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: 6/30/07
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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.
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June 30, 2007
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(R)
INVESTMENTS
ITEM 1. REPORTS TO STOCKHOLDERS.
Annual Report
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TABLE OF CONTENTS
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Page
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Letter from the President 3
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Management's Discussion of Fund Performance (Unaudited) 4-5
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Tabular Presentation of Portfolios of Investments (Unaudited) 6
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Statements of Assets and Liabilities 7-8
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Statements of Operations 9
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Statements of Changes in Net Assets 10-11
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Financial Highlights 12-15
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Notes to Financial Statements 16-22
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Portfolios of Investments:
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Florida Tax-Free Money Market Fund 23-24
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Ohio Insured Tax-Free Fund 25-26
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Ohio Tax-Free Money Market Fund 27-29
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Tax-Free Money Market Fund 30-32
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Notes to Portfolios of Investments 33
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Portfolio Composition (Unaudited) 34
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Report of Independent Registered Public Accounting Firm 35
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Other Items (Unaudited) 36-37
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Management of the Trust (Unaudited) 38-41
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2
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LETTER FROM THE PRESIDENT
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Dear Fellow Shareholder,
We are pleased to provide you with the Touchstone Tax Free Trust Annual Report.
Inside you will find key financial information for the twelve months ended June
30, 2007.
During the year, the economy grew at a moderate pace as the effects of the
Federal Reserve Board rate hikes spread. Uncertainties about future rate
increases remain, as analysts are watchful of the Fed's views of inflation, the
housing and job markets, and other key economic indicators.
Recently, the bond market has become more volatile due to concerns about the
exposure hedge funds and other institutions have to sub-prime mortgages. Looking
ahead, the investing environment could become more volatile amid conflicting
news on the economy and credit markets.
We do believe, however, that the municipal sector continues to offer attractive
investment opportunities for tax-conscious investors. Tax-free bond funds and
tax-free money market funds may help provide income, liquidity and stability to
your investment portfolio.
When we examine where the financial markets may be headed in the year to come,
we continue to believe that diversification is key to balancing risk and return.
We recommend that you work with your financial professional to employ a sound
asset allocation strategy that invests in a combination of stock, bond and money
market mutual funds to help keep your financial strategy on course. We also
suggest maintaining a long-term approach to gain the full potential benefits of
investing.
We greatly appreciate your continued support. Thank you for including Touchstone
as part of your investment plan.
Sincerely,
/s/ Jill T. McGruder
Jill T. McGruder
President
Touchstone Tax-Free Trust
3
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MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE (UNAUDITED)
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MARKET REVIEW
Growth in the U.S. economy moderated over the one-year period ending June 30,
2007. While a downturn in the housing sector negatively impacted the overall
economy, surprisingly, job growth remained strong. In addition, inflation, as
measured by the Consumer Price Index, declined over the course of the year. The
Federal Reserve ended a two year tightening cycle in June 2006 and has held the
fed funds rate steady at 5.25% for the past year. Over that period of time the
Fed has maintained a consistent message, calling for moderate growth in the
economy but always fearful that inflation will trend higher. In this
environment, Treasury yields have generally declined over the 12-month period.
Performance of the municipal market for the period was mixed, but overall it
underperformed most other fixed income sectors. Record new issue volume
accounted for this relative underperformance as municipalities looked to
refinance outstanding, higher yielding debt as well as sell new bonds to finance
growing infrastructure needs. Longer-term maturities and lower-rated bonds
experienced the best performance as yields on 30-year and low quality municipal
bonds declined the most. Yields on short-term maturities were up while
intermediate maturities declined marginally in yield. Performance of longer
maturity bonds was aided by the steeper yield curve in the municipal market as
compared to an inverted to flat yield curve in the Taxable Bond market. The
steep municipal curve allowed large institutional buyers to create tender option
bonds (TOB), which has put downward pressure on long-term municipal yields.
The outlook for interest rates is tied largely to the Fed's monetary policy and
potential problems in the sub-prime mortgage sector. The market sees moderate to
lower growth in the economy and expects that the Fed's next move will be to
lower interest rates. We believe the Fed, while still concerned about inflation,
is likely to remain on hold for the remainder of the year, with economic reports
and news from the sub-prime mortgage sector providing the impetus for direction
on interest rates.
TOUCHSTONE OHIO INSURED TAX-FREE FUND
The total return of the Touchstone Ohio Insured Tax-Free Fund was 4.19%. The
total return of the Lehman Brothers Municipal Bond Index was 4.70% for the same
period.
The Fund's relative performance was negatively impacted as lower-quality bonds
outperformed high quality issues. We continue to advocate the Fund's consistent
strategy of buying high-quality, insured Ohio municipal bonds in the 20-year
maturity range. We believe that this approach provides for more consistent
returns over the long-term as well as an attractive combination of tax-free
yield and total return.
During the lower interest rate environment that prevailed for much of the past
year the Fund had a number of bonds that were pre-refunded. This is the process
whereby a municipality refinances its debt and effectively shortens the maturity
of its outstanding bonds. In many instances we sold these bonds once they became
pre-refunded and bought new bonds in the 20-year maturity range to maintain a
consistent duration of the Fund's portfolio.
We anticipate that the Fed will hold interest rates steady for the remainder of
the year and expect yields to trade in a narrow range. We do not expect a
dramatic rise in longer-term yields but will use any pull back in the market to
put money to work. We will maintain the strategy of buying high-quality, insured
Ohio municipal bonds in the 20-year maturity range.
4
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MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE (CONTINUED)
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COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE OHIO INSURED TAX-FREE FUND - CLASS A* AND THE
LEHMAN BROTHERS MUNICIPAL BOND INDEX
----------------------------------------
OHIO INSURED TAX-FREE FUND
AVERAGE ANNUAL TOTAL RETURNS
1 Year 5 Years 10 Years
Class A (0.75)% 2.94% 4.00%
Class C 3.50% 3.18% 3.75%
----------------------------------------
OHIO INSURED TAX-FREE FUND - Class A LEHMAN BROTHERS GENERAL MUNICIPAL INDEX:
- ------------------------------------ ----------------------------------------
DATE BALANCE DATE BALANCE
---- ------- ---- -------
06/30/97 9,525 06/30/97 10,000
09/30/97 9,756 09/30/97 10,302
12/31/97 9,976 12/31/97 10,581
03/31/98 10,064 03/31/98 10,703
06/30/98 10,195 06/30/98 10,866
09/30/98 10,509 09/30/98 11,199
12/31/98 10,532 12/31/98 11,267
03/31/99 10,579 03/31/99 11,366
06/30/99 10,380 06/30/99 11,166
09/30/99 10,286 09/30/99 11,121
12/31/99 10,205 12/31/99 11,035
03/31/00 10,538 03/31/00 11,357
06/30/00 10,652 06/30/00 11,529
09/30/00 10,858 09/30/00 11,808
12/31/01 11,389 12/31/00 12,324
03/31/01 11,568 03/31/01 12,598
06/30/01 11,598 06/30/01 12,680
09/30/01 11,837 09/30/01 13,036
12/31/01 11,740 12/31/01 12,956
03/31/02 11,809 03/31/02 13,078
06/30/02 12,195 06/30/02 13,557
09/30/02 12,851 09/30/02 14,201
12/31/02 12,804 12/31/02 14,201
03/31/03 12,919 03/31/03 14,371
06/30/03 13,223 06/30/03 14,742
09/30/03 13,189 09/30/03 14,754
12/31/03 13,399 12/31/03 14,956
03/31/04 13,610 3/31/2004 15,215
06/30/04 13,227 6/30/2004 14,854
09/30/04 13,754 09/30/04 15,432
12/31/04 13,913 12/31/04 15,625
03/31/05 13,817 03/31/05 15,620
06/30/05 14,241 06/30/05 16,078
09/30/05 14,179 09/30/05 16,057
12/31/05 14,261 12/31/05 16,174
03/31/06 14,239 03/31/06 16,215
06/30/06 14,205 06/30/06 16,219
09/30/06 14,720 09/30/06 16,772
12/31/06 14,842 12/31/06 16,959
03/31/07 14,944 03/31/07 17,096
06/30/07 14,801 06/30/07 16,981
* The chart above represents performance of Class A shares only, which will
vary from the performance of Class C shares based on the difference in
loads and fees paid by shareholders in the different classes. Fund
inception was April 1, 1985, and the initial public offering of Class C
shares commenced on November 1, 1993.
The performance of the above Fund does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
5
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TABULAR PRESENTATION OF PORTFOLIOS OF INVESTMENTS (UNAUDITED)
JUNE 30, 2007
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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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FLORIDA TAX-FREE MONEY MARKET FUND
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CREDIT QUALITY (% OF NET ASSETS)
A-1 / P-1 / AAA 93.3
FW1* 6.7
------
Total 100.0
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PORTFOLIO ALLOCATION (% OF NET ASSETS)
Variable Rate Demand Notes 66.7
General Obligations 5.4
Fixed Rate Revenue 24.0
Commercial Paper 3.9
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Total 100.0
------
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OHIO TAX-FREE MONEY MARKET FUND
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CREDIT QUALITY (% OF NET ASSETS)
A-1 / P-1 / AAA 78.0
FW1* 22.0
------
Total 100.0
------
PORTFOLIO ALLOCATION (% OF NET ASSETS)
Variable Rate Demand Notes 72.9
General Obligations 16.6
Fixed Rate Revenue 7.0
Adjustable Rate Put Bonds 3.5
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Total 100.0
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OHIO INSURED TAX-FREE FUND
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CREDIT QUALITY (% OF NET ASSETS)
AAA / Aaa 94.8
AA / Aa 2.7
A/A 2.5
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Total 100.0
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PORTFOLIO ALLOCATION (% OF NET ASSETS)
General Obligations 41.1
Prerefunded / Escrowed to Maturity 19.1
Hospital / Healthcare 12.9
Education 12.2
Miscellaneous 0.8
Water and Sewer 6.6
Transportation 7.2
Housing 0.1
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Total 100.0
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TAX-FREE MONEY MARKET FUND
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CREDIT QUALITY (% OF NET ASSETS)
A-1 / P-1 / AAA 92.0
FW1* 8.0
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Total 100.0
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PORTFOLIO ALLOCATION (% OF NET ASSETS)
Variable Rate Demand Notes 79.1
Adjustable Rate Put Bonds 2.4
Fixed Rate Revenue 8.1
General Obligations 10.4
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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.
6
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STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2007
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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 $ 25,960,344 $ 59,700,394 $273,759,820 $ 99,302,417
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At market value $ 25,960,344 $ 61,028,898 $273,759,820 $ 99,302,417
Cash 16,672 39,316 53,932 57,793
Interest receivable 179,335 403,103 2,152,845 630,090
Receivable for capital shares sold -- 3,519 -- --
Other assets 1,548 4,406 5,882 5,342
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TOTAL ASSETS 26,157,899 61,479,242 275,972,479 99,995,642
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LIABILITIES
Dividends payable 59,137 65,439 441,247 745
Payable to Advisor 10,654 25,382 100,903 20,893
Payable to other affiliates 399 3,579 5,545 9,876
Payable to Trustees 5,311 5,674 6,091 4,468
Payable for securities purchased 300,576 -- 500,960 420,806
Payable for capital shares redeemed -- 6,525 -- --
Other accrued expenses and liabilities 20,707 40,276 61,964 23,545
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TOTAL LIABILITIES 396,784 146,875 1,116,710 480,333
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NET ASSETS $ 25,761,115 $ 61,332,367 $274,855,769 $ 99,515,309
===============================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 25,766,693 $ 59,385,704 $274,854,981 $ 99,515,070
Accumulated net realized gains (losses) from security transactions (5,578) 618,159 788 239
Net unrealized appreciation on investments -- 1,328,504 -- --
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NET ASSETS $ 25,761,115 $ 61,332,367 $274,855,769 $ 99,515,309
===============================================================================================================================
PRICING OF RETAIL SHARES
Net assets applicable to Retail shares $ -- $ -- $105,147,493 $ --
===============================================================================================================================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) -- -- 105,137,462 --
===============================================================================================================================
Net asset value, offering price and redemption price per share $ -- $ -- $ 1.00 $ --
===============================================================================================================================
PRICING OF INSTITUTIONAL SHARES
Net assets applicable to Institutional shares $ -- $ -- $169,708,276 $ --
===============================================================================================================================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) -- -- 169,704,531 --
===============================================================================================================================
Net asset value, offering price and redemption price per share $ -- $ -- $ 1.00 $ --
===============================================================================================================================
PRICING OF CLASS A SHARES
Net assets applicable to Class A shares $ 25,761,115 $ 56,162,940 $ -- $ 16,590,453
===============================================================================================================================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) 25,766,681 4,937,633 -- 16,600,561
===============================================================================================================================
Net asset value and redemption price per share $ 1.00 $ 11.37 $ -- $ 1.00
===============================================================================================================================
Maximum offering price per share $ -- $ 11.94 $ -- $ --
===============================================================================================================================
7
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STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
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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 $ -- $ 5,169,427 $ -- $ --
===============================================================================================================================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) -- 454,032 -- --
===============================================================================================================================
Net asset value, offering price and redemption price per share* $ -- $ 11.39 $ -- $ --
===============================================================================================================================
PRICING OF CLASS S SHARES
Net assets applicable to Class S shares $ -- $ -- $ -- $ 82,924,856
===============================================================================================================================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) -- -- -- 82,924,663
===============================================================================================================================
Net asset value, offering price and redemption price per share $ -- $ -- $ -- $ 1.00
===============================================================================================================================
* Redemption price per share varies by length of time shares are held.
See accompanying notes to financial statements.
8
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STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2007
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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 $ 914,038 $ 3,131,828 $ 9,861,990 $ 1,996,275
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 125,781 339,073 1,225,499 267,299
Distribution expenses, Retail class -- -- 247,047 --
Distribution expenses, Class A 62,877 154,454 -- 42,058
Distribution expenses, Class C -- 60,330 -- --
Distribution expenses, Class S -- -- -- 219,820
Administration fees 30,449 84,278 336,583 67,972
Transfer Agent fees, Retail class -- -- 33,909 --
Transfer Agent fees, Institutional class -- -- 6,182 --
Transfer Agent fees, Class A 6,677 34,904 -- 15,431
Transfer Agent fees, Class C -- 8,735 -- --
Transfer Agent fees, Class S -- -- -- 30,251
Professional fees 18,731 20,742 23,972 18,361
Custodian fees 5,338 10,579 51,529 11,599
Accounting services fees 12,000 18,750 24,750 17,750
Trustees' fees and expenses 17,178 16,553 18,032 15,161
Postage and supplies 3,171 16,380 19,885 11,469
Registration fees, Retail class -- -- 12,091 --
Registration fees, Class A 1,471 9,257 -- 8,817
Registration fees, Class C -- 7,245 -- --
Registration fees, Class S -- -- -- 3,580
Pricing expenses 5,115 9,615 21,036 6,113
Reports to shareholders 3,174 12,314 5,911 6,599
Compliance fees and expenses 918 1,147 1,935 1,009
Other expenses 652 3,631 4,564 833
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TOTAL EXPENSES 293,532 807,987 2,032,925 744,122
Fees waived and other operating expenses reimbursed by the Advisor (74,452) (170,084) (104,730) (105,182)
Fees waived by the Administrator (30,449) (84,278) (336,583) (67,972)
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NET EXPENSES 188,631 553,625 1,591,612 570,968
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NET INVESTMENT INCOME 725,407 2,578,203 8,270,378 1,425,307
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REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions 150 903,514 788 239
Net change in unrealized appreciation/depreciation on investments -- (519,947) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 150 383,567 788 239
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 725,557 $ 2,961,770 $ 8,271,166 $ 1,425,546
=================================================================================================================================
See accompanying notes to financial statements.
9
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STATEMENTS OF CHANGES IN NET ASSETS
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FLORIDA
TAX-FREE OHIO INSURED
MONEY MARKET TAX-FREE
FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2007 2006 2007 2006
- --------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 725,407 $ 613,539 $ 2,578,203 $ 2,939,925
Net realized gains from security transactions 150 -- 903,514 463,336
Net change in unrealized appreciation/depreciation on investments -- -- (519,947) (3,729,537)
- --------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 725,557 613,539 2,961,770 (326,276)
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class A (725,407) (613,539) (2,390,149) (2,693,310)
From net investment income, Class C -- -- (188,160) (246,822)
From net realized gains, Class A -- -- (605,797) (958,818)
From net realized gains, Class C -- -- (57,110) (109,298)
- --------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (725,407) (613,539) (3,241,216) (4,008,248)
- --------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS A
Proceeds from shares sold 38,655,640 63,790,639 1,507,559 2,782,827
Reinvested distributions 88,299 126,808 1,997,247 2,459,039
Payments for shares redeemed (40,406,783) (64,638,128) (11,330,197) (11,695,657)
- --------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS A SHARE TRANSACTIONS (1,662,844) (720,681) (7,825,391) (6,453,791)
- --------------------------------------------------------------------------------------------------------------------------------
CLASS C
Proceeds from shares sold -- -- 139,590 409,035
Reinvested distributions -- -- 180,989 220,900
Payments for shares redeemed -- -- (1,876,997) (2,851,844)
- --------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CLASS C SHARE TRANSACTIONS -- -- (1,556,418) (2,221,909)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (1,662,694) (720,681) (9,661,255) (13,010,224)
NET ASSETS
Beginning of year 27,423,809 28,144,490 70,993,622 84,003,846
- --------------------------------------------------------------------------------------------------------------------------------
End of year $ 25,761,115 $ 27,423,809 $ 61,332,367 $ 70,993,622
================================================================================================================================
UNDISTRIBUTED NET INVESTMENT INCOME $ -- $ -- $ -- $ --
================================================================================================================================
See accompanying notes to financial statements.
10
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STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
OHIO
TAX-FREE TAX-FREE
MONEY MARKET MONEY MARKET
FUND FUND
============================================================================================================
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2007 2006 2007 2006
============================================================================================================
FROM OPERATIONS
Net investment income $ 8,270,378 $ 6,473,158 $ 1,425,307 $ 972,176
Net realized gains from
security transactions 788 17,538 239 --
- ------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS 8,271,166 6,490,696 1,425,546 972,176
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Retail (2,884,708) (2,237,111) -- --
From net investment income, Institutional (5,385,670) (4,236,047) -- --
From net investment income, Class A -- -- (479,524) (410,299)
From net investment income, Class S -- -- (945,783) (561,877)
From net realized gains, Retail (6,368) -- -- --
From net realized gains, Institutional (11,170) -- -- --
- ------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS
TO SHAREHOLDERS (8,287,916) (6,473,158) (1,425,307) (972,176)
- ------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS
RETAIL
Proceeds from shares sold 154,993,833 149,098,338 -- --
Reinvested distributions 2,872,822 2,247,099 -- --
Payments for shares redeemed (144,795,154) (158,396,605) -- --
- ------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM RETAIL SHARE TRANSACTIONS 13,071,501 (7,051,168) -- --
- ------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
Proceeds from shares sold 371,911,836 326,790,025 -- --
Reinvested distributions 129,858 119,761 -- --
Payments for shares redeemed (385,429,495) (336,160,764) -- --
- ------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
INSTITUTIONAL SHARE TRANSACTIONS (13,387,801) (9,250,978) -- --
- ------------------------------------------------------------------------------------------------------------
CLASS A
Proceeds from shares sold -- -- 14,546,505 16,325,115
Reinvested distributions -- -- 469,892 405,444
Payments for shares redeemed -- -- (14,704,961) (19,701,796)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM CLASS A SHARE TRANSACTIONS -- -- 311,436 (2,971,237)
- ------------------------------------------------------------------------------------------------------------
CLASS S
Proceeds from shares sold -- -- 226,477,167 122,612,554
Reinvested distributions -- -- 946,943 566,872
Payments for shares redeemed -- -- (177,156,980) (103,596,488)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
CLASS S SHARE TRANSACTIONS -- -- 50,267,130 19,582,938
- ------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS (333,050) (16,284,608) 50,578,805 16,611,701
NET ASSETS
Beginning of year 275,188,819 291,473,427 48,936,504 32,324,803
- ------------------------------------------------------------------------------------------------------------
End of year $ 274,855,769 $ 275,188,819 $ 99,515,309 $ 48,936,504
============================================================================================================
UNDISTRIBUTED NET INVESTMENT INCOME $ -- $ -- $ -- $ --
============================================================================================================
See accompanying notes to financial statements.
11
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FLORIDA TAX-FREE MONEY MARKET FUND
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended June 30,
-------------------------------------------------------------------------------
2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.029 0.023 0.011 0.004 0.008
Net realized gains (losses) on investments 0.000(A) -- (0.000)(A) (0.000)(A) 0.000(A)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.029 0.023 0.011 0.004 0.008
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.029) (0.023) (0.011) (0.004) (0.008)
Distributions from net realized gains -- -- -- (0.000)(A) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.029) (0.023) (0.011) (0.004) (0.008)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
====================================================================================================================================
Total return 2.92% 2.28% 1.09% 0.36% 0.76%
====================================================================================================================================
Net assets at end of year (000's) $ 25,761 $ 27,424 $ 28,144 $ 29,385 $ 29,657
====================================================================================================================================
Ratio of net expenses to average net assets 0.75% 0.75% 0.75% 0.75% 0.69%
Ratio of net investment income to average
net assets 2.88% 2.23% 1.08% 0.35% 0.77%
(A) Amount rounds to less than $0.001.
OHIO INSURED TAX-FREE FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
- ----------------------------------------------------------------------------------------------------------------------
2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 11.45 $ 12.10 $ 11.68 $ 12.36 $ 11.94
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.45 0.46 0.45 0.48 0.49
Net realized and unrealized gains
(losses) on investments 0.03 (0.49) 0.43 (0.50) 0.49
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.48 (0.03) 0.88 (0.02) 0.98
- ----------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.45) (0.46) (0.45) (0.48) (0.49)
Distributions from net realized
gains (0.11) (0.16) (0.01) (0.21) (0.07)
- ----------------------------------------------------------------------------------------------------------------------
Total distributions (0.56) (0.62) (0.46) (0.69) (0.56)
- ----------------------------------------------------------------------------------------------------------------------
Capital contributions -- -- -- 0.03 --
- ----------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 11.37 $ 11.45 $ 12.10 $ 11.68 $ 12.36
======================================================================================================================
Total return (A) 4.19% (0.25%) 7.66% 0.04%(B) 8.43%
======================================================================================================================
Net assets at end of year (000's) $ 56,163 $ 64,266 $ 74,604 $ 77,837 $ 59,683
======================================================================================================================
Ratio of net expenses to average net
assets 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of net investment income to
average net assets 3.87% 3.87% 3.74% 3.94% 4.03%
Portfolio turnover rate 28% 24% 30% 36% 24%
(A) Total returns shown exclude the effect of applicable sales loads.
(B) Total return would have been (0.21%) without the capital contribution made
by the Advisor.
See accompanying notes to financial statements.
12
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
OHIO INSURED TAX-FREE FUND - CLASS C
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------------------------
2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 11.46 $ 12.11 $ 11.69 $ 12.41 $ 11.96
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 0.36 0.37 0.36 0.39 0.40
Net realized and unrealized gains (losses) on investments 0.04 (0.49) 0.43 (0.51) 0.52
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.40 (0.12) 0.79 (0.12) 0.92
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.36) (0.37) (0.36) (0.39) (0.40)
Distributions from net realized gains (0.11) (0.16) (0.01) (0.21) (0.07)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (0.47) (0.53) (0.37) (0.60) (0.47)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 11.39 $ 11.46 $ 12.11 $ 11.69 $ 12.41
===========================================================================================================================
Total return (A) 3.50% (1.00%) 6.86% (1.03%) 7.89%
===========================================================================================================================
Net assets at end of year (000's) $ 5,169 $ 6,728 $ 9,400 $ 9,862 $ 7,388
===========================================================================================================================
Ratio of net expenses to average net assets 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of net investment income to average net assets 3.12% 3.12% 2.99% 3.19% 3.27%
Portfolio turnover rate 28% 24% 30% 36%24%
(A) Total returns shown exclude the effect of applicable sales loads.
OHIO TAX-FREE MONEY MARKET FUND - RETAIL
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------
2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.029 0.023 0.011 0.004 0.008
Net realized gains on investments 0.000(A) -- -- 0.000(A) 0.000(A)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.029 0.023 0.011 0.004 0.008
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.029) (0.023) (0.011) (0.004) (0.008)
Distributions from net realized gains (0.000)(A) -- (0.000)(A) (0.000)(A) --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.029) (0.023) (0.011) (0.004) (0.008)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
==============================================================================================================================
Total return 2.96% 2.31% 1.13% 0.35% 0.78%
==============================================================================================================================
Net assets at end of year (000's) $ 105,148 $ 92,082 $ 99,127 $ 165,145 $ 155,810
==============================================================================================================================
Ratio of net expenses to average net assets 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of net investment income to average net assets 2.92% 2.26% 1.05% 0.35% 0.79%
(A) Amount rounds to less than $0.001.
See accompanying notes to financial statements.
13
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
OHIO TAX-FREE MONEY MARKET FUND - INSTITUTIONAL
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------
2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.032 0.025 0.014 0.006 0.010
Net realized gains on investments 0.000(A) -- -- 0.000(A) 0.000(A)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.032 0.025 0.014 0.006 0.010
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.032) (0.025) (0.014) (0.006) (0.010)
Distributions from net realized gains (0.000)(A) -- (0.000)(A) (0.000)(A) --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.032) (0.025) (0.014) (0.006) (0.010)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
==============================================================================================================================
Total return 3.21% 2.57% 1.39% 0.60% 1.03%
==============================================================================================================================
Net assets at end of year (000's) $ 169,708 $ 183,107 $ 192,346 $ 174,739 $ 266,120
==============================================================================================================================
Ratio of net expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.50%
Ratio of net investment income to average net assets 3.17% 2.50% 1.41% 0.59% 1.02%
(A) Amount rounds to less than $0.001.
TAX-FREE MONEY MARKET FUND - CLASS A
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------
2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.028 0.023 0.011 0.005 0.008
Net realized gains on investments 0.000(A) -- -- 0.000(A) 0.000(A)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.028 0.023 0.011 0.005 0.008
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.028) (0.023) (0.011) (0.005) (0.008)
Distributions from net realized gains -- -- -- (0.000)(A) --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.028) (0.023) (0.011) (0.005) (0.008)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
==============================================================================================================================
Total return 2.88% 2.28% 1.14% 0.50% 0.99%
==============================================================================================================================
Net assets at end of year (000's) $ 16,590 $ 16,279 $ 19,250 $ 20,263 $ 21,375
==============================================================================================================================
Ratio of net expenses to average net assets 0.89% 0.89% 0.89% 0.89% 0.89%
Ratio of net investment income to average net assets 2.85% 2.23% 1.13% 0.48% 0.79%
(A) Amount rounds to less than $0.001.
See accompanying notes to financial statements.
14
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
TAX-FREE MONEY MARKET FUND - CLASS S
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, PERIOD
----------------------------------------------------- ENDED
JUNE 30,
2007 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 0.026 0.020 0.009 0.002 0.001
Net realized gains on investments 0.000(B) -- -- 0.000(B) 0.000(B)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.026 0.020 0.009 0.002 0.001
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.026) (0.020) (0.009) (0.002) (0.001)
Distributions from net realized gains -- -- -- (0.000)(B) --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.026) (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 2.61% 2.01% 0.87% 0.25% 0.32%(C)
===============================================================================================================================
Net assets at end of period (000's) $ 82,925 $ 32,658 $ 13,075 $ 16,381 $ 18,692
===============================================================================================================================
Ratio of net expenses to average net assets 1.15% 1.15% 1.15% 1.15% 1.15%(C)
Ratio of net investment income to average net assets 2.58% 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
JUNE 30, 2007
- --------------------------------------------------------------------------------
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 Funds are registered to offer different classes of shares: Retail class
shares, Institutional class shares, Class A shares, Class C shares, and Class S
shares. The assets of each Fund are segregated, and a shareholder's interest is
limited to the Fund in which shares are held. The Funds' prospectus provides a
description of each Fund's investment objectives, policies, and strategies along
with information on the classes of shares currently being offered.
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.
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.
16
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 (GAAP) from the
application of this Statement relate to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair
value measurements. As of June 30, 2007, 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.
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.
17
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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.
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of income and expenses during the reporting period. Actual results could differ
from those estimates.
FEDERAL INCOME TAX -- It is each Fund's policy to continue to comply with the
special provisions of the Internal Revenue Code available to regulated
investment companies. As provided therein, in any fiscal year in which a Fund so
qualifies and distributes at least 90% of its net income, the Fund will be
relieved of federal income tax on the income distributed. Accordingly, no
provision for income taxes has been made.
In addition, each Fund intends to satisfy conditions, which enable it to
designate the interest income generated by its investment in municipal
securities, which is exempt from federal income tax when received by the Fund,
as exempt-interest dividends upon distribution to shareholders.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare and pay as
dividends in each calendar year at least 98% of its net investment income
(earned during the calendar year) and 98% of its net realized capital gains
(earned during the twelve months ended October 31) plus undistributed amounts
from prior years.
The tax character of distributions paid for the years ended June 30, 2007 and
2006 was as follows:
FLORIDA
TAX-FREE MONEY OHIO INSURED
MARKET FUND TAX-FREE FUND
- --------------------------------------------------------------------------------
2007 2006 2007 2006
- --------------------------------------------------------------------------------
From tax exempt income $ 725,407 $ 613,539 $2,578,309 $2,940,132
From long-term capital gains -- -- 662,907 1,068,116
- --------------------------------------------------------------------------------
$ 725,407 $ 613,539 $3,241,216 $4,008,248
- --------------------------------------------------------------------------------
OHIO TAX-FREE TAX-FREE
MONEY MARKET MONEY MARKET
FUND FUND
- --------------------------------------------------------------------------------
2007 2006 2007 2006
- --------------------------------------------------------------------------------
From tax exempt income $8,286,395 $6,473,158 $1,425,307 $ 972,176
From long-term capital gains 1,521 -- -- --
- --------------------------------------------------------------------------------
$8,287,916 $6,473,158 $1,425,307 $ 972,176
- --------------------------------------------------------------------------------
18
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The following information is computed on a tax basis for each item as of June
30, 2007:
FLORIDA
TAX-FREE MONEY OHIO INSURED
MARKET FUND TAX-FREE FUND
- --------------------------------------------------------------------------------
Tax cost of portfolio investments $ 25,960,344 $ 59,700,394
================================================================================
Gross unrealized appreciation -- 1,634,827
Gross unrealized depreciation -- (306,323)
- --------------------------------------------------------------------------------
Net unrealized appreciation -- 1,328,504
Capital loss carryforward (5,578) --
Undistributed tax exempt income 59,137 36,098
Undistributed ordinary income -- 22,120
Undistributed long-term gains -- 596,039
Other temporary differences (59,137) (36,098)
- --------------------------------------------------------------------------------
Accumulated earnings (deficit) $ (5,578) $ 1,946,663
================================================================================
OHIO TAX-FREE TAX-FREE
MONEY MARKET MONEY MARKET
FUND FUND
- --------------------------------------------------------------------------------
Tax cost of portfolio investments $ 273,759,820 $ 99,302,417
================================================================================
Undistributed tax exempt income 441,247 745
Undistributed ordinary income 788 41
Undistributed long-term gains -- 198
Other temporary differences (441,247) (745)
- --------------------------------------------------------------------------------
Accumulated earnings $ 788 $ 239
================================================================================
The capital loss carryforward as of June 30, 2007 in the table above expires as
follows:
FUND AMOUNT EXPIRATION DATE
- --------------------------------------------------------------------------------
Florida Tax-Free Money Market Fund $ 5,380 June 30, 2013
$ 198 June 30, 2014
- --------------------------------------------------------------------------------
The capital loss carryforwards may be utilized in future years to offset net
realized capital gains, if any, prior to distributing such gains to
shareholders.
During the year ended June 30, 2007, the Florida Tax-Free Money Market Fund
utilized $150 of capital loss carryforwards.
Reclassification 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, 2007, the Ohio Insured Tax-Free Fund
reclassified $106 of net investment loss to accumulated net realized gains on
the Statement of Assets and Liabilities.
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 December15, 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
December 31, 2007. Management is in the process of determining the impact of
adoption.
19
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments and government
securities) were as follows for the year ended June 30, 2007:
OHIO INSURED
TAX-FREE FUND
- -------------------------------------------------------------------------------
Purchases of investment securities $18,790,841
Proceeds from sales and maturities of investment securities $26,077,586
- -------------------------------------------------------------------------------
4. TRANSACTIONS WITH AFFILIATES
MANAGEMENT AGREEMENT
Touchstone Advisors, Inc. (the Advisor) provides general investment supervisory
services for the Funds, under the terms of an Advisory Agreement. Under the
Advisory Agreement, each Fund pays the Advisor a fee, which is computed and
accrued daily and paid monthly, at an annual rate based on average daily net
assets of each Fund as follows:
- --------------------------------------------------------------------------------
0.50% on the first $100 million
0.45% on the next $100 million
0.40% on the next $100 million
0.375% of such 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 under the terms of a Sub-Advisory
Agreement. The Sub-Advisor is a wholly-owned indirect subsidiary of The Western
and Southern Life Insurance Company. The Advisor (not the Funds) pays the
Sub-Advisor a fee for these services.
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
Effective January 1, 2007, the Advisor entered into an Administration and
Accounting Services Agreement with the Trust, whereby the Advisor is responsible
for supplying executive and regulatory compliance services, supervises the
preparation of tax returns, and coordinates the preparation of reports to
shareholders and reports to, and filings with, the Securities and Exchange
Commission and state securities authorities, materials for meetings of the Board
of Trustees, calculating the daily net asset value per share and maintaining the
financial books and records of each Fund. For its services, the Advisor receives
an annual fee of 0.20% of the aggregate average daily net assets of the Trust,
Touchstone Funds Group Trust, Touchstone Investment Trust (excluding
Institutional Money Market Fund), and Touchstone Strategic Trust up to and
including $6 billion; 0.16% of the next $4 billion of aggregate average daily
net assets; and 0.12% of the aggregate average daily net assets of all such
assets in excess of $10 billion. The fee is allocated among the Funds on the
basis of relative daily net assets.
Prior to January 1, 2007, administrative and accounting services were provided
to the Trust by JPMorgan (formerly Integrated Investment Services, Inc.)
pursuant to an Administration Agreement and Accounting Services Agreement under
which the Funds paid JPMorgan a monthly fee and reimbursed JPMorgan for certain
out-of-pocket expenses. Effective January 1, 2007, the Advisor engaged JPMorgan
as the Sub-Administrator to the Trust. JPMorgan provides administrative and
accounting services to the Trust and is compensated directly by the Advisor, not
the Trust.
EXPENSE LIMITATION AGREEMENT
The Trust and the Advisor have entered into an Expense Limitation Agreement to
contractually limit operating expenses of the Florida Tax-Free Money Market
Fund, Ohio Insured Tax-Free Fund, Ohio Tax-Free Money Market Fund, and Tax-Free
Money Market Fund. The maximum operating expense limit in any year with respect
to the Funds is based on a percentage of the average daily net assets of the
Funds. The Advisor has agreed to waive advisory fees and reimburse expenses in
order to maintain expense limitations for the Funds as follows through June 30,
2008:
20
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
CLASS R CLASS I CLASS A CLASS C CLASS S
- ---------------------------------------------------------------------------------------------
Florida Tax-Free Money Market Fund -- -- 0.75% -- --
Ohio Insured Tax-Free Fund -- -- 0.75% 1.50% --
Ohio Tax-Free Money Market Fund 0.75% 0.50% -- -- --
Tax-Free Money Market Fund -- -- 0.89% -- 1.15%
For the year ended June 30, 2007, the Advisor waived investment advisory fees,
administration fees, and/or reimbursed expenses as follows:
OTHER
INVESTMENT OPERATING
ADVISORY EXPENSES ADMINISTRATION
FEES WAIVED REIMBURSED FEES WAIVED
- ----------------------------------------------------------------------------------------------
Florida Tax-Free Money Market Fund $ 11,575 $ 62,877 $ 30,449
Ohio Insured Tax-Free Fund $ -- $ 170,084 $ 84,278
Ohio Tax-Free Money Market Fund $ -- $ 104,730 $ 336,583
Tax-Free Money Market Fund $ -- $ 105,182 $ 67,972
TRANSFER AGENT AGREEMENT
Under the terms of the Transfer Agent Agreement between the Trust and JPMorgan,
JPMorgan maintains the records of 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,
JPMorgan receives a monthly fee per shareholder account from each Fund. In
addition, each Fund pays JPMorgan out-of-pocket expenses including, but not
limited to, postage and supplies.
UNDERWRITING AGREEMENT
Touchstone Securities, Inc. (the Underwriter) is the Funds' principal
underwriter and, as such, acts as the exclusive agent for distribution of the
Funds' shares. Under the terms of the Underwriting Agreement between the Trust
and the Underwriter, the Underwriter earned $5,174 from underwriting and broker
commissions on the sale of Class A shares of the Ohio Insured Tax-Free Fund
during the year ended June 30, 2007. In addition, the Underwriter collected
$1,802 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.
21
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
COMPLIANCE SERVICES AGREEMENT
Under the terms of the Compliance Services Agreement between the Trust and
JPMorgan, JPMorgan provides certain compliance services to the Trust for a fee,
including developing and assisting in implementing a compliance program for
JPMorgan on behalf of the Funds and providing administrative support services to
the Funds' Compliance Program and Chief Compliance Officer. For these services,
JPMorgan receives a quarterly fee from each Fund.
OFFICERS/AFFILIATED COMPANIES
Certain officers of the Trust were also officers of the Advisor, Underwriter
and/or JPMorgan during the year ended June 30, 2007. The Advisor, Underwriter
and Integrated Investment Services, Inc. were each wholly-owned indirect
subsidiaries of The Western and Southern Life Insurance Company
(Western-Southern). On April 1, 2007, Western Southern sold Integrated
Investment Services, Inc. to JPMorgan.
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 the same as
the dollar value of those transactions as shown in the Statements of Changes in
Net Assets. Proceeds and payments on capital shares as shown in the Statements
of Changes in Net Assets for the Ohio Insured Tax-Free Fund are the result of
the following capital share transactions:
OHIO INSURED
TAX-FREE FUND
- --------------------------------------------------------------------------------
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
2007 2006
- --------------------------------------------------------------------------------
CLASS A
Shares sold 129,809 237,282
Shares reinvested 171,567 209,846
Shares redeemed (977,738) (997,466)
- --------------------------------------------------------------------------------
Net decrease in shares outstanding (676,362) (550,338)
Shares outstanding, beginning of year 5,613,995 6,164,333
- --------------------------------------------------------------------------------
Shares outstanding, end of year 4,937,633 5,613,995
================================================================================
CLASS C
Shares sold 12,057 35,097
Shares reinvested 15,528 18,821
Shares redeemed (160,738) (242,714)
- --------------------------------------------------------------------------------
Net decrease in shares outstanding (133,153) (188,796)
Shares outstanding, beginning of year 587,185 775,981
- --------------------------------------------------------------------------------
Shares outstanding, end of year 454,032 587,185
================================================================================
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.
22
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
FLORIDA TAX-FREE MONEY MARKET FUND - JUNE 30, 2007
- --------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
FIXED RATE REVENUE & GENERAL OBLIGATION BONDS -- 29.7%
$ 200,000 FL St Dept Environmental Protection Preservation Rev Ser A 5.000 7/1/07 $ 200,000
150,000 FL St Dept Trans UTGO (Right Of Way-A) Prerefunded @ 101 4.875 7/1/07 151,500
150,000 FL St Dept Trans UTGO Ser B Prerefunded @ 101 5.500 7/1/07 151,500
150,000 FL St Tpk Auth Rev (Dept of Trans) Ser A 5.500 7/1/07 150,000
175,000 FL St Tpk Auth Rev Ser A 5.000 7/1/07 175,000
300,000 LA Pub Facs Auth Hosp Rev (Franciscan Missionaries) Ser C 5.250 7/1/07 300,000
500,000 AMP OH Elect Rev BANS (Woodville Village) 4.350 7/19/07 500,060
250,000 Oak Creek Franklin WI Jt SD UTGO BANS Prerefunded @ 100 4.250 7/25/07 250,000
300,000 Alachua Co FL Pub Impt Rev Ser A 4.000 8/1/07 300,084
300,000 Alachua Co FL Pub Impt Rev Ser B 4.000 8/1/07 300,056
150,000 Hillsborough Co FL Util Ref Rev 4.000 8/1/07 150,058
150,000 MT St Long Range Bldg Ser C UTGO 5.250 8/1/07 150,169
240,000 RI St Cons Dev Ln Ser A UTGO Prerefunded @ 101 5.000 8/1/07 242,636
400,000 AMP OH Elect Rev BANS (Carey Village) 4.400 8/2/07 400,086
100,000 Miami Beach FL Wtr & Swr Rev Prerefunded @ 100 5.400 9/1/07 100,269
165,000 Broward Co FL Wtr & Swr Util Rev Ser B 4.000 10/1/07 165,141
360,000 Kissimmee FL Util Auth Elec Sys Rev 5.000 10/1/07 361,195
500,000 Manatee Co FL Pub Utils Rev 4.000 10/1/07 500,417
400,000 Orange Co FL Tourist Dev Tax Rev 5.000 10/1/07 401,221
400,000 Tampa FL GTD Entitlement Rev 6.000 10/1/07 402,429
750,000 Pinellas Co FL Hlth Facs Auth Rev Baycare A1 5.000 11/15/07 753,706
310,000 Tampa FL Hlth Catholic Hlth Sys East A1 5.500 11/15/07 312,109
100,000 Springfield OH CSD UTGO 4.100 12/1/07 100,167
220,000 Willard OH Var Purp Impt LTGO BANS 4.250 1/23/08 220,482
300,000 Mentor On The Lake OH LTGO BANS 4.150 6/25/08 300,850
300,000 AMP OH Elect Sys BANS (Newton Falls) 4.250 6/30/08 300,633
300,000 Columbiana OH Elec Sys Impt BANS 4.250 7/10/08 300,576
- ----------------------------------------------------------------------------------------------------------------
TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS $ 7,640,344
- ----------------------------------------------------------------------------------------------------------------
FLOATING & VARIABLE RATE DEMAND NOTES -- 67.2%
$1,100,000 Alachua Co FL Hlth Facs (Shands Teaching Hosp) 3.890 7/1/07 $ 1,100,000
1,000,000 Collier Co FL Hlth Fac Auth Hosp Rev (Cleveland Clinic) 3.860 7/1/07 1,000,000
400,000 FL St Brd Ed Muni Secs Tr Rcpts Ser SGA 102 3.930 7/1/07 400,000
1,100,000 Jacksonville FL Elect Auth Rev Ser B 3.860 7/1/07 1,100,000
200,000 Jacksonville FL Hlth Facs Hosp Rev (Baptist Med Ctr) 3.880 7/1/07 200,000
500,000 Manatee Co FL PCR (Florida Pwr & Light Co) 3.900 7/1/07 500,000
1,000,000 Orange Co FL Hlth Facs Auth Rev (Orlando Regl Hlthcare) 3.890 7/1/07 1,000,000
5,000 Sarasota Co FL Pub Hosp (Sarasota Mem Hosp) 3.900 7/1/07 5,000
390,000 Broward Co FL HFA MFH Rev (Jacaranda Village Apts) 3.730 7/4/07 390,000
100,000 Lee Co FL HFA MFH Rev (Forestwood Apts) 3.740 7/4/07 100,000
605,000 Marion Co FL HFA (Paddock Apts) 3.730 7/4/07 605,000
500,000 Nassau Co FL PCR (Rayonier) 3.770 7/4/07 500,000
500,000 Orange Co FL HFA Rev 3.730 7/4/07 500,000
505,000 Pinellas Co FL Edl Facs Auth Rev (Shorecrest Prep) 3.730 7/4/07 505,000
500,000 Port St Lucie FL Util Rev 3.720 7/4/07 500,000
450,000 Volusia Co FL HFA Rev (Fishermans Landing) 3.730 7/4/07 450,000
675,000 Duval Co FL HFA MFH Rev (Glades Apts) 3.730 7/5/07 675,000
450,000 Duval Co FL HFA MFH Rev (Lighthouse Bay Apts) 3.730 7/5/07 450,000
100,000 FL Higher Edl Facs Auth Rev (St Thomas Univ) 3.890 7/5/07 100,000
10,000 Gulf Breeze FL Loc Govt Loan Prog B 3.750 7/5/07 10,000
350,000 Gulf Breeze FL Muni Bond Fund Ser A 3.770 7/5/07 350,000
100,000 Highlands Co FL Hlth Facs Auth Rev (Adventist Hlth) 3.740 7/5/07 100,000
250,000 Hillsborough Co FL Rev (Carrollwood Day) 3.730 7/5/07 250,000
1,000,000 Jacksonville FL Econ Dev Hlthcare Facs Rev 3.800 7/5/07 1,000,000
500,000 Lexington-Fayette Co KY Urban Govt (Liberty Ridge) 3.830 7/5/07 500,000
23
- --------------------------------------------------------------------------------
FLORIDA TAX-FREE MONEY MARKET FUND (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
FLOATING & VARIABLE RATE DEMAND NOTES -- 67.2% (CONTINUED)
$ 100,000 Palm Beach Co FL Edl Facs Auth Rev (Atlantic College) 3.750 7/5/07 $ 100,000
900,000 Palm Beach Co FL Rev (Henry Morrison Flagler) 3.760 7/5/07 900,000
800,000 Palm Beach Co FL Rev (Morse Oblig Group) 3.750 7/5/07 800,000
200,000 Seminole Co FL IDA (FL Living Nursing Ctr) 3.930 7/5/07 200,000
1,000,000 Seminole Co FL IDA Rev (Master Academy) 3.750 7/5/07 1,000,000
500,000 Storm Lake IA Higher Ed Facs Rev (Buena Vista Univ) 3.880 7/5/07 500,000
500,000 Univ of North FL Fndtn Inc Rev Cap Impt 3.730 7/5/07 500,000
100,000 Univ of North FL Rev (Parking Sys) 3.730 7/5/07 100,000
930,000 Lee Co FL IDA Hlthcare Facs Rev (Bonita Cmnty Hlth) 3.790 7/6/07 930,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL FLOATING & VARIABLE RATE DEMAND NOTES $ 17,320,000
- ----------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 3.9%
$1,000,000 Jacksonville FL Hlth Facs Auth Rev (Baptist Med Ctr) 3.650 8/6/07 $ 1,000,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.8%
(Amortized Cost $25,960,344) $ 25,960,344
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.8%) (199,229)
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 25,761,115
================================================================================================================
See accompanying notes to portfolios of investments and notes to financial
statements.
24
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
OHIO INSURED TAX-FREE FUND - JUNE 30, 2007
- --------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
FIXED RATE REVENUE & GENERAL OBLIGATION BONDS -- 99.3%
$ 74,906 Columbus OH Special Assessment GO 5.050 04/15/08 $ 75,633
1,035,000 Reading OH Rev (St Mary's Ed Institute) 5.550 02/01/10 1,073,523
55,500 Cuyahoga Co OH Mtg Rev (West Tech Apts) 5.100 09/20/10 55,206
1,000,000 Hilliard OH CSD GO Prerefunded @ 101 5.750 12/01/10 1,066,800
525,000 Kings OH LSD GO Prerefunded @ 101 6.050 12/01/10 565,068
1,000,000 Summit Co OH GO Prerefunded @ 101 6.000 12/01/10 1,073,400
120,000 Cuyahoga Co OH Hosp Rev (Univ Hosp) Escrowed to Maturity 9.000 06/01/11 132,608
1,000,000 Lorain Co OH Hosp Rev (Catholic Hlth) 5.625 10/01/11 1,058,930
1,000,000 Hamilton Co OH Swr Sys Rev 5.500 12/01/11 1,062,710
1,000,000 Pickerington OH LSD UTGO Prerefunded @ 100 5.250 12/01/11 1,051,830
1,000,000 Monroe OH LSD UTGO Prerefunded @ 100 5.000 12/01/12 1,048,280
1,750,000 Eaton OH CSD GO Prerefunded @ 101 5.000 12/01/13 1,848,613
1,200,000 Ross Twp OH LSD UTGO Prerefunded @ 100 5.000 12/01/13 1,265,940
1,480,000 Lakewood OH CSD GO Prerefunded @ 100 5.250 12/01/14 1,593,812
660,000 West Chester Twp OH GO 5.500 12/01/14 704,596
400,000 Warren OH Wtr Wrks Rev 5.500 11/01/15 428,032
925,000 Buckeye Valley OH LSD GO 6.850 12/01/15 1,027,786
620,000 Columbus-Polaris Hsg Corp Rev Prerefunded @ 100 7.400 01/01/16 703,973
2,750,000 Little Miami OH LSD GO Prerefunded @ 100 5.000 12/01/16 2,935,102
1,260,000 Cleveland OH Arpt Sys Rev 5.125 01/01/17 1,279,177
1,000,000 Lorain Co OH Hosp Rev (Catholic Hlth Partners) 5.500 09/01/19 1,047,710
1,000,000 Lucas Co OH Hosp Rev (Promedica Hlth Grp) 5.625 11/15/19 1,044,170
1,085,000 West Clermont OH LSD GO 5.000 12/01/19 1,125,069
850,000 West Chester Twp OH GO 5.000 12/01/20 880,940
1,210,000 Cincinnati OH Tech College Rev 5.250 10/01/21 1,277,821
1,185,000 Akron OH Impt GO 5.000 12/01/22 1,225,705
765,000 Fairfield Co OH GO 5.000 12/01/22 790,796
250,000 OH St Higher Ed Fac (Xavier Univ) 5.000 05/01/23 258,013
1,050,000 Harrison OH Wst Wtr Sys Rev 5.250 11/01/23 1,106,553
1,000,000 Akron OH Var Purp GO 5.000 12/01/23 1,032,870
450,000 Columbus OH TIF Rev (Polaris) 4.750 12/01/23 456,611
865,000 Fairfield Co OH GO 5.000 12/01/23 900,543
1,000,000 OH St Higher Ed Fac Rev (Univ Dayton) 5.000 12/01/23 1,035,050
2,000,000 South-Western CSD UTGO 4.750 12/01/23 2,037,980
1,000,000 Toledo OH CSD GO 5.000 12/01/23 1,033,220
1,000,000 Hamilton Co OH Hosp Rev (Childrens Hosp Med Ctr) 5.000 05/15/24 1,030,440
400,000 Springboro OH Swr Sys Rev 5.000 06/01/24 413,932
825,000 Parma OH GO 4.750 12/01/24 839,396
1,000,000 Columbus OH Arpt Rev 5.000 01/01/25 1,035,190
1,040,000 Franklin Co OH Hosp Rev (Childrens Hosp) 5.000 05/01/25 1,073,966
810,000 Big Walnut OH LSD GO 5.000 12/01/25 838,909
1,885,000 Kings OH LSD UTGO 5.000 12/01/25 1,956,065
580,000 New Albany Plain OH LSD GO 5.000 12/01/25 596,211
1,000,000 Univ of Cincinnati OH General Rcpts 4.750 06/01/26 1,011,570
1,500,000 Richland Co OH Hosp Facs Rev (MedCentral Hlth Sys) 5.125 11/15/26 1,523,925
1,995,000 Butler CO OH Trans Dist 4.750 12/01/26 2,012,895
1,085,000 Elyria OH Var Purp GO 5.000 12/01/26 1,129,637
1,090,000 Fairborn OH CSD GO 5.000 12/01/26 1,133,709
3,000,000 OH St Higher Ed Fac Rev (Univ Dayton) 5.000 12/01/26 3,116,399
2,100,000 Oregon OH CSD GO 5.000 12/01/27 2,172,072
1,665,000 Wauseon OH Exempted Village SD GO 4.750 12/01/27 1,682,016
650,000 Univ of Cincinnati OH General Rcpts 5.000 06/01/28 677,346
1,185,000 Delaware OH GO 5.000 12/01/28 1,231,902
900,000 Licking Heights OH LSD GO 6.400 12/01/28 1,118,628
1,000,000 Mason OH Swr Sys Rev 5.000 12/01/28 1,030,620
- ----------------------------------------------------------------------------------------------------------------
TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS $ 60,928,898
- ----------------------------------------------------------------------------------------------------------------
25
- --------------------------------------------------------------------------------
OHIO INSURED TAX-FREE FUND (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
FLOATING & VARIABLE RATE DEMAND NOTES -- 0.2%
$ 100,000 Univ of Akron OH General Rcpts 3.740 07/05/07 $ 100,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 99.5%
(Amortized Cost $59,700,394) $ 61,028,898
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.5% 303,469
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 61,332,367
================================================================================================================
See accompanying notes to portfolios of investments and notes to financial
statements.
26
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
OHIO TAX-FREE MONEY MARKET FUND - JUNE 30, 2007
- --------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
FIXED RATE REVENUE & GENERAL OBLIGATION BONDS -- 23.5%
$1,000,000 Columbiana OH Elect Sys Impt Rev BANS 4.300 07/11/07 $ 1,000,067
995,000 Columbiana OH Wtr Main Impt BANS 4.400 08/08/07 995,253
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 3,160,979
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 09/20/07 820,444
3,500,000 Cuyahoga Heights OH UTGO BANS 4.500 09/27/07 3,506,614
796,000 Oakwood OH LTGO BANS 4.050 09/27/07 796,467
1,000,000 OH St Higher Ed Rev (Case Western Reserve Univ)
Prerefunded @ 101) 5.125 10/01/07 1,013,273
2,500,000 Vermilion OH Var Purp LTGO BANS 4.250 10/11/07 2,503,886
750,000 Ontario OH Wtr Sys Impt LTGO BANS 4.000 10/17/07 750,540
2,045,000 Kent OH Var Purp LTGO BANS 4.250 10/18/07 2,048,877
1,455,000 AMP OH Var Purp RANS 3.650 11/01/07 1,455,000
2,500,000 Canal Winchester OH LTGO BANS (Diley Road) 4.900 11/07/07 2,507,741
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 1,001,529
955,000 AMP OH Elect Rev BANS (Amherst) 3.700 11/29/07 955,000
1,640,000 AMP OH Elect Rev BANS (Bowling Green) 3.700 11/29/07 1,640,000
3,000,000 Deerfield Twp OH Var Purp LTGO BANS 3.610 11/29/07 3,000,000
1,600,000 Niles OH Wtr Sys Impt LTGO BANS 4.250 11/30/07 1,602,917
250,000 Franklin Co OH Convention Facs Auth Rev Prerefunded @ 101 5.000 12/01/07 253,824
1,780,000 AMP OH Elect Rev BANS (Edgerton) 4.000 12/06/07 1,781,499
1,610,000 Oakwood OH Street Impt LTGO BANS 4.150 12/06/07 1,613,049
2,180,000 North Baltimore OH LSD BANS 4.350 12/13/07 2,185,754
3,600,000 Morgan OH LSD UTGO BANS 4.500 12/19/07 3,608,245
1,500,000 Willard OH BANS LTGO 4.250 01/23/08 1,503,286
885,000 Southwest Regl Wtr Dist OH Rev BANS 4.250 03/12/08 887,984
1,200,000 Mason OH Golf Course Acq LTGO BANS 4.250 03/13/08 1,204,882
3,800,000 Niles OH LTGO BANS 4.125 03/13/08 3,808,366
1,500,000 Hamilton Twp OH UTGO BANS 4.250 03/20/08 1,505,218
2,560,000 Henry Co OH Var Purp LTGO 4.500 03/21/08 2,573,400
3,000,000 Ironton OH CSD UTGO BANS 4.300 05/28/08 3,009,157
3,880,000 Middletown OH CSD UTGO BANS 4.250 06/05/08 3,895,638
2,100,000 AMP OH Elect Sys BANS (Newton Falls) 4.250 06/30/08 2,104,416
500,000 Columbiana OH Elec Sys Impt BANS 4.250 07/10/08 500,960
- ----------------------------------------------------------------------------------------------------------------
TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS $ 64,497,820
- ----------------------------------------------------------------------------------------------------------------
FLOATING & VARIABLE RATE DEMAND NOTES -- 72.7%
$2,030,000 Cuyahoga Co OH IDR (S&R Playhouse Rlty) 3.750 07/01/07 $ 2,030,000
5,250,000 Montgomery Co OH (Miami Valley Hosp) 3.860 07/01/07 5,250,000
1,720,000 OH St Air Quality Rev PCR (OH Edison) 3.900 07/01/07 1,720,000
300,000 OH St Higher Ed Fac (Case Western) 3.900 07/01/07 300,000
2,100,000 OH St PCR (Sohio Water) 3.880 07/01/07 2,100,000
4,050,000 OH St Wtr Dev Auth Rev (FirstEnergy) Ser A 3.900 07/01/07 4,050,000
810,000 Centerville OH Hthcare (Bethany Luth Village) 3.780 07/04/07 810,000
3,000,000 Cleveland OH Arpt Sys Rev Tr Rcpts SGA 126 3.780 07/04/07 3,000,000
1,515,000 Cuyahoga Co OH Ed Fac (Utd Cerebral Palsy Assn) 3.800 07/04/07 1,515,000
325,000 Erie Co OH IDR (Toft Dairy Inc) 3.800 07/04/07 325,000
585,000 Hamilton Co OH Hlth Facs (St Aloysius Orphanage) 3.800 07/04/07 585,000
1,300,000 Hamilton Co OH Hosp Facs Rev (Eliz Gamble) 3.700 07/04/07 1,300,000
2,900,000 Kent St Univ Gen Rcpts Rev 3.700 07/04/07 2,900,000
3,800,000 Lake Co OH Hosp Facs Rev (Lake Hosp) 3.820 07/04/07 3,800,000
1,510,000 Lorain Co OH IDR (EMH Regl Med Ctr) 3.800 07/04/07 1,510,000
4,000,000 Middletown OH Dev Rev (Bishop-Fenwick HS) 3.830 07/04/07 4,000,000
1,900,000 Montgomery Co OH EDR (Dayton Art Inst) 3.830 07/04/07 1,900,000
27
- --------------------------------------------------------------------------------
OHIO TAX-FREE MONEY MARKET FUND (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
FLOATING & VARIABLE RATE DEMAND NOTES -- 72.7% (CONTINUED)
$6,900,000 Montgomery Co OH Rev (Catholic Hlth) Ser B 3.780 07/04/07 $ 6,900,000
2,550,000 OH St Air Quality Dev Auth Rev (FirstEnergy) Ser B 3.780 07/04/07 2,550,000
4,200,000 OH St Air Quality Rev (OH Edison) Ser A 3.750 07/04/07 4,200,000
4,500,000 OH St Wtr Dev Auth PCR Facs (First Energy) 3.750 07/04/07 4,500,000
3,480,000 OH Wtr Dev Auth Rev (Purewater) 3.750 07/04/07 3,480,000
150,000 Orrville OH Hosp Facs Rev (Orrville Hosp Fdtn) 3.850 07/04/07 150,000
800,000 Puerto Rico Elect Pwr Auth Tr Rcpts Ser SGA 43 3.740 07/04/07 800,000
900,000 Scioto Co OH Hosp Rev (VHA Ctr) Ser G 3.770 07/04/07 900,000
3,700,000 ABN AMRO MuniTOPS Ctfs Tr 2001-03 (Westerville OH CSD) 3.760 07/05/07 3,700,000
5,000,000 ABN AMRO MuniTOPS Ctfs Tr 2006-4 3.780 07/05/07 5,000,000
4,040,000 Akron Bath Copley OH Hosp (Summa Hlth) Ser B 3.750 07/05/07 4,040,000
500,000 Ashtabula Co OH Hosp (Ashtabula Co Med Ctr) 3.750 07/05/07 500,000
3,800,000 Athens Co OH Port Auth (Hsg for OH Univ) 3.790 07/05/07 3,800,000
1,925,000 Butler Co OH Hlthcare Facs Rev (Lifesphere) 3.760 07/05/07 1,925,000
1,085,000 Butler Co OH Hosp Facs (Berkeley Sq Ret) 3.770 07/05/07 1,085,000
2,500,000 Cambridge OH Hosp Facs Rev (SE OH Regl Med) 3.800 07/05/07 2,500,000
2,000,000 Carroll Co OH Hlthcare Facs (St Johns Village) 3.800 07/05/07 2,000,000
4,425,000 Clark Co OH MFH Rev (OH Masonic Home) 3.750 07/05/07 4,425,000
1,175,000 Cleveland OH Waterworks Rev Ser B 3.730 07/05/07 1,175,000
90,000 Cochocton Co OH Hosp (Echoing Hills Village) 4.100 07/05/07 90,000
2,040,000 Columbus OH Regl Arpt Auth Rev 3.750 07/05/07 2,040,000
300,000 Columbus OH Swr Rev 3.720 07/05/07 300,000
1,380,000 Cuyahoga Co OH Civic Facs (West Side Ecumenical) 3.800 07/05/07 1,380,000
4,160,000 Cuyahoga Co OH Cont Care Facs Rev 3.730 07/05/07 4,160,000
1,315,000 Cuyahoga Co OH EDR (Cleveland Botanical) 3.750 07/05/07 1,315,000
2,940,000 Delaware Co OH Hlth Facs (Sarah Moore Home) 3.880 07/05/07 2,940,000
1,850,000 Franklin Co OH EDR (Dominican Sisters) 3.800 07/05/07 1,850,000
1,195,000 Franklin Co OH Hlth Facs (Heinzerling Fndtn) 3.920 07/05/07 1,195,000
1,900,000 Franklin Co OH Hosp Rev (Childrens Hosp) 3.730 07/05/07 1,900,000
825,000 Franklin Co OH IDR (OH Girl Scout Council) 4.250 07/05/07 825,000
300,000 Hamilton Co OH EDR (Contemporary Arts Ctr) 3.770 07/05/07 300,000
2,500,000 Hamilton Co OH Hlthcare (Life Enriching Cmntys) Ser B 3.750 07/05/07 2,500,000
1,515,000 Hamilton Co OH Hlthcare Facs Rev (Episcopal) 3.740 07/05/07 1,515,000
1,150,000 Hamilton Co OH Hosp (Beechwood Home) 3.770 07/05/07 1,150,000
2,943,000 Hamilton OH MFH Afford Hsg (Knollwood Village) Ser A 3.790 07/05/07 2,943,000
2,524,000 Hancock Co OH MFH (Crystal Glen Apts) Ser A 3.750 07/05/07 2,524,000
4,000,000 Henry Co OH Fac Impt Rev (Co Hosp) 3.800 07/05/07 4,000,000
4,000,000 Highland Co OH Jt Twp Hosp Facs Rev 3.760 07/05/07 4,000,000
2,000,000 Jackson OH Hosp Facs Rev (Holzer Cons Hlth Sys) 3.780 07/05/07 2,000,000
2,695,000 Lima OH Hosp Facs (Lima Mem Hosp) 3.800 07/05/07 2,695,000
400,000 Lucas Co OH Hlth Facs (Lutheran Homes) 3.770 07/05/07 400,000
25,000 Lucas Co OH Hosp Rev (Sunshine Childrens Home) 3.900 07/05/07 25,000
5,000,000 Mahoning Co OH Hosp Facs Rev (Forum Hlth Oblig) 3.750 07/05/07 5,000,000
265,000 Mahoning Co OH IDR (OH Heart Inst) 4.250 07/05/07 265,000
155,000 Marion Co OH Hosp Pooled Lease Rev 3.790 07/05/07 155,000
1,045,000 Mason OH TIF Rev (Central Parke of Mason) 3.820 07/05/07 1,045,000
995,000 Montgomery Co OH Hlth Facs (Cmnty Blood Ctr) 4.100 07/05/07 995,000
1,500,000 Montgomery Co OH Rev (St Vincent de Paul) 3.750 07/05/07 1,500,000
700,000 OH St Higher Ed Fac Pooled Fin Rev (1997) 3.830 07/05/07 700,000
2,700,000 OH St Higher Ed Fac Pooled Fin Rev (1998) 3.830 07/05/07 2,700,000
1,275,000 OH St Higher Ed Fac Pooled Fin Rev (1999) 3.830 07/05/07 1,275,000
5,000,000 OH St Higher Ed Fac Pooled Fin Rev Ser B 3.750 07/05/07 5,000,000
2,200,000 OH St Higher Ed Fac Rev (Marietta College) 3.760 07/05/07 2,200,000
200,000 OH St Higher Ed Rev (Malone College) 3.800 07/05/07 200,000
3,610,000 OH St Tpk Rev Fltr Ctfs Ser 71 3.790 07/05/07 3,610,000
2,100,000 OH Univ Gen Rcpts Rev 3.750 07/05/07 2,100,000
28
- --------------------------------------------------------------------------------
OHIO TAX-FREE MONEY MARKET FUND (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
FLOATING & VARIABLE RATE DEMAND NOTES -- 72.7% (CONTINUED)
$ 700,000 Ottawa Co OH Hosp Facs Rev (Luther Home of Mercy) Ser 97 3.850 07/05/07 $ 700,000
1,300,000 Ottawa Co OH Hosp Rev (Lutheran Home of Mercy) Ser 99 3.850 07/05/07 1,300,000
3,535,000 Port Gtr Cincinnati Dev Auth Rev (Cincinnati Zoo) 3.830 07/05/07 3,535,000
710,000 Port Gtr Cincinnati Dev Auth Rev (Cincinnati Zoo) 3.910 07/05/07 710,000
3,450,000 Puerto Rico Childrens Tr Fund Putter Ser 149 3.770 07/05/07 3,450,000
3,815,000 Sharonville OH IDR (Duke Rlty LP) 3.870 07/05/07 3,815,000
2,320,000 Summit Co OH Civic Facs Rev (YMCA) 3.800 07/05/07 2,320,000
1,260,000 Summit Co OH Hlth Facs (Evant Inc) 3.850 07/05/07 1,260,000
3,995,000 Univ of Akron Gen Rcpts Fltr Ctfs Ser 165 3.790 07/05/07 3,995,000
3,610,000 Univ of Akron Gen Rcpts Ser 2004 3.740 07/05/07 3,610,000
475,000 Univ of Cincinnati OH Gen Rcpts Ser B 3.740 07/05/07 475,000
1,600,000 Warren Co OH IDR (Liquid Container) 3.740 07/05/07 1,600,000
1,685,000 Westlake OH Hlthcare Fac (Lutheran Home) 3.750 07/05/07 1,685,000
4,720,000 Woodlawn OH EDR (Goodwill Inds) 3.770 07/05/07 4,720,000
1,360,000 Miami Co OH Hosp Facs (Upper Valley Med Ctr) 3.790 07/06/07 1,360,000
5,700,000 Hamilton Co OH IDR (ADP) 3.750 07/15/07 5,700,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL FLOATING & VARIABLE RATE DEMAND NOTES $199,752,000
- ----------------------------------------------------------------------------------------------------------------
ADJUSTABLE RATE PUT BONDS -- 3.4%
$2,635,000 Cuyahoga Co OH IDR (Halle Office Bldg) 4.015 10/01/07 $ 2,635,000
3,000,000 ABN AMRO MuniTOPS Ctfs Tr 2006-37, 144A 3.750 10/04/07 3,000,000
755,000 Clermont Co OH EDR (John Q Hammons/Clermont Hills) 4.050 11/01/07 755,000
1,935,000 Richland Co OH IDR (Mansfield Sq Ltd) 3.950 11/15/07 1,935,000
415,000 Gallia Co OH IDR (Jackson Pike Assoc) 4.000 12/15/07 415,000
770,000 McDonald Tax Exempt Mtge Trust 4.350 12/17/07 770,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL ADJUSTABLE RATE PUT BONDS $ 9,510,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 99.6%
(Amortized Cost $273,759,820) $273,759,820
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4% 1,095,949
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $274,855,769
================================================================================================================
See accompanying notes to portfolios of investments and notes to financial
statements.
29
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
TAX-FREE MONEY MARKET FUND - JUNE 30, 2007
- --------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
FIXED RATE REVENUE & GENERAL OBLIGATION BONDS -- 18.4%
$ 100,000 DE Trans Auth Rev 5.500 07/01/07 $ 100,000
150,000 GA St Tollway Auth Rev (GA 400) 5.000 07/01/07 150,000
150,000 KY St Tpk Auth EDR 5.500 07/01/07 150,000
250,000 MA St Hlth & Edl Facs (Southcoast Hlth Sys) 5.500 07/01/07 250,000
250,000 Maricopa Co AZ SD # 006 UTGO (Washington Elem) Prerefunded
@ 100 4.750 07/01/07 250,000
160,000 VA College Bldg Auth (Marymount Univ) 4.300 07/01/07 160,000
150,000 WA St Pub Pwr Supply (Nuclear Proj No 2) ETM 6.000 07/01/07 150,000
200,000 WA St Pub Pwr Supply Ref (Nuclear) Ser A Prerefunded @ 102 5.250 07/01/07 204,000
150,000 PCS Bldg Corp Ind First Mtg 4.000 07/05/07 150,005
420,000 Columbiana OH Elect Sys Impt Rev BANS 4.300 07/11/07 420,028
200,000 Gateway PA SD UTGO Prerefunded @ 100 5.250 07/15/07 200,121
150,000 Tarrant Co TX LTGO Ref & Impt 4.375 07/15/07 150,024
1,000,000 AMP OH Elect Sys Rev BANS (Woodville Village) 4.350 07/19/07 1,000,120
500,000 Falmouth MA LTGO BANS 4.500 07/20/07 500,117
250,000 Hamilton Co IN Pub Bldg Corp Ref (First Mtg) 4.500 07/20/07 250,099
510,000 Kirtland OH UTGO BANS 4.150 07/25/07 510,066
1,000,000 Oak Creek-Franklin WS Jt SD UTGO Prerefunded @ 100 4.250 07/25/07 1,000,000
100,000 MN St UTGO 4.875 08/01/07 100,101
200,000 NV St UTGO Subser 1 4.750 08/01/07 200,186
350,000 Philadelphia PA Wtr & Wastewtr Rev Ser A Prerefunded @ 102 5.250 08/01/07 357,433
320,000 South Bend IN Ripley Sch Bldg Corp First Mtg Prerefunded @ 101 5.500 08/01/07 323,686
250,000 TX St Pub Fin Auth Bldg Rev 6.000 08/01/07 250,499
200,000 Wiseburn CA SD UTGO Ser A Prerefunded @ 102 5.000 08/01/07 204,164
425,000 AMP OH Elect Sys Rev BANS (Carey Village) 4.400 08/02/07 425,091
100,000 Denton TX ISD Bldg & Ref UTGO 4.050 08/15/07 100,048
500,000 Albany MN ISD No 745 UTGO 4.500 09/03/07 500,503
250,000 Dist of Columbia Rev (George Wash Univ) 5.500 09/15/07 250,918
745,000 AMP OH Elect Sys Rev BANS (Hubbard) 3.850 09/27/07 745,000
200,000 Dist of Columbia Rev (Howard Univ) 5.500 10/01/07 200,926
100,000 Milwaukee Co WI Ref Ser A UTGO 4.000 10/01/07 100,075
100,000 MS St Gaming Co Hwy Impts UTGO 5.000 10/01/07 100,308
300,000 NJ Casino Reinvestment Dev Auth ETM 6.000 10/01/07 301,737
300,000 MI St Bldg Auth Rev Facs Ser II Prerefunded @ 101 5.500 10/15/07 304,542
705,000 IN Hlth Fac (Charity Oblig Group) Prerefunded @ 100 5.000 11/01/07 708,015
200,000 OH St Pub Facs Com Higher Ed Prerefunded @ 100 4.750 11/01/07 200,701
150,000 Utah Co UT Sales Tax Rev Ref 4.000 11/01/07 150,047
700,000 Celina OH LTGO Var Purp Nts 4.625 11/14/07 701,964
400,000 PA St UTGO 5.375 11/15/07 402,241
290,000 Pinellas Co FL Hlth Facs (Baycare Hlth) 5.000 11/15/07 291,433
175,000 IL St UTGO Ser 1 5.500 12/01/07 176,293
500,000 Jones Co MS Hosp (South Cent Regl Med Ctr) Prerefunded @ 100 5.500 12/01/07 503,611
250,000 Snohomish Co WA SD No 002 UTGO 4.350 12/01/07 250,780
1,250,000 Forest Park OH Var Purp BANS 4.270 12/27/07 1,252,933
500,000 Chicago IL LTGO ETM 5.000 01/01/08 502,763
1,005,000 AMP OH Inc (Seville Village) 4.250 01/17/08 1,007,138
500,000 Willard OH LTGO Purp Impt BANS 4.250 01/23/08 501,095
160,000 Houston TX LTGO Ser C 7.000 03/01/08 163,151
600,000 Mentor On The Lake OH LTGO BANS 4.150 06/25/08 601,700
450,000 AMP OH Elect Sys BANS (Newton Falls) 4.250 06/30/08 450,949
420,000 Columbiana OH Elec Sys Impt BANS 4.250 07/10/08 420,806
- ----------------------------------------------------------------------------------------------------------------
TOTAL FIXED RATE REVENUE & GENERAL OBLIGATION BONDS $ 18,345,417
- ----------------------------------------------------------------------------------------------------------------
30
- --------------------------------------------------------------------------------
TAX-FREE MONEY MARKET FUND (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
FLOATING & VARIABLE RATE DEMAND NOTES -- 79.0%
$ 935,000 Arvada CO Wtr Sys Rev 3.900 07/01/07 $ 935,000
2,500,000 Berkeley Co SC Exempt Fac Indl Rev 3.960 07/02/07 2,500,000
4,500,000 Decatur AL Indl Dev Brd (BP Amoco Chem Co) 3.960 07/02/07 4,500,000
300,000 Forsyth MT PCR (Pacificorp) 3.900 07/02/07 300,000
2,700,000 Harris Co TX Hlth Facs Dev Rev (TX Children's Hosp) 3.920 07/02/07 2,700,000
950,000 ID Hlth Facs Auth Rev ( St Lukes Regl Med Ctr) 3.940 07/02/07 950,000
4,400,000 Jackson Co MS Port Fac Rev (Chevron USA Inc) 3.900 07/02/07 4,400,000
1,200,000 Loudoun Co VA IDA Rev (Howard Hughes Med) Ser C 3.880 07/02/07 1,200,000
4,500,000 MA St Hlth & Ed Facs Auth Rev (Children's Hosp) Ser L-2 3.900 07/02/07 4,500,000
1,900,000 MaComb Co MI Hosp Fin Auth Rev (Mt Clemens) Ser A-1 3.880 07/02/07 1,900,000
1,100,000 Manatee Co FL PCR (FL Pwr & Light Co) 3.900 07/02/07 1,100,000
4,500,000 NH Hlth & Ed Facs Auth Rev (Dartmouth College) Ser A 3.900 07/02/07 4,500,000
100,000 OH St Higher Ed Fac Rev (Case Western) 3.900 07/02/07 100,000
1,100,000 OH St Solid Waste Rev (BP Prod North Amer) 3.950 07/02/07 1,100,000
4,500,000 Orange Co FL Hlth Facs Auth Rev (Orlando Regl Hlth Care)
Ser A1 3.900 07/02/07 4,500,000
4,480,000 Putnam Co FL PCR Dev Auth (FL Pwr & Light Co) 3.900 07/02/07 4,480,000
3,600,000 Sarasota Co FL Pub Hosp (Sarasota Mem Hosp) 3.900 07/02/07 3,600,000
3,675,000 Sarpy Co NE Hlth Facs Auth Hosp Rev (Immanuel Hlth Sys) Ser 3.920 07/02/07 3,675,000
3,000,000 Sweetwater Co WY Environmental Impt Rev (Pacificorp) 3.940 07/02/07 3,000,000
2,205,000 Univ Athletic Assn Inc (FL Athletic Prog Rev) 3.900 07/02/07 2,205,000
4,500,000 Univ MI Univ Hosp Revs Ser A 3.900 07/02/07 4,500,000
2,500,000 WA St Hlth Care Facs Auth Rev (Multicare Hlth Sys) Ser D 3.920 07/02/07 2,500,000
400,000 Bloomington IL Normal Arpt Auth 4.100 07/04/07 400,000
1,100,000 Scio Twp MI EDR (ADP Inc) 4.240 07/04/07 1,100,000
585,000 Ulster Co NY IDA IDR (Viking Industries Inc) Ser A 3.870 07/04/07 585,000
1,000,000 ABN AMRO MuniTOPS Ctfs Tr 2006-56 (Frisco TX) 3.790 07/05/07 1,000,000
225,000 Akron Bath Copley OH Hosp (Visiting Nurse Svcs) 3.850 07/05/07 225,000
240,000 CA Infra EDB IDR (Metrotile Mfg) Ser A 3.990 07/05/07 240,000
100,000 CA Statewide Cmntys IDR (American Modular Sys) 3.780 07/05/07 100,000
100,000 Catawba Co NC Ind Fac (Lucky 7 Dev Grp) 3.890 07/05/07 100,000
1,000,000 Cl B Rev Ctfs Ser 2006-1 3.950 07/05/07 1,000,000
490,000 CO HFA EDR (Casarosa & Denver Gasket Inc) 3.990 07/05/07 490,000
635,000 Eagan MN Rev RANS 3.780 07/05/07 635,000
260,000 Fargo ND CDR Rev (Kelly Inns Fargo) 3.900 07/05/07 260,000
500,000 Hailey ID IDC Rev (Rocky Mountain Hardware) 3.930 07/05/07 500,000
1,000,000 Highland Co OH Jt Twp Hosp Dist Facs Rev Var Ref 3.760 07/05/07 1,000,000
867,000 Indianapolis IN EDR (Pedcor Invts Waterfront-B) 4.050 07/05/07 867,000
740,000 Indianapolis IN MFH Rev (Nora Commons) 3.930 07/05/07 740,000
225,000 Johnston Co NC IDA PCR (Inolex Chem Co) 3.930 07/05/07 225,000
280,000 Lake Co IL Cmnty SD #73 Putter Ser 329 3.810 07/05/07 280,000
390,000 Lancaster NE IDR (Garner Inds) Ser B 3.830 07/05/07 390,000
100,000 Lemoore CA COP (Muni Golf Course) 3.830 07/05/07 100,000
500,000 Lexington-Fayette Urban Co KY Govt IBR (Liberty Ridge) 3.830 07/05/07 500,000
2,110,000 Lexington-Fayette Urban Co KY Rev IBR (Eastland Pkwy) 3.830 07/05/07 2,110,000
245,000 MA St Ind Fin Agy Rev (Lower Mills Assoc LP) 3.830 07/05/07 245,000
240,000 Maricopa Co AZ IDA Hsg Rev (San Angelin Apts) 3.990 07/05/07 240,000
95,000 Montgomery Co OH EDR (Benjamin & Marian) 3.800 07/05/07 95,000
685,000 Oakland CA Liq Fac Rev (Assoc Bay Area Govt) 3.840 07/05/07 685,000
550,000 Ottawa Co OH Hosp Facs Rev (Luther Home of Mercy) Ser 97 3.850 07/05/07 550,000
1,440,000 Rev Bd Ctfs Ser 04-13 (Centennial East Apts) 3.950 07/05/07 1,440,000
1,000,000 Southglenn Met Dist CO Rev 3.780 07/05/07 1,000,000
640,000 St Charles Co MO IDA Rev (National Cart) Ser A 3.900 07/05/07 640,000
1,700,000 Storm Lake IA High Ed Facs Rev (Buena Vista) 3.880 07/05/07 1,700,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL FLOATING & VARIABLE RATE DEMAND NOTES $ 78,587,000
- ----------------------------------------------------------------------------------------------------------------
31
- --------------------------------------------------------------------------------
TAX-FREE MONEY MARKET FUND (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL COUPON MATURITY MARKET
AMOUNT RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
ADJUSTABLE RATE PUT BONDS -- 2.4%
$ 245,000 Summit Co OH IDR (SD Myers Inc) 4.350 08/15/07 $ 245,000
345,000 Dayton KY IBR (Patriot Signage Inc) 4.500 09/01/07 345,000
215,000 Summit Co OH IDR (Struktol Co America) 4.400 09/01/07 215,000
85,000 Cuyahoga Co OH IDR (Halle Office Bldg) 4.015 10/01/07 85,000
155,000 Newport KY IBR (Sumerel Tire) 4.100 12/01/07 155,000
1,000,000 Westmoreland Co PA IDA (White Cons Inds) 4.125 12/01/07 1,000,000
325,000 McDonald Tax Exempt Mtge Trust 4.350 12/17/07 325,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL ADJUSTABLE RATE PUT BONDS $ 2,370,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES -- 99.8%
(Amortized Cost $99,302,417) $ 99,302,417
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2% 212,892
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 99,515,309
================================================================================================================
See accompanying notes to portfolios of investments and notes to financial
statements.
32
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIOS OF INVESTMENTS
JUNE 30, 2007
- --------------------------------------------------------------------------------
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
June 30, 2007.
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
ETM - Escrowed to Maturity
GO - General Obligation
GTD - Guaranteed
HFA - Housing Finance Authority/Agency
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
144A - This is a restricted security that was sold in a transaction exempt from
Rule 144A of the Securities Act of 1933. This seccurity may be sold in a
transaction exempt form registration, normally to qualified institutional
buyers.
33
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION (UNAUDITED)
JUNE 30, 2007
- --------------------------------------------------------------------------------
As of June 30, 2007, 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 85.0% invested in debt
obligations issued by the State of Florida and its political subdivisions,
agencies, authorities and instrumentalities and by other issuers, the value of
which is exempt from federal income tax. As of June 30, 2007, 11.9% of the
portfolio securities of the Tax-Free Money Market Fund were concentrated in the
State of Ohio, 3.3% in the State of Kentucky and 2.9% 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 June 30, 2007, 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 June 30, 2007, 94.8% of the Ohio Insured Tax-Free Fund's long-term
portfolio securities were either (1) insured by an insurance policy obtained
from a recognized insurer which carries a rating of AAA by S&P or Aaa by
Moody's, (2) guaranteed as to the payment of interest and principal by an agency
or instrumentality of the U.S. Government or (3) secured as to the payment of
interest and principal by an escrow account consisting of obligations of the
U.S. Government. Four private insurers individually insure more than 10% of the
Ohio Insured Tax-Free Fund's portfolio securities and collectively insure 88.2%
of its portfolio securities.
The concentration of investments for each Fund as of June 30, 2007, classified
by revenue source, was as follows:
FLORIDA TAX-FREE OHIO INSURED OHIO TAX-FREE TAX-FREE
MONEY MARKET TAX-FREE MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------
General Obligations 20.9% 41.1% 3.5% 9.0%
- ---------------------------------------------------------------------------------------------
Revenue Bonds:
Industrial Development/
Pollution Control 4.2% -- 8.1% 8.8%
Hospital/Health Care 22.3% 12.9% 24.4% 46.9%
Utilities/Water & Sewer 5.8% 6.6% 10.7% 9.9%
Education 19.9% 12.2% 21.8% 8.6%
Housing/Mortgage 15.1% 0.1% 5.8% 2.5%
Economic Development 3.9% -- 10.7% 3.9%
Public Facilities -- -- 2.3% 0.4%
Transportation -- 7.2% 2.8% 0.4%
Special Tax 3.1% -- 3.5% 3.2%
Miscellaneous 4.8% 19.9% 6.4% 6.4%
- ---------------------------------------------------------------------------------------------
Total Investments 100.0% 100.0% 100.0% 100.0%
=============================================================================================
34
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of Touchstone Tax-Free Trust
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Touchstone Tax-Free Trust, comprised of 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 (the "Funds") as
of June 30, 2007, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to
perform an audit of the Funds' internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Funds' internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our procedures included
confirmation of securities owned as of June 30, 2007, by correspondence with the
custodian and brokers. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds comprising Touchstone Tax-Free Trust at June 30, 2007,
the results of their operations for the year then ended, the changes in their
net assets for the two years in the period then ended and their financial
highlights for each of the periods indicated therein, in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
August 14, 2007
35
- --------------------------------------------------------------------------------
OTHER ITEMS (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 (January 1, 2007 through June 30, 2007).
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 June 30, 2007" 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.
36
- --------------------------------------------------------------------------------
OTHER ITEMS (CONTINUED)
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------------------
EXPENSES
PAID
NET EXPENSE BEGINNING ENDING DURING THE
RATIO ACCOUNT ACCOUNT SIX MONTHS
ANNUALIZED VALUE VALUE ENDED
JUNE 30, JANUARY 1, JUNE 30, JUNE 30,
2007 2007 2007 2007*
- --------------------------------------------------------------------------------------------
FLORIDA TAX-FREE MONEY MARKET FUND
Actual 0.75% $ 1,000.00 $ 1,014.60 $ 3.75
Hypothetical 0.75% $ 1,000.00 $ 1,021.08 $ 3.76
OHIO INSURED TAX-FREE FUND
Class A Actual 0.75% $ 1,000.00 $ 997.20 $ 3.71
Class A Hypothetical 0.75% $ 1,000.00 $ 1,021.08 $ 3.76
Class C Actual 1.50% $ 1,000.00 $ 994.40 $ 7.42
Class C Hypothetical 1.50% $ 1,000.00 $ 1,017.36 $ 7.50
OHIO TAX-FREE MONEY MARKET FUND
Retail Class Actual 0.75% $ 1,000.00 $ 1,014.80 $ 3.75
Retail Class Hypothetical 0.75% $ 1,000.00 $ 1,021.08 $ 3.76
Institutional Class Actual 0.50% $ 1,000.00 $ 1,016.00 $ 2.50
Institutional Class Hypothetical 0.50% $ 1,000.00 $ 1,022.32 $ 2.51
TAX-FREE MONEY MARKET FUND
Class A Actual 0.89% $ 1,000.00 $ 1,014.40 $ 4.45
Class A Hypothetical 0.89% $ 1,000.00 $ 1,020.38 $ 4.46
Class S Actual 1.15% $ 1,000.00 $ 1,013.10 $ 5.74
Class S Hypothetical 1.15% $ 1,000.00 $ 1,019.09 $ 5.76
* 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).
37
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST (UNAUDITED)
- --------------------------------------------------------------------------------
Listed below is basic information regarding the Trustees and principal officers
of the Trust. The Trust's Statement of Additional Information includes
additional information about the Trustees and is available, without charge, upon
request by calling 1.800.543.0407.
INTERESTED TRUSTEES(1):
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
TERM OF OVERSEEN
OFFICE(2) IN THE
NAME POSITION(S) AND LENGTH TOUCHSTONE OTHER
ADDRESS HELD WITH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Jill T. McGruder Trustee Until Senior Vice President of The Western and Southern 53 Director of
Touchstone Advisors, and retirement Life Insurance Company. President and a director of LaRosa's (a
Inc President at age 75 IFS Financial Services, Inc. (a holding company). restaurant
303 Broadway or until She is a director of Capital Analysts Incorporated chain).
Cincinnati, OH she (an investment advisor and broker-dealer),
Year of Birth: 1955 resigns or Integrated Investment Services, Inc. until April
is removed 2007(the Trust's former administrator, accounting
Trustee and transfer agent), IFS Fund Distributors, Inc. (a
since 1999 broker-dealer), Touchstone Advisors, Inc. (the
Trust's investment advisor) and Touchstone
Securities, Inc. (the Trust's distributor). She is
also President and a director of IFS Agency
Services, Inc. (an insurance agency), W&S Financial
Group Distributors, Inc. (an annuity distributor)
and IFS Systems, Inc. She is Senior Vice President
and a director of W&S Brokerage Services, Inc. (a
broker-dealer). She is a director, President and
Chief Executive Officer of Integrity Life Insurance
Company and National Integrity Life Insurance
Company. She is President of Touchstone Tax-Free
Trust, Touchstone Investment Trust, Touchstone
Variable Series Trust, Touchstone Strategic Trust,
Touchstone Funds Group Trust and Constellation
Institutional Portfolios. She was President of
Touchstone Advisors, Inc., and Touchstone
Securities, Inc. until 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
John F. Barrett Trustee Until Chairman of the Board, President and Chief Executive 53 Director of
The Western and retirement Officer of The Western and Southern Life Insurance The
Southern Life at age 75 Company, Western- Southern Life Assurance Company Andersons
Insurance Company or until and Western & Southern Financial Group, Inc.; (an
400 Broadway he resigns Director and Chairman of Columbus Life Insurance agribusiness
Cincinnati, OH or is Company; Fort Washington Investment Advisors, Inc., and
Year of Birth: 1949 removed Integrity Life Insurance Company and National retailing
Trustee Integrity Life Insurance Company; Director of Eagle company);
since 2000 Realty Group, Inc., Eagle Realty Investments, Inc. Convergys
and Integrated Investment Services, Inc. (until Corporation
April 2007); Director, Chairman and CEO of WestAd, (a provider
Inc.; President and Trustee of Western & Southern of business
Financial Fund, Inc. support
systems and
customer
care
operations)
and Fifth
Third
Bancorp.
- ------------------------------------------------------------------------------------------------------------------------------------
38
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST (CONTINUED)
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
TERM OF OVERSEEN
OFFICE(2) IN THE
NAME POSITION(S) AND LENGTH TOUCHSTONE OTHER
ADDRESS HELD WITH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Richard L. Brenan Trustee Until Retired Managing Partner of KPMG LLP (a certified 53 Director of
303 Broadway retirement public accounting firm); Director of The National Wing
Cincinnati, OH at age 75 Underwriter Company (a publisher of insurance and Eyecare
Year of Birth: 1944 or until financial service products) until 2003. Companies.
he resigns
or is
removed
Trustee
since 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Phillip R. Cox Trustee Until President and Chief Executive Officer of Cox 53 Director of
303 Broadway retirement Financial Corp. (a financial services company). the Federal
Cincinnati, OH at age 75 Reserve
Year of Birth: 1947 or until Bank of
he resigns Cleveland
or is and Duke
removed Energy (a
Trustee utility
since 1994 company);
Chairman of
The
Cincinnati
Bell
Telephone
Company
LLC;
Director of
The Timken
Company (a
manufacturer
of
bearings,
alloy
steels and
related
products
and
services);
Director of
Diebold,
Incorporated
(a provider
of
integrated
self-service
delivery
and
security
systems).
- ------------------------------------------------------------------------------------------------------------------------------------
H. Jerome Lerner Trustee Until Principal of HJL Enterprises (a privately held 53 None
303 Broadway retirement investment company).
Cincinnati, OH at age 75
Year of Birth: 1938 or until
he resigns
or is
removed
Trustee
since 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. Siekmann Trustee Until Executive for Duro Bag Manufacturing Co. (a bag 53 Trustee of
303 Broadway retirement manufacturer); President of Shor Foundation for Jewish
Cincinnati, OH at age 75 Epilepsy Research (a charitable foundation); Hospital,
Year of Birth: 1938 or until Trustee of Riverfront Funds (mutual funds) from 1999 Greater
he resigns - 2004. Cincinnati
or is Arts &
removed Education
Trustee Center and
since 2005 Cincinnati
Arts
Association
- ------------------------------------------------------------------------------------------------------------------------------------
39
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST (CONTINUED)
- --------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED):
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
TERM OF OVERSEEN
OFFICE(2) IN THE
NAME POSITION(S) AND LENGTH TOUCHSTONE OTHER
ADDRESS HELD WITH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(3) HELD(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Robert E. Stautberg Trustee Until Retired Partner of KPMG LLP (a certified public 53 Trustee of
303 Broadway retirement accounting firm). Vice President of St. Xavier High Tri-Health
Cincinnati, OH at age 75 School. Physician
Year of Birth: 1934 or until Enterprise
he resigns Corporation.
or is
removed
Trustee
since 1994
- ------------------------------------------------------------------------------------------------------------------------------------
John P. Zanotti Trustee Until CEO, Chairman and Director of Avaton, Inc. (a 53 Director of
303 Broadway retirement wireless entertainment company). President of QMed
Cincinnati, OH at age 75 Cincinnati Biomedical (a life science and economic (a health
Year of Birth: 1948 or until development company) from July 2003 until 2005. CEO, care
he resigns Chairman and Director of Astrum Digital Information company).
or is (an information monitoring company) from 2000 until
removed 2001; President of Great American Life Insurance
Trustee Company from 1999 until 2000.
since 2002
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Ms. McGruder, as a director of Touchstone Advisors, Inc., the Trust's
investment advisor, and Touchstone Securities, Inc., the Trust's
distributor and an officer of affiliates of the advisor and distributor,
is an "interested person" of the Trust within the meaning of Section
2(a)(19) of the 1940 Act. Mr. Barrett, as President and Chairman of The
Western and Southern Life Insurance Company and Western-Southern Life
Assurance Company, parent companies of Touchstone Advisors, Inc. and
Year of Birth: since 2004;
Advisors, Inc., a Trust sub-advisor and an officer of other affiliates of
the advisor and distributor is an "interested person" of the Trust within
the meaning of Section 2(a)(19) of the 1940 Act.
(2) Each Trustee is elected to serve until the age of 75 or until he or she
sooner resigns or is removed.
(3) The Touchstone Fund Complex consists of 4 series of the Trust, 5 series of
Touchstone Investment Trust, 8 series of Touchstone Strategic Trust, 15
variable annuity series of Touchstone Variable Series Trust, 18 series of
Touchstone Funds Group Trust and 3 series of Constellation Institutional
Portfolios.
(4) Each Trustee is also a Trustee of Touchstone Investment Trust, Touchstone
Strategic Trust, Touchstone Variable Series Trust, Touchstone Funds Group
Trust, and Constellation Institutional Portfolios.
40
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL OFFICERS(1):
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER
OF FUNDS
TERM OF OVERSEEN
OFFICE(1) IN THE
NAME POSITION(S) AND LENGTH TOUCHSTONE OTHER
ADDRESS HELD WITH OF PRINCIPAL OCCUPATION(S) FUND DIRECTORSHIPS
AGE TRUST TIME SERVED DURING PAST 5 YEARS COMPLEX(2) HELD
- ------------------------------------------------------------------------------------------------------------------------------------
Jill T. McGruder President and Until See biography above. 53 See biography
Touchstone Trustee resignation, above.
Advisors, Inc. removal or
303 Broadway disqualification
Cincinnati, OH President
Year of Birth: since 2004;
1955 President from
2000-2002
- ------------------------------------------------------------------------------------------------------------------------------------
Brian E. Hirsch Vice President Until Senior Vice President-Compliance of IFS 53 None
Touchstone and Chief resignation, Financial Services, Inc., Director of Compliance
Advisors, Inc. Compliance removal or of W&S Brokerage Services, Inc.; Chief
303 Broadway Officer disqualification Compliance Officer of Puglisi & Co. from 2001
Cincinnati, OH Vice President until 2002.
Year of Birth: since 2003
1956
- ------------------------------------------------------------------------------------------------------------------------------------
James H. Grifo Vice Until President of Touchstone Securities, Inc. and 53 None
Touchstone President resignation, Touchstone Advisors, Inc.; Managing Director,
Securities, Inc. removal or Deutsche Asset Management until 2001.
303 Broadway disqualification
Cincinnati, OH Vice President
Year of Birth: since 2004
1951
- ------------------------------------------------------------------------------------------------------------------------------------
William A. Dent Vice President Until Senior Vice President of Touchstone Advisors, 53 None
Touchstone resignation, Inc.; Marketing Director of Promontory
Advisors, Inc. removal or Interfinancial Network from 2002-2003; Senior
303 Broadway disqualification Vice President of McDonald Investments from 1998
Cincinnati, OH Vice President - 2001.
Year of Birth: since 2004
1963
- ------------------------------------------------------------------------------------------------------------------------------------
Terrie A. Controller and Until Senior Vice President, Chief Financial Officer 53 None
Wiedenheft Treasurer resignation, and Treasurer of Integrated Investment Services,
Touchstone removal or Inc. (until April 2007), IFS Fund Distributors,
Advisors, Inc. disqualification Inc. and W&S Brokerage Services, Inc.; Chief
303 Broadway Controller Financial Officer of IFS Financial Services,
Cincinnati, OH since 2000 Inc., Touchstone Advisors, Inc. and Touchstone
Year of Birth: Treasurer Securities, Inc. and Assistant Treasurer of Fort
1962 since 2003 Washington Investment Advisors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Jay S. Fitton Secretary Until Director and Senior Counsel of Integrated 53 None
Integrated resignation, Investment Services, Inc. and IFS Fund
Investment removal or Distributors, Inc.
Services, Inc. disqualification
303 Broadway Secretary
Cincinnati, OH since 2006
Year of Birth:
1970
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Each officer also holds the same office with Touchstone Investment Trust,
Touchstone Variable Series Trust, Touchstone Strategic Trust, Touchstone
Funds Group Trust and Constellation Institutional Portfolios.
(2) The Touchstone Fund Complex consists of 4 series of the Trust, 5 series of
Touchstone Investment Trust,15 series of Touchstone Variable Series Trust,
8 series of Touchstone Strategic Trust, 18 series of Touchstone Funds
Group Trust and 3 series of Constellation Institutional Portfolios.
41
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TOUCHSTONE INVESTMENTS
DISTRIBUTOR
Touchstone Securities, Inc.*
303 Broadway
Cincinnati, Ohio 45202-4203
800.638.8194
www.touchstoneinvestments.com
INVESTMENT ADVISOR
Touchstone Advisors, Inc.*
303 Broadway
Cincinnati, Ohio 45202-4203
TRANSFER AGENT
JPMorgan
P.O. Box 5354
Cincinnati, Ohio 45201-5354
SHAREHOLDER SERVICE
800.543.0407
A Member of Western & Southern Financial Group(R)
- --------------------------------------------------------------------------------
[LOGO] TOUCHSTONE(R)
INVESTMENTS
303 Broadway, Suite 1100
Cincinnati, OH 45202-4203
ITEM 2. CODE OF ETHICS.
At the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to its principal executive officer and principal
financial officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that the registrant has at
least one audit committee financial expert serving on its audit committee. Mr.
Robert Stautberg is the registrant's audit committee financial expert and is an
independent trustee within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act").
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees. Audit fees totaled approximately $60,900 for the June 30, 2007
fiscal year and approximately $57,900 for the June 30, 2006 fiscal year,
including fees associated with the annual audit and filings of Form N-1A and
N-SAR.
(b) Audit-Related Fees. Audit-Related fees totaled approximately $116,000 for
the June 30, 2007 fiscal year and approximately $109,400 for the June 30, 2006
fiscal year and consisted of SAS 70 internal control reviews of the registrant's
fund accountant and transfer agent.
(c) Tax Fees. Tax fees totaled approximately $16,600 for the June 30, 2007
fiscal year and $10,800 for the June 30, 2006 fiscal year and consisted of fees
for tax compliance services and tax consultation services.
(d) All Other Fees. There were no fees for all other services during the June
30, 2007 or June 30, 2006 fiscal years.
(e) (1) Audit Committee Pre-Approval Policies. The Audit Committee's
pre-approval policies describe the types of audit, audit-related, tax and other
services that have the general pre-approval of the Audit Committee. The
pre-approval policies provide that annual audit service fees, tax services not
specifically granted pre-approval, services exceeding pre-approved cost levels
and other services that have not received general pre-approval will be subject
to specific pre-approval by the Audit Committee. The pre-approval policies
further provide that the Committee may grant general pre-approval to other audit
services (statutory audits and services associated with SEC registration
statements, periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings), audit-related
services (accounting consultations related to accounting, financial reporting or
disclosure matters not classified as "audit services," assistance with
understanding and implementing new accounting and financial reporting guidance
from rulemaking authorities, agreed-upon or expanded audit procedures related to
accounting and/or billing records required to respond to or comply with
financial, accounting or regulatory reporting matters and assistance with
internal control reporting requirements under Form N-SAR and Form N-CSR), tax
services that have historically been provided by the auditor that the Committee
believes would not impair the independence of the auditor and are consistent
with the SEC's rules on auditor independence and permissible non-audit services
classified as "all other services" that are routine and recurring services.
(e)(2) All services described in paragraphs (b) through (d) of Item 4 were
approved by the Audit Committee.
(f) Not applicable
(g) The aggregate non-audit fees for services to the registrant, its investment
adviser (excluding its sub-advisor) and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services to the
registrant were approximately $215,325 for the fiscal year ended June 30, 2007
and $212,100 for the fiscal year ended June 30, 2006.
(h) Not applicable
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable
ITEM 6. SCHEDULE OF INVESTMENTS.
The Schedule of Investments in securities of unaffiliated issuers is included in
the Annual Report.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Governance Committee will consider shareholder recommendations for
nomination to the Board only in the event that there is a vacancy on the Board.
Shareholders who wish to submit recommendations for nominations to the Board to
fill the vacancy must submit their recommendations in writing to Phillip R. Cox,
Chairman of the Governance Committee, c/o Touchstone, 303 Broadway, Suite 1100,
Cincinnati, OH 45202. Shareholders should include appropriate information on the
background and qualifications of any person recommended to the Governance
Committee (e.g., a resume), as well as the candidate's contact information and a
written consent from the candidate to serve if nominated and elected.
Shareholder recommendations for nominations to the Board will be accepted on an
ongoing basis and such recommendations will be kept on file for consideration in
the event of a future vacancy on the Board.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the 1940 Act) the registrant's
principal executive officer and principal financial officer have concluded that
the registrant's disclosure controls and procedures are effective as of a date
within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during
the registrant's second fiscal quarter of the period covered by this report that
have materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) The Code of Ethics for Senior Financial Officers was filed with
registrant's June 30, 2004 N-CSR and is hereby incorporated by
reference.
(a)(2) Certifications required by Item 12(a)(2) of Form N-CSR are filed
herewith.
(b) Certification required by Item 11(b) of Form N-CSR is filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Touchstone Tax-Free Trust
By (Signature and Title)
/s/ Jill T. McGruder
- --------------------
Jill T. McGruder
President
Date: August 28, 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: August 28, 2007
/s/ Terrie A. Wiedenheft
- ------------------------
Terrie A. Wiedenheft
Controller & Treasurer
Date: August 28, 2007