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SIGNATURE FRED R. KELLY, JR.
TITLE PORTFOLIO MANAGER
Auditors' Special Report on Internal Accounting Control
The Board of Trustees
Freedom Funds Management Company, Inc.:
We have made a study and evaluation as of September 30, 1996 of Freedom Funds
Management Company, Inc.'s (the "Company") system of internal accounting control
for the transfer of record ownership and the safeguarding of related securities
and funds in accordance with generally accepted auditing standards to the extent
we considered necessary to evaluate the system as required by Rule 17Ad-13 under
the Securities Exchange Act of 1934. This study included the transfer agent
operations of the Company which provides services to Colorado BondShares - A
Tax-Exempt Fund which is registered under the Investment Company Act of 1940.
Our study and evaluation included compliance tests of internal accounting
controls within the accounting system, the procedures for safeguarding
securities and funds, and the practices and procedures followed by the Company
(i) in transferring securities related to changes of ownership; (ii) in
registering changes of ownership on the books and records of the issuer; (iii)
in transferring recording ownership as a result of corporate actions; (iv) in
dividend disbursement and interest paying-agent activities; (v) in administering
dividend reinvestment programs; and (vi) in distributing statements respecting
initial offerings of securities. Rule 17Ad-13 contemplates that the scope of the
study and evaluation should be sufficient to provide reasonable assurance that
any material inadequacies, as defined, existing as of the date of our study
would be disclosed. The purpose of our study and evaluation was to provide a
basis for reporting material inadequacies under rule 17Ad-13, and was more
limited than would be necessary to express an opinion on the system of internal
accounting control taken as a whole.
The management of Freedom Funds management Company, Inc. is responsible for
establishing and maintaining a system of internal accounting control for the
transfer of record ownership and the safeguarding of related securities and
funds. In fulfilling this responsibility, estimates and judgments by management
are required to assess the expected benefits and related costs of control
procedures. the objectives of a system are to provide management with
reasonable, but not absolute, assurance that securities and funds are
safeguarded against loss from unauthorized use or disposition, and that transfer
agent activities are performed promptly and accurately.
<PAGE>
Because of inherent limitations in any system of internal accounting control,
errors or irregularities may occur and not be detected. Also, projection of any
evaluation of the system to future periods is subject to the risk that
procedures may become inadequate because of changes in conditions, or that the
degree of compliance with the procedures may deteriorate.
Our study and evaluation of the Company's system of internal accounting control
for the transfer of record ownership and the safeguarding of related securities
and funds as of September 30, 1996 was made for the limited purposes described
in the paragraphs above and would not necessarily disclose all weaknesses in the
system. Accordingly, we do not express an opinion on the system of internal
accounting control of the Company taken as a whole; however, such study and
evaluation disclosed no condition that we believe to be a material inadequacy as
defined in Rule 17Ad-13.
this report is intended solely for the use of management and the Securities and
Exchange Commission, and should not be used for any other purpose.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
November 6, 1996
<PAGE>
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
COLORADO BOND SHARES - A TAX-EXEMPT FUND:
In planning and performing our audit of the financial statements of Colorado
Bond Shares - A Tax-Exempt Fund for the year ended September 30, 1996, we
considered its 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 Bond Shares - 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 may deteriorate.
Our consideration of the internal structure would not necessarily disclosure all
matters in the internal control structure that might be material weaknesses
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, 1996.
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.
/s/ KPMG PEAT MARWICK LLP
-------------------------
KPMG Peat Marwick LLP
Denver, Colorado
November 6, 1996
ATTACHMENT 77G
For the period ending: 09/30/96
File number: 811-05009
DEFAULTS & ARREARS ON SENIOR SECURITIES
<TABLE>
<S> <C>
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: $ 463,188
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)
June 1, 1994 no interest payment
Default per $1,000 face: $ 530,000
3) El Paso County, Colorado Pheasant Run LID 86-2 Local Improvement District
In default: Interest
Nature of Default: District did not make timely interest payment.
Date of Default: March, 1994
Default per $1,000 face: $ 100,000
4) Mesa County Single Family Mortgage Revenue Series 1982
In default: Interest
Nature of Default: District did not make timely interest payment.
Date of Default: December 1, 1995
Default per $1,000 face: $ 220,000
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: $ 20,000
</TABLE>
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