets forth concisely the information that you should know about the Funds and the Reorganization.  A Statement of Additional Information (“SAI”) dated April 17, 2013 relating to this Prospectus/Information Statement and the Reorganization has been filed with the U.S. Securities and Exchange Commission (“SEC”) and is incorporated by reference into this Prospectus/Information Statement.

 


 

Additional information concerning the Acquired Fund and the Acquiring Fund is contained in the documents described below, all of which have been filed with the SEC and all of the documents described below are incorporated herein by reference (meaning that they are legally considered to be part of this Prospectus/Information Statement):

 

Information about the Acquired Fund and the Acquiring
Fund:

 

How to Obtain this Information:

Prospectus relating to the Touchstone Focused Equity Fund dated January 30, 2013 as amended.

 

Prospectus relating to the Touchstone Focused Fund dated July 20, 2012, as amended, which accompanies this Prospectus/Information Statement.

 

A copy of the Prospectus is being mailed with the Prospectus/Information Statement.  You may obtain copies of the SAIs, Annual Reports or Semi-Annual Reports, without charge, upon request by:

 

 

 

Statement of Additional Information relating to the Touchstone Focused Equity Fund dated January 30, 2013, as amended.

 

·                  Writing to Touchstone Funds Group Trust or Touchstone Strategic Trust, at P.O. Box 9878, Providence, RI 02940; or

 

 

 

Statement of Additional Information relating to the Touchstone Focused Fund dated July 20, 2012, as amended.

 

·                  Calling (800) 543-0407 toll-free; or

 

 

 

Annual Report relating to the Touchstone Focused Equity Fund dated September 30, 2012.*

 

·                  Downloading a copy from https://www.touchstoneinvestments.com/home/formslit/.

 

 

 

Annual Report relating to the Touchstone Focused Fund dated March 31, 2012.*

 

 

 

 

 

Semi-Annual Report (unaudited) relating to the Touchstone Focused Equity Fund dated March 31, 2012. *

 

 

 

 

 

Semi-Annual Report (unaudited) relating to the Touchstone Focused Fund dated September 30, 2012.*

 

 

 


* No other parts of these documents are incorporated by reference herein.

 

You can also obtain copies of any of the above-referenced documents without charge on the EDGAR database on the SEC’s Internet site at http://www.sec.gov.  Copies are available for a fee by electronic request at the following E-mail address: publicinfo@sec.gov, or from the Public Reference Section, Securities and Exchange Commission, Washington, D.C. 20549-1520.

 

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT DETERMINED THAT THE INFORMATION IN THIS PROSPECTUS/INFORMATION STATEMENT IS ACCURATE OR ADEQUATE, NOR HAS IT APPROVED OR DISAPPROVED THESE SECURITIES.  ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIMINAL OFFENSE.

 

An investment in the Funds:

 

·                  is not a deposit of, or guaranteed by, any bank

·                  is not insured by the FDIC, the Federal Reserve Board or any other government agency

·                  is not endorsed by any bank or government agency

·                  involves investment risk, including possible loss of your original investment

 


 

TABLE OF CONTENTS

 

SUMMARY

 

1

What are the Reasons for the Reorganization?

 

1

What are the key features of the Reorganization?

 

1

After the Reorganization, what shares of the Acquiring Fund will I own?

 

1

How do the Funds’ investment goals and principal investment strategies compare?

 

2

How do the Funds’ fees and expenses compare?

 

2

How do the Funds’ performance records compare? (1), (2)

 

8

Will I be able to purchase, redeem and exchange shares the same way?

 

10

Will I be able to receive distributions the same way?

 

10

Who will be the Advisor, Sub-Advisor, and Portfolio Manager of my Fund after the Reorganization?

 

10

Will the Acquiring Fund have the same service providers as the Acquired Fund?

 

11

What will be the primary federal income tax consequences of the Reorganization?

 

11

 

 

 

COMPARISON OF PRINCIPAL RISKS

 

11

 

 

 

INFORMATION ABOUT THE REORGANIZATION

 

13

Reasons for the Reorganization

 

13

Agreement and Plan of Reorganization

 

14

Description of the Securities to be Issued

 

15

Federal Income Tax Consequences

 

15

Pro Forma Capitalization

 

17

ADDITIONAL INFORMATION REGARDING THE FUNDS

 

19

Management of the Funds

 

19

Comparison of Investment Advisory Fees

 

20

Description of Share Classes of the Funds

 

21

Information regarding the Distributor and Rule 12b-1 Plans

 

21

Purchases, Redemptions, Exchanges of Shares and Dividend Policy

 

22

Purchase Policies and Redemption Policies

 

22

Exchange Privileges of the Funds

 

22

Dividend Policy

 

23

 

 

 

INFORMATION ON SHAREHOLDERS’ RIGHTS

 

23

Shareholder Information

 

25

 

 

 

FINANCIAL STATEMENTS AND EXPERTS

 

25

 

 

 

LEGAL MATTERS

 

25

 

 

 

ADDITIONAL INFORMATION

 

25

 

 

 

FINANCIAL HIGHLIGHTS

 

26

 

 

 

EXHIBIT A: AGREEMENT AND PLAN OF REORGANIZATION

 

A-1

 

 

 

EXHIBIT B: COMPARISON OF THE FUNDAMENTAL INVESTMENT LIMITATIONS

 

B-1

 

 

 

EXHIBIT C: CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

 

C-1

 


 

SUMMARY

 

This section summarizes the primary features and consequences of the Reorganization.  It may not contain all of the information that is important to you.  To understand the Reorganization, you should read this entire Prospectus/Information Statement and the exhibits.  This summary is qualified in its entirety by reference to the additional information contained elsewhere in this Prospectus/Information Statement, SAI, and the Reorganization Agreement, which is attached to this Prospectus/Information Statement as Exhibit A.

 

What are the Reasons for the Reorganization?

 

The Reorganization is designed to eliminate the offering of overlapping funds with the same investment goal and substantially similar investment strategies.  The Reorganization may lead to potential efficiencies and economies of scale for shareholders.  At a meeting held on February 21, 2013, the Board of TFGT, including those Trustees who are not “interested persons” of TFGT, as such term is defined in the Investment Company Act of 1940 (the “1940 Act”) (the “Disinterested Trustees”), considered and approved the Reorganization, determined that the Reorganization was in the best interests of shareholders of the Funds, and that the interests of existing shareholders of the Funds will not be diluted as a result of the Reorganization.  For more information, please see the section entitled “Reasons for the Reorganization.”

 

What are the key features of the Reorganization?

 

The Reorganization Agreement sets forth the key features of the Reorganization.  The Reorganization Agreement provides for the following:

 

·                                          the transfer of all of the assets of the Acquired Fund to the Acquiring Fund in exchange for shares of the Acquiring Fund;

 

·                                          the assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund;

 

·                                          the termination of the Acquired Fund subsequent to the distribution of shares of the corresponding Acquiring Fund to the Acquired Fund’s shareholders in complete liquidation of the Acquired Fund; and

 

·                                          the structuring of the Reorganization as a tax-free reorganization for federal income tax purposes.

 

The Reorganization is expected to be completed on or about May 17, 2013.

 

After the Reorganization, what shares of the Acquiring Fund will I own?

 

The following table shows the Acquired Fund and the Acquiring Fund, as well as the share class of the Acquiring Fund that will be issued to each corresponding share class of the Acquired Fund.

 

Acquired Fund and Share Classes

 

Acquiring Fund and Share Classes

Touchstone Focused Equity Fund, a series of TFGT

 

Touchstone Focused Fund, a series of TST

Class A

 

Class A

Class C

 

Class C

Class Y

 

Class Y

Institutional Class

 

Institutional Class

 

The new Acquiring Fund shares you receive will have the same total value as your shares of the Acquired Fund as of the close of business on the day immediately prior to the Reorganization.

 

1


 

How do the Funds’ investment goals and principal investment strategies compare?

 

The Funds have the same investment goal and principal investment strategies.  Although there are some differences in how the Funds’ principal investment strategies are described in their respective prospectuses, the Funds’ principal investment strategies are substantively identical.

 

Each Fund also has substantially similar fundamental investment limitations, which are set forth in Exhibit B.  Although the Fund’s fundamental imitations are described differently, substantively they are identical.  In other words, both Funds are subject to the same fundamental limitations under the 1940 Act.

 

Each Fund’s investment goal is to seek capital appreciation.  Each Fund invests, under normal market conditions, at least 80% of its net assets (including borrowings for investment purposes) in equity securities, which includes common stock, preferred stock, convertible bonds, and warrants. This is a non-fundamental investment policy that can be changed by each Fund upon 60 days prior notice to shareholders.

 

In selecting securities for the Fund, the Fund’s sub-advisor, Fort Washington Investment Advisors, Inc. (“Fort Washington”), seeks to invest in companies that:

 

·                  Are trading below its estimate of the companies’ intrinsic value; and

·                  Have a sustainable competitive advantage or a high barrier to entry in place. The barrier(s) to entry can be created through a cost advantage, economies of scale, high customer loyalty or a government barrier (e.g., license or subsidy). Fort Washington believes that the strongest barrier to entry is the combination of economies of scale and high customer loyalty.

 

The Funds will generally hold 25 to 35 securities.  Both Funds expect residual cash and equivalents to represent less than 10% of the Fund’s net assets. The Funds may, at times, hold fewer securities and a higher percentage of cash and equivalents when, among other reasons, Fort Washington cannot find a sufficient number of securities that meets its purchase requirements. Each Fund may invest up to 35% of its net assets in securities of foreign issuers through the use of ordinary shares or depositary receipts such as American Depositary Receipts (“ADRs”). Each Fund may also invest in securities of emerging market countries.

 

Fort Washington will generally sell a security if it reaches its estimate of fair value, if a more attractive investment opportunity is available, or if a structural change has taken place and Fort Washington cannot reliably estimate the impact of the change on the business fundamentals.

 

Each Fund may invest in companies of any size in seeking to achieve its investment goal. These securities may be traded over-the-counter or listed on an exchange.

 

Each Fund’s investment strategy often involves overweighting the Fund’s position in the industry sectors which it believes hold the most growth potential.

 

Each Fund is non-diversified and may invest a significant percentage of its assets in the securities of a single company.

 

How do the Funds’ fees and expenses compare?

 

Comparative Fee Tables

 

The following tables allow you to compare the various fees and expenses that you may pay for buying and holding shares of each of the Funds.  The tables also show the various costs and expenses that investors in the Acquired Fund will bear as shareholders of the Acquiring Fund.  Pro forma expense levels shown should not be considered an actual representation of future expenses or performance.  Such pro forma expense levels project anticipated levels but actual expenses may be greater or less than those shown.  The shareholder transaction expenses presented below show the maximum sales charge (load) on purchases of Fund shares as a percentage of offering price. However, you will not have to pay any front-end sales charge on any shares of the Acquiring Fund received as part of the Reorganization. Information regarding sales charge discounts for which you may qualify with respect to future purchases of Class A shares of the Acquiring Fund is included in the section entitled “Description of Share Classes of the Funds” below.   Expense ratios reflect annual fund operating expenses for the most recent

 

2


 

fiscal year ended September 30, 2012 for the Acquired Fund and March 31, 2012 for the Acquiring Fund. Pro forma numbers are estimated as if the Reorganization had been completed as of September 30, 2012 and do not include the estimated costs of the Reorganization. The Funds will not bear any Reorganization costs.

 

 

 

Acquired
Fund
Class A

 

Acquiring
Fund
Class A

 

Acquiring Fund after
Reorganization
(pro forma combined)
Class A

 

Shareholder Fees (fees paid directly from your investment)

 

 

 

 

 

 

 

Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price)

 

5.75

%

5.75

%

5.75

%

Maximum Deferred Sales (Load) (as a % of original purchase price or the amount redeemed, whichever is less)

 

1.00

%(1)

1.00

%(1)

1.00

%(1)

Wire Redemption Fee

 

Up to $15

 

Up to $15

 

Up to $15

 

 

 

 

 

 

 

 

 

Annual Fund Operating Expenses (expenses that you pay each year as a % of the value of your investment)

 

 

 

 

 

 

 

Management Fees(2), (4)

 

0.70

%

0.69

%

0.65

%

Distribution and/or Service (12b-1) Fees

 

0.25

%

0.25

%

0.25

%

Other Expenses(3)

 

0.87

%

0.82

%

0.69

%

Acquired Fund Fees and Expenses (AFFE)(4)

 

0.01

%

0.01

%

0.01

%

Total Annual Fund Operating Expenses

 

1.83

%

1.77

%

1.60

%

Fee Waivers and/or Expense Reimbursement(2),(5)

 

(0.62

)%

(0.56

)%

(0.39

)%

Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement

 

1.21

%

1.21

%

1.21

%

 


(1) A CDSC of up to 1.00% may apply for investments of $1 million or more of Class A shares (and therefore no initial sales charge was paid by the shareholder) and shares are redeemed within 12 months after initial purchase. The CDSC shall not apply to those purchases of Class A shares of $1 million or more where the selling broker-dealer was not paid a commission. You should contact your financial intermediary to determine whether you are subject to the CDSC.

(2)Expenses shown above have been restated to reflect a change to each Fund’s management fee and each Fund’s contractual fee waiver and will differ from the expenses reflected in the Acquired Fund’s and Acquiring Fund’s Annual Report for the fiscal year ended September 30, 2012 and March 31, 2012, respectively.

(3) “Other Expenses” are based on estimated amounts for the current fiscal year.

(4) The total annual fund operating expenses do not correlate to the ratio of expenses that are included in the Acquired Fund’s and Acquiring Fund’s Annual Report for the fiscal year ended September 30, 2012 and March 31, 2012, respectively, because the Annual Reports do not include Acquired Fund Fees and Expenses and the reduction in management fees.

(5) Touchstone Advisors, Inc. (“Touchstone Advisors”) and TFGT and TST, as applicable, have entered into an expense limitation agreement whereby Touchstone Advisors has contractually agreed to waive a portion of its fees or reimburse certain Fund expenses in order to limit annual fund operating expenses for each Fund to 1.20% for Class A shares. The expense limitation agreement for the Acquired Fund is effective through January 29, 2014.  The expenses limitation agreement for the Acquiring Fund is effective through May 19, 2014.  Both agreements can be terminated by a vote of the Board of Trustees of the Funds if they deem the termination to be beneficial to the Fund shareholders. The terms of Touchstone Advisors’ contractual waiver agreement provide that Touchstone Advisors is entitled to recoup, subject to approval by the Funds’ Board of Trustees, such amounts waived or reimbursed for a period of up to three (3) years from the year in which Touchstone Advisors reduced its compensation and/or assumed expenses for a Fund. No recoupment will occur unless a Fund’s operating expenses are below the expense limitation amount. See the discussion entitled “Expense Limitation Agreements with respect to the Funds” in this Prospectus/Information Statement for more information.

 

3


 

 

 

Acquired
Fund
Class C

 

Acquiring
Fund
Class C

 

Acquiring Fund after
Transaction
(pro forma combined)
Class C

 

Shareholder Fees (fees paid directly from your investment)

 

 

 

 

 

 

 

Maximum Deferred Sales (Load) (as a % of original purchase price or the amount redeemed, whichever is less)

 

1.00

%

1.00

%

1.00

%

Wire Redemption Fee

 

Up to $15

 

Up to $15

 

Up to $15

 

 

 

 

 

 

 

 

 

Annual Fund Operating Expenses (expenses that you pay each year as a % of the value of your investment)

 

 

 

 

 

 

 

Management Fees(1), (3)

 

0.70

%

0.69

%

0.65

%

Distribution and/or Service (12b-1) Fees

 

1.00

%

1.00

%

1.00

%

Other Expenses(2)

 

4.63

%

0.76

%

4.42

%

Acquired Fund Fees and Expenses (AFFE)(3)

 

0.01

%

0.01

%

0.01

%

Total Annual Fund Operating Expenses

 

6.34

%

2.46

%

6.08

%

Fee Waivers and/or Expense Reimbursement(1), (4)

 

(4.38

)%

(0.50

)%

(4.12

)%

Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement

 

1.96

%

1.96

%

1.96

%

 


(1) Expenses shown above have been restated to reflect a change to each Fund’s management fee and each Fund’s contractual fee waiver and will differ from the expenses reflected in the Acquired Fund’s and Acquiring Fund’s Annual Report for the fiscal year ended September 30, 2012 and March 31, 2012, respectively.

(2) “Other Expenses” are based on estimated amounts for the current fiscal year.

(3) The total annual fund operating expenses do not correlate to the ratio of expenses that are included in the Acquired Fund’s and Acquiring Fund’s Annual Report for the fiscal year ended September 30, 2012 and March 31, 2012, respectively, because the Annual Reports do not include Acquired Fund Fees and Expenses and the reduction in management fees.

(4) Touchstone Advisors and TFGT and TST, as applicable, have entered into an expense limitation agreement whereby Touchstone Advisors has contractually agreed to waive a portion of its fees or reimburse certain Fund expenses in order to limit annual fund operating expenses for each Fund to 1.95% for Class C shares. The expense limitation agreement for the Acquired Fund is effective through January 29, 2014.  The expenses limitation agreement for the Acquiring Fund is effective through May 19, 2014.  Both agreements can be terminated by a vote of the Board of Trustees of the Funds if they deem the termination to be beneficial to the Fund shareholders. The terms of Touchstone Advisors’ contractual waiver agreement provide that Touchstone Advisors is entitled to recoup, subject to approval by the Funds’ Board of Trustees, such amounts waived or reimbursed for a period of up to three (3) years from the year in which Touchstone Advisors reduced its compensation and/or assumed expenses for a Fund. No recoupment will occur unless a Fund’s operating expenses are below the expense limitation amount. See the discussion entitled “Expense Limitation Agreements with respect to the Funds” in this Prospectus/Information Statement for more information.

 

4


 

 

 

Acquired
Fund
Class Y

 

Acquiring
Fund
Class Y

 

Acquiring Fund after
Transaction
(pro forma combined)
Class Y

 

Shareholder Fees (fees paid directly from your investment)

 

 

 

 

 

 

 

Wire Redemption Fee

 

Up to $15

 

Up to $15

 

Up to $15

 

 

 

 

 

 

 

 

 

Annual Fund Operating Expenses (expenses that you pay each year as a % of the value of your investment)

 

 

 

 

 

 

 

Management Fees(1), (3)

 

0.70

%

0.69

%

0.65

%

Other Expenses(2)

 

0.70

%

0.52

%

0.50

%

Acquired Fund Fees and Expenses (AFFE)(3)

 

0.01

%

0.01

%

0.01

%

Total Annual Fund Operating Expenses

 

1.41

%

1.22

%

1.16

%

Fee Waivers and/or Expense Reimbursement(1),(4)

 

(0.45

)%

(0.26

)%

(0.20

)%

Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement

 

0.96

%

0.96

%

0.96

%

 


(1) Expenses shown above have been restated to reflect a change to each Fund’s management fee and each Fund’s contractual fee waiver and will differ from the expenses reflected in the Acquired Fund’s and Acquiring Fund’s Annual Report for the fiscal year ended September 30, 2012 and March 31, 2012, respectively.

(2) “Other Expenses” are based on estimated amounts for the current fiscal year.

(3) The total annual fund operating expenses do not correlate to the ratio of expenses that are included in the Acquired Fund’s and Acquiring Fund’s Annual Report for the fiscal year ended September 30, 2012 and March 31, 2012, respectively, because the Annual Reports do not include Acquired Fund Fees and Expenses and the reduction in management fees.

(4) Touchstone Advisors and TFGT and TST, as applicable, have entered into an expense limitation agreement whereby Touchstone Advisors has contractually agreed to waive a portion of its fees or reimburse certain Fund expenses in order to limit annual fund operating expenses for each Fund to 0.95% for Class C shares. The expense limitation agreement for the Acquired Fund is effective through January 29, 2014.  The expenses limitation agreement for the Acquiring Fund is effective through May 19, 2014.  Both agreements can be terminated by a vote of the Board of Trustees of the Funds if they deem the termination to be beneficial to the Fund shareholders. The terms of Touchstone Advisors’ contractual waiver agreement provide that Touchstone Advisors is entitled to recoup, subject to approval by the Funds’ Board of Trustees, such amounts waived or reimbursed for a period of up to three (3) years from the year in which Touchstone Advisors reduced its compensation and/or assumed expenses for a Fund. No recoupment will occur unless a Fund’s operating expenses are below the expense limitation amount. See the discussion entitled “Expense Limitation Agreements with respect to the Funds” in this Prospectus/Information Statement for more information.

 

5


 

 

 

Acquired
Fund
Institutional
Class

 

Acquiring Fund
Institutional
Class

 

Acquiring Fund after
Transaction
(pro forma combined)
Institutional Class

 

Shareholder Fees (fees paid directly from your investment)

 

 

 

 

 

 

 

Wire Redemption Fee

 

Up to $15

 

Up to $15

 

Up to $15

 

 

 

 

 

 

 

 

 

Annual Fund Operating Expenses (expenses that you pay each year as a % of the value of your investment)

 

 

 

 

 

 

 

Management Fees(1), (3)

 

0.70

%

0.69

%

0.65

%

Other Expenses(2)

 

0.79

%

0.31

%

0.34

%

Acquired Fund Fees and Expenses (AFFE)(3)

 

0.01

%

0.01

%

0.01

%

Total Annual Fund Operating Expenses

 

1.50

%

1.01

%

1.00

%

Fee Waivers and/or Expense Reimbursement(1),(4)

 

(0.69

)%

(0.20

)%

(0.19

)%

Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement

 

0.81

%

0.81

%

0.81

%

 


(1) Expenses shown above have been restated to reflect a change to each Fund’s management fee and each Fund’s contractual fee waiver and will differ from the expenses reflected in the Acquired Fund’s and Acquiring Fund’s Annual Report for the fiscal year ended September 30, 2012 and March 31, 2012, respectively.

(2) “Other Expenses” are based on estimated amounts for the current fiscal year.

(3) The total annual fund operating expenses do not correlate to the ratio of expenses that are included in the Acquired Fund’s and Acquiring Fund’s Annual Report for the fiscal year ended September 30, 2012 and March 31, 2012, respectively, because the Annual Reports do not include Acquired Fund Fees and Expenses and the reduction in management fees.

(4) Touchstone Advisors and TFGT and TST, as applicable, have entered into an expense limitation agreement whereby Touchstone Advisors has contractually agreed to waive a portion of its fees or reimburse certain Fund expenses in order to limit annual fund operating expenses for each Fund to 0.80% for Institutional Class shares. The expense limitation agreement for the Acquired Fund is effective through January 29, 2014.  The expenses limitation agreement for the Acquiring Fund is effective through May 19, 2014.  Both agreements can be terminated by a vote of the Board of Trustees of the Funds if they deem the termination to be beneficial to the Fund shareholders. The terms of Touchstone Advisors’ contractual waiver agreement provide that Touchstone Advisors is entitled to recoup, subject to approval by the Funds’ Board of Trustees, such amounts waived or reimbursed for a period of up to three (3) years from the year in which Touchstone Advisors reduced its compensation and/or assumed expenses for a Fund. No recoupment will occur unless a Fund’s operating expenses are below the expense limitation amount. See the discussion entitled “Expense Limitation Agreements with respect to the Funds” in this Prospectus/Information Statement for more information.

 

6


 

Expense Examples

 

The examples are intended to help you compare the cost of investing in the Acquired Fund versus the Acquiring Fund and the Acquiring Fund (Pro Forma Combined), assuming the Reorganization takes place.  The examples assume that you invest $10,000 for the time periods indicated and then, except as indicated, redeem all of your shares at the end of those periods. The examples also assume that your investment has a 5% return each year and that the operating expenses remain the same.  The examples also assume that the expense limitations remain in effect for the length of the contractual fee waiver for the Acquired Fund and remain in effect for a period of one year for the Acquiring Fund and the Acquiring Fund (Pro Forma Combined).  Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 

 

 

Assuming Redemption

 

Assuming No Redemption

 

 

 

1 Year

 

3
Years

 

5
Years

 

10
Years

 

1 Year

 

3
Years

 

5
Years

 

10
Years

 

Acquired Fund Class A

 

$

691

 

$

1,061

 

$

1,454

 

$

2,552

 

$

691

 

$

1,061

 

$

1,454

 

$

2,552

 

Acquiring Fund Class A

 

$

692

 

$

1,050

 

$

1,432

 

$

2,499

 

$

692

 

$

1,050

 

$

1,432

 

$

2,499

 

Acquiring Fund after Reorganization (Pro Forma Combined) Class A

 

$

691

 

$

1,014

 

$

1,360

 

$

2,333

 

$

691

 

$

1,014

 

$

1,360

 

$

2,333

 

Acquired Fund Class C

 

$

299

 

$

1,488

 

$

2,743

 

$

5,736

 

$

199

 

$

1,488

 

$

2,743

 

$

5,736

 

Acquiring Fund Class C

 

$

299

 

$

718

 

$

1,263

 

$

2,754

 

$

199

 

$

718

 

$

1,263

 

$

2,754

 

Acquiring Fund after Reorganization (Pro Forma Combined) Class C

 

$

299

 

$

1,440

 

$

2,653

 

$

5,573

 

$

199

 

$

1,440

 

$

2,653

 

$

5,573

 

Acquired Fund Class Y

 

$

98

 

$

402

 

$

728

 

$

1,652

 

$

98

 

$

402

 

$

728

 

$

1,652

 

Acquiring Fund Class Y

 

$

98

 

$

362

 

$

647

 

$

1,457

 

$

98

 

$

362

 

$

647

 

$

1,457

 

Acquiring Fund after Reorganization (Pro Forma Combined) Class Y

 

$

98

 

$

349

 

$

620

 

$

1,391

 

$

98

 

$

349

 

$

620

 

$

1,391

 

Acquired Fund Institutional Class

 

$

83

 

$

406

 

$

753

 

$

1,731

 

$

83

 

$

406

 

$

753

 

$

1,731

 

Acquiring Fund Institutional Class

 

$

82

 

$

300

 

$

536

 

$

1,213

 

$

82

 

$

300

 

$

536

 

$

1,213

 

Acquiring Fund after Reorganization (Pro Forma Combined) Institutional Class

 

$

83

 

$

301

 

$

536

 

$

1,212

 

$

83

 

$

301

 

$

536

 

$

1,212

 

 

7


 

Portfolio Turnover

 

Each Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio).  A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account.  These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example, affect the Funds’ performance.  The table below indicates the Acquired Fund’s and Acquiring Fund’s portfolio turnover rate for its most recent fiscal year ended (September 30, 2012 and March 31, 2012, respectively).

 

Acquired Fund

 

Portfolio Turnover
Rate

 

Acquiring Fund

 

Portfolio Turnover 
Rate

 

Touchstone Focused Equity Fund

 

54

%

Touchstone Focused Fund

 

99

%

 

How do the Funds’ performance records compare? (1), (2)

 

Touchstone Focused Equity Fund (Acquired Fund) and Touchstone Focused Fund (Acquiring Fund)

 

The bar chart and performance table below illustrate some indication of the risks of investing in the Fund by showing changes in the Funds’ performance from year to year and by showing how the Touchstone Focused Equity Fund’s average annual total returns for 1 year and since inception and the Touchstone Focused Fund’s average annual total returns for 1 year, 5 years, and 10 years compare with the Russell 3000® Index.  The bar chart does not reflect any sales charges, which would reduce your return.  The Fund’s past performance (before and after taxes) does not necessarily indicate how the Fund will perform in the future. Updated performance is available at no cost by visiting www.TouchstoneInvestments.com or by calling 1.800.543.0407.

 

Touchstone Focused Equity Fund — Class A Total Return as of December 31

 

 

Best Quarter:   1st Quarter 2012 +14.92%      Worst Quarter:   3rd Quarter 2011 -21.36%

 

The year-to-date return for the Touchstone Focused Equity Fund’s Class A shares as of March 31, 2013 is 9.61%.

 

8


 

Touchstone Focused Fund — Class Y shares Total Return as of December 31(1)

 

   

 

Best Quarter:   2nd Quarter 2009 +19.55%      Worst Quarter:   4th Quarter 2008 -19.04%

 

The year to date return for the Touchstone Focused Fund’s Class Y Shares as of March 31, 2013 is 11.08%.

 


(1) Class C shares were not operational and offered prior to April 12, 2012. Class C shares would have had substantially similar annual returns because the shares are invested in the same portfolio. Annual returns would differ only to the extent that the Classes have different expenses.

(2) The Focused Fund illustrates Class Y shares in its example because this Class of shares has a longer performance history than the Class A shares.

 

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes.  Your actual after-tax returns may differ from those shown and depend on your tax situation.  The after-tax returns do not apply to shares held in an IRA, 401(k), or other tax-deferred account.

 

The after-tax returns shown in the table are for Touchstone Focused Equity Fund Class A and Touchstone Focused Fund Class Y shares, and after-tax returns for other Classes will vary.

 

For the Touchstone Focused Fund, Class Y shares began operations on February 12, 1999, Class A shares began operations on September 30, 2003, Class C shares began operations on April 12, 2012, and Institutional Class shares began operations on December 20, 2006. Class A shares, Class C shares, and Institutional Class shares performance was calculated using the historical performance of Class Y shares for the periods prior to September 30, 2003, April 12, 2012, and December 20, 2006, respectively. The Class A shares and Class C shares performance for this period has been restated to reflect the impact of Class A shares and Class C shares fees and expenses accordingly.

 

9


 

Average Annual Total Returns

 

For the period ended December 31, 2012

 

 

 

Acquired Fund

 

Acquiring Fund

 

 

 

 

 

Since
Inception

 

 

 

5

 

10

 

 

 

1 Year

 

(12-31-09)

 

1 Year

 

Years

 

Years

 

Class A Return Before Taxes

 

13.42

%

5.91

%

14.90

%

1.98

%

7.90

%

Class A Return After Taxes on Distributions

 

13.34

%

5.44

%

14.88

%

1.41

%

7.47

%

Class A Return After Taxes on Distributions and Sale of Fund Shares

 

8.82

%

4.83

%

9.72

%

1.37

%

6.76

%

Class C Return Before Taxes

 

18.35

%

7.08

%

22.14

%

2.80

%

7.92

%

Class Y Return Before Taxes

 

20.53

%

8.25

%

22.13

%

3.45

%

8.81

%

Institutional Class Return Before Taxes

 

20.71

%

8.39

%

22.32

%

3.70

%

8.94

%

Russell 3000 Index
(reflects no deductions for fees, expenses or taxes)

 

16.42

%

10.81

%

16.42

%

2.04

%

7.68

%

 

Will I be able to purchase, redeem and exchange shares the same way?

 

After the Reorganization, you will be able to purchase, redeem and exchange shares the same way.  For more information, see the section entitled “Purchases, Redemptions, Exchanges of Shares and Dividend Policy,” below.

 

Will I be able to receive distributions the same way?

 

After the Reorganization, you will be able to receive distributions the same way.  Each Fund intends to distribute to its shareholders substantially all of its income and capital gains.  The table below outlines when dividends, if any, are declared and paid by each Fund:

 

Acquired Fund

 

Dividends Declared/ Dividends
Paid

 

Acquiring Fund

 

Dividends Declared/ Dividends 
Paid

Touchstone Focused Equity Fund

 

Annually/Annually

 

Touchstone Focused Fund

 

Annually/Annually

 

Net realized capital gains, if any, are distributed annually by both of the Funds.  After the Reorganization, any dividends and distributions will be reinvested in the class of shares of the Acquiring Fund you receive in the Reorganization or, if you have so elected, distributed in cash.  For more information, see the section entitled “Purchases, Redemptions, Exchanges of Shares and Dividend Policy.”

 

Who will be the Advisor, Sub-Advisor, and Portfolio Manager of my Fund after the Reorganization?

 

Touchstone Advisors currently serves as the investment advisor to each Fund and FWIA currently serves as the sub-advisor to each Fund.  After the Reorganization, Touchstone Advisors will continue to serve as the investment advisor to the Acquiring Fund and Fort Washington will continue to serve as the sub-advisor to the Acquiring Fund.  In addition, James Wilhelm will continue to serve as the portfolio manager to the Acquiring Fund.  For additional information regarding Touchstone Advisors, Fort Washington, and James Wilhelm, please see the section entitled “Management of the Funds” below.

 

10


 

Will the Acquiring Fund have the same service providers as the Acquired Fund?

 

Except for the Independent Registered Public Accounting Firm, the Funds currently have the same service providers.  Upon completion of the Reorganization, the Acquiring Fund will continue to engage its existing service providers, as set forth in the chart below.

 

ACQUIRED FUND

 

Service Providers

Principal Underwriter

 

Touchstone Securities, Inc.

Administrator

 

Touchstone Advisors, Inc.

Sub-Administrator

 

BNY Mellon Investment Servicing (US) Inc.

Transfer Agent

 

BNY Mellon Investment Servicing (US) Inc.

Custodian

 

Brown Brothers Harriman & Co.

Independent Registered Public Accounting Firm

 

Ernst & Young LLP

 

ACQUIRING FUND

 

Service Providers

Principal Underwriter

 

Touchstone Securities, Inc.

Administrator

 

Touchstone Advisors, Inc.

Sub-Administrator

 

BNY Mellon Investment Servicing (US) Inc.

Transfer Agent

 

BNY Mellon Investment Servicing (US) Inc.

Custodian

 

Brown Brothers Harriman & Co.

Independent Registered Public Accounting Firm

 

PricewaterhouseCoopers LLP

 

For additional information regarding the service providers to the Funds, please see each Fund’s SAI.

 

What will be the primary federal income tax consequences of the Reorganization?

 

The transaction has been structured to qualify as a tax-free reorganization for federal income tax purposes and is expected to so qualify.  If the Reorganization so qualifies, in general, no gain or loss will be recognized by the Acquired Fund or the Acquiring Fund or their respective shareholders as a result of the Reorganization.  As a condition to the closing of the Reorganization, the Acquiring Fund and the Acquired Fund will each receive an opinion from the law firm of Pepper Hamilton LLP that the Reorganization qualifies as a tax-free reorganization within the meaning of section 368(a) of the United States Internal Revenue Code of 1986, as amended (the “Code”).  The opinion, however, is not binding on the Internal Revenue Service (the “IRS”) or any court and thus does not preclude the IRS from asserting, or a court from rendering, a contrary position.  See “Federal Income Tax Consequences” for more information on the federal income tax consequences of the Reorganization.

 

Will there be any repositioning costs?

 

Given the Acquired Fund and the corresponding Acquiring Fund have the same investment goal and substantially similar investment strategies, no repositioning costs are expected to be incurred by either Fund as a result of the Reorganization.

 

COMPARISON OF PRINCIPAL RISKS

 

The principal risks of each Fund are identical.  The following section sets forth the principal risks of each Fund.  For more information on the risks associated with Funds, see each Fund’s SAI.

 

Principal Risks of Both Funds

 

Each Fund’s share price will fluctuate. You could lose money on your investment in each Fund, and each Fund could also return less than other investments.  As with any mutual fund, there is no guarantee that either Fund will achieve its investment goal.  Each Fund is subject to the principal risks listed below.

 

11


 

·                  Equity Securities Risk: Each Fund is subject to the risk that stock prices will fall over short or extended periods of time. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by these companies may decline in response to such developments, which could result in a decline in the value of each Fund’s shares.

 

·                  Large Cap Risk: Large cap risk is the risk that stocks of larger companies may underperform relative to those of small and mid-sized companies. Large cap companies may be unable to respond quickly to new competitive challenges, such as changes in technology and consumer tastes, and also may not be able to attain the high growth rate of successful smaller companies, especially during extended periods of economic expansion.

 

·                  Mid Cap Risk: Each Fund is subject to the risk that medium capitalization stocks may underperform other types of stocks or the equity markets as a whole. Stocks of mid-sized companies may be subject to more abrupt or erratic market movements than stocks of larger, more established companies. Mid-sized companies may have limited product lines or financial resources, and may be dependent upon a particular niche of the market.

 

·                  Small Cap Risk: Each Fund is subject to the risk that small capitalization stocks may underperform other types of stocks or the equity markets as a whole. Small cap stock risk is the risk that stocks of smaller companies may be subject to more abrupt or erratic market movements than stocks of larger, more established companies. Small companies may have limited product lines or financial resources, or may be dependent upon a small or inexperienced management group. In addition, small cap stocks typically are traded in lower volume, and their issuers typically are subject to greater degrees of changes in their earnings and prospects.

 

·                  Foreign Securities Risk: Investing in foreign securities poses additional risks since political and economic events unique in a country or region will affect those markets and their issuers. These events will not necessarily affect the U.S. economy or similar issuers located in the United States. In addition, investments in foreign securities are generally denominated in foreign currency. As a result, changes in the value of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of each Fund’s investments. These currency movements may happen separately from, or in response to, events that do not otherwise affect the value of the security in the issuer’s home country. There is a risk that foreign securities may not be subject to accounting standards or governmental supervision comparable to U.S. companies and that less public information about their operations may exist. There is risk associated with the clearance and settlement procedures in non-U.S. markets, which may be unable to keep pace with the volume of securities transactions and may cause delays. Foreign markets may be less liquid and more volatile than U.S. markets and offer less protection to investors. Over-the-counter securities may also be less liquid than exchange-traded securities.

 

·                  Emerging Markets Risk: Emerging markets may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with each Fund’s investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar.

 

·                  Investment Style Risk:  Each Fund’s investment strategy often involves overweighting the Fund’s position in the industry sectors which it believes hold the most growth potential.  As a result, poor performance or adverse economic events affecting one or more of these over weighted sectors could have a greater impact on the Fund than it would on another mutual fund with a broader range of investments.  In addition, each  

 

12


 

Fund focuses on a small number of companies, making it highly vulnerable to isolated business setbacks.

 

·                  Market Risk: Market risk is the risk that the market value of a security may fluctuate, sometimes rapidly and unpredictably.

 

·                  Management Risk: The value of your investment may decrease if the sub-advisor’s judgment about the attractiveness, value or market trends affecting a particular security, issuer, industry or sector or about market movements is incorrect.

 

·                  Non-Diversification Risk:  Each Fund is non-diversified, which means that it may invest a greater percentage of its assets than diversified mutual funds in the securities of a limited number of issuers.  The use of a non-diversified investment strategy may increase the volatility of the Fund’s investment performance, as the Fund may be more susceptible to risks associated with a single economic, political, or regulatory event than a diversified fund.

 

·                  Sector Focus Risk: Each Fund may focus its investments in certain industries with certain sectors.  A fund that focuses its investments in the securities of a particular market sector is subject to the risk that adverse circumstances will have a greater impact on the fund than a fund that does not focus its investments in a particular sector.  It is possible that economic, business, or political developments or other changes affecting one security in the area of focus will affect other securities in that area of focus in the same manner, thereby increasing the risk of such investments.

 

INFORMATION ABOUT THE REORGANIZATION

 

Reasons for the Reorganization

 

The Reorganization is designed to eliminate the offering of overlapping funds with the same investment goal and substantially similar investment strategies.  The Reorganization may lead to potential efficiencies and economies of scale for shareholders.  At a meeting held on February 21, 2013, the Board of TFGT and TST, including the Disinterested Trustees, considered and approved the Reorganization, determined that the Reorganization was in the best interests of shareholders of the Acquired Fund and the Acquiring Fund, and that the interests of existing shareholders of the Acquired Fund and the Acquiring Fund will not be diluted as a result of the Reorganization.

 

In evaluating the Reorganization, the Board requested and reviewed, with assistance of independent legal counsel, materials furnished by Touchstone Advisors, the investment advisor to the Funds.  These materials included written information regarding operations and financial conditions of the Funds, principal terms and conditions of the Reorganization, including the intention that the Reorganization be consummated on a tax-free basis.  The Trustees were also advised that as of December 31, 2012, the Acquired Fund had net assets of approximately $118.6 million, while the Acquiring Fund had assets of approximately $542.4 million. Accordingly, by merging the Funds, shareholders would enjoy a greater asset base over which fund expenses may be spread. In addition, the Trustees considered, among other things:

 

·                  the terms and conditions of the Reorganization;

 

·                  the investment advisory and other fees paid by the Funds and the expense ratios of the Funds;

 

·                  the advice and recommendation of Touchstone Advisors, including its opinion that in light of the foregoing, the Reorganization would be in the best interests of the Funds and their shareholders;

 

·                  the expenses of the Reorganization would not be borne by the Funds’ shareholders;

 

·                  the historical investment performance record of the Funds and expected continuity of day-to-day Fund management through Fort Washington;

 

13


 

·                  the same investment goal and investment strategies of the Funds;

 

·                  the fact that the Acquiring Fund will assume all of the liabilities of the Acquired Fund;

 

·                  the anticipated benefits to shareholders, including operating efficiencies, which may be achieved from the Reorganization;

 

·                  the anticipated tax-free nature of the Reorganization; and

 

·                  alternatives available to shareholders of the Acquired Fund, including the ability to redeem their shares.

 

During their consideration of the Reorganization, the Board met with independent legal counsel regarding the legal issues involved.  After consideration of the factors noted above, together with other factors and information considered to be relevant, and recognizing that there can be no assurance that any operating efficiencies or other benefits will in fact be realized, the Board concluded that the Reorganization would be in the best interests of the Funds and that the interests of the Funds’ shareholders would not be diluted as a result of the Reorganization.

 

Agreement and Plan of Reorganization

 

The following summary is qualified in its entirety by reference to the Reorganization Agreement, which is attached as Exhibit A to this Prospectus/Information Statement.

 

The Reorganization Agreement provides that all of the assets of the Acquired Fund will be acquired by the Acquiring Fund in exchange for shares of the Acquiring Fund, and the assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund on or about May 17, 2013 or such other date as may be agreed upon by the parties (the “Closing Date”).  The class or classes of the Acquiring Fund shares that you will receive in connection with the Reorganization will depend on the class or classes of the Acquired Fund shares that you hold.

 

Prior to the Closing Date, the Acquired Fund will endeavor to discharge all of its known liabilities and obligations. The Acquired Fund will prepare an unaudited statement of its assets and liabilities as of 4:00 PM Eastern Time on the Business Day preceding the Closing Date (the “Valuation Date”).  At or prior to the Valuation Date, for tax reasons, the Acquired Fund will declare a dividend or dividends and distribution or distributions which, together with all previous dividends and distributions, shall have the effect of distributing to the Acquired Fund’s shareholders all of the Acquired Fund’s investment company taxable income for all taxable periods ending on the Closing Date (computed without regard to any deduction for dividends paid), all of the Acquired Fund’s net tax exempt income and all of its net capital gains realized in all taxable periods ending on the Closing Date (after reductions for any capital loss carryforward).

 

BNY Mellon Investment Servicing (US) Inc., the sub-administrator for the Funds, will compute the value of the Acquired Fund’s portfolio of securities. The method of valuation employed will be consistent with the valuation procedures described in the then-current prospectus and statement of additional information of the Funds or such other valuation procedures as shall be mutually agreed upon by the parties.

 

As soon after the Closing Date as conveniently practicable, the Acquired Fund will liquidate and distribute pro rata to shareholders of record as of the close of business on the Valuation Date the full and fractional shares of the Acquiring Fund received by the Acquired Fund. The liquidation and distribution will be accomplished by the establishment of accounts in the names of the Acquired Fund’s shareholders on the Acquiring Fund’s share records of its transfer agent. Each account will represent the respective pro rata number of full and fractional shares of the Acquiring Fund due to the Acquired Fund’s shareholders. All issued and outstanding shares of the Acquired Fund will be canceled. Shares of the Acquiring Fund to be issued will have no preemptive or conversion rights and no share certificates will be issued. After these distributions and the winding up of its affairs, the Acquired Fund will be liquidated.

 

The consummation of the Reorganization is subject to the conditions set forth in the Reorganization Agreement. The Reorganization Agreement may be terminated (a) by the mutual agreement of the Acquired Fund and the Acquiring Fund; or (b) at or prior to the Closing Date by either party (1) because of a breach by the other of any representation, warranty, or agreement contained in the Reorganization Agreement to be performed at or prior to the Closing Date, if not cured within 30 days, or (2) because a condition in the

 

14


 

Reorganization Agreement expressed to be precedent to the obligations of the terminating party has not been met and it reasonably appears that it will not or cannot be met.  Whether or not the Reorganization is consummated, Touchstone Advisors will pay the expenses incurred by the Funds in connection with the Reorganization.

 

Description of the Securities to be Issued

 

Shareholders of the Acquired Fund as of the closing date will receive full and/or fractional shares of the Acquiring Fund in accordance with the procedures provided for in the Reorganization Agreement, as described above.  The shares of the Acquiring Fund to be issued in connection with the Reorganization will be fully paid and non-assessable when issued.  The rights of shareholders of the Funds are the same.  For more information see the section entitled “Information on Shareholders’ Rights” below.

 

Federal Income Tax Consequences

 

The following discussion summarizes the material U.S. federal income tax consequences of the Reorganization that are applicable to you as an Acquired Fund shareholder.  It is based on the Code, applicable U.S. Treasury regulations, judicial authority and administrative rulings and practice, all as of the date hereof and all of which are subject to change, including changes with retroactive effect.  The discussion below does not address any state, local or foreign tax consequences of the Reorganization.  Your tax treatment may vary depending upon your particular situation.  You also may be subject to special rules not discussed below if you are a certain kind of Acquired Fund shareholder, including, but not limited to: an insurance company; a tax-exempt organization; a financial institution or broker-dealer; a person who is neither a citizen nor resident of the United States or an entity that is not organized under the laws of the United States or a political subdivision thereof; a holder of Acquired Fund shares as part of a hedge, straddle or conversion transaction; a person that does not hold Acquired Fund shares as a capital asset at the time of the Reorganization; or an entity taxable as a partnership for U.S. federal income tax purposes.

 

The Reorganization is intended to qualify for federal income tax purposes as a tax-free reorganization under Section 368(a) of the Code.  As a condition to the closing of the Reorganization, the Acquired Fund and the Acquiring Fund will receive an opinion from the law firm of Pepper Hamilton LLP substantially to the effect that, on the basis of the existing provisions of the Code, U.S. Treasury regulations issued thereunder, current administrative rules, pronouncements and court decisions, and certain representations, qualifications and assumptions with respect to the Reorganization, for federal income tax purposes, upon consummation of the Reorganization:

 

(i)          The acquisition by the Acquiring Fund of all of the assets of the Acquired Fund solely in exchange for the Acquiring Fund’s assumption of all of the liabilities of the Acquired Fund and issuance of the Acquiring Fund shares, followed by the distribution of such Acquiring Fund shares by the Acquired Fund in complete liquidation to the Acquired Fund shareholders in exchange for their Acquired Fund shares, all as provided in the Reorganization Agreement, will constitute a reorganization within the meaning of Section 368(a) of the Code, and the Acquired Fund and the Acquiring Fund each will be “a party to a reorganization” within the meaning of Section 368(b) of the Code;

 

(ii)         Under Code Section 361, no gain or loss will be recognized by the Acquired Fund (i) upon the transfer of its assets to the Acquiring Fund solely in exchange for the Acquiring Fund shares and the assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund or (ii) upon the distribution of the Acquiring Fund shares by the Acquired Fund to the Acquired Fund shareholders in complete liquidation, as contemplated in the Reorganization Agreement;

 

(iii)        Under Code Section 1032, no gain or loss will be recognized by the Acquiring Fund upon the receipt of the assets of the Acquired Fund solely in exchange for the assumption of all of the liabilities of the Acquired Fund and issuance of the Acquiring Fund Shares as contemplated in the Reorganization Agreement;

 

(iv)        Under Code Section 362(b), the tax basis of the assets of the Acquired Fund received by the Acquiring Fund will be the same as the tax basis of such assets in the hands of the Acquired Fund immediately prior to the Reorganization;

 

15


 

(v)         Under Code Section 1223(2), the holding periods of the assets of the Acquired Fund in the hands of the Acquiring Fund will include the periods during which such assets were held by the Acquired Fund;

 

(vi)        Under Code Section 354, no gain or loss will be recognized by the Acquired Fund shareholders upon the exchange of all of their Acquired Fund shares solely for the Acquiring Fund shares in the Reorganization;

 

(vii)       Under Code Section 358, the aggregate tax basis of the Acquiring Fund shares to be received by each Acquired Fund shareholder pursuant to the Reorganization will be the same as the aggregate tax basis of the Acquired Fund shares exchanged therefor;

 

(viii)      Under Code Section 1223(1), an Acquired Fund shareholder’s holding period for the Acquiring Fund shares to be received will include the period during which the Acquired Fund shares exchanged therefor were held by such shareholder, provided that the Acquired Fund shareholder held the Acquired Fund shares as a capital asset at the time of the Reorganization.

 

Pepper Hamilton LLP will express no opinion as to (1) the effect of the Reorganization on (A) the Acquired Fund or the Acquiring Fund with respect to any asset as to which any unrealized gain or loss is required to be recognized for U.S. federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting, (B) any Acquired Fund shareholder or Acquiring Fund shareholder that is required to recognize unrealized gains and losses for U.S. federal income tax purposes under a mark-to-market system of accounting, or (C) the Acquired Fund or the Acquiring Fund with respect to any stock held in a passive foreign investment company as defined in Section 1297(a) of the Code or (2) any other federal tax issues (except those set forth above) and all state, local or foreign tax issues of any kind.

 

No private ruling will be sought from the IRS with respect to the federal income tax consequences of the Reorganization.  Opinions of counsel are not binding upon the IRS or the courts, are not guarantees of the tax results, and do not preclude the IRS from adopting or taking a contrary position, which may be sustained by a court.  If the Reorganization is consummated but the IRS or the courts determine that the Reorganization does not qualify as a tax-free reorganization under the Code and, thus, is taxable, the Acquired Fund would recognize gain or loss on the transfer of its assets to the Acquiring Fund and each shareholder of the Acquired Fund would recognize a taxable gain or loss equal to the difference between its tax basis in its Acquired Fund shares and the fair market value of the shares of the Acquiring Fund it receives.

 

Prior to the Reorganization, the Acquired Fund will declare a distribution to its shareholders, which together with all previous distributions, will have the effect of distributing to its shareholders substantially all of the Acquired Fund’s investment company taxable income (computed without regard to the deduction for dividends paid) and realized net capital gain, if any, through the Reorganization.  Such distributions will be taxable to shareholders for federal income tax purposes and may include net capital gain from the sale of portfolio assets (discussed below).  Even if reinvested in additional shares of the Acquired Fund, which would be exchanged for shares of the Acquiring Fund in the Reorganization, such distributions will be taxable for federal income tax purposes.

 

If portfolio assets of the Acquired Fund are sold prior to the Reorganization, the tax impact of such sales will depend on the difference between the price at which such portfolio assets are sold and the Acquired Fund’s basis in such assets.  Any capital gains recognized in these sales on a net basis will be distributed to the Acquired Fund’s shareholders as capital gains (to the extent of net realized long-term capital gain) and/or ordinary dividends (to the extent of net realized short-term capital gain) during or with respect to the year of sale, and such distributions will be taxable to shareholders.

 

U.S. federal income tax law permits a regulated investment company to carry forward net capital losses realized during taxable years beginning on or before December 22, 2010, for a period of up to eight taxable years, and, for net capital losses realized during taxable years beginning after December 22, 2010, for an unlimited number of taxable years.  A regulated investment company must use capital loss carryforwards generated in taxable years beginning after December 22, 2010 to offset gains arising in taxable years beginning after this date before capital losses carried forward from years beginning prior to this date are used.  The Reorganization will cause the tax year of the Acquired Fund to close, resulting in an earlier expiration of the capital loss carryforwards of the Acquired Fund than would otherwise occur and could also result in a capital loss for the taxable year ending on the Closing Date.  In addition, the Reorganization is expected to result in a limitation on the ability of the Acquiring

 

16


 

Fund to use the capital loss carryforwards of the Acquired Fund and, potentially, to use unrealized capital losses inherent in the tax basis of the assets acquired, once realized.  These limitations are imposed on an annual basis.  Capital loss carryforwards in excess of the annual limitation may be carried forward, subject to the overall eight-year limitation for capital loss carryforwards attributable to net capital losses realized in taxable years beginning on or before December 22, 2010.  The annual Section 382 limitation for periods following the Reorganization generally will equal the product of the net assets of the Acquired Fund subject to the limitation immediately prior to the Reorganization and the “long-term tax-exempt rate,” published by the IRS, in effect at the time of the Reorganization.  As of February 2013, the long-term tax-exempt rate is 2.83%.  However, no assurance can be given as to what long-term tax-exempt rate will be in effect at the time of the Reorganization.  In certain instances, under Section 384 of the Code, the Acquiring Fund will be prohibited from using the Acquired Fund’s loss carryforwards and unrealized losses against the unrealized gains of the Acquiring Fund at the time of the Reorganization, to the extent such gains are realized within five years following the Reorganization.  The ability of the Acquiring Fund to absorb the Acquired Fund’s losses in the future depends upon a variety of factors that cannot be known in advance, such as future realization of capital gains or losses. In general, the limitation under Section 382 will apply to capital loss carryforwards and unrealized losses of the Acquired Fund when its shareholders will hold less than 50% of the outstanding shares of the Acquiring Fund immediately following the Reorganization.  Accordingly, it is expected that the limitation will apply to any losses of the Acquired Fund.  As of September 30, 2012, for U.S. federal income tax purposes the Acquired Fund had capital loss carryforwards as indicated below.

 

 

 

No Expiration 
Short Term

 

No Expiration
Long Term

 

Total

 

Touchstone Focused Equity Fund

 

$

2,473,105

 

$

96,478

 

$

2,569,583

 

 

As of September 30, 2012, for U.S. federal income tax purposes the Acquired Fund had net unrealized gain.  These figures are likely to change by the date of the Reorganization, and do not reflect the impact of the Reorganization, including, in particular, the application of the loss limitation rules discussed herein.

 

The Acquired Fund shareholders may benefit from capital loss carryforwards of the Acquiring Fund.  The Acquiring Fund’s ability to use its own capital loss carryforwards and unrealized losses, once realized, may be subject to an annual limitation under Section 382 of the Code as well, such that losses in excess of the limitation cannot be used in the taxable year and must be carried forward.  The limitation generally equals the product of the net asset value of the Acquiring Fund immediately prior to the Reorganization and the long-term tax-exempt rate in effect at such time.  The ability of the Acquiring Fund to absorb losses in the future depends upon a variety of factors that cannot be known in advance.

 

In addition, shareholders of the Acquired Fund will receive a proportionate share of any taxable income and gains realized by the Acquiring Fund and not distributed to its shareholders prior to the Reorganization when such income and gains are eventually distributed by the Acquiring Fund.  As a result, shareholders of the Acquired Fund may receive a greater amount of taxable distributions than they would have had the Reorganization not occurred.

 

Tracking Your Basis and Holding Period; State and Local Taxes.  After the Reorganization, you will continue to be responsible for tracking the adjusted tax basis and holding period of your shares for federal income tax purposes.  However, mutual funds must report cost basis information to you and the Internal Revenue Service when a shareholder sells or exchanges shares that are not in a retirement account.

 

This discussion does not address any other state or local tax issues and only limited federal tax issues.

 

You are urged and advised to consult your own tax advisors as to the federal, state, local, foreign, and other tax consequences of the Reorganization in light of your individual circumstances, including the applicability and effect of possible changes in any applicable tax laws.

 

Pro Forma Capitalization

 

The following table sets forth, for the Reorganization, the total net assets, number of shares outstanding and net asset value (“NAV”) per share.  This information is generally referred to as the “capitalization” of a Fund.  The term “pro forma capitalization” means the expected capitalization of the Acquiring Fund after it has combined with the Acquired Fund.

 

17


 

 

 

Touchstone
Focused Equity
Fund

 (Acquired Fund)*

 

Touchstone
Focused Fund

(Acquiring
Fund)*

 

Pro Forma
Adjustments(1)

 

Pro Forma 
Combined
Touchstone
Focused Fund

 

Net Assets (all classes)

 

$

106,099,908

 

$

565,755,135

 

 

 

$

671,855,043

 

Class A net assets

 

$

94,025,359

 

$

6,061,430

 

 

 

$

100,086,789

 

Class A shares outstanding

 

8,092,718

 

252,978

 

(4,168,454

)(2)

4,177,242

 

Class A net asset value per share

 

$

11.62

 

$

23.96

 

 

 

$

23.96

 

Class C net assets

 

$

398,650

 

$

2,804

 

 

 

$

401,454

 

Class C shares outstanding

 

34,795

 

117

 

(18,101

)(2)

16,811

 

Class C net asset value per share

 

$

11.46

 

$

23.88

 

 

 

$

23.88

 

Class Y net assets

 

$

6,485,379

 

$

530,217,575

 

 

 

$

536,702,954

 

Class Y shares outstanding

 

552,910

 

21,898,228

 

(285,030

)(2)

22,166,108

 

Class Y net asset value per share

 

$

11.73

 

$

24.21

 

 

 

$

24.21

 

Institutional Class net assets

 

$

5,190,520

 

$

29,473,326

 

 

 

$

34,663,846

 

Institutional Class shares outstanding

 

458,684

 

1,212,916

 

(245,082

)(2)

1,426,518

 

Institutional Class net asset value per share

 

$

11.32

 

$

24.30

 

 

 

$

24.30

 

 


(1)     Touchstone Advisors will bear 100% of the Reorganization expenses.  As a result there are no pro forma adjustments to net assets.

(2)     Pro forma shares outstanding have been adjusted for the accumulated change in the number of shares of the Touchstone Focused Equity Fund’s shareholder accounts based on the relative value of the Touchstone Focused Equity Fund’s and the Touchstone Focused Fund’s net asset value per share.

 

18


 

ADDITIONAL INFORMATION REGARDING THE FUNDS

 

Management of the Funds

 

Each Fund has the same investment advisor, sub-advisor, and portfolio manager.

 

Touchstone Advisors, Inc. (“Touchstone Advisors”), located at 303 Broadway, Suite 1100, Cincinnati, Ohio 45202, is the investment advisor of the Funds and will continue to serve as the investment advisor to the Acquiring Fund upon closing of the Reorganization.  Touchstone Advisors has been a registered investment advisor since 1994. As of December 31, 2012, Touchstone Advisors had approximately $14.8 billion in assets under management.  As the Funds’ investment advisor, Touchstone Advisors continuously reviews, supervises and administers the Funds’ investment programs and also ensures compliance with the Funds’ investment policies and guidelines.  Touchstone Advisors is responsible for selecting each Fund’s sub-advisor(s), subject to approval by the Board. Touchstone Advisors selects a sub-advisor that has shown good investment performance in its areas of expertise. Touchstone Advisors considers various factors in evaluating a sub-advisor, including: level of knowledge and skill; performance as compared to its peers or benchmark; consistency of performance over 5 years or more; level of compliance with investment rules and strategies; employees; facilities and financial strength and quality of service.  Touchstone Advisors will also continually monitor each sub-advisor’s performance through various analyses and through in-person, telephone and written consultations with a sub-advisor. Touchstone Advisors discusses its expectations for performance with each sub-advisor and provides evaluations and recommendations to the Touchstone Board of Trustees, including whether or not a sub-advisor’s contract should be renewed, modified or terminated.

 

The Securities and Exchange Commission (the “SEC”) has granted an exemptive order that permits TFGT, TST or Touchstone Advisors, under certain conditions, to select or change unaffiliated sub-advisors, enter into new sub-advisory agreements or amend existing sub-advisory agreements without first obtaining shareholder approval. The Funds must still obtain shareholder approval of any sub-advisory agreement with a sub-advisor affiliated with TFGT, TST or Touchstone Advisors other than by reason of serving as a sub-advisor to one or more Funds. Shareholders of a Fund will be notified of any changes in its sub-advisory arrangements.  After the Reorganization, Touchstone Advisors and TST will continue to rely on this exemptive order.

 

Touchstone Advisors is a wholly owned subsidiary of Western & Southern Mutual Holding Company (“Western & Southern”).  Touchstone Advisors is also responsible for running all of the operations of the Funds, except those that are subcontracted to the sub-advisors, custodian, transfer agent, sub-administrative agent, or other parties.

 

Fort Washington Investment Advisors, Inc., a SEC-registered investment advisor, and affiliate of Touchstone Advisors, is located at 303 Broadway, Suite 1200, Cincinnati, Ohio 45202.  Fort Washington serves as the sub-advisor of the Funds.  As the sub-advisor, Fort Washington makes investment decisions for the Funds and also ensures compliance with the Touchstone Funds’ investment policies and guidelines.  As of December 31, 2012, Fort Washington had approximately $44.7 billion in assets under management.

 

James Wilhelm, Vice President and Senior Portfolio Manager, joined Fort Washington in 2002.  He has investment experience dating back to 1993.  He began as a Senior Equity Analyst in 2002 and then was named Portfolio Manager in 2005.  He became an Assistant Vice President in 2007 and then became Vice President in 2008.

 

19


 

Comparison of Investment Advisory Fees

 

Pursuant to an investment advisory agreement, Touchstone Advisors is entitled to receive a fee with respect to the average daily net assets of each Fund, which is computed and paid monthly.  Touchstone Advisors pays sub-advisory fees to Fort Washington out of its advisory fee.  The following table sets forth each Fund’s advisory fee as a percentage of average daily net assets.

 

Acquired Fund

 

Advisory Fee

 

Acquiring Fund

 

Advisory Fee

Touchstone Focused Equity Fund

 

0.70% on the first $100 million of assets; 0.65% on the next $400 million of assets; 0.60% on assets greater than $500 million

 

Touchstone Focused Fund

 

0.70% on the first $100 million of assets; 0.65% on the next $400 million of assets; 0.60% on assets greater than $500 million

 

Acquiring Fund’s Advisory and Sub-Advisory Agreement Approval

 

A discussion of the basis for the Touchstone Board of Trustees’ approval of the Touchstone Focused Equity Fund’s advisory and sub-advisory agreements can be found in the TFGT September 30, 2012 Annual Report.  A discussion of the basis of for the  Touchstone Board of Trustees’ approval of the Touchstone Focused  Fund’s advisory and sub-advisory agreements can be found in TST’s March 31, 2013  Annual Report.

 

Expense Limitation Agreements with respect to the Funds

 

Touchstone Advisors has contractually agreed to waive fees and reimburse expenses to the extent necessary to ensure the Funds’ total annual operating expenses (excluding dividend expenses relating to short sales, interest, taxes, brokerage commissions, other expenditures which are capitalized in accordance with generally accepted accounting principles, the cost of “Acquired Fund Fees and Expenses,” if any, and other extraordinary expenses not incurred in the ordinary course of business) do not exceed the contractual limits set forth below.  The contractual limits set forth below have been adjusted for each class of each Fund to include the effect of Rule 12b-1 fees, shareholder servicing fees and other anticipated class specific expenses, if applicable. Fee waivers and expense reimbursements are calculated and applied monthly, based on each Fund’s average net assets during such month.   The terms of Touchstone Advisors’ contractual fee waiver agreement provide that Touchstone Advisors is entitled to recoup, subject to approval by each Fund’s Board of Trustees, such amounts waived or reimbursed for a period of up to three (3) years from the year in which Touchstone Advisors reduced its compensation and/or assumed expenses for a Fund.  No recoupment will occur unless a Fund’s operating expenses are below the expense limitation amount.

 

Fund

 

Expense Limit

 

Termination Date

 

Touchstone Focused Equity Fund (Acquired Fund)

 

 

 

 

 

Class A

 

1.20

%

January 29, 2014

 

Class C

 

1.95

%

January 29, 2014

 

Class Y

 

0.95

%

January 29, 2014

 

Institutional

 

0.80

%

January 29, 2014

 

Touchstone Focused Fund (Acquiring Fund)

 

 

 

 

 

Class A

 

1.20

%

May 19, 2014

 

Class C

 

1.95

%

May 19, 2014

 

Class Y

 

0.95

%

May 19, 2014

 

Institutional

 

0.80

%

May 19, 2014

 

 

20


 

Description of Share Classes of the Funds

 

Each Fund offers Class A, Class C, Class Y and Institutional Class shares.

 

Class A Shares: For purchases below $1 million, the offering price of Class A shares of each 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.  Class A shares are subject to a 12b-1 distribution fee.  In addition, there is no sales charge on reinvested dividends and distributions.

 

Class A Sales Charge.  The following table shows the amount of front-end sales charge you will pay on purchases of Class A shares. The amount of front-end sales charge is shown as a percentage of (1) offering price and (2) the net amount invested after the charge has been subtracted.  Note that the front-end sales charge gets lower as your investment amount gets larger.

 

Amount of Your Investment

 

Sales Charge as % of
Offering Price

 

Sales Charge as % of
Net Amount Invested

 

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

 

2.95

%

3.04

%

$500,000 but less than $1 million

 

2.25

%

2.30

%

$1 million or more

 

0.00

%

0.00

%

 

Purchases in the amount of $1 million or more Class A shares are not subject to a front-end sales charge and are sold at NAV. For these purchases, Touchstone Securities, Inc. (“Touchstone Securities”) may pay your financial intermediary a distribution-related commission associated with such sale of up to 1.00%. In the event that Touchstone Securities paid such a commission to your financial intermediary, a CDSC of up to 1.00% may be charged on redemptions made within 1 year of your purchase. With respect to Class A shares, the percentage of the CDSC is based on the commission that was paid to your financial intermediary.  For more information on the CDSC, please see the section entitled “Contingent Deferred Sales Charge (“CDSC”)” in each Fund’s Prospectus.

 

Class C Shares: Class C shares of the Funds are sold at NAV without an initial sales charge so that the full amount of your purchase payment may be immediately invested in the Funds. Class C shares are subject to a 12b-1 fee.  A CDSC of 1.00% will be charged on Class C shares redeemed within 1 year after you purchased them.  Upon receipt of Class C shares in the Reorganization, Class C shareholders of the Acquired Fund will continue to be subject to the same holding period for purposes of determining whether a CDSC will be charged.  For more information on the CDSC, please see the section entitled “Contingent Deferred Sales Charge (“CDSC”)” in each Fund’s Prospectus.

 

Class Y Shares: Class Y shares of the Funds are sold at NAV without an initial sales charge so that the full amount of your purchase payment may be immediately invested in the Funds.  Class Y shares are not subject to a 12b-1 fee or CDSC.

 

Institutional Class Shares:  Institutional shares of the Funds are sold at NAV without an initial sales charge so that the full amount of your purchase payment may be immediately invested in the Funds. Institutional shares are not subject to a 12b-1 fee or CDSC.

 

Information regarding the Distributor and Rule 12b-1 Plans

 

Touchstone Securities is the principal underwriter of the Funds and, as such, is the exclusive agent for distribution of the Funds’ shares.  Shares of the Funds are sold in a continuous offering directly through Touchstone Securities through financial advisors and financial intermediaries or through processing organizations.  Touchstone Securities allows concessions to dealers who sell shares of the Funds.  Touchstone Securities receives that portion of the sales charge that is not reallowed to dealers and retains the entire sales charge on all direct investments and accounts with no designated dealer of record.  Touchstone Securities is a wholly owned subsidiary of IFS Financial Services, Inc. and an affiliate of Touchstone Advisors.

 

Each Fund’s Class A shares has adopted the same distribution plan under Rule 12b-1 and each Fund’s Class C shares have adopted the same distribution plan under Rule 12b-1.  The plans allow each Fund to pay distribution and other fees for the sale and distribution of its shares and for services provided to shareholders. Under the Class A plan, the Funds pay an annual fee of up to 0.25% of average daily net assets that are attributable to Class A shares. Under the Class C plan, the Funds pay an annual fee of up to 1.00% of average daily net assets that are

 

21


 

attributable to Class C shares (of which up to 0.75% is a distribution fee and up to 0.25% is a shareholder servicing fee).  Under each Class A plan and Class C plan, Touchstone Securities is compensated regardless of its expenses.  Because these fees are paid out of a Fund’s assets on an ongoing basis, they will increase the cost of your investment and over time may cost you more than paying other types of sales charges.

 

Purchases, Redemptions, Exchanges of Shares and Dividend Policy

 

Purchase Policies and Redemption Policies

 

Each Fund has the same minimum investment requirements, which are set forth in the chart below.

 

Minimum Investment Requirements

 

 

 

Class A, Class C and Class Y

 

 

 

Initial 
Investment

 

Additional
 Investment

 

Regular Account

 

$

2,500

 

$

50

 

Retirement Account or Custodial Account under the Uniform Gifts/Transfers to Minors Act

 

$

1,000

 

$

50

 

Investments through the Automatic Investment Plan

 

$

100

 

$

50

 

 

 

 

Institutional

 

 

 

Initial
Investment

 

Additional
Investment

 

Regular Account

 

$

500,000

 

$

50

 

 

You may buy and sell shares in the Funds on a day when the New York Stock Exchange is open for trading.  Class A shares and Class C shares may be purchased and sold directly from Touchstone Securities or through your financial advisor. Class Y shares are available only through your financial institution.  Institutional Class shares are available through Touchstone Securities or your financial institution. The Funds’ shares may be redeemed by telephone, Internet, mail, or wire or through accounts with certain brokers and other financial institutions.  Payments for redemptions of shares of the Funds are sent within seven days (normally within 3 business days) after receipt of a proper redemption request.  The Funds reserve the right to redeem in kind, under certain circumstances, by paying you the proceeds in liquid securities rather than in cash.  For more information about buying and selling shares see the section “Investing with Touchstone” of each Fund’s Prospectus or call 1.800.543.0407.

 

Exchange Privileges of the Funds

 

Each Fund has the same exchange privileges.  The Funds are subject to the exchange privileges listed below.

 

·      Class A shares may be exchanged into any other Touchstone Class A Fund at NAV and may be exchanged into any Touchstone money market fund, except the Institutional Money Market Fund and the Ohio Tax-Free Money Market Fund Institutional Class.

 

·      Class C shares may be exchanged into any other Touchstone Class C Fund and may be exchanged into any Touchstone money market fund, except the Institutional Money Market Fund and the Ohio Tax-Free Money Market Fund Institutional Class.

 

·      Class Y shares and Institutional shares are exchangeable for Class Y shares and Institutional Class shares of other Touchstone Funds, respectively, as long as applicable investment minimums and the proper selling agreement requirements are met.

 

·      You do not have to pay any exchange fee for your exchange, but if you exchange from a fund with a lower load schedule to a fund with a higher load schedule you may be charged the load differential.

 

22


 

·      Shares otherwise subject to a CDSC will not be charged a CDSC in an exchange.  However, when you redeem the shares acquired through the exchange, the shares you redeem may be subject to a CDSC, depending on when you originally purchased the exchanged shares.  For purposes of computing the CDSC, the length of time you have owned your shares will be measured from the date of original purchase and will not be affected by any exchange.

 

·      If you exchange Class C shares for Class A shares of any Touchstone money market fund, the amount of time you hold shares of the money market fund will not be added to the holding period of your original shares for the purpose of calculating the CDSC, if you later redeem the exchanged shares.  However, if you exchange back into your original Class C shares, the prior holding period of your Class C shares will be added to your current holding period of Class C shares in calculating the CDSC.

 

·      If you purchased Class A shares for $1 million or more at NAV and compensation was paid to an unaffiliated dealer and you exchange all or a portion of the shares into any Touchstone money market fund within 12 months of the original purchase, the amount of time you hold shares of the money market fund will not be added to the holding period of your original shares for the purpose of calculating the CDSC, if you later redeem the exchanged shares. However if you exchange back into Class A shares, the prior holding period of your Class A shares will be added to your current holding period of Class A shares in calculating the CDSC.

 

·      You should carefully review the disclosure provided in this Prospectus/Information Statement and each Fund’s prospectus relating to the exchanged-for shares before making an exchange of your Fund shares.

 

·      You may realize taxable gain if you exchange shares of a Fund for shares of another Fund.  See “Tax Information” in each Fund’s prospectus for more information and the tax consequences of such an exchange.

 

Dividend Policy

 

After the Reorganization, shareholders of the Acquired Fund who have elected to have their dividends and/or distributions reinvested will have dividends and/or distributions received from the Acquiring Fund reinvested in the same class of shares of the Acquiring Fund.  Shareholders of the Acquired Fund who have elected to receive dividends and/or distributions in cash will receive dividends and/or distributions from the Acquiring Fund in cash after the Reorganization, although they may, after the Reorganization, elect to have such dividends and/or distributions reinvested in additional shares of the Acquiring Fund.

 

The Funds have each qualified and intend to remain qualified to be treated as a regulated investment company under the Code.  To remain qualified as a regulated investment company, the Funds must, among other things, distribute 90% of their taxable and tax-exempt income and diversify their holdings as required by the Code.  While so qualified, so long as each Fund distributes all of its investment company taxable income (determined without regard to the deduction or dividends paid) and tax-exempt income and any net realized gains to its shareholders of record, it is expected that the Fund will not be required to pay any federal income taxes on the amounts distributed to its shareholders of record.

 

INFORMATION ON SHAREHOLDERS’ RIGHTS

 

The following is a comparison of certain important provisions of the governing instruments and governing laws of the Funds, but is not a complete description thereof.  Further information about each Fund’s governance structure is contained in each Fund’s SAI and its governing documents, which are on file with the SEC.

 

Organization and Governing Law.  Each Fund is governed by its Declaration of Trust (the “Declaration”) and its By-Laws, both as amended, restated or supplemented from time to time, and its business and affairs are managed under the supervision of its Board of Trustees.  Each Fund is subject to the federal securities laws, including the 1940 Act, and the rules and regulations promulgated by the SEC thereunder.  The Touchstone Focused Equity Fund is a series of TFGT, a Delaware statutory trust.  The Touchstone Focused Fund is a series of TST, a Massachusetts business trust.

 

23


 

Shares. When issued and paid for in accordance with the prospectus, shares of both Funds are fully paid and non-assessable, having no preemptive or subscription rights and are freely transferable.  Each share of both Funds represents an equal interest in such Fund.  Shares of each Fund are entitled to receive their pro rata share of distributions of income and capital gains, if any, made with respect to that Fund as are declared by the Board, although such distributions may vary in amount among the classes of a Fund to reflect class-specific expenses.  Such distributions may be in cash, in kind or in additional Fund shares.  In any liquidation of a Fund, each shareholder is entitled to receive his or her pro rata share of the net assets of the Fund, after satisfaction of all outstanding liabilities and expenses of the Fund.

 

Shareholder Meetings and Rights of Shareholders to Call a Meeting.  The Funds are not required to hold annual shareholder meetings under Delaware or Massachusetts law or their governing instruments.  The governing instruments of the Funds generally provide that a meeting of shareholders may be called at any time by the Board, the Chair of the Board of Trustees, or by the President. The governing instruments of the Funds provide that a special meeting of shareholders may be called for the purpose of voting on the removal of any Trustee upon the written request of shareholders owning at least 10% or more of outstanding shares entitled to vote.

 

Submission of Shareholder Proposals.  The Funds do not have provisions in their governing instruments requiring that a shareholder provide notice to the Funds in advance of a shareholder meeting to enable the shareholder to present a proposal at such meeting, although the federal securities laws, which apply to the Funds, require that certain conditions be met to present any proposals at shareholder meetings.

 

Quorum.  The governing instruments provide that a quorum will exist if shareholders of 40 percent of the outstanding shares entitled to vote are present at the meeting in person or by proxy.

 

Number of Votes.   The governing instruments provide that each shareholder is entitled to one vote for each whole share that they hold and a fractional vote for each fractional share that they hold.  The governing instruments do not provide for cumulative voting.

 

Right to Vote.  The 1940 Act provides that shareholders of each Fund have the power to vote with respect to certain matters:  specifically, for the election of Trustees, the selection of auditors (under certain circumstances), approval of investment advisory agreements and plans of distribution, and amendments to policies, objectives or restrictions deemed to be fundamental. Shareholders of each Fund also have the right to vote on certain matters affecting the Fund or a particular share class thereof under their governing instruments and applicable state law.  The following summarizes the matters on which Fund shareholders have a right to vote and the minimum shareholder vote required to approve the matter.  For matters on which shareholders of a Fund do not have a right to vote, the Trustees of the Fund may nonetheless determine to submit the matter to shareholders for approval.  Where referenced below, the phrase “vote of a majority of the outstanding shares” means the vote required by the 1940 Act, which is the lesser of (a) 67% or more of the shares present at the meeting, if the holders of more than 50% of the outstanding shares entitled to vote are present or represented by proxy; or (b) more than 50% of the outstanding shares entitled to vote.

 

Election and Removal of Directors/Trustees.  The shareholders of the Funds are entitled to vote for the election and the removal of Trustees.  The Trustees are elected by a plurality vote (i.e., the nominees receiving the greatest number of votes are elected).  Any trustee may be removed by a vote of two-thirds of the outstanding shares of the Trust.

 

Amendment of Governing Instruments.  Generally, the Trustees have the right to amend, from time to time, the Declaration and By-Laws.  Shareholders have the right to vote on any amendment to the Declaration that would adversely affect their rights as shareholders.  Any such amendment requires the vote of a majority of the outstanding shares entitled to vote.

 

Mergers and Reorganizations.  The Trust’s Declaration provides that any series may be merged into another series by vote of a majority of the Trustees of the Trust without the approval of shareholders.

 

Liquidation of a Fund.  The Trustees may liquidate the Funds by written notice to the shareholder of such Funds.

 

Indemnification.  The Declaration generally provides for the indemnification of the Trust’s Trustees and officers against all liabilities and expenses incurred by any Trustee or officer in connection with any

 

24


 

proceeding in which such person is made a party or otherwise or is threatened to be made a party by reason of being or having held such position with the applicable Fund, except with respect to any matter arising from his or her own disqualifying conduct. Such rights to indemnification are not exclusive and do not affect any other rights the Trustee or officer may have, including under any liability insurance policy.

 

Shareholder Information

 

A list of the name, address and percent ownership of each person who, as of December 31, 2012, to the knowledge of the Acquired Fund, owned 5% or more of the outstanding shares of a class of the Acquired Fund and a list of such information for each person who, as of that date, to the knowledge of the Acquiring Fund, owned 5% or more of the outstanding shares of a class of the Acquiring Fund can be found at Exhibit C to this Prospectus/Information Statement.

 

FINANCIAL STATEMENTS AND EXPERTS

 

The Annual Reports with respect to the Funds have been incorporated by reference herein in reliance upon the reports of Ernst & Young LLP, the independent registered public accounting firm for the Focused Equity Fund, and PricewaterhouseCoopers LLP, the independent registered public accounting firm for the Focused Fund, and upon the authority of said firms as experts in accounting and auditing. The Semi-Annual Reports with respect to the Funds have also been incorporated by reference herein. No other parts of the Annual Reports or Semi-Annual Reports are incorporated by reference herein.

 

LEGAL MATTERS

 

Certain legal matters in connection with the issuance of the Acquiring Fund’s Shares will be passed upon by Pepper Hamilton LLP, located at 3000 Two Logan Square, 18th and Arch Streets, Philadelphia, PA 19103.

 

ADDITIONAL INFORMATION

 

TFGT and TST are each subject to the informational requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, and in accordance therewith files reports and other information including proxy material and charter documents with the SEC. These items can be inspected and copied at the Public Reference Facilities maintained by the SEC in Washington, D.C., and at the SEC’s Regional Offices located at Northeast Regional Office, 3 World Financial Center, Room 4300, New York, New York 10281; Southeast Regional Office, 801 Brickell Avenue, Suite 1800, Miami, Florida 33131; Midwest Regional Office, 175 W. Jackson Boulevard, Suite 900, Chicago, Illinois 60604; Central Regional Office, 1801 California Street, Suite 1500, Denver, Colorado 80202-2656; and Pacific Regional Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036-3648. Copies of such materials can also be obtained at prescribed rates from the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549.

 

25


 

FINANCIAL HIGHLIGHTS

 

Touchstone Focused Equity Fund and Touchstone Focused Fund

 

The financial highlights tables are intended to help you understand each Fund’s financial performance for the past 5 years, or if shorter, the period of each Fund’s operation. Some of this information reflects financial information for a single Fund share. The total returns in the tables represent the rate an investor would have earned (or lost) on an investment in a Fund, assuming reinvestment of all dividends and distributions. The financial highlights for the Focused Fund appear in the Old Mutual Focused Fund (the “predecessor fund”) financial statements.  The March 31, 2012 Annual Reports to shareholders of the predecessor fund was audited by PricewaterhouseCoopers LLP (“PwC”), an independent registered public accounting firm, and incorporated by reference in the Touchstone Focused Fund’s Registration Statement on Form N-14, dated May 16, 2012.  The financial highlights for the Focused Equity Fund were audited by Ernst & Young LLP (“E&Y”), an independent registered public accounting firm. The report of PwC and E&Y for their respective Fund, along with each Fund’s financial statements and related notes, appears in each Fund’s 2012 Annual Report. You can obtain the Annual Report, which contains more performance information, at no charge by calling 1.800.543.0407.

 

Touchstone Focused Equity Fund—Class A

Selected Data for a Share Outstanding Throughout Each Period

 

 

 

Year Ended September 30,

 

Period
Ended
September
30,

 

 

 

2012

 

2011

 

2010 (A)

 

Net asset value at beginning of period

 

$

9.50

 

$

10.95

 

$

10.00

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

Net investment income

 

0.08

(B)

0.10

 

0.02

 

Net realized and unrealized gains (losses) on investments

 

2.37

 

(1.38

)

0.93

 

Total from investment operations

 

2.45

 

(1.28

)

0.95

 

Distributions from:

 

 

 

 

 

 

 

Net investment income

 

(0.07

)

(0.08

)

 

Realized capital gains

 

(0.26

)

(0.09

)

 

Total distributions

 

(0.33

)

(0.17

)

 

Net asset value at end of period

 

$

11.62

 

$

9.50

 

$

10.95

 

Total return (C)

 

26.46

%

(11.95

)%

9.40

%(D)

Ratios and supplemental data:

 

 

 

 

 

 

 

Net assets at end of period (000’s)

 

$

94,025

 

$

80,741

 

$

814

 

Ratio to average net assets:

 

 

 

 

 

 

 

Net expenses

 

1.20

%

1.20

%

1.20

%(E)

Gross expenses

 

1.82

%

1.70

%

4.65

%(E)

Net investment income

 

0.73

%

0.56

%

0.46

%(E)

Portfolio turnover rate

 

54

%

44

%

101

%(D)

 


(A) Represents the period from commencement of operations (December 31, 2009) through September 30, 2010.

(B) Per share amounts for the year or period are calculated based on average outstanding shares.

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

(D) Not annualized.

(E) Annualized.

 

26


 

Touchstone Focused Equity Fund—Class C

Selected Data for a Share Outstanding Throughout Each Period

 

 

 

Year Ended September
30,

 

Period Ended
September 30,

 

 

 

2012

 

2011

 

2010 (A)

 

Net asset value at beginning of period

 

$

9.38

 

$

10.88

 

$

10.00

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

Net investment loss

 

(B)(F)

(0.05

)

(0.01

)

Net realized and unrealized gains (losses) on investments

 

2.34

 

(1.32

)

0.89

 

Total from investment operations

 

2.34

 

(1.37

)

0.88

 

Distributions from:

 

 

 

 

 

 

 

Net investment income

 

 

(0.04

)

 

Realized capital gains

 

(0.26

)

(0.09

)

 

Total distributions

 

(0.26

)

(0.13

)

 

Net asset value at end of period

 

$

11.46

 

$

9.38

 

$

10.88

 

Total return (C)

 

25.24

%

(12.78

)%

8.90

%(D)

Ratios and supplemental data:

 

 

 

 

 

 

 

Net assets at end of period (000’s)

 

$

399

 

$

179

 

$

187

 

Ratio to average net assets:

 

 

 

 

 

 

 

Net expenses

 

1.95

%

1.95

%

1.95

%(E)

Gross expenses

 

6.33

%

5.90

%

5.45

%(E)

Net investment loss

 

(0.02

)%

(0.52

)%

(0.24

)%(E)

Portfolio turnover rate

 

54

%

44

%

101

%(D)

 


(A) Represents the period from commencement of operations (December 31, 2009) through September 30, 2010.

(B) Per share amounts for the year or period are calculated based on average outstanding shares.

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

(D) Not annualized.

(E) Annualized.

(F) Less than $0.005 per share

 

27


 

Touchstone Focused Equity Fund—Class Y

Selected Data for a Share Outstanding Throughout Each Period

 

 

 

Year Ended September 30,

 

Period
Ended
September
30,

 

 

 

2012

 

2011

 

2010 (A)

 

Net asset value at beginning of period

 

$

9.60

 

$

10.96

 

$

10.00

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

Net investment income

 

0.11

(B)

0.02

 

0.04

 

Net realized and unrealized gains (losses) on investments

 

2.39

 

(1.29

)

0.92

 

Total from investment operations

 

2.50

 

(1.27

)

0.96

 

Distributions from:

 

 

 

 

 

 

 

Net investment income

 

(0.11

)

 

 

Realized capital gains

 

(0.26

)

(0.09

)

 

Total distributions

 

(0.37

)

(0.09

)

 

Net asset value at end of period

 

$

11.73

 

$

9.60

 

$

10.96

 

Total return

 

26.77

%

(11.77

)%

9.60

%(C)

Ratios and supplemental data:

 

 

 

 

 

 

 

Net assets at end of period (000’s)

 

$

6,485

 

$

12,383

 

$

201

 

Ratio to average net assets:

 

 

 

 

 

 

 

Net expenses

 

0.95

%

0.95

%

0.95

%(D)

Gross expenses

 

1.40

%

1.18

%

4.62

%(D)

Net investment income

 

0.98

%

0.79

%

0.81

%(D)

Portfolio turnover rate

 

54

%

44

%

101

%(C)

 


(A) Represents the period from commencement of operations (December 31, 2009) through September 30, 2010.

(B) Per share amounts for the year or period are calculated based on average outstanding shares.

(C) Not annualized.

(D) Annualized.

 

28


 

Touchstone Focused Equity Fund—Institutional Class

Selected Data for a Share Outstanding Throughout Each Period

 

 

 

Year Ended September
30,

 

Period
Ended
September
30,

 

 

 

2012

 

2011

 

2010 (A)

 

Net asset value at beginning of period

 

$

9.28

 

$

10.97

 

$

10.00

 

Income (loss) from investment operations:

 

 

 

 

 

 

 

Net investment income

 

0.12

(B)

0.10

 

0.17

 

Net realized and unrealized gains (losses) on investments

 

2.30

 

(1.28

)

0.80

 

Total from investment operations

 

2.42

 

(1.18

)

0.97

 

Distributions from:

 

 

 

 

 

 

 

Net investment income

 

(0.12

)

(0.42

)

 

Realized capital gains

 

(0.26

)

(0.09

)

 

Total distributions

 

(0.38

)

(0.51

)

 

Net asset value at end of period

 

$

11.32

 

$

9.28

 

$

10.97

 

Total return

 

26.94

%

(11.68

)%

9.70

%(C)

Ratios and supplemental data:

 

 

 

 

 

 

 

Net assets at end of period (000’s)

 

$

5,191

 

$

852

 

$

768

 

Ratio to average net assets:

 

 

 

 

 

 

 

Net expenses

 

0.80

%

0.80

%

0.80

%(D)

Gross expenses

 

1.49

%

2.12

%

3.66

%(D)

Net investment income

 

1.13

%

0.50

%

0.99

%(D)

Portfolio turnover rate

 

54

%

44

%

101

%(C)

 


(A) Represents the period from commencement of operations (December 31, 2009) through September 30, 2010.

(B) Per share amounts for the year or period are calculated based on average outstanding shares.

(C) Not annualized.

(D) Annualized.

 

29


 

Touchstone Focused Fund—Class A

Selected Data for a Share Outstanding Throughout Each Period

 

 

 

Six Months 
Ended
September
30, 2012

 

Year Ended March 31,

 

 

 

(Unaudited)

 

2012

 

2011

 

2010

 

2009

 

2008

 

Net asset value at beginning of period

 

$

23.63

 

$

21.92

 

$

21.49

 

$

14.44

 

$

21.68

 

$

23.39

 

Income/(Loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

0.12

 

0.12

 

0.08

 

0.10

 

0.18

 

0.11

 

Net realized and unrealized gains/(losses) on investments

 

0.21

 

1.67

 

1.66

 

7.08

 

(7.11

)

(0.83

)

Total from investment operations

 

0.33

 

1.79

 

1.74

 

7.18

 

(6.93

)

(0.72

)

Distributions from:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

(0.24

)

(0.05

)

(0.13

)

(0.24

)

(0.03

)

Realized capital gains

 

 

 

(1.26

)

 

(0.07

)

(0.96

)

Total distributions

 

 

(0.24

)

(1.31

)

(0.13

)

(0.31

)

(0.99

)

Capital Contribution

 

 

0.16

(A)

 

 

 

 

Net asset value at end of period

 

$

23.96

 

$

23.63

 

$

21.92

 

$

21.49

 

$

14.44

 

$

21.68

 

Total return (B)

 

1.40

%(C)

9.08

%(A)

9.34

%

49.80

%

(32.04

)%

(3.46

)%

Ratios and supplemental data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period (000’s)

 

$

6,061

 

$

7,352

 

$

12,226

 

$

33,875

 

$

1,950

 

$

1,690

 

Ratio to average net assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net expenses

 

1.20

%(D)

1.20

%

1.20

%

1.20

%

1.35

%

1.40

%

Gross expenses

 

2.06

%(D)

1.44

%

1.42

%

1.38

%

2.76

%

2.20

%

Net investment income

 

0.91

%(D)

0.58

%

0.40

%

0.49

%

1.01

%

0.44

%

Portfolio turnover rate

 

190

%(C)

99

%

115

%

318

%

309

%

98

%

 


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

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

(C) Not annualized.

(D) Annualized.

 

30


 

Touchstone Focused Fund—Class C

Selected Data for a Share Outstanding Throughout Each Period

 

 

 

Period Ended
September 30,
2012

 

 

 

(Unaudited) (A)

 

Net asset value at beginning of period

 

$

22.61

 

Income from investment operations:

 

 

 

Net investment income

 

0.02

 

Net realized and unrealized gains on investments

 

1.25

 

Total from investment operations

 

1.27

 

Net asset value at end of period

 

$

23.88

 

Total return (B)

 

5.57

%(C)

Ratios and supplemental data:

 

 

 

Net assets at end of period (000’s)

 

$

3

 

Ratio to average net assets:

 

 

 

Net expenses

 

1.95

%(D)

Gross expenses

 

695.70

%(D)

Net investment income

 

0.16

%(D)

Portfolio turnover rate

 

190

%(C)

 


(A) Represents the period from commencement of operations (April 12, 2012) through September 30, 2012.

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

(C) Not annualized.

(D) Annualized.

 

31


 

Touchstone Focused Fund—Class Y

Selected Data for a Share Outstanding Throughout Each Period

 

 

 

Six
Months
Ended
September
30, 2012

 

Year Ended March 31,

 

 

 

(Unaudited)

 

2012

 

2011

 

2010

 

2009

 

2008

 

Net asset value at beginning of period

 

$

23.85

 

$

22.17

 

$

21.75

 

$

14.58

 

$

21.84

 

$

23.53

 

Income/(Loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

0.14

 

0.18

 

0.12

 

0.10

 

0.25

 

0.19

 

Net realized and unrealized gains/(losses) on investments

 

0.22

 

1.66

 

1.71

 

7.20

 

(7.20

)

(0.86

)

Total from investment operations

 

0.36

 

1.84

 

1.83

 

7.30

 

(6.95

)

(0.67

)

Distributions from:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

(0.32

)

(0.15

)

(0.13

)

(0.24

)

(0.06

)

Realized capital gains

 

 

 

(1.26

)

 

(0.07

)

(0.96

)

Total distributions

 

 

(0.32

)

(1.41

)

(0.13

)

(0.31

)

(1.02

)

Capital Contribution

 

 

0.16

(A)

 

 

 

 

Net asset value at end of period

 

$

24.21

 

$

23.85

 

$

22.17

 

$

21.75

 

$

14.58

 

$

21.84

 

Total return

 

1.51

%(B)

9.29

%(A)

9.71

%

50.14

%

(31.88

)%

(3.21

)%

Ratios and supplemental data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period (000’s)

 

$

530,218

 

$

555,142

 

$

595,397

 

$

577,028

 

$

42,976

 

$

17,780

 

Ratio to average net assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net expenses

 

0.95

%(C)

0.95

%

0.95

%

0.95

%

1.12

%

1.15

%

Gross expenses

 

1.15

%(C)

1.28

%

1.32

%

1.38

%

1.45

%

1.36

%

Net investment income

 

1.16

%(C)

0.85

%

0.60

%

0.50

%

1.33

%

0.78

%

Portfolio turnover rate

 

190

%(B)

99

%

115

%

318

%

309

%

98

%

 


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

(B) Not annualized.

(C) Annualized.

 

32


 

Touchstone Focused Fund—Institutional Class

Selected Data for a Share Outstanding Throughout Each Period

 

 

 

Six Months 
Ended 
September
30, 2012

 

Year Ended March 31,

 

 

 

(Unaudited)

 

2012

 

2011

 

2010

 

2009

 

2008

 

Net asset value at beginning of period

 

$

23.91

 

$

22.23

 

$

21.81

 

$

14.62

 

21.81

 

23.54

 

Income/(Loss) from investment operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

0.11

 

0.22

 

0.15

 

0.18

 

0.30

 

0.29

 

Net realized and unrealized gains/(losses) on investments

 

0.28

 

1.66

 

1.71

 

7.18

 

(7.17

)

(0.93

)

Total from investment operations

 

0.39

 

1.88

 

1.86

 

7.36

 

(6.87

)

(0.64

)

Distributions from:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

(0.36

)

(0.18

)

(0.17

)

(0.25

)

(0.13

)

Realized capital gains

 

 

 

(1.26

)

 

(0.07

)

(0.96

)

Total distributions

 

 

(0.36

)

(1.44

)

(0.17

)

(0.32

)

(1.09

)

Capital Contribution

 

 

 

0.16

(A)

 

 

 

 

Net asset value at end of period

 

$

24.30

 

$

23.91

 

$

22.23

 

$

21.81

 

$

14.62

 

$

21.81

 

Total return

 

1.63

%(B)

9.45

%(A)

9.86

%

50.44

%

(31.58

)%

(3.12

)%

Ratios and supplemental data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets at end of period (000’s)

 

$

29,473

 

$

29,879

 

$

28,879

 

$

31,166

 

$

15,451

 

$

23,097

 

Ratio to average net assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net expenses

 

0.80

%(C)

0.80

%

0.80

%

0.80

%

0.71

%

0.80

%

Gross expenses

 

1.06

%(C)

0.89

%

0.95

%

0.91

%

0.98

%

1.02

%

Net investment income

 

1.31

%(C)

1.02

%

0.75

%

0.91

%

1.60

%

1.46

%

Portfolio turnover rate

 

190

%(B)

99

%

115

%

318

%

309

%

98

%

 


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

(B) Not annualized.

(C) Annualized.

 

33


 

EXHIBIT A: AGREEMENT AND PLAN OF REORGANIZATION

 

THIS AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is made as of this 22 day of February 2013, by and among Touchstone Strategic Trust (“TST”), on behalf of the Touchstone Focused Fund (the “Acquiring Fund”); the Touchstone Funds Group Trust (“TFGT”) (collectively with TST, the “Trusts”), on behalf of the Touchstone Focused Equity Fund (the “Acquired Fund”); and, for purposes of Section 9.1 only, Touchstone Advisors, Inc (the “Advisor”).  TST is a Massachusetts business trust with its principal place of business at 303 Broadway, Suite 1100, Cincinnati, Ohio 45202.  TFGT is a Delaware statutory trust with its principal place of business at 303 Broadway, Suite 1100, Cincinnati, Ohio 45202.

 

WHEREAS, the following chart shows (i) the Acquired Fund and its classes of shares and (ii) the Acquiring Fund with its classes of shares:

 

Acquired Fund

 

Acquiring Fund

Touchstone Focused Equity Fund, a series of TFGT

 

Touchstone Focused Fund, a series of TST

Class A

 

Class A

Class C

 

Class C

Class Y

 

Class Y

Institutional Class

 

Institutional Class

 

WHEREAS, the reorganization (the “Reorganization”) will consist of (i) the transfer of all of the assets of the Acquired Fund in exchange for the corresponding classes of shares of beneficial interest, with a par value of $.01 per share, of the Acquiring Fund (each, a “Corresponding Class”); (ii) the assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund; and (iii) the distribution of the Corresponding Class of shares to the shareholders of the Acquired Fund in liquidation of the Acquired Fund as provided herein, all upon the terms and conditions hereinafter set forth in this Agreement.  The parties intend that the Reorganization shall qualify as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “IRS Code”).

 

WHEREAS, the Acquiring Fund and the Acquired Fund are series of their respective Trust, and the Trusts are each an open-end, registered management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), and the Acquired Fund owns securities that generally are assets of the character in which the Acquiring Fund is permitted to invest;

 

WHEREAS, the Acquiring Fund and the Acquired Fund are authorized to issue its shares of beneficial interest;

 

WHEREAS, the Board of Trustees of each Trust, including a majority of the Trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), have determined that the transactions contemplated herein will be in the best interests of the Acquiring Fund and its shareholders and that the interests of the existing shareholders of the Acquiring Fund will not be diluted as a result of the transactions contemplated herein;

 

WHEREAS, the Board of Trustees of each Trust, including a majority of the Independent Trustees, have determined that it is in the best interests of the Acquired Fund to exchange all of its assets and liabilities for Acquiring Fund Shares and that the interests of the existing shareholders of the Acquired Fund and the Acquiring Fund will not be diluted as a result of the transactions contemplated herein;

 

NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:

 

A-1


 

ARTICLE I

 

TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR

THE ACQUIRING FUND SHARES AND ASSUMPTION OF ACQUIRED FUND

LIABILITIES AND LIQUIDATION OF THE ACQUIRED FUND

 

1.1          THE EXCHANGE.  Subject to the terms and conditions herein set forth and on the basis of the representations and warranties contained herein, the Acquired Fund agrees to transfer all of the Acquired Fund’s assets as set forth in paragraph 1.2 to the Acquiring Fund.  The Acquiring Fund agrees in exchange for the Acquired Fund’s assets (i) to deliver to the Acquired Fund full and fractional shares of the Acquiring Fund (“Acquiring Fund Shares”), computed in the manner and as of the time and date set forth in Article II; and (ii) to assume all of the liabilities of the Acquired Fund, as set forth in paragraph 1.3.  Such transactions shall take place on the Closing Date p