N-CSR 1 e15737ncsr.txt FORM N-CSR ----------------------------------- OMB APPROVAL OMB Number: 3235-0570 Expires: November 30, 2005 Estimated average burden hours per response. . . . . . . 5.0 ----------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-03907 Empire Builder Tax Free Bond Fund -------------------------------------------------- (Exact name of registrant as specified in charter) 3435 Stelzer Rd Columbus, Ohio 43219 ---------------------------------------- ---------- (Address of principal executive offices) (Zip code) BISYS Fund Services 3435 Stelzer Rd, Columbus, Ohio 43219 --------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (614) 470-8000 Date of fiscal year end: February 28 Date of reporting period: August 31, 2003 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. Item 1. Reports to Stockholders. [LOGO] Empire Builder 3435 Stelzer Road Columbus, Ohio 43219 1-800-847-5886 Dear Shareholder, We are pleased to present The Empire Builder Tax Free Bond Fund Semi-Annual Report for the six months ended August 31, 2003. The portfolio continues to have a good year. As of August 31, 2003 the average maturity of the fund was 5.84 years. We have shortened the average maturity of the fund because of the low Discount Rate, which the Federal Reserve Board continued to cut this year and now stands at 1.00%. By shortening the maturity of the fund, we have reduced our maturity and interest rate risk for the portfolio. For the period January 1 through August 31, 2003 the Builder portfolio was up 0.69%, while the Premier portfolio was up 0.91%*. In our opinion, The Empire Builder Tax-Free Bond Fund is well positioned for the next six months. The no-load structure continues to offer value to the shareholder because there is no charge to purchase shares. We also recommend our automatic investment program (also known as dollar cost averaging**) that allows you to follow a disciplined investment plan. Please call the customer service desk at 1-800-847-5886 for information on how to participate. We look forward to helping you meet your investment needs. Sincerely, /s/ Seth M. Glickenhaus ----------------------- Seth M. Glickenhaus President ----------------------------------------- *Average Annual Total Return ---------------------------- As of June 30,2003 1 Year 5 Year 10 Year Builder Class 8.69% 5.39% 5.30% Premier Class 8.97% 5.69% 5.50% ----------------------------------------- For the reporting period March 1, 2003 through August 31, 2003 the Builder Class was down 0.21% and the Premier Class was down 0.03%. **Dollar cost averaging does not insure a profit and does not protect against loss in declining markets. An investor should consider his or her financial ability to continue making additional investments through periods of low share price levels. [LOGO] Empire Builder This report must be preceded or accompanied by a prospectus. For more complete information including charges and expenses, please call 1-800-847-5886 to receive a prospectus. Read the prospectus carefully before investing or sending money. The fund's income may be subject to certain state and local taxes and, depending on your tax status, the federal alternative minimum tax (AMT). Past performance does not guarantee future results. Not FDIC insured. May lose value. No bank guarantee. THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- August 31, 2003 (Unaudited)
Principal Value Credit Ratings** Municipal Securities--(93.9%) Amount (Note 2) ----------------- ----------------------------- --------- -------- New York City (11.7%) Aaa/AAA New York City, General Obligation, Series B, 5.25%, 8/1/2017, Callable 8/1/2007 @ 101, (AMBAC) ...................... $ 750,000 $ 795,038 A2/AAA New York City, General Obligation, Series B, 5.125%, 8/1/2019, Callable 8/1/2010 @ 101, (FGIC) ....................... 2,000,000 2,066,180 Aaa/AAA New York City, General Obligation, Series B, 5.375%, 8/1/2022, Callable 8/1/2007 @ 101, (MBIA) ....................... 1,250,000 1,284,762 Aaa/AAA New York City, General Obligation, Series B, Variable Rate, 0.80%,* 10/1/2022, Non Callable, (FGIC) ................................. 6,200,000 6,200,000 Aaa/AAA New York City, Health & Hospitals Corp., Health System Revenue, Series A, 5.50%, 2/15/2018, Callable 2/15/2012 @ 100, (FSA) ..... 1,000,000 1,068,880 Aaa/AAA New York City, Transitional Finance Authority, Future Tax Revenue, Series E, 5.25%, 2/1/2021, Callable 2/1/2013 @ 100, (MBIA) ...... 2,000,000 2,067,400 ----------- Total New York City ............................................... 13,482,260 ----------- New York State Agencies (55.3%) Long Island Power Authority (6.6%) Aaa/AAA Long Island Power Authority, New York Electric Systems, Series A, 6.00%, 12/1/2007, Non Callable, (AMBAC) ............... 1,000,000 1,144,320 Aaa/AAA Long Island Power Authority, New York Electric Systems, Series A, 5.50%, 12/1/2012, Non Callable, Escrow to Maturity, (FSA) ................................................. 1,210,000 1,369,986 NR/AAA Long Island Power Authority, New York Electric Systems, Series B, 5.25%, 6/1/2014, Non Callable, (XLCA-ICR) ....................... 3,000,000 3,275,310 Aaa/AAA Long Island Power Authority, New York Electric Systems, Series C, 5.00%, 9/1/2028, Callable 9/1/2013 @ 100, (FSA) ................. 1,800,000 1,784,772 ----------- Total Long Island Power Authority ................................. 7,574,388 ----------- New York State Dormitory Authority (31.4%) A3/AA- Albany County Airport, 5.25%, 4/1/2013, Callable 4/1/2008 @ 101 ......................................... 1,200,000 1,272,120 Aaa/AAA Augustana Lutheran Home for the Aged, Series A, 5.50%, 8/1/2020, Callable 8/1/2010 @ 101, (MBIA)(FHA) .................. 935,000 976,355 Aaa/AAA Augustana Lutheran Home for the Aged, Series A, 5.50%, 8/1/2030, Callable 8/1/2010 @ 101, (MBIA)(FHA) .................. 750,000 763,425 Aaa/AAA Columbia University, Series B, 5.375%, 7/1/2018, Callable 7/1/2012 @ 100 .................................................. 500,000 536,435 Aaa/AAA Columbia University, Series B, 5.375%, 7/1/2019, Callable 7/1/2012 @ 100 .................................................. 1,000,000 1,069,100 Aaa/AAA Columbia University, Series B, 5.375%, 7/1/2020, Callable 7/1/2012 @ 100 .................................................. 1,000,000 1,065,330 NR/AAA Heritage House Nursing Center, 7.00%, 8/1/2031, Callable 8/1/2004 @100, (FHA) ............................................ 440,000 440,805 A3/A Lease Revenue, Court Facilities, The City of New York Issue, Series A, 5.375%, 5/15/2021, Callable 5/15/2013 @ 100 ........... 1,000,000 1,013,880
The accompanying notes are an integral part of the financial statements. 3 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- August 31, 2003 -- continued (Unaudited)
Principal Value Credit Ratings** Municipal Securities--continued Amount (Note 2) ----------------- ------------------------------- --------- -------- New York State Agencies--continued New York State Dormitory Authority--continued A3/A Lease Revenue, Court Facilities, The City of New York Issue, Series A, 5.375%, 5/15/2022, Callable 5/15/2013 @ 100 ........... $ 500,000 $ 503,905 A3/A Lease Revenue, Court Facilities, The City of New York Issue, Series A, 5.375%, 5/15/2023, Callable 5/15/2013 @ 100 ........... 1,000,000 1,003,290 Baa3/AA Long Island University, Series B, 5.25%, 9/1/2028, Callable 9/1/2013 @ 100, (RADIAN) ........................................ 1,500,000 1,497,915 Aaa/AAA Lutheran Medical Center, 5.00%, 8/1/2016, Callable 2/1/2013 @ 100, (MBIA)(FHA) ..................................... 985,000 1,031,640 Aaa/AAA Mt. Sinai School of Medicine, 6.75%, 7/1/2015, Callable 7/1/2004 @ 100, (MBIA) .......................................... 2,250,000 2,254,860 Aaa/AAA New York Medical College, 5.25%, 7/1/2013, Callable 7/1/2008 @ 101, (MBIA) .......................................... 1,015,000 1,090,059 Aaa/AAA New York State Rehabilitation Association, Series A, 3.00%, 7/1/2004, Non Callable, (CIFG) .................................. 600,000 608,886 Aaa/AAA New York University, Series 2, 5.50%, 7/1/2018, Callable 7/1/2011 @ 100, (AMBAC) ......................................... 500,000 533,660 NR/AAA Park Ridge Housing, Inc., 6.375%, 8/1/2020, Callable 8/1/2010 @ 101, (FNMA) .......................................... 1,000,000 1,089,600 NR/AAA Park Ridge Housing, Inc., 6.50%, 8/1/2025, Callable 8/1/2010 @ 101, (FNMA) .......................................... 1,470,000 1,607,842 Aaa/NR Rochester Institute of Technology, 5.25%, 7/1/2016, Callable 7/1/2012 @ 100, (AMBAC) ......................................... 2,045,000 2,189,397 Aaa/NR Rochester Institute of Technology, 5.25%, 7/1/2017, Callable 7/1/2012 @ 100, (AMBAC) ......................................... 2,155,000 2,292,489 Aaa/AAA School Districts Financing, Series C, 5.25%, 4/1/2021, Callable 10/1/2012 @ 100, (MBIA) ......................................... 1,300,000 1,342,575 NR/AAA Service Contracts, Albany County, 5.25%, 4/1/2017, Callable 4/1/2008 @ 101, (MBIA) .......................................... 1,000,000 1,052,810 Aaa/AAA Special Acts School Districts Program, 6.00%, 7/1/2019, Callable 7/1/2005 @ 102, (MBIA) .......................................... 3,540,000 3,844,581 NR/AAA State University, 5.375%, 7/1/2021, Callable 7/1/2008 @ 102, (MBIA) .......................................... 1,190,000 1,236,351 Aaa/AAA State University, Series B, 5.25%, 11/15/2026, Mandatory Put 5/15/2012 @ 100, (AMBAC) ........................................ 700,000 755,160 Aaa/AAA Upstate Community Colleges, Series A, 6.00%, 7/1/2019, Callable 7/1/2010 @ 101, (FSA) ........................................... 1,000,000 1,115,840 Aaa/AAA Upstate Community Colleges, Series A, 6.00%, 7/1/2020, Callable 7/1/2010 @ 101, (FSA) ........................................... 845,000 938,626 NR/AAA Westchester County, Court Facilities, 5.25%, 8/1/2018, Callable 2/1/2009 @ 101, (MBIA) .......................................... 2,800,000 2,937,900 ----------- Total New York State Dormitory Authority .......................... 36,064,836 -----------
The accompanying notes are an integral part of the financial statements. 4 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- August 31, 2003 -- continued (Unaudited)
Principal Value Credit Ratings** Municipal Securities--continued Amount (Note 2) ----------------- ------------------------------- --------- -------- New York State Environmental Facilities Corp. (2.6%) Aaa/AAA Water Pollution Control Revenue, Revolving Fund, Water Pooled Loan, 6.60%, 6/15/2009, Pre-Refunded 6/15/2004 @ 101.5, (POL CTL - SRF) ................................................... $1,200,000 $ 1,269,960 Aaa/AAA Water Pollution Control Revenue, Revolving Fund, Water Pooled Loan, 5.90%, 1/15/2018, Callable 1/15/2006 @ 102, (POL CTL - SRF) ................................ 725,000 789,438 Aaa/AAA Water Pollution Control Revenue, Revolving Fund, Water Pooled Loan, 5.90%, 1/15/2018, Pre-Refunded 1/15/2006 @ 102, (POL CTL - SRF) ................................ 785,000 875,746 ----------- Total New York State Environmental Facilities Corp. 2,935,144 ----------- New York State Housing Finance Agency (3.8%) Aa1/NR Multi-Family Housing, Secured Mortgage Program, 6.45%, 8/15/2014, Callable 2/15/2004 @ 102, (SONYMA) ................... 2,245,000 2,309,387 NR/AA Personal Income Tax Revenue, Economic Development & Housing, Series A, 5.25%, 9/15/2019, Callable 3/15/2013 @ 100, (MBIA) .... 2,000,000 2,088,380 ----------- Total New York State Housing Finance Agency 4,397,767 ----------- New York State Medical Care Facilities Finance Agency (1.0%) Aaa/AAA Hospital & Nursing Home, St. Vincent's Hospital Project, 6.20%, 2/15/2021, Callable 2/15/2004 @ 102, (AMBAC)(FHA) ............... 1,060,000 1,100,810 New York State Metropolitan Transportation Authority (5.3%) Aaa/AAA Triborough Bridge & Tunnel Authority, 5.25%, 11/15/2017, Callable 11/15/2013 @ 100, (AMBAC) .............................. 3,360,000 3,586,733 AA3/AA- Triborough Bridge & Tunnel Authority, Series B, 5.25%, 11/15/2018, Callable 11/15/2012 @ 100, (General Obligation of the Authority) .................................... 2,400,000 2,539,752 ----------- Total New York State Metropolitan Transportation Authority 6,126,485 ----------- New York State Thruway Authority (3.7%) Aaa/AAA Highway & Bridge Trust Fund Bonds, Series A, 5.50%, 4/1/2014, Callable 4/1/2011 @ 101, (FGIC) ................................. 1,500,000 1,642,440 Aaa/AAA Highway & Bridge Trust Fund Bonds, Series B, 5.25%, 4/1/2017, Callable 10/1/2011 @ 100, (MBIA) ................................ 2,500,000 2,648,250 ----------- Total New York State Thruway Authority ............................ 4,290,690 ----------- New York State Urban Development Corporation (0.9%) A3/AA- Empire State Development Corporation, University Facilities Grants, 6.00%, 1/1/2009, Non Callable ................................... 905,000 1,021,971 ----------- Total New York State Agencies ..................................... 63,512,091 ----------- Other New York State Bonds (26.9%) Aaa/AAA Albany County, Airport Authority, Series A, 4.00%, 12/15/2004, Non Callable, (FSA) ............................................. 460,000 476,312
The accompanying notes are an integral part of the financial statements. 5 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- August 31, 2003 -- continued (Unaudited)
Principal Value Credit Ratings** Municipal Securities--continued Amount (Note 2) ----------------- ------------------------------- --------- -------- Other New York State Bonds--continued A3/NR Albany Housing Authority, Limited Obligation, 6.25%, 10/1/2012, Callable 10/1/2005 @ 102 ........................................ $1,000,000 $ 1,070,230 Aaa/AAA Albany Municipal Water Financial Authority, Series B, 5.00%, 12/1/2033, Callable 12/1/2008 @ 100, (MBIA) ..................... 1,500,000 1,481,445 Aaa/AAA Buffalo Municipal Water Finance Authority, Water System Revenue, 5.75%, 7/1/2019, Callable 7/1/2005 @ 102, (FGIC) ................ 500,000 540,890 Aaa/NR Corning, City School District, General Obligation, 5.00%, 6/15/2012, Non Callable, (FSA) ............................................. 1,000,000 1,084,160 Aaa/NR Corning, City School District, General Obligation, 5.00%, 6/15/2013, Callable 6/15/2012 @ 100, (FSA) ................................. 970,000 1,041,916 Aaa/NR Corning, City School District, General Obligation, 5.00%, 6/15/2014, Callable 6/15/2012 @ 100, (FSA) ................................. 600,000 641,274 Aaa/AAA Evans, General Obligation, 6.80%, 4/15/2012, Non Callable, (AMBAC) ......................................................... 225,000 272,156 Aaa/AAA Evans, General Obligation, 6.80%, 4/15/2013, Non Callable, (AMBAC) ......................................................... 225,000 273,056 Aaa/NR Fayetteville Manlius, Central School District, General Obligation, 5.00%, 6/15/2016, Callable 6/15/2012 @ 101, (FGIC) .............. 375,000 396,304 Aaa/NR Ilion, Central School District, General Obligation, Series B, 5.50%, 6/15/2015, Callable 6/15/2012 @ 101, (FGIC) ..................... 550,000 611,837 Aaa/NR Ilion, Central School District, General Obligation, Series B, 5.50%, 6/15/2016, Callable 6/15/2012 @ 101, (FGIC) ..................... 500,000 552,310 NR/AAA Lansing, Central School District, 1.75%, 6/15/2004, Non Callable, (FSA) ............................................. 1,005,000 1,009,824 NR/AAA Lillian Cooper Housing Development Corporation Mortgage Revenue, Series A, 7.00%, 1/1/2022, Callable 7/1/2004 @ 100, (FNMA)(FHA) .............................................. 1,100,000 1,106,083 Aa3/AA- Madison County, Industrial Development Agency, Colgate University, Series B, 5.00%, 7/1/2033, Callable 7/1/2013 @ 100 .............. 1,000,000 975,710 Aaa/NR Madison County, Series B, 2.50%, 10/15/2003, Non Callable, (AMBAC) ......................................................... 395,000 395,726 Aaa/AAA Mount Sinai Union Free School District, General Obligation, 6.20%, 2/15/2012, Non Callable, (AMBAC) ................................ 1,065,000 1,238,989 Aaa/AAA New York State, 6.00%, Series A, 7/15/2007, Non Callable, (FSA) ... 5,000,000 5,660,249 Aaa/AAA North Hempstead, General Obligation, Series B, 6.375%, 4/1/2009, Non Callable, (FGIC) .................................. 570,000 662,665 Aaa/AAA North Hempstead, General Obligation, Series B, 6.40%, 4/1/2010, Non Callable, (FGIC) ............................................ 560,000 653,912 NR/AAA Oneida County Industrial Development Agency, Mohawk Valley Network, St. Luke's Memorial Hospital, 5.00%, 1/1/2013, Callable 1/1/2008 @ 101, (FSA) .................................. 2,000,000 2,103,599 Aa1/NR Orange County, Series A, 2.00%, 11/1/2003, Non Callable ........... 1,805,000 1,808,031 Aa1/NR Orange County, Series A, 2.50%, 11/1/2004, Non Callable ........... 1,530,000 1,552,629
The accompanying notes are an integral part of the financial statements. 6 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- August 31, 2003 -- continued (Unaudited)
Principal Value Credit Ratings** Municipal Securities--continued Amount (Note 2) ----------------- ------------------------------- --------- -------- Other New York State Bonds--continued Aaa/NR Oyster Bay, General Obligation, 5.00%, 3/15/2011, Non Callable, (FSA) ............................................. $ 430,000 $ 467,032 Aaa/NR Southern Cayuga, Central School District, General Obligation, 5.00%, 5/15/2014, Callable 5/15/2012 @ 100, (FSA) ............... 400,000 427,296 Aaa/AAA Suffolk County, General Obligation, Series C, 5.00%, 9/15/2015, Callable 9/15/2008 @ 101, (FGIC) ................................ 965,000 1,018,278 Aaa/AAA Suffolk County, General Obligation, Series C, 5.00%, 9/15/2016, Callable 9/15/2008 @ 101, (FGIC) ................................ 550,000 572,924 Aaa/AAA Suffolk County, General Obligation, Series C, 5.00%, 9/15/2017, Callable 9/15/2008 @ 101, (FGIC) ................................ 480,000 497,160 Aaa/AAA Suffolk County, General Obligation, Series D, 5.00%, 11/1/2015, Callable 11/1/2008 @ 101, (FGIC) ................................ 1,125,000 1,188,236 Aaa/AAA Suffolk County, General Obligation, Series D, 5.00%, 11/1/2016, Callable 11/1/2008 @ 101, (FGIC) ................................ 1,110,000 1,157,075 ------------ Total Other New York State Bonds .................................. 30,937,308 ------------ Total Municipal Securities (Cost $104,937,436)-- 93.9% ............ 107,931,659 ------------ Short Term Investments (2.4%) Dreyfus New York Municipal Cash Management Fund (Cost $2,810,000) ............................................... 2,810,000 2,810,000 ------------ Total Investments (Cost $107,747,436) (a)-- 96.3% ................. $110,741,659 Other assets in excess of liabilities-- 3.7% ...................... 4,258,811 ------------ NET ASSETS -- 100.0% .............................................. $115,000,470 ============
---------- Percentages indicated are based on net assets of $115,000,470. (a) Represents cost for financial reporting and approximates cost for federal income tax and differs from fair value by net unrealized appreciation/depreciation of securities as follows: Unrealized appreciation $3,445,156 Unrealized depreciation (450,933) ---------- Net unrealized appreciation $2,994,223 ========== * Variable rate instrument. The rate presented represents the rate in effect at August 31, 2003. ** Credit Ratings given by Moody's Investors Service, Inc. and Standard & Poor's Corporation. The accompanying notes are an integral part of the financial statements. 7 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- August 31, 2003 -- continued Moody's Standard & Poor's Aaa AAA Instrument judged to be of the highest quality and carrying the smallest amount of investment risk. Aa AA Instrument judged to be of high quality by all standards. A A Instrument judged to be adequate quality by all standards. Baa BBB Instrument judged to be moderate quality by all standards. NR NR Not Rated. In the opinion of Glickenhaus & Co. ("Investment Adviser"), instrument judged to be of comparable investment quality to rated securities which may be purchased by the Fund. For items possessing the strongest investment attributes of their category, Moody's gives that letter rating followed by a number. The Standard & Poor's ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. Abbreviations used in this statement: AMBAC Insured as to principal and interest by the American Municipal Bond Assurance Corporation. CIFG Insured as to principal and interest by CDC IXIS Financial Guarantee. FGIC Insured as to principal and interest by the Financial Guarantee Insurance Corporation. FHA Insured by the Federal Housing Administration. FNMA Insured by the Federal National Mortgage Association. FSA Insured as to principal and interest by Financial Security Assurance. MBIA Insured as to principal and interest by the Municipal Bond Insurance Association. POL CTL -- SRF Insured as to principal and interest by Pollution Control Services. SONYMA Insured as to principal and interest by the State of New York Mortgage Association. RADIAN Insured as to principal and interest by Radian Asset Assurance. XLCA -- ICR Insured as to principal and interest by XL Capital Assurance, Inc. The accompanying notes are an integral part of the financial statements. 8 THE EMPIRE BUILDER TAX FREE BOND FUND Statement of Assets and Liabilities August 31, 2003 (Unaudited) Assets: Investments in securities, at value (cost $107,747,436) (Note 2) $110,741,659 Cash ......................................................... 391,661 Interest and dividend receivable ............................. 1,096,371 Receivable for investments sold .............................. 8,824,331 Prepaid expenses and other assets ............................ 49,607 ------------ Total Assets .............................................. 121,103,629 Liabilities: Dividends payable .............................. $ 64,634 Payable for investments purchased .............. 5,876,314 Advisory fee payable (Note 4) .................. 38,201 Administrative services fee payable (Note 4) ... 2,410 Other accrued expenses ......................... 121,600 ----------- Total Liabilities ......................................... 6,103,159 ------------ Net Assets ...................................................... $115,000,470 ============ Net Assets: Net assets consist of: Capital ...................................................... $110,760,616 Undistributed net investment income .......................... 52,425 Net realized gains from investments .......................... 1,193,206 Net unrealized appreciation from investments ................. 2,994,223 ------------ Net Assets ................................................ $115,000,470 ============ Builder Class: Net Assets ..................................... $54,965,330 Shares of beneficial interest outstanding ...... 3,092,502 ----------- Builder Class--offering and redemption price per share ............................. $ 17.77 =========== Premier Class: Net Assets ..................................... $60,035,140 Shares of beneficial interest outstanding ...... 3,377,029 ----------- Premier Class--offering and redemption price per share ............................. $ 17.78 =========== The accompanying notes are an integral part of the financial statements. 9 THE EMPIRE BUILDER TAX FREE BOND FUND Statement of Operations For the Period March 1, 2003 through August 31, 2003 (Unaudited) Investment Income: Interest ..................................................... $ 2,447,845 Dividend ..................................................... 10,287 ----------- Total Investment Income ...................................... 2,458,132 Expenses: Advisory fees (Note 4) .......................... $ 231,923 Administrative services fees (Note 4) ........... 100,822 Transfer agency fees (Builder Class) (Note 4) ... 92,379 Transfer agency fees (Premier Class) (Note 4) .. 26,789 Custody fees ................................... 10,376 Fund accounting fees (Note 4) .................. 30,213 Trustees' fees ................................. 14,221 Other fees ..................................... 77,778 ----------- Total Expenses .............................. 584,501 Less: Custody fee credit .................... (6,809) ----------- Total Net Expenses ........................................... 577,692 ----------- Net Investment Income ........................................... 1,880,440 ----------- Realized/Unrealized Gains (Losses) from Investment Transactions (Notes 2 and 3) Net realized gains from investment transactions . 533,710 Change in unrealized appreciation/depreciation from investment transactions ................. (2,523,023) ---------- Net realized/unrealized losses from investment transactions ........................................... (1,989,313) ----------- Change in net assets resulting from operations .................. $ (108,873) =========== The accompanying notes are an integral part of the financial statements. 10 THE EMPIRE BUILDER TAX FREE BOND FUND Statements of Changes in Net Assets
For the Period March 1, 2003 through August 31, 2003 Year Ended (Unaudited) February 28, 2003 --------------- ----------------- From Investment Activities: Operations: Net investment income ........................................ $ 1,880,440 $ 4,124,066 Net realized gains from investment transactions .............. 533,710 2,419,769 Change in unrealized appreciation/depreciation from investment transactions ...................................... (2,523,023) 1,026,786 ------------- ------------- Change in net assets resulting from operations ...... (108,873) 7,570,621 ------------- ------------- Distributions to shareholders from: Net investment income--Builder Class ......................... (861,789) (1,891,261) Net investment income--Premier Class ......................... (1,008,276) (2,218,177) Net realized gains from investment transactions--Builder Class -- (797,828) Net realized gains from investment transactions--Premier Class -- (851,523) ------------- ------------- Total distributions ................................. (1,870,065) (5,758,789) ------------- ------------- Capital Transactions: Proceeds from shares issued--Builder Class ................... 1,825,870 3,393,769 Proceeds from shares issued--Premier Class ................... 965,223 1,743,930 Dividends reinvested--Builder Class .......................... 753,056 2,408,830 Dividends reinvested--Premier Class .......................... 849,268 2,672,965 Cost of shares redeemed--Builder Class ....................... (3,347,645) (4,230,739) Cost of shares redeemed--Premier Class ....................... (1,769,005) (4,260,674) ------------- ------------- Change in net assets from capital share transactions (723,233) 1,728,081 ------------- ------------- Change in net assets ................................ (2,702,171) 3,539,913 Net Assets: Beginning of period .......................................... 117,702,641 114,162,728 ------------- ------------- End of period ................................................ $ 115,000,470 $ 117,702,641 ============= ============= Share Transactions: Issued--Builder Class ........................................ 100,566 188,963 Issued--Premier Class ........................................ 52,892 97,318 Reinvested--Builder Class .................................... 41,560 135,373 Reinvested--Premier Class .................................... 46,836 150,184 Redeemed--Builder Class ...................................... (184,717) (237,051) Redeemed--Premier Class ...................................... (97,604) (237,735) ------------- ------------- Change in shares ............................................. (40,467) 97,052 ------------- ------------- Undistributed Net Investment Income .......................... $ 52,425 $ 42,050 ============= =============
The accompanying notes are an integral part of the financial statements. 11 THE EMPIRE BUILDER TAX FREE BOND FUND Financial Highlights For a share of beneficial interest outstanding throughout each period
For the Period March 1, 2003 through Year Ended Year Ended Year Ended August 31, 2003 ----------------- ----------------- ----------------- (Unaudited) February 28, 2003 February 28, 2002 February 28, 2001 ----------- ----------------- ----------------- ----------------- Builder Premier Builder Premier Builder Premier Builder Premier Class Class Class Class Class Class Class Class ------- ------- ------- ------- ------- ------- ------- ------- Net Asset Value, Beginning of Period ....... $18.08 $18.08 $17.80 $17.80 $17.69 $17.69 $16.32 $16.32 ------ ------ ------ ------ ------ ------ ------ ------ Investment Activities: Net investment income ..... 0.28 0.30 0.61 0.66 0.72 0.77 0.73 0.79 Net realized and unrealized gains/(losses) on investments .......... (0.31) (0.30) 0.54 0.54 0.27 0.27 1.37 1.37 ------ ------ ------ ------ ------ ------ ------ ------ Total from Investment Operations ................ (0.03) (0.00) 1.15 1.20 0.99 1.04 2.10 2.16 ------ ------ ------ ------ ------ ------ ------ ------ Distributions: Net Investment Income ..... (0.28) (0.30) (0.61) (0.66) (0.71) (0.76) (0.73) (0.79) Net realized capital gains ................... -- -- (0.26) (0.26) (0.17) (0.17) -- -- ------ ------ ------ ------ ------ ------ ------ ------ Total distributions ....... (0.28) (0.30) (0.87) (0.92) (0.88) (0.93) (0.73) (0.79) ------ ------ ------ ------ ------ ------ ------ ------ Net Asset Value, End of Period ............. $17.77 $17.78 $18.08 $18.08 $17.80 $17.80 $17.69 $17.69 ====== ====== ====== ====== ====== ====== ====== ====== Total Return ................ (0.21)%(b) (0.03)%(b) 6.62% 6.90% 5.74% 6.01% 13.15% 13.53% Ratios/Supplementary Data: Net Assets, End of Period (in thousands) .......... $54,965 $60,035 $56,677 $61,025 $54,253 $59,910 $53,937 $60,418 Ratios of Net Investment Income to Average Net Assets .............. 3.03%(c) 3.26%(c) 3.44% 3.71% 4.04% 4.30% 4.31% 4.65% Ratios of Expenses to Average Net Assets ...... 1.09%(c) 0.85%(c) 1.16% 0.89% 1.14% 0.88% 1.20% 0.86% Ratios of Expenses to Average Net Assets* ..... 1.10%(c) 0.86%(c) 1.16% 0.89% 1.14% 0.88% 1.22% 0.88% Portfolio Turnover Rate (a) .................. 110.09% 110.09% 213.97% 213.97% 98.29% 98.29% 121.96% 121.96% Year Ended Year Ended ----------------- ----------------- February 28, 2000 February 28, 1999 ----------------- ----------------- Builder Premier Builder Premier Class Class Class Class ------- ------- ------- ------- Net Asset Value, Beginning of Period ....... $17.88 $17.88 $18.22 $18.22 ------ ------ ------- ------ Investment Activities: Net investment income ..... 0.78 0.84 0.75 0.80 Net realized and unrealized gains/(losses) on investments .......... (1.55) (1.56) 0.11 0.12 ------ ------ ------- ------ Total from Investment Operations ................ (0.77) (0.72) 0.86 0.92 ------ ------ ------- ------ Distributions: Net Investment Income ..... (0.76) (0.81) (0.75) (0.81) Net realized capital gains ................... (0.03) (0.03) (0.45) (0.45) ------ ------ ------- ------ Total distributions ....... (0.79) (0.84) (1.20) (1.26) ------ ------ ------- ------ Net Asset Value, End of Period ............. $16.32 $16.32 $ 17.88 $17.88 ====== ====== ======= ====== Total Return ................ (4.39)% (4.12)% 4.87% 5.17% Ratios/Supplementary Data: Net Assets, End of Period (in thousands) .......... $50,347 $55,636 $57,610 $63,657 Ratios of Net Investment Income to Average Net Assets .............. 4.47% 4.75% 4.15% 4.44% Ratios of Expenses to Average Net Assets ...... 1.08% 0.79% 1.11% 0.82% Ratios of Expenses to Average Net Assets* ..... 1.12% 0.83% 1.15% 0.86% Portfolio Turnover Rate (a) .................. 90.84% 90.84% 174.34% 174.34%
---------- * The ratio does not include a reduction of expenses for custodian fee credits of cash balances maintained with the custodian. (a) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (b) Not annualized. (c) Annualized. The accompanying notes are an integral part of the financial statements. 12 THE EMPIRE BUILDER TAX FREE BOND FUND Notes to Financial Statements (Unaudited) 1. Organization: The Empire Builder Tax Free Bond Fund (the "Fund") was established as a Massachusetts business trust by an Agreement and Declaration of Trust dated September 30, 1983. The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end, non-diversified investment company. The Fund has an unlimited number of shares authorized with no par value. The Fund offers two classes of shares; the Builder Class and the Premier Class. Each class of shares outstanding bears the same dividend, liquidation and other rights and conditions, except that the Builder Class shares and the Premier Class shares bear separate transfer agency expenses. Each class of shares has exclusive voting rights with respect to matters affecting only that class. 2. Significant Accounting Policies: The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America. Use of Estimates Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ from these amounts. Security Valuation Tax-exempt securities for which transaction prices are not readily available are valued at their fair value as determined by an independent pricing service approved by the Fund's Board of Trustees. The pricing service uses information with respect to transactions in bonds, quotations from bond dealers, market transactions in comparable securities and various relationships between securities in determining value. The methods used by the pricing service and the quality of valuations so established are reviewed by officers of the Fund and the Fund's Investment Adviser, under the general supervision of the Trustees of the Fund. Securities for which quotations are readily available are stated at market value. Short-term debt securities having remaining maturities of sixty (60) days or less are stated at amortized cost, which approximates market value. Security Transactions and Investment Income Security transactions are accounted for on the trade date. Interest income, which includes amortization of premium and accretion of discounts, is accrued as earned. Realized gains and losses from security transactions and unrealized appreciation and depreciation of investments are determined on the basis of identified cost. 13 THE EMPIRE BUILDER TAX FREE BOND FUND Notes to Financial Statements -- continued (Unaudited) Taxes The Fund qualifies and intends to continue to qualify as a "regulated investment company" under Subchapter M of the Internal Revenue Code, and to distribute substantially all of its tax-exempt and taxable income. Therefore, no federal income tax provision is required. In addition, by distributing during each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, the Fund will not be subject to a federal excise tax. Futures Contracts The Fund may purchase and sell financial futures contracts, options on such futures contracts and options on securities indices to hedge against changes in the value of New York tax-exempt bonds the Fund owns or expects to purchase. The Fund may also purchase and sell futures and options on U.S. Treasury securities in order to hedge against interest rate changes or other general changes in market values. Upon entering into a futures contract, the Fund is required to deposit cash or pledge securities in an amount equal to a certain percentage of the purchase price indicated in the futures contract (initial margin). Subsequent payments, which are dependent on the daily fluctuations in the value of the underlying security, are made or received by the Fund each day (daily variation margin) and are recorded as unrealized gains or losses until the contracts are closed. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedge assets. No futures were held on August 31, 2003. Distributions and Dividends Distributions to shareholders from net investment income are declared daily and paid monthly. The Fund also distributes at least annually substantially all net capital gains, if any, realized from portfolio transactions. The amounts of distributions from net investment income and net realized gains are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require reclassification. Determination of Net Asset Value and Allocation of Expenses In calculating net asset value per share of each class, investment income, realized/unrealized gains/losses, and expenses, other than class-specific expenses, are allocated proportionately among both classes daily in relation to the net assets of the Fund or on another reasonable basis. Expenses specific to a class are charged to that class. 14 THE EMPIRE BUILDER TAX FREE BOND FUND Notes to Financial Statements -- continued (Unaudited) Other The Fund maintains a cash balance with its custodian and receives a reduction of its custody fees and expenses for the amounts of interest earned on such uninvested cash balance. There was no effect on net investment income. The Fund could have invested such cash amounts in an income-producing asset if it had not agreed to a reduction of fees or expenses under the expense offset arrangement with the Fund's custodian. 3. Purchases and Sales of Investment Securities: Purchases and sales of investment securities, excluding short-term investments, during the period ended August 31, 2003, amounted to $116,046,516 and $118,456,979, respectively. 4. Advisory Fees and Other Related Party Transactions: The Fund retains Glickenhaus & Co. (the "Adviser") to act as investment adviser pursuant to an Investment Advisory Agreement. As compensation for its advisory services, the Adviser receives a fee computed daily and paid monthly, at the annual rates of 0.40% of the first $100,000,000 of average daily net assets and 0.3333% of any excess over $100,000,000. Glickenhaus has agreed to a reduction of advisory fees to the extent that the Fund's expenses, including the advisory fees, exceed 1.50% of the Fund's average annual net assets. For the period ended August 31, 2003, there was no reduction of advisory fees pursuant to this agreement. BISYS Fund Services Limited Partnership ("BISYS" or the "Administrator"), a wholly-owned subsidiary of The BISYS Group, Inc., serves as the fund's administrator, transfer agent, fund accountant and assists the Fund in all aspects of its administration and operation. BISYS is entitled to receive fees as well as be reimbursed for certain expenses incurred for providing these services. As compensation for administration and fund accounting services, BISYS will receive .15% and .03%, respectively, of average daily net assets of the fund (subject to certain minimum amounts). Fees received for transfer agency services are class specific and are based on the number of accounts per class. All fees are accrued daily and paid monthly. 15 [LOGO] Empire Builder 3435 Stelzer Road Columbus, Ohio 43219 1-800-847-5886 [LOGO] Empire Builder TAX FREE BOND FUND Semi-Annual Report August 31, 2003 Investment Adviser and Distributor Glickenhaus & Co. 6 East 43rd Street New York, New York 10017 Administrator BISYS Fund Services Limited Partnership 3435 Stelzer Road Columbus, Ohio 43219 Transfer and Shareholder Servicing Agent BISYS Fund Services Ohio, Inc. 3435 Stelzer Road Columbus, Ohio 43219 Custodian State Street Bank & Trust Co. 800 Pennsylvania Avenue 5th Floor Kansas City, MO 64105-1307 Legal Counsel Ropes & Gray One International Place Boston, Massachusetts 02110 Independent Accountants PricewaterhouseCoopers LLP 100 E. Broad Street Columbus, Ohio 43215 Customer Service 3435 Stelzer Road Columbus, Ohio 43219 1-800-847-5886 This report is submitted for the information of the shareholders of the Empire Builder Tax Free Bond Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus, obtainable from an investment dealer, which includes information regarding the Fund's objectives and policies, record, management, sales commission and other data. 528179 Item 2. Code of Ethics. Disclose whether, as of the end of the period covered by the report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, explain why it has not done so. Not applicable - only for annual reports. Item 3. Audit Committee Financial Expert. (a) (1) Disclose that the registrant's board of directors has determined that the registrant either: (i) Has at least one audit committee financial expert serving on its audit committee; or (ii) Does not have an audit committee financial expert serving on its audit committee. (2) If the registrant provides the disclosure required by paragraph (a)(1)(i) of this Item, it must disclose the name of the audit committee financial expert and whether that person is "independent." In order to be considered "independent" for purposes of this Item, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (i) Accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer; or (ii) Be an "interested person" of the investment company as defined in Section 2(a)(19) of the Act (15 U.S.C. 80a- 2(a)(19)). (3) If the registrant provides the disclosure required by paragraph (a)(1)(ii) of this Item, it must explain why it does not have an audit committee financial expert. Not applicable - only for annual reports. Item 4. Principal Accountant Fees and Services. (a) Disclose, under the caption Audit Fees, the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Disclose, under the caption Audit-Related Fees, the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (c) Disclose, under the caption Tax Fees, the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (d) Disclose, under the caption All Other Fees, the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (e) (1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. (2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. (g) Disclose the aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant. (h) Disclose whether the registrant's audit committee of the board of directors has considered whether the provision of nonaudit services that were rendered to the registrant's investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. Not applicable - Only effective for annual reports with periods ending on or after December 15, 2003. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. A closed-end management investment company that is filing an annual report on this Form N-CSR must, unless it invests exclusively in non-voting securities, describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities, including the procedures that the company uses when a vote presents a conflict between the interests of its shareholders, on the one hand, and those of the company's investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules thereunder) of the company, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the company's investment adviser, or any other third party, that the company uses, or that are used on the company's behalf, to determine how to vote proxies relating to portfolio securities. Not applicable. Item 8. [Reserved] Item 9. Controls and Procedures. (a) Disclose the conclusions of the registrant's principal executive and principal financial officers, or persons performing similar functions, regarding the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)). In the opinion of the principal executive officer and principal financial officer, based on their evaluation, the registrant's disclosure controls and procedures are adequately designed and are operating effectively to ensure (i) that material information relating to the registrant, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this report is being prepared; and (ii) that information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) Disclose any change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10. Exhibits. (a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a)(1)Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit. Not applicable - Only effective for annual reports. (a)(2)A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2). Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (b) A separate or combined certification for each principal executive officer and principal officer of the registrant as required by Rule 30a-2(b) under the Act of 1940. Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Empire Builder Tax Free Bond Fund ------------------------------------------------------------------- By (Signature and Title)* /s/ Troy A. Sheets Troy A. Sheets, Treasurer ------------------------------------------------------ Date 10/23/2003 --------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Seth M. Glickenhaus Seth M. Glickenhaus, President ------------------------------------------------------ Date 10/23/2003 --------------------------------------------------------------------------- By (Signature and Title)* /s/ Troy A. Sheets Troy A. Sheets, Treasurer ------------------------------------------------------ Date 10/23/2003 --------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.