TAX FREE FUND OF COLORADO
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          32
          Error! Main Document Only.

IMPORTANT NOTICE
PLEASE READ IMMEDIATELY

Aquilasm Group of Funds

                   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 22, 2000


TO SHAREHOLDERS OF THE FUND:

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

Place:    (a)  at the Lawrence C. Phipps Memorial
               Conference Center
               University of Denver
                    3400 Belcaro Drive
                    Denver, Colorado 80209

Time:          (b)  on June 22, 2000
               at 10:30 a.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(Proposal No.
               1);

                         (ii) to ratify (that is, to approve) or
               reject the selection of KPMG LLP as the Fund's
               independent auditors for the fiscal year ending
               December 31, 2000 (Proposal No. 2);

                         (iii) to act upon a proposal to change
               the fundamental policies of the Fund to allow the
               use of additional nationally recognized
               statistical rating organizations for rating
               obligations the Fund may purchase (Proposal No.
               3);

                         (iv) (Holders of Class A Shares and
               Class C Shares only): to act upon a proposal to
               change the Fund's Distribution Plan to provide for
               a rate of fees paid (in effect an increase) with
               respect to the Fund's Class A Shares regardless of
               Fund asset size (Proposal No. 4);

               (v) to act upon a proposed new investment advisory
               and administration agreement which will provide
               for level payment rates (no reduction) in
               management fees regardless of Fund asset size
               (Proposal No. 5);

               (vi) to act upon a proposed new sub-advisory
               agreement which will provide for level payment
               rates (no reduction) in sub-advisory fees
               regardless of Fund asset size (Proposal No. 6);
               and

                         (vii) 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 April 7, 2000 (the "record date").
               Also, the number of shares of each of the Fund's
               outstanding classes of shares that you held at
               that time and the respective net asset values of
               each class of shares at that time determine the
               number of votes you may cast at the Meeting (or
               any adjourned meeting or meetings).


                         By Order of the Board of Trustees,

                         EDWARD M. W. HINES
                         Secretary





May 5, 2000

PLEASE NOTE:

If you do not expect to attend the Meeting, please indicate
voting instructions in any of three ways: by telephone, by e-mail
or by completing the enclosed proxy card and returning it in the
accompanying stamped envelope. To avoid unnecessary expense to
the Fund, we request your cooperation in voting no matter how
large or small your holding may be.

<PAGE>


                    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 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 in
voting.

     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 800-872-5859 toll-free or 212-697-6666.

     The Fund's founder and Manager (the "Manager") is Aquila
Management Corporation, 380 Madison Avenue, Suite 2300, New York,
NY 10017. The Fund's principal underwriter (the "Distributor") is
Aquila Distributors, Inc., 380 Madison Avenue, Suite 2300, New
York, NY 10017. The Fund's Investment Sub-Adviser (the "Sub-
Adviser") is KPM Investment Management, Inc., 1700 Lincoln
Street, Denver, Colorado 80203.

     This Notice and Proxy Statement are first being mailed on or
about May 5, 2000.

     You should read the Proxy Statement prior to voting. Then,
you may vote in one of three ways:

     Proxy Card

     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 following the instructions on the proxy
card.

     As to the other matters listed on the proxy card, you may
direct the proxy holders to vote your shares on these proposals
by marking the appropriate box "For" or "Against" or instruct
them not to vote your shares on the proposal by marking the
"Abstain" box. If you return your signed proxy card and do not
mark the box on a proposal, the proxy holders will vote your
shares for that proposal.

     Telephone Voting

     To vote your shares by telephone, call toll free 1-800-690-
6903. You will be prompted to enter the 12-digit control number
on the enclosed proxy card. Follow the recorded instructions
using your proxy card as a guide. If you vote by phone, you need
not return the proxy card by mail.

     Internet Voting

      To vote your shares by the Internet, please contact the
Fund at http://proxyvote.com. You will be prompted to enter the
12-digit control number on the enclosed proxy card. Follow the
instructions on the screen, using your proxy card as a guide. If
you vote by the Internet, you need not return the proxy card by
mail.

     General Information

     You may end the power of the proxy holders to vote your
shares 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); (iii) voting your shares at the meeting in
person or by your duly appointed agent; or (iv) calling the toll
free number above or contacting the Fund's Internet address
above, entering your 12-digit control number and revoking your
previous vote.

     Shares held by brokers in "street name" and not voted or
marked as abstentions will not be counted for purposes of
determining a quorum or voted on any matter. This policy may make
it more difficult to obtain the votes required to approve
Proposals Nos. 3, 4, 5 and 6.

     The Fund is sending you this Notice and Proxy Statement in
connection with the solicitation by its Trustees of 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. 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.

     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
their shares. The Fund will pay these firms their out-of-pocket
expenses for doing so.

     On the record date, the Fund had 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 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 each of the Fund's outstanding classes of
shares was as follows: Class A Shares, $10.03; Class C Shares,
$10.02; and Class Y Shares, $10.05. The meeting is expected to
act upon matters that affect the Fund as a whole: the election of
Trustees and the action on proposals No. 2, 3 5 and 6. On matters
that affect the Fund as a whole, all shareholders of the Fund,
including the shareholders of all classes of the Fund, are
entitled to vote at the meeting. Proposal No. 4 affects
distribution payments only with respect to the Fund's Class A
Shares. This change will affect the holders of Class A Shares and
the holders of Class C shares, which are converted to Class A
Shares six years after purchase. The holders of Class A Shares
and the holders of Class C Shares are entitled to vote separately
by class on Proposal No 4. Proposal No. 4 does not affect the
holders of the Fund's Class Y Shares and they will not vote on
that proposal. No Class I Shares were outstanding on the record
date.
                         Voting Summary

All Shareholders voting together

  1.   Election of Trustees
2.   Selection of Auditors
3.   Change in Fundamental Policy
  5.   Change in Investment Advisory and Administration Agreement
6.   Change in Sub-Advisory Agreement

Holders of Class A Shares and Class C Shares only,
Voting Separately by Class

  4. Change in Distribution Plan


     On the record date, the total number of shares outstanding
for each class of shares was as follows: Class A Shares,
18,337,242; Class C Shares, 218,144; and Class Y Shares, 488,925.

     On the record date, the following institutional holders held
5% or more of the Fund's outstanding shares. On the basis of
information received from the holders the Fund's management
believes that all of the shares indicated are held for the
benefit of clients

Name and address    Number of shares         Percent of class
of the holder of
record

Merrill Lynch Pierce
Fenner & Smith,
Jacksonville, FL         1,093,566 Class A        6.0%
                                   Shares

                         18,448    Class C        8.5%
                                   Shares
Paine Webber,
3312 Shore Rd, Fort
Collins, CO              17,220    Class C        7.9%
                                   Shares
First Union
Securities
111 East Kilbourn Ave,
Milwaukee, WI            162,409   Class C        74.4%
                                   Shares
                              (in four accounts)
Haws & Co (a nominee)
c/o Guaranty Bank & Trust,
Denver CO                93,235    Class Y        19%
                                   Shares

Alpine Trust
& Asset Management,
225 N. 5th Street,
Grand Junction, CO       206,090   Class Y        42%
                                   Shares
Linway & Co.,
1740 Broadway,
Denver, CO,              114,407   Class Y        23.4%
                                   Shares

     The Fund's management is not aware of any other person
beneficially owning more than 5% of any class of its outstanding
shares as of such date.

                      ELECTION OF TRUSTEES
                        (Proposal No. 1)

     At the Meeting, seven Trustees are to be elected. 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 in the table 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.

     All of the nominees are presently Trustees and were elected
by the shareholders in June, 1999 except for Mr. Cornia, Ms.
Herrmann and Mr. Lucking. The Trustees and officers as a group
own less than 1% of the outstanding shares of the Fund. In the
material below and elsewhere in this Proxy Statement, Aquila
Management Corporation is referred to as the "Manager" 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 Manager and the Distributor. Ms.
Herrmann is an interested person of the Fund as an officer of the
Fund, as an officer, director and shareholder of the Manager and
a shareholder and director of the Distributor. Each is also an
interested person as a member of the immediate family of the
other.

     In the following material Hawaiian Tax-Free Trust, Tax-Free
Trust of Arizona, Tax-Free Trust of Oregon, Tax-Free Fund of
Colorado (this Fund), Churchill Tax-Free Fund of Kentucky,
Narragansett Insured Tax-Free Income Fund and Tax-Free Fund For
Utah, each of which is a tax-free municipal bond fund, are called
the "Aquila Bond Funds"; Pacific Capital Cash Assets Trust,
Churchill Cash Reserves Trust, Pacific Capital U.S. Government
Securities Cash Assets Trust, Pacific Capital Tax-Free Cash
Assets Trust, Capital Cash Management Trust and Capital Cash U.S.
Government Securities Trust, each of which is a money-market
fund, are called the "Aquila Money-Market Funds"; and Aquila
Cascadia Equity Fund and Aquila Rocky Mountain Equity Fund are
called the "Aquila Equity Funds."

     Described in the following material are the name, address,
positions with the Fund, age as of the record date and business
experience during at least the past five years of each nominee
and each officer of the Fund. All shares listed as owned by the
Trustees are Class A Shares unless indicated otherwise.


<TABLE>
<CAPTION>

Name, Position           Business Experience
with the Fund,
Address, Age,
Shares owned

<S>                   <C>           <C>

Lacy B. Herrmann*       Founder and Chairman of the Board of
Aquila
Chairman of the         Management Corporation, the sponsoring
Board of Trustees       organization and Manager or Administrator
380 Madison Avenue      and/or Adviser or Sub-Adviser to the
New York, New York      Aquila Money-Market Funds, the Aquila
Bond
10017                   Funds and the Aquila Equity Funds,
Age: 70                 and Founder, Chairman of the Board of
Trustees
Shares Owned: 212       and (currently or until 1998) President
of each
                        since its establishment, beginning in
                        1984; Director of Aquila Distributors,
                        Inc., distributor of the above funds,
                        since 1981 and formerly Vice President
                        or Secretary, 1981-1998; President and a
                        Director of STCM Management Company,
                        Inc., sponsor and sub-adviser to Capital
                        Cash Management Trust; Founder and
                        Chairman of several other money market
                        funds; Director or Trustee of OCC Cash
                        Reserves, Inc. and Quest For Value
                        Accumulation Trust, and Director or
                        Trustee of Oppenheimer Quest Value Fund,
                        Inc., Oppenheimer Quest Global Value
                        Fund, Inc. and Oppenheimer 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.

Tucker Hart Adams       President of The Adams Group, Inc.,
Trustee                 an economic consulting firm, since
4822 Alteza Drive       1989; Trustee of Tax-Free Fund
Colorado Springs        of Colorado (this Fund) since 1989 and
Colorado 80917          of Aquila Rocky Mountain Equity Fund
Age: 62                 since 1993; Vice President of United
Banks of
Shares Owned: 392       Colorado, 1985-1988; Chief Economist of
United
                        Banks of Colorado, 1981-1988; director
                        of the Montana Power Company, of the
                        Colorado Health Facilities Authority and
                        the University of Colorado Foundation;
                        formerly director of University
                        Hospital; currently or formerly an
                        officer or director of numerous
                        professional and community
                        organizations.

Gary C. Cornia          Professor and Associate Dean of
Trustee                 the Marriott School of Management,
577 East 1090 North     Brigham Young University, since 1991;
Orem, Utah 84057        Associate Professor, 1985-1991;
Age: 51                 Assistant Professor, 1980-1985;
Shares Owned:           Commissioner of the Utah Tax
                         Commission, 1983-1986; Director of the
                         National Tax Association, 1990-1993;
                         Chair of the Governor's Tax Review
                         Committee since 1993; Faculty Associate
                         of the Land Reform Training Institute,
                         Taipei, Taiwan and The Lincoln
                         Institute of Land Policy, Cambridge,
                         Massachusetts.


Diana P. Herrmann, *    President and Chief Operating Officer of
Trustee and             the Manager/Administrator since 1997, a
President                Director since 1984, Secretary since
                         1986
380 Madison Avenue       and previously its Executive Vice
New York, New York       President, Senior Vice President
10017                   or Vice President, 1986-1997;
Age: 42                 President of various Aquila Bond and
Shares Owned:           Money-Market Funds since 1998; Assistant
                        Vice President, Vice President, Senior
                        Vice President or Executive Vice
                        President of Aquila Money-Market, Bond
                        and Equity Funds since 1986; Trustee of
                        a number of Aquila Money-Market, Bond
                        and Equity Funds since 1995; Trustee of
                        Reserve Money-Market Funds, 1999-2000
                        and of Reserve Private Equity Series,
                        1998-2000; Assistant Vice President and
                        formerly Loan Officer of European
                        American Bank, 1981-1986; daughter of
                        the Fund's Chairman; Trustee of the
                        Leopold Schepp Foundation (academic
                        scholarships) since 1995; actively
                        involved in mutual fund and trade
                        associations and in college and other
                        volunteer organizations.

John C. Lucking         President, Econ-Linc, an
Trustee                 economic consulting firm,
7537 North Central Avenue     since 1995; Consulting
Phoenix, Arizona 85020  Economist, Bank One Arizona
Age: 56                 (formerly Valley National Bank of
Shares owned: 997       Arizona) 1994-1996; Chief Economist,
                        Valley National Bank of Arizona, 1987-
                        1994; Municipal bond analyst and
                        government securities institutional
                        sales representative, Valley National
                        Bank of Arizona, 1984-1987; Financial
                        Analyst, Phelps Dodge Corporation (a
                        mining company) 1980-1984; Director of
                        New Mexico and Arizona Land Company
                        since 1993; Director of Northern Arizona
                        University Investment Committee since
                        1997; Director SANU Resources and SHRI
                        (privately held mining and exploration
                        companies) since 1996; Director: Arizona
                        Historical Foundation and The Arizona
                        Mining and Mineral Museum Foundation.
                        Member: Joint Legislative Budget
                        Committee Economic Advisory Panel;
                        Western Blue Chip Economic Forecast
                        Panel; The Economic Club of Phoenix; The
                        Arizona Economic Roundtable; The
                        National Association of Business
                        Economists and the National Association
                        of Corporate Directors.


Anne J. Mills           Vice President for Business Affairs
Trustee                 of Ottawa University since 1992;
167 Glengarry Place     IBM Corporation, 1965-1991; Budget
Castle Rock             Review Officer of the American
Colorado 80104          Baptist Churches/USA, 1994-1997;
Age: 61                 Director of the American Baptist
Foundation,
Shares Owned: 5,757     1985-1996 and since 1998; Trustee of
Brown
                        University, 1992-1999; Trustee of
                        Churchill Cash Reserves Trust since
                        1985, of Tax-Free Trust of Arizona since
                        1986, of Churchill Tax-Free Fund of
                        Kentucky, Tax-Free Fund of Colorado
                        (this Fund)and Capital Cash Management
                        Trust since 1987 and of Tax-Free Fund
                        For Utah since 1994.

J. William Weeks        Trustee of Narragansett Insured
Trustee                 Tax-Free Income Fund and of Tax-
210 Jamaica Lane        Free Fund of Colorado (this Fund) since
1995;
Palm Beach, FL 33480    Senior Vice President of Tax-Free Fund
Age: 72                       of Colorado and Narragansett
                              Insured
Shares owned: 600       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, 1978-1988; 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.


Jerry G. McGrew         President of Aquila Distributors,
Senior Vice President   Inc. since 1998, Registered
5331 Fayette Street     Principal since 1993, Senior Vice
Houston, TX 77056       President, 1997-1998 and Vice
Age: 55                 President, 1993-1997; Senior Vice
                        President of Aquila Rocky Mountain
                        Equity Fund since 1996; Senior Vice
                        President of Churchill Tax-Free Fund of
                        Kentucky since 1994, and of Tax-Free
                        Fund of Colorado(this Fund) and Tax-Free
                        Fund For Utah since 1997; Vice President
                        of Churchill Cash Reserves Trust since
                        1995; Registered Representative of
                        J.J.B. Hilliard, W.L. Lyons Inc., 1983-
                        1987; Account Manager with IBM
                        Corporation, 1967-1981; Gubernatorial
                        appointee, Kentucky Financial
                        Institutions Board, 1993-1997; Chairman,
                        Total Quality Management for Small
                        Business, 1990-1994; President of
                        Elizabethtown/Hardin County, Kentucky,
                        Chamber of Commerce, 1989-1991;
                        President of Elizabethtown Country Club,
                        1983-1985; Director-at Large, Houston
                        Alliance for the Mentally Ill (AMI),
                        since 1998.

James M. McCullough     Senior Vice President of Aquila
Senior Vice President    Distributors, and of Aquila
1750 Aspen Court         Cascadia Equity Fund, Aquila
Lake Oswego, OR         Rocky Mountain Equity Fund,
97034                    Tax-Free Fund of Colorado
                         (this
Age: 55                  Fund) and Tax-Free Trust of
                         Oregon since 1999; Director
                         of Fixed Income Institutional
                         Sales, CIBC Oppenheimer & Co.
                         Inc., Seattle, WA, 1995-1999;
                         Sales Manager, Oregon
                         Municipal Bonds, Kidder,
                         Peabody, Inc., (acquired in
                         1995 by Paine, Webber)
                         Portland, OR, 1994-1995.


Jean M. Smith,          Assistant Treasurer of
Vice President          Bradford Trust Company,
410 17th Street         1977-1978; Staff Supervisor
Suite 1715,             of Wood Struthers & Winthrop,
Denver, Colorado        an investment advisory firm, 1976-1977;
80208                         Client Administrator of Bradford
Age: 55                       Trust Company, 1972-1976.


Jessica L.              Investor Representative with
Wiltshire               Oppenheimer Funds, 1996-1997; Sales
Vice President          Representative for Tax-Free Fund of
8 Inverness Drive East  Colorado (this Fund) and Aquila Rocky
Suite 130, Englewood    Mountain Equity Fund, 1993-1996 and 1997
Colorado 80112                to present.
Age: 29


Rose F. Marotta         Chief Financial Officer of the Aquila
Chief Financial Officer Money-Market, Bond and Equity Funds
380 Madison Avenue      since 1991 and Treasurer, 1981-1991;
New York, New York      formerly Treasurer of the predecessor of
10017                   Capital Cash Management Trust; Treasurer
Age: 75                 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 Manager
                        since 1984 and of the Distributor since
                        1985.


Richard F. West         Treasurer of the Aquila Money-Market,
Treasurer               Bond and Equity Funds and of Aquila
380 Madison Avenue      Distributors, Inc. since 1992;
New York, New York      Associate Director of Furman Selz
10017                   Incorporated, 1991-1992; Vice
Age: 64                 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.


Lori A Vindigni         Assistant Vice President of Aquila
                        Management
Assistant Treasurer     Corporation since 1998, formerly Fund
                        Accountant
380 Madison Avenue      for the Aquila Group of Investment
                        Companies
New York, New York      since 1995; Staff Officer and Fund
                        Accountant of
10017                   Citibank Global Asset Management Group
                        of
Age: 33                 Investment Companies, 1994-1995; Fund
                        Accounting
                        Supervisor of Dean Witter Group of
                        Investment Companies, 1990-1994; BS Kean
                        College of New Jersey, 1990.

Edward M. W. Hines      Partner of Hollyer Brady Smith Troxell
Secretary               Barrett Rockett Hines & Mone LLP,
551 Fifth Avenue        attorneys, since 1989 and counsel,
New York, New York      1987-1989; Secretary of the Aquila
10176                   Money-Market, Bond and Equity Funds since
1982;
Age: 60                 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 of the Aquila Money-
Assistant Secretary     Market, Bond and Equity Funds since 1995
380 Madison Avenue      and Vice President of the Aquila Money-
New York, New York      Market Funds since 1990; Vice President
of
10017                   the Manager since 1990; Investment
Services
Age: 60                 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.

</TABLE>

     The Fund does not currently pay fees to any of the Fund's
officers or to Trustees affiliated with the Manager or the Sub-
Adviser. For its fiscal year ended December 31, 1999, the Fund
paid a total of $69,817 in compensation and reimbursement of
expenses to the Trustees. No other compensation or remuneration
of any type, direct or contingent, was paid by the Fund to its
Trustees.
     The Fund is one of the 15 funds in the Aquilasm Group of
Funds, which consist of tax-free municipal bond funds, money-
market funds and equity funds. The following table lists the
compensation of all nominees for Trustee who received
compensation from the Fund or from other funds in the Aquilasm
Group of Funds during the Fund's fiscal year. 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 of Funds      serves

Tucker H.
Adams          $9,544                   $11,703        2

Gary C. Cornia      0                   $6,108         1

John C.
Lucking             0                   $9,850         1

Anne J.
Mills          $8,427                   $35,850        6

J. William
Weeks          $8,411                   $13,858        2

     Class A Shares may be purchased without a sales charge by
certain of the Fund's Trustees and officers.

     The Fund's Manager is Manager or Administrator to the
Aquilasm Group of Funds, which consists of tax-free municipal
bond funds, money-market funds and equity funds. As of March 31,
2000, these funds had aggregate assets of approximately $3.2
billion, of which approximately $1.8 billion consisted of assets
of the tax-free municipal bond funds. The Manager is controlled
by Mr. Lacy B. Herrmann, through share ownership directly,
through a trust and by his wife. During the fiscal year ended
December 31, 1999 the Fund paid $1,053,534 in fees to the
Manager.
     During the fiscal year ended December 31, 1999 $101,231 was
paid under Part I of the Fund's Distribution Plan to Qualified
Recipients with respect to Class A Shares, of which $4,616 was
retained by the Distributor. During the same periods, $12,680 was
paid under Part II of the Plan to Qualified Recipients with
respect to Class C Shares, of which $7,538 (including amounts
retained under the Fund's Shareholder Services Plan) was retained
by the Distributor. All of such payments were for compensation.
     The Distributor currently handles the distribution of the
shares of 15 funds (six 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. The shares of the Distributor are owned 72% by Mr.
Herrmann and other members of his immediate family, 24% by Diana
P. Herrmann and the balance by a former officer of the
Distributor.

Other Information on Trustees

     The Trustees have appointed a standing 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 two meetings 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. All current Trustees were present for at least 75%
of the total number of Board meetings and Audit Committee
meetings (if such Trustee was a member of that committee).

                    RATIFICATION OR REJECTION
                         OF SELECTION OF
                      INDEPENDENT AUDITORS
                        (Proposal No. 2)

     KPMG LLP, which is currently serving as the Fund's auditors,
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, 2000. Such
selection is submitted to the shareholders for ratification or
rejection.

     The firm has no direct or indirect financial interest in the
Fund, the Manager or the Sub-Adviser. 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.

                    ACTION REGARDING A CHANGE
               IN THE FUND'S FUNDAMENTAL POLICIES
                 TO ALLOW THE USE OF ADDITIONAL
     NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS
          FOR RATING OBLIGATIONS THE FUND MAY PURCHASE
                        (Proposal No. 3)

     Since beginning operations, the Fund has had a fundamental
policy that defines the "investment-grade" securities the Fund
may purchase as

               those rated within the four highest credit ratings
          assigned by Moody's Investors Service, Inc. ("Moody's")
          or Standard & Poor's Corporation ("S&P") or, if
          unrated, determined to be of comparable quality.

     When this fundamental policy was put in place Moody's and
S&P were essentially the only nationally recognized statistical
rating organizations ("NRSROs") with respect to municipal
obligations. In recent years, other organizations, notably Fitch
IBCA, Inc. ("Fitch"), have become active in rating municipal
obligations. Municipal bond issuers pay to have their bonds rated
and there is competition among the NRSROs. If an issuer chooses
to have its bonds rated by an NRSRO other than Moody's or S&P,
the current fundamental policy of the Fund has the effect of
requiring the Fund either to forego purchasing the bonds because
they are not rated by Moody's or S&P or to treat them as
"unrated" when in fact they do have ratings assigned by an NRSRO.
Both results distort the clear intent of the policy.

     Accordingly the Board of Trustees has determined that it
would be in the best interest of the Fund and its shareholders to
change the fundamental policy so that the ratings used to define
"investment-grade" securities would include those assigned by any
NRSRO approved from time to time by the Board of Trustees.

     At the present time, if the proposed change is adopted, the
Board of Trustees will approve Fitch in addition to Moody's and
S&P. The Board of Trustees has determined that the standards
Fitch employs in rating bonds are comparable to those of Moody's
and S&P and that bonds in the four highest categories rated by
Fitch are of comparable quality to those similarly rated by
Moody's and S&P.

Action Requested

THE BOARD OF TRUSTEES RECOMMENDS THAT THE PROPOSED CHANGE IN THE
FUND'S FUNDAMENTAL POLICIES DESCRIBED ABOVE BE APPROVED.

Vote Required

     The favorable vote of the holders of a majority (as defined
in the 1940 Act) of the outstanding shares of the Fund is
required for the approval of this Proposal No. 3. Under the 1940
Act, the vote of the holders of a majority of the outstanding
shares of the Fund means the vote of the holders of the lesser of
(a) 67% or more of the shares of the Fund present at the Meeting
or represented by proxy if the holders of more than 50% of such
shares are so present or represented, or (b) more than 50% of the
outstanding shares of the Fund, with one 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 all of the Fund's
three classes of shares.

     If this proposal is not approved, the Board of Trustees will
consider appropriate action, which could include continuing with
the present policies or calling another meeting of shareholders.

     The meeting can be adjourned by the affirmative vote of a
majority of the shares present in person or by proxy. In voting
for an adjournment, the proxy holders will consider all relevant
factors, including possible delay of receipt of proxies and
whether or not a substantial number of negative votes have been
cast with respect to any proposal. The shares of shareholders who
have voted by proxy against a proposal will be voted against
adjournment.

              BACKGROUND AND REASONS FOR
           PROPOSALS NO. 4, NO.5 and NO. 6

     Proposals 4, 5 and 6 taken together are intended to enable
the Fund to meet more effectively the competitive challenges of
other Colorado-oriented municipal bond funds. These proposals are
intended to result in retention of existing fund assets and
possible growth of those assets through increased sales while at
the same time assuring the Fund continued high quality
administrative and local portfolio management services.
Increasing assets is potentially beneficial to shareholders
because it allows spreading of some of the Fund's operating
expenses over a larger asset base and provides opportunities for
the Fund to acquire advantageously additional municipal
securities. There is no assurance, however, that these measures
will result in increased Fund assets.

     These proposals will allow the Fund to make asset retention
service fee payments at the annual rate of up to 0.15 of 1% of
all of its average annual net assets represented by Class A
Shares should competitive considerations require such action,
instead of being limited to a rate of 0.05 of 1% with respect to
assets up to $250 million and the full 0.15 of 1% only with
respect to assets above that amount. The Fund's assets are
currently approximately $200 million and have never reached $250
million.

     The Fund has been paying service fees at the rate of 0.05 of
1% since July 1, 1994. Even if the higher rate of payments with
respect to assets of $250 million or less is approved by the
shareholders, there is no current intention to increase the
payments above 0.05 of 1%. The actual rate will be as authorized
from time to time by the Board of Trustees (up to the .15 of 1%
limit).

     The proposals also will also allow the Fund to make
management fee payments at the annual rate of 0.50 of 1%
regardless of asset size or Class A distribution fees paid. Thus,
it would eliminate reductions in the rates of such fees that the
Fund would pay for any day on which the Fund makes certain
payments of the Class A Shares service fee; currently, if
permitted distribution fees were increased to 0.15 of 1% of the
assets represented by Class A Shares of $250 million or less, the
annual aggregate management fee rate would be reduced from 0.50
of 1% to 0.40 of 1% for assets of the Fund of $250 million or
less. There will be no other changes in the agreements with the
Manager and the Sub-Adviser, who will continue to provide the
same services as under the current agreements.

     The effect of these changes on management fees allocable to
Class C Shares, Class Y Shares and Class I Shares will be the
same as for Class A Shares. These changes do not affect the
distribution fees payable with respect to Class C Shares or Class
I Shares. Class Y Shares pay no distribution fee.

     The effect of these changes will be to authorize aggregate
management and distribution fees with respect to Class A Shares
of 0.65 of 1% instead of the current 0.55 of 1%. The actual rate
of the distribution fee for Class A Shares will be as authorized
from time to time by the Board of Trustees (up to the .15 of 1%
limit). There is no current intention to increase the
distribution fee rate for Class A Shares above 0.05 of 1%.
Accordingly, until that fee is increased, aggregate management
and distribution fees with respect to Class A Shares will remain
at current levels.

     The annual fee rates as a percentage of average annual net
assets that the Fund pays currently and as they will be if the
proposals are approved and implemented are illustrated by the
following table:

Annual Fee Rates with respect to Assets up to $250 million

Type of Payment     Current Arrangements         If Proposals
                                                  are approved

12b-1 fees (Class
A Shares)           0.05 of 1%               up to 0.15 of 1%

Management fees
(all Classes)       0.50 of 1%               0.50 of 1%

Annual Fee Rates with respect to Assets above $250 million

Type of Payment     Current Arrangements         If Proposals
                                                  are approved

12b-1 fees (Class
A Shares)           0.15 of 1%               up to 0.15 of 1%

Management fees
(all Classes)       0.40 of 1%               0.50 of 1%

Discussion of the Changes Proposed

     The Fund, which commenced operations in 1987, was one of the
early open-end mutual funds investing primarily in high-quality,
investment grade Colorado municipal obligations. It is designed
to offer Colorado residents, through an investment in the Fund,
the opportunity to enjoy the conveniences and features of a
mutual fund while participating in the advantages of the high
level of safety and the double tax-free income of municipal
obligations of Colorado issuers. Since 1987, the Fund has
invested in an increasing number and variety of high quality
municipal projects throughout the State, and has thereby
contributed to the economic development and quality of life of
Colorado residents.

     Since that date, numerous other Colorado open-end municipal
bond mutual funds have become available to Colorado residents,
thereby creating a highly competitive environment for the Fund.

     The Fund has grown since inception to a current total net
asset size of approximately $200 million. Management believes
that this growth results in substantial part from the attentive
services the Fund has provided to its shareholders, as well as
the success with which the Fund's investment advisers have
enabled the Fund to fulfill its objective, which is to provide as
high a level of current income exempt from State of Colorado and
regular Federal income taxes as is consistent with preservation
of capital.

     Growth in assets has enabled the Fund to achieve economies
of scale in its operations. This has contributed over the years
to a relatively low per-share rate of Fund operating expenses,
which in turn has produced higher investment returns to the
Fund's shareholders while at the same time permitting the Fund to
provide an increased level of service by extending and improving
its range of operating features.

     In the spring of 1994, The Board of Trustees determined that
in order for the Fund to be of most benefit to its shareholders
it must maintain a strong competitive posture. The Board of
Trustees, with assistance of management of the Fund, reviewed
carefully the features of other open-end municipal bond mutual
funds directed toward Colorado investors as they may affect the
ability of the Fund to continue to offer a variety of advantages
to its current shareholders and to prospective investors.
Although the Board recognized that there could be no assurance
that any of the following would occur, from this review the
Trustees determined that increasing the assets of the Fund as a
result of net sales of Fund shares and reinvestment of dividends
can in turn assure that the Fund will continue to be able to
purchase the best new and existing Colorado municipal
obligations, which in turn will benefit the yield and safety
features of the Fund for its shareholders, and that the
continuation of growth in assets can result in continued control
and possible reduction of the operating expense ratio of the
Fund, to the benefit of shareholders.

     The Trustees determined that conversely a decrease of Fund
assets caused by net redemptions of shares of the Fund can cause
the sale of portfolio securities for reasons other than sound
investment management and at times which may be inopportune in
the market and therefore can be detrimental to the Fund's
shareholders. Such a decrease in the assets of the Fund can
result in a higher operating expense ratio for the Fund, which
could lessen the net yield to shareholders.

     Consequently, the Board of Trustees of the Fund determined
that it was desirable to take certain actions to enhance the
competitive position of the Fund with a view to retaining and
possibly increasing the assets of the Fund, while at the same
time protecting the interests of present and future investors in
the Fund. The Board of Trustees proposed and in June 1994 the
shareholders of the Fund approved changes in the Fund's
Distribution Plan which would allow payment of an asset retention
service fee at the annual rate of 0.05 of 1% with respect to
average annual net assets represented by what are now called
Class A Shares of the Fund up to $250 million and at the rate of
0.15 of 1% with respect to net assets of the Fund above that
amount. Since payments under the plan began on July 1, 1994, the
assets of the Fund have never exceeded $250 million, so that no
payments at the higher rate have been made.

     In 1995, based on the same considerations, the Board of
Trustees proposed to the Fund's shareholders that the Fund be
able to make asset retention service fee payments at the annual
rate of 0.15 of 1% of all of its average annual net assets,
instead of being limited to a rate of 0.05 of 1% with respect to
assets up to $250 million and the full 0.15 of 1% only with
respect to assets above that amount. The Manager and Sub-Adviser
each agreed to changes in their agreements which would have
reduced combined management fees from 0.50 of 1% of average
annual net assets to 0.40 of 1% of such assets, with respect to
assets less than $250 million for any day on which the Fund makes
payments of the Class A service fee. However, the officers of the
Fund, in reviewing the competitive position of the Fund and the
various means of maintaining that position, have since 1995
regularly determined that the increase in service fee payments
and corresponding decrease in management fees were not practical,
so that the authorized increase in 12b-1 fee expenditures has
never been implemented.

     The Board of Trustees continues to believe that an increase
in 12b-1 fee payments with respect to Class A Shares could
benefit the Fund in circumstances that may well arise in the near
future. However, it has reviewed the reasons for coupling a
decrease in management fees with actual service fee expenditures
and determined that those reasons no longer support what is in
effect a forced subsidization by the Manager and the Sub-Adviser
of a portion of the Fund's expenses, particularly the Class A 12b-
1 expenditures. As to the Sub-Adviser's portion of such
subsidization, it has become increasingly evident to the Board
that the level of compensation that a sub-adviser would then
receive is unlikely in the future to attract and retain
investment management services of the quality that the Fund has
enjoyed. As to the portion of its fee that the Manager does not
pass through to the Sub-Adviser, the costs of providing its
customary services to the Fund, which have risen and are expected
to continue to do so, mean that the burden that such
subsidization would create is rising, particularly if the Sub-
Adviser is not asked to share that burden. Accordingly, the Board
of Trustees, after full review of the level of services provided
by the Manager and the Sub-Adviser, the Fund's current and
potential expense levels in relation to the market place, and of
other relevant factors, recommends that the provisions in the
Manager's and Sub-Adviser's agreements requiring reductions in
the event of Class A 12b-1 expenditures be eliminated.

          The following table shows the amounts that the Fund
paid during its last fiscal year ended December 31, 1999 for
asset retention service fees for Class A Shares and management
fees, as well as the amounts it would have paid if the proposed
new arrangements (at the full 0.15 of 1% rate under the
Distribution Plan) had been in effect throughout the entire last
fiscal year.

Type of   Paid Last Year      If proposed    Difference as
Payment                       arrangements   a percentage
                              had been       of 1999
                              in effect      payments


12b-1 fees
(Class A
Shares)        $101,231       $303,693*           300%*

Man-
agement
Fees      $1,053,534          $1,053,534          0%

Total
(Class
A Shares) $1,154,765          $1,357,237          117%

* As previously noted, it is currently contemplated that the full
amount of the proposed increase will not be authorized by the
Board of Trustees in the foreseeable future.

     Under the proposed structure, the upper limit for the
aggregate rate of management and distribution fees for Class A
Shares would rise from 0.55 of 1% to 0.65 of 1% of average annual
net assets.

     The proposals are designed to operate together to meet the
concerns described above. Accordingly, the proposed New (Amended
and Restated) Investment Advisory and Administration Agreement,
the proposed new Sub-Advisory Agreement and the proposed
amendment to the Distribution Plan to permit payment of an
increased asset retention fee will go into effect only if the
shareholders approve each of Proposals 4, 5 and 6. If these
proposals are not approved, the Board of Trustees will consider
what further action is appropriate to maintain and enhance the
competitive position of the Fund to protect the interests of
present and future investors in the Fund, which could include
continuing with the present arrangements.

Other Information About Aquila

     Aquila, founded in 1984, is controlled by Mr. Lacy B.
Herrmann (directly, through a trust and through share ownership
by his wife). Aquila's shares are owned as follows:

     Elizabeth B. Herrmann                                  27.5%
     Lacy B. Herrmann                                         25%
     Elizabeth B. Herrmann
     1993 Annuity Trust                                       40%

The balance of its shares are owned by other officers and
employees.

The names, addresses and principal occupations of the principal
executive officer and each director of Aquila are as follows:

     Name                     Position with Aquila

     Lacy B. Herrmann         Chairman, Chief Executive Officer
                              and Director

     Diana P. Herrmann        President, Chief Operating Officer
                              and Director

     Elizabeth B. Herrmann    Director

     The address of all of these individuals is 380 Madison
Avenue, Suite 2300, New York, NY 10017.

Other Information about KPM

     KPM is a wholly-owned subsidiary of KFS Corporation, a
member of the Mutual of Omaha Companies. The Fund's portfolio is
managed in the Sub-Adviser's Denver office. Founded in 1981, the
Sub-Adviser provides discretionary equity fixed-income and
balanced account management to mutual funds, retirement plans,
foundations, endowments and high net worth individuals and
currently manages over $647 million of clients' assets.

     Mr. Christopher Johns is the Fund's portfolio manager. Mr.
Johns is First Vice President and has been a Vice President of
the Sub-Adviser since 1992. From 1984 through 1992, he was a
portfolio manager at United Bank of Denver (now Norwest Bank,
Denver) when it acted as investment adviser to the Fund. He was
formerly a portfolio manager of Toledo Trust Company. He holds
the degree of BBA in Finance from the University of Cincinnati.

     Mr. Robert Schultz is the back-up portfolio manager and
research analyst. He has 10 years' experience with fixed-income
securities having worked at John Nuveen & Company and U.S.
Bancorp Piper Jaffray in Chicago.  He has an MBA from Loyola
University (Chicago) and a BS in Finance from Miami University
(Ohio).

     KPM has its primary office at 10250 Regency Circle, Omaha,
NE 68114 and its Denver office is located at One Norwest Center,
1700 Lincoln Street, Denver, CO 80203. Since 1983, KPM has been
indirectly a wholly-owned by Mutual of Omaha Insurance Company,
whose principal office is at Mutual of Omaha Plaza, Omaha, NE
68175.

The Chief Executive Officer and directors of KPM are as follows:

                    Position(s)
                    Held with
                    KPM Investment
     Name           Management Inc.          Principal Occupation

     Rod Cerny           President, CEO,     President, CEO,
                         Chairman            Chairman, KPM
                                             Investment
                                             Management, Inc.

     John W. Weekly      Director            Chairman and CEO
                                             Mutual of Omaha

     L. Jack Peterson    Director            Chairman Emeritus
                                             Of Kirkpatrick
                                             Pettis

     John A. Sturgeon    Director            President
                                             Mutual of Omaha

     Peter N. Lahti      Director            Chairman, President,
                                             CEO, Kirkpatrick,
                                             Pettis, and KFS
                                             Corporation

     KPM does not act as investment adviser to any investment
companies which have similar investment objectives to those of
the Fund.

     For the reasons set forth above, at an in-person meeting
called and held for the purpose in April 2000, the unanimous
Board of Trustees, including a majority of the Trustees who are
not parties to the Advisory and Administration Agreement or the
Sub-Advisory Agreement or "interested persons" (as defined in the
1940 Act) of any such party (the "Independent Trustees"), voted
to approve the proposed amendment to the Fund's Distribution Plan
and the new Advisory and Administration Agreement and new Sub-
Advisory Agreement.

ACTION ON AMENDMENT TO THE FUND'S 12b-1 PLAN (DISTRIBUTION PLAN)
WHICH WILL PROVIDE FOR A RATE OF FEES PAID (IN EFFECT AN
INCREASE) WITH RESPECT TO ALL FUND ASSETS REPRESENTED BY CLASS A
SHARES (Proposal No. 4)

     The Fund's Distribution Plan has four parts, relating
respectively to distribution payments with respect to Class A
Shares (Part I), to distribution payments relating to Class C
Shares (Part II), to distribution payments relating to Class I
Shares (Part III) and to certain defensive provisions (Part IV).
Proposal No. 4 affects only Part I of the Plan relating to Class
A Shares. Proposal No. 4 does not affect or make any changes to
Parts II, relating to Class C Shares, to Part III, relating to
Class I Shares, or to Part IV, defensive provisions. The Plan was
adopted on July 1, 1994 and last amended in 1998 when Part III
was added. The Plan was last approved by the Board of Trustees in
March, 2000. Only holders of Class A Shares and holders of Class
C Shares (which automatically convert into Class A Shares 6 years
after purchase) will vote on Proposal No. 4.

Proposed Changes in Provisions of the Plan Relating to Class A
Shares  (Part I)

     The only changes to Part I of the Plan will be elimination
of the provisions that limit the rate of payments under the Plan
with respect to Class A Shares to 0.05 of 1% of the average
annual net assets of the Fund represented by Class A up to $250
million and thus allows payments at the rate of 0.15 of 1% of
such net assets only above $250 million. The shareholders of the
Fund have previously approved a change in the Distribution Plan
that would allow payments at the annual rate of 0.15 of 1% of all
of the average annual net assets of the Fund represented by Class
A Shares; however, that change was conditioned on a simultaneous
reduction of management fees so that the aggregate cost would
remain at the rate of 0.05 of 1%. Implementation of that change,
which was to have taken place on October 1, 1996, was
indefinitely postponed and for the reasons described above has
been found to be impractical. Accordingly, Proposal No. 4
(together with proposals No. 5 and No. 6.) seeks approval of
distribution fee payments with respect to Class A Shares at the
annual rate of 0.15 of 1% of all of the annual net assets of the
Fund represented by Class A Shares without a simultaneous
reduction of management fees.

     As proposed to be amended, Part I of the Plan will provide
as follows:

     As used in Part I of the Plan, "Qualified Recipients" shall
mean broker-dealers or others selected by Aquila Distributors,
Inc. (the "Distributor"), including but not limited to any
principal underwriter of the Fund, with which the Fund or the
Distributor has entered into written agreements in connection
with Part I ("Class A Plan Agreements") and which have rendered
assistance (whether direct, administrative, or both) in the
distribution and/or retention of the Fund's Front-Payment Class
Shares or servicing of shareholder accounts with respect to such
shares.  "Qualified Holdings" shall mean, as to any Qualified
Recipient, all Front-Payment Class Shares beneficially owned by
such Qualified Recipient, or beneficially owned by its brokerage
customers, other customers, other contacts, investment advisory
clients, or other clients, if the Qualified Recipient was, in the
sole judgment of the Distributor, instrumental in the purchase
and/or retention of such shares and/or in providing
administrative assistance or other services in relation thereto.

     Subject to the direction and control of the Fund's Board of
Trustees, the Fund may make payments ("Class A Permitted
Payments") to Qualified Recipients, which Class A Permitted
Payments may be made directly, or through the Distributor or
shareholder servicing agent as disbursing agent, which may not
exceed, for any fiscal year of the Fund (as adjusted for any part
or parts of a fiscal year during which payments under the Plan
are not accruable or for any fiscal year which is not a full
fiscal year), 0.15 of 1% of the average annual net assets of the
Fund represented by the Front-Payment Class Shares. Such payments
shall be made only out of the Fund's assets allocable to the
Front-Payment Class Shares.

     The Distributor shall have sole authority (i) as to the
selection of any Qualified Recipient or Recipients; (ii) not to
select any Qualified Recipient; and (iii) as to the amount of
Class A Permitted Payments, if any, to each Qualified Recipient
provided that the total Class A Permitted Payments to all
Qualified Recipients do not exceed the amount set forth above.
The Distributor is authorized, but not directed, to take into
account, in addition to any other factors deemed relevant by it,
the following: (a) the amount of the Qualified Holdings of the
Qualified Recipient; (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area with respect to holders of Front-Payment Class
Shares, including without limitation, any or all of the following
activities: answering customer inquiries regarding account status
and history, and the manner in which purchases and redemptions of
shares of the Fund may be effected; assisting shareholders in
designating and changing dividend options, account designations
and addresses; providing necessary personnel and facilities to
establish and maintain shareholder accounts and records;
assisting in processing purchase and redemption transactions;
arranging for the wiring of funds; transmitting and receiving
funds in connection with customer orders to purchase or redeem
shares; verifying and guaranteeing shareholder signatures in
connection with redemption orders and transfers and changes in
shareholder designated accounts; furnishing (either alone or
together with other reports sent to a shareholder by such person)
monthly and year-end statements and confirmations of purchases
and redemptions; transmitting, on behalf of the Fund, proxy
statements, annual reports, updating prospectuses and other
communications from the Fund to its shareholders; receiving,
tabulating and transmitting to the Fund proxies executed by
shareholders with respect to meetings of shareholders of the
Fund; and providing such other related services as the
Distributor or a shareholder may request from time to time; and
(c) the possibility that the Qualified Holdings of the Qualified
Recipient would be redeemed in the absence of its selection or
continuance as a Qualified Recipient. Notwithstanding the
foregoing two sentences, a majority of the Independent Trustees
(as defined below) may remove any person as a Qualified
Recipient. Amounts within the above limits accrued to a Qualified
Recipient but not paid during a fiscal year may be paid
thereafter; if less than the full amount is accrued to all
Qualified Recipients, the difference will not be carried over to
subsequent years.

     While Part I is in effect, the Fund's Distributor shall
report at least quarterly to the Fund's Trustees in writing for
their review on the following matters:  (i) all Class A Permitted
Payments made under the Plan, the identity of the Qualified
Recipient of each payment, and the purposes for which the amounts
were expended; and (ii) all fees of the Fund to the Manager,
Sub-Adviser or Distributor paid or accrued during such quarter.
In addition, if any such Qualified Recipient is an affiliated
person, as that term is defined in the 1940 Act, of the Fund,
Manager, Sub-Adviser or Distributor, such person shall agree to
furnish to the Distributor for transmission to the Board of
Trustees of the Fund an accounting, in form and detail
satisfactory to the Board of Trustees, to enable the Board of
Trustees to make the determinations of the fairness of the
compensation paid to such affiliated person, not less often than
annually.

     Part I originally went into effect when it was approved (i)
by a vote of the Trustees, including the Independent Trustees,
with votes cast in person at a meeting called for the purpose of
voting on Part I of the Plan; and (ii) by a vote of holders of at
least a "majority" (as so defined) of the outstanding voting
securities of the Front-Payment Class Shares class (or of any
predecessor class or category of shares, whether or not
designated as a class) and a vote of holders of at least a
"majority"  (as so defined) of the outstanding voting securities
of the Level-Payment Class Shares and/or of any other class whose
shares are convertible into Front-Payment Class Shares. Part I
has continued, and will, unless terminated as hereinafter
provided, continue in effect, until the April 30 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 Trustees and its Independent Trustees with votes cast
in person at a meeting called for the purpose of voting on such
continuance. Part I may be terminated at any time by the vote of
a majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the 1940 Act) of the
outstanding voting securities of the Fund to which Part I
applies. Part I may not be amended to increase materially the
amount of payments to be made without shareholder approval of the
class or classes of shares affected by Part I as set forth in
(ii) above, and all amendments must be approved in the manner set
forth in (i) above.

     In the case of a Qualified Recipient which is a principal
underwriter of the Fund, the Class A Plan Agreement shall be the
agreement contemplated by Section 15(b) of the 1940 Act since
each such agreement must be approved in accordance with, and
contain the provisions required by, the Rule. In the case of
Qualified Recipients which are not principal underwriters of the
Fund, the Class A Plan Agreements with them shall be (i) their
agreements with the Distributor with respect to payments under
the Fund's Distribution Plan in effect prior to April 1, 1996 or
(ii) Class A Plan Agreements entered into thereafter.

Payments Under the Plan with respect to Class A Shares

     During the fiscal years ended December 31, 1999, 1998 and
1997, payments were made only under Part I and Part II of the
Plan. All payments were to Qualified Recipients and were made
were for compensation. During those periods, no payments were
made under Part III or Part IV of the Plan.

     During the fiscal years ended December 31, 1999, 1998 and
1997, $101,231, $104,938 and $107,821, respectively, was paid
under Part I of the Plan to Qualified Recipients with respect to
Class A Shares, of which $4,616, $4,446 and $4,357,respectively,
was retained by the Distributor.

Action Requested

THE BOARD OF TRUSTEES RECOMMENDS THAT THE PROPOSED CHANGE IN THE
PART I OF THE FUND'S DISTRIBUTION PLAN DESCRIBED ABOVE BE
APPROVED.

Vote Required

     The favorable vote of the holders of a majority (as defined
in the 1940 Act) of the outstanding Class A Shares and the same
majority of the outstanding Class C Shares of the Fund is
required for the approval of this Proposal No. 4.

     If this proposal is approved by the holders of Class A
Shares but not the holders of Class C Shares, the Board of
Trustees will consider other options which could include
implementation of the proposed change for Class A Shares and
creating a new conversion class of shares.

ACTION ON A NEW INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
  WHICH WILL PROVIDE FOR LEVEL PAYMENT RATES (NO REDUCTION) IN
          MANAGEMENT FEES REGARDLESS OF FUND ASSET SIZE
                        (PROPOSAL NO. 5)

     The new Investment Advisory and Administration Agreement
(the "Advisory Agreement") is identical to the current investment
advisory and administration agreement except that the annual rate
of fees on average annual assets would remain level at 0.50 of 1%
regardless of asset size; the current reduction of management
fees from 0.50 to 0.40 of 1% for average annual assets over $250
million will be eliminated, in effect increasing management fees
above that amount. The current advisory agreement was approved by
the shareholders of the Fund in June, 1998 and its renewal was
last approved by the Board of Trustees in March, 2000.  In the
following description, Aquila is referred to as the "Manager."

Description of the Investment Advisory and Administration
Agreement

     The Advisory Agreement provides that subject to the
direction and control of the Board of Trustees of the Fund, the
Manager shall:

     (i) supervise continuously the investment program of the
     Fund and the composition of its portfolio;

     (ii) determine what securities shall be purchased or sold by
     the Fund;

     (iii) arrange for the purchase and the sale of securities
     held in the portfolio of the Fund; and

     (iv) at its expense provide for pricing of the Fund's
     portfolio daily using a pricing service or other source of
     pricing information satisfactory to the Fund and, unless
     otherwise directed by the Board of Trustees, provide for
     pricing of the Fund's portfolio at least quarterly using
     another such source satisfactory to the Fund.

     The Advisory Agreement provides that, subject to the
termination provisions described below, the Manager may at its
own expense delegate to a qualified organization ("Sub-Adviser"),
affiliated or not affiliated with the Manager, any or all of the
above duties. Any such delegation of the duties set forth in (i),
(ii) or (iii) above shall be by a written agreement (the "Sub-
Advisory Agreement") approved as provided in Section 15 of the
Investment Company Act of 1940. The Manager will continue to
delegate all of such functions to KPM under the proposed Sub-
Advisory Agreement.

     The Advisory Agreement provides that subject to the
direction and control of the Board of Trustees of the Fund, the
Manager shall provide all administrative services to the Fund
other than those relating to its investment portfolio which have
been delegated to a Sub-Adviser of the Fund under a Sub-Advisory
Agreement; as part of such administrative duties, the Manager
shall:

     (i) provide office space, personnel, facilities and
     equipment for the performance of the following functions and
     for the maintenance of the headquarters of the Fund;

     (ii) oversee all relationships between the Fund and any
     sub-adviser, transfer agent, custodian, legal counsel,
     auditors and principal underwriter, including the
     negotiation of agreements in relation thereto, the
     supervision and coordination of the performance of such
     agreements, and the overseeing of all administrative matters
     which are necessary or desirable for the effective operation
     of the Fund and for the sale, servicing or redemption of the
     Fund's shares;

     (iii) either keep the accounting records of the Fund,
     including the computation of net asset value per share and
     the dividends (provided that if there is a Sub-Adviser,
     daily pricing of the Fund's portfolio shall be the
     responsibility of the Sub-Adviser under the Sub-Advisory
     Agreement) or, at its expense and responsibility, delegate
     such duties in whole or in part to a company satisfactory to
     the Fund;

     (iv) maintain the Fund's books and records, and prepare (or
     assist counsel and auditors in the preparation of) all
     required proxy statements, reports to the Fund's
     shareholders and Trustees, reports to and other filings with
     the Securities and Exchange Commission and any other
     governmental agencies, and tax returns, and oversee the
     insurance relationships of the Fund;

     (v) prepare, on behalf of the Fund and at the Fund's
     expense, such applications and reports as may be necessary
     to register or maintain the registration of the Fund and/or
     its shares under the securities or "Blue-Sky" laws of all
     such jurisdictions as may be required from time to time;

     (vi) respond to any inquiries or other communications of
     shareholders of the Fund and broker-dealers, or if any such
     inquiry or communication is more properly to be responded to
     by the Fund's shareholder servicing and transfer agent or
     distributor, oversee such shareholder servicing and transfer
     agent's or distributor's response thereto.

     The Advisory Agreement contains provisions relating to
compliance of the investment program, responsibility of the
Manager for any investment program managed by it, allocation of
brokerage, and responsibility for errors that are substantially
the same as the corresponding provisions in the Sub-Advisory
Agreement. See Proposal No. 6.

     The Advisory Agreement provides that the Manager shall, at
its own expense, provide office space, facilities, equipment, and
personnel for the performance of its functions thereunder and
shall pay all compensation of Trustees, officers, and employees
of the Fund who are affiliated persons of the Manager.

     The Fund shall bear the costs of preparing and setting in
type its prospectuses, statements of additional information and
reports to its shareholders, and the costs of printing or
otherwise producing and distributing those copies of such
prospectuses, statements of additional information and reports as
are sent to its shareholders. All costs and expenses not
expressly assumed by the Manager under the agreement or otherwise
by the Manager, administrator or principal underwriter or by any
Sub-Adviser shall be paid by the Fund, including, but not limited
to (i) interest and taxes; (ii) brokerage commissions; (iii)
insurance premiums; (iv) compensation and expenses of its
Trustees other than those affiliated with the Manager or such
sub-adviser, administrator or principal underwriter; (v) legal
and audit expenses; (vi) custodian and transfer agent, or
shareholder servicing agent, fees and expenses; (vii) expenses
incident to the issuance of its shares (including issuance on the
payment of, or reinvestment of, dividends); (viii) fees and
expenses incident to the registration under Federal or State
securities laws of the Fund or its shares; (ix) expenses of
preparing, printing and mailing reports and notices and proxy
material to shareholders of the Fund; (x) all other expenses
incidental to holding meetings of the Fund's shareholders; and
(xi) such non-recurring expenses as may arise, including
litigation affecting the Fund and the legal obligations for which
the Fund may have to indemnify its officers and Trustees.

     Under the Advisory Agreement, the Fund will pay to the
Manager a fee payable monthly and computed on the net asset value
of the Fund as of the close of business each business day at the
annual rate of 0.50 of 1% of such net asset value.

     The Advisory Agreement provides that the Sub-Advisory
Agreement may provide for its termination by the Manager upon
reasonable notice, provided, however, that the Manager agrees not
to terminate the Sub-Advisory Agreement except in accordance with
such authorization and direction of the Board of Trustees, if
any, as may be in effect from time to time.

     The Advisory Agreement provides that it will become
effective on the date of its approval by the shareholders of the
Fund and will, unless terminated as hereinafter provided,
continue in effect until the April 30 next preceding the second
anniversary of the effective date of the Advisory Agreement, and
from year to year thereafter, but only so long as such
continuance is specifically approved at least annually (1) by a
vote of the Fund's Board of Trustees, including a vote of a
majority of the Trustees who are not parties to the Advisory
Agreement or "interested persons" (as defined in the 1940 Act) of
any such party, with votes cast in person at a meeting called for
the purpose of voting on such approval, or (2) by a vote of the
holders of a "majority" (as so defined) of the outstanding voting
securities of the Fund and by such a vote of the Trustees.

   The Advisory Agreement provides that it may be terminated
by the Manager at any time without penalty upon giving the Fund
sixty days' written notice (which notice may be waived by the
Fund) and may be terminated by the Fund at any time without
penalty upon giving the Manager sixty days' written notice (which
notice may be waived by the Manager), provided that such
termination by the Fund shall be directed or approved by a vote
of a majority of its Trustees in office at the time or by a vote
of the holders of a majority (as defined in the 1940 Act) of the
voting securities of the Fund outstanding and entitled to vote.
The specific portions of the Advisory Agreement which relate to
providing investment advisory services will automatically
terminate in the event of the assignment (as defined in the 1940
Act) of the Advisory Agreement, but all other provisions relating
to providing services other than investment advisory services
will not terminate, provided however, that upon such an
assignment the annual fee payable monthly and computed on the net
asset value of the Fund as of the close of business each business
day shall be reduced to the annual rate of 0.30 of 1% of such net
asset value.

Action Requested

THE BOARD OF TRUSTEES RECOMMENDS THAT THE PROPOSED INVESTMENT
ADVISORY AND ADMINISTRATION AGREEMENT DESCRIBED ABOVE BE
APPROVED.

Vote Required

     The favorable vote of the holders of a majority (as defined
in the 1940 Act) of the outstanding shares of the Fund is
required for the approval of this Proposal No. 5.

ACTION UPON A PROPOSED NEW SUB-ADVISORY AGREEMENT BETWEEN AQUILA
 MANAGEMENT CORPORATION AS MANAGER AND KPM AS SUB-ADVISER WHICH
   WILL PROVIDE FOR LEVEL PAYMENT RATES (NO REDUCTION) IN SUB-
           ADVISORY FEES REGARDLESS OF FUND ASSET SIZE
                        (PROPOSAL NO. 6)

     The proposed Sub-Advisory Agreement (the "Sub-Advisory
Agreement") is identical to the current Sub-Advisory Agreement
except that the annual rate of fees on average annual assets
would remain level at 0.20 of 1% regardless of asset size; the
current reduction of sub-advisory fees from 0.20 to 0.16 of 1%
for average annual assets over $250 million will be eliminated,
in effect increasing sub-advisory fees above that amount. The
current sub-advisory agreement was approved by the shareholders
of the Fund in June, 1998 and its renewal was most recently
approved by the Board of Trustees in March, 2000.

     The Sub-Advisory Agreement provides that the Manager
appoints KPM as Sub-Adviser to render, to the Manager and to the
Fund, investment research and advisory services as set forth
below under the supervision of the Manager and subject to the
approval and direction of the Board of Trustees of the Fund.  The
Sub-Advisory Agreement provides that the Sub-Adviser will act as
managerial investment adviser to the Fund with respect to the
investment of the Fund's assets, and will supervise and arrange
the purchase of securities for and the sale of securities held in
the portfolio of the Fund.

     The Sub-Advisory Agreement provides in general that subject
to the direction and control of the Manager and the Board of
Trustees of the Fund, the Sub-Adviser shall:

     (i) supervise continuously the investment program of the
     Fund and the composition of its portfolio;

     (ii) determine what securities shall be purchased or sold by
     the Fund;

     (iii) arrange for the purchase and the sale of securities
     held in the portfolio of the Fund;

     (iv) at its expense provide for pricing of the Fund's
     portfolio daily using a pricing service or other source of
     pricing information satisfactory to the Fund and, unless
     otherwise directed by the Board of Trustees, provide for
     pricing of the Fund's portfolio at least quarterly using
     another such source satisfactory to the Fund; and

     (v) consult with the Manager in connection with its duties
     thereunder.

     The Sub-Advisory Agreement provides that any investment
program furnished by the Sub-Adviser shall at all times conform
to, and be in accordance with, any requirements imposed by: (1)
the Investment Company Act of 1940 (the "Act") and any rules or
regulations in force thereunder; (2) any other applicable laws,
rules and regulations; (3) the Declaration of Trust and By-Laws
of the Fund as amended from time to time; (4) any policies and
determinations of the Board of Trustees of the Fund; and (5) the
fundamental policies of the Fund, as reflected in its
registration statement under the Act or as amended by the
shareholders of the Fund.

     The Sub-Advisory Agreement provides that the Sub-Adviser
shall give to the Manager and to the Fund the benefit of its best
judgment and effort in rendering services thereunder, but the
Sub-Adviser shall not be liable for any loss sustained by reason
of the adoption of any investment policy or the purchase, sale or
retention of any security, whether or not such purchase, sale or
retention shall have been based upon (i) its own investigation
and research or (ii) investigation and research made by any other
individual, firm or corporation, if such purchase, sale or
retention shall have been made and such other individual, firm or
corporation shall have been selected in good faith by the Sub-
Adviser.  Under the Sub-Advisory Agreement, the Sub-Adviser will
not be liable for any error in judgment or for any loss suffered
by the Fund or its security holders in connection with the
matters to which the Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard
by it of its obligations and duties under the Agreement.

     The Sub-Advisory Agreement provides that nothing in it shall
prevent the Sub-Adviser or any affiliated person (as defined in
the Act) of the Sub-Adviser from acting as investment adviser or
manager for any other person, firm or corporation and shall not
in any way limit or restrict the Sub-Adviser or any such
affiliated person from buying, selling or trading any securities
for its own or their own accounts or for the accounts of others
for whom it or they may be acting, provided, however, that the
Sub-Adviser expressly represents that, while acting as Sub-
Adviser, it will undertake no activities which, in its judgment,
will adversely affect the performance of its obligations to the
Fund under the Agreement.  It is agreed that the Sub-Adviser
shall have no responsibility or liability for the accuracy or
completeness of the Fund's Registration Statement under the Act
and the Securities Act of 1933, except for information supplied
by the Sub-Adviser for inclusion therein.  The Sub-Adviser shall
promptly inform the Fund as to any information concerning the
Sub-Adviser appropriate for inclusion in such Registration
Statement, or as to any transaction or proposed transaction which
might result in an assignment (as defined in the Act) of the
Agreement.  To the extent that the Manager is indemnified under
the Fund's Declaration of Trust with respect to the services
provided under the Agreement by the Sub-Adviser, the Manager
agrees to provide the Sub-Adviser the benefits of such
indemnification.

     The Sub-Advisory Agreement provides that in connection with
its duties to arrange for the purchase and sale of the Fund's
portfolio securities, the Sub-Adviser shall select such broker-
dealers ("dealers") as shall, in the Sub-Adviser's judgment,
implement the policy of the Fund to achieve "best execution,"
i.e., prompt, efficient, and reliable execution of orders at the
most favorable net price.  The Sub-Adviser shall cause the Fund
to deal directly with the selling or purchasing principal or
market maker without incurring brokerage commissions unless the
Sub-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 dealers include a spread
between the bid and asked prices.  In allocating transactions to
dealers, the Sub-Adviser is authorized to consider, in
determining whether a particular dealer will provide best
execution, the 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
Sub-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 dealer, viewed
either in terms of the particular transaction or the Sub-
Adviser's overall responsibilities. If, on the foregoing basis,
the transaction in question could be allocated to two or more
dealers, the Sub-Adviser is authorized, in making such
allocation, to consider (i) whether a dealer has provided
research services, as further discussed below; and (ii) whether a
dealer has sold shares of 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 and that such research services may or may not
be useful to the Fund and may be used for the benefit of the Sub-
Adviser or its other clients.

     The Sub-Advisory Agreement provides that the Sub-Adviser
agrees to maintain, and to preserve for the periods prescribed,
such books and records with respect to the portfolio transactions
of the Fund as are required by applicable law and regulation, and
agrees that all records which it maintains for the Fund on behalf
of the Manager shall be the property of the Fund and shall be
surrendered promptly to the Fund or the Manager upon request. The
Sub-Adviser agrees to furnish to the Manager and to the Board of
Trustees of the Fund such periodic and special reports as each
may reasonably request.

     The Sub-Advisory Agreement provides that the Sub-Adviser
shall bear all of the expenses it incurs in fulfilling its
obligations under the Agreement. In particular, but without
limiting the generality of the foregoing: the Sub-Adviser shall
furnish the Fund, at the Sub-Adviser's expense, all office space,
facilities, equipment and clerical personnel necessary for
carrying out its duties under the Agreement. The Sub-Adviser
shall supply, or cause to be supplied, to any investment adviser,
administrator or principal underwriter of the Fund all necessary
financial information in connection with such adviser's,
administrator's or principal underwriter's duties under any
agreement between such adviser, administrator or principal
underwriter and the Fund.  The Sub-Adviser will also pay all
compensation of the Fund's officers, employees, and Trustees, if
any, who are affiliated persons of the Sub-Adviser.

   The Sub-Advisory Agreement provides that the Manager agrees
to pay the Sub-Adviser, and the Sub-Adviser agrees to accept as
full compensation for all services rendered by the Sub-Adviser as
such, a management fee payable monthly and computed on the net
asset value of the Fund as of the close of business each business
day at the annual rate of 0.20 of 1% of such net asset value.

     The Sub-Advisory Agreement provides that it will become
effective when approved by the shareholders of the Fund and
shall, unless terminated as thereinafter provided, continue in
effect until the April 30 next preceding the second anniversary
of the effective date of the Agreement, and from year to year
thereafter, but only so long as such continuance is specifically
approved at least annually (1) by a vote of the Fund's Board of
Trustees, including a vote of a majority of the Trustees who are
not parties to the Agreement or "interested persons" (as defined
in the Act) of any such party, with votes cast in person at a
meeting called for the purpose of voting on such approval, or (2)
by a vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote of
the Trustees.

     The Sub-Advisory Agreement provides that it may be
terminated by the Sub-Adviser at any time without penalty upon
giving the Manager and the Fund sixty days' written notice (which
notice may be waived). It may be terminated by the Manager or the
Fund at any time without penalty upon giving the Sub-Adviser
sixty days' written notice (which notice may be waived by the
Sub-Adviser), provided that such termination by the Fund shall be
directed or approved by a vote of a majority of its Trustees in
office at the time or by a vote of the holders of a majority (as
defined in the Act) of the voting securities of the Fund
outstanding and entitled to vote. The Sub-Advisory Agreement will
automatically terminate in the event of its assignment (as
defined in the 1940 Act) or the termination of the Advisory and
Administration Agreement.

Action Requested

     THE BOARD OF TRUSTEES RECOMMENDS THAT THE PROPOSED SUB-
ADVISORY AGREEMENT DESCRIBED ABOVE BE APPROVED.

Vote Required

     The favorable vote of the holders of a majority (as defined
in the 1940 Act) of the outstanding shares of the Fund is
required for the approval of this Proposal No. 6. See Proposal
No. 3 for a description of such a majority.

                           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. One of these conditions 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 in this Proxy Statement
for 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 your proxy card, telephone or internet vote entitles
them to vote, in accordance with their judgment on such matter or
matters. That is, by signing and returning your proxy card or by
voting by telephone or the Internet, you give the proxy holders
discretionary authority as to any such matter or matters.


<PAGE>


IMPORTANT NOTICE
PLEASE READ IMMEDIATELY

TAX-FREE FUND OF COLORADO

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on JUNE 22, 2000

PROXY STATEMENT

<PAGE>

                     Aquilasm Group of Funds
 TAX-FREE FUND OF COLORADO CLASS-A

          PROXY FOR SHAREHOLDERS MEETING June 22, 2000
       PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES

      The  undersigned shareholder of TAX-FREE FUND  OF  COLORADO
(the  "Fund)  does  hereby appoint LACY  B.  HERRMANN,  DIANA  P.
HERRMANN and EDWARD M. W. HINES, or any 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
on  Thursday,  June 22, 2000 at the Lawrence C.  Phipps  Memorial
Conference  Center,  University of Denver,  3400  Belcaro  Drive,
Denver,  CO  80209  at  10:30  a.m.  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. Such shares are entitled to  one  vote
for  every  dollar of net asset value represented  by  the  share
balance printed below.

Please read the proxy statement prior to voting.

     Annual Meeting Attendance
We encourage you to attend the Annual Meeting of Shareholders. If
you  can join us, please so indicate on the proxy card or  e-mail
us at [email protected]

VOTE BY TELEPHONE OR INTERNET OR MAIL
24 Hours a day, 7 days a week

     Telephone
     1-800-690-6903

      To vote your shares by telephone, call toll free 1-800-690-
6903.  You will be prompted to enter the 12-digit control  number
on this proxy card. Follow the simple recorded instructions using
this  proxy card as a guide. If you vote by phone, you  need  not
return the proxy card by mail.

     Internet
     www.proxyvote.com

      To  vote your shares by the Internet, contact the  Fund  at
www.proxyvote.com  You  will be prompted to  enter  the  12-digit
control number on this proxy card. Follow the simple instructions
at  the website, using your proxy card as a guide. If you vote by
the Internet, you need not return the proxy card by mail.

     Mail

      You  can vote your shares by completing and returning  this
proxy  card. 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.
     As to any other matter said proxies shall vote in accordance
with their best judgment.

     TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
_________________________________________________________________
      THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED

 TAX-FREE FUND OF COLORADO CLASS-A

     For  address changes and/or comments, please check this  box
     and write them on the back where indicated.
                                                       [_]

     Vote on Trustees
     (Proposal No.1 in Proxy Statement)

     1. Election of Trustees

     1)   Lacy B. Herrmann*; 2) Tucker Hart Adams; 3) Gary C. Cornia;
       4) Diana P. Herrmann*; 5) John C. Lucking; 6) Anne J. Mills; 7)
       J. William Weeks

          *interested Trustees
                __
               [__]       For all
                __
               [__]       Withhold all
                __
               [__]       For all except

To  withhold  authority to vote for one or  more  (but  not  all)
nominees,  mark "For all except" and write the nominee  number(s)
and/ or name(s) on the line below.

________________


      MANAGEMENT RECOMMENDS A VOTE FOR ALL NOMINEES LISTED  ABOVE
AND FOR THE PROPOSALS LISTED BELOW. THE SHARES REPRESENTED HEREBY
WILL  BE  VOTED  AS  INDICATED BELOW  OR  FOR  IF  NO  CHOICE  IS
INDICATED.


     1.   Action on selection of KPMG LLP as independent auditors
               (Proposal No.2 in Proxy Statement)

          FOR [__]  AGAINST  [__]  ABSTAIN [__]

     3. Action on change of fundamental policy of the Fund
          (Proposal No.3 in Proxy Statement)

          FOR [__]  AGAINST  [__]  ABSTAIN [__]

     4. Action on change of Distribution Plan of the Fund
          (Proposal No.4 in Proxy Statement)

          FOR [__]  AGAINST  [__]  ABSTAIN [__]

       5.   Action   on   change  of  investment   advisory   and
administration agreement of the Fund
          (Proposal No.5 in Proxy Statement)

          FOR [__]  AGAINST  [__]  ABSTAIN [__]

     6. Action on change of sub-advisory agreement of the Fund
          (Proposal No. 6 in Proxy Statement)

          FOR [__]  AGAINST  [__]  ABSTAIN [__]




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.


_________________________________Dated: _________
 Signature
[Please sign within the box]

_________________________________Dated: __________
 Signature
(Joint Owners)


                     Aquilasm Group of Funds
 TAX-FREE FUND OF COLORADO CLASS-C

          PROXY FOR SHAREHOLDERS MEETING June 22, 2000
       PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES

      The  undersigned shareholder of TAX-FREE FUND  OF  COLORADO
(the  "Fund)  does  hereby appoint LACY  B.  HERRMANN,  DIANA  P.
HERRMANN and EDWARD M. W. HINES, or any 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
on  Thursday,  June 22, 2000 at the Lawrence C.  Phipps  Memorial
Conference  Center,  University of Denver,  3400  Belcaro  Drive,
Denver,  CO  80209  at  10:30  a.m.  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. Such shares are entitled to  one  vote
for  every  dollar of net asset value represented  by  the  share
balance printed below.

Please read the proxy statement prior to voting.

     Annual Meeting Attendance
We encourage you to attend the Annual Meeting of Shareholders. If
you  can join us, please so indicate on the proxy card or  e-mail
us at [email protected]

VOTE BY TELEPHONE OR INTERNET OR MAIL
24 Hours a day, 7 days a week

     Telephone
     1-800-690-6903

      To vote your shares by telephone, call toll free 1-800-690-
6903.  You will be prompted to enter the 12-digit control  number
on this proxy card. Follow the simple recorded instructions using
this  proxy card as a guide. If you vote by phone, you  need  not
return the proxy card by mail.

     Internet
     www.proxyvote.com

      To  vote your shares by the Internet, contact the  Fund  at
www.proxyvote.com  You  will be prompted to  enter  the  12-digit
control number on this proxy card. Follow the simple instructions
at  the website, using your proxy card as a guide. If you vote by
the Internet, you need not return the proxy card by mail.

     Mail

      You  can vote your shares by completing and returning  this
proxy  card. 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.
     As to any other matter said proxies shall vote in accordance
with their best judgment.

     TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
_________________________________________________________________
      THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED

 TAX-FREE FUND OF COLORADO CLASS-C

     For  address changes and/or comments, please check this  box
     and write them on the back where indicated.
                                                       [_]

     Vote on Trustees
     (Proposal No.1 in Proxy Statement)

    1.  Election of Trustees

     1)   Lacy B. Herrmann*; 2) Tucker Hart Adams; 3) Gary C. Cornia;
       4) Diana P. Herrmann*; 5) John C. Lucking; 6) Anne J. Mills; 7)
       J. William Weeks

          *interested Trustees
                __
               [__]       For all
                __
               [__]       Withhold all
                __
               [__]       For all except

To  withhold  authority to vote for one or  more  (but  not  all)
nominees,  mark "For all except" and write the nominee  number(s)
and/ or name(s) on the line below.

________________


      MANAGEMENT RECOMMENDS A VOTE FOR ALL NOMINEES LISTED  ABOVE
AND FOR THE PROPOSALS LISTED BELOW. THE SHARES REPRESENTED HEREBY
WILL  BE  VOTED  AS  INDICATED BELOW  OR  FOR  IF  NO  CHOICE  IS
INDICATED.



     2.   Action on selection of KPMG LLP as independent auditors
               (Proposal No.2 in Proxy Statement)

          FOR [__]  AGAINST  [__]  ABSTAIN [__]

     3. Action on change of fundamental policy of the Fund
          (Proposal No.3 in Proxy Statement)

          FOR [__]  AGAINST  [__]  ABSTAIN [__]

     4. Action on change of Distribution Plan of the Fund
          (Proposal No.4 in Proxy Statement)

          FOR [__]  AGAINST  [__]  ABSTAIN [__]

       5.   Action   on   change  of  investment   advisory   and
administration agreement of the Fund
          (Proposal No.5 in Proxy Statement)

          FOR [__]  AGAINST  [__]  ABSTAIN [__]

     6. Action on change of sub-advisory agreement of the Fund
          (Proposal No. 6 in Proxy Statement)

          FOR [__]  AGAINST  [__]  ABSTAIN [__]

Please indicate if you plan to attend one of the Shareholder
Meetings. If you mark one of the boxes below, you must return the
proxy card by mail to have this information recorded.

     D.   I plan to attend the annual meeting in Denver [__]


     G.   I plan to attend the outreach meeting in Grand
     Junction [__]


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.


_________________________________Dated: _________
 Signature
[Please sign within the box]

_________________________________Dated: __________
 Signature
(Joint Owners)
                     Aquilasm Group of Funds
                TAX-FREE FUND OF COLORADO CLASS-Y

          PROXY FOR SHAREHOLDERS MEETING June 22, 2000
       PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES

      The  undersigned shareholder of TAX-FREE FUND  OF  COLORADO
(the  "Fund)  does  hereby appoint LACY  B.  HERRMANN,  DIANA  P.
HERRMANN and EDWARD M. W. HINES, or any 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
on  Thursday,  June 22, 2000 at the Lawrence C.  Phipps  Memorial
Conference  Center,  University of Denver,  3400  Belcaro  Drive,
Denver,  CO  80209  at  10:30  a.m.  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. Such shares are entitled to  one  vote
for  every  dollar of net asset value represented  by  the  share
balance printed below.

Please read the proxy statement prior to voting.

     Annual Meeting Attendance
We encourage you to attend the Annual Meeting of Shareholders. If
you  can join us, please so indicate on the proxy card or  e-mail
us at [email protected]

VOTE BY TELEPHONE OR INTERNET OR MAIL
24 Hours a day, 7 days a week

     Telephone
     1-800-690-6903

      To vote your shares by telephone, call toll free 1-800-690-
6903.  You will be prompted to enter the 12-digit control  number
on this proxy card. Follow the simple recorded instructions using
this  proxy card as a guide. If you vote by phone, you  need  not
return the proxy card by mail.

     Internet
     www.proxyvote.com

      To  vote your shares by the Internet, contact the  Fund  at
www.proxyvote.com  You  will be prompted to  enter  the  12-digit
control number on this proxy card. Follow the simple instructions
at  the website, using your proxy card as a guide. If you vote by
the Internet, you need not return the proxy card by mail.

     Mail

      You  can vote your shares by completing and returning  this
proxy  card. 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.
     As to any other matter said proxies shall vote in accordance
with their best judgment.

     TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
_________________________________________________________________
      THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED

 TAX-FREE FUND OF COLORADO CLASS-Y

     For  address changes and/or comments, please check this  box
     and write them on the back where indicated.
                                                       [_]

     Vote on Trustees
     (Proposal No.1 in Proxy Statement)

     1. Election of Trustees

     1.   Lacy B. Herrmann*; 2) Tucker Hart Adams; 3) Gary C. Cornia;
       4) Diana P. Herrmann*; 5) John C. Lucking; 6) Anne J. Mills; 7)
       J. William Weeks

          *interested Trustees
                __
               [__]       For all
                __
               [__]       Withhold all
                __
               [__]       For all except

To  withhold  authority to vote for one or  more  (but  not  all)
nominees,  mark "For all except" and write the nominee  number(s)
and/ or name(s) on the line below.

________________


      MANAGEMENT RECOMMENDS A VOTE FOR ALL NOMINEES LISTED  ABOVE
AND FOR THE PROPOSALS LISTED BELOW. THE SHARES REPRESENTED HEREBY
WILL  BE  VOTED  AS  INDICATED BELOW  OR  FOR  IF  NO  CHOICE  IS
INDICATED.



     2.   Action on selection of KPMG LLP as independent auditors
               (Proposal No.2 in Proxy Statement)

          FOR [__]  AGAINST  [__]  ABSTAIN [__]

     3. Action on change of fundamental policy of the Fund
          (Proposal No.3 in Proxy Statement)

          FOR [__]  AGAINST  [__]  ABSTAIN [__]

     4. (Class Y Shareholders do not vote on Proposal No. 4)

       5.   Action   on   change  of  investment   advisory   and
administration agreement of the Fund
          (Proposal No.5 in Proxy Statement)

          FOR [__]  AGAINST  [__]  ABSTAIN [__]

     6. Action on change of sub-advisory agreement of the Fund
          (Proposal No. 6 in Proxy Statement)

          FOR [__]  AGAINST  [__]  ABSTAIN [__]

Please indicate if you plan to attend one of the Shareholder
Meetings. If you mark one of the boxes below, you must return the
proxy card by mail to have this information recorded.

     D.   I plan to attend the annual meeting in Denver [__]


     H.   I plan to attend the outreach meeting in Grand
     Junction [__]

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.


_________________________________Dated: _________
 Signature
[Please sign within the box]

_________________________________Dated: __________
 Signature
(Joint Owners)




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