<PAGE> 1
November 24, 1999
Dear Shareholders:
Enclosed is our annual report for the fiscal year ended 09/30/99. Instead of
dreading the prospect of a new millennium, we are eagerly awaiting it. We
believe that we are well positioned to not only survive Y2K but to prosper
before, during and after it.
As an isolated individual investment, the Fund did not perform well for you this
year. We are reporting a total return for the fiscal year of 3.64% (based on
N.A.V.). This is the second worst year we have ever had. However, compared to
our competitors in the fixed income arena, our performance was stellar and we
may well end the calendar year as the only tax-exempt fund in the country with a
positive return. This would continue our unblemished track record of 12
consecutive years without a negative return.
Why was this such a tough year on bonds, shareholders ask? The explanation is
this. Three times this year the Federal Reserve has raised interest rates, by a
quarter of a percent each time, in order to curb a resurgence of inflation. When
interest rates rise, the principal value of bonds goes down. If the increase in
rates happens slowly over a period of several months, one tends to lose track of
the cumulative effect of these changes. To put it all in perspective though a 1%
rise in interest rates makes the principal value of a 30 year bond go down by,
approximately 12%; a 5 year bond goes down by 5%. Our shares dropped by
approximately 2% or $.22 per share, based on N.A.V. $9.64.
There were other positive things happening, simultaneously, which offset the
negative effects. We had one of the shortest average maturities of any fund in
our category. This lessens the damage to our portfolio because the fixed future
cash flows are still discounted back at higher rates but for shorter periods of
time. Point two is that the incredible strength of the Colorado economy has
dramatically improved the perceived quality of the bond holdings in our
portfolio thereby increasing prices. This trend is one, which we expect to
continue for the foreseeable future. A phenomenon such as this does not,
typically, occur in AAA rated funds because the quality of the bonds is already
as good as it gets. In order to get back to a par bid interest rates must return
to the level that they were when the bond was issued.
Remember, that tough years such as 1999 are frequently followed by ultra
positive years. Rising rates have merely given Colorado BondShares the
opportunity to acquire attractive bonds and lock in good tax exempt income for
the years to come. We believe tax exempt bonds represent a superior value now by
any measure and we expect to recoup most if not all of the $.22 in lost share
value in the next fiscal period.
As always we appreciate your continued support of our efforts.
Sincerely,
/s/ Fred R. Kelly
- -------------------------
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 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
Fortner Bayens Levkulich & Co., P.C.
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
[FORTNER, BAYENS, LEVKULICH AND CO., PC.C.]
Certified Public Accountants
Independent Auditors' Report
The Trustees and Shareholders of
Colorado BondShares - A Tax-Exempt Fund:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Colorado BondShares, A Tax-Exempt Fund, as of
September 30, 1999, and the related statements of operations, changes in net
assets and financial highlights for the year then ended. 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 audit. The statement of changes
in net assets for the year ended September 30, 1998 and financial highlights for
each of the years in the four-year period ended September 30, 1998, were audited
by other auditors whose report dated November 3, 1998 expressed an unqualified
opinion on that statement and financial highlights.
We conducted our audit 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 and
financial highlights. Our procedures included confirmation of securities owned
as of September 30, 1999, by correspondence with the custodian. 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 audit provides 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, 1999, the results of
its operations, changes in its net assets and the financial highlights for the
year then ended in conformity with generally accepted accounting principles.
Fortner, Bayens, Levkulich and Co., P.C.
Denver, Colorado
November 11, 1999
<PAGE> 4
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
Statement of Investments
September 30, 1999
<TABLE>
<CAPTION>
Face Market
Amount Colorado Municipal Bonds - 87.8% Value
- -------------- ----------------------------------------------------------- ------------
<S> <C> <C>
$ 235,000 Academy Water and Sanitation District G.O. Series 1995, 6.20%-7.10% due 11/15/02-05 $ 251,747
25,000 Adams & Arapahoe Counties School District No. 31J G.O. Series 1989, 7.30% due 11/15/04 (b) 25,111
200,000 Arapahoe County Water and Wastewater Authority Revenue Series 1994, 6.20%-6.30%
due 12/01/03-04 (b) 208,804
235,000 Arapahoe Water and Sanitation District G.O. Refunding and Improvement Series 1986,
8.50% due 12/01/05 264,335
2,250,000 Arapahoe Water and Sanitation District G.O. Refunding Series 1995B, 8.50% due 12/01/20 (b) 2,515,545
65,000 Arrowhead Metropolitan District G.O. Improvement Series 1995A, 5.90%-6.10%
due 12/01/01-03 66,478
100,000 Arrowhead Metropolitan District G.O. Refunding Series 1994, 5.70% due 12/01/03 102,439
70,000 City of Arvada G.O. Street and Bridge Refunding Series 1994, 3.80% due 12/01/99 70,004
306,040 Aurora Centretech Metropolitan District G.O. Refunding and Improvement Series 1994,
6.00% due 12/01/23 (b) 328,880
700,000 Beebe Draw Farms Metropolitan District G.O. Series 1998, 7.00% due 10/01/18 700,000
1,765,000 Bell Mountain Ranch Phase II Metropolitan District G.O. Series 1995, 8.50% due 11/15/15 2,002,745
680,000 Bennett School District No. 29J G.O. Refunding and Improvement Series 1991,
6.35%-6.95% due 12/01/99-04 688,470
145,000 City of Black Hawk Device Tax Revenue Series 1994, 5.55%-5.70% due 12/01/00-01 147,282
200,000 City of Black Hawk Device Tax Revenue Series 1996, 5.75%-5.85% due 12/01/03-04 205,514
275,000 City of Black Hawk G.O. Water Improvement Series 1992, 6.60%-6.80% due 12/01/99-00 279,240
80,000 Boulder County Gunbarrel General Improvement District G.O. Series 1994, 5.00% due 11/15/99 80,121
805,000 Boulder County Multifamily Refunding & Improvement Revenue (Thistle Cmnty Housing)
Series 1999A, 6.25% due 6/01/2019 764,790
75,000 Boulder County Multifamily Refunding & Improvement Revenue (Thistle Cmnty Housing)
Subordinate Series 1999B, 7.375% due 6/01/2015 72,891
25,000 Boulder Valley School District No. RE-2 Series 1992A, 5.80% due 10/15/01 25,834
135,000 Boxelder Sanitation District Sewer Revenue Refunding and Improvement Series 1994,
5.60%-5.90% due 1/01/00-03 136,480
280,000 Town of Breckenridge G.O. Recreation Center Refunding Series 1993, 4.30%-4.45%
due 12/01/99-00 281,195
310,543 Briargate Public Building Authority, Landowner Assessment Lien Series 1985A and 1986A,
9.50%-10.25% due 12/15/95-05 (g)(i) 282,406
12,000 Castle Pines North Metropolitan District Tax Revenue Series 1994B, 6.10%, due 12/01/33 (h) 10,200
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
470,000 Town of Castle Rock G.O. Water Refunding Series 1993, 4.55%-4.65% due 12/01/99-00 471,100
59,394 Centennial Downs Metropolitan District Cash Payment Deficiency Bond Series 1993,
8.09% due 12/01/34 (i) 59,471
588,601 Centennial Downs Metropolitan District Limited Tax Refunding Bond Series 1993,
8.09% due 12/01/34 (i) 595,252
271,980 Centennial Downs Metropolitan Interest Certificate Series 1993, 6.00% due 12/01/34 (i) 30,222
45,000 City of Central City Special Assessment District No.1, 7.5% due 12/01/03 45,247
2,500,000 Central Platte Valley Metropolitan District Special Obligation Revenue Series 1998, 7.00%
due 12/01/17 2,437,500
100,000 Clear Creek School District No. Re-1 G.O. Improvement Series 1991, 5.90% due 12/01/00 102,392
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Face Market
Amount Colorado Municipal Bonds - 87.8% Value
- -------------- ----------------------------------------------------------- ------------
<S> <C> <C>
2,009,520 Colorado Centre Metropolitan District Limited Tax and Special Revenue Series 1992A, 20,095
principal only, 0.00% due 1/01/27 (a)(e)(i)
2,008,335 Colorado Centre Metropolitan District Limited Tax and Special Revenue Series 1992A,
interest only, 9.00% due 1/01/27 (f)(i) 1,205,001
6,465,662 Colorado Centre Metropolitan District Limited Tax and Special Revenue Series 1992B,
0.00% due 1/01/32 (a)(g)(i) 64,657
4,150,000 Colorado Educational & Cultural Facility Authority Revenue Charter School-Liberty
Common Series 1998, 6.95% due 8/15/19 4,096,465
190,000 Colorado Health Facilities Authority Refunding Revenue Porter Memorial Hospital Series
1986A, 7.40% due 2/01/16 (b) 192,326
520,000 Colorado Health Facilities Authority Zero Coupon Retirement Housing Revenue Liberty
Heights Project 1990 Subordinate Series B, 6.97% due 7/15/20 (d) 143,478
635,000 Colorado Postsecondary Educational Facilities Authority Revenue National Technological
University Project Series 1993, 7.375% due 12/01/10 (b) 706,647
885,000 Colorado Postsecondary Educational Facilities Authority Revenue National Technological
University Project Series 1993, 7.75% due 12/01/10 990,022
65,000 Colorado Postsecondary Educational Facilities Authority Revenue The Naropa Institutional
Project Series 1990, 7.875% due 9/01/10 put 9/01/00 65,000
835,000 Colorado Springs Spring Creek G.I.D. GO Series 1995, 4.00% due 12/01/14 (b)(i) 375,750
1,180,000 Columbia Metropolitan District G.O. Improvement Series 1992, 7.60%-8.50% due 11/01/00-11/01/12 1,326,511
500,000 Cordillera Metropolitan District G.O. Series 1994A, 8.00% due 12/01/09 (b) 582,885
500,000 Cordillera Metropolitan District G.O. Series 1994, 8.25% due 12/01/13 (b) 588,385
1,025,000 Cotton Ranch Metropolitan District G.O. Series 1998A, 7.25% due 12/01/17 978,199
3,500,000 Cotton Ranch Metropolitan District Subordinate Junior G.O. Limited Tax Refunding Variable
Rate Series 1999B, 7.75% due 12/15/17 (h) 3,104,535
2,250,000 Cottonwood Water and Sanitation District Refunding Series 1996A, 7.60% 12/01/12 2,319,817
19,106,474 Cottonwood Water and Sanitation District Capital Appreciation Refunding Second Lien,
Series 1998A, 8.00% due 12/01/27 (d) 3,810,595
240,000 Town of Crested Butte Sales Tax Revenue Series 1994, 6.10%-6.35% due 12/01/01-03 248,976
125,000 Town of Crested Butte G.O. Water and Sewer Refunding Series 1993, 4.25% due 11/01/99 125,056
375,000 City of Delta Sales and Use Tax Revenue Refunding Series 1994, 4.35%-4.65%
due 12/01/01-03 375,740
72,000 City and County of Denver Lease Purchase Certificates Series 1993, 6.30% due 1/01/02 72,105
1,885,000 City and County of Denver Subordinate Multifamily Housing Revenue Capital Heights Apts.
Series 1999C, 8.00% due 5/01/32 1,878,290
45,000 Denver West Metropolitan District Series 1997B, 4.80% due 12/01/02 45,065
775,000 Denver West Metropolitan District Series 1997B, 5.70% due 12/01/17 774,930
75,000 Town of Dillon G.O. Series 1992, 5.70%-5.90% due 10/01/99-00 75,756
95,000 Town of Dillon Excise Tax Revenue Series 1994, 5.80% - 5.90% due 6/01/02-03 97,935
90,000 City of Durango First Mortgage Revenue Series 1995, 6.50% due 12/15/00 89,982
455,000 Eagle Riverview Affordable Housing Corp. Multifamily Housing Project
Revenue Series 1992A-2, 6.30% due 7/01/2029 455,000
60,000 El Paso and Elbert Counties Joint School District No. 23-JT G.O. Building
Series 1994, 5.75% due 12/15/01 61,606
90,000 El Paso County LID 85-2 Special Assessment Refunding Series 1988,
8.875%-9.00% due 9/01/00 9,000
90,588 El Paso County Pheasant Run LID Special Assessment Series 1986-2,
9.25% due 9/01/99(a) 22,647
100,000 El Paso County School District No. 2 - Harrison G.O. Improvement Series 1994, 7.10% due 12/01/04 111,270
500,000 El Paso County School District No. 20 Zero Coupon G.O. Refunding Series 1993A,
6.10% due 6/15/08 (d) 317,865
150,000 Elbert County School District C-1 G.O. Series 1994, 4.40% due 12/01/02 149,405
155,000 City of Englewood Golf Course Revenue Series 1994, 4.35% due 12/01/00 155,239
3,123,380 Equi-Mor Holdings Inc., Series 1998B, Class A Pass-Through Certificates, 7.00% due 9/01/18 3,123,380
1,060,527 Equi-Mor Holdings Inc., Series 1999A, Class A Pass-Through Certificates, 7.50% due 4/05/18 1,060,527
1,500,000 Fairlake Metropolitan District G.O. Series 1989, 9.00% due 6/01/09 1,528,125
25,000 Fort Collins Refunding Series B, 6.00%, due 12/01/02 26,291
25,000 Fort Lupton Golf Course Revenue Anticipation Warrants Series 1996A, 8.50% due 12/15/15 23,000
80,000 Fraser Valley Metropolitan Recreation District G.O. Refunding Series 1992, 5.40% due 10/01/99 80,002
100,000 Fremont School District RE-1 G.O. Refunding Series 1990, 6.80% due 10/01/99 100,008
2,000,000 Gateway Village GID G.O. Refunding and Improvement Series 1998, 6.00% due 12/01/18 1,868,280
239,000 Gateway Village GID G.O. Refunding and Improvement Series 1998, Zero Coupon 5.20%-5.60%
due 12/01/99-12/01/01 (d) 226,823
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Face Market
Amount Colorado Municipal Bonds - 87.8% Value
- -------------- ----------------------------------------------------------- ------------
<S> <C> <C>
845,000 Gateway Village GID G.O. Series 1995, 8.25%-8.75% due 12/01/05-14 (b) 943,543
1,000,000 Gateway Village GID Subordinate Limited Tax G.O. Series 1999, 7.00% due 6/01/19 1,000,000
100,000 City of Golden Sales and Use Tax Revenue Series 1992, 5.00% due 11/15/99 100,151
300,000 City of Grand Junction Downtown Development Authority Tax Increment Revenue Series 1996,
5.55%-5.65% due 11/15/04-05 308,126
1,275,000 Greatrock North Water and Sanitation District, Limited Tax G.O. Series 1998,
8.00% due 12/01/17 1,210,664
70,000 Greeley General Improvement District No. 1 G.O. Refunding Series July 15, 1994,
5.30% due 10/01/99 70,003
270,000 Greenwood Metropolitan District G.O. Refunding Series 1994, 6.10%-7.00% due 12/01/00-04 282,968
380,000 Greenwood North Metropolitan District G.O. Refunding Series 1993,
4.50%-5.00% due 12/01/99-01 380,313
220,000 Greenwood South Metropolitan District G.O. Refunding Series 1994, 6.25%-6.90%
due 12/01/01-04 230,324
100,000 City of Greenwood Village Sales Tax Revenue Refunding Series 1993, 4.40% due 12/01/99 100,105
510,000 Hamilton Creek District Series 1990, 1.18% due 12/01/04 (g) 255,000
10,000 Hyland Hills Park & Recreation District Special Revenue Improvement Series 1992,
7.10% due 12/15/00 10,370
340,000 Idledale Fire Protection District G.O. Series 1993, 5.20%-5.80% due 12/15/03-07 337,172
475,000 La Plata County Recreational Facilities Revenue Refunding Durango Ski Corporation
Project Series 1989A, 9.00% due 2/01/10 474,017
315,000 City of Las Animas Water G.O. Series 1989, 8.60% due 12/01/09 317,302
300,000 Left Hand Water District Water Revenue Refunding Series 1993, 4.30%-4.45% due 11/15/00-01 301,514
135,000 Lookout Mountain Water District G.O. Refunding Series 1993, 5.20% due 12/01/01 137,287
220,000 Mesa County Single Family Mortgage Revenue Series 1982, 5.375% due 12/01/99 (g) 17,600
1,250,000 Mid Valley Metropolitan District G.O. Refunding & Improvement Series 1989,
8.90% due 12/15/04 (b) 1,275,713
165,000 City of Montrose Sales and Use Tax Revenue Refunding Series 1993, 4.40% due 8/15/00 165,820
250,000 City of Montrose Water and Sewer Revenue Refunding and Improvement Series 1993,
4.50%-4.65% due 10/01/01-02 252,086
155,000 Monument Sanitation District G.O. Refunding Series 1994, 5.80%-5.90% due 12/01/01-02 158,638
175,000 Town of Mt. Crested Butte G.O. Refunding Series 1993, 4.60%-4.75% due 5/01/00-01 175,662
100,000 Mountain Village Metropolitan District G.O. Series 1992, 7.95% due 12/01/03 (b) 111,251
545,000 Mountain Village Metropolitan District G.O. Series 1992, 7.95% due 2/01/03 611,501
20,000 Northgate Public Building Authority Landowner Assessment Lien Series 1987A,
8.25% due 12/01/00(a) 2,800
225,000 North Jeffco Park and Recreation District Golf Course Revenue Series 1994, 5.80%-6.10%
due 12/01/01-04 232,554
800,000 North Pines Metropolitan District G.O. Limited Tax Series 1999, 6.00% due 12/01/03 788,368
760,000 North Pines Metropolitan District G.O. Limited Tax Series 1999, 8.00% due 6/01/2019 730,839
75,000 Otero County Swink School District No. 33 G.O. Building Series 1994, 8.40% due 12/15/00-03 83,284
165,000 Ouray County Ridgway School District #R-2 Series 1994 , 7.75% due 12/01/99-02 174,938
1,055,000 Panorama Metropolitan District G.O. Refunding Series 1989B, 9.00% due 12/01/09 (b) 1,074,707
1,900,000 Parker Jordan Metropolitan District Series 1998A, 6.25% due 12/01/17 1,849,289
280,000 Town of Parker Sales and Use Tax Refunding Revenue Series 1993, 4.20%-4.30%
due 11/01/99-00 280,712
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
Face Market
Amount Colorado Municipal Bonds - 87.8% Value
- -------- ----------------------------------------------------------- ------------
<S> <C> <C>
45,000 Pitkin County Sales Tax Revenue Series 1995, 5.30% due 12/01/00 45,077
200,000 Project 7 Water Authority Water Revenue Refunding Series 1993, 4.50% due 12/01/00 201,238
354,000 Pueblo County Capital Improvement Residual Revenue Series 1988, 10.07% due 8/02/10 (d) 136,527
130,000 Rangely Junior College District G.O. Building Series 1992, 6.25%-6.40% due 10/01/99-00 130,908
159,868 Roxborough Village Metropolitan District Series 1993A, 9.00% due 12/31/16 (i) 131,092
278,078 Roxborough Village Metropolitan District Series 1993B, principal only, 0.00% due 12/31/21 (e)(i 16,685
906,622 Roxborough Village Metropolitan District Series 1993C, 9.84% due 12/31/32 (d)(i) 9,066
20,270 Roxborough Village Metropolitan District Series 1993B, interest only, 10.41% due 1/01/43 (f)(i) 203
125,000 Saguache County Moffat School District No. 2 G.O. Series 1994, 5.70%-5.90% due 12/01/99-01 128,279
1,250,000 Sand Creek Metropolitan District G.O. Limited Tax Series 1997, 7.125% due 12/1/16 1,254,838
535,000 San Miguel County Housing Authority Multifamily Telluride Village Revenue Refunding
Series 1993, 6.30% due 7/01/13 558,262
1,710,000 City of Sheridan G.O. Series 1997, 7.50% due 12/01/16 1,684,162
120,000 Town of Snowmass Village Multifamily Revenue Series 1990A, 7.70% due 12/15/99 120,991
1,000,000 Southpark Metropolitan District Refunding G.O. Series 1996, 6.60% due 12/01/13 1,010,100
305,000 Southtech Metropolitan District G.O. Refunding Series 1994, 5.10%-5.85% due 12/01/99-04 311,954
100,000 Southwest Plaza Metropolitan District G.O. Refunding Series 1993, 5.00% due 12/01/99 100,174
40,000 City of Steamboat Springs Accommodations Tax Revenue Series 1995, 5.25% due 3/01/00 40,262
2,000,000 Sterling Hills Metropolitan District G.O. Series 1998, 7.75% due 12/01/18 1,896,160
360,000 Telluride Hospital District Series 1997, 4.60%-4.80% due 12/01/00-02 358,646
2,000,000 Todd Creek Farms Metropolitan District #2 Limited Tax G. O. Series 1997, 8.00% due 6/01/17 1,973,640
1,000,000 Todd Creek Farms Metropolitan District #2 Series 1999, 7.50% due 12/01/2018 960,670
300,000 Upper Eagle Regional Water Authority Water Refunding Series 1994, 5.50%-5.80%
due 12/01/99-01 304,060
610,000 Valley Metropolitan District G.O. Revenue Series 1992, 7.00% due 12/15/06 633,296
100,000 Weld County Reorganized School District RE-4 G.O. Series 1993, 4.65% due 12/01/00 100,800
235,000 Town of Windsor G.O. Water Refunding Series 1994, 4.40%-4.80% due 4/01/99-01 236,121
----------
Total Colorado Municipal Bonds (cost $74,135,905) 73,922,698
----------
</TABLE>
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
Statement of Investments
September 30, 1999
<TABLE>
<CAPTION>
Face Market
Amount Colorado Certificates of Participation - 1.0% Value
- -------------- ----------------------------------------------------------- -----------
<S> <C> <C>
155,000 Arapahoe County Recreation District Refunding Certificates of Participation Series 1996,
5.00%-5.20% due 12/01/04-06 158,278
170,000 City of Central City Certificates of Participation City Hall Project Series 1995,
6.50%-6.80% due 12/01/99-01 170,555
100,000 El Paso County School District No. 49 Falcon Schools Refunding Certificates of Participation
Series 1995, 4.375% due 11/01/01 100,323
200,000 Gilpin County Certificates of Participation Detention Facility Project Series 1994,
6.60% due 10/15/01 208,974
50,000 Las Animas County School District No. 001 Certificates of Participation Series 1991A,
8.00% due 12/01/10 52,775
145,000 Park School District R-3 Certificates of Participation Series 1996, 5.35%-5.45% due 6/01/04-05 145,109
---------
Total Colorado Certificates of Participation Bonds (cost $835,725) 836,014
---------
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
Face Market
Amount Colorado Industrial Development Revenue Bonds - 2.7% Value
- ------------- ----------------------------------------------------------- ----------
<S> <C> <C>
2,900,000 City of Fort Collins The Opera House Project Series 1986, 8.75%-10.00% due 12/01/10-16 (a) 2,239,400
---------
Total Colorado Industrial Development Revenue Bonds (cost $2,875,626) 2,239,400
---------
</TABLE>
<TABLE>
<CAPTION>
Face Market
Amount Other Municipal Bonds - 2.0% Value
- -------------- ----------------------------------------------------------- ----------
<S> <C> <C>
100,000 City of Burnsville G.O. Tax Increment Refunding Series 1993C, 4.40% due 2/01/02 100,526
105,000 Daggett County School District, G.O. Refunding Series 1993, 4.65% due 12/15/99 105,191
510,000 Dona Ana County New Mexico Tax-Exempt Multi-Family Housing Revenue Bonds
Subordinate Series 1999B1, 8.50% due 8/01/14 502,738
225,000 Saint Charles Mesa Water District Water Revenue Refunding Series 1992, 5.55% due 12/01/00 229,167
515,000 Sandoval County, New Mexico Project Revenue Bonds, Series 1997, 7.50% due 8/15/06 505,679
100,000 Santa Fe Public School District G.O. Series 1994, 5.60% due 6/15/01 100,134
120,000 West Wendover Recreation District G.O. Golf Course Improvement Refunding Series 1993,
5.60% due 12/01/99 120,332
-----------
Total Other Municipal Bonds (cost $1,680,444) 1,663,767
-----------
Total investments, at value (cost $79,527,700)* 93.5% 78,661,879
Other assets net of liabilities 6.5% 5,480,375
------ -----------
Net assets 100.0% $84,142,254
====== ===========
</TABLE>
- -------------
* Tax cost basis approximates book cost basis.
<PAGE> 9
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
Statement of Investments
September 30, 1999
(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. Interest rate shown for interest certificates represents effective
yield at acquisition.
(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, 1999. Income on this security is derived from the cash flow of
the issuer.
(h) Represents current interest rate for a variable rate bond.
(i) Terms of security have been restructured since the original issuance. The
face amount and market value of such securities amount to $14,423,783 and
$3,044,900 or 3.62% of net assets, respectively, as of September 30, 1999.
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.
<PAGE> 10
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
Statement of Assets and Liabilities
September 30, 1999
<TABLE>
<S> <C>
Assets
Investments, at value (cost $79,527,700) - see accompanying statement $ 78,661,879
Cash 4,281,043
Interest receivable 1,632,703
Shares of beneficial interest sold 14,430
------------
Total assets 84,590,055
------------
Liabilities
Payables and other liabilities:
Dividends 203,575
Investments purchased 23,000
Shares of beneficial interest redeemed 157,654
Accrued expenses and other 63,572
------------
Total liabilities 447,801
------------
Net Assets $ 84,142,254
============
Composition of Net Assets
Paid-in capital $ 84,951,295
Undistributed net investment income 57,472
Accumulated net realized gain from investment transactions (693)
Net unrealized depreciation of investments (note 3) (865,820)
------------
Net assets $ 84,142,254
============
Net asset value and redemption value per share (based on 8,932,095
shares of beneficial interest outstanding) $ 9.42
============
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $ 9.89
============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 11
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
Statement of Operations
September 30, 1999
<TABLE>
<S> <C>
Investment income - interest $ 5,269,218
Expenses:
Management fees (note 4) 399,110
Custodian fees (note 5) 71,443
Legal and auditing fees 31,741
Transfer agency expenses (note 4) 53,733
Shareholders' reports and proxy statements 24,265
Registration fees 510
Trustees' fees 800
Other 3,667
------------
Total expenses 585,269
Earnings credits on cash balances (note 5) (71,443)
------------
Net expenses 513,826
------------
Net investment income 4,755,392
------------
Realized and unrealized gain on investments:
Net realized gain on investments 7,024
------------
Net unrealized appreciation (depreciation) of investments:
Beginning of the period 1,102,024
End of the period (865,820)
------------
Net change in unrealized appreciation (depreciation)
on investments (1,967,844)
------------
Net realized and unrealized gain (loss) on investments (1,960,820)
------------
Net increase in net assets resulting from operations $ 2,794,572
============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 12
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
Statement of Changes in Net Assets
September 30, 1999
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
From investment activities:
Net investment income $ 4,755,392 $ 4,640,447
Net realized gain on investments 7,024 294,050
Net change in unrealized appreciation (depreciation) on investments (1,967,844) 187,505
------------ ------------
Net increase in net assets resulting from operations 2,794,572 5,122,002
------------ ------------
Dividends to shareholders from net investment income (4,697,920) (4,661,865)
------------ ------------
From beneficial interest transactions:
Proceeds from sale of shares 15,448,573 12,613,472
Dividends reinvested 2,828,356 2,860,000
Payments for shares redeemed (5,338,925) (10,075,001)
------------ ------------
Increase in net assets derived from beneficial
interest transactions 12,938,004 5,398,471
------------ ------------
Net increase in net assets 11,034,656 5,858,608
Net assets:
Beginning of period 73,107,598 67,248,990
------------ ------------
End of period (including undistributed net investment income of
$57,472 and $0, respectively) $ 84,142,254 $ 73,107,598
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 13
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
Financial Highlights
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 9.64 $ 9.58 $ 9.37 $ 9.16 $ 9.07
------ ------ ------ ------ ------
Net investment income 0.56 0.62 0.58 0.61 0.60
Net realized and unrealized gain (loss) on investments (0.22) 0.06 0.21 0.20 0.09
------ ------ ------ ------ ------
Increase from investment operations 0.34 0.68 0.79 0.81 0.69
Dividends from net investment income (0.56) (0.62) (0.58) (0.60) (0.60)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value (0.22) 0.06 0.21 0.21 0.09
------ ------ ------ ------ ------
Net asset value, end of period $ 9.42 $ 9.64 $ 9.58 $ 9.37 $ 9.16
====== ====== ====== ====== ======
Total Return, at Net Asset Value (1) 3.64% 7.62% 8.66% 9.15% 8.05%
====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000)s $ 84,142 $ 73,108 $ 67,249 $ 50,583 $ 44,768
Ratios to average net assets:
Net investment income 5.96% 6.66% 6.13% 6.50% 6.81%
Expenses, inclusive of expenses paid indirectly by the Fund .73% .77% .84% .77% .84%
Expenses, net of expenses paid indirectly by the Fund .64% .66% .73% .70% .77%
Portfolio turnover rate(2) 21.95% 28.63% 27.66% 24.53% 27.48%
====== ====== ====== ====== ======
</TABLE>
- -----------
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) 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.
Cost of purchases and proceeds from sales of investment securities
(excluding short-term securities) for the period September 30, 1999
were $24,638,985 and $16,532,855, respectively.
See accompanying notes to financial statements.
<PAGE> 14
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
Notes to Financial Statements
September 30, 1999
(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 (FFMC). The following is a summary of significant accounting
policies consistently followed by the Fund.
(a) Investment Valuation
The values 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 relevant trading or
market factors. The Fund records amortization of premiums and accretion
of original issued discounts on zero coupon bonds, using the effective
yield method, in accordance with federal income tax requirements.
Short-term debt securities having a remaining maturity of 60 days or
less are valued at amortized cost which approximates market value.
(b) 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 September 30, 1999, the Fund had
available for federal income tax purposes an unused capital loss
carryover of approximately $700, expiring in 2003.
(c) 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
$12,015,770 and $2,535,099 (3.01% of net assets), respectively, as of
September 30, 1999.
<PAGE> 15
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
Notes to Financial Statements
September 30, 1999
(d) 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
The Fund has an unlimited number of no par value shares of beneficial
interest authorized. Transactions in shares of beneficial interest for
the years ended September 30, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Proceeds from shares sold 1,611,128 1,313,197
Dividends reinvested 295,764 297,289
--------- ---------
1,906,892 1,610,486
Shares redeemed (557,388) (1,047,465)
--------- ---------
Net change 1,349,504 563,021
========= =========
</TABLE>
(3) Unrealized Gains and Losses
At September 30, 1999, the net unrealized depreciation on investments
of $865,820 was comprised of gross appreciation of $2,020,944 and gross
depreciation of $2,886,764.
(4) Management Fees and Other Transactions with Affiliates
Management fees paid to FFMC 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. FFMC 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. FFMC provided certain transfer
agency and shareholder services as part of the management fee
arrangement for the fiscal year ended September 30, 1999. 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.
<PAGE> 16
FEDERAL INCOME TAX INFORMATION
(unaudited)
In early 2000, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1999. 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, 1999, 100 percent of the dividends paid
by Colorado BondShares - A Tax-Exempt Fund from net investment income should be
treated as tax-exempt dividends.
