COMPOSITE GROUP
BOND
FUNDS
SEMIANNUAL
REPORT
JUNE 30,
1995
COMPOSITE
U.S. GOVERNMENT
SECURITIES, INC.
COMPOSITE
INCOME FUND, INC.
COMPOSITE
TAX-EXEMPT BOND
FUND, INC.
[LOGO]
PRESIDENTS
MESSAGE
ECONOMIC AND INTEREST RATE
OUTLOOK
FUNDS
INVESTMENT
HIGHLIGHTS
FUNDS
PORTFOLIOS
FINANCIAL
INFORMATION
FINANCIAL
STATEMENTS
FINANCIAL
HIGHLIGHTS
NOTES TO
FINANCIAL
STATEMENTS
MORE ABOUT
THE COMPOSITE
GROUP
PRESIDENT'S MESSAGE
[PHOTO, WILIAM PAPESH, PRESIDENT, COMPOSITE FUNDS]
Contrasted with 1994, the past six months was a period in which the bond
markets regained their respectability. And, as demonstrated once again, patient
investors had every reason to toast their good judgment in staying the course.
Each of the Composite Group bond funds showed marked improvement in results
for the six months ended June 30, 1995. For example, total returns including
reinvestment of dividends and capital gains for this period to Class A
shareholders was 12.57% from our U.S. Government Securities fund, 13.63% from
Composite Income, and 9.93% from our Tax-Exempt Bond Fund. These returns do not
include the initial sales charge. For a more complete discussion of performance,
please refer to the Investment Highlights section of this report which includes
returns to Class B shareholders and the effect of maximum sales charges to both
classes.
History has demonstrated that changes in interest rates tend to have a more
pronounced effect on longer-term bonds than on those of shorter maturities. For
this reason, at the beginning of the year we maintained longer-than-average
maturities in our portfolios in anticipation of declining interest rates. As we
expected, interest rates did come down during the last six months. Consequently,
we recently began to shorten maturities to achieve a prudent balance between
portfolio bond yields and investment risk.
The dynamics of the past 18 months reinforce the wisdom of investing in
mutual funds, offering as they do a combination of professional management and a
diversified pool of securities. To be sure, there will always be market
fluctuations. And investors should note that individual bonds, if held until
maturity, typically offer both a fixed rate of return and fixed principal value,
as contrasted with bond funds which cannot guarantee the return of principal
value upon redemption of Fund shares. But measured against the risks in owning
individual bonds, we continue to believe Composite Bond Funds provide a more
prudent alternative for the long-term investor.
Your business as well as your trust is important to us, and we will
continue in our quest to provide longer-term investment benefits consistent with
the objectives of the funds.
I am especially pleased to announce the selection of Kristianne Blake to
the Composite Group board of directors. President of a Spokane-based accounting
services firm, Mrs. Blake is a certified financial planner and certified public
accountant. Her work with individual clients in developing investment strategies
will bring us special expertise and we're delighted to have an individual with
her experience aboard.
William G. Papesh
President
ECONOMIC AND INTEREST RATE OUTLOOK
Following one of its worst declines in history in 1994, the bond market
staged a remarkable recovery over the past six months. The benchmark 10-year
U.S. Treasury note declined 1.63% during the first half of 1995, from 7.83% to
6.20%, as of June 30. The reduction in yields occurred in all maturities with
the exception of the short-term (one to three month) which remained essentially
unchanged. As described in the portfolio manager comments on each fund, we were
well-positioned to take advantage of this decline in yields.
As forecast in our annual report of December 31, 1994, the economy has
definitely shifted into a slower growth mode during the first half of 1995,
particularly during the second quarter. As a result, inflation pressures have
diminished and the capacity utilization rate has begun to ease. In addition to
this positive news for the bond market, investors are just now beginning to
respond to the very real prospects for federal government deficit reduction over
the next five years. Finally - and perhaps most importantly - although the
balanced budget amendment failed earlier this year, bi-partisan support for a
balanced budget is growing in the U.S. Congress and the Administration.
The Federal Reserve has done an outstanding job during the past 12 to 18
months, tightening money supply to bring about this economic slowdown. At this
point, the economy appears to be sufficiently weak to suggest the Federal
Reserve will be easing interest rates over the next few months. In fact, this
easing process began July 6, and we expect the Federal Reserve to ease very
slowly, being cautious to avoid stimulating the economy to a new round of
inflation.
As discussed in previous reports, we believe long-term prospects for low
inflation and low interest rates remain favorable. Productivity gains throughout
the American economy continue to contribute to the controlled inflation
environment, and worldwide competition should result in lower U.S. prices over
the long term. In addition, changes in key demographics should lead to
substantial increases in savings rates in the U.S. over the next five to ten
years. Coupled with the move to a balanced federal budget, we believe interest
rates are likely to trend significantly lower over the next two to three years.
Accordingly, we continue to believe that investors will be well-rewarded by
owning quality bond investments in the years ahead.
INVESTMENT HIGHLIGHTS
COMPOSITE U.S. GOVERNMENT SECURITIES, INC.
Composite U.S. Government Securities experienced solid returns over the
past six months as interest rates fell sharply. This performance is in sharp
contrast to last year, when the bond market experienced one of its worst
declines in history. The Fund has consistently taken advantage of opportunities
to add long-term value for shareholders, with significant success during the
first half of this year. To fulfill the objective of providing a high level of
current income, the Fund invested the majority of its assets in mortgage-backed
securities. Presently the Fund is composed of 74% mortgage-backed securities:
43% in fixed-rate Government National Mortgage Association (Ginnie Mae)
securities, 12% in adjustable-rate Ginnie Maes, and 19% in collateralized
mortgage obligations which are backed by Ginnie Maes. The remainder of the Fund
is invested predominantly in Treasury notes and bonds.
The decline in interest rates over the last six months has increased the
incentive for homeowners to refinance. Generally, as homeowners refinance, the
potential for prepayment of higher-yielding Ginnie Maes increases. However, even
at todays lower interest rate levels, our portfolio is well-insulated from major
prepayment risks since it is skewed heavily toward adjustable-rate and
low-coupon, fixed-rate mortgage-backed securities. In fact, the use of low
coupons was a contributing factor to the Funds strong first-half performance.
The Fund's average maturity was at the longer end of its intermediate range
over the last six months. This was clearly positive for the Fund, as it allowed
us to take full advantage of the decline in interest rates this year - with a
positive effect on the net asset value.
While Fund shares themselves are not guaranteed by the U.S. government, the
Fund is intended to provide a high level of current income consistent with
safety and liquidity. Portfolio investments are either direct obligations of or
guaranteed by the U.S. government, or collateralized by such securities. In
addition, the Fund continues to avoid the extremely volatile mortgage derivative
securities that were written about extensively in the press over the past year
and caused significant losses for a number of investment managers in 1994.
<TABLE>
FUND
PERFORMANCE
PERIODS ENDED 6/30/95
--------------------------------------
SIX MONTHS
<CAPTION>
CLASS A CLASS B
SHARES SHARES
------- -------
<S> <C> <C>
TOTAL RETURN
With sales charge 8.08% 9.11%
Without sales charge 12.57% 12.11%
PER SHARE
Dividends $.316 $.274
NET ASSET VALUES
Beginning $ 9.64 $ 9.64
Ending $10.52 $10.52
30-Day Yield 5.71% 5.07%
</TABLE>
--------------------------------------
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS
<CAPTION>
WITH WITHOUT
CLASS A SALES SALES
SHARES CHARGE CHARGE
------- ------ --------
<S> <C> <C>
ONE YEAR 8.47% 12.95%
FIVE YEARS 7.62% 8.49%
TEN YEARS 8.14% 8.58%
CLASS B
SHARES
------
ONE YEAR 9.01% 12.01%
LIFE OF CLASS 5.57% 7.93%
(SINCE 3/30/94)
</TABLE>
--------------------------------------
Reference to sales charges above is based on the maximum 4% initial sales charge
for Class A shares or maximum 3% contingent deferred sales charge for Class B
shares. Information presented represents past performance which cannot predict
future results. Investment returns and principal values of Fund shares will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
COMPOSITE INCOME FUND
Composite Income Fund experienced solid returns over the past six months as
interest rates fell sharply. This performance is in sharp contrast to last year,
when the bond market experienced a severe decline. The Fund has consistently
taken advantage of opportunities to add value for shareholders, with significant
success during the first half of this year.
Composite Income Fund was particularly well-positioned for the declining
interest rate environment of the first half of this year. The Fund's maturity
was at the longer end of its intermediate-maturity range, which offers the
potential to capture the full effect of the rate drop through a rising net asset
value. The Fund generally uses an intermediate-maturity profile (presently 12.4
years), which allows us to capture favorable yields for the benefit of our
shareholders who have intermediate to long-term time horizons.
In anticipation of a slightly weaker economy, the Fund took the opportunity
during the first half of the year to shift the focus of the corporate bond
sector to companies that are less sensitive to economic activity (i.e.
healthcare, defense, food products, and insurance). These moves helped to
increase the average credit-quality of the portfolio's bonds to A1/A+, as rated
by Moody's and Standard & Poor's, respectively. And, as an additional move to
strengthen the portfolio, the Fund increased its position in Treasury notes and
bonds.
The Fund remains well-structured to avoid the substantial risk of bonds
being called or refinanced in a lower-rate environment. Presently, the vast
majority (75%) of the Fund is invested in non-callable bonds, with another 10%
in low-coupon mortgages which are less susceptible to refinancing.
The intermediate average maturity of the Fund, portfolio diversification,
credit-quality, and the evaluation of the relative value within the fixed-income
markets are contributing factors we believe will continue to allow Composite
Income Fund to meet its long-term investment objectives.
<TABLE>
FUND PERFORMANCE
PERIODS ENDED 6/30/95
-----------------------------------------
SIX MONTHS
<CAPTION>
CLASS A CLASS B
SHARES SHARES
------- -------
<S> <C> <C>
TOTAL RETURN
With sales charge 9.03% 10.17%
Without sales charge 13.63% 13.17%
PER SHARE
Dividends $.293 $.258
NET ASSET VALUES
Beginning $ 8.29 $ 8.30
Ending $ 9.11 $ 9.12
30-Day Yield 5.73% 5.16%
</TABLE>
----------------------------------------
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS
<CAPTION>
WITH WITHOUT
CLASS A SALES SALES
SHARES CHARGE CHARGE
------ ------ -------
<S> <C> <C>
ONE YEAR 9.61% 14.22%
FIVE YEARS 8.77% 9.66%
TEN YEARS 8.34% 8.79%
CLASS B
SHARES
-------
ONE YEAR 10.30% 13.30%
LIFE OF CLASS 6.57% 8.92%
(SINCE 3/30/94)
</TABLE>
Reference to sales charges above is based on the maximum 4% initial sales charge
for Class A shares or maximum 3% contingent deferred sales charge for Class B
shares. Information presented represents past performance which cannot predict
future results. Investment returns and principal values of Fund shares will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
COMPOSITE TAX-EXEMPT BOND FUND
As discussed in the Economic & Interest Rate Outlook, the bond market
staged a remarkable recovery during the first half of 1995. Municipal bond
yields declined as well, although not as much as those of taxable bonds. The
ten-year AAA municipal bond yield declined 0.80% over the past six months - from
5.85% to 5.05% as of June 30 - resulting in strong price appreciation in the
Fund during the first half.
As reviewed in the annual report to shareholders last year, we extended the
Fund's average maturity to 15.8 years to position it for a potential interest
rate decline in 1995. This maturity posture, coupled with strong call protection
(66% non-callable) and high credit-quality (Aa/AA), contributed to very strong
investment performance over the past six months, with returns over the past
twelve months improving significantly over the previous twelve-month period.
In spite of its strong returns, the municipal bond market has
underperformed taxable bond yields over the past two months. Municipals have
been weighed down by investor concerns about some of the radical tax reform
proposals being discussed in the U.S. Congress, which could have negative
implications for municipal bonds.
While we believe there will be some form of tax reform in the future, we
are of the opinion that municipal bonds will retain their favorable tax status.
In early May, we shortened the average maturity of the Fund to its current 13.1
years in anticipation of market jitters over tax reform. This strategic move was
made to position the Fund to take advantage of anticipated market weakness in
municipal bonds as investors focused on these tax reform issues.
While we have no exposure to Orange County, California, its financial
condition continues to cause concerns for the municipal bond market. In fact, we
have consciously exercised prudence in our holdings of other municipal
securities in the state. Because of fiscal pressures, our minor presence in
California is secured by U.S. Treasury collateral or FGIC insurance.
We view the recent uncertainty and underperformance of municipal bonds as
creating outstanding value and will continue to monitor these and other factors
over the remainder of 1995 - looking for an opportunity to translate them into
enhanced returns for you, the shareholder.
<TABLE>
FUND PERFORMANCE
PERIODS ENDED 6/30/95
-------------------------------------
SIX MONTHS
<CAPTION>
CLASS A CLASS B
SHARES SHARES
------- -------
<S> <C> <C>
TOTAL RETURN
With sales charge 5.49% 6.49%
Without sales charge 9.93% 9.49%
PER SHARE
Dividends $.194 $.163
NET ASSET VALUES
Beginning $ 7.13 $ 7.13
Ending $ 7.64 $ 7.64
30-Day Yield 4.49% 3.81%
</TABLE>
-------------------------------------
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS
<CAPTION>
WITH WITHOUT
CLASS A SALES SALES
SHARES CHARGE CHARGE
------- ------ -------
<S> <C> <C>
ONE YEAR 4.61% 9.00%
FIVE YEARS 6.99% 7.88%
TEN YEARS 8.11% 8.56%
CLASS B
SHARES
------
ONE YEAR 5.11% 8.11%
LIFE OF CLASS 3.88% 6.25%
(SINCE 3/30/94)
</TABLE>
--------------------------------------
Reference to sales charges above is based on the maximum 4% initial sales charge
for Class A shares or maximum 3% contingent deferred sales charge for Class B
shares. Information presented represents past performance which cannot predict
future results. Investment returns and principal values of Fund shares will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. In certain circumstances, the alternative minimum tax,
as well as state and local taxes, may apply.
<TABLE>
COMPOSITE
U.S. GOVERNMENT
SECURITIES, INC.
PORTFOLIO OF
INVESTMENTS
IN SECURITIES
JUNE 30,
1995
COMPOSITE U.S. GOVERNMENT SECURITIES PORTFOLIO (UNAUDITED)
<CAPTION>
Principal Market
Amount Value
----------- -----------
U.S. TREASURY OBLIGATIONS 24.43%
<S> <C> <C>
$ 7,000,000 7.50%, due 11/15/2016 ........................................ $ 7,649,684
7,000,000 7.50%, due 01/31/1996 ........................................ 7,072,184
15,000,000 7.25%, due 05/15/2016 ........................................ 15,975,000
7,000,000 7.25%, due 08/15/2022 ........................................ 7,479,059
5,500,000 5.625%, due 08/31/1997 ....................................... 5,477,654
4,000,000 Zero coupon, due 08/15/2004 .................................. 2,235,947
------------
TOTAL U.S. TREASURY OBLIGATIONS (cost $46,643,151) 45,889,528
------------
MORTGAGE-BACKED SECURITIES 73.59%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION 54.94%
79,227 14.00%, due 06/15/2011 to 03/15/2012 ......................... 92,399
133,228 13.50%, due 08/15/2014 to 12/15/2014 ......................... 154,877
41,711 11.50%, due 07/15/2015 ....................................... 46,991
4,773,329 9.50%, due 07/15/2016 to 09/15/2020 .......................... 5,061,224
3,078,716 8.50%, due 05/15/2022 ........................................ 3,198,965
2,066,459 8.00%, due 04/15/2022 ........................................ 2,116,175
20,132,734 7.50%, due 12/15/2022 to 06/15/2024 .......................... 20,252,283
24,464,934 7.00%, due 07/15/2008 to 08/15/2023 .......................... 24,151,630
30,939,969 6.50%, due 03/20/2022 to 03/15/2024 .......................... 29,954,057
7,509,866 6.125%, due 12/20/2021 to 12/20/2022 ......................... 7,528,944
2,796,703 6.00%, due 05/20/2022 ........................................ 2,800,506
7,877,597 5.875%, due 09/20/2022 ....................................... 7,856,973
------------
103,215,024
------------
GNMA COLLATERALIZED MORTGAGE OBLIGATIONS 18.65%
2,303,246 Federal National Mortgage Association, 8.50%, due 02/25/2018 . 2,339,085
4,000,000 Federal National Mortgage Association, 8.25%, due 05/20/2020 . 4,167,760
6,408,000 Federal National Mortgage Association, 8.00%, due 06/25/2005 . 6,618,567
1,950,000 Federal National Mortgage Association, 7.50%, due 08/25/2001 . 2,018,952
2,230,000 Federal National Mortgage Association, 6.00%, due 08/25/2007 . 2,161,048
1,100,000 Federal National Mortgage Association, 5.75%, due 10/25/2010 . 1,090,012
8,500,000 Federal Home Loan Mortgage Corporation,
6.85%, due 07/25/2018 ........................................ 8,435,315
4,900,000 Merrill Lynch, 6.50%, due 08/27/2015 ......................... 4,762,114
2,000,000 Mortgage Capital Trust, 9.25%, due 06/01/2017 ................ 2,083,180
1,329,898 Morgan Stanley, 8.975%, due 06/01/2001 ....................... 1,356,098
------------
35,032,131
------------
TOTAL MORTGAGE-BACKED SECURITIES (cost $137,518,408) ........ 138,247,155
------------
SHORT-TERM INVESTMENT 1.44%
2,699,000 Repurchase agreement with Goldman Sachs, collateralized by
a U.S. Treasury Note, in a joint trading account at 6.00%
dated 06/30/1995, due 07/03/1995 with a maturity value
of $2,700,350 (cost $2,699,000) ............................. 2,699,000
------------
TOTAL INVESTMENTS (cost $186,860,559) ....................... 186,835,683
Other assets ($1,594,252) less liabilities ($568,905) ....... 1,025,347
------------
NET ASSETS $187,861,030
============
<FN>
FEDERAL INCOME TAX INFORMATION:
Net unrealized depreciation of investments at June 30, 1995, of $24,876, based
on aggregate cost of $184,860,559, was composed of gross depreciation of
$2,532,371 for investments having an excess of cost over value and gross
appreciation of $2,507,495 for investments having an excess of value over cost.
OTHER INFORMATION:
Purchases and sales (including maturities and principal repayments) of
investment securities, all of which were U.S. government securities, other than
short-term investments, aggregated $2,883,281 and $17,941,572, respectively,
during the six-month period ended June 30, 1995. Principal repayments of
mortgage-backed securities aggregated $3,661,872.
See accompanying notes to financial statements.
</FN>
</TABLE>
<TABLE>
COMPOSITE
INCOME
FUND, INC.
PORTFOLIO OF
INVESTMENTS
IN SECURITIES
JUNE 30,
1995
COMPOSITE INCOME FUND PORTFOLIO (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
------------- -----------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS 21.05%
$ 1,500,000 7.875%, due 08/15/2001 ........................................ $ 1,637,813
2,000,000 7.75%, due 01/31/2000 ......................................... 2,138,124
1,000,000 7.50%, due 12/31/1996 ......................................... 1,024,375
2,100,000 7.50%, due 11/15/2024 ......................................... 2,326,407
4,225,000 7.25%, due 08/15/2022 ......................................... 4,514,146
1,000,000 7.125%, due 02/29/2000 ........................................ 1,045,000
5,750,000 6.25%, due 08/15/2023 ......................................... 5,439,138
1,000,000 5.875%, due 03/31/1999 ........................................ 998,125
1,000,000 5.875%, due 02/15/2004 ........................................ 977,500
500,000 4.00%, due 01/31/1996 ......................................... 495,313
------------
TOTAL U.S. TREASURY OBLIGATIONS (cost $19,047,040) ............ 20,595,941
------------
MORTGAGE-BACKED SECURITIES 17.34%
FEDERAL HOME LOAN MORTGAGE CORPORATION 0.46%
438,053 9.00%, due 12/01/2004 ......................................... 452,014
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION 11.07%
2,420,887 7.00%, due 08/15/2008 ......................................... 2,431,467
1,775,203 7.00%, due 07/15/2023 ......................................... 1,748,022
2,358,175 6.50%, due 12/15/2023 ......................................... 2,266,796
925,587 6.50%, due 08/15/2023 ......................................... 889,721
2,436,585 6.50%, due 03/15/2024 ......................................... 2,342,168
1,156,156 6.125%, due 12/20/2021 ........................................ 1,158,748
------------
10,836,922
------------
COLLATERALIZED MORTGAGE OBLIGATIONS 5.81%
1,750,000 Donaldson, Lufkin & Jenrette, 7.35%, due 12/18/2003 ........... 1,718,115
1,000,000 Federal Home Loan Mortgage Corporation, 8.75%, due 06/15/2005 . 1,042,530
1,000,000 Federal Home Loan Mortgage Corporation, 7.50%, due 07/15/2020 . 1,022,120
154,098 Merrill Lynch Mortgage Investors, 9.70%, due 06/15/2008 ....... 159,301
1,310,483 Morgan Stanley Mortgage Trust, 9.30%, due 07/01/2017 .......... 1,356,216
386,283 Shearson Lehman, 8.75%, due 08/27/2017 ........................ 390,745
------------
5,689,027
------------
TOTAL MORTGAGE-BACKED SECURITIES (cost $17,052,750) 16,977,963
------------
CORPORATE BONDS 48.11%
NON-CONVERTIBLE CORPORATE BONDS 43.79%
AEROSPACE/DEFENSE 3.45%
2,000,000 Boeing Company, 8.75%, due 08/15/2021 ......................... 2,316,256
1,000,000 Loral Corporation, 8.375%, due 06/15/2024 ..................... 1,062,270
------------
3,378,526
------------
BANKING 3.61%
1,000,000 Bank of New York, 7.875%, due 11/15/2002 1,059,962
1,000,000 Manufacturers and Traders Trust Company, 8.125%, due 12/01/2002. 1,048,650
500,000 Mercantile Bank, 7.625%, due 10/15/2002 ....................... 514,448
1,000,000 Norwest Corporation, 6.65%, due 10/15/2023 .................... 909,528
------------
3,532,588
------------
CONSUMER PRODUCTS & SERVICES 4.03%
750,000 Conagra, Inc., 9.75%, due 03/01/2021 .......................... 935,071
2,000,000 Dart & Kraft Finance NV, 7.75%, due 11/30/1998 ................ 2,058,442
1,000,000 Fleming Companies, Inc., 5.77%, due 08/06/1998 ................ 955,080
------------
3,948,593
------------
ELECTRICAL EQUIPMENT 0.97%
1,000,000 Westinghouse Corporation, 7.875%, due 09/01/2023 .............. 951,450
------------
FINANCE 3.37%
1,000,000 General Motors Acceptance Corporation, 8.00%, due 04/10/1997 .. 1,026,691
1,250,000 Kemper Corporation, 6.875%, due 09/15/2003 .................... 1,188,004
1,000,000 Paine Webber Group, 8.875%, due 03/15/2005 .................... 1,080,616
------------
3,295,311
------------
HEALTH & MEDICAL 4.23%
850,000 American Home Products Corporation, 7.25%, due 03/01/2023 ..... 823,545
2,773,000 American Medical International, zero coupon, due 08/12/1997 ... 2,360,377
1,000,000 FHP International, 7.00%, due 09/15/2003 ...................... 950,919
------------
4,134,841
------------
INSURANCE 3.52%
2,000,000 Continental Corporation, 7.25%, due 03/01/2003 ................ 1,980,190
1,450,000 Integon Corporation, 8.00%, due 08/15/1999 .................... 1,466,826
------------
3,447,016
------------
MEDIA 4.73%
750,000 Tele-Communications, Inc., 9.25%, due 01/15/2023 .............. 771,064
2,000,000 Time Warner, Inc., 9.15%, due 02/01/2023 ...................... 2,108,560
2,150,000 Western Publishing Group, 7.65%, due 09/15/2002 ............... 1,752,250
------------
4,631,874
------------
OILS 3.29%
1,600,000 Burlington Resources, 9.125%, due 10/01/2021 .................. 1,919,226
1,000,000 Coastal Corporation, 10.75%, due 10/01/2010 ................... 1,295,817
------------
3,215,043
------------
PAPER & FOREST PRODUCTS 1.95%
2,000,000 Weyerhaeuser Corporation, 7.125%, due 07/15/2023 .............. 1,907,168
------------
TRANSPORTATION 2.68%
1,000,000 AMR Corporation, 9.75%, due 03/15/2000 ........................ 1,112,611
1,350,000 Burlington Northern, 8.75%, due 02/25/2022 .................... 1,511,664
------------
2,624,275
------------
UTILITIES/ELECTRIC 7.96%
3,000,000 Commonwealth Edison, 9.375%, due 02/15/2000 ................... 3,301,260
1,000,000 Pacific Gas and Electric, 9.08%, due 12/15/1997 ............... 1,060,534
2,000,000 Public Service Company of New Hampshire, 9.17%,
due 05/15/1998 ................................................ 2,111,954
1,200,000 Texas Utilities Electric, 9.50%, due 08/01/1999 ............... 1,317,955
------------
7,791,703
------------
TOTAL NON-CONVERTIBLE CORPORATE BONDS (cost $42,125,734) ...... 42,858,388
-------------
CONVERTIBLE CORPORATE BONDS 4.32%
FINANCIAL SERVICES 0.57%
500,000 Legg Mason, Inc., 5.25%, due 05/01/2003 ....................... 554,375
------------
INSURANCE 0.71%
700,000 Horace Mann Educators, 6.50%, due 12/01/1999 .................. 694,750
------------
RETAIL SALES 2.39%
2,500,000 Costco Wholesale Corporation, 5.75%, due 05/15/2002 ........... 2,334,375
------------
TRANSPORTATION 0.65%
200,000 Air Wisconsin, 7.75%, due 06/15/2010 .......................... 150,500
500,000 Airborne Freight, 6.75%, due 08/15/2001 ....................... 488,750
------------
639,250
------------
TOTAL CONVERTIBLE CORPORATE BONDS (cost $4,079,875) ........... 4,222,750
------------
TOTAL CORPORATE BONDS (cost $46,205,609) ...................... 47,081,138
------------
FOREIGN OBLIGATIONS 3.85%
$ 2,000,000 Province of Alberta, 9.25%, due 04/01/2000 ................. $ 2,244,120
1,500,000 United Mexican States, Series A, 6.25%, due 12/31/2019 ..... 916,875
1,000,000 United Mexican States, Series B, 6.25%, due 12/31/2019 ..... 611,250
------------
TOTAL FOREIGN OBLIGATIONS (cost $3,458,469) ................ 3,772,245
------------
SHARES
-------
PREFERRED STOCK 0.59%
INSURANCE 0.59%
11,000 Integon Corporation (cost $493,020) ........................... 573,375
------------
PRINCIPAL
AMOUNT
-------------
SHORT-TERM INVESTMENT 7.61%
COMMERCIAL PAPER 5.10%
$ 2,000,000 Ford Motor Credit Corporation, 5.92%, due 07/05/1995 .......... 1,998,684
3,000,000 General Electric Capital Corporation, 5.85%, due 07/13/1995 ... 2,994,150
------------
4,992,834
------------
REPURCHASE AGREEMENT 2.51%
2,453,000 Repurchase agreement with Goldman Sachs, collateralized
by a U.S. Treasury Note, in a joint trading account at 6.00%
dated 06/30/1995, due 07/03/1995 with a maturity value
of $2,454,227 ................................................. 2,453,000
------------
TOTAL SHORT-TERM INVESTMENTS (cost $7,445,834) ................ 7,445,834
------------
TOTAL INVESTMENTS (cost $93,702,722) 96,446,496
Other assets ($2,850,777), less liabilities ($1,432,666) ...... 1,418,111
------------
NET ASSETS .................................................... $ 97,864,607
============
<FN>
FEDERAL INCOME TAX INFORMATION:
Net unrealized appreciation of investments at June 30, 1995, of $2,743,774,
based on aggregate cost of $93,702,722, was composed of gross appreciation of
$3,754,255 for those investments having an excess of value over cost and gross
depreciation of $1,010,481 for investments having an excess of cost over value.
OTHER INFORMATION:
Purchases and sales (including maturities and principal repayments) of
investment securities, other than short-term investments, aggregated $26,769,880
and $32,608,610, respectively, during the six-month period ended June 30, 1995,
including purchases and sales of U. S. government securities of $17,791,768 and
$3,950,204, respectively. Principal repayments of mortgage-backed securities
aggregated $1,122,189.
See accompanying notes to financial statements.
</FN>
</TABLE>
<TABLE>
COMPOSITE
TAX-EXEMPT
BOND FUND, INC.
PORTFOLIO OF
INVESTMENTS
IN SECURITIES
JUNE 30,
1995
<CAPTION>
COMPOSITE TAX-EXEMPT BOND FUND PORTFOLIO (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
------------ ------------
<S> <C> <C>
STATE AND MUNICIPAL SECURITIES 95.84%
ALASKA 2.09%
$ 5,000,000 City of Valdez Revenue (Mobile-Alaska Pipeline), 5.75%,
due 11/01/2028 ....................................................... $ 4,751,300
------------
ARIZONA 6.64%
7,000,000 Phoenix, Arizona General Obligation, 5.55%, due 07/01/2009 ........... 6,986,490
5,000,000 Salt River Project Agricultural Improvement, 6.25%, due 01/01/2019 ... 5,088,950
3,000,000 Salt River Electrical System Revenue, 5.75%, due 01/01/2009 .......... 3,039,390
------------
15,114,830
------------
CALIFORNIA 4.05%
6,000,000 San Diego Industrial Development Authority
(San Diego Gas & Electric), 5.90%, due 06/01/2018 .................... 5,845,320
3,000,000 Santa Barbara County Certificate of Participation,
7.40%, due 02/01/2007 ................................................ 3,367,920
------------
9,213,240
------------
COLORADO 2.41%
5,000,000 Colorado Springs Utilities System Revenue, 6.75%, due 11/15/2021 ..... 5,481,633
------------
DELAWARE 0.31%
700,000 Delaware State Economic Development, Variable Rate
Demand Obligation 4.25%* ............................................. 700,000
------------
FLORIDA 4.45%
5,000,000 Jacksonville Electric Authority, 5.75%, due 10/01/2012 ............... 4,967,050
5,000,000 Orlando Utilities Commission Revenue, 6.00%, due 10/01/2010 .......... 5,171,600
------------
10,138,650
------------
GEORGIA 5.70%
5,000,000 Georgia State General Obligation, 6.30%, due 03/01/2009 .............. 5,443,250
8,000,000 Municipal Electric Authority of Georgia, Series C Revenue,
5.70%, due 01/01/2019 ................................................ 7,536,640
------------
12,979,890
------------
HAWAII 3.53%
2,000,000 Honolulu City & County General Obligation,
6.00%, due 01/01/2012 ................................................ 2,048,520
5,555,000 Hawaii State General Obligation, 6.40%, due 03/01/2009 ............... 5,997,122
------------
8,045,642
------------
ILLINOIS 9.04%
3,665,000 Chicago Illinois Gas Supply Revenue (Peoples Gas),
6.875%, due 03/01/2015 ............................................... 3,888,125
4,000,000 Chicago Waste Water Revenue, 6.75%, due 11/15/2020 ................... 4,462,720
2,000,000 Illinois Education Facilities Authority Revenue,
7.10%, due 12/01/2020 ................................................ 2,124,740
5,000,000 Illinois Sales Tax Revenue Series N, 7.00%, due 06/15/2020 ........... 5,670,050
6,000,000 Metro Pier and Expo Revenue, zero coupon, due 06/15/2009 ............ 2,579,520
4,000,000 Metro Pier and Expo Revenue, zero coupon, due 06/15/2008 ............ 1,852,320
------------
20,577,475
------------
INDIANA 2.73%
6,000,000 Indiana Municipal Power Revenue, 6.125%, due 01/01/2013 .............. 6,225,960
------------
MARYLAND 4.46%
5,000,000 Maryland State General Obligation, 4.30%, due 07/15/2003 ............. 4,773,650
5,000,000 Mayor & City Council of Baltimore Port Facility Revenue
(DuPont), 6.50%, due 10/01/2011 ...................................... 5,372,950
------------
10,146,600
------------
MASSACHUSETTS 3.51%
4,000,000 Massachusetts State Health & Educational Facilities Authority
Revenue, Brigham & Womens Hospital Variable Rate
Demand Obligation, 3.90%* ............................................ 4,000,000
4,000,000 Massachusetts Daily Commonwealth, Variable Rate
Demand Obligation, 4.20%* ............................................ 4,000,000
------------
8,000,000
------------
MISSISSIPPI 1.97%
4,000,000 Lowndes County Pollution Control Revenue (Weyerhaeuser),
6.80%, due 04/01/2022 ................................................ 4,486,720
------------
NEBRASKA 4.07%
7,000,000 Omaha Public Power District Revenue, Series B,
6.15%, due 02/01/2012 ................................................ 7,358,120
2,000,000 Omaha Public Power District Revenue, Series B,
5.50%, due 02/01/2014 ................................................ 1,905,960
------------
9,264,080
------------
NEW MEXICO 0.69%
1,500,000 City of Lordsburg Pollution Control Revenue (Phelps Dodge),
6.50%, due 04/01/2013 ................................................ 1,564,710
------------
NORTH CAROLINA 2.34%
5,000,000 North Carolina Eastern Municipal Power Agency,
7.00%, due 01/01/2008 ................................................ 5,330,950
------------
NORTH DAKOTA 1.99%
4,370,000 Mercer County Pollution Control Revenue (Otter Tail Power),
6.90%, due 02/01/2019 ................................................ 4,541,872
------------
OKLAHOMA 0.22%
500,000 Garfield County, Oklahoma, Variable Rate
Demand Obligation, 4.40%* ............................................ 500,000
------------
OREGON 2.78%
6,230,000 Washington County, Oregon General Obligation, 6.00%,
due 12/01/2012 ....................................................... 6,328,123
------------
TENNESSEE 2.30%
5,000,000 Memphis Electric System Revenue, 5.625%, due 01/01/2002 .............. 5,228,050
------------
TEXAS 3.22%
3,000,000 Harris County Toll Road Revenue, 8.25%, due 08/15/2007 ............... 3,430,200
4,250,000 San Antonio Electric & Gas Revenue, 5.00%, due 02/01/2012 ............ 3,899,120
------------
7,329,320
------------
UTAH 3.56%
6,000,000 Intermountain Power Agency Revenue, 5.25%, due 07/01/2014 ............ 5,506,560
3,000,000 Intermountain Power Agency Revenue, 5.00%, due 07/01/2023 ............ 2,588,250
------------
8,094,810
------------
WASHINGTON 17.89%
4,500,000 Kent School District #415, General Obligation,
6.30%, due 12/01/2008 ................................................ 4,746,240
2,750,000 Snohomish County School District #2 Everett General
Obligation, 7.20%, due 12/01/2010 .................................... 3,096,994
2,000,000 Spokane County Water District #3 Revenue,
7.60%, due 01/01/2008 ................................................ 2,201,560
4,000,000 University of Washington Housing and Dining Facilities Bond,
7.00%, due 12/01/2021 ................................................ 4,418,280
7,000,000 Vancouver Water & Sewer Revenue, 5.50%, due 06/01/2013 ............... 6,611,150
1,750,000 Washington Health Care Facilities Authority, Hutchinson,
7.375%, due 01/01/2018 ............................................... 1,875,563
1,750,000 Washington Health Care Facilities Authority, Hutchinson,
7.20%, due 01/01/2007 ................................................ 1,887,847
3,500,000 Washington Public Power Supply System Revenue,
7.625%, due 07/01/2010 ............................................... 4,061,610
4,900,000 Washington State General Obligation, 6.40%, due 06/01/2017 ........... 5,173,959
7,570,000 Washington State General Obligation, 5.00%, due 05/01/2017 ........... 6,654,635
------------
40,727,838
------------
WISCONSIN 4.04%
1,000,000 Wisconsin Health & Education Revenue, 7.125%, due 08/15/2007 ......... 1,106,160
3,750,000 Wisconsin State Refunding, Series 3, 5.30%, due 11/01/2011 ........... 3,568,614
5,000,000 Wisconsin State Transportation Revenue, Series A,
4.90%, due 07/01/2010 ................................................ 4,511,350
------------
9,186,124
------------
WYOMING 1.85%
4,000,000 Sweetwater County Pollution Control Revenue (Idaho Power),
7.625%, due 12/01/2014 ............................................... 4,204,120
-----------
TOTAL STATE AND MUNICIPAL SECURITIES (cost $209,764,829) ............. 218,161,937
===========
SHORT-TERM INVESTMENTS 2.35%
5,360,000 Nuveen Tax-Exempt Money Market Fund (cost $5,360,000) 5,360,000
------------
TOTAL INVESTMENTS (cost $215,124,829) 223,521,937
Other assets ($4,440,613) less liabilities ($329,749) 4,110,864
------------
NET ASSETS $227,632,801
============
<FN>
*Variable Rate Demand Obligations are payable on demand and are secured by
letters of credit or other credit support. The interest rate, which is subject
to change periodically, is based on an index of market interest rates.
FEDERAL INCOME TAX INFORMATION:
Net unrealized appreciation of investments at June 30, 1995, of $8,397,108,
based on aggregate cost of $215,124,829, was composed of gross appreciation of
$10,893,976 for investments having an excess of value over cost and gross
depreciation of $2,496,868 for investments having an excess of cost over value.
OTHER INFORMATION:
Purchases and sales of investment securities, other than short-term investments,
aggregated $18,267,324 and $32,106,638, respectively, during the six-month
period ended June 30, 1995.
See accompanying notes to financial statements.
</FN>
</TABLE>
<TABLE>
FINANCIAL
INFORMATION
JUNE 30,
1995
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
<CAPTION>
COMPOSITE COMPOSITE COMPOSITE
U.S. GOVERNMENT INCOME TAX-EXEMPT
SECURITIES, INC. FUND, INC. BOND FUND, INC.
---------------- -------------- ---------------
ASSETS
<S> <C> <C> <C>
Investments at market (identified cost
$186,860,559, $93,702,722, and
$215,124,829, respectively) note 1a .................. $ 186,835,683 $ 96,446,496 $ 223,521,937
Cash .................................................... 7,336 10,382 297,971
Prepaid expenses ........................................ 18,248 12,845 17,948
Receivable for:
Interest .............................................. 1,557,228 1,697,331 4,032,477
Investment securities sold ............................ -- 1,072,750 --
Sale of Fund's shares ................................. 11,440 57,469 92,217
------------- ------------- -------------
Total assets ............................................ 188,429,935 99,297,273 227,962,550
------------- ------------- -------------
LIABILITIES
Payable for:
Investment securities purchased ....................... -- 1,220,419 --
Dividends ............................................. 244,380 130,573 206,004
Repurchase of Fund's shares ........................... 286,644 61,829 78,264
Accrued expenses and other payables ................... 37,881 19,845 45,481
------------- ------------- -------------
Total liabilities ....................................... 568,905 1,432,666 329,749
------------- ------------- -------------
NET ASSETS .............................................. $ 187,861,030 $ 97,864,607 $ 227,632,801
============= ============= =============
COMPOSITION OF NET ASSETS
Capital stock, at par ................................... $ 1,786 $ 107,413 $ 2,979
Additional paid-in capital .............................. 194,514,006 111,013,407 219,882,303
Accumulated net realized loss ........................... (6,629,886) (15,999,987) (649,589)
Net unrealized appreciation (depreciation)
of investments ........................................ (24,876) 2,743,774 8,397,108
------------- ------------- -------------
$ 187,861,030 $ 97,864,607 $ 227,632,801
============= ============= =============
SHARES OF BENEFICIAL
INTEREST OUTSTANDING .................................... 17,862,140 10,741,327 29,785,501
============= ============= =============
CLASS A SHARES:
Net asset value and redemption price per share
(net assets of $186,275,605, $94,621,537, and
$225,692,002, respectively, for 17,711,375,
10,385,829, and 29,531,581 shares of beneficial
interest outstanding, respectively ................... $10.52 $ 9.11 $ 7.64
====== ====== ======
Offering price per share (100/96 of net asset
value per share) ..................................... $10.96 $ 9.49 $ 7.96
====== ====== ======
Class B Shares:
Net asset value, offering price and redemption price
per share (net assets of $1,585,425, $3,243,070, and
$1,940,799, respectively, for 150,765, 355,498,
and 253,920 shares of beneficial interest outstanding,
respectively ......................................... $10.52 $ 9.12 $ 7.64
====== ====== ======
<FN>
On sales of $25,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions for Class B
shares.
See accompanying notes to financial statements.
</FN>
</TABLE>
<TABLE>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
<CAPTION>
COMPOSITE COMPOSITE COMPOSITE
U.S. GOVERNMENT INCOME TAX-EXEMPT
SECURITIES, INC. FUND, INC. BOND FUND, INC.
---------------- ------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest income $ 6,795,230 $ 3,647,277 $ 6,706,624
------------ ------------ ------------
EXPENSES:
Management fees note 2 .............................. 581,377 288,034 552,938
Distribution expenses Class A note 2 ............... 166,438 89,456 205,774
Distribution expenses Class B note 2 ............... 5,951 13,573 7,637
Shareholder servicing note 2 ........................ 82,059 55,220 52,220
Postage, printing and office expense ................. 62,940 40,324 46,782
Registration and filing fees ......................... 10,447 10,444 11,585
Custodial fees ....................................... 12,371 8,233 8,992
Auditing and legal fees .............................. 9,821 8,376 8,278
Directors' fees note 2 .............................. 5,412 5,412 5,412
Insurance ............................................ 2,361 1,142 2,643
------------ ------------ ------------
Total expenses ......................................... 939,177 520,214 902,261
------------ ------------ ------------
Net investment income .................................. 5,856,053 3,127,063 5,804,363
------------ ------------ ------------
NET REALIZED AND UNREALIZED
Gain on Investments
Realized gain (loss) from investment transactions ...... (430,412) (1,028,294) 715,153
Unrealized appreciation of investments during the period 16,756,807 9,783,172 14,771,816
------------ ------------ ------------
Net realized and unrealized gain on investments ........ 16,326,395 8,754,878 15,486,969
------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 22,182,448 $ 11,881,941 $ 21,291,332
============ ============ ============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
COMPOSITE COMPOSITE COMPOSITE
U.S. GOVERNMENT INCOME TAX-EXEMPT BOND
SECURITIES, INC. FUND, INC. FUND, INC.
--------------------------- ---------------------------- ---------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR ENDED YEAR
JUNE 30, ENDED JUNE 30, ENDED JUNE 30, ENDED
1995 DECEMBER 31, 1995 DECEMBER 31, 1995 DECEMBER 31,
(UNAUDITED) 1994 (UNAUDITED) 1994 (UNAUDITED) 1994
------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income ................... $ 5,856,053 $ 14,064,719 $ 3,127,063 $ 6,698,839 $ 5,804,363 $ 12,448,608
Realized gain (loss) from investment
transactions .......................... (430,412) (4,397,627) (1,028,294) (225,532) 715,153 (1,364,723)
Unrealized appreciation (depreciation)
of investments during the period ...... 16,756,807 (22,453,803) 9,783,172 (11,673,357) 14,771,816 (28,088,153)
------------ ------------ ------------ ------------ ------------ -------------
Net increase (decrease) in net assets
resulting from operations ............. 22,182,448 (12,786,711) 11,881,941 (5,200,050) 21,291,332 (17,004,268)
DIVIDENDS TO SHAREHOLDERS
From net investment income:
Class A ............................... (5,824,045) (14,032,268) (3,046,215) (6,629,826) (5,771,318) (12,418,016)
Class B ............................... (32,008) (32,451) (80,848) (69,013) (33,064) (30,572)
NET CAPITAL SHARE
TRANSACTIONS NOTE 3
Class A ............................... (18,017,745) (53,233,173) (1,975,460) (4,954,098) (5,140,154) (14,201,390)
Class B ............................... 421,074 1,103,596 684,389 2,378,233 590,097 1,304,849
------------ ------------ ------------ ------------ ------------ -------------
Total increase (decrease) in net assets . (1,270,276) (78,981,007) 7,463,807 (14,474,754) 10,936,893 (42,349,397)
NET ASSETS
Beginning of the period ................. 189,131,306 268,112,313 90,400,800 104,875,554 216,695,908 259,045,305
------------ ------------ ------------ ------------ ------------ -------------
End of the period ....................... $187,861,030 $189,131,306 $ 97,864,607 $ 90,400,800 $227,632,801 $216,695,908
============ ============ ============ ============ ============ =============
UNDISTRIBUTED
NET INVESTMENT INCOME
AT END OF PERIOD ........................ $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
============ ============ ============ ============ ============ =============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
COMPOSITE U.S. GOVERNMENT
SECURITIES, INC.
<CAPTION>
CLASS A CLASS B
----------------------------------------------------------------- -----------------------
SIX MONTHS SIX MONTHS
ENDED TEN MONTHS ENDED MARCH 30,
JUNE 30, YEARS ENDED ENDED YEARS ENDED JUNE 30, 1994 TO
1995 DECEMBER 31, DECEMBER 31, LAST DAY OF FEBRUARY, 1995 DEC. 31,
--------------------- -------------------
(UNAUDITED) 1994 1993 1992<F3> 1992 1991 (UNAUDITED) 1994<F4>
--------- --------- --------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.64 $10.79 $10.63 $10.53 $10.17 $ 9.90 $ 9.64 $10.24
--------- --------- --------- -------- -------- -------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income ................. 0.32 0.63 0.69 0.62 0.79 0.84 0.27 0.41
Net Gains or Losses on Securities (both
realized and unrealized) ............. 0.88 (1.15) 0.16 0.10 0.36 0.27 0.88 (0.60)
--------- --------- --------- -------- -------- -------- --------- ---------
Total From Investment Operations .... 1.20 (0.52) 0.85 0.72 1.15 1.11 1.15 (0.19)
--------- --------- --------- -------- -------- -------- --------- ---------
LESS DISTRIBUTIONS
Dividends (from net investment income). (0.32) (0.63) (0.69) (0.62) (0.79) (0.84) (0.27) (0.41)
--------- --------- --------- -------- -------- -------- --------- ---------
NET ASSET VALUE, END OF PERIOD ......... $10.52 $ 9.64 $10.79 $10.63 $10.53 $10.17 $10.52 $ 9.64
========= ========= ========= ======== ======== ======== ========= =========
TOTAL RETURN <F1>....................... 12.57% -4.91% 8.12% 7.03% 11.72% 11.72% 12.11% -1.86%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($1,000's) .. $186,276 $188,068 $268,112 $207,501 $141,377 $92,293 $1,585 $1,063
Ratio of Expenses to Average Net Assets 1.00%<F5> 0.97% 0.99% 0.99%<F5> 1.01% 1.03% 1.83%<F5> 1.76%<F5>
Ratio of Net Income to Average Net
Assets 6.30%<F5> 6.19% 6.29% 6.98%<F5> 7.63% 8.43% 5.38%<F5> 5.43%<F5>
Portfolio Turnover Rate<F2>............ 3%<F5> 34% 51% 11%<F5> 17% 66% 3%<F5> 34%<F5>
<FN>
<F1> Total return does not reflect sales charge. Returns of less than one year
are aggregate returns and not annualized.
<F2> A portfolio turnover rate is the percentage computed by taking the lesser
of purchases or sales of portfolio securities (excluding securities with a
maturity date of one year or less at the time of acquisition) for a period
and dividing it by the monthly average of the market value of such
securities during the period.
<F3> Change in Fund's fiscal year-end. See note 1.
<F4> From the commencement of offering Class B shares.
<F5> Annualized.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COMPOSITE INCOME FUND, INC.
CLASS A CLASS B
---------------------------------------------------------------- ---------------------
SIX MONTHS THREE SIX MONTHS
ENDED MONTHS ENDED MARCH 30,
JUNE 30, YEARS ENDED ENDED YEARS ENDED JUNE 30, 1994 TO
1995 DECEMBER 31, DECEMBER 31, SEPTEMBER 30, 1995 DEC. 31,
------------------- ---------- ---------------
(UNAUDITED) 1994 1993 1992<F3> 1992 1991 (UNAUDITED) 1994<F4>
----------- ------- ------- -------- ------ ------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.29 $ 9.33 $ 8.99 $ 9.17 $ 8.68 $ 8.12 $ 8.30 $ 8.85
------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.29 0.60 0.61 0.16 0.65 0.68 0.26 0.40
Net Gains or Losses on Securities (both
realized and unrealized) 0.82 (1.04) 0.34 (0.18) 0.49 0.56 0.82 (0.55)
------- ------- ------- ------- ------- ------- ------- -------
Total From Investment Operations ......... 1.11 (0.44) 0.95 (0.02) 1.14 1.24 1.08 (0.15)
------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends (from net investment income) ..... (0.29) (0.60) (0.61) (0.16) (0.65) (0.68) (0.26) (0.40)
------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .............. $ 9.11 $ 8.29 $ 9.33 $ 8.99 $ 9.17 $ 8.68 $ 9.12 $ 8.30
======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN <F1>............................ 13.63% -4.82% 10.82% -0.23% 13.57% 15.93% 13.17% -1.67%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($1,000's) ....... $94,622 $88,102 $104,876 $86,425 $84,995 $73,342 $3,243 $2,299
Ratio of Expenses to Average Net Assets .... 1.11%<F5> 1.04% 1.08% 0.95%<F5> 1.05% 1.04% 1.91%<F5> 1.80%<F5>
Ratio of Net Income to Average Net Assets .. 6.81%<F5> 6.83% 6.58% 6.94%<F5> 7.26% 8.16% 5.96%<F5> 6.25%<F5>
Portfolio Turnover Rate <F2> ............... 61%<F5> 26% 51% 87%<F5> 47% 106% 61%<F5> 26%<F5>
<FN>
<F1> Total return does not reflect sales charge. Returns of less than one year are aggregate returns and not annualized.
<F2> A portfolio turnover rate is the percentage computed by taking the lesser of purchases or sales of portfolio securities
(excluding securities with a maturity date of one year or less at the time of acquisition) for a period and dividing it by the
monthly average of the market value of such securities during the period.
<F3> Change in Fund's fiscal year-end. See note 1.
<F4> From the commencement of offering Class B shares.
<F5> Annualized.
</FN>
</TABLE>
<TABLE>
COMPOSITE TAX-EXEMPT
BOND FUND, INC.
CLASS A CLASS B
<CAPTION>
--------------------------------------------------------------- ------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED MARCH 30,
JUNE 30, JUNE 30, 1994 TO
1995 YEARS ENDED DECEMBER 31, 1995 DEC. 31,
-----------------------------------------------
(Unaudited) 1994 1993 1992 1991 1990 (Unaudited) 1994<F3>
---------- ------ ------ ------ ------ ------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ..... $ 7.13 $ 8.04 $ 7.58 $ 7.42 $ 7.16 $ 7.17 $ 7.13 $ 7.49
-------- ------- ------- ------- ------- ------- ------ -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income ................... 0.19 0.39 0.40 0.42 0.45 0.47 0.16 0.25
Net Gains or Losses on Securities (both
realized and unrealized) ............... 0.51 (0.91) 0.54 0.23 0.34 (0.01) 0.51 (0.36)
-------- ------- ------- ------- ------- ------- ------ -------
Total From Investment Operations ...... 0.70 (0.52) 0.94 0.65 0.79 0.46 0.67 (0.11)
-------- ------- ------- ------- ------- ------- ------ -------
LESS DISTRIBUTIONS
Dividends (from net investment income) .. (0.19) (0.39) (0.40) (0.42) (0.45) (0.47) (0.16) (0.25)
Distributions (from capital gains) ...... 0.00 0.00 (0.08) (0.07) (0.08) 0.00 0.00 0.00
-------- ------- ------- ------- ------- ------ ------ -------
Total Distributions ................... (0.19) (0.39) (0.48) (0.49) (0.53) (0.47) (0.16) (0.25)
-------- ------- ------- ------ ------- ------- ------ -------
NET ASSET VALUE, END OF PERIOD ........... $ 7.64 $ 7.13 $ 8.04 $ 7.58 $ 7.42 $ 7.16 $ 7.64 $ 7.13
======== ======= ======= ====== ======= ======= ====== =======
TOTAL RETURN <F1> ........................ 9.93% -6.53% 12.54% 9.00% 11.36% 6.71% 9.49% -1.46%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($1,000's) .... $225,692 $215,438 $259,045 $186,861 $140,154 $111,462 $1,941 $1,258
Ratio of Expenses to Average Net Assets . 0.80%<F4> 0.79% 0.81% 0.78% 0.77% 0.77% 1.62%<F4> 1.58%<F4>
Ratio of Net Income to Average Net
Assets .................................. 5.19%<F4> 5.23% 4.97% 5.56% 6.16% 6.65% 4.33%<F4> 4.53%<F4>
Portfolio Turnover Rate<F2> ............. 15%<F4> 12% 19% 30% 83% 115% 15%<F4> 12%<F4>
<FN>
<F1> Total return does not reflect sales charge. Returns of less than one year are aggregate returns and not annualized.
<F2> A portfolio turnover rate is the percentage computed by taking the lesser of purchases or sales of portfolio securities
(excluding securities with a maturity date of one year or less at the time of acquisition) for a period and dividing it by the
monthly average of the market value of such securities during the period.
<F3> From the commencement of offering Class B shares.
<F4> Annualized.
</FN>
</TABLE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 ACCOUNTING POLICIES
Composite U.S. Government Securities, Inc., Composite Income Fund, Inc.,
and Composite Tax-Exempt Bond Fund, Inc. (together the "Funds") are registered
under the Investment Company Act of 1940, as amended, as open-end diversified
management investment companies.
On January 28, 1992, the Composite U.S. Government Securities, Inc. and
Composite Income Fund, Inc. Boards of Directors approved a change in their
fiscal year ends to December 31. Accordingly, information for the fiscal year
ended December 31, 1992, is presented for the ten-month period from March 1,
1992, for Composite U.S. Government Securities, Inc. and the three-month period
from October 1, 1992, for Composite Income Fund, Inc.
The Funds offer both Class A and Class B shares. Class B shares were first
offered March 30, 1994. The two classes of shares differ in their respective
sales charges, shareholder servicing fees, and distribution and services fees.
All shareholders bear the common expenses of the Fund pro rata, based on value
of settled shares outstanding, without distinction between share class.
Dividends are declared separately for each class. Neither class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses, including distribution and service fees.
Following is a summary of significant accounting policies, in conformity
with generally accepted accounting principles, which are consistently followed
by each Fund in the preparation of its financial statements:
a. Investment securities are stated on the basis of valuations provided by an
independent pricing service, approved by the Boards of Directors, which uses
information with respect to transactions, quotations from dealers, market
transactions in comparable securities, and various relationships between
securities in determining value. Investment securities with less than 60 days
to maturity when purchased are valued at amortized cost which approximates
market value. Investment securities not currently quoted as described above
will be priced at fair market value as determined in good faith in a manner
prescribed by the Boards of Directors.
b. Interest income is earned from the settlement date on securities purchased
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date.
c. Dividends to shareholders are recorded on a daily basis and dividends are
distributed monthly. The Funds distribute substantially all of their income
monthly.
d. Security transactions are accounted for on the trade date (execution date of
the order to buy or sell). Realized gain or loss from security transactions
and the change in unrealized appreciation or depreciation are determined on
the basis of identified cost.
e. Each Fund complies with requirements of the Internal Revenue Code applicable
to regulated investment companies and distributes taxable income so that no
provision for federal income or excise tax is required.
NOTE 2 TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
The amounts of fees and expenses described below are shown on each Funds
statement of operations.
Management fees were paid by each Fund to Composite Research & Management
Co., the investment adviser. The fees are based on an annual rate of .625% of
average daily net assets for Composite U.S. Government Securities and Composite
Income Fund and on an annual rate of .50% for Composite Tax-Exempt Bond Fund. An
individual Fund's management fees will be reduced if that Fund's net assets
exceed $250 million. Under terms of each Fund's management contract, Composite
Research & Management Co. has agreed to reimburse a Fund for its expenses in
excess of 1.50% of average daily net assets up to $30 million, and 1% of such
assets over $30 million. Composite Income Fund and Composite Tax-Exempt Bond
Fund will be further reimbursed for expenses exceeding .75% of average net
assets exceeding $130 million. No such reimbursement was required during the
six-months ended June 30, 1995.
Directors' fees and expenses were paid directly by each Fund to directors
having no affiliation with the Funds other than in their capacity as directors.
Other officers and directors received no compensation from the Funds.
Shareholder servicing fees were paid to Murphey Favre Securities Services,
Inc., (MFSSI) the transfer and shareholder servicing agent, for services
incidental to issuance and transfer of shares, maintaining shareholder lists,
and issuing and mailing distributions and reports. The authorized monthly
shareholder servicing fees are $1.60 and $1.70 per Class A and Class B share
accounts, respectively.
Distribution expenses were paid to Murphey Favre, Inc. (MFI), the principal
underwriter and distributor, in accordance with separate Distribution Plans for
Class A and Class B. Each Funds Board of Directors adopted the Plans pursuant to
Rule 12b-1 of the Investment Company Act of 1940. The Class A Distribution Plan
provides that the Fund will reimburse MFI up to 0.25% of the average daily net
assets attributable to Class A shares annually for a portion of its expenses
incurred in distributing each Funds' Class A shares, including payment to
brokers. The Class B Distribution Plan provides that the Funds will pay MFI a
distribution fee, equal to 0.75% annually, and a service fee of 0.25%, of the
Fund' average daily net assets attributable to Class B shares.
For the six-month period ended June 30, 1995, commissions (sales charges
paid by investors) on the purchases of Class A shares totaled $86,197, $92,540,
and $161,452, of which $86,173, $92,511, and $161,404 was retained by MFI, in
the Composite U.S. Government Securities, Composite Income Fund, and Composite
Tax-Exempt Bond Fund, respectively. For the six-month period ended June 30,
1995, MFI received contingent deferred sales charges of $667, $1,902, and $166,
for Composite U.S. Government Securities, Composite Income Fund, and Composite
Tax-Exempt Bond Fund, respectively, upon redemption of Class B shares as
reimbursement for sales commissions advanced by MFI at the time of sale of such
sales.
Under terms of the distribution contracts, MFI will reimburse the Funds if
its expenses exceed the most stringent applicable state blue sky limitation. No
such reimbursement was required during the six-month period ended June 30, 1995.
NOTE 3 CAPITAL STOCK
COMPOSITE U.S. GOVERNMENT SECURITIES, INC.
Capital stock shares authorized ....................... 1,000,000,000
Designated as:
Class A shares ...................................... 600,000,000
Class B shares ...................................... 400,000,000
Par value per share ................................... $ 0.0001
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------ --------------------------------
SIX MONTHS YEAR SIX MONTHS MARCH 30,
ENDED ENDED ENDED 1994 TO
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1995 1994 1995 1994<F1>
------------ ------------- ------------ -------------
SHARES
<S> <C> <C> <C> <C>
Sold ....................................................... 469,900 1,450,548 52,472 120,824
Issued for reinvestment of dividends ....................... 417,854 954,531 2,371 2,342
------------ ------------- ------------ -------------
887,754 2,405,079 54,843 123,166
Reacquired ................................................. (2,685,317) (7,733,340) (14,387) (12,857)
------------ ------------- ------------ -------------
Total increase (decrease) .................................. (1,797,563) (5,328,261) 40,456 110,309
============ ============= ============ =============
AMOUNT
Sold ....................................................... $ 4,754,171 $ 14,056,664 $ 540,523 $ 1,201,752
Issued for reinvestment of dividends ....................... 4,242,456 10,395,143 24,154 26,998
------------ ------------- ------------ -------------
8,996,627 24,451,807 564,677 1,228,750
Reacquired ................................................. (27,014,372) (77,684,980) (143,603) (125,154)
------------ ------------- ------------ -------------
Total increase (decrease) .................................. $(18,017,745) $(53,233,173) $ 421,074 $ 1,103,596
============ ============= ============ =============
<FN>
<F1> From the commencement of offering Class B shares.
</FN>
</TABLE>
Composite Income Fund, Inc.
Capital stock shares authorized ................................. 50,000,000
Designated as:
Class A shares ................................................ 30,000,000
Class B shares ................................................ 20,000,000
Par value per share ............................................. $ 0.01
<TABLE>
CLASS A CLASS B
-------------------------------- ---------------------------------
SIX MONTHS YEAR SIX MONTHS MARCH 30,
ENDED ENDED ENDED 1994 TO
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1995 1994 1995 1994<F1>
------------ ------------ ------------ -------------
SHARES
<S> <C> <C> <C> <C>
Sold ............................................... 760,309 1,783,466 92,613 290,683
Issued for reinvestment of dividends ............... 254,030 565,488 7,393 6,610
------------ ------------ ------------ -------------
1,014,339 2,348,954 100,006 297,293
Reacquired ......................................... (1,251,848) (2,963,495) (21,347) (20,455)
------------ ------------ ------------ -------------
Total increase (decrease) .......................... (237,509) (614,541) 78,659 276,838
============ ============ ============ =============
Amount
Sold ............................................... $ 6,583,023 $ 15,792,705 $ 806,972 $ 2,494,055
Issued for reinvestment of dividends ............... 2,214,684 4,889,312 64,467 55,679
------------ ------------ ------------ -------------
8,797,707 20,682,017 871,439 2,549,734
Reacquired ......................................... (10,773,167) (25,636,115) (187,050) (171,501)
------------ ------------ ------------ -------------
Total increase (decrease) .......................... $ (1,975,460) $ (4,954,098) $ 684,389 $ 2,378,233
============ ============ ============ =============
<FN>
<F1> From the commencement of offering Class B shares.
</FN>
</TABLE>
COMPOSITE TAX-EXEMPT BOND FUND, INC.
Capital stock shares authorized ........................... 500,000,000
Designated as:
Class A shares ........................................... 300,000,000
Class B shares ........................................... 200,000,000
Par value per share ........................................ $ 0.0001
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------- ---------------------------------
SIX MONTHS YEAR SIX MONTHS MARCH 30,
ENDED ENDED ENDED 1994 TO
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1995 1994 1995 1994<F1>
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
SHARES
Sold ............................................... 1,383,275 3,556,878 75,485 181,155
Issued for reinvestment of dividends ............... 488,720 1,310,239 2,894 3,539
------------ ------------ ------------ -------------
1,871,995 4,867,117 78,379 184,694
Reacquired ......................................... (2,558,482) (6,888,578) (830) (8,323)
------------ ------------ ------------ -------------
Total increase (decrease) .......................... (686,487) (2,021,461) 77,549 176,371
============ ============ ============ =============
AMOUNT
Sold ............................................... $ 9,619,177 $ 25,964,330 $ 569,906 $ 1,340,880
Issued for reinvestment of dividends ............... 4,452,320 9,728,020 26,461 25,691
------------ ------------ ------------ -------------
14,071,497 35,692,350 596,367 1,366,571
Reacquired ......................................... (19,211,651) (49,893,740) (6,270) (61,722)
------------ ------------ ------------ -------------
Total increase (decrease) .......................... $ (5,140,154) $(14,201,390) $ 590,097 $ 1,304,849
============ ============ ============ =============
<FN>
<F1> From the commencement of offering Class B shares.
</FN>
</TABLE>
NOTE 4 SHAREHOLDER MEETING RESULTS
A special meeting of the Funds' shareholders was held March 21, 1995. Each
matter voted upon at the meeting, as well as the number of votes cast for,
against or withheld, and abstained, are set forth below:
1. The Funds' shareholders elected the following nine directors:
<TABLE>
<CAPTION>
COMPOSITE U.S. GOVERNMENT COMPOSITE COMPOSITE TAX-EXEMPT
SECURITIES, INC. INCOME FUND, INC. BOND FUND, INC.
------------------------ --------------------------- --------------------------
SHARES SHARES SHARES
SHARES WITHHOLDING SHARES WITHHOLDING SHARES WITHHOLDING
VOTED AUTHORITY VOTED AUTHORITY VOTED AUTHORITY
"FOR" TO VOTE "FOR" TO VOTE "FOR" TO VOTE
--------- ------- --------- ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Wayne L. Attwood, M.D .............. 9,874,047 148,350 5,743,458 63,821 18,201,299 257,223
Kristianne Blake ................... 9,839,099 183,298 5,735,002 72,277 18,162,651 295,871
Anne V. Farrell .................... 9,870,287 152,110 5,735,341 71,938 18,164,549 293,973
Edwin J. McWilliams ................ 9,881,774 140,623 5,730,823 76,456 18,194,645 263,877
Michael K. Murphy .................. 9,868,638 153,759 5,753,880 53,399 18,202,937 255,585
William G. Papesh .................. 9,884,799 137,598 5,747,323 59,956 18,237,998 220,524
Jay Rockey ......................... 9,870,080 152,317 5,731,850 75,429 18,191,564 266,958
Leland J. Sahlin ................... 9,881,485 140,912 5,744,235 63,044 18,234,027 224,495
Richard C. Yancey .................. 9,879,972 142,425 5,746,767 60,512 18,211,479 247,043
<FN>
2. The Funds' shareholders ratified the selection by a majority of the
independent members of the Funds' Board of Directors of LeMaster & Daniels
as independent accountants for each Fund for the current year, subject to
termination at any time without penalty.
</FN>
</TABLE>
<TABLE>
<CAPTION>
<S>
<C> <C> <C>
SHARES SHARES
VOTED VOTED
"FOR" AGAINST ABSTAINED
----------- ------ --------
Composite U.S. Government Securities, Inc. ....................... 9,563,799 56,805 401,792
Composite Income Fund, Inc. ...................................... 5,556,031 31,439 219,808
Composite Tax-Exempt Bond Fund, Inc. ............................. 17,965,642 44,466 448,414
</TABLE>
A FAMILY OF
FUNDS TO MEET
MOST ANY NEED
MORE ABOUT THE COMPOSITE GROUP
DISCIPLINED INVESTMENT MANAGEMENT
With more than a half-century of experience investing in all types of
market conditions, we are convinced that discipline and patience are far better
friends than speculation. For many investors, short-term "opportunities" have
resulted in longer-term problems.
The Composite Group of Funds takes a long-term view toward the management
of your assets. Each fund is managed with a specific investment objective in
mind, and contains a diversified and carefully chosen portfolio of securities
that, in our opinion, best meet those objectives.
A RANGE OF OPPORTUNITY
The Composite Group offers investors eight distinct portfolios whose
securities range from value-oriented common stocks and income-producing
government and corporate bonds, to tax-exempt municipal obligations and money
market instruments. An investment in one or more of these portfolios allows you
to more closely match your objectives with sensible investment opportunities.
COMPOSITE BOND & STOCK FUND
Composite Bond & Stock Fund is managed to provide the potential for steady
income from bonds and long-term growth of income and principal from stocks.
Taking a conservative approach to meeting these objectives, we place as much
emphasis on credit-quality as on yields in choosing bonds, and on fundamental
values and the potential for appreciation in choosing stocks.
COMPOSITE GROWTH & INCOME FUND
Composite Growth & Income Fund has as its objective the long-term growth of
capital, with current income a secondary consideration. In pursuit of this
objective, the Fund invests principally in high-quality common stocks which, in
our opinion, are undervalued.
COMPOSITE NORTHWEST 50 FUND
Composite Northwest 50 Fund seeks to provide investment results that
closely correlate to the performance of the common stocks comprising the
Northwest 50 Index, which represents 50 companies located or doing business in
the Pacific Northwest (Oregon, Washington, Idaho, Montana and Alaska).
COMPOSITE U.S. GOVERNMENT
SECURITIES, INC.
Composite U.S. Government Securities is designed and managed to provide a
high level of current income, consistent with safety and liquidity. The Fund
seeks to achieve this objective by investing in a careful selection of
obligations issued or backed by the full faith and credit of the United States
government and in repurchase agreements secured by these types of obligations.
Investors should understand that individual shares of the Fund are not
guaranteed by the U.S. government and share values will fluctuate.
COMPOSITE INCOME FUND
Composite Income Fund seeks to provide an attractive level of current
income primarily from investments in corporate bonds and mortgage-backed
securities. Securities with intermediate-term maturities and carefully selected
credit-quality characteristics provide the foundation for this investment
strategy.
COMPOSITE TAX-EXEMPT BOND FUND
Composite Tax-Exempt Bond Fund seeks to provide current income, free from
federal income tax. The Fund invests in high-quality municipal bonds which have
received one of the four highest ratings from Standard & Poor's Corporation or
Moody's Investor Service, Inc. In certain circumstances the alternative minimum
tax, as well as state and local taxes, may apply.
TWO WAYS YOUR CASH CAN EARN ITS KEEP
Composite Cash Management Co. seeks to provide current money market rates
of return, liquidity, and preservation of capital through its two portfolios.
The Money Market portfolio invests in high-quality, short-term money market
obligations of banks, businesses, and the U.S. government.
The Tax-Exempt portfolio invests in high-quality, short-term municipal
bonds that are exempt from federal income tax.
Both portfolios are intended as repositories for future cash needs, with
draft-writing privileges available. Please note that shares of the Fund are
neither insured nor guaranteed by the U.S. government.
OUR FEATURES WORK
TO YOUR ADVANTAGE
* Distinct portfolios to fit your objectives.
* Professional management.
* Portfolio diversification.
* Ease of exchange among funds.
* Most funds appropriate for IRAs.
* Periodic investment programs.*
* Level Payment Withdrawal programs.
* Automatic reinvestment of earnings.
* While regular monthly or quarterly investment programs do not assure a profit
or protect against loss in a declining market, they do offer the potential for
enhanced growth over time.
WE'RE HERE TO HELP
We encourage you to visit with your registered representative when you have
questions about your investments or a new goal you have in mind.
But help is as close as your phone, as well. You may call Composite
Customer Service toll-free at 1-800-543-8072, Monday through Friday, 7:00 a.m. -
6:00 p.m., Pacific Time.
Or, if you prefer, you can have virtual 24-hour access to account
information by calling the Composite INFO-LINE at 1-800-662-3533 on your
touch-tone telephone. When calling, please be sure to have your account number
and personal identification number (the last four digits of your Social Security
or tax ID number) handy. Both are listed on your statement.
When calling INFO-LINE, press the
appropriate number on your touch-tone phone.
Account Balance: 2 Acct. # PIN # 1
Fund Prices: 1 1 1
Speak with Customer Service: 0
Last Transaction: 2 Acct. # PIN # 2 4
Money Market Yields: 1 1 2
Choose a New Option: 5
For more information on any of the Composite Group funds, including charges
and expenses, write or call for a free prospectus. Please read it carefully
before you invest or send money.
FOR FURTHER INFORMATION, PLEASE CONTACT:
FUND OFFICES
Composite Group of Funds
601 W. Main Avenue, Suite 801
Spokane, WA 99201-0613
Phone: (509) 353-3550
Toll free: (800) 543-8072
ADVISER
Composite Research & Management Co.
1201 Third Avenue, Suite 1220 Seattle, WA 98101-3015
DISTRIBUTOR
Murphey Favre, Inc.
1201 Third Avenue, Suite 780 Seattle, WA 98101-3015
CUSTODIAN
Investors Fiduciary Trust Company
127 W. 10th Street Kansas City, MO 64105-1716
INDEPENDENT PUBLIC ACCOUNTANTS
LeMaster & Daniels
601 W. Riverside Avenue, Suite 800 Spokane, WA 99201-0614
COUNSEL
Paine, Hamblen, Coffin, Brooke & Miller
717 W. Sprague Avenue, Suite 1200 Spokane, WA 99204-0464
OFFICERS
PRESIDENT
William G. Papesh
EXECUTIVE VICE PRESIDENT
Kerry K. Killinger
VICE PRESIDENTS
Gene G. Branson
Douglas D. Springer
VICE PRESIDENT & TREASURER
Monte D. Calvin
SECRETARY
John T. West
BOARD OF DIRECTORS
CHAIRMAN
Leland J. Sahlin
MEMBERS
Wayne L. Attwood, M.D.
Kristianne Blake
Anne V. Farrell
Edwin J. McWilliams
Michael K. Murphy
William G. Papesh
Jay Rockey
Richard C. Yancey
This report is submitted for the general information of
shareholders of the Fund. For more detailed information
about the Fund, its officers and directors, fees, expenses
and other pertinent information, please see the prospectus
of the Fund. This report is not authorized for distribution
to prospective investors in the Fund unless preceded or
accompanied by an effective prospectus.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL IFORMATION EXTRACTED FROM THE
REGISTRANT'S SEMIANNUAL REPORT AND FORM N-SAR WHICH ARE ON FILE WITH THE SECURITIES
AND EXCHANGE COMMISSION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
DOCUMENTS.
</LEGEND>
<CIK> 0000201507
<NAME> COMPOSITE TAX-EXEMPT BOND FUND, INC.
<SERIES>
<NUMBER> 001
<NAME> CLASS A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 215,124,829
<INVESTMENTS-AT-VALUE> 223,521,937
<RECEIVABLES> 4,124,694
<ASSETS-OTHER> 315,919
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 227,962,550
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 329,749
<TOTAL-LIABILITIES> 329,749
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 219,885,282
<SHARES-COMMON-STOCK> 29,531,581
<SHARES-COMMON-PRIOR> 30,218,068
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (649,589)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,397,108
<NET-ASSETS> 225,692,002
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,706,624
<OTHER-INCOME> 0
<EXPENSES-NET> (902,261)
<NET-INVESTMENT-INCOME> 5,804,363
<REALIZED-GAINS-CURRENT> 715,153
<APPREC-INCREASE-CURRENT> 14,771,816
<NET-CHANGE-FROM-OPS> 21,291,332
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,771,318)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,383,275
<NUMBER-OF-SHARES-REDEEMED> (2,558,482)
<SHARES-REINVESTED> 488,720
<NET-CHANGE-IN-ASSETS> 10,936,893
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,364,723)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 552,938
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 902,261
<AVERAGE-NET-ASSETS> 225,230,586
<PER-SHARE-NAV-BEGIN> 7.13
<PER-SHARE-NII> .19
<PER-SHARE-GAIN-APPREC> .51
<PER-SHARE-DIVIDEND> (.19)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.64
<EXPENSE-RATIO> .80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL IFORMATION EXTRACTED FROM THE
REGISTRANT'S SEMIANNUAL REPORT AND FORM N-SAR WHICH ARE ON FILE WITH THE SECURITIES
AND EXCHANGE COMMISSION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
DOCUMENTS.
</LEGEND>
<CIK> 0000201507
<NAME> COMPOSITE TAX-EXEMPT BOND FUND, INC.
<SERIES>
<NUMBER> 002
<NAME> CLASS B
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 215,124,829
<INVESTMENTS-AT-VALUE> 223,521,937
<RECEIVABLES> 4,124,694
<ASSETS-OTHER> 315,919
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 227,962,550
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</TABLE>
