UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act file number 811-5086

Churchill Tax-Free Trust
(Exact name of Registrant as specified in charter)

380 Madison Avenue
New York, New York 10017
(Address of principal executive offices) (Zip code)

Joseph P. DiMaggio
380 Madison Avenue
New York, New York 10017
(Name and address of agent for service)

Registrant's telephone number, including area code: (212) 697-6666

Date of fiscal year end: 12/31

Date of reporting period: 12/31/05

FORM N-CSR

ITEM 1. REPORTS TO STOCKHOLDERS.

ANNUAL
REPORT

DECEMBER 31, 2005

CHURCHILL
TAX-FREE FUND OF
KENTUCKY

A TAX-FREE INCOME INVESTMENT

[LOGO OF THE CHURCHILL TAX-FREE FUND OF KENTUCKY:
A STANDING PEGASUS IN A CIRCLE]

[LOGO OF THE AQUILA
GROUP OF FUNDS: ONE OF THE
AN EAGLE'S HEAD] AQUILA(SM) GROUP OF FUNDS

[LOGO OF THE CHURCHILL TAX-FREE FUND OF KENTUCKY:
A STANDING PEGASUS IN A CIRCLE]

SERVING KENTUCKY INVESTORS FOR ALMOST TWO DECADES

CHURCHILL TAX-FREE FUND OF KENTUCKY

"THE BENEFITS OF TAX-FREE INVESTING"

February, 2006

Dear Fellow Shareholder:

As the name of your fund clearly states, Churchill Tax-Free Fund of
Kentucky is tax-free* - free from Kentucky state and regular Federal income
taxes.

This tax-free status serves many purposes. It obviously provides you, and
our other shareholders, with tax-free income. But, it also provides
municipalities with an attractive motivator to help them raise revenue.
Additionally, the projects funded by these tax-free securities enhance the
quality of life for all community residents.

Many individuals pay as much as 30% to 40% of their income in Federal and
state taxes. Obviously, if you have to pay that much in taxes, it significantly
reduces what you get to keep in your pocket.

BENEFITS TO INVESTORS

As an investor seeking tax-free income, do you have to forego higher
yields? Not necessarily.

[BAR CHART]

Hypothetical Tax-Free Yield 3%
Hypothetical Taxable Equivalent Yield 5.0%

Hypothetical Tax-Free Yield 4%
Hypothetical Taxable Equivalent Yield 6.6%

Hypothetical Tax-Free Yield 5%
Hypothetical Taxable Equivalent Yield 8.8%

This chart assumes a 35% federal and 6% state tax-rate
and is for illustration purposes only; it does not
represent past or future performance of any investment.

The chart above shows that you would have to earn significantly more from
a taxable investment in order to be equal to what you get to keep from a
tax-free investment.

As you can clearly see from the chart, you would have to earn 6.6% on a
taxable investment in order to equal the tax-free level of 4%.

Keep this illustration in mind the next time you examine the yield that
Churchill Tax-Free Fund of Kentucky offers you. You will find that a 3%, 4% or
5% tax-free yield looks considerably more attractive to you when you consider
the implications of taxes.

NOT A PART OF THE ANNUAL REPORT

BENEFITS TO MUNICIPALITIES

As you are most likely aware, states, counties, cities, towns, and other
forms of municipalities issue tax-free bonds to raise monies. These issues
generally take two forms - general obligation securities and revenue securities.

General obligation municipal securities are primarily those securities
used to finance the general needs of such municipalities. General obligation
securities are secured by the tax-raising power of the specific municipality in
terms of its ability to pay interest and repay principal on a timely basis.
Thus, these securities are considered to be "backed by the full faith and
credit" of the issuer.

Revenue securities are issued to finance specific projects, such as a
hospital or airport. In this instance, the municipal issuer pledges the
operating revenues derived from the specific project to pay the interest and
repay the principal when due.

In many cases, smaller municipalities would have difficulty selling these
securities to the marketplace were it not for the added attractiveness of
tax-free status.

BENEFITS TO QUALITY OF LIFE

The benefit you may not have considered - when you made your investment in
the Fund - was that in the process of having the Fund provide you with tax-free
income, it also provides help to a variety of others within your community and
Kentucky. This is a benefit in which you can take real pride.

Municipal bonds, such as those in which Churchill Tax-Free Fund of
Kentucky invests, are the primary way infrastructure is financed. Infrastructure
is a relatively obscure word that by itself doesn't mean much to most people.
But, when you translate the word "infrastructure" into projects such as schools,
roads, bridges, water facilities, pollution control, airports, hospitals, and
fire and police stations, then you are speaking in terms that people more easily
understand.

As the economy of Kentucky grows, new and additional municipal projects
are needed for the benefit of the citizens of Kentucky and the various
communities throughout the Commonwealth. In essence, your money invested in the
Fund helps pay for that new school, road, airport, etc. that you and your
neighbors now enjoy. So, as an investor in Churchill Tax-Free Fund of Kentucky,
you can take pride in knowing that you are playing a vital role and a very real
part in enhancing the quality of life for your family, friends, neighbors and
future generations of Kentuckians.

SUMMARY

So the next time that you receive your statement from Churchill Tax-Free
Fund of Kentucky, remember that the benefits that are reaped from your
investment are more than just what is evident on that piece of paper.

Sincerely,

/s/ Diana P. Herrmann /s/ Lacy B. Herrmann

Diana P. Herrmann Lacy B. Herrmann
President Founder and Chairman Emeritus

* For certain investors, some dividends may be subject to Federal and State
taxes, including the Alternative Minimum Tax.

NOT A PART OF THE ANNUAL REPORT

[LOGO OF THE CHURCHILL TAX-FREE FUND OF KENTUCKY:
A STANDING PEGASUS IN A CIRCLE]

SERVING KENTUCKY INVESTORS FOR MORE THAN 15 YEARS

CHURCHILL TAX-FREE FUND OF KENTUCKY

ANNUAL REPORT

MANAGEMENT DISCUSSION OF FUND PERFORMANCE

The year ended December 31, 2005 proved to be a bit of an enigma that
challenged our long-held perception of how markets are supposed to perform.
Throughout 2005, the Federal Reserve continued to raise short-term interest
rates - from 2.25% in January to 4.25% in December. Traditionally, we have come
to expect a corresponding mirror reaction at the longer end of the yield curve:
short rates going up = long rates going up. Instead, due to a number of
technical factors, we saw long-term interest rates actually decline.

From December 31, 2004 to December 31, 2005, we saw short-term rates rise
a full percentage point (100 basis points on a typical AAA-rated 2 year
municipal bond). Over the same time period, we saw long-term rates decline 22
basis points (on a typical AAA-rated 30-year municipal bond). Demand for longer
maturity bonds has been especially strong from cash-rich foreign central banks.
And inflation, a bond's greatest nemesis, stayed somewhat "manageable" - except
for energy costs. Overall, inflation rose 3.4% in 2005 as measured by the
Consumer Price Index. The national unemployment rate ended the year at an annual
rate of 4.9%, a nice improvement versus last December's rate of 5.4%.

As the Gulf Coast states were ravaged time and again by a record number of
hurricanes, the price of oil rose to all time present day high levels,
approaching $70 a barrel. Natural gas and heating oil prices also surged - thank
goodness for a relatively mild winter- so far. Overall, energy prices rose a
staggering 17% in 2005.

The year 2005 was one in which both bonds and stocks provided relatively
modest returns. The past 12 months marked a period when stock market returns
were slightly positive. The Dow Jones Industrial Average rose 1.72%. Other
measures of equity performance fared a little better: the S & P 500 closed up
4.91%; and the NASDAQ Composite Index rose 2.13%. We are proud to report that
Churchill Tax-Free Fund of Kentucky provided its shareholders a positive total
rate of return of 2.39% in 2005, outperforming 64% of our peer group of all
intermediate single-state municipal bond funds.

As we begin 2006, it too promises to be every bit as eventful as was 2005,
with the United States working towards a more peaceful, democratic Iraq; the
rebuilding of New Orleans and other areas of Louisiana, Alabama, and Mississippi
after the devastation caused by a catastrophic series of hurricanes; and the
usual, ongoing partisan political wrangling in Washington.

2005 was a pretty good year for the Kentucky economy, overall. Modest
employment gains in the manufacturing sector were well received. Tax revenues,
as measured by the General Fund, are also on the rise.

For 2006, Governor Fletcher has embarked on his quest to come up with an
acceptable budget for the Commonwealth. The budgeting process from prior years
has been streamlined and we are

hopeful that a bipartisan plan will soon be presented, debated, and enacted in
short order! Kentucky municipal bonds continue to be in somewhat short supply,
due in large part to continued strong retail and institutional demand.

The investment objective of Churchill Tax-Free Fund of Kentucky is to
provide as high a level of triple tax-exempt current income as is consistent
with the preservation of capital. We believe this objective continues to be
successfully addressed by adhering to a discipline of solid fundamental,
conservative portfolio management ideals. The net asset value of the Fund's
Class A shares began 2005 at $10.74 per share and ended the year at $10.60 per
share. The Fund continues to maintain an average credit quality of "AA", with no
bonds rated less than "A". At year-end, nearly 80% of the portfolio was rated
"AAA". Our "laddered" maturity structure helps us manage price volatility. The
Fund has an average life of approximately 12.5 years and a modified duration of
approximately 5.35 years. We maintain a well-diversified portfolio of over 200
different Kentucky issues.

We are optimistic about the prospects for the U. S. and Kentucky economies
in 2006, and will strive to continue to react appropriately to any signs of
rising inflation. It is going to take continued vigilance and, if necessary,
intervention by the Federal Reserve to keep our economy on a positive track
while addressing inflation pressures over the course of 2006. To address these
concerns, we intend to "stay the course" and manage the portfolio by taking
advantage of opportunities in the Kentucky marketplace that are consistent with
the investment objectives of the Fund.

PERFORMANCE REPORT

The following graph illustrates the value of $10,000 invested in the Class
A shares of Churchill Tax-Free Fund of Kentucky for the 10-year period ended
December 31, 2005 as compared with the Lehman Brothers Quality Intermediate
Municipal Bond Index and the Consumer Price Index (a cost of living index). The
performance of each of the other classes is not shown in the graph but is
included in the table below. It should be noted that the Lehman Index does not
include any operating expenses nor sales charges and being nationally oriented,
does not reflect state specific bond market performance.

[GRAPHIC OF A LINE CHART WITH THE FOLLOWING INFORMATION:]

Cost Without With Lehman Brothers
of Sales Sales Quality Intermediate
Month/Year Living Charge Charge Municipal Bond Index
- ----------- ------ -------- ---------- ------------
December-95 $10,000 $10,000 $ 9,600 $10,000
December-96 10,332 10,429 10,008 10,427
December-97 10,508 11,249 10,795 11,190
December-98 10,678 11,820 11,343 11,861
December-99 10,964 11,642 11,172 11,896
December-00 11,336 12,613 12,104 12,922
December-01 11,511 13,123 12,594 13,635
December-02 11,785 14,140 13,570 14,894
December-03 12,007 14,847 14,249 15,585
December-04 12,397 15,520 14,894 16,055
December-05 12,821 15,899 15,258 16,322

AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED DECEMBER 31, 2005
---------------------------------------
SINCE
CLASS AND INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS INCEPTION
------ ------- -------- ---------
Class A (5/21/87)
With Sales Charge ......... (1.75)% 3.85% 4.32% 6.00%
Without Sales Charge ...... 2.39% 4.69% 4.75% 6.23%

Class C (4/01/96)
With CDSC ................. 0.51% 3.81% n/a 4.10%
Without CDSC .............. 1.53% 3.81% n/a 4.10%

Class Y (4/01/96)
No Sales Charge ........... 2.55% 4.87% n/a 5.13%

Class I (8/06/01)
No Sales Charge ........... 2.24% n/a n/a 4.38%

COMPARATIVE INDEX

Lehman Index ................ 1.66% 4.78% 5.02% 6.09% (Class A)
5.17% (Class C&Y)
4.40% (Class I)

Total return figures shown for the Fund reflect any change in price and assume
all distributions within the period were invested in additional shares. Returns
for Class A shares are calculated with and without the effect of the initial 4%
maximum sales charge. Returns for Class C shares are calculated with and without
the effect of the 1% contingent deferred sales charge (CDSC), imposed on
redemptions made within the first 12 months after purchase. Class I and Y shares
are sold without any sales charge. The rates of return will vary and the
principal value of an investment will fluctuate with market conditions. Shares,
if redeemed, may be worth more or less than their original cost. A portion of
each class's income may be subject to federal and state income taxes. Past
performance is not predictive of future investment results.

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Shareholders of
Churchill Tax-Free Fund of Kentucky:

We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Churchill Tax-Free Fund of Kentucky as
of December 31, 2005 and the related statement of operations, changes in net
assets, and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
in net assets for the year ended December 31, 2004 and the financial highlights
for each of the years in the four year period ended December 31, 2004 have been
audited by other auditors, whose report dated February 18, 2005 expressed an
unqualified opinion on such financial statement and financial highlights.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
We were not engaged to perform an audit of the Fund's internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 2005, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Churchill Tax-Free Fund of Kentucky as of December 31, 2005, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.

TAIT, WELLER & BAKER LLP

Philadelphia, Pennsylvania
February 16, 2006

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

CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2005

RATING
FACE MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (3.4%) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------

Bowling Green, Kentucky
$ 200,000 5.300%, 06/01/18 ................................... Aa3/NR $ 215,440
Hardin County, Kentucky
170,000 5.000%, 06/01/17 AMBAC Insured ..................... Aaa/NR 176,732
Lexington-Fayette Urban County Government, Kentucky
2,000,000 4.750%, 05/01/24 FGIC Insured ...................... Aaa/AAA 2,047,080
Lexington-Fayette Urban County, Kentucky
Government Project Unlimited Tax
125,000 5.000%, 12/01/15 ................................... Aa2/AA+ 132,172
340,000 5.150%, 12/01/17 ................................... Aa2/AA+ 362,552
Louisville - Jefferson County, Kentucky Metro
Government Unlimited Tax
1,590,000 5.000%, 11/01/19 ................................... Aa2/AA 1,709,584
1,825,000 5.000%, 11/01/20 ................................... Aa2/AA 1,955,232
Louisville, Kentucky Unlimited Tax
2,205,000 5.000%, 10/01/21 FGIC Insured ...................... Aaa/AAA 2,316,705
Warren County, Kentucky Judicial Unlimited Tax
345,000 5.100%, 09/01/17 AMBAC Insured ..................... Aaa/NR 372,048
365,000 5.150%, 09/01/18 AMBAC Insured ..................... Aaa/NR 394,277
-------------
Total General Obligation Bonds 9,681,822
-------------

REVENUE BONDS (95.6%)

STATE AGENCIES (34.5%)
Kentucky Area Development District Financing
500,000 5.000%, 12/01/23 LOC Wachovia Bank ................. NR/AA 523,670
Kentucky Asset/Liability Commission
500,000 4.500%, 10/01/22 FGIC Insured ...................... Aaa/AAA 509,055
Kentucky Infrastructure Authority
1,000,000 5.250%, 06/01/12 ................................... Aa3/A+ 1,075,270
635,000 5.250%, 06/01/12 ................................... Aa3/A+ 656,228
2,740,000 5.250%, 06/01/14 ................................... Aa3/A+ 2,937,938
1,235,000 5.250%, 08/01/17 ................................... NR/AA 1,348,879
100,000 5.000%, 06/01/18 ................................... Aa3/A+ 105,211
230,000 5.000%, 06/01/21 ................................... Aa3/A+ 241,300
220,000 6.000%, 09/01/08 ................................... Aa3/A+ 234,454
Kentucky State Property and Buildings Commission
4,000,000 5.375%, 02/01/14 FSA Insured (pre-refunded) ........ Aaa/AAA 4,393,200
400,000 5.250%, 10/01/14 (pre-refunded) .................... Aa3/A+ 431,752

RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------

STATE AGENCIES (CONTINUED)
Kentucky State Property and
Buildings Commission (continued)
$ 3,250,000 5.625%, 09/01/15 (pre-refunded) .................... Aa3/A+ $ 3,555,858
460,000 5.125%, 09/01/15 (pre-refunded) .................... Aa3/AAA 493,470
1,000,000 5.000%, 11/01/15 AMBAC Insured ..................... Aaa/AAA 1,080,490
100,000 5.375%, 05/01/16 MBIA Insured (pre-refunded) ....... Aaa/AAA 107,092
3,775,000 5.375%, 08/01/16 (pre-refunded) .................... Aaa/AAA 4,126,415
2,725,000 5.375%, 08/01/16 FSA Insured ....................... Aaa/AAA 2,945,725
3,905,000 5.125%, 09/01/16 (pre-refunded) .................... Aa3/AAA 4,189,128
5,000,000 5.250%, 10/01/16 ................................... Aa3/A+ 5,360,800
1,100,000 5.000%, 11/01/16 AMBAC Insured ..................... Aaa/AAA 1,184,689
1,265,000 5.250%, 08/01/17 MBIA Insured (pre-refunded) ....... Aaa/AAA 1,395,181
975,000 5.000%, 08/01/17 FSA Insured ....................... Aaa/AAA 1,024,735
8,155,000 5.125%, 09/01/17 (pre-refunded) .................... Aa3/AAA 8,748,358
200,000 5.375%, 10/01/17 MBIA Insured (pre-refunded) ....... Aaa/AAA 219,116
4,735,000 5.250%, 10/01/17 ................................... Aa3/A+ 5,065,030
1,250,000 5.500%, 11/01/17 FSA Insured ....................... Aaa/AAA 1,382,913
1,000,000 5.000%, 11/01/17 AMBAC Insured ..................... Aaa/AAA 1,072,100
165,000 5.375%, 02/01/18 FSA Insured (pre-refunded) ........ Aaa/AAA 181,219
3,030,000 5.000%, 08/01/18 FSA Insured (pre-refunded) ........ Aaa/AAA 3,255,038
3,950,000 5.125%, 09/01/18 (pre-refunded) .................... Aa3/AAA 4,228,633
6,000,000 5.250%, 10/01/18 ................................... Aa3/A+ 6,403,500
1,000,000 5.500%, 11/01/18 FSA Insured ....................... Aaa/AAA 1,106,330
155,000 5.100%, 11/01/18 FSA Insured ....................... Aaa/AAA 165,847
145,000 5.100%, 11/01/18 (pre-refunded) .................... Aa3/AAA 153,598
1,500,000 5.000%, 11/01/18 AMBAC Insured ..................... Aaa/AAA 1,602,930
4,000,000 5.375%, 10/01/19 MBIA Insured (pre-refunded) ....... Aaa/AAA 4,382,320
1,925,000 5.000%, 10/01/19 ................................... Aa3/A+ 2,018,767
360,000 5.000%, 10/01/19 MBIA Insured (pre-refunded) ....... Aaa/AAA 387,450
785,000 5.150%, 11/01/19 FSA Insured ....................... Aaa/AAA 843,239
3,000,000 5.000%, 11/01/19 FSA Insured ....................... Aaa/AAA 3,177,420
2,000,000 5.750%, 05/01/20 MBIA Insured (pre-refunded) ....... Aaa/AAA 2,183,980
250,000 5.000%, 05/01/20 FSA Insured ....................... Aaa/AAA 261,377
200,000 5.000%, 08/01/21 FSA Insured (pre-refunded) ........ Aaa/AAA 214,854
270,000 5.100%, 10/01/21 MBIA Insured (pre-refunded) ....... Aaa/AAA 291,978
255,000 5.150%, 02/01/22 FSA Insured (pre-refunded) ........ Aaa/AAA 276,958

RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------

STATE AGENCIES (CONTINUED)
Kentucky State Property and
Buildings Commission (continued)
$ 5,000,000 5.000%, 10/01/22 MBIA Insured (pre-refunded) ....... Aaa/AAA $ 5,440,700
235,000 5.000%, 08/01/23 MBIA Insured (pre-refunded) ....... Aaa/AAA 255,332
80,000 5.000%, 08/01/23 MBIA Insured (pre-refunded) ....... Aaa/AAA 86,922
Kentucky State Property Buildings Community Revenues
7,200,000 5.000%, 08/01/21 FSA Insured ....................... Aaa/AAA 7,690,896
-------------
Total State Agencies 99,017,345
-------------

COUNTY AGENCIES (6.5%)
Jefferson County, Kentucky Capital Projects
430,000 5.200%, 06/01/12 MBIA Insured ...................... Aaa/AAA 449,208
570,000 5.250%, 06/01/13 MBIA Insured ...................... Aaa/AAA 595,451
520,000 5.250%, 06/01/14 MBIA Insured ...................... Aaa/AAA 543,218
3,370,000 5.375%, 06/01/18 MBIA Insured ...................... Aaa/AAA 3,526,200
1,640,000 5.375%, 06/01/22 MBIA Insured ...................... Aaa/AAA 1,713,702
5,935,000 5.500%, 06/01/28 MBIA Insured ...................... Aaa/AAA 6,211,749
Nelson County, Kentucky Court Facilities
Project Revenue
185,000 5.000%, 06/01/21 ................................... Aa3/NR 194,502
Warren County, Kentucky Justice Center
1,580,000 5.250%, 09/01/17 MBIA Insured ...................... Aaa/AAA 1,660,422
Warren County, Kentucky Justice Center Expansion
Corp. Revenue
700,000 5.400%, 09/01/24 ................................... Aa3/NR 761,355
2,895,000 5.350%, 09/01/29 MBIA Insured ...................... Aaa/AAA 3,046,988
-------------
Total County Agencies 18,702,795
-------------

CITY/MUNICIPALITY OBLIGATIONS (0.9%)
Jeffersontown, Kentucky Public Project Corp.
500,000 5.750%, 11/01/15 ................................... A3/NR 519,690
Lexington-Fayette Urban County Government,
Kentucky Public Facilities Revenue
180,000 5.125%, 10/01/23 FSA Insured ....................... Aaa/AAA 189,909
Louisville, Kentucky Parking Authority
1,140,000 5.000%, 12/01/14 MBIA Insured ...................... Aaa/AAA 1,190,833
Shelbyville, Kentucky Certificates of Participation
625,000 5.000%, 10/01/22 ................................... A2/NR 653,669
-------------
Total City/Municipality Obligations 2,554,101
-------------

RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------

HOSPITALS (3.4%)
Jefferson County, Kentucky Health Facilities Revenue
$ 240,000 5.000%, 10/01/12 MBIA Insured ...................... Aaa/AAA $ 250,051
1,715,000 5.650%, 01/01/17 AMBAC Insured ..................... Aaa/AAA 1,783,326
2,200,000 5.250%, 05/01/17 ................................... NR/A 2,331,384
815,000 5.125%, 10/01/17 AMBAC Insured ETM ................. Aaa/AAA 844,079
125,000 5.750%, 01/01/26 AMBAC Insured ..................... Aaa/AAA 130,037
Jefferson County, Kentucky Revenue Medical
Center Revenue
2,000,000 5.500%, 05/01/22 ................................... NR/A 2,149,080
Kentucky Economic Development Finance Authority
1,000,000 5.000%, 02/01/18 FSA Insured ....................... Aaa/AAA 1,028,870
Louisville - Jefferson County, Kentucky Medical
Center Revenue
1,000,000 5.000%, 06/01/18 ................................... NR/A 1,067,070
-------------
Total Hospitals 9,583,897
-------------

HOUSING (8.2%)
Kentucky Housing Corp. Housing Revenue
250,000 4.100%, 01/01/15 AMT ............................... Aaa/AAA 248,882
170,000 4.100%, 07/01/15 AMT ............................... Aaa/AAA 169,206
210,000 4.300%, 01/01/16 AMT ............................... Aaa/AAA 211,527
200,000 4.200%, 01/01/16 AMT ............................... Aaa/AAA 199,402
610,000 4.300%, 07/01/16 AMT ............................... Aaa/AAA 604,461
550,000 4.200%, 07/01/16 AMT ............................... Aaa/AAA 548,289
555,000 4.200%, 01/01/17 ................................... Aaa/AAA 553,546
100,000 5.125%, 07/01/17 ................................... Aaa/AAA 102,355
680,000 4.200%, 07/01/17 ................................... Aaa/AAA 678,157
285,000 4.250%, 01/01/18 ................................... Aaa/AAA 283,940
95,000 5.550%, 07/01/18 AMT ............................... Aaa/AAA 95,000
180,000 4.250%, 07/01/18 ................................... Aaa/AAA 179,309
2,000,000 5.600%, 07/01/20 AMT ............................... Aaa/AAA 2,091,860
1,150,000 5.350%, 01/01/21 AMT ............................... Aaa/AAA 1,184,109
6,275,000 5.450%, 07/01/22 AMT ............................... Aaa/AAA 6,528,134
4,065,000 5.250%, 07/01/22 AMT ............................... Aaa/AAA 4,186,909
245,000 5.200%, 07/01/22 ................................... Aaa/AAA 251,715

RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------

HOUSING (CONTINUED)
Kentucky Housing Corp. Housing Revenue (continued)
$ 300,000 5.100%, 07/01/22 AMT ............................... Aaa/AAA $ 307,149
4,140,000 5.200%, 07/01/25 AMT ............................... Aaa/AAA 4,252,277
275,000 5.375%, 07/01/27 ................................... Aaa/AAA 283,866
570,000 5.550%, 07/01/33 ................................... Aaa/AAA 590,554
-------------
Total Housing 23,550,647
-------------

SCHOOLS (19.0%)
Beechwood, Kentucky Independent School
District Finance Corp.
180,000 5.650%, 03/01/20 ................................... Aa3/NR 193,786
Berea, Kentucky Educational Facilities Revenue
(Berea College)
1,000,000 4.125%, 06/01/25 ................................... Aaa/NR 975,810
Boone County, Kentucky School District Finance Corp.
1,730,000 4.125%, 08/01/22 XLCA Insured ...................... Aaa/NR 1,690,314
Boone County, Kentucky School District
Finance Corp. School Building
660,000 5.000%, 06/01/15 ................................... Aa3/NR 686,756
225,000 5.250%, 08/01/15 ................................... Aa3/NR 240,266
285,000 5.700%, 02/01/16 ................................... Aa3/NR 308,587
140,000 4.750%, 06/01/20 FSA Insured ....................... Aaa/AAA 145,156
1,000,000 5.375%, 08/01/20 FSA Insured ....................... AAA/NR 1,067,840
Boyd County, Kentucky School District Finance Corp.
1,025,000 5.000%, 10/01/15 ................................... Aa3/NR 1,079,797
575,000 5.375%, 10/01/17 ................................... Aa3/NR 603,830
Bullitt County, Kentucky School District Finance Corp.
200,000 4.300%, 10/01/21 ................................... Aaa/NR 201,730
2,455,000 4.500%, 10/01/22 MBIA Insured ...................... Aaa/NR 2,531,842
2,590,000 4.500%, 10/01/23 MBIA Insured ...................... Aaa/NR 2,665,291
Christian County, Kentucky School District Finance Corp.
500,000 5.000%, 06/01/09 ................................... Aa3/NR 521,115
820,000 4.000%, 08/01/19 XLCA Insured ...................... Aaa/NR 807,315
855,000 4.000%, 08/01/20 XLCA Insured ...................... Aaa/NR 837,396
905,000 4.000%, 08/01/21 XLCA Insured ...................... Aaa/NR 881,407

RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------

SCHOOLS (CONTINUED)
Christian County, Kentucky School District
Finance Corp. (continued)
$ 1,465,000 4.000%, 08/01/22 XLCA Insured ...................... Aaa/NR $ 1,418,325
1,525,000 4.125%, 08/01/23 XLCA Insured ...................... Aaa/NR 1,483,108
1,590,000 4.125%, 08/01/24 XLCA Insured ...................... Aaa/NR 1,536,830
Daviess County, Kentucky School District Finance Corp.
200,000 5.000%, 06/01/24 ................................... Aa3/NR 210,646
Fayette County, Kentucky School Building Revenue
200,000 5.125%, 04/01/18 AMBAC Insured ..................... Aaa/AAA 213,228
Fayette County, Kentucky School District Finance Corp.
5,000,000 4.250%, 04/01/23 FSA Insured ....................... Aaa/AAA 4,939,500
Floyd County, Kentucky School Building
250,000 5.000%, 12/01/09 ................................... Aa3/NR 263,945
680,000 4.375%, 10/01/22 ................................... Aa3/NR 688,847
Franklin County, Kentucky School District Finance Corp.
1,000,000 5.000%, 04/01/24 ................................... Aa3/NR 1,052,320
Graves County, Kentucky School Building Revenue
1,260,000 5.000%, 06/01/22 ................................... Aa3/NR 1,330,925
1,320,000 5.000%, 06/01/23 ................................... Aa3/NR 1,390,858
Hardin County, Kentucky School District Finance Corp.
100,000 5.500%, 02/01/17 (pre-refunded) .................... Aa3/NR 108,832
1,475,000 4.000%, 02/01/19 AMBAC Insured ..................... Aaa/NR 1,452,816
Hickman County, Kentucky School District Finance Corp.
School Building Revenue
250,000 5.000%, 06/01/24 ................................... Aa3/NR 263,308
Jefferson County, Kentucky School District Finance Corp.
School Building
750,000 5.300%, 01/01/13 FSA Insured ....................... Aaa/AAA 825,240
250,000 5.250%, 07/01/16 FSA Insured ....................... Aaa/AAA 265,450
150,000 9.500%, 04/01/20 FSA Insured ....................... Aaa/AAA 157,654
1,360,000 4.250%, 06/01/21 FSA Insured ....................... Aaa/AAA 1,362,040
Jessamine County, Kentucky School District Finance Corp.
School Building Revenue
1,205,000 4.900%, 05/01/22 ................................... Aa3/NR 1,250,657

RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------

SCHOOLS (CONTINUED)
Kenton County, Kentucky School District
$ 955,000 5.000%, 04/01/16 ................................... Aa3/NR $ 1,008,833
1,055,000 5.000%, 04/01/17 ................................... Aa3/NR 1,114,470
605,000 5.000%, 04/01/19 ................................... Aa3/NR 637,737
Kentucky Economic Development Finance Authority
College Revenue Centre College
1,230,000 5.000%, 04/01/17 FSA Insured ....................... Aaa/AAA 1,304,194
1,675,000 5.000%, 04/01/19 FSA Insured ....................... Aaa/AAA 1,767,929
Lexington-Fayette Urban County, Kentucky Government
Project Transylvania University
1,320,000 5.125%, 08/01/18 MBIA Insured ...................... Aaa/AAA 1,384,693
Lexington-Fayette Urban County, Kentucky Government
Project U.K. Library
725,000 5.000%, 11/01/15 MBIA Insured ...................... Aaa/AAA 765,085
305,000 5.000%, 11/01/18 MBIA Insured ...................... Aaa/AAA 320,851
300,000 5.000%, 11/01/20 MBIA Insured ...................... Aaa/AAA 314,598
Lincoln County, Kentucky School District
250,000 4.800%, 08/01/19 ................................... Aa3/NR 261,135
Louisville & Jefferson County, Kentucky University
of Louisville
500,000 5.000%, 06/01/19 AMBAC Insured ..................... Aaa/AAA 536,825
525,000 5.000%, 06/01/20 AMBAC Insured ..................... Aaa/AAA 561,970
Oldham County, Kentucky School District Finance Corp.
700,000 5.000%, 05/01/19 MBIA Insured ...................... Aaa/NR 746,543
Scott County, Kentucky School Building
100,000 5.000%, 03/01/22 ................................... Aa3/NR 105,570
Scott County, Kentucky School District Finance Corp.
1,115,000 4.200%, 01/01/22 AMBAC Insured ..................... Aaa/NR 1,117,486
1,955,000 4.250%, 01/01/23 AMBAC Insured ..................... Aaa/NR 1,962,253
1,560,000 4.300%, 01/01/24 AMBAC Insured ..................... Aaa/NR 1,565,772
Spencer County, Kentucky School District Finance Corp.
1,415,000 5.000%, 07/01/19 FSA insured ....................... Aaa/NR 1,510,739
University of Kentucky Revenue
1,335,000 5.000%, 05/01/16 FGIC Insured (pre-refunded) ....... Aaa/AAA 1,420,680
505,000 5.000%, 06/01/18 FSA insured ....................... Aaa/NR 531,654
-------------
Total Schools 54,591,784
-------------

RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------

TRANSPORTATION (11.8%)
Kenton County, Kentucky Airport Board
Airport Revenue
$ 500,000 5.625%, 03/01/13 MBIA Insured AMT .................. Aaa/AAA $ 545,055
1,570,000 5.000%, 03/01/13 MBIA Insured AMT .................. Aaa/AAA 1,665,770
750,000 5.625%, 03/01/14 MBIA Insured AMT .................. Aaa/AAA 816,300
1,000,000 5.500%, 03/01/17 MBIA Insured AMT .................. Aaa/AAA 1,081,500
2,230,000 5.500%, 03/01/18 MBIA Insured AMT .................. Aaa/AAA 2,406,014
1,300,000 5.000%, 03/01/23 MBIA Insured AMT .................. Aaa/AAA 1,340,924
Kentucky Interlocal School Transportation Authority
145,000 5.400%, 06/01/17 ................................... Aa3/A+ 145,905
400,000 6.000%, 12/01/20 ................................... Aa3/A+ 406,676
200,000 6.000%, 12/01/20 ................................... Aa3/A+ 203,338
300,000 5.800%, 12/01/20 ................................... Aa3/A+ 304,767
400,000 5.650%, 12/01/20 ................................... Aa3/A+ 406,116
350,000 5.600%, 12/01/20 ................................... Aa3/A+ 355,281
Kentucky State Turnpike Authority Economic
Development & Resource Recovery Road Revenue
1,000,000 5.625%, 07/01/12 FSA Insured (pre-refunded) ........ Aaa/AAA 1,096,980
200,000 5.625%, 07/01/13 FSA Insured (pre-refunded) ........ Aaa/AAA 219,396
500,000 5.625%, 07/01/14 FSA Insured (pre-refunded) ........ Aaa/AAA 548,490
250,000 5.200%, 07/01/14 FSA Insured (pre-refunded) ........ Aaa/AAA 269,417
450,000 5.250%, 07/01/15 FSA Insured (pre-refunded) ........ Aaa/AAA 485,973
2,775,000 5.250%, 07/01/16 FSA Insured ....................... Aaa/AAA 2,996,889
160,000 5.000%, 07/01/17 FSA Insured ....................... Aaa/AAA 168,862
3,455,000 5.100%, 07/01/18 FSA Insured ....................... Aaa/AAA 3,659,812
Louisville-Jefferson County Regional Airport, Kentucky
1,000,000 5.500%, 07/01/12 FSA Insured AMT ................... Aaa/AAA 1,086,170
2,000,000 5.750%, 07/01/15 FSA Insured AMT ................... Aaa/AAA 2,191,180
2,000,000 5.500%, 07/01/15 FSA Insured AMT ................... Aaa/AAA 2,184,360
1,650,000 5.750%, 07/01/17 FSA Insured AMT ................... Aaa/AAA 1,794,111
1,000,000 5.250%, 07/01/18 FSA Insured AMT ................... Aaa/AAA 1,062,900
1,000,000 5.000%, 07/01/18 FSA Insured AMT ................... Aaa/AAA 1,033,490
1,370,000 5.250%, 07/01/21 FSA Insured AMT ................... Aaa/AAA 1,445,391
3,390,000 5.250%, 07/01/22 FSA Insured AMT ................... Aaa/AAA 3,572,145
275,000 5.375%, 07/01/23 FSA Insured AMT ................... Aaa/AAA 290,309
-------------
Total Transportation 33,783,521
-------------

RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------

UTILITIES (11.3%)
Bardstown, Kentucky
$ 200,000 5.000%, 12/01/19 MBIA Insured ...................... Aaa/NR $ 213,044
Boone County, Kentucky Pollution Control
Rev. - Dayton Power & Light
1,000,000 4.700%, 01/01/28 FGIC Insured ...................... Aaa/AAA 1,013,760
Campbell & Kenton Counties, Kentucky
Sanitation Sewer District
100,000 5.000%, 08/01/24 FSA Insured ....................... Aaa/AAA 104,258
Kentucky Rural Water Finance Corp.
595,000 5.000%, 02/01/20 AMBAC Insured ..................... Aaa/AAA 628,487
Lexington-Fayette Urban County Government,
Kentucky Sewer System
1,000,000 5.000%, 07/01/19 ................................... Aa3/AA 1,058,920
Louisville & Jefferson County, Kentucky
Metropolitan Sewer District
1,000,000 5.000%, 05/15/12 FGIC Insured ...................... Aaa/AAA 1,044,270
2,565,000 5.375%, 05/15/17 MBIA Insured ...................... Aaa/AAA 2,800,159
125,000 5.300%, 05/15/18 MBIA Insured ...................... Aaa/AAA 130,370
2,180,000 5.000%, 05/15/18 FSA Insured ....................... Aaa/AAA 2,345,200
2,380,000 4.250%, 05/15/20 FSA Insured ....................... Aaa/AAA 2,381,714
2,510,000 4.250%, 05/15/21 FSA Insured ....................... Aaa/AAA 2,501,466
400,000 5.000%, 05/15/22 FGIC Insured ...................... Aaa/AAA 415,304
Louisville, Kentucky Waterworks Board Water
System Revenue
1,000,000 5.250%, 11/15/16 FSA Insured ....................... Aaa/AAA 1,071,090
1,000,000 5.250%, 11/15/17 FSA Insured ....................... Aaa/AAA 1,071,090
2,530,000 5.250%, 11/15/18 FSA Insured ....................... Aaa/AAA 2,709,858
205,000 5.250%, 11/15/19 FSA Insured ....................... Aaa/AAA 217,138
6,600,000 5.250%, 11/15/22 FSA Insured ....................... Aaa/AAA 7,060,086
2,415,000 5.250%, 11/15/24 FSA Insured ....................... Aaa/AAA 2,578,930
Northern Kentucky Water District
660,000 5.000%, 02/01/23 FGIC Insured ...................... Aaa/NR 688,024
Owensboro-Davies County, Kentucky Water District
600,000 5.000%, 01/01/13 AMBAC Insured ..................... Aaa/AAA 616,860

RATING
FACE MOODY'S/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
- ------------ ---------------------------------------------------- -------- -------------

UTILITIES (CONTINUED)
Owensboro, Kentucky Electric and Power
$ 1,555,000 5.000%, 01/01/20 FSA Insured ....................... Aaa/AAA $ 1,628,785
-------------
Total Utilities 32,278,813
-------------
Total Revenue Bonds 274,062,903
-------------

Total Investments (cost $275,656,661**) ......... 99.0% 283,744,725
Other assets less liabilities ................... 1.0 2,941,995
------ -------------
Net Assets ...................................... 100.0% $ 286,686,720
====== =============

PERTCENT OF
PORTFOLIO DISTRIBUTION BY QUALITY RATING (UNAUDITED) PORTFOLIO
-------------------------------------------------------------------------
Aaa of Moody's or AAA of S&P .......................... 79.5%
Aa of Moody's or AA of S&P ............................ 18.1
A of Moody's or S&P ................................... 2.4
------
100.0%
======

* Any security not rated (NR) by either credit rating service has been
determined by the Manager to have sufficient quality to be ranked in
the top four credit ratings if a credit rating was to be assigned by
a rating service.

** See note 4.

PORTFOLIO ABBREVIATIONS:
-------------------------------------------------
AMBAC - American Municipal Bond Assurance Corp.
AMT - Alternative Minimum Tax
ETM - Escrowed To Maturity
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assurance
LOC - Letter of Credit
MBIA - Municipal Bond Investors Assurance
NR - Not Rated
XLCA - XL Capital Assurance

See accompanying notes to financial statements.

CHURCHILL TAX-FREE FUND OF KENTUCKY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005

ASSETS
Investments at value (cost $275,656,661) ......................................... $283,744,725
Cash ............................................................................. 335,218
Interest receivable .............................................................. 4,084,023
Receivable for Fund shares sold .................................................. 105,333
Other assets ..................................................................... 10,876
------------
Total assets ..................................................................... 288,280,175
------------
LIABILITIES
Payable for investment securities purchased ........................................ 520,886
Payable for Fund shares redeemed ................................................... 434,299
Dividends payable .................................................................. 356,158
Management fee payable ............................................................. 97,275
Distribution and service fees payable .............................................. 68,330
Accrued expenses ................................................................... 116,507
------------
Total liabilities ..................................................................... 1,593,455
------------
NET ASSETS ............................................................................ $286,686,720
============
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $0.01 per share $ 270,458
Additional paid-in capital ......................................................... 277,019,303
Net unrealized appreciation on investments (note 4) ................................ 8,088,064
Undistributed net investment income ................................................ 434,620
Accumulated net realized gain on investments ....................................... 874,275
------------
$286,686,720
============
CLASS A
Net Assets ......................................................................... $223,810,514
============
Capital shares outstanding ......................................................... 21,115,833
============
Net asset value and redemption price per share ..................................... $ 10.60
============
Offering price per share (100/96 of $10.60 adjusted to nearest cent) ............... $ 11.04
============
CLASS C
Net Assets ......................................................................... $ 7,295,962
============
Capital shares outstanding ......................................................... 688,650
============
Net asset value and offering price per share ....................................... $ 10.59
============
Redemption price per share (*a charge of 1% is imposed on the redemption
proceeds of the shares, or on the original price, whichever is lower, if redeemed
during the first 12 months after purchase) ...................................... $ 10.59*
============
CLASS I
Net Assets ......................................................................... $ 7,764,453
============
Capital shares outstanding ......................................................... 732,909
============
Net asset value, offering and redemption price per share ........................... $ 10.59
============
CLASS Y
Net Assets ......................................................................... $ 47,815,791
============
Capital shares outstanding ......................................................... 4,508,378
============
Net asset value, offering and redemption price per share ........................... $ 10.61
============

See accompanying notes to financial statements.

CHURCHILL TAX-FREE FUND OF KENTUCKY
STATEMENT OF OPERATIONS
YEAR ENDED DECEmber 31, 2005

INVESTMENT INCOME:

Interest income ................................................ $ 13,123,385

Expenses:

Management fee (note 3) ........................................ $ 1,183,610
Distribution and service fees (note 3) ......................... 441,913
Transfer and shareholder servicing agent fees .................. 174,325
Trustees' fees and expenses (note 8) ........................... 132,112
Legal fees (note 3) ............................................ 77,219
Fund accounting fees ........................................... 66,928
Shareholders' reports and proxy statements ..................... 66,053
Custodian fees ................................................. 57,745
Registration fees and dues ..................................... 23,483
Auditing and tax fees .......................................... 21,000
Insurance ...................................................... 19,199
Chief compliance officer (note 3) .............................. 4,544
Miscellaneous .................................................. 22,057
--------------
Total expenses ................................................. 2,290,188

Expenses paid indirectly (note 6) .............................. (23,752)
--------------
Net expenses ................................................... 2,266,436
-------------
Net investment income .......................................... 10,856,949

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

Net realized gain (loss) from securities transactions .......... 1,064,505
Change in unrealized appreciation on investments ............... (4,961,711)
--------------
Net realized and unrealized gain (loss) on investments ......... (3,897,206)
-------------
Net change in net assets resulting from operations ............. $ 6,959,743
=============

See accompanying notes to financial statements.

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

YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------

OPERATIONS:
Net investment income ............................... $ 10,856,949 $ 11,464,403
Net realized gain (loss) from securities transactions 1,064,505 950,051
Change in unrealized appreciation on investments .... (4,961,711) (56,557)
------------- -------------
Change in net assets from operations .............. 6,959,743 12,357,897
------------- -------------

DISTRIBUTIONS TO SHAREHOLDERS (NOTE 10):
Class A Shares:
Net investment income ............................... (8,497,105) (9,151,161)

Class C Shares:
Net investment income ............................... (226,903) (225,967)

Class I Shares:
Net investment income ............................... (277,644) (239,947)

Class Y Shares:
Net investment income ............................... (1,888,768) (1,763,764)
------------- -------------
Change in net assets from distributions ........... (10,890,420) (11,380,839)
------------- -------------

CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from shares sold ........................... 33,559,576 45,176,081
Reinvested dividends and distributions .............. 4,311,984 5,174,766
Cost of shares redeemed ............................. (44,707,514) (40,998,605)
------------- -------------
Change in net assets from capital share transactions (6,835,954) 9,352,242
------------- -------------

Change in net assets ................................ (10,766,631) 10,329,300

NET ASSETS:
Beginning of period ................................. 297,453,351 287,124,051
------------- -------------

End of period* ...................................... $ 286,686,720 $ 297,453,351
============= =============

* Includes undistributed net investment income of: $ 434,620 $ 468,091
============= =============

See accompanying notes to financial statements.

CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005

1. ORGANIZATION

Churchill Tax-Free Fund of Kentucky (the "Fund"), a non-diversified,
open-end investment company, was organized in March, 1987 as a Massachusetts
business trust and commenced operations on May 21, 1987. The Fund is authorized
to issue an unlimited number of shares and, since its inception to April 1,
1996, offered only one class of shares. On that date, the Fund began offering
two additional classes of shares, Class C and Class Y shares. All shares
outstanding prior to that date were designated as Class A shares and are sold
with a front-payment sales charge and bear an annual distribution fee. Class C
shares are sold with a level-payment sales charge with no payment at time of
purchase but level service and distribution fees from date of purchase through a
period of six years thereafter. A contingent deferred sales charge of 1% is
assessed to any Class C shareholder who redeems shares of this Class within one
year from the date of purchase. Class C Shares together with a pro-rata portion
of all Class C Shares acquired through reinvestment of dividends and other
distributions paid in additional Class C Shares, automatically convert to Class
A Shares after 6 years. The Class Y shares are only offered to institutions
acting for an investor in a fiduciary, advisory, agency, custodian or similar
capacity and are not offered directly to retail investors. Class Y shares are
sold at net asset value without any sales charge, redemption fees, contingent
deferred sales charge or distribution or service fees. On April 30, 1998, the
Fund established Class I shares, which are offered and sold only through
financial intermediaries and are not offered directly to retail investors. Class
I Shares are sold at net asset value without any sales charge, redemption fees,
or contingent deferred sales charge. Class I shares carry a distribution fee and
a service fee. All classes of shares represent interests in the same portfolio
of investments and are identical as to rights and privileges but differ with
respect to the effect of sales charges, the distribution and/or service fees
borne by each class, expenses specific to each class, voting rights on matters
affecting a single class and the exchange privileges of each class.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with accounting principles generally accepted in the United States of
America for investment companies.

a) PORTFOLIO VALUATION: Municipal securities which have remaining maturities
of more than 60 days are valued each business day based upon information
provided by a nationally prominent independent pricing service and
periodically verified through other pricing services. In the case of
securities for which market quotations are readily available, securities
are valued by the pricing service at the mean of bid and asked quotations.
If market quotations or a valuation from the pricing service is not
readily available, the security is valued at fair value determined in good
faith under procedures established by and under the general supervision of
the Board of Trustees. Securities which mature in 60 days or less are
valued at amortized cost if their term to maturity at

purchase is 60 days or less, or by amortizing their unrealized
appreciation or depreciation on the 61st day prior to maturity, if their
term to maturity at purchase exceeds 60 days.

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

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

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

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

f) RECLASSIFICATION OF CAPITAL ACCOUNTS: Accounting principles generally
accepted in the United States of America require that certain components
of net assets relating to permanent differences be reclassified between
financial and tax reporting. These reclassifications have no effect on net
assets or net asset value per share. No reclassifications were made during
the year ended December 31, 2005.

3. FEES AND RELATED PARTY TRANSACTIONS

a) MANAGEMENT ARRANGEMENTS:

Aquila Investment Management LLC (the "Manager"), a wholly-owned
subsidiary of Aquila Management Corporation, the Fund's founder and sponsor,
serves as the Manager for the Fund under an Advisory and Administration
Agreement with the Fund. Under the Advisory and Administration Agreement, the
Manager provides all investment management and administrative services to the
Fund. The Manager's services include providing the office of the Fund and all
related services as well as managing relationships with of all the various
support organizations to theFund such as the shareholder servicing agent,
custodian, legal counsel, fund accounting agent, auditors and distributor. For
its services, the Manager is entitled to receive a fee which is payable monthly
and computed as

of the close of business each day at the annual rate of 0.40 of 1% on the Fund's
average net assets.

Under a Compliance Agreement with the Manager, the Manager is compensated
for Chief Compliance Officer related services provided to enable the Fund to
comply with Rule 38a-1 of the Investment Company Act of 1940.

Specific details as to the nature and extent of the services provided by
the Manager are more fully defined in the Fund's Prospectus and Statement of
Additional Information.

b) DISTRIBUTION AND SERVICE FEES:

The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940. Under one part of
the Plan, with respect to Class A Shares, the Fund is authorized to make
distribution fee payments to broker-dealers ("Qualified Recipients") or others
selected by Aquila Distributors, Inc. (the "Distributor") including, but not
limited to, any principal underwriter of the Fund, with which the Distributor
has entered into written agreements contemplated by the Rule and which have
rendered assistance in the distribution and/or retention of the Fund's shares or
servicing of shareholder accounts. The Fund makes payment of this service fee at
the annual rate of 0.15% of the Fund's average net assets represented by Class A
Shares. For the year ended December 31, 2005, distribution fees on Class A
Shares amounted to $346,088 of which the Distributor retained $19,970.

Under another part of the Plan, the Fund is authorized to make payments
with respect to Class C Shares to Qualified Recipients which have rendered
assistance in the distribution and/or retention of the Fund's Class C shares or
servicing of shareholder accounts. These payments are made at the annual rate of
0.75% of the Fund's average net assets represented by Class C Shares and for the
year ended December 31, 2005, amounted to $60,095. In addition, under a
Shareholder Services Plan, the Fund is authorized to make service fee payments
with respect to Class C Shares to Qualified Recipients for providing personal
services and/or maintenance of shareholder accounts. These payments are made at
the annual rate of 0.25% of the Fund's average net assets represented by Class C
Shares and for the year ended December 31, 2005, amounted to $20,031. The total
of these payments with respect to Class C Shares amounted to $80,126 of which
the Distributor retained $15,900.

Under another part of the Plan, the Fund is authorized to make payments
with respect to Class I Shares to Qualified Recipients. Class I payments, under
the Plan, may not exceed for any fiscal year of the Fund a rate (currently
0.20%), set from time to time by the Board of Trustees, of not more than 0.25%
of the average annual net assets represented by the Class I Shares. In addition,
Class I has a Shareholder Services Plan under which it may pay service fees
(currently 0.15%) of not more than 0.25% of the average annual net assets
represented by Class I Shares. That is, the total payments under both plans will
not exceed 0.50% of such net assets. For the year ended December 31, 2005, these
payments were made at the average annual rate of 0.35% of such net assets and
amounted to

$27,474 of which $15,699 related to the Plan and $11,775 related to the
Shareholder Services Plan.

Specific details about the Plans are more fully defined in the Fund's
Prospectus and Statement of Additional Information.

Under a Distribution Agreement, the Distributor serves as the exclusive
distributor of the Fund's shares. Through agreements between the Distributor and
various broker-dealer firms ("dealers"), the Fund's shares are sold primarily
through the facilities of these dealers having offices within Kentucky, with the
bulk of sales commissions inuring to such dealers. For the year ended December
31, 2005, total commissions on sales of Class A Shares amounted to $214,451 of
which the Distributor received $20,785.

c) OTHER RELATED PARTY TRANSACTIONS:

For the year ended December 31, 2005, the Fund incurred $74,729 of legal
fees allocable to Hollyer Brady Barrett & Hines LLP, counsel to the Fund for
legal services in conjunction with the Fund's ongoing operations. The Secretary
of the Fund is a Partner of that firm.

4. PURCHASES AND SALES OF SECURITIES

During the year ended December 31, 2005, purchases of securities and
proceeds from the sales of securities aggregated $72,949,925 and $75,859,757,
respectively.

At December 31, 2005 the aggregate tax cost for all securities was
$275,644,271. At December 31, 2005, the aggregate gross unrealized appreciation
for all securities in which there is an excess of market value over tax cost
amounted to $8,393,352 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over market value amounted to
$292,898 for a net unrealized appreciation of $8,100,454.

5. PORTFOLIO ORIENTATION

Since the Fund invests principally and may invest entirely in triple
tax-free municipal obligations of issuers within Kentucky, it is subject to
possible risks associated with economic, political, or legal developments or
industrial or regional matters specifically affecting Kentucky and whatever
effects these may have upon Kentucky issuers' ability to meet their obligations.

6. EXPENSES

The Fund has negotiated an expense offset arrangement with its custodian
wherein it receives credit toward the reduction of custodian fees and other Fund
expenses whenever there are uninvested cash balances. The Statement of
Operations reflects the total expenses before any offset, the amount of offset
and the net expenses. It is the general intention of the Fund to invest, to the
extent practicable, some or all of cash balances in income-producing assets
rather than leave cash on deposit.

7. CAPITAL SHARE TRANSACTIONS

Transactions in Capital Shares of the Fund were as follows:

YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------

CLASS A SHARES:
Proceeds from shares sold 2,024,652 $ 21,593,854 1,986,073 $ 21,266,749
Reinvested distributions 362,716 3,868,074 404,551 4,328,795
Cost of shares redeemed . (2,962,111) (31,537,026) (2,129,569) (22,709,719)
------------ ------------ ------------ ------------
Net change ........... (574,743) (6,075,098) 261,055 2,885,825
------------ ------------ ------------ ------------

CLASS C SHARES:
Proceeds from shares sold 90,038 959,910 262,256 2,800,388
Reinvested distributions 13,187 140,559 13,189 141,099
Cost of shares redeemed . (175,383) (1,859,038) (187,886) (2,010,343)
------------ ------------ ------------ ------------
Net change ........... (72,158) (758,569) 87,559 931,144
------------ ------------ ------------ ------------

CLASS I SHARES:
Proceeds from shares sold 44,082 471,889 283,026 2,993,441
Reinvested distributions 22,690 241,811 21,333 227,786
Cost of shares redeemed . (38,599) (410,675) (14,757) (156,921)
------------ ------------ ------------ ------------
Net change ........... 28,173 303,025 289,602 3,064,306
------------ ------------ ------------ ------------

CLASS Y SHARES:
Proceeds from shares sold 984,142 10,533,923 1,685,639 18,115,503
Reinvested distributions 5,130 61,540 44,562 477,086
Cost of shares redeemed . (1,022,004) (10,900,775) (1,516,929) (16,121,622)
------------ ------------ ------------ ------------
Net change ........... (32,732) (305,312) 213,272 2,470,967
------------ ------------ ------------ ------------
Total transactions in Fund
shares .................. (651,460) $ (6,835,954) 851,488 $ 9,352,242
============ ============ ============ ============

8. TRUSTEES' FEES AND EXPENSES

At December 31, 2005 there were 7 Trustees, one of which is affiliated
with the Manager and is not paid any fees. The total amount of Trustees' service
and attendance fees paid during the year ended December 31, 2005 was $106,125 to
cover carrying out their responsibilities and attendance at regularly scheduled
quarterly Board Meetings and meetings of the Independent Trustees held prior to
each quarterly Board Meeting. When additional or special meetings are held, the
meeting fees are paid to those Trustees in attendance. Trustees are reimbursed
for their expenses such as travel, accommodations, and meals incurred in
connection with attendance at Board Meetings and the Annual Meeting of
Shareholders. For the year ended December 31, 2005, such meeting-related
expenses amounted to $25,987.

9. SECURITIES TRADED ON A WHEN-ISSUED BASIS

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

10. INCOME TAX INFORMATION AND DISTRIBUTIONS

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

The Fund intends to maintain, to the maximum extent possible, the
tax-exempt status of interest payments received from portfolio municipal
securities in order to allow dividends paid to shareholders from net investment
income to be exempt from regular Federal and State of Kentucky income taxes.
However, due to differences between financial statement reporting and Federal
income tax reporting requirements, distributions made by the Fund may not be the
same as the Fund's net investment income, and/or net realized securities gains.
Further, a small portion of the dividends may, under some circumstances, be
subject to taxes at ordinary income and/or capital gain rates. For certain
shareholders, some dividend income may, under some circumstances, be subject to
the alternative minimum tax.

The tax character of distributions:

Year Ended December 31,
2005 2004
----------- -----------
Net tax-exempt income $10,817,058 $11,146,096
Ordinary income 73,362 234,743
----------- -----------
$10,890,420 $11,380,839
=========== ===========

As of December 31, 2005, the components of distributable earnings on a tax
basis were as follows:

Accumulated net realized gain $ 879,242
Unrealized appreciation 8,100,454
Undistributed tax-exempt income 422,230
----------
$9,401,926
==========

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

11. CHANGE IN PRINCIPAL ACCOUNTANTS

KPMG LLP was previously the principal accountants for the Churchill
Tax-Free Fund of Kentucky (the "Fund"). On July 27, 2005 KPMG LLP resigned as
the principal accountants of the Fund and Tait, Weller & Baker LLP was engaged
as the principal accountants to audit the Fund's financial statements for the
fiscal year of 2005. The decision was made by the Audit Committee of the Board
of Trustees.

The audit reports of KPMG LLP on the Fund's financial statements as of and
for the years ended December 31, 2004 and 2003 did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope, or accounting principles.

In connection with the audits of the two fiscal years ended December 31,
2004 and 2003 and the subsequent interim period through July 27, 2005, there
were no reportable events or disagreements with KPMG LLP on any matter of
accounting principles of practices, financial statement disclosure, or auditing
scope or procedures, which disagreements if not resolved to the satisfaction of
KPMG LLP would have caused them to make reference in connection with their
opinion to the subject matter of the disagreements.

CHURCHILL TAX-FREE FUND OF KENTUCKY
FINANCIAL HIGHLIGHTS

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

Class A
----------------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- -------- -------- --------

Net asset value, beginning of period ..... $ 10.74 $ 10.69 $ 10.66 $ 10.31 $ 10.40
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income+ ................ 0.39 0.42 0.44 0.47 0.50
Net gain (loss) on securities (both
realized and unrealized) ............ (0.14) 0.05 0.03 0.35 (0.09)
-------- -------- -------- -------- --------
Total from investment operations ...... 0.25 0.47 0.47 0.82 0.41
-------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income .. (0.39) (0.42) (0.44) (0.47) (0.50)
Distributions from capital gains ...... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions ................... (0.39) (0.42) (0.44) (0.47) (0.50)
-------- -------- -------- -------- --------
Net asset value, end of period ........... $ 10.60 $ 10.74 $ 10.69 $ 10.66 $ 10.31
======== ======== ======== ======== ========
Total return (not reflecting sales charge) 2.39% 4.49% 4.50% 8.15% 4.02%

Ratios/supplemental data
Net assets, end of period
(in thousands) ...................... $223,811 $232,927 $229,176 $226.014 $201,604
Ratio of expenses to average
net assets .......................... 0.77% 0.73% 0.72% 0.72% 0.72%
Ratio of net investment income to
average net assets .................. 3.66% 3.96% 4.14% 4.82% 4.82%
Portfolio turnover rate ............... 24.87% 14.31% 17.92% 18.27% 21.44%

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

Ratio of expenses to average
net assets .......................... 0.76% 0.73% 0.71% 0.71% 0.70%

Class C
----------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- -------- -------- --------

Net asset value, beginning of period ..... $ 10.73 $ 10.69 $ 10.66 $ 10.31 $ 10.39
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income+ ................ 0.30 0.33 0.35 0.38 0.41
Net gain (loss) on securities (both
realized and unrealized) ............ (0.14) 0.04 0.03 0.35 (0.08)
-------- -------- -------- -------- --------
Total from investment operations ...... 0.16 0.37 0.38 0.73 0.33
-------- -------- -------- -------- --------
Less distributions (note 10):
Dividends from net investment income .. (0.30) (0.33) (0.35) (0.38) (0.41)
Distributions from capital gains ...... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions ................... (0.30) (0.33) (0.35) (0.38) (0.41)
-------- -------- -------- -------- --------
Net asset value, end of period ........... $ 10.59 $ 10.73 $ 10.69 $ 10.66 $ 10.31
======== ======== ======== ======== ========
Total return (not reflecting sales charge) 1.53% 3.51% 3.62% 7.23% 3.24%

Ratios/supplemental data
Net assets, end of period
(in thousands) ...................... 7,296 $ 8,166 $ 7,197 $ 4,804 $ 3,355
Ratio of expenses to average
net assets .......................... 1.62% 1.58% 1.57% 1.56% 1.56%
Ratio of net investment income to
average net assets .................. 2.81% 3.11% 3.26% 3.62% 3.92%
Portfolio turnover rate ............... 24.87% 14.31% 17.92% 18.27% 21.44%

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

Ratio of expenses to average
net assets .......................... 1.61% 1.58% 1.56% 1.55% 1.55%

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

See accompanying notes to financial statements.

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

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

Class I
-------------------------------------------------
Year Ended December 31, Period
------------------------------------------------- Ended
2005 2004 2003 2002 12/31/01(1)
------- ------- ------- ------- -----------

Net asset value, beginning of period .......... $ 10.73 $ 10.69 $ 10.66 $ 10.31 $ 10.44
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income+ ..................... 0.38 0.41 0.43 0.46 0.19
Net gain (loss) on securities (both realized
and unrealized) .......................... (0.14) 0.03 0.02 0.35 (0.13)
------- ------- ------- ------- -------
Total from investment operations ........... 0.24 0.44 0.45 0.81 0.06
------- ------- ------- ------- -------
Less distributions (note 10):
Dividends from net investment income ....... (0.38) (0.40) (0.42) (0.46) (0.19)
Distributions from capital gains ........... -- -- -- -- --
------- ------- ------- ------- -------
Total distributions ........................ (0.38) (0.40) (0.42) (0.46) (0.19)
------- ------- ------- ------- -------
Net asset value, end of period ................ $ 10.59 $ 10.73 $ 10.69 $ 10.66 $ 10.31
======= ======= ======= ======= =======
Total return (not reflecting sales charge) .... 2.24% 4.24% 4.33% 7.98% 0.58%*

Ratios/supplemental data
Net assets, end of period
(in thousands) ........................... $ 7,764 $ 7,564 $ 4,438 $ 2,407 $ 1,426
Ratio of expenses to average net assets .... 0.92% 0.89% 0.88% 0.87% 0.83%**
Ratio of net investment income to average
net assets ............................... 3.52% 3.79% 3.95% 4.32% 4.47%**
Portfolio turnover rate .................... 24.87% 14.31% 17.92% 18.27% 21.44%*

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

Ratio of expenses to average net assets .... 0.91% 0.89% 0.87% 0.86% 0.82%**

Class Y
-------------------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- ------- -------

Net asset value, beginning of period .......... $ 10.75 $ 10.70 $ 10.67 $ 10.32 $ 10.40
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income+ ..................... 0.41 0.44 0.46 0.49 0.51
Net gain (loss) on securities (both realized
and unrealized) .......................... (0.14) 0.05 0.03 0.35 (0.07)
------- ------- ------- ------- -------
Total from investment operations ........... 0.27 0.49 0.49 0.84 0.44
------- ------- ------- ------- -------
Less distributions (note 10):
Dividends from net investment income ....... (0.41) (0.44) (0.46) (0.49) (0.52)
Distributions from capital gains ........... -- -- -- -- --
------- ------- ------- ------- -------
Total distributions ........................ (0.41) (0.44) (0.46) (0.49) (0.52)
------- ------- ------- ------- -------
Net asset value, end of period ................ $ 10.61 $ 10.75 $ 10.70 $ 10.67 $ 10.32
======= ======= ======= ======= =======
Total return (not reflecting sales charge) .... 2.55% 4.65% 4.65% 8.30% 4.28%

Ratios/supplemental data
Net assets, end of period
(in thousands) ........................... $47,816 $48,795 $46,313 $41,223 $25,585
Ratio of expenses to average net assets .... 0.62% 0.58% 0.57% 0.57% 0.57%
Ratio of net investment income to average
net assets ............................... 3.81% 4.11% 4.28% 4.63% 4.94%
Portfolio turnover rate .................... 24.87% 14.31% 17.92% 18.27% 21.44%

The expense ratios after giving effect to the expe

Ratio of expenses to average net assets .... 0.61% 0.58% 0.56% 0.56% 0.55%

- ----------
(1) For the period August 6, 2001 to December 31, 2001.
+ Per share amounts have been calculated using the monthly average shares
method.
* Not annualized.
** Annualized.

See accompanying notes to financial statements.

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

ANALYSIS OF EXPENSES (UNAUDITED)

As a shareholder of the Fund, you may incur two types of costs: (1)
transaction costs, including front-end sales charges with respect to Class A
shares or contingent deferred sales charges ("CDSC") with respect to Class C
shares; and (2) ongoing costs, including management fees; distribution and/or
service (12b-1) fees; and other Fund expenses. The tables below are intended to
help you understand your ongoing costs (in dollars) of investing in the Fund and
to compare these costs with the ongoing costs of investing in other mutual
funds.

The tables below are based on an investment of $1,000 invested on July 1,
2005 and held for the six months ended December 31, 2005.

ACTUAL EXPENSES

This table provides information about actual account values and actual
expenses. You may use the information provided in this table, together with the
amount you invested, to estimate the expenses that you paid over the period. To
estimate the expenses you paid on your account, divide your ending account value
by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6),
then multiply the result by the number under the heading entitled "Expenses Paid
During the Period".

FOR THE SIX MONTHS ENDED DECEMBER 31, 2005

ACTUAL
TOTAL RETURN BEGINNING ENDING EXPENSES
WITHOUT ACCOUNT ACCOUNT PAID DURING
SALES CHARGES(1) VALUE VALUE THE PERIOD(2)
- --------------------------------------------------------------------------------
Class A 0.34% $1,000.00 $1,003.40 $3.89
- --------------------------------------------------------------------------------
Class C (0.08)% $1,000.00 $ 999.20 $8.16
- --------------------------------------------------------------------------------
Class I 0.28% $1,000.00 $1,002.80 $4.59
- --------------------------------------------------------------------------------
Class Y 0.52% $1,000.00 $1,005.20 $3.13
- --------------------------------------------------------------------------------

(1) ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS, IF
ANY, AT NET ASSET VALUE AND DOES NOT REFLECT THE DEDUCTION OF THE
APPLICABLE SALES CHARGES WITH RESPECT TO CLASS A SHARES OR THE APPLICABLE
CONTINGENT DEFERRED SALES CHARGES ("CDSC") WITH RESPECT TO CLASS C SHARES.
TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE
TOTAL RETURN FOR THE YEAR.

(2) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.77%, 1.62%, 0.91%
AND 0.62% FOR THE FUND'S CLASS A, C, I AND Y SHARES, RESPECTIVELY,
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
184/365 (TO REFLECT THE ONE-HALF YEAR PERIOD).

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

ANALYSIS OF EXPENSES (UNAUDITED) (CONTINUED)

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The table below provides information about hypothetical account values and
hypothetical expenses based on the actual expense ratio and an assumed rate of
return of 5.00% per year before expenses, which is not the Fund's actual return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
the information provided in this table to compare the ongoing costs of investing
in the Fund and other mutual funds. To do so, compare this 5.00% hypothetical
example relating to the Fund with the 5.00% hypothetical examples that appear in
the shareholder reports of other mutual funds.

Please note that the expenses shown in the table below are meant to
highlight your ongoing costs only and do not reflect any transactional costs,
with respect to Class A shares. The example does not reflect the deduction of
contingent deferred sales charges ("CDSC") with respect to Class C shares.
Therefore, the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different mutual funds. In
addition, if these transaction costs were included, your costs would have been
higher.

FOR THE SIX MONTHS ENDED DECEMBER 31, 2005

HYPOTHETICAL
ANNUALIZED BEGINNING ENDING EXPENSES
TOTAL ACCOUNT ACCOUNT PAID DURING
RETURN VALUE VALUE THE PERIOD(1)
- --------------------------------------------------------------------------------
Class A 5.00% $1,000.00 $1,021.32 $3.92
- --------------------------------------------------------------------------------
Class C 5.00% $1,000.00 $1,017.04 $8.24
- --------------------------------------------------------------------------------
Class I 5.00% $1,000.00 $1,020.62 $4.63
- --------------------------------------------------------------------------------
Class Y 5.00% $1,000.00 $1,022.08 $3.16
- --------------------------------------------------------------------------------

(1) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.77%, 1.62%, 0.91%
AND 0.62% FOR THE FUND'S CLASS A, C, I AND Y SHARES, RESPECTIVELY,
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
184/365 (TO REFLECT THE ONE-HALF YEAR PERIOD).

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

FEDERAL TAX STATUS OF DISTRIBUTIONS (UNAUDITED)

This information is presented in order to comply with a requirement of the
Internal Revenue Code AND NO ACTION ON THE PART OF SHAREHOLDERS IS REQUIRED.

For the fiscal year ended December 31, 2005, $10,817,058 of dividends paid
by Churchill Tax-Free Fund of Kentucky, constituting 99.33% of total dividends
paid during fiscal 2005, were exempt-interest dividends.

Prior to January 31, 2006, shareholders were mailed IRS Form 1099-DIV
which contained information on the status of distributions paid for the 2005
CALENDAR YEAR.

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

INFORMATION AVAILABLE (UNAUDITED)

Much of the information that the funds in the Aquila(SM) Group of Funds
produce is automatically sent to you and all other shareholders. Specifically,
you are routinely sent the entire list of portfolio securities of your Fund
twice a year in the semi-annual and annual reports you receive. Additionally, we
prepare, and have available, portfolio listings at the end of each quarter.
Whenever you may be interested in seeing a listing of your Fund's portfolio
other than in your shareholder reports, please check our website
(http://www.aquilafunds.com) or call us at 1-800-437-1020.

The Fund additionally files a complete list of its portfolio holdings with
the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms
N-Q are available free of charge on the SEC website at http://www.sec.gov. You
may also review or, for a fee, copy the forms at the SEC's Public Reference Room
in Washington, DC or by calling 800-SEC-0330.

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

PROXY VOTING RECORD (UNAUDITED)

The Fund does not invest in equity securities. Accordingly, there were no
matters relating to a portfolio security considered at any shareholder meeting
held during the 12 months ended June 30, 2005 with respect to which the Fund was
entitled to vote. Applicable regulations require us to inform you that the
foregoing proxy voting information is available on the SEC website at
http://www.sec.gov.

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

ADDITIONAL INFORMATION (UNAUDITED)

TRUSTEES(1) AND OFFICERS

NUMBER OF
POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS
HELD WITH IN FUND HELD BY TRUSTEE
NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS
ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS
AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.)
- ----------------- ---------- ------------------- ---------- ---------------------

INTERESTED TRUSTEES(4)

Diana P. Herrmann Trustee Vice Chair and Chief Executive Officer 11 None
New York, NY since 1995 of Aquila Management Corporation,
(02/25/58) and President Founder of the Aquila(SM) Group of
since 1999 Funds(5) and parent of Aquila Investment
Management LLC, Manager, since 2004,
President and Chief Operating Officer
since 1997, 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 and President, Chief
Operating Officer and Manager of the
Manager since 2003; Vice Chair,
President, Executive Vice President or
Senior Vice President of funds in the
Aquila(SM) Group of Funds since 1986;
Director of the Distributor since 1997;
trustee, Reserve Money-Market Funds,
1999-2000 and Reserve Private Equity
Series, 1998-2000; Governor, Investment
Company Institute and head of its Small
Funds Committee since 2004; active in
charitable and volunteer organizations.

NON-INTERESTED TRUSTEES

Thomas A.Christopher Chair of the Vice President of Robinson, Hughes & 2 None
Danville, KY Board of Trustees Christopher, C.P.A.s, P.S.C., since
(12/19/47) since 2005 1977; President, A Good Place for Fun,
and Trustee Inc., a sports facility, since 1987;
since 1992 currently or formerly active with
various professional and community
organizations.

Douglas Dean Trustee Founder and Chairman of the Board of 1 None
Lexington, KY since 1987 Directors, Dean, Dorton & Ford P.S.C., a
(03/21/49) public accounting firm, since 1982;
active as an officer and member of
various charitable and community
organizations.

Theodore T. Mason Trustee Executive Director, East Wind Power 8 Trustee, Pimco Advisors
New York, NY since 1987 Partners LTD since 1994 and Louisiana VIT.
(11/24/35) Power Partners, 1999-2003; Treasurer,
Alumni Association of SUNY Maritime
College since 2004 (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 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
the Maritime College at Fort Schuyler
Foundation, Inc. since 2000.

Anne J. Mills Trustee President, Loring Consulting Company 4 None
Castle Rock, CO since 1987 since 2001; Vice President for Business
(12/23/38) Affairs, Ottawa University, 1992-2001;
IBM Corporation, 1965-1991; Budget
Review Officer, the American Baptist
Churches/USA, 1994-1997; director, the
American Baptist Foundation; Trustee,
Ottawa University; and Trustee Emerita,
Brown University.

William J. Nightingale Trustee Retired; formerly Chairman, founder 2 Ring's End, Inc.
Rowayton, CT since 1993 (1975) and Senior Advisor until 2000 of
(09/16/29) Nightingale & Associates, L.L.C., a
general management consulting firm
focusing on interim management,
divestitures, turnaround of troubled
companies, corporate restructuring and
financial advisory services.

James R. Ramsey Trustee President, University of Louisville 2 Community Bank and
Louisville, KY since 1987 since November 2002; Professor of Trust, Pikeville, KY
(11/14/48) Economics, University of Louisville, and Texas Roadhouse
1999-present; Kentucky Governor's Senior Inc.
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.

OTHER INDIVIDUALS

TRUSTEES EMERITUS(6)

Lacy B. Herrmann Founder and Founder and Chairman of the Board, N/A N/A
New York, NY Chairman Emeritus Aquila Management Corporation, the
(05/12/29) since 2006, sponsoring organization and parent of
Chairman of the the Manager or Administrator and/or
Board of Trustees, Adviser or Sub-Adviser to each fund of
1987-2005 the Aquila(SM) Group of Funds; Chairman
of the Manager or Administrator and/or
Adviser or Sub-Adviser to each since
2004; Founder and Chairman Emeritus of
Hawaiian Tax-Free Trust, Pacific Capital
Cash Assets Trust, Pacific Capital
Tax-Free Cash Assets Trust, Pacific
Capital U.S. Government Securities Cash
Assets Trust, Tax-Free Fund of Colorado,
Churchill Tax-Free Fund of Kentucky,
Narragansett Insured Tax-Free Income
Fund, Tax-Free Trust of Arizona,
Tax-Free Trust of Oregon, Tax-Free Fund
For Utah and Aquila Rocky Mountain
Equity Fund; previously Chairman and a
Trustee of each fund in the Aquila(SM)
Group of Funds since its establishment
until 2004 or 2005; Director of the
Distributor since 1981 and formerly Vice
President or Secretary, 1981-1998;
Trustee Emeritus, Brown University and
the Hopkins School; active in
university, school and charitable
organizations.

Carroll F. Knicely Trustee Emeritus President, Associated Publications Inc., N/A N/A
Glasgow, KY since 2004 Glasgow, Kentucky; director and member,
(12/08/28) Executive Board of West Kentucky
Corporation and director and
Secretary-Treasurer, South Gate Plaza,
Inc. (owner and developer of shopping
centers and commercial real estate);
director, Vice President and Treasurer,
Knicely and Knicely, Inc. (owner and
developer of rental properties and
residential real estate); former
trustee, Cambellsville University;
formerly Secretary of Commerce and
Commissioner of Commerce, Commonwealth
of Kentucky.

OFFICERS

Charles E.Childs, III Executive Vice Executive Vice President of all funds in N/A N/A
New York, NY President the Aquila(SM) Group of Funds and the
(04/01/57) since 2003 Manager and the Manager's parent since
2003; 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.

Thomas S. Albright Senior Vice Senior Vice President and Portfolio N/A N/A
Louisville, KY President Manager, Churchill Tax-Free Fund of
(07/26/52) since 2000 Kentucky since July 2000; Senior Vice
President, Tax-Free Fund For Utah since
2003, Vice President, 2001-2003 and
co-portfolio manager since 2001; Vice
President and backup portfolio manager,
Tax-Free Trust of Arizona, since 2004;
Vice President and Portfolio Manager,
Banc One Investment Advisors, Inc.,
1994-2000.

Jerry G. McGrew Senior Vice President of the Distributor since 1998, N/A N/A
New York, NY President Registered Principal since 1993, Senior
(06/18/44) since 1994 Vice President, 1997-1998 and Vice
President, 1993-1997; Senior Vice
President, Aquila Rocky Mountain Equity
Fund and five Aquila Bond Funds since
1995; Vice President, Churchill Cash
Reserves Trust, 1995-2001.

Todd W. Curtis Vice President Senior Vice President and Portfolio N/A N/A
Phoenix, AZ since 2004 Manager, Tax-Free Trust of Arizona,
(06/08/49) since August 2004; Vice President and
backup portfolio manager, Churchill
Tax-Free Fund of Kentucky, since 2004;
Vice President and Portfolio Manager,
Banc One Investment Advisors, Inc. and
its predecessors, 1981-2004.

Jason T. McGrew Vice President Vice President, Churchill Tax-Free Fund N/A N/A
Elizabethtown, KY since 2001 of Kentucky since 2001, Assistant Vice
(08/14/71) President, 2000-2001; 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 W. Anderson Chief Compliance Chief Compliance Officer of the Trust, N/A N/A
New York, NY Officer since 2004 the Manager and the Distributor since
(08/23/40) and Assistant 2004, Compliance Officer of the Manager
Secretary or its predecessor and current parent
since 2000 since 1998 and Assistant Secretary of
the Aquila(SM) Group of Funds since
2000.

Joseph P. DiMaggio Chief Financial Chief Financial Officer of the N/A N/A
New York, NY Officer since 2003 Aquila(SM) Group of Funds since 2003 and
(11/06/56) and Treasurer Treasurer since 2000.
since 2000

Edward M. W. Hines Secretary Partner, Hollyer Brady Barrett & Hines N/A N/A
New York, NY since 1987 LLP, legal counsel to the Fund, since
(12/16/39) 1989; Secretary of the Aquila(SM) Group
of Funds.

John M. Herndon Assistant Assistant Secretary of the Aquila(SM) N/A N/A
New York, NY Secretary Group of Funds since 1995 and Vice
(12/17/39) since 1995 President of the three Aquila
Money-Market Funds since 1990; Vice
President of the Manager or its
predecessor and current parent since
1990.

Lori A. Vindigni Assistant Assistant Treasurer of the Aquila(SM) N/A N/A
New York, NY Treasurer Group of Funds since 2000; Assistant
(11/02/66) since 2000 Vice President of the Manager or its
predecessor and current parent since
1998; Fund Accountant for the Aquila(SM)
Group of Funds, 1995-1998.

- ----------
(1) The Fund's Statement of Additional Information includes additional
information about the Trustees and is available, without charge, upon
request by calling 800-437-1020 (toll free).

(2) The mailing address of each Trustee and officer is c/o Churchill Tax-Free
Fund of Kentucky, 380 Madison Avenue, New York, NY 10017.

(3) Each Trustee holds office until the next annual meeting of shareholders or
until his or her successor is elected and qualifies. The term of office of
each officer is one year.

(4) Ms. Herrmann is an interested person of the Fund as an officer of the
Fund, as a director, officer and shareholder of the Manager's corporate
parent, as an officer and Manager of the Manager, and as a shareholder and
director of the Distributor.

(5) In this material Pacific Capital Cash Assets Trust, Pacific Capital U.S.
Government Securities Cash Assets Trust and Pacific Capital Tax-Free Cash
Assets Trust, each of which is a money-market fund, are called the "Aquila
Money-Market Funds"; Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona,
Tax-Free Trust of Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free
Fund of Kentucky, Narragansett Insured Tax-Free Income Fund and Tax-Free
Fund For Utah, each of which is a tax-free municipal bond fund, are called
the "Aquila Bond Funds"; Aquila Rocky Mountain Equity Fund is an equity
fund; considered together, these 11 funds are called the "Aquilasm Group
of Funds."

(6) A Trustee Emeritus may attend Board meetings but has no voting power.

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

PRIVACY NOTICE (UNAUDITED)

CHURCHILL TAX-FREE FUND OF KENTUCKY

OUR PRIVACY POLICY. In providing services to you as an individual who owns or is
considering investing in shares of the Fund we collect certain nonpublic
personal information about you. Our policy is to keep this information strictly
safeguarded and confidential, and to use or disclose it only as necessary to
provide services to you or as otherwise permitted by law. Our privacy policy
applies equally to former shareholders and persons who inquire about a fund.

INFORMATION WE COLLECT. "Nonpublic personal information" is personally
identifiable financial information about you as an individual or your family.
The kinds of nonpublic personal information we have about you may include the
information you provide us on your share purchase application or in telephone
calls or correspondence with us, and information about your fund transactions
and holdings, how you voted your shares and the account where your shares are
held.

INFORMATION WE DISCLOSE. We disclose nonpublic personal information about you to
companies that provide necessary services to us, such as the Fund's transfer
agent, distributor or investment adviser, as permitted or required by law, or as
authorized by you. Any other use is strictly prohibited. We do not sell
information about you or any of our fund shareholders to anyone.

HOW WE SAFEGUARD YOUR INFORMATION. We restrict access to nonpublic personal
information about you to only those persons who need it to provide services to
you or who are permitted by law to receive it. We maintain physical, electronic
and procedural safeguards to protect the confidentiality of all nonpublic
personal information we have about you.

If you have any questions regarding our Privacy Policy, please contact us at
1-800-437-1020.

AQUILA DISTRIBUTORS, INC.
AQUILA INVESTMENT MANAGEMENT LLC

This Privacy Policy also has been adopted by Aquila Distributors, Inc. and
Aquila Investment Management LLC and applies to all nonpublic information about
you that each of these companies may obtain in connection with services provided
to the Fund or to you as a shareholder of the Fund.

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

(THIS PAGE INTENTIONALLY LEFT BLANK)

FOUNDERS

Lacy B. Herrmann, Chairman Emeritus
AQUILA MANAGEMENT CORPORATION

MANAGER

AQUILA INVESTMENT MANAGEMENT LLC
380 Madison Avenue, Suite 2300
New York, New York 10017

BOARD OF TRUSTEES

Thomas A. Christopher, Chair
Douglas Dean
Diana P. Herrmann
Theodore T. Mason
Anne J. Mills
William J. Nightingale
James R. Ramsey

OFFICERS

Diana P. Herrmann, President
Thomas S. Albright, Senior Vice President and Portfolio Manager
Jerry G. McGrew, Senior Vice President
Jason T. McGrew, Vice President
Robert W. Anderson, Chief Compliance Officer
Joseph P. DiMaggio, Chief Financial Officer and Treasurer
Edward M.W. Hines, Secretary

DISTRIBUTOR

AQUILA DISTRIBUTORS, INC.
380 Madison Avenue, Suite 2300
New York, New York 10017

CUSTODIAN

BANK ONE TRUST COMPANY, N.A.
1111 Polaris Parkway
Columbus, Ohio 43240

TRANSFER AND SHAREHOLDER SERVICING AGENT

PFPC INC.
101 Sabin Street
Pawtuckett, RI 02860

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Tait, Weller & Baker LLP
1818 Market Street, Suite 2400
Philadelphia, PA 19103

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

ITEM 2. CODE OF ETHICS.

(a) As of December 31, 2005 (the end of the reporting period) the
Trust has adopted a code of ethics that applies to the Fund's
principal executive officer(s)and principal financial officer(s)
and persons performing similar functions ("Covered Officers") as
defined in the Aquila Group of Funds Code of Ethics for Principal
Executive and Senior Financial Officers under Section 406 of the
Sarbanes-Oxley Act of 2002.;

(f)(1) Pursuant to Item 10(a)(1), a copy of the Fund's Code of
Ethics that applies to the Trust's principal executive officer(s)
and principal financial officer(s) and persons performing similar
functions is included as an exhibit to its annual report on this
Form N-CSR;

(f)(2) The text of the Fund's Code of Ethics that applies to the
Fund's principal executive officer(s) and principal financial
officer(s) and persons performing similar functions has been
posted on its Internet website which can be found at the Fund's
Internet address at aquilafunds.com.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

(a)(1)(ii) The Board of Trustees of the Fund has determined that
it does not have at least one audit committee financial expert
serving on its audit committee. The Fund does not have such a
person serving on the audit committee because none of the persons
currently serving as Trustees happens to have the technical
accounting and auditing expertise included in the definition of
"audit committee financial expert" recently adopted by the Securities
and Exchange Commission in connection with this Form N-CSR, and the
Board has not heretofore deemed it necessary to seek such a person
for election to the Board.

The primary mission of the Board, which is that of oversight over
the operations and affairs of the Fund, confronts the Trustees with
a wide and expanding range of issues and responsibilities. The
Trustees believe that, accordingly, it is essential that the Board's
membership consist of persons with as extensive experience as possible
in fulfilling the duties and responsibilities of mutual fund directors
and audit committee members and, ideally, with extensive experience
and background relating to the economic and financial sectors and
securities in which the Fund invests, including exposure to the
financial and accounting matters commonly encountered with respect
to those sectors and securities. The Board believes that its current
membership satisfies those criteria. It recognizes that it would
also be helpful to have a member with the relatively focused accounting
and auditing expertise reflected in the applicable definition of
"audit committee financial expert," just as additional members with
similarly focused technical expertise in other areas relevant to
the Fund's operations and affairs would also contribute added value.
However, the Board believes that the Fund is better served, and its
assets better employed, by a policy of hiring experts in various
the specialized area of technical accounting and
auditing matters, if and as the Board identifies the need, rather
than by seeking to expand its numbers by adding technical experts
in the areas constituting its domain of responsibility. The Fund's
Audit Committee Charter explicitly authorizes the Committee to
retain such experts as it deems necessary in fulfilling its duties
under the Charter.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES

a) Audit Fees - The aggregate fees billed for each of the last two
fiscal years for professional services rendered by the principal
accountant for the audit of the Registrant's annual financial statements
or services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements were $16,000 in 2005
and $20,700 in 2004.

b) Audit Related Fees - There were no amounts billed for audit-related
fees over the past two years other than stated above.

c) Tax Fees - The Registrant was billed by the principal accountant
$3,000 and $8,942 in 2005 and 2004, respectively, for tax return
preparation, tax compliance and tax planning.

d) All Other Fees - There were no additional fees paid for audit and non-
audit services other than those disclosed in a) thorough c) above.

e)(1) Currently, the audit committee of the Registrant pre-approves audit
services and fees on an engagement-by-engagement basis.

e)(2) None of the services described in b) through d) above were approved
by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X, all were pre-approved on an engagement-by-engagement basis.

f) No applicable.

g) There were no non-audit services fees billed by the Registrant's accountant
to the Registrant's investment adviser or distributor over the past two years.

h) Not applicable.

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

ITEM 6. [RESERVED]

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

905: Not applicable.

ITEM 8. [RESERVED]

ITEM 9. CONTROLS AND PROCEDURES.

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

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

ITEM 10. EXHIBITS.

(a)(1) Aquila Group of Funds Code of Ethics for Principal Executive and
Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act
of 2002

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

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

SIGNATURES

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

CHURCHILL TAX-FREE TRUST

By: /s/ Diana P. Herrmann
- - - ---------------------------------
President and Trustee
March 9, 2006

By: /s/ Joseph P. DiMaggio
- - - -----------------------------------
Chief Financial Officer and Treasurer
March 9, 2006

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

By: /s/ Diana P. Herrmann
- - - ---------------------------------
Diana P. Herrmann
President and Trustee
March 9, 2006

By: /s/ Joseph P. DiMaggio
- - - -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer and Treasurer
March 9, 2006

CHURCHILL TAX-FREE TRUST

EXHIBIT INDEX

(a)(1) Aquila Group of Funds Code of Ethics for Principal Executive and
Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act
of 2002.

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

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