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) Citi 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 28,2009 Date of reporting period: February 28, 2009 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 fiscal year ended February 28, 2009. For the past year, the Builder class was up 5.01% while the Premier Class was up 5.19%. The economy has entered a severe recession, and is still troubled by the global financial crisis, including the subprime mortgage industry, the housing market and the stock market. In response to these troubled markets, the Federal Reserve Board cut the Federal Fund Rate four times, which now stands at a record low of between 0% and 0.25%. The housing and subprime markets continue to negatively impact the stock market, as well as other credit markets. The U.S. Treasuries market has seen higher activity due to investors seeking safety. We believe that this activity has left the municipal bond market looking extremely attractive compared to Treasuries. For example, the 10-year Treasury is yielding 2.68% while a 10-year AAA-rated municipal bond is yielding 3.19% (as of March 23, 2009). As the right opportunities present themselves, we will look to extend the duration of the portfolio to enhance returns, while seeking to protect principal. We will focus on increasing the yield of the Fund while maintaining the high credit quality of the bonds it holds. In our opinion, The Empire Builder Tax Free Bond Fund is well-positioned for the next year. Its no-load structure continues to offer value to the shareholder because there is no charge to purchase units. We believe that because of the current disparity between the yields on municipal bonds and Treasuries, it is an excellent time to purchase additional shares of the Empire Builder Tax-Free Bond Fund through our automatic investment program (also known as "dollar cost averaging"*), which helps shareholders follow a disciplined investment plan. Please call the customer service desk at 1-800-847-5886 for information on how to participate in the automatic investment program. 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 on the Fund, 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 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 (if any) 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'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 -------------------- 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, 2009 began at approximately 3.539% and ended at 3.017%. It was a very volatile market this year and the 10-year Treasury traded in a range of approximately 2.076% to 4.245%. Throughout the year, we saw dramatic shifts in the interest rate of the 10-year Treasury bond. We try to enhance the value of the Fund whenever possible. We continue to manage the Fund conservatively, while seeking 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, 1999, and a $20,000* investment in Premier Class shares of the Fund made March 1, 1999, held in each through February 28, 2009, as well as the performance of the Barclays Capital Municipal Bond Index (formerly, Lehman Municipal Bond Index), the Fund's benchmark, over the same period. The Barclays Capital Municipal Bond Index includes 25,000 long-term, investment grade, municipal bonds. In the opinion of Glickenhaus & Co., 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 fees and expenses of the Fund or 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, 2008, as measured by Beta. Finally, the index represents an unmanaged portfolio whereas the Fund is professionally managed. Indexes are unmanaged and one cannot invest directly in an index. The performance date on the following pages assumes that all dividends and distributions are reinvested at net asset value. Return calculations do not reflect taxes a shareholder would pay on Fund distributions (if any) or on the redemption of Fund shares. The performance data quoted represents past performance and future returns may be higher or lower. 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. * The minimum initial investment into the Premier Class is $20,000 Past performance is not a guarantee of future results. [The following information was depicted as a line chart in the printed material] Empire Builder Tax Free Barclays Capital Bond Fund Date Municipal Bond Index Builder Class ---------- -------------------- ------------- 2/28/1999 10,000 10,000 3/31/1999 10,014 10,003 4/30/1999 10,039 10,016 5/31/1999 9,981 9,922 6/30/1999 9,837 9,770 7/31/1999 9,873 9,784 8/31/1999 9,794 9,661 9/30/1999 9,798 9,627 10/31/1999 9,692 9,443 11/30/1999 9,795 9,606 12/31/1999 9,722 9,475 1/31/2000 9,679 9,402 2/29/2000 9,792 9,561 3/31/2000 10,006 9,827 4/30/2000 9,947 9,723 5/31/2000 9,895 9,661 6/30/2000 10,157 9,957 7/31/2000 10,298 10,101 8/31/2000 10,457 10,269 9/30/2000 10,403 10,185 10/31/2000 10,516 10,318 11/30/2000 10,596 10,427 12/31/2000 10,858 10,767 1/31/2001 10,965 10,803 2/28/2001 11,000 10,818 3/31/2001 11,099 10,935 4/30/2001 10,978 10,794 5/31/2001 11,096 10,899 6/30/2001 11,171 10,967 7/31/2001 11,336 11,159 8/31/2001 11,523 11,321 9/30/2001 11,484 11,195 10/31/2001 11,621 11,346 11/30/2001 11,523 11,244 12/31/2001 11,414 11,091 1/31/2002 11,612 11,301 2/28/2002 11,752 11,439 3/31/2002 11,522 11,196 4/30/2002 11,747 11,408 5/31/2002 11,818 11,424 6/30/2002 11,943 11,534 7/31/2002 12,097 11,672 8/31/2002 12,242 11,842 9/30/2002 12,510 12,135 10/31/2002 12,303 11,916 11/30/2002 12,252 11,825 12/31/2002 12,510 12,087 1/31/2003 12,479 12,032 2/28/2003 12,653 12,196 3/31/2003 12,661 12,207 4/30/2003 12,744 12,326 5/31/2003 13,043 12,629 6/30/2003 12,987 12,537 7/31/2003 12,533 12,084 8/31/2003 12,626 12,171 9/30/2003 12,998 12,517 10/31/2003 12,932 12,389 11/30/2003 13,067 12,472 12/31/2003 13,175 12,557 1/31/2004 13,251 12,591 2/29/2004 13,450 12,703 3/31/2004 13,403 12,670 4/30/2004 13,086 12,460 5/31/2004 13,038 12,450 6/30/2004 13,086 12,478 7/31/2004 13,258 12,599 8/31/2004 13,524 12,768 9/30/2004 13,595 12,806 10/31/2004 13,712 12,850 11/30/2004 13,599 12,769 12/31/2004 13,765 12,828 1/31/2005 13,894 12,874 2/28/2005 13,848 12,844 3/31/2005 13,760 12,790 4/30/2005 13,977 12,887 5/31/2005 14,076 12,928 6/30/2005 14,164 12,975 7/31/2005 14,100 12,943 8/31/2005 14,242 13,013 9/30/2005 14,146 12,966 10/31/2005 14,060 12,915 11/30/2005 14,128 12,953 12/31/2005 14,249 13,025 1/31/2006 14,288 13,042 2/28/2006 14,383 13,110 3/31/2006 14,284 13,019 4/30/2006 14,279 13,016 5/31/2006 14,343 13,060 6/30/2006 14,289 12,990 7/31/2006 14,459 13,147 8/31/2006 14,673 13,303 9/30/2006 14,776 13,374 10/31/2006 14,868 13,448 11/30/2006 14,992 13,557 12/31/2006 14,939 13,477 1/31/2007 14,901 13,436 2/28/2007 15,097 13,561 3/31/2007 15,060 13,513 4/30/2007 15,105 13,523 5/31/2007 15,038 13,489 6/30/2007 14,960 13,445 7/31/2007 15,076 13,527 8/31/2007 15,011 13,500 9/30/2007 15,233 13,635 10/31/2007 15,301 13,662 11/30/2007 15,398 13,767 12/31/2007 15,441 13,791 1/31/2008 15,636 13,926 2/29/2008 14,920 13,534 3/31/2008 15,346 13,773 4/30/2008 15,526 13,870 5/31/2008 15,620 13,929 6/30/2008 15,444 13,855 7/31/2008 15,502 13,909 8/31/2008 15,684 14,005 9/30/2008 14,948 13,686 10/31/2008 14,796 13,668 11/30/2008 14,843 13,699 12/31/2008 15,059 13,882 1/31/2009 15,610 14,185 2/28/2009 15,692 14,212 Average Annual Total Return (Unaudited) Empire Builder-Builder Class Expense 1 Year 5 Years 10 Years Ratio* - ---------------------------------------------------------------------------------------------- Empire Builder Tax Free Bond Fund -- Builder Class 5.01% 2.27% 3.58% 1.33% - ---------------------------------------------------------------------------------------------- Barclays Capital Municipal Bond Index 5.18% 3.13% 4.61% NA - ---------------------------------------------------------------------------------------------- [The following information was depicted as a line chart in the printed material] Empire Builder Tax Free Barclays Capital Bond Fund Date Municipal Bond Index Premier Class ---------- -------------------- ------------- 2/28/1999 20,000 20,000 3/31/1999 20,027 20,021 4/30/1999 20,077 20,040 5/31/1999 19,961 19,858 6/30/1999 19,674 19,559 7/31/1999 19,746 19,592 8/31/1999 19,587 19,350 9/30/1999 19,595 19,288 10/31/1999 19,383 18,925 11/30/1999 19,589 19,255 12/31/1999 19,443 18,998 1/31/2000 19,359 18,856 2/29/2000 19,584 19,176 3/31/2000 20,011 19,716 4/30/2000 19,893 19,510 5/31/2000 19,790 19,391 6/30/2000 20,314 19,993 7/31/2000 20,597 20,300 8/31/2000 20,914 20,632 9/30/2000 20,805 20,469 10/31/2000 21,032 20,744 11/30/2000 21,192 20,969 12/31/2000 21,715 21,659 1/31/2001 21,930 21,737 2/28/2001 22,000 21,772 3/31/2001 22,197 22,013 4/30/2001 21,957 21,734 5/31/2001 22,193 21,953 6/30/2001 22,341 22,096 7/31/2001 22,672 22,488 8/31/2001 23,046 22,819 9/30/2001 22,969 22,570 10/31/2001 23,242 22,878 11/30/2001 23,046 22,676 12/31/2001 22,828 22,372 1/31/2002 23,224 22,799 2/28/2002 23,504 23,080 3/31/2002 23,043 22,595 4/30/2002 23,494 23,027 5/31/2002 23,637 23,067 6/30/2002 23,886 23,296 7/31/2002 24,194 23,579 8/31/2002 24,484 23,929 9/30/2002 25,021 24,525 10/31/2002 24,606 24,088 11/30/2002 24,504 23,908 12/31/2002 25,021 24,443 1/31/2003 24,957 24,337 2/28/2003 25,306 24,673 3/31/2003 25,321 24,701 4/30/2003 25,489 24,945 5/31/2003 26,086 25,565 6/30/2003 25,975 25,384 7/31/2003 25,066 24,486 8/31/2003 25,253 24,665 9/30/2003 25,995 25,355 10/31/2003 25,864 25,099 11/30/2003 26,134 25,284 12/31/2003 26,350 25,443 1/31/2004 26,501 25,516 2/29/2004 26,900 25,759 3/31/2004 26,806 25,695 4/30/2004 26,171 25,274 5/31/2004 26,077 25,245 6/30/2004 26,171 25,320 7/31/2004 26,516 25,570 8/31/2004 27,047 25,919 9/30/2004 27,191 25,987 10/31/2004 27,425 26,083 11/30/2004 27,199 25,922 12/31/2004 27,531 26,062 1/31/2005 27,788 26,146 2/28/2005 27,696 26,091 3/31/2005 27,521 26,000 4/30/2005 27,955 26,187 5/31/2005 28,152 26,274 6/30/2005 28,327 26,374 7/31/2005 28,199 26,313 8/31/2005 28,484 26,460 9/30/2005 28,292 26,383 10/31/2005 28,120 26,269 11/30/2005 28,255 26,350 12/31/2005 28,498 26,500 1/31/2006 28,575 26,539 2/28/2006 28,767 26,681 3/31/2006 28,569 26,500 4/30/2006 28,559 26,500 5/31/2006 28,686 26,594 6/30/2006 28,578 26,472 7/31/2006 28,918 26,795 8/31/2006 29,347 27,102 9/30/2006 29,551 27,269 10/31/2006 29,736 27,424 11/30/2006 29,984 27,635 12/31/2006 29,878 27,477 1/31/2007 29,802 27,414 2/28/2007 30,195 27,669 3/31/2007 30,120 27,556 4/30/2007 30,209 27,599 5/31/2007 30,075 27,517 6/30/2007 29,920 27,434 7/31/2007 30,152 27,606 8/31/2007 30,021 27,555 9/30/2007 30,466 27,835 10/31/2007 30,602 27,895 11/30/2007 30,797 28,130 12/31/2007 30,882 28,167 1/31/2008 31,272 28,462 2/29/2008 29,840 27,648 3/31/2008 30,693 28,156 4/30/2008 31,052 28,359 5/31/2008 31,240 28,468 6/30/2008 30,887 28,321 7/31/2008 31,004 28,453 8/31/2008 31,367 28,635 9/30/2008 29,896 28,005 10/31/2008 29,591 27,955 11/30/2008 29,685 28,019 12/31/2008 30,118 28,396 1/31/2009 31,220 29,039 2/28/2009 31,384 29,084 Average Annual Total Return (Unaudited) Empire Builder-Premier Class Expense 1 Year 5 Years 10 Years Ratio* - ---------------------------------------------------------------------------------------------- Empire Builder Tax Free Bond Fund -- Premier Class 5.19% 2.46% 3.82% 1.14% - ---------------------------------------------------------------------------------------------- Barclays Capital Municipal Bond Index 5.18% 3.13% 4.61% NA - ---------------------------------------------------------------------------------------------- - ---------- * The above expense ratios are from the Fund's prospectus dated June 27, 2008. Additional information pertaining to the Fund's expense ratios for the year ended February 28, 2009 can be found in the Financial Highlights. Past performance is not a guarantee of future results. 3 Expense Examples (Unaudited): As a shareholder of The Empire Builder Tax Free Bond Fund, you incur two types of costs: (1) transaction costs, including exchange fees, and (2) ongoing costs, including management fees as well as 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, 2008 through February 28, 2009. Actual Expenses 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 Expenses Paid Expense Ratio Account Value Account Value During Period* During Period The Empire Builder Tax Free Bond Fund 9/1/08 2/28/09 9/1/08 - 2/28/09 9/1/08 - 2/28/09 - ------------------------------------- ------------- ------------- ---------------- ---------------- Builder Class ....................... $1,000.00 $1,014.80 $6.89 1.38% Premier Class ....................... 1,000.00 1,015.70 6.15 1.23% 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'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 The Empire Builder Tax Free Bond Fund 9/1/08 2/28/09 9/1/08 - 2/28/09 9/1/08 - 2/28/09 - ------------------------------------- ------------- ------------- ---------------- ---------------- Builder Class $1,000.00 $1,017.95 $6.90 1.38% Premier Class 1,000.00 1,018.70 6.16 1.23% Summary of Portfolio Holdings (Unaudited): Percent of The Empire Builder Tax Free Bond Fund Net Assets - ------------------------------------- ---------- New York State Agencies .......................................... 52.1% Other New York State Bonds ....................................... 20.1 New York City .................................................... 13.4 Short Term Investments ........................................... 4.6 Other New York State Agencies .................................... 4.0 ---- 94.2% ==== - ---------- * Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent half-year divided by the number of days in the fiscal year (to reflect the one-half year period). 4 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- February 28, 2009 Principal Fair Value Credit Ratings** Amount (Note 2) - ---------------- ---------- ---------- Municipal Securities (89.6%) New York City (13.4%) New York City, General Obligation Series F1 AA3/AA 3.000%, 11/15/2010, Non Callable .................................. $1,000,000 $ 1,016,080 Series E-1 AA3/AA 6.250%, 10/15/2028, Callable 10/15/2018 @ 100 ..................... 2,000,000 2,163,460 AA3/AAA New York City, Health & Hospitals Corp., Health System Revenue, Series A, 5.500%, 2/15/2018, Callable 2/15/2012 @ 100, (FSA) ...................................... 1,000,000 1,043,550 New York City, Housing Development Corp., Multifamily Housing Revenue, Series M AA2/AA 4.400%, 5/1/2014, Non Callable .................................... 165,000 169,148 AA2/AA 4.450%, 11/1/2014, Non Callable ................................... 330,000 338,953 AA2/AA 4.600%, 5/1/2015, Non Callable .................................... 340,000 349,860 AA2/AA 4.650%, 11/1/2015, Non Callable ................................... 350,000 360,791 AA2/AA 6.750%, 11/1/2033, Callable 11/1/18 @ 100 ......................... 1,000,000 1,064,070 AA1/AAA New York City, Transitional Finance Authority, Series B, 4.750%, 11/15/2015, Continuous Callable 4/20/2009 @ 101 .............. 5,000,000 5,038,550 ----------- Total New York City 11,544,462 ----------- New York State Agencies (52.1%) New York State Dormitory Authority (52.1%) A1/AA- Construction City University Systems, Series A, 5.750%, 7/1/2009, Non callable, (FGIC-TCRS) .................................. 2,000,000 2,031,700 BAA1/AA- Mental Health Services Facilities Improvement, Series A, 5.000%, 2/15/2019, Callable 2/15/2015 @ 100, (AMBAC) ................. 2,500,000 2,606,900 Montefiore Medical Center AA2/AAA 5.000%, 8/1/2022, Callable 2/1/2018 @ 100, (FHA) ..................... 1,000,000 1,025,980 AA2/AAA 5.000%, 8/1/2024, Callable 2/1/2018 @ 100, (FHA) ..................... 1,000,000 1,011,420 A1/AA- Municipal Health Facilities, 5.000%, 1/15/2018, Non Callable ........... 2,000,000 2,199,640 BAA1/AA- New York Medical College, 5.250%, 7/1/2013, Continuous Callable 4/20/2009 @ 101, (MBIA) ..................................... 1,015,000 1,021,790 AA3/AA- New York University, Series 2, 5.500%, 7/1/2018, Callable 7/1/2011 @ 100, (AMBAC) ..................................... 500,000 520,415 Rochester Institute of Technology, Series A A1/NR 5.250%, 7/1/2016, Callable 7/1/2012 @ 100, (AMBAC) ................... 2,045,000 2,184,142 A1/NR 5.250%, 7/1/2017, Callable 7/1/2012 @ 100, (AMBAC) ................... 2,155,000 2,294,601 A2/AA- School Districts Financing Program, Series D, 5.250%, 10/1/2023, Callable 10/1/2012 @ 100, (MBIA State Aid Withholding) ..................................................... 5,295,000 5,401,853 The accompanying notes are an integral part of the financial statements. 5 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- February 28, 2009 -- continued Principal Fair Value Credit Ratings** Municipal Securities -- continued Amount (Note 2) - ---------------- --------------------------------- ---------- ---------- New York State Dormitory Authority -- continued BAA1/AA- Special Acts School Districts Program, 6.000%, 7/1/2019, Callable 4/20/2009 @ 100, (MBIA) ..................................... $3,540,000 $ 3,539,611 St. Lawrence - Lewis BOCES AA3/AAA 4.000%, 8/15/2018, Callable 8/15/2017 @ 100, (FSA State Aid Withholding) ....................................... 100,000 105,273 AA3/AAA 4.125%, 8/15/2020, Callable 8/15/2017 @ 100, (FSA State Aid Withholding) ....................................... 110,000 112,480 AA3/AAA 4.250%, 8/15/2021, Callable 8/15/2017 @ 100, (FSA State Aid Withholding) ....................................... 100,000 101,632 AA1/NR State Mortgage Agency, Homeowner Mortgage Revenue, Series 158, 6.600%, 10/1/2038, Callable 10/1/2018 @ 100 .............. 500,000 527,165 State Supported Debt, City University Construction 5th Generation Resolution Series A NR/AA- 5.000%, 7/1/2019, Callable 7/1/2018 @ 100 ......................... 3,000,000 3,159,750 Series E NR/AA- 6.125%, 1/1/2031, Callable 1/1/19 @ 100 ........................... 1,500,000 1,576,095 NR/AA- State Supported Debt, Department of Education, Series A, 5.000%, 7/1/2018, Callable 7/1/2016 @ 100 .................. 1,000,000 1,058,340 NR/AA- State Supported Debt, Mental Health Services Facilities Improvement, Series F, 6.250%, 2/15/2031, Callable 8/15/2018 @ 100 ...................................................... 1,500,000 1,593,330 Teachers College A1/NR 5.000%, 3/1/2024, Callable 3/1/19 @ 100 .............................. 250,000 251,955 A1/NR 5.375%, 3/1/2029, Callable 3/1/19 @ 100 .............................. 500,000 500,190 AA3/AAA The New York & Presbyterian Hospital, Series A, 5.250%, 8/15/2010, Non- Callable, (FSA-FHA-INS) .............................. 4,000,000 4,198,000 AA3/A+ University of Rochester, Series A1, 5.000%, 7/1/2019, Callable 1/1/2017 @ 100 .............................................. 2,305,000 2,426,773 Upstate Community Colleges Series B A1/AA- 5.250%, 7/1/2015, Callable 7/1/2014 @ 100, (FGIC) ................. 3,140,000 3,498,274 Series A AA3/AAA 6.000%, 7/1/2019, Prerefunded 7/1/2010 @ 101, (FSA) ............... 1,000,000 1,078,000 AA3/AAA 6.000%, 7/1/2020, Prerefunded 7/1/2010 @ 101, (FSA) ............... 845,000 910,910 ----------- Total New York State Agencies .......................................... 44,936,219 ----------- The accompanying notes are an integral part of the financial statements. 6 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- February 28, 2009 -- continued Principal Fair Value Credit Ratings** Municipal Securities -- continued Amount (Note 2) - ---------------- --------------------------------- ---------- ---------- Other New York State Agencies (4.0%) AAA/AAA New York State Environmental Facilities Corp., State Water Pollution Control Revenue, Revolving Fund, Pooled Loan, 5.900%, 1/15/2018, Continuous Callable 4/20/2009 @ 100, (POL CTL-SRF) ........................................................ $ 725,000 $ 725,616 NR/AA- New York State Thruway Authority Service Contract Revenue, Local Highway & Bridge Services, 4.500%, 4/1/2010, Non Callable ......................................................... 580,000 601,014 NR/AA- New York State Urban Development Corp., Empire State Development, University Facilities Grants, Series D, 5.000%, 1/1/2015, Non Callable ............................................... 1,000,000 1,082,210 A1/AA- New York State Urban Development Corp., State Facilities Revenue, 5.700%, 4/1/2010, Non-Callable .............................. 1,000,000 1,048,790 ---------- Total Other New York State Agencies 3,457,630 ---------- Other New York State Bonds (20.1%) A3/NR Albany Housing Authority, Limited Obligation, 6.250%, 10/1/2012, Continuous Callable 4/20/2009 @ 100 .................................. 825,000 825,247 Corning, City School District, General Obligation AA3/NR 5.000%, 6/15/2012, Non Callable, (FSA) ............................... 1,000,000 1,097,110 AA3/NR 5.000%, 6/15/2013, Callable 6/15/2012 @ 100, (FSA) ................... 970,000 1,057,087 AA3/NR 5.000%, 6/15/2014, Callable 6/15/2012 @ 100, (FSA) ................... 600,000 647,136 AA3/AAA Erie County, IDA School Facility, City School District Buffalo Project, Series A, 5.750%, 5/1/2025, Callable 5/1/2017 @ 100, (FSA) ......................................................... 2,000,000 2,073,560 Evans, General Obligation BAA1/A 6.800%, 4/15/2012, Non Callable, (AMBAC) ............................. 225,000 253,370 BAA1/A 6.800%, 4/15/2013, Non Callable, (AMBAC) ............................. 225,000 258,131 A2/NR Fayetteville Manlius, Central School District, General Obligation, 5.000%, 6/15/2016, Callable 6/15/2012 @ 101, (FGIC) .................. 375,000 400,313 AA1/AAA Hempstead Town, General Obligation, Series A, 3.000%, 8/15/2010, Non Callable .............................................. 2,500,000 2,565,100 Ilion, Central School District, General Obligation, Series B A2/NR 5.500%, 6/15/2015, Callable 6/15/2012 @ 101, (FGIC) .................. 550,000 587,273 A2/NR 5.500%, 6/15/2016, Callable 6/15/2012 @ 101, (FGIC) .................. 500,000 532,445 A3/A- Long Island Power Authority, Electric System Revenue, Series A, 6.000%, 5/1/2033, Callable 5/1/2019 @ 100 .................. 500,000 518,430 A2/A Metropolitan Transportation Authority Revenue, Series 2008C, 6.500%, 11/15/2028, Callable 11/15/2018 @ 100 ........................ 1,500,000 1,643,310 A2/A Mount Sinai, Union Free School District, General Obligation, 6.200%, 2/15/2012, Non Callable, (AMBAC) ............................. 1,065,000 1,189,467 North Hempstead, General Obligation, Series B AA2/AA- 6.375%, 4/1/2009, Non Callable, (FGIC) ............................... 570,000 572,739 The accompanying notes are an integral part of the financial statements. 7 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- February 28, 2009 -- continued Principal Fair Value Credit Ratings** Municipal Securities -- continued Amount/Shares (Note 2) - ---------------- --------------------------------- ---------- ---------- Other New York State Bonds -- continued AA2/AA- 6.400%, 4/1/2010, Non Callable, (FGIC) ............................. $ 560,000 $ 593,807 AA3/AAA Oneida County, IDA Civic Facilities, Mohawk Valley Network, St. Luke's Memorial Hospital, 5.000%, 1/1/2013, Callable 1/1/2010 @ 101, (FSA) .............................................. 1,640,000 1,664,108 AA3/NR Oyster Bay, General Obligation, 5.000%, 3/15/2011, Non Callable, (FSA) ................................................ 430,000 460,345 AA3/NR Southern Cayuga, Central School District, General Obligation, 5.000%, 5/15/2014, Callable 5/15/2012 @ 100, (FSA) ................. 400,000 430,656 ----------- Total Other New York State Bonds ..................................... 17,369,634 ----------- Total Municipal Securities (Cost $75,638,902) ........................ 77,307,945 ----------- Short Term Investment (4.6%)(a) Dreyfus New York Municipal Cash Management Fund ...................... 4,010,000 4,010,000 ----------- Total Investments (Cost $79,648,902)(b) -- 94.2% ..................... $81,317,945 ----------- Net Other Assets (Liabilities) -- 5.8% ............................... 4,963,653 ----------- NET ASSETS -- 100.0% ................................................. $86,281,598 =========== - ---------- (a) Variable or Floating Rate Security. Rate disclosed is as of February 28, 2009. (b) See notes to financial statements for tax unrealized appreciation/depreciation of securities. ** Credit Ratings given by Moody's Investor Service, Inc. and Standard & Poor's Corp., represent ratings as of purchase date. (Unaudited) AMBAC Insured as to principal and interest by the American Municipal Bond Insurance Corp. BOCES Board of Cooperative Educational Services. 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. FSA Insured as to principal and interest by Federal Security Assurance. IDA Industrial Development Agency INS Insured MBIA Insured as to principal and interest by the Municipal Bond Insurance Association. NR Security is not rated. POL CTL-SRF Insured as to principal and interest by the Pollution Control State Revenue Fund. TCRS Transferable Custodial Receipts The accompanying notes are an integral part of the financial statements. 8 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- February 28, 2009 -- continued Moody's Aaa Issuers or issues rated Aaa demonstrate the strongest creditworthiness relative to other U.S. municipal or tax-exempt issuers or issues. Aa Issuers or issues rated Aa demonstrate very strong creditworthiness relative to other U.S. municipal or tax-exempt issuers or issues. A Issuers or issues rated A present above-average creditworthiness relative to other U.S. municipal or tax-exempt issuers or issues. 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. Standard & Poor's AAA An obligation rated 'AAA' has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. AA An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. A An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. 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. 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. 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, 2009 Assets: Investments in securities, at fair value (cost $79,648,902) (Note 2) .............. $81,317,945 Cash .............................................................................. 4,216,669 Interest and dividends receivable ................................................. 813,767 Receivable for capital shares issued .............................................. 59 Prepaid expenses and other assets ................................................. 66,521 ----------- Total Assets ................................................................... 86,414,961 Liabilities: Dividends payable .................................................. $ 11,545 Payable for capital shares redeemed ................................ 684 Advisory fees payable (Note 4) ..................................... 26,560 Administration fees payable (Note 4) ............................... 996 Transfer agency fees payable (Note 4) .............................. 19,018 Fund accounting fees payable ....................................... 99 Custodian fees payable ............................................. 273 Compliance services fees payable (Note 4) .......................... 1,504 Trustees' fees payable ............................................. 11,999 Other accrued expenses ............................................. 60,685 ----------- Total Liabilities ................................................................ 133,363 ----------- Net Assets ......................................................................... $86,281,598 =========== Net Assets: Capital .......................................................................... $84,652,119 Accumulated undistributed net investment income .................................. 10,568 Accumulated undistributed net realized losses from investments ................... (50,132) Net unrealized appreciation of investments ....................................... 1,669,043 ----------- Net Assets ......................................................................... $86,281,598 =========== Builder Class: Net Assets ......................................................... $40,249,715 Shares of Beneficial Interest Outstanding (unlimited shares authorized) ................................... 2,320,791 ----------- Net Asset Value, Offering and Redemption Price per share ........... $ 17.34 =========== Premier Class: Net Assets ......................................................... $46,031,883 Shares of Beneficial Interest Outstanding (unlimited shares authorized) ................................... 2,653,934 ----------- Net Asset Value, Offering and Redemption Price per share ........... $ 17.34 =========== 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, 2009 Investment Income: Interest ......................................................................... $3,484,765 Dividends ........................................................................ 13,618 ---------- Total Investment Income ....................................................... 3,498,383 Expenses: Advisory fees (Note 4) ............................................. $ 344,469 Administration fees (Note 4) ....................................... 204,791 Fund accounting fees (Note 4) ...................................... 60,408 Transfer agency fees -- Builder Class (Note 4) ..................... 99,262 Transfer agency fees -- Premier Class (Note 4) ..................... 36,379 Custody fees ....................................................... 22,775 Trustees' fees (Note 4) ............................................ 41,714 Audit fees ......................................................... 43,007 Compliance services fee (Note 4) ................................... 72,376 Legal fees ......................................................... 83,773 Other fees ......................................................... 71,770 --------- Total Expenses .................................................. 1,080,724 Less: Custody fee credit ........................................ (22,090) --------- Total Net Expenses ............................................................... 1,058,634 ---------- Net Investment Income .............................................................. 2,439,749 ---------- Realized/Unrealized Gain (Loss) on Investments (Notes 2 and 3) Net realized losses from investment transactions ................... (36,367) Change in unrealized appreciation/depreciation on investments ...... 1,923,448 --------- Net realized/unrealized gains from investments ................................ 1,887,081 ---------- Change in net assets resulting from operations ..................................... $4,326,830 ========== 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, 2009 February 29, 2008 ----------------- ----------------- From Investment Activities: Operations: Net investment income ................................... $ 2,439,749 $ 2,884,393 Net realized losses from investment transactions ........ (36,367) (43,534) Change in unrealized appreciation/depreciation from investment transactions .............................. 1,923,448 (2,926,610) ----------- ----------- Change in net assets resulting from operations .......... 4,326,830 (85,751) ----------- ----------- Distributions to Shareholders from: Net investment income: Builder Class ........................................... (1,112,554) (1,359,940) Premier Class ........................................... (1,329,543) (1,597,660) Net realized gains from investment transactions: Builder Class ........................................... -- (222,248) Premier Class ........................................... -- (245,249) ----------- ----------- Total distributions .................................. (2,442,097) (3,425,097) ----------- ----------- Change in net assets from capital share transactions ...... (2,186,689) (4,768,154) ----------- ----------- Change in net assets .................................... (301,956) (8,279,002) Net Assets: Beginning of period ..................................... 86,583,554 94,862,556 ----------- ----------- End of period ........................................... $86,281,598 $86,583,554 =========== =========== Accumulated undistributed net investment income ......... $ 10,568 $ 13,697 =========== =========== Capital Transactions: Builder Class Proceeds from shares issued ............................. $ 1,091,886 $ 826,510 Dividends reinvested .................................... 1,025,405 1,446,247 Value of shares redeemed ................................ (4,101,366) (4,269,790) ----------- ----------- Total Builder Class .................................. (1,984,075) (1,997,033) ----------- ----------- Premier Class Proceeds from shares issued ............................. 718,885 735,984 Dividends reinvested .................................... 1,118,450 1,531,526 Value of shares redeemed ................................ (2,039,949) (5,038,631) ----------- ----------- Total Premier Class .................................. (202,614) (2,771,121) ----------- ----------- Change in net assets from capital share transactions .... $(2,186,689) $(4,768,154) =========== =========== Share Transactions: Builder Class Issued .................................................. 63,477 47,542 Reinvested .............................................. 59,769 83,198 Redeemed ................................................ (238,963) (245,071) ----------- ----------- Total Builder Class Shares ........................... (115,717) (114,331) ----------- ----------- Premier Class Issued .................................................. 41,835 42,377 Reinvested .............................................. 65,174 88,105 Redeemed ................................................ (119,655) (288,649) ----------- ----------- Total Premier Class Shares ........................... (12,646) (158,167) ----------- ----------- The accompanying notes are an integral part of the financial statements. 12 THE EMPIRE BUILDER TAX FREE BOND FUND Financial Highlights These Financial Highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each period. Year Ended Year Ended Year Ended Year Ended Year Ended February 28, 2009 February 29, 2008 February 28, 2007 February 28, 2006 February 28, 2005 ----------------- ----------------- ----------------- ----------------- ----------------- 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 ......... $ 16.97 $ 16.97 $ 17.64 $ 17.65 $ 17.66 $ 17.66 $ 17.77 $ 17.77 $ 18.12 $ 18.13 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Investment Activities: Net investment income ....... 0.47 0.50 0.54 0.57 0.56 0.59 0.46 0.50 0.41 0.45 Net realized/unrealized gains/(losses) on investments .............. 0.37 0.37 (0.57) (0.58) 0.04 0.05 (0.10) (0.10) (0.22) (0.23) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total from Investment Operations ............... 0.84 0.87 (0.03) (0.01) 0.60 0.64 0.36 0.40 0.19 0.22 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Distributions: Net investment income ....... (0.47) (0.50) (0.55) (0.58) (0.56) (0.59) (0.46) (0.50) (0.41) (0.45) Net realized capital gains .. -- -- (0.09) (0.09) (0.06) (0.06) (0.01) (0.01) (0.13) (0.13) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total distributions ......... (0.47) (0.50) (0.64) (0.67) (0.62) (0.65) (0.47) (0.51) (0.54) (0.58) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Net Asset Value, End of Period ............... $ 17.34 $ 17.34 $ 16.97 $ 16.97 $ 17.64 $ 17.65 $ 17.66 $ 17.66 $ 17.77 $ 17.77 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= Total Return ................... 5.01% 5.19% (0.20)% (0.08)% 3.44% 3.70% 2.07% 2.26% 1.11% 1.29% Ratios/Supplementary Data: Net Assets, End of Period (in thousands) ........... $40,250 $46,032 $41,336 $45,248 $45,010 $49,853 $48,323 $53,540 $52,222 $56,313 Ratios of Net Investment Income to Average Net Assets ............... 2.74% 2.90% 3.07% 3.25% 3.19% 3.39% 2.67% 2.86% 2.32% 2.55% Ratios of Net Expenses to Average Net Assets (b) ........... 1.31% 1.15% 1.30% 1.12% 1.28% 1.08% 1.20% 1.01% 1.18% 0.95% Ratios of Expenses to Average Net Assets* ... 1.34% 1.18% 1.33% 1.14% 1.30% 1.10% 1.21% 1.02% 1.22% 0.99% Portfolio Turnover Rate (a) ................. 74.67% 74.67% 69.87% 69.87% 134.56% 134.56% 52.14% 52.14% 100.38% 100.38% - ---------- * 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 0.03%, 0.03%, 0.02%, 0.01%, and 0.01%, for the years 2009, 2008, 2007, 2006, and 2005, 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, 2009 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. Both classes of shares outstanding bear the same dividend, liquidation and other rights and conditions, except that the Builder Class shares and the Premier Class shares bear different 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 as of the dates of the financial statements. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ from these estimated amounts. Security Valuation Tax-exempt securities are valued using prices provided by an independent pricing service approved by the Fund's Board of Trustees. The independent 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 these prices. The methods used by the independent 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, 2009 Effective March 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS 157"). 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. Various inputs are used to determine the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: Level 1 -- quoted prices in active markets for identical securities. Level 2 -- other significant observable inputs other than level 1 quoted prices (including, but not limited to, quoted prices for similar securities, interest rates, prepayment speeds, credit risk). Level 3 -- significant unobservable inputs. Observable inputs are those based on market data obtained from sources independent of the Fund, and unobservable inputs reflect the Fund's own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. The following is a summary of the inputs used as of February 28, 2009 in valuing the Fund's investments: Investments in Securities ------------------------------------------------ LEVEL 2 -- Other LEVEL 3 -- Significant Significant LEVEL 1 -- Observable Unobservable Fund Name Quoted Prices Inputs Inputs - --------- ------------- ------------- ------------ Empire Builder Tax Free Bond Fund $4,010,000 $ 77,307,945 $ -- ---------- ------------ --------- Total $4,010,000 $ 77,307,945 $ -- ========== ============ ========= New Accounting Pronouncements In March 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161"). SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. SFAS 161 requires enhanced disclosures about the Fund's derivative and hedging activities, including how such activities are accounted for and their effect on the Fund's financial position, performance and cash flows. Management intends to adopt SFAS 161 during the fiscal year ending February 28, 2010. SFAS 161 is not expected to have a significant impact on the Fund's net assets or results of operations. 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. 15 THE EMPIRE BUILDER TAX FREE BOND FUND Notes to Financial Statements -- continued February 28, 2009 Taxes The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, and to distribute all its tax-exempt and taxable income. By distributing during each calendar year its net investment income, capital gains and certain other amounts, if any, the Fund will not be subject to a federal income or excise tax. Therefore, no federal income tax provision is required. The Fund complies with FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the affirmative evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax return to determine whether it is more-likely-than-not (i.e., greater than 50-percent) that each tax position will be sustained upon examination by a taxing authority based on the technical merits of the position. A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in an increase in a liability for taxes payable, including the recognition of any related interest and penalties as an operating expense. For all open tax years and all major taxing jurisdictions, management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally, the last four tax year ends and the interim tax period since then). Further, management of the Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. 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 considered either temporary or permanent in nature. To the extent these differences are permanent in nature (e.g. reclassification of market discounts, gain or 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 the number of shares outstanding. Realized and unrealized gains and losses are allocated based on relative net assets. 16 THE EMPIRE BUILDER TAX FREE BOND FUND Notes to Financial Statements -- continued February 28, 2009 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 fiscal year ended February 28, 2009. 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, 2009, amounted to $56,905,410 and $59,546,381, 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 in average daily net assets over $100,000,000. The Adviser has agreed to a reduction of the 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 fiscal year ended February 28, 2009, there was no reduction of advisory fees pursuant to this agreement. Citi Fund Services Ohio, Inc. ("Citi Ohio" or the "Administrator") and Citi Fund Services, Inc. ("Citi"), subsidiaries of Citi Investor Services, Inc., serves as the Fund's administrator, transfer agent and fund accountant. Citi Ohio and Citi 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 Citi Ohio (the "CCO Agreement"), Citi Ohio makes an employee available to serve as the Fund's Chief Compliance Officer (the "CCO"). Under the CCO Agreement, Citi 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 are reflected in the Statement of Operations as "Compliance services fee". Citi Ohio pays the salary and other compensation earned by any such individuals as employees of Citi 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, a $900 fee for each regularly scheduled meeting and $750 for each special meeting, plus reimbursement for certain expenses. During the year ended February 28, 2009, actual Trustee compensation and reimbursement was $41,714 in total from the Fund. 17 THE EMPIRE BUILDER TAX FREE BOND FUND Notes to Financial Statements -- continued February 28, 2009 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, 2009 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 ....... $708 $ -- $708 $2,444,099 $2,444,807 The tax character of dividends paid to shareholders during the fiscal year ended February 29, 2008 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 ....... $424,427 $44,538 $468,965 $2,950,370 $3,419,335 - ---------- * 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. As of February 28, 2009 the components of accumulated earnings (deficit) on a tax basis were as follows: Undistributed Accumulated Total Undistributed Undistributed Long-Term Capital Unrealized Accumulated Ordinary Tax-Exempt Capital Accumulated Distributions and Appreciation/ Earnings/ Income Income (Gains/Losses) Earnings Payable Other Losses (Depreciation)** (Deficit) ------------- ------------- -------------- ----------- ------------- ------------ ----------------- ----------- The Empire Builder Tax Free Bond Fund ........ $ -- $22,113 $ -- $22,113 $(11,545) $(63,864) $1,682,775 $1,629,479 As of February 28, 2009, the Empire Builder Tax Free Bond Fund had net capital loss carryforwards of $63,864, which expires 2017. This may be available to offset future realized capital gains. As of February 28, 2009, 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 ....... $ 79,635,170 $ 2,081,651 $ (398,876) $ 1,682,775 - ---------- ** 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. 18 Report of Independent Registered Public Accounting Firm To the Board of 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, 2009, 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, 2009 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Columbus, Ohio April 15, 2009 19 THE EMPIRE BUILDER TAX FREE BOND FUND February 28, 2009 Other Information (Unaudited) Proxy Voting Information 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. Availability of Quarterly Portfolio Schedules 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, and 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 Office/Length Principal Occupation(s) Builder Tax the Fund Birthdate Free Bond Fund of time served During the Past 5 Years Free 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 the ISI Fund Group, 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 430 August 1984 School of Law (1978 to present) and New York 40 Washington Square. So. Counsel, Kronish, Lieb, Weiner & Daily Tax-Free New York, NY 10012 Hellman (law firm) (2004 to present) Income Fund, Inc. 10/48 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 1940 Act) of the Fund because he is a General Partner of Glickenhaus & Co., the Adviser. Further information about certain of the Fund's Trustees is available in the Fund's Statement of Additional Information, dated June 27, 2008, which can be obtained upon request, without charge, by calling the Fund's shareholder servicing agent at [(800) 847-5886)]. 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 DANIEL J. IGO .............. Secretary Indefinite, Project Manager and Assistant Vice President, Citi Fund Services 100 Summer Street since (2007 to present); Compliance Manager, Citi CCO Compliance Ste. 1500 December 2007 Services (2006 to 2007); Legal Services Manager, Citi Fund Boston, MA 02110 services (2004 to 2006); Manager, State Street Research and 09/70 Management Company (2003 to 2004). JONATHAN ROSEN ............. Treasurer Indefinite, Senior Vice President, Financial Administration, Citi Fund Services 3435 Stelzer Road since Ohio, Inc. (2008 to present); Vice President, Financial Administration, Columbus, Ohio 43219 September 2008 Citi Fund Services Ohio, Inc. (2003 to 2008). 02/71 FREDERICK J. SCHMIDT ....... Chief Since June 2004 Senior Vice President and Chief Compliance Officer, CCO Services of 585 Stewart Avenue Compliance Term of Office Citi Fund Services 2004 to present; Chief Compliance Officer of four Garden City, NY 11530 and Anti-Money expires 2009 other investment companies or fund complexes for which CCO Services of 07/59 Laundering Citi Fund Services provides compliance services, 2004 to present; Officer(1) President, FJS Associates (regulatory consulting firm) (2002 to 2004). - ---------- (1) On March 3, 2009, Mr. Michael J. Nanosky became the Chief Compliance and Anti-Money Laundering Officer for the Fund and will serve for a term of one year. Mr. Nanosky is Vice President and Chief Compliance Officer of CCO Services of Citi Fund Services, Inc. since 2008. Prior to that he was Vice President and Managing Director of Regulatory Compliance of National City Bank -- Allegiant Asset Management from 2004 to 2008 and Assistant Vice President and Director of Fund Administration and Compliance of National City Bank -- Allegiant Asset Management from 2002 to 2004. He is 42 years old. (This page intentionally left blank) [LOGO] EMPIRE BUILDER 3435 Stelzer Road Columbus, Ohio 43219 1-800-847-5886 [LOGO] EMPIRE BUILDER TAX FREE BOND FUND Annual Report February 28, 2009 Investment Adviser and Distributor Glickenhaus & Co. 546 Fifth Avenue 7th Floor New York, New York 10036 Fund Accountant Citi Fund Services, Inc. 3435 Stelzer Road Columbus, Ohio 43219 Transfer Agent and Administrator Citi 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 41 S. High 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. 066466 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 $36,000 $ 35,000 Audit-Related Fees $ 2,900 $ 2,750 Tax Fees $ 9,500 $ 9,000 All Other Fees $ 0 $ 0 Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Investments. (a) Not applicable. (b) 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/ Jonathan Rosen ----------------------------- Jonathan Rosen, Treasurer Date April 27, 2009 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 April 27, 2009 By (Signature and Title) /s/ Jonathan Rosen --------------------------- Jonathan Rosen, Treasurer Date April 27, 2009