<PAGE> 1
November 28, 1995
Dear Shareholders:
While Colorado BondShares will likely not repeat its 1994 record as the number
one single state municipal bond fund in the country this year, the news is still
quite positive.
We finished our fiscal year ending September 30, 1995 having distributed
substantially more tax-exempt income than our competitors. Others are touting
their success based on total return statistics. Total return is the combination
of capital gains plus dividends. We caution against overemphasizing this popular
measure. In volatile markets capital gains in the short term tend to skew
investment results. Over time, capital gains and losses in the bond market tend
to offset each other. In order to truly benefit from the capital gains portion
of total return you would have to sell your investment. Not only does this
trigger a taxable event but it is inconsistent with a buy and hold strategy.
Over the past five years our performance is among the best in the country for a
single state municipal bond fund according to Morningstar. This is largely
because we have focused on the simple idea of maximizing dividends to
shareholders.
We genuinely appreciate your continuing support and confidence. A more detailed
review of the fund's fiscal year is provided in the audited financial statements
which follow. We welcome any specific questions that you have.
Yours truly,
/s/ Fred R. Kelly, Jr.
Fred R. Kelly, Jr.
Portfolio Manager
<PAGE> 2
OFFICERS AND TRUSTEES
GEORGE N. DONNELLY, PRESIDENT AND
CHAIRMAN OF THE BOARD OF TRUSTEES
ANDREW B. SHAFFER, SECRETARY, TREASURER AND TRUSTEE
FRED R. KELLY, JR. PORTFOLIO MANAGER
INVESTMENT ADVISOR
FREEDOM FUNDS MANAGEMENT COMPANY
TRANSFER, SHAREHOLDER SERVICING,
AND DIVIDEND DISBURSING AGENT
FREEDOM FUNDS MANAGEMENT COMPANY
DISTRIBUTOR
SMITH HAYES FINANCIAL SERVICES CORP.
CUSTODIAN OF PORTFOLIO SECURITIES
NORWEST INVESTMENTS AND TRUST, NORWEST BANK DENVER, N.A.
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
LEGAL COUNSEL
KUTAK ROCK
THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE
COLORADO BONDSHARES - A TAX-EXEMPT FUND. THIS REPORT MUST BE PRECEDED OR
ACCOMPANIED BY A PROSPECTUS OF THE FUND. THE PROSPECTUS CONTAINS INFORMATION
CONCERNING THE INVESTMENT POLICIES AND EXPENSES OF THE PORTFOLIO IN ADDITION TO
OTHER PERTINENT INFORMATION. SHARES OF COLORADO BONDSHARES - A TAX-EXEMPT FUND
ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT GUARANTEED BY ANY BANK,
AND ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
THE TRUSTEES AND SHAREHOLDERS OF
COLORADO BONDSHARES -
A TAX-EXEMPT FUND:
We have audited the accompanying statements of investments and assets and
liabilities of Colorado BondShares - a Tax- Exempt Fund as of September 30,
1995, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in the
eight-year period then ended and the period from June 4, 1987 (commencement of
operations) to September 30, 1987. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of September 30, 1995, by correspondence with the custodian and
brokers; and where confirmations were not received from brokers, we performed
other auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Colorado BondShares - A Tax-Exempt Fund as of September 30, 1995, the results
of its operations for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the eight-year period then ended and the
period from June 4, 1987 to September 30, 1987, in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
November 3, 1995
1
<PAGE> 4
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1995
________________________________________________________________________________
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS - 84.3% VALUE
------ -------------------------------- -----
<S> <C> <C>
$ 75,000 Adams County Pollution Control Revenue Refunding Series 1986A, 7.375% due
11/01/09 $ 77,625
600,000 Arapahoe Water and Sanitation District, Arapahoe County, G.O. Refunding and
Improvement Series 1985, 10.50% due 12/01/04 (b) 606,000
250,000 Arapahoe Water and Sanitation District G.O. Refunding and Improvement Series
1986, 8.50% due 12/01/05 264,675
175,000 Arapahoe Water and Sanitation District G.O. Refunding and Improvement Series,
1988A, 9.25% due 12/01/13 175,000
1,000,000 Arapahoe Water and Sanitation District G.O. Refunding and Improvement Series,
1988A, 9.25% due 12/01/13 (b) 1,070,000
2,250,000 Arapahoe Water and Sanitation District G.O. Refunding Series 1995B, 8.50% due
12/01/20 2,154,375
525,000 Arrowhead Metropolitan District G.O. Refunding and Improvement Series 1986,
8.50% due 11/01/06 (b) 549,035
575,000 Arvada Multifamily Rental Housing Revenue Series 1993, 7.50%
due 12/15/18 566,375
218,600 Aurora Centretech Metropolitan District G.O. Refunding and Improvement Series
1994, 6.00% due 12/01/23 99,000
50,000 City of Aurora Water Refunding G.O. Series 1987, 6.75%
due 11/01/12 (b) 50,500
480,000 Bear Creek LID #1 Special Assessment Refunding Series 1993, 6.5%
due 3/15/98 480,000
100,000 Boulder County Single Family Mortgage Revenue Series 1982A, 10.00% due
5/01/99 92,000
545,000 Boulder County Zero Coupon Single Family Mortgage Revenue Series 1983, 11.00%
due 12/01/14 (d) 61,531
545,000 Briargate Public Building Authority, Landowner Assessment Lien Series 1985A
and 1986A, 9.50%-10.25% due 12/15/95-05 (a) 223,102
555,000 Town of Castle Rock LID Series 1988-2D Special Assessment, 9.25%-10.375% due
12/01/08 (a) 111,000
665,000 Centennial Downs Metropolitan District G.O. Refunding Series 1985, 10.50%,
due 12/01/04 (b) 671,650
60,389 Centennial Downs Metropolitan District Cash Payment Deficiency Bond Series
1993, 8.09% due 12/01/34 21,758
591,853 Centennial Downs Metropolitan District Limited Tax Refunding Bond Series
1993, 8.09% due 12/01/34 217,364
271,980 Centennial Downs Metropolitan Interest Certificate Series 1993, 6.00% due
12/01/34 (c) 3
295,000 Cherry Hills Farm Metropolitan District G.O. Refunding Series 1992, 6.50% due
12/01/95-97 297,050
</TABLE>
(Continued)
2
<PAGE> 5
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
SEPTEMBER 30, 1995
________________________________________________________________________________
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS - 84.3% VALUE
------ -------------------------------- -----
<S> <C> <C>
$ 2,009,520 Colorado Centre Metropolitan District Limited Tax and Special Revenue Series
1992A, principal only, 0.00% due 1/01/27 (e) $ 20,095
2,008,335 Colorado Centre Metropolitan District Limited Tax and Special Revenue Series
1992A, interest only, 9.00% due 1/01/27 (f) 1,634,062
6,465,662 Colorado Centre Metropolitan District Limited Tax and Special Revenue Series
1992B, 10.19% due 1/01/32 (g) 64,657
370,000 Colorado Health Facilities Authority Revenue Bethesda Psyc-health System
Project Series 1987, 8.875%-9.125% due 9/01/07-17 (b) 403,373
5,000 Colorado Health Facilities Authority Hospital Refunding Revenue National
Jewish Center Series 1992, 6.15% due 2/15/98 4,900
190,000 Colorado Health Facilities Authority Refunding Revenue Porter Memorial
Hospital Series 1986A, 7.40% due 2/01/16 (b) 200,830
240,000 Colorado Health Facilities Authority Revenue Refunding Swedish Medical
Center Series 1987, 7.00% due 10/01/15 237,600
1,610,000 Colorado Postsecondary Educational Facilities Authority Revenue National
Technical University Project Series 1993, 7.375% -7.75% due
12/01/97-10 1,611,425
75,000 Colorado Postsecondary Educational Facilities Authority Revenue The Naropa
Institutional Project Series 1990, 7.875% due 9/01/10 put 9/01/97 76,125
10,000 Colorado Springs Cottonwood GID G.O. Series 1986, 2.39% Variable Rate due
12/01/31 2,800
1,000,000 Colorado Springs Spring Creek GID G.O. Series 1987, 9.375%
due 12/01/06 (a) 450,000
350,000 Colorado Tech Center Metropolitan District G.O. Refunding Series 1989, 9.75%
due 6/01/09 350,000
540,000 Columbia Metropolitan District G.O. Series 1986, 9.00%-9.50% due
12/01/97-05 545,400
1,185,000 Columbia Metropolitan District G.O. Improvement Series 1992, 7.10% - 8.50%
due 11/01/95-11/01/12 1,432,120
250,000 Copper Mountain Metropolitan District G.O. Refunding Series 1989A, 8.00% due
11/01/04 252,500
500,000 Copper Mountain Water and Sanitation District G.O. Refunding Series 1989A,
8.20% due 12/01/09 505,000
595,000 Cordillera Metropolitan District G.O. Series 1994A, 8.00% due
12/01/09 600,950
500,000 Cordillera Metropolitan District G.O. Series 1994, 8.25% due
12/01/13 500,000
</TABLE>
(Continued)
3
<PAGE> 6
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
SEPTEMBER 30, 1995
________________________________________________________________________________
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS - 84.3% VALUE
------ -------------------------------- -----
<S> <C> <C>
$ 175,000 City and County of Denver Zero Coupon Single Family Mortgage Revenue Series
1984, 11.63% due 9/01/15 (d) $ 18,861
15,000 City and County of Denver Zero Coupon Single Family Mortgage Revenue Series
1985A, 11.63% due 9/01/16 (d) 1,596
50,000 Metropolitan Denver Sewage Disposal District No. 1 Series 1986A, 6.75% due
4/01/11 (b) 51,672
555,000 Douglas County LID #3 Series 1991, 9.75%-10.00% due
8/01/97-02 554,025
575,000 Dove Valley Metropolitan District G.O. Refunding & Improve-ment Series 1988,
8.90%-9.50% due 12/01/99-08 586,500
505,000 Dove Valley Metropolitan District G.O. Refunding & Improve-ment Series 1989,
8.25% due 12/01/08 505,000
600,000 Eaglebend Affordable Housing Corporation Revenue Series 1990A-2, 10.00% due
7/01/21 582,000
500,000 Eaglebend Affordable Housing Corporation Revenue Series 1991B, 10.00% due
7/01/21 485,000
100,000 Edwards Metropolitan District G.O. Refunding Series 1988, 9.00%
due 12/01/06 100,000
90,000 El Paso County LID 85-2 Special Assessment Refunding Series 1988,
8.875%-9.00% due 9/01/00 (a) 18,000
100,000 El Paso County Pheasant Run LID Special Assessment Bonds Series 1986-2,
9.25% due 9/01/99 (a) 26,000
500,000 El Paso County School District No. 20 Zero Coupon G.O. Refunding Series
1993A, 6.10% due 6/15/08 (d) 228,930
1,500,000 Fairlake Metropolitan District G.O. Series 1989, 9.00%
due 6/01/09 1,515,000
10,000 Fairlake Metropolitan District G.O. Series 1991, 9.625%
due 12/01/98 10,000
515,000 Forest Hills Metropolitan District G.O. Refunding Series 1992B, 7.75% due
11/01/99 527,875
95,000 Fort Collins Special Assessment Series 1989, 8.75% due
8/01/01 95,475
500,000 Fort Collins G.O. Water Series 1982, 10.00% due
12/01/99 (b) 560,000
60,000 Green Valley Ranch Metropolitan District G.O. Series 1985, 10.00%-10.25%
due 12/01/96-02 60,000
500,000 Green Valley Ranch Metropolitan District G.O. Series 1991, 8.00% due
12/01/03 500,000
490,000 Greenwood North Metropolitan District G.O. Refunding Series 1993,
4.40%-5.00% due 12/01/98-01 462,801
10,000 Hyland Hills Park & Recreation District Special Revenue Improvement Series
1992, 7.10% due 12/15/00 10,000
</TABLE>
(Continued)
4
<PAGE> 7
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
SEPTEMBER 30, 1995
________________________________________________________________________________
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS - 84.3% VALUE
------ -------------------------------- -----
<S> <C> <C>
$ 340,000 Idledale Fire Protection District G.O. Series 1993, 5.20%-5.80% due
12/15/03-07 $ 321,138
500,000 Interstate South Metropolitan District G.O. Series 1985A, 10.50% due
12/01/02 (b) 505,000
210,000 Interstate South Metropolitan District G.O. Refunding & Improvement Series
1986, 9.50% due 12/01/06 (b) 224,280
640,000 Interstate South Metropolitan District G.O. Refunding & Improvement Series
1989, 8.375% due 12/01/05-09 658,900
1,185,000 Interstate South Metropolitan District Zero Coupon G.O. Refunding &
Improvement Series 1989, 9.00% due 12/01/10-14 (d) 257,226
1,085,000 Interstate South Metropolitan District G.O. Series 1994, 8.00% due
12/01/09 1,090,425
500,000 La Plata County Recreational Facilities Revenue Refunding Durango Ski
Corporation Project Series 1989A, 9.00% due 02/01/10 250,000
65,000 City of Lakewood Zero Coupon Single Family Mortgage Series 1985, 11.10% due
5/01/15 (d) 7,832
110,000 Larimer County Zero Coupon Single Family Mortgage Revenue Series 1985,
11.25% due 4/01/15 (d) 13,008
315,000 City of Las Animas Water G.O. Series 1989, 8.60% due
12/01/09 319,725
1,000,000 City of Louisville Sales Tax Revenue Series 1989, 8.60% due
11/15/13 (b) 1,131,000
220,000 Mesa County Single Family Mortgage Revenue Series 1982, 10.75%
due 12/01/99 27,434
1,250,000 Mid Valley Metropolitan District G.O. Refunding & Improve-ment Series 1989,
8.90% due 12/15/04 1,392,688
15,000 Montrose County Airport Authority Airport Revenue Refunding & Improvement
Series 1987, 9.50% due 12/01/07 F (b) 16,753
750,000 Mountain Village Metropolitan District G.O. Series 1992, 7.95%
due 12/01/03 839,025
350,000 Town of Nederland G.O. Water Refunding Series 1989, 8.50% due
8/15/13 363,405
280,000 Northern Metropolitan District Limited Tax Revenue Refunding Series 1992A,
8.20% -8.875% due 12/01/22 278,020
852,700 Northern Metropolitan District Limited Tax Revenue Refunding Series 1992B,
0.00% due 12/01/22 (c) 227,391
858,750 Northern Metropolitan District Limited Tax Revenue Refunding Series 1992B,
8.25%-8.875% due 12/01/22 (c) -
15,000 Northgate Public Building Authority Landowner Assessment Lien Series 1987A,
8.25% due 12/01/00 (a) 3,300
</TABLE>
(Continued)
5
<PAGE> 8
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
SEPTEMBER 30, 1995
________________________________________________________________________________
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS - 84.3% VALUE
------ -------------------------------- -----
<S> <C> <C>
$ 150,000 Panorama Metropolitan District G.O. Series 1986, 9.50% due
12/01/05 (b) $ 159,872
5,000 Panorama Metropolitan District G.O. Series 1986, 9.50% due
12/01/05 5,000
1,055,000 Panorama Metropolitan District G.O. Refunding Series 1989B, 9.00% due
12/01/09 1,065,550
150,000 Park Meadows Metropolitan District G.O. Refunding & Improvement Series 1985,
9.80%-10.75% due 12/01/95-04 150,350
1,000,000 Piney Creek Metropolitan District Refunding Series 1989A, 8.50%
due 12/01/14 1,046,800
410,000 Plains Metropolitan District G.O. Series 1986, 8.50%-9.25% due
12/01/96-6/01/06 328,000
225,000 Pueblo Urban Renewal Authority Revenue Series 1994B, 5.05% due 12/01/19, put
12/01/96 224,438
155,716 Roxborough Village Metropolitan District Series 1993A, 9.00% due
12/31/16 141,701
229,187 Roxborough Village Metropolitan District Series 1993B, principal only, 0.00%
due 12/31/21 (e) 22,919
11,954 Roxborough Village Metropolitan District Series 1993B, interest only, 10.41%
due 1/01/43 (f) 124
240,000 Saint Vrain Sanitation District G.O. Series 1987, 9.625% due
12/01/06 268,032
500,000 City of Salida Sales Tax Revenue Refunding & Improvement Series 1990, 8.20%
due 12/01/11 520,000
125,000 San Miguel County Housing Authority Multifamily Telluride Village Zero
Coupon Revenue Refunding Series 1993, 7.00% due 7/01/98 (d) 104,800
535,000 San Miguel County Housing Authority Multifamily Telluride Village Revenue
Refunding Series 1993, 6.30% due 7/01/13 497,192
185,000 San Miguel County School District No. R-1 G.O. Series 1992, 8.50% due
12/01/98 201,650
25,000 Southgate Corporate Center Metropolitan District G.O. Refunding Series 1988,
8.10% due 12/01/00 (b) 25,250
100,000 Southtech Metropolitan District G.O. Series 1994, 5.35%-5.85% due
12/01/01-12/01/04 97,092
385,000 Squaw Creek Metropolitan District Revenue Series 1994, 5.25% due 12/01/13,
put 12/01/98 383,075
610,000 Valley Metropolitan District G.O. Revenue Series 1992, 7.00% due
12/15/06 603,900
100,000 Walsenburg Natural Gas Revenue Series 1968, 6.25% due
6/01/98-6/01/99 99,500
</TABLE>
(Continued)
6
<PAGE> 9
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
SEPTEMBER 30, 1995
________________________________________________________________________________
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS - 84.3% VALUE
------ -------------------------------- -----
<S> <C> <C> <C>
$ 75,000 City of Westminster Special Assessment Series 1988, 9.00% due
12/01/03 $ 75,000
200,000 City of Westminster Sheridan Park GID G.O. Series 1986, 9.50% due
12/01/05(b) 202,000
5,000 Wright Farms Metropolitan District G.O. Series 1986, 9.75% due
12/01/05 5,050
------------
Total Colorado Municipal Bonds (cost $39,216,598) 37,732,460
------------
COLORADO CERTIFICATES OF PARTICIPATION - 0.9%
---------------------------------------------
100,000 Arapahoe Library District Certificates of Participation Series 1990, 6.55%
due 12/15/96 101,750
230,000 Huerfano County Refunding Certificates of Participation Series 1993, 4.20% -
4.50% due 12/01/95 - 96 228,450
50,000 Las Animas County School District No. 001 Certificates of Participation
Series 1991A, 8.00% due 12/01/10 52,000
------------
Total Colorado Certificates of Participation Bonds (cost $385,862) 382,200
------------
COLORADO INDUSTRIAL DEVELOPMENT REVENUE BONDS - 3.3%
----------------------------------------------------
5,000 City and County of Denver American Water Works Association Series 1987,
10.00% due 3/01/07 5,000
200,000 City and County of Denver Desks Colorado Project Series 1983, 4.60% due
10/15/05 (put 10/15/96) 200,000
1,305,000 City of Fort Collins The Opera House Project Series 1986, 8.75%-9.125% due
12/01/10-16 1,291,950
------------
Total Colorado Industrial Development Revenue
Bonds (cost $1,502,325) 1,496,950
------------
Total investments, at value (cost $41,104,785) 88.5% 39,611,610
Other assets net of liabilities 11.5 5,156,673
----- ------------
Net assets 100.0% $ 44,768,283
===== ============
</TABLE>
7
<PAGE> 10
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
SEPTEMBER 30, 1995
________________________________________________________________________________
(A) Non-income producing based upon the financial condition of the issuer (see
footnote 1).
(B) Originally issued as general obligation bonds but are now prerefunded and
are secured by an escrow fund consisting entirely of direct U.S.
Government obligations.
(C) Represents interest certificates whose characteristics are similar to zero
coupon bonds. All interest based on the coupon rate is remitted upon
maturity.
(D) Interest rate shown for zero coupon bonds represents the effective yield
at the date of acquisition.
(E) Principal-only certificate represents the right to receive the principal
payments on the underlying debt security upon maturity. The price of this
security is typically more volatile than that of coupon-bearing bonds of
the same maturity.
(F) Interest-only certificate represents the right to receive semi-annual
interest payments on the underlying debt security. The principal amount
of the underlying security represents the notional amount on which current
interest is calculated. The interest rate shown represents the effective
yield at the date of acquisition.
(G) Interest rate disclosed for cash flow bond represents the effective yield
at September 30, 1995. Income on this security is derived from the cash
flow of the issuer.
The following abbreviations are used in the descriptions of securities included
in the Statement of Investments:
G.O. - General Obligations
LID - Local Improvement District
GID - General Improvement District
See accompanying notes to financial statements.
8
<PAGE> 11
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
________________________________________________________________________________
<TABLE>
<S> <C>
ASSETS
------
Investments, at value (cost $41,104,785) - see
accompanying statement $ 39,611,610
Cash 4,019,168
Receivables:
Interest 1,273,557
Shares of beneficial interest sold 14,293
Investments sold 26,919
-----------
Total assets 44,945,547
-----------
LIABILITIES
-----------
.
Payables and other liabilities:
Dividends 127,847
Shares of beneficial interest redeemed 3,500
Investments purchased 4,615
Accrued expenses and other 41,302
-----------
Total liabilities 177,264
-----------
Net assets $ 44,768,283
==========
COMPOSITION OF NET ASSETS
-------------------------
Paid-in capital $ 46,621,637
Accumulated net realized loss from investment transactions (360,179)
Net unrealized depreciation of investments (note 3) (1,493,175)
-----------
Net assets
$ 44,768,283
==========
Net asset value and redemption value per share (based on 4,887,331
shares of beneficial interest outstanding) $ 9.16
==========
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $ 9.62
==========
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 12
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
________________________________________________________________________________
<TABLE>
<S> <C>
Investment income - interest $ 3,281,447
---------
Expenses:
Management fees (note 4) 215,384
Transfer agency expenses (note 4) 35,526
Custodian fees (note 5) 32,189
Legal and auditing fees 56,508
Shareholders' reports and proxy statements 15,142
Fidelity bond 5,984
Trustees' fees 2,766
Other 2,039
---------
Total expenses 365,538
---------
Earnings credits on cash balances (note 5) (32,189)
---------
Net expenses 333,349
---------
Net investment income 2,948,098
---------
Realized and unrealized gain (loss) on investments:
Net realized loss on investments (143,604)
---------
Net unrealized depreciation of investments:
Beginning of year (2,072,301)
End of year (1,493,175)
---------
Net change in unrealized depreciation on investments 579,126
---------
Net realized and unrealized gain on investments 435,522
---------
Net increase in net assets resulting from operations $ 3,383,620
=========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 13
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED SEPTEMBER 30, 1995 AND 1994
________________________________________________________________________________
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
From investment activities:
Net investment income $ 2,948,098 2,688,145
Net realized loss on investments (143,604) (95,539)
Net change in unrealized appreciation or (depreciation) on
investments 579,126 (141,740)
---------- ----------
Net increase in net assets resulting from operations 3,383,620 2,450,866
---------- ----------
Dividends to shareholders from net investment income (2,947,825) (2,692,678)
From beneficial interest transactions:
Proceeds from sale of shares 6,594,466 9,390,264
Dividends reinvested 1,915,678 1,731,218
Payments for shares redeemed (5,967,321) (3,862,743)
---------- ----------
Increase in net assets derived from
beneficial interest transactions 2,542,823 7,258,739
---------- ----------
Net increase in net assets 2,978,618 7,016,927
Net assets:
Beginning of year 41,789,665 34,772,738
---------- ----------
End of year, including undistributed net investment
income of $-0- and $106, respectively $ 44,768,283 41,789,665
========== ==========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 14
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year ended September 30
----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period $ 9.07 9.13 9.07 8.96 8.93
------ ------ ------ ------ ------
Net investment income .60 .63 .66 .68 .71
Net realized and unrealized
gain (loss) on investments .09 (.06) .07 .10 .03
------ ------ ------ ------ ------
Increase (decrease) from
investment operations .69 .57 .73 .78 .74
Dividends from net invest-
ment income (.60) (.63) (.67) (.67) (.71)
------ ------ ------ ------ ------
Net increase (decrease)
in net asset value .09 (.06) .06 .11 .03
------ ------ ------ ------ ------
Net asset value, end of period $ 9.16 9.07 9.13 9.07 8.96
====== ====== ====== ====== ======
TOTAL RETURN, AT NET ASSET
VALUE (1) 8.05% 6.50% 8.53 9.09 8.49
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)s $ 44,768 41,790 34,773 27,585 25,177
====== ====== ====== ====== ======
Ratios to average net assets:
Expenses (2) .84 .74 .81 .94 1.06
Net investment income 6.81% 6.96 7.27 7.61 8.04
Portfolio turnover ratio (3) 27.48% 22.04 7.87 5.00 9.35
======= ====== ====== ====== ======
Period
ended
September 30,
1990 1989 1988 1987*
---- ---- ---- -----
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period $ 9.61 9.59 9.43 10.00
------ ------ ------ -----
Net investment income .74 .74 .77 .26
Net realized and unrealized
gain (loss) on investments (.68) .03 (.16) (.57)
------ ------ ------ -----
Increase (decrease) from
investment operations .06 .77 .61 (.31)
Dividends from net invest-
ment income (.74) (.75) (.77) (.26)
------ ------ ------ -----
Net increase (decrease)
in net asset value (.68) .02 .16 (.57)
------ ------ ------ -----
Net asset value, end of period $ 8.93 9.61 9.59 9.43
====== ====== ====== =====
TOTAL RETURN, AT NET ASSET
VALUE (1) 0.61 8.49 9.57 (2.59)**
====== ====== ====== =====
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)s 34,397 37,551 15,319 5,992
====== ====== ====== =====
Ratios to average net assets:
Expenses (2) .82 .79 .43 .34**
Net investment income 7.85 8.80 7.38 7.79**
Portfolio turnover ratio (3) 34.54 11.58 11.12 58.64**
====== ====== ====== =====
</TABLE>
12
<PAGE> 15
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
FINANCIAL HIGHLIGHTS, CONTINUED
________________________________________________________________________________
* For the period June 4, 1987 (commencement of operations) to September 30,
1987.
** Annualized.
(1) Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends reinvested in
additional shares on the reinvestment date, and redemption at the net
asset value calculated on the last business day of the fiscal period.
Sales charges are not reflected in the total returns.
(2) Beginning in fiscal 1995 the expense ratio reflects the effect of gross
expenses (including those paid indirectly by the Fund via earnings credits
on cash balances). Prior period expense ratios have not been adjusted.
Absent voluntary expense reimbursement by the Fund's investment adviser,
the expense ratio for the years and period ended September 30, 1989, 1988,
and 1987 would have been .86%, 1.27%, and 3.13%, respectively. There have
been no voluntary reimbursements subsequent to fiscal 1989.
(3) The portfolio turnover ratio is computed by dividing the lesser of
purchases or sales of portfolio securities for a period by the monthly
average of the market value of portfolio securities owned during the
period. Securities with a maturity date of one year or less at the time
of acquisition are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term
securities) for the year ended September 30, 1995 were $11,145,796 and
$13,600,591, respectively.
See accompanying notes to financial statements.
13
<PAGE> 16
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
________________________________________________________________________________
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Colorado BondShares - A Tax-Exempt Fund (the Fund) is registered under the
Investment Company Act of 1940 as amended, as a diversified, open-end
management company. The Fund's investment adviser is Freedom Funds
Management Company (Freedom Funds), formerly known as Hanifen, Imhoff
Management Company, Inc. The following is a summary of significant
accounting policies consistently followed by the Fund.
INVESTMENT VALUATION
The value of investments are determined using prices quoted by one or more
independent broker/dealers dealing in municipal bonds. The Fund does not
record amortization of premiums or accretion of discounts for financial
statement purposes, except for original issued discounts on zero coupon
bonds which are amortized to maturity using the effective yield method.
Short-term debt securities having a remaining maturity of 60 days or less
are valued at amortized cost which approximates market value.
INCOME TAXES
The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all
its net investment income to shareholders. Therefore, no tax provision is
required.
OTHER
Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Dividends to shareholders are declared
each business day and paid monthly. Distributions to shareholders are
recorded on the ex-dividend date. Realized gains and losses from
investment transactions are calculated using the identified-cost basis
which is the same basis the Fund uses for federal income tax purposes.
The Fund discontinues the accrual of interest income on municipal bonds
when the securities become delinquent as to payment of principal or
interest, or when the Fund's investment adviser determines that an
uncertainty exists as to the realization of all or a portion of the
principal balance. The face amount and market value of bonds, for which
the accrual of interest income has been discontinued, approximated
$2,305,000 and $831,000 (1.9% of net assets), respectively, as of
September 30, 1995.
14
<PAGE> 17
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
________________________________________________________________________________
(2) SHARES OF BENEFICIAL INTEREST
At September 30, 1995, there was an unlimited number of no par value
shares of beneficial interest authorized. Transactions in shares of
beneficial interest for the years ended September 30, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Sold 727,055 1,031,501
Dividends reinvested 210,777 190,297
------- ---------
937,832 1,221,798
Redeemed (657,433) (424,541)
------- ---------
Net increase 280,399 797,257
======= =========
</TABLE>
(3) UNREALIZED GAINS AND LOSSES
At September 30, 1995, the net unrealized depreciation on investments of
$1,493,175 was comprised of gross appreciation of $1,167,874 and gross
depreciation of $2,661,049.
(4) MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to Freedom Funds were in accordance with the
investment advisory agreement with the Fund which provides for an annual
fee equivalent to 0.5% of the net assets of the Fund. Freedom Funds pays
all expenses associated with advertising, marketing, and distributing the
Fund's shares and serves as the transfer agent, dividend disbursing agent,
and registrar for the Fund. Freedom Funds provided transfer agency
services as part of the management fee arrangement for the fiscal year
ended September 30, 1995. Transfer agency expenses represent direct
expenses charged to the Fund by third parties.
(5) EARNINGS CREDITS ON CASH BALANCES
Earnings credits on cash balances maintained with the custodian by the
Fund resulted in offsetting custodian fees incurred for the safeguarding
of Fund assets.
15
<PAGE> 18
FEDERAL INCOME TAX INFORMATION
(unaudited)
In early 1996, shareholders will receive information regarding all dividends
and distributions paid to them by the Fund during calendar year 1995.
Regulations of the U.S. Treasury Department require the Fund to report this
information to the Internal Revenue Service.
During fiscal year ended September 30, 1995, 100 percent of the dividends paid
by Colorado BondShares A Tax-Exempt Fund from net investment income should be
treated as tax-exempt dividends.
<PAGE> 19
[Colorado BondShares logo]
A Tax-Exempt Fund
ANNUAL REPORT
September 30, 1995
