<PAGE>
[LOGO]
3435 Stelzer Road
Columbus, Ohio 43219
1-800-847-5886
Dear Shareholder,
We are pleased to present The Empire Builder Tax-Free Bond Fund Semi-
Annual Report for the period ended August 31, 2000.
We are glad to report that the portfolio has had a good year, despite the
repeated increases in the Discount Rate the Federal Reserve Board made this
year. Through August 31, 2000 the Builder portfolio was up 8.39%, and the
Premier portfolio was up 8.60%.
The economy seems to be softening after many robust years, and we believe
this will continue for sometime. This augurs well for the fixed income market,
in general, and particularly for the tax-free municipal market where yields
(especially in the longer maturities) are too close to taxable yields. We will
try to take advantage of this opportunity.
In our opinion, The Empire Builder Tax-Free Bond Fund is well positioned
for the next six months. The no-load structure continues to offer value to the
shareholder because there is no charge to purchase units. We also recommend our
automatic investment program (also known as dollar cost averaging*) that allows
you to follow a disciplined investment plan. Please call the customer service
desk at 1-800-847-5886 for information on how to participate. We look forward
to helping you meet your investment needs.
Sincerely,
/s/ SETH M. GLICKENHAUS
-----------------------
Seth M. Glickenhaus
President
*Dollar cost averaging does not insure a profit and does not protect against
loss in declining markets. An investor should consider his or her financial
ability to continue making additional investments through periods of low share
price levels.
This report must be preceded or accompanied by a prospectus. For more complete
information including charges and expenses, please call 1-800-847-5886 to
receive a prospectus. Read the prospectus carefully before investing or sending
money.
The fund's income may be subject to certain state and local taxes and,
depending on your tax status, the federal alternative minimum tax (AMT).
Past performance does not guarantee future results.
Not FDIC insured. May lose value. No bank guarantee.
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
Portfolio of Investments -- August 31, 2000 (unaudited)
<TABLE>
<CAPTION>
Principal Value
Credit Ratings** Municipal Securities--96.0% Amount (Note 2)
---------------- ----------------------------- -------------- -------------
<S> <C> <C> <C>
New York City--(8.9%)
Aaa/AAA New York City General
Obligation, Series B, 4.15%
(VR)*, 8/15/2005, Callable
8/15/2001 @ 100, (MBIA)...... $ 6,000,000 $ 5,999,999
Aaa/AAA New York City General
Obligation, Series B, 5.25%,
8/1/2017, Callable 8/1/2007
@ 101, (AMBAC)............... 1,200,000 1,179,000
Aaa/AAA New York City General
Obligation, Series B, 5.375%,
8/1/2022, Callable 8/1/2007
@ 101, (MBIA)................ 1,250,000 1,223,438
Aaa/AAA New York City General
Obligation, Series H, 5.375%,
8/1/2027, Callable 8/1/2008
@ 101, (FSA)................. 1,465,000 1,419,219
-------------
Total New York City.......... 9,821,656
-------------
New York City Agencies--(6.7%)
New York City Municipal Water
Authority (2.2%)
Aa3/AA New York City Municipal
Water Finance Authority,
Series A, 5.50%, 6/15/2024,
Callable 6/15/2006 @ 101..... 2,435,000 2,395,431
New York City Transitional
Finance Authority (4.5%)
Aa3/AA New York City Transitional
Finance Authority, Series C,
5.50%,
11/1/2024, Callable 5/1/2010
@ 101........................ 5,000,000 4,956,250
-------------
Total New York City Agencies. 7,351,681
-------------
New York State--(4.3%)
A2/AAA New York State General
Obligation, Series B, 5.00%,
3/1/2017, Callable 3/1/2008
@ 101, (AMBAC)............... 5,000,000 4,731,250
-------------
New York State Agencies---
(53.1%)
New York State Dormitory
Authority (23.4%)
Baa1/A Albany County Airport,
5.25%, 4/1/2013, Callable
4/1/2008 @ 101............... 1,200,000 1,198,500
Aaa/AAA City University, 5.00%,
7/1/2016, Callable 7/1/2008
@ 101, (FGIC)................ 2,900,000 2,794,875
NR/AAA Heritage House Nursing
Center, 7.00%, 8/1/2031,
Callable 8/1/2001
@ 102, (FHA)................. 465,000 480,131
Aaa/AAA Memorial Sloan Kettering,
5.75%, 7/1/2019, Non
Callable, (MBIA)............. 1,000,000 1,043,750
Aaa/AAA Mt. Sinai School of
Medicine, 6.75%, 7/1/2015,
Callable 7/1/2001
@ 102, (MBIA)................ 2,250,000 2,323,125
Aaa/AAA New York Medical College,
5.25%, 7/1/2013, Callable
7/1/2008 @ 101, (MBIA)....... 1,015,000 1,021,344
Aaa/AAA New York University, Series
A, 6.00%, 7/1/2017, Non
Callable, (MBIA)............. 1,000,000 1,083,750
Aaa/AAA North Shore Health System,
North Shore University
Hospital, 5.50%, 11/1/2014,
Non Callable, (MBIA)......... 1,000,000 1,032,500
Aaa/AAA Secured Hospital, Southside
Hospital, 5.00%, 2/15/2018,
Callable 2/15/2008
@ 101.5, (MBIA).............. 1,250,000 1,171,875
Aaa/AAA Special Acts School
Districts Program, 6.00%,
7/1/2019, Callable
7/1/2005 @ 102, (MBIA)....... 3,540,000 3,668,325
Aaa/AAA State University, Series C,
5.50%, 7/1/2019, Callable
7/1/2009 @ 101, (MBIA)....... 6,390,000 6,397,987
</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, 2000 (unaudited) -- continued
<TABLE>
<CAPTION>
Municipal Securities--- Principal Value
Credit Ratings** continued Amount (Note 2)
----------------- ----------------------------- -------------- -----------
<S> <C> <C> <C>
New York State Agencies---
continued
Aaa/AAA State University, 5.375%,
7/1/2021, Callable 7/1/2008
@ 102, (MBIA)................ $ 1,690,000 $ 1,656,200
Aaa/AAA Upstate Community Colleges,
Series A, 6.00%, 7/1/2019,
Callable 7/1/2010
@ 101, (FSA)................. 1,000,000 1,053,750
Aaa/AAA Upstate Community Colleges,
Series A, 6.00%, 7/1/2020,
Callable 7/1/2010
@ 101, (FSA)................ 845,000 889,363
New York State Energy,
Research & Development (3.8%)
Aaa/AAA Niagara Mohawk, Pollution
Control Revenue, 5.15%,
11/1/2025, Callable 11/1/2008
@ 102, (AMBAC)............... 1,350,000 1,269,000
Aaa/AAA Brooklyn Union Gas Company,
5.50%, 1/1/2021, Callable
1/1/2006 @ 102, (MBIA)....... 3,000,000 2,966,250
New York State Environmental
Facilities Corp. (1.4%)
Aaa/AAA Water Pollution Control
Revenue, Revolving Fund,
Water Pooled Loan, 5.90%,
1/15/2018, Callable
1/15/2006 @ 102.............. 1,510,000 1,566,625
New York State Housing
Finance Agency (3.5%)
Aa1/NR Multi-Family Housing,
Secured Mortgage Program,
6.45%, 8/15/2014,
Callable 2/15/2004
@ 102, (SONYMA Insured)...... 2,245,000 2,374,088
Aaa/AAA Housing Project Mortgage
Revenue Bonds, Series A,
6.125%, 11/1/2020,
Callable 5/1/2006 @ 102,
(FSA).................... 1,460,000 1,518,400
New York State Medical Care
Facilities Finance Agency
(5.8%)
Aaa/AAA Hospital and Nursing Home,
St. Vincent's Hospital
Project, 6.20%,
2/15/2021, Callable 2/15/2004
@ 102, (AMBAC)(FHA).......... 1,060,000 1,101,075
Aaa/AAA Long Term Health Care,
6.50%, 11/1/2015, Callable
11/1/2002 @ 102,
(FSA)(SONYMA Insured)........ 2,245,000 2,348,831
A3/A- Mental Health Services
Facilities, 7.625%,
2/15/2008, Callable
10/16/2000 @ 100............. 295,000 299,059
A3/A- Mental Health Services
Facilities, 7.875%,
8/15/2020, Callable
10/16/2000 @ 102............. 355,000 366,449
Aaa/AAA St. Mary's Hospital Project,
Series A, 6.20%, 11/1/2014,
Pre-Refunded 11/1/2003 @ 102,
(AMBAC)...................... 2,100,000 2,254,875
New York State Mortgage
Agency (3.5%)
Aa1/NR Homeowner, Series 72, 5.30%,
4/1/2027, Callable 7/1/2008
@ 101........................ 4,000,000 3,840,000
New York State Thruway
Authority (5.0%)
Aaa/AAA Highway & Bridge, Series A,
5.125%, 4/1/2016, Callable
4/1/2009 @ 101, (FGIC)....... 5,690,000 5,561,975
New York State Urban
Development Corporation
(1.8%)
Baa1/A Empire State Development
Corporation, University
Facilities Grants, 6.00%,
1/1/2009, Non Callable....... 905,000 974,006
Baa1/A Youth Facilities, 5.75%,
4/1/2008, Callable 4/1/2005
@ 102........................ 1,000,000 1,053,750
</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, 2000 (unaudited) -- continued
<TABLE>
<CAPTION>
Municipal Securities--- Principal Value
Credit Ratings** continued Amount (Note 2)
---------------- ---------------------------- ---------------- -------------
<S> <C> <C> <C>
New York State Agencies---
continued
Triborough Bridge & Tunnel
Authority (4.9%)
A1/A- Special Obligation, Series
B, 7.10%, 1/1/2010, Callable
1/1/2001 @ 102............... $ 3,725,000 $ 3,827,549
Aaa/AAA Special Obligation, Series
A, 5.25%, 1/1/2012, Callable
1/1/2008 @ 101, (FGIC)....... 1,500,000 1,531,875
--------------
Total New York State
Agencies..................... 58,669,282
--------------
Other New York State Bonds---
(16.9%)
Baa1/NR Albany Housing Authority,
Ltd. Obligation, 6.25%,
10/1/2012, Callable 10/1/2005
@ 102........................ 1,000,000 1,067,500
Aaa/AAA Buffalo Municipal Water
Finance Authority, Water
System Revenue, 5.75%,
7/1/2019, Callable 7/1/2005
@ 102, (FGIC)................ 500,000 511,250
Aaa/AAA Evans, General Obligation,
6.80%, 4/15/2012, Non
Callable, Bank Qualified,
(AMBAC)...................... 225,000 262,406
Aaa/AAA Evans, General Obligation,
6.80%, 4/15/2013, Non
Callable, Bank Qualified,
(AMBAC)...................... 225,000 263,250
NR/AAA Lillian Cooper Housing
Development Corp. Mortgage
Revenue, Series A, 7.00%,
1/1/2022, Callable 7/1/2001
@ 100, (FNMA) (FHA).......... 1,100,000 1,114,157
Aaa/AAA Long Island Power Authority,
Series A, 5.25%, 12/1/2026,
Callable 6/1/2008 @ 101,
(AMBAC)...................... 1,600,000 1,522,000
Aaa/AAA Long Island Power Authority,
Series A, 5.125%, 12/1/2022,
Callable 6/1/2008 @ 101,
(FSA)........................ 4,000,000 3,774,999
NR/AAA Monroe County Industrial
Development Agency Civic
Facility, Nazareth College,
5.25%, 4/1/2023, Callable
4/1/2008 @ 101, (MBIA)....... 500,000 478,750
Aaa/AAA Mount Sinai Union Free School
District, General Obligation,
6.20%, 2/15/2012, Non
Callable, (AMBAC)............ 1,065,000 1,183,481
Aaa/AAA North Hempstead, General
Obligation, Series B, 6.375%,
4/1/2009, Non Callable,
(FGIC)....................... 570,000 637,688
Aaa/AAA North Hempstead, General
Obligation, Series B, 6.40%,
4/1/2010, Non Callable,
(FGIC)....................... 560,000 630,700
NR/AAA Oneida County Industrial
Development Agency, Mohawk
Valley Network, St. Luke's
Memorial Hospital, 5.00%,
1/1/2013, Callable 1/1/2008
@ 101, (FSA)................. 2,000,000 1,982,500
Aaa/AAA Oneida County, General
Obligation, 0.00%, 4/15/2015,
Non Callable, (AMBAC)........ 500,000 228,750
Aaa/AAA Suffolk County General
Obligation, Series C, 5.00%,
9/15/2015, Callable 9/15/2008
@ 101, (FGIC)................ 965,000 934,844
Aaa/AAA Suffolk County General
Obligation, Series C, 5.00%,
9/15/2016, Callable 9/15/2008
@ 101, (FGIC)................ 550,000 528,688
Aaa/AAA Suffolk County General
Obligation, Series C, 5.00%,
9/15/2017, Callable 9/15/2008
@ 101, (FGIC)................ 480,000 457,800
Aaa/AAA Suffolk County General
Obligation, Series D, 5.00%,
11/1/2015, Callable 11/1/2008
@ 101, (FGIC)................ 1,125,000 1,089,844
</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, 2000 (unaudited) -- continued
<TABLE>
<CAPTION>
Municipal Securities--- Principal Value
Credit Ratings** continued Amount (Note 2)
---------------- ------------------------------- -------------------- -------------
<S> <C> <C> <C>
Other New York State Bonds---
continued
Aaa/AAA Suffolk County General
Obligation, Series D, 5.00%,
11/1/2016, Callable 11/1/2008
@ 101, (FGIC)................ $ 1,110,000 $ 1,066,988
NR/A- Westchester County Industrial
Development Agency Civic
Facility, Lawrence Hospital,
Series A, 5.125%, 1/1/2018,
Callable 1/1/2008 @ 102...... 1,000,000 913,750
-----------------
Total Other New York State
Bonds........................ 18,649,345
-----------------
Other Municipal Bonds---
(6.1%)
Guam (6.1%)
Aaa/AAA Guam Government Limited
Obligation Highway Revenue,
Series A, 6.25%, 5/1/2007,
Callable 5/1/2002 @ 102,
(FSA)........................ 1,000,000 1,048,750
Aaa/AAA Guam Power Authority, Series
A, 5.00%, 10/1/2024, Callable
10/1/2009 @ 101, (AMBAC)..... 6,000,000 5,707,500
-----------------
Total Other Municipal Bonds.. 6,756,250
-----------------
Total Municipal Securities
(Cost $104,372,109).......... 105,979,464
Short Term Investments---
(2.4%)
Dreyfus New York Municipal
Cash Management Fund......... 2,600,000 2,600,000
-----------------
Total Investments (Cost
$106,972,109)(a)---98.4%.... 108,579,464
Other Assets in Excess of
Liabilities---1.6%........... 1,733,781
-----------------
Total Net Assets---100.0%.... $110,313,245
=================
</TABLE>
-----------
Percentages indicated are based on net assets of $110,313,245.
* Variable rate note that is liquid cash equivalent.
(a)Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized
appreciation....... $ 2,310,402
Unrealized
depreciation....... (703,047)
--------------
Net unrealized
appreciation....... $ 1,607,355
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
Portfolio of Investments -- August 31, 2000 (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:
AMBAC Insured as to principal and interest by the American Municipal
Bond Assurance Corporation.
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.
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.
VR Variable Rate Note.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
Statement of Assets and Liabilities (unaudited)
August 31, 2000
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments in securities, at value (cost $106,972,109)
(Note 2)................................................ $ 108,579,464
Interest receivable....................................... 1,526,329
Receivable for investments sold........................... 481,655
Prepaid expenses and other assets......................... 6,530
----------------
Total Assets............................................. 110,593,978
================
Liabilities:
Due to Custodian...................... $ 184,189
Income distribution payable........... 39,651
Advisory fee payable (Note 4)......... 37,183
Administrative services fee payable
(Note 4)............................ 2,898
Other payables and accrued expenses... 16,812
----------------
Total Liabilities........................................ 280,733
----------------
Net Assets................................................. $ 110,313,245
================
Net Assets:
Net assets consist of:
Paid-in capital........................................... $ 110,140,140
Accumulated net investment income......................... 26,241
Accumulated net realized loss on investments including
futures contracts....................................... (1,460,491)
Net unrealized appreciation on investments................ 1,607,355
----------------
Net Assets................................................. $ 110,313,245
=================
Shares of Beneficial Interest:
Builder Class:
Shares of beneficial interest
outstanding......................... 3,043,677
================
Net asset value, offering and
redemption price per share
($52,177,715 divided by 3,043,677 shares) $ 17.14
================
Premier Class:
Shares of beneficial interest
outstanding......................... 3,391,028
================
Net asset value, offering and
redemption price per share
($58,135,530 divided by 3,391,028 shares) $ 17.14
================
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
Statement of Operations (unaudited)
For the Period Ended August 31, 2000
<TABLE>
<CAPTION>
<S> <C>
Income:
Interest..................................................... $ 3,043,300
Dividend..................................................... 30,251
---------------
3,073,551
Expenses:
Advisory fees (Note 4)..................... $ 215,983
Administrative services fees (Note 4)...... 101,036
Transfer agency and dividend disbursing
fees (Builder Class) (Note 4)............ 107,231
Transfer agency and dividend disbursing
fees (Premier Class) (Note 4)............ 23,066
Custody.................................... 15,832
Fund accounting fees and expenses (Note 4). 28,748
Trustees' fees and expenses................ 10,725
Other...................................... 50,666
---------------
Total expenses............................ 553,287
Less: Custody fee credit.................. (5,476)
---------------
Total net expenses........................................... 547,811
---------------
Investment income--net........................................ 2,525,740
---------------
Realized and Unrealized Gain on Investments
(Notes 2 and 3)
Net realized gain on investments including
futures contracts........................ 382,027
Net increase in unrealized appreciation/
(depreciation) on investments............ 4,945,231
---------------
Net gain on investments..................................... 5,327,258
---------------
Net Increase in Net Assets Resulting From Operations.......... $ 7,852,998
===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Period Ended
08/31/00 Year Ended
(unaudited) 02/29/00
--------------- ---------------
<S> <C> <C>
Change in Net Assets:
Operations:
Net investment income..................... $ 2,525,740 $ 5,251,466
Net realized gain/(loss) on investments
including futures contracts ............. 382,027 (1,835,956)
Net increase/(decrease) in unrealized
appreciation/(depreciation) on
investments including futures contracts . 4,945,231 (8,493,207)
--------------- ---------------
Net increase/(decrease) in net assets
resulting from operations ............... 7,852,998 (5,077,697)
--------------- ---------------
Distributions to shareholders from:
Net investment income--Builder Class...... (1,151,679) (2,403,704)
Net investment income--Premier Class...... (1,374,061) (2,847,747)
Net realized gains on investments--
Builder Class ........................... --- (81,511)
Net realized gains on investments--
Premier Class ........................... --- (91,093)
--------------- ---------------
Total distributions....................... (2,525,740) (5,424,055)
--------------- ---------------
Capital Transactions:
Proceeds from sale of shares--Builder
Class ................................... 1,822,440 2,843,152
Proceeds from sale of shares--Premier
Class ................................... 1,632,719 1,818,926
Proceeds from reinvestment of income and
capital gains distributions--
Builder Class ........................... 1,008,411 2,236,662
Proceeds from reinvestment of income and
capital gains distributions--
Premier Class ........................... 1,163,859 2,554,586
Cost of shares redeemed--Builder Class.... (3,526,249) (7,378,777)
Cost of shares redeemed--Premier Class.... (3,098,396) (6,856,669)
--------------- ---------------
Net decrease in net assets from capital
share transactions ...................... (997,216) (4,782,120)
--------------- ---------------
Net increase/(decrease) in net assets..... 4,330,042 (15,283,872)
Net Assets:
Beginning of period....................... 105,983,203 121,267,075
--------------- ---------------
End of period............................. $ 110,313,245 $ 105,983,203
=============== ===============
Undistributed net investment income
included in net assets at end of period . $ 26,241 $ 26,241
=============== ===============
Share Transactions:
Issued--Builder Class..................... 109,337 167,065
Issued--Premier Class..................... 97,835 106,750
Reinvested--Builder Class................. 60,439 132,492
Reinvested--Premier Class................. 69,741 151,284
Redeemed--Builder Class................... (211,811) (436,684)
Redeemed--Premier Class................... (186,305) (409,232)
--------------- ---------------
Change in shares.......................... (60,764) (288,325)
=============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<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 transfer agency 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.
Use of Estimates
Estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ from these amounts.
Security Valuation
Tax-exempt securities 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, 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.
10
<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, and to
distribute substantially all of its tax-exempt and taxable income. Therefore,
no federal income tax provision is required.
In addition, by distributing during each calendar year substantially all
of its net investment income, capital gains and certain other amounts, if any,
the Fund will not be subject to a federal excise tax.
Futures 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 value 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 at least annually
substantially all net capital gains, if any, 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 settled shares.
Other
The Fund maintains a cash balance with its custodian and receives a
reduction of their custody fees and expenses for the amounts of interest earned
on such uninvested cash balance. There was no effect on net investment income.
The Fund could have invested such cash amounts in an income-producing asset if
they had not agreed to a reduction of fees or expenses under the expense offset
arrangement with their custodian.
11
<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, 2000, amounted to
$44,954,507 and $54,998,464, 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.
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, 2000, there was
no reduction of advisory fees pursuant to this agreement.
BISYS Fund Services Ohio, Inc. ("BISYS" or the "Administrator"), a wholly-
owned subsidiary of The BISYS Group, Inc., serves as the fund's administrator,
transfer agent, fund accountant and assists the trust in all aspects of its
administration and operation. BISYS is entitled to receive fees as well as be
reimbursed for certain out-of-pocket expenses incurred for providing these
services.
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.
12
<PAGE>
THE EMPIRE BUILDER TAX FREE BOND FUND
Financial Highlights
For a share of beneficial interest outstanding throughout each period
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
---------------------------- ---------------------------- ----------------------------
August 31, 2000 (unaudited) February 29, 2000 February 28, 1999
---------------------------- ---------------------------- ----------------------------
Builder Class Premier Class Builder Class Premier Class Builder Class Premier Class
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 16.32 $ 16.32 $ 17.88 $ 17.88 $ 18.22 $ 18.22
------------ ------------ ------------ ------------ ------------ ------------
Income from Investment Operations:
Net investment income............ 0.38 0.40 0.78 0.84 0.75 0.80
Net realized and unrealized
gains (losses) on
securities...................... 0.82 0.82 (1.55) (1.56) 0.11 0.12
------------ ------------ ------------ ------------ ------------ ------------
Total from Investment
Operations...................... 1.20 1.22 (0.77) (0.72) 0.86 0.92
------------ ------------ ------------ ------------ ------------ ------------
Less Distributions:
Dividends from net
investment income............... (0.38) (0.40) (0.76) (0.81) (0.75) (0.81)
Distributions from net
realized capital gains.......... -- -- (0.03) (0.03) (0.45) (0.45)
------------ ------------ ------------ ------------ ------------ ------------
Total distributions.............. (0.38) (0.40) (0.79) (0.84) (1.20) (1.26)
------------ ------------ ------------ ------------ ------------ ------------
Net Asset Value, End of Period..... $ 17.14 $ 17.14 $ 16.32 $ 16.32 $ 17.88 $ 17.88
============ ============ ============ ============ ============ ============
Total Return (excludes sales charge) 7.41%(a) 7.59%(a) (4.39)% (4.12)% 4.87% 5.17%
Ratios/Supplementary Data:
Net Assets, End of Period
(in thousands)................... $ 52,178 $ 58,136 $ 50,347 $ 55,636 $ 57,610 $ 63,657
Ratios of Net Investment
Income to Average Net
Assets........................... 4.48%(b) 4.82%(b) 4.47% 4.75% 4.15% 4.44%
Ratios of Expenses to
Average Net Assets............... 1.19%(b) 0.85%(b) 1.08% 0.79% 1.11% 0.82%
Ratios of Expenses to
Average Net Assets*.............. 1.20%(b) 0.86%(b) 1.12% 0.83% 1.15% 0.86%
Portfolio Turnover Rate(c)........ 43.71% 43.71% 90.84% 90.84% 174.34% 174.34%
</TABLE>
<TABLE>
<CAPTION>
Year Ended Period Ended** Year Ended
---------------------------- ---------------------------- ----------------
February 28, February 28,
February 28, 1998 1997 1997 February 29, 1996
---------------------------- ------------- ------------- ----------------
Builder Class Premier Class Builder Class Premier Class Builder Class
------------ ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 17.73 $ 17.73 $ 17.96 $ 17.57 $ 17.31
------------ ------------ ------------ ------------ ----------------
Income from Investment Operations:
Net investment income............ 0.79 0.84 0.84 0.75 0.87
Net realized and unrealized
gains (losses) on
securities...................... 0.56 0.56 (0.10) 0.29 0.65
------------ ------------ ------------ ------------ ----------------
Total from Investment
Operations...................... 1.35 1.40 0.74 1.04 1.52
------------ ------------ ------------ ------------ ----------------
Less Distributions:
Dividends from net
investment income............... (0.79) (0.84) (0.84) (0.75) (0.87)
Distributions from net
realized capital gains.......... (0.07) (0.07) (0.13) (0.13) --
------------ ------------ ------------ ------------ ----------------
Total distributions.............. (0.86) (0.91) (0.97) (0.88) (0.87)
------------ ------------ ------------ ------------ ----------------
Net Asset Value, End of Period..... $ 18.22 $ 18.22 $ 17.73 $ 17.73 $ 17.96
============ ============ ============ ============ ================
Total Return (excludes sales charge) 7.82% 8.08% 4.30% 6.03%(a) 8.95%
Ratios/Supplementary Data:
Net Assets, End of Period
(in thousands)................... $ 59,091 $ 64,439 $ 59,133 $ 59,356 $ 117,860
Ratios of Net Investment
Income to Average Net
Assets........................... 4.42% 4.66% 4.81% 4.88%(b) 4.91%
Ratios of Expenses to
Average Net Assets............... 1.06% 0.81% 1.03% 0.93%(b) 0.96%
Ratios of Expenses to
Average Net Assets*.............. 1.16% 0.91% 1.07% 0.97%(b) 1.01%
Portfolio Turnover Rate(c)........ 201.00% 201.00% 181.00% 181.00% 150.00%
</TABLE>
-------------------------------------------------------------------------------
* The ratio does not include a reduction of expenses for custodian fee credits
of cash balances maintained with the custodian.
** Premier Class commenced operations on April 15, 1996.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis on the Fund as a whole
without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
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14
<PAGE>
THE MANAGEMENT
Trustees and Officers
<TABLE>
<CAPTION>
<S> <C>
Trustees Officers
SETH M. GLICKENHAUS,* Chairman of the Board SETH M. GLICKENHAUS
of Trustees President of the Fund; Senior Partner of Glickenhaus & Co.
Senior Partner of Glickenhaus & Co.
MICHAEL J. LYNCH
EDWARD A. FALKENBERG, Trustee Senior Vice President of the Fund; Director,
Retired Vice President and Controller, Unit Trust Department, Glickenhaus & Co.
Joseph E. Seagram & Sons, Inc. and
Controller, Seagram Company Ltd. FRANK M. DEUTCHKI
Vice President of the Fund; Vice President,
EDWARD A. KUCZMARSKI, Trustee Administration Services, BISYS Fund Services
Certified Public Accountant and Partner,
Hays & Company GEORGETTE L. PRIGAL
Vice President and Secretary of the Fund; Vice
ELIZABETH B. NEWELL, Trustee President, BISYS Fund Services
Trustee, International Preschools
GARY R. TENKMAN
JOHN P. STEINES, Trustee Treasurer of the Fund; Vice President,
Professor of Law, New York University Financial Services, BISYS Fund Services
School of Law
ALAINA V. METZ
Assistant Secretary of the Fund; Chief
Administrative Officer, Administration and
Regulatory Services, BISYS Fund Services
</TABLE>
*Trustee who is an "interested person" of the Fund as that term is defined in
the Investment Company Act of 1940.
<PAGE>
[LOGO]
TAX FREE BOND FUND
Semi Annual Report
August 31, 2000
Investment Adviser and Distributor
Glickenhaus & Co.
6 East 43rd Street
New York, New York 10017
Administrator
BISYS Fund Services Ohio, Inc.
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Transfer and Shareholder Servicing Agent
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Custodian
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Legal Counsel
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Independent Accountants
PricewaterhouseCoopers LLP
100 E. Broad Street
Columbus, Ohio 43215
Customer Service
3435 Stelzer Road
Columbus, Ohio 43219
1-800-847-5886
This report is submitted for the information of
the shareholders of the Empire Builder Tax Free
Bond Fund. It is not authorized for
distribution to prospective investors in the
Fund unless preceded or accompanied by an
[LOGO] effective prospectus, obtainable from an
3435 Stelzer Road investment dealer, which includes information
Columbus, Ohio 43219 regarding the Fund's objectives and policies,
1-800-847-5886 record, management, sales commission and other
data.
300024
<PAGE>
