INVESTMENT ADVISER
BANC ONE INVESTMENT
ADVISORS CORPORATION
1111 Polaris Parkway
Columbus, Ohio 43271-0211
ADMINISTRATOR AND FOUNDER
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue, Suite 2300
New York, New York 10017
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Thomas A. Christopher
Douglas Dean
Diana P. Herrmann
Ann R. Leven
Theodore T. Mason
Anne J. Mills
William J. Nightingale
James R. Ramsey
OFFICERS
Lacy B. Herrmann, President
Diana P. Herrmann, Vice President
Charles E. Childs, III, 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, Delaware 19809
CUSTODIAN
BANK ONE TRUST COMPANY, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG PEAT MARWICK 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, 1997
CHURCHILL
CASH RESERVES
TRUST
A CASH MANAGEMENT INVESTMENT
[Logo of Churchill Cash Reserves Trust: Standing Pegasus]
[Logo of Aquila Group of Funds: Eagle's Head]
ONE OF THE
AQUILAsm GROUP OF FUNDS
<PAGE>
[Logo of Churchill Cash Reserves Trust: Standing Pegasus]
CHURCHILL CASH RESERVES TRUST
ANNUAL REPORT
November 17, 1997
Dear Investor:
We are pleased to provide you with the Annual Report for
Churchill Cash Reserves Trust for the fiscal year ended September 30, 1997.
1997 began with investors wondering whether the brisk U.S.
economic growth of the 4th quarter of 1996 would carry over into the new
year. Indeed, as key indicators revealed continued strength in the economy,
forecasts of economic growth were revised upward as business activity and
consumer spending continued to expand. By the end of the first quarter, the
economy had barrelled ahead at a 4.9% annualized pace, its fastest in recent
years. But as investors have come to realize, good news for the economy is
bad news for the financial markets since strong economic growth can rekindle
higher inflation. Concerned that a continued strong economy and low
unemployment would potentionally put additional upward pressure on wages and
ultimately prices, the Federal Reserve voted on March 25th to raise
short-term interest rates for the first time in more than two years. However,
despite the early warning signs of potentially higher inflation, the Fed has
since left interest rates unchanged in recent months because actual gauges of
prices have remained stable or in some cases have fallen.
Without a significant policy change in interest rates, the
Trust's Investment Adviser, Banc One Investment Advisors Corporation,
continues to take advantage whenever possible, of any increase in short-term
interest rates by purchasing longer-maturity securities. This strategy
increased the Trust's average weighted maturity from 55 days on March 31,
1997 to a more aggressive 66 days on September 30, 1997. As of the end of the
current fiscal year, the Trust's seven-day yield was 5.21% compared to 5.03%
for the same period ended September 30, 1996.
Looking forward, we are optimistic that the Trust will continue
to provide investors attractive yields compared to alternative money market
investments. Through alertness to market opportunities, the Trust can produce
a highly competitive return for its investors without compromising safety.
All associated with Churchill Cash Reserves Trust pledge to you
our continued diligence in the operation of the Trust for your benefit. Your
confidence in Churchill Cash Reserves Trust is most valued and appreciated.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
<PAGE>
KPMG Peat Marwick LLP
Certified Public Accountants
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, 1997, 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 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, 1997, 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, 1997, 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
October 31, 1997
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
FACE
AMOUNT COMMERCIAL PAPER (70.0%) VALUE
<C> <S> <C>
Art Auction (4.8%)
$6,000,000 Sotheby's Inc., 5.59%, 10/01/97 $ 6,000,000
Banking (8.7%)
5,000,000 Banco Rio de la Plata S.A., 5.36%, 10/31/97 4,977,667
Letter of Credit: Bayerische Vereinsbank
6,000,000 Government Development Bank of Puerto Rico,
5.56%, 11/14/97 5,959,227
10,936,894
Brokerage (5.5%)
2,000,000 Goldman Sachs Group L.P., 5.78%, 01/13/98 1,966,604
5,000,000 Lehman Brothers Holdings Inc., 5.75%, 10/02/97 4,999,202
6,965,806
Computers (4.0%)
5,000,000 CSC Enterprises, 5.57%, 11/10/97 4,969,057
Electric and Gas Utility (9.5%)
6,000,000 AES Shady Point Inc., 5.58%, 10/03/97 5,998,140
Letter of Credit: Bank of Tokyo -
Mitsubishi, Ltd.
6,000,000 Cogentrix of Richmond, Inc., 5.64%, 10/23/97 5,979,320
Letter of Credit: Banque Paribas
11,977,460
Finance (19.1%)
5,980,000 Banner Receivables Corp., 5.59%, 10/16/97# 5,966,072
6,000,000 Gotham Funding Corp., 5.58%, 10/10/97# 5,991,630
6,000,000 Madison Funding Corp., 5.63%, 10/20/97# 5,982,172
6,000,000 Sanwa Business Credit Corp., 5.70%, 10/16/97 5,985,750
23,925,624
Insurance (4.8%)
6,000,000 SAFECO Credit Co. Inc., 5.62%, 10/17/97 5,985,014
Oil (4.0%)
5,000,000 Petroleo Brasileiro S.A.- Petrobras,
Series C, 5.68%, 10/02/97 4,999,212
Letter of Credit: Barclays Bank PLC
<PAGE>
Real Estate (9.6%)
6,000,000 75 State Street Capital Corp., 5.62%,
10/01/97, 6,000,000
Letter of Credit: Banque Paribas
6,000,000 SRD Finance Inc., 5.60%, 10/02/97 5,999,068
Letter of Credit: Sumitomo Bank, Ltd.
11,999,068
Total Commercial Paper 87,758,135
MEDIUM TERM NOTES (12.8%)
5,000,000 Bear Stearns Companies Inc., 5.38%, 03/18/98 5,000,000
5,000,000 IBM Credit Corp., 5.75%, 01/20/98 4,999,582
6,000,000 Merrill Lynch & Co. Inc., 5.41%, 03/04/98 6,000,106
Total Medium Term Notes 15,999,688
CERTIFICATES OF DEPOSIT (11.5%)
4,000,000 Bankers Trust Company, 5.92%, 07/17/98 3,999,092
2,000,000 Bankers Trust Company, 5.91%, 08/07/98 1,999,350
3,000,000 National Westminster Bank PLC, NY Branch,
5.85%, 07/22/98 2,997,190
5,500,000 Societe Generale NY Branch, 5.96%, 09/15/98 5,504,192
Total Certificates of Deposit 14,499,824
CORPORATE NOTES (5.6%)
2,000,000 Comerica Bank, 6.75%, 05/12/98 2,009,475
4,000,000 First Chicago NBD Corp., 8.50%, 06/01/98 4,059,300
1,000,000 Lehman Brothers Holdings Inc., 5.75%, 02/15/98 999,129
Total Corporate Notes 7,067,904
REPURCHASE AGREEMENTS (0.3%)
360,000 Aubrey G. Lanston & Co., 6.05%, 10/01/97 360,000
(Proceeds of $ 360,060 to be received
at maturity)
Collateral: $ 346,000 U.S.Treasury Notes,
7.625%, due 02/15/07
(Collateral Market Value $ 368,000)
Total Repurchase Agreements 360,000
Total Investments (cost
$125,685,551*) 100.2% 125,685,551
Liabilities in excess of
other assets (.2) (293,508)
Net Assets 100.0% $ 125,392,043
<FN> * Cost for Federal income tax purposes is identical. </FN>
<FN> # Pursuant to Rule 144A, resale is restricted to qualified
institutional buyers.</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
ASSETS
Investments at value (cost - $125,685,551) $ 125,685,551
Cash 659
Interest receivable 347,494
Other assets 9,096
Total assets 126,042,800
LIABILITIES
Dividends payable 565,648
Adviser and Administrator fees payable 54,782
Accrued expenses 30,327
Total liabilities 650,757
NET ASSETS (equivalent to $1.00 per share on
125,392,043 shares outstanding) $ 125,392,043
Net Assets consist of:
Capital Stock - Authorized an unlimited number
of shares, par value $.01 per share $ 1,253,920
Additional paid-in capital 124,138,123
$ 125,392,043
See accompanying notes to financial statements.
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
INVESTMENT INCOME:
Interest income $ 7,053,277
Expenses:
Investment Adviser fees (note 2) $ 417,092
Administrator fees (note 2) 213,857
Legal fees 49,886
Trustees' fees and expenses 49,552
Audit and accounting fees 25,050
Shareholders' reports and proxy statements 19,057
Registration fees and dues 13,223
Transfer and shareholder servicing agent fees 10,301
Custodian fees (note 4) 8,343
Insurance 3,019
Miscellaneous 26,645
836,025
Investment Advisory fees waived (note 2) (54,585)
Administration fees waived (note 2) (27,571)
Expenses paid indirectly (note 4) (964)
Net expenses 752,905
Net investment income $ 6,300,372
See accompanying notes to financial statements.
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
1997 1996
FROM INVESTMENT ACTIVITIES:
Net investment income $ 6,300,372 $ 7,917,182
Dividends to shareholders ($0.0499 and
$0.0500 per share, respectively) (6,300,372) (7,917,182)
Change in net assets derived from
investment activities - -
FROM CAPITAL SHARE TRANSACTIONS:
SHARES
YEAR ENDED SEPTEMBER 30,
1997 1996
Proceeds from shares
sold 334,569,913 584,601,557 334,569,913 584,601,557
Reinvested dividends 27 627,248 27 627,248
Cost of shares redeemed (330,116,590) (610,419,778) (330,116,590) (610,419,778)
Change in net assets
from capital share
transactions 4,453,350 (25,190,973) 4,453,350 (25,190,973)
Change in net assets 4,453,350 (25,190,973)
NET ASSETS:
Beginning of period 120,938,693 146,129,666
End of period $ 125,392,043 $ 120,938,693
See accompanying notes to financial statements.
<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 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.
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 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>
2. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under an Investment Advisory Agreement, Banc One Investment Advisors
Corporation (the "Adviser") became Adviser to the Trust, effective July 19,
1995. In this role, the Adviser supervises the investments and provides
various services to the Trust for which it 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 0.33 of 1% of the average daily net assets of the Trust.
The Trust also has an Administration Agreement with its founder and
sponsor, Aquila Management Corporation (the "Administrator"). Under this
Agreement, the Administrator provides all administration services, other than
those relating to the management of the Trust's investments. For its
services, the Administrator 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 0.17 of 1% of the average daily net assets of the Trust.
Specific details as to the nature and extent of the services provided by
the Adviser and the Administrator are more fully defined in the Trust's
Prospectus and Statement of Additional Information.
The Adviser and the Administrator each agree that the above fees shall be
reduced, but not below zero, by an amount equal to its proportionate share
(determined on the basis of the respective fees computed as described above)
of the amount, if any, by which the total expenses of the Trust in any fiscal
year, exclusive of taxes, interest and brokerage fees, shall exceed the
lesser of (i) 2.5% of the first $30 million of average net assets of the
Trust plus 2% of the next $70 million of such assets plus 1.5% of its average
annual net assets in excess of $100 million, or (ii) 25% of the Trust's total
annual investment income. No such reduction in fees was required during the
year ended September 30, 1997.
For the year ended September 30, 1997, the Trust incurred fees under the
Advisory Agreement and Administration Agreement of $417,092 and $213,857,
respectively, of which the Adviser and Administrator voluntarily waived
$54,585 and $27,571, respectively.
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 or in
cash, at the shareholder's option.
4. CUSTODIAN FEES
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 whenever there are
uninvested cash balances. During the year ended September 30, 1997, the
Trust's custodian fees amounted to $8,343, of which $964 was offset by such
credits. 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 with the custodian.
<PAGE>
CHURCHILL CASH RESERVES TRUST
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1997 1996 1995 1994 1993
<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 0.0499 0.0500 0.0526 0.0319 0.0265
Net gain (loss) on
securities (both
realized and
unrealized) - - - - -
Total from Investment
Operations 0.0499 0.0500 0.0526 0.0319 0.0265
Less Distributions:
Dividends from net
investment income (0.0499) (0.0500) (0.0526) (0.0319) (0.0265)
Distributions from
capital gains - - - - -
Total Distributions (0.0499) (0.0500) (0.0526) (0.0319) (0.0265)
Net Asset Value, End
of Period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
Total Return (%) 5.11 5.12 5.39 3.24 2.68
Ratios/Supplemental Data
Net Assets, End of
Period ($ thousands) 125,392 120,939 146,130 187,626 187,274
Ratio of Expenses to
Average Net Assets(%) 0.60 0.56 0.58 0.60 0.60
Ratio of Net Investment
Income to Average Net
Assets (%) 4.99 5.02 5.24 3.17 2.65
<CAPTION>
For the years ended September 30, 1997, 1996 and 1995, 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 expense
offset in custodian fees for uninvested cash balances, would have been:
<S> <C> <C> <C>
Net investment income
($) 0.0493 0.0493 0.0522
Ratio of Expenses to
Average Net Assets
(%) 0.66 0.63 0.62
Ratio of Net Investment
Income to Average Net
Assets (%) 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.
See accompanying notes to financial statements.
<PAGE>
REPORT ON THE ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
The Annual Meeting of Shareholders of Churchill Cash Reserves
Trust (the "Trust") was held on September 25, 1997.* At the meeting, the
following matters were submitted to a shareholder vote and approved:
(i) the election of Lacy B. Herrmann, Thomas A. Christopher,
Douglas Dean, Diana P. Herrmann, Ann R. Leven, Theodore T. Mason, Anne J.
Mills, William J. Nightingale, and James R. Ramsey as Trustees to hold office
until the next annual meeting of the Trust's shareholders or until his or her
successor is duly elected (each Trustee received 108,384,910.32 affirmative
votes (100.00%); no votes were withheld for any Trustee (0.00%)),
(ii) the ratification of the selection of KPMG Peat Marwick LLP
as the Trust's independent auditors for the fiscal year ending September 30,
1997 (votes for: 108,382,823.32 (99.998%); votes against: 2,087.00 (0.002%);
abstentions: 0.00 (0.00%); broker non-votes: 0.00 (0.00%)), and
(iii) the approval of proposed modifications of the Trust's
investment restrictions regarding investment of more than 5% of the Trust's
assets in the securities of a single issuer (votes for: 107,563,408.32
(99.24%); votes against: 821,502.00 (0.76%); abstentions: 0.00 (0.00%);
broker non-votes: 0.00 (0.00%)).
_____________________
* On the record date for this meeting, the holders of 127,336,103.99 shares
of the Trust were outstanding and entitled to vote. The holders of
108,384,910.32 shares (85.12%) entitled to vote were present in person or by
proxy at the meeting.
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, 1997, the total amount of
dividends paid by Churchill Cash Reserves Trust was ordinary dividend income.
Prior to January 31, 1998, shareholders will be mailed IRS Form
1099-DIV which will contain information on the status of dividends paid for
the 1997 CALENDAR YEAR.
<PAGE>
