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 811-3174
--------------------------------------------
Touchstone Tax-Free Trust
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
303 Broadway, Cincinnati, Ohio 45202
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(Address of principal executive offices) (Zip code)
Jill T. McGruder, 303 Broadway, Cincinnati, Ohio 45202
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(Name and address of agent for service)
Registrant's telephone number, including area code: (513) 362-8000
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Date of fiscal year end: 6/30/06
--------------------
Date of reporting period: 12/31/05
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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.
<page>
Item 1. Reports to Stockholders.
Touchstone Florida Tax-Free Money Market Fund Touchstone Ohio Insured Tax-Free
Fund Touchstone Ohio Tax-Free Money Market Fund Touchstone Tax-Free Money Market
Fund Touchstone Florida Tax-Free Money Market Fund Touchstone Ohio Insured
Tax-Free Fund Touchstone Ohio Tax-Free Money Market Fund Touchstone Tax-Free
Money Market Fund Touchstone Florida Tax-Free Money Market Fund Touchstone Ohio
Insured Tax-Free Fund Touchstone Ohio Tax-Free Money Market Fund Touchstone
Tax-Free Money Market Fund Touchstone Florida Tax-Free Money Market Fund
Touchstone Ohio Insured Tax-Free Fund Touchstone Ohio Tax-Free Money Market Fund
December 31, 2005 (Unaudited)
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[LOGO] TOUCHSTONE
INVESTMENTS
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Semi-Annual Report
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Touchstone Florida Tax-Free Money Market Fund
Touchstone Ohio Insured Tax-Free Fund
Touchstone Ohio Tax-Free Money Market Fund
Touchstone Tax-Free Money Market Fund
Research o Design o Select o Monitor
TABLE OF CONTENTS
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Page
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Tabular Presentation of Portfolios of Investments 3
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Statements of Assets and Liabilities 4-6
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Statements of Operations 7-8
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Statements of Changes in Net Assets 9-11
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Financial Highlights 12-18
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Notes to Financial Statements 19-25
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Portfolios of Investments:
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Florida Tax-Free Money Market Fund 26-27
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Ohio Insured Tax-Free Fund 28-29
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Ohio Tax-Free Money Market Fund 30-32
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Tax-Free Money Market Fund 33-34
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Notes to Portfolios of Investments 35
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Portfolio Composition (Unaudited) 36
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Other Items (Unaudited) 37-38
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2
TABULAR PRESENTATION OF PORTFOLIOS OF INVESTMENTS
(UNAUDITED)
================================================================================
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.
AS OF DECEMBER 31, 2005
-----------------------------------------------------
TOUCHSTONE FLORIDA TAX-FREE
MONEY MARKET FUND
-----------------
CREDIT QUALITY (% OF NET ASSETS)
A-1 / P-1 / AAA 91.9
FW1* 8.1
------
TOTAL 100.0
------
PORTFOLIO ALLOCATION (% OF NET ASSETS)
Variable Rate Demand Notes 74.4
General Obligations 8.8
Fixed Rate Revenue 7.0
Adjustable Rate Put Bonds 5.7
Commercial Paper 4.1
------
TOTAL 100.0
------
-----------------------------------------------------
-----------------------------------------------------
TOUCHSTONE OHIO TAX-FREE
MONEY MARKET FUND
-----------------
CREDIT QUALITY (% OF NET ASSETS)
A-1 / P-1 / AAA 78.7
FW1* 21.3
------
TOTAL 100.0
------
PORTFOLIO ALLOCATION (% OF NET ASSETS)
Variable Rate Demand Notes 73.4
General Obligations 15.0
Fixed Rate Revenue 8.4
Adjustable Rate Put Bonds 3.2
------
TOTAL 100.0
------
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-----------------------------------------------------
TOUCHSTONE OHIO
INSURED TAX-FREE FUND
---------------------
CREDIT QUALITY (% OF NET ASSETS)
AAA / Aaa 89.8
AA / Aa 8.9
Not Rated 1.3
------
TOTAL 100.0
------
PORTFOLIO ALLOCATION (% OF NET ASSETS)
General Obligations 45.7
Prerefunded / Escrowed
to Maturity 17.4
Hospital / Healthcare 11.5
Education 7.6
Miscellaneous 7.3
Water and Sewer 4.0
Transportation 2.8
Housing 2.0
Utilities 1.7
------
TOTAL 100.0
------
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TOUCHSTONE TAX-FREE
MONEY MARKET FUND
-----------------
CREDIT QUALITY (% OF NET ASSETS)
A-1 / P-1 / AAA 93.2
FW1* 6.8
------
TOTAL 100.0
------
PORTFOLIO ALLOCATION (% OF NET ASSETS)
Variable Rate Demand Notes 80.8
Adjustable Rate Put Bonds 10.0
Fixed Rate Revenue 6.9
General Obligations 2.3
------
TOTAL 100.0
------
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* Equivalent to Standard & Poor's and Moody's highest short-term ratings of
A-1 and P-1, respectively, based upon independent research conducted by
Fort Washington Investment Advisors, Inc.
3
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2005 (UNAUDITED)
===================================================================================================
FLORIDA OHIO
TAX-FREE INSURED
MONEY MARKET TAX-FREE
FUND FUND
- ---------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At amortized cost ............................................. $ 24,408,475 $ 72,742,310
-----------------------------
At market value ............................................... $ 24,408,475 $ 76,578,536
Cash ............................................................. 22,941 49,956
Interest receivable .............................................. 127,111 475,735
Receivable for capital shares sold ............................... -- 8,139
Other assets ..................................................... 1,662 9,144
-----------------------------
TOTAL ASSETS ..................................................... 24,560,189 77,121,510
-----------------------------
LIABILITIES
Dividends payable ................................................ 42,831 91,513
Payable to Advisor ............................................... 9,091 29,063
Payable to other affiliates ...................................... 4,440 11,897
Payable to Trustees .............................................. 6,653 7,012
Payable for capital shares redeemed .............................. -- 10,967
Other accrued expenses and liabilities ........................... 13,888 51,582
-----------------------------
TOTAL LIABILITIES ................................................ 76,903 202,034
-----------------------------
NET ASSETS ....................................................... $ 24,483,286 $ 76,919,476
-----------------------------
NET ASSETS CONSIST OF:
Paid-in capital .................................................. $ 24,489,014 $ 72,946,528
Accumulated net realized gains (losses) from security transactions (5,728) 136,722
Net unrealized appreciation on investments ....................... -- 3,836,226
-----------------------------
NET ASSETS ....................................................... $ 24,483,286 $ 76,919,476
=============================
PRICING OF CLASS A SHARES
Net assets applicable to Class A shares .......................... $ 24,483,286 $ 68,991,439
=============================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) ......... 24,489,002 5,884,656
=============================
Net asset value and redemption price per share ................... $ 1.00 $ 11.72
=============================
Maximum offering price per share ................................. $ -- $ 12.30
=============================
PRICING OF CLASS C SHARES
Net assets applicable to Class C shares .......................... $ -- $ 7,928,037
=============================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) ......... -- 675,608
=============================
Net asset value, offering price and redemption price per share* .. $ -- $ 11.73
=============================
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
4
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2005 (UNAUDITED)
==============================================================================================
OHIO
TAX-FREE TAX-FREE
MONEY MARKET MONEY MARKET
FUND FUND
- ----------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At amortized cost ......................................... $262,598,899 $ 48,299,343
----------------------------
At market value ........................................... $262,598,899 $ 48,299,343
Cash ......................................................... 119,165 --
Interest receivable .......................................... 1,659,458 210,664
Other assets ................................................. 11,327 8,974
----------------------------
TOTAL ASSETS ................................................. 264,388,849 48,518,981
----------------------------
LIABILITIES
Bank overdraft ............................................... -- 14,092
Dividends payable ............................................ 426,173 627
Payable to Advisor ........................................... 98,647 16,676
Payable to other affiliates .................................. 27,402 7,988
Payable to Trustees .......................................... 6,678 6,839
Payable for securities purchased ............................. -- 100,525
Other accrued expenses and liabilities ....................... 64,330 29,102
----------------------------
TOTAL LIABILITIES ............................................ 623,230 175,849
----------------------------
NET ASSETS ................................................... $263,765,619 $ 48,343,132
----------------------------
NET ASSETS CONSIST OF:
Paid-in capital .............................................. $263,763,024 $ 48,343,132
Accumulated net realized gains from security transactions .... 2,595 --
----------------------------
NET ASSETS ................................................... $263,765,619 $ 48,343,132
----------------------------
PRICING OF RETAIL SHARES
Net assets applicable to Retail shares ....................... $101,871,689 $ --
============================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) ..... 101,860,890 --
============================
Net asset value, offering price and redemption price per share $ 1.00 $ --
============================
PRICING OF INSTITUTIONAL SHARES
Net assets applicable to Institutional shares ................ $161,893,930 $ --
============================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) ..... 161,888,523 --
============================
Net asset value, offering price and redemption price per share $ 1.00 $ --
============================
5
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 2005 (UNAUDITED)
==============================================================================================
OHIO
TAX-FREE TAX-FREE
MONEY MARKET MONEY MARKET
FUND FUND
- ----------------------------------------------------------------------------------------------
PRICING OF CLASS A SHARES
Net assets applicable to Class A shares ...................... $ -- $ 18,593,048
============================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) ..... -- 18,603,210
============================
Net asset value, offering price and redemption price per share $ -- $ 1.00
============================
PRICING OF CLASS S SHARES
Net assets applicable to Class S shares ...................... $ -- $ 29,750,084
============================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) ..... -- 29,750,073
============================
Net asset value, offering price and redemption price per share $ -- $ 1.00
============================
See accompanying notes to financial statements.
6
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2005 (UNAUDITED)
=================================================================================================
FLORIDA OHIO
TAX-FREE INSURED
MONEY MARKET TAX-FREE
FUND FUND
- -------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income ................................................. $ 393,159 $ 1,873,908
----------------------------
EXPENSES
Investment advisory fees ........................................ 73,201 204,343
Distribution expenses, Class A .................................. 36,593 90,979
Distribution expenses, Class C .................................. -- 44,771
Transfer agent fees, Class A .................................... 6,000 19,041
Transfer agent fees, Class C .................................... -- 6,000
Accounting services fees ........................................ 12,000 18,750
Administration fees ............................................. 8,056 22,477
Postage and supplies ............................................ 1,336 25,938
Professional fees ............................................... 8,819 10,763
Trustees' fees and expenses ..................................... 7,441 7,688
Pricing expenses ................................................ 1,814 7,864
Custodian fees .................................................. 3,104 5,823
Registration fees, Class A ...................................... -- 4,215
Registration fees, Class C ...................................... -- 4,053
Reports to shareholders ......................................... 2,569 4,680
Compliance fees and expenses .................................... 48 149
Other expenses .................................................. 188 317
----------------------------
TOTAL EXPENSES .................................................. 161,169 477,851
Fees waived by the Advisor ...................................... 51,389 137,937
----------------------------
NET EXPENSES .................................................... 109,780 339,914
----------------------------
NET INVESTMENT INCOME ........................................... 283,379 1,533,994
----------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions ................... -- 222,193
Net change in unrealized appreciation/depreciation on investments -- (1,741,762)
----------------------------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS ............... -- (1,519,569)
----------------------------
Net Increase in Net Assets from Operations ...................... $ 283,379 $ 14,425
============================
See accompanying notes to financial statements.
7
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2005 (UNAUDITED)
================================================================================
OHIO
TAX-FREE TAX-FREE
MONEY MARKET MONEY MARKET
FUND FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income ................................ $ 3,799,996 $ 549,003
----------------------------
EXPENSES
Investment advisory fees ....................... 640,577 96,271
Distribution expenses, Retail class ............ 128,088 --
Distribution expenses, Class A ................. -- 24,199
Distribution expenses, Class S ................. -- 57,447
Administration fees ............................ 71,143 10,563
Transfer agent fees, Retail class .............. 20,161 --
Transfer agent fees, Institutional class ....... 6,000 --
Transfer agent fees, Class A ................... -- 9,480
Transfer agent fees, Class S ................... -- 6,000
Accounting services fees ....................... 24,750 15,750
Custodian fees ................................. 26,354 5,957
Postage and supplies ........................... 23,138 6,998
Professional fees .............................. 16,216 9,102
Trustees' fees and expenses .................... 7,625 7,503
Registration fees, Retail class ................ 3,859 --
Registration fees, Class A ..................... -- 6,518
Registration fees, Class S ..................... -- 2,618
Pricing expenses ............................... 7,781 1,860
Reports to shareholders ........................ 3,172 2,595
Compliance fees and expenses ................... 300 86
Other expenses ................................. 535 228
----------------------------
TOTAL EXPENSES ................................. 979,699 263,175
Fees waived by the Advisor ..................... 145,156 66,962
----------------------------
NET EXPENSES ................................... 834,543 196,213
----------------------------
NET INVESTMENT INCOME .......................... 2,965,453 352,790
----------------------------
REALIZED GAINS FROM SECURITY TRANSACTIONS ...... 2,595 --
----------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ..... $ 2,968,048 $ 352,790
============================
See accompanying notes to financial statements.
8
STATEMENTS OF CHANGES IN NET ASSETS
=========================================================================================================
FLORIDA OHIO
TAX-FREE INSURED
MONEY MARKET TAX-FREE
FUND FUND
---------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
DECEMBER 31, ENDED DECEMBER 31, ENDED
2005 JUNE 30, 2005 JUNE 30,
(UNAUDITED) 2005 (UNAUDITED) 2005
- ---------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ................ $ 283,379 $ 311,679 $ 1,533,994 $ 3,164,821
Net realized gains (losses) from
security transactions ............. -- (198) 222,193 1,085,053
Net change in unrealized appreciation/
depreciation on investments ....... -- -- (1,741,762) 2,101,484
---------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ................... 283,379 311,481 14,425 6,351,358
---------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A .. (283,379) (311,679) (1,395,946) (2,882,015)
From net investment income, Class C .. -- -- (138,048) (282,806)
From net realized gains, Class A ..... -- -- (958,818) (91,343)
From net realized gains, Class C ..... -- -- (109,298) (11,065)
---------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS ..... (283,379) (311,679) (2,602,110) (3,267,229)
---------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold ............ 35,775,731 73,748,617 1,320,220 3,985,430
Reinvested distributions ............. 66,405 77,889 1,610,587 1,947,062
Payments for shares redeemed ......... (39,503,340) (75,067,308) (6,240,440) (11,910,903)
---------------------------------------------------------------
NET DECREASE IN NET ASSETS
FROM CLASS A SHARE TRANSACTIONS ... (3,661,204) (1,240,802) (3,309,633) (5,978,411)
---------------------------------------------------------------
CLASS C
Proceeds from shares sold ............ -- -- 92,270 840,020
Reinvested distributions ............. -- -- 151,337 197,828
Payments for shares redeemed ......... -- -- (1,430,659) (1,838,409)
---------------------------------------------------------------
NET DECREASE IN NET ASSETS
FROM CLASS C SHARE TRANSACTIONS ... -- -- (1,187,052) (800,561)
---------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS ......... (3,661,204) (1,241,000) (7,084,370) (3,694,843)
NET ASSETS
Beginning of period .................. 28,144,490 29,385,490 84,003,846 87,698,689
---------------------------------------------------------------
End of period ........................ $ 24,483,286 $ 28,144,490 $ 76,919,476 $ 84,003,846
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UNDISTRIBUTED NET INVESTMENT INCOME .. $ -- $ -- $ -- $ --
---------------------------------------------------------------
See accompanying notes to financial statements.
9
STATEMENTS OF CHANGES IN NET ASSETS
========================================================================================================================
OHIO
TAX-FREE TAX-FREE
MONEY MARKET MONEY MARKET
FUND FUND
-----------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
DECEMBER 31, ENDED DECEMBER 31, ENDED
2005 JUNE 30, 2005 JUNE 30,
(UNAUDITED) 2005 (UNAUDITED) 2005
- ------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ....................... $ 2,965,453 $ 4,123,174 $ 352,790 $ 370,171
Net realized gains from security transactions 2,595 -- -- --
-----------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS .......................... 2,968,048 4,123,174 352,790 370,171
-----------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Retail .......... (997,420) (1,338,999) -- --
From net investment income, Institutional ... (1,968,033) (2,784,175) -- --
From net investment income, Class A ......... -- -- (188,794) (235,848)
From net investment income, Class S ......... -- -- (163,996) (135,566)
From net realized gains, Retail ............. -- (6,125) -- --
From net realized gains, Institutional ...... -- (10,168) -- --
-----------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS ............ (2,965,453) (4,139,467) (352,790) (371,414)
-----------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
RETAIL
Proceeds from shares sold ................... 76,934,116 220,903,508 -- --
Reinvested distributions .................... 1,008,987 1,340,804 -- --
Payments for shares redeemed ................ (75,198,793) (288,256,448) -- --
-----------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM RETAIL SHARE TRANSACTIONS ........... 2,744,310 (66,012,136) -- --
-----------------------------------------------------------------------
INSTITUTIONAL
Proceeds from shares sold ................... 188,739,296 475,611,129 -- --
Reinvested distributions .................... 61,508 95,331 -- --
Payments for shares redeemed ................ (219,255,517) (458,088,479) -- --
-----------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM INSTITUTIONAL SHARE TRANSACTIONS .... (30,454,713) 17,617,981 -- --
-----------------------------------------------------------------------
CLASS A
Proceeds from shares sold ................... -- -- 9,855,243 37,464,246
Reinvested distributions .................... -- -- 187,981 231,099
Payments for shares redeemed ................ -- -- (10,700,372) (38,706,765)
-----------------------------------------------------------------------
NET DECREASE IN NET ASSETS
FROM CLASS A SHARE TRANSACTIONS .......... -- -- (657,148) (1,011,420)
-----------------------------------------------------------------------
10
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
====================================================================================================================
OHIO
TAX-FREE TAX-FREE
MONEY MARKET MONEY MARKET
FUND FUND
----------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
DECEMBER 31, ENDED DECEMBER 31, ENDED
2005 JUNE 30, 2005 JUNE 30,
(UNAUDITED) 2005 (UNAUDITED) 2005
- --------------------------------------------------------------------------------------------------------------------
CLASS S
Proceeds from shares sold ............... -- -- 37,961,520 68,265,746
Reinvested distributions ................ -- -- 167,896 135,566
Payments for shares redeemed ............ -- -- (21,453,939) (71,707,542)
----------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM CLASS S SHARE TRANSACTIONS ...... -- -- 16,675,477 (3,306,230)
----------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS . (27,707,808) (48,410,448) 16,018,329 (4,318,893)
NET ASSETS
Beginning of period ..................... 291,473,427 339,883,875 32,324,803 36,643,696
----------------------------------------------------------------------
End of period ........................... $ 263,765,619 $ 291,473,427 $ 48,343,132 $ 32,324,803
=======================================================================
UNDISTRIBUTED NET INVESTMENT INCOME ..... $ -- $ -- $ -- $ --
=======================================================================
See accompanying notes to financial statements.
11
FLORIDA TAX-FREE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
======================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
2005 ------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income ................ 0.010 0.011 0.004 0.008 0.017 0.033
Net realized gains (losses)
on investments .................... -- (0.000)(A) (0.000)(A) 0.000(A) (0.000)(A) --
-------------------------------------------------------------------------
Total from investment operations ........ 0.010 0.011 0.004 0.008 0.017 0.033
-------------------------------------------------------------------------
Less distributions:
Dividends from net investment income . (0.010) (0.011) (0.004) (0.008) (0.017) (0.033)
Distributions from net realized gains -- -- (0.000)(A) -- -- --
-------------------------------------------------------------------------
Total distributions ..................... (0.010) (0.011) (0.004) (0.008) (0.017) (0.033)
-------------------------------------------------------------------------
Net asset value at end of period ........ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========================================================================
Total return ............................ 1.98%(B) 1.09% 0.36% 0.76% 1.66% 3.30%
=========================================================================
Net assets at end of period (000's) ..... $ 24,483 $ 28,144 $ 29,385 $ 29,657 $ 18,128 $ 16,690
=========================================================================
Ratio of net expenses to
average net assets ................... 0.75%(B) 0.75% 0.75% 0.69% 0.65% 0.65%
Ratio of net investment income to
average net assets ................... 1.94%(B) 1.08% 0.35% 0.77% 1.64% 3.26%
(A) Amount rounds to less than $0.001.
(B) Annualized.
See accompanying notes to financial statements.
12
OHIO INSURED TAX-FREE FUND - CLASS A
FINANCIAL HIGHLIGHTS
======================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
2005 ------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 12.10 $ 11.68 $ 12.36 $ 11.94 $ 11.89 $ 11.45
-------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income ................ 0.23 0.45 0.48 0.49 0.53 0.56
Net realized and unrealized gains
(losses) on investments ........... (0.22) 0.43 (0.50) 0.49 0.07 0.44
-------------------------------------------------------------------------
Total from investment operations ........ 0.01 0.88 (0.02) 0.98 0.60 1.00
-------------------------------------------------------------------------
Less distributions:
Dividends from net investment income . (0.23) (0.45) (0.48) (0.49) (0.53) (0.56)
Distributions from net realized gains (0.16) (0.01) (0.21) (0.07) (0.02) --
-------------------------------------------------------------------------
Total distributions ..................... (0.39) (0.46) (0.69) (0.56) (0.55) (0.56)
-------------------------------------------------------------------------
Capital contributions ................... -- -- 0.03 -- -- --
-------------------------------------------------------------------------
Net asset value at end of period ........ $ 11.72 $ 12.10 $ 11.68 $ 12.36 $ 11.94 $ 11.89
=========================================================================
Total return (A) ........................ 0.14%(B) 7.66% 0.04%(C) 8.43% 5.15% 8.88%
=========================================================================
Net assets at end of period (000's) .... $ 68,991 $ 74,604 $ 77,837 $ 59,683 $ 54,348 $ 54,791
=========================================================================
Ratio of net expenses to
average net assets ................... 0.75%(D) 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of net investment income to
average net assets .................. 3.84%(D) 3.74% 3.94% 4.03% 4.47% 4.77%
Portfolio turnover rate ................. 21%(D) 30% 36% 24% 28% 20%
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Not annualized.
(C) Total return would have been (0.21%) without the capital contribuiton made
by the Adviser (Note 4).
(D) Annualized.
See accompanying notes to financial statements.
13
OHIO INSURED TAX-FREE FUND - CLASS C
FINANCIAL HIGHLIGHTS
======================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
2005 ------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 12.11 $ 11.69 $ 12.41 $ 11.96 $ 11.89 $ 11.44
-------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income ................ 0.19 0.36 0.39 0.40 0.44 0.47
Net realized and unrealized gains
(losses) on investments ........... (0.22) 0.43 (0.51) 0.52 0.09 0.45
-------------------------------------------------------------------------
Total from investment operations ........ (0.03) 0.79 (0.12) 0.92 0.53 0.92
-------------------------------------------------------------------------
Less distributions:
Dividends from net investment income . (0.19) (0.36) (0.39) (0.40) (0.44) (0.47)
Distributions from net realized gains (0.16) (0.01) (0.21) (0.07) (0.02) --
-------------------------------------------------------------------------
Total distributions ..................... (0.35) (0.37) (0.60) (0.47) (0.46) (0.47)
-------------------------------------------------------------------------
Net asset value at end of period ........ $ 11.73 $ 12.11 $ 11.69 $ 12.41 $ 11.96 $ 11.89
=========================================================================
Total return (A) ........................ (0.24%)(B) 6.86% (1.03%) 7.89% 4.54% 8.15%
=========================================================================
Net assets at end of period (000's) .... $ 7,928 $ 9,400 $ 9,862 $ 7,388 $ 4,910 $ 4,526
=========================================================================
Ratio of net expenses to
average net assets ................... 1.50%(C) 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of net investment income to
average net assets ................... 3.09%(C) 2.99% 3.19% 3.27% 3.72% 4.00%
Portfolio turnover rate ................. 21%(C) 30% 36% 24% 28% 20%
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Not annualized.
(C) Annualized.
See accompanying notes to financial statements.
14
OHIO TAX-FREE MONEY MARKET FUND - RETAIL
FINANCIAL HIGHLIGHTS
======================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
2005 ------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income ................ 0.010 0.011 0.004 0.008 0.015 0.033
Net realized gains (losses)
on investments .................... -- -- 0.000(A) 0.000(A) (0.000)(A) --
-------------------------------------------------------------------------
Total from investment operations ........ 0.010 0.011 0.004 0.008 0.015 0.033
-------------------------------------------------------------------------
Less distributions:
Dividends from net investment income . (0.010) (0.011) (0.004) (0.008) (0.015) (0.033)
Distributions from net realized gains -- (0.000)(A) (0.000)(A) -- -- --
-------------------------------------------------------------------------
Total distributions ..................... (0.010) (0.011) (0.004) (0.008) (0.015) (0.033)
-------------------------------------------------------------------------
Net asset value at end of period ........ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========================================================================
Total return ............................ 1.99%(B) 1.13% 0.35% 0.78% 1.47% 3.31%
=========================================================================
Net assets at end of period (000's) .... $101,872 $ 99,127 $165,145 $155,810 $211,083 $211,564
=========================================================================
Ratio of net expenses to average net assets 0.75%(B) 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of net investment income to
average net assets ................... 1.95%(B) 1.05% 0.35% 0.79% 1.46% 3.29%
(A) Amount rounds to less than $0.001.
(B) Annualized.
See accompanying notes to financial statements.
15
OHIO TAX-FREE MONEY MARKET FUND - INSTITUTIONAL
FINANCIAL HIGHLIGHTS
======================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
2005 ------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income ................ 0.011 0.014 0.006 0.010 0.017 0.035
Net realized gains (losses)
on investments .................... -- -- 0.000(A) 0.000(A) (0.000)(A) --
-------------------------------------------------------------------------
Total from investment operations ........ 0.011 0.014 0.006 0.010 0.017 0.035
-------------------------------------------------------------------------
Less distributions:
Dividends from net investment income . (0.011) (0.014) (0.006) (0.010) (0.017) (0.035)
Distributions from net realized gains -- (0.000)(A) (0.000)(A) -- -- --
-------------------------------------------------------------------------
Total distributions ..................... (0.011) (0.014) (0.006) (0.010) (0.017) (0.035)
-------------------------------------------------------------------------
Net asset value at end of period ........ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========================================================================
Total return ............................ 2.25% (B) 1.39% 0.60% 1.03% 1.72% 3.58%
=========================================================================
Net assets at end of period (000's) .... $161,894 $192,346 $174,739 $266,120 $210,679 $185,381
=========================================================================
Ratio of net expenses to average net assets 0.50%(B) 0.50% 0.50% 0.50% 0.50% 0.50%
Ratio of net investment income to
average net assets ................... 2.19%(B) 1.41% 0.59% 1.02% 1.69% 3.52%
(A) Amount rounds to less than $0.001.
(B) Annualized.
See accompanying notes to financial statements.
16
TAX-FREE MONEY MARKET FUND - CLASS A
FINANCIAL HIGHLIGHTS
======================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ----------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
2005 ------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------------------------------------------------------------------------
Income from investment operations:
Net investment income ................ 0.010 0.011 0.005 0.008 0.017 0.034
Net realized gains on investments .... -- -- 0.000(A) 0.000(A) 0.000(A) --
-------------------------------------------------------------------------
Total from investment operations ........ 0.010 0.011 0.005 0.008 0.017 0.034
-------------------------------------------------------------------------
Less distributions:
Dividends from net investment income . (0.010) (0.011) (0.005) (0.008) (0.017) (0.034)
Distributions from net realized gains -- -- (0.000)(A) -- -- --
-------------------------------------------------------------------------
Total distributions ..................... (0.010) (0.011) (0.005) (0.008) (0.017) (0.034)
-------------------------------------------------------------------------
Net asset value at end of period ........ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========================================================================
Total return ............................ 2.00%(B) 1.14% 0.50% 0.99% 1.73% 3.45%
=========================================================================
Net assets at end of period (000's) .... $ 18,593 $ 19,250 $ 20,263 $ 21,375 $ 23,532 $ 22,409
=========================================================================
Ratio of net expenses to average net assets 0.89%(B) 0.89% 0.89% 0.89% 0.89% 0.89%
Ratio of net investment income to
average net assets ................... 1.95%(B) 1.13% 0.48% 0.79% 1.71% 3.42%
(A) Amount rounds to less than $0.001.
(B) Annualized.
See accompanying notes to financial statements.
17
TAX-FREE MONEY MARKET FUND - CLASS S
FINANCIAL HIGHLIGHTS
============================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
DECEMBER 31, ENDED ENDED ENDED
2005 JUNE 30, JUNE 30, JUNE 30,
(UNAUDITED) 2005 2004 2003(A)
- --------------------------------------------------------------------------------------------
Net asset value at beginning of period .. $ 1.000 $ 1.000 $ 1.000 $ 1.000
-----------------------------------------------
Income from investment operations:
Net investment income ................ 0.009 0.009 0.002 0.001
Net realized gains on investments .... -- -- 0.000(B) 0.000(B)
-----------------------------------------------
Total from investment operations ........ 0.009 0.009 0.002 0.001
-----------------------------------------------
Less distributions:
Dividends from net investment income . (0.009) (0.009) (0.002) (0.001)
Distributions from net realized gains -- -- (0.000)(B) --
-----------------------------------------------
Total distributions ..................... (0.009) (0.009) (0.002) (0.001)
-----------------------------------------------
Net asset value at end of period ........ $ 1.000 $ 1.000 $ 1.000 $ 1.000
===============================================
Total return ............................ 1.73%(C) 0.87% 0.25% 0.32%(C)
===============================================
Net assets at end of period (000's) ..... $ 29,750 $ 13,075 $ 16,381 $ 18,692
===============================================
Ratio of net expenses to average net assets 1.15%(C) 1.15% 1.15% 1.15%(C)
Ratio of net investment income
to average net assets ................ 1.71%(C) 0.86% 0.22% 0.31%(C)
(A) Represents the period from commencement of operations (February 3, 2003)
through June 30, 2003.
(B) Amount rounds to less than $0.001.
(C) Annualized.
See accompanying notes to financial statements.
18
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 (UNAUDITED)
================================================================================
1. ORGANIZATION
The Florida Tax-Free Money Market Fund, the Ohio Insured Tax-Free Fund, the Ohio
Tax-Free Money Market Fund, and the Tax-Free Money Market Fund (individually, a
Fund, and collectively, the Funds) are each a separate series of Touchstone
Tax-Free Trust (the Trust). The Trust is registered under the Investment Company
Act of 1940 (the 1940 Act) as an open-end management investment company. The
Trust was established as a Massachusetts business trust under a Declaration of
Trust dated April 13, 1981. The Declaration of Trust, as amended, permits the
Trustees to issue an unlimited number of shares of each Fund.
The Florida Tax-Free Money Market Fund seeks the highest level of interest
income exempt from federal income tax, consistent with liquidity and stability
of principal. The Fund invests primarily in high-quality, short-term Florida
municipal obligations issued by the State of Florida, its agencies and
municipalities, that pay interest that is exempt from both federal income tax
and the Florida intangible personal property tax.
The Ohio Insured Tax-Free Fund seeks the highest level of interest income exempt
from federal income tax and Ohio personal income tax, consistent with the
protection of capital. The Fund invests primarily (at least 80% of assets) in
high quality, long-term Ohio municipal obligations, including general obligation
bonds, revenue bonds and industrial development bonds that are protected by
insurance guaranteeing the payment of principal and interest in the event of
default.
The Ohio Tax-Free Money Market Fund seeks the highest level of current income
exempt from federal income tax and Ohio personal income tax, consistent with
liquidity and stability of principal. The Fund invests primarily in high
quality, short-term Ohio municipal obligations issued by the State of Ohio, its
agencies and municipalities, that pay interest that is exempt from both federal
income tax and Ohio personal income tax.
The Tax-Free Money Market Fund seeks the highest level of interest income exempt
from federal income tax, consistent with the protection of capital. The Fund
invests primarily in high-quality, short-term municipal obligations that pay
interest that is exempt from federal income tax.
The Ohio Insured Tax-Free Fund offers two classes of shares: Class A shares
(sold subject to a maximum front-end sales load of 4.75% and a distribution fee
of up to 0.25% of average daily net assets that are attributable to Class A
shares), and Class C shares (sold subject to a maximum contingent deferred sales
load of 1.00% for a one-year period and a distribution fee of up to 1.00% of
average daily net assets that are attributable to Class C shares). Each Class A
and Class C share of the Fund represents identical interests in the Fund's
investment portfolio and has the same rights, except that (i) Class C shares
bear the expenses of higher distribution fees, which will cause Class C shares
to have a higher expense ratio and to pay lower dividends than Class A shares;
(ii) certain other class specific expenses will be borne solely by the class to
which such expenses are attributable; and (iii) each class has exclusive voting
rights with respect to matters relating to its own distribution arrangements.
The Ohio Tax-Free Money Market Fund offers two classes of shares: Retail shares
(sold subject to a distribution fee of up to 0.25% of average daily net assets
of Retail shares) and Institutional shares (sold without a distribution fee).
Each Retail and Institutional share of the Fund represents identical interests
in the Fund's investment portfolio and has the same rights, except that (i)
Retail shares bear the expenses of distribution fees, which will cause Retail
shares to have a higher expense ratio and to pay lower dividends than
Institutional shares; (ii) certain other class specific expenses will be borne
solely by the class to which such expenses are attributable; (iii) each class
has exclusive voting rights with respect to matters affecting only that class;
and (iv) Retail shares are subject to a lower
19
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
minimum initial investment requirement and offer certain shareholder services
not available to Institutional shares such as checkwriting and automatic
investment and systematic withdrawal plans.
The Tax-Free Money Market Fund offers two classes of shares: Class A shares
(sold subject to a distribution fee of up to 0.25% of average daily net assets
of Class A shares) and Class S shares (sold subject to a distribution fee of up
to 1.00% of average daily net assets that are attributable to Class S shares).
The current maximum distribution fee for Class S shares is limited to 0.60% of
average daily net assets of Class S shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Trust's significant accounting policies:
SECURITY VALUATION -- Florida Tax-Free Money Market Fund, Ohio Tax-Free Money
Market Fund and Tax-Free Money Market Fund securities are valued on an amortized
cost basis, which approximates market. This involves initially valuing a
security at its original cost and thereafter assuming a constant amortization to
maturity of any discount or premium. This method of valuation is expected to
enable these Funds to maintain a constant net asset value per share. Ohio
Insured Tax-Free Fund securities are valued at market using an independent
pricing service which generally utilizes a computerized grid matrix of
tax-exempt securities and evaluations by its staff to determine what it believes
is the fair value of the securities. On limited occasions, if the valuation
provided by the pricing service ignores certain market conditions affecting the
value of a security or the pricing service cannot provide a valuation, the fair
value of the security will be determined in good faith consistent with
procedures approved by the Board of Trustees.
SHARE VALUATION -- The net asset value per share of the Florida Tax-Free Money
Market Fund is calculated daily by dividing the total value of the Fund's
assets, less liabilities, by its number of shares outstanding. The net asset
value per share of each class of shares of the Ohio Insured Tax-Free Fund, the
Ohio Tax-Free Money Market Fund, and the Tax-Free Money Market Fund is
calculated daily by dividing the total value of each Fund's assets attributable
to that class, less liabilities attributable to that class, by the number of
shares outstanding attributable to that class. The offering price per share of
the Florida Tax-Free Money Market Fund, the Ohio Tax-Free Money Market Fund and
the Tax-Free Money Market Fund is equal to the net asset value per share. The
maximum offering price of Class A shares of the Ohio Insured Tax-Free Fund is
equal to the net asset value per share plus a sales load equal to 4.99% of the
net asset value (or 4.75% of the offering price). The offering price of Class C
shares of the Ohio Insured Tax-Free Fund is equal to the net asset value per
share.
The redemption price per share of each Fund, including each class of shares with
respect to the Florida Tax-Free Money Market Fund, the Ohio Insured Tax-Free
Fund, the Ohio Tax-Free Money Market Fund, and the Tax-Free Money Market Fund is
equal to the net asset value per share. However, Class C shares of the Ohio
Insured Tax-Free Fund are subject to a contingent deferred sales load of 1.00%
(if redeemed within a one-year period from the date of purchase) of the original
purchase price.
INVESTMENT INCOME -- Interest income is accrued as earned and includes, where
applicable, the pro rata amortization of premium or accretion of discount.
DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income are
distributed daily and paid on the last business day of each month. Net realized
short-term capital gains, if any, may be distributed throughout the year and net
realized long-term capital gains, if any, are distributed at least once each
year. Income distributions and capital gain distributions are determined in
accordance with income tax regulations.
20
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
SECURITY TRANSACTIONS -- Security transactions are accounted for on the trade
date. Gains and losses on securities sold are determined on a specific
identification basis.
WHEN-ISSUED SECURITIES -- The Funds may purchase securities with delivery or
payments to occur at a later date. At the time the Funds enter into a commitment
to purchase a security, the transaction is recorded and the value of the
security is reflected in the net asset value. The value of the security may vary
with market fluctuations. No interest accrues to the Fund until payment takes
place. At the time the Fund enters into this type of transaction, it is required
to segregate cash or other liquid assets equal to the value of the securities
purchased.
ALLOCATIONS -- Investment income earned by a Fund is allocated daily to each
class of shares based on the percentage of the net asset value of settled shares
of such class to the total of the net asset value of settled shares of all
classes. Realized capital gains and losses and unrealized appreciation and
depreciation are allocated daily to each class of shares based upon the
proportionate share of total net assets of the Fund. Class specific expenses are
charged directly to the class incurring the expense. Common expenses that are
not attributable to a specific class are allocated daily to each class of shares
based upon its proportionate share of total net assets of the Fund. Expenses not
directly billed to a Fund are allocated daily to each Fund based on the
proportional share of each Fund's net assets in relation to total net assets of
all Funds in the Trust or another reasonable measure.
ESTIMATES -- The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
FEDERAL INCOME TAX -- It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its net income, the Fund will be relieved of
federal income tax on the income distributed. Accordingly, no provision for
income taxes has been made.
In addition, each Fund intends to satisfy conditions, which enable it to
designate the interest income generated by its investment in municipal
securities, which is exempt from federal income tax when received by the Fund,
as exempt-interest dividends upon distribution to shareholders.
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 investment income
(earned during the calendar year) and 98% of its net realized capital gains
(earned during the twelve months ended October 31) plus undistributed amounts
from prior years.
The tax character of distributions paid for the years ended June 30, 2005 and
2004 was as follows:
FLORIDA TAX-FREE
MONEY MARKET OHIO INSURED
FUND TAX-FREE FUND
- --------------------------------------------------------------------------------------------
2005 2004 2005 2004
From tax exempt income ..... $ 287,797 $ 110,513 $ 3,156,299 $ 2,585,019
From ordinary income ....... -- -- -- 49,199
From long-term capital gains -- -- 102,408 1,032,056
------------------------------------------------------------
$ 287,797 $ 110,513 $ 3,258,707 $ 3,666,274
============================================================
- --------------------------------------------------------------------------------------------
21
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
OHIO TAX-FREE TAX-FREE
MONEY MARKET MONEY MARKET
FUND FUND
- --------------------------------------------------------------------------------------------
2005 2004 2005 2004
From tax exempt income ..... $ 3,904,577 $ 1,939,469 $ 371,005 $ 120,215
From ordinary income ....... -- 10,212 -- 9,655
From long-term capital gains 16,293 1,198 -- --
------------------------------------------------------------
$ 3,920,870 $ 1,950,879 $ 371,005 $ 129,870
============================================================
- --------------------------------------------------------------------------------------------
The following information is computed on a tax basis for each item as of June
30, 2005:
- --------------------------------------------------------------------------------
FLORIDA
TAX-FREE OHIO-INSURED
MONEY MARKET TAX-FREE
FUND FUND
- --------------------------------------------------------------------------------
Cost of portfolio investments ................ $ 28,105,187 $ 79,882,679
=============================
Gross unrealized appreciation ................ $ -- $ 5,596,545
Gross unrealized depreciation ................ -- (18,557)
-----------------------------
Net unrealized appreciation .................. -- 5,577,988
Capital loss carryforward .................... (5,530) --
Post-October losses .......................... (198) --
Undistributed tax exempt income .............. 30,951 63,155
Undistributed long-term gains ................ -- 982,645
Other temporary differences .................. (30,951) (92,496)
-----------------------------
Accumulated earnings (deficit) .......... $ (5,728) $ 6,531,292
=============================
- --------------------------------------------------------------------------------
OHIO
TAX-FREE TAX-FREE
MONEY MARKET MONEY MARKET
FUND FUND
- --------------------------------------------------------------------------------
Cost of portfolio investments ............ $ 292,573,397 $ 32,780,431
=============================
Undistributed tax exempt income .......... 319,425 792
Other temporary differences .............. (319,425) (792)
Accumulated earnings (deficit) ...... $ -- $ --
=============================
- --------------------------------------------------------------------------------
The capital loss carryforward as of June 30, 2005 in the table above expires as
follows:
- --------------------------------------------------------------------------------
AMOUNT EXPIRATION DATE
Florida Tax-Free Money Market Fund........ $ 108 June 30, 2010
$ 5,422 June 30, 2013
- --------------------------------------------------------------------------------
The capital loss carryforwards and Post-October losses may be utilized in the
current and future years to offset net realized capital gains, if any, prior to
distributing such gains to shareholders.
FEDERAL TAX INFORMATION
The federal tax cost for the Florida Tax-Free Money Market Fund, Ohio Tax-Free
Money Market Fund and Tax-Free Money Market Fund is equal to the amortized cost
in the portfolio of
22
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
investments. As of December 31, 2005, the aggregate identified cost for federal
income tax purposes for the Ohio Insured Tax-Free Fund is $72,742,310, resulting
in gross unrealized appreciation and depreciation of $3,911,774 and $75,548,
respectively, and net unrealized appreciation of $3,836,226.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments and government
securities) were as follows for the six months ended December 31, 2005:
- --------------------------------------------------------------------------------
OHIO INSURED
TAX-FREE FUND
- --------------------------------------------------------------------------------
Purchases of investment securities.............................. $ 8,146,430
Proceeds from sales and maturities of investment securities..... $ 14,367,410
- --------------------------------------------------------------------------------
4. TRANSACTIONS WITH AFFILIATES
The President and certain other officers of the Trust are also officers of
Touchstone Advisors, Inc. (the Advisor), the Trust's investment advisor,
Touchstone Securities, Inc. (the Underwriter), the Trust's principal
underwriter, or Integrated Fund Services, Inc. (Integrated), the Trust's
administrator, transfer agent and accounting services agent. The Advisor, the
Underwriter and Integrated are each wholly-owned, indirect subsidiaries of The
Western and Southern Life Insurance Company.
MANAGEMENT AGREEMENT
Each Fund's investments are managed by the Advisor under the terms of a
Management Agreement. Under the Management Agreement, each Fund pays the Advisor
a fee, computed and accrued daily and paid monthly, at an annual rate of 0.50%
of its respective average daily net assets up to $100 million, 0.45% of such net
assets from $100 million to $200 million, 0.40% of such net assets from $200
million to $300 million and 0.375% of such net assets in excess of $300 million.
Fort Washington Investment Advisors, Inc. (Sub-Advisor) has been retained by the
Advisor to manage the investments of the Funds. The Advisor (not the Funds) pays
the Sub-Advisor a fee for these services.
The Trust and the Advisor have entered into an agreement to contractually limit
operating expenses. The maximum operating expense limit in any year with respect
to a Fund is based on a percentage of the average daily net assets of the Fund:
Florida Tax-Free Money Market Fund - 0.75%; Ohio Insured Tax-Free Fund - 0.75%
for Class A shares and 1.50% for Class C shares; Ohio Tax-Free Money Market Fund
- - 0.75% for Retail shares and 0.50% for Institutional shares; Tax-Free Money
Market Fund - 0.89% for Class A shares and 1.15% for Class S shares. The fee
waivers and expense limitations will remain in effect until at least June 30,
2006.
Pursuant to this expense limitation agreement, during the six months ended
December 31, 2005, the Advisor waived investment advisory fees and/or reimbursed
other operating expenses of the Funds as follows:
INVESTMENT ADVISORY OTHER OPERATING
FEES WAIVED EXPENSES REIMBURSED
----------- -------------------
Florida Tax-Free Money Market Fund ..... $ 14,796 $ 36,593
Ohio Insured Tax-Free Fund ............. $ 2,187 $ 135,750
Ohio Tax-Free Money Market Fund ........ $ 17,068 $ 128,088
Tax-Free Money Market Fund ............. $ -- $ 66,962
During the year ended June 30, 2004, the Advisor made a capital contribution to
the Ohio Insured Tax-Free Fund Class A shares totaling $150,000.
23
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement, Integrated supplies executive
and regulatory compliance services, supervises the preparation of tax returns,
and coordinates the preparation of reports to and filings with the Securities
and Exchange Commission and state securities authorities and materials for
meetings of the Board of Trustees. For these services, Integrated receives a
monthly fee from each Fund based on each Fund's net assets.
TRANSFER AGENT AGREEMENT
The Trust has entered into a Transfer Agency Agreement with Integrated. Under
the terms of the agreement, Integrated maintains the records for each
shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of each Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. For these services, Integrated receives a monthly fee per
shareholder account from each Fund, subject to a minimum monthly fee for each
Fund, or for each class of shares of a Fund, as applicable. In addition, each
Fund pays Integrated out-of-pocket expenses including, but not limited to,
postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement between the Trust and
Integrated, Integrated calculates the daily net asset value per share and
maintains the financial books and records of each Fund. For these services,
Integrated receives a monthly fee per Fund, based on average net assets, of each
Fund subject to an additional monthly fee for each additional class of shares.
In addition, each Fund pays certain out-of-pocket expenses incurred by
Integrated in obtaining valuations of such Fund's portfolio securities.
UNDERWRITING AGREEMENT
The Underwriter is the Funds' principal underwriter and, as such, acts as
exclusive agent for distribution of the Funds' shares. Under the terms of the
Underwriting Agreement between the Trust and the Underwriter, the Underwriter
earned $6,316 from underwriting and broker commissions on the sale of Class A
shares of the Ohio Insured Tax-Free Fund during the six months ended December
31, 2005. In addition, the Underwriter collected $8 of contingent deferred sales
loads on the redemption of Class C shares of the Ohio Insured Tax-Free Fund.
PLANS OF DISTRIBUTION
The Trust has a Plan of Distribution (Class A Plan) under which shares of the
Florida Tax-Free Money Market Fund and Class A shares or Retail shares of all
other Funds may directly incur or reimburse the Advisor or the Underwriter for
expenses related to the distribution and promotion of shares. The annual
limitation for payment of such expenses under the Class A Plan is 0.25% of
average daily net assets attributable to such shares.
The Trust also has a Plan of Distribution (Class C Plan) under which Class C
shares of the Ohio Insured Tax-Free Fund may directly incur or reimburse the
Advisor or the Underwriter for expenses related to the distribution and
promotion of shares. The annual limitation for payment of such expenses under
the Class C Plan is 1.00% of average daily net assets attributable to Class C
shares.
The Trust also has a Plan of Distribution (Class S Plan) under which Class S
shares of the Tax-Free Money Market Fund may directly incur or reimburse the
Advisor or the Underwriter for expenses related to the distribution and
promotion of shares. The annual limitation for payment of such expenses under
the Class S Plan is 1.00% of average daily net assets attributable to such
shares. The current distribution expense fee for Class S shares is limited to
0.60% of average daily net assets attributable to such shares.
24
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
COMPLIANCE SERVICES AGREEMENT
Under the terms of the Compliance Services Agreement between the Trust and
Integrated, Integrated provides certain compliance services to the Trust for a
fee, including developing and assisting in implementing a compliance program for
Integrated on behalf of the Funds and providing administrative support services
to the Funds' Compliance Program and Chief Compliance Officer.
5. CAPITAL SHARE TRANSACTIONS
Capital share transactions for the Florida Tax-Free Money Market Fund, the Ohio
Tax-Free Money Market Fund and the Tax-Free Money Market Fund are identical to
the dollar value of those transactions as shown in the Statements of Changes in
Net Assets. Proceeds and payments on capital shares as shown in the Statements
of Changes in Net Assets for the Ohio Insured Tax-Free Fund are the result of
the following capital share transactions:
- --------------------------------------------------------------------------------
OHIO INSURED
TAX-FREE FUND
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
2005 JUNE 30,
(UNAUDITED) 2005
- --------------------------------------------------------------------------------
CLASS A
Shares sold .................................. 111,279 331,997
Shares reinvested ............................ 136,656 162,199
Shares redeemed .............................. (527,612) (992,583)
-----------------------------
Net decrease in shares outstanding ........... (279,677) (498,387)
Shares outstanding, beginning of period ...... 6,164,333 6,662,720
-----------------------------
Shares outstanding, end of period ............ 5,884,656 6,164,333
-----------------------------
CLASS C
Shares sold .................................. 7,766 69,734
Shares reinvested ............................ 12,825 16,466
Shares redeemed .............................. (120,964) (153,563)
-----------------------------
Net decrease in shares outstanding ........... (100,373) (67,363)
Shares outstanding, beginning of period ...... 775,981 843,344
-----------------------------
Shares outstanding, end of period ............ 675,608 775,981
-----------------------------
- --------------------------------------------------------------------------------
6. 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.
25
FLORIDA TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005 (UNAUDITED)
===================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS -- 15.7% RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 1,000,000 Broward Co FL SD Ser A...................................... 3.000 02/15/06 $ 1,000,001
125,000 Miami-Dade Co FL Special Obligation......................... 5.000 04/01/06 125,584
250,000 FL St Brd Ed Cap Outlay..................................... 6.500 06/01/06 253,434
800,000 Covington KY Indpt Sch Dist TANS............................ 3.500 06/30/06 800,973
500,000 FL St Div Brd Fin Dept General Svcs Rev..................... 5.750 07/01/06 506,170
400,000 AMP OH Elect Rev BANS (Woodville Vlg)....................... 3.250 07/20/06 400,427
500,000 AMP OH Elect Rev BANS (Carey Vlg)........................... 3.400 08/03/06 500,713
250,000 Wilmington OH LTGO BANS (Lowes Rd Construction)............. 3.750 09/29/06 251,173
-----------
TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS......... $ 3,838,475
-----------
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE DEMAND NOTES -- 74.2% RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 300,000 Collier Co FL Health Fac Auth Hosp Rev (Cleveland Clinic)... 3.700 01/01/06 $ 300,000
500,000 FL St Brd Ed Muni Secs Tr Rcpts Ser SGA 102................. 3.200 01/01/06 500,000
500,000 Manatee Co FL PCR (Florida Pwr & Light Co).................. 3.700 01/01/06 500,000
800,000 Muni Sec Tr Ctfs 01-160 (FL Brd of Ed)...................... 3.200 01/01/06 800,000
980,000 Putnam Co FL Dev Auth PCR (FL Pwr & Light Co)............... 3.700 01/01/06 980,000
250,000 Broward Co FL HFA MFH Rev (Jacaranda Village Apts).......... 3.520 01/04/06 250,000
575,000 Dade Co FL IDA IDR (Dolphins Stadium) Ser A................. 3.550 01/04/06 575,000
780,000 Dade Co FL IDA IDR (Dolphins Stadium) Ser D................. 3.550 01/04/06 780,000
100,000 Lee Co FL HFA MFH Rev (Forestwood Apts)..................... 3.520 01/04/06 100,000
500,000 Lee Co FL IDR Ed Facs (Canterbury School)................... 3.550 01/04/06 500,000
605,000 Marion Co FL HFA (Paddock Apts)............................. 3.510 01/04/06 605,000
210,000 Nassau Co FL PCR (Rayonier)................................. 3.540 01/04/06 210,000
1,000,000 Orange Co FL HFA Rev (Sundown Assoc)........................ 3.560 01/04/06 1,000,000
700,000 Voluisa Co FL HFA MFH Rev (Anatole Apts).................... 3.510 01/04/06 700,000
450,000 Broward Co FL HFA MFH Rev (Southern Pointe)................. 3.510 01/05/06 450,000
675,000 Duval Co FL HFA MFH Rev (Glades Apts)....................... 3.510 01/05/06 675,000
950,000 Duval Co FL HFA MFH Rev (Sunbeam Road Apts)................. 3.520 01/05/06 950,000
800,000 FL Gulf Coast Univ Fin Corp Rev............................. 3.550 01/05/06 800,000
600,000 FL HFC Rev (Charleston)..................................... 3.540 01/05/06 600,000
120,000 Gulf Breeze FL Loc Govt Loan Prog B......................... 3.520 01/05/06 120,000
350,000 Gulf Breeze FL Muni Bond Fund Ser A......................... 3.520 01/05/06 350,000
300,000 Highlands Co FL HFA Rev (Adventist Hlth Sys)................ 3.550 01/05/06 300,000
400,000 Marion Co FL IDA Rev (Chambrel)............................. 3.540 01/05/06 400,000
1,050,000 Miami-Dade Co FL Wtr & Swr Rev.............................. 3.510 01/05/06 1,050,000
100,000 Palm Beach Co FL Edl Facs Auth Rev (Atlantic College)....... 3.600 01/05/06 100,000
900,000 Palm Beach Co FL Rev (Henry Morrison Flagler)............... 3.530 01/05/06 900,000
1,000,000 Palm Beach Co FL Rev (Morse Oblig Group).................... 3.560 01/05/06 1,000,000
775,000 Pasco Co FL School Board COP................................ 3.510 01/05/06 775,000
500,000 Puerto Rico Cmnwlth Hwy & Trans Auth Hwy Rev Ser 969........ 3.530 01/05/06 500,000
300,000 Seminole Co FL IDA (FL Living Nursing Ctr).................. 3.710 01/05/06 300,000
1,000,000 Seminole Co FL IDA Rev (Master Academy)..................... 3.560 01/05/06 1,000,000
100,000 Univ of North FL 1998 Parking Rev Bonds..................... 3.580 01/05/06 100,000
-----------
TOTAL FLOATING & VARIABLE DEMAND NOTES...................... $18,170,000
-----------
26
FLORIDA TAX-FREE MONEY MARKET FUND
(CONTINUED)
===================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS -- 5.7% RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 400,000 Corpus Christi TX IDC EDR (Texas Air Invt).................. 2.900 02/01/06 $ 400,000
1,000,000 Putnam Co FL Dev Auth PCR (Seminole Elec Coop).............. 3.270 06/15/06 1,000,000
-----------
TOTAL ADJUSTABLE RATE PUT BONDS............................. $ 1,400,000
-----------
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT COMMERCIAL PAPER -- 4.1% RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 1,000,000 Jacksonville FL Hlth Fac Auth Hosp Rev (Baptist Medical).... 3.100 01/18/06 $ 1,000,000
-----------
TOTAL INVESTMENT SECURITIES -- 99.7%
(Amortized Cost $24,408,475)................................ $24,408,475
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3%............... 74,811
-----------
NET ASSETS -- 100.0%........................................ $24,483,286
===========
See accompanying notes to portfolios of investments and notes to financial
statements.
27
OHIO INSURED TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005 (UNAUDITED)
===================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS -- 96.6% RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 1,000,000 Norwood OH TIF (Cornerstone)................................ 4.500 04/03/06 $ 1,000,010
224,718 Columbus OH Special Assessment GO........................... 5.050 04/15/08 232,504
1,000,000 OH St Bldg Auth Rev (Adult Correctional Bldg)
Prerefunded @ 100........................................ 5.250 10/01/09 1,073,420
1,000,000 Hamilton OH CSD GO Prerefunded @ 101........................ 5.500 12/01/09 1,085,180
1,000,000 Hamilton OH CSD GO Prerefunded @ 101........................ 5.625 12/01/09 1,089,730
1,000,000 Kings OH LSD GO Prerefunded @ 101........................... 5.650 12/01/09 1,090,650
1,035,000 Reading OH Rev (St Mary's Ed Institute)..................... 5.550 02/01/10 1,106,032
1,000,000 Bowling Green St Univ OH General Rcpts
Rev Prerefunded @ 101.................................... 5.750 06/01/10 1,102,400
680,000 Cuyahoga Co OH Mtg Rev (West Tech Apts)..................... 5.100 09/20/10 706,812
500,000 Akron OH GO Prerefunded @ 101............................... 5.800 11/01/10 555,830
275,000 Akron OH GO Prerefunded @ 101............................... 6.000 11/01/10 308,135
415,000 Dublin OH Var Purp Impt Ser A Prerefunded @ 100............. 6.000 12/01/10 462,156
1,000,000 Greene Co OH Swr Sys Rev Prerefunded @ 101.................. 5.625 12/01/10 1,105,250
1,000,000 Hilliard OH CSD GO Prerefunded @ 101........................ 5.750 12/01/10 1,110,850
1,000,000 Hilliard OH CSD GO Prerefunded @ 101........................ 5.750 12/01/10 1,110,850
525,000 Kings OH LSD GO Prerefunded @ 101........................... 6.050 12/01/10 590,216
500,000 Lake OH LSD GO (Stark Co) Prerefunded @ 100................. 5.750 12/01/10 551,205
1,000,000 Summit Co OH GO Prerefunded @ 101........................... 6.000 12/01/10 1,118,700
165,000 Cuyahoga Co OH Hosp Rev (Univ Hosp) Escrowed to Maturity.... 9.000 06/01/11 189,547
1,000,000 Lorain Co OH Hosp Rev (Catholic Health)..................... 5.625 10/01/11 1,091,560
1,000,000 Hamilton Co OH Swr Sys Rev.................................. 5.500 12/01/11 1,102,970
1,000,000 Indian Hill OH EVSD GO Prerefunded @ 100.................... 5.250 12/01/11 1,089,850
1,075,000 Franklin Co OH Hosp Impt (Childrens Hosp)................... 5.500 05/01/12 1,180,544
660,000 West Chester Twp OH GO...................................... 5.500 12/01/14 727,577
400,000 Warren OH Wtr Wrks Rev...................................... 5.500 11/01/15 443,588
1,000,000 Buckeye Valley OH LSD GO.................................... 6.850 12/01/15 1,172,270
1,315,000 Loveland OH CSD GO.......................................... 5.000 12/01/15 1,437,874
660,000 Columbus-Polaris Hsg Corp Rev Prerefunded @ 100............. 7.400 01/01/16 781,354
945,000 Chillicothe OH CSD GO....................................... 5.000 12/01/16 1,022,055
975,000 Hamilton Co OH Convention Facs Auth Rev (Second Lien)....... 5.000 12/01/16 1,045,668
1,260,000 Cleveland OH Arpt Sys Rev................................... 5.125 01/01/17 1,307,552
750,000 Butler Co OH Trans Impt Dist................................ 5.125 04/01/17 789,675
1,000,000 Univ of Cincinnati OH General Rcpts Rev..................... 5.750 06/01/19 1,094,290
1,000,000 Lorain Co OH Hosp Rev (Catholic Health Partners)............ 5.500 09/01/19 1,079,380
1,000,000 Lucas Co OH Hosp Rev (Promedica Health Grp)................. 5.625 11/15/19 1,078,280
500,000 Cleveland OH Non Tax Rev (Cleveland Stadium)................ 5.125 12/01/19 537,640
1,085,000 West Clermont OH LSD GO..................................... 5.000 12/01/19 1,155,688
210,000 Butler Co OH GO............................................. 5.250 12/01/20 228,554
1,500,000 Nordonia Hills OH CSD GO.................................... 5.375 12/01/20 1,618,350
1,000,000 Pickerington OH LSD UTGO.................................... 5.250 12/01/20 1,072,350
850,000 West Chester Twp OH GO...................................... 5.000 12/01/20 899,317
1,210,000 Cincinnati OH Tech College Rev.............................. 5.250 10/01/21 1,314,931
1,000,000 Monroe OH LSD Sch Impt GO................................... 5.000 12/01/21 1,058,650
1,170,000 Upper Arlington OH CSD GO................................... 5.000 12/01/21 1,250,613
1,185,000 Akron OH Impt GO............................................ 5.000 12/01/22 1,257,510
1,035,000 Elyria OH GO................................................ 5.000 12/01/22 1,102,151
28
OHIO INSURED TAX-FREE FUND
(CONTINUED)
===================================================================================================================
PRINCIPAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS -- 96.6% COUPON MATURITY MARKET
AMOUNT (CONTINUED) RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 765,000 Fairfield Co OH GO.......................................... 5.000 12/01/22 $ 811,810
1,000,000 Mansfield OH CSD............................................ 5.000 12/01/22 1,063,270
1,200,000 Ross Twp OH LSD GO.......................................... 5.000 12/01/22 1,273,428
250,000 OH St Higher Ed Fac (Xavier Univ)........................... 5.000 05/01/23 264,610
1,050,000 Harrison OH Wst Wtr Sys Rev................................. 5.250 11/01/23 1,141,907
1,000,000 Akron OH Var Purp GO........................................ 5.000 12/01/23 1,054,700
450,000 Columbus OH TIF Rev (Polaris)............................... 4.750 12/01/23 463,842
865,000 Fairfield Co OH GO.......................................... 5.000 12/01/23 917,653
425,000 Hamilton OH CSD GO.......................................... 5.000 12/01/23 451,210
1,480,000 Lakewood OH CSD............................................. 5.250 12/01/23 1,608,331
1,000,000 Newark OH Var Purp GO....................................... 4.750 12/01/23 1,029,900
1,000,000 OH St Higher Ed Fac Rev (Univ Dayton)....................... 5.000 12/01/23 1,054,400
1,000,000 Toledo OH CSD GO............................................ 5.000 12/01/23 1,059,750
1,085,000 Wyoming OH CSD.............................................. 5.000 12/01/23 1,153,887
1,000,000 Hamilton Co OH Hosp Rev (Childrens Hosp Med Ctr)............ 5.000 05/15/24 1,045,880
400,000 Springboro OH Swr Sys Rev................................... 5.000 06/01/24 421,612
1,000,000 Cleveland OH Muni SD GO..................................... 5.250 12/01/24 1,078,930
1,040,000 Franklin Co OH Hosp Rev (Childrens Hosp).................... 5.000 05/01/25 1,090,544
2,000,000 OH St Univ Gen Rcpts........................................ 5.000 06/01/25 2,109,019
810,000 Big Walnut OH LSD GO........................................ 5.000 12/01/25 855,295
1,750,000 Eaton OH CSD GO............................................. 5.000 12/01/25 1,842,943
2,000,000 Frankling Co OH Conv Ctr Rev................................ 5.000 12/01/25 2,116,979
1,885,000 Kings OH LSD UTGO........................................... 5.000 12/01/25 1,990,730
1,050,000 Lakota OH LSD............................................... 4.750 12/01/25 1,081,805
1,000,000 Oak Hills OH LSD GO......................................... 5.000 12/01/25 1,059,320
1,000,000 Plain OH LSD GO............................................. 5.000 12/01/25 1,046,860
900,000 Licking Heights OH LSD GO................................... 6.400 12/01/28 1,154,493
500,000 OH St Air Qlty Dev PCR...................................... 4.800 01/01/34 505,710
-----------
TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS......... $74,278,536
-----------
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE DEMAND NOTES -- 3.0% RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 400,000 Cleveland OH Inc Tax Rev.................................... 3.420 01/04/06 $ 400,000
1,000,000 Hamilton Co OH Hosp Rev (Health Alliance) Ser A............. 3.420 01/04/06 1,000,000
100,000 Hamilton Co OH Hosp Rev (Health Alliance) Ser B............. 3.530 01/04/06 100,000
800,000 Puerto Rico Elec Pwr Auth Tr Rcpts Ser SGA 43............... 3.530 01/04/06 800,000
-----------
TOTAL FLOATING & VARIABLE DEMAND NOTES...................... $ 2,300,000
-----------
TOTAL INVESTMENT SECURITIES -- 99.6%
(Amortized Cost $72,742,310)................................ $76,578,536
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4%............... 340,940
-----------
NET ASSETS -- 100.0%........................................ $76,919,476
===========
See accompanying notes to portfolios of investments and notes to financial
statements.
29
OHIO TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005 (UNAUDITED)
===================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS -- 23.4% RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 1,980,000 AMP OH Elec Rev BANS (Brewester Vlg)........................ 2.750 01/12/06 $ 1,980,118
2,000,000 OH Univ Gen Rcpts BANS...................................... 3.000 01/19/06 2,000,731
1,040,000 Willard OH LTGO BANS........................................ 3.000 01/25/06 1,040,303
3,230,000 Willard OH LTGO BANS........................................ 4.000 01/25/06 3,232,084
4,000,000 OH St Turnpike Rev Ser A Prerefunded @102................... 5.500 02/15/06 4,091,011
100,000 OH St Turnpike Rev Ser A Prerefunded @102................... 5.500 02/15/06 102,305
2,000,000 AMP OH Elec Rev BANS (Vlg of Lodi).......................... 3.250 03/16/06 2,002,391
500,000 Middletown OH Arpt Facs Acq LTGO BANS....................... 4.500 06/06/06 503,138
4,875,000 Middletown OH CSD UTGO BANS................................. 4.000 06/08/06 4,889,414
3,500,000 Gallia Co OH LSD LTGO BANS.................................. 4.500 06/15/06 3,517,157
1,500,000 AMP OH Elec Rev BANS (Newton Falls)......................... 3.000 06/30/06 1,500,000
2,350,000 AMP OH Elec Rev BANS (Montpelier)........................... 3.000 07/06/06 2,350,000
750,000 Glenwillow Vlg OH LTGO BANS................................. 3.400 08/10/06 750,882
3,250,000 Hillsboro OH CSD Sch Impt UTGO BANS......................... 4.000 08/16/06 3,264,762
5,840,000 AMP OH Elect Rev BANS (Bryan)............................... 3.500 08/18/06 5,852,489
3,373,000 Jackson Co OH Var Purp LTGO BANS............................ 4.000 09/07/06 3,387,542
4,350,000 Obetz OH Var Purp UTGO BANS................................. 5.900 10/13/06 4,434,775
2,750,000 Harrison Twp OH Fire Dept LTGO BANS......................... 3.400 10/19/06 2,753,176
4,280,000 Springboro OH Real Estate Acq Nts........................... 4.000 11/02/06 4,297,298
3,500,000 Cuyahoga Heights OH UTGO BANS............................... 4.000 11/15/06 3,514,739
6,197,000 Deerfield Twp OH Var Purp LTGO BANS......................... 4.000 11/30/06 6,221,584
TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS......... $61,685,899
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE DEMAND NOTES -- 73.0% RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 100,000 Cuyahoga Co OH Hosp (Univ Hosp)............................. 3.750 01/01/06 $ 100,000
2,315,000 Cuyahoga Co OH IDR (S&R Playhouse Rlty)..................... 3.000 01/01/06 2,315,000
1,930,000 OH St Air Quality Rev PCR (OH Edison)....................... 3.750 01/01/06 1,930,000
1,000,000 OH St Higher Ed Fac (Case Western).......................... 3.750 01/01/06 1,000,000
830,000 Centerville OH Hlthcare (Bethany Luth Vlg).................. 3.570 01/04/06 830,000
3,000,000 Cleveland OH Arpt Sys Rev Tr Rcpts SGA 126.................. 3.580 01/04/06 3,000,000
1,680,000 Cuyahoga Co OH Ed Fac (Utd Cerebral Paisy Assn)............. 3.590 01/04/06 1,680,000
760,000 Erie Co OH IDR (Toft Dairy Inc)............................. 3.590 01/04/06 760,000
270,000 Greene Co OH Hlth Fac (Greene Oaks)......................... 3.590 01/04/06 270,000
705,000 Hamilton Co OH Hlth Fac (St Aloysius Orphanage)............. 3.590 01/04/06 705,000
900,000 Hamilton Co OH Hosp Rev (Health Alliance) Ser B............. 3.530 01/04/06 900,000
1,375,000 Hamilton Co OH Hosp Rev (Health Alliance) Ser F............. 3.530 01/04/06 1,375,000
3,900,000 Lake Co OH Hosp Facs (Lake Hosp)............................ 3.620 01/04/06 3,900,000
1,710,000 Lorain Co OH IDR (EMH Regl Med Ctr)......................... 3.590 01/04/06 1,710,000
4,000,000 Middletown OH Dev (Bishop-Fenwick HS)....................... 3.580 01/04/06 4,000,000
2,000,000 Montgomery Co OH EDR (Dayton Art Inst)...................... 3.580 01/04/06 2,000,000
1,400,000 OH St GO Infrastructure Impt................................ 3.540 01/04/06 1,400,000
5,060,000 OH St Wtr Dev Auth Purewater................................ 3.540 01/04/06 5,060,000
1,000,000 OH Wtr Dev Auth PCR (Cleveland Elec) Ser B.................. 3.580 01/04/06 1,000,000
2,050,000 OH Wtr Dev Auth Rev (Timken Company)........................ 3.580 01/04/06 2,050,000
250,000 Orrville OH Hosp Fac (Orrville Hosp Fdtn)................... 3.620 01/04/06 250,000
3,400,000 Scioto Co OH Hosp Rev (VHA Ctr) Ser G....................... 3.540 01/04/06 3,400,000
30
OHIO TAX-FREE MONEY MARKET FUND
(CONTINUED)
===================================================================================================================
PRINCIPAL FLOATING & VARIABLE DEMAND NOTES -- 73.0% COUPON MATURITY MARKET
AMOUNT (CONTINUED) RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 3,000,000 ABN AMRO MuniTOPS Ctfs Tr 1998-18 (Cleveland OH Wtrwks)..... 3.570 01/05/06 $ 3,000,000
3,400,000 ABN AMRO MuniTOPS Ctfs Tr 2001-03 (Westerville OH CSD)...... 3.540 01/05/06 3,400,000
865,000 Akron Bath Copley OH Hosp (Summa Hlth) B.................... 3.560 01/05/06 865,000
900,000 Ashtabula Co OH Hosp (Ashtabula Co Med Ctr)................. 3.540 01/05/06 900,000
3,900,000 Athens Co OH Port Auth (Hsg OH Univ)........................ 3.550 01/05/06 3,900,000
1,505,000 Butler Co OH Hosp Facs (Berkeley Sq Ret).................... 3.540 01/05/06 1,505,000
3,015,000 Butler Co OH Hosp Facs Rev (Middletown Regl Hosp)........... 3.520 01/05/06 3,015,000
2,605,000 Cambridge OH Hosp Facs Rev (SE OH Regl Med)................. 3.600 01/05/06 2,605,000
2,020,000 Carroll Co OH Hlthcare Fac (St Johns Villa)................. 3.600 01/05/06 2,020,000
110,000 Cochocton Co OH Hosp (Echoing Hills Vlg).................... 3.650 01/05/06 110,000
1,300,000 Columbus OH Regl Arpt Auth Rev.............................. 3.520 01/05/06 1,300,000
3,815,000 Coshocton Co OH Hosp Facs Rev (Mem Hosp).................... 3.570 01/05/06 3,815,000
1,480,000 Cuyahoga Co OH Civic Facs (West Side Ecumenical)............ 3.590 01/05/06 1,480,000
4,800,000 Cuyahoga Co OH Hlth (Gardens of Mcgregor & Amasa Stone)..... 3.560 01/05/06 4,800,000
820,000 Cuyahoga Co OH Hlth Facs Rev (Franciscan Cmntys)............ 3.540 01/05/06 820,000
3,045,000 Delaware Co OH Hlth Fac (Sarah Moore Home).................. 3.660 01/05/06 3,045,000
1,990,000 Franklin Co OH EDR (Dominican Sisters)...................... 3.590 01/05/06 1,990,000
1,400,000 Franklin Co OH Hlth Fac (Heinzerling Fndtn)................. 3.650 01/05/06 1,400,000
800,000 Franklin Co OH Hlth Fac (Lifeline Organ Procurement)........ 3.590 01/05/06 800,000
3,000,000 Franklin Co OH Hlth Facs (Friendship Vlg Dublin)............ 3.540 01/05/06 3,000,000
7,385,000 Franklin Co OH Hlth Facs (Presbyterian)..................... 3.560 01/05/06 7,385,000
875,000 Franklin Co OH IDR (OH Girl Scout Council).................. 3.650 01/05/06 875,000
1,800,000 Fulton Co OH IDR (Polycraft Inc)............................ 3.820 01/05/06 1,800,000
300,000 Hamilton Co OH EDR (Contemporary Arts Ctr).................. 3.600 01/05/06 300,000
1,250,000 Hamilton Co OH Hosp (Beechwood Home)........................ 3.540 01/05/06 1,250,000
980,000 Hamilton Co OH Hosp (Childrens Hosp Med Ctr) Ser 2000....... 3.500 01/05/06 980,000
6,645,000 Hamilton Co OH Hosp (Drake Ctr Inc)......................... 3.510 01/05/06 6,645,000
2,300,000 Hamilton Co OH Hosp Facs Rev (Elizabeth Gamble) Ser B....... 3.440 01/05/06 2,300,000
5,920,000 Hamilton Co OH Sales Tax Fltr Ctfs Ser 356.................. 3.550 01/05/06 5,920,000
2,944,000 Hamilton OH MFH Afford Hsg (Knollwood Vlg) A................ 3.540 01/05/06 2,944,000
2,579,000 Hancock Co OH MFH (Crystal Glen Apts) A..................... 3.540 01/05/06 2,579,000
2,000,000 Jackson OH Hosp Facs Rev (Holzer Cons Hlth Sys)............. 3.570 01/05/06 2,000,000
3,630,000 Lima OH Hosp Fac (Lima Mem Hosp)............................ 3.590 01/05/06 3,630,000
400,000 Lucas Co OH Hlth Fac (Lutheran Homes)....................... 3.560 01/05/06 400,000
50,000 Lucas Co OH Hosp Rev (Sunshine Childrens Home).............. 3.700 01/05/06 50,000
55,000 Lucas Co OH IDR (SA Associates)............................. 3.680 01/05/06 55,000
515,000 Mahoning Co OH IDR (OH Heart Inst).......................... 3.650 01/05/06 515,000
300,000 Marion Co OH Hosp Pooled Lease Rev.......................... 3.540 01/05/06 300,000
1,095,000 Mason OH TIF Rev (Central Parke of Mason)................... 3.590 01/05/06 1,095,000
1,700,000 Middleburg Hgts OH Hosp Rev (SW Gen Hlth)................... 3.550 01/05/06 1,700,000
1,080,000 Montgomery Co OH Hlth Facs (Cmnty Blood Ctr)................ 3.650 01/05/06 1,080,000
2,100,000 Montgomery Co OH Rev (St Vincent de Paul)................... 3.560 01/05/06 2,100,000
1,375,000 OH St Higher Ed Fac (John Carroll).......................... 3.550 01/05/06 1,375,000
3,000,000 OH St Higher Ed Fac (Mt St Joseph).......................... 3.540 01/05/06 3,000,000
1,000,000 OH St Higher Ed Fac Pooled Fin (1997)....................... 3.610 01/05/06 1,000,000
2,800,000 OH St Higher Ed Fac Pooled Fin (1998)....................... 3.610 01/05/06 2,800,000
400,000 OH St Higher Ed Fac Pooled Fin (1999)....................... 3.610 01/05/06 400,000
200,000 OH St Higher Ed Rev (Malone College)........................ 3.600 01/05/06 200,000
3,695,000 Port Gtr Cincinnati Dev Auth (Cincinnati Zoo)............... 3.480 01/05/06 3,695,000
3,450,000 Puerto Rico Childrens Tr Fund Putter Ser 149................ 3.550 01/05/06 3,450,000
31
OHIO TAX-FREE MONEY MARKET FUND
(CONTINUED)
===================================================================================================================
PRINCIPAL FLOATING & VARIABLE DEMAND NOTES -- 73.0% COUPON MATURITY MARKET
AMOUNT (CONTINUED) RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 900,000 Puerto Rico Cmnwlth GO Putter Ser 441....................... 3.540 01/05/06 $ 900,000
2,000,000 Puerto Rico Cmnwlth Hwy & Trans Auth Rev Ser 969............ 3.530 01/05/06 2,000,000
1,700,000 Puerto Rico Pub Fin Corp Putters Ser 363.................... 3.540 01/05/06 1,700,000
4,135,000 Sharonville OH IDR (Duke Rlty LP)........................... 3.670 01/05/06 4,135,000
2,400,000 Summit Co OH Civic Fac Rev (YMCA)........................... 3.590 01/05/06 2,400,000
1,390,000 Summit Co OH Hlth Fac (Evant Inc)........................... 3.650 01/05/06 1,390,000
3,300,000 Toledo OH City Svcs Special Assmnt.......................... 3.510 01/05/06 3,300,000
2,225,000 Toledo OH City Svcs Special Assmnt.......................... 3.510 01/05/06 2,225,000
5,000,000 Toledo-Lucas Co OH Port Auth Rev............................ 3.530 01/05/06 5,000,000
3,995,000 Univ of Akron Gen Rcpts Fltr Ctfs Ser 165................... 3.550 01/05/06 3,995,000
3,700,000 Univ of Akron Gen Rcpts Ser 2004............................ 3.500 01/05/06 3,700,000
1,500,000 Warren Co OH Hlthcare Facs Rev.............................. 3.440 01/05/06 1,500,000
1,600,000 Warren Co OH IDR (Liquid Container)......................... 3.530 01/05/06 1,600,000
1,355,000 Westlake OH EDR (Oaks Dev Co)............................... 3.650 01/05/06 1,355,000
4,720,000 Woodlawn OH EDR (Goodwill Inds)............................. 3.540 01/05/06 4,720,000
1,570,000 Miami Co OH Hosp Fac (Upper Vly Med Ctr).................... 3.580 01/06/06 1,570,000
5,700,000 Hamilton Co OH IDR (ADP).................................... 3.160 01/15/06 5,700,000
------------
TOTAL FLOATING & VARIABLE DEMAND NOTES...................... $192,418,000
------------
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS -- 3.2% RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 3,040,000 Cuyahoga Co OH IDR (Halle Office Bldg)...................... 3.080 04/01/06 $ 3,040,000
910,000 Clermont Co OH EDR (John Q Hammons/Clermont Hills).......... 3.250 05/01/06 910,000
2,370,000 Richland Co OH IDR (Mansfield Sq Ltd)....................... 3.250 05/15/06 2,370,000
500,000 Gallia Co OH IDR (Jackson Pike Assoc)....................... 3.550 06/15/06 500,000
1,675,000 McDonald Tax Exempt Mtge Trust.............................. 3.500 11/15/06 1,675,000
------------
TOTAL ADJUSTABLE RATE PUT BONDS............................. $ 8,495,000
------------
TOTAL INVESTMENT SECURITIES -- 99.6%
(Amortized Cost $262,598,899)............................... $262,598,899
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4%................ 1,166,720
------------
NET ASSETS -- 100.0%......................................... $263,765,619
============
See accompanying notes to portfolios of investments and notes to financial
statements.
32
TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005 (UNAUDITED)
===================================================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FIXED RATE REVENUE & GENERAL OBLIGATION BONDS -- 9.2% RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 495,000 Rock Hill SC COP (Hospitality Fee Pledge)................... 3.000 01/01/06 $ 495,000
400,000 Arlington TX Indpt SD UTGO Prerefunded @ 100................ 5.000 02/15/06 400,856
205,000 North Central TX Hlth Fac Dev Corp Rev...................... 4.700 02/15/06 205,446
100,000 Detroit MI CSD UTGO......................................... 5.000 05/01/06 100,525
500,000 Gallia Co OH LSD LTGO BANS.................................. 4.500 06/15/06 502,451
900,000 Covington KY Indpt SD TRANS................................. 3.500 06/30/06 901,095
400,000 AMP OH Elect Sys Rev BANS (Woodville Vlg)................... 3.250 07/20/06 400,427
550,000 AMP OH Elect Sys Rev BANS (Carey Vlg)....................... 3.400 08/03/06 550,784
500,000 Obetz OH Var Purp UTGO BANS................................. 5.900 10/13/06 509,744
375,000 AMP OH Elect Sys Rev BANS (Yellow Springs).................. 4.000 11/02/06 376,213
-----------
TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS ....... $ 4,442,541
-----------
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT FLOATING & VARIABLE DEMAND NOTES -- 80.7% RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 1,035,000 Arvada CO Wtr Sys Rev....................................... 3.100 01/01/06 $ 1,035,000
35,000 Boone Co KY IBR (Hennegan Co)............................... 3.590 01/01/06 35,000
1,650,000 Broward Co FL Hlth Facs Rev (John Knox Vlg)................. 3.800 01/01/06 1,650,000
100,000 Chester Co PA IDA Rev (Archdiocese Philadelphia)............ 3.650 01/01/06 100,000
1,100,000 Converse Co WY PCR (Pacificorp)............................. 3.700 01/01/06 1,100,000
1,300,000 MO St Hlth & Ed (WA Univ) Ser A............................. 3.700 01/01/06 1,300,000
1,300,000 OH St Air Qlty Dev Auth Rev (OH Edison Co).................. 3.850 01/01/06 1,300,000
1,000,000 OH St Air Quality Rev PCR (Ohio Edison)..................... 3.750 01/01/06 1,000,000
1,400,000 OH St Higher Ed Fac Rev (Case Western)...................... 3.750 01/01/06 1,400,000
800,000 Tarrant Co TX Hlth Fac Rev (Cumberland Rest Inc)............ 3.700 01/01/06 800,000
1,300,000 Trumbull Co OH Hlthcare (Shepard of Valley Lutheran Home)... 3.750 01/01/06 1,300,000
500,000 Portland OR MFH Rev (South Pk Block)........................ 3.470 01/03/06 500,000
300,000 Bloomington IL Normal Arpt Auth............................. 3.590 01/04/06 300,000
250,000 CO Hlth Facs (Jefferson Hills) Ser B........................ 3.600 01/04/06 250,000
600,000 Dade Co FL IDA IDR (Dolphins Stadium)....................... 3.550 01/04/06 600,000
350,000 E-470 Pub Highway Auth CO Rev (Vehicle Reg Fee)............. 3.550 01/04/06 350,000
700,000 IL Dev Fin Auth IDR (Revcor Inc)............................ 3.640 01/04/06 700,000
900,000 Nassau Co FL PCR (Rayonier)................................. 3.540 01/04/06 900,000
400,000 OH St Air Qlty Dev Auth Rev (Timken)........................ 3.680 01/04/06 400,000
650,000 Orange Co FL HFA Rev (Sundown Assoc)........................ 3.560 01/04/06 650,000
400,000 Palm Beach Co FL Rev (Norton Gallery)....................... 3.430 01/04/06 400,000
1,100,000 Scio Twp MI EDR (ADP Inc)................................... 3.680 01/04/06 1,100,000
600,000 Ulster Co NY IDA IDR (Viking Industries Inc) Ser A.......... 3.660 01/04/06 600,000
1,575,000 Akron Bath Copley OH Hosp (Summa Hlth Sys).................. 3.560 01/05/06 1,575,000
275,000 Akron Bath Copley OH Hosp (Visiting Nurse Svcs)............. 3.600 01/05/06 275,000
500,000 Ames Higher Ed Facs Corp TX Rev (St Gabriels)............... 3.580 01/05/06 500,000
120,000 Boulder CO Dev Rev (Humane Society)......................... 3.630 01/05/06 120,000
240,000 CA Infra EDB IDR (Metrotile Mfg) Ser A...................... 3.760 01/05/06 240,000
100,000 CA Statewide Cmntys IDR (American Modular Sys).............. 3.600 01/05/06 100,000
100,000 Catawba Co NC Ind Fac (Lucky 7 Dev Grp)..................... 3.670 01/05/06 100,000
675,000 CO HFA EDR (Casarosa & Denver Gasket Inc)................... 3.720 01/05/06 675,000
500,000 Duchesne SD UT Bldg Auth Rev................................ 3.580 01/05/06 500,000
700,000 Duval Co FL HFA MFH Mtg Rev (Glades Apts)................... 3.510 01/05/06 700,000
33
TAX-FREE MONEY MARKET FUND
(CONTINUED)
===================================================================================================================
PRINCIPAL FLOATING & VARIABLE DEMAND NOTES -- 80.7% COUPON MATURITY MARKET
AMOUNT (CONTINUED) RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 545,000 Eden Prairie MN MFH Rev (Lake Place Apts)................... 3.630 01/05/06 $ 545,000
310,000 Eupora MS IDR (Plymouth Tube Co)............................ 3.800 01/05/06 310,000
280,000 Fargo ND CDR Rev (Kelly Inns Fargo)......................... 3.700 01/05/06 280,000
300,000 Hanford CA Swr Rev Ser A.................................... 3.600 01/05/06 300,000
900,000 Highlands Co FL Hlth Facs Auth Rev (Adventist Hlth Sys) Ser B 3.550 01/05/06 900,000
300,000 IA Fin Auth Rev (Northcrest Inc)............................ 3.630 01/05/06 300,000
390,000 IA Fin Auth Rev (Regis Schs)................................ 3.580 01/05/06 390,000
200,000 IA Higher Ed Auth Rev (American Institute).................. 3.630 01/05/06 200,000
1,000,000 IL Fin Auth Rev (The Clare at Wtr) Ser D.................... 3.550 01/05/06 1,000,000
500,000 IN St Ed Facs Auth (Univ Evansville)........................ 3.650 01/05/06 500,000
882,000 Indianapolis IN EDR (Pedcor Invts Waterfront-B)............. 3.850 01/05/06 882,000
740,000 Indianapolis IN MFH Rev (Nora Commons)...................... 3.650 01/05/06 740,000
280,000 Lake Co IL Cmnty SD #73 Putter Ser 329...................... 3.580 01/05/06 280,000
410,000 Lancaster NE IDR (Garner Inds) Ser B........................ 3.660 01/05/06 410,000
100,000 Lemoore CA COP (Muni Golf Course)........................... 3.810 01/05/06 100,000
300,000 MA St Ind Fin Agy Rev (Lower Mills Assoc LP)................ 3.650 01/05/06 300,000
240,000 Maricopa Co AZ IDA Hsg Rev (San Angelin Apts)............... 3.850 01/05/06 240,000
100,000 Montgomery Co OH EDR (Benjamin & Marian).................... 3.600 01/05/06 100,000
820,000 Oakland CA Liq Fac Rev (Assoc Bay Area Govt)................ 3.550 01/05/06 820,000
1,405,000 Ottawa Co OH Hosp Fac Rev (Luther Home of Mercy)............ 3.650 01/05/06 1,405,000
1,370,000 Ottawa Co OH Hosp Facs Rev (Luther Home of Mercy) Ser 97.... 3.650 01/05/06 1,370,000
800,000 Plymouth MN IDR (Scoville Press Inc)........................ 3.630 01/05/06 800,000
1,000,000 Puerto Rico Cmnwlth Hwy & Trans Auth Hwy Rev Ser 969........ 3.530 01/05/06 1,000,000
1,485,000 Rev Bd Ctfs Ser 04-13 (Centennial East Apts)................ 3.960 01/05/06 1,485,000
1,105,000 Salina KS Rev (Salina Cent Mall LP-Dillards)................ 3.750 01/05/06 1,105,000
700,000 Storm Lake IA High Ed Facs Rev (Buena Vista)................ 3.680 01/05/06 700,000
-----------
TOTAL FLOATING & VARIABLE DEMAND NOTES...................... $39,017,000
-----------
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT ADJUSTABLE RATE PUT BONDS -- 10.0% RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------
1,125,000 Corpus Cristi TX IDC EDR (Texas Air Invt)................... 2.900 02/01/06 1,124,802
300,000 Summit Co OH IDR (SD Myers Inc)............................. 3.400 02/15/06 300,000
120,000 Dayton KY IBR (Patriot Signage Inc)......................... 3.500 03/01/06 120,000
275,000 Summit Co OH IDR (Struktol Co America)...................... 3.750 03/01/06 275,000
95,000 Cuyahoga Co OH IDR (Halle Office Bldg)...................... 3.080 04/01/06 95,000
1,000,000 KY Rural Wtr Fin Corp Rev................................... 3.100 04/03/06 1,000,000
225,000 Newport KY IBR (Sumerel Tire)............................... 3.500 06/01/06 225,000
1,000,000 Westmoreland Co PA IDA (White Cons Inds).................... 3.685 06/01/06 1,000,000
700,000 McDonald Tax Exempt Mtge Trust.............................. 3.500 11/15/06 700,000
-----------
TOTAL ADJUSTABLE RATE PUT BONDS............................. $ 4,839,802
-----------
TOTAL INVESTMENT SECURITIES -- 99.9%
(Amortized Cost $48,299,343)................................ $48,299,343
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.1%................ 43,789
-----------
NET ASSETS -- 100.0%......................................... $48,343,132
===========
See accompanying notes to portfolios of investments and notes to financial
statements.
34
NOTES TO PORTFOLIOS OF INVESTMENTS
DECEMBER 31, 2005 (UNAUDITED)
================================================================================
Variable and adjustable rate put bonds earn interest at a coupon rate which
fluctuates at specified intervals, usually daily, monthly or semi-annually. The
rates shown in the Portfolios of Investments are the coupon rates in effect at
December 31, 2005.
Put bonds may be redeemed at the discretion of the holder on specified dates
prior to maturity. Mandatory put bonds are automatically redeemed at a specified
put date unless action is taken by the holder to prevent redemption.
Bonds denoted as prerefunded are anticipated to be redeemed prior to their
scheduled maturity. The dates indicated in the Portfolios of Investments are the
stipulated prerefunded dates.
PORTFOLIO ABBREVIATIONS:
BANS - Bond Anticipation Notes
CDR - Community Development Revenue
COP - Certificates of Participation
CSD - City School District
EDB - Economic Development Bank
EDR - Economic Development Revenue
EVSD - Exempted Village School District
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFC - Housing Finance Corporation/Committee
IBR - Industrial Building Revenue
IDA - Industrial Development Authority/Agency
IDC - Industrial Development Corporation
IDR - Industrial Development Revenue
LSD - Local School District
LTGO - Limited Tax General Obligation
MFH - Multi-Family Housing
PCR - Pollution Control Revenue
SD - School District
TANS - Tax Anticipation Notes
TRANS - Tax & Revenue Anticipation Notes
TIF - Tax Increment Financing
UT - Unlimited Tax
UTGO - Unlimited Tax General Obligation
35
PORTFOLIO COMPOSITION
DECEMBER 31, 2005 (UNAUDITED)
================================================================================
As of December 31, 2005, the Ohio Insured Tax-Free Fund and the Ohio Tax-Free
Money Market Fund were invested exclusively in debt obligations issued by the
State of Ohio and its political subdivisions, agencies, authorities and
instrumentalities and by other issuers, the interest from which is exempt from
Ohio personal income tax. The Florida Tax-Free Money Market Fund was 88.0%
invested in debt obligations issued by the State of Florida and its political
subdivisions, agencies, authorities and instrumentalities and by other issuers,
the value of which is exempt from the Florida intangible personal property tax.
As of December 31, 2005, 27.2% of the portfolio securities of the Tax-Free Money
Market Fund were concentrated in the State of Ohio, 4.7% in the State of
Kentucky and 4.4% in the State of Indiana.
The Florida Tax-Free Money Market Fund, the Ohio Insured Tax-Free Fund, and the
Ohio Tax-Free Money Market Fund are each non-diversified Funds under the 1940
Act. Thus, investments may be concentrated in fewer issuers than those of a
diversified fund. As of December 31, 2005, there were no concentrations of
investments (10% or greater) in any one issuer.
The Florida Tax-Free Money Market Fund, the Ohio Tax-Free Money Market Fund and
the Tax-Free Money Market Fund each invest in municipal securities maturing in
13 months or less and having a short-term rating in one of the top two ratings
categories by at least two nationally recognized statistical rating agencies (or
by one such agency if a security is rated by only that agency) or, if unrated,
are determined by the Advisor, under the supervision of the Board of Trustees,
to be of comparable quality.
As of December 31, 2005, 89.8% of the Ohio Insured Tax-Free Fund's long-term
portfolio securities were either (1) insured by an insurance policy obtained
from a recognized insurer which carries a rating of AAA by S&P or Aaa by
Moody's, (2) guaranteed as to the payment of interest and principal by an agency
or instrumentality of the U.S. Government or (3) secured as to the payment of
interest and principal by an escrow account consisting of obligations of the
U.S. Government. Four private insurers individually insure more than 10% of the
Ohio Insured Tax-Free Fund's portfolio securities and collectively insure 82.4%
of its portfolio securities.
The concentration of investments for each Fund as of December 31, 2005,
classified by revenue source, was as follows:
- --------------------------------------------------------------------------------
FLORIDA OHIO
TAX-FREE OHIO TAX-FREE TAX-FREE
MONEY INSURED MONEY MONEY
MARKET TAX-FREE MARKET MARKET
FUND FUND FUND FUND
- --------------------------------------------------------------------------------
General Obligations ................ -- 45.7% 7.9% 2.3%
-----------------------------------------
Revenue Bonds:
Industrial Development/
Pollution Control ............ 9.8% -- 10.2% 9.8%
Hospital/Health Care ............ 2.5% 11.5% 25.4% 23.4%
Utilities/Water & Sewer ......... 3.7% 5.7% 4.2% 11.4%
Education ....................... 32.3% 7.6% 10.7% 8.1%
Housing/Mortgage ................ 27.1% 2.0% 9.6% 11.3%
Economic Development ............ 0.9% -- 5.5% 7.9%
Public Facilities ............... 11.1% -- 4.9% 5.4%
Transportation .................. 1.0% 2.8% 2.7% 0.7%
Special Tax ..................... -- -- 7.9% 0.4%
Miscellaneous ................... 11.6% 24.7% 11.0% 19.3%
-----------------------------------------
Total Investments .................. 100.0% 100.0% 100.0% 100.0%
=========================================
- --------------------------------------------------------------------------------
36
OTHER ITEMS
DECEMBER 31, 2005 (UNAUDITED)
================================================================================
PROXY VOTING DISCLOSURE
The Sub-Advisor is 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-Advisor uses 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 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, 2005 through December 31, 2005).
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, 2005" to estimate the expenses you paid on your
account during this period.
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.
37
OTHER ITEMS
(CONTINUED)
================================================================================
EXPENSES PAID
NET EXPENSE BEGINNING ENDING DURING THE
RATIO ACCOUNT ACCOUNT SIX MONTHS
ANNUALIZED VALUE VALUE ENDED
DECEMBER 31, JULY 1, DECEMBER 31, DECEMBER 31,
2005 2005 2005 2005*
- ------------------------------------------------------------------------------------------------------
Florida Tax-Free Money Market Fund
Actual .......................... 0.75% $ 1,000.00 $ 1,009.90 $ 3.80
Hypothetical .................... 0.75% $ 1,000.00 $ 1,021.42 $ 3.82
Ohio Insured Tax-Free Fund
Class A Actual ................. 0.75% $ 1,000.00 $ 1,001.40 $ 3.78
Class A Hypothetical ........... 0.75% $ 1,000.00 $ 1,021.42 $ 3.82
Class C Actual ................. 1.50% $ 1,000.00 $ 997.60 $ 7.55
Class C Hypothetical ........... 1.50% $ 1,000.00 $ 1,017.64 $ 7.63
Ohio Tax-Free Money Market Fund
Retail Class Actual ............ 0.75% $ 1,000.00 $ 1,010.00 $ 3.80
Retail Class Hypothetical ...... 0.75% $ 1,000.00 $ 1,021.42 $ 3.82
Institutional Class Actual ...... 0.50% $ 1,000.00 $ 1,011.30 $ 2.53
Institutional Class Hypothetical 0.50% $ 1,000.00 $ 1,022.68 $ 2.55
Tax-Free Money Market Fund
Class A Actual ................. 0.89% $ 1,000.00 $ 1,010.00 $ 4.51
Class A Hypothetical ........... 0.89% $ 1,000.00 $ 1,020.72 $ 4.53
Class S Actual ................. 1.15% $ 1,000.00 $ 1,008.70 $ 5.82
Class S Hypothetical ........... 1.15% $ 1,000.00 $ 1,019.41 $ 5.85
- ------------------------------------------------------------------------------------------------------
* 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] (to reflect the one-half year
period).
ADVISORY AGREEMENT APPROVAL DISCLOSURE
The Board of Trustees (the "Board") of the Touchstone Tax-Free Trust
("TTFT")(the "Trust"), and by a separate vote, the Independent Trustees of the
Trust, approved the continuance of the Advisory Agreement between the Trust and
the Advisor with respect to each Fund and the Sub-Advisory Agreements with
respect to each Fund at a meeting held on November 17, 2005.
In determining whether to approve the continuation of the Advisory Agreement and
the Sub-Advisory Agreements for the Funds, the Advisor furnished information
necessary for a majority of the Independent Trustees to make the determination
that the continuance of the Advisory Agreement and of the Sub-Advisory
Agreements is in the 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 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 Advisory Agreement and the Sub-Advisory Agreements
with management and with experienced independent counsel and received
38
OTHER ITEMS
(CONTINUED)
================================================================================
materials from such counsel discussing the legal standards for their
consideration of the proposed continuation of the Advisory Agreement and the
Sub-Advisory Agreements with respect to each Fund. The Independent Trustees also
reviewed the proposed continuation of the Advisory Agreement and the
Sub-Advisory Agreements with respect to each of the Funds in private sessions
with counsel at which no representatives of management were present.
In approving the Funds' Advisory 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) comparison of fees and performance with
other advisers; (4) economies of scale; and (5) the terms of the Advisory
Agreement. The Board's analysis of these factors is set forth below. The
Independent Trustees were advised by independent legal counsel throughout the
process.
NATURE, EXTENT AND QUALITY OF ADVISOR SERVICES. The Board considered the level
and depth of knowledge of the Advisor, including the professional experience and
qualifications of senior personnel. The Board discussed the Advisor's
effectiveness in monitoring the performance of the Sub-Advisor, an affiliate of
the Advisor, and its 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 took into
account the Advisor's willingness to consider and implement organizational and
operational changes designed to improve investment results. 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 of the Funds under the Advisory 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 Trustees also considered Fund-by-Fund profitability data that they
received from management, which indicated the relative profit and loss of each
of the Funds. The Board noted that the Advisor has waived advisory fees and
reimbursed expenses for certain of the Funds and also pays the sub-advisory fees
out of the advisory fees the Advisor receives from the Funds. The Trustees
reviewed the profitability of the Advisor's relationship with the Funds both
before and after tax expenses and whether the Advisor had the financial
wherewithal to continue to provide a high level of services to the Funds, noting
the ongoing commitment of the Advisor's parent with respect to providing support
and resources as needed. The Trustees also considered that the Funds'
distributor, an affiliate of the Advisor, received 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 Trustees also noted that the
Advisor derives reputational and other benefits from its association with the
Funds.
The Trustees 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 advisory fees and total expense
ratios for the Funds with various comparative data, including the industry
median and average advisory fees and
39
OTHER ITEMS
(CONTINUED)
================================================================================
expense ratios in each Fund's respective peer group. The Board also considered
the Funds' performance results during the six-months, twelve-months, twenty-four
and thirty-six months ended September 30, 2005 and noted that the Board reviews
on a quarterly basis detailed information about the Funds' performance results,
portfolio composition and investment strategies.
The Board also considered the effect of each Fund's growth and size on its
performance and expenses. The Board further noted that the Advisor has waived
advisory fees and/or reimbursed expenses for certain of the Funds as necessary
to reduce their operating expenses to targeted levels. The Board noted that the
fees under the Sub-Advisory Agreements with respect to each Fund are paid by the
Advisor out of the advisory fee it receives from the Fund and the impact of such
sub-advisory fees on the profitability of the Advisor. In reviewing the expense
ratios and performance 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 Trustees considered, among other data, the specific factors and related
conclusions set forth below with respect to each Fund:
FLORIDA TAX-FREE MONEY MARKET 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 Advisor was currently waiving a portion of its
advisory fee. The Fund's performance for the six-months, twelve-months,
twenty-four months and thirty-six months ended September 30, 2005 was in the 3rd
quartile of the Fund's peer group. The Trustees noted the relatively small range
of difference between the expenses of the peer group's median and those of the
Fund, as well as with respect to the performance of the peer group. The Trustees
also took into account management's discussion of the Fund's performance. Based
upon their review, the Trustees concluded that the quality of the services
provided by the Advisor and the Fund's Sub-Advisor offset the current lower
performance ranking and that the advisory fee was reasonable in light of the
high quality of services received by the Fund and the other factors considered.
OHIO INSURED TAX-FREE FUND. The Fund's advisory fee and total expense ratio (net
of applicable expense waivers) were above the median and below the median,
respectively, of its peer group. The Board noted that the Advisor was currently
waiving a portion of its advisory fee. The Fund's performance for the
six-months, twelve-months, twenty-four months and thirty-four months ended
September 30, 2005 was in the 2nd quartile of the Fund's peer group. The
Trustees also took into account management's discussion of the Fund's
performance. Based upon their review, the Trustees concluded that the Fund's
performance over time was satisfactory and that the advisory fee was reasonable
in light of the high quality of services received by the Fund and the other
factors considered.
OHIO TAX-FREE MONEY MARKET FUND. The Fund's advisory fee and total expense ratio
were above the median and at the median, respectively, of its peer group. The
Board noted that the Advisor was currently waiving a portion of its advisory
fee. The Fund's performance for the six-months, twelve-months and twenty-four
months ended September 30, 2005 was in the 3rd quartile of the Fund's peer
group. The Trustees also took into account management's discussion of the Fund's
performance. Based upon their review, the Trustees concluded that the Fund's
performance is satisfactory and that the advisory fee was reasonable in light of
the high quality of services received by the Fund and the other factors
considered.
TAX-FREE MONEY MARKET 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 Advisor was currently waiving a portion of its advisory
fee. The Fund's performance for the six-months and twelve-months ended September
30, 2005 was in the 3rd quartile of the Fund's peer group, in the
40
OTHER ITEMS
(CONTINUED)
================================================================================
2nd quartile for the twenty-four months ended September 30, 2005 and in the 1st
quartile for the thirty-six month period. The Trustees noted the relatively
small range of difference between the expenses of the peer group's median and
those of the Fund, as well as with respect to the performance of the peer group.
The Trustees also took into account management's discussion of the Fund's
performance. Based upon their review, the Trustees concluded that the advisory
fee was reasonable in view of the high quality of services received by the Fund
and that relative performance over time has been satisfactory.
ECONOMIES OF SCALE. The Board considered the effect of each Fund's current size
and potential growth on its performance and fees. The Board considered the
effective fees under the Advisory Agreement as a percentage of assets at
different asset levels and possible economies of scale that may be realized if
the assets of each Fund grows. The Board noted that the advisory fee schedule
for each of the Funds contains breakpoints that reduce the fee rate on assets
above specified levels. The Trustees noted that the current fee level for the
Ohio Tax-Free Money Market Fund reflects such economies of scale. The Trustees
also noted that if a Fund's assets increase over time, the Fund may realize
other economies of scale if assets increase proportionally more than certain
other expenses.
CONCLUSION. In considering the renewal of the Funds' Advisory Agreement, the
Board, including the Independent Trustees, did not identify any single factor as
controlling, and each Trustee 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'
Advisory Agreement with the Advisor, among others: (a) the Advisor has
demonstrated that it possesses the capability and resources to perform the
duties required of it under the Advisory Agreement; (b) the Advisor maintains an
appropriate compliance program; (c) the performance of each Fund is reasonable
or satisfactory in relation to the performance of funds with similar investment
objectives and to relevant indices; and (d) each Fund's advisory expenses are
reasonable in relation to those of similar funds and to the services to be
provided by the Advisor. Based on their conclusions, the Board determined that
continuation of the Advisory Agreement for each Fund would be in the interests
of the respective Fund and its shareholders.
In approving the Funds' Sub-Advisory Agreements, the Board considered various
factors with respect to each Fund and the Sub-Advisory Agreements, among them:
(1) the nature, extent and quality of services provided to the Funds including
the personnel providing services; (2) the Sub-Advisor's compensation; (3) a
comparison of sub-advisory fees and performance with other advisers; and (4) the
terms of the Sub-Advisory Agreements. The Board's analysis of these factors is
set forth below. The Independent Trustees were advised by independent legal
counsel throughout the process.
NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED; INVESTMENT PERSONNEL. The Board
considered information provided by the Advisor regarding the services provided
by the Sub-Advisor, including information presented periodically throughout the
previous year. The Board noted the affiliation of the Sub-Advisor with the
Advisor, noting any potential conflicts of interest. The Board noted that, on a
periodic basis, the Board meets with various portfolio managers of the
Sub-Advisor to discuss their respective performance and investment process and
strategies. The Board considered the 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 Trustees also noted the
Sub-Advisor's brokerage practices. The Board also considered the Sub-Advisor's
regulatory and compliance history. The Board noted that the Advisor's compliance
monitoring processes include quarterly reviews of compliance reports and annual
compliance visits to the Sub-Advisor and that compliance issues are reported to
the Board.
41
OTHER ITEMS
(CONTINUED)
================================================================================
SUB-ADVISOR'S COMPENSATION. The Board also took into consideration the financial
condition of the 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 that Sub-Advisor of its relationship
with the Funds, the Trustees noted the undertakings of the Advisor to maintain
expense limitations for the Funds and also noted that the fees under the
Sub-Advisory Agreements were paid by the Advisor out of the advisory fees that
it receives under the Advisory Agreement. As a consequence, the profitability to
the Sub-Advisor of its relationship with each Fund were not substantial factors
in the Trustees' deliberations. For similar reasons, the Trustees did not
consider the potential economies of scale in the Sub-Advisor's management of the
Funds to be substantial factors in their consideration at this time although it
was noted that the sub-advisory fee schedule for the Funds contain breakpoints
that reduce the fee rate on assets above specified levels.
SUB-ADVISORY FEES AND FUND PERFORMANCE. The Board considered that each Fund pays
an advisory fee to the Advisor and that, in turn, the Advisor pays a
sub-advisory fee to the Sub-Advisor. Accordingly, the Board considered the
amount retained by the Advisor and the 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 fees for each Fund with various comparative data, if
available, including the industry median and average sub-advisory fees in each
Fund's respective investment category, and found that each Fund's sub-advisory
fee was reasonable and appropriate under the facts and circumstances.
No such comparative information was available for the Florida Tax-Free Money
Market Fund, Ohio Insured Tax-Free Fund or the Ohio Tax-Free Money Market Fund
due to the relatively small number of peers in each Fund's respective class with
subadvisory arrangements.
TAX-FREE MONEY MARKET FUND. The Fund's sub-advisory fee was below the median of
its peer group. Based upon their review, the Trustees concluded that the
sub-advisory fee was reasonable in light of the high quality of services
received by the Fund and the other factors considered.
As noted above, the Board considered each Fund's performance during the
six-months, twelve-months, twenty-four months and thirty-six months ended
September 30, 2005, as applicable, as compared to each Fund's respective peer
group and noted that the Board reviews on a quarterly basis detailed information
about the Funds' performance results, portfolio composition and investment
strategies. It noted the Advisor's expertise and resources in monitoring the
performance, investment style and risk adjusted performance of the Sub-Advisor.
The Board was mindful of the Advisor's focus on the Sub-Advisor's performance
and its ways of addressing underperformance.
CONCLUSION. In considering the renewal of the Sub-Advisory Agreements with
respect to each Fund, the Board, including the Independent Trustees, did not
identify any single factor as controlling, and each Trustee attributed different
weights to the various factors. The Board reached the following conclusions
regarding the Sub-Advisory Agreements with respect to each Fund, among others:
(a) the Sub-Advisor is qualified to manage the applicable Fund's assets in
accordance with its investment objectives and policies; (b) the Sub-Advisor
maintains an appropriate compliance program; (c) the performance of each Fund is
satisfactory or reasonable in relation to the performance of funds with similar
investment objectives and to relevant indices; (d) each Fund's advisory expenses
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 respective investment
objectives of each Fund. Based on their conclusions, the Board determined that
approval of the Sub-Advisory Agreements with respect to each Fund would be in
the interests of the respective Fund and its shareholders.
42
<page>
ITEM 2. CODE OF ETHICS.
Not required for Semiannual Reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required for Semiannual Reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required for Semiannual Reports
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 Semiannual Report filed under Item 1 of this Form N-CSR.
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.
The registrant does not have 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 last 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)(2) Certifications required by Item 12 (a)(2) of Form N-CSR are filed
herewith.
(b) Certification required by Item 12 (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 Tax-Free Trust
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By (Signature and Title)
/s/ Jill T. McGruder
- -------------------------------------------------------------------------------
Jill T. McGruder
President
Date: March 8, 2006
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 T. McGruder
- -------------------------------------------------------------------------------
Jill T. McGruder
President
Date: March 8, 2006
/s/ Terrie A. Wiedenheft
- -------------------------------------------------------------------------------
Terrie A. Wiedenheft
Controller & Treasurer
Date: March 8, 2005