<PAGE>
As filed with the Securities and Exchange Commission on July 29, 1996
Registration No. 2-72658
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Post-Effective Amendment No. 27 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 28 /X/
(Check appropriate box or boxes.)
ALEX. BROWN CASH RESERVE FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
P.O. Box 17250, Baltimore, Maryland 21203
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(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
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(Name and Address of Agent for Service)
Copies to:
Richard W. Grant, Esquire
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
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It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on August 1, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on [date] pursuant to paragraph (a) of rule 485
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*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, 1996 on May 23, 1996.
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<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
July 29, 1996
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
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<TABLE>
<CAPTION>
Registration
Part A Information Required in a Prospectus Statement Heading
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<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 and
Accounting Services
6. Capital Stock and Other Securities.................. Cover Page; Dividend and Taxes;
General Information
7. Purchase of Securities Being Offered................ How to Invest 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)
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10. Cover Page.......................................... Cover Page
11. Table of Contents................................... Table of Contents
12. General Information and History..................... Introduction; General Information
about the Fund
</TABLE>
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(1) The Statement of Additional Information relates to all classes of Shares.
<PAGE>
<TABLE>
<CAPTION>
<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 and 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..................................
20. Tax Status.......................................... Dividends and Taxes
21. Underwriters........................................ *
22. Calculation of Performance Data..................... Current Yield
23. Financial Statements................................ Financial Statements
Part C Other Information
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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>
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* Omitted since the answer is negative or the item is not applicable.
<PAGE>
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, 1996 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.
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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.
LOGO
The date of this Prospectus is August 1, 1996.
<PAGE>
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 ........ 9
5. How to Invest in the Fund ...... 9
6. How to Redeem Shares ........... 15
7. Telephone Transactions ......... 16
8. Dividends and Taxes ............ 17
9. Management of the Fund ......... 18
10. Investment Advisor ............. 19
11. Distributor .................... 20
12. Custodian, Transfer Agent and
Accounting Services ............ 21
13. Current Yield .................. 21
14. General Information ............ 22
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. Shares may be offered only to residents of those states in which such
shares are eligible for purchase.
1
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1. Fund Expenses
SHAREHOLDER TRANSACTION EXPENSES:
<TABLE>
<CAPTION>
FLAG INVESTORS FLAG INVESTORS
CLASS A CLASS B
SHARES SHARES
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<S> <C> <C>
Maximum Sales Charge Imposed on Purchases ................. None* None
Maximum Sales Charge Imposed on Reinvested Dividends ...... None None
Maximum Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, whichever is lower) ........ None* 4.00%**
</TABLE>
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average daily net assets)
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<TABLE>
<CAPTION>
<S> <C> <C>
Management Fees ......................................... .27% .27%
12b-1 Fees .............................................. .25% .75%
Other Expenses (including a .25% shareholder servicing fee
for Flag Investors Class B Shares) ..................... .10% .35%***
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Total Operating Expenses ................................ .62% 1.37%
====== =========
</TABLE>
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* 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
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Flag Investors Class A Shares ................ $ 6 $20 $35 $ 80
Flag Investors Class B Shares ................ $54 $74 $98 $132*
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You would pay the following expenses on the same
investment, assuming no redemption:
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Flag Investors Class B Shares ................ $14 $44 $78 $132*
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</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>
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 for
the Flag Investors Class A Shares and Class B Shares are restated using
current rather than historical expenses. 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.
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2. Financial Highlights
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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, 1996
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.
3
<PAGE>
PRIME SERIES (INCLUDING FLAG INVESTORS CLASS A SHARES((1)))
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
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<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------------------------------
1996(1) 1995(1) 1994(1) 1993(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 0.0524 0.0442 0.0262 0.0295
Less Distributions:
Dividends from net
investment income and
short-term gains (0.0524) (0.0442) (0.0262) (0.0295)
Net asset value at end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00
================= ============== ============== ==============
Total Return ** 5.36% 4.51% 2.65% 2.99%
Ratios to Average Net
Assets:
Expenses 0.60% 0.61% 0.62% 0.63%
Net investment income 5.25% 4.46% 2.62%* 2.95%
Supplemental Data:
Net assets at end of
period $2,392,658,047(2) $ 1,479,806,435 $ 1,368,451,627 $1,481,103,834
Number of shares
outstanding at end of
period 2,392,661,216 1,479,804,186 1,368,449,549 1,481,101,756
</TABLE>
4
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
For the
eleven
months
ended
Year Ended March 31, March 31, Year Ended April 30,
------------------------------------------------ -------------- ----------------------------
1992(1) 1991(1) 1990(1) 1989+(1) 1988 1987
-------------- -------------- -------------- -------------- ------------ ------------
<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 0.0485 0.0734 0.0846 0.0712 0.0647 0.0572
Less Distributions:
Dividends from net
investment income and
short- term gains (0.0485) (0.0734) (0.0846) (0.0712) (0.0647) (0.0572)
-------------- -------------- -------------- -------------- ------------ ------------
Net asset value at end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============= ============== ============ ============
Total Return ** 4.96% 7.59% 8.80% 8.01%* 6.67% 5.87%
Ratios to Average Net
Assets:
Expenses 0.61% 0.59% 0.52% 0.54%* 0.52% 0.55%
Net investment income 4.84% 7.31% 8.42% 7.81%* 6.46% 5.71%
Supplemental Data:
Net assets at end of
period $1,512,362,510 $1,295,888,161 $1,312,276,151 $1,084,793,157 $874,051,953 $831,784,041
Number of shares
outstanding at end of
period 1,512,360,432 1,295,888,161 1,312,272,415 1,084,789,421 874,047,336 831,779,424
</TABLE>
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*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 -- $2,386,216 and Flag Investors
Class A Shares -- $5,976,831.
5
<PAGE>
PRIME SERIES (FLAG INVESTORS CLASS B SHARES)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
- -----------------------------------------------------------------------------
April 3, 1995*
through
March 31, 1996
--------------
Per Share Operating Performance:
Net asset value at beginning of period $1.00
------
Income from Investment Operations:
Net investment income and short-term gains 0.0361
Less Distributions:
Dividends from net investment income and short-term
gains (0.0361)
--------
Net asset value at end of period $1.00
========
Total Return**: 3.69%
Ratios to Average Daily Net Assets:
Expenses 1.38%
Net investment income 4.30%
Supplemental Data:
Net assets at end of period $10,200
Number of shares outstanding at end of period 10,200
- ------
*Commencement of operations.
**Annualized.
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
6
<PAGE>
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).
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 by Moody's or S&P, 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.)
7
<PAGE>
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
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.
8
<PAGE>
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 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
9
<PAGE>
("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 by
completing the Application Form attached to this Prospectus and returning it,
together with payment of the purchase price, to 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 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 (a "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
10
<PAGE>
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.")
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 rep-
11
<PAGE>
resent 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.
Contingent Deferred Sales Charge
Year Since Initial Purchase (as a percentage of the dollar amount
Payment was Made subject to charge)
- ---------------------------------------------------------------------------
First ......................... 4.0%
Second ........................ 4.0%
Third ......................... 3.0%
Fourth ........................ 3.0%
Fifth ......................... 2.0%
Sixth ......................... 1.0%
Thereafter .................... None*
- ---------------------------------------------------------------------------
* 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.
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 individual 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
12
<PAGE>
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
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.
13
<PAGE>
Flag Investors Class A Shares may be exchanged for Class A shares of other
Flag Investors funds upon payment of the applicable sales charges. An
investor that has paid a sales charge on Class A shares may thereafter
exchange those Class A shares for Class A shares of other Flag Funds with i)
a higher sales charge, upon payment of an incremental sales charge or ii) an
equal or lower sales charge, at net asset value (i.e. without a sales
charge). In addition, Flag Investors Class A Shares may be exchanged for
Class B shares of other Flag Investors funds at net asset value, subject
thereafter 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.
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.
14
<PAGE>
PURCHASES THROUGH DIVIDEND REINVESTMENT
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.
Alternatively, shareholders may have their distributions invested in
shares of other funds in the Flag Investors family of funds. Shareholders who
are interested in this option should call (800) 553-8080 for additional
information.
Reinvestments of distributions will be effected without a sales charge.
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:
(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;
15
<PAGE>
(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
(c) Any additional documents required for redemption by corporations,
partnerships, trusts or fiduciaries.
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 payable 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 and 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 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.
16
<PAGE>
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. If these procedures are followed, 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.
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.
17
<PAGE>
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.
The Fund intends to make sufficient distributions of its ordinary income
and capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.
The sale, exchange or redemption of Flag Investors Shares is a taxable
event for the shareholder. 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.
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
18
<PAGE>
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 Prime Series 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. Four 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>
<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
* Charles W. Cole, Jr. Director Paul D. Corbin Vice President
James J. Cunnane Director M. Elliott Randolph, Jr. Vice President
John F. Kroeger Director Monica M. Hausner Vice President
Louis E. Levy Director Joseph A. Finelli Treasurer
Eugene J. McDonald Director Edward J. Stoken Secretary
Rebecca W. Rimel Director Laurie D. DePrine Assistant Secretary
* Truman T. Semans Director
Carl W. Vogt Director
Harry Woolf Director
</TABLE>
- ----------
* Messrs. Price, Hale, Semans and Cole are "interested persons" of the Fund
Director 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, an indirect subsidiary of Alex. Brown Incorporated (described
below), was organized in 1987 and acts as investment advisor to the Prime
Series. ICC supervises and manages the Prime Series' operations and generally
provides management and administrative services for the Prime Series. 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 May 31,
1996, had net assets of approximately $1.1 billion.
Pursuant to a new advisory agreement, which became effective August 23,
1995, ICC is entitled to receive a fee from the Fund, calculated daily and
payable monthly, at the following annual rates based upon the Fund's
aggregate average daily net assets: .30% of the first $500 million, .26% of
the next $500 million, .25% of the next $500 million, .24% of the next $1
billion, .23% of the next $1 billion and .22% of that portion in excess of
$3.5 billion. The Prime Series pays its share of the fee based on the
proportion its net assets bear to those of the Fund. In addition, ICC is
entitled to
19
<PAGE>
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. ICC may, from time to time, voluntarily waive a portion of
its advisory fee with respect to the Prime Series to preserve or enhance the
performance of the Series. As compensation for providing investment advisory
services to the Prime Series for the period August 23, 1995 to March 31,
1996, ICC received an annualized advisory fee at the rate of .27% of the
Prime Series' average daily net assets.
In the fiscal year ended March 31, 1996, the expenses borne by the Prime
Series, including the fees to ICC, amounted to .60% 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 and Accounting Services.")
11. Distributor
Alex. Brown serves as the exclusive distributor for the Flag Investors
Shares. 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.
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,
20
<PAGE>
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, 1996, Alex. Brown received a fee equal to .25% and .75%,
respectively, of the Flag Investors Class A and Class B 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. As
compensation for providing shareholder servicing for the Flag Investors Class
B Shares for the fiscal year ended March 31, 1996, Alex. Brown received a
shareholder servicing fee equal to .25% of the Flag Investors Class B Shares'
average daily net assets.
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.
12. Custodian, Transfer Agent and
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 provides
accounting services to the Prime Series. As compensation for providing
accounting services to the Prime Series for the fiscal year ended March 31,
1996, ICC received a fee equal to .01% of the Prime Series' aggregate average
daily net assets. (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
21
<PAGE>
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. 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. For information regarding these other classes, please call
1-800-553-8080. 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 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 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-
22
<PAGE>
assessable. The Board of Directors may create additional series or classes of
Fund shares without shareholder approval.
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 LLP 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.
23
<PAGE>
FLAG INVESTORS CASH RESERVE PRIME CLASS A SHARES
NEW ACCOUNT APPLICATION
- -----------------------------------------------------------------------------
<TABLE>
<S> <C>
Make check payable to "Flag Investors Cash Reserve Prime For assistance in completing this application please call:
Class A Shares" and mail with this application to: 1-800-553-8080, Monday-Friday, 8:30 a.m. to 5:30 p.m. (Eastern Time).
Alex. Brown & Sons Incorporated/Flag Investors Funds To open an IRA account please call 1-800-767-3524 for an
P.O. Box 419663 IRA information kit.
Kansas City, MO 64141-6663
Attn: Flag Investors Cash Reserve Prime Class A Shares
</TABLE>
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:________________
<TABLE>
INDIVIDUAL OR JOINT TENANT GIFTS TO MINORS
<S> <C>
- ------------------------------------------------------------------------ -----------------------------------------------------
First Name Initial Last Name Custodian's Name (only one allowed by law)
- ------------------------------------------------------------------------ -----------------------------------------------------
Social Security Number Minor's Name (only one)
- ------------------------------------------------------------------------ -----------------------------------------------------
Joint Tenant Initial Last Name Social Security Number of Minor
under the Uniform Gifts to Minors Act
------------------
State of Residence
CORPORATIONS, TRUSTS, PARTNERSHIPS, ETC. MAILING ADDRESS
- ------------------------------------------------------------------------ -----------------------------------------------------
Name of Corporation, Trust or Partnership Street
- ------------------------------------------------------------------------ -----------------------------------------------------
Tax ID Number Date of Trust City State Zip
- ------------------------------------------------------------------------ -----------------------------------------------------
Name of Trustees (If to be included in the Registration) Daytime Phone
- ------------------------------------------------------------------------
For the Benefit of
</TABLE>
DISTRIBUTION OPTIONS
Please check appropriate boxes. If none of the options is selected, all
distributions will be reinvested in additional Flag Investors Class A Shares
at no sales charge.
Income Dividends Capital Gains
[ ] Reinvested in additional shares [ ] Reinvested in additional shares
[ ] Paid in Cash [ ] Paid in Cash
Call (800) 553-8080 for information about reinvesting your dividends in other
funds in the Flag Investors Family of Funds.
<PAGE>
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.)
<TABLE>
<S> <C>
Minimum Initial Investment: $250 Please attach a voided check.
Subsequent Investment (check one):
[ ] Monthly ($100 minimum)
[ ] Quarterly ($250 minimum)
- ---------------------------------------- ------------------------------------
Bank Name Depositor's Signature Date
- ---------------------------------------- ------------------------------------
Existing Flag Investors Fund Account No., if any Depositor's Signature Date
(if joint acct., both must sign)
- --------------------------------------------------------------------------------------------
</TABLE>
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:______________________________ Bank Account No: _________________________
Address:___________________________ Bank Account Name: _______________________
SIGNATURE AND TAXPAYER CERTIFICATION
I have received a copy of the Fund's prospectus dated August 1, 1996. 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>
ALEX. BROWN CASH RESERVE FUND, INC.
July 29, 1996
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 and Accounting Services
6. Capital Stock and Other Securities.................. Cover Page; Dividend and Taxes;
General Information
7. Purchase of Securities Being Offered................ How to Invest the Fund; Distributor
8. Redemption or Repurchase............................ How to Redeem Shares
9. Pending Legal Proceedings........................... *
Part B Information Required in a Statement
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>
<TABLE>
<CAPTION>
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 and
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>
ALEX. BROWN CASH RESERVE FUND, INC.
P.O. Box 17250
Baltimore, Maryland 21203
- ------------------------
Third Class Mail
U.S. POSTAGE
PAID
Baltimore, M.D.
Permit No. 8614
- -----------------------
LOGO
ALEX. BROWN
CASH RESERVE
FUND, INC.
PRIME SERIES
TREASURY SERIES
TAX-FREE SERIES
Prospectus
& Application
August 1, 1996
<PAGE>
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, 1996 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>
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 11
6. Dividends and Taxes 13
7. Management of the Fund 14
8. Current Yield 16
9. General Information 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, 1996
1
<PAGE>
Table of Fees and
1 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.
<TABLE>
<CAPTION>
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 Daily Net Assets
- ------------------------------ -------------------------------------------
Management Fees (See "Management of the Fund -- Investment Advisor and
Sub-Advisor")............................................................. .27% .25% .28%
12b-1 Fees (See "Management of the Fund -- Distributor") .................. .25% .25% .25%
Other Expenses ............................................................ .10% .10% .10%
------------ ------------ ------------
Total Fund Operating Expenses ............................................. .62% .60% .63%
============ ============ ============
</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 .... $ 6 $ 6 $ 6
3 years ... $20 $19 $20
5 years ... $35 $34 $36
10 years .. $80 $77 $81
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
2
<PAGE>
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 that have been audited by the
Fund's independent accountants. The financial statements and financial
highlights for the fiscal year ended March 31, 1996 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,
------------------------------------------------------------------
1996(1) 1995(1) 1994(1) 1993(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 ..... 0.0524 0.0442 0.0262 0.0295
Less Distributions:
Dividends from net
investment income and
short-term gains ....... (0.0524) (0.0442) (0.0262) (0.0295)
-------------- -------------- -------------- --------------
Net asset value at end of
period ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ==============
Total Return ................ 5.36% 4.51% 2.65% 2.99%
Ratios to Average Net Assets:
Expenses .................. 0.60% 0.61% 0.62% 0.63%
Net investment income ..... 5.25% 4.46% 2.62% 2.95%
Supplemental Data:
Net assets at end of period $2,392,658,047 $1,479,806,435 $1,368,451,627 $1,481,103,834
Number of shares
outstanding at end of
period ................. 2,392,661,216 1,479,804,186 1,368,449,549 1,481,101,756
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED)
<TABLE>
<CAPTION>
For the
eleven
months
ended Year Ended April 30,
March 31, ---------------------------
1992(1) 1991(1) 1990 1989+ 1988 1987
-------------- -------------- -------------- -------------- ------------ ------------
<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 ..... 0.0485 0.0734 0.0846 0.0712 0.0647 0.0572
Less Distributions:
Dividends from net
investment income and
short-term gains ....... (0.0485) (0.0734) (0.0846) (0.0712) (0.0647) (0.0572)
-------------- -------------- -------------- -------------- ------------ ------------
Net asset value at end of
period ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ============== ============ ============
Total Return ................ 4.96% 7.59% 8.80% 8.01%* 6.67% 5.87%
Ratios to Average Net Assets:
Expenses .................. 0.61% 0.59% 0.52% 0.54%* 0.52% 0.55%
Net investment income ..... 4.84% 7.31% 8.42% 7.81%* 6.46% 5.71%
Supplemental Data:
Net assets at end of period $1,512,362,510 $1,295,888,161 $1,312,276,151 $1,084,793,157 $874,051,953 $831,784,041
Number of shares
outstanding at end of
period ................. 1,512,360,432 1,295,888,161 1,312,272,415 1,084,789,421 874,047,336 831,779,424
</TABLE>
- ------
* Annualized.
+ The Fund's fiscal year-end was changed to March 31.
(1) Financial information for fiscal years ended March 31, 1996, 1995, 1994,
1993, 1992 and 1991, respectively, is given for the Alex. Brown Cash
Reserve Shares class of the Prime Series.
3
<PAGE>
TREASURY SERIES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended March 31,
----------------------------------------------------------
1996(1) 1995(1) 1994(1) 1993(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 ... 0.0494 0.0411 0.0255 0.0285
Less Distributions:
Dividends from net
investment income and
short-term gains ..... (0.0494) (0.0411) (0.0255) (0.0285)
------------ ------------ ------------ ------------
Net asset value at end of
period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============
Total Return .............. 5.05% 4.19% 2.58% 2.89%
Ratios to Average Net
Assets:
Expenses ................ 0.58% 0.55%* 0.54%* 0.55%*
Net investment income ... 4.94% 4.09%** 2.55%** 2.87%**
Supplemental Data:
Net assets at end of
period ............... $666,814,158 $512,167,212 $581,724,214 $618,175,839
Number of shares
outstanding at end of
period ............... 666,762,028 512,162,864 581,723,448 618,152,465
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED)
<TABLE>
<CAPTION>
For the
eleven
months
ended Year Ended April 30,
March 31, ---------------------------
1992(1) 1991(1) 1990 1989+ 1988 1987
------------ ------------ ------------ ------------ ------------ ------------
<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 ... 0.0477 0.0698 0.0829 0.0696 0.0617 0.0578
Less Distributions:
Dividends from net
investment income and
short-term gains ..... (0.0477) (0.0698) (0.0829) (0.0696) (0.0617) (0.0578)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value at end of
period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============ ============ ============
Total Return .............. 4.88% 7.21% 8.61% 7.82%*** 6.35% 5.94%
Ratios to Average Net
Assets:
Expenses ................ 0.55% 0.56% 0.41% 0.44%*** 0.45% 0.45%
Net investment income ... 4.76% 6.82% 8.25% 7.50%*** 6.17% 5.74%
Supplemental Data:
Net assets at end of
period .............. $725,010,207 $716,551,599 $272,467,125 $235,086,589 $280,628,025 $251,097,755
Number of shares
outstanding at end of
period ............... 725,010,207 716,551,599 272,509,276 235,197,074 280,519,083 251,101,013
</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 4.14%, 2.80%, and 3.15% 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, 1996, 1995, 1994,
1993, 1992 and 1991, respectively, is given for the Alex. Brown Cash
Reserve Shares class of the Treasury Series.
4
<PAGE>
TAX-FREE SERIES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------------------------
1996 1995 1994 1993
-------------- --------------- -------------- --------------
<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 ........ 0.0318 0.0271 0.0184 0.0213
Less Distributions:
Dividends from net investment
income and short-term gains (0.0318) (0.0271) (0.0184) (0.0213)
-------------- -------------- -------------- --------------
Net asset value at end of
period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ==============
Total Return ................... 3.23% 2.75% 1.86% 2.15%
Ratios to Average Net Assets:
Expenses ..................... 0.60% 0.57% 0.58% 0.60%
Net investment income ........ 3.16% 2.74% 1.84% 2.13%
Supplemental Data:
Net assets at end of period .. $571,507,000 $475,384,229 $378,859,232 $315,661,447
Number of shares outstanding
at end of period .......... 571,593,265 475,474,913 378,939,262 315,700,742
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
For the period
Dec. 17, 1990*
through
1992 March 31, 1991
-------------- ----------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value at beginning
of period ................. $ 1.00 $ 1.00
-------------- --------------
Income from Investment
Operations:
Net investment income ........ 0.0353 0.0124
Less Distributions:
Dividends from net investment
income and short-term gains (0.0353) (0.0124)
-------------- --------------
Net asset value at end of
period .................... $ 1.00 $ 1.00
============== ==============
Total Return ................... 3.59% 4.35%**
Ratios to Average Net Assets:
Expenses ..................... 0.56%(1) 0.53%**
Net investment income ........ 3.49%(2) 4.25%**
Supplemental Data:
Net assets at end of period .. $304,987,823 $256,895,180
Number of shares outstanding
at end of period .......... 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>
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 that (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 by Moody's
or S&P, 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
6
<PAGE>
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 that satisfy applicable quality standards; or (ii) are fully insured as
to principal and interest by the Federal Deposit Insurance Corporation.
-- 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 that 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 prefer-
7
<PAGE>
ence 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:
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
that 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 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 that 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 that reflect self-imposed standards as well as federal and state
regulatory limitations, the most significant of which are set forth on the
following page:
8
<PAGE>
(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 that 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) that
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 that have entered into dealer
agreements with Alex. Brown ("Participating Dealers") or through institutions
that 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
9
<PAGE>
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.
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
10
<PAGE>
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.
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,
11
<PAGE>
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.
The Board of Directors may authorize redemption of all shares in an account
of any Series that 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
12
<PAGE>
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.)
Current federal tax limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Fund to purchase sufficient amounts of tax-exempt securities
to satisfy the Code's requirements for the payment of exempt- interest
dividends. All or a portion of the interest on indebtedness incurred or
continued by a shareholder to purchase or carry Shares is not deductible for
federal income tax purposes. Furthermore, entities or persons who are
"substantial users" (or persons related to "substantial users") of facilities
financed by "private activity bonds" or "industrial development bonds" should
consult their tax advisers before purchasing Shares. (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
13
<PAGE>
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.
The Fund intends to make sufficient distributions of its ordinary income and
capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.
The sale, exchange or redemption of shares is a taxable event for the
shareholder.
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 each series 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. Four 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, an indirect subsidiary of Alex. Brown Incorporated (described
below), was organized in 1987 and acts as the Fund's investment advisor. ICC
super-
14
<PAGE>
vises and manages the Fund's operations and generally provides management and
administrative services for the Fund. ICC may delegate its duties 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 May 31,
1996, had net assets of approximately $1.1 billion.
Pursuant to a new advisory agreement, which became effective August 23, 1995,
ICC is entitled to receive a fee from the Fund, calculated daily and payable
monthly, at the following annual rates based upon the Fund's aggregate
average daily net assets: .30% of the first $500 million, .26% of the next
$500 million, .25% of the next $500 million, .24% of the next $1 billion,
.23% of the next $1 billion and .22% of that portion in excess of $3.5
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 and the 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. As compensation for providing investment advisory services to the
Fund for the period from August 23, 1995 to March 31, 1996, ICC received an
annualized advisory fee at the rate of .27% of the Prime Series' average
daily net assets, .25% of the Treasury Series' average daily net assets and
.28% of the Tax-Free Series' average daily net assets. 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.
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 and 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 between ICC and PIMC. 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 30 open-end investment portfolios with total assets of
approximately $31 billion as of May 31, 1996.
As compensation for its services as sub-advisor to the Tax-Free Series for
the fiscal year ended March 31, 1996, PIMC received a fee from ICC equal to
.14% of the average net assets of 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.
In the fiscal year ended March 31, 1996, the expenses borne by each Series of
the Fund, including the fees to ICC, amounted to .60% of the Prime Series'
average net assets, .58% of the Treasury Series' average net assets and .60%
of the Tax-Free Series' average net assets. (See "Table of Fees and
Expenses.")
15
<PAGE>
DISTRIBUTOR
Alex. Brown, 135 East Baltimore Street, Baltimore, Maryland 21202, serves as
the exclusive distributor for shares of the Fund's three Series. Alex. Brown
is an investment banking firm that 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.
As compensation for its services for the fiscal year ended March 31, 1996,
Alex. Brown received a fee from the Fund that represented .25% of the Fund's
average net assets.
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.
16
<PAGE>
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 that 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 Class B
shares of other funds in the Flag Investors family of funds. For information
regarding the other classes of shares, please call (800) 553-8080. 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 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 AND 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 and to the Treasury Series. As compensation for providing accounting
services to the Prime Series and the Treasury Series for the fiscal year
ended March 31, 1996, ICC received from the Fund a fee for each such Series,
equal to .01% of the Series' aggregate average daily net assets. (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
17
<PAGE>
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 LLP 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.
18
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
APPLICATION FORM
<TABLE>
<S> <C>
TO OPEN A NEW ACCOUNT EXISTING ALEX. BROWN ACCOUNTS
1.) Complete application below in full. 1.) My account number is
2.) Check enclosed for $------------------- ----------------------------------------------------
2.) Name(s)
3. (a). $------ to be invested in Prime Series. ----------------------------------------------------
3.) Check enclosed for $
(b). $------ to be invested in Treasury Series. ----------------------------------------------------
4. (a). $------ to be invested in Prime Series.
(c). $------ to be invested in Tax-Free Series. (b). $------ to be invested in Treasury Series.
(c). $------ to be invested in Tax-Free Series.
</TABLE>
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, 1996.
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
- ------------------------------------------------------------- ----------------
Date
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
BOARD OF DIRECTORS
W. JAMES PRICE
Chairman
RICHARD T. HALE EUGENE J. McDONALD
Director Director
CHARLES W. COLE, JR. REBECCA W. RIMEL
Director Director
JAMES J. CUNNANE TRUMAN T. SEMANS
Director Director
JOHN F. KROEGER CARL W. VOGT
Director Director
LOUIS E. LEVY HARRY WOOLF
Director Director
- -----------------------------------------------------------------------------
OFFICERS
W. JAMES PRICE M. ELLIOTT RANDOLPH, JR. JOSEPH A. FINELLI
Chairman Vice President Treasurer
RICHARD T. HALE PAUL D. CORBIN EDWARD J. STOKEN
President Vice President Secretary
EDWARD J. VEILLEUX BRIAN C. NELSON LAURIE D. DEPRINE
Executive Vice President Vice President Assistant Secretary
MONICA M. HAUSNER
Vice President
- -----------------------------------------------------------------------------
Distributor Custodian
ALEX. BROWN & SONS PNC BANK
INCORPORATED Airport Business Center
135 East Baltimore Street 200 Stevens Drive
Baltimore, Maryland 21202 Lester, Pennsylvania 19113
(410) 727-1700
Investment Advisor Transfer Agent
INVESTMENT COMPANY CAPITAL CORP. INVESTMENT COMPANY CAPITAL CORP.
135 East Baltimore Street 135 East Baltimore Street
Baltimore, Maryland 21202 Baltimore, Maryland 21202
(800) 553-8080
Sub-Advisor
Tax-Free Series Independent Accountants
PNC INSTITUTIONAL COOPERS & LYBRAND L.L.P.
MANAGEMENT CORP. 2400 Eleven Penn Center
400 Bellevue Parkway Philadelphia, Pennsylvania 19103
Wilmington, Delaware 19809
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
July 29, 1996
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
- ------ ------------------------------------ -----------------
<C> <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 and
Accounting Services
6. Capital Stock and Other Securities.................. Cover Page; Dividend and Taxes;
General Information
7. Purchase of Securities Being Offered................ How to Invest 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>
<TABLE>
<CAPTION>
<C> <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 and 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
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>
ALEX. BROWN CASH RESERVE FUND, INC.
P.O. Box 17250
Baltimore, Maryland 21203
- ------------------------
Third Class Mail
U.S. POSTAGE
PAID
Baltimore, M.D.
Permit No. 8614
- -----------------------
LOGO
ALEX. BROWN
CASH RESERVE
FUND, INC.
INSTITUTIONAL
SHARES
Prospectus
August 1, 1996
<PAGE>
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:
o 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
o 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:
o No direct or indirect purchase or redemption charges;
o Dividends are declared daily and paid monthly in additional shares or
cash; and
o Wire and telephone transfers.
For current yield information and for purchase and redemption information,
call (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, 1996 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>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
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 8
6. Dividends and Taxes 9
7. How to Redeem Shares 10
8. Management of the Fund 11
9. Current Yield 12
10. General Information 12
</TABLE>
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 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.
Prospectus Dated: August 1, 1996
1
<PAGE>
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.
<TABLE>
<CAPTION>
Institutional Institutional
Shares Shares
Prime Treasury
Series Series
----------------- -----------------
As a % of Average
Shareholder Transaction Expenses Daily Net Assets
-------------------------------- ------------------------------------
<S> <C> <C>
Maximum Sales Charge imposed on Purchase (as a 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
------------------------------
Management Fees (See "Management of the Fund -- Investment Advisor") ........... .27% .25%
12b-1 Fees (See "Management of the Fund -- Distributor") ....................... None None
Other Expenses ................................................................. .10% .10%
----------------- -----------------
Total Fund Operating Expenses .................................................. .37% .35%
================= =================
</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:
<TABLE>
<CAPTION>
Institutional Institutional
Shares Shares
Prime Treasury
Series Series
----------------- -----------------
<S> <C> <C>
1 year ................ $ 4 $ 4
3 years ............... $12 $11
5 years ............... $21 $20
10 years .............. $48 $45
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
2
<PAGE>
2 Financial Highlights
The Fund has offered the Institutional Shares since June 4, 1990. The
financial highlights included in these tables are a part of the Fund's
financial statements for the periods indicated that have been audited by the
Fund's independent accountants. The financial statements and financial
highlights for the fiscal year ended March 31, 1996 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
----------------------------
Year Ended March 31,
----------------------------
1996 1995
------------- -----------
<S> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period .... $ 1.00 $ 1.00
------------- -------------
Income from Investment Operations:
Net investment income ..................... 0.0548 0.0472
Less Distributions:
Dividends from net investment income and
short-term gains ....................... (0.0548) (0.0472)
------------- -------------
Net asset value at end of period .......... $ 1.00 $ 1.00
============= =============
Total Return ................................ 5.62% 4.82%
Ratios to Average Net Assets:
Expenses .................................. 0.35% 0.36%
Net investment income ..................... 5.32% 4.57%
Supplemental Data:
Net assets at end of period ............... $53,699,315 $11,904,716
Number of shares outstanding at end of
period ................................. 53,699,535 11,904,663
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
June 4, 1990*
through
March 31,
1994 1993 1992 1991
------------- ------------- ------------- ---------------
<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 ..................... 0.0294 0.0327 0.0515 0.0617
Less Distributions:
Dividends from net investment income and
short-term gains ....................... (0.0294) (0.0327) (0.0515) (0.0617)
------------- ------------- ------------- ---------------
Net asset value at end of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= ============= ===============
Total Return ................................ 2.98% 3.32% 5.27% 7.70%**
Ratios to Average Net Assets:
Expenses .................................. 0.30%* 0.31% 0.32% 0.35%**
Net investment income ..................... 2.94%* 3.24% 5.34% 7.53%**
Supplemental Data:
Net assets at end of period ............... $23,437,449 $28,884,078 $21,867,108 $117,633,558
Number of shares outstanding at end of
period ................................. 23,437,512 28,884,132 21,867,108 117,633,558
</TABLE>
- ------
* The Institutional Prime Shares commenced operations on June 4, 1990.
** Annualized.
3
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Institutional Treasury Shares
------------------------------
Year Ended March 31,
------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period .... $ 1.00 $ 1.00
------------- -------------
Income from Investment
Operations:
Net investment income ..................... 0.0523 0.0438
Less Distributions:
Dividends from net investment income and
short-term gains ....................... (0.0523) (0.0438)
------------- -------------
Net asset value at end of period .......... $ 1.00 $ 1.00
============= =============
Total Return ................................ 5.36% 4.47%
Ratios to Average Net Assets:
Expenses .................................. 0.33% 0.30%(1)
Net investment income ..................... 5.12% 4.15%(2)
Supplemental Data:
Net assets at end of period ............... $51,822,757 $14,051,995
Number of shares outstanding at end of
period ................................. 51,813,226 14,046,467
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
June 4, 1990*
through
March 31,
1994 1993 1992 1991
------------- ------------- ------------- ---------------
<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 ..................... 0.0282 0.0314 0.0504 0.0590
Less Distributions:
Dividends from net investment income and
short-term gains ....................... (0.0282) (0.0314) (0.0504) (0.0590)
------------- ------------- ------------- ---------------
Net asset value at end of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= ============= ===============
Total Return ................................ 2.86% 3.19% 5.17% 7.36%**
Ratios to Average Net Assets:
Expenses .................................. 0.27%(1) 0.26%(1) 0.27% 0.29%**
Net investment income ..................... 2.82%(2) 3.16%(2) 4.90% 7.02%**
Supplemental Data:
Net assets at end of period ............... $39,692,848 $60,146,987 $63,834,323 $58,017,844
Number of shares outstanding at end of
period ................................. 39,688,259 60,140,874 63,834,323 58,017,844
</TABLE>
- ------
* The Institutional Treasury Shares commenced operations on June 4, 1990.
** Annualized.
(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,
espectively.
(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.
4
<PAGE>
3 The Fund and
The Institutional Shares
The Fund is a money market fund that 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
five 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 that 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 counselors,
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 that 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 that 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 that are directly attributable to a class
are charged against the income available for distribution as dividends to
such class.
4 Investment Program
Investment Objective
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 its 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 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
5
<PAGE>
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:
Bank Instruments consisting mainly of certificates of deposit and bankers'
acceptances that (i) are issued by U.S. banks that satisfy applicable quality
standards; or (ii) are fully insured as to principal and interest by the
Federal Deposit Insurance Corporation.
Commercial Instruments consisting mainly of commercial paper and variable
amount master demand notes. Eligible commercial paper is limited to
short-term unsecured promissory notes issued by corporations that (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 by Moody's
or S&P, 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.
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
6
<PAGE>
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 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 that 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 that it is obligated to repurchase.
Investment Restrictions
The Fund's investment program for both Series is subject to a number of
investment restrictions that 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 that 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.
Each 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 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.
7
<PAGE>
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 clients of investment
advisory affiliates of Alex. Brown; and 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 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
8
<PAGE>
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 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 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.
9
<PAGE>
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.
The Fund intends to make sufficient distributions of its ordinary income and
capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.
The sale, exchange or redemption of Institutional Shares is a taxable event
for the shareholder.
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.
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 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
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 and 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
10
<PAGE>
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 each Series 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. Four 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, an indirect subsidiary of Alex. Brown Incorporated (described
below), was organized in 1987 and acts as the investment advisor to the Prime
Series and the Treasury Series. ICC supervises and manages the Series'
operations and generally provides management and administrative services for
the Series. 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 May 31, 1996, had net assets of approximately $1.1 billion.
Pursuant to a new advisory agreement, which became effective August 23, 1995,
ICC is entitled to receive a fee from the Fund, calculated daily and payable
monthly, at the following annual rates based upon the Fund's aggregate
average daily net assets: .30% of the first $500 million, .26% of the next
$500 million, .25% of the next $500 million, .24% of the next $1 billion,
.23% of the next $1 billion and .22% of that portion in excess of $3.5
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
11
<PAGE>
assets. As compensation for providing investment advisory services to the
Prime Series and the Treasury Series for the period from August 23, 1995
through March 31, 1996, ICC received an annualized fee equal to .27% of the
Prime Series average daily net assets and .25% of the Treasury Series' average
daily 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 and Accounting Services.")
In the fiscal year ended March 31, 1996, the expenses borne by the Prime
Series and the Treasury Series, respectively, for the Institutional Shares,
including the fees to ICC, amounted to .35% of the Prime Series' average net
assets and .33% 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 that
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.
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
12
<PAGE>
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 that 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. For
information regarding the other classes of shares, please call (800) 553-
8080. 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 that 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.
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 AND 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 disbursing agent and provides accounting services to the Prime
Series and the Treasury Series. As compensation for providing accounting
services to the Prime Series and the Treasury Series for the fiscal year
ended March 31, 1996, ICC received from the Fund an annual fee equal to .01%
of the Prime Series' average daily net assets and .02% of the Treasury
Series' average daily net assets. (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.
13
<PAGE>
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 LLP serves as counsel to the Fund.
SHAREHOLDER INQUIRIES
Shareholders with inquiries concerning their shares should contact the Fund
at (800) 553-8080.
14
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
BOARD OF DIRECTORS
W. JAMES PRICE
Chairman
RICHARD T. HALE EUGENE J. McDONALD
Director Director
CHARLES W. COLE, JR. REBECCA W. RIMEL
Director Director
JAMES J. CUNNANE TRUMAN T. SEMANS
Director Director
JOHN F. KROEGER CARL W. VOGT
Director Director
LOUIS E. LEVY HARRY WOOLF
Director Director
- -----------------------------------------------------------------------------
OFFICERS
W. JAMES PRICE M. ELLIOTT RANDOLPH, JR. JOSEPH A. FINELLI
Chairman Vice President Treasurer
RICHARD T. HALE PAUL D. CORBIN EDWARD J. STOKEN
President Vice President Secretary
EDWARD J. VEILLEUX BRIAN C. NELSON LAURIE D. DEPRINE
Executive Vice President Vice President Assistant Secretary
MONICA M. HAUSNER
Vice President
- -----------------------------------------------------------------------------
Distributor Custodian
ALEX. BROWN & SONS PNC BANK
INCORPORATED Airport Business Center
135 East Baltimore Street 200 Stevens Drive
Baltimore, Maryland 21202 Lester, Pennsylvania 19113
(410) 727-1700
Investment Advisor Independent Accountants
INVESTMENT COMPANY CAPITAL CORP. COOPERS & LYBRAND L.L.P.
135 East Baltimore Street 2400 Eleven Penn Center
Baltimore, Maryland 21202 Philadelphia, Pennsylvania 19103
Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
135 East Baltimore Street
Baltimore, Maryland 21202
(800) 553-8080
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
July 29, 1996
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 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>
<TABLE>
<CAPTION>
<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
Being Offered.................................. Share Purchases and Redemptions
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>
QUALITY CASH RESERVE PRIME SHARES
P.O. Box 17250
Baltimore, Maryland 21203
- ------------------------
Third Class Mail
U.S. POSTAGE
PAID
Baltimore, M.D.
Permit No. 8614
- -----------------------
QUALITY
CASH RESERVE
PRIME SHARES
Prospectus
August 1, 1996
<PAGE>
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, 1996 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>
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 8
7. Dividends and Taxes 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 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.
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, 1996
1
<PAGE>
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.
<TABLE>
<CAPTION>
Shareholder Transaction Expenses
<S> <C>
Sales Charge Imposed on Purchases .................................................. None
Sales Charge Imposed on Reinvested Dividends ....................................... None
Maximum Deferred Sales Charge ...................................................... None
Redemption Fees .................................................................... None
Annual Fund Operating Expenses (as a percentage of average daily net assets)
(after fee waivers)
Management Fees .................................................................... .27%
12b-1 Fees (after fee waivers) ..................................................... .53%*
Other Expenses ..................................................................... .10%
-----
Total Fund Operating Expenses (after fee waivers) .................................. .90%*
=====
</TABLE>
- ------
* Alex. Brown currently intends to reduce its annual 12b-1 Fee, on a
voluntary basis, to .53% of the Quality Cash Reserve Prime Shares' average
daily net assets. Absent fee waivers, 12b-1 Fees would be .60% and Total
Fund Operating Expenses would be .97% of the Quality Cash Reserve Prime
Shares' average daily net assets.
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 ............................................. $ 9
3 years ............................................. $ 29
5 years ............................................. $ 51
10 years ............................................. $116
- ------
* The example is based on Total Fund Operating Expenses after fee waivers.
Absent fee waivers, expenses would be higher.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
2
<PAGE>
2 Financial Highlights
The Fund has offered the Quality Cash Reserve Prime Shares since May 6, 1991.
The financial highlights included in this table are a part of the Fund's
financial statements for the periods indicated that have been audited by the
Fund's independent accountants. The financial statements
and financial highlights for the fiscal year ended March 31, 1996 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>
Quality Cash Reserve Prime Shares
----------------------------------------------------------------------------------
Year Ended March 31, May 6, 1991
---------------------------------------------------------------- through
1996 1995 1994 1993 March 31, 1992*
-------------- ------------- ------------- -------------- ---------------
<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 ................. 0.0493 0.0402 0.0218 0.0253 0.0399
Less Distributions:
Dividends from net investment income
and short-term gains ................ (0.0493) (0.0402) (0.0218) (0.0253) (0.0399)
-------------- ------------- ------------- -------------- ---------------
Net asset value at end of period ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============= ============= ============== ===============
Total Return ............................ 5.04% 4.09% 2.20% 2.53% 4.30%**
Ratios to Average Net Assets:
Expenses .............................. 0.90%(1) 0.96% 1.06% 1.04% 0.96%**
Net investment income ................. 4.91%(2) 4.04% 2.18% 2.53% 4.30%**
Supplemental Data:
Net assets at end of period ........... $ 156,412,213 $ 94,592,158 $ 92,678,440 $ 101,321,868 $ 94,887,669
Number of shares outstanding at end of
period ............................. 156,412,393 94,591,979 92,678,268 101,321,668 94,887,669
</TABLE>
- ------
*The Quality Cash Reserve Prime Shares commenced operations on May 6, 1991.
**Annualized.
(1) Ratio of expense to average daily net assets prior to partial fee waivers
was 0.95%.
(2) Ratio of net investment income to average daily net assets prior to partial
fee waivers was 4.86%.
3
<PAGE>
3 The Fund and the Quality
Cash Reserve Prime Shares
The Fund is a money market fund that 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 five 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 that 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 that 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 that 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 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
4
<PAGE>
notes issued by corporations that (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 by Moody's or S&P, 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 that 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
5
<PAGE>
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 that 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;
(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 that 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
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<PAGE>
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 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.
7
<PAGE>
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
statement of account with his Participating Dealer. 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
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. The Participating Dealer may subtract from the
redemption proceeds the cost of effecting the wire transfer.
8
<PAGE>
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:
(1) 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;
(2) 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
(3) 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
that 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 substitute for careful tax
planning.
9
<PAGE>
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 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.
The Fund intends to make sufficient distributions of its ordinary income and
capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.
The sale, exchange or redemption of shares is a taxable event for the
shareholder.
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 each Series 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. Four 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.
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<PAGE>
INVESTMENT ADVISOR
Investment Company Capital Corp., 135 East Baltimore Street, Baltimore,
Maryland 21202, an indirect subsidiary of Alex. Brown Incorporated (described
below), was organized in 1987 and acts as the investment advisor to the Prime
Series. ICC supervises and manages the Prime Series' operations and generally
provides management and administrative services for the Prime Series. 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 May 31, 1996, had
net assets of approximately $1.1 billion.
Pursuant to a new advisory agreement, which became effective August 23, 1995,
ICC is entitled to receive a fee from the Fund, calculated daily and payable
monthly, at the following annual rates based upon the Fund's aggregate
average daily net assets: .30% of the first $500 million, .26% of the next
$500 million, .25% of the next $500 million, .24% of the next $ 1 billion,
.23% of the next $1 billion and .22% of that portion in excess of $3.5
billion. The Prime Series pays its share of the fee based on the proportion
its net assets bear to those of the Fund. 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.
As compensation for providing investment advisory services to the Prime
Series, for the period from August 23, 1995 to March 31, 1996, ICC received
an annualized advisory fee at the rate of .27% of the Prime Series'
average daily net assets. ICC may, from time to time, voluntarily waive a
portion of its advisory fee with respect to the Prime Series to preserve or
enhance the performance of such Series.
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to the Prime Series. (See "Custodian, Transfer
Agent and Accounting Services.")
In the fiscal year ended March 31, 1996, the expenses borne by the Quality Cash
Reserve Prime Shares class of the Prime Series, including the fees to ICC,
amounted to .90% (net of fee waivers) of such class' average daily net assets.
DISTRIBUTOR
Alex. Brown, 135 East Baltimore Street, Baltimore, Maryland 21202, serves as
the exclusive distributor for the Quality Cash Reserve Prime Shares. Alex.
Brown is an investment banking firm that 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.
As compensation for its services, Alex. Brown is entitled to receive a fee
from the Fund, equal to .60% of the aggregate net assets invested in Quality
Cash Reserve Prime Shares. Alex. Brown is currently reducing its distribution
fee, on a voluntary basis, to .53% of the Quality Cash Reserve Prime Shares'
average net assets. (See "Table of Fees and Expenses.")
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<PAGE>
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 is 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
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 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. For information regarding the other classes of
shares, please call (800) 553-8080. Shares of the Fund have equal rights with
respect to voting, except that the holders of shares of a particular Series
or class
12
<PAGE>
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 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 AND 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 provides accounting
services to the Prime Series. As compensation for providing accounting
services to the Prime Series for the fiscal year ended March 31, 1996, ICC
received a fee equal to .01% of the Prime Series' aggregate average daily net
assets. (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, 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 LLP serves as counsel to the Fund.
SHAREHOLDER INQUIRIES
Shareholders with inquiries concerning their shares should contact any
Participating Dealer.
13
<PAGE>
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, 1996
Relating to Prospectuses dated August 1, 1996 for:
Alex. Brown Cash Reserve Fund, Inc.
(Prime Series, Treasury Series and Tax-Free Series)
Quality Cash Reserve Prime Shares
Institutional Shares
(Prime Series and Treasury Series)
and Flag Investors Cash Reserve Prime Shares
(Class A and Class B)
<PAGE>
<TABLE>
<CAPTION>
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............................................................................................14
Transfer Agent, Custodian and Accounting Services...................................................15
Sub-Accounting......................................................................................16
Principal Holders of Securities.....................................................................16
Reports.............................................................................................18
Share Purchases and Redemptions...........................................................................18
Purchases and Redemptions...........................................................................18
Net Asset Value Determination.......................................................................18
Dividends and Taxes.......................................................................................19
Dividends...........................................................................................19
Taxes...............................................................................................20
Current Yield.............................................................................................23
Investment Program and Restrictions.......................................................................24
Investment Restrictions.............................................................................24
Portfolio Transactions....................................................................................27
Financial Statements......................................................................................29
</TABLE>
<PAGE>
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, 1996 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.
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"):
o Prime Series
o Treasury Series
o 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.
-3-
<PAGE>
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, 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.
-4-
<PAGE>
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.
Directors and Officers
The directors and executive officers of the Fund, their dates
of birth 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 (10/6/24) 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 (7/17/45)
Managing Director, Alex. Brown & Sons Incorporated; Chartered Financial Analyst;
President, Investment Company Capital Corp. (registered investment advisor).
*CHARLES W. COLE, JR., Director (11/11/35)
Vice Chairman, Alex. Brown Capital Advisory & Trust Company (registered
investment advisor); Director, Provident Bankshares Corporation and Provident
Bank of Maryland; President, Chief Executive Officer, Chief Administrative
Officer, and Director, First Maryland Bancorp, The First National Bank of
Maryland and First Omni Bank; Formerly, Director, York Bank and Trust Company.
JAMES J. CUNNANE, Director (3/11/38)
CBC Capital, 264 Carlyle Lake Drive, St. Louis, Missouri 63141. Managing
Director, CBC Capital (merchant banking), 1993-Present; Formerly, Senior
Vice-President and Chief Financial Officer, General Dynamics Corporation
(defense), 1989-1993 and Director, The Arch Fund (registered investment
company).
JOHN F. KROEGER, Director (8/11/24)
37 Pippins Way, Morristown, New Jersey 07960. Director/Trustee, AIM Funds
(registered investment companies); Formerly, Consultant, Wendell & Stockel
Associates, Inc. (consulting firm); General Manager, Shell Oil Company.
LOUIS E. LEVY, Director (11/16/32)
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 (4/10/51)
The Pew Charitable Trusts, One Commerce Square, 2005 Market Street, Suite 1700,
Philadelphia, PA 19103. President and Chief Executive Officer, The Pew
Charitable Trusts; Director and Executive Vice President, The Glenmede Trust
Company; Formerly, Executive Director, The Pew Charitable Trusts.
*TRUMAN T. SEMANS, Director (10/27/27)
- --------
* Messrs. Price, Hale, Semans and Cole are "interested persons," as defined in
the Investment Company Act of 1940.
-5-
<PAGE>
Managing Director, Alex. Brown & Sons Incorporated; Chartered Financial Analyst;
Director, ICC (registered investment advisor).
EUGENE J. MCDONALD, Director (7/14/32)
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).
CARL W. VOGT, Director (4/20/36)
Fulbright & Jaworski L.L.P., 801 Pennsylvania Avenue, N.W., Washington, D.C.
20004-2604. Senior Partner, Fulbright & Jaworski L.L.P. (law); Formerly,
Chairman, National Transportation Safety Board; Director, National Railroad
Passenger Corporation (Amtrak) and Member, Aviation System Capacity Advisory
Committee (Federal Aviation Administration).
HARRY WOOLF, Director (8/12/23)
Institute for Advanced Study, South Olden Lane, Princeton, New Jersey 08540.
Professor-at-Large Emeritus, Institute for Advanced Study; Director, ATL and
Spacelabs Medical Corp (medical equipment) and Family Health International
(nonprofit research and education); Trustee, Reed College (education); Formerly,
Trustee, Rockefeller Foundation; Director, Merrill Lynch Cluster C Funds
(registered investment companies).
EDWARD J. VEILLEUX, Executive Vice President (8/26/43)
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 (1/10/42)
Principal, Alex. Brown & Sons Incorporated, 1991 - Present; Principal, Monument
Capital Management, Inc., 1988-1991.
PAUL D. CORBIN, Vice President (7/24/52)
Principal, Alex. Brown & Sons Incorporated, 1991 - Present; Senior Vice
President, First National Bank of Maryland, 1985-1991.
BRIAN C. NELSON, Vice President (7/31/59)
Vice President, Alex. Brown & Sons Incorporated, Investment Company Capital
Corp. (registered investment advisor) and Armata Financial Corp. (registered
broker-dealer).
MONICA M. HAUSNER, Vice President (10/26/61)
Fixed Income Management Department, Alex. Brown & Sons Incorporated,
1992-Present; Formerly, Assistant Vice President, First National Bank of
Maryland, 1984-1992.
JOSEPH A. FINELLI, Treasurer (1/24/57)
Vice President, Alex. Brown & Sons Incorporated, September 1995-Present;
Formerly, Vice President and Treasurer, The Delaware Group of Funds (registered
investment companies) and Vice President, Delaware Management Company, Inc.,
1980-1995.
EDWARD J. STOKEN, Secretary (8/7/47)
Compliance Officer, Alex. Brown & Sons Incorporated, April 1995-Present;
Formerly, Legal Advisor, Federated Investors (registered investment advisor),
1991-1995.
LAURIE D. DEPRINE, Assistant Secretary (1/1/66)
Asset Management Department, Alex. Brown & Sons Incorporated, 1991-Present;
Formerly, 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.
-6-
<PAGE>
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, 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
and Vice President of 12 funds in the Fund Complex. Mr. Nelson, Mr. Finelli, Mr.
Stoken and Ms. DePrine serve as Vice President, Treasurer, Secretary 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, 1996 Non-Interested Directors' fees attributable to the assets
of the Fund totalled $206,622.
<TABLE>
<CAPTION>
COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------------------
Name of Person, Aggregate Compensation Pension or Retirement Estimated Total Compensation from the
Position from the Fund for the Benefits Accrued as Annual Benefits Fund and Fund Complex
Fiscal Year Ended Part of Fund Upon Retirement Paid to Directors for the
March 31, 1996 Expenses Fiscal Year Ended March 31, 1996
- --------------------- -------------------------- ----------------------- ------------------- ---------------------------------
<S> <C> <C> <C> <C>
*W. James Price $0 $0 $0 $0
Chairman
*Richard T. Hale $0 $0 $0 $0
Vice Chairman
Charles W. Cole $0 $+ $0 $0 for service
on 13 boards(2)
James J. Cunnane $27,072(1) $+ $19,500 $39,000 for service
Director on 13 boards(2)
N. Bruce Hannay** $24,753(1) $+ $19,500 $35,786 for service
Director on 13 boards(2)
John F. Kroeger $31,945(1) $+ $24,500 $45,950 for service
Director on 13 boards(2)
Louis E. Levy $27,072(1) $+ $19,500 $39,000 for service
Director on 13 boards(2)
Eugene J. McDonald $27,072(1) $+ $19,500 $39,000 for service
Director on 13 boards(2)
*Rebecca W. Rimel*** $28,098 $+ $19,500 $29,250 for service
Director on 6 boards in the Fund Complex
Carl W. Vogt $ 8,434 $+ $19,500 $9,750 for service
on 13 boards(2)
Harry Woolf $27,072 $+ $19,500 $39,000 for service
Director on 13 boards(2)
* A Director who is, or may be, an "interested person" as defined in the Investment Company Act.
** Retired on January 31, 1996 and is now deceased.
*** Elected to the Board on June 1, 1995
+ The Fund Complex has adopted a retirement plan for eligible Directors,
as described below. The actuarially computed pension expense for the
year ended March 31, 1996 was approximately $7,000.
</TABLE>
-7-
<PAGE>
(1) $0 of this amount has been deferred pursuant to a deferred compensation
plan.
(2) One of these funds ceased on May 17, 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
six years of service, each Participant will be entitled to receive an annual
retirement 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. 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
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.
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. Messrs. Cunnane, Kroeger, Levy, McDonald, Vogt,
Woolf and Ms. Rimel have each executed a Deferred Compensation Agreement.
Currently, the deferring Directors may select various Flag and Alex. Brown Funds
in which all or part of their deferral account shall be deemed to be invested.
Distributions from the deferring Directors' deferral accounts will be paid in
cash, in generally equal installments over a period of ten years.
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.
-8-
<PAGE>
As compensation for its services for the Fund, 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: .30% of the
first $500 million, .26% of the next $500 million, .25% of the next $500
million, .24% of the next $1 billion, .23% of the next $1 billion and .22% of
that portion in excess of $3.5 billion. In addition, the Advisor is entitled to
receive an additional fee with respect to the Prime Series' average daily net
assets as well as an additional fee with respect to the Tax-Free Series,
calculated daily and paid monthly, at the annual rate of .03% of the Tax-Free
Series' average daily net assets. 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. The rates set forth above were approved by the
Fund's Board of Directors on June 1, 1995, and by shareholders of the Prime
Series, the Treasury Series and the Tax-Free Series, respectively, on August 23,
1995.
In the fiscal year ended March 31, 1996, ICC served as the Fund's
investment advisor pursuant to both current and prior investment advisory
agreements, in effect for such periods. For that fiscal year, the aggregate fees
paid by the Fund to ICC were $7,291,008.
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 and March 31, 1994, the aggregate fees paid by the
Fund to ICC (net of voluntary fee waivers of $156,200 and $152,838 for the
Treasury Series for the fiscal years ended March 31, 1995 and March 31, 1994)
were $4,941,395 and $4,856,245, 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 May 31, 1996, had
net assets of approximately $1.1 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 and 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
-9-
<PAGE>
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.
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 providing sub-advisory
services to the Tax-Free Series for the fiscal year ended March 31, 1996, ICC
paid PIMC fees of $742,568. As compensation for providing 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) and March 31, 1994, ICC paid PIMC fees of
$1,377,476 and $1,740,475.
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 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 18, 1996.
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
-10-
<PAGE>
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
compensation as distributor of the Fund's shares is allocated to the
Institutional Shares. Alex. Brown receives a distribution fee from the Fund,
calculated daily and paid monthly, at the annual rates of .60% of the average
daily net assets of the Quality Cash Reserve Prime Shares and .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, 1996, March 31, 1995 and March 31, 1994, Alex. Brown received from the Fund
aggregate fees of 6,327,179, $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, 1996, March 31, 1995 and March 31, 1994, 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, 1996, March 31, 1995 and March 31, 1994,
Alex. Brown received from the Fund fees of $738,961, $574,855 and $570,251,
respectively.
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 year ended March 31, 1995 and March
31, 1994, Alex. Brown received commissions of $376 and $1,811, 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. 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
-11-
<PAGE>
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 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 18, 1996. 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.
-12-
<PAGE>
CASH RESERVE
For the fiscal year ended March 31, 1996, the Fund paid
$5,575,592, $1,549,949 and $1,345,261, respectively, to Alex Brown, the Fund's
distributor, pursuant to the 12b-1 plans of Alex. Brown Cash Reserve Fund,
Inc.'s Prime Series, Treasury Series and Tax-Free Series, respectively. Alex.
Brown, in turn, paid certain distribution-related expenses including one or more
of the following: advertising expenses; printing and mailing of prospectuses to
other than current shareholders; compensation to dealers and sales personnel;
and interest, carrying or other financing charges.
For the same period, the Fund paid $738,961 to Alex. Brown,
pursuant to the 12b-1 plan of the Quality Cash Reserve Prime Shares; and $19,190
and $70 to Alex. Bown, pursuant to the 12b-1 plans of the Flag Investors Cash
Reserve Prime Shares' Class A Shares and Class B Shares, respectively.
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
-13-
<PAGE>
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.
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 ICC (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 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
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<PAGE>
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 and 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. 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, 1996, PNC received custodian fees of
$610,914 (including reimbursement for out-of-pocket expenses) and, with respect
to the Tax-Free Series, PFPC received accounting fees (including reimbursement
for out-of-pocket expenses) of $101,924, 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.
Prime and Treasury Series
Average Net Assets Incremental Annual Accounting Fee Per Series
------------------ --------------------------------------------
$ 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%
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 fiscal year ended March 31, 1996 and for the period
from November 10, 1995 through March 31, 1995, ICC received fees of $ 150,692
and $58,826, respectively, for providing accounting services to the Prime
Series. For the fiscal years ended March 31, 1996, March 31, 1995 and for the
period from January 1, 1994 through March 31, 1994, ICC received fees of
$122,841, $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, 1996, such fees totalled $1,105,948 for Prime, $234,288 for
Treasury and $154,031 for Tax-Free, respectively.
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.
-15-
<PAGE>
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 July 16, 1996 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. 11.75% --%
A/C 0020170139
P.O. Box 1346
Baltimore, MD 21203-1346
Alex. Brown & Sons, Inc. 12.86% --%
A/C 0020170250
P.O. Box 1346
Baltimore, MD 21203-1346
Alex. Brown & Sons Inc. 15.98% --%
A/C 0020170321
P.O. Box 1346
Baltimore, MD 21203-1346
Alex. Brown & Sons Inc. 11.82% --%
A/C 0020170339
P.O. Box 1346
Baltimore, MD 21203-1346
Alex. Brown & Sons Inc. 6.03% --%
A/C 0020416928
P.O. Box 1346
Baltimore, MD 21203-1346
Institutional Treasury Shares
Alex. Brown & Sons, Inc. 6.52% --%
A/C 0020170073
P.O. Box 1346
Baltimore, MD 21203-1346
Alex. Brown & Sons, Inc. 16.79% --%
A/C 25010297
P.O. Box 1346
Baltimore, MD 21203-1346
<PAGE>
Flag Investors Cash Reserve Prime Class A Shares
Alex. Brown & Sons, Inc. 7.69% --%
FBO 242-06298-14
P.O. Box 1346
Baltimore, MD 21203-1346
Alex. Brown & Sons, Inc. 7.19% --%
FBO 242-06863-18
P.O. Box 1346
Baltimore, MD 21203-1346
Alex. Brown & Sons, Inc. 5.01% --%
FBO 601-80127-13
P.O. Box 1346
Baltimore, MD 21203-1346
Alex. Brown & Sons, Inc. *62.04% --%
135 E. Baltimore St.
Baltimore, MD 21202
Flag Investors Cash Reserve Prime Class B Shares
Marion L. Woss Tr. 96.14% --%
U/A 03/11/1992
Marion L. Woss Trust
13326 Plattner Dr.
Mokena, IL 60448-9227
Quality Prime Shares
Alex. Brown & Sons, Inc. 6.66% --%
A/C 0074255447
P.O. Box 1346
Baltimore, MD 210203-1346
Treasury Series
Alex. Brown & Sons, Inc. 7.92% --%
A/C 0023126873
P.O. Box 1346
Baltimore, MD 21203-1346
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<PAGE>
As of July 16, 1996, 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.
* As of such date, to Fund Management's Knowledge, Alex. Brown & Sons, Inc.
owned beneficially less than 1% of such Shares.
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, 1997.
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.
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.
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<PAGE>
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 90 days or less for each Series, purchases only
instruments having remaining maturities of 397 days 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 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
-18-
<PAGE>
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 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.
-19-
<PAGE>
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.
If for any taxable year, the Fund does not qualify as a
regulated investment company, all of its taxable income will be subject to tax
at regular corporate income tax rates without any deduction for distribution to
shareholders, and all such distributions generally will be taxable to
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the 70% 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.
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.
-20-
<PAGE>
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
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
-21-
<PAGE>
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, 1996.
<TABLE>
<CAPTION>
Series or class Current Yield Effective Yield Taxable-Equivalent Yield***
- --------------- ------------- --------------- ---------------------------
<S> <C> <C> <C>
Prime Series* 4.72% 4.83% N/A
Institutional Prime Shares 4.97% 5.10% N/A
Quality Cash Reserve Prime Shares 4.50% 4.60% N/A
Cash Reserve Prime B Shares 4.72% 4.83% N/A
Treasury Series** 4.46% 4.55% N/A
Institutional Treasury Shares 4.73% 4.84% N/A
Tax-Free Series 2.75% 2.80% 4.06%
</TABLE>
- -----------------------
* Other than the Institutional, Quality Cash Reserve Prime Shares or Flag
Investors Cash Reserve Prime Class B Shares.
** Other than the Institutional Shares.
*** Assumes a tax rate of 31%.
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
-22-
<PAGE>
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 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 (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
- --------
(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.
-23-
<PAGE>
(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 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.
- --------
(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>
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+").
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.
-25-
<PAGE>
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, 1996, March 31, 1995 and
March 31, 1994, 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 90 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 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, 1996, March 31, 1995 and March
31, 1994, 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, 1996, the
Fund held a 5.37% repurchase agreement issued by Goldman Sachs & Co. valued at
$83,000,000 and a 5.33% repurchase agreement issued by Morgan Stanley & Co.
valued at $100,000,000.
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.
-26-
<PAGE>
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:
(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.
-27-
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
PRIME SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets
March 31, 1996
<TABLE>
<CAPTION>
Rating (a)
----------------- Par
S&P Moody's (000) Value
------ --------- --------- --------------
COMMERCIAL PAPER -- 87.5%(b)
<S> <C> <C> <C> <C>
Automobiles & Trucks -- 4.9%
Ford Motor Credit Corp.
5.50% 4/1/96 ...................... A-1 P-1 $15,000 $ 15,000,000
PACCAR Financial Corp.
5.32% 4/18/96 ..................... A-1+ P-1 11,000 10,972,366
5.30% 4/24/96 ..................... A-1+ P-1 10,000 9,966,139
5.03% 5/16/96 ..................... A-1+ P-1 5,000 4,968,562
5.03% 5/23/96 ..................... A-1+ P-1 11,000 10,920,079
Toyota Motor Credit Corp.
5.31% 4/22/96 ..................... A-1+ P-1 30,000 29,907,075
5.30% 5/2/96 ...................... A-1+ P-1 15,450 15,379,488
5.00% 5/20/96 ..................... A-1+ P-1 15,000 14,897,917
5.00% 5/22/96 ..................... A-1+ P-1 15,000 14,893,750
------------
126,905,376
------------
Beverages -- 1.9%
Anheuser-Busch Companies, Inc.
5.34% 4/18/96 ..................... A-1+ P-1 15,000 14,962,175
4.90% 10/21/96 .................... A-1+ P-1 20,000 19,447,389
4.75% 10/28/96 .................... A-1+ P-1 15,000 14,584,375
------------
48,993,939
------------
Chemicals, General -- 2.1%
E.I. duPont de Nemours
5.31% 4/29/96 ..................... A-1+ P-1 25,000 24,896,750
5.02% 6/17/96 ..................... A-1+ P-1 15,000 14,833,167
5.03% 7/19/96 ..................... A-1+ P-1 5,000 4,923,851
5.50% 8/1/96 ...................... A-1+ P-1 10,000 9,813,611
------------
54,467,379
------------
Chemicals, Specialty -- 1.3%
Air Products & Chemicals
5.48% 4/16/96 .................... A-1 P-1 9,000 8,979,450
5.35% 6/17/96 .................... A-1 P-1 15,000 14,828,354
5.125% 7/11/96 .................... A-1 P-1 9,000 8,870,594
------------
32,678,398
------------
Computer & Office Equipment -- 7.9%
Hewlett-Packard
5.35% 4/18/96 ..................... A-1+ P-1 10,000 9,974,736
5.24% 4/19/96 ..................... A-1+ P-1 10,000 9,973,800
5.22% 4/26/96 ..................... A-1+ P-1 20,500 20,425,687
4.97% 6/19/96 ..................... A-1+ P-1 10,000 9,890,936
4.95% 6/25/96 ..................... A-1+ P-1 15,000 14,824,688
5.04% 7/19/96 ..................... A-1+ P-1 9,750 9,601,215
</TABLE>
6
<PAGE>
PRIME SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
<TABLE>
<CAPTION>
Rating (a)
----------------- Par
S&P Moody's (000) Value
------ --------- --------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- continued
Computer & Office Equipment -- continued
Pitney Bowes Credit Corp.
5.24% 4/18/96 ..................... A-1+ P-1 $10,000 $ 9,975,256
5.11% 4/30/96 ..................... A-1+ P-1 15,000 14,938,254
5.14% 5/2/96 ...................... A-1+ P-1 10,000 9,955,739
5.02% 10/3/96 ..................... A-1+ P-1 15,000 14,613,042
5.03% 10/3/96 ..................... A-1+ P-1 15,000 14,612,271
5.02% 10/4/96 ..................... A-1+ P-1 20,000 19,481,267
5.04% 10/4/96 ..................... A-1+ P-1 17,000 16,557,320
Xerox Credit Corp.
5.10% 5/8/96 ...................... A-1 P-1 20,000 19,895,167
5.05% 8/29/96 ..................... A-1 P-1 10,000 9,789,583
--------------
204,508,961
--------------
Credit Unions -- 2.5%
Central Corp. Credit
5.39% 4/15/96 ..................... A-1+ P-1 24,225 24,174,222
Mid-States Corporate Federal Credit
Union
5.33% 4/12/96 ..................... A-1+ P-1 18,000 17,970,685
5.33% 4/23/96 ..................... A-1+ P-1 8,000 7,973,942
U.S. Central Credit Union
5.30% 4/17/96 ..................... A-1+ P-1 15,000 14,964,667
--------------
65,083,516
--------------
Defense & Aircraft -- 2.1%
Rockwell International Corp.
5.31% 4/30/96 ..................... A-1+ P-1 55,000 54,764,939
--------------
Electrical & Electronics -- 2.9%
General Electric Company
5.43% 4/4/96 ...................... A-1+ P-1 25,000 24,988,687
5.42% 5/2/96 ...................... A-1+ P-1 25,000 24,883,319
5.07% 5/3/96 ...................... A-1+ P-1 10,000 9,954,933
Motorola Inc.
5.06% 4/25/96 ..................... A-1+ P-1 15,000 14,949,400
--------------
74,776,339
--------------
Electric Utility -- 1.4%
Indianapolis Power & Light
5.17% 4/2/96 ...................... A-1+ P-1 10,700 10,698,463
Northern States Power
5.35% 4/17/96 ..................... A-1+ P-1 25,000 24,940,556
--------------
35,639,019
--------------
</TABLE>
7
<PAGE>
PRIME SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
<TABLE>
<CAPTION>
Rating (a)
----------------- Par
S&P Moody's (000) Value
------ --------- --------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- continued
Entertainment -- 2.6%
Walt Disney Co. .......................
5.18% 7/15/96 ..................... A-1 P-1 $10,000 $ 9,848,917
5.18% 8/14/96 ..................... A-1 P-1 15,000 14,708,625
5.20% 9/10/96 ..................... A-1 P-1 20,000 19,532,000
5.18% 12/6/96 ..................... A-1 P-1 10,000 9,641,717
5.18% 12/9/96 ..................... A-1 P-1 15,000 14,456,100
--------------
68,187,359
--------------
Finance/Commercial -- 0.4%
CIT Group Holdings Inc.
5.32% 4/8/96 ...................... A-1 P-1 10,000 9,989,656
--------------
Finance/Consumer -- 2.2%
USAA Capital Corp.
5.32% 4/3/96 ...................... A-1+ P-1 7,000 6,997,931
5.12% 4/10/96 ..................... A-1+ P-1 15,000 14,980,800
5.02% 5/20/96 ..................... A-1+ P-1 10,000 9,931,672
5.05% 6/6/96 ...................... A-1+ P-1 8,500 8,421,304
5.05% 6/14/96 ..................... A-1+ P-1 18,006 17,819,088
--------------
58,150,795
--------------
Finance/Diversified -- 0.5%
General Electric Capital Corp.
5.15% 4/4/96 ...................... A-1+ P-1 12,000 11,994,850
--------------
Food -- 6.0%
Campbell Soup Co.
5.34% 6/6/96 ...................... A-1+ P-1 25,000 24,755,250
4.98% 10/4/96 ..................... A-1+ P-1 10,000 9,742,700
Cargill, Inc.
5.35% 4/2/96 ...................... A-1+ P-1 10,000 9,998,514
5.08% 4/30/96 ..................... A-1+ P-1 8,000 7,967,262
5.02% 5/8/96 ...................... A-1+ P-1 10,000 9,948,406
5.02% 5/20/96 ..................... A-1+ P-1 10,000 9,931,672
5.23% 6/17/96 ..................... A-1+ P-1 10,000 9,888,136
5.23% 6/18/96 ..................... A-1+ P-1 20,000 19,773,367
H.J.Heinz
5.37% 4/1/96 ...................... A-1 P-1 10,000 10,000,000
Hershey Foods
5.10% 4/26/96 ..................... A-1+ P-1 20,000 19,929,167
Kellogg Company
5.09% 4/16/96 ..................... A-1+ P-1 4,122 4,113,258
5.25% 6/3/96 ...................... A-1+ P-1 21,000 20,807,062
--------------
156,854,794
--------------
</TABLE>
8
<PAGE>
PRIME SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
<TABLE>
<CAPTION>
Rating (a)
----------------- Par
S&P Moody's (000) Value
------ --------- --------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- continued
Household Products -- 5.8%
Clorox Company ........................
5.33% 4/8/96 ...................... A-1+ P-1 $20,000 $ 19,979,272
5.30% 4/22/96 ..................... A-1+ P-1 15,000 14,953,625
5.03% 5/28/96 ..................... A-1+ P-1 5,000 4,960,179
Colgate-Palmolive Co.
5.35% 4/4/96 ...................... A-1 P-1 15,000 14,993,313
5.09% 7/12/96 ..................... A-1 P-1 10,000 9,855,783
Procter & Gamble Co.
5.23% 4/12/96 ..................... A-1+ P-1 18,200 18,170,915
5.23% 4/17/96 ..................... A-1+ P-1 15,000 14,965,133
5.07% 5/13/96 ..................... A-1+ P-1 14,000 13,917,190
5.07% 6/11/96 ..................... A-1+ P-1 20,000 19,800,017
5.00% 6/12/96 ..................... A-1+ P-1 9,000 8,910,000
5.07% 6/14/96 ..................... A-1+ P-1 12,000 11,874,940
--------------
152,380,367
--------------
Insurance, Property & Casualty -- 4.3%
A.I. Credit Corp.
5.00% 5/7/96 ...................... A-1+ P-1 15,000 14,925,000
5.00% 5/13/96 ..................... A-1+ P-1 20,000 19,883,333
AIG Funding Inc.
5.30% 4/19/96 ..................... A-1+ P-1 15,000 14,960,250
5.30% 5/20/96 ..................... A-1+ P-1 10,000 9,927,861
5.20% 7/31/96 ..................... A-1+ P-1 15,000 14,737,833
Chubb Capital Corp.
5.55% 4/12/96 ..................... A-1+ P-1 24,200 24,160,473
Marsh & McLennan Companies Inc.
5.15% 9/27/96 ..................... A-1+ P-1 15,000 14,615,896
--------------
113,210,646
--------------
Integrated Oil -- 3.7%
Amoco Co.
5.18% 4/18/96 ..................... A-1+ P-1 17,106 17,064,157
Exxon Imperial U.S. Inc.
5.28% 4/17/96 ..................... A-1+ P-1 25,000 24,941,422
5.30% 4/26/96 ..................... A-1+ P-1 30,000 29,889,583
Shell Oil Co.
5.37% 4/4/96 ...................... A-1+ P-1 25,000 24,988,812
--------------
96,883,974
--------------
Oil Transportation -- 0.6%
Colonial Pipeline
5.25% 4/11/96 ..................... A-1+ P-1 6,600 6,590,375
5.12% 4/12/96 ..................... A-1+ P-1 10,000 9,984,356
--------------
16,574,731
--------------
</TABLE>
9
<PAGE>
PRIME SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
<TABLE>
<CAPTION>
Rating (a)
----------------- Par
S&P Moody's (000) Value
------ --------- --------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- continued
Paper -- 1.3%
Kimberly-Clark Corp. ..................
5.13% 4/19/96 ..................... A-1+ P-1 $ 5,850 $ 5,834,995
5.30% 5/1/96 ...................... A-1+ P-1 20,000 19,911,667
5.27% 5/7/96 ...................... A-1+ P-1 8,000 7,957,840
--------------
33,704,502
--------------
Pharmaceuticals -- 8.9%
Abbott Laboratories
5.33% 4/25/96 ..................... A-1+ P-1 20,000 19,928,933
Eli Lilly & Co.
5.11% 4/23/96 ..................... A-1+ P-1 15,000 14,953,158
5.30% 5/23/96 ..................... A-1+ P-1 10,000 9,923,444
4.92% 6/17/96 ..................... A-1+ P-1 10,000 9,894,767
5.21% 6/20/96 ..................... A-1+ P-1 15,000 14,826,333
4.95% 8/20/96 ..................... A-1+ P-1 15,000 14,709,187
4.78% 8/22/96 ..................... A-1+ P-1 10,000 9,810,128
Pfizer Inc.
5.15% 4/4/96 ...................... A-1+ P-1 3,000 2,998,713
5.13% 4/17/96 ..................... A-1+ P-1 20,000 19,954,400
Schering-Plough Corp.
5.25% 5/24/96 ..................... A-1+ P-1 20,000 19,845,417
Warner-Lambert Co.
5.25% 6/10/96 ..................... A-1+ P-1 15,000 14,846,875
5.33% 6/12/96 ..................... A-1+ P-1 12,200 12,069,948
5.35% 6/18/96 ..................... A-1+ P-1 25,000 24,710,208
5.03% 7/30/96 ..................... A-1+ P-1 14,500 14,256,883
5.05% 7/30/96 ..................... A-1+ P-1 10,000 9,831,667
4.80% 8/8/96 ...................... A-1+ P-1 10,000 9,828,000
4.87% 9/3/96 ...................... A-1+ P-1 10,000 9,790,319
--------------
232,178,380
--------------
Publishing -- 6.8%
Dun & Bradstreet Corp.
5.30% 5/21/96 ..................... A-1+ P-1 20,000 19,852,778
Gannett Co.
5.22% 4/9/96 ...................... A-1 P-1 30,000 29,965,200
5.30% 4/11/96 ..................... A-1 P-1 26,200 26,161,428
5.27% 4/17/96 ..................... A-1 P-1 25,000 24,941,444
Knight-Ridder Inc.
5.60% 4/2/96 ...................... A-1+ P-1 25,000 24,996,111
5.25% 4/26/96 ..................... A-1+ P-1 10,000 9,963,542
5.07% 5/28/96 ..................... A-1+ P-1 25,000 24,799,312
McGraw-Hill, Inc.
5.50% 4/4/96 ...................... A-1 P-1 7,500 7,496,563
RR Donnelley & Sons
5.25% 4/26/96 ..................... A-1+ P-1 10,000 9,963,542
--------------
178,139,920
--------------
</TABLE>
10
<PAGE>
PRIME SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
<TABLE>
<CAPTION>
Rating (a)
------------------ Par
S&P Moody's (000) Value
------ --------- --------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- continued
Railroad -- 1.5%
Norfolk Southern Corporation
5.03% 6/7/96 ...................... A-1+ P-1 $12,500 $ 12,382,983
5.23% 6/21/96 ..................... A-1+ P-1 26,364 26,053,762
--------------
38,436,745
--------------
Retail, Specialty -- 2.0%
Toys "R" Us
5.30% 4/26/96 ..................... A-1 P-1 27,000 26,900,625
5.37% 5/6/96 ...................... A-1 P-1 25,000 24,869,479
--------------
51,770,104
--------------
Structured Finance -- 6.5%
CIESCO, L.P.
5.32% 4/11/96 ..................... A-1+ P-1 25,000 24,963,014
5.15% 5/8/96 ...................... A-1+ P-1 40,000 39,788,278
5.07% 5/23/96 ..................... A-1+ P-1 15,000 14,890,150
Corporate Asset Funding Company, Inc.
5.15% 4/4/96 ...................... A-1+ P-1 30,000 29,987,125
5.38% 4/22/96 ..................... A-1+ P-1 20,000 19,937,233
5.15% 5/2/96 ...................... A-1+ P-1 20,000 19,911,306
5.27% 5/23/96 ..................... A-1+ P-1 20,000 19,847,756
--------------
169,324,862
--------------
Telephone -- 7.0%
AT&T
5.50% 4/10/96 ..................... A-1+ P-1 10,000 9,986,250
5.30% 4/30/96 ..................... A-1+ P-1 15,000 14,935,958
5.18% 7/9/96 ...................... A-1+ P-1 15,000 14,786,325
Ameritech Capital Funding Corp.
5.07% 6/6/96 ...................... A-1+ P-1 30,000 29,721,150
5.02% 6/7/96 ...................... A-1+ P-1 20,000 19,813,144
5.20% 12/10/96 .................... A-1+ P-1 15,000 14,451,833
Ameritech Corp.
5.14% 4/12/96 ..................... A-1+ P-1 10,000 9,984,294
BellSouth Capital Fund
5.00% 5/7/96 ...................... A-1+ P-1 15,000 14,925,000
BellSouth Telecommunications
5.16% 4/23/96 ..................... A-1+ P-1 18,300 18,242,294
GTE North Inc.
5.48% 4/9/96 ...................... A-1+ P-1 20,000 19,975,644
Southwestern Bell Telephone Co.
5.32% 6/7/96 ...................... A-1+ P-1 15,000 14,851,483
--------------
181,673,375
--------------
</TABLE>
11
<PAGE>
PRIME SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
<TABLE>
<CAPTION>
Rating (a)
------------------ Par
S&P Moody's (000) Value
------ --------- --------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- continued
Waste Management -- 0.4%
WMX Technologies
4.78% 11/1/96 ..................... A-1 P-1 $ 10,000 $ 9,715,856
---------------
TOTAL COMMERCIAL PAPER ........... 2,276,988,782
---------------
VARIABLE RATE NOTE -- 1.9%
Coca-Cola Master Note
5.382%(c) 7/22/96 .................. A-1+ P-1 50,000 50,000,000
---------------
FEDERAL HOME LOAN BANK -- 0.6%
FHLB
5.18% 4/24/96 ..................... AAA -- 15,000 14,950,358
---------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 3.1%
FNMA
Discount Note
5.30% 4/16/96 ..................... -- P-1 25,000 24,944,792
5.18% 5/2/96 ...................... -- P-1 15,000 14,933,092
4.95% 9/5/96 ...................... -- P-1 10,000 9,784,125
Note
5.68% 10/7/96 ..................... AAA Aaa 20,000 20,017,657
5.39% 12/4/96 ..................... AAA Aaa 10,000 10,016,832
--------- ---------------
TOTAL FEDERAL NATIONAL MORTGAGE
ASSOCIATION ................... 80,000 79,696,498
--------- ---------------
REPURCHASE AGREEMENTS -- 7.0%(d)
Goldman Sachs & Co.
5.37%(e) 4/1/96 ................... -- -- 83,000 83,000,000
Morgan Stanley & Co.
5.33%(f) 4/1/96 ................... -- -- 100,000 100,000,000
---------------
TOTAL REPURCHASE AGREEMENTS ........................... 183,000,000
---------------
TOTAL INVESTMENTS -- 100.1% ................................... $2,604,635,638(g)
LIABILITIES IN EXCESS OF OTHER ASSETS, NET -- (0.1%) .......... (1,855,863)
---------------
NET ASSETS -- 100.0% .......................................... $2,602,779,775
===============
</TABLE>
12
<PAGE>
PRIME SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
Value
-----
Net Asset Value, Offering and Redemption Price Per:
Prime Share
($2,386,681,216 / 2,386,684,392 shares outstanding)............... $1.00
=====
Flag Investors Class A Share
($5,976,831 / 5,976,824 shares outstanding)....................... $1.00
=====
Flag Investors Class B Share
($10,200 / 10,200 shares outstanding)............................. $1.00
=====
Institutional Prime Share
($53,699,315 / 53,699,535 shares outstanding)..................... $1.00
=====
Quality Cash Reserve Prime Share
($156,412,213 / 156,412,393 shares outstanding)................... $1.00
=====
- ------
(a) Ratings assigned by Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P") are not covered by the Independent
Accountant'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 with no more than five days'
notice. Interest rates on master notes are redetermined weekly. Rates shown
are the rates in effect on March 31, 1996.
(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 3/29/96 to be repurchased on 4/1/96, collateralized by U.S. Treasury
Notes with a market value of $84,660,143.
(f) Dated 3/29/96 to be repurchased on 4/1/96, collateralized by U.S. Treasury
Notes with a market value of $102,042,479.
(g) Aggregate cost for financial reporting and federal tax purposes.
MOODY'S RATINGS:
Aaa Bonds that 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 that 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.
13
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
TREASURY SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets
March 31, 1996
<TABLE>
<CAPTION>
Maturity Par
Date (000) Value
-------- ----- -----
<S> <C> <C> <C>
U.S. TREASURY SECURITIES -- 99.5%
U.S. Treasury Bills(a) -- 70.0%
4.900% .................................. 4/4/96 $20,000 $ 19,991,833
5.000% .................................. 4/4/96 20,000 19,991,667
5.035% .................................. 4/11/96 36,000 35,949,650
4.900% .................................. 4/18/96 8,300 8,280,795
4.990% .................................. 4/18/96 12,300 12,271,017
5.000% .................................. 4/18/96 44,700 44,594,458
5.230% .................................. 4/25/96 14,200 14,150,489
4.790% .................................. 5/2/96 15,800 15,734,829
4.940% .................................. 5/2/96 8,600 8,563,417
4.975% .................................. 5/2/96 8,000 7,965,728
4.985% .................................. 5/2/96 10,500 10,454,927
5.045% .................................. 5/2/96 9,000 8,960,901
5.200% .................................. 5/2/96 9,500 9,457,461
5.245% .................................. 5/2/96 8,600 8,561,158
4.840% .................................. 5/9/96 5,000 4,974,456
4.955% .................................. 5/9/96 20,500 20,392,779
4.980% .................................. 5/9/96 10,000 9,947,433
4.985% .................................. 5/9/96 3,000 2,984,214
4.745% .................................. 5/16/96 16,200 16,103,914
4.950% .................................. 5/16/96 20,000 19,876,250
5.000% .................................. 5/16/96 4,000 3,975,000
4.930% .................................. 5/23/96 45,600 45,275,277
4.750% .................................. 5/30/96 7,600 7,540,836
4.755% .................................. 5/30/96 15,000 14,883,106
4.730% .................................. 6/6/96 7,600 7,534,095
4.850% .................................. 6/6/96 21,500 21,308,829
4.880% .................................. 6/6/96 1,500 1,486,580
4.910% .................................. 6/6/96 29,400 29,135,351
4.955% .................................. 6/20/96 6,500 6,428,428
4.950% .................................. 7/5/96 8,500 8,388,969
4.965% .................................. 7/11/96 2,500 2,465,176
4.990% .................................. 7/11/96 3,400 3,352,401
4.980% .................................. 7/25/96 9,500 9,348,871
5.000% .................................. 7/25/96 5,000 4,920,139
5.055% .................................. 7/25/96 38,200 37,583,150
------------
Total U.S. Treasury Bills .................... 502,833,584
------------
</TABLE>
14
<PAGE>
TREASURY SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
<TABLE>
<CAPTION>
Maturity Par
Date (000) Value
-------- ----- -----
<S> <C> <C> <C>
U.S. TREASURY SECURITIES -- continued
U.S. Treasury Notes -- 29.5%
5.500% .................................. 4/30/96 $110,000 $ 110,039,830
4.250% .................................. 5/15/96 20,000 19,972,141
7.375% .................................. 5/15/96 31,700 31,784,833
5.875% .................................. 5/31/96 15,000 15,019,026
7.625% .................................. 5/31/96 15,000 15,056,100
7.875% .................................. 7/15/96 20,000 20,147,390
-------------
Total U.S. Treasury Notes .................... 212,019,320
-------------
TOTAL U.S. TREASURY SECURITIES .......... 714,852,904
-------------
TOTAL INVESTMENTS -- 99.5% ........................ 714,852,904(b)
OTHER ASSETS LESS LIABILITIES, NET -- 0.5% ........ 3,784,011
-------------
NET ASSETS -- 100.0% .............................. $ 718,636,915
=============
Net Asset Value, Offering and Redemption Price Per:
Treasury Share
($666,814,158 / 666,762,028 shares outstanding) . $1.00
=====
Institutional Treasury Share
($51,822,757 / 51,813,226 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.
15
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
TAX-FREE SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets
March 31, 1996
<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,
Health Care Facilities Revenue Series 1994-B (MBIA
Insurance)
3.30% 4/7/96 (b) ................................... A-1+ -- $ 5,100 $ 5,100,000
Homewood Educational Building Authority (Sanford
University), Series 1988 A (First Alabama Bank LOC)
3.50% 4/7/96 (b) ................................... -- VMIG-1 4,720 4,720,000
Homewood Educational Building Authority (Sanford
University), Series 1988 B (First Alabama Bank LOC)
3.50% 4/7/96 (b) ................................... -- VMIG-1 5,665 5,665,000
------------
15,485,000
------------
ALASKA -- 1.8%
City of Valdez, Marine Terminal Revenue Refunding Bonds
(Arco Transportation Alaska, Inc. Project)
3.30% 6/10/96 (c) .................................. A-1 VMIG-1 10,500 10,500,000
------------
ARIZONA -- 2.4%
Salt River Project, Agricultural Improvement and Power
District
3.35% 8/14/96 (c) .................................. A-1+ P-1 13,698 13,698,000
------------
ARKANSAS -- 1.4%
Arkansas State Development Health Care Authority
Facilities (Sisters of Mercy) (Abm-AMRO Bank N.V. LOC)
3.40% 4/7/96 (b) ................................... A-1+ VMIG-1 8,100 8,100,000
------------
COLORADO -- 7.3%
Colorado Health Facilities Authority, Hospital Revenue,
Adjustable Rate (Sisters of Charity)
3.35% 4/7/96 (b) ................................... A-1+ VMIG-1 6,000 6,000,000
Colorado State Housing Finance Authority, Multi-Family
Housing Bonds -- Winridge Project (SunTrust Bank LOC)
3.40% 4/7/96 (b) ................................... A-1+ -- 7,000 7,000,000
Colorado TRAN
4.50% 6/27/96 (c) .................................. SP-1+ -- 15,000 15,026,465
4.50% 6/27/96 (c) .................................. SP-1+ -- 4,400 4,411,890
</TABLE>
16
<PAGE>
TAX-FREE SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
<TABLE>
<CAPTION>
Rating(a) Par
S&P Moody's (000) Value
-------- --------- -------- ------------
<S> <C> <C> <C> <C>
COLORADO -- continued
Moffat County Pollution Control Revenue Bonds, Series
1984 (Tri-State)
3.40% 4/7/96 (b) ................................... A-1+ P-1 $ 9,100 $ 9,100,000
------------
41,538,355
------------
FLORIDA -- 3.1%
Sunshine State Government Financing Authority,
Commercial Paper Notes
3.35% 4/30/96 ...................................... A-1+ -- 3,000 3,000,000
3.45% 8/13/96 (c) .................................. -- -- 8,975 8,975,000
3.40% 8/14/96 (c) .................................. A-1+ -- 5,700 5,700,000
------------
17,675,000
------------
GEORGIA -- 6.0%
Cobb County Housing Authority RB (Post Mill Project)
Series 1995 DN (FNMA LOC)
3.35% 4/7/96 (b) ................................... A-1+ -- 7,000 7,000,000
Dekalb County Housing Authority, Multifamily Clairmont
Crest Project (FNMA LOC)
3.30% 4/7/96 (b) ................................... A-1+ -- 4,000 4,000,000
Georgia Municipal Association, Pooled Bonds
(MBIA Insurance)
3.20% 4/7/96 (b) ................................... A-1+ VMIG-1 12,100 12,100,000
Smyrna Housing Authority RB (Post Valley Project)
Series 1995 DN (FNMA LOC)
3.35% 4/7/96 (b) ................................... A-1+ -- 11,000 11,000,000
------------
34,100,000
------------
IDAHO -- 1.2%
Idaho Health Facility Authority (Holy Cross Health
System)
3.35% 4/7/96 (b) ................................... A-1+ VMIG-1 7,000 7,000,000
------------
ILLINOIS -- 11.5%
Illinois Development Finance Authority PCRB Commonwealth
Edison CO Project, Series 94C (Abm-AMRO Bank N.V. LOC)
3.30% 4/7/96 (b) ................................... A-1+ P-1 15,500 15,500,000
Illinois Education Facility Authority, Museum of Science
and Industry (Northern Trust LOC)
3.40% 4/5/96 (b) ................................... -- VMIG-1 1,300 1,300,000
</TABLE>
17
<PAGE>
TAX-FREE SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
<TABLE>
<CAPTION>
Rating(a) Par
S&P Moody's (000) Value
-------- --------- -------- ------------
<S> <C> <C> <C> <C>
ILLINOIS -- continued
Illinois Health Facilities Authority, Gottlieb Health
Resources (Harris Trust LOC)
3.40% 4/7/96 (b) ................................... -- VMIG-1 $ 9,900 $ 9,900,000
Illinois Health Facilities Authority, Revenue Bonds
(Rush-Presbyterian-St. Luke's Medical Center)
3.35% 4/30/96 (c) .................................. A-1+ VMIG-1 3,000 3,000,000
Illinois Health Facilities Authority, Variable Rate
Demand Revenue Bonds, Revolving Fund Pooled Financing
Program (The University of Chicago Project)
3.25% 8/6/96 (c) ................................... A-1+ VMIG-1 11,400 11,400,000
Illinois Health Facility Authority, Carle Foundation
Project (FGIC Insurance)
3.40% 4/7/96 (b) ................................... -- VMIG-1 5,950 5,950,000
Illinois State Revenue Anticipation Certificates
4.50% 5/10/96 (c) .................................. SP-1 MIG-1 11,600 11,608,315
Illinois State Revenue Anticipation Certificates
4.50% 6/10/96 (c) .................................. SP-1+ MIG-1 6,600 6,006,665
Illinois State Toll Highway Authority, Toll Highway
Priority Series B (MBIA Insurance)
3.30% 4/7/96 (b) ................................... A-1+ VMIG-1 1,400 1,400,000
------------
66,064,980
------------
INDIANA -- 5.6%
Indiana Health Facilities Financing Authority, Hospital
Revenue Bonds
3.40% 4/7/96 (b) ................................... A-1+ VMIG-1 5,000 5,000,000
Indiana Health Facility Authority, Hospital Revenue
(Methodist Hospital)
3.40% 4/7/96 (b) ................................... A-1+ VMIG-1 6,900 6,900,000
Indianapolis, Indiana Gas Utility System, Citizens Gas
and Coke Utility
3.45% 8/14/96 (c) .................................. A-1+ P-1 10,000 10,000,000
Petersburg Pollution Control Revenue (Indianapolis
Power and Light) (AMBAC Insurance)
3.30% 4/7/96 (b) ................................... -- VMIG-1 10,000 10,000,000
------------
31,900,000
------------
IOWA -- 2.2%
Council Bluffs, Iowa Pollution Control Revenue (Illinois
Gas and Electric Company)
3.45% 4/7/96 (b) ................................... A-1+ VMIG-1 7,700 7,700,000
Louisa County Pollution Control Revenue, Refunding Bonds
(Rabo Bank Nederland LOC)
3.30% 4/7/96 (c) ................................... A-1+ VMIG-1 5,000 5,000,000
-----------
12,700,000
-----------
</TABLE>
18
<PAGE>
TAX-FREE SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
<TABLE>
<CAPTION>
Rating(a) Par
S&P Moody's (000) Value
-------- --------- -------- ------------
<S> <C> <C> <C> <C>
KANSAS -- 0.5%
Burlington Pollution Control Refunding Revenue Bonds
(Kansas City Power & Light Company) (Toronto Dominion
LOC)
3.20% 6/13/96 (c) .................................. A-1+ P-1 $ 3,150 $ 3,150,000
------------
LOUISIANA -- 6.4%
East Baton Rouge Parish (Georgia Pacific Corp.)
Pollution Control Revenue Bonds (Toronto Dominion LOC)
3.30% 4/7/96 (b) ................................... -- P-1 2,700 2,700,000
Louisiana Offshore Terminal Authority, Deepwater Port
Refunding Revenue Bonds (Union Bank of Switzerland LOC)
3.35% 4/7/96 (b) ................................... A-1+ -- 3,300 3,300,000
Louisiana Public Facilities Authority, College and
Equipment Series A (Societe Generale LOC)
3.35% 4/7/96 (b) ................................... A-1+ VMIG-1 10,750 10,750,000
Plaquemines Port, Harbor and Terminal District, Marine
Terminal Facilities Revenue Refunding Bonds
(Electro-Coal Transfer Corporation)
3.45% 5/14/96 (b) .................................. -- P-1 5,000 5,000,000
Plaquemines Port, Harbor and Terminal District, Marine
Terminal Facilities Revenue Refunding Bonds
3.50% 4/1/96 (c) ................................... P-1 -- 15,000 15,000,000
------------
36,750,000
------------
MARYLAND -- 4.5%
Maryland State Community Development Administration,
Department of Housing and Community Development,
Single Family Program First Series RB
3.45% 10/1/96 (c) .................................. VMIG-1 -- 7,500 7,500,000
Maryland State Health & Higher Education Authority
(Daughters of Charity)
3.40% 4/7/96 (b) ................................... VMIG-1 -- 11,000 11,000,000
Montgomery County General Obligations
3.30% 4/1/96 (c) ................................... A-1+ P-1 7,000 7,000,000
------------
25,500,000
------------
MASSACHUSETTS -- 2.0%
Massachusetts State Housing Finance, Multi-Family
Series A
3.25% 4/7/96 (b) ................................... A-1+ -- 11,400 11,400,000
-----------
</TABLE>
19
<PAGE>
TAX-FREE SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
<TABLE>
<CAPTION>
Rating(a) Par
S&P Moody's (000) Value
-------- --------- -------- ------------
<S> <C> <C> <C> <C>
MINNESOTA -- 1.5%
City of Rochester, Minnesota, Health Care Facility
(Mayo Medical Center)
3.20% 6/13/96 (c) .................................. A-1+ -- $3,000 $ 3,000,000
Regents of The University of Minnesota, Bonds
3.25% 6/14/96 (c) .................................. A-1+ VMIG-1 3,300 3,300,000
Regents of The University of Minnesota, Commercial Paper
Certificates
3.25% 6/14/96 (c) .................................. A-1+ P-1 2,000 2,000,000
------------
8,300,000
------------
MISSOURI -- 3.8%
Missouri Environmental Improvement, Pollution Control
Revenue, National Rural Utilities Series M
3.40% 4/7/96 (b) ................................... A-1+ VMIG-1 5,800 5,800,000
Missouri Health and Educational Facilities Authority,
Health Facilities Refunding Revenue Bonds (Sisters of
Mercy)
3.40% 4/7/96 (b) ................................... A-1+ VMIG-1 8,000 8,000,000
Missouri Health and Educational Facilities Authority,
Health Facility Revenue (Sisters of Mercy)
3.40% 4/7/96 (b) ................................... A-1+ VMIG-1 8,000 8,000,000
------------
21,800,000
------------
NEW JERSEY -- 0.3% ....................................
Mercer County Improvement Revenue Bonds (Credit
Suisse LOC)
3.00% 4/7/96 (b) ................................... A-1+ MIG-1 1,800 1,800,000
------------
NEW MEXICO -- 0.5%
Albuquerque Health Facility Authority (Sisters of
Charity) (Toronto Dominion LOC)
3.35% 4/7/96 (b) ................................... A-1+ VMIG-1 3,000 3,000,000
------------
NEW YORK -- 0.1%
New York Local Government Assistance Corporation,
Variable Rate Bonds (Societe Generale LOC)
3.15% 4/7/96 (b) ................................... A-1+ VMIG-1 100 100,000
Triborough Bridge and Tunnel Authority (FGIC Insurance)
3.10% 4/7/96 (b) ................................... A-1+ VMIG-1 600 600,000
------------
700,000
------------
</TABLE>
20
<PAGE>
TAX-FREE SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
<TABLE>
<CAPTION>
Rating(a) Par
S&P Moody's (000) Value
-------- --------- -------- ------------
<S> <C> <C> <C> <C>
NORTH CAROLINA -- 2.0%
City of Winston-Salem, G.O. Water and Sewer Revenue
3.30% 4/7/96 (b) ................................... A-1+ VMIG-1 $ 2,600 $ 2,600,000
North Carolina Education Facility Agency (Duke
University)
3.25% 4/7/96 (b) ................................... A-1+ VMIG-1 500 500,000
North Carolina Educational Facilities Finance Agency
(Duke University Project) Series 1987 A
3.25% 4/7/96 (b) ................................... A-1+ VMIG-1 3,000 3,000,000
North Carolina Medical Care (Duke University Hospital
Project) Series A
3.25% 4/7/96 (b) ................................... A-1+ VMIG-1 1,000 1,000,000
North Carolina Medical Care Community Hospital
(Moses Cone Memorial Hospital)
3.35% 4/7/96 (b) ................................... A-1+ -- 4,000 4,000,000
------------
11,100,000
------------
OKLAHOMA -- 1.4%
Oklahoma Industries Authority, Hospital Revenue, Medical
Practice Facility (St. Anthony) (Morgan Guaranty LOC)
3.65% 6/3/96 (c) ................................... -- VMIG-1 5,665 5,665,000
Oklahoma Industries Authority, Hospital Revenue, (St.
Anthony Parking Garage) (Morgan Guaranty LOC)
3.65% 6/3/96 (c) ................................... -- VMIG-1 2,425 2,425,000
------------
8,090,000
------------
OREGON -- 0.5%
City of Klamath Falls, Electric Revenue Bonds (Escrowed
in U.S. Treasuries)
4.40% 5/1/96 (c) ................................... SP-1+ -- 3,000 3,000,000
------------
SOUTH CAROLINA -- 1.2%
South Carolina Jobs Economic Development Authority,
Hospital Facilities Revenue Bonds (Wachovia LOC)
3.35% 4/7/96 (b) ................................... A-1+ VMIG-1 6,600 6,600,000
------------
TENNESSEE -- 5.0%
Metropolitan Nashville Airport Authority, Airport
Improvement Revenue Refunding Bonds (FGIC Insurance)
3.35% 4/7/96 (b) ................................... A-1+ VMIG-1 8,900 8,900,000
State of Tennessee GO, BANS Series A
3.50% 4/7/96 (b) ................................... SP-1+ VMIG-1 19,600 19,600,000
------------
28,500,000
------------
</TABLE>
21
<PAGE>
TAX-FREE SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
<TABLE>
<CAPTION>
Rating(a) Par
S&P Moody's (000) Value
-------- --------- -------- ------------
<S> <C> <C> <C> <C>
TEXAS -- 17.7%
Austin Utility System, Travis and Williamson Counties
(Swiss Bank LOC)
3.25% 5/10/96 ...................................... A-1+ P-1 $ 6,900 $ 6,900,000
3.25% 6/14/96 (c) .................................. -- -- 3,900 3,900,000
Board of Regents, Texas A & M University
System
3.25% 8/13/96 (c) .................................. A-1+ P-1 7,000 7,000,000
Dallas Area Rapid Trans Sales Tax Revenue Series A
(Credit Suisse LOC)
3.25% 6/14/96 (c) .................................. A-1+ P-1 5,000 5,000,000
Harris County Health Facilities Hospital Readily
Adjustable Revenue Bonds (San Jacinto Methodist
Hospital Project) (Morgan Guaranty LOC)
3.35% 6/1/96 (c) ................................... -- VMIG-1 11,250 11,250,000
Harris County Health Facility Development Corporation
(Texas Children's Hospital)
3.30% 4/7/96 (b) ................................... -- VMIG-1 700 700,000
Harris County Toll Road Series G
3.30% 4/7/96 (b) ................................... A-1+ VMIG-1 8,700 8,700,000
Harris County Toll Road Series H
3.30% 4/7/96 (b) ................................... A-1+ VMIG-1 10,300 10,300,000
Lower Colorado River Authority TECP
3.25% 5/9/96 (c) ................................... A-1+ P-1 9,000 9,000,000
Red River Authority (Southwestern Public Service)
(Union Bank of Switzerland LOC)
3.25% 4/7/96 (b) ................................... A-1+ MIG-1 5,600 5,600,000
State of Texas, Tax and Revenue Anticipation Notes
4.75% 8/30/96 (c) .................................. SP-1+ MIG-1 27,205 27,315,284
Texas Higher Education Authority, Facilities Revenue
Series 85B (FGIC Insurance)
3.35% 4/7/96 (b) ................................... A-1+ VMIG-1 5,250 5,250,000
-------------
100,915,284
-------------
UTAH -- 2.3%
Intermountain Power Agency, Power Supply Revenue and
Refunding Bonds (Swiss Bank LOC)
3.25% 8/12/96 (c) .................................. A-1+ VMIG-1 13,000 13,000,000
-------------
VERMONT -- 0.6%
State of Vermont General Obligation Revenue
Anticipation Notes Series F
3.35% 4/30/96 (c) .................................. A-1+ P-1 3,600 3,600,000
-------------
</TABLE>
22
<PAGE>
TAX-FREE SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
<TABLE>
<CAPTION>
Rating(a) Par
S&P Moody's (000) Value
-------- --------- -------- ------------
<S> <C> <C> <C> <C>
WASHINGTON -- 1.0%
Chelan County Public Utility District No. 1 (Chelan
Hydro Consolidated System) Series 1995A DN (MBIA
Insurance)
3.25% 4/7/96 (b) ................................... A-1+ VMIG-1 $ 3,590 $ 3,590,000
Port of Seattle, Washington, Industrial Development
Bonds (Sysco)
3.45% 4/7/96 (b) ................................... A-1 P-1 2,000 2,000,000
-------------
5,590,000
-------------
WISCONSIN -- 3.0%
Pleasant Prairie Village Pollution Control Refunding
Revenue Bonds (Wisconsin Electric Power Company
Project)
3.40% 4/7/96 (b) ................................... A-1+ P-1 10,000 10,000,000
Wisconsin Health and Education Facilities Authority
(Daughters of Charity Health Center)
3.40% 4/7/96 (b) ................................... -- VMIG-1 7,000 7,000,000
-------------
17,000,000
-------------
TOTAL INVESTMENTS --99.5% ................................................... 568,556,619(d)
-------------
OTHER ASSETS IN EXCESS OF LIABILITIES, NET -- 0.5% ........................... 2,950,381
-------------
NET ASSETS -- 100.0% ........................................................ $571,507,000
=============
Net Asset Value, Offering and Redemption Price per
Share ($571,507,000 / 571,593,265 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
Accountant's Report.
(b) Demand Security; payable upon demand by the Fund, usually with no more than
seven calendar days' notice. Interest rates are redeterminded periodically.
Rates shown are the rates in effect on March 31, 1996.
(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.
23
<PAGE>
TAX-FREE SERIES
- -------------------------------------------------------------------------------
Statement of Net Assets -- (continued)
March 31, 1996
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.
24
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------------
Statement of Operations
For the year ended March 31, 1996
<TABLE>
<CAPTION>
Prime Treasury Tax-Free
Series Series Series
-------------- ------------- -----------
<S> <C> <C> <C>
Investment Income (Note 1):
Interest income ................. $120,275,367 $36,310,501 $20,235,536
-------------- ------------- -----------
Expenses:
Distribution fee (Note 2) ....... 5,575,592 1,549,949 1,345,261
Investment advisory fees (Note 2) . 5,134,900 1,542,437 1,356,239
Transfer agent fees ............. 1,105,948 234,288 154,031
Custodian fees .................. 272,140 153,691 84,589
Accounting fees (Note 2) ........ 150,692 122,841 63,181
Directors' fees ................. 99,134 26,796 35,201
Registration fees ............... 169,236 54,148 81,232
Legal fees ...................... 65,876 25,067 21,107
Printing & postage fees ......... 181,021 77,172 32,758
Other expenses .................. 125,781 60,321 49,266
-------------- ------------- -----------
Total expenses................ 12,880,320 3,846,710 3,222,865
Less: Fees waived (Note 2).... (59,331) -- --
-------------- ------------- -----------
Net expenses .............. 12,820,989 3,846,710 3,222,865
-------------- ------------- -----------
Net investment income ................ 107,454,378 32,463,791 17,012,671
Net realized gain/(loss) from security
transactions ....................... (6,050) 51,785 4,419
-------------- ------------- -----------
Net increase in net assets resulting
from operations .................... $107,448,328 $32,515,576 $17,017,090
============== ============= ===========
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Prime Series
-------------------------------
March 31, March 31,
1996 1995
--------------- --------------
<S> <C> <C>
Increase/(Decrease) in net assets
Operations:
Net investment income ............................. $ 107,454,378 $ 64,805,363
Net realized gain/(loss) on sales of investments .. (6,050) 355
-------------- ---------------
Net increase in net assets resulting from operations 107,448,328 64,805,718
Distributions to shareholders from:
Net investment income:
Prime, Treasury and Tax-Free Shares, respectively. (99,181,255) (59,535,578)
Institutional Shares ........................... (1,334,079) (635,062)
Flag Investors Class A Shares .................. (402,702) (699,891)
Flag Investors Class B Shares .................. (300) --
Quality Cash Reserve Prime Shares .............. (6,536,042) (3,934,832)
-------------- ---------------
Total distributions ............................ (107,454,378) (64,805,363)
Capital share transactions, net - (Note 3) .......... 1,016,482,516 101,735,438
-------------- ---------------
Total increase/(decrease) in net assets ........... 1,016,476,466 101,735,793
Net assets:
Beginning of year .............................. 1,586,303,309 1,484,567,516
-------------- ---------------
End of year .................................... $2,602,779,775 $1,586,303,309
============== ===============
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
<TABLE>
<CAPTION>
Treasury Series Tax-Free Series
- ----------------------------------- ----------------------------------
March 31, March 31, March 31, March 31,
1996 1995 1996 1995
- ------------- ------------- ------------ --------------
<S> <C> <C> <C>
$ 32,463,791 $ 24,429,870 $ 17,012,671 $ 10,545,966
51,785 4,522 4,419 (10,654)
- ------------ ------------ -------------- -------------
32,515,576 24,434,392 17,017,090 10,535,312
(30,565,630) (22,548,414) (17,012,671) (10,545,966)
(1,898,161) (1,881,456) -- --
-- -- -- --
-- -- -- --
-- -- -- --
- ------------ -------------- -------------- --------------
(32,463,791) (24,429,870) (17,012,671) (10,545,966)
192,365,923 (95,202,377) 96,118,352 96,535,651
- ------------ -------------- -------------- --------------
192,417,708 (95,197,855) 96,122,771 96,524,997
526,219,207 621,417,062 475,384,229 378,859,232
- ------------ -------------- -------------- --------------
$718,636,915 $526,219,207 $571,507,000 $475,384,229
============ ============== ============== ==============
</TABLE>
27
<PAGE>
PRIME SERIES
- -------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each year)
Alex. Brown Cash Reserve Prime Shares
<TABLE>
<CAPTION>
Year ended March 31,
-----------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
<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 .... 0.0524 0.0442 0.0262 0.0295 0.0485
Less Distributions:
Dividends from net investment
income and/or short-term
gains ................. (0.0524) (0.0442) (0.0262) (0.0295) (0.0485)
-------------- -------------- -------------- -------------- --------------
Net asset value at end of
year ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ============== ==============
Total Return:
Based on net asset value per
share ................. 5.36% 4.51% 2.65% 2.99% 4.96%
Ratios to Average Daily Net
Assets:
Expenses ................. 0.60% 0.61% 0.62% 0.63% 0.61%
Net investment income .... 5.21% 4.46% 2.62% 2.95% 4.84%
Supplemental Data:
Net assets at end of year. $2,386,681,216 $1,472,079,739 $1,350,334,979 $1,470,711,552 $1,505,012,086
Number of shares outstanding
at end of year ........ 2,386,684,392 1,472,077,488 1,350,332,916 1,470,709,489 1,505,010,023
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
PRIME SERIES
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each year)
Flag Investors Cash Reserve Prime Shares -- Class A
<TABLE>
<CAPTION>
Year ended March 31,
---------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------- ------------- ------------
<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 ....... 0.0524 0.0442 0.0262 0.0295 0.0485
Less Distributions:
Dividends from net investment
income and/or short-term
gains .................... (0.0524) (0.0442) (0.0262) (0.0295) (0.0485)
------------ ------------ ------------- ------------- ------------
Net asset value at end of
year....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ============ ============= ============= ============
Total Return:
Based on net asset value per
share .................... 5.36% 4.51% 2.65% 2.99% 4.96%
Ratios to Average Daily Net
Assets:
Expenses .................... 0.60% 0.61% 0.62% 0.63% 0.61%
Net investment income ....... 5.25% 4.26% 2.62% 2.95% 4.84%
Supplemental Data:
Net assets at end of year.... $5,976,831 $7,726,696 $18,116,648 $10,392,282 $7,350,424
Number of shares outstanding
at end of year ........... 5,976,824 7,726,698 18,116,633 10,392,267 7,350,409
</TABLE>
See Notes to Financial Statements.
29
<PAGE>
PRIME SERIES
- -------------------------------------------------------------------------------
Financial Highlights
(for a share outstanding throughout the period)
Flag Investors Cash Reserve Prime Shares -- Class B
April 3, 1995*
through
March 31, 1996
--------------
Per Share Operating
Performance:
Net asset value at beginning
of year ............... $ 1.00
--------
Income from Investment
Operations:
Net investment income .... 0.0361
Less Distributions:
Dividends from net invest-
ment income ........... (0.0361)
--------
Net asset value at end of
year .................. $ 1.00
========
Total Return:
Based on net asset value
per share ............. 3.69%**
Ratios to Average Daily Net
Assets:
Expenses ................. 1.38%**
Net investment income .... 4.30%**
Supplemental Data:
Net assets at end of year . $ 10,200
Number of shares outstand-
ing at end of year .... 10,200
- ------
* Commencement of operations.
** Annualized.
See Notes to Financial Statements.
30
<PAGE>
PRIME SERIES
- -------------------------------------------------------------------------------
Financial Highlights
(for a share outstanding throughout the period)
Alex. Brown Cash Reserve Prime Institutional Shares
<TABLE>
<CAPTION>
Year ended March 31,
-----------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------- ------------- ------------- ------------- ------------
<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 .......... 0.0548 0.0472 0.0294 0.0327 0.0515
Less Distributions:
Dividends from net investment
income and/or short-term
gains ....................... (0.0548) (0.0472) (0.0294) (0.0327) (0.0515)
------------- ------------- ------------- ------------- ------------
Net asset value at end of year . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= ============= ============= ============
Total Return:
Based on net asset value per share 5.62% 4.82% 2.98% 3.32% 5.27%
Ratios to Average Daily Net Assets:
Expenses ....................... 0.35% 0.36% 0.30% 0.31% 0.32%
Net investment income .......... 5.32% 4.57% 2.94% 3.24% 5.34%
Supplemental Data:
Net assets at end of year ...... $53,699,315 $11,904,716 $23,437,449 $28,884,078 $21,867,108
Number of shares outstanding at
end of year.................. 53,699,535 11,904,663 23,437,512 28,884,132 21,867,108
</TABLE>
See Notes to Financial Statements.
31
<PAGE>
PRIME SERIES
- -------------------------------------------------------------------------------
Financial Highlights
(for a share outstanding throughout the period)
Quality Cash Reserve Prime Shares
<TABLE>
<CAPTION>
Year ended March 31, May 6, 1991*
---------------------------------------------------------------- through
1996 1995 1994 1993 March 31, 1992
-------------- ------------- ------------- -------------- --------------
<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 .... 0.0493 0.0402 0.0218 0.0253 0.0399
Less Distributions:
Dividends from net
investment income and/or
short-term gains ..... (0.0493) (0.0402) (0.0218) (0.0253) (0.0399)
-------------- ------------- ------------- -------------- --------
Net asset value at end of
year ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============= ============= ============== ========
Total Return:
Based on net asset value
per share ........... 5.04% 4.09% 2.20% 2.53% 4.30%**
Ratios to Average Daily Net
Assets:
Expenses ................ 0.90%(1) 0.96% 1.06% 1.04% 0.96%**
Net investment income ... 4.91%(2) 4.04% 2.18% 2.53% 4.30%**
Supplemental Data:
Net assets at end of year . $156,412,213 $94,592,158 $92,678,440 $101,321,868 $94,887,669
Number of shares
outstanding at end of
year................... 156,412,393 94,591,979 92,678,268 101,321,668 94,887,669
</TABLE>
- ----------
* Commencement of operations.
** Annualized.
1 Ratio of expenses to average daily net assets prior to partial fee waivers
was 0.95% for the year ended March 31, 1996,
2 Ratio of net investment income to average daily net assets prior to partial
fee waivers was 4.86% for the year ended March 31, 1996.
See Notes to Financial Statements.
32
<PAGE>
TREASURY SERIES
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each year)
Alex. Brown Cash Reserve Treasury Shares
<TABLE>
<CAPTION>
Year ended March 31,
----------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C>
Net asset value at beginning
of year.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------- -------------- -------------- -------------- --------------
Income from Investment
Operations:
Net investment income ....... 0.0494 0.0411 0.0255 0.0285 0.0477
Less Distributions:
Dividends from net investment
income and/or short-term
gains .................... (0.0494) (0.0411) (0.0255) (0.0285) (0.0477)
-------------- -------------- -------------- -------------- --------------
Net asset value at end of
year........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ============== ==============
Total Return:
Based on net asset value per
share........................ 5.05% 4.19% 2.58% 2.89% 4.88%
Ratios to Average Daily Net
Assets:
Expenses .................... 0.58% 0.55%* 0.54%* 0.55%* 0.55%
Net investment income ....... 4.94% 4.09% 2.55% 2.87% 4.76%
Supplemental Data:
Net assets at end of year ... $666,814,158 $512,167,212 $581,724,214 $618,175,839 $725,010,207
Number of shares outstanding
at end of year.............. 666,762,028 512,162,864 581,723,448 618,152,465 725,010,207
</TABLE>
- ------
* Ratio of expenses to average daily net assets prior to partial fee waivers
was 0.56% for the years ended March 31, 1995, 1994, and 1993.
See Notes to Financial Statements.
33
<PAGE>
TREASURY SERIES
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each year)
Alex. Brown Cash Reserve Treasury Institutional Shares
<TABLE>
<CAPTION>
Year ended March 31,
------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------- ------------- ------------- ------------- -------------
<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 .......... 0.0523 0.0438 0.0282 0.0314 0.0504
Less Distributions:
Dividends from net investment
income and/or short-term
gains........................ (0.0523) (0.0438) (0.0282) (0.0314) (0.0504)
------------- ------------- ------------- ------------- -------------
Net asset value at end of year.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= ============= ============= =============
Total Return:
Based on net asset value per
share......................... 5.36% 4.47% 2.86% 3.19% 5.17%
Ratios to Average Daily Net Assets:
Expenses ....................... 0.33% 0.30%(1) 0.27%(1) 0.26%(1) 0.27%
Net investment income .......... 5.12% 4.15%(2) 2.82%(2) 3.16%(2) 4.90%
Supplemental Data:
Net assets at end of year ...... $51,822,757 $14,051,995 $39,692,848 $60,146,987 $63,834,323
Number of shares outstanding at
end of year ................. 51,813,226 14,046,467 39,688,259 60,140,874 63,834,323
</TABLE>
- ------
(1) Ratio of expenses to average daily 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 daily 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.
34
<PAGE>
TAX-FREE SERIES
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each year)
Alex. Brown Cash Reserve Tax-Free Shares
<TABLE>
<CAPTION>
Year ended March 31,
------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
<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 .... 0.0318 0.0271 0.0184 0.0213 0.0353
Less Distributions:
Dividends from net
investment income
and/or short-term
gains.................. (0.0318) (0.0271) (0.0184) (0.0213) (0.0353)
-------------- -------------- -------------- -------------- --------------
Net asset value at end
of year ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ============== ==============
Total Return:
Based on net asset value
per share.............. 3.23% 2.75% 1.86% 2.15% 3.59%
Ratios to Average Daily Net
Assets:
Expenses ................ 0.60% 0.57% 0.58% 0.60% 0.56%(1)
Net investment income ... 3.16% 2.74% 1.84% 2.13% 3.49%(2)
Supplemental Data:
Net assets at end of year . $571,507,000 $475,384,229 $378,859,232 $315,661,447 $304,987,823
Number of shares
outstanding at end
of year................ 571,593,265 475,474,913 378,939,262 315,700,742 305,008,959
</TABLE>
- ------
(1) Ratio of expenses to average daily 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 daily net assets prior to
partial fees assumed was 3.48% for the year ended March 31, 1992.
35
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements
March 31, 1996
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 five
different classes of shares: Alex. Brown Cash Reserve Prime Shares ("Prime
Shares"), Flag Investors Cash Reserve Prime Shares Class A ("Flag Investors
Class A Shares"), Flag Investors Cash Reserve Prime Shares Class B ("Flag
Investors Class B 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 preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. 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
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.
36
<PAGE>
Notes to Financial Statements -- (continued)
March 31, 1996
NOTE 1 -- CONCLUDED
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 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 $87,648 (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 Financial Corp.,
with respect to all Series, and a sub-advisory agreement with PNC
Institutional Management Corporation ("PIMC") with respect to the Tax-Free
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: .30% of the
first $500 million, .26% of the next $500 million, .25% of the next $500
million, .24% of the next $1 billion, .23% of the next $1 billion and .22% of
that portion in excess of $3.5 billion. In addition, the Advisor 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 as well as an additional fee with respect to the
Tax-Free Series, calculated daily and paid monthly, at the annual rate of
.03% of the Tax-Free Series' average daily net assets. Prior to August 23,
1995, ICC received 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.
37
<PAGE>
Notes to Financial Statements -- (continued)
March 31, 1996
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 Tax-Free Series. For the year ended March 31, 1996, the Fund paid PIMC
$723,599 for sub-advisory and accounting services for the Tax-Free Series. No
advisory fees were waived for the year ended March 31, 1996.
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
for the same time periods as any ICC waiver. No advisory fees were waived for
the year ended March 31, 1996.
Under the terms of these agreements, ICC and the Fund's distributor 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 $150,692 and $122,841
for accounting services for the year ended March 31, 1996 for the Prime and
Treasury Series, respectively.
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 $1,105,948, $234,288 and $154,031 for transfer agent services for
the year ended March 31, 1996 for Prime, Treasury and Tax-Free Series,
respectively.
The Fund has entered into a distribution agreement with Alex. Brown & Sons
Incorporated ("Alex. Brown"). Under the terms of the distribution agreement,
Alex. Brown receives a fee from the Prime Shares, Flag Investors Class A
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 and Flag Investors
Class B Shares at the annual rate of .60% and 1.00%, respectively, of the
aggregate average daily net assets of the class. Alex. Brown voluntarily
waived distribution fees in the amount of $59,331 for the Quality Cash Shares
for the year ended March 31, 1996.
The Fund complex of which the Fund is a part has adopted a retirement plan
for eligible Directors. The actuarially computed pension expense for the year
ended March 31, 1996 was approximately $72,000, $26,000 and $18,000 for the
Prime, Treasury and Tax-Free Series, respectively.
NOTE 3 -- CAPITAL STOCK AND SHARE INFORMATION
The Fund is authorized to issue up to 6,400,000,000 shares of $.001 par
value capital stock (3,550,000,000 Prime Series, 1,500,000,000 Treasury
Series, 1,000,000,000 Tax-Free Series and 350,000,000 not classified).
Changes in shares outstanding during the years ended March 31, 1996 and March
31, 1995 are listed on the following page.
38
<PAGE>
Notes to Financial Statements -- (continued)
March 31, 1996
NOTE 3 -- CONCLUDED
March 31, 1996 March 31, 1995
---------------- ----------------
Prime Series:
Sold:
Prime Shares .................. 19,439,463,533 10,195,279,007
Flag Investors Class A Shares . 12,118,053 16,905,684
Flag Investors Class B Shares . 24,535 --
Institutional Prime Shares .... 213,159,539 60,472,629
Quality Cash Shares ........... 1,285,040,597 509,661,769
Issued as reinvestment of dividends:
Prime Shares .................. 93,103,137 57,178,155
Flag Investors Class A Shares . 374,561 666,245
Institutional Prime Shares .... 753,855 40,493
Quality Cash Shares ........... 6,300,386 3,847,996
Redeemed:
Prime Shares .................. (18,617,959,766) (10,130,712,590)
Flag Investors Class A Shares . (14,242,488) (27,961,864)
Flag Investors Class B Shares . (14,335) --
Institutional Prime Shares .... (172,118,522) (72,045,971)
Quality Cash Shares ........... (1,229,520,569) (511,596,054)
---------------- ----------------
Net increase ............. 1,016,482,516 101,735,499
================ ================
Treasury Series:
Sold:
Treasury Shares ............... 4,043,423,430 2,727,755,716
Institutional Treasury Shares . 396,793,576 854,592,222
Issued as reinvestment of dividends:
Treasury Shares ............... 28,890,267 21,562,879
Institutional Treasury Shares . 417,316 8
Redeemed: ........................
Treasury Shares ............... (3,917,714,533) (2,818,879,180)
Institutional Treasury Shares . (359,444,133) (880,234,022)
---------------- ----------------
Net increase/(decrease) .. 192,365,923 (95,202,377)
================ ================
Tax-Free Series:
Sold ............................. 4,817,984,787 3,571,743,009
Issued as reinvestment of dividends 16,116,851 10,051,311
Redeemed ......................... (4,737,983,286) (3,485,258,669)
---------------- ----------------
Net increase ............. 96,118,352 96,535,651
================ ================
NOTE 4 -- NET ASSETS
At March 31, 1996, net assets consisted of:
<TABLE>
<CAPTION>
Prime Treasury Tax-Free
Series Series Series
-------------- -------------- ------------
<S> <C> <C> <C>
Paid-in-capital ......................... $2,602,785,854 $718,571,065 $571,594,648
Undistributed net realized gain/(loss) on
sales of investments ................... (6,079) 65,850 (87,648)
-------------- -------------- ------------
$2,602,779,775 $718,636,915 $571,507,000
============== ============== ============
</TABLE>
39
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and Board of Directors of
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, 1996, and the related statement of operations for the year then
ended and the statement of changes in net assets for each of the two years in
the period then ended and the financial highlights for each of the three
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, 1996 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, 1996, and the results of their operations for the year
then ended and the changes in their net assets for each of the two years in
the period then ended and their financial highlights for each of the three
years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
May 10, 1996
40
<PAGE>
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, 1996
(2) Statement of Operations for the year ended March 31,
1996
(3) Statements of Changes in Net Assets for the years
ended March 31, 1996 and March 31, 1995
(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.1
(b) Copy of Articles Supplementary to Registrant's Articles of
Incorporation dated June 28, 1990.1
(c) Copy of Articles Supplementary to Registrant's Articles of
Incorporation dated July 31, 1990.1
(d) Copy of Articles Supplementary to Registrant's Articles of
Incorporation dated May 6, 1992.1
(e) Articles Supplementary to Registrant's Articles of
Incorporation.1
(2) By-Laws - Copy of Registrant's By-Laws.1
(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.3
(5) Advisory Agreement
(a) Amended Investment Advisory Agreement between Registrant and
Investment Company Capital Corp. with respect to the Prime
Series.1
<PAGE>
(b) Amended Investment Advisory Agreement between Registrant and
Investment Company Capital Corp. with respect to the Treasury
Series.1
(c) Amended Investment Advisory Agreement between Registrant and
Investment Company Capital Corp. with respect to the Tax-Free
Series.1
(d) Sub-Advisory Agreement among Registrant, 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,
1991.1
(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.1
(b) Registrant's Form of Shareholder Processing and Service
Agreement (Dealer Agreement) between Alex. Brown & Sons
Incorporated and Participating Broker-Dealers.1
(c) Registrant's Form of Shareholder Servicing Agreement between
Registrant and Shareholder Servicing Agents.1
(d) Distribution Agreement with respect to Institutional Shares
dated as of April 4, 1990 between Alex. Brown & Sons
Incorporated and Registrant.1
(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.1
(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.1
(g) Registrant's Form of Shareholder Servicing Agreement between
Registrant and Shareholder Servicing Agents with respect to
Registrant's Tax-Free Series.1
(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 Prime Shares.1
(i) Registrant's Form of Dealer Agreement between Alex. Brown &
Sons Incorporated and Participating Broker Dealers with
respect to Quality Cash Reserve Prime Shares.1
(j) Distribution Agreement between Alex. Brown & Sons Incorporated
and Alex. Brown with respect to Flag Investors Cash Reserve
Prime Shares- Class B.1
(k) Form of Shareholder Servicing Agreement for Flag Investors
Shares.1
(l) Form of Sub-Distribution Agreement for Flag Investors Shares.1
(7) Certain Bonus, Profit Sharing, Pension or Similar Contracts - None.
C-2
<PAGE>
(8) (a) Custodian Agreement dated as of April 4, 1990 between
Registrant and Provident National Bank (now known as PNC
Bank).1
(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.1
(9) 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.1
(10) Opinion of Counsel.1
(11) Consent of Coopers & Lybrand L.L.P.1
(12) Other Financial Statements - None.
(13) Agreement Concerning Initial Capitalization - None.
(14) Retirement Plan Models.4
(15) (a) Rule 12b-1 Plan - See Exhibit 6 above.
(b) Plan of Distribution with respect to Flag Investors Cash
Reserve Prime Shares - Class B.1
(16) Schedule of Computation of Performance Data (unaudited).1
(18) 18f-3 Plan.1
(24) Powers of Attorney.1
(27) Financial Data Schedules.1
- -----------------------
1 filed herewith.
2 filed as an Exhibit to Post-Effective Amendment No. 12 on February 5,
1990, and hereby incorporated by reference.
3 filed as an Exhibit to Post-Effective Amendment No. 22 on July 27,
1994, and hereby incorporated by reference.
4 filed as an Exhibit to Post-Effective Amendment No. 7 on June 27, 1996,
and hereby incorporated by reference.
C-3
<PAGE>
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.
<TABLE>
<CAPTION>
Number of Record Holders
of Alex. Brown Cash Reserve
Title of Class Fund, Inc. as of July 16, 1996
- -------------- ------------------------------
<S> <C>
Prime Series:
1. Alex. Brown Cash Reserve Prime Shares 88,151
2. Flag Investors Cash Reserve Prime Shares-Class A 306
3. Flag Investors Cash Reserve Prime Shares-Class B 8
4. Institutional Prime Shares 163
5. Quality Cash Reserve Prime Shares 10,407
Treasury Series:
1. Alex. Brown Cash Reserve Treasury Shares 16,024
2. Institutional Treasury Shares 104
Tax-Free Series:
1. Alex. Brown Cash Reserve Tax-Free Shares 8,960
</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:
C-4
<PAGE>
(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
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.
C-5
<PAGE>
PNC Institutional Management Corporation (Sub-Advisor to Registrant's
Tax-Free Series)
<TABLE>
<CAPTION>
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)
Director Richard C. Caldwell Executive Vice President Banking
PNC Bank, National Association(1)
Director Banking
PNC National Bank(2)
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 Banking
PNC Bank, New Jersey, National
Association (16)
Director Financial-Related
C-6
<PAGE>
Position with Other Business
PIMC Name Connections Type of Business
- ------------- ----------------- ---------------- ----------------
PFPC Inc.(3) Services
Director Laurence D. Fink Chairman and Chief Executive
Officer, Black Rock Financial
Management, Inc.
Director Richard L. Smoot President and Chief Banking
Executive Officer
PNC Bank, National Association(1)
(Phila.)(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
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)
President and Thomas H. Nevin None
Chief Invest-
ment Officer
Vice President Michelle L. Petrilli Chief Counsel Banking
and Secretary PNC Bank, DE(20)
Secretary Financial-Related
PFPC Inc.(3) Services
Director and Nicholas M. Marsini,Jr. Senior Vice President Banking
Chief Financial PNC Bank, National Association(1)
Officer
Director Financial-Related
PFPC Inc.(3) Services
Senior Vice President and Banking
Chief Financial Officer
PNC Bank, Delaware (20)
C-7
<PAGE>
Position with Other Business
PIMC Name Connections Type of Business
- ------------- ----------------- ---------------- ----------------
Director, Vice President Banking
and Treasurer
PNC National Bank(2)
Director Banking
PNC Bank, New Jersey,
National Association(16)
Director Fiduciary
PNC Trust Company Activities
of New York(11)
Director and Treasurer Holding Company
PNC Bancorp, Inc.(9)
Director and Treasurer Investment
PNC Capital Corp.(17) Activities
Director and Treasurer Banking
PNC Holding Corp.(18)
Director and Treasurer Investment
PNC Venture Corp. (19) Activities
Executive Vice Charles B. Landreth Vice President Banking
President PNC Bank, National
Association(1)
Senior Vice Vincent J. Ciavardini President and Chief Financial-Related
President Financial Officer Services
PFPC Inc.(3)
President and Director Financial-Related
PFPC International, Ltd.(26) Services
Senior Vice Scott Moss None
President
Senior Vice John N. Parthemore None
President
Senior Vice Dushyant Pandit None
President
Senior Vice James R. Smith None
President
Vice President, Stephen M. Wynne Executive Vice President and Financial-Related
Chief Accounting Chief Accounting Officer Services
Officer, and PFPC Inc.(3)
Assistant Secretary
C-8
<PAGE>
Position with Other Business
PIMC Name Connections Type of Business
- ------------- ----------------- ---------------- ----------------
Executive Vice President Financial
PFPC International, Ltd.(26) Services
Controller Pauline M. Heintz Vice President Financial-Related
PFPC Inc.(3) Services
</TABLE>
Vice President William F. Walsh None
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 Wendy Powell None
Vice President W. Don Simmons None
Vice President Charles Allen Stiteler None
Vice President Karen J. Walters None
Vice President G. Keith Robertshaw None
- --------------------
*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.
(5) Provident Capital Management, Inc., 30 S. 17th Street, Suite 1500,
Philadelphia, PA 19103.
C-9
<PAGE>
(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.
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.
C-10
<PAGE>
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
(c) Not Applicable.
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.
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.
C-11
<PAGE>
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>
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940 the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment No. 27 to
the Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this amendment 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 26th day of July, 1996.
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(s) indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Richard T. Hale President and July 26, 1996
- ---------------------------- Director -------------
Richard T. Hale Date
* Director July 26, 1996
- ---------------------------- -------------
W. James Price Date
/s/ Charles W. Cole Director July 26, 1996
- ---------------------------- -------------
Charles W. Cole, Jr. Date
* Director July 26, 1996
- ---------------------------- -------------
James J. Cunnane Date
* Director July 26, 1996
- ---------------------------- -------------
John F. Kroeger Date
* Director July 26, 1996
- ---------------------------- -------------
Louis E. Levy Date
* Director July 26, 1996
- ---------------------------- -------------
Eugene J. McDonald Date
/s/ Rebecca W. Rimel Director July 26, 1996
- ---------------------------- -------------
Rebecca W. Rimel Date
* Director July 26, 1996
- ---------------------------- -------------
Truman T. Semans Date
/s/ Carl W. Vogt Director July 26, 1996
- ---------------------------- -------------
Carl W. Vogt Date
* Director July 26, 1996
- ---------------------------- -------------
Harry Woolf Date
/s/ Joseph A. Finelli Chief Financial July 26, 1996
- ---------------------------- and Accounting -------------
Joseph A. Finelli Officer Date
* By: /s/ Brian C. Nelson
---------------------
Brian C. Nelson
Attorney-In-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EDGAR
Exhibit
Number Description
- ------- ------------
<S> <C> <C> <C>
EX-99.B (1) (a) Registrant's Articles of Incorporation, filed herewith.
EX-99.B (1) (b) Registrant's Articles Supplementary to its Articles of Incorporation, filed herewith.
EX-99.B (1) (c) Registrant's Articles Supplementary to its Articles of Incorporation, filed herewith.
EX-99.B (1) (d) Registrant's Articles Supplementary to its Articles of Incorporation, filed herewith.
EX-99.B (1) (e) Articles Supplementary to Registrant's Articles of Incorporation, filed herewith.
EX-99.B (2) Registrant's By-Laws, filed herewith.
(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.
(4) (b) Registrant's Specimen Certificate with respect to Tax-Free 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.
EX-99.B (5) (a) Amended Investment Advisory Agreement between Registrant and Investment Company
Capital Corp. with respect to the Prime Series, filed herewith.
EX-99.B (5) (b) Amended Investment Advisory Agreement between Registrant and Investment
Company Capital Corp. with respect to the Treasury Series, filed herewith.
EX-99.B (5) (c) Amended Investment Advisory Agreement between Registrant and Investment
Company Capital Corp. with respect to the Tax-Free Series, filed herewith.
EX-99.B (5) (d) 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,
filed herewith.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EDGAR
Exhibit
Number Description
- ------ ------------
<S> <C> <C> <C>
EX-99.B (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,
filed herewith.
EX-99.B (6) (b) Form of Shareholder Processing and Service Agreement (Dealer Agreement)
between Alex. Brown & Sons Incorporated and Participating Broker-Dealers,
filed herewith.
EX-99.B (6) (c) Shareholder Servicing Agreement between Registrant and Shareholder
Servicing Agents, filed herewith.
EX-99.B (6) (d) Distribution Agreement dated as of April 4, 1990 between Registrant and Alex.
Brown & Sons Incorporated with respect to Institutional Shares, filed herewith.
EX-99.B (6) (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, filed herewith.
EX-99.B (6) (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, filed herewith.
EX-99.B (6) (g) Form of Shareholder Servicing Agreement between Registrant and Shareholder
Servicing Agents with respect to Registrant's Tax-Free Series, filed herewith.
EX-99.B (6) (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, filed herewith.
EX-99.B (6) (i) Registrant's Form of Dealer Agreement between Alex. Brown & Sons
Incorporated and Participating Broker Dealers with respect to Quality Cash Reserve
Shares, filed herewith.
EX-99.B (6) (j) Form of Distribution Agreement between Alex. Brown & Sons Incorporated and
Alex Brown with respect to Flag Investors Cash Reserve Prime Shares-Class B,
filed herewith.
EX-99.B (6) (k) Form of Shareholder Servicing Agreement for Flag Investors Shares, filed
herewith.
EX-99.B (6) (l) Form of Sub-Distribution Agreement for Flag Investors Shares, filed herewith.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EDGAR
Exhibit
Number Description
- ------ -----------
<S> <C> <C> <C>
(7) None.
EX-99.B (8) (a) Custodian Agreement dated as of April 4, 1990 between Registrant and
Provident National Bank (now known as PNC Bank), filed herewith.
EX-99.B (8) (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, filed herewith.
EX-99.B (9) 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., filed herewith.
EX-99.B (10) Opinion of Counsel, filed herewith.
Ex-99.B (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.
EX-99.B (15) (b) Form of Plan of Distribution with respect to Flag Investors Cash Reserve Prime
Shares - Class B, filed herewith.
EX-99.B (16) Schedule of Computation of Performance Quotations (unaudited), filed herewith.
EX-99.B (18) 18f-3 Plan, filed herewith.
EX-99.B (24) Powers of Attorney, filed herewith.
Ex-27 Financial Data Schedules, filed herewith.
</TABLE>
<PAGE>
EX-99.B(1)(a)
ARTICLES OF INCORPORATION
OF
ALEX. BROWN CASH RESERVE FUND, INC.
FIRST: THE UNDERSIGNED, JULES BUCHWALD, whose address is 520
Madison Avenue, New York, New York 10022, being at least eighteen years of age,
does, under and by virtue of the general laws of the State of Maryland
authorizing the formation of corporations, act as incorporator with the
intention of forming a corporation.
SECOND: The name of the corporation is ALEX. BROWN
CASH RESERVE FUND, INC. (hereinafter called the "Corporation").
THIRD: The purpose for which the Corporation is formed and the
business or objects to be transacted, carried on and promoted by it, is to act
as an open-end investment company of the management type registered as such with
the Securities and Exchange Commission pursuant to the Investment Company Act of
1940 and to exercise and generally to enjoy all of the powers, rights and
privileges granted to, or conferred upon, corporations by the general laws of
the State of Maryland now or hereafter in force.
FOURTH: The post office address of the principal office of the
Corporation in the State of Maryland is c/o Alex. Brown & Sons Incorporated, 135
East Baltimore Street, Baltimore, Maryland 21202. The name of the resident agent
of the Corporation in this State is Edward J. Veilleux, a citizen of this State,
who resides there, and the post office address of the resident agent is 135 East
Baltimore Street, Baltimore, Maryland 21202.
FIFTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is 3,000,000,000 shares of Common
Stock of the par value of $.001 each, of which 2,000,000,000 shares are
designated "Prime Series", 500,000,000 shares are designated "Treasury Series",
and the balance of which are unclassified. Unissued shares of capital stock may
be classified and reclassified by the Board of Directors. The aggregate par
value of capital stock of all classes is $3,000,000.
SIXTH: The preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption of the Common Stock of the Corporation, shall be as
follows:
1
<PAGE>
(a) Subject to the power of the Board of Directors to
reclassify unissued shares, the shares of each class or series of stock of the
Corporation shall have the following preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption:
(i) All consideration received by the Corporation for
the issue or sale of shares of a class or series together with
all income, earnings, profits and proceeds thereof, shall
irrevocably belong to such class or series for all purposes,
subject only to the rights of creditors, and are herein
referred to as "assets belonging to" such class.
(ii) The assets belonging to such class or series
shall be charged with the liabilities of the Corporation in
respect of such class or series and with such class' or
series' share of the general liabilities of the Corporation,
in the latter case in proportion that the net asset value of
such class or series bears to the net asset value of all
classes or series. The determination of the Board of Directors
shall be conclusive as to the allocation of liabilities,
including, accrued expenses and reserves, to a class or
series.
(iii) Dividends or distributions on shares of any
class or series, whether payable in stock or cash, shall be
paid only out of earnings, surplus or other assets belonging
to such class or series.
(iv) In the event of the liquidation or dissolution
of the Corporation, stockholders of each class or series shall
be entitled to receive, as a class or series, out of the
assets of the Corporation available for distribution to
stockholders, the assets belonging to such class or series and
the assets so distributable to the stockholders of such class
or series shall be distributed among such stockholders in
proportion to the number of shares of such class or series
held by them.
(v) On each matter submitted to a vote of the
stockholders, each holder of a share of stock shall be
entitled to one vote for each such share of stock standing in
his name on the books of the corporation irrespective of the
class or series thereof; provided, however, that to the extent
class voting is required by the Investment Company Act of 1940
or Maryland law as to any such matter, those requirements
shall apply.
2
<PAGE>
Except as provided above, all provisions of the Articles of Incorporation
relating to stock of the Corporation shall apply to shares of and to the holders
of shares of all classes or series of stock.
(b) To the extent that the Corporation has funds or property
legally available therefor, each holder of shares of stock of the Corporation,
upon proper written request (including signature guarantees, if required by the
Board of Directors) to the Corporation accompanied, when stock certificates
representing such shares are outstanding, by surrender of the appropriate stock
certificate or certificates in proper form for transfer, or any such form as the
Board of Directors may provide, shall be entitled to require the Corporation to
redeem all or any number of the shares outstanding in the name of such holder on
the books of the Corporation, at the net asset value of such shares computed as
hereinafter provided. Notwithstanding the foregoing, the Board of Directors of
the Corporation may suspend the right of the holders of the shares of stock of
the Corporation to require the Corporation to redeem such shares when permitted
or required to do so by the Investment Company Act of 1940 or any rule or
regulation of the Securities and Exchange Commission promulgated thereunder.
When the Board of Directors of the Corporation, including a
majority of the Directors who are not "interested persons" as defined in Section
2(a)(19) of the Investment Company Act of 1940, determines in its sole
discretion, that the action is necessary for the business success and general
welfare of the Corporation in order to reduce disproportionate and unduly
burdensome expenses in the operation of the Corporation's affairs, to achieve
efficiencies in the administration of its activities, or to reduce or eliminate
excessive expenditures and undue difficulties in servicing, accounting and
reporting requirements with respect to the accounts of shareowners, it may by
resolution order the redemption of all shares of the stock of the Corporation at
the net asset value of such shares computed as hereinafter provided in accounts
having a net asset value for a period of three months less than that specified
in such resolution (but not exceeding $500.00 on the date of notice), excepting
accounts having a net asset value less than that specified in such resolution as
a result of a decline in the net asset value per share, following notice to
affected holders by mail, postage prepaid, at their addresses contained in the
books and records of the Corporation or its transfer agent, and subject to such
other reasonable terms and conditions as the Board of Directors may, in its sole
discretion, determine appropriate and desirable and to any requirements of
applicable statutes or regulations.
(c) No holder of shares of stock of the Corporation shall, as
such holder, have any preemptive right to purchase or
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subscribe for any shares of stock of the Corporation, other than such rights, if
any, as the Board of Directors of the Corporation, in its discretion, may from
time to time determine.
(d) All persons who shall acquire stock or securities of the
Corporation shall acquire the same subject to the provisions of these Articles
of Incorporation.
SEVENTH: The initial number of directors of the Corporation
shall be seven and the names of those who will serve as such until their
successors are duly chosen and qualified are as follows:
Charles T. Bauer
Alonzo G. Decker, Jr.
Richard T. Hale
N. Bruce Hannay
John F. Kroeger
W. James Price
Harry Woolf
The By-Laws of the Corporation may fix the number of directors
at a number greater or less than that named in these Articles of Incorporation
and may authorize the Board of Directors, by the vote of a majority of the
entire Board of Directors, to increase or decrease the number of directors fixed
by these Articles of Incorporation or by the By-Laws within the limits specified
from time to time in the By-Laws, provided that in no case shall the number of
directors be less than two or the number of stockholders, whichever is less, and
to fill the vacancies created by any such increase in the number of directors.
Unless otherwise provided by the By-Laws of the Corporation, the directors of
the Corporation need not be stockholders therein.
EIGHTH: In furtherance and not in limitation of the powers
conferred by the laws of the State of Maryland, the following provisions are
hereby adopted for the purpose of defining and regulating the powers of the
Corporation and of the directors and stockholders:
(a) The Board of Directors of this Corporation is hereby
empowered to authorize the issuance from time to time of shares of its stock of
any class, whether now or hereafter authorized, and securities convertible into
shares of its stock of any class or classes, whether now or hereafter
authorized, in each case upon such terms and conditions and for such
consideration as such Board of Directors shall from time to time determine.
(b) The Board of Directors of this Corporation is hereby
empowered to authorize the issuance from time to time of
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fractional shares of stock of this Corporation, whether now or hereafter
authorized, and any fractional shares so issued shall entitle the holders
thereof to exercise voting rights, receive dividends and participate in the
distribution of assets of the Corporation in the event of liquidation or
dissolution to the extent of their proportionate interest represented by such
fractional shares, but excluding the right to a certificate evidencing such
shares.
(c) The Corporation reserves the right to make from time to
time any amendment of its Articles of Incorporation, now or hereafter authorized
by law, including, but without limitation, any amendment which alters the
contract rights as expressly set forth in such Articles of Incorporation of any
outstanding stock.
(d) Except to the extent otherwise prohibited by applicable
law, the Corporation may enter into any management or investment advisory
contract or underwriting contract or any other type of contract with, and may
otherwise engage in any transaction or do business with, any person, firm or
corporation or any subsidiary or other affiliate of any such person, firm or
corporation and may authorize such person, firm or corporation or such
subsidiary or other affiliate to enter into any other contracts or arrangements
with any other person, firm or corporation which relate to the Corporation or
the conduct of its business, notwithstanding that any directors or officers of
the Corporation are or may subsequently become partners, directors, officers,
stockholders or employees of such person, firm or corporation or of such
subsidiary or other affiliate or may have a material financial interest in any
such contract or transaction or business and no such contract shall be
invalidated or voidable or in any way affected thereby nor shall any of such
directors or officers of the Corporation be liable to the Corporation or to any
stockholder or creditor thereof or to any other person for any loss incurred
solely because of the entering into and performance of such contract or the
engaging in such transaction or business or the existence of such material
financial interest therein; provided that nothing herein shall protect any
director or officer of the Corporation from liability to the Corporation or its
security holders to which he would be otherwise subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
(e) The net asset value of a share of any class or series of
stock of the Corporation will be determined by or pursuant to the direction of
the Board of Directors, which is authorized to determine, the methods to be used
to value the assets of a class or series, the amount and allocation of
liabilities of the Corporation to each class or series and all other matters in
connection therewith.
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(f) Any determination made in good faith, so far as accounting
matters are involved, in accordance with accepted accounting practices by or
pursuant to the direction of the Board of Directors of the Corporation, as to
the amount of assets, obligations or liabilities of any class of the
Corporation, as to the amount of net income of any class of the Corporation from
dividends and interest for any period or amounts at any time legally available
for the payment of dividends, as to the amount of any reserves or charges set up
and the propriety thereof, as to the time of or purpose for creating reserves or
as to the use, alteration or cancellation of any reserves or charges (whether or
not any obligation or liability for which such reserves or charges shall have
been created shall have been paid or discharged or shall be then or thereafter
required to be paid or discharged), as to the value of any security owned by any
class of the Corporation or as to any other matters relating to the issuance,
sale, redemption or other acquisition or disposition of securities or shares of
capital stock of any class of the Corporation, and any reasonable determination
made in good faith by the Board of Directors of the Corporation as to whether
any transaction constitutes a purchase of securities on "margin", a sale of
securities "short", or an underwriting of the sale of, or a participation in any
underwriting or selling group in connection with the public distribution of, any
securities, shall be final and conclusive, and shall be binding upon the
Corporation and all holders of its capital stock, past, present and future, and
shares of the capital stock of the Corporation are issued and sold on the
condition and understanding, evidenced by the purchase of shares of capital
stock or acceptance of share certificates, that any and all such determinations
shall be binding as aforesaid.
(g) The stockholders of the Corporation may remove any
director of the Corporation prior to the expiration of his term of office for
cause, and not otherwise, by the affirmative vote of a majority of all votes
entitled to be cast for the election of directors.
(h) Except to the extent otherwise specifically provided in
the Articles of Incorporation or By-Laws of the Corporation, the Corporation may
authorize or take any corporate action (including, but without limitation, any
amendment to its Articles of Incorporation) upon the affirmative vote of a
majority of the votes entitled to be cast thereon, notwithstanding any provision
of the Maryland General Corporation Law which would otherwise require more than
a majority vote of stock to authorize or take such action.
NINTH: The following provisions are hereby adopted for
the purpose of limiting the liability of and indemnifying the
directors and officers of the Corporation:
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(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 (i) to
require a waiver of compliance with any provision of the Securities Act of 1933,
or the Investment Company Act of 1940, or of any valid rule, regulation or order
of the Securities and Exchange Commission thereunder or (ii) to protect or
purport 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.
IN WITNESS WHEREOF, the undersigned incorporator of ALEX.
BROWN CASH RESERVE FUND, INC. who executed the foregoing Articles of
Incorporation hereby acknowledges the same to be his act and further
acknowledges that, to the best of his knowledge, information and belief, the
matters and facts set forth therein are true in all material respects.
Dated the 12th day of January, 1990.
/s/ Jules Buchwald
--------------------------------
Jules Buchwald,
Sole Incorporator
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EX-99.B(1)(b)
ALEX. BROWN CASH RESERVE FUND, INC.
ARTICLES SUPPLEMENTARY
ALEX. BROWN CASH RESERVE FUND, INC., having its principal
office in the City of Baltimore, certifies that:
FIRST: The total number of shares of capital stock
that the Corporation has authority to issue has been increased
to 4,000,000,000 shares of Common Stock, par value $.001 per
share (of which 2,500,000,000 shares are designated "Prime
Series", 1,000,000,000 shares are designated "Treasury Series"
and the balance of which are unclassified), by the
Corporation's Board of Directors in accordance with Section
2-105(c) of the Maryland General Corporation Law.
SECOND: Immediately before the increase the
Corporation was authorized to issue 3,000,000,000 shares of
Common Stock, par value $.001 per share (of which
2,000,000,000 shares were designated "Prime Series",
500,000,000 shares were designated "Treasury Series" and the
balance of which were unclassified), having an aggregate par
value of $3,000,000. As increased, the Corporation is
authorized to issue a total of 4,000,000,000 shares of Common
Stock, par value $.001 per share, having an aggregate par
value of $4,000,000.
THIRD: The Corporation is registered as an open-end
investment company under the Investment Company Act of 1940,
as amended.
IN WITNESS WHEREOF, Alex. Brown Cash Reserve Fund, Inc.
has caused these Articles Supplementary to be executed by its President and its
corporate seal to be affixed and attested by its Assistant Secretary on this
20th day of June, 1990. The President of the Corporation who signed these
Articles Supplementary acknowledges them to be the act of the Corporation and
states under the penalties for perjury that to the best of his knowledge,
information and belief the matters and facts relating to approval hereof are
true in all material respects.
ALEX. BROWN CASH RESERVE FUND, INC.
[CORPORATE SEAL] By: /s/ Richard T. Hale
-------------------------------
President
Attest: /s/ Carol F. Reuban
-------------------------
Assistant Secretary
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EX-99.B(1)(c)
ALEX. BROWN CASH RESERVE FUND, INC.
ARTICLES SUPPLEMENTARY
ALEX. BROWN CASH RESERVE FUND, INC., having its
principal office in the City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in
accordance with Section 2-105(c) of the Maryland General
Corporation Law has designated 400,000,000 shares of Common
Stock "Tax-Free Series" out of the unclassified shares of
capital stock of the Corporation, so that the total number of
shares of capital stock that the Corporation has authority to
issue remains 4,000,000,000 shares of Common Stock, par value
$.001 per share (of which 2,500,000,000 shares are designated
"Prime Series", 1,000,000,000 shares are designated "Treasury
Series", 400,000,000 shares are designated "Tax-Free Series",
and the balance of which are unclassified).
SECOND: Immediately before the increase the
Corporation was authorized to issue 4,000,000,000 shares of
Common Stock, par value $.001 per share (of which
2,500,000,000 shares were designated "Prime Series",
1,000,000,000 shares were designated "Treasury Series", and
the balance of which were unclassified), having an aggregate
par value of $4,000,000.
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THIRD: The Corporation is registered as an open-end
investment company under the Investment Company Act of 1940,
as amended.
IN WITNESS WHEREOF, Alex. Brown Cash Reserve Fund, Inc. has caused
these Articles Supplementary to be executed by one of its Vice Presidents and
its corporate seal to be affixed and attested by its Secretary on this 31st day
of July, 1990. The Vice President of the Corporation who signed these Articles
Supplementary acknowledges them to be the act of the Corporation and states
under the penalties for perjury that to the best of his knowledge, information
and belief the matters and facts relating to approval hereof are true in all
material respects.
ALEX. BROWN CASH RESERVE FUND, INC.
By: /s/ Robert Alexander
--------------------------------
[CORPORATE SEAL] Vice President
Attest: /s/ William H. Kleh
------------------------
Secretary
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EX-99.B(1)(d)
ALEX. BROWN CASH RESERVE FUND, INC.
ARTICLES SUPPLEMENTARY
ALEX. BROWN CASH RESERVE FUND, INC., having its principal office in the
City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in accordance with
Section 2-105(c) of the Maryland General Corporation Law has designated
five billion (5,000,000,000) shares of Common Stock, par value $.001
per share, of which two billion, five hundred million (2,500,000,000)
shares are designated "Prime Series", one billion, five hundred million
(1,500,000,000) shares are designated "Treasury Series", six hundred
million (600,000,000) shares are designated "Tax- Free Series", and the
balance of which are unclassified. Of the two billion, five hundred
million (2,500,000,000) shares designated for the Prime Series, two
billion (2,000,000,000) shares are classified as Alex. Brown Cash
Reserve Fund Shares, two hundred million (200,000,000) shares are
classified as Institutional Shares, fifty million (50,000,000) shares
are classified as Flag Investors Cash Reserve Prime Shares and two
hundred fifty million (250,000,000) shares are classified as Quality
Cash Reserve Prime Shares. Of the one billion, five hundred million
(1,500,000,000) shares designated for the Treasury Series, one billion,
three hundred million (1,300,000,000) shares
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are classified as Alex. Brown Cash Reserve Fund Shares and two hundred
million (200,000,000) shares are classified as Institutional Shares.
All of the six hundred million (600,000,000) shares designated for the
Tax-Free Series are classified as Alex. Brown Cash Reserve Fund Shares.
SECOND: Immediately before the increase the Corporation was
authorized to issue four billion (4,000,000,000) shares of Common
Stock, par value $.001 per share and of the aggregate par value of
$4,000,000.00 (of which two billion, five hundred million
(2,500,000,000) shares were designated "Prime Series", one billion
(1,000,000,000) shares were designated "Treasury Series", four hundred
million (400,000,000) shares were designated "Tax-Free Series", and the
balance of which were unclassified).
THIRD: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, Alex. Brown Cash Reserve Fund, Inc. has caused
these Articles Supplementary to be executed by one of its Vice-Presidents and
its corporate seal to be affixed and attested by its Secretary on this 6th day
of May, 1992. The Vice-President of the Corporation who signed these Articles
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Supplementary acknowledges them to be the act of the Corporation and states
under the penalties for perjury that to the best of his knowledge, information
and belief the matters and facts relating to approval hereof are true in all
material respects.
[CORPORATE SEAL]
ALEX. BROWN CASH RESERVE FUND, INC.
By: /s/ Edward J. Veilleux
--------------------------------
Vice-President
Attest: /s/ Brian C. Nelson
------------------------
Secretary
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EX-99.B(1)(e)
ALEX. BROWN CASH RESERVE FUND, INC.
ARTICLES SUPPLEMENTARY
ALEX. BROWN CASH RESERVE FUND, INC., having its principal office in the
City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in accordance with
Section 2-105(c) of the Maryland General Corporation Law has adopted a
resolution designating the Corporation's classified five billion (5,000,000,000)
shares of Common Stock, par value $.001 per share, having an aggregate par value
of $5,000,000.00 as follows: two billion, five hundred fifty million
(2,550,000,000) shares are designated "Prime Series", one billion, five hundred
million (1,500,000,000) shares are designated "Treasury Series", six hundred
million (600,000,000) shares are designated "Tax-Free Series", and the balance
of which are unclassified. Of the two billion, five hundred fifty million
(2,550,000,000) shares designated for the Prime Series, two billion
(2,000,000,000) shares are classified as Alex. Brown Cash Reserve Fund Shares,
two hundred million (200,000,000) shares are classified as Institutional Shares,
fifty million (50,000,000) shares are classified as Flag Investors Cash Reserve
Prime Shares Class A, fifty million (50,000,000) shares are classified as Flag
Investors Cash Reserve Prime Shares Class B, and two hundred fifty million
(250,000,000) shares are classified as Quality Cash Reserve Prime Shares. Of the
one billion, five hundred million (1,500,000,000) shares designated for the
Treasury Series, one billion, three hundred million (1,300,000,000) shares are
classified as Alex. Brown Cash Reserve Fund Shares and two hundred million
(200,000,000) shares are classified as Institutional Shares. All of the six
hundred million (600,000,000) shares designated for the Tax-Free Series are
classified as Alex. Brown Cash Reserve Fund Shares.
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SECOND: Immediately before the designation of the Flag
Investors Prime Shares Class A and Flag Investors Prime Shares Class B pursuant
to these Articles Supplementary, the Corporation was authorized to issue five
billion (5,000,000,000) shares of Common Stock, par value $.001 per share and of
the aggregate par value of $5,000,000.00, of which two billion, five hundred
million (2,500,000,000) shares were designed "Prime Shares", one billion, five
hundred million (1,500,000,000) shares were designated "Treasury Series", six
hundred million (600,000,000) shares were designated "Tax-Free Series", and the
balance of which were unclassified. Of the two billion, five hundred million
(2,500,000,000) shares designed for the Prime Series, two billion
(2,000,000,000) shares were classified as Alex. Brown Cash Reserve Fund Shares
and two hundred million (200,000,000) shares were classified as Institutional
Shares, fifty million (50,000,000) shares were classified as Flag Investors Cash
Reserve Prime Shares and two hundred fifty million (250,000,000) shares were
classified as Quality Cash Reserve Prime Shares. Of the one billion, five
hundred million (1,500,000,000) shares designated for the Treasury Series, one
billion, three hundred million (1,300,000,000) shares were classified as Alex.
Brown Cash Reserve Fund Shares and two hundred million (200,000,000) shares were
classified as Institutional Shares. All of the six hundred million (600,000,000)
shares designated for the Tax-Free Series were classified as Alex. Brown Cash
Reserve Fund shares.
THIRD: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940, as amended.
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IN WITNESS WHEREOF, Alex. Brown Cash Reserve Fund, Inc. has
caused these Articles Supplementary to be executed by one of its Vice-Presidents
and its corporate seal to be affixed and attested by its Secretary on this 31st
day of December 1994.
[CORPORATE SEAL]
ALEX. BROWN CASH RESERVE FUND, INC.
By: /s/ Edward J. Veilleux
-----------------------------------
Vice-President
Attest: /s/ Brian C. Nelson
-----------------------
Secretary
The undersigned, Vice President of ALEX. BROWN CASH RESERVE
FUND, INC., who executed on behalf of said corporation the foregoing Articles
Supplementary to the Articles of Incorporation of which this certificate is made
a part, hereby acknowledges, in the name and on behalf of said corporation, the
foregoing Articles Supplementary to the Articles of Incorporation to be the
corporate act of said corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
/s/ Edward J. Veilleux
----------------------------
Edward J. Veilleux
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EX-99.B(2)
Incorporating Amendments through June 30, 1990
ALEX. BROWN CASH RESERVE FUND, INC.
(a Maryland Corporation)
BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1. Place of Meeting. All meetings of the stockholders
shall be held at the principal office of the Corporation in the State of
Maryland or at such other place within or without the State of Maryland as may
from time to time be designated by the Board of Directors and stated in the
notice of meeting.
Section 2. Annual Meetings. Annual meetings of the
stockholders of the Corporation need not be held except as
required under the Maryland General Corporation Law.
Section 3. Special or Extraordinary meetings. Special or
extraordinary meetings of the stockholders for any purpose or purposes may be
called by the Chairman of the Board of Directors, if any, or by the President or
by the Board of Directors. In addition, such special or extraordinary meetings
shall be called by the Secretary upon receipt of the request in writing signed
by stockholders entitled to cast at least 10% of all the votes entitled to be
cast at the meeting stating the purpose of the meeting and the matters proposed
to be acted on. Unless requested by stockholders entitled to cast a majority of
all of the votes entitled to be cast at the meeting, a special meeting need not
be called to consider any matter which is substantially the same as a matter
voted on at a special meeting of the stockholders held during the preceding 12
months.
Section 4. Notice of Meeting of Stockholders. Not less than
ten days and not more than ninety days written or printed notice of every
meeting of stockholders, stating the time and place thereof (and the purpose of
any special or extraordinary meeting), shall be given to each stockholder
entitled to vote thereat and each other stockholder entitled to notice, by
leaving the same with him or at his residence or usual place of business or by
mailing it, postage prepaid, and addressed to him at his address as it appears
upon the books of the Corporation. Each person who is entitled to notice of any
meeting waives notice if he is present at the meeting, attends in
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person or by proxy or either before or after the meeting signs a waiver of
notice which is filed with the records of stockholders meetings.
Section 5. Closing of Transfer Books. Record Dates. The Board
of Directors may direct that the stock transfer books of the Corporation be
closed for a stated period not exceeding twenty days for the purpose of making
any proper determination with respect to stockholders, including which
stockholders are entitled to notice of and to vote at the meeting, receive a
dividend or be allotted other rights. If such books are closed for the purpose
of determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days immediately
preceding such meeting. In lieu of providing for the closing of the stock
transfer books, the Board of Directors may set a date, not exceeding ninety days
and not less than ten days preceding the date of any meeting of stockholders,
and not exceeding ninety days preceding any dividend payment date or any date
for the allotment of rights, as a record date for the determination of the
stockholders entitled to notice of and to vote at such meeting, or entitled to
receive such dividends or rights, as the case may be; and only stockholders of
record on such date shall be entitled to notice of and to vote at such meeting
or to receive such dividends or rights, as the case may be.
Section 6. Quorum. Adjournment of Meetings. The presence in
person or by proxy of stockholders entitled to cast a majority of all votes
entitled to be cast at the meeting shall constitute a quorum at all meetings of
the stockholders; and a majority of all votes cast at a meeting at which a
quorum is present is sufficient to approve any matter which properly comes
before the meeting, unless otherwise provided by applicable law, the Articles of
Incorporation or the By-Laws of the Corporation. If at any meeting of the
stockholders there shall be less than a quorum present, the stockholders present
at such meeting may, without further notice, adjourn the same from time to time
(but not more than 120 days after the original record date for such meeting)
until a quorum shall attend, but no business shall be transacted at any such
adjourned meeting except such as might have been lawfully transacted had the
meeting not been adjourned.
Section 7. Voting and Inspectors. At all meetings of
stockholders every stockholder of record entitled to vote thereat shall be
entitled to vote at such meeting either in person or by proxy appointed by
instrument in writing subscribed by such stockholder or his duly authorized
attorney. Unless a proxy provides otherwise, such proxy is not valid more than
eleven months after its date.
At any election of Directors, the Board of Directors prior
thereto may, or, if hey have not so acted, the Chairman of the meeting may
appoint two inspectors of election who shall first subscribe an oath or
affirmation to execute faithfully the
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duties of inspectors at such election with strict impartiality and according to
the best of their ability, and shall after the election make a certificate of
the result of the vote taken. No candidate for the office of Director shall be
appointed such Inspector.
The Chairman of the meeting may cause a vote by ballot to be
taken upon any election or matter.
Section 8. Conduct of Stockholders Meetings. The meetings of
the stockholders shall be presided over by the Chairman of the Board, or if he
shall not be present or if there is no Chairman, by the President, or if he
shall not be present, by a Vice President, or if neither the President nor any
Vice President is present, by a chairman to be elected at the meeting. The
Secretary of the Corporation, if present, shall act as Secretary of such
meetings, or if he is not present, an Assistant Secretary shall so act, and if
neither the Secretary nor an Assistant Secretary is present, by a secretary to
be elected at the meeting.
Section 9. Concerning Validity of Proxies. Ballots. Etc. At
every meeting of the stockholders, all proxies shall be received and taken in
charge of and all ballots shall be received and canvassed by the secretary of
the meeting, who shall decide all questions touching the qualification of
voters, the validity of the proxies, and the acceptance or rejection of votes,
unless inspectors of election shall have been appointed as provided in Section
7, in which event such inspectors of election shall decide all such questions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number and Term of Office. The business and
property of the Corporation shall be conducted and managed under the direction
of a Board of Directors consisting of two Directors, which number may bed
increased and decreased as provided in Section 2 of this Article. Each director
shall hold office until his successor is duly elected and qualifies.
Directors need not be stockholders.
Section 2. Increase or Decrease in Number of Directors. The
Board of Directors, by thee vote of a majority of the entire Board, may increase
the number of Directors to a number not exceeding fifteen, and may elect
Directors to fill the vacancies created by any such increase in the number of
Directors until their successors are duly elected and qualify. The Board of
Directors, by the vote of a majority of the entire Board, may
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decrease the number of Directors to a number not less than two but any such
decrease shall not affect the term of office of any Director. Vacancies
occurring other than by reason of any such increase shall be filled as provided
by the Maryland General Corporation Law.
Section 3. Place of Meeting. The Directors may hold their
meetings, have one or more offices, and keep the books of the Corporation
outside the State of Maryland, at any office or offices of the Corporation or at
any other place as they may from time to time determine, and in the case of
meetings, as they may from time to time determine or as shall be specified in
the respective notices of such meetings or waivers of notice thereof.
Section 4. Regular Meetings. Regular meetings of the
Board of Directors shall be held at such time and on such notice,
if any, as the Directors may from time to time determine.
Section 5. Special meetings. Special meetings of the Board of
Directors may be held "from time to time upon call of the Chairman of the Board
off Directors, if any, the President or two or more of the Directors, by oral or
telegraphic or written notice duly served on each Director not less than one
business day before such meeting or if sent or mailed to each Director not less
than three business days before such meeting. Each Director who is entitled to
notice waives such notice if he either before or after the meeting signs a
waiver of the notice which is filed with the minutes of the meeting or is
present at the meeting. Such notice or waiver of notice need not state the
purpose or purposes of such meeting.
Section 6. Quorum. One third of the Directors then in office
(but in no event less than two Directors), shall constitute a quorum for the
transaction of business. If at any meeting of the Board there shall be less than
a quorum present, a majority of those present may adjourn the meeting from time
to time until a quorum shad have been obtained. The act of the majority of the
Directors present at any meeting at which there is a quorum shall be the act of
the Directors, except as may be otherwise specifically provided by applicable
law, by the Articles of Incorporation or by these By-Laws.
Section 7. Telephonic Meeting, Etc. The members of the Board
of Directors or any committee of the Board of Directors may participate in a
meeting by means of a conference telephone or similar communications equipment
if all persons participating in such meeting can hear each other at the same
time, and participation in a meeting by these means constitutes presence in
person at such meeting.
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Section 8. Executive Committee. The Board of Directors may
elect from the Directors an Executive Committee to consist of such number of
Directors (but not less than two) as the Board may from time to time determine.
The Board of Directors by such affirmative vote shall have power at any time to
change the members of such Committee and may fill vacancies in the Committee by
election from the Directors. When the Board of Directors is not in session, the
Executive Committee shall have and may exercise any or all of the powers of the
Board of Directors in the management of the business and affairs of the
Corporation (including the power to authorize the seal of the Corporation to be
affixed to all papers which may require it) except as provided by law and except
the power to increase or decrease the size of, or fill vacancies on the Board.
The Executive Committee may fix its own rules of procedure, and may meet, when
and as provided by such rules or by resolution of the Board of Directors, but in
every case the presence of a majority shall be necessary to constitute a quorum.
Section 9. Other Committees. The Board of Directors may
appoint other committees which shall in each case consist of such number of
members (not less than two) and shall have and may exercise such powers as the
Board may determine in the resolution appointing them. A majority of all members
of any such committee may determine its action, and fix the time and place of
its meetings, unless the Board of Directors shall otherwise provide. The Board
of Directors shall have power at any time to change the members and powers of
any such committee, to fill vacancies, and to discharge any such committee. In
the, absence of any member of any committee, the members thereof present at any
meeting, whether or not they constitute a quorum, may appoint a member of the
Board of Directors to act in the place of such absent member.
Section 10. Informal Action by Directors. Except to the extent
otherwise specifically provided by applicable law, any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting, if a written consent to such action is
signed by all members of the Board or committee and is filed with the minutes of
proceedings of the Board or committee.
Section 11. Compensation of Directors. Directors shall be
entitled to receive such compensation from the Corporation for their services as
Directors as may from time to time be voted by the Board of Directors.
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ARTICLE III
OFFICERS
Section 1. Executive Officers. The executive officers of the
Corporation shall be chosen by the Board of Directors as soon as may be
practicable after the incorporation of the Corporation. These may include a
Chairman of the Board, and shall include a President, one or more Vice
Presidents (the number thereof to be determined by the Board of Directors), a
Secretary and a Treasurer. The Chairman of the Board, if any, shall be selected
from among the Directors. The Board of Directors may also in its discretion
appoint Assistant Secretaries, Assistant Treasurers, and other officers, agents
and employees, who shall have such authority and perform such duties as the
Board may determine. The Board of Directors may fill any vacancy which may occur
in any office. Any two offices, except those of President and Vice President,
may be held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity, if such instrument is required
by law or these By-Laws to be executed, acknowledged or verified by two or more
officers.
Section 2. Term of Office. Unless otherwise specifically
determined by the Board of Directors, all officers of the Corporation shall hold
office until their respective successors are chosen and qualify, provided,
however, that said term of office shall not create any contract rights in the
officer. If the Board of Directors in its judgment finds that the best interests
of the Corporation will be served, the Board of Directors may remove any officer
of the Corporation at any time with or without cause.
Section 3. The President shall be the chief executive officer
and head of the Corporation and, subject to the Board of Directors, shall have
the general control and management of the business and affairs of the
Corporation. If no Chairman of the Board be appointed, or, if appointed, said
Chairman is absent, the President shall, if present, preside at all meetings of
the stockholders and the Board of Directors.
Sections 4. The Chairman of the Board shall preside at all
meetings of the stockholders and the Board of Directors at which he shall be
present. Subject to the provisions of Section 2, he shall have such other powers
and duties as shall be prescribed by the Board of Directors, and shall undertake
such other assignments as may be requested by the President.
Section 5. The Chairman or one or more vice Presidents shall
have and exercise such powers and duties of the President in the absence or
inability of the President as may be assigned
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to them, respectively, by resolution of the Board of Directors or, to the extent
not so assigned, as the President may assign to them, respectively. In the
absence or inability of the President to act, the powers and duties of the
President not assigned by the Board of Directors or the President shall evolve
upon the Chairman or in his absence the Vice Chairman or in his absence the
senior Vice President.
Section 6. The Secretary shall have custody of the seal of the
Corporation. He shall keep the minutes of the meetings of the stockholders,
Board of Directors and any committees thereof, and he shall attend to the giving
and serving of all notices of the Corporation. He shall have charge of the stock
certificate book and such other books and papers as the Board may direct; and he
shall perform such other duties as may be incidental to his office or as may be
assigned to him by the Board of Directors. He shall also keep or cause to be
kept a stock book, containing the names, alphabetically arranged, of all persons
who are stockholders of the Corporation showing their places of residence, the
number and class or series of any class of shares of stock held by them
respectively, and the dates when they respectively became the owners of record
thereof, and such book shall be open for inspection as prescribed by the laws of
the State of Maryland.
Section 7. The Treasurer shall have the care and custody of
the funds and securities of the Corporation and shall deposit the same in the
name of the Corporation in such bank or banks or other depositories and subject
to withdrawal in such manner as these by-laws or the Board of Directors may
determine; he shall, if required by the Board of Directors, give such bond for
the faithful discharge of his duties in such form as the Board of Directors may
require.
ARTICLE IV
CAPITAL STOCK
Section 1. Certificates of Shares. Each stockholder of the
Corporation shall be entitled to a certificate or certificates for the number of
whole shares of each class of stock of the Corporation owned by him in such form
as the Board of Directors may from time to time prescribe.
Section 2. Transfer of Shares. Shares of the Corporation shall
be transferable on the books of the Corporation by the holder thereof in person
or by his duly authorized attorney or legal representative, upon surrender and
cancellation of certificates, if any, for the same number of shares, duly
endorsed or accompanied by proper instruments of assignment and
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transfer, with such proof of the authenticity of the signature as the
corporation or its agents may reasonably require. In the case of shares not
represented by certificates, the same or similar requirements may be imposed by
the Board of Directors.
Section 3. Stock Ledgers. The stock ledgers of the
Corporation, containing the names and addresses of the stockholders and the
number of shares held by them respectively, shall be kept at the principal
offices of the Corporation, or if the Corporation employs a transfer agent, at
the offices of the transfer agent of the Corporation.
Section 4. Lost. Stolen or Destroyed Certificates. The Board
of Directors may determine the conditions upon which a new certificate of stock
of the Corporation of any class may be issued in place of a certificate which is
alleged to have been lost, stolen or destroyed; and may, in their discretion,
require the owner of such certificate or his legal representative to give bond,
with sufficient surety to the Corporation and the transfer agent, if any, to
indemnify it and such transfer agent against any and all loss or claims which
may arise by reason of the issue of a new certificate in the place of the one so
lost, stolen or destroyed.
ARTICLE V
CORPORATE SEAL
The Board of Directors may provide a suitable corporate seal,
in such form and bearing such inscriptions as it may determine. In lieu of
fixing the Corporations seal to a document, it is sufficient to meet the
requirements of any law, rule or regulation relating to a corporate seal to
place the word "(seal)" adjacent to the signature of the person authorized to
sign the document on behalf of the Corporation.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board of
Directors.
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ARTICLE VII
INDEMNIFICATION
Section 1. Indemnification of Directors and Officers. The
Corporation shall indemnify its directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify its officers to the same extent as its
directors and to such further extent as is consistent with law. The Corporation
shall indemnify its directors and officers who while serving as directors or
officers also serve at the request of the Corporation as a director, officer,
partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan to
the fullest extent consistent with law. The indemnification and other rights
provided by this Article shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. This Article shall not protect any such person
against any liability to the Corporation or any stockholder thereof to which
such person 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 ("disabling conduct").
Section 2. Advances. Any current or former director or officer
of the corporation seeking indemnification within the scope of this Article
shall be entitled to advances from the Corporation for payment of the reasonable
expenses incurred by him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent permissible under the
Maryland General Corporation Law. The person seeking indemnification shall
provide to the Corporation a written affirmation of his good faith belief that
the standard of conduct necessary for indemnification by the Corporation has
been met and a written undertaking to repay any such advances if it should
ultimately be determined that the standard of conduct has not been met. In
addition, at least one of the following additional conditions shall be met: (a)
the person seeking indemnification shall provide a security in form and amount
acceptable to the Corporation for his undertaking; (b) the Corporation is
insured against losses arising by reason of the advance; or (c) a majority of a
quorum of directors of the Corporation who are neither "interested persons" as
defined in Section 2(a) (19) of the Investment Company Act of 1940, as amended,
nor parties to the proceeding ("disinterested nonparty directors"), or
independent legal counsel, in a written opinion, shall have determined, based on
a review of facts readily available to the Corporation at the time the advance
is proposed to be made, that there is reason to believe that the person
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seeking indemnification will ultimately be found to be entitled
to indemnification.
Section 3. Procedure. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine, or
cause to be determined, in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this Article have been met.
Indemnification shall be made only following: (a) a final decision on the merits
by a court or other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct or (b) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct by (i) the vote of a majority of a quorum of disinterested
nonparty directors or (ii) an independent legal counsel in a written opinion.
Section 4. Indemnification of Employees and Agents. Employees
and agents who are not officers or directors of the Corporation may be
indemnified, and reasonable expenses may be advanced to such employees or
agents, as may be provided by action of the Board of Directors or by contract,
subject to any limitations imposed by the Investment Company Act of 1940 as from
time to time amended.
Section 5. Other Rights. The Board of Directors may make
further provision consistent with law for indemnification and advance of
expenses to directors, officers, employees and agents by resolution, agreement
or otherwise. The indemnification provided by this Article shall not be deemed
exclusive of any other right, with respect to indemnification may be entitled
under any insurance or other agreement or resolution of stockholders or
disinterested directors or otherwise.
Section 6. Amendments. References in this Article are to the
Maryland General Corporation Law and to the Investment Company Act of 1940 as
from time to time amended. No amendment of these by-laws shall affect any right
of any person under this Article based on any event, omission or proceeding
prior to the amendment.
ARTICLE VIII
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of independent public accountants which shall sign or
certify the financial statements of each class of stock of the Corporation which
are filed with the Securities and Exchange Commission shall be selected annually
by the Board of
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Directors and ratified by the Board of Directors or the stockholders in
accordance with the provisions of the Investment Company Act of 1940 as from
time to time amended.
ARTICLE IX
ANNUAL STATEMENTS
The books of account of the Corporation shall be examined by
an independent firm of public accountants at the close of each annual period of
the Corporation and at such other times as may be directed the Board. A report
to the stockholders based upon each such examination shall be mailed to each
stockholder of each class of the Corporation of record on such dated with
respect to each report as may be determined by the Board, at his address as the
same appears on the books of the Corporation. Such annual statement shall also
be placed on file at the Corporations principal office in the State of Maryland.
Each such report shall show the assets and liabilities of the class of the
Corporation as of the close of the annual or semiannual period covered by the
report and the securities in which the funds of the class income and expenses
for the period form the end of the Corporations preceding fiscal year to the
close of the annual or semiannual period covered by the report and any other
information required by the Investment Company Act of 1940, as amended, and
shall set forth such other matters as the Board or such firm of independent
public accountants shall determine.
ARTICLE X
AMENDMENT OF BY-LAWS
The By-Laws of the Corporation may be altered, amended, added
to or repealed by the Board of Directors.
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EX-99.B(5)(a)
AMENDED INVESTMENT ADVISORY AGREEMENT
ALEX. BROWN CASH RESERVE FUND, INC. - PRIME SERIES
THIS AGREEMENT is made as of the 22nd day of August, 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;
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(d) provide the Prime Series with, or obtain for it, adequate
office space and all necessary office equipment and services, including
telephone service, heat, utilities, stationery supplies and similar items for
the Fund's principal office;
(e) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Prime
Series, and whether concerning the individual issuers whose securities are
included in the Prime Series or the activities in which they engage, or with
respect to securities which the Advisor considers desirable for inclusion in the
Prime Series;
(f) determine which issuers and securities shall be
represented in the Prime Series and regularly report thereon to the Fund's Board
of Directors;
(g) take all actions necessary to carry into effect the Fund's
purchase and sale programs with respect to its Prime Series;
(h) supervise the operations of the Prime Series' transfer and
dividend disbursing agent;
(i) provide the Prime Series with such administrative and
clerical services for the maintenance of certain shareholder records, as are
deemed advisable by the Fund's Board of Directors; and,
(j) arrange, but not pay for, the periodic updating of
prospectuses and supplements thereto, proxy material, tax returns, reports to
the shareholders of the Prime Series and reports to and filings with the
Securities and Exchange Commission (the "SEC") and state Blue Sky authorities,
which may be required for the Prime Series.
3. Broker-Dealer Relationship. In the event that the Advisor is
responsible for decisions to buy and sell securities for the Prime Series,
broker-dealer selection, and negotiation of its brokerage commission rates, the
Advisor's primary consideration in effecting a security transaction will be
execution at the most favorable price. The Fund understands that a substantial
majority of the Prime Series' transactions will be transacted with primary
market makers acting as principal on a net basis, with no brokerage commissions
being paid by the Fund. Such principal transactions may, however, result in a
profit to the market makers. In certain instances the Advisor may make purchases
of underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Prime Series on a
continuing basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Prime Series. The Advisor
is further authorized to allocate the orders placed by it on behalf of the Prime
Series to such brokers and dealers who also provide research or statistical
material or other services to the Fund or the Advisor. Such allocation shall be
in such amounts and proportions as the Advisor shall determine and the Advisor
will report on said allocation regularly to the
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Board of Directors of the Fund, indicating the brokers to whom such allocations
have been made and the basis therefor.
4. Control by Board of Directors. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as any
other activities undertaken by the Advisor on behalf of the Prime Series
pursuant thereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder;
(b) the provisions of the Registration Statement of the Fund
under the Securities Act of 1933 and 1940 Act;
(c) the provisions of the Articles of Incorporation, as
amended;
(d) the provisions of the By-laws of the Fund, as amended; and
(e) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Prime Series shall be
allocable between the Fund and the Advisor as follows:
(a) 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
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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 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 Prime Series which are not required by this
Agreement upon the request of the Fund's Board of Directors. Such services will
be performed on behalf of the Prime Series and the Advisor's charge in rendering
such services may be billed monthly to the Fund, subject to examination by the
Fund's independent accountants. Payment or assumption by the Advisor of any Fund
expense that the Advisor is not required to pay or assume under this Agreement
shall not relieve the Advisor of any of its obligations to the Prime Series nor
obligate the Advisor to pay or assume any similar Prime Series' expenses on any
subsequent occasions.
8. Compensation. For the services to be rendered and the expenses
assumed by the Advisor, the Prime Series shall pay to the Advisor monthly
compensation at an annual rate derived by: (1) calculating an amount equal to
.30% of the first $500 million of the Fund's aggregate average daily net assets,
.26% of the next $500 million of the Fund's aggregate average daily net assets,
.25% of the next $500 million of the Fund's aggregate average daily net assets,
.24% of the next $1 billion of the Fund's aggregate average daily net assets,
.23% of the next $1 billion of the Fund's aggregate average daily net assets and
.22% of that portion of the Fund's aggregate average daily net assets in excess
of $3.5 billion; (2) applying to this amount a fraction equal to the net assets
of the Prime Series divided by the net assets of the Fund; and (3) adding an
amount calculated daily and paid monthly, at the annual rate of .02% of the
Prime Series' average daily net assets.
Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation 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
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applicable. For the purposes of this paragraph, the Advisor's share of any
excess expenses shall be computed by multiplying such excess expenses by a
fraction, the numerator of which is the amount of the investment advisory fee
which would otherwise be payable to the Advisor for such fiscal year were it not
for this section 9 and the denominator of which is the sum of all investment
advisory and distribution fees which would otherwise be payable by the Fund were
it not for the expense limitation provisions of any investment advisory or
administration agreement to which the Fund is a party. The foregoing expense
limitations imposed by the state securities laws and regulations shall be
applied to the Prime Series separately unless the laws or regulations of any
state shall require that the expense limitations be imposed with respect to the
Fund as a whole. The foregoing 1% expense limitation shall be applied to the
Fund's Series on a combined basis.
10. Non-Exclusivity. The services of the Advisor to the Fund are not to
be deemed to be exclusive, and the Advisor shall be free to render investment
advisory and corporate administrative or other services to others (including
other investment companies) and to engage in other activities, so long as its
services under this Agreement are not impaired thereby. It is understood and
agreed that officers or directors of the Advisor may serve as officers or
directors of the Fund, and that officers or directors of the Fund may serve as
officers or directors of the Advisor to the extent permitted by law; and that
the officers and directors of the Advisor are not prohibited from engaging in
any other business activity or from rendering services to any other person, or
from serving as partners, officers, trustees or directors of any other firm,
trust or corporation, including other investment companies.
11. Term. This Agreement shall become effective at the close of
business on the date hereof and shall continue in force and effect, subject to
section 13 hereof, for two years from the date hereof.
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>
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 /s/ Brian C. Nelson
-------------------------
Attest:
/s/ Laurie D. DePrine
- -----------------------
Secretary
INVESTMENT COMPANY CAPITAL
CORP.
By /s/ Edward J. Veilleux
---------------------------
Attest:
/s/ Laurie D. DePrine
- -----------------------
Secretary
-6-
<PAGE>
EX-99.B(5)(b)
AMENDED INVESTMENT ADVISORY AGREEMENT
ALEX. BROWN CASH RESERVE FUND, INC. - TREASURY SERIES
THIS AGREEMENT is made as of the 22nd day of August, 1995 by and
between ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the
"Fund"), and INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation (the
"Advisor"), with respect to the following recital of fact:
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and
WHEREAS, the Fund's Articles of Incorporation authorize the Board of
Directors of the Fund to classify or reclassify authorized but unissued shares
of the Fund; and
WHEREAS, the Fund's Board of Directors has authorized the issuance of
three series of shares with a par value of $.001 representing interests in three
portfolios: the Prime Series, the Treasury Series and the Tax-Free Series (each
of the existing portfolios and any portfolios hereafter added shall be referred
to collectively as the "Series"); and
WHEREAS, the Fund and the Advisor desire to enter an agreement to
provide investment advisory and administrative services for the Fund's Treasury
Series (the "Treasury Series") on the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Investment Advisor. The Fund hereby appoints the
Advisor to act as the investment advisor to the Treasury Series. The Advisor
shall manage the Treasury Series' affairs and shall supervise all aspects of the
Treasury Series' operations (except as otherwise set forth herein), including
the investment and reinvestment of the cash, securities or other properties
comprising the Treasury Series' assets, subject at all times to the policies and
control of the Fund's Board of Directors. The Advisor shall give the Treasury
Series the benefit of its best judgment, efforts and facilities in rendering its
services as Advisor.
2. Duties of Investment Advisor. In carrying out its obligations under
section 1 hereof, the Advisor shall:
(a) supervise and manage all aspects of the Treasury Series'
operations;
(b) formulate and implement continuing programs for the
purchases and sales of securities, consistent with the investment objective and
policies of the Treasury Series;
(c) provide the Treasury Series with such executive,
administrative and clerical services as are deemed advisable by the Fund's Board
of Directors;
(d) provide the Treasury Series with, or obtain for it,
adequate office space and all necessary office equipment and services, including
telephone service, heat, utilities, stationery supplies and similar items for
the Fund's principal office;
-1-
<PAGE>
(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 Board
of Directors of the Fund, indicating the brokers to whom such allocations have
been made and the basis therefor.
-2-
<PAGE>
4. Control by Board of Directors. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as any
other activities undertaken by the Advisor on behalf of the Treasury Series
pursuant thereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder;
(b) the provisions of the Registration Statement of the Fund
under the Securities Act of 1933 and 1940 Act;
(c) the provisions of the Articles of Incorporation, as
amended;
(d) the provisions of the By-laws of the Fund, as amended; and
(e) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Treasury Series shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall furnish, at its expense and without cost
to the Fund, the services of one or more officers of the Fund, to the extent
that such officers may be required by the Fund for the proper conduct of its
affairs.
(b) The Fund assumes and shall pay or cause to be paid all
other expenses of the Treasury Series, including, without limitation, the
Treasury Series' allocable portion of the following expenses: payments to the
Fund's distributor under the Treasury Series' plans of distribution; the charges
and expenses of any registrar, any custodian or depository appointed by the Fund
for the safekeeping of its cash, portfolio securities and other property, and
any transfer, dividend or accounting agent or agents appointed by the Fund;
brokers' commissions chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party; all taxes, including
securities issuance and transfer taxes, and fees payable by the Fund to federal,
state or other governmental agencies; the costs and expenses of engraving or
printing of certificates representing shares of the Fund; all costs and expenses
in connection with the registration and maintenance of registration of the Fund
and its shares with the SEC and various states and other jurisdictions
(including filing fees, legal fees and disbursements of counsel); the costs and
expenses of printing, including typesetting, and distributing prospectuses and
statements of additional information of the Fund and supplements thereto to the
Fund's shareholders; all expenses of shareholders' and directors' meetings and
of preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of directors or director members of any
advisory board or committee; all expenses incident to the payment of any
dividend, distribution, withdrawal or redemption, whether in shares or in cash;
charges and expenses of any outside service used for pricing of the Fund's
shares; charges and expenses of legal counsel, including counsel to the
directors of the Fund who are not interested persons (as defined in the 1940
Act) of the Fund and of independent accountants, in connection with any matter
relating to the Fund; membership dues of industry associations; interest payable
on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and directors) of the Fund which inure to its benefit;
extraordinary expenses (including but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
provided herein.
-3-
<PAGE>
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 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 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, .23% of the
next $1 billion of the Fund's aggregate average daily net assets and .22% of
that portion of the Fund's aggregate average daily net assets in excess of $3.5
billion; and (2) applying to this amount a fraction equal to the net assets of
the Treasury Series divided by the net assets of the Fund.
Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Subject to the provisions of section 9 hereof, payment of the Advisor's
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated by section 9 hereof.
9. Expense Limitation. In the event the operating expenses of the Fund,
including all investment advisory and administrative fees, for any fiscal year
ending on a date on which this Agreement is in effect exceed either (i) the
expense limitations applicable to the Treasury Series imposed by the securities
laws or regulations thereunder of any state in which the Fund's shares are
qualified for sale, as such limitations may be raised or lowered from time to
time, or (ii) 1% of the Fund's average daily net assets, the Advisor shall
reduce its investment advisory fee to the extent of its share of such excess
expenses and, if required pursuant to any such laws or regulations, will
reimburse the Fund for its share of annual operating expenses in excess of any
expense limitation that may be applicable; provided, however, there shall be
excluded from such expenses the amounts of any interest, taxes, brokerage
commissions and extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Treasury Series as at the end of the
last business day of the month. Should two or more such expense limitations be
applicable as at the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Advisor's fee shall be
applicable. For the purposes of this paragraph, the Advisor's share of any
excess expenses shall be computed by multiplying such excess expenses by a
fraction, the numerator of which is the amount of the investment advisory fee
which would otherwise be payable to the Advisor for such fiscal year
-4-
<PAGE>
were it not for this section 9 and the denominator of which is the sum of all
investment advisory and distribution fees which would otherwise be payable by
the Fund were it not for the expense limitation provisions of any investment
advisory or administration agreement to which the Fund is a party. The foregoing
expense limitations imposed by the state securities laws and regulations shall
be applied to the Treasury Series separately unless the laws or regulations of
any state shall require that the expense limitations be imposed with respect to
the Fund as a whole. The foregoing 1% expense limitation shall be applied to the
Fund's Series on a combined basis.
10. Non-Exclusivity. The services of the Advisor to the Fund are not to
be deemed to be exclusive, and the Advisor shall be free to render investment
advisory and corporate administrative or other services to others (including
other investment companies) and to engage in other activities, so long as its
services under this Agreement are not impaired thereby. It is understood and
agreed that officers or directors of the Advisor may serve as officers or
directors of the Fund, and that officers or directors of the Fund may serve as
officers or directors of the Advisor to the extent permitted by law; and that
the officers and directors of the Advisor are not prohibited from engaging in
any other business activity or from rendering services to any other person, or
from serving as partners, officers, trustees or directors of any other firm,
trust or corporation, including other investment companies.
11. Term. This Agreement shall become effective at the close of
business on the date hereof and shall continue in force and effect, subject to
section 13 hereof, for two years from the date hereof.
12. Renewal. Following the expiration of its initial two-year term,
this Agreement shall continue in force and effect from year to year, provided
that such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote
of a majority of the outstanding voting securities of the
Treasury Series (as defined in Section 2(a)(42) of the 1940
Act), and
(b) by the affirmative vote of a majority of the directors who
are not parties to this Agreement or "interested persons" of a
party to this Agreement (other than as directors of the Fund)
by votes cast in person at a meeting specifically called for
such purpose.
13. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Fund's Board of Directors or by vote
of a majority of the Treasury Series' outstanding voting securities (as defined
in Section 2(a)(42) of the 1940 Act), or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by either party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" having the meaning defined in Section
2(a)(4) of the 1940 Act.
14. Liability of Advisor. In the performance of its duties hereunder,
the Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Advisor shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor of its
duties under this Agreement.
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>
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 /s/ Brian C. Nelson
--------------------------
Attest:
/s/ Laurie D. DePrine
- -----------------------
Secretary
INVESTMENT COMPANY CAPITAL
CORP.
By /s/ Edward J. Veilleux
--------------------------
Attest:
/s/ Laurie D. DePrine
- -----------------------
Secretary
-6-
<PAGE>
EX-99.B(5)(c)
AMENDED INVESTMENT ADVISORY AGREEMENT
ALEX. BROWN CASH RESERVE FUND, INC. - TAX-FREE SERIES
THIS AGREEMENT is made as of the 22nd day of August, 1995 by and
between ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the
"Fund"), and INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation (the
"Advisor"), with respect to the following recital of fact:
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and
WHEREAS, the Fund's Articles of Incorporation authorize the Board of
Directors of the Fund to classify or reclassify authorized but unissued shares
of the Fund; and
WHEREAS, the Fund's Board of Directors has authorized the issuance of
three series of shares with a par value of $.001 representing interests in three
portfolios: the Prime Series, the Treasury Series and the Tax-Free Series (each
of the existing portfolios and any portfolio hereafter added shall be referred
to collectively as the "Series"); and
WHEREAS, the Fund and the Advisor desire to enter an agreement to
provide investment advisory and administrative services for the Fund's Tax-Free
Series (the "Tax-Free Series") on the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Investment Advisor. The Fund hereby appoints the
Advisor to act as the investment advisor to the Tax-Free Series. The Advisor
shall manage the affairs of the Tax-Free Series and shall supervise all aspects
of the Tax-Free Series' operations (except as otherwise set forth herein),
including the investment and reinvestment of the cash, securities or other
properties comprising the Tax-Free Series' assets, subject at all times to the
policies and control of the Fund's Board of Directors. The Advisor shall give
the Tax-Free Series the benefit of its best judgment, efforts and facilities in
rendering its services as Advisor.
2. Duties of Investment Advisor. In carrying out its obligations under
section 1 hereof, the Advisor shall:
(a) supervise and manage all aspects of the Tax-Free Series'
operations;
(b) formulate and implement continuing programs for the purchases and
sales of securities, consistent with the investment objective and policies of
the Tax-Free Series;
(c) provide the Tax-Free Series with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of Directors;
(d) provide the Tax-Free Series with, or obtain for it, adequate office
space and all necessary office equipment and services, including telephone
service, heat, utilities, stationery supplies and similar items for the Fund's
principal office;
-1-
<PAGE>
(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.
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
-2-
<PAGE>
Tax-Free Series pursuant thereto, shall at all times be subject to any
applicable directives of the Board of Directors of the Fund.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;
(b) the provisions of the Registration Statement of the Fund under the
Securities Act of 1933 and 1940 Act;
(c) the provisions of the Articles of Incorporation, as amended;
(d) the provisions of the By-laws of the Fund, as amended; and
(e) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Tax-Free Series shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall furnish, at its expense and without cost
to the Fund, the services of one or more 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>
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,
.23% of the next $1 billion of the Fund's aggregate average daily net assets and
.22% of that portion of the Fund's aggregate average daily net assets in excess
of $3.5 billion; (2) applying to this amount a fraction equal to the net assets
of the Tax-Free Series divided by the net assets of the Fund; and (3) adding an
amount calculated daily and paid monthly, at the annual rate of .03% of the
Tax-Free Series' average daily net assets.
Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Subject to the provisions of section 9 hereof, payment of the Advisor's
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated by section 9 hereof.
9. Expense Limitation. In the event the operating expenses of the Fund,
including all investment advisory and administrative fees, for any fiscal year
ending on a date on which this Agreement is in effect exceed either (i) the
expense limitations applicable to the Tax-Free Series imposed by the securities
laws or regulations thereunder of any state in which the Fund's shares are
qualified for sale, as such limitations may be raised or lowered from time to
time, or (ii) 1% of the Fund's average daily net assets, the Advisor shall
reduce its investment advisory fee to the extent of its share of such excess
expenses and, if required pursuant to any such laws or regulations, will
reimburse the Fund for its share of annual operating expenses in excess of any
expense limitation that may be applicable; provided, however, there shall be
excluded from such expenses the amounts of any interest, taxes, brokerage
commissions and extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Tax-Free Series as of the end of the
last business day of the month. Should two or more such expense limitations be
applicable as of the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Advisor's fee shall be
applicable. For the purposes of this paragraph, the Advisor's share of any
excess expenses shall be computed by multiplying such excess expenses by a
fraction, the numerator of which is the amount of the investment advisory fee
which would otherwise be payable to the Advisor for such fiscal year
-4-
<PAGE>
were it not for this section 9 and the denominator of which is the sum of all
investment advisory and distribution fees which would otherwise be payable by
the Fund were it not for the expense limitation provisions of any investment
advisory or administration agreement to which the Fund is a party. The foregoing
expense limitations imposed by the state securities laws and regulations shall
be applied to the Tax-Free Series separately unless the laws or regulations of
any state shall require that the expense limitations be imposed with respect to
the Fund as a whole. The foregoing 1% expense limitation shall be applied to all
of the Fund's Series on a combined basis.
10. Non-Exclusivity. The services of the Advisor to the Fund are not to
be deemed to be exclusive, and the Advisor shall be free to render investment
advisory and corporate administrative or other services to others (including
other investment companies) and to engage in other activities, so long as its
services under this Agreement are not impaired thereby. It is understood and
agreed that officers or directors of the Advisor may serve as officers or
directors of the Fund, and that officers or directors of the Fund may serve as
officers or directors of the Advisor to the extent permitted by law; and that
the officers and directors of the Advisor are not prohibited from engaging in
any other business activity or from rendering services to any other person, or
from serving as partners, officers, trustees or directors of any other firm,
trust or corporation, including other investment companies.
11. Term. This Agreement shall become effective at the close of
business on the date hereof and shall continue in force and effect, subject to
section 13 hereof, for two years from the date hereof.
12. Renewal. Following the expiration of its initial two-year term,
this Agreement shall continue in force and effect from year to year, provided
that such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the outstanding voting securities of the Tax-Free Series (as defined
in Section 2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the directors who are not
parties to this Agreement or "interested persons" of a party to this Agreement
(other than as directors of the Fund) by votes cast in person at a meeting
specifically called for such purpose.
13. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Fund's Board of Directors or by vote
of a majority of the Tax-Free Series' outstanding voting securities (as defined
in Section 2(a)(42) of the 1940 Act), or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by either party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" having the meaning defined in Section
2(a)(4) of the 1940 Act.
14. Liability of Advisor. In the performance of its duties hereunder,
the Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Advisor shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor of its
duties under this Agreement.
15. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Fund and
the Advisor for this purpose shall be 135 East Baltimore Street, Baltimore,
Maryland 21202.
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
-5-
<PAGE>
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 /s/ Brian C. Nelson
--------------------------
Attest:
/s/ Laurie D. Deprine
- -------------------------
Secretary
INVESTMENT COMPANY CAPITAL
CORP.
By /s/ Edward J. Veilleux
----------------------------
Attest:
/s/ Laurie D. DePrine
- ---------------------------
Secretary
-6-
<PAGE>
EX-99.B(5)(d)
SUB-ADVISORY AGREEMENT
AGREEMENT dated as of June 1, 1991 between Flag Investors Management
Corp., a Maryland corporation (herein called the "Investment Advisor") and
PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware corporation (herein
called the "Sub-Advisor").
WHEREAS, the Investment Advisor is the investment advisor to Alex.
Brown Cash Reserve Fund, Inc., (herein called the "Company"), an open-end,
diversified, management investment company registered under the Investment
Company Act of 1940; and
WHEREAS, the Investment Advisor wishes to retain the Sub-Advisor to
assist the Investment Advisor in providing investment advisory services in
connection with the Company's Tax-Free Series (herein called the "Fund"); and
WHEREAS, the Sub-Advisor is willing to provide such services to the
Investment Advisor upon the conditions and for the compensation set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. Appointment. The Investment Advisor hereby appoints the Sub-Advisor
its sub-advisor with respect to the Fund as provided for in the Investment
Advisory Agreement between the Investment Advisor and the Company dated as of
April 4, 1990 (such Agreement or the most recent successor Advisory Agreement
between such parties is herein called the "Advisory Agreement"). The Sub-Advisor
accepts such appointment and agrees to render the services herein set forth in
the compensation herein provided.
2. Delivery of Documents. The Investment Advisor shall provide to the
Sub-Advisor copies of the Company's most recent prospectus and statement of
additional information (including supplements thereto) which relate to any class
of shares representing interests in the Fund (each such prospectus and statement
of additional information as presently in effect, and as they shall from time to
time be amended and supplemented, is herein respectively called a "Prospectus"
and a "Statement of Additional Information").
3. Sub-Advisory Services to the Fund. Subject to the supervision of the
Investment Advisor, the Sub-Advisor will supervise the day-to-day operations of
the Fund and perform the following services: (i) provide investment research and
credit analysis concerning the Fund's investments, (ii) conduct a continual
program of investment of the Fund's assets, (iii) place orders for all purchases
and sales of the investments made for the Fund, and (iv) maintain the books and
records required in connection with its duties hereunder. In addition, the
Sub-Advisor will keep the Investment Advisor informed of developments materially
affecting the Company. The Sub-Advisor will communicate to the Investment
Advisor on each day that a purchase or sale of a security is effected for the
Fund (i) the name of the issuer; (ii) the amount of the purchase or sale; (iii)
the name of the broker or dealer, if any, through which the purchase or sale
will be effected; (iv) the CUSIP number of the security, if any; and (v) such
other information as the Investment Advisor may reasonably require for purposes
of fulfilling its obligations to the Company under the Advisory Agreement. The
Sub-Advisor will render to the Company's Board of Directors such periodic and
special reports as the Investment Advisor may reasonably request. The
Sub-Advisor will provide the services rendered by it hereunder in accordance
with the Fund's investment objectives, policies and restrictions as stated in
the applicable Prospectus and Statement of Additional Information.
-1-
<PAGE>
4. Brokerage. The Sub-Advisor may place orders pursuant to its
investment determinations for the Fund either directly with the issuer or with
any broker or dealer. In placing orders, the Sub-Advisor will consider the
experience and skill of the firm's securities traders as well as the firm's
financial responsibility and administrative efficiency. The Sub-Advisor will
attempt to obtain the best price and the most favorable execution of its orders.
Consistent with these obligations, the Sub-Advisor may, subject to the approval
of the Board of Directors, select brokers on the basis of the research,
statistical and pricing services they provide to the Fund. A commission paid to
such brokers may be higher than that which another qualified broker would have
charged for effecting the same transaction, provided that the Sub-Advisor
determines in good faith that such transaction is reasonable in terms either of
the transaction or the overall responsibility of the Sub-Advisor to the Fund and
its other clients and that the total commissions paid by the Fund will be
reasonable in relation to the benefits to the Fund over the long-term. In no
instance will portfolio securities be purchased from or sold to the Company's
principal distributor, the Investment Advisor, or any affiliate thereof, except
to the extent permitted by exemptive order of the Securities and Exchange
Commission ("SEC") or by applicable law.
5. Compliance With Laws; Confidentiality. The Sub-Advisor agrees that
it will comply with all applicable rules and regulations of all federal and
state regulatory agencies having jurisdiction aver the Sub-Advisor in
performance of its duties hereunder (hereinafter called the "Rules"). The
Sub-Advisor will treat confidentially and as proprietary information of the
Company all records and information relative to the Company and prior, present
or potential shareholders, and will not use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Company, which
approval shall not be unreasonably withheld and may not be withheld where the
Sub-Advisor may be exposed to civil or criminal contempt proceedings for failure
to comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Company.
6. Control by Company's Board of Directors. Any recommendations
concerning the Fund's investment program proposed by the Sub-Advisor to the Fund
and the Investment Advisor pursuant to this Agreement as well as any other
activities undertaken by the Sub-Advisor on behalf of the Fund pursuant thereto,
shall at all times be subject to any applicable directives of the Board of
Directors of the Company.
7. Services Not Exclusive. The Sub-Advisor's services hereunder are not
deemed to be exclusive, and the Sub-Advisor shall be free to render similar
services to others so long as its services under this Agreement are not impaired
thereby.
8. Books and Records. In compliance with the requirements of Rule 31a-3
of the Rules, the Sub-Advisor hereby agrees that all records which it maintains
for the Company are the property of the Company and further agrees to surrender
promptly to the Company any such records upon the Company's request. The Sub-
Advisor further agrees to preserve, for the periods prescribed by Rule 31a-2,
the records required to be maintained by the Sub-Advisor hereunder pursuant to
Rule 31a-1 of the Rules.
9. Expenses. During the term of this Agreement, the Sub-Advisor will
bear all expenses in connection with the performance of its services under
this Agreement. The Sub-Advisor shall not bear certain other expenses related to
the operation of the Company including, but not limited to: taxes, interest,
brokerage fees and commissions and any extraordinary expense items.
10. Compensation. For the services which the Sub-Advisor will tender to
the Investment Advisor under this Agreement, the Investment Advisor will pay to
the Sub-Advisor on the first day of each month, a fee for the previous month
calculated daily, at an annual rate of .15% of the first $250 million of the
Tax-Free Series' aggregate average daily net assets, .13% of the next $250
million of the Tax-Free Series' aggregate average daily net assets, .11% of the
next $250 million of the Tax-Free Series aggregate daily net assets, .09% of the
next $250 million of the Tax-Free Series' aggregate average daily net assets,
.075% of the next $3 billion of the Tax-Free Series' aggregate average daily net
assets and .06% of that portion of the Tax-Free Series' aggregate average daily
net assets in excess of $4 billion.
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<PAGE>
11. Limitation on Liability. The Sub-Advisor will not be liable for any
error or judgment or mistake of law or for any loss suffered by the Investment
Advisor or by the Company in connection with the matters to which this Agreement
relates, except that it shall be liable to the Investment Advisor for a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations or duties under this Agreement.
12. Duration and Termination. This Agreement shall become effective
with respect to the Fund upon approval of this Agreement by vote of the
outstanding voting securities of the fund and, unless sooner terminated as
provided herein, shall continue with respect to the Fund until June 1, 1993.
Thereafter, if not terminated, this Agreement shall continue with respect to the
Fund for successive annual periods, provided such continuance is specifically
approved at least annually (a) by the vote of a majority of those members of the
Board of Directors of the Company who are not parties to this Agreement or
interested persons of the Company or any such party, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the Board of
Directors of the Company or by vote of a majority of the outstanding voting
securities of the Fund; provided however, that this Agreement may be terminated
with respect to the Fund (i) by the Company at any time, without the payment of
any penalty by the Board of Directors of the Company, (ii) by vote of a majority
of the outstanding voting securities of the Fund, (iii) by the Investment
Advisor, or (iv) by the Sub-Advisor, in all cases on 60-days' written notice to
the Investment Advisor. This Agreement will also immediately terminate in the
event of its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested person" and "assignment" shall have
the same meaning as such terms have in the Investment Company Act of 1940, as
amended.)
13. Amendment of this Agreement. No provision of this Agreement may be
changed, discharged or terminate orally, but only by an instrument in writing
signed by the party against which enforcement of the change, discharge or
termination is sought, and no amendment of this Agreement affecting the Fund
shall be effective until approved by vote of the holders of a majority of the
outstanding voting securities of the Fund.
14. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any provisions
hereof or otherwise affect their construction or effect. If any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder of this Agreement shall not be affected thereby.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed by Delaware
law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officer designated below as of the day and year first above
written.
FLAG INVESTORS MANAGEMENT CORP.
By: /s/ Edward J. Veilleux
-------------------------------
President
PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
By: /s/ Thomas H. Nevin
-------------------------------
President
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<PAGE>
EX-99.B(6)(a)
DISTRIBUTION AGREEMENT
(Containing Plan of Distribution under Rule 12b-1)
THIS AGREEMENT is made as of the 5th day of April
1990 by and between ALEX. BROWN CASH RESERVE FUND, INC., a
Maryland corporation (the "Fund"), and ALEX. & SONS INCORPORATED,
a Maryland corporation ("Alex. Brown").
Recital
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 Fund's Articles of Incorporation ("Articles")
authorizes 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 two series of shares, with a par value of $.001 per share, (such
shares, other than the Institutional Shares shall be referred to collectively as
the "Shares") in two portfolios: the Prime Series Portfolio and the Treasury
Series Portfolio (each of the existing portfolios and any portfolios hereafter
added, other than the Institutional Shares thereof, shall be referred to
collectively as the "Portfolios"); and
WHEREAS, the Fund and Alex. Brown desire to enter an agreement
to provide distribution services for the Fund's Portfolios on the terms and
conditions hereinafter set forth; and
WHEREAS, the payments contemplated by sections 7 and 8 of this
Agreement may be deemed to be the indirect financing of an activity intended to
result in the sale of Fund shares and since the allocation of certain charges
and expenses in section 9 hereof relating to the payment of expenses for
advertisements, promotional material, sales literature and printing and mailing
of prospectuses to other than current Fund shareholders may also be considered
the indirect financing of other activities intended to result in the sale of
Fund shares, this Agreement is intended to be a "written plan" as contemplated
by Rule 12b-1 under the 1940 Act; and
1
<PAGE>
WHEREAS, the Directors who are not "interested persons" of the
Fund shall determine in their sole discretion the selection and nomination of
the Fund's Directors who are not "interested persons";
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. The Fund hereby appoints Alex. Brown
as Distributor of the Fund for the period and on the terms set forth in this
Agreement. Alex. Brown accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Delivery Documents. The Fund has furnished Alex.
Brown with copies properly certified or authenticated of each of
the following:
(a) The Fund's Articles filed with the State
Department of Taxation and Assessment of the State of
Maryland on January 10, 1990 and all amendments
thereto;
(b) The Fund's By-Laws and all amendments
thereto (such By-Laws, as presently in effect and as
they shall from time to time be amended, are herein
called the "By-Laws");
(c) Resolutions of the Fund's Board of
Directors and shareholders authorizing the
appointment of Alex. Brown as the Fund's Distributor
and approving this Agreement;
(d) The Fund's Notification of Registration
Filed Pursuant to Section 8(a) of the 1940 Act on
Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission (the "SEC") on
June 5, 1981;
(e) The Fund's Registration Statement on
Form N-1 under the Securities Act of 1933, as amended
(the "1933 Act") (File No. 2-72658), and under the
1940 Act as filed with the SEC on June 5, 1981
relating to the shares of the Fund and all amendments
thereto; and
(f) The Fund's most recent prospectus and
statement of additional information (such prospectus
and statement of additional information, as presently
in effect and all amendments and supplements thereto,
are herein called the "Prospectus" and "SAI,"
respectively).
2
<PAGE>
The Fund will furnish Alex. Brown from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties as Distributor. Alex. Brown shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as Distributor. Alex. Brown will act as Distributor subject to the supervision
of the Fund's Board of Directors and the following understanding: (i) nothing
herein contained shall be deemed to relieve or deprive the Board of Directors of
the Fund of its responsibility for and control of the conduct of the Fund's
affairs; and (ii) in all matters relating to the performance of this Agreement,
Alex. Brown will act in conformity with the Articles, By-Laws and Prospectus and
SAI of the Fund and with Articles, instructions and directions of the Fund's
Board of Directors and will conform to and comply with the requirements of the
1940 Act and all other applicable Federal or state laws and regulations. In
carrying out its obligations hereunder, Alex. Brown shall:
(a) receive orders for the purchase of the
Fund's shares, accept or reject such orders on behalf
of the Fund in accordance with the Fund's currently
effective Prospectus and SAI and transmit such orders
as are so accepted to the Fund's transfer agent as
promptly as possible;
(b) receive requests for redemption from
holders of the Fund's shares and transmit such
redemption requests to the Fund's transfer agent
as promptly as possible;
(c) respond to inquiries from the Fund's
shareholders concerning the status of their
accounts with the Fund; and
(d) provide to the Fund's Board of
Directors, at least quarterly, a written report of
the amounts expended in connection with all
distribution services rendered pursuant to this
Agreement, including an explanation of the purposes
for which such expenditures were made.
4. Distribution of Shares. Alex. Brown shall be exclusive
distributor of the Fund's shares. It is mutually understood and agreed that
Alex. Brown does not undertake to sell all or any specific portion of the shares
of the Fund. The Fund shall not sell any of its shares except through Alex.
Brown. Notwithstanding the provisions of the foregoing sentence:
3
<PAGE>
(a) the Fund may issue its shares to any
other investment company or personal holding company,
or to the shareholders thereof, in exchange for all
or a majority of the shares or assets of any such
company;
(b) the Fund may issue its shares at their
net asset value to any shareholder of the Fund
purchasing such shares with dividends or other cash
distributions received from the Fund pursuant to an
offer made to all shareholders;
(c) Alex. Brown may enter into shareholder
processing and servicing agreements in accordance
with section 8 hereof;
(d) Alex. Brown may, and when requested by
the Fund shall, suspend its efforts to effectuate
sales of the shares of the Fund at any time when in
the opinion of Alex. Brown or of the Fund no sales
should be made because of market or other economic
considerations or abnormal circumstances of any kind;
(e) the Fund may withdraw the offering of
its shares: (i) at any time with the consent of Alex.
Brown, or (ii) without such consent when so required
by the provisions of any statute or of any order,
rule or regulation of any governmental body having
jurisdiction; and
(f) the price at which the shares may be
sold (the "offering price") shall be the net asset
value per share, which shall be determined in the
manner established from time to time by the Fund's
Board of Directors and as set forth in the Fund's
then current Prospectus and SAI.
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant thereto,
shall at all times be subject to any applicable directives of the Board of
Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, Alex. Brown shall at all times conform to:
(a) all applicable provisions of the 1940
Act and any rules and regulations adopted thereunder;
4
<PAGE>
(b) the provisions of the Registration
Statement of the Fund under the Securities Act of
1933 and the 1940 Act;
(c) the provisions of the Articles of the
Fund;
(d) the provisions of the By-Laws of the
Fund;
(e) the rules and regulations of the
National Association of Securities Dealers, Inc.
("NASD") and all other self-regulatory organizations
applicable to the sale of investment company shares;
and
(f) any other applicable provisions of state
and Federal law.
7. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that Alex. Brown may compensate its investment representatives 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. The total amount of such payments to its
investment representatives during any fiscal year shall not exceed 10% of the
fees received by Alex. Brown from the Fund during such fiscal year.
8. Shareholder Processing and Service Agreements. Alex. Brown
may enter into shareholder processing and service agreements (the "Dealer
Agreements") with any securities dealer ("Securities Dealer") who is registered
under the Securities Exchange Act of 1934 (the "1934 Act") and a member in good
standing of the NASD, who may wish to establish accounts or sub-accounts on
behalf of such Securities Dealer's customers. All Dealer Agreements shall be in
substantially the form of the agreement attached hereto as Exhibit A. Alex.
Brown may enter into shareholder processing and service agreements ("Shareholder
Service Agreements") with persons other than Securities Dealers ("Shareholder
Service Agents") who are not required to be registered under the 1934 Act or
members in good standing of the NASD, who are exempt from registration as a
broker or a dealer under the 1934 Act or who may otherwise lawfully furnish
services to Fund shareholders without registration under the 1934 Act.
Shareholder Service Agreements shall be in substantially the form of the
agreement attached hereto as Exhibit B. Alex. Brown will supervise the Fund's
relations with Securities Dealers and Shareholder Service Agents. Alex. Brown
will make payments to Securities Dealers and Shareholder Service Agents in such
amounts as Alex. Brown may determine from time to time in its discretion
5
<PAGE>
based upon the nature, quality and type of services being provided by the
Securities Dealer or Shareholder Service Agent; the cost to the Securities
Dealer or Shareholder Service Agent of providing such services; the amount of
assets being invested in shares of the Fund; and the contribution being made by
the Securities Dealer or Shareholder Service Agent toward reducing the expense
ratio. The formula or basis of the compensation shall be reviewed from time to
time by the Fund's Board of Directors; however, in no event shall such payments
exceed, on an annual basis, .25% of the average daily net asset value of all
shares held by the customers of each such Securities Dealer or Shareholder
Service Agent. [Such payments shall be borne by Alex. Brown and the Fund in such
proportion as may be determined by Alex. Brown; provided that the Fund's portion
of such fee shall not exceed 50% of the total fees payable to the Securities
Dealer or Shareholder Service Agent; and further provided that Alex. Brown shall
in no case make payments to any Securities Dealer or Shareholder Service Agent
exceeding .15% of the average daily net asset value of all shares held by
customers of each such Securities Dealer or Shareholder Service Agent. The
actual payments by Alex. Brown and the Fund and the basis for calculating such
payments shall be reported quarterly to the Board of Directors of the Fund.]
9. Expenses. The expenses connected with the Fund
shall be allocable between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its
expense and without cost to the Fund, the services of
personnel to the extent that such services are
required to carry out its obligations under this
Agreement.
(b) Alex. Brown shall bear the expenses of
printing and distributing Prospectuses and SAI (other
than those Prospectuses and SAI distributed to
shareholders of the Fund) and any other promotional
or sales literature used by Alex. Brown or furnished
by Alex. Brown to investors, Securities Dealers or
Shareholder Service Agents 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.
[(c)Alex. Brown and the Fund shall bear the
portion of the fees payable to Securities Dealers
and Shareholder Service Agents as set forth in
section 8 above.]
6
<PAGE>
(d) The Fund assumes and shall pay or cause
to be paid all other expenses of the Fund (other than
those expressly assumed by the Fund's investment
advisor and sub-advisor), including, without
limitation: the fees of the Fund's investment
advisor; 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 SAI 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; 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 insure to its benefit; extraordinary
expenses (including, but not limited to, legal claims
and liabilities and litigation costs and any
indemnification related thereto); and all other
charges and costs of the Fund's operation unless
otherwise explicitly provided herein.
7
<PAGE>
10. Delegation of Responsibilities. Alex. Brown may, but shall
not be under any duty to, perform services on behalf of the Fund 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 Fund and Alex. Brown'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
Alex. Brown of any Fund expense that Alex. Brown is not required to pay or
assume under this Agreement shall not relieve Alex. Brown of any of its
obligations to the Fund nor obligate Alex. Brown to pay or assume any similar
Fund expenses on any subsequent occasions.
11. Compensation. For the services to be rendered and the
expenses assumed by Alex. Brown, the Fund shall pay to Alex. Brown monthly
compensation at an annual rate of .25% of the aggregate daily net assets of the
Fund. Except as hereinafter set forth, compensation under this Agreement shall
be calculated and accrued daily and the amounts of the daily accruals shall be
paid monthly. If this Agreement becomes effective subsequently 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 calculations of the fees as set forth above. Subject to the
provisions of section 12 hereof, payment of Alex. Brown's compensation for the
preceding month shall be made as promptly as possible after completion of the
computations contemplated in section 12 hereof.
12. Expense Limitation. In the event the operating expenses of
the Fund, including all investment advisory and distribution fees, for any
fiscal year ending on a date on which this Agreement is in effect exceed either
(i) the expense limitations applicable to either of the Portfolios of the Fund
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,
Alex. Brown shall reduce its distribution 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. In the case of limitations described in
clause (ii) above, the obligation of Alex. Brown to reimburse the Fund is
limited to the fees actually received by Alex. Brown for such fiscal year. Such
reduction, if any, shall be computed and accrued daily, shall be settled on a
monthly basis and shall be based upon the expense
8
<PAGE>
limitation applicable to each of the Portfolios of the Fund 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 is the largest reduction in Alex. Brown's fee shall be
applicable. For the purposes of this paragraph, Alex. Brown'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 distribution fee which
would otherwise be payable to Alex. Brown for such fiscal year were it not for
this section 12 and the denominator of which is the sum of all investment
advisory and distribution fees which would otherwise be payable by the Fund or
Portfolio, whichever is applicable, were it not for the expense limitation
provisions of any investment advisory or distribution agreement to which the
Fund is a party. The foregoing expense limitations imposed by the state
securities laws and regulations shall be applied to each of the Fund's
Portfolios 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 Portfolios on a
combined basis.
13. Non-Exclusivity. The services of Alex. Brown to the Fund
are not to be deemed to be exclusive, and Alex. Brown shall be free to render
distribution or other services to others (including other investment companies)
and to engage in other activities. It is understood and agreed that officers or
directors of Alex. Brown may serve as officers or directors of the Fund, and
that officers or directors of the Fund may serve as officers or directors of
Alex. Brown to the extent permitted by law; and that the officers and directors
of Alex. Brown 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.
14. 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 16 hereof, for two years from the date hereof.
15. 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 each of the Portfolios (as
defined in Section 2(a)(42) of the 1940 Act), and
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<PAGE>
(b) by the affirmative vote of a majority of
the directors who are not parties to this Agreement
or "interested persons" (as defined by the 1940 Act)
of any such party and have no direct or indirect
financial interest in the operation of this Agreement
or any agreement related to this Agreement, by votes
cast in person at a meeting specifically called for
the purpose of voting on such approval.
Notwithstanding any provision of this paragraph to the contrary, if the
shareholders of one Portfolio fail to approve this Agreement, Alex. Brown may
continue to serve as distributor to the Portfolio whose shareholders approved
this Agreement and, in the manner and to the extent permitted by the 1940 Act,
to the Portfolio which did not approve this Agreement.
16. 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 members of the Board of Directors of the Fund who
are not "interested persons" of the Fund and have no direct or indirect
financial interest in the operation, of this Agreement or in any agreement
related to this Agreement, by vote of a majority of either Portfolio's
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act),
or by Alex. Brown, 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.
Should Alex. Brown cease to have a distribution agent in 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.
17. Amendments.
(a) This Agreement may be amended by the parties hereto only
if such amendment is specifically approved (i) by the Board of Directors of the
Fund or by the vote of a majority of outstanding voting securities of each of
the Fund's Portfolios, and (ii) by a majority of those trustees who are not
parties to this Agreement or "interested persons" of any such party, which vote
must be cast in person at a meeting called for the purpose of voting on such
approval; provided, however, that if any such amendment is material as such word
is used in Rule 12b-1 under the 1940 Act, such amendment shall be approved in
the manner prescribed in section 15 for the annual approval of the continuation
of this Agreement.
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<PAGE>
(b) In the event that this Agreement is proposed to
be amended to increase materially the amount to be spent for distribution, such
amendment will not be effected without shareholder approval.
18. Liability of the Distributor. In the performance of its
duties hereunder, Alex. Brown 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 Alex.
Brown shall not be liable for any act or omission which loss does not constitute
willful misfeasance, bad faith or gross negligence on the part of Alex. Brown or
reckless disregard by Alex. Brown of its duties under this Agreement.
19. 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 for this purpose and that of Alex. Brown shall be 135 East Baltimore
Street, Baltimore, Maryland 21202.
20. Questions of Interpretation. This Agreement shall be
implemented and continued in a manner consistent with the provisions of the 1940
Act. 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.
11
<PAGE>
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 & SONS INCORPORATED
By /s/ Richard T. Hale
-----------------------------
Attest:
/s/ Nancy Palmer
- ----------------------------
Assistant Secretary
ALEX. BROWN CASH RESERVE FUND,
INC.
By /s/ Edward J. Veilleux
------------------------------
Executive Vice President
Attest:
/s/ William H. Kleh
- ----------------------------
Secretary
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<PAGE>
EX-99.B(6)(b)
DEALER AGREEMENT
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor of Alex. Brown Cash Reserve Fund, Inc., a
Maryland corporation (the "Fund"). The Fund is an open-end, diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund offers its shares, $.001 par value,
to the public in accordance with the terms and conditions contained in the
Prospectus and Statement of Additional Information (the "Prospectus and SAI") of
the Fund. Presently, the Shares are divided into two series which represent
interests in two investment portfolios, as more fully described in the Fund's
current Prospectus and SAI - the Prime Series and the Treasury Series. The
Shares of both portfolios, other than Institutional Shares, are referred to
herein as the "Shares." The terms "Prospectus" and "SAI" as used herein refer to
the prospectus and statement of additional information on file with the
Securities and Exchange Commission ("SEC") which is part of the most recent
registration statement effective from time to time under the Securities Act of
1933, as amended (the "1933 Act").
In connection with the offering of Shares to the public, you may place
orders for purchase and redemption of Shares for and on behalf of your customers
on the following terms and conditions:
1. You are hereby authorized to (i) place orders directly with Alex.
Brown for purchases of Shares and (ii) tender Shares to Alex. Brown for
redemption, in each case subject to the terms and conditions set forth in the
Prospectus and SAI.
2. No person is authorized to make any representations concerning the
Fund or the Shares except those contained in the Prospectus and SAI and in such
printed information as Alex. Brown may subsequently prepare. No person is
authorized to distribute any sales material relating to the Fund without the
prior written approval of Alex. Brown.
3. You agree to undertake from time to time certain shareholder
servicing activities for customers of yours who have purchased Shares and who
use your facilities to communicate with the Fund or to effect redemptions or
additional purchases of the Shares. In consideration of the services and
facilities provided by you hereunder, the Fund and Alex. Brown will pay to you
the fee set forth in the attached Schedule based upon the average daily net
asset value of the Fund Shares held of record by you from time to time on behalf
of customers (the "Customers Fund
-1-
<PAGE>
Shares"), which fee will be computed daily and payable monthly. For purposes of
determining the fees payable under this computation, the average daily net asset
value of the Customers Fund Shares will be computed in the manner specified in
the Fund's registration statement (as the same is in effect from time to time)
in connection with the computation of the net asset value of Shares for purposes
of purchases and redemptions. The fee rate stated above may be prospectively
increased or decreased by Alex. Brown, in its sole discretion, at any time upon
notice to you. Further, Alex. Brown may, in its discretion and without notice,
suspend or withdraw the sale of Shares, including the sale of such Shares to you
for the account of any customer or customers. Alex. Brown represents to you that
this Agreement and the payment of such service fees has been authorized and
approved by the Fund.
4. You agree to comply with the provisions contained in the 1933 Act
governing the distribution of Prospectuses to persons to whom you offer Shares.
You further agree to deliver, upon our request, copies of any amended Prospectus
to customers whose Shares you are holding as record owner and to deliver to such
customers copies of the annual and interim financial reports and proxy
solicitation materials of the Fund. We agree to furnish to you as many copies of
the Prospectus, annual and interim financial reports and proxy solicitation
materials as you may reasonably request.
5. You represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. You agree that you will not offer Shares
to persons in any jurisdiction in which you may not lawfully make such offer due
to the fact that you have not registered under, or are not exempt from, the
applicable registration or licensing requirements of such jurisdiction.
6. The Fund has registered an indefinite number of Shares under the
1933 Act. Upon application to us, we will inform you as to the states or other
jurisdictions in which we believe the Shares have been qualified for sale under,
or are exempt from the requirements of, the respective securities laws of such
states, but we assume no responsibility or obligation as to your right to sell
Shares in any jurisdiction. We will file with the Department of State in New
York a Further State Notice with respect to the Shares, if necessary.
7. The Fund shall have full authority to take such action as it deems
advisable in respect of all matters pertaining to the offering of the Shares,
including the right in its discretion, without notice, to suspend sales or
withdraw the offering of Shares entirely.
8. You will (i) maintain all records required by law relating to
transactions in Shares of the Fund and, upon request by the Fund, promptly make
such of these records available to the
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<PAGE>
Fund as the Fund may reasonably request in connection with its operations; and
(ii) promptly notify the Fund if you experience any difficulty in maintaining
the records described in the foregoing clauses in an accurate and complete
manner.
9. Alex. Brown and the Fund shall be under no liability to you except
for lack of good faith and for obligations expressly assumed by them hereunder.
In carrying out your obligations, you agree to act in good faith and without
negligence. Nothing contained in this agreement is intended to operate as a
waiver by Alex. Brown or you of compliance with any provision of the 1940 Act,
the 1933 Act, the Securities Exchange Act of 1934, as amended, or the rules and
regulations promulgated by the SEC.
10. This Agreement may be terminated by either party, without penalty,
upon ten (10) days' notice to the other party and shall automatically terminate
in the event of its "assignment," as defined in the 1940 Act. This Agreement may
also be terminated at any time without penalty by the vote of a majority of the
members of the Board of Directors of the Fund who are not "interested persons"
(as such phrase is defined in the 1940 Act) and have no direct or indirect
financial interest in the operation of the Distribution Agreement between the
Fund and Alex. Brown or any related agreement, or by the vote of a majority of
the outstanding voting securities of the Fund.
11. All communications to us should be sent to:
ALEX. BROWN & SONS INCORPORATED
135 East Baltimore Street
Baltimore, MD 21202
Any notice to you shall be duly given if mailed or telegraphed to you
at the address specified below.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a copy of this Agreement.
ALEX. BROWN & SONS INCORPORATED
By______________________________
(Authorized Signature)
Confirmed and accepted:
Firm Name:_______________________
By:______________________________
Address:_________________________
Date:____________________________
-3-
<PAGE>
EX-99.B(6)(c)
EXHIBIT B
SHAREHOLDER SERVICE AGENT AGREEMENT
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor of Alex. Brown Cash Reserve Fund, Inc., a
Maryland corporation (the "Fund"). The Fund is an open-end, diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund offers its shares, $.001 par value,
to the public in accordance with the terms and conditions contained in the
Prospectus and Statement of Additional Information (the "Prospectus and SAI") of
the Fund. Presently, the shares are divided into two series which represent
interests in two investment portfolios, as more fully described in the Fund's
current Prospectus and SAI - the Prime Series and the Treasury Series. The
shares of both portfolios, other than the institutional shares, are referred to
herein as the "Shares." The terms "Prospectus" and "SAI" as used herein refer to
the prospectus and statement of additional information on file with the
Securities and Exchange Commission ("SEC") which is a part of the most recent
registration statement effective from time to time under the Securities Act of
1933, as amended (the "1933 Act").
1. You agree to provide the following support services to Clients who
may from time to time beneficially own Shares: (i) aggregating and processing
purchase and redemption requests for Shares from Clients and placing net
purchase and redemption orders with Alex. Brown; (ii) providing Clients with a
service that invests the assets of their accounts in Shares pursuant to specific
or preauthorized instructions; (iii) processing dividend payments from the Fund
on behalf of Clients; (iv) providing information periodically to Clients showing
their positions in Shares; (v) arranging for bank wires; (vi) responding to
Client inquiries relating to the services performed by you; (vii) providing
sub-accounting with respect to Shares beneficially owned by Clients or providing
the information to the Fund's transfer agent necessary for sub-accounting;
(viii) if required by law or any agreement with your Client, forwarding
shareholder communications from the Fund (such as proxies, shareholder reports,
annual and semi-annual financial statements and dividend, distribution and tax
notices) to Clients; and (ix) providing such other similar services as Alex.
Brown may reasonably request to the extent you are permitted to do so under
1
<PAGE>
applicable statutes, rules or regulations. You will provide to Clients a
schedule of any fees that you may charge to them relating to the investment of
their assets in Shares.
2. Shares purchased by you on behalf of your Clients will be registered
in your name or in the name of your nominee. The Client will be the beneficial
owner of the Shares purchased and held by you in accordance with the Client's
instructions and the Client may exercise all rights of a shareholder of the
Fund. You agree to transmit to the Fund's transfer agent in a timely manner all
purchase orders and redemption requests of your Clients, if required by law or
any agreement with your Client, and to forward to each Client all proxy
statements, periodic shareholder reports and other communications received from
the Fund by you on behalf of your Clients.
3. You agree to transmit to the Fund's transfer agent, on the date such
purchase orders are effective, federal funds in an amount equal to the amount of
all purchase orders placed by you on behalf of your Clients and accepted by the
Fund (net of any redemption orders placed by you on behalf of your Clients). In
the event that the Fund fails to receive such federal funds on such date (other
than through the fault of the Fund or its transfer agent), you shall indemnify
the Fund against any expense (including overdraft charges) incurred by the Fund
as a result of its failure to receive such federal funds.
4. You agree to make available to the Fund, upon the Fund's request,
such information relating to your Clients who are beneficial owners of Shares
and their transactions in Shares as may be required by applicable laws and
regulations.
5. You agree to transfer record ownership of a Client's Shares to the
Client promptly upon the request of the Client. In addition, record ownership
will be promptly transferred to the Client in the event that the person or
entity ceases to be your Client.
6. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
services to Clients.
7. For all purposes of this Agreement you will be deemed to be an
independent contractor and will have no authority to act as agent for Alex.
Brown or the Fund in any manner or in any respect. By your written acceptance of
this Agreement, you agree to and do release, indemnify and hold Alex. Brown, the
Fund and its transfer agent harmless from and against any and all direct or
indirect liabilities or losses resulting from requests,
2
<PAGE>
directions, actions or inactions of or by you or your officers, employees, or
agents regarding your responsibilities hereunder or, the purchase, redemption,
transfer or registration of Shares by or on behalf of Clients. You and your
employees will, upon request, be available during normal business hours to
consult with Alex. Brown or its designees concerning the performance of your
responsibilities under this Agreement.
8. In consideration of the services and facilities provided by you
hereunder, the Fund and Alex. Brown will pay to you, and you will accept as full
payment therefor, the fee set forth on the attached schedule based upon the
average daily net asset value of the Shares held of record by you from time to
time on behalf of Clients (the "Clients' Fund Shares"), which fee will be
computed daily and payable monthly. For purposes of determining the fees payable
under this computation, the average daily net asset value of the Clients' Fund
Shares will be computed in the manner specified in the Fund's registration
statement (as the same is in effect from time to time) in connection with the
computations of the net asset value of Shares for purposes of purchases and
redemptions. The fee rate stated above may be prospectively increased or
decreased by Alex. Brown, in its sole discretion, at any time upon notice to
you. Further, Alex. Brown may, in its discretion and without notice, suspend or
withdraw the sale of Shares, including the sale of such Shares to you for the
account of any Client or Clients. Alex. Brown represents to you that this
Agreement and the payment of such service fees has been authorized and approved
by the Fund.
9. You will (i) maintain all records required by law relating to
transactions in Shares of the Fund and, upon request by the Fund, promptly make
such of these records available to the Fund as the Fund may reasonably request
in connection with its operations; and (ii) promptly notify Alex. Brown if you
experience any difficulty in maintaining the records described in the foregoing
clauses in an accurate and complete manner.
10. Except as may be provided in a separate written agreement between
Alex. Brown and you, neither you nor any of your employees or agents are
authorized to assist in distribution of the Shares to the public or to make any
representation to your clients concerning Shares except those contained in the
then current Prospectus and SAI, copies of which will be supplied to you by the
Fund. Except as set forth in this Agreement, you shall have no authority to act
as agent for the Fund or Alex. Brown. Neither the Fund nor Alex. Brown will be
party, nor will they be represented as a party, to any agreement that you may
enter into with your Clients and neither the Fund nor Alex. Brown shall
participate, directly or indirectly, in any compensation that you may receive
from your Clients in connection with your acting on their behalf with the Fund.
3
<PAGE>
11. Alex. Brown is required by law to provide to the Board of Directors
of the Fund, and the Board of Directors of the Fund is required to review, at
least quarterly, a written report of the amounts expended under its agreement
with the Fund and the purposes for which such expenditures were made. In that
connection, you will furnish us or our designees with such information as we or
they may reasonably request (including, without limitation, periodic
certifications confirming the provision to Clients of the services described
herein), and will otherwise cooperate with Alex. Brown and its designees
(including, without limitation, any auditors designated by us), in connection
with the preparation of reports to the Fund's Board of Directors concerning this
Agreement and the monies paid or payable by us pursuant hereto, as well as any
other reports or filings that may be required by law.
12. You may enter into other similar servicing agreements
with any person or persons without Alex. Brown's consent.
13. Alex. Brown and the Fund shall be under no liability to you except
for lack of good faith and for obligations expressly assumed by Alex. Brown
hereunder. In carrying out your obligations, you agree to act in good faith and
without negligence. Nothing contained in this Agreement is intended to operate
as a waiver by Alex. Brown or you of compliance with any provision of the 1940
Act, the 1933 Act, the Securities Exchange Act of 1934, as amended, the rules
and regulations promulgated by the Securities and Exchange Commission
thereunder, or any other applicable law.
14. This Agreement may be terminated by either party, without penalty,
upon ten (10) days' notice to the other party and shall automatically terminate
in the event of its assignment, as defined in the 1940 Act. This Agreement may
also be terminated at any time without penalty by the vote of a majority of the
members of the Board of Directors of the Fund who are not "interested persons"
(as such phrase is defined in the 1940 Act) and have no direct or indirect
financial interest in the operation of the Distribution Agreement between the
Fund and Alex. Brown or any related agreement, or by the vote of a majority of
the outstanding voting securities of the Fund.
15. All communications to us should be sent to:
ALEX. BROWN & SONS INCORPORATED
135 East Baltimore Street
Baltimore, MD 21202
Any notice to you shall be duly given if mailed or telegraphed to you
at the address specified by you below.
4
<PAGE>
16. This Agreement shall become effective as of the date when it is
executed and dated below by you. This Agreement and all the rights and
obligations of the parties hereunder shall be governed by and construed under
the laws of the State of Maryland.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter and return it to us.
ALEX. BROWN & SONS INCORPORATED
By_______________________________
(Authorized Signature)
Confirmed and accepted:
Name:____________________________
By:______________________________
Address:_________________________
Date:____________________________
5
<PAGE>
EX-99.B(6)(d)
ALEX. BROWN CASH RESERVE FUND, INC.
INSTITUTIONAL SHARES
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of the 4th day of April, 1990 by and
between ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the
"Fund"), and ALEX. BROWN & SONS INCORPORATED, a Maryland corporation ("Alex.
Brown").
Recital
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 Fund's Articles of Incorporation ("Articles")
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 two series of shares, each with a par value of $.001 per share,
representing interests in two portfolios: the Prime Series Portfolio and the
Treasury Series Portfolio (each of the existing portfolios and any portfolios
hereafter added shall be referred to collectively as the "Portfolios"); and
WHEREAS, the Fund's Board of Directors has further authorized
the creation of an institutional class of shares of each Portfolio; and
WHEREAS, the Fund and Alex. Brown desire to enter an agreement
to provide distribution services for the institutional class of shares of the
Fund's Portfolios (collectively, the "Institutional Shares") on the terms and
conditions hereinafter set forth; and
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
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1. Appointment. The Fund hereby appoints Alex. Brown as
Distributor of the Institutional Shares for the period and on the terms set
forth in this Agreement. Alex. Brown accepts such appointment and agrees to
render the services herein set forth.
2. Delivery Documents. The Fund has furnished Alex. Brown with
copies properly certified or authenticated of each of the following:
(a) The Fund's Articles filed with the State
Department of Assessments and Taxation of the State
of Maryland on January 10, 1990 and all amendments
thereto;
(b) The Fund's By-Laws and all amendments
thereto (such By-Laws, as presently in effect and as
they shall from time to time be amended, are herein
called the "By-Laws");
(c) Resolutions of the Fund's Board of
Directors and shareholders authorizing the
appointment of Alex. Brown as the Distributor of the
Institutional Shares and approving this Agreement;
(d) The Fund's Notification of Registration
Filed Pursuant to Section 8(a) of the 1940 Act on
Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission (the "SEC") on
June 5, 1981;
(e) The Fund's Registration Statement on
Form N-1 under the Securities Act of 1933, as amended
(the "1933 Act") (File No. 2-72658), and under the
1940 Act as filed with the SEC on June 5, 1981
relating to the shares of the Fund and all amendments
thereto; and
(f) The Fund's most recent prospectus and
statement of additional information (such prospectus
and statement of additional information, as presently
in effect and all amendments and supplements thereto,
are herein called the "Prospectus" and "SAI,"
respectively).
The Fund will furnish Alex. Brown from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
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3. Duties as Distributor. Alex. Brown shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as Distributor. Alex. Brown will act as Distributor subject to the supervision
of the Fund's Board of Directors and the following understanding: (i) nothing
herein contained shall be deemed to relieve or deprive the Board of Directors of
the Fund of its responsibility for and control of the conduct of the Fund's
affairs; and (ii) in all matters relating to the performance of this Agreement,
Alex. Brown will act in conformity with the Articles, By-Laws and Prospectus and
SAI of the Fund and with the instructions and directions of the Fund's Board of
Directors and will conform to and comply with the requirements of the 1940 Act
and all other applicable Federal or state laws and regulations. In carrying out
its obligations hereunder, Alex. Brown shall:
(a) receive orders for the purchase of the
Fund's Institutional Shares, accept or reject such
orders on behalf of the Fund in accordance with the
Fund's currently effective Prospectus and SAI and
transmit such orders as are so accepted to the Fund's
transfer agent as promptly as possible;
(b) receive requests for redemption from
holders of the Fund's Institutional Shares and
transmit such redemption requests to the Fund's
transfer agent as promptly as possible; and
(c) respond to inquiries from the holders of
the Fund's Institutional Shares concerning the status
of their accounts with the Fund.
4. Distribution of Institutional Shares. Alex. Brown shall be
exclusive distributor of the Institutional Shares. It is mutually understood and
agreed that Alex. Brown does not undertake to sell all or any specific portion
of Institutional Shares. The Fund shall not sell any of its Institutional Shares
except through Alex. Brown. Notwithstanding the provisions of the foregoing
sentence:
(a) the Fund may issue its Institutional
Shares to any other investment company or personal
holding company, or to the shareholders thereof, in
exchange for all or a majority of the shares or
assets of any such company;
(b) the Fund may issue its Institutional
Shares at their net asset value to any shareholder of
the Fund purchasing such shares with dividends or
other cash distributions received from the Fund
pursuant to an offer made to all shareholders of the
Institutional Shares class of either Portfolio;
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(c) Alex. Brown may enter into shareholder
processing and servicing agreements in accordance
with section 8 hereof;
(d) Alex. Brown may, and when requested by
the Fund shall, suspend its efforts to effectuate
sales of the Institutional Shares at any time when in
the opinion of Alex. Brown or of the Fund no sales
should be made because of market or other economic
considerations or abnormal circumstances of any kind;
(e) the Fund may withdraw the offering of
the Institutional Shares: (i) at any time with the
consent of Alex. Brown, or (ii) without such consent
when so required by the provisions of any statute or
of any order, rule or regulation of any governmental
body having jurisdiction; and
(f) the price at which the Institutional
Shares may be sold (the "offering price") shall be
the net asset value per share, which shall be
determined in the manner established from time to
time by the Fund's Board of Directors and as set
forth in the Fund's then current Prospectus and SAI.
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant thereto,
shall at all times be subject to any applicable directives of the Board of
Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, Alex. Brown 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 the 1940 Act;
(c) the provisions of the Articles of the
Fund;
(d) the provisions of the By-Laws of the
Fund;
(e) the rules and regulations of the
National Association of Securities Dealers, Inc.
("NASD") and all other self-regulatory organizations
applicable to the sale of investment company shares;
and
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(f) any other applicable provisions of state
and Federal law.
7. Expenses. The expenses connected with the Institutional
Shares shall be allocable between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its
expense and without cost to the Fund, the services of
personnel to the extent that such services are
required to carry out its obligations under this
Agreement.
(b) Alex. Brown shall bear the expenses of
printing and distributing Prospectuses and SAI (other
than those Prospectuses and SAI distributed to
holders of Institutional Shares of the Fund) and any
other promotional or sales literature used by Alex.
Brown or furnished by Alex. Brown to investors in
connection with the public offering of the
Institutional Shares of the Fund, the expenses of
advertising in connection with such public offering
and all legal expenses in connection with the
foregoing.
(c) The Fund assumes and shall pay or cause
to be paid all other expenses of the Fund (other than
those expressly assumed by the Fund's investment
advisor and sub-advisor), including, without
limitations the fees of the Fund's investment
advisor; 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 SAI 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
5
<PAGE>
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 insure 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.
8. Delegation of Responsibilities. Alex. Brown may, but shall
not be under any duty to, perform services on behalf of the Fund 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 Fund and Alex. Brown'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
Alex. Brown of any Fund expense that Alex. Brown is not required to pay or
assume under this Agreement shall not relieve Alex. Brown of any of its
obligations to the Fund nor obligate Alex. Brown to pay or assume any similar
Fund expenses on any subsequent occasions.
9. Compensation. Alex. Brown shall receive no compensation for
the services to be rendered and the expenses assumed by it pursuant to this
Agreement.
10. Non-Exclusivity. The services of Alex. Brown to the Fund
are not to be deemed to be exclusive, and Alex. Brown shall be free to render
distribution or other services to others (including other investment companies)
and to engage in other activities. It is understood and agreed that officers or
directors of Alex. Brown may serve as officers or directors of the Fund, and
that officers or directors of the Fund may serve as officers or directors of
Alex. Brown to the extent permitted by law; and that the officers and directors
of Alex. Brown 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:
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(a)(i) by the Fund's Board of Directors or
(ii) by the vote of a majority of the outstanding
voting securities of the class of Institutional
Shares of each of the Portfolios (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" (as defined by the 1940 Act)
of any such party and have no direct or indirect
financial interest in the operation of this Agreement
or any agreement related to this Agreement, by votes
cast in person at a meeting specifically called for
the purpose of voting on such approval.
Notwithstanding any provision of this paragraph to the contrary, if the holders
of the class of Institutional Shares of one Portfolio fail to approve this
Agreement, Alex. Brown may continue to serve as distributor to the class of
Institutional Shares of the Portfolio whose holders approved this Agreement and,
in the manner and to the extent permitted by the 1940 Act, to the class of
Institutional Shares of the Portfolio which did not approve this Agreement.
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 members of the Board of Directors of the Fund who
are not "interested persons" of the Fund and have no direct or indirect
financial interest in the operation of this Agreement or in any agreement
related to this Agreement, by vote of a majority of the class of Institutional
Shares of either Portfolio's outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act), or by Alex. Brown, 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.
Should Alex. Brown cease to have a distribution agent in the
Institutional Shares of the Fund, the Fund will cease to use the words "Alex.
Brown" or any trademark or identifying logotype indicating that the
Institutional Shares of the Fund are distributed or administered by or otherwise
connected with Alex. Brown.
14. Amendments.
(a) This Agreement may be amended by the parties hereto only
if such amendment is specifically approved (i) by the Board of Directors of the
Fund or by the vote of a majority of outstanding voting securities of the
Institutional Shares class of each of the Fund's Portfolios, and (ii) by a
majority of those directors who are not parties to this Agreement or "interested
persons" of any such party, which vote must be
7
<PAGE>
cast in person at a meeting called for the purpose of voting on such approval;
provided, however, that if any such amendment is " material" as such word is
used in Rule 12b-1 under the 1940 Act, such amendment shall be approved in the
manner prescribed in section 12 for the annual approval of the continuation of
this Agreement.
(b) In the event that this Agreement is proposed to
be amended to increase materially the amount to be spent for distribution, such
amendment will not be effected without shareholder approval.
15. Liability of the Distributor. In the performance of its
duties hereunder, Alex. Brown 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 Alex.
Brown shall not be liable for any act or omission which loss does not constitute
willful misfeasance, bad faith or gross negligence on the part of Alex. Brown or
reckless disregard by Alex. Brown of its duties under this Agreement.
16. 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 for this purpose and that of Alex. Brown shall be 135 East Baltimore
Street, Baltimore, Maryland 21202.
17. Questions of Interpretation. This Agreement shall be
implemented and continued in a manner consistent with the provisions of the 1940
Act. 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.
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<PAGE>
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 & SONS INCORPORATED
By /s/ Robert T. Hale
---------------------------
Director
Attest:
/s/ Nancy Palmer
- ---------------------------
Assistant Secretary
ALEX. BROWN CASH RESERVE
FUND, INC.
By /s/ Edward J. Veilleux
-----------------------------
Executive Vice President
Attest:
/s/ William H. Kleh
- ----------------------------
Secretary
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EX-99.B(6)(e)
DISTRIBUTION AGREEMENT
(Containing Plan of Distribution under Rule 12b-1)
ALEX. BROWN CASH RESERVE FUND, INC. - TAX-FREE SERIES
THIS AGREEMENT is made as of the 5th day of October, 1990 by
and between ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the
"Fund"), and ALEX. BROWN & SONS INCORPORATED, a Maryland corporation ("Alex.
Brown").
Recital
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 Fund's Articles of Incorporation ("Articles")
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 per share,
representing interests in three portfolios: the Prime Series Portfolio, the
Treasury Series Portfolio and the Tax-Free Series Portfolio; and
WHEREAS, the Fund and Alex. Brown desire to enter an agreement
to provide distribution services for the shares of the Tax-Free Series Portfolio
of the Fund (the "Shares") on the terms and conditions hereinafter set forth;
and
WHEREAS, the payments contemplated by sections 7 and 8 of this
Agreement may be deemed to be the indirect financing of an activity intended to
result in the sale of Shares and since the allocation of certain charges and
expenses in section 9 hereof relating to the payment of expenses for
advertisements, promotional material, sales literature and printing and mailing
of prospectuses to other than current Fund shareholders may also be considered
the indirect financing of other activities intended to result in the sale of
Shares, this Agreement is intended to be a "written plan" as contemplated by
Rule 12b-1 under the 1940 Act; and
WHEREAS, the Directors who are not "interested persons" of the
Fund shall determine in their sole discretion the
1
<PAGE>
selection and nomination of the Fund's Directors who are not
"interested persons";
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. The Fund hereby appoints Alex. Brown
as Distributor of the Shares of the Tax-Free Series Portfolio of
the Fund for the period and on the terms set forth in this
Agreement. Alex. Brown accepts such appointment and agrees to
render the services herein set forth, for the compensation herein
provided.
2. Delivery Documents. The Fund has furnished Alex.
Brown with copies properly certified or authenticated of each of
the following:
(a) The Fund's Articles of Incorporation
filed with the State Department of Taxation and
Assessment of the State of Maryland on February 15,
1990 and all amendments thereto;
(b) The Fund's By-Laws and all amendments
thereto (such By-Laws, as presently in effect and as
they shall from time to time be amended, are herein
called the "By-Laws");
(c) Resolutions of the Fund's Board of
Directors and shareholders authorizing the
appointment of Alex. Brown as the Fund's
Distributor for the Shares and approving this
Agreement;
(d) The Fund's Notification of Registration
Filed Pursuant to Section 8(a) of the 1940 Act on
Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission, (the "SEC") on
June 5, 1981;
(e) The Fund's Registration Statement on
Form N-1 under the Securities Act of 1933, as amended
(the "1933 Act") (File No. 2-72658), and under the
1940 Act as filed with the SEC on June 5, 1981
relating to the shares of the Fund, and all
amendments thereto; and
(f) The Fund's most recent prospectus and
statement of additional information with respect to
the Tax-Free Series Portfolio (such prospectus and
statement of additional information, as
2
<PAGE>
presently in effect and all amendments and
supplements thereto, are herein called the
"Prospectus" and "SAI," respectively).
The Fund will furnish Alex. Brown from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties as Distributor. Alex. Brown shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as Distributor. Alex. Brown will act as Distributor subject to the supervision
of the Fund's Board of Directors and the following understanding: (i) nothing
herein contained shall be deemed to relieve or deprive the Board of Directors of
the Fund of its responsibility for and control of the conduct of the Fund's
affairs; and (ii) in all matters relating to the performance of this Agreement,
Alex. Brown will act in conformity with the Articles, By-Laws and Prospectus and
SAI of the Fund and with articles, instructions and directions of the Fund's
Board of Directors and will conform to and comply with the requirements of the
1940 Act and all other applicable Federal or state laws and regulations. In
carrying out its obligations hereunder, Alex. Brown shall:
(a) receive orders for the purchase of Shares, accept
or reject such orders on behalf of the Fund in accordance with
the Fund's currently effective Prospectus and SAI relating to
the Tax-Free Series Portfolio and transmit such orders as are
so accepted to the Fund's transfer agent as promptly as
possible;
(b) receive requests for redemption from holders
of the Shares and transmit such redemption requests to
the Fund's transfer agent as promptly as possible;
(c) respond to inquiries from the Fund's
shareholders concerning the status of their accounts
with the Tax-Free Series Portfolio of the Fund; and
(d) provide to the Fund's Board of Directors, at
least quarterly, a written report of the amounts expended in
connection with all distribution services rendered pursuant to
this Agreement, including an explanation of the purposes for
which such expenditures were made.
4. Distribution of Shares. Alex. Brown shall be exclusive
distributor of the Shares. It is mutually understood and agreed that Alex. Brown
does not undertake to sell all or any specific portion of the Shares. The Fund
shall not sell any of
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the Shares of the Tax-Free Series Portfolio except through Alex. Brown.
Notwithstanding the provisions of the foregoing sentence:
(a) the Fund may issue Shares to any other investment
company or personal holding company, or to the shareholders
thereof, in exchange for all or a majority of the shares or
assets of any such company;
(b) the Fund may issue Shares at their net asset
value to any shareholder of the Tax-Free Series purchasing
such Shares with dividends or other cash distributions
received from the Tax-Free Series pursuant to an offer made to
all shareholders;
(c) Alex. Brown may enter into shareholder processing
and servicing agreements in accordance with section a hereof;
(d) Alex. Brown may, and when requested by the Fund
shall, suspend its efforts to effectuate sales of Shares of
the Tax-Free Series Portfolio at any time when in the opinion
of Alex. Brown or of the Fund no sales should be made because
of market or other economic considerations or abnormal
circumstances of any kind;
(e) the Fund may withdraw the offering of Shares: (i)
at any time with the consent of Alex. Brown, or (ii) without
such consent when so required by the provisions of any statute
or of any order, rule or regulation of any governmental body
having jurisdiction; and
(f) the price at which the Shares may be sold (the
"offering price") shall be the net asset value per share,
which shall be determined in the manner established from time
to time by the Fund's Board of Directors and as set forth in
the Fund's then current Prospectus and SAI with respect to the
Tax-Free Series Portfolio.
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant thereto,
shall at all times be subject to any applicable directives of the Board of
Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, Alex. Brown shall at all times conform to:
4
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(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 the 1940 Act;
(c) the provisions of the Articles of the Fund;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD") and all other
self-regulatory organizations applicable to the sale of
investment company shares; and
(f) any other applicable provisions of state and
Federal law.
7. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that Alex. Brown may compensate its investment representatives 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.
8. Shareholder Processing and Servicing Agreements. Alex.
Brown may enter into shareholder processing and servicing agreements ("Dealer
Agreements") with any securities dealer ("Securities Dealer") who is registered
under the Securities Exchange Act of 1934 (the "1934 Act") and a member in good
standing of the NASD, who may wish to establish accounts or sub- accounts on
behalf of such Securities Dealer's customers. All Dealer Agreements shall be in
substantially the form of the agreement attached hereto as Exhibit A. Alex.
Brown may enter into shareholder processing and servicing agreements
("Shareholder Servicing Agreements") with persons other than Securities Dealers
("Shareholder Servicing Agents") who are not required to be registered under the
1934 Act or members in good standing of the NASD, who are exempt from
registration as a broker or a dealer under the 1934 Act or who may otherwise
lawfully furnish services to Fund shareholders without registration under the
1934 Act. Shareholder Servicing Agreements shall be in substantially the form of
the agreement attached hereto as Exhibit B. Alex. Brown will supervise the
Fund's relations with Securities Dealers and Shareholder Servicing Agents. Alex.
Brown will make payments to Securities Dealers and Shareholder Servicing Agents
in such amounts as Alex. Brown may determine from time to time in its discretion
based upon the nature, quality and type of services being provided by the
Securities Dealer or Shareholder Servicing Agent; the cost to
5
<PAGE>
the Securities Dealer or Shareholder Servicing Agent of providing such services;
the amount of assets being invested in shares of the Fund; and the contribution
being made by the Securities Dealer or Shareholder Servicing Agent toward
reducing the expense ratio. The formula or basis of the compensation shall be
reviewed from time to time by the Fund's Board of Directors; however, in no
event shall such payments exceed, on an annual basis, .25% of the average daily
net asset value of all shares held by the customers of each such Securities
Dealer or Shareholder Servicing Agent.
9. Expenses. The expenses connected with the Tax- Free Series
Portfolio shall be allocable between the Tax- Free Series Portfolio and Alex.
Brown as follows:
(a) Alex. Brown shall furnish, at its expense and
without cost to the Fund, the services of personnel to the
extent that such services are required to carry out its
obligations under this Agreement.
(b) Alex. Brown shall bear the expenses of printing
and distributing Prospectuses and SAI (other than those
Prospectuses and SAI distributed to shareholders of the
Tax-Free Series Portfolio of the Fund) and any other
promotional or sales literature used by Alex. Brown or
furnished by Alex. Brown to investors or Securities Dealers in
connection with the public offering of the Shares, the
expenses of advertising in connection with such public
offering and all legal expenses in connection with the
foregoing.
(c) The Tax-Free Series assumes and shall pay or
cause to be paid all other expenses of the Tax-Free Series
Portfolio (other than those expressly assumed by the Fund's
investment advisor and sub-advisor), including, without
limitation, the Tax-Free Series Portfolio's allocable portion
of the following expenses: the fees of the Fund's investment
advisor; 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 Tax-Free Series Portfolio in connection with portfolio
securities transactions to which the Tax-Free Series Portfolio
is a party; all taxes, including securities issuance and
transfer taxes, and fees payable by the Tax-Free Series
Portfolio to Federal, state or other governmental agencies;
the costs and expenses of engraving or printing of
certificates representing Shares; all costs and expenses in
connection with the registration and
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<PAGE>
maintenance of registration of the Tax-Free Series Portfolio
and the 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 SAI
of the Tax-Free Series Portfolio and supplements thereto to
the Tax- Free Series Portfolio 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 Shares; fees and expenses of legal counsel and
of independent accountants, in connection with any matter
relating to the Tax-Free Series Portfolio; membership dues of
industry associations; interest payable on Tax-Free Series
Portfolio borrowings; postage; insurance premiums on property
or personnel (including officers and directors) of the Fund
which insure 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 Tax-Free Series
Portfolio operation unless otherwise explicitly provided
herein.
10. Delegation of Responsibilities. Alex. Brown may, but shall
not be under any duty to, perform services on behalf of the Tax-Free Series
Portfolio 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 Portfolio and Alex. Brown's charge in rendering such services
may be billed monthly to the Tax-Free Series Portfolio, subject to examination
by the Fund's independent accountants. Payment or assumption by Alex. Brown of
any Tax-Free Series Portfolio expense that Alex. Brown is not required to pay or
assume under this Agreement shall not relieve Alex. Brown of any of its
obligations to the Tax-Free Series Portfolio nor obligate Alex. Brown to pay or
assume any similar expenses on any subsequent occasions.
11. Compensation. For the services to be rendered and the
expenses assumed by Alex. Brown, the Tax-Free Series Portfolio shall pay to
Alex. Brown monthly compensation at an annual rate of .25% of the aggregate
daily net assets the Tax- Free Series Portfolio. 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 subsequently to the
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<PAGE>
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 calculations of the fees as set forth
above. Subject to the provisions of section 11 hereof, payment of Alex. Brown's
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated in section 11 hereof.
12. Expense Limitation. In the event the operating expenses of
the Tax-Free Series Portfolio, including all investment advisory and
distribution 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 Portfolio imposed by the securities laws or regulations
thereunder of any state in which the 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, Alex. Brown shall reduce its distribution fee to the
extent of its share of such excess expenses and, if required pursuant to any
such laws or regulations, will reimburse the Tax-Free Series Portfolio 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 Tax-Free
Series Portfolio. The limitation described in clause (ii) above shall be applied
to all of the Fund's Portfolios on a combined basis, and the obligation of Alex.
Brown to reimburse the Tax-Free Series Portfolio shall be limited to the fees
actually received by Alex. Brown for such fiscal year. 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
Portfolio 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 Alex. Brown's fee shall be applicable. For the purposes of this paragraph,
Alex. Brown'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
distribution fee which would otherwise be payable to Alex. Brown for such fiscal
year were it not for this section 11 and the denominator of which is the sum of
all investment advisory and distribution fees which would otherwise be payable
by the Fund or Tax-Free Series Portfolio, whichever is applicable, were it not
for the expense limitation provisions of any investment advisory or distribution
agreement to which the Fund or the Tax-Free Series Portfolio is a party. The
foregoing expense limitations imposed by the state securities laws and
regulations shall be applied to the Fund's
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Tax-Free Series Portfolio 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.
13. Non-Exclusivity. The services of Alex. Brown to the
Tax-Free Series of the Fund are not to be deemed to be exclusive, and Alex.
Brown shall be free to render distribution or other services to others
(including other investment companies) and to engage in other activities. It is
understood and agreed that officers or directors of Alex. Brown may serve as
officers or directors of the Fund, and that officers or directors of the Fund
may serve as officers or directors of Alex. Brown to the extent permitted by
law; and that the officers and directors of Alex. Brown 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.
14. 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 15 hereof, for two years from the date hereof.
15. Renewal. Following the expiration of its initial two-year
term, this Agreement shall continue in force and effect from year to year,
provided that such continuance is specifically approved at least annually:
(a)(i) by the Fund's Board of Directors or (ii) by
the vote of a majority of the outstanding voting securities of
the Tax-Free Series Portfolio (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" (as defined by the 1940 Act) of any such party and
have no direct or indirect financial interest in the operation
of this Agreement or any agreement related to this Agreement,
by votes cast in person at a meeting specifically called for
the purpose of voting on such approval.
16. 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 members of the Board of Directors of the Fund who
are not "interested persons" of the Fund and have no direct or indirect
financial interest in the operation of this Agreement or in any agreement
related to this Agreement, by vote of a majority of the Tax-Free Series
Portfolio's outstanding voting securities (as defined in Section 2(a)(42) of the
1940 Act), or by Alex. Brown, on sixty
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<PAGE>
(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.
Should Alex. Brown cease to have a distribution agreement with
the Tax-Free Series Portfolio of the Fund, the Tax-Free Series Portfolio will
cease to use the words "Alex. Brown" or any trademark or identifying logotype
indicating that the Tax-Free Series Portfolio of the Fund is distributed or
administered by or otherwise connected with Alex. Brown.
17. Amendments.
(a) This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by
the Board of Directors of the Fund or by the vote of a
majority of outstanding voting securities of the Tax-Free
Series Portfolio, and (ii) by a majority of those directors
who are not parties to this Agreement or "interested persons"
of any such party, which vote must be cast in person at a
meeting called for the purpose of voting on such approval;
provided, however, that if any such amendment is "material" as
such word is used in Rule 12b-1 under the 1940 Act, such
amendment shall be approved in the manner prescribed in
section 14 for the annual approval of the continuation of this
Agreement.
(b) In the event that this Agreement is proposed to
be amended to increase materially the amount to be spent for
distribution, such amendment will not be effected without
shareholder approval.
18. Liability of the Distributor. In the performance of its
duties hereunder, Alex. Brown 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 Alex.
Brown shall not be liable for any act or omission which loss does not constitute
willful misfeasance, bad faith or gross negligence on the part of Alex. Brown or
reckless disregard by Alex. Brown of its duties under this Agreement.
19. 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 for this purpose and that of Alex. Brown shall be 135 East Baltimore
Street, Baltimore, Maryland 21202.
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<PAGE>
20. Questions of Interpretation. This Agreement shall be
implemented and continued in a manner consistent with the provisions of the 1940
Act. 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 & SONS INCORPORATED
By /s/ Richard T. Hale
------------------------------
Director
Attest:
/s/ Nancy Palmer
- --------------------------
ALEX. BROWN CASH RESERVE FUND,
INC.
By /s/ Edward J. Veilleux
------------------------------
Executive Vice President
Attest:
/s/ Brian C. Nelson
- --------------------------
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<PAGE>
EX-99.B(6)(f)
DEALER AGREEMENT
ALEX. BROWN CASH RESERVE FUND, INC. - TAX-FREE SERIES
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor of the Tax-Free Series of Alex. Brown Cash
Reserve Fund, Inc., a Maryland corporation (the "Fund"). The Fund is an
open-end, diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). This agreement
deals exclusively with the Tax-Free Cash Reserve Shares (the "Shares") which
represent interests in the investment portfolio of the Tax-Free Series of the
Fund. The Shares, $.001 par value, are offered to the public in accordance with
the terms and conditions contained in the Prospectus and Statement of Additional
Information (the "Prospectus" and "SAI" respectively) relating to the Tax-Free
Series of the Fund. The terms "Prospectus" and "SAI" as used herein refer to the
prospectus and statement of additional information relating to the Tax-Free
Series of the Fund on file with the Securities and Exchange Commission ("SEC")
which is part of the Fund's most recent registration statement effective from
time to time under the Securities Act of 1933, as amended (the "1933 Act").
In connection with the offering of Shares to the public, you
may place orders for purchase and redemption of Shares for and on behalf of your
customers on the following terms and conditions:
1. You are hereby authorized to (i) place orders directly with
Alex. Brown for purchases of Shares and (ii) tender Shares to Alex. Brown for
redemption, in each case subject to the terms and conditions set forth in the
Prospectus and SAI.
2. No person is authorized to make any representations
concerning the Fund, the Tax-Free Series or the Shares except those contained in
the Prospectus and SAI and in such printed information as Alex. Brown may
subsequently prepare. No person is authorized to distribute any sales material
relating to the Fund, the Tax-Free Series or the Shares without the prior
written approval of Alex. Brown.
3. You agree to undertake from time to time certain
shareholder servicing activities for customers of yours who have purchased
Shares and who use your facilities to communicate with the Fund or to effect
redemptions or additional purchases of the Shares. In consideration of the
services and facilities provided
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<PAGE>
by you hereunder, the Tax-Free Series of the Fund and Alex. Brown will pay to
you the fee set forth in the attached Schedule based upon the average daily net
asset value of the Shares held of record by you from time to time on behalf of
customers (the "Customers Shares"), which fee will be computed daily and payable
monthly. For purposes of determining the fees payable under this computation,
the average daily net asset value of the Customers Shares will be computed in
the manner specified in the Prospectus and SAI in connection with the
computation of the net asset value of the Shares for purposes of purchases and
redemptions. The fee rate stated above may be prospectively increased or
decreased by Alex. Brown, in its sole discretion, at any time upon notice to
you. Further, Alex. Brown may, in its discretion and without notice, suspend or
withdraw the sale of Shares, including the sale of such Shares to you for the
account of any customer or customers. Alex. Brown represents to you that this
Agreement and the payment of such service fees has been authorized and approved
by the Tax-Free Series of the Fund.
4. You agree to comply with the provisions contained in the
1933 Act governing the distribution of Prospectuses to persons to whom you offer
Shares. You further agree to deliver, upon our request, copies of any amended
Prospectuses to customers whose Shares you are holding as record owner and to
deliver to such customers copies of the annual and interim financial reports and
proxy solicitation materials of the Fund. We agree to furnish to you as many
copies of the Prospectus, annual and interim financial reports and proxy
solicitation materials as you may reasonably request.
5. You represent that you are a member in good standing of the
National Association of Securities Dealers, Inc. You agree that you will not
offer Shares to persons in any jurisdiction in which you may not lawfully make
such offer due to the fact that you have not registered under, or are not exempt
from, the applicable registration or licensing requirements of such
jurisdiction.
6. The Fund has registered an indefinite number of Shares
under the 1933 Act. Upon application to us, we will inform you as to the states
or other jurisdictions in which we believe the Shares have been qualified for
sale under, or are exempt from the requirements of, the respective securities
laws of such states, but we assume no responsibility or obligation as to your
right to sell Shares in any jurisdiction. We will file with the Department of
State in New York a Further State Notice with respect to the Shares, if
necessary.
7. The Tax-Free Series of the Fund shall have full authority
to take such action as it deems advisable in respect of all matters pertaining
to the offering of the Shares, including
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<PAGE>
the right in its discretion, without notice, to suspend sales or withdraw the
offering of Shares entirely.
8. You will (i) maintain all records required by law relating
to transactions in Shares and, upon request by the Tax- Free Series of the Fund,
promptly make such of these records available to the Tax-Free Series of the Fund
as the Tax-Free Series may reasonably request in connection with its operations;
and (ii) promptly notify the Tax-Free Series if you experience any difficulty in
maintaining the records described in the foregoing clauses in an accurate and
complete manner.
9. Alex. Brown and the Tax-Free Series of the Fund shall be
under no liability to you except for lack of good faith and for obligations
expressly assumed by them hereunder. In carrying out your obligations, you agree
to act in good faith and without negligence. Nothing contained in this agreement
is intended to operate as a waiver by Alex. Brown or you of compliance with any
provision of the 1940 Act, the 1933 Act, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated by the SEC, or any other
applicable law.
10. This Agreement may be terminated by either party, without
penalty, upon ten (10) days' notice to the other party and shall automatically
terminate in the event of its "assignment," as defined in the 1940 Act. This
Agreement may also be terminated at any time without penalty by the vote of a
majority of the members of the Board of Directors of the Fund who are not
"interested persons" (as such phrase is defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of the Distribution
Agreement with respect to the Tax-Free Series between the Fund and Alex. Brown
or any related agreement, or by the vote of a majority of the outstanding voting
securities of the Tax-Free Series of the Fund.
11. All communications to us should be sent to:
ALEX. BROWN & SONS INCORPORATED
135 East Baltimore Street
Baltimore, MD 21202
Any notice to you shall be duly given if mailed or telegraphed
to you at the address specified below.
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<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us a copy of this Agreement.
ALEX. BROWN & SONS INCORPORATED
By_____________________________
(Authorized Signature)
Confirmed and accepted:
Firm Name:__________________________
By:_________________________________
Address:____________________________
Date:_______________________________
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<PAGE>
EX-99.B(6)(g)
SHAREHOLDER SERVICE AGENT AGREEMENT
ALEX. BROWN CASH RESERVE FUND, INC. - TAX-FREE SERIES
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor of the Tax-Free Series of Alex. Brown Cash
Reserve Fund, Inc., a Maryland corporation (the "Fund"). The Fund is an
open-end, diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). This agreement
deals exclusively with the Tax-Free Cash Reserve Shares (the "Shares") which
represent interests in the investment portfolio of the Tax-Free Series of the
Fund. The Shares, $.001 par value, are offered to the public in accordance with
the terms and conditions contained in the Prospectus and Statement of Additional
Information (the "Prospectus" and "SAI" respectively) relating to the Tax-Free
Series of the Fund. The terms "Prospectus" and "SAI" as used herein refer to the
prospectus and statement of additional information relating to the Tax-Free
Series of the Fund on file with the Securities and Exchange Commission ("SEC")
which is a part of the Fund's most recent registration statement effective from
time to time under the Securities Act of 1933, as amended (the "1933 Act").
1. You agree to provide the following support services to
clients who may from time to time beneficially own Shares: (i) aggregating and
processing purchase and redemption requests for Shares from clients and placing
net purchase and redemption orders with Alex. Brown; (ii) providing clients with
a service that invests the assets of their accounts in Shares pursuant to
specific or preauthorized instructions; (iii) processing dividend payments from
the Tax-Free Series of the Fund on behalf of clients; (iv) providing information
periodically to clients showing their positions in Shares; (v) arranging for
bank wires; (vi) responding to client inquiries relating to the services
performed by you; (vii) providing sub-accounting with respect to Shares
beneficially owned by clients or providing the information to the Fund's
transfer agent necessary for sub- accounting; (viii) if required by law or any
agreement with your client, forwarding shareholder communications from the
Tax-Free Series of the Fund (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices), to
clients; and (ix) providing such other
1
<PAGE>
similar services as Alex. Brown may reasonably request to the extent you are
permitted to do so under applicable statutes, rules or regulations. You will
provide to clients a schedule of any fees that you may charge to them relating
to the investment of their assets in Shares.
2. Shares purchased by you on behalf of your clients will be
registered in your name or in the name of your nominee. The client will be the
beneficial owner of the Shares purchased and held by you in accordance with the
client's instructions and the client may exercise all rights of a shareholder of
the Tax-Free Series of the Fund. You agree to transmit to the Fund's transfer
agent in a timely manner all purchase orders and redemption requests of your
clients, if required by law or any agreement with your client, and to forward to
each client all proxy statements, periodic shareholder reports and other
communications received from the Tax-Free Series of the Fund by you on behalf of
your clients.
3. You agree to transmit to the Fund's transfer agent, on the
date such purchase orders are effective, federal funds in an amount equal to the
amount of all purchase orders placed by you on behalf of your clients and
accepted by the Fund (net of any redemption orders placed by you on behalf of
your clients). In the event that the Tax-Free Series of the Fund fails to
receive such federal funds on such date (other than through the fault of the
Tax-Free Series of the Fund or its transfer agent), you shall indemnify the
Tax-Free Series of the Fund against any expense (including overdraft charges)
incurred by the Tax-Free Series of the Fund as a result of its failure to
receive such federal funds.
4. You agree to make available to the Tax-Free Series of the
Fund, upon the Tax-Free Series of the Fund's request, such information relating
to your clients who are beneficial owners of Shares and their transactions in
Shares as may be required by applicable laws and regulations.
5. You agree to transfer record ownership of a client's Shares
to the client promptly upon the request of the client. In addition, record
ownership will be promptly transferred to the client in the event that the
person or entity ceases to be your client.
6. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonable, necessary or beneficial in order to provide the
aforementioned services to clients.
2
<PAGE>
7. For all purposes of this Agreement you will be deemed to be
an independent contractor and will have no authority to act as agent for Alex.
Brown or the Tax-Free Series of the Fund in any manner or in any respect. By
your written acceptance of this Agreement, you agree to and do release,
indemnify and hold Alex. Brown, the Tax-Free Series of the Fund and its transfer
agent harmless from and against any and all direct or indirect liabilities or
losses resulting from requests, directions, actions or inactions of or by you or
your officers, employees, or agents regarding your responsibilities hereunder or
the purchase, redemption, transfer or registration of Shares by or on behalf of
clients. You and your employees will, upon request, be available during normal
business hours to consult with Alex. Brown or its designees concerning the
performance of your responsibilities under this Agreement.
8. In consideration of the services and facilities provided by
you hereunder, the Tax-Free Series of the Fund and Alex. Brown will pay to you,
and you will accept as full payment therefor, the fee set forth on the attached
schedule based upon the average daily net asset value of the Shares held of
record by you from time to time on behalf of clients (the "Clients' Shares"),
which fee will be computed daily and payable monthly. For purposes of
determining the fees payable under this computation, the average daily net asset
value of the Clients' Shares will be computed in the manner specified in the
Prospectus and SAI in connection with the computations of the net asset value of
Shares for purposes of purchases and redemptions. The fee rate stated above may
be prospectively increased or decreased by Alex. Brown, in its sole discretion,
at any time upon notice to you. Further, Alex. Brown may, in its discretion and
without notice, suspend or withdraw the sale of Shares, including the sale of
such Shares to you for the account of any client or clients. Alex. Brown
represents to you that this Agreement and the payment of such service fees has
been authorized and approved by the Tax-Free Series of the Fund.
9. You will (i) maintain all records required by law relating
to transactions in Shares and, upon request by the Tax-Free Series of the Fund,
promptly make such of these records available to the Tax-Free Series of the Fund
as the Tax-Free Series may reasonably request in connection with its operations;
and (ii) promptly notify Alex. Brown if you experience any difficulty in
maintaining the records described in the foregoing clauses in an accurate and
complete manner.
10. Except as may be provided in a separate written agreement
between Alex. Brown and you, neither you nor any of your employees or agents are
authorized to assist in distribution of the Shares to the public or to make any
representation to your clients concerning shares except those contained in the
then current Prospectus and SAI, copies of which will be supplied to
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<PAGE>
you by the Tax-Free Series of the Fund. Except as set forth in this Agreement,
you shall have no authority to act as agent for the Tax-Free Series of the Fund
or Alex. Brown. Neither the Tax-Free Series of the Fund nor Alex. Brown will be
party, nor will they be represented as a party, to any agreement that you may
enter into with your clients and neither the Tax-Free Series of the Fund nor
Alex. Brown shall participate, directly or indirectly, in any compensation that
you may receive from your clients in connection with your acting on their behalf
with the Tax-Free Series of the Fund.
11. Alex. Brown is required by law to provide to the Board of
Directors of the Fund, and the Board of Directors of the Fund is required to
review, at least quarterly, a written report of the amounts expended under its
agreement with the Tax-Free Series of the Fund and the purposes for which such
expenditures were made. In that connection, you will furnish us or our designees
with such information as we or they may reasonably request (including, without
limitation, periodic certifications confirming the provision to clients of the
services described herein), and will otherwise cooperate with Alex. Brown and
its designees (including, without limitation, any auditors designated by us), in
connection with the preparation of reports to the Fund's Board of Directors
concerning this Agreement and the monies paid or payable by us pursuant hereto,
as well as any other reports or filings that may be required by law.
12. You may enter into other similar servicing agreements with
any person or persons without Alex. Brown's consent.
13. Alex. Brown and the Tax-Free Series of the Fund shall be
under no liability to you except for lack of good faith and for obligations
expressly assumed by Alex. Brown hereunder. In carrying out your obligations,
you agree to act in good faith and without negligence. Nothing contained in this
Agreement is intended to operate as a waiver by Alex. Brown or you of compliance
with any provision of the 1940 Act, the 1933 Act, the Securities Exchange Act of
1934, as amended, the rules and regulations promulgated by the Securities and
Exchange Commission thereunder, or any other applicable law.
14. This Agreement may be terminated by either party, without
penalty, upon ten (10) days' notice to the other party and shall automatically
terminate in the event of its assignment, as defined in the 1940 Act. This
Agreement may also be terminated at any time without penalty by the vote of a
majority of the members of the Board of Directors of the Fund who are not
"interested persons" (as such phrase is defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of the Distribution
Agreement, with respect to the Tax-Free Series, between the Fund and Alex.
Brown or any related
4
<PAGE>
agreement, or by the vote of a majority of the outstanding voting securities of
the Tax-Free Series of the Fund.
15. All communications to us should be sent to:
ALEX. BROWN & SONS INCORPORATED
135 East Baltimore Street
Baltimore, MD 21202
Any notice to you shall be duly given if mailed or telegraphed
to you at the address specified by you below.
16. This Agreement shall become effective as of the date when
it is executed and dated below by you. This Agreement and all the rights and
obligations of the parties hereunder shall be governed by and construed under
the laws of the State of Maryland.
If you agree to be legally bound by the provisions of this
Agreement, please sign a copy of this letter and return it to us.
ALEX. BROWN & SONS INCORPORATED
By______________________________
(Authorized Signature)
Confirmed and accepted:
Name:__________________________
By:____________________________
Address:_______________________
Date:__________________________
5
<PAGE>
Ex-99.B(6)(h)
QUALITY CASH RESERVE PRIME SHARES
A Class of the Alex. Brown Cash Reserve Fund, Inc.
DISTRIBUTION AGREEMENT
(Containing a Plan of Distribution under Rule 12b-1)
THIS AGREEMENT is made as of the 31st day of January, 1991 by
and between ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the
"Fund'), and ALEX. BROWN & SONS INCORPORATED, a Maryland corporation ("Alex.
Brown").
Recital
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 Fund's Articles of Incorporation ("Articles")
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 per share
representing interests in three portfolios: the Prime Series Portfolio (the
"Prime Portfolio"), the Treasury Series Portfolio and the Tax-Free Series
Portfolio (each of the existing portfolios and any portfolios hereafter added
shall be referred to collectively as the "Portfolios"); and
WHEREAS, the Fund's Board of Directors has further authorized
the creation of a Quality Cash Reserve Shares of the Prime Portfolio (the
"Shares"); and
WHEREAS, the Fund and Alex. Brown desire to enter an agreement
to provide distribution services for the Shares on the terms and conditions
hereinafter set forth; and
WHEREAS, the payments contemplated by section 7 of this
Agreement may be deemed to be the indirect financing of an activity intended to
result in the sale of Shares and since the allocation of certain charges and
expenses in section 8 hereof relating to the payment of expenses for
advertisements, promotional material, sales literature and printing and mailing
of prospectuses to other than current Fund shareholders may also be considered
the indirect financing of other activities Intended to result in the sale of
Shares, this Agreement is intended to be a "written plan" as contemplated by
Rule 12b-1 under the 1940 Act; and
WHEREAS, the Directors who are not "interested persons" of the
Fund shall determine in their sole discretion the selection and nomination of
the Fund's Directors who are not "interested persons";
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
<PAGE>
1. Appointment. The Fund hereby appoints Alex. Brown as
Distributor of the Shares for the period and on the terms set forth in this
Agreement. Alex. Brown accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Delivery of Documents. The fund has furnished Alex. Brown
with copies properly certified or authenticated of each of the following:
(a) The Fund's Articles filed with the State
Department of Taxation and Assessment of the State of Maryland
on February 15, 1990 and all amendments thereto;
(b) The Fund's By-Laws and all amendments thereto
(such By-Laws, as presently in effect and as they shall from
time to time be amended, are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors and
shareholders, as appropriate, authorizing the appointment of
Alex. Brown as the Fund's Distributor for the Shares and
approving this Agreement.
(d) The Fund's Notification of Registration filed
Pursuant to Section 8(a) of the 1940 Act on Form N-8A under
the 1940 Act as filed with the Securities and Exchange
Commission (the "SEC") on June 5, 1981;
(e) The Fund's Registration Statement on Form N-1
under the Securities Act of 1933, as amended (the "1933 Act")
(File No. 2-72658), and under the 1940 Act as filed with the
SEC on June 5, 1981 relating to the shares and all amendments
thereto; and
(f) The Fund's most recent prospectus and statement
of additional information (such prospectus and statement of
additional information, as presently in effect and all
amendments and supplements thereto, are herein called the
"Prospectus" and "SAI," respectively).
The Fund will furnish Alex. Brown from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties as Distributor. Alex. Brown shall give the Fund the
benefit of its best judgement, efforts and facilities in rendering its services
as Distributor. Alex. Brown will act as Distributor subject to the supervision
of the Fund's Board of Directors and the following understanding: (i) nothing
herein contained shall be deemed to relieve or deprive the Board of Directors of
the Fund of its responsibility for and control of the conduct of the Fund's
affairs; and (ii) in all matters relating to the performance of this Agreement,
Alex. Brown will act in conformity with the Articles, By-Laws and Prospectus and
SAI of the Fund and with the instructions and directions of the Fund's Board of
Directors and will conform to and comply with the requirements of the 1940 Act
and all other applicable Federal or state laws and regulations. In carrying out
its obligations hereunder, Alex. Brown shall:
(a) receive orders for the purchase of the Shares,
accept or reject such orders on behalf of the Fund in
accordance with the Fund's currently effective Prospectus and
SAI and transmit such orders as are so accepted to the Fund's
transfer agent as promptly as possible;
(b) receive requests for redemption from holders of
the Shares and transmit such redemption requests to the Fund's
transfer agent as promptly as possible;
2
<PAGE>
(c) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund; and
(d) provide to the Fund's Board of Directors, at
least quarterly, a written report of the amounts expended in
connection with all distribution services rendered pursuant to
this Agreement, including an explanation of the purposes for
which such expenditures were made.
4. Distribution of Shares. Alex. Brown shall be exclusive
distributor of the Shares. It is mutually understood and agreed that Alex. Brown
does not undertake to sell all or any specific portion of the Shares. The Fund
shall not sell any of the Shares except through Alex. Brown. Notwithstanding the
provisions of the foregoing sentence:
(a) the Fund may issue the Shares to any other
investment company or personal holding company, or to the
shareholders thereof, in exchange for all or a majority of the
shares or assets of any such company;
(b) the Fund may issue the Shares at their net asset
value to any shareholder of the Fund purchasing such Shares
with dividends or other cash distributions received from the
Fund pursuant to an offer made to all shareholders;
(c) Alex. Brown may, and when requested by the Fund
shall, suspend its efforts to effectuate sales of the Shares
at any time when in the opinion of Alex. Brown or of the Fund
no sales should be made because of market or other economic
considerations or abnormal circumstances of any kind;
(d) the Fund may withdraw the offering of the Shares:
(i) at any time with the consent of Alex. Brown, or (ii)
without such consent when so required by the provisions of any
statute or of any order, rule or regulation of any
governmental body having jurisdiction; and
(e) the price at which the Shares may be sold (the
"offering price") shall be the net asset value per share,
which shall be determined in the manner established from time
to time by the Fund's Board of Directors and as set forth in
the Fund's then current Prospectus and SAI.
5. Control by the Board of Directors. Any distribution
activities undertaken by Alex. Brown pursuant to this Agreement, as well as any
other activities undertaken by Alex. Brown on behalf of the Fund pursuant
thereto, shall at all times be subject to any applicable directives of the Board
of Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, Alex. Brown 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 the 1940 Act;
(c) the provisions of the Articles of the Fund;
3
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(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD") and all other
self-regulatory organizations applicable to the sale of
investment company shares; and
(f) any other applicable provisions of state and
federal law.
7. Shareholder Processing and Servicing Agreements. Alex.
Brown may enter into shareholder processing and service agreements (the "Dealer
Agreements") with any securities dealer "Securities Dealer") who is registered
under the Securities Exchange Act of 1934 (the "1934 Act") and a member in good
standing of the NASD, who may wish to establish accounts or sub-accounts on
behalf of such Securities Dealer's customers. All Dealer agreements shall be in
substantially the form of the agreement attached hereto as Exhibit A. Alex.
Brown will supervise the Fund's relations with Securities Dealers. Alex. Brown
will make payments to Securities Dealers in such amounts as Alex. Brown may
determine from time to time in its discretion based upon the nature, quality and
type of services being provided by the Securities Dealer; the cost to the
Securities Dealer providing such services; the amount of assets being invested
in shares of the Fund; and the contribution being made by the Securities Dealer
toward reducing the expense ratio. The formula or basis of the compensation
shall be reviewed from time to time by the Fund's Board of Directors; however,
in no event shall such payments exceed, on an annual basis, .60% of the average
daily net asset value of all Shares held by the customers of each such
Securities Dealer.
8. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its expense and
without cost to the Fund, the services of personnel to the
extent that such services are required to carry out its
obligations under this Agreement.
(b) Alex. Brown shall bear the expenses of printing
and distributing Prospectuses and SAI (other than those
Prospectuses and SAI distributed to shareholders of the Fund)
and any other promotional or sales literature used by Alex.
Brown or furnished by Alex. Brown to investors or Securities
Dealers in connection with the public offering of the Shares,
the expenses of advertising in connection with such public
offering and all legal expenses in connection with the
foregoing.
(c) The Fund assumes and shall pay or cause to be
paid all other expenses of the Fund (other than those
expressly assumed by the Fund's investment advisor and sub-
advisor), including, without limitation: the fees of the
Fund's investment advisor; 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; broker's 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 SAI 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
4
<PAGE>
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 operation unless otherwise
explicitly provided herein.
9. Delegation of Responsibilities. Alex. Brown may, but shall
not be under any duty to, perform services on behalf of the Fund 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 Fund and Alex. Brown'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
Alex. Brown of any Fund expense that Alex. Brown is not required to pay or
assume under this Agreement shall not relieve Alex. Brown of any of its
obligations to the Fund nor obligate Alex. Brown to pay or assume any similar
Fund expenses on any subsequent occasions.
10. Compensation. For the services to be rendered and the
expenses assumed by Alex. Brown, the Fund shall pay to Alex. Brown monthly
compensation at an annual rate of .60% of the aggregate daily net assets of the
Shares. 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 calculations of the fees as set forth above. Payment of
Alex. Brown's compensation for the preceding month shall be made as promptly as
possible.
11. Non-Exclusivity. The services of Alex. Brown to the Fund
are not to be deemed to be exclusive, and Alex. Brown shall be free to render
distribution or other services to others (including other investment companies)
and to engage in other activities. It is understood and agreed that officers or
directors of Alex. Brown may serve as officers or directors of the Fund, and
that officers or directors of the Fund may serve as officers or directors Alex.
Brown to the extent permitted by law; and that the officers and directors of
Alex. Brown are not prohibited from engaging in any other businesses 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.
12. 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 one year from the date hereof.
13. Renewal. Following the expiration of its initial one-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 at least a majority of the outstanding voting
securities of the Quality Shares class (as defined in the 1940
Act), and
(b) by the affirmative vote of a majority of the
directors who are riot parties to this Agreement or
"interested persons" (as defined by the 1940 Act) of any such
party and have no direct or indirect financial interest in the
operation of this Agreement or any
5
<PAGE>
agreement related to this Agreement, by votes cast in person
at a meeting specifically called for the purpose of voting on
such approval.
14. 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 members of the Board of Directors of the Fund who
are not "interested persons" of the Fund and have no direct or indirect
financial interest in the operation of this Agreement or in any agreement
related to this Agreement, by vote of a majority of the outstanding voting
securities of the Quality Shares class (as defined in the 1940 Act), or by Alex.
Brown, 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.
Should Alex. Brown cease to have a distribution agreement 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.
15. Amendments.
(a) This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by
the Board of Directors of the Fund or by the vote of a
majority of outstanding voting securities of the Quality
Shares class, and (ii) by a majority of those directors who
are not parties to this Agreement or "interested persons" of
any such party, which vote must be cast in person at a meeting
called for the purpose of voting on such approval; provided,
however, that if any such amendment is "material" as such word
is used in Rule 12b-1 under the 1940 Act, such amendment shall
be approved in the manner prescribed in section 13 for the
annual approval of the continuation of this Agreement.
(b) In the event that this Agreement is proposed to
be amended to increase materially the amount to be spent for
distribution, such amendment will not be effected without
shareholder approval.
16. Liability of the Distributor. In the performance of its
duties hereunder, Alex. Brown 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 Alex.
Brown shall not be liable for any act or omission which loss does not constitute
willful misfeasance, bad faith or gross negligence on the part of Alex. Brown or
reckless disregard by Alex. Brown of its duties under this Agreement.
17. 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 for this purpose and that of Alex. Brown shall be 135 East Baltimore
Street, Baltimore, Maryland 21202.
18. Questions of Interpretation. This Agreement shall be
implemented and continued in a manner consistent with the provisions of the 1940
Act. 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.
6
<PAGE>
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 & SONS INCORPORATED
Attest:
By /s/ Richard T. Hale
-------------------
/s/ Brian C. Nelson Director
- -------------------
ALEX. BROWN CASH RESERVE FUND, INC.
Attest:
/s/ Brian C. Nelson By /s/ Edward J. Veilleux
- ------------------- -------------------------
Executive Vice President
7
<PAGE>
EXHIBIT A
QUALITY CASH RESERVE PRIME SHARES
A Class of the Alex. Brown Cash Reserve Fund, Inc.
DEALER AGREEMENT
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor of Alex. Brown Cash Reserve Fund, Inc., a
Maryland corporation (the "Fund"). The Fund is an open-end, diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund offers its shares, $.001 par value,
to the public in accordance with the terms and conditions contained in the
prospectuses and statement of additional information ("SAI") of the Fund.
Presently, the shares are divided into three series which represent interests in
three investment portfolios, as more fully described in the Fund's current
prospectus and SAI - the Prime Series, the Treasury Series and the Tax-Free
Series. The Quality Cash Reserve Shares classes of the portfolios listed in the
attached Schedule, as may be amended from time to time, are referred to herein
as the "Shares." The terms "Prospectus" and "SAI" as used herein refer to the
prospectus and statement of additional information with respect to the Shares on
file with the Securities and Exchanges Commission ("SEC") which is part of the
most recent registration statement effective from time to time under the
Securities Act of 1933, as amended (the "1933 Act").
In connection with the offering of Shares to the public, you
may place orders for purchase and redemption of Shares for and on behalf of your
customers on the following terms and conditions:
1. You are hereby authorized to (i) place orders directly with
Alex. Brown for purchases of Shares and (ii) tender Shares to Alex. Brown for
redemption, in each case subject to the terms and conditions set forth in the
Prospectus and SAI.
2. No person is authorized to make any representations
concerning the Fund or the Shares except those contained in the Prospectus and
SAI and in such printed information as Alex. Brown may subsequently prepare. No
person is authorized to distribute any sales material relating to the Fund
without prior written approval of Alex.Brown.
3. You agree to undertake from time to time certain
shareholder servicing activities for customers of yours who have purchased
Shares and who use your facilities to communicate with the Fund or to effect
redemptions or additional purchases of the Shares. In consideration of the
services and facilities provided by you hereunder, the Fund and Alex. Brown will
pay to you the fee set forth In the attached Schedule based upon the average
daily net asset value of the Fund Shares held of record by you from time to time
on behalf of customers (the "Customers Fund Shares"), which fee will be computed
daily and payable monthly. For purposes of determining the fees payable under
this computation, the average daily net asset value of the Customers Fund Shares
will be computed in the manner specified in the Fund's registration statement
(as the same is in effect from time to time) in connection with the computation
of the net asset value of Shares for purposes of purchases and redemptions. The
fee rate stated above may be prospectively increased or decreased by Alex.
Brown, in its sole discretion, at any time upon notice to you. Further, Alex.
Brown may, in its discretion and without notice, suspend or withdraw the sale of
Shares, including the sale of such Shares to you for the account of any customer
or customers. Alex. Brown represents to you that this Agreement and the payment
of such service fees has been authorized and approved by the Fund.
4. You agree to comply with the provisions contained in the
1933 Act governing the distribution of Prospectuses to persons to whom you offer
Shares. You further agree to deliver, upon our
A-1
<PAGE>
request, copies of any amended Prospectus to customers whose Shares you are
holding as record owner and to deliver to such customers copies of the annual
and interim financial reports and proxy solicitation materials of the Fund. We
agree to furnish to you as many copies of the Prospectus, annual and interim
financial reports and proxy solicitation materials as you may reasonably
request.
5. You represent that you are a member in good standing of the
National Association of Securities Dealers, Inc. You agree that you will not
offer Shares to persons in any jurisdiction in which you may not lawfully make
such offer due to the fact that you have not registered under, or are not exempt
from, the applicable registration or licensing requirements of such
jurisdiction.
6. The Fund has registered an indefinite number of Shares
under the 1933 Act. Upon application to us, we will inform you as to the states
or other jurisdictions in which we believe the Shares have been qualified for
sale under, or are exempt from the requirements of, the respective securities
laws of such states, but we assume no responsibility or obligation as to your
right to sell Shares in any jurisdiction. We will file with the Department of
State in New York a Further State Notice with respect to the Shares, if
necessary.
7. The Fund shall have full authority to take such action as
it deems advisable in respect of all matters pertaining to the offering of the
Shares, including the right in its discretion, without notice, to suspend sales
or withdraw the offering of Shares entirely.
8. You will (i) maintain all records required by law relating
to transactions in Shares of the Fund and, upon request by the Fund, promptly
make such of these records available to the Fund as the Fund may reasonably
request in connection with its operations and (ii) promptly notify the Fund if
you experience any difficulty in maintaining the records described in the
foregoing clauses in an accurate and complete manner.
9. Alex. Brown and the Fund shall be under no liability to you
except for lack of good faith and for obligations expressly assumed by them
hereunder. In carrying out your obligations, you agree to act in good faith and
without negligence. Nothing contained in this agreement is intended to operate
as a waiver by Alex. Brown or you of compliance with any provision of the 1940
Act, the 1933 Act, the Securities Exchange Act of 1934, as amended, or the rules
and regulations promulgated by the SEC.
10. This Agreement may be terminated by either party, without
penalty, upon ten (10) days' notice to the other party and shall automatically
terminate in the event of its "assignment," as defined in the 1940 Act. This
Agreement may also be terminated at any time without penalty by the vote of a
majority of the members of the Board of Directors of the Fund who are not
"interested persons" (as such phrase is defined In the 1940 Act) and have no
direct or indirect financial interest in the operation of the Distribution
Agreement between the Fund and Alex. Brown or any related agreement, or by the
vote of a majority of the outstanding voting securities of the Fund.
11. All communications to us should be sent to:
ALEX. BROWN & SONS INCORPORATED
135 East Baltimore Street
Baltimore, MD 21202
Any notice to you shall be duly given if mailed or telegraphed
to you at the address specified below.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us a copy of this Agreement.
A-2
<PAGE>
ALEX. BROWN & SONS INCORPORATED
By ________________________________
(Authorized Signature)
Confirmed and accepted:
Firm Name:_______________________
By:______________________________
Address:_________________________
Date:____________________________
A-3
<PAGE>
EX-99.B(6)(i)
FORM OF
DEALER AGREEMENT
ALEX. BROWN CASH RESERVE FUND, INC. - CORRESPONDENT SHARES
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor of Alex. Brown Cash Reserve Fund, Inc., a
Maryland corporation (the "Fund"). The Fund is an open-end, diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund offers its shares, $.001 par value,
to the public in accordance with the terms and conditions contained in the
Prospectus and Statement of Additional Information (the "Prospectus and SAI") of
the Fund. Presently, the shares are divided into three series which represent
interests in three investment portfolios, as more fully described in the Fund's
current Prospectus and SAI - the Prime Series, the Treasury Series and the
Tax-Free Series. The Correspondent Shares classes of the portfolios listed on
Schedule 1 hereto as may be amended from time to time are referred to herein as
the "Shares." The terms "Prospectus" and "SAI" as used herein refer to the
prospectus and statement of additional information on file with the Securities
and Exchange Commission ("SEC") which is part of the most recent registration
statement effective from time to time under the Securities Act of 1933, as
amended (the "1933 Act").
In connection with the offering of Shares to the public, you
may place orders for purchase and redemption of Shares for and on behalf of your
customers on the following terms and conditions:
1. You are hereby authorized to (i) place orders directly with
Alex. Brown for purchases of Shares and (ii) tender Shares to Alex. Brown for
redemption, in each case subject to the terms and conditions set forth in the
Prospectus and SAI.
2. No person is authorized to make any representations
concerning the Fund or the Shares except those contained in the Prospectus and
SAI and in such printed information as Alex. Brown may subsequently prepare. No
person is authorized to distribute any sales material relating to the Fund
without the prior written approval of Alex. Brown.
3. You agree to undertake from time to time certain
shareholder servicing activities for customers of yours who have purchased
Shares and who use your facilities to communicate with the Fund or to effect
redemptions or additional purchases of the Shares. In consideration of the
services and facilities provided by you hereunder, the Fund and Alex. Brown will
pay to you the fee set forth in the attached Schedule based upon the average
1
<PAGE>
daily net asset value of the Fund Shares held of record by you from time to time
on behalf of customers (the "Customers Fund Shares"), which fee will be computed
daily and payable monthly. For purposes of determining the fees payable under
this computation, the average daily net asset value of the Customers Fund Shares
will be computed in the manner specified in the Fund's registration statement
(as the same is in effect from time to time) in connection with the computation
of the net asset value of Shares for purposes of purchases and redemptions. The
fee rate stated above may be prospectively increased or decreased by Alex.
Brown, in its sole discretion, at any time upon notice to you. Further, Alex.
Brown may, in its discretion and without notice, suspend or withdraw the sale of
Shares, including the sale of such Shares to you for the account of any customer
or customers. Alex. Brown represents to you that this Agreement and the payment
of such service fees has been authorized and approved by the Fund.
4. You agree to comply with the provisions contained in the
1933 Act governing the distribution of Prospectuses to persons to whom you offer
Shares. You further agree to deliver, upon our request, copies of any amended
Prospectus to customers whose Shares you are holding as record owner and to
deliver to such customers copies of the annual and interim financial reports and
proxy solicitation materials of the Fund. We agree to furnish to you as many
copies of the Prospectus, annual and interim financial reports and proxy
solicitation materials as you may reasonably request.
5. You represent that you are a member in good standing of the
National Association of Securities Dealers, Inc. You agree that you will not
offer Shares to persons in any jurisdiction in which you may not lawfully make
such offer due to the fact that you have not registered under, or are not exempt
from, the applicable registration or licensing requirements of such
jurisdiction.
6. The Fund has registered an indefinite number of Shares
under the 1933 Act. Upon application to us, we will inform you as to the states
or other jurisdictions in which we believe the Shares have been qualified for
sale under, or are exempt from the requirements of, the respective securities
laws of such states, but we assume no responsibility or obligation as to your
right to sell Shares in any jurisdiction. We will file with the Department of
State in New York a Further State Notice with respect to the Shares, if
necessary.
7. The Fund shall have full authority to take such action as
it deems advisable in respect of all matters pertaining to the offering of the
Shares, including the right in its discretion, without notice, to suspend sales
or withdraw the offering of Shares entirely.
8. You will (i) maintain all records required by law relating
to transactions in Shares of the Fund and, upon request by, the Fund, promptly
make such of these records available to the Fund as the Fund may reasonably
request in connection, with
2
<PAGE>
its operations; and (ii) promptly notify the Fund if you experience any
difficulty in maintaining the records described in the foregoing clauses in an
accurate and complete manner.
9. Alex. Brown and the Fund shall be under no liability to you
except for lack of good faith and for obligations expressly assumed by them
hereunder. In carrying out your obligations, you agree to act in good faith and
without negligence. Nothing contained in this agreement is intended to operate
as a waiver by Alex. Brown or you of compliance with any provision of the 1940
Act, the 1933 Act, the Securities Exchange Act of 1934, as amended, or the rules
and regulations promulgated by the SEC.
10. This Agreement may be terminated by either party, without
penalty, upon ten (10) days' notice to the other party and shall automatically
terminate in the event of its "assignment," as defined in the 1940 Act. This
Agreement may also be terminated at any time without penalty by the vote of a
majority of the members of the Board of Directors of the Fund who are not
"interested persons" (as such phrase is defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of the Distribution
Agreement between the Fund and Alex. Brown or any related agreement, or by the
vote of a majority of the outstanding voting securities of the Fund.
11. All communications to us should be sent to:
ALEX. BROWN & SONS INCORPORATED
135 East Baltimore Street
Baltimore, MD 21202
Any notice to you shall be duly given if mailed or telegraphed
to you at the address specified below.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us a copy of this Agreement.
ALEX. BROWN & SONS INCORPORATED
By_____________________________
(Authorized Signature)
Confirmed and accepted:
Firm Name: ______________________
By: _____________________________
Address: ________________________
_________________________________
Date: ___________________________
3
<PAGE>
EX-99.B(6)(j)
New Class B Shares
FLAG INVESTORS CASH RESERVE PRIME SHARES - CLASS B
(A Class of Alex. Brown Cash Reserve Fund, Inc.)
DISTRIBUTION AGREEMENT
AGREEMENT, made as of the 27th day of February, 1995, by
and between ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the
"Fund"), and ALEX. BROWN & SONS INCORPORATED, a Maryland corporation ("Alex.
Brown").
W I T N E S S E T H
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 Fund wishes to appoint Alex. Brown as the
exclusive distributor of the class of shares of the Fund known as the Flag
Investors Cash Reserve Prime Shares - Class B (the "Shares") and Alex. Brown
wishes to become the distributor of the Shares; and
WHEREAS, the compensation to Alex. Brown hereunder and the
payments contemplated by paragraph 9 constitute the financing of activities
intended to result in the sale of Shares, and this Agreement is entered into
pursuant to a "written plan" pursuant to Rule 12b-1 under the Act (the "Plan")
allowing the Fund to make such payments.
NOW, THEREFORE, in consideration of the premises herein
and of other good and valuable consideration the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment. The Fund appoints Alex. Brown as
Distributor for the Shares for the period and on the terms set forth in this
Agreement. The Fund may from time to time issue separate series or classes of
its shares of common stock, or classify and reclassify shares of such series as
classes, and the appointment effected hereby shall constitute appointment for
the distribution of such additional series and classes unless the parties shall
otherwise agree in writing. Alex. Brown accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished Alex.
Brown with copies properly certified or authenticated, of each of the following:
(a) The Fund's Articles of Incorporation, filed with
the Secretary of State of Maryland on February 15, 1990 and all amendments
thereto (the "Articles of Incorporation");
(b) The Fund's By-Laws and all amendments thereto
(such By-Laws, as presently in effect and as they shall from time to time be
amended, are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of Alex. Brown as the Fund's
Distributor of the Shares and approving this Agreement;
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(d) The Fund's Notification of Registration filed
pursuant to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, as
filed with the Securities and Exchange Commission (the "SEC") on June 5, 1981;
(e) The Fund's Registration Statement on Form N-1
under the Securities Act of 1933, as amended (the "1933 Act") (File No. 2-72658)
and under the 1940 Act as filed with the SEC on June 5, 1981 relating to the
Shares of the Fund, and all amendments thereto; and
(f) The Fund's most recent prospectus for the Shares
(such prospectus and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish Alex. Brown from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties as Distributor. Alex. Brown shall give the Fund
the benefit of its best judgment, efforts and facilities in rendering its
services as Distributor of the Shares. Alex. Brown shall:
(a) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund;
(b) take, on behalf of the Fund, all actions deemed
necessary to carry into effect the distribution of the Shares;
(c) provide the Board of Directors of the Fund with
quarterly reports as required by Rule 12b-1 under the 1940 Act.
4. Distribution of Shares. Alex. Brown shall be the
exclusive distributor of the Shares. It is mutually understood and agreed that
Alex. Brown does not undertake to sell all or any specific portion of the
Shares. The Fund shall not sell any of the Shares except through Alex. Brown and
securities dealers who have valid Sub-Distribution Agreements with Alex. Brown.
Notwithstanding the provisions of the foregoing sentence, the Fund may issue its
Shares at their net asset value to any shareholder of the Fund purchasing such
Shares with dividends or other cash distributions received from the Fund
pursuant to an offer made to all shareholders.
5. Control by Board of Directors. Any distribution
activities undertaken by Alex. Brown pursuant to this Agreement, as well as any
other activities undertaken by Alex. Brown on behalf of the Fund pursuant
hereto, shall at all times be subject to any directives of the Board of
Directors of the Fund. The Board of Directors may agree, on behalf of the Fund,
to amendments to this Agreement, provided that the Fund must obtain prior
approval of the shareholders of the Fund to any amendment which would result in
a material increase in the amount expended by the Fund.
6. Compliance with Applicable Requirements. In carrying
out its obligations under this Agreement, Alex. Brown shall at all times conform
to:
(a) all applicable provisions of the 1940 Act and any
rules and regulations adopted thereunder as amended;
(b) the provisions of the Registration Statement of
the Fund under the 1933 Act and the 1940 Act and any amendments and supplements
thereto;
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<PAGE>
(c) the provisions of the Articles of Incorporation of
the Fund and any amendments thereto;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD") and all other self-regulatory
organizations applicable to the sale of investment company shares; and
(f) any other applicable provisions of Federal and
State law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its expense and
without cost to the Fund, the services of personnel to the extent that such
services are required to carry out their obligations under this Agreement;
(b) Alex. Brown shall bear the expenses of any
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 Shares,
the expenses of advertising in connection with such public offering and all
legal expenses in connection with the foregoing;
(c) the Fund assumes and shall pay or cause to be paid
all other expenses of the Fund, including, without limitation: the fees of the
Fund's investment advisor; the charges and expenses of any registrar, custodian
or depositary appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, and any stock 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
corporate fees payable by the Fund to Federal, State or other governmental
agencies; the cost and expense of engraving or printing of stock certificates
representing Shares; all costs and expenses in connection with maintenance of
registration of the Fund and the Shares with the SEC and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel) except as provided in subparagraph (a) above, the expenses of printing,
including typesetting, and distributing prospectuses 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 who are not "interested
persons" of the Fund (as defined in the 1940 Act) or 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 Shares; charges and
expenses of legal counsel, including counsel to the Directors who are not
"interested persons" of the Fund (as defined in the 1940 Act), 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.
8. Delegation of Responsibilities. Alex. Brown may, but
shall be under no duty to, perform services on behalf of the Fund 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 Fund and Alex. Brown's charge
in rendering such services may be billed monthly to the Fund, subject to
examination by the Fund's
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<PAGE>
independent accountants. Payment or assumption by Alex. Brown of any Fund
expense that Alex. Brown is not required to pay or assume under this Agreement
shall not relieve Alex. Brown of any of its obligations to the Fund or obligate
Alex. Brown to pay or assume any similar Fund expense on any subsequent
occasions.
9. Compensation. For the services to be rendered and the
expenses assumed by Alex. Brown, the Fund shall pay to Alex. Brown, compensation
at the annual rate of .75% of the average daily net assets of the shares of the
Fund. Except as hereinafter set forth, continuing 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 calculations of the fees as set forth
above. Payment of Alex. Brown's compensation for the preceding month shall be
made as promptly as possible.
10. Service Fee. The Fund shall pay Alex. Brown a service
fee (as such term is defined in the NASD Rules of Fair Practice) equal to .25%
of the average daily net assets of the Shares of the Fund. Such fee shall be
calculated and accrued daily and the amounts of the daily accruals shall be paid
monthly in the manner described in paragraph 9 above.
11. Compensation for Servicing Shareholder Accounts. The
Fund acknowledges that Alex. Brown may compensate its investment representatives
for opening accounts, processing investor letters of transmittals and
applications and withdrawal 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
the Fund shareholders.
12. Sub-Distribution Agreements. Alex. Brown may enter
into Sub-Distribution Agreements (the "Sub-Distribution Agreements") with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing of the NASD, who may wish to act as a
Participating Dealer in connection with the proposed offering. All
Sub-Distribution Agreements shall be in substantially the form of the agreement
attached hereto as Exhibit "A". For processing Fund shareholders' redemption
orders, responding to the inquiries from Fund shareholders concerning the status
of their accounts and the operations of the Fund and communicating with the
Fund, its transfer agent and Alex. Brown, Alex. Brown may pay each such
Participating Dealer an amount not to exceed that portion of the compensation
paid to Alex. Brown hereunder that is attributable to accounts of Fund
shareholders who are customers of such Participating Dealer.
13. Non-Exclusivity. The services of Alex. Brown to the
Fund are not to be deemed exclusive and Alex. Brown shall be free to render
distribution or other services to others (including other investment companies)
and to engage in other activities. It is understood and agreed that directors,
officers or employees of Alex. Brown may serve as directors or officers of the
Fund, and that directors or officers of the Fund may serve as directors,
officers and employees of Alex. Brown to the extent permitted by law; and that
directors, officers and employees of Alex. Brown are not prohibited from
engaging in any other business activity or from rendering services to any other
person, or from serving as partners, directors or officers of any other firm or
corporation, including other investment companies.
14. Term and Approval. This Agreement shall become
effective at the close of business on the date hereof and shall remain in force
and effect for an initial term of two years and from year to year thereafter,
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 (as defined in the
1940 Act), and
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<PAGE>
(b) by the affirmative vote of a majority of the
Directors who are not "interested persons" of the Fund (as defined in the 1940
Act) and do not have a financial interest in the operation of this Agreement, by
votes cast in person at a meeting specifically called for such purpose.
15. Termination. This Agreement may be terminated at any
time, on sixty (60) days' written notice to the other party without the payment
of any penalty, (i) by vote of the Fund's Board of Directors, (ii) by vote of a
majority of the directors who are not "interested persons" of the Fund (as
defined in the 1940 Act) and do not have a financial interest in the operation
of this Agreement, (iii) by vote of a majority of the Fund's outstanding voting
securities (as defined in the 1940 Act) or (iv) by Alex. Brown. The notice
provided for herein may be waived by each party. This Agreement shall
automatically terminate in the event of its assignment (as the term is defined
in the 1940 Act).
16. Liability. In the performance of its duties hereunder,
Alex. Brown shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits in performing all
services provided for under this Agreement, but shall not be liable for any act
or omission which does not constitute willful misfeasance, bad faith or gross
negligence on the part of Alex. Brown or reckless disregard by Alex. Brown of
its duties under this Agreement.
17. 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 parties, it is agreed that the address of both
Alex. Brown and the Fund for this purpose shall be 135 East Baltimore Street,
Baltimore, Maryland 21202.
18. 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 the 1940 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. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers as of the day
and year first above written.
[SEAL] ALEX. BROWN CASH RESERVE FUND, INC.
Attest:/s/ Laurie D. DePrine By /s/ Brian C. Nelson
--------------------- -------------------
Title:
[SEAL] ALEX. BROWN & SONS INCORPORATED
Attest: /s/ Laurie D. DePrine By /s/ Edward J. Veilleux
--------------------- ----------------------
Title:
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<PAGE>
Exhibit A
FLAG INVESTORS FAMILY OF FUNDS - CLASS B SHARES
135 East Baltimore Street
Baltimore, Maryland 21202
SUB-DISTRIBUTION AGREEMENT
_____________________, 19__
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a
Maryland corporation, serves as distributor (the "Distributor") of the Flag
Investors Funds - Class B Shares (collectively, the "Funds", individually a
"Fund"). The Funds are open-end investment companies registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"). The
Funds offer their Flag Investors Class B Shares ("Shares") to the public in
accordance with the terms and conditions contained in the Prospectus of each
Fund. The term "Prospectus" used herein refers to the prospectus on file with
the Securities and Exchange Commission which is part of the registration
statement of each Fund under the Securities Act of 1933 (the "Securities Act").
In connection with the foregoing you may serve as a participating dealer (and,
therefore, accept orders for the purchase or redemption of Shares, respond to
shareholder inquiries and perform other related functions) on the following
terms and conditions:
1. Participating Dealer. You are hereby designated a
Participating Dealer and as such are authorized (i) to accept orders for the
purchase of Shares and to transmit to the Funds such orders and the payment made
therefore, (ii) to accept orders for the redemption of Shares and to transmit to
the Funds such orders and all additional material, including any certificates
for Shares, as may be required to complete the redemption and (iii) to assist
shareholders with the foregoing and other matters relating to their investments
in each Fund, in each case subject to the terms and conditions set forth in the
Prospectus of each Fund. You are to review each Share purchase or redemption
order submitted through you or with your assistance for completeness and
accuracy. You further agree to undertake from time to time certain shareholder
servicing activities for customers of yours who have purchased Shares and who
use your facilities to communicate with the Funds or to effect redemptions or
additional purchases of Shares.
2. Limitation of Authority. No person is authorized to
make any representations concerning the Funds or the Shares except those
contained in the Prospectus of each Fund and in such printed information as the
Distributor may subsequently prepare. No person is authorized to distribute any
sales material relating to any Fund without the prior written approval of the
Distributor.
3. Compensation. As compensation for such services, you
will look solely to the Distributor, and you acknowledge that the Funds shall
have no direct responsibility for any compensation. In addition to any sales
charge payable to you by your customer pursuant to a
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<PAGE>
Prospectus, the Distributor will pay you no less often than annually a
shareholder processing and service fee (as we may determine from time to time in
writing) computed as a percentage of the average daily net assets maintained
with each Fund during the preceding period by shareholders who purchase their
shares through you or with your assistance, provided that said assets are at
least $250,000 for each Fund for which you are to be compensated, and provided
that in all cases your name is transmitted with each shareholder's purchase
order.
4. Prospectus and Reports. You agree to comply with the
provisions contained in the Securities Act governing the distribution of
prospectuses to persons to whom you offer Shares. You further agree to deliver,
upon our request, copies of any amended Prospectus of the relevant Fund to
purchasers whose Shares you are holding as record owner and to deliver to such
persons copies of the annual and interim reports and proxy solicitation
materials of the Funds. We agree to furnish to you as many copies of each
Prospectus, annual and interim reports and proxy solicitation materials as you
may reasonably request.
5. Qualification to Act. You represent that you are a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"). Your expulsion or suspension from the NASD will automatically
terminate this Agreement on the effective date of such expulsion or suspension.
You agree that you will not offer Shares to persons in any jurisdiction in which
you may not lawfully make such offer due to the fact that you have not
registered under, or are not exempt from, the applicable registration or
licensing requirements of such jurisdiction. You agree that in performing the
services under this Agreement, you at all times will comply with the Rules of
Fair Practice of the NASD, including, without limitation, the provisions of
Section 26 of such Rules. You agree that you will not combine customer orders to
reach breakpoints in commissions for any purposes whatsoever unless authorized
by the then current Prospectus in respect of Shares of a particular class or by
us in writing. You also agree that you will place orders immediately upon their
receipt and will not withhold any order so as to profit therefrom. In
determining the amount payable to you hereunder, we reserve the right to exclude
any sales which we reasonably determine are not made in accordance with the
terms of the Prospectus and provisions of the Agreement.
6. Blue Sky. The Funds have registered an indefinite
number of Shares under the Securities Act. The Funds intend to register or
qualify in certain states where registration or qualification is required. We
will inform you as to the states or other jurisdictions in which we believe the
Shares have been qualified for sale under, or are exempt from the requirements
of, the respective securities laws of such states. You agree that you will offer
Shares to your customers only in those states where such Shares have been
registered, qualified, or an exemption is available. We assume no responsibility
or obligation as to your right to sell Shares in any jurisdiction. We will file
with the Department of State in New York a State Notice and a Further State
Notice with respect to the Shares, if necessary.
7. Authority of Fund. Each of the Funds shall have full
authority to take such action as it deems advisable in respect of all matters
pertaining to the offering of its Shares, including the right not to accept any
order for the purchase of Shares.
8. Record Keeping. You will (i) maintain all records
required by law to be kept by you relating to transactions in Shares and, upon
request by any Fund, promptly make such of these records available to the Fund
as the Fund may reasonably request in connection with its operations and (ii)
promptly notify the Fund if you experience any difficulty in maintaining the
records described in the foregoing clauses in an accurate and complete manner.
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9. Liability. The Distributor shall be under no liability
to you except for lack of good faith and for obligations expressly assumed by
them hereunder. In carrying out your obligations, you agree to act in good faith
and without negligence. Nothing contained in this Agreement is intended to
operate as a waiver by the Distributor or you of compliance with any provision
of the Investment Company Act, the Securities Act, the Securities Exchange Act
of 1934, as amended, or the rules and regulations promulgated by the Securities
and Exchange Commission thereunder.
10. Termination. This Agreement may be terminated by
either party, without penalty, upon ten days' notice to the other party and
shall automatically terminate in the event of its assignment (as defined in the
Investment Company Act). This Agreement may also be terminated at any time for
any particular Fund without penalty by the vote of a majority of the members of
the Board of Directors or Trustees of such Fund who are not "interested persons"
(as defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Distribution Agreement between such
Fund and the Distributor or by the vote of a majority of the outstanding voting
securities of the Fund.
11. Communications. All communications to us should be
sent to the above address. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below.
If the foregoing is in accordance with your understanding
of our agreement, please sign and return to us one copy of this agreement.
ALEX. BROWN & SONS INCORPORATED
-----------------------------------
(Authorized Signature)
Confirmed and accepted:
Firm Name: ________________________
By: _______________________________
Address: __________________________
Date:______________________________
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EX-99.B(6)(k)
FLAG INVESTORS FAMILY OF FUNDS
135 East Baltimore Street
Baltimore, Maryland 21202
SHAREHOLDER SERVICING AGREEMENT
_________________, 19__
Gentlemen:
We wish to enter into this Shareholder Servicing Agreement
with you concerning the provision of support services to your clients and
customers ("Customers") who may from time to time beneficially own shares of our
common stock ("Shares").
The terms and conditions of this Servicing Agreement are as
follows:
Section 1. (a) You agree to provide the following services to
Customers who may from time to time beneficially own Shares: (i) aggregating and
processing purchase and redemption requests for Shares from Customers and
placing net purchase and redemption orders with our distributor; (ii) processing
dividend payments from us on behalf of Customers; (iii) providing information
periodically to Customers showing their positions in Shares; (iv) arranging for
bank wires; (v) responding to Customer inquiries relating to the services
performed by you; (vi) providing subaccounting with respect to Shares
beneficially owned by Customers; (vii) as required by law, forwarding
shareholder communications from us (such as proxies, shareholder reports, annual
and semi-annual financial statements and dividend, distribution and tax notices)
to Customers; and (viii) providing such other similar services as we may
reasonably request to the extent you are permitted to do so under applicable
statutes, rules or regulations. You will provide to Customers a schedule of any
fees that you may charge directly to them for such services. You hereby
represent that such fees are not unreasonable or excessive. Shares purchased by
you on behalf of Customers will be registered with our transfer agent in your
name or in the name of your nominee. The Customer will be the beneficial owner
of Shares purchased and held by you in accordance with the Customer's
instructions ("Customers' Shares") and the Customer may exercise all rights of a
shareholder of the Fund.
(b) You agree that you will (i) maintain all records
required by law relating to transactions in Shares and, upon our request,
promptly make such of these records available to us as we may reasonably request
in connection with our operations, and (ii) promptly notify us if you experience
any difficulty in maintaining the records described in the foregoing clauses in
an accurate and complete manner.
Section 2. You will provide such office space and equipment,
telephone facilities and personnel (which may be a part of the space, equipment
and facilities currently used in your business, or any personnel employed by
you) as may be reasonably necessary or beneficial in order to provide the
aforementioned services to Customers.
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<PAGE>
Section 3. Neither you nor any of your officers, employees,
agents or assignees are authorized to make any representations concerning us or
Shares except those contained in our then current prospectus for such Shares,
copies of which will be supplied by us to you, or in such supplemental
literature or advertising as may be authorized by us in writing.
Section 4. For all purposes of this Agreement you will be
deemed to be an independent contractor, and will have no authority to act as
agent for us in any matter or in any respect. You may, upon prior written notice
to us, delegate your responsibilities hereunder to another person or persons;
provided, however, that notwithstanding any such delegation, you will remain
responsible for the performance of all of your responsibilities under this
Agreement. By your written acceptance of this Agreement, you agree to and do
release, indemnify and hold us harmless from and against any and all direct or
indirect liabilities or losses resulting from requests, directions, actions or
inactions of or by you or your officers, employees, agents or assignees
regarding your responsibilities hereunder or the purchase, redemption, transfer
or registration of Shares by or on behalf of Customers. You and your employees
will, upon request, be available during normal business hours to consult with us
or our designees concerning the performance of your responsibilities under this
Agreement.
Section 5. In consideration of the services and facilities
provided by you hereunder, we will cause our distributor pay to you, and you
will accept as full payment therefor, a fee (as we may determine from time to
time in writing) computed as a percentage of the average daily net assets of the
Customers' Shares held of record by you from time to time, which fee will be
computed daily and payable no less often than annually. For purposes of
determining the fees payable under this Section 5, the average daily net assets
of the Customers' Shares will be computed in the manner specified in our
registration statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of Shares for purposes of
purchases and redemptions. The fee rate stated above may be prospectively
increased or decreased by us or by our distributor, at any time upon notice to
you. Further, we may, in our discretion and without notice, suspend or withdraw
the sale of Shares, including the sale of such shares to you for the account of
any Customer or Customers.
Section 6. You will furnish us or our designees with such
information relating to your performance under this Agreement as we or they may
reasonably request (including, without limitation, periodic certifications
confirming the provision to Customers of the services described herein), and
shall otherwise cooperate with us and our designees (including, without
limitation, any auditors designated by us), in connection with the preparation
of reports to our Board of Directors concerning this Agreement and the monies
paid or payable by us pursuant hereto, as well as any other reports or filings
that may be required by law.
Section 7. We may enter into other similar services agreements
with any other person or persons without your consent.
Section 8. This Agreement will become effective on the date a
fully executed copy of this Agreement is received by us or our distributor, and
is terminable, without penalty, at any time by us or by you upon ten days'
notice to the other party hereto and shall automatically terminate in the event
of its assignment, as that term is defined in the Investment Company Act of
1940, as amended.
Section 9. This Agreement will be construed in accordance with
the laws of the State of Maryland.
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<PAGE>
Section 10. All notices and other communications to either you
or us will be duly given if mailed, telegraphed, telexed or transmitted by
similar telecommunications device, if to us at the address below, and if to you,
at the address specified by you after your signature below:
Flag Investors Family of Funds
135 East Baltimore Street
Baltimore, Maryland 21202
Attention: Edward J. Veilleux
If you agree to be legally bound by the provisions of this
Agreement, please sign a copy of this letter where indicated below and promptly
return it to us, at the address set forth in Section 10 above.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
Date: __________ By: ______________________________________
Authorized Officer
Confirmed and Accepted:
Firm Name: _______________________________
By: _______________________________
Address: _______________________________
__________________________________________
Date: _______________________________
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<PAGE>
EX-99.B(6)(l)
FLAG INVESTORS FAMILY OF FUNDS
135 East Baltimore Street
Baltimore, Maryland 21202
SUB-DISTRIBUTION AGREEMENT
_____________________, 19__
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor (the "Distributor") of the Flag Investors
Funds (collectively, the "Funds", individually a "Fund"). The Funds are open-end
investment companies registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Funds offer their shares ("Shares")
to the public in accordance with the terms and conditions contained in the
Prospectus of each Fund. The term "Prospectus" used herein refers to the
prospectus on file with the Securities and Exchange Commission which is part of
the registration statement of each Fund under the Securities Act of 1933 (the
"Securities Act"). In connection with the foregoing you may serve as a
participating dealer (and, therefore, accept orders for the purchase or
redemption of Shares, respond to shareholder inquiries and perform other related
functions) on the following terms and conditions:
1. Participating Dealer. You are hereby designated a Participating
Dealer and as such are authorized (i) to accept orders for the purchase of
Shares and to transmit to the Funds such orders and the payment made therefore,
(ii) to accept orders for the redemption of Shares and to transmit to the Funds
such orders and all additional material, including any certificates for Shares,
as may be required to complete the redemption and (iii) to assist shareholders
with the foregoing and other matters relating to their investments in each Fund,
in each case subject to the terms and conditions set forth in the Prospectus of
each Fund. You are to review each Share purchase or redemption order submitted
through you or with your assistance for completeness and accuracy. You further
agree to undertake from time to time certain shareholder servicing activities
for customers of yours who have purchased Shares and who use your facilities to
communicate with the Funds or to effect redemptions or additional purchases of
Shares.
2. Limitation of Authority. No person is authorized to make any
representations concerning the Funds or the Shares except those contained in the
Prospectus of each Fund and in such printed information as the Distributor may
subsequently prepare. No person is authorized to distribute any sales material
relating to any Fund without the prior written approval of the Distributor.
3. Compensation. As compensation for such services, you will look
solely to the Distributor, and you acknowledge that the Funds shall have no
direct responsibility for any compensation. In addition to any sales charge
payable to you by your customer pursuant to a Prospectus, the Distributor will
pay you no less often than annually a shareholder processing and service fee (as
we may determine from time to time in writing) computed as a percentage of the
average daily net assets maintained with each Fund during the preceding period
by shareholders who
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purchase their shares through you or with your assistance, provided that said
assets are at least $250,000 for each Fund for which you are to be compensated,
and provided that in all cases your name is transmitted with each shareholder's
purchase order.
4. Prospectus and Reports. You agree to comply with the provisions
contained in the Securities Act governing the distribution of prospectuses to
persons to whom you offer Shares. You further agree to deliver, upon our
request, copies of any amended Prospectus of the relevant Fund to purchasers
whose Shares you are holding as record owner and to deliver to such persons
copies of the annual and interim reports and proxy solicitation materials of the
Funds. We agree to furnish to you as many copies of each Prospectus, annual and
interim reports and proxy solicitation materials as you may reasonably request.
5. Qualification to Act. You represent that you are a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD").
Your expulsion or suspension from the NASD will automatically terminate this
Agreement on the effective date of such expulsion or suspension. You agree that
you will not offer Shares to persons in any jurisdiction in which you may not
lawfully make such offer due to the fact that you have not registered under, or
are not exempt from, the applicable registration or licensing requirements of
such jurisdiction. You agree that in performing the services under this
Agreement, you at all times will comply with the Rules of Fair Practice of the
NASD, including, without limitation, the provisions of Section 26 of such Rules.
You agree that you will not combine customer orders to reach breakpoints in
commissions for any purposes whatsoever unless authorized by the then current
Prospectus in respect of Shares of a particular class or by us in writing. You
also agree that you will place orders immediately upon their receipt and will
not withhold any order so as to profit therefrom. In determining the amount
payable to you hereunder, we reserve the right to exclude any sales which we
reasonably determine are not made in accordance with the terms of the Prospectus
and provisions of the Agreement.
6. Blue Sky. The Funds have registered an indefinite number of Shares
under the Securities Act. The Funds intend to register or qualify in certain
states where registration or qualification is required. We will inform you as to
the states or other jurisdictions in which we believe the Shares have been
qualified for sale under, or are exempt from the requirements of, the respective
securities laws of such states. You agree that you will offer Shares to your
customers only in those states where such Shares have been registered,
qualified, or an exemption is available. We assume no responsibility or
obligation as to your right to sell Shares in any jurisdiction. We will file
with the Department of State in New York a State Notice and a Further State
Notice with respect to the Shares, if necessary.
7. Authority of Fund. Each of the Funds shall have full authority to
take such action as it deems advisable in respect of all matters pertaining to
the offering of its Shares, including the right not to accept any order for the
purchase of Shares.
8. Record Keeping. You will (i) maintain all records required by law to
be kept by you relating to transactions in Shares and, upon request by any Fund,
promptly make such of these records available to the Fund as the Fund may
reasonably request in connection with its operations and (ii) promptly notify
the Fund if you experience any difficulty in maintaining the records described
in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to you except
for lack of good faith and for obligations expressly assumed by it hereunder. In
carrying out your obligations, you agree to act in good faith and without
negligence. Nothing contained in this Agreement is intended to operate as a
waiver by the Distributor or you of compliance with any provision of the
Investment
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<PAGE>
Company Act, the Securities Act, the Securities Exchange Act of 1934, as
amended, or the rules and regulations promulgated by the Securities and Exchange
Commission thereunder.
10. Termination. This Agreement may be terminated by either party,
without penalty, upon ten days' notice to the other party and shall
automatically terminate in the event of its assignment (as defined in the
Investment Company Act). This Agreement may also be terminated at any time for
any particular Fund without penalty by the vote of a majority of the members of
the Board of Directors or Trustees of such Fund who are not "interested persons"
(as defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Distribution Agreement between such
Fund and the Distributor or by the vote of a majority of the outstanding voting
securities of the Fund.
11. Communications. All communications to us should be sent to the
above address. Any notice to you shall be duly given if mailed or telegraphed to
you at the address specified by you below.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us one copy of this agreement.
ALEX. BROWN & SONS INCORPORATED
---------------------------------------
(Authorized Signature)
Confirmed and accepted:
Firm Name: ________________________
By: _______________________________
Address: __________________________
Date:______________________________
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EX-99.B(8)(a)
CUSTODIAN SERVICES AGREEMENT TERMS AND CONDITIONS
This Agreement is made as of April 4, 1990 by and between Alex. Brown
Cash Reserve, Inc. (the "Fund"), a Maryland corporation, and Provident National
Bank ("Provident"), a national banking association.
The Fund is registered as an open-end investment company under the
Investment Company Act of 1940 (the "1940" Act), as amended. The Fund wishes to
retain Provident to provide custodian services, and Provident wishes to furnish
custodian services, either directly or though an affiliate or affiliates, as
more fully described herein.
In consideration of the promises and mutual covenants herein contained,
the parties agree as follows:
1. Definitions.
(a) "Authorized Person." The term "Authorized Person" shall
mean any officer of the Fund and any other person, who is duly authorized by the
Fund's Governing Board, to give Oral and Written Instructions on behalf of the
Fund. Such persons are listed in the Certificate attached hereto as the
Authorized Persons Appendix as such appendix may be amended in writing by the
Fund's Governing Board from time to time.
(b) "Book-Entry System." The term "Book-Entry System" means
Federal Reserve Treasury book-entry system for United States and federal agency
securities, its successor or successors, and its nominee or nominees and any
book-entry system
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maintained by an exchange registered with the SEC under the 1934 Act.
(c) "CFTC." The term "CFTC" shall mean the Commodities Futures Trading
commission.
(d) "Governing Board." The term "Governing Board" shall mean
the Fund"s Board of Directors if the Fund is a corporation or the Fund's Board
of Trustees if the Fund is a trust, or, where duly authorized, a competent
committee thereof.
(e) "Oral Instructions." The term "Oral Instructions" shall
mean oral instructions received by Provident from an Authorized Person or from a
person reasonably believed by Provident to be an Authorized Person.
(f) "Provident." The term "Provident" shall mean Provident
National Bank or a subsidiary or affiliate of Provident National Bank.
(g) "SEC." The term "SEC" shall mean the Securities
and Exchange Commission.
(h) "Securities and Commodities Laws." The terms the "1933
Act" shall mean the Securities Act of 1933, the "1934 Act" shall mean the
Securities Exchange Act of 1934, the "1940 Act" shall mean the Investment
Company Act of 1940, as amended, and the "CEA" shall mean the Commodities
Exchange Act, as amended.
(i) "Shares." The term "Shares" shall mean the shares of stock
of any series or class of the Fund, or, where appropriate, units of beneficial
interest in a trust where the Fund is organized as a Trust.
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<PAGE>
(j) "Property." The term "Property" shall mean:
(i) any and all securities and other investment
items which the Fund may from time to time
deposit, or cause to be deposited, with
Provident or which Provident may from time to
time hold for the Fund;
(ii) all income in respect of any of such
securities or other investment items;
(iii) all proceeds of the sale of any of such
securities or investment items; and
(iv) all proceeds of the sale of securities issued
by the Fund, which are received by Provident
from time to time, from or on behalf of the
Fund.
(k) "Written Instructions." The term "Written Instructions"
shall mean written instructions signed by two Authorized Persons and received by
Provident. The instructions may be delivered by hand, mail, tested telegram,
cable, telex or facsimile sending device.
2. Appointment. The Fund hereby appoints Provident to provide custodian
services, and Provident accepts such appointment and agrees to furnish such
services.
3. Delivery of Documents. The Fund has provided or, where applicable,
will provide Provident with the following:
(a) certified or authenticated copies of the resolutions of
the Fund's Governing Board, approving the appointment
of Provident or its affiliates to provide services;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of the Fund's advisory agreement or agreements;
(d) a copy of the Fund's distribution agreement or
agreements;
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<PAGE>
(e) a copy of the Fund's administration agreements if
Provident is not providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in
respect of the Fund; and
(g) certified or authenticated copies of any and all
amendments or supplements to the foregoing.
4. Compliance with Government Rules and Regulations. Provident
undertakes to comply with all applicable requirements of the 1933 Act, the 1934
Act, the 1940 Act, and the CEA, and any laws, rules and regulations of
governmental authorities having jurisdiction with respect to all duties to be
performed by Provident hereunder. Except as specifically set forth herein,
Provident assumes no responsibility for such compliance by the Fund.
5. Instructions. Unless otherwise provided in this Agreement, Provident
shall act only upon Oral and Written Instructions. Provident shall be entitled
to rely upon any Oral and Written Instructions it receives from an Authorized
Persons (or from a person reasonably believed by Provident to be an Authorized
Person) pursuant to this Agreement. Provident may assume that any Oral or
Written Instructions received hereunder are not in any way inconsistent with the
provisions of organizational documents of the Fund or of any vote, resolution or
proceeding of the Fund's Governing Board or of the Fund's shareholders.
The Fund agrees to forward to Provident Written
Instructions confirming Oral Instructions so that Provident
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<PAGE>
receives the Written Instructions by the close of business on the same day that
such Oral Instructions are received. The fact that such confirming Written
Instructions are not received by Provident shall in no way invalidate the
transactions or enforceability of the transactions authorized by the Oral
Instructions.
The Fund further agrees that Provident shall incur no
liability to the Fund in acting upon Oral or Written Instructions provided such
instructions reasonably appear to have been received from an Authorized Person.
6. Right to Receive Advice.
(a) Advice of the Fund. If Provident is in doubt as to any
action it should or should not take, Provident may request directions or advice,
including Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If Provident shall be in doubt as to
any questions of law pertaining to any action it should or should not take,
Provident may request advice at its own cost from such counsel of its own
choosing (who may be counsel for the Fund, the Fund's advisor or Provident, at
the option of Provident).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral or Written Instructions Provident receives from the
Fund, and the advice it receives from counsel, Provident shall be entitled to
rely upon and follow the advice of counsel.
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<PAGE>
(d) Protection of Provident. Provident shall be protected in
any action it takes or does not take in reliance upon directions, advice or Oral
or Written Instructions it receives from the Fund or from counsel and which
Provident believes, in good faith, to be consistent with those directions,
advice or Oral or Written Instructions.
Nothing in this paragraph shall be construed so as to impose
an obligation upon Provident (i) to seek such directions, advice or Oral or
Written Instructions, or (ii) to act in accordance with such directions, advice
or Oral or Written Instructions unless, under the terms of other provisions of
this Agreement, the same is a condition of Provident's properly taking or not
taking such action.
7. Records. The books and records pertaining to the Fund, which are in
the possession of Provident, shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. The Fund, or the Fund's
authorized representatives, shall have access to such books and records at all
time during Provident's normal business hours. Upon the reasonable request of
the Fund, copies of any such books and records shall be provided by Provident to
the Fund or to an authorized representative of the Fund, at the Fund's expense.
8. Confidentiality. Provident agrees to keep confidential all records
of the Fund and information relative to the Fund and its Shareholders (past,
present and potential), unless the
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<PAGE>
release of such records or information is otherwise consented to, in writing, by
the Fund. The Fund further agrees that, should Provident be required to provide
such information or records to duly constituted authorities (who may institute
civil or criminal contempt proceedings for failure to comply), Provident shall
not be required to seek the Fund's consent prior to disclosing such information,
provided that Provident gives the Fund prior written notice of the provision of
such information and records.
9. Cooperation with Accountants. Provident shall cooperate with the
Fund, its independent public accountants and shall take all reasonable action in
the performance of its obligations under this Agreement to ensure that the
necessary information is made available to such accountants for the expression
of their opinion, as required by the Fund.
10. Disaster Recovery. Provident shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provision for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
Provident shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions but shall have no liability with respect thereto.
11. Compensation. As compensation for custody services rendered by
Provident during the term of this Agreement, the Fund will pay to Provident a
fee or fees as may be agreed to in writing from time to time by the Fund and
Provident.
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<PAGE>
12. Indemnification. The Fund agrees to indemnify and hold harmless
Provident and its nominees from all taxes, charges, expenses, assessment, claims
and liabilities (including, without limitation, liabilities arising under the
1933 Act, the 1934 Act, the 1940 Act, the CEA, and any state and foreign
securities and blue sky laws, and amendments thereto, and expenses, including
(without limitation) attorneys' fees and disbursements, arising directly or
indirectly from any action which Provident takes or does not take (i) at the
request or on the direction of or in reliance on the advice of the Fund or (ii)
upon Oral or Written Instructions. Neither Provident, nor any of its nominees,
shall be indemnified against any liability to the Fund or to its shareholders
(or any expenses incident to such liability) arising out of Provident's or its
nominees' own willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties and obligations under this Agreement or Provident's own
negligent failure to perform its duties under this Agreement.
13. Responsibility of Provident. Provident shall be under no duty to
take any action on behalf of the Fund except as specifically set forth herein or
as may be specifically agreed to by Provident, in writing. Provident shall be
obligated to exercise care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best efforts, within reasonable
limits, in performing Services provided for under this Agreement. Provident
shall be responsible for its own or its nominees own willful misfeasance, bad
faith, gross
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<PAGE>
negligence or reckless disregard of its duties and obligations under this
Agreement or Provident's own negligent failure to perform its duties under this
Agreement.
Without limiting the generality of the foregoing or of any
other provision of this Agreement, Provident, in connection with its duties
under this Agreement, shall not be under any duty or obligation to include into
and shall not be liable for (a) the validity or invalidity or authority or lack
thereof of any Oral or Written Instruction, notice or other instrument which
conforms to the applicable requirements of this Agreement, and which Provident
reasonably believes to be genuine; or (b) delays or errors or loss of data
occurring by reason of circumstances beyond Provident's control, including acts
of civil or military authority, national emergencies, fire, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
Notwithstanding anything in this Agreement to the contrary,
Provident shall have no liability to the Fund for any consequential, special or
indirect losses or damages which the Fund may incur or suffer by or as a
consequence of Provident's performance of the services provided hereunder,
whether or not the likelihood of such losses or damages was known by Provident.
14. Description of Services.
(a) Delivery of the Property. The Fund will deliver
or arrange for delivery to Provident, all the property it owns,
including cash received as a result of the distribution of its
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<PAGE>
Shares, during the period that is set forth in this Agreement. Provident will
not be responsible for such property until actual receipt.
(b) Receipt and Disbursement of Money. Provident, acting upon
Written Instructions, shall open and maintain separate account(s) in the Fund's
name using all cash received from or for the account of the Fund, subject to the
terms of this Agreement. In addition, upon Written Instructions, Provident shall
open separate custodial accounts for each separate series, portfolio or class of
the Fund and shall hold in such account(s) all cash received from or for the
accounts of the Fund specifically designated to each separate series, portfolio
or class.
Provident shall make cash payments from or for the account of
the Fund only for:
(i) purchases of securities in the name of the
Fund or Provident or Provident's nominee as
provided in sub-paragraph (j) and for which
Provident has received a copy of the
broker's or dealer's confirmation or payee's
invoice, as appropriate;
(ii) purchase or redemption of Shares of the Fund
delivered to Provident;
(iii) payment of, subject to Written Instructions,
interest, taxes, administration, accounting,
distribution, advisory, management fees or similar
expenses which are to be borne by the Fund;
(iv) payment to, subject to receipt of Written
Instructions, the Fund's transfer agent, as
agent for the shareholders, an amount equal
to the amount of dividends and distributions
stated in the Written Instructions to be
distributed in cash by the transfer agent to
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<PAGE>
shareholders, or, in lieu of paying the
Fund's transfer agent, Provident may arrange
for the direct payment of cash dividends and
distributions to shareholders in accordance
with procedures mutually agreed upon from
time to time by and among the Fund,
Provident and the Fund's transfer agent.
(v) payments, upon receipt "Written
Instructions", in connection with the
conversion, exchange or surrender of
securities owned or subscribed to by the
Fund and held by or delivered to Provident;
(vi) payments of the amounts of dividends received
with respect to securities sold short;
(vii) payments made to a sub-custodian pursuant to
provisions in subparagraph (c) of this
Paragraph 14; and
(viii) payments, upon Written Instructions made for
other proper Fund purposes.
Provident is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received as custodian
for the account of the Fund.
(c) Receipt of Securities.
(i) Provident shall hold all securities received
by it for or for the account of the Fund in a
separate account that physically segregates
such securities from those of any other
persons, firms or corporations. All such
securities shall be held or disposed of only
upon Written Instructions of the Fund
pursuant to the terms of this Agreement.
Provident shall have no power or authority to
assign, hypothecate, pledge or otherwise
dispose of any such securities or investment,
except upon the express terms of this
Agreement and upon Written Instructions,
accompanied by a certified resolution of the
Fund's Governing Board, authorizing the
transaction. In no case may any member of
the Fund's Board of Directors/Trustees, or
any officer, employee or agent of the Fund
withdraw any securities.
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<PAGE>
At Provident's own expense and for its own
convenience, Provident may enter into
sub-custodian agreements with other United
States banks or trust companies to perform
duties described in this sub-paragraph c.
Such bank or trust company shall have an
aggregate capital, surplus and undivided
profits, according to its last published
report, of at least one million dollars
($1,000,000), if it is a subsidiary or
affiliate of Provident, or at least twenty
million dollars ($20,000,000) if such bank
or trust company is not a subsidiary or
affiliate of Provident. In addition, such
bank or trust company must agree to comply
with the relevant provisions of the 1940 Act
and other applicable rules and regulations.
Provident shall remain responsible for the
performance of all of its duties as
described in this Agreement and shall hold
the Fund harmless from its own acts or
omissions, under the standards of care
provided for herein, or of any sub-custodian
chosen by Provident under the terms of this
sub-paragraph (c).
(d) Transactions Requiring Instructions. Upon receipt of Oral
or Written Instructions and not otherwise, Provident, directly or through the
use of the Book-Entry System, shall:
(i) deliver any securities held for the Fund against
the receipt of payment for the sale of such
securities;
(ii) execute and deliver to such persons as may be
designated in such Oral or Written Instructions,
proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as
owner of any securities may be exercised;
(iii) deliver any securities to the issuer thereof, or
its agent, when such securities are called,
redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to Provident;
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<PAGE>
(iv) deliver any securities held for the Fund against
receipt of other securities or cash issued or paid
in connection with the liquidation,
reorganization, refinancing, tender offer, merger,
consolidation or recapitalization of any
corporation, or the exercise of any conversion
privilege;
(v) deliver any securities held for the Fund to any
protective committee, reorganization committee or
other person in connection with the
reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets
of any corporation, and receive and hold under the
terms of this Agreement such certificates of
deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such
delivery;
(vi) make such transfer or exchanges of the assets of
the Fund and take such other steps as shall be
stated in said Oral or Written Instructions to be
for the purpose of effectuating a duly authorized
plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund;
(vii) release securities belonging to the Fund to any
bank or trust company for the purpose of a pledge
or hypothecation to secure any loan incurred by
the Fund; provided, however, that securities shall
be released only upon payment to Provident of the
monies borrowed, except that in cases where
additional collateral is required to secure a
borrowing already made subject to proper prior
authorization, further securities may be released
for that purpose; and repay such loan upon
redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the
note or notes evidencing the loan;
(viii) release and deliver securities owned by the Fund
in connection with any repurchase agreement
entered into on behalf of the Fund, but only on
receipt of payment therefor; and pay out moneys of
the Fund in connection with such repurchase
agreements, but only upon the delivery of the
securities;
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<PAGE>
(ix) release and deliver or exchange securities owned
by the Fund in connection with any conversion of
such securities, pursuant to their terms, into
other securities;
(x) release and deliver securities owned by the fund
for the purpose of redeeming in kind shares of the
Fund upon delivery thereof to Provident; and
(xi) release and deliver or exchange securities owned
by the Fund for other corporate purposes.
Provident must also receive a certified resolution describing
the nature of the corporate purpose and the name and address of the person(s) to
whom delivery shall be made when such action is pursuant to sub-paragraph
(d)(xi) above.
(e) Use of Book-Entry System. The Fund shall deliver to
Provident certified resolutions of the Fund's Governing Board approving,
authorizing and instructing Provident on a continuous and on-going basis, to
deposit in the Book-Entry System all securities belonging to the Fund eligible
for deposit therein and to utilize the Book-Entry System to the extent possible
in connection with settlements of purchases and sales of securities by the Fund,
and deliveries and returns of securities loaned, subject to repurchase
agreements or used as collateral in connection with borrowings. Provident shall
continue to perform such duties until it receives Written or Oral Instructions
authorizing contrary actions(s).
To administer the Book-Entry System properly, the following
provisions shall apply:
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<PAGE>
(i) With respect to securities of the Fund which are
maintained in the Book-Entry system, established
pursuant to this sub-paragraph (e) hereof, the
records of Provident shall identify by Book-Entry
or otherwise those securities belonging to the
Fund. Provident shall furnish the Fund a detailed
statement of the Property held for the Fund under
this Agreement at least monthly and from time to
time and upon written request.
(ii) Securities and any cash of the Fund deposited in
the Book-Entry System will at all times be
segregated from any assets and cash controlled by
Provident in other than a fiduciary or custodian
capacity but may be commingled with other assets
held in such capacities. Provident and its
sub-custodian, if any, will pay out money only
upon receipt of securities and will deliver
securities only upon the receipt of money.
(iii) All books and records maintained by Provident
which relate to the Fund's participation in the
Book-Entry System will at all times during
Provident's regular business hours be open to the
inspection of the Fund's duly authorized employees
or agents, and the Fund will be furnished with all
information in respect of the services rendered to
it as it may require.
(iv) Provident will provide the Fund with copies of any
report obtained by Provident on the system of
internal accounting control of the Book-Entry
System promptly after receipt of such a report by
Provident.
Provident will also provide the Fund with such reports on its
own system of internal control as the Fund may reasonably request from time to
time.
(f) Registration of Securities. All Securities held for the
Fund which are issued or issuable only in bearer form, except such securities
held in the Book-Entry System, shall be held by Provident in bearer form; all
other securities held for
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<PAGE>
the Fund may be registered in the name of the Fund; Provident; the Book-Entry
System; a sub-custodian; or any duly appointed nominee(s) of the Fund,
Provident, Book-Entry system or sub-custodian. The Fund reserves the right to
instruct Provident as to the method of registration and safekeeping of the
securities of the Fund. The Fund agrees to furnish to Provident appropriate
instruments to enable Provident to hold or deliver in proper form for transfer,
or to register its registered nominee or in the name of the Book-Entry System,
any securities which it may hold for the account of the Fund and which may from
time to time be registered in the name of the Fund. Provident shall hold all
such securities which are not held in the Book-Entry System in a separate
account for the Fund in the name of the Fund physically segregated at all times
from those of any other person or persons.
(g) Voting and Other Action. Neither Provident nor its nominee
shall vote any of the securities held pursuant to this Agreement by or for the
account of the Fund, except in accordance with Written Instructions. Provident,
directly or through the use of the Book-Entry System, shall execute in blank and
promptly deliver all notice, proxies, and proxy soliciting materials to the
registered holder of such securities. If the registered holder is not the Fund
then Written or Oral Instructions must designate the person(s) who owns such
securities.
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<PAGE>
(h) Transactions Not Requiring Instructions. In the absence of contrary
Written Instructions, Provident is authorized to take the following actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account of the Fund,
all income, dividends, distributions, coupons,
option premiums, other payments and similar items,
included or to be included in the Property, and,
in addition, promptly advise the Fund of such
receipt and credit such income, as collected, to
the Fund's custodian account;
(B) endorse and deposit for collection, in the name of
the Fund, checks, drafts, or other orders for the
payment of money;
(C) receive and hold for the account of the Fund all
securities received as a distribution on the
Fund's portfolio securities as a result of a stock
dividend, share split-up or reorganization,
recapitalization, readjustment or other
rearrangement or distribution of rights or similar
securities issued with respect to any portfolio
securities belonging to the Fund held by Provident
hereunder;
(D) present for payment and collect the amount payable
upon all securities which may mature or be called,
redeemed, or retired, or otherwise become payable
on the date such securities become payable; and
(E) take any action which may be necessary and proper
in connection with the collection and receipt of
such income and other payments and the endorsement
for collection of checks, drafts, and other
negotiable instruments.
(ii) Miscellaneous Transactions.
(A) Provident is authorized to deliver or cause to be
delivered Property against
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<PAGE>
payment or other consideration or written receipt
therefor in the following cases:
(1) for examination by a broker or dealer selling
for the account of the Fund in accordance
with street delivery custom;
(2) for the exchange of interim receipts or
temporary securities for definitive
securities; and
(3) for transfer of securities into the name of
the Fund or Provident or nominee of either,
or for exchange of securities for a different
number of bonds, certificates, or other
evidence, representing the same aggregate
face amount or number of units bearing the
same interest rate, maturity date and call
provisions, if any; provided that, in any
such case, the new securities are to be
delivered to Provident.
(B) Unless and until Provident receives Oral or
Written Instructions to the contrary Provident
shall:
(1) pay all income items held by it which call
for payment upon presentation and hold the
cash received by it upon such payment for the
account of the Fund;
(2) collect interest and cash dividends received
with notice to the Fund, to the account of
the Fund;
(3) hold for the account of the Fund all stock
dividends, rights and similar securities
issued with respect to any securities held by
us; and
(4) execute as agent on behalf of the Fund all
necessary ownership certificates required by
the Internal Revenue Code or the Income Tax
Regulations of the United
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<PAGE>
States Treasury Department or under the laws
of any State now or hereafter in effect,
inserting the Fund's name on such certificate
its the owner of the securities covered
thereby, to the extent it may lawfully do so.
(i) Segregated Accounts.
(i) Provident shall upon receipt of Written or Oral
Instructions establish and maintain a segregated
account(s) on its records for and on behalf of the
Fund. Such account(s) may be used to transfer cash
and securities, including securities in the
Book-Entry System:
(A) for the purposes of compliance by the Fund
with the procedures required by a securities
or option exchange, providing such procedures
comply with the 1940 Act and any releases of
the SEC relating to the maintenance of
segregated accounts by registered investment
companies; and
(B) upon receipt of Written Instructions, for
other proper corporate purposes.
(ii) Provident shall arrange for the establishment of
IRA custodian accounts for such shareholders
holding shares through IRA accounts, in accordance
with the Prospectus, the Internal Revenue Code
(including regulations), and with such other
procedures as are mutually agreed upon from time
to time by and among the Fund, Provident and the
Fund's transfer agent.
(j) Purchases of Securities. Provident shall settle purchased
securities upon receipt of Oral or Written Instructions from the fund or its
investment advisor(s) that specify:
(i) the name of the issuer and the title of the
securities, including CUSIP number if applicable;
(ii) the number of shares or the principal amount
purchased and accrued interest, if any;
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<PAGE>
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase; and
(vi) the name of the person from whom or the broker
through whom the purchase was made. Provident
shall upon receipt of securities purchased by or
for the Fund pay out of the moneys held for the
account of the Fund the total amount payable to
the person from whom or the broker through whom
the purchase was made, provided that the same
conforms to the total amount payable as set forth
in such Oral or Written Instructions.
(k) Sales of Securities. Provident shall sell securities
upon receipt of Oral Instructions from the Fund that specify:
(i) the name of the issuer and the title of the
security, including CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and
accrued interest, if any;
(iii) the date of trade, settlement and sale;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such
sale;
(vi) the name of the broker through whom or the person
to whom the sale was made; and
(vii) the location to which the security must be
delivered and delivery deadline, if any.
Provident shall deliver the securities upon receipt of the
total amount payable to the Fund upon such sale, provided that the total amount
payable is the same as was set forth in the Oral or Written Instructions.
Subject to the foregoing, Provident may accept payment in such form as shall be
- 20 -
<PAGE>
satisfactory to it, and may deliver securities and arrange for payment in
accordance with the customs prevailing among dealers in securities.
(l) Reports.
(i) Provident shall furnish the Fund the following
reports:
(A) such periodic and special reports as the Fund
may reasonably request;
(B) a monthly statement summarizing all
transactions and entries for the account of
the Fund, listing the portfolio securities
belonging to the fund with the adjusted
average cost of each issue and the market
value at the end of such month, and stating
the cash account of the Fund including
disbursement;
(C) the reports to be furnished to the Fund
pursuant to Rule 17f-4; and
(D) such other information as may be agreed upon
from time to time between the Fund and
Provident.
(ii) Provident shall transmit promptly to the Fund any
proxy statement, proxy material, notice of a call
or conversion or similar communication received by
it as custodian of the Property. Provident shall
be under no other obligation to inform the Fund as
to such actions or events.
(m) Collections. All collections of monies or other property,
in respect, or which are to become part of the Property (but not the safekeeping
thereof upon receipt by Provident) shall be at the sole risk of the Fund. If
payment is not received by Provident within a reasonable time after proper
demands have been made, Provident shall notify the Fund in writing, including
copies of all demand letters, any written responses, memoranda of
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<PAGE>
all oral responses and to telephonic demands thereto, and await instructions
from the Fund. Provident shall not be obliged to take legal action for
collection unless and until reasonably indemnified to its satisfaction.
Provident shall also notify the Fund as soon as reasonably practicable whenever
income due on securities is not collected in due course.
15. Duration and Termination. This Agreement shall continue until
terminated by the Fund or by Provident on sixty (60) days prior written notice
to the other party. In the event this Agreement is terminated (pending
appointment of a successor to Provident or vote of the shareholders of the Fund
to dissolve or to function without a custodian of its cash, securities or other
property), Provident shall not deliver cash, securities or other property of the
Fund to the Fund. It may deliver them to a bank or trust company of Provident's,
having an aggregate capital, surplus and undivided profits, as shown by its last
published report, of not less than twenty million dollars ($20,000,000), as a
custodian for the Fund to be held under terms similar to those of this
Agreement. Provident shall not be required to make any such delivery or payment
until full payment shall have been made to Provident of all of its fees,
compensation, costs and expenses. Provident shall have a security interest in
and shall have a right of set off against Property in the Fund's possession as
security for the payment of such fees, compensation, costs and expenses.
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<PAGE>
16. Notices. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed (a) if to Provident at
Provident's address, Airport Business Center, International Court 2, 200 Stevens
Drive, Philadelphia, Pennsylvania 19113, marked for the attention of the
Custodian Services Department (or its successor); (b) if to the Fund, at the
address of the Fund; or, (c) if to neither of the foregoing, at such other
address as shall have been notified to the sender of any such Notice or other
communication. If notice is sent by confirming telegram, cable, telex or
facsimile sending device, it shall be deemed to have been given immediately. If
notice is sent by first-class mail, it shall be deemed to have been given five
days after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered.
17. Amendments. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. Delegation. Provident may assign its rights and delegate its duties
hereunder to any wholly-owned direct or indirect subsidiary of Provident
National Bank or PNC Financial Corp., provided that (i) Provident gives the Fund
thirty (30) days prior written notice; (ii) the delegate agrees with Provident
to comply, with all relevant provisions of the 1940
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<PAGE>
Act; and (iii) Provident and such delegate promptly provide such information as
the Fund may request, and respond to such questions as the Fund may ask,
relative to the delegation, including (without limitation) the capabilities of
the delegate.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
21. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one more separate documents their agreement, if any, with respect
to delegated and/or Oral Instructions.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
This Agreement shall be deemed to be a contract made in Pennsylvania
and governed by Pennsylvania law. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This Agreement shall
be
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<PAGE>
binding and shall inure to the benefit of the parties hereto and their
respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
PROVIDENT NATIONAL BANK
By: /s/ APlambeck
-----------------------------------
Vice President
Dated: Nov. 20, 1990
ALEX. BROWN CASH RESERVE, INC.
By: /s/ Edward J. Veilleux
-----------------------------------
Executive Vice President
Dated: 12/11/90
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<PAGE>
EX-99.B(8)(b)
ACCOUNTING SERVICES AGREEMENT
TERMS AND CONDITIONS
This AGREEMENT is made as of June 1, 1991 by and between ALEX. BROWN
CASH RESERVE FUND, INC., (the "Company"), a Maryland corporation, and PROVIDENT
FINANCIAL PROCESSING CORPORATION ("PFPC"), a Delaware corporation which is an
indirect wholly-owned subsidiary of PNC Financial Corp.
The Fund is registered as a open-end, diversified investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund
wishes to retain PFPC to provide accounting services to its Tax Free Series,
(the "Fund"), and PFPC wishes to furnish such services.
In consideration of the promises and mutual covenants herein contained,
the parties agree as follows:
1. Definitions.
(a) "Authorized Person." The term "Authorized Person" shall
mean any officer of the Company and any other person, who is duly authorized by
the Company's Governing Board, to give Oral and Written Instructions on behalf
of the Company. Such persons are listed in the Certificate attached hereto as
the Authorized Persons Appendix.
(b) "Book-Entry System." The term "Book-Entry System" means
Federal Reserve Treasury book-entry system for United States and federal agency
securities, its successor or successors, and its nominee or nominees and any
book-entry system maintained by an exchange registered with the SEC under the
1934 Act.
(c) "CFTC." The term "CFTC" shall mean the Commodities Futures
Trading Commission.
(d) "Governing Board." The term "Governing Board" shall mean
the Company's Board of Directors if the Company is a corporation or the
Company's Board of Trustees if the Company is a trust, or, where duly
authorized, a competent committee thereof."
(e) "Oral Instructions." The term "Oral Instructions" shall
mean oral instructions received by PFPC from an Authorized Person or from a
person reasonably believed by PFPC to be an Authorized Person.
1
<PAGE>
(f) "Provident." The term "Provident" shall mean Provident
National Bank or a subsidiary or affiliate of Provident National Bank.
(g) "SEC". The term "SEC" shall mean the Securities and
Exchange Commission.
(h) "Securities and Commodities Laws." The term shall mean the
"1933 Act", the Securities Act of 1933, as amended, the "1934 Act", the
Securities Exchange Act of 1934, as amended, the 1940 Act, and the "CEA", the
Commodities Exchange Act, as amended.
(i) "Services." The term "Services" shall mean the service
provided to the Fund by PFPC.
(j) "Shares." The term "Shares" shall mean the shares of stock
of any series or class of the Fund, or, where appropriate, units of beneficial
interest in a trust where the Company is organized as a Trust.
(k) "Written Instructions." The term "Written Instructions"
shall mean written instructions signed by two Authorized Persons and received by
PFPC. The instructions may be delivered by hand, mail, tested telegram, cable,
telex, facsimile sending device.
2. Appointment.
The Company hereby appoints PFPC to provide accounting
services to the Fund, in accordance with the terms et forth in this Agreement.
PFPC accepts such appointment and agrees to furnish such services to the Fund.
3. Delivery of Documents.
The Company has provided or, where applicable, will provide
PFPC with the following:
(a) certified or authenticated copies of the
resolutions of the Company's Governing Board,
approving the appointment of Provident or its
affiliates to provide services;
(b) a copy of the Company's most recent effective
registration statement;
(c) a copy of the Fund's advisory agreement or
agreements;
(d) a copy of the Fund's distribution agreement or
agreements;
(e) a copy of the Fund's administration agreement if
Provident is not providing the Fund with such
services, if any;
2
<PAGE>
(f) copies of the shareholder servicing agreements
made in respect of the Company; and
(g) certified or authenticated copies of any and all
amendments or supplements to the foregoing.
4. Compliance with Government Rules and Regulations.
PFPC undertakes to comply with all applicable requirements of
the 1933 act, the 1934 Act, the 1940 Act, and the CEA, and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to all
duties to be performed by PFPC hereunder. Except as specifically set forth
herein, PFPC assumes no responsibility for such compliance by the Fund or the
Company.
5. Instructions.
Unless otherwise provided in this Agreement, PFPC shall act
only upon Oral Agreement and Written Instructions.
PFPC shall be entitled to rely on any Oral and Written
Instructions it receives from an Authorized Person (or from a person reasonably
believed by PFPC to be an Authorized Person) pursuant to this Agreement. PFPC
may assume that any Oral or Written Instruction received hereunder is not in any
way inconsistent with the provisions of organizational documents or this
Agreement or of any vote, resolution or proceeding of the Company's Governing
Board or of the Fund's shareholders.
The Company agrees to forward to PFPC Written Instructions
confirming Oral Instructions so that PFPC receives the Written Instructions by
the close of business on the same day that such Oral Instructions are received.
The fact that such conforming Written Instructions are not received by PFPC
shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. The Company further agrees
that PFPC shall incur no liability to the Fund or the Company in acting upon
Oral or Written Instructions provided such instructions reasonably appear to
have been received from an Authorized Person.
6. Right to Receive Advice.
(a) Advise of the Fund. If PFPC is in doubt as to any action
it should or should not take, PFPC may request directions or advice, including
Oral or Written Instructions, from the Company.
(b) Advice of Counsel. If PFPC shall be in doubt as to any
questions of law pertaining to any action it should or should not take, PFPC may
request advice at its own cost from
3
<PAGE>
such counsel of its own choosing (who may be counsel for the Company, the Fund's
advisor or PFPC, at the option of PFPC).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral or Written Instructions Provident receives from the
Company, and the advice it receives from counsel, PFPC shall be entitled to rely
upon and follow the advice of counsel.
(d) Protection of PFPC. PFPC shall be protected in any action
it takes or does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Company or from counsel and which PFPC
believes, in good faith, to be consistent with those directions, advice and Oral
and Written Instructions.
Nothing in this paragraph shall be construed so as to impose an
obligation upon PFPC (i) to seek such directions, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions, advice or Oral
or Written Instructions unless, under the terms of other provisions of this
Agreement, the same is a condition of PFPC's properly taking or not taking such
action.
7. Records.
The books and records pertaining to the Fund, which are in the
possession of PFPC shall be the property of the Company. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. The Company, or the Company's
Authorized Persons, shall have access to such books and records at all times
during PFPC's normal business hours. Upon the reasonable request of the Company,
copies of any such books and records shall be provided by PFPC to the Company or
to an Authorized Person of the Company, at the Company's request.
PFPC shall keep the following records:
(a) all books and records with respect to the Fund's
books of account;
(b) records of the Fund's securities transaction;
(c) all other books and records as PFPC is required to
maintain pursuant to Rule 31a-1 of the 1940 Act and
as specifically set forth in Appendix A hereto.
8. Confidentiality.
PFPC agrees to keep confidential all records of the Fund and
information relative to the Fund and its shareholders (past, present and
potential), unless the release of such records
4
<PAGE>
or information is otherwise consented to, in writing, by the Company. The
Company agrees that such consent shall not be unreasonably withheld. The Company
further agrees that, should PFPC be required to provide such information or
records to duly constituted authorities (who may institute civil or criminal
contempt proceedings for failure to comply), PFPC shall not be required to seek
the Fund's or Company's consent prior to disclosing such information.
9. Liaison with Accountants.
PFPC shall act as liaison with the Company's independent
public accountant and shall provide account analyses, fiscal year summaries, and
other audit-related schedules. PFPC shall take all reasonable action in the
performance of its obligations under this Agreement to assure that the necessary
information is made available to such accountants for the expression of their
opinion, as such may be required by the Company from time to time.
10. Disaster Recovery.
PFPC shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provision of
emergency use of electronic data processing equipment to the extent appropriate
equipment is available. In the event of equipment failures, PFPC shall, at no
additional expense to the Company, take reasonable steps to minimize service
interruptions but shall have no liability with respect thereto.
11. Compensation.
As compensation for services rendered by PFPC during the term
of this Agreement, the Company will pay to PFPC a fee or fees as may be agreed
to in writing by the Company and PFPC.
12. Indemnification.
The Company agrees to indemnify and hold harmless PFPC and its
nominees from all taxes, charges, expenses, assessments, claims and liabilities
(including, without limitation, liabilities arising under the 1933 Act, the 1934
Act, the CEA and any state and foreign securities and blue sky laws, and
amendments thereto), and expenses, including (without limitation) attorneys'
fees and disbursements, arising directly or indirectly from any action which
PFPC takes or does not take (i) at the request or on the direction of or in
reliance on the advice of the Company or (ii) upon Oral or Written Instructions.
Neither PFPC, nor any of its nominees, shall be indemnified against any
liability to the Company or the Fund or to its shareholders (or any expenses
incident to such liability) arising out of PFPC's
5
<PAGE>
own willful misfeasance, gross negligence or reckless disregard of its duties
and obligations under this Agreement.
13. Responsibility of PFPC.
PFPC shall be under no duty to take any action on behalf of
the Fund or the Company except as specifically set forth herein or as may be
specifically agreed to by PFPC, in writing. PFPC shall be obligated to exercise
care and diligence in the performance of its duties hereunder, to act in good
faith and to use its best efforts, within reasonable limits, in performing
services provided for under this Agreement. PFPC shall be responsible for
failure to perform its duties under this Agreement arising out of PFPC's willful
misfeasance, gross negligence or reckless disregard of its duties and
obligations under this Agreement. Notwithstanding the foregoing, PFPC shall not
be responsible for losses beyond its control, provided that PFPC has acted in
accordance with the standard of care set forth above; and provided further that
PFPC shall only be responsible for that portion of losses or damages suffered by
the Fund that are attributable to the willful misfeasance, gross negligence of
reckless disregard of PFPC or its duties and obligations under this Agreement.
Without limiting the generality of the foregoing or of any other
provision of this Agreement, PFPC, in connection with its duties under this
Agreement, shall not be liable for (a) the validity or invalidity or authority
of lack thereof of any Oral or Written Instruction, notice or other instrument
which conforms to the applicable requirements of this Agreement, and which PFPC
reasonably believes to be genuine; or (b) delays or errors or loss of data
occurring by reason of circumstances beyond PFPC's control, including acts of
civil or military authority, national emergencies, labor difficulties, fire,
flood or catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply. Notwithstanding anything
in this Agreement to the contrary, PFPC shall have no liability to the Fund or
the Company for any consequential, special or indirect losses or damages which
the Fund or the Company may incur or suffer by or as a consequence of PFPC's
performance of the services provided hereunder, whether or not the likelihood of
such losses or damages was known by PFPC.
14. Description of Accounting Services.
(a) Services on a Continuing Basis. PFPC will perform
the following accounting functions if required:
(i) Journalize the Fund's investment, capital
share and income and expense activities;
(ii) Verify investment buy/sell trade tickets when
received from the Fund's investment and
6
<PAGE>
transmit trades to the Company's custodian
for proper settlement;
(iii) Maintain individual ledgers for investment
securities;
(iv) Maintain historical tax lots for each
security;
(v) Reconcile cash and investment balances of
the Fund with the custodian, and provide the
Fund's investment advisor with the beginning
cash balance available for investment
purposes;
(vi) Update the cash availability throughout the
day as required by the Fund's advisor;
(vii) Post to and prepare the Fund's Statement of
Assets and Liabilities and the Statement of
Operations;
(viii) Calculate various contractual expenses (e.g.,
advisory and custody fees);
(ix) Monitor the expense accruals and notify Fund
management of any proposed adjustments;
(x) Control all disbursements from the Fund and
authorize such disbursements upon Written
Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine the Fund's net income;
(xiii) Obtain security market quotes from
independent pricing services approved by the
Advisor, or if such quotes are unavailable,
then obtain such prices from the Advisor,
and in either case calculate the market
value of the Fund's Investments;
(xiv) Transmit or mail a copy of the daily
portfolio valuation to the Advisor;
(xv) Compute the net asset value of the Fund;
(xvi) As appropriate, compute the yields, total
return, expense ratios, portfolio turnover
rate, and, if required, portfolio average
dollar-weighted maturity; and
(xvii) Prepare a monthly financial statement, which
will include the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses.
(b) PFPC will provide or arrange for the provision of
the following services:
(i) Prepare:
Federal and State Tax Returns
7
<PAGE>
Excise Tax Returns
Annuals and Semi-Annual Shareholder Reports
Rules 24(e) and 24(f)-2 Notices; Annual
Reports on Form N-SAR;
(ii) Blue Sky and Federal registration and
compliance process;
(iii) Assist in the review of registration
statements; and
(iv) Monitor compliance with Sub-Chapter M of the
Internal Revenue Code.
15. Duration and Termination.
This Agreement shall continue until terminated by the Company
or by PFPC on sixty (60) days prior written notice to the other party.
16. Notices.
All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex, or
facsimile sending device. If notice is sent by confirming telegram, cable,
telex, or facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first-class mail, it shall be deemed to have
been given three days after it has been mailed. If notice is sent by messenger,
it shall be deemed to have been given on the day it is delivered. Notices shall
be addressed (a) if to PFPC at PFPC's address, 103 Bellevue Parkway, Wilmington,
Delaware 19809; (b) if to the fund, at the address of the Fund; or (c) if to
neither of the foregoing, at such other address as shall have been notified to
the sender of any such Notice or other communication.
17. Amendments.
This Agreement, or any other thereof, may be changed or waived
only by written amendment, signed by the party against whom enforcement of such
change or waiver is sought.
18. Delegation.
PFPC may be assign its rights and delegate its duties
hereunder to any wholly-owned direct or indirect subsidiary of Provident
National Bank or PNC Financial Corp, provided that (i) PFPC gives the Company
thirty (30) days prior written notice; (ii) the delegate agrees with PFPC to
comply with all relevant provisions of the 1940 Act; and (iii) PFPC and such
delegate promptly provide such information as the Company may request, and
respond to such questions as the Company may request, and respond to such
questions as the Company may ask, relative to the delegation, including (without
limitation) the capabilities of the delegate.
8
<PAGE>
19. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
20. Further Actions.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
21. Miscellaneous.
This Agreement embodies the entire agreement and under
standing between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegation, compensation and/or Oral Instructions.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
This Agreement shall be deemed to be a contract made in Delaware and
governed by Delaware law. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
and shall inure to the benefit of the parties hereto and their respective
successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
PROVIDENT FINANCIAL PROCESSING
CORPORATION
By: /s/ Stephen M. Wyman
------------------------------
ALEX BROWN CASH RESERVE FUND, INC.
By: /s/ Edward J. Veilleux
------------------------------
Executive Vice President
9
<PAGE>
EX-99.B(9)
MASTER SERVICES AGREEMENT
THIS AGREEMENT is made as of the 1st day of January, 1994 by
and between ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the
"Fund"), and INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation ("ICC").
W I T N E S S E T H:
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 Fund desires to retain ICC to provide certain
services on behalf of the Fund, as set forth in the Appendices to this
Agreement, and ICC is willing so to serve.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints ICC to perform such
services and to serve such functions on behalf of the Fund as set forth in the
Appendices to this Agreement, on the terms set forth in this Agreement and the
Appendices hereto. ICC accepts such appointment and agrees to furnish such
services and serve such functions. The Fund may have currently outstanding one
or more series or classes of its shares of common stock, par value $.001 per
share ("Shares") and may from time to time hereafter issue separate series or
classes of its Shares or classify and reclassify Shares of any series or class,
and the appointment effected hereby shall constitute appointment for the
provision of services with respect to all existing series and classes and any
additional series and classes unless the parties shall otherwise agree in
writing.
2. Delivery of Documents. The Fund has furnished ICC with
copies properly certified or authenticated of the following documents and will
furnish ICC from time to time with copies, properly certified or authenticated,
of all amendments of or supplements thereto, if any:
(a) Resolutions of the Fund's Board of Directors
authorizing the appointment of ICC to act in such capacities on behalf of the
Fund as set forth in the Appendices to this Agreement, and the entering into of
this Agreement by the Fund;
(b) The Fund's Articles of Incorporation and all
amendments thereto (the "Charter") and the Fund's By-Laws and all
amendments thereto (the "By-Laws");
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<PAGE>
(c) The Fund's most recent Registration Statement
on Form N-1A under the Securities Act of 1933, as amended (the "1933 Act") and
under the 1940 Act as filed with the Securities and Exchange Commission (the
"SEC") relating to the Shares; and
(d) Copies of the Fund's most recent prospectus
or prospectuses, including amendments and supplements thereto
(collectively, the "Prospectus").
3. Services to be Provided; Fees. During the term of this
Agreement, ICC shall perform the services and act in such capacities on behalf
of the Fund as set forth herein and in the Appendices to this Agreement. For the
services performed by ICC for the Fund, the Fund will compensate ICC in such
amounts as may be agreed to from time to time by the parties in writing.
4. Records. The books and records pertaining to the Fund which
are in the possession of ICC shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws and rules and regulations. The Fund, or the Fund's
authorized representatives, shall have access to such books and records at all
times during ICC's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by ICC to the Fund
or the Fund's authorized representative at the Fund's expense.
5. Cooperation With Accountants. In addition to any
obligations set forth in an Appendix hereto, ICC shall cooperate with the Fund's
independent accountants and shall take all reasonable actions in the performance
of its obligations under this Agreement to ensure that the necessary information
is made available to such accountants for the expression of such accountants'
opinion of the Fund's financial statements or otherwise, as such may be required
by the Fund from time to time.
6. Compliance with Governmental Rules and Regulations. The
Fund assumes full responsibility for insuring that the Fund complies with all
applicable requirements of the 1933 Act, the Securities Exchange Act of 1934
(the "1934 Act"), the 1940 Act, and any laws, rules and regulations of
governmental authorities having jurisdiction. ICC undertakes to comply with all
applicable requirements of the 1933 Act, the 1934 Act, the 1940 Act, the
Commodities Exchange Act (if applicable), and all laws, rules and regulations of
governmental authorities having jurisdiction with respect to the performance by
ICC of its duties under this Agreement, including the Appendices hereto.
7. Expenses.
(a) ICC shall bear all expenses of its employees
and overhead incurred in connection with its duties under this Agreement and
shall pay all salaries and fees of the Fund's directors and officers who are
employees of ICC.
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(b) The Fund assumes and shall pay or cause to be
paid all other expenses of the Fund, including, without limitation: the fees of
the Fund's investment advisor, administrator and distributor; the charges and
expenses of any registrar, any custodian or depositary appointed by the Fund for
the safekeeping of its cash, portfolio securities and other property, and any
stock 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 corporate fees payable by the Fund
to federal, state or other governmental agencies; the cost and expense of
engraving or printing of stock certificates representing Shares; all costs and
expenses in connection with maintenance of registration of the Fund and its
Shares with the SEC and various states and other jurisdictions (including filing
fees and legal fees and disbursements of counsel); the expenses of printing,
including typesetting, and distributing prospectuses 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 members of any
advisory board or committee other than such directors or members who are
"interested persons" of the Fund (as defined in the 1940 Act); 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 Shares; charges and expenses of legal counsel, including
counsel to the directors of the Fund who are not "interested persons" of the
Fund (as defined in the 1940 Act), and of independent accountants, in connection
with any matter relating to the Fund; a portion of 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.
8. Liability; Indemnification. Neither ICC nor any of its
officers, directors or employees shall be liable for any error of judgment or
for any loss suffered by the Fund in connection with the matters to which this
Agreement, including the Appendices hereto, relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on its or their part in
the performance of, or from reckless disregard by it or them of, its or their
obligations and duties under this Agreement. The Fund agrees to indemnify and
hold harmless ICC and its nominees from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation, liabilities
arising under the 1933 Act, the 1934 Act, the 1940 Act, and any state and
foreign securities and blue sky laws, all
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as currently in existence or as amended from time to time) and expenses,
including (without limitation) attorneys' fees and disbursements, arising
directly or indirectly from any action or thing which ICC takes or does or omits
to take or do at the request or on the direction of or in reliance on the advice
of the Fund; provided, that neither ICC nor any of its nominees shall be
indemnified against any liability to the Fund or to its shareholders (or any
expenses incident to such liability) arising out of ICC's own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties and
obligations under this Agreement. Notwithstanding anything else in this
Agreement or any Appendix hereto to the contrary, ICC shall have no liability to
the Fund for any consequential, special or indirect losses or damages which the
Fund may incur or suffer as a consequence of ICC's performance of the services
provided in this Agreement or any Appendix hereto.
9. Responsibility of ICC. ICC shall be under no duty to take
any action on behalf of the Fund except as specifically set forth herein or as
may be specifically agreed to by ICC in writing. In the performance of its
duties hereunder, ICC shall be obligated to exercise care and diligence and to
act in good faith and to use its best efforts within reasonable limits in
performing services provided for under this Agreement, but ICC shall not be
liable for any act or omission which does not constitute willful misfeasance,
bad faith or gross negligence on the part of ICC or reckless disregard by ICC of
its duties under this Agreement. Notwithstanding anything in this Agreement to
the contrary, ICC shall have no liability to the Fund for any consequential,
special or indirect losses or damages which the Fund may incur or suffer by or
as a consequence of ICC's performance of the services provided hereunder.
10. Non-Exclusivity. The services of ICC to the Fund are not
to be deemed exclusive and ICC shall be free to render accounting or other
services to others (including other investment companies) and to engage in other
activities. It is understood and agreed that directors, officers or employees of
ICC may serve as directors or officers of the Fund, and that directors or
officers of the Fund may serve as directors, officers and employees of ICC to
the extent permitted by law; and that directors, officers and employees of ICC
are not prohibited from engaging in any other business activity or from
rendering services to any other person, or from serving as partners, directors
or officers of any other firm or corporation, including other investment
companies.
11. Notice. Any notice or other communication required to be
given pursuant to this Agreement shall be deemed duly given if delivered or
mailed by registered mail, postage prepaid, to the Fund at 135 E. Baltimore St.,
Balto., MD 21202, Attention: President, or to ICC at 135 E. Baltimore Street,
Baltimore, Maryland 21202, Attention: Mr. Edward J. Veilleux.
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12. Miscellaneous.
(a) This Agreement shall become effective as of
the date first above written and shall remain in force until terminated. This
Agreement, or any Appendix hereto, may be terminated at any time without the
payment of any penalty, by either party hereto on sixty (60) days' written
notice to the other party.
(b) This Agreement shall be construed in
accordance with the laws of the State of Maryland.
(c) If any provisions of this Agreement shall be
held or made invalid in whole or in part, the other provisions of this Agreement
shall remain in force. Invalid provisions shall, in accordance with the intent
and purpose of this Agreement, be replaced by mutual consent of the parties with
such valid provisions which in their economic effect come as close as legally
possible to such invalid provisions.
(d) Except as otherwise specified in the
Appendices hereto, ICC shall be entitled to rely on any notice or communication
believed by it to be genuine and correct and to have been sent to it by or on
behalf of the Fund.
(e) ICC agrees on behalf of itself and its
employees to treat confidentially all records and other information relative to
the Fund and its prior, present, or potential shareholders, except, after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where ICC may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Fund.
(f) Any part of this Agreement or any Appendix
attached hereto may be changed or waived only by an instrument in writing signed
by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
ALEX. BROWN CASH RESERVE FUND, INC.
By: /s/ Edward J. Veilleux
----------------------------------
Title:
INVESTMENT COMPANY CAPITAL CORP.
By: /s/ Edward J. Veilleux
----------------------------------
Title:
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Appendix I
ACCOUNTING SERVICES APPENDIX
to
MASTER SERVICES AGREEMENT
between
ALEX. BROWN CASH RESERVE FUND, INC. (TREASURY SERIES)
and INVESTMENT COMPANY CAPITAL CORP.
This Appendix is hereby incorporated into and made a part of
the Master Services Agreement dated as of January 1, 1994 (the "Master Services
Agreement") between ALEX. BROWN CASH RESERVE FUND, INC. and INVESTMENT COMPANY
CAPITAL CORP. Defined terms not otherwise defined herein shall have the meaning
set forth in the Master Services Agreement.
1. Accounting Services to be Provided. ICC will perform the following accounting
functions if required:
(a) Journalize investment, capital share and income and
expense;
(b) Verify investment buy/sell trade tickets when received
from the Fund's investment advisor and transmit trades to the Fund's custodian
for proper settlement;
(c) Maintain individual ledgers for investment securities;
(d) Maintain tax lots for each security;
(e) Reconcile cash and investment balances with the custodian,
and provide the Fund's investment advisor with the beginning cash balance
available for investment purposes;
(f) Update the cash availability throughout the day as
required by the Fund's investment advisor;
(g) Post to and prepare the Fund's Statement of Net Assets and
Liabilities and the Statement of Operations;
(h) Calculate various contractual expenses (e.g., advisor and
custody fees);
(i) Monitor the expense accruals and notify Fund management of
any proposed adjustments;
(j) Control all disbursements from the Fund and authorize such
disbursements upon written instructions from the President or any other officer
of the Fund or the investment advisor;
(k) Calculate capital gains and losses;
(l) Determine the Fund's net income;
(m) Obtain security market quotes from independent pricing
services approved by the investment advisor, or if such quotes are unavailable,
then obtain such prices from the investment advisor, and in either case
calculate the market value of portfolio investments;
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(n) Transmit or mail a copy of the daily portfolio valuation
to the Fund's investment advisor;
(o) Compute the Fund's net asset value;
(p) As appropriate, compute the yields, total return, expense
ratios, portfolio turnover rate;
(q) Prepare a monthly financial statement, which will include
the following items:
o Schedule of Investments;
o Statement of Net Assets and Liabilities;
o Statement of Operations;
o Statement of Changes in Net Assets;
o Cash Statement;
o Schedule of Capital Gains and Losses;
(r) Assist in the preparation of:
o Federal and State Tax Returns;
o Excise Tax Returns;
o Annual, Semi-Annual and Quarterly Shareholder
Reports;
o Rules 24 (e)-2 and 24 (f)-2 Notices;
o Annual and Semi-Annual Reports on Form N-SAR;
o Monthly and Quarterly Statistical Data Information
Reports Sent to Performance Tracking Companies;
(s) Assist in the Blue Sky and Federal registration and
compliance process;
(t) Assist in the review of registration statements; and
(u) Assist in monitoring compliance with Sub-Chapter M of the
Internal Revenue Code.
2. Records. ICC shall keep the following records: (a) all books and records
with respect to the Fund's books of account; and (b) records of the Fund's
securities transactions.
3. Liaison With Accountants. In addition to ICC's obligations relating to the
Fund's independent accountants set forth in the Master Services Agreement, ICC
shall act as liaison with the Fund's independent accountants and shall provide
account analyses, fiscal year summaries, and other audit related schedules.
4. Compensation. For services performed by ICC pursuant to this Appendix, the
Fund will pay to ICC compensation for such services as the parties may agree to
from time to time in writing.
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Appendix II
TRANSFER AGENCY SERVICES APPENDIX
to
MASTER SERVICES AGREEMENT
between
ALEX. BROWN CASH RESERVE FUND, INC.
and
INVESTMENT COMPANY CAPITAL CORP.
This Appendix is hereby incorporated into and made a part of the Master
Services Agreement dated as of February 28, 1994 (the "Master Services
Agreement") between ALEX. BROWN CASH RESERVE FUND INC. and INVESTMENT COMPANY
CAPITAL CORP. Defined terms not otherwise defined herein shall have the meaning
set forth in the Master Services Agreement.
1. Definitions.
(a) "Authorized Person". The term "Authorized Person" shall
mean any officer of the Fund and any other person, who is fully authorized by
the Fund's Board of Directors, to give Oral and Written Instructions on behalf
of the Fund. Such persons are listed in the Certificate attached hereto.
(b) "Oral Instructions". The term "Oral Instructions" shall
mean oral instructions received by ICC from an Authorized Person or from a
person reasonably believed by ICC to be an Authorized Person.
(c) "Written Instructions". The term "Written Instructions"
shall mean written instructions signed by two Authorized Persons and received by
ICC. The instructions may be delivered by hand, mail, tested telegram, cable,
telex or facsimile sending device.
2. Instructions. Unless otherwise provided in this Appendix, ICC shall
act only upon Oral and Written Instructions. ICC shall be entitled to rely upon
any Oral and Written Instruction it receives from an Authorized Person (or from
a person reasonably believed by ICC to be an Authorized Person) pursuant to this
Agreement. ICC may assume that any Oral or Written Instruction received
hereunder is not in any way inconsistent with the provisions of the Fund's
Articles of Incorporation, the Master Services Agreement, or any Appendix
attached thereto, or of any vote, resolution or proceeding of the Fund's Board
of Directors or shareholders.
The Fund agrees to forward to ICC Written Instructions
confirming Oral Instructions so that ICC receives the Written Instructions by
the close of business on the same day that such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by ICC shall
in no way invalidate the transactions or enforceability of the transactions
authorized by the Oral Instructions. The Fund further agrees that ICC shall
incur no liability to the Fund in acting upon Oral or Written Instructions
provided such instructions reasonably appear to have been received from an
Authorized Person.
If ICC is in doubt as to any action it should or should not
take, ICC may request directions or advice, including Oral or Written
Instructions, from the Fund. ICC shall be protected in any action it takes or
does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund or from counsel and which ICC believes,
in good faith, to be consistent with those directions, advice or Oral of Written
Instructions. Notwithstanding the foregoing, ICC shall have no obligation (i) to
seek such directions, advice or Oral or Written Instructions, or (ii) to act in
accordance with such directions, advice or
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Oral or Written Instructions unless, under the terms of other provisions of this
Appendix, the same is a condition of ICC's properly taking or not taking such
action.
3. Description of Services.
(a) General Services To be Provided. ICC shall provide to the
Fund the following services on an ongoing basis:
(i) Calculate 12b-1 payments;
(ii) Maintain proper shareholder registrations;
(iii) Review new applications and correspond with
shareholders, if necessary, to complete or
correct information;
(iv) Direct payment processing of checks or
wires;
(v) Prepare and certify stockholder lists in
conjunction with proxy solicitations;
solicit and tabulate proxies; receive and
tabulate proxy cards for meetings of the
Fund's shareholders;
(vi) Countersign securities;
(vii) Direct shareholder confirmation of activity;
(viii) Provide toll-free lines for direct
shareholder use, plus customer liaison staff
for on-line inquiry response;
(ix) Mail duplicate confirmation to
broker-dealers of their clients' activity,
whether executed through the broker-dealer
or directly with ICC;
(x) Provide periodic shareholder lists and
statistics to the Fund;
(xi) Provide detail for underwriter/broker
confirmations;
(xii) Mail periodic year-end tax and statement
information;
(xiii) Provide timely notification to investment
advisor, accounting agent, and custodian of
Fund activity; and
(xiv) Perform other participating broker-dealer
shareholder services as may be agreed upon
from time to time.
(b) Purchase of Shares. ICC shall issue and credit an account
of an investor, in the manner described in the Prospectus, once it receives: (i)
a purchase order; (ii) proper information to establish a shareholder account;
and (iii) confirmation of receipt by, or crediting of funds for such order to,
the Fund's custodian.
(c) Redemption of Shares. ICC shall redeem the Fund's shares
only in accordance with the provisions of the Prospectus and each shareholder's
individual directions. Shares shall be redeemed at such time as the shareholder
tenders his or her shares and directs the method of redemption in accordance
with the terms set forth in the Prospectus. If securities are received in proper
form, Shares shall
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be redeemed before the funds are provided to ICC. When the Fund provides ICC
with funds, redemption proceeds will be wired (if requested) or a redemption
check issued. All redemption checks shall be drawn to the recordholder unless
third party payment authorizations have been signed by the recordholder and
delivered to ICC.
(d) Dividends and Distributions. Upon receipt of certified
resolutions of the Fund's Board of Directors authorizing the declaration and
payment of dividends and distributions, ICC shall issue the dividends and
distributions in shares, or, upon shareholder election, pay such dividends and
distributions in cash. Such issuance or payment shall be made after deduction
and payment of the required amount of funds to be withheld in accordance with
any applicable tax laws or other laws, rules or regulations. The Fund's
shareholders shall receive tax forms and other information, or permissible
substitute notice, relating to dividends and distributions, paid by the Fund as
are required to be filed and mailed by applicable law, rule or regulation. ICC
shall maintain and file with the IRS and other appropriate taxing authorities
reports relating to all dividends and distributions paid by the Fund to its
shareholders as required by tax or other law, rule or regulation.
(e) Shareholder Account Services. If authorized in the
Prospectus, ICC shall arrange for the following services, in accordance with the
applicable terms set forth in the Prospectus: (i) the issuance of Shares
obtained through any pre-authorized check plan and direct purchases through
broker wire orders, checks and applications; (ii) exchanges of shares of any
fund for Shares of the Fund with which the Fund has exchange privileges; (iii)
automatic redemption from an account where that shareholder participates in an
automatic redemption plan; and (iv) redemption of Shares from an account with a
check writing privilege.
(f) Communications to Shareholders. Upon timely Written
Instructions, ICC shall mail all communications by the Fund to its shareholders,
including, reports to shareholders, confirmations of purchases and sales of
Shares, monthly or quarterly statements, dividend and distribution notices, and
proxy material.
(g) Records. ICC shall maintain records of the accounts for
each shareholder showing the following information: (i) name, address and U.S.
Tax Identification or Social Security number; (ii) number and class of Shares
held and number and class of Shares for which certificates, if any, have been
issued, including certificate numbers and denominations; (iii) historical
information regarding the account of each shareholder, including dividends and
distributions paid and the date and price for all transactions on a
shareholder's account; (iv) any stop or restraining order placed against a
shareholder's account; (v) any correspondence relating to the current
maintenance of a shareholder's account; (vi) information with respect to
withholdings; and (vii) any information required in order for ICC to perform any
calculations contemplated or required by this Appendix or the Master Services
Agreement.
(h) Lost or Stolen Certificates. ICC shall place a stop notice
against any certificate reported to be lost or stolen and comply with all
applicable federal regulatory requirements for reporting such loss or alleged
misappropriation. A new certificate shall be registered and issued upon: (i) the
shareholder's pledge of a lost instrument bond or such other appropriate
indemnity bond issued by a surety company approved by ICC; and (ii) completion
of a release and indemnification agreement signed by the shareholder to protect
ICC.
(i) Shareholder Inspection of Stock Records. Upon requests
from Fund shareholders to inspect stock records, ICC will notify the Fund and
the Fund shall deliver Oral or Written Instructions granting or denying each
such request. Unless ICC has acted contrary to the Fund's Instructions, the Fund
agrees to release ICC from any liability for refusal or permission for a
particular shareholder to inspect the Fund's shareholder records.
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<PAGE>
(j) Withdrawal of Shares and Cancellation of Certificates.
Upon receipt of Written Instructions, ICC shall cancel outstanding certificates
surrendered by the Fund to reduce the total amount of outstanding shares by the
number of shares surrendered by the Fund.
(k) Telephone Transactions. In accordance with the terms of
the Prospectus, ICC shall act upon shareholder requests made by telephone for
redemption or exchange of ISI shares; provided that (i) the shareholder has
authorized telephone transactions on the Fund's Account Application or otherwise
in writing, (ii) if the request is a redemption, the amount to be redeemed does
not exceed $10,000 and (iii) ICC has complied with the identification and other
security procedures required by the Fund in connection with telephone
transactions.
4. Fees. As compensation for the services performed by ICC for the Fund
pursuant to this Appendix, the Fund will pay to ICC such amounts as may be
agreed to from time to time by the parties in writing.
5. Delegation of Responsibilities. ICC may subcontract to any third
party all or any part of its obligations under this Appendix; provided that any
such subcontracting shall not relieve ICC of any of its obligations under this
Appendix. All subcontractors shall be paid by ICC.
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EX-99.B(10)
[LETTERHEAD OF SPENGLER, CARLSON, GUBAR, BRODSKY AND FRISCHLING]
January 17, 1990
Alex. Brown Cash Reserve Fund
135 East Baltimore Street.
Baltimore, Maryland 21202
Alex. Brown Cash Reserve Fund, Inc.
135 East Baltimore Street
Baltimore, Maryland 21202
Re: Alex. Brown Cash Reserve Fund
Registration No. 2-72658
------------------------------
Dear Sirs:
We have acted as counsel for Alex. Brown Cash Reserve Fund,
Inc., a Maryland corporation (the "Corporation") in connection with the proposed
Agreement and Plan of Reorganization and Liquidation (the "Agreement") between
the Corporation and Alex. Brown Cash Reserve Fund, a Massachusetts business
trust (the "Trust"). In connection with the plan of reorganization and
liquidation of the Trust provided for in the Agreement, the Corporation has
requested that we render to the Trust and the Corporation the opinion set forth
below.
As counsel for the Corporation, we have reviewed the Articles
of Incorporation of the Corporation, its By-Laws, resolutions of the directors
of the Corporation and the registration statement on Form N-1A (Registration No.
2-72658) (the "Registration Statement") filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, (including exhibits thereto). We have also made
such inquiries of the Trust and the Corporation and have examined originals,
certified copies or copies otherwise identified to our satisfaction of such
documents, records and other instruments of the Trust and the Corporation as we
have deemed necessary or appropriate for the purposes of this opinion. For
purposes of such examination, we have assumed the genuineness of all signatures
on original documents and the conformity to the original documents of all copies
submitted.
The opinions expressed herein are limited to matters of law
which govern the due organization of the Corporation and the authorization and
issuance of its shares of common stock, par value $.001. We are members of the
Bar of the State of New York
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<PAGE>
and do not hold ourselves out as experts as to the law of any other state or
jurisdiction. Based upon and subject to the foregoing, we are of the opinion,
and so advise you, as follows:
1. The Corporation has been duly organized as a corporation in
good standing under the laws of its state of incorporation.
2. The shares of the Corporation's common stock to be issued
pursuant to the Agreement have been duly authorized and, assuming the due
authorization, execution and delivery of the Agreement by the Corporation and
the Trust and upon consummation of the reorganization provided for therein in
accordance with the terms set forth in the Agreement, will have been validly and
legally issued and will be fully paid and nonassessable shares of common stock
of the Corporation.
3. The shares of Common Stock of the Corporation to be offered
for sale pursuant to the Prospectus are duly authorized and, when sold, issued
and paid for as contemplated by the Prospectus, will have been validly and
legally issued and will be fully paid and nonassessable shares of common stock
of the Corporation.
We consent to the filing of this opinion as an exhibit to the
Post-Effective Amendment to the Registration Statement to be filed, on behalf of
the Trust and to the references therein to our firm as Counsel to the
Corporation.
Very truly yours,
/s/ Spengler, Carlson, Gubar, Brodsky and Frischling
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<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion of our report dated May 10, 1996 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. 27 to the Registration Statement on Form N-1A
(No. 2-72658) under the Securities Act of 1933 of Alex. Brown Cash Reserve
Fund, Inc. We also consent to the references to our Firm under the headings
"Financial Highlights" and "General Information" in the Prospectus and
"Independent Accountants" in the Statement of Additional Information.
/s/ Coopers & Lybrand L.L.P.
----------------------------
2400 Eleven Penn Center
Philadelphia, Pennsylvania
July 26, 1996
<PAGE>
EX-99.B(15)(b)
FLAG INVESTORS CASH RESERVE PRIME SHARES - CLASS B
(A Class of Alex. Brown Cash Reserve Fund, Inc.)
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of the Flag Investors Cash Reserve Prime Shares -
Class B (the "Shares") of Alex. Brown Cash Reserve Fund, Inc. (the "Fund").
Other capitalized terms herein have the meaning given to them in the Fund's
prospectus.
2. Payments Authorized. (a) Alex. Brown & Sons Incorporated
("Alex. Brown") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments made
to it under the Distribution Agreement and to make payments on behalf of the
Fund to Shareholder Servicing Agents under Shareholder Servicing Agreements.
(b) Alex. Brown may make payments in any amount, provided that
the total amount of all payments made during a fiscal year of the Fund do not
exceed, in any fiscal year of the Fund, the amount paid to Alex. Brown under the
Distribution Agreement with respect to distribution of the Shares which is an
annual fee, calculated on an average daily net basis and paid monthly, equal to
.75% of the average daily net assets of the Shares of the Fund.
3. Expenses Authorized. Alex. Brown is authorized, pursuant to
the Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Shares, to pay for promotional or sales literature and to
make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which Alex. Brown as
distributor for the Shares is authorized to pay or cause to be paid on its
behalf and such payments shall not be included in the limitations contained in
this Plan. These expenses include: the fees of the Fund's investment advisor and
Alex. Brown; 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 maintenance of registration of
the Fund and its shares with the Securities and Exchange Commission and various
states and other jurisdictions (including filing fees and 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 supplements thereto to the Fund's shareholders; all
expenses of shareholders' and Directors'
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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 certified public 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.
5. Other Distribution Resources. Alex. Brown and Participating
Dealers may expend their own resources separate and apart from amounts payable
under the Plan to support the Fund's distribution effort. Alex. Brown will
report to the Board of Directors on any such expenditures as part of its regular
reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, Alex. Brown shall
report in writing at least quarterly to the Fund's Board of Directors, and the
Board shall review, the following: (i) the amounts of all payments under the
Plan, the identity of the recipients of each such payment; (ii) the basis on
which the amount of the payment to such recipient was made; (iii) the amounts of
expenses authorized under this Plan and the purpose of each such expense; and
(iv) all costs of each item specified in Section 4 of this Plan (making
estimates of such costs where necessary or desirable), in each case during the
preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment.
This Plan has been approved (i) by a vote of the Board of Directors of the Fund
and of a majority of the Directors who are not interested persons (as defined in
the 1940 Act), cast in person at a meeting called for the purpose of voting on
this Plan; and (ii) by a vote of holders of at least a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act). This Plan shall,
unless terminated as hereinafter provided, continue in effect from year to year
only so long as such continuance is specifically approved at least annually by
the vote of the Fund's Board of Directors and by the vote of a majority of the
Directors of the Fund who are not interested persons (as defined in the 1940
Act), cast in person at a meeting called for the purpose of voting on such
continuance. This Plan may be terminated at any time by a vote of a majority of
the Directors who are not interested persons (as defined in the 1940 Act) or by
the vote of the holders of a majority of the Fund's outstanding voting
securities (as defined in the 1940 Act). This Plan may not be amended to
increase materially the amount of payments to be made without shareholder
approval, as set forth in (ii) above, and all amendments must be approved in the
manner set forth under (i) above.
-2-
<PAGE>
EX-99.B(16)
Schedule of Performance Computations
YIELD CALCULATIONS
(a) Prime Series
Yield: Daily Dividend
------ --------------
September 24 .000228375
September 25 .000226898
September 26 .000227048
September 27 .000227201
September 28 .000227308
September 29 .000227372
September 30 .000227372
----------
Total .001591574
Divided
by 7 .000227368
Multiplied
by 365 8.30%
Compound Effective Yield:
-------------------------
[(1+.0015916)365/7] - 1 = 8.65%
(b) Treasury Series
Yield: Daily Dividend
------ --------------
September 24 .000228956
September 25 .000227851
September 26 .000226477
September 27 .000227141
September 28 .000227106
September 29 .000234918
September 30 .000234918
----------
Total .001607367
Divided
by 7 .000229624
Multiplied
by 365 8.38%
Compound Effective Yield:
-------------------------
[(1+.0016074)365/7]-1 = 8.74%
-1-
<PAGE>
Exhibit 18
Alex. Brown Cash Reserve Fund, Inc.
Rule 18f-3 Multiple Class Plan
for
Alex. Brown Cash Reserve Prime Shares
Flag Investors Cash Reserve Prime Class A Shares
Flag Investors Cash Reserve Prime Class B Shares
Alex. Brown Cash Reserve Prime Institutional Shares
Quality Cash Reserve Prime Shares
Alex. Brown Cash Reserve Treasury Shares
Alex. Brown Cash Reserve Treasury Institutional Shares
Alex. Brown Cash Reserve Tax-Free Shares
Adopted December 13, 1995
I. Introduction.
A. Authority. This Rule 18f-3 Multiple Class Plan (the "Plan") has been
adopted by the Board of Directors (the "Board") of Alex. Brown Cash Reserve
Fund, Inc. (the "Fund"), including a majority of the Directors of the Fund who
are not "interested persons" of the Fund (the "Independent Directors") pursuant
to Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940
Act"),
B. History. The Fund is entitled to rely on an exemptive order dated
December 30, 1994, which amended and supplemented prior multi-class exemptive
orders dated August 27, 1985 and February 27, 1987, respectively, (Inv. Co. Act
Releases Nos. IC-20813, IC-14695 and IC-15592, respectively) (collectively, the
"Order"). On December 13, 1995, the Fund elected to rely on Rule 18f-3 rather
than the Order, as permitted by Rule 18f-3 subject to certain conditions, and
created a multiple class distribution arrangement for the classes of shares of
the common stock of the Fund's existing series (the "Series"). The multiple
class distribution arrangement will be effective on the date of effectiveness of
the post-effective amendment to the Fund's registration statement that
incorporates the arrangement. The multi-class distribution arrangement will
apply to all existing Alex. Brown Cash Reserve Prime Shares, Flag Investors Cash
Reserve Prime Class A Shares, Flag Investors Cash Reserve Prime Class B Shares,
Alex. Brown Cash Reserve Prime Institutional Shares, Quality Cash Reserve Prime
Shares, Alex. Brown Cash Reserve Treasury Shares, Alex. Brown Cash Reserve
Treasury Institutional Shares, Alex. Brown Cash Reserve Tax-Free Shares and
future classes of Fund shares.
1
<PAGE>
C. Adoption of Plan; Amendment of Plan; and Periodic Review. Pursuant
to Rule 18f-3, the Fund is required to create a written plan specifying all of
the differences among the Fund's classes, including shareholder services,
distribution arrangements, expense allocations, and any related conversion
features or exchange options. The Board has created the Plan to meet this
requirement. The Board, including a majority of the Independent Directors, must
periodically review the Plan for its continued appropriateness, and must approve
any material amendment of the Plan as it relates to any class of any Series
covered by the Plan. This Plan must be amended to properly describe (through
additional exhibits hereto or otherwise) each additional class of shares
approved by the Fund's Board of Directors after the date hereof. Before any
material amendment of the Plan, the Fund is required to obtain a finding by a
majority of the Board, and a majority of the Independent Directors, that the
Plan as proposed to be amended, including the expense allocations, is in the
best interests of each class individually and the Fund as a whole.
II. Attributes of Share Classes
A. The rights of each existing class of the Fund are not being changed
hereby, and the rights, obligations and features of each of the classes of the
Fund shall be as set forth in the Fund's Articles of Incorporation and Bylaws,
as each such document is amended or restated to date, the resolutions that are
adopted with respect to the classes of the Fund and that are adopted pursuant to
the Plan to date, and related materials of the Board, as set forth in Exhibit A
hereto.
B. With respect to any class of shares of a Series, the following
requirements shall apply. Each share of a particular Series shall represent an
equal pro rata interest in the Series and shall have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that (i) each
class shall have a different class designation (e.g., Class A, Class B, Class C,
etc.); (ii) each class of shares shall separately bear any distribution expenses
in connection with the plan adopted pursuant to Rule 12b-1 under the 1940 Act (a
"Rule 12b-1 Plan"), if any, for such class (and any other costs relating to
obtaining shareholder approval of the Rule 12b-1 Plan for such class, or an
amendment of such plan) and shall separately bear any expenses associated with
any non-Rule 12b-1 Plan service payments ("service fees") that are made under
any servicing agreement, if any, entered into with respect to that class; (iii)
holders of the shares of the class shall have exclusive voting rights regarding
the Rule 12b-1 Plan relating to such class (e.g., the adoption, amendment or
termination of a Rule 12b-1 Plan), regarding the servicing agreements relating
to such class and regarding any matter submitted to shareholders in which the
interests of that class differ from the interests of any other class; (iv) each
new class of shares may bear, to the extent consistent with rulings and other
published
2
<PAGE>
statements of position by the Internal Revenue Service, the expenses of the
Fund's operation that are directly attributable to such class ("Class
Expenses")(1); and (v) each class may have conversion features unique to such
class, permitting conversion of shares of such class to shares of another class,
subject to the requirements set forth in Rule 18f-3.
III. Expense Allocations
Expenses of each class created after the date hereof must be
allocated as follows: (i) distribution and shareholder servicing payments
associated with any Rule 12b-1 Plan or servicing agreement, if any, relating to
each respective class of shares (including any costs relating to implementing
such plans or any amendment thereto) will be borne exclusively by that class;
(ii) any incremental transfer agency fees relating to a particular class will be
borne exclusively by that class; and (iii) Class Expenses relating to a
particular class will be borne exclusively by that class.
The methodology and procedures for calculating the net asset
value and dividends and distributions of the various classes of shares of the
Fund and the proper allocation of income and expenses among the various classes
of shares of the Fund are required to comply with the Fund's internal control
structure pursuant to applicable auditing standards, including Statement on
Auditing Standards No. 55, and to be reviewed as part of the independent
accountants' review of such internal control structure. The independent
accountants' report on the Fund's system of internal controls required by Form
N-SAR, Item 77B, is not required to refer expressly to the procedures for
calculating the classes' net asset values.
- --------
(1) Class Expenses are limited to any or all of the following: (i) transfer
agent fees identified as being attributable to a specific class of shares, (ii)
stationery, printing, postage, and delivery expenses related to preparing and
distributing materials such as shareholder reports, prospectuses, and proxy
statements to current shareholders of a specific class, (iii) Blue Sky
registration fees incurred by a class of shares, (iv) SEC registration fees
incurred by a class of shares, (v) expenses of administrative personnel and
services as required to support the shareholders of a specific class, (vi)
directors' fees or expenses incurred as a result of issues relating solely to a
class of shares, (vii) account expenses relating solely to a class of shares,
(viii) auditors' fees, litigation expenses, and legal fees and expenses relating
solely to a class of shares, and (ix) expenses incurred in connection with
shareholder meetings as a result of issues relating solely to a class of shares.
3
<PAGE>
Exhibit A
Resolutions Approving Prime Series
Treasury Series and Flag Investors Series
Date Approved: July 1990
FURTHER RESOLVED, The total number of shares of capital stock
which the Corporation shall have the authority to issue is 4,000,000,000 shares
of common stock of the par value of $.001 each, of which 2,500,000,000 shares
are designated "Prime Series", 1,000,000,000 shares are designated "Treasury
Series", 400,000,000 shares are designated "Flag Investors Series" and the
balance of which are unclassified. Unissued shares of the capital stock may be
classified and reclassified by the Board of Directors. The aggregate par value
of capital stock of all classes is $4,000,000.
Resolutions Renaming Flag Investors Shares
Date Approved: September 22-23, 1994
FURTHER RESOLVED, that the shares of common stock, par value
$.001 per share of Alex. Brown Cash Reserve Fund, Inc., previously designated as
the "Flag Investors Prime Shares" be, and they hereby are, further designated as
the "Flag Investors Prime Shares - Class A."
FURTHER RESOLVED, that an additional class of shares of each
of the Funds listed below be, and each of them hereby is, classified and
designated as the "Flag Investors Class B Shares" and that unissued shares of
common stock, par value $.001 per share of the Funds listed below be, and the
same hereby are, reclassified as follows:
Prime Series 2,550,000,000 shares
Flag Investors Class A 50,000,000 shares
Flag Investors Class B 50,000,000 shares
AB Cash Reserve Prime 2,000,000,000 shares
Quality Cash Reserve Prime 250,000,000 shares
Institutional Prime 200,000,000 shares
Treasury Series 1,500,000,000 shares
Alex. Brown Cash Reserve 1,300,000,000 shares
Institutional Treasury 200,000,000 shares
Tax-Free Series 600,000,000 shares
Unclassified 350,000,000 shares
Total Shares = 5,000,000,000 shares
FURTHER RESOLVED, that the proper officers of each of the
foregoing Funds be, and each of them hereby is, authorized and directed to file
articles supplementary to the relevant Fund's Articles of Incorporation and to
take such other action as may be necessary to designate and reclassify shares in
the foregoing manner.
RESOLVED, that the Distribution Agreement between Alex. Brown
Cash Reserve Fund, Inc. And Alex. Brown & Sons Incorporated for the Flag
Investors Class B Shares (the "Class B Shares") of said Fund be, and the same
hereby is, approved;
FURTHER RESOLVED, that at such time as the Fund offers the
Class B Shares, the Plan of Distribution presented at this meeting shall govern
the payment of 12b-1 fees by that class;
FURTHER RESOLVED, that the Plan of Distribution for the Class
B Shares of said Fund is determined to be reasonably likely to benefit the Fund
and its shareholders;
4
<PAGE>
Resolution Designating
Series Shares for Alex. Brown Cash Reserve Fund, Inc.
Date Approved: December 29, 1995
RESOLVED, that the total number of shares of Common Stock, par
value $.001 per share, which the Fund shall have the authority to issue be, and
hereby is, increased to six billion four hundred million (6,400,000,000) shares
having the aggregate par value of six million four hundred thousand dollars
($6,400,000), of which three billion five hundred fifty million (3,550,000,000)
shares are designated "Prime Series", one billion five hundred million
(1,500,000,000) shares are designated "Treasury Series", one billion
(1,000,000,000) shares are designated "Tax-Free Series" and the remainder are
unclassified. Of the three billion five hundred fifty million (3,550,000,000)
shares designated for the Prime Series, three billion (3,000,000,000) shares are
classified as Alex. Brown Cash Reserve Fund Shares, two hundred million
(200,000,000) shares are classified as Institutional Shares, fifty million
(50,000,000) shares are classified as Flag Investors Cash Reserve Prime Shares
Class A, fifty million (50,000,000) shares are classified as Flag Investors Cash
Reserve Prime Shares Class B, and two hundred fifty million (250,000,000) shares
are classified as Quality Cash Reserve Prime Shares. Of the one billion five
hundred million (1,500,000,000) shares designated for the Treasury Series, one
billion three hundred million (1,300,000,000) shares are classified as Alex.
Brown Cash Reserve Fund Shares and two hundred million (200,000,000) share are
classified as Institutional Shares. All of the one billion (1,000,000,000)
shares designated for the Tax-Free Series are classified as Alex. Brown Cash
Reserve Fund Series;
FURTHER RESOLVED, that the Articles Supplementary to the
Fund's Articles of Incorporation in the form attached hereto as Exhibit A be,
and hereby are, approved and adopted;
FURTHER RESOLVED, that the proper officers of the Fund be, and
they hereby are, authorized and directed in the name and on behalf of the Fund
to take any other action that the officer so acting may deem necessary or
appropriate to effectuate the filing and recording of the Articles Supplementary
in the appropriate offices in the State of Maryland.
5
<PAGE>
Incorporating Amendments through June 30, 1990
ALEX. BROWN CASH RESERVE FUND, INC.
(a Maryland Corporation)
BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1. Place of Meeting. All meetings of the stockholders
shall be held at the principal office of the Corporation in the State of
Maryland or at such other place within or without the State of Maryland as may
from time to time be designated by the Board of Directors and stated in the
notice of meeting.
Section 2. Annual Meetings. Annual meetings of the
stockholders of the Corporation need not be held except as required under the
Maryland General Corporation Law.
Section 3. Special or Extraordinary meetings. Special or
extraordinary meetings of the stockholders for any purpose or purposes may be
called by the Chairman of the Board of Directors, if any, or by the President or
by the Board of Directors. In addition, such special or extraordinary meetings
shall be called by the Secretary upon receipt of the request in writing signed
by stockholders entitled to cast at least 10% of all the votes entitled to be
cast at the meeting stating the purpose of the meeting and the matters proposed
to be acted on. Unless requested by stockholders entitled to cast a majority of
all of the votes entitled to be cast at the meeting, a special meeting need not
be called to consider any matter which is substantially the same as a matter
voted on at a special meeting of the stockholders held during the preceding 12
months.
Section 4. Notice of Meeting of Stockholders. Not less than
ten days and not more than ninety days written or printed notice of every
meeting of stockholders, stating the time and place thereof (and the purpose of
any special or extraordinary meeting), shall be given to each stockholder
entitled to vote thereat and each other stockholder entitled to notice, by
leaving the same with him or at his residence or usual place of business or by
mailing it, postage prepaid, and addressed to him at his address as it appears
upon the books of the Corporation. Each person who is entitled to notice of any
meeting waives notice if he is present at the meeting, attends in person or by
6
<PAGE>
proxy or either before or after the meeting signs a waiver of notice which is
filed with the records of stockholders meetings.
Section 5. Closing of Transfer Books. Record Dates. The Board
of Directors may direct that the stock transfer books of the Corporation be
closed for a stated period not exceeding twenty days for the purpose of making
any proper determination with respect to stockholders, including which
stockholders are entitled to notice of and to vote at the meeting, receive a
dividend or be allotted other rights. If such books are closed for the purpose
of determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days immediately
preceding such meeting. In lieu of providing for the closing of the stock
transfer books, the Board of Directors may set a date, not exceeding ninety days
and not less than ten days preceding the date of any meeting of stockholders,
and not exceeding ninety days preceding any dividend payment date or any date
for the allotment of rights, as a record date for the determination of the
stockholders entitled to notice of and to vote at such meeting, or entitled to
receive such dividends or rights, as the case may be; and only stockholders of
record on such date shall be entitled to notice of and to vote at such meeting
or to receive such dividends or rights, as the case may be.
Section 6. Quorum. Adjournment of Meetings. The presence in
person or by proxy of stockholders entitled to cast a majority of all votes
entitled to be cast at the meeting shall constitute a quorum at all meetings of
the stockholders; and a majority of all votes cast at a meeting at which a
quorum is present is sufficient to approve any matter which properly comes
before the meeting, unless otherwise provided by applicable law, the Articles of
Incorporation or the ByLaws of the Corporation. If at any meeting of the
stockholders there shall be less than a quorum present, the stockholders present
at such meeting may, without further notice, adjourn the same from time to time
(but not more than 120 days after the original record date for such meeting)
until a quorum shall attend, but no business shall be transacted at any such
adjourned meeting except such as might have been lawfully transacted had the
meeting not been adjourned.
Section 7. Voting and Inspectors. At all meetings of
stockholders every stockholder of record entitled to vote thereat shall be
entitled to vote at such meeting either in person or by proxy appointed by
instrument in writing subscribed by such stockholder or his duly authorized
attorney. Unless a proxy provides otherwise, such proxy is not valid more than
eleven months after its date.
At any election of Directors, the Board of Directors prior
thereto may, or, if hey have not so acted, the Chairman of the meeting may
appoint two inspectors of election who shall first subscribe an oath or
affirmation to execute faithfully the duties of inspectors at such election with
strict impartiality and according to the best of their ability, and shall after
the election make a certificate of the result of the vote taken. No candidate
for the office of Director shall be appointed such Inspector.
7
<PAGE>
The Chairman of the meeting may cause a vote by ballot to be
taken upon any election or matter.
Section 8. Conduct of Stockholders Meetings. The meetings of
the stockholders shall be presided over by the Chairman of the Board, or if he
shall not be present or if there is no Chairman, by the President, or if he
shall not be present, by a Vice President, or if neither the President nor any
Vice President is present, by a chairman to be elected at the meeting. The
Secretary of the Corporation, if present, shall act as Secretary of such
meetings, or if he is not present, an Assistant Secretary shall so act, and if
neither the Secretary nor an Assistant Secretary is present, by a secretary to
be elected at the meeting.
Section 9. Concerning Validity of Proxies. Ballots. Etc. At
every meeting of the stockholders, all proxies shall be received and taken in
charge of and all ballots shall be received and canvassed by the secretary of
the meeting, who shall decide all questions touching the qualification of
voters, the validity of the proxies, and the acceptance or rejection of votes,
unless inspectors of election shall have been appointed as provided in Section
7, in which event such inspectors of election shall decide all such questions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number and Term of Office. The business and
property of the Corporation shall be conducted and managed under the direction
of a Board of Directors consisting of two Directors, which number may bed
increased and decreased as provided in Section 2 of this Article. Each director
shall hold office until his successor is duly elected and qualifies. Directors
need not be stockholders.
Section 2. Increase or Decrease in Number of Directors. The
Board of Directors, by thee vote of a majority of the entire Board, may increase
the number of Directors to a number not exceeding fifteen, and may elect
Directors to fill the vacancies created by any such increase in the number of
Directors until their successors are duly elected and qualify. The Board of
Directors, by the vote of a majority of the entire Board, may decrease the
number of Directors to a number not less than two but any such decrease shall
not affect the term of office of any Director. Vacancies occurring other than by
reason of any such increase shall be filled as provided by the Maryland General
Corporation Law.
Section 3. Place of Meeting. The Directors may hold their
meetings, have one or more offices, and keep the books of the Corporation
outside the State of Maryland, at any office or offices of the Corporation or at
any other place as they may
8
<PAGE>
from time to time determine, and in the case of meetings, as they may from time
to time determine or as shall be specified in the respective notices of such
meetings or waivers of notice thereof.
Section 4. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such time and on such notice, if any, as the
Directors may from time to time determine.
Section 5. Special meetings. Special meetings of the Board of
Directors may be held "from time to time upon call of the Chairman of the Board
off Directors, if any, the President or two or more of the Directors, by oral or
telegraphic or written notice duly served on each Director not less than one
business day before such meeting or if sent or mailed to each Director not less
than three business days before such meeting. Each Director who is entitled to
notice waives such notice if he either before or after the meeting signs a
waiver of the notice which is filed with the minutes of the meeting or is
present at the meeting. Such notice or waiver of notice need not state the
purpose or purposes of such meeting.
Section 6. Quorum. One third of the Directors then in office
(but in no event less than two Directors), shall constitute a quorum for the
transaction of business. If at any meeting of the Board there shall be less than
a quorum present, a majority of those present may adjourn the meeting from time
to time until a quorum shad have been obtained. The act of the majority of the
Directors present at any meeting at which there is a quorum shall be the act of
the Directors, except as may be otherwise specifically provided by applicable
law, by the Articles of Incorporation or by these ByLaws.
Section 7. Telephonic Meeting, Etc. The members of the Board
of Directors or any committee of the Board of Directors may participate in a
meeting by means of a conference telephone or similar communications equipment
if all persons participating in such meeting can hear each other at the same
time, and participation in a meeting by these means constitutes presence in
person at such meeting.
Section 8. Executive Committee. The Board of Directors may
elect from the Directors an Executive Committee to consist of such number of
Directors (but not less than two) as the Board may from time to time determine.
The Board of Directors by such affirmative vote shall have power at any time to
change the members of such Committee and may fill vacancies in the Committee by
election from the Directors. When the Board of Directors is not in session, the
Executive Committee shall have and may exercise any or all of the powers of the
Board of Directors in the management of the business and affairs of the
Corporation (including the power to authorize the seal of he Corporation to be
affixed to all papers which may require it) except as provided by law and except
the power to increase or decrease the size of, or fill vacancies on the Board.
The Executive Committee may fix its own rules of procedure, and may meet, when
and as provided by such rules or by resolution of the Board of Directors, but in
every case the presence of a majority shall be necessary to constitute a quorum.
9
<PAGE>
Section 9. Other Committees. The Board of Directors may
appoint other committees which shall in each case consist of such number of
members (not less than two) and shall have and may exercise Such powers aa the
Board may determine in the resolution appointing them. A majority of all members
of any such committee may determine its action, and fix the time and place of
its meetings, unless the Board of Directors shall otherwise provide. The Board
of Directors shall have power at any time to change the members and powers of
any such committee, to fill vacancies, and to discharge any such committee. In
the, absence of any member of any committee, the members thereof present at any
meeting, whether or not they constitute a quorum, may appoint a member of the
Board of Directors to act in the place of such absent member.
Section 10. Informal Action by Directors. Except to the extent
otherwise specifically provided by applicable law, any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting, if a written consent to such action is
signed by all members of the Board or committee and is filed with the minutes of
proceedings of the Board or committee.
Section 11. Compensation of Directors. Directors shall be
entitled to receive such compensation from the Corporation for their services as
Directors as may from time to time be voted by the Board of Directors.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The executive officers of the
Corporation shall be chosen by the Board of Directors as soon as may be
practicable after the incorporation of the Corporation. These may include a
Chairman of the Board, and shall include a President, one or more Vice
Presidents (the number thereof to be determined by the Board of Directors), a
Secretary and a Treasurer. The Chairman of the Board, if any, shall be selected
from among the Directors. The Board of Directors may also in its discretion
appoint Assistant Secretaries, Assistant Treasurers, and other officers, agents
and employees, who shall have such authority and perform such duties as the
Board may determine The Board of Directors may fill any vacancy which may occur
in any office. Any two offices, except those of President and Vice President,
may be held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity, if such instrument is required
by law or these ByLaws to be executed, acknowledged or verified by two or more
officers.
Section 2. Term of Office. Unless otherwise specifically
determined by the Board of Directors, all officers of the Corporation shall hold
office until their respective
10
<PAGE>
successors are chosen and qualify, provided, however, that said term of office
shall not create any contract rights in the officer. If the Board of Directors
in its judgment finds that the best interests of the Corporation will be served,
the Board of Directors may remove any officer of the Corporation at any time
with or without cause.
Section 3. The President shall be the chief executive officer
and head of the Corporation and, subject to the Board of Directors, shall have
the general control and management of the business and affairs of the
Corporation. If no Chairman of the Board be appointed, or, if appointed, said
Chairman is absent, the President shall, if present, preside at all meetings of
the stockholders and the Board of Directors.
Sections 4. The Chairman of the Board shall preside at all
meetings of the stockholders and the Board of Directors at which he shall be
present. Subject to the provisions of Section 2, he shall have such other powers
and duties as shall be prescribed by the Board of Directors, and shall undertake
such other assignments as may be requested by the President.
Section 5. The Chairman or one or more vice Presidents shall
have and exercise such powers and duties of the President in the absence or
inability of the President as may be assigned to them, respectively, by
resolution of the Board of Directors or, to the extent not so assigned, as the
President may assign to them, respectively. In the absence or inability of the
President to act, the powers and duties of the President not assigned by the
Board of Directors or the President shall evolve upon the Chairman or in his
absence the Vice Chairman or in his absence the senior Vice President.
Section 6. The Secretary shall have custody of the seal of the
Corporation. He shall keep the minutes of the meetings of the stockholders,
Board of Directors and any committees thereof, and he shall attend to the giving
and serving of all notices of the Corporation. He shall have charge of the stock
certificate book and such other books and papers as the Board may direct; and he
shall perform such other duties as may be incidental to his office or as may be
assigned to him by the Board of Directors. He shall also keep or cause to be
kept a stock book, containing the names, alphabetically arranged, of all persons
who are stockholders of the Corporation showing their places of residence, the
number and class or series of any class of shares of stock held by them
respectively, and the dates when they respectively became the owners of record
thereof, and such book shall be open for inspection as prescribed by the laws of
the State of Maryland.
Section 7. The Treasurer shall have the care and custody of
the funds and securities of the Corporation and shall deposit the same in the
name of the Corporation in such bank or banks or other depositories and subject
to withdrawal in such manner as these bylaws or the Board of Directors may
determine; he shall, if required by the Board of Directors, give such bond for
the faithful discharge of his duties in such form as the Board of Directors may
require.
11
<PAGE>
ARTICLE IV
CAPITAL STOCK
Section 1. Certificates of Shares. Each stockholder of the
Corporation shall be entitled to a certificate or certificates for the number of
whole shares of each class of stock of the Corporation owned by him in such form
as the Board of Directors may from time to time prescribe.
Section 2. Transfer of Shares. Shares of the Corporation shall
be transferable on the books of the Corporation by the holder thereof in person
or by his duly authorized attorney or legal representative, upon surrender and
cancellation of certificates, if any, for the same number of shares, duly
endorsed or accompanied by proper instruments of assignment and transfer, with
such proof of the authenticity of the signature as the corporation or its agents
may reasonably require. In the case of shares not represented by certificates,
the same or similar requirements may be imposed by the Board of Directors.
Section 3. Stock Ledgers. The stock ledgers of the
Corporation, containing the names and addresses of the stockholders and the
number of shares held by them respectively, shall be kept at the principal
offices of the Corporation, or if the Corporation employs a transfer agent, at
the offices of the transfer agent of the Corporation.
Section 4. Lost. Stolen or Destroyed Certificates. The Board
of Directors may determine the conditions upon which a new certificate of stock
of the Corporation of any class may be issued in place of a certificate which is
alleged to have been lost, stolen or destroyed; and may, in their discretion,
require the owner of such certificate or his legal representative to give bond,
with sufficient surety to the Corporation and the transfer agent, if any, to
indemnify it and such transfer agent against any and all loss or claims which
may arise by reason of the issue of a new certificate in the place of the one so
lost, stolen or destroyed.
ARTICLE V
CORPORATE SEAL
The Board of Directors may provide a suitable corporate seal,
in such form and bearing such inscriptions as it may determine. In lieu of
fixing the Corporations seal to a document, it is sufficient to meet the
requirements of any law, rule or regulation relating to a corporate seal to
place the word "(seal)" adjacent to the signature of the person authorized to
sign the document on behalf of the Corporation.
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ARTICLE VI
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board of
Directors.
ARTICLE VII
INDEMNIFICATION
Section 1. Indemnification of Directors and Officers. The
Corporation shall indemnify its directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify its officers to the same extent as its
directors and to such further extent as is consistent with law. The Corporation
shall indemnify its directors and officers who while serving as directors or
officers also serve at the request of the Corporation as a director, officer,
partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan to
the fullest extent consistent with law. The indemnification and other rights
provided by this Article shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. This Article shall not protect any such person
against any liability to the Corporation or any stockholder thereof to which
such person 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 ("disabling conduct").
Section 2. Advances. Any current or former director or officer
of the corporation seeking indemnification within the scope of this Article
shall be entitled to advances from the Corporation for payment of the reasonable
expenses incurred by him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent permissible under the
Maryland General Corporation Law. The person seeking indemnification shall
provide to the Corporation a written affirmation of his good faith belief that
the standard of conduct necessary for indemnification by the Corporation has
been met and a written undertaking to repay any such advances if it should
ultimately be determined that the standard of conduct has not been met. In
addition, at least one of the following additional conditions shall be met: (a)
the person seeking indemnification shall provide a security in form and amount
acceptable to the Corporation for his undertaking; (b) the Corporation is
insured against losses arising by reason of the advance; or (c) a majority of a
quorum of directors of the Corporation who are neither "interested persons" as
defined in Section 2(a) (19) of the Investment
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Company Act of 1940, as amended, nor parties to the proceeding ("disinterested
nonparty directors"), or independent legal counsel, in a written opinion, shall
have determined, based on a review of facts readily available to the Corporation
at the time the advance is proposed to be made, that there is reason to believe
that the person seeking indemnification will ultimately be found to be entitled
to indemnification.
Section 3. Procedure. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine, or
cause to be determined, in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this Article have been met.
Indemnification shall be made only following: (a) a final decision on the merits
by a court or other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct or (b) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct by (i) the vote of a majority of a quorum of disinterested
nonparty directors or (ii) an independent legal counsel in a written opinion.
Section 4. Indemnification of Employees and Agents. Employees
and agents who are not officers or directors of the Corporation may be
indemnified, and reasonable expenses may be advanced to such employees or
agents, as may be provided by action of the Board of Directors or by contract,
subject to any limitations imposed by the Investment Company Act of 1940 as from
time to time amended.
Section 5. Other Rights. The Board of Directors may make
further provision consistent with law for indemnification and advance of
expenses to directors, officers, employees and agents by resolution, agreement
or otherwise. The indemnification provided by this Article shall not be deemed
exclusive of any other right, with respect to indemnification may be entitled
under any insurance or other agreement or resolution of stockholders or
disinterested directors or otherwise.
Section 6. Amendments. References in this Article are to the
Maryland General Corporation Law and to the Investment Company Act of 194 as
from time to time amended. No amendment of these bylaws shall affect any right
of any person under this Article based on any event, omission or proceeding
prior to the amendment.
ARTICLE VIII
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of independent public accountants which shall sign or
certify the financial statements of each class of stock of the Corporation which
are filed with the Securities and Exchange Commission shall be selected annually
by the Board of Directors and ratified by the Board of Directors or the
stockholders in accordance with the provisions of the Investment Company Act of
1940 as from time to time amended.
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ARTICLE IX
ANNUAL STATEMENTS
The books of account of the Corporation shall be examined by
an independent firm of public accountants at the close of each annual period of
the Corporation and at such other times as may be directed the Board. A report
to the stockholders based upon each such examination shall be mailed to each
stockholder of each class of the Corporation of record on such dated with
respect to each report as may be determined by the Board, at his address as the
same appears on the books of the Corporation. Such annual statement shall also
be placed on file at the Corporations principal office in the State of Maryland.
Each such report shall show the assets and liabilities of the class of the
Corporation as of the close of the annual or semiannual period covered by the
report and the securities in which the funds of the class income and expenses
for the period form the end of the Corporations preceding fiscal year to the
close of the annual or semiannual period covered by the report and any other
information required by the Investment Company Act of 1940, as amended, and
shall set forth such other matters as the Board or such firm of independent
public accountants shall determine.
ARTICLE X
AMENDMENT OF BY-LAWS
The By-Laws of the Corporation may be altered, amended, added
to or repealed by the Board of Directors.
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<PAGE>
ARTICLES SUPPLEMENTARY
ALEX. BROWN CASH RESERVE FUND, INC.
ALEX. BROWN CASH RESERVE FUND, INC. (the "Corporation")
having its principal office in the City of Baltimore, certifies
that:
FIRST: The Corporation's Board of Directors in accordance with
Section 2-105(c) of the Maryland General Corporation Law has adopted a
resolution increasing the total number of shares of Common Stock the corporation
is authorized to issue to six billion four hundred million (6,400,000,000)
shares of Common Stock, par value $.001 per share, and of the aggregate par
value of six million four hundred thousand dollars ($6,400,000), as follows:
three billion five hundred fifty million (3,550,000,000) shares are designated
"Prime Series", one billion five hundred million (1,500,000,000) shares are
designated "Treasury Series", one billion (1,000,000,000) shares are designated
"Tax-Free Series", and the balance of which are unclassified. Of the three
billion five hundred fifty million (3,550,000,000) shares designated for the
Prime Series, three billion (3,000,000,000) shares are classified as Alex. Brown
Cash Reserve Fund Shares, two hundred million (200,000,000) shares are
classified as Institutional Shares, fifty million (50,000,000) shares are
classified as Flag Investors Cash Reserve Prime Shares Class A, fifty million
(50,000,000) shares are classified as Flag Investors Cash Reserve Prime Shares
Class B and two hundred fifty million (250,000,000) shares are classified as
Quality Cash Reserve Prime Shares. Of the one billion five hundred million
(1,500,000,000) shares designated for the Treasury Series, one billion three
hundred million (1,300,000,000) shares are classified as Alex. Brown Cash
Reserve Fund Shares and two hundred million (200,000,000) shares are classified
as Institutional Shares. All of the one billion (1,000,000,000) shares
designated for the Tax-Free Series are classified as Alex.
Brown Cash Reserve Fund Shares.
SECOND: Immediately before the increase in authorized shares
pursuant to these Articles Supplementary, the Corporation was authorized to
issue five billion (5,000,000,000) shares of Common Stock, par value $.001 per
share and of the aggregate par value of five million dollars ($5,000,000), of
which two billion, five hundred fifty million (2,550,000,000) shares were
designated "Prime Series", one billion, five hundred million (1,500,000,000)
shares were designated "Treasury Series", six hundred million (600,000,000)
shares were designated "Tax-Free Series", and the balance of which were
unclassified. Of the two billion, five hundred fifty million (2,550,000,000)
shares designated for the Prime Series, two billion (2,000,000,000) shares were
classified as Alex. Brown Cash Reserve Fund Shares, two hundred million
(200,000,000) shares were classified as Institutional Shares, fifty million
(50,000,000) shares were classified as Flag Investors Cash Reserve Prime Shares
Class A, fifty million (50,000,000) shares were classified as Flag Investors
Cash Reserve Prime Shares Class B and two hundred fifty million (250,000,000)
shares were classified as Quality Cash Reserve Prime Shares. Of the one billion,
five hundred million (1,500,000,000) shares designated for the Treasury Series,
one billion, three hundred million (1,300,000,000) shares were classified as
Alex. Brown Cash Reserve Fund Shares and two hundred million (200,000,000)
shares were classified as Institutional Shares. All of the six hundred million
(600,000,000) shares designated for the Tax-Free Series were classified as Alex.
Brown Cash Reserve Fund Shares.
THIRD: The Corporation is registered as an open-end
investment company under the Investment Company Act of 1940, as
amended.
<PAGE>
IN WITNESS WHEREOF, Alex. Brown Cash Reserve Fund, Inc.
has caused these Articles Supplementary to be executed by one of
its Vice Presidents and its corporate seal to be affixed and
attested by its Secretary on this 29th day of December 1995.
[CORPORATE SEAL]
ALEX. BROWN CASH RESERVE FUND, INC.
By:/s/ Edward J. Veilleux
--------------------------------
Executive Vice President
Attest: /s/ Brian C. Nelson
--------------------
Secretary
The undersigned, Executive Vice President of ALEX. BROWN CASH
RESERVE FUND, INC., who executed on behalf of said corporation the foregoing
Articles Supplementary to the Articles of Incorporation of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Articles Supplementary to the Articles of
Incorporation to be the corporate act of said corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.
/s/ Edward J. Veilleux
------------------------
Edward J. Veilleux
16
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
INSTITUTIONAL SHARES
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of the 4th day of April, 1990 by and
between ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the
"Fund"), and ALEX. BROWN & SONS INCORPORATED, a Maryland corporation ("Alex.
Brown").
Recital
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 Fund's Articles of Incorporation ("Articles")
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 two series of shares, each with a par value of $.001 per share,
representing interests in two portfolios: the Prime Series Portfolio and the
Treasury Series Portfolio (each of the existing portfolios and any portfolios
hereafter added shall be referred to collectively as the "Portfolios"); and
WHEREAS, the Fund's Board of Directors has further authorized
the creation of an institutional class of shares of each Portfolio; and
WHEREAS, the Fund and Alex. Brown desire to enter an agreement
to provide distribution services for the institutional class of shares of the
Fund's Portfolios (collectively, the "Institutional Shares") on the terms and
conditions hereinafter set forth; and
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment. The Fund hereby appoints Alex. Brown as
Distributor of the Institutional Shares for the period and on the terms set
forth in this
17
<PAGE>
Agreement. Alex. Brown accepts such appointment and agrees to render the
services herein set forth.
2. Delivery Documents. The Fund has furnished Alex. Brown with
copies properly certified or authenticated of each of the following:
(a) The Fund's Articles filed with the State
Department of Assessments and Taxation of the State
of Maryland on February 5, 1990 and all amendments
thereto;
(b) The Fund's By-Laws and all amendments
thereto (such By-Laws, as presently in effect and as
they shall from time to time be amended, are herein
called the "By-Laws");
(c) Resolutions of the Fund's Board of
Directors and shareholders authorizing the
appointment of Alex. Brown as the Distributor of the
Institutional Shares and approving this Agreement;
(d) The Fund's Notification of Registration
Filed Pursuant to Section 8(a) of the 1940 Act on
Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission (the "SEC") on
June 5, 1981;
(e) The Fund's Registration Statement on
Form N-1 under the Securities Act of 1933, as amended
(the "1933 Act") (File No. 2-72658), and under the
1940 Act as filed with the SEC on June 5, 1981
relating to the shares of the Fund and all amendments
thereto; and
(f) The Fund's most recent prospectus and
statement of additional information (such prospectus
and statement of additional information, as presently
in effect and all amendments and supplements thereto,
are herein called the "Prospectus" and "SAI,"
respectively).
The Fund will furnish Alex. Brown from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties as Distributor. Alex. Brown shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as Distributor. Alex. Brown will act as Distributor subject to the supervision
of the Fund's Board of Directors and the following understanding: (i) nothing
herein contained shall be deemed to relieve or deprive the Board of Directors of
the Fund of its responsibility for and control of the
18
<PAGE>
conduct of the Fund's affairs; and (ii) in all matters relating to the
performance of this Agreement, Alex. Brown will act in conformity with the
Articles, By-Laws and Prospectus and SAI of the Fund and with the instructions
and directions of the Fund's Board of Directors and will conform to and comply
with the requirements of the 1940 Act and all other applicable Federal or state
laws and regulations. In carrying out its obligations hereunder, Alex. Brown
shall:
(a) receive orders for the purchase of the
Fund's Institutional Shares, accept or reject such
orders on behalf of the Fund in accordance with the
Fund's currently effective Prospectus and SAI and
transmit such orders as are so accepted to the Fund's
transfer agent as promptly as possible;
(b) receive requests for redemption from
holders of the Fund's Institutional Shares and
transmit such redemption requests to the Fund's
transfer agent as promptly as possible; and
(c) respond to inquiries from the holders of
the Fund's Institutional Shares concerning the status
of their accounts with the Fund.
4. Distribution of Institutional Shares. Alex. Brown shall be
exclusive distributor of the Institutional Shares. It is mutually understood and
agreed that Alex. Brown does not undertake to sell all or any specific portion
of Institutional Shares. The Fund shall not sell any of its Institutional Shares
except through Alex. Brown. Notwithstanding the provisions of the foregoing
sentence:
(a) the Fund may issue its Institutional
Shares to any other investment company or personal
holding company, or to the shareholders thereof, in
exchange for all or a majority of the shares or
assets of any such company;
(b) the Fund may issue its Institutional
Shares at their net asset value to any shareholder of
the Fund purchasing such shares with dividends or
other cash distributions received from the Fund
pursuant to an offer made to all shareholders of the
Institutional Shares class of either Portfolio;
(c) Alex. Brown may enter into shareholder
processing and servicing agreements in accordance
with section 8 hereof;
(d) Alex. Brown may, and when requested by
the Fund shall, suspend its efforts to effectuate
sales of the Institutional Shares at any time when in
the opinion of Alex. Brown or of the
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<PAGE>
Fund no sales should be made because of market or
other economic considerations or abnormal
circumstances of any kind;
(e) the Fund may withdraw the offering of
the Institutional Shares: (i) at any time with the
consent of Alex. Brown, or (ii) without such consent
when so required by the provisions of any statute or
of any order, rule or regulation of any governmental
body having jurisdiction; and
(f) the price at which the Institutional
Shares may be sold (the "offering price") shall be
the net asset value per share, which shall be
determined in the manner established from time to
time by the Fund's Board of Directors and as set
forth in the Fund's then current Prospectus and SAI.
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant thereto,
shall at all times be subject to any applicable directives of the Board of
Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, Alex. Brown 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 the 1940 Act;
(c) the provisions of the Articles of the
Fund;
(d) the provisions of the By-Laws of the
Fund;
(e) the rules and regulations of the
National Association of Securities Dealers, Inc.
("NASD") and all other self-regulatory organizations
applicable to the sale of investment company shares;
and
(f) any other applicable provisions of state
and Federal law.
7. Expenses. The expenses connected with the Institutional
Shares shall be allocable between the Fund and Alex. Brown as follows:
20
<PAGE>
(a) Alex. Brown shall furnish, at its
expense and without cost to the Fund, the services of
personnel to the extent that such services are
required to carry out its obligations under this
Agreement.
(b) Alex. Brown shall bear the expenses of
printing and distributing Prospectuses and SAI (other
than those Prospectuses and SAI distributed to
holders of Institutional Shares of the Fund) and any
other promotional or sales literature used by Alex.
Brown or furnished by Alex. Brown to investors in
connection with the public offering of the
Institutional Shares of the Fund, the expenses of
advertising in connection with such public offering
and all legal expenses in connection with the
foregoing.
(c) The Fund assumes and shall pay or cause
to be paid all other expenses of the Fund (other than
those expressly assumed by the Fund's investment
advisor and sub-advisor), including, without
limitations the fees of the Fund's investment
advisor; 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 SAI 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; 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 insure to its benefit;
21
<PAGE>
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.
8. Delegation of Responsibilities. Alex. Brown may, but shall
not be under any duty to, perform services on behalf of the Fund 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 Fund and Alex. Brown'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
Alex. Brown of any Fund expense that Alex. Brown is not required to pay or
assume under this Agreement shall not relieve Alex. Brown of any of its
obligations to the Fund nor obligate Alex. Brown to pay or assume any similar
Fund expenses on any subsequent occasions.
9. Compensation. Alex. Brown shall receive no compensation for
the services to be rendered and the expenses assumed by it pursuant to this
Agreement.
10. Non-Exclusivity. The services of Alex. Brown to the Fund
are not to be deemed to be exclusive, and Alex. Brown shall be free to render
distribution or other services to others (including other investment companies)
and to engage in other activities. It is understood and agreed that officers or
directors of Alex. Brown may serve as officers or directors of the Fund, and
that officers or directors of the Fund may serve as officers or directors of
Alex. Brown to the extent permitted by law; and that the officers and directors
of Alex. Brown 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 class of Institutional
Shares of each of the Portfolios (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" (as defined by the 1940 Act)
of any such party and have no direct or
22
<PAGE>
indirect financial interest in the operation of this
Agreement or any agreement related to this Agreement,
by votes cast in person at a meeting specifically
called for the purpose of voting on such approval.
Notwithstanding any provision of this paragraph to the contrary, if the holders
of the class of Institutional Shares of one Portfolio fail to approve this
Agreement, Alex. Brown may continue to serve as distributor to the class of
Institutional Shares of the Portfolio whose holders approved this Agreement and,
in the manner and to the extent permitted by the 1940 Act, to the class of
Institutional Shares of the Portfolio which did not approve this Agreement.
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 members of the Board of Directors of the Fund who
are not "interested persons" of the Fund and have no direct or indirect
financial interest in the operation of this Agreement or in any agreement
related to this Agreement, by vote of a majority of the class of Institutional
Shares of either Portfolio's outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act), or by Alex. Brown, 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.
Should Alex. Brown cease to have a distribution agent in the
Institutional Shares of the Fund, the Fund will cease to use the words "Alex.
Brown" or any trademark or identifying logotype indicating that the
Institutional Shares of the Fund are distributed or administered by or otherwise
connected with Alex. Brown.
14. Amendments.
(a) This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by the Board of
Directors of the Fund or by the vote of a majority of outstanding voting
securities of the Institutional Shares class of each of the Fund's Portfolios,
and (ii) by a majority of those directors who are not parties to this Agreement
or "interested persons" of any such party, which vote must be cast in person at
a meeting called for the purpose of voting on such approval; provided, however,
that if any such amendment is " material" as such word is used in Rule 12b-1
under the 1940 Act, such amendment shall be approved in the manner prescribed in
section 12 for the annual approval of the continuation of this Agreement.
(b) In the event that this Agreement is proposed to
be amended to increase materially the amount to be spent for distribution, such
amendment will not be effected without shareholder approval.
23
<PAGE>
15. Liability of the Distributor. In the performance of its
duties hereunder, Alex. Brown 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 Alex.
Brown shall not be liable for any act or omission which loss does not constitute
willful misfeasance, bad faith or gross negligence on the part of Alex. Brown or
reckless disregard by Alex. Brown of its duties under this Agreement.
16. 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 for this purpose and that of Alex. Brown shall be 135 East Baltimore
Street, Baltimore, Maryland 21202.
17. Questions of Interpretation. This Agreement shall be
implemented and continued in a manner consistent with the provisions of the 1940
Act. 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 & SONS INCORPORATED
Attest:
/s/ Nancy Palmer By /s/ Robert T. Hale
- -------------------- -----------------------
Assistant Secretary Director
ALEX. BROWN CASH RESERVE
FUND, INC.
Attest:
/s/ William H. Kleh By /s/ Edward J. Veilleux
- -------------------- -----------------------
Secretary Executive Vice President
24
<PAGE>
DISTRIBUTION AGREEMENT
(Containing Plan of Distribution under Rule 12b-1)
THIS AGREEMENT is made as of the 5th day of April, 1990 by and
between ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the
"Fund"), and ALEX. & SONS INCORPORATED, a Maryland corporation ("Alex. Brown").
Recital
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 Fund's Articles of Incorporation ("Articles")
authorizes 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 two series of shares, with a par value of $.001 per share, (such
shares, other than the Institutional Shares shall be referred to collectively as
the "Shares") in two portfolios: the Prime Series Portfolio and the Treasury
Series Portfolio (each of the existing portfolios and any portfolios hereafter
added, other than the Institutional Shares thereof, shall be referred to
collectively as the "Portfolios"); and
WHEREAS, the Fund and Alex. Brown desire to enter an agreement
to provide distribution services for the Fund's Portfolios on the terms and
conditions hereinafter set forth; and
WHEREAS, the payments contemplated by sections 7 and 8 of this
Agreement may be deemed to be the indirect financing of an activity intended to
result in the sale of Fund shares and since the allocation of certain charges
and expenses in section 9 hereof relating to the payment of expenses for
advertisements, promotional material, sales literature and printing and mailing
of prospectuses to other than current Fund shareholders may also be considered
the indirect financing of other activities intended to result in the sale of
Fund shares, this Agreement is intended to be a "written plan" as contemplated
by Rule 12b-1 under the 1940 Act; and
WHEREAS, the Directors who are not "interested persons" of the
Fund shall determine in their sole discretion the selection and nomination of
the Fund's Directors who are not "interested persons";
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<PAGE>
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. The Fund hereby appoints Alex. Brown as
Distributor of the Fund for the period and on the terms set forth in this
Agreement. Alex. Brown accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Delivery Documents. The Fund has furnished Alex. Brown with
copies properly certified or authenticated of each of the following:
(a) The Fund's Articles filed with the State
Department of Taxation and Assessment of the State of
Maryland on January _, 1990 and all amendments
thereto;
(b) The Fund's By-Laws and all amendments
thereto (such By-Laws, as presently in effect and as
they shall from time to time be amended, are herein
called the "By-Laws");
(c) Resolutions of the Fund"s Board of
Directors and shareholders authorizing the
appointment of Alex. Brown as the Fund's Distributor
and approving this Agreement;
(d) The Fund's Notification of Registration
Filed Pursuant to Section 8(a) of the 1940 Act on
Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission (the "SEC") on
June 5, 1981;
(e) The Fund's Registration Statement on
Form N-1 under the Securities Act of 1933, as amended
(the "1933 Act") (File No. 2-72658), and under the
1940 Act as filed with the SEC on June 5, 1981
relating to the shares of the Fund and all amendments
thereto; and
(f) The Fund's most recent prospectus and
statement of additional information (such prospectus
and statement of additional information, as presently
in effect and all amendments and supplements thereto,
are herein called the "Prospectus" and "SAI,"
respectively).
The Fund will furnish Alex. Brown from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
26
<PAGE>
3. Duties as Distributor. Alex. Brown shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as Distributor. Alex. Brown will act as Distributor subject to the supervision
of the Fund's Board of Directors and the following understanding: (i) nothing
herein contained shall be deemed to relieve or deprive the Board of Directors of
the Fund of its responsibility for and control of the conduct of the Fund's
affairs; and (ii) in all matters relating to the performance of this Agreement,
Alex. Brown will act in conformity with the Articles, By-Laws and Prospectus and
SAI of the Fund and with Articles, instructions and directions of the Fund's
Board of Directors and will conform to and comply with the requirements of the
1940 Act and all other applicable Federal or state laws and regulations. In
carrying out its obligations hereunder, Alex. Brown shall:
(a) receive orders for the purchase of the
Fund's shares, accept or reject such orders on behalf
of the Fund in accordance with the Fund's currently
effective Prospectus and SAI and transmit such orders
as are so accepted to the Fund's transfer agent as
promptly as possible;
(b) receive requests for redemption from
holders of the Fund's shares and transmit such
redemption requests to the Fund's transfer agent as
promptly as possible;
(c) respond to inquiries from the Fund's
shareholders concerning the status of their accounts
with the Fund; and
(d) provide to the Fund's Board of
Directors, at least quarterly, a written report of
the amounts expended in connection with all
distribution services rendered pursuant to this
Agreement, including an explanation of the purposes
for which such expenditures were made.
4. Distribution of Shares. Alex. Brown shall be exclusive
distributor of the Fund's shares. It is mutually understood and agreed that
Alex. Brown does not undertake to sell all or any specific portion of the shares
of the Fund. The Fund shall not sell any of its shares except through Alex.
Brown. Notwithstanding the provisions of the foregoing sentence:
(a) the Fund may issue its shares to any
other investment company or personal holding company,
or to the shareholders thereof, in exchange for all
or a majority of the shares or assets of any such
company;
(b) the Fund may issue its shares at their
net asset value to any shareholder of the Fund
purchasing such shares with
27
<PAGE>
dividends or other cash distributions received from
the Fund pursuant to an offer made to all
shareholders;
(c) Alex. Brown may enter into shareholder
processing and servicing agreements in accordance
with section 8 hereof;
(d) Alex. Brown may, and when requested by
the Fund shall, suspend its efforts to effectuate
sales of the shares of the Fund at any time when in
the opinion of Alex. Brown or of the Fund no sales
should be made because of market or other economic
considerations or abnormal circumstances of any kind;
(e) the Fund may withdraw the offering of
its shares: (i) at any time with the consent of Alex.
Brown, or (ii) without such consent when so required
by the provisions of any statute or of any order,
rule or regulation of any governmental body having
jurisdiction; and
(f) the price at which the shares may be
sold (the "offering price") shall be the net asset
value per share, which shall be determined in the
manner established from time to time by the Fund's
Board of Directors and as set forth in the Fund's
then current Prospectus and SAI.
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant thereto,
shall at all times be subject to any applicable directives of the Board of
Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, Alex. Brown 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 the 1940 Act;
(c) the provisions of the Articles of the
Fund;
(d) the provisions of the By-Laws of the
Fund;
(e) the rules and regulations of the
National Association of Securities Dealers, Inc.
("NASD") and all other self-regulatory
28
<PAGE>
organizations applicable to the sale of investment
company shares; and
(f) any other applicable provisions of state
and Federal law.
7. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that Alex. Brown may compensate its investment representatives 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. The total amount of such payments to its
investment representatives during any fiscal year shall not exceed 10% of the
fees received by Alex. Brown from the Fund during such fiscal year.
8. Shareholder Processing and Service Agreements. Alex. Brown
may enter into shareholder processing and service agreements (the "Dealer
Agreements") with any securities dealer ("Securities Dealer") who is registered
under the Securities Exchange Act of 1934 (the "1934 Act") and a member in good
standing of the NASD, who may wish to establish accounts or sub-accounts on
behalf of such Securities Dealer's customers. All Dealer Agreements shall be in
substantially the form of the agreement attached hereto as Exhibit A. Alex.
Brown may enter into shareholder processing and service agreements ("Shareholder
Service Agreements") with persons other than Securities Dealers ("Shareholder
Service Agents") who are not required to be registered under the 1934 Act or
members in good standing of the NASD, who are exempt from registration as a
broker or a dealer under the 1934 Act or who may otherwise lawfully furnish
services to Fund shareholders without registration under the 1934 Act.
Shareholder Service Agreements shall be in substantially the form of the
agreement attached hereto as Exhibit B. Alex. Brown will supervise the Fund's
relations with Securities Dealers and Shareholder Service Agents. Alex. Brown
will make payments to Securities Dealers and Shareholder Service Agents in such
amounts as Alex. Brown may determine from time to time in its discretion based
upon the nature, quality and type of services being provided by the Securities
Dealer or Shareholder Service Agent; the cost to the Securities Dealer or
Shareholder Service Agent of providing such services; the amount of assets being
invested in shares of the Fund; and the contribution being made by the
Securities Dealer or Shareholder Service Agent toward reducing the expense
ratio. The formula or basis of the compensation shall be reviewed from time to
time by the Fund's Board of Directors; however, in no event shall such payments
exceed, on an annual basis, .25% of the average daily net asset value of all
shares held by the customers of each such Securities Dealer or Shareholder
Service Agent. [Such payments shall be borne by Alex. Brown and the Fund in such
proportion as may be determined by Alex. Brown; provided that the Fund's portion
of such fee shall not exceed 50% of the total fees payable to the Securities
Dealer or Shareholder Service Agent; and further provided that Alex. Brown shall
in no case make payments to any Securities Dealer or Shareholder Service Agent
exceeding .15% of the average daily net asset value of all
29
<PAGE>
shares held by customers of each such Securities Dealer or Shareholder Service
Agent. The actual payments by Alex. Brown and the Fund and the basis for
calculating such payments shall be reported quarterly to the Board of Directors
of the Fund.]
9. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its
expense and without cost to the Fund, the services of
personnel to the extent that such services are
required to carry out its obligations under this
Agreement.
(b) Alex. Brown shall bear the expenses of
printing and distributing Prospectuses and SAI (other
than those Prospectuses and SAI distributed to
shareholders of the Fund) and any other promotional
or sales literature used by Alex. Brown or furnished
by Alex. Brown to investors, Securities Dealers or
Shareholder Service Agents 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.
[(c)Alex. Brown and the Fund shall bear the
portion of the fees payable to Securities Dealers and
Shareholder Service Agents as set forth in section 8
above.]
(d) The Fund assumes and shall pay or cause
to be paid all other expenses of the Fund (other than
those expressly assumed by the Fund's investment
advisor and sub-advisor), including, without
limitation: the fees of the Fund's investment
advisor; 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 SAI of the Fund and supplements thereto to the
Fund's shareholders; all expenses of shareholders'
and directors'
30
<PAGE>
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 insure 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.
10. Delegation of Responsibilities. Alex. Brown may, but shall
not be under any duty to, perform services on behalf of the Fund 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 Fund and Alex. Brown'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
Alex. Brown of any Fund expense that Alex. Brown is not required to pay or
assume under this Agreement shall not relieve Alex. Brown of any of its
obligations to the Fund nor obligate Alex. Brown to pay or assume any similar
Fund expenses on any subsequent occasions.
11. Compensation. For the services to be rendered and the
expenses assumed by Alex. Brown, the Fund shall pay to Alex. Brown monthly
compensation at an annual rate of .25% of the aggregate daily net assets of the
Fund. Except as hereinafter set forth, compensation under this Agreement shall
be calculated and accrued daily and the amounts of the daily accruals shall be
paid monthly. If this Agreement becomes effective subsequently 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 calculations of the fees as set forth above. Subject to the
provisions of section 12 hereof, payment of Alex. Brown's compensation for the
preceding month shall be made as promptly as possible after completion of the
computations contemplated in section 12 hereof.
12. Expense Limitation. In the event the operating expenses of
the Fund, including all investment advisory and distribution fees, for any
fiscal year ending on a date on which this Agreement is in effect exceed either
(i) the expense limitations applicable to either of the Portfolios of the Fund
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,
Alex. Brown shall reduce its distribution fee to the extent of its
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<PAGE>
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. In the case of limitations
described in clause (ii) above, the obligation of Alex. Brown to reimburse the
Fund is limited to the fees actually received by Alex. Brown for such fiscal
year. 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 each of the Portfolios of the Fund 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 is the largest reduction in Alex. Brown's fee shall be
applicable. For the purposes of this paragraph, Alex. Brown'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 distribution fee which
would otherwise be payable to Alex. Brown for such fiscal year were it not for
this section 12 and the denominator of which is the sum of all investment
advisory and distribution fees which would otherwise be payable by the Fund or
Portfolio, whichever is applicable, were it not for the expense limitation
provisions of any investment advisory or distribution agreement to which the
Fund is a party. The foregoing expense limitations imposed by the state
securities laws and regulations shall be applied to each of the Fund's
Portfolios 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 Portfolios on a
combined basis.
13. Non-Exclusivity. The services of Alex. Brown to the Fund
are not to be deemed to be exclusive, and Alex. Brown shall be free to render
distribution or other services to others (including other investment companies)
and to engage in other activities. It is understood and agreed that officers or
directors of Alex. Brown may serve as officers or directors of the Fund, and
that officers or directors of the Fund may serve as officers or directors of
Alex. Brown to the extent permitted by law; and that the officers and directors
of Alex. Brown 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.
14. 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 16 hereof, for two years from the date hereof.
15. 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:
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<PAGE>
(a)(i) by the Fund's Board of Directors or
(ii) by the vote of a majority of the outstanding
voting securities of each of the Portfolios (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" (as defined by the 1940 Act)
of any such party and have no direct or indirect
financial interest in the operation of this Agreement
or any agreement related to this Agreement, by votes
cast in person at a meeting specifically called for
the purpose of voting on such approval.
Notwithstanding any provision of this paragraph to the contrary, if the
shareholders of one Portfolio fail to approve this Agreement, Alex. Brown may
continue to serve as distributor to the Portfolio whose shareholders approved
this Agreement and, in the manner and to the extent permitted by the 1940 Act,
to the Portfolio which did not approve this Agreement.
16. 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 members of the Board of Directors of the Fund who
are not "interested persons" of the Fund and have no direct or indirect
financial interest in the operation, of this Agreement or in any agreement
related to this Agreement, by vote of a majority of either Portfolio's
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act),
or by Alex. Brown, 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.
Should Alex. Brown cease to have a distribution agent in 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.
17. Amendments.
(a) This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by the Board of
Directors of the Fund or by the vote of a majority of outstanding voting
securities of each of the Fund's Portfolios, and (ii) by a majority of those
trustees who are not parties to this Agreement or "interested persons" of any
such party, which vote must be cast in person at a meeting called for the
purpose of voting on such approval; provided, however, that if any such
amendment is material as such word is used in Rule 12b-1 under the 1940 Act,
such amendment shall be approved in the manner prescribed in section 15 for the
annual approval of the continuation of this Agreement.
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<PAGE>
(b) In the event that this Agreement is proposed to
be amended to increase materially the amount to be spent for distribution, such
amendment will not be effected without shareholder approval.
18. Liability of the Distributor. In the performance of its
duties hereunder, Alex. Brown 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 Alex.
Brown shall not be liable for any act or omission which loss does not constitute
willful misfeasance, bad faith or gross negligence on the part of Alex. Brown or
reckless disregard by Alex. Brown of its duties under this Agreement.
19. 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 for this purpose and that of Alex. Brown shall be 135 East Baltimore
Street, Baltimore, Maryland 21202.
20. Questions of Interpretation. This Agreement shall be
implemented and continued in a manner consistent with the provisions of the 1940
Act. 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 & SONS INCORPORATED
Attest:
/s/ Nancy Palmer By /s/ Richard T. Hale
- --------------------------- ---------------------------------
Assistant Secretary Director
ALEX. BROWN CASH RESERVE FUND, INC.
Attest:
/s/ William H. Kleh By /s/ Edward J. Veilleux
- --------------------------- ---------------------------------
Secretary Executive Vice President
34
<PAGE>
EXHIBIT A
DEALER AGREEMENT
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor of Alex. Brown Cash Reserve Fund, Inc., a
Maryland corporation (the "Fund"). The Fund is an open-end, diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund offers its shares, $.001 par value,
to the public in accordance with the terms and conditions contained in the
Prospectus and Statement of Additional Information (the "Prospectus and SAI") of
the Fund. Presently, the Shares are divided into two series which represent
interests in two investment portfolios, as more fully described in the Fund's
current Prospectus and SAI - the Prime Series and the Treasury Series. The
Shares of both portfolios, other than Institutional Shares, are referred to
herein as the "Shares." The terms "Prospectus" and "SAI" as used herein refer to
the prospectus and statement of additional information on file with the
Securities and Exchange Commission ("SEC") which is part of the most recent
registration statement effective from time to time under the Securities Act of
1933, as amended (the "1933 Act").
In connection with the offering of Shares to the public, you
may place orders for purchase and redemption of Shares for and on behalf of your
customers on the following terms and conditions:
1. You are hereby authorized to (i) place orders directly with
Alex. Brown for purchases of Shares and (ii) tender Shares to Alex. Brown for
redemption, in each case subject to the terms and conditions set forth in the
Prospectus and SAI.
2. No person is authorized to make any representations
concerning the Fund or the Shares except those contained in the Prospectus and
SAI and in such printed information as Alex. Brown may subsequently prepare. No
person is authorized to distribute any sales material relating to the Fund
without the prior written approval of Alex. Brown.
3. You agree to undertake from time to time certain
shareholder servicing activities for customers of yours who have purchased
Shares and who use your facilities to communicate with the Fund or to effect
redemptions or additional purchases of the Shares. In consideration of the
services and facilities provided by you hereunder, the Fund and Alex. Brown will
pay to you the fee set forth in the attached Schedule based upon the average
daily net asset value of the Fund Shares held of record by you from time to time
on behalf of customers (the "Customers Fund Shares"), which fee will be computed
daily and payable monthly. For purposes of determining the fees payable
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<PAGE>
under this computation, the average daily net asset value of the Customers Fund
Shares will be computed in the manner specified in the Fund's registration
statement (as the same is in effect from time to time) in connection with the
computation of the net asset value of Shares for purposes of purchases and
redemptions. The fee rate stated above may be prospectively increased or
decreased by Alex. Brown, in its sole discretion, at any time upon notice to
you. Further, Alex. Brown may, in its discretion and without notice, suspend or
withdraw the sale of Shares, including the sale of such Shares to you for the
account of any customer or customers. Alex. Brown represents to you that this
Agreement and the payment of such service fees has been authorized and approved
by the Fund.
4. You agree to comply with the provisions contained in the
1933 Act governing the distribution of Prospectuses to persons to whom you offer
Shares. You further agree to deliver, upon our request, copies of any amended
Prospectus to customers whose Shares you are holding as record owner and to
deliver to such customers copies of the annual and interim financial reports and
proxy solicitation materials of the Fund. We agree to furnish to you as many
copies of the Prospectus, annual and interim financial reports and proxy
solicitation materials as you may reasonably request.
5. You represent that you are a member in good standing of the
National Association of Securities Dealers, Inc. You agree that you will not
offer Shares to persons in any jurisdiction in which you may not lawfully make
such offer due to the fact that you have not registered under, or are not exempt
from, the applicable registration or licensing requirements of such
jurisdiction.
6. The Fund has registered an indefinite number of Shares
under the 1933 Act. Upon application to us, we will inform you as to the states
or other jurisdictions in which we believe the Shares have been qualified for
sale under, or are exempt from the requirements of, the respective securities
laws of such states, but we assume no responsibility or obligation as to your
right to sell Shares in any jurisdiction. We will file with the Department of
State in New York a Further State Notice with respect to the Shares, if
necessary.
7. The Fund shall have full authority to take such action as
it deems advisable in respect of all matters pertaining to the offering of the
Shares, including the right in its discretion, without notice, to suspend sales
or withdraw the offering of Shares entirely.
8. You will (i) maintain all records required by law relating
to transactions in Shares of the Fund and, upon request by the Fund, promptly
make such of these records available to the Fund as the Fund may reasonably
request in connection with its operations; and (ii) promptly notify the Fund if
you experience any difficulty in maintaining the records described in the
foregoing clauses in an accurate and complete manner.
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<PAGE>
9. Alex. Brown and the Fund shall be under no liability to you
except for lack of good faith and for obligations expressly assumed by them
hereunder. In carrying out your obligations, you agree to act in good faith and
without negligence. Nothing contained in this agreement is intended to operate
as a waiver by Alex. Brown or you of compliance with any provision of the 1940
Act, the 1933 Act, the Securities Exchange Act of 1934, as amended, or the rules
and regulations promulgated by the SEC.
10. This Agreement may be terminated by either party, without
penalty, upon ten (10) days' notice to the other party and shall automatically
terminate in the event of its "assignment," as defined in the 1940 Act. This
Agreement may also be terminated at any time without penalty by the vote of a
majority of the members of the Board of Directors of the Fund who are not
"interested persons" (as such phrase is defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of the Distribution
Agreement between the Fund and Alex. Brown or any related agreement, or by the
vote of a majority of the outstanding voting securities of the Fund.
11. All communications to us should be sent to:
ALEX. BROWN & SONS INCORPORATED
135 East Baltimore Street
Baltimore, MD 21202
Any notice to you shall be duly given if mailed or telegraphed
to you at the address specified below.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us a copy of this Agreement.
ALEX. BROWN & SONS INCORPORATED
By______________________________
(Authorized Signature)
Confirmed and accepted:
Firm Name:_______________________
By:______________________________
Address:_________________________
Date:____________________________
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<PAGE>
EXHIBIT B
SHAREHOLDER SERVICE AGENT AGREEMENT
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor of Alex. Brown Cash Reserve Fund, Inc., a
Maryland corporation (the "Fund"). The Fund is an open-end, diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund offers its shares, $.001 par value,
to the public in accordance with the terms and conditions contained in the
Prospectus and Statement of Additional Information (the "Prospectus and SAI") of
the Fund. Presently, the shares are divided into two series which represent
interests in two investment portfolios, as more fully described in the Fund's
current Prospectus and SAI - the Prime Series and the Treasury Series. The
shares of both portfolios, other than the institutional shares, are referred to
herein as the "Shares." The terms "Prospectus" and "SAI" as used herein refer to
the prospectus and statement of additional information on file with the
Securities and Exchange Commission ("SEC") which is a part of the most recent
registration statement effective from time to time under the Securities Act of
1933, as amended (the "1933 Act").
1. You agree to provide the following support services to
Clients who may from time to time beneficially own Shares: (i) aggregating and
processing purchase and redemption requests for Shares from Clients and placing
net purchase and redemption orders with Alex. Brown; (ii) providing Clients with
a service that invests the assets of their accounts in Shares pursuant to
specific or preauthorized instructions; (iii) processing dividend payments from
the Fund on behalf of Clients; (iv) providing information periodically to
Clients showing their positions in Shares; (v) arranging for bank wires; (vi)
responding to Client inquiries relating to the services performed by you; (vii)
providing sub-accounting with respect to Shares beneficially owned by Clients or
providing the information to the Fund's transfer agent necessary for
sub-accounting; (viii) if required by law or any agreement with your Client,
forwarding shareholder communications from the Fund (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Clients; and (ix) providing such other similar
services as Alex. Brown may reasonably request to the extent you are permitted
to do so under applicable statutes, rules or regulations. You will provide to
Clients a schedule of any fees that you may charge to them relating to the
investment of their assets in Shares.
2. Shares purchased by you on behalf of your Clients will be
registered in your name or in the name of your nominee. The Client will be the
beneficial owner of the Shares purchased and held by you in accordance with the
Client's instructions and the Client may exercise all rights of a shareholder of
the Fund. You agree to transmit to
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the Fund's transfer agent in a timely manner all purchase orders and redemption
requests of your Clients, if required by law or any agreement with your Client,
and to forward to each Client all proxy statements, periodic shareholder reports
and other communications received from the Fund by you on behalf of your
Clients.
3. You agree to transmit to the Fund's transfer agent, on the
date such purchase orders are effective, federal funds in an amount equal to the
amount of all purchase orders placed by you on behalf of your Clients and
accepted by the Fund (net of any redemption orders placed by you on behalf of
your Clients). In the event that the Fund fails to receive such federal funds on
such date (other than through the fault of the Fund or its transfer agent), you
shall indemnify the Fund against any expense (including overdraft charges)
incurred by the Fund as a result of its failure to receive such federal funds.
4. You agree to make available to the Fund, upon the Fund's
request, such information relating to your Clients who are beneficial owners of
Shares and their transactions in Shares as may be required by applicable laws
and regulations.
5. You agree to transfer record ownership of a Client's Shares
to the Client promptly upon the request of the Client. In addition, record
ownership will be promptly transferred to the Client in the event that the
person or entity ceases to be your Client.
6. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
services to Clients.
7. For all purposes of this Agreement you will be deemed to be
an independent contractor and will have no authority to act as agent for Alex.
Brown or the Fund in any manner or in any respect. By your written acceptance of
this Agreement, you agree to and do release, indemnify and hold Alex. Brown, the
Fund and its transfer agent harmless from and against any and all direct or
indirect liabilities or losses resulting from requests, directions, actions or
inactions of or by you or your officers, employees, or agents regarding your
responsibilities hereunder or, the purchase, redemption, transfer or
registration of Shares by or on behalf of Clients. You and your employees will,
upon request, be available during normal business hours to consult with Alex.
Brown or its designees concerning the performance of your responsibilities under
this Agreement.
8. In consideration of the services and facilities provided by
you hereunder, the Fund and Alex. Brown will pay to you, and you will accept as
full payment therefor, the fee set forth on the attached schedule based upon the
average daily net asset value of the Shares held of record by you from time to
time on behalf of Clients (the "Clients' Fund Shares"), which fee will be
computed daily and payable
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monthly. For purposes of determining the fees payable under this computation,
the average daily net asset value of the Clients' Fund Shares will be computed
in the manner specified in the Fund's registration statement (as the same is in
effect from time to time) in connection with the computations of the net asset
value of Shares for purposes of purchases and redemptions. The fee rate stated
above may be prospectively increased or decreased by Alex. Brown, in its sole
discretion, at any time upon notice to you. Further, Alex. Brown may, in its
discretion and without notice, suspend or withdraw the sale of Shares, including
the sale of such Shares to you for the account of any Client or Clients. Alex.
Brown represents to you that this Agreement and the payment of such service fees
has been authorized and approved by the Fund.
9. You will (i) maintain all records required by law relating
to transactions in Shares of the Fund and, upon request by the Fund, promptly
make such of these records available to the Fund as the Fund may reasonably
request in connection with its operations; and (ii) promptly notify Alex. Brown
if you experience any difficulty in maintaining the records described in the
foregoing clauses in an accurate and complete manner.
10. Except as may be provided in a separate written agreement
between Alex. Brown and you, neither you nor any of your employees or agents are
authorized to assist in distribution of the Shares to the public or to make any
representation to your clients concerning Shares except those contained in the
then current Prospectus and SAI, copies of which will be supplied to you by the
Fund. Except as set forth in this Agreement, you shall have no authority to act
as agent for the Fund or Alex. Brown. Neither the Fund nor Alex. Brown will be
party, nor will they be represented as a party, to any agreement that you may
enter into with your Clients and neither the Fund nor Alex. Brown shall
participate, directly or indirectly, in any compensation that you may receive
from your Clients in connection with your acting on their behalf with the Fund.
11. Alex. Brown is required by law to provide to the Board of
Directors of the Fund, and the Board of Directors of the Fund is required to
review, at least quarterly, a written report of the amounts expended under its
agreement with the Fund and the purposes for which such expenditures were made.
In that connection, you will furnish us or our designees with such information
as we or they may reasonably request (including, without limitation, periodic
certifications confirming the provision to Clients of the services described
herein), and will otherwise cooperate with Alex. Brown and its designees
(including, without limitation, any auditors designated by us), in connection
with the preparation of reports to the Fund's Board of Directors concerning this
Agreement and the monies paid or payable by us pursuant hereto, as well as any
other reports or filings that may be required by law.
12. You may enter into other similar servicing agreements with
any person or persons without Alex. Brown's consent.
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13. Alex. Brown and the Fund shall be under no liability to
you except for lack of good faith and for obligations expressly assumed by Alex.
Brown hereunder. In carrying out your obligations, you agree to act in good
faith and without negligence. Nothing contained in this Agreement is intended to
operate as a waiver by Alex. Brown or you of compliance with any provision of
the 1940 Act, the 1933 Act, the Securities Exchange Act of 1934, as amended, the
rules and regulations promulgated by the Securities and Exchange Commission
thereunder, or any other applicable law.
14. This Agreement may be terminated by either party, without
penalty, upon ten (10) days' notice to the other party and shall automatically
terminate in the event of its assignment, as defined in the 1940 Act. This
Agreement may also be terminated at any time without penalty by the vote of a
majority of the members of the Board of Directors of the Fund who are not
"interested persons" (as such phrase is defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of the Distribution
Agreement between the Fund and Alex. Brown or any related agreement, or by the
vote of a majority of the outstanding voting securities of the Fund.
15. All communications to us should be sent to:
ALEX. BROWN & SONS INCORPORATED
135 East Baltimore Street
Baltimore, MD 21202
Any notice to you shall be duly given if mailed or telegraphed
to you at the address specified by you below.
16. This Agreement shall become effective as of the date when
it is executed and dated below by you. This Agreement and all the rights and
obligations of the parties hereunder shall be governed by and construed under
the laws of the State of Maryland.
If you agree to be legally bound by the provisions of this
Agreement, please sign a copy of this letter and return it to us.
ALEX. BROWN & SONS INCORPORATED
By_______________________________
(Authorized Signature)
Confirmed and accepted:
Name:____________________________
By:______________________________
Address:_________________________
Date:____________________________
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DISTRIBUTION AGREEMENT
(Containing Plan of Distribution under Rule 12b-1)
ALEX. BROWN CASH RESERVE FUND, INC. - TAX-FREE SERIES
THIS AGREEMENT is made as of the 5th day of October, 1990 by
and between ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the
"Fund"), and ALEX. BROWN & SONS INCORPORATED, a Maryland corporation ("Alex.
Brown").
Recital
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 Fund's Articles of Incorporation ("Articles")
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 per share,
representing interests in three portfolios: the Prime Series Portfolio, the
Treasury Series Portfolio and the Tax-Free Series Portfolio; and
WHEREAS, the Fund and Alex. Brown desire to enter an agreement
to provide distribution services for the shares of the Tax-Free Series Portfolio
of the Fund (the "Shares") on the terms and conditions hereinafter set forth;
and
WHEREAS, the payments contemplated by sections 7 and 8 of this
Agreement may be deemed to be the indirect financing of an activity intended to
result in the sale of Shares and since the allocation of certain charges and
expenses in section 9 hereof relating to the payment of expenses for
advertisements, promotional material, sales literature and printing and mailing
of prospectuses to other than current Fund shareholders may also be considered
the indirect financing of other activities intended to result in the sale of
Shares, this Agreement is intended to be a "written plan" as contemplated by
Rule 12b-1 under the 1940 Act; and
WHEREAS, the Directors who are not "interested persons" of the
Fund shall determine in their sole discretion the selection and nomination of
the Fund's Directors who are not "interested persons";
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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. The Fund hereby appoints Alex. Brown as
Distributor of the Shares of the Tax-Free Series Portfolio of the Fund for the
period and on the terms set forth in this Agreement. Alex. Brown accepts such
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Delivery Documents. The Fund has furnished Alex. Brown with
copies properly certified or authenticated of each of the following:
(a) The Fund's Articles of Incorporation
filed with the State Department of Taxation and
Assessment of the State of Maryland on February 15,
1990 and all amendments thereto;
(b) The Fund's By-Laws and all amendments
thereto (such By-Laws, as presently in effect and as
they shall from time to time be amended, are herein
called the "By-Laws");
(c) Resolutions of the Fund's Board of
Directors and shareholders authorizing the
appointment of Alex. Brown as the Fund's Distributor
for the Shares and approving this Agreement;
(d) The Fund's Notification of Registration
Filed Pursuant to Section 8(a) of the 1940 Act on
Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission, (the "SEC") on
June 5, 1981;
(e) The Fund's Registration Statement on
Form N-1 under the Securities Act of 1933, as amended
(the "1933 Act") (File No. 2-72658), and under the
1940 Act as filed with the SEC on June 5, 1981
relating to the shares of the Fund, and all
amendments thereto; and
(f) The Fund's most recent prospectus and
statement of additional information with respect to
the Tax-Free Series Portfolio (such prospectus and
statement of additional information, as presently in
effect and all amendments and supplements thereto,
are herein called the "Prospectus" and "SAI,"
respectively).
The Fund will furnish Alex. Brown from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
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3. Duties as Distributor. Alex. Brown shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as Distributor. Alex. Brown will act as Distributor subject to the supervision
of the Fund's Board of Directors and the following understanding: (i) nothing
herein contained shall be deemed to relieve or deprive the Board of Directors of
the Fund of its responsibility for and control of the conduct of the Fund's
affairs; and (ii) in all matters relating to the performance of this Agreement,
Alex. Brown will act in conformity with the Articles, By-Laws and Prospectus and
SAI of the Fund and with articles, instructions and directions of the Fund's
Board of Directors and will conform to and comply with the requirements of the
1940 Act and all other applicable Federal or state laws and regulations. In
carrying out its obligations hereunder, Alex. Brown shall:
(a) receive orders for the purchase of Shares, accept
or reject such orders on behalf of the Fund in accordance with
the Fund's currently effective Prospectus and SAI relating to
the Tax-Free Series Portfolio and transmit such orders as are
so accepted to the Fund's transfer agent as promptly as
possible;
(b) receive requests for redemption from holders of
the Shares and transmit such redemption requests to the Fund's
transfer agent as promptly as possible;
(c) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Tax-Free
Series Portfolio of the Fund; and
(d) provide to the Fund's Board of Directors, at
least quarterly, a written report of the amounts expended in
connection with all distribution services rendered pursuant to
this Agreement, including an explanation of the purposes for
which such expenditures were made.
4. Distribution of Shares. Alex. Brown shall be exclusive
distributor of the Shares. It is mutually understood and agreed that Alex. Brown
does not undertake to sell all or any specific portion of the Shares. The Fund
shall not sell any of the Shares of the Tax-Free Series Portfolio except through
Alex. Brown. Notwithstanding the provisions of the foregoing sentence:
(a) the Fund may issue Shares to any other investment
company or personal holding company, or to the shareholders
thereof, in exchange for all or a majority of the shares or
assets of any such company;
(b) the Fund may issue Shares at their net asset
value to any shareholder of the Tax-Free Series purchasing
such Shares with dividends or other cash distributions
received from the Tax-Free Series pursuant to an offer made to
all shareholders;
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(c) Alex. Brown may enter into shareholder processing
and servicing agreements in accordance with section a hereof;
(d) Alex. Brown may, and when requested by the Fund
shall, suspend its efforts to effectuate sales of Shares of
the Tax-Free Series Portfolio at any time when in the opinion
of Alex. Brown or of the Fund no sales should be made because
of market or other economic considerations or abnormal
circumstances of any kind;
(e) the Fund may withdraw the offering of Shares: (i)
at any time with the consent of Alex. Brown, or (ii) without
such consent when so required by the provisions of any statute
or of any order, rule or regulation of any governmental body
having jurisdiction; and
(f) the price at which the Shares may be sold (the
"offering price") shall be the net asset value per share,
which shall be determined in the manner established from time
to time by the Fund's Board of Directors and as set forth in
the Fund's then current Prospectus and SAI with respect to the
Tax-Free Series Portfolio.
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant thereto,
shall at all times be subject to any applicable directives of the Board of
Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, Alex. Brown 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 the 1940 Act;
(c) the provisions of the Articles of the Fund;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD") and all other
self-regulatory organizations applicable to the sale of
investment company shares; and
(f) any other applicable provisions of state and
Federal law.
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7. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that Alex. Brown may compensate its investment representatives 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.
8. Shareholder Processing and Servicing Agreements. Alex.
Brown may enter into shareholder processing and servicing agreements ("Dealer
Agreements") with any securities dealer ("Securities Dealer") who is registered
under the Securities Exchange Act of 1934 (the "1934 Act") and a member in good
standing of the NASD, who may wish to establish accounts or sub-accounts on
behalf of such Securities Dealer's customers. All Dealer Agreements shall be in
substantially the form of the agreement attached hereto as Exhibit A. Alex.
Brown may enter into shareholder processing and servicing agreements
("Shareholder Servicing Agreements") with persons other than Securities Dealers
("Shareholder Servicing Agents") who are not required to be registered under the
1934 Act or members in good standing of the NASD, who are exempt from
registration as a broker or a dealer under the 1934 Act or who may otherwise
lawfully furnish services to Fund shareholders without registration under the
1934 Act. Shareholder Servicing Agreements shall be in substantially the form of
the agreement attached hereto as Exhibit B. Alex. Brown will supervise the
Fund's relations with Securities Dealers and Shareholder Servicing Agents. Alex.
Brown will make payments to Securities Dealers and Shareholder Servicing Agents
in such amounts as Alex. Brown may determine from time to time in its discretion
based upon the nature, quality and type of services being provided by the
Securities Dealer or Shareholder Servicing Agent; the cost to the Securities
Dealer or Shareholder Servicing Agent of providing such services; the amount of
assets being invested in shares of the Fund; and the contribution being made by
the Securities Dealer or Shareholder Servicing Agent toward reducing the expense
ratio. The formula or basis of the compensation shall be reviewed from time to
time by the Fund's Board of Directors; however, in no event shall such payments
exceed, on an annual basis, .25% of the average daily net asset value of all
shares held by the customers of each such Securities Dealer or Shareholder
Servicing Agent.
9. Expenses. The expenses connected with the Tax-Free Series
Portfolio shall be allocable between the Tax-Free Series Portfolio and Alex.
Brown as follows:
(a) Alex. Brown shall furnish, at its expense and
without cost to the Fund, the services of personnel to the
extent that such services are required to carry out its
obligations under this Agreement.
(b) Alex. Brown shall bear the expenses of printing
and distributing Prospectuses and SAI (other than those
Prospectuses and SAI distributed to shareholders of the
Tax-Free Series Portfolio of the Fund)
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and any other promotional or sales literature used by Alex.
Brown or furnished by Alex. Brown to investors or Securities
Dealers in connection with the public offering of the Shares,
the expenses of advertising in connection with such public
offering and all legal expenses in connection with the
foregoing.
(c) The Tax-Free Series assumes and shall pay or
cause to be paid all other expenses of the Tax-Free Series
Portfolio (other than those expressly assumed by the Fund's
investment advisor and sub-advisor), including, without
limitation, the Tax-Free Series Portfolio's allocable portion
of the following expenses: the fees of the Fund's investment
advisor; 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 Tax-Free Series Portfolio in connection with portfolio
securities transactions to which the Tax-Free Series Portfolio
is a party; all taxes, including securities issuance and
transfer taxes, and fees payable by the Tax-Free Series
Portfolio to Federal, state or other governmental agencies;
the costs and expenses of engraving or printing of
certificates representing Shares; all costs and expenses in
connection with the registration and maintenance of
registration of the Tax-Free Series Portfolio and the 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 SAI of the
Tax-Free Series Portfolio and supplements thereto to the
Tax-Free Series Portfolio 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 Shares; fees and expenses of legal counsel and
of independent accountants, in connection with any matter
relating to the Tax-Free Series Portfolio; membership dues of
industry associations; interest payable on Tax-Free Series
Portfolio borrowings; postage; insurance premiums on property
or personnel (including officers and directors) of the Fund
which insure 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 Tax-Free Series
Portfolio operation unless otherwise explicitly provided
herein.
10. Delegation of Responsibilities. Alex. Brown may, but shall
not be under any duty to, perform services on behalf of the Tax-Free Series
Portfolio which are
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<PAGE>
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
Portfolio and Alex. Brown's charge in rendering such services may be billed
monthly to the Tax-Free Series Portfolio, subject to examination by the Fund's
independent accountants. Payment or assumption by Alex. Brown of any Tax-Free
Series Portfolio expense that Alex. Brown is not required to pay or assume under
this Agreement shall not relieve Alex. Brown of any of its obligations to the
Tax-Free Series Portfolio nor obligate Alex. Brown to pay or assume any similar
expenses on any subsequent occasions.
11. Compensation. For the services to be rendered and the
expenses assumed by Alex. Brown, the Tax-Free Series Portfolio shall pay to
Alex. Brown monthly compensation at an annual rate of .25% of the aggregate
daily net assets the Tax-Free Series Portfolio. 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 subsequently 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 calculations of the
fees as set forth above. Subject to the provisions of section 11 hereof, payment
of Alex. Brown's compensation for the preceding month shall be made as promptly
as possible after completion of the computations contemplated in section 11
hereof.
12. Expense Limitation. In the event the operating expenses of
the Tax-Free Series Portfolio, including all investment advisory and
distribution 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 Portfolio imposed by the securities laws or regulations
thereunder of any state in which the 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, Alex. Brown shall reduce its distribution fee to the
extent of its share of such excess expenses and, if required pursuant to any
such laws or regulations, will reimburse the Tax-Free Series Portfolio 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 Tax-Free
Series Portfolio. The limitation described in clause (ii) above shall be applied
to all of the Fund's Portfolios on a combined basis, and the obligation of Alex.
Brown to reimburse the Tax-Free Series Portfolio shall be limited to the fees
actually received by Alex. Brown for such fiscal year. 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
Portfolio 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 Alex. Brown's fee shall be applicable. For the purposes of this paragraph,
Alex. Brown's share of any excess expenses shall be computed by multiplying
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such excess expenses by a fraction, the numerator of which is the amount of the
distribution fee which would otherwise be payable to Alex. Brown for such fiscal
year were it not for this section 11 and the denominator of which is the sum of
all investment advisory and distribution fees which would otherwise be payable
by the Fund or Tax-Free Series Portfolio, whichever is applicable, were it not
for the expense limitation provisions of any investment advisory or distribution
agreement to which the Fund or the Tax-Free Series Portfolio is a party. The
foregoing expense limitations imposed by the state securities laws and
regulations shall be applied to the Fund's Tax-Free Series Portfolio 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.
13. Non-Exclusivity. The services of Alex. Brown to the
Tax-Free Series of the Fund are not to be deemed to be exclusive, and Alex.
Brown shall be free to render distribution or other services to others
(including other investment companies) and to engage in other activities. It is
understood and agreed that officers or directors of Alex. Brown may serve as
officers or directors of the Fund, and that officers or directors of the Fund
may serve as officers or directors of Alex. Brown to the extent permitted by
law; and that the officers and directors of Alex. Brown 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.
14. 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 15 hereof, for two years from the date hereof.
15. Renewal. Following the expiration of its initial two-year
term, this Agreement shall continue in force and effect from year to year,
provided that such continuance is specifically approved at least annually:
(a)(i) by the Fund's Board of Directors or (ii) by
the vote of a majority of the outstanding voting securities of
the Tax-Free Series Portfolio (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" (as defined by the 1940 Act) of any such party and
have no direct or indirect financial interest in the operation
of this Agreement or any agreement related to this Agreement,
by votes cast in person at a meeting specifically called for
the purpose of voting on such approval.
16. 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 members of the Board of Directors of the Fund who
are not "interested persons" of the Fund and have no direct or indirect
financial interest in the
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operation of this Agreement or in any agreement related to this Agreement, by
vote of a majority of the Tax-Free Series Portfolio's outstanding voting
securities (as defined in Section 2(a)(42) of the 1940 Act), or by Alex. Brown,
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.
Should Alex. Brown cease to have a distribution agreement with
the Tax-Free Series Portfolio of the Fund, the Tax-Free Series Portfolio will
cease to use the words "Alex. Brown" or any trademark or identifying logotype
indicating that the Tax-Free Series Portfolio of the Fund is distributed or
administered by or otherwise connected with Alex. Brown.
17. Amendments.
(a) This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by
the Board of Directors of the Fund or by the vote of a
majority of outstanding voting securities of the Tax-Free
Series Portfolio, and (ii) by a majority of those directors
who are not parties to this Agreement or "interested persons"
of any such party, which vote must be cast in person at a
meeting called for the purpose of voting on such approval;
provided, however, that if any such amendment is "material" as
such word is used in Rule 12b-1 under the 1940 Act, such
amendment shall be approved in the manner prescribed in
section 14 for the annual approval of the continuation of this
Agreement.
(b) In the event that this Agreement is proposed to
be amended to increase materially the amount to be spent for
distribution, such amendment will not be effected without
shareholder approval.
18. Liability of the Distributor. In the performance of its
duties hereunder, Alex. Brown 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 Alex.
Brown shall not be liable for any act or omission which loss does not constitute
willful misfeasance, bad faith or gross negligence on the part of Alex. Brown or
reckless disregard by Alex. Brown of its duties under this Agreement.
19. 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 for this purpose and that of Alex. Brown shall be 135 East Baltimore
Street, Baltimore, Maryland 21202.
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20. Questions of Interpretation. This Agreement shall be
implemented and continued in a manner consistent with the provisions of the 1940
Act. 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 & SONS INCORPORATED
By /s/ Richard T. Hale
-----------------------------
Director
Attest:
/s/ Nancy Palmer
- ------------------------------
ALEX. BROWN CASH RESERVE FUND,
INC.
By /s/ Edward J. Veilleux
----------------------------
Executive Vice President
Attest:
/s/ Brian C. Nelson
- -----------------------------
51
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QUALITY CASH RESERVE PRIME SHARES
A Class of the Alex. Brown Cash Reserve Fund, Inc.
DISTRIBUTION AGREEMENT
(Containing a Plan of Distribution under Rule 12b-1)
THIS AGREEMENT is made as of the 31st day of January, 1991 by
and between ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the
"Fund'), and ALEX. BROWN & SONS INCORPORATED, a Maryland corporation ("Alex.
Brown").
Recital
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 Fund's Articles of Incorporation ("Articles")
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 per share
representing interests in three portfolios: the Prime Series Portfolio (the
"Prime Portfolio"), the Treasury Series Portfolio and the Tax-Free Series
Portfolio (each of the existing portfolios and any portfolios hereafter added
shall be referred to collectively as the "Portfolios"); and
WHEREAS, the Fund's Board of Directors has further authorized
the creation of a Quality Cash Reserve Shares of the Prime Portfolio (the
"Shares"); and
WHEREAS, the Fund and Alex. Brown desire to enter an agreement
to provide distribution services for the Shares on the terms and conditions
hereinafter set forth; and
WHEREAS, the payments contemplated by section 7 of this
Agreement may be deemed to be the indirect financing of an activity intended to
result in the sale of Shares and since the allocation of certain charges and
expenses in section 8 hereof relating to the payment of expenses for
advertisements, promotional material, sales literature and printing and mailing
of prospectuses to other than current Fund shareholders may also be considered
the indirect financing of other activities Intended to result in the sale of
Shares, this Agreement is intended to be a "written plan" as contemplated by
Rule 12b-1 under the 1940 Act; and
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WHEREAS, the Directors who are not "interested persons" of the
Fund shall determine in their sole discretion the selection and nomination of
the Fund's Directors who are not "interested persons";
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. The Fund hereby appoints Alex. Brown as
Distributor of the Shares for the period and on the terms set forth in this
Agreement. Alex. Brown accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Delivery of Documents. The fund has furnished Alex. Brown
with copies properly certified or authenticated of each of the following:
(a) The Fund's Articles filed with the State
Department of Taxation and Assessment of the State of Maryland
on February 15, 1990 and all amendments thereto;
(b) The Fund's By-Laws and all amendments thereto
(such ByLaws, as presently in effect and as they shall from
time to time be amended, are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors and
shareholders, as appropriate, authorizing the appointment of
Alex. Brown as the Fund's Distributor for the Shares and
approving this Agreement.
(d) The Fund's Notification of Registration filed
Pursuant to Section 8(a) of the 1940 Act on Form N-8A under
the 1940 Act as filed with the Securities and Exchange
Commission (the "SEC") on June 5, 1981;
(e) The Fund's Registration Statement on Form N-1
under the Securities Act of 1933, as amended (the "1933 Act")
(File No. 2-72658), and under the 1940 Act as filed with the
SEC on June 5, 1981 relating to the shares and all amendments
thereto; and
(f) The Fund's most recent prospectus and statement
of additional information (such prospectus and statement of
additional information, as presently in effect and all
amendments and supplements thereto, are herein called the
"Prospectus" and "SAI," respectively).
The Fund will furnish Alex. Brown from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
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3. Duties as Distributor. Alex. Brown shall give the Fund the
benefit of its best judgement, efforts and facilities in rendering its services
as Distributor. Alex. Brown will act as Distributor subject to the supervision
of the Fund's Board of Directors and the following understanding: (i) nothing
herein contained shall be deemed to relieve or deprive the Board of Directors of
the Fund of its responsibility for and control of the conduct of the Fund's
affairs; and (ii) in all matters relating to the performance of this Agreement,
Alex. Brown will act in conformity with the Articles, By-Laws and Prospectus and
SAI of the Fund and with the instructions and directions of the Fund's Board of
Directors and will conform to and comply with the requirements of the 1940 Act
and all other applicable Federal or state laws and regulations. In carrying out
its obligations hereunder, Alex. Brown shall:
(a) receive orders for the purchase of the Shares,
accept or reject such orders on behalf of the Fund in
accordance with the Fund's currently effective Prospectus and
SAI and transmit such orders as are so accepted to the Fund's
transfer agent as promptly as possible;
(b) receive requests for redemption from holders of
the Shares and transmit such redemption requests to the Fund's
transfer agent as promptly as possible;
(c) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund; and
(d) provide to the Fund's Board of Directors, at
least quarterly, a written report of the amounts expended in
connection with all distribution services rendered pursuant to
this Agreement, including an explanation of the purposes for
which such expenditures were made.
4. Distribution of Shares. Alex. Brown shall be exclusive
distributor of the Shares. It is mutually understood and agreed that Alex. Brown
does not undertake to sell all or any specific portion of the Shares. The Fund
shall not sell any of the Shares except through Alex. Brown. Notwithstanding the
provisions of the foregoing sentence:
(a) the Fund may issue the Shares to any other
investment company or personal holding company, or to the
shareholders thereof, in exchange for all or a majority of the
shares or assets of any such company;
(b) the Fund may issue the Shares at their net asset
value to any shareholder of the Fund purchasing such Shares
with dividends or other cash distributions received from the
Fund pursuant to an offer made to all shareholders;
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<PAGE>
(c) Alex. Brown may, and when requested by the Fund
shall, suspend its efforts to effectuate sales of the Shares
at any time when in the opinion of Alex. Brown or of the Fund
no sales should be made because of market or other economic
considerations or abnormal circumstances of any kind;
(d) the Fund may withdraw the offering of the Shares:
(i) at any time with the consent of Alex. Brown, or (ii)
without such consent when so required by the provisions of any
statute or of any order, rule or regulation of any
governmental body having jurisdiction; and
(e) the price at which the Shares may be sold (the
"offering price") shall be the net asset value per share,
which shall be determined in the manner established from time
to time by the Fund's Board of Directors and as set forth in
the Fund's then current Prospectus and SAI.
5. Control by the Board of Directors. Any distribution
activities undertaken by Alex. Brown pursuant to this Agreement, as well as any
other activities undertaken by Alex. Brown on behalf of the Fund pursuant
thereto, shall at all times be subject to any applicable directives of the Board
of Directors of the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, Alex. Brown 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 the 1940 Act;
(c) the provisions of the Articles of the Fund;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD") and all other
self-regulatory organizations applicable to the sale of
investment company shares; and
(f) any other applicable provisions of state and
federal law.
7. Shareholder Processing and Servicing Agreements. Alex.
Brown may enter into shareholder processing and service agreements (the "Dealer
Agreements") with any securities dealer "Securities Dealer") who is registered
under the Securities Exchange Act of 1934 (the "1934 Act") and a member in good
standing of the NASD, who may wish to establish accounts or sub-accounts on
behalf of such Securities Dealer's
55
<PAGE>
customers. All Dealer agreements shall be in substantially the form of the
agreement attached hereto as Exhibit A. Alex. Brown will supervise the Fund's
relations with Securities Dealers. Alex. Brown will make payments to Securities
Dealers in such amounts as Alex. Brown may determine from time to time in its
discretion based upon the nature, quality and type of services being provided by
the Securities Dealer; the cost to the Securities Dealer providing such
services; the amount of assets being invested in shares of the Fund; and the
contribution being made by the Securities Dealer toward reducing the expense
ratio. The formula or basis of the compensation shall be reviewed from time to
time by the Fund's Board of Directors; however, in no event shall such payments
exceed, on an annual basis, .60% of the average daily net asset value of all
Shares held by the customers of each such Securities Dealer.
8. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its expense and
without cost to the Fund, the services of personnel to the
extent that such services are required to carry out its
obligations under this Agreement.
(b) Alex. Brown shall bear the expenses of printing
and distributing Prospectuses and SAI (other than those
Prospectuses and SAI distributed to shareholders of the Fund)
and any other promotional or sales literature used by Alex.
Brown or furnished by Alex. Brown to investors or Securities
Dealers in connection with the public offering of the Shares,
the expenses of advertising in connection with such public
offering and all legal expenses in connection with the
foregoing.
(c) The Fund assumes and shall pay or cause to be
paid all other expenses of the Fund (other than those
expressly assumed by the Fund's investment advisor and
sub-advisor), including, without limitation: the fees of the
Fund's investment advisor; 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; broker's 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 SAI of the Fund and supplements thereto to
the Fund's shareholders; all expenses of shareholders' and
directors' meetings and of
56
<PAGE>
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 operation unless otherwise explicitly
provided herein.
9. Delegation of Responsibilities. Alex. Brown may, but shall
not be under any duty to, perform services on behalf of the Fund 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 Fund and Alex. Brown'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
Alex. Brown of any Fund expense that Alex. Brown is not required to pay or
assume under this Agreement shall not relieve Alex. Brown of any of its
obligations to the Fund nor obligate Alex. Brown to pay or assume any similar
Fund expenses on any subsequent occasions.
10. Compensation. For the services to be rendered and the
expenses assumed by Alex. Brown, the Fund shall pay to Alex. Brown monthly
compensation at an annual rate of .60% of the aggregate daily net assets of the
Shares. 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 calculations of the fees as set forth above. Payment of
Alex. Brown's compensation for the preceding month shall be made as promptly as
possible.
11. Non-Exclusivity. The services of Alex. Brown to the Fund
are not to be deemed to be exclusive, and Alex. Brown shall be free to render
distribution or other services to others (including other investment companies)
and to engage in other activities. It is understood and agreed that officers or
directors of Alex. Brown may serve as officers or directors of the Fund, and
that officers or directors of the Fund may serve as officers or directors Alex.
Brown to the extent permitted by law; and that the officers and directors of
Alex. Brown are not prohibited from engaging in any other businesses activity or
from rendering services to any other person, or from serving as
57
<PAGE>
partners, officers, trustees or directors of any other firm, trust or
corporation, including other investment companies.
12. 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 one year from the date hereof.
13. Renewal. Following the expiration of its initial one-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 at least a majority of the outstanding voting
securities of the Quality Shares class (as defined in the 1940
Act), and
(b) by the affirmative vote of a majority of the
directors who are riot parties to this Agreement or
"interested persons" (as defined by the 1940 Act) of any such
party and have no direct or indirect financial interest in the
operation of this Agreement or any agreement related to this
Agreement, by votes cast in person at a meeting specifically
called for the purpose of voting on such approval.
14. 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 members of the Board of Directors of the Fund who
are not "interested persons" of the Fund and have no direct or indirect
financial interest in the operation of this Agreement or in any agreement
related to this Agreement, by vote of a majority of the outstanding voting
securities of the Quality Shares class (as defined in the 1940 Act), or by Alex.
Brown, 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.
Should Alex. Brown cease to have a distribution agreement 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.
15. Amendments.
(a) This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by
the Board of Directors of the Fund or by the vote of a
majority of outstanding voting securities of the Quality
Shares class, and (ii) by a majority of those directors who
are not parties to this Agreement or "interested persons" of
any such party, which
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<PAGE>
(b) vote must be cast in person at a meeting called
for the purpose of voting on such approval; provided, however,
that if any such amendment is "material" as such word is used
in Rule 12b-1 under the 1940 Act, such amendment shall be
approved in the manner prescribed in section 13 for the annual
approval of the continuation of this Agreement.
(c) In the event that this Agreement is proposed to
be amended to increase materially the amount to be spent for
distribution, such amendment will not be effected without
shareholder approval.
16. Liability of the Distributor. In the performance of its
duties hereunder, Alex. Brown 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 Alex.
Brown shall not be liable for any act or omission which loss does not constitute
willful misfeasance, bad faith or gross negligence on the part of Alex. Brown or
reckless disregard by Alex. Brown of its duties under this Agreement.
17. 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 for this purpose and that of Alex. Brown shall be 135 East Baltimore
Street, Baltimore, Maryland 21202.
18. Questions of Interpretation. This Agreement shall be
implemented and continued in a manner consistent with the provisions of the 1940
Act. 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 & SONS INCORPORATED
Attest: By /s/ Richard T. Hale
---------------------------------
Director
/s/ Brian C. Nelson
- ----------------------
ALEX. BROWN CASH RESERVE FUND, INC.
Attest: By /s/ Edward J. Veilleux
---------------------------------
Executive Vice President
/s/ Brian C. Nelson
- ---------------------
59
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EXHIBIT A
QUALITY CASH RESERVE PRIME SHARES
A Class of the Alex. Brown Cash Reserve Fund, Inc.
DEALER AGREEMENT
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor of Alex. Brown Cash Reserve Fund, Inc., a
Maryland corporation (the "Fund"). The Fund is an open-end, diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund offers its shares, $.001 par value,
to the public in accordance with the terms and conditions contained in the
prospectuses and statement of additional information ("SAI") of the Fund.
Presently, the shares are divided into three series which represent interests in
three investment portfolios, as more fully described in the Fund's current
prospectus and SAI - the Prime Series, the Treasury Series and the Tax-Free
Series. The Quality Cash Reserve Shares classes of the portfolios listed in the
attached Schedule, as may be amended from time to time, are referred to herein
as the "Shares." The terms "Prospectus" and "SAI" as used herein refer to the
prospectus and statement of additional information with respect to the Shares on
file with the Securities and Exchanges Commission ("SEC") which is part of the
most recent registration statement effective from time to time under the
Securities Act of 1933, as amended (the "1933 Act").
In connection with the offering of Shares to the public, you
may place orders for purchase and redemption of Shares for and on behalf of your
customers on the following terms and conditions:
1. You are hereby authorized to (i) place orders directly with
Alex. Brown for purchases of Shares and (ii) tender Shares to Alex. Brown for
redemption, in each case subject to the terms and conditions set forth in the
Prospectus and SAI.
2. No person is authorized to make any representations
concerning the Fund or the Shares except those contained in the Prospectus and
SAI and in such printed information as Alex. Brown may subsequently prepare. No
person is authorized to distribute any sales material relating to the Fund
without prior written approval of Alex. Brown.
3. You agree to undertake from time to time certain
shareholder servicing activities for customers of yours who have purchased
Shares and who use your facilities to communicate with the Fund or to effect
redemptions or additional purchases of the Shares. In consideration of the
services and facilities provided by you hereunder, the Fund and Alex. Brown will
pay to you the fee set forth In the attached Schedule
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based upon the average daily net asset value of the Fund Shares held of record
by you from time to time on behalf of customers (the "Customers Fund Shares"),
which fee will be computed daily and payable monthly. For purposes of
determining the fees payable under this computation, the average daily net asset
value of the Customers Fund Shares will be computed in the manner specified in
the Fund's registration statement (as the same is in effect from time to time)
in connection with the computation of the net asset value of Shares for purposes
of purchases and redemptions. The fee rate stated above may be prospectively
increased or decreased by Alex. Brown, in its sole discretion, at any time upon
notice to you. Further, Alex. Brown may, in its discretion and without notice,
suspend or withdraw the sale of Shares, including the sale of such Shares to you
for the account of any customer or customers. Alex. Brown represents to you that
this Agreement and the payment of such service fees has been authorized and
approved by the Fund.
4. You agree to comply with the provisions contained in the
1933 Act governing the distribution of Prospectuses to persons to whom you offer
Shares. You further agree to deliver, upon our request, copies of any amended
Prospectus to customers whose Shares you are holding as record owner and to
deliver to such customers copies of the annual and interim financial reports and
proxy solicitation materials of the Fund. We agree to furnish to you as many
copies of the Prospectus, annual and interim financial reports and proxy
solicitation materials as you may reasonably request.
5. You represent that you are a member in good standing of the
National Association of Securities Dealers, Inc. You agree that you will not
offer Shares to persons in any jurisdiction in which you may not lawfully make
such offer due to the fact that you have not registered under, or are not exempt
from, the applicable registration or licensing requirements of such
jurisdiction.
6. The Fund has registered an indefinite number of Shares
under the 1933 Act. Upon application to us, we will inform you as to the states
or other jurisdictions in which we believe the Shares have been qualified for
sale under, or are exempt from the requirements of, the respective securities
laws of such states, but we assume no responsibility or obligation as to your
right to sell Shares in any jurisdiction. We will file with the Department of
State in New York a Further State Notice with respect to the Shares, if
necessary.
7. The Fund shall have full authority to take such action as
it deems advisable in respect of all matters pertaining to the offering of the
Shares, including the right in its discretion, without notice, to suspend sales
or withdraw the offering of Shares entirely.
8. You will (i) maintain all records required by law relating
to transactions in Shares of the Fund and, upon request by the Fund, promptly
make such of these records available to the Fund as the Fund may reasonably
request in connection
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with its operations and (ii) promptly notify the Fund if you experience any
difficulty in maintaining the records described in the foregoing clauses in an
accurate and complete manner.
9. Alex. Brown and the Fund shall be under no liability to you
except for lack of good faith and for obligations expressly assumed by them
hereunder. In carrying out your obligations, you agree to act in good faith and
without negligence. Nothing contained in this agreement is intended to operate
as a waiver by Alex. Brown or you of compliance with any provision of the 1940
Act, the 1933 Act, the Securities Exchange Act of 1934, as amended, or the rules
and regulations promulgated by the SEC.
10. This Agreement may be terminated by either party, without
penalty, upon ten (10) days' notice to the other party and shall automatically
terminate in the event of its "assignment," as defined in the 1940 Act. This
Agreement may also be terminated at any time without penalty by the vote of a
majority of the members of the Board of Directors of the Fund who are not
"interested persons" (as such phrase is defined In the 1940 Act) and have no
direct or indirect financial interest in the operation of the Distribution
Agreement between the Fund and Alex. Brown or any related agreement, or by the
vote of a majority of the outstanding voting securities of the Fund.
11. All communications to us should be sent to:
ALEX. BROWN & SONS INCORPORATED
135 East Baltimore Street
Baltimore, MD 21202
Any notice to you shall be duly given if mailed or telegraphed
to you at the address specified below.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us a copy of this Agreement.
ALEX. BROWN & SONS INCORPORATED
By______________________________
(Authorized Signature)
Confirmed and accepted:
Firm Name:_____________________
By:____________________________
Address:_______________________
Date:__________________________
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FLAG INVESTORS CASH RESERVE PRIME SHARES - CLASS B
(A Class of Alex. Brown Cash Reserve Fund, Inc.)
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of the Flag Investors Cash Reserve Prime Shares -
Class B (the "Shares") of Alex. Brown Cash Reserve Fund, Inc. (the "Fund").
Other capitalized terms herein have the meaning given to them in the Fund's
prospectus.
2. Payments Authorized. (a) Alex. Brown & Sons Incorporated
("Alex. Brown") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments made
to it under the Distribution Agreement and to make payments on behalf of the
Fund to Shareholder Servicing Agents under Shareholder Servicing
Agreements.
(b) Alex. Brown may make payments in any amount,
provided that the total amount of all payments made during a fiscal year of the
Fund do not exceed, in any fiscal year of the Fund, the amount paid to Alex.
Brown under the Distribution Agreement with respect to distribution of the
Shares which is an annual fee, calculated on an average daily net basis and paid
monthly, equal to .75% of the average daily net assets of the Shares of the
Fund.
3. Expenses Authorized. Alex. Brown is authorized, pursuant to
the Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Shares, to pay for promotional or sales literature and to
make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which Alex. Brown as
distributor for the Shares is authorized to pay or cause to be paid on its
behalf and such payments shall not be included in the limitations contained in
this Plan. These expenses include: the fees of the Fund's investment advisor and
Alex. Brown;
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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 maintenance of registration of the Fund and its
shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and 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
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 certified public 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.
5. Other Distribution Resources. Alex. Brown and Participating
Dealers may expend their own resources separate and apart from amounts payable
under the Plan to support the Fund's distribution effort. Alex. Brown will
report to the Board of Directors on any such expenditures as part of its regular
reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, Alex. Brown shall
report in writing at least quarterly to the Fund's Board of Directors, and the
Board shall review, the following: (i) the amounts of all payments under the
Plan, the identity of the recipients of each such payment; (ii) the basis on
which the amount of the payment to such recipient was made; (iii) the amounts of
expenses authorized under this Plan and the purpose of each such expense; and
(iv) all costs of each item specified in Section 4 of this Plan (making
estimates of such costs where necessary or desirable), in each case during the
preceding calendar or fiscal quarter.
64
<PAGE>
7. Effectiveness, Continuation, Termination and Amendment.
This Plan has been approved (i) by a vote of the Board of Directors of the Fund
and of a majority of the Directors who are not interested persons (as defined in
the 1940 Act), cast in person at a meeting called for the purpose of voting on
this Plan; and (ii) by a vote of holders of at least a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act). This Plan shall,
unless terminated as hereinafter provided, continue in effect from year to year
only so long as such continuance is specifically approved at least annually by
the vote of the Fund's Board of Directors and by the vote of a majority of the
Directors of the Fund who are not interested persons (as defined in the 1940
Act), cast in person at a meeting called for the purpose of voting on such
continuance. This Plan may be terminated at any time by a vote of a majority of
the Directors who are not interested persons (as defined in the 1940 Act) or by
the vote of the holders of a majority of the Fund's outstanding voting
securities (as defined in the 1940 Act). This Plan may not be amended to
increase materially the amount of payments to be made without shareholder
approval, as set forth in (ii) above, and all amendments must be approved in the
manner set forth under (i) above.
65
<PAGE>
EX-99.B(24)
ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Charles W. Cole, Jr., whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Alex. Brown Cash Reserve Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Charles W. Cole, Jr.
---------------------------
Charles W. Cole, Jr.
Date: June 24, 1996
-1-
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, James J. Cunnane, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Alex. Brown Cash Reserve Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ James J. Cunnane
--------------------------
James J. Cunnane
Date: December 27, 1994
-2-
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Joseph A. Finelli, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Alex. Brown Cash Reserve Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as Chief Financial and
Accounting Officer of the Fund such Registration Statement and any and all such
pre- and post-effective amendments filed with the Securities and Exchange
Commission under the 1933 Act and the 1940 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorney-in-fact and agent, or either of them or their substitute
or substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Joseph A. Finelli
---------------------------
Joseph A. Finelli
Date: July 26, 1996
-3-
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Richard T. Hale, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Alex. Brown Cash Reserve Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as President and a director of
the Fund such Registration Statement and any and all such pre- and
post-effective amendments filed with the Securities and Exchange Commission
under the 1933 Act and the 1940 Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorney-in-fact and agent, or either of them or their substitute or
substitutes, shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Richard T. Hale
---------------------------
Richard T. Hale
Date: July 26, 1994
-4-
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, John F. Kroeger, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Alex. Brown Cash Reserve Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ John F. Kroeger
---------------------------
John F. Kroeger
Date: July 26, 1994
-5-
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Louis E. Levy, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Alex. Brown Cash Reserve Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Louis E. Levy
---------------------------
Louis E. Levy
Date: July 26, 1994
-6-
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Eugene J. McDonald, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Alex. Brown Cash Reserve Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Eugene J. McDonald
---------------------------
Eugene J. McDonald
Date: July 26, 1994
-7-
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, W. James Price, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Alex. Brown Cash Reserve Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ W. James Price
---------------------------
W. James Price
Date: July 26, 1994
-8-
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Rebecca W. Rimel, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, her true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in her
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Alex. Brown Cash Reserve Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and seal
as of the date set forth below.
/s/ Rebecca W. Rimel
---------------------------
Rebecca W. Rimel
Date: July 26, 1996
-9-
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Truman T. Semans, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Brian C. Nelson, and each of them singly, his true and lawful
attorney-in-fact and agent, with full power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments, in his
name, place and stead, which said attorney-in-fact and agent may deem necessary
or advisable or which may be required to enable Alex. Brown Cash Reserve Fund,
Inc. (the "Fund") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940 Act"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the Fund's Registration
Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act, together with
any and all pre- and post-effective amendments thereto, including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Truman T. Semans
---------------------------
Truman T. Semans
Date: November 16, 1995
-10-
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Carl W. Vogt, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux and Brian
C. Nelson, and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution or resubstitution, to do any and all acts
and things and to execute any and all instruments, in his name, place and stead,
which said attorney-in-fact and agent may deem necessary or advisable or which
may be required to enable Alex. Brown Cash Reserve Fund, Inc. (the "Fund") to
comply with the Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the Fund's Registration Statement on Form N-1A
pursuant to the 1933 Act and the 1940 Act, together with any and all pre- and
post-effective amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a director of the Fund such Registration
Statement and any and all such pre- and post-effective amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney-in-fact and agent, or either of them
or their substitute or substitutes, shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Carl W. Vogt
---------------------------
Carl W. Vogt
Date: June 11, 1996
-11-
<PAGE>
ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Harry Woolf, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux and Brian
C. Nelson, and each of them singly, his true and lawful attorney-in-fact and
agent, with full power of substitution or resubstitution, to do any and all acts
and things and to execute any and all instruments, in his name, place and stead,
which said attorney-in-fact and agent may deem necessary or advisable or which
may be required to enable Alex. Brown Cash Reserve Fund, Inc. (the "Fund") to
comply with the Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the Fund's Registration Statement on Form N-1A
pursuant to the 1933 Act and the 1940 Act, together with any and all pre- and
post-effective amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a director of the Fund such Registration
Statement and any and all such pre- and post-effective amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney-in-fact and agent, or either of them
or their substitute or substitutes, shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Harry Woolf
---------------------------
Harry Woolf
Date: July 26, 1994
-12-
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<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 714,852,904
<INVESTMENTS-AT-VALUE> 714,852,904
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<ASSETS-OTHER> 295,604
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<TOTAL-ASSETS> 719,913,798
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<OTHER-ITEMS-LIABILITIES> 1,276,883
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<SHARES-COMMON-STOCK> 718,575,254
<SHARES-COMMON-PRIOR> 526,209,331
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 60,234
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 718,636,915
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 36,310,501
<OTHER-INCOME> 0
<EXPENSES-NET> 3,846,710
<NET-INVESTMENT-INCOME> 32,463,791
<REALIZED-GAINS-CURRENT> 51,785
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 32,515,576
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 32,463,791
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,440,217,006
<NUMBER-OF-SHARES-REDEEMED> 4,277,158,666
<SHARES-REINVESTED> 29,307,583
<NET-CHANGE-IN-ASSETS> 192,365,923
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 14,065
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,542,437
<INTEREST-EXPENSE> 3,846,710
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 658,289,696
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.046
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.046
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<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
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<NAME> PRIME SERIES
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 2,604,635,638
<INVESTMENTS-AT-VALUE> 2,604,635,638
<RECEIVABLES> 1,036,748
<ASSETS-OTHER> 520,016
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,606,192,401
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,412,462
<TOTAL-LIABILITIES> 3,412,462
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<PAID-IN-CAPITAL-COMMON> 1,959,420,457
<SHARES-COMMON-STOCK> 1,959,417,885
<SHARES-COMMON-PRIOR> 1,586,300,828
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,079)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
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<NET-INVESTMENT-INCOME> 107,454,378
<REALIZED-GAINS-CURRENT> (6,050)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 107,448,328
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 107,454,378
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,949,806,257
<NUMBER-OF-SHARES-REDEEMED> 20,033,855,680
<SHARES-REINVESTED> 100,531,939
<NET-CHANGE-IN-ASSETS> 1,016,482,516
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (29)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,134,900
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,880,320
<AVERAGE-NET-ASSETS> 2,071,185,362
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.052
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.052
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000353447
<NAME> ALEX BROWN CASH RESERVE
<SERIES>
<NUMBER> 3
<NAME> TAX-FREE SERIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 568,556,619
<INVESTMENTS-AT-VALUE> 586,556,619
<RECEIVABLES> 3,463,789
<ASSETS-OTHER> 98,911
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 572,119,319
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 612,319
<TOTAL-LIABILITIES> 612,319
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 571,594,648
<SHARES-COMMON-STOCK> 571,594,648
<SHARES-COMMON-PRIOR> 475,476,296
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (87,648)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 571,507,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 20,235,536
<OTHER-INCOME> 0
<EXPENSES-NET> 3,222,865
<NET-INVESTMENT-INCOME> 17,012,671
<REALIZED-GAINS-CURRENT> 4,419
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 17,017,090
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17,012,671
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,817,984,787
<NUMBER-OF-SHARES-REDEEMED> 4,737,983,286
<SHARES-REINVESTED> 16,116,851
<NET-CHANGE-IN-ASSETS> 96,118,352
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (92,067)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,356,239
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,222,865
<AVERAGE-NET-ASSETS> 537,909,710
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.032
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.032
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
