<PAGE>
- ------------------- [EMPIRE BUILDER TAX FREE BOND FUND LOGO] -------------------
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-800-847-5886
October 1, 1997
Dear Shareholder,
We are pleased to present the semi-annual report for the Empire Builder Tax
Free Bond Fund for the six months ended August 31, 1997.
With the shortage of skilled labor and growing union militancy, inflation
may be on the verge of increasing. This will be a negative for interest rates
and the bond market. Even though municipals are much cheaper than taxables, they
could be mildly vulnerable at these levels and we are increasingly cautious. The
strength of the economy and of the stock market reinforces this view.
While the inflation outlook remains favorable as measured by consumer and
producer prices, a number of other economic and market factors remain
troublesome. The employment picture and labor markets remain very tight. Retail
sales have rebounded after bottoming in April and consumer confidence remains
very strong. The Fed, while not raising rates at its last meeting, continues to
warn that they feel the risks remain weighted toward a stronger economy and they
will do whatever it takes to keep inflation in check. We will maintain our
conservative approach to the market. As always preservation of capital is
foremost in our minds. The Fund remains heavily weighted in triple AAA bonds.
In our opinion, the no-load structure of the Empire Builder continues to
offer value to you, the Shareholders. We look forward to helping you meet your
investment needs.
Sincerely,
/s/ Seth M. Glickenhaus
Seth M. Glickenhaus
President
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Credit Principal
Ratings* Municipal Securities -- 88.0% Amount Value
- ---------- ---------------------------------------- ------------- -------------
<S> <C> <C> <C>
NEW YORK CITY--0.01%
Aaa/AAA New York City, GO, Sub-Series C-1,
6.63%, 8/1/12, MBIA, Callable 8/1/02 @
101.5 $ 105,000 $ 114,975
-------------
TOTAL NEW YORK CITY (Identified Cost
$104,212)............................. 114,975
-------------
NEW YORK STATE AGENCIES--61.9%
Empire State Development Corp. (Urban
Development Corp.):
Aaa/AAA Correctional Capital Facilities,
Series 5, 5.50%, 1/1/25, MBIA,
Callable 1/1/05 @ 102............... 2,000,000 1,975,000
Baa1/BBB+ University Facilities Grants, 6.00%,
1/1/08.............................. 850,000 903,125
Baa1/BBB+ University Facilities Grants, 6.00%,
1/1/09.............................. 905,000 962,694
Baa1/BBB+ University Facilities Grants, 6.00%,
1/1/10.............................. 955,000 1,012,300
Baa1/BBB+ Youth Facilities, 5.75%, 4/1/08,
Callable 4/1/05 @ 102............... 1,000,000 1,037,500
New York State Dormitory Authority:
Aaa/AAA City University, 6.88%, 7/1/14, MBIA,
Callable 7/1/04 @ 102............... 4,825,000 5,482,406
Baa1/NR City University, Series D, 8.20%,
7/1/12, Callable 7/1/98 @ 102....... 2,500,000 2,633,175
Aaa/AAA Cooper Union, 5.38%, 7/1/20, AMBAC,
Callable 7/1/06 @ 102............... 860,000 841,725
Aa2/AA Cornell University, Series A, 7.38%,
7/1/20, Callable 7/1/00 @ 102....... 750,000 820,313
NR/AAA Heritage House, 7.00%, 8/1/31, FHA
232, Callable 8/1/01 @ 102.......... 480,000 522,000
Aaa/AAA Millard Fillmore Hospital, 5.00%,
2/1/06, AMBAC/FHA 242, Callable
8/1/04 @ 105........................ 910,000 917,963
Aaa/AAA Millard Fillmore Hospital, 5.00%,
8/1/06, AMBAC/FHA 242, Callable
8/1/04 @ 105........................ 1,735,000 1,750,181
Aaa/AAA Mount Sinai School of Medicine, 6.75%,
7/1/15, MBIA,
Callable 7/1/01 @ 102............... 2,250,000 2,438,437
Aaa/AAA Rockefeller University, Series A,
6.75%, 7/1/10,
Callable 7/1/01 @ 102............... 525,000 574,875
Aaa/AAA Rockefeller University, Series A,
6.75%, 7/1/11,
Callable 7/1/01 @ 102............... 1,000,000 1,091,250
NR/AAA St. John's Fisher College, 6.75%,
7/1/11, Connie Lee,
Callable 7/1/01 @ 102............... 2,670,000 2,890,275
Aaa/AAA St. Joseph's Hospital Health Center,
GO, 5.25%, 7/1/18, MBIA, Callable
7/1/07 @ 102........................ 1,000,000 975,000
NR/AAA St. Francis & Health, 7.65%, 8/1/30,
FHA 232, Pre-refunded 8/1/00 @
102................................. 975,000 1,082,250
Aaa/AAA Special Action School Districts
Program, 6.00%, 7/1/19, MBIA,
Callable 7/1/05 @ 102............... 3,540,000 3,725,850
Baa1/BBB+ State University Educational
Facilities, Series A, 5.25%,
5/15/01............................. 1,450,000 1,486,250
A1/NR Teresian House Project, 5.25%, 7/1/17,
Callable 7/1/07 @ 102, LC Fleet
Bank................................ 3,000,000 2,868,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 1997 (UNAUDITED) -- CONTINUED
<TABLE>
<CAPTION>
Credit Principal
Ratings* Municipal Securities -- continued Amount Value
- ---------- ---------------------------------------- ------------- -------------
<S> <C> <C> <C>
NEW YORK STATE
AGENCIES--61.9% -- CONTINUED
New York State Environmental Facility
Corp.:
Aaa/AAA Pollution Control Revenue, State
Water, Revolving Fund, Pooled Loan,
Series C, 5.90%, 1/15/18, Callable
1/15/06 @ 102....................... $ 1,510,000 $ 1,555,300
New York State Housing Finance Agency:
Aa2/NR Multi-Family Housing, Secured Mortgage
Program, Series C, 6.45%, 8/15/14,
SONYMA, Callable 2/15/04 @ 102...... 2,245,000 2,399,344
A1/NR Village of St. John Project, 8.25%,
5/1/09, HUD Section 8, Callable
11/3/97 @ 101....................... 1,640,000 1,642,050
New York State Medical Care Facilities
Finance Agency:
Aaa/AAA Long Term Health Care, Series D,
6.50%, 11/1/15, SONYMA/FSA, Callable
11/1/02 @ 102....................... 2,245,000 2,444,244
Baa1/BBB+ Mental Health Services Facilities,
7.63%, 2/15/08, Callable 2/15/98 @
102................................. 330,000 341,279
Baa1/BBB+ Mental Health Service Facilities,
7.88%, 8/15/20,
Callable 8/15/00 @ 102.............. 385,000 422,056
Aaa/AAA Mental Health Services Facilities,
Series E, 6.25%, 2/15/09, FSA,
Callable 8/15/04 @ 102.............. 1,420,000 1,553,125
Aaa/AAA St. Mary's Hospital Project, Series A,
6.20%, 11/1/14, AMBAC, Callable
11/1/03 @ 102....................... 2,100,000 2,247,000
Aaa/AAA Unrefunded Balance, Series F, 5.25%,
2/15/19, FGIC/TCRS, Callable 2/15/04
@ 102............................... 7,200,000 6,948,000
Aaa/AAA Hospital & Nursing, Series A, 6.20%,
2/15/21, AMBAC/TCRS/FHA 242,
Callable 2/15/04 @ 102.............. 2,500,000 2,615,625
Aaa/AAA Hospital, Series A, 5.38%, 2/15/25,
MBIA/FHA 242,
Callable 2/15/04 @ 102.............. 4,055,000 3,968,831
Aaa/AAA New York Hospital, Series A, 6.50%,
8/15/29, AMBAC/FHA 242, Callable
2/15/05 @ 102....................... 1,500,000 1,648,125
Aaa/AAA New York Hospital, Series A, 6.90%,
8/15/34, AMBAC/FHA 242, Callable
2/15/05 @ 102....................... 3,350,000 3,772,938
New York State Thruway Authority:
Aaa/AAA Service Contract Revenue, Local
Highways & Bridges, 5.30%, 4/1/04,
AMBAC/TCRS.......................... 5,825,000 6,058,000
-------------
TOTAL NEW YORK STATE AGENCIES
(Identified Cost $69,881,377)......... 73,607,236
-------------
OTHER NEW YORK STATE BONDS--21.1%
Baa1/NR Albany County Housing Authority, Ltd.
Obligation, 6.25%, 10/1/12, Callable
10/1/05 @ 102....................... 1,000,000 1,050,000
Aaa/AAA Buffalo Municipal Water Finance
Authority, Water System Revenue,
5.75%, 7/1/19, FGIC, Callable 7/1/05
@ 102............................... 500,000 511,250
Aaa/AAA Dutchess County, Resource Recovery
Agency, Solid Waste Management,
Series A, 7.50%, 1/1/09, FGIC,
Callable 1/1/00 @ 102............... 1,500,000 1,620,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 1997 (UNAUDITED) -- CONTINUED
<TABLE>
<CAPTION>
Shares or
Credit Principal
Ratings* Municipal Securities -- 88.0% Amount Value
- ---------- ---------------------------------------- ------------- -------------
<S> <C> <C> <C>
OTHER NEW YORK STATE
BONDS--21.1% -- CONTINUED
NR/AAA East Rochester Housing Authority, St.
John's Health Care Corp. Project,
5.75%, 8/1/37, MBIA/FHA 232,
Callable 8/1/07 @ 102............... $ 1,800,000 $ 1,829,250
Aaa/AAA Evans, GO, 6.80%, 4/15/12, AMBAC...... 225,000 264,375
Aaa/AAA Evans, GO, 6.80%, 4/15/13, AMBAC...... 225,000 264,656
NR/AAA Lillian Cooper Housing Development
Corp. Mortgage Revenue, Series A,
7.00%, 1/1/22, FNMA/FHA 221(D)4,
Callable 7/1/01 @ 100............... 1,100,000 1,170,125
Aaa/AAA Metropolitan Transit Authority of New
York, Commuter Facilities Revenue,
Series C, 5.25%, 7/1/17, FGIC,
Callable 7/1/07 @ 101............... 4,300,000 4,214,000
Aaa/AAA Mount Sinai United Free School
District, GO, 6.20%, 2/15/12,
AMBAC............................... 1,065,000 1,183,481
Aaa/AAA North Hempstead, GO, Series B, 6.38%,
4/1/09, FGIC........................ 570,000 645,525
Aaa/AAA North Hempstead, GO, Series B, 6.40%,
4/1/10, FGIC........................ 560,000 634,200
Aaa/AAA Port Authority of New York & New
Jersey, Consolidated, 109th Series,
5.38%, 7/15/27, FSA, Callable
1/15/07 @ 101....................... 7,840,000 7,673,400
A1/A- Triborough Bridge & Tunnel Authority,
Special Obligation, Series B, 7.10%,
1/1/10, Callable 1/1/01 @ 102....... 3,725,000 4,055,594
-------------
TOTAL OTHER NEW YORK STATE BONDS
(Identified Cost $24,128,653)......... 25,115,856
-------------
OTHER MUNICIPAL BONDS--5.0%
Aaa/AAA Guam Government, Limited Obligation,
Highway Revenue, Series A, 6.25%,
5/1/07, FSA, Callable 5/1/02 @
102................................. 1,000,000 1,086,250
Aaa/AAA Puerto Rico, Public Buildings
Authority, Government Facilities,
Series B, 5.00%, 7/1/12, MBIA,
Callable 7/1/07 @ 101.5............. 5,000,000 4,912,500
-------------
TOTAL MUNICIPAL BONDS (Identified Cost
5,928,070) 5,998,750
-------------
INVESTMENT COMPANY--2.9%
Dreyfus New York Municipal Cash
Management Fund....................... 3,500,000 3,500,000
-------------
TOTAL INVESTMENT COMPANY (Identified
Cost $3,500,000)...................... 3,500,000
-------------
TOTAL INVESTMENTS--91.0% (Identified
Cost $103,542,312) (a)................ 108,336,817
OTHER ASSETS LESS LIABILITIES--9.0%..... 10,687,612
-------------
NET ASSETS--100.0%...................... $ 119,024,429
-------------
-------------
</TABLE>
- ------------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............................................ $ 4,915,800
Unrealized depreciation............................................ (121,295)
-------------
Net unrealized appreciation........................................ $ 4,794,505
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
PORTFOLIO OF INVESTMENTS -- AUGUST 31, 1997 (UNAUDITED) -- CONTINUED
*Credit Ratings given by Moody's Investors Service Inc. and Standard & Poor's
Corporation (unaudited).
<TABLE>
<CAPTION>
MOODY'S STANDARD & POOR'S
<S> <C> <C>
Aaa AAA Instrument judged to be of the highest quality and carrying the smallest
amount of investment risk.
Aa AA Instrument judged to be of high quality by all standards.
A A Instrument judged to be adequate quality by all standards.
Baa BBB Instrument judged to be moderate quality by all standards.
NR NR Not Rated. In the opinion of the Investment Adviser, Instrument judged to
be of comparable investment quality to rated securities which may be
purchased by the Fund.
</TABLE>
For items possessing the strongest investment attributes of their category,
Moody's gives that letter rating followed by a number. The Standard & Poor's
ratings may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
ABBREVIATIONS USED IN THIS STATEMENT:
<TABLE>
<S> <C>
AMBAC Insured as to principal and interest by the AMBAC Indemnity Corporation.
Connie Lee Insured as to principal and interest by Connie Lee Insurance Company.
FGIC Insured as to principal and interest by the Financial Guarantee Insurance Corporation.
FHA Insured by the Federal Housing Administration.
FNMA Insured by the Federal National Mortgage Association.
FSA Insured as to principal and interest by Financial Security Assurance.
GO General Obligation
HUD Department of Housing and Urban Development.
LC Letter of Credit
MBIA Insured as to principal and interest by the Municipal Bond Insurance Association.
SONYMA Insured as to principal and interest by the State of New York Mortgage Association.
TCRS Transferable Custodial Receipts
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
AUGUST 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (identified cost $103,542,312)............................. $ 108,336,817
Cash........................................................................................... 4,398,747
Interest receivable............................................................................ 1,060,135
Receivable for investment securities sold...................................................... 5,504,623
Prepaid expenses and other assets.............................................................. 30,988
--------------
Total Assets................................................................................. 119,331,310
LIABILITIES:
Income distribution payable.................................................... $ 89,431
Payable for fund shares redeemed............................................... 15,000
Advisor fee payable............................................................ 39,587
Administrative services fee payable............................................ 19,345
Shareholder servicing and dividend disbursing agent fees payable
Builder...................................................................... 39,567
Premier...................................................................... 7,941
Audit fees payable............................................................. 15,039
Fund accounting fees payable................................................... 4,666
Legal fees payable............................................................. 51,387
Trustees' fees payable......................................................... 2,180
Reports to shareholders fees payable........................................... 18,628
Other liabilities.............................................................. 4,110
--------------
Total Liabilities............................................................................ 306,881
--------------
NET ASSETS....................................................................................... $ 119,024,429
--------------
--------------
NET ASSETS:
Net assets consist of:
Paid-in capital.............................................................................. $ 113,375,928
Accumulated net realized gains on investments................................................ 853,996
Net unrealized appreciation on investments................................................... 4,794,505
--------------
NET ASSETS....................................................................................... $ 119,024,429
--------------
--------------
SHARES OF BENEFICIAL INTEREST:
Builder Class:
Shares of beneficial interest outstanding...................................... 3,183,934
--------------
--------------
Net Asset Value, offering and redemption price per share
($57,047,638 divided by 3,183,934 shares)
Net Asset Value per share...................................................... $ 17.92
--------------
--------------
Premier Class:
Shares of beneficial interest outstanding...................................... 3,459,943
--------------
--------------
Net Asset Value, offering and redemption price per share
($61,976,791 divided by 3,459,943 shares).................................... $ 17.91
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED AUGUST 31, 1997
<TABLE>
<S> <C> <C>
INCOME:
Interest......................................................... $3,341,282
EXPENSES:
Advisory fees....................................... $ 231,384
Administrative services fees........................ 113,315
Shareholder servicing and dividend disbursing agent
fees :
Builder Class..................................... 71,208
Premier Class..................................... 13,029
Custodian fees...................................... 28,051
Legal fees.......................................... 16,387
Fund accounting fees and expenses................... 20,654
Reports to shareholders............................. 18,628
Insurance expense................................... 5,855
Audit fees.......................................... 15,039
Registration fees................................... 6,083
Trustees' fees and expenses......................... 11,180
Other expenses...................................... 5,431
-----------
Total expenses before waivers..................... 556,244
Less: custody fee credits......................... (28,051)
-----------
Net expenses..................................................... 528,193
----------
NET INVESTMENT INCOME............................................ 2,813,089
REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions....... 866,061
Net change in unrealized appreciation/depreciation
on investments.................................... 334,179
-----------
Net gains on investments....................................... 1,200,240
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $4,013,329
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the
Six Months
Ended For the Year
August 31, Ended
1997 February 28,
(unaudited) 1997
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income........................... $ 2,813,089 $ 5,706,608
Net realized gains on investments............... 866,061 720,080
Net realized losses on futures contracts........ -- (732,415)
Net change in unrealized
appreciation/depreciation on investments
including futures contracts................... 334,179 (656,980)
------------ ------------
Net increase in net assets resulting from
operations.................................... 4,013,329 5,037,293
------------ ------------
Distributions to shareholders from:
Net investment income--Builder Class............ (1,344,008) (3,318,420)
Net investment income--Premier Class............ (1,469,081) (2,388,188)
Net realized gains on investments--Builder
Class......................................... -- (535,066)
Net realized gains on investments--Premier
Class......................................... -- (304,958)
------------ ------------
Total distributions............................. (2,813,089) (6,546,632)
------------ ------------
SHARE TRANSACTIONS:
Proceeds from sales of 185,585 shares and
535,999 shares respectively-- Builder Class... 3,315,873 9,479,126
Proceeds from sales of 240,813 shares and
3,525,184 shares respectively--Premier
Class......................................... 4,281,167 61,910,250
Proceeds from reinvestment of income and capital
gains of 66,631 shares and 190,410 shares
respectively--Builder Class................... 1,181,748 3,354,882
Proceeds from reinvestment of income and capital
gains of 74,268 shares and 137,550 shares
respectively--Premier Class................... 1,315,564 2,422,316
Cost of 403,048 shares and 3,954,973 shares
respectively redeemed-- Builder Class......... (7,144,810) (69,479,003)
Cost of 203,360 shares and 314,512 shares
respectively redeemed-- Premier Class......... (3,614,549) (5,549,298)
------------ ------------
Net increase (decrease) in net assets from
capital share transaction..................... (665,007) 2,138,273
------------ ------------
Net increase in net assets...................... 535,233 628,934
NET ASSETS:
Beginning of year............................... 118,489,196 117,860,262
------------ ------------
End of year..................................... $119,024,429 $118,489,196
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. DESCRIPTION AND SHARES OF THE FUND:
The Empire Builder Tax Free Bond Fund (the 'Fund') was established as a
Massachusetts business trust by an Agreement and Declaration of Trust dated
September 30, 1983. The Fund is registered under the Investment Company Act of
1940, as amended, as an open-end, non-diversified investment company. The Fund
has an unlimited number of shares authorized with no par value.
The Fund seeks as high a level of current income exempt from federal income
tax and New York State and City personal income taxes as the Fund's investment
adviser believes is consistent with the preservation of capital. The Fund
invests primarily in a portfolio of New York tax-exempt bonds.
The Fund offers two classes of shares; the Builder Class and the Premier
Class. Builder Class shares offer a higher level of shareholder services and
features. Premier Class shares offer fewer services and features, and require a
higher minimum investment, but benefit from a lower level of expenses.
Each class of shares outstanding bears the same dividend, liquidation and
other rights and conditions, except that the Builder Class shares and the
Premier Class shares bear separate shareholder servicing expenses. Each class of
shares has exclusive voting rights with respect to matters affecting only that
class.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual amounts could differ from those estimates.
SECURITY VALUATION
Tax-exempt securities for which transaction prices are not readily
available are valued at their fair value as determined by an independent pricing
service approved by the Fund's Board of Trustees. The pricing service uses
information with respect to transactions in bonds, quotations from bond dealers,
market transactions in comparable securities and various relationships between
securities in determining value. The methods used by the pricing service and the
quality of valuations so established are reviewed by officers of the Fund and
the Fund's investment adviser, under the general supervision of the trustees of
the Fund.
Securities for which quotations are readily available are stated at market
value. Short-term debt securities having remaining maturities of sixty (60) days
or less are stated at amortized cost, which approximates market value.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on the trade date. Interest income
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.
9
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
TAXES
The Fund qualifies and intends to continue to qualify as a 'regulated
investment company' under Subchapter M of the Internal Revenue code of 1986, as
amended, and to distribute all or substantially all of its tax-exempt and
taxable income to its shareholders. Therefore, no federal income tax provision
is required.
In addition, by distributing during each calendar year substantially all of
its net investment income, capital gains and certain other amounts, if any, the
Fund will not be subject to a federal excise tax.
FUTURE CONTRACTS
The Fund may purchase and sell financial futures contracts, options on such
futures contracts and options on securities indices to hedge against changes in
the values of New York tax exempt bonds the Fund owns or expects to purchase.
The Fund may also purchase and sell futures and options on U.S. Treasury
securities in order to hedge against interest rate changes or other general
changes in market values.
Upon entering into a futures contract, the Fund is required to deposit cash
or pledge securities in an amount equal to a certain percentage of the purchase
price indicated in the futures contract (initial margin). Subsequent payments,
which are dependent on the daily fluctuations in the value of the underlying
security, are made or received by the Fund each day (daily variation margin) and
are recorded as unrealized gains or losses until the contracts are closed.
DISTRIBUTIONS AND DIVIDENDS
Distributions to shareholders from net investment income are declared daily
and paid monthly. The Fund also distributes to shareholders substantially all
net capital gains realized from portfolio transactions.
The amounts of dividends from net investment income and of distributions
from net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These 'book/tax' differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
DETERMINATION OF NET ASSET VALUE AND ALLOCATION OF EXPENSES
In calculating net asset value per share of each class, investment income
and expenses, other than class-specific expenses, are allocated daily to each
class of shares based on the value of outstanding shares.
10
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
3. PURCHASES AND SALES OF INVESTMENT SECURITIES:
Purchases and sales of investment securities, excluding short-term
investments, during the six months ended August 31, 1997 amounted to
$114,071,562 and $121,434,409, respectively.
4. ADVISORY FEES AND OTHER RELATED PARTY TRANSACTIONS:
The Fund retains Glickenhaus & Co. (The 'Adviser') to act as investment
adviser pursuant to an Investment Advisory Agreement. As compensation for its
advisory services, the Adviser receives a fee computed daily and paid monthly,
at the annual rates of 0.40% of the first $100,000,000 of average daily net
assets and 0.3333% of any excess over $100,000,000. For the six months ended
August 31, 1997, the advisory fee earned by the Adviser was $231,384.
Glickenhaus has agreed to a reduction of advisory fees to the extent that
the Fund's expenses, including the advisory fees, exceed 1.50% of the Fund's
average annual net assets. For the six months ended August 31, 1997, there was
no reduction of advisory fees pursuant to this agreement.
BISYS Fund Services provides the Fund with administrative services pursuant
to an administrative services agreement (the 'Administration Agreement'). BISYS
receives a fee from the Fund, computed daily and paid monthly at the annual
rates of 0.20% of the first $100,000,000 of average daily net assets and 0.14%
of any excess over $100,000,000. For the six months ended August 31, 1997, BISYS
earned $113,315 under its Administration Agreement with the Fund.
BISYS also provided the Fund with certain accounting and related services.
For their services under the Fund Accounting Agreement, BISYS receives from the
Fund a monthly fee of $2,500 plus reimbursement for out of pocket expenses. From
the six months ended August 31, 1997, BISYS received fees and expense
reimbursements of $20,654 under its Fund Accounting Agreement with the Fund.
Transfer agency services and dividend and capital gain disbursing agent
services, are currently provided to the Trust pursuant to a Transfer Agency
Agreement between the Trust and BISYS ('Transfer Agency Agreement'). For its
services under the Transfer Agency Agreement, BISYS is entitled to receive a fee
of $8 per account per year plus out-of-pocket expenses. During the six month
period ended August 31, 1997 BISYS received fees and expense reimbursements of
$71,208 for the Builder Class and $13,029 for the Premier Class under its
Transfer Agency Agreement with the Fund.
5. OFF-BALANCE-SHEET RISK AND DERIVATIVES:
The Fund's use of futures contracts involves, to varying degrees, elements
of market risk in excess of the amount recognized in the statement of assets and
liabilities. Futures contracts are one type of derivative financial instrument
and are used by the Fund to hedge against changes in the values of New York tax
exempt bonds that the Fund owns or expects to purchase. Although futures
contracts are not used by the Fund for the purpose of leveraging or speculating,
they can result in additional risks if used improperly. The objective in buying
or selling a derivative instrument is to increase or decrease a Fund's exposure
to changing security prices and interest rates. If the Adviser misjudges market
conditions or employs a strategy that does not correlate well with the Fund's
other investments, use of these derivatives could result in a loss, regardless
of the Adviser's original intent to reduce risk.
11
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
FINANCIAL HIGHLIGHTS
AMOUNTS EXPRESSED AS DOLLARS ARE FOR A
SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year Ended Year Ended
Six Months Ended Period Ended ------------ February 28,
-------------------------- ------------------ February 29, ------------
August 31, 1997 February 28, 1997 1996 1995
-------------------------- ------------------ ------------ ------------
Builder Premier Builder Premier Builder Builder
Class Class Class Class* Class Class
----------- ----------- ------- -------- ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $ 17.73 $ 17.73 $ 17.96 $ 17.57 $ 17.31 $ 18.24
----------- ----------- ------- -------- ------------ ------------
Income from Investment Operations:
Net investment income.............. 0.41 0.43 0.84 0.75 0.87 0.87
Net realized and unrealized gains
(losses) on securities........... 0.19 0.18 (0.10) 0.29 0.65 (0.71)
----------- ----------- ------- -------- ------------ ------------
Total from Investment Operations... 0.60 0.61 0.74 1.04 1.52 0.16
----------- ----------- ------- -------- ------------ ------------
Less Distributions:
Dividends from net investment
income........................... (0.41) (0.43) (0.84) (0.75) (0.87) (0.87)
Distributions from net realized
capital gains.................... -- -- (0.13) (0.13) -- --
Distributions in excess of net
realized capital gains........... -- -- -- -- -- (0.22)
----------- ----------- ------- -------- ------------ ------------
Total Distributions................ (0.41) (0.43) (0.97) (0.88) (0.87) (1.09)
----------- ----------- ------- -------- ------------ ------------
Net Asset Value, End of Period......... $ 17.92 $ 17.91 $ 17.73 $ 17.73 $ 17.96 $ 17.31
----------- ----------- ------- -------- ------------ ------------
----------- ----------- ------- -------- ------------ ------------
Total Return........................... 3.36%(c) 3.47%(c) 4.30% 6.03%(c) 8.95% 1.09%
Ratios/Supplemental Data:
Net Assets, End of Period (in
thousands)....................... $57,048 $61,977 $59,133 $ 59,356 $117,860 $108,020
Ratio of Expenses to Average Net
Assets........................... 0.98%(b) 0.78%(b) 1.03% 0.93%(b) 0.96% 0.93%
Ratio of Expenses to Average Net
Assets** ........................ 1.02%(b) 0.82%(b) 1.07% 0.97%(b) 1.01% 0.93%
Ratio of Net Investment Income to
Average Net Assets............... 4.64%(b) 4.84%(b) 4.81% 4.88%(b) 4.91% 5.04%
Ratio of Net Investment Income to
Average Net Assets**............. 4.60% 4.80% 4.77% 4.84% 4.86% 5.04%
Portfolio Turnover Rate (a)........ 102% 102% 181% 181% 150% 143%
<CAPTION>
Year Ended
February 28,
---------------------------
1994 1993
------------ ------------
Builder Builder
Class Class
------------ ------------
<S> <C> <C>
Net Asset Value, Beginning of Period... $ 18.41 $ 17.17
------------ ------------
Income from Investment Operations:
Net investment income.............. 0.90 0.94
Net realized and unrealized gains
(losses) on securities........... 0.09 1.43
------------ ------------
Total from Investment Operations... 0.99 2.37
------------ ------------
Less Distributions:
Dividends from net investment
income........................... (0.90) (0.94)
Distributions from net realized
capital gains.................... (0.26) (0.19)
Distributions in excess of net
realized capital gains........... -- --
------------ ------------
Total Distributions................ (1.16) (1.13)
------------ ------------
Net Asset Value, End of Period......... $ 18.24 $ 18.41
------------ ------------
------------ ------------
Total Return........................... 5.44% 14.32%
Ratios/Supplemental Data:
Net Assets, End of Period (in
thousands)....................... $108,305 $ 96,568
Ratio of Expenses to Average Net
Assets........................... 0.98% 1.03%
Ratio of Expenses to Average Net
Assets** ........................ 0.98% 1.03%
Ratio of Net Investment Income to
Average Net Assets............... 4.85% 5.31%
Ratio of Net Investment Income to
Average Net Assets**............. 4.85% 5.31%
Portfolio Turnover Rate (a)........ 164% 122%
</TABLE>
- ------------------
* Premier Class commenced operations on April 15, 1996.
** Effective fiscal year ended February 29, 1996, the fund received custodian
fee credits for cash balances maintained with the custodian. If such
custodian fee credits had not been received, the ratios would have been as
indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(b) Annualized
(c) Not annualized
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
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<PAGE>
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<PAGE>
THE MANAGEMENT
TRUSTEES AND OFFICERS
TRUSTEES
SETH M. GLICKENHAUS,* CHAIRMAN OF THE BOARD
OF TRUSTEES
Senior Partner of Glickenhaus & Co.
EDWARD A. FALKENBERG, Trustee
Vice President and Controller,
Joseph E. Seagram & Sons, Inc. and
Controller, Seagram Company Ltd.
EDWARD A. KUCZMARSKI, Trustee
Certified Public Accountant and Partner,
Hays & Company
ELIZABETH B. NEWELL, Trustee
Trustee, International Preschools
JOHN P. STEINES, Trustee
Professor of Law, New York University
School of Law
OFFICERS
SETH M. GLICKENHAUS
President of the Fund; Senior Partner of
Glickenhaus & Co.
MICHAEL J. LYNCH
Senior Vice President of the Fund; Director,
Unit Trust Department, Glickenhaus & Co.
FRANK M. DEUTCHKI
Vice President of the Fund; Registration and Compliance Officer, Fund
Administration and Regulatory, Services, BISYS Fund Services
GEORGETTE L. HORTON
Vice President of the Fund; Director,
BISYS Fund Services
MICHAEL SAKALA
Treasurer of the Fund; Vice President and Treasurer, BISYS Fund Services
ELLEN STOUTAMIRE
Secretary of the Fund; Vice President, Client Legal Services, BISYS Fund
Services
AMY WARD KAUP
Assistant Secretary of the Fund, Associate Manager, Client Legal Services, BISYS
Fund Services
ALAINA V. METZ
Assistant Secretary of the Fund; Chief Administrative Officer, Administration
and Regulatory Services, BISYS Fund Services
BRUCE TREFF
Assistant Secretary of the Fund; Counsel, Administrative and Regulatory
Services, BISYS Fund Services
* Trustee who is an 'interested person' of the Fund as that term is defined in
the Investment Company Act of 1940.
<PAGE>
[EMPIRE BUILDER LOGO]
3435 Stelzer Road
Columbus, Ohio 43219
1-800-847-5886
[EMPIRE BUILDER LOGO]
TAX FREE BOND FUND
SEMI ANNUAL REPORT
AUGUST 31, 1997
Investment Adviser and Distributor
GLICKENHAUS & CO.
6 East 43rd Street
New York, New York 10017
Administrator
BISYS FUND SERVICES LIMITED PARTNERSHIP
D/B/A BISYS FUND SERVICES
3435 Stelzer Road
Columbus, Ohio 43219
Transfer and Shareholder Servicing Agent
BISYS FUND SERVICES, INC.
3435 Stelzer Road
Columbus, Ohio 43219
Custodian
INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street
Kansas City, Missouri 64105
Legal Counsel
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
Independent Accountants
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas
New York, New York 10019
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.
