-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GgfVWIC2t9lLLqtC7tE9Uyd3UvV3aCfLcXxJlM4rRiUOqgBECOGc2h+fbexh6XzQ ruO3vlidXz3UrKlR5xQvYg== 0000812006-00-000001.txt : 20000223 0000812006-00-000001.hdr.sgml : 20000223 ACCESSION NUMBER: 0000812006-00-000001 CONFORMED SUBMISSION TYPE: PRE 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000428 FILED AS OF DATE: 20000222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHURCHILL TAX FREE TRUST CENTRAL INDEX KEY: 0000812006 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRE 14A SEC ACT: SEC FILE NUMBER: 811-05086 FILM NUMBER: 550370 BUSINESS ADDRESS: STREET 1: 380 MADISON AVE STE 2300 CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2126976666 MAIL ADDRESS: STREET 2: 380 MADISON AVE SUITE 2300 CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: CHURCHILL TAX FREE FUND OF KENTUCKY DATE OF NAME CHANGE: 19880911 PRE 14A 1 IMPORTANT NOTICE PLEASE READ IMMEDIATELY CHURCHILL TAX-FREE FUND OF KENTUCKY 380 Madison Avenue, Suite 2300, New York, N Y 10017 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 28, 2000 TO SHAREHOLDERS OF THE FUND: The purpose of this Notice is to advise you that an Annual Meeting of the Shareholders of Churchill Tax-Free Fund of Kentucky (the "Fund") will be held: Place: (a) at the Kentucky Derby Museum; 704 Central Avenue, Louisville, Kentucky; Time: (b) on April 28, 2000 at 10:00 a.m. local time; Purposes: (c) for the following purposes: (i) to elect nine Trustees; each Trustee elected will hold office until the next annual meeting of the Fund's shareholders or until his or her successor is duly elected; (ii) to ratify (that is, to approve) or reject the selection of KPMG LLP as the Fund's independent auditors for the fiscal year ending December 31, 2000 (Proposal No. 1); and 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 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. (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. 2); (iv) 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 February 4, 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 March 6, 2000 CHURCHILL TAX-FREE FUND OF KENTUCKY 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 Churchill Tax-Free Fund of Kentucky (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 organizer 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 Banc One Investment Advisors Corporation, 416 West Jefferson Street, Louisville, KY 40202. This Notice and Proxy Statement are first being mailed on or about March 6, 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." You may direct the proxy holders to vote your shares on any proposal 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 any box on a proposal, the proxy holders will vote your shares for the 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, do 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, do not return the proxy card by mail. 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. 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. 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; $10.02, Class C Shares, $10.02; and Class Y Shares, $10.03. The meeting is expected to act only upon matters that affect the Fund as a whole: the election of Trustees and the action on the proposals (Proposal No. 1 and Proposal No. 2). 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. On the record date, the total number of shares outstanding for each class of shares was as follows: Class A Shares, 20,028,822; Class C Shares, 191,801; and Class Y Shares, 1,266,833. Of the shares of the Fund outstanding on the record date, Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL held of record 10,489 Class C Shares (5.4% of the class); Advest Inc, Hartford, CT held of record 10,888 Class C Shares (5.7% of the class); National City Bank of Kentucky TTEE Cardinal Aluminum Co., Cleveland, OH held of record 250,456 Class Y Shares (19.8% of the class) and a nominee of Central Kentucky Trust Co, Danville, KY held of record 823,988 Class Y Shares (65% of the class) and Danky & Co, Danville, KY held of record 106,496 Class Y Shares (8.4% of the class). 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. James E Garrison and Edith A. Garrison, Murray, KY held of record 40,845 Class C Shares (21.2% of the class);) Ray N. Cossey and Elizabeth A. Cossey, TEES Bowling Green, KY held of record 21,806 Class Y Shares (11.3% of the class) Daniel H. Lail, Jr. and Beulah E. Lail, TEES Lexington, KY held of record 13,446 Class Y Shares (7.0% of the class) and James Robert Hall, Springfield, KY held of record 10,710 Class Y Shares (5.6% of the class) 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 At the Meeting, nine Trustees are to be elected. Whenever it is stated in this Proxy Statement that a matter is to be acted on at the Meeting, this means the Meeting held at the scheduled time or any adjourned meeting or meetings. Each Trustee elected will serve until the next annual meeting or until his or her successor is duly elected. The nominees selected by the Trustees are named 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 April, 1999. 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 and the Manager and a shareholder of the Distributor. Each is also an interested person as a member of the immediate family of the other. Mr. Dean is an interested person as a trustee of a trust that owns shares of the parent company of the Sub-Adviser. They are so designated by an asterisk. In the following material Pacific Capital Cash Assets Trust, Churchill Cash Reserves Trust, Pacific Capital U.S. Government Securities Cash Assets Trust and Pacific Capital Tax-Free Cash Assets Trust, each of which is a money-market fund, are together with Capital Cash Management Trust ("CCMT") called the "Aquila Money-Market Funds"; Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona, Tax-Free Trust of Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free Fund of Kentucky (this Fund), 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"; 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, positions with the Fund, age as of the record date and business experience during at least the past five years of each nominee and all officers of the Fund. All shares listed as owned by the Trustees are Class A Shares unless indicated otherwise. Lacy B. Herrmann* Chairman Founder and Chairman of the Board 380 Madison Avenue of the of Aquila Management Corporation, New York, New York Board of the sponsoring organization and 10017 Trustees Manager or Administrator and/or Age: 70 Adviser or Sub-Adviser to the Shares Owned:611(1) Aquila Money Market Funds, Aquila Bond Funds and the Aquila Equity Funds, and Founder, Chairman of the Board of Trustees 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 CCMT; 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. (1) Including 395 Shares held of record by Aquila Management Corporation. Thomas A Trustee Shareholder of Robinson, Christopher Hughes & Christopher,C.P.A.s, 459 Martin Luther P.S.C., since 1977; President King Blvd, Danville, of A Good Place for Fun, Inc., Kentucky 40422 a sports facility, since 1987; Age: 52 active member of the American Shares Owned: 1,751 Institute of Certified Public Accountants; Board of Directors of the Kentucky Society of CPAs 1991 to 1994; Trustee of Churchill Cash Reserves Trust since 1985 and of Churchill Tax- Free Fund of Kentucky (this Fund) since 1992; presently active in leadership roles with various civic, community and church organizations. Douglas Dean, * Trustee Founder and President of Dean, 106 West Vine Street Dorton& Ford P.S.C., a public Suite 600, accounting firm, since 1979; Lexington, Kentucky 40507 previously employed by Coopers & Age: 50 Lybrand a public accounting firm; Shares Owned: 5,556 member of the American Institute of Certified Public Accountants and Kentucky Society of Certified Public Accountants; accredited in business valuation by the American Institute of Certified Public Accountants; Trustee of Trent Equity Fund, an equity mutual fund, 1992-1994; Trustee of Churchill Cash Reserves Trust since 1995 and Churchill Tax-Free Fund of Kentucky (this Fund) since 1987; active as an officer and board member of various charitable and community organizations. Diana P. Herrmann, * Trustee President and Chief 380 Madison Avenue and Operating Officer of the New York, New York President Manager/Administrator since 1997, 10017 a Director since 1984, Age: 41 Secretary since 1986 and Shares Owned: 579 previously its Executive Vice President, Senior Vice President or Vice President, 1986-1997; President of various Aquila Bond and 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 since 1999 and Reserve Private Equity Series since 1998; Assistant Vice President and formerly Loan Officer of European American Bank, 1981-1986; daughter of the Trust'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. Carroll F. Knicely Trustee President of Associated 505 Augusta Circle, Publications Inc., Glasgow, Glasgow, Kentucky 42141 Kentucky; Director and member Age: 71 of the Executive Board of West Shares Owned: 7,634 Kentucky Corporation and Director and Secretary-Treasurer of South Gate Plaza, Inc. (owner and developer of shopping centers and commercial real estate); Director, Vice President and Treasurer of Knicely and Knicely, Inc. (owner and developer of rental properties and residential real estate); Trustee of Campbellsville University, Campbellsville, Kentucky since 1997; Trustee of Churchill Cash Reserves Trust and Churchill Tax- Free Fund of Kentucky (this Fund) since 1998; Editor and Publisher of Kentucky newspaper group, 1957- 1990; Secretary of Commerce of the Commonwealth of Kentucky, 1983-1988; Commissioner of Commerce of the Commonwealth of Kentucky, 1978-1979; currently active in real estate development, commercial and residential subdivision and regional economic development planning under Kentucky State government sponsorship. Theodore T. Mason Trustee Executive Director of Louisiana 26 Circle Drive, Power Partners, LLC Hastings-on-Hudson since 1999 and of East Wind Power New York 10706 Partners since 1994; Second Vice Age: 64 President of the Alumni Shares Owned: 735(2) Association of SUNY Maritime College since 1998 and Director for the same organization since 1997; Director of Cogeneration Development of Willamette Industries, Inc., a forest products company, 1991-1993; Vice President of Corporate Development of Penntech Papers, Inc., 1978-1991; Vice President of Capital Projects for the same company, 1977-1978; Vice Chairman of the Board of Trustees of CCMT since 1981; Trustee and Vice President, 1976-1981, and formerly Director of its predecessor; Director of STCM Management Company, Inc.; Vice Chairman of the Board of Trustees and Trustee of Prime Cash Fund (which is inactive) since 1982; Trustee of Short Term Asset Reserves, 1984-1986 and 1989- 1996, of Hawaiian Tax-Free Trust and Pacific Capital Cash Assets Trust since 1984, of Churchill Cash Reserves Trust since 1985, of Pacific Capital Tax-Free Cash Assets Trust and Pacific Capital U.S. Government Securities Cash Assets Trust since 1988 and of Churchill Tax-Free Fund of Kentucky (this Fund) since 1992; Trustee of OCC Accumulation Trust and the OCC Cash Reserves, Inc. since 1999; President and Director of Ted Mason Venture Associates, Inc., a venture capital consulting firm, 1972- 1980; Advisor to the Commander, U.S. Maritime Defense Zone Atlantic, 1984-1988; National Vice President, Surface/Subsurface, Naval Reserve Association, 1985-1987; National Vice President, Budget and Finance, for the same Association, 1983-1985; Commanding Officer of four Naval Reserve Units, 1974-1985; Captain, USNR, 1978-1988. (2) Held jointly with his wife. Anne J. Mills Trustee Vice President for Business 167 Glengarry Place Affairs of Ottawa University Castle Rock since 1992; IBM Corporation, Colorado 80104 1965-1991; Budget Review Officer Age: 61 of the American Baptist Shares Owned: 1,149 Churches/USA, 1994-1997; Director of the American Baptist Foundation, 1985-1996 and since 1998, Chair of that group, 1985-1988; 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 (this Fund), Tax-Free Fund of Colorado and Capital Cash Management Trust since 1987 and of Tax-Free Fund For Utah since 1994. William J. Trustee Chairman and founder (1975) Nightingale and Senior Advisor since 1995 1266 East Main Street of Nightingale & Associates, Stamford Connecticut L.L.C., a general management 06902 consulting firm focusing on Age: 70 interim management, divestitures, Shares Owned: 1,206 turnaround of troubled companies, corporate restructuring and financial advisory services; President, Chief Executive Officer and Director of Bali Company, Inc., a manufacturer of women's apparel, which became a subsidiary of Hanes Corporation, 1970-1975; prior to that, Vice President and Chief Financial Officer of Hanes Corporation after being Vice President- Corporate Development and Planning of that company, 1968- 1970; formerly Senior Associate of Booz, Allen & Hamilton, management consultants, after having been Marketing Manager with General Mills, Inc.; Trustee of Narragansett Insured Tax-Free Income Fund since 1992 and of Churchill Cash Reserves Trust and Churchill Tax-Free Fund of Kentucky (this Fund) since 1993; Director of Kasper A.S.L. Ltd., an apparel company, since 1997, of Ring's End, Inc., a building materials and construction company, since 1989, and of Furr's/Bishop's Inc., operator of a chain of restaurants, since 1998. James R. Ramsey Trustee Governor's Senior Policy Advisor State Budget Director, and State Budget Director since Office of State 1999; Professor of Economics, of Budget Director, University of Louisville since Suite 109 1999; Vice Chancellor for Finance 700 Capitol Avenue, and Administration of the Frankfort, KY 40601 University of North Carolina at Age: 51 Chapel Hill, 1998 to 1999; Shares Owned: 2,082(3) Trustee of Churchill Tax-Free Fund of Kentucky (this Fund) since 1987 and of Churchill Cash Reserves Trust since1995. Previously Vice President for Finance and Administration at Western Kentucky University; State Budget Director for the Commonwealth of Kentucky; Chief State Economist and Executive Director for the Office of Financial Management and Economic Analysis for the Commonwealth of Kentucky; Adjunct Professor at the University of Kentucky, Associate Professor at Loyola University-New Orleans and Assistant Professor at Middle Tennessee State University; served on numerous civic and corporate boards; consultant to Federal, State and local governments and to private business. (3) Held jointly with his wife. Jerry G. McGrew Senior President of Aquila 5331 Fayette Street Vice Distributors, Inc. since 1998, Houston, TX 77056 President Registered Principal since Age: 55 1993, Senior Vice President, Senior Vice President of Aquila Rocky Mountain Equity Fund since 1996; Senior Vice President of Churchill Tax-Free Fund of Kentucky this Fund) since 1994, and of Tax-Free Fund of Colorado 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. L. Michele Robbins Senior Senior Vice President of 8499 Hardinsburg Vice Churchill Tax-Free Fund Road, Cecilia President of Kentucky (this Fund) since Kentucky 42724 1996; Assistant Vice Age: 35 President, 1995-1996; Registered Representative of Aquila Distributors, Inc. since 1995; Investment Broker, 1990-1994; Sales Assistant, 1984-1990, J.J.B. Hilliard, W.L. Lyons, Inc. Terri M. Blair Vice Vice President of Churchill 800 Edlin Lane, President Tax-Free Fund of Kentucky (this Elizabethtown, KY Fund) since 1996; Corporate 42701 Safety Director /Human Resource Age: 35 Manager of Ramsey & Associates, Inc. 1995-1996; Senior Sales Representative of Bluegrass Cellular, Inc. 1993-1995. Rose F. Marotta Chief Chief Financial Officer 380 Madison Avenue Financial of the Aquila Money- New York, New York Officer Market, Bond and Equity 10017 Funds since 1991 and Age: 75 Treasurer, 1981-1991; formerly Treasurer of the predecessor of CCMT; Treasurer and Director of STCM Management Company, Inc., since 1974; Treasurer of Trinity Liquid Assets Trust, 1982-1986 and of Oxford Cash Management Fund, 1982-1988; Treasurer of InCap Management Corporation since 1982, of the Manager since 1984 and of the Distributor since 1985. Richard F. West Treasurer Treasurer of the Aquila Money- 380 Madison Avenue Market, Bond and Equity Funds New York, New York and of Aquila Distributors, 10017 Inc. since 1992; Associate Age: 64 Director of Furman Selz Incorporated, 1991-1992; Vice President of Scudder, Stevens & Clark, Inc. and Treasurer of Scudder Institutional Funds, 1989- 1991; Vice President of Lazard Freres Institutional Funds Group, Treasurer of Lazard Freres Group of Investment Companies and HT Insight Funds, Inc., 1986-1988; Vice President of Lehman Management Co., Inc. and Assistant Treasurer of Lehman Money-Market Funds, 1981-1985; Controller of Seligman Group of Investment Companies, 1960-1980. Edward M. W. Hines Secretary Partner of Hollyer Brady 551 Fifth Avenue Smith Troxell Barrett New York, New York 10176 Rockett Hines & Mone Age: 60 LLP, attorneys, since 1989 and counsel, 1987-1989; Secretary of the Aquila Money-Market, Bond and Equity Funds since 1982; Secretary of Trinity Liquid Assets Trust, 1982-1985 and Trustee of that Trust, 1985-1986; Secretary of Oxford Cash Management Fund, 1982-1988. John M. Herndon Assistant Assistant Secretary of the 380 Madison Avenue Secretary Aquila Money-Market, Bond and New York, New York Equity Funds since 1995 and Vice 10017 President of the Aquila Age: 60 Money-Market Funds since 1990; Vice President of the Manager since 1990; Investment Services Consultant and Bank Services Executive of Wright Investors' Service, a registered investment adviser, 1983-1989; Member of the American Finance Association, the Western Finance Association and the Society of Quantitative Analysts. 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 $76,080 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 14 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 Trustees who received compensation from the Fund and the compensation they received during the Fund's fiscal year from other funds in the Aquilasm Group of Funds. None of such Trustees has any pension or retirement benefits from the Fund or any of the other funds in the Aquila group. Compensation Number of from all boards on Compensation funds in the which the from the Aquilasm Trustee Name Fund Group serves Thomas A. Christopher $8,300 $13,250 2 Douglas Dean $6,950 $11,650 2 Carroll Knicely $7,318 $12,050 2 Theodore T. Mason $7,050 $49,484 7 Anne J. Mills $6,600 $35,850 6 William J. Nightingale $6,250 $17,600 3 James R. Ramsey $7,529 $12,450 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 December 31, 1999, these funds had aggregate assets of approximately $3.0 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 Fund and by his wife. During the fiscal year ended December 31, 1999 the Fund paid $949,606 in management fees. During the fiscal year ended December 31, 1999, $331,919 was paid under Part I of the Fund's Distribution Plan to Qualified Recipients. Of that amount, $7,455 was paid to the Distributor. During the same period $11,170 was paid to Qualified Recipients under Part II of the Plan with respect to the Fund's Class C Shares. Payments to the Distributor under that plan and payments to it under the Shareholder Services plan were $7,616. The Distributor currently handles the distribution of the shares of fourteen funds (five money-market funds, seven tax-free municipal bond funds and two equity funds), including the Fund. Under the Distribution Agreement, the Distributor is responsible for the payment of certain printing and distribution costs relating to prospectuses and reports as well as the costs of supplemental sales literature, advertising and other promotional activities. 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 an officer of the Distributor. Other Information on Trustees The Trustees have appointed an Audit Committee consisting of all of the Trustees (the "Independent Trustees") who are not "interested persons" of the Fund, as that term is defined in the 1940 Act. The Committee (i) recommends to the Board of Trustees what firm of independent auditors will be selected by the Board of Trustees (subject to shareholder ratification); (ii) reviews the methods, scope and result of audits and the fees charged; and (iii) reviews the adequacy of the Fund's internal accounting procedures and controls. The Committee held 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. 1) 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. CONSIDERATION OF 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. 2) 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 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. 2. 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. 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. IMPORTANT NOTICE PLEASE READ IMMEDIATELY CHURCHILL TAX-FREE FUND OF KENTUCKY NOTICE OF ANNUAL MEETING OF SHAREHOLDERS to be held on APRIL 28, 2000 PROXY STATEMENT CHURCHILL TAX-FREE FUND OF KENTUCKY PROXY FOR SHAREHOLDERS MEETING APRIL 28, 2000 PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES The undersigned shareholder of CHURCHILL TAX-FREE FUND OF KENTUCKY (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 Friday, April 28, 2000 at the Kentucky Derby Museum, 704 Central Avenue, Louisville, Kentucky, at 10:00 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. Telephone Voting (Touch-tone only) 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 instruction using this proxy card as a guide. If you vote by phone, do not return the proxy card by mail. Internet voting 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, do not return the proxy card by mail. Proxy Card Voting 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. MANAGEMENT RECOMMENDS A VOTE FOR ALL NOMINEES LISTED BELOW AND FOR THE PROPOSALS LISTED BELOW. THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED BELOW OR FOR IF NO CHOICE IS INDICATED. As to any other matter said attorneys shall vote in accordance with their best judgment. Annual Meeting Attendance We encourage you to attend the Annual Meeting of Shareholders. If you can join us, please indicate it on the proxy card, call us at 1-800-872-5859, or e-mail us at info@aquilafunds.com TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: _________________________________________________________________ THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED CHURCHILL TAX-FREE FUND OF KENTUCKY For address changes and/or comments, please check this box and write them on the back where indicated. [_] Vote on Trustees Election of Trustees 1) Lacy B. Herrmann; 2) Thomas A. Christopher; 3) Douglas Dean; 4) Diana P. Herrmann; 5) Carroll F. Knicely; 6) Theodore T. Mason; 7) Anne J. Mills; 8) William J. Nightingale; 9) James R. Ramsey __ [__] 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) on the line below. ________________ Vote on Proposals 1. Action on selection of KPMG LLP as independent auditors (Proposal No.1 in Proxy Statement) FOR [__] AGAINST [__] ABSTAIN [__] 2. Action on change of fundamental policy of the Fund (Proposal No.2 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) Please indicate where you plan to attend the Annual Meeting. I plan to attend the annual meeting in Louisville. [__] I plan to attend the outreach meeting in Danville. [__] -----END PRIVACY-ENHANCED MESSAGE-----