UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act file number 811-5047

Tax-Free Fund of Colorado
(Exact name of Registrant as specified in charter)

380 Madison Avenue
New York, New York 10017
(Address of principal executive offices) (Zip code)

Joseph P. DiMaggio
380 Madison Avenue
New York, New York 10017
(Name and address of agent for service)

Registrant's telephone number, including area code: (212) 697-6666

Date of fiscal year end: 12/31

Date of reporting period: 6/30/04

FORM N-CSR

ITEM 1. REPORTS TO STOCKHOLDERS.

[Logo of Aquila Group of Funds: an eagle's head]

AQUILA(SM)
GROUP OF FUNDS

SERVING COLORADO INVESTORS
FOR OVER 15 YEARS

TAX-FREE FUND
OF COLORADO

380 Madison Avenue, Suite 2300 o New York, NY 10017
800-437-1020 o 212-697-6666

[Logo of Tax-Free Fund of Colorado: a square with silhouettes of two mountains
and a rising sun]

SEMI-ANNUAL REPORT

TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS
JUNE 30, 2004
(UNAUDITED)

RATING
FACE MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (36.1%) S&P VALUE
- ---------- --------------------------------------------------------- -------- ------------

CITY & COUNTY (2.2%)
Denver, Colorado City & County Art Museum
$2,000,000 5.00%, 08/01/15 ...................................... Aa1/AA+ $ 2,109,900
Denver, Colorado City & County Excise
Tax Revenue
1,000,000 5.00%, 09/01/11 FSA Insured .......................... Aaa/AAA 1,076,000
2,260,000 5.00%, 09/01/12 FSA Insured .......................... Aaa/AAA 2,402,968
------------
5,588,868
------------
METROPOLITAN DISTRICT (6.1%)
Arapahoe, Colorado Park & Recreation District
1,070,000 5.00%, 12/01/17 FGIC Insured ......................... Aaa/NR 1,121,542
Castle Pines, Colorado Metropolitan District
1,060,000 5.50%, 12/01/07 FSA Insured .......................... Aaa/AAA 1,157,647
Foothills, Colorado Park & Recreational District
1,310,000 5.00%, 12/01/12 FSA Insured .......................... Aaa/NR 1,400,966
1,325,000 5.00%, 12/01/13 FSA Insured .......................... Aaa/NR 1,411,748
1,850,000 5.00%, 12/01/17 MBIA Insured ......................... Aaa/NR 1,939,115
Highlands Ranch, Colorado Metropolitan District
#1, Refunding
1,530,000 6.25%, 09/01/06 MBIA Insured ......................... Aaa/AAA 1,541,383
1,000,000 5.75%, 09/01/08 AMBAC Insured ........................ Aaa/AAA 1,104,930
1,730,000 5.75%, 09/01/09 AMBAC Insured ........................ Aaa/AAA 1,926,649
Interstate South, Colorado Metropolitan District
2,165,000 5.75%, 12/01/09 LOC: US Bank ......................... NR/AA- 2,228,045
South Suburban, Colorado Park & Recreational
District
1,365,000 5.125%, 12/15/09 FGIC Insured ........................ Aaa/AAA 1,471,211
------------
15,303,236
------------
SCHOOL DISTRICTS (27.8%)
Adams & Arapahoe Counties, Colorado School
District 28J
4,000,000 5.00%, 12/01/16 FSA Insured .......................... Aaa/AAA 4,236,760
Adams County, Colorado School District #12
$1,255,000 5.625%, 12/15/08 FGIC Insured ........................ Aaa/AAA $ 1,385,420
2,000,000 5.00%, 12/15/12 MBIA Insured ......................... Aaa/AAA 2,139,540
Adams County, Colorado School District #14
1,275,000 5.75%, 12/01/08 FSA Insured .......................... Aaa/AAA 1,411,336
Adams County, Colorado School District
#14 Refunding
1,200,000 4.50%, 12/01/16 MBIA Insured ......................... Aaa/NR 1,229,808
Arapahoe County, Colorado Cherry Creek School
District #5
1,000,000 5.50%, 12/15/08 ...................................... Aa2/AA 1,099,290
2,760,000 5.50%, 12/15/11 ...................................... Aa2/AA 3,041,354
2,750,000 5.50%, 12/15/12 ...................................... Aa2/AA 3,021,728
Boulder Valley, Colorado School District
1,215,000 5.50%, 12/01/08 FGIC Insured ......................... Aaa/AAA 1,325,565
Clear Creek, Colorado School District
1,000,000 5.00%, 12/01/16 FSA Insured .......................... Aaa/AAA 1,053,940
Denver, Colorado City & County School
District #1
1,000,000 5.60%, 06/01/08 ...................................... Aa3/AA- 1,093,130
Douglas & Elbert Counties, Colorado School District
# Re-1, Series 1992
2,000,000 5.25%, 12/15/11 FGIC Insured ......................... Aaa/AAA 2,166,860
El Paso County, Colorado School District
#2 Harrison
1,000,000 5.00%, 12/01/15 MBIA Insured ......................... Aaa/NR 1,057,560
El Paso County, Colorado School District #11
1,330,000 6.25%, 12/01/08 ...................................... Aa3/AA- 1,505,227
El Paso County, Colorado School District #20
1,000,000 6.15%, 12/15/08 MBIA Insured ......................... Aaa/AAA 1,130,500
1,500,000 5.00%, 12/15/14 FGIC Insured ......................... Aaa/NR 1,597,680
El Paso County, Colorado School District #38
1,110,000 5.70%, 12/01/12 ...................................... Aa3/NR 1,250,981
El Paso County, Colorado School District #49
$1,500,000 5.50%, 12/01/13 FSA Insured .......................... Aaa/AAA $ 1,668,060
1,000,000 5.25%, 12/01/14 FGIC Insured ......................... Aaa/AAA 1,077,380
1,795,000 5.00%, 12/01/15 FSA Insured .......................... Aaa/AAA 1,908,408
Fremont County, Colorado School District #001
Canon City
1,680,000 5.00%, 12/01/17 MBIA Insured ......................... Aaa/NR 1,768,771
Garfield County, Colorado School District
1,250,000 5.00%, 12/01/17 FSA Insured .......................... Aaa/NR 1,310,212
Jefferson County, Colorado School District # R-1
3,000,000 5.50%, 12/15/09 FGIC Insured ......................... Aaa/AAA 3,327,990
2,340,000 5.25%, 12/15/11 FGIC Insured ......................... Aaa/AAA 2,517,091
1,000,000 5.50%, 12/15/13 FGIC Insured ......................... Aaa/AAA 1,109,330
La Plata County, Colorado School District #9
1,500,000 5.00%, 11/01/18 MBIA Insured ......................... Aaa/NR 1,562,040
Larimer County, Colorado School District #R1
Poudre Refunding Series A
2,100,000 5.25%, 12/15/11 ...................................... Aa3/AA- 2,251,704
Larimer, Weld & Boulder Counties, Colorado School
District #R-2J Thompson Refunding Series 2003
1,000,000 4.375%, 12/15/14 FSA Insured ......................... Aaa/NR 1,024,860
Larimer, Weld & Boulder Counties, Colorado
Thompson S.D.
2,000,000 5.90%, 12/15/05 ...................................... Aa3/AA- 2,035,080
Mesa County, Colorado School District #51
1,065,000 6.00%, 12/01/06 MBIA Insured ......................... Aaa/AAA 1,158,400
1,000,000 5.20%, 12/01/09 MBIA Insured ......................... Aaa/AAA 1,077,340
Pueblo County, Colorado School District # 70
1,040,000 5.50%, 12/01/09 AMBAC Insured ........................ Aaa/AAA 1,120,340
1,000,000 5.00%, 12/01/15 FGIC Insured ......................... Aaa/AAA 1,051,710
3,440,000 5.00%, 12/01/16 FGIC Insured ......................... Aaa/AAA 3,606,702
Routt County, Colorado School District #2
Steamboat Springs
1,580,000 4.50%, 12/01/17 FSA Insured .......................... Aaa/AAA 1,598,281
Teller County, Colorado School District #2
Woodland Park
$1,265,000 5.00%, 12/01/17 MBIA Insured ......................... Aaa/AAA $ 1,332,083
Weld & Adams Counties, Colorado School
District 3J
1,000,000 5.50%, 12/15/10 AMBAC Insured Pre-Refunded ........... Aaa/AAA 1,111,900
Weld County, Colorado School District # 2
1,315,000 5.00%, 12/01/15 FSA Insured .......................... Aaa/AAA 1,390,691
Weld County, Colorado School District # 6
1,195,000 5.00%, 12/01/15 FSA Insured .......................... Aaa/AAA 1,256,793
Weld County, Colorado School District #6
Greeley Refunding
1,695,000 5.00%, 12/01/16 FSA Insured .......................... Aaa/AAA 1,795,327
Weld County, Colorado School District #8
1,115,000 5.00%, 12/01/15 FSA Insured .......................... Aaa/AAA 1,179,179
1,385,000 5.25%, 12/01/17 FSA Insured .......................... Aaa/AAA 1,480,939
------------
70,467,290
------------
Total General Obligation Bonds .................... 91,359,394
------------
REVENUE BONDS (64.3%)

ELECTRIC (3.1%)
Colorado Springs, Colorado Utilities Revenue
1,660,000 5.00%, 11/15/17 ...................................... Aa2/AA 1,736,028
Colorado Springs, Colorado Utilities Revenue
Subordinated Lien Improvement Series A
1,095,000 5.00%, 11/15/16 ...................................... Aa2/AA 1,157,809
1,000,000 5.00%, 11/15/17 ...................................... Aa2/AA 1,050,270
Moffat County, Colorado Pollution Control
2,125,000 5.625%, 11/01/06 AMBAC Insured ....................... Aaa/AAA 2,287,116
Platte River, Colorado Power Authority
1,500,000 6.00%, 06/01/07 MBIA Insured ......................... Aaa/AAA 1,643,865
------------
7,875,088
------------
HIGHER EDUCATION (9.8%)
Boulder County, Colorado Development
Revenue UCAR
$1,760,000 5.00%, 09/01/16 MBIA Insured ......................... Aaa/AAA $ 1,852,541
1,130,000 5.00%, 09/01/17 AMBAC Insured ........................ Aaa/AAA 1,188,398
City of Aurora, Colorado Educational Development
Refunding Bonds Series 1994
1,580,000 6.00%, 10/15/07 ...................................... NR/BBB 1,606,607
Colorado Educational & Cultural Facility Authority
Johnson & Wales
860,000 5.00%, 04/01/18 XLCI Insured ......................... Aaa/AAA 890,719
Colorado Educational & Cultural Facility Authority
University of Colorado Foundation Project
2,110,000 5.00%, 07/01/17 AMBAC Insured ........................ Aaa/AAA 2,207,482
1,865,000 5.375%, 07/01/18 AMBAC Insured ....................... Aaa/AAA 1,999,299
Colorado Post Secondary Educational Facility
1,170,000 5.50%, 03/01/08 MBIA Insured ......................... Aaa/AAA 1,275,089
Colorado State Colleges Board Trustees Auxiliary
System Revenue Refunding Series B
1,035,000 5.00%, 05/15/15 MBIA Insured ......................... Aaa/AAA 1,097,245
Colorado State University System
1,530,000 5.00%, 03/01/17 AMBAC Insured ........................ Aaa/NR 1,605,490
University of Colorado Enterprise System
1,000,000 5.00%, 06/01/11 ...................................... Aa3/AA- 1,084,230
2,325,000 5.00%, 06/01/15 AMBAC Insured ........................ Aaa/AAA 2,452,108
1,735,000 5.00%, 06/01/16 ...................................... Aa3/AA- 1,823,971
1,000,000 5.25%, 06/01/17 FGIC Insured ......................... Aaa/AAA 1,076,510
University of Northern Colorado Auxiliary Facilities
1,365,000 5.75%, 06/01/07 MBIA Insured Pre-Refunded ............ Aaa/AAA 1,384,233
1,745,000 5.75%, 06/01/08 MBIA Insured ......................... Aaa/AAA 1,892,610
1,390,000 5.00%, 06/01/15 AMBAC Insured ........................ Aaa/AAA 1,457,679
------------
24,894,211
------------
HOSPITAL (4.4%)
Colorado Health Facilities Authority Revenue,
Boulder Community Hospital Refunding
$1,410,000 5.65%, 10/01/06 MBIA Insured ......................... Aaa/AAA $ 1,451,510
Colorado Health Facility Authority Hospital
Revenue, Catholic Health
1,000,000 5.375%, 12/01/09 ..................................... Aa2/AA 1,067,100
Colorado Health Facility Authority Hospital Revenue,
North Colorado Medical Center
1,440,000 5.60%, 05/15/05 MBIA Insured ......................... Aaa/AAA 1,477,166
Colorado Health Facility Authority Hospital
Revenue, Sisters of Charity-Leavenworth
1,000,000 5.50%, 12/01/08 MBIA Insured ......................... Aaa/AAA 1,094,870
1,500,000 5.25%, 12/01/10 MBIA Insured ......................... Aaa/AAA 1,606,335
Colorado Health Facility Authority Sisters of Charity -
Health Care
1,000,000 6.25%, 05/15/09 AMBAC Insured, ETM ................... Aaa/AAA 1,132,330
Colorado Health Facility Community Provider
Pooled Loan Revenue
101,000 7.20%, 07/15/05 FSA Insured .......................... Aaa/AAA 101,307
Colorado Springs, Colorado Hospital Revenue
1,460,000 5.50%, 12/15/06 MBIA Insured ......................... Aaa/AAA 1,563,879
University Colorado Hospital Authority Hospital
Revenue
1,475,000 5.50%, 11/15/07 AMBAC Insured ........................ Aaa/NR 1,604,225
------------
11,098,722
------------
HOUSING (2.5%)
Adams County, Colorado Multi-Family Housing
Revenue, Brittany Station Series A
1,600,000 5.40%, 09/01/25 FNMA Insured ......................... NR/AAA 1,652,752
Colorado Housing Finance Authority
610,000 5.00%, 08/01/13 Series 2001 .......................... A1/A+ 624,060
1,095,000 6.05%, 10/01/16 Series 1999A3 ........................ Aa2/AA+ 1,105,260
35,000 6.125%, 11/01/23 Series 1998D3 ....................... Aa2/NR 37,262
Colorado Housing Finance Authority, SFM
$ 5,000 6.00%, 12/01/04 Series 1994C ......................... Aa2/NR $ 5,010
160,000 5.625%, 06/01/10 Series 1995D ........................ Aa2/NR 161,978
95,000 5.75%, 11/01/10 Series 1996A ......................... Aa2/NR 95,102
65,000 6.25%, 12/01/12 Series 1994C ......................... Aa2/NR 65,158
Colorado Housing Finance Authority, Single Family
Program 2000C3
160,000 5.70%, 10/01/22 ...................................... Aa2/AA 165,619
Colorado Housing Finance Authority, Single Family
Program Sub. 2000D
330,000 5.40%, 10/01/12 ...................................... A1/A+ 332,412
Denver, Colorado Single Family Mortgage Revenue
220,000 5.00%, 11/01/15 GNMA Insured ......................... NR/AAA 222,752
Littleton, Colorado Assisted Living Building Authority,
Amity Plaza Project Multi-Family Housing
Revenue Bond Series 1994
440,000 6.10%, 03/01/06 ...................................... NR/A+ 441,162
Snowmass Village, Colorado Multi-Family
Revenue Refunding
1,500,000 6.30%, 12/15/08 FSA Insured .......................... Aaa/AAA 1,507,200
------------
6,415,727
------------
LEASE (8.3%)
Aurora, Colorado COP
2,105,000 5.25%, 12/01/13 AMBAC Insured ........................ Aaa/AAA 2,262,096
Broomfield, Colorado COP
2,500,000 5.10%, 12/01/12 AMBAC Insured ........................ Aaa/NR 2,666,975
Denver, Colorado City and County COP
Roslyn Fire
1,835,000 5.00%, 12/01/15 ...................................... Aa2/AA 1,932,273
El Paso County, Colorado COP
1,100,000 5.25%, 12/01/09 MBIA Insured ......................... Aaa/AAA 1,206,458
El Paso County, Colorado COP Judicial Building
1,760,000 5.00%, 12/01/16 AMBAC Insured ........................ Aaa/AAA 1,854,934
El Paso County, Colorado COP Pikes Peak Regional
Development Authority
$1,925,000 5.00%, 12/01/18 AMBAC Insured ........................ Aaa/AAA $ 2,013,069
Fort Collins, Colorado Lease COP Series A
3,020,000 4.75%, 06/01/18 AMBAC Insured ++ ..................... Aaa/NR 3,091,816
Fremont County, Colorado COP Refunding and
Improvement Series A
2,075,000 5.00%, 12/15/18 MBIA Insured ......................... Aaa/AAA 2,170,284
Lakewood, Colorado COP
1,440,000 5.20%, 12/01/13 AMBAC Insured ........................ Aaa/AAA 1,539,216
Northern Colorado Water Conservancy District
1,000,000 5.00%, 10/01/15 MBIA Insured ......................... Aaa/AAA 1,056,580
Westminster, Colorado COP
1,055,000 5.35%, 09/01/11 MBIA Insured ......................... Aaa/AAA 1,152,450
------------
20,946,151
------------
SALES TAX (11.1%)
City of Boulder, Colorado
1,045,000 5.25%, 08/15/10 AMBAC Insured ........................ Aaa/AAA 1,138,496
Boulder, Colorado Open Space Acquisition
1,250,000 5.50%, 08/15/12 ...................................... Aa1/AA+ 1,367,663
Boulder County, Colorado Open Space Capital
Improvement
3,065,000 5.00%, 07/15/16 MBIA Insured + ....................... Aaa/AAA 3,224,135
1,630,000 5.00%, 07/15/17 MBIA Insured ......................... Aaa/AAA 1,705,599
Boulder County, Colorado Sales & Use Tax Open
Space Series A
1,000,000 5.45%, 12/15/12 FGIC Insured ......................... Aaa/AAA 1,090,610
City & County of Denver, Colorado Excise
Tax Revenue
2,000,000 5.375%, 09/01/10 FSA Insured ......................... Aaa/AAA 2,190,120
Colorado Springs, Colorado Sales & Use Tax
Revenue Service Sales
1,320,000 5.00%, 12/01/12 ...................................... A1/AA 1,403,292
Douglas County, Colorado Sales & Use Tax Open
Space Revenue
$1,780,000 5.50%, 10/15/12 FSA Insured .......................... Aaa/AAA $ 1,936,035
Golden, Colorado Sales & Use Tax
1,265,000 5.00%, 12/01/12 AMBAC Insured ........................ Aaa/AAA 1,352,842
Jefferson County, Colorado Open Space Sales Tax
1,245,000 5.00%, 11/01/11 FGIC Insured ......................... Aaa/AAA 1,331,752
1,600,000 5.00%, 11/01/13 AMBAC Insured ........................ Aaa/AAA 1,703,712
1,080,000 5.00%, 11/01/14 AMBAC Insured ........................ Aaa/AAA 1,142,262
Lakewood, Colorado Sales & Use Tax Revenue
1,040,000 5.25%, 12/01/09 ...................................... NR/AA 1,136,346
Larimer County, Colorado Sales Tax Revenue Bond
1,000,000 5.50%, 12/15/12 AMBAC Insured ........................ Aaa/AAA 1,089,750
Longmont, Colorado Sales & Use Tax
1,875,000 5.50%, 11/15/14 ...................................... NR/AA 2,043,506
Thornton, Colorado Sales Tax
1,000,000 5.00%, 09/01/14 FSA Insured .......................... Aaa/AAA 1,056,520
Westminster, Colorado Sales Tax Revenue
1,175,000 5.50%, 12/01/07 FGIC Insured ......................... Aaa/AAA 1,283,241
1,710,000 5.00%, 12/01/17 AMBAC Insured ........................ Aaa/AAA 1,792,371
------------
27,988,252
------------
TRANSPORTATION (5.0%)
Arapahoe County, Colorado E-470 Vehicle
Registration Revenue Bonds
1,000,000 5.45%, 08/31/07 MBIA Insured Pre-Refunded ............ Aaa/AAA 1,072,630
Colorado Department of Transportation Revenue
1,565,000 5.00%, 06/15/15 MBIA Insured ......................... Aaa/AAA 1,673,893
Colorado Department of Transportation-Transportation
Revenue Anticipation Note
1,000,000 6.00%, 06/15/13 AMBAC Insured Pre-Refunded ........... Aaa/AAA 1,144,620
Northwest Parkway, Colorado Public Highway
Authority Series A
2,515,000 5.15%, 06/15/14 AMBAC Insured ........................ Aaa/AAA 2,714,188
Regional Transportation District Colorado COP
$1,190,000 5.00%, 06/01/15 AMBAC Insured ........................ Aaa/AAA $ 1,255,057
1,510,000 4.85%, 06/01/18 AMBAC Insured ........................ Aaa/AAA 1,549,804
Regional Transportation District Colorado Sales Tax
Revenue
2,000,000 5.00%, 11/01/13 FGIC Insured ......................... Aaa/AAA 2,129,620
1,000,000 5.00%, 11/01/16 FGIC Insured ......................... Aaa/AAA 1,047,980
------------
12,587,792
------------
WATER & SEWER (17.7%)
Aurora, Colorado Water Improvement Revenue
First Lien Series A
1,155,000 5.00%, 08/01/16 MBIA Insured ......................... Aaa/NR 1,221,378
Boulder, Colorado Water & Sewer Revenue
1,000,000 5.40%, 12/01/14 ...................................... Aa2/AA+ 1,090,730
Broomfield, Colorado Sewer and Waste Water Revenue
1,985,000 5.00%, 12/01/15 AMBAC Insured ........................ Aaa/NR 2,099,257
1,000,000 5.00%, 12/01/16 AMBAC Insured ........................ Aaa/NR 1,053,940
Broomfield, Colorado Water Activity Enterprise
1,500,000 5.30%, 12/01/12 MBIA Insured ......................... Aaa/NR 1,628,745
1,730,000 5.25%, 12/01/13 MBIA Insured ......................... Aaa/NR 1,872,604
2,190,000 5.00%, 12/01/16 MBIA Insured ......................... Aaa/NR 2,308,129
2,290,000 5.00%, 12/01/17 ...................................... Aaa/NR 2,400,309
Centennial, Colorado Water & Sewer District
1,750,000 5.80%, 12/01/07 FSA Insured .......................... Aaa/AAA 1,861,038
Colorado Clean Water Revenue
1,000,000 5.375%, 09/01/10 ..................................... Aaa/AAA 1,089,190
Colorado Metro Wastewater Reclamation District
1,270,000 5.25%, 04/01/09 ...................................... Aa2/AA 1,362,786
Colorado Water Resource & Power Development Authority
215,000 6.00%, 09/01/06 ...................................... Aaa/AAA 216,582
1,000,000 5.50%, 09/01/09 ...................................... Aaa/AAA 1,088,320
1,635,000 5.00%, 09/01/12 ...................................... Aaa/AAA 1,757,854
Colorado Water Resource & Power Development Authority
(continued)
$1,000,000 5.55%, 11/01/13 FGIC Insured ......................... Aaa/AAA $ 1,096,260
2,675,000 5.00%, 09/01/16 MBIA Insured ......................... Aaa/AAA 2,843,445
1,855,000 5.00%, 09/01/17 MBIA Insured ......................... Aaa/AAA 1,959,251
Denver, Colorado City and County Wastewater Revenue
1,560,000 5.00%, 11/01/15 FGIC Insured ......................... Aaa/AAA 1,649,014
Denver, Colorado City & County Water Board
2,570,000 4.75%, 12/01/17 FSA Insured .......................... Aaa/AAA 2,643,194
1,885,000 4.75%, 12/01/18 FSA Insured .......................... Aaa/AAA 1,926,112
Lafayette, Colorado Water Revenue
1,625,000 5.00%, 12/01/17 MBIA Insured ......................... Aaa/AAA 1,710,865
Left Hand, Colorado Water District Revenue Refunding
1,190,000 4.50%, 05/15/15 FSA Insured .......................... Aaa/NR 1,220,821
Left Hand, Colorado Water District, Series 1996
1,530,000 5.75%, 11/15/08 MBIA Insured ......................... Aaa/AAA 1,655,582
Northglenn, Colorado Water & Sewer
1,010,000 5.75%, 12/01/06 FSA Insured .......................... Aaa/AAA 1,092,699
Pueblo, Colorado Board Water Works
1,000,000 5.50%, 11/01/10 FSA Insured .......................... Aaa/AAA 1,110,660
Thornton, Colorado, Refunding
2,000,000 5.60%, 12/01/06 FSA Insured .......................... Aaa/AAA 2,156,780
Ute, Colorado Water Conservancy District
1,570,000 5.50%, 06/15/12 MBIA Insured ......................... Aaa/AAA 1,709,856
Westminster, Colorado Water & Wastewater Utility Revenue
1,000,000 5.70%, 12/01/04 AMBAC Insured ........................ Aaa/AAA 1,017,600
------------
44,843,001
------------
MISCELLANEOUS REVENUE (2.4%)
Denver, Colorado City & County Helen Bonfils Project
2,275,000 5.875%, 12/01/09 ..................................... NR/AA- 2,475,018
South Suburban, Colorado Park & Recreational District
$1,000,000 6.00%, 11/01/07 ...................................... Baa3/NR $ 1,069,230
Thornton, Colorado Development Authority
1,230,000 5.75%, 12/01/06 MBIA Insured ......................... Aaa/AAA 1,330,712
Westminster, Colorado Golf Course Activity
1,000,000 5.40%, 12/01/13 Asset Guaranty Insured ............... NR/AA 1,057,720
------------
5,932,680
------------
Total Revenue Bonds ............................... 162,581,624
------------

Total Investments (cost $244,625,514*) .................. 100.4% 253,941,018
Other assets less liabilities ........................... (0.4) (894,137)
----- ------------
Net Assets .............................................. 100.0% $253,046,881
===== ============

* See note 4.

+ These securities are pledged as collateral for
the Trust's when-issued commitments.

++ Security traded on a "when-issued" basis.

PORTFOLIO ABBREVIATIONS:
---------------------------------------------------------
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificates of Participation
ETM - Escrowed to Maturity
FGIC - Financial Guaranty Insurance Co.
FNMA - Federal Housing Administration
FSA - Financial Security Assurance
GNMA - Government National Mortgage Association
LOC - Letter of Credit
MBIA - Municipal Bond Investors Assurance
NR - Not Rated
SFM - Single Family Mortgage
UCAR - University Corporation for Atmospheric Research
XLCI - XL Capital Assurance, Inc.

See accompanying notes to financial statements.

TAX-FREE FUND OF COLORADO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)

ASSETS
Investments at value (cost $244,625,514) .................... $253,941,018
Cash ........................................................ 1,050,175
Interest receivable ......................................... 1,741,987
Receivable for Fund shares sold ............................. 225,181
Receivable for investment securities sold ................... 94,000
Other assets ................................................ 16,367
------------
Total assets ................................................ 257,068,728
------------
LIABILITIES
Payable for securities purchased ............................ 3,069,709
Payable for Fund shares redeemed ............................ 479,292
Dividends payable ........................................... 261,868
Management fee payable ...................................... 103,586
Distribution fees payable ................................... 55,501
Accrued expenses ............................................ 51,891
------------
Total liabilities ........................................... 4,021,847
------------
NET ASSETS ..................................................... $253,046,881
============
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares,
par value $.01 per share ................................. $ 241,204
Additional paid-in capital .................................. 244,185,025
Net unrealized appreciation on investments (note 4) ......... 9,315,504
Net realized loss on investments ............................ (358,839)
Distributions in excess of net investment income ............ (336,013)
------------
$253,046,881
============
CLASS A
Net Assets .................................................. $224,755,099
============
Capital shares outstanding .................................. 21,423,660
============
Net asset value and redemption price per share .............. $ 10.49
============
Offering price per share (100/96 of $10.49 adjusted to
nearest cent) (note 3) ................................... $ 10.93
============
CLASS C
Net Assets .................................................. $ 14,509,028
============
Capital shares outstanding .................................. 1,385,726
============
Net asset value and offering price per share ................ $ 10.47
============
Redemption price per share (*a charge of 1% is imposed
on the redemption proceeds of the shares, or on the
original price, whichever is lower, if redeemed
during the first 12 months after purchase) ............... $ 10.47*
============
CLASS Y
Net Assets .................................................. $ 13,782,754
============
Capital shares outstanding .................................. 1,310,999
============
Net asset value, offering and redemption price per share .... $ 10.51
============

See accompanying notes to financial statements.

TAX-FREE FUND OF COLORADO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED)

INVESTMENT INCOME:

Interest income .......................................... $ 5,863,568

Expenses:

Management fee (note 3) .................................. $ 649,470
Distribution and service fees (note 3) ................... 135,602
Transfer and shareholder servicing agent fees ............ 76,413
Trustees' fees and expenses (note 8) ..................... 52,076
Shareholders' reports and proxy statements ............... 32,761
Legal fees ............................................... 27,835
Auditing and tax fees .................................... 14,866
Custodian fees ........................................... 10,776
Registration fees and dues ............................... 8,464
Insurance ................................................ 7,797
Miscellaneous ............................................ 18,658
-----------
Total expenses ........................................... 1,034,718

Expenses paid indirectly (note 6) ........................ (3,266)
-----------
Net expenses ............................................. 1,031,452
-----------
Net investment income .................................... 4,832,116

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

Net realized gain (loss) from securities transactions .... (358,693)
Change in unrealized appreciation on investments ......... (7,820,745)
-----------

Net realized and unrealized gain (loss) on investments ... (8,179,438)
-----------
Net change in net assets resulting from operations ....... $(3,347,322)
===========

See accompanying notes to financial statements.

TAX-FREE FUND OF COLORADO
STATEMENTS OF CHANGES IN NET ASSETS

SIX MONTHS ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
---------------- -----------------

OPERATIONS:
Net investment income ....................................... $ 4,832,116 $ 9,336,689
Net realized gain (loss) from securities transactions ....... (358,693) 18,155
Change in unrealized appreciation on investments ............ (7,820,745) 941,222
------------ ------------
Change in net assets from operations ..................... (3,347,322) 10,296,066
------------ ------------

DISTRIBUTIONS TO SHAREHOLDERS (NOTE 10):
Class A Shares:
Net investment income ....................................... (4,660,006) (9,078,557)

Class C Shares:
Net investment income ....................................... (241,325) (401,241)

Class I Shares:
Net investment income ....................................... -- (50)+

Class Y Shares:
Net investment income ....................................... (282,946) (432,274)
------------ ------------
Change in net assets from distributions .................. (5,184,277) (9,912,122)
------------ ------------

CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from shares sold ................................... 13,473,913 52,284,613
Reinvested dividends and distributions ...................... 3,035,748 5,865,102
Cost of shares redeemed ..................................... (17,620,346) (27,630,404)
------------ ------------
Change in net assets from capital share transactions ........ (1,110,685) 30,519,311
------------ ------------
Change in net assets ..................................... (9,642,284) 30,903,255

NET ASSETS:
Beginning of period ......................................... 262,689,165 231,785,910
------------ ------------
End of period* .............................................. $253,046,881 $262,689,165
============ ============

* Includes dividends in excess of net investment income
and undistributed net investment income of, respectively: $ (336,013) $ 16,148
============ ============

- ----------
+ For the period April 2, 2003 to July 8, 2003.

See accompanying notes to financial statements.

TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

1. ORGANIZATION

Tax-Free Fund of Colorado (the "Fund"), a non-diversified, open-end
investment company, was organized in February, 1987 as a Massachusetts business
trust and commenced operations on May 21, 1987. The Fund is authorized to issue
an unlimited number of shares and, since its inception to April 30, 1996,
offered only one class of shares. On that date, the Fund began offering two
additional classes of shares, Class C and Class Y shares. All shares outstanding
prior to that date were designated as Class A shares and are sold with a
front-payment sales charge and bear an annual distribution fee. Class C shares
are sold with a level-payment sales charge with no payment at time of purchase
but level service and distribution fees from date of purchase through a period
of six years thereafter. A contingent deferred sales charge of 1% is assessed to
any Class C shareholder who redeems shares of this Class within one year from
the date of purchase. Class C Shares, together with a pro-rata portion of all
Class C Shares acquired through reinvestment of dividends and other
distributions paid in additional Class C Shares, automatically convert to Class
A Shares after 6 years. The Class Y shares are only offered to institutions
acting for an investor in a fiduciary, advisory, agency, custodian or similar
capacity and are not offered directly to retail investors. Class Y shares are
sold at net asset value without any sales charge, redemption fees, contingent
deferred sales charge or distribution or service fees. On April 30, 1998, the
Fund established Class I shares, which are offered and sold only through
financial intermediaries and are not offered directly to retail investors. Class
I Shares are sold at net asset value without any sales charge, redemption fees,
or contingent deferred sales charge. Class I Shares carry a distribution and
service fee. As of the report date no Class I Shares were outstanding. All
classes of shares represent interests in the same portfolio of investments and
are identical as to rights and privileges but differ with respect to the effect
of sales charges, the distribution and/or service fees borne by each class,
expenses specific to each class, voting rights on matters affecting a single
class and the exchange privileges of each class.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with accounting principles generally accepted in the United States of
America for investment companies.

a) PORTFOLIO VALUATION: Municipal securities which have remaining maturities
of more than 60 days are valued at fair value each business day based upon
information provided by a nationally prominent independent pricing service
and periodically verified through other pricing services. In the case of
securities for which market quotations are readily available, securities
are valued by the pricing service at the mean of bid and asked quotations.
If market quotations or a valuation from the pricing service is not readily
available, the security is valued at fair value determined under procedures
established by and under the general supervision of the Board of Trustees.
Securities which mature in 60 days or less are valued at amortized cost if
their term to maturity at purchase is 60 days or less, or by amortizing
their unrealized appreciation or depreciation on the 61st day prior to
maturity, if their term to maturity at purchase exceeds 60 days.

b) SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME: Securities
transactions are recorded on the trade date. Realized gains and losses from
securities transactions are reported on the identified cost basis. Interest
income is recorded daily on the accrual basis and is adjusted for
amortization of premium and accretion of original issue and market
discount.

c) FEDERAL INCOME TAXES: It is the policy of the Fund to qualify as a
regulated investment company by complying with the provisions of the
Internal Revenue Code applicable to certain investment companies. The Fund
intends to make distributions of income and securities profits sufficient
to relieve it from all, or substantially all, Federal income and excise
taxes.

d) MULTIPLE CLASS ALLOCATIONS: All income, expenses (other than class-specific
expenses), and realized and unrealized gains or losses are allocated daily
to each class of shares based on the relative net assets of each class.
Class-specific expenses, which include distribution and service fees and
any other items that are specifically attributed to a particular class, are
charged directly to such class.

e) USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those
estimates.

3. FEES AND RELATED PARTY TRANSACTIONS

a) MANAGEMENT ARRANGEMENTS:

Aquila Investment Management LLC (the "Manager"), a wholly owned subsidiary
of Aquila Management Corporation, the Fund's founder and sponsor, serves as the
Manager for the Fund under an Advisory and Administration Agreement with the
Fund. The portfolio management of the Fund has been delegated to a Sub-Adviser
as described below. Under the Advisory and Administration Agreement, the Manager
provides all administrative services to the Fund, other than those relating to
the day-to-day portfolio management. The Manager's services include providing
the office of the Fund and all related services as well as overseeing the
activities of the Sub-Adviser and managing relationships with all the various
support organizations to the Fund such as the shareholder servicing agent,
custodian, legal counsel, auditors and distributor and additionally maintaining
the Fund's accounting books and records. For its services, the Manager is
entitled to receive a fee which is payable monthly and computed as of the close
of business each day at the annual rate of 0.50 of 1% on the Fund's net assets.

Kirkpatrick Pettis Investment Management, Inc. (the "Sub-Adviser"), a
wholly-owned subsidiary of KFS Corporation, a wholly-owned subsidiary of Mutual
of Omaha Insurance Company, serves as the Investment Sub-Adviser for the Fund
under a Sub-Advisory Agreement between the Manager and the Sub-Adviser. Under
this agreement, the Sub-Adviser continuously provides, subject to oversight of
the Manager and the Board of Trustees of the Fund, the investment program of the
Fund and the composition of its portfolio, arranges for the purchases and sales
of portfolio securities, and provides for daily pricing of the Fund's portfolio.
For its services, the Sub-Adviser is entitled to receive a fee from the Manager
which is payable monthly and computed as of the close of business each day at
the annual rate of 0.20 of 1% on the Fund's average net assets.

Specific details as to the effect of the Fund's payments under its
Distribution Plan, as described below, on the above management fees and as to
the nature and extent of the services provided by the Manager and the
Sub-Adviser are more fully defined in the Fund's Prospectus and Statement of
Additional Information.

b) DISTRIBUTION AND SERVICE FEES:

The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940. Under one part of
the Plan, with respect to Class A Shares, the Fund is authorized to make service
fee payments to broker-dealers or others ("Qualified Recipients") selected by
Aquila Distributors, Inc. (the "Distributor"), including, but not limited to,
any principal underwriter of the Fund, with which the Distributor has entered
into written agreements contemplated by the Rule and which have rendered
assistance in the distribution and/or retention of the Fund's shares or
servicing of shareholder accounts. The Fund currently makes payment of this
distribution fee at the annual rate of 0.05 of 1% of the Fund's average net
assets represented by Class A Shares. The Board of Trustees and shareholders
approved an amendment to the Fund's Distribution Plan applicable to Class A
Shares which will permit the Fund to make service fee payments at the rate of up
to 0.15 of 1% on the entire net assets represented by Class A Shares. For the
six months ended June 30, 2004, distribution fees on Class A Shares amounted to
$57,592 of which the Distributor retained $2,068.

Under another part of the Plan, the Fund is authorized to make payments
with respect to Class C Shares to Qualified Recipients which have rendered
assistance in the distribution and/or retention of the Fund's Class C shares or
servicing of shareholder accounts. These payments are made at the annual rate of
0.75% of the Fund's average net assets represented by Class C Shares and for the
six months ended June 30, 2004, amounted to $58,508. In addition, under a
Shareholder Services Plan, the Fund is authorized to make service fee payments
with respect to Class C Shares to Qualified Recipients for providing personal
services and/or maintenance of shareholder accounts. These payments are made at
the annual rate of 0.25 of 1% of the Fund's average net assets represented by
Class C Shares and for the six months ended June 30, 2004 amounted to $19,502.
The total of these payments with respect to Class C Shares amounted to $78,010
of which the Distributor retained $8,699.

Specific details about the Plans are more fully defined in the Fund's
Prospectus and Statement of Additional Information.

Under a Distribution Agreement, the Distributor serves as the exclusive
distributor of the Fund's shares. Through agreements between the Distributor and
various broker-dealer firms ("dealers"), the Fund's shares are sold primarily
through the facilities of these dealers having offices within Colorado, with the
bulk of sales commissions inuring to such dealers. For the six months ended June
30, 2004, total commissions on sales of Class A Shares amounted to $229,505 of
which the Distributor received $41,226.

c) OTHER RELATED PARTY TRANSACTIONS:

For the six months ended June 30, 2004, the Fund incurred $27,094 of legal
fees allocable to Hollyer Brady Barrett & Hines LLP, counsel to the Fund, for
legal services in conjunction with the Fund's ongoing operations. The Secretary
of the Fund is a Partner of Hollyer Brady Barrett & Hines LLP.

4. PURCHASES AND SALES OF SECURITIES

During the six months ended June 30, 2004, purchases of securities and
proceeds from the sales of securities aggregated $15,191,509 and $12,362,525,
respectively.

At June 30, 2004, the aggregate tax cost for all securities was
$244,607,219. At June 30, 2004 the aggregate gross unrealized appreciation for
all securities in which there is an excess of market value over tax cost
amounted to $10,038,576 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over market value amounted to
$704,777 for a net unrealized appreciation of $9,333,799.

5. PORTFOLIO ORIENTATION

Since the Fund invests principally and may invest entirely in double
tax-free municipal obligations of issuers within Colorado, it is subject to
possible risks associated with economic, political, or legal developments or
industrial or regional matters specifically affecting Colorado and whatever
effects these may have upon Colorado issuers' ability to meet their obligations.

6. EXPENSES

The Fund has negotiated an expense offset arrangement with its custodian
wherein it receives credit toward the reduction of custodian fees and other Fund
expenses whenever there are uninvested cash balances. The Statement of
Operations reflects the total expenses before any offset, the amount of offset
and the net expenses. It is the general intention of the Fund to invest, to the
extent practicable, some or all of cash balances in income-producing assets
rather than leave cash on deposit.

7. CAPITAL SHARE TRANSACTIONS

Transactions in Capital Shares of the Fund were as follows:

SIX MONTHS ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------

CLASS A SHARES:
Proceeds from shares sold .... 923,762 $ 10,003,684 3,047,540 $ 33,045,064
Reinvested distributions ..... 259,219 2,781,769 509,390 5,502,495
Cost of shares redeemed ...... (1,268,187) (13,594,361) (1,943,417) (20,966,281)
---------- ------------ ---------- ------------
Net change ................ (85,206) (808,908) 1,613,513 17,581,278
---------- ------------ ---------- ------------

CLASS C SHARES:
Proceeds from shares sold .... 220,556 2,371,987 789,815 8,539,708
Reinvested distributions ..... 12,847 137,679 22,651 244,197
Cost of shares redeemed ...... (310,203) (3,293,657) (193,704) (2,076,304)
---------- ------------ ---------- ------------
Net change ................ (76,800) (783,991) 618,762 6,707,601
---------- ------------ ---------- ------------

CLASS I SHARES:
Proceeds from shares sold .... -- -- 463 5,000
Reinvested distributions ..... -- -- 4 46
Cost of shares redeemed ...... -- -- (467) (5,101)
---------- ------------ ---------- ------------
Net change ................ -- -- --* (55)*
---------- ------------ ---------- ------------

CLASS Y SHARES:
Proceeds from shares sold .... 101,301 1,098,242 990,596 10,694,841
Reinvested distributions ..... 10,805 116,300 10,962 118,364
Cost of shares redeemed ...... (68,071) (732,328) (424,903) (4,582,718)
---------- ------------ ---------- ------------
Net change ................ 44,035 482,214 576,655 6,230,487
---------- ------------ ---------- ------------
Total transactions in Fund shares (117,971) $ (1,110,685) 2,808,930 $ 30,519,311
========== ============ ========== ============

* For the period April 2, 2003 to July 8, 2003.

8. TRUSTEES' FEES AND EXPENSES

During the previous fiscal year ended December 31, 2003, there were seven
Trustees, two of whom are affiliated with the Manager and are not paid any
trustee fees. Each Trustees' fee paid during the year was at the average annual
rate of $7,250 for carrying out responsibilities and attendance at regularly
scheduled Board Meetings. A meeting of the independent trustees is held prior to
each quarterly Board Meeting for which each attendee was paid an average fee of
$125. If additional or special meetings are scheduled for the Fund, separate
meeting fees are paid for each such meeting to those Trustees in attendance. The
Fund also reimburses the Trustees for expenses such as travel, accommodations,
and meals incurred in connection with attendance at regularly scheduled or
special Board Meetings and at the Annual Meeting and Outreach Meeting of
Shareholders. For the fiscal year ended December 31, 2003 such reimbursements
averaged approximately $5,400 per Trustee.

9. SECURITIES TRADED ON A WHEN-ISSUED BASIS

The Fund may purchase or sell securities on a when-issued basis.
When-issued transactions arise when securities are purchased or sold by the Fund
with payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield to the Fund at the time of
entering into the transaction. Beginning on the date the Fund enters into a
when-issued transaction, cash or other liquid securities are segregated in an
amount equal to or greater than the amount of the when-issued transaction. These
transactions are subject to market fluctuations and their current value is
determined in the same manner as for other securities.

10. INCOME TAX INFORMATION AND DISTRIBUTIONS

The Fund declares dividends daily from net investment income and makes
payments monthly in additional shares at the net asset value per share, in cash,
or in a combination of both, at the shareholder's option. Net realized capital
gains, if any, are distributed annually and are taxable.

The Fund intends to maintain, to the maximum extent possible, the
tax-exempt status of interest payments received from portfolio municipal
securities in order to allow dividends paid to shareholders from net investment
income to be exempt from regular Federal and State of Colorado income taxes.
However, due to the distribution levels maintained by the Fund and the
differences between financial statement reporting and Federal income tax
reporting requirements, distributions made by the Fund may not be the same as
the Fund's net investment income, and/or net realized securities gains. In this
regard, the Fund credited distributions in excess of net investment income in
the amount of $580,112, debited additional paid in capital in the amount of
$561,957 and accumulated net realized gain on investments $18,155 at December
31, 2003. This adjustment had no impact on the Fund's aggregate net assets at
December 31, 2003. Further, a small portion of the dividends may, under some
circumstances, be subject to taxes at ordinary income and/or capital gain rates.

The tax character of distributions:

YEAR ENDED DECEMBER 31,
------------------------
2003 2002
----------- ----------
Net tax-exempt income $ 9,331,870 $8,460,078
Ordinary income 562,097 210,674
Capital gain 18,155 156,615
----------- ----------
$ 9,912,122 $8,827,367
=========== ==========

As of December 31, 2003, the components of distributable earnings on a tax
basis were as follows:

Unrealized appreciation $17,152,251

The difference between book basis and tax basis unrealized appreciation is
attributable primarily to premium/discount adjustments.

TAX-FREE FUND OF COLORADO
FINANCIAL HIGHLIGHTS

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

CLASS A
------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/04 ----------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
----------- -------- -------- -------- -------- --------

Net asset value, beginning of period ............. $ 10.84 $ 10.82 $ 10.32 $ 10.31 $ 9.98 $ 10.63
-------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income+ ........................ 0.20 0.41 0.43 0.45 0.46 0.46
Net gain (loss) on securities (both realized
and unrealized) ............................ (0.33) 0.05 0.52 0.02 0.35 (0.55)
-------- -------- -------- -------- -------- --------
Total from investment operations .............. (0.13) 0.46 0.95 0.47 0.81 (0.09)
-------- -------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income .......... (0.22) (0.44) (0.45) (0.46) (0.48) (0.48)
Distributions from capital gains .............. -- -- -- -- -- (0.08)
-------- -------- -------- -------- -------- --------
Total distributions ........................... (0.22) (0.44) (0.45) (0.46) (0.48) (0.56)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ................... $ 10.49 $ 10.84 $ 10.82 $ 10.32 $ 10.31 $ 9.98
======== ======== ======== ======== ======== ========
Total return (not reflecting sales charge) ...... (1.26)%++ 4.32% 9.36% 4.64% 8.30% (0.84)%
Ratios/supplemental data
Net assets, end of period (in thousands) ...... $224,755 $233,109 $215,195 $187,022 $179,816 $190,698
Ratio of expenses to average net assets ....... 0.74%* 0.74% 0.75% 0.76% 0.78% 0.76%
Ratio of net investment income to average
net assets ................................. 3.77%* 3.81% 4.05% 4.27% 4.53% 4.41%
Portfolio turnover rate ....................... 4.77%++ 6.16% 6.95% 14.56% 22.45% 13.08%

The expense ratios after giving effect to the expense offset for uninvested cash
balances were:

Ratio of expenses to average net assets ....... 0.74%* 0.74% 0.74% 0.75% 0.77% 0.75%

- ----------
+ Per share amounts have been calculated using the monthly average shares
method.

++ Not annualized.

* Annualized.

See accompanying notes to financial statements.

TAX-FREE FUND OF COLORADO
FINANCIAL HIGHLIGHTS (CONTINUED)

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

CLASS C
---------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/04 -------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
----------- ------- ------ ------ ------ ------

Net asset value, beginning of period ......... $ 10.82 $ 10.80 $10.30 $10.29 $ 9.97 $10.61
------- ------- ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income+ .................... 0.15 0.31 0.31 0.34 0.37 0.36
Net gain (loss) on securities (both
realized and unrealized) ............... (0.34) 0.04 0.53 0.03 0.33 (0.54)
------- ------- ------ ------ ------ ------
Total from investment operations .......... (0.19) 0.35 0.84 0.37 0.70 (0.18)
------- ------- ------ ------ ------ ------
Less distributions (note 10):
Dividends from net investment income ...... (0.16) (0.33) (0.34) (0.36) (0.38) (0.38)
Distributions from capital gains .......... -- -- -- -- -- (0.08)
------- ------- ------ ------ ------ ------
Total distributions ....................... (0.16) (0.33) (0.34) (0.36) (0.38) (0.46)
------- ------- ------ ------ ------ ------
Net asset value, end of period ............... $ 10.47 $ 10.82 $10.80 $10.30 $10.29 $ 9.97
======= ======= ====== ====== ====== ======
Total return (not reflecting sales charge) ... (1.73)%++ 3.33% 8.32% 3.64% 7.18% (1.70)%
Ratios/supplemental data
Net assets, end of period (in thousands) .. $14,509 $15,820 $9,109 $1,909 $ 897 $1,932
Ratio of expenses to average net assets ... 1.69%* 1.69% 1.68% 1.69% 1.73% 1.70%
Ratio of net investment income to average
net assets ............................. 2.82%* 2.83% 2.99% 3.25% 3.60% 3.44%
Portfolio turnover rate ................... 4.77%++ 6.16% 6.95% 14.56% 22.45% 13.08%

The expense ratios after giving effect to the expense offset for uninvested cash
balances were:

Ratio of expenses to average net assets ... 1.69%* 1.68% 1.67% 1.68% 1.72% 1.69%

CLASS Y
---------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/04 -------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
----------- ------- ------ ------ ------ ------

Net asset value, beginning of period ......... $ 10.86 $ 10.84 $10.33 $10.33 $10.00 $10.65
------- ------- ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income+ .................... 0.20 0.42 0.44 0.45 0.46 0.46
Net gain (loss) on securities (both
realized and unrealized) ............... (0.33) 0.04 0.52 0.02 0.35 (0.54)
------- ------- ------ ------ ------ ------
Total from investment operations .......... (0.13) 0.46 0.96 0.47 0.81 (0.08)
------- ------- ------ ------ ------ ------
Less distributions (note 10):
Dividends from net investment income ...... (0.22) (0.44) (0.45) (0.47) (0.48) (0.49)
Distributions from capital gains .......... -- -- -- -- -- (0.08)
------- ------- ------ ------ ------ ------
Total distributions ....................... (0.22) (0.44) (0.45) (0.47) (0.48) (0.57)
------- ------- ------ ------ ------ ------
Net asset value, end of period ............... $ 10.51 $ 10.86 $10.84 $10.33 $10.33 $10.00
======= ======= ====== ====== ====== ======
Total return (not reflecting sales charge) ... (1.23)%++ 4.37% 9.50% 4.59% 8.36% (0.79)%
Ratios/supplemental data
Net assets, end of period (in thousands) .. $13,783 $13,760 $7,482 $4,312 $4,417 $5,416
Ratio of expenses to average net assets ... 0.69%* 0.69% 0.69% 0.71% 0.73% 0.71%
Ratio of net investment income to average
net assets ............................. 3.82%* 3.85% 4.07% 4.32% 4.58% 4.45%
Portfolio turnover rate ................... 4.77%++ 6.16% 6.95% 14.56% 22.45% 13.08%

The expense ratios after giving effect to the expense offset for uninvested cash
balances were:

Ratio of expenses to average net assets .. 0.69%* 0.69% 0.69% 0.70% 0.72% 0.70%

- ----------
+ Per share amounts have been calculated using the monthly average shares
method.

++ Not annualized.

* Annualized.

See accompanying notes to financial statements.

SHAREHOLDER MEETING RESULTS (UNAUDITED)

The adjourned Annual Meeting of Shareholders of Tax-Free Fund for Colorado (the
"Fund") was held on May 25, 2004. The holders of shares representing 77% of the
total net asset value of the shares entitled to vote were present in person or
by proxy. At the meeting, the following matters were voted upon and approved by
the shareholders (the resulting votes are presented below).

1. To elect Trustees.

Number of Votes:

TRUSTEE FOR WITHHELD
- ------- ---------- --------
Lacy B. Herrmann 18,655,687 144,139
Tucker Hart Adams 18,678,423 121,403
Thomas A. Christopher 18,701,147 98,678
Gary C. Cornia 18,701,304 98,521
Diana P. Herrmann 18,680,698 119,127
John C. Lucking 18,702,635 97,190
Anne J. Mills 18,688,007 111,818
J. William Weeks 18,672,227 127,598

2. To ratify the selection of KPMG LLP as the Trust's independent auditors.

Number of Votes:

FOR AGAINST ABSTAIN
- --- ------- -------
18,635,591 64,825 99,409

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INFORMATION AVAILABLE (UNAUDITED)

Much of the information that the funds in the Aquila(SM) Group of Funds
produce is automatically sent to you and all other shareholders. Specifically,
you are routinely sent the entire list of portfolio securities of your fund
twice a year in the semi-annual and annual reports you receive. You should know,
however, that we prepare, and have available, portfolio listings at the end of
each quarter.

Whenever you may be interested in seeing a listing of your Fund's portfolio
other than in your shareholder reports, please check our website
(www.aquilafunds.com) or call us at 1-800-437-1020.

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PROXY VOTING RECORD. The Fund does not invest in equity securities. Accordingly,
there were no matters relating to a portfolio security considered at any
shareholder meeting held during the 12 months ended June 30, 2004 with respect
to which the Fund was entitled to vote. Applicable regulations require us to
inform you that the foregoing proxy voting information is available on the SEC
website at http://www.sec.gov.

- --------------------------------------------------------------------------------

FOUNDER
AQUILA MANAGEMENT CORPORATION

MANAGER
AQUILA INVESTMENT MANAGEMENT LLC
380 Madison Avenue, Suite 2300
New York, New York 10017

INVESTMENT SUB-ADVISER
KIRKPATRICK PETTIS INVESTMENT MANAGEMENT, INC.
1600 Broadway, Suite 1100
Denver, Colorado 80202

BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Tucker Hart Adams
Thomas A. Christopher
Gary C. Cornia
Diana P. Herrmann
John C. Lucking
Anne J. Mills
J. William Weeks

OFFICERS
Diana P. Herrmann, Vice Chair and President
Stephen J. Caridi, Senior Vice President
Emily T. Rae, Vice President
Joseph P. DiMaggio, Chief Financial Officer and Treasurer
Edward M.W. Hines, Secretary

DISTRIBUTOR
AQUILA DISTRIBUTORS, INC.
380 Madison Avenue, Suite 2300
New York, New York 10017

CUSTODIAN
BANK ONE TRUST COMPANY, N.A.
1111 Polaris Parkway
Columbus, Ohio 43240

TRANSFER AND SHAREHOLDER SERVICING AGENT
PFPC Inc.
760 Moore Road
King of Prussia, Pennsylvania 19406

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
757 Third Avenue
New York, New York 10017

Further information is contained in the Prospectus, which must precede or
accompany this report.

ITEM 2. CODE OF ETHICS.
Not applicable.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.

ITEM 6. [RESERVED]

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

905: Not applicable.

ITEM 8. [RESERVED]

ITEM 9. CONTROLS AND PROCEDURES.

(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company Act of
1940) as of a date within 90 days of the fling of this report, the registrant's
chief financial and executive officers have concluded that the disclosure
controls and procedures of the registrant are appropriately designed to ensure
that information required to be disclosed in the registrant's reports that are
filed under the Securities Exchange Act of 1934 are accumulated and communicated
to registrant's management, including its principal executive officer(s) and
principal financial officer(s), to allow timely decisions regarding required
disclosure and is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms adopted by the Securities and Exchange
Commission.

(b) There have been no significant changes in registrant's internal controls or
in other factors that could significantly affect registrant's internal controls
subsequent to the date of the most recent evaluation, including no significant
deficiencies or material weaknesses that required corrective action.

ITEM 10. EXHIBITS.

(a)(1) Not applicable.
(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act of
1940.

(b) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(b) under the Investment Company Act
of 1940.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused this
\report to be signed on its behalf by the undersigned thereunto duly authorized.

TAX-FREE FUND OF COLORADO

By: /s/ Lacy B. Herrmann
- ---------------------------------
Chairman of the Board
September 6, 2004

By: /s/ Diana P. Herrmann
- ---------------------------------
Vice Chair, Trustee and President
September 6,2004

By: /s/ Joseph P. DiMaggio
- -----------------------------------
Chief Financial Officer and Treasurer
September 6, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

By: /s/ Lacy B. Herrmann
- ---------------------------------
Lacy B. Herrmann
Chairman of the Board
September 6, 2004

By: /s/ Diana P. Herrmann
- ---------------------------------
Diana P. Herrmann
Vice Chair, Trustee and President
September 6, 2004

By: /s/ Joseph P. DiMaggio
- -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
September 6, 2004