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:	6/30/04

						FORM N-CSR

ITEM 1.  REPORTS TO STOCKHOLDERS.



SEMI-ANNUAL
REPORT

JUNE 30, 2004

                                    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](R)

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

                                   ONE OF THE
                            AQUILA(SM) GROUP OF FUNDS

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

    AQUILA(SM)             SERVING KENTUCKY INVESTORS
 GROUP OF FUNDS                 FOR OVER 15 YEARS

                               CHURCHILL TAX-FREE
                                FUND OF KENTUCKY

               380 MADISON AVENUE, SUITE 2300 O NEW YORK, NY 10017
                           800-437-1020 O 212-697-6666

[Logo of the Churchill Tax-Free Fund of Kentucky: a standing pegasus in a
circle](R)

                               SEMI-ANNUAL REPORT

<PAGE>

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

<TABLE>
<CAPTION>
                                                                          RATING
    FACE                                                                 MOODY'S/
   AMOUNT     GENERAL OBLIGATION BONDS (1.3%)                               S&P         VALUE
-----------   -------------------------------------------------------    --------    -----------
<S>           <C>                                                         <C>        <C>
              Bowling Green, Kentucky
$   200,000      5.300%, 06/01/18....................................     Aa3/NR     $   212,736
              Lexington-Fayette Urban County, Kentucky
                 Government Project Unlimited Tax
    125,000      5.000%, 12/01/15....................................     Aa2/AA+        131,014
    340,000      5.150%, 12/01/17....................................     Aa2/AA+        357,041
              Louisville, Kentucky Unlimited Tax
  2,205,000      5.000%, 10/01/21 FGIC Insured.......................     Aaa/AAA      2,264,756
              Warren County, Kentucky Judicial Unlimited Tax
    345,000      5.100%, 09/01/17 AMBAC Insured......................     Aaa/NR         363,306
    365,000      5.150%, 09/01/18 AMBAC Insured......................     Aaa/NR         383,564
                                                                                     -----------
                   Total General Obligation Bonds....................                  3,712,417
                                                                                     -----------
              REVENUE BONDS (97.5%)

              STATE AGENCIES (38.3%)
              Kentucky Area Development District Financing
    500,000      5.000%, 12/01/23 LOC Wachovia Bank..................      NR/AA         503,545
              Kentucky Infrastructure Authority
  1,000,000      5.250%, 06/01/12....................................     Aa3/A+       1,083,490
    635,000      5.250%, 06/01/12....................................     Aa3/A+         678,961
  2,740,000      5.250%, 06/01/14....................................     Aa3/A+       2,944,705
  1,500,000      5.375%, 02/01/18 (pre-refunded).....................      NR/A-       1,519,305
    100,000      5.000%, 06/01/18....................................     Aa3/A+         102,994
              Kentucky Local Correctional Facilities Construction
                 Authority
  6,355,000      5.500%, 11/01/14 FSA Insured........................     Aaa/AAA      6,563,253
              Kentucky State Property and Buildings Commission
  3,000,000      6.250%, 09/01/07 MBIA Insured.......................     Aaa/AAA      3,323,520
    220,000      6.000%, 09/01/08....................................     Aa3/A+         244,761
    500,000      5.500%, 11/01/09 AMBAC Insured......................     Aaa/AAA        531,650
  4,000,000      5.375%, 02/01/14 FSA Insured (pre-refunded).........     Aaa/AAA      4,435,920
    400,000      5.250%, 10/01/14 (pre-refunded).....................     Aa3/A+         429,612
  3,250,000      5.625%, 09/01/15 (pre-refunded).....................     Aa3/A+       3,654,040
    460,000      5.125%, 09/01/15 (pre-refunded).....................     Aa3/A+         504,500
  1,000,000      5.000%, 11/01/15 AMBAC Insured......................     Aaa/AAA      1,062,700
    100,000      5.375%, 05/01/16 MBIA Insured (pre-refunded)........     Aaa/AAA        110,351
  6,500,000      5.375%, 08/01/16 FSA Insured........................     Aaa/AAA      7,130,955
  3,905,000      5.125%, 09/01/16 (pre-refunded).....................     Aa3/A+       4,282,770
              Kentucky State Property and Buildings Commission
                 (continued)
$ 5,000,000      5.250%, 10/01/16....................................     Aa3/A+    $  5,317,000
  1,100,000      5.000%, 11/01/16 AMBAC Insured......................     Aaa/AAA      1,164,614
  1,265,000      5.250%, 08/01/17 MBIA Insured (pre-refunded)........     Aaa/AAA      1,398,445
  1,250,000      5.000%, 08/01/17 FSA Insured (pre-refunded).........     Aaa/AAA      1,365,675
    975,000      5.000%, 08/01/17 FSA Insured........................     Aaa/AAA      1,014,995
  8,155,000      5.125%, 09/01/17 (pre-refunded).....................     Aa3/A+       8,943,915
    200,000      5.375%, 10/01/17 MBIA Insured (pre-refunded)........     Aaa/AAA        223,642
  4,735,000      5.250%, 10/01/17....................................     Aa3/A+       5,006,694
  1,250,000      5.500%, 11/01/17 FSA Insured........................     Aaa/AAA      1,370,388
  1,000,000      5.000%, 11/01/17 AMBAC Insured......................     Aaa/AAA      1,051,650
    165,000      5.375%, 02/01/18 FSA Insured (pre-refunded).........     Aaa/AAA        182,982
  3,030,000      5.000%, 08/01/18 FSA Insured (pre-refunded).........     Aaa/AAA      3,310,396
  3,950,000      5.125%, 09/01/18 (pre-refunded).....................     Aa3/A+       4,320,668
  6,000,000      5.250%, 10/01/18....................................     Aa3/A+       6,315,540
  3,000,000      5.000%, 10/01/18 AMBAC Insured......................     Aaa/AAA      3,198,570
  1,000,000      5.500%, 11/01/18 FSA Insured........................     Aaa/AAA      1,094,100
    155,000      5.100%, 11/01/18 FSA Insured........................     Aaa/AAA        162,480
    145,000      5.100%, 11/01/18 (pre-refunded).....................     Aa3/A+         157,705
  1,500,000      5.000%, 11/01/18 AMBAC Insured......................     Aaa/AAA      1,568,115
  2,000,000      5.250%, 05/01/19 MBIA Insured.......................     Aaa/AAA      2,176,680
  1,040,000      5.000%, 08/01/19 FSA Insured (pre-refunded).........     Aaa/AAA      1,136,242
  4,000,000      5.375%, 10/01/19 MBIA Insured (pre-refunded)........     Aaa/AAA      4,472,840
  1,925,000      5.000%, 10/01/19....................................     Aa3/A+       1,971,277
    360,000      5.000%, 10/01/19 MBIA Insured.......................     Aaa/AAA        371,887
    705,000      5.150%, 11/01/19 FSA Insured........................     Aaa/AAA        738,459
  3,000,000      5.000%, 11/01/19 FSA Insured........................     Aaa/AAA      3,111,390
  2,000,000      5.750%, 05/01/20 MBIA Insured (pre-refunded)........     Aaa/AAA      2,249,520
    250,000      5.000%, 05/01/20 FSA Insured........................     Aaa/AAA        256,812
    160,000      5.000%, 10/01/20 MBIA Insured.......................     Aaa/AAA        164,584
    270,000      5.100%, 10/01/21 MBIA Insured.......................     Aaa/AAA        278,211
    255,000      5.150%, 02/01/22 FSA Insured........................     Aaa/AAA        262,392
  5,000,000      5.000%, 10/01/22 MBIA Insured.......................     Aaa/AAA      5,114,750
    235,000      5.000%, 08/01/23 MBIA Insured.......................     Aaa/AAA        238,760
     80,000      5.000%, 08/01/23 MBIA Insured (pre-refunded)........     Aaa/AAA         86,921
                                                                                    ------------
                                                                                     108,905,331
                                                                                    ------------

              COUNTY AGENCIES (8.6%)
              Floyd County, Kentucky Public Property Courthouse
$   510,000      5.500%, 09/01/14 (pre-refunded).....................     NR/NR*    $    548,209
              Jefferson County, Kentucky Capital Projects
  1,000,000      5.200%, 06/01/08 MBIA Insured.......................     Aaa/AAA      1,081,960
    430,000      5.200%, 06/01/12 MBIA Insured.......................     Aaa/AAA        457,154
    570,000      5.250%, 06/01/13 MBIA Insured.......................     Aaa/AAA        614,055
    520,000      5.250%, 06/01/14 MBIA Insured.......................     Aaa/AAA        558,610
  3,370,000      5.375%, 06/01/18 MBIA Insured.......................     Aaa/AAA      3,596,565
  1,640,000      5.375%, 06/01/22 MBIA Insured.......................     Aaa/AAA      1,693,694
  5,935,000      5.500%, 06/01/28 MBIA Insured.......................     Aaa/AAA      6,145,752
              Pendleton County, Kentucky Multi-County
                 Lease Revenue
  4,500,000      6.500%, 03/01/19....................................      NR/A        4,563,360
              Warren County, Kentucky Justice Center
  1,580,000      5.250%, 09/01/17 MBIA Insured.......................     Aaa/AAA      1,675,606
              Warren County, Kentucky Justice Center Expansion
                 Corp. Revenue
    700,000      5.400%, 09/01/24....................................     Aa3/NR         726,845
  2,875,000      5.350%, 09/01/29 MBIA Insured.......................     Aaa/AAA      2,959,496
                                                                                    ------------
                                                                                      24,621,306
                                                                                    ------------

              CITY / MUNICIPALITY OBLIGATIONS (4.1%)
              Jeffersontown, Kentucky Public Project Corp.
    500,000      5.750%, 11/01/15....................................      A3/NR         531,505
              Lexington-Fayette Urban County Government,
                 Kentucky Public Facilities Revenue
    120,000      5.125%, 10/01/23 FSA Insured........................     Aaa/AAA        121,878
              Louisville, Kentucky Parking Authority
  1,140,000      5.000%, 12/01/14 MBIA Insured.......................     Aaa/AAA      1,189,772
              Mount Sterling, Kentucky Lease Revenue
  2,020,000      6.150%, 03/01/13....................................     Aa3/NR       2,048,058
  7,000,000      6.200%, 03/01/18....................................     Aa3/NR       7,097,440
              Shelbyville, Kentucky Certificates of Participation
    625,000      5.000%, 10/01/22....................................      A2/NR         626,625
                                                                                    ------------
                                                                                      11,615,278
                                                                                    ------------

              HOSPITALS (4.5%)
              Jefferson County, Kentucky Health Facilities Revenue
$   240,000      5.000%, 10/01/12 MBIA Insured.......................     Aaa/AAA   $    250,058
  1,715,000      5.650%, 01/01/17 AMBAC Insured......................     Aaa/AAA      1,832,409
  2,200,000      5.250%, 05/01/17....................................      NR/A        2,233,968
  2,815,000      5.125%, 10/01/17 AMBAC Insured ETM..................     Aaa/AAA      2,907,079
    525,000      5.125%, 10/01/18 MBIA Insured ETM...................     Aaa/AAA        543,275
    125,000      5.750%, 01/01/26 AMBAC Insured......................     Aaa/AAA        130,196
              Kentucky Development Finance Authority
                 Hospital Revenue
  2,790,000      5.000%, 08/15/15 MBIA Insured.......................     Aaa/AAA      2,855,928
              Kentucky Economic Development Finance Authority
  1,000,000      5.000%, 02/01/18 FSA Insured........................     Aaa/AAA      1,007,210
              Louisville & Jefferson County, Kentucky Medical
                 Center Revenue
  1,000,000      5.000%, 06/01/18....................................      NR/A        1,018,730
                                                                                    ------------
                                                                                      12,778,853
                                                                                    ------------

              HOUSING (6.9%)
              Kentucky Housing Corp. Housing Revenue
    310,000      6.100%, 07/01/16 AMT................................     Aaa/AAA        310,000
     95,000      5.550%, 07/01/18 AMT................................     Aaa/AAA         95,489
    250,000      5.850%, 07/01/20 AMT................................     Aaa/AAA        259,452
  2,000,000      5.600%, 07/01/20 AMT................................     Aaa/AAA      2,023,260
  1,150,000      5.350%, 01/01/21 AMT................................     Aaa/AAA      1,153,312
  6,075,000      5.450%, 07/01/22 AMT................................     Aaa/AAA      6,130,647
  4,065,000      5.250%, 07/01/22 AMT................................     Aaa/AAA      4,089,959
    245,000      5.200%, 07/01/22....................................     Aaa/AAA        247,585
    300,000      5.100%, 07/01/22 AMT................................     Aaa/AAA        296,520
  4,140,000      5.200%, 07/01/25 AMT................................     Aaa/AAA      4,119,052
    275,000      5.375%, 07/01/27....................................     Aaa/AAA        277,271
    570,000      5.550%, 07/01/33....................................     Aaa/AAA        575,860
                                                                                    ------------
                                                                                      19,578,407
                                                                                    ------------

              POLLUTION CONTROL REVENUE (1.3%)
              Jefferson County, Kentucky Pollution Control
                 (LG&E Energy)
  3,800,000      5.900%, 04/15/23....................................      A1/A-       3,867,564
                                                                                    ------------

              SCHOOLS (13.2%)
              Beechwood, Kentucky Independent School District
                 Finance Corp.
$   180,000      5.650%, 03/01/20....................................     Aa3/NR    $    192,548
              Boone County, Kentucky School District Finance
                 Corp. School Building
    660,000      5.000%, 06/01/15....................................     Aa3/NR         688,360
    225,000      5.250%, 08/01/15....................................     Aa3/NR         240,280
    285,000      5.700%, 02/01/16....................................     Aa3/NR         309,764
  1,000,000      5.375%, 08/01/20 FSA Insured........................     AAA/NR       1,057,440
              Boyd County, Kentucky School District Finance Corp.
  1,025,000      5.000%, 10/01/15....................................     Aa3/NR       1,071,453
    575,000      5.375%, 10/01/17....................................     Aa3/NR         613,755
              Christian County, Kentucky School District
                 Finance Corp.
    500,000      5.000%, 06/01/09....................................     Aa3/NR         537,630
              Fayette County, Kentucky School Building
  1,780,000      5.700%, 12/01/16....................................     Aa3/AA-      1,932,831
              Fayette County, Kentucky School Building Revenue
    200,000      5.125%, 04/01/18 AMBAC Insured......................     Aaa/AAA        209,852
              Fayette County, Kentucky School District
                 Finance Corp.
    250,000      5.300%, 09/01/14....................................     Aa3/AA-        268,948
              Floyd County, Kentucky School Building
    250,000      5.000%, 12/01/09....................................     Aa3/NR         270,353
              Franklin County, Kentucky School District
                 Finance Corp.
  1,000,000      5.000%, 04/01/24....................................     Aa3/NR       1,002,980
              Graves Co., Kentucky School Building Revenue
  1,260,000      5.000%, 06/01/22....................................     Aa3/NR       1,277,111
  1,320,000      5.000%, 06/01/23....................................     Aa3/NR       1,330,322
              Grayson County, Kentucky School Building Revenue
  1,940,000      6.000%, 01/01/15 (pre-refunded).....................     Aa3/NR       2,022,586
              Hardin County, Kentucky School District Finance Corp.
    100,000      5.500%, 02/01/17....................................     Aa3/NR         106,827
              Jefferson County, Kentucky School District Finance
                 Corp. School Building
$   750,000      5.300%, 01/01/13 FSA Insured........................     Aaa/AAA   $    822,397
    695,000      5.125%, 11/01/14 FSA Insured (pre-refunded).........     Aaa/AAA        755,409
  3,195,000      5.125%, 02/01/16 MBIA Insured (pre-refunded)........     Aaa/AAA      3,409,896
    250,000      5.250%, 07/01/16 FSA Insured........................     Aaa/AAA        264,985
              Kenton County, Kentucky School District
  1,800,000      5.375%, 03/01/15....................................     Aa3/A+       1,927,314
    955,000      5.000%, 04/01/16....................................     Aa3/NR         997,899
  1,055,000      5.000%, 04/01/17....................................     Aa3/NR       1,095,354
    605,000      5.000%, 04/01/19....................................     Aa3/NR         621,353
              Kentucky Economic Development Finance Authority
                 College Revenue Centre College
  1,230,000      5.000%, 04/01/17 FSA Insured........................     Aaa/AAA      1,287,367
  1,675,000      5.000%, 04/01/19 FSA Insured........................     Aaa/AAA      1,736,657
              Lexington-Fayette Urban County, Kentucky
                 Government Project Transylvania University
  1,320,000      5.125%, 08/01/18 MBIA Insured.......................     Aaa/AAA      1,368,814
              Lexington-Fayette Urban County, Kentucky
                 Government Project U.K. Library
    725,000      5.000%, 11/01/15 MBIA Insured.......................     Aaa/AAA        765,919
    205,000      5.000%, 11/01/18 MBIA Insured.......................     Aaa/AAA        214,008
              Meade County, Kentucky School District Finance Corp.
    400,000      5.700%, 07/01/15....................................     Aa3/NR         431,368
    500,000      6.000%, 07/01/16....................................     Aa3/NR         541,790
              Middlesboro, Kentucky Independent School District
                 Finance Corp.
    100,000      6.100%, 08/01/16....................................     Aa3/NR         108,773
              Oldham County, Kentucky School District
                 Finance Corp.
    500,000      5.000%, 05/01/19 MBIA Insured.......................     Aaa/NR         521,250
              Nelson County, Kentucky School Building
  1,820,000      5.750%, 04/01/15 (pre-refunded).....................     Aa3/NR       1,915,150
              Scott County, Kentucky School Building
  2,750,000      5.900%, 06/01/18 (pre-refunded).....................      Aa3/A       2,911,012
    100,000      5.000%, 03/01/22....................................     Aa3/NR         101,447
              Taylor County, Kentucky School Building
$   280,000      6.000%, 08/01/16....................................     Aa3/NR    $    304,125
    175,000      5.250%, 06/01/19....................................     Aa3/NR         184,474
              University of Kentucky Revenue
  1,335,000      5.000%, 05/01/16 FGIC Insured (pre-refunded)........     Aaa/AAA      1,452,734
    505,000      5.000%, 06/01/18 FSA insured........................     Aaa/NR         526,175
              Walton-Verona, Kentucky Independent School District
    105,000      5.100%, 06/01/19....................................     Aa3/NR         108,443
                                                                                    ------------
                                                                                      37,507,153
                                                                                    ------------
              TRANSPORTATION (11.8%)
              Kenton County, Kentucky Airport Board
                 Airport Revenue
    800,000      5.000%, 03/01/08 MBIA Insured AMT...................     Aaa/AAA        845,280
    500,000      5.625%, 03/01/13 MBIA Insured AMT...................     Aaa/AAA        533,710
  1,570,000      5.000%, 03/01/13 MBIA Insured AMT...................     Aaa/AAA      1,618,843
    750,000      5.625%, 03/01/14 MBIA Insured AMT...................     Aaa/AAA        799,072
  1,000,000      5.500%, 03/01/17 MBIA Insured AMT...................     Aaa/AAA      1,049,020
    380,000      5.500%, 03/01/18 MBIA Insured AMT...................     Aaa/AAA        395,626
  1,000,000      5.000%, 03/01/23 MBIA Insured AMT...................     Aaa/AAA        989,180
              Kentucky Interlocal School Transportation Authority
    150,000      5.100%, 03/01/05....................................     Aa3/A+         153,511
    145,000      5.400%, 06/01/17....................................      NR/A+         146,773
    400,000      6.000%, 12/01/20....................................      NR/A+         410,492
    200,000      6.000%, 12/01/20....................................      NR/A+         205,246
    300,000      5.800%, 12/01/20....................................      NR/A+         305,358
    400,000      5.650%, 12/01/20....................................      NR/A+         406,908
    350,000      5.600%, 12/01/20....................................      NR/A+         355,974
              Kentucky State Turnpike Authority Economic
                 Development & Resource Recovery Road Revenue
    120,000      8.500%, 07/01/06....................................     Aa3/A+         134,314
  1,000,000      6.500%, 07/01/08 AMBAC Insured......................     Aaa/AAA      1,132,580
  1,010,000      5.500%, 07/01/11 AMBAC Insured......................     Aaa/AAA      1,020,100
  1,000,000      5.625%, 07/01/12 FSA Insured........................     Aaa/AAA      1,101,020
    200,000      5.625%, 07/01/13 FSA Insured........................     Aaa/AAA        220,204
    500,000      5.625%, 07/01/14 FSA Insured........................     Aaa/AAA        550,210
    250,000      5.200%, 07/01/14 FSA Insured........................     Aaa/AAA        266,842
              Kentucky State Turnpike Authority Economic
                 Development & Resource Recovery Road
                 Revenue (continued)
$ 2,760,000      5.625%, 07/01/15 AMBAC Insured (pre-refunded).......     Aaa/AAA   $  2,923,999
    940,000      5.625%, 07/01/15 AMBAC Insured......................     Aaa/AAA        992,593
    450,000      5.250%, 07/01/15 FSA Insured........................     Aaa/AAA        479,736
  2,500,000      5.250%, 07/01/16 FSA Insured........................     Aaa/AAA      2,660,600
  3,455,000      5.100%, 07/01/18 FSA Insured........................     Aaa/AAA      3,599,073
              Louisville-Jefferson County Regional Airport, Kentucky
  1,000,000      5.500%, 07/01/12 FSA Insured AMT....................     Aaa/AAA      1,069,920
  2,000,000      5.750%, 07/01/15 FSA Insured AMT....................     Aaa/AAA      2,141,980
  2,000,000      5.500%, 07/01/15 FSA Insured AMT....................     Aaa/AAA      2,122,180
  1,000,000      5.250%, 07/01/18 FSA Insured AMT....................     Aaa/AAA      1,020,810
  1,370,000      5.250%, 07/01/21 FSA Insured AMT....................     Aaa/AAA      1,392,550
  2,390,000      5.250%, 07/01/22 FSA Insured AMT....................     Aaa/AAA      2,420,712
    275,000      5.375%, 07/01/23 FSA Insured AMT....................     Aaa/AAA        279,727
                                                                                    ------------
                                                                                      33,744,143
                                                                                    ------------
              UTILITIES (8.8%)
              Campbell & Kenton Counties, Kentucky Sanitation
                 Sewer District
    125,000      5.000%, 08/01/18 FGIC Insured.......................     Aaa/AAA        129,809
              Hardin County, Kentucky Water District
    605,000      5.900%, 01/01/25 MBIA Insured (pre-refunded)........     Aaa/AAA        644,700
    395,000      5.900%, 01/01/25 MBIA Insured.......................     Aaa/AAA        419,340
              Kentucky Rural Water Finance Corp.
    595,000      5.000%, 02/01/20 AMBAC Insured......................     Aaa/AAA        616,503
              Lexington-Fayette Urban County Government,
                 Kentucky Sewer System
  1,000,000      5.000%, 07/01/19....................................     Aa3/AA       1,030,650
              Louisville and Jefferson County, Kentucky
                 Metropolitan Sewer District
  1,000,000      5.000%, 05/15/12 FGIC Insured.......................     Aaa/AAA      1,053,130
  2,565,000      5.375%, 05/15/17 MBIA Insured.......................     Aaa/AAA      2,777,921
  1,410,000      5.400%, 05/15/22 FGIC Insured.......................     Aaa/AAA      1,480,274
    400,000      5.000%, 05/15/22 FGIC Insured.......................     Aaa/AAA        406,264
    120,000      6.250%, 05/15/26 MBIA Insured.......................     Aaa/AAA        131,773
              Louisville, Kentucky Waterworks Board Water
                 System Revenue
$ 1,000,000      5.250%, 11/15/16 FSA Insured........................     Aaa/AAA   $  1,059,150
  1,000,000      5.250%, 11/15/17 FSA Insured........................     Aaa/AAA      1,056,860
  2,485,000      5.250%, 11/15/18 FSA Insured........................     Aaa/AAA      2,614,990
  6,600,000      5.250%, 11/15/22 FSA Insured........................     Aaa/AAA      6,837,468
  2,415,000      5.250%, 11/15/24 FSA Insured........................     Aaa/AAA      2,472,477
              Northern Kentucky Water District
    240,000      5.000%, 02/01/23 FGIC Insured.......................     Aaa/NR         243,312
              Owensboro-Davies County, Kentucky Water District
    600,000      5.000%, 01/01/13 AMBAC Insured......................     Aaa/AAA        621,210
              Owensboro, Kentucky Electric and Power
  1,310,000      5.000%, 01/01/20 FSA Insured........................     Aaa/AAA      1,344,257
                                                                                    ------------
                                                                                      24,940,088
                                                                                    ------------
                 Total Revenue Bonds.................................                277,558,123
                                                                                    ------------

              Total Investments (cost $273,387,081**)................     98.8%      281,270,540
              Other assets less liabilities..........................      1.2         3,369,746
                                                                         -----      ------------
              Net Assets.............................................    100.0%     $284,640,286
                                                                         =====      ============
</TABLE>


              *    Any security not rated (NR) by either credit rating
                   service has been determined by the 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.

              **   See note 4.

                                  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

                See accompanying notes to financial statements.
<PAGE>

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

<TABLE>
<S>                                                                                       <C>
ASSETS
   Investments at value (cost $273,387,081) ...........................................   $ 281,270,540
   Interest receivable ................................................................       4,241,584
   Receivable for Fund shares sold ....................................................         129,133
   Other assets .......................................................................          18,466
                                                                                          -------------
   Total assets .......................................................................     285,659,723
                                                                                          -------------
LIABILITIES
   Cash overdraft .....................................................................         209,634
   Dividends payable ..................................................................         368,992
   Payable for Fund shares redeemed ...................................................         175,243
   Management fee payable .............................................................          93,541
   Distribution fees payable ..........................................................          73,165
   Payable for securities purchased ...................................................          21,199
   Accrued expenses ...................................................................          77,663
                                                                                          -------------
   Total liabilities ..................................................................       1,019,437
                                                                                          -------------
NET ASSETS ............................................................................   $ 284,640,286
                                                                                          =============
   Net Assets consist of:
   Capital Stock - Authorized an unlimited number of shares, par value $.01 per share .   $     270,693
   Additional paid-in capital .........................................................     277,083,928
   Net unrealized appreciation on investments (note 4) ................................       7,883,459
   Undistributed net investment income ................................................         446,662
   Accumulated net realized loss on investments .......................................      (1,044,456)
                                                                                          -------------
                                                                                          $ 284,640,286
                                                                                          =============
CLASS A
   Net Assets .........................................................................   $ 230,858,585
                                                                                          =============
   Capital shares outstanding .........................................................      21,956,087
                                                                                          =============
   Net asset value and redemption price per share .....................................   $       10.51
                                                                                          =============
   Offering price per share (100/96 of $10.51 adjusted to nearest cent) ...............   $       10.95
                                                                                          =============
CLASS C
   Net Assets .........................................................................   $   7,090,963
                                                                                          =============
   Capital shares outstanding .........................................................         674,697
                                                                                          =============
   Net asset value and offering price per share .......................................   $       10.51
                                                                                          =============
   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) ......................................   $       10.51*
                                                                                          =============
CLASS I
   Net Assets .........................................................................   $   7,267,973
                                                                                          =============
   Capital shares outstanding .........................................................         691,559
                                                                                          =============
   Net asset value, offering and redemption price per share ...........................   $       10.51
                                                                                          =============
CLASS Y
   Net Assets .........................................................................   $  39,422,765
                                                                                          =============
   Capital shares outstanding .........................................................       3,746,974
                                                                                          =============
   Net asset value, offering and redemption price per share ...........................   $       10.52
                                                                                          =============
</TABLE>

                 See accompanying notes to financial statements.

<PAGE>

                       CHURCHILL TAX-FREE FUND OF KENTUCKY
                             STATEMENT OF OPERATIONS
                         SIX MONTHS ENDED JUNE 30, 2004
                                   (UNAUDITED)

<TABLE>
<S>                                                           <C>            <C>
INVESTMENT INCOME:

     Interest income ......................................                  $ 6,867,547
Expenses:

     Management fee (note 3) ..............................   $   578,117
     Distribution and service fees (note 3) ...............       214,459
     Transfer and shareholder servicing agent fees ........        70,006
     Trustees' fees and expenses (note 8) .................        48,380
     Fund accounting fees .................................        32,779
     Shareholders' reports and proxy statements ...........        27,245
     Legal fees ...........................................        21,384
     Auditing and tax fees ................................        14,186
     Custodian fees .......................................        10,850
     Insurance ............................................         8,819
     Registration fees and dues ...........................         7,787
     Miscellaneous ........................................        13,327
                                                              -----------
     Total expenses .......................................     1,047,339

     Expenses paid indirectly (note 6) ....................        (6,352)
                                                              -----------
     Net expenses .........................................                    1,040,987
                                                                             -----------
     Net investment income ................................                    5,826,560

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

     Net realized gain (loss) from securities transactions         95,825
     Change in unrealized appreciation on investments .....    (5,222,873)
                                                              -----------
     Net realized and unrealized gain (loss) on investments                   (5,127,048)
                                                                             -----------
     Net change in net assets resulting from operations ...                  $   699,512
                                                                             ===========
</TABLE>

                 See accompanying notes to financial statements.

<PAGE>

                       CHURCHILL TAX-FREE FUND OF KENTUCKY
                       STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
                                                            SIX MONTHS ENDED
                                                              JUNE 30, 2004        YEAR ENDED
                                                               (UNAUDITED)      DECEMBER 31, 2003
                                                            ----------------    -----------------
<S>                                                           <C>                 <C>
OPERATIONS:
   Net investment income ...............................      $   5,826,560       $  11,709,378
   Net realized gain (loss) from securities transactions             95,825             259,635
   Change in unrealized appreciation on investments ....         (5,222,873)            183,334
                                                              -------------       -------------
      Change in net assets from operations .............            699,512          12,152,347
                                                              -------------       -------------

DISTRIBUTIONS TO SHAREHOLDERS (NOTE 10):
   Class A Shares:
   Net investment income ...............................         (4,608,384)         (9,367,500)

   Class C Shares:
   Net investment income ...............................           (112,902)           (200,217)

   Class I Shares:
   Net investment income ...............................            (99,818)           (146,438)

   Class Y Shares:
   Net investment income ...............................           (943,321)         (1,944,616)
                                                              -------------       -------------
      Change in net assets from distributions ..........         (5,764,425)        (11,658,771)
                                                              -------------       -------------

CAPITAL SHARE TRANSACTIONS (NOTE 7):
   Proceeds from shares sold ...........................         23,292,170          44,639,694
   Reinvested dividends and distributions ..............          2,722,077           5,821,000
   Cost of shares redeemed .............................        (23,433,099)        (38,277,178)
                                                              -------------       -------------
   Change in net assets from capital share transactions           2,581,148          12,183,516
                                                              -------------       -------------

   Change in net assets ................................         (2,483,765)         12,677,092

NET ASSETS:
   Beginning of period .................................        287,124,051         274,446,959
                                                              -------------       -------------

   End of period* ......................................      $ 284,640,286       $ 287,124,051
                                                              =============       =============

   * Includes undistributed net investment income of:         $     446,662       $     384,527
                                                              =============       =============
</TABLE>

                 See accompanying notes to financial statements.

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

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

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

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

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

3. FEES AND RELATED PARTY TRANSACTIONS

a)    MANAGEMENT ARRANGEMENTS:

      Aquila  Investment   Management  LLC  (the  "Manager"),   a  wholly  owned
subsidiary of Aquila  Management  Corporation,  the Fund's  founder and sponsor,
serves  as the  Manager  for the  Fund  under  an  Advisory  and  Administration
Agreement with the Fund. 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  managing  relationships  with 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, 2004,  distribution  fees on Class A
Shares amounted to $173,286 of which the Distributor retained $4,156.

      Under  another part of the Plan,  the Fund is  authorized to make payments
with  respect to Class C Shares to  Qualified  Recipients  which  have  rendered
assistance in the distribution  and/or retention of the Fund's Class C shares or
servicing of shareholder accounts. These payments are made at the annual rate of
0.75% of the Fund's average net assets represented by Class C Shares and for the
six months  ended June 30,  2004,  amounted to  $26,985.  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, 2004, amounted to $8,994. The total
of these  payments  with respect to Class C Shares  amounted to $35,979 of which
the Distributor retained $4,671.

      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,  2004,
these  payments were made at the average annual rate of 0.35% of such net assets
and amounted to $9,089 of which $5,194 related to the Plan and $3,895 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, 2004,  total  commissions on sales of Class A Shares amounted to $176,378 of
which the Distributor received $19,716.

c)    OTHER RELATED PARTY TRANSACTIONS:

      For the six months ended June 30, 3004, the Fund incurred $20,682 of legal
fees  allocable to Hollyer  Brady  Barrett & Hines LLP,  counsel to the Fund for
legal services in conjunction with the Fund's ongoing operations.  The Secretary
of the Fund is a Partner of Hollyer Brady Barrett & Hines LLP.

4. PURCHASES AND SALES OF SECURITIES

      During the six months ended June 30, 2004,  purchases  of  securities  and
proceeds from the sales of securities  aggregated  $19,337,725 and  $14,962,743,
respectively.

      At  June  30,  2004,  the  aggregate  tax  cost  for  all  securities  was
$273,006,611.  At June 30, 2004, the aggregate gross unrealized appreciation for
all  securities  in which  there is an  excess  of  market  value  over tax cost
amounted to  $9,485,281  and aggregate  gross  unrealized  depreciation  for all
securities in which there is an excess of tax cost over market value amounted to
$1,221,352 for a net unrealized appreciation of $8,263,929.

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:

<TABLE>
<CAPTION>
                                       SIX MONTHS ENDED
                                         JUNE 30, 2004                     YEAR ENDED
                                          (UNAUDITED)                   DECEMBER 31, 2003
                                   ---------------------------     ---------------------------
                                     SHARES          AMOUNT          SHARES          AMOUNT
                                     ------          ------          ------          ------
<S>                                 <C>           <C>              <C>            <C>
CLASS A SHARES:
   Proceeds from shares sold ..     1,218,021     $ 13,030,210      2,169,701     $ 23,197,568
   Reinvested distributions ...       203,007        2,166,020        423,111        4,508,492
   Cost of shares redeemed ....      (894,462)      (9,497,234)    (2,359,392)     (25,070,993)
                                   ----------     ------------     ----------     ------------
      Net change ..............       526,566        5,698,996        233,420        2,635,067
                                   ----------     ------------     ----------     ------------

CLASS C SHARES:
   Proceeds from shares sold ..        93,018          985,271        285,083        3,053,437
   Reinvested distributions ...         6,612           70,552         12,041          128,176
   Cost of shares redeemed ....       (98,182)      (1,047,968)       (74,572)        (795,113)
                                   ----------     ------------     ----------     ------------
      Net change ..............         1,448            7,855        222,552        2,386,500
                                   ----------     ------------     ----------     ------------

CLASS I SHARES:
   Proceeds from shares sold ..       281,382        2,975,745        198,482        2,130,432
   Reinvested distributions ...         6,743           71,917         12,722          135,513
   Cost of shares redeemed ....       (11,700)        (124,109)       (21,821)        (232,654)
                                   ----------     ------------     ----------     ------------
      Net change ..............       276,425        2,923,553        189,383        2,033,291
                                   ----------     ------------     ----------     ------------

CLASS Y SHARES:
   Proceeds from shares sold ..       583,810        6,300,944      1,511,098       16,258,257
   Reinvested distributions ...        38,624          413,588         98,382        1,048,819
   Cost of shares redeemed ....    (1,203,298)     (12,763,788)    (1,145,269)     (12,178,418)
                                   ----------     ------------     ----------     ------------
      Net change ..............      (580,864)      (6,049,256)       464,211        5,128,658
                                   ----------     ------------     ----------     ------------
Total transactions in Fund
   shares .....................       223,575     $  2,581,148      1,109,566     $ 12,183,516
                                   ==========     ============     ==========     ============
</TABLE>

8. TRUSTEES' FEES AND EXPENSES

     During the  previous  fiscal year ended  December  31, 2003 there were nine
trustees,  two of whom were  affiliated  with the  Manager  and are not paid any
trustee fees.  Each Trustees' fee paid during the year was at the average annual
rate of $7,250 for carrying out  responsibilities  and  attendance  at regularly
scheduled  Board Meetings.  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,  2003 such  reimbursements  averaged
approximately $3,400 per Trustee.

9. SECURITIES TRADED ON A WHEN-ISSUED BASIS

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

10. INCOME TAX INFORMATION AND DISTRIBUTIONS

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

      The  Fund  intends  to  maintain,  to the  maximum  extent  possible,  the
tax-exempt  status  of  interest  payments  received  from  portfolio  municipal
securities in order to allow dividends paid to shareholders  from net investment
income to be exempt from  regular  Federal and State of 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, 2003, the Fund had a capital loss carryover of $1,077,355,
$54,468 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.  In addition, the Fund generated a post October net capital loss of
$57,959.

      The tax character of distributions:

                                 YEAR ENDED DECEMBER 31,
                                   2003            2002
                               -----------    ------------
      Net tax-exempt income    $11,625,804    $ 11,355,823
      Ordinary income               32,967          13,045
                               -----------    ------------
                               $11,658,771    $ 11,368,868
                               ===========    ============

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

      Accumulated net realized loss           $ (1,135,314)
      Unrealized appreciation                   13,432,250
      Undistributed tax-exempt income               53,642
                                              ------------
                                              $ 12,350,578
                                              ============

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

<PAGE>

                       CHURCHILL TAX-FREE FUND OF KENTUCKY
                              FINANCIAL HIGHLIGHTS

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
                                                                              CLASS A
                                           -----------------------------------------------------------------------------
                                           SIX MONTHS
                                              ENDED                           YEAR ENDED DECEMBER 31,
                                             6/30/04        ------------------------------------------------------------
                                           (UNAUDITED)        2003         2002         2001         2000         1999
                                           -----------      --------     --------     --------     --------     --------
<S>                                          <C>            <C>          <C>          <C>          <C>          <C>
Net asset value, beginning of period .....   $  10.69       $  10.66     $  10.31     $  10.40     $  10.09     $  10.81
                                             --------       --------     --------     --------     --------     --------
Income (loss) from investment operations:
   Net investment income+  ...............       0.21           0.44         0.47         0.50         0.52         0.52
   Net gain (loss) on securities (both
     realized and unrealized) ............      (0.18)          0.03         0.35        (0.09)        0.31        (0.68)
                                             --------       --------     --------     --------     --------     --------
   Total from investment operations ......       0.03           0.47         0.82         0.41         0.83        (0.16)
                                             --------       --------     --------     --------     --------     --------
Less distributions (note 10):
   Dividends from net investment income ..      (0.21)         (0.44)       (0.47)       (0.50)       (0.52)       (0.53)
   Distributions from capital gains ......         --             --           --           --           --        (0.03)
                                             --------       --------     --------     --------     --------     --------
   Total distributions ...................      (0.21)         (0.44)       (0.47)       (0.50)       (0.52)       (0.56)
                                             --------       --------     --------     --------     --------     --------
Net asset value, end of period ...........   $  10.51       $  10.69     $  10.66     $  10.31     $  10.40     $  10.09
                                             ========       ========     ========     ========     ========     ========
Total return (not reflecting sales charge)       0.29%++        4.50%        8.15%        4.02%        8.45%       (1.51)%

Ratios/supplemental data
   Net assets, end of period
     (in thousands) ......................   $230,859       $229,176     $226.014     $201,604     $196,890     $205,842
   Ratio of expenses to average
     net assets ..........................       0.72%*         0.72%        0.72%        0.72%        0.74%        0.72%
   Ratio of net investment income to
     average net assets ..................       4.03%*         4.14%        4.82%        4.82%        5.10%        4.95%
   Portfolio turnover rate ...............       5.22%++       17.92%       21.44%       21.44%        6.61%        6.35%

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

   Ratio of expenses to average
     net assets ..........................       0.72%*         0.71%        0.71%        0.70%        0.73%        0.71%

<CAPTION>

                                                                               CLASS C
                                            -----------------------------------------------------------------------------
                                            SIX MONTHS
                                               ENDED                           YEAR ENDED DECEMBER 31,
                                              6/30/04       -------------------------------------------------------------
                                            (UNAUDITED)       2003         2002         2001         2000         1999
                                            -----------     --------     --------     --------     --------     --------
<S>                                          <C>            <C>          <C>          <C>          <C>          <C>
Net asset value, beginning of period .....   $  10.69       $  10.66     $  10.31     $  10.39     $  10.08     $  10.81
                                             --------       --------     --------     --------     --------     --------

Income (loss) from investment operations:
   Net investment income+  ...............       0.17           0.35         0.38         0.41         0.43         0.43
   Net gain (loss) on securities (both
     realized and unrealized) ............      (0.18)          0.03         0.35        (0.08)        0.31        (0.69)
                                             --------       --------     --------     --------     --------     --------
   Total from investment operations ......      (0.01)          0.38         0.73         0.33         0.74        (0.26)
                                             --------       --------     --------     --------     --------     --------
Less distributions (note 10):
   Dividends from net investment income ..      (0.17)         (0.35)       (0.38)       (0.41)       (0.43)       (0.44)
   Distributions from capital gains ......         --             --           --           --           --        (0.03)
                                             --------       --------     --------     --------     --------     --------
   Total distributions ...................      (0.17)         (0.35)       (0.38)       (0.41)       (0.43)       (0.47)
                                             --------       --------     --------     --------     --------     --------
Net asset value, end of period ...........   $  10.51       $  10.69     $  10.66     $  10.31     $  10.39     $  10.08
                                             ========       ========     ========     ========     ========     ========

Total return (not reflecting sales charge)      (0.14%)++       3.62%        7.23%        3.24%        7.54%       (2.45)%

Ratios/supplemental data
   Net assets, end of period
     (in thousands) ......................   $  7,091       $  7,197     $  4,804     $  3,355     $  1,861     $  1,932
   Ratio of expenses to average
     net assets ..........................       1.58%*         1.57%        1.56%        1.56%        1.59%        1.56%
   Ratio of net investment income to
     average net assets ..................       3.18%*         3.26%        3.62%        3.92%        4.24%        4.09%
   Portfolio turnover rate ...............       5.28%++       17.92%       18.27%       21.44%        6.61%        6.35%

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

   Ratio of expenses to average
     net assets ..........................       1.57%*         1.56%        1.55%        1.55%        1.58%        1.55%
</TABLE>

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

++    Not annualized.

 *    Annualized.

Note: On July 1, 2000, Aquila Management Corporation was appointed as the Fund's
      Investment  adviser,  assuming  investment  management   responsibilities,
      replacing Banc One Investment  Advisers  Corporation the Fund's Investment
      Sub-Adviser.  Effective January 1, 2004,  Aquila  Management  Corporation,
      founder of the Fund, assigned its Advisory and Administration Agreement to
      its wholly-owned subsidiary, Aquila Investment Management LLC.

                 See accompanying notes to financial statements.
<PAGE>

                       CHURCHILL TAX-FREE FUND OF KENTUCKY
                        FINANCIAL HIGHLIGHTS (CONTINUED)

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
                                                                         CLASS I
                                                 ----------------------------------------------------

                                                 SIX MONTHS            YEAR ENDED
                                                    ENDED              DECEMBER 31,         PERIOD
                                                   6/30/04       ---------------------       ENDED
                                                 (UNAUDITED)       2003         2002      12/31/01(1)
                                                 -----------     --------     --------    -----------
<S>                                               <C>            <C>          <C>          <C>
Net asset value, beginning of period ..........   $  10.69       $  10.66     $  10.31     $  10.44
                                                  --------       --------     --------     --------
Income (loss) from investment operations:
   Net investment income + ....................       0.20           0.43         0.46         0.19
   Net gain (loss) on securities (both realized
     and unrealized) ..........................      (0.18)          0.02         0.35        (0.13)
                                                  --------       --------     --------     --------
   Total from investment operations ...........       0.02           0.45         0.81         0.06
                                                  --------       --------     --------     --------
Less distributions (note 10):
   Dividends from net investment income .......      (0.20)         (0.42)       (0.46)       (0.19)
   Distributions from capital gains ...........         --             --           --           --
                                                  --------       --------     --------     --------
   Total distributions ........................      (0.20)         (0.42)       (0.46)       (0.19)
                                                  --------       --------     --------     --------
Net asset value, end of period ................   $  10.51       $  10.69     $  10.66     $  10.31
                                                  ========       ========     ========     ========
Total return (not reflecting sales charge) ....       0.21%++        4.33%        7.98%        0.58%++

Ratios/supplemental data
   Net assets, end of period
     (in thousands) ...........................   $  7,268       $  4,438     $  2,407     $  1,426
   Ratio of expenses to average net assets ....       0.88%*         0.88%        0.87%        0.83%*
   Ratio of net investment income to average
     net assets ...............................       3.87%*         3.95%        4.32%        4.47%*
   Portfolio turnover rate ....................       5.22%++       17.92%       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%*         0.87%        0.86%        0.82%*

<CAPTION>

                                                                                 CLASS Y
                                                  --------------------------------------------------------------------

                                                  SIX MONTHS
                                                     ENDED                      YEAR ENDED DECEMBER 31,
                                                    6/30/04      -----------------------------------------------------
                                                  (UNAUDITED)      2003       2002        2001       2000       1999
                                                  -----------    --------   --------    --------   --------   --------
<S>                                                 <C>          <C>        <C>         <C>        <C>        <C>
Net asset value, beginning of period ..........     $  10.70     $  10.67   $  10.32    $  10.40   $  10.09   $  10.82
                                                    --------     --------   --------    --------   --------   --------
Income (loss) from investment operations:
   Net investment income + ....................         0.22         0.46       0.49        0.51       0.53       0.53
   Net gain (loss) on securities (both realized
     and unrealized) ..........................        (0.18)        0.03       0.35       (0.07)      0.32      (0.69)
                                                    --------     --------   --------    --------   --------   --------
   Total from investment operations ...........         0.04         0.49       0.84        0.44       0.85      (0.16)
                                                    --------     --------   --------    --------   --------   --------
Less distributions (note 10):
   Dividends from net investment income .......        (0.22)       (0.46)     (0.49)      (0.52)     (0.54)     (0.54)
   Distributions from capital gains ...........           --           --         --          --         --      (0.03)
                                                    --------     --------   --------    --------   --------   --------
   Total distributions ........................        (0.22)       (0.46)     (0.49)      (0.52)     (0.54)     (0.57)
                                                    --------     --------   --------    --------   --------   --------
Net asset value, end of period ................     $  10.52     $  10.70   $  10.67    $  10.32   $  10.40   $  10.09
                                                    ========     ========   ========    ========   ========   ========
Total return (not reflecting sales charge) ....         0.36%++      4.65%      8.30%       4.28%      8.62%     (1.46)%

Ratios/supplemental data
   Net assets, end of period
     (in thousands) ...........................     $ 39,423     $ 46,313   $ 41,223    $ 25,585   $ 15,745   $ 13,346
   Ratio of expenses to average net assets ....         0.57%*       0.57%      0.57%       0.57%      0.59%      0.57%
   Ratio of net investment income to average
     net assets ...............................         4.18%*       4.28%      4.63%       4.94%      5.25%      5.09%
   Portfolio turnover rate ....................         5.22%++     17.92%     18.27%      21.44%      6.61%      6.35%

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

   Ratio of expenses to average net assets ....         0.57%*       0.56%      0.56%       0.55%      0.58%      0.56%
</TABLE>

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

(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 July 1, 2000, Aquila Management Corporation was appointed as the Fund's
      Investment   adviser.   Effective   January  1,  2004,  Aquila  Management
      Corporation, founder of the Fund, assigned its Advisory and Administration
      Agreement to its wholly-owned  subsidiary,  Aquila  Investment  Management
      LLC.

                See accompanying notes to financial statements.
<PAGE>

                     SHAREHOLDER MEETING RESULTS (UNAUDITED)

      The Annual Meeting of Shareholders of Churchill  Tax-Free Fund of Kentucky
(the "Fund") was held on April 23, 2004. The holders of shares  representing 83%
of the total net asset  value of the  shares  entitled  to vote were  present in
person or by proxy.  At the meeting,  the following  matters were voted upon and
approved by the shareholders  (the resulting votes are presented  below).

1. To elect Trustees.

                                Number of Votes:
         TRUSTEE                        FOR                      WITHHELD
         -------                        ---                      --------
         Lacy B. Herrmann               22,303,658               172,251
         Thomas A. Christopher          22,328,274               147,635
         Douglas Dean                   22,327,387               148,522
         Diana P. Herrmann              22,291,891               184,018
         Theodore T. Mason              22,317,207               158,702
         Anne J. Mills                  22,322,909               153,000
         William J. Nightingale         22,318,699               157,210
         James R. Ramsey                22,304,012               171,897

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

                                 Number of Votes:
         FOR                            AGAINST                 ABSTAIN
         ---                            -------                 -------
         22,029,198                     51,340                  395,370

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

INFORMATION AVAILABLE (UNAUDITED)

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

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

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

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

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

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

<PAGE>

FOUNDER
   AQUILA MANAGEMENT CORPORATION

MANAGER
   AQUILA INVESTMENT MANAGEMENT LLC
   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
   Theodore T. Mason
   Anne J. Mills
   William J. Nightingale
   James R. Ramsey

OFFICERS
   Diana P. Herrmann, Vice Chair and 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.
   760 Moore Road
   King of Prussia, Pennsylvania 19406

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

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




ITEM 2.  CODE OF ETHICS.
		Not applicable.

ITEM 3.  AUDIT COMMITTEE FINANCIAL EXPERT.
		Not applicable.

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

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

ITEM 6.  [RESERVED]

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

905:   	Not applicable.

ITEM 8. [RESERVED]

ITEM 9.  CONTROLS AND PROCEDURES.

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

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

ITEM 10.  EXHIBITS.

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

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

SIGNATURES

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

CHURCHILL TAX-FREE TRUST

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

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


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


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

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

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

By:  /s/  Joseph P. DiMaggio
-----------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
September 6, 20034