BROWN ALEX CASH RESERVE FUND INC, 485A24E, 1995-05-31

BROWN ALEX CASH RESERVE FUND INC
485A24E, 1995-05-31

Previous: OMNICARE INC, S-3, 1995-05-31

Next: FIDUCIARY CAPITAL GROWTH FUND INC, NSAR-A, 1995-05-31

<PAGE> 1
As filed with the Securities and Exchange Commission on May 31, 1995
Registration No. 2-72658
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /

Post-Effective Amendment No. 24 /X/

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /

Amendment No. 25 /X/

(Check appropriate box or boxes.)

ALEX. BROWN CASH RESERVE FUND, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

P.O. Box 17250, Baltimore, Maryland 21203
--------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code (410) 727-1700
--------------
Richard T. Hale
Alex. Brown & Sons Incorporated
135 East Baltimore Street, Baltimore, Maryland 21202
----------------------------------------------------
(Name and Address of Agent for Service)

Copies to:
Richard W. Grant, Esquire
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103-6993
- ------------------------------------------------------------------------------
It is proposed that this filing will become effective (check appropriate box)

/ / immediately upon filing pursuant to paragraph (b)
/ / on [date] pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/X/ on August 1, 1995 pursuant to paragraph (a) of rule 485
- -------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>

- -------------------------------------------------------------------------------------------------------------------------------
Title of Securities Amount Being Proposed Maximum Proposed Maximum Amount of
Being Registered Registered Offering Price Per Unit Aggregate Offering Price (1) Registration Fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Share of Common Stock 161,391,905 shares $1.00 per share -- (1) $100
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Registrant has calculated the maximum aggregate offering price pursuant to
Rule 24e-2 under the Investment Company Act of 1940 (the "1940 Act") for
fiscal year ended March 31, 1995. Registrant had actual aggregate
redemptions of 17,926,688,350 shares for its fiscal year ended March 31,
1995; has used 17,765,586,445 of available redemptions for reductions
pursuant to Rule 24f-2(c) under the 1940 Act and has previously used no
available redemptions for reductions pursuant to Rule 24e-2(a) of the 1940
Act during the current year. Registrant elects to use redemptions in the
aggregate amount of 161,101,905 shares for reductions in its current
amendment.
- -------------------------------------------------------------------------------

* Registrant continues its prior election under Rule 24f-2 to maintain an
indefinite registration of shares and accordingly filed its Rule 24f-2
notice for the fiscal year ended March 31, 1995 on May 26, 1995.
----------------------------------------------------------------------

<PAGE> 2

ALEX. BROWN CASH RESERVE FUND, INC.
May 31, 1995

CROSS REFERENCE SHEET

(The Cross Reference Sheet relating to
Alex. Brown Cash Reserve Fund, Inc. - Flag Investors Cash
Reserve Prime Shares immediately precedes the Prospectus for Flag
Investors Cash Reserve Prime Shares.
The Cross Reference Sheet relating to
Alex. Brown Cash Reserve Fund, Inc. -
Institutional Shares immediately precedes the Prospectus
for Alex. Brown Cash Reserve Fund, Inc. - Institutional Shares.
The Cross Reference Sheet relating to the
Alex. Brown Cash Reserve Fund, Inc. - Quality Cash Reserve Prime
Shares immediately precedes the Prospectus
for the Quality Cash Reserve Prime Shares.)

Items Required by Form N-1A
- ---------------------------
<TABLE>
<CAPTION>

Registration
Part A Information Required in a Prospectus Statement Heading
- ------ ----------------------------------- ------------------
<S> <C> <C>
1. Cover Page......................................... Cover Page
2. Synopsis........................................... Fee Table
3. Condensed Financial Information.................... Financial Highlights; Performance
Information
4. General Description of Registrant.................. Investment Program; Investment
Restrictions; General Information
5. Management of the Fund ............................ Management of the Fund;
Investment Advisor; Sub-Advisor;
Distributor; Custodian, Transfer
Agent, Accounting Services
6. Capital Stock and Other Securities................. Cover Page; Dividend and Taxes;
General Information
7. Purchase of Securities Being Offered............... How to Invest in the Fund; Distributor

8. Redemption or Repurchase........................... How to Redeem Shares
9. Pending Legal Proceedings.......................... *

Information Required in a Statement
Part B of Additional Information (1)
- ------ ------------------------------------
10. Cover Page......................................... Cover Page
11. Table of Contents.................................. Table of Contents
12. General Information and History.................... Introduction; General Information
about the Fund
</TABLE>

- -------------
1) The Statement of Additional Information relates to all classes of Shares.

<PAGE> 3

Part B Information Required in a Prospectus
- ------ -------------------------------------
<S> <C> <C>

13. Investment Objectives and Policies................. The Fund and Its Shares;
Investment Program and
Restrictions
14. Management of the Fund............................. Directors and Officers
15. Control Persons and Principal Holders
of Securities................................... Principal Holders of Securities
16. Investment Advisory and Other Services............. The Investment Advisor; The Sub-
Advisor; Distributor; Expenses;
Transfer Agent, Custodian,
Accounting Services; Sub-
Accounting; Reports
17. Brokerage Allocation............................... Portfolio Transactions
18. Capital Stock and Other Securities................. General Information About the Fund
- The Fund and Its Shares
19. Purchase, Redemption and Pricing of Securities
Being Offered................................. Share Purchases and Redemptions
20. Tax Status......................................... Dividends and Taxes
21. Underwriters....................................... *
22. Calculation of Performance Data.................... Current Yield
23. Financial Statements............................... Financial Statements

Part C Other Information
- ------ -------------------
Information required to be included in Part C is
set forth under the appropriate Item, so
numbered, in Part C to this Registration Statement.
</TABLE>

- -------------
* Omitted since the answer is negative or the item is not applicable.
<PAGE> 4

ALEX. BROWN CASH RESERVE FUND, INC.
P. O. Box 17250
Baltimore, Maryland 21203

Alex. Brown Cash Reserve Fund, Inc. (the "Fund") is a money market fund
designed for individuals, businesses, institutions and fiduciaries which seek
as high a level of current income (tax-exempt current income in the case of
the Tax-Free Portfolio) as is consistent with preservation of capital and
liquidity.

The Fund offers three Series of Shares:

o Prime Series

o Treasury Series

o Tax-Free Series

This Prospectus relates to the Alex. Brown Cash Reserve Shares of each of
the above Series.

Other principal features of the Fund:

o Fund shares are sold without purchase or redemption charges;

o Dividends are declared daily and paid monthly in additional shares or
cash; and

o Wire transfers, free check redemptions and other convenient cash
management services are available.

For current yield information and for purchase and redemption information,
call your Alex. Brown & Sons Incorporated investment representative or (410)
234-3737.

THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT INVESTORS SHOULD KNOW ABOUT
THE FUND PRIOR TO INVESTING AND SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE. A STATEMENT OF ADDITIONAL INFORMATION DATED AUGUST 1, 1995 HAS
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS HEREBY
INCORPORATED BY REFERENCE. IT IS AVAILABLE UPON REQUEST AND WITHOUT CHARGE BY
CALLING THE FUND AT (800) 553-8080.

<PAGE> 5

TABLE OF CONTENTS

PAGE

1. Table of Fees and Expenses ... 2
2. Financial Highlights ......... 3
3. Investment Program ........... 6
4. How to Invest in the Fund .... 9
5. How to Redeem Shares ......... 10
6. Dividends and Taxes .......... 12
7. Management of the Fund ....... 13
8. Current Yield ................ 15
9. General Information .......... 15
10. Application Form ............. 17

AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT ANY SERIES WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

Prospectus Dated: August 1, 1995

<PAGE> 6

1 TABLE OF FEES AND EXPENSES

The following table of fees and expenses is provided to assist investors in
understanding the various costs and expenses that an investor in each Series
of the Fund may bear directly and indirectly. A person who purchases shares
of the Fund through a financial institution may be charged separate fees by
the financial institution. The percentages shown below expressing Annual Fund
Operating Expenses are restated using current rather than historical
expenses. Actual expenses may be greater or less than those shown. Due to the
continuous nature of Rule 12b-1 fees, long-term shareholders of the Fund may
pay more than the equivalent of the maximum front-end sales charges permitted
by the Rules of Fair Practice of the National Association of Securities
Dealers, Inc.

Prime Treasury Tax-Free
Series Series Series
------------ ------------ ------------
<S> <C> <C> <C>
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge imposed on Purchase ...................................... None None None
Maximum Sales Charge imposed on Reinvested Dividends .......................... None None None
Deferred Sales Charge ......................................................... None None None
Redemption Fees ............................................................... None None None

Annual Fund Operating Expenses As a % of Average Net Assets
--------------------------------------------
Advisory Fees (See "Management of the Fund -- Investment Advisor and
Sub-Advisor") ............................................................... .28% .26% .29%
12b-1 Fees (See "Management of the Fund -- Distributor") ...................... .25% .25% .25%
Other Expenses ................................................................ .15% .09% .12%
------------ ------------ ------------
Total Fund Operating Expenses ................................................. .68% .60% .66%
============ ============ ============

</TABLE>

EXAMPLE

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

Prime Treasury Tax-Free
Series Series Series
---------- ------------ ------------

1 year ...... $ 7 $ 6 $ 7
3 years ..... $22 $19 $21
5 years ..... $39 $34 $37
10 years .... $88 $77 $85

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

<PAGE> 7

2 FINANCIAL HIGHLIGHTS

The financial highlights included in these tables are a part of the Fund's
financial statements for the Prime Series, the Treasury Series and the
Tax-Free Series for the indicated fiscal periods which have been audited by
the Fund's independent accountants. The financial statements and financial
highlights for the fiscal year ended March 31, 1995 and the report of the
Fund's independent accountants thereon are included in the Statement of
Additional Information which can be obtained at no charge by calling the Fund
at (800) 553-8080.

Prime Series
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------------------------------------------------------
1995(1) 1994(1) 1993(1) 1992(1) 1991(1)
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:

Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------- -------------- -------------- -------------- --------------
Income from Investment
Operations:
Net investment income 0.0442 0.0262 0.0295 0.0485 0.0734
Less Distributions:
Dividends from net
investment income
and short-term
gains ............. (0.0442) (0.0262) (0.0295) (0.0485) (0.0734)
-------------- -------------- -------------- -------------- --------------
Net asset value at
end of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ============== ==============
Total Return ......... 4.51% 2.65% 2.99% 4.96% 7.59%
Ratios to Average Net
Assets:
Expenses ............ 0.61% 0.62% 0.63% 0.61% 0.59%
Net investment income 4.46% 2.62% 2.95% 4.84% 7.31%
Supplemental Data:
Net assets at end of
period ............ $1,479,806,435 $1,368,451,627 $1,151,979,704 $1,264,629,485 $1,295,888,161
Number of shares
outstanding at end
of period ......... 1,479,804,186 1,368,449,549 1,151,977,279 1,264,629,485 1,295,888,161

</TABLE>

<PAGE> 8

For the
eleven
months
ended Year Ended April 30,
March 31, ------------------------------------------
1990 1989+ 1988 1987 1986
-------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------- -------------- ------------ ------------ ------------
Income from Investment
Operations:
Net investment income 0.0846 0.0712 0.0647 0.0572 0.0729
Less Distributions:
Dividends from net
investment income
and short-term
gains ............. (0.0846) (0.0712) (0.0647) (0.0572) (0.0729)
-------------- -------------- ------------ ------------ ------------
Net asset value at
end of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============ ============ ============
Total Return ......... 8.80% 8.01%* 6.67% 5.87% 7.54%
Ratios to Average Net
Assets:
Expenses ............ 0.52% 0.54%* 0.52% 0.55% 0.59%
Net investment income 8.42% 7.81%* 6.46% 5.71% 7.28%
Supplemental Data:
Net assets at end of
period ............ $1,312,276,151 $1,084,793,157 $874,051,953 $831,784,041 $686,611,968
Number of shares
outstanding at end
of period ......... 1,312,272,415 1,084,789,421 874,047,336 831,779,424 686,611,968
</TABLE>
- ------
* Annualized.
+ The Fund's fiscal year-end was changed to March 31.
(1) Financial information for fiscal years ended March 31, 1994, 1993, 1992
and 1991, respectively, is given for the Alex. Brown Cash Reserve Shares
class of the Prime Series.

3
<PAGE> 9

Treasury Series
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------------------------------------------------------
1995(1) 1994(1) 1993(1) 1992(1) 1991(1)
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at
beginning of
period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------
Income from
Investment
Operations:
Net investment
income ........... 0.0411 0.0255 0.0285 0.0477 0.0698
Less Distributions:
Dividends from net
investment income
and short-term
gains ............ (0.0411) (0.0255) (0.0285) (0.0477) (0.0698)
------------ ------------ ------------ ------------ ------------
Net asset value at
end of period .... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============ ============
Total Return ........ 4.19% 2.58% 2.89% 4.88% 7.21%
Ratios to Average Net
Assets:
Expenses ........... 0.55%* 0.54%* 0.55%* 0.55% 0.56%
Net investment
income ........... 4.09%** 2.55%** 2.87%** 4.76% 6.82%
Supplemental Data:
Net assets at end of
period ........... $512,167,212 $581,724,214 $618,175,839 $725,010,207 $716,551,599
Number of shares
outstanding at end
of period ........ 512,162,864 581,723,448 618,152,465 725,010,207 716,551,599

</TABLE>

<PAGE> 10

For the
eleven
months
ended Year Ended April 30,
March 31, ------------------------------------------
1990 1989+ 1988 1987 1986
-------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at
beginning of
period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------
Income from
Investment
Operations:
Net investment
income ........... 0.0829 0.0696 0.0617 0.0578 0.0717
Less Distributions:
Dividends from net
investment income
and short-term
gains ............ (0.0829) (0.0696) (0.0617) (0.0578) (0.0717)
------------ ------------ ------------ ------------ ------------
Net asset value at
end of period .... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============ ============
Total Return ........ 8.61% 7.82%*** 6.35% 5.94% 7.41%
Ratios to Average Net
Assets:
Expenses ........... 0.41% 0.44%*** 0.45% 0.45% 0.47%
Net investment
income ........... 8.25% 7.50%*** 6.17% 5.74% 7.17%
Supplemental Data:
Net assets at end of
period ........... $272,467,125 $235,086,589 $280,628,025 $251,097,755 $160,449,398
Number of shares
outstanding at end
of period ........ 272,509,276 235,197,074 280,519,083 251,101,013 160,449,398
</TABLE>
- ------
* Ratio of expenses to average net assets prior to partial fees waived was
0.56% for the fiscal years ended March 31, 1995, 1994 and 1993,
respectively.
** Ratio of net investment income to average net assets prior to partial
fees waived was 4.08%, 2.53%, and 2.86% for the years ended March 31,
1995, 1994 and 1993, respectively.
*** Annualized.
+ The Fund's fiscal year-end was changed to March 31.
(1) Financial information for fiscal years ended March 31, 1994, 1993, 1992
and 1991, respectively, is given for the Alex. Brown Cash Reserve Shares
class of the Treasury Series.

4
<PAGE> 11

Tax-Free Series
(For a share outstanding throughout each period)

For the period
Year Ended March 31, Dec. 17, 1990*
------------------------------------------------------ through
1995 1994 1993 1992 March 31, 1991
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>

Per Share Operating Performance:
Net asset value at beginning of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------
Income from Investment Operations:
Net investment income ...................... 0.0271 0.0184 0.0213 0.0353 0.0124
Less Distributions:
Dividends from net investment income and
short-term gains ......................... (0.0271) (0.0184) (0.0213) (0.0353) (0.0124)
------------ ------------ ------------ ------------ ------------
Net asset value at end of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============ ============
Total Return ................................ 2.75% 1.86% 2.15% 3.59% 4.35%**
Ratios to Average Net Assets:
Expenses ................................... 0.57% 0.58% 0.60% 0.56%/1 0.53%**
Net investment income ...................... 2.74% 1.84% 2.13% 3.49%/2 4.25%**
Supplemental Data:
Net assets at end of period ................ $475,384,229 $378,859,232 $315,661,447 $304,987,823 $256,895,180
Number of shares outstanding at end
of period ................................. 475,474,913 378,939,262 315,700,742 305,008,959 256,895,680
</TABLE>

- ------
* Date operations commenced.
** Annualized.
1. Ratio of expenses to average net assets prior to partial fees waived was
.57% for the year ended March 31, 1992.
2. Ratio of net investment income to average net assets prior to partial fees
waived was 3.48% for the year ended March 31, 1992.

5
<PAGE> 12

3 INVESTMENT PROGRAM

INVESTMENT OBJECTIVES

The investment objective of each Series of the Fund is to seek as high a
level of current income as is consistent with preservation of capital and
liquidity. Each Series endeavors to achieve this objective by investing in a
diversified portfolio of domestic money market instruments that satisfy
strict credit quality standards and that mature within one year or less from
the date of purchase. The Tax-Free Series endeavors to achieve its objective
by investing in a diversified portfolio of high quality, short-term municipal
obligations. (See "Portfolio Investments -- Treasury Series -- Prime Series
- -- Tax-Free Series.")

PORTFOLIO INVESTMENTS

-- Treasury Series

The Treasury Series may invest in U.S. Treasury obligations consisting of
marketable securities and instruments issued by the U.S. Treasury, including
bills, notes, bonds and other obligations. It is management's intention to
have 100% of the portfolio invested in such instruments at all times. In
unusual circumstances, up to 10% of the Series may be invested in repurchase
agreements collateralized by U.S. Treasury obligations. Such investments will
be made only when it is necessary to ensure that the Series is fully invested
while satisfying its liquidity requirements.

-- Prime Series

In addition to the U.S. Treasury obligations described above and repurchase
agreements collateralized by U.S. Treasury securities, the Prime Series may
invest in obligations issued or guaranteed as to principal and interest by
agencies or instrumentalities of the U.S. Government. Some of these
obligations are backed by the full faith and credit of the U.S. Government
(e.g., the Government National Mortgage Association), others are supported by
the issuing agency's right to borrow from the U.S. Treasury (e.g., securities
of Federal Home Loan Banks) and still others are backed only by the credit of
the instrumentality (e.g., the Federal National Mortgage Association).

The Prime Series may also invest in a broad range of commercial and bank
obligations that the investment advisor, under guidelines established by the
Board of Directors, believes present minimal credit risk and that satisfy the
criteria for such obligations described below:

The Prime Series may invest in instruments consisting of commercial paper and
variable amount master demand notes. Eligible commercial paper is limited to
short term, unsecured promissory notes issued by corporations which (i) are
rated Prime-1 by Moody's Investors Service, Inc. ("Moody's") or A-1+ or A-1
by Standard and Poor's Ratings Group ("S&P") or (ii) if not rated, are of
comparable quality to Prime-1 or A-1+ or A-1 instruments as determined by the
Fund's investment advisor; and (iii) are otherwise "Eligible Securities" as
defined in Rule 2a-7 under the Investment Company Act of 1940. Variable
amount master demand notes are unsecured demand notes that permit investment
of fluctuating amounts of money at variable rates of interest pursuant to
arrangements with issuers who meet the foregoing quality criteria. The
interest rate on a variable amount master demand note is periodically
redetermined according to a prescribed formula. Although there is no
secondary market in master demand notes, the payee may demand payment of the
principal amount of the note on relatively short notice. All master demand
notes acquired by the Prime Series will be payable within a prescribed notice
period not to exceed seven days. (See the Statement of Additional Information
with respect to commercial paper and bond ratings.)

The Prime Series may also invest in bank instruments, consisting mainly of
certificates of deposit and bankers' acceptances, that (i) are issued by U.S.
banks which satisfy applicable quality standards; or (ii) are fully insured as
to principal and interest by the Federal Deposit Insurance Corporation.

6
<PAGE> 13

-- Tax-Free Series

The Tax-Free Series may invest in municipal securities consisting of (i) debt
obligations issued by or on behalf of public authorities to obtain funds to
be used for various public purposes (including the construction of a wide
range of public facilities), for refunding outstanding obligations, for
general operating expenses and for lending such funds to other public
institutions and facilities, and (ii) certain types of industrial development
bonds issued by or on behalf of public authorities to obtain funds to provide
for the construction, equipment, repair or improvement of privately operated
facilities ("private activity bonds"); provided that the interest paid on
such debt obligations and private activity bonds, in the opinion of bond
counsel, is exempt from federal income taxes.

The Tax-Free Series invests in high quality municipal securities that the
investment advisor believes, under guidelines established by the Board of
Directors, present minimal credit risk and that at the time of purchase are
rated within the two highest credit categories assigned by the recognized
rating agencies, including: (1) bonds rated Aaa or Aa by Moody's or AAA or AA
by S&P; (2) municipal commercial paper rated Prime-1 or Prime-2 by Moody's or
A-1+, A-1 or A-2 by S&P (provided that such purchases would be further
limited unless the instrument meets the definition of "Eligible Security" as
defined in Rule 2a-7 under the Investment Company Act of 1940); (3) municipal
notes and floating and variable rate demand obligations rated SP-1 or higher
by S&P or MIG2 or VMIG or higher by Moody's; and (4) obligations secured by
letters of credit providers rated within the two highest categories by any
nationally recognized bank rating agency approved by the Fund's Board of
Directors. The Series may purchase unrated securities if they are determined
by the investment advisor, under guidelines established by the Board of
Directors, to be of comparable value to those obligations rated in the
categories described above.

The Tax-Free Series may hold cash reserves pending investment of such
reserves in municipal securities.

It is a fundamental policy of the Tax-Free Series to have its assets invested
so that at least 80% of the Series' income will be exempt from federal income
taxes, and it is the Tax-Free Series' present intention (but it is not a
fundamental policy) to invest its assets so that 100% of its annual interest
income will be tax-exempt. From time to time, on a temporary basis or for
defensive purposes, however, the Fund may invest in taxable short-term
investments which meet the criteria for investment for the Treasury or Prime
Series as described above.

The Tax-Free Series will seek to avoid the purchase of private activity bonds
the interest on which will be considered to be an item of preference for
purposes of alternative minimum tax liability for individuals under the
Internal Revenue Code of 1986, as amended (the "Code"). (See "Dividends and
Taxes.")

OTHER INVESTMENT PRACTICES

The Fund may enter into the following arrangements with respect to any Series
of the Fund:

When-Issued Securities involving commitments by a Series to purchase
portfolio securities on a "when-issued" basis. When-issued securities are
securities purchased for delivery beyond the normal settlement date at a
stated price and yield. A Series will generally not pay for such securities
or start earning interest on them until they are received. When-issued
commitments will not be used for speculative purposes and will be entered
into only with the intention of actually acquiring the securities.

The Prime Series and the Treasury Series may also enter into the following
arrangements:

7
<PAGE> 14

Repurchase Agreements under which the purchaser (for example, a Series of the
Fund) acquires ownership of an obligation and the seller agrees, at the time
of the sale, to repurchase the obligation at a mutually agreed upon time and
price, thereby determining the yield during the purchaser's holding period.
Although the underlying collateral for repurchase agreements may have
maturities exceeding one year, repurchase agreements entered into by a Series
will not have a stated maturity in excess of seven days from the date of
purchase. A Series may enter into repurchase agreements with institutions
which the Fund's Board of Directors believes present minimal credit risk. If
the seller of a repurchase agreement fails to repurchase the obligation in
accordance with the terms of the agreement, the Series of the Fund which
entered into the repurchase agreement may incur a loss to the extent that the
proceeds realized on the sale of the underlying obligation are less than the
repurchase price. In the event of the insolvency of a seller that defaults on
its repurchase obligation, disposition of the securities underlying the
repurchase agreement could be delayed pending court or administrative action.

The Prime Series may also enter into the following arrangements:

Reverse Repurchase Agreements involving the sale of money market instruments
held by the Prime Series, with an agreement to repurchase the instruments at
an agreed upon price and date. The Prime Series will em- ploy reverse
repurchase agreements only when necessary to meet unanticipated net
redemptions so as to avoid liquidating other money market instruments during
unfavorable market conditions. The Prime Series will utilize reverse
repurchase agreements when the interest income to be earned from portfolio
investments which would otherwise have to be liquidated to meet redemptions
is greater than the interest expense incurred as a result of the reverse
repurchase transactions. Reverse repurchase agreements involve the risk that
the market value of securities retained by the Prime Series in lieu of
liquidation may decline below the repurchase price of the securities sold by
the Prime Series which it is obligated to repurchase.

INVESTMENT RESTRICTIONS

The Fund's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and
state regulatory limitations, the most significant of which are set forth
below:

(1) No Series may purchase securities of any issuer (other than obligations
of the U.S. Government, its agencies or instrumentalities and any municipal
securities guaranteed by the U.S. Government), if immediately after such
purchase more than 5% of the value of such Series' assets would be invested
in such issuer;

(2) No Series may borrow money or issue senior securities, except that (i)
any Series may borrow money from banks for temporary purposes in amounts up
to 10% of the value of such Series' total assets at the time of borrowing,
provided that any such borrowings are repaid prior to the purchase of
additional portfolio securities, (ii) the Prime Series may enter into reverse
repurchase agreements in accordance with its investment program and (iii) any
Series of the Fund may enter into commitments to purchase securities in
accordance with its investment program;

(3) No Series may lend money or securities except to the extent that a
Series' investments may be considered loans;

(4) The Prime Series may not purchase any commercial paper or variable rate
demand notes which would cause more than 25% of the value of the Series'
total assets at the time of such purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the
same industry; and

(5) The Tax-Free Series may not purchase any securities (other than
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, certificates of deposit and guarantees of banks)

<PAGE> 15

which would cause more than 25% of the value of the Series' total net assets at
the time of such purchase to be invested in: (i) securities of one or more
issuers conducting their principal activities in the same state; (ii)
securities, the interest on which is paid from revenues of projects with similar
characteristics; or (iii) industrial development bonds the obligors of which are
in the same industry.

The investment objectives of each Series of the Fund as described under
"Investment Objectives" and the foregoing restrictions are matters of
fundamental policy except where noted and may not be changed without the
affirmative vote of a majority of the outstanding shares of the Series
affected. The Treasury Series has a policy, which may be changed by the
Fund's Board of Directors and without shareholder approval, of limiting
investments in U.S. Government obligations to U.S. Treasury obligations.

4 HOW TO INVEST IN THE FUND

GENERAL INFORMATION ON PURCHASES

Shares of any Series may be purchased from Alex. Brown & Sons Incorporated
("Alex. Brown") or through securities dealers which have entered into dealer
agreements with Alex. Brown ("Participating Dealers") or through institutions
which maintain accounts with the Fund on behalf of their customers. The terms
and conditions under which purchases will be effected may be subject to terms
and conditions set forth in agreements between the investor and Alex. Brown,
a Participating Dealer or other institution through which investments are
made.

The minimum initial investment in any Series of the Fund is $1,500.
Subsequent investments in the same Series must be at least $100. Orders for
purchase of Fund shares are accepted only on a "business day of the Fund"
which means any day on which PNC Bank, National Association ("PNC"), the
Fund's custodian, and the New York Stock Exchange are open for business. It
is expected that during the next twelve months, PNC and/or the New York Stock
Exchange will be closed on Saturdays and Sundays and on New Year's Day,
Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving
Day and Christmas Day.

An order to purchase Fund shares is effective only when Alex. Brown receives
an order in proper form and federal funds are available to the Fund for
investment. The Fund reserves the right to reject any order for the purchase
of Fund shares. Fund shares are purchased at the net asset value next
determined after acceptance of the order.

The net asset value of each of the Fund's Series is determined once daily as
of 12:00 noon (Eastern Time) on each business day of the Fund. Because the
Fund uses the amortized cost method of valuing the portfolio securities of
each Series and rounds the per share net asset value of shares of each
Series, it is anticipated that the net asset value of each Series will remain
constant at $1.00 per share, but there can be no assurance that this
objective can be met. Share purchases effected before 11:00 a.m. (Eastern
Time) begin to earn dividends on the same business day. Share purchases
received after 11:00 a.m. (Eastern Time) begin to earn dividends on the
following day. Payments transmitted by check are normally converted into
federal funds within two business days and are accepted subject to collection
at full face amount. If purchases of shares are made by check, redemption of
those shares may be restricted. (See "How to Redeem Shares.")

PURCHASES THROUGH ALEX. BROWN

Shares of any Series of the Fund may be purchased with funds on account with
Alex. Brown. Any investor who does not already maintain an Alex. Brown account
may open one by calling an Alex. Brown investment representative or by
completing the application included with this prospectus and mailing it,
together with the initial purchase amount, to the address indicated. Investments
in any Series of the Fund may be made by any one of the following convenient
methods.

9
<PAGE> 16

1. By telephone -- Investors may call their Alex. Brown investment
representative and request that available cash balances in their Alex. Brown
account be invested in one or more Series of the Fund.

2. By mail -- Investors may mail checks for purchases of shares of any
Series of the Fund to their Alex. Brown investment representative or deliver
checks directly to their local Alex. Brown office. Alternatively, investors
may mail checks to Alex. Brown through the use of convenient share purchase
order tickets and pre-addressed envelopes. A supply of order tickets and
envelopes may be obtained through any Alex. Brown investment representative
or by calling (800) 553-8080.

3. By wire -- Shares of any Series may be purchased by wiring funds to an
Alex. Brown account. Investors should call an Alex. Brown investment
representative or (410) 727-1700 for instructions.

4. Through an automatic investment and redemption program -- Alex. Brown has
established a special procedure whereby proceeds from sales of securities
will be combined with other available credit balances in an Alex. Brown
customer's account (the "account") on settlement date and invested in shares
of the Series of the Fund selected by the customer. In addition, all credit
balances in an account at the end of each day are invested on the next
business day of the Fund so long as the resulting Fund balance is $100 or
more. Additionally, Fund shares will be redeemed automatically to pay for
securities purchases in the account. Such redemption will be made on the
settlement date of the securities purchase.

The initial purchase requirement of $1,500 does not apply to those
shareholders who elect to take part in the Automatic Investment and
Redemption Program.

PURCHASES THROUGH DEALERS AND INSTITUTIONS

Special procedures are established for expediting transactions on behalf of
securities dealers and institutional accounts. The Fund and Alex. Brown have
arranged for PNC to offer sub-accounting services to Fund shareholders and
maintain information with respect to underlying share owners. Bank trust
departments, investment counselors, brokers, and others desiring
sub-accounting services can make the necessary arrangements through the Fund
or Alex. Brown. Check redemption services cannot be made available, however,
for shares held in sub-accounts.

5 HOW TO REDEEM SHARES

In addition to participation in the automatic purchase and redemption program
described above, shareholders may redeem all or part of their shares of any
Series on any business day of the Fund by transmitting a redemption order to
Alex. Brown by any of three convenient methods outlined below. A redemption
request is effected at the net asset value next determined after tender of
shares for redemption. Redemption orders received after 11:00 a.m. (Eastern
Time) will be executed the following business day of the Fund at the net
asset value of the Series to be redeemed next determined after receipt of the
order. If the shares to be redeemed were purchased by check, the Fund
reserves the right not to honor the redemption request until the check has
cleared, and redemption of such shares by wire or by check redemption will be
restricted for a period of fifteen calendar days unless the proceeds of
redemption are used to purchase other securities through Alex. Brown. The
right to redeem shares may be affected by the terms and conditions of the
shareholder's account agreement with Alex. Brown, a Participating Dealer or
other institution.

<PAGE> 17

REDEMPTION BY CHECK

Shareholders who complete the necessary forms may establish special check
redemption privileges that entitle them to write checks drawn on the Fund
that will clear through the Fund's account with PNC, in any amount not less
than $500. The payee of the check may cash or deposit it in the same way as
an ordinary bank check. Shareholders are entitled to dividends on the shares
redeemed until the check has been presented to PNC for payment. If the amount
of the check exceeds the value of the Fund shares of all Series in the
account, the check will be returned to the payee marked "nonsufficient
funds." Checks written in amounts less than $500 may also be returned. The
Fund in its discretion will honor such checks but will charge the account a
servicing fee of $15. Cancelled checks will not be returned to the
shareholder, but the amounts will be reflected on the shareholder's monthly
Alex. Brown statement of account. Since the total amount of shares in an
account may vary, shareholders should not attempt to redeem their entire
account by check.

The Fund reserves the right to terminate or alter check redemption privileges
at any time, to impose a service charge, or to charge for checks. The Fund
also may charge a shareholder's account for returned checks and for effecting
stop orders.

If a shareholder of more than one Series presents a check redemption request,
the Fund will automatically redeem shares of such Series in the following
order until the full amount of the check redemption has been satisfied: Tax-
Free Series, Prime Series and Treasury Series.

If a shareholder desires check redemption privileges, the necessary forms may
be obtained through Alex. Brown.

REDEMPTION BY WIRE

A shareholder who wishes to redeem $10,000 or more and who has previously
completed the necessary authorizations, may request that payment be made by
wire transfer of federal funds. In such case, once the redemption is
effected, payment will be made in federal funds wired to the shareholder's
bank on the same day. Alex. Brown will subtract from the redemption proceeds
the cost of effecting the wire transfer.

REDEMPTION BY MAIL

A shareholder may redeem Fund shares in any amount by mailing a redemption
request to Alex. Brown at P.O. Box 17250, Baltimore, Maryland 21203. Payment
for shares redeemed by mail will be made by check and will ordinarily be
mailed within seven days after receipt by Alex. Brown of a written redemption
request in good order. The request must include the following:

(a) a letter of instruction specifying the Alex. Brown account number and the
Series (Prime, Treasury or Tax- Free) and the number of shares or dollar
amount to be redeemed (or that all shares of a Series credited to an Alex.
Brown account be redeemed), signed by all owners of the shares in the exact
names in which their Alex. Brown account is maintained;

(b) a guarantee of the signature of each registered owner by a member of the
Federal Deposit Insurance Corporation, a trust company, broker, dealer,
credit union (if authorized under state law), a securities exchange or
association, clearing agency or savings association; and

(c) any additional documents required by the Fund or transfer agent for
redemption by corporations, partnerships, trusts or fiduciaries.

ADDITIONAL INFORMATION ON REDEMPTION

Dividends payable up to the date of redemption on redeemed shares will be paid
on the next dividend payment date. If all of the shares of a Series of the Fund
in an Alex. Brown account have been redeemed on the dividend payment date, the
dividend will be credited in cash to the shareholder's account at Alex. Brown.

11
<PAGE> 18

The Board of Directors may authorize redemption of all shares in an account
of any Series which has been reduced by the shareholder to less than $500, if
the Board of Directors determines that it is necessary to reduce
disproportionately burdensome expenses of servicing small accounts or is
otherwise in the best interest of the Fund. At least 60 days' prior notice
will be given to allow a shareholder to make an additional minimum investment
set by the Board of Directors to avoid redemption.

6 DIVIDENDS AND TAXES

DIVIDENDS

All of the net income earned on each Series is normally declared as dividends
daily to the respective shareholders of record of each Series. Dividends on
each Series are normally payable on the first day that a share purchase order
is effective but not on the date that a redemption order is effective. If a
purchase order is received by Alex. Brown after 11:00 a.m. (Eastern Time),
the shareholder will receive dividends beginning on the following day.
Dividends are declared daily and reinvested monthly in the form of additional
full and fractional shares of the same Series at net asset value, unless the
shareholder has elected to have dividends paid in cash.

TAXES

The following is only a general summary of certain federal tax considerations
affecting the Fund and the shareholders. No attempt is made to present a
detailed explanation of the tax treatment of the Fund or the shareholders,
and the discussion herein is not intended as a substitute for careful tax
planning.

The following summary is based on current tax laws and regulations, which may
be changed by legislative, judicial or administrative action.

Each Series of the Fund has elected to be taxed as a regulated investment
company under Subchapter M of the Code. As long as a Series qualifies for
this tax treatment, it will not be required to pay federal income taxes on
amounts distributed to shareholders; but shareholders, unless otherwise
exempt, will pay taxes on taxable amounts so distributed.

The Tax-Free Series intends to qualify to pay "exempt-interest dividends" to
its shareholders, by satisfying certain Code requirements described in the
Statement of Additional Information. So long as these and certain other
requirements are met, dividends of the Tax-Free Series derived from net
tax-exempt interest income will be exempt-interest dividends that are
excluded from the gross income of such Series' shareholders for federal
income tax purposes. Exempt-interest dividends may, however, have collateral
federal income tax consequences, including alternative minimum tax
consequences. (See the Statement of Additional Information.).

Distributions of net investment company taxable income (generally, net
investment income plus the excess, if any, of net short-term capital gains
over net long-term capital losses) are taxed to shareholders as ordinary
income. Distributions will not be eligible for the dividends received
deduction otherwise available to corporate shareholders. Although no Series
expects to realize any long-term capital gains, any distributions of net
capital gains (the excess of net long-term capital gains over net short-term
capital losses) will be taxable to shareholders as long-term capital gains,
regardless of the length of time a shareholder has held the shares.

Ordinarily, shareholders will include in their taxable income all dividends
declared by a Series in the year of payment. However, dividends declared payable
to shareholders of record in December of one year, but paid in January of the
following year, will be deemed for tax purposes to have been received by the
shareholders and paid by a Series in the year in which the dividends were
declared.

12
<PAGE> 19

Shareholders of the Treasury Series may not be required to pay state income
tax on dividends to the extent such dividends are derived from interest on
U.S. Treasury obligations. State laws vary and investors are encouraged to
consult with their tax advisors on this issue.

Shareholders will be advised annually as to the federal income tax status of
distributions made during the year. Shareholders are advised to consult with
their own tax advisors concerning the application of state and local taxes to
investments in the Fund, which may differ from the federal income tax
consequences described above. Additional information concerning taxes is set
forth in the Statement of Additional Information.

7 MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The overall business and affairs of the Fund are managed by its Board of
Directors. The Board of Directors approves all significant agreements between
the Fund and persons or companies furnishing services to the Fund, including
the Fund's agreements with its investment advisor, sub-advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to its officers and to Alex. Brown, Investment Company Capital
Corp. ("ICC"), the Fund's investment advisor, and PNC Institutional
Management Corporation ("PIMC"), the sub-advisor to the Tax-Free Series,
subject to the investment objectives and policies of the Fund and to general
supervision by the Fund's Board of Directors. Alex. Brown, ICC and PIMC also
furnish or procure on behalf of the Fund all services necessary to the proper
conduct of the Fund's business. Two Directors and all of the officers of the
Fund are officers or employees of Alex. Brown or ICC. A majority of the Board
of Directors of the Fund have no affiliation with Alex. Brown, ICC, or PIMC.

INVESTMENT ADVISOR

Investment Company Capital Corp., 135 East Baltimore Street, Baltimore,
Maryland 21202, a wholly-owned subsidiary of Alex. Brown (described below),
was organized in 1987 and acts as the Fund's investment advisor pursuant to
three separate Investment Advisory Agreements, each dated as of August 1,
1995 relating to either the Prime Series, the Treasury Series, or the
Tax-Free Series, respectively, (the "Advisory Agreements"). Pursuant to the
terms of the Advisory Agreements, ICC supervises and manages the Fund's
operations and generally provides management and administrative services for
the Fund. ICC may delegate its duties under the Advisory Agreements and has
delegated certain of such duties for the Tax-Free Series to PIMC as described
below. ICC is also investment advisor to, and Alex. Brown acts as distributor
for, several funds in the Flag Investors family of funds which, as of June
30, 1995, had net assets of approximately $ billion.

<PAGE> 20

rate of .02% of the Prime Series' average daily net assets and .03% of the
Tax-Free Series' average daily net assets. The fees were approved by the
Fund's Board of Directors on June 1, 1995, by the shareholders of the Prime
Series, the Treasury Series and the Tax-Free Series, respectively, on July ,
1995 and became effective on August 1, 1995. ICC 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.

Prior to August 1, 1995, ICC served as the Fund's investment advisor pursuant
to two separate investment advisory agreements, one dated as of April 4, 1990
relating to the Prime Series and the Treasury Series and one dated as of
October 5, 1990 relating to the Tax-Free Series. As compensation for
providing investment advisory services to the Fund for the fiscal year ended
March 31, 1995, ICC received a fee from the Fund (net of fee waivers for the
Treasury Series) which represented .21% of the Fund's aggregate average net
assets.

ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Prime and Treasury Series. (See
"Custodian, Transfer Agent, Accounting Services.")

SUB-ADVISOR

PIMC, Bellevue Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware
19809, acts as sub-advisor to the Tax-Free Series, pursuant to a sub-advisory
agreement dated as of June 1, 1991 between ICC and PIMC. Prior to November 1,
1994, PIMC also served as sub-advisor to the Prime Series. PIMC is a
wholly-owned subsidiary of PNC, the Fund's custodian. Subject to the
oversight of ICC, PIMC is responsible for managing the Tax-Free Series'
investments. PIMC was organized in 1977 to perform advisory services for
investment companies. PNC and its predecessors have been in the business of
managing the investments of fiduciary and other accounts in the Philadelphia,
Pennsylvania area since 1847. PIMC advises or manages approximately 65
open-end investment portfolios with total assets of approximately $ billion
as of June 30, 1995.

As compensation for its services as sub-advisor to the Prime Series for the
period from April 1, 1994 through October 31, 1994 and to the Tax-Free Series
for the fiscal year ended March 31, 1994, PIMC received a fee from ICC equal
to . % (annualized) of the combined aggregate average net assets of the
Prime Series and the Tax-Free Series. If ICC voluntarily waives a portion of
its fee with respect to the Tax-Free Series (see "Investment Advisor"), PIMC
has agreed to waive a portion of its fee in the same proportion and for the
same time periods as ICC's waiver.

During the fiscal year ended March 31, 1995, the expenses borne by each
Series of the Fund, including the fees to ICC, amounted to .61% of the Prime
Series' average net assets, .55% (net of fee waivers) of the Treasury Series'
average net assets and .57% of the Tax-Free Series' average net assets. (See
"Table of Fees and Expenses.")

DISTRIBUTOR

The Fund has entered into two separate distribution agreements, one dated as of
April 4, 1990 relating to the Prime Series and the Treasury Series and one dated
as of October 5, 1990 relating to the Tax-Free Series, (the "Distribution
Agreements"), with Alex. Brown, 135 East Baltimore Street, Baltimore, Maryland
21202. Alex. Brown is an investment banking firm which offers a broad range of
investment services to individual, institutional, corporate and municipal
clients. It is a wholly-owned subsidiary of Alex. Brown Incorporated which has
engaged directly and through subsidiaries and affiliates in the investment
business since 1800. Alex. Brown is a member of the New York Stock Exchange and
other leading securities exchanges. Headquartered in Baltimore, Maryland, Alex.
Brown has offices throughout the United States and, through subsidiaries,
maintains offices in London, England, Geneva, Switzerland and Tokyo, Japan.
Alex. Brown serves as the exclusive distributor for shares of the Fund's three
Series. As compensation for its services for the fiscal year ended March 31,
1995, Alex. Brown received a fee from the Fund which represented .25% of the
Fund's average net assets.

14
<PAGE> 21

Alex. Brown may make payments to shareholder servicing agents, including
securities dealers, banks and other financial institutions, that provide
shareholder services. Such financial institutions may impose separate fees in
connection with these services and investors should review this Prospectus in
conjunction with any such institution's fee schedule. In addition, financial
institutions may be required to register as dealers pursuant to state
securities laws.

Alex. Brown may use a portion of the fee it receives from the Fund to
compensate its investment representatives for opening shareholder accounts,
processing investor purchase and redemption orders, responding to inquiries
from Fund shareholders concerning the status of their accounts and operations
of the Fund, and communicating with the Fund and its transfer agent on behalf
of the Fund's shareholders. Additionally, Alex. Brown bears all expenses
associated with advertisements, promotional materials, sales literature and
printing and mailing prospectuses to other than Fund shareholders.

8 CURRENT YIELD

From time to time the Fund advertises the "yield" and "effective yield" of a
particular Series or class. Both figures are based on historical earnings and
are not intended to indicate future performance. The "yield" of a Series or
class refers to the income generated by an investment in that Series or class
over a seven-day period (which period will be stated in the advertisement).
This income is then "annualized", that is, the amount of income generated by
the investment during that week is assumed to be generated each week of a
52-week period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly, but when annualized, the income earned by an
investment in the Fund is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment. The Tax-Free Series may also advertise a
taxable-equivalent yield or effective yield, which are calculated by applying
a stated income tax rate to the Series' tax-exempt income for the same
periods and annualized as described above.

The yield for any Series or class of the Fund can be obtained by calling an
Alex. Brown investment representative or (410) 234-3737.

9 GENERAL INFORMATION

DESCRIPTION OF SHARES

Shares of the Fund are divided into three series, each with a par value of
$.001 - the Prime Series, the Treasury Series and the Tax-Free Series. Each
of the Series currently offers one or more classes, which classes differ from
each other principally in distribution fees, in some instances shareholders
servicing fees, and the method of distribution. The Institutional classes of
the Prime Series and the Treasury Series are available to certain
institutional investors and the Quality Cash Reserve class of the Prime
Series is available to clients of broker-dealers which have a correspondent
relationship with Alex. Brown as stated in the prospectuses for those
classes. The Fund also offers Flag Investors Cash Reserve Prime Class A
Shares, which are subject to a .25% distribution fee. The Fund's Flag
Investors Cash Reserve Prime Class B Shares are subject to a contingent
deferred sales charge and are available only through the exchange of

<PAGE> 22

Class B shares of other funds in the Flag Investors family of funds. Shares
of the Fund have equal rights with respect to voting, except that the holders
of shares of a particular Series or class will have the exclusive right to
vote on matters affecting only the rights of the holders of such Series or
class. For example, holders of a particular Series will have the exclusive
right to vote on any investment advisory agreement or investment restriction
that relates only to such Series. In the event of dissolution or liquidation,
holders of shares of each Series will receive pro rata, subject to the rights
of creditors, (a) the proceeds of the sale of the assets held in the
respective Series less (b) the liabilities of the Fund attributable to the
respective Series or allocated among all Series based on the respective
liquidation value of each Series. There will not normally be annual
shareholders' meetings. Shareholders may remove directors from office by
votes cast at a meeting of shareholders or by written consent. A meeting of
shareholders may be called at the request of the holders of 10% or more of
the Fund's outstanding shares.

There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and
non-assessable. The Board of Directors may create additional series or
classes of Fund shares without shareholder approval.

CUSTODIAN, TRANSFER AGENT, ACCOUNTING SERVICES

PNC, a national banking association with offices at Airport Business Center,
200 Stevens Drive, Lester, Pennsylvania 19113, acts as custodian for the
Fund's portfolio securities and cash. PFPC Inc. ("PFPC"), an affiliate of PNC
with offices at 400 Bellevue Parkway, Wilmington, Delaware 19809, provides
accounting services to the Tax-Free Series. Investment Company Capital Corp.,
135 East Baltimore Street, Baltimore, Maryland 21202 (telephone: (800) 553-
8080), the Fund's investment advisor, also serves as the Fund's transfer and
dividend disbursing agent and provides accounting services to the Prime
Series (effective November 10, 1994) and to the Treasury Series. As
compensation for providing accounting services to the Prime Series and the
Treasury Series, ICC receives from the Fund an annual fee for each such
Series, equal to $13,000, plus a percentage of the Series' aggregate average
daily net assets in excess of $10 million at a maximum rate of .100% of net
assets and declining at various asset levels to a minimum rate of .001% on
net assets of $1 billion or more. (See the Statement of Additional
Information.)

ANNUAL MEETINGS

Unless required under applicable Maryland law, the Fund does not expect to
hold annual meetings of shareholders. However, shareholders may remove
directors from office by votes cast at a meeting of shareholders or by
written consent. A meeting of shareholders may be called at the request of
the holders of 10% or more of the Fund's outstanding shares.

REPORTS

The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a list of
investments held in the Fund's portfolio and financial statements. The annual
financial statements are audited by the Fund's independent accountants,
Coopers & Lybrand L.L.P.

FUND COUNSEL

Morgan, Lewis & Bockius serves as counsel to the Fund.

SHAREHOLDER INQUIRIES

Shareholders with inquiries concerning their shares should contact an Alex.
Brown investment representative or (800) 553-8080.

16
<PAGE> 23

ALEX. BROWN CASH RESERVE FUND, INC.

APPLICATION FORM

==============================================================================
TO OPEN NEW ACCOUNT
1.) Complete application below in full.
2.) Check enclosed for $_____________
3.(a). $______ to be invested in Prime Series.
(b). $______ to be invested in Treasury Series.
(c). $______ to be invested in Tax-Free Series.

EXISTING ALEX. BROWN ACCOUNTS
1.) My account number is _______________________
2.) Name(s) _______________________
3.) Check enclosed for $ _______________________
4. (a). $______ to be invested in Prime Series.
(b). $______ to be invested in Treasury Series.
(c). $______ to be invested in Tax-Free Series.
==============================================================================

All checks should be made payable to Alex. Brown & Sons Incorporated and
mailed to:

Alex. Brown Cash Reserve Fund, Inc.
P.O. Box 17250
Baltimore, Maryland 21203

PLEASE NOTE: The minimum initial investment in each Series is $1,500.
Subsequent investments in each Series must be $100 or more.
- -----------------------------------------------------------------------------
1. ACCOUNT REGISTRATION -- Please Print

- -------------------------------------------- --------------------------
Names Social Security
or Tax ID No.**
- --------------------------------------------
Joint Owner's Name (if applicable)*

- -----------------------------------------------------------------------------
Street Address

- --------------------- ------ ----------- ------------------ -----------------
City State Zip Code Home Phone Office Phone

* In the case of joint ownership, joint tenancy with right of survivorship
will be presumed unless otherwise indicated.
** Enter "Applied" if number has been applied for and not received.
- -----------------------------------------------------------------------------
2. DIVIDEND INSTRUCTIONS
[ ] Place an "X" in this box if you want your dividends paid to you in cash.
Otherwise, they will be reinvested in additional shares of the Fund.
- -----------------------------------------------------------------------------
3. CHECK REDEMPTION PRIVILEGE (Optional)
[ ] Place an "X" in this box if you want information regarding the Check
Redemption Privilege.

- -----------------------------------------------------------------------------

4. SIGNATURE(S) I (we) am (are) of legal age and have read the prospectus
dated August 1, 1995.
Under penalties of perjury, I certify (1) that the number shown on this
form is my correct taxpayer identification number, and (2) that I am not
subject to backup withholding either because I have not been notified that I
am subject to backup withholding as a result of a failure to report all
interest or dividends, or the Internal Revenue Service has notified me that I
am no longer subject to backup withholding.

- ------------------------------------------------------------- ----------------
Date

17
<PAGE> 24

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE> 25

ALEX. BROWN CASH RESERVE FUND, INC.
BOARD OF DIRECTORS

W. JAMES PRICE, Chairman
Managing Director Emeritus,
Alex. Brown & Sons Incorporated
Baltimore, Maryland

RICHARD T. HALE
Managing Director,
Alex. Brown & Sons Incorporated
Baltimore, Maryland

JAMES J. CUNNANE
Managing Director,
CBC Capital
264 Carlyle Lake Drive,
St. Louis, Missouri 63141

N. BRUCE HANNAY
Business Consultant
Port Ludlow, Washington

JOHN F. KROEGER
Formerly Consultant, Wendell & Stockel
Associates, Inc.
Summit, New Jersey

LOUIS E. LEVY
Formerly Partner,
KPMG Peat Marwick
New York, New York

EUGENE J. McDONALD
President and CEO,
Duke Management Co.
Executive Vice President,
Duke University
Durham, North Carolina

REBECCA W. RIMEL

HARRY WOOLF
Professor, Institute for
Advanced Study
Princeton, New Jersey

- -----------------------------------------------------------------------------
OFFICERS

W. JAMES PRICE
Chairman

RICHARD T. HALE
President

EDWARD J. VEILLEUX
Executive Vice President

M. ELLIOTT RANDOLPH, JR.
Vice President

PAUL D. CORBIN
Vice President

BRIAN C. NELSON
Vice President
& Secretary

DIANA M. ELLIS
Treasurer

MONICA M. HAUSNER
Assistant Vice President

LAURIE D. DEPRINE
Assistant Secretary
<PAGE> 26

- -----------------------------------------------------------------------------

Distributor
ALEX. BROWN & SONS
INCORPORATED
135 East Baltimore Street
Baltimore, Maryland 21202
(410) 727-1700

Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
135 East Baltimore Street
Baltimore, Maryland 21202

Sub-Advisor
Tax Free Series
PNC INSTITUTIONAL
MANAGEMENT CORP.
400 Bellevue Parkway
Wilmington, Delaware 19809

Custodian
PNC BANK
Airport Business Center
200 Stevens Drive
Lester, Pennsylvania 19113

Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
135 East Baltimore Street
Baltimore, Maryland 21202
(800) 553-8080

Independent Accountants
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103

<PAGE> 27
LOGO

- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------

Printed in U.S.A.

Alex. Brown Third Class Mail
Cash Reserve Fund, Inc. U.S. POSTAGE
P.O. Box 17250 PAID
Baltimore, Maryland 21203 Baltimore, Md.
Permit No. 8614

(LOGO)

ALEX.
BROWN
CASH
RESERVE
FUND, INC.

PRIME SERIES
TREASURY SERIES
TAX-FREE SERIES

An open-end, diversified
fund for individuals, businesses,
institutions and fiduciaries,
designed as a convenient means
to earn a high level of current
income from three diversified, professionally managed
portfolios of high quality money market instruments while
preserving capital and liquidity.

August 1, 1995

Distributed by:
ALEX. BROWN & SONS
INCORPORATED
PROSPECTUS

<PAGE> 28

ALEX. BROWN CASH RESERVE FUND, INC.
May 31, 1995

CROSS REFERENCE SHEET RELATING TO
FLAG INVESTORS CASH RESERVE PRIME SHARES

(The Cross Reference Sheet relating to the
Alex. Brown Cash Reserve Fund, Inc. immediately precedes
the Prospectus for Alex. Brown Cash Reserve Fund, Inc.
The Cross Reference Sheet relating to the
Alex. Brown Cash Reserve Fund, Inc. -
Institutional Shares immediately precedes the Prospectus
for Alex. Brown Cash Reserve Fund, Inc. - Institutional Shares.
The Cross Reference Sheet relating to the
Alex. Brown Cash Reserve Fund, Inc. - Quality Cash Reserve Prime
Shares immediately precedes the Prospectus
for the Quality Cash Reserve Prime Shares.)

Items Required by Form N-1A
- ---------------------------
<TABLE>
<CAPTION>

Registration
Part A Information Required in a Prospectus Statement Heading
- ------ ---------------------------------------- -----------------------
<S> <C> <C>

1. Cover Page......................................... Cover Page
2. Synopsis........................................... Fee Table
3. Condensed Financial Information.................... Financial Highlights; Performance
Information
4. General Description of Registrant.................. Investment Program; Investment
Restrictions; General Information
5. Management of the Fund ............................ Management of the Fund;
Investment Advisor; Distributor;
Custodian, Transfer Agent,
Accounting Services
6. Capital Stock and Other Securities................. Cover Page; Dividend and Taxes;
General Information
7. Purchase of Securities Being Offered............... How to Invest in the Fund; Distributor
8. Redemption or Repurchase........................... How to Redeem Shares
9. Pending Legal Proceedings.......................... *

Information Required in a Statement
Part B of Additional Information (1)
- ------ ----------------------------------------
10. Cover Page......................................... Cover Page
11. Table of Contents.................................. Table of Contents
12. General Information and History.................... Introduction; General Information
about the Fund
</TABLE>

- -------------
(1) The Statement of Additional Information relates to all classes of Shares.

<PAGE> 29

16. Investment Advisory and Other Services............. The Investment Advisor; Distributor;
Expenses; Transfer Agent,
Custodian, Accounting Services;
Sub-Accounting; Reports
Portfolio Transactions
17. Brokerage Allocation............................... General Information About the Fund
18. Capital Stock and Other Securities................. - The Fund and Its Shares

21. Underwriters....................................... Current Yield
22. Calculation of Performance Data.................... Financial Statements
23. Financial Statements...............................

Part C Other Information
- ------ ------------------
Information required to be included in Part C is
set forth under the appropriate Item, so numbered, in Part C
to this Registration Statement.
</TABLE>

- -------------
* Omitted since the answer is negative or the item is not applicable.

<PAGE> 30

LOGO

FLAG INVESTORS
CASH RESERVE PRIME SHARES

(Class A and Class B Shares)

Alex. Brown Cash Reserve Fund, Inc. (the "Fund") is a money market fund
designed to seek as high a level of current income as is consistent with
preservation of capital and liquidity.

This Prospectus relates to the Flag Investors Cash Reserve Prime
Shares--Class A and Class B (the "Flag Investors Shares") of the Prime Series
of the Fund. Flag Investors Shares are available through Alex. Brown & Sons
Incorporated ("Alex. Brown") as well as Participating Dealers and Shareholder
Servicing Agents. However, Flag Investors Class B Shares are available only
through the exchange of Class B shares of other funds in the Flag Investors
family of funds. (See "How to Invest in the Fund.")

The Fund's Statement of Additional Information and separate prospectuses
concerning the other Series and classes of shares of the Fund may be obtained
without charge from Alex. Brown, P.O. Box 515, Baltimore, Maryland 21203 or
any securities dealer that has entered into a dealer agreement with Alex.
Brown with respect to such other Series or classes.

This Prospectus sets forth basic information that investors should know
about the Flag Investors Shares prior to investing and should be read and
retained for future reference. A Statement of Additional Information dated
August 1, 1995, has been filed with the Securities and Exchange Commission
(the "SEC") and is hereby incorporated by reference. It is available upon
request and without charge by calling the Fund at (800) 553-8080.

For current yield information and for purchase and redemption information,
call your investment representative or (800) 553-8080.
- -----------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE UNITED
STATES GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE PRIME SERIES WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.

The date of this Prospectus is August 1, 1995

PROSPECTUS

<PAGE> 31

(LOGO)
<PAGE> 32

FLAG INVESTORS
CASH RESERVE PRIME SHARES

(Class A and Class B Shares)

135 East Baltimore Street
Baltimore, Maryland 21202

TABLE OF CONTENTS
-----------------

Page
1. Fund Expenses ................ 2
2. Financial Highlights ......... 3
3. Investment Program ........... 6
4. Investment Restrictions ...... 8
5. How to Invest in the Fund .... 9
6. How to Redeem Shares ......... 14
7. Telephone Transactions ....... 15
8. Dividends and Taxes .......... 16
9. Management of the Fund ....... 18
10. Investment Advisor ........... 18
11. Distributor .................. 19
12. Custodian, Transfer Agent,
Accounting Services .......... 21
13. Current Yield ................ 21
14. General Information .......... 21

- -----------------------------------------------------------------------------
No person has been authorized to give any information or to make
representations not contained in this Prospectus in connection with any
offering made by this Prospectus and, if given or made, such information must
not be relied upon as having been authorized by the Fund or its distributor.
This Prospectus does not constitute an offering by the Fund or by its
distributor in any jurisdiction in which such offering may not lawfully be
made.

- -----------------------------------------------------------------------------
1

<PAGE> 33

=============================================================================
1. Fund Expenses
.............................................................................

SHAREHOLDER TRANSACTION EXPENSES:

<TABLE>
<CAPTION>
FLAG INVESTORS FLAG INVESTORS
CLASS A CLASS B
SHARES SHARES
-------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases .................... 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) ........... None* 4.00%**

ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net assets)
- ----------------------------------------------------------------------------------------------------------

Management Fees .............................................. .28% .28%
12b-1 Fees ................................................... .25% .75%
Other Expenses (including a .25% shareholder servicing
fee for Flag Investors Class B Shares) ...................... .15% .40%***
------ ---------
Total Operating Expenses ..................................... .68% 1.43%
====== =========
</TABLE>

- -----------------------------------------------------------------------------

* Flag Investors Class A Shares are not subject to a sales charge, however,
shareholders of other Flag Investors funds who exchange their Class A
shares of such funds for Flag Investors Class A Shares will retain
liability for any contingent deferred sales charge due on such shares
upon redemption. (See "How to Invest in the Fund -- Purchases by
Exchange.")
** A declining contingent deferred sales charge will be imposed on
redemptions of Flag Investors Class B Shares made within six years of
purchase. Flag Investors Class B Shares will automatically convert to
Flag Investors Class A Shares six years after purchase. (See "How to
Invest in the Fund -- Flag Investors Class B Shares.")
*** A portion of the shareholder servicing fee is allocated to member firms
of the National Association of Securities Dealers, Inc. and qualified
banks for continued personal service by such members to investors in Flag
Investors Class B Shares, such as responding to shareholder inquiries,
quoting net asset values, providing current marketing materials and
attending to other shareholder matters.

<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C>
Example:
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period: 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------------
Flag Investors Class A Shares ................. $ 7 $22 $39 $ 88
Flag Investors Class B Shares ................. $54 $74 $97 $139*
- ----------------------------------------------------------------------------------------------------------
You would pay the following expenses on the same
investment, assuming no redemption: ........... 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------------
Flag Investors Class B Shares ................. $15 $46 $81 $144*
- ----------------------------------------------------------------------------------------------------------
</TABLE>

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

The Example shown in the table above should not be considered a
representation of past or future expenses. Actual expenses may be greater or
less than those shown.

2
<PAGE> 34

The purpose of the foregoing table is to describe the various costs and
expenses that an investor in Flag Investors Shares may bear directly or
indirectly. A person who purchases Flag Investors Shares through a financial
institution may be charged separate fees by the financial institution. (For
more complete descriptions of the various costs and expenses, see "How to
Invest in the Fund--Offering Price", "Investment Advisor and Sub- Advisor"
and "Distributor.")

The percentages shown above expressing Annual Fund Operating Expenses are
restated using current rather than historical expenses. The expenses for the
Flag Investors Class B Shares, which were not offered prior to April 3, 1995,
are based on those of the Prime Series plus the incremental 12b-1 and service
fee costs. Due to the continuous nature of Rule 12b-1 fees, long-term
shareholders of the Fund may pay more than the equivalent of the maximum
front-end sales charges permitted by the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. ("NASD Rules").

=============================================================================
2. Financial Highlights
.............................................................................

The financial highlights included in this table are a part of the Fund's
financial statements for the Prime Series for the indicated fiscal periods
and have been audited by the Fund's independent accountants. The financial
statements and financial highlights for the fiscal year ended March 31, 1995
and the report of the Fund's independent accountants thereon are included in
the Statement of Additional Information which can be obtained at no charge by
calling the Fund at (800) 767-FLAG. The Flag Investors Class B Shares
commenced operations on April 3, 1995. Accordingly, no audited financial
information for the year ended March 31, 1995 has been provided for that
class.

<PAGE> 35

PRIME SERIES (INCLUDING FLAG INVESTORS CLASS A SHARES((1))
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
- -----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------------
1995(1) 1994(1) 1993(1) 1992(1)
----------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------- -------------- -------------- --------------
Income from Investment
Operations:
Net investment income and
short-term gains 0.0442 0.0262 0.0295 0.0485
Less Distributions:
Dividends from net
investment income and
short-term gains (0.0442) (0.0262) (0.0295) (0.0485)
----------------- -------------- -------------- --------------
Net asset value at end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00
================= ============== ============== ==============
Total Return ** 4.51% 2.65% 2.99% 4.96%
Ratios to Average Net
Assets:
Expenses 0.61% 0.62% 0.63% 0.61%
Net investment income 4.46% 2.62%* 2.95% 4.84%
Supplemental Data:
Net assets at end of
period $1,479,806,435(2) $1,368,451,627 $1,151,979,704 $1,264,629,485
Number of shares
outstanding at end of
period 1,479,804,186 1,368,449,549 1,151,977,279 1,264,629,485

</TABLE>
4
<PAGE> 36

<TABLE>
<CAPTION>
For the
eleven
months
ended
Year Ended March 31, March 31, Year Ended April 30,
--------------------------------- -------------- --------------------------------------------
1991(1) 1990(1) 1989+(1) 1988 1987 1986
-------------- -------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------- -------------- -------------- ------------ ------------ ------------
Income from Investment
Operations:
Net investment income and
short-term gains 0.0734 0.0846 0.0712 0.0647 0.0572 0.0729
Less Distributions:
Dividends from net
investment income and
short- term gains (0.0734) (0.0846) (0.0712) (0.0647) (0.0572) (0.0729)
-------------- -------------- -------------- ------------ ------------ ------------
Net asset value at end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ============ ============ ============
Total Return ** 7.59% 8.80% 8.01%* 6.67% 5.87% 7.54%
Ratios to Average Net
Assets:
Expenses 0.59% 0.52% 0.54%* 0.52% 0.55% 0.59%
Net investment income 7.31% 8.42% 7.81%* 6.46% 5.71% 7.28%
Supplemental Data:
Net assets at end of
period $1,295,888,161 $1,312,276,151 $1,084,793,157 $874,051,953 $831,784,041 $686,611,968
Number of shares
outstanding at end of
period 1,295,888,161 1,312,272,415 1,084,789,421 874,047,336 831,779,424 686,611,968
</TABLE>

- ------
*Annualized.
**Total return represents aggregate total return for the periods indicated
and does not reflect any applicable sales
charges.
+The Fund's fiscal year-end was changed to March 31.
(1) Per share information and ratios of the Flag Investors Class A Shares are
identical to the Prime Shares since January 5, 1989 (date Flag Investors
Class A Shares commenced operations).
(2) Net assets consist of: Prime Shares -- $1,472,079,739 and Flag Investors
Class A Shares -- $7,726,696.

<PAGE> 37

==============================================================================
3. Investment Program

The Fund is a money market fund which seeks as high a level of current
income as is consistent with preservation of capital and liquidity. This
Prospectus relates exclusively to the Flag Investors Class A and Class B
Shares, which are two of the five classes of shares currently offered by the
Prime Series.

..............................................................................
INVESTMENT OBJECTIVE

The investment objective of the Prime Series is to seek as high a level of
current income as is consistent with preservation of capital and liquidity.
The Prime Series endeavors to achieve its objective by investing in a
diversified portfolio of high quality money market instruments with
maturities of one year or less from the date of purchase.

.............................................................................
PORTFOLIO INVESTMENTS

The Prime Series seeks to achieve its objective by investing in domestic
money market instruments that satisfy strict credit quality standards and
that mature within one year or less from the date of purchase. The Prime
Series may invest in U.S. Treasury obligations, obligations issued or
guaranteed by agencies or instrumentalities of the U.S. Government and a
broad range of bank and commercial obligations that the investment advisor,
under guidelines established by the Board of Directors, believes present
minimal credit risk and that satisfy the criteria for such obligations
discussed below:

U.S. Treasury Obligations consisting of marketable securities and
instruments issued by the United States Treasury, including bills, notes,
bonds and other obligations.

Obligations of U.S. Government Agencies consisting of obligations issued
or guaranteed as to principal and interest by agencies or instrumentalities
of the U.S. Government. Some of these obligations are backed by the full
faith and credit of the U.S. Government (e.g., the Government National
Mortgage Association), others are supported by the issuing agency's right to
borrow from the U.S. Treasury (e.g., securities of Federal Home Loan Banks)
and still others are backed only by the credit of the instrumentality (e.g.,
the Federal National Mortgage Association).

<PAGE> 38

Bank Instruments consisting mainly of certificates of deposit and bankers'
acceptances that (a) are issued by U.S. banks which satisfy applicable
quality standards; or (b) are fully insured as to principal and interest by
the Federal Deposit Insurance Corporation.

Commercial Instruments consisting of commercial paper and variable amount
master demand notes. Eligible commercial paper is limited to short-term
unsecured promissory notes issued by corporations which (i) are rated Prime-1
by Moody's Investors Service, Inc. ("Moody's") or A-1(+) or A-1 by Standard &
Poor's Ratings Group ("S&P"); or (ii) if not rated, are of comparable quality
to Prime-1 or A-1(+) or A-1 instruments as determined by the Fund's
investment advisor; and (iii) are otherwise "Eligible Securities" as defined
in Rule 2a-7 under the Investment Company Act of 1940. Variable amount master
demand notes are unsecured demand notes that permit investment of fluctuating
amounts of money at variable rates of interest pursuant to arrangements with
issuers who meet the foregoing quality criteria. The interest rate on a
variable amount master demand note is periodically redetermined according to
a prescribed formula. Although there is no secondary market in master demand
notes, the payee may demand payment of the principal amount of the note on
relatively short notice. All master demand notes acquired by the Prime Series
will be payable within a prescribed notice period not to exceed seven days.
(See the Statement of Additional Information for information with respect to
commercial paper and bond ratings.)

The Prime Series may enter into the following arrangements:

Repurchase Agreements under which the purchaser (for example, the Prime
Series) acquires ownership of an obligation and the seller agrees, at the
time of the sale, to repurchase the obligation at a mutually agreed upon time
and price, thereby determining the yield during the purchaser's holding
period. Although the underlying collateral for repurchase agreements may have
maturities exceeding one year, repurchase agreements entered into by the
Prime Series will not have a stated maturity in excess of seven days from the
date of purchase. If the seller of a repurchase agreement fails to repurchase
the obligation in accordance with the terms of the agreement, the Prime
Series may incur a loss to the extent that the proceeds it realizes on the
sale of the underlying obligation are less than the repurchase price. In the
event of the insolvency of a seller that defaults on its repurchase
obligation, disposition of the securities underlying the repurchase agreement
could be delayed pending court or administrative action.

When-Issued Securities involving commitments by the Prime Series to
purchase portfolio securities on a "when-issued" basis. When-issued

<PAGE> 39

securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Prime Series will generally not pay for
such securities or start earning interest on them until they are received.
When-issued commitments will not be used for speculative purposes and will be
entered into only with the intention of actually acquiring the securities.

Reverse Repurchase Agreements involving the sale of money market
instruments held by the Prime Series, with an agreement to repurchase the
instrument at an agreed upon price and date. The Prime Series will employ
reverse repurchase agreements only when necessary to meet unanticipated net
redemptions so as to avoid liquidating other money market instruments during
unfavorable market conditions. The Prime Series will utilize reverse
repurchase agreements when the interest income to be earned from portfolio
investments which would otherwise have to be liquidated to meet redemptions
is greater than the interest expense incurred as a result of the reverse
repurchase transactions. Reverse repurchase agreements involve the risk that
the market value of securities retained by the Prime Series in lieu of
liquidation may decline below the repurchase price of the securities sold by
the Prime Series which it is obligated to repurchase.

=============================================================================
4. Investment Restrictions

The Prime Series' investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and
state regulatory limitations, the most significant of which are set forth
below. The Prime Series will not:

(1) purchase securities of any one issuer (other than obligations of the U.S.
Government, its agencies or instrumentalities), if immediately after such
purchase more than 5% of the value of the Prime Series' assets would be
invested in such issuer;

(2) purchase any commercial paper or variable rate demand notes which would
cause more than 25% of the value of the Prime Series' total assets at the
time of such purchase to be invested in the securities of one or more
issuers conducting their principal business activities in the same
industry;

(3) borrow money or issue senior securities, except that the Prime Series may
(a) borrow money from banks for temporary purposes in amounts up to 10%
of the value of the Prime Series' total assets at the time of borrowing,
provided that any such borrowings will be repaid prior to the purchase of
additional portfolio securities by the Prime Series, (b) enter into reverse

<PAGE> 40

repurchase agreements in accordance with its investment program, and (c)
enter into commitments to purchase securities in accordance with the Prime
Series' investment program, which commitments may be considered the issuance
of senior securities; or

(4) lend money or securities except to the extent that the Prime Series'
investments may be considered loans.

The Prime Series' investment objective as described under "Investment
Objective" and the foregoing restrictions are matters of fundamental policy
and may not be changed without the affirmative vote of a majority of the
outstanding shares of the Prime Series.

==============================================================================
5. How to Invest in the Fund
..............................................................................

GENERAL INFORMATION ON PURCHASES

Flag Investors Class A Shares may be purchased from Alex. Brown, 135 East
Baltimore Street, Baltimore, Maryland 21202, through any securities dealer
which has entered into a dealer agreement with Alex. Brown ("Participating
Dealers") or through any financial institution which has entered into a
Shareholder Servicing Agreement with the Fund ("Shareholder Servicing
Agents"). Flag Investors Class A Shares may also be purchased directly from
the Fund by completing the Application Form attached to this Prospectus and
returning it, together with payment of the purchase price, to the Fund at the
address shown on the Application Form. In addition, Flag Investors Class A
Shares may be purchased through the exchange of Class A Shares of other funds
in the Flag Investors family of funds (see "Purchases by Exchange" below).

Flag Investors Class B Shares may be purchased only through the exchange
of Class B Shares of other funds in the Flag Investors family of funds (see
"Purchases by Exchange" below). Exchanges may be effected through Alex. Brown
or any Participating Dealer or Shareholder Servicing Agent.

Purchase orders for Flag Investors Shares will be executed at a per share
price equal to the net asset value next determined after receipt of a
completed purchase order for such shares (the "Offering Price").

The minimum initial investment in Flag Investors Class A Shares is $2,000,
except that the minimum initial investment for shareholders of any other Flag
Investors fund or class is $500 and the minimum initial investment for
participants in the Flag Investors Class A Shares' Automatic

<PAGE> 41

Investing Plan is $250. The minimum initial investment in Flag Investors
Class B Shares, which are available only through exchange, is $500. Each
subsequent investment must be at least $100 per class, except that the
minimum subsequent investment under the Flag Investors Class A Shares'
Automatic Investing Plan is $250 for quarterly investments and $100 for
monthly investments. (See "Purchases Through Automatic Investing Plan"
below.) There is no minimum investment requirement for qualified retirement
plans (i.e., 401(k) plans or pension and profit sharing plans). IRA accounts
are, however, subject to the $2,000 minimum initial investment requirement.
There is no minimum investment requirement for spousal IRA accounts. Orders
for purchases of Flag Investors Shares are accepted on any day on which PNC
Bank, National Association ("PNC"), the Fund's custodian, and the New York
Stock Exchange are open for business ("Business Day"). It is expected that
during the next twelve months, PNC and/or the New York Stock Exchange will be
closed on Saturdays and Sundays and on New Year's Day, Martin Luther King,
Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.

An order to purchase Flag Investors Shares is effective only when Alex.
Brown, a Participating Dealer, or a Shareholder Servicing Agent receives an
order in proper form and federal funds are available to the Fund for
investment. The Fund reserves the right to reject any order for purchase of
Flag Investors Shares. Flag Investors Shares are purchased or exchanged at
the net asset value next determined after acceptance of the order.

The net asset value of Flag Investors Shares is determined once daily as
of 12:00 noon (Eastern Time) on each Business Day. Because the Prime Series
uses the amortized cost method of valuing its portfolio securities and rounds
the per share net asset value of shares, it is anticipated that the net asset
value of Flag Investors Shares will remain constant at $1.00 per share, but
there can be no assurance that this objective can be met. Share purchases
effected before 11:00 a.m. (Eastern Time) begin to earn dividends on the same
Business Day. Share purchases received after 11:00 a.m. (Eastern Time) begin
to earn dividends on the following day. Payments transmitted by check are
normally converted into federal funds within two Business Days and are
accepted subject to collection at full face amount. If purchases of Flag
Investors Shares are made by check, redemption of those shares may be
restricted. (See "How to Redeem Shares.")

<PAGE> 42

..............................................................................
OFFERING PRICE

Flag Investors Shares may be purchased or exchanged through Alex. Brown,
Participating Dealers or Shareholder Servicing Agents at net asset value.
Flag Investors Class B Shares are subject to a contingent deferred sales
charge described below.

..............................................................................
FLAG INVESTORS CLASS B SHARES

A contingent deferred sales charge will be imposed on certain Flag
Investors Class B Shares redeemed within six years of the initial purchase of
the original Class B shares tendered for exchange (the "Initial Purchase").
The charge is assessed on an amount equal to the lesser of the then-current
market value of the Flag Investors Class B Shares redeemed or the total cost
of such shares. Accordingly, even if the market value increases, the
contingent deferred sales charge will not be applied to dollar amounts
representing appreciation or reinvestment of dividends or capital gains
distributions.

In determining whether the contingent deferred sales charge is applicable
to a redemption, the calculation is made in the manner that results in the
lowest possible rate. Therefore, it is assumed that the redemption is first
of any Flag Investors Class B Shares in the shareholder's account that
represent reinvested dividends and distributions and second of Flag Investors
Class B Shares held the longest during the six year period. The amount of the
contingent deferred sales charge, if any, will vary depending on the number
of years from the time of payment for the Initial Purchase until the
redemption of the Flag Investors Class B Shares (the "holding period"). For
purposes of determining this holding period, all payments during a month are
aggregated and deemed to have been made on the first day of the month. The
following table sets forth the rates of the contingent deferred sales charge.

<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Year Since Initial Purchase (as a percentage of the dollar amount
Payment was Made subject to charge)
---------------------------------------------------------------------------
<S> <C>
First ......................... 4.0%
Second ........................ 4.0%
Third ......................... 3.0%
Fourth ........................ 3.0%
Fifth ......................... 2.0%
Sixth ......................... 1.0%
Thereafter .................... None*
- -----------------------------------------------------------------------------
</TABLE>

* As described more fully below, Flag Investors Class B Shares automatically
convert to Flag Investors Class A Shares six years after the beginning of
the calendar month in which the purchase order is accepted.

<PAGE> 43

There are other classes of Alex. Brown Cash Reserve Fund, Inc. that may be
purchased and redeemed without the payment of any sales charge.

Waiver of Contingent Deferred Sales Charge. The contingent deferred sales
charge will be waived on the redemption of Flag Investors Class B Shares (i)
following the death or initial determination of disability (as defined in the
Internal Revenue Code of 1986, as amended) of a shareholder; or (ii) to the
extent that the redemption represents a minimum required distribution from an
individual retirement account or other retirement plan to a shareholder who
has attained the age of 70 1/2 . The waiver with respect to (i) above is only
applicable in cases where the shareholder account is registered (a) in the
name of an indivdual person, (b) as a joint tenancy with rights of
survivorship, (c) as community property or (d) in the name of a minor child
under the Uniform Gifts or Uniform Transfers to Minors Act. A shareholder, or
his or her representative, must notify the Fund's transfer agent (the
"Transfer Agent") prior to the time of redemption if such circumstances exist
and the shareholder is eligible for this waiver. For information on the
imposition and waiver of the contingent deferred sales charge, contact the
Transfer Agent at (800) 553-8080.

Automatic Conversion to Class A Shares. Six years after the beginning of
the calendar month in which the Initial Purchase is accepted, Flag Investors
Class B Shares will automatically convert to Flag Investors Class A Shares
and will no longer be subject to the higher distribution and service fees.
Such conversion will be on the basis of the relative net asset values of the
two classes, without the imposition of any sales load, fee or other charge.
The conversion is not a taxable event to the shareholder.

For purposes of conversion to Flag Investors Class A Shares, shares
received as dividends and other distributions paid on Flag Investors Class B
Shares in the shareholder's account will be considered to be held in a
separate sub-account. Each time any Flag Investors Class B Shares in the
shareholder's account (other than those in the sub-account) convert to Flag
Investors Class A Shares, an equal pro rata portion of the Flag Investors
Class B Shares in the sub-account will also convert to Flag Investors Class A
Shares.

..............................................................................
SYSTEMATIC PURCHASE PLAN

The Fund has established a Systematic Purchase Plan pursuant to which
shareholders may elect to have a predetermined amount of their Flag Investors
Class A Shares redeemed, on a regular basis (for example, monthly), and the

<PAGE> 44

proceeds of such redemption used to purchase (at net asset value plus any
applicable front-end sales charge) shares of any other fund or funds in the Flag
Investors family of mutual funds selected in advance by the shareholder.
Shareholders may establish a Systematic Purchase Plan at any time by completing
a Systematic Purchase Plan Participation and Authorization Form and delivering
or mailing the completed form to Alex. Brown, a Participating Dealer or a
Shareholder Servicing Agent. For more information and to obtain a form,
shareholders should contact Alex. Brown, a Participating Dealer or a Shareholder
Servicing Agent.

...............................................................................
PURCHASES BY EXCHANGE

As permitted pursuant to any rule, regulation or order promulgated by the
SEC, shareholders of other Flag Investors funds may exchange their shares of
those funds for an equal dollar amount of Flag Investors Shares of the same
class. When a shareholder acquires Flag Investors Shares through an exchange
from shares of another fund in the Flag Investors family of funds, the Fund
will combine the period for which the original shares were held prior to the
exchange with the holding period of the shares acquired in the exchange for
purposes of determining what, if any, contingent deferred sales charge is
applicable upon redemption of the acquired shares.

Flag Investors Class A Shares may be exchanged for Class A shares of other
Flag Investors funds or for shares of Flag Investors Intermediate-Term Income
Fund, Inc. or Flag Investors Maryland Intermediate Tax-Free Income Fund, Inc.
upon payment of the applicable sales charges. In addition, Flag Investors
Class A Shares may be exchanged for Class B shares of other Flag Investors
funds at net asset value, subject to any contingent deferred sales charge.

The net asset value of shares purchased and redeemed in an exchange
request received on a Business Day will be determined on the same day,
provided that the exchange request is received prior to 11:00 a.m. (Eastern
Time). Exchange requests received after 11:00 a.m. (Eastern Time) will be
effected on the next Business Day.

The exchange privilege with respect to other Flag Investors funds may also
be exercised by telephone. (See "Telephone Transactions" below.)

The exchange privilege may be exercised only in those states where the
class of shares of such other funds may legally be sold. Investors should
receive and read the applicable prospectus prior to tendering shares for
exchange. The Fund may modify or terminate this offer of exchange at any time
on 60 days' prior written notice to shareholders.

<PAGE> 45

...............................................................................
PURCHASES THROUGH AUTOMATIC INVESTING PLAN

Shareholders may purchase Flag Investors Class A Shares regularly by means
of an Automatic Investing Plan with a pre-authorized check drawn on their
checking accounts. Under this plan, the shareholder may elect to have a
specified amount invested monthly or quarterly in Flag Investors Class A
Shares. The amount specified by the shareholder will be withdrawn from the
shareholder's checking account using the preauthorized check. This amount
will be invested in Flag Investors Class A Shares at net asset value.
Participation in the Automatic Investing Plan may be discontinued either by
the Fund or the shareholder upon 30 days' prior written notice to the other
party. A shareholder who wishes to enroll in the Automatic Investing Plan or
who wishes to obtain additional purchase information may do so by completing
the appropriate section of the Application Form attached to this Prospectus.

=============================================================================
6. How to Redeem Shares

Shareholders may redeem all or part of their Flag Investors Shares on any
Business Day by transmitting a redemption order through Alex. Brown, a
Participating Dealer, a Shareholder Servicing Agent or by regular or express
mail to the Transfer Agent. Shareholders may also redeem Flag Investors
Shares by telephone (in amounts up to $50,000). (See "Telephone Transactions"
below.) Redemption orders received after 11:00 a.m. (Eastern Time) will be
effected the following Business Day at the net asset value per share (reduced
by any applicable contingent deferred sales charge) next determined after
receipt of the order. If the shares to be redeemed were purchased by check,
the Fund reserves the right not to honor the redemption request until the
check has cleared, and redemption of such shares by wire, by check redemption
or by telephone will be restricted for a period of fifteen calendar days
unless the proceeds of redemption are used to purchase other securities
through Alex. Brown. Exchange privileges terminate upon redemption of shares.

Payment for redeemed shares will be made by check and will ordinarily be
mailed within seven days after receipt by Alex. Brown, a Participating
Dealer, a Shareholder Servicing Agent or the Transfer Agent of a duly
authorized telephone redemption request or of a redemption request fully
completed and, as applicable, accompanied by the documents described below:

<PAGE> 46

(a) A letter of instructions, specifying the shareholder's account number
with a Participating Dealer, if applicable, and the number of shares or
dollar amount of Flag Investors Class A or Class B Shares to be redeemed,
signed by all owners of the shares in the exact names in which their
account is maintained;

(b) For redemptions in excess of $50,000, a guarantee of the signature of
each registered owner by a member of the Federal Deposit Insurance
Corporation, a trust company, broker, dealer, credit union (if authorized
under state law), securities exchange or association, clearing agency or
savings association; and

Dividends payable up to the date of redemption on redeemed shares will be
paid on the next dividend payable date. If all Flag Investors Shares in an
account have been redeemed on the dividend payment date, the dividend will be
remitted in cash to the shareholder.

The Board of Directors may authorize redemption of all Flag Investors
Shares in an account which has been reduced by the shareholder to less than
$500, if the Board of Directors determines that it is necessary to reduce
disproportionately burdensome expenses of servicing small accounts or is
otherwise in the best interest of the Fund. At least 60 days' prior notice
will be given to allow a shareholder to make an additional minimum investment
set by the Board of Directors to avoid redemption.

==============================================================================
7. Telephone Transactions

Shareholders may exercise the exchange privilege with respect to other
Flag Investors funds, or redeem Flag Investors Shares of either class in
amounts up to $50,000, by notifying the Transfer Agent by telephone at (800)
553-8080 on any Business Day between the hours of 8:30 a.m. and 5:30 p.m.
(Eastern Time) or by regular or express mail to its address listed under
"Custodian, Transfer Agent, Accounting Services." Telephone transaction
privileges are automatic. However, shareholders may specifically request that
no telephone redemptions or exchanges be accepted for their accounts. This
election may be made on the Application Form or at any time thereafter by
completing and returning appropriate documentation supplied by the Transfer
Agent.

A telephone exchange or redemption placed by 11:00 a.m. (Eastern Time) is
effective that day. Telephone orders placed after 11:00 a.m. (Eastern

<PAGE> 47

Time) will be effected on the following Business Day at the net asset
value (less any applicable contingent deferred sales charge on redemptions)
next determined after receipt of the order.

The Fund and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures include requiring the investor to provide certain personal
identification information at the time an account is opened and prior to
effecting each transaction requested by telephone. In addition, all telephone
transaction requests will be recorded and investors may be required to
provide additional telecopied instructions of such transaction requests. The
Fund or the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent telephone instructions if either of them does not employ these
procedures. Neither the Fund nor the Transfer Agent will be responsible for
any loss, liability, cost or expense for following instructions received by
telephone that either of them reasonably believes to be genuine. During
periods of extreme economic or market changes, shareholders may experience
difficulty in effecting telephone transactions. In such event, requests
should be made by regular or express mail. (See "How to Invest in the Fund --
Purchases by Exchange" and "How to Redeem Shares.")

===============================================================================
8. Dividends and Taxes
...............................................................................

DIVIDENDS

All of the net income earned on the Flag Investors Shares is normally
declared as dividends daily to the respective shareholders of record of such
shares. Dividends on Flag Investors Shares are normally payable on the first
day that a purchase or exchange order is effective but not on the date that a
redemption order is effective. If an order to purchase or exchange shares is
received by Alex. Brown, a Participating Dealer, Shareholder Servicing Agent
or the Fund after 11:00 a.m. (Eastern Time), dividends on the Flag Investors
Shares will commence on the following day. Dividends are declared daily and
reinvested monthly in the form of additional full and fractional Flag
Investors Shares of the same class at net asset value, unless a shareholder
has elected on his account application to have dividends paid in cash.

<PAGE> 48

...............................................................................
TAXES

The following is only a general summary of certain federal income tax
considerations affecting the Fund and the shareholders. No attempt is made to
present a detailed explanation of the tax treatment of the Fund or the
shareholders, and the discussion herein is not intended as a substitute for
careful tax planning.

The following summary is based on current tax laws and regulations, which
may be changed by legislative, judicial or administrative action. The
Statement of Additional Information sets forth further information regarding
taxes.

The Prime Series has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended. As long
as the Prime Series qualifies for this tax treatment, it will not be required
to pay federal income taxes on amounts distributed to shareholders; but
shareholders, unless otherwise exempt, will pay taxes on the amounts so
distributed.

Distributions of net investment company taxable income (generally, net
investment income plus short-term capital gains, if any) are taxed to
shareholders as ordinary income. Although the Prime Series does not expect to
realize any long-term capital gains, any distributions of net capital gains
(the excess of net long-term capital gains over net short-term capital
losses) will be taxable to shareholders as long-term capital gains,
regardless of the length of time a shareholder has held Flag Investors
Shares. Distributions from the Fund will not be eligible for the dividends
received deduction otherwise available for corporate shareholders.

Ordinarily, shareholders will include all dividends declared by a
Portfolio in the year of payment. However, dividends declared payable to
shareholders of record in December of one year, but paid in January of the
following year, will be deemed for tax purposes to have been received by the
shareholders and paid by the Prime Series on December 31 of the year in which
the dividends were declared.

Shareholders will be advised annually as to the federal income tax status
of distributions made during the year. Shareholders are advised to consult
with their own tax advisors concerning the application of state, local or
other taxes to investments in the Prime Series, which may differ from the
federal income tax consequences described above.

<PAGE> 49

==============================================================================
9. Management of the Fund

The overall business and affairs of the Fund are managed by its Board of
Directors. The Board of Directors approves all significant agreements between
the Fund and persons or companies furnishing services to the Fund, including
the Fund's agreements with its investment advisor, sub- advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to its officers, to Alex. Brown and to Investment Company Capital
Corp. ("ICC"), the Fund's investment advisor, subject always to the
investment objective and policies of the Fund and to general supervision by
the Fund's Board of Directors. Alex. Brown and ICC also furnish or procure on
behalf of the Fund all services necessary to the proper conduct of the Fund's
business. Two Directors and all of the officers of the Fund are officers or
employees of Alex. Brown or ICC. A majority of the Board of Directors of the
Fund have no affiliation with Alex. Brown or ICC.

The Fund's Directors and officers are as follows:
<TABLE>
<CAPTION>

<S> <C> <C> <C>
*W. James Price Chairman Edward J. Veilleux Executive Vice President
*Richard T. Hale President and Director Brian C. Nelson Vice President and Secretary
James J. Cunnane Director Paul D. Corbin Vice President
N. Bruce Hannay Director M. Elliott Randolph, Jr. Vice President
John F. Kroeger Director Diana M. Ellis Treasurer
Louis E. Levy Director Monica M. Hausner Assistant Vice President
Eugene J. McDonald Director Laurie D. DePrine Assistant Secretary
*Rebecca W. Rimel Director
Harry Woolf Director

</TABLE>

- ------
* Messrs. Price and Hale are, and Ms. Rimel may be, "interested persons" of the
Fund within the meaning of Section 2(a)(19) under the Investment Company
Act of 1940.

==============================================================================
10. Investment Advisor

Investment Company Capital Corp., 135 East Baltimore Street, Baltimore,
Maryland 21202, a wholly-owned subsidiary of Alex. Brown (described below),
was organized in 1987 and acts as the Fund's investment advisor pursuant to
an Investment Advisory Agreement dated as of August 1, 1995 (the "Advisory
Agreement"). Pursuant to the terms of the Advisory Agreement, ICC supervises
and manages the Fund's operations and generally provides management and
administrative services for the Fund. In addition, ICC is responsible for
managing the Prime Series' investments. ICC is also investment advisor to,
and Alex. Brown acts as distributor for, several funds in the Flag Investors
family of funds which, as of June 30, 1995, had net assets of approximately
$ billion.

<PAGE> 50

As compensation for providing investment advisory services to the Fund,
ICC is entitled to receive a fee from the Fund, calculated daily and paid
monthly, 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. Each Series
pays its share of the fee in proportion to its relative net assets. In
addition, ICC is 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 fees were approved by the
Fund's Board of Directors on June 1, 1995, by the shareholders of the Prime
Series on July ------, 1995 and became effective on August 1, 1995. ICC may,
from time to time, voluntarily waive a portion of its advisory fee with
respect to any Series of the Fund to preserve or enhance the performance of
the Series.

Prior to August 1, 1995, ICC served as the Fund's investment advisor
pursuant to an investment advisory agreement dated as of April 4, 1990 and as
compensation for its services for the fiscal year ended March 31, 1995,
received a fee equal to .21% of the Fund's aggregate average daily net
assets.

Prior to November 1, 1994, PNC Institutional Management Corporation
("PIMC"), Bellevue Corporate Center, 400 Bellevue Parkway, Wilmington,
Delaware 19809, served as the sub-advisor to the Prime Series pursuant to a
sub-advisory agreement dated as of April 1, 1992 between ICC and PIMC. For
the period from April 1, 1994 through October 31, 1994, PIMC received a fee
from ICC which represented, on an annualized basis, % of the combined
aggregate average net assets of the Prime Series and the Tax-Free Series,
another series of the Fund for which PIMC serves as sub-advisor. In the
fiscal year ended March 31, 1995, the expenses borne by the Prime Series,
including the fees to ICC, amounted to .61% of the Prime Series' average net
assets.

ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Prime Series. (See "Custodian, Transfer
Agent, Accounting Services.")

===============================================================================
11. Distributor

Alex. Brown serves as the exclusive distributor for shares of the Fund's
three Series. Alex. Brown is an investment banking firm which offers a

<PAGE> 51

broad range of investment services to individual, institutional, corporate
and municipal clients. It is a wholly-owned subsidiary of Alex. Brown
Incorporated, which has engaged directly and through subsidiaries and
affiliates in the investment business since 1800. Alex. Brown is a member of
the New York Stock Exchange and other leading securities exchanges.
Headquartered in Baltimore, Maryland, Alex. Brown has offices throughout the
United States and, through subsidiaries, maintains offices in London,
England, Geneva, Switzerland and Tokyo, Japan.

Pursuant to Distribution Agreements and Plans of Distribution in effect
for the Flag Investors Class A and Class B Shares, the Fund pays Alex. Brown
an annual distribution fee, paid monthly, equal to .25% of the Flag Investors
Class A Shares' average daily net assets and .75% of the Flag Investors Class
B Shares' average daily net assets. Alex. Brown may use a portion of this fee
to compensate its investment representatives for opening shareholder
accounts, processing investor purchases, exchanges and redemption orders,
responding to inquiries from Fund shareholders concerning the status of their
accounts and operations of the Fund, and communicating with the Fund and the
Transfer Agent on behalf of the Fund's shareholders. Alex. Brown may also
retain Shareholder Servicing Agents, including securities dealers, banks and
other financial institutions, to provide services to shareholders. Alex.
Brown bears all expenses associated with advertisements, promotional
materials, sales literature and printing and mailing prospectuses to
prospective shareholders. Alex. Brown may retain, as profit, any amount of
the distribution fee that is not so expended. As compensation for
distributing the Flag Investors Class A Shares for the fiscal year ended
March 31, 1995, Alex. Brown received a fee equal to .25% of the Flag
Investors Class A Shares' average daily net assets.

Flag Investors Class B Shares are also subject to a shareholder servicing
fee at an annual rate of .25% of the average daily net assets of the Flag
Investors Class B Shares. This fee is used to compensate Alex. Brown,
Participating Dealers and Shareholder Servicing Agents for services provided
and expenses incurred in maintaining shareholder accounts, responding to
shareholder inquiries and providing information on their investments.

Financial institutions that act as Shareholder Servicing Agents may impose
separate fees in connection with these services, and investors should review
this Prospectus in conjunction with any such institution's fee schedule. In
addition, these financial institutions may be required to register as dealers
pursuant to state securities laws.

<PAGE> 52

==============================================================================
12. Custodian, Transfer Agent,
Accounting Services

PNC, a national banking association with offices at Airport Business
Center, 200 Stevens Drive, Lester, Pennsylvania 19113, acts as custodian for
the Fund's portfolio securities and cash. Investment Company Capital Corp.,
135 East Baltimore Street, Baltimore, Maryland 21202 (telephone: (800)
553-8080) is the Fund's transfer and dividend disbursing agent and, effective
November 10, 1994, provides accounting services to the Prime Series. As
compensation for providing accounting services to the Prime Series, ICC
receives from the Fund an annual fee equal to $13,000 plus a percentage of
the Prime Series' aggregate average daily net assets in excess of $10 million
at a maximum rate of .100% of net assets and declining at various asset
levels to a minimum of .001% on net assets of $1 billion or more. (See the
Statement of Additional Information.) ICC also serves as the Fund's
investment advisor.

==============================================================================
13. Current Yield

From time to time the Fund advertises the "yield" and "effective yield" of
a particular Series or class. Both figures are based on historical earnings
and are not intended to indicate future performance. The "yield" of a Series
or class refers to the income generated by an investment in that Series or
class over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized", that is, the income earned
in the period is assumed to be earned every seven days over a 52-week period
and is stated as a percentage of the investment. The "effective yield" is
calculated similarly but when annualized, the income earned by the investment
is assumed to be reinvested in Flag Investors Class A or Class B Shares and
thus compounded in the course of a 52-week period. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment. Yield may vary between classes as a result of
differences in expenses. The yield for Flag Investors Class A or Class B
Shares can be obtained by calling the Fund at (410) 234-3737.

==============================================================================
14. General Information
..............................................................................
DESCRIPTION OF SHARES

Shares of the Fund are divided into three series, each with a par value of
$.001 -- the Prime Series, the Treasury Series and the Tax-Free Series.

<PAGE> 53

Each of the Series currently offers one or more classes, which classes differ
from each other principally in distribution fees, in some instances
shareholder servicing fees, and the method of distribution. The institutional
class of the Prime Series is available to certain institutional investors and
the Quality Cash Reserve class of the Prime Series is available to clients of
broker-dealers which have a correspondent relationship with Alex. Brown as
stated in the prospectuses for those classes. The Fund also offers Alex.
Brown Cash Reserve Fund Prime Shares which are subject to a .25% distribution
fee. Shares of the Fund have equal rights with respect to voting, except that
the holders of shares of a particular Series or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such
Series or class. For example, holders of a particular Series will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such Series. The holders of each Series have
distinctive rights with respect to dividends and redemption which are more
fully described in this Prospectus. In the event of dissolution or
liquidation, holders of each Series will receive prorata, subject to the
rights of creditors, (a) the proceeds of the sale of the assets held in the
respective Series, less (b) the liabilities of the Fund attributable to the
respective Series or allocated among all Series based on the respective
liquidation value of each Series.

There are no preemptive or conversion rights applicable to any of the
Fund's shares. The Fund's shares, when issued, will be fully paid and non-
assessable. The Board of Directors may create additional series or classes of
Fund shares without shareholder approval.

..............................................................................
ANNUAL MEETINGS

..............................................................................
REPORTS

<PAGE> 54

..............................................................................
FUND COUNSEL

Morgan, Lewis & Bockius serves as counsel to the Fund.

..............................................................................
SHAREHOLDER INQUIRIES

Shareholders with inquiries concerning their shares should contact the
Transfer Agent at (800) 553-8080, Alex. Brown, or any Participating Dealer or
Shareholder Servicing Agent.

<PAGE> 55

FLAG INVESTORS CASH RESERVE PRIME CLASS A SHARES
NEW ACCOUNT APPLICATION
- -----------------------------------------------------------------------------

Make check payable to "Flag Investors Cash Reserve Prime
Class A Shares" and mail with this application to:

Flag Investors Funds
P.O. Box 419426
Kansas City, MO 64141-6426
Attn: Flag Investors Cash Reserve Prime Class A Shares

For assistance in completing this application please call: 1-800-553-8080
8:30 a.m. to 5:30 p.m., Eastern Time, Monday-Friday

To open an IRA account, call 1-800-767-3524 to request an IRA application

I wish to purchase Flag Investors Cash Reserve Prime Class A Shares in the
amount of $ .

The minimum initial purchase is $2,000, except that the minimum initial
purchase for shareholders of any other Flag Investors Fund or class is $500
and the minimum initial purchase for participants in the Flag Investors Cash
Reserve Prime Class A Shares' Automatic Investing Plan is $250. Each
subsequent purchase requires a $100 minimum, except that the minimum
subsequent purchase under the Flag Investors Cash Reserve Prime Class A
Shares' Automatic Investing Plan is $250 for quarterly purchases and $100 for
monthly purchases. The Fund reserves the right not to accept checks for more
than $50,000 that are not certified or bank checks.

YOUR ACCOUNT REGISTRATION (PLEASE PRINT)

Existing Account No., if any:
- -----------------------------------------------------------------------------

INDIVIDUAL OR JOINT TENANT

- -----------------------------------------------------------------------------
First Name Initial Last Name

- -----------------------------------------------------------------------------
Social Security Number

- -----------------------------------------------------------------------------
Joint Tenant Initial Last Name

Gifts to Minors

- -----------------------------------------------------------------------------
Custodian's Name (only one allowed by law)

- -----------------------------------------------------------------------------
Minor's Name (only one)

- -----------------------------------------------------------------------------
Social Security Number of Minor

under the __________________ Uniform Gifts to Minors Act
State of Residence

<PAGE> 56

Corporations, Trusts, Partnerships, etc.

- -----------------------------------------------------------------------------
Name of Corporation, Trust or Partnership

- -----------------------------------------------------------------------------
Tax ID Number Date of Trust

- -----------------------------------------------------------------------------
Name of Trustees (If to be included in the Registration)

- -----------------------------------------------------------------------------
For the Benefit of

YOUR MAILING ADDRESS
- -----------------------------------------------------------------------------
Street

- -----------------------------------------------------------------------------
City State Zip

- -----------------------------------------------------------------------------
Daytime Phone

DISTRIBUTION OPTIONS

Please check appropriate boxes. If none of the options are elected, all
distributions will be reinvested in additional shares of the Fund at no sales
charge.
Income Dividends
[ ] Reinvested in additional shares
[ ] Paid in Cash
Capital Gains
[ ] Reinvested in additional shares
[ ] Paid in Cash
- -----------------------------------------------------------------------------
<PAGE> 57

AUTOMATIC INVESTING PLAN (OPTIONAL)

[ ] I authorize you as Agent for the Automatic Investing Plan to
automatically invest $------ in Flag Investors Class A Shares for me, on a
monthly or quarterly basis, on or about the 20th of each month or if
quarterly, the 20th of January, April, July and October, and to draw a bank
draft in payment of the investment against my checking account. (Bank drafts
may be drawn on commercial banks only.)

Minimum Initial Investment: $250
Subsequent Investment (check one):
[ ] Monthly ($100 minimum)
[ ] Quarterly ($250 minimum)

- -----------------------------------------------------------------------------
Bank Name

- -----------------------------------------------------------------------------
Existing Flag Investors Fund Account No., if any

Please attach a voided check.

- -----------------------------------------------------------------------------
Depositor's Signature Date

- -----------------------------------------------------------------------------
Depositor's Signature Date
(if joint acct., both must sign)

TELEPHONE TRANSACTIONS

I understand that I will automatically have telephone redemption privileges
(for amounts up to $50,000) and telephone exchange privileges (with respect
to other Flag Investors Funds) unless I mark one or both of the boxes below.
No, I/We do not want
[ ] Telephone redemption privileges
[ ] Telephone exchange privileges

Redemptions effected by telephone will be mailed to the address of record. If
you would prefer redemptions mailed to a pre-designated bank account, please
provide the following information:

Bank: _______________________________________________________________________

Address: ____________________________________________________________________

Bank Account No: ____________________________________________________________

Bank Account Name: __________________________________________________________

- ------------------------------------------------------------------------------
<PAGE> 58

SIGNATURE AND TAXPAYER CERTIFICATION

I have received a copy of the Fund's prospectus dated August 1, 1995. Unless
the box below is checked, I certify under penalties of perjury, (1) that the
number shown on this form is my correct taxpayer identification number and
(2) that I am not subject to backup withholding as a result of a failure to
report all interest or dividends, or the Internal Revenue Service has
notified me that I am no longer subject to backup withholding. [ ] Check here
if you are subject to backup withholding.
If a non-resident alien, please indicate country of residence:________________

I acknowledge that the telephone redemption and exchange privileges are
automatic and will be effected as described in the Fund's current prospectus
(see "Telephone Transactions"). I also acknowledge that I may bear the risk
of loss in the event of fraudulent use of such privileges. If I do not want
telephone redemption or exchange privileges, I have so indicated on this
Application.

- ----------------------------------------------------------------------------
Signature Date

- ----------------------------------------------------------------------------
Signature (if joint acct., both must sign) Date

For Dealer Use Only

Dealer's Name:_______________________________Dealer Code:_____________________

Dealer's Address:____________________________Branch Code:_____________________

____________________________

Representative:______________________________Rep. No.: _______________________

<PAGE> 59

ALEX. BROWN CASH RESERVE FUND, INC.
May 31, 1995

CROSS REFERENCE SHEET RELATING TO THE INSTITUTIONAL SHARES

(The Cross Reference Sheet relating to Alex. Brown
Cash Reserve Fund, Inc. immediately precedes the Prospectus
for Alex. Brown Cash Reserve Fund, Inc.
The Cross Reference Sheet relating to
Alex. Brown Cash Reserve Fund, Inc. - Flag Investors
Cash Reserve Prime Shares immediately precedes
the Prospectus for Alex. Brown Cash Reserve Fund, Inc. -
Flag Investors Cash Reserve Prime Shares
The Cross Reference Sheet relating to the
Alex. Brown Cash Reserve Fund, Inc. - Quality Cash Reserve Prime
Shares immediately precedes the Prospectus
for the Quality Cash Reserve Prime Shares.)

Items Required by Form N-1A
- ---------------------------
<TABLE>
<CAPTION>

Registration
Part A Information Required in a Prospectus Statement Heading
- ------ -------------------------------------- ------------------
<S> <C> <C>
1. Cover Page......................................... Cover Page
2. Synopsis........................................... Fee Table
3. Condensed Financial Information.................... Financial Highlights; Performance
Information
4. General Description of Registrant.................. Investment Program; Investment
Restrictions; General Information
5. Management of the Fund ............................ Management of the Fund;
Investment Advisor; Distributor;
Custodian, Transfer Agent,
Accounting Services
6. Capital Stock and Other Securities................. Cover Page; Dividend and Taxes;
General Information
7. Purchase of Securities Being Offered............... How to Invest in the Fund; Distributor

8. Redemption or Repurchase........................... How to Redeem Shares
9. Pending Legal Proceedings.......................... *

Information Required in a Statement
Part B of Additional Information (1)
- ------ --------------------------------------
10. Cover Page......................................... Cover Page
11. Table of Contents.................................. Table of Contents
12. General Information and History.................... Introduction; General Information
about the Fund

</TABLE>

- -------------

(1) The Statement of Additional Information relates to all classes of Shares.

<PAGE> 60

<S> <C> <C>
13. Investment Objectives and Policies................. The Fund and Its Shares;
Investment Program and
Restrictions
14. Management of the Fund............................. Directors and Officers
15. Control Persons and Principal Holders
of Securities................................... Principal Holders of Securities
16. Investment Advisory and Other Services............. The Investment Advisor; Distributor;
Expenses; Transfer Agent,
Custodian, Accounting Services;
Sub-Accounting; Reports
Portfolio Transactions
17. Brokerage Allocation............................... General Information About the Fund
18. Capital Stock and Other Securities................. - The Fund and Its Shares

19. Purchase, Redemption and Pricing of Securities Share Purchases and Redemptions
Being Offered................................. Dividends and Taxes
20. Tax Status......................................... *
21. Underwriters....................................... Current Yield
22. Calculation of Performance Data.................... Financial Statements
23. Financial Statements...............................

Part C Other Information
- ------ -----------------
Information required to be included in Part C is
set forth under the appropriate Item, so
numbered, in Part C to this Registration
Statement.
</TABLE>

- -------------
* Omitted since the answer is negative or the item is not applicable.

<PAGE> 61

ALEX. BROWN CASH RESERVE FUND, INC.
INSTITUTIONAL SHARES
P. O. Box 17250
Baltimore, Maryland 21203

Alex. Brown Cash Reserve Fund, Inc. (the "Fund") is a money market fund
designed to seek as high a level of current income as is consistent with
preservation of capital and liquidity. The class of shares of the Fund
offered by this Prospectus may be purchased only by eligible institutions.
The Fund offers:
* Prime Series -- a portfolio invested in U.S. Treasury obligations,
repurchase agreements backed by such instruments, obligations issued or
guaranteed by agencies or instrumentalities of the U.S. Government,
domestic bank instruments and commercial paper of the highest quality; and
* Treasury Series -- a portfolio invested in U.S. Treasury bills, notes,
bonds and other obligations issued by the U.S. Treasury.
Other principal features of the Fund:
* No direct or indirect purchase or redemption charges;
* Dividends are declared daily and paid monthly in additional shares or
cash; and
* Wire and telephone transfers.
For current yield information and for purchase and redemption information,
call (410) 234-3737.

TABLE OF CONTENTS

PAGE

1. Table of Fees and Expenses .............. 2
2. Financial Highlights .................... 3
3. The Fund and the Institutional Shares ... 5
4. Investment Program ...................... 5
5. How to Invest in Institutional Shares of
the Fund ................................ 7
6. Dividends and Taxes ..................... 8
7. How to Redeem Shares .................... 9
8. Management of the Fund .................. 10
9. Current Yield ........................... 12
10. General Information ..................... 12

AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT ANY SERIES WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

Prospectus Dated: August 1, 1995

<PAGE> 62

1 Table of Fees and Expenses

The following table of fees and expenses is provided to assist investors
in understanding the various costs and expenses that an investor in
Institutional Shares of the Prime or Treasury Series of the Fund may bear
directly and indirectly. The percentages shown below expressing Annual Fund
Operating Expenses are restated using current rather than historical
expenses. Actual expenses may be greater or less than those shown.

Institutional Institutional
Shares Shares
Prime Treasury
Series Series
----------------- ---------------

Shareholder Transaction Expenses As a % of Average Net Assets
------------------------------- --------------------------------------
<S> <C> <C>
Maximum Sales Charge imposed on Purchase (as percentage of offering price) ........... None None
Maximum Sales Charge imposed on Reinvested Dividends (as a percentage
of offering price) ................. None None
Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable) . None None
Redemption Fees (as a percentage of amount redeemed, if applicable) .................. None None

Annual Fund Operating Expenses
- ------------------------------
Advisory Fees (See "Management of the Fund -- Investment Advisor") ................... .28% .26%
12b-1 Fees (See "Management of the Fund -- Distributor") ............................. None None
All Other Expenses ................................................................... .15% .07%
------ ------
Total Fund Operating Expenses ........................................................ .43% .33%
===== ======

</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 Institutional
Shares of either Series would have paid transaction and operating expenses at
the end of each year as follows:

Prime Treasury
Series Series
---------- ------------
1 year ............................. $ 4 $ 3
3 years ............................ $14 $11
5 years ............................ $24 $20
10 years ........................... $55 $45

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

<PAGE> 63

2 Financial Highlights

The Fund has offered the Institutional Shares since June 4, 1990. However,
the Fund has offered other classes of shares since 1981 in the case of the
Prime Series and 1982 in the case of the Treasury Series. Historical
financial information about the Fund is not fully applicable to the
Institutional Shares because the expenses paid by the Fund in the past differ
from those the Institutional Shares may incur. (See "Table of Fees and
Expenses.") Nevertheless, historical information about the Fund may be
useful to investors if they take into account the differences in expenses.
Accordingly, the financial highlights included in these tables are a part of
the Fund's financial statements for the periods indicated which have been
audited by the Fund's independent accountants. The financial statements and
financial highlights for the fiscal year ended March 31, 1995 and the report
of the Fund's independent accountants thereon are included in the Statement
of Additional Information which can be obtained at no charge by calling the
Fund at (800) 553-8080.

FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
INSTITUTIONAL PRIME SHARES
-----------------------------------------------------------------
JUNE 4, 1990*
YEAR ENDED MARCH 31, THROUGH
------------------------ MARCH 31,
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- --------------
Income from Investment
Operations:
Net investment income ......... 0.0472 0.0294 0.0327 0.0515 0.0617

Less Distributions:
Dividends from net investment
income and short-term gains . (0.0472) (0.0294) (0.0327) (0.0515) (0.0617)
----------- ----------- ----------- ----------- --------------
Net asset value at end of
period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ==============
Total Return ................... 4.82% 2.98% 3.32% 5.27% 7.70%**
Ratios to Average Net Assets:
Expenses ...................... 0.36% 0.30%* 0.31% 0.32% 0.35%**
Net investment income ......... 4.57% 2.94%* 3.24% 5.34% 7.53%**
Supplemental Data:
Net assets at end of period ... $11,904,716 $23,437,449 $28,884,078 $21,867,108 $ 117,633,558
Number of shares outstanding at
end of period ............... 11,904,663 23,437,512 28,884,132 21,867,108 117,633,558

</TABLE>

<PAGE> 64

<TABLE>
<CAPTION>
PRIME SERIES*
-----------------------------------------------------------------------------------------------
FOR THE
ELEVEN
MONTHS
YEAR ENDED MARCH 31, ENDED YEAR ENDED APRIL 30,
---------------------------------- MARCH 31, ---------------------------------------
1991 1990 1989+ 1988 1987 1986
-------------- -------------- -------------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------- -------------- -------------- ------------ ------------ ------------
Income from Investment
Operations:
Net investment income ......... 0.0734 0.0846 0.0712 0.0647 0.0572 0.0729
Less Distributions:
Dividends from net investment
income and short-term gains . (0.0734) (0.0846) (0.0712) (0.0647) (0.0572) (0.0729)
-------------- -------------- -------------- ------------ ------------ ------------
Net asset value at end of
period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ============ ============ ============
Total Return ................... 7.59% 8.80% 8.01%** 6.67% 5.87% 7.54%
Ratios to Average Net Assets:
Expenses ...................... 0.59% 0.52% 0.54%** 0.52% 0.55% 0.59%
Net investment income ......... 7.31% 8.42% 7.81%** 6.46% 5.71% 7.28%
Supplemental Data: .............
Net assets at end of period ... $1,295,888,161 $1,312,276,151 $1,084,793,157 $874,051,953 $831,784,041 $686,611,968
Number of shares outstanding at
end of period ............... 1,295,888,161 1,312,272,415 1,084,789,421 874,047,336 831,779,424 686,611,968

</TABLE>

- ------
*The Institutional Prime Shares commenced operations on June 4, 1990. Per
share data under the heading Prime Series does not include data for the
Institutional Prime Shares.
**Annualized.
+The Fund's fiscal year-end was changed to March 31.

<PAGE> 65
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>

INSTITUTIONAL TREASURY SHARES
-----------------------------------------------------------------------------
JUNE 4, 1990*
YEAR ENDED MARCH 31, THROUGH
----------------------------------------------------------- MARCH 31,
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- -------------
Income from Investment
Operations:
Net investment income ......... 0.0438 0.0282 0.0314 0.0504 0.0590
Less Distributions: ............
Dividends from net investment
income and short-term gains . (0.0438) (0.0282) (0.0314) (0.0504) (0.0590)
----------- ----------- ----------- ----------- -------------
Net asset value at end of
period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== =============
Total Return ................... 4.47% 2.86% 3.19% 5.17% 7.36%**
Ratios to Average Net Assets:
Expenses ...................... 0.30%/1 0.27%/1 0.26%/1 0.27% 0.29%**
Net investment income ......... 4.15%/2 2.82%/2 3.16%/2 4.90% 7.02%**
Supplemental Data: .............
Net assets at end of period ... $14,051,995 $39,692,848 $60,146,987 $63,834,323 $58,017,844
Number of shares outstanding at
end of period ............... 14,046,467 39,688,259 60,140,874 63,834,323 58,017,844

</TABLE>
<TABLE>
<CAPTION>
TREASURY SERIES*
-----------------------------------------------------------------------------------------------
FOR THE
ELEVEN
MONTHS
YEAR ENDED MARCH 31, ENDED YEAR ENDED APRIL 30,
-------------------------------- MARCH 31, --------------------------------------------
1991 1990 1989+ 1988 1987 1986
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------ ------------
Income from Investment
Operations:
Net investment income ......... 0.0698 0.0829 0.0696 0.0617 0.0578 0.0717
Less Distributions:
Dividends from net investment
income and short-term gains . (0.0698) (0.0829) (0.0696) (0.0617) (0.0578) (0.0717)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value at end of
period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============ ============ ============
Total Return ................... 7.21% 8.61% 7.82%** 6.35% 5.94% 7.41%
Ratios to Average Net Assets:
Expenses ...................... 0.56% 0.41% 0.44%** 0.45% 0.45% 0.47%
Net investment income ......... 6.82% 8.25% 7.50%** 6.17% 5.74% 7.17%
Supplemental Data:
Net assets at end of period ... $716,551,599 $272,467,125 $235,086,589 $280,628,025 $251,097,755 $160,449,398
Number of shares outstanding at
end of period ............... 716,551,599 272,509,276 235,197,074 280,519,083 251,101,013 160,449,398
</TABLE>
- ------

* The Institutional Treasury Shares commenced operations on June 4, 1990.
Per Share data under the heading Treasury Series does not include data for
the Institutional Shares.
** Annualized.
+ The Fund's fiscal year-end was changed to March 31.
1 Ratio of expenses to average net assets prior to partial fees waived was
0.31%, 0.29% and 0.27% for the years ended March 31, 1995, 1994 and 1993,
respectively.
2 Ratio of net investment income to average net assets prior to partial fees
waived was 4.14%, 2.80% and 3.15% for the years ended March 31, 1995, 1994,
and 1993, respectively.

<PAGE> 66

3 The Fund and The Institutional Shares

The Fund is a money market fund which seeks a high level of current income
consistent with preservation of capital and liquidity. The Fund has two
separate portfolios that offer Institutional Shares: the Prime Series and the
Treasury Series (the "Series"). This Prospectus relates exclusively to one of
four classes of shares currently offered by the Prime Series and one of two
classes of shares currently offered by the Treasury Series. The classes of
shares of the Fund offered pursuant to this Prospectus are designed primarily
for institutions as an economical and convenient means for the investment of
short-term funds which they hold for their own account or hold or manage for
others. Such institutions include banks and trust companies, savings
institutions, corporations, insurance companies, investment counsellors,
pension funds, employee benefit plans, trusts, estates and educational,
religious and charitable institutions. The other classes of shares of the
Fund are offered to both individual and institutional investors.

All classes of each Series share a common investment objective, portfolio and
advisory fee, but each class has different expenses, shareholder
qualifications and methods of distribution. Expenses of the Fund which are
not directly attributable to the operations of any class or Series are
prorated among all classes of the Fund based upon the relative net assets of
each class. Expenses of the Fund which are not directly attributable to a
specific class but are directly attributable to a specific Series are
prorated among all the classes of such Series based upon the relative net
assets of each such class. Expenses of the Fund which are directly
attributable to a class are charged against the income available for
distribution as dividends to such class.

4 Investment Program

Investment Objective

Portfolio Investments

The Prime Series and the Treasury Series may invest in U.S. Treasury
obligations consisting of marketable securities and instruments issued by the
U.S. Treasury, including bills, notes, bonds and other obligations. It is
management's intention to have 100% of the Treasury Series' assets invested
in such instruments at all times. In unusual circumstances, up to 10% of the
Treasury Series' assets may be invested in repurchase agreements
collateralized by U.S. Treasury obligations. Such investments will be made
only when it is necessary to ensure that the Treasury Series is fully
invested while satisfying its liquidity requirements.

In addition to U.S. Treasury obligations, the Prime Series may invest in
obligations issued or guaranteed as to principal and interest by agencies or
instrumentalities of the U.S. Government. Some of these obligations are
backed by the full faith and credit of the U.S. Government (e.g., the
Government National Mortgage Association), others are supported by the
issuing agency's right to borrow from the U.S. Treasury (e.g., securities of
Federal Home Loan Banks) and still others are backed only by the credit of
the instrumentality (e.g., the Federal National Mortgage Association).

The Prime Series may also invest in a broad range of bank and commercial
obligations that the investment advisor, under guidelines established by the
Board of Directors, believes present minimal credit risk and that satisfy the
criteria for such obligations described below:

<PAGE> 67

Bank Instruments consisting mainly of certificates of deposit and bankers'
acceptances that (i) are issued by U.S. banks which satisfy applicable quality
standards; or (ii) are fully insured as to principal and interest by the Federal
Deposit Insurance Corporation.

Commercial Instruments consisting of commercial paper and variable amount
master demand notes. Eligible commercial paper is limited to short-term
unsecured promissory notes issued by corporations which (i) are rated Prime-1
by Moody's Investors Service, Inc. ("Moody's") or A-1+ or A-1 by Standard &
Poor's Ratings Group ("S&P"); or (ii) if not rated, are of comparable quality
to Prime-1 or A-1+ and A-1 instruments as determined by the Fund's investment
advisor; and (iii) are otherwise "Eligible Securities" under Rule 2a-7 of the
Investment Company Act of 1940. Variable amount master demand notes are
unsecured demand notes that permit investment of fluctuating amounts of money
at variable rates of interest pursuant to arrangements with issuers who meet
the foregoing quality criteria. The interest rate on a variable amount master
demand note is periodically redetermined according to a prescribed formula.
Although there is no secondary market in master demand notes, the payee may
demand payment of the principal amount of the note on relatively short
notice. All master demand notes acquired by the Prime Series will be payable
within a prescribed notice period not to exceed seven days. (See the
Statement of Additional Information for information with respect to
commercial paper and bond ratings.)

The Fund may enter into the following arrangements with respect to both
Series:

Repurchase Agreements under which the purchaser (for example, a Series of
the Fund) acquires ownership of an obligation and the seller agrees, at the
time of the sale, to repurchase the obligation at a mutually agreed upon time
and price, thereby determining the yield during the purchaser's holding
period. Although the underlying collateral for repurchase agreements may have
maturities exceeding one year, repurchase agreements entered into by a Series
of the Fund will not have a stated maturity in excess of seven days from the
date of purchase. If the seller of a repurchase agreement fails to repurchase
the obligation in accordance with the terms of the agreement, the Series of
the Fund that entered into the repurchase agreement may incur a loss to the
extent that the proceeds realized on the sale of the underlying obligation
are less than the repurchase price. In the event of the insolvency of a
seller that defaults on its repurchase obligation, disposition of the
securities underlying the repurchase agreement could be delayed pending court
or administrative action.

The Prime Series may also enter into the following arrangements:

Reverse Repurchase Agreements involving the sale of money market instruments
held by the Prime Series with an agreement to repurchase the instruments at an
agreed upon price and date. The Prime Series will employ reverse repurchase
agreements only when necessary to meet unanticipated net redemptions so as to
avoid liquidating other money market instruments during unfavorable market
conditions. The Prime Series will utilize reverse repurchase agreements when the
interest income to be earned from portfolio investments which would otherwise

6
<PAGE> 68

have to be liquidated to meet redemptions is greater than the interest expense
incurred as a result of the reverse repurchase transactions. Reverse repurchase
agreements involve the risk that the market value of securities retained by the
Prime Series in lieu of liquidation may decline below the repurchase price of
the securities sold by the Prime Series which it is obligated to repurchase.

Investment Restrictions

The Fund's investment program for both Series is subject to a number of
investment restrictions which reflect self-imposed standards as well as
federal and state regulatory limitations, the most significant of which are
set forth below. The Fund will not:

(1) purchase securities of any one issuer (other than obligations of the
U.S. Government, its agencies or instrumentalities if immediately after such
purchase more than 5% of the value of a Series' assets would be invested in
such issuer;

(2) with respect to the Prime Series only, purchase any commercial paper or
variable rate demand notes which would cause more than 25% of the value of
the Prime Series' total assets at the time of such purchase to be invested in
the securities of one or more issuers conducting their principal business
activities in the same industry;

(3) borrow money or issue senior securities, except that (i) either Series
may borrow money from banks for temporary purposes in amounts up to 10% of
the value of such Series' total assets at the time of borrowing, provided
that any such borrowings by such Series will be repaid prior to the purchase
of additional portfolio securities by such Series, (ii) the Prime Series may
enter into reverse repurchase agreements in accordance with its investment
program and (iii) either Series of the Fund may enter into commitments to
purchase securities in accordance with the investment program of such Series,
which commitments may be considered the issuance of senior securities; or

(4) lend money or securities except to the extent that a Series' investments
may be considered loans.

The Fund's investment objective as described under "Investment Objective" and
the foregoing restrictions are matters of fundamental policy and may not be
changed without the affirmative vote of a majority of the outstanding shares
of the Series affected. The Treasury Series has a policy, which may be
changed by the Fund's Board of Directors and without shareholder approval, of
limiting investments in U.S. Government obligations to U.S. Treasury
obligations.

5. How to Invest in Institutional Shares of the Fund

General Information on Purchases

Institutions (e.g., banks and trust companies, savings institutions,
corporations, insurance companies, investment counsellors, pension funds,
employee benefit plans, trusts, estates and educational, religious and
charitable institutions) may purchase Institutional Shares of both Series
through Alex. Brown & Sons Incorporated ("Alex. Brown"). Institutions
interested in establishing an account with the Fund should contact Alex.
Brown for details at (410) 727-1700.

The minimum initial investment in Institutional Shares of either Series of the
Fund is $1,000,000; there is no minimum for subsequent investments in the same
Series. Orders for the purchase of Institutional Shares are accepted only on a
"business day of the Fund" which means any day on which PNC Bank, National
Association ("PNC"), the Fund's custodian, and the New York Stock Exchange are
open for business. It is expected that during the next twelve months, PNC and/or

<PAGE> 69

the New York Stock Exchange will be closed on Saturdays and Sundays and on New
Year's Day, Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving Day and Christmas Day.

Orders to purchase Institutional Shares are executed at the net asset value
of Fund shares as next determined after the order is effective. Because the
Fund uses the amortized cost method of valuing the portfolio securities of
each Series and rounds the per share net asset value of shares of each
Series, it is anticipated that the net asset value of each Series will remain
constant at $1.00 per share, but there can be no assurance that this
objective can be met.

The net asset value of all shares of each of the Fund's Series is determined
once daily as of 12:00 noon (Eastern Time) on each business day of the Fund.
An order placed by telephone in the manner described below before noon will
be effective the same day if federal funds are wired to the Fund's custodian
before the close of business on that day. Wire orders are effective as of the
next net asset value determination after receipt of the wire. Share purchases
effected before 11:00 a.m. (Eastern Time) begin to earn dividends on the same
business day. Share purchases received after 11:00 a.m. (Eastern Time) begin
to earn dividends on the following day.

Institutions may place orders to purchase Institutional Shares either by
calling Alex. Brown at (410) 727-1700 and then wiring federal funds, or by
wiring federal funds with the necessary instructions as described below. As
noted, a telephone order placed by 12:00 noon (Eastern Time) is effective
that day if federal funds are received by the close of business. A wire order
is effective the same day if the wire is received before noon or the
following day if the wire order is received after noon. A shareholder who
places an order by telephone will be asked to furnish:

--The shareholder's Fund account number

--The amount to be invested

--The Series selected for investment (Prime Series or Treasury Series)

Federal Funds should be wired to:

PNC Bank
a/c Alex. Brown & Sons Incorporated
Acct. #5918197
Philadelphia, PA 19103

referring in the wire to:

--Alex. Brown Cash Reserve Fund, Inc. (Institutional Shares)

--The Fund account number (and, if available, the shareholder account
number)

--The amount to be invested

--Either the Prime Series or the Treasury Series

Other Information

Periodic statements of account from Alex. Brown will reflect all dividends,
purchases and redemptions of Institutional Shares. The Fund and Alex. Brown
have arranged for PNC to offer sub-accounting services to Fund shareholders
and maintain information with respect to underlying share owners.

The Fund reserves the right to reject any order for the purchase of
Institutional Shares.

6 Dividends and Taxes

Dividends

All of the net income earned on the Prime Series and the Treasury Series is
normally declared as dividends daily to the respective shareholders of record of
each Series. Dividends on both Series are normally payable on the first day that

<PAGE> 70

a share purchase order is effective but not on the date that a redemption order
is effective. If a purchase order is received by Alex. Brown after 11:00 a.m.
(Eastern Time), the shareholder will receive dividends beginning on the
following day. Dividends are declared daily and reinvested monthly in the form
of additional full and fractional shares of the same Series at net asset value,
unless the shareholder has elected to have dividends paid in cash.

Taxes

The following summary is based on current tax laws and regulations, which may
be changed by legislative, judicial or administrative action.

Each Series has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
As long as a Series qualifies for this tax treatment, it will not be required
to pay federal income taxes on amounts distributed to shareholders; but
shareholders, unless otherwise exempt, will pay taxes on the amount so
distributed.

Distributions of net investment company taxable income (generally, net
investment income plus the excess, if any, of net short-term capital gains
over net long-term capital losses) are taxed to shareholders as ordinary
income. Distributions will not be eligible for the dividends received
deduction otherwise available to corporate shareholders. Although neither
Series expects to realize any long-term capital gains, any distributions of
net capital gains (the excess of net long-term capital gains over net
short-term capital losses) will be taxable to shareholders as long-term
capital gains, regardless of the length of time a shareholder has held the
shares.

Under certain circumstances, shareholders of the Treasury Series may not be
required to pay state income tax on dividends to the extent such dividends
are derived from interest on U.S. Treasury obligations. State laws vary and
investors are encouraged to consult with their tax advisors on this issue.

Ordinarily, shareholders will include in their taxable income all dividends
declared by a Series in the year of payment. However, dividends declared
payable to shareholders of record in December of one year, but paid in
January of the following year, will be deemed for tax purposes to have been
received by the shareholders and paid by a Series in the year in which the
dividends were declared.

7 How to Redeem Shares

Shareholders may redeem all or part of their Institutional Shares of either
Series on any business day of the Fund by transmitting a redemption order to
Alex. Brown by either of the methods outlined below. A redemption request is
effected at the net asset value next determined after tender of Institutional
Shares for redemption.

Shareholders may submit redemption orders by calling Alex. Brown at (410)
727-1700. Telephone redemption privileges are automatic. Both Alex. Brown and
the Fund will employ reasonable procedures to confirm that instructions

<PAGE> 71

communicated by telephone are genuine. These procedures include requiring the
investor to provide certain personal identification information at the time the
account is opened and prior to effecting each transaction requested by
telephone. In addition, investors may be required to provide additional
telecopied instructions of redemption requests. The Fund or Alex. Brown may be
liable for any losses due to unauthorized or fraudulent telephone instructions
if either of them does not employ these procedures. Neither the Fund nor Alex.
Brown will be responsible for any loss, liability, cost or expense incurred in
following instructions received by telephone that either reasonably believes to
be genuine. During periods of extreme economic or market changes, shareholders
may experience difficulty in effecting telephone redemptions. In such event,
requests should be made by regular or express mail to Alex. Brown, 135 East
Baltimore Street, Baltimore, Maryland 21202 or to the Fund's transfer agent at
its address listed under "General Information -- Custodian, Transfer Agent,
Accounting Services."

A shareholder may request that payment be made by wire transfer of federal
funds. In such case, if the redemption order is received by the Fund prior to
11:00 a.m. (Eastern Time) on a business day of the Fund, Institutional Shares
will be redeemed and payment will be made in federal funds wired to the
shareholder's bank on the same day. If the redemption order is received after
11:00 a.m. (Eastern Time), shares will be redeemed at the next computed net
asset value and payment will be made in federal funds wired to the
shareholder's bank on the next business day of the Fund. If a shareholder
requests payment of redemption proceeds by check, such payment will be sent
promptly and in any event within seven business days.

Dividends payable up to the date of redemption on redeemed shares will be
paid on the next dividend payment date. If all of the Institutional Shares of
a Series of the Fund in an Alex. Brown account have been redeemed on the
dividend payment date, the dividend will be paid in cash to the shareholder.

8 Management of the Fund

Board of Directors

The overall business and affairs of the Fund are managed by its Board of
Directors. The Board of Directors approves all significant agreements between
the Fund and persons or companies furnishing services to the Fund, including
the Fund's agreements with its investment advisor, sub-advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to its officers, to Alex. Brown and to Investment Company Capital
Corp. ("ICC"), the Fund's investment advisor subject to the investment
objectives and policies of the Fund and to general supervision of the Fund's
Board of Directors. Alex. Brown and ICC also furnish or procure on behalf of
the Prime and Treasury Series all services necessary to the proper conduct of
such Series' business. Two Directors and all of the officers of the Fund are
officers or employees of Alex. Brown or ICC. A majority of the Board of
Directors of the Fund have no affiliation with Alex. Brown or ICC.

Investment Advisor

Investment Company Capital Corp., 135 East Baltimore Street, Baltimore,
Maryland 21202, a wholly-owned subsidiary of Alex. Brown (described below),
was organized in 1987 and acts as the Fund's investment advisor pursuant to
separate Investment Advisory Agreements for each Series, dated as of August
1, 1995 (the "Advisory Agreements"). Pursuant to the terms of the Advisory
Agreements, ICC supervises and manages the Fund's operations and generally
provides management and administrative services for the Fund. ICC is also
investment advisor to, and Alex. Brown acts as distributor for, several funds
in the Flag Investors family of funds which, as of June 30, 1995, had net
assets of approximately $------ billion.

<PAGE> 72

As compensation for providing investment advisory services to the Fund, ICC
is entitled to receive a fee from the Fund, calculated daily and paid
monthly, 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. Each Series
pays its share of the foregoing fee in proportion to its relative net assets.
In addition, ICC is 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 fees were approved by the
Fund's Board of Directors on June 1, 1995, by the shareholders of the Prime
Series and the Treasury Series, respectively, on July ------, 1995 and became
effective on August 1, 1995. ICC may, from time to time, voluntarily waive a
portion of its advisory fee with respect to any Series of the Fund to
preserve or enhance the performance of the Series.

Prior to August 1, 1995, ICC served as the Fund's investment advisor pursuant
to an investment advisory agreement dated as of April 4, 1990. As
compensation for investment advisory services for the fiscal year ended March
31, 1995, ICC received a fee from the Fund (net of fee waivers for the
Treasury Series) which represented .21% of the Fund's average net assets.

ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Treasury Series. (See "Custodian,
Transfer Agent, Accounting Services.")

Prior to November 1, 1994, PNC Institutional Management Corporation ("PIMC")
Bellevue Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809,
served as sub-advisor to the Prime Series. As compensation for its services
for the fiscal period ended March 31, 1995, PIMC received a fee from ICC,
calculated daily and paid monthly equal to . % (annualized) of the combined
aggregate average net assets of the Prime Series and the Tax-Free Series.

During the fiscal year ended March 31, 1995, the expenses borne by the Prime
Series and the Treasury Series, respectively, for the Institutional Shares,
including the fees to ICC, amounted to .36% of the Prime Series' average net
assets and .35% (net of fee waivers) of the Treasury Series' average net
assets.

Distributor

The Fund has entered into a distribution agreement dated as of April 4, 1990
(the "Distribution Agreement") with Alex. Brown, 135 East Baltimore Street,
Baltimore, Maryland 21202. Alex. Brown is an investment banking firm which
offers a broad range of investment services to individual, institutional,
corporate and municipal clients. It is a wholly-owned subsidiary of Alex.
Brown Incorporated, which has engaged directly and through subsidiaries and
affiliates in the investment business since 1800. Alex Brown is a member of
the New York Stock Exchange and other leading securities exchanges.
Headquartered in Baltimore, Maryland, Alex. Brown has offices throughout the
United States and, through subsidiaries, maintains offices in London,
England, Geneva, Switzerland and Tokyo, Japan. Alex. Brown serves as the
exclusive distributor for shares of the Fund's three Series. Alex. Brown
receives no compensation for its services with respect to the Institutional
Shares.

Alex. Brown bears all expenses associated with advertisements, promotional
materials, sales literature and printing and mailing prospectuses to other
than Fund shareholders.

<PAGE> 73

9 Current Yield

From time to time the Fund advertises the "yield" and "effective yield" of
the Institutional Shares of either Series. Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Series refers to the income generated by an investment in the
Series over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized," that is, the amount of
income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly, but when
annualized, the income earned by an investment in the Series is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment.

10 General Information

Description of Shares

Shares of the Fund are divided into three series, each with a par value of
$.001 -- the Prime Series, the Treasury Series and the Tax-Free Series. Each
of the Series currently issues one or more classes, which classes differ from
each other principally in distribution fees, in some instances shareholder
servicing fees, and the method of distribution. The Quality Cash Reserve
class of the Prime Series is available to clients of broker-dealers which
have a correspondent relationship with Alex. Brown as stated in the
prospectus for that class. The Fund also offers Alex. Brown Cash Reserve Fund
Prime Shares, Alex. Brown Cash Reserve Fund Treasury Shares and Flag
Investors Cash Reserve Prime Class A Shares, which are subject to
distribution fees of .25%. The Fund's Flag Investors Cash Reserve Prime Class
B Shares are subject to a contingent deferred sales charge and are available
only through the exchange of Class B Shares of other funds in the Flag
Investors family of funds. Shares of the Fund have equal rights with respect
to voting, except that the holders of shares of a particular Series or class
will have the exclusive right to vote on matters affecting only the rights of
the holders of such Series or class. For example, holders of a particular
Series or class will have the exclusive right to vote on any investment
advisory agreement or investment restriction that relates only to such Series
or class. The holders of each Series have distinctive rights with respect to
dividends and redemption which are more fully described in this Prospectus.
In the event of dissolution or liquidation, holders of each Series will
receive prorata, subject to the rights of creditors, (a) the proceeds of the
sale of the assets held in the respective Series less (b) the liabilities of
the Fund attributable to the respective Series or allocated among all Series
based on the respective liquidation value of each Series. There will not
normally be annual shareholders' meetings. Shareholders may remove directors
from office by votes cast at a meeting of shareholders or by written consent.
A meeting of shareholders may be called at the request of the holders of 10%
or more of the Fund's outstanding shares.

Custodian, Transfer Agent, Accounting Services

PNC, a national banking association with offices at Airport Business Center, 200
Stevens Drive, Lester, Pennsylvania 19113, acts as custodian for the Fund's
portfolio securities and cash. Investment Company Capital Corp., 135 East
Baltimore Street, Baltimore, Maryland 21202 (telephone: (800) 553-8080), the
Fund's investment advisor, also serves as the Fund's transfer and dividend

<PAGE> 74

disbursing agent and provides accounting services to the Treasury Series and,
effective November 10, 1994, to the Prime Series. As compensation for providing
accounting services to the Prime Series and the Treasury Series, ICC receives
from the Fund an annual fee for each Series equal to $13,000, plus a percentage
of the Series' average daily net assets in excess of $10 million at a maximum
rate of .100% of net assets and declining at various asset levels to a minimum
rate of .001% on net assets of $1 billion or more. (See the Statement of
Additional Information.)

Annual Meetings

Reports

The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a list of
investments held in the Fund's portfolio and financial statements. The annual
statements are audited by the Fund's independent accountants, Coopers &
Lybrand L.L.P.

Fund Counsel

Morgan, Lewis & Bockius serves as counsel to the Fund.

Shareholder Inquiries

Shareholders with inquiries concerning their shares should contact the Fund
at (800) 553-8080.

<PAGE> 75

(THIS PAGE INTENTIONALLY LEFT BLANK)

<PAGE> 76

ALEX. BROWN CASH RESERVE FUND, INC.
BOARD OF DIRECTORS

W. JAMES PRICE, Chairman
Managing Director Emeritus,
Alex. Brown & Sons Incorporated
Baltimore, Maryland

RICHARD T. HALE
Managing Director,
Alex. Brown & Sons Incorporated
Baltimore, Maryland

JAMES J. CUNNANE
Managing Director,
CBC Capital
264 Carlyle Lake Drive
St. Louis, Missouri 63141

N. BRUCE HANNAY
Business Consultant
Port Ludlow, Washington

JOHN F. KROEGER
Formerly Consultant, Wendell & Stockel
Associates, Inc.
Summit, New Jersey

LOUIS E. LEVY
Formerly Partner,
KPMG Peat Marwick
New York, New York

EUGENE J. McDONALD
President and CEO,
Duke Management Co.
Executive Vice President,
Duke University
Durham, North Carolina

REBECCA W. RIMEL

HARRY WOOLF
Professor, Institute for
Advanced Study
Princeton, New Jersey

- -----------------------------------------------------------------------------

OFFICERS

W. JAMES PRICE
Chairman

RICHARD T. HALE
President

EDWARD J. VEILLEUX
Executive Vice President

M. ELLIOTT RANDOLPH, JR.
Vice President

PAUL D. CORBIN
Vice President

BRIAN C. NELSON
Vice President
& Secretary

DIANA M. ELLIS
Treasurer

MONICA M. HAUSNER
Assistant Vice President

LAURIE D. DEPRINE
Assistant Secretary

- -----------------------------------------------------------------------------
<PAGE> 77

Distributor
ALEX. BROWN & SONS
INCORPORATED
135 East Baltimore Street
Baltimore, Maryland 21202
(410) 727-1700

Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
135 East Baltimore Street
Baltimore, Maryland 21202

Custodian
PNC BANK
Airport Business Center
Lester, Pennsylvania 19113

Independent Accountants
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103

Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
135 East Baltimore Street
Baltimore, Maryland 21202
(800) 553-8080

<PAGE> 78

- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------

Printed in U.S.A.

Alex. Brown
Cash Reserve Fund, Inc.
Institutional Shares
P.O. Box 17250
Baltimore, Maryland 21203

Third Class Mail
U.S. POSTAGE
PAID
Baltimore, Md.
Permit No. 8614

ALEX.
BROWN
CASH
RESERVE
FUND, INC.
INSTITUTIONAL
SHARES

An open-end, diversified
fund for institutions designed
as a convenient means to earn
a high level of current income
from two diversified, professionally
managed portfolios of high quality
money market instruments while
preserving principal and liquidity.

August 1, 1995

Distributed by:
ALEX. BROWN & SONS
INCORPORATED
PROSPECTUS

<PAGE> 79

ALEX. BROWN CASH RESERVE FUND, INC.
May 31, 1995

CROSS REFERENCE SHEET RELATING TO QUALITY CASH RESERVE PRIME SHARES

(The Cross Reference Sheet relating to
Alex. Brown Cash Reserve Fund, Inc. immediately
precedes the Prospectus for Alex. Brown Cash Reserve Fund, Inc.
The Cross Reference Sheet relating to
Alex. Brown Cash Reserve Fund, Inc. - Flag Investors Cash
Reserve Prime Shares immediately precedes the Prospectus for Flag
Investors Cash Reserve Prime Shares.
The Cross Reference Sheet relating to
Alex. Brown Cash Reserve Fund, Inc. -
Institutional Shares immediately precedes the Prospectus
for Alex. Brown Cash Reserve Fund, Inc. - Institutional Shares.)

Items Required by Form N-1A
- ---------------------------
<TABLE>
<CAPTION>

Registration
Part A Information Required in a Prospectus Statement Heading
- ------ ------------------------------------ -----------------
<S> <C> <C>
1. Cover Page......................................... Cover Page
2. Synopsis........................................... Fee Table
3. Condensed Financial Information.................... Financial Highlights; Performance
Information
4. General Description of Registrant.................. Investment Program; Investment
Restrictions; General Information
5. Management of the Fund ............................ Management of the Fund;
Investment Advisor; Distributor;
Custodian, Transfer Agent,
Accounting Services
6. Capital Stock and Other Securities................. Cover Page; Dividend and Taxes;
General Information
7. Purchase of Securities Being Offered............... How to Invest in the Fund; Distributor

8. Redemption or Repurchase........................... How to Redeem Shares
9. Pending Legal Proceedings.......................... *

Information Required in a Statement
Part B of Additional Information (1)
- ------ -----------------------------------
10. Cover Page......................................... Cover Page
11. Table of Contents.................................. Table of Contents
12. General Information and History.................... Introduction; General Information
about the Fund
</TABLE>
- -------------
(1) The Statement of Additional Information relates to all classes of Shares.

<PAGE> 80

Part C Other Information
- ------ ------------------
Information required to be included in Part C is
set forth under the appropriate Item, so
numbered, in Part C to this Registration Statement.

</TABLE>
- -------------
* Omitted since the answer is negative or the item is not applicable.
<PAGE> 81

QUALITY CASH RESERVE PRIME SHARES
(A Class of Alex. Brown Cash Reserve Fund, Inc.)
P.O. Box 17250
Baltimore, Maryland, 21203

Alex. Brown Cash Reserve Fund, Inc. (the "Fund") is a money market fund
designed to seek as high a level of current income as is consistent with
preservation of capital and liquidity. This Prospectus relates to the Quality
Cash Reserve Prime Shares (the "Shares"). Shares are available exclusively
through broker-dealers that provide certain shareholder services
("Participating Dealers"). These include broker-dealers that have
correspondent relationships with Alex. Brown & Sons Incorporated ("Alex.
Brown"), the Fund's distributor.

Other principal features of the Shares:

o Shares are sold without purchase or redemption charges;
o Dividends are declared daily and paid monthly in additional shares or
cash; and
o Wire and telephone transfers, free check redemptions and other convenient
cash management services are available.

For current yield information and for purchase and redemption information, call
any Participating Dealer.

The Fund's Statement of Additional Information and separate prospectuses for the
other Series and classes of the Fund may be obtained without charge from Alex.
Brown or any securities dealer that has entered into a dealer agreement with
Alex. Brown with respect to such other Series or classes.

THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT INVESTORS SHOULD KNOW ABOUT
THE FUND PRIOR TO INVESTING AND SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE. A STATEMENT OF ADDITIONAL INFORMATION DATED AUGUST 1, 1995 HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS HEREBY INCORPORATED BY
REFERENCE. IT IS AVAILABLE UPON REQUEST AND WITHOUT CHARGE BY CALLING THE FUND
AT (800) 553-8080.

TABLE OF CONTENTS

PAGE

1. Table of Fees and Expenses .................. 2
2. Financial Highlights ........................ 3
3. The Fund and the Quality Cash Reserve Prime
Shares ...................................... 4
4. Investment Program .......................... 4
5. How to Invest in the Quality Cash Reserve
Prime Shares ............................... 6
6. How to Redeem Shares ........................ 7
7. Dividends and Taxes ......................... 8
8. Management of the Fund ...................... 9
9. Current Yield ............................... 10
10. General Information ......................... 11

AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE PRIME SERIES WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

Prospectus Dated: August 1, 1995

<PAGE> 82

1 TABLE OF FEES AND EXPENSES

The following table of fees and expenses is provided to assist investors in
understanding the various costs and expenses that an investor in the Quality
Cash Reserve Prime Shares may bear directly or indirectly. The percentages shown
below expressing Annual Fund Operating Expenses are restated using current
rather than historical expenses. Actual expenses may be greater or less than
those shown. Due to the continuous nature of Rule 12b-1 fees, long-term
shareholders of the Fund may pay more than the equivalent of the maximum
front-end sales charges otherwise permitted by the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.

Shareholder Transaction Expenses
Sales Charge Imposed on Purchases .................................. None
Sales Charge Imposed on Reinvested Dividends ....................... None
Deferred Sales Charge .............................................. None
Redemption Fees .................................................... None

Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees .................................................... .28%
12b-1 Fees ......................................................... .60%
Other Expenses ..................................................... .15%
-----
Total Fund Operating Expenses ...................................... 1.03%
=====

EXAMPLE OF QUALITY CASH RESERVE PRIME SHARES EXPENSES

The following is an illustration of the total transaction and operating expenses
that an investor in Quality Cash Reserve Prime Shares would bear over different
periods of time, assuming a hypothetical investment of $1,000, a 5% annual
return on the investment, and redemption at the end of the period:

1 year ................................................................ $ 11
3 years ................................................................ $ 33
5 years ................................................................ $ 58
10 years................................................................ $133

This Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.

<PAGE> 83

2 FINANCIAL HIGHLIGHTS

The Fund has offered the Quality Cash Reserve Prime Shares since May 6, 1991.
However, the Fund has offered other classes of the Prime Series since 1981.
Historical financial information about the Fund is not fully applicable to the
Quality Cash Reserve Prime Shares because the expenses paid by the Fund in the
past may differ from those the Quality Cash Reserve Prime Shares may incur. (See
"Table of Fees and Expenses.") Nevertheless, historical information about the
Fund may be useful to investors if they take into account the differences in
expenses. Accordingly, the financial highlights included in this table are a
part of the Fund's financial statements for the periods indicated which have
been audited by the Fund's independent accountants. The financial statements and
financial highlights for the fiscal year ended March 31, 1995 and the report of
the Fund's independent accountants thereon are included in the Statement of
Additional Information which can be obtained at no charge by calling the Fund at
(800) 553-8080.

Financial Highlights
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
Prime Series
---------------
Quality Cash Reserve Prime Shares
------------------------------------------------------------
Year Ended March 31, May 6, 1991
----------------------------------------- through
1995 1994 1993 March 31, 1992*
----------- ----------- ------------ ---------------
<S> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at beginning
of period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ------------ -----------
Income from Investment
Operations:
Net investment income ...... 0.0402 0.0218 0.0253 0.0399
Less Distributions:
Dividends from net
investment income and
short-term gains ......... (0.0402) (0.0218) (0.0253) (0.0399)
----------- ----------- ------------ -----------
Net asset value at end of
period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== ============ ===========
Total Return ............... 4.09% 2.20% 2.53% 4.30%***
Ratios to Average Net Assets:
Expenses ................... 0.96% 1.06% 1.04% 0.96%***
Net investment income ...... 4.04% 2.18% 2.53% 4.30%***
Supplemental Data:
Net assets at end of period $94,592,158 $92,678,440 $101,321,868 $94,887,669
Number of shares outstanding
at end of period ......... 94,591,979 92,678,268 101,321,668 94,887,669

</TABLE>
<PAGE> 84

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
Prime Series
- ----------------------------------------------------------------------------------------------------------------------
For the
eleven
months
Year Ended March 31, ended Year Ended April 30,
------------------------------------------------- March 31, ----------------------------------------------
1992** 1991** 1990 1989+ 1988 1987 1986
-------------- -------------- -------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>

$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------- -------------- -------------- -------------- ------------ ------------ ------------

0.0485 0.0734 0.0846 0.0712 0.0647 0.0572 0.0729

(0.0485) (0.0734) (0.0846) (0.0712) (0.0647) (0.0572) (0.0729)
-------------- -------------- -------------- -------------- ------------ ------------ ------------

$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ============== ============ ============ ============
4.96% 7.59% 8.80% 8.01%*** 6.67% 5.87% 7.54%

0.61% 0.59% 0.52% 0.54%*** 0.52% 0.55% 0.59%
4.84% 7.31% 8.42% 7.81%*** 6.46% 5.71% 7.28%

$1,264,629,485 $1,295,888,161 $1,312,276,151 $1,084,793,157 $874,051,953 $831,784,041 $686,611,968

1,264,629,485 1,295,888,161 1,312,276,151 1,084,793,157 874,051,953 831,784,041 686,611,968
</TABLE>
- ------
*The Quality Cash Reserve Prime Shares commenced operations on May 6,
1991. Per share data under the heading Prime Series does not include data
for the Quality Cash Reserve Prime Shares.
**Financial information for the fiscal years ended March 31, 1992 and 1991,
respectively, is for the Prime Shares and the Flag Investors Prime Shares
classes only.
***Annualized.
+The Fund's fiscal year-end was changed to March 31.

3
<PAGE> 85

3 THE FUND AND THE QUALITY CASH RESERVE PRIME SHARES

The Fund is a money market fund which seeks a high level of current income
consistent with preservation of capital and liquidity. The Fund consists of
three separate portfolios: the Prime Series, the Treasury Series and the
Tax-Free Series. This Prospectus relates exclusively to one of four classes of
shares currently offered by the Prime Series. The class of shares of the Prime
Series offered pursuant to this Prospectus has been designated as the Quality
Cash Reserve Prime Shares. All classes of the Prime Series share a common
investment objective, portfolio and advisory fee, but each class has different
expenses, shareholder qualifications and methods of distribution. Expenses of
the Fund which are not directly attributable to the operations of any class or
Series are prorated among all classes of the Fund based upon the relative net
assets of each class. Expenses of the Fund which are not directly attributable
to a specific class but are directly attributable to a specific Series are
prorated among all the classes of such Series based upon the relative net assets
of each such class. Expenses of the Fund which are directly attributable to a
class are charged against the income available for distribution as dividends to
such class.

Quality Cash Reserve Prime Shares are offered primarily to customers of
Participating Dealers that have correspondent relationships with Alex. Brown as
a convenient means of investing cash in their brokerage accounts. Quality Cash
Reserve Prime Shares are also offered through other Participating Dealers that
agree to provide certain shareholder services. (See "How to Invest in the
Quality Cash Reserve Prime Shares.")

4 INVESTMENT PROGRAM

INVESTMENT OBJECTIVE

The investment objective of the Prime Series is to seek as high a level of
current income as is consistent with preservation of capital and liquidity. The
Prime Series endeavors to achieve this objective by investing in a diversified
portfolio of domestic money market instruments that satisfy strict credit
quality standards and that mature within one year or less from the date of
purchase.

PORTFOLIO INVESTMENTS

The Prime Series may invest in U.S. Treasury obligations consisting of
marketable securities and instruments issued by the U.S. Treasury, including
bills, notes, bonds and other obligations. In addition to U.S. Treasury
obligations and repurchase agreements collateralized by U.S. Treasury
securities, the Prime Series may invest in obligations issued or guaranteed as
to principal and interest by agencies or instrumentalities of the U.S.
Government. Some of these obligations are backed by the full faith and credit of
the U.S. Government (e.g., the Government National Mortgage Association), others
are supported by the issuing agency's right to borrow from the U.S. Treasury
(e.g., securities of Federal Home Loan Banks) and still others are backed only
by the credit of the instrumentality (e.g., the Federal National Mortgage
Association).

The Prime Series may invest in instruments consisting of commercial paper and
variable amount master demand notes. Eligible commercial paper is limited to
short term, unsecured promissory notes issued by corporations which (i) are
rated Prime-1 by Moody's Investor Services, Inc. ("Moody's") or A-1+ or A-1 by
Standard and Poor's Ratings Group ("S&P"), or (ii) if not rated, are of
comparable quality to Prime-1 or A-1+ or A-1 instruments as determined by the
Fund's investment advisor; and (iii) are otherwise "Eligible Securities" as
defined in Rule 2a-7 under the Investment Company Act of 1940. Variable amount
master demand notes are unsecured demand notes that permit investment of
fluctuating amounts of money at variable rates of interest pursuant to
arrangements with issuers who meet the foregoing quality criteria. The interest
rate on a variable amount master demand note is periodically redetermined
according to a prescribed formula. Although there

<PAGE> 86

is no secondary market in master demand notes, the payee may demand payment of
the principal amount of the note on relatively short notice. All master demand
notes acquired by the Prime Series will be payable within a prescribed notice
period not to exceed seven days. (See the Statement of Additional Information
with respect to commercial paper and bond ratings.)

The Prime Series may also invest in bank instruments, consisting mainly of
certificates of deposit and bankers' acceptances, that (i) are issued by U.S.
banks which satisfy applicable quality standards, or (ii) are fully insured as
to principal and interest by the Federal Deposit Insurance Corporation.

OTHER INVESTMENT PRACTICES

The Prime Series may enter into the following arrangements:

Repurchase Agreements under which the purchaser (for example, the Prime
Series) acquires ownership of an obligation and the seller agrees, at the time
of the sale, to repurchase the obligation at a mutually agreed upon time and
price, thereby determining the yield during the purchaser's holding period.
Although the underlying collateral for repurchase agreements may have maturities
exceeding one year, repurchase agreements entered into by the Prime Series will
not have a stated maturity in excess of seven days from the date of purchase. If
the seller of a repurchase agreement fails to repurchase the obligation in
accordance with the terms of the agreement, the Prime Series may incur a loss to
the extent that the proceeds realized on the sale of the underlying obligation
are less than the repurchase price. In the event of the insolvency of a seller
that defaults on its repurchase obligation, disposition of the securities
underlying the repurchase agreement could be delayed pending court or
administrative action.

When-Issued Securities involving commitments by the Prime Series to purchase
portfolio securities on a "when-issued" basis. When-issued securities are
securities purchased for delivery beyond the normal settlement date at a stated
price and yield. The Prime Series will generally not pay for such securities or
start earning interest on them until they are received. When-issued commitments
will not be used for speculative purposes and will be entered into only with the
intention of actually acquiring the securities.

Reverse Repurchase Agreements involving the sale of money market instruments
held by the Prime Series, with an agreement to repurchase the instruments at an
agreed upon price and date. The Prime Series will employ reverse repurchase
agreements only when necessary to meet unanticipated net redemptions so as to
avoid liquidating other money market instruments during unfavorable market
conditions. The Prime Series will utilize reverse repurchase agreements when the
interest income to be earned from portfolio investments which would otherwise
have to be liquidated to meet redemptions is greater than the interest expense
incurred as a result of the reverse repurchase transactions. Reverse repurchase
agreements involve the risk that the market value of securities retained by the
Prime Series in lieu of liquidation may decline below the repurchase price of
the securities sold by the Prime Series which it is obligated to repurchase.

INVESTMENT RESTRICTIONS

The Prime Series investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations, the most significant of which are set forth below. The
Prime Series will not:

(1) purchase securities of any issuer (other than obligations of the U.S.
Government, its agencies or instrumentalities), if immediately after such
purchase more than 5% of the value of the Prime Series' assets would be invested
in such issuer;

(2) borrow money or issue senior securities, except that the Prime Series
may (i) borrow money from banks for temporary purposes in amounts up to 10% of
the value of its total assets at the time of borrowing, provided that any such
borrowings will be repaid prior to the purchase of additional portfolio
securities, (ii) enter into reverse repurchase agreements in accordance with its
investment program and (iii) enter into commitments to purchase securities in
accordance with its investment program;

5
<PAGE> 87

(3) lend money or securities except to the extent that the Prime Series'
investments may be considered loans; or

(4) purchase any commercial paper or variable rate demand notes which would
cause more than 25% of the value of the Prime Series' total assets at the time
of such purchase to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry.

The investment objective of the Prime Series as described under "Investment
Objective" and the foregoing restrictions are matters of fundamental policy
except where noted and may not be changed without the affirmative vote of a
majority of the outstanding shares of the Prime Series.

5 HOW TO INVEST IN THE QUALITY CASH RESERVE PRIME SHARES

GENERAL INFORMATION ON PURCHASES

Quality Cash Reserve Prime Shares are offered primarily to customers of
Participating Dealers that have correspondent relationships with Alex. Brown,
but Quality Cash Reserve Prime Shares are also offered through other
Participating Dealers that provide certain shareholder services. Purchases of
Quality Cash Reserve Prime Shares may be made only through Participating
Dealers. The terms and conditions under which purchases may be effected are
governed by the investor's agreement with the Participating Dealer.

The minimum initial investment is $1,500. Subsequent investments must be at
least $100. Orders for purchase of Quality Cash Reserve Prime Shares are
accepted only on a "business day of the Fund" which means any day on which PNC
Bank, National Association ("PNC"), the Fund's custodian, and the New York Stock
Exchange are open for business. It is expected that during the next twelve
months, PNC and/or the New York Stock Exchange will be closed on Saturdays and
Sundays and on New Year's Day, Martin Luther King, Jr.'s Birthday, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving Day and Christmas Day.

An order to purchase Quality Cash Reserve Prime Shares is effective only when a
Participating Dealer receives it in proper form and the investor has an
available cash balance in his account for investment. The Fund reserves the
right to reject any order for purchase of Quality Cash Reserve Prime Shares.
Quality Cash Reserve Prime Shares are purchased at the net asset value next
determined after acceptance of the order.

The net asset value of the Prime Series is determined once daily as of 12:00
noon (Eastern Time) on each business day of the Fund. Because the Fund uses the
amortized cost method of valuing the portfolio securities of the Prime Series
and rounds the per share net asset value of shares of the Prime Series, it is
anticipated that the net asset value of the Prime Series will remain constant at
$1.00 per share, but there can be no assurance that this objective can be met.
Share purchases effected before 11:00 a.m. (Eastern Time) begin to earn
dividends on the same business day. Share purchases received after 11:00 a.m.
(Eastern Time) begin to earn dividends on the following day. Payments
transmitted by check are normally converted into federal funds within two
business days and are accepted subject to collection at full face amount.

PURCHASES THROUGH AN ACCOUNT

Share purchases may be effected through an investor's account maintained
with a Participating Dealer, through procedures established in connection with
the requirements of the Fund and such Participating Dealer. A Participating
Dealer may impose minimum investor account requirements. Although Participating
Dealers do not impose sales charges for purchases of Quality Cash Reserve Prime
Shares, brokers may charge an investor's account fees for services provided to
the account. (See "Management of the Fund--Distributor.") Information concerning
account requirements, services and charges should be obtained from an investor's
broker. This Prospectus should be read in conjunction with any information
received from a Participating Dealer.

AUTOMATIC INVESTMENT AND REDEMPTION PROGRAM

The Fund has established a special procedure whereby proceeds from sales of
securities will be combined with other

<PAGE> 88

available credit balances in a Participating Dealer's customer's account (the
"account") on settlement date and invested in Quality Cash Reserve Prime Shares.
In addition, all credit balances in an account at the end of each day are
invested on the next business day of the Fund so long as the resulting Fund
balance is $100 or more. Additionally, Fund shares will be redeemed
automatically to pay for securities purchases in the account. Such redemption
will be made on the settlement date of the securities purchase.

The initial purchase requirement of $1,500 does not apply to those shareholders
who elect to take part in the Automatic Investment and Redemption Program.
Investors should contact a Participating Dealer for more information.

6 HOW TO REDEEM SHARES

Shareholders may redeem all or part of their Quality Cash Reserve Prime
Shares on any business day of the Fund by transmitting a redemption order to a
Participating Dealer. A redemption request is effected at the net asset value
next determined after tender of shares for redemption. Redemption orders
received after 11:00 a.m. (Eastern Time) will be executed the following business
day at the net asset value of the Series to be redeemed next determined after
receipt of the order. The terms and conditions under which redemptions may be
effected are governed by the shareholder's agreement with the Participating
Dealer.

REDEMPTION BY TELEPHONE

Subject to terms and conditions contained in their Participating Dealer
Agreement, shareholders may submit redemption orders for $250 or more by
telephone to a Participating Dealer. Funds will be credited to the shareholder's
account with the Participating Dealer or invested as directed by the
shareholder. If a shareholder requests payment of redemption proceeds by check,
such payment will be sent promptly and in any event within seven business days.
During periods of extreme economic or market changes, shareholders may
experience difficulty in effecting telephone redemptions. In such event,
requests should be made by one of the other methods described below.

REDEMPTION BY CHECK

Shareholders who complete the necessary forms may establish special check
redemption privileges that entitle them to write checks drawn on the Fund that
will clear through the Fund's account with PNC, in any amount not less than
$250. The payee of the check may cash or deposit it in the same way as an
ordinary bank check. Shareholders are entitled to dividends on the shares
redeemed until the check has been presented to PNC for payment. If the amount of
the check exceeds the value of the Quality Cash Reserve Prime Shares in the
account, the check will be returned to the payee marked "non-sufficient funds."
Checks written in amounts less than $250 may also be returned. The Fund in its
discretion will honor such checks but will charge the account a servicing fee of
$15. Cancelled checks will not be returned to the shareholder, but the amounts
will be reflected on the shareholder's monthly Alex. Brown statement of account.
Since the total amount of shares in an account may vary, shareholders should not
attempt to redeem their entire account by check.

The Fund reserves the right to terminate or alter check redemption privileges at
any time, to impose a service charge, or to charge for checks. The Fund also may
charge a shareholder's account for returned checks and for effecting stop
orders.

If a shareholder desires check redemption privileges, the necessary forms may be
obtained through a Participating Dealer.

REDEMPTION BY WIRE

<PAGE> 89

the shareholder's bank on the same day. The Participating Dealer may subtract
from the redemption proceeds the cost of effecting the wire transfer.

REDEMPTION BY MAIL

Shareholders may redeem Quality Cash Reserve Prime Shares in any amount by
mailing a redemption request to a Participating Dealer. Payment for shares
redeemed by mail will be made by check and will ordinarily be mailed within
seven days after receipt by the Participating Dealer of a written redemption
request in good order. The request must include the following:

(a) a letter of instruction specifying the Participating Dealer account
number and the number of Quality Cash Reserve Prime Shares or dollar amount to
be redeemed (or that all Quality Cash Reserve Prime Shares credited to a
Participating Dealer account be redeemed), signed by all owners of the Quality
Cash Reserve Prime Shares in the exact names in which their account is
maintained;

(b) a guarantee of the signature of each registered owner by a member of the
Federal Deposit Insurance Corporation, a trust company, broker, dealer, credit
union (if authorized under state law), a securities exchange or association,
clearing agency or savings association; and

(c) any additional documents required by the Fund or transfer agent for
redemption by corporations, partnerships, trusts or fiduciaries.

ADDITIONAL INFORMATION ON REDEMPTION

Dividends payable up to the date of redemption on redeemed shares will be paid
on the next dividend payment date. If all of the shareholder's shares have been
redeemed on the dividend payment date, the dividend will be credited in cash to
the shareholder's account.

The Board of Directors may authorize redemption of all shares in an account
which has been reduced by the shareholder to less than $500, if the Board of
Directors determines that it is necessary to reduce disproportionately
burdensome expenses of servicing small accounts or is otherwise in the best
interest of the Fund. At least 60 days' prior notice will be given to allow a
shareholder to make an additional minimum investment set by the Board of
Directors to avoid redemption.

7 DIVIDENDS AND TAXES

DIVIDENDS

All of the net income earned on the Prime Series is normally declared as
dividends daily to the respective shareholders of record of the Prime Series.
Dividends on the Prime Series are normally payable on the first day that a share
purchase order is effective but not on the date that a redemption order is
effective. If a purchase order is received by Alex. Brown after 11:00 a.m.
(Eastern Time), the shareholder will receive dividends beginning on the
following day. Dividends are declared daily and reinvested monthly in the form
of additional full and fractional shares of the Prime Series at net asset value,
unless the shareholder has elected to have dividends paid in cash.

TAXES

The following is only a general summary of certain federal tax considerations
affecting the Fund and the shareholders. No attempt is made to present a
detailed explanation of the tax treatment of the Fund or the shareholders, and
the discussion herein is not intended as a substitude for careful tax planning.

The following summary is based on current tax laws and regulations, which may be
changed by legislation, judicial, or administrative action.

The Prime Series has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended. As long as the
Prime Series qualifies for this tax treatment, it will not be required to pay
federal income taxes on amounts distributed to shareholders; but shareholders,
unless otherwise exempt, will pay taxes on amounts so distributed.

Distributions of net investment company taxable income (generally, net
investment income plus net short-term capital gains, if any) are taxed to
shareholders as ordinary

8
<PAGE> 90

income. Distributions will not be eligible for the dividends received deduction
otherwise available to corporate shareholders. Although the Prime Series does
not expect to realize any long-term capital gains, any distributions of net
capital gains (the excess of net long-term capital gains over net short-term
capital losses) will be taxable to shareholders as long-term capital gains,
regardless of the length of time a shareholder has held the shares.

Ordinarily, shareholders will include in their taxable income all dividends
declared by a Fund in the year of payment. However, dividends declared payable
to shareholders of record in December of one year, but paid in January of the
following year, will be deemed for tax purposes to have been received by the
shareholders and paid by the Prime Series in the year in which the dividends
were declared.

Shareholders will be advised annually as to the federal income tax status of
distributions made during the year. Shareholders are advised to consult with
their own tax advisors concerning the application of state and local taxes to
investments in the Prime Series, which may differ from the federal income tax
consequences described above. Additional information concerning taxes is set
forth in the Statement of Additional Information.

8 MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The overall business and affairs of the Fund are managed by its Board of
Directors. The Board of Directors approves all significant agreements between
the Fund and persons or companies furnishing services to the Fund, including the
Fund's agreements with its investment advisor, sub-advisor, distributor,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to its officers, to Alex. Brown and to Investment Company Capital
Corp. ("ICC"), the Fund's investment advisor, subject to the investment
objectives and policies of the Fund and to general supervision by the Fund's
Board of Directors. Alex. Brown and ICC also furnish or procure on behalf of the
Fund all services necessary to the proper conduct of the Fund's business. Two
Directors and all of the officers of the Fund are officers or employees of Alex.
Brown or ICC. A majority of the Board of Directors of the Fund have no
affiliation with Alex. Brown or ICC.

INVESTMENT ADVISOR

Investment Company Capital Corp., 135 East Baltimore Street, Baltimore, Maryland
21202, a wholly-owned subsidiary of Alex. Brown (described below), was organized
in 1987 and acts as the Fund's investment advisor pursuant to an Investment
Advisory Agreement dated as of August 1, 1995 (the "Advisory Agreement").
Pursuant to the terms of the Advisory Agreement, ICC supervises and manages the
Fund's operations and generally provides management and administrative services
for the Fund. ICC is also investment advisor to, and Alex. Brown acts as
distributor for, several funds in the Flag Investors family of funds which, as
of June 30, 1995, had net assets of approximately $ billion.

As compensation for providing investment advisory services to the Fund, ICC is
entitled to receive a fee from the Fund, calculated daily and paid monthly, 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. Each Series pays its share of the fee in
proportion to its relative net assets. In addition, ICC is 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 fees were approved by the Fund's Board of Directors on June 1, 1995,
by the shareholders of the Prime Series on July , 1995 and became effective on
August 1, 1995. ICC may, from time to time, voluntarily waive a portion of its
advisory fee with respect to any Series of the Fund to preserve or enhance the
performance of the Series.

Prior to August 1, 1995, ICC served as the Fund's adviser pursuant to an
investment advisory agreement dated as of

<PAGE> 91

April 4, 1990 and for the fiscal year ended March 31, 1995, received a fee from
the Fund which represented .21% of the Fund's aggregate average net assets.

ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Prime Series (See "Custodian, Transfer
Agent, Accounting Services.")

In the fiscal year ended March 31, 1995, the expenses borne by the Quality Cash
Reserve Prime Shares class of the Prime Series, including the fees to ICC,
amounted to .96% of such class's average net assets.

DISTRIBUTOR

The Fund has entered into a distribution agreement dated as of January 31, 1991
relating to the Quality Cash Reserve Prime Shares (the "Distribution Agreement")
with Alex. Brown, 135 East Baltimore Street, Baltimore, Maryland 21202. Alex.
Brown is an investment banking firm which offers a broad range of investment
services to individual, institutional, corporate and municipal clients. Alex.
Brown is a wholly-owned subsidiary of Alex. Brown Incorporated which has engaged
directly and through subsidiaries in the investment business since 1800. Alex.
Brown is a member of the New York Stock Exchange and other leading securities
exchanges. Headquartered in Baltimore, Maryland, Alex. Brown has offices
throughout the United States and, through subsidiaries, maintains offices in
London, England, Geneva, Switzerland and Tokyo, Japan. Alex. Brown serves as the
exclusive distributor for the Quality Cash Reserve Prime Shares. As compensation
for its services for the fiscal year ended March 31, 1995, Alex. Brown received
a fee from the Fund which represented .60% of the aggregate net assets invested
in Quality Cash Reserve Prime Shares.

Alex. Brown expects to allocate on a proportional basis up to all of its annual
fee received from the Fund to Participating Dealers as compensation for opening
shareholder accounts, processing investor purchase and redemption orders,
responding to inquiries from Fund shareholders concerning the status of their
accounts and operations of the Fund, and communicating with the Fund and its
transfer agent on behalf of the Fund's shareholders. Additionally, Alex. Brown
bears all expenses associated with advertisements, promotional materials, sales
literature and printing and mailing prospectuses to other than Fund
shareholders. Alex. Brown will from time to time and from its own resources pay
or allow additional discounts or promotional incentives in the form of cash or
other compensation (including merchandise or travel) to Participating Dealers.

Alex. Brown is also distributor for all other classes of shares of the Prime
Series (currently, Alex. Brown Cash Reserve Prime Shares, Flag Investors Cash
Reserve Prime Class A and Class B Shares and Alex. Brown Cash Reserve Prime
Institutional Shares). These classes differ primarily in their distribution
fees, in some instances shareholder servicing fees and the method of
distribution. None of the other classes are offered primarily in conjunction
with brokerage accounts at Participating Dealers that have correspondent
relationships with Alex. Brown. However, Alex. Brown Cash Reserve Prime Shares
may also be available through Participating Dealers and are allocated lower
distribution and shareholder servicing charges. The Alex. Brown Prime
Institutional Shares are available to certain institutional investors. Flag
Investors Cash Reserve Prime Class B Shares are subject to a contingent deferred
sales charge and are available only through the exchange of Class B Shares of
other funds in the Flag Investors family of funds.

9 CURRENT YIELD

10
<PAGE> 92

class refers to the income generated by an investment in that Series or class
over a seven-day period (which period will be stated in the advertisement.) This
income is then "annualized", that is, the amount of income generated by the
investment during that week is assumed to be generated each week of a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly, but when annualized, the income earned by an investment in
the Fund is assumed to be reinvested. The "effective yield" will be slightly
higher than the "yield" because of the compounding effect of this assumed
reinvestment. The yield for the Quality Cash Reserve Prime Shares may be
obtained by calling any Participating Dealer.

10 GENERAL INFORMATION

DESCRIPTION OF SHARES

Shares of the Fund are divided into three series, each with a par value of $.001
- - the Prime Series, the Treasury Series and the Tax-Free Series. Each of the
Series currently offers one or more classes of shares, which classes differ from
each other principally in the allocation of certain expenses and the method of
distribution. Shares of the Fund have equal rights with respect to voting,
except that the holders of shares of a particular Series or class will have the
exclusive right to vote on matters affecting only the rights of the holders of
such Series or class. For example, holders of a particular Series will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such Series. In the event of dissolution or
liquidation, holders of shares of each Series will receive pro rata, subject to
the rights of creditors, (a) the proceeds of the sale of the assets held in the
respective Series less (b) the liabilities of the Fund attributable to the
respective Series or allocated among all Series based on the respective
liquidation value of each Series. There will not normally be annual
shareholders' meetings. Shareholders may remove directors from office by votes
cast at a meeting of shareholders or by written consent. A meeting of
shareholders may be called at the request of the holders of 10% or more of the
Fund's outstanding shares.

There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional series or classes of Fund shares
without shareholder approval.

CUSTODIAN, TRANSFER AGENT, ACCOUNTING SERVICES

PNC, a national banking association with offices at Airport Business Center, 200
Stevens Drive, Lester, Pennsylvania 19113, acts as custodian for the Fund's
portfolio securities and cash. Investment Company Capital Corp., 135 East
Baltimore Street, Baltimore, Maryland 21202 (telephone: (800) 553-8080) is the
Fund's transfer and dividend disbursing agent and, effective November 10, 1994
provides accounting services to the Prime Series. As compensation for providing
accounting services to the Prime Series ICC receives an annual fee equal to
$13,000 plus a percentage of the Prime Series' aggregate average daily net
assets in excess of $10 million at a maximum rate of .100% of net assets and
declining at various asset levels to a minimum of .001% on net assets of $1
billion or more. (See the Statement of Additional Information.) ICC also serves
as the Fund's investment advisor.

ANNUAL MEETINGS

Unless required under applicable Maryland law, the Fund does not expect to hold
annual meetings of shareholders. However, shareholders may remove directors from
office by votes cast at a meeting of shareholders or by written consent. A
meeting of shareholders may be called at the request of the holders of 10% or
more of the Fund's outstanding shares.

REPORTS

The Fund furnishes shareholders with semi-annual reports containing information
about the Fund and its operations,

11
<PAGE> 93

including a list of investments held in the Fund's portfolio and financial
statements. The annual financial statements are audited by the Fund's
independent accountants, Coopers & Lybrand L.L.P.

FUND COUNSEL

Morgan, Lewis & Bockius serves as counsel to the Fund.

SHAREHOLDER INQUIRIES

Shareholders with inquiries concerning their shares should contact any
Participating Dealer.

<PAGE> 94

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 95

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 96

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 97

Printed in U.S.A.

Quality Cash Reserve Prime Shares Third Class Mail
P.O. Box 17250 U.S. POSTAGE
Baltimore, Maryland 21203 PAID
Baltimore, Md.
Permit No. 8614

QUALITY
CASH
RESERVE
PRIME
SHARES

A Class of Alex. Brown Cash Reserve Fund, Inc.

An open-end, diversified fund, designed as a convenient
means to earn a high level of current income from a
diversified, professionally managed portfolio of high
quality money market instruments while preserving capital
and liquidity.

August 1, 1995

Distributed by:
ALEX. BROWN & SONS
INCORPORATED

<PAGE> 98

PROSPECTUS

STATEMENT OF ADDITIONAL INFORMATION

________________________________________

ALEX. BROWN CASH RESERVE FUND, INC.
________________________________________

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
PROSPECTUS. IT SHOULD BE READ IN CONJUNCTION WITH A
PROSPECTUS FOR THE APPROPRIATE CLASS OF SHARES, WHICH
MAY BE OBTAINED BY WRITING OR CALLING YOUR ALEX. BROWN &
SONS INCORPORATED INVESTMENT REPRESENTATIVE, ANY
PARTICIPATING DEALER OF THE FUND'S SHARES, ALEX. BROWN &
SONS INCORPORATED, P.O. BOX 17250, BALTIMORE, MARYLAND
21203, OR THE FUND AT (800) 553-8080.

Statement of Additional Information dated August 1, 1995
Relating to Prospectuses dated August 1, 1995 for:
Alex. Brown Cash Reserve Fund, Inc.
Quality Cash Reserve Prime Shares
Institutional Shares
and Flag Investors Cash Reserve Prime Shares
Class A and Class B

<PAGE> 99

TABLE OF CONTENTS

<S> <C>

Introduction..............................................................................................2
General Information About the Fund........................................................................3
The Fund and Its Shares.............................................................................3
Directors and Officers..............................................................................5
The Investment Advisor..............................................................................8
The Sub-Advisor.....................................................................................9
Distributor.........................................................................................10
Expenses............................................................................................13
Transfer Agent, Custodian, Accounting Services......................................................15
Sub-Accounting......................................................................................16
Principal Holders of Securities.....................................................................16
Reports.............................................................................................17
Share Purchases and Redemptions...........................................................................17
Purchases and Redemptions...........................................................................17
Net Asset Value Determination.......................................................................17
Dividends and Taxes.......................................................................................18
Dividends...........................................................................................18
Taxes...............................................................................................19
Current Yield.............................................................................................22
Investment Program and Restrictions.......................................................................23
Investment Restrictions.............................................................................25
Portfolio Transactions....................................................................................26
Financial Statements......................................................................................28

</TABLE>

INTRODUCTION

Alex. Brown Cash Reserve Fund, Inc. (the "Fund") is a mutual fund. The
rules and regulations of the Securities and Exchange Commission (the "SEC")
require all mutual funds to furnish prospective investors certain information
concerning the activities of the company being considered for investment. There
is a Prospectus dated August 1, 1995 for each class of the Fund's shares which
contains this information and which may be obtained without charge from an Alex.
Brown & Sons Incorporated ("Alex. Brown") investment representative or by
writing Alex. Brown, P.O. Box 17250, Baltimore, Maryland 21203. Investors may
also call (410) 727-1700 or (except in the case of the Institutional Shares)
dealers authorized by Alex. Brown to distribute the respective classes of the
Fund's shares. Some of the information required to be in this Statement of
Additional Information is also included in the Fund's current Prospectuses; and,
in order to avoid repetition, reference will be made to sections of the
Prospectuses. Unless otherwise noted, the term "Prospectus" as used herein
refers to the Prospectus for each class of the Fund's shares. Additionally, the
Prospectus and this Statement of Additional Information omit certain information
contained in the registration statement filed with the SEC. Copies of the
registration statement, including items omitted from the Prospectus and this
Statement of Additional Information, may be obtained from the SEC by paying the
charges prescribed under its rules and regulations.

-2-

<PAGE> 100

GENERAL INFORMATION ABOUT THE FUND

The Fund and Its Shares

The Fund is registered as an open-end diversified management
investment company under the Investment Company Act of 1940, as amended, (the
"1940 Act") and its shares are registered under the Securities Act of 1933. The
Fund was organized as a corporation under the laws of the State of Maryland on
November 19, 1980, reorganized as a business trust under the laws of the
Commonwealth of Massachusetts on August 30, 1985 and, following certain changes
in Maryland law, reorganized as a Maryland corporation effective April 5, 1990.
Shares of the Fund are redeemable at the net asset value thereof (less any
applicable contingent deferred sales charge with respect to Flag Investors Cash
Reserve Prime Class B Shares) at the option of the holders thereof or at the
option of the Fund in certain circumstances. For information concerning the
methods of redemption and the rights of share ownership, consult the Prospectus
under the captions "General Information" and "How to Redeem Shares."

The Fund offers three series of shares (each such series is referred
to herein as a "Series" and collectively as the "Series"):

* Prime Series
* Treasury Series
* Tax-Free Series

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 through broker-dealers that have correspondent relationships with
Alex. Brown. 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. There is only one class
of the Tax-Free Series, designated as the Alex. Brown Cash Reserve Tax-Free
Shares.

As used in the Prospectus, the term "majority of the outstanding
shares" of either the Fund or a particular Series or class means, respectively,
the vote of the lesser of (i) 67% or more of the shares of the Fund or such
Series or class present or represented by proxy at a meeting, if the holders of
more than 50% of the outstanding shares of the Fund or such Series or class are
present or represented by proxy, or (ii) more than 50% of the outstanding shares
of the Fund or such Series or class.

Shareholders do not have cumulative voting rights, and therefore the
holders of more than 50% of the outstanding shares of all classes voting
together for the election of directors may elect all of the members of the Board
of Directors of the Fund. In such event, the remaining holders cannot elect any
members of the Board of Directors of the Fund.

The Board of Directors may classify or reclassify any unissued shares
of any class or classes in addition to those already authorized by setting or
changing in any one or more respects, from time to time, prior to the issuance
of such shares, the preferences, conversion or other rights, voting powers,

-3-
<PAGE> 101

restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption, of such shares. Any such classification or
reclassification will comply with the provisions of the 1940 Act.

The Fund's Articles of Incorporation authorize the issuance of five
billion shares, each with a par value of $.001. The Board of Directors may
increase or (within limits) decrease the number of authorized shares without
shareholder approval. A share of a Series represents an equal proportionate
interest in such Series with each other share of that Series and is entitled to
a proportionate interest in the dividends and distributions from that Series
except to the extent such dividends and distributions may be affected by
differences in the expenses allocated to a particular class. Additional
information concerning the rights of share ownership is set forth in the
Prospectus.

The assets received by the Fund for the issue or sale of shares of
each Series and all income, earnings, profits, losses and proceeds therefrom,
subject only to the rights of creditors, are allocated to that Series, and
constitute the underlying assets of that Series. The underlying assets of each
Series are segregated and are charged with the expenses attributable to that
Series and with a share of the general expenses of the Fund as described below
under "Expenses." While the expenses of the Fund are allocated to the separate
books of account of each Series, certain expenses may be legally chargeable
against the assets of all Series. In addition, expenses of a Series that are
attributable to a particular class of shares offered by that Series are
allocated to that class. See "Expenses."

The Fund's Charter provides that the directors and officers of the
Fund will not be liable to the Fund or its shareholders for any action taken by
such director or officer while acting in his capacity as such, except for any
liability to which the director or officer would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. The Fund's Charter provides for
indemnification by the Fund of the directors and officers of the Fund except
with respect to any matter as to which any such person did not act in good faith
in the reasonable belief that his action was in or not opposed to the best
interests of the Fund. Such person may not be indemnified against any liability
to the Fund or the Fund's shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. The Fund's Charter also
authorizes the purchase of liability insurance on behalf of the directors and
officers.

As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. Directors may be removed from office by a vote of the
holders of two-thirds of the outstanding shares at a meeting duly called for
that purpose, which meeting shall be held upon written request of the holders of
not less than 10% of the outstanding shares of the Fund. Upon written request by
ten or more shareholders, who have been such for at least six months and who
hold shares constituting 1% of the outstanding shares, stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
director, the Fund has undertaken to provide a list of shareholders or to
disseminate appropriate materials.

Except as otherwise disclosed in the Prospectus and in this Statement
of Additional Information, the directors shall continue to hold office and may
appoint their successors.

-4-

<PAGE> 102

Directors and Officers

The directors and executive officers of the Fund and their principal
occupations during the last five years are set forth below. Unless otherwise
indicated, the address of each Director and executive officer is 135 East
Baltimore Street, Baltimore, Maryland 21202.

*W. JAMES PRICE, Director and Chairman of the Board
6885 North Ocean Boulevard, Apartment #306, Ocean Ridge, Florida 33435-3343.
Director, Boca Research, Inc. (computer peripherals); Managing Director
Emeritus, Alex. Brown & Sons Incorporated; Formerly, Director, CSX Corp.
(transportation and natural resources company) and PHH Corporation (business
services).

*RICHARD T. HALE, Director and President
Managing Director, Alex. Brown & Sons Incorporated; Chartered Financial Analyst.

JAMES J. CUNNANE, Director
CBC Capital, 264 Carlyle Lake Drive, St. Louis, Missouri 63141. Managing
Director, CBC Capital (a merchant banking firm), 1993-Present; Formerly, Senior
Vice-President and Chief Financial Officer, General Dynamics Corporation
(defense)(1989-1993) and Director, The Arch Fund (mutual fund).

N. BRUCE HANNAY, Director
201 Condon Lane, Port Ludlow, Washington 98365. Director, Plenum Publishing
Corp; Formerly, Director, Rohm & Haas Company (diversified chemicals) and
General Signal Corp. (control equipment & systems) and Consultant, SRI
International (nonprofit consulting organization).

JOHN F. KROEGER, Director
Swan Road, P.O. Box 464, Martingham, St. Michaels, Maryland 21663.
Director/Trustee, AIM Funds (registered investment companies); Formerly,
Consultant, Wendell & Stockel Associates, Inc. (consulting firm); General
Manager, Shell Oil Company.

LOUIS E. LEVY, Director
26 Farmstead Road, Short Hills, New Jersey 07078. Director, Kimberly-Clark
Corporation (personal consumer products) and Household International (banking
and finance); Chairman of the Quality Control Inquiry Committee, American
Institute of Certified Public Accountants; Formerly, Trustee, Merrill Lynch
Funds for Institutions, 1991-1993; Adjunct Professor, Columbia
University-Graduate School of Business, 1991-1992; Partner, KPMG Peat Marwick,
retired 1990.

*REBECCA W. RIMEL, Director

[INSERT BIO]

EUGENE J. MCDONALD, Director
Duke Management Company, Erwin Square, Suite 100, 2200 West Main Street, Durham,
North Carolina 27705. President, Duke Management Company (investments);
Executive Vice President, Duke University (education, research and healthcare).

- -------------
* Messrs. Hale and Price are "interested persons," as defined in the
Investment Company Act of 1940. Although Ms. Rimel is not technically an
"interested person" of the Fund, in light of her relationship with The
Glenemede Trust Company, the Fund deems it prudent to treat her as if she
was an "interested person" for certain purposes.

-5-

<PAGE> 103

HARRY WOOLF, Director
Institute for Advanced Study, South Olden Lane, Princeton, New Jersey 08540.
Professor-at-Large Emeritus, Institute for Advanced Study; Director, Merrill
Lynch Cluster C Funds (registered investment companies), ATL and Spacelabs
Medical Corp (medical equipment) and Family Health International (nonprofit
research and education); Trustee, Reed College (education); Formerly, Trustee,
Rockefeller Foundation.

EDWARD J. VEILLEUX, Executive Vice President
Principal, Alex. Brown & Sons Incorporated; President, Investment Company
Capital Corp. (registered investment advisor); Vice President, Armata Financial
Corp. (registered broker-dealer).

M. ELLIOTT RANDOLPH, JR., Vice President
Principal, Alex. Brown & Sons Incorporated, 1991 - Present; Principal, Monument
Capital Management, Inc., 1988-1991.

PAUL D. CORBIN, Vice President
Principal, Alex. Brown & Sons Incorporated, 1991 - Present; Senior Vice
President, First National Bank of Maryland, 1985-1991.

BRIAN C. NELSON, Vice President and Secretary
Vice President, Alex. Brown & Sons Incorporated, Investment Company Capital
Corp. (registered investment advisor) and Armata Financial Corp. (registered
broker-dealer).

DIANA M. ELLIS, Treasurer
Manager, Portfolio Accounting Department, Investment Company Capital Corp.
(registered investment advisor); Mutual Fund Accounting Department, Alex.
Brown & Sons Incorporated, 1991 - Present; Formerly, Accounting Manager,
Downtown Press Inc. (printer), 1987-1991.

MONICA M. HAUSNER, Assistant Vice President
Fixed Income Management Department, Alex. Brown & Sons Incorporated, 1992 -
Present; Formerly, Assistant Vice President, First National Bank of Maryland,
1984-1992.

LAURIE D. DEPRINE, Assistant Secretary
Asset Management Department, Alex. Brown & Sons Incorporated, 1991 - Present;
Prior thereto, Student, 1989-1991.

Directors and officers of the Fund are also directors and officers of
some or all of the investment companies managed, administered, advised or
distributed by Alex. Brown or its affiliates.

There are currently 13 funds in the Flag Investors/ISI Funds and Alex.
Brown Cash Reserve Fund, Inc. fund complex (the "Fund Complex"). Mr. Hale serves
as President and Director of one fund, Vice President of one fund and as a
Director of 11 other funds in the Fund Complex. Mr. Price serves as a Director
of eight funds in the Fund Complex. Messrs. Cunnane, Hannay, Kroeger, Levy,
McDonald and Woolf serve on the Board of each fund in the Fund Complex. Ms.
Rimel serves on the Board of six funds in the Fund Complex. Mr. Randolph serves
as President of two funds and as a Vice President of one fund in the Fund
Complex. Mr. Corbin serves as a Vice President of one fund and as Executive Vice
President of two other funds in the Fund Complex. Ms. Hausner serves as an
Assistant Vice President of one fund and as a Vice President of another fund in
the Fund Complex. Mr. Veilleux serves as Executive Vice President of one fund

-6-

<PAGE> 104

and Vice President of 12 funds in the Fund Complex. Mr. Nelson, Ms. Ellis and
Ms. DePrine serve as Vice President and Secretary, Treasurer, and Assistant
Secretary, respectively, for each of the funds in the Fund Complex.

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 or her attendance at Board and committee meetings) from the
Fund and from all Flag Investors/ISI Funds for which he or she 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.

COMPENSATION TABLE

- ------------------------------------------------------------------------------------------------------------------------------------
Name of Person, Aggregate Compensation From Deferred Total Compensation From
Position the Fund for the Fiscal Year Compensation the Fund and Fund Complex
Ended March 31, 1995 Paid to Directors for the
Fiscal Year Ended March 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*Richard T. Hale $0 $0 $0
Vice Chairman

*W. James Price $0 $0 $0
Vice Chairman

James J. Cunnane $0 $ 6,321 $9,750 **
Director

N. Bruce Hannay $18,308 $ 6,223 $39,000 for service on
Director 13 boards

John F. Kroeger $26,982 $0 $42,900 for service on
Director 13 boards

Louis E. Levy $ 8,757 $ 9,750 $29,720 ***
Director

Eugene J. McDonald $11,987 $12,544 $39,000 for service on
Director 13 boards

*Rebecca W. Rimel**** $0 $0 $0
Director

Harry Woolf $11,987 $12,544 $39,000 for service on
Director 13 boards

</TABLE>

- ------------
* Messrs. Hale and Price are, and Ms. Rimel may be "interested persons"
as defined in the Investment Company Act.
** Elected to the Board on December 14, 1994.
*** Elected to the Board on June 17, 1994.
**** Elected to the Board on July __, 1995.

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

-7-

<PAGE> 105

benefit equal to a percentage of the fee earned by him or her in his or her last
year of service. Upon retirement, each Participant will receive annually 10% of
such fee for each year that he or she served after completion of the first five
years, up to a maximum annual benefit of 50% of the fee earned by him or her in
his or her last year of service. The fee will be paid quarterly, for life, by
each Fund for which he or she 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 and who will be
paid a quarterly fee of $4,875 by the Fund Complex for the rest of his or her
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.

Beginning in December, 1994, any Director who receives fees from the
Fund is permitted to defer a minimum of 50%, or up to all, of his or her annual
compensation pursuant to a Deferred Compensation Plan.

The Investment Advisor

Investment Company Capital Corp. ("ICC"), 135 East Baltimore Street,
Baltimore, Maryland 21202, a wholly-owned subsidiary of Alex. Brown (described
below), acts as the Fund's investment advisor pursuant to three separate
Investment Advisory Agreements dated as of August 1, 1995, one relating to the
Prime Series, one relating to the Treasury Series and one relating to the Tax-
Free Series (the "Advisory Agreements"). ICC was organized in 1987. The terms of
the Advisory Agreements are the same except to the extent specified below.
Pursuant to the terms of the Advisory Agreements, ICC (a) supervises and manages
the Fund's operations; (b) formulates and implements continuing programs for the
purchases and sales of securities, consistent with the investment objective and
policies of each Series; (c) provides the Fund with such executive,
administrative and clerical services as are deemed advisable by the Fund's Board
of Directors; (d) provides the Fund with, or obtains for it, adequate office
space and all necessary office equipment and services; (e) obtains and evaluates
pertinent information about significant developments and economic, statistical
and financial data, domestic, foreign and otherwise, whether affecting the
economy generally or any Series of the Fund, and whether concerning the
individual issuers whose securities are included in the Fund's Series or the
activities in which they engage, or with respect to securities which ICC
considers desirable for inclusion in the portfolio of any of the Fund's Series;
(f) determines which issuers and securities shall be represented in the
Portfolio of any of the Fund's Series; (g) takes all actions necessary to carry
into effect the Fund's purchase and sale programs; (h) supervises the operations
of the Fund's transfer and dividend disbursing agent; (i) provides 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) arranges, but does not pay for, the periodic updating of prospectuses
and supplements thereto, proxy material, tax returns, reports to the Fund's
shareholders and reports to and filings with the SEC and state Blue Sky
authorities. ICC may delegate its duties under the Advisory Agreements, and has
delegated certain of such duties with respect to the Tax-Free Series to PIMC as
described below.

As compensation for its services for the Fund, ICC receives a fee from
the Fund, calculated daily and paid monthly, 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
that portion of the Fund's aggregate average daily net assets in excess of $2.5
billion. Each Series pays its share of the fee in proportion to its relative net
assets. In addition, ICC is entitled to receive an additional fee from the Fund,
for the Prime and Tax-Free Series, calculated daily and paid monthly at the
annual rate of .02% of the Prime Series' average daily net assets and .03% of
the Tax-Free Series' average daily net assets. ICC may, from time to time,

-8-

<PAGE> 106

voluntarily waive a portion of its advisory fee with respect to any Series to
preserve or enhance the performance of the Series. The rates set forth above
were approved by the Fund's Board of Directors on June 1, 1995, by shareholders
of the Prime Series, the Treasury Series and the Tax-Free Series, respectively,
on July __, 1995 and became effective on August 1, 1995.

Prior to August 1, 1995, ICC served as the Fund's investment advisor
pursuant to two separate Investment 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. For the fiscal years
ended March 31, 1995, March 31, 1994 and March 31, 1993 the aggregate fees paid
by the Fund to ICC (net of voluntary fee waivers of $156,200, $152,838 and
$89,848 for the Treasury Series for the fiscal years ended March 31, 1995, March
31, 1994 and March 31, 1993) were $4,941,395, $4,856,245 and $4,809,834,
respectively.

The Advisory Agreements will continue in effect for an initial term of
two years, and from year to year thereafter if each such agreement is
specifically approved at least annually by the Fund's Board of Directors and by
a majority of the directors who are not parties to either Advisory Agreement or
interested persons of any such party by votes cast in person at a meeting called
for such purpose. The Fund or ICC may terminate any Advisory Agreement on 60
days' written notice without penalty. The Advisory Agreements terminate
automatically in the event of an "assignment," as defined in the 1940 Act.

ICC advises other mutual funds which, as of June 30, 1995, had net
assets of approximately $___ billion.

ICC also serves as the Fund's transfer and dividend disbursing agent
and provides accounting services to the Prime Series and the Treasury Series.
(See "Transfer Agent, Custodian, Accounting Services.")

The Sub-Advisor

PNC Institutional Management Corporation ("PIMC") Bellevue Corporate
Center, 400 Bellevue Parkway, Wilmington, Delaware 19809 serves as a sub-advisor
to the Tax-Free Series pursuant to a sub-advisory agreement between ICC and
PIMC, dated as of June 1, 1991 (the "Sub-Advisory Agreement"). PIMC is a wholly
owned subsidiary of PNC Bank, National Association, a national banking
association ("PNC"). PIMC was organized in 1977 to perform advisory services for
investment companies. PNC and its predecessors have been in the business of
managing the investments of fiduciary and other accounts in the Philadelphia,
Pennsylvania area since 1847. PNC is a wholly-owned, indirect subsidiary of PNC
Bank Corp., a multi-bank holding company.

Pursuant to the terms of the Sub-Advisory Agreement, PIMC: (a)
provides the Fund with certain executive, administrative and clerical services
as deemed advisable by the Fund's Board of Directors; (b) formulates and
implements continuing programs for the purchase and sale of securities for the
Tax-Free Series; (c) determines which issuers and securities shall be
represented in the Tax-Free Series' portfolio; and (d) takes, on behalf of such
Series, all actions which appear to the Series to be necessary to carry into
effect such purchase and sale programs, including for the purchase and sale of
portfolio securities. Any investment program undertaken by PIMC will at all
times be subject to the policies and control of the Fund's Board of Directors
and the supervision of ICC. PIMC shall not be liable to the Tax-Free Series or
its shareholders for any act or omission by PIMC or for any loss sustained by
such Series or its shareholders except in the case of PIMC's willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.

-9-
<PAGE> 107

As compensation for its services under the Sub-Advisory Agreement,
PIMC receives a fee from ICC, calculated daily and paid monthly, at an annual
rate based upon the following levels of the aggregate average daily net assets
of the Tax-Free Series: .15% of the first $250 million, .13% of the next $250
million, .11% of the next $250 million, .09% of the next $250 million, .075% of
the next $3 billion and .06% of that portion of the aggregate average daily net
assets in excess of $4 billion. If ICC voluntarily waives a portion of its fee
with respect to the Tax-Free Series (see "Investment Advisor" above), PIMC has
agreed to waive a portion of its fee in the same proportion and for the same
time periods as ICC's waiver. Prior to November 1, 1994, PIMC served as
sub-advisor to the Prime Series pursuant to a sub-advisory agreement dated as of
April 1, 1992 between ICC and PIMC. As compensation for sub-advisory services to
the Prime Series and the Tax-Free Series, respectively, for the fiscal years
ended March 31, 1995 (with respect to the Prime Series for the period from April
1, 1994 through October 30, 1994), March 31, 1994 and March 31, 1993, ICC paid
PIMC fees of $_______, $1,740,475 and $1,596,607.

The Sub-Advisory Agreement was approved by the Fund's Board of
Directors, including a majority of those directors who are not parties to such
sub-advisory agreement or interested persons of any such party on March 19, 1991
and by shareholders of the Tax-Free Series on May 28, 1991. The Sub-Advisory
Agreement will continue in effect for an initial term of two-years, and
thereafter from year to year if it is specifically approved at least annually by
the Fund's Board of Directors and by the directors who are not parties to such
sub-advisory agreement or interested persons of any such party by votes cast in
person at a meeting called for such purpose. The Fund, ICC or PIMC may terminate
the Sub-Advisory Agreement on 60 days' written notice without penalty. The
Sub-Advisory Agreement terminates automatically in the event of an "assignment,"
as defined in the 1940 Act. The Sub-Advisory Agreement was most recently
approved by the Board of Directors in the foregoing manner on March 8, 1995.

Distributor

Alex. Brown serves as the distributor for each class of the Fund's
shares pursuant to five separate Distribution Agreements (the "Distribution
Agreements"), one relating to the Institutional Shares, one relating to the
Tax-Free Series, one relating to the Quality Cash Reserve Prime Shares, one
relating to the Flag Investors Cash Reserve Prime Class B Shares and one
relating to the other classes of the Fund's shares. The terms of each of the
Distribution Agreements are the same except to the extent specified below.
Pursuant to the Distribution Agreements, Alex Brown: (a) receives orders for the
purchase of the Fund's shares, accepts or rejects such orders on behalf of the
Fund in accordance with the Fund's currently effective Prospectus and transmits
such orders as are accepted to the Fund's transfer agent as promptly as
possible; (b) receives requests for redemption from holders of the Fund's shares
and transmits such redemption requests to the Fund's transfer agent as promptly
as possible; (c) responds to inquiries from the Fund's shareholders concerning
the status of their accounts; and (d) takes, on behalf of the Fund, all actions
which appear to the Fund's Board of Directors necessary to carry into effect the
distribution of the Fund's shares. Alex. Brown shall not be liable to the Fund
or its shareholders for any act or omission by Alex. Brown or any loss sustained
by the Fund or the Fund's shareholders except in the case of Alex. Brown's
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.

As compensation for its services, Alex. Brown receives a distribution
fee from the Fund, calculated daily and paid monthly, at the annual rate of .25%
of the aggregate average daily net assets of all classes of the Fund, excluding
net assets attributable to the Institutional Shares, the Quality Cash Reserve
Prime Shares and the Flag Investors Cash Reserve Prime Class B Shares. Alex.
Brown receives no compensation with respect to its services as distributor for
the Institutional Shares (except to the extent that compensation to ICC may be
regarded as indirect compensation to Alex. Brown) and none of Alex. Brown's

-10-

<PAGE> 108

compensation as distributor of the Fund's shares is allocated to the
Institutional Shares. As compensation for its services with respect to the
Quality Cash Reserve Prime Shares, Alex. Brown receives a distribution fee from
the Fund, calculated daily and paid monthly, at the annual rate of .60% of the
average daily net assets of the Quality Cash Reserve Prime Shares. As
compensation for its services with respect to the Flag Investors Cash Reserve
Prime Class B Shares, Alex. Brown receives a distribution fee from the Fund
calculated daily and paid monthly at the annual rate of .75% of the average
daily net assets of the Flag Investors Cash Reserve Prime Class B Shares. In
addition, Alex. Brown will receive a shareholder servicing fee, paid monthly, at
an annual rate equal to .25% of the Flag Investors Cash Reserve Prime Class B
Shares' average daily net assets. The fees set forth above were approved, as
appropriate, by shareholders of the Prime Series and the Treasury Series on
April 4, 1990, by shareholders of the Tax-Free Series on May 28, 1991, by the
sole shareholder of the Quality Cash Reserve Prime Shares class on January 30,
1991 and by the sole shareholder of the Flag Investors Cash Reserve Prime Class
B Shares class on February 27, 1995. As compensation for distribution services
for the Prime and Treasury Series (except the Institutional Shares, the Quality
Cash Reserve Prime Shares and the Flag Investors Cash Reserve Prime Class B
Shares) for the fiscal years ended March 31, 1995, March 31, 1994 and March 31,
1993, Alex. Brown received from the Fund aggregate fees of __________,
$4,672,018 and $4,457,422, respectively. As compensation for distribution
services for the Tax-Free Series for the fiscal years ended March 31, 1995,
March 31, 1994 and March 31, 1993 and March 31, 1992 Alex. Brown received from
the Fund fees of $960,441, $838,211 and $746,743, respectively. As
compensation for distribution services for the Quality Cash Reserve Prime Shares
for the fiscal years ended March 31, 1995, March 31, 1994 and March 31, 1993,
Alex. Brown received from the Fund fees of $________, $574,855 and $570,251,
respectively. The Flag Investors Cash Reserve Prime Class B Shares were not
offered in any fiscal period ended March 31, 1995.

Prior to February 28, 1995, sales of the Flag Investors Cash Reserve
Prime Class A Shares were subject to a sales charge, a portion of which was paid
as a commission to the Distributor. For the period from April 1, 1994 through
February 27, 1995 and for the fiscal years ended March 31, 1995, March 31, 1994
and March 31, 1993, Alex. Brown received commissions of $______, $1,811 and
$589, respectively from sales of such Shares. Sales of the Flag Investors Cash
Reserve Prime Class B Shares are subject to a contingent deferred sales charge
to be paid as a commission to the Distributor.

Pursuant to the Distribution Agreements, Alex. Brown may pay certain
promotional and advertising expenses and, except in the case of the
Institutional Shares, may compensate its investment representatives, certain
registered securities dealers and banks and other financial institutions for
services provided in connection with the processing of orders for purchase or
redemption of the Fund's shares and furnishing other shareholder services.
Payments by Alex. Brown to its investment representatives and to certain
registered securities dealers are paid by Alex. Brown out of fees received by
Alex. Brown from the Fund. Specifically, Alex. Brown may compensate its
investment representatives and certain registered securities dealers for opening
accounts, processing investor purchase and redemption orders, responding to
inquiries from Fund shareholders concerning the status of their accounts and the
operations of the Fund, and communicating with the Fund and its transfer agent
on behalf of Fund shareholders. Alex. Brown may also enter into shareholder
processing and servicing agreements ("Shareholder Servicing Agreements") with
any securities dealer who is registered under the Securities Exchange Act of
1934 and is a member in good standing of the National Association of Securities
Dealers, Inc. and (except for the Quality Cash Reserve Prime Shares) with banks
and other financial institutions who may wish to establish accounts or
sub-accounts on behalf of their customers (collectively, such securities
dealers, banks and financial institutions are referred to as "Shareholder
Servicing Agents").

The Glass-Steagall Act and other applicable laws, among other things,
generally prohibit federally chartered or supervised banks from engaging in the
business of underwriting, selling or distributing securities. Accordingly, Alex.

-11-

<PAGE> 109

Brown will engage banks as Shareholder Servicing Agents only to perform
administrative and shareholder servicing functions. Management of the Fund
believes that such laws should not preclude a bank from acting as a Shareholder
Servicing Agent. However, judicial or administrative decisions or
interpretations of such laws as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or their
subsidiaries or affiliates, could prevent a bank from continuing to perform all
or a part of its servicing activities. If a bank were prohibited from so acting,
shareholder clients would be permitted to remain as Fund shareholders and
alternate means for continuing the servicing of such shareholders would be
sought. In such event, changes in the operation of the Fund might occur and
shareholders serviced by such bank might no longer be able to avail themselves
of any automatic investment or other services then being provided by such bank.
It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences. In addition, state
securities laws on this issue may differ from the interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.

For processing investor purchase and redemption orders, responding to
inquiries from Fund shareholders concerning the status of their accounts and
operations of the Fund and communicating with the Fund, its transfer agent and
Alex. Brown, Alex. Brown may make payments to Shareholder Servicing Agents out
of Alex. Brown's distribution fee in an amount not to exceed on an annual basis
.25% (with respect to all classes or Series other than the Institutional Shares,
the Quality Cash Reserve Prime Shares or the Flag Investors Cash Reserve Prime
Class B Shares), .60% (with respect to the Quality Cash Reserve Prime Shares
only) or .75% (with respect to the Flag Investors Cash Reserve Prime Class B
Shares only) of the average daily net assets of the respective classes that such
Shareholder Servicing Agent's customers maintain with the Fund during the term
of any Shareholder Servicing Agreement.

The fees payable to Shareholder Servicing Agents under Shareholder
Servicing Agreements will be negotiated by Alex. Brown. Alex. Brown will report
quarterly to the Fund's Board of Directors on the rate to be paid under each
such agreement and the amounts paid or payable under such agreements. The rate
will be based upon Alex. Brown's analysis of: (1) the nature, quality and scope
of services being provided by the Shareholder Servicing Agent; (2) the costs
incurred by the Shareholder Servicing Agent in connection with providing
services to shareholders; (3) the amount of assets being invested in shares of
the Fund; and (4) the contribution being made by the Shareholder Servicing Agent
toward reducing the Fund's expense ratio. The provisions of the Distribution
Agreements authorizing payments by Alex. Brown for advertisements, promotional
materials, sales literature and printing and mailing of prospectuses to other
than Fund shareholders, payments by Alex. Brown to its investment
representatives and payments by Alex. Brown and the Fund to Shareholder
Servicing Agents may be deemed to constitute payments by the Fund to support
distribution. Accordingly, such Distribution Agreements (except relating to the
Institutional Shares which have not adopted a plan of distribution and the Flag
Investors Cash Reserve Prime Class B Shares which have adopted a separate plan
of distribution) constitute written plans pursuant to Rule 12b-1 under the 1940
Act. All such plans together with the plan of distribution for the Flag
Investors Cash Reserve Prime Class B Shares are hereafter collectively referred
to as the "Plans."

The Distribution Agreements and the Plans will remain in effect from
year to year provided that each agreement and Plan is specifically approved at
least annually by the Fund's Board of Directors and by the affirmative vote of a
majority of the directors who are not parties to the Distribution Agreement or
any Shareholder Servicing Agreement or interested persons of any such party by
votes cast in person at a meeting called for such purpose. In approving the
Plans, the directors determined, in the exercise of their business judgment and
in light of their fiduciary duties as directors of the Fund, that there was a
reasonable likelihood that such Plans would benefit the Fund and its
shareholders. Although it is a primary objective of each Plan to reduce expenses

-12-
<PAGE> 110

of the Fund by fostering growth in the Fund's net assets, there can be no
assurance that this objective of each Plan will be achieved; however, based on
the data and information presented to the Board of Directors by Alex. Brown, the
Board of Directors determined that there is a reasonable likelihood that the
benefits of growth in the size of the Fund can be accomplished under the Plan.

The Distribution Agreements and Plans were most recently approved in
the foregoing manner on March 8, 1995. The Distribution Agreement and Plan for
the Flag Investors Cash Reserve Prime Class B Shares were approved by the sole
shareholder of such class on March 29, 1995.

Each Plan will be renewed only if the directors make a similar
determination prior to each renewal term. The Plans may not be amended to
increase the maximum amount of payments by Alex. Brown to its investment
representatives or Shareholder Servicing Agents without shareholder approval,
and all material amendments to the provisions of any of the Distribution
Agreements relating to the Plan must be approved by a vote of the Board of
Directors and of the directors who have no direct or indirect interest in the
Plan, cast in person at a meeting called for the purpose of such vote.

When the Board of Directors of the Fund approved the Distribution
Agreements, the Plans and the form of Shareholder Servicing Agreement, the Board
of Directors requested and evaluated such information as it deemed reasonably
necessary to make an informed determination that the agreements and Plans should
be approved. The Board considered and gave appropriate weight to all pertinent
factors necessary to reach the good faith judgment that the agreements and Plans
would benefit the Fund and its shareholders.

During the continuance of the Plans, Alex. Brown will report in
writing to the Fund's Board of Directors annually the amounts and purposes of
such payments for services rendered to shareholders by its registered account
representatives or by securities dealers and financial institutions who have
executed Shareholder Servicing Agreements.

The Plan relating to the Flag Investors Cash Reserve Prime Class B
Shares may be terminated at any time without penalty. The Fund or Alex. Brown
may terminate each of the Distribution Agreements on 60 days' written notice
without penalty. The Distribution Agreements terminate automatically in the
event of an "assignment", as defined in the 1940 Act. The services of Alex.
Brown to the Fund as Distributor are not exclusive, and it is free to render
similar services to others. The Fund has agreed that, should Alex. Brown cease
to have Distribution Agreements with the Fund, the Fund will cease to use the
words "Alex. Brown" or any trademark or identifying logotype indicating that the
Fund is distributed or administered by or otherwise connected with Alex. Brown.

Some of the directors of the Fund are customers of, and have had
normal brokerage transactions with, Alex. Brown in the ordinary course of
business. All such transactions are made on substantially the same terms as
those prevailing at the time for comparable transactions with unrelated persons.
Additional transactions may be expected to take place in the future.

Alex. Brown also serves as the distributor for other mutual funds in
the Flag Investors family of funds (currently: Flag Investors Telephone Income
Fund, Inc., Flag Investors International Fund, Inc., Flag Investors Emerging
Growth Fund, Inc., Flag Investors Total Return U.S. Treasury Fund Shares of
Total Return U.S. Treasury Fund, Inc., Flag Investors Managed Municipal Fund
Shares of Managed Municipal Fund, Inc., Flag Investors Intermediate-Term Income
Fund, Inc., Flag Investors Value Builder Fund, Inc., Flag Investors Maryland
Intermediate Tax Free Income Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc. and Flag Investors Equity Partners Fund, Inc.

-13-
<PAGE> 111

Expenses

Alex. Brown and ICC furnish, without cost to the Fund, the services of
the President, Secretary and one or more Vice Presidents of the Fund and such
other personnel as are required for the proper conduct of the Fund's affairs and
to carry out their obligations under the Distribution Agreements, the Investment
Advisory Agreements and the Sub-Advisory Agreement. PIMC (for the Tax-Free
Series) and Alex. Brown (for the Prime Series and the Treasury Series) maintain,
at their own expense and without cost to the Fund, trading functions in order to
carry out their respective obligations to place orders for the purchase and sale
of portfolio securities for the Tax-Free, Prime or Treasury Series, as
appropriate. Alex. Brown bears the expenses of printing and distributing
prospectuses (other than those prospectuses distributed to existing shareholders
of the Fund) and any other promotional or sales literature used by Alex. Brown
or furnished by Alex. Brown to purchasers or dealers in connection with the
public offering of the Fund's shares, the expenses of advertising in connection
with such public offering and all legal expenses in connection with the
foregoing.

The Fund pays or causes to be paid all other expenses of the Fund,
including, without limitation: the fees of Alex. Brown and ICC; 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
share 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 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 of the Fund and
supplements thereto to the Fund's shareholders (prospectuses distributed to
prospective shareholders are paid for by Alex. Brown); 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; fees and expenses of legal counsel 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 operations unless otherwise explicitly assumed by Alex. Brown, ICC
or PIMC.

Expenses which are attributable to any of the Fund's three Series are
charged against the income of such Series in determining net income for dividend
purposes. Expenses of the Fund which are not directly attributable to the
operations of a particular Series are allocated among the Series based upon the
relative net assets of each Series. Expenses attributable to a class of shares
of a Series are allocated to that class.

If for any fiscal year the operating expenses of the Fund (exclusive
of any interest, taxes, brokerage commissions and extraordinary expenses) should
exceed 1% of the combined average daily net assets of all three Series of the
Fund, ICC will reimburse the Fund for such excess expenses up to an amount equal
to its aggregate fees from the Fund for such year. If ICC is required to
reimburse the Fund for such excess amount, PIMC has agreed to reimburse ICC a
proportionate amount of its aggregate fees from ICC for such year. Additionally,
ICC has agreed, if required by law, to reimburse the Fund, to the extent
required so that the amount of the ordinary expenses of the Fund (excluding

-14-

<PAGE> 112

brokerage commissions, interest, taxes and extraordinary expenses such as
litigation costs) paid or incurred by any of the Fund's Series do not exceed the
expense limitations applicable to the Fund imposed by the securities laws or
regulations of any state or jurisdiction in which the Fund's shares are
registered or qualified for sale. Currently, the most restrictive of such
expense limitations requires ICC to reimburse the Fund, or reduce its fees, to
the extent required so that the amount of the ordinary expenses of the Fund
(excluding brokerage commissions, interest, taxes and extraordinary expenses
such as litigation costs) paid or incurred by any of the Fund's Series do not
exceed 2.5% of the first $30 million of the Fund's average daily net assets,
2.0% of the next $70 million of the Fund's average daily net assets and 1.5% of
the Fund's average daily net assets in excess of $100 million.

Transfer Agent, Custodian, Accounting Services

PNC acts as custodian for the Fund's portfolio securities and cash.
PFPC, an affiliate of PNC and PIMC, provides certain accounting services for the
Tax-Free Series. Prior to November 10, 1994, PFPC also provided accounting
services for the Prime Series. ICC, the Fund's investment advisor, provides
accounting services for the Prime Series and the Treasury Series. In addition,
ICC serves as the Fund's transfer and dividend disbursing agent. PNC, PFPC and
ICC receive such compensation from the Fund (or, with respect to accounting
fees, from the Tax-Free, Prime or Treasury Series, as appropriate) for services
in such capacities as are agreed to from time to time by PNC, PFPC, ICC and the
Fund. For the fiscal year ended March 31, 1995, PNC received custodian fees of
$_______ (including reimbursement for out-of-pocket expenses) and PFPC received
accounting fees (including reimbursement for out-of-pocket expenses) of $_______
($______ for the Prime Series (for the period from March 1, 1994 through
November 9, 1994) and $______ for the Tax-Free Series), respectively.

As compensation for providing accounting services to the Prime Series
and the Treasury Series, ICC receives an annual fee, calculated daily and paid
monthly as shown below. These fees became effective on September 22, 1994 with
respect to the Treasury Series and November 10, 1994 with respect to the Prime
Series.
<TABLE>
<CAPTION>

Prime and Treasury Series
Average Net Assets Incremental Annual Accounting Fee Per Series
------------------ --------------------------------------------

<S> <C>
$ 0 - $ 10,000,000 $13,000(fixed fee)
$ 10,000,000 - $ 20,000,000 .100%
$ 20,000,000 - $ 30,000,000 .080%
$ 30,000,000 - $ 40,000,000 .060%
$ 40,000,000 - $ 50,000,000 .050%
$ 50,000,000 - $ 60,000,000 .040%
$ 60,000,000 - $ 70,000,000 .030%
$ 70,000,000 - $ 100,000,000 .020%
$100,000,000 - $ 500,000,000 .015%
$500,000,000 - $1,000,000,000 .005%
over $1,000,000,000 .001%

</TABLE>

In addition, the Prime Series and the Treasury Series, as appropriate,
will reimburse ICC for the following out-of-pocket expenses incurred in
connection with ICC's performance of accounting services for such Series:
express delivery, independent pricing and storage.

For the period from November 10, 1995 through March 31, 1995, ICC
received fees of $58,826 for providing accounting services to the Prime Series.
For the fiscal year ended March 31, 1995 and for the period from January 1, 1994

-15-

<PAGE> 113

through March 31, 1994, ICC received fees of $90,083 and $15,402, respectively,
for providing accounting services to the Treasury Series. Prior to January 1,
1994, Alex. Brown provided accounting services to the Treasury Series and for
the period from April 1, 1993 through December 31, 1993 received fees of
$47,275.

As compensation for providing transfer agency services, the Fund pays
ICC up to $15.00 per account per year plus reimbursement for out-of-pocket
expenses incurred in connection therewith. For the fiscal year ended March 31,
1995, such fees totalled $1,451,556.

The address of ICC is 135 East Baltimore Street, Baltimore, Maryland
21202 (telephone: 800-553-8080), the address of PNC is Airport Business Center,
200 Stevens Drive, Lester, Pennsylvania 19113, and the address of PFPC is 400
Bellevue Parkway, Wilmington, Delaware 19809. PFPC may reimburse Alex. Brown for
certain shareholder servicing functions performed by Alex. Brown.

Sub-Accounting

The Fund and ICC have arranged for PFPC to offer sub-accounting
services to Fund shareholders and maintain information with respect to
underlying owners. Investors, such as financial institutions, investment
counselors and brokers, who purchase shares for the account of others, can make
arrangements through the Fund or ICC for these sub-accounting services.

Principal Holders of Securities

The names and addresses of the holders of 5% or more of the
outstanding shares of any class of the Fund as of May 22, 1995 and the
percentage of outstanding shares of such classes owned by such shareholders as
of such date are, to Fund management's knowledge, as follows:

Title of Class
and Name and Percent Owned Percent
Address of of Record and Owned of
Record Owner (1) and Beneficially Record Only
- --------------- ----------------- ------------

Institutional Prime Shares

Alex. Brown & Sons, Inc. 48.67% 48.67%
P.O. Box 1346
Baltimore, MD 21203

Alex. Brown & Sons, Inc. 50.34% 50.34%
P.O. Box 1346
Baltimore, MD 21203

Institutional Treasury Shares

Alex. Brown & Sons, Inc. 100% 100%
P.O. Box 1346
Baltimore, MD 21203

Flag Investors Cash Reserve Prime Class A Shares

Alex Brown & Sons, Inc. 6.63% 6.63%
P.O. Box 1346
Baltimore, MD 21203

-16-

<PAGE> 114

Alex Brown & Sons, Inc. 13.26% 13.26%
P.O. Box 1346
Baltimore, MD 21203

Tax-Free Series

Alex Brown & Sons, Inc. 8.99% 8.99%
P.O. Box 1346
Baltimore, MD 21203

As of May 22, 1995, the directors and officers of the Fund as a group
(16 persons) owned an aggregate of less than 1% of the Fund's shares or any
class thereof.

Reports

The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held in the Fund's portfolios and its financial statements. The
annual financial statements are audited by the Fund's independent accountants.
The Board of Directors has selected Coopers & Lybrand L.L.P., 2400 Eleven Penn
Center, Philadelphia, Pennsylvania 19103, as the Fund's independent accountants
to audit the Fund's financial statements and review the Fund's federal tax
returns for the fiscal year ending March 31, 1996.

SHARE PURCHASES AND REDEMPTIONS

Purchases and Redemptions

A complete description of the manner by which the Fund's Shares may be
purchased or redeemed appears in the Prospectus for that class under the
headings "How to Invest in the Fund" and "How to Redeem Shares." The Fund
reserves the right to suspend the sale of Shares at any time.

The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange is restricted, as
determined by applicable rules and regulations of the SEC, (b) the New York
Stock Exchange is closed for other than customary weekend and holiday closings,
(c) the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposal of portfolio securities or the
valuation of the net assets of the Fund not reasonably practicable.

Net Asset Value Determination

The net asset value of each of the Fund's Series is determined once
daily as of 12:00 noon Eastern time each day that PNC and the New York Stock
Exchange are open for business.

For the purpose of determining the price at which shares of each class
of each Series are issued and redeemed, the net asset value per share is
calculated immediately after the daily dividend declaration by: (a) valuing all
securities and instruments of such Series as set forth below; (b) deducting such
Series' and class' liabilities; (c) dividing the resulting amount by the number
of shares outstanding of such class; and (d) rounding the per share net asset
value to the nearest whole cent. As discussed below, it is the intention of the
Fund to maintain a net asset value per share of $1.00 for each class of each
Series.

-17-
<PAGE> 115

The instruments held in each Series' portfolio are valued on the basis
of amortized cost. This involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold all the
securities in its portfolios. During periods of declining interest rates, the
daily yield for any Series computed as described under "Dividends and Taxes"
below, may be higher than a like computation made by a fund with identical
investments utilizing a method of valuation based upon market prices and
estimates of market prices for all of its portfolio instruments. Thus, if the
use of amortized cost by the Fund results in a lower aggregate portfolio value
for a Series on a particular day, a prospective investor in such Series would be
able to obtain a somewhat higher yield than would result from an investment in a
fund utilizing solely market values, and existing investors in such Series would
receive less investment income. The converse would apply in a period of rising
interest rates.

The valuation of the portfolio instruments based upon their amortized
cost, the calculation of the per share net asset value to the nearest whole cent
and the concomitant maintenance of the net asset value per share of $1.00 for
each class of each Series is permitted in accordance with rules and regulations
of the SEC applicable to money market funds, as amended, effective June 1, 1991,
which require the Fund to adhere to certain quality, maturity and
diversification conditions. The Fund maintains a dollar-weighted average
portfolio maturity of 120 days or less for each Series, purchases only
instruments having remaining maturities of one year or less and invests only in
securities determined by the Board of Directors to be of high quality with
minimal credit risk. The Board of Directors is required to establish procedures
designed to stabilize, to the extent reasonably possible, the Fund's price per
share at $1.00 for each class of each Series as computed for the purpose of
sales and redemptions. Such procedures include review of each Series' portfolio
holdings by the Board of Directors, at such intervals as it may deem
appropriate, to determine whether the net asset value calculated by using
available market quotations or other reputable sources for any class of any
Series deviates from $1.00 per share and, if so, whether such deviation may
result in material dilution or is otherwise unfair to existing shareholders of
the relevant class or Series. In the event the Board of Directors determines
that such a deviation exists for any class of any Series, it will take such
corrective action as the Board of Directors deems necessary and appropriate with
respect to any class of such Series, including sales of portfolio instruments
prior to maturity to realize capital maturity; withholding of dividends;
redemption of shares in kind; or establishment of a net asset value per share by
using available market quotations.

DIVIDENDS AND TAXES

Dividends

All of the net income earned on the Treasury Series, the Prime Series
and the Tax-Free Series is declared daily as dividends to the respective holders
of record of shares of each class of each Series. The net income of each Series
for dividend purposes (from the time of the immediately preceding determination
thereof) consists of (a) interest accrued and discount earned (including both
original issue and market discount), if any, on the assets of such Series and
any general income of the Fund prorated to the Series based on its relative net
assets, less (b) amortization of premium and accrued expenses for the applicable
dividend period attributable directly to such Series and general expenses of the
Fund prorated to each such Series based on its relative net assets. Expenses
attributable to a class of a Series are allocated to that class. Although
realized gains and losses on the assets of each Series are reflected in the net
asset value of such Series, they are not expected to be of an amount which would
affect the net asset value of any Series of $1.00 per share for the purposes of
purchases and redemptions. Realized gains and losses may be declared and paid
yearly or more frequently. The amount of discount or premium on instruments in

-18-

<PAGE> 116

each portfolio is fixed at time of their purchase. See "Net
Asset Value Determination" above.

Should the Fund incur or anticipate any unusual expense or loss or
depreciation which would adversely affect the net asset value per share or net
income per share of any class of a Series for a particular period, the Board of
Directors would at that time consider whether to adhere to the present dividend
policy described above or to revise it in light of then prevailing
circumstances. For example, if the net asset value per share of any class of a
Series was reduced, or was anticipated to be reduced, below $1.00, the Board of
Directors might suspend further dividend payments with respect to such class or
Series until the net asset value returns to $1.00. Thus, the expense or loss or
depreciation might result in a shareholder (i) receiving no dividends for the
period during which the shareholder held shares of such class or Series or (ii)
receiving upon redemption a price per share lower than that which he paid.

Dividends on all classes of a Series are normally payable on the first
day that a share purchase or exchange order is effective but not on the day that
a redemption order is effective. However, if a purchase order is received by
Alex. Brown after 11:00 a.m. Eastern time on any business day, the shareholder
will receive dividends beginning the following business day. The net income of
each Series for dividend purposes is determined as of 12:00 noon Eastern time
each day that the Fund is open for business and immediately prior to the
determination of each Series' net asset value on that day. Dividends are
declared and reinvested monthly in the form of additional full and fractional
shares of the same Series at net asset value unless the shareholder has elected
to have dividends paid in cash.

Taxes

The following is only a summary of certain additional federal income
tax considerations generally affecting the Fund and its shareholders that are
not described in the Fund's Prospectus. No attempt is made to present a detailed
explanation of the federal, state or local tax treatment of the Fund or its
shareholders, and the discussion here and in the Fund's Prospectus is not
intended as a substitute for careful tax planning.

The following discussion of federal income tax consequences is based
on the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations issued thereunder as in effect on the date of this Statement of
Additional Information. New legislation, as well as administrative changes or
court decisions, may significantly change the conclusions expressed herein, and
may have a retroactive effect with respect to the transactions contemplated
herein.

1. Generally

Through payment of all or substantially all of its net investment
company taxable income (generally, net investment income plus net short term
capital gains) plus, in the case of the Tax-Free Series, all or substantially
all of its net exempt interest income, to shareholders and by meeting certain
diversification of assets and other requirements of the Code, each Series
expects to qualify as a regulated investment company under Subchapter M of the
Code. This will enable each Series to be relieved from payment of income taxes
on that portion of its net investment company taxable income and net capital
gains (the excess of net long-term capital gains over net short-term capital
losses) distributed to shareholders. Each Series also intends to meet the
distribution requirements of the Code to avoid the imposition of a 4% federal
excise tax.

In order to qualify for tax treatment as a regulated investment
company under the Code, each Series must distribute annually to its shareholders
at least the sum of 90% of its net interest income excludable from gross income
plus 90% of its investment company taxable income and also must meet several

-19-

<PAGE> 117

additional requirements. Among those requirements are the following: (i)
each Series must derive less than 30% of its gross income from the sale or other
disposition of stock or securities held for less than three months; (ii) each
Series must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock or securities, or certain other income;
(iii) at the close of each quarter of each Series' taxable year, at least 50% of
the value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other registered investment companies and
other securities, with such other securities limited, in respect to any one
issuer, to an amount that does not exceed 5% of the value of the Series' assets
and that does not represent more than 10% of the outstanding voting securities
of such issuer; (iv) at the close of each quarter of each Series' taxable year,
not more than 25% of the value of its assets may be invested in securities
(other than U.S. Government securities or the securities of other registered
investment companies) of any one issuer or of two or more issuers which the
Series controls and which are engaged in the same, similar or related trades or
businesses.

Each Series' policy is to distribute to its shareholders substantially
all of its investment company taxable income for each year. Such dividends
generally will be taxable to shareholders as ordinary income. Dividends will be
subject to taxation whether paid in the form of cash or additional shares of a
Series.

Since all of each Series' net investment income is expected to be
derived from earned interest, it is anticipated that no part of any distribution
will be eligible for the dividends received deduction for corporate
shareholders.

Although no Series expects to recognize any long-term capital gains,
each Series' policy is to distribute substantially all of its net capital gains
(the excess of net long-term capital gains over net short-term capital losses).
Any such net capital gains distributions will be taxable to shareholders as
long-term capital gains regardless of how long a shareholder has held shares. An
ordinary income dividend or a distribution of net capital gains received after
the purchase of a Series' shares reduces the net asset value of the shares by
the amount of such dividend or distribution and will be subject to income taxes.

Generally, when establishing an account, an investor must supply a
taxpayer identification number to the Series and certify that the investor is
not subject to backup withholding. Failure to do so will result in the Series'
having to withhold from distributions 31% of all amounts otherwise payable.
Backup withholding may also apply in certain other circumstances. The amounts
withheld will be credited against the shareholder's federal income tax
liability, and if withholding results in an overpayment of taxes, the
shareholder may obtain a refund from the Internal Revenue Service.

Dividends to shareholders who are non-resident individuals or entities
may be subject to a 30% United States withholding tax under existing provisions
of the Code applicable to foreign individuals and entities unless a reduced rate
of withholding or a withholding exemption is provided under applicable treaty
law. Non-resident shareholders are urged to consult their own tax advisors
concerning the applicability of the U.S. withholding tax.

The Code imposes a 4% non-deductible federal excise tax on a regulated
investment company that fails to distribute by the end of any calendar year 98%
of its ordinary income for that year and 98% of its capital gain net income (the
excess of short and long term capital gains over short and long term capital
losses) for the one-year period ending on October 31 of such calendar year, plus
certain other amounts. Each Series intends to make sufficient distributions of
its ordinary income and capital gains net income prior to the end of each
calendar year to avoid liability for this excise tax.

-20-
<PAGE> 118

Any gain or loss recognized on a sale or redemption of shares of the
Series by a shareholder who is not a dealer in securities generally will be
treated as a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise generally will be treated as a short-term
capital gain or loss. Any loss recognized by a Shareholder upon the sale or
redemption of shares of the Series held for six months or less, however, will be
disallowed to the extent of any exempt-interest dividends received by the
Shareholder with respect to such shares. If shares on which a net capital gain
distribution has been received are subsequently sold or redeemed, and such
shares have been held for six months or less, any loss recognized will be
treated as a long-term capital loss to the extent of the capital gain
distribution.

Dividends and capital gains distributions may also be subject to state
and local taxes. Shareholders are urged to consult their tax advisors regarding
specific questions as to federal, state, or local taxes.

2. Additional Considerations for Tax-Free Series

The following additional considerations relate to the Tax-Free Series.
The Tax-Free Series intends to invest in sufficient Municipal Securities so that
it will qualify to pay "exempt-interest dividends" (as defined in the Code) to
shareholders. The Tax-Free Series' dividends payable from net tax-exempt
interest earned from Municipal Securities will qualify as exempt-interest
dividends if, at the close of each quarter of the taxable year of the Series, at
least 50% of the value of the Series' total assets consists of Municipal
Securities. In addition, the Series must distribute an amount equal to at least
the sum of 90% of the net exempt-interest income and 90% of the investment
company taxable income earned by the Series during the taxable year.

Exempt-interest dividends distributed to shareholders are not
includable in the shareholders' gross income for regular federal income tax
purposes. However, while such interest is exempt from regular federal income
tax, it may be subject to the alternative minimum tax (the "Alternative Minimum
Tax") imposed by Section 55 of the Code and in the case of corporate
shareholders, the environmental tax (the "Environmental Tax") imposed by Section
59A of the Code. The Alternative Minimum Tax will be imposed at rates of up to
28% in the case of noncorporate taxpayers and at the rate of 20% in the case of
corporate taxpayers, to the extent it exceeds the taxpayer's regular tax
liability. The Environmental Tax is imposed at the rate of 0.12% and applies
only to corporate taxpayers. The Alternative Minimum Tax and the Environmental
Tax may be imposed in two circumstances. First, exempt-interest dividends
derived from certain Municipal Securities that are "private activity bonds"
which are issued after August 7, 1986, will generally constitute an item of tax
preference (and therefore potentially be subject to the Alternative Minimum Tax
and the Environmental Tax) for both corporate and non-corporate taxpayers. The
Fund intends, when possible, to avoid investing in such Municipal Securities.
Second, exempt-interest dividends derived from all Municipal Securities,
regardless of the date of issue, or whether derived from private activity bonds,
must be taken into account by corporate taxpayers in determining the amount of
their "adjusted current earnings," as defined in Section 56(g) of the Code,
which is used in calculating their alternative minimum taxable income for
purposes of determining the Alternative Minimum Tax and the Environmental Tax.

The percentage of income that constitutes "exempt-interest dividends"
will be determined for each year for the Series and will be applied uniformly to
all dividends declared with respect to the Series during that year. This
percentage may differ from the actual percentage for any particular day.

As noted, it is the present policy of the Series to invest only in
securities the interest on which is exempt from federal tax. However,
distributions of net investment income received by the Series from investments
in debt securities other than Municipal Securities and any net realized
short-term capital gains distributed by the Series will be taxable to
shareholders as ordinary income and will not be eligible for the dividends

-21-
<PAGE> 119

received deduction for corporate shareholders. Further, any distribution of net
capital gains (the excess of net long-term capital gains over net short-term
capital losses), such as gains from the sale of Municipal Securities held by the
Series for more than one year, will generally constitute taxable long-term
capital gains to shareholders.

Interest on indebtedness which is incurred or continued to purchase or
carry shares of an investment company which distributes exempt-interest
dividends during the year is not deductible for federal income tax purposes. The
deduction otherwise allowable to property and casualty insurance companies for
"losses incurred" will be reduced by an amount equal to a portion of
exempt-interest dividends received or accrued during any taxable year. Foreign
corporations engaged in a trade or business in the United States will be subject
to a "branch profits tax" on their "dividend equivalent amount" for the taxable
year, which will include exempt-interest dividends. Certain Subchapter S
corporations may also be subject to taxes on their "passive investment income,"
which could include exempt-interest dividends. Up to 85% of the Social Security
benefits or railroad retirement benefits received by an individual during any
taxable year will be included in the gross income of such individual, depending
upon the individual's "modified adjusted gross income", which includes
exempt-interest dividends. Further, the Tax-Free Series may not be an
appropriate investment for persons who are "substantial users" of facilities
financed by industrial development bonds or are "related persons" to such users.
A "substantial user" is defined generally to include certain persons who
regularly use a facility in their trade or business. Such persons should consult
with their own tax advisors before investing in the Tax-Free Series.

Issuers of Municipal Securities (or the beneficiary of Municipal
Securities) may have made certain representations or covenants in connection
with the issuance of such Municipal Securities to satisfy certain requirements
of the Code that must be satisfied subsequent to the issuance of such Municipal
Securities. Investors should be aware that exempt-interest dividends derived
from such Municipal Securities may become subject to federal income taxation
retroactively to the date thereof if such representations are determined to have
been inaccurate or if the issuer of such Municipal Securities (or the
beneficiary of such Municipal Securities) fails to comply with such covenants.

Receipt of exempt-interest dividends may also result in collateral
federal tax consequences to certain taxpayers. Prospective investors should
consult their own tax advisors as to such consequences.

CURRENT YIELD

Set forth below are the current, effective and taxable-equivalent
yields, as applicable, for each class or series of the Fund's shares for the
seven-day period ended March 31, 1995. The Flag Investors Cash Reserve Prime
Class B Shares were not offered during this period.

Series or class Current Yield Effective Yield Taxable-Equivalent Yield***
- ---------------- ------------- --------------- --------------------------
<S> <C> <C> <C>
Prime Series* ____% ____% N/A
Institutional Prime Shares ____% ____% N/A
Quality Cash Reserve Prime Shares ____% ____% N/A
Treasury Series** ____% ____% N/A
Institutional Treasury Series ____% ____% N/A
Tax-Free Series ____% ____% ____%
</TABLE>
- ------------
* Other than the Institutional, Quality Cash Reserve Prime Shares or Flag
Investors Cash Reserve Prime Class B Shares classes.
** Other than the Institutional Shares class.
*** Assumes a tax rate of 31%.

-22-
<PAGE> 120

The yield for each Series of the Fund can be obtained by calling your
sub-distributor or Alex. Brown at (410) 561-8686. Quotations of yield on each
Series of the Fund may also appear from time to time in the financial press and
in advertisements.

The current yields quoted will be the net average annualized yield for
an identified period, usually seven consecutive calendar days. Yield for each
Series or class will be computed by assuming that an account was established
with a single share of a Series (the "Single Share Account") on the first day of
the period. To arrive at the quoted yield, the net change in the value of that
Single Share Account for the period (which would include dividends accrued with
respect to the share, and dividends declared on shares purchased with dividends
accrued and paid, if any, but would not include realized gains and losses or
unrealized appreciation or depreciation) will be multiplied by 365 and then
divided by the number of days in the period, with the resulting figure carried
to the nearest hundredth of one percent. The Fund may also furnish a quotation
of effective yield for each Series or class that assumes the reinvestment of
dividends for a 365 day year and a return for the entire year equal to the
average annualized yield for the period, which will be computed by compounding
the unannualized current yield for the period by adding 1 to the unannualized
current yield, raising the sum to a power equal to 365 divided by the number of
days in the period, and then subtracting 1 from the result. In addition, the
Fund may furnish a quotation of the Tax-Free Series' taxable-equivalent yield,
which will be computed by dividing the tax-exempt portion of such Series'
effective yield for a stated consecutive seven day period by one minus the
investor's income tax rate and adding the product to the portion of the yield
for the same consecutive seven day period that is not tax-exempt. The resulting
yield is what the investor would need to earn from a taxable investment in order
to realize an after-tax benefit equal to the tax-free yield provided by the
Tax-Free Series. Historical yields are not necessarily indicative of future
yields. Rates of return will vary as interest rates and other conditions
affecting money market instruments change. Yields also depend on the quality,
length of maturity and type of instruments in each of the Fund's Series and each
Series' or class' operating expenses. Quotations of yields will be accompanied
by information concerning the average weighted maturity of the portfolio of a
Series. Comparison of the quoted yields of various investments is valid only if
yields are calculated in the same manner and for identical limited periods. When
comparing the yield for either Series of the Fund with yields quoted with
respect to other investments, shareholders should consider (a) possible
differences in time periods, (b) the effect of the methods used to calculate
quoted yields, and (c) the quality and average-weighted maturity of portfolio
investments, expenses, convenience, liquidity and other important factors.

INVESTMENT PROGRAM AND RESTRICTIONS

Information concerning the Fund's investment program is discussed in
the Fund's Prospectus.

Each Series may invest in instruments that have certain minimum
ratings of either Moody's Investor Services, Inc. ("Moody's") or Standard and
Poor's Corporation ("S&P") as permitted by the investment objective, policies
and restrictions of each such Series. See "Investment Program" in the
Prospectus. Investments of commercial paper may be precluded unless a particular
instrument is an "Eligible Security" as defined in Rule 2a-7 under the 1940 Act.
Rule 2a-7 defines "Eligible Security" as follows:

(i) a security with a remaining maturity of 397 days or less that
is rated (or that has been issued by an issuer that is rated with respect
to a class of Short-term debt obligations, or any security within that
class, that is comparable in priority and security with the security) by

-23-
<PAGE> 121

the Requisite NRSROs(1) in one of the two highest rating categories for
Short-term debt obligations (within which there may be sub-categories or
gradations indicating relative standing); or

(ii) a security:

(A) that at the time of issuance was a Long-term security
but that has a remaining maturity of 397 calendar days or less, and

(B) whose issuer has received from the Requisite NRSROs a
rating, with respect to a class of Short-term debt obligations (or any
security within that class) that is now comparable in priority and
security with the security, in one of the two highest rating
categories for Short-term debt obligations (within which there may be
sub-categories or gradations indicating relative standing); or

(iii) an Unrated Security that is of comparable quality to a
security meeting the requirements of paragraphs (a)(5)(i) or (ii) of this
section, as determined by the money market fund's board of directors;
provided, however, that:

(A) the board of directors may base its determination that a
Standby Commitment is an Eligible Security upon a finding that the
issuer of the commitment presents a minimal risk of default; and

(B) a security that at the time of issuance was a Long-term
security but that has a remaining maturity of 397 calendar days or
less and that is an Unrated Security(2) is not an Eligible Security if
the security has a Long-term rating from any NRSRO that is not within
the NRSRO's two highest categories (within which there may be
sub-categories or gradations indicating relative standing).

The following is a description of the minimum ratings of Moody's and
S&P for instruments in which each Series may invest.

Commercial Paper Ratings

Moody's - The rating Prime-1 (P-1) is the highest commercial paper
rating assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of

- ------------

1/ "Requisite NRSRO" shall mean (a) any two nationally recognized statistical
rating organizations that have issued a rating with respect to a security or
class of debt obligations of an issuer, or (b) if only one NRSRO has issued
a rating with respect to such security or issuer at the time the Fund
purchases or rolls over the security, that NRSRO. At present the NRSROs are:
Standard & Poor's Ratings Group, Moody's Investors Service, Inc., Duff and
Phelps, Inc., Fitch Investors Services, Inc. and, with respect to certain
types of securities, IBCA Limited and its affiliates, IBCA Inc.
Subcategories or gradations in ratings (such as a "+" or "-") do not count
as rating categories.

2/ An "unrated security" is a security (i) issued by an issuer that does not
have a current short-term rating from any NRSRO, either as to the particular
security or as to any other short-term obligations of comparable priority
and security; (ii) that was a long-term security at the time of issuance and
whose issuer has not received from any NRSRO a rating with respect to a
class of short-term debt obligations now comparable in priority and
security; or (iii) a security that is rated but which is the subject of an
external credit support agreement not in effect when the security was
assigned its rating, provided that a security is not an unrated security if
any short-term debt obligation issued by the issuer and comparable in
priority and security is rated by any NRSRO.

-24-
<PAGE> 122

speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These factors are all
considered in determining whether the commercial paper is rated P-1, P-2 or P-3.

S & P - Commercial paper rated A-1+ or A-1 by S&P has the following
characteristics. Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better, although in some cases "BBB"
credits may be allowed. The issuer has access to at least two channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management is unquestioned. Relative strength or weakness of the
above factors determines whether the issuer's commercial paper is rated A-1, A-2
or A-3.

Short Term Debt Ratings

Moody's - State and municipal notes, as well as other short-term
obligations, are assigned a Moody's Investment Grade (MIG) rating. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in
evaluating bond risk may be less important over the short run.

MIG 1

Notes bearing this designation are of the best quality. Notes are
enjoying strong "protection" by established cash flows, superior liquidity
support or a demonstrated broad-based access to the market for refinancing.

MIG 2

Notes bearing this designation are of high quality. Margins of
protection are ample although not as large as in the preceding group.

S&P - The note rating reflects the liquidity concerns and market
access risks unique to notes. Notes due in 3 years or less will receive a note
rating. Notes rated "SP-1" have a strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics are
assigned a plus (+) designation.

Tax-Exempt Demand Ratings

Moody's - Issues which have demand features (i.e., variable rate
demand obligations) are assigned a VMIG symbol. This symbol reflects such
characteristics as payment upon periodic demand rather than fixed maturity, and
payment relying on external liquidity. The VMIG rating is modified by the
numbers 1, 2 or 3. VMIG1 represents the best quality in the VMIG category, VMIG2
represents high quality, and VMIG3 represents favorable quality.

S&P - "dual" ratings are assigned to all long-term debt issues that
have as part of their provisions a demand feature. The first rating addresses
the likelihood of repayment of principal and interest as due, and the second
rating addresses only the demand feature. The long-term debt rating symbols are
used for bonds to denote the long-term maturity, and the commercial paper rating
symbols are used to denote the put option (e.g., "AAA/A-1+").

-25-
<PAGE> 123

Investment Restrictions

The most significant investment restrictions applicable to the Fund's
investment program are set forth in the Prospectus under the heading "Investment
Program - Investment Restrictions." Additionally, as a matter of fundamental
policy which may not be changed without a majority vote of shareholders (as that
term is defined in the Prospectus under the heading "General Information"), no
Series will:

(1) buy common stocks or voting securities or invest in companies for
the purpose of exercising control or management; (2) mortgage, pledge or
hypothecate any assets except to secure permitted borrowings and reverse
repurchase agreements and then only in an amount up to 15% of the value of a
Series' total assets at the time of borrowing or entering into a reverse
repurchase agreement; (3) underwrite securities issued by any other person,
except to the extent that the purchase of securities and the later disposition
of such securities in accordance with a Series' investment program may be deemed
an underwriting; (4) invest in real estate (a Series may, however, purchase and
sell securities secured by real estate or interests therein or issued by issuers
which invest in real estate or interests therein); (5) purchase oil, gas or
mineral interests (a Series may, however, purchase and sell the securities of
companies engaged in the exploration, development, production, refining,
transporting and marketing of oil, gas or minerals); (6) purchase or sell
commodities or commodity futures contracts, purchase securities on margin, make
short sales or invest in puts or calls; or (7) acquire for value the securities
of any other investment company, except in connection with a merger,
consolidation, reorganization or acquisition of assets.

The following investment restrictions may be changed by a vote of the
majority of the Board of Directors of the Fund. No Series will: (1) invest more
than 10% of the value of its net assets in illiquid securities, including
repurchase agreements with remaining maturities in excess of seven days; (2)
invest in warrants if as a result more than 2% of the value of such Series net
assets would be invested in warrants which are not listed on a recognized stock
exchange, or more than 5% of such Series net assets would be invested in
warrants regardless of whether listed on such exchange; (3) purchase any
securities of unseasoned issuers which have been in operation directly or
through predecessors for less than three years; (4) invest in real estate
limited partnership interests or oil, gas or mineral leases; or (5) purchase or
retain the securities of any issuer if to the knowledge of the Fund any officer
or Director of the Fund, its investment advisor or sub-advisors owns
beneficially more than .5% of the outstanding securities of such issuer and
together they own beneficially more than 5% of the securities of such issuer.

PORTFOLIO TRANSACTIONS

ICC and PIMC, for the Tax-Free Series, (the "Advisors") are
responsible for decisions to buy and sell securities for the Fund, broker-dealer
selection and negotiation of commission rates. Since purchases and sales of
portfolio securities by the Fund are usually principal transactions, the Fund
incurs little or no brokerage commissions. Portfolio securities are normally
purchased directly from the issuer or from a market maker for the securities.
The purchase price paid to dealers serving as market makers may include a spread
between the bid and asked prices. The Fund may also purchase securities from
underwriters at prices which include a commission paid by the issuer to the
underwriter. During the fiscal years ended March 31, 1995, March 31, 1994 and
March 31, 1993, the Fund incurred no brokerage commissions.

The Fund does not seek to profit from short-term trading, and will
generally (but not always) hold portfolio securities to maturity. The Fund's
fundamental policies require that investments mature within one year or less,
and the amortized cost method of valuing portfolio securities requires that the
Fund maintain an average weighted portfolio maturity of 120 days or less. Both
policies may result in relatively high portfolio turnover, but since brokerage
commissions are not normally paid on money market instruments, the high

-26-

<PAGE> 124

rate of portfolio turnover is not expected to have a material effect on the
Fund's net income or expenses.

The Advisors' primary consideration in effecting a security
transaction is to obtain the best net price and the most favorable execution of
the order. To the extent that the executions and prices offered by more than one
dealer are comparable, the Advisors may, at their discretion, effect
transactions with dealers that furnish statistical, research or other
information or services which are deemed by the Advisors to be beneficial to the
Fund's investment program. Certain research services furnished by dealers may be
useful to the Advisors with clients other than the Fund. Similarly, any research
services received by the Advisors through placement of portfolio transactions of
other clients may be of value to the Advisors in fulfilling their obligations to
the Fund. The Advisors are of the opinion that the material received is
beneficial in supplementing their research and analysis, and, therefore, may
benefit the Fund by improving the quality of their investment advice. The
advisory fee paid by the Fund is not reduced because the Advisors receive such
services. During the fiscal years ended March 31, 1995, March 31, 1994 and March
31, 1993, the Advisors directed no transactions to dealers and paid no related
commissions because of research services provided to the Fund.

The Fund is required to identify any securities of its "regular
brokers or dealers" (as such term is defined in the 1940 Act) which the Fund has
acquired during its most recent fiscal year. As of March 31, 1995, the Fund held
a 6.25% repurchase agreement issued by Goldman Sachs & Co. valued at $78,000,000
and a 6.03% repurchase agreement issued by Morgan Stanley & Co. valued at
$175,000,000.

The Advisors and their affiliates manage several other investment
accounts, some of which may have objectives similar to that of the Fund. It is
possible that at times, identical securities will be acceptable for one or more
of such investment accounts. However, the position of each account in the
securities of the same issue may vary and the length of time that each account
may choose to hold its investment in the securities of the same issue may
likewise vary. The timing and amount of purchase by each account will also be
determined by its cash position. If the purchase or sale of securities
consistent with the investment policies of the Fund and one or more of these
accounts is considered at or about the same time, transactions in such
securities will be allocated in good faith among the Fund and such accounts in a
manner deemed equitable by the Advisors. The Advisors may combine such
transactions, in accordance with applicable laws and regulations, in order to
obtain the best net price and most favorable execution. The allocation and
combination of simultaneous securities purchases on behalf of the Fund's three
series will be made in the same way that such purchases are allocated among or
combined with those of other such investment accounts. Simultaneous transactions
could adversely affect the ability of the Fund to obtain or dispose of the full
amount of a security which it seeks to purchase or sell.

Portfolio securities will not be purchased from or sold to or through
any "affiliated person" of the Advisors, as defined in the 1940 Act. In making
decisions with respect to purchase of portfolio securities for the Fund, the
Advisors will not take into consideration whether a dealer or other financial
institution has executed a Shareholder Servicing Agreement with Alex. Brown.

Provisions of the 1940 Act and rules and regulations thereunder have
been construed to prohibit the Fund's purchasing securities or instruments from
or through, or selling securities or instruments to or through, any holder of 5%
or more of the voting securities of any investment company managed or advised by
the Advisors. The Fund has obtained an order of exemption from the SEC which
permits the Fund to engage in such transactions with a 5% holder, if the 5%
holder is one of the 50 largest U.S. banks measured by deposits. Purchases from
these 5% holders are subject to quarterly review by the Fund's Board of
Directors, including those directors who are not "interested persons" of the
Fund. Additionally, such purchases and sales are subject to the following
conditions:

-27-
<PAGE> 125

(1) The Fund will maintain and preserve a written copy of the internal
control procedures for the monitoring of such transactions, together
with a written record of any such transactions setting forth a
description of the security purchased or sold, the identity of the
purchaser or seller, the terms of the purchase or sale transactions
and the information or materials upon which the determinations to
purchase or sell each security were made;

(2) Each security to be purchased or sold by the Fund will be: (i)
consistent with the Fund's investment policies and objectives; (ii)
consistent with the interests of the Fund's shareholders; and (iii)
comparable in terms of quality, yield, and maturity to similar
securities purchased or sold during a comparable period of time;

(3) The terms of each transaction will be reasonable and fair to the
Fund's shareholders and will not involve overreaching on the part of
any person; and

(4) Each commission, fee, spread or other remuneration received by a
5% holder will be reasonable and fair compared to the commission, fee,
spread or other remuneration received by other brokers or dealers in
connection with comparable transactions involving similar securities
purchased or sold during a comparable period of time and will not
exceed the limitations set forth in Section 17(e)(2) of the 1940 Act.

FINANCIAL STATEMENTS

\ See next page

-28-
<PAGE> 126

ALEX. BROWN CASH RESERVE FUND, INC.
PRIME SERIES
- -------------------------------------------------------------------------
Statement of Net Assets

March 31, 1995
<TABLE>
<CAPTION>
Rating (a)
------------------- Par
S&P Moody's (000) Value
------ --------- --------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- 75.7%(b)
Automobiles & Trucks -- 7.5%
Daimler-Benz North America Corp.
6.03% 04/17/95 ..................... A-1+ P-1 $15,000 $ 14,959,800
5.98% 04/28/95 ..................... A-1+ P-1 10,000 9,955,150
6.13% 05/01/95 ..................... A-1+ P-1 10,000 9,948,917
6.13% 08/16/95 ..................... A-1+ P-1 10,000 9,766,719
Ford Motor Credit Corp.
6.20% 04/21/95 ..................... A-1 P-1 25,000 24,913,889
6.04% 04/27/95 ..................... A-1 P-1 10,000 9,956,378
6.17% 05/10/95 ..................... A-1 P-1 15,000 14,899,738
PACCAR Financial Corp.
6.00% 04/21/95 ..................... A-1+ P-1 5,000 4,983,333
6.07% 05/11/95 ..................... A-1+ P-1 15,000 14,898,833
6.05% 06/15/95 ..................... A-1+ P-1 5,000 4,936,979
--------------
119,219,736
--------------
Beverages -- 1.6%
Anheuser-Busch Companies, Inc.
5.98% 07/14/95 ..................... A-1+ P-1 15,000 14,740,867
Coca-Cola Company
6.10% 04/10/95 ..................... A-1+ P-1 10,000 9,984,750
--------------
24,725,617
--------------
Chemicals, Specialty -- 0.8%
Air Products & Chemicals
6.07% 07/20/95 ..................... A-1 P-1 5,000 4,907,264
Lubrizol Corp.
5.96% 04/07/95 ..................... A-1+ P-1 8,300 8,291,755
--------------
13,199,019
--------------
Computer & Office Equipment -- 2.8%
Pitney Bowes Credit Corp.
6.07% 05/12/95 ..................... A-1+ P-1 15,000 14,896,304
6.02% 06/19/95 ..................... A-1+ P-1 10,000 9,867,894
6.18% 08/16/95 ..................... A-1+ P-1 10,000 9,764,817
6.20% 08/21/95 ..................... A-1+ P-1 10,000 9,755,444
--------------
44,284,459
--------------
Credit Unions -- 2.1%
Southwest Corporate Federal Credit
Union
6.10% 04/24/95 ..................... A-1+ P-1 15,000 14,941,542
U.S. Central Credit Union
6.05% 06/15/95 ..................... A-1+ P-1 9,000 8,886,563
Empire Corporate Federal Credit Union
6.02% 04/25/95 ..................... A-1+ P-1 10,000 9,959,867
--------------
33,787,972
--------------
</TABLE>
29
<PAGE> 127

PRIME SERIES
- -------------------------------------------------------------------------
Statement of Net Assets - (continued)

March 31, 1995
<TABLE>
<CAPTION>

Rating (a)
------------------- Par
S&P Moody's (000) Value
------ --------- --------- -------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- continued
Defense & Aircraft -- 2.5%
Rockwell International Corp.
6.05% 06/01/95 ..................... A-1+ P-1 $15,000 $14,846,229
6.45% 06/01/95 ..................... A-1+ P-1 10,000 9,890,708
6.58% 06/06/95 ..................... A-1+ P-1 15,000 14,819,050
-------------
39,555,987
-------------
Electrical & Electronics -- 0.9%
General Electric Company
6.03% 04/19/95 ..................... A-1+ P-1 15,000 14,954,775
-------------
Electric Utility -- 1.5%
Citizens Utilities Companies
6.08% 06/01/95 ..................... A-1+ P-1 15,750 15,587,740
6.06% 06/09/95 ..................... A-1+ P-1 8,800 8,697,788
-------------
24,285,528
-------------
Finance/Commercial -- 1.1%
AT&T Capital Corp.
5.97% 05/12/95 ..................... A-1 P-1 8,000 7,945,607
6.03% 05/23/95 ..................... A-1 P-1 10,000 9,912,900
-------------
17,858,507
--------------
Finance/Consumer -- 2.2%
USAA Capital Corp.
6.05% 05/11/95 ..................... A-1+ P-1 15,000 14,899,167
6.12% 09/05/95 ..................... A-1+ P-1 10,000 9,733,100
6.12% 09/12/95 ..................... A-1+ P-1 10,000 9,721,200
-------------
34,353,467
-------------
Finance/Diversified -- 3.4%
General Electric Capital Corp.
6.17% 05/23/95 ..................... A-1+ P-1 15,000 14,866,317
6.17% 06/08/95 ..................... A-1+ P-1 4,000 3,953,382
6.13% 06/15/95 ..................... A-1+ P-1 25,000 24,680,729
6.20% 11/14/95 ..................... A-1+ P-1 10,000 9,609,056
-------------
53,109,484
-------------
Food -- 6.2%
Campbell Soup Co.
6.00% 04/04/95 ..................... A-1+ P-1 15,000 14,992,500
6.15% 08/23/95 ..................... A-1+ P-1 30,000 29,262,000
Cargill, Inc.
6.05% 06/19/95 ..................... A-1+ P-1 15,000 14,800,854
6.07% 07/17/95 ..................... A-1+ P-1 10,000 9,819,586
Kellogg Company
6.00% 04/28/95 ..................... A-1+ P-1 10,000 9,955,000
Sara Lee Corp.
6.10% 04/26/95 ..................... A-1+ P-1 10,000 9,957,639
6.25% 08/08/95 ..................... A-1+ P-1 10,000 9,776,042
-------------
98,563,621
-------------
</TABLE>
30

<PAGE> 128

PRIME SERIES
- -------------------------------------------------------------------------
Statement of Net Assets - (continued)

March 31, 1995
<TABLE>
<CAPTION>
Rating (a)
------------------- Par
S&P Moody's (000) Value
------ --------- --------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- continued
Household Products -- 2.6%
Procter & Gamble Co.
6.13% 04/04/95 ..................... A-1+ P-1 $10,800 $ 10,794,483
6.00% 04/11/95 ..................... A-1+ P-1 15,000 14,975,000
5.97% 04/12/95 ..................... A-1+ P-1 15,000 14,972,638
--------------
40,742,121
--------------
Integrated Oil -- 5.6%
Exxon Imperial U.S. Inc.
6.04% 05/08/95 ..................... A-1+ P-1 25,000 24,844,805
6.04% 05/15/95 ..................... A-1+ P-1 20,000 19,852,356
Shell Oil Co.
5.97% 05/01/95 ..................... A-1+ P-1 20,000 19,900,500
6.05% 08/22/95 ..................... A-1+ P-1 15,000 14,639,521
6.12% 08/22/95 ..................... A-1+ P-1 10,000 9,756,900
--------------
88,994,082
--------------
Insurance, Life -- 0.6%
John Hancock Capital Corp.
6.05% 06/15/95 ..................... A-1+ P-1 10,000 9,873,958
--------------
Insurance, Property & Casualty -- 6.7%
A.I. Credit Corp.
6.21% 04/14/95 ..................... A-1+ P-1 15,000 14,966,363
6.08% 04/24/95 ..................... A-1+ P-1 6,000 5,976,693
6.07% 05/10/95 ..................... A-1+ P-1 6,550 6,506,928
AIG Funding Inc.
6.30% 04/17/95 ..................... A-1+ P-1 15,000 14,958,000
6.62% 06/20/95 ..................... A-1+ P-1 10,000 9,852,889
Marsh & McLennan Companies Inc.
6.02% 07/03/95 ..................... A-1+ P-1 15,000 14,766,725
6.08% 07/24/95 ..................... A-1+ P-1 15,000 14,711,200
6.08% 08/22/95 ..................... A-1+ P-1 25,000 24,396,222
--------------
106,135,020
--------------
Paper -- 1.2%
Minnesota Mining & Manufacturing Co.
6.00% 05/31/95 ..................... A-1+ P-1 15,000 14,850,000
6.00% 06/01/95 ..................... A-1+ P-1 5,000 4,949,167
--------------
19,799,167
--------------
Pharmaceuticals -- 5.6%
Eli Lilly & Co.
6.34% 04/10/95 ..................... A-1+ P-1 5,000 4,992,075
5.90% 04/18/95 ..................... A-1+ P-1 50,000 49,860,694
Warner-Lambert Co.
5.95% 04/20/95 ..................... A-1+ P-1 15,000 14,952,896
6.00% 05/12/95 ..................... A-1+ P-1 18,631 18,503,688
--------------
88,309,353
--------------
</TABLE>
31
<PAGE> 129

PRIME SERIES
- -------------------------------------------------------------------------
Statement of Net Assets - (continued)

March 31, 1995
<TABLE>
<CAPTION>
Rating (a) Par
-------------------
S&P Moody's (000) Value
------ --------- --------- --------------

COMMERCIAL PAPER -- continued
<S> <C> <C> <C> <C>
Publishing -- 4.4%
Dow Jones & Company
6.13% 04/26/95 ..................... A-1+ P-1 $10,000 $ 9,957,431
Dun & Bradstreet Corp.
6.025% 05/24/95 .................... A-1+ P-1 30,000 29,733,896
McGraw-Hill, Inc.
5.98% 04/13/95 ..................... A-1 P-1 19,000 18,962,127
6.10% 05/03/95 ..................... A-1 P-1 9,950 9,896,049
--------------
68,549,503
--------------
Railroad -- 0.6%
Norfolk Southern Corp.
6.07% 05/04/95 ..................... A-1+ P-1 10,000 9,944,358
--------------
Structured Finance -- 5.3%
CIESCO, L.P.
6.125% 05/02/95 .................... A-1+ P-1 10,000 9,947,257
6.10% 05/19/95 ..................... A-1+ P-1 15,000 14,878,000
6.03% 06/16/95 ..................... A-1+ P-1 10,000 9,872,700
6.07% 07/24/95 ..................... A-1+ P-1 10,000 9,807,783
Corporate Asset Funding Company, Inc.
6.00% 05/05/95 ..................... A-1+ P-1 20,000 19,886,667
6.03% 06/23/95 ..................... A-1+ P-1 15,000 14,791,463
6.10% 08/25/95 ..................... A-1+ P-1 5,500 5,363,936
--------------
84,547,806
--------------
Telephone -- 8.4%
AT&T
6.22% 05/11/95 ..................... A-1+ P-1 15,000 14,896,333
6.10% 05/15/95 ..................... A-1+ P-1 10,000 9,925,444
6.17% 05/18/95 ..................... A-1+ P-1 10,000 9,919,447
6.08% 07/21/95 ..................... A-1+ P-1 15,000 14,718,800
Ameritech Capital Funding Corp.
6.22% 07/10/95 ..................... A-1+ P-1 15,000 14,740,833
Ameritech Corp.
6.43% 05/08/95 ..................... A-1+ P-1 10,000 9,933,914
BellSouth Capital Fund
6.05% 07/14/95 ..................... A-1+ P-1 20,000 19,650,444
6.12% 09/18/95 ..................... A-1+ P-1 15,000 14,566,500
U.S. West Communications
6.04% 06/05/95 ..................... A-1+ P-1 25,000 24,727,361
--------------
133,079,076
--------------
</TABLE>
32
<PAGE> 130

PRIME SERIES
- -------------------------------------------------------------------------
Statement of Net Assets - (continued)

March 31, 1995
<TABLE>
<CAPTION>
Rating (a)
------------------- Par
S&P Moody's (000) Value
------ --------- --------- -----------------
COMMERCIAL PAPER -- continued
<S> <C> <C> <C> <C>
Waste Management -- 2.1%
WMX Technologies
6.42% 04/25/95 ..................... A-1 P-1 $ 18,000 $ 17,922,960
6.42% 05/09/95 ..................... A-1 P-1 6,800 6,753,918
6.17% 08/15/95 ..................... A-1 P-1 5,000 4,883,456
6.15% 11/02/95 ..................... A-1 P-1 4,000 3,853,083
-----------------
33,413,417
-----------------
TOTAL COMMERCIAL PAPER ............ 1,201,286,033
-----------------
FEDERAL HOME LOAN BANK -- 1.2%
FHLB
5.78% 05/08/95 ..................... A-1+ P-1 10,000 9,940,594
6.03% 08/01/95 ..................... A-1+ P-1 10,000 9,795,650
-----------------
TOTAL FEDERAL HOME LOAN BANK ...... 19,736,244
-----------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 2.8%
FNMA
6.09% 04/03/95 ..................... A-1+ P-1 10,000 9,996,617
5.80% 05/11/95 ..................... A-1+ P-1 25,000 24,838,889
6.00% 05/17/95 ..................... A-1+ P-1 10,000 9,923,333
-----------------
TOTAL FEDERAL NATIONAL MORTGAGE
ASSOCIATION ...................... 44,758,839
-----------------
UNITED STATES TREASURY BILLS -- 3.4%
U.S. Treasury Bill
5.85% 05/25/95 ..................... AAA Aaa 55,000 54,506,650
-----------------
VARIABLE RATE OBLIGATIONS -- 1.0%
Coca-Cola Master Note
4.945%(c) 06/20/95 ................. A-1+ P-1 15,000 15,000,000
-----------------
REPURCHASE AGREEMENTS -- 16.0%(d)
Goldman Sachs & Co.
6.25%(e) 04/03/95 .................. -- -- 78,000 78,000,000
Morgan Stanley & Co.
6.03%(f) 04/03/95 .................. -- -- 175,000 175,000,000
-----------------
TOTAL REPURCHASE AGREEMENTS ............................... 253,000,000
-----------------
TOTAL INVESTMENTS -- 100.1% .................................. $ 1,588,287,766(g)
LIABILITIES IN EXCESS OF OTHER ASSETS, NET -- (0.1%) ......... (1,984,457)
-----------------
NET ASSETS -- 100.0% ......................................... $ 1,586,303,309
=================
</TABLE>

33
<PAGE> 131

PRIME SERIES
- -------------------------------------------------------------------------
Statement of Net Assets - (concluded)

March 31, 1995

<TABLE>
<CAPTION>
Value
-------
<S> <C>
Net Asset Value, Offering and Redemption Price Per:
Prime Share
($1,472,079,739 / 1,472,077,488 shares outstanding) $1.00
=======
Flag Investors Share
($7,726,696 / 7,726,698 shares outstanding) ....... $1.00
=======
Institutional Prime Share
($11,904,716 / 11,904,663 shares outstanding) ..... $1.00
=======
Quality Cash Share
($94,592,158 / 94,591,979 shares outstanding) ..... $1.00
=======

</TABLE>

- ------
(a) Ratings assigned by Moody's Investor Service, Inc. ("Moody's") and
Standard & Poors Corporation ("S&P") are not covered by the Independent
Auditor's Report.

(b) Most commercial paper is traded on a discount basis. In such cases, the
interest rate shown represents the rate of discount paid or received at
time of purchase by the Fund.

(c) Master note is payable upon demand by the Fund upon no more than five
days' notice. Interest rates on master notes are redetermined weekly.
Rates shown are the rates in effect on March 31, 1995.

(d) Collateral on repurchase agreements is taken into possession by the Fund
upon entering into the repurchase agreement. The collateral is marked to
market daily to insure market value as being at least 102 percent of the
resale price of the repurchase agreement.

(e) Dated 3/31/95 to be repurchased on 4/3/95, collateralized by U.S.
Treasury Notes with a market value of $79,560,214.

(f) Dated 3/31/95 to be repurchased on 4/3/95, collateralized by U.S.
Treasury obligations with a total market value of $179,239,573.

(g) Aggregate cost for financial reporting and federal tax purposes.

Moody's Ratings:
Aaa Bonds which are judged to be of the best quality.
P-1 Commercial paper bearing this designation is of the best quality.

S&P Ratings:
AAA These are obligations of the highest quality.
A-1 Commercial paper which has a strong degree of safety regarding timely
payment. Those issues determined to possess very strong safety
characteristics are denoted with a plus (+) sign.

A detailed description of the above ratings can be found in the
Fund's Statement of Additional Information.

See Notes to Financial Statements

34
<PAGE> 132

ALEX. BROWN CASH RESERVE FUND, INC.
TREASURY SERIES
- -------------------------------------------------------------------------
Statement of Net Assets

March 31, 1995

<TABLE>
<CAPTION>
Maturity Par
Date (000) Value
---------- --------- --------------
<S> <C> <C> <C>
U.S. TREASURY SECURITIES -- 99.7%
U.S. Treasury Bills(a) -- 74.1%
5.640% ...................................... 04/06/95 $ 500 $ 499,608
5.700% ...................................... 04/06/95 13,300 13,289,563
5.700% ...................................... 04/06/95 3,500 3,497,229
5.770% ...................................... 04/06/95 9,000 8,992,788
5.530% ...................................... 04/13/95 9,000 8,983,410
5.620% ...................................... 04/13/95 8,000 7,985,013
5.750% ...................................... 04/13/95 20,000 19,961,667
5.760% ...................................... 04/13/95 4,500 4,491,360
5.700% ...................................... 04/20/95 15,000 14,954,875
5.680% ...................................... 04/20/95 11,500 11,465,526
5.750% ...................................... 04/20/95 11,500 11,465,101
5.770% ...................................... 04/20/95 11,500 11,465,465
5.770% ...................................... 04/20/95 19,500 19,440,617
5.790% ...................................... 05/04/95 5,500 5,470,809
5.705% ...................................... 05/04/95 13,000 12,932,015
5.755% ...................................... 05/04/95 16,000 15,915,593
5.820% ...................................... 05/04/95 11,500 11,438,648
5.810% ...................................... 05/11/95 1,300 1,291,608
5.840% ...................................... 05/11/95 10,500 10,431,867
5.660% ...................................... 05/18/95 20,700 20,547,039
5.875% ...................................... 05/25/95 12,000 11,894,250
5.990% ...................................... 05/25/95 6,000 5,946,090
5.730% ...................................... 06/01/95 18,000 17,825,235
5.695% ...................................... 06/01/95 22,000 21,787,703
5.860% ...................................... 06/01/95 1,800 1,782,615
6.000% ...................................... 06/01/95 3,000 2,969,500
5.770% ...................................... 06/08/95 3,700 3,659,674
5.785% ...................................... 06/15/95 25,000 24,698,698
5.785% ...................................... 06/15/95 10,000 9,879,479
5.730% ...................................... 07/06/95 6,500 6,400,680
5.700% ...................................... 07/13/95 9,700 9,541,809
5.745% ...................................... 07/13/95 9,500 9,343,848
5.840% ...................................... 07/13/95 4,300 4,228,152
5.790% ...................................... 07/20/95 13,600 13,359,393
5.805% ...................................... 07/20/95 3,200 3,143,240
6.190% ...................................... 07/20/95 6,000 5,893,667
5.835% ...................................... 07/27/95 23,500 23,054,352
------------
Total U.S. Treasury Bills ...................... 389,928,184
------------
</TABLE>
35
<PAGE> 133

TREASURY SERIES
- -------------------------------------------------------------------------
Statement of Net Assets - (concluded)

March 31, 1995
<TABLE>
<CAPTION>
Maturity Par
Date (000) Value
---------- --------- -----------
U.S. Treasury Notes -- 25.6%
<S> <C> <C> <C>
3.875% ...................................... 04/30/95 $20,000 $ 19,962,727
5.875% ...................................... 05/15/95 15,000 14,994,131
5.875% ...................................... 05/15/95 15,000 14,995,555
5.875% ...................................... 05/15/95 15,000 14,994,945
4.125% ...................................... 05/31/95 10,000 9,971,183
4.125% ...................................... 05/31/95 50,000 49,855,917
4.625% ...................................... 08/15/95 10,000 9,944,079
--------------
Total U.S. Treasury Notes ...................... 134,718,537
--------------
TOTAL U.S. TREASURY SECURITIES .............. 524,646,721
--------------
TOTAL INVESTMENTS -- 99.7% ........................ 524,646,721(b)
OTHER ASSETS LESS LIABILITIES, NET -- 0.3% ........ 1,572,486
--------------
NET ASSETS -- 100.0% .............................. $ 526,219,207
==============
Net Asset Value, Offering and Redemption Price Per:
Treasury Share
($512,167,212 / 512,162,864 shares outstanding) . $1.00
======
Institutional Treasury Share .....................
($14,051,995 / 14,046,467 shares outstanding) ... $1.00
=======

</TABLE>

------
(a) U.S. Treasury Bills are traded on a discount basis. In such cases, the
interest rate shown represents the yield at the date of purchase.

(b) Aggregate cost for financial reporting and federal tax purposes.

See Notes to Financial Statements

36
<PAGE> 134

ALEX. BROWN CASH RESERVE FUND, INC.
TAX-FREE SERIES
- --------------------------------------------------------------------------
Statement of Net Assets

March 31, 1995

<TABLE>
<CAPTION>
Rating(a) Par
S&P Moody's (000) Value
------- --------- --------- -----------
<S> <C> <C> <C> <C>
ALABAMA -- 2.7%
Health Care Facility Authority of The City of
Huntsville, Series 1994-B (MBIA Insurance)
4.25% 04/07/95 (b) .............................. A-1+ -- $ 1,100 $ 1,100,000
Homewood Educational Building Authority (Sanford
University), Series 1988 A (First Alabama Bank LOC)
4.25% 04/07/95 (b) .............................. -- VMIG-1 4,865 4,865,000
Homewood Educational Building Authority (Sanford
University), Series 1988 B (First Alabama Bank LOC)
4.25% 04/07/95 (b) .............................. -- VMIG-1 5,835 5,835,000
Mcintosh IDA (Ciba-Geigy Corporation), Series 1985
A (Swiss Bank LOC)
4.10% 04/07/95 (b) .............................. A-1+ -- 1,100 1,100,000
-----------
12,900,000
-----------
ALASKA -- 1.7%
Alaska Housing Finance Corporation, General
Mortgage Revenue, Series 1991 C
4.15% 04/07/95 (b) .............................. -- VMIG-1 8,000 8,000,000
-----------
ARIZONA -- 1.3%
Apache County PCR (Tucson Electric), 83A (Barclays
Bank LOC)
4.20% 04/07/95 (b) .............................. A-1+ -- 4,300 4,300,000
Pima County IDA (Tucson Electric) (Societe Generale
LOC)
4.20% 04/07/95 (b) .............................. A-1+ -- 1,900 1,900,000
-----------
6,200,000
-----------
ARKANSAS -- 0.2%
Arkansas Development Finance Authority (Higher
Education Capital Asset Program), 1985 Series A
(FGIC Insurance)
4.10% 04/07/95 (b) .............................. A-1+ VMIG-1 1,100 1,100,000
-----------
CALIFORNIA -- 3.3%
Los Angeles County TRAN
4.50% 06/30/95 (c) .............................. SP-1+ MIG-1 15,440 15,467,638
-----------
</TABLE>

37
<PAGE> 135

TAX-FREE SERIES
- --------------------------------------------------------------------------
Statement of Net Assets - (continued)

March 31, 1995
<TABLE>
<CAPTION>
Rating(a) Par
S&P Moody's (000) Value
------- --------- --------- -----------
<S> <C> <C> <C> <C>
COLORADO -- 5.3%
Arapahoe County, Colorado Capital Improvement,
Highway E-470, Series F (Swiss Bank LOC)
4.45% 08/31/95 (c) .............................. SP-1+ -- $10,000 $10,000,000
Colorado Health Facility Authority (North Colorado
Medical Center) (MBIA Insurance)
4.05% 04/07/95 (b) .............................. A-1+ VMIG-1 6,000 6,000,000
4.00% 04/07/95 (b) .............................. A-1+ VMIG-1 2,100 2,100,000
Colorado TRAN
4.50% 06/27/95 (c) .............................. SP-1+ MIG-1 6,000 6,004,658
La Plata County PCR (Amoco)
4.40% 09/01/95 (c) .............................. A-1+ P-1 1,080 1,080,000
------------
25,184,658
------------
CONNECTICUT -- 1.6%
Connecticut GO, Economic Recovery, Series B
4.10% 04/07/95 (b) .............................. A-1+ VMIG-1 7,500 7,500,000
------------
DELAWARE -- 4.2%
Delaware Economic Development Authority (Hospital
Billings), Series A (MBIA Insurance)
4.30% 04/07/95 (b) .............................. A-1+ VMIG-1 19,600 19,600,000
------------
DISTRICT OF COLUMBIA -- 2.4%
District of Columbia (Catholic University of
America), Series 89A
4.30% 04/07/95 (b) .............................. -- VMIG-1 11,200 11,200,000
------------
GEORGIA -- 0.8%
Burke County Development Authority PCR (Ogelthorpe
Power Corporation), Series 94A (FGIC Insurance)
4.10% 04/07/95 (b) .............................. A-1+ VMIG-1 3,800 3,800,000
------------
ILLINOIS -- 14.7%
Chicago GO, Series 1992 (Canadian Imperial Bank
LOC)
4.10% 04/07/95 (b) .............................. A-1+ VMIG-1 10,400 10,400,000
Chicago Illinois GO, Series B (Morgan Guaranty LOC)
4.60% 11/01/95 (c) .............................. A-1+ VMIG-1 4,300 4,300,000

</TABLE>

38
<PAGE> 136

TAX-FREE SERIES
- --------------------------------------------------------------------------
Statement of Net Assets - (continued)

March 31, 1995
<TABLE>
<CAPTION>

Rating(a) Par
S&P Moody's (000) Value
------- --------- --------- ------------
ILLINOIS -- continued
<S> <C> <C> <C> <C>
Illinois Development Finance Authority, PCR
Refunding (Canadian Imperial Bank LOC)
4.20% 05/02/95 (c) .............................. A-1+ VMIG-1 $ 7,900 $ 7,900,000
Illinois Education Authority (Art Institute of
Chicago)
4.25% 04/07/95 (b) .............................. A-1+ VMIG-1 12,900 12,900,000
Illinois Health and Education Authority (University
of Chicago)
4.50% 08/17/95 (c) .............................. A-1+ VMIG-1 11,400 11,400,000
Illinois Health Facility Authority (Highland Park
Hospital), Series 1991A (FGIC Insurance)
3.75% 06/01/95 (c) .............................. A-1+ VMIG-1 7,500 7,500,000
Illinois Health Facility Authority (Gottlieb Health
Resources)
4.15% 04/07/95 (b) .............................. -- VMIG-1 9,900 9,900,000
Illinois Health Facility Authority (University of
Chicago Hospital) (MBIA Insurance)
4.10% 04/07/95 (b) .............................. -- -- 5,300 5,300,000
------------
69,600,000
------------
INDIANA -- 2.8%
City of Petersburg, PCR Refunding
4.30% 05/01/95 (c) .............................. A-1+ VMIG-1 1,000 1,000,000
Indiana Health Facility (Rehabilitation Hospital)
(Toronto Dominion LOC)
4.25% 04/07/95 (b) .............................. -- VMIG-1 5,500 5,500,000
Jasper County, Northern Indiana Public Service
(Barclays Bank LOC)
4.25% 05/01/95 (c) .............................. A-1+ VMIG-1 6,800 6,800,000
------------
13,300,000
------------
IOWA -- 1.8%
Council Bluffs Iowa PCR (Illinois Gas and Electric
Company)
4.15% 04/07/95 (b) .............................. -- -- 3,000 3,000,000
Polk County (Hospital Equipment Authority) (MBIA
Insurance)
4.25% 04/07/95 (b) .............................. A-1+ VMIG-1 5,600 5,600,000
------------
8,600,000
------------
LOUISIANA -- 5.5%
Louisiana Offshore Terminal Authority (Deepwater
Port), Refunding (Union Bank of Switzerland LOC)
4.05% 04/07/95 (b) .............................. A-1+ -- 3,300 3,300,000

</TABLE>
39
<PAGE> 137

TAX-FREE SERIES
- --------------------------------------------------------------------------
Statement of Net Assets - (continued)

March 31, 1995
<TABLE>
<CAPTION>
Rating(a) Par
S&P Moody's (000) Value
------- --------- --------- -----------
<S> <C> <C> <C> <C>
LOUISIANA -- continued
Louisiana Public Facilities Authority (Ciba-Geigy
Corporation), PCR Series 1985 (Credit Suisse LOC)
4.10% 04/07/95 (b) .............................. A-1+ -- $ 1,700 $ 1,700,000
Parish of Desoto, PCR (Central Louisiana Electric)
(Swiss Bank LOC)
4.00% 04/07/95 (b) .............................. A-1+ VMIG-1 3,000 3,000,000
Plaquemines Port, Harbor and Terminal District
(Tampa Electric), Refunding Bonds
3.95% 04/27/95 (c) .............................. -- P-1 6,900 6,900,000
3.95% 05/01/95 (c) .............................. -- P-1 5,000 5,000,000
Plaquemines Port Harbor and Terminal District
(Tampa Electric)
4.30% 09/01/95 (c) .............................. A-1+ -- 5,000 5,003,039
Rapides Parish, PCR Refunding (Swiss Bank LOC)
4.00% 04/07/95 (b) .............................. A-1+ VMIG-1 1,400 1,400,000
------------
26,303,039
------------
MARYLAND -- 4.5%
Baltimore PCR (Hanson PLC) (Barclays Bank LOC)
4.15% 04/07/95 (b) .............................. A-1+ -- 5,000 5,000,000
Maryland State Health & Higher Education Authority
(Daughters of Charity)
4.25% 04/07/95 (b) .............................. -- VMIG-1 11,200 11,200,000
Mayor and City Council of Baltimore, Highway User
RAN
5.00% 06/09/95 (c) .............................. SP-1+ MIG-1 5,000 5,008,289
------------
21,208,289
------------
MICHIGAN -- 1.7%
Michigan Strategic Fund (Consumer Power Company)
(Union Bank of Switzerland LOC)
4.55% 04/01/95 (b) .............................. -- P-1 8,200 8,200,000
------------
MINNESOTA -- 0.4%
City of Becker PCR (Northern States Power Company
-- Sherbourne County
4.30% 05/01/95 (c) .............................. A-1+ VMIG-1 2,000 2,000,000
------------
MISSISSIPPI -- 1.4%
Jackson County Water System Revenue (Chevron)
4.45% 08/01/95 (c) .............................. -- VMIG-1 6,700 6,700,000
------------
</TABLE>

40
<PAGE> 138

TAX-FREE SERIES
- --------------------------------------------------------------------------
Statement of Net Assets - (continued)

March 31, 1995
<TABLE>
<CAPTION>
Rating(a) Par
S&P Moody's (000) Value
------- --------- --------- ------------
<S> <C> <C> <C> <C>
MISSOURI -- 1.8%
City of Columbia Water and Electric System (Toronto
Dominion LOC)
4.20% 04/07/95 (b) .............................. -- VMIG-1 $ 2,000 $ 2,000,000
Missouri Environmental Improvement PCR (National
Rural Utilities), Series M
4.30% 04/07/95 (b) .............................. A-1+ VMIG-1 6,400 6,400,000
------------
8,400,000
------------
NEBRASKA -- 0.5%
Nebraska Higher Education Loan Program, Student
Loan Program, Series 1985 D (MBIA Insurance)
4.10% 04/07/95 (b) .............................. -- VMIG-1 1,000 1,000,000
Nebraska Higher Education Loan Program, Student
Loan Program, Series 1985 E (MBIA Insurance)
4.10% 04/07/95 (b) .............................. -- VMIG-1 1,400 1,400,000
------------
2,400,000
------------
NEVADA -- 0.3%
Clark County Airport System, Series 1993-A (MBIA
Insurance)
4.15% 04/07/95 (b) .............................. A-1+ VMIG-1 1,600 1,600,000
------------
NEW JERSEY -- 2.1% .................................
New Jersey State TRAN, Series A
5.00% 06/15/95 (c) .............................. SP-1+ MIG-1 10,000 10,018,947
------------
NEW MEXICO -- 2.1%
Albuquerque Health Facility Authority (Sisters of
Charity) (Toronto Dominion LOC)
4.05% 04/07/95 (b) .............................. A-1+ VMIG-1 3,100 3,100,000
Farmington PCR (Arizona Public Service) (Union Bank
of Switzerland LOC)
4.45% 04/01/95 (b) .............................. A-1+ VMIG-1 2,200 2,200,000
Town of Hurley PCR (BP Petroleum)
4.55% 04/01/95 (b) .............................. A-1+ P-1 4,600 4,600,000
------------
9,900,000
------------
NEW YORK -- 1.4%
Dormitory Authority, New York (Cornell University),
Series 1990-B
4.45% 04/03/95 (b) .............................. A-1+ VMIG-1 2,400 2,400,000

</TABLE>

41
<PAGE> 139

TAX-FREE SERIES
- --------------------------------------------------------------------------
Statement of Net Assets - (continued)

March 31, 1995
<TABLE>
<CAPTION>
Rating(a) Par
S&P Moody's (000) Value
------- --------- --------- ------------
<S> <C> <C> <C> <C>
NEW YORK -- continued
New York State Energy Research and Development
Authority (Niagara Mohawk), Series 87A (Morgan
Guaranty LOC)
4.45% 04/01/95 (b) .............................. A-1+ VMIG-1 $ 1,600 $ 1,600,000
Triborough Bridge and Tunnel Authority (FGIC
Insurance)
3.80% 04/07/95 (b) .............................. A-1+ VMIG-1 2,600 2,600,000
------------
6,600,000
------------
NORTH CAROLINA -- 3.3%
North Carolina Medical Care (Duke University
Hospital Project) Series A
4.075% 04/07/95 (b) ............................. A-1+ VMIG-1 1,000 1,000,000
North Carolina Municipal Power Agency, Catawba
3.80% 04/03/95 (c) .............................. A-1 P-1 14,400 14,400,000
------------
15,400,000
------------
OHIO -- 3.1%
Franklin County Hospital Revenue (Holy Cross Health
System Corp) Series 1995
4.15% 04/07/95 (b) .............................. A-1 VMIG-1 14,500 14,500,000
------------
PENNSYLVANIA -- 2.1%
Commonwealth of Pennsylvania TAN
4.75% 06/30/95 (c) .............................. SP-1+ MIG-1 10,000 10,017,964
------------
PUERTO RICO -- 0.8%
Puerto Rico Government Development Bank (Credit
Suisse LOC)
4.10% 04/07/95 (b) .............................. A-1+ VMIG-1 3,600 3,600,000
------------
TENNESSEE -- 2.4%
Metropolitan Nashville Airport Authority, Refunding
(FGIC Insurance)
4.25% 04/07/95 (b) .............................. A-1+ VMIG-1 8,100 8,100,000
State of Tennessee GO, BAN
4.10% 04/07/95 (b) .............................. SP-1+ VMIG-1 3,500 3,500,000
------------
11,600,000
------------
TEXAS -- 16.2%
Gulf Coast Waste Disposal Authority, Environmental
Improvement (Amoco Oil)
4.40% 09/01/95 (c) .............................. A-1+ -- 3,000 3,000,000
Hale County Industrial Development Corp., PCR
(Amoco)
4.40% 09/01/95 (c) .............................. A-1+ P-1 5,900 5,900,000

</TABLE>

42
<PAGE> 140

TAX-FREE SERIES
- --------------------------------------------------------------------------
Statement of Net Assets - (continued)

March 31, 1995
<TABLE>
<CAPTION>
Rating(a) Par
S&P Moody's (000) Value
------- --------- --------- -----------
<S> <C> <C> <C> <C>
TEXAS -- continued
Harris County Health Facility Development
Corporation (Methodist Hospital) (Morgan Guaranty
LOC)
4.20% 06/01/95 (c) .............................. -- VMIG-1 $ 7,000 $ 7,000,000
4.50% 04/01/95 (b) .............................. A-1+ -- 2,400 2,400,000
Harris County Health Facility Development
Corporation (Texas Children's Hospital)
4.15% 04/07/95 (b) .............................. -- VMIG-1 7,900 7,900,000
Houston, GO, TECP
4.25% 05/01/95 (c) .............................. A-1+ P-1 4,500 4,500,000
Red River Authority (Southwestern Public Service)
(Union Bank of Switzerland LOC)
4.00% 04/07/95 (b) .............................. A-1+ VMIG-1 5,000 5,000,000
State of Texas Public Finance Authority, GO
4.25% 07/27/95 (c) .............................. A-1+ P-1 6,300 6,300,000
Texas Higher Education Authority, Facilities
Revenue, Series 85B (FGIC Insurance)
4.25% 04/07/95 (b) .............................. A-1+ VMIG-1 5,480 5,480,000
Texas, TRAN
5.00% 08/31/95 (c) .............................. SP-1+ MIG-1 20,000 20,044,243
West Side Calhoun County Development Corporation
PCR (British Petroleum)
4.50% 04/01/95 (b) .............................. A-1+ P-1 9,000 9,000,000
------------
76,524,243
------------
UTAH -- 3.4%
Emery County PCR Refunding (Pacific Corp.) (Credit
Suisse LOC)
4.25% 05/01/95 (c) .............................. A-1+ VMIG-1 1,230 1,230,000
Salt Lake City, Utah PCR Petroleum
4.50% 04/01/95 (b) .............................. -- VMIG-1 6,415 6,415,000
Salt Lake County PCR Refunding (British Petroleum)
4.55% 04/01/95 (b) .............................. A-1+ P-1 3,500 3,500,000
Utah State Board of Regents, Student Loan Revenue,
Series B (AMBAC Insurance)
4.10% 04/07/95 (b) .............................. A-1+ VMIG-1 5,000 5,000,000
------------
16,145,000
------------
</TABLE>

43
<PAGE> 141

TAX-FREE SERIES
- --------------------------------------------------------------------------
Statement of Net Assets - (continued)

March 31, 1995
<TABLE>
<CAPTION>
Rating(a) Par
S&P Moody's (000) Value
------- --------- --------- ------------
<S> <C> <C> <C> <C>
VERMONT -- 4.0%
State of Vermont GO, Commercial Paper Notes,
Series C
4.25% 05/01/95 (c) .............................. A-1+ P-1 $15,000 $ 15,000,000
Vermont Student Loan Authority, Series 1985
(National Westminster LOC)
4.00% 04/07/95 (b) .............................. A-1+ VMIG-1 3,800 3,800,000
-------------
18,800,000
-------------
TOTAL INVESTMENTS --99.4% ................................................. 472,369,778(d)
-------------
OTHER ASSETS IN EXCESS OF LIABILITIES, NET -- 0.6% ........................ 3,014,451
-------------
NET ASSETS --100.0% ....................................................... $ 475,384,229
=============
Net Asset Value, Offering and Redemption Price
per Share
($475,384,229 / 475,474,913 shares outstanding) $1.00
=====

</TABLE>

- ------
(a) Ratings assigned by Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P") are not covered by the Independent
Auditors' Report.
(b) Demand security; payable upon demand by the Fund with usually no more
than seven calendar days' notice. Interest rates are redetermined
periodically. Rates shown are the rates in effect on March 31, 1995.
(c) Security has an outstanding call, mandatory put or optional put by the
issuer. Par value and maturity date reflect such call or put.
(d) Aggregate cost for financial reporting and federal tax purposes.

See Notes to Financial Statements

44
<PAGE> 142

TAX-FREE SERIES
- --------------------------------------------------------------------------
Statement of Net Assets - (concluded)

March 31, 1995

INVESTMENT ABBREVIATIONS:
BAN Bond Anticipation Notes
GO General Obligation Bonds
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
LOC Letter of Credit
PCR Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
RB Revenue Bonds
TAN Tax Anticipation Notes
TECP Tax-Exempt Commercial Paper
TRAN Tax Revenue Anticipation Notes

INSURANCE ABBREVIATIONS:
AMBAC AMBAC Indemnity Corp.
MBIA Municipal Bond Investors Assurance
FGIC Federal Guaranty Insurance Corporation

MOODY'S MUNICIPAL BOND RATINGS:
Aaa Bonds which are judged to be of the best quality.
Aa Bonds which are judged to be of high quality by all standards.
Issues are sometimes rated with a 1, 2 or 3 which denotes a high,
medium or low ranking within the rating.
MIG-1 Notes bearing this designation are of the best quality.
VMIG-1 Variable rate demand obligations bearing this designation are of
the best quality.
P-1 Commercial paper bearing this designation is of the best quality.

S&P MUNICIPAL BOND RATINGS:
AAA These are obligations of the highest quality.
AA These obligations have the second strongest capacity for payment of
debt service. Those issues determined to possess very strong safety
characteristics are denoted with a plus (+) sign.
SP-1 Notes which have a strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics are assigned a plus (+) designation.
A-1 Commercial paper which has a strong degree of safety regarding
timely payment. Those issues determined to possess very strong
safety characteristics are denoted with a plus (+) sign.

A detailed description of the above ratings can be found in the
Fund's Statement of Additional Information.

See Notes to Financial Statements.

45
<PAGE> 143

ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------
STATEMENT OF OPERATIONS

FOR THE YEAR ENDED MARCH 31, 1995

<TABLE>
<CAPTION>
PRIME TREASURY TAX-FREE
SERIES SERIES SERIES
-------------- -------------- ------------
Investment Income (Note 1):
<S> <C> <C> <C>
Interest income ........................ $74,005,596 $27,610,164 $12,750,288
-------------- -------------- ------------
Expenses:
Distribution fee (Note 2) .............. 3,966,213 1,375,462 960,441
Investment advisory fee (Note 2) ....... 3,050,911 1,246,714 799,970
Transfer agent fees .................... 1,146,786 192,385 112,008
Custodian fees ......................... 342,213 174,999 93,702
Accounting fee (Note 2) ................ 100,466 90,083 60,284
Directors' fees ........................ 76,967 36,901 19,121
Other expenses ......................... 516,677 219,950 158,796
------------ -------------- ------------
Total expenses ....................... 9,200,233 3,336,494 2,204,322
Less: Fees waived (Note 2) .......... -- (156,200) --
------------ -------------- --------------
Net expenses ....................... 9,200,233 3,180,294 2,204,322
------------ -------------- --------------
Net investment income ..................... 64,805,363 24,429,870 10,545,966
Net realized gain/(loss) from security
transactions ............................. 355 4,522 (10,654)
------------ -------------- --------------
Net increase in net assets resulting from
operations ............................... $64,805,718 $24,434,392 $10,535,312
============ ============== ==============

</TABLE>

See Notes to Financial Statements.

46
<PAGE> 144

ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------
Statement of Changes in Net Assets

<TABLE>
<CAPTION>
Prime Series
----------------------------------
March 31, March 31,
1995 1994
-------------- -------------
<S> <C> <C>
Increase/(Decrease) in net assets
Operations:
Net investment income .............................. $ 64,805,363 $ 36,031,670
Net realized gain/(loss) from security transactions 355 (384)
-------------- --------------
Net increase in net assets resulting from operations 64,805,718 36,031,286
Distributions to shareholders from:
Net investment income:
Prime, Treasury and Tax-Free shares, respectively (59,535,578) (32,739,196)
Institutional shares ............................. (635,062) (781,048)
Flag Investors shares ............................ (699,891) (422,128)
Quality Cash shares .............................. (3,934,832) (2,089,298)
Net realized gains:
Prime, Treasury and Tax Free shares, respectively -- --
Institutional shares ............................. -- --
Flag Investors shares ............................ -- --
Quality Cash shares .............................. -- --
-------------- --------------
Total distributions .............................. (64,805,363) (36,031,670)
-------------- --------------
Capital share transactions, net - (Note 3) .......... 101,735,438 202,382,250
-------------- --------------
Total increase/(decrease) in net assets ............ 101,735,793 202,381,866
Net assets:
Beginning of year ................................ 1,484,567,516 1,282,185,650
-------------- --------------
End of year ...................................... $1,586,303,309 $1,484,567,516
============== ==============
</TABLE>

See Notes to Financial Statements.

47
<PAGE> 145

<TABLE>
<CAPTION>
Treasury Series Tax-Free Series
- --------------------------------- ---------------------------------
March 31, March 31, March 31, March 31,
1995 1994 1995 1994
-------------- --------------- -------------- ---------------
<S> <C> <C> <C>

$24,429,870 $ 17,417,546 $ 10,545,966 $ 6,162,576
4,522 52,709 (10,654) (43,790)
- ----------- --------------- --------------- ---------------
24,434,392 17,470,255 10,535,312 6,118,786

(22,548,414) (15,354,953) (10,545,966) (6,159,520)
(1,881,456) (2,062,594) -- --
-- -- -- --
-- -- -- --

-- (69,098) -- --
-- (7,743) -- --
-- -- -- --
-- -- -- --
- ------------ -------------- --------------- ---------------
(24,429,870) (17,494,388) (10,545,966) (6,159,520)
- ------------ -------------- --------------- ---------------
(95,202,377) (56,881,631) 96,535,651 63,238,519
- ------------ -------------- --------------- ---------------
(95,197,855) (56,905,764) 96,524,997 63,197,785

621,417,062 678,322,826 378,859,232 315,661,447
- ------------ -------------- --------------- ---------------
$526,219,207 $621,417,062 $475,384,229 $378,859,232
============ ============== =============== ===============

</TABLE>

48
<PAGE> 146

ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)

PRIME AND FLAG INVESTORS SHARES:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at
beginning of year ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment
Operations:
Net investment income ..... 0.0442 0.0262 0.0295 0.0485 0.0734
Less Distributions:
Dividends from net
investment income and
short-term gains ........ (0.0442) (0.0262) (0.0295) (0.0485) (0.0734)
-------------- -------------- --------------- -------------- ---------------
Net asset value at end of
year .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ============== ==============
Total Return 4.51% 2.65% 2.99% 4.96% 7.59%

Ratios to Average Net Assets:
Expenses .................. 0.61% 0.62% 0.63% 0.61% 0.59%
Net investment income ..... 4.46% 2.62% 2.95% 4.84% 7.31%

Supplemental Data:
Net assets at end of year . $1,479,806,435 $1,368,451,627 $1,151,979,704 $1,264,629,485 $1,295,888,161
Number of shares
outstanding at end of
year .................... 1,479,804,186 1,368,449,549 1,151,977,279 1,264,629,485 1,295,888,161
</TABLE>

See Notes to Financial Statements.

49
<PAGE> 147

ALEX. BROWN CASH RESERVE FUND, INC.
- ---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)

TREASURY SHARES:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at beginning
of year .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------- -------------- -------------- -------------- --------------
Income from Investment
Operations:
Net investment income ........ 0.0411 0.0255 0.0285 0.0477 0.0698
Less Distributions:
Dividends from net investment
income and short-term gains (0.0411) (0.0255) (0.0285) (0.0477) (0.0698)
-------------- -------------- -------------- -------------- --------------
Net asset value at end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ============== ==============
Total Return .................. 4.19% 2.58% 2.89% 4.88% 7.21%
Ratios to Average Net Assets:
Expenses ..................... 0.55%* 0.54%* 0.55%* 0.55% 0.56%
Net investment income ........ 4.09%** 2.55%** 2.87%** 4.76% 6.82%
Supplemental Data:
Net assets at end of year .... $512,167,212 $581,724,214 $618,175,839 $725,010,207 $716,551,599
Number of shares outstanding
at end of year ............. 512,162,864 581,723,448 618,152,465 725,010,207 716,551,599

</TABLE>

- ------
* Ratio of expenses to average net assets prior to partial fee waivers was
0.56% for the years ended March 31, 1995, 1994, and 1993.
** Ratio of net investment income to average net assets prior to partial fee
waivers was 4.08%, 2.53%, and 2.86% for the years ended March 31, 1995,
1994 and 1993, respectively.

See Notes to Financial Statements.

50
<PAGE> 148

ALEX. BROWN CASH RESERVE FUND, INC.
- ---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Institutional Prime and Institutional Treasury Shares:

<TABLE>
<CAPTION>
Institutional Prime Shares
---------------------------------------------------------------------

Year ended March 31,
---------------------------------------------------------------------
1995 1994 1993 1992
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ----------- ----------- ------------
Income from Investment Operations:
Net investment income .......... 0.0472 0.0294 0.0327 0.0515
Less Distributions:
Dividends from net investment
income and short-term gains .. (0.0472) (0.0294) (0.0327) (0.0515)
------------ ----------- ----------- -----------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ =========== =========== ===========
Total Return 4.82% 2.98% 3.32% 5.27%
Ratios to Average Net Assets:
Expenses ....................... 0.36% 0.30% 0.31% 0.32%
Net investment income .......... 4.57% 2.94% 3.24% 5.34%
Supplemental Data:
Net assets at end of period .... $ 11,904,716 $23,437,449 $28,884,078 $21,867,108
Number of shares outstanding at
end of period ................ 11,904,663 23,437,512 28,884,132 21,867,108
</TABLE>

- ------
* Commencement of operations.
** Annualized.
(1) Ratio of expenses to average net assets prior to partial fee waivers
assumed was 0.31%, 0.29% and 0.27% for the years ended March 31, 1995,
1994, and 1993, respectively.
(2) Ratio of net investment income to average net assets prior to partial
fee waivers assumed was 4.14%, 2.80% and 3.15% for the years ended March
31, 1995, 1994, and 1993, respectively.

See Notes to Financial Statements.

51
<PAGE> 149

- ---------------------------------------------------------------------------

<TABLE>
<CAPTION>
Institutional Treasury Shares
- --------------- --------------------------------------------------------------------------------------
June 4, 1990* Year ended March 31, June 4, 1990*
through --------------------------------------------------------------------- through
March 31, 1991 1995 1994 1993 1992 March 31, 1991
- -------------- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------ ------------- ------------- ------------- ------------- --------------

0.0617 0.0438 0.0282 0.0314 0.0504 0.0590

(0.0617) (0.0438) (0.0282) (0.0314) (0.0504) (0.0590)
- ------------ ------------- ------------- ------------- ------------- --------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============= ============= ============= ============= ==============

7.70%** 4.47% 2.86% 3.19% 5.17% 7.36%

0.35%** 0.30%(1) 0.27%(1) 0.26%(1) 0.27% 0.29%
7.53%** 4.15%(2) 2.82%(2) 3.16%(2) 4.90% 7.02%

$117,633,558 $14,051,995 $39,692,848 $60,146,987 $63,834,323 $58,017,844

117,633,558 14,046,467 39,688,259 60,140,874 63,834,323 58,017,844
</TABLE>

52
<PAGE> 150

ALEX. BROWN CASH RESERVE FUND, INC.
- ---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Tax-Free Series and Quality Cash Shares:

<TABLE>
<CAPTION>
Tax-Free Series
----------------------------------------------------------------------------

Year ended March 31,
----------------------------------------------------------------------------
1995 1994 1993 1992
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------- -------------- -------------- --------------
Income from Investment
Operations:
Net investment income ......... 0.0271 0.0184 0.0213 0.0353
Less Distributions:
Dividends from net investment
income and short-term gains .. (0.0271) (0.0184) (0.0213) (0.0353)
-------------- -------------- -------------- --------------
Net asset value at end of
period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ==============
Total Return 2.75% 1.86% 2.15% 3.59%
Ratios to Average Net Assets: ..
Expenses ...................... 0.57% 0.58% 0.60% 0.56%(1)
Net investment income ......... 2.74% 1.84% 2.13% 3.49%(2)
Supplemental Data:
Net assets at end of period ... $475,384,229 $378,859,232 $315,661,447 $304,987,823
Number of shares outstanding at
end of period ............... 475,474,913 378,939,262 315,700,742 305,008,959
</TABLE>

- ------
* Commencement of operations.
** Annualized.
(1) Ratio of expenses to average net assets prior to partial fees assumed
was 0.57% for the year ended March 31, 1992.
(2) Ratio of net investment income to average net assets prior to partial
fees assumed was 3.48% for the year ended March 31, 1992.

See Notes to Financial Statements.

53
<PAGE> 151

- ---------------------------------------------------------------------------

<TABLE>
<CAPTION>
Quality Cash Shares
- -------------- ----------------------------------------------------------------------
Dec. 17, 1990* Year ended March 31, May 6, 1991*
through ----------------------------------------------- through
March 31, 1991 1995 1994 1993 March 31, 1992
- -------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>

$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------ ------------- ------------- -------------- --------------

0.0124 0.0402 0.0218 0.0253 0.0399

(0.0124) (0.0402) (0.0218) (0.0253) (0.0399)
- ------------ ------------- ------------- -------------- --------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============= ============= ============== ==============
4.35%** 4.09% 2.20% 2.53% 4.30%**

0.53%** 0.96% 1.06% 1.04% 0.96%**
4.25%** 4.04% 2.18% 2.53% 4.30%**

$256,895,180 $94,592,158 $92,678,440 $101,321,868 $94,887,669

256,895,680 94,591,979 92,678,268 101,321,668 94,887,669
</TABLE>

54
<PAGE> 152

ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------
Notes to Financial Statements
March 31, 1995

NOTE 1 -- Significant Accounting Policies

Alex. Brown Cash Reserve Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund is organized as a Maryland
corporation consisting of three different portfolios, the Prime Series, the
Treasury Series, and the Tax-Free Series. The Prime Series consists of four
different classes of shares: Alex. Brown Cash Reserve Prime Shares ("Prime
Shares"), Flag Investors Cash Reserve Prime Shares ("Flag Investors Shares"),
Quality Cash Reserve Prime Shares ("Quality Cash Shares") and Institutional
Prime Shares. The Treasury Series offers two classes of shares: Alex. Brown
Cash Reserve Treasury Shares ("Treasury Shares") and Institutional Treasury
Shares. The Tax-Free Series offers only one class of shares. Matters
affecting each class are voted on exclusively by such shareholders. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.

A. Security Valuation -- The Fund maintains a dollar weighted average
portfolio maturity of 90 days or less for each portfolio. The securities
of each portfolio are valued on the basis of amortized cost which
approximates market value. This method values a security at its cost on
the date of purchase and thereafter assumes a constant amortization to
maturity of any original issue or other discount or premium.

B. Security Transactions, Investment Income and Distributions --
Securities transactions are accounted for on a trade date basis. Realized
gains or losses on sales, if any, are computed on the basis of specific
identification of the securities sold. Interest income is recorded on an
accrual basis and includes, when applicable, amortization of premiums and
accretion of discounts. Dividends to shareholders are declared daily and
distributions or reinvestments of the dividends are made monthly.

C. Repurchase Agreement -- The Prime Series may agree to purchase money
market instruments subject to the seller's agreement to repurchase them at
an agreed upon date and price. The seller, under a repurchase agreement,
will be required on a daily basis to maintain the value of the securities
subject to the agreement at not less than the repurchase price. The
agreement is conditioned upon the collateral being deposited under the
Federal Reserve book-entry system.

D. Federal Income Taxes -- The Fund intends to continue to comply with the
requirements of the Internal Revenue Code necessary to continue to qualify
as a regulated investment company and, as such, will not be subject

55
<PAGE> 153

Notes to Financial Statements - (continued)
March 31, 1995

NOTE 1 -- CONCLUDED

to federal income taxes on otherwise taxable income (including net
realized capital gains) which is distributed to shareholders. Each
portfolio is treated as a separate entity for federal income tax purposes.
The Tax-Free Series has a capital loss carryforward of $92,067 (which may
be carried forward to offset future taxable capital gains, if any) which
begins to expire, if not previously utilized, in 2000.

E. Expenses -- Operating expenses directly attributable to a class of
shares are charged to that class' operations. Expenses of the Fund which
are not directly attributable to a specific class are prorated among the
classes to which the expense relates based on the relative net assets of
each class.

NOTE 2 -- ADVISORY FEES AND TRANSACTIONS WITH OTHER AFFILIATES

The Fund has entered into an investment advisory agreement with Investment
Company Capital Corp. ("ICC"), a subsidiary of Alex. Brown & Sons
Incorporated ("Alex. Brown"), with respect to all Series, and a sub-advisory
agreement with PNC Institutional Management Corporation ("PIMC") with respect
to the Tax-Free Series. Prior to November 1, 1994, PIMC also served as
sub-advisor to the Prime Series. Under the terms of the investment advisory
agreement, ICC receives a fee from the Fund, calculated daily and paid
monthly, at the following annual rates based upon the Fund's aggregate
average daily net assets, .25% of the first $500 million, .21% of the next
$500 million, .20% of the next $500 million and .19% of that portion in
excess of $1.5 billion.

As compensation for its subadvisory services, PIMC receives a fee from
ICC, calculated daily and paid monthly, at the following annual rates based
upon the Tax-Free Series' aggregate average daily net assets; .15% of the
first $250 million, .13% of the next $250 million, .11% of the next $250
million, .09% of the next $250 million, .075% of the next $3 billion and .06%
of that portion in excess of $4 billion.

The Fund, pursuant to the sub-advisory agreement with PIMC, has agreed to
reimburse PIMC for certain costs incurred in providing accounting services to
the Prime and Tax-Free Series. For the year ended March 31, 1995, the Fund
paid PIMC $882,440 for sub-advisory and accounting services for the Prime
Series and $495,036 for the Tax-Free Series.

ICC may, from time to time, voluntarily waive a portion of its advisory
fee with respect to the Prime, Treasury and Tax-Free Series to preserve or
enhance the performance of each Series as compared to certain industry
benchmarks, and, if ICC elects to so waive a portion of its fee, PIMC has
agreed that it would waive a portion of its fee in the same proportion and

56
<PAGE> 154

Notes to Financial Statements - (continued)
March 31, 1995

NOTE 2 -- CONCLUDED

for the same time periods as any ICC waiver. ICC voluntarily waived fees in the
amount of $156,200 for the Treasury Series for the year ended March 31, 1995.

Under the terms of these agreements, ICC and Alex. Brown will, if
necessary, reimburse the Fund for any fiscal year to the extent that expenses
(exclusive of any interest, taxes, brokerage commissions and extraordinary
expenses) exceed 1% of aggregate average daily net assets each of the Fund's
three Series. The obligation of ICC to reimburse the Fund is limited to the
fees actually received by ICC for such fiscal year.

As compensation for its accounting services, ICC receives from the Prime
and Treasury Series an annual fee, calculated daily and paid monthly, based
on the Fund's average daily net assets. ICC received $58,826 and $90,083 for
accounting services for the year ended March 31, 1995 for the Prime and
Treasury Series, respectively. Prior to November 10, 1994, PIMC provided
accounting services for the Prime Series.

As compensation for its transfer agent services, ICC receives from the
Fund's three series a per account fee, calculated and paid monthly. ICC
received $1,146,786, $192,385 and $112,385 for transfer agent services for
the year ended March 31, 1995 for Prime, Treasury and Tax-Free Series,
respectively.

The Fund has entered into a distribution agreement with Alex. Brown. Under
the terms of the distribution agreement, Alex. Brown receives a fee from the
Prime Shares, Flag Investors Shares, Treasury Shares, and the Tax-Free
Series, at the annual rate of .25% of the aggregate average daily net assets
of these classes of shares. Alex. Brown also receives a fee from the Quality
Cash Shares at the annual rate of .60% of the aggregate average daily net
assets of the class.

NOTE 3 -- CAPITAL STOCK AND SHARE INFORMATION

5,000,000,000 shares of $.001 par value capital stock were authorized
(2,500,000,000 Prime Series, 1,500,000,000 Treasury Series, 600,000,000
Tax-Free Series and 400,000,000 not classified). Changes in shares
outstanding during the years ended March 31, 1995 and 1994, respectively, are
listed on the following page.

57
<PAGE> 155

Notes to Financial Statements - (continued)
March 31, 1995

NOTE 3 -- CONCLUDED

<TABLE>
<CAPTION>
March 31, 1995 March 31, 1994
---------------- ---------------
<S> <C> <C>
Prime Series:
Sold:
Prime Shares .................... 10,195,279,007 9,686,804,894
Flag Investors Shares ........... 16,905,684 19,779,192
Institutional Prime Shares ...... 60,472,629 112,556,652
Quality Cash Shares ............. 509,661,769 588,672,765
Issued as reinvestment of
dividends:
Prime Shares .................... 57,178,155 30,696,236
Flag Investors Shares ........... 666,245 410,766
Institutional Prime Shares ...... 40,493 --
Quality Cash Shares ............. 3,847,996 2,016,719
Redeemed:
Prime Shares .................... (10,130,712,590) (9,503,242,285)
Flag Investors Shares ........... (27,961,864) (17,976,533)
Institutional Prime Shares ...... (72,045,971) (118,003,272)
Quality Cash Shares ............. (511,596,054) (599,332,884)
---------------- ---------------
Net increase ................. 101,735,499 202,382,250
================ ===============
Treasury Series:
Sold:
Treasury Shares ................. 2,727,755,716 3,008,800,861
Institutional Treasury Shares ... 854,592,222 1,065,032,301
Issued as reinvestment of
dividends:
Treasury Shares ................. 21,562,879 14,417,283
Institutional Treasury Shares ... 8 --
Redeemed:
Treasury Shares ................. (2,818,879,180) (3,059,647,160)
Institutional Treasury Shares ... (880,234,022) (1,085,484,916)
---------------- ---------------
Net (decrease) ............... (95,202,377) (56,881,631)
================ ===============
Tax-Free Series:
Sold .............................. 3,571,743,009 3,167,571,073
Issued as reinvestment of dividends 10,051,311 5,808,090
Redeemed .......................... (3,485,258,669) (3,110,140,644)
---------------- ---------------
Net increase ................. 96,535,651 63,238,519
================ ===============
</TABLE>

NOTE 4 -- NET ASSETS

At March 31, 1995, net assets consisted of:

<TABLE>
<CAPTION>
Prime Treasury Tax-Free
Series Series Series
-------------- -------------- --------------
<S> <C> <C> <C>
Paid-in-capital ...................... $1,586,303,338 $526,205,142 $475,476,296
Undistributed net realized gain/(loss)
from security transactions ........... (29) 14,065 (92,067)
-------------- -------------- --------------
$1,586,303,309 $526,219,207 $475,384,229
</TABLE>
58
<PAGE> 156

Report of Independent Accountants

To The Shareholders and Board of Directors
Alex. Brown Cash Reserve Fund, Inc.:

We have audited the accompanying statements of net assets of Alex. Brown Cash
Reserve Fund, Inc. (consisting of the Prime, Treasury and Tax-Free Series) as of
March 31, 1995, and the related statement of operations for the year then ended
and the statement of changes in net assets and the financial highlights for each
of the two years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for each of
the respective years in the period ended March 31, 1993 were audited by other
auditors whose report dated May 7, 1993, expressed an unqualified opinion
thereon.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
March 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Series comprising the Alex. Brown Cash Reserve Fund, Inc. as
of March 31, 1995, and the results of their operations for the year then ended
and the changes in their net assets and their financial highlights for each of
the two years in the period then ended, in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
May 1, 1995

<PAGE> 157

PART C

OTHER INFORMATION

Item 24
(a) Financial Statements

In Part A:
Financial Highlights

In Part B:

(1) Statement of Net Assets as of March 31, 1995
(2) Statement of Operations for the year ended March 31,
1995
(3) Statements of Changes in Net Assets for the years ended
March 31, 1995 and March 31, 1994
(4) Notes to Financial Statements
(5) Report of Independent Accountants

In Part C:
None

(b) Exhibits

Exhibit
Number Description
- ------- -----------
(1) Charter

(a) Copy of Registrant's Articles of Incorporation.(2)

(b) Copy of Articles Supplementary to Registrant's Articles of
Incorporation dated June 28, 1990.(3)

(d) Copy of Articles Supplementary to Registrant's Articles of
Incorporation dated May 6, 1992.(6)

(e) Form of Articles Supplementary to Registrant's Articles of
Incorporation.(9)

(2) By-Laws - Copy of Registrant's By-Laws.(3)

(3) Certain Voting Trust Agreements - None.

(4) Specimen Security

(a) Copy of form of Registrant's Specimen Certificate.(2)

(b) Copy of form of Registrant's Specimen Certificate with respect
to Tax-Free Series Shares.(8)

(5) Advisory Agreement

(a) Investment Advisory Agreement dated as of April 4, 1990
between Registrant and Flag Investors Management Corp. (now
known as Investment Company Capital Corp.) with respect to
Registrant's Prime and Treasury Series.(7)

<PAGE> 158

(b) Investment Advisory Agreement dated October 5, 1990 between
Registrant and Flag Investors Management Corp. (now known as
Investment Company Capital Corp.) with respect to Registrant's
Tax-Free Series.(8)

(d) Form of Amended Investment Advisory Agreement between
Registrant and Investment Company Capital Corp. with respect
to the Prime Series.

(e) Form of Amended Investment Advisory Agreement between
Registrant and Investment Company Capital Corp. with respect
to the Treasury Series.

(f) Form of Amended Investment Advisory Agreement between
Registrant and Investment Company Capital Corp. with respect
to the Tax-Free Series.

(6) Underwriting or Distribution Agreement

(a) Distribution Agreement containing a Plan of Distribution under
Rule 12b-1 dated as of April 5, 1990 between Alex. Brown &
Sons Incorporated and Registrant.(6)

(b) Registrant's Form of Shareholder Processing and Service
Agreement (Dealer Agreement) between Alex. Brown & Sons
Incorporated and Participating Broker-Dealers.(3)

(d) Distribution Agreement with respect to Institutional Shares
dated as of April 4, 1990 between Alex. Brown & Sons
Incorporated and Registrant.(7)

(e) Distribution Agreement containing a Plan of Distribution under
Rule 12b-1 dated as of October 5, 1990 between Alex. Brown &
Sons Incorporated and Registrant with respect to Tax-Free
Series.(7)

(f) Registrant's Form of Shareholder Processing and Service
Agreement (Dealer Agreement) between Alex. Brown & Sons
Incorporated and Participating Broker-Dealers with respect to
Registrant's Tax-Free Series.(4)

(g) Registrant's Form of Shareholder Servicing Agreement between
Registrant and Shareholder Servicing Agents with respect to
Registrant's Tax-Free Series.(4)

(i) Registrant's Form of Dealer Agreement between Alex. Brown &
Sons Incorporated and Participating Broker Dealers with
respect to Quality Cash Reserve Prime Shares.(5)

C-2
<PAGE> 159

(j) Form of Distribution Agreement between Alex. Brown & Sons
Incorporated and Alex. Brown with respect to Flag Investors
Cash Reserve Prime Shares- Class B.(9)

(k) Form of Shareholder Servicing Agreement for Flag Investors
Shares.(9)

(l) Form of Sub-Distribution Agreement for Flag Investors
Shares.(9)

(7) Certain Bonus, Profit Sharing, Pension or Similar Contracts - None.

(8) (a) Custodian Agreement dated as of April 4, 1990 between
Registrant and Provident National Bank (now known as PNC
Bank).(7)

(b) Accounting Services Agreement dated as of June 1, 1991 between
Registrant and Provident Financial Processing Corporation (now
known as PFPC Inc.) with respect to the Tax-Free Series.(8)

(9) Form of Master Services Agreement (for transfer agency services for the
Fund and accounting services for the Prime and Treasury Series) between
Registrant and Investment Company Capital Corp.(8)

(10) Opinion and Consent of Messrs. Spengler Carlson Gubar Brodsky &
Frischling.(2)

(11) (a) Consent of Coopers & Lybrand L.L.P.

(12) Other Financial Statements - None.

(13) Agreement Concerning Initial Capitalization - None.

(14) Retirement Plan Models.(1)

(15) (a) Rule 12b-1 Plan - See Exhibit 6 above.

(b) Form of Plan of Distribution with respect to Flag Investors
Cash Reserve Prime Shares - Class B.(9)

(16) Schedule of Computation of Performance Data (unaudited).(2)

(24) (a) Powers of Attorney.(8)

(b) Power of Attorney of James J. Cunnane.(9)

- ------------
1 filed as an Exhibit to Post-Effective Amendment No. 7 on June 27, 1986,
and hereby incorporated by reference.

2 filed as an Exhibit to Post-Effective Amendment No. 12 on February 5,
1990, and hereby incorporated by reference.

C-3
<PAGE> 160

3 filed as an Exhibit to Post-Effective Amendment No. 14 on July 27,
1990, and hereby incorporated by reference.

4 filed as an Exhibit to Post-Effective Amendment No. 15 on August 6,
1990, and hereby incorporated by reference.

5 filed as an Exhibit to Post-Effective Amendment No. 16 on November 30,
1990 and hereby incorporated by reference.

6 filed as an Exhibit to Post-Effective Amendment No. 20 on July 27,
1992, and hereby incorporated by reference.

7 filed as an Exhibit to Post-Effective Amendment No. 21 on July 28, 1993
and hereby incorporated by reference.

8 filed as an Exhibit to Post-Effective Amendment No. 22 on July 27,
1994, and hereby incorporated by reference.

9 filed as an Exhibit to Post-Effective Amendment No. 23 on December 30,
1994, and hereby incorporated by reference.

Item 25. Persons Controlled by or under Common Control With Registrant

Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each such
person indicate (1) if a company, the state or other sovereign power under the
laws of which it is organized, and (2) the percentage of voting securities owned
or other basis of control by the person, if any, immediately controlling it.

None.

Item 26. Number of Holders of Securities

State in substantially the tabular form indicated, as of a specified
date within 90 days prior to the date of filing, the number of record holders of
each class of securities of the Registrant.

Number of Record Holders
of Alex. Brown Cash Reserve
Title of Class Fund, Inc. as of May 22, 1995
- -------------- -----------------------------
Prime Series: <C>
<S>
1. Alex. Brown Cash Reserve Prime Shares 70,244

2. Flag Investors Cash Reserve Prime Shares-Class A 361

3. Flag Investors Cash Reserve Prime Shares-Class B 0

4. Institutional Prime Shares 4

5. Quality Cash Reserve Prime Shares 8,358

</TABLE>

C-4

<PAGE> 161

Number of Record Holders
of Alex. Brown Cash Reserve
Title of Class Fund, Inc. as of May 22, 1995
- -------------- -----------------------------

Treasury Series:
<S> <C>

1. Alex. Brown Cash Reserve Treasury Shares 14,845

2. Institutional Treasury Shares 2

Tax-Free Series:

1. Alex. Brown Cash Reserve Tax-Free Shares 8,183

</TABLE>

Item 27. Indemnification

State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified in any manner against any liability which may be
incurred in such capacity, other than insurance provided by any director,
officer, affiliated person or underwriter for their own protection.

Sections a, b, c and d of Article IX of Registrant's Articles of
Incorporation included as Exhibit 1 to this Registration Statement and
incorporated herein by reference, provide as follows:

(a) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the Corporation shall have
any liability to the Corporation or its stockholders for damages. This
limitation on liability applies to events occurring at the time a
person serves as a director or officer of the Corporation whether or
not such person is a director or officer at the time of any proceeding
in which liability is asserted.

(b) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify and advance expenses
to its officers to the same extent as its directors and to such further
extent as is consistent with law. The Board of Directors may by By-Law,
resolution or agreement make further provisions for indemnification of
directors, officers, employees and agents to the fullest extent
permitted by the Maryland General Corporation Law.

(c) No provision of this Article shall be effective to protect any
director or officer of the Corporation against any liability to the
Corporation or its security holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his
office.

(d) References to the Maryland General Corporation Law in this Article
are to the law as from time to time amended. No further amendment to
the Articles of Incorporation of the Corporation shall affect any right
of any person under this Article based on any event, omission or
proceeding prior to such amendment.

Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission

C-5
<PAGE> 162

such indemnification is against public policy as expressed in the Act and is,
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Investment Company Act of 1940 and will be governed
by the final adjudication of such issue. Insurance coverage is provided under a
joint Mutual Fund & Investment Advisory Professional and Directors & Officers
Liability Policy, issued by Evanston Insurance Company, with a $5,000,000 limit
of liability.

Item 28. Business and Other Connections of Investment Advisor

Describe any other business, profession, vocation or employment of a
substantial nature in which each investment advisor of the Registrant, and each
director, officer or partner of any such investments advisor, is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner, or trustee.

Investment Company Capital Corp.

During the last two fiscal years, no director or officer of Investment
Company Capital Corp. (formerly known as Flag Investors Management Corp.) the
Registrant's investment advisor, has engaged in any other business, profession,
vocation or employment of a substantial nature other than that of the business
of investment management and, through affiliation, investment banking.

PNC Institutional Management Corporation (Sub-Advisor to Registrant's
Tax-Free Series)

Position with Other Business
PIMC Name Connections Type of Business
- ------------- ------------------ --------------- ----------------
<S> <C> <C> <C>
Chairman and J. Richard Carnall Executive Vice President Banking
Director PNC Bank, National Association(1)

Director Banking
PNC National Bank(2)

Chairman and Director Financial-Related
PFPC Inc.(3) Services

Director Fiduciary
PNC Trust Company Activities
of New York(11)

Director Equipment
Hayden Bolts, Inc.*

Director Real Estate
Parkway Real Estate Company*

Director Investment
Provident Capital Management Advisory
Inc.(5)

</TABLE>

C-6

Position with Other Business
PIMC Name Connections Type of Business
- ------------- ------------------ --------------- ----------------
<S> <C> <C> <C>

Director Financial
PFPC International, Ltd.(26) Services

Director Richard C. Caldwell Executive Vice President Banking
PNC Bank, National Association(1)

Director Fiduciary
PNC Trust Company Activities
of New York(11)

Director Investment
Provident Capital Management Advisory
Inc.(5)

Executive Vice President Bank Holding
PNC Bank Corp.(14) Company

Director Fiduciary
PNC Bank, FSB(27) Activities

Chairman and Director Investment
PNC Asset Management Group,Inc.(28) Advisory

Director Investment
PNC Equity Advisors Company(29) Advisory

Director Banking
PNC Bank of New England(30)

Director Financial-Related
PFPC Inc.(3) Services

Director Richard L. Smoot President and Chief Banking
Executive Officer
PNC Bank, National Association(1)

Senior Vice President Bank Holding
PNC Bank Corp.(14) Company

Director Financial-Related
PFPC Inc.(3) Services

Director Fiduciary
PNC Trust Company of NY(11) Activities

</TABLE>
C-7

<PAGE> 164

Position with Other Business
PIMC Name Connections Type of Business
- ------------- ------------------ --------------- ----------------
<S> <C> <C> <C>
Director, Chairman and President Banking
PNC Bank, New Jersey,
National Association(16)

Director, Chairman and CEO Banking
PNC National Bank(2)

Chairman & Director Leasing
PNC Credit Corp (13)

Secretary Michelle L. Petrilli Chief Counsel Banking
PNC Bank, DE(20)

Secretary Financial-Related
PFPC Inc.(3) Services

President and Thomas H. Nevin None
Chief Invest-
ment Officer

Chief Financial Nicholas M. Marsini, Jr. Director of Finance Finance
PFPC Bank Corp.

Executive Vice Charles B. Landreth Vice President Banking
President PNC Bank, National Association(1)

Senior Vice Vincent J. Ciavardini President and Director Financial-Related
President PFPC Inc.(3) Services

President and Director Financial-Related
PFPC International, Ltd.(26) Services

Senior Vice Scott Moss None
President

Senior Vice John N. Parthemore Vice President Banking
President PNC Bank, National Association(1)

Senior Vice Dushyant Pandit None
President

Senior Vice James R. Smith None
President

Group Vice William F. Walsh None
President

</TABLE>

C-8
<PAGE> 165

Position with Other Business
PIMC Name Connections Type of Business
- ------------- ------------------ --------------- ----------------
<S> <C> <C> <C>
Vice President, Stephen M. Wynne Executive Vice President and Financial-Related
Chief Accounting Chief Accounting Officer Services
Officer, and PFPC Inc.(3)
Assistant Secretary

Executive Vice President Financial
PFPC International, Ltd.(26) Services

Vice President Pauline M. Heintz Vice President Financial-Related
and Controller PFPC Inc.(3) Services

Vice President John R. Antczak None

Vice President Jeffrey W. Carson None

Vice President Katherine A. Chuppe None

Vice President Mary J. Coldren None

Vice President Michele C. Dillon None

Vice President Patrick J. Ford None

Vice President Richard Hoerner None

Vice President Michael S. Hutchinson None

Vice President Michael J. Milligan None

Vice President Allyn Plambeck None

Vice President W. Don Simmons None

Vice President Chalres Allen Stiteler None

</TABLE>
- ------------
*Information regarding these corporations can be obtained from the office of
the Secretary.

(1) PNC Bank, National Association, 120 S. 17th Street, Philadelphia, PA 19103
Broad & Chestnut Streets, Philadelphia,
PA 19101
17th and Chestnut Streets, Philadelphia,
PA 19103

(2) PNC National Bank, 103 Bellevue Parkway, Wilmington, DE 19809.

(3) PFPC Inc., 103 Bellevue Parkway, Wilmington, DE 19809.

(4) PNC Service Corp, 103 Bellevue Parkway, Wilmington, DE 19809.

C-9

<PAGE> 166

(5) Provident Capital Management, Inc., 30 S. 17th Street, Suite 1500,
Philadelphia, PA 19103.

(6) PNC Investment Corp., Broad and Chestnut Street, Philadelphia, PA
19101.

(7) Provident Realty Management, Inc., Broad and Chestnut Streets,
Philadelphia, PA 19101.

(8) Provident Realty, Inc., Broad and Chestnut Streets, Philadelphia, PA
19101.

(9) PNC Bancorp, Inc., 3411 Silverside Road, Wilmington, DE 19810

(10) PNC New Jersey Credit Corp, 1415 Route 70 East, Suite 604, Cherry Hill,
NJ 08034.

(11) PNC Trust Company of New York, 40 Broad Street, New York, NY 10084.

(12) Provcor Properties, Inc., Broad and Chestnut Streets, Philadelphia, PA
19101.

(13) PNC Credit Corp, 103 Bellevue Parkway, Wilmington, DE 19809.

(14) PNC Bank Corp., 5th Avenue and Wood Streets, Pittsburgh, PA 15265.

(15) Advanced Investment Management, Inc., 27th Floor, One Oliver Plaza,
Pittsburgh, PA 15265.

(16) PNC Bank, New Jersey, National Association, Woodland Falls Corporate
Park, 210 Lake Drive East, Cherry Hill, NJ 08002.

(17) PNC Capital Corp, 5th Avenue and Woods Streets, Pittsburgh, PA 15265.

(18) PNC Holding Corp, 222 Delaware Avenue, P.O. Box 791, Wilmington, DE
19899.

(19) PNC Venture Corp, 5th Avenue and Woods Streets, Pittsburgh, PA 15265.

(20) PNC Bank, Delaware, 300 Delaware Avenue, Wilmington, DE 19801.

(21) Bank of Delaware Corp., 300 Delaware Avenue, Wilmington, DE 19801.

(22) Del-Vest, Inc., 300 Delaware Avenue, Wilmington, DE 19801.

(23) Marand Corp., 222 Delaware Avenue, Wilmington, DE 19801.

(24) Millsboro Insurance Agency, 300 Delaware Avenue, Wilmington, DE 19801.

(25) Roney-Richards, Inc., 300 Delaware Avenue, Wilmington, DE 19801.

(26) PFPC International, Ltd., Dublin, Ireland.

(27) PNC Bank, FSB, P.O. Box 4026, Vero Beach, FL.

(28) PNC Asset Management Group, Inc., 1835 Market Street, Philadelphia, PA
19103.

(29) PNC Equity Advisors Company, 1835 Market Street, Philadelphia, PA
19103.

(30) PNC Bank of New England, 125 High Street, Boston, MA.

C-10
<PAGE> 167

In addition, see the Statement of Additional Information, Part B under
headings "General Information about the Fund - The Investment Advisor,
The Sub-Advisor and Directors and Officers" for information concerning
Investment Company Capital Corp. and PNC Institutional Management
Corporation.

Item 29. Principal Underwriters

(a) Registrant
Flag Investors Telephone Income Fund, Inc.
Flag Investors International Fund, Inc.
Flag Investors Emerging Growth Fund, Inc.
Flag Investors Quality Growth Fund, Inc.
Flag Investors Total Return U.S. Treasury Fund
Shares of Total Return U.S. Treasury Fund, Inc.
Flag Investors Managed Municipal Fund Shares of Managed
Municipal Fund, Inc.
Flag Investors Intermediate-Term Income Fund, Inc.
Flag Investors Value Builder Fund, Inc.
Flag Investors Maryland Intermediate Tax Free Income Fund,
Inc.
Flag Investors Real Estate Securities Fund, Inc.
Flag Investors Equity Partners Fund, Inc.

(b)

Name and Principal Position and Position and
Business Offices with Principal Offices with
Address* Underwriter Registrant
- ------------------ ----------------------- ------------

Mayo A. Shattuck III President and Director None

Alvin B. Krongard Chairman, Chief Executive None
Officer and Director

Beverly L. Wright Chief Financial Officer, None
Treasurer

Robert F. Price Secretary None

- ------------
*135 E. Baltimore Street, Baltimore, MD 21202

Item 30. Location of Accounts and Records

With respect to each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to
31a-3) promulgated thereunder, furnish the name and address of each person
maintaining physical possession of each such account, book or other document.

C-11

<PAGE> 168

PNC Institutional Management Corporation (formerly Provident
Institutional Management Corporation), and PFPC Inc. (formerly
Provident Financial Processing Corp.) each located at Bellevue
Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809,
will maintain physical possession of each such account, book or other
document of the Registrant at their respective principal executive
offices except for those maintained by the Registrant's Custodian, PNC
Bank, National Association (successor by merger to Provident National
Bank), Airport Business Center, 200 Stevens Drive, Lester, Pennsylvania
19113; by Registrant's Distributor, Alex. Brown & Sons Incorporated,
135 East Baltimore Street, Baltimore, Maryland 21202; or by
Registrant's Investment Advisor and Transfer Agent, Investment Company
Capital Corp., 135 East Baltimore Street, Baltimore, Maryland 21202.

Item 31. Management Services

Furnish a summary of the substantive provisions of any management
related service contract not discussed in Part I of this Form (because the
contract was not believed to be material to a purchaser of securities of the
Registrant) under which services are provided to the Registrant, indicating the
parties to the contract, the total dollars paid and by whom, for the last three
fiscal years.

None.

Item 32. Undertakings

None.

C-12
<PAGE> 169

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this
Post-Effective Amendment No. 24 to the Registration Statement to be signed on
its behalf by the undersigned thereto duly authorized in the City of Baltimore,
in the State of Maryland, on the 31st day of May, 1995.

Registrant: ALEX. BROWN CASH RESERVE FUND, INC.

By: /s/Richard T. Hale
----------------------
Richard T. Hale
President and Director

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities on the date indicated:
<TABLE>
<CAPTION>

SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>

/s/ Richard T. Hale President and May 31, 1995
- --------------------------------------- Director
Richard T. Hale

*/s/ W. James Price Director May 31, 1995
- --------------------------------------
W. James Price

*/s/ James J. Cunnane Director May 31, 1995
- ------------------------------------
James J. Cunnane

*/s/ N. Bruce Hannay Director May 31, 1995
- -------------------------------------
N. Bruce Hannay

*/s/ John F. Kroeger Director May 31, 1995
- --------------------------------------
John F. Kroeger

*/s/ Louis E. Levy Director May 31, 1995
- ----------------------------------------
Louis E. Levy

*/s/ Eugene J. McDonald Director May 31, 1995
-----------------------------------
Eugene J. McDonald

*/s/ Harry Woolf Director May 31, 1995
- -----------------------------------
Harry Woolf

*/s/ Diana M. Ellis Chief Financial and May 31, 1995
- ----------------------------------- Accounting Officer
Diana M. Ellis

*By: /s/ Brian C. Nelson
- -----------------------------------
Brian C. Nelson
Attorney-In-Fact

</TABLE>

<PAGE> 170

EXHIBIT INDEX
<TABLE>
<CAPTION>

Exhibit
Number Description Page No.
- ------- ----------- --------
<S> <C> <C>
(1) (a) Registrant's Articles of Incorporation are hereby incorporated by
reference to Post-Effective Amendment No. 12 to Registrant's
Registration Statement on Form N-1A (Registration No. 2-72658), filed
with the Securities and Exchange Commission on February 5, 1990.

(b) Registrant's Articles Supplementary to its Articles of Incorporation are
hereby incorporated by reference to Post-Effective Amendment No. 14
to Registrant's Registration Statement Form N-1A (Registration No.
2-72658), filed with the Securities and Exchange Commission on July 27,
1990.

(c) Registrant's Articles Supplementary to its Articles of Incorporation are
hereby incorporated by reference to Post-Effective Amendment No. 15
to Registrant's Registration Statement on Form N-1A (Registration No.
2-72658), filed with the Securities and Exchange Commission on August 6,
1990.

(d) Registrant's Articles Supplementary to its Articles of Incorporation dated
May 6, 1992 are hereby incorporated by reference to Post-Effective
Amendment No. 20 to Registrant's Registration Statement on Form N-1A
(Registration No. 2-72658), filed with the Securities and Exchange
Commission on July 27, 1992.

(e) Registrant's Form of Articles Supplementary are hereby incorporated by
reference to Post-Effective Amendment No. 23 to Registrant's
Registration Statement on Form N-1A (Registration No. 2-72658), filed
with the Securities and Exchange Commission on December 30, 1994.

(2) Registrant's By-Laws are hereby incorporated by reference to Post-Effective
Amendment No. 14 to Registrant's Registration Statement on Form N-1A
(Registration No. 2-72658), filed with the Securities and Exchange Commission
on July 27, 1990.

(3) None.

(4) (a) Registrant's Specimen Securities with respect to Prime Series Shares
and Treasury Series Shares are hereby incorporated by reference to
Post-Effective Amendment No. 12 to Registrant's Registration Statement
on Form N-1A (Registration No. 2-72658), filed with the Securities and
Exchange Commission on February 5, 1990.

(b) Registrant's Specimen Certificate with respect to Tax-Free Series Shares
are hereby incorporated by reference to Post-Effective Amendment No.
22 to Registrant's Registration Statement on Form N-1A (Registration
No. 2-72658), filed with the Securities and Exchange Commission on
July 27, 1994.

(5) (a) Investment Advisory Agreement dated as of April 4, 1990 between
Registrant and Flag Investors Management Corp. (now known as
Investment Company Capital Corp.) with respect to Registrant's Prime
and Treasury Series is hereby incorporated by reference to Post-
Effective Amendment No. 21 to Registrant's Registration Statement on
Form N-1A (Registration Statement No. 2-72658), filed with the
Securities and Exchange Commission on July 28, 1993.

</TABLE>

<PAGE> 171

Exhibit
Number Description Page No.
- ------- ----------- --------
<S> <C> <C>
(b) Investment Advisory Agreement dated as of October 5, 1990 between
Registrant and Flag Investors Management Corp. (now known as
Investment Company Capital Corp.) with respect to Registrant's Tax-
Free Series is hereby incorporated by reference to Post-Effective
Amendment No. 22 to Registrant's Registration Statement on Form N-1A
(Registration Statement No. 2-72658), filed with the Securities and
Exchange Commission on July 27, 1994.

(c) Sub-Advisory Agreement between Flag Investors Management Corp.
(now known as Investment Company Capital Corp.) and Provident
Institutional Management Corporation (now known as PNC Institutional
Management Corporation) with respect to the Tax-Free Series as in
effect from June 1, 1991 is hereby incorporated by reference to Post-
Effective Amendment No. 22 to Registrant's Registration Statement on
Form N-1A (Registration Statement No. 2-72658), filed with the
Securities and Exchange Commission on July 27, 1994.

Ex-99.B(5)(d) Form of Amended Investment Advisory Agreement between Registrant
and Investment Company Capital Corp. with respect to the Prime Series,
filed herewith.

Ex-99.B(5)(e) Form of Amended Investment Advisory Agreement between Registrant
and Investment Company Capital Corp. with respect to the Treasury
Series, filed herewith.

Ex-99.B(5)(f) Form of Amended Investment Advisory Agreement between Registrant
and Investment Company Capital Corp. with respect to the Tax-Free
Series, filed herewith.

(6) (a) Distribution Agreement containing a Plan of Distribution under Rule
12b-1 dated as of April 5, 1990 between Registrant and Alex. Brown &
Sons Incorporated is hereby incorporated by reference to Post-Effective
Amendment No. 20 to Registrant's Registration Statement on Form N-1A
(Registration Statement No. 2-72658), filed with the Securities and
Exchange Commission on July 27, 1992.

(b) Form of Shareholder Processing and Service Agreement (Dealer
Agreement) between Alex. Brown & Sons Incorporated and Participating
Broker-Dealers is hereby incorporated by reference to Post-Effective
Amendment No. 14 to Registrant's Registration Statement on Form N-1A
(Registration No. 2-72658), filed with the Securities and Exchange
Commission on July 27, 1990.

(c) Form of Shareholder Servicing Agreement between Registrant and
Shareholder Servicing Agents is hereby incorporated by reference to
Post-Effective Amendment No. 12 to Registrant's Registration Statement
on Form N-1A (Registration No. 2-72658), filed with the Securities and
Exchange Commission on February 5, 1990.

</TABLE>

<PAGE> 172

Exhibit
Number Description Page No.
- ------- ----------- --------
<S> <C> <C>
(d) Distribution Agreement dated as of April 4, 1990 between Registrant and
Alex. Brown & Sons Incorporated with respect to Institutional Shares is
hereby incorporated by reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement on Form N-1A (Registration No.
2-72658), filed with the Securities and Exchange Commission on July 28,
1993.

(e) Distribution Agreement dated as of October 5, 1990 containing a Plan of
Distribution under Rule 12b-1 between Registrant and Alex. Brown & Sons
Incorporated with respect to Registrant's Tax-Free Series is hereby
incorporated by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A (Registration No.
2-72658), filed with the Securities and Exchange Commission on July 28,
1993.

(f) Form of Shareholder Processing and Service Agreement (Dealer
Agreement) between Alex. Brown & Sons Incorporated and Participating
Broker-Dealers with respect to Registrant's Tax-Free Series is hereby
incorporated by reference to Post-Effective Amendment No. 15 to
Registrant's Registration Statement on Form N-1A (Registration No.
2-72658), filed with the Securities and Exchange Commission on
August 6, 1990.

(g) Form of Shareholder Servicing Agreement between Registrant and
Shareholder Servicing Agents with respect to Registrant's Tax-Free
Series is hereby incorporated by reference to Post-Effective Amendment
No. 15 to Registrant's Registration Statement on Form N-1A
(Registration No. 2-72658), filed with the Securities and Exchange
Commission on August 6, 1990.

(h) Distribution Agreement containing a Plan of Distribution under Rule
12b-1 dated as of January 31, 1991 between Alex. Brown & Sons
Incorporated and Registrant with respect to Quality Cash Reserve Shares
is hereby incorporated by reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement on Form N-1A (Registration No.
2-72658), filed with the Securities and Exchange Commission on July 28,
1993.

(i) Registrant's Form of Dealer Agreement between Alex. Brown & Sons
Incorporated and Participating Broker Dealers with respect to Quality
Cash Reserve Shares is hereby incorporated by reference to Post-
Effective Amendment No. 16 to Registrants' Registration Statement on
Form N-1A (Registration No. 2-72658), filed with the Securities and
Exchange Commission on November 30, 1990.

</TABLE>

<PAGE> 173

Exhibit
Number Description Page No.
- ------- ----------- --------
<S> <C> <C>
(j) Form of Distribution Agreement between Alex Brown & Sons
Incorporated and Alex Brown with respect to Flag Investors Cash
Reserve Prime Shares- Class B is hereby incorporated by reference to
Post-Effective Amendment No. 23 to Registrant's Registration Statement
on Form N-1A (Registration No. 2-72658), filed with the Securities and
Exchange Commission on December 30, 1994.

(k) Form of Shareholder Servicing Agreement for Flag Investors Shares is
hereby incorporated by reference to Post-Effective Amendment No. 23
to Registrant's Registration Statement on Form N-1A (Registration No.
2-72658), filed with the Securities and Exchange Commission on
December 30, 1994.

(l) Form of Sub-Distribution Agreement for Flag Investors Shares is hereby
incorporated by reference to Post-Effective Amendment No. 23 to
Registrant's Registration Statement on Form N-1A (Registration No.
2-72658), filed with the Securities and Exchange Commission on
December 30, 1994.

(7) None.

(8) (a) Custodian Agreement dated as of April 4, 1990 between Registrant and
Provident National Bank (now known as PNC Bank) is hereby
incorporated by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A (Registration
Statement No. 2-72658), filed with the Securities and Exchange
Commission on July 28, 1993.

(b) Accounting Services Agreement dated as of June 1, 1991 between
Registrant and Provident Financial Processing Corporation (now known
as PFPC Inc.) with respect to the Tax-Free Series is hereby incorporated
by reference to Post-Effective Amendment No. 22 to Registrant's
Registration Statement on Form N-1A (Registration Statement No.
2-72658), filed with the Securities and Exchange Commission on July 27,
1994.

(9) Form of Master Services Agreement (for transfer agency services for the Fund
and accounting services for the Prime and Treasury Series) between Registrant
and Investment Company Capital Corp. is hereby incorporated by reference to
Post-Effective Amendment No. 22 to Registrant's Registration Statement on
Form N-1A (Registration Statement No. 2-72658), filed with the Securities and
Exchange Commission on July 27, 1994.

(10) Opinion of Counsel is hereby incorporated by reference to Post-Effective
Amendment No. 12 to Registrant's Registration Statement on Form N-1A
(Registration No. 2-72658), filed with the Securities and Exchange Commission
on February 5, 1990.

</TABLE>

<PAGE> 174

Exhibit
Number Description Page No.
- ------- ----------- --------
<S> <C> <C>

Ex-99.B(11) (a) Consent of Coopers & Lybrand L.L.P., filed herewith.

(12) None.

(13) None.

(14) Retirement Plan Models are hereby incorporated by reference to Post-Effective
Amendment No. 7 to Registrant's Registration Statement on Form N-1A
(Registration No. 2-72658), filed with the Securities and Exchange Commission
on June 27, 1986.

(15) (a) See Exhibit 6 above.

(b) Form of Plan of Distribution with respect to Flag Investors Cash Reserve
Prime Shares - Class B is hereby incorporated by reference to Post-
Effective Amendment No. 23 to Registrant's Registration Statement on
Form N-1A (Registration No. 2-72658), filed with the Securities and
Exchange Commission on December 30, 1994.

(16) Schedule of Computation of Performance Quotations (unaudited) is hereby
incorporated by reference to Post-Effective Amendment No. 12 to Registrant's
Registration Statement on Form N-1A (Registration No. 2-72658), filed with the
Securities and Exchange Commission on February 5, 1990.

(24) (a) Powers of Attorney are hereby incorporated by reference to Post-
Effective Amendment No. 22 on July 27, 1994.

(b) Power of Attorney of James J. Cunnane is hereby incorporated by
reference to Post-Effective Amendment No. 23 to Registrant's
Registration Statement on Form N-1A (Registration No. 2-72658), filed
with the Securities and Exchange Commission on December 30, 1994.

</TABLE>

<PAGE> 175
Ex-99.B(5)(d)

FORM OF 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;

<PAGE> 176

(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, stationary 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;

(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

-2-

<PAGE> 177

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;

(d) the provisions of the By-laws of the Fund, as amended; and

(e) any other applicable provisions of state and federal law.

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

(a) The Advisor shall furnish, at its expense and without cost to
the Fund, the services of one or more officers of the Fund, to the extent
that such officers may be required by the Fund for the proper conduct of
its affairs.

(b) The Fund assumes and shall pay or cause to be paid all other
expenses of the Prime Series, including, without limitation the Prime
Series' allocable portion of the following expenses: payments to the Fund's
distributor under the Prime Series' plans of distribution; the charges and
expenses of any registrar, any custodian or depository appointed by the
Fund for the safekeeping of its cash, portfolio securities and other
property, and any transfer, dividend or accounting agent or agents
appointed by the Fund; brokers' commissions chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a
party; all taxes, including securities issuance and transfer taxes, and
fees payable by the Fund to federal, state or other governmental agencies;
the costs and expenses of engraving or printing of certificates
representing shares of the Fund; all costs and expenses in connection with
the registration and maintenance of registration of the Fund and its shares
with the SEC and various states and other jurisdictions (including filing
fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and
statements of additional information of the Fund and supplements thereto to
the Fund's shareholders; all expenses of shareholders' and directors'
meetings and of preparing, printing and mailing of proxy statements and
reports to shareholders; fees and travel expenses of directors or director
members of any advisory board or committee; all expenses incident to the
payment of any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used for
pricing of the Fund's shares; charges and expenses of legal counsel,
including counsel to the directors of the Fund who are not interested
persons (as defined in the 1940 Act) of the Fund and of independent
accountants, in connection with any matter relating to the Fund; membership
dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers
and directors) of the Fund which inure to its benefit; extraordinary
expenses (including but not limited to, legal claims and liabilities

-3-

<PAGE> 178

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 the Sub-Advisory Agreement.

(b) The Advisor may, but shall not be under any duty to, perform
services on behalf of the Prime Series which are not required by this
Agreement upon the request of the Fund's Board of Directors. Such services
will be performed on behalf of the Prime Series and the Advisor's charge in
rendering such services may be billed monthly to the Fund, subject to
examination by the Fund's independent accountants. Payment or assumption by
the Advisor of any Fund expense that the Advisor is not required to pay or
assume under this Agreement shall not relieve the Advisor of any of its
obligations to the Prime Series nor obligate the Advisor to pay or assume
any similar Prime Series' expenses on any subsequent occasions.

8. Compensation. For the services to be rendered and the expenses
assumed by the Advisor, the Prime Series shall pay to the Advisor monthly
compensation at an annual rate derived by: (1) calculating an amount equal to
.30% of the first $500 million of the Fund's aggregate average daily net assets,
.26% of the next $500 million of the Fund's aggregate average daily net assets,
.25% of the next $500 million of the Fund's aggregate average daily net assets,
.24% of the next $1 billion of the Fund's aggregate average daily net assets and
.23% of that portion of the Fund's aggregate average daily net assets in excess
of $2.5 billion; (2) applying to this amount a fraction equal to the net assets
of the Prime Series divided by the net assets of the Fund; and (3) adding an
amount calculated daily and paid monthly, at the annual rate of .02% of the
Prime Series' average daily net assets.

Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Subject to the provisions of section 9 hereof, payment of the Advisor's
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated by section 9 hereof.

9. Expense Limitation. In the event the operating expenses of the Fund,
including all investment advisory and administrative fees, for any fiscal year
ending on a date on which this Agreement is in effect exceed either (i) the
expense limitations applicable to the Prime Series imposed by the securities
laws or regulations thereunder of any state in which the Fund's shares are
qualified for sale, as such limitations may be raised or lowered from time to
time, or (ii) 1% of the Fund's average daily net assets, the Advisor shall
reduce its investment advisory fee to the extent of its share of such excess
expenses and, if required pursuant to any such laws or regulations, will
reimburse the Fund for its share of annual operating expenses in excess of any
expense limitation that may be applicable; provided, however, there shall be
excluded from such expenses the amounts of any interest, taxes, brokerage
commissions and extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Prime Series as at the end of the last
business day of the month. Should two or more such expense limitations be
applicable as at the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Advisor's fee shall be
applicable. For the purposes of this paragraph, the Advisor's share of any

-4-

<PAGE> 179

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.

12. Renewal. Following the expiration of its initial two-year term,
this Agreement shall continue in force and effect from year to year, provided
that such continuance is specifically approved at least annually:

(a) (i) by the Fund's Board of Directors or (ii) by the vote of
a majority of the outstanding voting securities of the Prime
Series (as defined in Section 2(a)(42) of the 1940 Act), and

(b) by the affirmative vote of a majority of the directors who
are not parties to this Agreement or "interested persons" of a
party to this Agreement (other than as directors of the Fund)
by votes cast in person at a meeting specifically called for
such purpose.

13. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Fund's Board of Directors or by vote
of a majority of the Prime Series' outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act), or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by either party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" having the meaning defined in Section
2(a)(4) of the 1940 Act.

14. Liability of Advisor. In the performance of its duties hereunder,
the Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Advisor shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor of its
duties under this Agreement.

15. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Fund and
the Advisor for this purpose shall be 135 East Baltimore Street, Baltimore,
Maryland 21202.

-5-

<PAGE> 180

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

-6-

<PAGE> 181
Ex-99.B(5)(e)

FORM OF 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;

<PAGE> 182

(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, stationary supplies and similar items
for the Fund's principal office;

(e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Treasury Series, and whether concerning the individual issuers whose
securities are included in the Treasury Series or the activities in which
they engage, or with respect to securities which the Advisor considers
desirable for inclusion in the Treasury Series;

(f) determine which issuers and securities shall be represented
in the Treasury Series and regularly report thereon to the Fund's Board of
Directors;

(g) take all actions necessary to carry into effect the Fund's
purchase and sale programs with respect to its Treasury Series;

(h) supervise the operations of the Treasury Series' transfer and
dividend disbursing agent;

(i) provide the Treasury Series with such administrative and
clerical services for the maintenance of certain shareholder records, as
are deemed advisable by the Fund's Board of Directors; and,

(j) arrange, but not pay for, the periodic updating of
prospectuses and supplements thereto, proxy material, tax returns, reports
to the shareholders of the Treasury Series and reports to and filings with
the Securities and Exchange Commission (the "SEC") and state Blue Sky
authorities, which may be required for the Treasury Series.

3. Broker-Dealer Relationship. In the event that the Advisor is
responsible for decisions to buy and sell securities for the Treasury Series,
broker-dealer selection, and negotiation of its brokerage commission rates, the
Advisor's primary consideration in effecting a security transaction will be
execution at the most favorable price. The Fund understands that a substantial
majority of the Treasury Series' transactions will be transacted with primary
market makers acting as principal on a net basis, with no brokerage commissions
being paid by the Fund. Such principal transactions may, however, result in a
profit to the market makers. In certain instances the Advisor may make purchases
of underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Treasury Series on a
continuing basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Treasury Series. The
Advisor is further authorized to allocate the orders placed by it on behalf of
the Treasury Series to such brokers and dealers who also provide research or
statistical material or other services to the Fund or the Advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocation regularly to the

-2-

<PAGE> 183

Board of Directors of the Fund, indicating the brokers to whom such allocations
have been made and the basis therefor.

4. Control by Board of Directors. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as any
other activities undertaken by the Advisor on behalf of the Treasury Series
pursuant thereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.

5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:

(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;

(b) the provisions of the Registration Statement of the Fund
under the Securities Act of 1933 and 1940 Act;

(d) the provisions of the By-laws of the Fund, as amended; and

(e) any other applicable provisions of state and federal law.

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

(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' 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

-3-

<PAGE> 184

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 the 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.

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

-4-

<PAGE> 185

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.

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

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.

-5-

<PAGE> 186

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

<PAGE> 187
Ex-99.B(5)(f)

FORM OF INVESTMENT ADVISORY AGREEMENT
ALEX. BROWN CASH RESERVE FUND, INC. - TAX-FREE 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's Board of Directors has authorized the issuance of
three series of shares with a par value of $.001 representing interests in three
portfolios: the Prime Series, the Treasury Series and the Tax-Free Series (each
of the existing portfolios and any portfolio hereafter added shall be referred
to collectively as the "Series"); and

WHEREAS, the Fund and the Advisor desire to enter an agreement to
provide investment advisory and administrative services for the Fund's Tax-Free
Series (the "Tax-Free Series") on the terms and conditions hereinafter set
forth;

NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:

1. Appointment of Investment Advisor. The Fund hereby appoints the
Advisor to act as the investment advisor to the Tax-Free Series. The Advisor
shall manage the affairs of the Tax-Free Series and shall supervise all aspects
of the Tax-Free Series' operations (except as otherwise set forth herein),
including the investment and reinvestment of the cash, securities or other
properties comprising the Tax-Free Series' assets, subject at all times to the
policies and control of the Fund's Board of Directors. The Advisor shall give
the Tax-Free Series the benefit of its best judgment, efforts and facilities in
rendering its services as Advisor.

2. Duties of Investment Advisor. In carrying out its obligations under
section 1 hereof, the Advisor shall:

(a) supervise and manage all aspects of the Tax-Free Series'
operations;

(b) formulate and implement continuing programs for the purchases
and sales of securities, consistent with the investment objective and
policies of the Tax-Free Series;

(c) provide the Tax-Free Series with such executive,
administrative and clerical services as are deemed advisable by the Fund's
Board of Directors;

<PAGE> 188

(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, stationary supplies and similar items
for the Fund's principal office;

(e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Tax-Free Series, and whether concerning the individual issuers whose
securities are included in the Tax-Free Series or the activities in which
they engage, or with respect to securities which the Advisor considers
desirable for inclusion in the Tax-Free Series;

(f) determine which issuers and securities shall be represented
in the Tax-Free Series and regularly report thereon to the Fund's Board of
Directors;

(g) take all actions necessary to carry into effect the Fund's
purchase and sale programs, with respect to its Tax-Free Series;

(h) supervise the operations of the Tax-Free Series' transfer and
dividend disbursing agent;

(i) provide the Tax-Free Series with such administrative and
clerical services for the maintenance of certain shareholder records, as
are deemed advisable by the Fund's Board of Directors; and,

(j) arrange, but not pay for, the periodic updating of
prospectuses and supplements thereto, proxy material, tax returns, reports
to the shareholders of the Tax-Free Series and reports to and filings with
the Securities and Exchange Commission (the "SEC") and state Blue Sky
authorities, which may be required for the Tax-Free Series.

3. Broker-Dealer Relationship. In the event that the Advisor is
responsible for decisions to buy and sell securities for the Tax-Free Series,
broker-dealer selection, and negotiation of its brokerage commission rates, the
Advisor's primary consideration in effecting a security transaction will be
execution at the most favorable price. The Fund understands that a substantial
majority of the Tax-Free Series' transactions will be transacted with primary
market makers acting as principal on a net basis, with no brokerage commissions
being paid by the Fund. Such principal transactions may, however, result in a
profit to the market makers. In certain instances the Advisor may make purchases
of underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Tax-Free Series on a
continuing basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Tax-Free Series. The
Advisor is further authorized to allocate the orders placed by it on behalf of
the Tax-Free Series to such brokers and dealers who also provide research or
statistical material or other services to the Fund or the Advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocation regularly to the Board
of Directors of the Fund, indicating the brokers to whom such allocations have
been made and the basis therefor.

-2-

<PAGE> 189

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:

(a) The Advisor shall furnish, at its expense and without cost to
the Fund, the services of one or more of its officers 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.

-3-

<PAGE> 190

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 and shall report regularly thereon to the Fund's Board of
Directors. The Advisor shall not be responsible for any such 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.

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

-4-

<PAGE> 191

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 all of
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.

(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.

-5-

<PAGE> 192

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

<PAGE> 193

Ex-99.B (11)

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the inclusion of our report dated May 1, 1995 on our
audit of the financial statements and financial highlights of Alex. Brown
Cash Reserve Fund, Inc. in the Statement of Additional Information with respect
to Post-Effective Amendment No. 24 to the Registration Statement (No. 2-72658)
on Form N-1A under the Securities Act of 1933, of Alex. Brown Cash Reserve
Fund, Inc. We also consent to the reference of our Firm under the heading
"General Information" in the Prospectus and under the heading "Reports" in
the Statement of Additional Information.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
May 30, 1995