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.
<PAGE>
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
<PAGE>
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 [email protected]
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. [__]
