<PAGE> 1
November 27, 2000
Dear Shareholder:
As of September 30, 2000, municipal bonds are offering returns that compare
favorably with stocks for the first time since 1992. This comparison will likely
be even more heavily weighted toward bonds in the months ahead, as investors
seek stability and predictable income over potential appreciation. Stocks in the
S&P 500 for example returned 13.33% for the fiscal year. The Dow Jones
Industrial Average yielded 5.33%. Our total return for the same period was
6.76%, actually 12.12% on a tax-equivalent basis assuming the highest tax
bracket. There were times during the last year, specifically April through
August when your dividends, totaling $.68 per share for the fiscal year,
reflected an annualized yield of over 8.00% on your investment. This was caused
by an attractive average coupon in the portfolio coupled with the receipt of
extraordinary income from several sources.
Most of the price appreciation in the tax-exempt bond market so far has been in
high-grade municipals. However, our high-grade bonds have short maturities so
they have not moved much in price. Our portfolio holdings of longer, small,
lesser-known credits should be next to appreciate if history is an indicator.
First, though, we will have to overcome selling by other funds, some of whom
have experienced trouble this year, tightened liquidity, and heavy supply of new
bonds. We have viewed the last year as an incredible opportunity to purchase
bonds at very lucrative interest rates not seen in years. These purchases should
reap handsome rewards in the years ahead.
Traditionally, when you have as we do now, an inverted yield curve (short-term
rates are higher than long-term rates) it is a signal that the economy will be
slowing in the future. That, typically, means lower interest rates down the
road; a further reason why we think bonds are a compelling value now.
Attached, please find the annual report of the Fund, specifying our holdings and
our operating results for the fiscal year ended September 30, 2000. The results
reflect a return that more nearly matches our historic levels and is
significantly better than last year. Thank you, all, for your continued support.
At this writing we are very close to reaching $100 million in assets, a nice
milestone in our history.
Sincerely,
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
WELLS FARGO INVESTMENTS AND TRUST,
WELLS FARGO BANK WEST, 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.
FEDERAL INCOME TAX INFORMATION
(UNAUDITED)
In early 2001, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 2000. 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, 2000, 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> 3
[FORTNER, BAYENS, LEVKULICH & CO., P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholders
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, 2000, the related statement of operations for the year
then ended, and the statements of changes in net assets and financial highlights
for each of the years in the two-year period 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 financial highlights
for each of the years in the three-year period ended September 30, 1998, were
audited by other auditors whose report dated November 3, 1998 expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, 2000, 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 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, 2000,
the results of its operations for the year then ended, the changes in its net
assets and the financial highlights for each of the years in the two-year period
then ended in conformity with generally accepted accounting principles.
FORTNER, BAYENS, LEVKULICH & CO., P.C.
Denver, Colorado
November 3, 2000
<PAGE> 4
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS- 95.2% VALUE
------ ------------------------------- ------
<S> <C> <C>
235,000 Academy Water and Sanitation District G.O. Series 1995, 6.20%-7.10% due
11/15/2002-05 248,950
200,000 Arapahoe County Water and Wastewater Authority Revenue Series 1994,
6.20%-6.30% due 12/1/2003-04 (b) 204,351
215,000 Arapahoe Water and Sanitation District G.O. Refunding and Improvement Series
1986, 8.50% due 12/1/2005 236,726
2,250,000 Arapahoe Water and Sanitation District G.O. Refunding Series 1995B, 8.50% due
12/1/2020 (b) 2,429,640
65,000 Arrowhead Metropolitan District G.O. Improvement Series 1995A, 5.90%-6.10% due
12/1/2001-03 65,994
100,000 Arrowhead Metropolitan District G.O. Refunding Series 1994, 5.70% due
12/1/2003 101,758
950,000 Aurora Multifamily Housing Revenue River Falls Project Series 1999A, 5.70% due
7/1/2029 832,675
306,040 Aurora Centretech Metropolitan District G.O. Refunding and Improvement Series
1994, 6.00% due 12/1/2023 (b) 436,649
700,000 Beebe Draw Farms Metropolitan District G.O. Series 1998, 7.00% due
10/1/2018 646,940
1,295,000 Bell Mountain Ranch Phase II Metropolitan District G.O. Series 1995, 8.50% due
11/15/2015 1,470,408
145,000 Black Hawk (City of) Device Tax Revenue Series 1994, 5.55%-5.70% due
12/1/2000-01 145,723
200,000 Black Hawk (City of) Device Tax Revenue Series 1996, 5.75%-5.85% due
12/1/2003-04 204,531
2,250,000 Black Hawk (City of) Device Tax Revenue Series 1998, 5.625% due 12/1/2021 1,986,300
100,000 Black Hawk (City of) G.O. Water Improvement Series 1992, 6.80% due 12/1/2000 100,406
265,000 Boulder County Multifamily Refunding & Improvement Revenue (Thistle Cmnty
Housing) Series 1999A, 6.00% due 6/1/2011 252,537
805,000 Boulder County Multifamily Refunding & Improvement Revenue (Thistle Cmnty
Housing) Series 1999A, 6.25% due 6/1/2019 751,234
75,000 Boulder County Multifamily Refunding & Improvement Revenue (Thistle Cmnty
Housing) Subordinate Series 1999B, 7.375% due 6/1/2015 71,759
25,000 Boulder Valley School District No. RE-2 Series 1992A, 5.80% due 10/15/2001 25,361
75,000 Boxelder Sanitation District Sewer Revenue Refunding and Improvement Series
1994, 5.90% due 1/1/2003 75,912
200,000 Breckenridge (Town of) G.O. Recreation Center Refunding Series 1993, 4.45% due
12/1/2000 199,984
</TABLE>
3
<PAGE> 5
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS- 95.2% VALUE
------ ------------------------------- ------
<S> <C> <C>
4,450,000 Bromley Park Metropolitan District No. 3 G.O. Ltd. Tax Series 2000, 8.00% due
12/1/2019 4,450,000
70,000 Castle Rock (Town of) G.O. Water Refunding Series 1993, 4.65% due 12/1/2000 70,006
25,000 Castle Rock (Town of) G.O. Series 1988-2, 10.375% due 12/1/2008 25,000
565,000 Castle Rock (Town of) LID Series 1988-2D Special Assessment, 9.25%-10.375% due
12/1/2008 (i) 172,150
510,000 Central City (City of) Excise Tax Revenue Refunding Series 1996, 5.70%-6.60%
due 12/1/2001-11 466,158
25,000 Central City (City of) Special Assessment District No.1, 7.50% due 12/1/2003 25,108
2,500,000 Central Platte Valley Metropolitan District Special Obligation
Revenue Series 1998, 7.00% due 12/1/2017 2,437,500
100,000 Clear Creek School District No. Re-1 G.O. Improvement Series 1991, 5.90% due
12/1/2000 100,254
2,009,520 Colorado Centre Metropolitan District Ltd. Tax and Special Revenue Series
1992A, principal only, 0.00% due 1/1/2027 (a)(e)(i) 15,835
2,008,335 Colorado Centre Metropolitan District Ltd. Tax and Special Revenue Series
1992A, interest only, 9.00% due 1/1/2027 (f)(i) 1,200,743
6,465,662 Colorado Centre Metropolitan District Ltd. Tax and Special Revenue Series
1992B, 0.00% due 1/1/2032 (a)(g)(i) 50,949
965,000 Colorado Educational & Cultural Facilities Authority Charter School Revenue -
Crown Pointe Academy Series 2000, 7.25% due 7/15/2025 965,000
4,060,000 Colorado Educational & Cultural Facilities Authority Charter School Revenue -
Liberty Common Series 1998, 6.95% due 8/15/2019 4,007,626
695,000 Colorado Educational & Cultural Facilities Authority Charter School Revenue -
Elbert County Series 2000, 7.50% due 6/1/2010 695,000
1,225,000 Colorado Educational & Cultural Facilities Authority Private School Revenue -
Series 2000A, 8.50% due 6/1/2022 1,225,000
520,000 Colorado Health Facilities Authority Zero Coupon Retirement Housing Revenue
Liberty Heights Project 1990 Subordinate Series B, 6.97% due 7/15/2020 (d) 152,324
595,000 Colorado Postsecondary Educational Facilities Authority Revenue National
Technological University Project Series 1993, 7.375% due 12/1/2010 (b) 650,525
830,000 Colorado Postsecondary Educational Facilities Authority Revenue National
Technological University Project Series 1993, 7.75% due 12/1/2010 928,496
805,000 Colorado Springs Spring Creek G.I.D. GO Series 1995, 4.08% due 12/1/2014
(h)(i) 362,250
</TABLE>
4
<PAGE> 6
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS- 95.2% VALUE
------ ------------------------------- ------
<S> <C> <C>
1,180,000 Columbia Metropolitan District G.O. Improvement Series 1992, 7.60%-8.50% due
11/1/2000-12 1,280,700
470,000 Cordillera Metropolitan District G.O. Series 1994A, 8.00% due 12/1/2009 (b) 534,649
500,000 Cordillera Metropolitan District G.O. Series 1994, 8.25% due 12/1/2013 (b) 573,475
1,025,000 Cotton Ranch Metropolitan District G.O. Series 1998A, 7.25% due
12/1/2017 1,007,555
3,500,000 Cotton Ranch Metropolitan District Subordinate Junior G.O. Ltd. Tax Refunding
Variable Rate Series 1999B, 7.75% due 12/15/2017 (h) 3,104,535
2,250,000 Cottonwood Water and Sanitation District Refunding Series 1996A, 7.60% due
12/1/2012 2,310,818
19,106,474 Cottonwood Water and Sanitation District Capital Appreciation Refunding Second
Lien, Series 1998A, 8.00% due 12/1/2027 (d) 3,810,595
240,000 Crested Butte (Town of) Sales Tax Revenue Series 1994, 6.10%-6.35% due
12/1/2001-03 245,191
375,000 Delta Sales (City of) and Use Tax Revenue Refunding Series 1994, 4.35%-4.65%
due 12/1/2001-03 373,836
72,000 Denver (City and County of) Lease Purchase Certificates Series 1993, 6.30% due
1/1/2002 72,099
1,500,000 Denver (City and County of) Airport System Subordinate Revenue Series 1997B,
5.70% due 12/1/2020 (h) 1,500,000
1,885,000 Denver (City and County of) Subordinate Multifamily Housing Revenue Capitol
Heights Apts. Series 1999C, 8.00% due 5/1/2032 1,885,000
45,000 Denver West Metropolitan District Series 1997B, 4.80% due 12/1/2002 44,779
775,000 Denver West Metropolitan District Series 1997B, 5.70% due 12/1/2017 723,858
40,000 Dillon (Town of) G.O. Series 1992, 5.90% due 10/1/2000 40,003
95,000 Dillon (Town of) Excise Tax Revenue Series 1994, 5.80%-5.90% due 6/1/2002-03 96,977
90,000 Durango (City of) First Mortgage Revenue Series 1995, 6.50% due 12/15/2000 89,861
470,000 Eagle Ranch Metropolitan District Golf Course Enterprise Revenue Series 1999B,
5.75% due 10/15/2018 (h) 470,000
450,000 Eagle Riverview Affordable Housing Corp. Multifamily Housing Project Revenue
Series 1999B, 7.00% due 7/1/2029 424,044
60,000 El Paso and Elbert Counties Joint School District No. 23-JT G. O. Building
Series 1994, 5.75% due 12/15/2001 60,721
90,000 El Paso County LID 85-2 Special Assessment Refunding Series 1988, 8.875%-9.00%
due 9/1/2001 (a) 9,000
50,588 El Paso County Pheasant Run LID Special Assessment Series 1986-2, 9.25% due
9/1/1999 (a) 12,647
</TABLE>
5
<PAGE> 7
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS- 95.2% VALUE
------ ------------------------------- ------
<S> <C> <C>
100,000 El Paso County School District No. 2 - Harrison G.O. Improvement Series 1994,
7.10% due 12/1/2004 109,091
500,000 El Paso County School District No. 20 Zero Coupon G.O. Refunding Series 1993A,
6.10% due 6/15/2008 (d) 338,835
150,000 Elbert County School District C-1 Elizabeth G.O. Series 1994, 4.40% due
12/1/2002 148,664
155,000 City of Englewood Golf Course Revenue Series 1994, 4.35% due 12/1/2000 154,834
3,062,405 Equi-Mor Holdings Inc. Class A Pass-Through Certificates Series 1998B, 7.00%
due 9/1/2018 3,062,405
466,438 Equi-Mor Holdings Inc Class A Pass-Through Certificates Series 1999A, 7.50%
due 4/5/2018 466,438
25,000 Fort Collins Refunding Series B, 6.00%, due 12/1/2002 25,787
25,000 Fort Lupton Golf Course Revenue Anticipation Warrants Series 1996A, 8.50% due
12/15/2015 12,500
500,000 Galleria Metropolitan District G.O. Series 1999, 7.25% due 12/1/2019 496,705
2,000,000 Gateway Village GID G.O. Refunding and Improvement Series 1998, 6.00% due
12/1/2018 1,833,700
160,000 Gateway Village GID G.O. Refunding and Improvement Series 1998, Zero Coupon
5.40%-5.60% due 12/1/2000-01 (d) 154,757
835,000 Gateway Village GID G.O. Series 1995, 8.25%-8.75% due 12/1/2005-14 (b) 900,332
1,000,000 Gateway Village GID Subordinate Ltd. Tax G.O. Series 1999, 7.00% due 6/1/2019 960,700
300,000 Grand Junction (City of) Downtown Development Authority Tax Increment Revenue
Series 1996, 5.55%-5.65% due 11/15/2004-05 306,015
1,200,000 Greatrock North Water and Sanitation District Ltd. Tax G.O. Series 1998, 8.00%
due 12/1/2017 1,159,176
270,000 Greenwood Metropolitan District G.O. Refunding Series 1994, 6.10%-7.00% due
12/1/2000-04 279,675
265,000 Greenwood North Metropolitan District G.O. Refunding Series 1993, 4.75%-5.00%
due 12/1/2000-01 265,033
220,000 Greenwood South Metropolitan District G.O. Refunding Series 1994, 6.25%-6.90%
due 12/1/2001-04 227,231
510,000 Hamilton Creek District Series 1990, 1.19% due 12/1/2004 (g)(i) 255,000
10,000 Hyland Hills Park & Recreation District Special Revenue Improvement Series
1992, 7.10% due 12/15/2000 10,054
340,000 Idledale Fire Protection District G.O. Series 1993, 5.20%-5.80% due
12/15/2003-07 340,121
465,000 La Plata County Recreational Facilities Revenue Refunding Durango Ski
Corporation Project Series 1989A, 9.00% due 2/1/2010 454,677
</TABLE>
6
<PAGE> 8
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS- 95.2% VALUE
------ ------------------------------- ------
<S> <C> <C>
315,000 Las Animas (City of) Water G.O. Series 1989, 8.60% due 12/1/2009 316,937
300,000 Left Hand Water District Water Revenue Refunding Series 1993, 4.30%-4.45% due
11/15/2000-01 299,936
2,030,000 Littleton (The) Riverfront Authority Tax Increment Revenue Refunding Series
1999A-1, 8.00% due 12/1/2008 2,053,853
135,000 Lookout Mountain Water District G.O. Refunding Series 1993, 5.20% due
12/1/2001 135,752
250,000 Montrose (City of) Water and Sewer Revenue Refunding and Improvement Series
1993, 4.50%-4.65% due 10/1/2001-02 250,298
155,000 Monument Sanitation District G.O. Refunding Series 1994, 5.80%-5.90% due
12/1/2001-02 156,754
90,000 Mt. Crested Butte (Town of) G.O. Refunding Series 1993, 4.75% due 5/1/2001 90,034
100,000 Mountain Village Metropolitan District G.O. Series 1992, 7.95% due 12/1/2003
(b) 107,807
435,000 Mountain Village Metropolitan District G.O. Series 1992, 7.95% due 12/1/2003 488,079
225,000 North Jeffco Park and Recreation District Golf Course Revenue Series 1994,
5.80%-6.10% due 12/1/2001-04 230,503
750,000 North Pines Metropolitan District G.O. Ltd. Tax Series 1999, 6.00% due
12/1/2003 744,075
760,000 North Pines Metropolitan District G.O. Ltd. Tax Series 1999, 8.00% due 6/1/2019 748,668
2,800,000 North Range Village Metropolitan District G.O. Ltd. Tax Series 2000, 8.00% due
12/1/2020 2,800,000
75,000 Otero County Swink School District No. 33 G.O. Building Series 1994, 8.40% due
12/15/2000-03 80,354
115,000 Ouray County Ridgway School District #R-2 Series 1994, 7.75% due 12/1/2001-02 120,741
145,000 Parker (Town of) Sales and Use Tax Refunding Revenue Series 1993, 4.30% due
11/1/2000 144,974
4,470,000 Parker Jordan Metropolitan District G.O. Series 2000, 7.25% due 12/1/2019 4,470,000
45,000 Pitkin County Sales Tax Revenue Series 1995, 5.30% due 12/1/2000 45,019
200,000 Project 7 Water Authority Water Revenue Refunding Series 1993, 4.50% due
12/1/2000 200,002
354,000 Pueblo County Capital Improvement Residual Revenue Series 1988, 10.07% due
8/2/2010 (d) 149,059
45,000 Rangely Junior College District G.O. Building Series 1992, 6.40% due 10/1/2000 45,004
</TABLE>
7
<PAGE> 9
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
FACE MARKET
AMOUNT COLORADO MUNICIPAL BONDS- 95.2% VALUE
------ ------------------------------- ------
<S> <C> <C>
159,868 Roxborough Village Metropolitan District Series 1993A, 9.00% due 12/31/2016 (i) 130,753
278,078 Roxborough Village Metropolitan District Series 1993B, principal only, 0.00%
due 12/31/2021 (e)(i) 16,095
906,622 Roxborough Village Metropolitan District Series 1993C, 9.84% due 12/31/2032
(d)(i) 7,144
20,270 Roxborough Village Metropolitan District Series 1993B, interest only, 10.41%
due 1/1/2043 (f)(i) 160
120,000 Saguache County Moffat School District No. 2 G.O. Series 1994, 5.80%-5.90% due
12/1/2000-01 120,996
225,000 Saint Charles Mesa Water District Water Revenue Refunding Series 1992, 5.55%
due 12/1/2000 225,401
535,000 San Miguel County Housing Authority Multifamily Telluride Village Revenue
Refunding Series 1993, 6.30% due 7/1/2013 550,569
1,245,000 Sand Creek Metropolitan District G.O. Ltd. Tax Series 1997, 7.125% due
12/1/2016 1,237,978
1,660,000 Sheridan Series 1997A, 7.50% due 12/1/2016 1,661,909
1,000,000 Southpark Metropolitan District Refunding G.O. Series 1996, 6.60%
due 12/1/2013 1,039,650
275,000 Southtech Metropolitan District G.O. Refunding Series 1994, 5.20%-5.85% due
12/1/2000-04 278,363
2,000,000 Sterling Hills Metropolitan District G.O. Ltd. Tax Series 1998, 7.75% due
6/1/2018 1,913,720
3,320,000 Sterling Hills West Metropolitan District G.O. Ltd. Tax Series 2000, 8.00% due
12/1/2019 3,320,000
4,825,000 Tabernash Meadows Water & Sanitation District G.O. Bonds Series 2000, 8.40%
due 12/1/2020 4,825,000
360,000 Telluride Hospital District Series 1997, 4.60%-4.80% due 12/1/00-02 358,155
1,950,000 Todd Creek Farms Metropolitan District #2 Ltd. Tax G. O. Series 1997, 8.00%
due 6/1/2017 1,934,966
1,000,000 Todd Creek Farms Metropolitan District No. 2 Ltd. Tax G.O. Series 1999, 7.50%
due 12/1/2018 958,530
200,000 Upper Eagle Regional Water Authority Water Refunding Series 1994, 5.65%-5.80%
due 12/1/2000-01 201,234
610,000 Valley Metropolitan District G.O. Revenue Series 1992, 7.00% due 12/15/2006 618,442
100,000 Weld County Reorganized School District RE-4 G.O. Series 1993, 4.65% due
12/1/2000 100,034
35,000 Town of Windsor G.O. Water Refunding Series 1994, 4.80% due 4/1/2001 35,059
----------
Total Colorado Municipal Bonds (cost $93,468,969) 92,331,842
----------
</TABLE>
8
<PAGE> 10
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
FACE MARKET
AMOUNT COLORADO CERTIFICATES OF PARTICIPATION - 1.4% VALUE
------ --------------------------------------------- ------
<S> <C> <C>
155,000 Arapahoe County Recreation District Refunding Certificates of Participation
Series 1996, 5.00%-5.20% due 12/1/2004-06 157,939
125,000 Central City (City of) Certificates of Participation City Hall Project Series
1995, 6.65%-6.80% due 12/1/2000-01 125,060
600,000 Eagle-Vail Metropolitan District Golf Course Series 1999, 6.00% due 12/1/2019 566,694
100,000 El Paso County School District No. 49 Falcon Schools Refunding Certificates of
Participation Series 1995, 4.375% due 11/1/2001 99,910
200,000 Gilpin County Certificates of Participation Detention Facility Project Series 203,324
1994, 6.60% due 10/15/2001
50,000 Las Animas County School District No. 001 Certificates of Participation
Series 1991A, 8.00% due 12/1/2010 50,791
145,000 Park School District R-3 Certificates of Participation Series 1995 & 1996,
5.35%-5.45% due 6/1/2004-05 145,091
----------
Total Colorado Certificates of Participation Bonds 1,348,809
(cost $1,310,793) ----------
COLORADO INDUSTRIAL DEVELOPMENT BONDS
-------------------------------------
762,091 Fort Collins Industrial Development Revenue (The Opera House Project) Series
1986B, 0.00% due 12/1/2016 (a)(i) 0
----------
Total Colorado Industrial Development Bonds (cost $0) 0
OTHER MUNICIPAL BONDS - 1.2%
----------------------------
100,000 City of Burnsville G.O. Tax Increment Refunding Series 1993C, 4.40% due
2/1/2002 100,033
510,000 Dona Ana County New Mexico Tax-Exempt Multi-Family Housing Revenue Bonds
Subordinate Series 1999B1, 8.50% due 8/1/2014 510,000
515,000 Sandoval County Project Revenue Bonds New Mexico Tournament Soccer Complex
Series 1997, 7.50% due 8/15/2006 502,032
100,000 Santa Fe New Mexico Public School District G.O. Series 1994, 5.60% due
6/15/2001 100,095
Total Other Municipal Bonds (cost $1,225,593) 1,212,160
---------
Total investments, at value (cost $96,005,355)* 97.8% 94,892,811
Other assets net of liabilities 2.2% 2,099,993
------ ------------
Net assets 100.0% $ 96,992,804
===== ============
</TABLE>
*Tax cost basis approximates book cost basis.
10
<PAGE> 11
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 2000
(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, 2000. 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 $14,490,446 and
2,211,192 or 2.28% of net assets, respectively, as of September 30, 2000.
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> 12
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $96,005,355) - see accompanying statement $ 94,892,811
Cash 358,535
Interest receivable 2,081,950
Shares of beneficial interest sold 53,496
------------
Total Assets 97,386,792
------------
LIABILITIES
Payables and other liabilities:
Dividends 277,170
Shares of beneficial interest redeemed 30,724
Accrued expenses and other 86,094
------------
Total liabilities 393,988
------------
Net Assets $ 96,992,804
============
COMPOSITION OF NET ASSETS
Paid-in capital $ 98,384,038
Overdistributed net investment income (9,756)
Accumulated net realized losses (268,934)
Net unrealized depreciation of investments (note 3) (1,112,544)
------------
Net Assets $ 96,992,804
============
Net asset value and redemption value per share (based on 10,365,069
shares of beneficial interest outstanding) $ 9.35
============
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $ 9.82
============
</TABLE>
See accompanying notes to financial statements.
12
<PAGE> 13
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
<TABLE>
<S> <C>
Investment income - interest $ 7,097,448
Expenses:
Management fees (note 4) 448,172
Custodian fees (note 5) 68,106
Legal and auditing fees 112,536
Transfer agency expenses (note 4) 65,096
Shareholders' reports 22,900
Registration fees 3,010
Trustees' fees 400
Other 2,206
------------
Total expenses 722,426
Earnings credits on cash balances (note 5) (68,106)
------------
Net expenses 654,320
------------
Net investment income 6,443,128
Realized and unrealized loss on investments:
Net realized loss on investments (268,241)
------------
Net unrealized depreciation of investments
Beginning of the year (865,820)
End of year (1,112,544)
------------
Net change in unrealized depreciation on investments (246,724)
------------
Net realized and unrealized loss on investments (514,965)
------------
Net increase in net assets resulting from operations $ 5,928,163
============
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 14
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
FROM INVESTMENT ACTIVITIES: 2000 1999
------------ ------------
<S> <C> <C>
Net investment income $ 6,443,128 $ 4,755,392
Net realized gain (loss) on investments (268,241) 7,024
Net change in unrealized depreciation on investments (246,724) (1,967,844)
------------ ------------
Net increase in net assets resulting from operations 5,928,163 2,794,572
------------ ------------
Dividends to shareholders from net investment income (6,510,357) (4,697,920)
------------ ------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Proceeds from sale of shares 14,998,860 15,448,573
Dividends reinvested 3,717,435 2,828,356
Payments for shares redeemed (5,283,551) (5,338,925)
------------ ------------
Increase in net assets derived from
beneficial interest transactions 13,432,744 12,938,004
------------ ------------
Net increase in net assets 12,850,550 11,034,656
NET ASSETS
Beginning of period 84,142,254 73,107,598
------------ ------------
End of period, including (overdistributed) undistributed
net investment income of ($9,754) and $57,472, respectively $ 96,992,804 $ 84,142,254
============ ============
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 15
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 9.42 $ 9.64 $ 9.58 $ 9.37 $ 9.16
---------- ---------- ---------- ---------- ----------
Net investment income 0.68 0.56 0.62 0.58 0.61
Net realized and unrealized gain (loss)
on investments (0.07) (0.22) 0.06 0.21 0.20
---------- ---------- ---------- ---------- ----------
Increase from investment operations 0.61 0.34 0.68 0.79 0.81
Dividends from net investment income (0.68) (0.56) (0.62) (0.58) (0.60)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value (0.07) (0.22) 0.06 0.21 0.21
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $ 9.35 $ 9.42 $ 9.64 $ 9.58 $ 9.37
========== ========== ========== ========== ==========
TOTAL RETURN, AT NET ASSET VALUE (1) 6.76% 3.64% 7.62% 8.66% 9.15%
========== ========== ========== ========== ==========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)s $ 96,993 $ 84,142 $ 73,108 $ 67,249 $ 50,583
========== ========== ========== ========== ==========
Ratios to average net assets:
Net investment income 7.18% 5.96% 6.66% 6.13% 6.50%
Total expenses .81% .73% .77% .84% .77%
Net expenses .73% .64% .66% .73% .70%
Portfolio turnover rate (2) 18.11% 21.95% 28.63% 27.66% 24.53%
========== ========== ========== ========== ==========
</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, 2000 were $31,192,832 and
$15,013,700, respectively.
See accompanying notes to the financial statements.
15
<PAGE> 16
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(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.
(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 discounts on
zero coupon bonds, using the effective yield method, in accordance with
federal income tax purposes. 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, 2000, the Fund had available for federal income
tax purposes an unused capital loss carryover of approximately $268,934,
expiring in 2008.
(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 amounts and market value of bonds, for
which the accrual of interest income has been discontinued, approximated
$9,377,861 and $88,431 (.09% of net assets), respectively, as of September
30, 2000.
16
<PAGE> 17
COLORADO BONDSHARES -
A TAX-EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(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, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Shares Sold 1,599,665 1,611,128
Dividends Reinvested 396,544 295,764
---------- ----------
1,996,209 1,906,892
Shares Redeemed (563,235) (557,388)
---------- ----------
Net Increase in Shares Outstanding 1,432,974 1,349,504
========== ==========
</TABLE>
(3) UNREALIZED GAINS AND LOSSES
At September 30, 2000, the net unrealized depreciation on investments of
$1,112,544 was comprised of gross appreciation of $1,775,928 and gross
depreciation of $2,888,472.
(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
fiscal year ended September 30, 2000. 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.
17
