-----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, ATeoDNLCq3eW3+vg0q3NL1kteglviVySdKGfu7H1ft5B6CjDBapKkWJ4YL+GWyB2 simPvyflUsM7snQGT5nf3A== 0000812006-03-000023.txt : 20030905 0000812006-03-000023.hdr.sgml : 20030905 20030905144228 ACCESSION NUMBER: 0000812006-03-000023 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030905 EFFECTIVENESS DATE: 20030905 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHURCHILL TAX FREE TRUST CENTRAL INDEX KEY: 0000812006 IRS NUMBER: 136864349 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05086 FILM NUMBER: 03883546 BUSINESS ADDRESS: STREET 1: 380 MADISON AVE STREET 2: SUITE 2300 CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2126976666 MAIL ADDRESS: STREET 1: 380 MADISON AVENUE STREET 2: 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 N-CSR 1 ctftformncsr.txt CHURCHILL TAX-FREE TRUST 6/30/03 SEMI-ANNUAL REPORT 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 811-5086 Churchill Tax-Free Trust (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: 6/30/03 FORM N-CSR ITEM 1. REPORTS TO STOCKHOLDERS. CHURCHILL TAX-FREE TRUST Semi-Annual Report June 30, 2003 [Logo of the Aquila Group of Funds: an eagle's head] AQUILA(SM) GROUP OF FUNDS SERVING KENTUCKY INVESTORS FOR OVER 15 YEARS CHURCHILL TAX-FREE FUND OF KENTUCKY 380 MADISON AVENUE, SUITE 2300 * NEW YORK, NY 10017 800-437-1020 * 212-697-6666 [Logo of the Churchill Tax-Free Fund of Kentucky: a standing pegasus in a circle] SEMI-ANNUAL REPORT CHURCHILL TAX-FREE FUND OF KENTUCKY STATEMENT OF INVESTMENTS JUNE 30, 2003 (UNAUDITED)
RATING FACE MOODY'S/ AMOUNT GENERAL OBLIGATION BONDS (1.3%) S&P VALUE ---------------- ---------------------------------------------------------- ----------- --------------- Bowling Green Kentucky $ 200,000 5.300%, 06/01/18 ...................................... Aa3/NR $ 219,000 Lexington-Fayette Urban County Government Project Unlimited Tax 125,000 5.000%, 12/01/15 ...................................... Aa2/AA+ 137,969 340,000 5.150%, 12/01/17 ...................................... Aa2/AA+ 372,300 Louisville Kentucky Unlimited Tax 2,205,000 5.000%, 10/01/21 FGIC Insured ......................... Aaa/AAA 2,334,544 Warren County Kentucky Judicial Unlimited Tax 345,000 5.100%, 09/01/17 AMBAC Insured ........................ Aaa/NR 377,775 365,000 5.150%, 09/01/18 AMBAC Insured ........................ Aaa/NR 398,763 --------------- Total General Obligation Bonds ..................... 3,840,351 --------------- REVENUE BONDS (97.4%) ---------------------------------------------------------- STATE AGENCIES (32.2%) ---------------------------------------------------------- Kentucky Area Development District Financing 500,000 5.000%, 12/01/23 LOC Wachovia Bank .................... NR/AA 523,750 280,000 4.700%, 06/01/23 LOC Wachovia Bank .................... NR/AA 277,900 300,000 4.000%, 06/01/16 LOC Wachovia Bank .................... NR/AA 298,125 2,465,000 4.800%, 06/01/29 LOC Wachovia Bank .................... NR/AA 2,449,594 Kentucky Infrastructure Authority 1,000,000 5.250%, 06/01/12 ...................................... Aa3/A+ 1,148,750 635,000 5.250%, 06/01/12 ...................................... Aa3/A+ 699,294 2,740,000 5.250%, 06/01/14 ...................................... Aa3/A+ 3,092,775 1,110,000 6.375%, 06/01/14 Pre-Refunded ......................... Aa3/AA- 1,239,038 1,500,000 5.375%, 02/01/18 ...................................... NR/A- 1,534,740 Kentucky Local Correctional Facilities Construction Authority 6,355,000 5.500%, 11/01/14 FSA Insured .......................... Aaa/AAA 6,807,794 Kentucky Rural Economic Development Authority 3,110,000 7.250%, 06/01/17 LOC Bank One AMT ..................... NR/A+ 3,202,616 Kentucky State Property and Buildings Commission 3,000,000 6.250%, 09/01/07 MBIA Insured ......................... Aaa/AAA 3,506,250 220,000 6.000%, 09/01/08 ...................................... Aa3/A+ 259,325 $ 500,000 5.500%, 11/01/09 AMBAC Insured ........................ Aaa/AAA $ 551,875 400,000 5.000%, 09/01/13 ...................................... Aa3/A+ 409,744 4,000,000 5.375%, 02/01/14 FSA Insured .......................... Aaa/AAA 4,590,000 400,000 5.250%, 10/01/14 ...................................... Aa3/A+ 450,500 460,000 5.125%, 09/01/15 ...................................... Aa3/A+ 509,450 3,250,000 5.625%, 09/01/15 ...................................... Aa3/A+ 3,749,687 100,000 5.375%, 05/01/16 MBIA Insured ......................... Aaa/AAA 112,375 6,500,000 5.375%, 08/01/16 FSA Insured .......................... Aaa/AAA 7,328,750 3,905,000 5.125%, 09/01/16 ...................................... Aa3/A+ 4,275,975 5,000,000 5.250%, 10/01/16 ...................................... Aa3/A+ 5,531,250 1,150,000 5.000%, 08/01/17 FSA Insured .......................... Aaa/AAA 1,240,563 8,155,000 5.125%, 09/01/17 ...................................... Aa3/A+ 8,919,531 4,735,000 5.250%, 10/01/17 ...................................... Aa3/A+ 5,196,662 800,000 5.500%, 11/01/17 FSA Insured .......................... Aaa/AAA 915,000 165,000 5.375%, 02/01/18 FSA Insured .......................... Aaa/AAA 184,388 2,605,000 5.000%, 08/01/18 FSA Insured .......................... Aaa/AAA 2,790,606 3,950,000 5.125%, 09/01/18 ...................................... Aa3/A+ 4,305,500 6,000,000 5.250%, 10/01/18 ...................................... Aa3/A+ 6,607,500 145,000 5.100%, 11/01/18 ...................................... Aa3/A+ 156,056 1,040,000 5.000%, 08/01/19 FSA Insured .......................... Aaa/AAA 1,106,300 1,000,000 5.375%, 10/01/19 MBIA Insured ......................... Aaa/AAA 1,105,000 1,925,000 5.000%, 10/01/19 ...................................... Aa3/A+ 2,054,937 360,000 5.000%, 10/01/19 MBIA Insured ......................... Aaa/AAA 383,400 3,000,000 5.000%, 11/01/19 FSA Insured .......................... Aaa/AAA 3,217,500 705,000 5.150%, 11/01/19 FSA Insured .......................... Aaa/AAA 764,044 2,000,000 5.750%, 05/01/20 MBIA Insured ......................... Aaa/AAA 2,255,000 160,000 5.000%, 10/01/20 MBIA Insured ......................... Aaa/AAA 169,400 205,000 5.150%, 02/01/22 FSA Insured .......................... Aaa/AAA 217,300 --------------- 94,138,244 --------------- COUNTY AGENCIES (8.7%) ---------------------------------------------------------- Floyd County Public Property Courthouse 510,000 5.500%, 09/01/14 Pre-Refunded ......................... NR/NR** 572,475 Jefferson County Kentucky Capital Projects $ 1,000,000 5.200%, 06/01/08 MBIA Insured ......................... Aaa/AAA $ 1,127,500 430,000 5.200%, 06/01/12 MBIA Insured ......................... Aaa/AAA 476,225 570,000 5.250%, 06/01/13 MBIA Insured ......................... Aaa/AAA 628,425 520,000 5.250%, 06/01/14 MBIA Insured ......................... Aaa/AAA 577,850 3,370,000 5.375%, 06/01/18 MBIA Insured ......................... Aaa/AAA 3,681,725 1,640,000 5.375%, 06/01/22 MBIA Insured ......................... Aaa/AAA 1,742,500 5,935,000 5.500%, 06/01/28 MBIA Insured ......................... Aaa/AAA 6,380,125 Pendleton County Kentucky Multi-County Lease Revenue 4,500,000 6.500%, 03/01/19 ...................................... NR/A 4,657,500 Warren Co., Kentucky Justice Center Expansion Corp. Revenue 700,000 5.400%, 09/01/24 ...................................... Aa3/NR 757,750 2,875,000 5.350%, 09/01/29 MBIA Insured ......................... Aaa/AAA 3,047,500 Warren County Kentucky Justice Center 1,580,000 5.250%, 09/01/17 MBIA Insured ......................... Aaa/AAA 1,728,125 --------------- 25,377,700 --------------- CITY / MUNICIPALITY OBLIGATIONS (5.8%) ---------------------------------------------------------- Jeffersontown Kentucky Public Project Corp. 500,000 5.750%, 11/01/15 ...................................... A3/NR 548,125 Kentucky League Cities Funding Trust Certificates of Participation (Covington) 1,715,000 6.200%, 08/01/17 ...................................... NR/A+ 1,795,983 Kentucky League Cities Funding Trust Certificates of Participation (Owensboro) 700,000 5.900%, 08/01/16 ...................................... NR/A 732,074 Lexington-Fayette UCG, Kentucky Pub. Facs. Revenue FSA Insured 120,000 5.125%, 10/01/23 ...................................... Aaa/AAA 126,150 Louisville Kentucky Parking Authority 1,140,000 5.000%, 12/01/14 MBIA Insured ......................... Aaa/AAA 1,235,475 Mount Sterling Kentucky Lease Revenue 2,020,000 6.150%, 03/01/13 ...................................... Aa3/NR 2,090,902 7,000,000 6.200%, 03/01/18+ ..................................... Aa3/NR 7,246,400 Munfordville Kentucky Industrial Development $ 2,500,000 7.000%, 06/01/19 LOC Bank One AMT ..................... NR/A+ $ 2,604,900 Shelbyville Kentucky Certificates of Participation 625,000 5.000%, 10/01/22 ...................................... A2/NR 653,906 --------------- 17,033,915 --------------- HOSPITALS (5.3%) ---------------------------------------------------------- Jefferson County Kentucky Health Facilities Revenue 240,000 5.000%, 10/01/12 MBIA Insured ......................... Aaa/AAA 257,700 1,715,000 5.650%, 01/01/17 AMBAC Insured ........................ Aaa/AAA 1,886,500 2,200,000 5.250%, 05/01/17 ...................................... NR/A 2,323,750 2,765,000 5.125%, 10/01/17 AMBAC Insured ETM .................... Aaa/AAA 2,982,744 325,000 5.125%, 10/01/18 MBIA Insured ETM ..................... Aaa/AAA 352,219 125,000 5.750%, 01/01/26 AMBAC Insured ........................ Aaa/AAA 136,406 Kentucky Development Finance Authority Hospital Revenue 1,375,000 6.125%, 02/01/12 FSA Insured .......................... Aaa/AAA 1,406,845 2,790,000 5.000%, 08/15/15 MBIA Insured ......................... Aaa/AAA 2,915,550 3,000,000 5.900%, 12/01/15 FGIC Insured ......................... Aaa/AAA 3,121,800 --------------- 15,383,514 --------------- HOUSING (10.2%) ---------------------------------------------------------- Greater Kentucky Housing Assistance Corp. Multi- Family Housing Revenue 320,000 6.300%, 07/01/15 MBIA Insured ......................... Aaa/AAA 326,000 275,000 6.400%, 07/01/23 MBIA Insured ......................... Aaa/AAA 279,812 Kentucky Housing Corp. Housing Revenue 1,660,000 5.400%, 07/01/14 ...................................... Aaa/AAA 1,712,024 1,150,000 6.250%, 07/01/15 AMT .................................. Aaa/AAA 1,213,250 315,000 6.100%, 07/01/16 AMT .................................. Aaa/AAA 335,081 575,000 6.400%, 01/01/17 ...................................... Aaa/AAA 595,481 95,000 5.550%, 07/01/18 AMT .................................. Aaa/AAA 97,612 835,000 5.800%, 01/01/19 ...................................... Aaa/AAA 851,700 250,000 5.850%, 07/01/20 AMT .................................. Aaa/AAA 269,375 2,000,000 5.600%, 07/01/20 AMT .................................. Aaa/AAA 2,095,000 $ 1,000,000 5.350%, 01/01/21 AMT .................................. Aaa/AAA $ 1,040,000 6,075,000 5.450%, 07/01/22 AMT .................................. Aaa/AAA 6,371,156 245,000 5.200%, 07/01/22 ...................................... Aaa/AAA 257,556 300,000 5.100%, 07/01/22 AMT .................................. Aaa/AAA 309,000 4,040,000 5.250%, 07/01/22 AMT .................................. Aaa/AAA 4,226,850 4,140,000 5.200%, 07/01/25 AMT .................................. Aaa/AAA 4,269,375 275,000 5.375%, 07/01/27 ...................................... Aaa/AAA 287,375 2,760,000 6.300%, 01/01/28 AMT .................................. Aaa/AAA 2,891,100 190,000 6.375%, 07/01/28 AMT .................................. Aaa/AAA 199,262 1,525,000 6.250%, 07/01/28 AMT .................................. Aaa/AAA 1,603,156 570,000 5.550%, 07/01/33 ...................................... Aaa/AAA 594,937 --------------- 29,825,102 --------------- POLLUTION CONTROL REVENUE (1.4%) ---------------------------------------------------------- Jefferson County Kentucky Pollution Control (E.ON AG -LGE Energy) 3,800,000 5.900%, 04/15/23 ...................................... A1/A- 3,937,750 --------------- SCHOOLS (14.7%) ---------------------------------------------------------- Beechwood, Kentucky Independent School District Finance Corp. 180,000 5.650%, 03/01/20 ...................................... Aa3/NR 202,050 Boone County Kentucky School District Finance Corp. School Building 660,000 5.000%, 06/01/15 ...................................... Aa3/NR 715,275 225,000 5.250%, 08/01/15 ...................................... Aa3/NR 252,281 285,000 5.700%, 02/01/16 ...................................... Aa3/NR 326,681 1,000,000 5.375%, 08/01/20 FSA Insured .......................... Aaa/NR 1,096,250 Boyd County Kentucky School District Finance Corp. 1,025,000 5.000%, 10/01/15 ...................................... Aa3/NR 1,105,719 575,000 5.375%, 10/01/17 ...................................... Aa3/NR 643,281 Campbell County Kentucky School District Finance Corp. 350,000 5.100%, 02/01/12 ...................................... Aa3/NR 365,519 Christian County Kentucky School District Finance Corp. $ 500,000 5.000%, 06/01/09 ...................................... Aa3/NR $ 557,500 Fayette County School Building 1,780,000 5.700%, 12/01/16 ...................................... Aa3/AA- 2,006,950 Fayette Co., Kentucky School Building Revenue AMBAC Insured 200,000 5.125%, 04/01/18 ...................................... Aaa/AAA 216,750 Floyd County Kentucky School Building 250,000 5.000%, 12/01/09 ...................................... Aa3/NR 284,687 Franklin Co., Kentucky School Building Revenue 345,000 4.000%, 05/01/17 ...................................... Aa3/NR 345,862 400,000 4.000%, 05/01/19 ...................................... Aa3/NR 394,000 245,000 4.000%, 05/01/20 ...................................... Aa3/NR 238,262 Graves Co., Kentucky School Building Revenue 1,260,000 5.000%, 06/01/22++ .................................... Aa3/NR 1,330,875 1,320,000 5.000%, 06/01/23++ .................................... Aa3/NR 1,387,650 Grayson County Kentucky School Building Revenue 1,940,000 6.000%, 01/01/15 ...................................... Aa3/NR 2,114,600 Hardin County School District Finance Corp. 100,000 5.500%, 02/01/17 ...................................... Aa3/NR 113,625 Jefferson County Kentucky School District Finance Corp. School Building 750,000 5.300%, 01/01/13 FSA Insured .......................... Aaa/AAA 868,125 695,000 5.125%, 11/01/14 FSA Insured .......................... Aaa/AAA 765,369 3,195,000 5.125%, 02/01/16 MBIA Insured ......................... Aaa/AAA 3,434,625 250,000 5.250%, 07/01/16 FSA Insured .......................... Aaa/AAA 276,250 Kenton County, Kentucky School District 1,760,000 5.375%, 03/01/15 ...................................... A1/A+ 1,944,800 955,000 5.000%, 04/01/16 ...................................... Aa3/NR 1,042,144 1,055,000 5.000%, 04/01/17 ...................................... Aa3/NR 1,142,037 605,000 5.000%, 04/01/19 ...................................... Aa3/NR 648,106 Kentucky Econ. Development Fin. Auth. College Revenue Centre College 1,230,000 5.000%, 04/01/17 FSA Insured .......................... Aaa/AAA 1,337,625 1,675,000 5.000%, 04/01/19 FSA Insured .......................... Aaa/AAA 1,794,344 Larue County Kentucky School District Finance Corp. $ 350,000 5.000%, 08/01/26 ...................................... Aa3/NR $ 366,625 Lexington-Fayette Urban County Government Project Transylvania University 1,250,000 5.125%, 08/01/18 MBIA Insured ......................... Aaa/AAA 1,342,188 Lexington-Fayette Urban County Government Project U.K. Library 725,000 5.000%, 11/01/15 MBIA Insured ......................... Aaa/AAA 790,250 205,000 5.000%, 11/01/18 MBIA Insured ......................... Aaa/AAA 218,325 McCreary Co., Kentucky School Building Revenue 320,000 4.000%, 05/01/17 ...................................... Aa3/NR 320,400 785,000 4.000%, 05/01/18 ...................................... Aa3/NR 778,131 795,000 4.000%, 05/01/19 ...................................... Aa3/NR 783,075 545,000 4.000%, 05/01/21 ...................................... Aa3/NR 523,200 Meade County Kentucky School District Finance Corp. 400,000 5.700%, 07/01/15 ...................................... Aa3/NR 447,000 500,000 6.000%, 07/01/16 ...................................... Aa3/NR 563,125 Middlesboro Kentucky Independent School District Finance Corp. 100,000 6.100%, 08/01/16 ...................................... Aa3/NR 113,375 Murray St. Univ., Kentucky Housing & Dining Revenue 165,000 4.000%, 09/01/22 ...................................... NR/A- 153,863 170,000 4.100%, 09/01/23 ...................................... NR/A- 159,375 160,000 4.000%, 09/01/21 ...................................... NR/A- 151,000 Nelson County Kentucky School Building 1,820,000 5.750%, 04/01/15 ...................................... Aa3/NR 1,997,450 Scott County Kentucky School Building 125,000 4.500%, 05/01/18 FSA Insured .......................... Aaa/NR 130,469 2,750,000 5.900%, 06/01/18 Pre-Refunded ......................... Aa3/A 3,045,625 100,000 5.000%, 03/01/22 ...................................... Aa3/NR 105,750 Taylor County Kentucky School Building 280,000 6.000%, 08/01/16 ...................................... Aa3/NR 316,400 175,000 5.250%, 06/01/19 ...................................... Aa3/NR 192,281 University of Kentucky Revenue $ 1,335,000 5.000%, 05/01/16 FGIC Insured ......................... Aaa/AAA $ 1,440,131 385,000 5.000%, 06/01/18 FSA insured .......................... Aaa/AAA 411,469 Woodford Co., Kentucky School Building Revenue 1,665,000 4.000%, 07/01/20 ...................................... Aa3/NR 1,619,213 --------------- 42,919,962 --------------- TRANSPORTATION (10.0%) ---------------------------------------------------------- Kenton Kentucky Airport Board 800,000 5.000%, 03/01/08 MBIA Insured AMT ..................... Aaa/AAA 879,000 500,000 5.625%, 03/01/13 MBIA Insured AMT ..................... Aaa/AAA 562,500 750,000 5.625%, 03/01/14 MBIA Insured AMT ..................... Aaa/AAA 845,625 1,000,000 5.500%, 03/01/17 MBIA Insured AMT ..................... Aaa/AAA 1,098,750 380,000 5.500%, 03/01/18 MBIA Insured AMT ..................... Aaa/AAA 414,675 1,625,000 5.000%, 03/01/23 MBIA Insured AMT ..................... Aaa/AAA 1,651,406 Kentucky Interlocal School Transportation Authority 150,000 5.100%, 03/01/05 ...................................... Aa3/A+ 159,187 145,000 5.400%, 06/01/17 ...................................... NR/A+ 146,799 200,000 6.000%, 12/01/20 ...................................... NR/A+ 203,884 400,000 6.000%, 12/01/20 ...................................... NR/A+ 407,768 300,000 5.800%, 12/01/20 ...................................... NR/A+ 305,844 400,000 5.650%, 12/01/20 ...................................... NR/A+ 407,168 350,000 5.600%, 12/01/20 ...................................... NR/A+ 356,230 Kentucky State Turnpike Auth. Econ. Development & Resource Recovery Road Revenue 120,000 8.500%, 07/01/06 ...................................... Aa3/A+ 143,850 1,000,000 6.500%, 07/01/08 AMBAC Insured ........................ Aaa/AAA 1,196,250 1,010,000 5.500%, 07/01/11 AMBAC Insured ........................ Aaa/AAA 1,032,725 1,000,000 5.625%, 07/01/12 FSA Insured .......................... Aaa/AAA 1,158,750 200,000 5.625%, 07/01/13 FSA Insured .......................... Aaa/AAA 229,250 250,000 5.200%, 07/01/14 FSA Insured .......................... Aaa/AAA 278,438 500,000 5.625%, 07/01/14 FSA Insured .......................... Aaa/AAA 575,000 2,760,000 5.625%, 07/01/15 AMBAC Insured, Pre-Refunded .......... Aaa/AAA 3,053,250 940,000 5.625%, 07/01/15 AMBAC Insured ........................ Aaa/AAA 1,024,600 450,000 5.250%, 07/01/15 FSA Insured .......................... Aaa/AAA 501,750 $ 3,455,000 5.100%, 07/01/18 FSA Insured .......................... Aaa/AAA $ 3,757,313 2,500,000 5.250%, 07/01/16 FSA Insured .......................... Aaa/AAA 2,781,250 Louisville-Jefferson Co. Regional Airport 1,000,000 5.750%, 07/01/15 FSA Insured AMT ...................... Aaa/AAA 1,130,000 1,000,000 5.500%, 07/01/15 FSA Insured AMT ...................... Aaa/AAA 1,123,750 1,000,000 5.250%, 07/01/18 FSA Insured AMT ...................... Aaa/AAA 1,066,250 1,370,000 5.250%, 07/01/21 FSA Insured AMT ...................... Aaa/AAA 1,440,213 890,000 5.250%, 07/01/22 FSA Insured AMT ...................... Aaa/AAA 928,938 275,000 5.375%, 07/01/23 FSA Insured AMT ...................... Aaa/AAA 291,844 --------------- 29,152,257 --------------- UTILITIES (9.1%) ---------------------------------------------------------- Boone Co.-Florence, Kentucky Water Supply Sys. Revenue FGIC Insured 185,000 5.000%, 12/01/27 ...................................... Aaa/NR 193,325 Campbell & Kenton Counties, Kentucky Sanitation Sewer Dist. 100,000 5.000%, 08/01/18 FGIC Insured ......................... Aaa/AAA 106,000 Hardin County, Kentucky Water District 1,000,000 5.900%, 01/01/25 MBIA Insured ......................... Aaa/AAA 1,093,750 Lexington-Fayette Urban County Government Sewer System 1,000,000 5.000%, 07/01/19 ...................................... Aa3/AA 1,076,250 Louisville and Jefferson County Kentucky Metropolitan Sewer District 1,000,000 5.000%, 05/15/12 FGIC Insured ......................... Aaa/AAA 1,095,000 2,565,000 5.375%, 05/15/17 MBIA Insured ......................... Aaa/AAA 2,892,038 1,410,000 5.400%, 05/15/22 FGIC Insured ......................... Aaa/AAA 1,489,313 120,000 6.250%, 05/15/26 MBIA Insured ......................... Aaa/AAA 138,150 Louisville Kentucky Waterworks Board Water 1,000,000 5.250%, 11/15/16 FSA Insured .......................... Aaa/AAA 1,107,500 1,000,000 5.250%, 11/15/17 FSA Insured .......................... Aaa/AAA 1,101,250 2,435,000 5.250%, 11/15/18 FSA Insured .......................... Aaa/AAA 2,666,325 $ 6,600,000 5.250%, 11/15/22 FSA Insured .......................... Aaa/AAA $ 7,053,750 2,415,000 5.250%, 11/15/24 FSA Insured .......................... Aaa/AAA 2,568,956 Northern Kentucky Water District 1,170,000 4.125%, 02/01/22 FGIC Insured++ ....................... Aaa/NR 1,143,675 200,000 5.000%, 02/01/23 FGIC Insured ......................... Aaa/NR 209,250 1,015,000 5.000%, 02/01/27 FGIC Insured ......................... Aaa/NR 1,053,063 Owensboro-Davies County Water District 600,000 5.000%, 01/01/13 AMBAC Insured ........................ Aaa/AAA 648,000 Owensboro, Kentucky Electric and Power 1,000,000 5.000%, 01/01/20 FSA Insured .......................... Aaa/AAA 1,051,250 --------------- 26,686,845 --------------- Total Revenue Bonds ................................ 284,455,289 --------------- Total Investments (cost $272,273,634*) ................... 98.7% 288,295,640 Other assets less liabilities ............................ 1.3 3,929,034 ------ --------------- Net Assets ............................................... 100.0% $ 292,224,674 ====== ===============
* See note 4. ** Any security not rated has been determined by the Investment Manager to have sufficient quality to be ranked in the top four credit ratings if a credit rating were to be assigned by a rating service. + Security pledged as collateral for the Fund's when - issued commitments (see note 9). ++ Security traded on a "when-issued" basis. PORTFOLIO ABBREVIATIONS: --------------------------------------------------------- AMBAC - American Municipal Bond Assurance Corp. AMT - Alternative Minimum Tax ETM - Escrowed To Maturity FGIC - Financial Guaranty Insurance Co. FSA - Financial Security Assurance LOC - Letter of Credit MBIA - Municipal Bond Investors Assurance Corp. See accompanying notes to financial statements. CHURCHILL TAX-FREE FUND OF KENTUCKY STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (UNAUDITED) ASSETS Investments at value (cost $272,273,634) ..................................................... $ 288,295,640 Cash ......................................................................................... 3,599,544 Interest receivable .......................................................................... 4,196,844 Receivable for investment securities sold .................................................... 1,115,000 Receivable for Fund shares sold .............................................................. 132,535 Other assets ................................................................................. 11,984 ------------- Total assets ................................................................................. 297,351,547 ------------- LIABILITIES Payable for investment securities purchased .................................................. 4,394,293 Dividends payable ............................................................................ 388,549 Management fee payable ....................................................................... 96,531 Distribution fees payable .................................................................... 93,247 Payable for Fund shares redeemed ............................................................. 75,901 Accrued expenses ............................................................................. 78,352 ------------- Total liabilities ............................................................................ 5,126,873 ------------- NET ASSETS ......................................................................................... $ 292,224,674 ============= Net Assets consist of: Capital Stock - Authorized an unlimited number of shares, par value $.01 per share ........... $ 270,167 Additional paid-in capital ................................................................... 276,224,244 Net unrealized appreciation on investments (note 4) .......................................... 16,022,006 Undistributed net investment income .......................................................... 360,270 Accumulated net realized loss on investments ................................................. (652,013) ------------- $ 292,224,674 ============= CLASS A Net Assets ................................................................................... $ 231,525,990 ============= Capital shares outstanding ................................................................... 21,406,999 ============= Net asset value and redemption price per share ............................................... $ 10.82 ============= Offering price per share (100/96 of $10.82 adjusted to nearest cent) ......................... $ 11.27 ============= CLASS C Net Assets ................................................................................... $ 6,574,775 ============= Capital shares outstanding ................................................................... 608,197 ============= Net asset value and offering price per share ................................................. $ 10.81 ============= 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) .............................................. $ 10.81* ============= CLASS I Net Assets ................................................................................... $ 4,355,350 ============= Capital shares outstanding ................................................................... 402,858 ============= Net asset value, offering and redemption price per share ..................................... $ 10.81 ============= CLASS Y Net Assets ................................................................................... $ 49,768,559 ============= Capital shares outstanding ................................................................... 4,598,623 ============= Net asset value, offering and redemption price per share ..................................... $ 10.82 =============
See accompanying notes to financial statements. CHURCHILL TAX-FREE FUND OF KENTUCKY STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) INVESTMENT INCOME: Interest income ............................................................ $ 6,780,500 Expenses: Management fee (note 3) .................................................... $ 554,626 Distribution and service fees (note 3) ..................................... 199,127 Transfer and shareholder servicing agent fees .............................. 59,255 Trustees' fees and expenses (note 8) ....................................... 47,436 Legal fees ................................................................. 34,099 Shareholders' reports and proxy statements ................................. 29,255 Custodian fees ............................................................. 13,176 Auditing fees .............................................................. 12,829 Registration fees and dues ................................................. 8,738 Insurance .................................................................. 6,758 Fund accounting fees ....................................................... 5,510 Miscellaneous .............................................................. 10,152 -------------- Total expenses ............................................................. 980,961 Expenses paid indirectly (note 6) .......................................... (9,888) -------------- Net expenses ............................................................... 971,073 ------------- Net investment income ...................................................... 5,809,427 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from securities transactions ...................... 747,903 Change in unrealized appreciation on investments ........................... 3,099,008 -------------- Net realized and unrealized gain (loss) on investments ..................... 3,846,911 ------------- Net change in net assets resulting from operations ......................... $ 9,656,338 -------------
See accompanying notes to financial statements. CHURCHILL TAX-FREE FUND OF KENTUCKY STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ---------------- ----------------- OPERATIONS: Net investment income ................................................... $ 5,809,427 $ 11,410,017 Net realized gain (loss) from securities transactions ................... 747,903 773,552 Change in unrealized appreciation on investments ........................ 3,099,008 7,631,648 ------------- ------------- Change in net assets from operations ................................. 9,656,338 19,815,217 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 10): Class A Shares: Net investment income ................................................... (4,687,428) (9,598,236) Class C Shares: Net investment income ................................................... (89,997) (146,784) Class I Shares: Net investment income ................................................... (60,823) (86,355) Class Y Shares: Net investment income ................................................... (944,829) (1,537,493) ------------- ------------- Change in net assets from distributions .............................. (5,783,077) (11,368,868) ------------- ------------- CAPITAL SHARE TRANSACTIONS (NOTE 7): Proceeds from shares sold ............................................... 28,490,226 52,239,557 Reinvested dividends and distributions .................................. 2,758,974 5,609,442 Cost of shares redeemed ................................................. (17,344,746) (23,818,330) ------------- ------------- Change in net assets from capital share transactions .................... 13,904,454 34,030,669 ------------- ------------- Change in net assets .................................................... 17,777,715 42,477,018 NET ASSETS: Beginning of period ..................................................... 274,446,959 231,969,941 ------------- ------------- End of period* .......................................................... $ 292,224,674 $ 274,446,959 ============= ============= * Includes undistributed net investment income of: $ 360,270 $ 333,920 ============= =============
See accompanying notes to financial statements. CHURCHILL TAX-FREE FUND OF KENTUCKY NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION Churchill Tax-Free Fund of Kentucky (the "Fund"), a non-diversified, open-end investment company, was organized in March, 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 1, 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 fee and a service fee. 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 at the mean of bid and asked quotations and, in the case of other securities, 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) ALLOCATION OF EXPENSES: Expenses, other than class-specific expenses, 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 Management Corporation (the "Manager"), the Fund's founder and sponsor, serves as the Manager for the Fund under an Advisory and Administration Agreement with the Fund. Under the Advisory and Administration Agreement, the Manager provides all investment management and administrative services to the Fund. The Manager's services include providing the office of the Fund and all related services as well as overseeing the activities of all the various support organizations to the Fund such as the shareholder servicing agent, custodian, legal counsel, fund accounting agent, auditors and distributor. 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 0.40 of 1% on the Fund's average net assets. Specific details as to the nature and extent of the services provided by the Manager 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 distribution fee payments to broker-dealers ("Qualified Recipients") or others 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 makes payment of this service fee at the annual rate of 0.15% of the Fund's average net assets represented by Class A Shares. For the six months ended June 30, 2003, service fees on Class A Shares amounted to $168,702 of which the Distributor retained $4,533. 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, 2003, amounted to $20,523. 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 the Fund's average net assets represented by Class C Shares and for the six months ended June 30, 2003, amounted to $6,841. The total of these payments with respect to Class C Shares amounted to $27,364 of which the Distributor retained $5,077. Under another part of the Plan, the Fund is authorized to make payments with respect to Class I Shares to Qualified Recipients. Class I payments, under the Plan, may not exceed for any fiscal year of the Fund a rate (currently 0.20%), set from time to time by the Board of Trustees, of not more than 0.25% of the average annual net assets represented by the Class I Shares. In addition, Class I has a Shareholder Services Plan under which it may pay service fees (currently 0.15%) of not more than 0.25% of the average annual net assets represented by Class I Shares. That is, the total payments under both plans will not exceed 0.50% of such net assets. For the six months ended June 30, 2003, these payments were made at the average annual rate of 0.35% of such net assets and amounted to $5,357 of which $3,061 related to the Plan and $2,296 related to the Shareholder Services Plan. 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 Kentucky, with the bulk of sales commissions inuring to such dealers. For the six months ended June 30, 2003, total commissions on sales of Class A Shares amounted to $299,060 of which the Distributor received $27,895. c) OTHER RELATED PARTY TRANSACTIONS: For the six months ended June 30, 2003, the Fund incurred $33,693 of legal fees allocable to Hollyer Brady Smith & 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 Smith & Hines LLP. 4. PURCHASES AND SALES OF SECURITIES During the six months ended June 30, 2003, purchases of securities and proceeds from the sales of securities aggregated $34,773,077 and $25,986,061, respectively. At June 30, 2003, the aggregate tax cost for all securities was $271,964,664. At June 30, 2003, the aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost amounted to $16,555,764 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value amounted to $224,788 for a net unrealized appreciation of $16,330,976. 5. PORTFOLIO ORIENTATION Since the Fund invests principally and may invest entirely in triple tax-free municipal obligations of issuers within Kentucky, it is subject to possible risks associated with economic, political, or legal developments or industrial or regional matters specifically affecting Kentucky and whatever effects these may have upon Kentucky 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, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 ------------------------------------ ------------------------------------ SHARES AMOUNT SHARES AMOUNT ------ ------ ------ ------ CLASS A SHARES: Proceeds from shares sold ............... 1,265,865 $ 13,611,604 2,800,411 $ 29,436,982 Reinvested distributions ................ 212,624 2,280,603 454,110 4,764,701 Cost of shares redeemed ................. (1,267,591) (13,551,691) (1,611,194) (16,933,028) ------------- ------------ ------------- ------------ Net change ........................... 210,898 2,340,516 1,643,327 17,268,655 ------------- ------------ ------------- ------------ CLASS C SHARES: Proceeds from shares sold ............... 169,149 1,821,387 166,058 1,743,988 Reinvested distributions ................ 5,452 58,473 9,211 96,673 Cost of shares redeemed ................. (17,101) (183,737) (50,063) (523,419) ------------- ------------ ------------- ------------ Net change ........................... 157,500 1,696,123 125,206 1,317,242 ------------- ------------ ------------- ------------ CLASS I SHARES: Proceeds from shares sold ............... 183,454 1,971,320 85,241 895,032 Reinvested distributions ................ 4,051 43,515 7,325 77,007 Cost of shares redeemed ................. (10,398) (112,078) (5,158) (53,879) ------------- ------------ ------------- ------------ Net change ........................... 177,107 1,902,757 87,408 918,160 ------------- ------------ ------------- ------------ CLASS Y SHARES: Proceeds from shares sold ............... 1,025,052 11,085,915 1,918,939 20,163,555 Reinvested distributions ................ 35,048 376,383 63,761 671,061 Cost of shares redeemed ................. (325,104) (3,497,240) (599,076) (6,308,004) ------------- ------------ ------------- ------------ Net change ........................... 734,996 7,965,058 1,383,624 14,526,612 ------------- ------------ ------------- ------------ Total transactions in Fund shares .................................. 1,280,501 $ 13,904,454 3,239,565 $ 34,030,669 ============= ============ ============= ============
8. TRUSTEES' FEES AND EXPENSES During the previous fiscal year there were nine trustees, two of whom were affiliated with the Manager and are not paid any trustee fees. Each Trustee's fees paid during the year were at the annual rate of $6,750 for carrying out their responsibilities and attendance at regularly scheduled Board Meetings. 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 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 of Shareholders. For the fiscal year ended December 31, 2002 such reimbursements averaged approximately $4,700 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. 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 Kentucky income taxes. However, due to 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. Further, a small portion of the dividends may, under some circumstances, be subject to taxes at ordinary income and/or capital gain rates. For certain shareholders, some dividend income may, under some circumstances, be subject to the alternative minimum tax. At December 31, 2002, the Fund had a capital loss carryover of $1,394,949, $372,062 of which expires on December 31, 2007 and $1,022,887 will expire on December 31, 2008. This carryover is available to offset future net realized gains on securities transactions to the extent provided for in the Internal Revenue Code. To the extent that this loss carryover is used to offset future realized capital gains, it is probable the gains so offset will not be distributed. CHURCHILL TAX-FREE FUND OF KENTUCKY FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A ---------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, 6/30/03 ------------------------------------------------------ (UNAUDITED) 2002 2001 2000 1999 1998 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period .......... $10.66 $10.31 $10.40 $10.09 $10.81 $10.81 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income + .................... 0.22 0.47 0.50 0.52 0.52 0.53 Net gain (loss) on securities (both realized and unrealized) ................ 0.16 0.35 (0.09) 0.31 (0.68) 0.01 ------ ------ ------ ------ ------ ------ Total from investment operations ........... 0.38 0.82 0.41 0.83 (0.16) 0.54 ------ ------ ------ ------ ------ ------ Less distributions (note 10): Dividends from net investment income ....... (0.22) (0.47) (0.50) (0.52) (0.53) (0.53) Distributions from capital gains ........... - - - - (0.03) (0.01) ------ ------ ------ ------ ------ ------ Total distributions ........................ (0.22) (0.47) (0.50) (0.52) (0.56) (0.54) ------ ------ ------ ------ ------ ------ Net asset value, end of period ................ $10.82 $10.66 $10.31 $10.40 $10.09 $10.81 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) .... 3.62%++ 8.15% 4.02% 8.45% (1.51)% 5.13% Ratios/supplemental data Net assets, end of period (in thousands) ........................... $231,526 $226,014 $201,604 $196,890 $205,842 $229,667 Ratio of expenses to average net assets ............................... 0.71%* 0.72% 0.72% 0.74% 0.72% 0.73% Ratio of net investment income to average net assets ....................... 4.19%* 4.50% 4.82% 5.10% 4.95% 4.89% Portfolio turnover rate .................... 9.39%++ 18.27% 21.44% 6.61% 6.35% 12.79% The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets ............................... 0.71%* 0.71% 0.70% 0.73% 0.71% 0.72% CLASS I ----------------------------------------- SIX MONTHS ENDED PERIOD 6/30/03 ENDED (UNAUDITED) 2002 12/31/01(1) ----------- ------- ----------- Net asset value, beginning of period .......... $10.66 $10.31 $10.44 ------ ------ ------ Income (loss) from investment operations: Net investment income + .................... 0.21 0.46 0.19 Net gain (loss) on securities (both realized and unrealized) ................. 0.15 0.35 (0.13) ------ ------ ------ Total from investment operations ........... 0.36 0.81 0.06 ------ ------ ------ Less distributions (note 10): Dividends from net investment income ....... (0.21) (0.46) (0.19) Distributions from capital gains ........... - - - ------ ------ ------ Total distributions ........................ (0.21) (0.46) (0.19) ------ ------ ------ Net asset value, end of period ................ $10.81 $10.66 $10.31 ====== ====== ====== Total return (not reflecting sales charge) .... 3.44%++ 7.98% 0.58%++ Ratios/supplemental data Net assets, end of period (in thousands) ........................... $4,355 $2,407 $1,426 Ratio of expenses to average net assets .............................. 0.87%* 0.87% 0.83%* Ratio of net investment income to average net assets ...................... 3.99%* 4.32% 4.47%* Portfolio turnover rate .................... 9.39%++ 18.27% 21.44%++ The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets ............................... 0.87%* 0.86% 0.82%*
- ---------- (1) For the period August 6, 2001 to December 31, 2001. + Per share amounts have been calculated using the monthly average shares method. ++ Not annualized. * Annualized. Note: On May 1, 1998, pursuant to new management arrangements, Banc One Investment Advisors Corporation was appointed as the Fund's Investment Sub-Adviser. On July 1, 2000, Aquila Management Corporation was appointed as the Fund's Investment adviser. See accompanying notes to financial statements. FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C ---------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, 6/30/03 ------------------------------------------------------ (UNAUDITED) 2002 2001 2000 1999 1998 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period .......... $10.66 $10.31 $10.39 $10.08 $ 10.81 $10.81 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income + .................... 0.17 0.38 0.41 0.43 0.43 0.44 Net gain (loss) on securities (both realized and unrealized) ................. 0.16 0.35 (0.08) 0.31 (0.69) 0.01 ------ ------ ------ ------ ------ ------ Total from investment operations ........... 0.33 0.73 0.33 0.74 (0.26) 0.45 ------ ------ ------ ------ ------ ------ Less distributions (note 10): Dividends from net investment income ....... (0.18) (0.38) (0.41) (0.43) (0.44) (0.44) Distributions from capital gains ........... - - - - (0.03) (0.01) ------ ------ ------ ------ ------ ------ Total distributions ........................ (0.18) (0.38) (0.41) (0.43) (0.47) (0.45) ------ ------ ------ ------ ------ ------ Net asset value, end of period ................ $10.81 $10.66 $10.31 $10.39 $10.08 $10.81 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) .... 3.08%++ 7.23% 3.24% 7.54% (2.45)% 4.24% Ratios/supplemental data Net assets, end of period (in thousands) ........................... $6,575 $4,804 $3,355 $1,861 $1,932 $949 Ratio of expenses to average net assets ............................... 1.56%* 1.56% 1.56% 1.59% 1.56% 1.59% Ratio of net investment income to average net assets .................... 3.30%* 3.62% 3.92% 4.24% 4.09% 4.04% Portfolio turnover rate .................... 9.39%++ 18.27% 21.44% 6.61% 6.35% 12.79% The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets ............................... 1.55%* 1.55% 1.55% 1.58% 1.55% 1.57%
CLASS Y ---------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, 6/30/03 ------------------------------------------------------ (UNAUDITED) 2002 2001 2000 1999 1998 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period .......... $10.67 $10.32 $10.40 $10.09 $10.82 $10.82 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income + .................... 0.23 0.49 0.51 0.53 0.53 0.54 Net gain (loss) on securities (both realized and unrealized) ................ 0.15 0.35 (0.07) 0.32 (0.69) 0.02 ------ ------ ------ ------ ------ ------ Total from investment operations ........... 0.38 0.84 0.44 0.85 (0.16) 0.56 ------ ------ ------ ------ ------ ------ Less distributions (note 10): Dividends from net investment income ....... (0.23) (0.49) (0.52) (0.54) (0.54) (0.55) Distributions from capital gains ........... - - - - (0.03) (0.01) ------ ------ ------ ------ ------ ------ Total distributions ........................ (0.23) (0.49) (0.52) (0.54) (0.57) (0.56) ------ ------ ------ ------ ------ ------ Net asset value, end of period ................ $10.82 $10.67 $10.32 $10.40 $10.09 $10.82 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) .... 3.59%++ 8.30% 4.28% 8.62% (1.46)% 5.26% Ratios/supplemental data Net assets, end of period (in thousands) .......................... $49,769 $41,223 $25,585 $15,745 $13,346 $14,335 Ratio of expenses to average net assets .............................. 0.56%* 0.57% 0.57% 0.59% 0.57% 0.58% Ratio of net investment income to average net assets ................... 4.32%* 4.63% 4.94% 5.25% 5.09% 5.03% Portfolio turnover rate .................... 9.39%++ 18.27% 21.44% 6.61% 6.35% 12.79% The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets .............................. 0.56%* 0.56% 0.55% 0.58% 0.56% 0.57%
- ---------- + Per share amounts have been calculated using the monthly average shares method. ++ Not annualized. * Annualized. Note: On May 1, 1998, pursuant to new management arrangements, Banc One Investment Advisors Corporation was appointed as the Fund's Investment Sub-Adviser. On July 1, 2000, Aquila Management Corporation was appointed as the Fund's Investment adviser. See accompanying notes to financial statements. SHAREHOLDER MEETING RESULTS (UNAUDITED) The Annual Meeting of Shareholders of Churchill Tax-Free Fund of Kentucky (the "Fund") was held on April 25, 2003. The holders of shares representing 69% 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 for each matter are presented below). 1. To elect Trustees. Number of Votes: TRUSTEE FOR WITHHELD ------- --- -------- Lacy B. Herrmann 17,109,013 684,610 Thomas A. Christopher 17,687,762 105,862 Douglas Dean 17,702,009 91,614 Diana P. Herrmann 17,107,249 686,375 Carroll F. Knicely 17,692,175 101,449 Theodore T. Mason 17,693,740 99,883 Anne J. Mills 17,704,864 88,759 William J. Nightingale 17,123,235 670,389 James R. Ramsey 17,680,082 113,542 2. To ratify the selection of KPMG LLP as the Fund's independent auditors. Number of Votes: FOR AGAINST ABSTAIN --- ------- ------- 17,241,009 41,206 511,408 MANAGER AND FOUNDER AQUILA MANAGEMENT CORPORATION 380 Madison Avenue, Suite 2300 New York, New York 10017 BOARD OF TRUSTEES Lacy B. Herrmann, Chairman Thomas A. Christopher Douglas Dean Diana P. Herrmann Carroll F. Knicely Theodore T. Mason Anne J. Mills William J. Nightingale James R. Ramsey OFFICERS Diana P. Herrmann, President Thomas S. Albright, Senior Vice President and Portfolio Manager Jerry G. McGrew, Senior Vice President Jason T. McGrew, 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. 400 Bellevue Parkway Wilmington, Delaware 19809 INDEPENDENT AUDITORS KPMG LLP 757 Third Avenue New York, New York 10017 Further information is contained in the Prospectus, which must precede or accompany this report. SEMI-ANNUAL REPORT JUNE 30, 2003 CHURCHILL TAX-FREE FUND OF KENTUCKY A TAX-FREE INCOME INVESTMENT [Logo of the Churchill Tax-Free Fund of Kentucky: a standing pegasus in a circle] [Logo of the Aquila Group of Funds: an eagle's head] ONE OF THE AQUILA(SM) GROUP OF FUNDS 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. CHURCHILL TAX-FREE TRUST By: /s/ Lacy B. Herrmann - --------------------------------- Chairman of the Board September 8, 2003 By: /s/ Diana P. Herrmann - --------------------------------- President September 8, 2003 By: /s/ Joseph P. DiMaggio - ----------------------------------- Chief Financial Officer September 8, 2003 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 8, 2003 By: /s/ Diana P. Herrmann - --------------------------------- Diana P. Herrmann President September 8, 2003 By: /s/ Joseph P. DiMaggio - ----------------------------------- Joseph P. DiMaggio Chief Financial Officer September 8, 2003 CHURCHILL TAX-FREE TRUST EXHIBIT INDEX (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) Certification of chief executive officer and chief financial officer as required by Rule 30a-2(b) of the Investment Company Act of 1940. EX-99.CERT 3 ctft302cert.txt 302 CERTIFICATIONS EX-99.CERT CERTIFICATIONS I, Lacy B. Herrmann, certify that: 1. I have reviewed this report on Form N-CSR of Churchill Tax-Free Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report ("Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 8, 2003 /s/ Lacy B. Herrmann - ---------------------- Title: Chairman of the Board I, Diana P. Herrmann, certify that: 1. I have reviewed this report on Form N-CSR of Churchill Tax-Free Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 2. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report ("Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 8, 2003 /s/ Diana P. Herrmann - ---------------------- Title: President I, Joseph P. DiMaggio, certify that: 1. I have reviewed this report on Form N-CSR of Churchill Tax-Free Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 2. Based on my knowledge, the financial statements, other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report ("Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 8, 2003 /s/ Joseph P. DiMaggio - ------------------------ Title: Chief Financial Officer EX-99.906CERT 4 ctft906cert.txt 906 CERTIFICATIONS CERTIFICATION Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (subsections and (b) of section 1350, chapter 63 of title 18,United States Code), each of the undersigned officers of Churchill Tax-Free Trust, do hereby certify to such officer's knowledge, that: The report on Form N-CSR of Churchill Tax-Free Trust for the period ended June 30, 2003 (the "Form N-CSR")fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of Churchill Tax-Free Trust. Dated: September 8, 2003 /s/ Lacy B. Herrmann --------------------- Lacy B. Herrmann Chairman of the Board Churchill Tax-Free Trust Dated: September 8, 2003 /s/ Diana P. Herrmann ---------------------- President Churchill Tax-Free Trust Dated: September 8, 2003 /s/ Joseph P. DiMaggio ----------------------- Chief Financial Officer Churchill Tax-Free Trust A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Churchill Tax-Free Trust and will be retained by Churchill Tax-Free Trust and furnished to the Securities and Exchange Commission or its staff upon request. This certification is being furnished solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----