Update on the Kentucky Economy Churchill Tax Free Fund Annual Shareholders Meeting April 25, 2008

2  High gasoline prices  Subprime lending crisis/banking  Housing weakness  Slowdown in GDP Nationally – It was quite a year

3 To see what’s happened in Kentucky’s economy Let’s put it in a historical context

4 Kentucky’s Economy “A Quick History” Major Recession Heavy job loss Strong job growth Strong income growth Employment/Income growth greater than U.S.

5 THEN November 2000 – The light switch... July 2003 – Job losses  Manufacturing  Telecommunications  Utilities

6 UPDATE 2004 – 2007 Decent growth-Not great  Growth in business services  Growth in health care  Some defense related growth  COAL  Loss of manufacturing jobs

7 KY Employment is Growing Strongly March 2000: 1,831.6 July 2003: 1,775.3 March 2006: 1,839.7 Nonfarm employment in thousands January 2007: 1,854.3 March 2007: 1,858.8 December 2007: 1,857.3

8 Manufacturing Employment in KY Continues to be a Concern in thousands January 2006: December 2007: 252.7

9  Employment Gain +3,000 jobs (+0.2%) Manufacturing -8,200 jobs (-3.1%)  So, we continue in trading jobs  Manufacturing (high wage) For  Services (some high, some low)  Healthcare  Business  Retail  Income growth, but less than National average Update 2007

10 Kentucky Outlook  Continued modest employment growth (Less than 1.0%)  OK income growth (Around 5%)  Below U.S.  Housing slow  Energy concerns  Continued state budget issues  Expenditure side of budget  Pension Liability  Other And We Will Try One More Time to Guess the Future

11 More of the Same OK – Not Great