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008 C000001 801-4855
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008 D030001 98104
011 A000001 COMPOSITE FUNDS DISTRIBUTOR, INC.
011 B000001 8-50200
011 C010001 SPOKANE
011 C020001 WA
011 C030001 99201
011 C040001 0613
012 A000001 MURPHEY FAVRE SECURITIES SERVICES, INC.
012 B000001 84-
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012 C020001 WA
012 C030001 99201
012 C040001 0613
013 A000001 LEMASTER & DANIELS
013 B010001 SPOKANE
013 B020001 WA
013 B030001 99201
014 A000001 WM FINANCIAL SERVICES, INC.
014 B000001 8-3641
014 A000002 GREAT WESTERN FINANCIAL SECURITIES CORP.
014 B000002 8-30410
014 A000003 SIERRA INVESTMENT SERVICES CORPORATION
014 B000003 8-45144
015 A000001 INVESTORS FIDUCIARY TRUST COMPANY
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<PAGE>
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022 B000002 13-5674085
022 C000002 22326
022 D000002 17215
022 A000003 OPPENHEIMER & CO. INC.
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022 C000003 9513
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022 B000004 41-0953246
022 C000004 4175
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<PAGE>
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022 B000009 13-3299429
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022 A000010 UNION BANK OF CALIFORNIA
022 B000010 94-0304228
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SIGNATURE JOHN T WEST
TITLE SECRETARY
Board of Directors
Composite Tax-Exempt Bond Fund, Inc.
In planning and performing our audit of the financial statements of Composite
Tax-Exempt Bond Fund, Inc., for the year ended December 31, 1997, we considered
its internal control structure, including procedures for safeguarding
securities, in order to determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and to comply with the
requirements of Form N-SAR, not to provide assurance on the internal control
structure.
The management of Composite Tax-Exempt Bond Fund, Inc., is responsible for
establishing and maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgements by management are required to assess
the expected benefits and related costs of internal control structure policies
and procedures. Two of the objectives of an internal control structure are to
provide management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements in conformity
with generally accepted accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projection of any evaluation
of the structure to future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce to
a relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving the internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses as defined above as of
December 31, 1997.
This report is intended solely for the information and use of management and the
Securities and Exchange Commission.
/s/LeMaster & Daniels PLLC
Spokane, Washington
January 20, 1999
SHAREHOLDER MEETING RESULTS
A special meeting of the Funds' shareholders was held on December 23, 1997.
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 shareholders of each Fund were asked to approve the reorganization of the
Fund as a Massachusetts Business Trust. Sufficient votes were not received at
the time of the meeting so a shareholder meeting has been rescheduled for
February 20, 1998:
<TABLE>
<CAPTION>
SHARES SHARES
VOTED VOTED
"FOR" "AGAINST" ABSTAINED
--------- --------- ---------
<S> <C> <C> <C>
U.S. Government Securities.................. 5,956,060 230,779 556,153
Income Fund................................. 5,636,314 159,419 416,368
Tax-Exempt Bond Fund........................ 16,107,675 658,938 1,057,048
</TABLE>
2. The shareholders of each Fund elected the following thirteen directors:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES INCOME FUND TAX-EXEMPT BOND FUND
-------------------------- --------------------- ------------------------
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>
David E. Anderson............... 6,429,873 341,382 6,104,481 221,658 17,218,113 642,775
Wayne L. Attwood, M.D........... 6,431,347 339,908 6,105,631 220,509 17,242,129 618,758
Arthur H. Bernstein............. 6,429,873 341,382 6,106,876 219,264 17,212,234 648,653
Kristianne Blake................ 6,431,347 339,908 6,110,832 215,308 17,252,011 608,877
Edmond R. Davis................. 6,428,748 342,507 6,106,655 219,485 17,217,312 643,576
John W. English................. 6,429,873 341,382 6,106,655 219,485 17,222,637 638,250
Anne V. Farrell................. 6,431,347 339,908 6,110,832 215,308 17,246,654 614,233
Michael K. Murphy............... 6,431,347 339,908 6,111,871 214,269 17,252,812 608,076
Alfred E. Osborne, Jr. ......... 6,430,192 341,063 6,104,237 221,903 17,221,836 639,051
William G. Papesh............... 6,431,347 339,908 6,111,871 214,269 17,246,654 614,233
Daniel Pavelich................. 6,431,347 339,908 6,110,832 215,308 17,237,941 622,946
Jay Rockey...................... 6,430,729 340,526 6,110,807 215,333 17,242,129 618,758
Richard C. Yancey............... 6,431,347 339,908 6,107,813 218,326 17,239,481 621,406
</TABLE>
3. The shareholders of each Fund approved an amended Investment Manager
Agreement:
<TABLE>
<CAPTION>
SHARES SHARES
VOTED VOTED
"FOR" "AGAINST" ABSTAINED
--------- ----------- -----------
<S> <C> <C> <C>
U.S. Government Securities.................. 5,914,823 235,825 620,607
Income Fund................................. 5,684,940 154,070 487,130
Tax-Exempt Bond Fund........................ 15,878,245 664,128 1,318,515
</TABLE>
4. The shareholders of each Fund approved an amended Distribution Plan of the
Fund for its Class A shares:
<TABLE>
<CAPTION>
SHARES SHARES
VOTED VOTED
"FOR" "AGAINST" ABSTAINED
---------- --------- ---------
<S> <C> <C> <C>
U.S. Government - Class A................... 5,631,527 284,561 663,332
U.S. Government - Class B................... 147,611 10,977 4,982
Income Fund - Class A....................... 5,091,958 149,315 480,830
Income Fund - Class B....................... 414,271 23,737 48,986
Tax-Exempt Bond - Class A................... 15,180,941 648,176 1,439,694
Tax-Exempt Bond - Class B................... 469,782 30,513 54,553
</TABLE>
5. The shareholders of each Fund approved certain amendments to existing
investment restrictions allowing each Fund to invest in the following types
of securities:
<TABLE>
<CAPTION>
SHARES SHARES
VOTED VOTED
"FOR" "AGAINST" ABSTAINED
U.S. GOVERNMENT SECURITIES --------- --------- ---------
<S> <C> <C> <C>
Rule 144A Securities........................ 5,709,823 330,472 702,696
U.S. Government Agency Securities........... 5,722,625 352,894 667,472
Dollar Rolls................................ 5,805,566 246,639 690,786
SHARES SHARES
VOTED VOTED
INCOME FUND "FOR" "AGAINST" ABSTAINED
--------- --------- ---------
Rule 144A Securities........................ 5,429,023 211,985 568,091
Foreign Currency............................ 5,452,798 185,996 570,305
Dollar Rolls................................ 5,477,216 178,096 553,788
REITs....................................... 5,459,334 194,290 555,473
Interest Rate Futures....................... 5,473,825 159,031 576,243
SHARES SHARES
VOTED VOTED
TAX-EXEMPT BOND FUND "FOR" "AGAINST" ABSTAINED
--------- --------- ---------
Rule 144A Securities........................ 15,585,347 694,051 1,544,263
Interest Rate Futures....................... 15,667,661 635,543 1,520,457
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL 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> 12-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 174,739,268
<INVESTMENTS-AT-VALUE> 193,928,062
<RECEIVABLES> 3,376,491
<ASSETS-OTHER> 21,729
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 197,326,282
<PAYABLE-FOR-SECURITIES> 811,631
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 384,186
<TOTAL-LIABILITIES> 1,195,817
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 176,941,671
<SHARES-COMMON-STOCK> 23,253,456
<SHARES-COMMON-PRIOR> 26,002,410
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,188,794
<NET-ASSETS> 196,130,465
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,310,385
<OTHER-INCOME> 0
<EXPENSES-NET> (1,661,465)
<NET-INVESTMENT-INCOME> 9,648,920
<REALIZED-GAINS-CURRENT> 2,286,826
<APPREC-INCREASE-CURRENT> 4,270,931
<NET-CHANGE-FROM-OPS> 16,206,677
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,381,180)
<DISTRIBUTIONS-OF-GAINS> (283,504)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,161,023
<NUMBER-OF-SHARES-REDEEMED> (4,861,387)
<SHARES-REINVESTED> 951,410
<NET-CHANGE-IN-ASSETS> (12,741,318)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,991,447)
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 987,356
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,661,465
<AVERAGE-NET-ASSETS> 200,871,278
<PER-SHARE-NAV-BEGIN> 7.83
<PER-SHARE-NII> 0.38
<PER-SHARE-GAIN-APPREC> 0.27
<PER-SHARE-DIVIDEND> (0.38)
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.09
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL 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> 12-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 174,739,268
<INVESTMENTS-AT-VALUE> 193,928,062
<RECEIVABLES> 3,376,491
<ASSETS-OTHER> 21,729
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 197,326,282
<PAYABLE-FOR-SECURITIES> 811,631
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 384,186
<TOTAL-LIABILITIES> 1,195,817
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 176,941,671
<SHARES-COMMON-STOCK> 1,002,792
<SHARES-COMMON-PRIOR> 672,375
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,188,794
<NET-ASSETS> 196,130,465
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,310,385
<OTHER-INCOME> 0
<EXPENSES-NET> (1,661,465)
<NET-INVESTMENT-INCOME> 9,648,920
<REALIZED-GAINS-CURRENT> 2,286,826
<APPREC-INCREASE-CURRENT> 4,270,931
<NET-CHANGE-FROM-OPS> 16,206,677
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (267,740)
<DISTRIBUTIONS-OF-GAINS> (11,875)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 398,272
<NUMBER-OF-SHARES-REDEEMED> (95,335)
<SHARES-REINVESTED> 27,480
<NET-CHANGE-IN-ASSETS> (12,741,318)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,991,447)
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 987,356
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,661,465
<AVERAGE-NET-ASSETS> 200,871,278
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<PER-SHARE-NII> 0.32
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<PER-SHARE-NAV-END> 8.09
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
