May 25, 2007

Dear Shareholder,

      It is time again for me to provide the operating results for the semi-annual period ended March 31, 2007. The primary performance statistics outlined on page 17 look great due in part to the extraordinary distribution which we made in November on United Airlines/ Denver International Airport bonds. Shareholders who acquired shares after that date did not benefit from this distribution so their results are not as positive.

      This is the current situation. We are earning an average of about 4% on rated short term low risk securities. By extending maturities as much as 40 years we can only improve the return on that portion of the portfolio by slightly more than 1%. I don’t presently favor this trade off and I prefer staying with the short paper until the market gives us a reason to change strategies.

      Our hope is to supplement the existing income stream with potential values that occasionally present themselves in the municipal bond market. We have benefited from these special situations in past years, however the timing is difficult to predict. Often they do not happen when they are supposed to or they may not happen at all. Opportunities have presented themselves in the past when issuers have become too optimistic about their growth expectations in the face of a slow down in the housing market. These credits may need to be restructured which would offer us a source of new product. As I indicated earlier, we have plenty of liquidity to take advantage of these situations when and if they develop.

      Income could experience some ebb and flow in upcoming months so I would encourage investors to keep an eye on the big picture as the year unfolds. We expect to continue to perform well in terms of our total return including appreciation as well as current income.

Investment Adviser

Transfer, Shareholder Servicing, and Dividend
Disbursing Agent

Distributor

Custodian of Portfolio Securities

Independent Registered Public Accounting
Firm

Legal Counsel

This report is submitted for the general information of the shareholders of Colorado BondShares — A Tax-Exempt Fund. This report must be preceded or accompanied by a Prospectus of the Fund. The prospectus contains information concerning the investment policies and expenses of the portfolio in addition to other pertinent information. Shares of Colorado BondShares — A Tax-Exempt Fund are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including possible loss of the principal amount invested.

      As a shareholder of Colorado BondShares — A Tax-Exempt Fund (the “Fund”), you incur two types of costs:

      The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing cost of investing in other mutual funds.

      The Example is based on an investment of $1,000 made at the beginning of October 1, 2006 and held for the entire six month period ended March 31, 2007.

Actual Expenses

      The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

      The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the 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 the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the 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 sales charges (loads). Therefore, the second line of 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.

      *Expenses are equal to the Fund’s annualized expense ratio, 0.56%, based on actual expenses for the period, multiplied by the average account value over the period, multiplied by 182/365 (number of days in the period).

      ¹The semi-annual return includes an interest payment representing four years of unpaid interest relating to the Fund’s holding of United Airlines/ Denver International Airport bonds that is a non-recurring event outside the control of the Fund. This event occurred in the first quarter of the semi-annual period ended March 31, 2007.

Colorado BondShares — A Tax-Exempt Fund

Based on a Percentage of Total Net Assets as of March 31, 2007

SECTOR BREAKDOWN (unaudited)

Colorado BondShares — A Tax-Exempt Fund

Based on a Percentage of Total Net Assets as of March 31, 2007

A Tax-Exempt Fund

Schedule of Investments (unaudited)

March 31, 2007

A Tax-Exempt Fund

Schedule of Investments (unaudited) —  (Continued)

A Tax-Exempt Fund

Schedule of Investments (unaudited) —  (Continued)

A Tax-Exempt Fund

Schedule of Investments (unaudited) —  (Continued)

A Tax-Exempt Fund

Schedule of Investments (unaudited) —  (Continued)

A Tax-Exempt Fund

Schedule of Investments (unaudited) —  (Continued)

A Tax-Exempt Fund

Schedule of Investments (unaudited) —  (Continued)

A Tax-Exempt Fund

Schedule of Investments (unaudited) —  (Continued)

A Tax-Exempt Fund

Schedule of Investments (unaudited) —  (Continued)

A Tax-Exempt Fund

Schedule of Investments (unaudited) —  (Continued)

A Tax-Exempt Fund

Schedule of Investments (unaudited) —  (Continued)

See accompanying notes to financial statements.

A Tax-Exempt Fund

Statement of Assets and Liabilities (unaudited)

March 31, 2007

See accompanying notes to financial statements.

A Tax-Exempt Fund

Statement of Operations

For the Six Months Ended March 31, 2007 (unaudited)

See accompanying notes to financial statements.

A Tax-Exempt Fund

Statement of Changes in Net Assets

See accompanying notes to financial statements.

A Tax-Exempt Fund

Financial Highlights

See accompanying notes to financial statements.

A Tax-Exempt Fund

Notes to Financial Statements (unaudited)

      Colorado BondShares — A Tax-Exempt Fund (the “Fund”) is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management company. The Fund’s investment objectives are to maximize income exempt from federal income taxes and from personal income taxes of the State of Colorado to the extent consistent with the preservation of capital and to seek opportunities for capital appreciation. The Fund’s investment adviser is Freedom Funds Management Company (“Freedom Funds”). The following is a summary of significant accounting policies consistently followed by the Fund.

      The values of most investment securities are determined at their market price using prices quoted by a national independent pricing service approved by the Fund’s Board of Trustees. In cases where a market price is not available from the pricing service, or where the Fund determines that the “market price” so determined is not reflective of the true “fair value” or realizable value of these securities, the securities are valued at “fair value” as determined in good faith by the Fund’s Board of Trustees. In either event, the Fund values the municipal bonds and other securities taking into consideration yield, stability, risk, quality, coupon, maturity, type of issue, trading characteristics and any other relevant trading or market factors. The Fund records amortization of premiums and accretion of original discounts on zero coupon bonds using the effective yield method, in accordance with federal income tax purposes. Short-term debt securities having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value.

      The Fund intends to comply with the requirements of subchapter M of the Internal Revenue Code, as amended, applicable to regulated investment companies and to distribute all its net investment income to shareholders. The Fund distributes investment income monthly and due to the tax-exempt nature of its investments the income is generally non-taxable to the shareholders. The Fund distributes net realized capital gains, if any, to its shareholders at least annually. Income distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to the differing treatment of tax allocations. As of March 31, 2007, the majority of the Fund’s distributable earnings is attributable to capital gains.

A Tax-Exempt Fund

Notes to Financial Statements (unaudited) — (Continued)

      Investment transactions are accounted for on the date the investments are purchased or sold (trade date). Dividends to shareholders are declared each business day and paid monthly. Distributions to shareholders are recorded on the ex-dividend date. Realized gains and losses from investment transactions are calculated using the identified-cost basis, which is the same basis the Fund uses for federal income tax purposes. Interest income is recorded on the accrual basis. The Fund concentrates its investments in Colorado and, therefore, may have more credit risks related to the economic conditions of Colorado than a portfolio with a broader geographical diversification. The Fund invests in non-rated securities, which may be subject to a greater degree of credit risk and risk of loss of income and principal, and may be more sensitive to economic conditions than lower yielding, higher rate fixed income securities. The Fund discontinues the accrual of interest income on municipal bonds when the securities become delinquent as to payment of principal or interest, or when the Fund’s investment adviser determines that an uncertainty exists as to the realization of all or a portion of the principal balance. The face amount of bonds for which the accrual of interest income has been discontinued approximates $14,437,529 and such bonds have an aggregate market value of $1,798,334, or less than 1% of net assets, as of March 31, 2007.

      The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

      The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund.

      The Fund distributed $587,743 in excess of net investment income to the shareholders during the fiscal year ended September 30, 2006. To correct this over distribution, the November 2006 dividend to shareholders was reduced by $587,743. In March 2007, the Adviser reimbursed shareholders $3,424 for the amount of the over distribution that was not recoverable due to closed

A Tax-Exempt Fund

Notes to Financial Statements (unaudited) — (Continued)

accounts. These adjustments are included in dividends to shareholders from net investment income presented on the statement of changes in net assets.

      In the first quarter of the semi-annual period ended March 31, 2007 the Fund received an interest payment of approximately $3.8 million representing four years of unpaid interest relating to the Fund’s holding of United Airlines/ Denver International Airport bonds that is a non-recurring event outside of the control of the Fund. The interest income was received October 19, 2006 by the Fund and distributed to shareholders as part of the November 15, 2006 dividend.

      On July 13, 2006, The Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. FIN 48 requires the evaluations of tax positions taken or expected to be 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 for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management believes that the adoption of FIN 48 will have no impact on the financial statements of the Fund.

A Tax-Exempt Fund

Notes to Financial Statements (unaudited) — (Continued)

      The Fund has an unlimited number of no par value shares of beneficial interest authorized. Transactions in shares of beneficial interest for the six month period ended March 31, 2007 and the year ended September 30, 2006 were as follows:

      At March 31, 2007, the net unrealized appreciation on investments of $3,917,244 was comprised of gross appreciation of $12,305,414 and gross depreciation of $8,388,170.

      Management fees paid to Freedom Funds were in accordance with the investment advisory agreement with the Fund which provides for an annual fee equivalent to 0.5% of the net assets of the Fund. Freedom Funds pays all expenses associated with advertising, marketing, and distributing the Fund’s shares and serves as the transfer agent, dividend disbursing agent, and registrar for the Fund. Freedom Funds provided certain transfer agency and shareholder services as part of the management fee arrangement for the period ended March 31, 2007. Transfer agency expenses represent direct expenses charged to the Fund by third parties.

A Tax-Exempt Fund

Notes to Financial Statements (unaudited) — (Continued)

      Expenses paid indirectly by the Fund represent earnings credits on cash balances maintained with the Fund’s custodian bank, Wells Fargo Investments and Trust. The earnings credits resulted in offsetting custodian fees of $45,822, legal fees of $17,779 for services provided by Kutak Rock, portfolio pricing fees of $8,193 for services provided by Standard and Poor’s, a division of The McGraw-Hill Companies, shareholder report fees of $48,578 for services provided by Bowne and accounting fees of $25,000 for services provided by Anton Collins and Mitchell.

      The Board of Trustees of the Fund supervises the activities of the Fund, reviews the Fund’s service contracts and hires the companies that run the day-to-day operations of the Fund, such as the administrator, custodian, investment adviser, transfer agent and underwriter. The following table lists the trustees and officers of the Fund together with their positions held with the Fund and the term of office.

Officers and Trustees

Chairman of the Board

George N. Donnelly

Chairman of the Board of Trustees since inception of the Fund 1987

Independent Trustees

Bruce G. Ely

Trustee since July 2002

James R. Madden

Trustee since September 2004

Officer and Trustee¹

Andrew B. Shaffer¹

Trustee, Secretary and Treasurer since June 1995 and President since January 2003

¹Andrew B. Shaffer is an “interested person” of the Fund as defined in the Investment Company Act of 1940 (the “1940 Act”) by virtue of his position as both an officer and a trustee of the Fund as described in the table above.

      Additional information about the Fund’s trustees is included in the Statement of Additional Information (“SAI”) which is available, with charge, upon request, by calling us at 1-800-572-0069.

      The Fund does not invest in equity securities. Accordingly, there were no matters relating to a portfolio security considered during the 12 months ended June 30, 2006 with respect to which the Fund was entitled to vote. Applicable regulations require us to inform you that the foregoing proxy voting information is available on the SEC website at http://www.sec.gov or you may call us at 1-800-572-0069.

Quarterly Statement of Investments

      The Fund files a complete statement of investments with the Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at http://www.sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling 1-800-732-0330 or you may call us at 1-800-572-0069.