<PAGE>
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
L. Michele Robbins, Senior Vice President
Teresa M. Blair, Vice President
James M. McCullough, Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, 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.
100 East Broad Street
Columbus, Ohio 43271
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, 2000
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
AQUILASM GROUP OF FUNDS
</PAGE>
<PAGE>
SERVING KENTUCKY INVESTORS FOR OVER A DECADE
CHURCHILL TAX-FREE FUND OF KENTUCKY
SEMI-ANNUAL REPORT
"CONSISTENCY"
August 18, 2000
Dear Fellow Shareholder:
If there is one word that captures the essence of Churchill Tax-Free Fund
of Kentucky, that word is "CONSISTENCY."
The Fund has constantly attempted to provide:
* CONSISTENCY of share value,
* CONSISTENCY in the TAX-FREE return produced by the Fund
* CONSISTENCY of quality of investments and
* CONSISTENCY in the type of investments for the Fund.
CONSISTENCY OF SHARE VALUE
As you are aware, management of the Fund cannot control interest rates or
their effect upon the market. Interest rates are primarily controlled by the
Federal Reserve Board. The Fed increases or decreases rates as they feel is
necessary in order to maintain the stability and growth potential of the economy
of the United States.
When the Federal Reserve feels that growth in the economy is increasing at
too rapid a pace, they tend to increase interest rates and reduce the supply of
money in order to slow down the rate of growth. (This is what has happened
during the past year or so.) On the other hand, when the Federal Reserve feels
that the economy needs stimulation, there is a tendency to decrease interest
rates and increase the supply of money in order to provide an additional impetus
to the overall economy.
Interest rate changes have the effect in the marketplace of creating
changes in the share value of fixed-income securities such as the Fund. As we
have previously indicated, when interest rates go up, the share value goes down.
And, when interest rates go down, the share value goes up. What we have done is
to use various investment management techniques to dampen the swings that can
occur in the share value of the Fund.
Despite the variations in share price that have taken place since the
inception of the Fund, management of the Fund has strived to provide, to the
maximum extent possible, CONSISTENCY in the value of the Fund's shares. This you
will note from the chart below.
[Graphic of a bar chart with the following information:]
SHARE NET ASSET VALUE
5/21/87 $ 9.60
12/31/87 9.26
12/31/88 9.53
12/31/89 10.05
12/31/90 10.00
12/31/91 10.39
12/31/92 10.50
12/31/93 10.93
12/31/94 9.97
12/31/95 10.71
12/31/96 10.55
12/31/97 10.81
12/31/98 10.81
12/31/99 10.09
6/30/2000 10.15
</PAGE>
<PAGE>
Since the majority of investors using the Fund are pre-retirees or
retirees, this action by the Fund of maintaining a stable share value is what we
feel is in the best interest of all shareholders. We want you to know that when
you need money from your investment in the Fund, it is THERE - at approximately
the same value that it has been all along.
CONSISTENCY IN THE TAX-FREE RETURN PRODUCED BY THE FUND
When you look at the Fund in terms of income produced on a year-by-year
basis, you will observe that we have tried to provide the maximum level of
yearly TAX-FREE return as can be produced by a quality-oriented portfolio of
municipal securities.
As you are aware, this level of return will vary from year to year as
interest rate changes by the Federal Reserve affect the overall marketplace.
Nevertheless, there is a CONSISTENCY to the level of return that the Fund would
like to provide for you and other shareholders.
Although the income level received by shareholders will vary from year to
year, it does have a CONSISTENCY to it. And, this is why shareholders buy and
own the Fund - for that CONSISTENCY of TAX-FREE income.
During recent years, the level of SPENDABLE TAX-FREE return provided to
shareholders has ranged between 4.65% to 5.37% based upon an average share value
of the Fund.
Shareholders of Churchill Tax-Free Fund of Kentucky should not buy or sell
the Fund based upon capital appreciation, such as they would with an equity or
stock fund.
An analogy for a shareholder of Churchill Tax-Free Fund of Kentucky would
be a person buying a dairy cow for the steady stream of milk it supplies, not
for what it might be worth when he/she sells it.
What the Fund is providing is a relatively steady stream of TAX-FREE income
and a relatively stable share value.
Shareholders buy and hold their position in Churchill Tax-Free Fund of
Kentucky for the longer term, not for a quick in and out. Therefore,
shareholders do NOT and should NOT look upon the Fund for its total return -
but, rather for the income stream it provides in the form of TAX-FREE dividends.
Also, when you look at the recent level of TAX-FREE income provided by the
Fund and measure that against the taxable income required to provide the same
amount of money in your pocket, here's what things look like.
[Graphic of a bar chart with the following information:]
CHURCHILL TAX-FREE FUND OF KENTUCKY'S TRIPLE TAX-FREE
DISTRIBUTION RATE AS COMPARED TO THE TAXABLE EQUIVALENT RATE
AN INVESTOR WOULD HAVE TO EARN AT VARIOUS TAX BRACKETS
RATE OF RETURN
TAXABLE EQUIVALENT RATE TRIPLE TAX-FREE DISTRIBUTION RATE
TAX BRACKET
28% 4.90% 7.24%
31% 4.90% 7.66%
36% 4.90% 8.29%
40% 4.90% 8.80%
</PAGE>
<PAGE>
CONSISTENCY OF QUALITY OF INVESTMENTS
Since inception of the Fund, management has CONSISTENTLY sought
high-quality investments for its shareholders.
We don't like surprises. Nor, do shareholders like surprises. We believe
the best way to avoid surprises is to stick with quality.
The pie chart below gives you a breakdown of the quality of the individual
securities of the Fund as at the Semi-Annual Report date of June 30, 2000.
[Graphic of a pie chart with the following information:]
PORTFOLIO DISTRIBUTION BY QUALITY
AAA 63.62%
AA 15.74%
A 19.19%
Below A and Not Rated 1.45%
As you will recall, the Fund's prospectus restricts its investments to only
the top four quality securities - AAA, AA, A, Baa - although there are nine
different grades of quality associated with municipal bond investing ranging
from the highest to the lowest. We have always tried to make sure that
shareholders know that, to the maximum extent possible, their invested money
will be there when they need it. The best way we know to accomplish this
objective is by sticking with quality.
This is why we CONSISTENTLY seek to maintain most of the Fund's money in
the upper quality securities - AAA AND AA. As you will appreciate, the exact
level of quality will vary from time to time based upon availability of
securities in the marketplace to achieve the Fund's objective.
CONSISTENCY IN THE TYPE OF INVESTMENTS FOR THE FUND
Management of Churchill Tax-Free Fund of Kentucky has CONSISTENTLY embraced
the idea that your investment should not only help shareholders financially, but
also help your state and its communities. Thus, investments in the Fund are as
diversified as possible. Diversification geographically and by type of project
is another way of ensuring that your money is doing the best job possible for
not only you, but also for your community and state.
[Graphic of a pie chart with the following information:]
PORTFOLIO DISTRIBUTION BY MARKET SECTOR
Airports 2.52%
Hospitals 9.79%
Housing 15.58%
Local Public Property 19.10%
Pollution Control 10.29%
School Building Revenues and Universities 11.22%
Kentucky State Agencies 11.23%
Turnpikes/Highways 4.25%
Utilities 5.96%
Other 10.06%
</PAGE>
<PAGE>
SUMMARY
As we have tried to illustrate in this report to you, the essence of
Churchill Tax-Free Fund of Kentucky is CONSISTENCY. This is what we feel that
shareholders are primarily interested in. And, this is exactly what we are
trying to provide to you and other shareholders.
CONSISTENCY OF APPRECIATION
As always, we again wish to express our appreciation for the confidence you
have shown by your investment in Churchill Tax-Free Fund of Kentucky. We can
assure you that we will CONSISTENTLY do our best to merit your continued level
of trust.
Sincerely,
Diana P. Herrmann
President
Lacy B. Herrmann
Chairman, Board of Trustees
</PAGE>
<PAGE>
CHURCHILL TAX-FREE FUND OF KENTUCKY
STATEMENT OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (95.3%) S&P VALUE
</CAPTION>
<S> <C> <C> <C> <C>
STATE AGENCIES (15.6%)
Kentucky Higher Education Student Loan Corporation
Insured Student Loan Revenue,
$ 1,490,000 6.500%, 06/01/02 Aaa/AA- $ 1,527,250
2,955,000 6.800%, 06/01/03 Aaa/AA- 3,073,200
1,915,000 7.100%, 12/01/11 Aaa/AA- 1,984,419
Kentucky Infrastructure Authority Revenue,
930,000 5.000%, 06/01/09, MBIA Insured Aaa/AAA 926,513
555,000 7.200%, 06/01/11 Aa3/A 577,433
635,000 5.250%, 06/01/12 Aa3/A 635,794
875,000 6.500%, 06/01/12 Aa3/A 911,094
1,110,000 6.375%, 06/01/14, Pre-Refunded Aa3/A 1,202,963
1,500,000 5.375%, 02/01/18 Aa3/A 1,436,250
Kentucky Local Correctional Facilities Construction
Authority Revenue,
5,065,000 5.500%, 11/01/14, FSA Insured Aaa/AAA 5,096,656
Kentucky Area Development
345,000 5.750%, 12/01/27, LOC Fifth Third Bank NR/AA 331,631
145,000 5.600%, 06/01/28, LOC Fifth Third Bank NR/AA 136,481
785,000 5.500%, 06/01/28, LOC Fifth Third Bank NR/AA 725,144
Kentucky Rural Economic Development Authority
3,110,000 7.250%, 06/01/17, LOC Bank One NR/A+ 3,226,625
Kentucky State Properties and Buildings
Commission Revenue,
3,000,000 6.250%, 09/01/07 Aaa/AAA 3,228,750
4,510,000 6.625%, 10/01/07, Pre-Refunded NR/AAA 4,707,312
365,000 7.000%, 02/01/06, Pre-Refunded NR/AAA 377,425
220,000 6.000%, 09/01/08 Aa3/A+ 234,850
500,000 5.500%, 11/01/09, AMBAC Insured Aaa/AAA 513,750
1,000,000 6.500%, 08/01/11, Pre-Refunded Aaa/AAA 1,040,970
400,000 5.000%, 09/01/13 Aa3/A+ 386,500
Puerto Rico Public Buildings Authority,
1,000,000 6.875%, 07/01/12, Pre-Refunded Aaa/AAA 1,061,250
33,342,260
COUNTY AGENCIES (11.7%)
Clark County Kentucky Public Properties Corp.
Revenue,
1,120,000 6.700%, 06/01/16, Pre-Refunded A/NR 1,158,058
Floyd County Public Property, Courthouse Revenue,
</PAGE>
<PAGE>
$ 510,000 5.500%, 09/01/14 NR/A $ 510,638
Jefferson County Kentucky Capital Projects,
1,000,000 5.200%, 06/01/08, MBIA Insured Aaa/AAA 1,012,500
420,000 5.250%, 06/01/14, MBIA Insured Aaa/AAA 412,650
1,620,000 5.375%, 06/01/18, MBIA Insured Aaa/AAA 1,569,375
1,640,000 5.375%, 06/01/22, MBIA Insured Aaa/AAA 1,555,950
5,900,000 5.500%, 06/01/28, MBIA Insured Aaa/AAA 5,634,500
Muhlenberg County Kentucky Industrial
Development Revenue,
1,500,000 7.000%, 09/01/01 NR/A 1,530,000
Pendleton County Kentucky Multi-County Lease Revenue,
500,000 7.300%, 03/01/02 NR/AA 510,625
570,000 7.550%, 03/01/10 NR/AA 588,377
4,500,000 6.500%, 03/01/19 NR/A 4,640,625
3,000,000 6.400%, 03/01/19 NR/A 3,217,500
Warren County Kentucky Justice,
2,875,000 5.350%, 09/01/29, MBIA Insured Aaa/NR 2,670,156
25,010,954
CITY/MUNICIPAL OBLIGATIONS (8.9%)
Jeffersontown Kentucky Public Project Corp. Revenue,
500,000 5.750%, 11/01/15 A/NR 506,250
Kentucky League Cities Funding Trust COP,
700,000 5.900%, 08/01/16, (Owensboro) NR/A 714,000
1,715,000 6.200%, 08/01/17, (Covington) NR/A+ 1,779,313
Louisville Kentucky Public Properties Corp.,
4,090,000 6.700%, 12/01/20, Pre-Refunded A/A- 4,350,738
Mount Sterling Kentucky Lease Revenue,
1,920,000 6.150%, 03/01/13 Aa/NR 1,992,000
7,000,000 6.200%, 03/01/18 Aa/NR 7,183,738
Munfordville Kentucky Industrial Development
Revenue,
2,500,000 7.000%, 06/01/19, LOC Bank One NR/A+ 2,634,375
19,160,414
UTILITIES (6.0%)
Carrolton & Henderson Kentucky Gas Revenue,
1,000,000 5.000%, 01/01/07, FSA Insured Aaa/AAA 977,500
Carrolton & Henderson Kentucky Gas Revenue,
1,750,000 5.000%, 01/01/09, FSA Insured Aaa/AAA 1,686,563
Hardin County, Kentucky Water District
</PAGE>
<PAGE>
$ 1,000,000 5.900%, 01/01/25, MBIA Insured Aaa/AAA $ 1,005,000
Lebanon Kentucky Waterworks Revenue,
250,000 7.500%, 04/01/16, Pre-Refunded NR/NR* 260,223
Louisville and Jefferson County Kentucky
Metropolitan Sewer District Revenue,
1,000,000 5.000%, 05/15/12, MBIA Insured Aaa/AAA 975,000
250,000 5.000%, 05/15/13, MBIA Insured Aaa/AAA 239,688
2,000,000 5.300%, 05/15/19, MBIA Insured Aaa/AAA 1,902,500
4,070,000 5.500%, 05/15/23, MBIA Insured Aaa/AAA 3,927,550
1,525,000 6.500%, 05/15/24, MBIA Insured, Pre-Refunded Aaa/AAA 1,652,719
12,626,743
POLLUTION CONTROL REVENUE (10.1%)
Ashland Kentucky Pollution Control Revenue,
(Ashland Oil)
3,000,000 6.650%, 08/01/09 Baa2/NR 3,086,250
Boone County Kentucky Pollution Control,
(Dayton Power & Light)
4,000,000 6.500%, 11/15/22 A2/BBB+ 4,080,000
Boone County Kentucky Pollution Control, (Cinergy)
750,000 5.500%, 01/01/24, MBIA Insured Aaa/AAA 721,875
Carroll County Kentucky Pollution Control Revenue,
(LG&E Energy)
4,500,000 7.450%, 09/15/16 A1/A 4,753,125
2,910,000 6.250%, 02/01/18 Aa1/A 2,942,738
Jefferson County Kentucky Pollution Control
Revenue, (LG&E Energy)
3,800,000 5.900%, 04/15/23 Aa1/A 3,747,750
Wickliffe Kentucky Pollution Control, (Westvaco)
2,455,000 6.200%, 04/01/07 A3/BBB+ 2,458,683
21,790,421
TRANSPORTATION (7.6%)
Kenton County Kentucky Airport Board Airport
Revenue,
5,240,000 6.300%, 03/01/15, FSA Insured Aaa/AAA 5,344,800
Kentucky Interlocal School Transportation Authority
</PAGE>
<PAGE>
$ 150,000 5.100%, 03/01/05 NR/A $ 151,875
145,000 5.400%, 06/01/17 NR/A 140,288
200,000 6.000%, 12/01/20 NR/A 202,750
300,000 5.800%, 12/01/20 NR/A 298,875
400,000 6.000%, 12/01/20 NR/A 405,500
400,000 5.650%, 12/01/20 NR/A 391,500
350,000 5.600%, 12/01/20 NR/A 340,375
Kentucky State Turnpike Authority Economic
Development Road Revenue,
120,000 8.500%, 07/01/06 A1/A+ 141,450
1,000,000 6.500%, 07/01/08, AMBAC Insured Aaa/AAA 1,097,500
3,505,000 5.625%, 07/01/15, AMBAC Insured Aaa/AAA 3,531,288
Puerto Rico Commonwealth Highway &
Transportation Authority Highway Revenue,
4,000,000 6.625%, 07/01/12, Pre-Refunded Baa1/A 4,220,000
16,266,201
HOSPITALS (9.7%)
Floyd County Kentucky Hospital Revenue,
225,000 7.500%, 08/01/10, FHA Insured NR/AAA 231,851
Hopkins County Kentucky Hospital Revenue,
1,000,000 6.625%, 11/15/11, MBIA Insured Aaa/AAA 1,040,000
Jefferson County Kentucky Health Facilities Revenue,
1,500,000 5.650%, 01/01/17, AMBAC Insured Aaa/AAA 1,490,625
1,150,000 6.550%, 05/01/22, AMBAC Insured Aaa/AAA 1,193,125
Kentucky Development Finance Authority Hospital
Revenue,
750,000 7.000%, 09/01/06, Pre-Refunded NR/NR* 784,688
3,000,000 6.500%, 11/01/07, Pre-Refunded A1/A+ 3,127,500
1,000,000 5.700%, 10/01/10, ACA Insured NR/A 1,001,250
2,150,000 6.750%, 11/01/12, Pre-Refunded A1/A+ 2,249,438
1,375,000 6.125%, 02/01/12, FSA Insured, (Kingsdaughters) Aaa/AAA 1,433,438
2,590,000 5.000%, 08/15/15, MBIA Insured Aaa/AAA 2,428,125
3,000,000 5.900%, 12/01/15, FGIC Insured Aaa/AAA 3,048,750
1,000,000 5.850%, 10/01/17, ACA Insured NR/A 956,250
1,990,000 5.000%, 08/15/24, MBIA Insured Aaa/AAA 1,741,250
20,726,290
</PAGE>
<PAGE>
HOUSING (15.2%)
Greater Kentucky Housing Assistance Corp.
Multi-Family Housing Revenue,
$ 320,000 6.300%, 07/01/15 Aaa/NR $ 328,000
2,025,000 6.050%, 07/01/22 Aaa/AAA 2,030,063
275,000 6.400%, 07/01/23 Aaa/NR 281,875
Jefferson County Kentucky Multi-Family Revenue,
1,530,000 5.750%, 06/01/23, (Taylorsville Road Project) NR/AA 1,549,125
Kenton County Kentucky Industrial Development
1,000,000 6.125%, 12/01/17, FHA Insured Aa/NR 987,500
Kenton County Kentucky Industrial Development,
300,000 6.950%, 12/01/26, FHA Insured Aa/NR 315,375
Kentucky Housing Corporation Housing Revenue,
255,000 7.750%, 01/01/07 Aaa/AAA 261,755
1,000,000 6.500%, 01/01/07 Aaa/AAA 1,032,500
175,000 7.250%, 01/01/09 Aaa/AAA 177,560
980,000 7.125%, 01/01/10 Aaa/AAA 1,009,733
4,975,000 6.600%, 07/01/11 Aaa/AAA 5,124,250
230,000 5.400%, 07/01/14 Aaa/AAA 226,550
750,000 6.250%, 07/01/15 Aaa/AAA 766,875
315,000 6.100%, 07/01/16 Aaa/AAA 318,544
1,245,000 6.400%, 01/01/17 Aaa/AAA 1,280,794
3,000,000 5.300%, 07/01/18 Aaa/AAA 2,767,500
1,450,000 5.800%, 01/01/19 Aaa/AAA 1,453,625
220,000 7.900%, 01/01/21 Aaa/AAA 224,950
80,000 8.100%, 01/01/22 Aaa/AAA 82,120
1,240,000 7.450%, 01/01/23 Aaa/AAA 1,274,100
6,900,000 6.300%, 01/01/28 Aaa/AAA 6,943,125
2,890,000 6.375%, 07/01/28 Aaa/AAA 2,922,513
1,130,000 6.250%, 07/01/28 Aaa/AAA 1,134,238
32,492,670
SCHOOLS (10.5%)
Boone County Kentucky School District Finance
Corp. School Building Revenue,
1,750,000 6.750%, 09/01/09, Pre-Refunded Aa3/A 1,841,875
2,250,000 6.125%, 12/01/17, Pre-Refunded Aa3/NR 2,359,688
2,295,000 5.700%, 05/01/18 Aa3/NR 2,300,738
Boyd County Kentucky School District Finance Corp.,
575,000 5.375%, 10/01/17 Aa3/NR 560,625
Christian County Kentucky School District
Finance Corp.,
</PAGE>
<PAGE>
$ 500,000 5.000%, 06/01/09 Aa3/NR $ 498,125
Fayette County School Building Revenue,
160,000 5.350%, 01/01/14 Aa3/A+ 159,400
1,780,000 5.700%, 12/01/16 Aa3/A+ 1,797,800
Floyd County Kentucky School Building Revenue
250,000 5.000%, 12/01/09 Aa3/NR 249,063
Garrard County Kentucky School Building Revenue,
100,000 5.900%, 06/01/15 Aa3/NR 103,125
160,000 5.900%, 06/01/16 Aa3/NR 163,600
Grayson County Kentucky School Building Revenue,
1,940,000 6.000%, 01/01/15 Aa3/NR 2,000,625
Jefferson County Kentucky School District Finance
Corp. School Building Revenue,
165,000 6.200%, 01/01/06, MBIA Insured Aaa/AAA 172,838
205,000 6.200%, 01/01/06, MBIA Insured Pre-Refunded Aaa/AAA 213,969
100,000 5.250%, 07/01/09 Aaa/AAA 101,125
500,000 5.875%, 01/01/11 Aa3/A+ 518,125
695,000 5.125%, 11/01/14, FSA Insured Aaa/AAA 675,019
Kenton County Kentucky School District Finance
Corp. School Building Revenue,
100,000 5.250%, 03/01/06 Aa3/A+ 102,000
Lexington-Fayette Urban County Government
Project U.K. Library
725,000 5.000%, 11/01/15, MBIA Insured Aaa/AAA 678,781
Meade County Kentucky School District Finance Corp.,
400,000 5.700%, 07/01/15 Aa3/NR 407,500
500,000 6.000%, 07/01/16 Aa3/NR 519,375
Middlesboro Kentucky Independent School District
Finance Corp.
100,000 6.100%, 08/01/16 Aa3/NR 103,875
Nelson County Kentucky School Building Revenue,
1,820,000 5.750%, 04/01/15 Aa3/NR 1,870,050
Pike County Kentucky School District Finance
Corp. School Building Revenue,
720,000 7.000%, 12/01/09, Pre-Refunded Aa3/A 748,548
Rowan County Kentucky School District Finance Corp.,
215,000 5.600%, 06/01/16 Aa3/NR 216,075
Scott County Kentucky School Building Revenue,
</PAGE>
<PAGE>
$ 2,750,000 5.900%, 06/01/18 Aa3/NR $ 2,798,125
Taylor County Kentucky School Building Revenue,
280,000 6.000%, 08/01/16 Aa3/NR 291,200
Todd County Kentucky School Building Revenue,
980,000 6.300%, 10/01/14, Pre-Refunded Aa3/A 1,051,050
22,502,319
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES (3.4%)
Kentucky Economic Development,
7,300,000 5.400%, 01/01/22 + Aaa/NR 7,300,000
7,300,000
Total Investments (cost $208,133,332**) 98.7% 211,218,272
Other assets in excess of liabilities 1.3 2,772,904
Net Assets 100.0% $ 213,991,176
</TABLE>
* 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.
** Cost for Federal tax purposes is identical.
+ The security has a maturity of more than one year, but has
variable rate and demand features which qualify it as a
short-term security. The rate disclosed is that currently in
effect. This rate changes periodically based on market
conditions or a specified market index.
PORTFOLIO ABBREVIATIONS:
ACA - American Capital Access
AMBAC - American Municipal Bond Assurance Corp.
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Administration
FSA - Financial Security Assurance
MBIA - Municipal Bond Investors Assurance Corp.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
CHURCHILL TAX-FREE FUND OF KENTUCKY
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
ASSETS
Investments at value (cost $208,133,332) $211,218,272
Interest receivable 3,527,861
Receivable for investment securities sold 120,000
Receivable for Fund shares sold 78,604
Other assets 799
Total assets 214,945,536
LIABILITIES
Cash overdraft 402,452
Dividends payable 253,574
Payable for Fund shares redeemed 111,807
Distribution fees payable 77,772
Management fee payable 69,770
Accrued expenses 38,985
Total liabilities 954,360
NET ASSETS $213,991,176
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $.01 per share $ 210,769
Additional paid-in capital 213,473,882
Accumulated net realized loss on investments (2,778,415)
Net unrealized appreciation on investments 3,084,940
$213,991,176
CLASS A
Net Assets $198,918,474
Capital shares outstanding 19,592,939
Net asset value and redemption price per share $ 10.15
Offering price per share (100/96 of $10.15 adjusted to nearest cent) $ 10.57
CLASS C
Net Assets $ 1,371,153
Capital shares outstanding 135,114
Net asset value and offering price per share $ 10.15
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) $ 10.15*
CLASS Y
Net Assets $ 13,701,549
Capital shares outstanding 1,348,807
Net asset value, offering and redemption price per share $ 10.16
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
CHURCHILL TAX-FREE FUND OF KENTUCKY
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 6,291,928
Expenses:
Management fee (note 3) $ 426,518
Distribution and service fees (note 3) 157,661
Transfer and shareholder servicing agent fees 64,000
Trustees' fees and expenses 41,000
Legal fees 27,000
Shareholders' reports and proxy statements 23,000
Custodian fees 14,500
Audit and accounting fees 13,000
Registration fees and dues 7,500
Insurance 5,000
Miscellaneous 8,808
787,987
Expenses paid indirectly (note 7) (13,235)
Net expenses 774,752
Net investment income 5,517,176
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from securities transactions (700,736)
Change in unrealized appreciation on investments 2,011,241
Net realized and unrealized gain on investments 1,310,505
Net increase in net assets resulting from operations $ 6,827,681
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
CHURCHILL TAX-FREE FUND OF KENTUCKY
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
</CAPTION>
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 5,517,176 $ 11,777,033
Net realized loss from securities transactions (700,736) (2,077,873)
Change in unrealized depreciation on investments 2,011,241 (13,367,712)
Change in net assets from operations 6,827,681 (3,668,552)
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 6):
Class A Shares:
Net investment income (5,134,117) (11,098,723)
Net realized gain on investments - (712,904)
Class C Shares:
Net investment income (37,858) (61,991)
Net realized gain on investments - 6,285)
Class Y Shares:
Net investment income (345,008) (754,212)
Net realized gain on investments - (46,239)
Change in net assets from distributions (5,516,983) ( 12,680,354)
CAPITAL SHARE TRANSACTIONS (NOTE 8):
Proceeds from shares sold 7,233,274 22,053,760
Reinvested dividends and distributions 2,616,701 6,456,809
Cost of shares redeemed (18,289,160) (35,993,090)
Change in net assets from capital share transactions (8,439,185) (7,482,521)
Change in net assets (7,128,487) (23,831,427)
NET ASSETS:
Beginning of period 221,119,663 244,951,090
End of period $213,991,176 $ 221,119,663
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
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 service 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. 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. At June 30, 2000 there were no
Class I shares outstanding. All classes of shares represent interests in the
same portfolio of investments and are identical as to rights and privileges but
differ with respect to the effect of sales charges, the distribution and/or
service fees borne by each class, expenses specific to each class, voting rights
on matters affecting a single class and the exchange privileges of each class.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles 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 was 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 exceeded 60 days.
</PAGE>
<PAGE>
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 discount. Market
discount is recognized upon disposition of the security.
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 generally accepted accounting principles 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. The portfolio management of the Fund had been delegated
to a Sub-Adviser through June 30, 2000 as described below. Under the Advisory
and Administration Agreement, the Manager provides all administrative services
to the Fund, other than those relating to the day-to-day portfolio management.
The Manager's services include providing the office of the Fund and all related
services as well as overseeing the activities of the Sub-Adviser and all the
various support organizations to the Fund such as the shareholder servicing
agent, custodian, legal counsel, auditors and distributor and additionally
maintaining the Fund's accounting books and records. For its services, the
Manager is entitled to receive a fee which is payable monthly and computed as of
the close of business each day at the annual rate of 0.40 of 1% on the Fund's
net assets.
Banc One Investment Advisors Corporation (the "Sub-Adviser") served as the
Investment Sub-Adviser for the Fund through June 30, 2000 under a Sub-Advisory
Agreement between the Manager and the Sub-Adviser. Under this agreement, the
Sub-Adviser continuously provided, subject to oversight of the Manager and the
Board of Trustees of the Fund, the investment program of the Fund and the
composition of its portfolio, arranged for the purchases and sales of portfolio
securities, and provided for daily pricing of the Fund's portfolio. For its
services, the Sub-Adviser was entitled to receive a fee from the Manager which
was payable monthly and computed as of the close of business each day at the
annual rate of 0.14 of 1% on the Fund's net assets.
</PAGE>
<PAGE>
For the six months ended June 30, 2000, the Fund incurred fees for advisory
and administrative services of $426,518.
On June 11, 2000, the Board of Trustees approved a change in the above
management arrangements to be effective on July 1, 2000. On that date, the
Manager assumed full responsibility for the Fund's investment program together
with the other duties previously performed by the Sub-Adviser as described
above. The total fee schedule did not change as a result of these new
arrangements.
Specific details as to the nature and extent of the services provided by
the Manager and by the Sub-Adviser (through June 30, 2000) are more fully
defined in the Fund's Prospectus and Statement of Additional
Information.
b) DISTRIBUTION AND SERVICE FEES:
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940. Under one part of
the Plan, with respect to Class A Shares, the Fund is authorized to make service
fee payments to broker-dealers ("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, 2000, service fees on Class A Shares amounted
to $148,904, of which the Distributor received $3,444.
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 net assets represented by Class C Shares and for the six
months ended June 30, 2000, amounted to $6,568. 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 net assets represented by Class C Shares and for the six
months ended June 30, 2000, amounted to $2,189. The total of these payments with
respect to Class C Shares amounted to $8,757, of which the Distributor received
$5,733.
Specific details about the Plans are more fully defined in the Fund's
Prospectus and Statement of Additional Information.
</PAGE>
<PAGE>
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, 2000, total commissions on sales of Class A Shares amounted to $91,556, of
which the Distributor received $11,603.
4. PURCHASES AND SALES OF SECURITIES
During the six months ended June 30, 2000, purchases of securities and
proceeds from the sales of securities aggregated $1,693,145 and $9,836,740,
respectively.
At June 30, 2000, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted to
$5,091,534 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over market value amounted to $2,006,594
for a net unrealized appreciation of $3,084,940.
At December 31, 1999, the Fund has a capital loss carryover of $1,820,125
which expires on December 31, 2007. 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 is used to offset future
realized capital gains, it is probable the gains so offset will not be
distributed.
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. 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. An additional
distribution of gain may be made to the extent necessary to avoid payment of
Federal taxes by the Fund.
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 dividends may, under some circumstances, be subject to the
alternative minimum tax.
</PAGE>
<PAGE>
7. 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.
8. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
SHARES AMOUNT SHARES AMOUNT
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 596,047 $ 6,003,190 1,525,380 $ 16,084,824
Reinvested distributions 255,985 2,578,345 607,660 6,362,827
Cost of shares redeemed (1,661,780) (16,722,375) (2,966,462) (31,041,782)
Net change (809,748) (8,140,840) (833,422) (8,594,131)
CLASS C SHARES:
Proceeds from shares sold 3,304 33,286 119,878 1,262,958
Reinvested distributions 2,563 25,797 4,864 50,548
Cost of shares redeemed (62,303) (626,690) (21,003) (217,677)
Net change (56,436) (567,607) 103,739 1,095,829
CLASS Y SHARES:
Proceeds from shares sold 119,132 1,196,798 439,346 4,705,978
Reinvested distributions 1,248 12,559 4,179 43,434
Cost of shares redeemed (93,595) (940,095) (446,192) (4,733,631)
Net change 26,785 269,262 (2,667) 15,781
Total transactions in Fund
shares (839,399) $ (8,439,185) (732,350) $ (7,482,521)
</TABLE>
</PAGE>
<PAGE>
CHURCHILL TAX-FREE FUND OF KENTUCKY
FINANCIAL HIGHLIGHTS
(UNAUDITED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.09 $10.81 $10.81 $10.55 $10.71 $9.97
Income from Investment Operations:
Net investment income 0.26 0.52 0.53 0.55 0.55 0.60
Net gain (loss) on securities (both realized and
unrealized) 0.07 (0.68) 0.01 0.27 (0.12) 0.74
Total from Investment Operations 0.33 (0.16) 0.54 0.82 0.43 1.34
Less Distributions (note 6):
Dividends from net investment income (0.26) (0.53) (0.53) (0.55) (0.59) (0.60)
Distributions from capital gains - (0.03) (0.01) (0.01) - -
Total Distributions (0.26) (0.56) (0.54) (0.56) (0.59) (0.60)
Net Asset Value, End of Period $10.16 $10.09 $10.81 $10.81 $10.55 $10.71
Total Return (not reflecting sales charge)(%) 3.21+ (1.51) 5.13 8.08 4.17 13.75
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 198,918 205,842 229,667 226,477 222,889 230,270
Ratio of Expenses to Average Net Assets (%) 0.74* 0.72 0.73 0.73 0.75 0.80
Ratio of Net Investment Income to Average Net Assets (%) 5.16* 4.95 4.89 5.19 5.22 5.74
Portfolio Turnover Rate (%) 0.82+ 6.35 12.79 22.39 8.94 17.09
The expense ratios after giving effect to the expense offset for uninvested
cash balances were:
Ratio of Expenses to Average Net Assets (%) 0.73* 0.71 0.72 0.72 0.74 0.79
</TABLE>
+ Not annualized.
* Annualized.
Note: Effective September 11, 1995, Banc One Investment Advisors Corporation
became the Fund's Investment Adviser replacing PNC Bank, Kentucky, Inc.
and effective on May 1, 1998, pursuant to new management arrangements, was
appointed as the Fund's Investment Sub-Adviser.
</PAGE>
<PAGE>
CHURCHILL TAX-FREE FUND OF KENTUCKY
FINANCIAL HIGHLIGHTS (CONTINUED)
(UNAUDITED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C CLASS Y
SIX MONTHS PERIOD SIX MONTHS PERIOD
ENDED ENDED ENDED ENDED
JUNE 30, YEAR ENDED DECEMBER 31, DEC. 31, JUNE 30, YEAR ENDED DECEMBER 31, DEC. 31,
2000 1999 1998 1997 1996(1) 2000 1999 1998 1997 1996(1)
</CAPTION>
<S><C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.08 $10.81 $10.81 $10.55 $10.47 $10.09 $10.82 $10.82 $10.55 $10.47
Income from Investment Operations:
Net investment income 0.22 0.43 0.44 0.46 0.37 0.27 0.53 0.54 0.56 0.43
Net gain (loss) on securities (both
realized and unrealized) 0.07 (0.69) 0.01 0.27 0.11 0.06 (0.69) 0.02 0.29 0.11
Total from Investment Operations 0.29 (0.26) 0.45 0.73 0.48 0.33 (0.16) 0.56 0.85 0.54
Less Distributions (note 6):
Dividends from net investment income (0.22) (0.44) (0.44) (0.46) (0.40) (0.27) (0.54) (0.55) (0.57) (0.46)
Distributions from capital gains - (0.03) (0.01) (0.01) - - (0.03) (0.01) (0.01) -
Total Distributions (0.22) (0.47) (0.45) (0.47) (0.40) (0.27) (0.57) (0.56) (0.58) (0.46)
Net Asset Value, End of Period $10.15 $10.08 $10.81 $10.81 $10.55 $10.15 $10.09 $10.82 $10.82 $10.55
Total Return (not reflecting sales
charge)(%) 2.87+ (2.45) 4.24 7.16 4.72+ 3.39+ (1.46) 5.26 8.34 5.24+
Ratios/Supplemental Data
Net Assets, End of Period
($ thousands) 1,371 1,932 949 845 433 13,702 13,346 14,335 8,957 5,823
Ratio of Expenses to Average Net
Assets (%) 1.59* 1.56 1.59 1.57 1.56* 0.59* 0.57 0.58 0.57 0.58*
Ratio of Net Investment Income
to Average Net Assets (%) 4.31* 4.09 4.04 4.30 4.34* 5.31* 5.09 5.03 5.31 5.41*
Portfolio Turnover Rate (%) 0.82+ 6.35 12.79 22.39 8.94 0.82+ 6.35 12.79 22.39 8.94
The expense ratios after giving effect to the expense offset for uninvested
cash balances were:
Ratio of Expenses to Average Net
Assets (%) 1.58* 1.55 1.57 1.56 1.55* 0.58* 0.56 0.57 0.56 0.56*
</TABLE>
(1) For the period April 1, 1996 (commencement of operations) through
December 31, 1996.
+ Not annualized.
* Annualized.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
SHAREHOLDER MEETING RESULTS (UNAUDITED)
The Annual Meeting of Shareholders of Churchill Tax-Free Fund of Kentucky
(the "Fund") was held on April 28, 2000. The holders of shares representing 98%
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 145,342,214 2,107,155
Thomas A. Christopher 145,484,939 1,964,431
Douglas Dean 145,506,391 1,942,978
Diana P. Herrmann 145,198,647 2,250,722
Carroll F. Knicely 144,880,933 2,568,436
Theodore T. Mason 145,411,262 2,038,108
Anne J. Mills 145,299,779 2,149,590
William J. Nightingale 145,358,416 2,090,953
James R. Ramsey 145,039,349 2,410,020
2. To ratify the selection of KPMG LLP as the Fund's independent auditors.
NUMBER OF VOTES:
FOR AGAINST ABSTAIN
143,531,770 482,412 3,435,186
ADJOURNED SESSION OF
SHAREHOLDER MEETING RESULTS (UNAUDITED)
The adjourned session of the Annual Meeting of Shareholders of Churchill
Tax-Free Fund of Kentucky (the "Fund") was held on May 31, 2000. The holders of
shares representing 68% of the total net asset value of the shares entitled to
vote were present in person or by proxy. At the meeting, the following matter
was voted upon and approved by the shareholders (the resulting votes for the
matter are presented below).
1. To act upon a proposal to change the fundamental policies of the Fund to
allow the use of additional nationally recognized statistical rating
organizations.
NUMBER OF VOTES:
FOR AGAINST ABSTAIN
100,234,138 2,108,008 4,782,566
</PAGE>
