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
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(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: (800) 847-5886
Date of fiscal year end: February 28,
Date of reporting period: February 28, 2007
Item 1. Reports to Stockholders.
[LOGO]
- ---------------------------------EMPIRE BUILDER---------------------------------
--------------
Dear Shareholder,
We are pleased to present The Empire Builder Tax Free Bond Fund Annual Report
for the year ended February 28, 2007.
For the past year, the Builder class was up 3.44%, and the Premier Class was up
3.70%. In last year For the past year, the Builder class was up 3.44%, and the
Premier Class was up 3.70%. In last year's letter, we forecasted the Federal
Reserve Board was coming close to an end in their interest rate tightening
cycle. Since our last report in February 20 06, the Federal Reserve Board raised
the rate two times; it now stands at 5.25%.
The Federal Reserve Board has been holding the rate steady since June 2006.
There are two major issues on the table at the moment. The first is the housing
market and the troubles in the subprime mortgage industry. If the subprime
market weakens further, the Fed might reduce the Federal Fund Rate. The second
issue is inflation. The Fed could either raise or lower rates depending on the
economic numbers. Currently, we believe in the Fed might reduce the Federal Fund
Rate. The second issue is inflation. The Fed could either raise or lower rates
depending on the economic numbers. Currently, we believe in "staying the course"
- - as the right opportunities present themselves, we will continue to extend the
duration of the portfolio to enhance our returns, while keeping principal
intact. We will focus on increasing the yield of the Fund while maintaining the
high credit quality of the bonds in the Fund.
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 units. 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.
The Fund 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 is no guarantee of future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and net
asset value will fluctuate so that an investor not reflect taxes that a
shareholder would pay on fund distributions or on the redemption of fund shares.
The investment return and net asset value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost. To
obtain performance information for the most recent month end, please call
1-800-847-5886. For more complete information on The Empire Builder Tax Free
Bond Fund, you may request additional prospectuses by calling 1-800-847-5886.
You should consider the fund For more complete information on The Empire Builder
Tax Free Bond Fund, you may request additional prospectuses by calling
1-800-847-5886. You should consider the fund's investment objectives, risk,
charges and expenses carefully before you invest. Information about these and
other important information is in the fund's prospectus which you should read
carefully before investing.
Not FDIC insured. May lose value. No bank guarantee.
[LOGO]
- ---------------------------------EMPIRE BUILDER---------------------------------
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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, 2007 began at approximately
4.589% and ended at 4.554%. 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 4.42% to 5.24%. 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 conservatively taking 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, 1997, and a
$20,000* investment in Premier Class shares of the Fund made March 1, 1997, held
in each through February 28, 2007, 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 The Lehman Municipal Bond
Index includes 25,000 long-term, investment grade, municipal bonds. In the
opinion of the Fund's adviser, 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, 2006, 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. Return calculations assume the reinvestment distributions and do
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 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:
3.44% for the one-year period beginning March 1, 2006 and ended
February 28, 2007.
3.46% for the five-year period beginning March 1, 2002 and ended
February 28, 2007.
4.36% for the ten-year period beginning March 1, 1997 and ended
February 28, 2007
* The minimum initial investment into the Premier Class is $20,000
[The following information was depicted as a bar chart in the printed material.]
Lehman Empire Builder
Municipal Tax Free
Bond Bond Fund
Date Index Builder Class
--------- --------- -------------
2/28/1997 $10,000 $10,000
2/28/1998 10,914 10,778
2/28/1999 11,585 11,301
2/29/2000 11,343 10,804
2/28/2001 12,743 12,226
2/28/2002 13,614 12,927
2/28/2003 14,658 13,783
2/29/2004 15,582 14,356
2/28/2005 16,042 14,515
2/28/2006 16,663 14,816
2/28/2007 $17,491 $15,326
The Fund's Premier Class shares' average annual total return for the
periods indicated was as follows:
3.70% for the one-year period beginning March 1, 2006 and ended
February 28, 2007.
3.69% for the five-year period beginning March 1, 2002 and ended
February 28, 2007.
4.63% for the ten-year period beginning March 1, 1997 and ended
February 28, 2007.
[The following information was depicted as a bar chart in the printed material.]
Lehman Empire Builder
Municipal Tax Free
Bond Bond Fund
Date Index Premier Class
--------- --------- -------------
2/28/1997 $20,000 $20,000
2/28/1998 21,828 21,609
2/28/1999 23,170 22,723
2/29/2000 22,687 21,787
2/28/2001 25,487 24,736
2/28/2002 27,229 26,223
2/28/2003 29,317 28,033
2/29/2004 31,164 29,266
2/28/2005 32,085 29,643
2/28/2006 33,327 30,314
2/28/2007 $34,981 $31,436
3
Expense Examples (Unaudited):
As a shareholder of The Empire Builder Tax Free Bond Fund, you incur two
types of costs: (1) transaction costs, exchange fees and (2) ongoing costs,
including management fees; and other Fund expenses.
These examples are 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.
These examples are based on an investment of $1,000 invested at the
beginning of the period and held for the entire period from September 1, 2006
through February 28, 2007.
Actual Example
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 ,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 Expenses Paid Expense Ratio
Account Value Account Value During Period* During Period
9/1/06 2/28/07 9/1/06 - 2/28/07 9/1/06 - 2/28/07
------------- ------------- ---------------- ----------------
Builder Class.. $1,000.00 $1,019.40 $6.46 1.29%
Premier Class.. 1,000.00 1,020.90 5.56 1.11%
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and
hypothetical expenses based on The Empire Builder Tax Free Bond Fund 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, such as
exchange fees. 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 Expenses Paid Expense Ratio
Account Value Account Value During Period* During Period
9/1/06 2/28/07 9/1/06 - 2/28/07 9/1/06 - 2/28/07
------------- ------------- ---------------- ----------------
Builder Class.. $1,000.00 $1,018.40 $6.46 1.29%
Premier Class.. 1,000.00 1,019.29 5.56 1.11%
- ----------
* Expenses are equal to the average value times the Fund's annualized
expense ratio multiplied by the number of days in the most recent
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, 2007
Principal Fair Value
Credit Ratings** Amount (Note 2)
- ---------------- --------- ----------
Municipal Securities (99.6%)
New York City (25.2%)
New York City, General Obligation
Series G
A1/AA- 5.000%, 8/1/2008, Non Callable.............................. $5,000,000 $ 5,089,450
Series B
AAA/AAA 5.250%, 8/1/2017, Callable 8/1/2007 @ 101, (AMBAC) ......... 730,000 741,570
AAA/AAA 5.250%, 8/1/2017, Prerefunded 8/1/2007 @ 101, (AMBAC)....... 20,000 20,336
Subseries B2
AA2/AAA 3.650%, 8/15/2018, (LOC - Morgan Guaranty Trust)(a)......... 200,000 200,000
Series B
A1/AAA 5.125%, 8/1/2019, Callable 8/1/2010 @ 101, (FGIC)........... 2,000,000 2,109,960
AAA/AAA 5.375%, 8/1/2022, Callable 8/1/2007 @ 101, (MBIA)........... 1,235,000 1,255,032
AAA/AAA New York City, Health & Hospitals Corporation, Health System
Revenue, Series A, 5.500%, 2/15/2018, Callable
2/15/2012 @ 100, (FSA) .......................................... 1,000,000 1,087,220
AAA/AAA New York City, Municipal Water Finance Authority, Water & Sewer
System Revenue, Series B, 5.800%, 6/15/2029,
Callable 6/15/2007 @ 101, (MBIA) ............................. 5,000,000 5,079,700
New York City, Transitional Finance Authority
Series B
AA2/AAA 5.000%, 11/1/2014, Non Callable............................... 3,590,000 3,903,479
AA2/AAA 5.000%, 11/1/2016, Non Callable............................... 1,500,000 1,649,370
AA2/AAA 5.000%, 11/1/2017, Callable 5/1/2017 @ 100.................... 1,305,000 1,435,865
Series 3, Subseries 3H
AA2/AAA 3.600%, 11/1/2022, (SPA - Royal Bank of Canada)(a)............ 1,300,000 1,300,000
-----------
Total New York City.............................................. 23,871,982
-----------
New York State Agencies (42.9%)
New York State Dormitory Authority (41.1%)
Augustana Lutheran Home for the Aged, Series A
AAA/AAA 5.500%, 8/1/2020, Callable 8/1/2010 @ 101, (FHA/MBIA) ........ 860,000 911,841
AAA/AAA 5.500%, 8/1/2030, Callable 8/1/2010 @ 101, (FHA/MBIA) ........ 750,000 790,290
Columbia University, Series B
AAA/AAA 5.375%, 7/1/2018, Prerefunded 7/1/2012 @ 100.................. 500,000 542,865
AAA/AAA 5.375%, 7/1/2019, Prerefunded 7/1/2012 @ 100.................. 1,000,000 1,085,730
AAA/AAA 5.375%, 7/1/2020, Prerefunded 7/1/2012 @ 100.................. 1,000,000 1,085,730
AAA/AAA Good Samaritan Medical Center, Series A, 5.625%, 7/1/2012,
Callable 7/1/2009 @ 101, (MBIA)............................... 1,365,000 1,434,792
AA2/AA Memorial Sloan-Kettering Cancer Center, Series 1, 5.000%, 7/1/2034,
Callable 7/1/2013 @ 100....................................... 3,000,000 3,155,700
The accompanying notes are an integral part of the financial statements.
5
THE EMPIRE BUILDER TAX FREE BOND FUND
Portfolio of Investments -- February 28, 2007 -- continued
Principal Fair Value
Credit Ratings** Municipal Securities -- continued Amount (Note 2)
- ---------------- --------------------------------- --------- ----------
New York State Dormitory Authority -- continued
AAA/AAA Mental Health Services Facilities Improvement, Series A, 5.000%,
2/15/2019, Callable 2/15/2015 @ 100, (AMBAC).................. $2,500,000 $ 2,695,125
AAA/AAA New York Medical College, 5.250%, 7/1/2013,
Callable 7/1/2008 @ 101, (MBIA)............................... 1,015,000 1,045,795
AAA/AAA New York University, Series 2, 5.500%, 7/1/2018,
Callable 7/1/2011 @ 100, (AMBAC).............................. 500,000 534,380
Park Ridge Housing, Inc.
NR/AAA 6.375%, 8/1/2020, Callable 8/1/2010 @ 101,
(AMBAC/FNMA) ................................................. 1,000,000 1,088,610
NR/AAA 6.500%, 8/1/2025, Callable 8/1/2010 @ 101,
(AMBAC/FNMA) ................................................. 1,470,000 1,606,063
NR/AA Queens Medical Center, 3.950%, 8/15/2012, Non Callable, (FHA).... 1,600,000 1,611,680
Rochester Institute of Technology, Series A
AAA/NR 5.250%, 7/1/2016, Callable 7/1/2012 @ 100, (AMBAC).......... 2,045,000 2,200,849
AAA/NR 5.250%, 7/1/2017, Callable 7/1/2012 @ 100, (AMBAC).......... 2,155,000 2,322,465
AAA/AAA School Districts Financing, Series C, 5.250%, 4/1/2021,
Callable 10/1/2012 @ 100, (MBIA).............................. 1,300,000 1,400,581
AAA/AAA Special Acts School Districts Program, 6.000%, 7/1/2019,
Callable 7/1/2007 @ 100, (MBIA)............................... 3,540,000 3,566,090
NR/AA- State Supported Debt, Department of Education, Series A, 5.000%,
7/1/2018, Callable 7/1/2016 @ 100............................. 1,000,000 1,086,860
A1/A+ University of Rochester, Series A1, 5.000%, 7/1/2019,
Callable 1/1/2017............................................. 2,305,000 2,506,204
Upstate Community Colleges
Series B
AAA/AAA 5.250%, 7/1/2015, Callable 7/1/2014 @ 100, (FGIC)........... 3,140,000 3,455,853
Series A
AAA/AAA 6.000%, 7/1/2019, Prerefunded 7/1/2010 @ 101, (FSA)......... 1,000,000 1,084,320
AAA/AAA 6.000%, 7/1/2020, Prerefunded 7/1/2010 @ 101, (FSA)......... 845,000 916,250
AAA/AAA Westchester County, Court Facilities, 5.250%, 8/1/2018,
Prerefunded 2/1/2009 @ 101, (MBIA)............................ 2,800,000 2,913,036
-----------
Total New York State Dormitory Authority......................... 39,041,109
-----------
New York State Environmental Facilities Corp. (0.8%)
AAA/AAA State Water Pollution Control Revenue, Revolving Fund,
Pooled Loan, 5.900%, 1/15/2018, Callable 1/15/2008 @ 100,
(POL CTL-SRF)................................................. 725,000 733,512
-----------
New York State Urban Development Corp. (1.0%)
A1/AA- Empire State Development Corp., University Facilities Grants,
6.000%, 1/1/2009, Non Callable................................ 905,000 942,277
-----------
Total New York State Agencies.................................... 40,716,898
-----------
The accompanying notes are an integral part of the financial statements.
6
THE EMPIRE BUILDER TAX FREE BOND FUND
Portfolio of Investments -- February 28, 2007 -- continued
Principal Fair Value
Credit Ratings** Municipal Securities -- continued Amount (Note 2)
- ---------------- --------------------------------- --------- ----------
Other New York State Bonds (31.5%)
A3/NR Albany Housing Authority, Limited Obligation, 6.250%, 10/1/2012,
Callable 10/1/2007 @ 100...................................... $1,000,000 $ 1,012,140
Corning, City School District, General Obligation
AAA/NR 5.000%, 6/15/2012, Non Callable, (FSA)........................ 1,000,000 1,065,700
AAA/NR 5.000%, 6/15/2013, Callable 6/15/2012 @ 100, (FSA)............ 970,000 1,032,778
AAA/NR 5.000%, 6/15/2014, Callable 6/15/2012 @ 100, (FSA)............ 600,000 637,938
Evans, General Obligation
AAA/AAA 6.800%, 4/15/2012, Non Callable, (AMBAC)...................... 225,000 258,669
AAA/AAA 6.800%, 4/15/2013, Non Callable, (AMBAC)...................... 225,000 264,305
AAA/NR Fayetteville Manlius, Central School District, General Obligation,
5.000%, 6/15/2016, Callable 6/15/2012 @ 101, (FGIC)........... 375,000 401,434
Ilion, Central School District, General Obligation, Series B
AAA/NR 5.500%, 6/15/2015, Callable 6/15/2012 @ 101, (FGIC)........... 550,000 604,071
AAA/NR 5.500%, 6/15/2016, Callable 6/15/2012 @ 101, (FGIC)........... 500,000 549,660
AAA/AAA Long Island Power Authority, Electric Systems, Series F,
4.250%, 5/1/2033, Callable 11/1/2016 @ 100, (MBIA)............ 6,400,000 6,389,632
AAA/AAA Metropolitan Transportation Authority, Service Contracts,
Series A, 5.000%, 7/1/2030, Callable 7/1/12 @ 100, (AMBAC) ... 2,000,000 2,101,760
AAA/AAA Mount Sinai, Union Free School District, General Obligation,
6.200%, 2/15/2012, Non Callable, (AMBAC)...................... 1,065,000 1,188,348
AAA/AAA New York Convention Center Development Corp., Hotel Unit Fee,
Revenue, 5.000%, 11/15/2044, Callable 11/15/2015
@ 100, (AMBAC)................................................ 1,500,000 1,593,300
North Hempstead, General Obligation, Series B
AAA/AAA 6.375%, 4/1/2009, Non Callable, (FGIC)........................ 570,000 600,945
AAA/AAA 6.400%, 4/1/2010, Non Callable, (FGIC)........................ 560,000 604,694
AAA/AAA Oneida County, IDA Civic Facilities, Hamilton College Project,
Series B, 4.000%, 7/1/2022, Callable 7/1/2017 @ 100, (MBIA)... 500,000 493,210
NR/AAA Oneida County, IDA Civic Facilities, Mohawk Valley Network,
St. Luke's Memorial Hospital, 5.000%, 1/1/2013,
Callable 1/1/2008 @ 101, (FSA)................................ 2,000,000 2,042,620
AAA/NR Oyster Bay, General Obligation, 5.000%, 3/15/2011,
Non Callable, (FSA) .......................................... 430,000 452,382
A1/AA- Port Authority of New York & New Jersey, 5.000%, 9/1/2033,
Callable 9/1/2013 @ 101....................................... 5,000,000 5,301,300
AAA/AAA Rensselaer, City School District, Certificate of Participation,
5.000%, 6/1/2017, Callable 6/1/16 @ 100, (XLCA)............... 500,000 545,130
AAA/NR Southern Cayuga, Central School District, General Obligation,
5.000%, 5/15/2014, Callable 5/15/2012 @ 100, (FSA)............ 400,000 425,904
The accompanying notes are an integral part of the financial statements.
7
THE EMPIRE BUILDER TAX FREE BOND FUND
Portfolio of Investments -- February 28, 2007 -- continued
Principal Fair Value
Credit Ratings** Municipal Securities -- continued Amount (Note 2)
- ---------------- --------------------------------- --------- ----------
Other New York State Bonds -- continued
Suffolk County, General Obligation, Series D
AAA/AAA 5.000%, 11/1/2015, Callable 11/1/2008 @ 101, (FGIC)........... $1,125,000 $ 1,160,280
AAA/AAA 5.000%, 11/1/2016, Callable 11/1/2008 @ 101, (FGIC)........... 1,110,000 1,145,353
-----------
Total Other New York State Bonds................................. 29,871,553
-----------
Total Municipal Securities (Cost $91,788,228).................... 94,460,433
-----------
Short Term Investment (0.1%)(a)
Dreyfus New York Municipal Cash Management Fund.................. 110,000 110,000
-----------
Total Investments (Cost $91,898,228) -- 99.7%.................... $94,570,433
Net Other Assets (Liabilities) -- 0.3%............................ 292,123
-----------
NET ASSETS -- 100.0%.............................................. $94,862,556
===========
- ----------
(a) Variable or Floating Rate Security. Rate disclosed is as of February 28,
2007.
**Credit Ratings given by Moody **Credit Ratings given by Moody's
Investors Service, Inc. and Standard & Poor's Corp. (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 of adequate quality by
all standards.
NR NR Not Rated. In the opinion of the Investment
Advisor, 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.
AMBAC Insured as to principal and interest by the American Municipal
Bond Insurance Corp.
FGIC Insured as to principal and interest by the Financial Guaranty
Insurance Co.
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 Federal Security
Assurance.
LOC Letter of Credit
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.
SPA Standby Purchase Agreement
XLCA Insured as to principal and interest by the XL Capital
Assurance
The accompanying notes are an integral part of the financial statements.
8
THE EMPIRE BUILDER TAX FREE BOND FUND
Portfolio of Investments -- February 28, 2007 -- continued
Summary of Portfolio Holdings (Unaudited):
Percent of
The Empire Builder Tax Free Bond Fund Net Assets
- ------------------------------------- ----------
New York City ............................................... 25.2%
New York State Agencies ..................................... 42.9
Other New York State Bonds .................................. 31.5
Short Term Investments ...................................... 0.1
----
99.7%
====
The accompanying notes are an integral part of the financial statements.
9
THE EMPIRE BUILDER TAX FREE BOND FUND
Statement of Assets and Liabilities
February 28, 2007
Assets:
Investments in securities, at fair value (cost $91,898,228) (Note 2)...................... $94,570,433
Cash...................................................................................... 101,338
Interest and dividends receivable......................................................... 808,384
Receivable for capital shares issued...................................................... 41
Prepaid expenses and other assets......................................................... 52,823
-----------
Total Assets............................................................................ 95,533,019
Liabilities:
Dividends payable......................................................... $ 8,493
Payable for investments purchased......................................... 489,885
Payable for capital shares redeemed....................................... 35,881
Advisory fees payable (Note 4)............................................ 29,052
Administration fees payable (Note 4)...................................... 18,874
Transfer agency fees payable (Note 4)..................................... 32,250
Custodian fees payable.................................................... 6,411
Compliance services fees payable (Note 4)................................. 509
Other accrued expenses.................................................... 49,108
-----------
Total Liabilities....................................................................... 670,463
-----------
Net Assets................................................................................... $94,862,556
===========
Net Assets:
Capital................................................................................... $91,606,961
Accumulated undistributed net investment income........................................... 108,267
Accumulated undistributed net realized gains from investments............................. 475,123
Net unrealized appreciation of investments................................................ 2,672,205
-----------
Net Assets................................................................................... $94,862,556
===========
Builder Class:
Net Assets................................................................ $45,009,511
Shares of Beneficial Interest Outstanding................................. 2,550,839
-----------
Net Asset Value, Offering and Redemption Price per share.................. $ 17.64
===========
Premier Class:
Net Assets................................................................ $49,853,045
Shares of Beneficial Interest Outstanding................................. 2,824,747
-----------
Net Asset Value, Offering and Redemption Price per share.................. $ 17.65
===========
The accompanying notes are an integral part of the financial statements.
10
THE EMPIRE BUILDER TAX FREE BOND FUND
Statement of Operations
For the Year Ended February 28, 2007
Investment Income:
Interest.................................................................................. $4,302,596
Dividend.................................................................................. 40,317
----------
Total Investment Income................................................................... 4,342,913
Expenses:
Advisory fees (Note 4).................................................... $ 388,744
Administration fees (Note 4).............................................. 206,000
Fund accounting fees (Note 4)............................................. 62,438
Transfer agency fees -- Builder Class (Note 4)............................. 118,228
Transfer agency fees -- Premier Class (Note 4)............................. 29,027
Custody fees.............................................................. 35,678
Trustees' fees (Note 4)................................................... 41,995
Compliance services fee (Note 4).......................................... 61,245
Legal fees................................................................ 72,734
Other fees................................................................ 144,985
----------
Total expenses.......................................................... 1,161,074
Less: Custody fee credit................................................ (19,748)
----------
Total Net Expenses........................................................................ 1,141,326
----------
Net Investment Income........................................................................ 3,201,587
----------
Realized/Unrealized Gains on Investments (Notes 2 and 3)
Net realized gains from investment transactions........................... 851,324
Change in unrealized appreciation/depreciation from
investment transactions................................................. (643,480)
----------
Net realized/unrealized gains from investments.......................................... 207,844
----------
Change in net assets resulting from operations............................................... $3,409,431
==========
The accompanying notes are an integral part of the financial statements.
11
THE EMPIRE BUILDER TAX FREE BOND FUND
Statements of Changes in Net Assets
Year Ended Year Ended
February 28, 2007 February 28, 2006
----------------- -----------------
From Investment Activities:
Operations:
Net investment income ............................................. $ 3,201,587 $ 2,911,121
Net realized gains (losses) from investment transactions .......... 851,324 (118,027)
Change in unrealized appreciation/depreciation from
investment transactions ......................................... (643,480) (555,577)
------------- -------------
Change in net assets resulting from operations .................... 3,409,431 2,237,517
------------- -------------
Distributions to Shareholders from:
Net investment income:
Builder Class ..................................................... (1,465,943) (1,312,241)
Premier Class ..................................................... (1,721,433) (1,540,648)
Net realized gains from investment transactions:
Builder Class ..................................................... (150,345) (24,867)
Premier Class ..................................................... (165,902) (27,553)
------------- -------------
Total distributions ............................................. (3,503,623) (2,905,309)
------------- -------------
Change in net assets from capital share transactions ................. (6,906,289) (6,003,679)
------------- -------------
Change in net assets .............................................. (7,000,481) (6,671,471)
Net Assets:
Beginning of period ............................................... 101,863,037 108,534,508
End of period ..................................................... $ 94,862,556 $ 101,863,037
============= =============
Accumulated net investment income ................................. $ 108,267 $ 35,403
============= =============
Capital Transactions:
Builder Class
Proceeds from shares issued ....................................... $ 731,923 $ 1,090,241
Dividends reinvested .............................................. 1,509,355 1,193,736
Value of shares redeemed .......................................... (5,504,685) (5,861,452)
------------- -------------
Total Builder Class ............................................. (3,263,407) (3,577,475)
------------- -------------
Premier Class
Proceeds from shares issued ....................................... 469,568 827,135
Dividends reinvested .............................................. 1,623,363 1,301,277
Value of shares redeemed .......................................... (5,735,813) (4,554,616)
------------- -------------
Total Premier Class ............................................. (3,642,882) (2,426,204)
------------- -------------
Change in net assets from capital share transactions .............. $ (6,906,289) $ (6,003,679)
============= =============
Share Transactions:
Builder Class
Issued ............................................................ 41,662 61,598
Reinvested ........................................................ 85,919 67,498
Redeemed .......................................................... (313,777) (331,422)
------------- -------------
Total Builder Class Shares ...................................... (186,196) (202,326)
------------- -------------
Premier Class
Issued ............................................................ 26,740 46,728
Reinvested ........................................................ 92,388 73,571
Redeemed .......................................................... (326,261) (257,400)
------------- -------------
Total Premier Class Shares ...................................... (207,133) (137,101)
------------- -------------
The accompanying notes are an integral part of the financial statements.
12
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
February 28, 2007 February 28, 2006 February 29, 2005
------------------ ------------------- ------------------
Builder Premier Builder Premier Builder Premier
Class Class Class Class Class Class
------- ------- ------- ------- ------- -------
Net Asset Value,
Beginning of Period ....... $ 17.66 $ 17.66 $ 17.77 $ 17.77 $ 18.12 $ 18.13
------- ------- ------- ------- ------- -------
Investment Activities:
Net investment income ..... 0.56 0.59 0.46 0.50 0.41 0.45
Net realized/unrealized
gains/(losses) on
investments ............. 0.04 0.05 (0.10) (0.10) (0.22) (0.23)
------- ------- ------- ------- ------- -------
Total from Investment
Operations .............. 0.60 0.64 0.36 0.40 0.19 0.22
------- ------- ------- ------- ------- -------
Distributions:
Net investment income ..... (0.56) (0.59) (0.46) (0.50) (0.41) (0.45)
Net realized capital gains (0.06) (0.06) (0.01) (0.01) (0.13) (0.13)
------- ------- ------- ------- ------- -------
Total distributions ....... (0.62) (0.65) (0.47) (0.51) (0.54) (0.58)
------- ------- ------- ------- ------- -------
Net Asset Value,
End of Period ............. $ 17.64 $ 17.65 $ 17.66 $ 17.66 $ 17.77 $ 17.77
======= ======= ======= ======= ======= =======
Total Return ................. 3.44% 3.70% 2.07% 2.26% 1.11% 1.29%
Ratios/Supplementary Data:
Net Assets, End of Period
(in thousands) .......... $45,010 $49,853 $48,323 $53,540 $52,222 $56,313
Ratios of Net Investment
Income to Average
Net Assets .............. 3.19% 3.39% 2.67% 2.86% 2.32% 2.55%
Ratios of Net Expenses
to Average Net Assets(b) 1.28% 1.08% 1.20% 1.01% 1.18% 0.95%
Ratios of Expenses
to Average Net Assets* .. 1.30% 1.10% 1.21% 1.02% 1.22% 0.99%
Portfolio Turnover Rate(a) 134.56% 134.56% 52.14% 52.14% 100.38% 100.38%
Year Ended Year Ended
February 28, 2004 February 28, 2003
------------------- -------------------
Builder Premier Builder Premier
Class Class Class Class
------- ------- ------- -------
Net Asset Value,
Beginning of Period ....... $ 18.08 $ 18.08 $ 17.80 $ 17.80
------- ------- ------- -------
Investment Activities:
Net investment income ..... 0.51 0.55 0.61 0.66
Net realized/unrealized
gains/(losses) on
investments ............. 0.22 0.23 0.54 0.54
------- ------- ------- -------
Total from Investment
Operations .............. 0.73 0.78 1.15 1.20
------- ------- ------- -------
Distributions:
Net investment income ..... (0.51) (0.55) (0.61) (0.66)
Net realized capital gains (0.18) (0.18) (0.26) (0.26)
------- ------- ------- -------
Total distributions ....... (0.69) (0.73) (0.87) (0.92)
------- ------- ------- -------
Net Asset Value,
End of Period ............. $ 18.12 $ 18.13 $ 18.08 $ 18.08
======= ======= ======= =======
Total Return ................. 4.16% 4.40% 6.62% 6.90%
Ratios/Supplementary Data:
Net Assets, End of Period
(in thousands) .......... $55,504 $61,048 $56,677 $61,025
Ratios of Net Investment
Income to Average
Net Assets .............. 2.85% 3.03% 3.44% 3.71%
Ratios of Net Expenses
to Average Net Assets(b) 1.04% 0.86% 1.16% 0.89%
Ratios of Expenses
to Average Net Assets* .. 1.05% 0.87% 1.16% 0.89%
Portfolio Turnover Rate(a) 202.77% 202.77% 213.97% 213.97%
- ----------
* 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 rate is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(b) Ratio as disclosed reflects the impact of custody fee credits from the
custodian. Had the custody credits not been included the impact would have
been to increase the ratios by 0.02%, 0.01%, 0.01%, 0.01% and 0.00%, for
the years 2007, 2006, 2005, 2004 and 2003, respectively.
The accompanying notes are an integral part of the financial statements.
13
THE EMPIRE BUILDER TAX FREE BOND FUND
Notes to Financial Statements
February 28, 2007
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 (the "1940 Act"), 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 may
enter into contracts with its 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 adhered to
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 ("GAAP").
Use of Estimates
Estimates and assumptions are required to be made regarding amounts of
income and expenses, assets and liabilities and disclosure of contingent assets
and liabilities at the dates of the financial statement. 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 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.
14
THE EMPIRE BUILDER TAX FREE BOND FUND
Notes to Financial Statements -- continued
February 28, 2007
New Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income
Taxes." FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken in the course of preparing the
Fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required no later than the last business day of the first financial statement
reporting period for fiscal years beginning after December 15, 2006. At this
time, management is evaluating the implications of FIN 48 and its impact on the
Fund's financial statements.
In September 2006, the FASB issued Statement of Financial Accounting
Standards No. 157 ("SFAS 157"), "Fair Value Measurements." This standard
establishes a single authoritative definition of fair value, sets out a
framework for measuring fair value and requires additional disclosures about
fair value measurements. SFAS 157 applies to fair value measurements already
required or permitted by existing standards. SFAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. The changes to current accounting principles
generally accepted in the United States of America from the application of this
Statement relate to the definition of fair value, the methods used to measure
fair value and the expanded disclosures about fair value measurements. At this
time, the Fund does not believe the adoption of SFAS 157 will significantly
impact the financial statement amounts; however, additional disclosures may be
required about the inputs used to develop the measurements and the effect of
certain of the measurements on changes in net assets for the period.
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. 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. Therefore, no federal income tax provision is
required.
15
THE EMPIRE BUILDER TAX FREE BOND FUND
Notes to Financial Statements -- continued
February 28, 2007
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 GAAP. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature (e.g. 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.
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 shares outstanding. Realized and unrealized gains and
losses are allocated based 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 for
the year ended February 28, 2007. 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.
3. Purchases and Sales of Investment Securities:
Purchases and sales of investment securities, excluding short-term
investments, during the year ended February 28, 2007, amounted to $136,482,535
and $122,068,635, respectively. During the year, 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 accrued 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.
The Adviser 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, 2007, there was no
reduction of advisory fees pursuant to this agreement.
16
THE EMPIRE BUILDER TAX FREE BOND FUND
Notes to Financial Statements -- continued
February 28, 2007
BISYS Fund Services Ohio, Inc. ("BISYS Ohio" or the "Administrator") and
BISYS Fund Services, Inc. ("BISYS"), subsidiaries of The BISYS Group, Inc.,
serves as the Fund's administrator, transfer agent and fund accountant. BISYS
Ohio and BISYS receive compensation for administration and fund accounting
services at a rate of 0.15% and 0.03%, respectively, of 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.
Under a Compliance Services Agreement between the Fund and BISYS Ohio (the
"CCO Agreement"), BISYS Ohio makes an employee available to serve as the Fund's
Chief Compliance Officer (the "CCO"). Under the CCO Agreement, BISYS Ohio also
provides infrastructure and support in implementing the written policies and
procedures comprising the Fund's compliance program, including support services
to the CCO. Expenses incurred for the Fund are reflected on the Statement of
Operations as "Compliance service fees". BISYS Ohio pays the salary and other
compensation earned by any such individuals as employees of BISYS Ohio.
Certain Officers and Trustees of the Fund are affiliated with the Adviser
or the Administrator. Such Officers and Trustees receive no compensation from
the Fund for serving in their respective roles. Each of the four non-interested
Trustees who serve on both the Board and the Audit Committee are compensated
$2,100 in retainer per quarter and a $900 fee for each regularly scheduled
meeting, plus reimbursement for certain expenses. During the year ended February
28, 2007, actual Trustee compensation was $46,000 in total from the Fund.
5. Concentration of Credit Risk:
The Fund invests primarily in debt instruments of municipal issuers in the
New York State. The issuers' abilities to meet their obligations may be affected
by economic developments in New York State or its region.
6. Federal Income Tax Information:
The tax character of dividends paid to shareholders during the fiscal year
ended February 28, 2007 were as follows:
Distributions paid from
-----------------------
Total
Ordinary Net Long-Term Total Taxable Tax Exempt Distributions
Income Distributions Distributions Distributions Paid*
-------- ------------- ------------- ------------- -------------
The Empire Builder Tax
Free Bond Fund................... $55,404 $316,247 $371,651 $3,166,469 $3,538,120
17
THE EMPIRE BUILDER TAX FREE BOND FUND
Notes to Financial Statements -- continued
February 28, 2007
The tax character of dividends paid to shareholders during the fiscal year
ended February 28, 2006 were as follows: Distributions paid from
Distributions paid from
-----------------------
Total
Ordinary Net Long-Term Total Taxable Tax Exempt Distributions
Income Distributions Distributions Distributions Paid*
-------- ------------- ------------- ------------- -------------
The Empire Builder Tax
Free Bond Fund................... $10,637 $41,876 $52,513 $2,831,143 $2,883,656
As of February 28, 2007 the components of accumulated earnings (deficit)
on a tax basis were as follows:
Undistributed
Undistributed Undistributed Long-Term
Ordinary Tax-Exempt Capital Accumulated
Income Income Gains/Losses Earnings
------------- ------------- ------------- -----------
The Empire Builder Tax
Free Bond Fund.......... $409,401 $116,760 $9,477 $535,638
Total
Accumulated Unrealized Accumulated
Distributions Capital and Appreciation/ Earnings/
Payable Other Losses (Depreciation)** (Deficit)
------------- ------------ ---------------- ------------
The Empire Builder Tax
Free Bond Fund.......... $(8,493) $ -- $2,728,450 $3,255,595
- ----------
* Total distributions paid may differ from the amount reported in the
Statement of Changes in Net Assets because for tax purposes distributions
are recognized when actually paid.
** 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.
As of February 28, 2007, the cost, gross unrealized appreciation and gross
unrealized depreciation on securities for federal income tax purposes, were as
follows:
Tax Net Unrealized
Tax Unrealized Unrealized Appreciation
Tax Cost Appreciation Depreciation (Depreciation)
-------- -------------- ------------ --------------
The Empire Builder Tax
Free Bond Fund.......... $91,841,983 $2,746,299 $(17,849) $2,728,450
18
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, 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 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 audit 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, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Columbus, Ohio
April 16, 2007
19
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; and (ii) on the
Securities and Exchange Commission's (the "Commission") 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 30th is available
(i) without charge, upon request, by calling 1-800-847-5886; and (ii) on the
Commission's website at http://www.sec.gov.
The Fund files a complete Schedule of Portfolio Holdings with the
Commission for the first and third quarters of each fiscal year on Form N-Q. The
Fund's Forms N-Q are available without charge on the Commission's website at
http://www.sec.gov, or may be reviewed and copied at the Commission's Public
Reference Room in Washington, D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
20
THE MANAGEMENT (Unaudited)
Independent Trustees
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
- ---------------------- ---------------- -------------- --------------------------------- ---------------- -------------
EDWARD A. FALKENBERG....... Trustee Since Principal, ACME Real Estate 1 None
23 Oak Lane June 1989 (1998 to present)
Scarsdale, NY 10583
09/40
EDWARD A. KUCZMARSKI....... Trustee Since Certified Public Accountant, 1 Director of
Hays & Company April 1984 Managing Partner, Hays & Company New York
477 Madison Ave., 10th Flr LLP (1980 to present) Daily Tax-Free
New York, NY 10022 Income Fund, Inc.
11/49 and 9 Funds within
the Reich & Tang
Complex
CAROLINE E. NEWELL......... Trustee Since Head, Park Ave. Christian Church 1 Director of
PACCDS April 1984 Day School (2001 to present); Head, New York
1010 Park Ave. Le Chateau des Enfants Daily Tax-Free
New York, NY 10028 (1991 to present) Income Fund, Inc.
07/40
JOHN P. STEINES, JR........ Trustee Since Professor of Law, New York University 1 Director of
NYU School of Law, Rm 440 August 1984 School of Law (1978 to present) and New York
40 Washington Square. So. Counsel, Kronish, Lieb, Weiner & Hellman Daily Tax-Free
New York, NY 10012 (law firm) (2004 to present); Counsel, Income Fund, Inc.
10/48 Deloitte & Touche LLP (2001 to 2004)
Interested Persons
SETH M. GLICKENHAUS*....... Trustee Since General Partner of Glickenhaus & Co. 1 None
546 Fifth Avenue, 7th Floor Chairman of April 1984 (1961 to present)
New York, NY 10036-5000 the Board
03/14 and President
- ----------
* Mr. Glickenhaus is an "interested person" (as defined in Section 2(a)(19)
of the Investment Company Act of 1940, as amended) of the Fund because he
is a General Partner of Glickenhaus & Co., the Adviser.
Officers of the Fund
MICHAEL J. LYNCH........... Senior Vice Indefinite, Director, Unit Trust Department
546 Fifth Avenue, 7th Floor President since Glickenhaus & Co. (1997 to Present)
New York, NY 10036 March 1997
07/62
KINGA KAPUSCINSKI.......... Secretary Indefinite, Assistant Counsel, BISYS Fund Services
100 Summer Street since (2004 - present); Associate, Goodwin Procter
Ste. 1500 December 2004 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)
AARON J. MASEK............. Treasurer Indefinite, Vice President, Fund Administration & Oversight
3435 Stelzer Road since Services, BISYS Fund Services, Inc.,
Columbus, Ohio 43219 June 2005 1997 to present
01/74
FREDERICK J. SCHMIDT....... Chief Since June 2004 Senior Vice President and Chief Compliance
585 Stewart Avenue Compliance Term of Office Officer, CCO Services of BISYS Fund Services
Garden City, NY 11530 and Anti- expires 2007 since 2004; Chief Compliance Officer of four other
07/59 Money investment companies or fund complexes for which CCO
Laundering Services of BISYS Fund Services provides compliance
Officer 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
21
[LOGO]
EMPIRE BUILDER
3435 Stelzer Road
Columbus, Ohio 43219
1-800-847-5886
[LOGO]
EMPIRE BUILDER
TAX FREE BOND FUND
Annual Report
February 28, 2007
Investment Adviser and Distributor
Glickenhaus & Co.
546 Fifth Avenue
7th Floor
New York, New York 10036
Fund Accountant
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Transfer Agent and Administrator
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Custodian
State Street Bank & Trust Co.
800 Pennsylvania Avenue
5th Floor
Kansas City, Missouri 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.
539478
Item 2. Code of Ethics.
(a) 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 an Exhibit.
(b) 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.
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.
Current Year Previous Year
------------ -------------
Audit Fees $33,000 $31,000
Audit-Related Fees $ 2,750 $ 2,500
Tax Fees $ 4,250 $ 4,000
All Other Fees $ 0 $ 0
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable.
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.
Not applicable.
Item 11. Controls and Procedures.
(a)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 recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.
(b)There were no changes 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 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)(1) The code of ethics that is the subject of the disclosure required by Item
2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) are attached hereto.
(a)(3) Not applicable.
(b) 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/ Aaron Masek
----------------------
Aaron Masek, Treasurer
Date May 4, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Seth M. Glickenhaus
----------------------------------
Seth M. Glickenhaus, President
Date May 4, 2007
By (Signature and Title)* /s/ Aaron Masek
--------------------------
Aaron Masek, Treasurer
Date May 4, 2007
* Print the name and title of each signing officer under his or her signature.