<PAGE>
MANAGER AND FOUNDER
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
INVESTMENT SUB-ADVISER
Banc One Investment
Advisors Corporation
1111 Polaris Parkway
Columbus, Ohio 43240
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Thomas A. Christopher
Douglas Dean
Diana P. Herrmann
Carroll F. Knicely
Theodore T. Mason
Anne J. Mills
William J. Nightingale
James R. Ramsey
OFFICERS
Lacy B. Herrmann, President
Charles E. Childs, III, Senior Vice President
Diana P. Herrmann, Senior Vice President
John M. Herndon, Vice President
Jerry G. McGrew, Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER SERVICING AGENT
PFPC INC.
400 Bellevue Parkway
Wilmington, DE 19809
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG LLP
345 Park Avenue
New York, New York 10154
Further information is contained in the Prospectus which must precede or
accompany this report.
ANNUAL
REPORT
SEPTEMBER 30, 1999
CHURCHILL
CASH RESERVES
TRUST
[Logo of the Churchill Cash Reserves Trust: a standing Pegasus]
A CASH MANAGEMENT INVESTMENT
[Logo of the Aquila Group of Funds: an eagle's head in an oval]
ONE OF THE
AQUILASM GROUP OF FUNDS
</PAGE>
<PAGE>
[Logo of the Churchill Cash Reserves Trust: a standing Pegasus]
CHURCHILL CASH RESERVES TRUST
ANNUAL REPORT
November 18, 1999
Dear Investor:
We are pleased to provide you with the Annual Report for Churchill
Cash Reserves Trust for the fiscal year ended September 30, 1999.
The economic climate and the Federal Reserve's monetary policy once
again had an impact on the short-term debt markets during the Trust's current
report period.
Beginning in the fall of 1998, the Federal Reserve responded to the
economic turmoil in Southeast Asia, Russia, and Latin America with a three-step
interest rate reduction. Keeping a watchful eye on world events, the federal
funds rate was lowered 0.75 of 1% from 5.50% to 4.75% in order to maintain the
momentum of the U.S. economy by providing liquidity to the global financial
system. The difficulties experienced in these areas resulted in weak currencies
which helped keep U.S. inflation in check.
However, this spring, the Federal Reserve became concerned that the
U.S. economy might be growing too rapidly. Such rate of growth, coupled with low
unemployment, could lead to higher levels of inflation. This primarily would
result in increased stress on labor markets and would potentially put additional
upward pressure on wages and ultimately prices. In testimony before the Joint
Economic Committee of Congress, Federal Reserve Chairman Alan Greenspan, noted
that the financial markets had recovered from last fall's near paralysis that
caused the Fed to cut the federal fund's rate by 0.75 of 1%. He further
testified that unless something slows down the economy, a rise in inflation is
nearly inevitable. Indeed, on two occasions during the summer of 1999, the Fed
voted each time to raise short-term interest rates 0.25 of 1%. Then finally on
November 16th, the Fed voted again to raise rates for the third time this year.
The current target on the federal fund's rate is now 5.50% and the discount rate
is 5.00%.
As mentioned in previous report letters, yields on money market
funds like the Trust, move in concert with rate policies pursued by the Federal
Reserve. In slightly over a 12-month period, we have witnessed a complete market
interest rate cycle. First, three rate cuts last fall and then a subsequent
increase in rates this year. As a result, the Trust's yield has followed a
similar pattern. As of September 30, 1999, the Trust's average seven-day yield
was 4.90% compared to 4.49% for the seven-day period ended March 31, 1999 and
5.10% on September 30, 1998. As of the date of this report letter, the Trust's
seven-day yield is now 5.10%.
You can be assured that all those associated with the management of
Churchill Cash Reserves Trust will consistently work in the interest of your
investment in the Trust. We very much value you as a shareholder and appreciate
the confidence you have shown in Churchill Cash Reserves Trust.
Sincerely,
/s/ Lacy B. Herrmann
- ---------------------
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
</PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
Churchill Cash Reserves Trust:
We have audited the accompanying statement of assets and liabilities
of Churchill Cash Reserves Trust, including the statement of investments, as of
September 30, 1999, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust'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
September 30, 1999, by correspondence with the custodia n. 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.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Churchill Cash Reserves Trust as of September 30, 1999, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
- --------------
KPMG LLP
New York, New York
November 5, 1999
</PAGE>
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT COMMERCIAL PAPER - 58.35% VALUE
</CAPTION>
<S> <C> <C>
BANKING - 14.98%
$ 4,000,000 Banco de Galicia y Buenos Aires S.A., 5.375%, 10/22/99 + $ 3,987,458
Letter of Credit: Bayerische Hypo-und Vereinsbank AG
3,500,000 Banco Santander Puerto Rico, 5.390%, 10/12/99 3,494,236
4,000,000 Santander Finance (DE) Inc., 5.200%, 12/17/99 3,955,511
11,437,205
COMMERCIAL LOANS - 15.67%
2,500,000 Moat Funding LLC, 5.200%, 12/10/99 + 2,474,722
2,000,000 Moat Funding LLC, Variable Rate, 5.625%, 03/23/00 + 2,000,000
3,500,000 Repeat Offering Securitization Entity Inc., 5.350%, 10/04/99 + 3,498,439
4,000,000 Special Purpose Accounts Receivable Coop. Corp.,
5.19%, 10/14/99 + 3,992,503
11,965,664
ELECTRIC AND GAS UTILITIES - 5.23%
4,000,000 Duke Capital Corp., 5.370%, 10/15/99 + 3,991,647
SECURITIES ARBITRAGE - 3.25%
2,500,000 Sigma Finance Inc., 5.000%, 11/15/99 + 2,484,375
TRADE / TERM RECEIVABLES - 19.22%
3,750,000 Amsterdam Funding Corp., 5.960%, 01/13/00 + 3,685,433
3,500,000 Concord Minutemen Capital Company, LLC, 5.420%, 10/06/99 + 3,497,365
3,500,000 Old Line Funding Corp., 5.350%, 10/12/99 + 3,494,278
4,000,000 Sheffield Receivables Corp., 5.360%, 10/01/99 + 4,000,000
14,677,076
Total Commercial Paper 44,555,967
CERTIFICATES OF DEPOSIT - 10.48%
1,000,000 Bayerische Hypo-und Vereinsbank AG, 5.01%, 02/07/00 999,864
2,000,000 Bayerische Landesbank GZ, 5.12%, 03/21/00 1,999,503
4,000,000 Credit Suisse First Boston, 5.560%, 01/18/00 3,998,176
1,000,000 Den Danske Bank, 5.040%, 02/09/00 999,931
Total Certificates of Deposit 7,997,474
CORPORATE NOTES - 6.94%
5,300,000 Syndicated Loan Funding Trust, Variable Rate Note, 5.630%,
02/15/00 + 5,300,000
MEDIUM TERM NOTES - 21.23%
1,000,000 Bear Stearns Companies Inc - Series B, 5.320%, 05/19/00 1,000,000
1,000,000 Beta Finance Inc., 5.750%, 07/24/00 + 1,000,000
1,000,000 General Motors Acceptance Corp., 5.750%, 01/05/00 1,000,550
4,500,000 Lehman Brothers Holdings Inc., 6.050%, 04/28/00 4,510,933
3,700,000 Liberty Lighthouse US Capital Co LLC, Variable Rate, 5.625%,
09/25/00 + 3,700,000
1,500,000 Sigma Finance Inc., 5.410%, 03/13/00 + 1,500,000
3,500,000 Structured Products Asset Return Certificates-Series 99-4,
Variable Rate, 5.391%,1/24/2000 3,500,000
Guaranteed by: Credit Suisse Financial Products
Total Medium Term Notes 16,211,483
REPURCHASE AGREEMENTS - 2.98%
2,272,000 Westdeutsche Landesbank GZ, 5.400%, 10/01/99 2,272,000
(Proceeds of $2,272,341 to be received at maturity)
Collateral: $2,346,000 U.S. Treasury Bonds, 5.500%, due
03/15/03
(collateral market value $2,318,387)
Total Investments (cost $76,336,924*) 99.98% 76,336,924
Other assets in excess of liabilities .02 18,999
Net Assets 100.00% $ 76,355,923
</TABLE>
* Cost for Federal tax purposes is identical.
+ Pursuant to Rule 144A, resale is restricted to qualified
institutional buyers.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investments at value (cost $76,336,924) $ 76,336,924
Cash 604
Interest receivable 376,047
Other assets 5,623
Total assets 76,719,198
LIABILITIES
Dividends payable 304,531
Accrued expenses 32,319
Management fee payable 26,425
Total liabilities 363,275
NET ASSETS (equivalent to $1.00 per share on 76,346,862 shares outstanding) $ 76,355,923
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares,
par value $.01 per share $ 763,469
Additional paid-in capital 75,588,706
Undistributed net investment income 3,748
$ 76,355,923
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
INVESTMENT INCOME:
Interest Income $ 5,087,880
Expenses:
Management fee (note 2) $ 479,780
Trustees' fees and expenses 46,431
Legal fees 33,389
Audit and accounting fees 19,050
Transfer and shareholder servicing agent fees 11,601
Custodian fees 11,342
Shareholders' reports 9,991
Registration fees and dues 8,092
Insurance 3,980
Miscellaneous 7,185
630,841
Management fee waived (note 2) (52,894)
Expenses paid indirectly (note 4) (2,228)
Net expenses 575,719
Net investment income 4,512,161
Net realized gain from securities transactions 1,002
Net increase in net assets resulting from operations $ 4,513,163
See accompanying notes to financial statements.
</PAGE>
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1999 1998
</CAPTION>
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income $ 4,512,161 $ 6,313,930
Dividends to shareholders from net investment income
($0.0469 and $0.0513 per share, respectively) (4,512,161) (6,313,930)
Net realized gain from securities transactions 1,002 8,059
Change in net assets derived from investment activities 1,002 8,059
FROM CAPITAL SHARE TRANSACTIONS:
SHARES
YEAR ENDED SEPTEMBER 30,
1999 1998
Proceeds from shares sold 227,485,121 329,102,190 227,485,121 329,102,190
Reinvested dividends 558 611 558 611
Cost of shares redeemed (254,997,252) (350,636,409) (254,997,252) (350,636,409)
Change in net assets from
capital share transactions (27,511,573) (21,533,608) (27,511,573) (21,533,608)
Change in net assets (27,510,571) (21,525,549)
NET ASSETS:
Beginning of period 103,866,494 125,392,043
End of period $ 76,355,923 $ 103,866,494
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
CHURCHILL CASH RESERVES TRUST
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Churchill Cash Reserves Trust (the "Trust"), a diversified, open-end
investment company, was organized on January 4, 1985, as a Massachusetts
business trust and is authorized to issue an unlimited number of shares. The
Trust commenced operations on July 9, 1985.
The following is a summary of significant accounting policies followed
by the Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.
a) PORTFOLIO VALUATION: The Trust'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.
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 premiums and accretion of discounts as discussed in the
preceding paragraph.
c) FEDERAL INCOME TAXES: It is the policy of the Trust to qualify as a
regulated investment company by complying with the provisions of the
Internal Revenue Code applicable to certain investment companies. The Trust
intends to make distributions of income and securities profits sufficient
to relieve it from all, or substantially all, Federal income and excise
taxes.
d) REPURCHASE AGREEMENTS: It is the Trust'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 in order to compare the value of the collateral to the amount
of the "loan" (repurchase agreements being defined as "loans" in the 1940
Act), including the accrued interest earned thereon. If the value of the
collateral is less than 102% of the loan plus the accrued interest thereon,
additional collateral is required from the borrower.
e) 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 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.
</PAGE>
<PAGE>
2. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Aquila Management Corporation (the "Manager"), the Trust's founder and
sponsor, serves as the Manager for the Trust under an Advisory and
Administration Agreement with the Trust. The portfolio management of the Trust
has been delegated to a Sub-Adviser as described below. Under the Advisory and
Administration Agreement, the Manager provides all administrative services to
the Trust, other than those relating to the day-to-day portfolio management. The
Manager's services include providing the office of the Trust and all related
services as well as overseeing the activities of the Sub-Adviser and all the
various support organizations to theTrust such as the shareholder servicing
agent, custodian, legal counsel, auditors and distributor and additionally
maintaining the Trust's accounting books and records. 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 0.50 of 1% on the Trust's
net assets.
Banc One Investment Advisors Corporation (the "Sub-Adviser") serves as
the Investment Sub-Adviser for the Trust under a Sub-Advisory Agreement between
the Manager and the Sub-Adviser. Under this agreement, the Sub-Adviser
continuously provides, subject to oversight of the Manager and the Board of
Trustees of the Trust, the investment program of the Trust and the composition
of its portfolio, arranges for the purchases and sales of portfolio securities,
and provides for daily pricing of the Trust's portfolio.
For its services, the Sub-Adviser is entitled to receive a fee from the Manager
which is payable monthly and computed as of the close of business each day at
the annual rate of 0.33 of 1% on the Trust's net assets.
For the year ended September 30, 1999, the Trust incurred fees for
advisory and administrative services of $479,780 of which $52,894 was
voluntarily waived. Specific details as to the nature and extent of the services
provided by the Manager and the Sub-Adviser are more fully defined in the
Trust's Prospectus and Statement of Additional Information.
On August 10, 1999, BANK ONE CORPORATION, the Sub-Adviser's parent,
purchased the Trust's $5,000,000 investment in General American Life Insurance
Co. ("General American") at par plus accrued interest for a total amount of
$5,008,204. At that time, General American's bond-like investments called
"short-term funding agreements" had been downgraded by the rating agencies and
therefore were no longer considered an eligible investment for the Trust.
Under a Distribution Agreement, Aquila Distributors, Inc. (the
"Distributor") serves as the exclusive distributor of the Trust's shares. No
compensation or fees are paid by the Trust to the Distributor for such share
distribution.
3. DISTRIBUTIONS
The Trust 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.
4. EXPENSES
The Trust has negotiated an expense offset arrangement with its
custodian, Bank One Trust Company, N.A., an affiliate of the Adviser, wherein it
receives credit toward the reduction of custodian fees and other Trust 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 Trust to invest, to the extent
practicable, some or all of cash balances in income-producing assets rather
than leave cash on deposit.
</PAGE>
<PAGE>
CHURCHILL CASH RESERVES TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
Income from Investment Operations:
Net investment income 0.0469 0.0513 0.0499 0.0500 0.0526
Total from Investment Operations 0.0469 0.0513 0.0499 0.0500 0.0526
Less Distributions:
Dividends from net investment income (0.0469) (0.0513) (0.0499) (0.0500) (0.0526)
Total Distributions (0.0469) (0.0513) (0.0499) (0.0500) (0.0526)
Net Asset Value, End of Period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
Total Return (%) 4.79 5.25 5.11 5.12 5.39
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 76,356 103,866 125,392 120,939 146,130
Ratio of Expenses to Average Net
Assets (%) 0.60 0.60 0.60 0.56 0.58
Ratio of Net Investment Income to
Average Net Assets (%) 4.70 5.13 4.99 5.02 5.24
The expense and net investment income ratios without the effect of the Manager's
voluntary waiver of a portion of fees were:
Ratio of Expenses to Average Net
Assets (%) 0.66 0.63 0.66 0.63 0.62
Ratio of Net Investment Income to
Average Net Assets (%) 4.65 5.10 4.93 4.94 5.20
</TABLE>
Note: Effective July 19, 1995, Banc One Investment Advisors Corporation
became the Trust's Investment Adviser replacing PNC Bank, Kentucky, Inc. and
effective on June 5,1998, pursuant to new management arrangements, was
appointed as the Trust's Investment Sub-Adviser.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
PREPARING FOR YEAR 2000 (UNAUDITED)
The Trustees and officers of the Trust have been monitoring issues
involving preparedness for the turn of the century for some time in an effort to
minimize any potential impact upon the Trust and its shareholders. Our officers
have focussed significant time and effort in order that the various computerized
functions that could affect the Trust are ready by the beginning of the year
2000.
The Trust is highly reliant on certain mission-critical suppliers'
services. Each supplier of these services has provided the Trust's officers with
assurances that it is actively addressing potential problems relating to the
year 2000. The officers, in turn, are monitoring and will continue to monitor
the progress of its suppliers.
The Trust has NOT incurred, nor is anticipated to incur, any costs
related to Y2K. All such costs are being incurred by the respective vendors.
As you can well understand, we cannot directly control our supplier
operations. We assure you, however, that we recognize a responsibility to inform
our shareholders if in the future we become aware of any developments which
would lead us to believe that the Trust will be significantly affected by year
2000 problems.
We will continue to keep you up-to-date through future
communications.
FEDERAL TAX STATUS OF DIVIDENDS (UNAUDITED)
This information is presented in order to comply with a requirement
of the Internal Revenue Code AND NO CURRENT ACTION ON THE PART OF THE
SHAREHOLDERS IS REQUIRED.
For the fiscal year ended September 30, 1999, the total amount of
dividends paid by Churchill Cash Reserves Trust was ordinary dividend income.
Prior to January 31, 2000, shareholders will be mailed IRS Form
1099-DIV which will contain information on the status of dividends paid for the
1999 CALENDAR YEAR.
</PAGE>
