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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number______ 811-03907____________________________
The Empire Builder Tax Free Bond Fund
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
3435 Stelzer Road Columbus, OH 43219
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
BISYS Fund Services, 3435 Stelzer Road, Columbus, OH 43219
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (614) 470-8000
Date of fiscal year end: February 28, 2005
Date of reporting period: February 28, 2005
Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
Item 1. Reports to Stockholders.
- -------------------------------------[LOGO]-------------------------------------
EMPIRE BUILDER
--------------
3435 Stelzer Road
Columbus, Ohio 43219
1-800-847-5886
Dear Shareholder,
We are pleased to present The Empire Builder Tax Free Bond Fund Annual
Report for the year ended February 28, 2005.
For the past year, the Builder class was up 1.11%, and the Premier Class
was up 1.29%. In last year's letter, we forecasted the Federal Reserve Board
raising the Federal Fund Rate in the near future. Since our last report in
February 2004, the Federal Reserve Board raised the rate seven times - it now
stands at 2.75%.
Because we were heading into a period of potentially rising interest
rates, we shortened the average duration of the portfolio. Doing so reduces our
maturity and interest rate risk which protects the Fund's principal, our primary
objective. This is the main reason for the lower returns this year. We will
continue to keep the average duration of the portfolio short for the near
future. We feel the Federal Reserve Board will continue to raise the Federal
Fund Rate in the near future. When the right opportunities present themselves,
we will extend the duration of the portfolio to enhance our returns.
In our opinion, The Empire Builder Tax Free Bond Fund is well positioned
for the next year. The no-load structure continues to offer value to the
shareholder because there is no charge to purchase shares. We also recommend our
automatic investment program (also known as dollar cost averaging*) that allows
you to follow a disciplined investment plan. Please call the customer service
desk at 1-800-847-5886 for information on how to participate. We look forward to
helping you meet your investment needs.
Sincerely,
/s/ Seth M. Glickenhaus
Seth M. Glickenhaus
President
*Dollar cost averaging does not insure a profit and does not protect against
loss in declining markets. An investor should consider his or her financial
ability to continue making additional investments through periods of low share
price levels.
This report must be preceded or accompanied by a prospectus. For more complete
information including charges and expenses, please call 1-800-847-5886 to
receive a prospectus. Read the prospectus carefully before investing or sending
money.
The Fund's income may be subject to certain state and local taxes and, depending
on your tax status, the federal alternative minimum tax (AMT).
Past performance does not guarantee future results.
Not FDIC insured. May lose value. No bank guarantee.
- -------------------------------------[LOGO]-------------------------------------
EMPIRE BUILDER
--------------
Market Conditions during the Fund's most recent fiscal year
As we mentioned last year, the 10-year Treasury bond is the leading
benchmark for long-term interest rates. Interest rates in the 10-year Government
Bond Market for the fiscal year ended February 28, 2005 began at approximately
3.97% and ended at 4.38%. These figures suggest a very stable year. This is not
the case, however, as we had yet another very volatile market this year. The
10-year traded in a range of approximately 3.68% to 4.87%. Throughout the year,
we saw dramatic shifts in the interest rate of the 10-year bond.
We try to enhance the value of the Fund whenever possible. We continue to
manage the Fund to take advantage of opportunities that arise in the marketplace
due to interest rate movements and quality enhancements.
The following graphs illustrate the total return based on a $10,000
investment in Builder Class shares of the Fund made March 1, 1995, and a
$20,000* investment in Premier Class shares of the Fund made at the commencement
date of April 15, 1996, held in each through February 28, 2005, as well as the
performance of the Lehman Municipal Bond Index over the same period.
The Lehman Municipal Bond Index includes 25,000 long-term, investment
grade, municipal bonds. In the opinion of the Fund's advisor, this index most
accurately represents the performance of the broad municipal bond market.
However, there are substantial differences between the index and the Fund.
First, the index covers municipal bonds nationwide, whereas the Fund invests
only in New York tax exempt bonds. Second, the index does not reflect the cost
and expenses of actually obtaining the underlying bonds. Third, the index had a
higher level of volatility than the Fund during the ten years ended December 31,
2004, as measured by Beta. Finally, the index represents an unmanaged portfolio
whereas the Fund is professionally managed.
The graphs assume all dividends and distributions are reinvested at net
asset value. Past performance does not guarantee future results. Return
calculations assume the reinvestment of distributions and do not reflect taxes a
shareholder would pay on fund distributions or on the redemption of fund shares.
The performance data quoted represents past performance and current returns may
be higher or lower. The investment return and net asset value will fluctuate so
that an investor's shares, when redeemed maybe worth more or less than the
original cost.
The Fund's Builder Class shares' average annual total return for the
periods indicated was as follows:
1.11% for the one-year period beginning March 1, 2004 and ended February
28, 2005.
6.08% for the five-year period beginning March 1, 2000 and ended February
28, 2005.
5.13% for the ten-year period beginning March 1, 1995 and ended February
28, 2005.
* The minimum initial investment into the Premier Class is $20,000.
[The following information was depicted as a line chart in the printed material]
Empire Builder
Lehman Municipal Tax Free Bond Fund
Bond Index* Builder Class
---------------- ------------------
2/28/1995 $ 10,000 $ 10,000
2/28/1996 $ 11,105 $ 10,895
2/28/1997 $ 11,718 $ 11,363
2/28/1998 $ 12,790 $ 12,248
2/28/1999 $ 13,576 $ 12,841
2/28/2000 $ 13,293 $ 12,277
2/28/2001 $ 14,934 $ 13,892
2/28/2002 $ 15,949 $ 14,689
2/28/2003 $ 17,172 $ 15,662
2/28/2004 $ 18,253 $ 16,313
2/28/2005 $ 18,792 $ 16,494
* An unmanaged portfolio.
The Fund's Premier Class shares' average annual total return for the
periods indicated was as follows:
1.29% for the one-year period beginning March 1, 2004 and ended February
28, 2005.
F 6.35% for the five-year period beginning March 1, 2000 and ended
February 28, 2005.
7.47% for the period beginning April 15, 1996 (commencement of operations)
and ended February 28, 2005.
[The following information was depicted as a line chart in the printed material]
Empire Builder
Lehman Municipal Tax Free Bond Fund
Bond Index* Premier Class
---------------- ------------------
4/15/1996 $ 20,000 $ 20,000
2/28/1997 $ 21,438 $ 21,280
2/28/1998 $ 23,399 $ 22,992
2/1/1999 $ 24,837 $ 24,178
2/1/2000 $ 24,319 $ 23,182
2/1/2001 $ 27,322 $ 26,319
2/1/2002 $ 29,177 $ 27,902
2/1/2003 $ 31,415 $ 29,827
2/29/2004 $ 33,393 $ 31,140
2/28/2005 $ 34,380 $ 31,541
* An unmanaged portfolio.
3
Expense Examples (Unaudited):
As a shareholder of The Empire Builder Tax Free Bond Fund, you incur two
types of costs: (1) transaction costs, and (2) ongoing costs, including
management fees; and other Fund expenses.
This example is intended to help you understand your ongoing costs (in
dollars) of investing in The Empire Builder Tax Free Bond Fund and to compare
these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period from September 1, 2004 through
February 28, 2005.
Actual Return
The table below provides information about actual account values and
actual expenses. You may use the information below, together with the amount you
invested, to estimate the expenses that you paid over the period. Simply divide
your account value by $1,000 (for example, an $8,600 account value divided by
$1,000 = 8.6), then multiply the result by the number in the table under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
Beginning Ending Expense Paid Expense Ratio
Account Value Account Value During Period* During Period
9/1/04 2/28/05 9/1/04 - 2/28/05 9/1/04 - 2/28/05
------------- ------------- ---------------- ----------------
The Empire Builder
Tax Free Bond Fund Builder Class $1,000.00 $1,006.00 $6.22 1.25%
Premier Class 1,000.00 1,006.60 4.98 1.00%
Hypothetical Return for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on The Empire Builder Tax Free Bond Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs. Therefore,
the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
Beginning Ending Expense Paid Expense Ratio
Account Value Account Value During Period* During Period
9/1/04 2/28/05 9/1/04 - 2/28/05 9/1/04 - 2/28/05
------------- ------------- ---------------- ----------------
The Empire Builder
Tax Free Bond Fund Builder Class $1,000.00 $1,018.60 $6.26 1.25%
Premier Class 1,000.00 1,019.84 5.01 1.00%
The Empire Builder Tax Free Bond Fund invested, as a percentage of net
assets, in the following sectors, as of February 28, 2005.
Percent of
Empire Builder Tax Free Bond Fund Net Assets
- --------------------------------- ----------
New York City ............................................... 12.3%
New York State Agencies ..................................... 54.3
Other New York State Bonds .................................. 27.8
Puerto Rico ................................................. 4.6
Short Term Investments ...................................... 0.0
----
99.0%
====
- ----------
* Expenses are equal to the average account value times the Funds annualized
expense ratio multiplied by the number of days in the most recent fiscal
half-year divided by the number of days in the fiscal year.
4
THE EMPIRE BUILDER TAX FREE BOND FUND
Portfolio of Investments -- February 28, 2005
Principal Fair Value
Credit Ratings** Municipal Securities (99.0%) Amount (Note 2)
- ---------------- ---------------------------- --------- ----------
New York City (12.3%)
Aaa/AAA New York City, General Obligation, Series B, 5.25%,
8/1/2017, Callable 8/1/2007 @ 101, (AMBAC).................... $ 750,000 $ 799,733
A2/AAA New York City, General Obligation, Series B, 5.125%,
8/1/2019, Callable 8/1/2010 @ 101, (FGIC)..................... 2,000,000 2,144,760
Aaa/AAA New York City, General Obligation, Series B, 5.375%,
8/1/2022, Callable 8/1/2007 @ 101, (MBIA)..................... 1,250,000 1,334,988
Aaa/AAA New York City, Health & Hospital Corporation, Health System
Revenue, Series A, 5.50%, 2/15/2018, Callable 2/15/2012
@ 100, (FSA).................................................. 1,000,000 1,108,110
Aaa/AAA New York City Municipal Water Finance Authority Water &
Sewer System Revenue, 6.125%, 6/15/2020, Prerefunded
6/15/2005 @ 101............................................... 1,000,000 1,021,990
Aaa/AAA New York City Municipal Water Finance Authority Water &
Sewer System Revenue, Series A, 5.875%, 6/15/2025,
Prerefunded 6/15/2005 @ 101................................... 3,150,000 3,217,031
Aaa/AAA New York City, General Obligation, Series B2, Variable Rate,
1.80%*, 8/15/2009, Non Callable, (MBIA)....................... 1,120,000 1,120,000
Aaa/AAA New York City, General Obligation, Series H, Variable Rate,
1.80%*, 8/1/2013, Non Callable, (MBIA)........................ 2,600,000 2,600,000
-----------
Total New York City.............................................. 13,346,612
-----------
New York State Agencies (54.3%)
Long Island Power Authority (1.3%)
Aaa/AAA Long Island Power Authority, Electric System General Revenue,
Series A, 5.50% 12/1/2012, Non Callable, (FSA)................ 1,210,000 1,385,208
-----------
New York State Dormitory Authority (27.8%)
A3/AA- Albany County Airport Project, State Service Contract, 5.25%,
4/1/2013, Callable 4/1/2008 @ 101............................. 1,200,000 1,276,956
NR/AAA Albany County Airport Project, State Service Contract, 5.25%,
4/1/2017, Callable 4/1/2008 @ 101, (MBIA)..................... 1,000,000 1,069,890
Aaa/AAA Albany County Hospital Project, State Service Contract 2.00%,
8/15/2006, Non Callable, (FHA)(FSA)........................... 1,250,000 1,232,413
Aaa/AAA Augustana Lutheran Home for the Aged, Series A, 5.50%,
8/1/2020, Callable 8/1/2010 @ 101, (FHA)(MBIA)................ 905,000 981,871
Aaa/AAA Augustana Lutheran Home for the Aged, Series A, 5.50%,
8/1/2030, Callable 8/1/2010 @ 101, (FHA)(MBIA)................ 750,000 808,755
Aaa/AAA Columbia University, Series B, 5.375%, 7/1/2018, Callable
7/1/2012 @ 100................................................ 500,000 560,450
Aaa/AAA Columbia University, Series B, 5.375%, 7/1/2019, Callable
7/1/2012 @ 100................................................ 1,000,000 1,116,790
The accompanying notes are an integral part of the financial statements.
5
THE EMPIRE BUILDER TAX FREE BOND FUND
Portfolio of Investments -- February 28, 2005 -- continued
Principal Fair Value
Credit Ratings** Municipal Securities -- continued Amount (Note 2)
- ---------------- --------------------------------- --------- ----------
New York State Agencies -- continued
New York State Dormitory Authority -- continued
Aaa/AAA Columbia University, Series B, 5.375%, 7/1/2020, Callable
7/1/2012 @ 100................................................ $ 1,000,000 $ 1,112,700
Aaa/AAA Leake & Watts Services, Inc., 3.00%, 7/1/2005, Non Callable,
(MBIA)........................................................ 500,000 501,595
Aaa/AAA Lutheran Medical Center, 5.00%, 8/1/2016, Callable 2/1/2013
@ 100, (MBIA)................................................. 985,000 1,067,179
Aaa/AAA New York Medical College, 5.25%, 7/1/2013, Callable 7/1/2008
@ 101, (MBIA)................................................. 1,015,000 1,091,947
Aaa/AAA New York University, Series 2, 5.50%, 7/1/2018, Callable 7/1/2011
@ 100, (AMBAC) ............................................... 500,000 551,225
NR/AAA Park Ridge Housing, Inc., 6.375%, 8/1/2020, Callable 8/1/2010
@ 101, (FNMA)................................................. 1,000,000 1,134,570
NR/AAA Park Ridge Housing, Inc., 6.50%, 8/1/2025, Callable 8/1/2010
@ 101, (FNMA)................................................. 1,470,000 1,676,726
Aaa/NR Rochester Institute of Technology, Series A, 5.25%, 7/1/2016,
Callable 7/1/2012 @ 100, (AMBAC).............................. 2,045,000 2,243,958
Aaa/NR Rochester Institute of Technology, Series A, 5.25%, 7/1/2017,
Callable 7/1/2012 @ 100, (AMBAC).............................. 2,155,000 2,345,933
Aaa/AAA School Districts Financing, Series C, 5.25%, 4/1/2021, Callable
10/1/2012 @ 100, (MBIA)....................................... 1,300,000 1,416,818
Aaa/AAA Special Acts School Districts Program, 6.00%, 7/1/2019, Callable
7/1/2005 @ 102, (MBIA)........................................ 3,540,000 3,653,315
NR/AAA State University, 5.375%, 7/1/2021, Callable 7/1/2008
@ 102, (MBIA)................................................. 865,000 942,634
NR/AAA State University, 5.375%, 7/1/2021, Prerefunded 7/1/2008
@ 102, (MBIA)................................................. 325,000 358,205
Aaa/AAA Upstate Community Colleges, Series A, 6.00%, 7/1/2019,
Callable 7/1/2010 @ 101, (FSA)................................ 1,000,000 1,137,170
Aaa/AAA Upstate Community Colleges, Series A, 6.00%, 7/1/2020,
Callable 7/1/2010 @ 101, (FSA)................................ 845,000 960,469
NR/AAA Westchester County, Court Facilities, 5.25%, 8/1/2018,
Callable 2/1/2009 @ 101, (MBIA) .............................. 2,800,000 2,978,752
-----------
Total New York State Dormitory Authority......................... 30,220,321
-----------
New York State Energy, Research & Development (0.9%)
Aaa/AAA Western New York State Nuclear Service Center, Series PJ, 5.40%,
4/1/2005, Non Callable, (CAPMAC).............................. 1,020,000 1,023,029
-----------
The accompanying notes are an integral part of the financial statements.
6
THE EMPIRE BUILDER TAX FREE BOND FUND
Portfolio of Investments -- February 28, 2005 -- continued
Principal Fair Value
Credit Ratings** Municipal Securities -- continued Amount (Note 2)
- ---------------- --------------------------------- --------- ----------
New York State Agencies -- continued
New York State Environmental Facilities Corp. (1.5%)
Aaa/AAA State Water Pollution Control Revenue, Revolving Fund,
Pooled Loan, 5.90%, 1/15/2018, Prerefunded 1/15/2006
@ 102, (POL CTL-SRF).......................................... $ 785,000 $ 824,760
Aaa/AAA State Water Pollution Control Revenue, Revolving Fund,
Pooled Loan, 5.90%, 1/15/2018, Callable 1/15/2006
@ 102, (POL CTL-SRF).......................................... 725,000 760,235
-----------
Total New York State Environmental Facilities Corp............... 1,584,995
-----------
New York State Medical Care Facilities Finance Agency (1.0%)
Aaa/AAA Hospital & Nursing Home, St. Vincents Hospital Project, 6.20%,
2/15/2021, Callable 2/15/2006 @ 101, (AMBAC)(FHA)............. 1,060,000 1,073,928
-----------
New York State Metropolitan Transportation Authority (14.3%)
A3/AA- Metropolitan Transportation Authority Revenue, State Service
Contract, Series B, 5.00%, 7/1/2005, Non Callable............. 3,000,000 3,027,840
Aaa/AAA Metropolitan Transportation Authority Revenue, Transportation
Revenue, Series A, 5.00%, 11/15/2006, Non Callable, (FSA)..... 12,000,000 12,510,120
-----------
Total New York State Metropolitan Transportation Authority....... 15,537,960
-----------
New York State Thruway Authority (5.4%)
Aaa/AAA Highway & Bridge Trust Fund Bonds, Series A, 5.25%,
4/1/2006, Non Callable, (FGIC)................................ 1,500,000 1,546,005
Aaa/AAA Highway & Bridge Trust Fund Bonds, Series A, 5.50%, 4/1/2014,
Callable 4/1/2011 @ 101, (FGIC) .............................. 1,500,000 1,669,845
Aaa/AAA Highway & Bridge Trust Fund Bonds, Series A, 5.25%,
4/1/2017, Callable 10/1/2011 @ 100, (MBIA) ................... 2,500,000 2,709,150
-----------
Total New York State Thruway Authority........................... 5,925,000
-----------
New York State Urban Development Corp. (2.1%)
A3/AA- Community Enhancement Facilities, Series A, 5.00%, 4/1/2005,
Non Callable.................................................. 1,270,000 1,273,285
A3/AA- Empire State Development Corp., University Facilities Grants,
6.00%, 1/1/2009, Non Callable................................. 905,000 997,962
-----------
Total New York State Urban Development Corp...................... 2,271,247
-----------
Total New York State Agencies.................................... 59,021,688
-----------
Other New York State Bonds (27.8%)
A3/NR Albany Housing Authority, Limited Obligation, 6.25%, 10/1/2012,
Callable 10/1/2005 @ 102...................................... 1,000,000 1,040,590
Aaa/AAA Attica, Central School District, General Obligation, 3.125%,
6/15/2005, Non Callable, (FGIC)............................... 425,000 426,330
The accompanying notes are an integral part of the financial statements.
7
THE EMPIRE BUILDER TAX FREE BOND FUND
Portfolio of Investments -- February 28, 2005 -- continued
Principal Fair Value
Credit Ratings** Municipal Securities -- continued Amount (Note 2)
- ---------------- --------------------------------- --------- ----------
Other New York State Bonds -- continued
Aaa/AAA Babylon, General Obligation, 5.00%, 8/1/2006,
Non Callable, (AMBAC)......................................... $ 1,000,000 $ 1,034,990
Aaa/NR Binghamton, General Obligation, 2.50%, 3/15/2005,
Non Callable, (FSA)........................................... 510,000 510,133
Aaa/AAA Buffalo, Municipal Water Finance Authority, Water System Revenue,
5.75%, 7/1/2019, Callable 7/1/2005 @ 102, (FGIC).............. 500,000 515,600
Aaa/AAA Buffalo, Sewer System Revenue Authority, Series I, 4.00%,
7/1/2005, Non Callable, (FSA)................................. 1,000,000 1,006,430
Aaa/AAA Buffalo, Sewer System Revenue Authority, 4.00%, 7/1/2006,
Non Callable, (FSA)........................................... 1,095,000 1,117,010
Aaa/NR Chittenango, Central School District, General Obligation, 3.00%,
6/15/2005, Non Callable, (FSA)................................ 510,000 511,418
Aaa/NR Corning, City School District, General Obligation 5.00%, 6/15/2012,
Non Callable, (FSA) .......................................... 1,000,000 1,098,350
Aaa/NR Corning, City School District, General Obligation 5.00%, 6/15/2013,
Callable 6/15/2012 @ 100, (FSA) .............................. 970,000 1,063,430
Aaa/NR Corning, City School District, General Obligation 5.00%, 6/15/2014,
Callable 6/15/2012 @ 100, (FSA) .............................. 600,000 655,776
Aa2/NR Dutchess County Public Improvement, General Obligation, 3.50%,
12/15/2005, Non Callable...................................... 1,365,000 1,378,253
Aaa/AAA Erie County, Industrial Development Agency Buffalo School District
Project, 5.00%, 5/1/2006, Non Callable........................ 3,175,000 3,267,773
Aaa/AAA Evans, General Obligation, 6.80%, 4/15/2012,
Non Callable, (AMBAC)......................................... 225,000 271,249
Aaa/AAA Evans, General Obligation, 6.80%, 4/15/2013, Non Callable,
(AMBAC)....................................................... 225,000 274,568
Aaa/NR Fayetteville Manlius, Central School District, General Obligation,
5.00%, 6/15/2016, Callable 6/15/2012 @ 101, (FGIC)............ 375,000 408,225
Aaa/NR Ilion, Central School District, General Obligation, Series B,
5.50%, 6/15/2015, Callable 6/15/2012 @ 101, (FGIC) ........... 550,000 624,800
Aaa/NR Ilion, Central School District, General Obligation, Series B,
5.50%, 6/15/2016, Callable 6/15/2012 @ 101, (FGIC) ........... 500,000 563,530
Aaa/NR Mount Pleasant, General Obligation, 2.00%, 5/1/2005,
Non Callable, (MBIA).......................................... 550,000 550,033
Aaa/AAA Mount Sinai, Union Free School District, General Obligation,
6.20%, 2/15/2012, Non Callable, (AMBAC)....................... 1,065,000 1,240,299
Aaa/AAA Niagara Falls Public Water Authority, Water & Sewer System
Revenue, Series A, 5.50%, 7/15/2028, Callable 7/15/2006
@ 100, (MBIA)................................................. 1,000,000 1,039,340
The accompanying notes are an integral part of the financial statements.
8
THE EMPIRE BUILDER TAX FREE BOND FUND
Portfolio of Investments -- February 28, 2005 -- continued
Principal Fair Value
Credit Ratings** Municipal Securities -- continued Amount (Note 2)
- ---------------- --------------------------------- --------- ----------
Other New York State Bonds -- continued
Aaa/AAA North Hempstead, General Obligation, Series B, 6.375%, 4/1/2009,
Non Callable, (FGIC) ......................................... $ 570,000 $ 640,047
Aaa/AAA North Hempstead, General Obligation, Series B, 6.40%, 4/1/2010,
Non Callable, (FGIC).......................................... 560,000 641,659
NR/AAA Oneida County, Industrial Development Agency, Mohawk
Valley Network, St. Luke's Memorial Hospital, 5.00%, 1/1/2013,
Callable 1/1/2008 @ 101, (FSA)................................ 2,000,000 2,102,559
Aaa/NR Oyster Bay, General Obligation, 5.00%, 3/15/2011,
Non Callable, (FSA)........................................... 430,000 470,429
Aaa/NR Poughkeepsie Town, General Obligation, Series B, 2.00%,
12/15/2005, Non Callable, (MBIA).............................. 610,000 608,408
Aaa/NR Southern Cayuga, Central School District, General Obligation,
5.00%, 5/15/2014, Callable, 5/15/2012 @ 100, (FSA) ........... 400,000 436,812
Aaa/AAA Suffolk County, General Obligation, Series C, 5.00%, 9/15/2015,
Callable 9/15/2008 @ 101, (FGIC).............................. 965,000 1,031,546
Aaa/AAA Suffolk County, General Obligation, Series C, 5.00%, 9/15/2016,
Callable 9/15/2008 @ 101, (FGIC) ............................. 550,000 586,405
Aaa/AAA Suffolk County, General Obligation, Series C, 5.00%, 9/15/2017,
Callable 9/15/2008 @ 101, (FGIC) ............................. 480,000 510,614
Aaa/AAA Suffolk County, General Obligation, Series D, 5.00%, 11/1/2015,
Callable 11/1/2008 @ 101, (FGIC) ............................. 1,125,000 1,204,808
Aaa/AAA Suffolk County, General Obligation, Series D, 5.00%, 11/1/2016,
Callable 11/1/2008 @ 101, (FGIC) ............................. 1,110,000 1,185,558
Aaa/AAA Wyandanch, Union Free School District, General Obligation,
2.25%, 4/1/2005, Non Callable, (MBIA)......................... 575,000 575,166
Aaa/AAA Yonkers, General Obligation, Series A, 2.00%, 12/1/2005,
Non Callable, (MBIA).......................................... 750,000 747,953
Aaa/AAA Yonkers, General Obligation, Series E, 5.00%, 12/1/2006,
Non Callable, (MBIA).......................................... 750,000 779,693
-----------
Total Other New York State Bonds................................. 30,119,784
-----------
Puerto Rico (4.6%)
BAA1/A- Puerto Rico Commonwealth, General Obligation, 5.00%, 7/1/2030,
Mandatory Put 7/1/2012 @ 100.................................. 1,000,000 1,065,530
Aaa/AAA Puerto Rico Electric Power Authority, Revenue, Series W, 6.50%,
7/1/2005, (MBIA).............................................. 750,000 760,763
A3/A- Puerto Rico Electric Power Authority, Revenue, Series OO, 4.00%,
7/1/2006, Non Callable........................................ 500,000 508,605
Aaa/AAA Puerto Rico Municipal Finance Agency, Revenue, Series A, 4.25%,
8/1/2005, Non Callable, (FSA)................................. 2,195,000 2,214,337
The accompanying notes are an integral part of the financial statements.
9
THE EMPIRE BUILDER TAX FREE BOND FUND
Portfolio of Investments -- February 28, 2005 -- continued
Shares or
Principal Fair Value
Credit Ratings** Municipal Securities -- continued Amount (Note 2)
- ---------------- --------------------------------- --------- ----------
Puerto Rico -- continued
Aaa/AAA Puerto Rico Municipal Finance Agency, Revenue, General
Obligation, Series B, 5.00%, 8/1/2005, Non Callable, (FSA).... $ 400,000 $ 404,744
------------
Total Puerto Rico................................................ 4,953,979
------------
Total Municipal Securities (Cost $103,570,801)................... 107,442,063
------------
Short Term Investments (0.0%)
New York (0.0%)
Dreyfus New York Municipal Cash Management Fund.................. 10,000 10,000
------------
Total Short Term Investments (Cost $10,000)...................... 10,000
------------
Total Investments (Cost $103,580,801) (a) -- 99.0%................ $107,452,063
Net Other Assets (Liabilities) -- 1.0%............................ 1,082,445
------------
NET ASSETS -- 100.0%............................................. $108,534,508
============
- ----------
* Variable rate instrument. The rate presented represents the rate in effect
at February 28, 2005.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of
amortization/accretion of premium/market discount recognized for financial
reporting in excess of federal income tax reporting of $51,716. Cost for
federal income tax differs from fair value by net unrealized
appreciation/depreciation of securities as follows:
Unrealized appreciation $4,159,549
Unrealized depreciation (236,571)
----------
Net unrealized appreciation $3,922,978
==========
The accompanying notes are an integral part of the financial statements.
10
THE EMPIRE BUILDER TAX FREE BOND FUND
Portfolio of Investments -- February 28, 2005 -- continued
**Credit Ratings given by Moody's Investors Service Inc. and Standard & Poor's
Corporation. (Unaudited)
Moody's Standard & Poor's
Aaa AAA Instrument judged to be of the highest quality
and carrying the smallest amount of investment
risk.
Aa AA Instrument judged to be of high quality by all
standards.
A A Instrument judged to be adequate quality by all
standards.
Baa BBB Instrument judged to be moderate quality by all
standards.
NR NR Not Rated. In the opinion of the Investment
Adviser, instrument judged to be of comparable
investment quality to rated securities which may
be purchased by the Fund.
For items possessing the strongest investment attributes of their category,
Moody's gives that letter rating followed by a number. The Standard & Poor's
ratings may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Abbreviations used in this statement:
AMBAC Insured as to principal and interest by the American Municipal
Bond Assurance Corporation.
CAPMAC Insured as to principal and interest by Capital Markets Assurance
Corp.
FGIC Insured as to principal and interest by the Financial Guarantee
Insurance Corporation.
FHA Insured as to principal and interest by the Federal Housing
Administration.
FNMA Insured as to principal and interest by the Federal National
Mortgage Association.
FSA Insured as to principal and interest by Financial Security
Assurance.
MBIA Insured as to principal and interest by the Municipal Bond
Insurance Association.
POL CTL-SRF Insured as to principal and interest by the Pollution
Control State Revenue Fund.
The accompanying notes are an integral part of the financial statements.
11
THE EMPIRE BUILDER TAX FREE BOND FUND
Statement of Assets and Liabilities
February 28, 2005
Assets:
Investments in securities, at fair value
(cost $103,580,801) (Note 2) .............................. $107,452,063
Cash ........................................................ 41,366
Interest and dividend receivable ............................ 1,088,132
Receivable for investments sold ............................. 4,990,000
Prepaid expenses and other assets ........................... 69,044
------------
Total Assets .............................................. 113,640,605
Liabilities:
Dividends payable ............................ $ 21,337
Payable for investments purchased ............ 4,943,750
Advisory fee payable (Note 4) ................ 32,992
Administrative services fee payable (Note 4) . 2,137
Transfer Agency fee payable (Note 4) ......... 51,820
Other accrued expenses ....................... 54,061
------------
Total Liabilities ......................................... 5,106,097
------------
Net Assets ..................................................... $108,534,508
============
Net Assets:
Net assets consist of:
Capital ..................................................... $104,516,927
Undistributed net investment income ......................... 42,180
Net realized gains from investments ......................... 104,139
Net unrealized appreciation from investments ................ 3,871,262
------------
Net Assets ..................................................... $108,534,508
============
Builder Class:
Net Assets ................................... $ 52,221,865
Shares of Beneficial Interest Outstanding .... 2,939,361
------------
Builder Class - Net Asset Value (offering
and redemption price per share) ............ $ 17.77
============
Premier Class:
Net Assets ................................... $ 56,312,643
Shares of Beneficial Interest Outstanding .... 3,168,981
------------
Premier Class - Net Asset Value (offering
and redemption price per share) ............ $ 17.77
============
The accompanying notes are an integral part of the financial statements.
12
THE EMPIRE BUILDER TAX FREE BOND FUND
Statement of Operations
For the Year Ended February 28, 2005
Investment Income:
Interest .................................................. $ 3,883,006
Dividend .................................................. 11,042
-----------
Total Investment Income ................................... 3,894,048
Expenses:
Advisory fees (Note 4) ......................... $ 437,779
Administrative services fees (Note 4) .......... 200,000
Transfer agency fees (Builder Class) (Note 4) .. 165,682
Transfer agency fees (Premier Class) (Note 4) .. 42,711
Audit fees ..................................... 73,232
Custody fees ................................... 34,748
Fund accounting fees (Note 4) .................. 62,989
Trustees' fees ................................. 27,847
Other fees ..................................... 180,389
-----------
Total Expenses ............................... 1,225,377
Less: Custody fee credit ..................... (6,714)
Less: Reimbursement from Administrator ....... (33,884)
-----------
Total Net Expenses ........................................ 1,184,779
-----------
Net Investment Income ........................................ 2,709,269
-----------
Realized/Unrealized Gains (Losses) on
Investments (Notes 2 and 3)
Net realized gains from investment transactions. 501,510
Change in unrealized appreciation/
depreciation from investment transactions .... (1,985,120)
-----------
Net realized/unrealized gains (losses)
from investment transactions .......................... (1,483,610)
-----------
Change in net assets resulting from operations ............ $ 1,225,659
===========
The accompanying notes are an integral part of the financial statements.
13
THE EMPIRE BUILDER TAX FREE BOND FUND
Statements of Changes in Net Assets
Year Ended Year Ended
February 28, 2005 February 29, 2004
----------------- -----------------
From Investment Activities:
Operations:
Net investment income ........................ $ 2,709,269 $ 3,448,263
Net realized gains from investment
transactions ............................... 501,510 1,113,657
Change in unrealized appreciation/
depreciation from investment transactions .. (1,985,120) 339,136
------------ -------------
Change in net assets resulting from operations 1,225,659 4,901,056
------------ -------------
Distributions to shareholders from:
Net investment income -- Builder Class ....... (1,242,130) (1,593,260)
Net investment income -- Premier Class ....... (1,456,573) (1,842,382)
Net realized gains from investment
transactions -- Builder Class .............. (398,748) (559,031)
Net realized gains from investment
transactions -- Premier Class .............. (424,895) (610,097)
------------ -------------
Total distributions ........... (3,522,346) (4,604,770)
------------ -------------
Capital Transactions:
Proceeds from shares issued -- Builder Class . 2,263,421 2,865,115
Proceeds from shares issued -- Premier Class . 1,217,483 1,833,457
Dividends reinvested -- Builder Class ........ 1,479,069 1,929,811
Dividends reinvested -- Premier Class ........ 1,620,288 2,146,150
Value of shares redeemed -- Builder Class .... (5,932,632) (6,113,946)
Value of shares redeemed -- Premier Class .... (6,368,780) (4,107,168)
------------ -------------
Change in net assets from capital
share transactions ......................... (5,721,151) (1,446,581)
------------ -------------
Change in net assets .......... (8,017,838) (1,150,295)
Net Assets:
Beginning of period .......................... 116,552,346 117,702,641
------------ -------------
End of period ................................ $108,534,508 $ 116,552,346
============ =============
Share Transactions:
Issued -- Builder Class ...................... 126,398 158,501
Issued -- Premier Class ...................... 68,205 101,203
Reinvested -- Builder Class .................. 82,927 107,001
Reinvested -- Premier Class .................. 90,826 118,931
Redeemed -- Builder Class .................... (332,368) (338,191)
Redeemed -- Premier Class .................... (357,565) (227,524)
------------ -------------
Change in shares ............................. (321,577) (80,079)
------------ -------------
Undistributed net investment income .......... $ 42,180 $ 42,925
============ =============
The accompanying notes are an integral part of the financial statements.
14
THE EMPIRE BUILDER TAX FREE BOND FUND
Financial Highlights
For a share of beneficial interest outstanding throughout each period
Year Ended Year Ended Year Ended Year Ended Year Ended
February 28, 2005 February 29, 2004 February 28, 2003 February 28, 2002 February 28, 2001
----------------- ----------------- ----------------- ----------------- -----------------
Builder Premier Builder Premier Builder Premier Builder Premier Builder Premier
Class Class Class Class Class Class Class Class Class Class
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, Beginning
of Period ................. $ 18.12 $ 18.13 $ 18.08 $ 18.08 $ 17.80 $ 17.80 $ 17.69 $ 17.69 $ 16.32 $ 16.32
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Investment Activities:
Net investment income ..... 0.41 0.45 0.51 0.55 0.61 0.66 0.72 0.77 0.73 0.79
Net realized/ unrealized
gains/(losses) on
investments ............. (0.22) (0.23) 0.22 0.23 0.54 0.54 0.27 0.27 1.37 1.37
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment
Operations .............. 0.19 0.22 0.73 0.78 1.15 1.20 0.99 1.04 2.10 2.16
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions:
Net investment income ..... (0.41) (0.45) (0.51) (0.55) (0.61) (0.66) (0.71) (0.76) (0.73) (0.79)
Net realized capital gains (0.13) (0.13) (0.18) (0.18) (0.26) (0.26) (0.17) (0.17) -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions ....... (0.54) (0.58) (0.69) (0.73) (0.87) (0.92) (0.88) (0.93) (0.73) (0.79)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period .................... $ 17.77 $ 17.77 $ 18.12 $ 18.13 $ 18.08 $ 18.08 $ 17.80 $ 17.80 $ 17.69 $ 17.69
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Return ................. 1.11% 1.29% 4.16% 4.40% 6.62% 6.90% 5.74% 6.01% 13.15% 13.53%
Ratios/Supplementary Data:
Net Assets, End of Period
(in thousands) .......... $52,222 $56,313 $55,504 $61,048 $56,677 $61,025 $54,253 $59,910 $53,937 $60,418
Ratios of Net investment
income to Average
Net Assets .............. 2.32% 2.55% 2.85% 3.03% 3.44% 3.71% 4.04% 4.30% 4.31% 4.65%
Ratios of Expenses to
Average Net Assets ...... 1.18% 0.95% 1.04% 0.86% 1.16% 0.89% 1.14% 0.88% 1.20% 0.86%
Ratios of Expenses to
Average Net Assets* ..... 1.22% 0.99% 1.05% 0.87% 1.16% 0.89% 1.14% 0.88% 1.22% 0.88%
Portfolio Turnover Rate(a) 100.38% 100.38% 202.77% 202.77% 213.97% 213.97% 98.29% 98.29% 121.96% 121.96%
- ----------
* The ratio does not include a reduction of expenses for custodian fee
credits of cash balances maintained with the custodian or amounts
reimbursed by the Administrator.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of the financial statements.
15
THE EMPIRE BUILDER TAX FREE BOND FUND
Notes to Financial Statements
1. Organization:
The Empire Builder Tax Free Bond Fund (the "Fund") was established as a
Massachusetts business trust by an Agreement and Declaration of Trust dated
September 30, 1983. The Fund is registered under the Investment Company Act of
1940, as amended, as an open-end, non-diversified investment company. The Fund
has an unlimited number of shares authorized with no par value.
The Fund offers two classes of shares; the Builder Class and the Premier
Class. Each class of shares outstanding bears the same dividend, liquidation and
other rights and conditions, except that the Builder Class shares and the
Premier Class shares bear separate transfer agency expenses. Each class of
shares has exclusive voting rights with respect to matters affecting only that
class.
Under the Fund's organizational documents, its' Officers and Trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts with their vendors and others that provide for general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund.
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.
Use of Estimates
Estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ from these amounts.
Security Valuation
Tax-exempt securities are valued at their fair value as determined by an
independent pricing service approved by the Fund's Board of Trustees. The
pricing service uses information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable securities and
various relationships between securities in determining fair value. The methods
used by the pricing service and the quality of valuations so established are
reviewed by Officers of the Fund and Glickenhaus & Co. (the "Adviser"), under
the general supervision of the Trustees of the Fund.
Securities for which quotations are not readily available are stated at
fair value using procedures approved by the Trustees of the Fund. Short-term
debt securities having remaining maturities of sixty (60) days or less are
stated at amortized cost, which approximates market value. Investments in
investment companies are reported at their respective net asset values as
reported by those companies.
16
THE EMPIRE BUILDER TAX FREE BOND FUND
Notes to Financial Statements -- continued
Security Transactions and Investment Income
Security transactions are accounted for no later than one business day
after trade date. However, for financial reporting purposes, security
transactions are accounted for on trade date. Interest income, which includes
amortization of premium and accretion of discounts, is accrued as earned.
Realized gains and losses from security transactions and unrealized appreciation
and depreciation of investments are determined on the basis of identified cost.
Taxes
The Fund qualifies and intends to continue to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code, and to
distribute substantially all of its tax-exempt and taxable income. Therefore, no
federal income tax provision is required.
In addition, by distributing during each calendar year substantially all
of its net investment income, capital gains and certain other amounts, if any,
the Fund will not be subject to a federal excise tax.
Distributions and Dividends
Distributions to shareholders from net investment income are declared
daily and paid monthly. The Fund also distributes at least annually
substantially all net capital gains, if any, realized from portfolio
transactions.
The amounts of distributions from net investment income and net realized
gains are determined in accordance with federal income tax regulations, which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature (i.e. reclass of market
discounts, gain/loss, paydowns, and distributions), such amounts are
reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification. The
Fund utilizes equalization accounting for tax purposes and designates earnings
and profits, including net realized gains distributed to shareholders on
redemption of shares, as part of the dividend paid deduction for income tax
purposes.
Determination of Net Asset Value and Allocation of Expenses
In calculating net asset value per share of each class, investment income
and expenses, other than class-specific expenses, are allocated daily to each
class of shares based on the value of outstanding shares. Realized and
unrealized gains and losses are allocated on relative net assets.
Other
The Fund maintains a cash balance with its custodian and receives a
reduction of its custody fees and expenses for the amounts of interest earned on
such uninvested cash balance. There was no effect on net investment income. The
Fund could have invested such cash amounts in an income-producing asset if it
had not agreed to a reduction of fees or expenses under the expense offset
arrangement with the Fund's custodian.
17
THE EMPIRE BUILDER TAX FREE BOND FUND
Notes to Financial Statements -- continued
3. Purchases and Sales of Investment Securities:
Purchases and sales of investment securities, excluding short-term
investments, during the year ended February 28, 2005 amounted to $98,948,604 and
$92,334,497, respectively. During the same period, there were no purchases or
sales of long-term U.S. Government securities.
4. Advisory Fees and Other Related Party Transactions:
The Fund retains the Adviser to act as investment adviser pursuant to an
Investment Advisory Agreement. As compensation for its advisory services, the
Adviser receives a fee computed daily and paid monthly, at the annual rates of
0.40% of the first $100,000,000 of average daily net assets and 0.3333% of any
excess over $100,000,000.
Glickenhaus has agreed to a reduction of advisory fees to the extent that
the Fund's expenses, including the advisory fees, exceed 1.50% of the Fund's
average annual net assets. For the year ended February 28, 2005, there was no
reduction of advisory fees pursuant to this agreement.
BISYS Fund Services Ohio, Inc. ("BISYS Ohio" or the "Administrator") and
BISYS Fund Services, Inc. ("BISYS"), subsidiaries of The BISYS Group, Inc.,
serve as the Fund's administrator, transfer agent, and fund accountant. BISYS
Ohio and BISYS receives compensation for administration and fund accounting
services at a rate of .15% and .03%, respectively, of the average daily net
assets of the Fund (subject to certain minimum amounts), including reimbursement
for certain expenses incurred. Fees received for transfer agency services are
class specific and are based on the number of accounts per class. All fees are
accrued daily and paid monthly.
During the year ended February 28, 2005, the Administrator reimbursed the
Fund for certain expenses in the amount of $33,884, which is not subject to
recoupment in future periods.
Certain Officers and Trustees of the Trust are affiliated with the Adviser
or the Administrator. Such Officers and Trustees receive no compensation from
the Fund for serving in their respective roles, except the Chief Compliance
Officer. Each of the four Trustees who served both on the Board and the Audit
Committee were compensated $5,500 ($22,000 in total) for meeting and retainer
fees during the year ended February 28, 2005, and reimbursed for certain
expenses. There are certain employees of the Administrator, such as the Chief
Compliance Officer and staff who administer the Fund's compliance program, for
which the Fund reimburses the Administrator for certain amounts related to
compensation and certain other expenses incurred. For the year ended February
28, 2005, the total related amounts paid by the Fund was $55,833.
18
THE EMPIRE BUILDER TAX FREE BOND FUND
Notes to Financial Statements -- continued
5. Federal Income Tax Information:
The tax character of dividends paid to shareholders during the fiscal year
ended February 28, 2005 were as follows:
Distributions paid from
-------------------------
Total
Ordinary Net Long-Term Total Taxable Tax Exempt Distributions
Income Capital Gains Distributions Distributions Paid
-------- ------------- ------------- ------------- -------------
The Empire Builder Tax
Free Bond Fund........................... $793,788 $30,020 $823,808 $2,700,927 $3,524,735
The tax character of dividends paid to shareholders during the fiscal year
ended February 29, 2004 were as follows:
Distributions paid from
-------------------------
Total
Ordinary Net Long-Term Total Taxable Tax Exempt Distributions
Income Capital Gains Distributions Distributions Paid
-------- ------------- ------------- ------------- -------------
The Empire Builder Tax
Free Bond Fund........................... $450,149 $718,979 $1,169,128 $3,440,551 $4,609,679
Total Distributions paid differ from amounts shown on the Statements of
Changes in Net Assets because dividends are recognized when paid for tax
purposes.
As of February 28, 2005 the components of accumulated earnings (deficit)
on a tax basis was as follows:
Undistributed Total
Undistributed Undistributed Long-Term Accumulated Unrealized Accumulated
Ordinary Tax-Exempt Capital Accumulated Distributions Capital and Appreciation/ Earnings/
Income Income Gains/Losses Earnings Payable Other Losses (Depreciation)* (Deficit)
------------- ------------- ------------- ----------- ------------- ------------ --------------- -----------
The Empire
Builder
Tax Free
Bond Fund .. $10,543 $63,518 $41,879 $115,940 $(21,337) $ -- $3,922,978 $4,017,581
- ----------
* The difference between the book-basis and tax-basis unrealized
appreciation (depreciation) is attributable primarily to the difference
between book and tax amortization methods for premium and market discount.
19
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders of
The Empire Builder Tax Free Bond Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Empire Builder Tax Free Bond
Fund (the "Fund") at February 28, 2005, 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 five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at February 28, 2005 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Columbus, Ohio
April 14, 2005
20
THE EMPIRE BUILDER TAX FREE BOND FUND
Other Information (Unaudited)
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities is available (i)
without charge, upon request, by calling 1-800-847-5886; (ii) on the Securities
and Exchange Commission's website at http://www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30, 2004 is
available (i) without charge, upon request, by calling 1-800-847-5886 and (ii)
on the Securities and Exchange Commission's website at http://www.sec.gov.
Schedule of Portfolio Investments for quarters ending May 31 and November
30 were available starting November 30, 2004, without charge, on the Securities
and Exchange Commission's website at http://www.sec.gov.
21
THE MANAGEMENT
Trustees and Officers (Unaudited)
Number of
Positions Portfolios
Held With Overseen for Directorships
The Empire Term of The Empire Held Outside
Name, Address, and Builder Tax Free Office/Length Principal Occupation(s) Builder Tax Free the Fund
Birthdate Bond Fund of time served During the Past 5 Years Bond Fund Complex
- --------------------------- ---------------- -------------- --------------------------------- ---------------- --------------
SETH M. GLICKENHAUS........ Trustee, Indefinite, Senior Partner of Glickenhaus & Co. 1 None
6 East 43rd Street Chairman of since 4/84
New York, NY 10017 the Board
03/14 and President
EDWARD A. FALKENBERG....... Trustee, Indefinite, Principal, ACME Real Estate 1 None
23 Oak Lane since 6/89 (1998 to present); retired, Vice
Scarsdale, NY 10583 President and Controller, Joseph E.
09/40 Seagram & Sons, Inc.; Controller
Seagram Company Ltd.
EDWARD A. KUCZMARSKI....... Trustee, Indefinite, Certified Public Accountant, Partner, 1 NY Daily Tax
Hays & Company since 4/84 Hays & Company (1980 to present) Free Income Fund
477 Madison Ave., 10th Flr
New York, NY 10022
11/49
ELIZABETH B. NEWELL........ Trustee, Indefinite, Director, Park Ave. Christian Church 1 NY Daily Tax
130 East End Avenue since 4/84 Day School (2001 to present); Director, Free Income Fund
New York, NY 10028 The American School in Switzerland
07/40 (1991 to present)
JOHN P. STEINES............ Trustee, Indefinite, Professor of Law, New York University 1 NY Daily Tax
NYU School of Law, Rm 440 since 8/84School of Law (1978 to present); Free Income Fund
40 Washington Square. So. Kronish Leib Weiner & Hellman (2004
New York, NY 10012 to present) Counsel, Deloitte &
10/48 Touche LLP (2001 to 2004)
- ----------
* Mr. Glickenhaus is treated by the Fund as an "interested person" (as
defined in Section 2(a)(19) of the 1940 Act) of the Fund, Mr. Glickenhaus
is an "interested person" because he is a Senior Partner of Glickenhaus &
Co., the Advisor.
MICHAEL J. LYNCH........... Senior Vice Indefinite, Director, Unit Trust Department
6 East 43rd Street President since 3/97 Glickenhaus & Co. (1997 to Present);
New York, NY 10017 formerly Divisional Vice President/Desk
07/62 Supervisor, Unit Investment Trust Paine
Webber
KINGA KAPUSCINSKI.......... Vice President Indefinite, Assistant Counsel, BISYS Fund Services
100 Summer Street and Secretary since 12/04 (2004 - present); Associate, Goodwin Procter
Ste. 1500 LLP (2001 - 2004); Senior Federal Law Clerk
Boston, MA 02110 and Federal Law Clerk, U.S. District Court for
06/72 the District of Massachusetts (1999 - 2001)
TROY A. SHEETS............. Treasurer Indefinite, Vice President of Financial Services,
3435 Stelzer Road since 10/02 BISYS Fund Services (2002 to present);
Columbus, Ohio 43219 Senior Manager, KPMG LLP (1993 to 2002)
05/71
MICK GRUNEWALD............. Vice President Indefinite, Director, Client Services, BISYS Fund
3435 Stelzer Road since 6/03 Services, Inc. (1993 to Present)
Columbus, Ohio 43219
04/70
FREDRICK J. SCHMIDT........ Chief since 9/04 Senior Vice President and Chief Compliance
90 Park Avenue Compliance Term of Officer, CCO Services of BISYS Fund Services
10th Floor Officer Office since 2004; Chief Compliance Officer of four other
New York, NY 10016 expires 2005 Investment companies or fund complexes that CCO
services of BISYS Fund Services provides compliance
services since 2004; President, FJS Associates
(regulatory consulting firm) from 2002 to 2004;
Vice President, Credit Agricole Asset
Management, U.S. from 1987 to 2002.
[LOGO]
EMPIRE BUILDER
3435 Stelzer Road
Columbus, Ohio 43219
1-800-847-5886
[LOGO]
EMPIRE BUILDER
TAX FREE BOND FUND
Annual Report
February 28, 2005
Investment Adviser and Distributor
Glickenhaus & Co.
6 East 43rd Street
New York, New York 10017
Administrator
BISYS Fund Services Ohio, Inc.
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Transfer and Shareholder Servicing Agent
BISYS Fund Services Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Custodian
State Street Bank & Trust Co.
800 Pennsylvania Avenue
5th Floor
Kansas City, MO 64105-1307
Legal Counsel
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Independent Registered
Public Accounting Firm
PricewaterhouseCoopers LLP
100 E. Broad Street
Columbus, Ohio 43215
Customer Service
3435 Stelzer Road
Columbus, Ohio 43219
1-800-847-5886
This report is submitted for the information of the shareholders of the Empire
Builder Tax Free Bond Fund. It is not authorized for distribution to prospective
investors in the Fund unless preceded or accompanied by an effective prospectus,
obtainable from an investment dealer, which includes information regarding the
Fund's objectives and policies, record, management, sales commission and other
data.
533605
Item 1. Reports to Stockholders.
Include a copy of the report transmitted to stockholders pursuant to Rule
30e-1 under the Act (17 CFR 270.30e-1).
Item 2. Code of Ethics.
Disclose whether, as of the end of the period covered by the report, the
registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party. If the registrant has not adopted such a code of ethics,
explain why it has not done so. The registrant has adopted a code of
ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller,
or persons performing similar functions. This code of ethics is included
as Exhibit 12 (a)(1).
The registrant must briefly describe the nature of any amendment, during
the period covered by the report, to a provision of its code of ethics
that applies to the registrant's principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions, regardless of whether these individuals are
employed by the registrant or a third party, and that relates to any
element of the code of ethics definition enumerated in paragraph (b) of
this Item. The registrant must file a copy of any such amendment as an
exhibit pursuant to Item 11(a)(1), unless the registrant has elected to
satisfy paragraph (f) of this Item by posting its code of ethics on its
website pursuant to paragraph (f)(2) of this Item, or by undertaking to
provide its code of ethics to any person without charge, upon request,
pursuant to paragraph (f)(3) of this Item.
If the registrant has, during the period covered by the report, granted a
waiver, including an implicit waiver, from a provision of the code of
ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller,
or persons performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party, that relates
to one or more items set forth in paragraph (b) of this Item, the
registrant must briefly describe the nature of the waiver, the name of the
person to whom the waiver was granted, and the date of the waiver.
During the period covered by the report, with respect to the registrant's
code of ethics that applies to its principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions; there have been no amendments to, nor any
waivers granted from, a provision that relates to any element of the code
of ethics definition enumerated in paragraph (b) of this Item 2.
Item 3. Audit Committee Financial Expert.
(a) (1) Disclose that the registrant's board of directors has
determined that the registrant either:
(i) Has at least one audit committee financial expert serving
on its audit committee; or
(ii) Does not have an audit committee financial expert serving
on its audit committee.
(2) If the registrant provides the disclosure required by paragraph
(a)(1)(i) of this Item, it must disclose the name of the audit
committee financial expert and whether that person is "independent."
In order to be considered "independent" for purposes of this Item, a
member of an audit committee may not, other than in his or her
capacity as a member of the audit committee, the board of directors,
or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or
other compensatory fee from the issuer; or
(ii) Be an "interested person" of the investment company as
defined in Section 2(a)(19) of the Act (15 U.S.C. 80a-
2(a)(19)).
(3) If the registrant provides the disclosure required by paragraph
(a)(1)(ii) of this Item, it must explain why it does not have an
audit committee financial expert.
3(a)(1) The registrant's board of directors has determined that the registrant
has at least one audit committee financial expert serving on its audit
committee.
3(a)(2) The audit committee financial expert is Edward A. Kuczmarski, who is
"independent" for purposes of this Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Disclose, under the caption Audit Fees, the aggregate fees billed for
each of the last two fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
2004 $26,500
2005 $28,400
(b) Disclose, under the caption Audit-Related Fees, the aggregate fees
billed in each of the last two fiscal years for assurance and related services
by the principal accountant that are reasonably related to the performance of
the audit of the registrant's financial statements and are not reported under
paragraph (a) of this Item. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
2004 $2,500
2005 $2,500
Fees for both 2004 & 2005 relate to the review of the annual N1-A update.
(c) Disclose, under the caption Tax Fees, the aggregate fees billed in
each of the last two fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the fees
disclosed under this category.
2004 $3,500
2005 $37,634
Fees for both 2004 & 2005 relate to the preparation of the Fund federal income &
excise tax returns and review of the excise tax calculations, as well as
additional fees for tax advice and services related to dividend considerations.
(d) Disclose, under the caption All Other Fees, the aggregate fees billed
in each of the last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
2004 $0
2005 $0
(e) (1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation
S-X.
Except as permitted by Rule 2-01(c)(7)(i)(C) of Regulation S-X, the Trust's
Audit Committee must pre-approve all audit and non-audit services provided by
the independent accountants relating to the operations or financial reporting of
the funds. Prior to the commencement of any audit or non-audit services to a
fund, the Audit Committee reviews the services to determine whether they are
appropriate and permissible under applicable law.
(2) Disclose the percentage of services described in each of paragraphs
(b) through (d) of this Item that were approved by the audit committee pursuant
to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
None of the services summarized in (a)-(d), above, were approved by the Audit
Committee pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X.
(f) If greater than 50 percent, disclose the percentage of hours expended
on the principal accountant's engagement to audit the registrant's financial
statements for the most recent fiscal year that were attributed to work
performed by persons other than the principal accountant's full-time, permanent
employees.
Not applicable.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant for
each of the last two fiscal years of the registrant.
2004 $6,000
2005 $40,134
(h) Disclose whether the registrant's audit committee of the board of
directors has considered whether the provision of nonaudit services that were
rendered to the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling, controlled
by, or under common control with the investment adviser that provides ongoing
services to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the
principal accountant's independence.
Not applicable
Item 5. Audit Committee of Listed Registrants.
(a) If the registrant is a listed issuer as defined in Rule 10A-3 under
the Exchange Act (17CFR 240.10A-3), state whether or not the
registrant has a separately-designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Exchange
Act (15 U.S.C. 78c(a)(58)(A)). If the registrant has such a
committee, however designated,
identify each committee member. If the entire board of directors is
acting as the registrant's audit committee as specified in Section
3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)), so state.
(b) If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act (17CFR 240.10A-3(d)) regarding an exemption
from the listing standards for all audit committees.
Not applicable.
Item 6. Schedule of Investments.
File Schedule I - Investments in securities of unaffiliated issuers as of the
close of the reporting period as set forth in ss. 210.12-12 of Regulation S-X,
unless the schedule is included as part of the report to shareholders filed
under Item 1 of this Form.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
A closed-end management investment company that is filing an annual report
on this Form N-CSR must, unless it invests exclusively in non-voting securities,
describe the policies and procedures that it uses to determine how to vote
proxies relating to portfolio securities, including the procedures that the
company uses when a vote presents a conflict between the interests of its
shareholders, on the one hand, and those of the company's investment adviser;
principal underwriter; or any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules
thereunder) of the company, its investment adviser, or its principal
underwriter, on the other. Include any policies and procedures of the company's
investment adviser, or any other third party, that the company uses, or that are
used on the company's behalf, to determine how to vote proxies relating to
portfolio securities.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
If the registrant is a closed-end management investment company that is filing
an annual report on this Form N-CSR, provide the information specified in
paragraphs (a) and (b) of this Item with respect to portfolio managers.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. If the registrant is a closed-end management
investment company, provide the information specified in paragraph (b) of this
Item with respect to any purchase made by or on behalf of the registrant or any
"affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Exchange Act
(17 CFR 240.10b-18(a)(3)), of shares or other units of any class of the
registrant's equity securities that is registered by the registrant pursuant to
Section 12 of the Exchange Act (15 U.S.C. 781).
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Describe any material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors, where those changes
were implemented after the registrant last provided disclosure in response to
the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or
this Item.
Not applicable.
Item 11. Controls and Procedures.
(a) Disclose the conclusions of the registrant's principal executive and
principal financial officers, or persons performing similar functions, regarding
the effectiveness of the registrant's disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as of a date
within 90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or
240.15d-15(b)).
The registrant's principal executive officer and principal financial
officer have concluded, based on their evaluation of the registrant's disclosure
controls and procedures as conducted within 90 days of the filing date of this
report, that these disclosure controls and procedures are adequately designed
and are operating effectively to ensure that information required to be
disclosed by the registrant on Form N-CSR is (i) accumulated and communicated to
the investment company's management, including its certifying officers, to allow
timely decisions regarding required disclosure; and (ii) recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms.
(b) Disclose any change in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that
occurred during the registrant's last fiscal half-year (the registrant's second
fiscal half-year in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control
over financial reporting.
There were no changes in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that have materially affected or are reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a) File the exhibits listed below as part of this Form. Letter or
number the exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of
the disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit. The code of ethics
that is the subject of the disclosure required by Item 2 is attached hereto.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Act (17 CFR 270.30a-2). Certifications pursuant to Rule 30a-2(a) are
attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1
under the Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange
Act, provide the certifications required by rule 30a-2(b) under the Act as an
exhibit. A certification furnished pursuant to this paragraph will not be deemed
"filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to
the liability of that section. Such certification will not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933 or
the Exchange Act, except to the extent that the registrant incorporates it by
reference. Certifications pursuant to Rule 30a-2(b) are furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The Empire Builder Tax Free Bond Fund
By (Signature and Title)* /s/ Troy A. Sheets
-----------------------------------
Troy A. Sheets, Treasurer
Date May 9, 2005
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 (Signature and Title)* /s/ Seth M. Glickenhaus
-----------------------------------
Seth M. Glickenhaus, President
Date May 9, 2005
By (Signature and Title)* /s/ Troy A. Sheets
-----------------------------
Troy A. Sheets, Treasurer
Date May 9, 2005
* Print the name and title of each signing officer under his or her signature.