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Touchstone Funds Group Trust – ‘N-CSR’ for 9/30/18

On:  Friday, 11/30/18, at 4:00pm ET   ·   Effective:  11/30/18   ·   For:  9/30/18   ·   Accession #:  1144204-18-62595   ·   File #:  811-08104

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/30/18  Touchstone Funds Group Trust      N-CSR       9/30/18    4:6.9M                                   Toppan Vintage/FA
          → Touchstone Active Bond Fund ⇒ Class A (TOBAX) — Class C (TODCX) — Class Y (TOBYX) — Institutional (TOBIX)
          → Touchstone Ares Credit Opportunities Fund ⇒ Class A (TMARX) — Class C (TMACX) — Class Y (TMAYX) — Institutional Class (TARBX)
          → Touchstone Emerging Markets Small Cap Fund ⇒ Class A (TEMAX) — Class C (TEFCX) — Class Y (TEMYX) — Institutional (TMEIX)
          → Touchstone High Yield Fund ⇒ Class A (THYAX) — Class C (THYCX) — Class Y (THYYX) — Institutional (THIYX)
          → Touchstone Impact Bond Fund ⇒ Class A (TCPAX) — Class C (TCPCX) — Class Y (TCPYX) — Institutional (TCPNX)
          → Touchstone Merger Arbitrage Fund ⇒ Class A (TMGAX) — Class C (TMGCX) — Class Y (TMGYX) — Institutional (TMGLX)
          → Touchstone Mid Cap Fund ⇒ Class A (TMAPX) — Class C (TMCJX) — Class Y (TMCPX) — Class Z (TMCTX) — Institutional (TMPIX)
          → Touchstone Mid Cap Value Fund ⇒ Class A (TCVAX) — Class C (TMFCX) — Class Y (TCVYX) — Institutional (TCVIX)
          → Touchstone Sands Capital International Growth Equity Fund ⇒ Class A (TPYAX) — Class C (TPYCX) — Class Y (TPYYX)
          → Touchstone Sands Capital Select Growth Fund ⇒ Class A (TSNAX) — Class C (TSNCX) — Class Y (CFSIX) — Class Z (PTSGX)
          → Touchstone Small Cap Fund ⇒ Class A (TSFAX) — Class C (TSFCX) — Class Y (TSFYX) — Institutional (TSFIX)
          → Touchstone Small Cap Value Fund ⇒ Class A (TVOAX) — Class C (TVOCX) — Class Y (TVOYX) — Institutional (TVOIX)
          → Touchstone Ultra Short Duration Fixed Income Fund ⇒ Class A (TSDAX) — Class C (TSDCX) — Class S (SSSGX) — Class Y (TSYYX) — Class Z (TSDOX) — Institutional Class (TSDIX)

Document/Exhibit                   Description                      Pages   Size 

 1: N-CSR       Certified Annual Shareholder Report by a            HTML   2.73M 
                          Management Investment Company                          
 4: EX-99.906 CERT  Certifications                                  HTML      8K 
 3: EX-99.CERT  Certifications                                      HTML     16K 
 2: EX-99.CODE ETH  Code of Ethics                                  HTML     30K 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act file number 811-08104

Touchstone Funds Group Trust

(Exact name of registrant as specified in charter)

303 Broadway, Suite 1100
Cincinnati, Ohio 45202-4203

(Address of principal executive offices) (Zip code)

Jill T. McGruder
303 Broadway, Suite 1100
Cincinnati, Ohio 45202-4203

(Name and address of agent for service)

Registrant's telephone number, including area code: 800-638-8194

Date of fiscal year end: September 30

Date of reporting period: September 30, 2018

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

Item 1. Reports to Stockholders.

The Report to Shareholders is attached herewith.

September 30, 2018

Annual Report

Touchstone Funds Group Trust

Touchstone Active Bond Fund

Touchstone Arbitrage Fund

Touchstone Emerging Markets Small Cap Fund

Touchstone High Yield Fund

Touchstone Impact Bond Fund (formerly known as Touchstone Total Return Bond Fund)

Touchstone Merger Arbitrage Fund

Touchstone Mid Cap Fund

Touchstone Mid Cap Value Fund

Touchstone Premium Yield Equity Fund

Touchstone Sands Capital Select Growth Fund

Touchstone Small Cap Fund

Touchstone Small Cap Value Fund

Touchstone Ultra Short Duration Fixed Income Fund

IMPORTANT NOTE: Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Touchstone Funds’ annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the shareholder reports from Touchstone Funds or from your financial intermediary, such as a broker-dealer or bank. Instead, annual and semi-annual shareholder reports will be available on the Touchstone Funds’ website (TouchstoneInvestments.com/Resources), and you will be notified by mail each time a report is posted and provided with a website link to access the report.

Beginning on January 1, 2019, you may elect to receive all future annual and semi-annual shareholder reports in paper, free of charge. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. To elect to receive paper copies of shareholder reports through the mail or otherwise change your delivery method, contact your financial intermediary or, if you hold your shares directly through Touchstone Funds, visit TouchstoneInvestments.com/Resources/Edelivery or call Touchstone Funds toll-free at 1.800.543.0407. Your election to receive shareholder reports in paper will apply to all Touchstone Funds that you hold through the financial intermediary, or directly with Touchstone.

Table of Contents

This report identifies the Funds' investments on September 30, 2018. These holdings are subject to change. Not all investments in each Fund performed the same, nor is there any guarantee that these investments will perform as well in the future. Market forecasts provided in this report may not occur.

Letter from the President

Dear Shareholder:

We are pleased to provide you with the Touchstone Funds Group Trust Annual Report. It includes key financial information, as well as manager commentaries for the Funds, for the 12 months ended September 30, 2018.

The global economic recovery, now in its 10th year following the 2008 Credit Crisis, gained momentum in 2017 as the U.S., Japan, the European Union (EU) and China all reported solid economic growth through much of the 12 months. Notably, U.S. Gross Domestic Product growth is on track to report its first 3+ percent growth rate in over a decade. Despite the overall solid economic fundamentals, much of the period saw an increase in market volatility as tariffs and trade tensions raised the specter of an escalating global trade war. The “synchronized global expansion” showed signs of unraveling because of these growing trade tensions. Yet, the latter portion of the fiscal year saw some resolution on trade tensions as the U.S. reached preliminary trade deals with Canada, Mexico and South Korea, as well as a tariff truce with the EU. Throughout the period, monetary policies across the major central banks continued their divergent paths as the Bank of Japan and the European Central Bank maintained accommodative stances, while the U.S. Federal Reserve Board (Fed) continued toward its goal of monetary policy normalization by raising rates four times in the fiscal year. Additionally, the Fed began executing on a plan to reduce the size of its balance sheet by selling securities it had acquired during its post-Crisis Quantitative Easing programs.

A strengthening U.S. dollar, diverging economic data and widening trade disputes in the fiscal year’s second half affected performance results overseas. Global equities posted dramatically different results with U.S. equity markets posting double-digit returns compared to low single-digit returns from developed markets. The aforementioned strong U.S. dollar and trade tensions weighed on emerging markets equities as they posted slightly negative returns. Within the U.S. equity markets, growth-oriented stocks outpaced their value-oriented counterparts, while large-capitalization stocks outperformed mid- and small-capitalization stocks.

The Fed’s four rate hikes during the period drove short-term rates higher, while longer-term rates also moved higher but at a slower pace, resulting in a flattening of the yield curve. This increase in rates resulted in negative returns for investment grade bonds. However, non-investment grade bonds generated positive returns because they were less sensitive to interest rate changes and more correlated to economic activity.

With 2019 right around the corner, the post-Crisis bull market is approaching its 10-year anniversary. While it has certainly contained periods of volatility, the length and strength of this market environment only reinforces our view that investing is a long-term endeavor. A disciplined approach and appropriate time horizon can deter short-term thinking and reactive decision making. Your financial advisor can help you by identifying a risk-return profile and developing an investment plan that will help address your long-term financial goals.

We greatly appreciate your continued support. Thank you for including Touchstone as part of your investment plan.

Sincerely,

Jill T. McGruder

President

Touchstone Funds Group Trust

Management's Discussion of Fund Performance (Unaudited)

Touchstone Active Bond Fund

Sub-Advised by Fort Washington Investment Advisors, Inc.

Investment Philosophy

The Touchstone Active Bond Fund seeks to provide as high a level of current income as is consistent with the preservation of capital. Capital appreciation is a secondary goal. In deciding what securities to buy and sell for the Fund, the overall investment opportunities and risks in different sectors of the debt securities market are analyzed by focusing on maximizing total return and reducing volatility of the Fund’s portfolio. A disciplined sector allocation process is followed in order to build a broadly diversified portfolio of bonds.

Fund Performance

The Touchstone Active Bond Fund (Class A Shares) underperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, for the 12-month period ended September 30, 2018. The Fund’s total return was -1.87 percent (calculated excluding the maximum sales charge) while the total return of the benchmark was -1.22 percent.

Market Environment

The return of volatility during the period reflected concerns about inflation and rising interest rates, as well as uncertainty surrounding global trade. As the 12-month period came to an end, markets waited anxiously for a resolution between the U.S. and its global trading partners as tensions continued to mount.

Within the index, Investment Grade Corporate Bonds, Mortgage-Backed Securities (MBS), Asset-Backed Securities (ABS) and Commercial Mortgage-Backed Securities (CMBS) all outperformed U.S. Treasuries during the period. However, High Yield Bonds also outperformed all fixed income sectors during the period.

During the 12-month period, the yield curve flattened as external forces depressed the long end of the curve while the U.S. Federal Reserve Board (Fed) increased the federal funds rate a total of four times. In general, yields moved rather significantly. In fact, yields on both the 10-year and 2-year U.S. Treasuries ended the period notably higher and tighter. The relationship between the two yields, commonly referenced as a market indicator on investor sentiment, began to concern many investors as it tightened to levels that many felt would invert, which is a strong signal for an impending recession.

Market expectations of additional Fed rate hikes also increased which was a reaction to strong underlying fundamentals. Underlying growth of the U.S. economy remained solidly above trend with third quarter growth projected to be approximately 3 percent. The strength of the economy was broad-based given the tailwinds from strong labor markets and fiscal policy; consensus expectations suggested a continuation of current growth rates. Labor markets consistently added over 150,000 jobs per month and remained tight. Wage growth was also strong and began to show signs of acceleration. Core inflation readings remained in line with the Fed’s 2 percent target.

Broad financial conditions were generally supportive of risk assets and economic growth, yet by the end of the period they were near the long-term average. At these levels, financial conditions no longer provided a tailwind for growth but instead were neutral. Driving financial conditions were the higher federal funds rate and a stronger U.S. dollar. And, while global central bank policy was generally accommodative, it began moving toward a more neutral level, as led by the Fed.

Portfolio Review

An overweight to Investment Grade Corporate Bond exposure was the main detractor of performance over the 12-month period.

Management's Discussion of Fund Performance (Unaudited) (Continued)

The Funds allocation to U.S. dollar-denominated Emerging Markets debt was additive over the period, while security selection was strong within Securitized Assets, particularly within ABS and Non-Agency MBS. The Fund’s allocation to Treasury Inflation-Protected Securities (TIPS) was also positive, particularly at the end of 2017 as the Fund took advantage of sharp increases in inflation expectations on the back of rising commodity prices and strong economic data.

The Fund benefited from a rotation out of High Yield in favor of Securitized Assets in early October 2017 as spreads tightened significantly. Throughout the 12-month period, High Yield spreads continued to grind tighter. We believed Securitized Assets offered a more attractive risk/reward profile, particularly within the ABS and Non-Agency MBS sectors. We like these sectors as they closely relate to the health of the U.S. consumer, which we believe to be strong.

We made a modest allocation to U.S. dollar-denominated Emerging Markets debt. Valuations in this asset class were at attractive levels as spreads relative to domestic Investment Grade Corporates and High Yield reached pre-crisis highs. Combined with global growth conditions and supportive fundamentals, we believe the sector offered good opportunity.

Outlook

Going forward, we believe the greatest potential is the Fund’s risk assets, driven by U.S. economic growth, steady inflation and accommodative central bank policy. While financial conditions are no longer accommodative to growth, we believe they are not a hindrance either. Valuations have adjusted to reflect uncertainty around trade issues and how it will impact growth, and we believe the potential upside for price appreciation is limited. We have been taking advantage of opportunities among securitized assets when possible, where we believe attractive risk/reward profiles can be found in the ABS and Non-Agency MBS sectors. We like these sectors’ close connections to consumer spending, which continues to be healthy.

We believe global central banks need to maintain accommodative policies in order to support expansion abroad. Rate hikes by the Fed will further tighten financial conditions as the year progresses, which may become a headwind for the Fund’s overweight position to risk assets. Further escalation of trade disputes, specifically between the U.S. and China, may also impact risk assets.

We believe interest rates are generally fair, and currently reflect the positive economic outlook. As a result, in the near-term, the Fund is positioned with a long duration and neutral curve relative to the benchmark, and we will look to opportunistically take advantage of dislocations in the market as they arise.

Management's Discussion of Fund Performance (Unaudited) (Continued)

Comparison of the Change in Value of a $10,000 Investment in the

Touchstone Active Bond Fund - Class A^*and the

Bloomberg Barclays U.S. Aggregate Bond Index

The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Note to Chart

Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index comprised of U.S. investment grade, fixed rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and ten years.

Management's Discussion of Fund Performance (Unaudited)

Touchstone Arbitrage Fund

Sub-Advised by Longfellow Investment Management Co., LLC

Investment Philosophy

The Touchstone Arbitrage Fund seeks to achieve positive absolute returns over the long term regardless of market conditions by investing primarily in securities of companies that are involved in publicly announced mergers, takeovers, tender offers, debt restructurings, minority purchases, leveraged buyouts, spin-offs, liquidations and other corporate reorganizations.

Fund Performance

The Touchstone Arbitrage Fund (Class A shares) underperformed its benchmark, the ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index, for the 12-month period ended September 30, 2018. The Fund’s total return was -1.18 percent (calculated excluding the maximum sales charge) while the benchmark’s total return was 1.59 percent.

Market Environment

During the 12-month period ended September 30, 2018, risk assets continued to generate strong returns, however volatility increased. Earnings growth remained strong and U.S. corporations have begun to benefit from the lower corporate tax rate as part of the 2017 corporate tax reform.

The U.S. Federal Reserve Board (Fed) was firmly committed to a schedule for rate increases, with 25 basis point increases in each of the last four quarters. While rates remained low relative to historical averages and access to capital markets to facilitate acquisitions was abundant, there was implied risk that the Fed moved too quickly and disrupted what has been a slow and steady recovery in the economy since the depths of the Financial Crisis ten years ago.

Deal spread levels remained below what was anticipated given the increase in short rates. In terms of deal activity, Information Technology and Health Care were the busiest industries in the Fund’s investable universe. While the market sentiment for deal-making appears to be robust, there seems to be an impact from both geopolitical trade pressures and general uncertainty as it relates to tariffs and the emerging trade war issues between the United States and China.

Portfolio Review

While the Fund’s positioning frequently changed due to companies with new deals being added and completed deals being removed, there were no significant changes to its overall positioning. During the period, the Fund’s holdings had 71 deals close and the Fund invested in 80 new companies with pending transactions.

The Fund benefited from the outcome of the Broadcom Ltd./Brocade Communications Systems, Inc. deal. Broadcom and Brocade announced a definitive agreement for Broadcom to acquire Brocade for $12.75 per share in cash. The deal closing was subject to regulatory approvals in various jurisdictions, customary closing conditions, as well as the approval of Brocade’s stockholders. One of the regulatory requirements needed was from the Committee on Foreign Investment in the United States (CFIUS). The companies ran into issues getting this approval. Only after an agreement from Broadcom to move its headquarters back to the United States was the deal allowed to close.

Another deal that contributed to Fund performance was the Discovery Communications Inc./Scripps Networks Interactive Inc. deal. Discovery and Scripps announced a definitive agreement for Discovery to acquire Scripps. Shareholders received $90.00 per share under the terms of the agreement, comprised of $63.00 per share in cash and $27.00 per share in Class C common shares of Discovery stock. The deal had been stalled in an

Management's Discussion of Fund Performance (Unaudited) (Continued)

extended regulatory review in which the Department of Justice (DOJ) had asked the companies for more information. The companies supplied the DOJ with what was requested and were then given the approval needed to close the merger.

The Fund’s performance was hurt by its exposure to Akorn Inc., Tribune Media Company and NXP Semiconductors N.V. The Fund continues to hold these companies because of our belief in their future prospects and/or the stock’s valuation dislocations.

Fresenius SE & Co. KGaA announced a definitive agreement to acquire Akorn Inc. for $34.00 a share. The agreement and transaction have been approved by the boards of both companies and recommended by Akorn’s board to its shareholders. Akorn dropped materially following the announcement that their acquirer, Fresenius, terminated the merger agreement on the back of an investigation into Akorn’s data integrity requirements. Akorn filed suit in Delaware court in order to enforce the merger agreement. A Delaware judge ruled that Fresenius had the right to terminate the merger agreement. This ruling is the first in a Delaware court in which a material adverse event had been proven to have occurred during a merger.

Qualcomm Inc. and NXP Semiconductors N.V. announced a definitive agreement for Qualcomm to acquire NXP for $110.00 per share in cash through a tender offer. NXP was trading with a significant discount to the new Qualcomm offer due to the ongoing trade war between China and the United States. The lone remaining regulatory approval by the Ministry of Commerce, People’s Republic of China (MOFCOM) was elusive due to the ongoing trade war. The deal was terminated.

Sinclair Broadcast Group, Inc. and Tribune Media Company announced a definitive agreement under which Sinclair would acquire Tribune for $35.00 in cash and 0.23 shares of Sinclair Class A common stock for each share of Tribune Class A common stock and Class B common stock. The transaction was subject to approval by Tribune’s stockholders, as well as customary closing conditions, including approval by the Federal Communications Commission (FCC) and antitrust clearance. The deal was terminated by Tribune when the FCC stated that it was against the divestiture package put forth by Sinclair.

Outlook

The main entity driving the environment remains CFIUS. With potential new measures being adopted by the U.S. to broaden the purview of CFIUS, we remain highly selective and disciplined in our analysis of any cross-border transaction. Our investment process includes a strong emphasis on buyer due diligence and focus on cross-border buyers that could run afoul of U.S. regulatory bodies. We believe prevailing deal spreads will increase but lag the past four interest rate hikes.

The market continues to differentiate between the riskier and the more straightforward deals. Deals with a greater amount of perceived risk are being assigned a significantly wider spread than transactions with fewer hurdles. This is in contrast to much of recent history when spreads were not necessarily compensating investors appropriately for the amount of risk taken.

We think access to capital, slow global growth, and strong corporate balance sheets will drive incremental strategic Mergers & Acquisitions. We also think that historically low funding costs should provide a tailwind for financial buyers. On balance, we see a backdrop that remains supportive for continued deal activity.

We believe the Fund is well positioned with a strong focus on liquidity management and mitigating downside risk. We are optimistic at the tailwinds for deal activity and potential for wider spreads based on our outlook.

Management's Discussion of Fund Performance (Unaudited) (Continued)

Comparison of the Change in Value of a $10,000 Investment in the

Touchstone Arbitrage Fund - Class A^* and the

ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index

The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Note To Chart

ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged index of Treasury securities maturing in 90 days that assumes reinvestment of all income.

Management's Discussion of Fund Performance (Unaudited)

Touchstone Emerging Markets Small Cap Fund

Sub-Advised by Copper Rock Capital Partners LLC

Investment Philosophy

The Touchstone Emerging Markets Small Cap Fund seeks capital appreciation by primarily investing in equity securities of emerging markets small-cap companies diversified across sectors and industries. The Fund’s investment process seeks to add value through bottom-up stock selection and in-depth fundamental research.

Fund Performance

The Touchstone Emerging Markets Small Cap Fund (Class A shares) underperformed its benchmark, the MSCI Emerging Markets Small Cap Index for the 12-month period ended September 30, 2018. The Fund’s total return was -11.66 percent (calculated excluding the maximum sales charge) while the total return of the benchmark was -4.20 percent.

Market Environment

During the final quarter of 2017, the asset class comprising small market capitalization equities in emerging markets climbed higher, driven by outperforming stocks in the Health Care and Information Technology sectors, a strong consumer and a broad rally in commodities. Market volatility crept higher during the remainder of the 12-month period as investors’ concerns surfaced over slowing global growth and hawkish commentary from the U.S. Federal Reserve Board (Fed). Specifically, from the second quarter of 2018 to the end of the period, stocks of small capitalization companies in emerging markets were broadly pressured and moved into negative territory. In general, the asset class as a whole was negatively impacted by a stronger U.S. dollar, tensions surrounding trade disputes and tariffs and higher U.S. interest rates.

From a sector perspective within the small capitalization emerging markets asset class, only the Health Care and Consumer Staple sectors produced positive returns while the Communications Services, Utilities and Industrials sectors were the largest decliners. In terms of style, growth stocks underperformed their value counterparts.

Portfolio Review

Over the 12-month period, the Fund faced significant headwinds due to market volatility and the impending impact over a protracted trade war. In particular, the Fund’s holdings in most sectors of the Chinese market detracted from performance, as did a lack of exposure to Korean pharmaceutical and biotechnology stocks, which rallied during the period. Stock selection in India also detracted from relative returns. Stock selection in Thailand, combined with an overweight allocation to the country, was additive. Thailand benefited from being one of the most progressive countries in reforming its balance sheet, and from being more insulated than others from concerns over rising U.S. interest rates.

From a sector perspective, the Fund benefited from positive stock selection in the Consumer Staples, Materials, Energy and Financials sectors, while selection in the Health Care, Consumer Discretionary and Real Estate sectors detracted the most.

Among the individual stocks that contributed to Fund performance were KrungThai Card Public Co. Ltd. (Financials sector), TCI Co. Ltd. (Consumer Staples sector), Douzone Bizon Co. Ltd. (Information Technology sector), China Resources Cement Holdings Ltd. (Materials sector) and Muangthai Capital Public Co. Ltd. (Financials sector).

KrungThai is a credit card issuer in Thailand offering both VISA and Mastercard branded cards. The company’s smaller and more nimble size in the market has allowed it to manage the Bank of Thailand’s push to curb countrywide household debt much better than its competitors. The company also reported higher net profits

Management's Discussion of Fund Performance (Unaudited) (Continued)

during the period versus both its competitors and street expectations. While credit card usage has slowed in Thailand, KrungThai’s growth still outpaced the broad industry.

TCI Co. is a Taiwan-based innovative health foods company that develops and produces supplements and nutritional products. The company also makes facial masks which are sold to global consumer retailers like Sephora & Co., among other clients. During the first quarter of 2018, the company announced earnings that beat market expectations, and management guided for strong growth driven by new product innovation over the next five years. Rising wages in China, along with an aging demographic that was more inclined and able to spend on beauty and health care products, were also important growth catalysts for TCI. In addition, the company has production facilities in Taiwan which Chinese customers perceive to be higher quality. Going forward, we expect the company’s sales will benefit from greater demand for health products and nutritional supplements in China and across Asia. We also believe the market is just beginning to appreciate TCI’s strong growth profile and overseas opportunities.

Douzone Bizon is a South Korea-based provider of enterprise risk platforms and accounting software for small to mid-sized enterprises (SME). Similar to other software companies, Douzone Bizon has begun to migrate desktop users to the cloud which results in both higher fees and lower maintenance costs. In 2018, the company started to experience strong SME customer growth through its web-based accounting platform, as well as growth from its new web-based modules. Importantly, the company also won new business from a large conglomerate in Korea.

China Resources Cement is a producer of cement in southeastern China. The company recently benefited from the closure of highly polluting cement plants across China and from price coordination among larger cement companies. In addition, the Greater Bay Area initiative in China – a plan to link nine cities in Guangdong province plus Hong Kong and Macau to form an integrated business hub – has led to government-led infrastructure growth and cement demand. During the quarter, the stock outperformed due to strong first quarter results and continued price increases. As a result of this outperformance, and the company’s increased market cap, we exited the position.

Muangthai Capital is a commercial lending company based in Thailand that provides individual and SME loans targeted to car titles and agricultural vehicle and land titles. Investor concerns over regulatory tightening in the commercial lending space eased during the period and, as final regulations were released, Muangthai was within the guidelines across all categories. This news positively impacted the stock as did reports of strong company fundamentals that were announced in the firm’s latest quarterly update.

Among the individual stocks that detracted from Fund performance were Qualicorp Consultoria e Corretora de Seguros SA (Health Care sector), Sansiri Public Co. Ltd. (Real Estate sector), China Yongda Automobiles Services Holdings Ltd. (Consumer Discretionary sector), L&T Finance Holdings (Financials sector) and AirTAC International Group (Industrials sector).

Qualicorp is a private health insurance distributor in Brazil which offers direct sales to affinity groups and individual customers. While Qualicorp was a long-term contributor to Fund performance, the company recently came under pressure despite delivering strong cash flow and maintaining a favorable balance sheet. Weakness was primarily driven by continued price increases in Brazil’s overall medical costs. Though company management executed a plan to protect its operational key performance indicators, the increased costs began to impact membership in the affinity plans supported by Qualicorp. As a result, we exited the Fund’s position.

Sansiri is a developer of higher end residential properties in Thailand. The company’s third quarter 2017 results showed weaker performance compared to the prior quarter, which raised concerns that the company would not meet its 2017 guidance. In addition, the company guided for slower growth in 2018. While the company

Management's Discussion of Fund Performance (Unaudited) (Continued)

reported solid pre-sales in November 2017, which led to a mild recovery through December, the company did not recover from its previous highs. We exited the Fund’s position as a result.

China Yongda Automobile Services is a retailer of premium international automobile brands in China including BMW, Audi and Porsche. A major portion of our growth thesis for Yongda was the fact that BMW has five new model rollouts through 2019. Unfortunately, several of the model rollouts were significantly delayed in 2018. At the same time, broad auto sales in China have been under significant pressure driven by the USA/China trade dispute. As the fundamental support for the company has also eroded, we decide to liquidate the Fund’s position.

L&T Finance is a non-banking financial company (NBFC) in India with focus on rural, housing and wholesale lending, plus an asset management and wealth management business. All NBFCs in India have been under pressure recently – including L&T Finance – due to pressure on the currency that has resulted in a squeeze on short term liquidity. India’s central bank is addressing some of the liquidity issues for NBFCs and we believe this is having a positive impact. Furthermore, we see a strong growth path ahead for L&T Finance and continue to see it as high quality and buffered from direct impact of the liquidity squeeze. We continue to hold the stock as we believe there is potential opportunity.

AirTAC International Group manufactures pneumatic components and is a key component supplier into the factory automation supply chain. AirTAC has a high quality, focused management team that has shown strict adherence to product development and pricing that drives profitability. A key thesis for our investment in AirTAC was that we expect the growth in factory automation to continue – especially within China – for the next several years. Unfortunately, capital expenditure decisions – especially on spending on factory automation – have broadly been put on hold due to concerns surrounding the USA/China trade dispute. As such, we have decided to exit the Fund’s investment in AirTAC.

At the end of the quarter, the Fund was overweight to the Financials, Consumer Discretionary, Information Technology, Energy and Health Care sectors. It was underweight to the Consumer Staples, Materials, Communication Services, Real Estate, Utilities and Industrials sectors. On a country basis, the Fund was overweight to China, Thailand, India, Korea, Hungary, Greece and Brazil, while the largest underweight allocations were to Chile, Taiwan and Indonesia.

Outlook

Many market strategists are now setting the trade war between the U.S. and China as their base case assumption going forward. This has clearly had a notable impact on investor sentiment for emerging markets equities over the past two quarters, and also extends a broader impact in the emerging markets space beyond just China. Also, India – which seemed to have a longer-term focus driving its broad growth – began to experience some negative impact on its currency and short-term liquidity.

Nonetheless, there were positive factors during the most recent quarter of the 12-month period that were encouraging. Thailand has cleaned up its public balance sheet over the past decade and now stands out economically from the crowd in terms of stability and defensiveness within emerging markets. Mexico has moved past a major election and, after re-establishing the trade agreement with the U.S. and Canada, has shown opportunities for improving growth and company fundamentals. Brazil will be finished with its elections soon which we believe has started to create a stabilizing effect on that market, thereby strengthening the impact of positive fundamentals.

Given this background, we continue to approach the investment opportunities within the emerging markets small cap space by focusing on stocks with strong, well-explained and visible earnings growth supported by valuation levels and management teams that deliver the key drivers of sustainable earnings growth. We do this

Management's Discussion of Fund Performance (Unaudited) (Continued)

within a framework and awareness that recognizes the headwinds and tailwinds associated with the country dynamics that are present today in emerging markets.

Comparison of the Change in Value of a $10,000 Investment in the

Touchstone Emerging Markets Small Cap Fund - Class A* and the

MSCI Emerging Markets Small Cap Index

The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Notes to Chart

MSCI Emerging Markets Small Cap Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of small companies from emerging markets.

MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI.

Management's Discussion of Fund Performance (Unaudited)

Touchstone High Yield Fund

Sub-Advised by Fort Washington Investment Advisors, Inc.

Investment Philosophy

The Touchstone High Yield Fund seeks a high level of income. Capital appreciation is a secondary consideration. The Fund primarily invests in non-investment-grade securities.

Fund Performance

The Touchstone High Yield Fund (Class A shares) underperformed its benchmark, ICE BofA Merrill Lynch High Yield Cash Pay Index, for the 12-month period ended September 30, 2018. The Fund’s total return was 1.24 percent (calculated excluding the maximum sales charge) while the benchmark’s total return was 2.89 percent.

Market Environment

Over the 12-month period, the High Yield market was driven by a handful of larger economic movements that significantly affected the asset class and returns. In part, news was dominated by economic volatility surrounding political rhetoric, tax policy, sanctions and trade tariffs out of Washington, D.C. When taken as a whole, the combination of tax stimulus and fiscal stimulus positively impacted the economy. In particular, it resulted in a rally in risk assets, along with a notable change in interest rates, due to an increase in growth expectations while inflation expectations remained subdued. The market also saw increased volatility from trade rhetoric and the resulting subsequent implementation.

Yields on 2-year and 10-year U.S. Treasuries rose meaningfully and was a significant headwind for fixed income assets. Investment grade corporate securities with long durations and low spreads were affected the most. Below-investment grade securities were able to absorb the headwinds more effectively. Their typically shorter duration were less prone to the intermediate-to-longer-term U.S. Treasury yield increases and outperformed.

During the 12-month period, the top performing sectors were Supermarkets, Pharmaceuticals, Energy and Aerospace/Defense. The common theme among these sectors was that returns were all dominated by low-rated, predominately CCC-rated bonds, which was a headwind to the Fund’s higher quality portfolio and detracted from performance. For example, crude oil prices steadily increased during the period, thus providing a backdrop for high-yielding, lower-quality Energy bonds to continue their recovery from the lows seen in 2015 and 2016. As a result, Independent Energy and Oil Field Services were two of the strongest returning segments in the benchmark. The weakest performing sectors were Auto Parts, Housewares and Apparel.

Portfolio Review

Overall, sector allocation detracted from Fund performance for the 12-month period. The Fund’s overweight positions to Supermarkets and Wirelines contributed to Fund returns, as did underweight positions to Packaging and Wireless. The Fund’s overweight position to Food & Beverage detracted from performance but credit selection within the sector more than offset this allocation effect. The Fund’s underweight to Pharmaceuticals, which was dominated by the returns of CCC-rated Valeant Pharmaceuticals International Inc. and Endo International PLC, negatively impacted performance. These two bonds were a headwind which was difficult to offset. As previously noted, credit quality and duration were the two most significant macroeconomic factors affecting performance for the period.

Security selection detracted from performance and was driven by two main factors: underweight positions in CCC-rated bonds and overweight positions in Diebold Nixdorf Inc. and Ultra Petroleum Corp. Diebold Nixdorf is a financial and retail technology company that specializes in the production of ATMs. The holding was the largest detractor as the company struggled to integrate a large acquisition. Ultra Petroleum, an exploration and

Management's Discussion of Fund Performance (Unaudited) (Continued)

production company, also detracted as the company struggled with commodity pricing, the implementation of a new strategy, and speculation surrounding the management of its balance sheet. GenOn Energy, an energy company and bankruptcy entity rebounded and positively affected performance. Additionally, overweight positions to a Telecommunications company, Frontier Communications Corp. and a Midstream company, NGL Energy Partners LP, also contributed to returns.

The largest overweight sectors within the Fund were Food & Beverage, Consumer Products and Midstream, while the largest underweights were Information Technology, Independent Energy and Wireless Communications.

Fund duration was slightly longer than that of the benchmark as the portfolio is underweight the shortest-to-maturity segment of the market and overweight mid-durations bonds. In general, the Fund does not seek to take an explicit position on duration, preferring instead to let security selection decisions drive relative performance.

Outlook

We believe the greatest opportunities may be a continuation of the current environment of low growth mixed with relatively easy monetary policy, or a meaningful sell-off in the High Yield market. The combination of solid Gross Domestic Product growth, strong employment gains, positive financial conditions and a resetting of interest rates provides an environment in which we believe the High Yield market has potential. This scenario presumes that the ongoing trade talks do not evolve into a market-altering event and that economic activity, which has accelerated domestically, maintains its current pace of expansion.

In light of High Yield’s relatively low spread and yield levels, the Fund is positioned toward the lower portion of its risk range. Yield is below that of the benchmark due to a significant underweight to CCC-rated bonds. We believe that the BB- and B-rated segments of the market are fairly valued. As the business cycle has recovered from the slowdown in 2015 and 2016, and because of the risk asset sell-off, we have reduced the Fund’s CCC-rated exposure. More recently, purchase activity has been tilted towards BB-rated issuers. We believe the Fund’s defensive stance positions it well in a market in which CCC-rated bonds are priced with little room for error and economic activity is currently high.

The Fund’s positioning emphasizes security selection over sector allocation as we believe there are a limited number of sector allocation opportunities in the current environment. Where there are sector opportunities, we express our views through quality (BB versus B) and not necessarily through a large underweight or overweight to a sector.

Management's Discussion of Fund Performance (Unaudited) (Continued)

Comparison of the Change in Value of a $10,000 Investment in the

Touchstone High Yield Fund - Class A^*and the ICE BofA Merrill Lynch High Yield Cash Pay

Index

The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Note to Chart

ICE BofA Merrill Lynch High Yield Cash Pay Index is an unmanaged index used as a general measure of market performance consisting of fixed-rate, coupon-bearing bonds with an outstanding par which is greater than or equal to $50 million, a maturity range greater than or equal to one year and must be less than BBB/Baa3 rated but not in default.

Management's Discussion of Fund Performance (Unaudited)

Touchstone Impact Bond Fund*

Sub-Advised by EARNEST Partners LLC

Investment Philosophy

The Touchstone Impact Bond Fund seeks current income. Capital appreciation is a secondary goal. The Fund invests primarily in fixed income securities or sectors that are considered undervalued for their risk characteristics.

Fund Performance

The Touchstone Impact Bond Fund (Class A shares) outperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index for the 12-month period ended September 30, 2018. The Fund’s total return was -1.07 percent (calculated excluding the maximum sales charge) while the benchmark’s total return was -1.22 percent.

Market Environment

U.S. economic data was positive for the 12-month period ended September 30, 2018 in a relatively stable and consistent pattern. Gross domestic product (GDP) reported real gains during all four quarters of the period. The unemployment rate also improved in a somewhat steady fashion and ended the period with the lowest unemployment rate in decades. Meanwhile, labor force participation was steady and wage growth improved as the number of job openings was on par with the number of job seekers. Many companies reported that their single largest challenge was finding employees to fill job openings. While the employment picture improved, inflation remained reasonably stable and well anchored. This was due in part to the U.S. Federal Reserve Board’s (Fed) monetary policy. The Fed raised interest rates once each quarter for the 12-month period, which was done in large part to stem increasing inflation as the economy continued to build momentum.

During the 12-month period, the Bloomberg Barclays U.S. Aggregate Bond Index outperformed relative to similar duration U.S. Treasuries. Lower quality bonds were in particularly high demand during the period as BBB-rated securities delivered the strongest levels of outperformance, whereas high-quality AAA-rated securities were the weakest performers.

Interest rates rose notably during the period, and these increases occurred across the yield curve with the largest moves taking place in the shorter parts of the curve. This was due to a confluence of factors including but not limited to: 1) an increase in U.S. Treasury Bill supply to fund the fiscal deficit, 2) increases in the federal funds rate, 3) reduced demand for U.S. Treasuries from international investors and 4) low inflation expectations by market participants. The rising interest rate environment was especially difficult for U.S. Treasuries, as these securities are inherently exposed to interest rate risk without any of the additional yield spread that bonds can generate. As a result, U.S. Treasuries declined during the period.

During the 12-month period, the stock market’s outperformance and the bond market’s higher yields helped attract assets from U.S. pensions into fixed income assets as funding gaps were narrowed. With these drivers, nearly all spread sectors within the U.S. fixed income market delivered positive relative returns during the quarter. U.S. Credit led the way, with U.S. Corporate Bonds driving much of the performance due to increased earning potential which buoyed optimism for the sector. This sentiment particularly favored issuers from the Industrials sector, as that sector significantly outperformed U.S. Treasuries with similar durations.

Credit-sensitive securities such as Asset-Backed Securities (ABS) and Commercial Mortgage-Backed Securities (CMBS) also posted strong relative returns during the period. Agency Single-Family Mortgage-Backed Securities (MBS) performed well, but to a lesser degree, due to spurts of market volatility. Agency Multi-Family MBS,

Management's Discussion of Fund Performance (Unaudited) (Continued)

which are structured in a way that leaves them less prone to changes in volatility, also outperformed. U.S. Agency bonds also produced positive relative returns for the fiscal year.

Portfolio Review

The Fund’s overweight position in Agency Multi-Family MBS provided a tailwind as the sector outperformed its sister, Agency Single-Family MBS, during the period. The Fund’s overweight to U.S. Agencies provided another tailwind. The Fund’s underweight to CMBS was a headwind as the sector also performed well. This was largely offset by the market’s preference for more cyclical and sensitive portions of the U.S. Corporate Bond sector. More consistent industries such as Utilities generated modest relative returns compared to that of more cyclical industries within the Industrials sector.

Individual issues created a mixture of tailwinds and headwinds during the period. Security selection within U.S. Agencies contributed to performance. Security selection within ABS, in particular the Fund’s rate reduction bonds, outperformed their broader sector. Conversely, positions within U.S. Corporate Bonds detracted. General Electric Co. surprised the majority of the investment community with previously undisclosed impairments and losses. The company is now in the midst of a fundamental transition. We have completely sold the Fund’s position in the company. Alternatively, we have retained the Fund’s investment in South Carolina Electric and Gas Co. despite the headwinds faced by the company and its recent drag on performance. The debt held is secured in nature and we believe, regardless of the pressures faced by the company, the assets backing this mortgage are critical and essential in nature to the local economy it supports.

The Fund does not make any active interest rate bets and, accordingly, the Fund’s effective duration was approximately matched to that of the benchmark at the end of the quarter. By approximately matching the benchmark’s duration, the Fund’s interest rate risk is effectively equal to that of the benchmark over time. Furthermore, while changes in interest rates can impact total return, the Fund attempts to remain relatively neutral. With this approach, we believe changes in interest rates should not have much impact on the relative performance of the Fund.

Outlook

Looking ahead, we believe there are many events and developments taking place that could provide opportunities. As we have previously described, the Fed’s normalization of its balance sheet could provide a tailwind for the Fund as the portfolio is underweight in both U.S. Treasuries and Single-Family MBS. If the Fed, the single largest buyer of these securities, begins to step away from the purchasing table, these sectors could experience relative underperformance. Thus far, the pace of the Fed’s balance sheet tapering has been modest at approximately $150 billion in aggregate, and the run rate is scheduled to reach upwards of $50 billion a month by the end of the year. The divergent monetary policies that have been pursued by the Fed versus the rest of the world has increased currency hedging costs. This, along with trade disputes, has reduced demand for U.S. Treasuries from foreign buyers. Going forward, as these two large sources of demand pull back from the U.S. Treasury market, supply is expected to increase due to budget deficits and expansionary fiscal policy. As a result, the underweight positions to U.S. Treasuries and Single-Family MBS have the potential to benefit the Fund.

Furthermore, unexpected volatility within the financial markets could be fueled by increased levels of leverage, tense trade rhetoric with China, concerns surrounding emerging markets, and potential liquidity implications resulting from central bank actions. However, we believe the Fund’s emphasis on less economically sensitive sectors and higher quality could act to mitigate these impacts. As such, we believe the Fund is positioned well and maintains a discipline that balances risk and return objectives.

^*Formerly Touchstone Total Return Bond Fund.

Management's Discussion of Fund Performance (Unaudited) (Continued)

Comparison of the Change in Value of a $10,000 Investment in the

Touchstone Impact Bond Fund - Class A^* and the

Bloomberg Barclays U.S. Aggregate Bond Index

The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Note to Chart

Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index comprised of U.S. investment grade, fixed rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and ten years.

Management's Discussion of Fund Performance (Unaudited)

Touchstone Merger Arbitrage Fund

Sub-Advised by Longfellow Investment Management Co., LLC

Investment Philosophy

The Touchstone Merger Arbitrage Fund seeks to achieve positive absolute returns regardless of market conditions over the long term by investing primarily in securities of companies that are involved in publicly announced mergers and other corporate reorganizations. Merger arbitrage is an investment strategy that seeks to capture the “arbitrage spread” represented by the difference between the market price of the securities of the company being purchased and the value that is offered for these securities by the acquiring company. The Fund selects securities based on proposed financing terms, the size of the transaction, anti-trust concerns, regulatory approvals and shareholder voting requirements.

Fund Performance

The Touchstone Merger Arbitrage Fund (Class A shares) underperformed its benchmark, the ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index, for the 12-month period ended September 30, 2018. The Fund’s total return was -0.96 percent (calculated excluding the maximum sales charge) while the benchmark’s total return was 1.59 percent.

Market Environment

During the 12-month period ended September 30, 2018, risk assets continued to generate strong returns, however volatility increased. Earnings growth remained strong and U.S. corporations have begun to benefit from the lower corporate tax rate as part of the 2017 corporate tax reform.

The U.S. Federal Reserve Board (Fed) was firmly committed to a schedule for rate increases, with 25 basis point increases in each of the last four quarters. While rates remained low relative to historical averages and access to capital markets to facilitate acquisitions was abundant, there was implied risk that the Fed moved too quickly and disrupted what has been a slow and steady recovery in the economy since the depths of the Financial Crisis ten years ago.

Deal spread levels remained below what was anticipated given the increase in short-term interest rates. In terms of deal activity, Information Technology and Health Care were the busiest industries in the Fund’s investable universe. While the market sentiment for deal-making appears to be robust, there seems to be an impact from both geopolitical trade pressures and general uncertainty as it relates to tariffs and the emerging trade war issues between the United States and China.

Portfolio Review

While the Fund’s positioning frequently changed due to companies with new deals being added and completed deals being removed, there were no significant changes to its overall positioning. During the period, the Fund’s holdings had 73 deals close and the Fund invested in 83 new transactions.

The Fund benefited from the outcome of the Broadcom Ltd./Brocade Communications Systems Inc. deal. Broadcom and Brocade announced a definitive agreement for Broadcom to acquire Brocade for $12.75 per share in cash. The deal closing was subject to regulatory approvals in various jurisdictions, customary closing conditions, as well as the approval of Brocade’s stockholders. One of the regulatory requirements needed was from the Committee on Foreign Investment in the United States (CFIUS). The companies ran into issues getting this approval. Only after an agreement from Broadcom to move its headquarters back to the United States was the deal allowed to close.

Management's Discussion of Fund Performance (Unaudited) (Continued)

Another deal that contributed to Fund performance was the Discovery Communications Inc./Scripps Networks Interactive Inc. deal. Discovery and Scripps announced a definitive agreement for Discovery to acquire Scripps. Shareholders received $90.00 per share under the terms of the agreement, comprised of $63.00 per share in cash and $27.00 per share in Class C common shares of Discovery stock. The deal had been stalled in an extended regulatory review in which the Department of Justice (DOJ) had asked the companies for more information. The companies supplied the DOJ with what was requested and were then given the approval needed to close the merger.

The Fund’s performance was hurt by its exposure to Akorn Inc., Tribune Media Company, NXP Semiconductors N.V. and Sparton Corp. The Fund continues to hold these companies because of our belief in their future prospects and/or the stock’s valuation dislocations.

Fresenius SE & Co. KGaA announced a definitive agreement to acquire Akorn Inc. for $34.00 a share. The agreement and transaction have been approved by the boards of both companies and recommended by Akorn’s board to its shareholders. Akorn dropped materially following the announcement that their acquirer, Fresenius, terminated the merger agreement on the back of an investigation into Akorn’s data integrity requirements. Akorn filed suit in Delaware court in order to enforce the merger agreement. A Delaware judge ruled that Fresenius had the right to terminate the merger agreement. This ruling is the first in a Delaware court in which a material adverse event had been proven to have occurred during a merger.

Qualcomm Inc. and NXP Semiconductors N.V. announced a definitive agreement for Qualcomm to acquire NXP for $110.00 per share in cash through a tender offer. NXP was trading with a significant discount to the new Qualcomm offer due to the ongoing trade war between China and the United States. The lone remaining regulatory approval by the Ministry of Commerce, People’s Republic of China (MOFCOM) was elusive due to the ongoing trade war. The deal was terminated.

Sinclair Broadcast Group Inc. and Tribune Media Company announced a definitive agreement under which Sinclair would acquire Tribune for $35.00 in cash and 0.23 shares of Sinclair Class A common stock for each share of Tribune Class A common stock and Class B common stock. The transaction was subject to approval by Tribune’s stockholders, as well as customary closing conditions, including approval by the Federal Communications Commission (FCC) and antitrust clearance. The deal was terminated by Tribune when the FCC stated that it was against the divestiture package put forth by Sinclair.

Sparton Corporation’s planned merger with Ultra Electronics Holdings PLC was blocked by the U.S. Department of Defense. Sparton immediately announced that it was restarting its sales process as prior to this announced deal several other parties expressed interested in acquiring either the entire company, its Manufacturing & Design Services segment or its Defense & Security Systems segment.

Outlook

The main entity driving the environment remains CFIUS. With potential new measures being adopted by the U.S. to broaden the purview of CFIUS, we remain highly selective and disciplined in our analysis of any cross-border transaction. Our investment process includes a strong emphasis on buyer due diligence and focus on cross-border buyers that could run afoul of U.S. regulatory bodies. We believe prevailing deal spreads will increase but lag the past four interest rate hikes.

The market continues to differentiate between the riskier and the more straightforward deals. Deals with a greater amount of perceived risk are being assigned a significantly wider spread than transactions with fewer hurdles. This is in contrast to much of recent history when spreads were not necessarily compensating investors appropriately for the amount of risk taken.

Management's Discussion of Fund Performance (Unaudited) (Continued)

We think access to capital, slow global growth, and strong corporate balance sheets will drive incremental strategic Mergers & Acquisitions. We also think that historically low funding costs should provide a tailwind for financial buyers. On balance, we see a backdrop that remains supportive for continued deal activity.

We believe the Fund is well positioned with a strong focus on liquidity management and mitigating downside risk. We are optimistic at the tailwinds for deal activity and potential for wider spreads based on our outlook.

Management's Discussion of Fund Performance (Unaudited) (Continued)

Comparison of the Change in Value of a $10,000 Investment in the

Touchstone Merger Arbitrage Fund - Class A* and the

ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index

The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Note to Chart

ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged index of Treasury securities maturing in 90 days that assumes reinvestment of all income.

Management's Discussion of Fund Performance (Unaudited)

Touchstone Mid Cap Fund

Sub-Advised by The London Company

Investment Philosophy

The Touchstone Mid Cap Fund seeks long-term capital growth by investing primarily in common stocks of mid-cap U.S.-listed companies. The Fund utilizes a bottom-up security selection process that screens potential investments against a proprietary quantitative model for return on capital, earnings-to-enterprise value ratio, and free cash flow yield. Its goal is to purchase financially stable companies that are believed to consistently generate high returns on unleveraged operating capital, are run by shareholder-oriented managements and are trading at a discount to their respective intrinsic values.

Fund Performance

The Touchstone Mid Cap Fund (Class A shares) outperformed its benchmark, the Russell Midcap^® Index, for the 12-month period ended September 30, 2018. The Fund’s total return was 15.83 percent (calculated excluding the maximum sales charge) while the benchmark’s total return was 13.98 percent.

Market Environment

U.S. stocks posted positive results driven by strong economic news, solid corporate earnings, and the benefit of individual and corporate tax reductions that took effect at the beginning of 2018. The markets experienced greater volatility and the pace of inflation picked up, but there were few signs of significant pricing pressures. The U.S. Federal Reserve Board (Fed) increased the federal funds rate by 25 basis points four times during the period. Expectations for firming inflation and higher growth, along with balance sheet normalization from the Fed, contributed to higher longer-term rates.

While economic data was mostly positive, there were areas of potential concern, including housing and the impact of tariffs. Housing construction was limited by both supply and demand constraints. While housing starts and existing home sales were relatively stable, growth was limited. The lack of housing supply and rising input costs had a negative impact on the supply side while higher interest rates caused limited demand.

Portfolio Review

During the 12-month period, the Fund benefited from strong stock selection but sector allocation was a headwind for performance. The Information Technology and Health Care sectors were the best performing, however, the Fund’s underweight to both sectors detracted. Stock selection in the Information Technology sector was also a drag on performance. On the other hand, stock selection within the Industrials and Financials sectors was strong enough to offset the underperformance of those sectors and contributed to returns. Overall, the more traditional growth sectors outperformed the more defensive sectors during the period.

Among the individual stocks that contributed to Fund performance were Cintas Corp., Old Dominion Freight Line Inc., Copart Inc. (all three from the Industrials sector), Progressive Corp. (Financials sector) and Deckers Outdoor Corp. (Consumer Discretionary sector). Cintas, a provider of specialized services to businesses, moved higher due to a favorable environment of low unemployment and strong business confidence. The company’s acquisition of G&K Services Inc. exceeded expectations as Cintas has de-levered quickly to its pre-acquisition leverage targets. Old Dominion Freight Line, a national less-than-truckload motor carrier, continued to benefit from tight capacity throughout the industry and strong economic growth, as both volume and pricing improved across the industry. Further, the implementation of electronic logging devices and driver shortages have limited capacity growth, which we believe should be a positive for pricing in the future. Copart, a provider of online vehicle auction services, ended the period significantly higher despite a downward slide earlier in the year. Overall, its business was on solid footing and its operations in Europe showed good potential. We believe the drivers

Management's Discussion of Fund Performance (Unaudited) (Continued)

of Copart’s success remain intact and its operating leverage has improved with greater volume. Progressive, an insurance provider, outperformed as the company continued to post premium growth along with profitable underwriting results, and its combined expense ratio came in lower than expected. The company also posted improved top-line growth in both its auto and home insurance policies, and both of its digital and agency platforms increased market share. Deckers Outdoor, a footwear designer and distributor, increased meaningfully due to improving sales from its UGG brand and progress on margin initiatives. The improved sentiment has reversed the company’s low valuation and low expectations seen earlier in the year.

Among the individual stocks that detracted from performance were Whirlpool Corp. (Consumer Discretionary sector), Edgewell Personal Care Co. (Consumer Staples sector), NewMarket Corp. (Materials sector), Symantec Corp. (Information Technology sector) and CarMax Inc. (Consumer Discretionary sector). Whirlpool, an appliance manufacturer, posted a string of disappointing quarters due to a variety of factors, including rising raw material costs and continued difficulties in its EMEA (Europe, the Middle East and Africa) segment. Further, the company lowered its full-year guidance in July in conjunction with second-quarter earnings. In our view, the negative sentiment was somewhat overdone, as Whirlpool has strong cash flow, leading market share and exposure to the ongoing recovery in the U.S. housing market. Edgewell Personal Care, a consumer products company, moved notably lower as greater competition in the wet shave business negatively impacted sales and pricing. Earlier in the year, the company announced a system-wide restructuring effort to help better position the company for the future. We were skeptical of the plan and elected to exit the position. NewMarket, a petroleum additives company, fell during the period as higher raw material costs and lower pricing were headwinds to performance. We remain attracted to the company’s stable revenue outlook in the fuel additives and lubricants market, pricing power in a consolidated industry, and excellent history of capital allocation. Symantec, a cybersecurity company, declined dramatically during the summer amid accounting concerns. The company’s uncertainty around the issue raised doubts, and we exited the stock on the news. CarMax, a used-car retailer, moved lower as higher interest rates, negative auto sentiment due to trade tariffs, and new competition weighed on the stock. We remain attracted to the company’s business model and the market share opportunities that we believe lie ahead.

The Fund initiated new positions in STORE Capital Corp. (Real Estate sector), Sensata Technologies Holding PLC (Industrials sector), Axalta Coating Systems Ltd. (Materials sector), Entegris Inc. and Skyworks Solutions Inc. (both from the Information Technology sector). STORE Capital operates as an internally managed net-lease real estate investment trust (REIT). The company fills a niche in the middle market sale-leaseback space, providing lessees (without credit ratings) customer-centric solutions to free up capital. By originating the majority of investments directly, STORE Capital has been able to execute long-term lease rates at a significant spread to the market and, combined with annual lease escalations and high occupancy, provide high visibility. The company also benefits from a high-quality management team with many years of experience in the space. Sensata is an industrial technology company with long-cycle contracts, visible cash flows and high switching costs. It is also a world leader in mission-critical sensors and electrical protection. The business has high barriers to entry with original equipment manufacturers (OEMs) due to performance, importance and quality of product. The company also generates a significant amount of predictable free cash flow and its capital expenditures are minimal. Axalta Coating Systems is a worldwide coatings company that has strayed away from being a commoditized paint supplier and remained focused on becoming a specialized service business. There are high barriers to entry within this industry due to capital expenditures needed for plants, business relationships and high brand loyalty. The auto refinishing and OEM coating businesses are oligopolistic in nature with high switching costs, which has also attracted other long-term investors due to strong cash generation and high return on invested capital (ROIC). Entegris is a specialty chemical company with the majority of revenue coming from the semiconductor space. The company’s revenue is more recurring in nature and less cyclical than its OEM or capital equipment peers. Its products are considered leading edge and address highly specialized niches in the electronic materials space. The industry has high barriers to entry, few competitors and high switching costs. Entegris also benefits from a high margin, high ROIC business that is managed by a seasoned, transparent management team. Looking

Management's Discussion of Fund Performance (Unaudited) (Continued)

ahead, Entegris is expected to benefit from an improvement in its operating leverage as well as additional innovative products. Skyworks Solutions is a semiconductor company focused on the integrated solutions for radio frequency (RF) chips used in mobile phones. The company enjoys strong margins due to industry consolidation and a lack of competitors. The consolidation of mobile device manufacturers has not impacted profitability because Skyworks’ products are critical to functionality and are not commoditized.

The Fund sold its positions in Pulte Group Inc. (Consumer Discretionary sector), Voya Financial Inc. (Financials sector), Symantec Corp. (Information Technology sector) and Edgewell Personal Care Co. (Consumer Staples sector). The Fund trimmed its positions in Progressive Corp. (Financials sector), Cintas Corp. (Consumer Discretionary sector) and Old Dominion Freight Line Inc. (Industrials sector).

Outlook

The combination of solid economic growth, low inflation and relatively low interest rates usually creates a positive environment for stocks. We believe this holds true today, but there are risks. In our opinion, we believe potential risks include relatively high valuations for stocks using traditional metrics, rising inflation, the impact of increasing tariffs, or the Fed taking a more aggressive stance. We believe the risks and rewards are somewhat balanced as they relate to stocks overall, but we remain cautious and focused on limiting the downside.

Going forward, we believe the attractive candidates we are vetting today are a result of what the market is providing, and is consistent with our general outlook. Specifically, we believe downside risk can be mitigated by remaining focused on those companies with pricing power, copious cash generation and prudent capital allocation. We seek companies with strong return on capital and sustainable competitive advantages. We remain attracted to the capital metric because it speaks to the ability of the company to generate cash, which is ultimately what lowers risk. We also tend to be attracted to businesses that are overcapitalized and under-levered. We believe an under-levered company has more options available to it if the economy falls into a recession, including changing its capital structure to lower its overall cost of capital.

We believe the Fund is positioned well based on the strength of the companies we own and the overall valuation of the Fund’s portfolio. While the market is not considered cheap and we could certainly see a pullback and/or greater volatility in the near future, it is difficult to predict when we will experience the next downturn.

Management's Discussion of Fund Performance (Unaudited) (Continued)

Comparison of the Change in Value of a $10,000 Investment in the Touchstone

Mid Cap Fund - Class A* and the Russell Midcap^® Index

The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Notes to Chart

Russell Midcap^® Index measures the performance of the 800 smallest companies in the Russell 1000^® Index.

The Frank Russell Company (FRC) is the source and owner of the Index data contained or reflected in this material and all trademarks and copyrights related thereto. The material may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a Touchstone Investments presentation of the data, and FRC is not responsible for the formatting or configuration of this material or for any inaccuracy in the presentation thereof.

Management's Discussion of Fund Performance (Unaudited)

Touchstone Mid Cap Value Fund

Sub-Advised by LMCG Investments, LLC

Investment Philosophy

The Touchstone Mid Cap Value Fund seeks capital appreciation by investing primarily in common stocks of medium capitalization companies. The Fund seeks to identify companies believed to be selling at a discount to their intrinsic value.

Fund Performance

The Touchstone Mid Cap Value Fund (Class A shares) underperformed its benchmark, the Russell Midcap^® Value Index, for the 12-month period ended September 30, 2018. The Fund’s total return was 2.80 percent (calculated excluding the maximum sales charge) while the benchmark’s total return was 8.81 percent.

Market Environment

Within U.S. mid-capitalization stocks, growth stocks continued to outpace value stocks. Additionally, the market environment favored companies with lower leverage, higher foreign sales, lower price-to-earnings ratios, higher yield and higher sales growth. Within the benchmark, the top performing sectors were Communication Services, Energy and Information Technology, while the Real Estate, Consumer Staples and Consumer Discretionary sectors detracted the most.

Portfolio Review

During the 12-month period, the Fund’s strongest contributors were the Industrials, Financials and Real Estate sectors. Primary detractors were the Energy, Consumer Discretionary and Health Care sectors. Stock selection was the primary driver of underperformance for the period. The market environment negatively impacted the Fund as momentum characteristics and higher valuations were headwinds.

The Energy sector detracted, led by holdings EQT Corp. and Cimarex Energy Co., as stocks related to gas underperformed during the period. EQT is a petroleum and natural gas exploration and pipeline transport company. EQT was negatively impacted by delays in the spin-off of its master limited partnership (MLP) assets and Mountain Valley natural gas pipeline buildout, along with a slowdown in production growth. Cimarex is an exploration and production company with operations in the Permian Basin. Recently, companies with exposure to the Permian Basin, including Cimarex, have struggled due to concerns around congestion in the area. We believe the overcrowding will be a short-term problem and should subside once additional pipelines are developed.

Within the Consumer Discretionary sector, underperformance was driven by LKQ Corp., BorgWarner Inc. and The Michael Companies Inc. LKQ is a provider of alternative and specialty parts to repair and accessorize vehicles. The stock sold off following reports of a lackluster margin, as the market punished the company on the perception that management was more interested in growth and acquisitions than operational excellence. We believe that the margin deficit will be short term and that company management understood the importance of margin and operations after the market’s reactions. BorgWarner, a components supplier, moved lower as investors grew concerned about global trade wars and weakness in foreign exchange rates. Conversely, we added to the Fund’s position in Michaels Cos. Inc., an arts and crafts retailer, based on the stock’s recent underperformance, as we were attracted to the quality and growth of the company and its lower valuation.

Underperformance in the Health Care sector was mainly concentrated in Fund holdings Patterson Companies Inc. and Dentsply Sirona Inc. Patterson is a provider of services and technologies to the dental and animal health markets. The company reduced guidance while in the final stages of significant improvements to its operations and distribution. We believe that once these transitory issues have been resolved, Patterson will

Management's Discussion of Fund Performance (Unaudited) (Continued)

emerge with cutting-edge operations and a more efficient and productive sales force. Dentsply Sirona, a dental equipment and consumables producer, traded lower on reduced forward guidance, management turnover, and management’s announcement that it is working on developing a comprehensive restructuring program. However, we continue to be attracted to the company’s long-term outlook based on expected revenue growth, additional cost reductions, a strong competitive position and current valuation relative to its history.

The Fund’s overweight to the Information Technology sector and positive stock selection in the software industry helped offset underperformance from MACOM Technology Solutions Holdings Inc. and Diebold Nixdorf Inc. MACOM is a developer and producer of radio, microwave and millimeter-wave semiconductor devices and components. The company reported results in line with guidance but slightly underperformed its semiconductor peers. We believe the demand trends should continue to modulate until China’s inventory correction is complete because management continued to release positive forward guidance and demand commentary. We added to the position based on the stock’s recent underperformance. Diebold Nixdorf is a financial and retail technology company that specializes in the production of ATMs. We exited the Fund’s position as balance sheet concerns increased following a reduction in the company’s earnings guidance.

The Fund’s holdings within the Industrials sector contributed to performance, including KAR Auction Services Inc. and Clean Harbors Inc. KAR Auction Services continued to exhibit solid execution in all three segments of its business: used car auctions, auto salvage and financing to used car dealers. Clean Harbors is a provider of environmental, energy and industrial services. The company experienced a strong rebound in demand for its industrial services and benefited from operational improvements in its oil re-refining business.

The Financials sector contributed to Fund returns during the period, as stock selection in banks and capital markets was particularly strong, including SVB Financial Group, TCF Financial Corp. and E*TRADE Financial Corp. SVB Financial Group moved higher after a strong first quarter report, and we trimmed the Fund’s position on the stock’s strength. TCF Financial and E*TRADE also contributed to performance and we exited both Fund positions in favor of new opportunities. Further, the Fund’s underweight to real estate investment trusts (REITs) also benefited the Fund during the period.

On a sector basis, the Fund maintained overweight positions to the Materials and Consumer Staples sectors, and underweight positions to the Real Estate, Communication Services and Financials sectors.

Outlook

Looking ahead, our greatest concern is that the market environment will continue to reward growth and visibility, irrespective of valuation and quality. However, we will not deviate from our process of buying high-quality companies that are temporarily out of favor, and we believe that buying stocks, irrespective of valuation, is a risky strategy. We will continue to seek attractively valued investment opportunities with favorable risk-reward profiles.

The Fund utilizes a classic value-driven philosophy based on the belief that leading businesses selling at a discount to fair value have the potential to generate excess returns. The Fund’s strategy focuses on stocks that are temporarily out of favor in the market, specifically companies with higher returns on capital, free cash flow and strong balance sheets. Emphasis is placed on those companies having the cash flow characteristics as well as the balance sheet strength necessary to buffer the company from any prolonged weakness. While the companies we select often dominate a particular industry niche and generally have significant barriers to entry, we believe they are able to perpetuate a higher return on capital over time. The Fund’s overall investment process utilizes fundamental bottom-up security selection, while we believe risk-control measures ensure security and sector diversification.

Management's Discussion of Fund Performance (Unaudited) (Continued)

Comparison of the Change in Value of a $10,000 Investment in the
Touchstone Mid Cap Value Fund - Class A^* and the Russell Midcap^® Value Index

The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Notes to Chart

Russell Midcap^® Value Index measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values.

The Frank Russell Company (FRC) is the source and owner of the data contained or reflected in this material and all trademarks and copyrights related thereto. The material may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a Touchstone Investments presentation of the data, and FRC is not responsible for the formatting or configuration of this material or for any inaccuracy in the presentation thereof.

Management's Discussion of Fund Performance (Unaudited)

Touchstone Premium Yield Equity Fund

Sub-Advised by Miller/Howard Investments, Inc.

Investment Philosophy

The Touchstone Premium Yield Equity Fund seeks long-term growth of capital and high current income by focusing on dividend-paying equity securities of U.S. and foreign companies believed to possess attractive long-term return potential primarily due to lower than average valuations and improving business outlooks.

Fund Performance

The Touchstone Premium Yield Equity Fund (Class A shares) underperformed the Russell 3000^® Value Index and the Dow Jones U.S. Select Dividend Index for the 12-month period ended September 30, 2018. The Fund’s total return was 6.41 percent (calculated excluding the maximum sales charge) while the returns of its benchmarks were 9.46 percent and 10.59 percent, respectively.

Market Environment

The U.S. economy continued to grow, as gross domestic product (GDP) reported real gains during all four quarters of the period and ended the fiscal year higher than the previous fiscal year. The U.S. unemployment rate steadily improved and the labor force participation rate was essentially the same for the 12-month period. The spread between the unemployment rate and those unemployed, including marginally attached and part-time workers, continued to narrow which helped push wage growth higher. However, despite the growth in wages, consumer sentiment and inflation remained subdued. Capacity utilization was stubbornly low and uncertainty surrounding threats of a trade war also continued to be a concern. The U.S. Federal Reserve Board (Fed) raised the federal funds rate by 25 basis points in September, after previously raising it by the same amount in March and June, as well as in December 2017.

During the 12-month period, stocks continued to grow into their valuations, as evidenced by companies that beat earnings expectations and increased their earnings per share (EPS). While some of the strength was attributed to lower tax rates, much of it was also a reflection of strong business trends. Companies within the Information Technology sector, many of which paid high taxes and held significant cash offshore, were clear beneficiaries due to reduced rates on profits and repatriation. The Energy sector also performed well, as stock valuations were reasonable relative to the broader market. The sector also benefited from firmer crude oil prices and improving investor sentiment. At the end of June, OPEC agreed to raise output but not enough to fully meet projected demand growth and potential geopolitical supply disruptions.

During the period, the historically traditional dividend sectors lagged the Russell 3000^® Value Index, including Consumer Staples, Real Estate and Utilities.

Portfolio Review

During the period, the Fund’s underweight position to the Health Care sector detracted from performance. The Fund maintained a significant overweight to the Information Technology sector which contributed to returns, however, security selection within the sector posted mixed results.

Among the individual stocks that contributed to performance were Sysco Corp. (Consumer Staples sector), Pfizer Inc. (Health Care sector) and Target Corp. (Consumer Discretionary sector). Sysco Corp., a food distributor, operates in a congenial competitive environment, as one of two end-to-end restaurant suppliers with a fully national footprint. The stock outperformed after the company reported strong performance, along with higher than expected EPS and revenues. Investors also reacted favorably to management’s guidance for its three-year plan. The stock was sold as it became overvalued compared to its peers. Pfizer, a pharmaceutical company, reported better than expected EPS and revenues. The company also guided higher its EPS for 2018 and announced

Management's Discussion of Fund Performance (Unaudited) (Continued)

encouraging results for several of its pipeline drugs. Target, a general merchandise retailer, reported better than expected EPS and revenues. Same-store sales also exceeded expectations, as in-store traffic growth was stronger than it had been in a decade, and management raised its fiscal-year guidance for 2019. Target also had a strong holiday season in 2017, which contributed to its outperformance. The Fund trimmed its position in Target due to the stock’s valuation.

Among the individual stocks that detracted from performance were Enbridge Inc., Williams Cos. Inc. (both from the Energy sector) and Pitney Bowes Inc. (Information Technology sector). Enbridge, a Canada-based midstream pipeline company, declined following a negative preliminary judicial decision on one of its major pipeline projects. Ongoing legal issues and protests weighed on the stock’s performance, thus making this holding too controversial for the Fund’s conservative strategy. Therefore we exited the Fund’s position. Williams Cos., a midstream energy company, declined following the Federal Energy Regulatory Commission’s (FERC’s) ruling on the income tax allowance at master limited partnerships (MLPs). In August 2018, Williams Cos. acquired Williams Partners, an MLP, to simplify its corporate structure. Williams Partners was believed to be one of the partnerships most exposed to FERC-regulated pipes, which negatively impacted the stock. Pitney Bowes, a business solutions and global technology company, reported its second consecutive quarter of disappointing earnings and guidance at the end of 2017, which indicated the company’s turnaround was taking longer than anticipated. We believed that more capital-intensive solutions seem likely and, while warranted, could jeopardize the company’s dividend. Therefore we exited the Fund’s position.

The following stocks were added to the Fund during the 12-month period. Citigroup Inc. (Financials sector) is an investment bank and financial services company. Citigroup passed this year’s bank stress test and significantly increased its dividend. We believe the company has solid loan and deposit growth, ample capital, improved cost position and stable credit metrics. Broadcom Inc. (Information Technology sector) is an analog and digital semiconductor technology company. Broadcom has benefited from outsized sales and cash flow growth prospects, a solid balance sheet and coverage ratios, low valuation, and management’s commitment to its dividend. Carnival Corp. (Consumer Discretionary sector) is a large cruise ship company spanning multiple brands. Carnival increased its dividend over the past year. Earnings are also expected to grow. Carnival has plans for operational improvements by working to share best practices across its brands and combining operations, where appropriate. Further, we believe Carnival should benefit from lower unemployment and improving consumer finances. Six Flags Entertainment Corp. (Consumer Discretionary sector) is a regional theme park operator. The company has reinvented itself with a more consistent business model and a stronger balance sheet. We believe the key to its dividend has been the company’s growing push toward selling annual passes, which recently accounted for two-thirds of ticket revenues, thereby insulating Six Flags from consequences of weather and summer gasoline prices. We believe Six Flags should benefit from lower unemployment and improving consumer finances.

International Paper Co. (Materials sector) a U.S. packaging company, continued to benefit from growth in ecommerce and the economy in general, and it has driven solid demand for container board. The industry in North America has consolidated, positioning International Paper to gain from improved pricing. The Fund exited the stock last year following investor concerns surrounding a large acquisition, and reestablished the position after the company announced it would not pursue the deal. Nokia Oyj (Information Technology sector) has a strong market position in providing both fixed and wireless 5G equipment to service providers. Nokia has no net debt and should be an advantaged vendor in Western markets where privacy concerns are heightened. We also believe there are savings that Nokia can further achieve from its acquisition of Alcatel-Lucent SA and benefit from its growing licensing business. Occidental Petroleum Corp. (Energy sector) is a global integrated energy company. Oil production significantly increased in the Permian Basin, and Occidental owns some of the most attractive acreage in the area. The Permian Basin has proven so prolific that industry production has overwhelmed pipeline capacity. Occidental has further benefited from owning both wells and a pipeline system. Umpqua Holdings Corp. (Financials sector) is a midsized regional bank. The company has benefited from

Management's Discussion of Fund Performance (Unaudited) (Continued)

healthy economic growth in the Pacific Northwest. Like many other banks, Umpqua is streamlining its branch network to lower costs in the digital age. The AES Corp. (Utilities sector) is an electric power distribution company. The stock was added due to its attractive valuation, visible growth profile and free cash flow growth. The company also has an improving balance sheet, and an increasing focus on renewables and energy storage. Huntington Bancshares Inc. (Financials sector) is a regional bank with a leading market share across Ohio and Michigan. We believe that Huntington should benefit from rising interest rates, lower regulation and lower taxes. Further, its upper Midwest footprint should benefit from increased capital expenditure, while lower tax rates should be additive to the company’s EPS. Aegon NV (Financials sector) is a provider of life insurance and retirement products. The company’s U.S. unit, Transamerica, generates over half of Aegon’s net income and is expected to benefit from the reduction in U.S. corporate tax rates. We believe Aegon should also benefit from rising long-term interest rates. KLA-Tencor Corp. (Information Technology sector) is a leading producer of process control equipment for semiconductor manufacturing. Demand for equipment is robust, as manufacturers gear up to produce an increasingly wide range of semiconductors, including those for artificial intelligence, Internet of Things (IoT), cloud computing and autonomous vehicles, as well as those in established markets such as personal computers and mobile phones. Fidelity National Financial Inc. (Financials sector) is one of the largest providers of title insurance. Title insurance is a consolidated industry with stable pricing, and Fidelity has a cash-rich balance sheet and low valuation. CenterPoint Energy Inc. (Utilities sector) is an electric and natural gas utility. The company has a visible backlog of high return projects. We believe it should also benefit from economic growth in the Houston, Texas area.

HSBC Holdings PLC (Financials sector) is a global bank with operations in over 60 countries and a dominant presence in Asia. While regulatory reform in the U.S. has been a tailwind for banks, HSBC has benefited from its offshore presence and the acceleration in global economic activity. Sabre Corp. (Information Technology sector) is a travel software company. We believe the company will benefit as its multi-year capital program quickly winds down, thus freeing up cash. Airline traffic is set to increase in the coming years and, as one of only three software platforms behind all global airline bookings, we believe Sabre should benefit from favorable industry dynamics. Total SA (Energy sector) is a French multinational integrated oil and gas company. Total has global diversification, significant connection to the global liquified natural gas trade, cost-advantaged petrochemical facilities, and long-lived, high cash-flowing production fields. Texas Instruments Inc. (Information Technology sector) is a semiconductor design and manufacturing company. We believe the company will benefit from tax reform and key technology drivers, including Big Data, the IoT and machine learning.

The following stocks were sold from the Fund during the 12-month period for a variety of reasons including valuation, declining fundamentals, lower earnings guidance and concerns over dividends: Vodafone Group PLC (Communication Services Sector); United Parcel Service Inc. (Industrials sector); Bank of Montreal Canada (Financials sector); Merck & Co. Inc. (Health Care sector); AbbVie Inc.’s (Health Care sector); Hanesbrands Inc. (Consumer Discretionary sector); Cracker Barrel Old Country Store Inc. (Consumer Discretionary sector); Welltower Inc. (Real Estate sector); Ventas Inc. (Real Estate sector); International Business Machines Corp. (Information Technology sector); Tupperware Brands Corp. (Consumer Discretionary sector); Covanta Holding Corp. (Industrials sector); Hospitality Properties Trust (Real Estate sector); Weyerhaeuser Co. (Real Estate sector); PacWest Bancorp (Financials sector); National Grid PLC (Utilities sector); AT&T Inc. (Communication Services sector); L Brands Inc. (Consumer Discretionary sector); Microchip Technology Inc. (Information Technology sector); Abbott Laboratories (Health Care sector); GlaxoSmithKline PLC (Health Care sector); Johnson & Johnson (Health Care sector); Pitney Bowes (Industrials sector); and Enbridge (Energy sector).

Outlook

Looking ahead, we believe mature technology companies offer excellent prospects for dividend growth. Fluctuating demand for personal computers and mobile phones formerly made this a highly cyclical sector. The industry

Management's Discussion of Fund Performance (Unaudited) (Continued)

has now diversified dramatically. Semiconductors and software are literally everywhere, from factory floors to autos to video doorbells at home.

In our opinion, banks and insurance companies also have the potential for dividend growth. Lower interest rates have depressed what financial firms can earn on loans and other assets. Given recent commentary from the Fed, short-term interest rates are likely to continue rising. Additionally, the tightening labor market, faster economic growth and some hints of inflation point to rising long-term rates. We believe higher interest rates should boost earnings for financial companies.

Going forward, we believe the Fund is positioned well. Earnings and dividend growth are robust, and while we believe Fund holdings will participate, we are still concerned about risk. We continue to marginally favor high dividend growth over high dividend yield, both because consistent high-yielding stocks have become more difficult to find and because we believe dividend growth should help counter the effect of rising rates. As we look out over the next decade, we see an increased use of semiconductors in all aspects of life. We believe the Financials sector will continue to expand and innovate alongside a growing economy. Naturally, some companies are better suited than others to deliver growing dividends. We will continue to seek attractive opportunities.

Management's Discussion of Fund Performance (Unaudited) (Continued)

Comparison of the Change in Value of a $10,000 Investment in the

Touchstone Premium Yield Equity Fund - Class A*, the Russell 3000^® Value Index and the

Dow Jones U.S. Select Dividend Index

The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Notes to Chart

Russell 3000^® Value Index measures the performance of those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values.

Dow Jones U.S. Select Dividend Index measures 100 leading U.S. dividend-paying companies.

Frank Russell Company (FRC) is the source and owner of the Russell 3000^® Value Index data contained or reflected in this material and all trademarks and copyrights related thereto. The material may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a Touchstone Investments presentation of the data, and FRC is not responsible for the formatting or configuration of this material or for any inaccuracy in the presentation thereof.

Management's Discussion of Fund Performance (Unaudited)

Touchstone Sands Capital Select Growth Fund

Sub-Advised by Sands Capital Management, LLC

Investment Philosophy

The Touchstone Sands Capital Select Growth Fund seeks long-term capital appreciation by primarily invests in common stocks of large capitalization U.S. companies that are believed to have above-average potential for revenue or earnings growth. The Fund typically invests in 25 to 35 companies. Sands Capital generally seeks stocks with sustainable above-average earnings growth and capital appreciation potential. In addition, Sands Capital looks for companies that have a significant competitive advantage, a leadership position or proprietary niche, a clear mission in an understandable business, financial strength and are valued rationally in relation to comparable companies, the market and the business prospects for that particular company.

Fund Performance

The Touchstone Sands Capital Select Growth Fund (Class A shares) outperformed its benchmark the Russell 1000^® Growth Index for the 12-month period ended September 30, 2018. The Fund’s total return was 33.03 percent (calculated excluding the maximum sales charge) while the total return of the benchmark was 26.30 percent.

Market Environment

Record U.S. profit growth, accelerating economic growth, increasing business confidence, and record low unemployment have combined to propel the Russell 1000^® Growth Index’s rise over the latest fiscal year. Strength was broad based as all sectors contributed to the benchmark’s return. Strength particularly came from the Information Technology and Consumer Discretionary sectors, as software-as-a-service and internet-based businesses reported strong corporate profit growth and strengthening business fundamentals. Some question the sustainability of the growth environment and its support for elevated valuations.

Portfolio Review

Among the top contributors for the 12-month period were Netflix Inc. (Communications Services sector), Salesforce.com Inc. (Information Technology sector), Amazon.com Inc. (Consumer Discretionary sector), ServiceNow Inc. (Information Technology sector) and Adobe Systems Inc. (Information Technology sector). Netflix continued to demonstrate the strength of its customer-content flywheel—the virtuous cycle created as more subscribers increase subscription revenue, which funds content creation, and in turn attracts more subscribers. This has led to remarkable scale, with Netflix spending more on content development than almost any non-sport entertainment buyer in the world. We believe that Netflix’s customer-content flywheel will benefit from more than $80 billion in content investment over the next five years, which we expect will further extend the company’s competitive moat, and will continue to generate strong subscriber growth. With this level of investment, combined with an affordable price point, we believe that Netflix could become a must-have entertainment utility for many of the world’s broadband households.

Among the top detractors for the period were Incyte Corp. and Regeneron Pharmaceuticals Inc. (both from the Health Care sector), Floor & Décor Holdings Inc. and Under Armour Inc. (both from the Consumer Discretionary sector), and Lending Club Corp. (Financials sector). We sold Incyte after the company announced that epacadostat failed to produce the required results in its Phase 3 trials for treatment of melanoma, one of the drugs in development. In addition to this pipeline setback, Incyte had a suboptimal U.S. regulatory decision when its rheumatoid arthritis drug baricitinib was approved, but with restrictions. These negative outcomes followed the 2016 failure of Jakafi to meet the FDA Phase 3 trial requirements in solid tumors. Despite these setbacks, we continue to view Incyte as one of the leading global biotech businesses with a growing oncology franchise and a broad pipeline of molecules. We continue to have conviction in the business’s longer-term

Management's Discussion of Fund Performance (Unaudited) (Continued)

prospects, but its potential over our investment horizon has diminished. Given a highly concentrated portfolio, we concluded that Incyte’s fit with our criteria weakened relative to our opportunity set, so we exited the Fund’s position.

During the period, we purchased Loxo Oncology Inc. and Align Technology Inc. (both from the Health Care sector), Workday Inc. (Information Technology sector) Floor & Décor Holdings Inc. (Consumer Discretionary sector), and Sarepta Therapeutics Inc. (Health Care sector) for the Fund’s portfolio. Over the same period, we sold Under Armour Inc. and Snap Inc. (both from the Consumer Discretionary sector), Lending Club Inc. (Financials sector), Chipotle Mexican Grill Inc. (Consumer Discretionary sector), Biogen Inc. (Health Care sector), Incyte Inc. (Health Care sector), Baidu Inc. (Communications Services sector), and Starbucks Corp. (Consumer Discretionary sector).

Loxo Oncology (Loxo) Inc. is an emerging leader in genetically targeted cancer therapy development. We believe Loxo has a compelling overall R&D strategy, focused on developing highly selective therapies for genetically defined cancer subgroups. As opposed to broader cancer treatments, which address greater disease heterogeneity and face more competition, targeted therapies often provide dramatic patient benefits with higher probabilities of clinical success. The highlight of the company’s late-stage pipeline is the drug larotrectinib, which treats cancer patients with tropomyosin receptor kinase (TRK) mutations. Loxo partnered with Bayer to globally commercialize and develop larotrectinib along with a follow-on TRK therapy. In our view, the partnership validates the TRK opportunity, introduces an existing experienced oncology sales force, and provides Loxo the funds to invest in its pipeline. The Bayer partnership should also enable Loxo to shift focus toward its earlier-stage development efforts beyond TRK mutations, which we believe the market underappreciates, including a drug for cancers driven by REarranged during Transfection (RET) mutations. Over the long term, we expect above-average earnings growth as Loxo commercializes drugs and continues to execute on its focused R&D strategy.

Align Technology Inc. is the market leader for clear aligners, which are alternatives to traditional dental braces. Through its Invisalign System, Align is the clear aligner pioneer and global leader, with over 80 percent market share. Currently, traditional braces are used to treat over 90 percent of the 10 million annual cases of malocclusion, or misaligned teeth, worldwide. Over the next few decades, we expect clear aligners to become the treatment standard globally, as they are aesthetically superior, less painful, more hygienic, and faster than traditional braces, while being less time-consuming for clinicians. We also expect the overall malocclusion treatment market to expand, as more adults that didn’t previously want visible braces adopt invisible clear aligners, and as Align improves access through international expansion and direct-to-consumer (DTC) channels. In addition to expanding the market, DTC should allow Align to control more of the economics, driving higher margins over time. Beyond Align’s leadership in the secular shift to aligners, we expect the business to benefit from a number of competitive advantages. These include widespread brand recognition, the most comprehensive product offerings, patent protection, and the largest clear aligner data repository, which helps direct future innovation.

Workday Inc. is a leading provider of enterprise software-as-a-service (SaaS) applications for human capital management, financial management systems, and analytics. Over the next decade, we expect enterprises to adopt SaaS-based enterprise resource planning solutions. We see Workday as both a driver and key beneficiary of this trend. The cloud-based nature of the company’s products allows for the delivery of more frequent updates with greater ease, less down time, and a lower total cost of ownership relative to traditional on-premise software. Workday’s leadership in human capital management is already well-established, but its growth is still in the early innings, in our view. We think that combining this foothold with advanced analytics capabilities should enable Workday to succeed in financial management, broaden its addressable opportunity, extend the duration of the company’s growth, and position Workday as a key strategic vendor to its customers.

Floor & Decor Holdings Inc. is an emerging leader in the hard surface flooring industry. We believe the company is disrupting the space by offering best-in-class product assortment, the deepest in-stock inventory, and lower

Management's Discussion of Fund Performance (Unaudited) (Continued)

pricing—all of which are key factors for customers. The average square feet per store is more than triple the size of specialty tile flooring companies, and nearly 15 times larger than the space dedicated to hard surface flooring at large home improvement centers. Additionally, the number of in-stock SKUs per store is unmatched, with more than four times the inventory of the next highest competitor. On pricing, our research indicates that Floor & Decor’s products are approximately 10 to 15 percent and 30 to 40 percent cheaper than those of large home improvement chains and mom-and-pop stores, respectively. With a target of more than tripling its store count to 300 over the next few years, the company is still in the early phase of its growth. Impressively, new stores have demonstrated compelling economics, generating 18 to 20 percent cash-on-cash returns in their first year of operations. In our view, store growth and store economics should be supported by the growth of the hard surface flooring market, which we estimate at $18 billion and growing two to three times faster than carpet. Additionally, we believe the hard surface flooring market is largely protected from pure online competition, given that customers generally prefer to see and feel products before making large purchases, and the heavy weight of the products makes shipping expensive. Moreover, favorable long-term trends—such as rising home values, aging housing stock, and millennials entering the housing market—serve as possible tailwinds to the company’s long-term growth. We believe the combination of its value proposition, significant store growth opportunity, new store economics, and favorable housing trends, positions Floor & Decor to deliver above-average growth over the long term.

Sarepta Therapeutics Inc. is a U.S. biotechnology company that develops therapies for rare neuromuscular diseases, with a particular focus on Duchenne muscular dystrophy (DMD). DMD is a deadly genetic disorder characterized by progressive and debilitating muscular weakness in boys, eventually leading to early adulthood death. Existing therapies only provide a marginal benefit in certain groups of patients, and we believe the huge amount of unmet need supports a multi-billion dollar addressable market for more effective treatments. Sarepta has a variety of DMD therapies in development, and the most compelling of these assets, in our view, is its lead microdystrophin gene therapy. While the company already offers an approved drug for a small subset of DMD patients, we believe this newer gene-therapy approach will offer dramatically better efficacy and address significantly more patients. This view is based on proof-of-concept data that we find highly compelling. Beyond this single microdystrophin development program, Sarepta’s pipeline also includes a number of other drugs, with additional opportunities in DMD from RNA-targeting (or “exon-skipping”) treatments—supported by close to 10 years of proprietary exon-skipping research—and earlier-stage gene-therapy programs for other rare genetic diseases beyond DMD. The breadth of Sarepta’s gene-therapy development efforts and its encouraging progress in this area thus far have been enabled by management’s highly proactive and prolific partnering strategy, which we believe has attracted some of the top scientific minds from this emerging field. We suspect that many more diseases will be successfully addressed by gene therapy longer term, and believe that Sarepta is well positioned to benefit through its early innovation and large team of scientific leaders.

We sold Under Armour Inc. as both industry and company-specific factors negatively affected the share price over the past 12 months. We believe Under Armour will fix many of its issues over time, and will retain its status as a leading sports apparel brand. However, we believe execution on the company’s strategic initiatives could be challenging, and may take longer to materialize than we initially thought. Given these execution challenges, we decided it was prudent to exit.

We sold Snap Inc. after losing conviction in its ability to meaningfully grow its user base, which was the key swing factor for our investment case. A pending user application redesign, along with stronger competition from the Facebook ecosystem, present significant challenges to user growth in our opinion, and we are not confident in Snap’s ability to successfully navigate these hurdles. We initially expected the intimate nature of Snap’s application to be a key differentiator, but we underestimated the effectiveness of Facebook’s Instagram Stories at copying some of Snap’s features and driving user engagement, thereby limiting Snap’s ability to expand beyond its core young millennial user base. Our small weight in Snap reflected this competitive risk from Facebook,

Management's Discussion of Fund Performance (Unaudited) (Continued)

as well as the operational risks associated with a young company early in its growth cycle. We continue to view Snap as a strategic social asset with a highly engaged user base—and will continue to monitor the company’s progress—but we no longer believe Snap meets our criteria as a leading growth business.

While we believe Lending Club Inc. is still a decent business with a novel method of distributing credit, it is no longer a strong fit with our six investment criteria. Over the past several quarters, the company has worked to heal itself from the control violations in May of 2016. However, loan growth recovery is slower than we expected, and we do not foresee revenue and earnings returning to the hyper-growth rates that we anticipated. Additionally, management turnover lowered our conviction in the company’s leadership. It appears to us that the new management team is less willing to be innovative, and therefore will be unable to accelerate growth in a meaningful way.

We sold Chipotle Mexican Grill Inc., which no longer fits our six investment criteria. While new initiatives may improve business results in the short term, we no longer view Chipotle as a leading growth franchise with a large competitive moat. Specifically, we lost conviction in its competitive advantage and industry leadership, and believe its current valuation is too high relative to its business risks and dwindling competitive advantages. Chipotle’s brand power diminished following its food safety issues over the past few years, and we believe that there is a high likelihood of another brand-tarnishing event. The company’s food manufacturing line allows Chipotle to serve fresh food on a large scale, but the company has struggled to regain customer affinity following brand-damaging incidents, rendering this manufacturing advantage much less relevant. Additionally, Chipotle’s leadership is limited to a very specific category of restaurants, and we do not expect meaningful share gains in the broader restaurant industry. We had originally expected the company to be successful with multiple formats over time, but those alternative formats are no longer likely to be material over our investment horizon. Finally, we believe the company’s current valuation, at a significant premium to other restaurants, does not reflect its business risks and weakened potential.

While we continue to view Biogen Inc. as a leading innovator in neurology drug innovation, the business has become more mature relative to other businesses in our opportunity set. We still believe the company’s developments in Alzheimer’s disease and other areas of neurology should add value over time. However, its large and slow-growing multiple sclerosis franchise dilutes the impact of future pipeline success, in our opinion. With an unconstrained mandate to own what we think are the 20 to 30 best growth businesses in the U.S., we believe our shareholders are better served by our investing in businesses that we view as stronger fits with our investment criteria.

We sold Baidu Inc. following the resignation announcement of the company’s chief operating officer, Qi Lu. We believe Baidu is losing the key employee who orchestrated the positive strategy, product, and execution changes over the past 18 months, so its longer-term trajectory is now more uncertain, especially in the burgeoning field of artificial intelligence. We expect the company to deliver solid results in the near term, building on the momentum from Qi’s improvements, and given that internet search is a highly defensible business model. Longer term, however, we are concerned that artificial intelligence initiatives—such as autonomous vehicles and voice—will fall short due to lack of talent. Additionally, the company may need to implement a broad-based wage increase to mitigate employee turnover, which would pressure margins. Given the uncertain longer-term prospects, and the high bar for ADR ownership in the Fund’s portfolio, we decided to sell the business.

Our thesis for owning Starbucks was based on continued U.S. same-store-sales growth (SSSG), driven by digital marketing initiatives, and a long store-growth runway in China, where the opportunity is largely untapped. We believe the company has made significant progress in both countries, but is currently facing challenges that may hinder its ability to generate industry-leading growth. In the U.S., the company’s sluggish afternoon sales have weighed on SSSG, and management reduced store-growth guidance. In China, heavy competitor discounting pressured comparable sales. We believe this promotional environment is unsustainable, and that Starbucks should continue to benefit from rising coffee consumption in China over the longer term. Overall,

Management's Discussion of Fund Performance (Unaudited) (Continued)

we continue to view Starbucks as a leading global business. However, given our highly concentrated approach to invest in what we believe are the best businesses positioned for long-term, above-average growth, we decided it was prudent to sell Starbucks and reinvest into younger growth businesses.

The rationale behind the sale of Incyte is described at the beginning of the Portfolio Review section.

Outlook

We view secular trends, innovation, and company-specific competitive advantages as key to driving growth through a variety of economic environments. For a business to possess the above-average earnings growth potential we require, it is often a key innovator or vital facilitator within an attractive industry that is benefiting from positive secular change. Secular trends are distinct from short-term economic factors as they tend to persist through market cycles and can provide powerful structural tailwinds that enhance the sustainability of a business’s growth for many years. We believe our long-term investment horizon allows us to capture the benefit of these characteristics and realize the ultimate earnings power of a company, while weathering volatility over shorter periods. Furthermore, our approach—active, concentrated, and benchmark-agnostic—enables us to have outsized exposure to companies within this sphere that we believe are the best fits with our six investment criteria.

We believe the majority of businesses in the Fund’s portfolio benefit from one or more secular trends. However, we have identified four broad trends that together comprise a majority of the Fund’s portfolio:

Retail Revolution: E-Commerce

E-Commerce is the fastest growing segment of retail sales, but only accounts for about seven percent of the total worldwide retail market. As a proportion of total retail sales, ecommerce is expected to nearly double by 2019. Brands now have the ability to directly interact with consumers through novel mediums, such as social media and lifestyle apps, and become embedded in their daily routines. Tools such as Amazon Prime and Visa Checkout reduce the friction associated with online payment. Portfolio beneficiaries include Alibaba Group Holding Ltd., Amazon.com Inc., Booking Holdings Inc., and Visa Inc..

Union of Healthcare and Technology

Major areas of unmet need continue to exist in the treatment of disease. However, improved understanding of disease biology and new approaches to treatment are enabling more productive drug development. Additionally, we expect genomic sequencing and health care information systems to facilitate precision medicine, enabling physicians to provide more targeted care. We are also witnessing the rise of minimally invasive surgical technologies, which have quality of life advantages for the patient and efficiency benefits for providers, leading them to increasingly become the standard of care. Portfolio beneficiaries include Alexion Pharmaceuticals Inc., BioMarin Pharmaceutical Inc., Edwards Lifesciences Corp., Illumina Inc., Regeneron Pharmaceuticals Inc., and Sarepta Therapeutics.

Software-as-a-Service (SaaS)

In our view, information technology spending is shifting toward innovations that make enterprises more agile and efficient. Cloud-based software is a key facilitator of this shift. Fast deployment, scalability, easy and frequent updates, and lower total cost of ownership create a compelling customer value proposition. SaaS businesses tend to benefit from revenue visibility, “sticky” clientele, margin leverage opportunities, and low customer acquisition costs. Portfolio beneficiaries include Adobe Systems Inc., Amazon.com Inc., Palo Alto Networks Inc., Salesforce.com Inc., ServiceNow Inc., and Splunk Inc.

Data-Driven Decision Making

We believe companies with large, proprietary pools of consumer data and tools that use this data to create unique content have sizable monetization opportunities. Advertising is already well on its way toward transformation, as access to consumer data is enabling companies to create targeted, more effective ads. At the micro level,

Management's Discussion of Fund Performance (Unaudited) (Continued)

companies are beginning to use predictive analytics to generate insights from their own pools of data. Portfolio beneficiaries include Alphabet Inc., Facebook Inc., Netflix Inc., Splunk Inc., and Workday Inc..

In a volatile market, stock prices tend to move together as a group, which can result in a disconnection between valuations and long-term growth prospects. When volatility is driven by fear, investors’ time horizons tend to shorten, and fast-growing, disruptive companies that are investing in their growth, and therefore unlikely to realize their full potential for years (i.e., the kinds of businesses we seek to own), often suffer from outsized pressure. During these periods, some investors appear inclined to trade a potentially larger long-term total return for the near-term surety of stable cash flows, dividends, and/or lower, more secure growth. Drug pipelines, potential new products, and other types of future optionality are often ignored. A company that is under-earning its full potential today in order to become larger tomorrow can suddenly be viewed as less valuable than one that is growing more slowly, further along the maturity curve, and not investing in its own growth.

We believe the Fund owns companies that are positioned to deliver strong business results and earnings growth over our five- to ten-year investment horizon. Our focus on the sustainability of a business’s future earnings growth typically steers us toward companies we believe are benefiting from secular trends that should provide powerful growth tailwinds throughout economic cycles. We have high conviction in the long-term growth estimates for the Fund portfolio’s companies and believe they can deliver the growth necessary to support above average relative and absolute returns over the next several years.

The Fund’s sector allocations are a byproduct of our bottom-up, fundamental approach. Our six investment criteria typically lead us to innovative businesses that are creating new or disrupting existing markets, and/or benefiting from powerful secular tailwinds. Our approach to investment research, portfolio construction, and risk management results in a portfolio that we believe is naturally diversified across industries and businesses at different stages of their respective growth lifecycles. We expect to continue to have higher weights in key growth sectors, including consumer, life sciences, and technology, and lower weights in highly-cyclical sectors such as energy, industrials, and financials.

Management's Discussion of Fund Performance (Unaudited) (Continued)

Comparison of the Change in Value of a $10,000 Investment in the

Touchstone Sands Capital Select Growth Fund - Class A* and the Russell 1000^® Growth Index

The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Notes to Chart

Russell 1000^® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

The Frank Russell Company (FRC) is the source and owner of the data contained or reflected in this material and all trademarks and copyrights related thereto. The material may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a Touchstone Investments presentation of the data, and FRC is not responsible for the formatting or configuration of this material or for any inaccuracy in the presentation thereof.

Management's Discussion of Fund Performance (Unaudited)

Touchstone Small Cap Fund

Sub-Advised by The London Company

Investment Philosophy

The Touchstone Small Cap Fund seeks capital appreciation by investing primarily in common stocks of U.S. companies with small market capitalizations. The Fund utilizes a bottom-up security selection process that screens potential investments against a proprietary quantitative model for return on capital, earnings-to-enterprise value ratio, and free cash flow yield.

Fund Performance

The Touchstone Small Cap Fund (Class A shares) underperformed its benchmark, the Russell 2000^® Index, for the 12-month period ended September 30, 2018. The Fund’s total return was 12.14 percent (calculated excluding the maximum sales charge) while the benchmark’s total return was 15.24 percent.

Market Environment

U.S. stocks posted positive results driven by strong economic news, solid corporate earnings, and the benefit of individual and corporate tax reductions that took effect at the beginning of 2018. The markets experienced greater volatility and the pace of inflation picked up, but there were few signs of significant pricing pressures. The U.S. Federal Reserve Board (Fed) increased the federal funds rate by 25 basis points four times during the period. Expectations for firming inflation and higher growth, along with balance sheet normalization from the Fed, contributed to higher longer-term rates.

While economic data was mostly positive, there were areas of potential concern, including housing and the impact of tariffs. Housing construction was limited by both supply and demand constraints. While housing starts and existing home sales were relatively stable, growth was limited. The lack of housing supply and rising input costs had a negative impact on the supply side while higher interest rates caused limited demand.

Portfolio Review

The Fund’s stock selection positively impacted relative performance, while sector allocation detracted from returns. At the sector level, an underweight to the Health Care and Information Technology sectors, and an overweight to the Materials sector, were headwinds to performance. Conversely, an overweight to the Consumer Discretionary sector and an underweight to the Financials sector were slight positives for returns during the period.

Among the individual stocks that contributed to Fund performance were DST Systems Inc. (Information Technology sector), Ingevity Corp. (Materials sector), GATX Corp., USG Corp. and Armstrong World Industries Inc. (all three from the Industrials sector). DST Systems is a provider of software for the financial services industry. The stock rallied after SS&C Technologies Inc. announced plans to acquire the company in an all-cash transaction. Ingevity, a manufacturer of specialty chemicals and carbon materials, outperformed as a result of strong quarterly results during the period. Within the company’s Performance Chemical segment, the acquisition of Georgia-Pacific LLC and related crude tall oil supply commitments allowed for solid margin expansion. The company’s Performance Material segment continued to benefit from increased regulations around the world requiring their patent-protected carbon filter products. GATX, a railcar leasing company, was strong due to improved Industrial activity and signs of a slowly improving railcar leasing market. Additionally, the North American rail industry showed favorable trends, including increased railroad car loadings and relatively slower railroad velocity year over year. Despite the oversupply of railcars during this cycle, GATX was successful with renewals and long-term contracts. The company was also successful at managing risk during this cycle. USG is a manufacturer of construction materials, most notably drywall and joint compound. The stock outperformed due to a buyout offer made by Germany-based

Management's Discussion of Fund Performance (Unaudited) (Continued)

Knauf KG in an all-cash transaction. The deal is expected to close in early 2019. Armstrong World Industries, a manufacturer of walls and ceilings, continued to execute well as a result of steady commercial activity and strong pricing power. Recently, hurricane damage in the U.S. led to increased demand. The company also sold its lower margin international business which should benefit margins in the future.

Among the individual stocks that detracted from performance were Alexander & Baldwin Inc. (Real Estate sector), GCP Applied Technologies Inc., NewMarket Corp. (both from the Materials sector), PriceSmart Inc. (Consumer Staples sector) and Cooper Tire & Rubber Co. (Consumer Discretionary sector). Alexander & Baldwin owns and operates real estate properties in Hawaii. The stock declined due to the company’s recent conversion to a real estate investment trust (REIT) and the impact of rising rates on the sector. The company’s Grace Pacific Corp. division posted weaker than expected results which also impacted the stock. However, we remain attracted to the company’s land holdings and its competitive positioning in the Hawaiian market. GCP Applied Technologies is a provider of specialty construction chemicals, building materials and packaging technologies. The stock declined as higher raw material inflation weighed on gross margins and cash flows. While inflation may weigh on earnings in the short term, GCP recently announced price increases and decided to exit underperforming markets, which should benefit the company in the long term. Further, we are encouraged by the company’s relatively clean balance sheet, recently restructured debt and market-leading positions in specialty concrete chemicals and building materials. NewMarket, a petroleum additives company, declined during the period as higher raw material costs and lower pricing were headwinds to performance. We remain attracted to the company’s stable revenue outlook, pricing power in a consolidated industry and excellent history of capital allocation. PriceSmart, a membership warehouse club, was volatile during the year, with weakness concentrated in its fiscal third quarter. The company’s lower than expected earnings were driven by higher costs related to its acquisition of Aeropost Inc. The stock was also negatively impacted by downward estimate revisions reflecting expectations of higher expenses as the company invests in its omni-channel approach. We remain attracted to the company’s differentiated store format, stability of income from membership fees, and solid balance sheet. Cooper Tire & Rubber, a tire manufacturer, was weak early in the year as pricing pressures in the industry negatively impacted profitability. As such, we exited the stock.

The Fund initiated new positions in MSG Networks Inc. (Communication Services sector), Versum Materials Inc. (Information Technology sector), GCP Applied Technologies Inc. (Materials sector), Union Bankshares Corp. (Financials sector), Masonite International Corp. (Industrials sector), LCI Industries Inc. and Adient PLC (both from the Consumer Discretionary sector). MSG Networks owns multiple regional sports networks with long-term contracts covering the major sports teams in the New York City area. Specifically, the company has the rights to broadcast the Knicks (NBA), Rangers (NHL), Islanders (NHL), Devils (NHL) and Liberty (WNBA) games. MSG Networks generates high returns on capital and operating margins with minimal capital spending needs, resulting in significant cash flow. Versum is an electronics materials company in an industry with high barriers to entry, few competitors, and high switching costs. The company’s operating margins have increased substantially and its cash generation remains strong. Versum has also de-levered, which provides opportunities to allocate capital back to shareholders or engage in value additive deals. GCP Applied Technologies provides products and technology solutions for customers in the specialty construction chemicals and building materials industries. A majority of company sales comes from its Specialty Construction Chemicals segment, which is one of the leading producers of cement additives and concrete admixtures. This business is expected to grow beyond the forecasted global construction outlook as emerging market penetration for ready-mix concrete increases. The remaining sales are generated from its Specialty Building Materials segment, which is a collection of specialty niche products including building envelope products that are used in commercial construction to prevent water, vapor and air from infiltrating the building. This segment has benefited from increased urbanization and increased construction sophistication and codes in emerging markets. Union Bankshares, a large regional bank headquartered in Virginia, was added because of the company’s conservative underwriting culture and low-cost deposit base. Return on equity has improved in recent years and we believe returns could continue to improve, especially if

Management's Discussion of Fund Performance (Unaudited) (Continued)

rates increase, which should lead to higher net interest margin. Masonite International is a leading manufacturer of interior and exterior doors with a sizable market share. While the market has consolidated in recent years to two major players, we believe this bodes well for Masonite’s future pricing and returns. LCI Industries is a well-managed company with leading market share in the recreational vehicle (RV) manufacturing industry. LCI’s high market share allows the company to achieve industry-leading margins and a high return on invested capital. The company also has a strong balance sheet, and we believe it is a good candidate for balance sheet optimization. Adient is a supplier of auto seating, with an attractive global market share. The business operates in an oligopoly with two main competitors.

The Fund sold its positions in CooperTire & Rubber Co. and Deckers Outdoor Corp. (both from the Consumer Discretionary sector), and received cash for its position in Orbital ATK Inc. (Industrials sector) after the company was acquired by Northrup Grumman Corp. The Fund trimmed its positions in Olin Corp. (Materials sector) and Service Corp. International (Consumer Discretionary sector).

Outlook

The combination of solid economic growth, low inflation and relatively low interest rates usually creates a positive environment for stocks. We believe this holds true today, but there are risks. In our opinion, we believe potential risks include relatively high valuations for stocks using traditional metrics, rising inflation, the impact of increasing tariffs, or the Fed taking a more aggressive stance. We believe the risks and rewards are somewhat balanced as they relate to stocks overall, but we remain cautious and focused on limiting the downside.

Going forward, we believe the attractive candidates we are vetting today are a result of what the market is providing, and is consistent with our general outlook. Specifically, we believe downside risk can be mitigated by remaining focused on those companies with pricing power, copious cash generation and prudent capital allocation. We seek companies with strong return on capital and sustainable competitive advantages. We remain attracted to the capital metric because it speaks to the ability of the company to generate cash, which is ultimately what lowers risk. We also tend to be attracted to businesses that are overcapitalized and under-levered. We believe an under-levered company has more options available to it if the economy falls into a recession, including changing its capital structure to lower its overall cost of capital.

We believe the Fund is positioned well based on the strength of the companies we own and the overall valuation of the Fund’s portfolio. While the market is not considered cheap and we could certainly see a pullback and/or greater volatility in the near future, it is difficult to predict when we will experience the next downturn.

Management's Discussion of Fund Performance (Unaudited) (Continued)

Comparison of the Change in Value of a $10,000 Investment in the

Touchstone Small Cap Fund - Class A^* and the

Russell 2000^® Index

The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Notes to Chart

Russell 2000^® Index measures the performance of the small-cap segment of the U.S. equity universe.

The Frank Russell Company (FRC) is the source and owner of the data contained or reflected in this material and all trademarks and copyrights related thereto. The material may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a Touchstone Investments presentation of the data, and FRC is not responsible for the formatting or configuration of this material or for any inaccuracy in the presentation thereof.

Management's Discussion of Fund Performance (Unaudited)

Touchstone Small Cap Value Fund

Sub-Advised by LMCG Investments, LLC

Investment Philosophy

The Touchstone Small Cap Value Fund seeks long-term capital growth by investing primarily in common stocks of small capitalization companies. The Fund seeks to identify companies believed to be selling at a discount to their intrinsic value.

Fund Performance

The Touchstone Small Cap Value Fund (Class A shares) underperformed its benchmark, the Russell 2000^® Value Index, for the 12-month period ended September 30, 2018. The Fund’s total return was 7.12 percent (calculated excluding the maximum sales charge) while the benchmark’s total return was 9.33 percent.

Market Environment

Within U.S. small-capitalization stocks, growth stocks outperformed value stocks. Additionally, the market environment favored stocks with higher earnings growth, lower sales growth and higher beta¹. The Financials and Industrials sectors were the top contributors to benchmark performance during the quarter, while the Consumer Staples sector detracted the most.

Portfolio Review

During the 12-month period, the Fund’s strongest contributors by sector were Industrials, Financials, Real Estate and Communication Services. The primary detractors by sector were Consumer Staples and Consumer Discretionary. Stock selection was the primary driver of underperformance for the period. From a factor perspective, the market environment negatively impacted the Fund as momentum characteristics and higher valuations were headwinds.

The Fund was negatively impacted by an overweight position and stock selection in the Consumer Staples sector, particularly in food products companies. The Hain Celestial Group Inc., TreeHouse Foods Inc. and Hostess Brands Inc. were notable detractors during the period. Poor volumes recently have hampered the food and personal products space, and many Consumer Staples companies have continued to face headwinds from freight and other material costs.

Within the Consumer Discretionary sector, stock-specific issues surrounding Horizon Global Corp., Del Frisco’s Restaurant Group and The Michael Companies, Inc. weighed on Fund performance. Horizon Global is a producer of towing, trailering cargo management and accessory products related to the automotive markets. The stock declined as core profitability fell short of expectations. In particular, customers reduced inventories, and operational difficulties surrounding a transition to a new distribution facility surfaced. A change in CEO and a push from an activist investor refocused management’s decision making and operating execution, which we believe should bode well for the company going forward. Michaels Cos., an arts and craft retailer, declined after management chose to reinvest a portion of the company’s tax savings back into the business instead of passing it through to the bottom line. Del Frisco, a steakhouse restaurant chain, stumbled upon the acquisition of the Barteca Restaurant Group, the owner of the Barcelona Wine Bar and Bartaco concepts, which sent the stock lower. Looking ahead, we believe all of these issues surrounding the aforementioned stocks are transitory and the Fund continues to hold these positions.

Within the Health Care sector, the Fund’s strength in the healthcare providers segment was offset by stock selection in the pharmaceuticals segment. This, combined with a lack of exposure to health care equipment and biotechnology companies, detracted from Fund performance. Patterson Cos. Inc., a provider of services

Management's Discussion of Fund Performance (Unaudited) (Continued)

and technologies to the dental and animal health markets detracted from performance during the period. The company reduced guidance while in the final stages of significant improvements to its operations and distribution. We believe that once these transitory issues are resolved, Patterson will emerge with cutting-edge operations and a more efficient and productive sales force.

During the period, stock selection in the Energy sector detracted from relative returns as did an underweight to that sector. Within the Materials sector, stock selection and an overweight to the chemicals industry detracted from performance.

Stock selection, along with an overweight position within the Industrials sector contributed to performance. Team Inc., an engineering services company, moved higher following better than expected results, strong bookings and a potential inflection in refinery spending due to higher oil prices. The company’s restructuring and cost reduction plan seemed to be on track as well. Korn/Ferry International, an executive recruiter and consultant, contributed due to solid execution and market share gains with a positive environmental backdrop.

Within the Financials sector, stock selection in the insurance segment was strong and was led by National General Holdings Corp., TCF Financial Corp., Validus Holdings Ltd. and The Hanover Insurance Group Inc. The Fund’s lack of exposure to thrifts and an underweight to real estate investment trusts (REITs) also benefited Fund performance. Stock selection in the Communications Services sector, particularly in media companies, benefited returns.

The Fund maintained an overweight to the Industrials, Materials, and Consumer Staples sectors, and an underweight to the Real Estate, Financials and Energy sectors.

Outlook

Looking ahead, our greatest concern is that the market environment will continue to reward growth and visibility, irrespective of valuation and quality. However, we will not deviate from our process of buying high-quality companies that are temporarily out of favor, and we believe that buying stocks, irrespective of valuation, is a risky strategy. We will continue to seek attractively valued investment opportunities with favorable risk-reward profiles.

The Fund utilizes a classic value-driven philosophy based on the belief that leading businesses selling at a discount to fair value have the potential to generate excess returns. The Fund’s strategy focuses on stocks that are temporarily out of favor in the market, specifically companies with higher returns on capital, free cash flow and strong balance sheets. Emphasis is placed on those companies having the cash flow characteristics as well as the balance sheet strength necessary to buffer the company from any prolonged weakness. While the companies we select often dominate a particular industry niche and generally have significant barriers to entry, we believe they are able to perpetuate a higher return on capital over time. The Fund’s overall investment process utilizes fundamental bottom-up security selection, while we believe risk-control measures ensure security and sector diversification.

¹Beta is a measure of the volatility of a fund relative to its benchmark. The Beta of a benchmark is 1.00.

Management's Discussion of Fund Performance (Unaudited) (Continued)

Comparison of the Change in Value of a $10,000 Investment in the

Touchstone Small Cap Value Fund - Class A* and the

Russell 2000^® Value Index

The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Notes to Chart

Russell 2000^® Value Index measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.

The Frank Russell Company (FRC) is the source and owner of the data contained or reflected in this material and all trademarks and copyrights related thereto. The material may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a Touchstone Investments presentation of the data, and FRC is not responsible for the formatting or configuration of this material or for any inaccuracy in the presentation thereof.

Management's Discussion of Fund Performance (Unaudited)

Touchstone Ultra Short Duration Fixed Income Fund

Sub-Advised by Fort Washington Investment Advisors, Inc.

Investment Philosophy

The Touchstone Ultra Short Duration Fixed Income Fund seeks maximum total return consistent with the preservation of capital by primarily investing in a diversified portfolio of fixed income securities of different maturities, including U.S. Treasury securities, U.S. government agency and U.S. government-sponsored enterprise securities, corporate bonds, mortgage-backed securities, commercial mortgage-backed securities, asset-backed securities, municipal bonds and cash equivalent securities including repurchase agreements and commercial paper. While the Fund may invest in securities of any maturity or duration, interest rate risk is managed by seeking to maintain an effective duration of one year or less under normal market conditions.

Fund Performance

The Touchstone Ultra Short Duration Fixed Income Fund (Class A shares) underperformed its first benchmark, the ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index, but outperformed its second benchmark, the ICE BofA Merrill Lynch 1-Year U.S. Treasury Note Index, for the 12-month period ended September 30, 2018. The Fund’s total return was 1.50 percent (calculated excluding the maximum sales charge) while the total returns of its benchmarks were 1.59 percent and 1.08 percent, respectively.

Market Environment

The Fund’s fiscal year began with the passage of the Tax Cuts and Jobs Act of 2017 which reduced taxes for businesses and individuals, giving a boost to the U.S. economy that had been relatively stagnant for almost a decade. The new corporate tax rate buoyed business confidence, and incented wage growth and capital expenditures. This, combined with a synchronized global expansion, propelled equities to an all-time high in the fourth quarter of 2017.

Early in 2018, the January employment report showed an acceleration in wage growth. However, trade tensions escalated as the Trump administration placed duties on steel and aluminum, and tariffs on $50 billion worth of Chinese imports. The markets, fearing inflation, pushed interest rates higher and risk premiums wider. As such, during the first half of the Fund’s fiscal year, short-term interest rates moved higher and credit spreads widened. The S&P 500^® Index also gave back virtually all of the increases it achieved as a result of the tax cuts.

These themes of strong domestic growth and trade tensions carried through the second half of the fiscal year. However, a byproduct of these themes – a strong U.S. dollar and weaker Chinese yuan – brought inflationary pressures to several Emerging Markets economies including Turkey, Brazil and Argentina. This resulted in broad-based weakness in Emerging Markets in general. Further, the eurozone, China and Japan all softened on trade-related concerns.

Against this backdrop, the U.S. economy continued to post strong results with an increase in gross domestic product (GDP) growth. Consumer and business confidence remained near cycle highs, unemployment was close to historic lows, and underlying consumer and business fundamentals remained strong. Interest rates continued to rise, while credit spreads reversed course and retraced most of their widening from earlier in the year.

Interest rates were a significant headwind during the fiscal year as short-term rates moved higher. Longer-term rates increased as well, but to a lesser degree. Risk assets, with the exception of Emerging Markets, generally performed well during the 12-month period. Equities posted solid outperformance, and credit spreads in most sectors were near the lower end of recent ranges. The U.S. Federal Reserve Board (Fed) raised the federal funds

Management's Discussion of Fund Performance (Unaudited) (Continued)

rate four times during the year, and signaled that it remains constructive on the outlook for the U.S. economy and is committed to additional rate hikes over the coming year.

Portfolio Review

Returns were primarily driven by the Fund’s favorable sector exposures. Consistent with its investment discipline and historical positioning, the Fund had limited exposure to government securities and maintained an emphasis on structured securities, such as Commercial Mortgage-Backed Securities (CMBS), Asset-Backed Securities (ABS) and Agency Mortgage-Backed Securities (MBS). This positioning benefited Fund performance, which was further bolstered by positive security selection. Given the substantive increase in interest rates the Fund also benefited from its overweight to higher spread assets combined with a short option adjusted duration, as well as an increased allocation to floating-rate securities.

The Fund’s sector allocations saw few meaningful changes during the fiscal year. Corporate Bond exposure increased earlier in the year due to technical weakness in the sector, then moderated to more normalized levels. The Fund maintained a significant allocation to ABS, as we believed the sector offered the most compelling combination of liquidity and spread. We increased the Fund’s CMBS exposure opportunistically midway through the year, as the sector’s high-quality, high-return assets were difficult to source. The Fund’s exposure to Agency MBS was historically low given the lack of value in that market, and we increased the Fund’s cash and equivalents during the period.

The Fund’s portfolio duration was near the lower end of the historical operating range and largely unchanged throughout most of the year. Duration positioning likely had little impact on Fund performance during the period. In our view, a relatively flat yield curve means there is little advantage to owning longer duration securities, particularly given their greater risk exposure in the event of increased inflation expectations or a steepening yield curve.

Outlook

In our view, the investment environment continues to favor an overweight to risk assets, supported by sound economic underpinnings: strong corporate profitability, a solid labor market, accommodative global central bank policies and neutral financial conditions. In addition, consumer credit fundamentals remain favorable and support the Fund’s exposure to structured products, many of which are backed by consumer receivables. Despite the favorable backdrop, we continue to closely monitor trade policy, inflation, and weakness in Emerging Markets and the eurozone. Trade policy has dominated headlines in recent months and is having a material impact on global growth expectations and currencies. Significant tariffs have already been levied by the U.S., with China responding in kind. And, with political relations continuing to deteriorate, both rhetoric and actions are expected to escalate into year-end. The effect on markets, particularly Emerging Markets, has caused market participants to question the potential for contagion. Inflation also remains a risk given the increasing strength of U.S. labor markets. In our view, credit spreads adequately reflect these risks.

It is difficult to predict changes in the level of interest rates, but the groundwork has been laid by the Fed to continue to raise short-term rates. We think there is still downside if inflation expectations increase and the market begins to believe that the Fed will aggressively raise interest rates to keep inflation in check. Consistent with market expectations, we believe the yield curve will continue to flatten and volatility will increase as well.

We believe the Fund is positioned well for this scenario. Duration is currently at the short end of its historical range, and credit quality is at the middle of its operating range. The Fund maintains an overweight to higher quality, non-government securities, as well as historically high exposure to floating-rate securities and continued low spread duration. This positioning reflects our constructive outlook for the U.S. economy, concern surrounding higher short-term rates, and our expectations for increased market volatility going forward.

Management's Discussion of Fund Performance (Unaudited) (Continued)

We remain most comfortable adding exposure to securities higher in the capital structure, (i.e., higher credit quality), but in less liquid parts of the market where additional yield can be found without taking on additional fundamental credit risk. Valuations in most sectors have returned to the full side of fair value and we believe they are likely to remain so in the near term.

Management's Discussion of Fund Performance (Unaudited) (Continued)

Comparison of the Change in Value of a $10,000 Investment in the

Touchstone Ultra Short Duration Fixed Income Fund - Class A^*,

the ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index

and the ICE BofA Merrill Lynch 1-Year U.S. Treasury Note Index

The performance of the above Fund does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Notes to Chart

ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged index of Treasury securities maturing in 90 days that assumes reinvestment of all income.

ICE BofA Merrill Lynch 1-Year U.S. Treasury Note Index is an unmanaged index comprised of a single issue purchased at the beginning of the month and held for a full month. The issue selected at each month-end rebalancing is the outstanding two-year Treasury Note Bill that matures closest to, but, not beyond one year from the rebalancing date.

Tabular Presentation of Portfolios of Investments (Unaudited)

September 30, 2018

The tables below provide each Fund’s geographic allocation, sector allocation and/or credit quality. We hope it will be useful to shareholders as it summarizes key information about each Fund’s investments.

Tabular Presentation of Portfolios of Investments (Unaudited) (Continued)

Tabular Presentation of Portfolios of Investments (Unaudited) (Continued)

Tabular Presentation of Portfolios of Investments (Unaudited) (Continued)

Tabular Presentation of Portfolios of Investments (Unaudited) (Continued)

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Portfolio of Investments

Touchstone Active Bond Fund – September 30, 2018

Touchstone Active Bond Fund (Continued)

Touchstone Active Bond Fund (Continued)