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<PAGE> PAGE 2
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SIGNATURE FRED KELLY
TITLE PRESIDENT
THE TRUSTEES AND SHAREHOLDERS
COLORADO BONDSHARES - A TAX-EXEMPT FUND:
In planning and performing our audit of the financial statements of Colorado
BondShares - A Tax-Exempt Fund as of and for the year ended September 30, 1995,
we considered the Fund's internal control structure, including procedures for
safeguarding securities, in order to determine our auditing procedures for the
purpose of expressing our opinion on the financial statements and to comply with
the requirements of Form N-SAR, not to provide assurance on the internal control
structure.
The management of Colorado BondShares - A Tax-Exempt Fund is responsible for
establishing and maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of internal control structure policies and
procedures. Two of the objectives of an internal control structure are to
provide management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements in conformity
with generally accepted accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and may not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that it may
become inadequate because of changes in conditions or that the effectiveness of
the design and operation of the structure may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weakness under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce to
a relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving the internal control structure, including procedures for safeguarding
securities, that we considered to be material weaknesses, as defined above, as
of September 30, 1995.
This report is intended solely for the information and use of management and the
Securities and Exchange Commission and should not be used for any other purpose.
KPMG PEAT MARWICK LLP
Denver, Colorado
November 3, 1995
ATTACHMENT 77G.
For the period ending: 09/30/95
File number: 811-05009
DEFAULTS & ARREARS ON SENIOR SECURITIES
1) Briargate Public Building Authority, Landowner Assessment Lien Series
1985A and 1986A
In default: Interest
Nature of Default: (partial default) District did not make timely
interest payment.
Date of Default: December 15, 1990
Default per $1,000 face: $545,000
2) Town of Castle Rock, Local Improvement District 1988-2
In default: Interest
Nature of Default: (partial default) District did not make timely
interest payment.
Date of Default: December 1, 1993 (50% interest payment)
Default per $1,000 face: $555,000
3) Colorado Springs, Colorado, Spring Creek General Improvement District
In default: Interest
Nature of Default: District did not make timely interest payment.
Date of Default: June 15, 1994
Default per $1,000 face: $1,000,000
4) El Paso County, Colorado Pheasant Run LID 86-2 Local Improvement
District Bonds
In default: Interest
Nature of Default: (partial default) District did not make timely
interest payment.
Date of Default: March, 1994
Default per $1,000 face: $100,000
<PAGE>
ATTACHMENT 77G.
Page 2
For the period ending: 09/30/95
File number: 811-05009
DEFAULTS & ARREARS ON SENIOR SECURITIES
5) Northgate Public Building Authority Landowner Assessment Lien Series
1987A
In default: Interest
Nature of Default: District did not make timely interest payment.
Date of Default: July 1, 1991
Default per $1,000 face: $10,000
