COLORADO DOUBLE TAX-EXEMPT BOND FUND
Dear Shareholder:
December 31, 1997, marked the end of the Fund's first fiscal year. The activity
in the portfolios, even though minimal, was primarily Aaa rated bonds. Approval
of the Fund's literature by the regulators was finally obtained in early
November. Marketing of the Fund with investors, financial advisors, and many
other potential distributors was management's main effort during December 1997.
The portfolio managers maintained daily surveillance during the period and
intend to continue that surveillance in pursuit of maximizing total return in
high quality holdings.
Management is currently approaching the coming year with the anticipation that
interest rates will tend to go lower, and are prepared to best remain flexible
to changing economic conditions.
Sincerely,
/s/ Calvin F. Isaak
Calvin F. Isaak
President
CFI/md
February 26, 1998
600 Seventeenth Street * South Tower * Suite 2610 * Denver, Colorado 80202
303-623-7500 TEL * 303 623 8120 FAX
800 279-4426 TOLL FREE * www.ColoradoXX.com INTERNET
<PAGE>
COLORADO DOUBLE TAX
COLORADO DOUBLE TAX
LIPPER MUNICIPAL SHORT TERM/
SHORT MUNI INDEX INTERMEDIATE PORTFOLIO
----------------- -------------------------
INCEPTION $10,000.00 $10,000.00
OCTOBER 1997 10,006.12 10,430.00
NOVEMBER 1997 10,035.86 10,020.00
DECEMBER 1997 10,090.09 10,096.70
LIPPER MUNICIPAL COLORADO DOUBLE TAX-
GENERAL MUNI INDEX INCOME PORTFOLIO
------------------ ----------------
INCEPTION $10,000.00 $10,000.00
OCTOBER 1997 10,036.02 10,160.00
NOVEMBER 1997 10,091.00 9,970.00
DECEMBER 1997 10,250.82 10,204.09
<PAGE>
COLORADO DOUBLE TAX EXEMPT BOND FUND, INC.
SCHEDULE OF INVESTMENTS
SHORT INTERMEDIATE PORTFOLIO
December 31,1997
<TABLE>
<CAPTION>
Face Bond Rating
Amount Moody's/S&P Market Value
---------------- ------------------------------------
<C> <S> <C> <C>
REVENUE BONDS 98.02%
-------------------------------------------------
HOSPITAL 92.66%
-------------------------------------------------
$45,000 Pueblo County, Hospital Facilities,
7.50%, 09/01/01 NR/AAA $ 47,169
HOUSING 5.36%
-------------------------------------------------
5,000 Arapahoe County, Single Family Mtg.,
Zero Coupon, 09/01/10 NR/NR 2,728
------------------
TOTAL REVENUE BONDS
(Cost $49,736) 49,897
------------------
34 MUTUAL FUNDS .06%
-------------------------------------------------
Star Bank Tax Free Fund,
(Cost $34) 34
------------------
TOTAL INVESTMENTS
(Cost $49,770) 98.08% $ 49,931
Other Assets in Excess of Liabilities 1.92% 975
------------------------------------
NET ASSETS 100.0% $ 50,906
====================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
COLORADO DOUBLE TAX EXEMPT BOND FUND, INC.
SCHEDULE OF INVESTMENTS
INCOME PORTFOLIO
December 31, 1997
<TABLE>
<CAPTION>
Face Bond Rating
Amount Moody's/S&P Market Value
----------- ----------------------------------
CERTIFICATES OF PARTICIPATION 4.92%
--------------------------------------
<C> <S> <C> <C>
$ 15,000 El Paso County, School District 38,
6.90%, 12/01/13
(Cost $15,775) Aaa/AAA $ 15,774
---------------
REVENUE BONDS 88.88%
--------------------------------------
HOSPITALS 8.55%
--------------------------------------
25,000 Colorado Springs Hospital,
5.70%, 12/15/08 Aaa/AAA 27,384
---------------
HOUSING 4.43%
--------------------------------------
5,000 Adams County, Building Auth.,
Zero Coupon, 08/15/12 NR/AAA 2,406
30,000 Colorado Housing Finance Auth.,
Zero Coupon, 09/01/10 Aa1/NR 11,770
---------------
14,176
---------------
PUBLIC FACILITIES 6.62%
--------------------------------------
20,000 Colorado Health Facs Auth, Lutheran Medical,
7.25%, 10/01/14 A1/A+ 21,200
---------------
TRANSPORTATION 48.88%
--------------------------------------
150,000 Denver City & County Airport,
5.875%, 11/15/16 Aaa/AAA 156,542
---------------
UTILITY 20.40%
--------------------------------------
25,000 Colorado Springs Utilities,
6.00%, 11/15/18 Aa2/AA 26,421
35,000 Platte River Power Authority,
6.00%, 06/01/18 NR/AAA 38,913
---------------
65,334
---------------
TOTAL REVENUE BONDS
(Cost $280,646) 284,636
---------------
MUTUAL FUNDS 5.83%
--------------------------------------
18,662 Star Bank Tax Free Fund,
(Cost $18,662) 18,662
---------------
TOTAL INVESTMENTS
(Cost $315,083) 99.63% $ 319,072
Other Assets in Excess of Liabilities 0.37% 1,178
----------------------------------
NET ASSETS 100.00% $ 320,250
==================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT/
INTERMEDIATE INCOME
PORTFOLIO PORTFOLIO
-------------------------
ASSETS:
<S> <C> <C>
Investments in securities, at value (Cost $49,770
and $315,083 respectively) (Note 6) $49,931 $319,072
Receivable from advisor (Note 3) 1,298 1,200
Service deposit 3,000 3,000
Interest receivable 1,125 2,029
------------------------
TOTAL ASSETS 55,354 325,301
------------------------
LIABILITIES:
Payable for dividends declared 89 635
Accrued expenses 4,359 4,416
------------------------
TOTAL LIABILITIES 4,448 5,051
------------------------
NET ASSETS $50,906 $320,250
========================
NET ASSETS CONSIST OF:
Capital stock, $.001 par value; limited
shares authorized; 5,074 and 31,653
shares outstanding respectively (Note 5) $ 5 $ 32
Additional paid in capital 50,740 315,931
Undistributed net investment income 0 0
Accumulated undistributed net realized
gain from security transactions 0 298
Net unrealized appreciation
of investments 161 3,989
------------------------
NET ASSETS $50,906 $320,250
========================
Net asset value, redemption and offering price per share
($50,906/5,074 and $320,250/ 31,653 shares of capital
stock outstanding respectively) (Note 5) $ 10.03 $ 10.12
========================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
COLORADO DOUBLE TAX EXEMPT BOND FUND, INC.
STATEMENT OF OPERATIONS
For the period April 17, 1997 (Capitalization)
to December 31, 1997
- --------------------------------------------------------------------------------
SHORT
INTERMEDIATE INCOME
PORTFOLIO PORTFOLIO
---------------------------
INVESTMENT INCOME:
Interest $ 395 1,814
---------------------------
TOTAL INCOME 395 1,814
---------------------------
EXPENSES:
Investment advisory fee (Note 3) 21 73
Distribution fee (Note 4) 22 80
Administrative fee (Note 3) 959 982
Transfer agent fee (Note 3) 320 320
Audit fee 1,971 1,971
Custody fee 1,014 1,014
Directors fees and expenses 750 750
Registration 127 127
Legal fee 1,774 1,774
Other 591 591
---------------------------
TOTAL EXPENSES 7,549 7,682
---------------------------
Less: Expense reimbursement from advisor
(Note 3) (7,489) (7,466)
---------------------------
NET EXPENSES 60 216
NET INVESTMENT INCOME 335 1,598
---------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
(Note 2)
Net realized gain on investments 0 298
Unrealized appreciation of investments
for the period 161 3,989
---------------------------
NET GAIN ON INVESTMENTS 161 4,287
---------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 496 $ 5,885
===========================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
COLORADO DOUBLE TAX EXEMPT BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the period April 17, 1997 (Capitalization)
to December 31, 1997
- --------------------------------------------------------------------------------
SHORT
INTERMEDIATE INCOME
PORTFOLIO PORTFOLIO
--------------- ------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 335 $ 1,598
Net realized gain on investments 0 298
Unrealized appreciation for the period 161 3,989
-------- ---------
Net increase in net assets
from operations 496 5,885
-------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
From net investment income($.07 and $.08 per
share respectively) (335) (1,598)
-------- ---------
CAPITAL SHARE TRANSACTIONS (NOTE 5) 50,745 315,963
-------- ---------
TOTAL INCREASE IN NET ASSETS 50,906 320,250
-------- ---------
NET ASSETS:
Beginning of period 0 0
-------- ---------
End of period $ 50,906 $ 320,250
======== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
COLORADO DOUBLE TAX EXEMPT BOND FUND, INC.
SHORT INTERMEDIATE PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a fund share outstanding throughout the period)
For the period
October 28, 1997
(Commencement of operations)
to
December 31,1997
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------------------
Income from investment operations:
Net investment income 0.07
Capital gains
Net realized and unrealized gain (loss)
on investments 0.03
-------------------
TOTAL FROM INVESTMENT OPERATIONS 0.10
-------------------
Less distributions:
Dividends from net investment income (0.07)
Dividends from net realized gains 0.00
-------------------
TOTAL DISTRIBUTIONS (0.07)
-------------------
NET ASSET VALUE, END OF PERIOD $ 10.03
===================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ........... 51
Ratio of expenses to average net assets ........ 84.89% **
Ratio of expenses to average net assets,
after reimbursement ....................... 0.68% **
Ratio of net investment income (loss) to average
net assets ................................ (80.44)% **
Ratio of net investment income (loss) to average
net assets, after reimbursement ........... 3.77% **
Portfolio turnover rate ........................ 0.00
Average commission rate paid ................... 0.0000
Total return * ................................. 5.64% **
* Based on net asset value per share
** The Portfolio was capitalized on April 17, 1997, with $50,000 representing
5,000 shares at a net asset value per share of $10.00. The initial public
offering was made on November 3, 1997, at which time the net asset value per
share was $10.00. Ratios for this initial period of operations are
annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
COLORADO DOUBLE TAX EXEMPT BOND FUND, INC.
INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a fund share outstanding throughout the period)
For the period
October 28,1997
(Commencement of operations)
to
December 31, 1997
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------------------
Income from investment operations:
Net investment income 0.09
Capital gains
Net realized and unrealized gain (loss)
on investments 0.12
-------------------
TOTAL FROM INVESTMENT OPERATIONS 0.21
-------------------
Less distributions:
Dividends from net investment income (0.09)
Dividends from net realized gains 0.00
-------------------
TOTAL DISTRIBUTIONS (0.09)
-------------------
NET ASSET VALUE, END OF PERIOD $ 10.12
===================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ........... 320
Ratio of expenses to average net assets ........ 24.20% **
Ratio of expenses to average net assets,
after reimbursement ....................... 0.68% **
Ratio of net investment income (loss) to average
net assets ................................ (18.48)% **
Ratio of net investment income (loss) to average
net assets, after reimbursement ........... 5.03% **
Portfolio turnover rate ........................ 25.64%
Average commission rate paid ................... 0.0000
Total return * ................................. 12.21% **
* Based on net asset value per share
** The Portfolio was capitalized on April 17, 1997, with $50,000 representing
5,000 shares at a net asset value per share of $10.00. The initial public
offering was made on November 3, 1997, at which time the net asset value per
share was $10.00. Ratios for this initial period of operations are
annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
COLORADO DOUBLE TAX EXEMPT BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1. ORGANIZATION
The Colorado Double Tax Exempt Bond Fund (the "Fund") was organized as a
Maryland Corporation, on August 29, 1996, and commenced operations on October
28, 1997. The Corporation is registered under the Investment Company Act of
1940, as amended, as a non-diversified, open end management investment company.
The Fund is authorized to issue 100,000,000 shares of capital stock, par value
of $.001 per share, of which 40,000,000 shares are initially authorized as Class
A shares which constitute the Short-Intermediate Portfolio and 20,000,000 shares
are initially authorized as Class B Shares which constitute the Income
Portfolio. The Fund was formed to provide Colorado investors with as high a
level of tax exempt income exempt from Federal and Colorado state income taxes
as is consistent with the maturities of the portfolio selected, with a greater
degree of principal stability than is associated with funds or trusts invested
exclusively in long-term municipal bonds.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
SECURITIES VALUATIONS- Portfolio securities are valued at the
last reported sale price on the securities exchange or national securities
market on which such securities primarily are traded. Securities not listed on
an exchange or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices.
Short-term investments are carried at amortized cost, which approximates value.
Any securities or other assets for which recent market quotations are not
readily available are valued at fair value as determined in good faith by the
Fund's Board of Trustees. Expenses and fees, including the management fee and
distribution and service fees, are accrued daily and taken into account for the
purpose of determining the net asset value of the Fund's shares.
FEDERAL INCOME TAXES- The Fund intends to qualify each year as a "regulated
investment company" under the Internal Revenue Code. By so qualifying, the Fund
will not be subject to federal income taxes to the extent that it distributes
substantially all of its net investment income and any realized capital gains.
DIVIDENDS AND DISTRIBUTIONS- The Fund accrues dividends daily and distributes
monthly all of its net investment income. The Fund intends to distribute its net
long term capital gains and its net short term capital gains at least once a
year.
ORGANIZATION EXPENSES- During its organization and initial registration with the
Securities and Exchange Commission (the "SEC"), the Fund incurred organization
expenses of $38,656. The Adviser has elected to incur these expenses.
OTHER- The fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determining gains
or losses for financial statements and income tax purposes. Interest income is
recorded on an accrual basis.
USE OF ESTIMATES- The preparation of financial statements in
conformity with generally accepted accounting principles 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 increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.
<PAGE>
COLORADO DOUBLE TAX EXEMPT BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 3. INVESTMENT ADVISORY, ADMINISTRATION AND CUSTODIAL AGREEMENTS
The Board of Directors provides broad supervision over the affairs of the
Fund. Pursuant to a Management Agreement between the Fund and Funds Management
Corporation (the "Manager") and subject to the authority of the Board of
Directors, the Manager manages the investments of the Fund and is responsible
for the overall management of the business affairs of the Fund.
Under the terms of the Management Agreement, the Fund has agreed to pay the
manager a base monthly management fee at the annual rate of .23%, of the Fund's
average daily net assets.
All expenses incurred in the operation of the Fund will be borne by the
Fund, except to the extent specifically assumed by the manager. The expenses to
be borne by the Fund will include: taxes, interest, brokerage fees and
commissions, fees of board members who are not officers, directors or employees
of the Manager or its affiliates, Securities and Exchange Commission fees, state
Blue Sky qualification fees, advisory, administrative and fund accounting fees,
charges of custodians, transfer and dividend disbursing agents' fees, insurance
premiums, industry association fees, outside auditing and legal expenses, costs
attributable to investor services (including, without limitation, telephone and
personnel expenses), costs of shareholders' reports and meetings, costs of
preparing and printing prospectuses and statements of additional information,
amounts payable under the Fund's Distribution and Shareholder Servicing Plan
(the "Plan") and any extraordinary expenses. The Manager has agreed to reimburse
the Fund for its expenses to the extent that they ever exceed .68% (including
the Advisor's fee) of the average annual net assets of the Fund. The Manager is
a wholly owned subsidiary of Isaak Bond Investments, Inc. (The Principal
Underwriter). The Principal Underwriter is owned by certain Officers and
Directors of the Fund.
For the period October 28, 1997 (commencement of operations) through
December 31, 1997, the Manager earned advisory fees of $94. The Manager earned
$21 from the Short-Intermediate Portfolio and $73 from the Income Portfolio
respectively. The Manager reimbursed the Fund $14,955 in expenses. The Manager
reimbursed the Short-Intermediate Portfolio $7,489, and reimbursed the Income
Portfolio $7,466 respectively.
The Fund has agreements with American Data Services, Inc. (the
"Administrator") to provide shareholder servicing, fund accounting and
administrative services to the Fund. The services to be provided under the
agreements include day-to-day administration of matters related to the corporate
existence of the Fund (other than rendering investment advice), maintenance of
its records, preparation of reports, supervision of the Fund's arrangement with
its custodian and assistance in the preparation of the Fund's registration
statement under federal and state laws. Costs incurred totaled $2,581, $1,279
from the Short-Intermediate Portfolio, and $1,302 from the Income Portfolio
respectively, for the period October 28, 1997 (commencement of operations)
through December 31, 1997. The agreements provide for minimum fees of $3,000 per
portfolio plus expenses and transactional charges. The agreements provide for
discounts to the Fund during the first eight months of the Fund's operations or
until average daily net assets exceed specified levels. The Fund is required to
maintain a $3,000 per portfolio deposit with the Administrator.
<PAGE>
COLORADO DOUBLE TAX EXEMPT BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 3. INVESTMENT ADVISORY, ADMINISTRATION AND CUSTODIAL AGREEMENTS (CONTINUED)
The Fund's custody agreements with a bank provides for fees on a
transactional basis plus expenses. The minimum monthly fee per portfolio is $400
per month.
NOTE 4. DISTRIBUTION AGREEMENT
Under a plan adopted by the Fund's Board of Directors pursuant to Rule
12b-1 under the 1940 Act (the "Plan"), the Fund pays the Manager for each of the
Fund's portfolios, a shareholder servicing and distribution fee at the annual
rate of .25% of the average daily net assets of the Fund. Such fee will be used
in it's entirety by the Manager to make payments to reimburse distributors or
others for all expenses incurred by distributors or others in the promotion and
distribution of the Fund's shares. Such expenses may include, but are not
limited to, the printing of prospectuses and reports used for sales purposes,
expenses of prepaying and distributing sales literature and related expenses,
including a prorated portion of distributors' overhead expenses attributable to
the distribution of Fund shares, as well as any distribution or service fees
paid to securities broker-dealers or their firms or others who have executed a
servicing agreement with the Fund, distributors or their affiliates. The fees
paid to the Manager under the Plan are in addition to the fees payable under the
Management Agreement and are payable without regard to actual expenses incurred.
For the period ended December 31, 1997, the amount paid or accrued for such
expenses was $102.
NOTE 5. CAPITAL SHARE TRANSACTIONS
As of December 31, 1997 there was an authorized number of $.001 par value
shares of capital stock authorized for the Fund. The Fund is authorized to issue
100,000,000 shares of capital stock, par value of $.001 per share, of which
40,000,000 shares were initially authorized as Class A Shares which constitute
the Short-Intermediate Portfolio and 20,000,000 shares were initially authorized
as Class B Shares which constitute the Income Portfolio. The Board of Directors
is authorized to assign any of the 40,000,000 unassigned shares of the Fund to a
portfolio. Transactions in capital stock during the period April 17, 1997
(capitalization) through December 31, 1997 were as follows:
<PAGE>
COLORADO DOUBLE TAX EXEMPT BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 5. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
Short-Intermediate Portfolio Income Portfolio
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 5,050 $50,500 31,558 $315,000
Shares issued for reinvestment
of dividends and distribution 24 245 95 963
Shares redeemed 0 0 0 0
----- ------- ------- --------
Net increase 5,074 $50,745 31,653 $315,963
==========================================================
</TABLE>
NOTE 6. INVESTMENTS
For the period October 28, 1997 (commencement of operations) through
December 31, 1997, purchases and sales of investment securities, other than
short-term investments, were as follows. The Short-Intermediate Portfolio
aggregated $49,885 and $0 respectively. The gross unrealized appreciation for
all securities totaled $161 and the gross unrealized depreciation for all
securities totaled $0 for a net unrealized appreciation of $161. The aggregate
cost of securities for federal income tax purposes at December 31, 1997 was
$49,770. Purchases and sales of the Income Portfolio aggregated $347,959 and
$51,850 respectively. The gross unrealized appreciation for all securities
totaled $4,048 and the gross unrealized depreciation for all securities totaled
$59 for a net unrealized appreciation of $3,989. The aggregate cost of
securities for federal income tax purposes at December 31, 1997 was $315,083.
<PAGE>
Independent Accountants' Report
The Shareholders and
Board of Directors
Colorado Double Tax-Exempt Bond Fund, Inc.
We have audited the statements of assets and liabilities, including the
schedules of investments, of the COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
(Company) comprising, respectively, the Short-Intermediate and Income
Portfolios) as of December 31, 1997, and the related statements of operations,
changes in net assets, and financial highlights for the periods indicated
thereon. These financial statements and financial highlights are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards required that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosure in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting the COLORADO DOUBLE TAX-EXEMPT BOND
FUND, INC. as of December 31, 1997, the result of their operations, the changes
in their net assets, and the financial highlights for the periods indicated
thereon in conformity with generally accepted accounting principles.
BAIRD, KURTZ & DOBSON
Denver, Colorado
February 25, 1998
