IMPORTANT NOTICE
PLEASE READ IMMEDIATELY

                             AQUILA
                    TAX-FREE FUND OF COLORADO
      380 Madison Avenue, Suite 2300, New York, N.Y. 10017

                   NOTICE OF ANNUAL MEETING OF
                     SHAREHOLDERS TO BE HELD
                        on June 12, 1997

TO SHAREHOLDERS OF THE FUND:

     The purpose of this Notice is to advise you that an Annual
Meeting of the Shareholders of Aquila Tax-Free Fund of Colorado
(the "Fund") will be held

     Place:    (a)  at Denver Marriott Tech Center
                    4900 S. Syracuse Street
                    Denver, Colorado 80237

     Time:     (b)  on June 12, 1997 at 2:00 p.m. local time;

     Purposes: (c)  for the following purposes:

                    (i)  to elect seven Trustees; each Trustee
                    elected will hold office until the next annual
                    meeting of the Fund's shareholders or until
                    his or her successor is duly elected;

                    (ii) to ratify (that is, to approve) or reject
                    the selection of KPMG Peat Marwick LLP as the
                    Fund's independent auditors for the fiscal
                    year ending December 31, 1997 (Proposal No.
                    1); and




Please Note:
If you do not expect to attend the Meeting, you are requested to
indicate voting instructions on the enclosed proxy and to date,
sign and return it in the accompanying stamped envelope. To avoid
unnecessary expense to the Fund, your cooperation is requested in
mailing in your proxy no matter how large or small your holding may
be.





                    (iii)     to act upon any other matters which
                    may properly come before the Meeting at the
                    scheduled time and place or any adjourned
                    meeting or meetings.

     Who Can
     Vote What
     Shares:   (d)  To vote at the Meeting, you must have been a
                    shareholder on the Fund's records at the close
                    of business on March 24, 1997 (the "record
                    date"). Also, the number of shares held by you
                    according to such records at the close of
                    business on the record date determines the
                    number of shares you may vote at the Meeting
                    (or any adjourned meeting or meetings).

                              By Order of the Board of Trustees


                              EDWARD M. W. HINES
                              Secretary
     April 25, 1997









                              (ii)





                             AQUILA
                    TAX-FREE FUND OF COLORADO
    380 Madison Avenue, Suite 2300, New York, New York 10017

                         PROXY STATEMENT

                          INTRODUCTION

     The purpose of the Notice (the first two pages of this
document) is to advise you of the time, place and purposes of an
Annual Meeting of the Shareholders of Aquila Tax-Free Fund of
Colorado (the "Fund"). The purpose of this Proxy Statement (all the
rest of this document) is to give you information on which you may
base your decisions as to the choices, if any, you make on the
enclosed proxy card.

     This Notice and Proxy Statement are first being mailed on or
about April 25, 1997.

     A copy of the Fund's most recent annual report and most recent
semi-annual report will be sent to you without charge upon written
request to the Fund's Distributor, Aquila Distributors, Inc., 380
Madison Avenue, Suite 2300, New York, NY 10017 or by calling
800-872-2652 toll-free or 212-697-6666.

     The Fund's organizer and administrator (the "Administrator")
is Aquila Management Corporation, 380 Madison Avenue, Suite 2300,
New York, NY 10017. The Fund's investment adviser is KPM Investment
Management, Inc. (the "Adviser"), 1700 Lincoln Street, Denver
Colorado 80203. The Adviser is a wholly owned subsidiary of KFS
Corporation which is wholly-owned by Mutual of Omaha Insurance
Company, whose principal office is at Mutual of Omaha Plaza, Omaha,
NE 68175. 

     The enclosed proxy card authorizes the persons named (or their
substitutes) to vote your shares; the Fund calls these persons the
"proxy holders." As to the election of Trustees you may authorize
the proxy holders to vote your shares for the entire slate
indicated below by marking the appropriate box on the proxy card or
by merely signing and returning your proxy card with no
instructions. Or, you may withhold the authority of the proxy
holders to vote on the election of Trustees by marking the
appropriate box. Also, you may withhold that authority as to any
particular nominee, by striking a line through the nominee's name
on the proxy card.

     As to the other matter listed on the proxy card, you may
direct the proxy holders to vote your shares on that proposal by
checking the appropriate box "For" or "Against" or instruct them
not to vote your shares on that proposal by checking the "Abstain"
box. If you return your signed proxy card and do not check any box
on the proposal, the proxy holders will vote your shares for the
proposal.

     You may end the power of the proxy holders to vote your shares
after you have signed and returned your proxy card and before the
power is used by (i) so notifying the Fund in writing; (ii) signing
a new and different proxy card (if the Fund receives it before the
old one is used); or (iii) voting your shares in person or by your
duly appointed agent at the meeting. Shares held by brokers in
"street name" and not voted or marked as abstentions will not be
counted for purposes of determining a quorum.

     The Fund is sending you this Notice and Proxy Statement in
connection with the solicitation by its Trustees of proxy cards
("proxies") to be used at the Annual Meeting to be held at the time
and place and for the purposes indicated in the Notice or any
adjourned meeting or meetings. The Fund pays the costs of the
solicitation. Proxies are being solicited by the use of the mails;
they may also be solicited by telephone, facsimile and personal
interviews. Brokerage firms, banks and others may be requested to
forward this Notice and Proxy Statement to beneficial owners of the
Fund's shares so that these owners may authorize the voting of
these shares. The Fund will pay these firms for their out-of-pocket
expenses for doing so.

     The Fund has three classes of shares outstanding. All
shareholders of the Fund are entitled to vote at the meeting. Each
shareholder on the record date is entitled to one (1) vote for each
dollar (and a proportionate fractional vote for each fraction of a
dollar) of net asset value (determined as of the record date)
represented by full and fractional shares of any class held on the
record date. On the record date, the net asset value per share of
the Fund's Class A Shares was $10.35, of its Class C Shares was
$10.34 and of its Class Y Shares was $10.36. The meeting will act
upon matters that affect the Fund as a whole: the election of
Trustees and the action on the selection of auditors (Proposal No.
1). On matters that affect the Fund as a whole, all shareholders of
the Fund, including the shareholders of all three classes of the
Fund are entitled to vote at the meeting. 

     On the record date, the total number of shares outstanding for
the Fund was 20,814,050. Of the shares of the Fund outstanding on
the record date, Merrill Lynch, Pierce, Fenner & Smith, Inc., P.O.
Box 30561, New Brunswick, NJ held of record 1,118,882 Class A
Shares (5.4% of the class); Everan Clearing, 111 East Kilbourne
Ave., Milwaukee, WI held 65,496 Class C Shares (72.0% of the
class); Paine Webber f/b/o Carol W. Litchfield held 17,459 Class C
Shares (19.2% of the class) and Haws & Co. c/o Guaranty Bank &
Trust, Denver, CO held 52,454 Class Y Shares (99.9% of the class).
The Fund's management is not aware of any other person beneficially
owning more than 5% of its outstanding shares as of such date. On
the basis of information received from the holder, the Fund's
management believes that all of the shares indicated are held for
the benefit of clients. 

                      ELECTION OF TRUSTEES

     At the Meeting, seven Trustees are to be elected. Whenever it
is stated in this Proxy Statement that a matter is to be acted on
at the Meeting, this means the Meeting held at the scheduled time
or any adjourned meeting or meetings.

     Each Trustee elected will serve until the next annual meeting
or until his or her successor is duly elected. The nominees
selected by the Trustees are named below. See "Introduction" above
for information as to how you can instruct the proxy holders as to
the voting of your shares as to the election of Trustees.

     Each of the nominees is presently a Trustee and was previously
elected by the shareholders at the annual meeting of the Fund held
on June 19, 1996. Except for Mr. Weeks, who has been a Trustee
since 1995, and Dr. Adams, who has been a Trustee since 1989, every
other Trustee has been a Trustee since the beginning of the Fund's
operations in 1987. The Trustees and officers as a group owned on
the record date less than 1% of the outstanding shares of the Fund.
In the table below and elsewhere in this Proxy Statement, Aquila
Management Corporation is referred to as the "Administrator" and
the Fund's Distributor, Aquila Distributors, Inc., is referred to
as the "Distributor." Mr. Herrmann is an "interested person" of the
Fund, as that term is defined in the Investment Company Act of 1940
(the "1940 Act") as an officer of the Fund and a Director, officer
and shareholder of the Distributor. He is so designated by an
asterisk.

     Described in the following material are the name, positions
with the Fund, age as of March 24, 1997 and business experience
during at least the past five years (other than with the Fund) of
each nominee and all officers of the Fund.

Lacy B. Herrmann*, President and Chairman of the Board of Trustees,
Age: 67, Shares owned: 330 (1)

Founder, President and Chairman of the Board of Aquila Management
Corporation since 1984, the sponsoring organization and
Administrator and/or Adviser or Sub-Adviser to the following open-
end investment companies, and Founder, Chairman of the Board of
Trustees, and President of each: Hawaiian Tax-Free Trust since
1984; Tax-Free Trust of Arizona since 1986; Tax-Free Trust of
Oregon since 1986; Churchill Tax-Free Fund of Kentucky since 1987;
Tax-Free Fund For Utah since 1992; and Narragansett Insured Tax-
Free Income Fund since 1992; each of which is a tax-free municipal
bond fund, and two equity funds, Aquila Rocky Mountain Equity Fund
since 1993 and Aquila Cascadia Equity Fund since 1996, which,
together with this Fund are called the Aquila Bond and Equity
Funds; and Pacific Capital Cash Assets Trust since 1984; Churchill
Cash Reserves Trust since 1985; Pacific Capital U.S. Treasuries
Cash Assets Trust since 1988; Pacific Capital Tax-Free Cash Assets
Trust since 1988; each of which is a money market fund, and
together with Capital Cash Management Trust ("CCMT") are called the
Aquila Money-Market Funds; Vice President, Director, Secretary and
formerly Treasurer of Aquila Distributors, Inc. since 1981,
distributor of the above funds; President and Chairman of the Board
of Trustees of CCMT, a money market fund since 1981, and an Officer
and Trustee/Director of its predecessors since 1974; Chairman of
the Board of Trustees and President of Prime Cash Fund (which is
inactive), since 1982 and of Short Term Asset Reserves 1984-1996;
President and a Director of STCM Management Company, Inc., sponsor
and sub-adviser to CCMT; Chairman, President, and a Director since
1984, of InCap Management Corporation, formerly sub-adviser and
administrator of Prime Cash Fund and Short Term Asset Reserves, and
Founder and Chairman of several other money market funds; Director
or Trustee of OCC Cash Reserves, Inc., Oppenheimer Quest Global
Value Fund, Inc., Oppenheimer Quest Value Fund, Inc., and Trustee
of Quest For Value Accumulation Trust, The Saratoga Advantage
Trust, and of the Rochester Group of Funds, each of which is an
open-end investment company; Trustee of Brown University, 1990-1996
and currently Trustee Emeritus; actively involved for many years in
leadership roles with university, school and charitable
organizations.

(1) Includes 149 shares owned by the Administrator.

Tucker Hart Adams, Trustee, Age: 59, Shares owned: 336

President of the Adams Group, an economic consulting firm, since
1989; Trustee of Aquila Rocky Mountain Equity Fund since 1993; Vice
President of United Banks of Colorado, 1985-1988; Chief Economist
of United Banks of Colorado, 1981-1988; Director of University
Hospital, 1990-1994; Director of the Colorado Health Facilities
Authority; Vice Chair of the University of Colorado Foundation;
currently or formerly an officer or director of numerous
professional and community organizations.

Arthur K. Carlson, Trustee, Age: 75, Shares owned: 443

Retired; Advisory Director of the Renaissance Companies (design and
construction companies of commercial, industrial and upscale
residential properties) since 1996; Senior Vice President and
Manager of the Trust Division of The Valley National Bank of
Arizona, 1977-1987; Trustee of Hawaiian Tax-Free Trust, Tax-Free
Trust of Arizona and Pacific Capital Cash Assets Trust since 1987,
of Pacific Capital Tax-Free Cash Assets Trust and Pacific Capital
U.S. Treasuries Cash Assets Trust since 1988 and of Aquila Rocky
Mountain Equity Fund since 1993; previously Vice President of
Investment Research at Citibank, New York City, and prior to that
Vice President and Director of Investment Research of Irving Trust
Company, New York City; past President of The New York Society of
Security Analysts and currently a member of the Phoenix Society of
Financial Analysts; formerly Director of the Financial Analysts
Federation; past Chairman of the Board and, currently, Director of
Mercy Healthcare of Arizona, Phoenix, Arizona since 1990; Director
of Northern Arizona University Foundation since 1990; present or
formerly an officer and/or director of various other community and
professional organizations.

William M. Cole, Trustee, Age: 65, Shares owned: 1,916

President of Cole International, Inc., financial and shipping
consultants, since 1974; President of Cole Associates, shopping
center and real estate developers, 1974-1976; President of Seatrain
Lines, Inc., 1970-1974; former General Partner of Jones & Thompson,
international shipping brokers; Trustee of Pacific Capital Cash
Assets Trust since 1984, of Hawaiian Tax-Free Trust since 1985 and
of Pacific Capital Tax-Free Cash Assets Trust and Pacific Capital
U.S. Treasuries Cash Assets Trust since 1988; Chairman of Cole
Group, a financial consulting and real estate firm, since 1985.

Anne J. Mills, Trustee, Age: 58, Shares owned: 7,351

Vice President for Business Affairs of Ottawa University since
1992; Director of Customer Fulfillment, U.S. Marketing and Services
Group, IBM Corporation, 1990-1991; Director of Business
Requirements of that Group, 1988-1990; Director of Phase Management
of that Group, 1985-1988; Budget Review Officer of the American
Baptist Churches/USA since 1994; Director of the American Baptist
Foundation since 1985; Trustee of Brown University; Trustee of
Churchill Cash Reserves Trust since 1985, of Tax-Free Trust of
Arizona since 1986, of Churchill Tax-Free Fund of Kentucky and
Capital Cash Management Trust since 1987 and of Tax-Free Fund For
Utah since 1994. 

J. William Weeks, Trustee, Age: 69, Shares owned: 514

Trustee of Narragansett Insured Tax-Free Income Fund since 1995;
Senior Vice President of Tax-Free Fund of Colorado and Narragansett
Insured Tax-Free Income Fund, 1992-1995; Vice President of Hawaiian
Tax-Free Trust, Tax-Free Trust of Arizona, Tax-Free Trust of Oregon
and Churchill Tax-Free Fund of Kentucky, 1990-1995; Senior Vice
President or Vice President of the Bond and Equity Funds and Vice
President of Short Term Asset Reserves and Pacific Capital Cash
Assets Trust, 1984-1988; President and Director of Weeks & Co.,
Inc., financial consultants, since 1978; limited partner and
investor in various real estate partnerships since 1988; Partner of
Alex. Brown & Sons, investment bankers, 1966-1976; Vice President
of Finance and Assistant to the President of Howard Johnson
Company, a restaurant and motor lodge chain, 1961-1966; formerly
with Blyth & Co., Inc., investment bankers.

John G. Welles, Trustee, Age: 71, Shares owned: 4,691

Retired; Executive Director Emeritus of the Denver Museum of
Natural History since 1995; Director of the Museum, 1987-1994;
Regional Administrator of Region VIII, U.S. Environmental
Protection Agency, 1983-1987; Vice President for Planning and
Public Affairs of the Colorado School of Mines, 1974-1983; Member
of the Board of Directors of Intra West Mortgage Corporation, 1976-
1983; Member of the Board of Directors of the Gulf of Maine
Foundation; formerly head of the Industrial Economics Division of
the University of Denver Research Institute, consultant to the
United Nations Conference on the Human Environment and to Business
International, and Chairman of the Colorado Front Range Project;
formerly Vice President and member of Ethics Commission of the
American Association of Museums.

William C. Wallace, Vice President, Age: 62

Vice President of Capital Cash Management Trust and Pacific Capital
Cash Assets Trust since 1984; Senior Vice President of Hawaiian
Tax-Free Trust since 1985 and Vice President, 1984-1985; Senior
Vice President of Tax-Free Trust of Arizona since 1989 and Vice
President, 1986-1988; Vice President of Tax-Free Trust of Oregon
since 1986, of Churchill Tax-Free Fund of Kentucky since 1987, of
Pacific Capital Tax-Free Cash Assets Trust and Pacific Capital U.S.
Treasuries Cash Assets Trust since 1988 and of Narragansett Insured
Tax-Free Income Fund since 1992; Secretary and Director of STCM
Management Company, Inc. since 1974; President of the Distributor
since 1995 and formerly Vice President of the Distributor, 1986-
1992; Member of the Panel of Arbitrators, American Arbitration
Association, since 1978; Assistant Vice President, American Stock
Exchange, Market Development Division, and Director of Marketing,
American Gold Coin Exchange, a subsidiary of the American Stock
Exchange, 1976-1984.

Jean M. Smith, Vice President, Age: 52

Assistant Treasurer of Bradford Trust Company, 1977-1978; Staff
Supervisor of Wood Struthers & Winthrop, an investment advisory
firm, 1976-1977; Client Administrator of Bradford Trust Company,
1972-1976.

Marie E. Aro, Vice President, Age: 42

Vice President and Mutual Fund marketing Director of Boettcher &
Company, Inc., a regional brokerage firm, 1981-1990; Marketing and
Shareholder Services Representative with AIM Management Inc., a
mutual funds adviser and underwriter, 1980-1981.

Rose F. Marotta, Chief Financial Officer, Age: 72

Chief Financial Officer of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1991 and Treasurer, 1981-1991;
formerly Treasurer of the predecessor of CCMT; Treasurer and
Director of STCM Management Company, Inc., since 1974; Treasurer of
Trinity Liquid Assets Trust, 1982-1986 and of Oxford Cash
Management Fund, 1982-1988; Treasurer of InCap Management
Corporation since 1982, of the Administrator since 1984 and of the
Distributor since 1985.

Richard F. West, Treasurer, Age: 61

Treasurer of the Aquila Money-Market Funds and the Aquila Bond and
Equity Funds and of Aquila Distributors, Inc. since 1992; Associate
Director of Furman Selz Incorporated, 1991-1992; Vice President of
Scudder, Stevens & Clark, Inc. and Treasurer of Scudder
Institutional Funds, 1989-1991; Vice President of Lazard Freres
Institutional Funds Group, Treasurer of Lazard Freres Group of
Investment Companies and HT Insight Funds, Inc., 1986-1988; Vice
President of Lehman Management Co., Inc. and Assistant Treasurer of
Lehman Money Market Funds, 1981-1985; Controller of Seligman Group
of Investment Companies, 1960-1980.

Edward M. W. Hines, Secretary, Age: 57

Partner of Hollyer Brady Smith Troxell Barrett Rockett Hines & Mone
LLP, attorneys, since 1989 and counsel, 1987-1989; Secretary of the
Aquila Money-Market Funds and the Aquila Bond and Equity Funds
since 1982; Secretary of Trinity Liquid Assets Trust, 1982-1985 and
Trustee of that Trust, 1985-1986; Secretary of Oxford Cash
Management Fund, 1982-1988.

John M. Herndon, Assistant Secretary, Age: 57

Assistant Secretary of the Aquila Money-Market Funds and the Aquila
Bond and Equity Funds since 1995 and Vice President of the Aquila
Money-Market Funds since 1990; Vice President of the Administrator
since 1990; Investment Services Consultant and Bank Services
Executive of Wright Investors' Service, a registered investment
adviser, 1983-1989; Member of the American Finance Association, the
Western Finance Association and the Society of Quantitative
Analysts.

Patricia A. Craven, Assistant Secretary & Compliance Officer, Age:
30

Assistant Secretary of the Aquila Money-Market Funds and the Aquila
Bond and Equity Funds since 1995; Counsel to the Administrator and
the Distributor since 1995; formerly a Legal Associate for
Oppenheimer Management Corporation, 1993-1995.

Compensation of Trustees

     For its fiscal year ended December 31, 1996, the Fund paid a
total of $59,804 in compensation and reimbursement of expenses to
those Trustees to whom it pays fees. No other compensation or
remuneration of any type, direct or contingent, was paid by the
Fund to its Trustees. The Fund does not pay fees to Trustees
affiliated with the Administrator or to any of its officers.

     The Fund is one of the 14 funds in the Aquilasm Group of
Funds, which consists of tax-free municipal bond funds, money
market funds and two equity funds. The following table lists the
compensation of all Trustees who received compensation from the
Fund and the compensation they received during the Fund's fiscal
year from other funds in the Aquilasm Group of Funds. None of such
Trustees has any pension or retirement benefits from the Fund or
any of the other funds in the Aquila group.

                                   Compensation        Number of 
                                   from all            boards on 
               Compensation        funds in the        which the 
               from the            Aquilasm            Trustee 
Name           Fund                Group               now serves

Tucker H. 
Adams          $7,480              $10,042             2

Arthur K.
Carlson        $5,471              $50,827             7

William M.
Cole           $6,430              $41,144             5

Anne J. 
Mills          $5,525              $28,184             6

J. William
Weeks          $7,257              $10,257             2

John G.  
Welles         $7,461              $7,461              1


     The Fund's Administrator is administrator to the Aquilasm
Group of Funds, which consist of tax-free municipal bond funds and
money market funds. As of December 31, 1996, these funds had
aggregate assets of approximately $2.7 billion, of which
approximately $1.9 billion consisted of assets of the tax-free bond
funds. The Administrator, which was founded in 1984, is controlled
by Mr. Lacy B. Herrmann (directly, through a trust and through
share ownership by his wife). For the year ended December 31, 1996,
advisory fees of $429,691 were paid or accrued to the Adviser, of
which $7,388 was voluntarily waived. During the year ended December
31, 1996, administration fees of $644,125 were paid or accrued to
the Administrator under the Administration Agreement of which
$99,853 was voluntarily waived.

     The Distributor currently handles the distribution of the
shares of fourteen funds (five money market funds, seven tax-free
municipal bond funds and two equity funds) including the Fund.
Under the Distribution Agreement, the Distributor is responsible
for the payment of certain printing and distribution costs relating
to prospectuses and reports as well as the costs of supplemental
sales literature, advertising and other promotional activities. All
of the shares of the Distributor are owned by Mr. Herrmann. During
the fiscal year, the Distributor retained $83,492 in commissions on
sales of the Fund's Class A Shares. Under the Fund's Distribution
Plan the Distributor received $2,606 with respect to the Fund's
Class A Shares and $1,662 with respect to the Fund's Class C
Shares. In addition, it received $554 under the Fund's Shareholder
Services Plan.

Other Information on Trustees

     The Trustees have appointed an Audit Committee consisting of
all of the Trustees (the "Independent Trustees") who are not
"interested persons" of the Fund, as that term is defined in the
1940 Act.  The Committee (i) recommends to the Board of Trustees
what firm of independent auditors will be selected by the Board of
Trustees (subject to shareholder ratification); (ii) reviews the
methods, scope and result of audits and the fees charged; and (iii)
reviews the adequacy of the Fund's internal accounting procedures
and controls. The Committee held one meeting during the Fund's last
fiscal year. The Board of Trustees does not have a nominating
committee. During the Fund's last fiscal year, the Board of
Trustees held four meetings. Each Trustee attended at least 75% of
the total number of Board meetings and the Audit Committee meetings
(if such Trustee was a member of that Committee).

                  RATIFICATION OR REJECTION OF
                SELECTION OF INDEPENDENT AUDITORS
                        (Proposal No. 1)

     KPMG Peat Marwick LLP has been selected by the Fund's Board of
Trustees, including a majority of the Independent Trustees, as the
Fund's independent auditors for the fiscal year ending December 31,
1997; such selection is submitted to the shareholders for
ratification or rejection.

     The firm has no direct or indirect financial interest in the
Fund, the Fund's Adviser or the Fund's Administrator. It is
expected that representatives of the firm will not be present at
the meeting but will be available should any matter arise requiring
their presence.

                           RECEIPT OF
                      SHAREHOLDER PROPOSALS

     Under the proxy rules of the Securities and Exchange
Commission, shareholder proposals meeting tests contained in those
rules may, under certain conditions, be included in the Fund's
proxy statement and proxy card for a particular annual meeting. No
shareholder proposals have been received. One of the conditions
under the proxy rules relates to the timely receipt by the Fund of
any such proposal. Under these rules, proposals submitted for
inclusion in the proxy material for the Fund's next annual meeting
after the meeting to which this Proxy Statement relates must be
received by the Fund not less than 120 days before the anniversary
of the date stated on the first page of this Proxy Statement
relating to the first mailing of this Proxy Statement. The date for
such submission could change, depending on the scheduled date for
the next annual meeting; if so, the Fund will so advise you.

     The fact that the Fund receives a shareholder proposal in a
timely manner does not insure its inclusion in the Fund's proxy
material, since there are other requirements in the proxy rules
relating to such inclusion.

                         OTHER BUSINESS

     The Fund does not know of any other matter which will come up
for action at the Meeting. If any other matter or matters properly
come up for action at the Meeting, including any adjournment of the
Meeting, the proxy holders will vote the shares which the proxy
cards entitle them to vote in accordance with their judgment on
such matter or matters. That is, by signing and returning your
proxy card, you give the proxy holders discretionary authority as
to any such matter or matters.





IMPORTANT NOTICE
PLEASE READ
IMMEDIATELY

AQUILA
TAX-FREE
FUND OF COLORADO

[LOGO]

NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD ON JUNE 12, 1997

PROXY STATEMENT





                             AQUILA
                    TAX-FREE FUND OF COLORADO

          PROXY FOR SHAREHOLDERS MEETING JUNE 12, 1997 

            PROXY SOLICITED ON BEHALF OF THE TRUSTEES

     The undersigned shareholder of AQUILA TAX-FREE FUND OF
COLORADO (the "Fund") does hereby appoint LACY B. HERRMANN and
EDWARD M. W. HINES, or either of them, as attorneys and proxies of
the undersigned, with full power of substitution, to attend the
Annual Meeting of Shareholders of the Fund to be held at Denver
Marriott Tech Center, 4900 S. Syracuse Street, Denver, Colorado
80237, on June 12, 1996 at 2:00 local time and at all adjournments
thereof, and thereat to vote the shares held in the name of the
undersigned on the record date for said meeting on the matters
listed below.

     Please mark your proxy, date and sign it below and return it
promptly in the accompanying envelope which requires no postage if
mailed in the United States.

     Management recommends a vote FOR all nominees listed below and
FOR the proposals listed below.  The shares represented hereby will
be voted as indicated below or FOR if no choice is indicated.

     As to any other matter said attorneys shall vote in accordance
with their best judgment.

     Please indicate your vote by an "X" in the appropriate box
below

          Election of Trustees---.
                __ 
               [__]       FOR all nominees listed below
                __ 
               [__]       VOTE WITHHELD for all nominees listed 
                               below    
     
(Instructions:  To withhold authority to vote for any one or more
of the nominees, strike a line through the name of that nominee 
or the names of such nominees in the list below.)

     LACY B. HERRMANN; TUCKER HART ADAMS; ARTHUR K. CARLSON;
WILLIAM M. COLE; ANNE J. MILLS; J. WILLIAM WEEKS; JOHN G. WELLES



        Ratification of selection of KPMG Peat
        Marwick LLP as independent auditors              

                               __           __            __      
(Proposal No. 1)          FOR [__] AGAINST [__]  ABSTAIN [__]



                 Dated:  ____________  ______, 1997
                            Month        Day




__________________________________
                    SIGNATURE(S)


                                   
__________________________________
                    SIGNATURE(S)

PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON.  When signing as
a custodian, attorney, executor, administrator, trustee, guardian,
etc., please sign your full title as such.  Joint owners should
each sign.