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 811-5047
Tax-Free Fund of Colorado
(Exact name of Registrant as specified in charter)
380 Madison Avenue
New York, New York 10017
(Address of principal executive offices) (Zip code)
Joseph P. DiMaggio
380 Madison Avenue
New York, New York 10017
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 697-6666
Date of fiscal year end: 12/31
Date of reporting period: 12/31/05
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT
DECEMBER 31, 2005
[LOGO OF TAX-FREE FUND OF COLORADO:
A SQUARE WITH SILHOUETTES OF TWO MOUNTAINS AND A RISING SUN]
TAX-FREE FUND
OF
COLORADO
A TAX-FREE INCOME INVESTMENT
[LOGO OF THE AQUILA
GROUP OF FUNDS: ONE OF THE
AN EAGLE'S HEAD] AQUILA(SM) GROUP OF FUNDS
[LOGO OF TAX-FREE FUND OF COLORADO:
A SQUARE WITH SILHOUETTES OF TWO
MOUNTAINS AND A RISING SUN]
SERVING COLORADO INVESTORS FOR ALMOST TWO DECADES
TAX-FREE FUND OF COLORADO
"THE BENEFITS OF TAX-FREE INVESTING"
February, 2006
Dear Fellow Shareholder:
As the name of your fund clearly states, Tax-Free Fund of Colorado is
tax-free* - free from Colorado state and regular Federal income taxes.
This tax-free status serves many purposes. It obviously provides you, and
our other shareholders, with tax-free income. But, it also provides
municipalities with an attractive motivator to help them raise revenue.
Additionally, the projects funded by these tax-free securities enhance the
quality of life for all community residents.
Many individuals pay as much as 30% to 40% of their income in Federal and
state taxes. Obviously, if you have to pay that much in taxes, it significantly
reduces what you get to keep in your pocket.
BENEFITS TO INVESTORS
As an investor seeking tax-free income, do you have to forego higher
yields? Not necessarily.
[BAR CHART]
Hypothetical Tax-Free Yield 3%
Hypothetical Taxable Equivalent Yield 4.8%
Hypothetical Tax-Free Yield 4%
Hypothetical Taxable Equivalent Yield 6.[ILLEGIBLE]%
Hypothetical Tax-Free Yield 5%
Hypothetical Taxable Equivalent Yield 8.[ILLEGIBLE]%
This chart assumes a 35% federal and 4.63% state
tax-rate and is for illustration purposes only; it does
not represent past or future performance of any
investment.
The chart above shows that you would have to earn significantly more from
a taxable investment in order to be equal to what you get to keep from a
tax-free investment.
As you can clearly see from the chart, you would have to earn 6.5% on a
taxable investment in order to equal the tax-free level of 4%.
Keep this illustration in mind the next time you examine the yield that
Tax-Free Fund of Colorado offers you. You will find that a 3%, 4% or 5% tax-free
yield looks considerably more attractive to you when you consider the
implications of taxes.
NOT A PART OF THE ANNUAL REPORT
BENEFITS TO MUNICIPALITIES
As you are most likely aware, states, counties, cities, towns, and other
forms of municipalities issue tax-free bonds to raise monies. These issues
generally take two forms - general obligation securities and revenue securities.
General obligation municipal securities are primarily those securities
used to finance the general needs of such municipalities. General obligation
securities are secured by the tax-raising power of the specific municipality in
terms of its ability to pay interest and repay principal on a timely basis.
Thus, these securities are considered to be "backed by the full faith and
credit" of the issuer.
Revenue securities are issued to finance specific projects, such as a
hospital or airport. In this instance, the municipal issuer pledges the
operating revenues derived from the specific project to pay the interest and
repay the principal when due.
In many cases, smaller municipalities would have difficulty selling these
securities to the marketplace were it not for the added attractiveness of
tax-free status.
BENEFITS TO QUALITY OF LIFE
The benefit you may not have considered - when you made your investment in
the Fund - was that in the process of having the Fund provide you with tax-free
income, it also provides help to a variety of others within your community and
Colorado. This is a benefit in which you can take real pride.
Municipal bonds, such as those in which Tax-Free Fund of Colorado invests,
are the primary way infrastructure is financed. Infrastructure is a relatively
obscure word that by itself doesn't mean much to most people. But, when you
translate the word "infrastructure" into projects such as schools, roads,
bridges, water facilities, pollution control, airports, hospitals, and fire and
police stations, then you are speaking in terms that people more easily
understand.
As the economy of Colorado grows, new and additional municipal projects
are needed for the benefit of the citizens of Colorado and the various
communities throughout the state. In essence, your money invested in the Fund
helps pay for that new school, road, airport, etc. that you and your neighbors
now enjoy. So, as an investor in Tax-Free Fund of Colorado, you can take pride
in knowing that you are playing a vital role and a very real part in enhancing
the quality of life for your family, friends, neighbors and future generations
of Coloradans.
SUMMARY
So the next time that you receive your statement from Tax-Free Fund of
Colorado, remember that the benefits that are reaped from your investment are
more than just what is evident on that piece of paper.
Sincerely,
/s/ Diana P. Herrmann /s/ Lacy B. Herrmann
Diana P. Herrmann Lacy B. Herrmann
President Founder and Chairman Emeritus
* For certain investors, some dividends may be subject to Federal and State
taxes.
NOT A PART OF THE ANNUAL REPORT
[LOGO OF TAX-FREE FUND OF COLORADO:
A SQUARE WITH SILHOUETTES OF TWO
MOUNTAINS AND A RISING SUN]
SERVING COLORADO INVESTORS FOR MORE THAN 15 YEARS
TAX-FREE FUND OF COLORADO
ANNUAL REPORT
MANAGEMENT DISCUSSION
2005 REVIEW
The two main themes affecting the fixed-income markets in 2005 were the
continuation of short-term interest rate increases by the Federal Reserve (the
"Fed") and a flattening of the U.S. Treasury yield curve. The Federal Funds rate
rose from 2.25% at the beginning of 2005 to 4.25% in December. The Fed has made
it abundantly clear that their main priority is to keep inflation in check.
While short-term interest rates rose by a full 2.0% during the year, interest
rates on Treasury securities with maturities of 10 years and longer only rose by
about 0.6%, which created the "flatter" yield curve. This is an indication that
the market has a lot of confidence that the Federal Reserve will keep inflation
low for the foreseeable future. The risks to continued low interest rates are
spiking energy costs, rising budget and trade deficits, strong labor markets
with real wage growth and the costs of war overseas. We believe that as 2006
progresses we will begin to see the effects of the Fed's current effort to
reduce the pace of economic growth. If inflation remains contained, consumer
spending begins to slow, and Gross Domestic Product (GDP) weakens, shorter-term
interest rates are likely to decline.
The Colorado economy continues to do well. The Office of State Planning
and Bugeting forecasted a 2.1% increase in Colorado employment in 2005, the
unemployment rate remains below 5%, personal income growth was above 6% in 2005
and retail trade sales are forecast to grow 5.7%. Construction activity in this
state has always been the wild card. During the past year, residential has been
about flat while non-residential construction has risen by 8.7% led by retail,
office and factory projects. Tourism also remains a strong point for the
Colorado economy. Skier visits, hotel occupancy, conventions and airport traffic
have all shown good improvement.
The Colorado municipal bond market experienced another busy year. Although
total issuance was down about 7% to $7 billion, the new issue supply was steady
and of high quality. In November, Colorado voters passed Referendum C, which
will allow the state to retain all the revenue it collects for the next 5 years
without limits. This is expected to add $3.1 billion to state coffers over that
time period. We believe that this is a positive development for the Colorado
municipal bond market as it will improve the credit strength of the state as a
whole and also add some stability to the funding of many municipal projects that
the state supports. The companion ballot issue, Referendum D, which allowed for
bonding of transportation, elementary and higher education programs did not
pass.
Tax-Free Fund of Colorado sought to maintain a defensive investment
posture for 2005. The average maturity of the bonds in the Fund ended the year
at 8.2 years. The yields on lower credit quality bonds continued to compress
relative to the highest quality bonds. Consequently, we maintained our 98%
position in AAA & AA rated bonds. Approximately two-thirds of our portfolio
has maturities of 10 years or less. These bonds experienced a slight negative
impact from rising short-term interest rates. We believe that the higher coupons
and shorter maturities of these bonds will serve us well in the event that
longer-term rates rise or shorter rates return to lower levels associated with
slower economic growth. The total return for Class A investors based on the Net
Asset Value was 1.53% in 2005. The double-exempt dividend yield averaged
approximately 3.8% for the year.
2006 STRATEGY
We anticipate that 2006 will begin to bring about a change in our
portfolio. As some of the shorter high coupon bonds approach call dates or
maturities we may sell them and reinvest the proceeds in the 13 to 15 year range
in an effort to improve yield. In the event that shorter-term interest rates
begin to decline faster than long-term interest rates, we will have the
flexibility to accelerate this process. We are also prepared to improve yield on
the Fund by adding selected A rated securities once the yields improve relative
to AAA rated bonds. We will continue to maintain our overall portfolio strategy
of intermediate maturity, investment-grade securities while we are trying to
improve yield within those parameters. We appreciate your investment in Tax-Free
Fund of Colorado and we place the highest priority on providing a safe, stable
double tax-exempt income stream with low share price volatility.
PERFORMANCE REPORT
The following graph illustrates the value of $10,000 invested in the Class
A shares of Tax-Free Fund of Colorado for the 10-year period ended December 31,
2005 as compared with the Lehman Brothers Quality Intermediate Municipal Bond
Index and the Consumer Price Index (a cost of living index). The performance of
each of the other classes is not shown in the graph but is included in the table
below. It should be noted that the Lehman Index does not include any operating
expenses nor sales charges and being nationally oriented, does not reflect state
specific bond market performance.
[GRAPHIC OF A LINE CHART WITH THE FOLLOWING INFORMATION:]
Lehman Brothers
Quality
Cost Without With Intermediate
of Sales Sales Municipal
Mont/Year Living Charge Charge Bond Index
- ----------- ------ -------- ---------- ------------
December-95 $10,000 $10,000 $ 9,600 $10,000
December-96 10,332 10,391 9,975 10,427
December-97 10,508 11,127 10,682 11,190
December-98 10,678 11,669 11,202 11,861
December-99 10,964 11,560 11,098 11,896
December-00 11,336 12,520 12,019 12,922
December-01 11,511 13,089 12,566 13,635
December-02 11,785 14,236 13,667 14,894
December-03 12,007 14,934 14,337 15,585
December-04 12,397 15,337 14,723 16,055
December-05 12,821 15,580 14,957 16,322
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED DECEMBER 31, 2005
---------------------------------------
SINCE
CLASS AND INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS INCEPTION
------ ------- -------- ---------
Class A (5/21/87)
With Sales Charge ........ (2.57)% 3.60% 4.11% 5.72%
Without Sales Charge ..... 1.53% 4.45% 4.53% 5.95%
Class C (4/30/96)
With CDSC ................ (0.43)% 3.46% n/a 3.76%
Without CDSC ............. 0.57% 3.46% n/a 3.76%
Class Y (4/30/96)
No Sales Charge .......... 1.49% 4.50% n/a 5.01%
COMPARATIVE INDEX
Lehman Index ............... 1.66% 4.78% 5.02% 6.09% (Class A)
5.20% (Class C&Y)
Total return figures shown for the Fund reflect any change in price and assume
all distributions within the period were invested in additional shares. Returns
for Class A shares are calculated with and without the effect of the initial 4%
maximum sales charge. Returns for Class C shares are calculated with and without
the effect of the 1% contingent deferred sales charge (CDSC) imposed on
redemptions made within the first 12 months after purchase. Class Y shares are
sold without any sales charge. The rates of return will vary and the principal
value of an investment will fluctuate with market conditions. Shares, if
redeemed, may be worth more or less than their original cost. A portion of each
class's income may be subject to federal and state income taxes. Past
performance is not predictive of future investment results.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of
Tax-Free Fund of Colorado:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Tax-Free Fund of Colorado as of
December 31, 2005 and the related statement of operations, statement of changes
in net assets, and the financial highlights for the year then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The statement
of changes in net assets for the year ended December 31, 2004 and the financial
highlights for each of the years in the four year period ended December 31, 2004
have been audited by other auditors, whose report dated February 18, 2005
expressed an unqualified opinion on such financial statement and financial
highlights.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
We were not engaged to perform an audit of the Fund's internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 2005, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Tax-Free Fund of Colorado as of December 31, 2005, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
February 16, 2006
- --------------------------------------------------------------------------------
TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2005
RATING
FACE MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (34.6%) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------
CITY & COUNTY (1.8%)
Denver, Colorado City & County Art Museum
$ 2,000,000 5.000%, 08/01/15 ................................... Aa1/AA+ $ 2,133,580
Pueblo County, Colorado Pueblo Library
District Refunding
2,135,000 4.250%, 11/01/19 ................................... Aaa/NR 2,155,411
-------------
Total City & County 4,288,991
-------------
METROPOLITAN DISTRICT (3.8%)
Arapahoe, Colorado Park & Recreation District
1,070,000 5.000%, 12/01/17 FGIC Insured ...................... Aaa/NR 1,134,628
Castle Pines, Colorado Metropolitan District
1,060,000 5.500%, 12/01/07 FSA Insured ....................... Aaa/AAA 1,103,089
Foothills, Colorado Park & Recreational District
1,310,000 5.000%, 12/01/12 FSA Insured ....................... Aaa/NR 1,404,582
1,325,000 5.000%, 12/01/13 FSA Insured ....................... Aaa/NR 1,414,133
Highlands Ranch, Colorado Metropolitan
District #1, Refunding
1,000,000 5.750%, 09/01/08 AMBAC Insured ..................... Aaa/AAA 1,058,620
1,730,000 5.750%, 09/01/09 AMBAC Insured ..................... Aaa/AAA 1,864,231
South Suburban, Colorado Park & Recreational District
1,365,000 5.125%, 12/15/09 FGIC Insured ...................... Aaa/AAA 1,430,411
-------------
Total Metropolitan District 9,409,694
-------------
SCHOOL DISTRICTS (29.0%)
Adams County, Colorado School District #12
(Adams 12 Five Star Schools)
1,255,000 5.625%, 12/15/08 FGIC Insured Pre-Refunded ......... Aaa/AAA 1,322,481
1,170,000 5.000%, 12/15/12 MBIA Insured Pre-Refunded ......... Aaa/AAA 1,254,989
830,000 5.000%, 12/15/12 MBIA Insured Pre-Refunded ......... Aaa/AAA 893,968
Adams County 12 Five Star Schools, Colorado
Refunding Series B
2,000,000 4.250%, 12/15/19 FSA Insured ....................... Aaa/AAA 2,027,520
Adams County, Colorado School District #14
1,275,000 5.750%, 12/01/08 FSA Insured Pre-Refunded .......... Aaa/AAA 1,345,380
Adams County, Colorado School District #14 Refunding
1,200,000 4.500%, 12/01/16 MBIA Insured ...................... Aaa/NR 1,261,248
RATING
FACE MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------
SCHOOL DISTRICTS (CONTINUED)
Adams & Weld Counties, Colorado School
District #027J (Brighton)
$ 1,765,000 4.300%, 12/01/19 FGIC Insured ...................... Aaa/AAA $ 1,793,699
Arapahoe County, Colorado Cherry Creek
School District #5
1,000,000 5.500%, 12/15/08 ................................... Aa2/AA 1,060,360
2,760,000 5.500%, 12/15/11 ................................... Aa2/AA 2,969,042
2,750,000 5.500%, 12/15/12 ................................... Aa2/AA 2,958,285
Boulder Valley, Colorado School District
1,215,000 5.500%, 12/01/08 FGIC Insured ...................... Aaa/AAA 1,275,580
Clear Creek, Colorado School District
1,000,000 5.000%, 12/01/16 FSA Insured ....................... Aaa/AAA 1,064,750
Denver, Colorado City & County School District #1
Refunding Series A
1,000,000 5.600%, 06/01/08 ................................... Aa3/AA- 1,050,130
Denver, Colorado City & County School District #1
Refunding Series C
3,000,000 4.250%, 12/01/18 FGIC Insured ...................... Aaa/AAA 3,046,620
Douglas & Elbert Counties, Colorado
School District # Re-1, Series 1992
2,000,000 5.250%, 12/15/11 FGIC Insured ...................... Aaa/AAA 2,136,980
El Paso County, Colorado School District #11
1,330,000 6.250%, 12/01/08 ................................... Aa3/AA- 1,431,692
El Paso County, Colorado School District #20
1,000,000 6.150%, 12/15/08 MBIA Insured ...................... Aaa/AAA 1,078,740
1,500,000 5.000%, 12/15/14 FGIC Insured ...................... Aaa/NR 1,609,875
El Paso County, Colorado School District #38
1,110,000 5.700%, 12/01/12 Pre-Refunded ...................... Aa3/NR 1,220,734
El Paso County, Colorado School District #49
1,500,000 5.500%, 12/01/13 FSA Insured ....................... Aaa/AAA 1,664,055
1,000,000 5.250%, 12/01/14 FGIC Insured ...................... Aaa/AAA 1,082,070
1,795,000 5.000%, 12/01/15 FSA Insured ....................... Aaa/AAA 1,933,215
RATING
FACE MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------
SCHOOL DISTRICTS (CONTINUED)
Fremont County, Colorado School District
#001 Canon City
$ 1,680,000 5.000%, 12/01/17 MBIA Insured ...................... Aaa/NR $ 1,794,022
Garfield County, Colorado School District
1,250,000 5.000%, 12/01/17 FSA Insured ....................... Aaa/NR 1,325,500
Grand County, Colorado School District #002
(East Grand) Refunding & Improvement Series B
1,040,000 4.250%, 12/01/18 FSA Insured ....................... Aaa/AAA 1,056,162
Jefferson County, Colorado School District # R-1
3,000,000 5.500%, 12/15/09 FGIC Insured Pre-Refunded ......... Aaa/AAA 3,210,930
2,340,000 5.250%, 12/15/11 FGIC Insured ...................... Aaa/AAA 2,488,239
1,000,000 5.500%, 12/15/13 FGIC Insured Pre-Refunded ......... Aaa/AAA 1,070,310
La Plata County, Colorado School District #9
1,500,000 5.000%, 11/01/18 MBIA Insured ...................... Aaa/NR 1,622,190
2,245,000 4.250%, 11/01/18 MBIA Insured ...................... Aaa/NR 2,282,806
Larimer County, Colorado School District #R1
Poudre Refunding Series A
2,100,000 5.250%, 12/15/11 ................................... Aa3/AA- 2,202,522
Mesa County, Colorado School District #51
1,065,000 6.000%, 12/01/06 MBIA Insured ...................... Aaa/AAA 1,091,274
1,000,000 5.200%, 12/01/09 MBIA Insured Pre-Refunded ......... Aaa/AAA 1,027,220
Mesa County, Colorado School District #51
(Grand Junction) Series A
1,500,000 4.350%, 12/01/19 MBIA Insured ...................... Aaa/NR 1,529,940
Pueblo County, Colorado School District #70
1,040,000 5.500%, 12/01/09 AMBAC Insured ..................... Aaa/AAA 1,081,101
1,000,000 5.000%, 12/01/15 FGIC Insured ...................... Aaa/AAA 1,062,370
3,440,000 5.000%, 12/01/16 FGIC Insured ...................... Aaa/AAA 3,643,338
Teller County, Colorado School District #2
Woodland Park
1,265,000 5.000%, 12/01/17 MBIA Insured ...................... Aaa/AAA 1,359,926
Weld & Adams Counties, Colorado School District #3J
1,000,000 5.500%, 12/15/10 AMBAC Insured Pre-Refunded ........ Aaa/AAA 1,077,650
RATING
FACE MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------
SCHOOL DISTRICTS (CONTINUED)
Weld County, Colorado School District #2
$ 1,315,000 5.000%, 12/01/15 FSA Insured ....................... Aaa/AAA $ 1,405,064
Weld County, Colorado School District #3J
1,440,000 4.350%, 12/15/19 FSA Insured ....................... Aaa/NR 1,468,858
Weld County, Colorado School District #6
1,195,000 5.000%, 12/01/15 FSA Insured ....................... Aaa/AAA 1,272,783
Weld County, Colorado School District #8
1,115,000 5.000%, 12/01/15 FSA Insured ....................... Aaa/AAA 1,191,366
1,385,000 5.250%, 12/01/17 FSA Insured ....................... Aaa/AAA 1,498,058
-------------
Total School Districts 71,243,042
-------------
Total General Obligation Bonds 84,941,727
-------------
REVENUE BONDS (64.3%)
ELECTRIC (2.7%)
Colorado Springs, Colorado Utilities Revenue
1,660,000 5.000%, 11/15/17 ................................... Aa2/AA 1,764,812
Colorado Springs, Colorado Utilities Revenue
Subordinated Lien Improvement Series A
1,000,000 5.000%, 11/15/17 ................................... Aa2/AA 1,071,010
Moffat County, Colorado Pollution Control
2,125,000 5.625%, 11/01/06 AMBAC Insured ..................... Aaa/AAA 2,165,332
Platte River, Colorado Power Authority
1,500,000 6.000%, 06/01/07 MBIA Insured ...................... Aaa/AAA 1,554,915
-------------
Total Electric 6,556,069
-------------
HIGHER EDUCATION (10.8%)
Boulder County, Colorado Development Revenue UCAR
1,760,000 5.000%, 09/01/16 MBIA Insured ...................... Aaa/AAA 1,870,317
1,130,000 5.000%, 09/01/17 AMBAC Insured ..................... Aaa/AAA 1,204,591
Colorado Educational & Cultural Facility Authority
Johnson & Wales
860,000 5.000%, 04/01/18 XLCA Insured ...................... Aaa/AAA 905,804
RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------
HIGHER EDUCATION (CONTINUED)
Colorado Educational & Cultural Facility Authority
University of Colorado Foundation Project
$ 2,110,000 5.000%, 07/01/17 AMBAC Insured ..................... Aaa/AAA $ 2,230,776
1,865,000 5.375%, 07/01/18 AMBAC Insured ..................... Aaa/AAA 2,022,481
Colorado Educational & Cultural Facility Authority
Refunding University of Denver Project Series B
1,050,000 4.500%, 03/01/19 FGIC Insured ...................... Aaa/AAA 1,077,520
Colorado Mountain Jr. College District Student
Housing Facilities Enterprise Revenue
1,000,000 4.500%, 06/01/18 MBIA Insured ..................... Aaa/AAA 1,032,480
Colorado Post Secondary Educational Facility
1,170,000 5.500%, 03/01/08 MBIA Insured ...................... Aaa/AAA 1,220,848
Colorado State Board Governors University
Enterprise System Revenue
Research Building Revolving Fund Series A
1,485,000 4.250%, 12/01/18 XLCA Insured ...................... Aaa/NR 1,492,113
Colorado State Colleges Board Trustees Auxiliary
System Revenue Refunding Series B
1,035,000 5.000%, 05/15/15 MBIA Insured ...................... Aaa/AAA 1,109,934
Colorado State University System
1,530,000 5.000%, 03/01/17 AMBAC Insured ..................... Aaa/NR 1,625,288
University of Colorado Enterprise System
1,000,000 5.000%, 06/01/11 ................................... Aa3/AA- 1,071,230
2,325,000 5.000%, 06/01/15 AMBAC Insured ..................... Aaa/AAA 2,480,868
1,735,000 5.000%, 06/01/16 ................................... Aa3/AA- 1,852,078
1,000,000 5.250%, 06/01/17 FGIC Insured ...................... Aaa/AAA 1,090,100
1,000,000 4.375%, 06/01/19 FGIC Insured ...................... Aaa/AAA 1,020,780
University of Northern Colorado Auxiliary Facilities
1,745,000 5.750%, 06/01/08 MBIA Insured ...................... Aaa/AAA 1,802,044
1,390,000 5.000%, 06/01/15 AMBAC Insured ..................... Aaa/AAA 1,470,078
-------------
Total Higher Education 26,579,330
-------------
RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------
HOSPITAL (2.6%)
Colorado Health Facility Authority Hospital Revenue,
Catholic Health
$ 1,000,000 5.375%, 12/01/09 ................................... Aa2/AA $ 1,055,150
Colorado Health Facility Authority Hospital Revenue,
Sisters of Charity-Leavenworth
1,000,000 5.500%, 12/01/08 MBIA Insured ...................... Aaa/AAA 1,057,030
1,500,000 5.250%, 12/01/10 MBIA Insured ...................... Aaa/AAA 1,574,160
Colorado Health Facility Authority
Sisters of Charity - Health Care
1,000,000 6.250%, 05/15/09 AMBAC Insured, ETM ................ Aaa/AAA 1,087,430
University Colorado Hospital Authority
Hospital Revenue
1,475,000 5.500%, 11/15/07 AMBAC Insured ..................... Aaa/NR 1,530,873
-------------
Total Hospital 6,304,643
-------------
HOUSING (1.3%)
Colorado Housing & Finance Authority
350,000 5.000%, 08/01/13 Series 2001 ....................... A1/A+ 354,693
710,000 6.050%, 10/01/16 Series 1999A3 ..................... Aa2/AA+ 740,942
15,000 6.125%, 11/01/23 Series 1998D3 ..................... Aa2/NR 15,748
Colorado Housing & Finance Authority
Multi-Family/Project Bonds
1,575,000 4.250%, 10/01/17 Class II 2004 Series A-3 .......... Aa2/AA 1,593,616
Colorado Housing & Finance Authority,
Single Family Mortgage
80,000 5.625%, 06/01/10 Series 1995D ...................... Aa2/NR 80,418
45,000 5.750%, 11/01/10 Series 1996A ...................... Aa2/A+ 44,994
Colorado Housing & Finance Authority,
Single Family Mortgage 2000C3
70,000 5.700%, 10/01/22 ................................... Aa2/AA 70,920
Colorado Housing Finance Authority, Single
Family Mortgage Subordinated 2000D
175,000 5.400%, 10/01/12 ................................... A1/A+ 178,068
RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------
HOUSING (CONTINUED)
Denver, Colorado Single Family Mortgage Revenue
$ 110,000 5.000%, 11/01/15 GNMA Insured ...................... NR/AAA $ 112,391
-------------
Total Housing 3,191,790
-------------
LEASE (8.6%)
Aurora, Colorado COP
2,105,000 5.250%, 12/01/13 AMBAC Insured ..................... Aaa/AAA 2,253,003
Broomfield, Colorado COP
2,500,000 5.100%, 12/01/12 AMBAC Insured ..................... Aaa/NR 2,677,625
Denver, Colorado City and County COP Roslyn Fire
1,835,000 5.000%, 12/01/15 ................................... Aa2/AA 1,952,440
El Paso County, Colorado COP
1,100,000 5.250%, 12/01/09 MBIA Insured ...................... Aaa/AAA 1,172,974
El Paso County, Colorado COP Judicial Building
1,760,000 5.000%, 12/01/16 AMBAC Insured ..................... Aaa/AAA 1,873,960
El Paso County, Colorado COP Pikes Peak Regional
Development Authority
1,925,000 5.000%, 12/01/18 AMBAC Insured ..................... Aaa/AAA 2,048,931
Fort Collins, Colorado Lease COP Series A
3,020,000 4.750%, 06/01/18 AMBAC Insured ..................... Aaa/NR 3,171,423
Fremont County, Colorado COP Refunding and
Improvement Series A
2,075,000 5.000%, 12/15/18 MBIA Insured ...................... Aaa/AAA 2,209,169
Lakewood, Colorado COP
1,440,000 5.200%, 12/01/13 AMBAC Insured ..................... Aaa/AAA 1,534,709
Northern Colorado Water Conservancy District
1,000,000 5.000%, 10/01/15 MBIA Insured ...................... Aaa/AAA 1,067,020
Westminster, Colorado COP
1,055,000 5.350%, 09/01/11 MBIA Insured ...................... Aaa/AAA 1,133,302
-------------
Total Lease 21,094,556
-------------
SALES TAX (14.6%)
City of Boulder, Colorado
1,045,000 5.250%, 08/15/10 AMBAC Insured ..................... Aaa/AAA 1,109,403
Boulder, Colorado Open Space Acquisition
1,250,000 5.500%, 08/15/12 ................................... Aa1/AA+ 1,350,575
RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------
SALES TAX (CONTINUED)
Boulder County, Colorado Open Space
Capital Improvement
$ 3,065,000 5.000%, 07/15/16 MBIA Insured ...................... Aaa/AAA $ 3,253,988
1,630,000 5.000%, 07/15/17 MBIA Insured ..................... Aaa/AAA 1,723,774
Boulder County, Colorado Sales & Use Tax Open
Space Series A
1,000,000 5.450%, 12/15/12 FGIC Insured ...................... Aaa/AAA 1,080,730
City & County of Denver, Colorado Excise Tax Revenue
2,000,000 5.375%, 09/01/10 FSA Insured ....................... Aaa/AAA 2,133,200
Colorado Springs, Colorado Sales & Use Tax
Revenue Service Sales
1,320,000 5.000%, 12/01/12 ................................... A1/AA 1,388,693
Denver, Colorado City & County Excise Tax Revenue
1,000,000 5.000%, 09/01/11 FSA Insured ....................... Aaa/AAA 1,070,640
2,260,000 5.000%, 09/01/12 FSA Insured ....................... Aaa/AAA 2,419,646
Douglas County, Colorado Sales & Use Tax Open
Space Revenue
1,780,000 5.500%, 10/15/12 FSA Insured ....................... Aaa/AAA 1,932,012
Golden, Colorado Sales & Use Tax
1,265,000 5.000%, 12/01/12 AMBAC Insured ..................... Aaa/AAA 1,356,333
Greeley, Colorado Sales & Use Tax Revenue
1,445,000 4.250%, 10/01/18 MBIA Insured ...................... Aaa/AAA 1,474,001
1,435,000 4.000%, 10/01/19 MBIA Insured ...................... Aaa/AAA 1,422,946
Jefferson County, Colorado Open Space Sales Tax
1,245,000 5.000%, 11/01/11 FGIC Insured ...................... Aaa/AAA 1,313,948
1,600,000 5.000%, 11/01/13 AMBAC Insured ..................... Aaa/AAA 1,706,240
1,080,000 5.000%, 11/01/14 AMBAC Insured ..................... Aaa/AAA 1,147,640
1,695,000 4.000%, 11/01/18 AMBAC Insured ..................... Aaa/AAA 1,688,186
Lakewood, Colorado Sales & Use Tax Revenue
1,040,000 5.250%, 12/01/09 ................................... NR/AA 1,107,038
Larimer County, Colorado Sales Tax Revenue Bond
1,000,000 5.500%, 12/15/12 AMBAC Insured ..................... Aaa/AAA 1,088,170
TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 2005
RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------
SALES TAX (CONTINUED)
Longmont, Colorado Sales & Use Tax
$ 1,875,000 5.500%, 11/15/14 ................................... NR/AA $ 2,034,225
Thornton, Colorado Sales Tax
1,000,000 5.000%, 09/01/14 FSA Insured ....................... Aaa/AAA 1,061,030
Westminster, Colorado Sales Tax Revenue
1,175,000 5.500%, 12/01/07 FGIC Insured ...................... Aaa/AAA 1,222,764
1,710,000 5.000%, 12/01/17 AMBAC Insured ..................... Aaa/AAA 1,813,284
-------------
Total Sales Tax 35,898,466
-------------
TRANSPORTATION (4.0%)
Colorado Department of Transportation-Transportation
Revenue Anticipation Note
1,000,000 6.000%, 06/15/13 AMBAC Insured Pre-Refunded ........ Aaa/AAA 1,109,820
Northwest Parkway, Colorado Public Highway
Authority Series A
2,515,000 5.150%, 06/15/14 AMBAC Insured ..................... Aaa/AAA 2,716,326
Regional Transportation District, Colorado COP
1,190,000 5.000%, 06/01/15 AMBAC Insured ..................... Aaa/AAA 1,268,254
1,510,000 4.850%, 06/01/18 AMBAC Insured ..................... Aaa/AAA 1,578,373
Regional Transportation District, Colorado
Sales Tax Revenue
2,000,000 5.000%, 11/01/13 FGIC Insured ...................... Aaa/AAA 2,128,700
1,000,000 5.000%, 11/01/16 FGIC Insured Pre-Refunded ......... Aaa/AAA 1,075,820
-------------
Total Transportation 9,877,293
-------------
WATER & SEWER (17.1%)
Boulder, Colorado Water & Sewer Revenue
1,000,000 5.400%, 12/01/14 ................................... Aa2/AA+ 1,081,180
Boulder, Colorado Water & Sewer Revenue Series C
2,420,000 4.500%, 12/01/18 ................................... Aa2/AA+ 2,502,062
Broomfield, Colorado Sewer and Waste Water Revenue
1,985,000 5.000%, 12/01/15 AMBAC Insured ..................... Aaa/NR 2,124,684
1,000,000 5.000%, 12/01/16 AMBAC Insured ..................... Aaa/NR 1,067,090
Broomfield, Colorado Water Activity Enterprise
1,500,000 5.300%, 12/01/12 MBIA Insured ...................... Aaa/NR 1,631,925
RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------
WATER & SEWER (CONTINUED)
$ 1,730,000 5.250%, 12/01/13 MBIA Insured ...................... Aaa/NR $ 1,866,099
2,190,000 5.000%, 12/01/16 MBIA Insured ...................... Aaa/NR 2,331,802
2,290,000 5.000%, 12/01/17 MBIA Insured ...................... Aaa/NR 2,428,316
Colorado Clean Water Revenue
830,000 5.375%, 09/01/10 Pre-Refunded ...................... Aaa/AAA 873,841
170,000 5.375%, 09/01/10 ................................... Aaa/AAA 178,449
Colorado Metro Wastewater Reclamation District
1,270,000 5.250%, 04/01/09 ................................... Aa2/AA 1,321,283
Colorado Water Resource & Power Development Authority
215,000 6.000%, 09/01/06 ................................... Aaa/AAA 215,858
1,000,000 5.550%, 11/01/13 FGIC Insured ...................... Aaa/AAA 1,086,490
2,675,000 5.000%, 09/01/16 MBIA Insured ...................... Aaa/AAA 2,885,202
1,855,000 5.000%, 09/01/17 MBIA Insured ...................... Aaa/AAA 1,990,897
2,095,000 4.000%, 09/01/19 ................................... Aaa/AAA 2,068,854
Colorado Water Resource Power Development
Authority Clean Water Revenue Series A
1,375,000 5.000%, 09/01/12 Pre-Refunded ...................... Aaa/AAA 1,478,469
260,000 5.350%, 09/01/12 ................................... Aaa/AAA 278,327
Colorado Water Resource Power Development
Authority Clean Water Revenue Series B
820,000 5.500%, 09/01/09 Pre-Refunded ...................... Aaa/AAA 865,895
180,000 5.500%, 09/01/09 ................................... Aaa/AAA 189,700
Denver, Colorado City and County Wastewater Revenue
1,560,000 5.000%, 11/01/15 FGIC Insured ...................... Aaa/AAA 1,665,690
Lafayette, Colorado Water Revenue
1,625,000 5.000%, 12/01/17 MBIA Insured ...................... Aaa/AAA 1,735,289
Left Hand, Colorado Water District, Series 1996
1,000,000 5.750%, 11/15/08 MBIA Insured Pre-Refunded ......... Aaa/AAA 1,020,840
Northglenn, Colorado Water & Sewer
1,010,000 5.750%, 12/01/06 FSA Insured ....................... Aaa/AAA 1,032,685
Pueblo, Colorado Board Water Works
1,000,000 5.500%, 11/01/10 FSA Insured ....................... Aaa/AAA 1,090,300
Thornton, Colorado Refunding
2,000,000 5.600%, 12/01/06 FSA Insured ....................... Aaa/AAA 2,042,260
RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------
WATER & SEWER (CONTINUED)
Thornton, Colorado Water Enterprise Revenue
$ 1,445,000 4.500%, 12/01/18 MBIA Insured ...................... Aaa/AAA $ 1,494,260
Ute, Colorado Water Conservancy District
1,570,000 5.500%, 06/15/12 MBIA Insured ...................... Aaa/AAA 1,695,490
Widefield, Colorado Water & Sanitation District
Water & Sewer Refunding & Improvement
1,870,000 4.500%, 12/01/19 MBIA Insured ...................... Aaa/AAA 1,928,082
-------------
Total Water & Sewer 42,171,319
-------------
MISCELLANEOUS REVENUE (2.6%)
Denver, Colorado City & County Helen Bonfils Project
2,275,000 5.875%, 12/01/09 ................................... NR/A+ 2,376,238
South Suburban, Colorado Park & Recreational District
685,000 6.000%, 11/01/07 ................................... Baa2/NR 702,488
Thornton, Colorado Development Authority
1,230,000 5.750%, 12/01/06 MBIA Insured ...................... Aaa/AAA 1,257,626
Thornton, Colorado Development Authority
Tax Increment North Washington Street
Urban Renewal Project
1,040,000 4.500%, 12/01/18 MBIA Insured ..................... Aaa/AAA 1,075,454
Westminster, Colorado Golf Course Activity
1,000,000 5.400%, 12/01/13 Radian Group, Inc. Insured ........ NR/AA 1,049,450
-------------
Total Miscellaneous Revenue ........................ 6,461,256
-------------
Total Revenue Bonds (cost $234,570,437) 158,134,722
-------------
SHORT-TERM OBLIGATION-0.4%
UTILITY (0.4%)
Colorado Springs, Colorado Utility Revenue
Subordinated Lien Weekly Reset VRDO(1)
1,000,000 3.040%, 11/01/29 (cost $1,000,000) ................. VMIG1/A1+ 1,000,000
-------------
Total Investments (cost $235,570,437*) ............. 99.3% 244,076,449
Other assets less liabilities ...................... 0.7 1,708,561
------ -------------
Net Assets ......................................... 100.0% $ 245,785,010
====== =============
PERCENT OF
PORTFOLIO DISTRIBUTION BY QUALITY RATING (UNAUDITED) PORTFOLIO
---------------------------------------------------- ---------
Aaa of Moody's or AAA of S&P ......................... 82.5%
Aa of Moody's or AA of S&P ........................... 15.6
A of Moody's or S&P .................................. 1.6
Baa of Moody's or BBB of S&P ......................... 0.3
------
100.0%
======
* See note 4.
(1) Variable rate demand obligations (VRDOs) are payable upon demand in
seven days.
PORTFOLIO ABBREVIATIONS:
----------------------------------------------------------
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificates of Participation
ETM - Escrowed to Maturity
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assurance
GNMA - Government National Mortgage Association
MBIA - Municipal Bond Investors Assurance
NR - Not Rated
UCAR - University Corporation for Atmospheric Research
VRDO - Variable Rate Demand Obligation
XLCA - XL Capital Assurance
See accompanying notes to financial statements.
TAX-FREE FUND OF COLORADO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
ASSETS
Investments at value (cost $235,570,437) ......................................... $ 244,076,449
Cash ............................................................................. 583,315
Interest receivable .............................................................. 1,700,996
Receivable for Fund shares sold .................................................. 139,910
Other assets ..................................................................... 9,404
-------------
Total assets ..................................................................... 246,510,074
-------------
LIABILITIES
Dividends payable .................................................................. 270,863
Payable for Fund shares redeemed ................................................... 239,161
Management fee payable ............................................................. 104,373
Distribution and service fees payable .............................................. 41,451
Accrued expenses ................................................................... 69,216
-------------
Total liabilities .................................................................. 725,064
-------------
NET ASSETS ............................................................................ $ 245,785,010
=============
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $0.01 per share $ 235,822
Additional paid-in capital ......................................................... 237,264,426
Net unrealized appreciation on investments (note 4) ................................ 8,506,012
Net realized loss on investments ................................................... (245,339)
Undistributed net investment income ................................................ 24,089
-------------
$ 245,785,010
=============
CLASS A
Net Assets ......................................................................... $ 218,111,015
=============
Capital shares outstanding ......................................................... 20,927,423
=============
Net asset value and redemption price per share ..................................... $ 10.42
=============
Offering price per share (100/96 of $10.42 adjusted to nearest cent) ............... $ 10.85
=============
CLASS C
Net Assets ......................................................................... $ 13,002,614
=============
Capital shares outstanding ......................................................... 1,250,031
=============
Net asset value and offering price per share ....................................... $ 10.40
=============
Redemption price per share (*a charge of 1% is imposed on the redemption
proceeds of the shares, or on the original price, whichever is lower, if redeemed
during the first 12 months after purchase) ...................................... $ 10.40*
=============
CLASS Y
Net Assets ......................................................................... $ 14,671,381
=============
Capital shares outstanding ......................................................... 1,404,704
=============
Net asset value, offering and redemption price per share ........................... $ 10.44
=============
See accompanying notes to financial statements.
TAX-FREE FUND OF COLORADO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME:
Interest income ............................................... $ 11,406,593
Expenses:
Management fee (note 3) ....................................... $ 1,262,228
Distribution and service fees (note 3) ........................ 253,734
Transfer and shareholder servicing agent fees ................. 179,390
Trustees' fees and expenses (note 8) .......................... 136,144
Legal fees (note 3) ........................................... 102,451
Shareholders' reports and proxy statements .................... 61,477
Custodian fees ................................................ 33,858
Registration fees and dues .................................... 21,630
Auditing and tax fees ......................................... 20,465
Insurance ..................................................... 16,568
Chief compliance officer (note 3) ............................. 4,544
Miscellaneous ................................................. 36,930
-------------
Total expenses ................................................ 2,129,419
Expenses paid indirectly (note 6) ............................. (10,825)
-------------
Net expenses .................................................. 2,118,594
-------------
Net investment income ......................................... 9,287,999
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from securities transactions ......... 114,717
Change in unrealized appreciation on investments .............. (5,760,022)
-------------
Net realized and unrealized gain (loss) on investments ........ (5,645,305)
-------------
Net change in net assets resulting from operations ............ $ 3,642,694
=============
See accompanying notes to financial statements.
TAX-FREE FUND OF COLORADO
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------
OPERATIONS:
Net investment income ............................... $ 9,287,999 $ 9,628,069
Net realized gain (loss) from securities transactions 114,717 (360,056)
Change in unrealized appreciation on investments .... (5,760,022) (2,870,215)
------------- -------------
Change in net assets from operations .............. 3,642,694 6,397,798
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (note 10):
Class A Shares:
Net investment income ............................... (8,882,147) (9,247,370)
Class C Shares:
Net investment income ............................... (433,040) (472,310)
Class Y Shares:
Net investment income ............................... (625,839) (588,272)
------------- -------------
Change in net assets from distributions ........... (9,941,026) (10,307,952)
------------- -------------
CAPITAL SHARE TRANSACTIONS (note 7):
Proceeds from shares sold ........................... 21,108,886 26,103,958
Reinvested dividends and distributions .............. 5,684,989 6,078,032
Cost of shares redeemed ............................. (31,598,529) (34,073,005)
------------- -------------
Change in net assets from capital share transactions (4,804,654) (1,891,015)
------------- -------------
Change in net assets .............................. (11,102,986) (5,801,169)
NET ASSETS:
Beginning of period ................................. 256,887,996 262,689,165
------------- -------------
End of period* ...................................... $ 245,785,010 $ 256,887,996
============= =============
* Includes undistributed net investment
income of: $ 24,089 $ 18,945
============= =============
See accompanying notes to financial statements.
TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
1. ORGANIZATION
Tax-Free Fund of Colorado (the "Fund"), a non-diversified, open-end
investment company, was organized in February, 1987 as a Massachusetts business
trust and commenced operations on May 21, 1987. The Fund is authorized to issue
an unlimited number of shares and, since its inception to April 30, 1996,
offered only one class of shares. On that date, the Fund began offering two
additional classes of shares, Class C and Class Y shares. All shares outstanding
prior to that date were designated as Class A shares and are sold with a
front-payment sales charge and bear an annual distribution fee. Class C shares
are sold with a level-payment sales charge with no payment at time of purchase
but level service and distribution fees from date of purchase through a period
of six years thereafter. A contingent deferred sales charge of 1% is assessed to
any Class C shareholder who redeems shares of this Class within one year from
the date of purchase. Class C Shares, together with a pro-rata portion of all
Class C Shares acquired through reinvestment of dividends and other
distributions paid in additional Class C Shares, automatically convert to Class
A Shares after 6 years. The Class Y shares are only offered to institutions
acting for an investor in a fiduciary, advisory, agency, custodian or similar
capacity and are not offered directly to retail investors. Class Y shares are
sold at net asset value without any sales charge, redemption fees, contingent
deferred sales charge or distribution or service fees. On April 30, 1998, the
Fund established Class I shares, which are offered and sold only through
financial intermediaries and are not offered directly to retail investors. Class
I Shares are sold at net asset value without any sales charge, redemption fees,
or contingent deferred sales charge. Class I Shares carry a distribution and
service fee. As of the report date no Class I Shares were outstanding. All
classes of shares represent interests in the same portfolio of investments and
are identical as to rights and privileges but differ with respect to the effect
of sales charges, the distribution and/or service fees borne by each class,
expenses specific to each class, voting rights on matters affecting a single
class and the exchange privileges of each class.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with accounting principles generally accepted in the United States of
America for investment companies.
a) PORTFOLIO VALUATION: Municipal securities which have remaining maturities
of more than 60 days are valued at fair value each business day based upon
information provided by a nationally prominent independent pricing service
and periodically verified through other pricing services. In the case of
securities for which market quotations are readily available, securities
are valued by the pricing service at the mean of bid and asked quotations.
If market quotations or a valuation from the pricing service is not
readily available, the security is valued at fair value determined in good
faith under procedures established by and under the general supervision of
the Board of
Trustees. Securities which mature in 60 days or less are valued at
amortized cost if their term to maturity at purchase is 60 days or less,
or by amortizing their unrealized appreciation or depreciation on the 61st
day prior to maturity, if their term to maturity at purchase exceeds 60
days.
b) SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME: Securities
transactions are recorded on the trade date. Realized gains and losses
from securities transactions are reported on the identified cost basis.
Interest income is recorded daily on the accrual basis and is adjusted for
amortization of premium and accretion of original issue and market
discount.
c) FEDERAL INCOME TAXES: It is the policy of the Fund to qualify as a
regulated investment company by complying with the provisions of the
Internal Revenue Code applicable to certain investment companies. The Fund
intends to make distributions of income and securities profits sufficient
to relieve it from all, or substantially all, Federal income and excise
taxes.
d) MULTIPLE CLASS ALLOCATIONS: All income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses are
allocated daily to each class of shares based on the relative net assets
of each class. Class-specific expenses, which include distribution and
service fees and any other items that are specifically attributed to a
particular class, are charged directly to such class.
e) USE 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 increases and decreases in net assets from
operations during the reporting period. Actual results could differ from
those estimates.
f) RECLASSIFICATION OF CAPITAL ACCOUNTS: Accounting principles generally
accepted in the United States of America require that certain components
of net assets relating to permanent differences be reclassified between
financial and tax reporting. These reclassifications have no effect on net
assets or net asset value per share. On December 31, 2005 the Fund
increased undistributed net investment income by $658,171, increased
accumulated net realized gain on investments by $146 and decreased capital
stock by $658,317 due primarily to differing book/tax treatment of
distributions and bond amortization.
3. FEES AND RELATED PARTY TRANSACTIONS
a) MANAGEMENT ARRANGEMENTS:
Aquila Investment Management LLC (the "Manager"), a wholly-owned
subsidiary of Aquila Management Corporation, the Fund's founder and sponsor,
serves as the Manager for the Fund under an Advisory and Administration
Agreement with the Fund. The portfolio management of the
Fund has been delegated to a Sub-Adviser as described below. Under the Advisory
and Administration Agreement, the Manager provides all administrative services
to the Fund, other than those relating to the day-to-day portfolio management.
The Manager's services include providing the office of the Fund and all related
services as well as overseeing the activities of the Sub-Adviser and managing
relationships with all the various support organizations to theFund such as the
shareholder servicing agent, custodian, legal counsel, auditors and distributor
and additionally maintaining the Fund's accounting books and records. For its
services, the Manager is entitled to receive a fee which is payable monthly and
computed as of the close of business each day at the annual rate of 0.50 of 1%
on the Fund's net assets.
Kirkpatrick Pettis Capital Management, Inc. (the "Sub-Adviser"), a
wholly-owned subsidiary of the Davidson Companies, serves as the Investment
Sub-Adviser for the Fund under a Sub-Advisory Agreement between the Manager and
the Sub-Adviser. Under this agreement, the Sub-Adviser continuously provides,
subject to oversight of the Manager and the Board of Trustees of the Fund, the
investment program of the Fund and the composition of its portfolio, arranges
for the purchases and sales of portfolio securities, and provides for daily
pricing of the Fund's portfolio. For its services, the Sub-Adviser is entitled
to receive a fee from the Manager which is payable monthly and computed as of
the close of business each day at the annual rate of 0.20 of 1% on the Fund's
average net assets.
Under a Compliance Agreement with the Manager, the Manager is compensated
for Chief Compliance Officer related services provided to enable the Fund to
comply with Rule 38a-1 of the Investment Company Act of 1940.
Specific details as to the effect of the Fund's payments under its
Distribution Plan, as described below, on the above management fees and as to
the nature and extent of the services provided by the Manager and the
Sub-Adviser are more fully defined in the Fund's Prospectus and Statement of
Additional Information.
b) DISTRIBUTION AND SERVICE FEES:
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940. Under one part of
the Plan, with respect to Class A Shares, the Fund is authorized to make service
fee payments to broker-dealers or others ("Qualified Recipients") selected by
Aquila Distributors, Inc. (the "Distributor"), including, but not limited to,
any principal underwriter of the Fund, with which the Distributor has entered
into written agreements contemplated by the Rule and which have rendered
assistance in the distribution and/or retention of the Fund's shares or
servicing of shareholder accounts. The Fund currently makes payment of this
distribution fee at the annual rate of 0.05 of 1% of the Fund's average net
assets represented by Class A Shares. The Board of Trustees and shareholders
approved an amendment to the Fund's Distribution Plan applicable to Class A
Shares which permits the Fund to make service fee payments at the rate
of up to 0.15 of 1% on the entire net assets represented by Class A Shares. For
the year ended December 31, 2005, distribution fees on Class A Shares amounted
to $111,347 of which the Distributor retained $3,626.
Under another part of the Plan, the Fund is authorized to make payments
with respect to Class C Shares to Qualified Recipients which have rendered
assistance in the distribution and/or retention of the Fund's Class C shares or
servicing of shareholder accounts. These payments are made at the annual rate of
0.75% of the Fund's average net assets represented by Class C Shares and for the
year ended December 31, 2005, amounted to $106,790. In addition, under a
Shareholder Services Plan, the Fund is authorized to make service fee payments
with respect to Class C Shares to Qualified Recipients for providing personal
services and/or maintenance of shareholder accounts. These payments are made at
the annual rate of 0.25 of 1% of the Fund's average net assets represented by
Class C Shares and for the year ended December 31, 2005 amounted to $35,597. The
total of these payments with respect to Class C Shares amounted to $142,387 of
which the Distributor retained $29,550.
Specific details about the Plans are more fully defined in the Fund's
Prospectus and Statement of Additional Information.
Under a Distribution Agreement, the Distributor serves as the exclusive
distributor of the Fund's shares. Through agreements between the Distributor and
various broker-dealer firms ("dealers"), the Fund's shares are sold primarily
through the facilities of these dealers having offices within Colorado, with the
bulk of sales commissions inuring to such dealers. For the year ended December
31, 2005, total commissions on sales of Class AShares amounted to $380,724 of
which the Distributor received $70,562.
c) OTHER RELATED PARTY TRANSACTIONS:
For the year ended December 31, 2005, the Fund incurred $100,252 of legal
fees allocable to Hollyer Brady Barrett & Hines LLP, counsel to the Fund, for
legal services in conjunction with the Fund's ongoing operations. The Secretary
of the Fund is a Partner in that firm.
4. PURCHASES AND SALES OF SECURITIES
During the year ended December 31, 2005, purchases of securities and
proceeds from the sales of securities aggregated $26,540,980 and $31,231,240,
respectively.
At December 31, 2005, the aggregate tax cost for all securities was
$235,546,347. At December 31, 2005 the aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax cost
amounted to $8,748,439 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over market value amounted to
$218,337 for a net unrealized appreciation of $8,530,102.
5. PORTFOLIO ORIENTATION
Since the Fund invests principally and may invest entirely in double
tax-free municipal obligations of issuers within Colorado, it is subject to
possible risks associated with economic, political, or legal developments or
industrial or regional matters specifically affecting Colorado and whatever
effects these may have upon Colorado issuers' ability to meet their obligations.
6. EXPENSES
The Fund has negotiated an expense offset arrangement with its custodian
wherein it receives credit toward the reduction of custodian fees and other Fund
expenses whenever there are uninvested cash balances. The Statement of
Operations reflects the total expenses before any offset, the amount of offset
and the net expenses. It is the general intention of the Fund to invest, to the
extent practicable, some or all of cash balances in income-producing assets
rather than leave cash on deposit.
7. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
CLASS A SHARES:
Proceeds from shares sold .... 1,666,823 $ 17,582,759 1,760,071 $ 18,949,465
Reinvested distributions ..... 489,086 5,154,342 516,057 5,531,026
Cost of shares redeemed ...... (2,390,628) (25,145,318) (2,622,852) (28,078,616)
------------ ------------ ------------ ------------
Net change ................ (234,719) (2,408,217) (346,724) (3,598,125)
------------ ------------ ------------ ------------
CLASS C SHARES:
Proceeds from shares sold .... 150,827 1,588,430 370,611 3,973,438
Reinvested distributions ..... 21,343 224,529 24,433 261,462
Cost of shares redeemed ...... (348,748) (3,664,214) (430,961) (4,581,119)
------------ ------------ ------------ ------------
Net change ................ (176,578) (1,851,255) (35,917) (346,219)
------------ ------------ ------------ ------------
CLASS Y SHARES:
Proceeds from shares sold .... 182,878 1,937,697 296,183 3,181,055
Reinvested distributions ..... 28,938 306,118 26,651 285,544
Cost of shares redeemed ...... (265,014) (2,788,997) (131,896) (1,413,270)
------------ ------------ ------------ ------------
Net change ................ (53,198) (545,182) 190,938 2,053,329
------------ ------------ ------------ ------------
Total transactions in Fund shares (464,495) $ (4,804,654) (191,703) $ (1,891,015)
============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES
At December 31, 2005 there were 7 Trustees, one of which is affiliated
with the Manager and is not paid any fees. The total amount of Trustees' service
and attendance fees paid during the year ended December 31, 2005 was $104,075,
to cover carrying out their responsibilities and attendance at regularly
scheduled quarterly Board Meetings and meetings of the Independent Trustees held
prior to each quarterly Board Meeting. When additional or special meetings are
held, the meeting fees are paid to those Trustees in attendance. Trustees are
reimbursed for their expenses such as travel, accommodations and meals incurred
in connection with attendance at Board Meetings and the Annual Meeting of
Shareholders. For the year ended December 31, 2005, such meeting-related
expenses amounted to $32,069.
9. SECURITIES TRADED ON A WHEN-ISSUED BASIS
The Fund may purchase or sell securities on a when-issued basis.
When-issued transactions arise when securities are purchased or sold by the Fund
with payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield to the Fund at the time of
entering into the transaction. Beginning on the date the Fund enters into a
when-issued transaction, cash or other liquid securities are segregated in an
amount equal to or greater than the amount of the when-issued transaction. These
transactions are subject to market fluctuations and their current value is
determined in the same manner as for other securities.
10. INCOME TAX INFORMATION AND DISTRIBUTIONS
The Fund declares dividends daily from net investment income and makes
payments monthly in additional shares at the net asset value per share, in cash,
or in a combination of both, at the shareholder's option. Net realized capital
gains, if any, are distributed annually and are taxable.
The Fund intends to maintain, to the maximum extent possible, the
tax-exempt status of interest payments received from portfolio municipal
securities in order to allow dividends paid to shareholders from net investment
income to be exempt from regular Federal and State of Colorado income taxes.
However, due to the distribution levels maintained by the Fund and the
differences between financial statement reporting and Federal income tax
reporting requirements, distributions made by the Fund may not be the same as
the Fund's net investment income, and/or net realized securities gains. At
December 31, 2005, the Fund had a capital loss carryover of $245,339 which
expires on December 31, 2012. This carryover is available to offset future net
realized gains on securities transactions to the extent provided for in the
Internal Revenue Code. To the extent that this loss carryover is used to offset
future realized capital gains, it is probable the gains so offset will not be
distributed.
The tax character of distributions:
Year Ended December 31,
2005 2004
----------- -----------
Net tax-exempt income $ 9,394,426 $ 9,625,055
Ordinary income 546,600 682,897
----------- -----------
$ 9,941,026 $10,307,952
=========== ===========
As of December 31, 2005, the components of distributable earnings on a tax
basis were as follows:
Unrealized appreciation $ 8,530,102
Accumulated net realized loss (245,339)
-----------
$ 8,284,763
===========
The difference between book basis and tax basis unrealized appreciation is
attributable primarily to premium/discount adjustments.
11. CHANGE IN PRINCIPAL ACCOUNTANTS
KPMG LLP was previously the principal accountants for the Tax-Free Fund of
Colorado (the "Fund"). On July 27, 2005 KPMG LLP resigned as the principal
accountants of the Fund and Tait, Weller and Baker LLP was engaged as the
principal accountants to audit the Fund's financial statements for the fiscal
year of 2005. The decision was made by the Audit Committee of the Board of
Trustees.
The audit reports of KPMG LLP on the Fund's financial statements as of and
for the years ended December 31, 2004 and 2003 did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope, or accounting principles.
In connection with the audits of the two fiscal years ended December 31,
2004 and 2003 and the subsequent interim period through July 27, 2005, there
were no reportable events or disagreements with KPMG LLP on any matter of
accounting principles of practices, financial statement disclosure, or auditing
scope or procedures, which disagreements if not resolved to the satisfaction of
KPMG LLP would have caused them to make reference in connection with their
opinion to the subject matter of the disagreements.
TAX-FREE FUND OF COLORADO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class A
------------------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
Net asset value, beginning of period .................. $ 10.68 $ 10.84 $ 10.82 $ 10.32 $ 10.31
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income+ ............................. 0.39 0.40 0.41 0.43 0.45
Net gain (loss) on securities (both realized
and unrealized) ................................. (0.23) (0.13) 0.05 0.52 0.02
-------- -------- -------- -------- --------
Total from investment operations ................... 0.16 0.27 0.46 0.95 0.47
-------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income ............... (0.42) (0.43) (0.44) (0.45) (0.46)
Distributions from capital gains ................... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions ................................ (0.42) (0.43) (0.44) (0.45) (0.46)
-------- -------- -------- -------- --------
Net asset value, end of period ........................ $ 10.42 $ 10.68 $ 10.84 $ 10.82 $ 10.32
======== ======== ======== ======== ========
Total return (not reflecting sales charge) ............ 1.53% 2.57% 4.32% 9.36% 4.64%
Ratios/supplemental data
Net assets, end of period (in thousands) ........... $218,111 $226,070 $233,109 $215,195 $187,022
Ratio of expenses to average net assets ............ 0.79% 0.75% 0.74% 0.75% 0.76%
Ratio of net investment income to average net assets 3.73% 3.76% 3.81% 4.05% 4.27%
Portfolio turnover rate ............................ 10.57% 12.55% 6.16% 6.95% 14.56%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets ............ 0.79% 0.74% 0.74% 0.74% 0.75%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
See accompanying notes to financial statements.
TAX-FREE FUND OF COLORADO
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class C
------------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- ------- -------
Net asset value, beginning of period ....... $ 10.66 $ 10.82 $ 10.80 $ 10.30 $ 10.29
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income+ .................. 0.29 0.30 0.31 0.31 0.34
Net gain (loss) on securities (both
realized and unrealized) .............. (0.23) (0.13) 0.04 0.53 0.03
------- ------- ------- ------- -------
Total from investment operations ........ 0.06 0.17 0.35 0.84 0.37
------- ------- ------- ------- -------
Less distributions (note 10):
Dividends from net investment income .... (0.32) (0.33) (0.33) (0.34) (0.36)
Distributions from capital gains ........ -- -- -- -- --
------- ------- ------- ------- -------
Total distributions ..................... (0.32) (0.33) (0.33) (0.34) (0.36)
------- ------- ------- ------- -------
Net asset value, end of period ............. $ 10.40 $ 10.66 $ 10.82 $ 10.80 $ 10.30
======= ======= ======= ======= =======
Total return (not reflecting sales charge) . 0.57% 1.60% 3.33% 8.32% 3.64%
Ratios/supplemental data
Net assets, end of period (in thousands) $13,003 $15,210 $15,820 $ 9,109 $ 1,909
Ratio of expenses to average net assets . 1.74% 1.70% 1.69% 1.68% 1.69%
Ratio of net investment income to average
net assets ............................ 2.78% 2.81% 2.83% 2.99% 3.25%
Portfolio turnover rate ................. 10.57% 12.55% 6.16% 6.95% 14.56%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets . 1.74% 1.69% 1.68% 1.67% 1.68%
Class Y
------------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- ------- -------
Net asset value, beginning of period ....... $ 10.71 $ 10.86 $ 10.84 $ 10.33 $ 10.33
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income+ .................. 0.40 0.41 0.42 0.44 0.45
Net gain (loss) on securities (both
realized and unrealized) .............. (0.24) (0.12) 0.04 0.52 0.02
------- ------- ------- ------- -------
Total from investment operations ........ 0.16 0.29 0.46 0.96 0.47
------- ------- ------- ------- -------
Less distributions (note 10):
Dividends from net investment income .... (0.43) (0.44) (0.44) (0.45) (0.47)
Distributions from capital gains ........ -- -- -- -- --
------- ------- ------- ------- -------
Total distributions ..................... (0.43) (0.44) (0.44) (0.45) (0.47)
------- ------- ------- ------- -------
Net asset value, end of period ............. $ 10.44 $ 10.71 $ 10.86 $ 10.84 $ 10.33
======= ======= ======= ======= =======
Total return (not reflecting sales charge) . 1.49% 2.73% 4.37% 9.50% 4.59%
Ratios/supplemental data
Net assets, end of period (in thousands) $14,671 $15,608 $13,760 $ 7,482 $ 4,312
Ratio of expenses to average net assets . 0.74% 0.70% 0.69% 0.69% 0.71%
Ratio of net investment income to average
net assets ............................ 3.77% 3.81% 3.85% 4.07% 4.32%
Portfolio turnover rate ................. 10.57% 12.55% 6.16% 6.95% 14.56%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets . 0.74% 0.69% 0.69% 0.69% 0.70%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
ANALYSIS OF EXPENSES (UNAUDITED)
As a shareholder of the Fund, you may incur two types of costs: (1)
transaction costs, including front-end sales charges with respect to Class A
shares or contingent deferred sales charges ("CDSC") with respect to Class C
shares; and (2) ongoing costs, including management fees; distribution and/or
service (12b-1) fees; and other Fund expenses. The tables below are intended to
help you understand your ongoing costs (in dollars) of investing in the Fund and
to compare these costs with the ongoing costs of investing in other mutual
funds.
The tables below are based on an investment of $1,000 invested on July 1,
2005 and held for the six months ended December 31, 2005.
ACTUAL EXPENSES
This table provides information about actual account values and actual
expenses. You may use the information provided in this table, together with the
amount you invested, to estimate the expenses that you paid over the period. To
estimate the expenses you paid on your account, divide your ending account value
by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During the Period".
FOR THE SIX MONTHS ENDED DECEMBER 31, 2005
ACTUAL
TOTAL RETURN BEGINNING ENDING EXPENSES
WITHOUT ACCOUNT ACCOUNT PAID DURING
SALES CHARGES(1) VALUE VALUE THE PERIOD(2)
- --------------------------------------------------------------------------------
Class A 0.00% $1,000.00 $1,000.00 $4.03
- --------------------------------------------------------------------------------
Class C (0.48)% $1,000.00 $ 995.20 $8.80
- --------------------------------------------------------------------------------
Class Y 0.03% $1,000.00 $1,000.30 $3.78
- --------------------------------------------------------------------------------
(1) ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS, IF
ANY, AT NET ASSET VALUE AND DOES NOT REFLECT THE DEDUCTION OF THE
APPLICABLE SALES CHARGES WITH RESPECT TO CLASS A SHARES OR THE APPLICABLE
CONTINGENT DEFERRED SALES CHARGES ("CDSC") WITH RESPECT TO CLASS C SHARES.
TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.
(2) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.80%, 1.75% AND
0.75% FOR THE FUND'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO
REFLECT THE ONE-HALF YEAR PERIOD).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANALYSIS OF EXPENSES (UNAUDITED) (CONTINUED)
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio and an assumed rate of
return of 5.00% 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
the information provided in this table to compare the ongoing costs of investing
in the Fund and other mutual funds. To do so, compare this 5.00% hypothetical
example relating to the Fund with the 5.00% hypothetical examples that appear in
the shareholder reports of other mutual funds.
Please note that the expenses shown in the table below are meant to
highlight your ongoing costs only and do not reflect any transactional costs,
with respect to Class A shares. The example does not reflect the deduction of
contingent deferred sales charges ("CDSC") with respect to Class C shares.
Therefore, the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different mutual funds. In
addition, if these transaction costs were included, your costs would have been
higher.
FOR THE SIX MONTHS ENDED DECEMBER 31, 2005
HYPOTHETICAL
ANNUALIZED BEGINNING ENDING EXPENSES
TOTAL ACCOUNT ACCOUNT PAID DURING
RETURN VALUE VALUE THE PERIOD(1)
- --------------------------------------------------------------------------------
Class A 5.00% $1,000.00 $1,021.17 $4.08
- --------------------------------------------------------------------------------
Class C 5.00% $1,000.00 $1,016.38 $8.89
- --------------------------------------------------------------------------------
Class Y 5.00% $1,000.00 $1,021.42 $3.82
- --------------------------------------------------------------------------------
(1) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.80%, 1.75% AND
0.75% FOR THE FUND'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO
REFLECT THE ONE-HALF YEAR PERIOD).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INFORMATION AVAILABLE (UNAUDITED)
Much of the information that the funds in the Aquila(SM) Group of Funds
produce is automatically sent to you and all other shareholders. Specifically,
you are routinely sent the entire list of portfolio securities of your Fund
twice a year in the semi-annual and annual reports you receive. Additionally, we
prepare, and have available, portfolio listings at the end of each quarter.
Whenever you may be interested in seeing a listing of your Fund's portfolio
other than in your shareholder reports, please check our website at
http://www.aquilafunds.com or call us at 1-800-437-1020.
The Fund additionally files a complete list of its portfolio holdings with
the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms
N-Q are available free of charge on the SEC website at http://www.sec.gov. You
may also review or, for a fee, copy the forms at the SEC's Public Reference Room
in Washington, DC or by calling 800-SEC-0330.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROXY VOTING RECORD (UNAUDITED)
The Fund does not invest in equity securities. Accordingly, there were no
matters relating to a portfolio security considered at any shareholder meeting
held during the 12 months ended June 30, 2005 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FEDERAL TAX STATUS OF DISTRIBUTIONS (UNAUDITED)
This information is presented in order to comply with a requirement of the
Internal Revenue Code AND NO ACTION ON THE PART OF SHAREHOLDERS IS REQUIRED.
For the calendar year ended December 31, 2005, $9,394,426 of dividends
paid by Tax-Free Fund of Colorado, constituting 94.50% of total dividends paid
during calendar 2005, were exempt-interest dividends and the balance were
ordinary dividend income.
Prior to January 31, 2006, shareholders were mailed IRS Form 1099-DIV
which contained information on the status of distributions paid for the 2005
CALENDAR YEAR.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
TRUSTEES(1) AND OFFICERS
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
INTERESTED TRUSTEES(4)
Diana P. Herrmann Trustee since Vice Chair and Chief Executive Officer 11 None
New York, NY 2000 and of Aquila Management Corporation,
(02/25/58) President Founder of the Aquila(SM) Group of
since 1999 Funds(5) and parent of Aquila Investment
Management LLC, Manager, since 2004,
President and Chief Operating Officer
since 1997, a Director since 1984,
Secretary since 1986 and previously its
Executive Vice President, Senior Vice
President or Vice President, 1986-1997;
Chief Executive Officer and Vice Chair
since 2004 and President, Chief
Operating Officer and Manager of the
Manager since 2003; Vice Chair,
President, Executive Vice President or
Senior Vice President of funds in the
Aquila(SM) Group of Funds since 1986;
Director of the Distributor since 1997;
trustee, Reserve Money-Market Funds,
1999-2000 and Reserve Private Equity
Series, 1998-2000; Governor, Investment
Company Institute and head of its Small
Funds Committee since 2004; active in
charitable and volunteer organizations.
NON-INTERESTED TRUSTEES
Anne J. Mills Chair of the President, Loring Consulting Company 4 None
Castle Rock, CO Board of since 2001; Vice President for Business
(12/23/38) Trustees Affairs, Ottawa University, 1992-2001;
since 2005 and IBM Corporation, 1965-1991; Budget
Trustee Review Officer, the American Baptist
since 1987 Churches/USA, 1994-1997; director, the
American Baptist Foundation; Trustee,
Ottawa University; and Trustee Emerita,
Brown University.
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
Tucker Hart Adams Trustee President, The Adams Group, Inc., an 2 Director, Colorado
Colorado Springs, CO since 1989 economic consulting firm, since 1989; Health Facilities
(01/11/38) formerly Chief Economist, United Banks Authority and Mortgage
of Colorado; currently or formerly Analysis Computer Corp.
active with numerous professional and
community organizations.
Thomas A.Christopher Trustee Vice President of Robinson, Hughes & 2 None
Danville, KY since 2004 Christopher, C.P.A.s, P.S.C., since
(12/19/47) 1977; President, A Good Place for Fun,
Inc., a sports facility, since 1987;
currently or formerly active with
various professional and community
organizations.
Gary C. Cornia Trustee Director, Romney Institute of Public 4 None
Orem, UT since 2000 Management, Marriott School of
(06/24/48) Management, Brigham Young University,
2004 - present; Professor, Marriott
School of Management, 1980 - present;
Past President, the National Tax
Association; Fellow, Lincoln Institute
of Land Policy, 2002-2003; Associate
Dean, Marriott School of Management,
Brigham Young University, 1991-2000;
Utah Governor's Tax Review Committee
since 1993.
John C. Lucking Trustee President, Econ-Linc, an economic 3 Director, Sanu Resources
Phoenix, AZ since 2000 consulting firm, since 1995; formerly
(05/20/43) Consulting Economist, Bank One Arizona
and Chief Economist, Valley National
Bank; member, Arizona's Joint
Legislative Budget Committee Economic
Advisory Panel and the Western Blue Chip
Economic Forecast Panel; Board member,
Northern Arizona University Foundation
since 1997; member, various historical,
civic and economic associations.
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
J. William Weeks Trustee Retired; limited partner in real estate 2 None
Palm Beach, FL since 1995 partnerships Alex, Brown & Sons No. 1
(06/22/27) and 2; formerly Senior Vice President or
Vice President of the Aquila Bond Funds;
and Vice President of the Distributor.
OTHER INDIVIDUALS
CHAIRMAN EMERITUS(6)
Lacy B. Herrmann Founder and Founder and Chairman of the Board, N/A N/A
New York, NY Chairman Aquila Management Corporation, the
(05/12/29) Emeritus since sponsoring organization and parent of
2005 the Manager or Administrator and/or
Adviser or Sub-Adviser to each fund of
the Aquila(SM) Group of Funds; Chairman of
the Manager or Administrator and/or
Adviser or Sub-Adviser to each since
2004; Founder and Chairman Emeritus of
Hawaiian Tax-Free Trust, Pacific Capital
Cash Assets Trust, Pacific Capital
Tax-Free Cash Assets Trust, Pacific
Capital U.S. Government Securities Cash
Assets Trust, Tax-Free Fund of Colorado,
Churchill Tax-Free Fund of Kentucky,
Narragansett Insured Tax-Free Income
Fund, Tax-Free Trust of Arizona,
Tax-Free Trust of Oregon, Tax-Free Fund
For Utah and Aquila Rocky Mountain
Equity Fund; previously Chairman and a
Trustee of each fund in the Aquila(SM)
Group of Funds since its establishment
until 2004 or 2005; Director of the
Distributor since 1981 and formerly Vice
President or Secretary, 1981-1998;
Trustee Emeritus, Brown University and
the Hopkins School; active in
university, school and charitable
organizations.
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
OFFICERS
Charles E. Childs, III Executive Executive Vice President of all funds in N/A N/A
New York, NY Vice President the Aquila(SM) Group of Funds and the
(04/01/57) since 2003 Manager and the Manager's parent since
2003; formerly Senior Vice President,
corporate development, Vice President,
Assistant Vice President and Associate
of the Manager's parent since 1987;
Senior Vice President, Vice President or
Assistant Vice President of the Aquila
Money-Market Funds, 1988-2003.
Stephen J. Caridi Senior Vice President of the Distributor since N/A N/A
New York, NY Vice President 1995; Vice President, Hawaiian Tax-Free
(05/06/61) since 2004 Trust since 1998; Senior Vice President,
Narragansett Insured Tax-Free Income
Fund since 1998, Vice President
1996-1997; Senior Vice President,
Tax-Free Fund of Colorado since 2004;
Assistant Vice President, Tax-Free Fund
For Utah since 1993.
Jerry G. McGrew Senior President of the Distributor since 1998, N/A N/A
New York, NY Vice President Registered Principal since 1993, Senior
(06/18/44) since 1997 Vice President, 1997-1998 and Vice
President, 1993-1997; Senior Vice
President, Aquila Rocky Mountain Equity
Fund and five Aquila Bond Funds since
1995; Vice President, Churchill Cash
Reserves Trust, 1995-2001.
Emily T. Rae Vice President Vice President of Aquila Rocky Mountain N/A N/A
Aurora, CO since 2002 Equity Fund and Tax-Free Fund of
(03/02/74) Colorado since 2002; investment analyst,
Colorado State Bank and Trust, 2001-02;
financial analyst, J.P. Morgan, 2000-01,
senior registered associate, Kirkpatrick
Pettis, 1998-2000.
NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------
Robert W. Anderson Chief Compliance Chief Compliance Officer of the Fund, N/A N/A
New York, NY Officer the Manager and the Distributor since
(08/23/40) since 2004 2004, Compliance Officer of the Manager
and Assistant or its predecessor and current parent
Secretary since 1998 and Assistant Secretary of
since 2000 the Aquila(SM) Group of Funds since 2000.
Joseph P. DiMaggio Chief Financial Chief Financial Officer of the Aquila(SM) N/A N/A
New York, NY Officer Group of Funds since 2003 and Treasurer
(11/06/56) since 2003 since 2000.
and Treasurer
since 2000
Edward M. W. Hines Secretary Partner, Hollyer Brady Barrett & Hines N/A N/A
New York, NY since 1987 LLP, legal counsel to the Fund, since
(12/16/39) 1989; Secretary of the Aquila(SM) Group of
Funds.
John M. Herndon Assistant Assistant Secretary of the Aquila(SM) N/A N/A
New York, NY Secretary Group of Funds since 1995 and Vice
(12/17/39) since 1995 President of the three Aquila
Money-Market Funds since 1990; Vice
President of the Manager or its
predecessor and current parent since
1990.
Lori A. Vindigni Assistant Assistant Treasurer of the Aquila(SM) N/A N/A
New York, NY Treasurer Group of Funds since 2000; Assistant
(11/02/66) since 2000 Vice President of the Manager or its
predecessor and current parent since
1998; Fund Accountant for the Aquila(SM)
Group of Funds, 1995-1998.
- ----------
(1) The Fund's Statement of Additional Information includes additional
information about the Trustees and is available, without charge, upon
request by calling 800-437-1020 (toll free).
(2) The mailing address of each Trustee and officer is c/o Tax-Free Fund of
Colorado, 380 Madison Avenue, New York, NY 10017.
(3) Each Trustee holds office until the next annual meeting of shareholders or
until his or her successor is elected and qualifies. The term of office of
each officer is one year.
(4) Ms. Herrmann is an interested person of the Fund as an officer of the
Fund, as a director, officer and shareholder of the Manager's corporate
parent, as an officer and Manager of the Manager, and as a shareholder and
director of the Distributor.
(5) In this material Pacific Capital Cash Assets Trust, Pacific Capital U.S.
Government Securities Cash Assets Trust and Pacific Capital Tax-Free Cash
Assets Trust, each of which is a money-market fund, are called the "Aquila
Money-Market Funds"; Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona,
Tax-Free Trust of Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free
Fund of Kentucky, Narragansett Insured Tax-Free Income Fund and Tax-Free
Fund For Utah, each of which is a tax-free municipal bond fund, are called
the "Aquila Bond Funds"; Aquila Rocky Mountain Equity Fund is an equity
fund; considered together, these 11 funds are called the "Aquila(SM) Group
of Funds."
(6) The Chairman Emeritus may attend Board meetings but has no voting power.
- --------------------------------------------------------------------------------
PRIVACY NOTICE (unaudited)
TAX-FREE FUND OF COLORADO
OUR PRIVACY POLICY. In providing services to you as an individual who owns or is
considering investing in shares of the Fund we collect certain nonpublic
personal information about you. Our policy is to keep this information strictly
safeguarded and confidential, and to use or disclose it only as necessary to
provide services to you or as otherwise permitted by law. Our privacy policy
applies equally to former shareholders and persons who inquire about a fund.
INFORMATION WE COLLECT. "Nonpublic personal information" is personally
identifiable financial information about you as an individual or your family.
The kinds of nonpublic personal information we have about you may include the
information you provide us on your share purchase application or in telephone
calls or correspondence with us, and information about your fund transactions
and holdings, how you voted your shares and the account where your shares are
held.
INFORMATION WE DISCLOSE. We disclose nonpublic personal information about you to
companies that provide necessary services to us, such as the Fund's transfer
agent, distributor, investment adviser or sub-adviser, as permitted or required
by law, or as authorized by you. Any other use is strictly prohibited. We do not
sell information about you or any of our fund shareholders to anyone.
HOW WE SAFEGUARD YOUR INFORMATION. We restrict access to nonpublic personal
information about you to only those persons who need it to provide services to
you or who are permitted by law to receive it. We maintain physical, electronic
and procedural safeguards to protect the confidentiality of all nonpublic
personal information we have about you.
If you have any questions regarding our Privacy Policy, please contact us at
1-800-437-1020.
AQUILA DISTRIBUTORS, INC.
AQUILA INVESTMENT MANAGEMENT LLC
This Privacy Policy also has been adopted by Aquila Distributors, Inc. and
Aquila Investment Management LLC and applies to all nonpublic information about
you that each of these companies may obtain in connection with services provided
to the Fund or to you as a shareholder of the Fund.
- --------------------------------------------------------------------------------
FOUNDERS
Lacy B. Herrmann, Chairman Emeritus
AQUILA MANAGEMENT CORPORATION
MANAGER
AQUILA INVESTMENT MANAGEMENT LLC
380 Madison Avenue, Suite 2300
New York, New York 10017
INVESTMENT SUB-ADVISER
KIRKPATRICK PETTIS CAPITAL MANAGEMENT, INC.
1600 Broadway, Suite 1100
Denver, Colorado 80202
BOARD OF TRUSTEES
Anne J. Mills, Chair
Tucker Hart Adams
Thomas A. Christopher
Gary C. Cornia
Diana P. Herrmann
John C. Lucking
J. William Weeks
OFFICERS
Diana P. Herrmann, President
Stephen J. Caridi, Senior Vice President
Emily T. Rae, Vice President
Robert W. Anderson, Chief Compliance Officer
Joseph P. DiMaggio, Chief Financial Officer and Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
AQUILA DISTRIBUTORS, INC.
380 Madison Avenue, Suite 2300
New York, New York 10017
CUSTODIAN
BANK ONE TRUST COMPANY, N.A.
1111 Polaris Parkway
Columbus, Ohio 43240
TRANSFER AND SHAREHOLDER SERVICING AGENT
PFPC Inc.
101 Sabin Street
Pawtuckett, RI 02860
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Tait, Weller & Baker LLP
1818 Market Street, Suit 2400
Philadelphia, PA 19103
Further information is contained in the Prospectus, which must precede or
accompany this report.
ITEM 2. CODE OF ETHICS.
(a) As of December 31, 2005 (the end of the reporting period) the
Trust has adopted a code of ethics that applies to the Fund's
principal executive officer(s)and principal financial officer(s)
and persons performing similar functions ("Covered Officers") as
defined in the Aquila Group of Funds Code of Ethics for Principal
Executive and Senior Financial Officers under Section 406 of the
Sarbanes-Oxley Act of 2002.;
(f)(1) Pursuant to Item 10(a)(1), a copy of the Fund's Code of
Ethics that applies to the Trust's principal executive officer(s)
and principal financial officer(s) and persons performing similar
functions is included as an exhibit to its annual report on this
Form N-CSR;
(f)(2) The text of the Fund's Code of Ethics that applies to the
Fund's principal executive officer(s) and principal financial
officer(s) and persons performing similar functions has been
posted on its Internet website which can be found at the Fund's
Internet address at aquilafunds.com.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1)(ii) The Board of Trustees of the Fund has determined that
it does not have at least one audit committee financial expert
serving on its audit committee. The Fund does not have such a
person serving on the audit committee because none of the persons
currently serving as Trustees happens to have the technical
accounting and auditing expertise included in the definition of
"audit committee financial expert" recently adopted by the Securities
and Exchange Commission in connection with this Form N-CSR, and the
Board has not heretofore deemed it necessary to seek such a person
for election to the Board.
The primary mission of the Board, which is that of oversight over
the operations and affairs of the Fund, confronts the Trustees with
a wide and expanding range of issues and responsibilities. The
Trustees believe that, accordingly, it is essential that the Board's
membership consist of persons with as extensive experience as possible
in fulfilling the duties and responsibilities of mutual fund directors
and audit committee members and, ideally, with extensive experience
and background relating to the economic and financial sectors and
securities in which the Fund invests, including exposure to the
financial and accounting matters commonly encountered with respect
to those sectors and securities. The Board believes that its current
membership satisfies those criteria. It recognizes that it would
also be helpful to have a member with the relatively focused accounting
and auditing expertise reflected in the applicable definition of
"audit committee financial expert," just as additional members with
similarly focused technical expertise in other areas relevant to
the Fund's operations and affairs would also contribute added value.
However, the Board believes that the Fund is better served, and its
assets better employed, by a policy of hiring experts in various
the specialized area of technical accounting and
auditing matters, if and as the Board identifies the need, rather
than by seeking to expand its numbers by adding technical experts
in the areas constituting its domain of responsibility. The Fund's
Audit Committee Charter explicitly authorizes the Committee to
retain such experts as it deems necessary in fulfilling its duties
under the Charter.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
a) Audit Fees - The aggregate fees billed for each of the last two
fiscal years for professional services rendered by the principal
accountant for the audit of the Registrant's annual financial statements
or services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements were $16,000 in 2005
and $22,110 in 2004.
b) Audit Related Fees - There were no amounts billed for audit-related
fees over the past two years other than stated above.
c) Tax Fees - The Registrant was billed by the principal accountant
$3,000 and $6,792 in 2005 and 2004, respectively, for tax return
preparation, tax compliance and tax planning.
d) All Other Fees - There were no additional fees paid for audit and non-
audit services other than those disclosed in a) thorough c) above.
e)(1) Currently, the audit committee of the Registrant pre-approves audit
services and fees on an engagement-by-engagement basis.
e)(2) None of the services described in b) through d) above were approved
by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X, all were pre-approved on an engagement-by-engagement basis.
f) No applicable.
g) There were no non-audit services fees billed by the Registrant's accountant
to the Registrant's investment adviser or distributor over the past two years.
h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
905: Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company Act of
1940) as of a date within 90 days of the fling of this report, the registrant's
chief financial and executive officers have concluded that the disclosure
controls and procedures of the registrant are appropriately designed to ensure
that information required to be disclosed in the registrant's reports that are
filed under the Securities Exchange Act of 1934 are accumulated and communicated
to registrant's management, including its principal executive officer(s) and
principal financial officer(s), to allow timely decisions regarding required
disclosure and is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms adopted by the Securities and Exchange
Commission.
(b) There have been no significant changes in registrant's internal controls or
in other factors that could significantly affect registrant's internal controls
subsequent to the date of the most recent evaluation, including no significant
deficiencies or material weaknesses that required corrective action.
ITEM 10. EXHIBITS.
(a)(1) Aquila Group of Funds Code of Ethics for Principal Executive and
Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act
of 2002.
(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act of
1940.
(b) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(b) under the Investment Company Act
of 1940.
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.
TAX-FREE FUND OF COLORADO
By: /s/ Diana P. Herrmann
- - - ---------------------------------
President and Trustee
March 9, 2006
By: /s/ Joseph P. DiMaggio
- - - -----------------------------------
Chief Financial Officer and Treasurer
March 9, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: /s/ Diana P. Herrmann
- - - ---------------------------------
Diana P. Herrmann
President and Trustee
March 9, 2006
By: /s/ Joseph P. DiMaggio
- - - -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
March 9, 2006
TAX-FREE FUND OF COLORADO
EXHIBIT INDEX
(a)(1) Aquila Group of Funds Code of Ethics for Principal Executive and
Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act
of 2002.
(a) (2) Certifications of principal executive officer
and principal financial officer as required by Rule 30a-2(a)
under the Investment Company Act of 1940.
(b) Certification of chief executive officer and chief financial
officer as required by Rule 30a-2(b) of the Investment Company Act
of 1940.