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
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Touchstone Tax-Free Trust
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(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: 6/30/07
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Date of reporting period: 12/31/06
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Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
Semiannual Report
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December 31, 2006
(Unaudited)
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
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[LOGO] TOUCHSTONE
INVESTMENTS
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 4-5
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Statements of Operations 6
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Statements of Changes in Net Assets 7-8
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Financial Highlights 9-15
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Notes to Financial Statements 16-23
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Portfolios of Investments:
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Florida Tax-Free Money Market Fund 24-25
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Ohio Insured Tax-Free Fund 26-27
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Ohio Tax-Free Money Market Fund 28-31
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Tax-Free Money Market Fund 32-34
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Notes to Portfolios of Investments 35
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Portfolio Composition 36
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Other Items 37-43
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2
TABULAR PRESENTATION OF PORTFOLIOS OF INVESTMENTS
AS OF DECEMBER 31, 2006 (UNAUDITED)
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The illustrations below provide each Fund's sector allocation. We hope it will
be useful to shareholders as it summarizes key information about each Fund's
investments.
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TOUCHSTONE FLORIDA TAX-FREE MONEY MARKET FUND
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CREDIT QUALITY (% OF NET ASSETS)
A-1 / P-1 / AAA 91.5
FW1* 8.5
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Total 100.0
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PORTFOLIO ALLOCATION (% OF NET ASSETS)
Variable Rate Demand Notes 78.4
General Obligations 3.9
Fixed Rate Revenue 9.1
Adjustable Rate Put Bonds 3.7
Commercial Paper 4.9
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Total 100.0
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TOUCHSTONE OHIO TAX-FREE MONEY MARKET FUND
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CREDIT QUALITY (% OF NET ASSETS)
A-1 / P-1 / AAA 77.3
FW1* 22.7
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Total 100.0
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PORTFOLIO ALLOCATION (% OF NET ASSETS)
Variable Rate Demand Notes 70.8
General Obligations 19.0
Fixed Rate Revenue 6.4
Adjustable Rate Put Bonds 3.8
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Total 100.0
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TOUCHSTONE OHIO INSURED TAX-FREE FUND
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CREDIT QUALITY (% OF NET ASSETS)
AAA / Aaa 92.1
AA / Aa 5.6
A/A 2.3
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Total 100.0
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PORTFOLIO ALLOCATION (% OF NET ASSETS)
General Obligations 41.1
Prerefunded / Escrowed to Maturity 22.9
Hospital / Healthcare 12.0
Education 10.1
Miscellaneous 0.7
Water and Sewer 7.6
Transportation 4.3
Utilities 1.3
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Total 100.0
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TOUCHSTONE TAX-FREE MONEY MARKET FUND
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CREDIT QUALITY (% OF NET ASSETS)
A-1 / P-1 / AAA 84.8
FW1* 15.2
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Total 100.0
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PORTFOLIO ALLOCATION (% OF NET ASSETS)
Variable Rate Demand Notes 72.6
Adjustable Rate Put Bonds 4.7
Fixed Rate Revenue 8.8
General Obligations 13.9
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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, 2006 (UNAUDITED)
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FLORIDA OHIO OHIO TAX-FREE
TAX-FREE INSURED TAX-FREE MONEY
MONEY MARKET TAX-FREE MONEY MARKET MARKET
FUND FUND FUND FUND
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ASSETS
Investment securities:
At amortized cost $ 20,416,498 $ 64,920,561 $274,583,492 $ 56,211,085
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At market value $ 20,416,498 $ 68,140,743 $274,583,492 $ 56,211,085
Cash 42,728 31,654 138,577 38,279
Interest receivable 128,191 429,253 2,011,335 394,917
Receivable for investment securities sold 400,000 -- -- 600,000
Receivable for capital shares sold -- 13,857 -- --
Other assets 1,486 8,205 7,206 6,066
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TOTAL ASSETS 20,988,903 68,623,712 276,740,610 57,250,347
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LIABILITIES
Dividends payable 44,837 80,170 522,890 791
Payable to Advisor 3,538 25,232 98,475 24,422
Payable to other affiliates 4,009 10,779 25,922 9,591
Payable to Trustees 3,546 4,818 1,500 3,852
Payable for securities purchased -- -- -- 100,913
Payable for capital shares redeemed -- 16,321 -- --
Other accrued expenses and liabilities 17,381 43,093 70,608 37,388
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TOTAL LIABILITIES 73,311 180,413 719,395 176,957
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NET ASSETS $ 20,915,592 $ 68,443,299 $276,021,215 $ 57,073,390
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NET ASSETS CONSIST OF:
Paid-in capital $ 20,921,170 $ 65,118,973 $276,020,850 $ 57,073,153
Accumulated net realized gains (losses) from security transactions (5,578) 104,144 365 237
Net unrealized appreciation on investments -- 3,220,182 -- --
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NET ASSETS $ 20,915,592 $ 68,443,299 $276,021,215 $ 57,073,390
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PRICING OF RETAIL SHARES
Net assets applicable to Retail shares $ -- $ -- $ 97,815,688 $ --
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Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) -- -- 97,805,806 --
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Net asset value, offering price and redemption price per share $ -- $ -- $ 1.00 $ --
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PRICING OF INSTITUTIONAL SHARES
Net assets applicable to Institutional shares $ -- $ -- $178,205,527 $ --
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Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) -- -- 178,202,056 --
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Net asset value, offering price and redemption price per share $ -- $ -- $ 1.00 $ --
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PRICING OF CLASS A SHARES
Net assets applicable to Class A shares $ 20,915,592 $ 62,552,563 $ -- $ 17,998,693
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Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) 20,921,159 5,381,735 -- 18,008,803
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Net asset value and redemption price per share $ 1.00 $ 11.62 $ -- $ 1.00
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Maximum offering price per share $ -- $ 12.20 $ -- $ --
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4
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FLORIDA OHIO OHIO TAX-FREE
TAX-FREE INSURED TAX-FREE MONEY
MONEY MARKET TAX-FREE MONEY MARKET MARKET
FUND FUND FUND FUND
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PRICING OF CLASS C SHARES
Net assets applicable to Class C shares $ -- $ 5,890,736 $ -- $ --
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Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) -- 506,330 -- --
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Net asset value, offering price and redemption price per share* $ -- $ 11.63 $ -- $ --
===================================================================================================================================
PRICING OF CLASS S SHARES
Net assets applicable to Class S shares $ -- $ -- $ -- $ 39,074,697
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Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) -- -- -- 39,074,505
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Net asset value, offering price and redemption price per share $ -- $ -- $ -- $ 1.00
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* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
5
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2006 (UNAUDITED)
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FLORIDA OHIO OHIO TAX-FREE
TAX-FREE INSURED TAX-FREE MONEY
MONEY MARKET TAX-FREE MONEY MARKET MARKET
FUND FUND FUND FUND
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INVESTMENT INCOME
Interest income $ 491,358 $ 1,640,487 $ 4,867,622 $ 984,586
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EXPENSES
Investment advisory fees 68,412 177,073 614,396 133,416
Distribution expenses, Retail class -- -- 123,164 --
Distribution expenses, Class A 34,199 80,337 -- 21,029
Distribution expenses, Class C -- 32,797 -- --
Distribution expenses, Class S -- -- -- 109,629
Administration fees 7,533 19,477 68,179 14,660
Accounting services fees 12,000 18,750 24,750 17,750
Transfer Agent fees, Retail class -- -- 19,102 --
Transfer Agent fees, Institutional class -- -- 6,000 --
Transfer Agent fees, Class A 6,000 17,461 -- 8,111
Transfer Agent fees, Class C -- 6,000 -- --
Transfer Agent fees, Class S -- -- -- 6,000
Custodian fees 3,892 4,967 26,156 4,631
Postage and supplies 2,329 10,887 14,328 8,455
Trustees' fees and expenses 7,313 7,586 5,269 6,435
Registration fees, Retail class -- -- 8,023 --
Registration fees, Class A 740 4,683 -- 4,769
Registration fees, Class C -- 3,809 -- --
Registration fees, Class S -- -- -- 1,876
Professional fees 10,066 11,543 19,799 9,873
Pricing expenses 1,850 6,673 9,556 3,324
Reports to shareholders 1,624 3,642 2,061 2,828
Compliance fees and expenses 12 184 2,179 42
Other expenses 805 9,063 1,228 702
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TOTAL EXPENSES 156,775 414,932 944,190 353,530
Fees waived by the Advisor (54,178) (124,791) (147,450) (68,579)
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NET EXPENSES 102,597 290,141 796,740 284,951
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NET INVESTMENT INCOME 388,761 1,350,346 4,070,882 699,635
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REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 150 389,393 365 237
Net change in unrealized appreciation/depreciation on investments -- 1,371,731 -- --
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NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 150 1,761,124 365 237
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NET INCREASE IN NET ASSETS FROM OPERATIONS $ 388,911 $ 3,111,470 $ 4,071,247 $ 699,872
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See accompanying notes to financial statements.
6
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
FLORIDA
TAX-FREE OHIO INSURED
MONEY MARKET TAX-FREE
FUND FUND
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SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
DECEMBER 31, ENDED DECEMBER 31, ENDED
2006 JUNE 30, 2006 JUNE 30,
(UNAUDITED) 2006 (UNAUDITED) 2006
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FROM OPERATIONS
Net investment income $ 388,761 $ 613,539 $ 1,350,346 $ 2,939,925
Net realized gains from security transactions 150 -- 389,393 463,336
Net change in unrealized appreciation/
depreciation on investments -- -- 1,371,731 (3,729,537)
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NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 388,911 613,539 3,111,470 (326,276)
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DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A (388,761) (613,539) (1,247,646) (2,693,310)
From net investment income, Class C -- -- (102,700) (246,822)
From net realized gains, Class A -- -- (605,797) (958,818)
From net realized gains, Class C -- -- (57,110) (109,298)
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DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (388,761) (613,539) (2,013,253) (4,008,248)
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FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 17,946,463 63,790,639 759,879 2,782,827
Reinvested distributions 54,051 126,808 1,246,836 2,459,039
Payments for shares redeemed (24,508,881) (64,638,128) (4,705,315) (11,695,657)
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NET DECREASE IN NET ASSETS
FROM CLASS A SHARE TRANSACTIONS (6,508,367)
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CLASS C
Proceeds from shares sold -- -- 56,484 409,035
Reinvested distributions -- -- 117,204 220,900
Payments for shares redeemed -- -- (1,123,628)
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NET DECREASE IN NET ASSETS
FROM CLASS C SHARE TRANSACTIONS -- -- (949,940) (2,221,909)
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TOTAL DECREASE IN NET ASSETS (6,508,217) (720,681) (2,550,323) (13,010,224)
NET ASSETS
Beginning of period 27,423,809 28,144,490 70,993,622 84,003,846
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End of period $ 20,915,592 $ 27,423,809 $ 68,443,299 $ 70,993,622
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UNDISTRIBUTED NET INVESTMENT INCOME $ -- $ -- $ -- $ --
===================================================================================================================================
See accompanying notes to financial statements.
7
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
================================================================================
OHIO
TAX-FREE TAX-FREE
MONEY MARKET MONEY MARKET
FUND FUND
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SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
DECEMBER 31, ENDED DECEMBER 31, ENDED
2006 JUNE 30, 2006 JUNE 30,
(UNAUDITED) 2006 (UNAUDITED) 2006
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FROM OPERATIONS
Net investment income $ 4,070,882 $ 6,473,158 $ 699,635 $ 972,176
Net realized gains from security transactions 365 17,538 237 --
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NET INCREASE IN NET ASSETS FROM OPERATIONS 4,071,247 6,490,696 699,872 972,176
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DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Retail (1,409,875) (2,237,111) -- --
From net investment income, Institutional (2,661,007) (4,236,047) -- --
From net investment income, Class A -- -- (235,732) (410,299)
From net investment income, Class S -- -- (463,903) (561,877)
From net realized gains, Retail (6,368) -- -- --
From net realized gains, Institutional (11,170) -- -- --
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DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (4,088,420) (6,473,158) (699,635) (972,176)
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FROM CAPITAL SHARE TRANSACTIONS
RETAIL
Proceeds from shares sold 71,739,002 149,098,338 -- --
Reinvested distributions 1,415,895 2,247,099 -- --
Payments for shares redeemed (67,415,052) (158,396,605) -- --
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NET INCREASE (DECREASE) IN NET ASSETS FROM RETAIL SHARE
TRANSACTIONS 5,739,845 (7,051,168) -- --
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INSTITUTIONAL
Proceeds from shares sold 143,741,638 326,790,025 -- --
Reinvested distributions 58,916 119,761 -- --
Payments for shares redeemed (148,690,830) (336,160,764) -- --
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NET DECREASE IN NET ASSETS FROM INSTITUTIONAL SHARE
TRANSACTIONS (4,890,276) (9,250,978) -- --
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CLASS A
Proceeds from shares sold -- -- 7,741,055 16,325,115
Reinvested distributions -- -- 231,905 405,444
Payments for shares redeemed -- -- (6,253,281) (19,701,796)
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NET INCREASE (DECREASE) IN NET ASSET FROM CLASS A SHARE
TRANSACTIONS -- -- 1,719,679 (2,971,237)
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CLASS S
Proceeds from shares sold -- -- 99,393,138 122,612,554
Reinvested distributions -- -- 464,667 566,872
Payments for shares redeemed -- -- (93,440,835) (103,596,488)
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NET INCREASE IN NET ASSETS FROM CLASS S SHARE TRANSACTIONS -- -- 6,416,970 19,582,938
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TOTAL INCREASE (DECREASE) IN NET ASSETS 832,396 (16,284,608) 8,136,886 16,611,701
NET ASSETS
Beginning of period 275,188,819 291,473,427 48,936,504 32,324,803
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End of period $276,021,215 $275,188,819 $ 57,073,390 $ 48,936,504
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UNDISTRIBUTED NET INVESTMENT INCOME $ -- $ -- $ -- $ --
===================================================================================================================================
See accompanying notes to financial statements.
8
FINANCIAL HIGHLIGHTS
================================================================================
FLORIDA TAX-FREE MONEY MARKET FUND
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
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SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
2006 ---------------------------------------------------------------------------------
(UNAUDITED) 2006 2005 2004 2003 2002
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Net asset value at
beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
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Income (loss) from
investment operations:
Net investment income 0.014 0.023 0.011 0.004 0.008 0.017
Net realized gains
(losses) on investments -- -- (0.000)(A) (0.000)(A) 0.000(A) (0.000)(A)
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Total from investment
operations 0.014 0.023 0.011 0.004 0.008 0.017
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Less distributions:
Dividends from net
investment income (0.014) (0.023) (0.011) (0.004) (0.008) (0.017)
Distributions from
net realized gains -- -- -- (0.000)(A) -- --
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Total distributions (0.014) (0.023) (0.011) (0.004) (0.008) (0.017)
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Net asset value at
end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
================================================================================================================================
Total return 2.89%(B) 2.28% 1.09% 0.36% 0.76% 1.66%
================================================================================================================================
Net assets at end
of period (000's) $ 20,916 $ 27,424 $ 28,144 $ 29,385 $ 29,657 $ 18,128
================================================================================================================================
Ratio of net expenses to
average net assets 0.75%(B) 0.75% 0.75% 0.75% 0.69% 0.65%
Ratio of net investment
income to average
net assets 2.84%(B) 2.23% 1.08% 0.35% 0.77% 1.64%
(A) Amount rounds to less than $0.001.
(B) Annualized.
See accompanying notes to financial statements.
9
FINANCIAL HIGHLIGHTS (continued)
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OHIO INSURED TAX-FREE FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
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SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
2006 ---------------------------------------------------------------------------------
(UNAUDITED) 2006 2005 2004 2003 2002
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Net asset value at
beginning of period $ 11.45 $ 12.10 $ 11.68$ 12.36 $ 11.94 $ 11.89
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Income (loss) from
investment operations:
Net investment income 0.23 0.46 0.45 0.48 0.49 0.53
Net realized and
unrealized gains
(losses) on investments 0.28 (0.49) 0.43 (0.50) 0.49 0.07
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Total from investment
operations 0.51 (0.03) 0.88 (0.02) 0.98 0.60
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Less distributions:
Dividends from net
investment income (0.23) (0.46) (0.45) (0.48) (0.49) (0.53)
Distributions from net
realized gains (0.11) (0.16) (0.01) (0.21) (0.07) (0.02)
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Total distributions (0.34) (0.62) (0.46) (0.69) (0.56) (0.55)
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Capital contributions -- -- -- 0.03 -- --
================================================================================================================================
Net asset value at end
of period $ 11.62 $ 11.45 $ 12.10 $ 11.68 $ 12.36 $ 11.94
================================================================================================================================
Total return(A) 4.48%(B) (0.25%) 7.66% 0.04%(C) 8.43% 5.15%
================================================================================================================================
Net assets at end of
period (000's) $ 62,552 $ 64,266 $ 74,604 $ 77,837 $ 59,683 $ 54,348
================================================================================================================================
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 3.88%(D) 3.87% 3.74% 3.94% 4.03% 4.47%
Portfolio turnover rate 35%(D) 24% 30% 36% 24% 28%
(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 contribution made
by the Advisor.
(D) Annualized.
See accompanying notes to financial statements.
10
FINANCIAL HIGHLIGHTS (CONTINUED)
================================================================================
OHIO INSURED TAX-FREE FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
================================================================================
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
2006 ---------------------------------------------------------------------------------
(UNAUDITED) 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of period $ 11.46 $ 12.11 $ 11.69 $ 12.41 $ 11.96 $ 11.89
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income 0.18 0.37 0.36 0.39 0.40 0.44
Net realized and
unrealized gains
(losses) on investments 0.28 (0.49) 0.43 (0.51) 0.52 0.09
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Total from investment
operations 0.46 (0.12) 0.79 (0.12) 0.92 0.53
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Less distributions:
Dividends from net
investment income (0.18) (0.37) (0.36) (0.39) (0.40) (0.44)
Distributions from net
realized gains (0.11) (0.16) (0.01) (0.21) (0.07) (0.02)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.29) (0.53) (0.37) (0.60) (0.47) (0.46)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at
end of period $ 11.63 $ 11.46 $ 12.11 $ 11.69 $ 12.41 $ 11.96
================================================================================================================================
Total return (A) 4.08%(B) (1.00%) 6.86% (1.03%) 7.89% 4.54%
================================================================================================================================
Net assets at end of
period (000's) $ 5,891 $ 6,728 $ 9,400 $ 9,862 $ 7,388 $ 4,910
================================================================================================================================
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 3.13%(C) 3.12% 2.99% 3.19% 3.27% 3.72%
Portfolio turnover rate 35%(C) 24% 30% 36% 24% 28%
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Not annualized.
(C) Annualized.
See accompanying notes to financial statements.
11
FINANCIAL HIGHLIGHTS (CONTINUED)
================================================================================
OHIO TAX-FREE MONEY MARKET FUND - RETAIL
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
2006 ---------------------------------------------------------------------------------
(UNAUDITED) 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------------
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 0.014 0.023 0.011 0.004 0.008 0.015
Net realized gains
(losses) on investments -- -- -- 0.000(A) 0.000(A) (0.000)(A)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 0.014 0.023 0.011 0.004 0.008 0.015
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.014) (0.023) (0.011) (0.004) (0.008) (0.015)
Distributions from net
realized gains (0.000)(A) -- (0.000)(A) (0.000)(A) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.014) (0.023) (0.011) (0.004) (0.008) (0.015)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at end
of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
================================================================================================================================
Total return 2.91%(B) 2.31% 1.13% 0.35% 0.78% 1.47%
================================================================================================================================
Net assets at end of
period (000's) $ 97,816 $ 92,082 $ 99,127 $ 165,145 $ 155,810 $ 211,083
================================================================================================================================
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 2.86%(B) 2.26% 1.05% 0.35% 0.79% 1.46%
(A) Amount rounds to less than $0.001.
(B) Annualized.
See accompanying notes to financial statements.
12
================================================================================
OHIO TAX-FREE MONEY MARKET FUND - INSTITUTIONAL
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
2006 ---------------------------------------------------------------------------------
(UNAUDITED) 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------------
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 0.016 0.025 0.014 0.006 0.010 0.017
Net realized gains
(losses) on
investments -- -- -- 0.000(A) 0.000(A) (0.000)(A)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 0.016 0.025 0.014 0.006 0.010 0.017
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
Investment income (0.016) (0.025) (0.014) (0.006) (0.010) (0.017)
Distributions from net
realized gains (0.000)(A) -- (0.000)(A) (0.000)(A) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.016) (0.025) (0.014) (0.006) (0.010) (0.017)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at end
of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
================================================================================================================================
Total return 3.17%(B) 2.57% 1.39% 0.60% 1.03% 1.72%
================================================================================================================================
Net assets at end
of period (000's) $ 178,205 $ 183,107 $ 192,346 $ 174,739 $ 266,120 $ 210,679
================================================================================================================================
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 3.11%(B) 2.50% 1.41% 0.59% 1.02% 1.69%
(A) Amount rounds to less than $0.001.
(B) Annualized.
See accompanying notes to financial statements.
13
FINANCIAL HIGHLIGHTS (CONTINUED)
================================================================================
TAX-FREE MONEY MARKET FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
2006 ---------------------------------------------------------------------------------
(UNAUDITED) 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------------
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 0.014 0.023 0.011 0.005 0.008 0.017
Net realized gains on
investments -- -- -- 0.000(A) 0.000(A) 0.000(A)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 0.014 0.023 0.011 0.005 0.008 0.017
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.014) (0.023) (0.011) (0.005) (0.008) (0.017)
Distributions from net
realized gains -- -- -- (0.000)(A) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.014) (0.023) (0.011) (0.005) (0.008) (0.017)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at
end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
================================================================================================================================
Total return 2.84%(B) 2.28% 1.14% 0.50% 0.99% 1.73%
================================================================================================================================
Net assets at end of
period (000's) $ 17,998 $ 16,279 $ 19,250 $ 20,263 $ 21,375 $ 23,532
================================================================================================================================
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 2.80%(B) 2.23% 1.13% 0.48% 0.79% 1.71%
(A) Amount rounds to less than $0.001.
(B) Annualized.
See accompanying notes to financial statements.
14
================================================================================
TAX-FREE MONEY MARKET FUND - CLASS S
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED PERIOD
DECEMBER 31, YEAR ENDED JUNE 30, ENDED
2006 ------------------------------------------------ JUNE 30,
(UNAUDITED) 2006 2005 2004 2003(A)
- ------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.013 0.020 0.009 0.002 0.001
Net realized gains on
investments -- -- -- 0.000(B) 0.000(B)
- ------------------------------------------------------------------------------------------------------------
Total from investment
operations 0.013 0.020 0.009 0.002 0.001
- ------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.013) (0.020) (0.009) (0.002) (0.001)
Distributions from
net realized gains -- -- -- (0.000)(B) --
- ------------------------------------------------------------------------------------------------------------
Total distributions (0.013) (0.020) (0.009) (0.002) (0.001)
- ------------------------------------------------------------------------------------------------------------
Net asset value at
end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
============================================================================================================
Total return 2.57%(C) 2.01% 0.87% 0.25% 0.32%(C)
============================================================================================================
Net assets at end of
period(000's) $ 39,075 $ 32,658 $ 13,075 $ 16,381 $ 18,692
============================================================================================================
Ratio of net expenses
to average net assets 1.15%(C) 1.15% 1.15% 1.15% 1.15%(C)
Ratio of net investment
income to average net
assets 2.54%(C) 2.10% 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.
15
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 (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 federal income 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 minimum initial investment
requirement and offer certain shareholder services not available to
Institutional shares such as checkwriting and automatic investment and
systematic withdrawal plans.
16
================================================================================
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.
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 applies to
fair value measurements already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
The changes to current generally accepted accounting principles from the
application of this Statement relate to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair
value measurements. As of December 31, 2006, the Trust does not believe the
adoption of SFAS No. 157 will impact the amounts reported in the financial
statements, however, additional disclosures may be required about the inputs
used to develop the measurements and the effect of certain of the measurements
reported on the statement of changes in net assets for a fiscal period.
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.
17
NOTES TO FINANCIAL STATEMENTS (continued)
================================================================================
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.
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.
18
================================================================================
The tax character of distributions paid for the year ended June 30, 2006 was as
follows:
FLORIDA
TAX-FREE MONEY OHIO INSURED
MARKET FUND TAX-FREE FUND
- --------------------------------------------------------------------------------
2006 2006
- --------------------------------------------------------------------------------
From tax exempt income $ 613,539 $ 2,940,132
From long-term capital gains -- 1,068,116
- --------------------------------------------------------------------------------
$ 613,539 $ 4,008,248
- --------------------------------------------------------------------------------
OHIO TAX-FREE TAX-FREE
MONEY MARKET MONEY MARKET
FUND FUND
- --------------------------------------------------------------------------------
2006 2006
- --------------------------------------------------------------------------------
From tax exempt income $ 6,473,158 $ 972,176
From long-term capital gains -- --
- --------------------------------------------------------------------------------
$ 6,473,158 $ 972,176
- --------------------------------------------------------------------------------
The following information is computed on a tax basis for each item as of June
30, 2006:
FLORIDA
TAX-FREE MONEY OHIO INSURED
MARKET FUND TAX-FREE FUND
- --------------------------------------------------------------------------------
Cost of portfolio investments $ 27,314,250 $ 68,832,006
- --------------------------------------------------------------------------------
Gross unrealized appreciation -- 2,292,089
Gross unrealized depreciation -- (443,638)
- --------------------------------------------------------------------------------
Net unrealized appreciation -- 1,848,451
Capital loss carryforward (5,728) --
Undistributed tax exempt income 61,589 54,834
Undistributed long-term gains -- 377,658
Other temporary differences (61,589) (54,834)
- --------------------------------------------------------------------------------
Accumulated earnings (deficit) $ (5,728) $ 2,226,109
- --------------------------------------------------------------------------------
OHIO TAX-FREE TAX-FREE
MONEY MARKET MONEY MARKET
FUND FUND
- --------------------------------------------------------------------------------
Cost of portfolio investments $ 274,468,437 $ 49,840,821
- --------------------------------------------------------------------------------
Undistributed tax exempt income 475,760 1,211
Undistributed ordinary income 16,017 --
Undistributed long-term gains 1,521 --
Other temporary differences (475,760) (1,211)
- --------------------------------------------------------------------------------
Accumulated earnings $ 17,538 $ --
- --------------------------------------------------------------------------------
19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
The capital loss carryforward as of June 30, 2006 in the table above expires as
follows:
FUND AMOUNT EXPIRATION DATE
- --------------------------------------------------------------------------------
Florida Tax-Free Money Market Fund $ 108 June 30, 2010
$ 5,422 June 30, 2013
$ 198 June 30, 2014
- --------------------------------------------------------------------------------
The capital loss carryforwards and Post-October losses may be utilized in future
years to offset net realized capital gains, if any, prior to distributing such
gains to shareho lders.
Reclassifcation of capital accounts - Reclassifications result primarily from
the difference in the tax treatment of paydown securities. These
reclassifications have no impact on the net assets or net asset value per share
of the Funds and are designed to present the Funds' capital accounts on a tax
basis. For the year ended June 30, 2006, the Ohio Insured Tax-Free Fund
reclassified $207 of net investment loss to accumulated net realized gains on
the Statement of Assets and Liabilities.
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 investments. As of December 31, 2006, the aggregate
identified cost for federal income tax purposes for the Ohio Insured Tax-Free
Fund is $64,920,561, resulting in gross unrealized appreciation and depreciation
of $3,236,843 and $16,661, respectively, and net unrealized appreciation of
$3,220,182.
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN
48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Funds' tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be applied
to all open tax years as of the effective date. Recent SEC guidance allows
implementing FIN 48 in fund NAV calculations as late as the Fund's last NAV
calculation in the first required financial statement reporting period. As a
result, the Funds will incorporate FIN 48 in their semi annual report on June
30, 2007. Management is in the process of determining the impact of adoption.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments and government
securities) were as follows for the six months ended December 31, 2006:
OHIO INSURED
TAX-FREE FUND
- --------------------------------------------------------------------------------
Purchases of investment securities $12,155,565
Proceeds from sales and maturities of investment securities $16,279,793
- --------------------------------------------------------------------------------
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 Investment Services, Inc., formerly 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.
20
================================================================================
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.
EXPENSE LIMITATION AGREEMENT
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,
2007.
Pursuant to this expense limitation agreement, during the six months ended
December 31, 2006, the Advisor waived investment advisory fees and/or reimbursed
other operating expenses of the Funds as follows:
INVESTMENT OTHER OPERATING
ADVISORY EXPENSES
FEES WAIVED REIMBURSED
- --------------------------------------------------------------------------------
Florida Tax-Free Money Market Fund $ 19,979 $ 34,199
Ohio Insured Tax-Free Fund $ 11,657 $ 113,134
Ohio Tax-Free Money Market Fund $ 24,286 $ 123,164
Tax-Free Money Market Fund $ -- $ 68,579
- --------------------------------------------------------------------------------
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.
21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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 $2,014 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, 2006. In addition, the Underwriter collected $1,773 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.
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. For these
services, Integrated receives a quarterly fee from each Fund.
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:
22
================================================================================
OHIO INSURED
TAX-FREE FUND
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
2006 JUNE 30,
(UNAUDITED) 2006
- --------------------------------------------------------------------------------
CLASS A
Shares sold 65,006 237,282
Shares reinvested 106,547 209,846
Shares redeemed (403,813) (997,466)
- --------------------------------------------------------------------------------
Net decrease in shares outstanding (232,260) (550,338)
Shares outstanding, beginning of period 5,613,995 6,164,333
- --------------------------------------------------------------------------------
Shares outstanding, end of period 5,381,735 5,613,995
================================================================================
CLASS C
Shares sold 4,874 35,097
Shares reinvested 10,007 18,821
Shares redeemed (95,736) (242,714)
- --------------------------------------------------------------------------------
Net decrease in shares outstanding (80,855) (188,796)
Shares outstanding, beginning of period 587,185 775,981
- --------------------------------------------------------------------------------
Shares outstanding, end of period 506,330 587,185
================================================================================
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.
23
PORTFOLIO OF INVESTMENTS
FLORIDA TAX-FREE MONEY MARKET FUND - DECEMBER 31, 2006 (UNAUDITED)
================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------
FIXED RATE REVENUE & GENERAL OBLIGATION BONDS -- 12.7%
$ 500,000 Willard OH LTGO BANS 4.250 01/24/07 $ 500,170
200,000 St Lucie Co FL Pub Impt Rev Ser A Escrowed to Maturity 4.800 04/01/07 200,595
300,000 Mentor On The Lake OH LTGO BANS 4.250 06/26/07 300,562
200,000 FL St Dept Environmental Protection Preservation Rev Ser A 5.000 07/01/07 201,398
500,000 AMP OH Elect Rev BANS (Woodville Village) 4.350 07/19/07 500,660
150,000 Hillsborough Co FL Util Ref Rev 4.000 08/01/07 150,390
400,000 AMP OH Elect Rev BANS (Carey Village) 4.400 08/02/07 400,564
400,000 Tampa FL GTD Entitlement Rev 6.000 10/01/07 407,159
- --------------------------------------------------------------------------------------------------------------
TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS $ 2,661,498
- --------------------------------------------------------------------------------------------------------------
FLOATING & VARIABLE RATE DEMAND NOTES -- 76.5%
$ 300,000 Collier Co FL Edl Facs Auth Rev (Ave Maria) 4.000 01/01/07 $ 300,000
700,000 Putnam Co FL Dev Auth PCR (FL Pwr & Light Co) 3.950 01/01/07 700,000
700,000 Manatee Co FL PCR (Florida Pwr & Light Co) 3.950 01/01/07 700,000
650,000 Univ Athletic Assn Inc (FL Athletic Prog Rev) 4.000 01/01/07 650,000
200,000 Broward Co FL Hlth Facs Rev (John Knox Village) 4.050 01/01/07 200,000
300,000 FL St Governmental Fin Comm 4.000 01/01/07 300,000
400,000 Collier Co FL Hlth Fac Auth Hosp Rev (Cleveland Clinic) 3.980 01/01/07 400,000
250,000 Broward Co FL HFA MFH Rev (Jacaranda Village Apts) 3.910 01/03/07 250,000
605,000 Marion Co FL HFA (Paddock Apts) 3.900 01/03/07 605,000
510,000 Pinellas Co FL Edl Facs Auth Rev (Shorecrest Prep) 3.910 01/03/07 510,000
800,000 Volusia Co FL HFA MFH Rev (Anatole Apts) 3.900 01/03/07 800,000
100,000 Lee Co FL HFA MFH Rev (Forestwood Apts) 3.960 01/03/07 100,000
1,000,000 Seminole Co FL IDA Rev (Master Academy) 3.930 01/04/07 1,000,000
775,000 Pasco Co FL School Board COP 3.910 01/04/07 775,000
1,050,000 Miami-Dade Co FL Wtr & Swr Rev 3.930 01/04/07 1,050,000
450,000 Duval Co FL HFA MFH Rev (Lighthouse Bay Apts) 3.910 01/04/07 450,000
300,000 Seminole Co FL IDA (FL Living Nursing Ctr) 4.110 01/04/07 300,000
200,000 Puerto Rico Cmnwlth Hwy & Trans Auth Hwy Rev Ser 969 3.900 01/04/07 200,000
10,000 Gulf Breeze FL Loc Govt Loan Prog B 4.000 01/04/07 10,000
350,000 Gulf Breeze FL Muni Bond Fund Ser A 3.930 01/04/07 350,000
900,000 Palm Beach Co FL Rev (Henry Morrison Flagler) 3.940 01/04/07 900,000
250,000 Hillsborough Co FL Rev (Carrollwood Day) 3.910 01/04/07 250,000
1,000,000 Jacksonville FL Econ Dev Hlthcare Facs Rev 3.950 01/04/07 1,000,000
900,000 Palm Beach Co FL Rev (Morse Oblig Group) 3.930 01/04/07 900,000
100,000 Palm Beach Co FL Edl Facs Auth Rev (Atlantic College) 3.920 01/04/07 100,000
1,000,000 Lexington-Fayette Urban Co KY Govt IBR (Liberty Ridge) 4.010 01/04/07 1,000,000
500,000 FL Higher Edl Facs Auth Rev (St Thomas Univ) 3.990 01/04/07 500,000
100,000 Univ of North FL Rev (Parking Sys) 4.030 01/04/07 100,000
675,000 Duval Co FL HFA MFH Rev (Glades Apts) 3.910 01/04/07 675,000
930,000 Lee CO FL IDA Hlthcare Facs Rev (Bonita Cmnty Hlth) 3.990 01/05/07 930,000
- --------------------------------------------------------------------------------------------------------------
TOTAL FLOATING & VARIABLE RATE DEMAND NOTES $16,005,000
- --------------------------------------------------------------------------------------------------------------
24
================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------
ADJUSTABLE RATE PUT BONDS -- 3.6%
$ 750,000 Putnam Co FL Dev Auth PCR (Seminole Elec Coop) 3.530 06/15/07 $ 750,000
- --------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 4.8%
$ 1,000,000 Jacksonville FL Hlth Facs Auth Rev (Baptist Med Ctr) 3.510 02/06/07 $ 1,000,000
- --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 97.6%
(Amortized Cost $20,416,498) $20,416,498
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.4% 499,094
- --------------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $20,915,592
==============================================================================================================
See accompanying notes to portfolios of investments and notes to financial
statements.
25
PORTFOLIO OF INVESTMENTS
OHIO INSURED TAX-FREE FUND - DECEMBER 31, 2006 (UNAUDITED)
================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------
FIXED RATE REVENUE & GENERAL OBLIGATION BONDS -- 96.0%
$ 149,812 Columbus OH Special Assessment GO 5.050 04/15/08 $ 152,390
1,000,000 Hamilton OH CSD GO Prerefunded @ 101 5.625 12/01/09 1,064,960
1,000,000 Univ of Cincinnati OH General Rcpts Rev Prerefunded @ 101 5.750 12/01/09 1,068,400
1,035,000 Reading OH Rev (St Mary's Ed Institute) 5.550 02/01/10 1,085,984
55,500 Cuyahoga Co OH Mtg Rev (West Tech Apts) 5.100 09/20/10 55,443
1,000,000 Greene Co OH Swr Sys Rev Prerefunded @ 101 5.625 12/01/10 1,079,830
1,000,000 Hilliard OH CSD GO Prerefunded @ 101 5.750 12/01/10 1,084,360
525,000 Kings OH LSD GO Prerefunded @ 101 6.050 12/01/10 574,954
500,000 Lake OH LSD GO (Stark Co) Prerefunded @ 100 5.750 12/01/10 537,845
1,000,000 Summit Co OH GO Prerefunded @ 101 6.000 12/01/10 1,091,500
1,500,000 Nordonia Hills OH CSD GO Prerefunded @ 101 5.375 12/01/10 1,606,170
1,000,000 Hilliard OH CSD GO Prerefunded @ 101 5.750 12/01/10 1,084,360
145,000 Cuyahoga Co OH Hosp Rev (Univ Hosp) Escrowed to Maturity 9.000 06/01/11 161,922
1,000,000 Lorain Co OH Hosp Rev (Catholic Hlth) 5.625 10/01/11 1,074,150
1,000,000 Hamilton Co OH Swr Sys Rev 5.500 12/01/11 1,081,690
1,000,000 Pickerington OH LSD UTGO Prerefunded @ 101 5.250 12/01/11 1,071,000
155,000 New Albany Plain LSD Prerefunded @ 101 5.000 06/01/12 165,126
1,750,000 Eaton OH CSD GO Prerefunded @ 101 5.000 12/01/12 1,887,918
1,000,000 Monroe OH LSD Sch Impt GO Prerefunded @ 100 5.000 12/01/12 1,070,740
1,200,000 Ross Twp OH LSD GO Prerefunded @ 100 5.000 12/01/13 1,295,988
660,000 West Chester Twp OH GO 5.500 12/01/14 716,767
400,000 Warren OH Wtr Wrks Rev 5.500 11/01/15 439,308
925,000 Buckeye Valley OH LSD GO 6.850 12/01/15 1,060,651
640,000 Columbus-Polaris Hsg Corp Rev Prerefunded @ 100 7.400 01/01/16 746,054
1,260,000 Cleveland OH Arpt Sys Rev 5.125 01/01/17 1,287,191
1,000,000 Lorain Co OH Hosp Rev (Catholic Hlth Partners) 5.500 09/01/19 1,059,260
1,000,000 Lucas Co OH Hosp Rev (Promedica Hlth Grp) 5.625 11/15/19 1,056,550
1,085,000 West Clermont OH LSD GO 5.000 12/01/19 1,149,894
210,000 Butler Co OH GO 5.250 12/01/20 227,709
850,000 West Chester Twp OH GO 5.000 12/01/20 899,419
1,210,000 Cincinnati OH Tech College Rev 5.250 10/01/21 1,309,849
1,185,000 Akron OH Impt GO 5.000 12/01/22 1,255,993
765,000 Fairfield Co OH GO 5.000 12/01/22 807,924
250,000 OH St Higher Ed Fac (Xavier Univ) 5.000 05/01/23 263,863
1,050,000 Harrison OH Wst Wtr Sys Rev 5.250 11/01/23 1,133,664
865,000 Fairfield Co OH GO 5.000 12/01/23 924,391
425,000 Hamilton OH CSD GO 5.000 12/01/23 454,181
450,000 Columbus OH TIF Rev (Polaris) 4.750 12/01/23 466,502
1,000,000 Akron OH Var Purp GO 5.000 12/01/23 1,054,390
1,000,000 OH St Higher Ed Fac Rev (Univ Dayton) 5.000 12/01/23 1,059,630
1,480,000 Lakewood OH CSD GO 5.250 12/01/23 1,613,940
2,000,000 South-Western CSD UTGO 4.750 12/01/23 2,093,400
1,000,000 Toledo OH CSD GO 5.000 12/01/23 1,059,910
1,000,000 Hamilton Co OH Hosp Rev (Childrens Hosp Med Ctr) 5.000 05/15/24 1,054,150
400,000 Springboro OH Swr Sys Rev 5.000 06/01/24 424,400
825,000 Parma OH GO 4.750 12/01/24 863,528
1,040,000 Franklin Co OH Hosp Rev (Childrens Hosp) 5.000 05/01/25 1,100,965
1,885,000 Kings OH LSD UTGO 5.000 12/01/25 2,010,277
26
================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------
FIXED RATE REVENUE & GENERAL OBLIGATION BONDS -- 96.0% (CONTINUED)
$ 845,000 New Albany Plain LSD GO 5.000 12/01/25 $ 887,478
810,000 Big Walnut OH LSD GO 5.000 12/01/25 861,119
1,000,000 Univ of Cincinnati OH General Rcpts 4.750 06/01/26 1,038,460
1,500,000 Richland Co OH Hosp Facs Rev (MedCentral Hlth Sys) 5.125 11/15/26 1,586,295
1,090,000 Fairborn OH CSD GO 5.000 12/01/26 1,168,644
2,750,000 Little Miami OH LSD GO 5.000 12/01/26 2,947,697
1,085,000 Elyria OH Var Purp GO 5.000 12/01/26 1,163,001
3,000,000 OH St Higher Ed Fac Rev (Univ Dayton) 5.000 12/01/26 3,208,079
2,100,000 Oregon OH CSD GO 5.000 12/01/27 2,234,924
2,000,000 Mason OH Swr Sys Rev 5.000 12/01/28 2,112,820
900,000 Licking Heights OH LSD GO 6.400 12/01/28 1,173,546
1,185,000 Delaware OH GO 5.000 12/01/28 1,270,190
- --------------------------------------------------------------------------------------------------------------
TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS $65,540,743
- --------------------------------------------------------------------------------------------------------------
FLOATING & VARIABLE RATE DEMAND NOTES -- 3.8%
$ 900,000 OH St Air Quality Rev PCR (OH Edison) 3.950 01/02/07 $ 900,000
100,000 Hamilton Co OH Hosp Rev (Hlth Alliance) Ser B 3.850 01/03/07 100,000
1,600,000 Puerto Rico Cmnwlth Hwy & Trans Auth Rev Ser 969 3.900 01/04/07 1,600,000
- --------------------------------------------------------------------------------------------------------------
TOTAL FLOATING & VARIABLE RATE DEMAND NOTES $ 2,600,000
- --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 99.8%
(Amortized Cost $64,920,561) $68,140,743
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2% 302,556
- --------------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $68,443,299
==============================================================================================================
See accompanying notes to portfolios of investments and notes to financial
statements.
27
PORTFOLIO OF INVESTMENTS
OHIO TAX-FREE MONEY MARKET FUND - DECEMBER 31, 2006 (UNAUDITED)
================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------
FIXED RATE REVENUE & GENERAL OBLIGATION BONDS -- 25.3%
$ 1,780,000 AMP OH Elect Rev BANS (Brewster) 4.000 01/11/07 $ 1,780,192
3,435,000 Stryker OH LSD UTGO BANS 5.000 01/11/07 3,436,210
1,130,000 Stryker OH LSD LTGO BANS 5.000 01/11/07 1,130,398
2,000,000 OH Univ Gen Rcpts BANS 4.500 01/18/07 2,001,081
2,020,000 Willard OH LTGO BANS 4.250 01/24/07 2,020,686
1,000,000 Univ of Cincinnati Gen Rcpts BANS 4.500 01/25/07 1,000,394
1,000,000 Mount Vernon OH LTGO BANS 4.375 03/22/07 1,001,580
100,000 OH St Bldg Auth Facs (Adult Corr Bldg) 5.500 04/01/07 100,470
100,000 OH St Hwy Cap Impt UTGO Ser E 5.500 05/01/07 100,610
2,000,000 Worthington OH CSD UTGO BANS 4.375 05/03/07 2,005,606
2,500,000 Canal Winchester OH LTGO BANS 4.550 05/10/07 2,505,160
900,000 OH St Higher Ed Fac Rev (Xavier Univ) Prerefunded @102 5.300 05/15/07 923,513
4,225,000 Middletown OH CSD UTGO BANS 4.300 06/07/07 4,232,055
500,000 Delaware Co OH LTGO BANS 4.750 06/13/07 502,293
4,950,000 Anderson Twp OH LTGO BANS 4.750 06/14/07 4,971,650
3,000,000 Versailles OH Exempt Village SD UTGO BANS 4.350 06/26/07 3,008,520
1,450,000 Solon OH UTGO BANS 4.500 06/28/07 1,454,462
1,425,000 AMP OH Elect Rev BANS (Newton Falls) 4.250 06/29/07 1,426,486
1,000,000 Columbiana OH Elect Sys Impt Rev BANS 4.300 07/11/07 1,001,268
995,000 Columbiana OH Wtr Main Impt BANS 4.400 08/08/07 996,444
1,285,000 AMP OH Elect Rev BANS (Bryan) 3.900 08/17/07 1,285,000
3,159,000 Jackson Co OH Var Purp LTGO BANS 4.300 09/06/07 3,166,254
783,555 Parma Heights OH LTGO BANS 3.700 09/20/07 783,555
820,000 Warrensville Heights OH Var Purp LTGO BANS 3.950 09/20/07 821,424
796,000 Oakwood OH LTGO BANS 4.050 09/27/07 797,415
3,500,000 Cuyahoga Heights OH UTGO BANS 4.500 09/27/07 3,520,036
2,500,000 Vermilion OH Var Purp LTGO BANS 4.250 10/11/07 2,510,685
750,000 Ontario OH Wtr Sys Impt LTGO BANS 4.000 10/17/07 751,431
2,045,000 Kent OH Var Purp LTGO BANS 4.250 10/18/07 2,055,224
1,455,000 AMP OH Var Purp RANS 3.650 11/01/07 1,455,000
1,165,000 AMP OH Elect Rev BANS (Monroeville Village) 3.700 11/15/07 1,165,000
2,070,000 AMP OH Elect Rev BANS (Shelby) 3.700 11/15/07 2,070,000
1,000,000 Solon OH Var Purp UTGO BANS 4.000 11/21/07 1,003,433
3,000,000 Deerfield Twp OH Var Purp LTGO BANS 3.610 11/29/07 3,000,000
1,640,000 AMP OH Elect Rev BANS (Bowling Green) 3.700 11/29/07 1,640,000
955,000 AMP OH Elect Rev BANS (Amherst) 3.700 11/29/07 955,000
1,600,000 Niles OH Wtr Sys Impt LTGO BANS 4.250 11/30/07 1,606,331
1,780,000 AMP OH Elect Rev BANS (Edgerton) 4.000 12/06/07 1,783,187
1,610,000 Oakwood OH Street Impt LTGO BANS 4.150 12/06/07 1,616,483
2,180,000 North Baltimore OH LSD BANS 4.350 12/13/07 2,191,956
- --------------------------------------------------------------------------------------------------------------
TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS $69,776,492
- --------------------------------------------------------------------------------------------------------------
28
================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------
FLOATING & VARIABLE RATE DENAND NOTES -- 70.6%
$ 100,000 Cuyahoga Co OH Hosp (Univ Hosp) 3.990 01/01/07 $ 100,000
2,000,000 OH St Air Quality Rev PCR (OH Edison) 3.950 01/01/07 2,000,000
815,000 OH St Wtr Dev Auth Rev (FirstEnergy) Ser A 4.000 01/01/07 815,000
2,030,000 Cuyahoga Co OH IDR (S&R Playhouse Rlty) 3.550 01/01/07 2,030,000
810,000 Centerville OH Hlthcare (Bethany Luth Village) 3.950 01/03/07 810,000
1,510,000 Lorain Co OH IDR (EMH Regl Med Ctr) 3.990 01/03/07 1,510,000
150,000 Orrville OH Hosp Facs Rev (Orrville Hosp Fdtn) 4.030 01/03/07 150,000
2,000,000 Montgomery Co OH EDR (Dayton Art Inst) 3.970 01/03/07 2,000,000
475,000 Erie Co OH IDR (Toft Dairy Inc) 3.990 01/03/07 475,000
200,000 Hamilton Co OH Hosp Facs Rev (Hlth Alliance) Ser F 3.850 01/03/07 200,000
1,575,000 Cuyahoga Co OH Ed Fac (Utd Cerebral Palsy Assn) 3.990 01/03/07 1,575,000
4,475,000 OH Wtr Dev Auth Rev (Purewater) 3.880 01/03/07 4,475,000
2,050,000 OH Wtr Dev Auth Rev (Timken Company) 3.950 01/03/07 2,050,000
3,800,000 Lake Co OH Hosp Facs Rev (Lake Hosp) 3.980 01/03/07 3,800,000
625,000 Hamilton Co OH Hlth Facs (St Aloysius Orphanage) 3.990 01/03/07 625,000
2,300,000 Hamilton Co OH Hosp Facs Rev (Hlth Alliance) Ser B 3.850 01/03/07 2,300,000
300,000 Hamilton Co OH Hosp Facs Rev (Gamble) 3.870 01/03/07 300,000
2,000,000 Ohio St Air Quality Dev Auth Rev (FirstEnergy) Ser B 3.950 01/03/07 2,000,000
3,000,000 Cleveland OH Arpt Sys Rev Tr Rcpts SGA 126 3.920 01/03/07 3,000,000
4,000,000 Middletown OH Dev Rev (Bishop-Fenwick HS) 3.970 01/03/07 4,000,000
900,000 OH St Air Quality Dev Auth Rev(Timken) 3.910 01/03/07 900,000
800,000 Puerto Rico Elect Pwr Auth Tr Rcpts Ser SGA 43 3.860 01/03/07 800,000
1,300,000 Butler Co OH Hosp Facs (Berkeley Sq Ret) 3.920 01/04/07 1,300,000
3,900,000 Athens Co OH Port Auth (Hsg for OH Univ) 3.960 01/04/07 3,900,000
500,000 Ashtabula Co OH Hosp (Ashtabula Co Med Ctr) 3.930 01/04/07 500,000
155,000 Marion Co OH Hosp Pooled Lease Rev 3.930 01/04/07 155,000
3,535,000 Port Gtr Cincinnati Dev Auth Rev (Cincinnati Zoo) 3.990 01/04/07 3,535,000
2,500,000 Hamilton Co OH Hlthcare (Life Enriching Cmntys) B 3.930 01/04/07 2,500,000
2,940,000 Delaware Co OH Hlth Facs (Sarah Moore Home) 4.060 01/04/07 2,940,000
6,775,000 Clark Co OH MFH Rev (OH Masonic Home) 3.940 01/04/07 6,775,000
1,850,000 Franklin Co OH EDR (Dominican Sisters) 3.990 01/04/07 1,850,000
825,000 Franklin Co OH IDR (OH Girl Scout Council) 4.250 01/04/07 825,000
1,270,000 Hamilton Co OH Hosp (Childrens Hosp Med Ctr) Ser 1997 3.910 01/04/07 1,270,000
2,000,000 Carroll Co OH Hlthcare Facs (St Johns Village) 3.980 01/04/07 2,000,000
5,000,000 ABN AMRO MuniTOPS Ctfs Tr 2006-4 3.950 01/04/07 5,000,000
2,605,000 Hamilton Co OH Hosp (Childrens Hosp Med Ctr) Ser 2000 3.910 01/04/07 2,605,000
400,000 Lucas Co OH Hlth Facs (Lutheran Homes) 3.960 01/04/07 400,000
6,315,000 Hamilton Co OH Sales Tax Fltr Ctfs Ser 356 3.950 01/04/07 6,315,000
2,500,000 Cambridge OH Hosp Facs Rev (SE OH Regl Med) 3.980 01/04/07 2,500,000
1,150,000 Hamilton Co OH Hosp (Beechwood Home) 3.920 01/04/07 1,150,000
2,340,000 Middleburg Hgts OH Hosp Rev (SW Gen Hlth) 3.920 01/04/07 2,340,000
4,385,000 Franklin Co OH Hlth Facs (Presbyterian) 3.930 01/04/07 4,385,000
2,000,000 Jackson OH Hosp Facs Rev (Holzer Cons Hlth Sys) 3.940 01/04/07 2,000,000
2,130,000 Butler Co OH Hosp Facs Rev (Middletown Regl Hosp) 3.930 01/04/07 2,130,000
2,320,000 Summit Co OH Civic Facs Rev (YMCA) 3.990 01/04/07 2,320,000
1,000,000 Puerto Rico Cmnwlth Hwy & Trans Auth Rev Ser 969 3.900 01/04/07 1,000,000
300,000 Toledo OH City Svcs Special Assmnt 3.910 01/04/07 300,000
1,080,000 Hamilton Co OH Hosp (Drake Ctr Inc) 3.910 01/04/07 1,080,000
29
OHIO TAX-FREE MONEY MARKET FUND (CONTINUED)
================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------
FLOATING & VARIABLE RATE DEMAND NOTES -- 70.6% (CONTINUED)
$ 2,800,000 Univ of Akron Gen Rcpts Ser 2004 3.910 01/04/07 $ 2,800,000
200,000 OH St Higher Ed Rev (Malone College) 3.980 01/04/07 200,000
4,000,000 Henry Co OH Fac Impt Rev (Co Hosp) 3.990 01/04/07 4,000,000
710,000 Port Gtr Cincinnati Dev Auth Rev (Cincinnati Zoo) 4.070 01/04/07 710,000
1,835,000 Hamilton Co OH Hlthcare Facs Rev (Episcopal) 3.910 01/04/07 1,835,000
3,000,000 OH Univ Gen Rcpts Rev 3.930 01/04/07 3,000,000
795,000 Butler Co OH Hlthcare Facs Rev (Lifesphere) 3.950 01/04/07 795,000
4,800,000 Cleveland OH Waterworks Rev Ser B 3.880 01/04/07 4,800,000
695,000 Mahoning Co OH Hsg Rev (Youngstown St Univ) 3.950 01/04/07 695,000
3,450,000 Puerto Rico Childrens Tr Fund Putter Ser 149 3.950 01/04/07 3,450,000
3,000,000 OH St Higher Ed Fac Pooled Fin Rev (2006) 3.930 01/04/07 3,000,000
4,750,000 Hamilton Co OH Pkg Sys Rev 3.910 01/04/07 4,750,000
300,000 Hamilton Co OH EDR (Contemporary Arts Ctr) 3.950 01/04/07 300,000
1,600,000 Cuyahoga Co OH Hlth Facs Rev (Franciscan Cmntys) 3.910 01/04/07 1,600,000
1,300,000 Columbus OH Regl Arpt Auth Rev 3.930 01/04/07 1,300,000
1,700,000 Montgomery Co OH Rev (St Vincent de Paul) 3.940 01/04/07 1,700,000
2,944,000 Hamilton OH MFH Afford Hsg (Knollwood Village) A 3.930 01/04/07 2,944,000
650,000 Geauga Co OH Hlthcare Facs Rev (Heather Hill Inc) 3.890 01/04/07 650,000
2,553,000 Hancock Co OH MFH (Crystal Glen Apts) A 3.930 01/04/07 2,553,000
6,160,000 Cuyahoga Co OH Cont Care Facs Rev 3.910 01/04/07 6,160,000
3,030,000 Lima OH Hosp Facs (Lima Mem Hosp) 3.990 01/04/07 3,030,000
25,000 Lucas Co OH Hosp Rev (Sunshine Childrens Home) 4.080 01/04/07 25,000
375,000 Mahoning Co OH IDR (OH Heart Inst) 4.250 01/04/07 375,000
2,440,000 Akron Bath Copley OH Hosp (Summa Hlth) B 3.930 01/04/07 2,440,000
995,000 Montgomery Co OH Hlth Facs (Cmnty Blood Ctr) 4.150 01/04/07 995,000
100,000 Cochocton Co OH Hosp (Echoing Hills Village) 4.150 01/04/07 100,000
700,000 OH St Higher Ed Fac Pooled Fin Rev (1997) 3.980 01/04/07 700,000
2,700,000 OH St Higher Ed Fac Pooled Fin Rev (1998) 3.980 01/04/07 2,700,000
5,000,000 Mahoning Co OH Hosp Facs Rev (Forum Hlth Oblig) 3.930 01/04/07 5,000,000
4,720,000 Woodlawn OH EDR (Goodwill Inds) 3.920 01/04/07 4,720,000
1,045,000 Mason OH TIF Rev (Central Parke of Mason) 3.970 01/04/07 1,045,000
1,275,000 OH St Higher Ed Fac Pooled Fin Rev (1999) 3.980 01/04/07 1,275,000
3,610,000 OH St Tpk Rev Fltr Ctfs Ser 71 3.950 01/04/07 3,610,000
1,195,000 Franklin Co OH Hlth Facs (Heinzerling Fndtn) 4.040 01/04/07 1,195,000
1,400,000 Cuyahoga Co OH Civic Facs (West Side Ecumenical) 3.990 01/04/07 1,400,000
3,400,000 ABN AMRO MuniTOPS Ctfs Tr 2001-03 (Westerville OH CSD) 3.950 01/04/07 3,400,000
1,600,000 Warren Co OH IDR (Liquid Container) 3.950 01/04/07 1,600,000
3,995,000 Univ of Akron Gen Rcpts Fltr Ctfs Ser 165 3.950 01/04/07 3,995,000
1,305,000 Summit Co OH Hlth Facs (Evant Inc) 4.030 01/04/07 1,305,000
3,815,000 Sharonville OH IDR (Duke Rlty LP) 4.040 01/04/07 3,815,000
500,000 Ottawa Co OH Hosp Rev (Lutheran Home of Mercy) Ser 99 4.030 01/04/07 500,000
1,360,000 Miami Co OH Hosp Facs (Upper Valley Med Ctr) 3.990 01/05/07 1,360,000
5,700,000 Hamilton Co OH IDR (ADP) 3.630 01/15/07 5,700,000
- ---------------------------------------------------------------------------------------------------------------
TOTAL FLOATING & VARIABLE RATE DEMAND NOTES $194,517,000
===============================================================================================================
30
================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------
ADJUSTABLE RATE PUT BONDS -- 3.7%
$ 2,635,000 Cuyahoga Co OH IDR (Halle Office Bldg) 3.960 04/01/07 $ 2,635,000
810,000 Clermont Co OH EDR (John Q Hammons/Clermont Hills) 3.900 05/01/07 810,000
3,000,000 ABN AMRO MuniTOPS Ctfs Tr 2006-37, 144A 3.600 05/10/07 3,000,000
2,155,000 Richland Co OH IDR (Mansfield Sq Ltd) 3.800 05/15/07 2,155,000
415,000 Gallia Co OH IDR (Jackson Pike Assoc) 3.800 06/15/07 415,000
1,275,000 McDonald Tax Exempt Mtge Trust 4.350 12/17/07 1,275,000
- ---------------------------------------------------------------------------------------------------------------
TOTAL ADJUSTABLE RATE PUT BONDS $ 10,290,000
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 99.6%
(Amortized Cost $274,583,492) $274,583,492
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4% 1,437,723
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $276,021,215
===============================================================================================================
See accompanying notes to portfolios of investments and notes to financial
statements.
31
PORTFOLIO OF INVESTMENTS
TAX-FREE MONEY MARKET FUND - DECEMBER 31, 2006 (UNAUDITED)
================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------
FIXED RATE REVENUE & GENERAL OBLIGATIIB BONDS -- 22.4%
$ 750,000 Noblesville IN Rev BANS 3.750 01/01/07 $ 750,000
100,000 IN St Edl Facs Auth Rev (Butler Univ) Prerefunded @ 101 5.200 01/01/07 101,000
479,350 AMP OH Elect Sys Rev BANS (Milan Village) 4.000 01/11/07 479,395
100,000 Taylor IN Cmnty Sch Corp Rev Prerefunded @ 101 4.750 01/15/07 101,039
300,000 Virginia Beach VA UTGO 5.000 01/15/07 300,118
1,000,000 Willard OH BANS LTGO 4.250 01/24/07 1,000,339
1,000,000 Chelmsford MA Wtr Dist UTGO BANS 4.000 01/25/07 1,000,261
100,000 SC Jobs EDA Rev (Anderson Med Ctr) 4.750 02/01/07 100,091
225,000 De Kalb Ogle ETC Co IL Cmnty College Dist 523 UTGO 5.750 02/01/07 225,377
100,000 Indianapolis IN Loc Pub Impt Rev 4.600 02/01/07 100,088
325,000 IN Bond Bank Rev 6.000 02/01/07 325,641
500,000 OH St Tpk Cmnty Rev Ser B 5.000 02/15/07 500,812
150,000 North Harris Montgomery Cmnty College Dist TX LTGO 5.000 02/15/07 150,254
100,000 Collin Co TX UTGO 4.750 02/15/07 100,129
195,000 Shelby Co TN Pub Impt & Sch Ser A UTGO 5.000 03/01/07 195,433
250,000 Maryland St Loc Facs UTGO Prerefunded @ 100 5.000 03/01/07 250,557
100,000 Daviess Co KY UTGO (Solid Waste Sys) 4.050 04/01/07 100,035
200,000 Madison Co MS SD UTGO 4.000 04/15/07 200,224
100,000 Dist of Colmbia UTGO Ser B2 5.500 06/01/07 100,779
100,000 Dist of Colmbia UTGO Ser A3 5.600 06/01/07 100,820
200,000 Dist of Columbia UTGO Ser B1 5.500 06/01/07 201,526
878,000 Versailles OH Exempt Village SD BANS 4.350 06/26/07 880,494
700,000 Mentor on the Lake OH LTGO BANS 4.250 06/26/07 701,312
100,000 Delaware Trans Auth Rev 5.500 07/01/07 100,913
150,000 WA St Pub Pwr Supply Rev Ser A (Nuclear Proj No 2)
Escrowed to Maturity 6.000 07/01/07 151,760
160,000 Virginia College Bldg Auth VA Edl Facs Rev (Marymount Univ) 4.300 07/01/07 160,436
420,000 Columbiana OH Elect Sys Impt Rev BANS 4.300 07/11/07 420,532
1,000,000 AMP OH Elect Sys Rev BANS (Woodville Village) 4.350 07/19/07 1,001,317
510,000 Kirtland OH UTGO BANS 4.150 07/25/07 510,555
425,000 AMP OH Elect Sys Rev BANS (Carey Village) 4.400 08/02/07 425,599
500,000 Albany MN ISD No 745 UTGO 4.500 09/03/07 501,909
745,000 AMP OH Elect Sys Rev BANS (Hubbard) 3.850 09/27/07 745,000
530,000 IN Health Fac (Charity Oblig Group) Prerefunded @ 100 5.000 11/01/07 535,651
250,000 Snohomish Co WA SD No 002 UTGO 4.350 12/01/07 251,691
- --------------------------------------------------------------------------------------------------------------
TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS $12,771,087
- --------------------------------------------------------------------------------------------------------------
FLOATING & VARIABLE RATE DEMAND NOTES -- 71.7%
$ 1,250,000 IL Hlth Facs Auth Rev (OSF Hlthcare) 4.050 01/01/07 $ 1,250,000
550,000 Grand Forks ND Hlthcare Facs Rev (United Hosp) 4.050 01/01/07 550,000
500,000 Jacksonville FL Hlth Facs Auth Hosp Rev Ser A 3.990 01/01/07 500,000
1,900,000 OH St Wtr Dev Auth PCR Facs (FirstEnergy) 4.000 01/01/07 1,900,000
1,350,000 IL Fin Auth Rev (Resurrection Hlth) 4.050 01/01/07 1,350,000
1,575,000 Broward Co FL Hlth Facs Rev (John Knox Village) 4.050 01/01/07 1,575,000
600,000 Jacksonville FL Elect Auth Rev 4.000 01/01/07 600,000
2,000,000 Washington St Hsg Fin Comnty Rev (Panorama City) 4.020 01/01/07 2,000,000
935,000 Arvada CO Wtr Sys Rev 3.700 01/01/07 935,000
32
================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------
FLOATING & VARIABLE RATE DEMAND NOTES -- 71.7% (CONTINUED)
$ 450,000 Montgomery Co OH (Miami Valley Hosp) 4.000 01/01/07 $ 450,000
600,000 OH St Air Quality Rev PCR (Ohio Edison) 3.950 01/01/07 600,000
1,200,000 Collier Co FL Ed Facs Auth Rev (Ave Maria) 4.000 01/01/07 1,200,000
700,000 Bloomington IL Normal Arpt Auth 4.150 01/03/07 700,000
400,000 Palm Beach Co FL Rev (Norton Gallery) 3.930 01/03/07 400,000
595,000 Ulster Co NY IDA IDR (Viking Industries Inc) Ser A 4.060 01/03/07 595,000
1,100,000 Scio Twp MI EDR (ADP Inc) 4.230 01/03/07 1,100,000
250,000 Akron Bath Copley OH Hosp (Visiting Nurse Svcs) 4.030 01/04/07 250,000
390,000 Lancaster NE IDR (Garner Inds) Ser B 4.010 01/04/07 390,000
100,000 CA Statewide Cmntys IDR (American Modular Sys) 3.950 01/04/07 100,000
280,000 Lake Co IL Cmnty SD #73 Putter Ser 329 3.970 01/04/07 280,000
1,000,000 ABN AMRO MuniTOPS Ctfs Tr 2006-52 (Tacoma WA) 3.960 01/04/07 1,000,000
740,000 Indianapolis IN MFH Rev (Nora Commons) 4.120 01/04/07 740,000
240,000 CA Infra EDB IDR (Metrotile Mfg) Ser A 4.120 01/04/07 240,000
1,290,000 Ottawa Co OH Hosp Facs Rev (Luther Home of Mercy) Ser 97 4.030 01/04/07 1,290,000
260,000 Fargo ND CDR Rev (Kelly Inns Fargo) 4.070 01/04/07 260,000
1,000,000 LA HFA Rev (Walmsley Hsg) 3.960 01/04/07 1,000,000
200,000 SC Jobs EDR (Hammond) 3.910 01/04/07 200,000
1,000,000 Rev Bd Ctfs Ser 06-4 (Wildwood Branch), 144A 4.140 01/04/07 1,000,000
500,000 IN St Ed Facs Auth (Univ Evansville) 3.980 01/04/07 500,000
500,000 Hailey ID IDC Rev (Rocky Mountain Hardware) 4.110 01/04/07 500,000
240,000 Maricopa Co AZ IDA Hsg Rev (San Angelin Apts) 4.220 01/04/07 240,000
1,000,000 ABN AMRO MuniTOPS Ctfs Tr 2006-56 (Frisco TX) Weekly 3.960 01/04/07 1,000,000
1,000,000 Jacksonville FL Econ Dev Cmnty Hlthcare Facs Rev 3.950 01/04/07 1,000,000
200,000 Eupora MS IDR (Plymouth Tube Co) 4.150 01/04/07 200,000
500,000 Ames Higher Ed Facs Corp TX Rev (St Gabriels) 3.980 01/04/07 500,000
100,000 Lemoore CA COP (Muni Golf Course) 4.010 01/04/07 100,000
1,000,000 Cl B Rev Ctfs Ser 2006-1 4.140 01/04/07 1,000,000
1,000,000 Dayton TN Indl Dev Brd Edl Facs Rev (Bryan College) 3.930 01/04/07 1,000,000
2,110,000 Lexington-Fayette Urban Co KY Rev IBR (Eastland Pkwy) 4.010 01/04/07 2,110,000
640,000 St Charles Co MO IDA Rev (National Cart) Ser A 4.070 01/04/07 640,000
1,455,000 Rev Bd Ctfs Ser 04-13 (Centennial East Apts) 4.160 01/04/07 1,455,000
300,000 Hanford CA Swr Rev Ser A 3.940 01/04/07 300,000
905,000 Weber Co UT Indl Rev (Enable Inds Inc) 4.010 01/04/07 905,000
835,000 Ottawa Co OH Hosp Fac Rev (Luther Home of Mercy) 4.030 01/04/07 835,000
225,000 Johnston Co NC IDA PCR (Inolex Chem Co) 4.110 01/04/07 225,000
685,000 Oakland CA Liq Fac Rev (Assoc Bay Area Govt) 4.020 01/04/07 685,000
245,000 MA St Ind Fin Agy Rev (Lower Mills Assoc LP) 3.970 01/04/07 245,000
115,000 Boulder CO Dev Rev (Humane Society) 4.010 01/04/07 115,000
100,000 Catawba Co NC Ind Fac (Lucky 7 Dev Grp) 4.070 01/04/07 100,000
400,000 Marion Co FL IDA Rev MFH (Chambrel) 3.910 01/04/07 400,000
585,000 CO HFA EDR (Casarosa & Denver Gasket Inc) 4.170 01/04/07 585,000
600,000 Storm Lake IA High Ed Facs Rev (Buena Vista) 4.060 01/04/07 600,000
500,000 Duchesne SD UT Bldg Auth Rev 3.960 01/04/07 500,000
390,000 IA Fin Auth Rev (Regis Schs) 3.980 01/04/07 390,000
100,000 IA Higher Ed Auth Rev (American Institute) 4.010 01/04/07 100,000
95,000 Montgomery Co OH EDR (Benjamin & Marian) 3.980 01/04/07 95,000
33
TAX-FREE MONEY MARKET FUND (CONTINUED)
================================================================================
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------
FLOATING & VARIABLE RATE DEMAND NOTES -- 71.7% (CONTINUED)
$ 700,000 FL HFC MFH Rev (Charleston) 3.910 01/04/07 $ 700,000
445,000 Eden Prairie MN MFH Rev (Lake Place Apts) 4.010 01/04/07 445,000
875,000 Indianapolis IN EDR (Pedcor Invts Waterfront-B) 4.230 01/04/07 875,000
- --------------------------------------------------------------------------------------------------------------
TOTAL FLOATING & VARIABLE RATE DEMAND NOTES $40,800,000
- --------------------------------------------------------------------------------------------------------------
ADJUSTABLE RATE PUT BONDS -- 4.6%
$ 170,000 Summit Co OH IDR (SD Myers Inc) 4.500 02/15/07 $ 170,000
215,000 Summit Co OH IDR (Struktol Co America) 4.300 03/01/07 215,000
380,000 Dayton KY IBR (Patriot Signage Inc) 4.400 03/01/07 380,000
85,000 Cuyahoga Co OH IDR (Halle Office Bldg) 3.960 04/01/07 85,000
1,000,000 Westmoreland Co PA IDA (White Cons Inds) 4.015 06/01/07 1,000,000
155,000 Newport KY IBR (Sumerel Tire) 4.100 06/01/07 155,000
100,000 Houston TX ISD LTGO (Schlhouse) 3.630 06/15/07 99,998
535,000 McDonald Tax Exempt Mtge Trust 4.350 12/17/07 535,000
- --------------------------------------------------------------------------------------------------------------
TOTAL ADJUSTABLE RATE PUT BONDS $ 2,639,998
- --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 98.7%
(Amortized Cost $56,211,085) $56,211,085
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.3% 862,305
- --------------------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $57,073,390
==============================================================================================================
See accompanying notes to portfolios of investments and notes to financial
statements.
34
NOTES TO PORTFOLIOS OF INVESTMENTS
DECEMBER 31, 2006 (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, 2006.
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
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
ISD - Independent School District
LSD - Local School District
LTGO - Limited Tax General Obligation
MFH - Multi-Family Housing
PCR - Pollution Control Revenue
RANS - Revenue Anticipation Notes
SD - School District
TIF - Tax Increment Financing
UT - Unlimited Tax
UTGO - Unlimited Tax General Obligation
35
PORTFOLIO COMPOSITION
DECEMBER 31, 2006 (UNAUDITED)
================================================================================
As of December 31, 2006, 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 83.7%
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 federal income tax. As of December 31, 2006,
22.0% of the portfolio securities of the Tax-Free Money Market Fund were
concentrated in the State of Ohio, 4.8% in the State of Kentucky and 7.1% 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, 2006, 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, 2006, 92.1% 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 87.6%
of its portfolio securities.
The concentration of investments for each Fund as of December 31, 2006,
classified by revenue source, was as follows:
FLORIDA TAX-FREE OHIO INSURED TAX-FREE OHIO TAX-FREE
MONEY MARKET TAX-FREE MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------
General Obligations 7.9% 41.1% 6.6% 12.4%
- ---------------------------------------------------------------------------------------------------------------
Revenue Bonds:
Industrial Development/
Pollution Control 7.1% -- 7.5% 8.0%
Hospital/Health Care 15.6% 12.0% 28.9% 16.5%
Utilities/Water & Sewer 3.4% 8.9% 9.7% 5.0%
Education 24.4% 10.1% 17.4% 8.5%
Housing/Mortgage 21.9% -- 5.5% 11.4%
Economic Development 1.5% -- 8.7% 16.3%
Public Facilities 5.1% -- 2.7% 0.7%
Transportation -- 4.3% 2.4% --
Special Tax 4.9% -- 4.9% 3.8%
Miscellaneous 8.2% 23.6% 5.7% 17.4%
- ---------------------------------------------------------------------------------------------------------------
Total Investments 100.0% 100.0% 100.0% 100.0%
===============================================================================================================
36
OTHER ITEMS
DECEMBER 31, 2006 (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, 2006 through December 31, 2006).
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, 2006" 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
NET EXPENSE BEGINNING ENDING PAID DURING
RATIO ACCOUNT ACCOUNT THE SIX
ANNUALIZED VALUE VALUE MONTHS ENDED
DECEMBER 31, JULY 1, DECEMBER 31, DECEMBER 31,
2006 2006 2006 2006*
- -------------------------------------------------------------------------------------------------
FLORIDA TAX-FREE MONEY MARKET FUND
Actual 0.75% $ 1,000.00 $ 1,014.40 $ 3.81
Hypothetical 0.75% $ 1,000.00 $ 1,021.42 $ 3.82
OHIO INSURED TAX-FREE FUND
Class A Actual 0.75% $ 1,000.00 $ 1,044.80 $ 3.87
Class A Hypothetical 0.75% $ 1,000.00 $ 1,021.42 $ 3.82
Class C Actual 1.50% $ 1,000.00 $ 1,040.80 $ 7.72
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 $ 1,014.60 $ 3.81
Retail Class Hypothetical 0.75% $ 1,000.00 $ 1,021.42 $ 3.82
Institutional Class Actual 0.50% $ 1,000.00 $ 1,015.90 $ 2.54
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 $ 1,014.20 $ 4.52
Class A Hypothetical 0.89% $ 1,000.00 $ 1,020.72 $ 4.53
Class S Actual 1.15% $ 1,000.00 $ 1,012.90 $ 5.84
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).
38
================================================================================
ADVISORY AGREEMENT APPROVAL DISCLOSURE
At a meeting held on November 16, 2006, the Board of Trustees (the "Board") of
the Touchstone Tax-Free Trust (the "Trust"), and by a separate vote, the
Independent Trustees of the Trust, approved with respect to each Fund the
continuance of the Investment Advisory Agreement between the Trust and the
Advisor and the respective Sub-Advisory Agreement between the Advisor and the
Sub-Advisor.
In determining whether to approve the continuation of the Investment Advisory
Agreement and the Sub-Advisory Agreements, the Advisor furnished information
necessary for a majority of the Independent Trustees to make the determination
that the continuance of the Investment Advisory Agreement and the respective
Sub-Advisory Agreement was in the interests of each Fund and its 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 Investment Advisory Agreement and the Sub-Advisory
Agreements with management and with experienced independent legal counsel and
received materials from such counsel discussing the legal standards for their
consideration of the proposed continuation with respect to each Fund of the
Investment Advisory Agreement and the respective Sub-Advisory Agreement. The
Independent Trustees also reviewed with respect to each Fund the proposed
continuation of the Investment Advisory Agreement and the respective
Sub-Advisory Agreement in private sessions with counsel at which no
representatives of management were present.
In approving the Funds' Investment 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) a comparison of fees and
performance with other advisers; (4) economies of scale; and (5) the terms of
the Investment Advisory Agreement. The Board's analysis of these factors is set
forth below. The Independent Trustees were advised by independent legal counsel
throughout the process.
NATURE, EXTENT AND QUALITY OF ADVISOR SERVICES. The Board considered the level
and depth of knowledge of the 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 the Advisor's timeliness in responding to performance issues.
In evaluating the quality of services provided by the Advisor, the Board took
into account its familiarity with the Advisor's senior management through Board
meetings, discussions and reports during the preceding year. The Board also took
into account the Advisor's compliance policies and procedures. The quality of
administrative and other services, including the Advisor's role in coordinating
the activities of the Funds' other service providers, was also considered. The
Board also considered the Advisor's relationship with its affiliates and the
resources available to them, as well as any potential conflicts of interest. The
Board concluded that it was satisfied with the nature, extent and quality of
services provided to each Fund by the Advisor under the Investment 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 Board noted that the Advisor had waived portions of the advisory fees
paid by the Funds and also paid the Sub-Advisor's sub-advisory fees out of the
advisory fees the Advisor received from the Funds. The Board reviewed the
profitability of the Advisor's relationship with the Funds both before and after
tax expenses and whether the Advisor 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 company with respect to providing support and resources
as needed. The Board also considered that the Funds' distributor, an affiliate
of the Advisor, received Rule 12b-1 distribution fees from the Funds and
received a portion of the sales charges on sales or redemptions of certain
classes of shares. The Board also noted that the Advisor derived benefits to its
reputation and other benefits from its association with the Funds.
39
OTHER ITEMS (CONTINUED)
================================================================================
The Board recognized that the Advisor was entitled to earn a reasonable level of
profits in exchange for the level of services it provided to each Fund and the
entrepreneurial risk that it assumed as Advisor. Based upon its review, the
Board concluded that the Advisor's level of profitability, if any, from its
relationship with each Fund was reasonable and not excessive.
EXPENSES AND PERFORMANCE. The Board compared the respective advisory fees and
total expense ratios for the Funds with various comparative data, including the
median and average advisory fees and total expense ratios of each Fund's peer
group. The Board also considered the Funds' respective performance results
during the one-year, three-years, and five-years ended September 30, 2006 and
noted that it reviewed on a quarterly basis detailed information about each
Fund's 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 had waived
portions of the advisory fees paid by the Funds in order to reduce the Funds'
respective operating expenses to targeted levels. The Board noted that the
Sub-Advisor's sub-advisory fees under the Sub-Advisory Agreements were paid by
the Advisor out of the advisory fees it received from the Funds and the impact
of such sub-advisory fees on the profitability of the Advisor. In reviewing the
respective 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 Board considered, among other factors, 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 below 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
one-year, three-years and five-years ended September 30, 2006 was in the 3rd
quartile of its peer group. The Board took into account management's discussion
of the Fund's performance. Based upon its review, the Board concluded that the
Fund's performance was satisfactory and that the advisory fee was reasonable
given the high quality of services received by the Fund from the Advisor 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 below 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 one-year, three-years and five-years ended
September 30, 2006 was in the 2nd quartile of its peer group. Based upon its
review, the Board concluded that the Fund's performance was satisfactory and
that the advisory fee was reasonable given the high quality of services received
by the Fund from the Advisor and the other factors considered.
OHIO TAX-FREE MONEY MARKET FUND. The Fund's advisory fee and total expense ratio
(net of applicable expense waivers) were below the median and above 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 one-year,
three-years and five-years ended September 30, 2006 was in the 3rd quartile of
its peer group. The Board also took into account management's discussion of the
Fund's performance. Based upon its review, the Board concluded that the Fund's
performance was satisfactory and that the advisory fee was reasonable given the
high quality of services received by the Fund from the Advisor and the other
factors considered.
40
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TAX-FREE MONEY MARKET FUND. The Fund's advisory fee and total expense ratio (net
of applicable expense waivers) were below the median and above 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 one-year
and three-years ended September 30, 2006 was in the 3rd quartile of its peer
group and in the 1st quartile for the five-years ended September 30, 2006. The
Board 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 Board also took into account management's
discussion of the Fund's performance. Based upon its review, the Board concluded
that the Fund's relative performance over time was satisfactory and that the
advisory fee was reasonable given the high quality of services received by the
Fund from the Advisor and the other factors considered.
ECONOMIES OF SCALE. The Board considered the effect of each Fund's current size
and potential growth on its performance and fees. The Board considered the
effective advisory fees under the Investment Advisory Agreement as a percentage
of assets at different asset levels and possible economies of scale that might
be realized if the assets of each Fund increased. The Board noted that the
advisory fee schedule for each Fund contained breakpoints that would reduce the
respective advisory fee rate on assets above specified levels as the respective
Fund's assets increased. The Board noted that the current advisory fee for the
Ohio Tax-Free Money Market Fund reflected such economies of scale. The Board
also noted that if a Fund's assets increased over time, the Fund might realize
other economies of scale if assets increased proportionally more than certain
other expenses.
CONCLUSION. In considering the renewal of the Funds' Investment 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 Board evaluated all information available to it on a
Fund-by-Fund basis, and its determinations were made separately with respect to
each Fund. The Board reached the following conclusions regarding the Funds'
Investment Advisory Agreement with the Advisor, among others: (a) the Advisor
had demonstrated that it possessed the capability and resources to perform the
duties required of it under the Investment Advisory Agreement; (b) the Advisor
maintained an appropriate compliance program; (c) the performance of each Fund
was reasonable or satisfactory in relation to the performance of funds with
similar investment objectives and to relevant indices; and (d) each Fund's
advisory fee was reasonable in relation to those of similar funds and to the
services to be provided by the Advisor. Based on its conclusions, the Board
determined with respect to each Fund that continuation of the Investment
Advisory Agreement was in the interests of the Fund and its shareholders.
In approving the Funds' respective Sub-Advisory Agreements, the Board considered
various factors with respect to each Fund and the respective Sub-Advisory
Agreement, among them: (1) the nature, extent and quality of services provided
to the Fund, including the personnel providing services; (2) the Sub-Advisor's
compensation; (3) a comparison of the sub-advisory fee and performance with
other advisers; and (4) the terms of the Sub-Advisory Agreement. The Board's
analysis of these factors is set forth below. The Independent Trustees were
advised by independent legal counsel throughout the process.
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
preceding year. The Board took into account the affiliation of the Sub-Advisor
with the Advisor, noting any potential conflicts of interest. The Board noted
that, on a periodic basis, it met with various portfolio managers of the
Sub-Advisor to discuss their performance and investment processes 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 were responsible for managing the investment of
portfolio securities of each Fund. The Board 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 included quarterly reviews of compliance reports and annual compliance
visits to the Sub-Advisor and that compliance issues, if any, were reported
regularly 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 the Sub-Advisor of its relationship
with the Funds, the Board noted the undertakings of the Advisor to maintain
expense limitations for the Funds and also noted that the sub-advisory fees
under the Sub-Advisory Agreements were paid by the Advisor out of the advisory
fees that it received under the Investment Advisory Agreement. As a consequence,
the profitability to the Sub-Advisor of its relationship with each Fund was not
a substantial factor in the Board's deliberations. For similar reasons, the
Board did not consider the potential economies of scale in the Sub-Advisor's
management of the Funds to be a substantial factor in its consideration,
although the Board noted that the sub-advisory fee schedule for each Fund
contained breakpoints that would reduce the sub-advisory fee rate on assets
above specified levels as the Fund's assets increased.
SUB-ADVISORY FEES AND FUND PERFORMANCE. The Board considered that each Fund paid
an advisory fee to the Advisor and that, in turn, the Advisor paid a
sub-advisory fee to the Sub-Advisor. Accordingly, the Board considered the
amount retained by the Advisor and the sub-advisory fee paid to the Sub-Advisor
with respect to the various services provided by the Advisor and the
Sub-Advisor. The Board compared the sub-advisory fee for each Fund with various
comparative data, including the median and average sub-advisory fees of each
Fund's peer group, and found that each Fund's sub-advisory fee was reasonable
and appropriate under the facts and circumstances.
FLORIDA TAX-FREE MONEY MARKET FUND. The Fund's sub-advisory fee was above the
median of its peer group. Based upon its review, the Board concluded that the
sub-advisory fee was reasonable given the high quality of services received by
the Fund from the Sub-Advisor and the other factors considered.
OHIO INSURED TAX-FREE FUND. The Fund's sub-advisory fee was below the median of
its peer group. Based upon its review, the Board concluded that the sub-advisory
fee was reasonable given the high quality of services received by the Fund from
the Sub-Advisor and the other factors considered.
OHIO TAX-FREE MONEY MARKET FUND. The Fund's sub-advisory fee was below the
median of its peer group. Based upon its review, the Board concluded that the
sub-advisory fee was reasonable given the high quality of services received by
the Fund from the Sub-Advisor and the other factors considered.
TAX-FREE MONEY MARKET FUND. The Fund's sub-advisory fee was below the median of
its peer group. Based upon its review, the Board concluded that the sub-advisory
fee was reasonable given the high quality of services received by the Fund from
the Sub-Advisor and the other factors considered.
As noted above, the Board considered each Fund's performance during the
one-year, three-years, and five-years ended September 30, 2006 as compared to
each Fund's peer group and noted that it reviewed on a quarterly basis detailed
information about each Fund's performance results, portfolio composition and
investment strategies. The Board also noted the Advisor's expertise and
resources in monitoring the performance, investment style and risk adjusted
performance of the Sub-Advisor. The Board also was mindful of the Advisor's
emphasis on the Sub-Advisor's performance and the Advisor's ways of addressing
underperformance.
42
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CONCLUSION. In considering the renewal of the Sub-Advisory Agreement with
respect to each Fund, the Board, including the Independent Trustees, did not
identify any single factor as controlling, and each Trustee attributed different
weights to the various factors. The Board reached the following conclusions
regarding the Sub-Advisory Agreement with respect to each Fund, among others:
(a) the Sub-Advisor was qualified to manage each Fund's assets in accordance
with the Fund's investment objectives and policies; (b) the Sub-Advisor
maintained an appropriate compliance program; (c) the performance of each Fund
was satisfactory or reasonable in relation to the performance of funds with
similar investment objectives and to relevant indices; (d) each Fund's
sub-advisory fee was reasonable in relation to those of similar funds and to the
services to be provided by the Sub-Advisor; and (e) the Sub-Advisor's investment
strategies were appropriate for pursuing the investment objectives of each Fund.
Based on its conclusions, the Board determined with respect to each Fund that
approval of the respective Sub-Advisory Agreement was in the interests of the
Fund and its shareholders.
43
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TOUCHSTONE INVESTMENTS
DISTRIBUTOR
Touchstone Securities, Inc.
303 Broadway
Cincinnati, Ohio 45202-4203
800.638.8194
www.touchstoneinvestments.com
INVESTMENT ADVISOR
Touchstone Advisors, Inc.
303 Broadway
Cincinnati, Ohio 45202-4203
TRANSFER AGENT
Integrated Investment Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
SHAREHOLDER SERVICE
800.543.0407
A Member of Western & Southern Financial Group(R)
- --------------------------------------------------------------------------------
[LOGO] TOUCHSTONE
INVESTMENTS
303 Broadway, sUITE 1100
Cincinnati, Ohio 45202-4203
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
-------------------------------------------------------------------
By (Signature and Title)
/s/ Jill T. McGruder
- ------------------------------
Jill T. McGruder
President
Date: March 9, 2007
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 9, 2007
/s/ Terrie A. Wiedenheft
- ------------------------------
Terrie A. Wiedenheft
Controller & Treasurer
Date: March 9, 2007