(Letterhead of Alex. Brown)
June __, 1995
Dear Shareholder:
The Directors of the Alex. Brown Cash Reserve Fund, Inc. have
called for a shareholders meeting to vote on two proposals.
First, we are required to elect additional directors to provide
for the scheduled retirement of several of the existing directors,
some of whom have served on your Fund since inception in 1981.
We believe that you will be most pleased with the caliber of the
new directors who are described in the attached proxy statement.
Second, the Directors approved an increase in the fees for the
Fund. We are asking shareholders to vote in favor of this
increase based on the following explanation.
The Alex. Brown Cash Reserve Fund, Inc. is one of the oldest
money market funds in the country and has operated extremely well
since its inception. Recessions have come and gone and the Fund
has avoided any exposure to possible credit problems. The Fund
has never owned and will not own the exotic derivatives that
caused problems for some in 1994. Not all money funds have been
as successful.
The Fund's record is due partly to conservative policies. While
these are too numerous to list in a short letter, we want to
mention a few to give you the flavor of your fund. We own only
domestic securities. We limit holdings in any issuer to 4% of
the Fund compared to the 5% legal limit. We restrict our
weighted average maturity of the Fund to 60 days; the legal limit
is 90 days.
These policies are implemented with careful diligence. Computer
programs ensure compliance with many of the restrictions. The
portfolio managers and credit analysts report quarterly to the
Fund's directors and more often to a senior committee at the
Fund's advisor. The employees managing the Fund each have more
than ten years' experience with money funds. For all these
reasons, each series of the Fund has been awarded a AAA rating by
S&P.
Although we insist on safety of principal as our number one goal,
we have been able to generate very competitive yields for
shareholders. For the year ended March 31, 1995, each series
produced a yield that exceeded the average for the universe of
its particular type of money market fund as calculated by
IBC/Donoghue's.
Finally, Fund expenses for each series, as measured by the
expense ratios, are below the average for their respective
categories as calculated by IBC/Donoghue, and even with the
proposed fee increase will be below the average as calculated by
IBC/Donoghue.
These points are explained in the attached proxy. We encourage
you to read it carefully, and we ask you to join with the Fund's
directors and vote in favor of the proposal.
We thank you for your consideration.
Sincerely yours,
/s/ W. JAMES PRICE /s/ RICHARD T. HALE
- ------------------ -------------------
W. James Price Richard T. Hale
Chairman President
<PAGE> 1
PRELIMINARY COPY
ALEX. BROWN CASH RESERVE FUND, INC.
135 East Baltimore Street
Baltimore, Maryland 21202
----------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
JULY 25, 1995
TO THE SHAREHOLDERS OF ALEX. BROWN CASH RESERVE FUND, INC.
You are cordially invited to a Special Meeting of the Shareholders of
Alex. Brown Cash Reserve Fund, Inc. (the "Fund") on Tuesday, July 25, 1995 at
4:00 p.m. (Baltimore Time) in the Audio-Visual Room of Alex. Brown & Sons
Incorporated, One Thirty-Five East Baltimore Street, Baltimore, Maryland, 21202,
for the purpose of considering the proposals set forth below and for the
transaction of such other business as may be properly brought before the
meeting:
PROPOSAL 1: To consider and act upon a proposal to elect a Board
of Directors (voted on by the shareholders of the
Fund as a whole);
PROPOSAL 2: To approve or disapprove an amended investment
advisory agreement between the Fund and Investment
Company Capital Corp. with respect to the Prime
Series (voted by the shareholders of the Prime
Series);
PROPOSAL 3: To approve or disapprove an amended investment
advisory agreement between the Fund and Investment
Company Capital Corp. with respect to the Treasury
Series (voted by the shareholders of the Treasury
Series); and
PROPOSAL 4: To approve or disapprove an amended investment
advisory agreement between the Fund and Investment
Company Capital Corp. with respect to the Tax-Free
Series (voted by the shareholders of the Tax-Free
Series).
Only shareholders of the Fund at the close of business on June 9, 1995 are
entitled to notice of, and to vote at, this meeting or any adjournment thereof.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD. A POSTAGE PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE SO THAT YOU MAY RETURN YOUR PROXY CARD AS SOON AS
POSSIBLE. IT IS MOST IMPORTANT AND IN YOUR INTEREST FOR YOU TO SIGN YOUR PROXY
CARD AND RETURN IT SO THAT A QUORUM WILL BE PRESENT AND A MAXIMUM NUMBER OF
SHARES MAY BE VOTED. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE.
Brian C. Nelson
Secretary
Dated: June 21, 1995
<PAGE> 2
PRELIMINARY COPY
ALEX. BROWN CASH RESERVE FUND, INC.
135 East Baltimore Street
Baltimore, Maryland 21202
---------------------------
PROXY STATEMENT
---------------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD
JULY 25, 1995
This Proxy Statement is furnished by the Directors of Alex. Brown Cash
Reserve Fund, Inc. (the "Fund") in connection with their solicitation of proxies
for use at the Special Meeting of Shareholders of the Fund (the "Meeting") to be
held on Tuesday, July 25, 1995 at 4:00 p.m. (Baltimore Time), or at any
adjournment thereof, in the Audio-Visual Room of Alex. Brown & Sons
Incorporated, One Thirty-Five East Baltimore Street, Baltimore, Maryland, 21202.
It is expected that the Notice of Special Meeting, the Proxy Statement and the
Proxy Card will be mailed to Shareholders on or about June 21, 1995.
If you do not expect to be present at the Meeting and wish your Shares
to be voted, please date and sign the enclosed Proxy Card ("Proxy") and mail it
in the enclosed reply envelope, allowing sufficient time for the card to be
received on or before 4:00 p.m. (Baltimore time) on July 25, 1995. If the
accompanying Proxy is executed properly and returned, shares represented by it
will be voted at the Meeting in accordance with the instructions on the Proxy.
However, if no instructions are specified, shares will be voted for the election
of the Directors of the Fund (the "Directors") (Proposal 1), for the amended
investment advisory agreement with respect to the Prime Series (Proposal 2), for
the amended investment advisory agreement with respect to the Treasury Series
(Proposal 3) and for the amended investment advisory agreement with respect to
the Tax-Free Series (Proposal 4). Shareholders may revoke their Proxies at any
time prior to the time it is voted by giving written notice to the Secretary of
the Fund, by delivering a subsequently dated Proxy or by attending and voting at
the Meeting. Abstentions and broker non-votes are each included in the
determination of the number of shares present and voting at the Meeting.
All shareholders of the Fund are entitled to vote on Proposal 1.
Proposals 2, 3 and 4 require action by the shareholders of the Prime, Treasury
and Tax-Free Series, respectively, as shown below. The summary voting table
below sets forth all of the proposals to be acted upon and indicates which
Series shareholders are solicited with respect to each proposal.
Proposal Number Series
--------------- ------
1 Prime, Treasury and Tax-Free
2 Prime
3 Treasury
4 Tax-Free
<PAGE> 3
The close of business on June 9, 1995 has been fixed as the record date
for the determination of Shareholders entitled to notice of, and to vote at, the
Meeting and at any adjournment thereof. On that date, the Fund had
__________________ shares outstanding, consisting of ____________ shares
outstanding of the Prime Series, ______________ shares outstanding of the
Treasury Series and _____________ shares outstanding of the Tax-Free Series.
Each full share will be entitled to one vote at the Special Meeting and each
fraction of a share will be entitled to the fraction of a vote equal to the
proportion of a full share represented by the fractional share.
The expenses of the meeting will be borne by the Fund, except that the
incremental costs associated with Proposals 2 through 4 will be borne by
Investment Company Capital Corp. ("ICC" or the "Adviser"), and will include
reimbursement to brokerage firms and others for expenses in forwarding proxy
solicitation material to beneficial owners. The solicitation of Proxies will be
largely by mail, but may include, without cost to the Fund, telephonic,
telegraphic or oral communication by regular employees of the Adviser.
The Fund will furnish, without charge, a copy of its annual report for
its fiscal year ended March 31, 1995 to any shareholder requesting such report.
Request for the annual report should be made in writing to Alex. Brown Cash
Reserve Fund, Inc., P.O. Box 17250, Baltimore, Maryland, 21203 or by calling
1-800-553-8080.
The Fund is registered as an open-end diversified management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and its shares are registered under the Securities Act of 1933. The Fund offers
three series of shares (each a "Series" and collectively the "Series"): Prime
Series, Treasury Series and Tax-Free Series. ICC, 135 East Baltimore Street,
Baltimore, Maryland 21202, a wholly-owned subsidiary of Alex. Brown & Sons
Incorporated ("Alex. Brown" or the "Distributor"), acts as the Fund's investment
adviser to each of the Series pursuant to two separate Investment Advisory
Agreements currently in effect (the "Current Advisory Agreements"), one dated as
of April 4, 1990 with respect to the Prime Series and the Treasury Series and
one dated as of October 5, 1990 with respect to the Tax-Free Series. It is
proposed that shareholders approve amended investment advisory agreements with
respect to each of the Series to replace the Current Advisory Agreements. See
Proposals 2, 3 and 4 below.
2
<PAGE> 4
PROPOSAL 1: To consider and act upon a proposal to elect a Board of
Directors (voted on by the shareholders of the Fund as a whole);
At the Meeting, it is proposed that nine Directors will be elected to
hold office until their successors are duly elected and qualified. The persons
named in the accompanying Proxy intend, in the absence of contrary instructions,
to vote all proxies on behalf of the shareholders for the election of W. James
Price, Richard T. Hale, James J. Cunnane, N. Bruce Hannay, John F. Kroeger,
Louis E. Levy, Eugene J. McDonald, Rebecca W. Rimel and Harry Woolf. Messrs.
Price, Hale, Cunnane, Hannay, Kroeger, Levy, McDonald and Woolf are currently
members of the Board of Directors. Messrs. Price, Hale, Hannay, Kroeger and
Woolf were last elected by shareholders at a special meeting held on March 30,
1990. Mr. McDonald was elected by the Board on June 17, 1992. Mr. Levy was
elected by the Board on June 17, 1994. Mr. Cunnane was elected by the Board on
December 14, 1994. Alonzo G. Decker retired from the Board effective December
31, 1994. Ms. Rimel has not previously served on the Board and has not
previously been elected by the shareholders.
The proposal to elect the Board of Directors is being presented for
shareholder approval pursuant to requirements under the 1940 Act. In compliance
with the 1940 Act, shareholder meetings must be held within sixty days to elect
Directors whenever fewer than a majority of the Directors holding office have
been elected by the shareholders or, if necessary in the case of filling
vacancies, to assure that at least two-thirds of the Directors holding office
after such vacancies are filled have been elected by the shareholders. Because
the addition of Ms. Rimel raises the number of Directors to nine, of which five
have been elected by shareholders of the Fund, a shareholder meeting must be
held to elect Ms. Rimmel in order for the Board of Directors to comply with the
two-thirds requirement. The meeting also obviates the need to hold shareholder
meetings in the future to fill vacancies caused by prospective retirements.
Because the corporation does not hold regular annual shareholder
meetings, each nominee, if elected, will hold office until his successor is
elected and qualified. Under Maryland General Corporation Law, a corporation
registered under the 1940 Act is not required to hold an annual meeting in any
year in which the election of Directors is not required to be acted upon under
such Act. The Fund has availed itself of this provision and will achieve cost
savings by eliminating printing costs, mailing charges and other expenses
involved in routine annual meetings.
Even with the elimination of routine annual meetings, the Board of
Directors may call special meetings of shareholders for action by shareholder
vote as may be required by the 1940 Act, or required or permitted by the
Articles of Incorporation and By-Laws of the Fund. As described above,
shareholder meetings will be held to elect Directors under certain circumstances
in compliance with the 1940 Act. Shareholder meetings may also be held by the
Fund in order to approve investment policy changes, a new investment advisory
agreement or other matters requiring shareholder action under the 1940 Act.
A meeting may also be called by shareholders holding at least 10% of
the Shares entitled to vote at the meeting for the purpose of voting upon the
removal of Directors, in which case shareholders may receive assistance in
communicating with other shareholders as if the provisions contained in Section
16(c) of the 1940 Act applied. In addition, Maryland General Corporation Law
provides for the calling of a special meeting by the written request of
shareholders holding at least 25% of the Shares entitled to vote at the meeting.
Each of the nominees has consented to being named in this Proxy
Statement and to serving as a Director if elected. The Fund knows of no reason
why any nominee would be unable or unwilling to serve if elected. Should any of
the nominees become unable or unwilling to accept nomination or election, the
persons named in the proxy will exercise their voting power to vote for such
person or persons as the management of the Fund may recommend. Directors will be
elected by a majority of all votes cast at the Meeting provided that a majority
of shareholders entitled to vote is present in person or by Proxy at the
Meeting. If you give no voting instructions, your Shares will be voted for all
nominees named herein.
3
<PAGE> 5
Information Regarding Nominees
The following information is provided for each nominee. It includes his
or her name, position with the Fund, length of directorship (if applicable),
age, principal occupations or employment during the past five years,
directorships with other companies which file reports periodically with the
Securities and Exchange Commission, number of shares of the Fund beneficially
owned and percentage of shares of the Fund beneficially owned.
<TABLE>
<CAPTION>
Business Experience Shares of the Fund
Name and Position During the Past Five Years, Beneficially Owned
with the Fund Age Including all Directorships as of June 2, 1995 Percentage
------------------- ----- ----------------------------- -------------------- -------------
<S> <C> <C> <C> <C>
W. James Price* 70 Director, Boca Research, Inc.; 113,940.98 **
Director and Chairman Managing Director Emeritus, Alex.
of the Board since 1981 Brown & Sons Incorporated;
Director, CSX Corp. and PHH
Corporation.
Richard T. Hale* 49 Managing Director, Alex. Brown & 0 **
Director and President Sons Incorporated.
since 1989
James J. Cunnane 57 Managing Director, CBC Capital; 0 **
Director since 1994 Formerly, Senior Vice-President and
Chief Financial Officer, General
Dynamics Corporation and Director,
The Arch Fund.
N. Bruce Hannay 74 Director, Plenum Publishing Corp; 3,346.52 **
Director since 1984 Formerly, Director, Rohm & Haas
Company and General Signal Corp.
and Consultant, SRI International.
John F. Kroeger 70 Director/Trustee, AIM Funds; 43,093.58 **
Director since 1981 Formerly, Consultant, Wendell &
Stockel Associates, Inc. and General
Manager, Shell Oil Company.
Louis E. Levy 62 Director, Kimberly-Clark Corporation 0 **
Director and President since 1994 and Household International;
Chairman of the Quality Control
Inquiry Committee, American
Institute of Certified Public
Accountants; Formerly, Trustee,
Merrill Lynch Funds for
Institutions, Adjunct Professor,
Columbia University-Graduate
School of Business, and Partner,
KPMG Peat Marwick.
Eugene J. McDonald 62 President, Duke Management 0 **
Director since 1992 Company; Executive Vice President,
Duke University.
Rebecca W. Rimel* 44 President and Chief Executive Officer, 0 **
Nominee for Director The Pew Charitable Trusts; Director
and Executive Vice President, The
Glenmede Trust Company; Formerly,
Executive Director, The Pew
Charitable Trusts.
</TABLE>
4
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C> <C>
Harry Woolf 71 Professor-at-Large Emeritus, 56,176.37 **
Director since 1981 Institute for Advanced Study;
Director, Merrill Lynch Cluster C
Funds, ATL and Spacelabs Medical
Corp and Family Health
International.
</TABLE>
- ---------------------
* "Interested person" within the meaning of the 1940 Act. Mr. Price and Ms.
Rimel will be treated by the Fund as if they could each be deemed to be an
"interested person." Mr. Hale is a Managing Director of Alex. Brown & Sons
Incorporated, the Fund's Distributor ("Alex. Brown" or the "Distributor").
** As of June 2, 1995, Directors and nominees of the Fund beneficially
owned less than 1% of the shares of the Fund.
Board Approval of the Election of Directors
By meeting of the Board of Directors dated June 1, 1995, the Board
approved setting the number of Directors at nine and recommended that
shareholders vote for each of the nominees for Director named herein. In
recommending that shareholders elect the nominees as Directors of the Fund, the
Board considered the nominees' experience and qualifications.
Shareholder Approval of the Election of Directors
The election of the Directors requires the favorable vote of a majority
of all votes cast at the Meeting provided that a majority of shareholders
entitled to vote is present in person or by Proxy at the Meeting. If the
Directors are not approved by the shareholders of the Fund, the Board will
consider alternative nominations.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF
THE DIRECTORS. ---
PROPOSAL 2: To approve or disapprove an amended investment advisory agreement
between the Fund and Investment Company Capital Corp. with respect
to the Prime Series
General
On June 1, 1995, the Directors unanimously approved, subject to the
approval of the shareholders of the Prime Series (the "Prime Shareholders"), an
Amended Investment Advisory Agreement with respect to the Prime Series (the
"Amended Prime Advisory Agreement") to increase the rate of the fee payable to
the Adviser. Under the investment advisory agreement currently in effect with
respect to the Prime Series and the Treasury Series (the "Current Prime and
Treasury Advisory Agreement"), the Adviser receives a fee from the Fund,
calculated daily and paid at the end of each calendar month, at the annual rate
of .25% of the first $500 million of the Fund's aggregate average daily net
assets, .21% of the next $500 million of the Fund's aggregate average daily net
assets, .20% of the next $500 million of the Fund's aggregate average daily net
assets and .19% of that portion of the Fund's aggregate average daily net assets
in excess of $1.5 billion. The Prime Series pays its proportional share of the
fee based on its relative net assets. The Adviser may, from time to time,
voluntarily waive a portion of its advisory fee with respect to the Prime Series
to preserve or enhance the performance of such Series. No such waiver was
5
<PAGE> 7
required for the fiscal year ended March 31, 1995. Such voluntary waiver is not
contractual and is subject to change.
Under the Amended Prime Advisory Agreement, the Adviser would receive a
fee from the Fund, calculated daily and paid at the end of each calendar month,
at the annual rate of .30% of the first $500 million of the Fund's aggregate
average daily net assets, .26% of the next $500 million of the Fund's aggregate
average daily net assets, .25% of the next $500 million of the Fund's aggregate
average daily net assets, .24% of the next $1 billion of the Funds aggregate
average daily net assets and .23% of the Fund's aggregate average daily net
assets in excess of $2.5 billion. The Prime Series would pay its portion of the
foregoing fee based on the proportion of its net assets relative to the Fund's
net assets. In addition, the Adviser would be entitled to receive an additional
fee with respect to the Prime Series, calculated daily and paid monthly, at the
annual rate of .02% of the Prime Series' average daily net assets. The effect of
this change is to increase the rate paid by the Prime Series at each asset level
by .07%. The Adviser would be able, from time to time, to voluntarily waive a
portion of its advisory fee with respect to the Prime Series to preserve or
enhance the performance of the Prime Series. A copy of the Amended Prime
Advisory Agreement, as it is proposed to be approved by the Prime Shareholders,
is attached hereto as Exhibit A.
Evaluation and Recommendation
To assist the Directors in their consideration of the Amended Prime
Advisory Agreement, the Adviser presented a comparative analysis, under the
existing and pro forma advisory fees, of the performance and expenses of the
Fund. The Directors took into account the Adviser's belief that the proposed fee
structure represents a reasonable return, is in line with acceptable
profitability levels, is still less than that of competing funds and maintains
the Fund's competitive performance. In addition, the Directors considered the
following factors: (1) the nature and quality of the advisory services rendered
and the results achieved by the Adviser in the management of the Fund, giving
due consideration to the likely impact of the proposed fee on relative
performance; (2) the relationship of the proposed advisory fee schedule to the
fee schedules of comparable mutual funds, the impact of the proposed increase in
advisory fees on the Fund's expense ratio and the relationship of the Fund's pro
forma expense ratio to the expense ratios of comparable mutual funds; (3) the
costs borne by the Adviser in providing investment advisory services to the
Fund; (4) the profits of the Adviser in providing services to the Fund; and (5)
the extent to which the economies of scale that the Adviser might experience as
a result of growth in the Fund's assets would be shared with the Fund.
Description of the Current Prime and Treasury Advisory Agreement
The Current Prime and Treasury Advisory Agreement was last approved by
the Prime Shareholders on April 4, 1990.
The Prime and Treasury Advisory Agreement provides that the Adviser, in
return for its fee, will (a) supervise and manage the Series' operations; (b)
formulate and implement continuing programs for the purchases and sales of
securities, consistent with the investment objective and policies of the Prime
Series; (c) provide the Fund with such executive, administrative and clerical
services as are deemed advisable by the Fund's Board of Directors; (d) provide
the Fund with, or obtain for it, adequate office space and all necessary office
equipment and services; (e) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data, domestic,
foreign and otherwise, whether affecting the economy generally or the Prime
Series, and whether concerning the individual issuers whose securities are
included in the Prime Series or the activities in which they engage, or with
respect to securities which the Adviser considers desirable for inclusion in the
Prime Series; (f) determine which issuers and securities shall be represented in
the Prime Series; (g) take all actions necessary to carry into effect the Fund's
purchase and sale programs; (h) supervise the operations of the Fund's transfer
and dividend disbursing agent; (i) provide the Fund with such administrative and
clerical services for the maintenance of certain shareholder records as are
deemed advisable by the Fund's Board of Directors; and (j) arrange, but not
6
<PAGE> 8
pay for, the periodic updating of prospectuses and supplements thereto, proxy
material, tax returns, reports to the Prime Shareholders and reports to and
filings with the SEC and state Blue Sky authorities. Subject to the approval of
the Board and the Prime Shareholders, the Adviser may delegate certain of its
duties enumerated above to a sub-adviser.
The Current Prime and Treasury Advisory Agreement also provides for
compensation, as discussed above.
The Current Prime and Treasury Advisory Agreement provides that the
Adviser will furnish, at its expense and without cost to the Fund, the services
of one or more officers of the Fund, to the extent that such officers may be
required by the Fund for the proper conduct of its affairs. The Fund assumes and
pays all other expenses of the Fund, including, without limitation: payments to
the Fund's distributor under the Fund's plan of distribution; the charges and
expenses of any registrar, any custodian or depository appointed by the Fund for
the safekeeping of its cash, portfolio securities and other property, and any
transfer, dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and fees payable by the Fund to federal, state or
other governmental agencies; the costs and expenses of engraving or printing of
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Directors or Director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's shares;
charges and expenses of legal counsel, including counsel to the Directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund and
of independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
Directors) of the Fund which inure to its benefit; extraordinary expenses
(including but not limited to, legal claims and liabilities and litigation costs
and any indemnification related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
The Current Prime and Treasury Advisory Agreement provides for expense
limitations. In the event the operating expenses of the Fund, including all
investment advisory and administrative fees, for any fiscal year ending on a
date on which the agreement is in effect exceed either (i) the expense
limitations applicable to the Prime Series imposed by the securities laws or
regulations thereunder of any state in which the Fund's shares are qualified for
sale, as such limitations may be raised or lowered from time to time, or (ii) 1%
of the Fund's average daily net assets, the Adviser will reduce its investment
advisory fee to the extent of its share of such excess expenses and, if required
pursuant to any such laws or regulations, will reimburse the Fund for its share
of annual operating expenses in excess of any expense limitation that may be
applicable. Excluded from such expenses are the amounts of any interest, taxes,
brokerage commissions and extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto) paid or payable by the Fund. Such reduction, if any, will be
computed and accrued daily, will be settled on a monthly basis and will be based
upon the expense limitation applicable to the Prime Series as at the end of the
last business day of the month. The foregoing expense limitations imposed by the
state securities laws and regulations will be applied to the Prime Series
separately unless the laws or regulations of any state shall require that the
expense limitations be imposed with respect to the Fund as a whole. The
foregoing 1% expense limitation shall be applied to the Fund's Series on a
combined basis.
7
<PAGE> 9
The services of the Adviser are not to be deemed exclusive, and the
Adviser and its officers and Directors are free to render investment advisory
and other services to others, including other investment companies, and to
engage in other activities, so long as its services under the agreement are not
impaired thereby. The Adviser's officers or Directors may serve as officers or
Directors of the Fund, and the Fund's officers or Directors may serve as
officers or Directors of the Adviser, to the extent permitted by law.
Following the expiration of its initial two-year term, the Current
Prime and Treasury Advisory Agreement continues in force and effect from year to
year, provided that such continuance is approved at least annually by the Fund's
Board or by the vote of a majority of the Prime Series' outstanding voting
securities, and by the affirmative vote of a majority of the Directors who are
not parties to the agreement or "interested persons" of a party to the agreement
(other than as Directors of the Fund) by votes cast in person at a meeting
specifically called for such purpose.
The Current Prime and Treasury Agreement may be terminated at any time,
on waivable written notice within sixty days and without any penalty, by vote of
the Fund's Board, by vote a majority of the Prime Series' outstanding voting
securities or by the Adviser. The agreement automatically terminates in the
event of its assignment.
The Current Prime and Treasury Agreement obligates the Adviser to
exercise care and diligence and to act in good faith and to use its best efforts
within reasonable limits to ensure the accuracy of all services performed under
the agreement, but the Adviser is not liable for any act or omission which
does not constitute willful misfeasance, bad faith or gross negligence on the
part of the Adviser or its officers, Directors or employees, or reckless
disregard by the Adviser of its duties under the agreement.
The Adviser
The Adviser is a wholly-owned subsidiary of Alex. Brown, which is
located at 135 East Baltimore Street, Baltimore, Maryland, 21202, Baltimore,
Maryland, 21203. Alex. Brown is a wholly-owned subsidiary of Alex. Brown
Incorporated, which is also located at 135 East Baltimore Street, Baltimore,
Maryland, 21202.
The following information is provided for each Director and the
principal executive officer of the Adviser. It includes his or her name,
position with the Adviser, address and principal occupation.
<TABLE>
<CAPTION>
Name and Position
with the Adviser Address Principal Occupation
-------------------- ----------- ---------------------
<S> <C> <C>
Benjamin Howell Griswold, 135 East Baltimore Chairman of the Board
IV Street and Chief Executive
Director Baltimore, Maryland Officer, Alex. Brown
21202 & Sons Incorporated
Mayo A. Shattuck III 135 East Baltimore President, Alex.
Director Street Brown & Sons
Baltimore, Maryland Incorporated
21202
Alvin B. Krogard 135 East Baltimore Director, Managing
Director Street Director and Investment
Baltimore, Maryland Representative, Alex.
21202 Brown & Sons
Incorporated
Edward J. Veilleux 135 East Baltimore Principal, Alex. Brown
President Street & Sons Incorporated;
Baltimore, Maryland Vice President,
21202 Armata Financial
Corp.
</TABLE>
8
<PAGE> 10
As of June _, 1995, Mr. Price, Chairman of the Fund, beneficially owned
_____ shares of Alex. Brown Incorporated. As of June _, 1995, Mr. Hale,
a Director of the Fund, beneficially owned _______ shares of Alex. Brown
Incorporated. Mr. Veilleux, Executive Vice President of the Fund, is President
of the Adviser and as of June _, 1995, owned ____ shares of Alex. Brown
Incorporated. Mr. Nelson, Vice President and Secretary of the Fund, is Vice
President of the Adviser.
For the fiscal year March 31, 1995, the Fund paid the Adviser an
aggregate fee (net of a voluntary fee waiver of $156,200 for the Treasury
Series) of $4,941,395 for advisory services. For such fiscal year, the Fund also
paid the Adviser aggregate fees of $58,826 for transfer agency services provided
to the Fund and $90,083 for accounting services provided to the Treasury Series.
For the period from November 10, 1994 to March 31, 1995, the Fund paid the
Adviser $58,826 for accounting services provided to the Prime Series. For the
fiscal year ended March 31, 1995, the Fund paid the Distributor an aggregate
distribution fee of $12,302,116.
Comparison between the Amended Prime Advisory Agreement and the Current Prime
and Treasury Advisory Agreement
The terms of the Amended Prime Advisory Agreement and the Current Prime
and Treasury Agreement, as applicable to the Prime Series, are effectively the
same, except for provisions regarding compensation, as discussed above.
There are currently five classes of the Prime Series, designated as the
Alex. Brown Cash Reserve Prime Shares, the Flag Investors Cash Reserve Prime
Class A Shares, the Flag Investors Cash Reserve Prime Class B Shares, the Alex.
Brown Cash Reserve Prime Institutional Shares and the Quality Cash Reserve Prime
Shares. Flag Investors Cash Reserve Prime Class B Shares are available only
through the exchange of shares of other funds in the Flag Investors family of
funds and are subject to a contingent deferred sales charge as described in the
Prospectus for the shares. The Quality Cash Reserve Prime Shares are offered
primarily to broker-dealers that have correspondent relationships with Alex.
Brown.
The following table compares the existing fees and expenses of each of
the five classes of the Prime Series under the Current Prime and Treasury
Advisory Agreement and the pro forma fees and expenses of each of the classes of
the Prime Series under the Amended Prime Advisory Agreement. The percentages
shown below expressing existing Annual Fund Operating Expenses are based on the
actual expenses of each class of the Prime Series for the fiscal year ended
March 31, 1995.
9
<PAGE> 11
<TABLE>
<CAPTION>
Alex. Brown Cash Reserve Prime Shares
-------------------------------------
Shareholder Transaction Expenses Existing Pro Forma
- -------------------------------- -------- ---------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchase................................................ None None
Maximum Sales Charge Imposed on Reinvested Dividends.................................... None None
Deferred Sales Charge................................................................... None None
Redemption Fees......................................................................... None None
Annual Fund Operating Expenses (as a percentage of average net assets) Existing Pro Forma
- --------------------------------------------------------------------- -------- ---------
Advisory Fees........................................................................... .21% .28%
12b-1 Fees.............................................................................. .25% .25%
Other Expenses.......................................................................... .16% .15%
---- ----
Total Fund Operating Expenses........................................................... .62% .68%
==== ====
</TABLE>
Example
Assuming a hypothetical investment of $1,000, a 5% annual return and redemption
at the end of each time period, an investor in the shares above would have paid
transaction and operating expenses at the end of each year as follows:
<TABLE>
<CAPTION>
Existing Pro Forma
-------- ---------
<C> <C> <C>
1 year.................................................................................. $ 6 $ 7
3 years................................................................................. $ 20 $ 22
5 years................................................................................. $ 35 $ 39
10 years................................................................................ $ 80 $ 88
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
<TABLE>
<CAPTION>
Flag Investors Cash Reserve Prime Class A Shares
------------------------------------------------
Shareholder Transaction Expenses Existing Pro Forma
- -------------------------------- -------- ---------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchase............................................. None* None*
Maximum Sales Charge Imposed on Reinvested Dividends................................. None None
Deferred Sales Charge................................................................ None* None*
Redemption Fees...................................................................... None None
Annual Fund Operating Expenses (as a percentage of average net assets) Existing Pro Forma
- --------------------------------------------------------------------- -------- ---------
Advisory Fees........................................................................ .21% .28%
12b-1 Fees........................................................................... .25% .25%
Other Expenses....................................................................... .16% .15%
---- ----
Total Fund Operating Expenses........................................................ .62% .68%
==== ====
</TABLE>
- ---------------------
* Flag Investors Class A Shares are not subject to a sales charge. However,
shareholders of other Flag Investors funds who exchange their Class A shares
of such funds for Flag Investors Class A Shares will retain liability for any
contingent deferred sales charge due on such shares upon redemption.
10
<PAGE> 12
Example
Assuming a hypothetical investment of $1,000, a 5% annual return and redemption
at the end of each time period, an investor in the shares above would have paid
transaction and operating expenses at the end of each year as follows:
<TABLE>
<CAPTION>
Existing Pro Forma
-------- ---------
<C> <C> <C>
1 year............................................................................... $ 6 $ 7
3 years.............................................................................. $ 20 $ 22
5 years.............................................................................. $ 35 $ 39
10 years............................................................................. $ 80 $ 88
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
<TABLE>
<CAPTION>
Flag Investors Cash Reserve Prime Class B Shares
------------------------------------------------
Shareholder Transaction Expenses Existing Pro Forma
- -------------------------------- -------- ---------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchase............................................. None None
Maximum Sales Charge Imposed on Reinvested Dividends................................. None None
Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, whichever is lower)...................................................... 4.00%* 4.00%*
Annual Fund Operating Expenses (as a percentage of average net assets) Existing Pro Forma
- --------------------------------------------------------------------- -------- ---------
Advisory Fees........................................................................ .21% .28%
12b-1 Fees........................................................................... .75% .75%
Other Expenses (including a .25% shareholder servicing fee).......................... .41% .40%
----- -----
Total Fund Operating Expenses........................................................ 1.37% 1.43%
===== =====
</TABLE>
- ---------------------
* A declining contingent deferred sales charge will be imposed on redemptions
of Flag Investors Class B Shares made within six years of purchase. Flag
Investors Class B Shares will automatically convert to Flag Investors Class
A Shares six years after purchase.
** A portion of the shareholder servicing fee is allocated to member firms of
the National Association of Securities Dealers, Inc. and qualified banks
for continued personal service by such members to investors in Flag
Investors Class B Shares, such as responding to shareholder inquiries,
quoting net asset values, providing current marketing materials and
attending to other shareholder matters.
Example
An investor in the Shares above would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
<TABLE>
<CAPTION>
Existing Pro Forma
-------- ---------
<C> <C> <C>
1 year............................................................................... $ 54 $ 54
3 years.............................................................................. $ 74 $ 74
5 years.............................................................................. $ 98 $ 97
10 years............................................................................. $132* $139*
</TABLE>
- --------------------
* Expenses assume that Class B shares are converted to Class A shares at the
end of six years. Therefore, the expense figures assume six years of Class
B expenses and four years of Class A expenses.
An investor in the shares above would pay the following expenses on the same
investment, assuming no redemption:
11
<PAGE> 13
<TABLE>
<CAPTION>
Existing Pro Forma
-------- ---------
<C> <C> <C>
1 year............................................................................... $ 14 $ 15
3 years.............................................................................. $ 44 $ 46
5 years.............................................................................. $ 78 $ 81
10 years............................................................................. $132* $144*
</TABLE>
- --------------------
* Expenses assume that Class B shares are converted to Class A shares at the
end of six years. Therefore, the expense figures assume six years of Class
B expenses and four years of Class A expenses.
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
<TABLE>
<CAPTION>
Alex. Brown Cash Reserve Prime Institutional Shares
---------------------------------------------------
Shareholder Transaction Expenses Existing Pro Forma
- -------------------------------- -------- ---------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchase............................................. None None
Maximum Sales Charge Imposed on Reinvested Dividends................................. None None
Deferred Sales Charge................................................................ None None
Redemption Fees...................................................................... None None
Annual Fund Operating Expenses (as a percentage of average net assets) Existing Pro Forma
- --------------------------------------------------------------------- -------- ---------
Advisory Fees........................................................................ .21% .28%
12b-1 Fees........................................................................... None None
Other Expenses....................................................................... .09% .15%
----
Total Fund Operating Expenses........................................................ .30% .43%
==== ===
</TABLE>
Example
Assuming a hypothetical investment of $1,000, a 5% annual return and redemption
at the end of each time period, an investor in the shares above would have paid
transaction and operating expenses at the end of each year as follows:
<TABLE>
<CAPTION>
Existing Pro Forma
-------- ----------
<C> <C> <C>
1 year............................................................................... $ 3 $ 4
3 years.............................................................................. $ 10 $ 14
5 years.............................................................................. $ 17 $ 24
10 years............................................................................. $ 39 $ 55
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
12
<PAGE> 14
<TABLE>
<CAPTION>
Quality Cash Reserve Prime Shares
---------------------------------
Shareholder Transaction Expenses Existing Pro Forma
- -------------------------------- -------- ---------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchase............................................. None None
Maximum Sales Charge Imposed on Reinvested Dividends................................. None None
Deferred Sales Charge................................................................ None None
Redemption Fees...................................................................... None None
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses (as a percentage of average net assets) Existing Pro Forma
- --------------------------------------------------------------------- -------- ---------
<S> <C> <C>
Advisory Fees........................................................................ .21% .28%
12b-1 Fees........................................................................... .60% .60%
Other Expenses....................................................................... .25% .22%
Total Fund Operating Expenses........................................................ 1.06% 1.10%
==== ====
</TABLE>
Example
Assuming a hypothetical investment of $1,000, a 5% annual return and redemption
at the end of each time period, an investor in the shares above would have paid
transaction and operating expenses at the end of each year as follows:
<TABLE>
<CAPTION>
Existing Pro Forma
-------- ---------
<C> <C> <C>
1 year............................................................................... $ 11 $ 11
3 years.............................................................................. $ 34 $ 36
5 years.............................................................................. $ 60 $ 62
10 years............................................................................. $137 $142
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For the fiscal year ended March 31, 1995, the aggregate fee paid by the
Fund to the Adviser for services on behalf of the Prime Series was $3,050,911.
If the proposed fee had been in effect, the Adviser would have received
$4,076,335, which equals a 33.6% increase.
Shareholder Approval of the Amended Prime Advisory Agreement
Approval of the Amended Prime Advisory Agreement requires the
affirmative vote of a majority of the outstanding shares of the Prime Series.
For purposes of this proposal, "majority of the outstanding shares" means the
vote of (i) 67% or more of the Prime Series' outstanding shares present at the
Meeting, if the holders of more than 50% of the outstanding shares of the Prime
Series are present or represented by proxy, or (ii) more than 50% of the Prime
Series' outstanding shares, whichever is less.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE
AMENDED PRIME ADVISORY AGREEMENT ON BEHALF OF THE FUND. ---
PROPOSAL 3: To approve or disapprove an amended investment advisory agreement
between the Fund and Investment Company Capital Corp. with
respect to the Treasury Series
General
On June 1, 1995, the Directors unanimously approved, subject to the
approval of the shareholders of the Treasury Series (the "Treasury
Shareholders"), an Amended Investment Advisory Agreement with respect to the
Treasury Series (the "Amended Treasury Advisory Agreement") to increase the rate
of the fee payable to the Adviser. Under the investment advisory agreement
13
<PAGE> 15
currently in effect with respect to the Prime Series and the Treasury Series
(the "Current Prime and Treasury Advisory Agreement"), the Adviser receives a
fee from the Fund, calculated daily and paid at the end of each calendar month,
at the annual rate of .25% of the first $500 million of the Fund's aggregate
average daily net assets, .21% of the next $500 million of the Fund's aggregate
average daily net assets, .20% of the next $500 million of the Fund's aggregate
average daily net assets and .19% of that portion of the Fund's aggregate
average daily net assets in excess of $1.5 billion. The Treasury Series pays its
proportionate share of the fee based on its relative net assets. The Adviser
voluntarily waives a portion of its advisory fee with respect to the Treasury
Series to preserve or enhance the performance of the Treasury Series. Such
voluntary waiver is not contractual and is subject to change.
Under the Amended Treasury Advisory Agreement, the Adviser would
receive a fee from the Fund, calculated daily and paid at the end of each
calendar month, at the annual rate of .30% of the first $500 million of the
Fund's aggregate average daily net assets, .26% of the next $500 million of the
Fund's aggregate average daily net assets, .25% of the next $500 million of the
Fund's aggregate average daily net assets, .24% of the next $1 billion of the
Fund's aggregate average daily net assets and .23% of the Fund's aggregate
average daily net assets in excess of $2.5 billion. The Treasury Series would
pay its portion of the foregoing fee based on the proportion of its net assets
relative to the Fund's net assets. The effect of this change is to increase the
rate paid by the Treasury Series at each asset level by .05%. The Adviser would
be able, from time to time, to voluntarily waive a portion of its advisory fee
with respect to the Treasury Series to preserve or enhance the performance of
the Treasury Series. A copy of the Amended Treasury Advisory Agreement, as it is
proposed to be approved by the Treasury Shareholders, is attached hereto as
Exhibit B.
Evaluation and Recommendation
To assist the Directors in their consideration of the Amended Treasury
Advisory Agreement, the Adviser presented a comparative analysis, under the
existing and pro forma advisory fees, of the performance and expenses of the
Fund. The Directors took into account the Adviser's belief that the proposed fee
structure represents a reasonable return, is in line with acceptable
profitability levels, is still less than that of competing funds and maintains
the Fund's competitive performance. In addition, the Directors considered the
following factors: (1) the nature and quality of the advisory services rendered
and the results achieved by the Adviser in the management of the Fund, giving
due consideration to the likely impact of the proposed fee on relative
performance; (2) the relationship of the proposed advisory fee schedule to the
fee schedules of comparable mutual funds, the impact of the proposed increase in
advisory fees on the Fund's expense ratio and the relationship of the Fund's pro
forma expense ratio to the expense ratios of comparable mutual funds; (3) the
costs borne by the Adviser in providing investment advisory services to the
Fund; (4) the profits of the Adviser in providing services to the Fund; and (5)
the extent to which the economies of scale that the Adviser might experience as
a result of growth in the Fund's assets would be shared with the Fund.
Description of the Current Prime and Treasury Advisory Agreement
For a description of the Current Prime and Treasury Advisory Agreement,
Treasury Shareholders are directed to the "Description of the Current Prime and
Treasury Advisory Agreement" section under Proposal 2 on page 6. Compensation
provisions under the Amended Treasury Advisory Agreement are described above.
The Adviser
For information concerning the Adviser, Treasury Shareholders are
directed to "The Adviser" section under Proposal 2 on page 8.
14
<PAGE> 16
Comparison between the Amended Treasury Advisory Agreement and the Current
Prime and Treasury Advisory Agreement
The terms of the Amended Treasury Advisory Agreement and the Current
Prime and Treasury Agreement, as applicable to the Treasury Series, are
effectively the same, except for provisions regarding compensation, as discussed
above.
There are currently two classes of the Treasury Series, designated as
the Alex. Brown Cash Reserve Treasury Shares and the Alex. Brown Cash Reserve
Treasury Institutional Shares. The Institutional Shares of the Prime and
Treasury Series are offered primarily to institutions. The following table
compares the existing fees and expenses of the Treasury Series under the Current
Prime and Treasury Advisory Agreement and the pro forma fees and expenses of the
Treasury Series under the Amended Treasury Advisory Agreement. The percentage
shown below expressing existing Annual Fund Operating Expenses are based on the
actual expenses of each class of the Treasury Series for the fiscal year ended
March 31, 1995.
<TABLE>
<CAPTION>
Alex. Brown Cash Reserve Treasury Series
----------------------------------------
Shareholder Transaction Expenses Existing Pro Forma
- -------------------------------- -------- ---------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchase............................................. None None
Maximum Sales Charge Imposed on Reinvested Dividends................................. None None
Deferred Sales Charge................................................................ None None
Redemption Fees...................................................................... None None
Annual Fund Operating Expenses (as a percentage of average net assets) Existing Pro Forma
- --------------------------------------------------------------------- -------- ---------
Advisory Fees (net of fee waivers)................................................... .19%* .26%
12b-1 Fees........................................................................... .25% .25%
Other Expenses....................................................................... .10% .09%
---- ----
Total Fund Operating Expenses (net of fee waivers)................................... .54%* .60%
==== ====
</TABLE>
- -----------------------
* Absent fee waivers for the fiscal year ended March 31, 1995, Advisory Fees
and Total Fund Operating Expenses would have been .21% and .56%,
respectively, of the average net assets of the Alex. Brown Cash Reserve
Treasury Shares of the Treasury Series.
Example
Assuming a hypothetical investment of $1,000, a 5% annual return and redemption
at the end of each time period, an investor in the shares above would have paid
transaction and operating expenses at the end of each year as follows:
<TABLE>
<CAPTION>
Existing* Pro Forma
--------- ---------
<C> <C> <C>
1 year............................................................................... $ 6 $ 6
3 years.............................................................................. $ 17 $ 19
5 years.............................................................................. $ 31 $ 34
10 years............................................................................. $ 70 $ 77
</TABLE>
- ----------------------------
* Absent fee waivers for the one, three, five and ten year periods, expenses
would be $6, $18, $32 and $72, respectively.
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
15
<PAGE> 17
<TABLE>
<CAPTION>
Alex. Brown Cash Reserve Treasury Institutional Shares
------------------------------------------------------
Shareholder Transaction Expenses Existing Pro Forma
- -------------------------------- -------- ---------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchase............................................. None None
Maximum Sales Charge Imposed on Reinvested Dividends................................. None None
Deferred Sales Charge................................................................ None None
Redemption Fees...................................................................... None None
Annual Fund Operating Expenses (as a percentage of average net assets) Existing Pro Forma
- --------------------------------------------------------------------- -------- ---------
Advisory Fees (net of fee waivers)................................................... .19%* .26%
12b-1 Fees........................................................................... None None
Other Expenses....................................................................... .08% .07%
---- ---
Total Fund Operating Expenses (net of fee waivers)................................... .27%* .33%
==== ===
</TABLE>
- -----------------------
* Absent fee waivers for the fiscal year ended March 31, 1995, Advisory Fees
and Total Fund Operating Expenses would have been .21% and .29%,
respectively, of the average net assets of the Alex. Brown Cash Reserve
Treasury Shares of the Treasury Series.
Example
Assuming a hypothetical investment of $1,000, a 5% annual return and redemption
at the end of each time period, an investor in the shares above would have paid
transaction and operating expenses at the end of each year as follows:
<TABLE>
<CAPTION>
Existing* Pro Forma
-------- ---------
<C> <C> <C>
1 year............................................................................... $ 3 $ 3
3 years.............................................................................. $ 9 $ 11
5 years.............................................................................. $ 15 $ 20
10 years............................................................................. $ 35 $ 45
</TABLE>
- ----------------------------
* Absent fee waivers for the one, three, five and ten year periods, expenses
would be $3, $9, $16 and $37, respectively.
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For the fiscal year ended March 31, 1995, the Advisor was entitled to
receive an aggregate fee of $1,246,714 for services on behalf of the Treasury
Series and from such amount waived a fee of $156,200. If the proposed fee had
been in effect, the Adviser would have received $1,539,110, which equals a
23.5% increase.
Shareholder Approval of the Amended Treasury Advisory Agreement
Approval of the Amended Treasury Advisory Agreement requires the
affirmative vote of a majority of the outstanding shares of the Treasury Series.
For purposes of this proposal, "majority of the outstanding shares" means the
vote of (i) 67% or more of the Treasury Series' outstanding shares present at
the Meeting, if the holders of more than 50% of the outstanding shares of the
Treasury Series are present or represented by proxy, or (ii) more than 50% of
the Treasury Series' outstanding shares, whichever is less.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE
AMENDED TREASURY ADVISORY AGREEMENT ON BEHALF OF THE FUND. ---
16
<PAGE> 18
PROPOSAL 4: To approve or disapprove an amended investment advisory agreement
between the Fund and Investment Company Capital Corp. with respect
to the Tax-Free Series
General
On June 1, 1995, the Directors unanimously approved, subject to the
approval of the shareholders of the Tax-Free Series (the "Tax-Free
Shareholders"), an Amended Investment Advisory Agreement with respect to the
Tax-Free Series (the "Amended Tax-Free Advisory Agreement") to increase the rate
of the fee payable to the Adviser. Under the investment advisory agreement
currently in effect with respect to the Tax-Free Series (the "Current Tax-Free
Advisory Agreement"), the Adviser receives a fee from the Fund, calculated daily
and paid at the end of each calendar month, at the annual rate of .25% of the
first $500 million of the Fund's aggregate average daily net assets, .21% of the
next $500 million of the Fund's aggregate average daily net assets, .20% of the
next $500 million of the Fund's aggregate average daily net assets and .19% of
that portion of the Fund's aggregate average daily net assets in excess of $1.5
billion. The Tax-Free Series pays its proportional share of the fee based on its
relative net assets. The Adviser may, from time to time, voluntarily waive a
portion of its advisory fee with respect to the Tax-Free Series to preserve or
enhance the performance of such Series. No such waiver was required for the
fiscal year ended March 31, 1995. Such voluntary waiver is not contractual and
is subject to change.
Under the Amended Tax-Free Advisory Agreement, the Adviser would
receive a fee from the Fund, calculated daily and paid at the end of each
calendar month, at the annual rate of .30% of the first $500 million of the
Fund's aggregate average daily net assets, .26% of the next $500 million of the
Fund's aggregate average daily net assets, .25% of the next $500 million of the
Fund's aggregate average daily net assets, .24% of the next $1 billion of the
Fund's aggregate average daily net assets and .23% of the Fund's aggregate
average daily net assets in excess of $2.5 billion. The Tax-Free Series would
pay its portion of the foregoing fee based on the proportion of its net assets
relative to the Fund's net assets. In addition, the Adviser would be entitled to
receive an additional fee with respect to the Tax-Free Series, calculated daily
and paid monthly, at the annual rate of .03% of the Tax-Free Series' average
daily net assets. The effect of this change is to increase the rate paid by
the Tax-Free Series at each asset level by .08%. The Adviser may, from time to
time, voluntarily waive a portion of its advisory fee with respect to any Series
to preserve or enhance the performance of the Series. A copy of the Amended
Tax-Free Advisory Agreement, as it is proposed to be approved by the Tax-Free
Shareholders, is attached hereto as Exhibit C.
Evaluation and Recommendation
To assist the Directors in their consideration of the Amended Tax-Free
Advisory Agreement, the Adviser presented a comparative analysis, under the
existing and pro forma advisory fees, of the performance and expenses of the
Fund. The Directors took into account the Adviser's belief that the proposed fee
structure represents a reasonable return, is in line with acceptable
profitability levels, is still less than that of competing funds and maintains
the Fund's competitive performance. In addition, the Directors considered the
following factors: (1) the nature and quality of the advisory services rendered
and the results achieved by the Adviser in the management of the Fund, giving
due consideration to the likely impact of the proposed fee on relative
performance; (2) the relationship of the proposed advisory fee schedule to the
fee schedules of comparable mutual funds, the impact of the proposed increase in
advisory fees on the Fund's expense ratio and the relationship of the Fund's pro
forma expense ratio to the expense ratios of comparable mutual funds; (3) the
costs borne by the Adviser in providing investment advisory services to the
Fund; (4) the profits of the Adviser in providing services to the Fund; and (5)
the extent to which the economies of scale that the Adviser might experience as
a result of growth in the Fund's assets would be shared with the Fund.
17
<PAGE> 19
Description of the Current Tax-Free Advisory Agreement
The Current Tax-Free Advisory Agreement was last approved by the
Tax-Free Shareholders on May 28, 1991.
The Tax-Free Advisory Agreement provides that the Adviser, in return
for its fee, will (a) supervise and manage the Series' operations; (b) formulate
and implement continuing programs for the purchases and sales of securities,
consistent with the investment objective and policies of the Tax-Free Series;
(c) provide the Fund with such executive, administrative and clerical services
as are deemed advisable by the Fund's Board of Directors; (d) provide the Fund
with, or obtain for it, adequate office space and all necessary office equipment
and services; (e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign and
otherwise, whether affecting the economy generally or the Tax-Free Series, and
whether concerning the individual issuers whose securities are included in the
Tax-Free Series or the activities in which they engage, or with respect to
securities which the Adviser considers desirable for inclusion in the Tax-Free
Series; (f) determine which issuers and securities shall be represented in the
Tax-Free Series; (g) take all actions necessary to carry into effect the Fund's
purchase and sale programs; (h) supervise the operations of the Fund's transfer
and dividend disbursing agent; (i) provide the Fund with such administrative and
clerical services for the maintenance of certain shareholder records as are
deemed advisable by the Fund's Board of Directors; and (j) arrange, but not pay
for, the periodic updating of prospectuses and supplements thereto, proxy
material, tax returns, reports to the Tax-Free Shareholders and reports to and
filings with the SEC and state Blue Sky authorities. Subject to the approval of
the Board and the Tax-Free Shareholders, the Adviser may delegate certain of its
duties enumerated above to a sub-adviser and has delegated such duties to PNC
Institutional Management Corporation.
The Current Tax-Free Advisory Agreement also provides for compensation,
as discussed above.
The Current Tax-Free Advisory Agreement provides that the Adviser will
furnish, at its expense and without cost to the Fund, the services of one or
more officers of the Fund, to the extent that such officers may be required by
the Fund for the proper conduct of its affairs. The Fund assumes and pays all
other expenses of the Fund, including, without limitation: payments to the
Fund's distributor under the Fund's plan of distribution; the charges and
expenses of any registrar, any custodian or depository appointed by the Fund for
the safekeeping of its cash, portfolio securities and other property, and any
transfer, dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and fees payable by the Fund to federal, state or
other governmental agencies; the costs and expenses of engraving or printing of
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Directors or Director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's shares;
charges and expenses of legal counsel, including counsel to the Directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund and
of independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
Directors) of the Fund which inure to its benefit; extraordinary expenses
(including but not limited to, legal claims and liabilities and litigation costs
and any indemnification related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
The Current Tax-Free Advisory Agreement provides for expense
limitations. In the event the operating expenses of the Fund, including all
investment advisory and administrative fees, for any fiscal year ending on a
date on which the agreement is in effect exceed either (i) the expense
limitations applicable to the Tax-Free Series imposed by the securities laws or
18
<PAGE> 20
regulations thereunder of any state in which the Fund's shares are qualified for
sale, as such limitations may be raised or lowered from time to time, or (ii) 1%
of the Fund's average daily net assets, the Adviser will reduce its investment
advisory fee to the extent of its share of such excess expenses and, if required
pursuant to any such laws or regulations, will reimburse the Fund for its share
of annual operating expenses in excess of any expense limitation that may be
applicable. Excluded from such expenses are the amounts of any interest, taxes,
brokerage commissions and extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto) paid or payable by the Fund. Such reduction, if any, will be
computed and accrued daily, will be settled on a monthly basis and will be based
upon the expense limitation applicable to the Tax-Free Series as at the end of
the last business day of the month. The foregoing expense limitations imposed by
the state securities laws and regulations will be applied to the Tax-Free Series
separately unless the laws or regulations of any state shall require that the
expense limitations be imposed with respect to the Fund as a whole. The
foregoing 1% expense limitation shall be applied to the Fund's Series on a
combined basis.
The services of the Adviser are not to be deemed exclusive, and the
Adviser and its officers and Directors are free to render investment advisory
and other services to others, including other investment companies, and to
engage in other activities, so long as its services under the agreement are not
impaired thereby. The Adviser's officers or Directors may serve as officers or
Directors of the Fund, and the Fund's officers or Directors may serve as
officers or Directors of the Adviser, to the extent permitted by law.
Following the expiration of its initial two-year term, the Current
Tax-Free Advisory Agreement continues in force and effect from year to year,
provided that such continuance is approved at least annually by the Fund's Board
or by the vote of a majority of the Tax-Free Series' outstanding voting
securities, and by the affirmative vote of a majority of the Directors who are
not parties to the agreement or "interested persons" of a party to the agreement
(other than as Directors of the Fund) by votes cast in person at a meeting
specifically called for such purpose.
The Current Tax-Free Agreement may be terminated at any time, on
waivable written notice within sixty days and without any penalty, by vote of
the Fund's Board, by vote a majority of the Tax-Free Series' outstanding voting
securities or by the Adviser. The agreement automatically terminates in the
event of its assignment.
The Current Tax-Free Agreement obligates the Adviser to exercise care
and diligence and to act in good faith and to use its best efforts within
reasonable limits to ensure the accuracy of all services performed under the
agreement, but the Adviser is not liable for any act or omission which does
not constitute willful misfeasance, bad faith or gross negligence on the part of
the Adviser or its officers, Directors or employees, or reckless disregard by
the Adviser of its duties under the agreement.
The Adviser
For information concerning the Adviser, Tax-Free Shareholders are
directed to "The Adviser" section under Proposal 2 on page 8.
Comparison between the Amended Tax-Free Advisory Agreement and the Current
Tax-Free Advisory Agreement
The terms of the Amended Tax-Free Advisory Agreement and the Current
Tax-Free Agreement are effectively the same, except for provisions regarding
compensation, as described above.
There is only one class of the Tax-Free Series, designated as the Alex.
Brown Cash Reserve Tax-Free Shares. The following table compares the existing
fees and expenses of the Alex. Brown Cash Reserve Tax-Free Shares of the
Tax-Free Series under the Current Tax-Free Advisory Agreement and the pro forma
fees and expenses of the Alex. Brown Cash Reserve Tax-Free Shares of the
Tax-Free Series under the Amended Tax-Free Advisory Agreement. The percentages
19
<PAGE> 21
shown below expressing existing Annual Fund Operating Expenses are based on the
actual expenses of the Tax-Free Series for the fiscal year ended March 31, 1995.
<TABLE>
<CAPTION>
Alex. Brown Cash Reserve Tax-Free Shares
----------------------------------------
Shareholder Transaction Expenses Existing Pro Forma
- -------------------------------- -------- ---------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchase............................................. None None
Maximum Sales Charge Imposed on Reinvested Dividends................................. None None
Deferred Sales Charge................................................................ None None
Redemption Fees...................................................................... None None
Annual Fund Operating Expenses (as a percentage of average net assets) Existing Pro Forma
- --------------------------------------------------------------------- -------- ---------
Advisory Fees........................................................................ .21% .29%
12b-1 Fees........................................................................... .25% .25%
Other Expenses....................................................................... .12% .12%
---- ---
Total Fund Operating Expenses........................................................ .58% .66%
==== ===
</TABLE>
Example
Assuming a hypothetical investment of $1,000, a 5% annual return and redemption
at the end of each time period, an investor in the shares above would have paid
transaction and operating expenses at the end of each year as follows:
<TABLE>
<CAPTION>
Existing Pro Forma
-------- ---------
<C> <C> <C>
1 year............................................................................... $ 6 $ 7
3 years.............................................................................. $ 19 $ 21
5 years.............................................................................. $ 33 $ 37
10 years............................................................................. $ 75 $ 85
</TABLE>
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For the fiscal year ended March 31, 1995, the aggregate fee paid by the
Fund to the Adviser for services on behalf of the Tax-Free Series was $799,970.
If the proposed fee had been in effect, the Adviser would have received
$1,108,537, which equals a 38.6% increase.
Shareholder Approval of the Amended Tax-Free Advisory Agreement
Approval of the Amended Tax-Free Advisory Agreement requires the
affirmative vote of a majority of the outstanding shares of the Tax-Free Series.
For purposes of this proposal, "majority of the outstanding shares" means the
vote of (i) 67% or more of the Tax-Free Series' outstanding shares present at
the Meeting, if the holders of more than 50% of the outstanding shares of the
Tax-Free Series are present or represented by proxy, or (ii) more than 50% of
the Tax-Free Series' outstanding shares, whichever is less.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE
AMENDED TAX-FREE ADVISORY AGREEMENT ON BEHALF OF THE FUND. ---
20
<PAGE> 22
ADDITIONAL INFORMATION
Directors and Executive Officers
Information about the Fund's current Directors and principal executive
officers, including their names, positions with the Fund, length of such
positions, ages, principal occupations or employment during the past five years
and amount of shares of the Fund beneficially owned is set forth below. Each
officer of the Fund will hold such office until a successor has been elected by
the Board of Directors.
<TABLE>
<CAPTION>
Business Experience Shares of the Fund
Position With during the Past Five Years, Beneficially Owned
Name the Fund Age including all Directorships as of June 2, 1995**
---- ------------- --- ---------------------------- --------------------
<S> <C> <C> <C> <C>
W. James Price* Director and Chairman 70 See "Information Regarding ***
of the Board since 1981. Nominees."
Richard T. Hale* Director and President 49 See "Information Regarding ***
since 1989. Nominees."
James J. Cunnane Director since 1994. 57 See "Information Regarding ***
Nominees."
N. Bruce Hannay Director since 1984. 74 See "Information Regarding **
Nominees."
John F. Kroeger Director since 1981. 70 See "Information Regarding ***
Nominees."
Louis E. Levy Director and President 62 See "Information Regarding ***
since 1994. Nominees."
Eugene J. McDonald Director since 1992. 62 See "Information Regarding ***
Nominees."
Harry Woolf Director since 1981. 71 See "Information Regarding ***
Nominees."
Edward J. Veilleux Executive Vice 51 Principal, Alex. Brown & Sons ***
President since Incorporated; President, Investment
_________. Company Capital Corp.; Vice
President, Armata Financial Corp.
Paul D. Corbin Vice President since 42 Principal, Alex. Brown & Sons ***
__________. Incorporated, 1991 - Present;
Senior Vice President, First
National Bank of Maryland.
M. Elliott Randolph, Jr. Vice President since 53 Principal, Alex. Brown & Sons ***
____________. Incorporated, 1991 - Present;
Principal, Monument Capital
Management, Inc.
Brian C. Nelson Vice President and 35 Vice President, Alex. Brown & ***
Secretary since 1989. Sons Incorporated, Investment
Company Capital Corp. and
Armata Financial Corp.
</TABLE>
21
<PAGE> 23
<TABLE>
<CAPTION>
Business Experience Shares of the Fund
Position With during the Past Five Years, Beneficially Owned
Name the Fund Age including all Directorships as of June 2, 1995**
---- ------------- --- ---------------------------- --------------------
<S> <C> <C> <C> <C>
Diana M. Ellis Treasurer since 1993. 42 Manager, Portfolio Accounting ***
Department, Investment Company
Capital Corp.; Mutual Fund
Accounting Department, Alex.
Brown & Sons Incorporated,
1991 - Present; Formerly,
Accounting Manager, Downtown
Press Inc.
Monica M. Hausner Assistant Vice President 33 Vice President, Fixed Income ***
since ____________. Management Department, Alex.
Brown & Sons Incorporated,
1992 - Present; Formerly,
Assistant Vice President,
First National Bank of
Maryland.
Laurie D. DePrine Assistant Secretary since 28 Asset Management Department, ***
1992. Alex. Brown & Sons Incorporated,
1991 - Present; Formerly, student.
</TABLE>
- ---------------------
* "Interested person" within the meaning of the 1940 Act. Mr. Price will be
treated by the Fund as if he could be deemed to be an "interested person".
Mr. Hale is a Managing Director of the Distributor. Mr. Veilleux is a
Principal of the Distributor and President of the Adviser.
** This information has been provided by each Director and officer of the
Fund.
*** As of June 2, 1995, to Fund management's knowledge, the Directors
and executive officers (15 persons) of the Fund, individually and as a
group, beneficially owned less than 0.05% of the outstanding shares of the
Fund or any Series thereof.
Each director who is not an "interested person" receives an aggregate
annual fee (plus reimbursement for reasonable out-of-pocket expenses incurred in
connection with his attendance at Board and committee meetings) from the Fund
and from all registered investment companies to which the Adviser or an
affiliated person of the Adviser provides investment advisory services
(collectively, the "Fund Complex") for which he serves. Payment of such fees and
expenses are allocated among all such funds described above in proportion to
their relative net assets. For the fiscal year ended March 31, 1995,
Non-Interested Directors fees attributable to the assets of the Fund totalled
$132,989. Officers of the Fund receive no direct remuneration in such capacity
from the Fund. Officers of the Fund who are officers of Alex. Brown may be
considered to have received remuneration indirectly. As of June 2, 1995,
the Directors and officers of the Fund as a group beneficially owned an
aggregate of less than 1% of the shares of the Fund.
The aggregate compensation paid by the Fund to each of the Fund's
Directors serving during the fiscal year ended March 31, 1995 is set forth in
the compensation table below. The aggregate compensation paid to such Directors
during calendar year 1994 by all funds in the Fund Complex is also set forth in
the compensation table below.
22
<PAGE> 24
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total Compensation
Aggregate Pension or Retirement From the Fund and Number of Funds in
Compensation from Benefits Accrued as Fund Complex Paid to Fund Complex for
Name of Person, Position the Fund Part of Fund Expenses Directors Which Director Serves
------------------------ -------- --------------------- --------- ---------------------
<S> <C> <C> <C> <C>
Richard T. Hale* $ 0 $ 0 $ 0 [11]
W. James Price* 0 0 0 [8]
James J. Cunnane** 0 6,321 9,750 13
N. Bruce Hannay 18,308 6,223 39,000 13
John F. Kroeger 26,982 0 42,900 13
Louis E. Levy** 8,757 9,750 29,250 13
Eugene J. McDonald 11,987 12,544 39,000 13
Harry Woolf 11,987 12,544 39,000 13
</TABLE>
- -----------------
* "Interested person," within the meaning of the 1940 Act, of the Fund and
all other U.S. registered investment companies in the Fund Complex for
which he serves as a director or trustee. Mr. Price may be deemed to be an
"interested person". Mr. Hale is a Managing Director of the Distributor.
** Mr. Levy and Mr. Cunnane became Directors in June, 1994 and December,
1994, respectively.
The Fund Complex has adopted a Retirement Plan (the "Retirement Plan")
for Directors who are not employees of the Fund, the Fund's Adviser or their
respective affiliates (the "Participants"). After completion of five years of
service, each Participant will be entitled to receive an annual retirement
benefit equal to a percentage of the fees earned by him in his last year of
service. Upon retirement, each Participant will receive annually 10% of such fee
for each year that he served after completion of the first five years, up to a
maximum annual benefit of 50% of the fee earned by him in his last year of
service. The fee will be paid quarterly, for life, by each Fund for which he
serves. The Retirement Plan is unfunded and unvested. Messrs. Hannay, Kroeger
and Woolf have qualified but have not received benefits, and no such benefits
are being accrued for them since they have not yet retired. The Fund has one
Participant, a Director who retired effective December 31, 1994, who has
qualified for the Retirement Plan by serving thirteen years as Director in the
Fund Complex and who will be paid a quarterly fee of $4,875 by the Fund Complex
for the rest of his life. Such fee is allocated to each fund in the Fund Complex
based upon the relative net assets of such fund to the Fund Complex.
There were four meetings of the Board of Directors held during the
fiscal year ended March 31, 1995. In such fiscal year, all Directors attended at
least 75% of the meetings of the Board of Directors held during their respective
terms.
The Board of Directors has an Audit Committee. The Audit Committee
makes recommendations to the full Board of Directors with respect to the
engagement of independent accountants and reviews, with the independent
accountants, the results of the audit engagement and matters having a material
effect on the Fund's financial operations. The members of the Audit Committee
are Messrs. Cunnane, Hannay, Kroeger, Levy, McDonald and Woolf, each of whom is
not an "interested person" within the meaning of the 1940 Act. The Audit
Committee met four times during the fiscal year ended March 31, 1995. In such
fiscal year, all members attended at least 75% of the meetings of the Audit
Committee held during their respective terms.
The Board of Directors has a Nominating Committee. The Nominating
Committee makes recommendations to the full Board of Directors with respect to
candidates for and policies of the Board of Directors. The members of the
Nominating Committee are Messrs. Cunnane, Hannay, Kroeger, Levy, McDonald
23
<PAGE> 25
and Woolf, each of whom is not an "interested person" within the meaning of the
1940 Act. The Nominating Committee did not meet during the fiscal year
ended March 31, 1995.
The Board of Directors has a Compensation Committee. The Compensation
Committee makes recommendations to the full Board of Directors with respect to
compensation of Directors. The members of the Compensation Committee are Messrs.
Cunnane, Hannay, Kroeger, Levy, McDonald and Woolf, each of whom is not an
"interested person" within the meaning of the 1940 Act. The Compensation
Committee did not meet during the fiscal year ended March 31, 1995.
Independent Accountants
A majority of the Fund's Board of Directors who are not "interested
persons" of the Fund have selected Coopers & Lybrand L.L.P. as the independent
accountants of the Fund for the fiscal year ending March 31, 1996. If requested
by a shareholder either in writing or by telephone in advance of the Meeting, a
representative of Coopers & Lybrand L.L.P. will be present at the Meeting to
make a statement if desired and to be available to respond to appropriate
questions from shareholders. Such request should be directed to the Fund by
writing to the Fund, P.O. Box 17250, Baltimore, Maryland, 21203, or by calling
the Fund at 1-800-553-8080.
Beneficial Owners
To the knowledge of Fund Management, as of May 22, 1995, the
following were beneficial owners of 5% or more of the outstanding shares of the
Fund's Series.
<TABLE>
<CAPTION>
Name & Address Amount of Beneficial Ownership Percent of Total Shares Outstanding
- -------------- ------------------------------ ----------------------------------
<S> <C> <C>
Flag Investors Cash Reserve Prime Class A Shares
Alex. Brown & Sons, Inc. 998,376 shares 13.26%
FBO 242-09111
P.O. Box 1346
Baltimore, MD 21203
Alex. Brown & Sons, Inc. 449,237 shares 6.63%
FBO 201-62090
P.O. Box 1346
Baltimore, MD 21203
Alex. Brown Cash Reserve Tax-Free Shares
Alex. Brown & Sons, Inc. 44,397,821 shares 8.89%
FBO 0024737688
P.O. Box 1346
Baltimore, MD 21203
</TABLE>
Submission of Shareholder Proposals
As a Maryland corporation, the Fund is not required to hold annual
shareholder meetings, except in certain limited circumstances. Shareholders who
wish to present a proposal for action at the next meeting or suggestions as to
nominees for the Board of Directors should submit the proposal or suggestions to
be considered to the Fund within a reasonable time in advance of any such
meeting for inclusion in the Fund's proxy statement and form of proxy for such
meeting as is held. The Nominating Committee of the Board of Directors will give
consideration to shareholder suggestions as to nominees for the Board of
Directors. Shareholders retain the right, under limited circumstances, to
request that a meeting of shareholders be held for the purpose of considering
the removal of a Director from office, and if such a request is made, the Fund
will assist with shareholder communications in connection with the meeting.
Other Matters
No business other than the matters described above is expected to come
before the Meeting, but should any other matter requiring a vote of shareholders
arise, including any question as to an adjournment of the Meeting, the persons
named in the enclosed proxy will vote thereon according to their best judgment
in the interest of the Fund.
24
<PAGE> 26
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING AND WHO WISH
TO HAVE THEIR SHARES VOTED ARE REQUESTED TO FILL IN, DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES.
By Order of the Directors,
Brian C. Nelson
Secretary
Dated: June 21, 1995
25
<PAGE> 27
EXHIBIT A
FORM OF AMENDED INVESTMENT ADVISORY AGREEMENT
ALEX. BROWN CASH RESERVE FUND, INC.-PRIME SERIES
THIS AGREEMENT is made as of the ___ day of _____, 1995 by and between
ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the "Fund"), and
INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation (the "Advisor"), with
respect to the following recital of fact:
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and
WHEREAS, the Fund's Articles of Incorporation authorize the Board of
Directors of the Fund to classify or reclassify authorized but unissued shares
of the Fund; and
WHEREAS, the Fund's Board of Directors has authorized the issuance of
three series of shares with a par value of $.001 representing interests in three
portfolios: the Prime Series, the Treasury Series and the Tax-Free Series (each
of the existing portfolios and any portfolio hereafter added shall be referred
to collectively as the "Series"); and
WHEREAS, the Fund and the Advisor desire to enter an agreement to
provide investment advisory and administrative services for the Fund's
Prime Series (the "Prime Series") on the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Investment Advisor. The Fund hereby appoints the
Advisor to act as the investment advisor to the Prime Series. The Advisor
shall manage the Prime Series' affairs and shall supervise all aspects
of the Prime Series' operations (except as otherwise set forth herein),
including the investment and reinvestment of the cash, securities or other
properties comprising the Prime Series' assets, subject at all times to the
policies and control of the Fund's Board of Directors. The Advisor shall give
the Prime Series the benefit of its best judgment, efforts and facilities in
rendering its services as Advisor.
2. Duties of Investment Advisor. In carrying out its obligations under
section 1 hereof, the Advisor shall:
(a) supervise and manage all aspects of the Prime Series'
operations;
(b) formulate and implement continuing programs for the purchases and
sales of securities, consistent with the investment objective and policies of
the Prime Series;
(c) provide the Prime Series with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of Directors;
<PAGE> 28
(d) provide the Prime Series with, or obtain for it, adequate office
space and all necessary office equipment and services, including telephone
service, heat, utilities, stationery supplies and similar items for the Fund's
principal office;
(e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Prime Series, and
whether concerning the individual issuers whose securities are included in the
Prime Series or the activities in which they engage, or with respect to
securities which the Advisor considers desirable for inclusion in the Prime
Series;
(f) determine which issuers and securities shall be represented in the
Prime Series and regularly report thereon to the Fund's Board of Directors;
(g) take all actions necessary to carry into effect the Fund's purchase
and sale program with respect to its Prime Series;
(h) supervise the operations of the Prime Series' transfer and
dividend disbursing agent;
(i) provide the Prime Series with such administrative and clerical
services for the maintenance of certain shareholder records, as are deemed
advisable by the Fund's Board of Directors; and,
(j) arrange, but not pay for, the periodic updating of prospectuses and
supplements thereto, proxy material, tax returns, reports to the shareholders of
the Prime Series and reports to and filings with the Securities and Exchange
Commission (the "SEC") and state Blue Sky authorities, which may be required for
the Prime Series.
3. Broker-Dealer Relationship. In the event that the Advisor is
responsible for decisions to buy and sell securities for the Prime Series,
broker-dealer selection, and negotiation of its brokerage commission rates, the
Advisor's primary consideration in effecting a security transaction will be
execution at the most favorable price. The Fund understands that a substantial
majority of the Prime Series' transactions will be transacted with primary
market makers acting as principal on a net basis, with no brokerage commissions
being paid by the Fund. Such principal transactions may, however, result in a
profit to the market makers. In certain instances the Advisor may make purchases
of underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Prime Series on a
continuing basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Prime Series. The
Advisor is further authorized to allocate the orders placed by it on behalf of
the Prime Series to such brokers and dealers who also provide research or
statistical material or other services to the Fund or the Advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocation regularly to the Board
of Directors of the Fund, indicating the brokers to whom such allocations have
been made and the basis therefor.
A-2
<PAGE> 29
4. Control by Board of Directors. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as any
other activities undertaken by the Advisor on behalf of the Prime Series
pursuant thereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;
(b) the provisions of the Registration Statement of the Fund under the
Securities Act of 1933 and 1940 Act;
(c) the provisions of the Articles of Incorporation, as amended;
(d) the provisions of the By-laws of the Fund, as amended; and
(e) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Prime Series shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall furnish, at its expense and without cost to the
Fund, the services of one or more officers of the Fund, to the extent that such
officers may be required by the Fund for the proper conduct of its affairs.
(b) The Fund assumes and shall pay or cause to be paid all other
expenses of the Prime Series, including, without limitation the Prime Series'
allocable portion of the following expenses: payments to the Fund's distributor
under the Prime Series' plans of distribution; the charges and expenses of any
registrar, any custodian or depository appointed by the Fund for the safekeeping
of its cash, portfolio securities and other property, and any transfer, dividend
or accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and fees payable by the Fund to federal, state or other governmental
agencies; the costs and expenses of engraving or printing of certificates
representing shares of the Fund; all costs and expenses in connection with the
registration and maintenance of registration of the Fund and its shares with the
SEC and various states and other jurisdictions (including filing fees, legal
fees and disbursements of counsel); the costs and expenses of printing,
including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of directors or director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's shares;
charges and expenses of legal counsel, including counsel to the directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund and
of independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
directors) of the Fund which inure to its benefit; extraordinary expenses
(including but not limited to, legal claims and liabilities and litigation costs
and any indemnification related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
A-3
<PAGE> 30
7. Delegation of Responsibilities.
(a) Subject to the approval of the Board of Directors and
shareholders of the Prime Series, the Advisor may delegate to a sub-advisor
certain of its duties enumerated in section 2 hereof provided that the Advisor
shall continue to supervise the performance of any such sub-advisor. The Advisor
shall not be responsible for the Sub-advisor's performance under a
sub-advisory agreement.
(b) The Advisor may, but shall not be under any duty to,
perform services on behalf of the Prime Series which are not required by this
Agreement upon the request of the Fund's Board of Directors. Such services will
be performed on behalf of the Prime Series and the Advisor's charge in
rendering such services may be billed monthly to the Fund, subject to
examination by the Fund's independent accountants. Payment or assumption by the
Advisor of any Fund expense that the Advisor is not required to pay or assume
under this Agreement shall not relieve the Advisor of any of its obligations to
the Prime Series nor obligate the Advisor to pay or assume any similar Prime
Series' expenses on any subsequent occasions.
8. Compensation. For the services to be rendered and the expenses
assumed by the Advisor, the Prime Series shall pay to the Advisor monthly
compensation at an annual rate derived by: (1) calculating an amount equal to
.30% of the first $500 million of the Fund's aggregate average daily net assets,
.26% of the next $500 million of the Fund's aggregate average daily net assets,
.25% of the next $500 million of the Fund's aggregate average daily net assets,
.24% of the next $1 billion of the Fund's aggregate average daily net assets and
.23% of that portion of the Fund's aggregate average daily net assets in excess
of $2.5 billion; (2) applying to this amount a fraction equal to the net assets
of the Prime Series divided by the net assets of the Fund; and (3) adding an
amount calculated daily and paid monthly, at the annual rate of .02% of the
Prime Series' average daily net assets.
Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Subject to the provisions of section 9 hereof, payment of the Advisor's
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated by section 9 hereof.
9. Expense Limitation. In the event the operating expenses of the Fund,
including all investment advisory and administrative fees, for any fiscal year
ending on a date on which this Agreement is in effect exceed either (i) the
expense limitations applicable to the Prime Series imposed by the securities
laws or regulations thereunder of any state in which the Fund's shares are
qualified for sale, as such limitations may be raised or lowered from time to
time, or (ii) 1% of the Fund's average daily net assets, the Advisor shall
reduce its investment advisory fee to the extent of its share of such excess
expenses and, if required pursuant to any such laws or regulations, will
reimburse the Fund for its share of annual operating expenses in excess of any
expense limitation that may be applicable; provided, however, there shall be
excluded from such expenses the amounts of any interest, taxes, brokerage
commissions and extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Prime Series as at the end of the
last business day of the month. Should two or more such expense limitations be
applicable as at the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Advisor's fee shall be
applicable. For the purposes of this paragraph, the Advisor's share of any
excess expenses shall be computed by multiplying such excess expenses by a
fraction, the numerator of which is the amount of the investment advisory fee
which would otherwise be payable to the Advisor for such fiscal year were it
A-4
<PAGE> 31
not for this section 9 and the denominator of which is the sum of all investment
advisory and distribution fees which would otherwise be payable by the Fund were
it not for the expense limitation provisions of any investment advisory or
administration agreement to which the Fund is a party. The foregoing expense
limitations imposed by the state securities laws and regulations shall be
applied to the Prime Series separately unless the laws or regulations of any
state shall require that the expense limitations be imposed with respect to the
Fund as a whole. The foregoing 1% expense limitation shall be applied to
the Fund's Series on a combined basis.
10. Non-Exclusivity. The services of the Advisor to the Fund are not to
be deemed to be exclusive, and the Advisor shall be free to render investment
advisory and corporate administrative or other services to others (including
other investment companies) and to engage in other activities, so long as its
services under this Agreement are not impaired thereby. It is understood and
agreed that officers or directors of the Advisor may serve as officers or
directors of the Fund, and that officers or directors of the Fund may serve as
officers or directors of the Advisor to the extent permitted by law; and that
the officers and directors of the Advisor are not prohibited from engaging in
any other business activity or from rendering services to any other person, or
from serving as partners, officers, trustees or directors of any other firm,
trust or corporation, including other investment companies.
11. Term. This Agreement shall become effective at the close of
business on the date hereof and shall continue in force and effect, subject to
section 13 hereof, for two years from the date hereof.
12. Renewal. Following the expiration of its initial two-year term,
this Agreement shall continue in force and effect from year to year, provided
that such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the outstanding voting securities of the Prime Series (as
defined in Section 2(a) (42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the directors who are
not parties to this Agreement or "interested persons" of a party to this
Agreement (other than as directors of the Fund) by votes cast in person at
a meeting specifically called for such purpose.
13. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Fund's Board of Directors or by vote
of a majority of the Prime Series' outstanding voting securities (as defined
in Section 2(a)(42) of the 1940 Act), or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by either party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" having the meaning defined in Section
2(a)(4) of the 1940 Act.
14. Liability of Advisor. In the performance of its duties hereunder,
the Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Advisor shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor of its
duties under this Agreement.
15. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Fund and
the Advisor for this purpose shall be 135 East Baltimore Street, Baltimore,
Maryland 21202.
A-5
<PAGE> 32
16. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to said Act.
In addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is revised by rule, regulation or order of the SEC,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
ALEX. BROWN CASH RESERVE FUND,
INC.
By __________________________
Attest:
___________________________
Secretary
INVESTMENT COMPANY CAPITAL
CORP.
By __________________________
Attest:
____________________________
Secretary
A-6
<PAGE> 33
EXHIBIT B
FORM OF AMENDED INVESTMENT ADVISORY AGREEMENT
ALEX. BROWN CASH RESERVE FUND, INC. - TREASURY SERIES
THIS AGREEMENT is made as of the ___ day of _____, 1995 by and between
ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the "Fund"), and
INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation (the "Advisor"), with
respect to the following recital of fact:
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and
WHEREAS, the Fund's Articles of Incorporation authorize the Board of
Directors of the Fund to classify or reclassify authorized but unissued shares
of the Fund; and
WHEREAS, the Fund's Board of Directors has authorized the issuance of
three series of shares with a par value of $.001 representing interests in three
portfolios: the Prime Series, the Treasury Series and the Tax-Free Series (each
of the existing portfolios and any portfolios hereafter added shall be referred
to collectively as the "Series"); and
WHEREAS, the Fund and the Advisor desire to enter an agreement to
provide investment advisory and administrative services for the Fund's Treasury
Series (the "Treasury Series") on the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Investment Advisor. The Fund hereby appoints the
Advisor to act as the investment advisor to the Treasury Series. The Advisor
shall manage the Treasury Series' affairs and shall supervise all aspects of the
Treasury Series' operations (except as otherwise set forth herein), including
the investment and reinvestment of the cash, securities or other properties
comprising the Treasury Series' assets, subject at all times to the policies and
control of the Fund's Board of Directors. The Advisor shall give the Treasury
Series the benefit of its best judgment, efforts and facilities in rendering its
services as Advisor.
2. Duties of Investment Advisor. In carrying out its obligations under
section 1 hereof, the Advisor shall:
(a) supervise and manage all aspects of the Treasury Series'
operations;
(b) formulate and implement continuing programs for the purchases
and sales of securities, consistent with the investment objective and policies
of the Treasury Series;
(c) provide the Treasury Series with such executive,
administrative and clerical services as are deemed advisable by the Fund's Board
of Directors;
<PAGE> 34
(d) provide the Treasury Series with, or obtain for it, adequate
office space and all necessary office equipment and services, including
telephone service, heat, utilities, stationery supplies and similar items for
the Fund's principal office;
(e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Treasury Series, and
whether concerning the individual issuers whose securities are included in the
Treasury Series or the activities in which they engage, or with respect to
securities which the Advisor considers desirable for inclusion in the Treasury
Series;
(f) determine which issuers and securities shall be represented
in the Treasury Series and regularly report thereon to the Fund's Board of
Directors;
(g) take all actions necessary to carry into effect the Fund's
purchase and sale programs with respect to its Treasury Series;
(h) supervise the operations of the Treasury Series' transfer and
dividend disbursing agent;
(i) provide the Treasury Series with such administrative and
clerical services for the maintenance of certain shareholder records, as are
deemed advisable by the Fund's Board of Directors; and,
(j) arrange, but not pay for, the periodic updating of
prospectuses and supplements thereto, proxy material, tax returns, reports to
the shareholders of the Treasury Series and reports to and filings with the
Securities and Exchange Commission (the "SEC") and state Blue Sky authorities,
which may be required for the Treasury Series.
3. Broker-Dealer Relationship. In the event that the Advisor is
responsible for decisions to buy and sell securities for the Treasury Series,
broker-dealer selection, and negotiation of its brokerage commission rates, the
Advisor's primary consideration in effecting a security transaction will be
execution at the most favorable price. The Fund understands that a substantial
majority of the Treasury Series' transactions will be transacted with primary
market makers acting as principal on a net basis, with no brokerage commissions
being paid by the Fund. Such principal transactions may, however, result in a
profit to the market makers. In certain instances the Advisor may make purchases
of underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Treasury Series on a
continuing basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Treasury Series. The
Advisor is further authorized to allocate the orders placed by it on behalf of
the Treasury Series to such brokers and dealers who also provide research or
statistical material or other services to the Fund or the Advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
B-2
<PAGE> 35
determine and the Advisor will report on said allocation regularly to the Board
of Directors of the Fund, indicating the brokers to whom such allocations have
been made and the basis therefor.
4. Control by Board of Directors. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as any
other activities undertaken by the Advisor on behalf of the Treasury Series
pursuant thereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;
(b) the provisions of the Registration Statement of the Fund
under the Securities Act of 1933 and 1940 Act;
(c) the provisions of the Articles of Incorporation, as amended;
(d) the provisions of the By-laws of the Fund, as amended; and
(e) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Treasury Series shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall furnish, at its expense and without cost to
the Fund, the services of one or more officers of the Fund, to the extent that
such officers may be required by the Fund for the proper conduct of its affairs.
(b) The Fund assumes and shall pay or cause to be paid all other
expenses of the Treasury Series, including, without limitation the Treasury
Series' allocable portion of the following expenses: payments to the Fund's
distributor under the Treasury Series' plan of distribution; the charges and
expenses of any registrar, any custodian or depository appointed by the Fund for
the safekeeping of its cash, portfolio securities and other property, and any
transfer, dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and fees payable by the Fund to federal, state or
other governmental agencies; the costs and expenses of engraving or printing of
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of directors or director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's shares;
charges and expenses of legal counsel, including counsel to the directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund and
of independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
B-3
<PAGE> 36
directors) of the Fund which inure to its benefit; extraordinary expenses
(including but not limited to, legal claims and liabilities and litigation costs
and any indemnification related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
7. Delegation of Responsibilities.
(a) Subject to the approval of the Board of Directors and
shareholders of the Treasury Series, the Advisor may delegate to a sub-advisor
certain of its duties enumerated in section 2 hereof provided that the Advisor
shall continue to supervise the performance of any such sub-advisor. The Advisor
shall not be responsible for the Sub-advisor's performance under a
sub-advisory agreement.
(b) The Advisor may, but shall not be under any duty to,
perform services on behalf of the Treasury Series which are not required by this
Agreement upon the request of the Fund's Board of Directors. Such services will
be performed on behalf of the Treasury Series and the Advisor's charge in
rendering such services may be billed monthly to the Fund, subject to
examination by the Fund's independent accountants. Payment or assumption by the
Advisor of any Fund expense that the Advisor is not required to pay or assume
under this Agreement shall not relieve the Advisor of any of its obligations to
the Treasury Series nor obligate the Advisor to pay or assume any similar
Treasury Series' expenses on any subsequent occasions.
8. Compensation. For the services to be rendered and the expenses
assumed by the Advisor, the Fund shall pay to the Advisor monthly compensation
at an annual rate derived by: (1) calculating an amount equal to .30% of the
first $500 million of the Fund's aggregate average daily net assets, .26% of the
next $500 million of the Fund's aggregate average daily net assets, .25% of the
next $500 million of the Fund's aggregate average daily net assets, .24% of the
next $1 billion of the Fund's aggregate average daily net assets and .23% of
that portion of the Fund's aggregate average daily net assets in excess of $2.5
billion; and (2) applying to this amount a fraction equal to the net assets of
the Treasury Series divided by the net assets of the Fund.
Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Subject to the provisions of section 9 hereof, payment of the Advisor's
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated by section 9 hereof.
9. Expense Limitation. In the event the operating expenses of the Fund,
including all investment advisory and administrative fees, for any fiscal year
ending on a date on which this Agreement is in effect exceed either (i) the
expense limitations applicable to the Treasury Series imposed by the securities
laws or regulations thereunder of any state in which the Fund's shares are
qualified for sale, as such limitations may be raised or lowered from time to
time, or (ii) 1% of the Fund's average daily net assets, the Advisor shall
reduce its investment advisory fee to the extent of its share of such excess
expenses and, if required pursuant to any such laws or regulations, will
reimburse the Fund for its share of annual operating expenses in excess of any
expense limitation that may be applicable; provided, however, there shall be
excluded from such expenses the amounts of any interest, taxes, brokerage
commissions and extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Treasury Series as at the end of
B-4
<PAGE> 37
the last business day of the month. Should two or more such expense limitations
be applicable as at the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Advisor's fee shall be
applicable. For the purposes of this paragraph, the Advisor's share of any
excess expenses shall be computed by multiplying such excess expenses by a
fraction, the numerator of which is the amount of the investment advisory fee
which would otherwise be payable to the Advisor for such fiscal year were it not
for this section 9 and the denominator of which is the sum of all investment
advisory and distribution fees which would otherwise be payable by the Fund were
it not for the expense limitation provisions of any investment advisory or
administration agreement to which the Fund is a party. The foregoing expense
limitations imposed by the state securities laws and regulations shall be
applied to the Treasury Series separately unless the laws or regulations of any
state shall require that the expense limitations be imposed with respect to the
Fund as a whole. The foregoing 1% expense limitation shall be applied to the
Fund's Series on a combined basis.
10. Non-Exclusivity. The services of the Advisor to the Fund are not to
be deemed to be exclusive, and the Advisor shall be free to render investment
advisory and corporate administrative or other services to others (including
other investment companies) and to engage in other activities, so long as its
services under this Agreement are not impaired thereby. It is understood and
agreed that officers or directors of the Advisor may serve as officers or
directors of the Fund, and that officers or directors of the Fund may serve as
officers or directors of the Advisor to the extent permitted by law; and that
the officers and directors of the Advisor are not prohibited from engaging in
any other business activity or from rendering services to any other person, or
from serving as partners, officers, trustees or directors of any other firm,
trust or corporation, including other investment companies.
11. Term. This Agreement shall become effective at the close of
business on the date hereof and shall continue in force and effect, subject to
section 13 hereof, for two years from the date hereof.
12. Renewal. Following the expiration of its initial two-year term,
this Agreement shall continue in force and effect from year to year, provided
that such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote
of a majority of the outstanding voting securities of the
Treasury Series (as defined in Section 2(a) (42) of the 1940
Act), and
(b) by the affirmative vote of a majority of the directors who
are not parties to this Agreement or "interested persons" of a
party to this Agreement (other than as directors of the Fund)
by votes cast in person at a meeting specifically called for
such purpose.
13. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Fund's Board of Directors or by vote
of a majority of the Treasury Series' outstanding voting securities (as defined
in Section 2(a)(42) of the 1940 Act), or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by either party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" having the meaning defined in Section
2(a)(4) of the 1940 Act.
14. Liability of Advisor. In the performance of its duties hereunder,
the Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Advisor shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor of its
duties under this Agreement.
B-5
<PAGE> 38
15. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Fund and
the Advisor for this purpose shall be 135 East Baltimore Street, Baltimore,
Maryland 21202.
16. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to said Act.
In addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is revised by rule, regulation or order of the SEC,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
ALEX. BROWN CASH RESERVE FUND,
INC.
By __________________________
Attest:
____________________________
Secretary
INVESTMENT COMPANY CAPITAL
CORP.
By __________________________
Attest:
____________________________
Secretary
B-6
<PAGE> 39
EXHIBIT C
FORM OF AMENDED INVESTMENT ADVISORY AGREEMENT
ALEX. BROWN CASH RESERVE FUND, INC. - TAX-FREE SERIES
THIS AGREEMENT is made as of the ___ day of _____, 1995 by and between
ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the "Fund"), and
INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation (the "Advisor"), with
respect to the following recital of fact:
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and
WHEREAS, the Fund's Articles of Incorporation authorize the Board of
Directors of the Fund to classify or reclassify authorized but unissued shares
of the Fund; and
WHEREAS, the Fund's Board of Directors has authorized the issuance of
three series of shares with a par value of $.001 representing interests in three
portfolios: the Prime Series, the Treasury Series and the Tax-Free Series (each
of the existing portfolios and any portfolio hereafter added shall be referred
to collectively as the "Series"); and
WHEREAS, the Fund and the Advisor desire to enter an agreement to
provide investment advisory and administrative services for the Fund's Tax-Free
Series (the "Tax-Free Series") on the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Investment Advisor. The Fund hereby appoints the
Advisor to act as the investment advisor to the Tax-Free Series. The Advisor
shall manage the affairs of the Tax-Free Series and shall supervise all aspects
of the Tax-Free Series' operations (except as otherwise set forth herein),
including the investment and reinvestment of the cash, securities or other
properties comprising the Tax-Free Series' assets, subject at all times to the
policies and control of the Fund's Board of Directors. The Advisor shall give
the Tax-Free Series the benefit of its best judgment, efforts and facilities in
rendering its services as Advisor.
2. Duties of Investment Advisor. In carrying out its obligations under
section 1 hereof, the Advisor shall:
(a) supervise and manage all aspects of the Tax-Free Series'
operations;
(b) formulate and implement continuing programs for the purchases and
sales of securities, consistent with the investment objective and policies of
the Tax-Free Series;
(c) provide the Tax-Free Series with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of Directors;
<PAGE> 40
(d) provide the Tax-Free Series with, or obtain for it, adequate office
space and all necessary office equipment and services, including telephone
service, heat, utilities, stationery supplies and similar items for the Fund's
principal office;
(e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Tax-Free Series, and
whether concerning the individual issuers whose securities are included in the
Tax-Free Series or the activities in which they engage, or with respect to
securities which the Advisor considers desirable for inclusion in the Tax-Free
Series;
(f) determine which issuers and securities shall be represented in the
Tax-Free Series and regularly report thereon to the Fund's Board of Directors;
(g) take all actions necessary to carry into effect the Fund's purchase
and sale programs with respect to its Tax-Free Series;
(h) supervise the operations of the Tax-Free Series' transfer and
dividend disbursing agent;
(i) provide the Tax-Free Series with such administrative and clerical
services for the maintenance of certain shareholder records, as are deemed
advisable by the Fund's Board of Directors; and,
(j) arrange, but not pay for, the periodic updating of prospectuses and
supplements thereto, proxy material, tax returns, reports to the shareholders of
the Tax-Free Series and reports to and filings with the Securities and Exchange
Commission (the "SEC") and state Blue Sky authorities, which may be required for
the Tax-Free Series.
3. Broker-Dealer Relationship. In the event that the Advisor is
responsible for decisions to buy and sell securities for the Tax-Free Series,
broker-dealer selection, and negotiation of its brokerage commission rates, the
Advisor's primary consideration in effecting a security transaction will be
execution at the most favorable price. The Fund understands that a substantial
majority of the Tax-Free Series' transactions will be transacted with primary
market makers acting as principal on a net basis, with no brokerage commissions
being paid by the Fund. Such principal transactions may, however, result in a
profit to the market makers. In certain instances the Advisor may make purchases
of underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Tax-Free Series on a
continuing basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Tax-Free Series. The
Advisor is further authorized to allocate the orders placed by it on behalf of
the Tax-Free Series to such brokers and dealers who also provide research or
statistical material or other services to the Fund or the Advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocation regularly to the Board
of Directors of the Fund, indicating the brokers to whom such allocations have
been made and the basis therefor.
C-2
<PAGE> 41
4. Control by Board of Directors. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as any
other activities undertaken by the Advisor on behalf of the Tax-Free Series
pursuant thereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;
(b) the provisions of the Registration Statement of the Fund under the
Securities Act of 1933 and 1940 Act;
(c) the provisions of the Articles of Incorporation, as amended;
(d) the provisions of the By-laws of the Fund, as amended; and
(e) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Tax-Free Series shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall furnish, at its expense and without cost to the
Fund, the services of one or more officers of the Fund to the extent that such
officers may be required by the Fund for the proper conduct of its affairs.
(b) The Fund assumes and shall pay or cause to be paid all other
expenses of the Tax-Free Series, including, without limitation the Tax-Free
Series' allocable portion of the following expenses: payments to the Fund's
distributor under the Fund's plan of distribution; the charges and expenses of
any registrar, any custodian or depository appointed by the Fund for the
safekeeping of its cash, portfolio securities and other property, and any
transfer, dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and fees payable by the Fund to federal, state or
other governmental agencies; the costs and expenses of engraving or printing of
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of directors or director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's shares;
charges and expenses of legal counsel, including counsel to the directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund and
of independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
directors) of the Fund which inure to its benefit; extraordinary expenses
(including but not limited to, legal claims and liabilities and litigation costs
and any indemnification related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
C-3
<PAGE> 42
7. Delegation of Responsibilities.
(a) Subject to the approval of the Board of Directors and
shareholders of the Tax-Free Series, the Advisor may delegate to a sub-advisor
certain of its duties enumerated in section 2 hereof provided that the Advisor
shall continue to supervise the performance of any such sub-advisor. The Advisor
shall not be responsible for the Sub-advisor's performance under a sub-advisory
agreement.
(b) The Advisor may, but shall not be under any duty to,
perform services on behalf of the Tax-Free Series which are not required by this
Agreement upon the request of the Fund's Board of Directors. Such services will
be performed on behalf of the Tax-Free Series and the Advisor's charge in
rendering such services may be billed monthly to the Fund, subject to
examination by the Fund's independent accountants. Payment or assumption by the
Advisor of any Fund expense that the Advisor is not required to pay or assume
under this Agreement shall not relieve the Advisor of any of its obligations to
the Tax-Free Series nor obligate the Advisor to pay or assume any similar
expenses on any subsequent occasions.
8. Compensation. For the services to be rendered and the expenses
assumed by the Advisor, the Tax-Free Series shall pay to the Advisor monthly
compensation at an annual rate derived by: (1) calculating an amount equal to
.30% of the first $500 million of the Fund's aggregate average daily net assets,
.26% of the next $500 million of the Fund's aggregate average daily net assets,
.25% of the next $500 million of the Fund's aggregate average daily net assets,
.24% of the next $1 billion of the Fund's aggregate average daily net assets and
.23% of that portion of the Fund's aggregate average daily net assets in excess
of $2.5 billion; (2) applying to this amount a fraction equal to the net assets
of the Tax-Free Series divided by the net assets of the Fund; and (3) adding an
amount calculated daily and paid monthly, at the annual rate of .03% of the
Tax-Free Series' average daily net assets.
Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Subject to the provisions of section 9 hereof, payment of the Advisor's
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated by section 9 hereof.
9. Expense Limitation. In the event the operating expenses of the Fund,
including all investment advisory and administrative fees, for any fiscal year
ending on a date on which this Agreement is in effect exceed either (i) the
expense limitations applicable to the Tax-Free Series imposed by the securities
laws or regulations thereunder of any state in which the Fund's shares are
qualified for sale, as such limitations may be raised or lowered from time to
time, or (ii) 1% of the Fund's average daily net assets, the Advisor shall
reduce its investment advisory fee to the extent of its share of such excess
expenses and, if required pursuant to any such laws or regulations, will
reimburse the Fund for its share of annual operating expenses in excess of any
expense limitation that may be applicable; provided, however, there shall be
excluded from such expenses the amounts of any interest, taxes, brokerage
commissions and extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Tax-Free Series as of the end of the
last business day of the month. Should two or more such expense limitations be
applicable as of the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Advisor's fee shall be
applicable. For the purposes of this paragraph, the Advisor's share of any
excess expenses shall be computed by multiplying such excess expenses by a
fraction, the numerator of which is the amount of the investment advisory fee
which would otherwise be payable to the Advisor for such fiscal year were it
C-4
<PAGE> 43
not for this section 9 and the denominator of which is the sum of all investment
advisory and distribution fees which would otherwise be payable by the Fund were
it not for the expense limitation provisions of any investment advisory or
administration agreement to which the Fund is a party. The foregoing expense
limitations imposed by the state securities laws and regulations shall be
applied to the Tax-Free Series separately unless the laws or regulations of any
state shall require that the expense limitations be imposed with respect to the
Fund as a whole. The foregoing 1% expense limitation shall be applied to the
Fund's Series on a combined basis.
10. Non-Exclusivity. The services of the Advisor to the Fund are not to
be deemed to be exclusive, and the Advisor shall be free to render investment
advisory and corporate administrative or other services to others (including
other investment companies) and to engage in other activities, so long as its
services under this Agreement are not impaired thereby. It is understood and
agreed that officers or directors of the Advisor may serve as officers or
directors of the Fund, and that officers or directors of the Fund may serve as
officers or directors of the Advisor to the extent permitted by law; and that
the officers and directors of the Advisor are not prohibited from engaging in
any other business activity or from rendering services to any other person, or
from serving as partners, officers, trustees or directors of any other firm,
trust or corporation, including other investment companies.
11. Term. This Agreement shall become effective at the close of
business on the date hereof and shall continue in force and effect, subject to
section 13 hereof, for two years from the date hereof.
12. Renewal. Following the expiration of its initial two-year term,
this Agreement shall continue in force and effect from year to year, provided
that such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the outstanding voting securities of the Tax-Free Series (as defined
in Section 2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the directors who are not
parties to this Agreement or "interested persons" of a party to this Agreement
(other than as directors of the Fund) by votes cast in person at a meeting
specifically called for such purpose.
13. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Fund's Board of Directors or by vote
of a majority of the Tax-Free Series' outstanding voting securities (as defined
in Section 2(a)(42) of the 1940 Act), or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by either party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" having the meaning defined in Section
2(a)(4) of the 1940 Act.
14. Liability of Advisor. In the performance of its duties hereunder,
the Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Advisor shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor of its
duties under this Agreement.
15. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Fund and
the Advisor for this purpose shall be 135 East Baltimore Street, Baltimore,
Maryland 21202.
C-5
<PAGE> 44
16. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to said Act.
In addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is revised by rule, regulation or order of the SEC,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
ALEX. BROWN CASH RESERVE FUND,
INC.
By __________________________
Attest:
___________________________
Secretary
INVESTMENT COMPANY CAPITAL
CORP.
By __________________________
Attest:
____________________________
Secretary
C-6
<PAGE> 45
ALEX. BROWN CASH RESERVE FUND, INC. -- PRIME SERIES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
July 25, 1995
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF ALEX. BROWN CASH RESERVE RESERVE, INC.
This Proxy is for your use in voting on various matters relating to Alex. Brown
Cash Reserve Fund, Inc. (the "Fund"). The undersigned Shareholder(s) of the
Fund, revoking previous proxies, hereby appoint(s) Edward J. Veilleux, Brian C.
Nelson and Mary E. Connell and each of them (with full power of substitution)
the proxy or proxies of the undersigned to attend the Special Meeting of
Shareholders of the Fund to be held on July 25, 1995 and any adjournments
thereof, to vote all of the shares of the Fund that the signer would be entitled
to vote if personally present at the Special Meeting of Shareholders and on any
other matters brought before the Meeting, all as set forth in the Notice of
Special Meeting of Shareholders. Said proxies are directed to vote or refrain
from voting pursuant to the Proxy Statement as indicated upon the matters set
forth below:
(1) To consider and act upon a proposal to elect a Board of Directors
(voted by the shareholders of the Fund as a whole).
____ FOR all nominees listed below
____ WITHHOLD AUTHORITY to vote ____ FOR all nominees listed below except
for all nominees listed below. those whose names have been stricken.
(Instructions: To withhold authority to vote for any or all of the nominees,
strike a line through the names of such nominee(s) below.)
W. James Price, Richard T. Hale, James J. Cunnane, N. Bruce Hannay,
John F. Kroeger, Louis E. Levy, Eugene J. McDonald, Rebecca W. Rimel,
Harry Woolf
(2) To approve or disapprove an amended investment advisory agreement between
the Fund and Investment Company Capital Corp. with respect to the Prime
Series (voted by the shareholders of the Prime Series).
____ FOR ____ AGAINST ____ ABSTAIN
[Proposal (3) Intentionally Omitted.]
[Proposal (4) Intentionally Omitted.]
This Proxy will be voted as indicated above. If no indication is made, this
Proxy will be voted FOR the proposals set forth above. The undersigned
acknowledges receipt with this proxy of a copy of the Notice of Special Meeting
of Shareholders and the Proxy Statement of the Board of Directors.
Please Date: -> Date: _________________, 1995
Please print and sign your name in the space provided
to authorize the voting of your shares as indicated
and return promptly. When signing on behalf of a
corporation, partnership, estate, trust, or in any other
representative capacity, please sign your name and title.
For joint accounts, each joint owner must sign.
_______________________________________
(Signature of Shareholder)
_______________________________________
(Co-owner signature, if any)
_______________________________________
(Printed Name of Shareholder)
_______________________________________
(Printed name of co-owner, if any)
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE> 46
ALEX. BROWN CASH RESERVE FUND, INC. -- TREASURY SERIES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
July 25, 1995
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF ALEX. BROWN CASH RESERVE RESERVE, INC.
This Proxy is for your use in voting on various matters relating to Alex. Brown
Cash Reserve Fund, Inc. (the "Fund"). The undersigned Shareholder(s) of the
Fund, revoking previous proxies, hereby appoint(s) Edward J. Veilleux, Brian C.
Nelson and Mary E. Connell and each of them (with full power of substitution)
the proxy or proxies of the undersigned to attend the Special Meeting of
Shareholders of the Fund to be held on July 25, 1995 and any adjournments
thereof, to vote all of the shares of the Fund that the signer would be entitled
to vote if personally present at the Special Meeting of Shareholders and on any
other matters brought before the Meeting, all as set forth in the Notice of
Special Meeting of Shareholders. Said proxies are directed to vote or refrain
from voting pursuant to the Proxy Statement as indicated upon the matters set
forth below:
(1) To consider and act upon a proposal to elect a Board of Directors
(voted by the shareholders of the Fund as a whole).
____ FOR all nominees listed below
____ WITHHOLD AUTHORITY to vote ____ FOR all nominees listed below except
for all nominees listed below. those whose names have been stricken.
(Instructions: To withhold authority to vote for any or all of the nominees,
strike a line through the names of such nominee(s) below.)
W. James Price, Richard T. Hale, James J. Cunnane, N. Bruce Hannay,
John F. Kroeger, Louis E. Levy, Eugene J. McDonald, Rebecca W. Rimel,
Harry Woolf
[Proposal (2) Intentionally Omitted.]
(3) To approve or disapprove an amended investment advisory agreement between
the Fund and Investment Company Capital Corp. with respect to the
Treasury Series (voted by the shareholders of the Treasury Series).
____ FOR ____ AGAINST ____ ABSTAIN
[Proposal (4) Intentionally Omitted.]
This Proxy will be voted as indicated above. If no indication is made, this
Proxy will be voted FOR the proposals set forth above. The undersigned
acknowledges receipt with this proxy of a copy of the Notice of Special Meeting
of Shareholders and the Proxy Statement of the Board of Directors.
Please Date: -> Date: _________________, 1995
Please print and sign your name in the space provided
to authorize the voting of your shares as indicated
and return promptly. When signing on behalf of a
corporation, partnership, estate, trust, or in any other
representative capacity, please sign your name and title.
For joint accounts, each joint owner must sign.
_______________________________________
(Signature of Shareholder)
_______________________________________
(Co-owner signature, if any)
_______________________________________
(Printed Name of Shareholder)
_______________________________________
(Printed name of co-owner, if any)
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE> 47
ALEX. BROWN CASH RESERVE FUND, INC. -- TAX-FREE SERIES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
July 25, 1995
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF ALEX. BROWN CASH RESERVE RESERVE, INC.
This Proxy is for your use in voting on various matters relating to Alex. Brown
Cash Reserve Fund, Inc. (the "Fund"). The undersigned Shareholder(s) of the
Fund, revoking previous proxies, hereby appoint(s) Edward J. Veilleux, Brian C.
Nelson and Mary E. Connell and each of them (with full power of substitution)
the proxy or proxies of the undersigned to attend the Special Meeting of
Shareholders of the Fund to be held on July 25, 1995 and any adjournments
thereof, to vote all of the shares of the Fund that the signer would be entitled
to vote if personally present at the Special Meeting of Shareholders and on any
other matters brought before the Meeting, all as set forth in the Notice of
Special Meeting of Shareholders. Said proxies are directed to vote or refrain
from voting pursuant to the Proxy Statement as indicated upon the matters set
forth below:
(1) To consider and act upon a proposal to elect a Board of Directors
(voted by the shareholders of the Fund as a whole).
____ FOR all nominees listed below
____ WITHHOLD AUTHORITY to vote ____ FOR all nominees listed below except
for all nominees listed below. those whose names have been stricken.
(Instructions: To withhold authority to vote for any or all of the nominees,
strike a line through the names of such nominee(s) below.)
W. James Price, Richard T. Hale, James J. Cunnane, N. Bruce Hannay,
John F. Kroeger, Louis E. Levy, Eugene J. McDonald, Rebecca W. Rimel,
Harry Woolf
[Proposal (2) Intentionally Omitted.]
[Proposal (3) Intentionally Omitted.]
(4) To approve or disapprove an amended investment advisory agreement between
the Fund and Investment Company Capital Corp. with respect to the
Tax-Free Series (voted by the shareholders of the Tax-Free Series).
____ FOR ____ AGAINST ____ ABSTAIN
This Proxy will be voted as indicated above. If no indication is made, this
Proxy will be voted FOR the proposals set forth above. The undersigned
acknowledges receipt with this proxy of a copy of the Notice of Special Meeting
of Shareholders and the Proxy Statement of the Board of Directors.
Please Date: -> Date: _________________, 1995
Please print and sign your name in the space provided
to authorize the voting of your shares as indicated
and return promptly. When signing on behalf of a
corporation, partnership, estate, trust, or in any other
representative capacity, please sign your name and title.
For joint accounts, each joint owner must sign.
_______________________________________
(Signature of Shareholder)
_______________________________________
(Co-owner signature, if any)
_______________________________________
(Printed Name of Shareholder)
_______________________________________
(Printed name of co-owner, if any)
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
