BROWN ALEX CASH RESERVE FUND INC, DEF 14A, 1995-06-26

BROWN ALEX CASH RESERVE FUND INC
DEF 14A, 1995-06-26

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<PAGE>

SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

Alex. Brown Cash Reserve Fund, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: 1

4) Proposed maximum aggregate value of transaction:

5) Total fee paid:

[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

2) Form, Schedule or Registration Statement No.:

3) Filing Party:

4) Date Filed:

- --------
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.

<PAGE>

(Letterhead of Alex. Brown Cash Reserve Fund, Inc.)

PRIME SERIES
TREASURY SERIES
TAX-FREE SERIES

June 21, 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:

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.

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 both proposals.

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
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, increasing the
advisory fee (voted on 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, increasing the
advisory fee (voted on 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, increasing the
advisory fee (voted on 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
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 they are 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

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
2,914,547,907 shares outstanding, consisting of 1,814,843,002 shares
outstanding of the Prime Series, 565,526,406 shares outstanding of the
Treasury Series and 534,178,499 shares outstanding of the Tax-Free Series.
Each full share will be entitled to one vote at the 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 "Advisor"), 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 Advisor.

<PAGE> 3
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, as amended.
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 advisor 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, which
increase advisory fees, to replace the Current Advisory Agreements. See
Proposals 2, 3 and 4 below.

<PAGE> 4
PROPOSAL 1: TO CONSIDER AND ACT UPON A PROPOSAL TO ELECT A BOARD OF DIRECTORS

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. Rimel 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 achieves 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.

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.

<PAGE> 5
<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 Managing Director Emeritus, Alex. Brown & 113,940.98 **
Director and Chairman Sons Incorporated; Director, Boca
of the Board since Research, Inc.; Formerly, Director, CSX
1981 Corp. and PHH Corporation.

Richard T. Hale* 49 Managing Director, Alex. Brown & Sons 0 **
Director and Incorporated.
President since 1989

James J. Cunnane 57 Managing Director, CBC Capital; Formerly, 0 **
Director since 1994 Senior Vice-President and Chief Financial
Officer, General Dynamics Corporation and
Director, The Arch Fund.

N. Bruce Hannay 74 Director, Plenum Publishing Corp; Formerly, 3,346.56 **
Director since 1984 Director, Rohm & Haas Company and General
Signal Corp. and Consultant, SRI
International.

John F. Kroeger 70 Director/Trustee, AIM Funds; Formerly, 43,093.58 **
Director since 1981 Consultant, Wendell & Stockel Associates,
Inc. and General Manager, Shell Oil
Company.

Louis E. Levy 62 Director, Kimberly-Clark Corporation and 0 **
Director since 1994 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 Company; 0 **
Director since 1992 Executive Vice President, Duke
University.

Rebecca W. Rimel* 44 President and Chief Executive Officer, The 0 **
Nominee for Director Pew Charitable Trusts; Director and
Executive Vice President, The Glenmede
Trust Company; Formerly, Executive
Director, The Pew Charitable Trusts.

Harry Woolf 71 Professor-at-Large Emeritus, Institute for 56,176.37 **
Director since 1981 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.

<PAGE> 6
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 registered investment companies to
which the Advisor or an affiliated person of the Advisor provides investment
advisory services (collectively, the "Fund Complex") is also set forth in the
compensation table below.

COMPENSATION TABLE

<TABLE>
<CAPTION>
Total Compensation Number of Funds in
From the Fund and Fund Complex
Aggregate Fund Complex for
Compensation Deferred Paid to Which
Name from the Fund Compensation Directors Director Serves
------------------------ --------------- -------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Richard T. Hale* ....... $ 0 $ 0 $ 0 12
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. 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. 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 Advisor 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.

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 SHAREHOLDERS OF THE FUND
VOTE FOR THE ELECTION OF THE DIRECTORS.
---
5

<PAGE> 7
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, INCREASING THE ADVISORY FEE

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 Advisor. 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 Advisor 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 Advisor 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 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 Advisor 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, .23% of the next $1 billion of
the Fund's aggregate average daily net assets and .22% of the Fund's
aggregate average daily net assets in excess of $3.5 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 Advisor
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 by .07% on Fund assets up to $2.5
billion, .06% on Fund assets from $2.5 billion up to $3.5 billion, and .05%
on Fund assets in excess of $3.5 billion. The Advisor 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. Such voluntary waiver would not be contractual and would be subject
to change. 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 Advisor 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 Advisor'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 Advisor 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 Advisor in providing
investment advisory services to the Fund; (4) the profits of the Advisor in
providing services to the Fund; and (5) the extent to which the economies of
scale that the Advisor might experience as a result of growth in the Fund's
assets would be shared with the Fund. With respect to the nature and quality
of services and the results achieved, the Directors noted the success of the
Fund since inception (1981) in maintaining a high quality portfolio and
avoiding credit problems and exotic securities which affected some funds. The
Directors also noted the Advisor's ability to provide a competitive yield for
shareholders while emphasizing credit quality.

<PAGE> 8
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 Advisor, 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 Advisor
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 pay for, the periodic
updating of prospectuses and supplements thereto, proxy materials, 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 Advisor may delegate certain of its duties
enumerated above to a sub-advisor.

The Current Prime and Treasury Advisory Agreement also provides for
compensation, as discussed above.

The Current Prime and Treasury Advisory Agreement provides that the
Advisor 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.

<PAGE> 9

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.

The services of the Advisor are not to be deemed exclusive, and the
Advisor 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 Advisor'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 Advisor, 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 of a majority of the Prime Series' outstanding
voting securities or by the Advisor. The agreement automatically terminates
in the event of its assignment.

The Current Prime and Treasury Agreement obligates the Advisor 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 Advisor is not 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 the agreement.

THE ADVISOR

The Advisor is a wholly-owned subsidiary of Alex. Brown, which is located
at 135 East Baltimore Street, Baltimore, Maryland, 21202. 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 Advisor. It includes his name, position with the
Advisor, address and principal occupation.

<TABLE>
<CAPTION>
Name and Position
with the Advisor Address Principal Occupation
-------------------------------- ----------------------------- ---------------------------------
<S> <C> <C>
Alvin B. Krongard 135 East Baltimore Street Chairman and Chief Executive
Director Baltimore, Maryland 21202 Officer, Alex. Brown Incorporated

Mayo A. Shattuck III 135 East Baltimore Street President, Alex. Brown
Director Baltimore, Maryland 21202 Incorporated

Benjamin Howell Griswold, IV 135 East Baltimore Street Chairman Emeritus, Alex. Brown
Director Baltimore, Maryland 21202 Incorporated

Edward J. Veilleux 135 East Baltimore Street Principal, Alex. Brown & Sons
President Baltimore, Maryland 21202 Incorporated; Vice President,
Armata Financial Corp.

</TABLE>

<PAGE> 10
As of June 1, 1995, Mr. Price, Chairman of the Fund, beneficially owned
71,876 shares of Alex. Brown Incorporated. As of June 1, 1995, Mr. Hale, a
Director of the Fund, beneficially owned 76,406 shares of Alex. Brown
Incorporated. Mr. Veilleux, Executive Vice President of the Fund, is
President of the Advisor and as of June 1, 1995, owned 500 shares of Alex.
Brown Incorporated. Mr. Nelson, Vice President and Secretary of the Fund, is
Vice President of the Advisor.

For the fiscal year ended March 31, 1995, the Fund paid the Advisor 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 Advisor 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 Advisor $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 $6,302,116.

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.

ALEX. BROWN CASH RESERVE PRIME SHARES

<TABLE>
<CAPTION>
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 ........................................................ .15% .15%
---- ----
Total Fund Operating Expenses ......................................... .61% .68%
==== ====
</TABLE>

<PAGE> 11
EXAMPLE

Assuming a hypothetical investment of $1,000, a 5% annual return and
redemption at the end of each time period, an investor in Alex. Brown Cash
Reserve Prime Shares would have paid transaction and operating expenses at
the end of each year as follows:

<TABLE>
<CAPTION>
Existing Pro Forma
-------- ---------
<S> <C> <C>
1 year ................................................................ $ 6 $ 7
3 years ............................................................... $20 $22
5 years ............................................................... $35 $39
10 years ............................................................... $79 $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.

FLAG INVESTORS CASH RESERVE PRIME CLASS A SHARES

<TABLE>
<CAPTION>
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 ............................................................ .25% .25%
Other Expenses ........................................................ .15% .15%
---- ----
Total Fund Operating Expenses ......................................... .61% .68%
==== ====

</TABLE>

- ------

* Flag Investors Cash Reserve Prime 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 Cash Reserve Prime
Class A Shares will retain liability for any contingent deferred sales
charge due on such shares upon redemption.

EXAMPLE

Assuming a hypothetical investment of $1,000, a 5% annual return and
redemption at the end of each time period, an investor in Flag Investors Cash
Reserve Prime Class A Shares would have paid transaction and operating
expenses at the end of each year as follows:

<TABLE>
<CAPTION>
Existing Pro Forma
-------- ---------
<S> <C> <C>
1 year ................................................................ $ 6 $ 7
3 years ................................................................ $20 $22
5 years ................................................................ $35 $39
10 years ............................................................... $79 $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.

<PAGE> 12
FLAG INVESTORS CASH RESERVE PRIME CLASS B SHARES

<TABLE>
<CAPTION>
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%*

</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 ............................................................ .75% .75%
Other Expenses (including a .25% shareholder servicing fee) ........... .40%** .40%**
---- ----
Total Fund Operating Expenses ......................................... 1.36% 1.43%
==== ====

</TABLE>

- ------
* A declining contingent deferred sales charge will be imposed on
redemptions of Flag Investors Cash Reserve Prime Class B Shares made
within six years of purchase. Flag Investors Cash Reserve Prime Class B
Shares will automatically convert to Flag Investors Cash Reserve Prime
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 Cash Reserve Prime 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 Flag Investors Cash Reserve Prime Class B Shares 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
-------- ---------
<S> <C> <C>
1 year ................................................................ $ 54 $ 55
3 years ................................................................ $ 74 $ 76
5 years ................................................................ $ 97 $101
10 years ............................................................... $131* $140*

</TABLE>

- ------

* Expenses assume that Flag Investors Cash Reserve Prime Class B Shares are
converted to Flag Investors Cash Reserve Prime Class A Shares at the end of
six years. Therefore, the expense figures assume six years of Flag
Investors Cash Reserve Prime Class B expenses and four years of Flag
Investors Cash Reserve Prime Class A expenses.

An investor in Flag Investors Cash Reserve Prime Class B Shares would pay
the following expenses on the same investment, assuming no redemption:

<TABLE>
<CAPTION>
Existing Pro Forma
-------- ---------
<S> <C> <C>
1 year ................................................................ $ 14 $ 15
3 years ................................................................ $ 44 $ 46
5 years ................................................................ $ 77 $ 81
10 years ............................................................... $131* $140*

</TABLE>

- ------

<PAGE> 13
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.

ALEX. BROWN CASH RESERVE PRIME INSTITUTIONAL SHARES

<TABLE>
<CAPTION>
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 ............................................................ None None
Other Expenses ........................................................ .15% .15%
---- ----
Total Fund Operating Expenses ......................................... .36% .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 Alex. Brown Cash
Reserve Prime Institutional Shares would have paid transaction and operating
expenses at the end of each year as follows:

<TABLE>
<CAPTION>
Existing Pro Forma
-------- ----------
<S> <C> <C>
1 year ................................................................. $ 4 $ 4
3 years ................................................................. $12 $14
5 years ................................................................. $20 $24
10 years ................................................................ $46 $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.

<PAGE> 14
QUALITY CASH RESERVE PRIME SHARES

<TABLE>
<CAPTION>
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 ............................................................ .60% .60%
Other Expenses ........................................................ .15% .15%
----- -----
Total Fund Operating Expenses ......................................... .96% 1.03%
===== =====
</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 Quality Cash
Reserve Prime Shares would have paid transaction and operating expenses at
the end of each year as follows:

<TABLE>
<CAPTION>
Existing Pro Forma
-------- ---------
<S> <C> <C>
1 year ................................................................ $ 10 $ 11
3 years ................................................................ $ 31 $ 33
5 years ................................................................ $ 54 $ 58
10 years ............................................................... $124 $133

</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 Advisor for services on behalf of the Prime Series was
$3,050,911. If the proposed fee had been in effect, the Advisor 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 OF THE PRIME SERIES
VOTE FOR APPROVAL OF THE AMENDED PRIME ADVISORY AGREEMENT.
---

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, INCREASING THE ADVISORY FEE

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 Advisor. Under the investment advisory
agreement currently in effect with respect to the Prime Series and the

<PAGE> 15
Treasury Series (the "Current Prime and Treasury Advisory Agreement"), the
Advisor 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 Advisor 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 Advisor 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 by .05% on Fund assets up
to $2.5 billion and .04% on Fund assets in excess of $2.5 billion. The
Advisor 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. Such voluntary waiver would not be
contractual and would be subject to change. 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 Advisor 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 Advisor'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 Advisor 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 Advisor in providing
investment advisory services to the Fund; (4) the profits of the Advisor in
providing services to the Fund; and (5) the extent to which the economies of
scale that the Advisor might experience as a result of growth in the Fund's
assets would be shared with the Fund. With respect to the nature and quality
of services and the results achieved, the Directors noted the success of the
Fund since inception (1981) in maintaining a high quality portfolio and
avoiding credit problems and exotic securities which affected some funds. The
Directors also noted the Advisor's ability to provide a competitive yield for
shareholders while emphasizing credit quality.

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 section entitled "Description of
the Current Prime and Treasury Advisory Agreement" under Proposal 2 on page
7. Compensation provisions under the Amended Treasury Advisory Agreement are
described above.

THE ADVISOR

For information concerning the Advisor, Treasury Shareholders are directed
to the section entitled "The Advisor" under Proposal 2 on page 8.

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.

<PAGE> 16
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.

ALEX. BROWN CASH RESERVE TREASURY SERIES

<TABLE>
<CAPTION>
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) .................................... .20%* .26%
12b-1 Fees ............................................................ .25% .25%
Other Expenses ........................................................ .10% .10%
---- ----
Total Fund Operating Expenses (net of fee waivers) .................... .55%* .61%
==== ====
</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 Alex. Brown Cash
Reserve Treasury Shares would have paid transaction and operating expenses at
the end of each year as follows:

<TABLE>
<CAPTION>
Existing* Pro Forma
--------- ---------
<S> <C> <C>
1 year ................................................................ $ 6 $ 6
3 years ................................................................ $18 $20
5 years ................................................................ $31 $35
10 years ............................................................... $71 $79
</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.

<PAGE> 17
ALEX. BROWN CASH RESERVE TREASURY INSTITUTIONAL SHARES

<TABLE>
<CAPTION>
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) .................................... .20%* .26%
12b-1 Fees ............................................................ None None
Other Expenses ........................................................ .10% .10%
---- ----
Total Fund Operating Expenses (net of fee waivers) .................... .30%* .36%
===== ====
</TABLE>

- ------
* Absent fee waivers for the fiscal year ended March 31, 1995, Advisory Fees
and Total Fund Operating Expenses would have been .21% and .31%,
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 Alex. Brown Cash
Reserve Treasury Institutional Shares would have paid transaction and
operating expenses at the end of each year as follows:

<TABLE>
<CAPTION>
Existing* Pro Forma
--------- ----------
<S> <C> <C>
1 year ................................................................ $ 3 $ 4
3 years ................................................................ $10 $12
5 years ................................................................ $17 $20
10 years ............................................................... $39 $46
</TABLE>

- ------
* Absent fee waivers for the one, three, five and ten year periods, expenses
would be $3, $10, $18 and $41, 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 Advisor 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 OF THE
TREASURY SERIES VOTE FOR APPROVAL OF THE AMENDED TREASURY ADVISORY
AGREEMENT. ---

<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, INCREASING THE ADVISORY FEE
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 Advisor. Under the investment advisory
agreement currently in effect with respect to the Tax-Free Series (the
"Current Tax-Free Advisory Agreement"), the Advisor 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 Advisor 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 Advisor 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 Advisor
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 by .08% on Fund assets up to
$2.5 billion and .07% on Fund assets in excess of $2.5 billion. The Advisor
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.
Such voluntary waiver would not be contractual and would be subject to
change. 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 Advisor 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 Advisor'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 Advisor 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 Advisor in providing
investment advisory services to the Fund; (4) the profits of the Advisor in
providing services to the Fund; and (5) the extent to which the economies of
scale that the Advisor might experience as a result of growth in the Fund's
assets would be shared with the Fund. With respect to the nature and quality
of services and the results achieved, the Directors noted the success of the
Fund since inception (1981) in maintaining a high quality portfolio and
avoiding credit problems and exotic securities which affected some funds. The
Directors also noted the Advisor's ability to provide a competitive yield for
shareholders while emphasizing credit quality.

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.

<PAGE> 19
The Tax-Free Advisory Agreement provides that the Advisor, 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
Advisor 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 Advisor may delegate certain of its duties enumerated above
to a sub-advisor 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 Advisor 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
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 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

<PAGE> 20

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.

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 Advisor. The agreement automatically terminates in the
event of its assignment.

The Current Tax-Free Agreement obligates the Advisor 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 Advisor is not 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 the agreement.

THE ADVISOR

For information concerning the Advisor, Tax-Free Shareholders are directed
to the section entitled "The Advisor" 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 Advisory 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 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.

<PAGE> 21
ALEX. BROWN CASH RESERVE TAX-FREE SHARES

<TABLE>
<CAPTION>
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 ........................................................ .11% .11%
----- ----
Total Fund Operating Expenses .......................................... .57% .65%
==== ====
</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 Alex. Brown Cash
Reserve Tax-Free Shares would have paid transaction and operating expenses at
the end of each year as follows:

<TABLE>
<CAPTION>
Existing Pro Forma
-------- ---------
<S> <C> <C>
1 year ................................................................ $ 6 $ 7
3 years ................................................................ $18 $21
5 years ................................................................ $32 $37
10 years ............................................................... $73 $84
</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 Advisor for services on behalf of the Tax-Free Series was
$799,970. If the proposed fee had been in effect, the Advisor 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 OF THE TAX-FREE
SERIES VOTE FOR APPROVAL OF THE AMENDED TAX-FREE ADVISORY AGREEMENT.
---
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 service,
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.

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 since 1994. 62 See "Information Regarding ***
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 1985. Incorporated; President,
Investment Company Capital
Corp.; Vice President, Armata
Financial Corp.

Paul D. Corbin Vice President since 42 Principal, Alex. Brown & Sons ***
1992. Incorporated, 1991 - Present;
Senior Vice President, First
National Bank of Maryland.

M. Elliott Randolph, Jr. Vice President since 53 Principal, Alex. Brown & Sons ***
1992. 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>

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 Treasuer 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 33 Vice President, Fixed Income ***
President since 1992. Management Department, Alex.
Brown & Sons Incorporated, 1992
- Present; Formerly, Assistant
Vice President, First National
Bank of Maryland.

Laurie D. DePrine Assistant Secretary 28 Asset Management Department, ***
since 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 Advisor.

** 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 all funds in 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 employees 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.

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.

<PAGE> 24
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 and
Woolf, each of whom is not an "interested person" within the meaning of the
1940 Act. The Nominating Committee met twice during the fiscal year ended
March 31, 1995. In such fiscal year, all members attended all meetings of the
Nominating Committee held during their respective terms.

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>
Amount of Percent of
Name & Address Beneficial Ownership 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. 499,237 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.

<PAGE> 25
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.

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

<PAGE> 26
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 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 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;
(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 programs with respect to its Prime Series;

A-1

<PAGE> 27
(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.

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-2

<PAGE> 28
(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.

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, .23% of the next $1 billion of the Fund's aggregate average
daily net assets and .22% of that portion of the Fund's aggregate average
daily net assets in excess of $3.5 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

A-3

<PAGE> 29

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 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.

(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.

A-4

<PAGE> 30
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.

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-5

<PAGE> 31
EXHIBIT B
FORM OF AMENDED INVESTMENT ADVISORY AGREEMENT
ALEX. BROWN CASH RESERVE FUND, INC. -- TREASURY SERIES

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 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;
(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;

B-1

<PAGE> 32
(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 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:

6. Expenses. The expenses connected with the Treasury Series shall be
allocable between the Fund and the Advisor as follows:

B-2

<PAGE> 33
(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 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.

B-3

<PAGE> 34

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 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.

(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.

B-4

<PAGE> 35
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.

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-5

<PAGE> 36
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;

(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;

C-1

<PAGE> 37
(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.

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;

(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:

C-2
<PAGE> 38
(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.

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 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.

C-3
<PAGE> 39
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 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.

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.

C-4
<PAGE> 40
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.

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-5
<PAGE> 41
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,
Edward J. Stoken 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 (the "Meeting") to be held on July 25,
1995 at 4:00 p.m. (Baltimore Time) 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 Meeting 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
on by the shareholders of the Fund as a whole).

/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
for all nominees listed below.
/ / FOR all nominees listed below except
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, increasing the advisory fee (voted on by the shareholders of the
Prime Series).

/ /FOR / / AGAINST / / ABSTAIN

[Proposal (3) Intentionally Omitted.]

[Proposal (4) Intentionally Omitted.]
(Continued and to be signed on reverse side).
<PAGE> 42

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

__________________________________
(Signature of Shareholder)

__________________________________
(Co-owner signature, if any)

__________________________________
(Printed Name of Shareholder)

__________________________________
(Printed name of co-owner, if any)

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.

PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.

<PAGE> 43
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.

(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).

/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
for all nominees listed below.
/ / FOR all nominees listed below except
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, increasing the advisory fee (voted on by the
shareholders of the Treasury Series).

/ / FOR / / AGAINST / / ABSTAIN

[Proposal (4) Intentionally Omitted.]

(Continued and to be signed on reverse side).
<PAGE> 44

Please Date: --
Date:_______________________, 1995

__________________________________
(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> 45
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.

(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).

/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
for all nominees listed below.
/ / FOR all nominees listed below except
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, increasing the advisory fee (voted on by the
shareholders of the Tax-Free Series).

/ / FOR / / AGAINST / / ABSTAIN

(Continued and to be signed on reverse side).
<PAGE> 46

Please Date: --
Date:_______________________, 1995

__________________________________
(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
QUALITY CASH RESERVE PRIME SHARES
A CLASS OF 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 QUALITY CASH RESERVE PRIME SHARES

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); and

Quality Cash Reserve Prime Shares are a class of the Prime Series of the
Fund. 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.

Brian C. Nelson
Secretary

Dated: June 21, 1995

<PAGE> 48

QUALITY CASH RESERVE PRIME SHARES
A CLASS OF 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

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) and
for the amended investment advisory agreement with respect to the Prime
Series (Proposal 2). All shareholders of the Fund are entitled to vote on
Proposal 1. Proposal 2 requires action by the shareholders of the Prime
Series. Shareholders may revoke their Proxies at any time prior to the time
they are 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.

The expenses of the Meeting will be borne by the Fund, except that the
incremental costs associated with Proposal 2 will be borne by Investment
Company Capital Corp. ("ICC" or the "Advisor"), 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 Advisor.

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, as amended.
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 advisor to each of the Series pursuant to two separate
Investment Advisory Agreements currently in effect, one dated as of April 4,
1990 with respect to the Prime Series and the Treasury Series (the "Current

<PAGE> 49

Prime and Treasury Advisory Agreement") and one dated as of October 5,
1990 with respect to the Tax- Free Series. It is proposed that shareholders
of the Prime Series ("Prime Shareholders"), which includes shareholders of
Quality Cash Reserve Prime Shares, approve an amended investment advisory
agreement with respect to the Prime Series (the "Amended Prime Advisory
Agreement"). The Amended Prime Advisory Agreement, which increases the
advisory fee, replaces the Current Prime and Treasury Advisory Agreement.
Shareholders of the Fund's other Series will also be voting at the Meeting on
proposals to approve amended investment advisory agreements with regard to
their respective Series, which increase advisory fees, to replace the
existing advisory agreements.

<PAGE> 50

PROPOSAL 1: TO CONSIDER AND ACT UPON A PROPOSAL TO ELECT A BOARD OF DIRECTORS

INFORMATION REGARDING NOMINEES

<PAGE> 51

<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 Managing Director Emeritus, Alex. Brown 113,941 **
Director and Chairman & Sons Incorporated; Director, Boca
of the Board since Research, Inc.; Formerly, Director,
1981 CSX Corp. and PHH Corporation.

Richard T. Hale* 49 Managing Director, Alex. Brown & Sons 0 **
Director and Incorporated.
President 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; 3,347 **
Director since 1984 Formerly, Director, Rohm & Haas
Company and General Signal Corp. and
Consultant, SRI International.

John F. Kroeger 70 Director/Trustee, AIM Funds; Formerly, 43,094 **
Director since 1981 Consultant, Wendell & Stockel
Associates, Inc. and General
Manager, Shell Oil Company.

Louis E. Levy 62 Director, Kimberly-Clark Corporation 0 **
Director 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 Company; 0 **
Director since 1992 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.

Harry Woolf 71 Professor-at-Large Emeritus, Institute 56,176 **
Director since 1981 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.

<PAGE> 52

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 registered investment companies to
which the Advisor or an affiliated person of the Advisor provides investment
advisory services (collectively, the "Fund Complex") is also set forth in the
compensation table below.

COMPENSATION TABLE

</TABLE>

** Mr. Levy and Mr. Cunnane became Directors in June, 1994 and December,
1994, respectively.

BOARD APPROVAL OF THE ELECTION OF DIRECTORS

SHAREHOLDER APPROVAL OF THE ELECTION OF DIRECTORS

THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT SHAREHOLDERS OF THE FUND
VOTE FOR THE ELECTION OF THE DIRECTORS.
---

<PAGE> 53

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, INCREASING THE ADVISORY FEE

GENERAL

On June 1, 1995, the Directors unanimously approved, subject to the
approval of 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 Advisor. Under the Current Prime
and Treasury Advisory Agreement, the Advisor 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 Advisor
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 required for the fiscal year ended March 31, 1995.
Such voluntary waiver is not contractual and is subject to change.

EVALUATION AND RECOMMENDATION

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.

<PAGE> 54

The Current Prime and Treasury Advisory Agreement also provides for
compensation, as discussed above.

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 Advisor 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

<PAGE> 55

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.

THE ADVISOR

The following information is provided for each Director and the principal
executive officer of the Advisor. It includes his name, position with the
Advisor, address and principal occupation.

<TABLE>
<CAPTION>
Name and Position
with the Advisor Address Principal Occupation
------------------- ------- --------------------
<S> <C> <C>
Alvin B. Krongard 135 East Baltimore Street Chairman and Chief Executive
Director Baltimore, Maryland 21202 Officer, Alex. Brown Incorporated

Mayo A. Shattuck III 135 East Baltimore Street President, Alex. Brown
Director Baltimore, Maryland 21202 Incorporated

Benjamin Howell Griswold, IV 135 East Baltimore Street Chairman Emeritus, Alex. Brown
Director Baltimore, Maryland 21202 Incorporated

Edward J. Veilleux President 135 East Baltimore Street Principal, Alex. Brown & Sons
Baltimore, Maryland 21202 Incorporated; Vice President,
Armata Financial Corp.

</TABLE>

As of June 1, 1995, Mr. Price, Chairman of the Fund, beneficially owned
71,876 shares of Alex. Brown Incorporated. As of June 1, 1995, Mr. Hale, a
Director of the Fund, beneficially owned 76,406 shares of Alex. Brown
Incorporated. Mr. Veilleux, Executive Vice President of the Fund, is
President of the Advisor and as of June 1, 1995, owned 500 shares of Alex.
Brown Incorporated. Mr. Nelson, Vice President and Secretary of the Fund, is
Vice President of the Advisor.

<PAGE> 56

COMPARISON BETWEEN THE AMENDED PRIME ADVISORY AGREEMENT AND THE CURRENT PRIME
AND TREASURY ADVISORY AGREEMENT

The following table compares the existing fees and expenses of the Quality
Cash Reserve Prime Shares under the Current Prime and Treasury Advisory
Agreement and the pro forma fees and expenses of the class 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.

QUALITY CASH RESERVE PRIME SHARES

<TABLE>
<CAPTION>
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 .............................................................. .60% .60%
Other Expenses .......................................................... .15% .15%
--- ----
Total Fund Operating Expenses ........................................... .96% 1.03%
=== ====
</TABLE>

EXAMPLE

<TABLE>
<CAPTION>
Existing Pro Forma
-------- ----------
<S> <C> <C>
1 year .................................................................. $ 10 $ 11
3 years ................................................................. $ 31 $ 33
5 years ................................................................. $ 54 $ 58
10 years ................................................................ $124 $133

</TABLE>

<PAGE> 57

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

SHAREHOLDER APPROVAL OF THE AMENDED PRIME ADVISORY AGREEMENT

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE PRIME SERIES
VOTE FOR APPROVAL OF THE AMENDED PRIME ADVISORY AGREEMENT.
---
ADDITIONAL INFORMATION

DIRECTORS AND EXECUTIVE OFFICERS

<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 Nominees."
1981.
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 since 1994. 62 See "Information Regarding ***
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 1985. Incorporated; President,
Investment Company Capital
Corp.; Vice President, Armata
Financial Corp.
</TABLE>

<PAGE> 58
<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>
Paul D. Corbin Vice President since 42 Principal, Alex. Brown & Sons ***
1992. Incorporated, 1991 - Present;
Senior Vice President, First
National Bank of Maryland.
M. Elliott Randolph, Vice President since 53 Principal, Alex. Brown & Sons ***
Jr. 1992. 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.
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 33 Vice President, Fixed Income ***
President since 1992. Management Department, Alex.
Brown & Sons Incorporated, 1992
- Present; Formerly, Assistant
Vice President, First National
Bank of Maryland.
Laurie D. DePrine Assistant Secretary 28 Asset Management Department, ***
since 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 Advisor.

** This information has been provided by each Director and officer of the
Fund.

<PAGE> 59

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 and
Woolf, each of whom is not an "interested person" within the meaning of the
1940 Act. The Nominating Committee met twice during the fiscal year ended
March 31, 1995. In such fiscal year, all members attended all meetings of the
Nominating Committee held during their respective terms.

INDEPENDENT ACCOUNTANTS

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>
Amount of Percent of
Name & Address Beneficial Ownership 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. 499,237 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>

<PAGE> 60

SUBMISSION OF SHAREHOLDER PROPOSALS

OTHER MATTERS

By Order of the Directors,

Brian C. Nelson
Secretary

Dated: June 21, 1995

<PAGE> 61

EXHIBIT A
FORM OF AMENDED INVESTMENT ADVISORY AGREEMENT
ALEX. BROWN CASH RESERVE FUND, INC. -- PRIME SERIES

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

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:

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;

(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 programs with respect to its Prime Series;

A-1
<PAGE> 62

(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.

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;

(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-2

<PAGE> 63

(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.

7. Delegation of Responsibilities.

(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.

A-3

<PAGE> 64

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.

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.

(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.

A-4

<PAGE> 65

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.

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-5

<PAGE> 66

QUALITY CASH RESERVE PRIME SHARES
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.

(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).

| | FOR all nominees | | WITHHOLD AUTHORITY to vote | | FOR all nominees
listed below for all nominees listed listed below except
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

(Continued and to be signed on reverse side).

Please Date: -> Date:___________________________________, 1995

______________________________________________
(Signature of Shareholder)

______________________________________________
(Co-owner signature, if any)

______________________________________________
(Printed Name of Shareholder)

______________________________________________
(Printed name of co-owner, if any)

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.

PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.