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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 | 811-05009 |
COLORADO BONDSHARES — A TAX EXEMPT FUND
(Exact name of registrant as specified in charter)
1200 17TH STREET, SUITE 1000, DENVER, COLORADO 80202-5835
(Address of principal executive offices) (Zip code)
FRED R. KELLY, JR. 1200 17TH STREET, SUITE 1000, DENVER, COLORADO 80202-5835
(Name and address of agent for service)
Registrant’s telephone number, including area code: | 303-572-6990 |
Date of fiscal year end: | 09/30/2004 |
Date of reporting period: | 03/31/2004 |
Item 1. Reports to Stockholders
Dear Shareholder, | May 24, 2004 |
As the semi-annual period ended on March 31, 2004, our price reached the highest point in nearly three years and dividends remained relatively high. Included is a list of investments and a summary of our operating performance which provides greater detail. Subsequent to that date, the bond market has declined as interest rates responded to indications of possible future inflation and rate adjustments by Alan Greenspan of the Federal Reserve Board. We have, since, fielded a number of calls from shareholders regarding the slight decline in their account’s market value and this seems to be much more interesting to you than what happened in the previous six months. Therefore, I would like to take this opportunity to respond to that particular question as well as a couple of others, hopefully bringing clarity to some potentially confusing issues.
Bond prices have declined, slightly, due to some upward adjustments in interest rates. As many of you know, when interest rates rise, bond prices fall because of the inverse relationship between bond prices and yield. For example, if the market yield on a security with a 1% coupon and one year to maturity increased from 1% to 2%, the price of that security would go down from 100 cents on the dollar to approximately 99 cents on the dollar. It follows that the longer the maturities, the greater the price adjustment. Yields go up, prices go down — everyone follows the logic. In our case, however, share price went down by $0.09, since 03/31/04 and yields went down by 1%. How can this happen?
We intentionally positioned the portfolio with a bias toward short maturities presently paying, only, around 1%. What this means, simply, is that the amount of monthly (dividend) income you receive is down. This, however, should be a temporary situation because we are beginning to place those proceeds back into new investments with higher yields. By buying shorter maturities, we averted, what would have been, a larger decline in the share price. Looking forward, we believe it will be much easier to make up lost income than principal.
During this type of interest rate environment there is also confusion about price variances between the price that shareholders have paid and the account market values which are quoted at Net Asset Value. Remember that the Fund offers volume discounts on new money purchases, depending on the total amount being invested. Many of you have availed yourself of these price points in the past. So, when you are attempting to determine how much true price fluctuation you have experienced you should remember to compare the original price paid (at the appropriate discount category) to the market price at the time of purchase. The difference between the price paid (Ask) and the Net Asset Value (Bid) at that time, is the amount of the sales charge that you paid not the result of market action.
As always, we thank you for your support and we are available to answer any questions.
Sincerely, | |
Fred R. Kelly, Jr. | |
Portfolio Manager |
Officers and Trustees
George N. Donnelly, Chairman of the Board |
Investment Adviser
Freedom Funds Management Company |
Transfer, Shareholder Servicing, and Dividend Disbursing Agent
Freedom Funds Management Company |
Distributor
SMITH HAYES Financial Services Corporation |
Custodian of Portfolio Securities
Wells Fargo Investments and Trust, |
Independent Auditors
Fortner, Bayens, Levkulich & Co., P.C. |
Legal Counsel
Kutak Rock |
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, and are not insured by the FDIC or any other agency, and involve investment risks, including possible loss of the principal amount invested.
Colorado BondShares
Statement of Investments
March 31, 2004 (unaudited)
Face Amount | Market Value | |||||||||||
Colorado Municipal Bonds — 77.9% | ||||||||||||
125,000 | Academy Water and Sanitation District G.O. Series 1995, 6.50%-7.10% due 11/15/2004-05 | 129,489 | ||||||||||
500,000 | Adams County Multi-Family Housing Hunters Cove Series 1985A, 1.06%, due 1/15/2014 (h) | 500,000 | ||||||||||
2,175,000 | Antelope Heights Metropolitan District (Town of Parker) G.O. Series 2003, 8.00% due 12/1/2023 | 2,175,000 | ||||||||||
10,700,000 | Arapahoe County Multi-Family Housing Hunters Run 1.03% due 8/1/2031 (h) | 10,700,000 | ||||||||||
90,000 | Arapahoe Water and Sanitation District G.O. Refunding and Improvement Series 1986, 8.50% due 12/1/2005 (b) | 97,355 | ||||||||||
950,000 | Aurora Multi-Family Housing Revenue (River Falls Project) Series 1999A, 5.70% due 7/1/2029 | 937,394 | ||||||||||
306,040 | Aurora Centretech Metropolitan District G.O. Refunding and Improvement Series 1994, 6.00% due 12/1/2023 (b) | 493,786 | ||||||||||
700,000 | Beebe Draw Farms Metropolitan District G.O. Series 1998, 7.00% due 10/1/2018 | 680,190 | ||||||||||
1,295,000 | Bell Mountain Ranch Phase II Metropolitan District G.O. Series 1995, 8.50% due 11/15/2015 (b) | 1,454,440 | ||||||||||
5,215,000 | Belle Creek Metropolitan District No. 1 G.O. Ltd. Tax Series 2000, 8.00% due 12/1/2020 | 5,421,879 | ||||||||||
100,000 | Black Hawk (City of) Device Tax Revenue Series 1996, 5.85% due 12/1/2004 | 101,948 | ||||||||||
2,250,000 | Black Hawk (City of) Device Tax Revenue Series 1998, 5.625% due 12/1/2021 | 1,976,085 | ||||||||||
1,115,000 | Boulder County Multi-Family Refunding and Improvement Revenue (Thistle Community Housing Project) Series 1999, 6.00%-7.375% due 6/1/2011-19 | 1,031,259 | ||||||||||
1,845,000 | Bradburn Metropolitan District #3 G.O. Ltd. Tax, Series 2003, 7.50% due 12/1/2033 | 1,845,000 | ||||||||||
6,700,000 | Bromley Park Metropolitan District No. 3 G.O. Ltd. Tax Exchange Series 2001A & B, 8.00% due 12/1/2019-22 | 6,796,102 | ||||||||||
6,000,000 | Bromley Park Metropolitan District No. 2 G.O. Series 2002B, 8.00% due 12/1/2022 | 6,126,660 | ||||||||||
4,750,000 | Bromley Park Metropolitan District No. 2 G.O. Series 2003, 8.00% due 12/01/2028 | 4,750,000 | ||||||||||
14,000,000 | Broomfield Village Metropolitan District No. 2 Special Revenue Refunding Series 2003B, 1.77% due 7/1/2032 (h) | 14,000,000 |
2
Statement of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||||||
Colorado Municipal Bonds — (Continued) | ||||||||||||
25,000 | Castle Rock (Town of) G.O. Series 1988-2, 10.375% due 12/1/2008 | 29,391 | ||||||||||
565,000 | Castle Rock (Town of) LID Series 1988-2D Special Assessment, 9.25%-10.375% due 12/1/2008 (i) | 45,200 | ||||||||||
145,000 | Central City (City of) Excise Tax Revenue Refunding Series 1996, 6.20%-6.60% due 12/1/2006-11 | 124,436 | ||||||||||
2,250,000 | Central Platte Valley Metropolitan District Special Obligation Revenue Series 1998, 7.00% due 12/1/2017 (b) | 2,578,478 | ||||||||||
2,009,520 | Colorado Centre Metropolitan District Ltd. Tax and Special Revenue Series 1992A, principal only, 0.00% due 1/1/2027 (a)(f)(i) | 12,560 | ||||||||||
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) | 1,207,511 | ||||||||||
6,465,662 | Colorado Centre Metropolitan District Ltd. Tax and Special Revenue Series 1992B, 0.00% due 1/1/2032 (a)(g)(i) | 40,410 | ||||||||||
3,740,000 | Colorado Educational & Cultural Facilities Authority Charter School Revenue (Liberty Common) Series 1999, 6.95% due 8/15/2019 | 4,407,440 | ||||||||||
920,000 | Colorado Educational & Cultural Facilities Authority Charter School Revenue (Crown Pointe Academy) Series 2000, 7.25% due 7/15/2025 | 962,955 | ||||||||||
1,225,000 | Colorado Educational & Cultural Facilities Authority Private School Revenue (Escuela Tlatelolco Project) Series 2000A, 8.50% due 6/1/2022 | 1,233,477 | ||||||||||
675,000 | Colorado Educational & Cultural Facilities Authority Charter School Revenue (Elbert County) Series 2000, 8.00% due 6/1/2004-10 | 673,521 | ||||||||||
2,115,000 | Colorado Educational & Cultural Facilities Authority Charter School Revenue (Belle Creek Charter School Project) Series 2002A, 7.625% due 3/15/2032 | 2,129,171 | ||||||||||
350,000 | Colorado Health Facilities Authority Revenue Refunding National Benevolent Association Series A, 5.25% due 1/1/2027 (a) | 253,225 | ||||||||||
100,000 | Colorado Health Facilities Authority Revenue Refunding National Benevolent Association Series B, 5.25% due 2/1/2028 (a) | 72,350 | ||||||||||
150,000 | Colorado Health Facilities Authority Revenue National Benevolent Association Series A, 6.375% due 9/1/2029 (a) | 108,525 | ||||||||||
4,200,000 | Colorado Housing & Finance Authority Adjustable Rate Class I Series A-1, 1.03% due 10/1/2030 (h) | 4,200,000 | ||||||||||
4,885,000 | Colorado Housing & Finance Authority Multi-Family Adjustable Rate Class III Series A-1, 103% due 4/1/2030 (h) | 4,885,000 | ||||||||||
1,605,000 | Colorado Housing & Finance Authority Variable Rate Class I Series A-2, 1.03% due 4/1/2020 (h) | 1,605,000 |
3
Statement of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||||||
Colorado Municipal Bonds — (Continued) | ||||||||||||
5,240,000 | Colorado Housing & Finance Authority Class I Adjustable Rate Series AA-2, 1.03% due 5/1/2031 (h) | 5,240,000 | ||||||||||
4,115,000 | Colorado Housing & Finance Authority Single Family Mortgage Class I Adjustable Rate 2002 Series A-3, 1.03% due 11/1/2021 (h) | 4,115,000 | ||||||||||
7,320,000 | Colorado Housing & Finance Authority Adjustable Rate Multi-Family Project Class I Series A-4, 1.03% due 10/1/2030 (h) | 7,320,000 | ||||||||||
14,915,000 | Colorado Housing & Finance Authority Adjustable Rate Multi-Family Housing Insured Mortgage Revenue 2002 Series AA, 1.03% due 10/1/2030 (h) | 14,915,000 | ||||||||||
5,000,000 | Colorado Housing & Finance Authority Adjustable Rate Single Family Mortgage Series B-3, 1.03% due 11/1/2021 (h) | 5,000,000 | ||||||||||
1,380,000 | Colorado Housing & Finance Authority Adjustable Rate Class I Series AA3, 1.03% due 5/1/2036 (h) | 1,380,000 | ||||||||||
11,740,000 | Colorado Housing & Finance Authority Variable Rate Multi-Family Class I Series C4, 1.03% due 10/1/2032 (h) | 11,740,000 | ||||||||||
625,000 | Colorado Postsecondary Educational Facilities Authority Revenue (National Technological University Project) Series 1993, 7.75% due 12/1/2010 | 632,375 | ||||||||||
425,000 | Colorado Postsecondary Educational Facilities Authority Revenue (National Technological University Project) Series 1993, 7.375% due 12/1/2010 (b) | 445,757 | ||||||||||
675,000 | Colorado Springs Spring Creek GID G.O. Series 1995, 6.50% due 12/1/2014 (h)(i) | 614,250 | ||||||||||
2,455,000 | Conservatory Metropolitan District G.O. Series 2003, 7.50% due 12/1/2027 | 2,435,826 | ||||||||||
320,000 | Cordillera Metropolitan District G.O. Series 1994A, 8.00% due 12/1/2009 (b) | 337,978 | ||||||||||
475,000 | Cordillera Metropolitan District G.O. Series 1994, 8.25% due 12/1/2013 (b) | 502,441 | ||||||||||
1,025,000 | Cotton Ranch Metropolitan District G.O. Series 1998A, 7.25% due 12/15/2017 | 1,038,950 | ||||||||||
3,500,000 | Cotton Ranch Metropolitan District G.O. Ltd. Tax Refunding Series 1999A, 8.00% due 12/15/2017 (h) | 3,498,495 | ||||||||||
2,240,000 | Cottonwood Water and Sanitation District Refunding Series 1996A, 7.60% due 12/1/2012 | 2,371,354 | ||||||||||
1,865,000 | Denver (City and County of) Subordinate Multi-Family Housing Revenue (Capitol Heights Apartments) Series 1999C, 8.00% due 5/1/2032 | 1,780,926 | ||||||||||
12,795,000 | Denver (City and County of) Special Facilities Airport Revenue (United Airlines Project) Series 1992A, 6.875% due 10/1/2032 (a) | 10,491,900 | ||||||||||
775,000 | Denver West Metropolitan District Series 1997B, 5.70% due 12/1/2017 | 794,530 |
4
Statement of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||||||
Colorado Municipal Bonds — (Continued) | ||||||||||||
435,000 | Eagle Riverview Affordable Housing Corporation Multi-Family Housing Project Revenue Series 1999B, 7.00% due 7/1/2029 | 395,445 | ||||||||||
1,145,000 | Eaglebend Affordable Housing Multi-Family Housing Project Series B, 7.40% due 7/1/2021 | 1,142,596 | ||||||||||
90,000 | El Paso County LID 85-2 Special Assessment Refunding Series 1988, 8.875%-9.00%, due 9/1/2000 (a) | 9,000 | ||||||||||
4,605,000 | El Paso County Multi-Family Housing Revenue Adjustable Rate Briarglen Apartments Project, 1.02% due 12/1/2024 (h) | 4,605,000 | ||||||||||
100,000 | El Paso County School District No. 2 — Harrison G.O. Improvement Series 1994, 7.10% due 12/1/2004 | 103,900 | ||||||||||
235,366 | Equi-Mor Holdings Inc. Class A Pass-Through Certificates Series 1999A, 7.50% due 4/5/2018 | 235,366 | ||||||||||
270,000 | Fort Lupton Golf Course Revenue Anticipation Warrants Series 1996A, 8.50% due 12/15/2015 (a) | 99,900 | ||||||||||
1,900,000 | Fronterra Village Metropolitan District G.O. Series 2001, 8.00% due 12/1/2021 | 1,922,572 | ||||||||||
4,550,000 | Fronterra Village Metropolitan District No. 2 G.O. Series 2003, 8.00% due 12/1/2023 | 4,623,483 | ||||||||||
500,000 | Galleria Metropolitan District G.O. Series 1999, 7.25% due 12/1/2019 | 523,815 | ||||||||||
1,905,000 | Gateway Village GID G.O. Refunding and Improvement Series 1998, 6.00% due 12/1/2018 | 1,829,505 | ||||||||||
970,000 | Gateway Village GID Subordinate Ltd. Tax G.O. Series 1999, 7.00% due 6/1/2019 | 972,638 | ||||||||||
5,750,000 | Grand Elk Ranch GID Ltd. Tax G.O. Series 2003, 8.00% due 12/1/2023 | 5,737,695 | ||||||||||
300,000 | Grand Junction (City of) Downtown Development Authority Tax Increment Revenue Series 1996, 5.55%-5.65% due 11/15/2004-05 | 301,437 | ||||||||||
750,000 | Greatrock North Water and Sanitation District Ltd. Tax G.O. Series 1998, 8.00% due 12/1/2017 | 758,715 | ||||||||||
630,000 | Hamilton Creek Metropolitan District Series 1990, 0.00% due 12/1/2004 (a)(g)(i) | 603,968 | ||||||||||
265,000 | Idledale Colorado Fire Protection District G.O. Series 1993, 5.35%-5.80% due 12/15/2004-07 | 266,715 | ||||||||||
225,000 | Las Animas (City of) Water G.O. Series 1989, 8.60% due 12/1/2009 | 227,207 | ||||||||||
955,000 | Littleton (The) Riverfront Authority Tax Increment Revenue Refunding Series 1999A-1, 8.00% due 12/1/2008 | 972,238 |
5
Statement of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||||||
Colorado Municipal Bonds — (Continued) | ||||||||||||
6,245,000 | Maher Ranch Metropolitan District No. 4 (Town of Castle Rock) G.O Ltd. Tax Series 2003, 7.80% due 12/1/2027 | 6,245,000 | ||||||||||
2,345,000 | Moffat County Pollution Control Revenue Tri-State Generation and Transmission Series 1984, 1.23% due 7/1/2010 (h) | 2,345,000 | ||||||||||
260,000 | Mount Carbon Metropolitan District Revenue Refunding Series A, 7.00% due 6/1/2043 | 257,400 | ||||||||||
2,000,000 | Mount Carbon Metropolitan District Revenue Refunding Ltd. Tax Series B, 7.00% due 6/1/2043 | 1,980,000 | ||||||||||
565,000 | Mount Carbon Metropolitan District Revenue Refunding Series C, 8.00% due 6/1/2043 (e) | 40 | ||||||||||
60,000 | North Jeffco Park and Recreation District Golf Course Revenue Series 1994, 6.10% due 12/1/2004 | 60,814 | ||||||||||
1,380,000 | North Pines Metropolitan District G.O. Ltd. Tax Series 2000, 9.00% due 12/1/2020 | 1,000,500 | ||||||||||
2,800,000 | North Range Village Metropolitan District G.O. Ltd. Tax Series 2000, 8.00% due 12/1/2020 | 2,891,168 | ||||||||||
1,365,000 | North Range Village Metropolitan District G.O. Ltd. Tax Series 2001, 4.9%-8.5% due 12/1/2021 (h) | 1,373,272 | ||||||||||
1,685,000 | Parker Jordan Metropolitan District G.O. Series 1998A, 6.25% due 12/1/2017 (b) | 1,937,278 | ||||||||||
4,460,000 | Parker Jordan Metropolitan District G.O. Series 2000, 7.25% due 12/1/2019 (b) | 5,515,726 | ||||||||||
6,075,000 | Rendezvous Residential Metropolitan District G.O. Ltd. Tax Series 2002, 8.00% due 12/1/2021 | 6,075,000 | ||||||||||
1,375,000 | Routt County LID Special Improvement District Special Assessment #2-1 Series A, 6.50% due 8/1/2024 | 1,347,678 | ||||||||||
154,077 | Roxborough Village Metropolitan District Series 1993A, 9.00% due 12/31/2016 (i) | 132,507 | ||||||||||
337,187 | Roxborough Village Metropolitan District Series 1993B, principal only, 0.00% due 12/31/2021 (e)(i) | 23,603 | ||||||||||
58,916 | Roxborough Village Metropolitan District Series 2003B, interest only, 9.00% due 12/31/2032 (f)(i) | 1,767 | ||||||||||
367,251 | Roxborough Village Metropolitan District Series 1993B, interest only, 10.41% due 12/31/2042 (f)(i) | 7,345 |
6
Statement of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||||||
Colorado Municipal Bonds — (Continued) | ||||||||||||
2,140,000 | Sand Creek Metropolitan District G.O. Ltd. Tax Series 1997, 7.125% due 12/1/2016(b) | 2,542,855 | ||||||||||
905,000 | Sand Creek Metropolitan District G.O. Ltd. Tax Series 1998, 6.625% due 12/1/2017(b) | 1,069,285 | ||||||||||
1,430,000 | City of Sheridan Colorado G.O. Series 1997A, 7.50% due 12/1/2016 | 1,506,619 | ||||||||||
1,000,000 | Southpark Metropolitan District G.O. Refunding Series 1996, 6.60% due 12/1/2013 | 1,054,140 | ||||||||||
10,000 | Southwest Commons Improvement District G.O. Series 1987, 9.25% due 12/15/2006 | 10,232 | ||||||||||
1,935,000 | Sterling Hills Metropolitan District G.O. Ltd. Tax Series 1998, 7.75% due 6/1/2018 | 1,941,695 | ||||||||||
3,310,000 | Sterling Hills West Metropolitan District G.O. Ltd. Tax Series 2001A, 8.00% due 12/1/2019 | 3,406,586 | ||||||||||
3,315,000 | Sterling Hills West Metropolitan District G.O. Ltd. Tax Series 2001B, 8.00% due 12/1/2021 | 3,429,301 | ||||||||||
5,290,000 | Tabernash Meadows Water and Sanitation District G.O. Series 2000, 8.40% due 6/1/2020 | 3,967,500 | ||||||||||
350,000 | Tabernash Meadows Water and Sanitation District G.O. Series 2003, 9.00% due 12/1/2014 | 262,500 | ||||||||||
1,715,000 | Todd Creek Farms Metropolitan District No. 2 Ltd. Tax G.O. Series 1997, 8.00% due 6/1/2017 (b) | 2,005,915 | ||||||||||
955,000 | Todd Creek Farms Metropolitan District No. 2 Ltd. Tax G.O. Series 1999, 7.50% due 12/1/2018 (b) | 1,105,537 | ||||||||||
Total Colorado Municipal Bonds (cost $230,473,357) | $ | 237,267,477 | ||||||||||
Colorado Capital Appreciation and Zero Coupon — 4.3% | ||||||||||||
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) | 236,720 | ||||||||||
19,019,288 | Cottonwood Water and Sanitation District Capital Appreciation Refunding Second Lien, Series 1998A, 8.00% due 12/1/2027 (d) | 3,793,052 | ||||||||||
500,000 | El Paso County School District No. 20 G.O. Refunding Series 1993A, Zero Coupon, 6.10% due 6/15/2008 (d) | 448,135 |
7
Statement of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||||||
Colorado Capital Appreciation and Zero Coupon — (Continued) | ||||||||||||
906,622 | Roxborough Village Metropolitan District Series 1993C, 9.84% due 12/31/2032 (d)(i) | 13,599 | ||||||||||
12,105,000 | Silver Peaks Metropolitan District No. 1 Revenue Zero Coupon Series 2003, 8.00% due 12/1/2004-12 (d) | 8,567,744 | ||||||||||
Total Colorado Capital Appreciation and Zero Coupon Bonds (cost $15,919,227) | $ | 13,059,250 | ||||||||||
Colorado Certificates of Participation — 0.3% | ||||||||||||
155,000 | Arapahoe County Recreation District Refunding Certificates of Participation Series 1996, 5.00%-5.20% due 12/1/2004-06 | 159,597 | ||||||||||
600,000 | Eagle-Vail Metropolitan District Golf Course Series 1999, 6.00% due 12/1/2019 | 608,556 | ||||||||||
145,000 | Park School District R-3 Certificates of Participation Series 1995 and 1996, 5.35%-5.45% due 6/1/2004-05 | 145,930 | ||||||||||
Total Colorado Certificates of Participation Bonds (cost $827,330) | $ | 914,083 | ||||||||||
Other Municipal Bonds — 9.4% | ||||||||||||
2,500,000 | California Statewide Communities Development Authority Multi-Family Housing Revenue Senior (Heritage Apartments at Arcadia) Series 2003G, 6.40% due 12/1/2041 | 2,500,000 | ||||||||||
3,740,000 | Class B Revenue Bond Certificate Series Trust 2004-1 Variable Rate Senior Certificates of Beneficial Ownership, 1.37% due 7/1/2037 (h) | 3,740,000 | ||||||||||
1,890,000 | County of El Paso Housing Finance Corporation Multi-Family Housing Revenue (San Jose, Ltd. Project) Series 1999B, 6.00% due 8/1/2031 | 1,890,000 | ||||||||||
5,000,000 | Freddie Mac Multi-Family Variable Rate Certificates Series M001 Class B, 9.75% due 4/1/2032 (g) | 5,000,000 | ||||||||||
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 | ||||||||||
2,260,000 | Maricopa County Arizona Multi-Family Revenue (Rancho Del Sol Apartments) Series 2002A, Subordinate Series C, 6.40% due 12/1/2024 | 2,260,000 |
8
Statement of Investments (unaudited) — (Continued)
Face Amount | Market Value | |||||||||||
Other Municipal Bonds — (Continued) | ||||||||||||
420,000 | Sandoval County New Mexico Project Revenue Tournament Soccer Complex Series 1997, 7.50% due 8/15/2006 | 413,091 | ||||||||||
8,030,000 | Speedway Indiana Multi-Family Economic Development Revenue (Hermitage Apartments Project) Series 1999, 6.00% due 5/1/2031 | 8,030,000 | ||||||||||
450,000 | Texas State Department Housing & Community Affairs Multi-Family Revenue (Reading Road Apartments), Series A & B 2003, 6.75% due 7/1/2036 | 450,000 | ||||||||||
650,000 | Uinta County Wyoming School District No. 6 Series 2002, 3.00% due 12/1/2004 | 650,527 | ||||||||||
2,300,000 | Utah Housing Corporation Multi-Family Housing Mortgage Revenue (Layton Pointe Apartments Project) Series 2003, 6.5% due 6/1/2035 | 2,300,000 | ||||||||||
Total Other Municipal Bonds (cost $32,265,000) | $ | 28,489,868 | ||||||||||
Total investments, at value (cost $279,484,914)* | 91.9 | % | 279,730,678 | |||||||||
Other assets net of liabilities | 8.1 | 24,707,807 | ||||||||||
Net assets | 100.0 | % | $ | 304,438,485 | ||||||||
* | Tax cost basis approximates book cost basis. | |
(a) | Non-income producing based upon the financial condition of the issuer (see footnote 1). | |
(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. | |
(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 |
9
Statement of Investments (unaudited) — (Continued)
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, 2004. 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 face amount of restructured securities approximates $14,177,570 and a market value of $2,702,720 or approximately 1.0% of net assets, respectively, as of March 31, 2004. |
The following abbreviations are used in the descriptions of securities included in the Statement of Investments: | |
G.O. — General Obligation | |
GID — General Improvement District | |
LID — Local Improvement District | |
Ltd. — Limited |
See accompanying notes to financial statements.
10
Colorado BondShares
Statement of Assets and Liabilities
ASSETS | |||||
Investments, at value (cost $279,484,914) | $ | 279,730,678 | |||
— see accompanying statement | |||||
Cash | 35,141 | ||||
Bonds sold | 53,408,000 | ||||
Interest receivable | 6,127,737 | ||||
Shares of beneficial interest sold | 616,768 | ||||
TOTAL ASSETS | 339,918,324 | ||||
LIABILITIES | |||||
Payables and other liabilities: | |||||
Dividends payable | 685,163 | ||||
Bonds purchased | 34,502,439 | ||||
Shares of beneficial interest redeemed | 66,828 | ||||
Accrued expenses | 225,409 | ||||
TOTAL LIABILITIES | 35,479,839 | ||||
NET ASSETS | $ | 304,438,485 | |||
COMPOSITION OF NET ASSETS | |||||
Paid-in capital | $ | 304,177,549 | |||
Accumulated net realized gains | 15,172 | ||||
Net unrealized appreciation of investments (note 3) | 245,764 | ||||
NET ASSETS | $ | 304,438,485 | |||
NET ASSET VALUE AND REDEMPTION VALUE PER SHARE (based on 32,427,732 shares of beneficial interest outstanding) | $ | 9.39 | |||
MAXIMUM OFFERING PRICE PER SHARE (net asset value plus sales charge of 4.75% of offering price) | $ | 9.86 | |||
See accompanying notes to financial statements.
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Colorado BondShares
Statement of Operations
INVESTMENT INCOME | ||||||
Interest | $ | 8,699,503 | ||||
EXPENSES | ||||||
Management fees (note 4) | 718,293 | |||||
Custodian fees (note 5) | 41,596 | |||||
Legal and auditing fees | 64,965 | |||||
Portfolio pricing fees (note 5) | 8,795 | |||||
Registration fees | 4,575 | |||||
Shareholders’ reports | 24,705 | |||||
Transfer agency expenses (note 4) | 45,750 | |||||
Trustees’ fees | 1,501 | |||||
Other | 3,331 | |||||
Total expenses | 913,511 | |||||
Earnings credits on cash balances (note 5) | (50,391 | ) | ||||
Net expenses | 863,120 | |||||
NET INVESTMENT INCOME | 7,836,383 | |||||
REALIZED AND UNREALIZED GAINS/(LOSSES) ON INVESTMENTS | ||||||
Realized net (loss) on investments | (19,127 | ) | ||||
Change in net unrealized appreciation on investments | 3,725,925 | |||||
NET REALIZED AND UNREALIZED GAIN/(LOSS) | 3,706,798 | |||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 11,543,181 | ||||
See accompanying notes to financial statements.
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Colorado BondShares
Statements of Changes in Net Assets
Six Months | Year Ended | |||||||||
Ended | September 30, | |||||||||
March 31, 2004 | 2003 | |||||||||
FROM INVESTMENT ACTIVITIES | ||||||||||
Net investment income | $ | 7,836,383 | $ | 15,377,534 | ||||||
Realized net gain/(loss) on investments | (19,127 | ) | 79,914 | |||||||
Change in unrealized appreciation/(depreciation) on investments | 3,725,925 | (1,572,190 | ) | |||||||
Net increase in net assets resulting from operations | 11,543,181 | 13,885,258 | ||||||||
Dividends to shareholders from net investment income | (7,837,653 | ) | (15,377,534 | ) | ||||||
FROM BENEFICIAL INTEREST TRANSACTIONS | ||||||||||
Proceeds from sale of shares | 39,700,199 | 84,737,048 | ||||||||
Dividends reinvested | 4,730,052 | 9,133,079 | ||||||||
Payments for shares redeemed | (10,904,125 | ) | (26,222,421 | ) | ||||||
Increase in net assets derived from beneficial interest transactions | 33,526,126 | 67,647,706 | ||||||||
Net increase in net assets | 37,231,654 | 66,155,430 | ||||||||
NET ASSETS | ||||||||||
Beginning of period | 267,206,831 | 201,051,401 | ||||||||
End of period | $ | 304,438,485 | $ | 267,206,831 | ||||||
See accompanying notes to financial statements.
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Colorado BondShares
Financial Highlights
Year Ended September 30, | |||||||||||||||||||||
Six Months Ended | |||||||||||||||||||||
March 31, 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||
(unaudited) | |||||||||||||||||||||
Per Share Operating Data: | |||||||||||||||||||||
Net Asset Value, beginning of period | $ | 9.27 | $ | 9.33 | $ | 9.39 | $ | 9.35 | $ | 9.42 | |||||||||||
Net investment income | 0.25 | 0.60 | 0.59 | 0.68 | 0.68 | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.11 | (0.06 | ) | (0.06 | ) | 0.04 | (0.07 | ) | |||||||||||||
Increase from investment operations | 0.36 | 0.54 | 0.53 | 0.72 | 0.61 | ||||||||||||||||
Dividends from net investment income | (0.25 | ) | (0.60 | ) | (0.59 | ) | (0.68 | ) | (0.68 | ) | |||||||||||
Net increase (decrease) in net asset value | 0.11 | (0.06 | ) | (0.06 | ) | 0.04 | (0.07 | ) | |||||||||||||
Net Asset Value, end of period | $ | 9.38 | $ | 9.27 | $ | 9.33 | $ | 9.39 | $ | 9.35 | |||||||||||
Total Return, at Net Asset Value(1) | 4.12 | %+ | 5.96 | % | 5.90 | % | 7.79 | % | 6.76 | % | |||||||||||
Ratios/ Supplemental Data: | |||||||||||||||||||||
Net investment income | 5.48 | %* | 6.46 | % | 6.77 | % | 7.14 | % | 7.18 | % | |||||||||||
Total expenses | 0.64 | %* | 0.65 | % | 0.64 | % | 0.66 | % | 0.81 | % | |||||||||||
Net expenses | 0.60 | %* | 0.61 | % | 0.59 | % | 0.60 | % | 0.73 | % | |||||||||||
Net assets, end of period (000’s) | $ | 304,438 | $ | 267,207 | $ | 201,051 | $ | 138,520 | $ | 96,993 | |||||||||||
Ratios to average net assets: | |||||||||||||||||||||
Portfolio turnover rate(2) | 3.20 | %* | 4.65 | % | 6.03 | % | 7.91 | % | 18.11 | % | |||||||||||
(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 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, 2004 were $8,201,152 and $2,594,765, respectively. | |
* | Annualized | |
+ | Not Annualized |
See accompany notes to financial statements.
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Colorado BondShares
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 the Internal Revenue Code applicable to regulated investment companies and to distribute all its net investment income to shareholders. Therefore, no tax provision is required.
(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. The Fund concentrates its investments in Colorado and,
15
Notes to Financial Statements (unaudited) — (Continued)
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 $27,885,182 and a market value of $12,948,088 or 4.25% of net assets, as of March 31, 2004.
(d) Uses of Estimates |
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
(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, 2004 and the year ended September 30, 2003 were as follows:
Six Months | Year Ended | |||||||
March 31, | September 30, | |||||||
2004 | 2003 | |||||||
Shares sold | 4,254,775 | 9,131,780 | ||||||
Dividends reinvested | 506,852 | 984,201 | ||||||
4,761,627 | 10,115,981 | |||||||
Shares redeemed | (1,167,956 | ) | (2,831,508 | ) | ||||
Net increase in shares outstanding | 3,593,671 | 7,284,473 | ||||||
16
Notes to Financial Statements (unaudited) — (Continued)
(3) | Unrealized Gains and Losses |
At March 31, 2004, the net unrealized appreciation on investments of $245,764 was comprised of gross appreciation of $9,679,298 and gross depreciation of $9,433,534.
(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, 2004. Transfer agency expenses represent direct expenses charged to the Fund by third parties.
(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 $41,596 and pricing fees of $8,795 for services provided by Standard and Poor’s, a division of The McGraw-Hill Companies.
17
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 required in this filing.
Item 6. Schedule of Investments included in Item 1
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not required in this filing.
Item 8. [Reserved]
Item 9. Submission of Matters to a Vote of Security Holders
Not required in this filing.
Item 10. Controls and Procedures
(a) It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s disclosure controls and procedures, as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c)) (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing), provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure.
(b) There has been no change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s most recent fiscal half-year (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.
Item 11. Exhibits
(a) | (2 | ) | President & Treasurer’s Section 302 certification. | |||||
(b) | Combined Section 906 certification. |
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) | Colorado BondShares A Tax-Exempt Fund | |
By (Signature and Title) | * /s/ Andrew B. Shaffer | |
Andrew B. Shaffer | ||
President and Secretary |
Date: | June 4, 2004 | |