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
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(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)
Citi Fund Services, 3435 Stelzer Road, Columbus, OH 43219
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(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.
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[LOGO]
EMPIRE BUILDER
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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
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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.
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[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, 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*
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Empire Builder Tax Free Bond Fund -- Builder Class 5.01% 2.27% 3.58% 1.33%
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Barclays Capital Municipal Bond Index 5.18% 3.13% 4.61% NA
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[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
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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*
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Empire Builder Tax Free Bond Fund -- Premier Class 5.19% 2.46% 3.82% 1.14%
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Barclays Capital Municipal Bond Index 5.18% 3.13% 4.61% NA
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* 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%
====
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* 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