ANNUAL REPORT
COLORADO
DOUBLE TAX-EXEMPT
BOND FUND
DECEMBER 31, 1998
[LOGO]
600 17th Street, Suite 2610 S. Tower, Denver, Colorado 80202
Statewide Call Toll Free 1-800-279-4426
From the Denver Area Call (303) 623-7500
LETTER FROM THE PRESIDENT
February 11, 1999
Dear Shareholder:
The Colorado Double Tax-Exempt Bond Fund, Inc., Short-Intermediate
Portfolio, has just finished its first complete calendar year on December 31,
1998, recognizing a total return of 6.53% made up of a 4.53% tax-exempt
distribution, plus a 2.00% capital gain, The portfolio was ranked number one in
the Lipper Fixed Income Fund performance analysis service, in the category of
Oother states short/intermediate muni debt fundsO one year performance.
The Income Portfolio for the same period, recognized a total return of
6.325% made up of 4.79% tax-exempt distribution, plus a 1.54% capital gain.
Without recognizing deductibility features, and using a simple formula, in the
maximum Federal (39.6%) and State of Colorado (5.0%) the taxable equivalent
yields for the Short-Intermediate Portfolio equals 10.18% (8.18% + 2.00%). The
Income Portfolio equals 10.19% (8.65% + 1.54%).
An unmanaged portfolio based on the Municipal Inter-Market yield history as
of December 31, 1997, and December 31, 1998, illustrates a total return for an
average life of 6 years of 5.35% (4.25% + 1.10%). The total return on an average
life of 20 years is 6.23% (5.15% + 1.08%). The standard index, Lehman Brothers
Index, for the long-term municipal total return for 1998, was 6.48% using a
composite quality from Baa to Aaa. The Colorado Double Tax-Exempt Bond Fund,
being measured herein had a composite quality of Aa in both portfolios.
The portfolio managers continue to monitor the portfolios on a daily basis
in an effort to maximize the annualized total return for both portfolios. Total
new issue municipal bond market volume in 1998, was second only to 1993. It is
expected that 1999 volume will be 10%-20% lower. Periodically, during 1998, the
municipal yield relationship to the US Treasury yields was at 95%-100%. It is
expected that the relationship between these yields, municipal and treasury,
well re-adjust to the more normal 82%-85% during 1999.
We look forward to serving your fixed income allocation of your total
investment during the coming year.
Sincerely,
/s/Calvin F. Isaak
-----------------
Calvin F. Isaak
President
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN SHORT-INTERMEDIATE PORTFOLIO
AND THE BENCHMARK SINCE INCEPTION OF 10/28/97
[GRAPH]
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN INCOME PORTFOLIO
AND THE BENCHMARK SINCE INCEPTION OF 10/28/97
[GRAPH]
<PAGE>
<TABLE>
<CAPTION>
COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
SCHEDULE OF INVESTMENTS
SHORT-INTERMEDIATE PORTFOLIO
December 31, 1998
Face Bond Rating
Amount Moody's/S&P Market Value
- ---------- ----------- ------------
CERTIFICATES OF PARTICIPATION 14.07%
<S> <C> <C>
$100,000 Adams & Arapahoe Counties, Joint School District,
6.25%. 06/15/07................................................... Aaa/AAA $107,800
20,000 Aims Junior College District,
6.40%. 12/02/00................................................... A3/NR 20,047
10,000 Conejos & Alamosa County, School District RE1J,
7.40%, 12/01/10................................................... NR/AA- 10,573
100,000 El Paso County, School District 38,
6.25%, 12/01/01................................................... A/A2 103,798
20,000 Weld County, Administration Building Lease,
6.40%, 08/01/00................................................... Baa1/NR 20,859
--------
TOTAL CERTIFICATES OF PARTICIPATION (Cost $261,987).......................... 263,077
--------
ESCROWED IN U.S. GOVERNMENT SECURITIES 5.30%
5,000 Arapahoe County, Single Family Mortgage,
Zero Coupon, 09/01/10............................................. NR/AAA 2,982
30,000 Arvada,
8.00%, 12/01/03................................................... AAA /A+ 35,623
10,000 Castle Pines Metropolitan District,
7.625%, 12/01/15.................................................. Aaa/AAA 10,669
40,000 Pueblo County, Hospital Facilities Series B,
7.50%, 09/01/01................................................... NR/NR 41,101
20,000 Thornton Capital Appreciation,
Zero Coupon, 12/01/10............................................. Aaa/AAA 8,367
--------
TOTAL ESCROWED IN U.S. GOVERNMENT SECURITIES (Cost $96,642).................. 98,742
--------
GENERAL OBLIGATION 28.38%
County/City/Special District/School District 27.00%
80,000 Adams County, School District #12,
6.20%, 12/15/09................................................... Aaa/AAA 88,179
100,000 Arapahoe County, School District #005,
5.00%, 12/15/09................................................... Aa2/AA 104,811
85,000 Boulder Valley, School District RE-2,
6.25%, 10/15/08................................................... Aa3/AA 90,557
40,000 Broomfield, Capital Appreciation Series B,
Zero Coupon, 12/01/09............................................. A1/NR 21,849
35,000 Brighton,
6.625%, 12/01/11.................................................. Aaa/AAA 38,256
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
SCHEDULE OF INVESTMENTS
SHORT-INTERMEDIATE PORTFOLIO (continued)
December 31, 1998
<S> <C> <C>
50,000 El Paso County, School District #20,
5.15%, 12/15/03................................................... Aa3/AA- 52,964
25,000 Jefferson County, School District R-001,
5.00%, 12/15/04................................................... Aaa/AAA 26,470
75,000 Larimer County, School District R-1
5.50%, 12/15/07................................................... Aa3/AA- 81,898
--------
.................................................................. 504,984
--------
Special Tax 1.38%
25,000 Boulder Open Space Acquisition,
7.20%, 08/15/13................................................... Aa1/AA+ 25,862
--------
TOTAL GENERAL OBLIGATION (Cost $526,627)..................................... 530,846
--------
REVENUE BONDS 50.18%
Hospital 17.33%
25,000 Colorado Health Facilities, Craig Hospital,
4.90%, 12/01/03................................................... A2/NR 26,057
295,000 Colorado Health Facilities, National Benevolent Association,
4.60%, 02/01/03................................................... Baa1/NR 297,985
--------
324,042
--------
Housing 8.42%
100,000 Colorado Housing Finance Authority, Single Family Series A,
6.20%, 11/01/99................................................... Aa1/AA+ 101,431
20,000 Colorado Housing Finance Authority, Single Family Series AA,
5.05%, 11/01/07................................................... Aa1/AA+ 20,573
35,000 Pueblo County Single Family Mortgage,
GNMA/FNMA Backed Series A,
6.30%, 06/01/03................................................... NR/AA- 35,480
--------
157,484
--------
Industrial Development 7.55%
70,000 Boulder County Industrial Development, May Department Stores,
6.25%, 09/01/07................................................... NR/A 74,899
65,000 Broomfield Industrial Development, Albertsons Inc.,
5.35%, 02/01/00................................................... NR/A+ 66,336
--------
141,235
--------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
SCHEDULE OF INVESTMENTS
SHORT-INTERMEDIATE PORTFOLIO (continued)
December 31, 1998
Special Tax 12.34%
<S> <C> <C>
200,000 Denver, City & County Excise Tax Series A,
5.00%, 11/01/08................................................... Aaa/AAA 199,770
30,000 Denver, City & County Excise Tax,
7.15%, 09/01/10................................................... Aaa/AAA 31,042
----------
230,812
----------
Utility 4.54%
80,000 Platte River Power Authority Series DD,
5.00%, 06/01/08................................................... Aaa/AAA 84,914
----------
TOTAL REVENUE BONDS (Cost $933,505).......................................... 938,487
----------
20,099 MUTUAL FUNDS 1.07%
Star Bank Tax Free Fund, (Cost $20,099)........................... 20,099
----------
TOTAL INVESTMENTS (Cost $1,838,860)......................................... 99.13% $1,851,251
Other assets in excess of liabilities........................................ 0.87% 18,901
----------
NET ASSETS .................................................................. 100.00% $1,870,152
==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
SCHEDULE OF INVESTMENTS
INCOME PORTFOLIO
December 31, 1998
Face Bond Rating
Amount Moody's/S&P Market Value
- ---------- ----------- ------------
CERTIFICATES OF PARTICIPATION 23.22%
<S> <C> <C>
$15,000 El Paso County, School District 38,
6.90%, 12/01/13................................................... Aaa/AAA $ 15,745
100,000 Englewood, Civic Center Project,
5.10%, 6/01/18.................................................... Aaa/AAA 100,452
250,000 Lakewood,
5.00%, 12/01/20................................................... Aaa/AAA 246,875
150,000 Moffat County, Public Safety,
5.125%, 6/01/23................................................... Aaa/AAA 150,594
----------
TOTAL CERTIFICATES OF PARTICIPATION (Cost $513,846)......................... 513,666
----------
GENERAL OBLIGATION 18.69%
50,000 El Paso County, School District 11,
7.10%, 12/01/18................................................... Aa3/AA- 60,833
100,000 Highlands Ranch Metropolitan District 3, Series B,
5.125%, 12/01/12.................................................. NR/A 101,395
50,000 Interstate South Metropolitan District,
6.00%, 12/01/20................................................... NR/A+ 53,992
125,000 Larimer County School District R-1, Poudre,
5.50%, 12/15/13................................................... Aa3/AA- 133,336
60,000 Thornton,
6.00%, 12/01/15................................................... Aaa/AAA 63,780
----------
TOTAL GENERAL OBLIGATION (Cost $414,290).................................... 413,336
----------
ESCROWED IN U.S. GOVERNMENT SECURITIES 4.87%
5,000 Adams County, Building Authority,
Zero Coupon, 08/15/12............................................. NR/AAA 2,670
Colorado Health Facilities Authority Retirement,
110,000 Zero Coupon, 07/15/20............................................. NR/AAA 34,838
85,000 Zero Coupon, 07/15/22............................................. AAA/AAA 24,194
180,000 Zero Coupon, 07/15/24............................................. NR/AAA 46,048
----------
TOTAL ESCROWED IN U.S. GOVERNMENT SECURITIES (Cost $107,970)................. 107,750
----------
REVENUE BONDS 51.71%
Education 19.56%
205,000 Colorado Postsecondary Educational Facilities,
6.00%, 03/01/16................................................... A2/AAA 221,228
100,000 Colorado State College Board, Adams State,
5.75%, 05/15/19................................................... Aaa/AAA 106,329
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
SCHEDULE OF INVESTMENTS
INCOME PORTFOLIO (continued)
<S> <C> <C>
100,000 University of Northern Colorado, Aux Facilities,
5.60%, 06/01/24................................................... Aaa/AAA 105,234
----------
432,791
----------
Hospitals 3.15%
50,000 Colorado Health Facilities, Catholic Health,
5.00%, 12/01/28................................................... Aa2/AA 48,674
20,000 Colorado Health Facilities, Cleo Wallace,
7.00%, 08/01/15................................................... NR/NR 20,914
----------
69,588
----------
Housing 18.01%
75,000 Adams County, Housing Authority Mortgage,
5.80%, 12/01/22................................................... NR/A 79,221
300,000 Aurora Single Family Mortgage,
Zero Coupon, 11/01/12............................................. NR/AAA 156,075
30,000 Colorado Housing Finance Authority, Single Family Housing,
5.60%, 11/01/16................................................... Aa1/AA+ 31,189
50,000 Colorado Housing Finance Authority, Multi Series A,
5.90%, 10/01/29................................................... Aa2/AA 52,140
25,000 El Paso County, Multi Mortgage, Cottonwood Terrace,
5.875%, 09/20/28.................................................. Aaa/NR 25,901
50,000 San Miguel County, Housing Authority,
6.40%, 07/01/23................................................... NR/NR 53,817
----------
398,343
----------
Special Tax 2.41%
50,000 Colorado State Fair Authority,
7.40%, 12/01/12................................................... NR/NR 53,382
----------
53,382
----------
Utility 8.58%
Colorado Springs Utilities,
25,000 6.50%, 11/15/15................................................... Aa2/AA 27,202
100,000 6.125%, 11/15/20.................................................. Aa2/AA 106,753
50,000 Upper Eagle Regal Water Authority,
6.70%, 12/01/18................................................... NR/NR 55,878
----------
.................................................................. 189,833
----------
TOTAL REVENUE BONDS (Cost $1,132,351)........................................ 1,143,937
----------
TOTAL INVESTMENTS (Cost $2,168,457).......................................... 98.49% $2,178,689
Other assets in excess of liabilities........................................ 1.51% 33,365
----------
NET ASSETS .................................................................. 100.00% $2,212,054
==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
Short-
Intermediate Income
Portfolio Portfolio
------------ ----------
ASSETS:
<S> <C> <C>
Investments in securities, at value (Cost $1,838,860
and $2,168,457 respectively) (Note 6)............................................. $1,851,251 $2,178,689
Cash................................................................................ 15,816 11,285
Receivable from advisor (Note 3).................................................... 24,003 25,088
Interest receivable................................................................. 18,141 15,889
Prepaid insurance................................................................... 1,168 1,210
Service deposit..................................................................... 3,000 3,000
---------- ----------
Total assets ............................................................... 1,913,379 2,235,161
---------- ----------
LIABILITIES:
Payable for securities purchased.................................................... 26,320 0
Payable for dividends declared...................................................... 0 5,831
Accrued expenses.................................................................... 16,907 17,276
---------- ----------
Total liabilities ........................................................... 43,227 23,107
---------- ----------
Net Assets ......................................................................... $1,870,152 $2,212,054
========== ==========
NET ASSETS CONSIST OF:
Capital stock, $.001 par value; limited shares authorized; 183,613 and 217,271.....
shares outstanding, respectively (Note 5)......................................... $ 184 $ 217
Additional paid in capital.......................................................... 1,857,652 2,201,602
Undistributed net investment income................................................. 0 0
Accumulated undistributed net realized gain from security transactions.............. (74) 3
Net unrealized appreciation of investments.......................................... 12,390 10,232
---------- ----------
Net Assets ........................................................................ $1,870,152 $2,212,054
========== ==========
Net asset value, redemption and offering price per share
($1,870,152/183,613 and $2,212,054/217,271 shares of
capital stock outstanding, respectively) (Note 5)................................. $ 10.19 $ 10.18
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
Short-
Intermediate Income
Portfolio Portfolio
<S> <C> <C>
Investment Income:
Interest............................................................................ $ 59,803 $ 84,926
---------- ----------
Total income .................................................................. 59,803 84,926
---------- ----------
Expenses:
Investment advisory fee (Note 3).................................................... 2,841 3,711
Distribution fee (Note 4)........................................................... 3,088 4,033
Administrative fee (Note 3)......................................................... 26,976 28,021
Transfer agent fee (Note 3)......................................................... 10,306 10,349
Audit fee........................................................................... 8,499 8,500
Custody fee......................................................................... 7,375 8,275
Directors fees and expenses......................................................... 4,000 4,000
Registration........................................................................ 726 726
Legal fee........................................................................... 16,468 16,468
Insurance expense................................................................... 6,329 6,287
Other............................................................................... 674 667
---------- ----------
Total expenses ................................................................ 87,282 91,037
---------- ----------
Less: Expense reimbursement from advisor (Note 3).................................. (78,883) (80,066)
---------- ----------
Net expenses .................................................................. 8,399 10,971
---------- ----------
Net investment income ......................................................... 51,404 73,955
---------- ----------
Realized and Unrealized Gain on Investments: (Note 2)
Net realized gain on investments.................................................... 7,047 19,036
Unrealized appreciation of investments for the period............................... 12,229 6,243
---------- ----------
Net gain on investments ............................................................ 19,276 25,279
---------- ----------
Net increase in net assets from operations ......................................... $70,680 $99,234
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the period For the period
For the year April 17, 1997 For the year April 17, 1997
ended (Capitalization) ended (Capitalization)
December 31, to December 31, December 31, to December 31,
1998 1997 1998 1997
------------ -------------- ------------ --------------
Short-Intermediate Portfolio Income Portfolio
--------------------------------- -------------------------------
Increase in Net Assets from Operations:
<S> <C> <C> <C> <C>
Net investment income............................... $ 51,404 $ 335 $ 73,955 $ 1,598
Net realized gain on investments.................... 7,047 0 19,036 298
Unrealized appreciation for the period.............. 12,229 161 6,243 3,989
------------ --------- ------------ ----------
Net increase in net assets from operations.......... 70,680 496 99,234 5,885
------------ --------- ------------ ----------
Distributions paid to shareholders:
From net investment income($.44, $.07 and $.47,...
$.09 per share, respectively)................... (51,404) (335) (73,955) (1,598)
From net realized gains
($.04 and $.09 per share respectively)............ (7,121) 0 (19,331) 0
Capital share transactions (Note 5) ................ 1,807,091 50,745 1,885,856 315,963
------------ --------- ------------ ----------
Total increase in net assets ................. 1,819,246 50,906 1,891,804 320,250
------------ --------- ------------ ----------
Net Assets:
Beginning of period................................. 50,906 0 320,250 0
------------ --------- ------------ ----------
End of period ...................................... $1,870,152 $50,906 $2,212,054 $320,250
============ ========= ============ ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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
For the year (Commencement of
ended operations) to
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period ............................ $10.03 $10.00
------ ------
Income from investment operations:
Net investment income....................................... 0.44 0.07
Net realized and unrealized gain on investments............. 0.20 0.03
------ ------
Total from investment operations ............................ 0.64 0.10
------ ------
Less distributions:
Dividends from net investment income....................... (0.44) (0.07)
Dividends from net realized gains.......................... (0.04) 0.00
------ ------
Total distributions ............................................. (0.48) (0.07)
------ ------
Net asset value, end of period .................................. $10.19 $10.03
====== ======
Ratios/Supplemental Data:
Net assets, end of period (in 000's)............................. 1,870 51
Ratio of expenses to average net assets.......................... 7.07% 84.89% **
Ratio of expenses to average net assets, after reimbursement..... 0.68% 0.68% **
Ratio of net investment income (loss) to average net assets...... (2.22)% (80.44)% **
Ratio of net investment income (loss) to average
net assets, after reimbursement............................. 4.16% 3.77% **
Portfolio turnover rate.......................................... 172.71% 0.00%
Total return *................................................... 6.53% 5.64% **
</TABLE>
* 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)
<TABLE>
<CAPTION>
For the period
October 28, 1997
For the year (Commencement of
ended operations) to
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period ............................ $10.12 $10.00
------ ------
Income from investment operations:
Net investment income....................................... 0.47 0.09
Net realized and unrealized gain on investments............. 0.15 0.12
------ ------
Total from investment operations ........................... 0.62 0.21
------ ------
Less distributions:
Dividends from net investment income....................... (0.47) (0.09)
Dividends from net realized gains.......................... (0.09) 0.00
------ ------
Total distributions ............................................. (0.56) (0.09)
------ ------
Net asset value, end of period .................................. $10.18 $10.12
====== ======
Ratios/Supplemental Data:
Net assets, end of period (in 000's)............................. 2,212 320
Ratio of expenses to average net assets.......................... 5.64% 24.20% **
Ratio of expenses to average net assets, after reimbursement.... 0.68% 0.68% **
Ratio of net investment income (loss) to average net assets...... (0.38)% (18.48)% **
Ratio of net investment income (loss) to average
net assets, after reimbursement.............................. 4.58% 5.03% **
Portfolio turnover rate.......................................... 120.86% 25.64%
Total return *................................................... 6.33% 12.21% **
</TABLE>
* 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, 1998
NOTE 1. ORGANIZATION
The Colorado Double Tax Exempt Bond Fund (the OFundO) 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
FundOs Board of Directors. 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 FundOs shares.
Federal Income Taxes- The Fund intends to qualify each year as a
Oregulated investment companyO 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 OSECO), 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, 1998
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 OManagerO) 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 FundOs
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 agentsO 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 shareholdersO reports and meetings, costs of
preparing and printing prospectuses and statements of additional information,
amounts payable under the FundOs Distribution and Shareholder Servicing Plan
(the OPlanO) 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 AdvisorOs fee) of the average annual net assets of the Fund. The Manager is
a wholly owned subsidiary of Isaak Bond Investments, Inc. (OThe Principal
UnderwriterO). The Principal Underwriter is owned by certain Officers and
Directors of the Fund.
For the year ended December 31, 1998, the Manager earned advisory fees of
$6,552. The Manager earned $2,841 from the Short-Intermediate Portfolio, and
$3,711 from the Income Portfolio, respectively. The Manager reimbursed the Fund
$158,949 in expenses. The Manager reimbursed the Short-Intermediate Portfolio
$78,883, and reimbursed the Income Portfolio $80,066, respectively.
The Fund has agreements with American Data Services, Inc. (the
OAdministratorO) 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 FundOs arrangement with
its custodian and assistance in the preparation of the FundOs registration
statement under federal and state laws. Costs incurred totaled $75,652, $37,282
for the Short-Intermediate Portfolio, and $38,370 for the Income Portfolio
respectively, for the year ended December 31, 1998. The agreements provide for
minimum fees of $3,000 per portfolio plus expenses and transactional charges.
The Fund is required to maintain a $3,000 per portfolio deposit with the
Administrator.
The FundOs custody agreements with a bank provides for fees on a
transactional basis plus expenses. The minimum monthly fee per portfolio is $400
per month.
<PAGE>
COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE 4. DISTRIBUTION AGREEMENT
Under a plan adopted by the FundOs Board of Directors pursuant to Rule
12b-1 under the 1940 Act (the OPlanO), the Fund pays the Manager for each of the
FundOs 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 itOs 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 FundOs 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 distributorsO 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 year ended December 31, 1998, the amount paid or accrued for such
expenses was $7,121. The breakdown per Fund was, $3,088 for the
Short-Intermediate Portfolio, and $4,033 for the Income Portfolio.
NOTE 5. CAPITAL SHARE TRANSACTIONS
As of December 31, 1998 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 were as follows:
NOTE 5. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
Short-Intermediate Portfolio
For the period
For the year April 17, 1997
ended (Capitalization) to
December 31, 1998 December 31, 1997
-------------------------- --------------------------
Shares Amount Shares Amount
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Shares sold..................................... 189,687 $1,920,879 5,050 $50,500
Shares issued for reinvestment
of dividends and distribution................ 5,756 58,616 24 245
Shares redeemed................................. (16,904) (172,404) 0 0
------- ---------- ----- -------
Net increase.................................... 178,539 $1,807,091 5,074 $50,745
======= ========== ===== =======
</TABLE>
COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE 5. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
Income Portfolio
For the period
For the year April 17, 1997
ended (Capitalization) to
December 31, 1998 December 31, 1997
--------------------------- --------------------------
Shares Amount Shares Amount
-------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Shares sold..................................... 169,620 $1,722,647 31,558 $315,000
Shares issued for reinvestment
of dividends and distribution................ 16,500 168,209 95 963
Shares redeemed................................. (502) (5,000) 0 0
------- ---------- ------ --------
Net increase.................................... 185,618 $1,885,856 31,653 $315,963
======= ========== ====== ========
</TABLE>
NOTE 6. INVESTMENTS
<TABLE>
<CAPTION>
Short-
Intermediate Income
Portfolio Portfolio
------------ ----------
<S> <C> <C>
Purchases of investment securities..................................... $3,782,930 $3,689,302
========== ==========
Sales of investment securities......................................... $2,016,623 $1,898,013
========== ==========
Accumulated unrealized appreciation- January 1, 1998................... $ 161 $ 3,989
Add: Gross unrealized appreciation................................. 16,514 11,999
Less: Gross unrealized depreciation................................ (4,285) (5,756)
---------- ----------
Accumulated unrealized appreciation- December 31, 1998................. $ 12,390 $ 10,232
========== ==========
Aggregate cost of securities, Federal income tax purposes.............. $1,838,860 $2,168,457
========== ==========
</TABLE>
<PAGE>
The Shareholders and
Board of Directors
Colorado Double Tax-Exempt Bond Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the COLORADO DOUBLE TAX-EXEMPT BOND
FUND, INC. (Company) (comprising, respectively, the Short-Intermediate and
Income Portfolios) as of December 31, 1998 and the related statement of
operation for the year then ended, the statement of changes in net assets for
the year ended December 31, 1998 and period from April 17, 1997 (Capitalization)
to December 31, 1997, and the financial highlights for the year ended December
31, 1998 and period from April 17, 1997 (Capitalization) to December 31, 1997.
These financial statements and financial highlights are the responsibility of
the CompanyOs 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 require 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 and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998, 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
statement 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 the
COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC. as of December 31, 1998, the result
of its operations for the year ended, the changes in net assets for the year
ended December 31, 1998 and for the period from April 17, 1997 (Capitalization)
to December 31, 1997, and the financial highlights for the year ended December
31, 1998 and for the period from April 17, 1997 (Capitalization) to December 31,
1997 in conformity with generally accepted accounting principles.
/s/ BAIRD, KURTZ & DOBSON
-------------------------
BAIRD, KURTZ & DOBSON
Denver, Colorado
February 16, 1999
