INVESTMENT ADVISER
BANC ONE INVESTMENT
ADVISORS CORPORATION
1111 Polaris Parkway
Columbus, Ohio 43240
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
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, DE 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.
SEMI-ANNUAL
REPORT
MARCH 31, 1998
CHURCHILL
CASH RESERVES
TRUST
A CASH MANAGEMENT INVESTMENT
[Logo of Churchill Cash Reserves Trust: Standing Pegasus]
[Logo of Aquila Group of Funds: an Eagle's Head]
ONE OF THE
AQUILAsm GROUP OF FUNDS
<PAGE>
[Logo of Churchill Cash Reserves Trust: Standing Pegasus]
CHURCHILL CASH RESERVES TRUST
SEMI-ANNUAL REPORT
May 6, 1998
Dear Investor:
We are pleased to provide you with the Semi-Annual Report for Churchill
Cash Reserves Trust for the six-month period ended March 31, 1998.
The current period was marked by increasing volatility in the
world financial markets. Most significant was the impact of the Asian
financial crisis, which caused currency values to plunge and sent financial
markets into turmoil. It is hard to believe the magnitude of the currency
depreciation that has taken place in various countries versus the U.S.
dollar. The currency deterioration against the U.S. dollar has ranged from
10% to well over 70% with various countries around the world. The impact of
the Asian crisis on the U.S. economy and its continued expansion remains a
factor that can not be ignored. Thirty percent of U.S. exports go to Asia
and, now after the currency devaluations, consumers in that region have
significantly less in the way of purchasing power. As a result, some U.S.
firms could find demand for their exports weakening while at the same time
cheaper goods coming from Asia should force U.S. competitors to lower their
prices. With fewer U.S. exports and greater imports, the Federal Reserve is
hoping the economy will slow on its own from its torrid pace and that the
current low level of inflation we have experienced over the past several
years will continue.
The lack of monetary action policy by the Fed during the Asian
financial crisis kept short-term interest relatively stable during the first
half of the current fiscal year. 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. At March 31, 1998, the seven-day
yield of the Trust was 5.15% compared to 5.21% for the seven-day period
ending September 30, 1997.
Since taking over as the Trust's Investment Adviser in July 1995,
Banc One Investment Advisors has acted with a high level of prudence in
examining the creditworthiness and marketability of all issuers of securities
utilized in the Trust's investment portfolio. Investors in the Trust can
take comfort in knowing that those securities in the Trust's portfolio will
be chosen on the basis of possessing high quality and minimal credit risk in
order to ensure maximum safety for investors' cash reserves.
Your use of Churchill Cash Reserves Trust is greatly appreciated.
You can be assured that every effort will be expended by all associated with
the Trust to merit your continued confidence.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENT OF INVESTMENTS
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT COMMERCIAL PAPER - 62.8% VALUE
<S> <C> <C>
Art Auction - 3.8%
$4,500,000 Sotheby's Inc., 5.62%, 04/03/98 $ 4,498,595
Automotive - 4.2%
5,000,000 American Honda Finance Corp., 5.50%, 04/16/98 4,988,542
Brokerage - 1.2%
1,500,000 Lehman Brothers Holdings Inc., 5.45%, 08/19/98 1,468,208
Chemicals - 4.2%
5,000,000 Azko Nobel, Inc., 5.51%, 06/2/98 4,952,553
Computers - 4.2%
5,000,000 CSC Enterprises, 5.50%, 04/03/98 4,998,472
Electric and Gas Utility - 5.0%
6,000,000 Cogentrix of Richmond, Inc., 5.57%, 04/20/98
Letter of Credit : Banque Paribas 5,982,362
Electronics - 3.4%
4,000,000 Hitachi Credit America Corp., 5.55%, 04/23/98 3,986,433
Finance - 23.3%
2,000,000 Banner Receivables Corp., 5.75%, 04/03/98 + 1,999,361
3,660,000 Banner Receivables Corp., 5.75%, 04/20/98 + 3,648,893
5,139,000 Broadway Capital Corp., 5.77%, 04/06/98 + 5,134,882
5,000,000 Gotham Funding Corp., 5.77%, 04/15/98 + 4,988,780
6,000,000 Lexington Parker Capital Co. LLC, 5.49%,
08/21/98 + 5,870,070
6,000,000 Old Line Funding Corp., 5.55%, 04/08/98 + 5,993,525
27,635,511
Insurance - 4.2%
5,000,000 SAFECO Credit Co. Inc., 5.48%, 05/06/98 4,973,361
Real Estate - 9.3%
5,000,000 Countrywide Funding Corp., 5.57%, 04/15/98 4,989,169
6,000,000 75 State Street Capital Corp., 5.57%, 04/22/98 5,980,505
Letter of Credit : Banque Paribas 10,969,674
Total Commercial Paper 74,453,711
CERTIFICATES OF DEPOSIT - 11.4%
2,000,000 Bankers Trust Company, 5.91%, 08/07/98 1,999,732
3,000,000 Bayerische Landesbank, 5.70%, 10/06/98 2,999,112
3,000,000 National Westminster Bank PLC, NY Branch,
5.85%, 07/22/98 2,998,929
5,500,000 Societe Generale NY Branch, 5.96%, 09/15/98 5,502,006
Total Certificates of Deposit 13,499,779
CORPORATE NOTES - 10.6%
1,625,000 American Express Credit Corp., 7.375%, 02/01/99 1,645,959
3,300,000 Comerica Bank, 6.75%, 5/12/98 3,303,149
2,715,000 Deutsche Bank Finance NV, 6.375%, 12/23/98 2,724,405
1,000,000 Fleet Financial Group, 6.00%, 10/26/98 1,002,322
2,605,000 Morgan Stanley Group, 6.125%, 01/05/99 2,608,539
1,250,000 National Australia Bank, NY Branch, 9.70%,
10/15/98 1,275,363
Total Corporate Notes 12,559,737
MEDIUM TERM NOTES - 8.1%
4,175,000 Lehman Brothers Holdings, 6.65%, 7/14/98 4,182,617
1,400,000 Salomon Inc., 6.22%, 11/19/98 1,404,376
2,000,000 Salomon Inc., 6.30%, 02/01/99 2,006,371
2,000,000 Salomon Inc., 6.22%, 03/01/99 2,051,673
Total Medium Term Notes 9,645,037
REPURCHASE AGREEMENTS - 6.9%
8,245,000 CIBC/Wood Gundy, 5.95%, 04/01/98 8,245,000
(Proceeds of $8,246,363 to be received at
maturity)
Collateral: $5,682,000 U.S.Treasury Notes,
12.00%, due 08/15/13
(Collateral Market Value $ 8,434,527)
Total Repurchase Agreements 8,245,000
Total Investments (cost $118,403,264*) 99.8% 118,403,264
Other assets in excess of liabilities 0.2 214,696
Net Assets 100.0% $118,617,960
<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
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments at value (cost $118,403,264) $118,403,264
Cash 384
Interest receivable 793,041
Other assets 9,087
Total assets 119,205,776
LIABILITIES
Dividends payable 511,594
Adviser and Administrator fees payable 44,709
Accrued expenses 31,513
Total liabilities 587,816
NET ASSETS (equivalent to $1.00 per share on 118,617,960
shares outstanding) $118,617,960
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares,
par value $.01 per share $ 1,186,180
Additional paid-in capital 117,431,780
$118,617,960
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest Income $3,953,532
Expenses:
Investment Adviser fees (note 2) $ 226,704
Administrator fees (note 2) 116,787
Trustees' fees and expenses 26,000
Legal fees 20,500
Audit and accounting fees 13,000
Shareholders' reports and proxy statements 8,000
Transfer and shareholder servicing agent fees 7,000
Registration fees and dues 5,000
Custodian fees (note 4) 3,384
Insurance 1,100
Miscellaneous 9,240
436,715
Investment Advisory fees waived (note 2) (14,849)
Administrator fees waived (note 2) (7,649)
Expenses paid indirectly (note 4) (2,224)
Net expenses 411,993
Net investment income $3,541,539
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CHURCHILL CASH RESERVES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income $ 3,541,539 $ 6,300,372
Dividends to shareholders ($0.0257 and $0.0499
per share, respectively) (3,541,539) (6,300,372)
Change in net assets derived from investment activities - -
FROM CAPITAL SHARE TRANSACTIONS:
<CAPTION>
SHARES
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997
<S> <C> <C> <C> <C>
Proceeds from shares sold 223,085,545 334,569,913 223,085,545 334,569,913
Reinvested dividends 9 27 9 27
Cost of shares redeemed (229,859,637) (330,116,590) (229,859,637) (330,116,590)
Change in net assets from
capital share transactions (6,774,083) 4,453,350 (6,774,083) 4,453,350
Change in net assets (6,774,083) 4,453,350
NET ASSETS:
Beginning of period 125,392,043 120,938,693
End of period $118,617,960 $125,392,043
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CHURCHILL CASH RESERVES TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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
six months ended March 31, 1998.
For the six months ended March 31, 1998, the Trust incurred fees under
the Advisory Agreement and Administration Agreement of $226,704 and $116,787,
respectively, of which the Adviser and Administrator voluntarily waived
$14,849 and $7,649, 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 six months ended March 31, 1998, the
Trust's custodian fees amounted to $3,384, of which $2,224 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
(UNAUDITED)
For a share outstanding throughout each period
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
3/31/98 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
Income from Investment Operations:
Net investment income 0.0257 0.0499 0.0500 0.0526 0.0319 0.0265
Net gain (loss) on securities (both
realized and unrealized) - - - - - -
Total from Investment Operations 0.0257 0.0499 0.0500 0.0526 0.0319 0.0265
Less Distributions:
Dividends from net investment income (0.0257) (0.0499) (0.0500) (0.0526) (0.0319) (0.0265)
Distributions from capital gains - - - - - -
Total Distributions (0.0257) (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 $1.0000
Total Return (%) 2.60+ 5.11 5.12 5.39 3.24 2.68
Ratios/Supplemental Data
Net Assets, End of Period
($ thousands) 118,618 125,392 120,939 146,130 187,626 187,274
Ratio of Expenses to Average Net
Assets (%) 0.60* 0.60 0.56 0.58 0.60 0.60
Ratio of Net Investment Income to
Average Net Assets (%) 5.16* 4.99 5.02 5.24 3.17 2.65
<CAPTION>
For the six months ended March 31, 1998 and 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> <C>
Net investment income ($) 0.0255 0.0493 0.0493 0.0522
Ratio of Expenses to Average Net
Assets (%) 0.64* 0.66 0.63 0.62
Ratio of Net Investment Income to
Average Net Assets (%) 5.12* 4.93 4.94 5.20
<FN> + Not annualized. </FN>
<FN> * Annualized. </FN>
</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.
