PRIME CASH FUND ANNUAL REPORT
380 Madison Avenue December 31, 1996
Suite 2300
New York, New York 10017
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
December 31, 1996
<S> <C>
Cash and Net Assets - 100.0%. . . . . . . . . . . . $1,001
Applicable to 1,001 shares outstanding (unlimited
number of $.01 par value shares authorized). . . $1.00
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<S> <C> <C>
INVESTMENT INCOME:
Interest Income. . . . . . . . . . . . . . . . . $ 124,066
EXPENSES:
Investment Adviser Fees (note B) . . . . . . . . $ 5,481
Administrator Fees (note B). . . . . . . . . . . 5,481
Audit and Accounting Fees. . . . . . . . . . . . 2,500
Transfer and Shareholder Servicing Agent Fees. . 747
Custodian Fees . . . . . . . . . . . . . . . . . 628
Legal Fees . . . . . . . . . . . . . . . . . . . 500
15,337
Fees waived by Investment Adviser (note B) . . . (1,108)
Fees waived by Administrator (note B). . . . . . (3,295)
Reimbursement of expenses by Administrator (note B)(2,188)
Net expenses . . . . . . . . . . . . . . . . . . 8,746
NET INVESTMENT INCOME. . . . . . . . . . . . $ 115,320
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
PRIME CASH FUND
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Year Ended December 31,
FROM INVESTMENT ACTIVITIES: 1996 1995
<S> <C> <C>
Net investment income . . . . . . . . . . . . $ 115,320 $ 3,851,571
Dividends to shareholders ($ 0.0045
and $ .0552 per share, respectively) . . . . 115,320 (3,851,571)
Change in net assets derived from
investment activities ---- -----
<CAPTION>
FROM FUND SHARE TRANSACTIONS:
SHARES
Year Ended December 31,
1996 1995
<S> <C> <C> <C> <C>
Shares sold . . . . . . . 1,059 170,912,151 1,059 170,912,151
Shares redeemed . . . (30,008,702) (179,309,010) (30,008,702) (179,309,010)
Decrease in shares and
net assets derived
from Fund share
transactions (30,007,643) (8,396,859) (30,007,643) (8,396,859)
Net decrease in net
assets. . . . . . . (30,007,643) (8,396,859)
<CAPTION>
NET ASSETS:
<S> <C> <C>
Beginning of Year . . . . . . 30,008,644 38,405,503
End of Year . . . . . . . . . $ 1,001 $ 30,008,644
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PRIME CASH FUND
NOTES TO FINANCIAL STATEMENTS
Note A - Summary of Significant Accounting Policies:
Prime Cash Fund (the "Fund") was organized on September 10, 1982 as a
Massachusetts business trust authorized to issue an unlimited number of
shares, and commenced operations on April 12, 1983 as a diversified,
open-end investment company. The Fund ceased operations on February 1, 1996
inasmuch as all shares outstanding, except for 1,001 shares owned by Aquila
Management Corporation, had been redeemed by shareholders. Although the
Fund is not conducting a public offering of it shares, it will continue its
existence as a Massachusetts business trust and maintain its registration as
an investment company.
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 were 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, approximated 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 were included in interest income.
(2) Securities transactions and related investment income: Security
transactions were recorded on the trade date. Realized gains and losses
from securities transactions were reported on the identified cost basis.
Interest income was recorded daily on the accrual basis and was adjusted
for amortization of premiums and accretion of discounts as discussed in
the preceding paragraph.
(3) Federal income taxes: The Fund qualified as a regulated investment
company by complying with the provisions of the Internal Revenue Code
applicable to certain investment companies. The Fund made distributions
of income and securities profits sufficient to relieve it from all, or
substantially all, federal income and excise taxes.
(4) Repurchase agreements: The Fund monitored closely the creditworthiness
of all firms with which it entered into repurchase agreements, and took
possession of, or otherwise perfected its security interest in,
securities purchased under agreements to resell. The securities
purchased under agreements to resell were marked to market every
business day so that the value of the "collateral" was 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 was 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
<PAGE>
PRIME CASH FUND
NOTES TO FINANCIAL STATEMENTS
(continued)
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.
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, 1996.
For the year ended December 31, 1996, the Fund incurred fees under
the Advisory Agreement and Administration Agreement of $ 5,481 and $ 5,481,
respectively. During this period, the Adviser and Administrator voluntarily
waived fees of $ 1,108 and $ 3,295, respectively, and the Administrator
voluntarily agreed to reimburse the Fund for other expenses in the amount
of $ 2,188.
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:
During the period from January 1, 1996 through January 31, 1996, the
Fund declared dividends daily from net investment income and made payment at
the end of the period.
Report on the Annual Meeting of Shareholders (unaudited)
The Annual Meeting of Shareholders of Prime Cash Fund ("the Fund") was
held on December 23, 1996*. At the meeting, the following matters were
submitted to a shareholder vote and approved by a unanimous vote of the
Fund's outstanding voting securities: (i) the election of Lacy B. Herrmann,
Paul Y. Clinton, and Theodore T. Mason as Trustees to hold office until the
next annual meeeting of the Fund's shareholders or until his or her successor
is duly elected, 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, 1996.
* On the record date for this meeting, 1,001 shares of the Fund were
outstanding and entitled to vote. The holders of 1,001 shares (100%)
entitled to vote were present in person or by proxy at the meeting.
Federal Tax Status of 1996 Dividends (unaudited)
The total amount of dividends declared in 1996 by Prime Cash Fund is
taxable as ordinary dividend income for Federal income tax purposes.
<PAGE>
PRIME CASH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For a share outstanding throughout each year
Year Ended December 31,
1996 1995 1994 1993 1992
<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 0.0045 0.0552 0.0370 0.0260 0.0327
Less Distributions:
Dividends from net investment
income. . . . . . . (0.0045) (0.0552) (0.0370) (0.0260) (0.0327)
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%
Ratios/Supplemental Data
Net Assets, End of Year
(in thousands) . . . 1 $ 30,009 $ 38,406 $ 67,170 $ 96,563
Ratio of Expenses to
Average Net Assets . * 0.45% 0.55% 0.61% 0.68%
Ratio of Net Investment Income to
Average Net Assets . * 5.55% 4.00% 2.60% 3.27%
<CAPTION>
* Results are not presented for 1996 inasmuch as the Fund was in operation
for only one month. 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:
<C> <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.
<PAGE>
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, as of December 31, 1996, 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. 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 A 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, 1996, 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
January 13, 1997
