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: 06/30/07
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
SEMI-ANNUAL
REPORT
JUNE 30, 2007
[LOGO OF TAX-FREE FUND OF COLORADO: A SQUARE WITH
SILLHOUETTES 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 GROUP OF FUNDS (SM)
[LOGO OF TAX-FREE FUND OF COLORADO:
A SQUARE WITH SILHOUETTES OF TWO
MOUNTAINS AND A RISING SUN]
SERVING COLORADO INVESTORS FOR TWO DECADES
TAX-FREE FUND OF COLORADO
"PROFESSIONAL MANAGEMENT"
August, 2007
Dear Fellow Shareholder:
Rising interest rates, reaching for yield and tightening yield curves - these
are all topics that have been in the news as of late. While there is a plethora
of information available on these topics and others if you are interested, the
good news is that when it comes to Tax-Free Fund of Colorado you don't need to
be versed in "financialese" any more than you wish.
Why? Because one of the conveniences afforded you through an investment in
Tax-Free Fund of Colorado is local active professional portfolio management. The
Fund's portfolio manager continuously monitors economic, monetary and financial
trends and adjusts the portfolio accordingly as and when he deems appropriate.
Your Fund's portfolio manager provides ongoing surveillance of the marketplace
and strives to maneuver cautiously through its ups and downs - much like a
ship's captain whose job it is to ride out sudden storms.
Not unlike the prudent ship's captain who ensures that the cargo is properly
balanced and positioned, the Fund's portfolio manager is constantly monitoring
the investment portfolio and the economic weather conditions striving to provide
as stable a net asset value and as high a level of tax-free income as possible.
As with a ship in choppy seas, your investment requires constant vigilance and
nimble reflexes in all phases of its management. This does not, however, mean
selling and buying securities continuously based upon market blips. What it does
mean is being a keen observer of the scene, monitoring securities very carefully
and taking action as appropriate whenever significant changes occur or are
anticipated.
NOT A PART OF THE SEMI-ANNUAL REPORT
Your portfolio manager seeks opportunities that make sense within the prevailing
marketplace and which provide double tax-free income while maintaining the
overall conservative nature of the portfolio.
In short, your professional manager does the work for you. So, the next time you
come across a boring, complex analysis of the bond market, feel free to flip
right past it. Your Fund's portfolio management team's job (and their passion)
is to keep on top of and make sense out of all the news. Thus, like a seasoned
traveler, you can enjoy your trip knowing that there are experienced eyes
watching the waters and steady hands on the helm.
Sincerely,
/s/ Lacy B. Herrmann /s/ Diana P. Herrmann
Lacy B. Herrmann Diana P. Herrmann
Founder and Chairman Emeritus President
NOT A PART OF THE SEMI-ANNUAL REPORT
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (33.5%) S&P VALUE
- --------------- ---------------------------------------------------------- -------- -------------
CITY & COUNTY (1.0%)
Denver, Colorado City & County Art Museum
$ 2,000,000 5.000%, 08/01/15 ......................................... Aa1/AA+ $ 2,085,340
-------------
METROPOLITAN DISTRICT (6.7%)
Arapahoe, Colorado Park & Recreation District
1,070,000 5.000%, 12/01/17 FGIC Insured ............................ Aaa/NR 1,113,592
Aspen Grove Business Improvement District,
Colorado Refunding
1,150,000 4.750%, 12/01/21Radian Insured ........................... NR/AA 1,162,133
Castle Pines, Colorado Metropolitan District
1,060,000 5.500%, 12/01/07 FSA Insured ............................. Aaa/AAA 1,067,325
Fiddlers Business Improvement District Greenwood
Village, Colorado Refunding & Capital
Improvement-Sr. Lien-Series 1
1,000,000 5.000%, 12/01/22 ACA Insured ............................. NR/A 1,011,930
Foothills, Colorado Park & Recreational District
1,310,000 5.000%, 12/01/12 FSA Insured ............................. Aaa/NR 1,361,850
1,325,000 5.000%, 12/01/13 FSA Insured ............................. Aaa/NR 1,375,814
Highlands Ranch, Colorado Metropolitan District
#1, Refunding
1,000,000 5.750%, 09/01/08 AMBAC Insured ........................... Aaa/AAA 1,022,130
1,730,000 5.750%, 09/01/09 AMBAC Insured ........................... Aaa/AAA 1,794,373
Hyland Hills Metro Park & Recreation District, Colorado
Special Revenue Refunding & Improvement
1,275,000 4.375%, 12/15/26 ACA Insured ............................. NR/A 1,188,096
North Metro Fire Rescue District, Colorado
1,200,000 4.625%, 12/01/20 AMBAC Insured ........................... Aaa/AAA 1,232,676
South Suburban, Colorado Park & Recreational District
1,365,000 5.125%, 12/15/09 FGIC Insured ............................ Aaa/AAA 1,390,157
-------------
Total Metropolitan District 13,720,076
-------------
SCHOOL DISTRICTS (25.8%)
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 1,277,841
1,170,000 5.000%, 12/15/12 MBIA Insured ............................ Aaa/AAA 1,216,695
830,000 5.000%, 12/15/12 MBIA Insured Pre-Refunded ............... Aaa/AAA 865,873
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- --------------- ---------------------------------------------------------- -------- -------------
SCHOOL DISTRICTS (CONTINUED)
Adams County, Colorado School District #14
$ 1,275,000 5.750%, 12/01/08 FSA Insured Pre-Refunded ................ Aaa/AAA $ 1,297,899
Adams County 12 Five Star Schools,
Colorado Refunding
2,000,000 4.500%, 12/15/20 MBIA Insured ............................ Aaa/AAA 2,019,900
Adams and Weld Counties, Colorado School
District #027J (Brighton) Refunding
1,600,000 4.375%, 12/01/19 FSA Insured ............................. Aaa/AAA 1,597,664
Arapahoe County, Colorado Cherry Creek School
District #5
1,000,000 5.500%, 12/15/08 ......................................... Aa2/AA 1,023,790
2,760,000 5.500%, 12/15/11 Pre-Refunded ............................ Aa2/AA 2,865,874
2,750,000 5.500%, 12/15/12 Pre-Refunded ............................ Aa2/AA 2,855,490
Boulder Valley, Colorado School District
1,215,000 5.500%, 12/01/08 FGIC Insured ............................ Aaa/AAA 1,235,619
Clear Creek, Colorado School District
1,000,000 5.000%, 12/01/16 FSA Insured ............................. Aaa/AAA 1,043,200
Denver, Colorado City & County School District #1
Series A Refunding
1,000,000 5.600%, 06/01/08 ......................................... Aa3/AA- 1,016,010
Douglas & Elbert Counties, Colorado School District
# Re-1, Series 1992
2,000,000 5.250%, 12/15/11 FGIC Insured Pre-Refunded ............... Aaa/AAA 2,066,100
El Paso County, Colorado School District #11
Colorado Springs
1,330,000 6.250%, 12/01/08 ......................................... Aa3/AA- 1,372,108
El Paso County, Colorado School District #20
1,000,000 6.150%, 12/15/08 MBIA Insured ............................ Aaa/AAA 1,032,980
1,500,000 5.000%, 12/15/14 FGIC Insured ............................ Aaa/NR 1,571,205
El Paso County, Colorado School District #38
1,110,000 5.700%, 12/01/12 Pre-Refunded ............................ Aa3/NR 1,172,737
El Paso County, Colorado School District #49
1,500,000 5.500%, 12/01/13 FSA Insured Pre-Refunded ................ Aaa/AAA 1,625,805
1,000,000 5.250%, 12/01/14 FGIC Insured Pre-Refunded ............... Aaa/AAA 1,052,880
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- --------------- ---------------------------------------------------------- -------- -------------
SCHOOL DISTRICTS (CONTINUED)
Garfield County, Colorado School District
$ 1,250,000 5.000%, 12/01/17 FSA Insured ............................. Aaa/NR $ 1,300,925
Jefferson County, Colorado School District # R-1
3,000,000 5.500%, 12/15/09 FGIC Insured Pre-Refunded ............... Aaa/AAA 3,102,360
2,340,000 5.250%, 12/15/11 FGIC Insured Pre-Refunded ............... Aaa/AAA 2,411,698
1,000,000 5.500%, 12/15/13 FGIC Insured Pre-Refunded ............... Aaa/AAA 1,034,120
La Plata County, Colorado School District #9
1,500,000 5.000%, 11/01/18 MBIA Insured Pre-Refunded ............... Aaa/NR 1,571,925
Larimer County, Colorado School District #R1
Poudre Series A Refunding
2,100,000 5.250%, 12/15/11 ......................................... Aa3/AAA 2,135,553
Pueblo County, Colorado School District #70
1,040,000 5.500%, 12/01/09 AMBAC Insured ........................... Aaa/AAA 1,047,186
1,000,000 5.000%, 12/01/15 FGIC Insured ............................ Aaa/AAA 1,039,580
3,440,000 5.000%, 12/01/16 FGIC Insured ............................ Aaa/AAA 3,570,503
Teller County, Colorado School District #2
Woodland Park
1,265,000 5.000%, 12/01/17 MBIA Insured ............................ Aaa/AAA 1,332,905
Weld and Adams Counties, Colorado School
District #3J
1,000,000 5.500%, 12/15/10 AMBAC Insured Pre-Refunded .............. Aaa/AAA 1,038,830
Weld County, Colorado School District #2
1,315,000 5.000%, 12/01/15 FSA Insured ............................. Aaa/AAA 1,374,412
Weld County, Colorado School District #6
1,195,000 5.000%, 12/01/15 FSA Insured Pre-Refunded ................ Aaa/AAA 1,246,218
Weld County, Colorado School District #8
1,115,000 5.000%, 12/01/15 FSA Insured ............................. Aaa/AAA 1,169,234
1,385,000 5.250%, 12/01/17 FSA Insured ............................. Aaa/AAA 1,469,056
-------------
Total School Districts ................................... 53,054,175
-------------
Total General Obligation Bonds ........................... 68,859,591
-------------
REVENUE BONDS (66.0%)
ELECTRIC (1.3%)
Colorado Springs, Colorado Utilities Revenue
1,660,000 5.000%, 11/15/17 ......................................... Aa2/AA 1,730,351
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- --------------- ---------------------------------------------------------- -------- -------------
ELECTRIC (CONTINUED)
Colorado Springs, Colorado Utilities Revenue
Subordinated Lien Improvement Series A
$ 1,000,000 5.000%, 11/15/17 ......................................... Aa2/AA $ 1,047,040
-------------
Total Electric 2,777,391
-------------
HIGHER EDUCATION (10.9%)
Boulder, Colorado Development Revenue UCAR
1,760,000 5.000%, 09/01/16 MBIA Insured ............................ Aaa/AAA 1,835,346
1,130,000 5.000%, 09/01/17 AMBAC Insured ........................... Aaa/AAA 1,181,641
Colorado Educational & Cultural Facility Authority
Johnson & Wales
860,000 5.000%, 04/01/18 XLCA Insured ............................ Aaa/AAA 890,272
Colorado Educational & Cultural Facility Authority
University of Colorado Foundation Project
2,110,000 5.000%, 07/01/17 AMBAC Insured ........................... Aaa/AAA 2,205,541
1,865,000 5.375%, 07/01/18 AMBAC Insured ........................... Aaa/AAA 1,980,798
Colorado Educational & Cultural Facility Authority
Refunding University of Denver Project Series B
1,050,000 4.500%, 03/01/19 FGIC Insured ............................ Aaa/AAA 1,061,960
Colorado Mountain Jr. College District Student
Housing Facilities Enterprise Revenue
1,000,000 4.500%, 06/01/18 MBIA Insured ............................ Aaa/AAA 1,011,800
Colorado Post Secondary Educational Facility
860,000 5.500%, 03/01/08 MBIA Insured ............................ Aaa/AAA 869,555
Colorado State University System
1,530,000 5.000%, 03/01/17 AMBAC Insured ........................... Aaa/NR 1,594,872
University of Colorado Enterprise System
1,000,000 5.000%, 06/01/11 ......................................... Aa3/AA- 1,036,520
2,325,000 5.000%, 06/01/15 AMBAC Insured ........................... Aaa/AAA 2,428,602
1,735,000 5.000%, 06/01/16 ......................................... Aa3/AA- 1,824,457
1,000,000 5.250%, 06/01/17 FGIC Insured ............................ Aaa/AAA 1,064,590
1,000,000 4.375%, 06/01/19 FGIC Insured ............................ Aaa/AAA 1,002,030
University of Northern Colorado Auxiliary Facilities
875,000 5.750%, 06/01/08 MBIA Insured ETM ........................ Aaa/AAA 890,558
1,390,000 5.000%, 06/01/15 AMBAC Insured ........................... Aaa/AAA 1,439,234
-------------
Total Higher Education ................................... 22,317,776
-------------
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- --------------- ---------------------------------------------------------- -------- -------------
HOSPITAL (6.1%)
Colorado Health Facility Authority Hospital
Revenue, Catholic Health Initiatives Series A
$ 1,000,000 5.375%, 12/01/09 Pre-Refunded ............................ Aa2/AA $ 1,023,970
Colorado Health Facility Authority Hospital
Revenue, Sisters of Charity - Health Care
1,000,000 6.250%, 05/15/09 AMBAC Insured, ETM ...................... Aaa/AAA 1,041,550
Colorado Health Facility Authority Hospital
Revenue, Sisters of Charity - Leavenworth
1,000,000 5.500%, 12/01/08 MBIA Insured ............................ Aaa/AAA 1,021,910
1,500,000 5.250%, 12/01/10 MBIA Insured ............................ Aaa/AAA 1,532,415
Colorado Health Facility Authority Revenue,
Catholic Health Initiatives-A
1,500,000 5.000%, 09/01/21 ......................................... Aa2/AA 1,555,680
Colorado Health Facilities Authority Revenue,
Catholic Health-Series B-1 Refunding, Weekly
Reset VRDO*
1,500,000 3.750%, 03/01/23 ......................................... AA2/AA 1,500,000
Colorado Health Facility Authority Revenue,
Evangelical Lutheran Project
1,000,000 5.250%, 06/01/21 ......................................... A3/A- 1,035,190
Denver, Colorado Health & Hospital Authority
Healthcare Revenue Series A Refunding
1,230,000 5.000%, 12/01/20 ......................................... NR/BBB 1,241,894
Park Hospital District Larimer County, Colorado
Limited Tax Revenue
1,010,000 4.500%, 01/01/21 Assured Guaranty Insured ................ Aa1/AAA 1,014,242
University of Colorado Hospital Authority
Hospital Revenue
1,475,000 5.500%, 11/15/07 AMBAC Insured ........................... Aaa/NR 1,483,776
-------------
Total Hospital ........................................... 12,450,627
-------------
HOUSING (1.2%)
Colorado Housing & Finance Authority
445,000 6.050%, 10/01/16 Series 1999A3 ........................... Aa2/NR 452,690
15,000 6.125%, 11/01/23 Series 1998D3 ........................... Aa2/NR 15,322
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- --------------- ---------------------------------------------------------- -------- -------------
HOUSING (CONTINUED)
Colorado Housing & Finance Authority Multi-
Family/Project Bonds
$ 1,575,000 4.250%, 10/01/17 Class II 2004 Series A-3 ................ Aa2/AA $ 1,571,031
Colorado Housing & Finance Authority, Single
Family Program Refunding
210,000 5.000%, 08/01/13 Series 2001 Series B .................... A1/A+ 211,088
Colorado Housing Finance Authority, Single
Family Mortgage
20,000 5.625%, 06/01/10 Series 1995D ............................ Aa2/NR 20,219
20,000 5.750%, 11/01/10 Series 1996A ............................ Aa2/NR 20,044
Colorado Housing Finance Authority, Single
Family Mortgage
40,000 5.700%, 10/01/22 2000C3 .................................. Aa2/AA 40,062
Colorado Housing Finance Authority, Single
Family Mortgage Subordinated
100,000 5.400%, 10/01/12 2000D ................................... A1/A+ 100,226
Denver, Colorado Single Family Mortgage Revenue
100,000 5.000%, 11/01/15 GNMA Insured ............................ NR/AAA 101,094
-------------
Total Housing 2,531,776
-------------
LEASE (12.4%)
Aurora, Colorado COP
2,105,000 5.250%, 12/01/13 AMBAC Insured Pre-Refunded .............. Aaa/AAA 2,195,410
Broomfield, Colorado COP
2,500,000 5.100%, 12/01/12 AMBAC Insured ........................... Aaa/NR 2,586,650
Colorado Educational & Cultural Facilities Authority
Revenue, Ave Maria School Project Refunding
1,000,000 4.850%, 12/01/25 Radian Insured .......................... NR/AA 996,340
Colorado Educational & Cultural Facilities Authority
Revenue (Frontier Academy) Refunding
1,300,000 4.375%, 06/01/19 CIFG Assurance North America,
Inc. Insured .......................................... Aaa/AAA 1,286,285
Denver, Colorado City and County COP (Roslyn Fire)
1,835,000 5.000%, 12/01/15 ......................................... Aa2/AA 1,903,134
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- --------------- ---------------------------------------------------------- -------- -------------
LEASE (CONTINUED)
El Paso County, Colorado COP
$ 1,100,000 5.250%, 12/01/09 MBIA Insured ............................ Aaa/AAA $ 1,134,254
El Paso County, Colorado COP (Judicial Building)
1,760,000 5.000%, 12/01/16 AMBAC Insured ........................... Aaa/AAA 1,845,606
El Paso County, Colorado COP (Judicial Complex
Project) Series A
1,000,000 4.500%, 12/01/21 AMBAC Insured ........................... NR/AAA 1,000,790
El Paso County, Colorado COP (Pikes Peak Regional
Development Authority)
1,925,000 5.000%, 12/01/18 AMBAC Insured ........................... Aaa/AAA 2,010,624
Fort Collins, Colorado Lease COP Series A
3,020,000 4.750%, 06/01/18 AMBAC Insured ........................... Aaa/NR 3,109,422
Fremont County, Colorado COP Refunding &
Improvement Series A
2,075,000 5.000%, 12/15/18 MBIA Insured ............................ Aaa/AAA 2,167,815
Golden, Colorado COP
1,575,000 4.375%, 12/01/20 FGIC Insured ............................ Aaa/AAA 1,575,551
Lakewood, Colorado COP
1,440,000 5.200%, 12/01/13 AMBAC Insured Pre-Refunded .............. Aaa/AAA 1,499,573
Northern Colorado Water Conservancy District COP
1,000,000 5.000%, 10/01/15 MBIA Insured ............................ Aaa/AAA 1,043,900
Westminster, Colorado COP
1,055,000 5.350%, 09/01/11 MBIA Insured ............................ Aaa/AAA 1,097,759
-------------
Total Lease 25,453,113
-------------
SALES TAX (13.9%)
Boulder, Colorado
1,045,000 5.250%, 08/15/10 AMBAC Insured Aaa/AAA 1,074,344
Boulder, Colorado Open Space Acquisition
1,250,000 5.500%, 08/15/12 Aa1/AA+ 1,308,375
Boulder, Colorado Open Space Capital Improvement
3,065,000 5.000%, 07/15/16 MBIA Insured Aaa/AAA 3,203,323
1,630,000 5.000%, 07/15/17 MBIA Insured Aaa/AAA 1,699,780
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- --------------- ---------------------------------------------------------- -------- -------------
SALES TAX (CONTINUED)
Boulder, Colorado Sales & Use Tax Open Space
Series A
$ 1,000,000 5.450%, 12/15/12 FGIC Insured Pre-Refunded ............... Aaa/AAA $ 1,046,790
Colorado Springs, Colorado Sales & Use Tax
Revenue Service Sales
1,320,000 5.000%, 12/01/12 ......................................... A1/AA 1,349,330
Denver, Colorado City & County Excise
Tax Revenue
2,000,000 5.375%, 09/01/10 FSA Insured ............................. Aaa/AAA 2,063,240
1,000,000 5.000%, 09/01/11 FSA Insured Pre-Refunded ................ Aaa/AAA 1,036,050
2,260,000 5.000%, 09/01/12 FSA Insured Pre-Refunded ................ Aaa/AAA 2,341,473
Douglas County, Colorado Sales & Use Tax Open
Space Revenue
1,780,000 5.500%, 10/15/12 FSA Insured ............................. Aaa/AAA 1,866,170
Golden, Colorado Sales & Use Tax
1,265,000 5.000%, 12/01/12 AMBAC Insured ........................... Aaa/AAA 1,315,069
Jefferson County, Colorado Open Space Sales Tax
1,245,000 5.000%, 11/01/11 FGIC Insured ............................ Aaa/AAA 1,275,054
1,600,000 5.000%, 11/01/13 AMBAC Insured ........................... Aaa/AAA 1,660,272
1,080,000 5.000%, 11/01/14 AMBAC Insured ........................... Aaa/AAA 1,119,377
Lakewood, Colorado Sales & Use Tax Revenue
1,040,000 5.250%, 12/01/09 ......................................... NR/AAA 1,070,940
Larimer County, Colorado Sales Tax Revenue Bond
1,000,000 5.500%, 12/15/12 AMBAC Insured ........................... Aaa/AAA 1,050,750
Longmont, Colorado Sales & Use Tax
1,875,000 5.500%, 11/15/14 Pre-Refunded ............................ NR/AA+ 1,969,163
Thornton, Colorado Sales Tax
1,000,000 5.000%, 09/01/14 FSA Insured ............................. Aaa/AAA 1,035,170
Westminster, Colorado Special Purpose Sales & Use
Tax Revenue Post Project Series B
1,055,000 5.500%, 12/01/07 FGIC Insured ............................ Aaa/AAA 1,062,290
120,000 5.500%, 12/01/07 Pre-Refunded ETM ........................ Aaa/AAA 120,820
-------------
Total Sales Tax .......................................... 28,667,780
-------------
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- --------------- ---------------------------------------------------------- -------- -------------
TRANSPORTATION (5.2%)
Colorado Department of Transportation-Tax
Revenue Anticipation Note
$ 1,000,000 6.000%, 06/15/13 AMBAC Insured Pre-Refunded .............. #Aaa/AAA $ 1,062,600
Northwest Parkway, Colorado Public Highway
Authority Series A
2,515,000 5.150%, 06/15/14 AMBAC Insured ........................... Aaa/AAA 2,650,282
Regional Transportation District, Colorado COP
1,190,000 5.000%, 06/01/15 AMBAC Insured ........................... Aaa/AAA 1,241,944
1,510,000 4.850%, 06/01/18 AMBAC Insured ........................... Aaa/AAA 1,572,756
Regional Transportation District, Colorado Sales
Tax Revenue
2,000,000 5.000%, 11/01/13 FGIC Insured ............................ Aaa/AAA 2,075,340
1,000,000 5.000%, 11/01/16 FGIC Insured Pre-Refunded ............... Aaa/AAA 1,043,030
Walker Field, Colorado Public Airport Authority
Airport Revenue
1,000,000 5.000%, 12/01/22 ......................................... BAA3/NR 1,004,140
-------------
Total Transportation 10,650,092
-------------
WATER & SEWER (13.0%)
Boulder, Colorado Water & Sewer Revenue
1,000,000 5.400%, 12/01/14 ......................................... Aa2/AA+ 1,047,690
Boulder, Colorado Water & Sewer Revenue Series C
2,420,000 4.500%, 12/01/18 ......................................... Aa2/AA+ 2,453,759
Broomfield, Colorado Sewer and Waste Water Revenue
1,985,000 5.000%, 12/01/15 AMBAC Insured ........................... Aaa/NR 2,079,585
1,000,000 5.000%, 12/01/16 AMBAC Insured ........................... Aaa/NR 1,045,670
Broomfield, Colorado Water Activity Enterprise
1,500,000 5.300%, 12/01/12 MBIA Insured ............................ Aaa/NR 1,578,975
1,730,000 5.250%, 12/01/13 MBIA Insured ............................ Aaa/NR 1,813,819
Colorado Clean Water Revenue
830,000 5.375%, 09/01/10 Pre-Refunded ............................ Aaa/AAA 845,255
170,000 5.375%, 09/01/10 Un-Refunded portion ..................... Aaa/AAA 172,797
Colorado Metro Wastewater Reclamation District
1,270,000 5.250%, 04/01/09 ......................................... Aa2/AA 1,283,119
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- --------------- ---------------------------------------------------------- -------- -------------
WATER & SEWER (CONTINUED)
Colorado Water Resource & Power Development
Authority
$ 2,675,000 5.000%, 09/01/16 MBIA Insured ............................ Aaa/AAA $ 2,822,847
1,855,000 5.000%, 09/01/17 MBIA Insured ............................ Aaa/AAA 1,951,646
Colorado Water Resource & Power Development
Authority Clean Water Revenue Series A
1,375,000 5.000%, 09/01/12 Pre-Refunded ............................ Aaa/AAA 1,430,825
260,000 5.000%, 09/01/12 Un-Refunded portion ..................... Aaa/AAA 270,254
Colorado Water Resource & Power Development
Authority Clean Water Revenue Series B
820,000 5.500%, 09/01/09 Pre-Refunded ............................ Aaa/AAA 836,220
180,000 5.500%, 09/01/09 Un-Refunded portion ..................... Aaa/AAA 183,316
Colorado Water Resource & Power Development
Authority Small Water Resource Series A
600,000 5.550%, 11/01/13 FGIC Insured Un-Refunded portion ........ Aaa/AAA 630,150
400,000 5.550%, 11/01/13 FGIC Insured Pre-Refunded ............... Aaa/AAA 420,484
Denver, Colorado City and County Wastewater
Revenue
1,560,000 5.000%, 11/01/15 FGIC Insured ............................ Aaa/AAA 1,629,467
Pueblo, Colorado Board Water Works
1,000,000 5.500%, 11/01/10 FSA Insured ............................. Aaa/AAA 1,049,660
Thornton, Colorado Water Enterprise Revenue
1,445,000 4.500%, 12/01/18 MBIA Insured ............................ Aaa/AAA 1,462,196
Ute, Colorado Water Conservancy District
1,570,000 5.500%, 06/15/12 MBIA Insured ............................ Aaa/AAA 1,638,750
-------------
Total Water & Sewer ...................................... 26,646,484
-------------
MISCELLANEOUS REVENUE (2.0%)
Denver, Colorado City & County Helen Bonfils Project
1,755,000 5.875%, 12/01/09 ......................................... NR/A+ 1,769,251
South Suburban, Colorado Park & Recreational District
350,000 6.000%, 11/01/07 ......................................... Baa2/NR 351,152
Thornton, Colorado Development Authority Tax
Increment North Washington Street Urban
Renewal Project
1,040,000 4.500%, 12/01/18 MBIA Insured ............................ Aaa/AAA 1,052,376
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- --------------- ---------------------------------------------------------- -------- -------------
MISCELLANEOUS REVENUE (CONTINUED)
Westminster, Colorado Golf Course Activity
$ 1,000,000 5.400%, 12/01/13 Radian Group, Inc. Insured NR/AA $ 1,024,910
-------------
Total Miscellaneous Revenue 4,197,689
-------------
Total Revenue Bonds 135,692,728
-------------
Total Investments (cost $200,825,599 - note 4) 99.5% 204,552,319
Other assets less liabilities 0.5 1,099,954
----- -------------
100.0% $ 205,652,273
===== =============
* Variable rate demand obligations (VRDOs) are payable upon
demand within seven days for securities with weekly liquidity.
PERCENT OF
PORTFOLIO DISTRIBUTION BY QUALITY RATING (UNAUDITED) PORTFOLIO
---------------------------------------------------- ---------
Aaa of Moody's or AAA of S&P 77.2%
Aa of Moody's or AA of S&P 18.9
A of Moody's or S&P 2.6
Baa of Moody's or BBB of S&P 1.3
100.0%
PORTFOLIO ABBREVIATIONS:
--------------------------------------------------------------------
ACA - American Capital Assurance Financial Guaranty Corp.
AMBAC - American Municipal Bond Assurance Corp.
CIFG - CDC IXIS Financial Guaranty
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
XLCA - XL Capital Assurance
VRDO - Variable Rate Demand Obligation
See accompanying notes to financial statements.
TAX-FREE FUND OF COLORADO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2007 (unaudited)
ASSETS
Investments at value (cost $200,825,599) ............................................................... $ 204,552,319
Cash ................................................................................................... 369,014
Interest receivable .................................................................................... 1,483,352
Receivable for Fund shares sold ........................................................................ 48,240
Other assets ........................................................................................... 10,706
-------------
Total assets ........................................................................................... 206,463,631
-------------
LIABILITIES
Payable for Fund shares redeemed ....................................................................... 545,163
Dividends payable ...................................................................................... 129,462
Management fee payable ................................................................................. 84,667
Distribution and service fees payable .................................................................. 16,883
Accrued expenses ....................................................................................... 35,183
-------------
Total liabilities ...................................................................................... 811,358
-------------
NET ASSETS ................................................................................................ $ 205,652,273
=============
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $0.01 per share .................... $ 202,730
Additional paid-in capital ............................................................................. 202,589,487
Net unrealized appreciation on investments (note 4) .................................................... 3,726,720
Accumulated net realized loss on investments ........................................................... (625,182)
Distributions in excess of net investment income ....................................................... (241,482)
-------------
$ 205,652,273
=============
CLASS A
Net Assets ............................................................................................. $ 189,010,940
=============
Capital shares outstanding ............................................................................. 18,631,848
=============
Net asset value and redemption price per share ......................................................... $ 10.14
=============
Offering price per share (100/96 of $10.14 adjusted to nearest cent) ................................... $ 10.56
=============
CLASS C
Net Assets ............................................................................................. $ 10,981,309
=============
Capital shares outstanding ............................................................................. 1,084,606
=============
Net asset value and offering price per share ........................................................... $ 10.12
=============
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) .......................................................... $ 10.12*
=============
CLASS Y
Net Assets ............................................................................................. $ 5,660,024
=============
Capital shares outstanding ............................................................................. 556,569
=============
Net asset value, offering and redemption price per share ............................................... $ 10.17
=============
See accompanying notes to financial statements.
TAX-FREE FUND OF COLORADO
STATEMENT OF OPERATIONS
SIX MONTHS Ended JUNE 30, 2007 (unaudited)
INVESTMENT INCOME:
Interest income ............................................................. $ 4,785,022
Expenses:
Management fee (note 3) ..................................................... $ 521,460
Distribution and service fees (note 3) ...................................... 103,805
Transfer and shareholder servicing agent fees ............................... 81,210
Trustees' fees and expenses (note 8) ........................................ 56,600
Shareholders' reports and proxy statements .................................. 27,084
Legal fees (note 3) ......................................................... 25,818
Custodian fees .............................................................. 17,113
Auditing and tax fees ....................................................... 9,422
Insurance ................................................................... 8,060
Registration fees and dues .................................................. 5,484
Chief compliance officer (note 3) ........................................... 2,253
Miscellaneous ............................................................... 17,767
-----------
Total expenses .............................................................. 876,076
Expenses paid indirectly (note 6) ........................................... (9,329)
-----------
Net expenses ................................................................ 866,747
--------------
Net investment income ....................................................... 3,918,275
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from securities transactions ....................... (82,870)
Change in unrealized appreciation on investments ............................ (3,284,846)
Net realized and unrealized gain (loss) on investments ...................... (3,367,716)
--------------
Net change in net assets resulting from operations .......................... $ 550,559
==============
See accompanying notes to financial statements.
TAX-FREE FUND OF COLORADO
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 2007 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2006
----------------- -----------------
OPERATIONS:
Net investment income ......................................................... $ 3,918,275 $ 8,609,285
Net realized gain (loss) from securities transactions ......................... (82,870) (296,973)
Change in unrealized appreciation on investments .............................. (3,284,846) (1,494,446)
------------- -------------
Change in net assets from operations ....................................... 550,559 6,817,866
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (note 10):
Class A Shares:
Net investment income ......................................................... (3,890,834) (8,364,068)
Class C Shares:
Net investment income ......................................................... (173,919) (376,548)
Class Y Shares:
Net investment income ......................................................... (116,567) (481,457)
------------- -------------
Change in net assets from distributions .................................... (4,181,320) (9,222,073)
------------- -------------
CAPITAL SHARE TRANSACTIONS (note 7):
Proceeds from shares sold ..................................................... 9,912,710 16,194,654
Reinvested dividends and distributions ........................................ 2,364,939 5,247,141
Cost of shares redeemed ....................................................... (18,459,565) (49,357,648)
------------- -------------
Change in net assets from capital share transactions .......................... (6,181,916) (27,915,853)
------------- -------------
Change in net assets ....................................................... (9,812,677) (30,320,060)
NET ASSETS:
Beginning of period ........................................................... 215,464,950 245,785,010
------------- -------------
End of period* ................................................................ $ 205,652,273 $ 215,464,950
============= =============
* Includes distributions in excess of net investment income
and undistributed net investment income, respectively of: .................... $ (241,482) $ 21,563
============= =============
See accompanying notes to financial statements.
TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
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, 2006 the Fund
increased undistributed net investment income by $610,262 and decreased
additional paid-in capital by $610,262 due primarily to differing book/tax
treatment of distributions and bond amortization.
g) ACCOUNTING PRONOUNCEMENTS: In July 2006, the Financial Accounting
Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting
for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for
how uncertain tax positions should be recognized, measured, presented and
disclosed in the financial statements. FIN 48 required the evaluation of
tax positions taken or expected to be taken in the course of preparing the
Fund's tax returns to
determine whether the tax positions are "more-likely-than-not" of being
sustained by the applicable tax authority. Tax positions not deemed to
meet the more-likely-than-not threshold would have been recorded as a tax
benefit or expense in the current year. FIN 48 was effective for the Fund
on June 29, 2007 and there were no uncertain tax positions to be reflected
in the Fund's financial statements at June 30, 2007.
In September 2006, FASB issued FASB Statement No. 157, "Fair Value
Measurement" ("SFAS 157"), which defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair
value measurements. SFAS 157 is effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The Fund
believes adoption of SFAS 157 will have no material impact on the Fund's
financial statements.
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 average 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 six
months ended June 30, 2007, distribution fees on Class A Shares amounted to
$47,934 of which the Distributor retained $1,822.
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
six months ended June 30,2007, amounted to $41,903. 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 six months ended June 30, 2007 amounted to $13,968.
The total of these payments with respect to Class C Shares amounted to $55,871
of which the Distributor retained $13,001.
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 six months ended June
30, 2007, total commissions on sales of Class A Shares amounted to $98,072 of
which the Distributor received $19,500.
c) OTHER RELATED PARTY TRANSACTIONS:
For the six months ended June 30, 2007, the Fund incurred $25,140 of legal
fees allocable to Hollyer Brady Barrett & Hines LLP ("Hollyer Brady") and its
successor, Butzel Long PC, counsel to the Fund, for legal services in
conjunction with the Fund's ongoing operations. The Secretary of the Fund was a
partner at Hollyer Brady and is a shareholder of its successor.
4. PURCHASES AND SALES OF SECURITIES
During the six months ended June 30, 2007, purchases of securities and
proceeds from the sales of securities aggregated $9,809,336 and $11,960,085,
respectively.
At June 30, 2007, the aggregate tax cost for all securities was
$200,802,021. At June 30, 2007 the aggregate gross unrealized appreciation for
all securities in which there is an excess of value over tax cost amounted to
$4,180,237 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $429,939 for a net
unrealized appreciation of $3,750,298.
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.
7. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as follows:
SIX MONTHS ENDED
JUNE 30, 2007 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2006
---------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
CLASS A SHARES:
Proceeds from shares sold ................... 813,258 $ 8,345,592 1,276,887 $ 13,173,965
Reinvested distributions .................... 219,930 2,253,390 473,577 4,889,312
Cost of shares redeemed ..................... (1,574,630) (16,178,388) (3,504,597) (36,133,383)
------------ ------------ ------------ ------------
Net change ............................... (541,442) (5,579,406) (1,754,133) (18,070,106)
------------ ------------ ------------ ------------
CLASS C SHARES:
Proceeds from shares sold ................... 89,503 915,970 119,840 1,233,789
Reinvested distributions .................... 8,947 91,509 18,176 187,305
Cost of shares redeemed ..................... (155,258) (1,589,369) (246,633) (2,541,592)
------------ ------------ ------------ ------------
Net change ............................... (56,808) (581,890) (108,617) (1,120,498)
------------ ------------ ------------ ------------
CLASS Y SHARES:
Proceeds from shares sold ................... 63,411 651,148 172,601 1,786,900
Reinvested distributions .................... 1,948 20,040 16,528 170,524
Cost of shares redeemed ..................... (67,238) (691,808) (1,035,385) (10,682,673)
------------ ------------ ------------ ------------
Net change ............................... (1,879) (20,620) (846,256) (8,725,249)
------------ ------------ ------------ ------------
Total transactions in Fund shares .............. (600,129) $ (6,181,916) (2,709,006) $(27,915,853)
============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES
At June 30, 2007 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 six months ended June 30, 2007 was $38,184, 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 six months ended June 30, 2007, such meeting-related
expenses amounted to $18,416.
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, 2006, the Fund had a capital loss carryover of $542,312 of which
$245,339 expires in 2012 and $296,973 expires in 2014. 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,
2006 2005
---------- ----------
Net tax-exempt income $ 8,611,722 $ 9,394,426
Ordinary income 610,351 546,600
----------- -----------
$ 9,222,073 $ 9,941,026
=========== ===========
As of December 31, 2006, the components of distributable earnings on a tax
basis were as follows:
Unrealized appreciation $7,033,129
Accumulated net realized loss (542,312)
----------
$6,490,817
==========
The difference between book basis and tax basis unrealized appreciation is
attributable primarily to premium/discount adjustments.
11. RECENT DEVELOPMENTS
In late May, 2007, the U. S. Supreme Court agreed to hear an appeal in
DEPARTMENT OF REVENUE OF KENTUCKY V. DAVIS, a case concerning the
constitutionality of differential tax treatment for interest from in-state vs.
out-of-state municipal securities, a practice which is common among the majority
of the states. If the U.S. Supreme Court affirms the prior decision, Kentucky
(and all other states that differentially tax interest on municipal bonds) may
then be required to accord equal income tax treatment to all municipal bond
interest. While it is impossible to predict the consequences of such an outcome,
they may include effects on the net asset values of the shares, and/or on the
tax treatment of the dividends, of some or all single-state municipal bond
funds, including the Fund. The case is expected to be heard and decided during
the U.S. Supreme Court's October 2007 - April 2008 term, with a decision likely
to be handed down in 2008.
TAX-FREE FUND OF COLORADO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class A
----------------------------------------------------------------------------------
Six Months
Ended Year Ended December 31,
6/30/07 ------------------------------------------------------------------
(unaudited) 2006 2005 2004 2003 2002
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period .......... $ 10.32 $ 10.42 $ 10.68 $ 10.84 $ 10.82 $ 10.32
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income+ ..................... 0.19 0.39 0.39 0.40 0.41 0.43
Net gain (loss) on securities (both realized
and unrealized) ......................... (0.16) (0.07) (0.23) (0.13) 0.05 0.52
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ........... 0.03 0.32 0.16 0.27 0.46 0.95
---------- ---------- ---------- ---------- ---------- ----------
Less distributions (note 10):
Dividends from net investment income ....... (0.21) (0.42) (0.42) (0.43) (0.44) (0.45)
Distributions from capital gains ........... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ........................ (0.21) (0.42) (0.42) (0.43) (0.44) (0.45)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period ................ $ 10.14 $ 10.32 $ 10.42 $ 10.68 $ 10.84 $ 10.82
========== ========== ========== ========== ========== ==========
Total return (not reflecting sales charge) .... 0.25%* 3.11% 1.53% 2.57% 4.32% 9.36%
Ratios/supplemental data
Net assets, end of period (in thousands) ... $ 189,011 $ 197,926 $ 218,111 $ 226,070 $ 233,109 $ 215,195
Ratio of expenses to average net assets .... 0.79%** 0.79% 0.79% 0.75% 0.74% 0.75%
Ratio of net investment income to average
net assets .............................. 3.80%** 3.76% 3.73% 3.76% 3.81% 4.05%
Portfolio turnover rate .................... 4.73%* 7.48% 10.57% 12.55% 6.16% 6.95%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets .... 0.78%** 0.78% 0.79% 0.74% 0.74% 0.74%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
* Not annualized.
** Annualized.
See accompanying notes to financial statements.
TAX-FREE FUND OF COLORADO
FINANCIAL HIGHLIGHTS (continued)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class C
-----------------------------------------------------------------------
Six Months
Ended Year Ended December 31,
6/30/07 --------------------------------------------------------
(unaudited) 2006 2005 2004 2003 2002
----------- -------- -------- -------- -------- --------
Net asset value, beginning of period .................. $ 10.30 $ 10.40 $ 10.66 $ 10.82 $ 10.80 $ 10.30
-------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income+ ............................. 0.15 0.29 0.29 0.30 0.31 0.31
Net gain (loss) on securities (both
realized and unrealized) ......................... (0.17) (0.07) (0.23) (0.13) 0.04 0.53
-------- -------- -------- -------- -------- --------
Total from investment operations ................... (0.02) 0.22 0.06 0.17 0.35 0.84
-------- -------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income ............... (0.16) (0.32) (0.32) (0.33) (0.33) 0.34)
Distributions from capital gains ................... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions ................................ (0.16) (0.32) (0.32) (0.33) (0.33) (0.34)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ........................ $ 10.12 $ 10.30 $ 10.40 $ 10.66 $ 10.82 $ 10.80
======== ======== ======== ======== ======== ========
Total return (not reflecting sales charge) ............ (0.22)%* 2.14% 0.57% 1.60% 3.33% 8.32%
Ratios/supplemental data
Net assets, end of period (in thousands) ........... $ 10,981 $ 11,760 $13,003 $ 15,210 $ 15,820 $ 9,109
Ratio of expenses to average net assets ............ 1.74%** 1.74% 1.74% 1.70% 1.69% 1.68%
Ratio of net investment income to
average net assets ............................... 2.85%** 2.81% 2.78% 2.81% 2.83% 2.99%
Portfolio turnover rate ............................ 4.73%* 7.48% 10.57% 12.55% 6.16% 6.95%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets ............... 1.73%** 1.73% 1.74% 1.69% 1.68% 1.67%
Class Y
-----------------------------------------------------------------------
Six Months
Ended Year Ended December 31,
6/30/07 --------------------------------------------------------
(unaudited) 2006 2005 2004 2003 2002
----------- -------- -------- -------- -------- --------
Net asset value, beginning of period .................. $ 10.35 $ 10.44 $ 10.71 $ 10.86 $ 10.84 $ 10.33
-------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income+ ............................. 0.20 0.40 0.40 0.41 0.42 0.44
Net gain (loss) on securities (both
realized and unrealized) ......................... (0.17) (0.07) (0.24) (0.12) 0.04 0.52
-------- -------- -------- -------- -------- --------
Total from investment operations ................... 0.03 0.33 0.16 0.29 0.46 0.96
-------- -------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income ............... (0.21) (0.42) (0.43) (0.44) (0.44)
(0.45)
Distributions from capital gains ................... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions ................................ (0.21) (0.42) (0.43) (0.44) (0.44) (0.45)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ........................ $ 10.17 $ 10.35 $ 10.44 $ 10.71 $ 10.86 $ 10.84
======== ======== ======== ======== ======== ========
Total return (not reflecting sales charge) ............ 0.28%* 3.26% 1.49% 2.73% 4.37% 9.50%
Ratios/supplemental data
Net assets, end of period (in thousands) ........... $ 5,660 $ 5,779 $ 14,671 $ 15,608 $ 13,760 $ 7,482
Ratio of expenses to average net assets ............ 0.74%** 0.75% 0.70% 0.69% 0.69%
Ratio of net investment income to
average net assets ............................... 3.85%** 3.82% 3.77% 3.81% 3.85% 4.07%
Portfolio turnover rate ............................ 4.73%* 7.48% 10.57% 12.55% 6.16% 6.95%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets ............ 0.73%** 0.74% 0.74% 0.69% 0.69% 0.69%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
* Not annualized.
** Annualized.
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 table below is 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 table below is based on an investment of $1,000 invested on January 1,
2007 and held for the six months ended June 30, 2007.
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".
SIX MONTHS ENDED JUNE 30, 2007
ACTUAL
TOTAL RETURN BEGINNING ENDING EXPENSES
WITHOUT ACCOUNT ACCOUNT PAID DURING
SALES CHARGES(1) VALUE VALUE THE PERIOD(2)
- -------------------------------------------------------------------------------
Class A 0.25% $ 1,000.00 $ 1,002.50 $ 3.87
- -------------------------------------------------------------------------------
Class C (0.22)% $ 1,000.00 $ 997.80 $ 8.57
- -------------------------------------------------------------------------------
Class Y 0.28% $ 1,000.00 $ 1,002.80 $ 3.63
- -------------------------------------------------------------------------------
(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 0.78%, 1.73% AND
0.73% FOR THE FUND'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (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.
SIX MONTHS ENDED JUNE 30, 2007
Hypothetical
Annualized Beginning Ending Expenses
Total Account Account Paid During
Return Value Value the Period(1)
- --------------------------------------------------------------------------------
Class A 5.00% $1,000.00 $1,020.93 $3.91
- --------------------------------------------------------------------------------
Class C 5.00% $1,000.00 $1,016.22 $8.65
- --------------------------------------------------------------------------------
Class Y 5.00% $1,000.00 $1,021.17 $3.66
- --------------------------------------------------------------------------------
(1) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.78%, 1.73% AND
0.73% FOR THE FUND'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY
THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO
REFLECT THE ONE-HALF YEAR PERIOD).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INFORMATION AVAILABLE (UNAUDITED)
Much of the information that the funds in the Aquila Group of Fundssm
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, 2007 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.
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING RESULTS (UNAUDITED)
The Annual Meeting of Shareholders of Tax-Free Fund of Colorado (the "Fund") was
held on June 21, 2007. The holders of shares representing 77% of the total net
asset value of the shares entitled to vote were present in person or by proxy.
At the meeting, the following matters were voted upon and approved by the
shareholders (the resulting votes are presented below).
1. To elect Trustees.
DOLLAR AMOUNT OF VOTES
----------------------
TRUSTEE FOR WITHHELD
------- --- --------
Tucker Hart Adams $160,776,428 $1,663,336
Thomas A. Christopher $160,805,938 $1,633,827
Gary C. Cornia $160,805,938 $1,633,827
Diana P. Herrmann $159,743,750 $2,696,014
Lyle W. Hillyard $160,721,447 $1,718,318
John C. Lucking $160,726,092 $1,713,672
Anne J. Mills $160,776,428 $1,663,336
2. To ratify the selection of Tait, Weller & Baker LLP as the Fund's independent
registered public accounting firm.
DOLLAR AMOUNT OF VOTES
----------------------
FOR AGAINST ABSTAIN
--- ------- -------
$157,155,391 $756,493 $4,527,869
ADDITIONAL INFORMATION (UNAUDITED)
RENEWAL OF THE ADVISORY AND ADMINISTRATION AGREEMENT AND THE SUB-ADVISORY
AGREEMENT
Renewal until April 30, 2008 of the Advisory and Administration Agreement
(the "Advisory Agreement") between the Fund and the Manager and the Sub-Advisory
Agreement (the "Sub-Advisory Agreement") between the Manager and Kirkpatrick
Pettis Capital Management, Inc. (the "Sub-Adviser") was approved by the Board of
Trustees and the independent Trustees in March, 2007. At a meeting called and
held for that purpose at which a majority of the independent Trustees were
present in person, the following materials were considered:
o Copies of the agreements to be renewed;
o A term sheet describing the material terms of the agreements;
o The Annual Report of the Fund for the year ended December 31, 2006;
o A report, prepared by the Manager and provided to the Trustees in
advance of the meeting for the Trustees review, containing data
about the performance of the Fund, data about its fees, expenses and
purchases and redemptions of capital stock together with comparisons
of such data with similar data about other comparable funds, as well
as data as to the profitability of the Manager and the Sub-Adviser;
and
o Quarterly materials reviewed at prior meetings on the Fund's
performance, operations, portfolio and compliance.
The Trustees considered the Advisory and Administration Agreement and the
Sub-Advisory Agreement separately as well as in conjunction with each other to
determine their combined effects on the Fund. The Trustees reviewed materials
relevant to, and considered, the factors set forth below, and as to each
agreement reached the conclusions described.
THE NATURE, EXTENT, AND QUALITY OF THE SERVICES PROVIDED BY THE MANAGER AND THE
SUB-ADVISER.
The Manager has provided all administrative services to the Fund. The
Board considered the nature and extent of the Manager's supervision of
third-party service providers, including the Fund's shareholder servicing agent
and custodian. The Board considered that the Manager had established and
maintained a strong culture of ethical conduct and regulatory compliance, and
had not been subject to the kinds of regulatory and legal difficulties affecting
a number of other investment advisers.
The Manager has arranged for the Sub-Adviser to provide local management
of the Fund's portfolio. The Trustees noted that the Sub-Adviser employed Mr.
Christopher Johns as portfolio manager for the Fund, and had provided facilities
for credit analysis of the Fund's portfolio securities. Mr. Johns, based in
Denver, has provided local information regarding specific holdings in the Fund's
portfolio. The portfolio manager has also been available and has met with the
brokerage and financial planner community and with investors and prospective
investors to provide them with information generally about the Fund's portfolio,
with which to assess the Fund as an investment vehicle for residents of Colorado
in light of prevailing interest rates and local economic conditions.
The Board considered that the Manager and the Sub-Adviser had provided all
services the Board deemed necessary or appropriate, including the specific
services that the Board has determined are required for the Fund, given that its
purpose is to provide shareholders with as high a level of current income exempt
from Colorado state and regular Federal income taxes as is consistent with
preservation of capital. It noted that compared to other Colorado state-specific
municipal bond funds, the portfolio of the Fund was of significantly higher
quality and contained no securities subject to the alternative minimum tax.
The Board concluded that a commendable quality of services was provided
and that the Fund would be well served if they continued. Evaluation of this
factor weighed in favor of renewal of the Advisory Agreement and the
Sub-Advisory Agreement.
THE INVESTMENT PERFORMANCE OF THE FUND, THE MANAGER AND THE SUB-ADVISER.
The Board reviewed each aspect of the Fund's performance and compared its
performance with that of its local competitors and with national averages and
with benchmark indices. It was noted that the materials provided by the Manager
indicated that compared to the five largest competitive Colorado funds, the Fund
has had investment performance that is below that of its peers for one-, five-
and ten-year periods, with lower investment performance explained by the Fund's
generally higher-quality portfolio and generally shorter average maturities.
The Board concluded that the performance of the Fund was acceptable in
light of market conditions, the length of its average maturities, its investment
objectives and its long-standing emphasis on minimizing risk. Evaluation of this
factor indicated to the Trustees that renewal of the Advisory Agreement and
Sub-Advisory Agreement would be appropriate.
THE COSTS OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED BY THE
MANAGER AND THE SUB-ADVISER AND THEIR AFFILIATES FROM THEIR RELATIONSHIPS WITH
THE FUND.
The information provided in connection with renewal contained expense data
for the Fund and its local competitors as well as data for all single-state
tax-free municipal bond funds nationwide, including data for all such front-end
load funds of a comparable asset size. The materials also showed the
profitability to the Manager and the Sub-Adviser of their services to the Fund.
The Board compared the expense and fee data with respect to the Fund to
similar data about other funds that it found to be relevant. The Board concluded
that the expenses of the Fund and the fees paid were similar to and were
reasonable as compared to those being paid by single-state tax-free municipal
bond funds nationwide, being less than the national average, and by the Fund's
local competitors.
The Board considered that the foregoing indicated the appropriateness of
the costs of the services to the Fund, which was being well managed as indicated
by the factors considered previously.
The Board further concluded that the profitability to the Manager and the
Sub-Adviser did not argue against approval of the fees to be paid under the
Advisory Agreement or the Sub-Advisory Agreement.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED AS THE FUND GROWS.
Data provided to the Trustees showed that the Fund's asset size had
declined in recent years. They concluded that the uncertain interest rate
environment might make it difficult to achieve substantial growth in assets in
the near future. The Trustees also noted that the materials indicate that the
Fund's fees are already generally lower than those of its peers, including those
with breakpoints. Evaluation of this factor indicated to the Board that the
Advisory Agreement and Sub-Advisory Agreement should be renewed without addition
of breakpoints at this time.
BENEFITS DERIVED OR TO BE DERIVED BY THE MANAGER AND THE SUB-ADVISER AND THEIR
AFFILIATES FROM THEIR RELATIONSHIPS WITH THE FUND.
The Board observed that, as is generally true of most fund complexes, the
Manager and Sub-Adviser and their affiliates, by providing services to a number
of funds or other investment clients including the Fund, were able to spread
costs as they would otherwise be unable to do. The Board noted that while that
produces efficiencies and increased profitability for the Manager and
Sub-Adviser and their affiliates, it also makes their services available to the
Fund at favorable levels of quality and cost which are more advantageous to the
Fund than would otherwise have been possible.
(THIS PAGE INTENTIONALLY LEFT BLANK)
(THIS PAGE INTENTIONALLY LEFT BLANK)
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
Gary C. Cornia, Vice Chair
Tucker Hart Adams
Thomas A. Christopher
Diana P. Herrmann
Lyle W. Hillyard
John C. Lucking
TRUSTEE EMERITUS
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
TRANSFER AND SHAREHOLDER SERVICING AGENT
PFPC Inc.
101 Sabin Street
Pawtucket, RI 02860
CUSTODIAN
JPMORGAN CHASE BANK, N.A.
1111 Polaris Parkway
Columbus, Ohio 43240
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Tait, Weller & Baker LLP
1818 Market Street, Suite 2400
Philadelphia, PA 19103
Further information is contained in the Prospectus, which must precede or
accompany this report.
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Included in Item 1 above
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Board of Directors of the Registrant has adopted a Nominating
Committee Charter which provides that the Nominating Committee (the 'Committee')
may consider and evaluate nominee candidates properly submitted by shareholders
if a vacancy among the Independent Trustees of the Registrant occurs and if,
based on the Board's then current size, composition and structure, the Committee
determines that the vacancy should be filled. The Committee will consider
candidates submitted by shareholders on the same basis as it considers and
evaluates candidates recommended by other sources. A copy of the qualifications
and procedures that must be met or followed by shareholders to properly submit
a nominee candidate to the Committee may be obtained by submitting a request
in writing to the Secretary of the Registrant.
ITEM 11. 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 filing 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 12. EXHIBITS.
(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
September 6, 2007
By: /s/ Joseph P. DiMaggio
- - - -----------------------------------
Chief Financial Officer and Treasurer
September 6, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: /s/ Diana P. Herrmann
- - - ---------------------------------
Diana P. Herrmann
President and Trustee
September 6, 2007
By: /s/ Joseph P. DiMaggio
- - - -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
September 6, 2007
TAX-FREE FUND OF COLORADO
EXHIBIT INDEX
(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.