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: 12/31/07
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL
REPORT
DECEMBER 31, 2007
[LOGO OF TAX-FREE FUND OF COLORADO: A SQUARE WITH
SILLHOUETTES OF TWO MOUNTAINS AND A RISING SUN](R)
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 (R)
[LOGO OF TAX-FREE FUND OF COLORADO:
A SQUARE WITH SILHOUETTES OF TWO
MOUNTAINS AND A RISING SUN](R)
Serving Colorado Investors For More Than Two Decades
Tax-Free Fund of Colorado
"How Your Fund is Coping
With the Current Market Situation"
February, 2008
Dear Fellow Shareholder:
As you are well aware, our country has been going through a credit crunch
that began last year, particularly in August, 2007. This credit situation and
liquidity crisis have continued to worsen in various forms since that time which
has also led to a weakening in the U.S. dollar.
While things have continued to be quite messy in the securities market
despite the actions of the Federal Reserve to lower interest rates, we feel it
is important for you to know that we are doing everything possible to ensure
that your investment in Tax-Free Fund of Colorado does not have any problems.
By design, Tax-Free Fund of Colorado contains an overwhelming percentage
of securities - 89.7% as of 12/31/07 - which, due to the addition of insurance
bought by issuers or otherwise, are credit rated as A or higher. You should be
aware, however, that when purchasing securities for the Fund's portfolio, we
always look to the underlying credit quality of the issues. Even without
insurance and other credit enhancements, your Fund's portfolio manager has
confirmed that the UNDERLYING CREDIT QUALITY of the Fund's portfolio holdings is
approximately 82% A-rated or higher. Additionally, the average maturity of the
securities in the Fund's portfolio is intermediate in nature. Thus, with a
portfolio of high quality and intermediate maturity securities, the Fund's share
value has remained reasonably stable. We strongly believe that when things get
tough in the securities markets, that's when a portfolio of high quality
investments pays off.
You can be assured that we will seek to continue operating the Fund and
maintaining its portfolio in your best interest. As we have emphasized to you
since the founding of Tax-Free Fund of Colorado, the Trustees and management
team of your Fund fully realize that it is YOUR money, invested in YOUR Fund,
invested in projects throughout YOUR communities and state. Not only are YOUR
investments in the Fund being handled as well as we can in terms of its
portfolio construction, but your Fund is also helping to fund hundreds of vital
municipal projects throughout Colorado.
Because it is YOUR Fund, we try to ensure that all shareholders always
have the chance to know what is going on with their investment. Furthermore, we
want shareholders to have the chance to ask any questions of the management
team, to ease any concern they might have. Thus, to provide you with
face-to-face access to your management team, we always hold IN-STATE Annual
Meetings of Shareholders.
NOT A PART OF THE SEMI-ANNUAL REPORT
One question asked during a recent shareholder meeting of another fund in
the Aquila Group of Funds that we think you might find of interest concerned the
cost of running the fund. This question gives us an opportunity to emphasize
that the total expense ratio of Tax-Free Fund of Colorado Class A shares is
0.79% (as you will note in the enclosed Annual Report). Or, put another way, the
total annual operating cost is only 0.79 of 1%. With the average expense ratio
of similar type funds being 0.83%, we believe that Tax-Free Fund of Colorado is
doing a good job of controlling costs. It is also very important for us to point
out that the Fund's expense ratio is NOT subsidized. When comparing expense
ratios, it is important to read the fine print to see whether or not operating
costs are subsidized.
We appreciate your loyalty to Tax-Free Fund of Colorado. We will do
everything we can to merit your continued trust.
Sincerely,
[PHOTO OMITTED]
/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
[LOGO OF TAX-FREE FUND OF COLORADO:
A SQUARE WITH SILHOUETTES OF TWO
MOUNTAINS AND A RISING SUN]
Serving Colorado Investors For More Than Two Decades
Tax-Free Fund of Colorado
ANNUAL REPORT
Management Discussion
2007 REVIEW
The weakness in the residential housing market was the primary factor
influencing the U.S. economy and financial markets during 2007. The almost 40%
decline in new home starts from last year, sliding home prices and building home
inventories has put a heavy burden on the economy. The labor markets had
remained relatively stable until late in the year. The unemployment rate rose
slightly during the year to 4.9%. The job growth in the education, health
services, business services and hospitality sectors was offset by sharp declines
in the manufacturing and construction industries. As the year progressed into
the fourth quarter, the Federal Reserve (the Fed) became increasingly concerned
about a real estate led economic slowdown. The Fed cut short term interest rates
by ? of 1% in September and another ? of 1% by the end of December. The Federal
funds rate ended the year at 4.25% versus 5.25% at the end of 2006. These were
the first rate cuts by the Fed since 2003.
The interest rates on U.S. Treasury securities reversed their trends of
recent years. The past few years have been marked by a flat or inverted yield
curve with relatively high short term rates. In 2007 we have seen a decline in
rates on 1 to 5 year notes of 1.7% and 1.2%, respectively. Yields on 10 to 30
year bonds only declined by approximately 0.60% to 0.35%. This has created a
more normal relationship where rates are higher for longer maturities to
compensate for the additional risk of the less certain long term future.
Investors are concerned about a possible consumer-led recession in the short run
and the potential for higher inflation in the future.
The Colorado economy was not immune to the plight of residential real
estate. The state had the fourth highest residential foreclosure rate in the
nation which represented a 27% increase from 2006. Home prices were generally
flat to down slightly, depending on location. The unemployment rate ended the
year at 4.5% after improving early in the year and deteriorating in November and
December. Retail sales growth was up about 5.2%, and the state inflation rate is
expected to be about 2.8% for the year.
The Colorado municipal bond market experienced another strong year for new
issuance. Total new bond sales for the year exceeded $8 billion. There were
large financings for the Denver airport, RTD Fastracks and $1 billion in Special
District bonds.
We believe the conservative investment strategy of Tax-Free Fund of
Colorado paid off during 2007. The 6 year average maturity and high credit
quality of the bonds we own held their value very well in a hostile market
environment. Interest rates on bonds with maturities 15 years and longer rose by
0.08% - 0.25%, while interest rates on bonds with maturities 10 years and
shorter declined by 0.05% to 0.50%. Creditworthiness of municipal bond issuers
and insurers became of paramount
MANAGEMENT DISCUSSION OF FUND PERFORMANCE (CONTINUED)
importance during the year. The deteriorating housing market and uncertainty
about the major monoline municipal bond insurers led to a flight to quality in
the municipal bond market. The Fund has been steadfast in investing in what we
believe to be the strongest municipal projects around the state.
As of December 31, 2007, the portfolio had an average maturity of 6 years,
and 93.6% of the securities were rated AAA or AA. Approximately 82% of the
Fund's holdings have some form of credit enhancement or insurance. Even without
the enhancements, our portfolio has an average underlying rating of AA with
about 82% achieving an underlying rating of A or higher. This attention to
safety has always been a hallmark of Tax-Free Fund of Colorado. We believe that,
in many cases, our bonds now may have stronger credit characteristics than the
various companies that insure them.
The total return for Class A investors based on Net Asset Value was 3.21%.
The double-exempt dividend yield averaged approximately 3.89% for the year.
2008 STRATEGY
Last year we spoke of our concerns about risk in the municipal market.
There was very little reward to add the risk of longer maturity, lower credit
quality bonds to the portfolio. Things have changed. The market is now driven by
the fear of recession and the uncertainty of the impact of the sub prime crisis
on the major municipal bond insurers. The risk side of the equation has become
far more important than yield. We believe this environment will allow us to
improve the yield of the Fund by selectively adding to positions where our local
knowledge provides a comfort level, especially with lower rated investment grade
bonds. We also have the opportunity to sell some of the shorter bonds and pick
up yield by extending maturities to the 15-20 year range. We plan to maintain
the overall intermediate maturity structure of the Fund while we lengthen the
portfolio within that range.
Now that the market is in the process of recognizing and re-pricing risk,
we believe that it is an opportune time to take advantage of market
inefficiencies as they arise. Our goal for 2008 is to improve the yield of the
Fund while not wavering from our principal mission of a safe, stable, double
tax-free income stream.
Thank you for your investment in Tax-Free Fund of Colorado.
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,
2007 as compared with the Lehman Brothers Quality Intermediate Municipal Bond
Index ("Lehman Indexand 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
Cost of Fund Class A Shares Fund Class A Shares Quality Intermediate
Living Index no sales charge with sales charge Municipal Bond Index
12/97 10,000 10,000 9,600 10,000
12/98 10,161 10,490 10,072 10,600
12/99 10,434 10,392 9,979 10,631
12/00 10,787 11,254 10,807 11,548
12/01 10,955 11,766 11,298 12,185
12/02 11,215 12,798 12,288 13,310
12/03 11,426 13,425 12,891 13,927
12/04 11,798 13,787 13,238 14,348
12/05 12,201 13,965 13,409 14,586
12/06 12,511 14,460 13,884 15,138
12/07 13,021 14,905 14,312 15,876
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED DECEMBER 31, 2007
--------------------------------------------
SINCE
CLASS AND INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS INCEPTION
- ------------------------------------------------- ------ ------- -------- ---------
Class A (Commenced operations on 5/21/87)
With Sales Charge............................. (0.91)% 2.11% 3.65% 5.47%
Without Sales Charge.......................... 3.21% 2.94% 4.07% 5.68%
Class C (Commenced operations on 4/30/96)
With CDSC..................................... 1.22% 1.97% 3.09% 3.48%
Without CDSC.................................. 2.24% 1.97% 3.09% 3.48%
Class Y (Commenced operations on 4/30/96)
No Sales Charge............................... 3.17% 3.00% 4.12% 4.69%
Lehman Index..................................... 4.88% 3.59% 4.73% 5.92% (Class A)
5.05% (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, 2007 and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the three years in
the period 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
audits. The financial highlights for each of the years in the two 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 highlights.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
the Fund's internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the 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, 2007, by correspondence with
the custodian. 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Tax-Free Fund of Colorado as of December 31, 2007, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the three
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
February 28, 2008
- --------------------------------------------------------------------------------
TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (29.6%) S&P VALUE
- --------------- --------------------------------------------------------- -------- -------------
CITY & COUNTY (1.1%)
Denver, Colorado City & County Art Museum
$ 2,000,000 5.000%, 08/01/15 ........................................ Aa1/AA+ $ 2,124,020
-------------
METROPOLITAN DISTRICT (6.2%)
Arapahoe, Colorado Park & Recreation District
1,070,000 5.000%, 12/01/17 FGIC Insured ........................... Aaa/NR 1,126,967
Aspen Grove Business Improvement District,
Colorado Refunding
1,150,000 4.750%, 12/01/21Radian Insured .......................... NR/AA 1,141,858
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/CCC** 911,270
Foothills, Colorado Park & Recreational District
1,310,000 5.000%, 12/01/12 FSA Insured ............................ Aaa/NR 1,390,500
1,325,000 5.000%, 12/01/13 FSA Insured ............................ Aaa/NR 1,402,937
Highlands Ranch, Colorado Metropolitan District
#1, Refunding
1,000,000 5.750%, 09/01/08 AMBAC Insured .......................... Aaa/AAA 1,017,810
1,730,000 5.750%, 09/01/09 AMBAC Insured .......................... Aaa/AAA 1,804,615
Hyland Hills Metro Park & Recreation District, Colorado
Special Revenue Refunding & Improvement
1,275,000 4.375%, 12/15/26 ACA Insured ............................ NR/CCC** 1,061,667
North Metro Fire Rescue District, Colorado
1,200,000 4.625%, 12/01/20 AMBAC Insured .......................... Aaa/AAA 1,261,212
South Suburban, Colorado Park & Recreational District
1,365,000 5.125%, 12/15/09 FGIC Insured ........................... Aaa/AAA 1,390,457
-------------
Total Metropolitan District ............................. 12,509,293
-------------
SCHOOL DISTRICTS (22.3%)
Adams County, Colorado School District #12
(Adams 12 Five Star Schools)
1,170,000 5.000%, 12/15/12 MBIA Insured ........................... Aaa/AAA 1,238,141
830,000 5.000%, 12/15/12 MBIA Insured Pre-Refunded .............. Aaa/AAA 886,241
Arapahoe County, Colorado Cherry Creek School
District #5
1,000,000 5.500%, 12/15/08 ........................................ Aa2/AA 1,023,440
2,760,000 5.500%, 12/15/11 Pre-Refunded ........................... Aa2/AA 2,888,975
2,750,000 5.500%, 12/15/12 Pre-Refunded ........................... Aa2/AA 2,878,507
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- --------------- --------------------------------------------------------- -------- -------------
SCHOOL DISTRICTS (CONTINUED)
Clear Creek, Colorado School District
$ 1,000,000 5.000%, 12/01/16 FSA Insured ............................ Aaa/AAA $ 1,061,980
Denver, Colorado City & County School District
#1 Series A Refunding
1,000,000 5.600%, 06/01/08 ........................................ Aa3/AA- 1,010,470
Douglas & Elbert Counties, Colorado School
District # Re-1, Series 1992
2,000,000 5.250%, 12/15/11 FGIC Insured Pre-Refunded .............. Aaa/AAA 2,084,840
El Paso County, Colorado School District #11
Colorado Springs
1,330,000 6.250%, 12/01/08 ........................................ Aa3/AA- 1,366,947
El Paso County, Colorado School District #20
1,000,000 6.150%, 12/15/08 MBIA Insured ........................... Aaa/AAA 1,028,800
1,500,000 5.000%, 12/15/14 FGIC Insured ........................... Aaa/NR 1,600,665
El Paso County, Colorado School District #38
1,110,000 5.700%, 12/01/12 Pre-Refunded ........................... Aa3/NR 1,189,643
El Paso County, Colorado School District #49
1,500,000 5.500%, 12/01/13 FSA Insured Pre-Refunded ............... Aaa/AAA 1,640,160
1,000,000 5.250%, 12/01/14 FGIC Insured Pre-Refunded .............. Aaa/AAA 1,076,250
Garfield County, Colorado School District
1,250,000 5.000%, 12/01/17 FSA Insured ............................ Aaa/NR 1,322,288
Jefferson County, Colorado School District # R-1
3,000,000 5.500%, 12/15/09 FGIC Insured Pre-Refunded .............. Aaa/AAA 3,101,490
2,340,000 5.250%, 12/15/11 FGIC Insured Pre-Refunded .............. Aaa/AAA 2,413,733
1,000,000 5.500%, 12/15/13 FGIC Insured Pre-Refunded .............. Aaa/AAA 1,033,830
La Plata County, Colorado School District #9
1,500,000 5.000%, 11/01/18 MBIA Insured Pre-Refunded .............. Aaa/NR 1,616,985
Larimer County, Colorado School District #R1
Poudre Series A Refunding
2,100,000 5.250%, 12/15/11 ........................................ Aa3/AAA 2,137,842
Pueblo County, Colorado School District #70
1,000,000 5.000%, 12/01/15 FGIC Insured ........................... Aaa/AAA 1,052,080
3,440,000 5.000%, 12/01/16 FGIC Insured ........................... Aaa/AAA 3,606,324
Teller County, Colorado School District #2
Woodland Park
1,265,000 5.000%, 12/01/17 MBIA Insured ........................... Aaa/AAA 1,356,434
RATING
PRINCIPAL MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
- --------------- --------------------------------------------------------- -------- -------------
SCHOOL DISTRICTS (CONTINUED)
Weld and Adams Counties, Colorado School District #3J
$ 1,000,000 5.500%, 12/15/10 AMBAC Insured Pre-Refunded ............. Aaa/AAA $ 1,047,120
Weld County, Colorado School District #2
1,315,000 5.000%, 12/01/15 FSA Insured ............................ Aaa/AAA 1,402,592
Weld County, Colorado School District #6
1,195,000 5.000%, 12/01/15 FSA Insured Pre-Refunded ............... Aaa/AAA 1,275,208
Weld County, Colorado School District #8
1,115,000 5.000%, 12/01/15 FSA Insured Pre-Refunded ............... Aaa/AAA 1,203,364
1,385,000 5.250%, 12/01/17 FSA Insured Pre-Refunded ............... Aaa/AAA 1,510,356
-------------
Total School Districts .................................. 45,054,705
-------------
Total General Obligation Bonds .......................... 59,688,018
-------------
REVENUE BONDS (69.4%)
ELECTRIC (3.6%)
Colorado Springs, Colorado Utilities Revenue
1,660,000 5.000%, 11/15/17 ........................................ Aa2/AA 1,757,459
Colorado Springs, Colorado Utilities Revenue Lien,
Series A
4,500,000 3.370%, 11/01/29 VRDO1 .................................. VMIG1/A1+ 4,500,000
Colorado Springs, Colorado Utilities Revenue
Subordinated Lien Improvement Series A
1,000,000 5.000%, 11/15/17 ........................................ Aa2/AA 1,066,840
-------------
Total Electric .......................................... 7,324,299
-------------
HIGHER EDUCATION (11.1%)
Boulder, Colorado Development Revenue UCAR
1,760,000 5.000%, 09/01/16 MBIA Insured ........................... Aaa/AAA 1,856,994
1,130,000 5.000%, 09/01/17 AMBAC Insured .......................... Aaa/AAA 1,201,359
Colorado Educational & Cultural Facility Authority,
Johnson & Wales
860,000 5.000%, 04/01/18 XLCA Insured ........................... Aaa/AAA 903,576
Colorado Educational & Cultural Facility Authority,
Regis University Project
1,695,000 5.000%, 06/01/24 Radian Insured ......................... Aa3/AA 1,685,542
Colorado Educational & Cultural Facility Authority,
University of Colorado Foundation Project
2,110,000 5.000%, 07/01/17 AMBAC Insured .......................... Aaa/AAA 2,264,072
1,865,000 5.375%, 07/01/18 AMBAC Insured .......................... Aaa/AAA 2,030,202
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- --------------- --------------------------------------------------------- -------- -------------
HIGHER EDUCATION (CONTINUED)
Colorado Mountain Jr. College District Student
Housing Facilities Enterprise Revenue
$ 1,000,000 4.500%, 06/01/18 MBIA Insured ........................... Aaa/AAA $ 1,026,030
Colorado Post Secondary Educational Facility
860,000 5.500%, 03/01/08 MBIA Insured ........................... Aaa/AAA 863,225
Colorado State Board of Governors University
Enterprise System, Series A, Refunding and
Improvement
425,000 5.000%, 03/01/13 Prerefunded, ETM ....................... Aaa/NR 458,783
Colorado State Board of Governors University
Enterprise System, Series A, Refunding and
Improvement
1,105,000 5.000%, 03/01/17 AMBAC Insured .......................... Aaa/NR 1,170,250
University of Colorado Enterprise System
1,000,000 5.000%, 06/01/11 ........................................ Aa3/AA- 1,056,660
2,325,000 5.000%, 06/01/15 AMBAC Insured Pre-Refunded ............. Aaa/AAA 2,491,772
1,735,000 5.000%, 06/01/16 Pre-Refunded ........................... Aa3/AA- 1,879,057
1,000,000 5.250%, 06/01/17 FGIC Insured Pre-Refunded .............. Aaa/AAA 1,095,320
University of Northern Colorado Auxiliary Facilities
875,000 5.750%, 06/01/08 MBIA Insured, Pre-Refunded ............. Aaa/AAA 885,010
1,390,000 5.000%, 06/01/15 AMBAC Insured .......................... Aaa/AAA 1,455,942
-------------
Total Higher Education .................................. 22,323,794
-------------
HOSPITAL (9.9%)
Colorado Health Facility Authority Hospital Revenue,
Catholic Health Initiatives Series A
1,000,000 5.375%, 12/01/09 ........................................ Aa2/AA 1,019,730
Colorado Health Facility Authority Hospital Revenue,
Poudre Valley Health Care Series F Refunding
2,800,000 5.000%, 03/01/25 ........................................ Baa2/BBB+ 2,678,536
Colorado Health Facility Authority Hospital Revenue,
Sisters of Charity - Health Care
1,000,000 6.250%, 05/15/09 AMBAC Insured, Pre-Refunded ............ Aaa/AAA 1,041,430
Colorado Health Facility Authority Hospital Revenue,
Sisters of Charity - Leavenworth
1,000,000 5.500%, 12/01/08 MBIA Insured ........................... Aaa/AAA 1,019,160
1,500,000 5.250%, 12/01/10 MBIA Insured ........................... Aaa/AAA 1,526,730
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- --------------- --------------------------------------------------------- -------- -------------
HOSPITAL (CONTINUED)
Colorado Health Facility Authority Revenue, Boulder
Community Hospital Project VRDO1
$ 2,000,000 3.400%, 10/01/30 JPMorgan Insured ....................... VMIG1/A1+ $ 2,000,000
Colorado Health Facility Authority Revenue, Catholic
Health Initiatives-A
1,500,000 5.000%, 09/01/21 ........................................ Aa2/AA 1,559,745
Colorado Health Facility Authority Revenue, Catholic
Health Series B-5 Refunding VRDO1
2,500,000 3.380%, 03/01/23 ........................................ VMIG1/A1+ 2,500,000
Colorado Health Facility Authority Revenue,
Evangelical Lutheran Project
1,000,000 5.250%, 06/01/21 ........................................ A3/A- 1,035,690
Colorado Health Facilities Authority Revenue,
Northern Colorado Medical Center VRDO1
1,420,000 3.410%, 05/15/20 MBIA Insured ........................... VMIG1/A1+ 1,420,000
Denver, Colorado Health & Hospital Authority
Healthcare, Revenue Series A Refunding,
2,000,000 5.000%, 12/01/18 ........................................ NR/BBB 1,975,100
1,230,000 5.000%, 12/01/20 ........................................ NR/BBB 1,192,399
Park Hospital District Larimer County, Colorado
Limited Tax Revenue
1,010,000 4.500%, 01/01/21 Assured Guaranty Insured ............... Aaa/AAA 1,040,068
-------------
Total Hospital .......................................... 20,008,588
-------------
HOUSING (0.4%)
Colorado Housing & Finance Authority
385,000 6.050%, 10/01/16 Series 1999A3 .......................... Aa2/NR 390,221
10,000 6.125%, 11/01/23 Series 1998D3 .......................... Aa2/NR 10,159
Colorado Housing & Finance Authority, Single
Family Program Refunding
185,000 5.000%, 08/01/13 Series 2001 Series B ................... A1/A+ 189,114
Colorado Housing Finance Authority, Single
Family Mortgage
15,000 5.625%, 06/01/10 Series 1995D ........................... Aaa/NR 15,160
10,000 5.750%, 11/01/10 Series 1996A ........................... Aa2/NR 10,029
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- --------------- --------------------------------------------------------- -------- -------------
HOUSING (CONTINUED)
Colorado Housing Finance Authority, Single
Family Mortgage
$ 35,000 5.700%, 10/01/22 Series 2000C3 .......................... Aa2/AA $ 35,512
Colorado Housing Finance Authority, Single
Family Mortgage Subordinated
90,000 5.400%, 10/01/12 Series 2000D ........................... A1/A+ 90,864
Denver, Colorado Single Family Mortgage Revenue
95,000 5.000%, 11/01/15 GNMA Insured ........................... NR/AAA 96,266
-------------
Total Housing ........................................... 837,325
-------------
LEASE (10.9%)
Aurora, Colorado COP
2,105,000 5.250%, 12/01/13 AMBAC Insured Pre-Refunded ............. Aaa/AAA 2,231,089
Broomfield, Colorado COP
2,500,000 5.100%, 12/01/12 AMBAC Insured .......................... Aaa/NR 2,615,950
Colorado Educational & Cultural Facilities Authority
Revenue, Ave Maria School Project Refunding
1,000,000 4.850%, 12/01/25 Radian Insured ......................... NR/AA 971,970
Denver, Colorado City and County COP (Roslyn Fire)
1,835,000 5.000%, 12/01/15 ........................................ Aa2/AA 1,931,925
El Paso County, Colorado COP
1,100,000 5.250%, 12/01/09 MBIA Insured ........................... Aaa/AAA 1,142,218
El Paso County, Colorado COP (Judicial Building)
1,760,000 5.000%, 12/01/16 AMBAC Insured Pre-Refunded ............. Aaa/AAA 1,899,480
El Paso County, Colorado COP (Pikes Peak Regional
Development Authority)
1,925,000 5.000%, 12/01/18 AMBAC Insured .......................... Aaa/AAA 2,044,061
Fort Collins, Colorado Lease COP Series A
3,020,000 4.750%, 06/01/18 AMBAC Insured .......................... Aaa/NR 3,169,460
Fremont County, Colorado COP Refunding &
Improvement Series A
2,075,000 5.000%, 12/15/18 MBIA Insured ........................... Aaa/AAA 2,198,463
Lakewood, Colorado COP
1,440,000 5.200%, 12/01/13 AMBAC Insured Pre-Refunded ............. Aaa/AAA 1,524,269
Northern Colorado Water Conservancy District COP
1,000,000 5.000%, 10/01/15 MBIA Insured ........................... Aaa/AAA 1,060,030
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- --------------- --------------------------------------------------------- -------- -------------
LEASE (CONTINUED)
Westminster, Colorado COP
$ 1,055,000 5.350%, 09/01/11 MBIA Insured Pre-Refunded .............. Aaa/AAA $ 1,104,986
-------------
Total Lease ............................................. 21,893,901
-------------
SALES TAX (14.5%)
Boulder, Colorado
1,045,000 5.250%, 08/15/10 AMBAC Insured .......................... Aaa/AAA 1,080,070
Boulder, Colorado Open Space Acquisition
1,250,000 5.500%, 08/15/12 ........................................ Aa1/AA+ 1,325,362
Boulder, Colorado Open Space Capital Improvement
3,065,000 5.000%, 07/15/16 MBIA Insured ........................... Aaa/AAA 3,241,544
1,630,000 5.000%, 07/15/17 MBIA Insured ........................... Aaa/AAA 1,717,629
Boulder, Colorado Sales & Use Tax Open Space
Series A
1,000,000 5.450%, 12/15/12 FGIC Insured Pre-Refunded .............. Aaa/AAA 1,055,620
Colorado Springs, Colorado Sales & Use Tax
Revenue Service Sales
1,320,000 5.000%, 12/01/12 ........................................ A1/AA 1,360,392
Denver, Colorado City & County Excise Tax Revenue
2,000,000 5.375%, 09/01/10 FSA Insured ............................ Aaa/AAA 2,074,220
1,000,000 5.000%, 09/01/11 FSA Insured Pre-Refunded ............... Aaa/AAA 1,054,850
2,260,000 5.000%, 09/01/12 FSA Insured Pre-Refunded ............... Aaa/AAA 2,383,961
Douglas County, Colorado Sales & Use Tax Open
Space Revenue
1,780,000 5.500%, 10/15/12 FSA Insured ............................ Aaa/AAA 1,887,031
Golden, Colorado Sales & Use Tax
1,265,000 5.000%, 12/01/12 AMBAC Insured .......................... Aaa/AAA 1,340,356
Jefferson County, Colorado Open Space Sales Tax
1,245,000 5.000%, 11/01/11 FGIC Insured ........................... Aaa/AAA 1,281,690
1,600,000 5.000%, 11/01/13 AMBAC Insured .......................... Aaa/AAA 1,689,248
1,080,000 5.000%, 11/01/14 AMBAC Insured .......................... Aaa/AAA 1,137,078
Lakewood, Colorado Sales & Use Tax Revenue
1,040,000 5.250%, 12/01/09 ........................................ NR/AAA 1,080,893
Larimer County, Colorado Sales Tax Revenue Bond
1,000,000 5.500%, 12/15/12 AMBAC Insured .......................... Aaa/AAA 1,067,660
RATING
PRINCIPAL 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 Pre-Refunded ........................... NR/AA+ $ 1,998,394
Park Meadows Business Improvement District,
Colorado Shared Sales Tax Revenue Bonds
1,500,000 5.300%, 12/01/27 ........................................ NR/NR* 1,403,640
Thornton, Colorado Sales Tax
1,000,000 5.000%, 09/01/14 FSA Insured ............................ Aaa/AAA 1,052,450
-------------
Total Sales Tax ......................................... 29,232,088
-------------
TRANSPORTATION (5.3%)
Colorado Department of Transportation-Tax
Revenue Anticipation Note
1,000,000 6.000%, 06/15/13 AMBAC Insured Pre-Refunded ............. #Aaa/AAA 1,072,950
Northwest Parkway, Colorado Public Highway
Authority Series A
2,515,000 5.150%, 06/15/14 AMBAC Insured .......................... Aaa/AAA 2,703,474
Regional Transportation District, Colorado COP
1,190,000 5.000%, 06/01/15 AMBAC Insured .......................... Aaa/AAA 1,255,057
1,510,000 4.850%, 06/01/18 AMBAC Insured Pre-Refunded ............. Aaa/AAA 1,605,372
Regional Transportation District, Colorado Sales
Tax Revenue
2,000,000 5.000%, 11/01/13 FGIC Insured ........................... Aaa/AAA 2,099,160
1,000,000 5.000%, 11/01/16 FGIC Insured Pre-Refunded .............. Aaa/AAA 1,060,700
Walker Field, Colorado Public Airport Authority
Airport Revenue
1,000,000 5.000%, 12/01/22 ........................................ BAA3/NR 956,390
-------------
Total Transportation .................................... 10,753,103
-------------
WATER & SEWER (12.6%)
Boulder, Colorado Water & Sewer Revenue
1,000,000 5.400%, 12/01/14 Pre-Refunded ........................... Aa2/AA+ 1,064,040
Boulder, Colorado Water & Sewer Revenue Series C
2,420,000 4.500%, 12/01/18 ........................................ Aa2/AA+ 2,517,913
Broomfield, Colorado Sewer and Waste Water Revenue
1,985,000 5.000%, 12/01/15 AMBAC Insured .......................... Aaa/NR 2,109,400
1,000,000 5.000%, 12/01/16 AMBAC Insured .......................... Aaa/NR 1,058,910
RATING
PRINCIPAL MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- --------------- --------------------------------------------------------- -------- -------------
WATER & SEWER (CONTINUED)
Broomfield, Colorado Water Activity Enterprise
$ 1,500,000 5.300%, 12/01/12 MBIA Insured ........................... Aaa/NR $ 1,595,280
1,730,000 5.250%, 12/01/13 MBIA Insured ........................... Aaa/NR 1,832,070
Colorado Clean Water Revenue
830,000 5.375%, 09/01/10 Pre-Refunded ........................... Aaa/AAA 843,263
170,000 5.375%, 09/01/10 Un-Refunded portion .................... Aaa/AAA 172,550
Colorado Metro Wastewater Reclamation District
1,270,000 5.250%, 04/01/09 ........................................ Aa2/AA 1,276,325
Colorado Water Resource & Power Development
Authority
2,675,000 5.000%, 09/01/16 MBIA Insured ........................... Aaa/AAA 2,876,802
1,855,000 5.000%, 09/01/17 MBIA Insured ........................... Aaa/AAA 1,984,776
Colorado Water Resource & Power Development
Authority Clean Water Revenue Series A
1,375,000 5.000%, 09/01/12 Pre-Refunded ........................... Aaa/AAA 1,461,707
260,000 5.000%, 09/01/12 Un-Refunded portion .................... Aaa/AAA 275,564
Colorado Water Resource & Power Development
Authority Clean Water Revenue Series B
820,000 5.500%, 09/01/09 Pre-Refunded ........................... Aaa/AAA 833,768
180,000 5.500%, 09/01/09 Un-Refunded portion .................... Aaa/AAA 182,691
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 635,100
400,000 5.550%, 11/01/13 FGIC Insured Pre-Refunded .............. Aaa/AAA 426,516
Denver, Colorado City and County Wastewater Revenue
1,560,000 5.000%, 11/01/15 FGIC Insured ........................... Aaa/AAA 1,655,160
Pueblo, Colorado Board Water Works
1,000,000 5.500%, 11/01/10 FSA Insured ............................ Aaa/AAA 1,063,830
Ute, Colorado Water Conservancy District
1,570,000 5.500%, 06/15/12 MBIA Insured ........................... Aaa/AAA 1,650,541
-------------
Total Water & Sewer ..................................... 25,516,206
-------------
MISCELLANEOUS REVENUE (1.1%)
Denver, Colorado City & County Helen Bonfils Project
1,205,000 5.875%, 12/01/09 ........................................ NR/A+ 1,207,711
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 $ 1,021,430
-------------
Total Miscellaneous Revenue ............................. 2,229,141
-------------
Total Revenue Bonds ..................................... 140,118,445
-------------
Total Investments (cost $194,091,475-note 4) ............ 99.0% 199,806,463
Other assets less liabilities ........................... 1.0 2,066,669
------ -------------
100.0% $ 201,873,132
====== =============
PERCENT OF
PORTFOLIO DISTRIBUTION BY QUALITY RATING (UNAUDITED) PORTFOLIO
---------------------------------------------------- ----------
LONG-TERM RATINGS
Aaa of Moody's or AAA of S&P .......................... 69.6%
Aa of Moody's or AA of S&P ............................ 18.8
A of Moody's or S&P ................................... 1.3
Baa of Moody's or BBB of S&P .......................... 3.4
CCC of S&P** .......................................... 1.0
Not rated* ............................................ 0.7
SHORT-TERM RATINGS
VMIG1 of Moody's or A1+ of S&P ........................ 5.2
------
100.0%
======
* Any security not rated (NR) by either credit rating service must be
determined by the Investment Sub-Adviser to have sufficient quality
to be ranked in the top four ratings if a credit rating were to be
assigned by a rating service.
** On January 11, 2008, S&P suspended their rating on this security.
1 Variable rate demand obligations (VRDOs) are payable upon demand in
seven days.
PORTFOLIO ABBREVIATIONS:
------------------------------------------------------------------------
ACA - American Capital Assurance Financial Guaranty Corp.
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, 2007
ASSETS
Investments at value (cost $194,091,475) ........................................... $ 199,806,463
Cash ............................................................................... 1,201,551
Interest receivable ................................................................ 1,483,942
Receivable for Fund shares sold .................................................... 105,511
Other assets ....................................................................... 14,514
-------------
Total assets ..................................................................... 202,611,981
-------------
LIABILITIES
Payable for Fund shares redeemed ................................................... 459,904
Dividends payable .................................................................. 118,745
Management fee payable ............................................................. 85,684
Distribution and service fees payable .............................................. 16,911
Accrued expenses ................................................................... 57,605
-------------
Total liabilities .................................................................. 738,849
-------------
NET ASSETS ............................................................................ $ 201,873,132
=============
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $0.01 per share $ 197,383
Additional paid-in capital ......................................................... 196,683,232
Net unrealized appreciation on investments (note 4) ................................ 5,714,988
Accumulated net realized loss on investments ....................................... (748,553)
Undistributed net investment income ................................................ 26,082
-------------
$ 201,873,132
=============
CLASS A
Net Assets ......................................................................... $ 185,282,806
=============
Capital shares outstanding ......................................................... 18,115,642
=============
Net asset value and redemption price per share ..................................... $ 10.23
=============
Offering price per share (100/96 of $10.23 adjusted to nearest cent) ............... $ 10.66
=============
CLASS C
Net Assets ......................................................................... $ 10,563,448
=============
Capital shares outstanding ......................................................... 1,034,839
=============
Net asset value and offering price per share ....................................... $ 10.21
=============
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) ...................................... $ 10.21*
=============
CLASS Y
Net Assets ......................................................................... $ 6,026,878
=============
Capital shares outstanding ......................................................... 587,819
=============
Net asset value, offering and redemption price per share ........................... $ 10.25
=============
See accompanying notes to financial statements.
TAX-FREE FUND OF COLORADO
STATEMENT OF OPERATIONS
YEAR Ended DECEMBER 31, 2007
Investment Income:
Interest income $ 9,482,007
Expenses:
Management fee (note 3) $ 1,031,818
Distribution and service fees (note 3) 205,432
Transfer and shareholder servicing agent fees 170,552
Trustees' fees and expenses (note 8) 102,830
Shareholders' reports and proxy statements 58,939
Legal fees (note 3) 55,163
Custodian fees 25,845
Auditing and tax fees 19,001
Registration fees and dues 13,842
Insurance 12,762
Chief compliance officer (note 3) 4,544
Miscellaneous 47,293
------------
Total expenses 1,748,021
Expenses paid indirectly (note 6) (25,557)
------------
Net expenses 1,722,464
-------------
Net investment income 7,759,543
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) from securities transactions (206,241)
Change in unrealized appreciation on investments (1,296,578)
------------
Net realized and unrealized gain (loss) on investments (1,502,819)
-------------
Net change in net assets resulting from operations $ 6,256,724
=============
See accompanying notes to financial statements.
TAX-FREE FUND OF COLORADO
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
----------------- -----------------
OPERATIONS:
Net investment income ............................... $ 7,759,543 $ 8,609,285
Net realized gain (loss) from securities transactions (206,241) (296,973)
Change in unrealized appreciation on investments .... (1,296,578) (1,494,446)
------------- -------------
Change in net assets from operations .............. 6,256,724 6,817,866
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (note 10):
Class A Shares:
Net investment income ............................... (7,672,295) (8,364,068)
Class C Shares:
Net investment income ............................... (342,777) (376,548)
Class Y Shares:
Net investment income ............................... (232,447) (481,457)
------------- -------------
Change in net assets from distributions ........... (8,247,519) (9,222,073)
------------- -------------
CAPITAL SHARE TRANSACTIONS (note 7):
Proceeds from shares sold ........................... 18,965,362 16,194,654
Reinvested dividends and distributions .............. 4,637,380 5,247,141
Cost of shares redeemed ............................. (35,203,765) (49,357,648)
------------- -------------
Change in net assets from capital share transactions (11,601,023) (27,915,853)
------------- -------------
Change in net assets .............................. (13,591,818) (30,320,060)
NET ASSETS:
Beginning of period ................................. 215,464,950 245,785,010
------------- -------------
End of period* ...................................... $ 201,873,132 $ 215,464,950
============= =============
* Includes undistributed net investment income of: .. $ 26,082 $ 21,563
============= =============
See accompanying notes to financial statements.
TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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.
FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
("FIN 48") was adopted on June 29, 2007. Management has reviewed the tax
positions for each of the open tax years (2004-2007) and has determined
that the implementation of FIN 48 did not have a material impact on the
Fund's financial statements.
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, 2007 the Fund
increased undistributed net investment income by $492,495 and decreased
additional paid-in capital by $492,495 due primarily to differing book/tax
treatment of distributions and bond amortization.
g) ACCOUNTING PRONOUNCEMENT: 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 year
ended December 31, 2007, distribution fees on Class A Shares amounted to $94,812
of which the Distributor retained $3,704.
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, 2007, amounted to $82,965. 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, 2007 amounted to $27,655. The
total of these payments with respect to Class C Shares amounted to $110,620 of
which the Distributor retained $25,104.
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 brokerage and advisory firms ("intermediaries"), the Fund's shares are
sold primarily through the facilities of these intermediaries having offices
within Colorado, with the bulk of sales commissions inuring to such
intermediaries. For the year ended December 31, 2007, total commissions on sales
of Class A Shares amounted to $234,204 of which the Distributor received
$46,020.
c) OTHER RELATED PARTY TRANSACTIONS:
For the year ended December 31, 2007, the Fund incurred $23,781 of legal
fees allocable to Hollyer Brady Barrett & Hines LLP ("Hollyer Brady") and
$29,529 to 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 year ended December 31, 2007, purchases of securities and
proceeds from the sales of securities aggregated $17,767,473 and $35,179,243,
respectively.
At December 31, 2007, the aggregate tax cost for all securities was
$194,065,393. At December 31, 2007 the aggregate gross unrealized appreciation
for all securities in which there is an excess of value over tax cost amounted
to $6,567,845 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $826,775 for a net
unrealized appreciation of $5,741,070.
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:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
CLASS A SHARES:
Proceeds from shares sold .... 1,543,026 $ 15,781,661 1,276,887 $ 13,173,965
Reinvested distributions ..... 430,513 4,399,250 473,577 4,889,312
Cost of shares redeemed ...... (3,031,187) (30,993,982) (3,504,597) (36,133,383)
------------ ------------ ------------ ------------
Net change ................ (1,057,648) (10,813,071) (1,754,133) (18,070,106)
------------ ------------ ------------ ------------
CLASS C SHARES:
Proceeds from shares sold .... 151,365 1,544,571 119,840 1,233,789
Reinvested distributions ..... 18,231 185,929 18,176 187,305
Cost of shares redeemed ...... (276,171) (2,819,549) (246,633) (2,541,592)
------------ ------------ ------------ ------------
Net change ................ (106,575) (1,089,049) (108,617) (1,120,498)
------------ ------------ ------------ ------------
CLASS Y SHARES:
Proceeds from shares sold .... 159,917 1,639,130 172,601 1,786,900
Reinvested distributions ..... 5,095 52,201 16,528 170,524
Cost of shares redeemed ...... (135,641) (1,390,234) (1,035,385) (10,682,673)
------------ ------------ ------------ ------------
Net change ................ 29,371 301,097 (846,256) (8,725,249)
------------ ------------ ------------ ------------
Total transactions in Fund shares (1,134,852) $(11,601,023) (2,709,006) $(27,915,853)
============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES
At December 31, 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 year ended December 31, 2007 was $75,333, 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 meetings (audit, nominating 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, 2007, such meeting-related expenses amounted to $27,497.
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. Net realized capital gains, if any, are distributed annually
and are taxable. Dividends and capital gains distributions are paid in in
additional shares at the net asset value per share, in cash, or in a combination
of both, at the shareholder's option.
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, 2007, the Fund had a capital loss carryover of $742,836 of which
$245,339 expires in 2012, $296,973 expires in 2014, and $200,524 expires in
2015. 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.
As of December 31, 2007, there were post-October capital loss deferrals of
$5,717, which will be recognized in the following year.
The tax character of distributions:
Year Ended December 31,
2007 2006
---------- ----------
Net tax-exempt income $7,755,024 $8,611,722
Ordinary income 492,495 610,351
---------- ----------
$8,247,519 $9,222,073
========== ==========
As of December 31, 2007, the components of distributable earnings on a tax
basis were as follows:
Undistributed tax-exempt income $ 118,745
Unrealized appreciation 5,741,070
Accumulated net realized loss (742,836)
-----------
$ 5,116,979
===========
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 U.S. Supreme Court heard the case on November 5,
2007 and is expected to hand a decision down in 2008.
Over the past few months, municipal bond insurance companies have been
under review by the three major rating agencies Standard & Poor's, Moody's and
Fitch. The ratings of some of the insurance companies have now either been
downgraded and/or have a negative outlook. The financial markets continue to
assess the severity of the losses caused by the subprime credit crisis and its
impact on municipal bond insurance companies and insured municipal bond prices.
TAX-FREE FUND OF COLORADO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class A
----------------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------------
2007 2006 2005 2004 2003
--------- --------- --------- --------- ---------
Net asset value, beginning of period ......... $ 10.32 $ 10.42 $ 10.68 $ 10.84 $ 10.82
--------- --------- --------- --------- ---------
Income (loss) from investment operations:
Net investment income ...................... 0.39++ 0.39+ 0.39+ 0.40+ 0.41+
Net gain (loss) on securities (both realized
and unrealized) .......................... (0.07) (0.07) (0.23) (0.13) 0.05
--------- --------- --------- --------- ---------
Total from investment operations ........... 0.32 0.32 0.16 0.27 0.46
--------- --------- --------- --------- ---------
Less distributions (note 10):
Dividends from net investment income ....... (0.41) (0.42) (0.42) (0.43) (0.44)
Distributions from capital gains ........... -- -- -- -- --
--------- --------- --------- --------- ---------
Total distributions ........................ (0.41) (0.42) (0.42) (0.43) (0.44)
--------- --------- --------- --------- ---------
Net asset value, end of period ............... $ 10.23 $ 10.32 $ 10.42 $ 10.68 $ 10.84
========= ========= ========= ========= =========
Total return (not reflecting sales charge) ... 3.21% 3.11% 1.53% 2.57% 4.32%
Ratios/supplemental data
Net assets, end of period (in thousands) ... $ 185,283 $ 197,926 $ 218,111 $ 226,070 $ 233,109
Ratio of expenses to average net assets .... 0.80% 0.79% 0.79% 0.75% 0.74%
Ratio of net investment income to average
net assets ............................... 3.80% 3.76% 3.73% 3.76% 3.81%
Portfolio turnover rate .................... 8.77% 7.48% 10.57% 12.55% 6.16%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets .... 0.79% 0.78% 0.79% 0.74% 0.74%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
++ Per share amounts have been calculated using the daily average shares
method.
TAX-FREE FUND OF COLORADO
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class C
-----------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
Net asset value, beginning of period ................... $ 10.30 $ 10.40 $ 10.66 $ 10.82 $ 10.80
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income ................................ 0.29++ 0.29+ 0.29+ 0.30+ 0.31+
Net gain (loss) on securities (both
realized and unrealized) ........................... (0.06) (0.07) (0.23) (0.13) 0.04
-------- -------- -------- -------- --------
Total from investment operations ..................... 0.23 0.22 0.06 0.17 0.35
-------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income ................. (0.32) (0.32) (0.32) (0.33) (0.33)
Distributions from capital gains ..................... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions .................................. (0.32) (0.32) (0.32) (0.33) (0.33)
-------- -------- -------- -------- --------
Net asset value, end of period ......................... $ 10.21 $ 10.30 $ 10.40 $ 10.66 $ 10.82
======== ======== ======== ======== ========
Total return (not reflecting sales charge) ............. 2.24% 2.14% 0.57% 1.60% 3.33%
Ratios/supplemental data
Net assets, end of period (in thousands) ............. $ 10,563 $ 11,760 $ 13,003 $ 15,210 $ 15,820
Ratio of expenses to average net assets .............. 1.75% 1.74% 1.74% 1.70% 1.69%
Ratio of net investment income to
average net assets ................................. 2.85% 2.81% 2.78% 2.81% 2.83%
Portfolio turnover rate .............................. 8.77% 7.48% 10.57% 12.55% 6.16%
The expense ratios after giving effect to the expense offset for uninvested cash balances were:
Ratio of expenses to average net assets .............. 1.74% 1.73% 1.74% 1.69% 1.68%
Class Y
-----------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
Net asset value, beginning of period ................... $ 10.35 $ 10.44 $ 10.71 $ 10.86 $ 10.84
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income ................................ 0.40++ 0.40+ 0.40+ 0.41+ 0.42+
Net gain (loss) on securities (both
realized and unrealized) ........................... (0.08) (0.07) (0.24) (0.12) 0.04
-------- -------- -------- -------- --------
Total from investment operations ..................... 0.32 0.33 0.16 0.29 0.46
-------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income ................. (0.42) (0.42) (0.43) (0.44) (0.44)
Distributions from capital gains ..................... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions .................................. (0.42) (0.42) (0.43) (0.44) (0.44)
-------- -------- -------- -------- --------
Net asset value, end of period ......................... $ 10.25 $ 10.35 $ 10.44 $ 10.71 $ 10.86
======== ======== ======== ======== ========
Total return (not reflecting sales charge) ............. 3.17% 3.26% 1.49% 2.73% 4.37%
Ratios/supplemental data
Net assets, end of period (in thousands) ............. $ 6,027 $ 5,779 $ 14,671 $ 15,608 $ 13,760
Ratio of expenses to average net assets .............. 0.75% 0.75% 0.74% 0.70% 0.69%
Ratio of net investment income to
average net assets ................................. 3.84% 3.82% 3.77% 3.81% 3.85%
Portfolio turnover rate .............................. 8.77% 7.48% 10.57% 12.55% 6.16%
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%
- ----------
+ Per share amounts have been calculated using the monthly average shares
method.
++ Per share amounts have been calculated using the daily average shares
method.
- --------------------------------------------------------------------------------
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 July 1,
2007 and held for the six months ended December 31, 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 DECEMBER 31, 2007
ACTUAL
TOTAL RETURN BEGINNING ENDING EXPENSES
WITHOUT ACCOUNT ACCOUNT PAID DURING
SALES CHARGES(1) VALUE VALUE THE PERIOD(2)
- --------------------------------------------------------------------------------
Class A 2.95% $1,000.00 $1,029.50 $4.04
- --------------------------------------------------------------------------------
Class C 2.47% $1,000.00 $1,024.70 $8.88
- --------------------------------------------------------------------------------
Class Y 2.88% $1,000.00 $1,028.80 $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 0.79%, 1.74% AND
0.74% 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.
SIX MONTHS ENDED DECEMBER 31, 2007
HYPOTHETICAL
ANNUALIZED BEGINNING ENDING EXPENSES
TOTAL ACCOUNT ACCOUNT PAID DURING
RETURN VALUE VALUE THE PERIOD(1)
- --------------------------------------------------------------------------------
Class A 5.00% $1,000.00 $1,021.22 $4.02
- --------------------------------------------------------------------------------
Class C 5.00% $1,000.00 $1,016.43 $8.84
- --------------------------------------------------------------------------------
Class Y 5.00% $1,000.00 $1,021.48 $3.77
- --------------------------------------------------------------------------------
(1) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.79%, 1.74% AND
0.74% 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 Group of Funds(R)
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 1-800-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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 2007, $7,754,024 of dividends
paid by Tax-Free Fund of Colorado, constituting 94.03% of total dividends paid
during calendar 2007, were exempt-interest dividends and the balance were
ordinary dividend income.
Prior to January 31, 2008, shareholders were mailed IRS Form 1099-DIV
which contains information on the status of distributions paid for the 2007
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.)
- ----------------- ---------- ------------------- ---------- ---------------------
Diana P. Herrmann Trustee since Vice Chair and Chief Executive Officer of 12 ICI Mutual Insurance
New York, NY 2000 and Aquila Management Corporation, Founder of the Company
(02/25/58) President Aquila Group of Funds(R) (5) and parent of
since 1999 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; Chair, Vice
Chair, President, Executive Vice President or
Senior Vice President of funds in the Aquila
Group of Funds(R) 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 (a trade
organization for the U.S. fund industry
dedicated to protecting shareholder interests
and educating the public about investing) and
head of its Small Funds Committee since 2004;
active in charitable and volunteer Senior Vice
President of funds in the Aquila Group of
Funds(R) 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 (a trade
organization for the U.S. fund industry
dedicated to protecting shareholder interests
and educating the public about investing) 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 since 4 None
Castle Rock, CO Board of 2001; Vice President for Business Management
(12/23/38) Trustees since and CFO, Ottawa University, since 2006, Vice
2005 and President for Business Affairs, 1992-2001; IBM
Trustee since Corporation, 1965-1991; currently active with
1987 various charitable educational and religious
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.)
- ----------------- ---------- ------------------- ---------- ---------------------
Gary C. Cornia Vice Chair of Director, Romney Institute of Public 4 Lincoln Institute of Land
Orem, UT the Board of Management, Marriott School of Management, Policy, Cambridge, MA
(06/24/48) Trustees since Brigham Young University, 2004 - present;
2006 and Professor, Marriott School of Management, 1980
Trustee since - present; Past President, the National Tax
2000 Association; Fellow, Lincoln Institute of Land
Policy, 2002 - present; Associate Dean,
Marriott School of Management, Brigham Young
University, 1991-2000; Utah Governor's Tax
Review Committee since 1993.
Tucker Hart Adams Trustee since President, The Adams Group, Inc., an economic 3 Director, Colorado Health
Colorado Springs, CO 1989 consulting firm, since 1989; formerly Chief Facilities Authority
(01/11/38) Economist, United Banks of Colorado; currently
or formerly active with numerous professional
and community organizations.
Thomas A. Christopher Trustee since Vice President of Robinson, Hughes & 3 None
Danville, KY 2004 Christopher, C.P.A.s, P.S.C., since 1977;
(12/19/47) President, A Good Place for Fun, Inc., a
sports facility, since 1987; currently or
formerly active with various professional and
community organizations.
Lyle W. Hillyard Trustee since President of the law firm of Hillyard, 2 None
Logan, UT 2006 Anderson & Olsen, Logan, Utah, since 1967;
(09/25/40) member of Utah Senate, 1985 to present, in the
following positions: President, 2000, Senate
Majority Leader, 1999-2000, Assistant Majority
Whip, 1995-1998; served as Chairman of the
following Senate Committees: Tax and Revenue,
Senate Judiciary Standing, Joint Executive
Appropriations, and Senate Rules; currently
serves as Co-Chair, Joint Executive
Appropriations.
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.)
- ----------------- ---------- ------------------- ---------- ---------------------
John C. Lucking Trustee since President, Econ-Linc, an economic consulting 3 None
Phoenix, AZ 2000 firm, since 1995; formerly Consulting
(05/20/43) 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, Northern
Arizona University Foundation since 1997;
member, various historical, civic and economic
associations.
OTHER INDIVIDUALS
TRUSTEES EMERITUS(6)
Lacy B. Herrmann Founder and Founder and Chairman of the Board, Aquila N/A N/A
New York, NY Chairman Management Corporation, the sponsoring
(05/12/29) Emeritus since organization and parent of the Manager or
2005; Chairman Administrator and/or Adviser or Sub-Adviser to
of the Board each fund of the Aquila Group of Funds(R);
of Trustees, Chairman of the Manager or Administrator
1987-2004 and/or Adviser or Sub-Adviser to each since
2004; Founder and Chairman Emeritus of each
fund in the Aquila Group of Funds(R);
previously Chairman and a Trustee of each fund
in the Aquila Group of Funds(R) 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.
J. William Weeks Trustee Retired; limited partner in real estate N/A N/A
Palm Beach, FL Emeritus since partnerships Alex, Brown & Sons No. 1 and 2;
(06/22/27) 2006 formerly Senior Vice President or Vice
President of the Aquila Municipal Bond Funds;
and Vice President of the Distributor.
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.)
- ----------------- ---------- ------------------- ---------- ---------------------
Charles E. Childs, III Executive Vice Executive Vice President of all funds in the N/A N/A
New York, NY President Aquila Group of Funds(R) and the Manager and
(04/01/57) since 2003 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 Vice President of the Distributor since 1995; N/A N/A
New York, NY President Vice President, Hawaiian Tax-Free Trust since
(05/06/61) since 2004 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; Vice
President, Aquila Rocky Mountain Equity Fund
since 2006.
Jerry G. McGrew Senior Vice President of the Distributor since 1998, N/A N/A
New York, NY President Registered Principal since 1993, Senior Vice
(06/18/44) since 1997 President, 1997-1998 and Vice President,
1993-1997; Senior Vice President, Aquila Three
Peaks High Income Fund, Aquila Rocky Mountain
Equity Fund and five Aquila Municipal Bond
Funds; Vice President, Churchill Cash Reserves
Trust, 1995-2001.
Robert W. Anderson Chief Chief Compliance Officer of the Fund and each N/A N/A
New York, NY Compliance of the other funds in the Aquila Group of
(08/23/40) Officer since Funds(R), the Manager and the Distributor
2004 and since 2004, Compliance Officer of the Manager
Assistant or its predecessor and current parent
Secretary 1998-2004; Assistant Secretary of the Aquila
since 2000 Group of Funds(R) since 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.)
- ----------------- ---------- ------------------- ---------- ---------------------
Joseph P. DiMaggio Chief Chief Financial Officer of the Aquila Group of N/A N/A
New York, NY Financial Funds(R) since 2003 and Treasurer since 2000.
(11/06/56) Officer since
2003 and
Treasurer
since 2000
Edward M. W. Hines Secretary Shareholder of Butzel Long, a professional N/A N/A
New York, NY since 1987 corporation, counsel to the Fund, since 2007;
(12/16/39) Partner of Hollyer Brady Barrett & Hines LLP,
its predecessor as counsel, 1989-2007;
Secretary of the Aquila Group of Funds(R).
John M. Herndon Assistant Assistant Secretary of the Aquila Group of N/A N/A
New York, NY Secretary Funds(R) since 1995 and Vice President of the
(12/17/39) since 1995 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 Group of N/A N/A
New York, NY Treasurer Funds(R) since 2000; Assistant Vice President
(11/02/66) since 2000 of the Manager or its predecessor and current
parent since 1998; Fund Accountant for the
Aquila Group of Funds(R), 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) or by visiting the EDGAR
Database at the SEC's internet site at www.sec.gov.
(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. Ms. Herrmann is the daughter of Lacy B.
Herrmann, the Founder and Chairman Emeritus of the Fund.
(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 Municipal Bond Funds"; Aquila Rocky Mountain Equity Fund is an
equity fund; Aquila Three Peaks High Income Fund is a high income
corporate bond fund; considered together, these 12 funds are called the
"Aquila Group of Funds(R)."
(6) A Trustee 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 non-public
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 the Fund.
INFORMATION WE COLLECT. "Non-public personal information" is personally
identifiable financial information about you as an individual or your family.
The kinds of non-public 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 non-public personal information about you
to companies that provide necessary services to us, such as the Fund's transfer
agent, distributor, or manager, 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.
NON-CALIFORNIA RESIDENTS: We also may disclose some of this information to
another fund in the Aquila Group of Funds(R) (or its service providers) under
joint marketing agreements that permit the funds to use the information only to
provide you with information about other funds in the Aquila Group of Funds(R)
or new services we are offering that may be of interest to you.
CALIFORNIA RESIDENTS ONLY: In addition, unless you "opt-out" of the following
disclosures using the form that was mailed to you under separate cover, we may
disclose some of this information to another fund in the Aquila Group of
Funds(R) (or its sevice providers) under joint marketing agreements that permit
the funds to use the information only to provide you with information about
other funds in the Aquila Group of Funds(R) or new services we are offering that
may be of interest to you.
HOW WE SAFEGUARD YOUR INFORMATION. We restrict access to non-public 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 non-public
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 non-public 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.
- --------------------------------------------------------------------------------
(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
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.
(a) As of December 31, 2007 (the end of the reporting period) the
Trust has adopted a code of ethics that applies to the Trust'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 Trust'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 Trust's Code of Ethics that applies to the
Trust'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 Trust'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
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
a) Audit Fees - The aggregate fees billed for professional services
rendered by the principal accountant for the audit of the Registrant's
annual financial statements were $18,000 in 2006 and $18,000 in 2007.
b) Audit Related Fees - There were no amounts billed for audit-related
fees over the past two years.
c) Tax Fees - The Registrant was billed by the principal accountant
$3,000 and $3,000 in 2006 and 2007, respectively, for return preparation
and tax compliance.
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. 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)(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 10, 2008
By: /s/ Joseph P. DiMaggio
- - - -----------------------------------
Chief Financial Officer and Treasurer
March 10, 2008
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 10, 2008
By: /s/ Joseph P. DiMaggio
- - - -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
March 10, 2008
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.