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 811-23789
Touchstone ETF Trust
(Exact name of registrant as specified in charter)
303 Broadway, Suite 1100
Cincinnati, Ohio 45202-4203
(Address of principal executive offices) (Zip code)
E. Blake Moore, Jr.
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: December 31
Date of reporting period: June 30, 2023
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.
| (a) | The Report to Shareholders is attached herewith. |
Semi-Annual Report
| Touchstone ETF Trust |
| Touchstone Climate Transition ETF |
| Touchstone Dividend Select ETF |
| Touchstone Strategic Income Opportunities ETF |
| Touchstone Ultra Short Income ETF |
| Touchstone US Large Cap Focused ETF |
Table of Contents
This report identifies the Funds'
investments on June 30, 2023. 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.
2
Tabular Presentation of
Portfolios of Investments (Unaudited)
June 30, 2023
The tables below provide
each Fund’s sector allocation and/or credit quality. We hope it will be useful to shareholders as it summarizes key information about each Fund’s investments.
* Sector classifications
are based upon the Global Industry Classification Standard (GICS®).
** Credit quality
ratings are from S&P Global Ratings ("S&P") and Moody's Investors Service (“Moody's”). If agency ratings differ, the higher rating will be used. Where no rating has been assigned, it may be for
reasons unrelated to the creditworthiness of the issuer.
3
Tabular Presentation of
Portfolios of Investments (Unaudited) (Continued)
Touchstone Ultra Short Income
ETF
| Credit Quality*(% of Fixed Income Securities) | |
| AAA/Aaa | 56.9% |
| AA/Aa | 12.9 |
| A/A | 11.6 |
| BBB/Baa | 17.2 |
| BB/Ba | 1.0 |
| Cash Equivalents | 0.4 |
| Total | 100.0% |
Touchstone US
Large Cap Focused ETF
| Sector Allocation**(% of Net Assets) | |
| Information Technology | 26.3% |
| Health Care | 15.3 |
| Communication Services | 13.2 |
| Financials | 13.1 |
| Industrials | 9.1 |
| Consumer Discretionary | 7.4 |
| Consumer Staples | 4.1 |
| Energy | 3.6 |
| Materials | 1.5 |
| Real Estate | 1.0 |
| Short-Term Investment Fund | 5.5 |
| Other Assets/Liabilities (Net) | (0.1) |
| Total | 100.0% |
* Credit quality ratings are from
S&P Global Ratings ("S&P") and Moody's Investors Service (“Moody's”). If agency ratings differ, the higher rating will be used. Where no rating has been assigned, it may be for reasons unrelated to
the creditworthiness of the issuer.
** Sector classifications are based
upon the Global Industry Classification Standard (GICS®).
4
Portfolio of Investments
Touchstone Strategic Income Opportunities
ETF – June 30, 2023 (Unaudited)
7
Touchstone Strategic Income
Opportunities ETF (Unaudited) (Continued)
Other Information:
The inputs or methodology
used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below,
please refer to the security valuation section in the accompanying Notes to Financial Statements.
| Valuation Inputs at Reporting Date: | ||||
| Description | Level 1 | Level 2 | Level 3 | Total |
| Assets: | ||||
| Corporate Bonds | $— | $45,227,670 | $— | $45,227,670 |
| U.S. Treasury Obligations | — | 25,496,570 | — | 25,496,570 |
| Asset-Backed Securities | — | 11,004,723 | — | 11,004,723 |
| Commercial Mortgage-Backed Securities | — | 6,095,130 | — | 6,095,130 |
| Common Stocks | 4,010,856 | — | — | 4,010,856 |
| Sovereign Government Obligations | — | 3,014,553 | — | 3,014,553 |
| Non-Agency Collateralized Mortgage Obligations | — | 2,061,534 | — | 2,061,534 |
| Preferred Stocks | 159 | — | — | 159 |
| Short-Term Investment Fund | 3,092,647 | — | — | 3,092,647 |
| Total Assets | $7,103,662 | $92,900,180 | $— | $100,003,842 |
| Liabilities: | ||||
| Other Financial Instruments | ||||
| Swap Agreements | ||||
| Credit contracts | $— | $(56,221) | $— | $(56,221) |
| Futures | ||||
| Interest rate contracts | (285,074) | — | — | (285,074) |
| Total Liabilities | $(285,074) | $(56,221) | $— | $(341,295) |
| Total | $6,818,588 | $92,843,959 | $— | $99,662,547 |
Futures Contracts
At June 30, 2023, $117,600 was segregated with
the broker as collateral for futures contracts. The Fund had the following futures contracts, brokered by Wells Fargo, open at June 30, 2023:
| Description | Expiration Date | Number of Contracts | Notional Value | Unrealized Depreciation |
| Long Futures: | ||||
| 2-Year U.S. Treasury Note | 9/29/2023 | 98 | $20,212,762 | $(285,074) |
Centrally Cleared Credit Default Swaps
on Credit Indices(1)
| Counterparty | Termination Date | Notional Amount(2) | Pay Fixed Rate | Clearinghouse | Underlying Bond | Value(3) | Premiums Paid/ (Received) | Unrealized Depreciation |
| Buy Protection: | ||||||||
| Wells Fargo | 6/20/28 | $4,000,000 | 5.000% | ICE | Markit CDX North America High Yield Series 40 5Y Index | $(111,721) | $(55,500) | $(56,221) |
| (1) | If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying investments comprising the referenced index or (ii) receive a net settlement amount in the form of cash or investments equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying investments comprising the referenced index. |
| (2) | The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement. |
| (3) | The quoted market prices and resulting values for credit default swap agreements on the underlying bond serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative had the notional amount of the swap agreement been closed/sold as of the period end. Decreasing market values (sell protection) or increasing market values (buy protection) when compared to the notional amount of the swap, represent a deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
See accompanying Notes to Financial
Statements.
10
Statements of Assets and
Liabilities
June 30, 2023 (Unaudited)
| Touchstone Climate Transition ETF | Touchstone Dividend Select ETF | Touchstone Strategic Income Opportunities ETF | Touchstone Ultra Short Income ETF | Touchstone US Large Cap Focused ETF | |
| Assets | |||||
| Investments, at cost | $11,344,414 | $27,030,054 | $101,492,821 | $52,153,899 | $26,388,136 |
| Investments, at market value * | $11,969,608 | $28,669,433 | $100,003,842 | $51,918,110 | $29,394,957 |
| Cash | — | — | — | 765 | — |
| Cash deposits held at prime broker (A) | — | — | 339,980 | — | 106 |
| Dividends and interest receivable | 24,036 | 36,402 | 901,756 | 312,449 | 22,682 |
| Receivable for investments sold | — | — | 447,020 | — | — |
| Receivable for securities lending income | — | — | 3,904 | — | — |
| Tax reclaim receivable | 2,920 | 788 | — | — | — |
| Other assets | 12,636 | 30,163 | 18,455 | 17,641 | 16,034 |
| Total Assets | 12,009,200 | 28,736,786 | 101,714,957 | 52,248,965 | 29,433,779 |
| Liabilities | |||||
| Payable for return of collateral for securities on loan | — | — | 1,230,407 | — | — |
| Payable for investments purchased | — | — | 299,979 | 961,108 | — |
| Payable to Investment Adviser | 6,274 | 12,868 | 45,372 | 10,544 | 16,708 |
| Payable to other affiliates | 2,708 | 8,879 | 17,409 | 11,470 | 9,320 |
| Payable to Trustees | 4,565 | 19,407 | 19,407 | 19,407 | 19,407 |
| Payable for professional services | 6,020 | — | 14,627 | 13,310 | 12,542 |
| Payable for reports to shareholders | 2,133 | 3,541 | 5,535 | 104 | 5,051 |
| Payable for transfer agent services | 193 | 8,448 | 9,987 | 9,650 | 8,944 |
| Payable for variation margin on futures contracts | — | — | 3,062 | — | — |
| Payable for variation margin on swap agreements | — | — | 25,753 | — | — |
| Other accrued expenses and liabilities | 3,054 | — | 16,660 | — | — |
| Total Liabilities | 24,947 | 53,143 | 1,688,198 | 1,025,593 | 71,972 |
| Net Assets | $11,984,253 | $28,683,643 | $100,026,759 | $51,223,372 | $29,361,807 |
| Net assets consist of: | |||||
| Paid-in capital | 11,258,640 | 26,870,537 | 101,957,654 | 51,360,868 | 25,733,176 |
| Distributable earnings (deficit) | 725,613 | 1,813,106 | (1,930,895) | (137,496) | 3,628,631 |
| Net Assets | $11,984,253 | $28,683,643 | $100,026,759 | $51,223,372 | $29,361,807 |
| Pricing of shares outstanding | |||||
| Net assets applicable to shares outstanding | $11,984,253 | $28,683,643 | $100,026,759 | $51,223,372 | $29,361,807 |
| Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) | 450,000 | 1,075,000 | 4,075,000 | 2,054,000 | 1,025,000 |
| Net asst value, offering price and redemption price per share | $26.63 | $26.68 | $24.55 | $24.94 | $28.65 |
| *Includes market value of securities on loan of: | $— | $— | $1,187,208 | $— | $— |
| (A) | Represents segregated cash for futures contracts and swap agreements. |
See accompanying Notes to Financial
Statements.
14
Statements of Operations For the Six Months Ended June 30, 2023 (Unaudited)
| Touchstone Climate Transition ETF(A) | Touchstone Dividend Select ETF | Touchstone Strategic Income Opportunities ETF | Touchstone Ultra Short Income ETF | Touchstone US Large Cap Focused ETF | |
| Investment Income | |||||
| Dividends | $68,787 | $376,950 | $75,276 | $— | $194,000 |
| Interest | — | — | 2,670,751 | 1,161,490 | — |
| Income from securities loaned | — | — | 17,889 | — | — |
| Total Investment Income | 68,787 | 376,950 | 2,763,916 | 1,161,490 | 194,000 |
| Expenses | |||||
| Investment advisory fees | 12,155 | 74,403 | 275,037 | 63,605 | 93,405 |
| Administration fees | 2,587 | 18,725 | 69,221 | 35,217 | 18,470 |
| Compliance fees and expenses | 1,377 | 4,060 | 4,060 | 4,060 | 4,060 |
| Custody fees | 67 | 773 | 16,107 | 1,305 | 759 |
| Professional fees | 6,020 | 15,770 | 16,433 | 15,518 | 11,981 |
| Transfer Agent fees | 193 | 6,099 | 7,169 | 6,520 | 6,126 |
| Reports to Shareholders | 2,133 | 4,223 | 3,707 | 5,481 | 3,782 |
| Trustee fees | 4,565 | 12,988 | 12,988 | 12,988 | 12,988 |
| Other expenses | 6,460 | 10,550 | 19,596 | 15,284 | 10,674 |
| Total Expenses | 35,557 | 147,591 | 424,318 | 159,978 | 162,245 |
| Fees waived and/or reimbursed by the Adviser and/or Affiliates(B) | (22,651) | (56,956) | (98,833) | (72,540) | (70,187) |
| Net Expenses | 12,906 | 90,635 | 325,485 | 87,438 | 92,058 |
| Net Investment Income (Loss) | 55,881 | 286,315 | 2,438,431 | 1,074,052 | 101,942 |
| Realized and Unrealized Gains (Losses) on Investments | |||||
| Net realized gains (losses) on investments(C) | 44,362 | 232,083 | (348,848) | 290,685 | 630,892 |
| Net realized gains on futures contracts | — | — | 218,897 | — | — |
| Net realized losses on swap agreements | — | — | (26,178) | — | — |
| Net change in unrealized appreciation (depreciation) on investments | 625,194 | 1,268,562 | 601,028 | 99,371 | 3,928,652 |
| Net change in unrealized appreciation (depreciation) on futures contracts | — | — | (285,074) | — | — |
| Net change in unrealized appreciation (depreciation) on swap agreements | — | — | (56,221) | — | — |
| Net change in unrealized appreciation (depreciation) on foreign currency transactions | 176 | — | — | — | — |
| Net Realized and Unrealized Gains (Losses) on Investments | 669,732 | 1,500,645 | 103,604 | 390,056 | 4,559,544 |
| Change in Net Assets Resulting from Operations | $725,613 | $1,786,960 | $2,542,035 | $1,464,108 | $4,661,486 |
| (A) | Represents the period from commencement of operations (April 28, 2023) through June 30, 2023. |
| (B) | See Note 4 in Notes to Financial Statements. |
| (C) | Net realized gains on investments includes realized gains of $64,163, $500,542 and $687,745 for the Climate Transition ETF, the Dividend Select ETF and the US Large Cap Focused ETF, respectively, for redemptions-in-kind activity, which will not be recognized by the Funds for tax purposes. |
See accompanying Notes to Financial
Statements.
15
Statements of Changes in Net
Assets
| Touchstone Climate Transition ETF | Touchstone Dividend Select ETF | Touchstone Strategic Income Opportunities ETF | Touchstone Ultra Short Income ETF | ||||
| For the Period Ended June 30, 2023(A) (Unaudited) | For the Six Months Ended June 30, 2023 (Unaudited) | For the Period Ended December 31, 2022(B) | For the Six Months Ended June 30, 2023 (Unaudited) | For the Period Ended December 31, 2022(C) | For the Six Months Ended June 30, 2023 (Unaudited) | For the Period Ended December 31, 2022(D) | |
| From Operations | |||||||
| Net investment income | $55,881 | $286,315 | $184,324 | $2,438,431 | $1,871,714 | $1,074,052 | $712,928 |
| Net realized gains (losses) on investments, futures contracts and swap agreements | 44,362 | 232,083 | 263,630 | (156,129) | (7,826) | 290,685 | 27,875 |
| Net change in unrealized appreciation (depreciation) on investments, futures contracts, swap agreements and foreign currency transactions | 625,370 | 1,268,562 | 370,817 | 259,733 | (2,090,007) | 99,371 | (335,160) |
| Change in Net Assets from Operations | 725,613 | 1,786,960 | 818,771 | 2,542,035 | (226,119) | 1,464,108 | 405,643 |
| Distributions to Shareholders: | |||||||
| Distributed earnings | — | (279,733) | (183,700) | (2,338,783) | (1,908,028) | (1,320,907) | (686,340) |
| Total Distributions | — | (279,733) | (183,700) | (2,338,783) | (1,908,028) | (1,320,907) | (686,340) |
| Share Transactions | |||||||
| Proceeds from Shares issued | 11,913,894 | 2,615,191 | 27,851,716 | 623,145 | 101,334,509 | — | 51,360,868 |
| Cost of Shares redeemed | (655,254) | (2,009,035) | (1,916,527) | — | — | — | — |
| Change in Net Assets from Share Transactions | 11,258,640 | 606,156 | 25,935,189 | 623,145 | 101,334,509 | — | 51,360,868 |
| Total Increase (Decrease) in Net Assets | 11,984,253 | 2,113,383 | 26,570,260 | 826,397 | 99,200,362 | 143,201 | 51,080,171 |
| Net Assets | |||||||
| Beginning of period | — | 26,570,260 | — | 99,200,362 | — | 51,080,171 | — |
| End of period | $11,984,253 | $28,683,643 | $26,570,260 | $100,026,759 | $99,200,362 | $51,223,372 | $51,080,171 |
| Share Transactions | |||||||
| Shares issued | 475,001 | 100,000 | 1,125,000 | 25,000 | 4,050,000 | — | 2,054,000 |
| Shares redeemed | (25,001) | (75,000) | (75,000) | — | — | — | — |
| Change in Shares Outstanding | 450,000 | 25,000 | 1,050,000 | 25,000 | 4,050,000 | — | 2,054,000 |
| (A) | Represents the period from commencement of operations (April 28, 2023) through June 30, 2023. |
| (B) | Represents the period from commencement of operations (August 2, 2022) through December 31, 2022. |
| (C) | Represents the period from commencement of operations (July 21, 2022) through December 31, 2022. |
| (D) | Represents the period from commencement of operations (August 4, 2022) through December 31, 2022. |
| (E) | Represents the period from commencement of operations (July 27, 2022) through December 31, 2022. |
See accompanying Notes to Financial
Statements.
16
Statements of Changes in Net
Assets (Continued)
| Touchstone US Large Cap Focused ETF | |
| For the Six Months Ended June 30, 2023 (Unaudited) | For the Period Ended December 31, 2022(E) |
| $101,942 | $58,992 |
| 630,892 | 139,950 |
| 3,928,652 | (921,831) |
| 4,661,486 | (722,889) |
| — | (58,353) |
| — | (58,353) |
| 3,431,490 | 27,969,085 |
| (3,469,943) | (2,449,069) |
| (38,453) | 25,520,016 |
| 4,623,033 | 24,738,774 |
| 24,738,774 | — |
| $29,361,807 | $24,738,774 |
| 125,000 | 1,125,000 |
| (125,000) | (100,000) |
| — | 1,025,000 |
17
Financial Highlights
| Touchstone Climate Transition ETF | ||||||||||||||||||||||
| Period ended | Net asset value at beginning of period | Net investment income | Net realized and unrealized gains (losses) on investments | Total from investment operations | Net asset value at end of period | Total return based on NAV | Net assets at end of period (000's) | Ratio of net expenses to average net assets | Ratio of gross expenses to average net assets | Ratio of net investment income (loss) to average net assets | Portfolio turnover rate | |||||||||||
| 06/30/23(1)(2) | $25.00 | $0.12 | $1.51 | $1.63 | $26.63 | 6.52%(3) | $11,984 | 0.69%(4) | 1.90%(4) | 2.99%(4) | 16%(3)(5) | |||||||||||
| (1) | Represents the period from commencement of operations (April 28, 2023) through June 30, 2023. |
| (2) | Unaudited. |
| (3) | Not annualized. |
| (4) | Annualized. |
| (5) | Portfolio turnover excludes securities delivered from processing redemptions-in-kind and received from processing subscriptions-in-kind. |
| Touchstone Dividend Select ETF | ||||||||||||||||||||||||||
| Period ended | Net asset value at beginning of period | Net investment income | Net realized and unrealized gains (losses) on investments | Total from investment operations | Distributions from net investment income | Total distributions | Net asset value at end of period | Total return based on NAV | Net assets at end of period (000's) | Ratio of net expenses to average net assets | Ratio of gross expenses to average net assets | Ratio of net investment income (loss) to average net assets | Portfolio turnover rate | |||||||||||||
| 12/31/22(1) | $25.00 | $0.18 | $0.31 | $0.49 | $(0.18) | $(0.18) | $25.31 | 1.94%(2) | $26,570 | 0.67%(3) | 1.41%(3) | 2.11%(3) | 28%(2)(4) | |||||||||||||
| 06/30/23(5) | 25.31 | 0.27 | 1.36 | 1.63 | (0.26) | (0.26) | 26.68 | 6.54(2) | 28,684 | 0.67(3) | 1.09(3) | 2.12(3) | 4(2)(4) | |||||||||||||
| (1) | Represents the period from commencement of operations (August 2, 2022) through December 31, 2022. |
| (2) | Not annualized. |
| (3) | Annualized. |
| (4) | Portfolio turnover excludes securities delivered from processing redemptions-in-kind and received from processing subscriptions-in-kind. |
| (5) | Unaudited. |
| Touchstone Strategic Income Opportunities ETF | ||||||||||||||||||||||||||
| Period ended | Net asset value at beginning of period | Net investment income | Net realized and unrealized gains (losses) on investments | Total from investment operations | Distributions from net investment income | Total distributions | Net asset value at end of period | Total return based on NAV | Net assets at end of period (000's) | Ratio of net expenses to average net assets | Ratio of gross expenses to average net assets | Ratio of net investment income (loss) to average net assets | Portfolio turnover rate | |||||||||||||
| 12/31/22(1) | $25.00 | $0.48 | $(0.50) | $(0.02) | $(0.49) | $(0.49) | $24.49 | (0.03)%(2) | $99,200 | 0.65%(3) | 0.89%(3) | 4.51%(3) | 47%(2) | |||||||||||||
| 06/30/23(4) | 24.49 | 0.60(5) | 0.04 | 0.64 | (0.58) | (0.58) | 24.55 | 2.56(2) | 100,027 | 0.65(3) | 0.85(3) | 4.88(3) | 80(2) | |||||||||||||
| (1) | Represents the period from commencement of operations (July 21, 2022) through December 31, 2022. |
| (2) | Not annualized. |
| (3) | Annualized. |
| (4) | Unaudited. |
| (5) | The net investment income per share was based on average shares outstanding for the period. |
| Touchstone Ultra Short Income ETF | ||||||||||||||||||||||||||
| Period ended | Net asset value at beginning of period | Net investment income | Net realized and unrealized gains (losses) on investments | Total from investment operations | Distributions from net investment income | Total distributions | Net asset value at end of period | Total return based on NAV | Net assets at end of period (000's) | Ratio of net expenses to average net assets | Ratio of gross expenses to average net assets | Ratio of net investment income (loss) to average net assets | Portfolio turnover rate | |||||||||||||
| 12/31/22(1) | $25.00 | $0.35 | $(0.14) | $0.21 | $(0.34) | $(0.34) | $24.87 | 0.87%(2) | $51,080 | 0.34%(3) | 0.75%(3) | 3.65%(3) | 16%(2) | |||||||||||||
| 06/30/23(4) | 24.87 | 0.52 | 0.19 | 0.71 | (0.64) | (0.64) | 24.94 | 2.90(2) | 51,223 | 0.34(3) | 0.63(3) | 4.22(3) | 49(2) | |||||||||||||
| (1) | Represents the period from commencement of operations (August 4, 2022) through December 31, 2022. |
| (2) | Not annualized. |
| (3) | Annualized. |
| (4) | Unaudited. |
See accompanying Notes to Financial
Statements.
18
Financial Highlights (Continued)
| Touchstone US Large Cap Focused ETF | ||||||||||||||||||||||||||
| Period ended | Net asset value at beginning of period | Net investment income | Net realized and unrealized gains (losses) on investments | Total from investment operations | Distributions from net investment income | Total distributions | Net asset value at end of period | Total return based on NAV | Net assets at end of period (000's) | Ratio of net expenses to average net assets | Ratio of gross expenses to average net assets | Ratio of net investment income (loss) to average net assets | Portfolio turnover rate | |||||||||||||
| 12/31/22(1) | $25.00 | $0.06 | $(0.86) | $(0.80) | $(0.06) | $(0.06) | $24.14 | (3.25)%(2) | $24,739 | 0.69%(3) | 1.54%(3) | 0.66%(3) | 3%(2)(4) | |||||||||||||
| 06/30/23(5) | 24.14 | 0.10 | 4.41 | 4.51 | — | — | 28.65 | 18.69(2) | 29,362 | 0.69(3) | 1.22(3) | 0.76(3) | 1(2)(4) | |||||||||||||
| (1) | Represents the period from commencement of operations (July 27, 2022) through December 31, 2022. |
| (2) | Not annualized. |
| (3) | Annualized. |
| (4) | Portfolio turnover excludes securities delivered from processing redemptions-in-kind and received from processing subscriptions-in-kind. |
| (5) | Unaudited. |
See accompanying Notes to Financial
Statements.
19
Notes to Financial Statements
June 30, 2023 (Unaudited)
1. Organization
The Touchstone ETF
Trust (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was established as a Delaware
statutory trust pursuant to an Agreement and Declaration of Trust dated February 1, 2022. The Trust consists of the following five funds (individually, a “Fund”, and collectively, the
“Funds”):
| Touchstone Climate Transition ETF ("Climate Transition ETF”) |
| Touchstone Dividend Select ETF ("Dividend Select ETF”) |
| Touchstone Strategic Income Opportunities ETF ("Strategic Income Opportunities ETF”) |
| Touchstone Ultra Short Income ETF ("Ultra Short Income ETF”) |
| Touchstone US Large Cap Focused ETF ("US Large Cap Focused ETF”) |
Each Fund is
diversified, with the exception of the US Large Cap Focused ETF, which is non-diversified.
The Agreement and
Declaration of Trust permits the Trust to issue an unlimited number of shares of beneficial interest of each Fund. The Funds are actively managed exchange-traded funds (“ETFs”). Shares of the Dividend
Select ETF (ticker: DVND) and the Strategic Income Opportunities ETF (ticker: SIO) are listed for trading on NYSE Arca, Inc. and shares of Climate Transition ETF (ticker: HEAT), US Large Cap Focused ETF (ticker: LCF)
and the Ultra Short Income ETF (ticker: TUSI) are listed for trading on Cboe BZX Exchange, Inc. The market price for a share of each Fund may be different from a Fund's most recent net asset value (“NAV”).
ETFs are funds that trade like other publicly traded securities. Unlike shares of a mutual fund, which can be bought and redeemed from the issuing fund by all shareholders at a price based on NAV, shares of the Funds
may be purchased or redeemed directly from the Funds at NAV solely by a member or participant of a clearing agency registered with the Securities and Exchange Commission ("SEC"), which has entered into an "Authorized
Participant Agreement" with the funds' distributor and the transfer agent to purchase aggregations of a specific number of shares ("Creation Units") through a dealer that has entered into such an agreement
("Authorized Participants"). Also, unlike shares of a mutual fund, shares of the Funds are listed on an exchange and trade in the secondary market at market prices that change throughout the day.
The assets of each Fund
are segregated, and a shareholder’s interest is limited to the Fund in which shares are held. The Funds’ prospectus provides a description of each Fund’s investment goal, policies, and strategies.
2. Significant Accounting
Policies
The following is a
summary of the Funds’ significant accounting policies:
Each Fund is an
investment company that follows the accounting and reporting guidance of Accounting Standards Codification Topic 946 applicable to investment companies.
Security valuation and
fair value measurements — U.S. generally accepted accounting principles (“U.S. GAAP”) defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in
an orderly transaction between market participants at the measurement date. All investments in securities are recorded at their fair value. The Funds define the term “market value”, as used throughout this
report, as the estimated fair value. The Funds use various methods to measure fair value of their portfolio securities on a recurring basis. U.S. GAAP fair value measurement standards require disclosure of a hierarchy
that prioritizes inputs to valuation methods. These inputs are summarized in the three broad levels listed below:
• Level 1 − quoted prices in
active markets for identical securities
• Level 2 − other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 − significant unobservable inputs
(including a Fund’s own assumptions in determining the fair value of investments)
The inputs or methodology
used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The aggregate value by
input level, as of June 30, 2023, for each Fund’s investments, is included in each Fund's Portfolio of Investments, which also includes a breakdown of the Fund’s investments by credit quality and/or sector
allocation. The Funds did not hold or transfer any Level 3 categorized securities during the six months ended June 30, 2023.
Changes in valuation
techniques may result in transfers into or out of an investment’s assigned level within the hierarchy.
The Funds’
portfolio securities are valued as of the close of the regular session of trading on the New York Stock Exchange (“NYSE”) (ordinarily 4:00 p.m., Eastern Time or at the time as of which the NYSE establishes
official closing prices). Portfolio securities traded on stock exchanges are valued at the last reported sale price, official close price, or last bid price if no sales are reported. Portfolio securities quoted by
NASDAQ are valued at the NASDAQ Official Closing Price (“NOCP”) or from the primary
20
Notes to Financial
Statements (Unaudited) (Continued)
exchange on which the security
trades. To the extent these securities are actively traded, they are categorized in Level 1 of the fair value hierarchy. Options and futures are valued at the last quoted sales price. If there is no such
reported sale on the valuation date, long option positions are valued at the most recent bid price, and short option positions are valued at the most recent ask price on the valuation date and are categorized in Level
1. Shares of mutual funds in which the Funds invest are valued at their respective net asset value (“NAV”) as reported by the underlying funds and are categorized in Level 1.
Debt securities held
by the Funds are valued at their evaluated bid by an independent pricing service or at their last broker-quoted bid prices as obtained from one or more of the major market makers for such securities. Independent
pricing services use information provided by market makers or estimates of market values through accepted market modeling conventions. Observable inputs to the models may include prepayment speeds, pricing spread,
yield, trade information, dealer quotes, market color, cash flow models, the securities’ terms and conditions, among others, and are generally categorized in Level 2. Investments in asset-backed and
mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche
specific spread to the benchmark yield based on the unique attributes of the tranche, and are generally categorized in Level 2. Debt securities with remaining maturities of 60 days or less may be valued at
amortized cost, provided such amount approximates market value and are categorized in Level 2. While this method provides consistency in valuation (and may only be used if it approximates market value), it may result
in periods during which fair value, as determined by amortized cost, is higher or lower than the price that would be received if the Fund sold the investment.
Securities mainly
traded on a non-U.S. exchange or denominated in foreign currencies are generally valued according to the preceding closing values on that exchange, translated to U.S. dollars using currency exchange rates as of the
close of regular trading on the NYSE (ordinarily 4:00 p.m., Eastern Time, or at the time as of which the NYSE establishes official closing prices), and are generally categorized in Level 1. However, if an event that
may change the value of a security occurs after the time that the closing value on the non-U.S. exchange was determined, but before the close of regular trading on the NYSE, the security may be priced based on fair
value and is generally categorized in Level 2. This may cause the value of the security, if held on the books of a Fund, to be different from the closing value on the non-U.S. exchange and may affect the calculation
of that Fund’s NAV. The Funds may use fair value pricing under the following circumstances, among others:
• If the value of a security has been materially affected by events occurring before the Funds' pricing time but after the close of the primary markets on which the security is
traded.
• If the exchange on which a portfolio security is principally traded closes early or if trading in a particular portfolio security was halted during the day and did not resume prior to the Funds' NAV
calculation.
• If a security is so thinly
traded that reliable market quotations are unavailable due to infrequent trading.
• If the validity of market
quotations is not reliable.
Securities held by the
Funds that do not have readily available market quotations, significant observable inputs, or securities for which the available market quotations are not reliable, are priced at their estimated fair value using
procedures established by Touchstone Advisors, Inc. (the “Adviser”) and adopted by the Funds' Board of Trustees (the “Board”) and are generally categorized in Level 3.
Collateralized Loan
Obligations — The Strategic Income Opportunities ETF and Ultra Short Income ETF may invest in collateralized loan obligations (“CLOs”). CLOs are types of asset-backed securities. A
CLO is an entity that is backed by syndicated bank loans. The cash flows of the CLO can be split into multiple segments, called “tranches,” which will vary in risk profile and yield. The riskiest segment
is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CLO and serves to protect the other, more senior, tranches from default in all
but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying
securities, and often receive higher ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due
to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.
Investment
companies — The Funds may invest in securities of other investment companies, including ETFs, open-end funds and closed-end funds. Open-end funds are investment companies that issue new shares
continuously and redeem shares daily. Closed-end funds are investment companies that typically issue a fixed number of shares that trade on a securities exchange or over-the-counter (“OTC”). An ETF is an
investment company that typically seeks to track the performance of an index by holding in its portfolio shares of all the companies, or a representative sample of the companies, that are components of a particular
index. ETF shares are traded on a securities exchange based on their market value. The risks of investment in other investment companies typically reflect the risks of the types of securities in which the other
investment companies invest. Investments in ETFs and closed-end funds are subject to the additional risk that their shares may trade at a premium or discount to their NAV. When a Fund
21
Notes to Financial
Statements (Unaudited) (Continued)
invests in another investment
company, shareholders of the Fund indirectly bear their proportionate share of the other investment company’s fees and expenses, including operating, registration, trustee, licensing, and marketing, as well as
their share of the Fund’s fees and expenses.
Futures Contracts — The Strategic Income Opportunities ETF may buy and sell futures contracts and related options to manage its exposure to changing interest rates and securities prices. Some
strategies reduce a Fund’s exposure to price fluctuations, while others tend to increase its market exposure. Futures and options on futures can be volatile instruments and involve certain risks that could
negatively impact a Fund’s return. When a Fund purchases or sells a futures contract, or sells an option thereon, a Fund must deposit initial margin and, in some instances, daily variation margin, to meet its
obligations under a contract with a futures commission merchant
When the contract is
closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transactions and the Fund’s basis in the contract. Risks of entering into futures
contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying instruments. Second, it is possible that a lack of liquidity for futures
contracts could exist in the secondary market resulting in an inability to close a futures position prior to its maturity date. Third, the purchase of a futures contract involves the risk that the Fund could lose more
than the original margin deposit required to initiate the futures transaction. Finally, the risk exists that losses could exceed amounts disclosed on the Statements of Assets and Liabilities. There is minimal
counterparty credit risk involved in entering into futures contracts since they are exchange-traded instruments and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees the
futures against default.
As of June 30, 2023, the
Strategic Income Opportunities ETF had futures contracts as shown on the Portfolio of Investments.
Swap Contracts — The Strategic Income Opportunities ETF may enter into swap transactions to help enhance the value of its portfolio or manage its exposure to different types of investments. Swaps
are financial instruments that typically involve the exchange of cash flows between two parties on specified dates (settlement dates), where the cash flows are based on agreed-upon prices, rates, indexes, etc. The
nominal amount on which the cash flows are calculated is called the notional amount. Swaps are individually negotiated and structured to include exposure to a variety of different types of investments or market
factors, such as interest rates, foreign currency rates, mortgage securities, corporate borrowing rates, security prices, indexes or inflation rates.
Swap agreements may
increase or decrease the overall volatility of the investments of a Fund and its share price. The performance of swap agreements may be affected by a change in the specific interest rate, currency, or other factors
that determine the amounts of payments due to and from a Fund. If a swap agreement calls for payments by a Fund, the Fund must be prepared to make such payments when due. In addition, if the counterparty’s
creditworthiness declines, the value of a swap agreement would be likely to decline, potentially resulting in losses.
Generally, bilateral
swap agreements and OTC swaps have a fixed maturity date that will be agreed upon by the parties. The agreement can be terminated before the maturity date only under limited circumstances, such as default by one of
the parties or insolvency, among others, and can be transferred by a party only with the prior written consent of the other party. The Fund may be able to eliminate its exposure under a swap agreement either by
assignment or by other disposition, or by entering into an offsetting swap agreement with the same party or a similarly creditworthy party. If the counterparty is unable to meet its obligations under the contract,
declares bankruptcy, defaults or becomes insolvent, a Fund may not be able to recover the money it expected to receive under the contract.
Cleared swaps are
transacted through futures commission merchants that are members of central clearinghouses with the clearinghouses serving as a central counterparty. Pursuant to rules promulgated under the Dodd-Frank Wall Street
Reform and Consumer Protection Act, central clearing of swap agreements is currently required for certain market participants trading certain instruments, and central clearing for additional instruments is expected to
be implemented by regulators until the majority of the swaps market is ultimately subject to central clearing.
Swaps are
marked-to-market daily based upon values received from third party vendors or quotations from market makers. For OTC swaps, any upfront premiums paid or received are recorded as assets or liabilities, respectively,
and are shown as premium paid on swap agreements or premium received on swap agreements in the Statements of Assets and Liabilities. For swaps that are centrally cleared, initial margins, determined by each relevant
clearing agency or clearing member, are posted at a clearing broker in accordance with CFTC or the applicable regulator's regulations. The change in value of swaps, including accruals of periodic amounts of interest
to be paid or received on swaps, is recorded as unrealized appreciation or depreciation. Daily changes in the value of centrally cleared swaps are recorded in the Statements of Assets and Liabilities as receivable or
payable for variation margin on swap agreements and settled daily. Upfront premiums and liquidation payments received or paid are recorded as realized gains or losses at the termination or maturity of the swap. Net
periodic payments received or paid by the Fund are recorded as realized gain or loss.
22
Notes to Financial
Statements (Unaudited) (Continued)
A swap agreement can
be a form of leverage, which can magnify a Fund’s gains or losses. In order to reduce the risk associated with leveraging, the Fund will only enter into a swap agreement subject to the regulatory limitations set
forth in Rule 18f-4 under the 1940 Act (the "Derivatives Rule").
As of June 30, 2023, the
Strategic Income Opportunities ETF held swap agreements as shown on the Portfolio of Investments.
Effective August 19,
2022 (the “Compliance Date”), the Derivatives Rule replaced the asset segregation regime of Investment Company Act Release No. 10666 (“Release 10666”) with a new framework for the use of
derivatives by registered funds. As of the Compliance Date, the SEC rescinded Release 10666 and withdrew no-action letters and similar guidance addressing a fund's use of derivatives and began requiring funds to
satisfy the requirements of the Derivatives Rule. As a result, on or after the Compliance Date, the Funds will no longer engage in “segregation” or “coverage” techniques with respect to
derivatives transactions and will instead comply with the applicable requirements of the Derivatives Rule. Centrally-cleared swap contracts are subject to clearinghouse rules, including initial and variation margin
requirements, daily settlement of obligations and the clearinghouse guarantee of payments to the broker.
Foreign currency
translation — The books and records of the Funds are maintained in U.S. dollars and translated into U.S. dollars on the following basis:
| (1) | market value of investment securities, assets and liabilities at the current rate of exchange on the valuation date; and |
| (2) | purchases and sales of investment securities, income, and expenses at the relevant rates of exchange prevailing on the respective dates of such transactions. |
The Funds do not isolate
that portion of gains and losses on investments in equity securities that is due to changes in the foreign exchange rates from that which is due to changes in market prices of equity securities.
Real Estate Investment
Trusts — The Funds may invest in real estate investment trusts (“REITs”) that involve risks not associated with investing in stocks. Risks associated with investments in REITs
include declines in the value of real estate, general and economic conditions, changes in the value of the underlying property and defaults by borrowers. The value of assets in the real estate industry may go through
cycles of relative underperformance and outperformance in comparison to equity securities markets in general. Dividend income is recorded using management’s estimate of the income included in distributions
received from REIT investments. The actual amounts of income, return of capital and capital gains are only determined by each REIT after its fiscal year-end and may differ from the estimated amount. Estimates of
income are adjusted in the Funds to the actual amounts when the amounts are determined.
Derivative instruments
and hedging activities — The Strategic Income Opportunities ETF may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement” or
“MNA”) or similar agreement with certain counterparties. An ISDA Master Agreement is a bilateral agreement between a Fund and a counterparty that governs OTC derivatives and foreign exchange contracts, and
typically contains, among other things, collateral posting terms and master netting provisions in the event of a default or termination. Under an ISDA Master Agreement, a party may, under certain circumstances, offset
with the counterparty certain derivative financial instruments’ payables or receivables with collateral held or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting). These default events include bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular
jurisdiction may impose restrictions on or prohibitions against the right of offset.
When entering into a
derivative transaction, a Fund may be required to post and maintain collateral or margin (including both initial and variation margin). Collateral and margin requirements differ by type of derivative. Margin
requirements are established by the broker or clearing house for exchange-traded and centrally cleared derivatives (financial futures contracts, options, and centrally cleared swaps). Brokers can ask for margining in
excess of the clearing house’s minimum in certain circumstances. Collateral terms are contract specific for OTC derivatives (forward foreign currency contracts, options, and swaps). For derivatives traded under
an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and comparing that amount to the value of any
collateral currently pledged by the Fund and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the
counterparty, if any, are reported separately on the Statements of Assets and Liabilities as cash deposits held at prime broker and due to prime broker, respectively. Non-cash collateral pledged by the Fund, if any,
is noted in the Portfolio of Investments. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty
non-performance.
Certain ISDA Master
Agreements allow counterparties to OTC derivatives transactions to terminate derivative contracts prior to maturity in the event a Fund’s net assets decline by a stated percentage or the Fund fails to meet the
terms of its ISDA Master Agreement, which would cause the Fund (counterparty) to accelerate payment of any net liability owed to the counterparty (Fund).
23
Notes to Financial
Statements (Unaudited) (Continued)
For financial reporting
purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.
As of June 30, 2023, the
Strategic Income Opportunities ETF Fund did not hold any assets and liabilities that were subject to a MNA.
The following table sets
forth the fair value of the Funds’ derivative financial instruments by primary risk exposure as of June 30, 2023:
| Fund | Derivatives not accounted for as hedging instruments under ASC 815 | Asset Derivatives | Liability Derivatives |
| Strategic Income Opportunities ETF | Swap Agreements - Credit Contracts*
| $— | $56,221 |
Futures Contracts - Interest Rate Contracts**
| — | 285,074 |
| * | Statements of Assets and Liabilities Location: Payable for variation margin on swap agreements. Variation margin reported in the Portfolio of Investments and other tables in the Notes to the Financial Statements is the cumulative unrealized appreciation (depreciation). |
| ** | Statements of Assets and Liabilities Location: Payable for variation margin on futures contracts. Only current day’s variation margin is reported within the payable/receivable on the Statement of Assets and Liabilities. Includes cumulative appreciation/(depreciation) on futures contracts as reported on the Portfolio of Investments and within the components of net assets section of the Statement of Assets and Liabilities. |
The following table sets
forth the effect of the Strategic Income Opportunities ETF derivative financial instruments by primary risk exposure on the Statements of Operations for the year ended June 30, 2023:
| Fund | Derivatives not accounted for as hedging instruments under ASC 815 | Realized Gains (Losses) on Derivatives | Change in Unrealized Appreciation (Depreciation) on Derivatives |
| Strategic Income Opportunities ETF | Futures - Interest Rate Contracts*
| $218,897 | $(285,074) |
Swap Agreements - Credit Contracts**
| (26,178) | (56,221) |
| * | Statements of Operations Location: Net realized gains on futures contracts and Net change in unrealized appreciation (depreciation) on futures contracts, respectively. |
| ** | Statements of Operations Location: Net realized losses on swap agreements and Net change in unrealized appreciation (depreciation) on swap agreements, respectively. |
For the six months ended
June 30, 2023, the average quarterly balances of outstanding derivative financial instruments for the Strategic Income Opportunities ETF was as follows:
| Strategic Income Opportunities ETF | |
| Credit Contracts: | |
| Credit Default Swaps (buy protection) - Notional value | $2,666,667 |
| Interest Rate Contracts: | |
| Futures Contracts (long) - Notional Value | 13,280,550 |
| Futures Contracts (short) - Notional Value | 1,565,510 |
Portfolio securities
loaned — The Funds may lend their portfolio securities. Lending portfolio securities exposes the Funds to the risk that the borrower may fail to return the loaned securities or may not be
able to provide additional collateral or that the Funds may experience delays in recovery of the loaned securities or loss of rights in the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain cash collateral with the Funds' custodian. The loaned securities are secured by collateral valued at least equal, at all times, to the market value of the loaned securities plus accrued
interest, if any. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the security
lending agreement. The cash collateral is reinvested by the Funds' custodian into an approved short-term investment vehicle. The approved short-term investment vehicle is subject to market risk.
24
Notes to Financial
Statements (Unaudited) (Continued)
As of June 30, 2023, the
following Fund loaned securities and received collateral as follows:
| Fund | Security Type | Market Value of Securities Loaned* | Market Value of Collateral Received** | Net Amount*** |
| Strategic Income Opportunities ETF | Corporate Bonds | $1,187,208 | $1,230,407 | $43,199 |
| * | The remaining contractual maturity is overnight for all securities. |
| ** | Gross amount of recognized liabilities for securities lending included in the Statements of Assets and Liabilities. |
| *** | Net amount represents the net amount payable due to (received from) the borrower in the event of default. |
All cash collateral is
received, held, and administered by the Funds' custodian for the benefit of the lending Fund in its custody account or other account established for the purpose of holding collateral in cash equivalents.
Funds participating in
securities lending receive compensation in the form of fees. Securities lending income is derived from lending long securities from the Funds to creditworthy approved borrowers at rates that are determined based on
daily trading volumes, float, short-term interest rates and market liquidity and is shown net of fees on the Statements of Operations. When a Fund lends securities, it retains the interest or dividends on the
investment of any cash received as collateral, and the Fund continues to receive interest or dividends on the loaned securities.
Unrealized gain or loss
on the market value of the loaned securities that may occur during the term of the loan is recognized by the Fund. The Fund has the right under the lending agreement to recover any loaned securities from the borrower
on demand.
When-issued or delayed
delivery transactions — Each Fund may purchase or sell securities on a when-issued or delayed delivery basis. These transactions involve a commitment by the Fund to purchase or sell securities for a
predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. When purchasing a security on a delayed delivery basis, the Fund assumes the rights and risks of ownership
of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining NAV. The Fund may dispose of or renegotiate a delayed delivery transaction after it is
entered into, and may sell when-issued securities before they are delivered, which may result in a capital gain or loss. When the Fund has sold a security on a delayed delivery basis, the Fund does not participate in
future gains and losses with respect to the security. When-issued or delayed delivery transactions physically settling within 35-days are deemed not to involve a senior security. When-issued or delayed delivery
transactions that do not physically settle within 35-days are required to be treated as derivatives transactions in compliance with the Derivatives Rule.
Share valuation — The NAV per share of each Fund is calculated daily by dividing the total value of a Fund’s assets, less liabilities, by the number of outstanding shares.
Investment income — Dividend income from securities is recognized on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Funds, where
applicable. Interest income from securities is recorded on the basis of interest accrued, premium amortized and discount accreted. Realized gains and losses resulting from principal pay downs on mortgage-backed and
asset-backed securities are included in interest income. Market discounts, original issue discounts and market premiums on debt securities are accreted/amortized to interest income over the life of the security or to
the appropriate call date, as applicable, with a corresponding adjustment in the cost basis of that security. In addition, it is the Funds’ policy to accrue for foreign capital gains taxes, if applicable, on
certain foreign securities held by the Funds. An estimated foreign capital gains tax is recorded daily on net unrealized gains on these securities and is payable upon the sale of such securities when a gain is
realized.
Distributions to
shareholders — Each Fund intends to distribute to its shareholders substantially all of its income and capital gains. The Climate Transition ETF and US Large Cap Focused ETF declare and
distribute their income, if any, annually, as a dividend to shareholders. The Dividend Select ETF declares and distribute its income, if any, quarterly, as a dividend to shareholders. The Strategic Income
Opportunities ETF and the Ultra Short Income ETF declare and distribute their income, if any, monthly as a dividend to shareholders. Each Fund makes distributions of capital gains, if any, at least annually, net of
applicable capital loss carryforwards. Income distributions and capital gain distributions are determined in accordance with income tax regulations. Recognition of the Funds' net investment income from investments in
underlying funds is affected by the timing of dividend declarations by the underlying funds.
Allocations — Expenses not directly billed to a Fund are allocated proportionally among all Funds in the Trust, and, if applicable, Touchstone Funds Group Trust, Touchstone Strategic Trust and
Touchstone Variable Series Trust (collectively with the Trust, “Touchstone Fund Complex”), daily in relation to net assets of each Fund or another reasonable measure.
Security transactions — Security transactions are reflected for financial reporting purposes as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the
identified cost basis.
25
Notes to Financial
Statements (Unaudited) (Continued)
Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from
those estimates.
LIBOR Transition — Many debt securities, derivatives and other financial instruments in which the Funds may invest, as well as any borrowings made by the Funds from banks or from other lenders,
utilized the London Interbank Offered Rate (“LIBOR”) as the reference or benchmark index for interest rate calculations. LIBOR was a measure of the average interest rate at which major global banks can
borrow from one another. The ICE Benchmark Administration Limited, the administrator of LIBOR, ceased publishing most LIBOR maturities on June 30, 2023. In addition, the U.K. Financial Conduct Authority has
required the ICE Benchmark Administration Limited to continue publishing a subset of U.S. dollar LIBOR settings on a "synthetic" basis through March 2024 for the three-month sterling LIBOR setting and September 2024
for the one-, three- and six-month sterling LIBOR settings. All other market participants adopted alternative rates such as Secured Overnight Financing Rate (“SOFR”) or otherwise amended such financial
instruments to include fallback provisions and other measures that contemplated the discontinuation of LIBOR. To facilitate the transition of legacy derivatives contracts referencing LIBOR, the International Swaps and
Derivatives Association, Inc. launched a protocol to incorporate fallback provisions. There are obstacles to converting certain longer term securities to a new benchmark or benchmarks and the effectiveness of one
versus multiple alternative reference rates has not been determined. Certain proposed replacement rates, such as SOFR, are materially different from LIBOR, and required changes to the applicable spreads. The
utilization of an alternative reference rate, or the transition process to an alternative reference rate, may adversely affect the fund’s performance.
3. Investment Transactions
Investment transactions
(excluding short-term investments and U.S. Government securities) were as follows for the six months ended June 30, 2023:
| Climate Transition ETF* | Dividend Select ETF* | Strategic Income Opportunities ETF | Ultra Short Income ETF | US Large Cap Focused ETF* | |
| Purchases of investment securities | $11,406,229 | $1,151,207 | $9,443,848 | $20,549,521 | $317,557 |
| Proceeds from sales and maturities | $881,423 | $1,214,501 | $15,644,546 | $20,659,778 | $544,001 |
| * | The Climate Transition ETF, the Dividend Select ETF and US Large Cap Focused ETF had subscriptions-in-kind into the Fund of $1,259,331, 2,537,845 and $3,261,934, respectively, which are excluded from purchases of investment securities. The Climate Transition ETF, the Dividend Select ETF and the US Large Cap Focused ETF had redemptions-in-kind out of the Fund of $646,120, $2,013,992 and $3,416,432, respectively, which are excluded from the proceeds from sales and maturities. |
For the six months ended
June 30, 2023, purchases and proceeds from sales and maturities in U.S. Government Securities were $69,140,939 and $62,049,989, respectively, for the Strategic Income Opportunities ETF.
4. Transactions with
Affiliates and Other Related Parties
Certain officers of
the Trust are also officers of the Adviser, or The Bank of New York Mellon (“BNY Mellon”), the sub-administrator, custodian and transfer agent to the Funds. Such officers receive no compensation from the
Trust. The Adviser is a wholly-owned subsidiaries of Western & Southern Financial Group, Inc. (“Western & Southern”).
On behalf of the
Funds, the Adviser pays each Independent Trustee a quarterly retainer plus additional retainers to the Lead Independent Trustee and the chairs of each standing committee. Interested Trustees do not receive
compensation from the Funds. Each Independent Trustee also receives compensation for each Board meeting and committee meeting attended. Each standing committee chair receives additional compensation for each committee
meeting that he or she oversees. The Adviser is reimbursed by the Funds for the Independent Trustees’ compensation and out-of-pocket expenses relating to their services. The Funds accrued Trustee-related
expenses of $56,517 for the Funds’ Board for the six months ended June 30, 2023.
MANAGEMENT & EXPENSE
LIMITATION AGREEMENTS
The Adviser provides
general investment supervisory services for the Funds, under the terms of an advisory agreement (the “Advisory Agreement”). Under the Advisory Agreement, each Fund pays the Adviser a fee, which is computed
and accrued daily and paid monthly, at an annual rate based on average daily net assets of each Fund as shown in the table below.
| Climate Transition ETF | 0.65% on the first $500 million |
26
Notes to Financial
Statements (Unaudited) (Continued)
| 0.60% on assets over $500 million | |
| Dividend Select ETF | 0.55% on the first $1 billion |
| 0.50% on assets over $1 billion | |
| Strategic Income Opportunities ETF | 0.55% on the first $250 million |
| 0.50% on the next $250 million | |
| 0.45% on assets over $500 million | |
| Ultra Short Income ETF | 0.25% on all assets |
| US Large Cap Focused ETF | 0.70% on the first $500 million |
| 0.65% on the next $300 million | |
| 0.60% on the next $200 million | |
| 0.50% on the next $1 billion | |
| 0.40% on assets over $2 billion |
The Adviser has entered
into investment sub-advisory agreements with the following parties (each, a “Sub-Adviser”):
| Fort Washington Investment Advisors, Inc. | Lombard Odier Asset Management (USA) Corp. |
| Dividend Select ETF | Climate Transition ETF |
| Strategic Income Opportunities ETF | |
| Ultra Short Income ETF | |
| US Large Cap Focused ETF |
The Adviser pays
sub-advisory fees to each Sub-Adviser from its advisory fee.
The Adviser entered
into an expense limitation agreement (the “Expense Limitation Agreement”) to contractually limit the annual operating expenses of the Funds, excluding: dividend and interest expenses relating to short sales;
interest; taxes; brokerage commissions and other transaction costs; portfolio transaction and investment related expenses, including expenses associated with the Funds’ interfund lending program, if any; other
expenditures which are capitalized in accordance with U.S. GAAP; the cost of “Acquired Fund Fees and Expenses”, if any; and other extraordinary expenses not incurred in the ordinary course of business. The
maximum annual operating expense limit in any year with respect to the Funds is based on a percentage of the average daily net assets of the Funds. The Adviser has agreed to waive a portion of its fees, and to
reimburse certain fund expenses in order to maintain the following expense limitations for the Funds:
| Termination Date | ||
| Climate Transition ETF | 0.69% | April 29, 2024 |
| Dividend Select ETF | 0.67% | April 29, 2024 |
| Strategic Income Opportunities ETF | 0.65% | April 29, 2024 |
| Ultra Short Income ETF | 0.34% | April 29, 2024 |
| US Large Cap Focused ETF | 0.69% | April 29, 2024 |
The Expense Limitation
Agreement can be terminated with respect to a Fund by a vote of the Funds’ Board if it deems the termination to be beneficial to the Fund’s shareholders.
During the six months
ended June 30, 2023, the Adviser or its affiliates waived investment advisory fees, administration fees or other operating expenses, as follows:
| Fund | Investment Advisory Fees Waived | Administration Fees Waived | Other Operating Expenses Reimbursed/ Waived | Total |
| Climate Transition ETF | $— | $2,587 | $20,064 | $22,651 |
| Dividend Select ETF | — | 18,725 | 38,231 | 56,956 |
| Strategic Income Opportunities ETF | — | 69,221 | 29,612 | 98,833 |
| Ultra Short Income ETF | — | 35,217 | 37,323 | 72,540 |
| US Large Cap Focused ETF | — | 18,740 | 51,447 | 70,187 |
Under the terms of
the Expense Limitation Agreement, the Adviser is entitled to recover, subject to approval by the Funds’ Board, such amounts waived or reimbursed for a period of up to three years from the date on which the
Adviser reduced its compensation or assumed expenses for the Funds. A Fund will make repayments to the Adviser only if such repayment does not cause the Fund's operating expenses (after the repayment is taken into
account) to exceed the Fund's expense limit in place when such amounts were waived or reimbursed by the Adviser and the Fund's current expense limitation.
27
Notes to Financial
Statements (Unaudited) (Continued)
As of June 30, 2023, the
Adviser may seek recoupment of previously waived fees and reimbursed expenses as follows:
| Fund | Expires on or before December 31, 2025 | Expires on or before December 31, 2026 | Total |
| Climate Transition ETF | $— | $22,651 | $22,651 |
| Dividend Select ETF | 64,225 | 56,956 | 121,181 |
| Strategic Income Opportunities ETF | 98,127 | 98,833 | 196,960 |
| Ultra Short Income ETF | 79,410 | 72,540 | 151,950 |
| US Large Cap Focused ETF | 76,391 | 70,187 | 146,578 |
The Adviser did not
recoup any amounts it previously waived or reimbursed during the six months ended June 30, 2023.
ADMINISTRATION AGREEMENT
The Adviser entered
into an Administration Agreement with the Trust, whereby the Adviser is responsible for: supplying executive and regulatory compliance services; supervising the preparation of tax returns; coordinating the preparation
of reports to shareholders and reports to and filings with the SEC and state securities authorities, as well as materials for meetings of the Board; calculating the daily NAV per share; and maintaining the financial
books and records of each Fund.
For its services, the
Adviser’s annual administrative fee is:
0.145%
on the first $20 billion of the aggregate average daily net assets;
0.11% on the next $10
billion of aggregate average daily net assets;
0.09% on the next $10
billion of aggregate average daily net assets; and
0.07% on the
aggregate average daily net assets over $40 billion.
The fee is computed and
allocated among the Touchstone Fund Complex on the basis of relative daily net assets.
The Adviser has engaged
BNY Mellon as the sub-administrator to the Trust. BNY Mellon provides administrative and accounting services to the Trust and is compensated directly by the Adviser, not the Trust.
TRANSFER AGENT AGREEMENT
Under the terms of the
Transfer Agent Agreement between the Trust and BNY Mellon, BNY Mellon provides the Trust with transfer agency services, which include Creation Unit order processing. For these services, BNY Mellon receives a monthly
fee from each Fund. In addition, each Fund pays out-of-pocket expenses incurred by BNY Mellon, including, but not limited to, postage and supplies.
CUSTODIAN AGREEMENT
As custodian, BNY Mellon
is responsible for custody of each Fund’s assets.
SECURITIES LENDING AGREEMENT
As securities lending
agent, BNY Mellon administers the securities lending program for the Funds. BNY Mellon lends certain securities, which are held in custody accounts maintained with BNY Mellon, to borrowers that have been approved by
the Funds.
PLANS OF DISTRIBUTION
The Trust has adopted
a distribution plan pursuant to Rule 12b-1 under the 1940 Act. The plan allows each Fund to pay distribution fees up to a maximum of 0.25% of average daily net assets. No such fee is currently incurred and paid by the
Funds. The Funds will not incur and pay distribution fees until such time as approved by the Fund's Board.
DISTRIBUTOR
Foreside Fund Services,
LLC (the “Distributor”) serves as the principal distributor of the Fund’s shares. The Adviser has agreed to compensate the Distributor for distribution-related services.
28
Notes to Financial
Statements (Unaudited) (Continued)
INTERFUND TRANSACTIONS
Pursuant to Rule 17a-7
under the 1940 Act, the Funds may engage in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Trustees and/or common Officers. During the six
months ended June 30, 2023, the Funds did not engage in any Rule 17a-7 transactions.
5. Fund Share Transactions
Shares of each Fund
are issued and redeemed only in Creation Units. Investors may acquire shares and shareholders may tender their shares for redemption only in Creation Units. The number of shares of a Fund that constitute a Creation
Unit is as follows: 25,000 for the Climate Transition ETF, Dividend Select ETF, Strategic Income Opportunities ETF and US Large Cap Focused ETF and 50,000 for the Ultra Short Income ETF. Each Fund generally offers and
issues shares either in exchange for (i) a basket of securities designated by the Fund (“Deposit Securities”) together with the deposit of a specified cash payment (“Cash Component”) or (ii) a
cash payment equal in value to the Deposit Securities (“Deposit Cash”) together with the Cash Component. Transactions in capital shares of the Fund are disclosed in detail in the Statement of Changes in
Net Assets. Authorized Participants are subject to standard creation and redemption transaction fees to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units.
6. Liquidity
Interfund Lending — Pursuant to an Exemptive Order issued by the SEC on March 28, 2017, the Funds, along with certain other funds in the Touchstone Fund Complex, may participate in an interfund
lending program. The interfund lending program provides an alternate credit facility that allows the Funds to lend to or borrow from other participating funds in the Touchstone Fund Complex, subject to the conditions
of the Exemptive Order. The Funds may not borrow under the facility for leverage purposes and the loans’ duration may be no more than 7 days.
During the six months
ended June 30, 2023, the Funds did not utilize Interfund Lending.
7. Federal Tax Information
Federal Income Tax — It is each Fund’s policy to continue to comply with the special provisions of the Internal Revenue Code applicable to regulated investment companies. As provided therein, in
any fiscal year in which a Fund so qualifies and distributes at least 90% of its investment company taxable income, the Fund (but not the shareholders) will be relieved of federal income tax on the income distributed.
It is each Fund’s policy to distribute all of its taxable income and accordingly, no provision for income taxes has been made.
In order to avoid
imposition of the excise tax applicable to regulated investment companies, it is also each Fund’s intention to declare and pay as dividends in each calendar year at least 98% of its investment company taxable
income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ending October 31) plus undistributed amounts from prior years.
The tax character of
distributions paid for the period ended December 31, 2022 are as follows:
| Dividend Select ETF | Strategic Income Opportunities ETF | Ultra Short Income ETF | US Large Cap Focused ETF | |
| Period Ended December 31, 2022 | Period Ended December 31, 2022 | Period Ended December 31, 2022 | Period Ended December 31, 2022 | |
| From ordinary income | $183,700 | $1,908,028 | $686,340 | $58,353 |
| Total distributions | $183,700 | $1,908,028 | $686,340 | $58,353 |
29
Notes to Financial
Statements (Unaudited) (Continued)
The following
information is computed on a tax basis for each item as of December 31, 2022:
| Touchstone Dividend Select ETF | Touchstone Strategic Income Opportunities ETF | Touchstone Ultra Short Income ETF | Touchstone US Large Cap Focused ETF | |
| Tax cost of portfolio investments | $25,209,576 | $99,641,499 | $51,161,867 | $24,513,622 |
| Gross unrealized appreciation on investments | 1,333,329 | 1,143,105 | 88,947 | 1,102,567 |
| Gross unrealized depreciation on investments | (973,461) | (3,302,087) | (424,107) | (2,024,398) |
| Net unrealized appreciation (depreciation) on investments | 359,868 | (2,158,982) | (335,160) | (921,831) |
| Capital loss carryforwards | (54,504) | — | — | (111,663) |
| Undistributed ordinary income | 515 | 24,835 | 54,463 | 639 |
| Accumulated earnings (deficit) | $305,879 | $(2,134,147) | $(280,697) | $(1,032,855) |
The difference between
the tax cost of portfolio investments and the financial statement cost is primarily due to wash sale loss deferrals and taxable interest on defaulted securities.
As of December 31, 2022,
the Funds had the following capital loss carryforwards for federal income tax purposes:
| Fund | No Expiration Short Term | No Expiration Long Term | Total |
| Dividend Select ETF | $ 54,504 | $ — | $ 54,504 |
| US Large Cap Focused ETF | 111,663 | — | 111,663 |
The capital loss
carryforwards may be utilized in future years to offset net realized capital gains, if any, prior to distributing such gains to shareholders.
The Funds recognize
tax benefits or expenses of uncertain tax positions only when the position is more likely than not to be sustained assuming examination by tax authorities. Management of the Funds has reviewed tax positions taken in
tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the previous three tax year ends and the interim tax period since then, as applicable) and has concluded that no
provision for unrecognized tax benefits or expenses is required in these financial statements and does not expect this to change over the next six months. The Funds recognize interest and penalties, if any, related to
unrecognized tax benefits in the Statements of Operations. During the period, the Funds did not incur any interest or penalties.
As of June 30, 2023, the
Trust had federal tax costs resulting in net unrealized appreciation (depreciation) as follows:
| Fund | Federal Tax Cost | Gross Unrealized Appreciation on Investments | Gross Unrealized Depreciation on Investments | Gross Unrealized Appreciation on Other(A) | Gross Unrealized Depreciation on Other(A) | Net Unrealized Appreciation (Depreciation) |
| Climate Transition ETF | $11,344,414 | $813,217 | $(188,023) | $196 | $(19) | $625,371 |
| Dividend Select ETF | 27,030,054 | 2,628,229 | (988,850) | — | — | 1,639,379 |
| Strategic Income Opportunities ETF | 101,492,821 | 1,407,563 | (2,896,542) | — | (341,295) | (1,830,274) |
| Ultra Short Income ETF | 52,153,899 | 135,830 | (371,619) | — | — | (235,789) |
| US Large Cap Focused ETF | 26,388,136 | 3,511,941 | (505,120) | — | — | 3,006,821 |
| (A) | Other includes Derivatives and Foreign Currency Transactions. | |
8. Commitments and
Contingencies
The Funds indemnify
the Trust’s officers and Trustees for certain liabilities that might arise from their performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts that
contain a variety of representations and warranties and which provide general indemnifications. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made
against the Funds.
30
Notes to Financial
Statements (Unaudited) (Continued)
9. Principal Risks
Risks Associated with
Foreign Investments – Certain Funds may invest in the securities of foreign issuers. Investing in securities issued by companies whose principal business activities are outside the U.S. may involve
significant risks not present in domestic investments. For example, there is generally less publicly available information about foreign companies, particularly those not subject to the disclosure and reporting
requirements of the U.S. securities laws. Foreign issuers are generally not bound by uniform accounting, auditing, and financial reporting requirements and standards of practice comparable to those applicable to
domestic issuers. Investments in foreign securities also involve the risk of possible adverse changes in investment or exchange control regulations, expropriation or confiscatory taxation, limitations on the removal
of funds or other assets of a Fund, political or financial instability or diplomatic and other developments which could affect such investments. Political and military events, may cause market disruptions. Foreign
stock markets, while growing in volume and sophistication, are generally not as developed as those in the U.S., and securities of some foreign issuers (particularly those located in developing countries) may be less
liquid and more volatile than securities of comparable U.S. companies. In general, there is less overall governmental supervision and regulation of foreign securities markets, broker-dealers, and issuers than in the
U.S.
Risks Associated with
Sector Concentration – Certain Funds may invest a high percentage of their assets in specific sectors of the market in order to achieve a potentially greater investment return. As a result, these Funds
may be more susceptible to economic, political, and regulatory developments in a particular sector of the market, positive or negative, and may experience increased volatility in the Funds' NAVs and magnified effect
on the total return.
Risks Associated with
Credit – An issuer may be unable to make timely payments of either principal or interest. This may cause the issuer’s securities to decline in value. Credit risk is particularly
relevant to those Funds that invest a significant amount of their assets in junk bonds or lower-rated securities.
Risks Associated with
Cyber Security - With the increased use of technologies, such as mobile devices and "cloud"-based service offerings and the dependence on the Internet and computer systems to perform necessary business
functions, the Funds' service providers are susceptible to cyber security risks that could result in losses to a Fund and its shareholders. Cyber security breaches are either intentional or unintentional events that
allow an unauthorized party to gain access to Fund assets, customer data, or proprietary information, or cause a Fund or Fund service provider to suffer data corruption or lose operational functionality. A cyber
security breach could result in the loss or theft of customer data or funds, loss or theft of proprietary information or corporate data, physical damage to a computer or network system, or costs associated with system
repairs, any of which could have a substantial impact on a Fund. Cyber security incidents could cause a Fund, the Adviser, a Sub-Adviser, or other service provider to incur regulatory penalties, reputational damage,
compliance costs associated with corrective measures, litigation costs, or financial loss. They may also result in violations of applicable privacy and other laws. In addition, such incidents could affect issuers in
which a Fund invests, thereby causing the Fund’s investments to lose value.
Risks Associated with
Interest Rate Changes – The price of debt securities is generally linked to the prevailing market interest rates. In general, when interest rates rise, the price of debt securities falls, and when
interest rates fall, the price of debt securities rises. The price volatility of a debt security also depends on its maturity. Longer-term securities are generally more volatile, so the longer the average maturity or
duration of these securities, the greater their price risk. Duration is a measure of the expected life, taking into account any prepayment or call features of the security, that is used to determine the price
sensitivity of the security for a given change in interest rates. Specifically, duration is the change in the value of a fixed-income security that will result from a 1% change in interest rates, and generally is
stated in years. For example, as a general rule a 1% rise in interest rates means a 1% fall in value for every year of duration. Maturity, on the other hand, is the date on which a fixed-income security becomes due
for payment of principal. An increase in interest rates could negatively impact a Fund’s NAV. Recent and potential future changes in government monetary policy may affect interest rates. Over the past
several years, the U.S. Federal Reserve has maintained the level of interest rates at or near historic lows. However, more recently, interest rates have begun to increase as a result of action that has been taken by
the U.S. Federal Reserve, which has raised, and may continue to raise, interest rates. Such increases which could expose fixed-income and related markets to heightened volatility and could cause the value of a Fund's
investments, and the Fund's NAV, to decline, potentially suddenly and significantly, which may negatively impact the Fund's performance.
Risks Associated with
Health Crises – A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, which may lead to less liquidity in
certain instruments, industries, sectors or the markets generally, and may ultimately affect Fund performance. For example, the COVID-19 pandemic has resulted and may continue to result in significant disruptions to
global business activity and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. The
impact of a health crisis and other epidemics and pandemics that may arise in the future, could affect the global economy in ways that cannot necessarily be foreseen at the present time. A health crisis may exacerbate
other pre-existing political, social and economic risks. Any such impact could adversely affect a Fund's performance, resulting in losses to your investment.
Please see the
Funds’ prospectus and statement of additional information for a complete discussion of these and other risks.
31
Notes to Financial
Statements (Unaudited) (Continued)
10. Subsequent Events
Subsequent events
occurring after the date of this report have been evaluated for potential impact to this report through the date the financial statements were issued.
There were no subsequent
events that necessitated recognition or disclosure in the Funds’ financial statements.
32
Other Items (Unaudited)
Proxy Voting Guidelines and Proxy
Voting Records
The Sub-Advisers are
responsible for exercising the voting rights associated with the securities purchased and held by the Funds. A description of the policies and procedures that the Sub-Advisers use in fulfilling this responsibility is
available as an appendix to the most recent Statement of Additional Information, which can be obtained without charge by calling toll free 1.800.543.0407 or by visiting the Touchstone website at
TouchstoneInvestments.com or on the Securities and Exchange Commission’s (the “Commission”) website sec.gov. Information regarding how those proxies were voted during the most recent twelve-month
period ended June 30, which will be filed by August 31 of that year, is also available without charge by calling toll free 1.800.543.0407 or on the Commission’s website at sec.gov.
Quarterly Portfolio Disclosure
Each Fund’s
holdings as of the end of the third month of every fiscal quarter will be disclosed on Form N-PORT within 60 days of the end of the fiscal quarter. The complete listing of each Fund’s portfolio holdings is
available on the Commission’s website and will be made available to shareholders upon request by calling 1.833.368.7383.
Schedule of Shareholder Expenses
As a shareholder of
the Funds, you incur two types of costs: (1) transaction costs, including brokerage commissions paid on purchases and sales of an ETF’s Shares, which are not reflected in the example and (2) ongoing costs,
including investment advisory fees; shareholder servicing fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these
costs with the ongoing costs of investing in other funds.
The example is based on
an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2023 through June 30, 2023).
Actual Expenses
The first line for
each share class of a Fund in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under
the heading entitled “Expenses Paid During the Six Months Ended June 30, 2023” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison
Purposes
The second line for
each share class of a Fund in the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratio and an assumed rate of return of 5% per
year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You
may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the
expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of an ETF’s Shares, which
are not reflected in the example. Therefore, the second line for each share class of a Fund in the table below is useful in comparing ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Net Expense Ratio Annualized June 30, 2023 | Beginning Account Value January 1, 2023 | Ending Account Value June 30, 2023 | Expenses Paid During the Six Months Ended June 30, 2023* | ||
| Climate Transition ETF** | |||||
| Actual | 0.69% | $1,000.00 | $1,065.20 | $1.19 | |
| Hypothetical | 0.69% | $1,000.00 | $1,007.20 | $1.16 |
33
Other Items (Unaudited) (Continued)
| Net Expense Ratio Annualized June 30, 2023 | Beginning Account Value January 1, 2023 | Ending Account Value June 30, 2023 | Expenses Paid During the Six Months Ended June 30, 2023* | ||
| Dividend Select ETF | |||||
| Actual | 0.67% | $1,000.00 | $1,065.40 | $3.43 | |
| Hypothetical | 0.67% | $1,000.00 | $1,021.47 | $3.36 | |
| Strategic Income Opportunities ETF | |||||
| Actual | 0.65% | $1,000.00 | $1,025.60 | $3.26 | |
| Hypothetical | 0.65% | $1,000.00 | $1,021.57 | $3.26 | |
| Ultra Short Income ETF | |||||
| Actual | 0.34% | $1,000.00 | $1,029.00 | $1.71 | |
| Hypothetical | 0.34% | $1,000.00 | $1,023.11 | $1.71 | |
| US Large Cap Focused ETF | |||||
| Actual | 0.69% | $1,000.00 | $1,186.90 | $3.74 | |
| Hypothetical | 0.69% | $1,000.00 | $1,021.37 | $3.46 |
| * | Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect one-half year period). |
| ** | Represents the period from commencement of operations (April 28, 2023) through June 30, 2023. Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 61/365. |
Liquidity Risk Management
The Funds have adopted
and implemented a written liquidity risk management program (the “LRM Program”) as required by Rule 22e-4 under the Investment Company Act of 1940, as amended. Rule 22e-4 requires that each Fund adopt a
program that is reasonably designed to assess and manage the Funds’ liquidity risk, which is the risk that a Fund could not meet redemption requests without significant dilution of remaining investors’
interests in a Fund.
Assessment and
management of a Fund’s liquidity risk under the LRM Program takes into consideration certain factors, such as a Fund’s investment strategy and the liquidity of its portfolio investments during normal and
reasonably foreseeable stressed conditions, its short- and long-term cash-flow projections during both normal and reasonably foreseeable stressed conditions, and its cash and cash-equivalent holdings and access to
other funding sources. As required by the rule, the LRM Program includes policies and procedures for classification of Fund portfolio holdings in four liquidity categories, maintaining certain levels of highly liquid
investments, and limiting holdings of illiquid investments. To the extent a Fund is classified as an "In-Kind ETF" under Rule 22e-4, the Fund is not required to include in the LRM Program policies and procedures
relating to classification of portfolio holdings into four liquidity categories or establishment of a highly liquid investment minimum.
The Board of Trustees
of the Trust approved the appointment of a LRM Program administrator responsible for administering the LRM Program and for carrying out the specific responsibilities set forth in the LRM Program, including reporting
to the Board on at least an annual basis regarding the LRM Program’s operation, its adequacy, and the effectiveness of its implementation for the past year (the “Program Administrator Report”). The
Board has reviewed the Program Administrator Report covering the period from May 12, 2022 through May 12, 2023 (the “Review Period”). The Program Administrator Report stated that during the Review Period
the LRM Program operated adequately and effectively in promoting effective liquidity risk management for the Funds.
Advisory and Sub-Advisory Agreement
Approval Disclosure
At a meeting held on
November 17, 2022, the Board of Trustees (the “Board” or “Trustees”) of the Touchstone ETF Trust (the “Trust”), and by a separate vote, the Independent Trustees of the Trust,
approved an amendment to the Investment Advisory Agreement between the Trust and the Adviser adding the Touchstone Climate Transition ETF (the “Fund”) and also initially approved a Sub-Advisory Agreement
between the Adviser and Lombard Odier Asset Management (USA) Corp. doing business as Lombard Odier Asset Management (USA) Corp. (the “Sub-Adviser”) with respect to the Fund.
In determining whether
to approve the amendment to the Investment Advisory Agreement and the Sub-Advisory Agreement, the Adviser and the Sub-Adviser furnished information necessary for a majority of the Independent Trustees to make the
determination that approval of the amendment to the Investment Advisory Agreement and the initial approval of the Sub-Advisory Agreement was in the best interests of the Fund and its shareholders. The information
considered by the Board included: (1) a comparison of the Fund’s proposed advisory fee and estimated net expense ratios with those of comparable funds; (2) performance information regarding the
Sub-Adviser’s Climate Transition Strategy, which was the strategy the Adviser proposed the Sub-Adviser utilize in managing the Fund; (3) the Adviser’s and its affiliates’ estimated revenues and costs
of providing services to the Fund; and (4) information about the Adviser’s and Sub-Adviser’s personnel.
34
Other Items (Unaudited) (Continued)
Prior to voting, the
Independent Trustees reviewed the proposed approval of the amendment to the Investment Advisory Agreement and the Sub-Advisory Agreement with management and with experienced independent legal counsel and received
materials from such counsel discussing the legal standards for their consideration of the approval of the amendment to the Investment Advisory Agreement and the Sub-Advisory Agreement with respect to the Fund. The
Independent Trustees also reviewed the proposed approval of the amendment to the Investment Advisory Agreement and the Sub-Advisory Agreement with independent legal counsel in a private session at which no
representatives of management were present.
In approving the
amendment to the Investment Advisory Agreement, the Board considered various factors, among them: (1) the nature, extent and quality of services to be provided to the Fund, including the personnel who would be
providing such services; (2) the Adviser's proposed compensation and anticipated profitability; (3) a comparison of estimated net expenses and relevant performance information; (4) anticipated economies of scale; and
(5) the terms of the Investment Advisory Agreement. The Board's analysis of these factors is set forth below. The Independent Trustees were advised by independent legal counsel throughout the process.
Nature, Extent and
Quality of Advisor Services. The Board considered the level and depth of knowledge of the Adviser, including the professional experience and qualifications of senior personnel. In evaluating the quality of services to
be provided by the Adviser, the Board took into account its familiarity with the Adviser’s senior management through Board meetings, discussions and reports during the preceding year. The Board also took into
account the Adviser’s compliance policies and procedures. The quality of administrative and other services provided to other funds managed by the Adviser, including the Adviser’s role in coordinating the
activities of those funds’ other service providers, was also considered. The Board also considered the Adviser’s relationship with its affiliates and the resources available to them, as well as any
potential conflicts of interest.
The Board discussed
the Adviser’s effectiveness in monitoring the performance of the Trust’s other sub-advisors, and the Adviser’s timeliness in responding to performance issues. The Board considered the
Adviser’s process for monitoring the Sub-Adviser, which would include an examination of both qualitative and quantitative elements of the Sub-Adviser’s organization, personnel, procedures, investment
discipline, infrastructure and performance. The Board considered that the Adviser would conduct periodic due diligence of the Sub-Adviser, during which the Adviser would examine a wide variety of factors, such
as the financial condition of the Sub-Adviser, the quality of the Sub-Adviser’s systems, the effectiveness of the Sub-Adviser’s disaster recovery programs, trade allocation and execution procedures,
compliance with the Sub-Adviser’s policies and procedures, results of regulatory examinations and any other factors that might affect the quality of services to be provided by the Sub-Adviser to the Fund.
The Board noted that the Adviser’s monitoring processes also would include quarterly reviews of compliance certifications, and that any issues arising from such reviews and the Adviser’s due
diligence reviews of the Sub-Adviser would be reported to the Board.
The Trustees concluded
that they were satisfied with the nature, extent and quality of services to be provided to the Fund by the Adviser under the Investment Advisory Agreement.
Advisor’s
Proposed Compensation and Anticipated Profitability. The Board took into consideration the financial condition and anticipated profitability of the Adviser and its affiliates and the anticipated direct and indirect benefits to be derived by
the Adviser and its affiliates from the Adviser’s relationship with the Fund. The Board noted that the Adviser had contractually agreed to waive advisory fees and administrative fees and/or reimburse expenses in
order to limit the Fund’s net operating expenses and would pay sub-advisory fees out of the advisory fees the Adviser would receive from the Fund. The Board reviewed the anticipated profitability of the
Adviser's relationship with the Fund and also considered whether the Adviser has the financial wherewithal to provide a high level of services to the Fund, noting the ongoing commitment of the Adviser’s parent
company with respect to providing support and resources as needed. The Board also noted that the Adviser would derive benefits to its reputation and other benefits from its association with the Fund.
The Board recognized
that the Adviser should be entitled to earn a reasonable level of profits in exchange for the level of services it would provide to the Fund and the entrepreneurial risk that it would assume as Adviser. Based upon
their review, the Trustees concluded that the Adviser’s and its affiliates’ level of profitability, if any, to be derived from their relationship with the Fund was reasonable and not excessive.
Estimated Expenses and
Performance. The Board compared the Fund's proposed advisory fee and estimated total expense ratios, after estimated waivers and reimbursements, with those of comparable funds. The Board noted that the
proposed advisory fee was below the median of the Morningstar peer group of actively managed ETFs with “climate” or “carbon” in their names. The Board took into account the Fund’s
estimated total expenses after estimated waivers and reimbursements, noting that the estimated net expenses would place the Fund below the median of actively managed ETFs with “climate” or
“carbon” in their names. The Board also took into account that the Adviser had contractually agreed to limit the Fund's net operating expenses for at least one year following the launch of the Fund.
The Board took into consideration the performance of the Sub-Adviser’s Climate Transition Strategy relative to the Morningstar Global Large-Stock Blend category average and the MSCI World NR USD Index
through September 30, 2022, noting that the Sub-Adviser’s Climate Transition Strategy had outperformed and underperformed the Morningstar category and benchmark index, respectively, since the Strategy’s
inception on March 16, 2020.
35
Other Items (Unaudited) (Continued)
The Board also
considered the effect of the Fund’s potential growth and size on its performance and expenses. The Board noted that the Adviser had contractually agreed to waive a portion of its fees and/or reimburse expenses
of the Fund in order to reduce the Fund’s operating expenses to a targeted level. The Board noted that the sub-advisory fees under the Sub-Advisory Agreement with respect to the Fund would be paid by the Adviser
out of the advisory fee it would receive from the Fund and considered the impact of such sub-advisory fees on the profitability of the Adviser. In reviewing the proposed total expense ratios and relevant performance
information, the Board also took into account the nature, extent and quality of the services to be provided to the Fund by the Adviser and its affiliates.
Potential Economies of
Scale. The Board considered the effect of the Fund's potential growth and size on its performance and expenses. The Board took into account management’s discussion of the Fund’s
advisory fee structure. The Board considered the proposed advisory fees under the Investment Advisory Agreement as a percentage of assets at different asset levels and possible economies of scale that might be
realized if the assets of the Fund increased. The Board noted that the proposed advisory fee schedule for the Fund would contain a breakpoint that would reduce the advisory fee rate on assets above a specified level
as the Fund’s assets increased. The Board also noted that if the Fund’s assets increased over time, the Fund might realize other economies of scale if assets increased proportionally more than
certain other expenses. The Board also considered the fact that, under the Investment Advisory Agreement, the advisory fee payable to the Adviser by the Fund would be reduced by the total sub-advisory fee paid by the
Adviser to the Fund’s Sub-Adviser.
Conclusion. In considering the approval of the amendment to the Investment Advisory Agreement, the Board, including the Independent Trustees, did not identify any single factor as controlling, and
each Trustee may have attributed different weights to the various factors. The Trustees evaluated all information available to them. The Board reached the following conclusions regarding the Investment Advisory
Agreement with the Adviser, among others: (a) the Adviser demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Adviser
maintains an appropriate compliance program; and (c) the Fund’s proposed advisory fee is reasonable relative to those of similar funds and the services to be provided by the Adviser. Based on their conclusions,
the Trustees determined with respect to the Fund that approval of the amendment to the Investment Advisory Agreement was in the best interests of the Fund and its shareholders.
In initially approving
the Sub-Advisory Agreement for the Fund, the Board considered various factors with respect to the Fund and the Sub-Advisory Agreement, among them: (1) the nature, extent and quality of services to be provided to the
Fund, including the personnel who would be providing such services; (2) the Sub-Adviser’s proposed sub-advisory fee; (3) the performance of the Sub-Adviser’s Climate Transition Strategy; and (4) the terms
of the Sub-Advisory Agreement. The Board’s analysis of these factors is set forth below. The Independent Trustees were advised by independent legal counsel throughout the process.
Nature, Extent and
Quality of Services Provided; Investment Personnel. The Board considered information provided by the Adviser and the Sub-Adviser regarding the services to be provided by the Sub-Adviser. The Board also considered the Sub-Adviser’s
level of knowledge and investment style. The Board reviewed the experience and credentials of the applicable investment personnel of the Sub-Adviser who would be responsible for managing the Fund. The Board also
took into consideration that the Adviser was satisfied with the Sub-Adviser’s in-house risk and compliance teams.
Sub-Advisor’s
Proposed Compensation. The Board also took into consideration the financial condition of the Sub-Adviser and any indirect benefits to be derived by the Sub-Adviser from the Sub-Adviser’s relationship with
the Fund. In considering the anticipated profitability to the Sub-Adviser of its relationship with the Fund, the Board noted the proposed contractual undertaking of the Adviser to maintain expense limitations for the
Fund and also noted that the sub-advisory fee under the Sub-Advisory Agreement would be paid by the Adviser out of the advisory fee that it would receive under the Investment Advisory Agreement and was negotiated at
arm’s-length. As a consequence, the anticipated profitability to the Sub-Adviser of its relationship with the Fund was not a substantial factor in the Board’s deliberations. For similar reasons, the
Board did not consider the potential economies of scale in the Sub-Adviser’s management of the Fund to be a substantial factor in its consideration, although the Board noted that the sub-advisory fee schedule
included a breakpoint and that the Sub-Adviser had agreed to waive a portion of its sub-advisory fee until the Fund’s assets reached $50 million.
Proposed Sub-Advisory
Fees and Performance Information. The Board compared the Fund's proposed sub-advisory fee with those of other Touchstone ETFs. The Board noted that peer group data was not available to evaluate the proposed sub-advisory
fee. The Board considered that the Fund would pay an advisory fee to the Adviser and that the Adviser would pay a sub-advisory fee to the Sub-Adviser out of the advisory fee it would receive from the Fund. The
Board considered the amount to be retained by the Adviser and the sub-advisory fee to be paid to the Sub-Adviser with respect to the various services to be provided by the Adviser and the Sub-Adviser. The Board also
noted that the Adviser negotiated the sub-advisory fee with the Sub-Adviser at arm’s-length. Based on their review, the Trustees concluded that the Fund’s proposed sub-advisory fee was reasonable in light
of the quality of services to be provided by the Sub-Adviser to the Fund and the other factors considered.
36
Other Items (Unaudited) (Continued)
As noted above, the
Board considered the performance of the Sub-Adviser’s Climate Transition Strategy. The Board also noted the Adviser’s expertise and resources in monitoring the performance, investment style and
risk-adjusted performance of the Trust’s other sub-advisors. The Board was mindful of the Adviser's focus on the performance of sub-advisors and the Adviser's ways of addressing underperformance.
Conclusion. In considering the initial approval of the Sub-Advisory Agreement with respect to the Fund, the Board, including the Independent Trustees, did not identify any single factor as controlling,
and each Trustee may have attributed different weights to the various factors. The Board reached the following conclusions regarding the Sub-Advisory Agreement, among others: (a) the Sub-Adviser is qualified to manage
the Fund’s assets in accordance with the Fund's investment goals and policies; (b) the Sub-Adviser maintains an appropriate compliance program; (c) the Fund’s proposed advisory and sub-advisory fee
structure is reasonable relative to those of similar ETFs and to the services to be provided by the Adviser and the Sub-Adviser; and (d) the Sub-Adviser’s proposed investment strategies are appropriate for
pursuing the investment goals of the Fund. Based on its conclusions, the Board determined that approval of the Sub-Advisory Agreement with respect to the Fund was in the best interests of the Fund and its
shareholders.
37
PRIVACY PROTECTION POLICY
We Respect Your Privacy
Thank you for your
decision to invest with us. Touchstone and its affiliates have always placed a high value on the trust and confidence our clients place in us. We believe that confidence must be earned and validated through time. In
today’s world, when technology allows the sharing of information at light speeds, trust must be reinforced by our sincere pledge to take the steps necessary to ensure that the information you share with us is
treated with respect and confidentiality.
Our Pledge to Our Clients
• We collect
only the information we need to service your account and administer our business.
• We are committed to keeping your information confidential and we place strict limits and controls on the use and sharing of your information.
• We make
every effort to ensure the accuracy of your information.
We Collect the Following Nonpublic
Personal Information About You:
• Information we receive from you on or in applications or other forms, correspondence, or conversations, including, but not limited to, your name, address, phone number, social
security number, assets, income and date of birth; and
• Information about your transactions with us, our affiliates, or others, including, but not limited to, your account number and balance, payment history, parties to transactions,
cost basis information, and other financial information.
Categories of Information We
Disclose and Parties to Whom We Disclose
We do not disclose any
nonpublic personal information about our current or former clients to nonaffiliated third parties, except as required or permitted by law.
We Place Strict Limits and Controls
on the Use and Sharing of Your Information
• We restrict access to nonpublic personal information about you to authorized employees who need the information to administer your business.
• We maintain physical, electronic and procedural safeguards that comply with federal standards to protect this information.
• We do not disclose any nonpublic personal information about our current or former clients to anyone, except as required or permitted by law or as described in this document.
• We will not
sell your personal information to anyone.
We May Provide Information to
Service Your Account
Sometimes it is
necessary to provide information about you to various companies such as transfer agents, custodians and broker-dealers to facilitate the servicing of your account. These organizations have a legitimate business need
to see some of your personal information in order for us to provide service to you. We may disclose to these various companies the information that we collect as described above. We require that these companies,
including our own subsidiaries and affiliates, strictly maintain the confidentiality of this information and abide by all applicable laws. We do not permit these companies to sell the information for their own
purposes, and we never sell our customer information.
This policy is applicable
to the following affiliated companies: Touchstone Funds Group Trust, Touchstone Strategic Trust, Touchstone Variable Series Trust and Touchstone ETF Trust.
The Privacy Protection
Policy is not part of the Semi-Annual Report.
39
Touchstone Investments
Investment Adviser
Touchstone Advisors, Inc.*
303 Broadway
Cincinnati, Ohio 45202-4203
303 Broadway
Cincinnati, Ohio 45202-4203
Distributor
Foreside Fund Services, LLC
Three Canal Plaza, Suite 100
Portland, Maine 04101
Three Canal Plaza, Suite 100
Portland, Maine 04101
Transfer Agent
The Bank of New York Mellon
6023 Airport Road
Oriskany, New York 13424
Shareholder Service
1.833.368.7383
* A Member of Western &
Southern Financial Group
ETF-2657-ETFT-SAR-2306
| (b) | Not applicable. |
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
| (a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1(a) of this form. |
| (b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
| (a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
| (b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
| (a)(1) | Not applicable. |
| (a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
| (a)(2)(1) | Not applicable. |
| (a)(2)(2) | Not applicable. |
| (b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) | Touchstone ETF Trust | |||
| By (Signature and Title)* | /s/ E. Blake Moore, Jr. | |||
| E. Blake Moore, Jr., President | ||||
| (principal executive officer) | ||||
| Date: | 08/30/2023 | |||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* | /s/ E. Blake Moore, Jr. | |||
| E. Blake Moore, Jr., President | ||||
| (principal executive officer) | ||||
| Date: | 08/30/2023 | |||
| By (Signature and Title)* | /s/ Terrie A. Wiedenheft | |||
| Terrie A. Wiedenheft, Controller and Treasurer | ||||
| (principal financial officer) | ||||
| Date: | 08/30/2023 | |||
* Print the name and title of each signing officer under his or her signature