COLORADO DOUBLE TAX EXMEPT BOND FUND INC, N-1A EL, 1997-01-24

COLORADO DOUBLE TAX EXMEPT BOND FUND INC
N-1A EL, 1997-01-24

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As filed with the Securities and Exchange Commission
on January 23, 1997

Securities Act File No. __________
Investment Company Act File No. __________

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT of 1933 [X]

Pre-Effective Amendment No. __ [ ]

Post-Effective Amendment No. __ [ ]

and

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940

Amendment No. __ [ ]

(Check appropriate box or boxes)

COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
(Exact Name of Registration as Specified in Charter)

600 17th Street, 2610 S. Tower
Denver, Colorado 80202
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (303) 623-7500

Calvin F. Isaak
600 17th Street
2610 S. Tower
Denver, Colorado 80202
(Name and Address of Agent for Service)

Copy to:

Robert J. Ahrenholz, Esq.
Deborah A. Schultz, Esq.
Kutak Rock
717 17th Street
Suite 2900
Denver, Colorado 80202
<PAGE>

Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the Registration Statement.

It is proposed that this filing will become effective (check appropriate
box):

____ immediately upon filing pursuant to paragraph (b)
____ on (date) pursuant to paragraph (b)
_X__ 60 days after filing pursuant to paragraph (a)(1)
____ on (date) pursuant to paragraph (a)(1)
____ 75 days after filing pursuant to (a)(2)
____ on (date) pursuant to (a)(2) of rule 485

If appropriate check the following box:

[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment

Calculation of Registration Fee Under the Securities Act of 1933
<TABLE>
<CAPTION>
Title of Proposed Proposed
Securities Amount Maximum Maximum Amount of
Being Being Offering Aggregate Offering Registration
Registered Registered Price Per Unit Price Fee
---------- ---------- -------------- ----- ---

<S> <C> <C> <C> <C>
Shares* $.001 par Indefinite** ** Indefinite** No Fee Required
value per Share
</TABLE>

*The Shares consist of two classes: Short-Intermediate Portfolio and Income
Portfolio.
**An indefinite number of Shares of the Registrant is being registered by this
Registration Statement pursuant to Rule 24f-2 under the Investment Company Act
of 1940.
<PAGE>

COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET

Part A
Item No. Prospectus Heading
-------- ------------------

1. Cover Page.......................... Cover Page

2. Synopsis............................ Expense Table

3. Condensed Financial Information..... Not applicable

4. General Description of Registrant... Cover Page; Description of the Fund;
Management of the Fund; Investment
Considerations; Additional Information

5. Management of the Fund.............. Management of the Fund; Investment
Considerations

5A. Management's Discussion of Fund
Performance......................... Not Applicable

6. Capital Stock and Other Securities.. Taxation of the Fund and its
Shareholders; Distributions;
Description of the Fund; Additional
Information; Transfer and Dividend
Disbursing Agent, Counsel and Auditors

7. Purchase of Securities Being Offered Purchase of Shares; Exchange
Privilege; Net Asset Value Per Share

8. Redemption or Repurchase............ Redemption of Shares; Net Asset Value
Per Share

9. Pending Legal Proceedings........... Not applicable

10. Cover Page.......................... Cover Page

11. Table of Contents................... Table of Contents; Introduction

12. General Information and History..... Not Applicable
<PAGE>

Part B Heading in Statement of Additional
Item No. Information or Prospectus (If Not
-------- Otherwise Included in Statement)
--------------------------------------
13. Investment Objectives and Policies.. Investment Objective and Management
Policies

14. Management of the Fund.............. Management of the Fund; Financial
Statements; Transfer Agent and
Dividend Disbursing Agent, Counsel and
Auditors

15. Control Persons and Principal
Holders of Securities............... Management of the Fund; Financial
Statements

16. Investment Advisory and Other
Services............................ Management of the Fund Management of
the Fund

17. Brokerage Allocation and Other
Practices........................... Management of the Fund

18. Capital Stock and Other Securities.. Additional Information

19. Purchase, Redemption and Pricing of
Securities Being Offered............ Net Asset Value Per Share; Purchase of
Shares; Redemption of Shares

20. Tax Status.......................... Taxation of the Fund and its
Shareholders

21. Underwriters........................ Not Applicable

22. Calculation of Performance Data..... Computation of Yield and Investment
Performance

23. Financial Statements................ Financial Statements; Report of
Certified Public Accountants

Part C

Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.
<PAGE>

A registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. Information
contained herein is subject to completion or amendment. These securities may not
be sold nor may offers to buy be accepted prior to the time the Registration
Statement becomes effective. This Prospectus shall not constitute an offer to
sell or the solicitation of an offer to buy nor shall there be any sale of these
securities in any jurisdiction in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws of
any such jurisdiction.

PRELIMINARY PROSPECTUS DATED January ___, 1997

[LOGO] 600 17th Street
Colorado Double Tax Suite 2610 S. Tower
Exempt Bond Fund, Inc. Denver, Colorado 80202

Statewide Call Toll Free 1-800-__________
From the Denver Area Call (303) 623-7500

Colorado Double Tax-Exempt Bond Fund, Inc. (the "Fund") is an open end
management investment company. The Fund presently offers Colorado investors a
choice of a Short- Intermediate Portfolio and an Income Portfolio, each of which
is a no-load, non-diversified investment portfolio of the Fund. Both portfolios
seek to provide Colorado investors with as high a level of tax-exempt income as
is consistent with the maturities of the portfolio selected and, regardless 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.

The Short-Intermediate Portfolio invests primarily in high quality short
and intermediate term Colorado municipal securities and is restricted to a
weighted average maturity of no more than seven years. The Income Portfolio
invests primarily in high quality long- and intermediate- term Colorado
municipal securities and is expected to have a weighted average maturity of more
than seven years. The Short-Intermediate Portfolio generally provides a lower
yield than the Income Portfolio; but, in turn, generally provides greater
principal stability than the Income Portfolio.

This Prospectus is intended to set forth in a clear and concise manner
information about the Fund that a prospective investor should know before
investing. After reading the Prospectus, it should be retained for future
reference as it contains information about the purchase and sale of shares and
other items which a prospective investor will find useful to have.

A "Statement of Additional Information" dated __________, 1997 which
provides a further discussion of certain matters covered by this Prospectus and
other matters which may be of interest to investors, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. A
copy is available without charge from the Fund at the address and telephone
number shown above.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>

TABLE OF CONTENTS

Page
----
EXPENSE TABLE............................................................. 1
DESCRIPTION OF THE FUND................................................... 2
MANAGEMENT OF THE FUND.................................................... 8
TAXATION OF THE FUND AND ITS SHAREHOLDERS................................. 12
NET ASSET VALUE PER SHARE................................................. 14
PURCHASE OF SHARES........................................................ 14
REDEMPTION OF SHARES...................................................... 17
EXCHANGE PRIVILEGE........................................................ 19
DISTRIBUTIONS............................................................. 20
TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND AUDITORS.................................................... 20
ADDITIONAL INFORMATION.................................................... 20

i
<PAGE>

EXPENSE TABLE

Shareholder Transaction Expenses

Contingent Deferred Sales Loads (as a percentage of ...... *
original purchase price or redemption proceeds,
as applicable) ........................................... ________

Annual Fund Operating Expenses (as a percentage
of average net assets) ............................................ ________

Management Fees ................................................... .23
12b-1 Fees ........................................................ .25
Other Expenses:
Registration and Filing Fees .................... _______
Reports to Shareholders ......................... _______
Other ........................................... _______

Total Other Expenses .............................................. ________
Total Fund Operating Expenses ..................................... .68
=======

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder will bear directly or indirectly
in connection with an investment in the Fund. These figures are based on
estimated amounts for the current fiscal year and are based on estimated
operating expenses of the Fund before fee waivers and expense reductions.

Example

As required by regulations of the Securities and Exchange Commission, the
following example illustrates the expenses that apply to a $1,000 investment in
the Fund over various time periods assuming (i) a 5% annual rate of return and
(ii) redemption at the end of each such time period.

One Year Three Years

This example is based on the aggregate annual operating expenses, before
fee waivers and expense reductions, shown above and should not be considered a
representation of past or future expenses which may be more or less than those
shown.

* A deferred sales charge is assessed on certain redemptions that are redeemed
within one year of purchase. See "Purchase of Shares."
** Estimated expenses for the current fiscal year.
<PAGE>

DESCRIPTION OF THE FUND

The Fund is an open-end management investment company, or mutual fund,
organized as a Maryland corporation on August 29, 1996. The Fund offers a choice
of two portfolios, each of which is a no-load, non-diversified investment
portfolio of the Fund. Both portfolios are designed to provide Colorado
investors with as high a level of dividend income exempt from Federal and
Colorado state income taxes as is consistent with the portfolio selected and
prudent investment management.

Investment Objective

The Fund believes that by offering two portfolios, it can achieve a more
precise objective for an investor than a single portfolio attempting to achieve
multiple objectives. The Fund offers a Short-Intermediate Portfolio which
restricts its weighted average maturity to no more than seven years, and an
Income Portfolio which is expected to have a weighted average maturity of more
than seven years. Each portfolio differs from the other primarily in the
maturity of its holdings and consequently in the yield levels and principal
volatility which might be expected from such maturity differentials. The
Short-Intermediate Portfolio generally provides a lower yield than the Income
Portfolio; but, in turn, generally provides greater principal stability than the
Income Portfolio.

It is a nonfundamental policy of the Fund that, under normal circumstances,
the Fund will invest at least 65% of the value of its total assets in tax-exempt
bonds. The balance of its total assets will be invested in other tax-exempt
securities of the State of Colorado, its political subdivisions, municipalities
and public authorities, the interest on which is exempt from federal income
taxes and from Colorado personal income taxes.

Under normal market conditions, the Fund will attempt to invest 100% and,
as a matter of fundamental policy, will invest at least 80% of its total assets
in each portfolio in Colorado municipal securities. The Fund will invest only in
securities which at the time of purchase have one of the four highest ratings of
Moody's Investor Service, Inc. ("Moody's) (Aaa, Aa, A or Baa), Standard & Poor's
Corporation ("S&P") (AAA, AA, A or BBB), or Fitch Investors Service, Inc.
("Fitch") (AAA, AA, A and BBB), or in securities which are not rated, provided
that, in the opinion of the Fund's investment adviser (the "Adviser"), such
securities are comparable in quality to those within the four highest ratings of
Moody's, S&P or Fitch. These securities are considered to be "investment grade"
securities, although bonds rated in the fourth highest ratings level (Baa by
Moody's and BBB by S&P and Fitch) are regarded as having an adequate capacity to
pay principal and interest but with greater vulnerability to adverse economic
conditions and as having some speculative characteristics. Securities on which
the interest is treated as an item of tax preference for purposes of the
alternative minimum tax will not be counted toward the 80% policy of the Fund.
In the event the rating of an issue held in the Fund's portfolio is lowered by
the rating service, such change will be considered by the Fund in its evaluation
of the overall investments of the security, but such change will not necessarily
result in an automatic sale of the security. For a description of municipal
securities ratings see "Appendix A-Description of Municipal Securities Ratings"
in the Statement of Additional Information.

2
<PAGE>

The Fund also may invest up to 20% of the value of its net assets in
fixed-income securities, the interest on which is subject to federal, state and
local income tax. This may be done (i) pending the investment or reinvestment in
Colorado municipal securities, (ii) in order to avoid the necessity of
liquidating portfolio investments to meet redemptions of shares by investors, or
(iii) where market conditions due to rising interest rates or other adverse
factors warrant temporary investing for defensive purposes. For purposes of this
paragraph, the term "fixed-income securities" shall include only securities
issued or guaranteed by the United States Government (such as bills, notes and
bonds), its agencies, instrumentalities or authorities, and certificates of
deposit of domestic banks which have capital, surplus and undivided profits of
over $1 billion and which are members of the Federal Deposit Insurance
Corporation.

Generally, the Fund will not buy illiquid securities or Colorado municipal
securities for which an active trading market does not exist. Moreover, as a
matter of fundamental policy, in no event will the Fund acquire Colorado
municipal securities or other illiquid assets for which there is no active
trading market if such Colorado municipal securities and illiquid assets, in the
aggregate, would comprise 15% or more of the net assets of the Fund. Included in
this 15% limitation are restricted or not readily marketable securities and
repurchase agreements maturing or terminable in more than seven days. Although
there may be no daily bid and asked activity for certain not rated Colorado
municipal securities, there is an active secondary market for them, and for this
reason the Adviser considers them to be liquid.

The Fund may borrow money from banks for temporary purposes only, and in an
amount not to exceed 10% of the value of its total assets. The Fund will not
purchase portfolio securities if it has outstanding borrowings in excess of 5%
of the value of its total assets.

Except as otherwise herein noted or in the Statement of Additional
Information, the investment policies of the Fund described in this Prospectus
are not fundamental and the Board of Directors of the Fund may change such
policies without the vote of a majority of the outstanding voting securities of
the Fund. However, the Board of Directors will not change the Fund's principal
investment objective, which is a fundamental policy of the Fund, of seeking to
maximize income exempt from federal taxes and from Colorado personal income
taxes to the extent consistent with preservation of capital without such a vote.
Under the Investment Company Act of 1940 (the "1940 Act"), a "vote of a majority
of the outstanding voting securities" of the Fund or of a particular series
means the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the Fund or such series or (2) 67% or more of the shares of the Fund
or of such series present at a shareholders' meeting if more than 50% of the
outstanding shares of the Fund or of such series are represented at the meeting
in person or by proxy. The Fund is subject to a number of additional investment
restrictions, some of which may be changed only with the approval of
shareholders, which limits its activities to some extent. For a list of these
restrictions and more information concerning the policies discussed herein,
please see the Statement of Additional Information.

3
<PAGE>

Colorado Municipal Securities

As used in this prospectus, the term, "Colorado municipal securities,"
refers to debt obligations issued by the State of Colorado, its counties,
municipalities, authorities and political subdivisions for the purpose of
obtaining funds for various public purposes. The interest on such obligations
is, in the opinion of bond counsel to the issuers, exempt from federal and
Colorado State income taxes.

Municipal obligations are classified as general obligation bonds, revenue
bonds and notes. General obligation bonds are secured by the issuer's pledge of
its faith, credit and taxing power for the payment of principal and interest.
Revenue bonds are payable from the revenue derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise or
other specific revenue source, but not from the general taxing power. Notes are
short-term instruments which are obligations of the issuing municipalities or
agencies and are sold in anticipation of a bond sale, collection of taxes or
receipt of other revenues.

In addition, certain types of "industrial development bonds" issued by or
on behalf of public authorities to obtain funds for privately operated
facilities are included in the definition of Colorado municipal securities,
provided that the interest paid thereon is exempt from Federal and Colorado
State income taxes. Tax-exempt industrial development bonds do not generally
pledge of the credit of the issuing municipality.

The Fund may also purchase bond put programs consisting of long-term low
coupon bonds with put options that give the purchaser the right to sell the
bonds back to the seller at a specified price on a specified date usually within
three to five years of the offering date of the program. In the case of such
purchases, the date that the put option may be exercised is considered to be the
maturity date. All bonds purchased as part of bond put programs are required to
satisfy the same quality standards of the Fund applicable to other bond
purchases. Additionally, the obligation of the seller to purchase a bond upon
exercise of the put option must be supported by a bank letter of credit (which
in the case of a selling bank must be issued by another bank). In the opinion of
the Adviser, the marketability and liquidity of such bonds and their
accompanying put options is the same as other bonds held by the Fund. The Fund
may also purchase tender option programs that give the purchaser the right to
sell the bonds back to the seller or issuer at any time prior to maturity after
expiration of a specified holding period. In the case of such purchases, the
first date that the bonds may be tendered is considered to be the maturity date.
There is no limitation on the aggregate principal amount of bonds associated
with bond put programs or tender option programs which may be purchased in
either portfolio although it is not anticipated that either program will exceed
20% of the assets of a portfolio.

Each portfolio may invest in variable rate demand instruments, repurchase
agreements and standby commitments provided that none of such investments
constitutes more than 5% of the assets of the portfolio. Each portfolio may also
invest in when-issued securities without limitation.

4
<PAGE>

Also included within the general category of Colorado municipal securities
are participation certificates issued by government authorities or entities to
finance the acquisition or construction of equipment, land and/or facilities.
The certificates represent participations in a lease, an installment purchase
contract or a conditional sales contract (hereinafter collectively called "lease
obligations") relating to such equipment, land or facilities. Although lease
obligations do not constitute general obligations of the issuer for which the
issuer's unlimited taxing power is pledged, a lease obligation frequently is
backed by the issuer's covenant to budget for, appropriate and make the payments
due under the lease obligation. However, certain lease obligations contain
"non-appropriative" clauses which provide that the issuer has no obligation to
make lease or installment purchase payments in future years unless money is
appropriated for such purpose on a yearly basis. Although "non-appropriation"
lease obligations are secured by the leased property, disposition of the
property in the event of foreclosure might prove difficult. These securities
represent a type of financing that has not yet developed the depth of
marketability associated with more conventional securities. Certain investments
in lease obligations may be illiquid. The Fund may not invest in illiquid lease
obligations, if such investments, together with other illiquid investments,
would exceed 15% of the Fund's net assets. The Fund may, however, invest without
regard to such limitation in lease obligations which the Adviser, pursuant to
guidelines which have been adopted by the Board of Directors and subject to the
supervision of the Board of Directors, determines to be liquid. The Adviser will
deem lease obligations liquid if they are publicly offered and have received an
investment grade rating of Baa or better by Moody's or BBB or better by S&P or
Fitch.

The Short-Intermediate Portfolio will tend to have a longer average
maturity when interest rates are expected to decline (a market rise) and a
shorter average maturity when interest rates are expected to rise (a market
decline). The Income Portfolio places no maturity restrictions on the municipal
securities in which it may invest. The Income Portfolio's weighted average
maturity is expected to be more than seven years. The Income Portfolio will tend
to have a longer average maturity when interest rates are expected to decline (a
market rise) and a shorter average maturity when interest rates are expected to
rise (a market decline). The Income Portfolio does not intend to maximize income
through total concentration in long-term maturities. The Income Portfolio will
have a dollar weighted average maturity of twenty years or more with respect to
that portion of its holdings not invested in short-term securities (maturity
equal to one year or less) only if in the Adviser's opinion the prevailing
conditions are very favorable to long-term investment.

While these quality and maturity policies should generally result in lower
yields for both portfolios than would be obtainable in funds or trusts comprised
of longer term obligations, lower quality obligations or both, they are intended
to provide greater stability of principal than such other funds or trusts.

The current yield and average maturity for both portfolios is available at
any time by calling the appropriate telephone number as indicated on the cover
page of this Prospectus.

5
<PAGE>

A more detailed description of the securities in which the Fund may invest
is contained in the Statement of Additional Information.

Investment Risk Considerations

In addition to the risks specific to the types of securities in which the
Fund may invest described herein and in the Statement of Additional Information,
the Fund is also subject to the following risks:

Market/Credit Risk. There are two categories of risks to which the Fund is
subject: credit risk and market risk. Credit risk is a function of the ability
of an issuer of a municipal security to maintain timely interest payments and to
pay the principal of a security upon maturity. It is generally reflected in a
security's underlying credit rating and its stated interest rate. A change in
the credit risk associated with a municipal security may cause a corresponding
change in the security's price. Even though the Fund's quality standards require
that investments (including bonds purchased in bond put programs) be in the four
highest categories of Moody's, S&P or Fitch or the determination of equivalent
quality by the Adviser in the case of all investments not secured with U.S.
government obligations, or of equivalent quality as determined by the Adviser
for not rated securities, there is no assurance that credit risk can be entirely
eliminated. The ratings assigned by Moody's, S&P and Fitch represent their
opinions as to the quality of the securities which they undertake to rate and
are not absolute standards of quality. Market risk is the risk of price
fluctuation of a municipal security caused by changes in economic and interest
rate conditions generally affecting the market as a whole. A municipal
security's maturity length also affects the price. As with other debt
instruments, the price of the securities in which the Fund invests are likely to
decrease in times of rising interest rates. Conversely, when rates fall, the
value of the Fund's debt instruments may rise. Price changes of securities have
a direct impact on the net asset value of the Fund.

Diversification. As a non-diversified investment company, the Fund is not
subject to any restrictions under the 1940 Act with respect to the concentration
of its investments in assets of one or more issuers. This concentration may
present greater risks than in the case of a diversified company. However, the
Fund's investments will be limited so as to qualify as a "regulated investment
company" for purposes of the Internal Revenue Code of 1986, as amended (the
"Code"). To qualify, among other requirements, the Fund's investments will be
limited so that at the close of each of the taxable year, (i) not more than 25%
of the market value of the Fund's total assets will be invested in the
securities of a single issuer, and (ii) with respect to 50% of the market value
of its total assets, not more than 5% of the market value of its total assets
will be invested in the securities of a single issuer and the Fund will not own
more than 10% of the outstanding voting securities of a single issuer. (For
purposes of this restriction, the Fund will regard each state and each political
subdivision, agency or instrumentality of such state and each multi-state agency
of which such state is a member and each public authority which issues
securities on behalf of a private entity as a separate issuer, except that if
the security is backed only by the assets and revenues of a non-government
entity then the entity with the ultimate responsibility for the payment of
principal and interest may be regarded as the sole issuer. A fund which elects
to be classified as "diversified" under the 1940 Act must satisfy the foregoing
5% and 10% requirements with respect to 75% of its total assets. To the extent
the Fund assumes large positions in a small number of issuers, the Fund's total
return may fluctuate to a greater extent than that of a diversified company as a
result of changes in the financial condition or in the market's assessment of
the issuers.

6
<PAGE>

Risks Related to Colorado

Because of limitations contained in the state constitution, the State of
Colorado issues no general obligation bonds secured by the full faith and credit
of the state. Several agencies and instrumentalities of state government,
however, are authorized by statute to issue bonds secured by revenues from
specific projects and activities. Additionally, the state currently is
authorized to issue short-term revenue anticipation notes.

There are approximately 2,000 units of local government in Colorado. These
include counties, home rule cities and counties, statutory cities and towns,
school districts, water and sanitation districts, fire protection districts,
metropolitan districts, general improvement and service districts. These
municipal entities all have some constitutional and/or statutory authority to
collect taxes, generate revenues and incur indebtedness.

A major revenue source for many of these municipalities is the ad valorem
property tax levied at the local level, with $2,421,892,140 and $2,512,514,138
projected to be collected throughout Colorado in tax years 1994 and 1995,
respectively.

In 1994, the assessed valuation of all real and personal property subject
to taxation in Colorado was $29,831,046,660. This was up 3.2% from 1993 levels.
For the 1989 and 1990 levy years, residential property was assessed at 15% of
statutory "actual" value, and all other property was assessed at 29% of
statutory "actual" value, using the levels of value for the one and one-half
year period immediately prior to July 1, 1988, to determine statutory "actual"
value. For the 1991 and 1992 levy years, the residential assessment ratio was
14.34% and the levels of value for the one and one-half year period immediately
prior to July 1, 1990, were used to determine statutory "actual" value. For 1993
and 1994, the residential assessment ratio was reduced to 12.86%. For 1995 and
1996, the ratio was reduced to 10.36% from 12.86%.

The Colorado Legislative Council's economic forecast predicts an increase
in general fund revenues of about 4.4% during the 1995-1996 fiscal year.

7
<PAGE>

The major risks to a continued economic recovery in Colorado are reduced
federal expenditures, particularly in the area of defense, cessation of large
public works projects in the state, a drop in tourism caused by the lack of any
state-sponsored advertising, and reduced commercial real estate values. Any of
these potential events could adversely affect the Colorado economy and local
governmental revenues. Additionally, on November 3, 1992, Colorado voters
approved an amendment to the Colorado Constitution which is commonly referred to
as the Taxpayer's Bill of Rights ("TABOR"). TABOR imposes various limits and new
requirements on spending by the State of Colorado and all Colorado local
governments (each of which is referred to in this section as a "governmental
unit"). Any of the following, for example, now requires prior voter approval:
(i) any increase in a governmental unit's spending from one year to the next in
excess of the rate of inflation plus a "growth factor," as defined in TABOR;
(ii) any increase in the real property tax revenues of a local governmental unit
(not including the State) from one year to the next in excess of inflation plus
the appropriate "growth factor"; (iii) any new tax, tax rate increase, mill levy
increase, valuation for assessment ratio increase for a property class,
extension of an expiring tax or a tax policy change directly causing a net tax
revenue gain; and (iv) except for refinancing bonded indebtedness at a lower
interest rate or adding new employees to existing pension plans, creation of any
multiple-fiscal year direct or indirect debt or other financial obligation
whatsoever without adequate present cash reserves pledged irrevocably and held
for payments in all future fiscal years. TABOR has already reduced the financial
flexibility of all levels of Colorado government. In particular, governmental
units dependent on taxes on residential property are being squeezed between
TABOR requirements of voter approval for increased mill levies and an earlier
State constitutional amendment which has had the effect of lowering the
assessment rate on residential property from 21.0% to 10.36% over the past eight
years.

There can be no assurance that these, or other events, will not negatively
affect the market value of the securities in the Fund or the ability of
municipal entities to pay their debt obligations in a timely manner.

Legislative Tax Changes

From time to time proposals to restrict or eliminate the Federal income tax
exemption for interest on the type of securities to be purchased by the Fund are
introduced and undoubtedly will continue to be introduced. If such proposals
were enacted, the Fund would reevaluate its investment objective and policies.
Any change in such objective and policies would require shareholder approval. It
is not known if a flat tax plan (or any of the other Treasury recommendations)
will be enacted and, if it is enacted, the form it will take.

MANAGEMENT OF THE FUND

The affairs of the Fund will be managed under the supervision of its Board
of Directors. The identities of the directors and officers of the Fund, together
with certain other information about them, including fees paid to directors, are
contained in the Statement of Additional Information. The Fund has been
organized as a corporation under the laws of the State of Maryland. In
accordance with Maryland's General Corporation law, a director of the Fund is
responsible for performing his duties in good faith, in a manner he reasonably
believes to be in the best interests of the Fund and with the care that an
ordinarily prudent person in a like position would use under similar
circumstances.

8
<PAGE>

Adviser

The Adviser, Funds Management Corporation, located at 600 17th Street,
Suite 2610 South Tower, Denver, Colorado 80202, serves as the Fund's investment
adviser pursuant to an Investment Advisory Agreement (the "Advisory Agreement")
between the Fund and the Adviser dated ________, 1997. The Adviser was
incorporated as a Colorado corporation on April 7, 1988.

Mr. Calvin F. Isaak, 600 17th Street, Suite 2610 South, Denver, Colorado
80202, is the President of the Adviser, as well as President and Chairman of the
Board of the Fund. He is also Chairman of the Board and President of Isaak Bond
Investments, Inc., the Fund's principal underwriter and a distributor of the
Fund's shares (the "Underwriter"). Mr. Isaak is a controlling shareholder of the
Underwriter, which owns all of the stock of the Adviser. In his capacity as
President of the Adviser, he will be primarily responsible in directing all
investment decisions for the Fund, placing orders to purchase and sell
securities and supervising the investment staff which provides economic and
research services to the Fund.

All investment decisions are made in accordance with the Fund's stated
policies and are subject to the supervision and direction of the Board of
Directors.

Under the Advisory Agreement, the Fund pays the Adviser as compensation for
its services, a fee computed daily and paid monthly at an annual rate of .23 of
1.00% of the value of the Fund's average daily net assets.

Portfolio Transactions

The frequency of portfolio transactions-the Fund's portfolio turnover
rate-will vary from year to year depending on market conditions. The Adviser
anticipates that the Fund will not have a portfolio turnover rate in excess of
100% per year; however, there can be no assurances that the Fund will be able to
meet this objective.

The Adviser will be authorized to allocate the Fund's securities
transactions to the Underwriter and to other broker-dealers who help distribute
the Fund's shares. The Adviser will allocate transactions to such broker-dealers
only when it reasonably believes that the commissions and transaction quality is
comparable to that available from other qualified broker-dealers. This is
consistent with the Rules of the National Association of Securities Dealers,
Inc., and subject to seeking the most favorable price and execution available
and such other policies as the Board of Directors may determine.

9
<PAGE>

In connection with its duties to arrange for the purchase and sale of
portfolio securities, the Adviser will select such broker-dealers who will, in
the Adviser's judgment, implement the Fund's policy to achieve best execution,
i.e., prompt, efficient and reliable execution of orders at the most favorable
net price. The Adviser will cause the Fund to deal directly with the selling or
purchasing principal or market maker without incurring brokerage commissions
unless the Adviser determines that better price or execution may be obtained by
paying such commissions; the Fund expects that most transactions will be
principal transactions at net prices and that the Fund will incur little or no
brokerage costs. The Fund understands that purchases from underwriters include a
commission or concession paid by the issuer to the underwriter and that
principal transactions placed through broker-dealers include a spread between
the bid and asked prices. When allocating transactions to broker-dealers, the
Adviser is authorized to consider, in determining whether a particular
broker-dealer will provide best execution, the broker-dealer's reliability,
integrity, financial condition and risk in positioning the securities involved,
as well as the difficulty of the transaction in question, and thus need not pay
the lowest spread or commission available if the Adviser determines in good
faith that the amount of commission is reasonable in relation to the value of
the brokerage and research services provided by the broker-dealer, viewed either
in terms of the particular transaction or the Adviser's overall responsibilities
as to the accounts as to which it exercises investment discretion. If, on the
foregoing basis, the transaction in question could be allocated to two or more
broker-dealers, the Adviser is authorized in making such allocation, to
consider, (i) whether a broker-dealer has provided research services, as further
discussed below; and (ii) whether a broker-dealer has sold Fund shares or the
shares of any other investment company or companies having the Adviser as its
investment adviser or having the same sub-manager, administrator or principal
underwriter as the Fund. Such research may be in written form or through direct
contact with individuals and may include quotations on portfolio securities and
information on particular issuers and industries, as well as on market, economic
or institutional activities. The Fund recognizes that no dollar value can be
placed on such research services or on execution services, that such research
services may or may not be useful to the Fund and/or other accounts of the
Adviser and that such research received by such other accounts may or may not be
useful to the Fund.

Under the 1940 Act, the Fund may not purchase portfolio securities from any
underwriting syndicate of which the Underwriter, as principal, is a member
except under certain limited circumstances set forth in Rule 10f-3 thereof.
These conditions relate among other things, to the terms of an issue of
municipal securities purchased by the Fund, the reasonableness of the
broker-dealer spread, the amount of municipal securities which may be purchased
from any one issuer, and the amount of the Fund's assets which may be invested
in a particular issue. The rule also requires that any purchase made subject to
its provisions be reviewed at least quarterly by the Fund's Board of Directors,
including a majority of the Fund's Board of Directors who are not interested
persons of the Fund as defined by the 1940 Act.

The Board of Directors will review quarterly the Adviser's performance of
its responsibilities in connection with the placement of portfolio transactions
on behalf of the Fund. Such review is conducted for the purpose of determining
if the markups and commissions, if any, paid by the Fund are reasonable in
relation to the benefits received by the Fund taking into account the
competitive practices in the industry.

10
<PAGE>

Certain investments may be appropriate for the Fund and also for clients of
the Underwriter. In such event, the Underwriter will allocate transactions among
the Fund and its clients in a manner which it believes to be equitable to each.
In some cases, this procedure could have an adverse effect on the price or
amount of the securities purchased or sold by the Fund. Purchase and sale orders
for the Fund may be combined with those of other clients of the Underwriter in
the interest of obtaining the most favorable net results for the Fund.

Plan of Distribution

A plan of distribution has been approved and adopted by the Fund (the
"Distribution Plan") pursuant to Rule 12b-1 under the 1940 Act for each of the
Fund's portfolios. Under the Distribution Plan, the Fund may 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 maximum amount which the Fund may reimburse to distributors or others
for such expenses is 0.25% per annum of the average daily net assets of the
Fund, payable on a quarterly basis. All expenses of distribution in excess of
0.25% per annum will be borne by distributors or others who have incurred them,
without reimbursement from the Fund.

The Distribution Plan also covers any payments to or by the Fund, Advisers,
distributors or other parties on behalf of the Fund, Advisers or distributors to
the extent such payments are deemed to be before the financing of any activity
primarily intended to result in the sale of shares by the Fund in the context of
Rule 12b-1. The payments under this Distribution Plan are included in the
maximum operating expenses which may be borne by the Fund.

Expenses of the Fund

In addition to the Adviser's fee, the Fund bears all its other expenses,
including, but not limited to, fees and expenses of those directors who are not
officers of the Adviser; salaries and expenses of any employees of the Fund who
are not affiliated with the Adviser; fees and expenses of the custodian,
transfer agent and dividend disbursing agent; interest expenses; taxes and
governmental fees; brokerage commissions and other expenses incurred in
acquiring or disposing of portfolio securities; accounting and legal fees;
insurance premiums; expenses of maintaining the Fund's qualification as a
Maryland corporation and of holding shareholders' meetings; expenses of
preparation and distribution to shareholders, of reports, proxies and
prospectuses; fees and expenses of membership in industry organizations;
expenses incident to the issuance of its shares against payment therefor by or
on behalf of the subscribers thereto, including printing of stock certificates
and such non-recurring expenses as may arise, including actions, suits or
proceedings to which the Fund is a party and the legal obligation which the Fund
may have to indemnify its officers and directors with respect thereto.
Notwithstanding the foregoing, all organizational expenses, including expenses
of registering and qualifying shares for sale with the Securities and Exchange
Commission, legal and accounting expenses incurred in organizing the Fund and
registering the shares and expenses incurred in the solicitation of purchasers
of Fund shares, will be borne by the Adviser.

11
<PAGE>

The Adviser has agreed to reimburse the Fund for its expenses to the extent
that they [ever exceed 1%] (including the Adviser's fee) of the average annual
net assets of the Fund.

TAXATION OF THE FUND AND ITS SHAREHOLDERS

Federal Income Taxes

The Fund intends to qualify as a "regulated investment company" under the
Code, and intends to take all other action required to ensure that no federal
income taxes will be payable by the Fund and that the Fund may pay
"exempt-interest dividends" to its shareholders. The Fund has received an
opinion of counsel from Kutak Rock to the effect that, subject to certain
conditions described therein, the Fund will be characterized as a regulated
investment company, as described in Section 851 of the Code. In order to pay
exempt-interest dividends at least 50% of the value of the Fund's total assets
must consist of obligations exempt from federal income tax pursuant to Section
103(a) of the Code.

Net interest income on obligations exempt from federal income tax, when
distributed to shareholders and designated by the Fund as exempt-interest
dividends, will be exempt from federal income tax in the hands of the
shareholders. Short-term capital gains are taxable to shareholders as ordinary
income, whether received in cash or reinvested. Long-term capital gain
distributions to shareholders will be treated as taxable long-term capital gain,
whether received in shares of the Fund or in cash, regardless of how long a
shareholder has held his shares. It is not likely that the Fund will retain
undistributed capital gains; however, in such an event, a shareholder must
include in income, as long-term capital gain, his share of undistributed
long-term capital gain designated by the Fund. Under such circumstances, the
shareholder may claim a refundable credit against the tax for his proportionate
share of any capital gain tax paid by the Fund. Under present law, capital gains
are subject to a maximum tax rate of 28%.

Under Section 55 of the code, the alternative minimum tax now applies to
all taxpayers, including corporations, and increases a taxpayer's tax liability
only to the extent it exceeds the taxpayer's regular income tax (less certain
credits) for the year. The alternative minimum tax is equal to 26% (or in some
cases, 28%) in the case of individuals (20% for corporations) of the excess of
the taxpayer's taxable excess, which is the amount by which alternative minimum
taxable income exceeds the applicable exemption amount. The exemption is $45,000
for spouses filing a joint return, 40,000 for corporations, $33,750 for a single
taxpayer, and $22,500 for a married taxpayer filing a separate return, or for a
trust or estate. The exemption is phased out at the rate of $.25 for each dollar
by which a taxpayer's alternative taxable income exceeds a predetermined amount.

12
<PAGE>

"Alternative minimum taxable income" is a taxpayer's taxable income (i)
determined with specified adjustments for the alternative minimum tax and (ii)
increased by "items of tax preference." The types of income constituting "items
of tax preference" include otherwise allowable tax-exempt interest on private
activity bonds issued after August 7, 1986 (except bonds issued by charities
qualifying under Section 501(c)(3) of the Code).

Under the Code any loss on the sale or exchange of shares in the Fund held
by a shareholder for six months or less will be disallowed to the extent the
shareholder received exempt-interest dividends with respect to those shares.

Distributions from the Fund's non-exempt investment income and from any net
realized short-term gain will be taxable to shareholders as ordinary income,
whether received in cash or in additional shares of the Fund. Under the Code,
interest on indebtedness incurred or continued to purchase or carry shares of
the Fund will not be deductible to the extent that the Fund's distributions are
exempt from federal income tax.

Subject to modification by Regulations to be published, written notice
concerning the federal income tax status of distributions will be mailed within
60 days after the close of the year to shareholders of the Fund annually in
accordance with applicable provisions of the Code.

Regulated investment companies will be subject to a non-deductible excise
tax equal to 4% of the excess of the amount required to be distributed for the
calendar year over the distributed amount for the calendar year. The Fund
intends to avoid the imposition of this excise tax, and will therefore
distribute during each calendar year at least 98% of its ordinary income for
such calendar year and 98% of its capital gain net income for the one year
period ending on October 31 of the calendar year.

Unless a shareholder includes his taxpayer identification number (social
security number for individuals) in the General Authorization Form and certifies
that he is not subject to backup withholding, the Fund is required to withhold
and remit to the U.S. Treasury 31% of non-exempt distributions and other
reportable payments to the shareholder.

Persons who may be "substantial users" (or "related persons" of substantial
users) of facilities financed by industrial development bonds should consult
their tax advisers before purchasing Fund shares.

The limitations on the deduction of miscellaneous itemized deductions do
not apply to publicly offered regulated investment companies. The Adviser
intends to use its best efforts to ensure that the Fund qualifies as a publicly
offered regulated investment company for the purposes of the foregoing
provision.

13
<PAGE>

Colorado Income Taxes

Individuals, trusts, estates, and corporations who are holders of shares of
the Fund and who are subject to Colorado income tax will not be subject to
Colorado tax on distributions from the Fund to the extent that such
distributions qualify as either (1) exempt interest dividends of a regulated
investment company under Section 852(b)(5) of the Code, which are derived from
interest on tax-exempt obligations of the State of Colorado or any of its
political subdivisions; or (2) distributions derived from interest on
obligations of the United States or its possessions included in federal adjusted
gross income.

To the extent that distributions on shares of the Fund are attributable to
sources of income not described in the preceding sentences, including capital
gains, such distributions will not be exempt from Colorado income tax.

There are no municipal income taxes in Colorado. As intangibles, shares in
the Fund will be exempt from Colorado property taxes.

NET ASSET VALUE PER SHARE

The net asset value per share of each portfolio is determined by the Fund's
custodian (the "Custodian"), American Data Services, Inc. as of 12:00 noon
Colorado time on each day when the New York Stock Exchange is open and on any
other day on which there is sufficient trading in municipal obligations to
affect portfolio values, by dividing the total assets of each portfolio less all
its liabilities by the total number of shares outstanding in such portfolio. In
determining net asset value, all of each portfolio's securities except money
market instruments and short-term municipal obligations with remaining
maturities of 60 days or less are valued at market by a pricing service,
approved by the Board of Directors and the Custodian, which furnishes the
Custodian with valuations based in each case upon information concerning market
transactions and quotations from recognized municipal securities broker-dealers.
Securities for which market quotations are readily available are valued at the
last reported sale price, or, if no sales are reported on that day, at the mean
between the latest available bid and asked prices. Securities for which
quotations are not readily available are valued by the pricing service
considering such factors as yields or prices of municipal securities of
comparable quality, type of issue, coupon, maturity and rating, indications as
to value from broker-dealers, and general market conditions. The methods used by
the pricing service and the valuations so established are reviewed regularly by
officers of the Fund under the general supervision of its Board of Directors.
The Fund's pricing service is Kenny. The use of such service by the Fund is the
method selected by the Fund's Board of Directors for obtaining a fair
determination of the value of securities for which quotations are not readily
available.

PURCHASE OF SHARES

Shares of each portfolio may be purchased by check or by wire transfer of
funds through a bank. The minimum initial investment is $10,000 for each
portfolio selected. Investments may be made in any amount in excess of the
minimum. Subsequent investments may be [in any amount] for the portfolio
selected. Each portfolio's shares are sold on a continuous basis without a sales
charge at the net asset value in effect at the time a purchase order is
processed. Purchase orders are processed after federal funds are made available
to the Fund as hereafter provided.

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<PAGE>

A contingent deferred sales charge of 1% may be imposed upon redemption of
Fund shares if they are redeemed within one year of purchase. The charge will
not be imposed upon redemption of reinvested dividends or share appreciation.
The charge is applied to the value of the shares redeemed excluding amounts not
subject to the charge. The contingent sales charge will be waived in the event
of: (a) redemption of shares of a shareholder (including a registered joint
owner) who has died; (b) redemption of shares if they are to be exchanged for
shares of another portfolio; and (c) redemption of shares of a shareholder
(including a registered joint owner) who after purchase of the shares being
redeemed becomes totally disabled (as evidenced by a determination by the
federal Social Security Administration).

Dividends begin on the day federal funds are made available to the Fund and
continue to and including the day of redemption.

Purchases by Check

Shares may be purchased initially by mailing a completed account
application form together with a check payable to "Colorado Double Tax-Exempt
Bond Fund, Inc." for the amount to be invested in the Fund. The address for
mailing is Colorado Double Tax-Exempt Bond Fund, Inc.,
_________________________. (If sending by express mail or other service
requiring a street address, use __________________________________.

Purchases of shares purchased by check are effected when federal funds are
made available to the Fund. Federal funds are normally made available to the
Fund at 9:00 a.m. on the third business day following receipt of the check.
Shares are purchased at the net asset value in effect when the check is received
by the Fund. During the period of time between receipt of the check and the
Fund's collection of federal funds, an investor's money will not be invested and
no dividends will accrue to an investor.

Subsequent purchases may be effected by mailing a check as outlined above.
The shareholder's account number and the portfolio in which he intends to make
the additional purchase should appear on the check. In addition, the shareholder
should enclose the stub portion of the most recent confirmation statement
received from the Fund.

Purchases by Wire

Shares may be purchased by wiring federal funds to the Fund. Prior to an
initial investment, an investor should call toll free the appropriate telephone
number of the Fund listed on the cover page of this Prospectus to obtain a
shareholder account number and instructions. An investor should indicate the
portfolio in which he intends to invest, or if investing in both portfolios, the
investor will receive an account number for each portfolio.

15
<PAGE>

An investor should then instruct his bank to wire transfer the intended
investment amount in federal funds to:

----------------------------
Account No. ________________
----------------------------
Attention: Colorado Double Tax-Exempt Bond Fund, Inc.
Account of (Investor's name(s))
Account No. (The account number assigned by telephone)

If investing in both portfolios, indicate both account numbers and the amount to
be invested in each portfolio.

A completed account application form must be received by the Fund before
any withdrawal or exchange transactions can be handled.

Subsequent purchases may be effected by wiring federal funds as outlined
above and indicating the investor's name and account number to which they are to
be credited.

No stock certificates will be issued unless a request in writing is made to
the Fund's transfer agent. Instead an account will be established for each
investor and all shares purchased or received, including those obtained through
reinvestment of distributions, will be registered on the books of the Fund and
credited to such account.

The Fund has the right to limit the amount of purchases and to refuse to
sell shares to any person.

Other than the contingent deferred sales charge described above, no sales
charges or commissions are payable in connection with the sale of the Fund's
shares. The expenses incurred in the sale of Fund shares, including advertising
and promotion, are included among the organizational expenses which will be paid
by the Adviser.

Automatic Investment Plan

Under the Fund's Automatic Investment Plan, a shareholder may be able to
arrange to make additional purchases of shares automatically on a monthly basis
by electronic funds transfer from a checking account, if the bank which
maintains the account is a member of the Automated Clearing House, or by
preauthorized checks drawn on the shareholder's bank account. A shareholder may,
of course, terminate the program at any time. The Automatic Investment Plan
Application included with this Prospectus contains the requirements applicable
to this program. In addition, shareholders may obtain more information
concerning this program from their securities broker-dealers or from
distributors.

16
<PAGE>

The market value of the Fund's shares is subject to fluctuation. Before
undertaking any plan for systematic investment, the investors should keep in
mind that such a program does not assure a profit or protect against a loss.

REDEMPTION OF SHARES

The Fund's shares may be redeemed at the net asset value of the applicable
portfolio next determined after receipt of the redemption request in proper form
at the offices of American Data Services, Inc., the Fund's Transfer Agent (the
"Transfer Agent"). A shareholder redeeming between monthly dividend payment
dates receives any accrued but unpaid dividends applicable to the redeemed
shares.

Redemption By Mail

Shares may be redeemed by sending a written redemption request to the
Transfer Agent. The redemption request should state the name of the Fund, the
portfolio name, the name(s) on the redeeming shareholder's account, such
shareholder's account number and the dollar amount or number of shares to be
redeemed. If the shares to be redeemed are represented by certificates issued by
the Fund to the redeeming shareholder, such certificates must be returned with
the redemption request. In all cases, the signature, whether on the written
request or on a stock power, must be signed exactly as the shareholder name(s)
appears on the account statement, including fiduciary capacity (e.g. Trustee,
Guardian, etc.) and be guaranteed by an authorized person of a commercial bank
or a member firm of the New York Stock Exchange. The Transfer Agent may require
additional supporting documents for redemptions made by corporations, executors,
administrators, personal representatives, trustees, guardians and other
fiduciaries. A redemption request will not be deemed to have been submitted
until the Transfer Agent receives all required documents in proper form. The
address for redemption requests is ____________________. (If sending by express
mail or other service requiring a street address, use _____________________.)
Redemption proceeds are normally mailed on the next business day following
receipt of a redemption request in proper form but in no event later than seven
(7) days following receipt of such requests.

Redemption By Telephone

Shares may be redeemed by telephone if the appropriate section on the
account application form has been completed. Shareholders may request
redemptions by telephoning the Transfer Agent at ________________ and arranging
for the proceeds to be wire transferred to a previously designated bank account
if all the following conditions are met:

(a) A telephone redemption authorization included in the account
application form is on file with the Fund before the redemption request is
placed. See the appropriate section on the account application form. This
authorization requires designation of a bank account to which the
redemption payment is to be wired. The proceeds will not be wired to other
than the designated bank account.

17
<PAGE>

(b) If a shareholder did not establish the telephone redemption
privilege or wishes to change the bank account to which the redemption
payment is to be wired, such shareholder must provide the Fund with a
signed and signature guarantee request designating the change.

Redemption is consummated at the asset value in effect at the close of
business of the day the redemption request is received provided the request is
made prior to 12:00 noon Colorado time. In such event, the wire transfer is
ordinarily made the morning of the next business day. If the redemption request
is made after 12:00 noon Colorado time, redemption is consummated at the net
asset value next determined and the wire transfer is ordinarily sent on the
morning of the second business days following the receipt of the redemption
request.

Shares which were purchased by a personal check cannot be redeemed by
telephone until the check has cleared the bank which may take up to 30 days.
Accordingly, if this restriction is of concern to an investor, purchases should
be made by wire transfer.

If transfer is requested by telephone in accordance with the procedures
described above, payment will be by wire transfer to the bank account designated
on the account application form. the Transfer Agent's charges for each such wire
transfer (currently $_____) will be deducted from the proceeds of the
redemption.

Redemption proceeds are normally wired or mailed on the next business day
following receipt of wired or telephoned instructions, but in no event later
than seven (7) days following receipt of such requests.

Investors designating a savings and loan association as the bank to receive
their telephone redemption proceeds are advised that if the savings and loan
association is not a participant in the Federal Reserve System, redemption
proceeds must be wired to a commercial bank which is a correspondent of the
savings and loan association. It is suggested that investors discuss wire
procedures and costs with their savings and loan association before completing
the telephone redemption authorization on the account application form.

The telephone redemption procedure may be modified or terminated at any
time by the Fund or the Transfer Agent.

If, in the opinion of the Board of Directors of the Fund, conditions exist
which make cash payment undesirable, redemption payments may be made in whole or
in part in securities or other property, valued for this purpose as they are
valued in computing the net asset value of the Fund. Shareholders receiving any
such securities or other property on redemption will incur any costs of sale.

18
<PAGE>

Apart from the charge imposed by the Transfer Agent for effecting a
redemption payment by a bank wire transfer, neither the Fund nor the Transfer
Agent imposes a redemption fee, however a contingent deferred sales charge may
apply. If a shareholder uses the services of a broker-dealer to effect
redemption of his shares, the broker-dealer may charge a fee for such services.

EXCHANGE PRIVILEGE

The shares of one portfolio may be exchanged for shares of the other
portfolio without cost. The privilege to exchange shares enables an investor to
switch portfolios when he believes that such a shift is an appropriate personal
investment decision. It is not intended as a trading vehicle to respond to
short-term market fluctuations. An exchange involves a redemption of all or a
portion of shares held in one portfolio and the investment of the proceeds in
shares of the other portfolio. Accordingly, the exchange privilege is, for
federal income tax purposes, a sale on which a shareholder may realize a taxable
gain or loss and a purchase which establishes a new investment, a new cost basis
and a new holding period. In order to prevent abuse of the exchange privilege to
the disadvantage of other shareholders, the Fund reserves the right to terminate
or restrict the exchange privilege of any shareholder who makes more than two
exchanges per year.

Exchange by Telephone

An investor may make telephone exchanges by telephoning the Transfer Agent
at ___________ provided that (a) he has elected the telephone exchange option on
the account application form, (b) the registration on the two accounts will be
identical and (c) the shares to be exchanged are not in certificate form.
Neither the Fund nor the Transfer Agent is responsible for the authenticity of
exchange instructions received by telephone or telegraph. Instructions received
by the Transfer Agent are transacted at the net asset value in effect at the
time the call is received.

Exchange by Mail

An investor may exchange shares by submitting a written request signed
exactly as the shares are registered and accompanied by the certificate(s), if
any, evidencing such shares. The request must be addressed to the Transfer Agent
and should include specific instructions for the redemption and purchase of
shares. These instructions must include the identity of the existing account
(the Fund's name, portfolio name, account name and account number) and specify
the number of shares to be exchanged. Unless otherwise specified, the new
account will be established with the same registration, telephone option(s) and
dividend option as the present account. If the new account is to be different in
any respect, the exchange request must contain a signature guarantee described
under redemption procedures.

19
<PAGE>

The exchange privilege may be modified or discontinued at any time.

DISTRIBUTIONS

The Fund declares dividends of net investment income daily. Dividends are
paid to shareholders in dividends of additional shares on the 15th day of each
month. If the 15th day of a month falls on a weekend or holiday on which the New
York Stock Exchange is closed, the dividend will be distributed on the next
succeeding business day. Payments vary in amount depending on income received
from portfolio securities and expenses of operation.

Shares will begin earning dividends on the day after which the Fund
receives payment and shares are issued. Shares or cash continue to earn
dividends through the date they are redeemed or delivered subsequent to
reinstatement.

Unless you elect by written notice to the Adviser, at least ten business
days prior to the dividend Payable Date, your dividends and gain distributions,
if any, will be made in additional shares at net asset value. If you desire to
elect a different option, you may choose to receive dividends in cash and any
gain distributions in shares or receive both dividends and any gain
distributions in cash. (See Item 4 on the General Authorization Form.)

The Fund will distribute no later than December 31, sufficient capital
gains net income determined as of October 31 of each calendar year to avoid the
application of the 4% excise tax imposed pursuant to the Code.

TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND AUDITORS

American Data Services, Inc. acts as transfer agent and dividend disbursing
agent for the Fund. The Transfer Agent has no part in determining the investment
policies of the Fund or portfolio securities to be purchased or sold by the
Fund.

Kutak Rock, 717 17th Street, Denver, Colorado 80202, acts as counsel to the
Fund and has rendered its opinion in connection with the shares offered by this
prospectus.

Baird, Kurtz & Dobson has been selected as auditor for the Fund.

ADDITIONAL INFORMATION

The Fund was incorporated under the laws of the State of Maryland on August
29, 1996. 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. Shares of each portfolio have equal voting
rights and no preference as to conversion, exchange, retirement or any other
feature exists. Each share has one vote and any vote which affects the holders
of either portfolio (other than a vote for the election of directors or
selection of auditors) shall require the approval of a majority of the shares of
the affected portfolio. Each share, when issued and paid for in accordance with
the terms of offering, will be fully paid and non-assessable. Shares of the
Fund's stock may be redeemed by shareholders at net asset value. Shares have no
preemptive, subscription or conversion rights and are freely transferable.

20
<PAGE>

Fund shares do not have cumulative voting rights, which means the holders
of more than 50% of the shares voting for the election of directors can elect
100% of the directors if they choose to do so and in such event the holders of
the remaining shares so voting will not be able to elect any directors.

The Board of Directors is authorized to assign any of the 40,000,000
unassigned shares of the Fund to a portfolio. Additional portfolios may be
offered in the future but such additional offerings would not affect the
interests of current shareholders in the existing portfolios.

The Transfer Agent maintains a record of each shareholder's ownership.
Shareholders will receive from the Transfer Agent confirmations, as well as
monthly statements of account which will show their holdings. In the interests
of economy and convenience, certificates representing the Fund's shares will not
be physically issued except upon the shareholder's specific written request to
the Transfer Agent.

The Fund sends to each of its shareholders a semiannual report and an
audited annual report each of which includes a list of the investment securities
held by the Fund. Shareholder inquiries should be made by writing the Fund at
its address set forth on the cover page of this Prospectus or by telephoning the
Fund at the telephone numbers also set forth on the cover page of this
Prospectus.

No person has been authorized to give any information or to make any
representations other than those which may be contained in this Prospectus and
in the Fund's official sales literature made in connection with the offering of
the Fund's shares, and if given or made, such other information or
representations must not be relied upon as having been authorized by the Fund.
This Prospectus does not constitute an offer in any State in which, or to any
person to whom, such offer may not lawfully be made.

21
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

Dated ____________, 1997

COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.

This Statement of Additional Information is intended to supplement the
information provided to investors in the Prospectus dated _____________, 1997
(the "Prospectus") of Colorado Double Tax-Exempt Bond Fund, Inc. (the "Fund").
This Statement of Additional Information is not itself a prospectus and should
be read only in conjunction with the Prospectus. Copies of the Fund's Prospectus
may be obtained by writing the Fund at 600 17th Street, 2610 S. Tower, Denver,
Colorado 80293, or calling the Fund at either 1-__________ (statewide) or
1-303-623-7500 (from the Denver area).

STATEMENT OF ADDITIONAL INFORMATION

TABLE OF CONTENTS

Page
----
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES............................. 2
CALCULATION OF PERFORMANCE DATA.......................................... 10
MANAGEMENT OF THE FUND................................................... 12
ADVISORY AGREEMENT AND EXPENSES.......................................... 14
PURCHASE OF SHARES....................................................... 15
REDEMPTION OF SHARES..................................................... 17
EXCHANGE PRIVILEGE....................................................... 19
DISTRIBUTIONS............................................................ 20
TRANSFER AGENT........................................................... 21
CUSTODIAN AND AUDITORS................................................... 21
FINANCIAL STATEMENT...................................................... 22
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS................................... 23
APPENDIX A............................................................... 24
<PAGE>

INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES

The following discussion supplements the description of the Fund's
investment objectives and management policies set forth in the Prospectus.

The Fund purchases primarily Colorado municipal securities which it
believes are attractive and competitive in terms of quality, maturity and yield.
Even though any purchase obviously appears totally suitable at the time of
purchase, the dynamics of the municipal bond market in response to changes in
general economic and political conditions, interest rate and inflationary
expectations, and supply and demand considerations require continuous
reevaluation of each investment relative to how return, quality and
marketability might be improved, within the fundamental and management policies
established for each portfolio.

2
<PAGE>

Portfolio Turnover

To the extent that bond trading and portfolio turnover serve shareholders'
objectives by improving return, quality and marketability, such active
investment management is not only pursued but in the opinion of the Adviser is
required.

At all times, sales of investment positions, involving reinvestment of
proceeds, must either demonstrate (a) a mathematical certitude, within quality
and maturity requisites, of improved investment results for the Fund or (b) a
very apparent improvement in liquidity and marketability as perceived under any
prudent investment criteria. Since all sales give rise to realized capital gains
or losses for the Fund and since all sales, repurchases and trades result in the
payment of commissions or markups and markdowns, all such transactions are
reviewed by the Board of Directors on a quarterly basis in terms of investment
benefits to the Fund and its shareholders recognizing prevailing market
conditions and considerations.

Portfolio turnover is the lesser of purchases or sales of portfolio
securities for the year, divided by the monthly average value of the portfolio
securities. While it is impossible to determine with any accuracy the portfolio
turnover rate for each portfolio, it is expected that turnover will vary
considerably from period to period depending on market conditions, but generally
should not exceed 100% per annum. The rate of turnover will not be a limiting
factor whenever the Adviser deems it advisable to sell or purchase securities.
As discussed above, all portfolio transactions involving reinvestment must
demonstrate quantifiable benefits to the Fund and its shareholders to even
occur.

Colorado Municipal Securities

3
<PAGE>

There are also a variety of hybrid and special types of municipal
securities that have characteristics of both general obligation and revenue
bonds.

Municipal notes are short-term obligations issued to obtain temporary funds
for states, cities, municipalities and municipal agencies. These notes include
tax, revenue and bond anticipation notes that provide temporary funds until the
anticipated taxes, revenues or bond proceeds, respectively, are received by the
issuer. Other municipal notes include construction loan notes and short-term
discount notes. Project notes, issued by a state or local housing authority, are
secured by the full faith and credit of the United States. Municipal commercial
paper consists of very short-term negotiable notes, which provide seasonal
working capital needs or interim construction financing. The commercial paper is
paid from general revenues or is refinanced with long-term debt.

Yields of municipal securities depend upon a number of factors, including
economic and money and capital market conditions, the volume of municipal
securities available, conditions within the municipal securities market, and the
maturity, rating, and size of individual offerings. Market values of municipal
securities will vary inversely in relation to their yields. The magnitude of
changes in market values in response to changes in market rates of interest
typically varies in proportion to the maturity of the obligation.

Bond Put Programs and Tender Option Programs

The Fund may invest in bond put programs. Under such programs, long-term,
low coupon bonds are purchased with a put option that gives the purchaser the
right to sell the bonds back to the seller at a specified price on a specified
date significantly prior to the stated maturity of the bonds. Usually, but not
necessarily, the put option is exercisable three to five years from the date of
the offering of a program. Sellers of bond put programs usually are large
institutional holders of low coupon bonds bought prior to 1980 who believe they
can use the proceeds from such sales more advantageously by investing in taxable
securities. All bonds purchased as part of bond put programs are required to
satisfy the same quality standards of the Fund applicable to other bond
purchases. Additionally, the obligation of the seller to purchase the bond upon
exercise of the put option must be supported by a bank letter of credit. In the
opinion of the Adviser, the marketability and liquidity of such bonds and their
accompanying put options is the same as other bonds held by the Fund.

4
<PAGE>

The Fund may also invest in tender option programs which give the purchaser
the option to tender the bonds purchased to the seller or issuer at face amount.
The bonds may be tendered after the expiration of a specified holding period
usually ranging from one to five years ("initial tender option date").
Subsequent to the initial tender option date, the interest rate is ordinarily
adjusted semiannually or annually to the then current market level for
corresponding short-term bonds. Under tender option programs, the purchaser has
a choice of tendering its bonds on any semiannual or annual readjustment date,
continuing to maintain its position or selling the bonds and the related tender
option in the open market between the semiannual and annual readjustment dates.
In the case of tender option programs, the earliest date that the tender option
is exercisable is considered to be the maturity date. If the bonds are not
tendered on the initial tender option date or on any subsequent readjustment
date, the next readjustment date is considered the maturity date. There is no
limitation on the aggregate principal amount of bonds associated with bond put
programs or tender option programs which may be purchased in either portfolio
although it is not anticipated that either program will exceed 20% of the assets
of a portfolio.

In the case of either bond put programs or tender option programs involving
a seller other than the issuer, the Fund may only purchase programs where the
put or tender option obligations of the seller are supported by bank letters of
credit which additionally provide that funds will be available to repurchase the
bonds when the put or tender options are exercised. If the seller is a bank, the
letter of credit is required to be issued by another bank.

Variable Rate Demand Instruments

Variable rate demand instruments are tax-exempt municipal obligations that
provide for a periodic adjustment in the interest rate paid on the instrument
according to changes in interest rates generally. These instruments permit the
Fund to demand payment of the unpaid principal balance plus accrued interest
upon a specified number of days' notice to the issuer. The demand feature may be
backed by a bank letter of credit or guarantee issued with respect to such
instrument. The Fund intends to exercise the demand only (a) upon a default
under the terms of the municipal obligation, (b) as needed to provide liquidity
to the Fund, or (c) to maintain a high-quality investment portfolio. The issuer
of a variable rate demand instrument may have a corresponding right to prepay in
its discretion the outstanding principal of the instrument plus accrued interest
upon notice comparable to that required for the holder to demand payment.

The variable rate demand instruments that the Fund may purchase are payable
on demand on not more than seven days' notice. The terms of the instruments
provide that interest rates are adjustable at intervals ranging from daily up to
six months, and the adjustments are based upon the prime rate of a bank or other
appropriate interest rate adjustment index as provided in the respective
instruments.

5
<PAGE>

When-Issued Securities

Municipal securities may be purchased or sold on a delayed-delivery basis
or on a when-issued basis. These transactions arise when securities are
purchased or sold by the Fund with payment and delivery taking place in the
future, in order to secure what is considered to be an advantageous price and
yield to the Fund. No payment is made until delivery is due, often a month or
more after the purchase. When the Fund engages in when-issued and
delayed-delivery transactions, certain risks are involved. The Fund relies on
the buyer or seller, as the case may be, to consummate the transaction. Failure
of the buyer or seller to do so may result in the Fund missing the opportunity
of obtaining a price considered to be advantageous. The securities are subject
to market fluctuations and no interest accrues to the purchaser during this
period. At the time the Fund makes the commitment to purchase municipal
securities on a delayed-delivery basis or a when-issued basis, it will record
the transaction and reflect the value of the municipal securities in determining
the net asset value of the appropriate portfolio. A segregated account for the
Fund consisting of cash or high-grade securities equal to the amount of the
when-issued commitments will be established with the Fund's custodian. For the
purpose of determining the adequacy of the securities in the account, the
deposited securities will be valued at market. If the market value of such
securities declines, additional cash or securities will be placed in the account
on a daily basis so that the market value of the account will equal the amount
of such commitments by the Fund. There is no restriction on the amount of
when-issued securities which may be purchased by either portfolio.

Certificates of Participation

6
<PAGE>

Repurchase Agreements

The Fund may invest in repurchase agreements. A repurchase agreement
involves a sale of securities to the Fund, with the concurrent agreement of the
seller (a member bank of the Federal Reserve system or a securities
broker-dealer which the Adviser believes to be financially sound) to repurchase
the securities at the same price plus an amount equal to an agreed upon interest
rate, within a specified time, usually less than one week, but, on occasion, at
a later time. The value of the underlying securities will always be at least
equal to the repurchase price, including any accrued interest earned on the
repurchase agreement. The Fund will make payment for such securities only upon
physical delivery or evidence of book-entry transfer to the account of the
custodian or a bank acting as agent for the Fund. In the event of a bankruptcy
or other default of a seller of a repurchase agreement, the Fund could
experience both delays in liquidating the underlying securities and losses,
including: (a) possible decline in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto; (b) possible
subnormal levels of income and lack of access to income during this period; and
(c) expenses of enforcing its rights. It is expected that repurchase agreements
will give rise to income which will not qualify as tax-exempt income when
distributed by the Fund.

Standby Commitments

Subject to the receipt of any required regulatory authorization, the Fund
may acquire standby commitments for either portfolio which will enable such
portfolio to improve its liquidity by making available same day settlements on
sales. A standby commitment is a right acquired by the Fund, when it purchases a
municipal obligation from a broker, dealer or other financial institution
("seller"), to sell up to the same principal amount of such securities back to
the seller, at the Fund's option, at a specific price. Standby commitments are
also known as "puts." The Fund's investment policies permit the acquisition of
standby commitments solely to facilitate portfolio liquidity. The exercise by
the Fund of a standby commitment is subject to the ability of the seller to
fulfill its contractual commitment.

Standby commitments acquired by the Fund for a portfolio will have the
following features: (a) they will be in writing and will be physically held by
the Fund's custodian; (b) the Fund's rights to exercise them will be
unconditional and unqualified; (c) they will be entered into only with sellers
which in the Adviser's opinion present a minimal risk of default; (d) although
standby commitments will not be transferable, municipal obligations purchased
subject to such commitments may be sold to a third party at any time, even
though the commitment is outstanding; and (e) their exercise price will be (i)
the Fund's acquisition cost, excluding the cost, if any, of the standby
commitment, of the municipal obligations which are subject to the commitment
(excluding any accrued interest which the Fund may have paid on their
acquisition), less any amortized market premium or plus any amortized market or
original issue discount during the period the Fund owned the securities, plus
(ii) all interest accrued on the securities since the last interest payment
date.

The Fund expects that standby commitments generally will be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the Fund will pay for standby commitments either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitments. As a matter of policy, the total amount
paid by the Fund in either manner for outstanding standby commitments will not
exceed 1/2 of 1% of the value of the total assets of the affected portfolio
calculated immediately after any standby commitment is acquired.

7
<PAGE>

It is difficult to evaluate the likelihood of use or the potential benefit
of a standby commitment. Therefore, it is expected that the Adviser will
determine that standby commitments ordinarily have a "fair value" of zero,
regardless of whether any direct or indirect consideration was paid. However, if
the market price of the security subject to the standby commitment is less than
the exercise price of the standby commitment, its cost will be reflected as
unrealized depreciation for the period during which the commitment is held.

The Fund understands that the Internal Revenue Service has issued a revenue
ruling to the effect that a registered investment company will be the owner of
municipal obligations acquired subject to a put option and that interest on the
obligations will be tax-exempt to the Fund. There is, however, no assurance that
standby commitments will be available to the Fund, and the Fund has not assumed
that such commitments would continue to be available under all market
conditions.

Investment Restrictions

The Fund has adopted certain investment restrictions which cannot be
changed without approval by the holders of a majority of the outstanding voting
shares of each affected portfolio. As defined in the Investment Company Act of
1940 (the "1940 Act"), this means the lesser of the vote of (a) 67% of the
portfolio's shares at a meeting where more than 50% of the outstanding shares
are present in person or by proxy or (b) more than 50% of the portfolio's
shares.

Each portfolio may not:

1. Purchase securities or make investments other than in accordance with
its investment objective and policies.

2. Purchase securities if as a result of such purchase more than 25% of the
portfolio's total assets would be invested in any one industry. For purposes of
this limitation, there is no limitation on the purchase of securities issued by
state or municipal governments or their political subdivisions or securities
issued, guaranteed or secured by the U.S. government, its agencies or
instrumentalities (including refunded municipal obligations fully secured by
direct obligations of the U.S. government or its agencies or instrumentalities
held in irrevocable trust). Industrial revenue bonds ultimately payable by
companies within the same industry are treated as if they were issued by issuers
in the same industry. Neither portfolio may enter into a repurchase agreement if
more than 10% of assets would be subject to repurchase agreements maturing in
more than seven days.

8
<PAGE>

3. Purchase the securities of any issue if as a result more than 5% of the
portfolio's assets would be invested in the securities of such issuer provided
that there is no limitation on the purchase of securities issued, guaranteed or
secured by the U.S. government, its agencies or instrumentalities (including
refunded municipal obligations fully secured by direct obligations of the U.S.
government, its agencies or instrumentalities held in irrevocable trust). This
restriction does not apply with respect to 50% of the portfolio's total assets.
For purposes of this limitation, the Fund will regard the entity which has the
primary responsibility for the payment of interest and principal as the issuer.

4. Invest more than 5% of the portfolio's total assets in industrial
development bonds sponsored by companies which with their predecessors have less
than three years continuous operation.

5. Make loans to others (except through the purchase of debt obligations or
repurchase agreements in accordance with its investment objective and policies).

6. Borrow money or enter into reverse repurchase agreements except the Fund
may borrow money from banks for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests which might otherwise
require the untimely disposition of securities, in an amount up to 10% of the
value of the portfolio's total assets (including the amount borrowed) valued at
market less liabilities (not including the amount borrowed) at the time the
borrowing is made. Whenever borrowings exceed 5% of the value of the Fund's
total assets, the Fund will not make any additional investments.

7. Make short sales of securities or purchase securities on margin, except
to obtain such short-term credits as may be necessary for the clearance of
transactions.

8. Write, purchase or sell puts, calls or combinations thereof, although
the Fund may purchase municipal securities comprising bond put programs and
tender option programs as well as municipal securities subject to standby
commitments, variable rate demand notes or repurchase agreements in accordance
with its investment objective and policies provided that neither municipal
securities subject to standby commitments nor variable rate demand notes
constitute more than 5% of the assets of either portfolio.

9. Purchase or retain the securities of any issuer if any of the officers
or directors of the Fund or its investment adviser owns beneficially more than
1/2 of 1% of the securities of such issuer and together own more than 5% of the
securities of such issuer.

10. Invest more than 15% of the portfolio's total assets in non-marketable
securities, including securities restricted as to disposition under the federal
securities laws, repurchase agreements maturing in more than seven days and
securities which are not otherwise readily marketable.

11. Invest for the purpose of exercising control or management of another
issuer.

9
<PAGE>

12. Invest in commodities or commodity futures contracts or in real estate
except that the Fund may invest in municipal securities secured by real estate
or interests therein.

13. Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in municipal securities of issuers
which invest in or sponsor such programs.

14. Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.

15. Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.

If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage beyond the specified limit resulting
from a change in values or net assets will not be considered a violation.

Section 18(f)(1) of the 1940 Act prohibits an open-end investment company
from borrowing from a bank unless there is an asset coverage of 300% for all
borrowings. Under Rule 18f-1 under such Act, an open-end investment company may
elect to commit itself to pay in cash all requests for redemption subject to
certain limitations specified in said Rule. If an investment company makes such
an election, the investment company is exempt from the requirements of Section
18(f)(1) to the extent necessary to enable it to effectuate cash redemptions.
The Fund has not elected to commit itself to pay all cash in redeeming shares
and, therefore, is subject to Section 18(f)(1). The restriction set forth in
paragraph 6 above further restricts borrowings.

CALCULATION OF PERFORMANCE DATA

The Fund may publish certain performance figures in advertisements from
time to time. These performance figures may include yield, tax equivalent yield
and total return figures.

Yield

Yield reflects the income per share deemed earned by the Fund's portfolio
investments. Yield is determined by dividing the net investment income per share
deemed earned during the preceding 30-day period by the maximum offering price
per share on the last day of the period and annualizing the result according to
the following formula:

6
(a - b)
YIELD = 2 ------ + 1 - 1
cd

10
<PAGE>

Where: a = interest earned during the period.

b = expenses accrued for the period (net of reimbursements).

c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.

d = the maximum offering price per share on the last day of
the period.

To calculate interest earned (for the purpose of "a" above) the Fund will:

(a) Compute the yield to maturity of each obligation held by the Fund
based on the market value of the obligation at the close of business on the
last business day of each month, or with respect to obligations purchased
during the month, the purchase price.

(b) Divide the yield to maturity by 360 and multiply the quotient by
the market value of the obligation (including actual accrued interest) to
determine the interest income on the obligation for each day of the
subsequent month that the obligation is in the portfolio.

The maturity of an obligation with a call provision is the next call date
on which the obligation reasonably may be expected to be called or, if none, the
maturity date.

In the case of an obligation issued without original issue discount and
having a current market discount, the coupon rate of interest is used in lieu of
the yield to maturity. In the case of an obligation with original issue
discount, if the discount based on the current market value exceeds the
then-remaining portion of original issue discount (market discount), the yield
to maturity is the imputed rate based on the original issue discount
calculation. In the case of an obligation with original issue discount, if the
discount based on the current market value is less than the then-remaining
portion of original issue discount (market premium), the yield to maturity is
based upon market value.

Tax Equivalent Yield

Tax equivalent yield shows the yield from a taxable investment which would
produce an after-tax yield equal to that of a fund that invests in tax-exempt
securities. It is computed by dividing the tax-exempt portion of the Fund's
yield (as calculated above) by one minus a stated income tax rate and adding the
product to the portion (if any) of the Fund's yield that is not tax-exempt.

11
<PAGE>

Total Return

Total return is the percentage change in the value of a hypothetical
investment that has occurred in the indicated time period, taking into account
the imposition of the sales charge and other fees and assuming the reinvestment
of all dividends and distributions. Cumulative total return reflects the Fund's
performance over a stated period of time and is computed as follows:

ERV - P
---------- = Total Return
P

Where: ERV = ending redeemable value of the hypothetical $1,000 payment
made at the beginning of the base period (reduced by the maximum
sales charge) assuming reinvestment of all dividends and
distributions.

P = a hypothetical initial payment of $1,000.

Average annual total return reflects the hypothetical annually compounded
return that would have produced the same cumulative total return if the Fund's
performance had been constant over the entire period, and is computed according
to the following formula:

P(1+T)n = ERV

Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years in the base period.

ERV = ending redeemable value of the hypothetical
$1,000 payment made at the beginning of the base
period (reduced by the maximum sales charge) assuming
reinvestment of all dividends and distributions.

All performance figures are based on historical results and are not
intended to indicate future performance.

MANAGEMENT OF THE FUND

Directors and Officers

The names and business addresses of the directors and officers of the Fund
together with information as to their principal business occupations during at
least the past five years are shown below. Each director who is an "interested
person" of the Fund, as defined in the 1940 Act, is indicated by an asterisk.

12
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation
Name and Address Positions with the Fund During Past 5 Years
- ---------------- ----------------------- -------------------

<S> <C> <C>
James M. Coughlin Director President of Coughlin & Company, an
investment banking firm, since prior
to 1992.

Bruce L. Evans Director Attorney with the law firm of Lentz,
Evans and King, P.C. since 1973.

Calvin F. Isaak* President, Chairman and Chairman of the Board of Directors
Director and President of Isaak Bond
Investments, Inc., a registered
broker-dealer, since 1977.

David J. Isaak* Vice President, Treasurer Vice President of Municipal Bond
and Director Trading Department of Isaak Bond
Investments, Inc. since 1984.

Philip J. Konsella Director President and owner of Comark
Realty, Inc. since prior to 1992.

Stan Voth Secretary Chief Financial Officer of Isaak Bond
Investments, Inc. since 1987.
</TABLE>

Directors of the Fund who are not "interested persons" of the Fund are paid
$500 per meeting by the Fund, which is subject to adjustment annually, and are
reimbursed for expenses incurred in attending meetings of the Board of
Directors.

Calvin F. Isaak, the President and a director of the Fund, is also the
majority shareholder and the President of Isaak Bond Investments, Inc., the
Fund's principal underwriter and a distributor of the Fund's shares (the
"Underwriter"). Mr. Isaak is also the Chairman of the Board of Directors and
President of Funds Management Corporation, the Fund's investment adviser. Mr.
Calvin F. Isaak and Mr. David Isaak are father and son.

The Fund's investment adviser is Funds Management Corporation (the
"Adviser"), a Colorado corporation formed on April 7, 1988. The Adviser has
registered with the Securities and Exchange Commission as an Adviser under the
Investment Advisers Act of 1940.

The Adviser will attempt to meet the Fund's investment objectives by
providing portfolio management and credit analysis services pursuant to the
Prospectus and the Advisory Agreement. There is no assurance that the Adviser
can meet the Fund's investment objectives. The Adviser anticipates that the Fund
will not have a portfolio turnover rate in excess of 100% per year in an attempt
to meet these objectives.

13
<PAGE>

The Fund is a Maryland Corporation. Its Board of Directors will supervise
the activities of the Fund and review the Fund's service contracts.

The Fund is not required to hold annual shareholder meetings. However,
special meetings may be called by the Board of Directors or upon the written
request of shareholders owning at least one-tenth of the shares entitled to
vote, for such purposes as electing or removing directors, changing fundamental
investment policies, or approving a new or amended advisory or management
contract or plan of distribution. Each shareholder receives one vote for each
share held. The Board of Directors has the power to create additional series of
Fund shares.

ADVISORY AGREEMENT AND EXPENSES

Under the Advisory Agreement dated _______________, 1997, between the Fund
and the Adviser, and subject to the control of the Board of Directors, the
Adviser manages the assets of the Fund, including making purchases and sales of
portfolio securities consistent with the Fund's investment objectives and
policies. In addition, the Adviser administers the Fund's daily business affairs
such as providing accurate accounting records, computing accrued income and
expenses of the Fund, computing the daily net asset value of the Fund, assuring
proper dividend disbursements, proper financial information to investors, and
notices of all shareholders', meetings, and providing sufficient office space,
storage, telephone services, and personnel to accomplish these responsibilities.
The Board of Directors of the Fund approved the Advisory Agreement, by unanimous
vote, on _______________, 1997 in the manner required by the 1940 Act. The sole
shareholder of the Fund approved the Advisory Agreement on ____________, 1997.
The Adviser pays all of the compensation of directors of the Fund who are
employees of the Adviser and of the officers and employees of the Fund. The Fund
pays all of the compensation of directors who are not employees of the Adviser.
The Advisory Agreement also provides that the Adviser will not be liable to the
Fund for any error of judgment or mistake of law, or for any loss arising out of
any investment, or for any act or omission in performing its duties under the
Agreement, except for willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties under the Advisory Agreement.

In exchange for its services, the Adviser is entitled to receive a
management fee from the Fund, calculated daily and payable monthly, equal to
0.23% of the average daily net assets on an annual basis.

The Fund is responsible for paying all its expenses other than those
assumed by the Adviser, including brokerage commissions, if any, fees and
expenses of independent attorneys and auditors, taxes and governmental fees,
including fees and expenses of qualifying the Fund and its shares under federal
and state securities laws, and expenses of repurchase or redemption of shares,
expenses of printing and distributing reports, notices and proxy materials to
shareholders, expenses of printing and filing reports and other documents with
governmental agencies, expenses of shareholders' meetings, expenses of corporate
data processing and related services, shareholder account services, fees and
disbursements of appraisers, transfer agents and custodians, expenses of
disbursing dividends and distributions, fees and expense of trustees of the Fund
not employed by the Adviser or its affiliates, insurance premiums and
extraordinary expenses such as litigation expenses.

14
<PAGE>

The Advisory Agreement will continue in effect from year to year if such
continuance is approved in the manner required by the 1940 Act (i.e., (1) by a
vote of a majority of the Board of Trustees or of the outstanding voting
securities of the Fund and (2) by a vote of a majority of the trustees who are
not parties to the Advisory Agreement or interested persons of any such party),
and if the Adviser shall not have notified the Fund at least 60 days prior to
the anniversary date of the previous continuance that it does not desire such
continuance. The Advisory Agreement may be terminated by the Fund, without
penalty, on 60 days' written notice to the Adviser and will terminate
automatically in the event of its assignment.

PURCHASE OF SHARES

A contingent deferred sales charge of 1% may be imposed upon redemption of
Fund shares if they are redeemed within one year of purchase. The charge will
not be imposed upon redemption of reinvested dividends or share appreciation.
The charge is applied to the value of the shares redeemed excluding amounts not
subject to the charge. The contingent sales charge will be waived in the event
of: (a) redemption of shares of a shareholder (including a registered joint
owner) who has died; (b) redemption of shares if they are to be exchange for
shares of another portfolio; and (c) redemption of shares of a shareholder
(including a registered joint owner) who after purchase of the shares being
redeemed becomes totally disabled (as evidenced by a determination by the
federal Social Security Administration).

Dividends begin on the day federal funds are made available to the Fund and
continue to and including the day of redemption.

Purchases by Check

15
<PAGE>

Purchases by Wire

Shares may be purchased by wiring federal funds to the Fund. Prior to an
initial investment, an investor should call toll free the appropriate telephone
number of the Fund listed on the cover page of this Prospectus to obtain a
shareholder account number and instructions. An investor should indicate the
portfolio in which he intends to invest, or if investing in both portfolios, he
will receive an account number for each portfolio.

An investor should then instruct his bank to wire transfer the intended
investment amount in federal funds to:

If investing in both portfolios, indicate both account numbers and the amount to
be invested in each portfolio.

A completed account application form must be received by the Fund before
any withdrawal or exchange transactions can be handled.

Subsequent purchases may be effected by wiring federal funds as outlined
above and indicating the investor's name and account number to which they are to
be credited.

16
<PAGE>

The Fund has the right to limit the amount of purchases and to refuse to
sell shares to any person.

Automatic Investment Plan

Under the Fund's Automatic Investment Plan, a shareholder may be able to
arrange to make additional purchases of Shares automatically on a monthly basis
by electronic funds transfer from a checking account, if the bank which
maintains the account is a member of the Automated Clearing House, or by
preauthorized checks drawn on the shareholder's bank account. A shareholder may,
of course, terminate the program at any time. The Automatic Investment Plan
Application included with this Prospectus contains the requirements applicable
to this program. In addition, shareholders may obtain more information
concerning this program from their securities broker-dealers or from
distributors.

REDEMPTION OF SHARES

The Fund's shares may be redeemed at the net asset value of the applicable
portfolio next determined after receipt of the redemption request in proper form
at the offices of American Data Services, Inc. ("ADS"), the Fund's transfer
agent. A shareholder redeeming between monthly dividend payment dates receives
any accrued but unpaid dividends applicable to the redeemed shares.

Redemption By Mail

Shares may be redeemed by sending a written redemption request to ADS. The
redemption request should state the name of the Fund, the portfolio name, the
name(s) on the redeeming shareholder's account, such shareholder's account
number and the dollar amount or number of shares to be redeemed. If the shares
to be redeemed are represented by certificates issued by the Fund to the
redeeming shareholder, such certificates must be returned with the redemption
request. In all cases, the signature, whether on the written request or on a
stock power, must be signed exactly as the shareholder name(s) appears on the
account statement, including fiduciary capacity (e.g. Trustee, Guardian, etc.)
and be guaranteed by an authorized person of a commercial bank or a member firm
of the New York Stock Exchange. ADS may require additional supporting documents
for redemptions made by corporations, executors, administrators, personal
representatives, trustees, guardians and other fiduciaries. A redemption request
will not be deemed to have been submitted until ADS receives all required
documents in proper form. The address for redemption requests is
____________________. (If sending by express mail or other service requiring a
street address, use _____________________.) Redemption proceeds are normally
mailed on the next business day following receipt of a redemption request in
proper form but in no event later than seven (7) days following receipt of such
requests.

17
<PAGE>

Redemption By Telephone

Shares may be redeemed by telephone if the appropriate section on the
account application form has been completed. Shareholders may request
redemptions by telephoning ADS at ________________ and arranging for the
proceeds to be wire transferred to a previously designated bank account if all
the following conditions are met:

If transfer is requested by telephone in accordance with the procedures
described above, payment will be by wire transfer to the bank account designated
on the account application form. ADS's charges for each such wire transfer
(currently $_____ will be deducted from the proceeds of the redemption.

18
<PAGE>

The telephone redemption procedure may be modified or terminated at any
time by the Fund or ADS.

Apart from the charge imposed by ADS for effecting a redemption payment by
a bank wire transfer, neither the Fund nor ADS imposes a redemption fee,
however, a contingent deferred sales charge may apply. If a shareholder uses the
services of a broker-dealer to effect redemption of his shares, the
broker-dealer may charge a fee for such services.

EXCHANGE PRIVILEGE

Exchange by Telephone

An investor may make telephone exchanges by telephoning ADS at ___________
provided that (a) he has elected the telephone exchange option on the account
application form, (b) the registration on the two accounts will be identical and
(c) the shares to be exchanged are not in certificate form. Neither the Fund nor
ADS is responsible for the authenticity of exchange instructions received by
telephone or telegraph. Instructions received by ADS are transacted at the net
asset value in effect at the time the call is received.

19
<PAGE>

Exchange by Mail

An investor may exchange shares by submitting a written request signed
exactly as the shares are registered and accompanied by the certificate(s), if
any, evidencing such shares. The request must be addressed to ADS and should
include specific instructions for the redemption and purchase of shares. These
instructions must include the identity of the existing account (the Fund's name,
portfolio name, account name and account number) and specify the number of
shares to be exchanged. Unless otherwise specified, the new account will be
established with the same registration, telephone option(s) and dividend option
as the present account. If the new account is to be different in any respect,
the exchange request must contain a signature guarantee described under
redemption procedures.

The exchange privilege may be modified or discontinued at any time.

DISTRIBUTIONS

The Underwriter is the general distributor of the shares of the Fund
pursuant to a Distribution Agreement dated ___________, 1997 (the "Distribution
Agreement"). The Distribution Agreement was approved by the Board of Directors
of the Fund, on ___________, 1997 in the manner required by the 1940 Act.

20
<PAGE>

The Underwriter may offer cash or non-cash incentives to dealers in
addition to sales charges in order to promote the sale of shares of the Fund.
Any such cash or non-cash incentives will be in compliance with all applicable
rules and regulations of the National Association of Securities Dealers, Inc.

TRANSFER AGENT

ADS serves as the transfer agent, shareholder servicing agent and dividend
disbursing agent for the Fund, pursuant to a Transfer Agency and Service
Agreement dated ___________, 1997 (the "Agreement"). ADS's duties under the
Agreement include processing purchase and redemption transactions, establishing
and maintaining shareholder accounts and records, disbursing dividends declared
by the Fund and all other customary services of a transfer agent, shareholder
servicing agent and dividend disbursing agent. As compensation for these
services, the Fund pays ADS a fee of ___________.

CUSTODIAN AND AUDITORS

Star Bank, N.A. is the portfolio securities custodian for the Fund. Their
address is 425 Walnut Street, M.L. 6118, Cincinnati, Ohio 45202.

Baird, Kurtz & Dobson, independent certified public accountants, are the
auditors of the Fund. Their address is One Norwest Center, 1700 Lincoln Street,
Suite 3400, Denver, Colorado 80203.

21
<PAGE>

APPENDIX A

KEY TO MOODY'S MUNICIPAL BOND RATINGS

Aaa Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.

Aa Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.

A Bonds that are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present that suggest a susceptibility to impairment
some time in the future.

Baa Bonds that are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

Ba Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or
maintenance of other terms of the contract over any long period of
time may be small.

22
<PAGE>

Caa Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.

Ca Bonds that are rated Ca represent obligations that are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.

C Bonds that are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

23
<PAGE>

KEY TO S&P'S MUNICIPAL BOND RATINGS

AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Capacity to pay interest and repay principal is extremely strong.

AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.

A Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.

BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.

BB Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which
could lead to inadequate capacity to meet timely interest and
principal payments. The "BB" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
"BBB-" rating.

B Debt rated "B" has greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The "B"
rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied "BB" or "BB-" rating.

CCC Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and
economic conditions to meet timely payment of interest and repayment
of principal. In the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The "CCC" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "B"
or "B-" rating.

CC The rating "CC" typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.

C The rating "C" typically is applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating. The
"C" rating may be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are continued.

24
<PAGE>

CI The rating "CI" is reserved for income bonds on which no interest is
being paid.

D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The
"D" rating also will be used upon the filing of a bankruptcy petition
if debt service payments are jeopardized.

25
<PAGE>

KEY TO FITCH'S MUNICIPAL BOND RATINGS

AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.

AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F-1+."

A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher
ratings.

BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on
these bonds, and therefore, impair timely payment. The likelihood that
the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.

Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "AAA" category.

Credit Trend Indicator: Credit trend indicators show whether credit
fundamentals are improving, stable, declining, or uncertain, as follows:

Improving [Up Arrow]
Stable [Left, Right Arrow]
Declining [Down Arrow]
Uncertain [Up, Down Arrow]

Credit trend indicators are not predictions that any rating change will
occur, and have a longer-term time frame than issues placed on FitchAlert.

NR Indicates that Fitch does not rate the specific issue.

Conditional A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.

26
<PAGE>

Suspended A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.

Withdrawn A rating will be withdrawn when an issue matures or is called or
refinanced and, at Fitch's discretion, when an issuer fails to
furnish proper and timely information.

FitchAlert Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the
likely direction of such change. These are designed as
"Positive," indicating a potential upgrade, "Negative," for
potential downgrade, or "Evolving," where ratings may be raised
or lowered. FitchAlert is relatively short-term, and should be
resolved within 12 months.

DESCRIPTION OF FITCH SPECULATIVE GRADE BOND RATINGS

Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB" to "C") represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an
assessment of the ultimate recovery value through reorganization or liquidation.

The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength.

Bonds that have the same rating are of similar but not necessarily
identical credit quality since rating categories cannot fully reflect the
differences in degrees of credit risk.

BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt
service requirements.

B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the issue.

CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.

27
<PAGE>

CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C Bonds are in imminent default in payment of interest or principal.

DDD, DD and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis
of their ultimate recovery value in liquidation or reorganization
of the obligor. "DDD" represents the highest potential for
recovery on these bonds, and "D" represents the lowest potential
for recovery.

28
<PAGE>

Colorado Double Tax
Exempt Bond Fund [LOGO]

Account Application

Send All Checks and Forms To
Colorado Double Tax-Exempt Bond Fund, Inc.

1. Registration-Please Print All Items Except Signatures.

Check one box

[ ] Individual [ ] Joint Registrant [ ] Gift to Minors [ ] Corporations,
Use line 1 Use line 2 Use lines 3, 4 & % Partnerships,
Trusts & Others
Use lines 6 & 7

_______________________________________________________________________________
1.First Name, Initial, Last Name Soc. Sec. No.

_______________________________________________________________________________
2.Right of survivorship presumed, Soc. Sec. No.
unless tenancy in common is indicated.

_______________________________________________________________ as Custodian for
3. Custodian's Name

______________________________________________________________________ under the
4. Minor's Name

_____________________________ Uniform Gifts to Minors Act._____________________
5. State Minor's Soc. Sec. No.

_______________________________________________________________________________
6. Name of Corporation or Other Entity. If a Trust, include date of trust
instrument.

________________________________________________________ __________________
7. Taxpayer Ident. No.

2. Address-Please Print.

_______________________________________________________________________________
Street Address (Area Code) Home Phone No.

_______________________________________________________________________________
City, State, Zip Code (Area Code) Home Phone No.

3. Initial Investment $10,000 Minimum per Portfolio

Portfolio Selection: [ ] The Short-Intermediate Portfolio $__________
[ ] The Income Portfolio $__________

Investment Source:

[ ] By Check $__________

Please make check payable to Colorado Double Tax-Exempt Bond Fund, Inc, and mail
with this completed Account Application. You will be assigned an account
number(s) by ____________ upon receipt.

[ ] By Wire $__________

Call the Fund for instructions and account number(s). Read the purchase by wire
section of the prospectus as a reference if you are unclear on any procedures.

Each portfolio is assigned a separate account number to avoid errors.

I confirm the account number(s) I was assigned by telephone with regard to my
wire transfer of funds as follows:

____________________________________________________
Short-Intermediate Portfolio Assigned Account Number

____________________________________________________
Income Portfolio Assigned Account Number

4. Distributions (If no selection is checked, the Share Option will be
assigned.)

[ ] Share Option Income dividends and capital gain distributions automatically
reinvested in additional shares.

[ ] Income Option Income dividends and capital gain distributions distributed
in cash.

5. Wire Service

[ ] Yes [ ] No Permits Redemption Proceeds initiated by wire, telephone or
letter to be transmitted via Fed Wire to Fed Member Banks.
If you desire to permit such transmittals, fill out "Bank
Account Details" Below.

Bank Account Details-Fill Out This Section if "Yes" is Checked For Item 5:

_______________________________________________________________________________
Name of your Bank. Note: Initial Investment Check or wire must be drawn against
this account.

_______________________________________________________________________________
Account Name Account Number(s)

_______________________________________________________________________________
Address of Bank City State Zip Code

6. Telephone Privileges

[ ] Yes [ ] No Portfolio Exchange-Permits Exchange between the two
portfolios by telephone

[ ] No Status of Account by Telephone-Unless the "NO" box is
checked, the investor(s) authorize(s) ___________ to respond
to telephone inquiries from persons reasonably believed by
the Bank to be the registrant(s).

29
<PAGE>

7. Signature And Taxpayer Identification Number Certification For Individual
Investors

The undersigned warrant(s) that I (we) have full authority and, if a natural
person, am (are) of legal age to purchase shares pursuant to this Application
have received a current Fund Prospectus and agree to be bound by its terms. I
(we) agree that American Data Services, Inc., Colorado Double Tax-Exempt Bond
Fund, Inc. or any of their officers, directors or employees will not be liable
for any loss or expense for acting upon any instructions or inquiries believes
genuine.

Taxpayer Identification Number Certification: Under the penalties of perjury, I
(we) certify [1] that the Social Security Number(s) or Taxpayer Identification
Number(s) shown in Section 1 of this form is (are) my (our) correct Taxpayer
Identification Number(s), and [2] that I (we) am (are) not subject to backup
withholding either because I (we) have not been notified that I (we) am (are)
subject to backup withholding as a result of a failure to report all dividends,
or the Internal Revenue Service has notified me (us) that I (we) am (are) no
longer subject to backup withholding.

_______________________________________________________________________________
Individual (or Custodian) Date Joint Registrant, if any

Complete Only If Copies of Advices Are Required.

Certification A For Use by Advisers Only.
The undersigned represent(s) and warrant(s) that authorization to purchase and
redeem shares of the Fund has been given by the investor(s).

_______________________________________________________________________________
Firm Name

_______________________________________________________________________________
Address

_______________________________________________________________________________
City, State, Zip

_______________________________________________________________________________
Date Authorized Signature and Title

_______________________________________________________________________________
Firm Name

_______________________________________________________________________________
Address

_______________________________________________________________________________
City, State, Zip

_______________________________________________________________________________
Date Authorized Signature and Title

Certification B For Use By Corporations, Pension Trusts, Partnership or Other
Institutional Investors Only.

___________________________________
Dated:

Note: Retain a copy of this document for your records. Any modification of the
information below will require an amendment to this form. This document is in
full force and effect until another duly executed form is received by American
Data Services, Inc.

[ ] New [ ] Amendment to form dated

_______________________________________________________________________________
Name of Registered Owner: Account No(s):

Registered Owner is a:

[ ] Corporation/Incorporated Association* [ ] Partnership

[ ] Pension Trust [ ] Other: (such as Non-Profit
Organization, Religious Organization,
Sole Proprietorship, Investment Club,
Non-Incorporated Association, etc.)

The following named persons are currently officers/trustees/general
partners/other authorized signatories of the Registered Owner, and any _____**
of them ("Authorized Person(s)") is/are currently authorized under the
applicable governing document to act with full power to purchase, redeem, assign
or transfer securities of Colorado Double Tax-Exempt Bond Fund, Inc. (the
"Fund") for the Registered Owner and to execute and deliver any instrument
necessary to effectuate the authority hereby conferred:

Name Title Specimen Signature
_______________________ ______________________________ _______________________
_______________________ ______________________________ _______________________
_______________________ ______________________________ _______________________
_______________________ ______________________________ _______________________

American Data Services, Inc. ("ADS") may, without inquiry, act only upon the
instruction of Any Person(s) purporting to be (an) Authorized Person(s) as named
in the Certification form last received by ADS. ADS and the Fund shall not be
liable for any claims, expenses (including legal fees) or losses resulting from
the ADS having acted upon any instruction reasonably believed genuine.

For Corporations and Incorporated Associations Only. Note: Either Signature
Guarantee or Seal is Required.

I, ____________________, Secretary of the above-named Registered Owner, do
hereby certify that at a meeting on ____________________ at which a quorum was
present throughout, the Board of Directors of the corporation/the officers of
the association duly adopted a resolution, which is in full force and effect and
in accordance with the Registered Owner's charter and bylaws, which resolution
did the following: (1) empowered the above-named Authorized Person(s) to effect
securities transactions for the Registered Owner on the terms described above;
(2) authorized the Secretary to certify, from time to time, the names and titles
of the officers of the Registered Owner and to notify ADS when changes in office
occur; and (3) authorized the Secretary to certify that such a resolution has
been duly adopted and will remain in full force and effect until ADS receives a
duly executed amendment to the Certification form.

Signature
Guaranteed***
(or Corporation Seal)

Witness my hand on behalf of the
corporation/association this ____ day of
__________, 19__.

__________________________________________
Secretary***

The undersigned officer (other than the Secretary) hereby certifies that the
foregoing instrument has been signed by the Secretary of the
corporation/association.

Signature
Guaranteed***
(or Corporate Seal) __________________________________________
Certifying Officer of the Corporation or
Incorporated Association***

For All Other Institutional Investors__________________________________________
Certifying Trustee(s)/General partner(s)/
Other(s)***

Signature(s)
Guaranteed*** __________________________________________
Certifying Trustee(s)/General Partner(s)/
Other(s)***

**Insert a number unless otherwise indicated. The bank may honor instructions of
any one of the persons named above.
***Signature(s) must be guaranteed by a commercial bank or trust company located
or having a correspondent in New York City, or by a member firm of a national
securities exchange. Notarization is not acceptable.

30
<PAGE>

APPLICATION FOR AUTOMATIC INVESTMENT PLAN

I hereby request that __________ draw a check or an automated clearing
house ("ACH") debit on my checking account as described below each month to
purchase shares in the Short- Intermediate Portfolio or shares in the Income
Portfolio of Colorado Double Tax-Exempt Bond Fund subject to the terms set forth
below.

You are hereby authorized to draw a check or an ACH debit each month on my bank
account for investment in Colorado Double Tax-Exempt Bond Fund as indicated
below:

Amount of each check or ACH debit $
Account No.
Please date and invest checks or draw ACH
debits on the 20th of each month beginning

(Month)

I agree that you are preparing these checks or drawing these debits voluntarily
at my request and that you shall not be liable for any loss arising from any
delay in preparing or failure to prepare any such check or debit. If I change
banks or desire to terminate or suspend this program, I agree to notify you
promptly in writing.

I further agree that if a check or debit is not honored upon presentation,
__________ is authorized to discontinue immediately the Automatic Investment
plan and to liquidate sufficient shares held in my account to offset the
purchase made with the returned check or dishonored debit.

Date Signature of Depositor

Signature of Depositor
(If joint account, both must sign)

5. FOR BROKER-DEALER ONLY

Branch Office, Address, Stamp

This form when completed should be mailed to:

Colorado Double Tax-Exempt Bond Fund
c/o __________
__________
__________

A-1
<PAGE>

AUTHORIZATION TO HONOR CHECKS OR ACH
DEBITS DRAWN BY FINANCIAL DATA SERVICES,
INC.

To Bank
(Investor's Bank)
Bank Address
City, State, Zip Code

As a convenience to me, I hereby request and authorize you to pay and charge to
my account checks or ACH debits drawn on my account by and payable to
__________. I agree that your rights in respect to each such check or debit
shall be the same as if it were a check drawn on you and signed personally by
me. This authority is to remain in effect until revoked personally by me. This
authority is to remain in effect until revoked personally by me in writing.
Until you receive such notice, you shall be fully protected in honoring any such
check or debit. I further agree that if any such check or debit be dishonored,
whether with or without cause and whether intentionally or inadvertently, you
shall be under no liability.

Date Signature of Depositor
Bank (If joint account, both must sign)
Number

NOTE: IF AUTOMATIC INVESTMENT PLAN IS ELECTED, YOUR BLANK, UNSIGNED CHECK MARKED
"VOID" SHOULD ACCOMPANY THIS APPLICATION.

We hereby authorize Isaak Bond Investments, Inc. to act as our agent in
connection with transactions under this authorization form and agree to notify
the distributor of any purchases made under a Letter of Intention or Systematic
Withdrawal Plan. We guarantee the Shareholder's Signature.

Broker-Dealer Name and Address

By
Authorized Signature of Broker-Dealer

Branch-Code F/C No. F/C Last Name

Broker-Dealer's Customer A/C No.

A-2

<PAGE>

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements included in Part B:

(i) Report of Certified Public Accountants

(ii) Statement of Assets and Liabilities

(b) Exhibits:

Exhibit No. Description of Exhibit

1 Articles of Incorporation of Registrant

2 Bylaws of Registrant

4(a) Specimen copy of certificate for shares
issued by Registrant for Short-
Intermediate Portfolio *

4(b) Specimen copy of certificate for shares
issued by Registrant for Income Portfolio *

5 Form of Investment Advisory Agreement

6 Form of Distribution Agreement

8 Form of Custodian Agreement *

9 Form of Transfer Agency and Service
Agreement

10 Opinion of counsel *

11(a) Consent of Kutak Rock (included in
Exhibit 10)*

11(b) Consent of Independent Public Accountants *

C-1
<PAGE>

15(a) 12b-1 Distribution Plan (Short-
Intermediate Portfolio)

15(b) 12b-1 Distribution Plan(Income Portfolio)

* To be filed by amendment

Item 25. Persons Controlled by or under Common Control with Registrant

Not applicable.

Item 26. Number of Holders of Securities

There will be one record holder of the Registrant's shares on the date the
Registrant's Registration Statement becomes effective of whom will hold 5,000
shares of the Short-Intermediate Portfolio and 5,000 shares of the Income
Portfolio.

Item 27. Indemnification

Reference is made to Article V of the Registrant's Bylaws filed as Exhibit
No. 2 to Registrant's Registration Statement and Section 2-418 of the Maryland
General Corporation Law with respect to the indemnification of Registrant's
directors and officers. Registrant undertakes that insofar as indemnification
for liabilities arising under the Securities Act of 1933 ("1933 Act") may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.

Item 28. Business and Other Connections of Adviser

Funds Management Corporation was organized as a Colorado corporation for
the purpose of serving as the investment adviser of the Registrant. It has no
present plans of engaging in any other business activity although it may
eventually serve as an investment adviser to other investment companies.

C-2
<PAGE>

Set forth below is a list of the officers and directors of Funds Management
Corporation, together with information as to any business, profession, vocation
or employment of a substantial nature engaged in by such officers and directors
during the past two years.

Position with Funds
Name Management Corporation* Other Businesses, Etc.

Calvin F. Isaak President and Director President and Director of Isaak
Bond Investments, Inc.

David J. Isaak Vice President, Treasurer Vice President of Municipal Bond
and Director Trading Department of Isaak Bond
Investments, Inc.

*Address: 600 17th Street, 2610 S. Tower, Denver, Colorado 80293

Item 29. Principal Underwriter

(a) Not Applicable

(b)

Position with Isaak Bond
Name Investments, Inc. Position with Registrant

Calvin F. Isaak President and Director President and Chairman of the
Board

David J. Isaak Vice President of Municipal Vice President, Treasurer and
Bond Trading Department Director

Item 30. Location of Accounts and Records

Colorado Double Tax-Exempt Bond Fund, Inc.
600 17th Street
2610 S. Tower
Denver, Colorado 80293

Item 31. Management Services

Not applicable.

C-3
<PAGE>

Item 32. Undertakings

The Registrant hereby undertakes:

(a) to file an amendment to the Registration Statement showing the initial
capital received before accepting subscriptions from any persons in excess of 25
if the Registrant proposes to raise capital pursuant to Section 14(a)(3) of the
Act;

(b) to file a post-effective amendment, using financial statements which
need not be certified, within four to six months form the effective date of the
Registrants 1933 Act Registration Statement.

C-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver and State of Colorado, on the 22nd day of
January, 1997.

COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.

By /s/ Calvin F. Isaak
----------------------
Calvin F. Isaak, President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date(s) indicated:

Signature Title Date

/s/ James M. Coughlin Director January 22, 1997
- ----------------------
James M. Coughlin

/s/ Bruce L. Evans Director January 22, 1997
- ----------------------
Bruce L. Evans

/s/ Calvin F. Isaak President (Chief Executive January 22, 1997
- ---------------------- Officer) and Chairman of the
Calvin F. Isaak Board

/s/ David Isaak Vice President, Treasurer and January 22, 1997
- ---------------------- Director
David J. Isaak

/s/ Philip J. Konsella Director January 22, 1997
- ----------------------
Philip J. Konsella

C-5

EXHIBIT 1

ARTICLES OF INCORPORATION OF REGISTRANT

ARTICLES OF INCORPORATION
OF
COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.

THE UNDERSIGNED, Calvin F. Isaak, whose address is 600 Seventeenth Street,
Suite 2610, South Tower, Denver, Colorado 80202, being at least eighteen years
of age, does hereby act as incorporator with the intention of forming a
corporation, under and by virtue of the provisions of the Maryland General
Corporation Law, as amended, authorizing the formation of corporations.

ARTICLE I

NAME

The name of the corporation (which is hereinafter called the "Corporation")
is COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.

ARTICLE II

PRINCIPAL OFFICE; REGISTERED OFFICE

The address of the principal office of the Corporation is 600 Seventeenth
Street, Suite 2610, South Tower, Denver, Colorado 80202. The name of the
resident agent of the Corporation in this State is The Corporation Trust
Incorporated, a corporation of this State, and the post office address of the
resident agent is 32 South Street, Baltimore, Maryland 21202.

ARTICLE III

PURPOSES AND POWERS

Section 3.01. The Corporation is formed to conduct, operate and carry on
the business of an investment company.

Section 3.02. The Corporation may engage in any other business and shall
have all powers conferred upon or permitted to corporations by the Maryland
General Corporation Code.
<PAGE>

ARTICLE IV

CAPITAL STOCK

Section 4.01. Issuance. The total number of shares of capital stock which
the Corporation shall have authority to issue is 100,000,000, all of which shall
be common stock having a par value of $.001 per share and an aggregate par value
of $100,000. Until such time as the Board of Directors shall provide otherwise,
40,000,000 of the authorized shares are designated as Class A common stock,
20,000,000 of such shares are designated as Class B common stock, and the
remaining 40,000,000 of such shares shall be designated in accordance with
Section 6.01(a) hereof. Each class of the Corporation's common stock shall have
the same preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of and
rights to require redemption.

Section 4.02. Rights, Restrictions, Limitations and Redemption. A
description of the rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption of each class
is as follows, unless otherwise set forth in any amendments to these Articles of
Incorporation.

(a) Assets Belonging to Common Stock. All consideration received by
the Corporation for the issue or sales of shares of a class of the
Corporation's common stock, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to such class for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books of the account
of the Corporation.

(b) Liabilities Belonging to Common Stock. The assets belonging to a
class of the Corporation's common stock shall be charged with the
liabilities of the Corporation in respect of such shares, with all
expenses, costs, charges and reserves attributable thereto, and shall be so
recorded upon the books of account of the Corporation.

(c) Dividends. Dividends and distributions on shares of a class may be
paid to the holders of shares at such times, in such manner and from such
of the income and capital gains, accrued or realized, from the assets
belonging to such class of common stock of the Corporation, after providing
for actual and accrued liabilities, as the Board of Directors may
determine.

(d) Liquidation. In event of the liquidation or dissolution of the
Corporation, stockholders of each class of the Corporation's common stock
shall be entitled to receive, as a class, out of the assets of the
Corporation available for distribution to stockholders, but other than
general assets not attributable to any particular class of stock, the
assets belonging to the class less the liabilities belonging to that class;
and the assets so distributable among such stockholders in proportion to
the number of shares of the class held by them and recorded on the books of
the Corporation. In the event that there are any general assets not
attributable to any particular class of stock, and such assets are
available for distribution, the distribution shall be made to the holders
of all classes in proportion to the net asset value of the respective
classes or as otherwise determined by the Board of Directors.

1-2
<PAGE>

(e) Voting. On each matter submitted to a vote of the stockholders,
each holder of stock shall be entitled to one vote for each share standing
in his or her name on the books of the Corporation. Subject to any
applicable requirements of the Investment Company Act of 1940, as from time
to time in effect, or rules or orders of the Securities and Exchange
Commission or any successor thereto, or other applicable law, all holders
of shares of stock shall vote as a single class except with respect to any
matter which affects only one or more (but less than all) classes of stock,
in which case only the holders of shares of the class affected shall be
entitled to vote. Without limiting the generality of the foregoing, and
subject to any applicable requirements of the Investment Company Act of
1940, as from time to time in effect, or rules or orders of the Securities
and Exchange Commission or any successor thereto, or other applicable law,
the holders of each of the Class A common stock and Class B common stock
shall have, respectively, with respect to any matter submitted to a vote of
stockholders (i) exclusive voting rights with respect to any such matter
that only affects the class of common stock of which they are holders,
including, without limitation, the provisions of any distribution plan
adopted by the Corporation pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (a "Plan") with respect to the class of which they are
holders and (ii) no voting rights with respect to the provisions of any
Plan that affects one or more of such other classes of common stock, but
not the class of which they are holders, or with respect to any other
matters that does not affect the class of common stock of which they are
holders.

Section 4.03. Fractional Shares. The Corporation may issue shares of stock
in fractional denominations to the same extent as its whole shares, and shares
in fractional denominations shall be shares of stock having, proportionately to
the respective fractions represented thereby, all the rights of whole shares,
including, without limitation, the right to vote, the right to receive dividends
and distributions and the right to participate upon liquidation of the
Corporation, but excluding the right to receive a stock certificate evidencing a
fractional share.

Section 4.04. Additional Shares. No holder of shares shall be entitled as
such, as a matter of right, to purchase or subscribe for any shares or
securities which the Corporation may issue or sell (whether out of the number of
shares authorized by the Articles of Incorporation, or out of any shares
acquired by the Corporation after the issue thereof, or otherwise).

1-3
<PAGE>

Section 4.05. Quorum. The presence in person or by proxy of the holders of
one-third of the shares issued and outstanding and entitled to vote thereat
shall constitute a quorum for the transaction of any business at all meetings of
the stockholders except as otherwise provided by the Investment Company Act of
1940, an amended, any other applicable law or in these Articles of
Incorporation.

Section 4.06. Approval by Majority Vote. Notwithstanding any provisions of
the Maryland General Corporation Law requiring a greater proportion than a
majority of the votes of stockholders entitled to be cast in order to take or
authorize any action, any such action may be taken or authorized upon the
concurrence of a majority of the aggregate number of votes entitled to be cast
thereon.

Section 4.07. Redemption. All shares now or hereafter authorized shall be
"subject to redemption" and "redeemable," in the sense used in the Maryland
General Corporation Law, as amended, authorizing the formation of corporations,
at the redemption or repurchase price for shares, determined in the manner set
out in these Articles of Incorporation or in any amendment hereto. In the
absence of any contrary specification as to the purpose for which shares are
repurchased by it, all shares so repurchased shall be deemed to be "acquired for
retirement" in the sense contemplated by the Maryland General Corporation Law.
Shares retired by repurchase or retired by redemption shall thereafter have the
status of authorized but unissued shares of the Corporation.

All persons who shall acquire shares shall acquire the same subject to the
provisions of these Articles of Incorporation, as the same may be amended from
time to time.

ARTICLE V

DIRECTORS

The initial Board of Directors shall consist of five members whose names
and addresses are as follows:

1-4
<PAGE>

Walter J. Coughlin Suite 2610, South Tower
600 Seventeenth Street
Denver, CO 80202

Bruce L. Evans Suite 2610, South Tower
600 Seventeenth Street
Denver, CO 80202

Calvin F. Isaak Suite 2610, South Tower
600 Seventeenth Street
Denver, CO 80202

David J. Isaak Suite 2610, South Tower
600 Seventeenth Street
Denver, CO 80202

Phil Konsella Suite 2610, South Tower
600 Seventeenth Street
Denver, CO 80202

The number of directors in office may be changed from time to time in such
lawful manner as the Bylaws of the Corporation shall provide.

ARTICLE VI

POWERS OF THE BOARD OF DIRECTORS AND STOCKHOLDERS

Section 6.01. Board of Directors. The Board of Directors shall have the
general management and control of the business and property of the Corporation,
and may exercise all the powers of the Corporation, except such as are by
statute or by these Articles of Incorporation or by the Bylaws conferred upon or
reserved to the stockholders. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is hereby empowered:

(a) To authorize, from time to time, the issuance and sale of shares
whether for cash at not less than the par value thereof or for such other
consideration as the Board of Directors may deem advisable, in the manner
and to the extent now or hereafter permitted by the laws of the State of
Maryland; provided, however, the consideration (or the value thereof as
determined by the Board of Directors) per share to be received by the
Corporation upon the sale of shares (including treasury shares) shall not
be less than the net asset value per share outstanding at the time as of
which the computation of such net asset value shall be made.

1-5
<PAGE>

(b) To authorize the execution and performance by the Corporation of
an agreement or agreements, which may be exclusive contracts, with Isaak
Bond Investments, Inc., or any other person, as distributor, providing for
the distribution of shares.

(c) To specify, in instances in which it may be desirable, that shares
repurchased by the Corporation are not acquired for retirement and to
specify the purposes for which such shares are repurchased.

(d) To authorize the execution and performance by the Corporation of
an agreement or agreements with Fund Investments Corporation or any
successor to that corporation, providing for the provision of investment
advisory services and other operations of the Corporation.

(e) To adopt initial Bylaws for the Corporation at their
organizational meeting or by their informal written action as the case may
be. Thereafter, the power to make, alter and repeal the Bylaws of the
Corporation shall be vested in the Board of Directors of the Corporation.

(f) To adopt procedures for determination of and to maintain constant
the net asset value of shares of any class of the Corporation's stock.

The Corporation may, in its Bylaws, confer powers on the Board of Directors
in addition to the powers expressly conferred by statute.

ARTICLE VII

REDEMPTIONS AND REPURCHASES

Section 7.01. The Corporation shall under some circumstances redeem, and
may under other circumstances repurchase or redeem, shares as follows:

(a) Obligation of the Corporation to Redeem Shares. Each holder of
shares shall be entitled at his option to require the Corporation to redeem
all or any part of the shares owned by such holder, upon written or
telegraphic request to the Corporation or its designated agent, accompanied
by surrender of the certificate or certificates for such shares, or such
other evidence of ownership as shall be specified by the Board of
Directors, at a redemption price per share equal to the net asset value per
share, subject to and in accordance with the provisions of Section 7.02 of
this Article VII.

(b) Right of the Corporation to Redeem Shares. In addition, the Board
of Directors may, from time to time in its discretion, authorize the
Corporation to require the redemption of all or any part of the outstanding
shares at the net asset value per share, subject to and in accordance with
the provisions of Section 7.02 of this Article VII, upon the sending of
written notice thereof to each stockholder any of whose shares are so
redeemed and upon such terms and conditions as the Board of Directors shall
deem advisable.

1-6
<PAGE>

(c) Right of the Corporation to Repurchase Shares. In addition the
Board of Directors may, from time to time in its discretion, authorize the
officers of the Corporation to repurchase shares, either directly or
through an agent, subject to and in accordance with the provisions of
Section 7.02 of this Article VII. The price to be paid by the Corporation
upon any such repurchase shall be determined, in the discretion of the
Board of Directors, in accordance with any provision of the Investment
Company Act of 1940, as amended, or any rule or regulation thereunder,
including any rule or regulation made or adopted pursuant to Section 22 of
the Investment Company Act of 1940, as amended, by the Securities and
Exchange Commission or any securities association registered under the
Securities Exchange Act of 1934, as amended.

Section 7.02. The following provisions shall be applicable with respect to
redemptions and repurchases of shares pursuant to Section 7.01 of this Article
VII:

(a) The time as of which the net asset value per share applicable to
any redemption pursuant to subparagraph 7.01(a) or 7.01(b) shall be
computed shall be such time as may be determined by or pursuant to the
direction of the Board of Directors.

(b) Certificates for shares of any class to be redeemed or repurchased
shall be surrendered in proper form for transfer, together with such proof
of the authenticity of signatures as may be required by resolution of the
Board of Directors.

(c) Except as otherwise permitted by the Investment Company Act of
1940, as amended, payment of the redemption or repurchase price by the
Corporation or its designated agent shall be made in cash within seven days
after the time used for determination of the redemption or repurchase
price, but in no event prior to delivery to the Corporation or its
designated agent of the certificate or certificates for the shares so
redeemed or repurchased, or of such other evidence of ownership as shall be
specified by the Board of Directors. Any such payment may be made in whole
or in part in portfolio securities or in cash, as the Board of Directors
shall deem advisable, and no stockholder shall have the right, other than
as determined by the Board of Directors, to have his shares redeemed in
portfolio securities.

(d) Notwithstanding subsection (a) of Section 7.01, the Board of
Directors of the Corporation may suspend the right of the holders of shares
to require the Corporation to redeem such shares or may suspend any
voluntary purchase of such shares:

(i) for any period (A) during which the New York Stock Exchange
is closed other than customary weekend and holiday closings or (B)
during which trading on the New York Stock Exchange is restricted;

1-7
<PAGE>

(ii) for any period during which an emergency, as defined by the
rules of the Securities and Exchange Commission or any successor
thereto, exists as a result of which (A) disposal by the Corporation
of securities owned by it is not reasonably practicable or (B) it is
not reasonably practicable for the Corporation fairly to determine the
value of its net assets; or

(iii) for such periods as the Securities and Exchange Commission
or any successor thereto may by order permit for the protection of the
security holders of the Corporation.

(e) The right of the holder of shares redeemed or repurchased by the
Corporation as provided in this Article to receive dividends thereon and
all other rights of such stockholder with respect to such shares shall
forthwith cease and terminate from and after the time as of which the
redemption or repurchase price of such shares has been determined (except
the right of such stockholder to receive (i) the redemption or repurchase
price of such shares from the Corporation or its designated agent, and (ii)
any dividend to which such stockholder had previously become entitled as
the record holder of such shares on the record date for such dividend, and,
with respect to shares otherwise entitled to vote, except the right of such
stockholder to vote at a meeting of stockholders such shares owned of
record by him on the record date for such meeting).

ARTICLE VIII

DETERMINATION BINDING

Any determination made by or pursuant to the direction of the Board of
Directors in good faith, and so far as accounting matters are involved in
accordance with accepted accounting practice, as to the amount of the assets,
obligations or liabilities of the Corporation, as to the amount of the net
income of the Corporation for any period or amounts that are any time legally
available for the payment of dividends of shares, as to the amount of any
reserves or charges set up with respect to such shares and the propriety
thereof, as to the time of or purpose for creating any reserves or charges with
respect to such shares, as to the use, alteration or cancellation of any
reserves or charges with respect to the shares (whether or not any obligation or
liability for which such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter required to be paid or
discharged), as to the price or closing bid or asked price of any security owned
or held by the Corporation, as to the market value of any security or fair value
of any other asset owned by the Corporation, as to the number of shares
outstanding or deemed to be outstanding, as to the impracticability or
impossibility of liquidating securities in orderly fashion, as to the extent to
which it is practicable to deliver the proportionate interest in the securities
and other assets of the Corporation represented by any shares redeemed or
repurchased in payment for any such shares, as to the method of payment for any
such shares redeemed or repurchased, or as to any other matters relating to the
issue, sale, redemption, repurchase, and/or other acquisition or disposition of
securities or shares of the Corporation shall be final and conclusive and shall
be binding upon the Corporation and all holders of shares are issued and sold on
the condition and understanding that any and all such determinations shall be
binding as aforesaid.

1-8
<PAGE>

ARTICLE IX

LIABILITY OF DIRECTORS AND OFFICERS

No director or officer of the Corporation shall be liable to the
Corporation or its shareholders for money damages except when such liability
shall arise by reason of the person's willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office, or as otherwise required by Maryland General Corporation Law or the
Investment Company Act of 1940, as amended.

ARTICLE X

INDEMNIFICATION

To the maximum extent permitted by the Maryland General Corporation Law as
from time to time amended, the Corporation shall indemnify its currently acting
and its former directors, officers and employees and those persons who, at the
request of the Corporation, serve or have served another corporation,
partnership, joint venture, trust or other enterprise in one or more of such
capacities. The indemnification provided for herein shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any statute, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. Notwithstanding anything contained herein
to the contrary, no officer or director of the Corporation shall be indemnified
for any liability to the Corporation or its stockholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.

ARTICLE XI

AMENDMENTS

The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation in the manner now or
hereafter prescribed by the laws of the State of Maryland, including any
amendment which alters the contract rights, as expressly set forth in these
Articles of Incorporation, of any outstanding stock, and all rights conferred
upon stockholders herein are granted subject to this reservation.

1-9
<PAGE>

IN WITNESS WHEREOF, the undersigned incorporator of COLORADO DOUBLE
TAX-EXEMPT BOND FUND, INC. hereby executes the foregoing Articles of
Incorporation and acknowledges the same to be his act.

Dated as of the 28th day of August, 1996.

Calvin F. Isaak, Incorporator

1-10

EXHIBIT 2

BYLAWS OF REGISTRANT

BYLAWS
OF
COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.

ARTICLE I

OFFICES

Section 1.01. Principal Office. The address of the principal office of the
corporation is 600 Seventeenth Street, Suite 2610, South Tower, Denver, Colorado
80202. The name and address of the resident agent in the State of Maryland is
the Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202.

Section 1.02. Other Offices. In addition to the registered office, other
offices may also be maintained at such other place or places, either within or
without the State of Maryland, as may be designated from time to time by the
Board of Directors, or as the business of the corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 2.01. Annual Meetings. The Corporation will not hold an annual
meeting of stockholders in any year in which the election of directors is not
required to be acted upon under the Investment Company Act of 1940.

If such a meeting is held then there shall be submitted to the stockholders
at such meeting the question of the election of directors and such meeting shall
be deemed the annual meeting of the stockholders for that year. The place,
either within or without the State of Maryland, and the time for such meetings
shall be fixed by the Board of Directors.

Section 2.02. Special Meetings. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by statute or by the
Articles of Incorporation, may be held at any place, within or without the State
of Maryland, and may be called at any time by the Board of Directors or by the
President, and shall be called at the request in writing of stockholders
entitled to cast at least twenty-five percent (25%) of all the votes entitled to
be cast at such meeting. Such request shall state the purpose or purposes of the
meeting and the matters proposed to be acted on at it provided, however, that
unless requested by stockholders entitled to cast a majority of all the votes
entitled to be cast at a meeting, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted on at any
special meeting of the stockholders held during the preceding twelve (12)
months. The Secretary shall inform such stockholders of the reasonably estimated
costs of preparing and mailing the notice of the meeting and on payment of these
costs to the Corporation shall notify each stockholder entitled to notice of the
meeting. Notwithstanding any of the foregoing, the Board of Directors shall call
a special meeting of stockholders to consider the removal of one or more
Directors at the request in writing of the holders of record of at least ten
percent (10%) of the outstanding shares of the common stock of the corporation.

2-1
<PAGE>

Section 2.03. Notice of Meetings and Stockholder List. Written or printed
notice of the purpose or purposes and of the time and place of every meeting of
the stockholders shall be given by the Secretary of the corporation to each
stockholder of record entitled to vote at the meeting and each other stockholder
entitled to notice of the meeting, by placing such notice in the mail at least
ten (10) days, but not more than ninety (90) days, and in any event within the
period prescribed by law, prior to the date named for the meeting addressed to
each stockholder at his address appearing on the books of the Corporation or
supplied by him to the Corporation for the purpose of notice.

Section 2.04. Record Date. The Board of Directors may fix, in advance, a
date as the record date for the purpose of determining stockholders entitled to
notice of, or to vote at, any meeting of stockholders, or stockholders entitled
to receive payment of any dividend or the allotment of any rights or in order to
make a determination of stockholders for any other proper purpose. Such date, in
any case, shall be not more than 90 days, and in case of a meeting of
stockholders not less than 10 days, prior to the date on which the meeting or
particular action requiring such determination of stockholders is to be held or
taken. In lieu of fixing a record date, the Board of Directors may provide that
the stock transfer books shall be closed for a stated period but not to exceed
20 days. If the stock transfer books are closed for the purpose of determining
stockholders entitled to notice of, or to vote at, a meeting of stockholders,
such books shall be closed for at least 10 days immediately preceding such
meeting. If no record date is fixed and the stock transfer books are not closed
for the determination of stockholders: (a) the record date for the determination
of stockholders entitled to notice of, or to vote at, a meeting of stockholders
shall be the later of the close of business on the day on which the notice of
meeting is mailed or the thirtieth day before the meeting; and (b) the record
date for the determination of stockholders entitled to receive payment of a
dividend or an allotment of any rights shall be at the close of business on the
day on which the resolution of the Board of Directors declaring the dividend or
allotment of rights is adopted, provided that the payment or allotment date
shall not be more than 60 days after the date on which the resolution is
adopted.

Section 2.05. Conduct of Meeting. Meetings of the stockholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting: the President, the Chairman of the Board, a Vice President
or, if none of the foregoing is in office and present and acting, by a chairman
to be chosen by the stockholders. The Secretary of the corporation or, in his
absence, an Assistant Secretary, shall act as secretary of every meeting, but if
neither the Secretary nor an Assistant Secretary is present the chairman of the
meeting shall appoint a secretary of the meeting.

2-2
<PAGE>

Section 2.06. Special Meeting Business. Business transacted at any special
meeting of stockholders shall be limited to the purposes stated in the notice.

Section 2.07. Quorum. The holders of one-third of the shares issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, unless a greater number is required by the Investment
Company Act of 1940, as amended, any other applicable law or by the Articles of
Incorporation. If, however, a quorum is not present or represented by proxy at
any stockholders' meeting, the holders of a majority of the shares present in
person or by proxy and entitled to vote thereat shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented by proxy. At such
adjourned meeting at which a quorum shall be present or represented by proxy any
business may be transacted which might have been transacted at the meeting as
originally notified; provided, that the meeting may not be adjourned to a date
more than 120 days after the original record date for the meeting, and if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the adjourned meeting.

Section 2.08. Voting. Each share of stock shall entitle the holder thereof
to one vote, except in the election of directors, at which each said vote may be
cast for as many persons as there are directors to be elected. Cumulative voting
shall not be allowed in the election of directors. Except for election of
directors, a majority of the votes cast at a meeting of stockholders, duly
called and at which a quorum is present, shall be sufficient to take or
authorize action upon any matter which may come before a meeting, unless more
than a majority of votes cast is required by the corporation's Articles of
Incorporation. A plurality of all the votes cast at a meeting at which a quorum
is present shall be sufficient to elect a director.

Section 2.09. Proxy Representation. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether for the purposes of determining his presence
at a meeting, or whether by waiving notice of any meeting, voting or
participating at a meeting, expressing consent or dissent without a meeting or
otherwise. Every proxy shall be executed in writing by the stockholder or by his
duly authorized attorney-in-fact and filed with the Secretary of the
corporation. No unrevoked proxy shall be valid after 11 months from the date of
its execution, unless a longer time is expressly provided therein.

Section 2.10. Informal Action. Any action required or permitted to be taken
at a meeting of stockholders may be taken without a meeting if a consent in
writing, setting forth such action, is signed by all the stockholders entitled
to vote on the subject matter thereof and any other stockholders entitled to
notice of a meeting of stockholders (but not to vote thereat) have waived in
writing any rights which they may have to dissent from such action and such
consent and waiver are filed with the records of the corporation.

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ARTICLE III

DIRECTORS

Section 3.01. The Number of Directors. The affairs and business of this
corporation shall be managed by a Board of Directors consisting of three or more
members who need not be stockholders of the Corporation. The number of directors
shall be fixed from time to time by resolution of the Board of Directors. The
directors shall be elected at the annual meeting of the stockholders except as
provided in Section 3.02, and each director elected shall hold office until his
successor is elected and qualified.

Section 3.02. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and
qualified; provided, however, that no vacancy can be filled as provided above if
prohibited by the provisions of the investment Company Act of 1940, as amended.

Section 3.03. General Powers. The Board of Directors shall have the control
and general management of the affairs and business of the corporation. Such
directors shall in all cases act as a board, regularly convened, by a majority,
and they may adopt such rules and regulations for the conduct of their meetings
and the management of the corporation, as they may deem proper, not inconsistent
with these Bylaws, the Articles of Incorporation or the laws of the State of
Maryland. A director shall perform his duties as a director, in good faith, in a
manner he reasonably believes to be in the best interests of the corporation,
and with such care as an ordinarily prudent person in like position would use
under similar circumstances.

Section 3.04. Chairman. The Board of Directors may at any time appoint one
of its members as Chairman of the Board, who shall serve at the pleasure of the
Board and who shall perform and execute such duties and powers as may be
conferred upon or assigned to him by the Board or these Bylaws, but who shall
not by reason of performing and executing these duties and powers be deemed an
officer or employee of the corporation.

ARTICLE IV

BOARD OF DIRECTORS' MEETINGS

Section 4.01. Directors' Meetings. The Board of Directors of the
corporation may hold regular or special meetings either within or without the
State of Maryland.

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Section 4.02. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the Board of Directors except that the first meeting of a
newly elected board shall be held as soon after its election as the directors
may conveniently assemble.

Section 4.03. Special Meetings. Special meetings of the board may be called
by the President on five days' notice to each director, either personally, by
mail or by telegram and special meetings shall be called by the President or
Secretary in like manner and on like notice on the written request of two
directors unless the board consists of only one director, in which case special
meetings shall be called by the President or Secretary in like manner and on
like notice on the written request of the sole director. The person or persons
authorized to call special meetings of the Board of Directors may fix any place,
either within or without the State of Maryland, as the place for holding any
special meeting of the Board of Directors called by them.

Section 4.04. Chairman of the Meeting. The Chairman of the Board, if any
and if present and acting, or the President or any other director chosen by the
Board, shall preside at all meetings.

Section 4.05. Quorum and Manner of Acting. A majority of the directors,
whose number is designated in Section 3.01, shall constitute a quorum for the
transaction of business at any meeting and the act of a majority of the
directors present at any meeting at which a quorum is present shall be the act
of the Board of Directors. In the absence of a quorum, the majority of the
directors present may adjourn any meeting from time to time, without notice
other than announcement at the meeting, until a quorum be had; provided,
however, notwithstanding the above, if the Board of Directors is taking action
pursuant to the Investment Company Act of 1940, as amended, a majority of the
directors who are not "interested persons" (as defined by such Act) of the
Corporation shall constitute a quorum for taking such action. The directors
shall act only as a board and the individual directors shall have no power as
such, unless the board consists of only one director.

Section 4.06. Written Consent. Unless otherwise restricted by the Articles
of Incorporation or these Bylaws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting, without prior notice and without a vote, if all members
of the board or committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the board
or committee.

Section 4.07. Telephonic Meetings. Unless otherwise restricted by the
Articles of Incorporation, members of the Board of Directors, or any committee
designated by the board of directors, may participate in a meeting of the Board
of Directors or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.

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Section 4.08. Voting. At all meetings of the Board of Directors, each
director is to have one vote, irrespective of the number of shares of stock that
he may hold.

Section 4.09. Compensation. Unless otherwise restricted by the Articles of
Incorporation or these Bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed slum for attendance at each meeting of the Board of Directors or a
stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.

Section 4.10. Removal. Unless otherwise restricted by the Articles of
Incorporation or by law, any director or the entire Board of Directors may be
removed, with or without cause, by the vote of the holders of a majority of
shares entitled to vote at an election of directors.

Section 4.11. Resignation of Directors. Any director of the corporation may
resign at any time by giving written notice of his resignation to the Board of
Directors, the Chairman of the board, the President, any Vice President or the
Secretary of the corporation. Such resignation shall take effect at the date of
receipt of such notice or at any later time specified therein and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.

ARTICLE V

COMMITTEES

The Board of Directors may appoint from among its members an Executive
Committee and other committees composed of two or more directors and may
delegate to such committee or committees, in the intervals between meetings of
the Board of Directors, any or all of the powers of the Board of Directors in
the management of the business and affairs of the corporation, except the power
to amend the Bylaws, to approve any consolidation, merger, share exchange or
transfer of assets, to declare dividends, to issue stock, to recommend to
stockholders any action requiring the stockholders' approval or to approve any
agreement or take any action required to be approved or taken under the
Investment Company Act of 1940 by a majority of the directors who are not
"interested persons" of the corporation. In the absence of any member of any
such committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a member of the Board of Directors to act in
the place of such absent member. The Board of Directors may at any time change
the members of any committee, fill vacancies or discharge any committee.

Two or more members of any committee, shall constitute a quorum unless the
board shall otherwise provide. Each committee may fix its own rules of procedure
and may meet as and when provided by those rules. Copies of the minutes of all
meetings of committees shall be distributed to the Board of Directors unless the
board shall otherwise provide.

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ARTICLE VI

NOTICE

Whenever, under the provisions of the statutes or of the Articles of
Incorporation or of these Bylaws, notice is required to be given to any director
or stockholder, it shall mean personal or written notice. If mailed, such notice
shall be deemed to have been delivered when deposited in the United States mail
so addressed, with postage thereon prepaid. If notice is given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director or stockholder may waive notice of any meeting
either before or after such meeting by signing a written waiver of notice which
is filed with the records of the meeting. The attendance of a director, or the
attendance in person or by proxy of a stockholder, at any meeting shall
constitute a waiver of notice of such meeting.

ARTICLE VII

OFFICERS

Section 7.01. Number. The officers of the corporation shall be a President,
a Vice President, a Treasurer and a Secretary and such other or subordinate
officers as the Board of Directors may from time to time elect. One person may
hold the office and perform the duties of one or more of said officers;
provided, however, that a person may not serve concurrently as President and
Vice President.

Section 7.02. Election, Term of Office, Qualifications. The officers of the
corporation shall be chosen by the Board of Directors and they shall be elected
annually at the meeting of the Board of Directors held immediately after each
annual meeting of the stockholders, except as hereinafter otherwise provided for
filling vacancies. Each officer shall hold his office until his successor shall
have been duly chosen and shall have qualified, or until his death, or until he
shall resign or shall have been removed in the manner hereinafter provided.

Section 7.03. Salaries. Salaries of the officers may be fixed from time to
time by the Board of Directors. No officer shall be prevented from receiving
such salary by reason of the fact that he is also a director of the corporation.

Section 7.04. Removal; Vacancies. Any officer or agent elected or appointed
by the Board of Directors may be removed by the Board of Directors at any time
whenever in its judgment the best interest of the corporation would be served
thereby such removal shall be without prejudice to the contract rights, if any,
of the person so removed. Any vacancy occurring in any office of the corporation
shall be filled by the Board of Directors.

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Section 7.05. Resignation. Any officer may resign at any time by giving
written notice thereof to the Board of Directors. Such resignation shall take
effect on the date specified therein and no acceptance of the same shall be
necessary to render the same effective.

Section 7.06. President. The President shall be the chief executive officer
of the corporation and shall have general supervision over the business of the
corporation and over its several officers, subject however, to the control of
the Board of Directors. The President shall preside at all meetings of the
stockholders and the Board of Directors. He may sign, with the Treasurer or the
Secretary or any other proper officer of the corporation thereunto authorized by
the Board of Directors certificates for shares of the corporation; may sign and
execute in the name of the corporation deeds, mortgages, bonds, contracts or
other instruments authorized by the Board of Directors, except in cases where
the signing and execution thereof shall be expressly delegated by the Board of
Directors or by these Bylaws to some other officer or agent of the corporation;
and in general shall perform all duties incident to the duties of the President,
and such other duties as from time to time may be assigned to him by the Board
of Directors.

Section 7.07. Vice President. A Vice President shall in the absence or
incapacity of the President, or as ordered by the Board of Directors, perform
the duties of the President, or such other duties or functions as may be given
to him by the Board of Directors from time to time.

Section 7.08. Treasurer. The Treasurer shall have the care and custody of
all the funds and securities of the corporation and deposit the same in the name
of the corporation in such bank or trust company as the Board of Directors may
designate; he may sign or countersign all checks, drafts and orders for the
payment of money and may pay out and dispose of the same under the direction of
the Board of Directors, and may sign or countersign all notes or other
obligations of indebtedness of the corporation; he may sign with the President
certificates for shares of the corporation; he shall at all reasonable times
exhibit the books and accounts to any director or stockholder of the corporation
under application at the office of the company during business hours; and he
shall, in general, perform all duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to him by the President
or by the Board of Directors. The Board of Directors may at its discretion
require of each officer authorized to disburse the funds of the corporation a
bond in such amount as it may deem adequate.

Section 7.09. Secretary. The Secretary shall attend all meetings and keep
the minutes of all such meetings of the Board of Directors and also attend all
the meetings and keep the minutes of such meetings of the stockholders; he shall
attend to the giving and serving of all notices of the corporation, and shall
affix the seal of the corporation to all certificates of stock, when signed and
countersigned by the duly authorized officers; he may sign certificates for
shares of the corporation; he may sign or countersign all checks, drafts and
orders for the payment of money; he shall have charge of the certificate book
and such other books and papers as the board may direct; he shall keep a stock
book containing the names, alphabetically arranged, of all persons who are
stockholders of the corporation, showing their places of residence, the number
of shares of stock held by them respectively, the time when they respectively
became the owners thereof, and the amount paid thereon; and he shall, in
general, perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the President or by the
Board of Directors.

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Section 7.10. Assistant Treasurers and Assistant Secretaries. The Assistant
Treasurers shall respectively as required by the Board of Directors give bonds
for the faithful discharge of their duties in such sums and with such sureties
as the Board of Directors shall determine and shall perform the duties of the
Treasurer in the absence of the Treasurer. The Assistant Secretaries as
thereunto authorized by the Board of Directors may sign with the President or
Vice President certificates for shares of the corporation, the issue of which
shall have been authorized by resolution of the Board of Directors and shall
perform the duties of the Secretary in the absence of the Secretary. The
Assistant Treasurers and Assistant Secretaries shall, in general, perform such
duties as may be assigned to them by the Treasurer or the Secretary
respectively, or by the President or by the Board of Directors.

Section 7.11. Other Officers. The Board of Directors may authorize and
empower other persons or other officers appointed by it to perform the duties
and functions of the officers specifically designated above by special
resolution in each case.

ARTICLE VIII

CAPITAL STOCK

Section 8.01. Certificates for Shares. The Board of Directors at any time
may authorize the issuance of share certificates. Certificates for shares of the
corporation shall be in such form as is consistent with Maryland General
Corporation Law and shall be approved by the incorporators or by the Board of
Directors. The certificates shall be numbered in order of their issue, shall be
signed by the President or a Vice President and by the Secretary or the
Treasurer, or by such other person or officer as may be designated by the Board
of Directors; and the seal of the corporation shall be affixed thereto, which
said signatures and seal may be authenticated by facsimiles of the signatures of
the said duly designated officers and of the seal of the corporation. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue. No certificate shall be issued
for any shares until such shares are fully paid. In lieu of issuing Certificates
for shares, the Board of Directors or the transfer agent of the Fund either may
issue receipts therefor or may keep accounts upon the books of the corporation
for the record holders of such shares, who shall in either case, for all
purposes hereunder, be deemed to be the holders of certificates for such shares
as if they had accepted such certificates and shall be held to have expressly
assented and agreed to the terms thereof.

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Section 8.02. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate or certificates alleged to have been lost,
stolen or destroyed.

Section 8.03. Transfer of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.

Section 8.04. Stock Ledgers. The Corporation shall not be required to keep
original or duplicate stock ledgers at its principal office in the City of
Baltimore, Maryland, but stock ledgers shall be kept at the respective offices
of the Transfer Agent of the Corporation's capital stock.

ARTICLE IX

STATEMENT OF AFFAIRS

The President of the corporation or, if the Board of Directors shall
determine otherwise, some other executive officer thereof, shall prepare or
cause to be prepared annually a full and correct statement of the affairs of the
corporation, including a balance sheet and a financial statement of operations
for the preceding fiscal year, which shall be filed at the principal office of
the corporation in the State of Maryland, so long as the same is required by the
Maryland General Corporation Law.

ARTICLE X

CONTRACTS, LOANS, CHECKS AND DEPOSITS

Section 10.01. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.

Section 10.02. Loans. No loans shall be contracted on behalf of the
corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the Board of Directors or approved by a loan committee appointed
by the Board of Directors and charged with the duty of supervising investments.
Such authority may be general or confined to specific instances.

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Section 10.03. Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.

Section 10.04. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the Board of Directors
may select. Such funds may be drawn out only on checks signed in the name of the
corporation by such person or persons as provided herein or as the Board of
Directors, by appropriate resolution, may direct.

ARTICLE XI

FISCAL YEAR

The fiscal year of the corporation shall be fixed by resolution of the
Board of Directors.

ARTICLE XII

SEAL

The Board of Directors shall provide a corporate seal which shall bear the
full name of the corporation and the words "CORPORATE SEAL, MARYLAND." The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.

ARTICLE XIII

CUSTODIAN

All securities and funds of the corporation shall be held by one or more
custodians each of which shall be a bank or trust company having (according to
its last published report) not less than One Hundred Million Dollars
($100,000,000) aggregate capital, surplus and undivided profits (the
"Custodian"), provided any such Custodian can be found ready and willing to act.

The terms of custody of such securities and funds shall include provisions
to the effect that the Custodian shall deliver securities owned by the
corporation only (a) upon sales of such securities for the account of the
corporation and receipt by the Custodian of payment therefor, (b) when such
securities are called, redeemed or retired or otherwise become payable, (c) in
exchange for or upon conversion into other securities alone or other securities
and cash whether pursuant to any plan or merger, consolidation, reorganization,
recapitalization or readjustment or otherwise, (d) upon conversion of such
securities pursuant to their terms into other securities, (e) upon exercise of
subscription, purchase or other similar rights represented by such securities,
(f) for the purpose of exchanging interim receipt or temporary securities for
definitive securities, (g) for the purpose of redeeming in kind shares of the
corporation, (h) for loans of securities by the corporation, or (i) for other
proper corporate purposes.

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Such terms of custody shall also include provisions to the effect that the
Custodian shall deliver funds of the corporation only (a) upon the purchase of
securities for the portfolio of the corporation and the delivery of such
securities to the Custodian, (b) for the repurchase or redemption of shares of
the corporation, (c) for the payment of dividends, taxes, management or
supervisory fees or operating expenses, (d) for payments in connection with the
conversion, exchange or surrender of securities owned by the corporation, (e)
for payments in connection with the return of securities loaned by the
corporation or the reduction of cash collateral, or (f) for other proper
corporate purposes.

Upon the resignation or inability of any such Custodian to serve, the
corporation shall (a) use its best efforts to obtain a successor custodian, (b)
require the funds and securities of the corporation held by the Custodian to be
delivered to the successor custodian, and (c) in the event that no successor
custodian can be found, submit to the stockholders of the corporation, before
permitting delivery of such funds and securities to anyone other than a
successor custodian, the question whether the corporation shall be dissolved or
shall function without a custodian; provided, however, that nothing herein
contained shall prevent the termination of any agreement between the corporation
and any such Custodian with respect to any of the corporation's shares (and with
respect to the assets and liabilities belonging to such shares) by the
affirmative vote of the holders of a majority of the outstanding shares entitled
to vote.

Such terms of custody shall further provide that, pending appointment of a
successor custodian or a vote of the stockholders to function without a
custodian, the Custodian shall not deliver funds and other property of the
corporation to the corporation, but may deliver them to a bank or trust company
of its own selection having (according to its last published report) not less
than One Hundred Million Dollars ($100,000,000) aggregate capital, surplus and
undivided profits, as Custodian for the corporation to be held under terms
similar to those under which they were held by the retiring Custodian.

Subject to such rules, regulations and orders as the Securities and
Exchange Commission may adopt, the corporation may authorize or direct the
Custodian to deposit all or any part of the securities owned by the corporation
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, or such other person as may be permitted by the Commission, pursuant to
which system all securities of any particular class or series of any issuer
deposited within the system are treated as fungible and may be transferred or
pledged by bookkeeping entry without physical delivery of such securities,
provided that all such deposits shall be subject to withdrawal only upon the
order of the Custodian.

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As used herein, the term "receipt by the Custodian of payment" shall
include the receipt of (a) a certified or official bank check, (b) an advice
that funds have been or will be credited to the account of the Custodian at a
clearing agency registered under the Securities Exchange Act of 1934, as
amended, or (c) a bank wire from a correspondent bank of the Custodian. As used
herein, the term "delivery of such securities to the Custodian" shall include
the receipt of (a) securities in bearer form or in proper form for transfer, or
(b) an advice that securities have been credited to the account of the Custodian
at a clearing agency registered under the Securities Exchange Act of 1934.

The corporation may make such other arrangements for the custody of its
assets (including deposit arrangements) as may be required by any applicable
law, rule or regulation.

The corporation may also have such transfer agents and registrars of its
shares as the Board of Directors shall from time to time determine. The Board of
Directors may employ and fix the powers, rights, duties, responsibilities,
privileges, immunities and compensation of any such custodian, transfer agent or
registrar, subject, however, in the case of any such custodian, to the foregoing
provisions of this paragraph.

ARTICLE XIV

MISCELLANEOUS

Section 14.01. Amendments. These Bylaws may be altered, amended or repealed
and new Bylaws may be adopted at any meeting of the Board of Directors of the
corporation.

Section 14.02. Books and Records. Except as otherwise required by statute,
the books and records of the corporation may be kept within or without the State
of Maryland at such place or places as may be from time to time designated by
the Board of Directors.

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EXHIBIT 5

FORM OF INVESTMENT ADVISORY AGREEMENT

INVESTMENT ADVISORY AGREEMENT

THIS INVESTMENT ADVISORY AGREEMENT (this "Agreement"), made this ____ day
of _________________, 1996, by and between THE COLORADO DOUBLE TAX-EXEMPT BOND
FUND, INC., a Maryland corporation (the "Fund"), and FUNDS MANAGEMENT
CORPORATION, a Colorado corporation (the "Manager").

W I T N E S S E T H:

1. Investment Advisory and Management Services. The Fund hereby engages the
Manager, and the Manager hereby agrees to act, as investment adviser for, and to
manage the affairs, business, and the investment of the assets of, the Fund.

The investment of the assets of the Fund shall at all times be subject to
the applicable provisions of the Articles of Incorporation, the Bylaws, the
Prospectus and Statement of Additional Information of the Fund, as from time to
time in effect, and shall conform to the investment objective and policies of
the Fund as set forth in the Prospectus and Statement of Additional Information
of the Fund and as interpreted from time to time by the Board of Directors of
the Fund. Within the framework of the investment objective and policies and
restrictions of the Fund, the Manager shall have the sole and exclusive
responsibility for the management of the Fund portfolio and the making and
execution of all investment decisions for the Fund. The Manager shall report to
the Board of Directors regularly at such times and in such detail as the Board
may from time to time determine to be appropriate, in order to permit the Board
to determine the adherence of the Manager to the investment policies of the
Fund.

The Manager shall obtain and provide investment research and supervise the
Fund's investments and conduct a continuous program of investment, evaluation,
and if appropriate, sale and reinvestment of the Fund's assets. The Manager
shall furnish to the Fund such statistical information, with respect to the
investments which the Fund may hold or contemplate purchasing, as the Fund may
reasonably request. The Fund wishes to be informed of important developments
materially affecting its portfolio and shall expect the Manager, on its own
initiative, to furnish to the Fund from time to time such information as it may
believe appropriate for this purpose.

In addition, the Manager shall supply office facilities, clerical staff,
and stationery and office supplies; prepare reports to the Fund's shareholders,
tax returns, reports to and filings with the Securities and Exchange Commission
and state blue sky authorities; and generally assist in all aspects of the
Fund's operations.

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The Manager hereby acknowledges that all records necessary in the operation
of the Fund, including records pertaining to its shareholders and investments,
are the property of the Fund, and in the event that a transfer of management or
investment advisory services to someone other than the Manager should ever
occur, the Manager will promptly, and at its own cost, take all steps necessary
to segregate such records and deliver them to the Fund.

The Manager shall exercise its best judgment in rendering the services to
be provided to the Fund hereunder and the Fund agrees as an inducement to its
undertaking the same that the Manager shall not be liable hereunder for any
error of judgment or mistake of law or for any loss suffered by the Fund,
provided that nothing herein shall be deemed to protect or purport to protect it
against any liability to the Fund or to its shareholders to which the Manager
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties hereunder, or by reason of its
reckless disregard of its obligations and duties hereunder.

2. Compensation for Services. In payment for the investment advisory
services to be rendered by the Manager hereunder, the Fund shall pay to the
Manager a monthly fee, which fee shall be paid to the Manager not later than the
fifth business day following the end of each month in which said services were
rendered. Said monthly fee shall be based on the average of the net asset values
of all of the issued and outstanding shares of the Fund as determined as of the
close of each business day of the month pursuant to the Articles of
Incorporation, Bylaws, Prospectus and Statement of Additional Information of the
Fund and shall be equal to an annual rate of .23 of 1% of the Fund's average
daily net assets. Net asset value shall be computed on such days and at such
time or time as described in the Fund's then-current Prospectus and Statement of
Additional Information. The fee for the period from the date of the commencement
of the initial public sale of the Fund's shares to the end of the month during
which such sale shall have been commenced shall be pro-rated according to the
proportion which such period bears to the full monthly period, and upon any
termination of this Agreement before the end of any month, the fee for such part
of a month shall be pro-rated according to the proportion which such period
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement.

For the purpose of determining fees payable to the Manager, the value of
the Fund's net assets shall be computed in the manner specified in the Fund's
Articles of Incorporation for the computation of the value of the Fund's net
assets.

5-2
<PAGE>

3. Allocation of Expenses.

(a) All costs and expenses (other than those specifically referred to
herein as being borne by the Manager or Isaak Bond Investments, Inc.,
underwriter of the Funds's shares (the "Underwriter")) incurred in the
operation of the Fund shall be borne by the Fund. These expenses include,
but are not limited to, all expenses incurred in the operation of the Fund
and any public offering of its shares, including, among others, interest,
taxes, brokerage fees and commissions, fees of the directors who are not
employees of the Manager or the Underwriter, or any of their affiliates,
expenses of directors' and shareholders' meetings, including the cost of
printing and mailing proxies, expenses of insurance premiums for fidelity
and other coverage, expenses of redemption of Fund shares, expenses of
issue and sale of Fund shares (to the extent not borne by the Underwriter
under its agreement with the Fund), expenses of printing and mailing stock
certificates representing shares of the Fund, association membership dues,
charges of custodian, transfer agent, dividend disbursing agent, accounting
services agent, investor servicing agent, and bookkeeping, auditing, and
legal expenses. The Fund will also pay the fees and bear the expense of
registering and maintaining the registration of the Fund and its shares
with the Securities and Exchange Commission and registering or qualifying
its shares under state or other securities laws and the expense of
preparing and mailing prospectuses and reports to shareholders.

(b) The Underwriter shall bear all advertising promotional expenses in
connection with the distribution of the Fund's shares, including paying for
prospectuses for new shareholders.

4. Limit on Expenses. In the event that the Fund's operating expenses
(including the investment advisory and management fee but excluding taxes,
interest, brokerage and extraordinary expenses, if any) exceed 1% of the Fund's
average daily net assets on an annual basis, the Manager shall reduce the amount
of the investment advisory and management fee or assume expenses of the Fund in
the amount of such excess, up to the amount of the investment advisory and
management fee payable by the Fund to the Manager. The Manager shall directly
incur and pay all expenses relating to the Fund, and the Fund in turn shall
reimburse the Manager to the extent of the lesser of (a) the actual expenses or
(b) the 1% expense limitation. This expense reimbursement shall be paid monthly
by the Fund to the Manager.

5. Freedom to Deal with Third Parties. The Manager shall be free to render
services to others similar to those rendered under this Agreement or of a
different nature except as such services may conflict with the services to be
rendered or the duties to be assumed hereunder.

6. Effective Date, Duration and Termination of Agreement. The effective
date of this Agreement shall be ______________, 1996. Wherever referred to in
this Agreement, the vote or approval of the holders of a majority of the
outstanding voting securities of the Fund shall mean (a) the vote of 67% or more
of such securities if the holders of more than 50% of such securities are
present in person or by proxy or (b) the vote of more than 50% of such
securities, whichever is the lesser.

5-3
<PAGE>

Unless sooner terminated and hereinafter provided, this Agreement shall
continue in effect until _______________ and from year to year thereafter, but
only so long as such continuance is specifically approved at least annually by
the Board of Directors of the Fund or by the vote of the holders of a majority
of the outstanding voting securities of the Fund; provided that in either event
the continuance also is approved by a majority of the Board of Directors who are
not "interested persons" of the Manager, the Underwriter, or the Fund, as
defined by the provisions of the Investment Company Act of 1940, as amended (the
"1940 Act"), cast in person at a meeting called for the purpose of voting on
such approval.

This Agreement may be terminated at any time without the payment of any
penalty by the vote of the Board of Directors of the Fund or by the vote of the
holders of a majority of the outstanding voting securities of the Fund, or by
the Manager, upon 60 days' written notice to the other party.

This Agreement shall automatically terminate in the event of its assignment
as such term is defined by the 1940 Act, as amended.

7. Amendments to Agreement. No material amendment to this Agreement shall
be effective until approved by vote of the holders of a majority of the
outstanding voting securities of the Fund.

8. Notices. Any notice under this Agreement shall be in writing, addressed,
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate in writing for receipt of such notice.

9. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Colorado.

5-4
<PAGE>

IN WITNESS WHEREOF, the Fund and the Manager have caused this Agreement to
be executed by their duly authorized officers and their respective corporate
seals affixed hereto all as of the day and year first above written.

THE COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.

By
Calvin F. Isaak, President

FUNDS MANAGEMENT CORPORATION

By
Calvin F. Isaak, President

5-5

EXHIBIT 6

FORM OF DISTRIBUTION AGREEMENT

DISTRIBUTION AGREEMENT

THIS AGREEMENT, made this _____ day of ____________, 1996, by and between
THE COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC., a Maryland corporation (the
"Fund"), and ISAAK BOND INVESTMENTS, INC., a Colorado corporation (the
Underwriter").

W I T N E S S E T H:

Section 1. Underwriting Services. The Fund hereby engages the Underwriter,
and the Underwriter hereby agrees to act, as principal underwriter for the Fund
in the sale and distribution of the shares of the Fund to the public, either
through dealers or otherwise. The Underwriter agrees to offer such shares for
sale at all times when such shares are available for sale and may lawfully be
offered for sale and sold.

Section 2. Sale of Fund Shares. Such shares are to be sold only on the
following terms:

(a) All subscriptions, offers, or sales shall be subject to acceptance
or rejection by the Fund. Any offer or sale shall be conclusively presumed
to have been accepted by the Fund if the Fund shall fail to notify the
Underwriter of the rejection of such offer or sale prior to the computation
of the net asset value of the Fund's shares next following receipt by the
Fund of notice of such offer or sale.

(b) No share of the Fund shall be sold by the Underwriter for any
consideration other than cash or, except in instances otherwise provided
for by the Fund's currently effective Prospectus, for any amount less than
the public offering price per share, which shall be determined in
accordance with the Fund's currently effective Prospectus.

Section 3. Sale of Shares by the Fund. The Fund reserves the right to issue
shares at any time directly to its shareholders as a stock dividend or stock
split and to sell shares to its shareholders or to other persons approved by the
Underwriter at not less than net asset value.

Section 4. Registration of Shares. The Fund agrees to make prompt and
reasonable efforts to effect and keep in effect, at its expense, the
registration or qualification of its shares for sale in such jurisdictions as
the Fund may designate.

Section 5. Information to be furnished to the Underwriter. The Fund agrees
that it will furnish the Underwriter with such information with respect to the
affairs and accounts of the Fund as the Underwriter may from time to time
reasonably require, and further agrees that the Underwriter, at all reasonable
times, shall be permitted to inspect the books and records of the Fund.

6-1
<PAGE>

Section 6. Allocation of Expenses. During the period of this Agreement, the
Fund shall pay or cause to be paid all expenses, costs, and fees incurred by the
Fund which are not assumed by the Underwriter or Funds Management Corporation, a
Colorado corporation and the Fund's investment adviser ("the Manager"). The
Underwriter shall pay all advertising and promotional expenses in connection
with the distribution of the Fund's shares including paying for prospectuses for
new shareholders, except as paid by the Fund under its Distribution Plan and
Agreement.

Section 7. Compensation to the Underwriter. It is understood and agreed by
the parties hereto that the Underwriter will receive compensation for services
it performs hereunder in accordance with Schedule A hereto.

Section 8. Limitation of the Underwriter's Authority. The Underwriter shall
be deemed to be an independent contractor and, except as specifically provided
or authorized herein, shall have no authority to act for or represent the Fund.

Section 9. Subscription for Shares-Refund for Cancelled Orders. The
Underwriter shall subscribe for the shares of the Fund only for the purpose of
covering purchase orders already received by it or for the purpose of investment
for its own account. In the event that an order for the purchase of shares of
the Fund is placed with the Underwriter by a customer or dealer and subsequently
cancelled, the Underwriter shall forthwith cancel the subscription for such
shares entered on the books of the Fund, and, if the Underwriter has paid the
Fund for such shares, shall be entitled to receive from the Fund in refund of
such payment the lesser of:

(a) the consideration received by the Fund for said shares; or

(b) the net asset value of such shares at the time of cancellation by
the Underwriter.

Section 10. Freedom to Deal with Third Parties. The Underwriter shall be
free to render to others services of a nature either similar to or different
from those rendered under this Agreement, except such as may impair its
performance of the services and duties to be rendered by it hereunder.

6-2

<PAGE>

Section 11. Indemnification.

(a) The Fund will indemnify and hold harmless the Underwriter and each
person, if any, who controls the Underwriter within the meaning of the Act,
against any losses, claims, damages or liabilities to which the Underwriter
or such controlling person may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the Fund's
Registration Statement or Prospectus or any other written sales material
prepared by the Fund which is utilized by the Underwriter in connection
with the sale of Shares of the Fund or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or (in the case of the Registration Statement and
Prospectus) necessary to make the statements therein not misleading or (in
the case of such other sales material) necessary to make the statements
therein not misleading in the light of the circumstances under which they
were made; and will reimburse the Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by the
Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Fund will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement or Prospectus in
conformity with written information furnished to the Fund by the
Underwriter specifically for use therein; and provided, further, that
nothing herein shall be so construed as to protect the Underwriter against
any liability to the Fund or the Fund's shareholders to which the
Underwriter would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence, in the performance of its duties, or by
reason of the reckless disregard by the Underwriter of its obligations and
duties under this Agreement. This indemnity agreement will be in addition
to any liability which the Fund may otherwise have.

(b) The Underwriter will indemnify and hold harmless the Fund, each of
its directors and officers and each person, if any, who controls the Fund
within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Fund or any such director, officer or controlling
person may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
Prospectus or any sales material not prepared by the Fund which is utilized
in connection with the sale of shares of the Fund or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or (in the case of the Registration
Statement and Prospectus) necessary to make the statements therein not
misleading or (in the case of such other sales material) necessary to make
the statements therein not misleading in the light of the circumstances
under which they were made, in the case of the Registration Statement and
Prospectus to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in conformity with written information furnished to the Fund by the
Underwriter specifically for use therein; and the Underwriter will
reimburse any legal or other expenses reasonably incurred by the Fund or
any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action. This indemnity agreement will be in addition to any liability which
the Underwriter may otherwise have.

6-3
<PAGE>

(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 10, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from liability which it may have to any indemnified party
otherwise than under this Section 10. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, to assume the
defense thereof, with counsel satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 10 for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.

Section 12. Rules of NASD, etc. The Underwriter will conform to the Rules
of Fair Practice of the National Association of Securities Dealers, Inc. and the
securities laws of any jurisdiction in which it sells, directly or indirectly,
any shares. The Underwriter also agrees to furnish to the Fund sufficient copies
of any agreements or plans it intends to use in connection with any sales of
shares in adequate time for the Fund to file and clear them with the proper
authorities before they are put into use, and not to use them until so filed and
cleared.

Section 13. Effective Date, Duration and Termination of Agreement. The
effective date of this Agreement shall be _____________. Whenever referred to in
this Agreement, the vote or approval of the holders of a majority of the
outstanding voting securities of the Fund shall mean (a) the vote of 67% or more
of such securities if the holders of more than 50% of such securities are
present in person or by proxy or (b) the vote of more than 50% of such
securities, whichever is the lesser.

Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect until ____________ and from year to year thereafter but only
so long as such continuance is specifically approved at least annually by the
Board of Directors of the Fund or by the vote of the holders of a majority of
the outstanding voting securities of the Fund; provided that in either event the
continuance also is approved by a majority of the Board of Directors who are not
"interested persons" of the Fund, the Underwriter or the Manager as defined by
the provisions of the Investment Company Act of 1940, as amended (the "1940
Act"), cast in person at a meeting called for the purpose of voting on such
approval.

This Agreement may be terminated at any time without the payment of any
penalty by the vote of the Board of Directors of the Fund or by the vote of the
holders of a majority of the outstanding voting securities of the Fund, or by
the Underwriter, upon 60 days' written notice to the other party.

6-4
<PAGE>

This Agreement shall automatically terminate in the event of its assignment
(as defined by the provisions of the 1940 Act).

Section 14. Amendments to Agreement. No material amendment to this
Agreement shall be effective until approved by the Underwriter and by vote of a
majority of the Board of Directors of the Fund who are not "interested persons"
of the Underwriter.

Section 15. Notices. Any notice under this Agreement shall be in writing,
addressed, delivered, or mailed, postage prepaid, to the other party at such
address as such other party may designate in writing for receipt of such notice.

Section 16. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Colorado.

IN WITNESS WHEREOF, the Fund and the Underwriter have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.

THE COLORADO DOUBLE TAX-EXEMPT BOND FUND, INC.

By
Calvin F. Isaak, President

ISAAK BOND INVESTMENTS, INC.

By
Calvin F. Isaak, President

6-5

<PAGE>

SCHEDULE A

6-6

EXHIBIT 9

FORM OF TRANSFER AGENCY AND SERVICE AGREEMENT

9-1

EXHIBIT 15(a)

12b-1 DISTRIBUTION PLAN
(SHORT-INTERMEDIATE PORTFOLIO)

Dated: _____________, 1996

The Colorado Double Tax-Exempt Bond Fund, Inc.

DISTRIBUTION PLAN
for
Short-Intermediate Term Portfolio

1. The Plan. This amended and restated Plan (the "Plan") is the written
plan, contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act
of 1940 (the "1940 Act") of The Colorado Double Tax-Exempt Bond Fund, Inc. (the
"Fund").

2. Certain Expense Payments Permitted. The adviser, the administrator or
the sub-adviser may make payments ("Permitted Payments") in connection with the
costs of printing and distributing all copies of the Fund's prospectuses,
statements of additional information and reports to shareholders which are not
sent to the Fund's shareholders. It is recognized that the Permitted Payments
result in the bearing by the adviser, administrator or sub-adviser of certain
distribution expenses. Since the profits, if any, of the adviser, administrator
or sub-adviser are dependent on the advisory or administration fees paid by the
Fund to the adviser, administrator or sub-adviser, its profits, if any, would be
less, or losses, if any, would be increased due to such Permitted Payments and
the bearing by it of such expenses. If and to the extent that any such advisory
or administration fees paid by the Fund might, in view of the foregoing, be
considered as indirectly financing any activity which is primarily intended to
result in the sale of Fund shares, the payment of such fees is authorized by
this Plan.

3. Certain Fund Payments Authorized. If and to the extent that any of the
payments listed below are considered to be "primarily intended to result in the
sale of" shares issued by the Fund within the meaning of the Rule, such payments
are authorized under this Plan: (i) the costs of the preparation of all reports
and notices to shareholders and the costs of printing and mailing such reports
and notices to existing shareholders, irrespective of whether such reports or
notices contain or are accompanied by material intended to result in the sale of
shares of the Fund or other funds or other investments; (ii) the costs of the
preparation and setting in type of all prospectuses and statements of additional
information, and the costs of printing and mailing of all prospectuses and
statements of additional information to existing shareholders; (iii) the costs
of the preparation, printing and mailing of all proxy statements and proxies,
irrespective of whether any such proxy statement includes any item relating to,
or directed toward, the sale of the Fund's shares; (iv) all legal and accounting
fees relating to the preparation of any such reports, prospectuses, statements
of additional information, proxies and proxy statements; (v) all fees and
expenses relating to the registration or qualification of the Fund and/or its
shares under the securities or "Blue Sky" laws of any jurisdiction; (vi) all
fees under the Securities Act of 1933 and the 1940 Act, including fees in
connection with any application for exemption relating to or directed toward the
sale of the Fund's shares; (vii) all fees and assessments of the Investment
Company Institute or any successor organization, irrespective of whether some of
its activities are designed to provide sales assistance; (viii) all costs of the
preparation and mailing of confirmations of shares sold or redeemed or share
certificates, and reports of share balances; and (ix) all costs of responding to
telephone or mail inquiries of investors.

15(a)-1
<PAGE>

4. Disinterested Directors. While this Plan is in effect, the selection and
nomination of those Directors of the Fund who are not "interested persons" of
the Fund shall be committed to the discretion of such disinterested Directors.
Nothing herein shall prevent the involvement of others in such selection and
nomination if the final decision on any such selection and nomination is
approved by a majority of such disinterested Directors.

5. Reports. While this Plan is in effect, the Fund's sub-adviser or
administrator shall report at least quarterly to the Fund's Directors in writing
for their review on the following matters: (i) all costs of each item specified
in Sections 2 and 3 of this Plan (making estimates of such costs where necessary
or desirable) during the preceding calendar or fiscal quarter; and (ii) all fees
of the Fund to the sub-adviser or administrator paid or accrued during such
quarter.

6. Effectiveness, Continuation, Termination and Amendment. This Plan
originally went into effect when it was approved (i) by a vote of the Directors
of the Fund and of those Directors (the "Independent Directors") who, at the
time of such vote, were not "interested persons" as defined in the 1940 Act of
the Fund and had no direct or indirect financial interest in the operation of
this Plan or in any agreements related to this Plan, with votes cast in person
at a meeting called for the purpose of voting on this Plan; and (ii) by a vote
of holders of at least a "majority" (as so defined) of the outstanding voting
securities of the Fund. This plan has continued, and will, unless terminated as
hereinafter provided, continue in effect, until the ____________ next succeeding
such effectiveness, and from year to year thereafter only so long as such
continuance is specifically approved at least annually by the Fund's Directors
and its Independent Directors with votes cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may be terminated at any
time by the vote of a majority of the Independent Directors or by the vote of
the holders of a "majority" (as defined in the 1940 Act) of the outstanding
voting securities of the Fund. This Plan may not be amended to increase
materially the amount of payments to be made without shareholder approval as set
forth in (ii) above, and all amendments must be approved in the manner set forth
in (i) above.

15(a)-2
<PAGE>

EXHIBIT 15(b)

12b-1 DISTRIBUTION PLAN
(INCOME PORTFOLIO)

Dated: _____________, 1996

The Colorado Double Tax-Exempt Bond Fund, Inc.

DISTRIBUTION PLAN
for
Income Portfolio

15(b)-1
<PAGE>

15(b)-2