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 811-21113
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Touchstone Institutional Funds Trust
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(Exact name of registrant as specified in charter)
303 Broadway, Suite 1100
Cincinnati, OH 45202
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(Address of principal executive offices) (Zip code)
Jill McGruder
Touchstone Advisors, Inc.
303 Broadway, Suite 1100
Cincinnati, OH 45202
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(Name and address of agent for service)
registrant's telephone number, including area code: (513) 878-4066
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Date of fiscal year end: 12/31
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Date of reporting period: 12/31/09
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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. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
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December 31, 2009
Annual Report
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TOUCHSTONE INSTITUTIONAL FUNDS TRUST
Touchstone JSAM Institutional Large Cap Value Fund
Touchstone Mazama Institutional Growth Fund
Touchstone Sands Capital Institutional Growth Fund
[LOGO] Touchstone Investments(R)
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Table of Contents
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Page
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Letter from the President 3
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Management's Discussion of Fund Performance (Unaudited) 4-12
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Tabular Presentation of Portfolios of Investments (Unaudited) 13
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Statements of Assets and Liabilities 14
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Statements of Operations 15
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Statements of Changes in Net Assets 16-17
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Financial Highlights 18-20
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Notes to Financial Statements 21-27
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Portfolios of Investments:
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JSAM Institutional Large Cap Value Fund 28
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Mazama Institutional Growth Fund 29-30
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Sands Capital Institutional Growth Fund 31
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Report of Independent Registered Public Accounting Firm 32
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Other Items (Unaudited) 33-38
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Management of the Trust (Unaudited) 39-41
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Privacy Protection Policy 42
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2
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Letter from the President
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Dear Shareholder:
We are pleased to provide you with the Touchstone Institutional Funds Trust
Annual Report. Inside you will find key financial information, as well as
manager commentaries for the year ended December 31, 2009.
After the series of events in 2008 that took such a heavy toll on financial
markets, government programs implemented have had a positive effect on financial
markets, helping 2009 become a truly extraordinary year. Improving confidence in
the economy and strong technicals have combined to fuel a rally. Spreads in most
sectors have narrowed considerably, particularly in the corporate and mortgage
sectors, and the Federal Reserve is expected to remain accommodative into 2010
as the economy remains weak.
Though troubled by the historically significant loss of global capital, concern
for inflationary pressure from growth, and Treasury debt issuance, the impact on
the bond market was one of improving liquidity. Market conditions during the
quarter were dominated by global optimism for a recovery, led by expectations of
inventory rebuilding and signs of improved interest in home buying. Economic
data was less mixed, with strength evidenced by a rebound in consumer optimism
and the stock market, although the domestic U.S. economy is still laboring under
high unemployment.
Despite the fact that some forecasters believe the economy could remain sluggish
for some time, continued government stimulus, higher exports due to the dollar
weakness, and higher revenues combined with improving cost containment should
lead to a restocking cycle, as well as improving employment prospects and wage
gains in 2010.
Touchstone is committed to providing investors with access to institutional
money managers who act in a sub-advisory capacity. Our sub-advisors are
investment managers with demonstrated proficiency in their declared area of
expertise. We hope that you will find the enclosed commentaries helpful.
We greatly appreciate your continued support. Thank you for including Touchstone
as part of your investment plan.
Sincerely,
/s/ Jill T. McGruder
Jill T. McGruder
President
Touchstone Institutional Funds Trust
3
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Management's Discussion of Fund Performance (Unaudited)
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TOUCHSTONE JSAM INSTITUTIONAL LARGE CAP VALUE FUND
SUB-ADVISED BY JS ASSET MANAGEMENT
PERFORMANCE AND MARKET OVERVIEW
The total return of the Touchstone JSAM Institutional Large Cap Value Fund was
60.58% for the year ended December 31, 2009. The total return of the Russell
1000(R) Value Index was 19.69% for the same period. The U.S. equity market
experienced a significant recovery throughout the year, but it is still
significantly below its pre-Lehman Brothers failure levels. We remain upbeat
about the outlook for U.S. equities, but demonstrably so for our deep value
stocks as we are still finding tremendous opportunities.
PORTFOLIO REVIEW
The Fund's portfolio is diversified and the outperformance has been broad-based.
For the year, stocks in the Financials, Information Technology, Energy,
Industrials, Consumer Staples and Consumer Discretionary sectors all contributed
positively to Fund performance. While every sector in the benchmark saw a
positive return for the year, the Fund was overweight in some of the best
performing sectors - Financials, Information Technology, and Consumer
Discretionary. The Fund was underweight in sectors that did not perform as well
for the benchmark - Telecommunication Services, Energy, Consumer Staples and
Health Care.
The largest contributors to Fund performance were Genworth Financial Inc.,
Capital One Financial Corp., Bank of America Corp., Morgan Stanley (all from the
Financials sector), and Navistar International Corp. (Industrials sector).
Detractors to Fund performance were CIT Group, Conseco Inc., MGIC Investment
Corp., Citigroup Inc. (all from the Financials sector), and Hudson Highland
Group Inc. (Industrials sector).
The worst recession in seven decades ended in the third quarter. The prevailing
consensus forecast of a "new normal," with a very weak recovery is at odds with
history. We are more optimistic. The economy has yet to benefit from the
positive effect of inventory rebuilding and pent-up demand for capital spending.
While U.S. equities have appreciated significantly, they have lagged the credit
market. When investment grade spreads were last at current levels, equities were
nearly 15 percent higher. We believe equity valuations remain attractive,
adjusted for depressed earnings. Stocks are inexpensive based on free cash flow;
yielding 7 1/2 percent - nearly the highest ever. We believe companies will show
surprisingly strong earnings leverage, driven by unprecedented cost cuts and
minimal capital spending. In the third quarter, sales were down year over year,
operating profits were flat, but free cash flow was up 30 percent. The
combination of top-line growth and tight cost control will drive surprisingly
strong margin improvement.
Deep value relative performance troughed in November 2008 and has had a powerful
recovery, confirming this revaluation cycle as one of history's greatest. We
continue to believe the returns of value investing this cycle will be very
strong. The average duration of a bull market is 40 months and the average
cumulative gain has been 140 percent. As this was a particularly long bear
market and stocks were so inexpensive, it seems reasonable that the recovery
would be longer and greater than average. We believe the Fund does not have
outsized risk. All the companies in the Fund are modeled and stress tested. We
monitor CDS spreads on a regular basis. The balance sheets often have more cash
than obligations that the company will face for several years. The perceived
risks of October 2008 have turned out to be significantly wrong. Historically,
deep value has done well as the economy recovers. As this cycle was the most
stressful since the depression, we believe the recovery will be longer than
usual. The majority of our companies are selling at just 5-6x recovery earnings.
4
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Management's Discussion of Fund Performance (Continued)
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The Fund was overweight Financials in the fourth quarter of 2008 and remains so.
According to FDIC data, which goes back to the early 1930s, the U.S. banking
industry has never had more capital as a percent of assets than it has now and
has never been better reserved for losses. Based on the Federal Reserve's stress
test, banks are over the hump - having recognized more than half the ultimate
credit loss. The growth in non-performing assets peaked in the first half of
2009 and we project they will decline in early 2010. The Fund's bank holdings
are selling at 4-5x recovery earnings, are better capitalized than most, and
have less than peer exposure to commercial real estate.
We continue to find the Household Durables industry of the Consumer
Discretionary sector an attractive investment, as it appears the housing crisis
is behind us. U.S. new home sales are still very depressed at a 440,000/year
pace. Existing home sales have recovered to a 6.5 million annual rate, the
highest level in two years. Existing home inventory is now only 6.5 months,
modestly below the "normal" level of seven months. Fears of foreclosed homes
overwhelming the market are overdone as the percentage of foreclosed homes
continues to decline. Home prices in the 20 largest U.S. cities have increased
for five consecutive months.
During the fourth quarter of 2009, the Board of Trustees (the "Trustees") of the
Touchstone Institutional Funds Trust unanimously voted to close and liquidate
the Touchstone JSAM Institutional Large Cap Value Fund (the "Fund"). This
decision was made after careful consideration of the Fund's asset size and
prospects for future growth. Consequently, the Fund was closed and liquidated on
January 15, 2010. Fund shares were redeemed for cash and the proceeds were
remitted to shareholders on that date.
5
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Management's Discussion of Fund Performance (Continued)
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COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
JSAM INSTITUTIONAL LARGE CAP VALUE FUND AND THE RUSSELL 1000(R) VALUE INDEX
[LINE CHART]
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JSAM INSTITUTIONAL LARGE CAP VALUE FUND
AVERAGE ANNUAL TOTAL RETURNS
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1 Year Since Inception*
60.58% (18.24%)
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JSAM Institutional Large Cap Value Fund Russell 1000(R) Value Index
Date Balance Balance
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6/20/05 10,000 10,000
6/30/05 9,720 9,806
9/30/05 9,724 10,187
12/31/05 10,143 10,316
3/31/06 10,549 10,928
6/30/06 10,351 10,993
9/30/06 10,816 11,677
12/31/06 11,899 12,611
3/31/07 11,882 12,767
6/30/07 12,791 13,397
9/30/07 10,944 13,365
12/31/07 8,761 12,590
3/31/08 7,449 11,492
6/30/08 6,378 10,881
9/30/08 4,109 10,217
12/31/08 2,501 7,951
3/31/09 2,352 6,617
6/30/09 3,340 7,722
9/30/09 4,549 9,131
12/31/09 4,016 9,516
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The initial public offering commenced on June 20, 2005.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
6
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Management's Discussion of Fund Performance (Continued)
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TOUCHSTONE MAZAMA INSTITUTIONAL GROWTH FUND
SUB-ADVISED BY MAZAMA CAPITAL MANAGEMENT
PERFORMANCE AND MARKET OVERVIEW
The total return of the Touchstone Mazama Institutional Growth Fund was 59.89%
for the year ended December 31, 2009. The total return of the Russell Midcap(R)
Growth Index was 46.29% for the same period.
PORTFOLIO REVIEW
The bull market is alive and well as we usher in a new decade. As most investors
know, earnings growth - both real and expected - drives stock prices. That is
true whether the growth comes from cost cutting and favorable year-over-year
comparisons, as in 2009, or from top-line growth, which we expect to see in 2010
and 2011. Business conditions improved much more than many investors anticipated
during the year, while businesses continued right-sizing their inventories and
staffing in order to weather the headwinds of the "Great Recession." Regardless
of whether the global recovery continues unabated, U.S. growth companies are
well positioned to grow their businesses over the next two years and beyond. We
believe the opportunities to earn outsized profits in economies around the world
have never been more plentiful. We expect these opportunities will lead to
accelerated earnings growth regardless of whether the U.S. recovery is as anemic
as some expect. The Fund's holdings, on average, generate a large portion of
their revenues outside of the U.S. This exposure is increasingly focused on U.S.
companies with opportunities in fast-growing, large economies such as China,
India and Brazil, where economic growth is expected to outpace the U.S by a wide
margin in the coming years. The share of the world's middle class living in
developing countries is expected to grow exponentially by the year 2030, which
will become a staggering game-changer that bodes very well for the highly
competitive, forward-looking U.S. growth companies whose stocks are held in the
Fund.
Sectors contributing positively to relative performance included Information
Technology, Consumer Staples, Consumer Discretionary and Energy. Sectors
detracting from relative performance included Industrials, Financials, Health
Care and Materials. Securities contributing the most to relative performance
included Medarex Inc., Riverbed Technology Inc., Blackstone Group LP and Red Hat
Inc. Securities that detracted from relative performance included UCBH Holdings
Inc., Cubist Pharmaceuticals Inc., SunPower Corp. and Meruelo Maddux Properties
Inc.
U.S. equities posted remarkable returns during the year with the fastest growing
companies leading the way. Growth stocks in general outperformed value stocks by
a very wide margin as the market rebounded from the low water mark in March. And
while much has been written in the financial press about the "low-quality" rally
in 2009, the Fund outperformed while holding stocks of companies with
higher-quality balance sheets with less debt, better debt coverage and more cash
than their respective benchmarks.
The Fund is overweight the consumer retail, consumer-related information
technology, financials and alternative energy industries. Overall, holiday
spending came in better than expected, which combined with lean retail
inventories is setting up the Fund's consumer companies to post strong earnings
for the year. Looking ahead, consumer companies also face easy comparisons in
the first half of 2010, which will also contribute to strong year-over-year
earnings growth.
The Fund continues to focus on high-quality Information Technology stocks with
imminent growth opportunities from the enterprise PC replacement cycle expected
in 2010 through 2012; the continued acceleration of smart phone proliferation;
the recovery of online advertising spending; and the reacceleration of internet
traffic growth. Looking forward, we expect the Information Technology sector
fundamentals to continue to improve in the first half of 2010, along with the
recovery of enterprise and consumer spending. A plethora of innovations, such as
eBooks, tablet computers, Android based phones, HD video streaming, LED TVs,
OLED handsets, and 3D gaming will continue to be adopted by an increasingly
large and vital global middle class. Meanwhile, Wall Street earnings
expectations for 2011 are approaching record levels, foreshadowing what we
believe will be another positive year in 2010, as well as record high revenues
and earnings through 2012.
7
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Management's Discussion of Fund Performance (Continued)
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The Fund's Health Care exposure remains at or below the benchmark. We are
keeping a watchful eye on policymaking efforts in Washington and will make
incremental adjustments accordingly. Regardless of the outcome, we remain
particularly fond of Fund investments in innovative drug companies with leading
products that are either protected from, or driven by, generic drug utilization.
Solar stocks are well positioned for 2010. Demand is running very high as
countries like the U.S., Japan, Italy and France are sweetening their solar
incentives, which is providing a long needed diversification in markets other
than Germany. We expect solar companies worldwide to report strong fourth
quarter 2009 results and to provide seasonally better guidance for the first
quarter 2010. More importantly, we expect 2010 to become a big year for solar,
with demand up more than 50 percent in watts deployed. Also, wind power is very
well positioned for outstanding growth in 2010 and beyond, and we continue to
track several other emerging technologies that show great promise, including new
power saving battery technology, electronics and alternative fuels.
Interest rates remain at historic lows, the yield curve remains extraordinarily
steep, and the Fed will likely refrain from raising rates for six to twelve
months - all of which work in favor of net interest margin expansion, a key
earnings driver for banks. As the broad economy gradually returns to health,
banks will become more comfortable increasing their lending, which will further
boost their earnings. In 2010, constructive equity market conditions and calmer
global credit market conditions should continue to drive strong performance in
asset manager stocks. Institutional investors will likely continue to "re-risk"
with their investment dollars as they started to in the fourth quarter. This
will lead to higher inflows into equities, while inflows into fixed-income will
moderate and the outflows from money markets should continue. Similarly, with a
recovering economy, particularly in their predominant end markets, the Fund's
financial technology stocks should again enjoy solid stock price performance in
2010.
CURRENT STRATEGY AND OUTLOOK
The trend is clear. The potential for growth stocks to outperform other
financial asset classes over the next several years is greater than it has been
in a very long time. While fundamentals continue to improve, alternatives are
scarce. Corporate and government bonds are in bubble territory. Spreads have
narrowed, while bond fund inflows and balances have hit record highs, leaving
bond investors precariously vulnerable to an inevitable increase in interest
rates. Money market funds are paying negative real rates of return. Precious
metals are in bubble territory, in our view, as a result of a weaker dollar,
which will likely reverse as interest rates move up. This should provide
meaningful support for the stocks of U.S. growth companies that are well
positioned to benefit from economic recovery in the U.S. and continued growth in
select economies around the world.
We also expect the next ten years to be a decade of significant outperformance
of growth stocks, driven in large part by a global expansion and an emerging
middle class the likes of which the world has never seen. This new era will
bring with it new markets for U.S. technology, consumer, energy and service
companies that will truly exemplify the meaning of "growth," which we expect to
be very rewarding for Mazama's traditional, growth-oriented strategy in the
years ahead.
8
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Management's Discussion of Fund Performance (Continued)
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COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MAZAMA
INSTITUTIONAL GROWTH FUND AND THE RUSSELL MIDCAP(R) GROWTH INDEX
[LINE CHART]
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MAZAMA INSTITUTIONAL GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS
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1 Year Since Inception*
59.89% (5.71%)
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Mazama Institutional Growth Fund Russell Midcap(R) Growth Index
Date Balance Balance
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1/30/08 10,000 10,000
3/31/08 9,883 9,752
6/30/08 9,926 10,205
9/30/08 8,021 8,394
12/31/08 5,586 6,097
3/31/09 5,214 5,893
6/30/09 6,806 7,111
9/30/09 8,529 8,361
12/31/09 8,932 8,920
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The initial public offering commenced on January 30, 2008.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
9
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Management's Discussion of Fund Performance (Continued)
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TOUCHSTONE SANDS CAPITAL INSTITUTIONAL GROWTH FUND
SUB-ADVISED BY SANDS CAPITAL MANAGEMENT
PERFORMANCE AND MARKET OVERVIEW
The total return of the Touchstone Sands Capital Institutional Growth Fund was
71.08% for the one year period ended December 31, 2009. The total return of the
Russell 1000(R) Growth Index was 37.21% for the same period.
PORTFOLIO REVIEW
The Fund's outperformance during the year was primarily attributable to security
selection. The largest contributors to relative performance were Amazon.com
Inc., Apple Inc., Intuitive Surgical Inc., National Oilwell Varco Inc., and
Google Inc. The largest detractors from relative performance were Genzyme Corp.,
Abraxis Bioscience Inc. and Illumina Inc.
In aggregate, sector allocation contributed positively to relative performance
during the year. The largest contributor was not having any exposure to the
Consumer Staples sector. An underweight position in the Industrials sector and
an overweight position in the Financials sector also positively impacted
relative performance. An overweight position in the Health Care sector was the
largest detractor from relative performance. Other relative detractors included
overweight positions in the Energy and Consumer Discretionary sectors.
CURRENT STRATEGY AND OUTLOOK
One of the prominent themes from 2009 was debate on the "low quality" rally that
seemed to increase uncertainty in the markets and dampen expectations for the
future. We wouldn't dispute the occurrence of the low quality rally - during
broad and severe market declines, lower quality businesses typically suffer
disproportionally as the underlying fundamentals are called into question.
Market concerns about the viability and sustainability of a business often are
reflected in the stock price. Once the fears have subsided, the stock price
recovery can be quite significant.
However, what we found more interesting was the participation of extremely high
quality businesses in the rally. Unquestionably, there was a rebound "bounce"
from the irrational price levels found at the end of 2008, especially seen in
the Financials sector which could hardly be called robust businesses with strong
secular drivers and clear visibility of future growth. The Fund's portfolio of
stocks of high quality businesses, stock prices rebounded positively and
dramatically.
More importantly, was the clear re-connection of stock prices with very strong
underlying business fundamentals. This dynamic is not widespread - by definition
it is very specific. This is a challenging operating environment where the
strong are clearly getting stronger, often on an absolute basis, but clearly
relative to their competition. Examples abound in the Fund that back up that
view: Amazon.com Inc. grew revenues in quarters one, two and three at 18
percent, 14 percent and 28 percent respectively, compared to anemic growth and
early year contraction for e-commerce overall and Wal-Mart Stores Inc. and
Target Corporation individually. Google Inc. experienced third quarter
advertising revenue growth of 4 percent which was dramatic compared to CBS,
Viacom and the New York Times revenue contraction. In short, we'd characterize
the year not only as a bounce of stock prices coming off worst case scenario
lows but also one where stock prices began to reconnect with select companies
that outperformed in the very difficult operating environment.
10
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Management's Discussion of Fund Performance (Continued)
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Looking ahead we remain very optimistic on the companies in the Fund and the
broader universe of large growth businesses in general. We believe the
competitive positioning of the Fund's businesses is far better coming out of the
recessionary environment than when they entered it. Cost cutting, downsizing and
re-focusing the business while leveraging their financial strength has created a
sizeable gap compared to their competitors. This gap will likely widen as the
economy picks up steam and they experience revenue and earnings growth.
We've talked about the globalization of business and how it has impacted
companies in the Fund, as well as those we are considering. The percentage of
revenue that is sourced outside the U.S. continues to increase each year as
U.S.-based companies seeking growth continue to find attractive opportunities
outside the U.S. borders. Currently, approximately 49 percent of the revenue
from the Fund's companies is created outside the U.S., which is up from 45
percent just one year ago. We believe this added diversity of business will
continue to help U.S. companies achieve growth targets, expand markets, gain
share and increase earnings.
Globalization is helping large established businesses find new sources of growth
more so than ever before. The market collapse and recessionary environment has
improved the competitive positioning of our select portfolio companies.
Valuation levels remain very reasonable and attractive on an historical basis
and relative to future growth expectations. We add these factors up and very
much like the outlook for the broad universe of growth companies, especially for
the select businesses in the Fund.
11
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Management's Discussion of Fund Performance (Continued)
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COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SANDS CAPITAL
INSTITUTIONAL GROWTH FUND AND THE RUSSELL 1000(R) GROWTH INDEX
[LINE CHART]
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SANDS CAPITAL INSTITUTIONAL GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS
-----------------------------------
1 Year Since Inception*
71.08% 3.09%
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Sands Capital Institutional Growth Fund Russell 1000(R) Growth Index
Date Balance Balance
---- ------- -------
1/21/05 10,000 10,000
3/31/05 9,760 9,938
6/30/05 10,490 10,183
9/30/05 11,050 10,591
12/31/05 11,790 10,907
3/31/06 11,600 11,244
6/30/06 10,690 10,806
9/30/06 10,790 11,231
12/31/06 11,100 11,896
3/31/07 11,390 12,038
6/30/07 11,869 12,863
9/30/07 12,979 13,405
12/31/07 13,179 13,302
3/31/08 11,199 11,948
6/30/08 11,719 12,097
9/30/08 9,780 10,605
12/31/08 6,794 8,188
3/31/09 7,128 7,851
6/30/09 8,686 9,132
9/30/09 10,504 10,408
12/31/09 11,623 11,235
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
* The initial public offering commenced on January 21, 2005.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
12
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Tabular Presentation of Portfolios of Investments (Unaudited)
December 31, 2009
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The illustrations below provide each Fund's sector allocation. We hope it will
be useful to shareholders as it summarizes key information about each Fund's
investments.
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JSAM INSTITUTIONAL LARGE CAP VALUE FUND
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SECTOR ALLOCATION (% OF NET ASSETS)
Financials 83.2
Consumer Discretionary 20.6
Investment Fund 234.1
Other Assets/Liabilities (Net) (237.9)
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TOTAL 100.0
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SANDS CAPITAL INSTITUTIONAL GROWTH FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Information Technology 34.3
Health Care 19.5
Consumer Discretionary 16.4
Energy 13.8
Financials 7.9
Materials 3.8
Telecommunication Services 2.7
Industrials 0.9
Investment Funds 2.5
Other Assets/Liabilities (Net) (1.8)
--------
TOTAL 100.0
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MAZAMA INSTITUTIONAL GROWTH FUND
- --------------------------------------------------------------------------------
SECTOR ALLOCATION (% OF NET ASSETS)
Information Technology 29.9
Consumer Discretionary 19.3
Financials 16.2
Health Care 12.2
Industrials 10.9
Energy 4.3
Consumer Staples 3.4
Telecommunication Services 3.2
Rights 0.1
Investment Funds 26.6
Other Assets/Liabilities (Net) (26.1)
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TOTAL 100.0
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13
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Statements of Assets and Liabilities
December 31, 2009
- --------------------------------------------------------------------------------
JSAM
INSTITUTIONAL MAZAMA SANDS CAPITAL
LARGE CAP INSTITUTIONAL INSTITUTIONAL
VALUE GROWTH GROWTH
FUND FUND FUND
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ASSETS
Investment securities:
At cost $ 2,103,411 $ 24,394,920 $ 872,172,785
====================================================================================================================================
Affiliated securities, at market value $ -- $ 222,708 $ 13,225,243
Non-affiliated securities, at market value 2,104,064 28,230,533 1,008,914,612
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At market value - including $975,119, $5,553,064, and $11,481,088 of
securities loaned for the JSAM Institutional Large Cap Value Fund,
Mazama Instituional Growth Fund,
and Sands Capital Institutional Growth Fund, respectively. $ 2,104,064 $ 28,453,241 $ 1,022,139,855
Dividends and interest receivable 2,696 6,078 362,261
Receivable for capital shares sold -- -- 1,410,079
Receivable for securities sold 6,981,813 43,505 7,556,241
Receivable for securities lending income 175 2,489 698
Other assets 7,364 2,159 --
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TOTAL ASSETS 9,096,112 28,507,472 1,031,469,134
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LIABILITIES
Bank overdraft 7,002,378 -- --
Payable upon return of securities loaned 1,457,825 5,775,165 11,843,989
Payable for capital shares redeemed 4,000 -- 13,507,346
Payable for securities purchased -- 146,946 1,519,925
Payable to Advisor 7,060 17,579 659,490
Other accrued expenses and liabilities 2,072 1,567 41,033
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TOTAL LIABILITIES 8,473,335 5,941,257 27,571,783
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 622,777 $ 22,566,215 $ 1,003,897,351
====================================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 12,461,291 $ 23,271,439 $ 1,009,140,899
Accumulated net investment income -- 78,434 --
Accumulated net realized losses on investments (11,839,167) (4,841,979) (155,210,618)
Net unrealized appreciation on investments 653 4,058,321 149,967,070
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 622,777 $ 22,566,215 $ 1,003,897,351
====================================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 201,408 2,544,042 90,273,321
====================================================================================================================================
Net asset value, offering price and redemption price per share $ 3.09 $ 8.87 $ 11.12
====================================================================================================================================
See accompanying notes to financial statements.
14
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended December 31, 2009
- --------------------------------------------------------------------------------
JSAM
INSTITUTIONAL MAZAMA SANDS CAPITAL
LARGE CAP INSTITUTIONAL INSTITUTIONAL
VALUE GROWTH GROWTH
FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends from affiliated securities $ 2,980 $ 1,405 $ 125,260
Dividends from non-affiliated securities (A) 69,793 127,847 4,899,221
Interest -- -- 6
Income from securities loaned 5,155 47,147 181,116
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 77,928 176,399 5,205,603
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Unified management fee 74,176 163,499 6,123,357
Registration fees 2,624 2,080 93,902
Miscellaneous expenses 2,058 2,692 36,164
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 78,858 168,271 6,253,423
Operating expenses reimbursed by the Advisor (1,388) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET EXPENSES 77,470 168,271 6,253,423
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 458 8,128 (1,047,820)
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions (1,057,379) (778,070) (52,373,740)
Net change in unrealized appreciation/depreciation on investments 7,089,606 9,266,347 477,762,223
- ------------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 6,032,227 8,488,277 425,388,483
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 6,032,685 $ 8,496,405 $ 424,340,663
====================================================================================================================================
(A) Net of foreign tax withholding of: $ 89 $ -- $ --
See accompanying notes to financial statements.
15
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
JSAM INSTITUTIONAL MAZAMA
LARGE CAP VALUE INSTITUTIONAL GROWTH
FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2009 2008 2009 2008(A)
- ------------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 458 $ 201,560 $ 8,128 $ 93,733
Net realized losses from security transactions (1,057,379) (8,732,844) (778,070) (4,064,539)
Net change in unrealized appreciation/depreciation on investments 7,089,606 (3,075,416) 9,266,347 (5,208,026)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 6,032,685 (11,606,700) 8,496,405 (9,178,832)
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (458) (205,374) -- (98,683)
From tax return of capital (18,676) -- (8,677) --
- ------------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (19,134) (205,374) (8,677) (98,683)
- ------------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 4,296,072 7,264,882 802,447 22,633,550
Reinvested distributions 19,132 198,787 8,678 98,683
Payments for shares redeemed (15,573,331) (5,696,679) (187,148) (208)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS (11,258,127) 1,766,990 623,977 22,732,025
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (5,244,576) (10,045,084) 9,111,705 13,454,510
NET ASSETS
Beginning of period 5,867,353 15,912,437 13,454,510 --
- ------------------------------------------------------------------------------------------------------------------------------------
End of period $ 622,777 $ 5,867,353 $ 22,566,215 $ 13,454,510
====================================================================================================================================
(A) Represents the period from commencement of operations (January 30, 2008)
through December 31, 2008.
See accompanying notes to financial statements.
16
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL
INSTITUTIONAL
GROWTH
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2009 2008
- ------------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment loss $ (1,047,820) $ (4,012,993)
Net realized losses from security transactions (52,373,740) (98,617,235)
Net change in unrealized appreciation/depreciation on investments 477,762,223 (533,006,141)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 424,340,663 (635,636,369)
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gains -- (25,298,914)
- ------------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS -- (25,298,914)
- ------------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 267,089,340 479,719,949
Reinvested distributions -- 24,184,001
Payments for shares redeemed (279,090,089) (626,905,070)
- ------------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM SHARE TRANSACTIONS (12,000,749) (123,001,120)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 412,339,914 (783,936,403)
NET ASSETS
Beginning of year 591,557,437 1,375,493,840
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $ 1,003,897,351 $ 591,557,437
====================================================================================================================================
See accompanying notes to financial statements.
17
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
JSAM INSTITUTIONAL LARGE CAP VALUE FUND
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
PERIOD
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------------------- DECEMBER 31,
2009 2008 2007 2006 2005(A)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 1.93 $ 6.92 $ 10.95 $ 9.97 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (0.09) 0.09 0.13 0.12 0.05
Net realized and unrealized gains (losses)
on investments 1.26 (4.99) (3.00) 1.59 0.09
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.17 (4.90) (2.87) 1.71 0.14
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income --(D) (0.09) (0.13) (0.12) (0.05)
Distributions from net realized gains -- -- (1.03) (0.61) (0.12)
Tax return of capital (0.01) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.01) (0.09) (1.16) (0.73) (0.17)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 3.09 $ 1.93 $ 6.92 $ 10.95 $ 9.97
====================================================================================================================================
Total return 60.58% (71.46%) (26.37%) 17.32% 1.43%(B)
====================================================================================================================================
Net assets at end of period (000's) $ 623 $ 5,867 $ 15,912 $ 21,846 $ 14,673
====================================================================================================================================
Ratio of net expenses to average net assets 0.73% 0.73% 0.77% 0.75% 0.71%(C)
Ratio of gross expenses to average net assets 0.74% 0.89% 0.77% 0.75% 0.71%(C)
Ratio of net investment income to average net assets 0.00%(D) 1.89% 1.22% 1.18% 1.24%(C)
Portfolio turnover rate 139% 88% 72% 82% 45%(B)
(A) Represents the period from commencement of operations (June 20, 2005)
through December 31, 2005.
(B) Not annualized.
(C) Annualized.
(D) Amount rounds to less than 0.005%.
See accompanying notes to financial statements.
18
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
MAZAMA INSTITUTIONAL GROWTH FUND
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
YEAR PERIOD
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2009 2008(A)
- --------------------------------------------------------------------------------
Net asset value at beginning of period $ 5.55 $ 10.00
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.00(B) 0.05
Net realized and unrealized gains
(losses) on investments 3.32 (4.45)
- --------------------------------------------------------------------------------
Total from investment operations 3.32 (4.40)
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income -- (0.05)
Tax return of capital --(B) --
- --------------------------------------------------------------------------------
Total distributions -- (0.05)
- --------------------------------------------------------------------------------
Net asset value at end of period $ 8.87 $ 5.55
================================================================================
Total return 59.89% (44.13%)(C)
================================================================================
Net assets at end of period (000's) $ 22,566 $ 13,455
================================================================================
Ratio of net expenses to average
net assets 0.98% 0.98%(D)
Ratio of gross expenses to average
net assets 0.98% 0.99%(D)
Ratio of net investment income to
average net assets 0.05% 0.70%(D)
Portfolio turnover rate 124% 200%(D)
(A) Represents the period from commencement of operations (January 30, 2008)
through December 31, 2008.
(B) Amount rounds to less than $0.005.
(C) Not annualized.
(D) Annualized.
See accompanying notes to financial statements.
19
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
SANDS CAPITAL INSTITUTIONAL GROWTH FUND
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
PERIOD
YEAR ENDED DECEMBER 31, ENDED
--------------------------------------------------------- DECEMBER 31,
2009 2008 2007 2006 2005(A)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $ 6.50 $ 13.18 $ 11.10 $ 11.79 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.01) (0.04) (0.04) (0.04) (0.02)
Net realized and unrealized gains (losses)
on investments 4.63 (6.35) 2.12 (0.65) 1.81
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.62 (6.39) 2.08 (0.69) 1.79
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.29) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $ 11.12 $ 6.50 $ 13.18 $ 11.10 $ 11.79
====================================================================================================================================
Total return 71.08% (48.45%) 18.74% (5.85%) 17.90%(B)
====================================================================================================================================
Net assets at end of period (000's) $ 1,003,897 $ 591,557 $ 1,375,494 $ 1,234,451 $ 615,503
====================================================================================================================================
Ratio of net expenses to average net assets 0.80% 0.80% 0.80% 0.80% 0.79%(C)
Ratio of net investment loss to average net assets (0.13%) (0.37%) (0.31%) (0.44%) (0.45%)(C)
Portfolio turnover rate 34% 44% 36% 28% 16%(B)
(A) Represents the period from commencement of operations (January 21, 2005)
through December 31, 2005.
(B) Not annualized.
(C) Annualized.
See accompanying notes to financial statements.
20
- --------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 2009
- --------------------------------------------------------------------------------
1. ORGANIZATION
The Touchstone Institutional Funds Trust (the Trust), a Delaware Business Trust,
is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company with three funds, all of which are
non-diversified. The financial statements included herein are those of the
Touchstone JSAM Institutional Large Cap Value Fund, Touchstone Mazama
Institutional Growth Fund, and Touchstone Sands Capital Institutional Growth
Fund, each a "Fund" and collectively the "Funds". The Funds commenced operations
on June 20, 2005, January 30, 2008 and January 21, 2005, respectively.
The Funds are registered to offer one class of shares. 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 objectives, policies, and strategies along with information on the
class of shares currently being offered.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed by
the Funds:
SECURITY VALUATION - The Funds' portfolio securities are valued as of the close
of the regular session of trading on the New York Stock Exchange (currently 4:00
p.m., Eastern time). Portfolio securities traded on stock exchanges are valued
at the last sale price and portfolio securities quoted by NASDAQ are valued at
the NASDAQ Official Closing Price (NOCP). Securities not traded on a particular
day, or for which the last sale price is not readily available, are valued at
their last broker-quoted bid prices as obtained from one or more of the major
market makers for such securities by an independent pricing service. Securities
for which market quotations or the NOCP are not readily available are valued
based on fair value as determined by or under the direction of the Board of
Trustees. Money market instruments and other debt securities with a remaining
maturity of less than 60 days are valued at amortized cost, which approximates
market value. Shares of open-end mutual funds in which the Funds invest are
valued at their respective net asset values as reported by the underlying funds.
The Funds have adopted FASB ASC 820 "Fair Value Measurements." This standard
establishes a single authoritative definition of fair value, sets out a
framework for measuring fair value and requires additional disclosures about
fair value measurements. Fair Value Measurements applies to fair value
measurements already required or permitted by existing standards. The changes to
current generally accepted accounting principles (GAAP) from the application of
this Statement relate to the definition of fair value, the methods used to
measure fair value, and the expanded disclosures about fair value measurements.
Various inputs are used in determining the value of the Funds investments. These
inputs are summarized in the three broad levels listed below:
o Level 1 - quoted prices in active markets for identical securities
o Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit
risk, etc.)
o Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
21
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. For
example, money market securities are valued using amortized cost, in accordance
with rules under the Investment Company Act of 1940. Generally, amortized cost
approximates the current fair value of a security, but since the value is not
obtained from a quoted price in an active market, such securities are reflected
as Level 2.
The aggregate value by input level, as of December 31, 2009, 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 geographic/industry
concentration.
PORTFOLIO SECURITIES LOANED - Each Fund may lend its portfolio securities.
Lending portfolio securities exposes a Fund 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 Fund 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
collateral marked to market daily, in the form of cash and/or liquid securities,
with the Fund's custodian in an amount at least equal to the market value of the
loaned securities.
As of December 31, 2009, the following Funds loaned common stocks and received
collateral as follows:
MARKET VALUE VALUE OF
OF COMMON COLLATERAL
STOCKS LOANED RECEIVED
- --------------------------------------------------------------------------------
JSAM Institutional Large Cap Value Fund $ 975,119 $ 1,457,825
Mazama Institutional Growth Fund $ 5,553,064 $ 5,775,165
Sands Capital Institutional Growth Fund $11,481,088 $11,843,989
All collateral received as cash and securities is received, held and
administered by the Funds' custodian for the benefit of the Funds in the
applicable custody account or other account established for the purpose of
holding collateral.
Funds participating in securities lending receive compensation in the form of
fees, or retain a portion of interest or dividends on the investment of any cash
received as collateral. The Funds also continue to receive interest or dividends
on the securities loaned. The loans are secured by collateral valued at least
equal, at all times, to the fair value of the securities loaned plus accrued
interest. Unrealized gain or loss on the fair value of the securities loaned
that may occur during the term of the loan are recognized by the Funds. The
Funds have the right under the lending agreement to recover the securities from
the borrower on demand.
SHARE VALUATION - The net asset value per share is calculated each business day.
It is computed by dividing the assets of each Fund, less its liabilities, by the
number of outstanding shares of each Fund.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Dividend income is recognized on the ex-dividend date. Costs used in determining
realized gains and losses on the sales of investment securities are those of the
specific securities sold.
DIVIDENDS AND DISTRIBUTIONS - The Funds pay distributions of net income
quarterly. Any net realized capital gains on sales of securities are distributed
to shareholders at least annually.
22
- --------------------------------------------------------------------------------
Notes to Financial Statements (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 reported period. Actual results could differ from
those estimates.
EXPENSES - The Funds pay a unified management fee to Touchstone Advisors, Inc.
(the Advisor) for providing or procuring advisory, administration and other
services. The Advisor is responsible for compensating any third party engaged to
provide services under its supervision and is also responsible for payment of
the fees of the independent Trustees, custodian, independent auditor, legal
counsel (excluding costs in connection with certain litigation or administrative
actions), and the transfer and dividend disbursing agent. The Funds will pay all
state registration fees and charges incurred related to printing and mailing to
existing shareholders prospectuses, statement of additional information, proxy
solicitation material, shareholder reports and EDGAR filings.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments and U.S. Government
securities) were as follows for the year ended December 31, 2009:
JSAM MAZAMA SANDS CAPITAL
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
LARGE CAP VALUE GROWTH GROWTH
FUND FUND FUND
- --------------------------------------------------------------------------------
Cost of Purchases $ 12,852,057 $ 21,685,632 $259,618,313
Proceeds from Sales $ 24,088,682 $ 21,049,902 $267,419,636
- --------------------------------------------------------------------------------
4. TRANSACTIONS WITH AFFILIATES
Certain officers of the Trust are also officers of the Advisor, the Underwriter
(Touchstone Securities, Inc.) and/or JPMorgan Chase Bank, N.A. (JPMorgan) the
Sub-Administrator and Transfer Agent to the Funds. The Advisor and Underwriter
are each wholly-owned indirect subsidiaries of The Western and Southern Life
Insurance Company (Western-Southern).
AFFILIATED INVESTMENTS - Each Fund may invest in the Touchstone Institutional
Money Market Fund, subject to compliance with the several conditions set forth
in an order received by the Trust from the Securities and Exchange Commission.
To the extent that the other Touchstone Funds are invested in the Touchstone
Institutional Money Market Fund, the Advisor and Administrator will be paid
additional fees from the Touchstone Institutional Money Market Fund that will
not be waived or reimbursed.
A summary of each Fund's investment in the Touchstone Institutional Money Market
Fund for the year ended December 31, 2009, is noted below:
SHARE ACTIVITY
-------------------------------------------------------
BALANCE BALANCE VALUE
12/31/08 PURCHASES SALES 12/31/09 DIVIDENDS 12/31/09
- ------------------------------------------------------------------------------------------------------------------------------------
JSAM Institutional Large Cap Value Fund 30,239 10,381,471 (10,411,710) -- $ 2,980 $ --
Mazama Institutional Growth Fund 163,358 4,552,324 (4,492,974) 222,708 $ 1,405 $ 222,708
Sands Capital Institutional Growth Fund 11,655,145 190,954,293 (189,384,195) 13,225,243 $ 125,260 $ 13,225,243
- ------------------------------------------------------------------------------------------------------------------------------------
23
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
MANAGEMENT AGREEMENT - The Trust and the Advisor are parties to a management
agreement under which the Advisor receives a fee, calculated daily and paid
monthly, of 0.70%, 0.95% and 0.78% per annum of the average daily net assets of
the JSAM Institutional Large Cap Value Fund, Mazama Institutional Growth Fund,
and Sands Capital Institutional Growth Fund, respectively. Under the management
agreement, the Advisor continuously reviews, supervises and administers the
Funds' investment programs, subject to the supervision of and policies
established by the Board of Trustees. Under the management agreement, the
Advisor also provides administrative services to the Trust and pays all
operating expenses on the Trust's behalf, excluding BlueSky state registration
fees and charges incurred related to printing and mailing to existing
shareholders prospectuses, statement of additional information, proxy
solicitation material, shareholder reports and EDGAR filings.
JS Asset Management, LLC ("JSAM"), a SEC registered investment advisor, serves
as the sub-advisor to the JSAM Institutional Large Cap Value Fund, and makes
investment decisions for the Fund, and also ensures compliance with the Fund's
investment policies and guidelines.
Mazama Capital Management, Inc. ("Mazama"), a SEC registered investment advisor,
serves as the sub-advisor to the Mazama Institutional Growth Fund, and makes
investment decisions for the Fund, and also ensures compliance with the Fund's
investment policies and guidelines.
Sands Capital Management, LLC, a SEC registered investment advisor, serves as
the sub-advisor to the Sands Capital Institutional Growth Fund, and makes
investment decisions for the Fund, and also ensures compliance with the Fund's
investment policies and guidelines.
The Advisor, (not the Funds), pays the Sub-Advisors a fee for their services.
EXPENSE LIMITATION AGREEMENT - Effective January 1, 2009, the Trust and the
Advisor entered into an Expense Limitation Agreement to contractually limit
operating expenses of the JSAM Institutional Large Cap Value Fund, Mazama
Institutional Growth Fund, and Sands Capital Institutional Growth Fund. The
maximum 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 Advisor has
agreed to waive advisory fees and reimburse expenses in order to maintain
expense limitations for the Funds as follows through April 30, 2010:
- --------------------------------------------------------------------------------
JSAM Institutional Large Cap Value Fund 0.73%
Mazama Institutional Growth Fund 0.98%
Sands Capital Institutional Growth Fund 0.80%
- --------------------------------------------------------------------------------
24
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
5. CAPITAL SHARE TRANSACTIONS
Proceeds and payments on capital shares as shown in the Statements of Changes in
Net Assets are the result of the following capital share transactions for the
periods shown:
JSAM INSTITUTIONAL MAZAMA
LARGE CAP VALUE INSTITUTIONAL GROWTH
FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2009 2008 2009 2008(A)
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold 1,943,948 1,925,287 144,371 2,412,028
Shares reinvested 10,570 56,624 1,162 13,616
Shares redeemed (4,800,417) (1,235,389) (27,115) (20)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (2,845,899) 746,522 118,418 2,425,624
Shares outstanding, beginning of period 3,047,307 2,300,785 2,425,624 --
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, end of period 201,408 3,047,307 2,544,042 2,425,624
====================================================================================================================================
SANDS CAPITAL
INSTITUTIONAL GROWTH
FUND
- --------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2009 2008
- --------------------------------------------------------------------------------
Shares sold 32,434,529 45,994,085
Shares reinvested -- 3,761,120
Shares redeemed (33,203,542) (63,110,167)
- --------------------------------------------------------------------------------
Net decrease in shares outstanding (769,013) (13,354,962)
Shares outstanding, beginning of year 91,042,334 104,397,296
- --------------------------------------------------------------------------------
Shares outstanding, end of year 90,273,321 91,042,334
================================================================================
(A) Represents the period from commencement of operations (January 30, 2008)
through December 31, 2008.
6. FEDERAL INCOME TAXES
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 taxable net income, the Fund (but
not the shareholders) will be relieved of federal income tax on the income
distributed. 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 net realized capital gains
(earned during the twelve months ending October 31) plus undistributed amounts
from prior years.
25
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The tax character of distributions paid for the years ended December 31, 2009
and 2008 was as follows:
JSAM INSTITUTIONAL
LARGE CAP VALUE FUND
- --------------------------------------------------------------------------------
2009 2008
- --------------------------------------------------------------------------------
From ordinary income $ 458 $205,374
From tax return of capital 18,676 --
- --------------------------------------------------------------------------------
$ 19,134 $ 205,374
- --------------------------------------------------------------------------------
SANDS CAPITAL
MAZAMA INSTITUTIONAL INSTITUTIONAL
GROWTH FUND GROWTH FUND
- --------------------------------------------------------------------------------
2009 2008 2009 2008
- --------------------------------------------------------------------------------
From ordinary income $ -- $ 98,683 $ -- $ --
From long-term capital gains -- -- -- 25,298,914
From tax return of capital 8,677 -- -- --
- --------------------------------------------------------------------------------
$ 8,677 $ 98,683 $ -- $25,298,914
- --------------------------------------------------------------------------------
The following information is computed on a tax basis for each item as of
December 31, 2009:
JSAM INSTITUTIONAL MAZAMA SANDS CAPITAL
LARGE CAP INSTITUTIONAL INSTITUTIONAL
VALUE FUND GROWTH FUND GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
Tax cost of portfolio investments $ 2,175,265 $ 24,988,335 $ 913,766,989
- ------------------------------------------------------------------------------------------------------------------------------------
Gross unrealized appreciation 39,916 4,389,005 193,920,779
Gross unrealized depreciation (111,117) (924,099) (85,547,913)
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) (71,201) 3,464,906 108,372,866
Post-October losses (1,750,309) -- --
Capital loss carryforward (10,017,004) (4,170,130) (113,616,414)
Other temporary differences -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated deficit $ (11,838,514) $ (705,224) $ (5,243,548)
====================================================================================================================================
The difference between the tax cost of portfolio investments and the financial
statement cost is primarily due to wash sales.
As of December 31, 2009, the Funds had the following capital loss carryforwards
for federal income tax purposes.
EXPIRES
FUND AMOUNT DECEMBER 31,
- --------------------------------------------------------------------------------
JSAM Institutional Large Cap Value Fund $ 8,536,062 2016
1,480,942 2017
-----------------
$ 10,017,004
-----------------
Mazama Institutional Growth Fund $ 881,641 2016
3,288,489 2017
-----------------
$ 4,170,130
-----------------
Sands Capital Institutional Growth Fund $ 3,211,909 2016
110,404,505 2017
-----------------
$ 113,616,414
-----------------
26
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
The capital loss carryforwards may be utilized in future years to offset net
realized capital gain, if any, prior to distributing such gains to shareholders.
Certain reclassifications, the result of permanent differences between financial
statement and income tax reporting requirements have been made to the components
of capital. These reclassifications have no impact on the net assets or net
asset value per share of the Funds and are designed to present the Funds'
capital accounts on a tax basis. The following reclassifications of return of
capital distributions, investments in limited partnerships and net investment
loss have been made to the following Funds for the year ended December 31, 2009:
UNDISTRIBUTED ACCUMULATED
PAID-IN NET INVESTMENT NET REALIZED
CAPITAL INCOME GAINS
- --------------------------------------------------------------------------------
JSAM Institutional Large Cap Value Fund $ (18,676) $ 18,676 $ --
Mazama Institutional Growth Fund (78,983) 78,983 --
Sands Capital Institutional Growth Fund (1,047,820) 1,047,820 --
- --------------------------------------------------------------------------------
The fund evaluates tax positions taken or expected to be taken in the course of
preparing the funds' tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authorities. Tax
positions not deemed to meet the more-likely-than-not threshold are recorded as
tax benefits or expenses in the current year. Management has analyzed the funds'
tax positions taken on federal income tax returns for all open tax years (tax
years ended December 31, 2006 - December 31, 2009), and has concluded that no
provision for federal income tax is required in the funds' financial statements.
7. 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 that have not yet occurred. However, based on experience, the Funds expect
the risk of loss to be remote.
8. CONCENTRATIONS/RISKS
Each Fund may invest a high percentage of its assets in specific sectors of the
market in order to achieve a potentially greater investment return. As a result,
the 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 on the Funds' net asset value and magnified
effect on the total return.
9. SUBSEQUENT EVENTS
During a meeting held November 19, 2009 of the Board of Trustees, the Trustees
unanimously approved the liquidation of the JSAM Institutional Large Cap Value
Fund. On January 15, 2010 all outstanding shares of the JSAM Institutional Large
Cap Value Fund were redeemed as part of the liquidation of the Fund and all
operations ceased on this date.
27
- --------------------------------------------------------------------------------
Portfolio of Investments
JSAM Institutional Large Cap Value Fund - December 31, 2009
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 103.8% SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIALS -- 83.2%
Bank of America Corp. 8,600 $ 129,516
Citigroup, Inc.+ 39,146 129,573
Huntington Bancshares, Inc. 35,300 128,845
Marshall & Ilsley Corp. 23,900 130,255
- --------------------------------------------------------------------------------
518,189
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 20.6%
Ryland Group, Inc.+ 6,500 128,050
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 646,239
- --------------------------------------------------------------------------------
INVESTMENT FUND -- 234.1%
Invesco AIM Liquid Assets Portfolio** 1,457,825 $ 1,457,825
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 337.9%
(Cost $2,103,411) $ 2,104,064
LIABILITIES IN EXCESS OF OTHER ASSETS -- (237.9%) (1,481,287)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 622,777
================================================================================
+ All or a portion of the security is on loan. The total value of the
securities on loan as of December 31, 2009, was $975,119.
** Represents collateral for securities loaned.
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
- --------------------------------------------------------------------------------
Investment Fund $1,457,825 $ -- $ -- $1,457,825
Common Stocks 646,239 -- -- 646,239
--------------------------------------------------
$2,104,064
See accompanying notes to financial statements.
28
- --------------------------------------------------------------------------------
Portfolio of Investments
Mazama Institutional Growth Fund - December 31, 2009
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 99.4% SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 29.9%
Advanced Micro Devices, Inc.*+ 34,740 $ 336,283
Agilent Technologies, Inc.* 7,300 226,811
Akamai Technologies, Inc.*+ 12,600 319,158
Cognizant Technology
Solutions Corp.- Class A* 4,805 217,667
Cree, Inc.* 1,485 83,709
F5 Networks, Inc.* 945 50,066
Intersil Corp.- Class A 30,810 472,625
Intuit, Inc.* 5,500 168,905
Marvell Technology Group Ltd.* 20,700 429,525
Mastercard, Inc.- Class A+ 1,555 398,049
NetApp, Inc.* 6,400 220,096
Novellus Systems, Inc.* 14,715 343,448
NVIDIA Corp.* 52,600 982,568
Paychex, Inc. 6,600 202,224
Red Hat, Inc.* 13,200 407,880
Riverbed Technology, Inc.* 15,750 361,778
SanDisk Corp.*+ 15,400 446,446
Skyworks Solutions, Inc.* 8,435 119,693
Solarwinds, Inc.*+ 12,330 283,713
TriQuint Semiconductor, Inc.* 111,345 668,070
- --------------------------------------------------------------------------------
6,738,714
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 19.3%
Abercrombie & Fitch Co.- Class A 4,020 140,097
Apollo Group, Inc.- Class A* 1,795 108,741
Bed Bath & Beyond, Inc.* 2,500 96,575
Best Buy Co., Inc. 6,350 250,571
Chico's FAS, Inc.* 20,770 291,818
Chipotle Mexican Grill, Inc.- Class A*+ 2,085 183,814
Coach, Inc. 16,085 587,585
Deckers Outdoor Corp.* 5,005 509,109
Dick's Sporting Goods, Inc.* 9,380 233,281
Dollar Tree, Inc.* 1,100 53,130
DreamWorks Animation
SKG, Inc.- Class A* 7,310 292,034
Expedia, Inc.* 2,560 65,818
Guess?, Inc. 2,950 124,785
Orbitz Worldwide, Inc.* 50,675 371,954
Starbucks Corp.*+ 8,945 206,272
Strayer Education, Inc.+ 465 98,808
Tiffany & Co. 7,300 313,900
TJX Cos., Inc. 5,200 190,060
Urban Outfitters, Inc.* 6,975 244,055
- --------------------------------------------------------------------------------
4,362,407
- --------------------------------------------------------------------------------
FINANCIALS -- 16.2%
Affiliated Managers Group, Inc.*+ 3,330 224,275
Blackstone Group LP+ 69,400 910,528
CB Richard Ellis Group, Inc.- Class A*+ 12,995 176,342
East West Bancorp, Inc.+ 11,025 174,195
Greenhill & Co., Inc.+ 5,165 414,440
Hudson City Bancorp, Inc. 6,600 90,618
IntercontinentalExchange, Inc.* 1,350 151,605
Jefferies Group, Inc.* 19,530 463,447
MSCI, Inc.- Class A*+ 6,060 192,708
NASDAQ OMX Group, Inc./The* 27,810 551,194
T Rowe Price Group, Inc. 4,200 223,650
TD Ameritrade Holding Corp.* 4,260 82,559
- --------------------------------------------------------------------------------
3,655,561
- --------------------------------------------------------------------------------
HEALTH CARE -- 12.2%
Cephalon, Inc.*+ 5,550 346,376
Cubist Pharmaceuticals, Inc.* 39,580 750,833
Dendreon Corp.*+ 9,405 247,163
Henry Schein, Inc.* 1,300 68,380
Illumina, Inc.*+ 8,020 245,813
Myriad Genetics, Inc.* 32,200 840,420
Waters Corp.* 4,090 253,416
- --------------------------------------------------------------------------------
2,752,401
- --------------------------------------------------------------------------------
INDUSTRIALS -- 10.9%
CH Robinson Worldwide, Inc.+ 3,400 199,682
Expeditors International of
Washington, Inc.+ 12,675 440,203
Flowserve Corp. 1,450 137,068
Fluor Corp. 2,100 94,584
Goodrich Corp. 1,970 126,573
Precision Castparts Corp. 1,715 189,250
Quanta Services, Inc.* 10,960 228,406
SunPower Corp.- Class A*+ 22,550 533,984
Suntech Power Holdings
Co. Ltd.- ADR*+ 22,435 373,094
URS Corp.* 1,990 88,595
Verisk Analytics, Inc.- Class A*+ 1,995 60,409
- --------------------------------------------------------------------------------
2,471,848
- --------------------------------------------------------------------------------
ENERGY -- 4.3%
Atwood Oceanics, Inc.* 5,400 193,590
Cobalt International Energy, Inc.*+ 7,660 106,014
Continental Resources, Inc.*+ 2,100 90,069
FMC Technologies, Inc.* 4,300 248,712
PetroHawk Energy Corp.* 5,400 129,546
Range Resources Corp. 4,200 209,370
- --------------------------------------------------------------------------------
977,301
- --------------------------------------------------------------------------------
29
- --------------------------------------------------------------------------------
Mazama Institutional Growth Fund (Continued)
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 99.4% (CONTINUED) SHARES VALUE
- -------------------------------------------------------------------------------
CONSUMER STAPLES -- 3.4%
Avon Products, Inc. 6,805 $ 214,357
Church & Dwight Co., Inc. 1,100 66,495
H.J. Heinz Co. 3,800 162,488
Mead Johnson Nutrition Co.- Class A 1,000 43,700
Whole Foods Market, Inc.*+ 9,835 269,971
- --------------------------------------------------------------------------------
757,011
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 3.2%
Clearwire Corp.- Class A*+ 51,780 350,033
NII Holdings, Inc.* 11,000 369,380
- --------------------------------------------------------------------------------
719,413
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $22,434,656
- --------------------------------------------------------------------------------
RIGHTS - 0.1%
Clearwire Corp. - Rights,
expiring 6/21/10*+ 51,780 $ 20,712
- -------------------------------------------------------------------------------
INVESTMENT FUNDS --26.6%
Invesco AIM Liquid Assets Portfolio** 5,775,165 $ 5,775,165
Touchstone Institutional
Money Market Fund^ 222,708 222,708
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 5,997,873
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 126.1%
(Cost $24,394,920) $28,453,241
LIABILITIES IN EXCESS OF OTHER ASSETS -- (26.1%) (5,887,026)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $22,566,215
================================================================================
* Non-income producing security.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
+ All or a portion of the security is on loan. The total value of the
securities on loan as of December 31, 2009, was $5,553,064.
** Represents collateral for securities loaned.
ADR -- American Depositary Receipt
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
- --------------------------------------------------------------------------------
Common Stocks $22,434,656 $ -- $ -- $22,434,656
Investment Funds 5,997,873 -- -- 5,997,873
Rights 20,712 -- -- 20,712
-------------------------------------------------------
$28,453,241
See accompanying notes to financial statements.
30
- --------------------------------------------------------------------------------
Portfolio of Investments
Sands Capital Institutional Growth Fund - December 31, 2009
- --------------------------------------------------------------------------------
MARKET
COMMON STOCKS -- 99.3% SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 34.3%
Apple, Inc.* 345,850 $ 72,925,931
Broadcom Corp.- Class A* 604,100 18,998,945
FLIR Systems, Inc.* 552,300 18,071,256
Google, Inc.- Class A* 106,200 65,841,876
QUALCOMM, Inc. 1,128,100 52,185,906
Salesforce.com, Inc.* 645,700 47,633,289
Visa, Inc.- Class A 621,900 54,391,374
VMware, Inc.- Class A* 331,400 14,044,732
- --------------------------------------------------------------------------------
344,093,309
- --------------------------------------------------------------------------------
HEALTH CARE -- 19.5%
Allergan, Inc. 716,300 45,134,063
Genzyme Corp.* 844,600 41,393,846
Illumina, Inc.* 547,029 16,766,439
Intuitive Surgical, Inc.* 202,200 61,331,304
Stryker Corp. 110,750 5,578,477
Varian Medical Systems, Inc.* 537,800 25,195,930
- --------------------------------------------------------------------------------
195,400,059
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 16.4%
Amazon.com, Inc.* 556,500 74,860,380
Las Vegas Sands Corp.* 1,231,126 18,393,022
NIKE, Inc.- Class B 395,900 26,157,113
Staples, Inc. 805,500 19,807,245
Starbucks Corp.* 1,090,100 25,137,706
- --------------------------------------------------------------------------------
164,355,466
- --------------------------------------------------------------------------------
ENERGY -- 13.8%
FMC Technologies, Inc.* 721,400 41,725,776
National Oilwell Varco, Inc. 1,208,240 53,271,302
Schlumberger Ltd. 667,000 43,415,030
- --------------------------------------------------------------------------------
138,412,108
- --------------------------------------------------------------------------------
FINANCIALS -- 7.9%
Charles Schwab Corp./The 730,700 13,751,774
CME Group, Inc.+ 77,300 25,968,935
IntercontinentalExchange, Inc.* 351,720 39,498,156
- --------------------------------------------------------------------------------
79,218,865
- --------------------------------------------------------------------------------
MATERIALS -- 3.8%
Monsanto Co. 472,400 38,618,700
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 2.7%
America Movil SAB de CV,
Series L- ADR 582,000 27,342,360
- --------------------------------------------------------------------------------
INDUSTRIALS -- 0.9%
Iron Mountain, Inc.*+ 423,100 9,629,756
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS $ 997,070,623
- --------------------------------------------------------------------------------
INVESTMENT FUNDS --2.5%
Invesco AIM Liquid Assets Portfolio** 11,843,989 11,843,989
Touchstone Institutional
Money Market Fund^ 13,225,243 13,225,243
- --------------------------------------------------------------------------------
TOTAL INVESTMENT FUNDS $ 25,069,232
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 101.8%
(Cost $872,172,785) $ 1,022,139,855
LIABILITIES IN EXCESS OF
OTHER ASSETS -- (1.8%) (18,242,504)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 1,003,897,351
================================================================================
* Non-income producing security.
^ Affiliated Fund, sub-advised by Fort Washington Investment Advisors, Inc.
See Note 4.
+ All or a portion of the security is on loan. The total value of the
securities on loan as of December 31, 2009, was $11,481,088.
** Represents collateral for securities loaned.
ADR -- American Depositary Receipt
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
- --------------------------------------------------------------------------------
Common Stocks $997,070,623 $ -- $ -- $ 997,070,623
Investment Funds 25,069,232 -- -- 25,069,232
--------------------------------------------------------
$ 1,022,139,855
See accompanying notes to financial statements.
31
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
Touchstone Institutional Funds Trust
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Touchstone Institutional Funds Trust,
(comprised of the Touchstone JSAM Institutional Large Cap Value Fund, Touchstone
Mazama Institutional Growth Fund and the Touchstone Sands Capital Institutional
Growth Fund) (the "Funds"), as of December 31, 2009, and the related statements
of operations for the year then ended, and the statements of changes in net
assets and financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for the period ended December 31, 2005 were audited by other
auditors, whose report dated February 22, 2006, expressed an unqualified opinion
on those financial statements and highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to
perform an audit of the Funds' internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Funds' internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our procedures included
confirmation of securities owned as of December 31, 2009, by correspondence with
the custodian and brokers. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios comprising Touchstone Institutional Funds Trust at
December 31, 2009, the results of their operations for the year then ended, and
the changes in their net assets and financial highlights for each of the periods
indicated therein, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
February 26, 2010
32
- --------------------------------------------------------------------------------
Other Items (Unaudited)
- --------------------------------------------------------------------------------
DIVIDEND RECEIVED DEDUCTION
For corporate shareholders, the following ordinary dividends paid during the
year ended December 31, 2009 qualify for the corporate dividends received
deduction:
JSAM Institutional Large Cap Value Fund 100%
PROXY VOTING
The Sub-Advisors 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-Advisors use in fulfilling this
responsibility and information regarding how those proxies were voted during the
twelve month period ended June 30 are available without charge upon request by
calling toll free 1.800.543.0407. These items are also available on the
Securities and Exchange Commission's (the Commission) website at
http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The Trust files a complete listing of portfolio holdings for each Fund as of the
end of the first and third quarters of each fiscal year on Form N-Q. The
complete listing (i) is available on the Commission's website; (ii) may be
reviewed and copied at the Commission's Public Reference Room in Washington, DC;
and (iii) will be made available to shareholders upon request by calling
1.800.543.0407. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
SCHEDULE OF SHAREHOLDER EXPENSES
As a shareholder of the Funds, you incur two types of costs: (1) transaction
costs, including reinvested dividends or other distributions; and (2) ongoing
costs, including investment advisory fees; distribution (12b-1) 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 mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (July 1, 2009 through December 31, 2009).
ACTUAL EXPENSES
The first line of 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 December 31, 2009" to estimate the expenses you paid on your
account during this period.
33
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of 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.
EXPENSES
NET EXPENSE BEGINNING ENDING PAID DURING
RATIO ACCOUNT ACCOUNT THE SIX MONTHS
ANNUALIZED VALUE VALUE ENDED
DECEMBER 31, JULY 1, DECEMBER 31, DECEMBER 31,
2009 2009 2009 2009*
- ------------------------------------------------------------------------------------------------------------------------------------
JSAM INSTITUTIONAL LARGE CAP VALUE FUND
Actual 0.73% $ 1,000.00 $ 1,202.30 $ 4.07
Hypothetical 0.73% $ 1,000.00 $ 1,021.51 $ 3.73
MAZAMA INSTITUTIONAL GROWTH FUND
Actual 0.98% $ 1,000.00 $ 1,312.40 $ 5.69
Hypothetical 0.98% $ 1,000.00 $ 1,020.29 $ 4.97
SANDS CAPITAL INSTITUTIONAL GROWTH FUND
Actual 0.79% $ 1,000.00 $ 1,338.10 $ 4.67
Hypothetical 0.79% $ 1,000.00 $ 1,021.21 $ 4.04
* Expenses are equal to the Fund's annualized expense ratio, multiplied by
the average account value over the period, multiplied by [number of days
in most recent fiscal half-year/365 [or 366]] (to reflect the one-half
year period).
ADVISORY AGREEMENT APPROVAL DISCLOSURE
At a meeting held on November 19, 2009, the Board of Trustees (the "Board" or
"Trustees") of the Touchstone Institutional Funds Trust (the "Trust"), and by a
separate vote, the Independent Trustees of the Trust, approved the continuance
of the Management Agreement between the Trust and the Advisor with respect to
each Fund of the Trust and of the Sub-Advisory Agreement with respect to each
Fund between the Advisor and the respective Sub-Advisor.
In determining whether to approve the continuation of the Management Agreement
and the Sub-Advisory Agreements, the Advisor furnished information necessary for
a majority of the Independent Trustees to make the determination that the
continuance of the Management Agreement and of the respective Sub-Advisory
Agreement was in the best interests of each of the Funds and its respective
shareholders. The information provided to the Board included: (1) industry data
comparing advisory fees and expense ratios of comparable investment companies;
(2) comparative performance information; (3) the Advisor's and its affiliates'
revenues and costs of providing services to the Funds; and (4) information about
the Advisor's and Sub-Advisor's personnel. Prior to voting, the Independent
Trustees reviewed the proposed continuance of the Management Agreement and the
Sub-Advisory Agreements with management and with experienced independent legal
counsel and received materials from such counsel discussing the legal standards
for their consideration of the proposed continuation of the Management Agreement
and the Sub-Advisory Agreement with respect to each Fund. The Independent
Trustees also reviewed the proposed continuation of the Management Agreement and
the Sub-Advisory Agreement with respect to each of the Funds in private sessions
with independent legal counsel at which no representatives of management were
present.
34
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
In approving the Funds' Management Agreement, the Board considered various
factors, among them: (1) the nature, extent and quality of services provided to
the Funds, including the personnel providing services; (2) the Advisor's
compensation and profitability; (3) a comparison of fees and performance with
other advisers; (4) economies of scale; and (5) the terms of the Management
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 Advisor, including the professional experience and
qualifications of senior personnel. The Board discussed the Advisor's
effectiveness in monitoring the performance of each Sub-Advisor and the
Advisor's timeliness in responding to performance issues. In evaluating the
quality of services provided by the Advisor, the Board took into account its
familiarity with the Advisor's senior management through Board meetings,
discussions and reports during the preceding year. The Board also took into
account the Advisor's compliance policies and procedures. The quality of
administrative and other services, including the Advisor's role in coordinating
the activities of the Funds' other service providers, was also considered. The
Board also considered the Advisor's relationship with its affiliates and the
resources available to them, as well as any potential conflicts of interest. The
Trustees concluded that they were satisfied with the nature, extent and quality
of services provided to each Fund by the Advisor under the Management Agreement.
Advisor's Compensation and Profitability. The Board took into consideration the
financial condition and profitability of the Advisor and its affiliates and the
direct and indirect benefits derived by the Advisor and its affiliates from the
Advisor's relationship with the Funds. The information considered by the Board
included operating profit margin information for the Advisor's business as a
whole. The Board noted that the Advisor waived advisory fees for the Mazama
Institutional Growth Fund. The Board also noted that the Advisor pays the
Sub-Advisors' sub-advisory fees out of the advisory fees the Advisor receives
from the Funds. The Board reviewed the profitability of the Advisor's
relationship with the Funds both before and after tax expenses and whether the
Advisor has the financial wherewithal to continue to provide a high level of
services to the Funds, noting the ongoing commitment of the Advisor's parent
company with respect to providing support and resources as needed. The Board
also considered that the Funds' distributor, an affiliate of the Advisor,
receives Rule 12b-1 distribution fees from the Funds and receives a portion of
the sales charges on sales or redemptions of certain classes of shares. The
Board also noted that the Advisor derives benefits to its reputation and other
benefits from its association with the Funds.
The Board recognized that the Advisor should be entitled to earn a reasonable
level of profits in exchange for the level of services it provides to each Fund
and the entrepreneurial risk that it assumes as Advisor. Based upon their
review, the Trustees concluded that the Advisor's level of profitability, if
any, from its relationship with each Fund was reasonable and not excessive.
Expenses and Performance. The Board compared the respective advisory fees and
total expense ratios for each of the Funds with various comparative data,
including the median and average advisory fees and total expense ratios of each
Fund's respective peer group. The Board also considered, among other data, the
Funds' respective performance results during the six-month, twelve-month, and
thirty-six month periods ended September 30, 2009, as applicable, and noted that
the Board reviews on a quarterly basis detailed information about each Fund's
performance results, portfolio composition and investment strategies. The Board
also took into account current market conditions and their effect on the Funds'
performance.
35
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
The Board also considered the effect of each Fund's growth and size on its
performance and expenses. The Board noted that the sub-advisory fees under the
Sub-Advisory Agreement with respect to each Fund were paid by the Advisor out of
the advisory fees it receives from the Fund and the impact of such sub-advisory
fees on the profitability of the Advisor. In reviewing the respective expense
ratios and performance of each of the Funds, the Board also took into account
the nature, extent and quality of the services provided by the Advisor and its
affiliates.
The Board considered, among other data, the specific factors and related
conclusions set forth below with respect to each Fund:
Mazama Institutional Growth Fund. The Fund's advisory fee and total expense
ratio (net of applicable expense waivers) were above the median of its peer
group. The Board noted that the Fund had commenced operations on January 30,
2008. The Board also took into account management's discussion of the Fund's
expenses, including the impact that the relatively small size of the Fund had
upon expenses. The Fund's performance for the six-month and twelve-month periods
ended September 30, 2009 was in the 1st quartile of its peer group. Based upon
their review, the Trustees concluded that the Fund's performance was
satisfactory and that the advisory fee was reasonable in light of the high
quality of services received by the Fund from the Advisor and the other factors
considered.
Sands Capital Institutional Growth Fund. The Fund's advisory fee and total
expense ratio were above the median of its peer group. The Board took into
account management's discussion of the Fund's expenses and the Fund's advisory
fee structure. The Fund's performance for the six-month, twelve-month, and
thirty-six month periods ended September 30, 2009 was in the 1st quartile of its
peer group. Based upon their review, the Trustees concluded that the Fund's
performance was satisfactory and that the advisory fee was reasonable in light
of the high quality of services received by the Fund from the Advisor and the
other factors considered.
Economies of Scale. The Board considered the effect of each Fund's current size
and potential growth on its performance and fees. The Board took into account
management's discussion of the Funds' advisory fee structure. The Board also
noted that if a Fund's assets increased over time, the Fund might realize other
economies of scale if assets increased proportionally more than certain other
expenses.
Conclusion. In considering the renewal of the Funds' Management 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 on a
Fund-by-Fund basis, and their determinations were made separately with respect
to each Fund. The Board reached the following conclusions regarding the Funds'
Management Agreement with the Advisor, among others: (a) the Advisor had
demonstrated that it possesses the capability and resources to perform the
duties required of it under the Management Agreement; (b) the Advisor maintains
an appropriate compliance program; (c) the performance of each Fund is
satisfactory in relation to the performance of funds with similar investment
objectives and to relevant indices; and (d) each Fund's advisory fee is
reasonable in relation to those of similar funds and to the services to be
provided by the Advisor. Based on their conclusions, the Trustees determined
with respect to each Fund that continuation of the Management Agreement was in
the best interests of the Fund and its shareholders.
In approving the Funds' Sub-Advisory Agreements, the Board considered various
factors with respect to each Fund and its respective Sub-Advisory Agreement,
among them: (1) the nature, extent and quality of services provided to the Fund,
including the personnel providing services; (2) the Sub-Advisor's compensation;
(3) a comparison of the sub-advisory fee and performance with other advisers;
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.
36
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
Nature, Extent and Quality of Services Provided; Investment Personnel. The Board
considered information provided by the Advisor regarding the services provided
by the Sub-Advisor, including information presented periodically throughout the
previous year. The Board noted that, on a periodic basis, the Board meets with
portfolio managers of the Sub-Advisor to discuss their performance and
investment processes and strategies. The Board considers each Sub-Advisor's
level of knowledge and investment style. The Board reviewed the experience and
credentials of the investment personnel who are responsible for managing the
investment of portfolio securities with respect to the Funds. The Board also
noted each Sub-Advisor's brokerage practices. The Board also considered each
Sub-Advisor's regulatory and compliance history. The Board noted that the
Advisor's compliance monitoring processes includes quarterly reviews of
compliance reports and annual compliance visits to the Sub-Advisors and that
compliance issues, if any, are reported to the Board.
Sub-Advisor's Compensation. The Board also took into consideration the financial
condition of each Sub-Advisor and any indirect benefits derived by the
Sub-Advisor and its affiliates from the Sub-Advisor's relationship with the
Funds. In considering the profitability to each Sub-Advisor of its relationship
with the Funds, the Board noted that the sub-advisory fees under the
Sub-Advisory Agreements were paid by the Advisor out of the advisory fees that
it receives under the Management Agreement and are negotiated at arms-length. As
a consequence, the profitability to each Sub-Advisor of its relationship with a
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 each
Sub-Advisor's management of the Funds to be a substantial factor in its
consideration.
Sub-Advisory Fees and Fund Performance. The Board considered that each Fund pays
an advisory fee to the Advisor and that the Advisor pays the sub-advisory fee to
the Sub-Advisor. The Board also compared the sub-advisory fees paid by the
Advisor to fees charged by the Sub-Advisors to manage comparable institutional
separate accounts. The Board considered the amount retained by the Advisor and
the sub-advisory fee paid to the Sub-Advisor with respect to the various
services provided by the Advisor and the Sub-Advisor. The Board compared the
sub-advisory fee for each Fund with various comparative data, including the
median and average sub-advisory fees of each Fund's peer group, and considered
the following information:
Mazama Institutional Growth Fund. The Fund's sub-advisory fee was above the
median of its peer group. Based upon their review, the Trustees concluded that
the sub-advisory fee was reasonable in light of the quality of services received
by the Fund from the Sub-Advisor and the other factors considered.
Sands Capital Institutional Growth Fund. The Fund's sub-advisory fee was above
the median of its peer group. Based upon their review, the Trustees concluded
that the sub-advisory fee was reasonable in light of the quality of services
received by the Fund from the Sub-Advisor and the other factors considered.
As noted above, the Board considered the Funds' performance during the
six-month, twelve-month, and thirty-six month periods ended September 30, 2009,
as applicable, as compared to each Fund's peer group and noted that the Board
reviews on a quarterly basis detailed information about each Fund's performance
results, portfolio composition and investment strategies. The Board also noted
the Advisor's expertise and resources in monitoring the performance, investment
style and risk adjusted performance of each Sub-Advisor. The Board also was
mindful of the Advisor's focus on each Sub-Advisor's performance and the
Advisor's ways of addressing underperformance.
37
- --------------------------------------------------------------------------------
Other Items (Continued)
- --------------------------------------------------------------------------------
Conclusion. In considering the renewal of the Sub-Advisory Agreement with
respect to each 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 with respect to each Fund,
among others: (a) the Sub-Advisor was qualified to manage each Fund's assets in
accordance with the Fund's investment objectives and policies; (b) the
Sub-Advisor maintains an appropriate compliance program; (c) the performance of
each Fund is satisfactory in relation to the performance of funds with similar
investment objectives and to relevant indices; (d) each Fund's advisory fees are
reasonable in relation to those of similar funds and to the services to be
provided by the Advisor and the Sub-Advisor; and (e) the Sub-Advisor's
investment strategies are appropriate for pursuing the investment objectives of
each Fund. Based on its conclusions, the Board determined that approval of the
Sub-Advisory Agreement with respect to each Fund was in the best interests of
the respective Fund and its shareholders.
38
- --------------------------------------------------------------------------------
Management of the Trust (Unaudited)
- --------------------------------------------------------------------------------
Listed below is basic information regarding the Trustees and principal officers
of the Trust. The Trust's Statement of Additional Information includes
additional information about the Trustees and is available, without charge, upon
request by calling 1.800.543.0407.
INTERESTED TRUSTEES(1):
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
OVERSEEN
TERM OF IN THE
NAME POSITION(S) OFFICE(2) AND TOUCHSTONE OTHER
ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Jill T. McGruder Trustee and Until President and CEO of IFS 48 Director of LaRosa's (a
Touchstone Advisors, Inc President retirement at Financial Services, Inc. restaurant chain), Capital
303 Broadway age 75 or until (a holding company). Analysts Incorporated (an
Cincinnati, OH she resigns or investment advisor and
Year of Birth: 1955 is removed broker-dealer), IFS
Trustee since Financial Services, Inc.
2006 (a holding company), IFS
Fund Distributors (a broker-
dealer), Integrity and
National Integrity Life
Insurance Co., Touchstone
Securities (the Trust's
distributor), Touchstone
Advisors (the Trust's
investment advisor and
administrator), W&S
Brokerage Services (a
broker-dealer) and W&S
Financial Group Distributors
(a distribution company).
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
- ------------------------------------------------------------------------------------------------------------------------------------
Phillip R. Cox Trustee Until President and Chief Executive 48 Director of Cincinnati Bell
105 East Fourth Street retirement at Officer of Cox Financial Corp. (a communications company),
Cincinnati, OH age 75 or until (a financial services company). Bethesda Inc. (a hospital),
Year of Birth: 1947 he resigns or is Timken Co. (a manufacturing
removed company), Diebold (a
Trustee since technology solutions
2006 company), and Ohio Business
Alliance for Higher
Education.
- ------------------------------------------------------------------------------------------------------------------------------------
Susan J. Hickenlooper Trustee Until President and Trustee of 48 Trustee of Gateway Trust (a
c/o Touchstone Advisors, Inc. retirement at Episcopal Retirement charitable organization),
303 Broadway age 75 or until Homes Foundation. Trustee of Cincinnati Parks
Cincinnati, OH she resigns or Foundation.
Year of Birth: 1946 is removed
Trustee since
2009
- ------------------------------------------------------------------------------------------------------------------------------------
H. Jerome Lerner Trustee Until Principal of HJL Enterprises 48 None
c/o Touchstone Advisors, Inc. retirement at (a privately held
303 Broadway age 75 or until investment company).
Cincinnati, OH he resigns or is
Year of Birth: 1938 removed
Trustee since
2007
- ------------------------------------------------------------------------------------------------------------------------------------
39
- --------------------------------------------------------------------------------
Management of the Trust (Continued)
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED):
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
OVERSEEN
TERM OF IN THE
NAME POSITION(S) OFFICE(2) AND TOUCHSTONE OTHER
ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. Siekmann Trustee Until Executive for Duro Bag 48 None
c/o Touchstone Advisors, Inc. retirement at Manufacturing Co. (a bag manufacturer)
303 Broadway age 75 or until from 2002-2008. President of Shor
Cincinnati, OH he resigns or is Foundation for Epilepsy Research
Year of Birth: 1938 removed (a charitable foundation).
Trustee since
2006
- ------------------------------------------------------------------------------------------------------------------------------------
Robert E. Stautberg Trustee Until Retired Partner of KPMG LLP 48 Trustee of
c/o Touchstone Advisors, Inc. retirement at (a certified public accounting Tri-Health
303 Broadway age 75 or until firm). Vice President of Physician
Cincinnati, OH he resigns or is St. Xavier High School. Enterprise
Year of Birth: 1934 removed Corporation.
Trustee since
2006
- ------------------------------------------------------------------------------------------------------------------------------------
John P. Zanotti Trustee Until CEO, Chairman and Director of 48 None
c/o Touchstone Advisors, Inc. retirement at Avaton, Inc. (a wireless
303 Broadway age 75 or until entertainment company) until 2006.
Cincinnati, OH he resigns or is President of Cincinnati Biomedical
Year of Birth: 1948 removed (a life science and economic
Trustee since development company) from
2007 2003-2007. Chairman of Integrated
Media Technologies (a media company).
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Ms. McGruder, as a director of the Advisor and the Trust's Distributor,
and an officer of affiliates of the Advisor and the Trust's Distributor,
is an "interested person" of the Trust within the meaning of Section
2(a)(19) of the 1940 Act.
(2) Each Trustee is elected to serve until the age of 75 or until he or she
sooner resigns or is removed.
(3) The Touchstone Fund Complex consists of 3 series of the Trust, 20 series
of Touchstone Funds Group Trust, 4 series of Touchstone Investment Trust,
6 series of Touchstone Strategic Trust, 4 series of Touchstone Tax-Free
Trust, and 11 variable annuity series of Touchstone Variable Series Trust.
(4) Each Trustee is also a Trustee of Touchstone Funds Group Trust, Touchstone
Investment Trust, Touchstone Strategic Trust, Touchstone Tax-Free Trust,
and Touchstone Variable Series Trust.
40
- --------------------------------------------------------------------------------
Management of the Trust (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL OFFICERS(1):
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
TERM OF OVERSEEN
OFFICE AND IN THE
NAME POSITION(S) LENGTH TOUCHSTONE OTHER
ADDRESS HELD WITH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(2) HELD
- ------------------------------------------------------------------------------------------------------------------------------------
Jill T. McGruder President Until resignation, See biography above. 48 See biography
Touchstone Advisors, Inc. and Trustee removal or above.
303 Broadway disqualification
Cincinnati, OH President since
Year of Birth: 1955 2004; President
from 2000-2002
- ------------------------------------------------------------------------------------------------------------------------------------
Brian E. Hirsch Vice Until resignation, Senior Vice President and Chief 48 None
Touchstone Advisors, Inc. President removal or Compliance Officer of
303 Broadway and Chief disqualification IFS Financial Services, Inc.
Cincinnati, OH Compliance Vice President
Year of Birth: 1956 Officer since 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Steven M. Graziano Vice Until resignation, President of Touchstone 48 None
Touchstone Advisors, Inc. President removal or Advisors, Inc.; Executive Vice
303 Broadway disqualification President of Pioneer Investment
Cincinnati, OH Vice President Management, Head of Retail
Year of Birth: 1954 since 2009 Distribution and Strategic
Marketing 2007 - 2008; Executive
Vice President of Pioneer
Investment Management, Chief
Marketing Officer 2002 - 2007
- ------------------------------------------------------------------------------------------------------------------------------------
Terrie A. Wiedenheft Controller Until resignation, Chief Financial Officer of 48 None
Touchstone Advisors, Inc. and removal or IFS Financial Services, Inc.
303 Broadway Treasurer disqualification
Cincinnati, OH Controller since
Year of Birth: 1962 2000; Treasurer
since 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Jay S. Fitton Secretary Until resignation, Assistant Vice President and 48 None
JPMorgan removal or Senior Counsel at JPMorgan
303 Broadway disqualification Chase Bank, N.A.
Cincinnati, OH Secretary since
Year of Birth: 1970 2006; Assistant
Secretary from
2002-2006
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Each officer also holds the same office with Touchstone Funds Group Trust,
Touchstone Investment Trust, Touchstone Strategic Trust, Touchstone
Tax-Free Trust, and Touchstone Variable Series Trust.
(2) The Touchstone Fund Complex consists of 3 series of the Trust, 20 series
of Touchstone Funds Group Trust, 4 series of Touchstone Investment Trust,
6 series of Touchstone Strategic Trust, 4 series of Touchstone Tax-Free
Trust, and 11 variable annuity series of Touchstone Variable Series Trust.
41
- --------------------------------------------------------------------------------
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
o We collect only the information we need to service your account and
administer our business.
o We are committed to keeping your information confidential and we place
strict limits and controls on the use and sharing of your information.
o We make every effort to ensure the accuracy of your information.
WE COLLECT THE FOLLOWING NONPUBLIC PERSONAL INFORMATION ABOUT YOU:
o 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
o 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
o We restrict access to nonpublic personal information about you to
authorized employees who need the information to administer your business.
o We maintain physical, electronic and procedural safeguards that comply
with federal standards to protect this information.
o 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.
o 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, broker-dealers and marketing service firms
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. Companies
within our corporate family that may receive this information are financial
service providers and insurance companies. We do not permit these associated
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 Investment Trust, Touchstone Strategic Trust,
Touchstone Tax-Free Trust, Touchstone Variable Series Trust, Touchstone
Institutional Funds Trust, Touchstone Securities, Inc.*, Capital Analysts
Incorporated and W&S Brokerage Services, Inc.
* Touchstone Securities, Inc. serves as the underwriter to the Touchstone
Funds.
A Member of Western & Southern Financial Group(R)
THE PRIVACY PROTECTION POLICY IS NOT PART OF THE ANNUAL REPORT.
- --------------------------------------------------------------------------------
42
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[LOGO] Touchstone Investments(R)
303 Braodway, Suite 1100
Cincinnati, OH 45202-4203
- --------------------------------------------------------------------------------
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TOUCHSTONE INVESTMENTS
DISTRIBUTOR
Touchstone Securities, Inc.*
303 Broadway
Cincinnati, Ohio 45202-4203
800.638.8194
www.touchstoneinvestments.com
INVESTMENT ADVISOR
Touchstone Advisors, Inc.*
303 Broadway
Cincinnati, Ohio 45202-4203
TRANSFER AGENT
JPMorgan Chase Bank, N.A.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
SHAREHOLDER SERVICE
800.543.0407
* A Member of Western & Southern Financial Group
TSF-1105-TIFT-AR-0912
ITEM 2. CODE OF ETHICS.
At the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to its principal executive officer and principal
financial officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that the registrant has at
least one audit committee financial expert serving on its audit committee. Mr.
Don Siekmann is the registrant's audit committee financial expert and is an
independent trustee within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act").
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees. Audit fees totaled approximately $38,175 for the December 31,
2009 fiscal year and $53,200 for the December 31, 2008 fiscal year, including
fees associated with the annual audit and filings of the registrant's Form N-1A
and Form N-SAR.
(b) Audit-Related Fees. Audit-related fees totaled $15,000 ($9,000 paid by
JPMorgan) for the December 31, 2009 fiscal year and $0 for the December 31, 2008
fiscal year. The 2009 fees are related to limited internal control testing in of
the Trust's fund accountant and transfer agent.
(c) Tax Fees. Tax fees totaled $18,200 for the December 31, 2009 fiscal year and
$17,200 for the December 31, 2008 fiscal year and consisted of fees for tax
compliance services and tax consultation services.
(d) All Other Fees. There were no other fees for the December 31, 2009 or
December 31, 2008 fiscal years.
(e) (1) Audit Committee Pre-Approval Policies. The Audit Committee's
pre-approval policies describe the types of audit, audit-related, tax and other
services that have the general pre-approval of the Audit Committee. The
pre-approval policies provide that annual audit service fees, tax services not
specifically granted pre-approval, services exceeding pre-approved cost levels
and other services that have not received general pre-approval will be subject
to specific pre-approval by the Audit Committee. The pre-approval policies
further provide that the Committee may grant general pre-approval to other audit
services (statutory audits and services associated with SEC registration
statements, periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings), audit-related
services (accounting consultations related to accounting, financial reporting or
disclosure matters not classified as "audit services," assistance with
understanding and implementing new accounting and financial reporting guidance
from rulemaking authorities, agreed-upon or expanded audit procedures related to
accounting and/or billing records required to respond to or comply with
financial, accounting or regulatory reporting matters and assistance with
internal control reporting requirements under Form N-SAR and Form N-CSR), tax
services that have historically been provided by the auditor that the Committee
believes would not impair the independence of the auditor and are consistent
with the SEC's rules on auditor independence and permissible non-audit services
classified as "all other services" that are routine and recurring services.
(e)(2) All services described in paragraphs (b) through (d) of Item 4 were
approved by the Audit Committee.
(f) Not applicable
(g) The aggregate non-audit fees for services to the registrant, its investment
adviser (excluding its sub-advisors) and any entity controlling, controlled by,
or under common control with the advisor that provides ongoing services to the
registrant were $48,200 for the December 31, 2009 fiscal year and $46,200 for
the December 31, 2008 fiscal year.
(h) Not applicable
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments in securities of unaffiliated issuers is included in
the Annual Report.
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.
No material changes have been made to the procedures by which shareholders may
recommend nominees to its Board of Trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the 1940 Act) the registrant's
principal executive officer and principal financial officer have concluded that
the registrant's disclosure controls and procedures are effective as of a date
within 90 days of the filing date of this report.
(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) that occurred during
the registrant's second fiscal half-year that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS.
(a)(1) The Code of Ethics for Senior Financial Officers was filed with
registrant's N-CSR for the December 31, 2006 fiscal year and is hereby
incorporated by reference.
(a)(2) Certifications required by Item 12(a)(2) of Form N-CSR are filed
herewith.
(b) Certification required by Item 11(b) of Form N-CSR is filed herewith.
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 Institutional Funds Trust
-------------------------------------------------------------------
By (Signature and Title) /s/ Jill McGruder
-------------------------------------------------------
Jill McGruder, President
(principal executive officer)
Date March 3, 2010
---------------------------------------------------------------------------
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/ Jill McGruder
-------------------------------------------------------
Jill McGruder, President
(principal executive officer)
Date March 3, 2010
---------------------------------------------------------------------------
By (Signature and Title) /s/ Terrie Wiedenheft
-------------------------------------------------------
Terrie Wiedenheft, Controller and Treasurer
(principal financial officer)
Date March 2, 2010
---------------------------------------------------------------------------