<PAGE> 1
[COLORADO BONDSHARES LOGO]
A Tax-Exempt Fund
SEMI-ANNUAL REPORT
March 31, 1998
(unaudited)
<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 ADVISER
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
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
May 21, 1998
Dear Shareholders:
Enclosed is our semiannual report for the period ended March 31, 1998. As we
advance into 1998, Colorado BondShares continues to enjoy strong earnings,
positive growth and a highly competitive posture. Several events are unfolding
which make the future seem very bright indeed.
"Surging supply and static demand" were some of the buzz words in a recent Wall
Street Journal article used to describe the recent bond market activity.
Admittedly, these two factors do not typically foster healthy bond prices.
However, they are occurring simultaneously with another, more pervasive,
condition-low interest rates. The low borrowing costs induced first quarter
bond issuances to rise to $68 billion (up 70% from 1997). This the highest
volume since 1993 and over half of it is being used to fund new construction
projects, not just refinancing old ones.
One of the biggest challenges we have faced has been a profound scarcity of
suitable, non-rated tax-exempt product. Now, finally, that situation is abating
and we, at Colorado BondShares, plan to take full advantage of this glut of
bonds by investing our liquid funds longer term and locking in some attractive
yields. Market analysts ponder the future direction of interest rates. Some
believe that the Federal Reserve is on the verge of a rate increase as a
preemptive move to curtail inflationary pressures. Still others are convinced
that the economic indicators no longer tell the same story they used to and
that we are, in fact, in a disinflationary economy. In short, it is still
somewhat of a guessing game as to how the general market will respond during
the rest of 1998. To us, though, the future direction of interest rates is not
as relevant as the availability of suitable product. We grow increasingly
confident that we will be able to find projects with interest rates at or near
the levels of the bonds maturing. Hence we will be able to ensure the
continuation and competitiveness of our income stream well into the future.
Yet another fact reaffirms the timeliness of investments in our market sector.
The Taxpayer's Relief Act signed into law in 1997, contains numerous tax breaks
which, at first blush, look quite generous. Unfortunately, also implemented
were many offsetting provisions that limit, or preclude, certain individuals
(some of 33 million Americans) from taking advantage of these perceived
benefits because of their income level. Some individuals are actually paying
more tax now than before the tax cuts. And, qualifying for the tax breaks may
not be the most daunting problem. The effective dates, require some scrutiny to
avoid making costly errors. The purest play for attractive after-tax income
continues to be tax-exempt bonds.
Sincerely,
Fred R. Kelly, Jr.
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COLORADO BONDSHARES-
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
MARCH 31, 1998 (UNAUDITED)
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<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS - 92.8% VALUE
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<S> <C> <C>
$ 235,000 Academy Water and Sanitation District G.O. Series 1995, 6.20%-7.10% due
11/15/02-05 $ 260,686
25,000 Adams & Arapahoe Counties School District No. 31J G.O. Series 1989, 7.30% due
11/15/04 (b) 26,419
75,000 Adams County Pollution Control Revenue Refunding Series 1986A, 7.375% due
11/01/09 76,145
200,000 Arapahoe County Water and Wastewater Authority Revenue Series 1994,
6.20%-6.30% due 12/01/03-04 (b) 214,981
250,000 Arapahoe Water and Sanitation District G.O. Refunding and Improvement Series
1986, 8.50% due 12/01/05 292,433
175,000 Arapahoe Water and Sanitation District G.O. Refunding and Improvement Series,
1988A, 9.25% due 12/01/13 183,053
1,000,000 Arapahoe Water and Sanitation District G.O. Refunding and Improvement Series,
1988A, 9.25% due 12/01/13 (b) 1,046,360
2,250,000 Arapahoe Water and Sanitation District G.O. Refunding Series 1995B, 8.50% due
12/01/20 (b) 2,647,305
65,000 Arrowhead Metropolitan District G.O. Improvement Series 1995A, 5.90%-6.10% due
12/01/01-03 67,778
100,000 Arrowhead Metropolitan District G.O. Refunding Series 1994, 5.70% due 12/01/03
105,783
70,000 City of Arvada G.O. Street and Bridge Refunding Series 1994, 3.80% due 12/01/99
70,113
550,000 Arvada Multifamily Rental Housing Revenue Series 1993, 7.50% due 12/15/18
556,452
250,000 City of Aspen G.O. Electric Refunding Series 1991, 5.35% due 10/01/98
252,063
306,040 Aurora Centretech Metropolitan District G.O. Refunding and Improvement Series
1994, 6.00% due 12/01/23 306,034
135,000 Bayfield School District No. 10 JT-R G.O. Refunding Series 1992, 5.50% due
09/15/98 136,096
100,000 Beaver Creek Metropolitan District G.O. Refunding Series 1993, 4.60% due
12/01/98 100,640
1,775,000 Bell Mountain Ranch Phase II Metropolitan District G.O. Series 1995, 8.50%
due 11/15/15 1,936,685
460,000 Bell Mountain Ranch Phase II Metropolitan District Improvement Fee Revenue
Series 1997, 7.50% due 11/15/00 460,708
230,000 Bell Mountain Ranch Phase III Metropolitan District Improvement Fee Revenue
Series 1996, 7.00% due 11/15/99 230,398
345,000 Bell Mountain Ranch Phase III Metropolitan District Improvement Fee Revenue
Series 1997, 7.50% due 11/15/00 345,531
680,000 Bennett School District No. 29J G.O. (Adams & Arapahoe County) Ref. and
Imp. Series 1991, 6.35%-6.95% due 12/01/99-04 718,620
</TABLE>
1
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COLORADO BONDSHARES-
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS - 92.8% VALUE
------ -------------------------------- ------
<S> <C> <C>
$ 145,000 City of Black Hawk Device Tax Revenue Series 1994, 5.55%-5.70% due
12/01/00-01 $ 150,818
200,000 City of Black Hawk Device Tax Revenue Series 1996, 5.75%-5.85% due
12/01/03-04 213,011
350,000 City of Black Hawk G.O. Water Improvement Series 1992, 6.40%-6.80% due
12/01/98-00 366,808
500,000 City of Boulder Open Space Acquisition Refunding Series 1989 7.20% due
08/15/13 525,655
130,000 Boulder County Gunbarrel General Improvement District G.O. Series 1994,
4.90%-5.00% due 11/15/98-99 131,863
100,000 Boulder County Single Family Mortgage Revenue Series 1982A, 10.00% due
05/01/99 88,956
210,000 Boulder County Zero Coupon Single Family Mortgage Revenue Series 1983,
11.00% due 12/01/14 (d) 37,699
25,000 Boulder Valley School District No. RE-2 Series 1992A , 5.80% due 10/15/01
26,426
135,000 Boxelder Sanitation District Sewer Revenue Refunding and Improvement Series
1994, 5.60%-5.90% due 01/01/00-03 139,529
280,000 Town of Breckenridge G.O. Recreation Center Refunding Series 1993,
4.30%-4.45% due 12/01/99-00 283,280
488,691 Briargate Public Building Authority, Landowner Assessment Lien Series 1985A
and 1986A, 9.50%-10.25% due 06/15/95-05 (a) 322,629
12,000 Castle Pines North Metropolitan District Tax Revenue Bonds Series 1994B,
5.05%, due 12/01/33 (h) 7,800
25,000 Town of Castle Rock G.O. Series 1988-2 10.375% due 12/01/08
25,000
530,000 Town of Castle Rock LID Series 1988-2D Special Assessment, 9.25%-10.375% due
12/01/08 (a) 185,500
670,000 Town of Castle Rock G.O. Water Refunding Series 1993, 4.30%-4.65% due
12/01/98-00 676,840
60,389 Centennial Downs Metropolitan District Cash Payment Deficiency Bond Series
1993, 8.09% due 12/01/34 48,311
588,601 Centennial Downs Metropolitan District Limited Tax Refunding Bond Series
1993, 8.09% due 12/01/34 353,161
271,980 Centennial Downs Metropolitan Interest Certificate Series 1993, 6.00% due
12/01/34 (c) 2,720
100,000 Clear Creek School District No. Re-1 G.O. Improvement Series 1991, 5.90%
due 12/01/00 105,070
2,009,520 Colorado Centre Metropolitan District Limited Tax and Special Rev. Series
1992A, principal only, 0.00% due 01/01/27 (e) (a) 20,095
2,008,335 Colorado Centre Metropolitan District Limited Tax and Special Revenue
Series 1992A, interest only, 9.08% due 01/01/27 (f) 1,205,001
</TABLE>
2
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COLORADO BONDSHARES-
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS - 92.8% VALUE
------ -------------------------------- ------
<S> <C> <C>
$ 6,465,662 Colorado Centre Metropolitan District Limited Tax and Special Revenue
Series 1992B, 0.00% due 01/01/32 (g) (a) $ 64,657
975,000 Colorado Health Facilities Authority Revenue Community Provider Pooled
Series 1987 7.25% due 07/15/98 982,605
190,000 Colorado Health Facilities Authority Refunding Revenue Porter Memorial
Hospital Series 1986A, 7.40% due 02/01/16 (b) 201,696
520,000 Colorado Health Facilities Authority Zero Coupon Retirement Housing Revenue
Liberty Heights Project 1990 Subordinate Series B, 6.97% due 07/15/20 (d) 158,569
1,000,000 Colorado Health Facilities Authority Revenue Steamboat Springs Hospital
Series 1997 5.30% due 09/15/2009-08 998,700
1,610,000 Colorado Postsecondary Educational Facilities Authority Revenue National
Technological University Project Series 1993, 7.375%-7.75% due 12/01/10 1,642,759
70,000 Colorado Postsecondary Educational Facilities Authority Revenue The Naropa
Institutional Project Series 1990, 7.875% due 09/01/10 put 09/01/00 70,000
910,000 Colorado Springs Spring Creek G.I.D. G.O. Series 1995, 1.5% due 12/01/14 (h) 455,774
325,000 Colorado Tech Center Metropolitan District G.O. Refunding Series 1989,
9.75% due 06/01/09 (b) 350,162
1,180,000 Columbia Metropolitan District G.O. Improvement Series 1992, 7.60%-8.50%
due 11/01/00-11/01/12 1,395,913
100,000 City of Commerce City Special Improvement District No. 17 Special
Assessment, 6.90%-7.10% due 12/01/07 (b) 100,069
525,000 Cordillera Metropolitan District G.O. Series 1994A, 8.00% due 12/01/09 546,000
500,000 Cordillera Metropolitan District G.O. Series 1994, 8.25% due 12/01/13 520,000
1,025,000 Cotton Ranch Metropolitan District Eagle County G.O. Series 1998A 7.25%
due 12/01/17 1,025,000
2,250,000 Cottonwood Water and Sanitation District Refunding Series 1996, 7.60%
12/01/12 2,405,115
240,000 Town of Crested Butte Sales Tax Revenue Series 1994, 6.10%-6.35% due
12/01/01-03 256,575
125,000 Town of Crested Butte G.O. Water and Sewer Refunding Series 1993, 4.25% due
11/01/99 125,796
375,000 City of Delta Sales and Use Tax Revenue Refunding Series 1994, 4.35%-4.65%
due 12/01/01-03 379,190
2,250,000 City and County of Denver Excise Tax Revenue Series 1989 6.50% due 09/01/14 2,326,095
</TABLE>
3
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COLORADO BONDSHARES-
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS - 92.8% VALUE
------ -------------------------------- ------
<S> <C> <C>
$ 72,000 City and County of Denver Lease Purchase Certificates Series 1993, 6.30%
due 01/01/02 $ 72,200
10,000 City and County of Denver Special Facilities Airport Revenue Series 1967,
5.375% due 01/01/99 9,945
45,000 City and County of Denver Zero Coupon Single Family Mortgage Revenue Series
1984, 11.63% due 09/01/15 (d) 6,862
45,000 Denver West Metropolitan District Series 1997B 4.80% due 12/01/02 45,128
775,000 Denver West Metropolitan District Series 1997B 5.70% due 12/01/17 775,000
75,000 Town of Dillon G.O. Series 1992, 5.70%-5.90% due 10/01/99-00 77,832
95,000 Town of Dillon Excise Tax Revenue Series 1994, 5.80% - 5.90% due 06/01/02-03 99,089
320,000 Douglas County LID #3 Series 1991, 10.00% due 08/01/02 320,000
90,000 City of Durango First Mortgage Revenue Series 1995, 6.50% due 12/15/00 91,331
25,000 Eagle County Eagle Valley Library District G.O. (Limited Tax) Library
Series March 1, 1994, 4.45% due 12/01/98 25,130
60,000 El Paso and Elbert Counties Joint School District No. 23-JT
G.O. Building Series 1994, 5.75% due 12/15/01 62,965
90,000 El Paso County LID 85-2 Special Assessment Refunding Series 1988,
8.875%-9.00% due 09/01/00 9,000
1,200,000 El Paso County Multifamily Housing Briarglen Apartments Project Series
1994, 4.10% due 12/01/24 (h) 1,200,000
100,000 El Paso County Pheasant Run LID Special Assessment Bonds Series 1986-2,
9.25% due 09/01/98 (a) 25,000
100,000 El Paso County School District No. 2 - Harrison G.O. Improvement Series
1994, 7.10% due 12/01/04 115,984
500,000 El Paso County School District No. 20 Zero Coupon G.O. Refunding Series
1993A, 6.10% due 06/15/08 (d) 309,055
150,000 Elbert County School District C-1 G.O. Series 1994, 4.40% due 12/01/02 150,684
155,000 City of Englewood Golf Course Revenue Series 1994, 4.35% due 12/01/00 156,001
100,000 Estes Park Urban Renewal Authority Tax Increment Revenue Refunding Series
1993, 4.30% due 05/15/98 100,065
490,000 Evergreen Metropolitan District Water Revenue Refunding Series 1992A,
6.10%-6.25% due 07/15/98-99 499,101
10,000 Fairlake Metropolitan District G.O. Series 1991, 9.625% due 12/01/98 10,338
</TABLE>
4
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COLORADO BONDSHARES-
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS - 92.8% VALUE
------ -------------------------------- ------
<S> <C> <C>
$ 1,500,000 Fairlake Metropolitan District G.O. Series 1989, 9.00% due 06/01/09
$ 1,559,295
355,000 Forest Hills Metropolitan District G.O. Refunding Series 1992B, 7.75% due
11/01/99 357,787
25,000 Fort Collins Refunding Series B, 6.00%, due 12/01/02
26,986
150,000 Fraser Valley Metropolitan Recreation District GO. Refunding Series 1992,
5.20%-5.40% due 10/01/98-99 152,316
50,000 Town of Frederick G.O. Water Refunding Series 1993, 4.70% due 12/01/98
50,284
100,000 School District Fremont RE-1 G.O. Refunding Series 1990, 6.80% due 10/01/99
101,487
850,000 Gateway Village Improvement District G.O. Series 1995, 8.25%-8.75% due
12/01/05-14 874,163
200,000 City of Glenwood Springs Sales and Use Tax Revenue Series 1992A, 5.90% due
12/01/02 202,552
200,000 City of Golden Sales and Use Tax Revenue Series 1992, 4.50%-5.00% due
11/15/97-99 202,517
300,000 City of Grand Junction Downtown Development Authority Tax Increment Revenue
Series 1996, 5.55%-5.65% due 11/15/04-05 316,806
100,000 Greeley General Improvement District No. 1 G.O. Refunding Series July 15,
1994, 5.20%-5.30% due 10/01/98-99 101,679
280,000 Greenwood Metropolitan District G.O. Refunding Series 1994, 5.60%-7.00% due
12/01/98-04 301,627
490,000 Greenwood North Metropolitan District G.O. Refunding Series 1993,
4.40%-5.00% due 12/01/98-01 492,109
220,000 Greenwood South Metropolitan District G.O. Refunding Series 1994,
6.25%-6.90% due 12/01/01-04 236,186
100,000 City of Greenwood Village Sales Tax Revenue Refunding Series 1993, 4.40%
due 12/01/99 100,996
500,000 Hamilton Creek District Series 1990, 0.7% due 12/01/04 (g) 260,000
55,000 Town of Hayden G.O. Water Refunding Series 1993, 4.30% due 09/01/99 55,331
10,000 Hyland Hills Park & Recreation District Special Revenue Improvement Series
1992, 7.10% due 12/15/00 10,779
340,000 Idledale Fire Protection District G.O. Series 1993, 5.20%-5.80% due
12/15/03-07 343,495
480,000 La Plata County Recreational Facilities Revenue Refunding Durango Ski
Corporation Project Series 1989A, 9.00% due 02/01/10 465,600
100,000 City of Lafayette Sales and Use Tax Revenue Series 1991, 5.70% due 11/15/98 101,288
</TABLE>
5
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COLORADO BONDSHARES-
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS - 92.8% VALUE
------ -------------------------------- ------
<S> <C> <C>
$ 65,000 City of Lakewood Zero Coupon Single Family Mortgage Series 1985, 11.10% due
05/01/15 (d) $ 10,577
315,000 City of Las Animas Water G.O. Series 1989, 8.60% due 12/01/09
316,320
300,000 Left Hand Water District Water Revenue Refunding Series 1993, 4.30%-4.45%
due 11/15/00-01 303,415
135,000 Lookout Mountain Water District G.O. Refunding Series 1993, 5.20% due
12/01/01 139,456
1,000,000 City of Louisville Sales Tax Revenue Series 1989, 8.60% due 11/15/13 (b)
1,040,010
35,000 City of Manitou Springs Water and Sewer Revenue Series 1992, 5.20% due
03/01/99 35,218
220,000 Mesa County Single Family Mortgage Revenue Series 1982, 10.75% due 12/01/99
(a) 17,600
1,250,000 Mid Valley Metropolitan District G.O. Refunding & Improvement Series 1989,
8.90% due 12/15/04 (b) 1,368,825
140,000 Moffat School District No. 2 G.O. (Saguache County) Series 1994,
5.55%-5.90% due 12/01/98-01 146,752
320,000 City of Montrose Sales and Use Tax Revenue Refunding Series 1993,
4.20%-4.40% due 08/15/99-00 322,786
250,000 City of Montrose Water and Sewer Revenue Refunding and Improvement Series
1993, 4.50%-4.65% due 10/01/01-02 254,492
155,000 Monument Sanitation District G.O. Refunding Series 1994, 5.80%-5.90% due
12/01/01-02 162,320
255,000 Town of Mt. Crested Butte G.O. Refunding Series 1993, 4.40%-4.75% due
05/01/99-01 257,678
750,000 Mountain Village Metropolitan District G.O. Series 1992, 7.95% due 12/01/03 845,438
350,000 Town of Nederland G.O. Water Refunding Series 1989, 8.50% due 08/15/13 (b) 356,276
225,000 North Jeffco Park and Recreation District Golf Course Revenue Series 1994,
5.80%-6.10% due 12/01/01-04 240,036
60,000 Northeast Teller County Fire Protection District G.O. Series 1988, 7.60% due
12/01/98 60,320
20,000 Northgate Public Building Authority Landowner Assessment Lien Series 1987A,
8.25% due 12/01/00(a) 2,800
200,000 City of Northglenn Water and Sewer Revenue Refunding Series 1992, 4.70% due
12/01/98 201,410
100,000 Town of Palisade G.O. Water Refunding Series 1993B, 5.10% due 04/01/99 101,283
1,055,000 Panorama Metropolitan District G.O. Refunding Series 1989B, 9.00% due
12/01/09 (b) 1,153,811
</TABLE>
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<PAGE> 10
COLORADO BONDSHARES-
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS - 92.8% VALUE
------ -------------------------------- ------
<S> <C> <C>
$ 280,000 Town of Parker Sales and Use Tax Refunding Revenue Series 1993, 4.20%-4.30%
due 11/01/99-00 $ 282,484
1,900,000 Parker Jordan Metropolitan District Series 1998A 6.25% due 12/01/17
1,889,170
45,000 Pitkin County Sales Tax Revenue Series 1995, 5.30% due 12/01/00
45,866
200,000 Project 7 Water Authority Water Revenue Refunding Series 1993, 4.50% due
12/01/00 202,900
205,000 Rangely Junior College District G.O. Building Series 1992, 6.15%-6.40% due
10/01/98-00 210,180
210,000 Ridgway School District No. R-2 G.O. (Ouray County) Series 1994, 7.75% due
12/01/98-02 229,671
159,868 Roxborough Village Metropolitan District Series 1993A, 9.00% due 12/31/16
131,092
278,078 Roxborough Village Metropolitan District Series 1993B, principal only, 0.00%
due 12/31/21 (e) 16,685
906,622 Roxborough Village Metropolitan District Series 1993C, 9.84% due 12/31/32 (d)
9,066
20,270 Roxborough Village Metropolitan District Series 1993B, interest only, 10.41%
due 01/01/43 (f) 203
225,000 St. Charles Mesa Water District Water Revenue Refunding Series 1992, 5.55%
due 12/01/00 234,477
500,000 City of Salida Sales Tax Revenue Refunding & Improvement Series 1990, 8.20%
due 12/01/11 513,280
125,000 San Miguel County Housing Authority Multifamily Telluride Village Zero Coupon
Revenue Refunding Series 1993, 7.00% due 07/01/98 (d) 123,419
535,000 San Miguel County Housing Authority Multifamily Telluride Village Revenue
Refunding Series 1993, 6.30% due 07/01/13 548,514
1,250,000 Sand Creek Metropolitan District G.O. Limited Tax Bonds, Series 1997, 7.125%
due 12/1/16 1,250,000
185,000 San Miguel County School District No. R-1 G.O. Series 1992, 8.50% due
12/01/98 (b) 190,866
1,755,000 City of Sheridan G.O. Series 1997, 7.50% due 12/01/16 1,755,000
1,900,000 Smith Creek Metropolitan District Revenue Series 1997, Variable Rate 3.50%
due 10/01/35 (h) 1,900,000
230,000 Town of Snowmass Village Multifamily Housing Series 1990A, 7.60%-7.70% due
12/15/98-99 240,896
210,000 Southgate Corporate Center Metropolitan District G.O. Refunding Series 1994,
5.50% due 12/01/98 210,840
</TABLE>
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<PAGE> 11
COLORADO BONDSHARES-
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS - 92.8% VALUE
------ -------------------------------- ------
<S> <C> <C>
$ 1,000,000 Southpark Metropolitan District Refunding G.O. Series 1996, 6.60% due 12/01/13
$ 980,000
305,000 Southtech Metropolitan District G.O. Refunding Series 1994, 5.10%-5.85% due
12/01/99-04 317,949
100,000 Southwest Plaza Metropolitan District G.O. Refunding Series 1993, 5.00% due
12/01/99 101,758
385,000 Squaw Creek Metropolitan District Revenue Series 1994, 5.25% due 12/01/13,
put 12/01/98 384,973
40,000 City of Steamboat Springs Accommodations Tax Revenue Series 1995, 5.25% due
03/01/00 41,034
200,000 Summit County Sewer Revenue Refunding Series 1992, 4.60% due 12/01/98 201,296
180,000 Superior Metropolitan District No. 2 G.O. Refunding Series 1994A, 5.90% due
12/01/98 180,756
75,000 Swink School District No. 33 G.O. (Otero County) Building Bonds Series 1994,
8.40% due 12/15/00-03 87,671
360,000 Telluride Hospital District Series 1997 4.60% - 4.8% due 12/01/00-02 361,664
2,000,000 Todd Creek Farms Metropolitan District #2 Series 1997 8.0% due 06/01/17-07 2,000,000
300,000 Upper Eagle Regional Water Authority Water Refunding Series 1994, 5.50%-5.80%
due 12/01/99-01 311,049
610,000 Valley Metropolitan District G.O. Revenue Series 1992, 7.00% due 12/15/06 645,630
100,000 Walsenburg Natural Gas Revenue Series 1968, 6.25% due 06/01/98-99 101,174
100,000 Weld County Reorganized School District RE-4 G.O. Series 1993, 4.65% due
12/01/00 101,826
100,000 Westglenn Metropolitan District G.O. Refunding Series 1994, 4.80% due 12/01/98 100,733
335,000 Town of Windsor, G.O. Water Refunding Series 1994, 4.4% -4.80% due 04/01/99-01 338,619
125,000 City of Woodland Park Limited Sales Tax Refunding Bonds Series 1994A, 5.25%
due 6/01/98-12/01/98 125,785
Total Colorado Municipal Bonds (cost $62,314,578) 63,132,472
----------
</TABLE>
8
<PAGE> 12
COLORADO BONDSHARES-
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT COLORADO CERTIFICATES OF PARTICIPATION - 1.3% VALUE
------ --------------------------------------------- ------
<S> <C> <C>
$ 155,000 Arapahoe County Recreation District Refunding Certificates of
Participation Series 1996, 5.00%-5.20% due 12/01/04-06 $ 162,163
170,000 City of Central City Certificates of Participation City Hall Project
Series 1995, 6.50%-6.80% due 12/01/99-01 171,537
100,000 El Paso County School District No. 49 (Falcon Schools) Refunding
Certificates of Participation Series 1995, 4.375% due 11/01/01 101,114
200,000 Gilpin County Certificates of Participation Dentention Facility Project
Series 1994, 6.60% due 10/15/01 216,222
50,000 Las Animas County School District No. 001 Certificates of Participation
Series 1991A, 8.00% due 12/01/10 55,420
145,000 Park School District R-3 Certificates of Participation Series 1996,
5.35%-5.45% due 06/01/04-05 145,191
Total Colorado Certificates of Participation Bonds
(cost $858,641) 851,647
-----------
COLORADO INDUSTRIAL DEVELOPMENT REVENUE BONDS - 3.9%
----------------------------------------------------
555,000 Adams County Robertson Association Series 1979, 9.00% due 06/15/04 556,870
200,000 City and County of Denver Desks Colorado Project Series 1983, 4.25% due
10/15/05 (put 10/15/98) 200,038
1,925,000 City of Fort Collins The Opera House Project Series 1986, 8.75%-10.00% due
12/01/10-16 1,888,473
Total Colorado Industrial Development Revenue Bonds
(cost $2,678,700) 2,645,381
-----------
</TABLE>
9
<PAGE> 13
COLORADO BONDSHARES-
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT OTHER MUNICIPAL BONDS-1.8% VALUE
------ -------------------------- ------
<S> <C> <C>
$ 100,000 City of Burnsville G.O. Tax Increment Refunding Series 1993C, 4.40% due
02/01/02 $ 101,039
205,000 Daggett County School District, G.O. Refunding Series 1993, 4.50%-4.65%
due 12/15/98-99 207,011
515,000 Sandoval County, New Mexico Project Revenue Bonds, Series 1997, 7.50% due
08/15/06 515,000
100,000 Santa Fe Public School District G.O. Series 1993, 4.00% due 06/15/99 100,046
100,000 Santa Fe Public School District G.O. Series 1994, 5.60% due 06/15/01 101,792
100,000 Washington County School District 007 Hillsboro Series 1989, 6.70% due
06/01/08 (b) 103,473
120,000 West Wendover Recreation District G.O. Golf Course Improvement Refunding
Series 1993, 5.60% due 12/01/99 123,268
Total Other Municipal Bonds (cost $1,256,731) 1,251,629
-----------
Total investments, at value (cost $67,108,650) 99.8% 67,881,129
Other assets net of liabilities .2 160,071
----- -----------
Net assets 100.0% $68,041,200
===== ===========
</TABLE>
10
<PAGE> 14
COLORADO BONDSHARES-
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS, CONTINUED
MARCH 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
(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 March 31, 1998. Income on this security is derived from the cash flow
of the issuer.
(h) Represents current interest rate for a variable rate bond.
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.
11
<PAGE> 15
COLORADO BONDSHARES-
A TAX-EXEMPT FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $67,108,650) - see accompanying statement $ 67,881,130
Cash 124,433
Interest receivable 1,263,670
Shares of beneficial interest sold 49,812
------------
Total assets 69,319,045
------------
LIABILITIES
Payables and other liabilities:
Dividends 205,843
Shares of beneficial interest redeemed 2,000
Investments purchased 1,025,000
Accrued expenses and other 45,002
------------
Total liabilities 1,277,845
Net Assets $ 68,041,200
============
COMPOSITION OF NET ASSETS
Paid-in capital $ 66,903,287
Undistributed net investment income 542,054
Accumulated net realized loss from investment transactions (176,620)
Net unrealized appreciation of investments (note 3) 772,479
------------
Net assets $ 68,041,200
============
Net asset value and redemption value per share (based on 7,050,096
shares of beneficial interest outstanding) $ 9.65
========
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $ 10.13
========
</TABLE>
See accompanying notes to financial statements.
12
<PAGE> 16
COLORADO BONDSHARES-
A TAX-EXEMPT FUND
STATEMENT OF OPERATIONS
MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income - interest $ 2,842,468
-----------
Expenses:
Management fees (note 4) 169,946
Custodian fees (note 5) 40,830
Legal and auditing fees 17,683
Transfer agency expenses (note 4) 19,110
Shareholders' reports and proxy statements 15,097
Fidelity bond 1,146
Registration fees 1,820
Trustees' fees 910
Other 546
-----------
Total expenses 267,088
Earnings credits on cash balances (note 5) (40,830)
-----------
Net expenses 226,258
Net investment income 2,616,210
Realized and unrealized gain on investments:
Net realized gain on investments 125,147
-----------
Net unrealized appreciation
(depreciation) of investments:
Beginning of the period 914,519
End of the period 772,479
Net change in unrealized appreciation on investments (142,040)
-----------
Net realized and unrealized gain (loss) on investments (16,893)
-----------
Net increase in net assets resulting from operations $ 2,599,317
===========
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 17
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIODS ENDED MARCH 31, 1998 AND SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
03/31/98 09/30/97
-------- --------
<S> <C> <C>
From investment activities:
Net investment income $ 2,616,210 $ 3,651,580
Net realized gain (loss) on investments 125,147 66,006
Net change in unrealized (depreciation) on investments (142,040) 1,342,920
------------ ------------
Net increase in net assets resulting from operations 2,599,317 5,060,506
------------ ------------
Dividends to shareholders from net investment income (2,095,574) (3,640,860)
------------ ------------
From beneficial interest transactions:
Proceeds from sale of shares 3,191,445 16,889,528
Dividends reinvested 1,284,360 2,375,147
Payments for shares redeemed (4,187,338) (4,018,181)
Increase in net assets derived from
beneficial interest transactions 288,467 15,246,494
------------ ------------
Net increase in net assets 792,210 16,666,140
Net assets:
Beginning of period 67,248,990 50,582,850
------------ ------------
End of period, including undistributed net investment
income of $542,054 and $21,418 respectively $ 68,041,200 $ 67,248,990
============ ============
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 18
COLORADO BONDSHARES-
A TAX-EXEMPT FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended September 30
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six Months
PER SHARE OPERATING DATA: Ended
3/31/98 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning
of period $ 9.58 $ 9.37 9.16 9.07 9.13 9.07
---------- ---------- ---------- ---------- ---------- ----------
Net investment income .37 .58 .61 .60 .63 .66
Net realized and unrealized
gain (loss) on investments (.01) .21 .20 .09 (.06) .07
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) from
investment operations .36 .79 .81 .69 .57 .73
Dividends from net investment
income (.29) (.58) (.60) (.60) (.63) (.67)
---------- ---------- ---------- ---------- ----------
Net increase (decrease)
in net asset value .07 .21 .21 .09 (.06) .06
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of $ 9.65 9.58 9.37 9.16 9.07 9.13
========== ========== ========== ========== ========== ==========
period
TOTAL RETURN, AT NET ASSET
VALUE (1) 3.81%+ 8.66 9.15 8.05 6.50 8.53
========== ========== ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)s $ 68,041 67,249 50,583 44,768 41,790 34,773
========== ========== ========== ========== ========== ==========
Ratios to average net assets:
Net investment income 3.84%+ 6.13% 6.50% 6.81% 6.96% 7.27%
Expenses, inclusive of
expenses paid indirectly
by the Fund (2) .78%* .84% .77% .84% .74% .81%
Expenses, net of
expenses paid indirectly
by the Fund (2) .66%* .73% .70% .77% .74% .81%
Portfolio turnover rate (3) 13.81% 27.66% 24.53% 27.48% 22.04% 7.87%
========== ========== ========== ========== ========== ==========
<CAPTION>
Year Ended September 30
------------------------------------------------------------------------------
1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period 8.96 8.93 9.61 9.59 9.43
---------- ---------- ---------- ---------- ----------
Net investment income .68 .71 .74 .74 .77
Net realized and unrealized
gain (loss) on investments .10 .03 (.68) .03 .16
---------- ---------- ---------- ---------- ----------
Increase (decrease) from
investment operations .78 .74 .06 .77 .93
Dividends from net investment
income (.67) (.71) (.74) (.75) (.77)
---------- ---------- ---------- ---------- ----------
Net increase (decrease)
in net asset value .11 .03 (.68) .02 .16
---------- ---------- ---------- ---------- ----------
Net asset value, end of 9.07 8.96 8.93 9.61 9.59
========== ========== ========== ========== ==========
period
TOTAL RETURN, AT NET ASSET
VALUE (1) 9.09 8.49 0.61 8.49 9.57
========== ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)s 27,585 25,177 34,397 37,551 15,319
========== ========== ========== ========== ==========
Ratios to average net assets:
Net investment income 7.61% 8.04% 7.85% 8.80% 7.38%
Expenses, inclusive of
expenses paid indirectly
by the Fund (2) .94% 1.06% .82% .79% .43%
Expenses, net of
expenses paid indirectly
by the Fund (2) .94% 1.06% .82% .79% .43%
Portfolio turnover rate (3) 5.00% 9.35% 34.54% 11.58% 11.12%
========== ========== ========== ========== ==========
</TABLE>
15
<PAGE> 19
COLORADO BONDSHARES-
A TAX-EXEMPT FUND
FINANCIAL HIGHLIGHTS, CONTINUED
- --------------------------------------------------------------------------------
+ Not annualized
* 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) 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 rate 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. Sales of securities include the proceeds of securities which have
been called, or for which payment has been made through redemption or
maturity. 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 period March 31, 1998 were $11,938,502 and $8,921,013,
respectively.
See accompanying notes to financial statements.
16
<PAGE> 20
COLORADO BONDSHARES-
A TAX-EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(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 objectives are to maximize
income exempt from federal income taxes and from personal income taxes of
the State of Colorado to the extent consistent with the preservation of
capital and to seek opportunities for capital appreciation. The Fund's
investment adviser is Freedom Funds Management Company (Freedom Funds).
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 a national
independent pricing service approved by the Fund's Board of Trustees. The
pricing service values the municipal bonds taking into consideration
yield, stability, risk, quality, coupon, maturity, type of issue, trading
characteristics and any other revenant trading or market factors. 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. At March 31, 1998, the Fund had available for federal income tax
purposes an unused capital loss carryover of approximately $176,620,
expiring in 2002, 2003, and 2004.
OTHER/SECURITY CREDIT RISK
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 concentrates its investments in Colorado and, therefore, may have
more credit risks related to the economic conditions of Colorado than a
portfolio with a broader geographical diversification. The Fund invests in
nonrated securities, which may be subject to a greater degree of credit
risk, and risk of loss of income and principal, and may be more sensitive
to economic conditions than lower yielding, higher rated fixed income
securities. 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
$9,833,873 and $638,281 (.9% of net assets), respectively, as of March 31,
1998.
17
<PAGE> 21
COLORADO BONDSHARES-
A TAX-EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
(2) SHARES OF BENEFICIAL INTEREST
At March 31, 1998, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in shares of beneficial
interest for the six month period ended March 31, 1998 and the fiscal year
ended September 30, 1997 were as follows:
<TABLE>
<CAPTION>
Six Months
Ended
3/31/98 09/30/97
----------- ----------
<S> <C> <C>
Proceeds from shares sold 330,731 1,794,879
Dividends reinvested 133,142 251,774
---------- ----------
463,873 2,046,653
Shares redeemed (433,348) (426,982)
---------- ----------
Net change 30,525 1,619,761
========== ==========
</TABLE>
(3) UNREALIZED GAINS AND LOSSES
At March 31, 1998, the net unrealized appreciation on investments of
$772,479 was comprised of gross appreciation of $2,286,848 and gross
depreciation of $1,514,369 .
(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 certain transfer agency
and shareholder services as part of the management fee arrangement for the
six month period ended March 31, 1998. Transfer agency expenses represent
direct expenses charged to the Fund by third parties.
(5) EARNINGS CREDITS ON CASH BALANCES
Expenses paid indirectly by the Fund represent earnings credits on cash
balances maintained with the custodian by the Fund which result in
offsetting custodian fees incurred for the safeguarding of Fund assets.
18
