|   | Tickers: | Class A – CHTFX | Class C – CHKCX |
|--------|----------|-----------------------|-----------------------|
|   |     | Class I – CHKIX | Class Y – CHKYX |

| Fund Summary                                                        |                 |     2        |
|---------------------------------------------------------------------|----------------------|-----------------------------|
|                                                                |                 |                        |
| Investment Objective                                                |     2 |
|                                                                |                 |                        |
| Fees and Expenses of the Fund                                       |     2 |
|                                                                |                 |                        |
| Shareholder Fees                                                    |     2 |
|                                                                |                 |                        |
| Principal Investment Strategies                                     |     3 |
|                                                                |                 |                        |
| Principal Risks                                                     |     3      |
|                                                                |                 |                        |
| Fund Performance                                                    |     5      |
|                                                                |                 |                        |
| Management                                                          |     6 |
|                                                                |                 |                        |
| Purchase and Sale of Fund Shares                                    |     6 |
|                                                                |                 |                        |
| Tax Information                                                     |     6 |
|   Payment to Broker-Dealers and Other Financial Intermediaries |                 |       6 |
|                                                                |
|                                                                |                 |                        |
| Investment of the Fund’s Assets                               |     6 |
|                                                                |                 |                        |
| Fund Management                                                     |   10            |
|                                                                |                 |                        |
| Net Asset Value per Share                                      |   11       |
| Purchases                                                           |                 |   11                   |
|                                                                |                 |                        |
| Redeeming An Investment                                             |   14            |
|                                                                |                 |                        |
| Alternative Purchase Plans                                          |   18            |
|                                                                |                 |                        |
| Dividends and Distributions                                         |   24            |
|                                                                |                 |                        |
| Tax Information                                                     |   25            |
|                                                                |                 |                        |
| Financial Highlights                                                |   28            |

|                                                                                                       | Class AShares | Class CShares | Class IShares | Class YShares |
|------------------------------------------------------------------------------------------------------------|---------------|---------------|---------------|---------------|
| Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)                       | 4.00%         | None          | None          | None          |
|                                                                                                       |          |          |          |          |
| Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of redemption value or purchase price) | None(1)       | 1.00%         | None          | None          |
|                                                                                                       |          |          |          |          |
| Annual Fund Operating Expenses (Expenses that you pay each year as a percentage of your investment)        |          |          |          |          |
|                                                                                                       |          |          |          |          |
| Management Fee                                                                                             | 0.40%         | 0.40%         | 0.40%         | 0.40%         |
|                                                                                                       |          |          |          |          |
| Distribution (12b-1) Fee                                                                                   | 0.15%         | 0.75%         | 0.15%         | None          |
|                                                                                                       |          |          |          |          |
| Other Expenses                                                                                             | 0.20%         | 0.44%         | 0.40%         | 0.20%         |
|                                                                                                       |          |          |          |          |
| Total Annual Fund Operating Expenses                                                                       | 0.75%         | 1.59%         | 0.95%         | 0.60%         |
|                                                                                                       |          |          |          |          |

| (1) | Purchases of $1 million or more have no sales charge but a contingent deferred sales charge of up to 1% for redemptions within two years of purchase. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|           | 1 year | 3 years | 5 years | 10 years         |
|----------------|--------|---------|---------|------------------|
| Class A Shares | $474   | $630    | $800    | $1,293           |
| Class C Shares | $262   | $502    | $866    | $1,456           |
| Class I Shares | $97    | $303    | $525    | $1,166           |
| Class Y Shares | $61    | $192    | $335    | $  750 |

| Class C Shares | $162 | $502 | $866 | $1,456 |
|----------------|------|------|------|--------|

| * | be rated within the four highest credit ratings assigned by nationally recognized statistical rating organizations or, |
|---|------------------------------------------------------------------------------------------------------------------------|

| * | if unrated, be determined to be of comparable quality by the Fund’s Manager, Aquila Investment Management LLC. |
|---|----------------------------------------------------------------------------------------------------------------------|

| * | Interest rate risk relates to fluctuations in market value arising from changes in prevailing interest rates. If interest rates rise, the value of debt securities, including Kentucky Obligations, will normally decline. If the value of Kentucky Obligations held by the Fund declines, the net asset value of your shares in the Fund will also decline. Kentucky Obligations with longer maturities generally have a more pronounced reaction to interest rate changes than shorter-term securities. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| * | Credit risk relates to the ability of the particular issuers of the Kentucky Obligations the Fund owns to make periodic interest payments as scheduled and ultimately repay principal at maturity. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                               | Average Annual Total Returns forthe Periods Ended December 31, 2010 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------|
|                                                                                                                                                               | 1 Year                                                              | 5 Years | 10 Years |
| Class Returns Before Taxes:                                                                                                                                        |                                                                |   |   |
| Class A                                                                                                                                                            | (2.69)%                                                             | 2.70% | 3.69% |
| Class C                                                                                                                                                            | (0.58)%                                                             | 2.66% | 3.23% |
| Class I (since inception of class on 8/6/01)                                                                                                                       | 1.13%                                                               | 3.39% | 3.85% |
| Class Y                                                                                                                                                            | 1.44%                                                               | 3.67% | 4.27% |
| Class Y Returns After Taxes:                                                                                                                                       |                                                                |   |   |
| On Distributions                                                                                                                                                   | 1.44%                                                               | 3.63% | 4.24% |
| On Distributions and Redemption                                                                                                                                    | 2.35%                                                               | 3.73% | 4.27% |
| Barclays Capital Quality Intermediate Municipal Bond Index (This index is unmanaged and does not reflect deductions for fund operating expenses or sales charges.) | 3.21%                                                               | 4.73% | 4.76% |

|   | * | obtaining funds for general operating expenses, |
|--------|---|-------------------------------------------------|

|   | * | refunding outstanding obligations, |
|--------|---|------------------------------------|

|   | * | obtaining funds for loans to other public institutions and facilities, and |
|--------|---|----------------------------------------------------------------------------|

|   | * | funding the construction of highways, bridges, schools, hospitals, housing, mass transportation, streets and water and sewer works. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------|

|   | * | tax, revenue or bond anticipation notes, |
|--------|---|------------------------------------------|

|   | * | construction loan notes, |
|--------|---|--------------------------|

|   | * | project notes, which sometimes carry a U.S. government guarantee, |
|--------|---|-------------------------------------------------------------------|

|   | * | municipal lease/purchase agreements, which are similar to installment purchase contracts for property or equipment, and |
|--------|---|-------------------------------------------------------------------------------------------------------------------------|

|   | * | floating and variable rate demand notes. |
|--------|---|------------------------------------------|

|   | * | Initially, $1,000, except that there is no minimum amount for purchase of shares through certain financial intermediaries as discussed below. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | * | Subsequently, any amount (for investments in shares of the same class). |
|--------|---|-------------------------------------------------------------------------|

|   | * | $50 or more if an Automatic Investment Program is established. |
|--------|---|----------------------------------------------------------------|

|   | * | Subsequently, any amount you specify of $50 or more. |
|--------|---|------------------------------------------------------|

|   | * | You are not permitted to maintain both an Automatic  Investment Program and an Automatic Withdrawal Plan simultaneously. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------|

| ·   | through an investment broker or dealer, or a bank or other financial intermediary, that has a sales agreement with the Distributor, Aquila Distributors, Inc., in which case that institution will take action on your behalf, and you will not personally perform the steps indicated below; or |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | directly through the Distributor, by mailing payment to the Fund’s Agent, BNY Mellon. |
|--------------------|---------------------------------------------------------------------------------------------|

| Opening a Class A or Class C Share Account                                                                                              |
|----------------------------------------------------------------------------------------------------------------------------------------------|
| * Make out a check for the investment amount payable to Churchill Tax-Free Fund of Kentucky.                                                 |
|                                                                                                                                         |
| * Complete a New Account Application, which is available with the Prospectus or upon request, indicating the features you wish to authorize. |
|                                                                                                                                         |
| * Send your check and completed New Account Application to your dealer or to the Fund’s Agent, BNY Mellon.                             |

| Adding to a Class A or Class C Share Account                                                                                                                                                          |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| By Wire                                                                                                                                                                                                    | By Check  |
| * Telephone the Agent (toll-free) at 800-437-1000 (individual shareholders) or 877-953-6932 (broker/dealers) to advise us that you would like to purchase shares of the Fund by wire transfer.   | * Make out a check for the investment amount payable to Churchill Tax-Free Fund of Kentucky. * Fill out the pre-printed stub attached to the Fund’s confirmations or supply the name(s) of account owner(s), the account number, and the name of the Fund. * Send your check and account information to your dealer or to the Fund’s Agent, BNY Mellon.  |

|   | *-Class C Shares held for less than 12 months (from the date of purchase); and |
|--------|--------------------------------------------------------------------------------|

|   | *-CDSC Class A Shares (as described below). |
|--------|---------------------------------------------|

| By mail, send instructions to:                                                           | By telephone, call:    | By FAX, send instructions to: |
|------------------------------------------------------------------------------------------|------------------------|-------------------------------|
| BNY MellonAttn:  Aquila Group of Funds4400 Computer DriveWestborough, MA 01581 | 800-437-1000 toll-free | 508-599-1838                  |

|   | account name(s) |
|--------|-----------------|

|   | account number |
|--------|----------------|

|   | amount to be redeemed |
|--------|-----------------------|

|   | any payment directions. |
|--------|-------------------------|

| ·   | account name(s); |
|--------------------|------------------|

| ·   | account number; |
|--------------------|-----------------|

| ·   | dollar amount or number of shares to be redeemed or a statement that all shares held in the account are to be redeemed; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------|

| ·   | payment instructions (we normally mail redemption proceeds to your address as registered with the Fund); and |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | signature(s) of the registered shareholder(s). |
|--------------------|------------------------------------------------|

| ·   | member of a national securities exchange; |
|--------------------|-------------------------------------------|

| ·   | U.S. bank or trust company; |
|--------------------|-----------------------------|

| ·   | state-chartered savings bank; |
|--------------------|-------------------------------|

| ·   | federally chartered savings and loan association; |
|--------------------|---------------------------------------------------|

| ·   | foreign bank having a U.S. correspondent bank; or |
|--------------------|---------------------------------------------------|

| ·   | participant in the Securities Transfer Association Medallion Program (“STAMP”), the Stock Exchanges Medallion Program (“SEMP”) or the New York Stock Exchange, Inc. Medallion Signature Program (“MSP”). |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Redemption               | Method of Payment                                                                                                                                                                                   | Charges                                                   |
|--------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------|
| Under $1,000.            | Check.                                                                                                                                                                                              | None.                                                     |
| $1,000 or more.          | Check, or wired or transferred through the Automated Clearing House to your Financial Institution account, if you so requested on your New Account Application or Ready Access Features Form.  | None.                                                          |
| Through a broker/dealer. | Check or wire, to your broker/dealer.                                                                                                                                                               | None.  However, your broker/dealer may charge a fee. |

|                                                  | Class A Shares“Front-Payment Class”                                                                                                                                                 | Class C Shares“Level-Payment Class”                                                                                                                                                                                       |
|-------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                  |                                                                                                                                                                                            |                                                                                                                                                                                                                                  |
| Initial Sales Charge                                  | Class A Shares are offered at net asset value plus amaximum sales charge of 4%, paid at the time of purchase.  Thus, your investment is reduced by the applicable sales charge.  | None.  Class C Shares are offered at net asset value with no sales charge payable at the time of purchase.                                                                                                                  |
| Contingent Deferred Sales Charge (“CDSC”) | None (except for certain purchases of $1 million or more).                                                                                                                                      | A CDSC of 1% is imposed upon the redemption of Class C Shares held for less than 12 months. No CDSC applies to Class C Shares acquired through the reinvestment of dividends or distributions.                                   |
| Distribution and Service Fees                         | A distribution fee of 0.15 of 1% is imposed on the average annual net assets represented by the Class A Shares.                                                                                 | There is a level charge for distribution and service fees for six years after the date of purchase at the aggregate annual rate of 1% of the average net assets represented by the Class C Shares.                               |
| Other Information                                     | The initial sales charge is waived or reduced in some cases.  Larger purchases qualify for lower sales charges.                                                                       | 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 six years. |

|                                   | Class Y Shares“Institutional Class”                               | Class I Shares“Financial Intermediary Class”                                                                                                                                       |
|----------------------------------------|-------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Initial Sales Charge                   | None. Financial intermediaries may charge a fee for purchase of shares.  | None. Financial intermediaries may charge a fee for purchase of shares.                                                                                                                             |
| Contingent Deferred Sales Charge  | None.                                                                         | None.                                                                                                                                                                                               |
| Distribution and Service Fees          | None.                                                                         | Distribution fee of up to 0.25 of 1% of average annual net assets allocable to Class I Shares, currently up to 0.15 of 1% of such net assets, and a service fee of up to 0.25 of 1% of such assets. |

| Class A Shares Offering Price                               | Class C, I and Y Shares Offering Price  |
|-------------------------------------------------------------|----------------------------------------------|
| Net asset value per share plus the applicable sales charge. | Net asset value per share.                   |

|   | * an individual; |
|--------|------------------|

|   | * an individual, together with his or her spouse, and/or any children under 21 years of age purchasing shares for their accounts; |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | * a trustee or other fiduciary purchasing shares for a single trust estate or fiduciary account; or |
|--------|-----------------------------------------------------------------------------------------------------|

|   | * a government, municipality or tax-exempt entity that meets the requirements for qualification under Section 501 of the Internal Revenue Code. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| IAmount of Purchase Plus Value of All OtherShares Held By a Single Purchaser                             | IISales Charge as Percentage of Public Offering Price | IIISales Charge as Approximate Percentage of Amount Invested |
|----------------------------------------------------------------------------------------------------------|-------------------------------------------------------|--------------------------------------------------------------|
|                                                                                                     |                                                  |                                                         |
| Less than $25,000                                                                                        | 4.00%                                                 | 4.17%                                                        |
| $25,000 but less than $50,000                                                                            | 3.75%                                                 | 3.90%                                                        |
| $50,000 but less than $100,000                                                                           | 3.50%                                                 | 3.63%                                                        |
| $100,000 but less than $250,000                                                                          | 3.25%                                                 | 3.36%                                                        |
| $250,000 but less than $500,000                                                                          | 3.00%                                                 | 3.09%                                                        |
| $500,000 but less than $1,000,000                                                                        | 2.50%                                                 | 2.56%                                                        |
|                                                                                                     |                                                  |                                                         |
| For purchases of $1 million or more see “Sales Charges for Purchases of $1 Million or More.” |

|   |
|--------|

| If you invest $10,000 (Column I), your sales charge would be 4.00% or $400 (Column II).                                                                                      | ($10,000 x .04 = $400)               |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------|
| The value of your account would be equivalent to the amount of your investment less the sales charge. (The initial value of your account would be $10,000 - $400 = $9,600.)  | ($10,000 - $400 = $9,600)            |
| The sales charge as a percentage of the reduced value of your account would be 4.17% (Column III).                                                                           | ($400 / $9,600 = 0.0416666 or 4.17%) |

| Value of Holdings                      | During First Two Years After Purchase |
|----------------------------------------|---------------------------------------|
|                                   |                                  |
| $1 million and up to $2.5 million      | 1%                                    |
|                                   |                                  |
| Over $2.5 million and up to $5 million | 0.50% in year 10.25% in year 2        |
|                                   |                                  |
| Over $5 million                        | 0                                     |

|   | * - Redemption following the death of the shareholder or beneficial owner. |
|--------|----------------------------------------------------------------------------|

|   | * - Redemption by the Fund when an account falls below the minimum required account size. |
|--------|-------------------------------------------------------------------------------------------|

|   | * - Redemption by an investor who purchased $1 million or more without an initial sales charge if the securities dealer of record waived its commission in connection with the purchase, with notice to the investor and the Fund at the time of purchase. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) permit the Fund to finance activities primarily intended to result in the sale of its shares; |
|--------|---------------------------------------------------------------------------------------------------|

|   | (ii) permit the Manager to make payment for distribution expenses out of its own funds; and |
|--------|---------------------------------------------------------------------------------------------|

|   | (iii) protect the Fund against any claim that some of the expenses which it pays or may pay might be considered to be sales-related and therefore come within the purview of the Rule. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1. the day prior to the day when redemption proceeds are mailed, wired or transferred by the Automated Clearing House or the Agent or paid by the Agent to a financial intermediary; or |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. the third business day after the day the net asset value of the redeemed shares was determined. |
|--------|----------------------------------------------------------------------------------------------------|

|           | Exempt-Interest  Dividends  | Capital Gains Dividends | Ordinary Income Dividends |
|----------------|--------------------------------------------|-------------------------|---------------------------|
| Class A Shares | 100.00%                                    | 0.00%                   | 0.00%                     |
| Class C Shares | 100.00%                                    | 0.00%                   | 0.00%                     |
| Class I Shares | 100.00%                                    | 0.00%                   | 0.00%                     |
| Class Y Shares | 100.00%                                    | 0.00%                   | 0.00%                     |

|                                                                                            |   |
|-------------------------------------------------------------------------------------------------|--------|
|                                                                                            |   | Class A |   | Class C |
|                                                                                            |   | Year Ended December 31, |   | Year Ended December 31, |
|                                                                                            |   | 2010 |   | 2009 |   | 2008 |   | 2007 |   | 2006 |   | 2010 |   | 2009 |   | 2008 |   | 2007 |   | 2006 |
| Net asset value, beginning of period                                                            |   | $ | 10.51 |   |   | $ | 9.42 |   |   | $ | 10.38 |   |   | $ | 10.59 |   |   | $ | 10.60 |   |   | $ | 10.51 |   |   | $ | 9.42 |   |   | $ | 10.38 |   |   | $ | 10.58 |   |   | $ | 10.59 |   |
| Income (loss) from investment operations:                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net investment income                                                                           |   |   | 0.40 | (1) |   |   | 0.41 | (1) |   |   | 0.40 | (1) |   |   | 0.39 | (1) |   |   | 0.39 | (2) |   |   | 0.31 | (1) |   |   | 0.32 | (1) |   |   | 0.31 | (1) |   |   | 0.31 | (1) |   |   | 0.30 | (2) |
| Net gain (loss) on securities (both                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| realized and unrealized)                                                                        |   |   | (0.25 | ) |   |   | 1.09 |   |   |   | (0.92 | ) |   |   | (0.15 | ) |   |   | 0.03 |   |   |   | (0.26 | ) |   |   | 1.09 |   |   |   | (0.91 | ) |   |   | (0.15 | ) |   |   | 0.03 |   |
| Total from investment operations                                                                |   |   | 0.15 |   |   |   | 1.50 |   |   |   | (0.52 | ) |   |   | 0.24 |   |   |   | 0.42 |   |   |   | 0.05 |   |   |   | 1.41 |   |   |   | (0.60 | ) |   |   | 0.16 |   |   |   | 0.33 |   |
| Less distributions (note 10):                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends from net investment income                                                            |   |   | (0.40 | ) |   |   | (0.41 | ) |   |   | (0.39 | ) |   |   | (0.39 | ) |   |   | (0.40 | ) |   |   | (0.31 | ) |   |   | (0.32 | ) |   |   | (0.31 | ) |   |   | (0.30 | ) |   |   | (0.31 | ) |
| Distributions from capital gains                                                                |   |   | – |   |   |   | – |   |   |   | (0.05 | ) |   |   | (0.06 | ) |   |   | (0.03 | ) |   |   | – |   |   |   | – |   |   |   | (0.05 | ) |   |   | (0.06 | ) |   |   | (0.03 | ) |
| Total distributions                                                                             |   |   | (0.40 | ) |   |   | (0.41 | ) |   |   | (0.44 | ) |   |   | (0.45 | ) |   |   | (0.43 | ) |   |   | (0.31 | ) |   |   | (0.32 | ) |   |   | (0.36 | ) |   |   | (0.36 | ) |   |   | (0.34 | ) |
| Net asset value, end of period                                                                  |   | $ | 10.26 |   |   | $ | 10.51 |   |   | $ | 9.42 |   |   | $ | 10.38 |   |   | $ | 10.59 |   |   | $ | 10.25 |   |   | $ | 10.51 |   |   | $ | 9.42 |   |   | $ | 10.38 |   |   | $ | 10.58 |   |
| Total return                                                                                    |   |   | 1.38 | %(3) |   |   | 16.05 | %(3) |   |   | (5.05 | )%(3) |   |   | 2.38 | %(3) |   |   | 4.02 | %(3) |   |   | 0.42 | %(4) |   |   | 15.06 | %(4) |   |   | (5.85 | )%(4) |   |   | 1.61 | %(4) |   |   | 3.15 | %(4) |
| Ratios/supplemental data                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net assets, end of period                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (in thousands)                                                                                  |   | $ | 186,298 |   |   | $ | 194,816 |   |   | $ | 169,582 |   |   | $ | 194,140 |   |   | $ | 211,501 |   |   | $ | 8,657 |   |   | $ | 4,207 |   |   | $ | 2,694 |   |   | $ | 4,120 |   |   | $ | 5,686 |   |
| Ratio of expenses to average                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net assets                                                                                      |   |   | 0.75 | % |   |   | 0.76 | % |   |   | 0.79 | % |   |   | 0.75 | % |   |   | 0.76 | % |   |   | 1.59 | % |   |   | 1.60 | % |   |   | 1.64 | % |   |   | 1.60 | % |   |   | 1.62 | % |
| Ratio of net investment income to                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| average net assets                                                                              |   |   | 3.80 | % |   |   | 3.96 | % |   |   | 3.97 | % |   |   | 3.77 | % |   |   | 3.71 | % |   |   | 2.90 | % |   |   | 3.06 | % |   |   | 3.10 | % |   |   | 2.92 | % |   |   | 2.87 | % |
| Portfolio turnover rate                                                                         |   |   | 8.32 | % |   |   | 8.18 | % |   |   | 13.76 | % |   |   | 18.92 | % |   |   | 19.07 | % |   |   | 8.32 | % |   |   | 8.18 | % |   |   | 13.76 | % |   |   | 18.92 | % |   |   | 19.07 | % |
| The expense ratios after giving effect to the expense offset for uninvested cash balances were: |   |
| Ratio of expenses to average                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net assets                                                                                      |   |   | 0.75 | % |   |   | 0.76 | % |   |   | 0.78 | % |   |   | 0.74 | % |   |   | 0.76 | % |   |   | 1.59 | % |   |   | 1.60 | % |   |   | 1.63 | % |   |   | 1.59 | % |   |   | 1.61 | % |

|                                                                                            |   |
|-------------------------------------------------------------------------------------------------|--------|
|                                                                                            |   | Class I |   | Class Y |
|                                                                                            |   | Year Ended December 31, |   | Year Ended December 31, |
|                                                                                            |   | 2010 |   | 2009 |   | 2008 |   | 2007 |   | 2006 |   | 2010 |   | 2009 |   | 2008 |   | 2007 |   | 2006 |
| Net asset value, beginning of period                                                            |   | $ | 10.51 |   |   | $ | 9.42 |   |   | $ | 10.38 |   |   | $ | 10.58 |   |   | $ | 10.59 |   |   | $ | 10.52 |   |   | $ | 9.43 |   |   | $ | 10.39 |   |   | $ | 10.59 |   |   | $ | 10.61 |   |
| Income (loss) from investment operations:                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net investment income                                                                           |   |   | 0.39 | (1) |   |   | 0.39 | (1) |   |   | 0.38 | (1) |   |   | 0.38 | (1) |   |   | 0.38 | (2) |   |   | 0.42 | (1) |   |   | 0.42 | (1) |   |   | 0.41 | (1) |   |   | 0.41 | (1) |   |   | 0.41 | (2) |
| Net gain (loss) on securities (both                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| realized and unrealized)                                                                        |   |   | (0.27 | ) |   |   | 1.09 |   |   |   | (0.91 | ) |   |   | (0.14 | ) |   |   | 0.02 |   |   |   | (0.26 | ) |   |   | 1.09 |   |   |   | (0.91 | ) |   |   | (0.14 | ) |   |   | 0.01 |   |
| Total from investment operations                                                                |   |   | 0.12 |   |   |   | 1.48 |   |   |   | (0.53 | ) |   |   | 0.24 |   |   |   | 0.40 |   |   |   | 0.16 |   |   |   | 1.51 |   |   |   | (0.50 | ) |   |   | 0.27 |   |   |   | 0.42 |   |
| Less distributions (note 10):                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends from net investment income                                                            |   |   | (0.38 | ) |   |   | (0.39 | ) |   |   | (0.38 | ) |   |   | (0.38 | ) |   |   | (0.38 | ) |   |   | (0.42 | ) |   |   | (0.42 | ) |   |   | (0.41 | ) |   |   | (0.41 | ) |   |   | (0.41 | ) |
| Distributions from capital gains                                                                |   |   | – |   |   |   | – |   |   |   | (0.05 | ) |   |   | (0.06 | ) |   |   | (0.03 | ) |   |   | – |   |   |   | – |   |   |   | (0.05 | ) |   |   | (0.06 | ) |   |   | (0.03 | ) |
| Total distributions                                                                             |   |   | (0.38 | ) |   |   | (0.39 | ) |   |   | (0.43 | ) |   |   | (0.44 | ) |   |   | (0.41 | ) |   |   | (0.42 | ) |   |   | (0.42 | ) |   |   | (0.46 | ) |   |   | (0.47 | ) |   |   | (0.44 | ) |
| Net asset value, end of period                                                                  |   | $ | 10.25 |   |   | $ | 10.51 |   |   | $ | 9.42 |   |   | $ | 10.38 |   |   | $ | 10.58 |   |   | $ | 10.26 |   |   | $ | 10.52 |   |   | $ | 9.43 |   |   | $ | 10.39 |   |   | $ | 10.59 |   |
| Total return                                                                                    |   |   | 1.13 | % |   |   | 15.89 | % |   |   | (5.16 | )% |   |   | 2.33 | % |   |   | 3.87 | % |   |   | 1.44 | % |   |   | 16.21 | % |   |   | (4.88 | )% |   |   | 2.63 | % |   |   | 4.08 | % |
| Ratios/supplemental data                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net assets, end of period                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (in thousands)                                                                                  |   | $ | 7,429 |   |   | $ | 8,345 |   |   | $ | 7,810 |   |   | $ | 8,363 |   |   | $ | 8,018 |   |   | $ | 39,938 |   |   | $ | 45,657 |   |   | $ | 37,299 |   |   | $ | 41,648 |   |   | $ | 46,625 |   |
| Ratio of expenses to average                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net assets                                                                                      |   |   | 0.90 | % |   |   | 0.90 | % |   |   | 0.93 | % |   |   | 0.89 | % |   |   | 0.91 | % |   |   | 0.60 | % |   |   | 0.61 | % |   |   | 0.64 | % |   |   | 0.60 | % |   |   | 0.61 | % |
| Ratio of net investment income to                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| average net assets                                                                              |   |   | 3.64 | % |   |   | 3.82 | % |   |   | 3.83 | % |   |   | 3.62 | % |   |   | 3.57 | % |   |   | 3.95 | % |   |   | 4.10 | % |   |   | 4.12 | % |   |   | 3.92 | % |   |   | 3.86 | % |
| Portfolio turnover rate                                                                         |   |   | 8.32 | % |   |   | 8.18 | % |   |   | 13.76 | % |   |   | 18.92 | % |   |   | 19.07 | % |   |   | 8.32 | % |   |   | 8.18 | % |   |   | 13.76 | % |   |   | 18.92 | % |   |   | 19.07 | % |
| The expense ratios after giving effect to the expense offset for uninvested cash balances were: |   |
| Ratio of expenses to average                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net assets                                                                                      |   |   | 0.90 | % |   |   | 0.90 | % |   |   | 0.92 | % |   |   | 0.88 | % |   |   | 0.90 | % |   |   | 0.60 | % |   |   | 0.61 | % |   |   | 0.63 | % |   |   | 0.59 | % |   |   | 0.61 | % |

|   |           | Ticker Symbol | CUSIP #   |
|--------|----------------|---------------|-----------|
|   |           |          |      |
|   | Class A Shares | CHTFX         | 171562101 |
|   | Class C Shares | CHKCX         | 171562309 |
|   | Class I Shares | CHKIX         | 171562507 |
|   | Class Y Shares | CHKYX         | 171562408 |
|   |           |          |      |

----

| Statement of Additional Information | April 24, 2011  |
|-------------------------------------|----------------------|

|   | Tickers: | Class A – CHTFX | Class C – CHKCX |
|--------|----------|-----------------------|-----------------------|
|   |     | Class I – CHKIX | Class Y – CHKYX |

| Fund History                                | 2  |
|---------------------------------------------|----|
| Investment Strategies and Risks             | 2  |
| Fund Policies                               | 7  |
| Management of the Fund                      | 8  |
| Ownership of Securities                     | 19 |
| Investment Advisory and Other Services      | 20 |
| Brokerage Allocation and Other Practices    | 33 |
| Capital Stock                               | 33 |
| Purchase, Redemption, and Pricing of Shares | 35 |
| Additional Tax Information                  | 45 |
| Underwriters                                | 47 |
| Appendix A                                  | 48 |

| Highest rating (1)        | 15.6%                              |
|---------------------------|------------------------------------|
| Second highest rating (2) | 69.4%                              |
| Third highest rating (3)  | 14.4%                              |
| Fourth highest rating (4) | 0.4%                               |
| Not rated                 |      0.2% |
|                      | 100.0%                             |

| * | Also includes pre-refunded Kentucky Obligations, which are bonds for which U.S. Government Obligations have been placed in escrow to retire such Obligations at their earliest call date. |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|     Name, Address(1) and Date of Birth   |    Positions Held with Fund and Length of Service(2)  |      Principal Occupation(s) During Past 5 Years                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  Number of Portfolios in Fund Complex(3) Overseen by Trustee |     Other Directorships Held by Trustee During Past 5 Years |
|------------------------------------------------------------------------|---------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------|---------------------------------------------------------------------------------|
| Interested Trustee(4)                                             |                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                              |                                                                            |
| Diana P. HerrmannNew York, NY(02/25/58)                           | Trustee since 1995 and President since 1999                          | Vice Chair and Chief Executive Officer of Aquila Management Corporation, Founder of the Aquila Group of Funds(5) and parent of Aquila Investment Management LLC, Manager since 2004, President since 1997, Chief Operating Officer, 1997-2008, a Director since 1984, Secretary since 1986 and previously its Executive Vice President, Senior Vice President or Vice President, 1986-1997; Chief Executive Officer and Vice Chair since 2004, President and Manager  since 2003, and Chief Operating Officer (2003-2008), of the Manager; Chair, Vice Chair, President, Executive Vice President and/or Senior Vice President of funds in the Aquila Group of Funds since 1986; Director of the Distributor since 1997; Governor, Investment Company Institute (the trade organization for the U.S. mutual fund industry dedicated to protecting shareholder interests and educating the public about investing) for various periods since 2004, and head of its Small Funds Committee, 2004-2009; active in charitable and volunteer organizations.  | 12                                                                | ICI Mutual Insurance Company, a Risk Retention Group (2006-2009 and since 2010) |
| Non-interested Trustees                                           |                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                              |                                                                            |
| Thomas A.ChristopherDanville, KY(12/19/47)                        | Chair of the Board of Trustees since 2005 and Trusteesince 1992      | Vice President of Robinson, Hughes & Christopher, C.P.A.s, P.S.C., since 1977; President, A Good Place for Fun, Inc., a sports facility, since 1987; Director, Sunrise Children’s Services Inc. (2010); currently or formerly active with various professional and community organizations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 5                                                                 | None                                                                            |
| David A. DuffyNorth Kingstown, RI(08/07/39)                       | Trustee since 2009                                                   | Chairman, Rhode Island Convention Center Authority since 2003; director (advisory board) of Citizens Bank of Rhode Island and Connecticut since 1999; retired Founder, formerly President, Duffy & Shanley, Inc., a marketing communications firm, 1973-2003; past National Chairman, National Conference for Community and Justice (NCCJ); Past Chair, Providence College President’s Council; Past Vice Chair, Providence College Board of Trustees; officer or director of numerous civic and non-profit organizations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 2                                                                 | Delta Dental of Rhode Island                                                    |
| Theodore T. MasonHastings-on-Hudson, NY(11/24/35)                      | Trustee since 1987                                                   | Executive Director, East Wind Power Partners LTD since 1994 and Louisiana Power Partners, 1999-2003; Assistant Treasurer, Fort Schuyler Maritime Alumni Association, Inc., successor to Alumni Association of SUNY Maritime College, since 2010 (Treasurer, 2004-2009, President, 2002-2003, First Vice President, 2000-2001, Second Vice President, 1998-2000) and director of the same organization since 1997; Director, STCM Management Company, Inc., 1973-2004; twice national officer of Association of the United States Navy (formerly Naval Reserve Association), Commanding Officer of four naval reserve units and Captain, USNR (Ret); director, The Navy League of the United States New York Council since 2002; trustee, The Maritime Industry Museum at Fort Schuyler, 2000-2004; and Fort Schuyler Maritime Foundation, Inc., successor to the Maritime College at Fort Schuyler Foundation, Inc., since 2000.                                                                                                                                 | 9                                                                 | Formerly Trustee, Premier VIT                                                   |
| Anne J. MillsCastle Rock, CO (12/23/38)                           | Trustee since 1987                                                   | President, Loring Consulting Company since 2001; Vice President for Business Management and CFO, Ottawa University, 1992-2001, 2006-2008; IBM Corporation, 1965-1991; currently active with various charitable, educational and religious organizations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 5                                                                 | None                                                                            |
| John J. PartridgeProvidence, RI(05/05/40)                         | Trustee since 2009                                                        | Founding Partner, Partridge Snow & Hahn LLP, a law firm, Providence, Rhode Island, since 1988, Senior Counsel, since January 1, 2007; Assistant Secretary – Advisor to the Board, Narragansett Insured Tax-Free Income Fund, 2005-2008, Trustee 2002-2005; director or trustee of various educational, civic and charitable organizations, including Ocean State Charities Trust, Memorial Hospital of Rhode Island, and The Pawtucket Foundation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 5                                                                 | None                                                                            |
| James R. RamseyLouisville, KY(11/14/48)                           | Trustee since 1987                                                        | President, University of Louisville since November 2002; Professor of Economics, University of Louisville, 1999-present; Kentucky Governor’s Senior Policy Advisor and State Budget Director, 1999-2002; Vice Chancellor for Finance and Administration, the University of North Carolina at Chapel Hill, 1998 to 1999; previously Vice President for Finance and Administration at Western Kentucky University, State Budget Director for the Commonwealth of Kentucky, Chief State Economist and Executive Director for the Office of Financial Management and Economic Analysis for the Commonwealth of Kentucky, Adjunct Professor at the University of Kentucky, Associate Professor at Loyola University-New Orleans and Assistant Professor at Middle Tennessee State University.                                                                                                                                                                                                                                                                   | 2                                                                 | Community Bank and Trust, Pikeville, KY and Texas Roadhouse Inc.                |
| Laureen L. WhiteNorth Kingstown, RI(11/18/59)                     | Trustee since 2009                                                        | President, Greater Providence Chamber of Commerce, since 2005, Executive Vice President 2004-2005 and Senior Vice President, 1989-2002; Executive Counselor to the Governor of Rhode Island for Policy and Communications, 2003-2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 2                                                                 | None                                                                            |
|                                                                   |                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                              |                                                                            |

| Diana P. Herrmann:     | More than 20 years of experience in mutual fund management.                                                   |
|------------------------|--------------------------------------------------------------------------------------------------------------------|
| Thomas A. Christopher: | Experienced trustee of mutual funds, knowledgeable about financial and local matters.                         |
| David A. Duffy:        | Experienced mutual fund trustee, knowledgeable about local government affairs.                                |
| Theodore T. Mason:     | Extensive financial and management experience; knowledgeable about operation and management of mutual funds.  |
| Anne J. Mills:         | Extensive financial and management experience; knowledgeable about operation and governance of mutual funds.  |
| John J. Partridge:     | Lawyer, knowledgeable about finance and corporate governance.                                                 |
| James R. Ramsey:       | Experienced educator and knowledgeable about local economy and governmental affairs.                          |
| Laureen L. White:      | Knowledgeable about local government affairs.                                                                      |

|     Name, Address(1)  and Date of Birth  |     Positions Held with Trust and Length of Service(2)             |      Principal Occupation(s) During Past 5 Years                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|------------------------------------------------------------------------|----------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Chairman Emeritus(6)                                              |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Lacy B. HerrmannNew York, NY(05/12/29)                                 | Founder and Chairman Emeritus since 2005, Chairman of the Board of Trustees, 1987-2005 | Founder and Chairman of the Board, Aquila Management Corporation, the sponsoring organization and parent of the Manager or Administrator and/or Adviser to each fund of the Aquila Group of Funds; Chairman of the Manager or Administrator and/or Adviser to each since 2004; Founder and Chairman Emeritus of each fund in the Aquila Group of Funds; previously Chairman and a Trustee of each fund in the Aquila Group of Funds since its establishment until 2004 or 2005; Director of the Distributor since 1981 and formerly Vice President or Secretary, 1981-1998; Director or  trustee, Premier VIT, 1994-2009; Director or trustee of Oppenheimer Quest Value Funds Group, Oppenheimer Small Cap Value Fund, Oppenheimer Midcap Fund, 1987-2009, and Oppenheimer Rochester Group of Funds, 1995-2009; Trustee Emeritus, Brown University and the Hopkins School; active in university, school and charitable organizations.  |
| Officers                                                          |                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Charles E.Childs, IIINew York, NY(04/01/57)                       | Executive Vice President since 2003                                                    | Executive Vice President of all funds in the Aquila Group of Funds and the Manager and the Manager’s parent since 2003; Chief Operating Officer of the Manager and the Manager’s parent since 2008; formerly Senior Vice President, corporate development, Vice President, Assistant Vice President and Associate of the Manager’s parent since 1987; Senior Vice President, Vice President or Assistant Vice President of the Aquila Money-Market Funds, 1988-2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Marie E. AroDenver, CO(02/10/55)                                       | Senior Vice President since 2010                                                  | Co-President of the Distributor since 2010, Vice President, 1993-1997; Senior Vice President, Aquila Three Peaks Opportunity Growth Fund since 2004; Senior Vice President, Tax-Free Trust of Arizona since 2010 and Vice President, 2004-2010; Senior Vice President, Aquila Three Peaks High Income Fund since 2006; Senior Vice President, Hawaiian Tax-Free Trust, Tax-Free Fund For Utah, Tax-Free Fund of Colorado, Tax-Free Trust of Oregon, Churchill Tax-Free Fund of Kentucky and Narragansett Insured Tax-Free Income Fund since 2010; Vice President, INVESCO Funds Group, 1998-2003.                                                                                                                                                                                                                                                                                                                                                 |
| Paul G. O’BrienCharlotte, NC(11/28/59)                           | Senior Vice President since 2010                                                       | Co-President, Aquila Distributors, Inc. since 2010, Managing Director, 2009-2010; Senior Vice President of Aquila Three Peaks Opportunity Growth Fund, Aquila Three Peaks High Income Fund, and each of the Aquila Municipal Bond Funds since 2010; held various positions to Senior Vice President and Chief Administrative Officer of Evergreen Investments Services, Inc., 1997 - 2008; Mergers and Acquisitions Coordinator for Wachovia Corporation, 1994 - 1997.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Todd W. CurtisPhoenix, AZ(06/08/49)                               | Vice President since 2004                                                         | Senior Vice President and Portfolio Manager, Tax-Free Trust of Arizona, since August 2004; Vice President and Portfolio Manager, Churchill Tax-Free Fund of Kentucky, since 2009, backup portfolio manager, 2004-2009; Vice President and Co-Portfolio Manager, Tax-Free Fund For Utah, since 2009; Vice President and Portfolio Manager, Banc One Investment Advisors, Inc. and its predecessors, 1981-2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| James ThompsonBountiful, Utah(03/17/55)                           | Assistant Vice President since 2009                                               | Vice President and Co-Portfolio Manager, Tax-Free Fund For Utah, since 2009; Assistant Vice President and Backup Portfolio Manager, Tax-Free Trust of Arizona and Churchill Tax-Free Fund of Kentucky, since 2009; Senior Vice President, First Security Bank/Wells Fargo Brokerage Services LLC, Salt Lake City, UT, 1991-2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Jason T. McGrewElizabethtown, KY(08/14/71)                             | Vice Presidentsince 2001                                                          | Vice President, Churchill Tax-Free Fund of Kentucky since 2001, Assistant Vice President, 2000-2001; Vice President, Aquila Three Peaks Opportunity Growth Fund since 2006; Investment Broker with Raymond James Financial Services 1999-2000 and with J.C. Bradford and Company 1997-1999; Associate Broker at Prudential Securities 1996-1997.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Robert S. DriessenNew York, NY (10/12/47)                         | Chief Compliance Officer since 2009                                                    | Chief Compliance Officer of each fund in the Aquila Group of Funds, the Manager and the Distributor since December 2009; Vice President, Chief Compliance Officer, Curian Capital, LLC, 2004-2008; Vice President, Chief Compliance Officer, Phoenix Investment Partners, Ltd., 1999- 2004; Vice President, Risk Liaison, Corporate Compliance, Bank of America, 1996-1999; Vice President, Securities Compliance, Prudential Insurance Company of America, 1993-1996; various positions to Branch Chief, U.S. Securities and Exchange Commission, 1972-1993.                                                                                                                                                                                                                                                                                                                                                                                     |
| Joseph P. DiMaggioNew York, NY(11/06/56)                          | Chief Financial Officer since 2003 and Treasurer since 2000                       | Chief Financial Officer of each fund in the Aquila Group of Funds since 2003 and Treasurer since 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Edward M. W. HinesNew York, NY(12/16/39)                               | Secretary since 1987                                                              | Of Counsel to Butzel Long, a professional corporation, counsel to the Trust/Fund, since 2010 and previously Shareholder since 2007; Partner of Hollyer Brady Barrett & Hines LLP, its predecessor as counsel, 1989-2007; Secretary of each fund in the Aquila Group of Funds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| John M. HerndonNew York, NY (12/17/39)                       | Assistant Secretary since 1995                                                    | Assistant Secretary of each fund in the Aquila Group of Funds since 1995 and Vice President of the three Aquila Money-Market Funds since 1990; Vice President of the Manager or its predecessor and current parent since 1990.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Yolonda S. ReynoldsNew York, NY(04/23/60)                              | Assistant Treasurer since 2010                                                         | Director of Fund Accounting for the Aquila Group of Funds since 2007; Investment Accountant, TIIA-CREF, 2007; Sr. Fund Accountant, JP Morgan Chase, 2003-2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Lori A. VindigniNew York, NY(11/02/66)                            | Assistant Treasurer since 2000                                                    | Assistant Treasurer of each fund in the Aquila Group of Funds since 2000; Assistant Vice President of the Manager or its predecessor and current parent since 1998; Fund Accountant for the Aquila Group of Funds, 1995-1998.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

| Name of Trustee         | Dollar Range of Ownership in Churchill Tax-Free Fund of Kentucky(1) | Aggregate Dollar Range of Ownership in the Aquila Group of Funds (1) |
|-------------------------|---------------------------------------------------------------------|----------------------------------------------------------------------|
|                    |                                                                |                                                                 |
| Interested Trustee      |                                                                |                                                                 |
|                    |                                                                |                                                                 |
| Diana P. Herrmann       | C                                                                   | E                                                                    |
|                    |                                                                |                                                                 |
|                    |                                                                |                                                                 |
| Non-interested Trustees |                                                                |                                                                 |
|                    |                                                                |                                                                 |
| Thomas A. Christopher   | E                                                                   | E                                                                    |
|                    |                                                                |                                                                 |
| David A. Duffy          | C                                                                   | C                                                                    |
|                    |                                                                |                                                                 |
| Theodore T. Mason       | C                                                                   | E                                                                    |
|                    |                                                                |                                                                 |
| Anne J. Mills           | C                                                                   | D                                                                    |
|                    |                                                                |                                                                 |
| John J. Partridge       | C                                                                   | E                                                                    |
|                    |                                                                |                                                                 |
| James R. Ramsey         | E                                                                   | E                                                                    |
|                    |                                                                |                                                                 |
| Laureen L. White        | B                                                                   | B                                                                    |
|                    |                                                                |                                                                 |
|                    |                                                                |                                                                 |

| Name                  | Compensation from the Fund | Compensation from all funds in the Aquila Group of Funds | Number of boards on which the Trustee serves |
|-----------------------|----------------------------|----------------------------------------------------------|----------------------------------------------|
|                  |                       |                                                     |                                         |
| Thomas A. Christopher | $22,442                    | $102,500                                                 | 5                                            |
| David A. Duffy        | $11,250                    | $28,500                                                  | 2                                            |
| Theodore T. Mason     | $11,185                    | $140,250                                                 | 9                                            |
| Anne J. Mills         | $13,200                    | $74,000                                                  | 5                                            |
| John J. Partridge     | $11,333                    | $41,000                                                  | 5                                            |
| James R. Ramsey       | $14,250                    | $28,500                                                  | 2                                            |
| Laureen L. White      | $11,000                    | $25,500                                                  | 2                                            |
|                  |                       |                                                     |                                         |

| Name and address of theholder of record                                          | Number of shares                    | Percent of class |
|----------------------------------------------------------------------------------|-------------------------------------|------------------|
|                                                                             |                                |             |
| Institutional 5% shareholders                                                    |                                |             |
|                                                                             |                                |             |
| NFS LLC FEBOc/o Stock Yards Bank200 S. 5th StreetLouisville, KY             | 2,520,875 Class A Shares            | 14.24%           |
| Vallee & Co. FBO SGC/O M&I Trust Co.11270 W. Park Pl.Milwaukee, WI  | 2,096,167  Class Y Shares | 58.73%           |
| Bankdanc/o Kentucky Trust Company218 W. Main StreetDanville, KY             | 475,311 Class Y Shares              | 13.32%           |
| Danky & Co.P.O. Box 28Danville, KY                                      | 359,198 Class Y Shares              | 10.06%           |
| Pershing LLCP.O. Box 2052Jersey City, NJ                                    | 670,858 Class I Shares              | 92.64%           |
| Additional 5% shareholders                                                       |                                |             |

| 2010   | $1,022,782                 |
|--------|----------------------------|
|   |                       |
| 2009   | $   956,137 |
|   |                       |
| 2008   | $   956,228 |

|   | Sales Charges | Retained by Distributor |
|--------|---------------|-------------------------|
|   |          |                    |
| 2010   | $277,793      | $26,548            |
| 2009   | $238,343      | $19,822            |
| 2008   | $131,646      | $15,125            |

| Amount of Purchase Plus Value of All Other Shares Held by a Single Purchaser | Sales Charge as Percentage of Public Offering Price | Commissions as Percentage of Offering Price |
|------------------------------------------------------------------------------|-----------------------------------------------------|---------------------------------------------|
|                                                                         |                                                |                                        |
| Less than $25,000                                                            | 4.00%                                               | 3.50%                                       |
| $25,000 but less than $50,000                                                | 3.75%                                               | 3.50%                                       |
| $50,000 but less than $100,000                                               | 3.50%                                               | 3.25%                                       |
| $100,000 but less than $250,000                                              | 3.25%                                               | 3.00%                                       |
| $250,000 but less than $500,000                                              | 3.00%                                               | 2.75%                                       |
| $500,000 but less than $1,000,000                                            | 2.50%                                               | 2.25%                                       |

|     | To Qualified Recipients                                                         | To Distributor                                                                         | To Other Qualified Recipients                                             |
|----------|---------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|---------------------------------------------------------------------------|
|     |                                                                            |                                                                                   |                                                                      |
| Part I   | $          297,723            | $      11,094                                            | $         286,629            |
| Part II  | $            46,855 | $       6,591                                       | $           40,264 |
| Part III | $            16,170 | $              0 | $           16,170 |

|   | * Front-Payment Class Shares (“Class A Shares”) are offered to investors at net asset value plus a sales charge, paid at the time of purchase, at the maximum rate of 4.0% of the public offering price, with lower rates for larger purchases including previous purchases of shares of any class of any of the funds in the Aquila Group of Funds. There is no sales charge on purchases of $1 million or more, but redemptions of shares so purchased are generally subject to a contingent deferred sales charge (“CDSC”). Class A Shares are subject to a fee under the Fund’s Distribution Plan at the rate of 0.15 of 1% of the average annual net assets represented by the Class A Shares. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | * Level-Payment Class Shares (“Class C Shares”) are offered to investors at net asset value with no sales charge payable at the time of purchase but with a level charge for service and distribution fees for six years after the date of purchase at the aggregate annual rate of 1% of the average annual net assets of the Class C Shares. Six years after the date of purchase, Class C Shares are automatically converted to Class A Shares. If you redeem Class C Shares before you have held them for 12 months from the date of purchase you will pay a CDSC; this charge is 1%, calculated on the net asset value of the Class C Shares at the time of purchase or at redemption, whichever is less. There is no CDSC after Class C Shares have been held beyond the applicable period. For purposes of applying the CDSC and determining the time of conversion, the 12-month and six-year holding periods are considered modified by up to one month depending upon when during a month your purchase of such shares is made. Class C Shares are subject to a fee under the Fund’s Distribution Plan at the rate of 0.75 of 1% of the average annual net assets represented by the Class C Shares and a service fee of 0.25 of 1% of such assets. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *Institutional Class Shares (“Class Y Shares”) are offered and sold only through institutions acting for investors in a fiduciary, advisory, agency, custodial or similar capacity, and are not offered directly to retail customers. Class Y Shares are offered at net asset value with no sales charge, no redemption fee, no contingent deferred sales charge and no distribution fee. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *Financial Intermediary Class Shares (“Class I Shares”) are offered and sold only through financial intermediaries with which Aquila Distributors, Inc. has entered into sales agreements, and are not offered directly to retail customers. Class I Shares are offered at net asset value with no sales charge and no redemption fee or contingent deferred sales charge, although a financial intermediary may charge a fee for effecting a purchase or other transaction on behalf of its customers. Class I Shares may carry a distribution fee of up to 0.25 of 1% of average annual net assets allocable to Class I Shares, currently up to 0.15 of 1% of such net assets, and a service fee of up to 0.25 of 1% of such assets. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (i)   | Class A Shares issued in a single purchase of $1 million or more by a single purchaser; and |
|-----------------|---------------------------------------------------------------------------------------------|

| (ii)   | Class A Shares issued when the value of the purchase, together with the value (based on purchase cost or current net asset value, whichever is higher) of shares of the Fund or any other fund in the Aquila Group of Funds that are owned by the purchaser, is $1 million or more. |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  Value of Holdings At the Time of Purchase | CDSC You will Pay on Redemption              | Commission Paid to Broker/Dealer        |
|-------------------------------------------------|----------------------------------------------|-----------------------------------------|
|                                            |                                         |                                    |
| $1 million and up to $2.5 million          | 1% in years 1 & 2None               | 1%0.50% in 2 paymentsover 2 years  |
|                                            |                                         |                                    |
| Over $2.5 million and up to $5 million          | 0.50 of 1% in year 10.25 of 1% in year 2None | 0.50%0.25% in 2 paymentsover 2 years    |
|                                            |                                         |                                    |
| Over $5 million                                 | None                                         | 0.25%                                   |

| Amount of Purchase                    | Amount Distributed to Broker/Dealer as a Percentage of Purchase Price |
|---------------------------------------|-----------------------------------------------------------------------|
|                                  |                                                                  |
| $1 million but less than $2.5 million | 1%                                                                    |
|                                  |                                                                  |
| 2.5 million but less than $5 million  | 0.50 of 1%                                                            |
|                                  |                                                                  |
| 5 million or more                     | 0.25 of 1%                                                            |

|   | * | current and former Trustees and officers of any funds in the Aquila Group of Funds, |
|--------|---|-------------------------------------------------------------------------------------|

|   | * | the directors, managers, officers and certain employees, former employees and representatives of the Manager, the Distributor, and the sub-adviser of any fund in the Aquila Group of Funds and the parents and/or affiliates of such companies, |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | * | selected broker dealers, their officers and employees and other investment professionals, |
|--------|---|-------------------------------------------------------------------------------------------|

|   | * | certain persons connected with firms providing legal, advertising or public relations assistance, |
|--------|---|---------------------------------------------------------------------------------------------------|

|   | * | plans for the benefit of trust or similar clients of banking institutions over which these institutions have full investment authority, if the Distributor has an agreement relating to such purchases. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | satisfies uniform criteria which enable the Distributor to realize economies of scale in its costs of distributing shares; |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------|

|   |  (ii) | gives its endorsement or authorization (if it is a group or association) to an investment program to facilitate solicitation of its membership by a broker or dealer; and |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | complies with the conditions of purchase that make up an agreement between the Fund and the group, representative or broker or dealer. |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | assistance in training and educating the financial advisor’s personnel; |
|--------------------|-------------------------------------------------------------------------------|

| ·   | participation in the financial advisor’s conferences and meetings; |
|--------------------|--------------------------------------------------------------------------|

| ·   | advertising of the Fund’s shares; |
|--------------------|-----------------------------------------|

| ·   | payment of travel expenses, including lodging, for attendance at sales seminars by qualifying registered representatives; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------|

| ·   | other incentives or financial assistance to financial advisors in connection with promotional, training or educational seminars or conferences; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | shareholder appreciation events; |
|--------------------|----------------------------------|

| ·   | exhibit space or sponsorships at regional or national events of financial intermediaries; |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | participation in special financial advisor programs; |
|--------------------|------------------------------------------------------|

| ·   | continued availability of the Fund’s shares through the financial advisor’s automated trading platform; |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | access to the financial advisor’s sales representatives and national sales management personnel by the Distributor or Fund representatives; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | inclusion of the Fund and/or the Aquila Group of Funds on preferred or recommended sales lists; and |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | other comparable expenses at the discretion of the Distributor. |
|--------------------|-----------------------------------------------------------------|

|   | 1. | Interactive Data Pricing and Reference Data, Inc. (pricing services) on a daily basis with no lag; |
|--------|----|----------------------------------------------------------------------------------------------------|

|   | 2. | Tait, Weller & Baker LLP, its independent registered public accounting firm, as soon as practicable following the Fund's fiscal year-end and on an as-needed basis; and |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. | Fitch, its financial printer, as soon as practicable following each fiscal quarter-end. |
|--------|----|-----------------------------------------------------------------------------------------|

| Name of Principal Underwriter                                                                            | Net Underwriting Discounts and Commissions | Compensation on Redemptions and Repurchases | Brokerage Commissions | Other Compensation |
|----------------------------------------------------------------------------------------------------------|--------------------------------------------|---------------------------------------------|-----------------------|--------------------|
|                                                                                                     |                                       |                                        |                  |               |
| Aquila Distributors Inc.                                                                            | $26,548                                    | None                                        | None                  | None(*)       |
| (*) Amounts paid to the Distributor under the Fund’s Distribution Plan are for compensation.  |

| I.     | Likelihood of default - capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation;                                                                                                                                                                                               |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                          |
| II.    | Nature of and provisions of the obligation;                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                          |
| III.   | Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization or other arrangement under the laws of bankruptcy and other laws affecting creditors rights.                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                          |
| AAA    | Debt rated “AAA” has the highest rating assigned by Standard & Poor’s. Capacity to pay interest and repay principal is extremely strong.                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                          |
| AA     | Debt rated “AA” has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree.                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                          |
| A      | Debt rated “A” has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                          |
| BBB    | Debt rated “BBB” is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. |

| Aaa    | Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edge”. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.           |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Aa     | Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| A      | Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future.                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Baa    | Bonds which are rated Baa are considered as medium grade obligations; i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.                              |

| MIG1/VMIG1 | This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support or demonstrated broad-based access to the market for refinancing. |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |                                                                                                                                                                                                              |
| MIG2/VMIG2 | This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.                                                                                 |
|       |                                                                                                                                                                                                              |
| MIG3/VMIG3 | This designation denotes acceptable credit quality. Liquidity and cash flow protection may be narrow, and market access for refinancing is likely to be less well established.                                    |

| AAA    | Bonds rated AAA are of the highest credit quality, with exceptionally strong protection for the timely repayment of principal and interest.                                                                                                                                 |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                        |
| AA     | Bonds rated AA are of superior credit quality, and protection of interest and principal is considered high.                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                        |
| A      | Bonds rated A are of satisfactory credit quality.  Protection of interest and principal is still substantial, but the degree of strength is less than with AA rated entities.                                                                                     |
|   |                                                                                                                                                                                                                                                                        |
| BBB    | Bonds rated BBB are of adequate credit quality.                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                        |
| BB     | Bonds rated BB are defined to be speculative, where the degree of protection afforded interest and principal is uncertain, particularly during periods of economic recession.                                                                                               |
|   |                                                                                                                                                                                                                                                                        |
| B      | Bonds rated B are highly speculative and there is a reasonably high level of uncertainty which exists as to the ability of the entity to pay interest and principal on a continuing basis in the future, especially in periods of economic recession or industry adversity. |

| AAA    | Highest credit quality. ‘AAA’ ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.                                                             |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                      |
| AA     | Very high credit quality. ‘AA’ ratings denote a very low expectation of credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                      |
| A      | High credit quality. ‘A’ ratings denote a low expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.                                       |
|   |                                                                                                                                                                                                                                                                                                                                                      |
| BBB    | Good credit quality. ‘BBB’ ratings indicate that there is currently a low expectation of credit risk. The capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. This is the lowest investment-grade category. |
|   |                                                                                                                                                                                                                                                                                                                                                      |

| F1     | Highest credit quality. Indicates the strongest capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                       |
| F2     | Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings.                   |
|   |                                                                                                                                                                                       |
| F3     | Fair credit quality. The capacity for timely payment of financial commitments is adequate; however, near-term adverse changes could result in a reduction to non-investment grade.         |
|   |                                                                                                                                                                                       |