N-CSR 1 e26759_ncsr.txt ANNUAL SHAREHOLDER REPORT 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 The Empire Builder Tax Free Bond Fund -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 3435 Stelzer Road, Columbus, OH 43219 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) BISYS Fund Services, 3435 Stelzer Road, Columbus, OH 43219 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (800) 847-5886 Date of fiscal year end: February 28, Date of reporting period: February 28, 2007 Item 1. Reports to Stockholders. [LOGO] ---------------------------------EMPIRE BUILDER--------------------------------- -------------- Dear Shareholder, We are pleased to present The Empire Builder Tax Free Bond Fund Annual Report for the year ended February 28, 2007. For the past year, the Builder class was up 3.44%, and the Premier Class was up 3.70%. In last year For the past year, the Builder class was up 3.44%, and the Premier Class was up 3.70%. In last year's letter, we forecasted the Federal Reserve Board was coming close to an end in their interest rate tightening cycle. Since our last report in February 20 06, the Federal Reserve Board raised the rate two times; it now stands at 5.25%. The Federal Reserve Board has been holding the rate steady since June 2006. There are two major issues on the table at the moment. The first is the housing market and the troubles in the subprime mortgage industry. If the subprime market weakens further, the Fed might reduce the Federal Fund Rate. The second issue is inflation. The Fed could either raise or lower rates depending on the economic numbers. Currently, we believe in the Fed might reduce the Federal Fund Rate. The second issue is inflation. The Fed could either raise or lower rates depending on the economic numbers. Currently, we believe in "staying the course" - as the right opportunities present themselves, we will continue to extend the duration of the portfolio to enhance our returns, while keeping principal intact. We will focus on increasing the yield of the Fund while maintaining the high credit quality of the bonds in the Fund. In our opinion, The Empire Builder Tax Free Bond Fund is well positioned for the next year. The no-load structure continues to offer value to the shareholder because there is no charge to purchase units. 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 *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. The Fund 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 is no guarantee of future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains and do not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. The investment return and net asset value will fluctuate so that an investor not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. The investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information for the most recent month end, please call 1-800-847-5886. For more complete information on The Empire Builder Tax Free Bond Fund, you may request additional prospectuses by calling 1-800-847-5886. You should consider the fund For more complete information on The Empire Builder Tax Free Bond Fund, you may request additional prospectuses by calling 1-800-847-5886. You should consider the fund's investment objectives, risk, charges and expenses carefully before you invest. Information about these and other important information is in the fund's prospectus which you should read carefully before investing. Not FDIC insured. May lose value. No bank guarantee. [LOGO] ---------------------------------EMPIRE BUILDER--------------------------------- -------------- Market Conditions during the Fund's Most Recent FIscal Year As we mentioned last year, the 10-year Treasury bond is the leading benchmark for long-term interest rates. Interest rates in the 10-year Government Bond Market for the fiscal year ended February 28, 2007 began at approximately 4.589% and ended at 4.554%. These figures suggest a very stable year. This is not the case, however, as we had yet another very volatile market this year. The 10-year traded in a range of approximately 4.42% to 5.24%. Throughout the year, we saw dramatic shifts in the interest rate of the 10-year bond. We try to enhance the value of the Fund whenever possible. We continue to manage the Fund conservatively taking advantage of opportunities that arise in the marketplace due to interest rate movements and quality enhancements. The following graphs illustrate the total return based on a $10,000 investment in Builder Class shares of the Fund made March 1, 1997, and a $20,000* investment in Premier Class shares of the Fund made March 1, 1997, held in each through February 28, 2007, as well as the performance of the Lehman Municipal Bond Index over the same period. The Lehman Municipal Bond Index includes 25,000 long-term, investment grade, municipal bonds. In the opinion of the Fund The Lehman Municipal Bond Index includes 25,000 long-term, investment grade, municipal bonds. In the opinion of the Fund's adviser, this index most accurately represents the performance of the broad municipal bond market. However, there are substantial differences between the index and the Fund. First, the index covers municipal bonds nationwide, whereas the Fund invests only in New York tax exempt bonds. Second, the index does not reflect the cost and expenses of actually obtaining the underlying bonds. Third, the index had a higher level of volatility than the Fund during the ten years ended December 31, 2006, as measured by Beta. Finally, the index represents an unmanaged portfolio whereas the Fund is professionally managed. The graphs assume all dividends and distributions are reinvested at net asset value. Return calculations assume the reinvestment distributions and do not guarantee future results. Return calculations assume the reinvestment of distributions and do not reflect taxes a shareholder would pay on fund distributions or on the redemption of fund shares. The performance data quoted represents past performance and current returns may be higher or lower. The investment return and net asset value will fluctuate so that an investor that an investor's shares, when redeemed maybe worth more or less than the original cost. The Fund's Builder Class shares' average annual total return for the periods indicated was as follows: 3.44% for the one-year period beginning March 1, 2006 and ended February 28, 2007. 3.46% for the five-year period beginning March 1, 2002 and ended February 28, 2007. 4.36% for the ten-year period beginning March 1, 1997 and ended February 28, 2007 * The minimum initial investment into the Premier Class is $20,000 [The following information was depicted as a bar chart in the printed material.] Lehman Empire Builder Municipal Tax Free Bond Bond Fund Date Index Builder Class --------- --------- ------------- 2/28/1997 $10,000 $10,000 2/28/1998 10,914 10,778 2/28/1999 11,585 11,301 2/29/2000 11,343 10,804 2/28/2001 12,743 12,226 2/28/2002 13,614 12,927 2/28/2003 14,658 13,783 2/29/2004 15,582 14,356 2/28/2005 16,042 14,515 2/28/2006 16,663 14,816 2/28/2007 $17,491 $15,326 The Fund's Premier Class shares' average annual total return for the periods indicated was as follows: 3.70% for the one-year period beginning March 1, 2006 and ended February 28, 2007. 3.69% for the five-year period beginning March 1, 2002 and ended February 28, 2007. 4.63% for the ten-year period beginning March 1, 1997 and ended February 28, 2007. [The following information was depicted as a bar chart in the printed material.] Lehman Empire Builder Municipal Tax Free Bond Bond Fund Date Index Premier Class --------- --------- ------------- 2/28/1997 $20,000 $20,000 2/28/1998 21,828 21,609 2/28/1999 23,170 22,723 2/29/2000 22,687 21,787 2/28/2001 25,487 24,736 2/28/2002 27,229 26,223 2/28/2003 29,317 28,033 2/29/2004 31,164 29,266 2/28/2005 32,085 29,643 2/28/2006 33,327 30,314 2/28/2007 $34,981 $31,436 3 Expense Examples (Unaudited): As a shareholder of The Empire Builder Tax Free Bond Fund, you incur two types of costs: (1) transaction costs, exchange fees and (2) ongoing costs, including management fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in The Empire Builder Tax Free Bond Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from September 1, 2006 through February 28, 2007. Actual Example The table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1 ,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled ,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Beginning Ending Expenses Paid Expense Ratio Account Value Account Value During Period* During Period 9/1/06 2/28/07 9/1/06 - 2/28/07 9/1/06 - 2/28/07 ------------- ------------- ---------------- ---------------- Builder Class.. $1,000.00 $1,019.40 $6.46 1.29% Premier Class.. 1,000.00 1,020.90 5.56 1.11% Hypothetical Example for Comparison Purposes The table below provides information about hypothetical account values and hypothetical expenses based on The Empire Builder Tax Free Bond Fund The table below provides information about hypothetical account values and hypothetical expenses based on The Empire Builder Tax Free Bond Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Beginning Ending Expenses Paid Expense Ratio Account Value Account Value During Period* During Period 9/1/06 2/28/07 9/1/06 - 2/28/07 9/1/06 - 2/28/07 ------------- ------------- ---------------- ---------------- Builder Class.. $1,000.00 $1,018.40 $6.46 1.29% Premier Class.. 1,000.00 1,019.29 5.56 1.11% ---------- * Expenses are equal to the average value times the Fund's annualized expense ratio multiplied by the number of days in the most recent half-year divided by the number of days in the fiscal year. 4 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- February 28, 2007
Principal Fair Value Credit Ratings** Amount (Note 2) ---------------- --------- ---------- Municipal Securities (99.6%) New York City (25.2%) New York City, General Obligation Series G A1/AA- 5.000%, 8/1/2008, Non Callable.............................. $5,000,000 $ 5,089,450 Series B AAA/AAA 5.250%, 8/1/2017, Callable 8/1/2007 @ 101, (AMBAC) ......... 730,000 741,570 AAA/AAA 5.250%, 8/1/2017, Prerefunded 8/1/2007 @ 101, (AMBAC)....... 20,000 20,336 Subseries B2 AA2/AAA 3.650%, 8/15/2018, (LOC - Morgan Guaranty Trust)(a)......... 200,000 200,000 Series B A1/AAA 5.125%, 8/1/2019, Callable 8/1/2010 @ 101, (FGIC)........... 2,000,000 2,109,960 AAA/AAA 5.375%, 8/1/2022, Callable 8/1/2007 @ 101, (MBIA)........... 1,235,000 1,255,032 AAA/AAA New York City, Health & Hospitals Corporation, Health System Revenue, Series A, 5.500%, 2/15/2018, Callable 2/15/2012 @ 100, (FSA) .......................................... 1,000,000 1,087,220 AAA/AAA New York City, Municipal Water Finance Authority, Water & Sewer System Revenue, Series B, 5.800%, 6/15/2029, Callable 6/15/2007 @ 101, (MBIA) ............................. 5,000,000 5,079,700 New York City, Transitional Finance Authority Series B AA2/AAA 5.000%, 11/1/2014, Non Callable............................... 3,590,000 3,903,479 AA2/AAA 5.000%, 11/1/2016, Non Callable............................... 1,500,000 1,649,370 AA2/AAA 5.000%, 11/1/2017, Callable 5/1/2017 @ 100.................... 1,305,000 1,435,865 Series 3, Subseries 3H AA2/AAA 3.600%, 11/1/2022, (SPA - Royal Bank of Canada)(a)............ 1,300,000 1,300,000 ----------- Total New York City.............................................. 23,871,982 ----------- New York State Agencies (42.9%) New York State Dormitory Authority (41.1%) Augustana Lutheran Home for the Aged, Series A AAA/AAA 5.500%, 8/1/2020, Callable 8/1/2010 @ 101, (FHA/MBIA) ........ 860,000 911,841 AAA/AAA 5.500%, 8/1/2030, Callable 8/1/2010 @ 101, (FHA/MBIA) ........ 750,000 790,290 Columbia University, Series B AAA/AAA 5.375%, 7/1/2018, Prerefunded 7/1/2012 @ 100.................. 500,000 542,865 AAA/AAA 5.375%, 7/1/2019, Prerefunded 7/1/2012 @ 100.................. 1,000,000 1,085,730 AAA/AAA 5.375%, 7/1/2020, Prerefunded 7/1/2012 @ 100.................. 1,000,000 1,085,730 AAA/AAA Good Samaritan Medical Center, Series A, 5.625%, 7/1/2012, Callable 7/1/2009 @ 101, (MBIA)............................... 1,365,000 1,434,792 AA2/AA Memorial Sloan-Kettering Cancer Center, Series 1, 5.000%, 7/1/2034, Callable 7/1/2013 @ 100....................................... 3,000,000 3,155,700
The accompanying notes are an integral part of the financial statements. 5 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- February 28, 2007 -- continued
Principal Fair Value Credit Ratings** Municipal Securities -- continued Amount (Note 2) ---------------- --------------------------------- --------- ---------- New York State Dormitory Authority -- continued AAA/AAA Mental Health Services Facilities Improvement, Series A, 5.000%, 2/15/2019, Callable 2/15/2015 @ 100, (AMBAC).................. $2,500,000 $ 2,695,125 AAA/AAA New York Medical College, 5.250%, 7/1/2013, Callable 7/1/2008 @ 101, (MBIA)............................... 1,015,000 1,045,795 AAA/AAA New York University, Series 2, 5.500%, 7/1/2018, Callable 7/1/2011 @ 100, (AMBAC).............................. 500,000 534,380 Park Ridge Housing, Inc. NR/AAA 6.375%, 8/1/2020, Callable 8/1/2010 @ 101, (AMBAC/FNMA) ................................................. 1,000,000 1,088,610 NR/AAA 6.500%, 8/1/2025, Callable 8/1/2010 @ 101, (AMBAC/FNMA) ................................................. 1,470,000 1,606,063 NR/AA Queens Medical Center, 3.950%, 8/15/2012, Non Callable, (FHA).... 1,600,000 1,611,680 Rochester Institute of Technology, Series A AAA/NR 5.250%, 7/1/2016, Callable 7/1/2012 @ 100, (AMBAC).......... 2,045,000 2,200,849 AAA/NR 5.250%, 7/1/2017, Callable 7/1/2012 @ 100, (AMBAC).......... 2,155,000 2,322,465 AAA/AAA School Districts Financing, Series C, 5.250%, 4/1/2021, Callable 10/1/2012 @ 100, (MBIA).............................. 1,300,000 1,400,581 AAA/AAA Special Acts School Districts Program, 6.000%, 7/1/2019, Callable 7/1/2007 @ 100, (MBIA)............................... 3,540,000 3,566,090 NR/AA- State Supported Debt, Department of Education, Series A, 5.000%, 7/1/2018, Callable 7/1/2016 @ 100............................. 1,000,000 1,086,860 A1/A+ University of Rochester, Series A1, 5.000%, 7/1/2019, Callable 1/1/2017............................................. 2,305,000 2,506,204 Upstate Community Colleges Series B AAA/AAA 5.250%, 7/1/2015, Callable 7/1/2014 @ 100, (FGIC)........... 3,140,000 3,455,853 Series A AAA/AAA 6.000%, 7/1/2019, Prerefunded 7/1/2010 @ 101, (FSA)......... 1,000,000 1,084,320 AAA/AAA 6.000%, 7/1/2020, Prerefunded 7/1/2010 @ 101, (FSA)......... 845,000 916,250 AAA/AAA Westchester County, Court Facilities, 5.250%, 8/1/2018, Prerefunded 2/1/2009 @ 101, (MBIA)............................ 2,800,000 2,913,036 ----------- Total New York State Dormitory Authority......................... 39,041,109 ----------- New York State Environmental Facilities Corp. (0.8%) AAA/AAA State Water Pollution Control Revenue, Revolving Fund, Pooled Loan, 5.900%, 1/15/2018, Callable 1/15/2008 @ 100, (POL CTL-SRF)................................................. 725,000 733,512 ----------- New York State Urban Development Corp. (1.0%) A1/AA- Empire State Development Corp., University Facilities Grants, 6.000%, 1/1/2009, Non Callable................................ 905,000 942,277 ----------- Total New York State Agencies.................................... 40,716,898 -----------
The accompanying notes are an integral part of the financial statements. 6 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- February 28, 2007 -- continued
Principal Fair Value Credit Ratings** Municipal Securities -- continued Amount (Note 2) ---------------- --------------------------------- --------- ---------- Other New York State Bonds (31.5%) A3/NR Albany Housing Authority, Limited Obligation, 6.250%, 10/1/2012, Callable 10/1/2007 @ 100...................................... $1,000,000 $ 1,012,140 Corning, City School District, General Obligation AAA/NR 5.000%, 6/15/2012, Non Callable, (FSA)........................ 1,000,000 1,065,700 AAA/NR 5.000%, 6/15/2013, Callable 6/15/2012 @ 100, (FSA)............ 970,000 1,032,778 AAA/NR 5.000%, 6/15/2014, Callable 6/15/2012 @ 100, (FSA)............ 600,000 637,938 Evans, General Obligation AAA/AAA 6.800%, 4/15/2012, Non Callable, (AMBAC)...................... 225,000 258,669 AAA/AAA 6.800%, 4/15/2013, Non Callable, (AMBAC)...................... 225,000 264,305 AAA/NR Fayetteville Manlius, Central School District, General Obligation, 5.000%, 6/15/2016, Callable 6/15/2012 @ 101, (FGIC)........... 375,000 401,434 Ilion, Central School District, General Obligation, Series B AAA/NR 5.500%, 6/15/2015, Callable 6/15/2012 @ 101, (FGIC)........... 550,000 604,071 AAA/NR 5.500%, 6/15/2016, Callable 6/15/2012 @ 101, (FGIC)........... 500,000 549,660 AAA/AAA Long Island Power Authority, Electric Systems, Series F, 4.250%, 5/1/2033, Callable 11/1/2016 @ 100, (MBIA)............ 6,400,000 6,389,632 AAA/AAA Metropolitan Transportation Authority, Service Contracts, Series A, 5.000%, 7/1/2030, Callable 7/1/12 @ 100, (AMBAC) ... 2,000,000 2,101,760 AAA/AAA Mount Sinai, Union Free School District, General Obligation, 6.200%, 2/15/2012, Non Callable, (AMBAC)...................... 1,065,000 1,188,348 AAA/AAA New York Convention Center Development Corp., Hotel Unit Fee, Revenue, 5.000%, 11/15/2044, Callable 11/15/2015 @ 100, (AMBAC)................................................ 1,500,000 1,593,300 North Hempstead, General Obligation, Series B AAA/AAA 6.375%, 4/1/2009, Non Callable, (FGIC)........................ 570,000 600,945 AAA/AAA 6.400%, 4/1/2010, Non Callable, (FGIC)........................ 560,000 604,694 AAA/AAA Oneida County, IDA Civic Facilities, Hamilton College Project, Series B, 4.000%, 7/1/2022, Callable 7/1/2017 @ 100, (MBIA)... 500,000 493,210 NR/AAA Oneida County, IDA Civic Facilities, Mohawk Valley Network, St. Luke's Memorial Hospital, 5.000%, 1/1/2013, Callable 1/1/2008 @ 101, (FSA)................................ 2,000,000 2,042,620 AAA/NR Oyster Bay, General Obligation, 5.000%, 3/15/2011, Non Callable, (FSA) .......................................... 430,000 452,382 A1/AA- Port Authority of New York & New Jersey, 5.000%, 9/1/2033, Callable 9/1/2013 @ 101....................................... 5,000,000 5,301,300 AAA/AAA Rensselaer, City School District, Certificate of Participation, 5.000%, 6/1/2017, Callable 6/1/16 @ 100, (XLCA)............... 500,000 545,130 AAA/NR Southern Cayuga, Central School District, General Obligation, 5.000%, 5/15/2014, Callable 5/15/2012 @ 100, (FSA)............ 400,000 425,904
The accompanying notes are an integral part of the financial statements. 7 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- February 28, 2007 -- continued
Principal Fair Value Credit Ratings** Municipal Securities -- continued Amount (Note 2) ---------------- --------------------------------- --------- ---------- Other New York State Bonds -- continued Suffolk County, General Obligation, Series D AAA/AAA 5.000%, 11/1/2015, Callable 11/1/2008 @ 101, (FGIC)........... $1,125,000 $ 1,160,280 AAA/AAA 5.000%, 11/1/2016, Callable 11/1/2008 @ 101, (FGIC)........... 1,110,000 1,145,353 ----------- Total Other New York State Bonds................................. 29,871,553 ----------- Total Municipal Securities (Cost $91,788,228).................... 94,460,433 ----------- Short Term Investment (0.1%)(a) Dreyfus New York Municipal Cash Management Fund.................. 110,000 110,000 ----------- Total Investments (Cost $91,898,228) -- 99.7%.................... $94,570,433 Net Other Assets (Liabilities) -- 0.3%............................ 292,123 ----------- NET ASSETS -- 100.0%.............................................. $94,862,556 ===========
---------- (a) Variable or Floating Rate Security. Rate disclosed is as of February 28, 2007. **Credit Ratings given by Moody **Credit Ratings given by Moody's Investors Service, Inc. and Standard & Poor's Corp. (Unaudited) 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 of adequate quality by all standards. NR NR Not Rated. In the opinion of the Investment Advisor, 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. AMBAC Insured as to principal and interest by the American Municipal Bond Insurance Corp. FGIC Insured as to principal and interest by the Financial Guaranty Insurance Co. FHA Insured as to principal and interest by the Federal Housing Administration. FNMA Insured as to principal and interest by the Federal National Mortgage Association. FSA Insured as to principal and interest by Federal Security Assurance. LOC Letter of Credit MBIA Insured as to principal and interest by the Municipal Bond Insurance Association. POL CTL-SRF Insured as to principal and interest by the Pollution Control State Revenue Fund. SPA Standby Purchase Agreement XLCA Insured as to principal and interest by the XL Capital Assurance The accompanying notes are an integral part of the financial statements. 8 THE EMPIRE BUILDER TAX FREE BOND FUND Portfolio of Investments -- February 28, 2007 -- continued Summary of Portfolio Holdings (Unaudited): Percent of The Empire Builder Tax Free Bond Fund Net Assets ------------------------------------- ---------- New York City ............................................... 25.2% New York State Agencies ..................................... 42.9 Other New York State Bonds .................................. 31.5 Short Term Investments ...................................... 0.1 ---- 99.7% ==== The accompanying notes are an integral part of the financial statements. 9 THE EMPIRE BUILDER TAX FREE BOND FUND Statement of Assets and Liabilities February 28, 2007
Assets: Investments in securities, at fair value (cost $91,898,228) (Note 2)...................... $94,570,433 Cash...................................................................................... 101,338 Interest and dividends receivable......................................................... 808,384 Receivable for capital shares issued...................................................... 41 Prepaid expenses and other assets......................................................... 52,823 ----------- Total Assets............................................................................ 95,533,019 Liabilities: Dividends payable......................................................... $ 8,493 Payable for investments purchased......................................... 489,885 Payable for capital shares redeemed....................................... 35,881 Advisory fees payable (Note 4)............................................ 29,052 Administration fees payable (Note 4)...................................... 18,874 Transfer agency fees payable (Note 4)..................................... 32,250 Custodian fees payable.................................................... 6,411 Compliance services fees payable (Note 4)................................. 509 Other accrued expenses.................................................... 49,108 ----------- Total Liabilities....................................................................... 670,463 ----------- Net Assets................................................................................... $94,862,556 =========== Net Assets: Capital................................................................................... $91,606,961 Accumulated undistributed net investment income........................................... 108,267 Accumulated undistributed net realized gains from investments............................. 475,123 Net unrealized appreciation of investments................................................ 2,672,205 ----------- Net Assets................................................................................... $94,862,556 =========== Builder Class: Net Assets................................................................ $45,009,511 Shares of Beneficial Interest Outstanding................................. 2,550,839 ----------- Net Asset Value, Offering and Redemption Price per share.................. $ 17.64 =========== Premier Class: Net Assets................................................................ $49,853,045 Shares of Beneficial Interest Outstanding................................. 2,824,747 ----------- Net Asset Value, Offering and Redemption Price per share.................. $ 17.65 ===========
The accompanying notes are an integral part of the financial statements. 10 THE EMPIRE BUILDER TAX FREE BOND FUND Statement of Operations For the Year Ended February 28, 2007
Investment Income: Interest.................................................................................. $4,302,596 Dividend.................................................................................. 40,317 ---------- Total Investment Income................................................................... 4,342,913 Expenses: Advisory fees (Note 4).................................................... $ 388,744 Administration fees (Note 4).............................................. 206,000 Fund accounting fees (Note 4)............................................. 62,438 Transfer agency fees -- Builder Class (Note 4)............................. 118,228 Transfer agency fees -- Premier Class (Note 4)............................. 29,027 Custody fees.............................................................. 35,678 Trustees' fees (Note 4)................................................... 41,995 Compliance services fee (Note 4).......................................... 61,245 Legal fees................................................................ 72,734 Other fees................................................................ 144,985 ---------- Total expenses.......................................................... 1,161,074 Less: Custody fee credit................................................ (19,748) ---------- Total Net Expenses........................................................................ 1,141,326 ---------- Net Investment Income........................................................................ 3,201,587 ---------- Realized/Unrealized Gains on Investments (Notes 2 and 3) Net realized gains from investment transactions........................... 851,324 Change in unrealized appreciation/depreciation from investment transactions................................................. (643,480) ---------- Net realized/unrealized gains from investments.......................................... 207,844 ---------- Change in net assets resulting from operations............................................... $3,409,431 ==========
The accompanying notes are an integral part of the financial statements. 11 THE EMPIRE BUILDER TAX FREE BOND FUND Statements of Changes in Net Assets
Year Ended Year Ended February 28, 2007 February 28, 2006 ----------------- ----------------- From Investment Activities: Operations: Net investment income ............................................. $ 3,201,587 $ 2,911,121 Net realized gains (losses) from investment transactions .......... 851,324 (118,027) Change in unrealized appreciation/depreciation from investment transactions ......................................... (643,480) (555,577) ------------- ------------- Change in net assets resulting from operations .................... 3,409,431 2,237,517 ------------- ------------- Distributions to Shareholders from: Net investment income: Builder Class ..................................................... (1,465,943) (1,312,241) Premier Class ..................................................... (1,721,433) (1,540,648) Net realized gains from investment transactions: Builder Class ..................................................... (150,345) (24,867) Premier Class ..................................................... (165,902) (27,553) ------------- ------------- Total distributions ............................................. (3,503,623) (2,905,309) ------------- ------------- Change in net assets from capital share transactions ................. (6,906,289) (6,003,679) ------------- ------------- Change in net assets .............................................. (7,000,481) (6,671,471) Net Assets: Beginning of period ............................................... 101,863,037 108,534,508 End of period ..................................................... $ 94,862,556 $ 101,863,037 ============= ============= Accumulated net investment income ................................. $ 108,267 $ 35,403 ============= ============= Capital Transactions: Builder Class Proceeds from shares issued ....................................... $ 731,923 $ 1,090,241 Dividends reinvested .............................................. 1,509,355 1,193,736 Value of shares redeemed .......................................... (5,504,685) (5,861,452) ------------- ------------- Total Builder Class ............................................. (3,263,407) (3,577,475) ------------- ------------- Premier Class Proceeds from shares issued ....................................... 469,568 827,135 Dividends reinvested .............................................. 1,623,363 1,301,277 Value of shares redeemed .......................................... (5,735,813) (4,554,616) ------------- ------------- Total Premier Class ............................................. (3,642,882) (2,426,204) ------------- ------------- Change in net assets from capital share transactions .............. $ (6,906,289) $ (6,003,679) ============= ============= Share Transactions: Builder Class Issued ............................................................ 41,662 61,598 Reinvested ........................................................ 85,919 67,498 Redeemed .......................................................... (313,777) (331,422) ------------- ------------- Total Builder Class Shares ...................................... (186,196) (202,326) ------------- ------------- Premier Class Issued ............................................................ 26,740 46,728 Reinvested ........................................................ 92,388 73,571 Redeemed .......................................................... (326,261) (257,400) ------------- ------------- Total Premier Class Shares ...................................... (207,133) (137,101) ------------- -------------
The accompanying notes are an integral part of the financial statements. 12 THE EMPIRE BUILDER TAX FREE BOND FUND Financial Highlights For a share of beneficial interest outstanding throughout each period
Year Ended Year Ended Year Ended February 28, 2007 February 28, 2006 February 29, 2005 ------------------ ------------------- ------------------ Builder Premier Builder Premier Builder Premier Class Class Class Class Class Class ------- ------- ------- ------- ------- ------- Net Asset Value, Beginning of Period ....... $ 17.66 $ 17.66 $ 17.77 $ 17.77 $ 18.12 $ 18.13 ------- ------- ------- ------- ------- ------- Investment Activities: Net investment income ..... 0.56 0.59 0.46 0.50 0.41 0.45 Net realized/unrealized gains/(losses) on investments ............. 0.04 0.05 (0.10) (0.10) (0.22) (0.23) ------- ------- ------- ------- ------- ------- Total from Investment Operations .............. 0.60 0.64 0.36 0.40 0.19 0.22 ------- ------- ------- ------- ------- ------- Distributions: Net investment income ..... (0.56) (0.59) (0.46) (0.50) (0.41) (0.45) Net realized capital gains (0.06) (0.06) (0.01) (0.01) (0.13) (0.13) ------- ------- ------- ------- ------- ------- Total distributions ....... (0.62) (0.65) (0.47) (0.51) (0.54) (0.58) ------- ------- ------- ------- ------- ------- Net Asset Value, End of Period ............. $ 17.64 $ 17.65 $ 17.66 $ 17.66 $ 17.77 $ 17.77 ======= ======= ======= ======= ======= ======= Total Return ................. 3.44% 3.70% 2.07% 2.26% 1.11% 1.29% Ratios/Supplementary Data: Net Assets, End of Period (in thousands) .......... $45,010 $49,853 $48,323 $53,540 $52,222 $56,313 Ratios of Net Investment Income to Average Net Assets .............. 3.19% 3.39% 2.67% 2.86% 2.32% 2.55% Ratios of Net Expenses to Average Net Assets(b) 1.28% 1.08% 1.20% 1.01% 1.18% 0.95% Ratios of Expenses to Average Net Assets* .. 1.30% 1.10% 1.21% 1.02% 1.22% 0.99% Portfolio Turnover Rate(a) 134.56% 134.56% 52.14% 52.14% 100.38% 100.38%
Year Ended Year Ended February 28, 2004 February 28, 2003 ------------------- ------------------- Builder Premier Builder Premier Class Class Class Class ------- ------- ------- ------- Net Asset Value, Beginning of Period ....... $ 18.08 $ 18.08 $ 17.80 $ 17.80 ------- ------- ------- ------- Investment Activities: Net investment income ..... 0.51 0.55 0.61 0.66 Net realized/unrealized gains/(losses) on investments ............. 0.22 0.23 0.54 0.54 ------- ------- ------- ------- Total from Investment Operations .............. 0.73 0.78 1.15 1.20 ------- ------- ------- ------- Distributions: Net investment income ..... (0.51) (0.55) (0.61) (0.66) Net realized capital gains (0.18) (0.18) (0.26) (0.26) ------- ------- ------- ------- Total distributions ....... (0.69) (0.73) (0.87) (0.92) ------- ------- ------- ------- Net Asset Value, End of Period ............. $ 18.12 $ 18.13 $ 18.08 $ 18.08 ======= ======= ======= ======= Total Return ................. 4.16% 4.40% 6.62% 6.90% Ratios/Supplementary Data: Net Assets, End of Period (in thousands) .......... $55,504 $61,048 $56,677 $61,025 Ratios of Net Investment Income to Average Net Assets .............. 2.85% 3.03% 3.44% 3.71% Ratios of Net Expenses to Average Net Assets(b) 1.04% 0.86% 1.16% 0.89% Ratios of Expenses to Average Net Assets* .. 1.05% 0.87% 1.16% 0.89% Portfolio Turnover Rate(a) 202.77% 202.77% 213.97% 213.97%
---------- * The ratio does not include a reduction of expenses for custodian fee credits of cash balances maintained with the custodian or amounts reimbursed by the Administrator. (a) Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. (b) Ratio as disclosed reflects the impact of custody fee credits from the custodian. Had the custody credits not been included the impact would have been to increase the ratios by 0.02%, 0.01%, 0.01%, 0.01% and 0.00%, for the years 2007, 2006, 2005, 2004 and 2003, respectively. The accompanying notes are an integral part of the financial statements. 13 THE EMPIRE BUILDER TAX FREE BOND FUND Notes to Financial Statements February 28, 2007 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 (the "1940 Act"), 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. Under the Fund's organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts with its vendors and others that provide for general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. 2. Significant Accounting Policies: The following is a summary of significant accounting policies adhered to 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 ("GAAP"). Use of Estimates Estimates and assumptions are required to be made regarding amounts of income and expenses, assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statement. 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 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 fair value. The methods used by the pricing service and the quality of valuations so established are reviewed by Glickenhaus & Co. (the "Adviser"), under the general supervision of the Trustees of the Fund. Securities for which quotations are not readily available are stated at fair value using procedures approved by the Trustees of the Fund. Short-term debt securities having remaining maturities of sixty (60) days or less are stated at amortized cost, which approximates market value. Investments in investment companies are reported at their respective net asset values as reported by those companies. 14 THE EMPIRE BUILDER TAX FREE BOND FUND Notes to Financial Statements -- continued February 28, 2007 New Accounting Pronouncements In July 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes." FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required no later than the last business day of the first financial statement reporting period for fiscal years beginning after December 15, 2006. At this time, management is evaluating the implications of FIN 48 and its impact on the Fund's financial statements. In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 ("SFAS 157"), "Fair Value Measurements." This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS 157 applies to fair value measurements already required or permitted by existing standards. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current accounting principles generally accepted in the United States of America from the application of this Statement relate to the definition of fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. At this time, the Fund does not believe the adoption of SFAS 157 will significantly impact the financial statement amounts; however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period. Security Transactions and Investment Income Security transactions are accounted for no later than one business day after trade date. However, for financial reporting purposes, security transactions are accounted for on 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. 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. 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. Therefore, no federal income tax provision is required. 15 THE EMPIRE BUILDER TAX FREE BOND FUND Notes to Financial Statements -- continued February 28, 2007 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 GAAP. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature (e.g. reclass of market discounts, gain/loss, paydowns and distributions), 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 and expenses, other than class-specific expenses, are allocated daily to each class of shares based on shares outstanding. Realized and unrealized gains and losses are allocated based on relative net assets. 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 for the year ended February 28, 2007. 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 year ended February 28, 2007, amounted to $136,482,535 and $122,068,635, respectively. During the year, there were no purchases or sales of long-term U.S. Government Securities. 4. Advisory Fees and Other Related Party Transactions: The Fund retains the Adviser to act as investment adviser pursuant to an Investment Advisory Agreement. As compensation for its advisory services, the Adviser receives a fee accrued 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. The Adviser 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 year ended February 28, 2007, there was no reduction of advisory fees pursuant to this agreement. 16 THE EMPIRE BUILDER TAX FREE BOND FUND Notes to Financial Statements -- continued February 28, 2007 BISYS Fund Services Ohio, Inc. ("BISYS Ohio" or the "Administrator") and BISYS Fund Services, Inc. ("BISYS"), subsidiaries of The BISYS Group, Inc., serves as the Fund's administrator, transfer agent and fund accountant. BISYS Ohio and BISYS receive compensation for administration and fund accounting services at a rate of 0.15% and 0.03%, respectively, of average daily net assets of the Fund (subject to certain minimum amounts), including reimbursement for certain expenses incurred. 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. Under a Compliance Services Agreement between the Fund and BISYS Ohio (the "CCO Agreement"), BISYS Ohio makes an employee available to serve as the Fund's Chief Compliance Officer (the "CCO"). Under the CCO Agreement, BISYS Ohio also provides infrastructure and support in implementing the written policies and procedures comprising the Fund's compliance program, including support services to the CCO. Expenses incurred for the Fund are reflected on the Statement of Operations as "Compliance service fees". BISYS Ohio pays the salary and other compensation earned by any such individuals as employees of BISYS Ohio. Certain Officers and Trustees of the Fund are affiliated with the Adviser or the Administrator. Such Officers and Trustees receive no compensation from the Fund for serving in their respective roles. Each of the four non-interested Trustees who serve on both the Board and the Audit Committee are compensated $2,100 in retainer per quarter and a $900 fee for each regularly scheduled meeting, plus reimbursement for certain expenses. During the year ended February 28, 2007, actual Trustee compensation was $46,000 in total from the Fund. 5. Concentration of Credit Risk: The Fund invests primarily in debt instruments of municipal issuers in the New York State. The issuers' abilities to meet their obligations may be affected by economic developments in New York State or its region. 6. Federal Income Tax Information: The tax character of dividends paid to shareholders during the fiscal year ended February 28, 2007 were as follows:
Distributions paid from ----------------------- Total Ordinary Net Long-Term Total Taxable Tax Exempt Distributions Income Distributions Distributions Distributions Paid* -------- ------------- ------------- ------------- ------------- The Empire Builder Tax Free Bond Fund................... $55,404 $316,247 $371,651 $3,166,469 $3,538,120
17 THE EMPIRE BUILDER TAX FREE BOND FUND Notes to Financial Statements -- continued February 28, 2007 The tax character of dividends paid to shareholders during the fiscal year ended February 28, 2006 were as follows: Distributions paid from
Distributions paid from ----------------------- Total Ordinary Net Long-Term Total Taxable Tax Exempt Distributions Income Distributions Distributions Distributions Paid* -------- ------------- ------------- ------------- ------------- The Empire Builder Tax Free Bond Fund................... $10,637 $41,876 $52,513 $2,831,143 $2,883,656
As of February 28, 2007 the components of accumulated earnings (deficit) on a tax basis were as follows:
Undistributed Undistributed Undistributed Long-Term Ordinary Tax-Exempt Capital Accumulated Income Income Gains/Losses Earnings ------------- ------------- ------------- ----------- The Empire Builder Tax Free Bond Fund.......... $409,401 $116,760 $9,477 $535,638
Total Accumulated Unrealized Accumulated Distributions Capital and Appreciation/ Earnings/ Payable Other Losses (Depreciation)** (Deficit) ------------- ------------ ---------------- ------------ The Empire Builder Tax Free Bond Fund.......... $(8,493) $ -- $2,728,450 $3,255,595
---------- * Total distributions paid may differ from the amount reported in the Statement of Changes in Net Assets because for tax purposes distributions are recognized when actually paid. ** The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the difference between book and tax amortization methods for premium and market discount. As of February 28, 2007, the cost, gross unrealized appreciation and gross unrealized depreciation on securities for federal income tax purposes, were as follows:
Tax Net Unrealized Tax Unrealized Unrealized Appreciation Tax Cost Appreciation Depreciation (Depreciation) -------- -------------- ------------ -------------- The Empire Builder Tax Free Bond Fund.......... $91,841,983 $2,746,299 $(17,849) $2,728,450
18 Report of Independent Registered Public Accounting Firm To the Trustees and Shareholders of The Empire Builder Tax Free Bond Fund: In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The Empire Builder Tax Free Bond Fund (the "Fund") at February 28, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Columbus, Ohio April 16, 2007 19 Other Information (Unaudited) A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling 1-800-847-5886; and (ii) on the Securities and Exchange Commission's (the "Commission") website at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available (i) without charge, upon request, by calling 1-800-847-5886; and (ii) on the Commission's website at http://www.sec.gov. The Fund files a complete Schedule of Portfolio Holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available without charge on the Commission's website at http://www.sec.gov, or may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 20 THE MANAGEMENT (Unaudited)
Independent Trustees Number of Positions Portfolios Held With Overseen for Directorships The Empire Term of The Empire Held Outside Name, Address, and Builder Tax Free Office/Length Principal Occupation(s) Builder Tax Free the Fund Birthdate Bond Fund of time served During the Past 5 Years Bond Fund Complex ---------------------- ---------------- -------------- --------------------------------- ---------------- ------------- EDWARD A. FALKENBERG....... Trustee Since Principal, ACME Real Estate 1 None 23 Oak Lane June 1989 (1998 to present) Scarsdale, NY 10583 09/40 EDWARD A. KUCZMARSKI....... Trustee Since Certified Public Accountant, 1 Director of Hays & Company April 1984 Managing Partner, Hays & Company New York 477 Madison Ave., 10th Flr LLP (1980 to present) Daily Tax-Free New York, NY 10022 Income Fund, Inc. 11/49 and 9 Funds within the Reich & Tang Complex CAROLINE E. NEWELL......... Trustee Since Head, Park Ave. Christian Church 1 Director of PACCDS April 1984 Day School (2001 to present); Head, New York 1010 Park Ave. Le Chateau des Enfants Daily Tax-Free New York, NY 10028 (1991 to present) Income Fund, Inc. 07/40 JOHN P. STEINES, JR........ Trustee Since Professor of Law, New York University 1 Director of NYU School of Law, Rm 440 August 1984 School of Law (1978 to present) and New York 40 Washington Square. So. Counsel, Kronish, Lieb, Weiner & Hellman Daily Tax-Free New York, NY 10012 (law firm) (2004 to present); Counsel, Income Fund, Inc. 10/48 Deloitte & Touche LLP (2001 to 2004) Interested Persons SETH M. GLICKENHAUS*....... Trustee Since General Partner of Glickenhaus & Co. 1 None 546 Fifth Avenue, 7th Floor Chairman of April 1984 (1961 to present) New York, NY 10036-5000 the Board 03/14 and President
---------- * Mr. Glickenhaus is an "interested person" (as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended) of the Fund because he is a General Partner of Glickenhaus & Co., the Adviser.
Officers of the Fund MICHAEL J. LYNCH........... Senior Vice Indefinite, Director, Unit Trust Department 546 Fifth Avenue, 7th Floor President since Glickenhaus & Co. (1997 to Present) New York, NY 10036 March 1997 07/62 KINGA KAPUSCINSKI.......... Secretary Indefinite, Assistant Counsel, BISYS Fund Services 100 Summer Street since (2004 - present); Associate, Goodwin Procter Ste. 1500 December 2004 LLP (2001 - 2004); Senior Federal Law Clerk Boston, MA 02110 and Federal Law Clerk, U.S. District Court for 06/72 the District of Massachusetts (1999 - 2001) AARON J. MASEK............. Treasurer Indefinite, Vice President, Fund Administration & Oversight 3435 Stelzer Road since Services, BISYS Fund Services, Inc., Columbus, Ohio 43219 June 2005 1997 to present 01/74 FREDERICK J. SCHMIDT....... Chief Since June 2004 Senior Vice President and Chief Compliance 585 Stewart Avenue Compliance Term of Office Officer, CCO Services of BISYS Fund Services Garden City, NY 11530 and Anti- expires 2007 since 2004; Chief Compliance Officer of four other 07/59 Money investment companies or fund complexes for which CCO Laundering Services of BISYS Fund Services provides compliance Officer services, since 2004; President, FJS Associates (regulatory consulting firm) from 2002 to 2004; Vice President, Credit Agricole Asset Management, U.S. from 1987 to 2002
21 [LOGO] EMPIRE BUILDER 3435 Stelzer Road Columbus, Ohio 43219 1-800-847-5886 [LOGO] EMPIRE BUILDER TAX FREE BOND FUND Annual Report February 28, 2007 Investment Adviser and Distributor Glickenhaus & Co. 546 Fifth Avenue 7th Floor New York, New York 10036 Fund Accountant BISYS Fund Services, Inc. 3435 Stelzer Road Columbus, Ohio 43219 Transfer Agent and Administrator BISYS Fund Services Ohio, Inc. 3435 Stelzer Road Columbus, Ohio 43219 Custodian State Street Bank & Trust Co. 800 Pennsylvania Avenue 5th Floor Kansas City, Missouri 64105-1307 Legal Counsel Ropes & Gray One International Place Boston, Massachusetts 02110 Independent Registered Public Accounting Firm 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. 539478 Item 2. Code of Ethics. (a) 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. This code of ethics is included as an Exhibit. (b) During the period covered by the report, with respect to the registrant's code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions; there have been no amendments to, nor any waivers granted from, a provision that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item 2. Item 3. Audit Committee Financial Expert. 3(a)(1) The registrant's board of directors has determined that the registrant has at least one audit committee financial expert serving on its audit committee. 3(a)(2) The audit committee financial expert is Edward A. Kuczmarski, who is "independent" for purposes of this Item 3 of Form N-CSR. Item 4. Principal Accountant Fees and Services. Current Year Previous Year ------------ ------------- Audit Fees $33,000 $31,000 Audit-Related Fees $ 2,750 $ 2,500 Tax Fees $ 4,250 $ 4,000 All Other Fees $ 0 $ 0 Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Schedule of Investments. Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of Matters to a Vote of Security Holders. Not applicable. Item 11. Controls and Procedures. (a)The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure 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)There were no changes 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 second fiscal quarter of the period covered by this report that have materially affected or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) The code of ethics that is the subject of the disclosure required by Item 2 is attached hereto. (a)(2) Certifications pursuant to Rule 30a-2(a) are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) are furnished herewith. 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) The Empire Builder Tax Free Bond Fund By (Signature and Title)* /s/ Aaron Masek ---------------------- Aaron Masek, Treasurer Date May 4, 2007 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 May 4, 2007 By (Signature and Title)* /s/ Aaron Masek -------------------------- Aaron Masek, Treasurer Date May 4, 2007 * Print the name and title of each signing officer under his or her signature.