Prime Cash Fund
380 Madison Avenue, Suite 2300, New York, N.Y. 10017
(212)697-6666, FAX (212)687-5373
Annual Report
February 6, 1996
Dear Investor:
Prime Cash Fund has consistently provided shareholders with specialized
management of cash reserves since its inception in April, 1983.
Over this period of nearly 13 years, the Fund has generated a high level
of safety of principal, liquidity, and current income for shareholders under
various market conditions by investing in a diversified portfolio of
money-market securities which meet specific high-quality standards and
possess minimal credit risk.
Through this investment management approach, the Fund was able to
achieve a AAA rating from both the credit rating services, Standard & Poor's
and Moody's Investors Service, and to provide investors with a highly
satisfactory yield for the fiscal year ended December 31, 1995.
Subsequent to the Fund's fiscal year end and effective February 1, 1996,
the Fund ceased operations. Although the Fund is no longer conducting a
public offering of its shares, it will continue its existence as a registered
investment management company.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
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<TABLE>
<CAPTION>
PRIME CASH FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
FACE
AMOUNT COMMERCIAL PAPER (81.2% of Net Assets) VALUE
<C> <S> <C>
Chemicals (6.7%)
$ 2,000,000 Dupont (E.I) de Nemours & Co., 5.72%,
due 1/05/96 $ 1,998,729
Consumer Finance (13.3%)
2,000,000 American General Finance Corp., 5.74%,
due 1/19/96 1,994,260
2,000,000 Student Loan Corp., 5.76%, due 1/09/96 1,997,440
Total Consumer Finance 3,991,700
Diversified Finance (6.6%)
2,000,000 Transamerica Finance Corp., 5.77%, due 1/17/96 1,994,871
Energy (6.6%)
2,000,000 Chevron Oil Finance Co., 5.72%, due 1/18/96 1,994,598
Foods (3.3%)
1,000,000 Nestle Capital Corp., 5.75%, due 1/12/96 998,243
Insurance (15.0%)
1,500,000 Prudential Funding Corp., 5.82%, due 1/16/96 1,496,363
2,000,000 Safeco Credit Co., 5.74%, due 1/29/96 1,991,071
1,000,000 USAA Capital Corp., 5.76%, due 1/03/96 999,680
Total Insurance 4,487,114
Manufacturing (8.4%)
2,533,000 Pitney Bowes Credit Corp., 5.72%, due 1/11/96 2,528,975
Structured Finance (6.7%)
2,000,000 Ciesco L.P., 5.73%, due 1/12/96 1,996,498
Transportation (7.6%)
2,300,000 United Parcel Services, 5.70%, due 1/18/96 2,293,809
Utilities (7.0%)
597,000 Allegheny Generating Co., 5.70%, due 1/16/96 595,582
1,500,000 Florida Power Corp., 5.82%, due 1/04/96 1,499,273
Total Utilities 2,094,855
Total Commercial Paper 24,379,392
U.S. GOVERNMENT AGENCY DISCOUNT NOTES
(18.3% of Net Assets)
5,500,000 Federal Home Loan Bank, 5.70%, due 1/2/96 5,499,129
</TABLE>
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<TABLE>
<CAPTION>
PRIME CASH FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
FACE
AMOUNT MASTER NOTE (1.1% of Net Assets) VALUE
<C> <S> <C>
$ 327,000 Associates Corp. of North America, 5.30%,
due 1/02/96 $327,000
Total Investments (100.6%)
(Cost - $ 30,205,521*) 30,205,521
Liabilities in excess of other assets (-0.6%) (196,877)
Net Assets (100%) $30,008,644
<FN>
(*) Aggregate cost for Federal income tax purposes.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
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<TABLE>
<CAPTION>
PRIME CASH FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<S> <C>
ASSETS
Investments at value (Cost - $ 30,205,521) $ 30,205,521
Cash 4,933
Due from Administrator for reimbursement of expenses 28,612
Interest receivable 2,626
Other assets 6,552
Total Assets 30,248,244
LIABILITIES
Dividends payable 194,396
Accrued expenses 33,419
Adviser and Administrator fees payable 11,785
Total Liabilities 239,600
NET ASSETS (equivalent to $ 1.00 per share on
30,008,644 shares outstanding) $ 30,008,644
Net Assets consist of:
Capital Stock - Authorized an unlimited number of
shares, par value $ .01 per share $ 300,086
Additional paid-in capital 29,708,558
$ 30,008,644
</TABLE>
See accompanying Notes to Financial Statements.
4
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<TABLE>
<CAPTION>
PRIME CASH FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<S> <C> <C>
INVESTMENT INCOME:
Interest Income $ 4,163,304
EXPENSES:
Investment Adviser Fees (note B) $ 173,614
Administrator Fees (note B) 173,614
Trustees' Fees and Expenses 55,676
Legal Fees 22,079
Audit and Accounting Fees 21,260
Custodian Fees (note D) 17,397
Transfer and Shareholder Servicing Agent Fees 7,573
Registration Fees and Dues 5,670
Shareholders' Reports and Proxy Statements 3,412
Other 18,829
499,124
Fees waived by Investment Adviser (note B) (12,315)
Fees waived by Administrator (note B) (92,625)
Reimbursement of expenses by Administrator
(note B) (81,104)
Expenses paid indirectly (note D) ( 1,347)
Net expenses 311,733
NET INVESTMENT INCOME $ 3,851,571
</TABLE>
See accompanying Notes to Financial Statements.
5
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<CAPTION>
PRIME CASH FUND
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended December 31,
FROM INVESTMENT ACTIVITIES: 1995 1994
<S> <C> <C>
Net investment income $ 3,851,571 $ 2,686,317
Dividends to shareholders ($ 0.0552 and
$ 0.0370 per share, respectively) (3,851,571) (2,686,317)
Change in net assets derived from
investment activities ---- -----
<CAPTION>
FROM FUND SHARE TRANSACTIONS:
SHARES
Year Ended December 31,
1995 1994
<S> <C> <C> <C> <C>
Shares sold 170,912,151 274,838,670 170,912,151 274,838,670
Shares redeemed (179,309,010) (303,603,492) (179,309,010) (303,603,492)
Decrease in shares
and net assets
derived from Fund
share transactions (8,396,859) (28,764,822) (8,396,859) (28,764,822)
Net decrease in net
assets (8,396,859) (28,764,822)
NET ASSETS:
Beginning of Year 38,405,503 67,170,325
End of Year $ 30,008,644 $ 38,405,503
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE>
PRIME CASH FUND
NOTES TO FINANCIAL STATEMENTS
Note A - Summary of Significant Accounting Policies:
Prime Cash Fund (the "Fund"), a diversified, open-end investment company,
was organized on September 10, 1982 as a Massachusetts business trust and is
authorized to issue an unlimited number of shares.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.
(1) Portfolio valuation: The Fund's portfolio securities are valued by the
amortized cost method permitted in accordance with Rule 2a-7 under the
Investment Company Act of 1940 (the "1940 Act"), which, after considering
accrued interest thereon, approximates market. Under this method, a
portfolio security is valued at cost, adjusted for amortization of
premiums and accretion of discounts. Amortization of premiums and
accretion of discounts are included in interest income.
(2) Securities transactions and related investment income: Securities 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 premiums and accretion of discounts as discussed in the preceding
paragraph.
(3) 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.
(4) Repurchase agreements: It is the Fund's policy to monitor closely the
creditworthiness of all firms with which it enters into repurchase
agreements, and to take possession of, or otherwise perfect its security
interest in, securities purchased under agreements to resell. The
securities purchased under agreements to resell are marked to market
every business day so that the value of the "collateral" is at least
equal to the value of the "loan" (repurchase agreements being defined as
"loans" in the 1940 Act), including the accrued interest earned thereon,
plus sufficient additional market value as is considered necessary to
provide a margin of safety.
(5) Use of estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities 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.
Note B - Management Fee and Other Transactions with Affiliates:
TCW Funds Management, Inc. (the "Adviser") became Investment Adviser to
the Fund in April, 1992. In this role, under an Investment Advisory Agreement,
the Adviser supervises the Fund's investments and provides various services
for which it receives a fee which is payable monthly and computed on the net
assets of the Fund as of the close of business each day at the annual rate of
0.25% of the net assets up to $ 300 million and 0.35% of the net assets above
$ 300 million. The Fund also has an Administration Agreement with Aquila
Management Corporation (the "Administrator") to provide all administrative
services to the Fund other than those relating to the investment portfolio
and the maintenance of the accounting books and records. The Administrator
receives a fee for such services which is payable monthly and computed on the
net assets of the Fund as of the close of business each day at the annual
rate of 0.25% of the net assets up to $ 300 million and 0.15% of the net
assets above $ 300 million. Specific details as to the nature and the extent
of the services provided by the Adviser and Administrator are more fully
described in the Fund's Prospectus and Statement of Additional Information.
7
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PRIME CASH FUND
NOTES TO FINANCIAL STATEMENTS
(continued)
The Adviser and the Administrator each agrees that the above fees shall
be reduced, but not below zero, by an amount equal to its pro-rata portion
(based on the aggregate fees of the Adviser and the Administrator) of the
amount, if any, by which the total expenses of the Fund in any fiscal year,
exclusive of taxes, interest and brokerage fees, exceed the lesser of
(i) 2.5% of the first $ 30 million of average annual net assets of the Fund
plus 2% of the next $ 70 million of such assets and 1.5% of its average
annual net assets in excess of $ 100 million, or (ii) 25% of the Fund's total
annual investment income. No such reduction in fees was required during the
year ended December 31, 1995.
For the year ended December 31, 1995, the Fund incurred fees under the
Advisory Agreement and Administration Agreement of $ 173,614 and $ 173,614,
respectively. During this period, the Adviser and Administrator voluntarily
waived fees of $ 12,315 and $ 92,625, respectively, and the Administrator
voluntarily agreed to reimburse the Fund for other expenses in the amount of
$ 81,104.
Under a Distribution Agreement, Aquila Distributors, Inc. (the
"Distributor") serves as the exclusive distributor of the Fund's shares. No
compensation or fees are paid to the Distributor for such share distribution.
Note C - Distributions:
The Fund declares dividends daily from net investment income and makes
payment monthly in additional shares at the Net Asset Value per share or in
cash, at the shareholder's option.
Note D - Custodian Fees:
The Fund has negotiated an expense offset arrangement with its custodian
wherein it receives credit toward the reduction of custodian fees whenever
there are uninvested cash balances. During the year ended December 31, 1995,
the Fund's custodian fees amounted to $ 17,397, of which $ 1,347 was offset
by such credits. The Fund could have invested its cash balances in an
income-producing asset if it had not agreed to a reduction in fees under the
expense offset arrangement with the custodian.
Note E - Subsequent Event - Cessation of Operations of the Fund:
All outstanding shares of the Fund, except for 1,001 shares owned by the
Administrator, were redeemed by shareholders by February 1, 1996. The
portfolio of investments was liquidated as of that date and the proceeds, net
of liabilities, were used to pay the redeeming shareholders. Although the
Fund is no longer conducting a public offering of its shares, it will
continue its existence as a Massachusetts business trust and maintain its
registration as an investment company.
8
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<CAPTION>
PRIME CASH FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year
Year Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
Income from Investment
Operations:
Net investment income 0.0552 0.0370 0.0260 0.0327 0.0556
Less Distributions:
Dividends from net
investment income (0.0552) (0.0370) (0.0260) (0.0327) (0.0556)
Net Asset Value,
End of Year $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
Total Return 5.66% 3.76% 2.63% 3.19% 5.68%
Ratios/Supplemental Data
Net Assets, End of
Year (in thousands) $ 30,009 $ 38,406 $ 67,170 $ 96,563 $ 287,597
Ratio of Expenses to
Average Net Assets 0.45% 0.55% 0.61% 0.68% 0.60%
Ratio of Net Investment
Income to Average Net
Assets 5.55% 4.00% 2.60% 3.27% 5.56%
<CAPTION>
For the years ended December 31, 1995 and December 31, 1994, net investment
income per share and the ratios of income and expenses to average net assets
without the Adviser's and Administrator's voluntary waiver of fees and the
Adminstrator's voluntary expense reimbursement and, the expense offset in
custodian fees for uninvested cash balances in 1995, would have been:
<S> <C> <C>
Net Investment Income $ 0.0525 $ 0.0350
Ratio of Expenses to
Average Net Assets 0.72% 0.76%
Ratio of Net Investment
Income to Average Net
Assets 5.28% 3.79%
</TABLE>
Note: Effective April 1, 1992, TCW Funds Management Inc. became the Fund's
Adviser, replacing Security Pacific National Bank.
See accompanying Notes to Financial Statements.
9
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INDEPENDENT AUDITOR'S REPORT
To the Board of Trustees and Shareholders of
Prime Cash Fund:
We have audited the accompanying statement of assets and liabilities of
Prime Cash Fund, including the statement of investments, as of December 31,
1995, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the years in the
five-year period 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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. An audit 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, 1995, by correspondence with the
custodian. 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 audits
provide a reasonable basis for our opinion.
As described in Note E to the financial statements, Prime Cash Fund
ceased operations on February 1, 1996.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Prime Cash Fund as of December 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
February 2, 1996
10
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Report on the Annual Meeting of Shareholders (unaudited)
The Annual Meeting of Shareholders of the Fund was held on December 22,
1995. At the meeting, the following matters were submitted to a shareholder
vote* and approved: (i) the election of Lacy B. Herrmann, Herbert S. Beggs,
Paul Y. Clinton, Walter M. Keenan, Theodore T. Mason, and Cornelius T. Ryan
as Trustees to hold office until the next annual meeeting of the Fund's
shareholders or until his or her successor is duly elected (each Trustee
received at least 55,666,579 affirmative votes (100%)), and (ii) the
ratification of the selection of KPMG Peat Marwick LLP as the Fund's
independent auditors for the fiscal year ending December 31, 1995 (votes for:
55,666,579 (100%)).
________________________________________
* On the record date for this meeting, 55,675,036 shares of the Fund were
outstanding and entitled to vote. The holders of 55,666,579 shares (99.98%)
entitled to vote were present in person or by proxy at the meeting.
Federal Tax Status of 1995 Dividends (unaudited)
The total amount of dividends declared in 1995 by Prime Cash Fund is
taxable as ordinary dividend income for Federal income tax purposes.
11
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