Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-05009
COLORADO BONDSHARES — A TAX EXEMPT FUND
(Exact name of registrant as specified in charter)
1200 17TH STREET, SUITE 850, DENVER, COLORADO 80202-5808
(Address of principal executive offices) (Zip code)
(Address of principal executive offices) (Zip code)
FRED R. KELLY, JR. 1200 17TH STREET, SUITE 850, DENVER, COLORADO 80202-5808
(Name and address of agent for service)
(Name and address of agent for service)
Registrant’s telephone number, including area code: 303-572-6990
Date of fiscal year end: 09/30
Date of reporting period: 03/31/2007
TABLE OF CONTENTS
Table of Contents
Item 1. REPORTS TO STOCKHOLDERS.
Table of Contents
![(Colorado BondShares Logo)](https://capedge.com/proxy/N-CSRS/0000950134-07-013168/d47011d4701100.gif)
May 25, 2007
Dear Shareholder,
It is time again for me to provide the operating results for the semi-annual period ended March 31, 2007. The primary performance statistics outlined on page 17 look great due in part to the extraordinary distribution which we made in November on United Airlines/ Denver International Airport bonds. Shareholders who acquired shares after that date did not benefit from this distribution so their results are not as positive.
This is the current situation. We are earning an average of about 4% on rated short term low risk securities. By extending maturities as much as 40 years we can only improve the return on that portion of the portfolio by slightly more than 1%. I don’t presently favor this trade off and I prefer staying with the short paper until the market gives us a reason to change strategies.
Our hope is to supplement the existing income stream with potential values that occasionally present themselves in the municipal bond market. We have benefited from these special situations in past years, however the timing is difficult to predict. Often they do not happen when they are supposed to or they may not happen at all. Opportunities have presented themselves in the past when issuers have become too optimistic about their growth expectations in the face of a slow down in the housing market. These credits may need to be restructured which would offer us a source of new product. As I indicated earlier, we have plenty of liquidity to take advantage of these situations when and if they develop.
Income could experience some ebb and flow in upcoming months so I would encourage investors to keep an eye on the big picture as the year unfolds. We expect to continue to perform well in terms of our total return including appreciation as well as current income.
Sincerely, | |
![]() | |
Fred R. Kelly, Jr. | |
Portfolio Manager |
Table of Contents
Officers and Trustees
George N. Donnelly, Chairman of the Board of Trustees | |
Bruce G. Ely, Trustee | |
James R. Madden, Trustee | |
Andrew B. Shaffer, President, Secretary, Treasurer and Trustee | |
Fred R. Kelly, Jr., Portfolio Manager |
Investment Adviser
Freedom Funds Management Company |
Transfer, Shareholder Servicing, and Dividend
Disbursing Agent
Disbursing Agent
Freedom Funds Management Company |
Distributor
SMITH HAYES Financial Services Corporation |
Custodian of Portfolio Securities
Wells Fargo Investments and Trust, Wells Fargo Bank, N.A. |
Independent Registered Public Accounting
Firm
Firm
Anton Collins Mitchell LLP |
Legal Counsel
Kutak Rock LLP |
This report is submitted for the general information of the shareholders of Colorado BondShares — A Tax-Exempt Fund. This report must be preceded or accompanied by a Prospectus of the Fund. The prospectus contains information concerning the investment policies and expenses of the portfolio in addition to other pertinent information. Shares of Colorado BondShares — A Tax-Exempt Fund are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including possible loss of the principal amount invested.
Table of Contents
FUND EXPENSES (Unaudited)
As a shareholder of Colorado BondShares — A Tax-Exempt Fund (the “Fund”), you incur two types of costs:
• | Sales charges (front loads) on fund purchases and | |
• | Ongoing fund costs, including management fees, administrative services, and other fund expenses. All mutual funds have operating expenses. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of a fund. |
The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing cost of investing in other mutual funds.
The Example is based on an investment of $1,000 made at the beginning of October 1, 2006 and held for the entire six month period ended March 31, 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 Period” 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 Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s 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 Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account | Ending Account | Expenses Paid | ||||||||||
Colorado BondShares – A Tax-Exempt Fund | Value 10/01/06 | Value 03/31/07 | During Period* | |||||||||
Based on Actual Fund Return | $ | 1,000.00 | $ | 1,030.99 | 1 | $ | 2.84 | |||||
Based on Hypothetical 5% Annual Return Before Expenses | $ | 1,000.00 | $ | 1,022.20 | $ | 2.82 |
*Expenses are equal to the Fund’s annualized expense ratio, 0.56%, based on actual expenses for the period, multiplied by the average account value over the period, multiplied by 182/365 (number of days in the period).
1The semi-annual return includes an interest payment representing four years of unpaid interest relating to the Fund’s holding of United Airlines/ Denver International Airport bonds that is a non-recurring event outside the control of the Fund. This event occurred in the first quarter of the semi-annual period ended March 31, 2007.
Table of Contents
CREDIT QUALITY (unaudited)
Colorado BondShares — A Tax-Exempt Fund
Based on a Percentage of Total Net Assets as of March 31, 2007
![(PIE CHART)](https://capedge.com/proxy/N-CSRS/0000950134-07-013168/d47011d4701101.gif)
SECTOR BREAKDOWN (unaudited)
Colorado BondShares — A Tax-Exempt Fund
Based on a Percentage of Total Net Assets as of March 31, 2007
![(PIE CHART)](https://capedge.com/proxy/N-CSRS/0000950134-07-013168/d47011d4701102.gif)
2
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Schedule of Investments (unaudited)
March 31, 2007
Face Amount | Market Value | |||||||
Colorado Municipal Bonds — 81.6% | ||||||||
1,000,000 | Adonea Metropolitan District No. 2 LTD Tax (Convertible to Unlimited Tax) G.O. Series 2005A, 6.125% to yield 6.25% due 12/1/2025 | $ | 1,045,350 | |||||
2,175,000 | Antelope Heights Metropolitan District G.O. (LTD Tax Convertible to Unlimited Tax) Series 2003, 8.00% due 12/1/2023 | 2,402,897 | ||||||
2,000,000 | Arista Metropolitan District Special Revenue Bond Series 2005, 6.75% due 12/1/2035 | 2,160,340 | ||||||
950,000 | Aurora Multifamily Housing Revenue (River Falls Project) Senior Series 1999A, 5.70% due 7/1/2029 | 928,711 | ||||||
306,040 | Aurora Centretech Metropolitan District G.O. Refunding and Improvement Series 1994, 6.00% due 12/1/2023(b) | 464,361 | ||||||
2,960,000 | BNC Metropolitan District No. 1 G.O. (LTD Tax Convertible to Unlimited Tax) Series 2004, 8.00% due 6/1/2028 | 2,960,000 | ||||||
1,000,000 | Beacon Pointe Metropolitan District LTD Tax (Convertible to Unlimited Tax) G.O. Series 2005A, 6.125% to yield 6.25% due 12/1/2025 | 985,550 | ||||||
700,000 | Beebe Draw Farms Metropolitan District G.O. Series 1998, 7.00% due 10/1/2018 | 698,362 | ||||||
5,095,000 | Belle Creek Metropolitan District No. 1 G.O. LTD Tax Series 2000, 8.00% due 12/1/2020 | 5,310,009 | ||||||
2,250,000 | Black Hawk (City of) Device Tax Revenue Series 1998, 5.625% due 12/1/2021 | 2,337,930 | ||||||
4,520,000 | Boulder County Development Revenue (Boulder College of Massage Therapy Project) Series 2006A, 6.35% due 10/15/2031 | 4,532,656 | ||||||
700,000 | Boulder County Variable Rate Demand Revenue (YCMA of Boulder Valley Project) Series 2006, 3.65% due 2/1/2031(h) | 700,000 | ||||||
1,845,000 | Bradburn Metropolitan District No. 3 G.O. LTD Tax Series 2003, 7.50% due 12/1/2033 | 1,845,000 | ||||||
6,245,000 | Bromley Park Metropolitan District No. 3 G.O. Exchange (LTD Tax to Unlimited Tax) Series 2001A and B, 8.00% due 12/1/2019-22 | 6,535,655 | ||||||
6,000,000 | Bromley Park Metropolitan District No. 2 G.O. (LTD Tax Convertible to Unlimited Tax) Series 2002B, 8.00% due 12/1/2022 | 6,128,760 | ||||||
3,991,000 | Bromley Park Metropolitan District No. 2 G.O. (LTD Tax Convertible to Unlimited Tax) Series 2003, 8.00% due 12/01/2028 | 4,062,519 | ||||||
4,900,000 | Broomfield Village Metropolitan District No. 2 Special Revenue Refunding Series 2005B, 3.90% due 7/1/2032(h) | 4,900,000 | ||||||
9,275,000 | Broomfield Village Metropolitan District No. 2 Special Revenue Refunding Series 2003B, 4.40% due 7/1/2032(h) | 9,275,000 |
3
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Schedule of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||
Colorado Municipal Bonds — (Continued) | ||||||||
500,000 | Castle Oaks Metropolitan District G.O. LTD Tax Series 2005, 6.00% due 12/1/2025 | $ | 519,805 | |||||
1,950,000 | Castle Pines North Metropolitan District LTD Tax G.O. Variable Rate Refunding Series 2006C, 3.67% due 12/1/2024(h) | 1,950,000 | ||||||
25,000 | Castle Rock (Town of) G.O. Series 1988-2, 10.375% due 12/1/2008 | 27,120 | ||||||
565,000 | Castle Rock (Town of) LID No. 1988-2 Special Assessment Series 1988, 9.25%-10.375% due 12/1/2008(i) | 39,550 | ||||||
1,930,000 | Central Platte Valley Metropolitan District Special Obligation Revenue Series 1998, 7.00% due 12/1/2017(b) | 1,999,267 | ||||||
6,465,662 | Colorado Centre Metropolitan District LTD Tax and Special Revenue Series 1992B, 0.00% due 1/1/2032 (a)(g)(i) | 161,642 | ||||||
2,009,520 | Colorado Centre Metropolitan District LTD Tax and Special Revenue Series 1992A, principal only, 0.00% due 1/1/2027(a)(e)(i) | 20,095 | ||||||
2,008,335 | Colorado Centre Metropolitan District LTD Tax and Special Revenue Series 1992A, interest only, 9.00% due 1/1/2027(f)(h)(i) | 1,104,584 | ||||||
1,700,000 | Colorado Educational and Cultural Facilities Authority Charter School Revenue (Brighton Charter School Project) Series 2006, 6.00% due 11/1/2036 | 1,700,000 | ||||||
3,350,000 | Colorado Educational and Cultural Facilities Authority Charter School Revenue (Liberty Common School Project) Series 1998, 6.95% due 8/15/2019(b) | 3,480,818 | ||||||
860,000 | Colorado Educational and Cultural Facilities Authority Charter School Revenue (Crown Pointe Academy) Series 2000, 7.25% due 7/15/2025 | 900,093 | ||||||
1,155,000 | Colorado Educational and Cultural Facilities Authority Private School Revenue (Escuela Tlatelolco Project) Series 2000A, 8.50% due 6/1/2022 | 1,151,847 | ||||||
375,000 | Colorado Educational and Cultural Facilities Authority Charter School Revenue (Elbert County Charter School Project) Series 2000A, 8.00% due 6/1/2010(b) | 400,406 | ||||||
5,410,000 | Colorado Educational and Cultural Facilities Authority Student Housing Revenue (Inn at Auraria LLC Project) Series 2005A, 5.875% due 7/1/2023 | 5,579,657 | ||||||
2,020,000 | Colorado Educational and Cultural Facilities Authority Charter School Revenue (Belle Creek Charter School Project) Series 2002A, 7.625% to yield 7.75% due 3/15/2032 | 2,108,456 | ||||||
5,305,000 | Colorado Educational and Cultural Facilities Authority Charter School Revenue (Regis Jesuit High School Project) Series 2003, 3.65% due 12/1/2033(h) | 5,305,000 | ||||||
750,000 | Colorado Educational and Cultural Facilities Authority Variable Rate Demand Revenue (Telluride Mountain School Project) Series 2006, 3.65% due 8/1/2026(h) | 750,000 |
4
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Schedule of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||
Colorado Municipal Bonds — (Continued) | ||||||||
6,700,000 | Colorado Educational and Cultural Facilities Authority Revenue Variable Rate (Colorado Christian University Project) Series 2004, 3.70% due 7/1/2034(h) | $ | 6,700,000 | |||||
785,000 | Colorado Educational and Cultural Facilities Authority Charter School Revenue Refunding and Improvement (Elbert County Charter School Project) Series 2004, 7.375% to yield 7.45% due 3/1/2035 | 843,961 | ||||||
2,650,000 | Colorado Educational and Cultural Facilities Authority Revenue Variable Rate (Denver Art Museum Project) Series 2004, 3.65% due 1/1/2034(h) | 2,650,000 | ||||||
2,480,000 | Colorado Health Facilities Authority Variable Rate Demand Revenue (Golden West Manor Project) Series 2006A, 3.67% due 12/1/2037(h) | 2,480,000 | ||||||
4,960,000 | Colorado Health Facilities Authority Variable Rate Demand Revenue Refunding (Craig Hospital Project) Series 2003, 3.65% due 12/1/2020(h) | 4,960,000 | ||||||
710,000 | Colorado Health Facilities Authority Variable Rate Demand Revenue (Sisters of Charity of Leavenworth Health System) Series 2003B, 3.66% due 12/1/2038(h) | 710,000 | ||||||
450,000 | Colorado Health Facilities Authority Revenue Extendable Rate Adjustable Securities (Christian Living Communities Project) Series 2006B, 4.65% due 1/1/2037(h) | 450,414 | ||||||
3,655,000 | Colorado Housing and Finance Authority Economic Development Revenue (Micro Business Development Corporation Project) Series 2005, 6.75% due 12/1/2010 | 3,682,193 | ||||||
5,585,000 | Colorado Housing and Finance Authority Multi-family/ Project Class I Adjustable Rate 2000 Series A-1, 3.66% due 10/1/2030(h) | 5,585,000 | ||||||
4,775,000 | Colorado Housing and Finance Authority Multi-family/ Project Class III Adjustable Rate 2000 Series A-1, 3.66% due 4/1/2030(h) | 4,775,000 | ||||||
7,110,000 | Colorado Housing and Finance Authority Variable Rate Class I Series A-2, 3.66% due 4/1/2020(h) | 7,110,000 | ||||||
135,000 | Colorado Housing and Finance Authority Single Family Project Adjustable Rate Class I AA Series 2001, 3.66% due 5/1/2031(h) | 135,000 | ||||||
1,020,000 | Colorado Housing and Finance Authority Single Family Project Adjustable Rate, 3.66% due 11/1/2021(h) | 1,020,000 | ||||||
13,610,000 | Colorado Housing and Finance Authority Adjustable Rate Multi-family Insured Mortgage Revenue 2002 Series AA, 3.66% due 10/1/2030(h) | 13,610,000 | ||||||
2,000,000 | Colorado Housing and Finance Authority Single Family Class I Adjustable Rate Series 2001 AA-3, 3.66% due 5/1/2036(h) | 2,000,000 | ||||||
11,740,000 | Colorado Housing and Finance Authority Multi-family Project Class I Adjustable Rate 2002 Series C4, 3.66% due 10/1/2032(h) | 11,740,000 |
5
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Schedule of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||
Colorado Municipal Bonds — (Continued) | ||||||||
4,500,000 | Colorado Housing and Finance Authority Single Family Class I-C4 Adjustable Rate, 3.66% due 11/1/2021(h) | $ | 4,500,000 | |||||
5,670,000 | Colorado Housing and Finance Authority Multi-family Project Class I Adjustable Rate 2005 Series B-3, 3.66% due 10/1/2036(h) | 5,670,000 | ||||||
15,870,000 | Colorado Housing and Finance Authority Single Family Mortgage Class I Adjustable Rate 2006 Series B-2, 3.66% due 11/1/2034(h) | 15,870,000 | ||||||
19,670,000 | Colorado Housing and Finance Authority Single Family Mortgage Class I Adjustable Rate 2006 Series C-2, 3.66% due 11/1/2034(h) | 19,670,000 | ||||||
2,990,000 | Colorado School of Mines Development Corporation Refunding Variable Rate Demand Series 2005, 3.82% due 9/1/2026(h) | 2,990,000 | ||||||
1,700,000 | Colorado Springs Variable Rate Demand Obligation (Pikes Peak Mental Health Center Select Services, Inc. Project) Series 2003, 3.65% due 3/15/2023(h) | 1,700,000 | ||||||
5,000,000 | Commerce City Northern Infrastructure General Improvement District G.O. Variable Rate Series 2006, 3.70% due 12/1/2028(h) | 5,000,000 | ||||||
2,455,000 | Conservatory Metropolitan District G.O. (LTD Tax Convertible to Unlimited Tax) Series 2003, 7.50% due 12/1/2027 | 2,768,798 | ||||||
3,725,000 | Conservatory Metropolitan District G.O. (LTD Tax Convertible to Unlimited Tax) Series 2005, 6.75% due 12/1/2034 | 4,020,504 | ||||||
1,000,000 | Cornerstone Metropolitan District No. 1 Variable Rate Revenue Series 2006, 3.68% due 12/1/2036(h) | 1,000,000 | ||||||
1,025,000 | Cotton Ranch Metropolitan District G.O. Series 1998A, 7.25% due 12/15/2017 | 1,048,165 | ||||||
3,145,000 | Crested Butte Industrial Development Refunding and Improvement Revenue (Crested Butte Academy Project) Series 2006B, 7.50% due 8/15/2026 | 2,979,196 | ||||||
1,895,000 | Crystal Valley Metropolitan District No. 1 Douglas County Variable Rate Demand Revenue Series 2004, 3.65% due 10/1/2034(h) | 1,895,000 | ||||||
1,865,000 | Denver (City and County of) Subordinate Multifamily Housing Revenue (Capitol Heights Apartments) Series 1999C, 8.00% due 5/1/2032 | 1,145,427 | ||||||
2,315,000 | Denver (City and County of) Single Family Home Mortgage Revenue (Metro Mayors Caucus Single Family Mortgage Bond Program) Series 2001A, 6.30% due 11/1/2032 | 2,359,772 | ||||||
13,280,000 | Denver (City and County of) Special Facilities Airport Revenue (United Airlines Project) Series 1992A, 6.875% due 10/1/2032 | 13,578,800 | ||||||
775,000 | Denver West Metropolitan District G.O. Series 1997B, 5.70% due 12/1/2017 | 779,921 | ||||||
405,000 | Eagle Riverview Affordable Housing Corporation Multifamily Housing Project Subordinate Revenue Series 1999B, 7.00% due 7/1/2029 | 405,405 |
6
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Schedule of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||
Colorado Municipal Bonds — (Continued) | ||||||||
1,035,000 | Eaglebend Affordable Housing Corporation Multifamily Housing Project Revenue Refunding Series B, 7.40% due 7/1/2021 | $ | 1,064,756 | |||||
7,500,000 | East Cherry Creek Valley Water and Sanitation District Water Activity Enterprise, Inc. Variable Rate Water Revenue Series 2004, 3.00% due 11/15/2023(h) | 6,000,000 | ||||||
5,000,000 | Ebert Metropolitan District Securitization Trust Series 2004-S1, Class A2 Certificates 3.80% due 12/1/2034(h) | 5,000,000 | ||||||
1,725,000 | Ebert Metropolitan District Securitization Trust Series 2005-S1, Class A2 Certificates 3.80% due 12/1/2009(h) | 1,725,000 | ||||||
90,000 | El Paso County Powers Boulevard/ Drennan Road LID 1985-2 Special Assessment Refunding Series 1988, 8.875%-9.00% due 9/1/2000(a) | 9,000 | ||||||
1,149 | Equi-Mor Holdings, Inc. Series 1999A Class A Pass-Through Certificates, 7.50% due 4/5/2018 | 1,149 | ||||||
620,000 | Fort Lupton Golf Course Revenue Anticipation Warrants Senior Series 1996A, 8.50% due 12/15/2015(a) | 124,000 | ||||||
1,900,000 | Fronterra Village Metropolitan District G.O. (LTD Tax Convertible to Unlimited Tax) Series 2001, 8.00% due 12/1/2021(b) | 2,234,381 | ||||||
4,550,000 | Fronterra Village Metropolitan District No. 2 G.O. (LTD Tax Convertible to Unlimited Tax) Series 2003, 8.00% due 12/1/2023(b) | 5,125,802 | ||||||
500,000 | Galleria Metropolitan District G.O. LTD Tax Series 1999, 7.25% to yield 7.375% due 12/1/2019(b) | 544,950 | ||||||
905,000 | Gateway Village GID G.O. Refunding and Improvement Series 1998, 6.00% due 12/1/2018(b) | 930,747 | ||||||
755,000 | Gateway Village GID G.O. Refunding and Improvement Series 1998, 6.00% due 12/1/2018 | 746,823 | ||||||
890,000 | Gateway Village GID Subordinate LTD Tax G.O. Series 1999, 7.00% due 6/1/2019(b) | 917,973 | ||||||
2,000,000 | Granby Ranch Metropolitan District LTD Tax G.O. Series 2006, 6.75% due 12/1/2036 | 2,097,280 | ||||||
5,750,000 | Grand Elk Ranch GID LTD Tax G.O. Series 2003, 8.00% due 12/1/2023 | 5,840,908 | ||||||
675,000 | Greatrock North Water and Sanitation District LTD Tax G.O. Series 1998, 8.00% due 12/1/2017 | 713,597 | ||||||
1,000,000 | High Plains Metropolitan District LTD Tax (Convertible to Unlimited Tax) G.O. Series 2005A, 6.125% to yield 6.25% due 12/1/2025 | 985,550 | ||||||
50,000 | Idledale Fire Protection District G.O. Series 1993, 5.80% due 12/15/2007 | 50,110 | ||||||
130,000 | Las Animas (City of) G.O. Water Series 1989, 8.60% due 12/1/2009 | 132,760 |
7
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Schedule of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||
Colorado Municipal Bonds — (Continued) | ||||||||
405,000 | Littleton (The) Riverfront Authority Tax Increment Revenue Refunding Series 1999A-1, 8.00% due 12/1/2008 | $ | 409,188 | |||||
2,000,000 | Madre Metropolitan District No. 2 G.O. (LTD Tax Convertible to Unlimited Tax) Series 2007A, 5.375% due 12/1/2026 | 2,000,000 | ||||||
6,245,000 | Maher Ranch Metropolitan District No. 4 G.O. LTD Tax Series 2003, 7.80% due 12/1/2027 | 6,557,250 | ||||||
1,945,000 | Maher Ranch Metropolitan District No. 4 G.O. LTD Tax Series 2006, 7.00% due 12/1/2036 | 2,122,676 | ||||||
14,665,000 | Moffat County Weekly Adjustable/ Fixed Rate Pollution Control Revenue Refunding (Colorado-Ute Electric Association, Inc. Project) Tri-State Generation and Transmission Series 1984, 3.66% due 7/1/2010(h) | 14,665,000 | ||||||
260,000 | Mount Carbon Metropolitan District LTD Tax and Revenue Refunding Series 2004A, 7.00% due 6/1/2043 | 111,176 | ||||||
2,000,000 | Mount Carbon Metropolitan District LTD Tax and Revenue Refunding Series 2004B, 7.00% due 6/1/2043 | 855,200 | ||||||
565,000 | Mount Carbon Metropolitan District LTD Tax and Revenue Refunding Series 2004C, 8.00% due 6/1/2043(e) | 40 | ||||||
1,000,000 | Mountain Shadows Metropolitan District G.O. (LTD Tax Convertible to Unlimited Tax) Series 2007, 5.50% due 12/1/2027 | 1,000,000 | ||||||
1,500,000 | Neu Towne Metropolitan District G.O. (LTD Tax Convertible to Unlimited Tax) Series 2004, 7.20% due 12/1/2023 | 1,500,000 | ||||||
1,210,000 | North Pines Metropolitan District G.O. LTD Tax Series 2000, 9.00% due 12/1/2020 | 1,255,133 | ||||||
2,765,000 | North Range Village Metropolitan District G.O. LTD Tax Series 2000, 8.00% due 12/1/2020(b) | 3,121,630 | ||||||
1,365,000 | North Range Village Metropolitan District G.O. LTD Tax Series 2001, 10.00% due 12/1/2021(b)(h) | 1,616,597 | ||||||
1,000,000 | Northwest Metropolitan District No. 3 G.O. (LTD Tax Convertible to Unlimited Tax) Series 2005, 6.125% due 12/1/2025 | 1,065,960 | ||||||
1,430,000 | Parker Jordan Metropolitan District G.O. Series 1998A, 6.25% due 12/1/2017(b) | 1,480,307 | ||||||
4,445,000 | Parker Jordan Metropolitan District G.O. Series 2000, 7.25% to yield 7.375% due 12/1/2019(b) | 4,850,162 | ||||||
5,790,000 | Rendezvous Residential Metropolitan District G.O. LTD Tax Series 2002, 8.00% due 12/1/2021 | 6,305,368 |
8
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Schedule of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||
Colorado Municipal Bonds — (Continued) | ||||||||
3,100,000 | Revenue Bond Certificate Series Trust 2004-13 Senior Certificates of Beneficial Ownership (Centennial East Apartments Project) 3.90% due 12/1/2033(h) | $ | 3,100,000 | |||||
970,000 | Riverdale Peaks II Metropolitan District G.O. (LTD Tax Convertible to Unlimited Tax) Series 2005, 6.40% due 12/1/2025 | 1,031,527 | ||||||
1,135,000 | Riverdale Peaks II Metropolitan District G.O. (LTD Tax Convertible to Unlimited Tax) Series 2005, 6.50% due 12/1/2035 | 1,206,698 | ||||||
1,375,000 | Routt County LID No. 2002-1 Special Assessment Series 2004A, 6.50% to yield 6.59% due 8/1/2024 | 1,439,364 | ||||||
144,746 | Roxborough Village Metropolitan District Series 1993A, 9.00% due 12/31/2016(i) | 170,807 | ||||||
334,438 | Roxborough Village Metropolitan District Series 1993B, principal only, 0.00% due 12/31/2021(e)(i) | 178,761 | ||||||
367,251 | Roxborough Village Metropolitan District Series 1993B, interest only, 10.41% due 12/31/2042(f)(i) | 56,924 | ||||||
1,870,000 | Sand Creek Metropolitan District G.O. LTD Tax Series 1997, 7.125% due 12/1/2016(b) | 1,944,089 | ||||||
805,000 | Sand Creek Metropolitan District G.O. LTD Tax Series 1998, 6.625% due 12/1/2017(b) | 846,409 | ||||||
2,000,000 | Serenity Ridge Metropolitan District No. 2 Series 2004, 7.375% due 12/1/2024 | 2,000,000 | ||||||
1,000,000 | Silver Peaks Metropolitan District No. 2 General Obligation (LTD Tax Convertible to Unlimited Tax) Series 2006, 5.75% due 12/1/2036 | 1,000,000 | ||||||
3,750,000 | Solitude Metropolitan District Senior G.O. LTD Tax Series 2006, 7.00% due 12/1/2026 | 3,750,000 | ||||||
2,000,000 | Southlands Metropolitan District No. 1 (LTD Tax Convertible to Unlimited Tax) Series 2004, 7.125% to yield 7.18% due 12/1/2034 | 2,219,400 | ||||||
510,000 | Southlands Metropolitan District No. 1 G.O. (LTD Tax Convertible to Unlimited Tax) Series 2004, 6.75% to yield 6.80% due 12/1/2016 | 564,177 | ||||||
1,000,000 | Southlands Metropolitan District No. 1 G.O. (LTD Tax Convertible to Unlimited Tax) Series 2004, 7.00% to yield 7.05% due 12/1/2024 | 1,108,560 | ||||||
1,780,000 | Sterling Hills Metropolitan District G.O. LTD Tax Refunding and Improvement Series 1998, 7.75% due 6/1/2018 | 1,835,821 | ||||||
3,135,000 | Sterling Hills West Metropolitan District G.O. Exchange (LTD Tax Convertible to Unlimited Tax) Series 2001A, 8.00% due 12/1/2019 | 3,288,646 | ||||||
3,315,000 | Sterling Hills West Metropolitan District G.O. (LTD Tax Convertible to Unlimited Tax) Series 2001B, 8.00% due 12/1/2021 | 3,561,503 |
9
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Schedule of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||
Colorado Municipal Bonds — (Continued) | ||||||||
3,012,007 | Sterling Hills West Metropolitan District G.O. LTD Tax Series 2004, 7.50% due 12/1/2021 | $ | 2,706,650 | |||||
4,020,000 | Tabernash Meadows Water and Sanitation District G.O. Series 2000, 8.40% due 6/1/2020 | 3,015,000 | ||||||
1,485,000 | Todd Creek Farms Metropolitan District No. 2 LTD Tax G.O. Series 1997, 8.00% due 6/1/2017(b) | 1,525,644 | ||||||
875,000 | Todd Creek Farms Metropolitan District No. 2 LTD Tax G.O. Series 1999, 7.50% due 12/1/2018(b) | 896,210 | ||||||
5,500,000 | Triview Metropolitan District G.O. Variable Rate Refunding and Improvement Series 2006A, 3.70% due 11/1/2023(h) | 5,496,590 | ||||||
10,920,000 | United Water & Sanitation District Revenue Refunding and Improvement Series 2004A, 6.00% due 12/1/2013 | 11,189,833 | ||||||
10,800,000 | United Water & Sanitation District Revenue Series 2004B, 6.00% to yield 6.05% due 12/1/2012 | 10,976,256 | ||||||
20,400,000 | United Water & Sanitation District (Lupton Lakes Water Storage Project and Water Activity Enterprise) Revenue Bonds Series 2006, 6.00% due 3/1/2021 | 20,424,480 | ||||||
500,000 | Wheatlands Metropolitan District No. 2 G.O. (LTD Tax Convertible to Unlimited Tax) Series 2005, 6.00% due 12/1/2025 | 521,210 | ||||||
2,060,000 | Wildgrass Metropolitan District No. 2 G.O. (LTD Tax Convertible to Unlimited Tax) Refunding Series 2007, 6.20% to yield due 12/1/2034 | 2,207,640 | ||||||
500,000 | Wyndham Hill Metropolitan District No. 2 G.O. LTD Tax Series 2005, 6.25% due 12/1/2025 | 526,595 | ||||||
Total Colorado Municipal Bonds (cost $400,626,437) | $ | 412,253,263 | ||||||
Colorado Capital Appreciation and Zero Coupon — 8.2% | ||||||||
27,778,000 | Bromley Park Metropolitan District No. 3 Subordinate LTD Tax G.O. Capital Appreciation Series 2006, 8.00% due 12/15/2031(d) | $ | 4,335,821 | |||||
520,000 | Colorado Health Facilities Authority Zero Coupon Retirement Housing Revenue (Liberty Heights Project) 1990 Subordinate Series B, 6.97% due 7/15/2020(b)(d) | 295,022 | ||||||
7,470,000 | Conifer Metropolitan District Jefferson County Supplemental Interest Coupons, Series 2006, 8.00% due 12/1/2010-2031 | 2,734,916 |
10
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Schedule of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||
Colorado Capital Appreciation and Zero Coupon — (Continued) | ||||||||
18,400,000 | Cottonwood Water and Sanitation District G.O. Second Lien (LTD Tax Through 2001) Refunding Series 1998A, Capital Appreciation 8.00% due 12/1/2027(d) | $ | 3,884,712 | |||||
500,000 | El Paso County School District No. 20 G.O. Refunding Series 1993A, Zero Coupon 6.10% due 6/15/2008(d) | 477,890 | ||||||
8,005,000 | McKay Landing Metropolitan District No. 2 Subordinate G.O. LTD Tax Refunding Series 2004B, Capital Appreciation 7.50% due 12/1/2031(b)(d) | 1,476,522 | ||||||
18,500,000 | PV Water and Sanitation Metropolitan District Capital Appreciation Revenue Series 2006, 6.00% due 12/15/2017(d) | 9,882,145 | ||||||
906,622 | Roxborough Village Metropolitan District Series 1993C, 9.84% due 12/31/2032(d)(i) | 18,132 | ||||||
8,070,000 | Silver Peaks Metropolitan District No. 1 Revenue Series 2003, 8.00% due 12/1/2007-2012(d) | 6,377,089 | ||||||
13,910,000 | United Water & Sanitation District Ravenna Project Water Activity Enterprise Capital Appreciation Revenue Series 2006, 6.50% due 12/15/2011(d) | 10,306,754 | ||||||
2,286,030 | United Water & Sanitation District Ravenna Project Water Activity Enterprise Capital Appreciation Subordinate Series 2006B, 7.00% due 12/15/2011(d) | 1,677,421 | ||||||
Total Colorado Capital Appreciation and Zero Coupon Bonds (cost $45,544,276) | $ | 41,466,424 | ||||||
Colorado Certificates of Participation — 0.1% | ||||||||
600,000 | Eagle-Vail Metropolitan District Building Authority (Golf Course Project) Series 1999, 6.00% due 12/1/2019 | $ | 607,302 | |||||
Total Colorado Certificates of Participation Bonds (cost $527,330) | $ | 607,302 | ||||||
11
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Schedule of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||
Other Municipal Bonds — 10.1% | ||||||||
3,740,000 | Class B Revenue Bond Certificate Series Trust 2004-1 Variable Rate Senior Certificates of Beneficial Ownership, 3.90% due 7/1/2037(h) | $ | 3,740,000 | |||||
4,920,797 | Freddie Mac Multifamily Variable Rate Certificates Series M001 Class B, 13.64% due 4/1/2037(g) | 4,920,797 | ||||||
21,945,255 | Freddie Mac Multifamily Variable Rate Certificates Series M010 Class A, 3.75% due 11/1/2036(h) | 21,945,255 | ||||||
700,000 | The Industrial Development Authority of the City of Kansas City, Missouri Multifamily Housing Revenue (Alexandria Apartments) Series 2005A, 6.75% due 1/1/2028 | 705,418 | ||||||
3,300,000 | The Industrial Development Authority of the City of Kansas City, Missouri Subordinate Multifamily Housing Revenue (Alexandria Apartments) Series 2005B, 4.50% due 1/1/2008 | 3,300,594 | ||||||
525,000 | Lisbon (City of) North Dakota Industrial Revenue Series 2002C (Harvest Board LLC), 15.00% due 4/1/2005(a) | 131,250 | ||||||
4,500,000 | Lisbon (City of) North Dakota Industrial Revenue Series 2001A (Harvest Board LLC), 15.00% due 4/1/2011(a) | 1,125,000 | ||||||
7,645,000 | Revenue Bond Certificate Series Trust 2005-4 Senior Certificates of Beneficial Ownership (Hermitage Apartments Project), 3.90% due 5/1/2031(h) | 7,645,000 | ||||||
1,000,000 | The Industrial Development Authority of the City of St. Louis, Missouri Senior Housing Revenue (Grant School Apartments) Series 2005A, 6.75% due 5/1/2027 | 1,018,210 | ||||||
5,000,000 | Uinta County School District Number 6 General Obligation Refunding Series 2006, 7.00% to yield 4.40% due 12/1/2020 | 6,353,800 | ||||||
Total Other Municipal Bonds (cost $54,597,026) | $ | 50,885,324 | ||||||
Colorado Taxable Notes — 0% | ||||||||
227,347 | Note receivable from Tabernash Meadows, LLC, A Colorado Limited Liability Company, 24.00% due 2/09/2002(a) | $ | 227,347 | |||||
Total Colorado Taxable Notes (cost $227,347) | $ | 227,347 | ||||||
Total investments, at value (cost $501,522,416) | 97.7 | % | $ | 505,439,660 | ||||||
Other assets net of liabilities | 2.3 | 11,911,173 | ||||||||
Net assets | 100.0 | % | $ | 517,350,833 | ||||||
12
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Schedule of Investments (unaudited) — (Continued)
(a) | Non-income producing based upon the financial condition of the issuer (see footnote 1 to notes to financial statements). | |
(b) | Originally issued as general obligation bonds but are now pre-refunded and are secured by an escrow fund consisting entirely of direct U.S. Government obligations. | |
(c) | Represents interest certificates whose characteristics are similar to zero coupon bonds. All interest based on the coupon rate is remitted upon maturity. Interest rate shown for interest certificates represents effective yield at acquisition. At March 31, 2007, the Fund had no such investments. | |
(d) | Interest rate shown for zero coupon bonds represents the effective yield at the date of acquisition. | |
(e) | Principal-only certificate represents the right to receive the principal payments on the underlying debt security upon maturity. The price of this security is typically more volatile than that of coupon-bearing bonds of the same maturity. | |
(f) | Interest-only certificate represents the right to receive semi-annual interest payments on the underlying debt security. The principal amount of the underlying security represents the notional amount on which current interest is calculated. The interest rate shown represents the effective yield at the date of acquisition. | |
(g) | Interest rate disclosed for cash flow bond represents the effective yield at March 31, 2007. Income on this security is derived from the cash flow of the issuer. | |
(h) | Represents current interest rate for a variable/step rate bond. | |
(i) | Terms of security have been restructured since the original issuance. The aggregate face amount of all such restructured securities approximates $12,801,575 and a market value of $1,750,495, or less than 1% of net assets, respectively, as of March 31, 2007. |
The following abbreviations are used in the descriptions of securities included in the Schedule of Investments: | |
G.O. — General Obligation | |
GID — General Improvement District | |
LID — Local Improvement District | |
LTD — Limited |
See accompanying notes to financial statements.
13
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Statement of Assets and Liabilities (unaudited)
March 31, 2007
ASSETS | ||||||
Investments, at fair value (cost $501,522,416) | $ | 505,439,660 | ||||
— see accompanying statement | ||||||
Cash | 4,061,266 | |||||
Interest receivable | 8,368,851 | |||||
Shares of beneficial interest sold | 1,376,051 | |||||
TOTAL ASSETS | 519,245,828 | |||||
LIABILITIES | ||||||
Payables and other liabilities: | ||||||
Dividends payable | 1,087,019 | |||||
Shares of beneficial interest redeemed | 212,853 | |||||
Accrued expenses | 285,123 | |||||
Payable for investment securities purchased | 310,000 | |||||
TOTAL LIABILITIES | 1,894,995 | |||||
NET ASSETS, AT FAIR VALUE | $ | 517,350,833 | ||||
COMPOSITION OF NET ASSETS | ||||||
Paid-in capital | $ | 513,340,435 | ||||
Distributable earnings | 93,154 | |||||
Net unrealized appreciation of investments (note 3) | 3,917,244 | |||||
NET ASSETS, AT FAIR VALUE | $ | 517,350,833 | ||||
NET ASSET PRICE AND REDEMPTION PRICE PER SHARE (based on 54,650,362 shares of beneficial interest outstanding at March 31, 2007, unlimited number of no par value shares authorized) | $ | 9.47 | ||||
MAXIMUM OFFERING PRICE PER SHARE (net asset value plus sales charge of 4.75% of offering price) | $ | 9.94 | ||||
See accompanying notes to financial statements.
14
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Statement of Operations
For the Six Months Ended March 31, 2007 (unaudited)
INVESTMENT INCOME | ||||||
Interest | $ | 16,707,275 | ||||
EXPENSES | ||||||
Management fees (note 4) | 1,192,467 | |||||
Custodian fees (note 5) | 45,822 | |||||
Legal and auditing fees | 81,334 | |||||
Portfolio pricing fees (note 5) | 8,193 | |||||
Registration fees | 7,284 | |||||
Shareholders’ reports | 79,286 | |||||
Transfer agency expenses (note 4) | 59,981 | |||||
Trustees’ fees | 2,250 | |||||
Other | 10,363 | |||||
Total expenses | 1,486,980 | |||||
Earnings credits on cash balances (note 5) | (145,372 | ) | ||||
Net expenses | 1,341,608 | |||||
NET INVESTMENT INCOME | 15,365,667 | |||||
REALIZED AND UNREALIZED GAIN ON INVESTMENTS | ||||||
Net realized net gain on investments | 87,378 | |||||
Change in net unrealized appreciation/depreciation on investments | 276,265 | |||||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 363,643 | |||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 15,729,310 | ||||
See accompanying notes to financial statements.
15
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Statement of Changes in Net Assets
Year | ||||||||||
Six Months | Ended | |||||||||
Ended | September 30, | |||||||||
March 31, 2007 | 2006 | |||||||||
(Unaudited) | ||||||||||
FROM OPERATIONS: | ||||||||||
Net investment income | $ | 15,365,667 | $ | 19,842,871 | ||||||
Net realized gain on investments | 87,378 | 3,257 | ||||||||
Change in unrealized appreciation/depreciation on investments | 276,265 | 2,765,643 | ||||||||
Net increase in net assets resulting from operations | 15,729,310 | 22,611,771 | ||||||||
FROM DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||||
Dividends to shareholders from net investment income | (15,365,667 | ) | (19,842,871 | ) | ||||||
Distributions in excess of net investment income | 587,743 | (587,743 | ) | |||||||
Realized capital gain and ordinary income | — | (354,059 | ) | |||||||
Total distributions to shareholders | (14,777,924 | ) | (20,784,673 | ) | ||||||
FROM BENEFICIAL INTEREST TRANSACTIONS: | ||||||||||
Proceeds from sale of shares | 85,384,730 | 98,061,711 | ||||||||
Dividends reinvested | 9,055,135 | 13,000,474 | ||||||||
Redemption of shares | (18,603,394 | ) | (40,755,502 | ) | ||||||
Increase in net assets derived from beneficial interest transactions | 75,836,471 | 70,306,683 | ||||||||
Net increase in net assets | 76,787,857 | 72,133,781 | ||||||||
NET ASSETS: | ||||||||||
Beginning of period | 440,562,976 | 368,429,195 | ||||||||
End of period | $ | 517,350,833 | $ | 440,562,976 | ||||||
See accompanying notes to financial statements.
16
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Financial Highlights
Six Months | For Fiscal Years Ended September 30, | ||||||||||||||||||||||||
Ended | |||||||||||||||||||||||||
3/31/2007 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
Per Share Operating Data: | |||||||||||||||||||||||||
For a Fund Share Outstanding Throughout the Period | |||||||||||||||||||||||||
Net Asset Value, beginning of period | $ | 9.45 | $ | 9.41 | $ | 9.35 | $ | 9.27 | $ | 9.33 | $ | 9.39 | |||||||||||||
Net investment income | 0.30 | 0.47 | 0.48 | 0.47 | 0.60 | 0.59 | |||||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.01 | 0.06 | 0.07 | 0.08 | (0.06 | ) | (0.06 | ) | |||||||||||||||||
Increase from investment operations | 0.31 | 0.53 | 0.55 | 0.55 | 0.54 | 0.53 | |||||||||||||||||||
Dividends to shareholders from net investment income | (0.30 | ) | (0.47 | ) | (0.48 | ) | (0.47 | ) | (0.60 | ) | (0.59 | ) | |||||||||||||
Distributions in excess of net investment income | 0.01 | (0.01 | ) | — | — | — | — | ||||||||||||||||||
Realized capital gains and ordinary income | — | (0.01 | ) | (0.01 | ) | 0.00 | 0.00 | 0.00 | |||||||||||||||||
Net increase (decrease) in net asset value | 0.02 | 0.04 | 0.06 | 0.08 | (0.06 | ) | (0.06 | ) | |||||||||||||||||
Net Asset Value, end of period | $ | 9.47 | $ | 9.45 | $ | 9.41 | $ | 9.35 | $ | 9.27 | $ | 9.33 | |||||||||||||
Total Return, at Net Asset Value(1)(2) | 3.38 | %+ | 5.72 | % | 6.14 | % | 6.19 | % | 5.96 | % | 5.90 | % | |||||||||||||
Ratios/ Supplemental Data: | |||||||||||||||||||||||||
Ratios to average net assets: | |||||||||||||||||||||||||
Net investment income | 6.42 | %* | 4.97 | % | 5.10 | % | 5.08 | % | 6.46 | % | 6.77 | % | |||||||||||||
Before expenses paid indirectly | 0.62 | %* | 0.61 | % | 0.58 | % | 0.63 | % | 0.65 | % | 0.64 | % | |||||||||||||
After expenses paid indirectly | 0.56 | %* | 0.57 | % | 0.55 | % | 0.60 | % | 0.61 | % | 0.59 | % | |||||||||||||
Net assets, end of period (000s) | $ | 517,351 | $ | 440,563 | $ | 368,429 | $ | 312,651 | $ | 267,207 | $ | 201,051 | |||||||||||||
Portfolio turnover rate(3) | 7.42 | % | 5.27 | % | 4.40 | % | 2.57 | % | 4.65 | % | 6.03 | % | |||||||||||||
(1) | Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. | |
(2) | The Total Return at Net Asset Value for the period ended March 31, 2007 includes an interest payment representing four years of unpaid interest relating to the Fund’s holding of United Airlines/ Denver International Airport that is a non-recurring event outside the control of the Fund. This event occurred in the first quarter of the semi-annual period ended March 31, 2007. | |
(3) | The portfolio turnover rate is computed by dividing the lesser of purchases or sales of portfolio securities for a period by the monthly average of the market value of portfolio securities owned during the period. Sales of securities include the proceeds of securities which have been called, or for which payment has been made through redemption or maturity. Securities with a maturity date of one year or less at the time of acquisition are excluded from the calculation. Cost of purchases and proceeds from sales of investment securities (excluding short-term securities) for the period March 31, 2007 were $23,549,664 and $22,385,511, respectively. | |
+ | Not Annualized | |
* | Annualized |
See accompanying notes to financial statements.
17
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Notes to Financial Statements (unaudited)
(1) | Summary of Significant Accounting Policies |
Colorado BondShares — A Tax-Exempt Fund (the “Fund”) is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management company. The Fund’s investment objectives are to maximize income exempt from federal income taxes and from personal income taxes of the State of Colorado to the extent consistent with the preservation of capital and to seek opportunities for capital appreciation. The Fund’s investment adviser is Freedom Funds Management Company (“Freedom Funds”). The following is a summary of significant accounting policies consistently followed by the Fund.
(a) | Investment Valuation |
The values of most investment securities are determined at their market price using prices quoted by a national independent pricing service approved by the Fund’s Board of Trustees. In cases where a market price is not available from the pricing service, or where the Fund determines that the “market price” so determined is not reflective of the true “fair value” or realizable value of these securities, the securities are valued at “fair value” as determined in good faith by the Fund’s Board of Trustees. In either event, the Fund values the municipal bonds and other securities taking into consideration yield, stability, risk, quality, coupon, maturity, type of issue, trading characteristics and any other relevant trading or market factors. The Fund records amortization of premiums and accretion of original discounts on zero coupon bonds using the effective yield method, in accordance with federal income tax purposes. Short-term debt securities having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value.
(b) | Income Taxes |
The Fund intends to comply with the requirements of subchapter M of the Internal Revenue Code, as amended, applicable to regulated investment companies and to distribute all its net investment income to shareholders. The Fund distributes investment income monthly and due to the tax-exempt nature of its investments the income is generally non-taxable to the shareholders. The Fund distributes net realized capital gains, if any, to its shareholders at least annually. Income distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to the differing treatment of tax allocations. As of March 31, 2007, the majority of the Fund’s distributable earnings is attributable to capital gains.
18
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Notes to Financial Statements (unaudited) — (Continued)
(c) | Other/ Security Credit Risk |
Investment transactions are accounted for on the date the investments are purchased or sold (trade date). Dividends to shareholders are declared each business day and paid monthly. Distributions to shareholders are recorded on the ex-dividend date. Realized gains and losses from investment transactions are calculated using the identified-cost basis, which is the same basis the Fund uses for federal income tax purposes. Interest income is recorded on the accrual basis. The Fund concentrates its investments in Colorado and, therefore, may have more credit risks related to the economic conditions of Colorado than a portfolio with a broader geographical diversification. The Fund invests in non-rated securities, which may be subject to a greater degree of credit risk and risk of loss of income and principal, and may be more sensitive to economic conditions than lower yielding, higher rate fixed income securities. The Fund discontinues the accrual of interest income on municipal bonds when the securities become delinquent as to payment of principal or interest, or when the Fund’s investment adviser determines that an uncertainty exists as to the realization of all or a portion of the principal balance. The face amount of bonds for which the accrual of interest income has been discontinued approximates $14,437,529 and such bonds have an aggregate market value of $1,798,334, or less than 1% of net assets, as of March 31, 2007.
(d) | Uses of Estimates |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.
(e) | Classification of Distributions to Shareholders |
The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund.
The Fund distributed $587,743 in excess of net investment income to the shareholders during the fiscal year ended September 30, 2006. To correct this over distribution, the November 2006 dividend to shareholders was reduced by $587,743. In March 2007, the Adviser reimbursed shareholders $3,424 for the amount of the over distribution that was not recoverable due to closed
19
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Notes to Financial Statements (unaudited) — (Continued)
accounts. These adjustments are included in dividends to shareholders from net investment income presented on the statement of changes in net assets.
In the first quarter of the semi-annual period ended March 31, 2007 the Fund received an interest payment of approximately $3.8 million representing four years of unpaid interest relating to the Fund’s holding of United Airlines/ Denver International Airport bonds that is a non-recurring event outside of the control of the Fund. The interest income was received October 19, 2006 by the Fund and distributed to shareholders as part of the November 15, 2006 dividend.
(f) | New Accounting Pronouncement |
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 evaluations of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management believes that the adoption of FIN 48 will have no impact on the financial statements of the Fund.
20
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Notes to Financial Statements (unaudited) — (Continued)
(2) | Shares of Beneficial Interest |
The Fund has an unlimited number of no par value shares of beneficial interest authorized. Transactions in shares of beneficial interest for the six month period ended March 31, 2007 and the year ended September 30, 2006 were as follows:
Six Months Ended | Year Ended | ||||||||||||||||
March 31, 2007 | September 30, 2006 | ||||||||||||||||
(Unaudited) | |||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||
Shares sold | 9,033,765 | $ | 85,384,730 | 10,423,444 | $ | 98,061,711 | |||||||||||
Dividends reinvested | 958,348 | 9,055,135 | 1,382,357 | 13,000,474 | |||||||||||||
9,992,113 | 94,439,865 | 11,805,801 | 111,062,185 | ||||||||||||||
Shares redeemed | (1,967,955 | ) | (18,603,394 | ) | (4,333,243 | ) | (40,755,502 | ) | |||||||||
Net increase in shares outstanding | 8,024,158 | $ | 75,836,471 | 7,472,558 | $ | 70,306,683 | |||||||||||
(3) | Unrealized Gains and Losses |
At March 31, 2007, the net unrealized appreciation on investments of $3,917,244 was comprised of gross appreciation of $12,305,414 and gross depreciation of $8,388,170.
(4) | Management Fees and Other Transactions with Affiliates |
Management fees paid to Freedom Funds were in accordance with the investment advisory agreement with the Fund which provides for an annual fee equivalent to 0.5% of the net assets of the Fund. Freedom Funds pays all expenses associated with advertising, marketing, and distributing the Fund’s shares and serves as the transfer agent, dividend disbursing agent, and registrar for the Fund. Freedom Funds provided certain transfer agency and shareholder services as part of the management fee arrangement for the period ended March 31, 2007. Transfer agency expenses represent direct expenses charged to the Fund by third parties.
21
Table of Contents
Colorado BondShares
A Tax-Exempt Fund
Notes to Financial Statements (unaudited) — (Continued)
(5) | Earnings Credits on Cash Balances |
Expenses paid indirectly by the Fund represent earnings credits on cash balances maintained with the Fund’s custodian bank, Wells Fargo Investments and Trust. The earnings credits resulted in offsetting custodian fees of $45,822, legal fees of $17,779 for services provided by Kutak Rock, portfolio pricing fees of $8,193 for services provided by Standard and Poor’s, a division of The McGraw-Hill Companies, shareholder report fees of $48,578 for services provided by Bowne and accounting fees of $25,000 for services provided by Anton Collins and Mitchell.
22
Table of Contents
Officers and Trustees
The Board of Trustees of the Fund supervises the activities of the Fund, reviews the Fund’s service contracts and hires the companies that run the day-to-day operations of the Fund, such as the administrator, custodian, investment adviser, transfer agent and underwriter. The following table lists the trustees and officers of the Fund together with their positions held with the Fund and the term of office.
Officers and Trustees
Chairman of the Board
George N. Donnelly
Chairman of the Board of Trustees since inception of the Fund 1987
Independent Trustees
Bruce G. Ely
Trustee since July 2002
James R. Madden
Trustee since September 2004
Officer and Trustee1
Andrew B. Shaffer1
Trustee, Secretary and Treasurer since June 1995 and President since January 2003
1Andrew B. Shaffer is an “interested person” of the Fund as defined in the Investment Company Act of 1940 (the “1940 Act”) by virtue of his position as both an officer and a trustee of the Fund as described in the table above.
Additional information about the Fund’s trustees is included in the Statement of Additional Information (“SAI”) which is available, with charge, upon request, by calling us at 1-800-572-0069.
23
Table of Contents
Proxy Voting Record
The Fund does not invest in equity securities. Accordingly, there were no matters relating to a portfolio security considered during the 12 months ended June 30, 2006 with respect to which the Fund was entitled to vote. Applicable regulations require us to inform you that the foregoing proxy voting information is available on the SEC website at http://www.sec.gov or you may call us at 1-800-572-0069.
Quarterly Statement of Investments
The Fund files a complete statement of investments with the Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at http://www.sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling 1-800-732-0330 or you may call us at 1-800-572-0069.
24
Table of Contents
(This page intentionally left blank)
Table of Contents
Table of Contents
Item 2. CODE OF ETHICS.
Not required in this filing.
Item 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required in this filing.
Item 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required in this filing.
Item 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
Item 6. SCHEDULE OF INVESTMENTS.
Included in Item 1 of this Report.
Item 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
Item 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
Item 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
Item 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not adopted procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. CONTROLS AND PROCEDURES.
(a) The registrant has adopted and maintained disclosure controls and procedures (as such term is defined in Rules 30a-3(c) under the Investment Company Act of 1940, as amended (the “Act”)) that are designed to ensure that information required to be disclosed in the registrant’s reports under the Act, is recorded, processed, summarized and reported within the time periods required under the SEC’s rules and forms and that the information is accumulated and communicated to the registrant’s management, including its principal executive officer and principal financial officer to allow for timely decisions regarding required disclosure.
As required by SEC Rule 30a-3(b), the registrant carried out an evaluation under the supervision and with the participation of its management, including its principal executive officer and principal financial officer, of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures within the 90-day period prior to the filing date of this report. Based on the foregoing, the registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures were effective as of that date.
(b) There were changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting, as a result of the material weakness in the registrant’s internal control over financial reporting described below.
In November of 2006 and in connection with its audit of the registrant’s financial statements for the period ended September 30, 2006, Anton Collins Mitchell LLP advised management of the registrant, and management of the registrant agreed with Anton Collins Mitchell LLP, that the registrant did not maintain effective controls over the calculations relating to bond accretion. Specifically, the calculations of bond accretion were not determined in accordance with accounting principles generally accepted in the United States of America for investment companies because not all of the calculations were made using the effective yield method. Anton Collins Mitchell LLP’s internal control report, which discusses this matter, is filed as an Exhibit to the registrant’s Form N-SAR for the period ended September 30, 2006 filed on November 29, 2006.
During the period covered by this report, the registrant initiated changes to remediate the aforementioned deficiency and to strengthen the registrant’s internal control processes. During the quarter ending March 31, 2007, the registrant acquired more sophisticated accounting computer software to calculate bond accretion for bonds with complex repayment features. The registrant also plans to undertake additional changes to remediate the aforementioned deficiency and to strengthen the registrant’s internal control process, including the implementation of additional review procedures over the evaluation and application of relevant accounting pronouncements, rules, regulations and interpretations relating to the calculation of bond accretion. These additional procedures include consultation with outside resources as they have and may be deemed appropriate.
ITEM 12. EXHIBITS.
(a)(2)(i) | President & Treasurer’s Section 302 certification. |
(b) | Combined Section 906 certification. |
Table of Contents
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.
COLORADO BONDSHARES—A TAX-EXEMPT FUND | ||||
By: | /s/ Andrew B. Shaffer | |||
Andrew B. Shaffer, | ||||
President, Secretary and Treasurer |
Date: June 08, 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: | /s/ Andrew B. Shaffer | |||
Andrew B. Shaffer, | ||||
President, Secretary and Treasurer | ||||
(Principal Executive Officer and Principal Financial Officer) | ||||
Date: June 08, 2007 |