BROWN ALEX CASH RESERVE FUND INC, DEFS14A, 1997-07-18

BROWN ALEX CASH RESERVE FUND INC
DEFS14A, 1997-07-18

Previous: BROWN ALEX CASH RESERVE FUND INC, PRES14A, 1997-07-18

Next: CMA GOVERNMENT SECURITIES FUND, 485B24E, 1997-07-18

<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:

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

Alex. Brown Cash Reserve Fund, Inc.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

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

----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:

----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:

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

5) Total fee paid:

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

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

1) Amount Previously Paid:

___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:

___________________________________________________________________________
3) Filing Party:

___________________________________________________________________________
4) Date Filed:

___________________________________________________________________________

<PAGE>

[LETTERHEAD OF ALEX. BROWN CASH RESERVE FUND, INC.]

July 17, 1997

Dear Shareholders:

The enclosed proxy statement relates to a special meeting of the Shareholders
of the Alex. Brown Cash Reserve Fund, Inc. (the "Fund").

On April 6, 1997, Alex. Brown Incorporated, the parent corporation of the Fund's
investment advisor, entered into a definitive agreement to merge into a
subsidiary of Bankers Trust New York Corporation. Due to the pending change in
control of Alex. Brown Incorporated, we are asking Shareholders of each of the
Fund's Series to approve new investment advisory agreements and, in the case of
the Tax-Free Series, a new sub-advisory agreement. The same advisor and
sub-advisor will continue to provide these services to your Fund. The new
agreements are substantially the same as the current agreements.

We are also asking Shareholders to elect a Board of Directors. All eight
nominees currently serve as Directors although two were appointed to fill
vacancies and were not previously elected by Shareholders. This election will
give the Fund flexibility to fill vacancies in the future. Also, with the
resignation of one existing interested Director, the percentage of independent
directors is being increased to 75% of the board members.

These proposals have been unanimously approved by your Fund's Board of
Directors, who recommend you vote for the proposals. Your vote is important and
your participation in the governance of the Fund does make a difference.

Richard T. Hale
Director and President

<PAGE>

ALEX. BROWN CASH RESERVE FUND, INC.
One South Street
Baltimore, Maryland 21202

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

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
AUGUST 14, 1997

TO THE SHAREHOLDERS OF ALEX. BROWN CASH RESERVE FUND, INC.:

You are cordially invited to a special meeting (the "Special Meeting") of
the shareholders of Alex. Brown Cash Reserve Fund, Inc. (the "Fund") on
Thursday, August 14, 1997, at 10:30 a.m. Eastern Standard Time at the offices
of Investment Company Capital Corp., in The Conference Room on the 30th Floor
of The Alex. Brown Building, One South Street, Baltimore, Maryland 21202, for
the purpose of considering the proposals set forth below and for the
transaction of such other business as may be properly brought before the
Special Meeting:

PROPOSAL 1: To consider and act upon a proposal to elect a Board of
Directors of the Fund (voted on by all shareholders).

PROPOSAL 2: To approve or disapprove a new Investment Advisory Agreement
between the Fund and Investment Company Capital Corp. with
respect to the Prime Series (voted on by shareholders of the
Prime Series).

PROPOSAL 3: To approve or disapprove a new Investment Advisory Agreement
between the Fund and Investment Company Capital Corp. with
respect to the Treasury Series (voted on by shareholders of the
Treasury Series).

PROPOSAL 4: To approve or disapprove a new Investment Advisory Agreement
between the Fund and Investment Company Capital Corp. with
respect to the Tax-Free Series (voted on by shareholders of the
Tax-Free Series).

PROPOSAL 5: To approve or disapprove a new Sub-Advisory Agreement between
Investment Company Capital Corp. and PNC Institutional
Management Corporation with respect to the Tax-Free Series
(voted on by shareholders of the Tax-Free Series).

Only shareholders of the Fund at the close of business on June 25, 1997
are entitled to notice of, and to vote at, this meeting or any adjournment
thereof.

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD. A POSTAGE PAID ENVELOPE
IS ENCLOSED FOR YOUR CONVENIENCE SO THAT YOU MAY RETURN YOUR PROXY CARD AS SOON
AS POSSIBLE. IT IS MOST IMPORTANT AND IN YOUR INTEREST FOR YOU TO SIGN AND DATE
YOUR PROXY CARD AND RETURN IT SO THAT A QUORUM WILL BE PRESENT AND A MAXIMUM
NUMBER OF SHARES MAY BE VOTED. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS
USE.

Scott J. Liotta
Vice President and Secretary
Dated: July 17, 1997
<PAGE>

ALEX. BROWN CASH RESERVE FUND, INC.
One South Street
Baltimore, Maryland 21202
---------------------
PROXY STATEMENT
---------------------

SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
AUGUST 14, 1997

This Proxy Statement is furnished by the Board of Directors of Alex. Brown
Cash Reserve Fund, Inc. (the "Fund") in connection with the solicitation of
proxies for use at the special meeting of shareholders of the Fund to be held
on Thursday, August 14, 1997, at 10:30 a.m. Eastern Standard Time, or at any
adjournment thereof (the "Special Meeting"), at the offices of Investment
Company Capital Corp., in The Conference Room on the 30th Floor of The Alex.
Brown Building, One South Street, Baltimore, Maryland 21202. It is expected
that the Notice of Special Meeting, the Proxy Statement and a Proxy Card will
be mailed to shareholders on or about July 17, 1997.

The primary purpose of the Special Meeting is to permit the shareholders
of each of the Fund's series to consider new Investment Advisory Agreements
and, in the case of the Tax-Free Series, a new Sub-Advisory Agreement to take
effect following the consummation of the transactions contemplated by an
Agreement and Plan of Merger, dated as of April 6, 1997 (the "Merger"), between
Bankers Trust New York Corporation and Alex. Brown Incorporated. This action is
necessary to avoid the possibility that the Merger could result in assignment
and, therefore, termination of the Fund's current Investment Advisory
Agreements and Sub-Advisory Agreement. It is contemplated that, after the
Merger, Investment Company Capital Corp. ("ICC" or the "Advisor") will remain
the investment advisor to each series of the Fund and PNC Institutional
Management Corporation ("PIMC" or the "Sub-Advisor") will remain the
sub-advisor to the Tax-Free Series of the Fund. The proposed new Investment
Advisory Agreements and the proposed new Sub-Advisory Agreement are identical
to the Fund's current Investment Advisory Agreements and current Sub-Advisory
Agreement, except for the dates of execution, effectiveness and initial term;
and, in the case of the new Investment Advisory Agreements, the deletion of
provisions relating to state expense limits that have been preempted by federal
law; a proviso to the effect that the obligation of the Advisor to make its
personnel available to serve as officers of the Fund is subject to applicable
banking regulations; and a provision authorizing ICC, subject to the approval
of the Fund's Board of Directors, to delegate its responsibilities to corporate
affiliates. At the Special Meeting, shareholders will also be asked to elect a
slate of Directors.

All shareholders of the Fund are entitled to vote on Proposal 1. Proposals
2, 3, 4, and 5 require action by the shareholders of the Prime, Treasury, or
Tax-Free Series, individually, as shown below. The summary voting table below
sets forth all of the proposals to be acted upon and indicates which series'
shareholders are solicited with respect to each proposal.

Proposal Number Series
- ----------------- -----------------------------
1 Prime, Treasury and Tax-Free
2 Prime
3 Treasury
4 Tax-Free
5 Tax-Free

If you do not expect to be present at the Special Meeting and wish your
shares to be voted, please date and sign the enclosed Proxy Card ("Proxy") and
mail it in the enclosed reply envelope, allowing sufficient time for the Proxy
to be received on or before 10:30 a.m. Eastern Standard Time on Thursday,
August 14, 1997. No postage is required if the Proxy is mailed in the United
States. If the accompanying Proxy is executed properly and returned, shares
represented by it will be voted at the Special Meeting in accordance with the
instructions on the Proxy. However, if no instructions are specified, shares
will be voted FOR the election of the proposed slate of Directors of the Fund
("Proposal 1"), FOR the new Investment Advisory Agreement with respect to the
Prime

1
<PAGE>

Series ("Proposal 2"), FOR the new Investment Advisory Agreement with respect
to the Treasury Series ("Proposal 3"), FOR the new Investment Advisory
Agreement with respect to the Tax-Free Series ("Proposal 4") and FOR the new
Sub-Advisory Agreement with respect to the Tax-Free Series ("Proposal 5").
Shareholders may revoke their Proxies at any time prior to the time they are
voted by giving written notice to the Secretary of the Fund, by delivering a
subsequently dated Proxy or by attending and voting at the Special Meeting.

The close of business on June 25, 1997, has been fixed as the record date
(the "Record Date") for the determination of shareholders entitled to notice
of, and to vote at, the Special Meeting and at any adjournment thereof. On that
date, the Fund had 4,325,370,335.897 shares outstanding, consisting of
2,992,276,572.237 shares outstanding of the Prime Series, 673,226,835.220
shares outstanding of the Treasury Series and 659,866,928.440 shares
outstanding of the Tax-Free Series. Each full share will be entitled to one
vote at the Special Meeting and each fraction of a share will be entitled to
the fraction of a vote equal to the proportion of a full share represented by
the fractional share.

The expenses of the Special Meeting will be borne by the Fund, except that
the incremental costs associated with Proposals 2, 3, 4 and 5 will be borne by
ICC, and will include reimbursement to brokerage firms and others for expenses
in forwarding Proxy solicitation materials to beneficial owners. The
solicitation of Proxies will be largely by mail, but may include telephonic,
telegraphic or oral communication by employees and officers of ICC and PIMC
(collectively, the "Advisors").

THE FUND WILL FURNISH TO SHAREHOLDERS, WITHOUT CHARGE, A COPY OF THE
ANNUAL REPORT FOR ITS FISCAL YEAR ENDED MARCH 31, 1997, UPON REQUEST. THE
ANNUAL REPORT OF THE FUND MAY BE OBTAINED BY WRITTEN REQUEST TO THE FUND, ONE
SOUTH STREET, BALTIMORE, MARYLAND 21202, OR BY CALLING (800) 553-8080.

The Fund is registered as an open-end, diversified management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered under the Securities Act of 1933, as amended. The
Fund offers three series of shares (each a "Series" and collectively the
"Series"): Prime Series, Treasury Series and Tax-Free Series. ICC, One South
Street, Baltimore, Maryland 21202, an indirect subsidiary of Alex. Brown
Incorporated, acts as the Fund's investment advisor to each of the Series
pursuant to three separate Investment Advisory Agreements currently in effect
(the "Current Advisory Agreements"). It is proposed that shareholders approve
new Investment Advisory Agreements (the "New Advisory Agreements")
substantially similar to the Current Advisory Agreements with respect to each
of the Series. (See Proposals 2, 3 and 4 below.) In addition, PIMC serves as
sub-advisor to the Tax-Free Series pursuant to a Sub-Advisory Agreement with
ICC. It is proposed that shareholders of the Tax-Free Series approve a new
Sub-Advisory Agreement substantially similar to the current Sub-Advisory
Agreement. (See Proposal 5.)

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

At the Special Meeting, it is proposed that eight Directors be elected to
hold office until their successors are duly elected and qualified. The persons
named in the accompanying Proxy intend, in the absence of contrary
instructions, to vote all Proxies on behalf of the shareholders for the
election of James J. Cunnane, Richard T. Hale, John F. Kroeger, Louis E. Levy,
Eugene J. McDonald, Rebecca W. Rimel, Truman T. Semans, and Carl W. Vogt (each
a "Nominee" and collectively, the "Nominees"). All of the Nominees are
currently members of the Board of Directors. Messrs. Cunnane, Hale, Kroeger,
Levy and McDonald and Ms. Rimel were last elected by a vote of shareholders on
July 25, 1995. Mr. Vogt and Mr. Semans were appointed by the Board of Directors
to fill vacancies on the Board as they arose and have not previously been
elected by the shareholders. Messrs. W. James Price and Harry Woolf retired
from the Board effective December 31, 1996. Mr. Charles W. Cole, Jr. has
resigned from the Board, effective upon the election of Directors at the
Special Meeting, so that 75% of the Board members will be Disinterested persons
within contemplation of Section 15(f) of the 1940 Act. It is the intention of
the Board that at least 75% of its members will be such Disinterested persons
for at least three years after the Merger.

The proposal to elect the Board of Directors is being presented for
shareholder approval pursuant to requirements under the 1940 Act. Under the
1940 Act, Directors may not fill vacancies unless at least two-thirds of the
Directors holding office after such vacancies are filled have been elected by
the shareholders. The Special Meeting will provide the Board with operating
flexibility by making it possible for the Board of Directors to fill vacancies
that may occur in the future.

2
<PAGE>

Each of the Nominees has consented to being named in this Proxy Statement
and to serving as a Director if elected. The Fund knows of no reason why any
Nominee would be unable or unwilling to serve if elected.

The Fund is incorporated under the laws of the State of Maryland. Under
Maryland General Corporation Law, a corporation registered under the 1940 Act,
such as the Fund, is not required to hold an annual meeting in any year in
which the election of Directors is not required to be acted upon under the 1940
Act. The Fund has availed itself of this provision and achieves cost savings by
eliminating printing costs, mailing charges and other expenses involved in
routine annual meetings. Because the Fund does not hold regular annual
shareholder meetings, each Nominee, if elected, will hold office until his or
her successor is elected and qualified.

Even with the elimination of routine annual meetings, the Board of
Directors may call special meetings of shareholders for action by shareholder
vote as may be required by the 1940 Act, or as required or permitted by the
Articles of Incorporation and By-Laws of the Fund. As described above,
shareholder meetings will be held, in compliance with the 1940 Act, to elect
Directors under certain circumstances. Shareholder meetings may also be held by
the Fund for other purposes, including to approve investment policy changes, a
new Investment Advisory or Sub-Advisory Agreement or other matters requiring
shareholder action under the 1940 Act.

A meeting may also be called by shareholders holding at least 10% of the
shares entitled to vote at the meeting for the purpose of voting upon the
removal of Directors. 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. In
addition, Maryland General Corporation Law provides for the calling of a
special meeting by the written request of shareholders holding at least 25% of
the shares entitled to vote at the meeting.

Information Regarding Nominees

3
<PAGE>

<TABLE>
<CAPTION>
Business Experience Shares
Name and Position During the Past Five Years Beneficially Owned
with the Fund Age (including all Directorships) as of May 31, 1997** Percentage
- ---------------------- ----- -------------------------------------- ---------------------- -----------
<S> <C> <C> <C> <C>
John F. Kroeger 72 Director/Trustee, AIM Funds 131,583 shares ***
Director since 1981 (registered investment companies).
Formerly, Consultant, Wendell &
Stockel Associates, Inc. (consulting
firm) and General Manager, Shell
Oil Company. Director of each
fund in the Fund Complex.
Louis E. Levy 64 Director, Kimberly-Clark None ***
Director since 1994 Corporation (personal consumer
products) and Household
International (finance and
banking); 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. Director of each fund in the
Fund Complex.
Eugene J. McDonald 65 President, Duke Management None ***
Director since 1995 Company (investments); Executive
Vice President, Duke University
(education, research and health
care); Director, Central Carolina
Bank & Trust (banking), Key
Funds (registered investment
companies), AMBAC Treasurers
Trust and DP Mann Holdings
(insurance). Director of each fund
in the Fund Complex.
Rebecca W. Rimel 46 President and Chief Executive None ***
Director since 1995 Officer, The Pew Charitable Trusts;
Director and Executive Vice
President, The Glenmede Trust
Company. Formerly, Executive
Director, The Pew Charitable
Trusts. Director of 10 funds in the
Fund Complex.
</TABLE>

4
<PAGE>

- ------------
* Denotes an individual who is an "interested person" as defined in the 1940
Act. Such individual's service as Director is conditioned upon Federal
Reserve Board approval. (See discussion of each New Advisory Agreement
below.)
** This information has been provided by each Nominee for Director of the
Fund.
*** As of May 31, 1997, the Nominees of the Fund as a group beneficially owned
an aggregate of less than 1% of the Fund.

Compensation of Directors

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 all of the funds in the Fund Complex for which he or she serves.
Payment of such fees and expenses is allocated among all such funds described
above in proportion to their relative net assets. For the fiscal year ended
March 31, 1997, Disinterested Directors' (defined below) fees attributable to
the assets of the Fund totaled $241,532. Officers of the Fund receive no direct
remuneration in such capacity from the Fund. Officers of the Fund who are
employees of Alex. Brown Incorporated or its affiliates ("Alex. Brown") may be
considered to have received remuneration indirectly.

Any Director who receives fees from the Fund is permitted to defer a
minimum of 50%, and up to 100%, of his or her annual compensation pursuant to a
Deferred Compensation Plan. Messrs. Cunnane, Kroeger, Levy, McDonald and Vogt
and Ms. Rimel have each executed a Deferred Compensation Agreement and may
defer a portion of their compensation from the Fund and the Fund Complex.
Currently, the deferring Directors may select various funds in the Fund Complex
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 quarterly installments over a period of ten years.

The aggregate compensation payable by the Fund to each of the Fund's
Directors serving during the fiscal year ended March 31, 1997 is set forth in
the compensation table below. The aggregate compensation payable to such
Directors during the fiscal year ended March 31, 1997 by the Fund Complex is
also set forth in the compensation table below.

5
<PAGE>

COMPENSATION TABLE

<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation Pension or Retirement From the Fund and Number of Funds in
Payable Benefits Accrued as Fund Complex Fund Complex for
Name and Position from the Fund Part of Fund Expenses Payable to Directors Which Director Serves
- ----------------------------------- --------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Charles W. Cole, Jr., Director/1 $ 0 $ 0 $ 0 8
Richard T. Hale, Director/1 ..... $ 0 $ 0 $ 0 12
James J. Cunnane, Director ...... $ 27,801/3 + $ 39,000 12
John F. Kroeger, Director ...... $ 34,930/3 + $ 49,000 12
Louis E. Levy, Director ......... $ 27,801/3 + $ 39,000 12
Eugene J. McDonald, Director ... $ 27,801/3 + $ 39,000 12
W. James Price, Director/1, /2 ... $ 0 $ 0 $ 0 7
Rebecca W. Rimel, Director ...... $ 31,763/3 + $ 39,000 10/4
Truman T. Semans, Director/1 ..... $ 0 $ 0 $ 0 10
Carl W. Vogt, Director ......... $ 32,232/3 + $ 39,000 9/4
Harry Woolf, Director/2 ........... $ 20,880/3 + $ 29,250 12
</TABLE>

- ------------
/1 Denotes an individual who is an "interested person" as defined in the 1940
Act.
/2 Retired, effective December 31, 1996.
/3 Of the amounts payable to Messrs. Cunnane, Kroeger, Levy, McDonald, Vogt and
Woolf and Ms. Rimel, $27,801, $0, $19,500, $27,801, $32,232, $20,880 and
$31,763, respectively, were deferred pursuant to the Fund Complex's Deferred
Compensation Plan.
/4 Ms. Rimel and Mr. Vogt receive proportionately higher compensation from each
fund for which they serve as a Director.
+ The Fund Complex has adopted a retirement plan for eligible Directors, as
described below. The actuarially computed pension expense for the Fund for
the fiscal year ended March 31, 1997 was $47,681.

The Fund Complex has adopted a retirement plan (the "Retirement Plan") for
Directors who are not employees of the Fund, the Fund's investment 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 fees earned by such Participant 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 the Participant 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. Mr. Kroeger has qualified but has not
received benefits. The Fund has two Participants, a Director who retired
effective December 31, 1994 and a Director who retired effective December 31,
1996, who have qualified for the Retirement Plan by serving thirteen years and
fourteen years, respectively, as Directors in the Fund Complex and each of whom
will be paid a quarterly fee of $4,875 by the Fund Complex for the rest of his
life. Another Participant who retired on January 31, 1996, and died on June 2,
1996, was paid fees of $8,090 by the Fund Complex under the Retirement Plan in
the fiscal year ended March 31, 1997. Such fees are allocated to each fund in
the Fund Complex based upon the relative net assets of such fund to the Fund
Complex.

6
<PAGE>

Estimated Annual Benefits Payable By Fund Complex
Upon Retirement
---------------------------------------------------
Years of Service Chairman of Audit Committee Other Participants
- ------------------ ----------------------------- -------------------
6 years $ 4,900 $ 3,900
7 years $ 9,800 $ 7,800
8 years $14,700 $11,700
9 years $19,600 $15,600
10 years or more $24,500 $19,500

Meetings and Committees of the Board of Directors

There were four meetings of the Board of Directors held during the fiscal
year ended March 31, 1997. In such fiscal year, all Directors attended at least
75% of the meetings of the Board of Directors held during their respective
terms.

The Board of Directors has an Audit and Compliance Committee. The Audit
and Compliance Committee makes recommendations to the full Board of Directors
with respect to the engagement of independent accountants and reviews, with the
independent accountants, the results of the audit engagement and matters having
a material effect on the Fund's financial operations. The members of the Audit
and Compliance Committee during the fiscal year ended March 31, 1997, were
Messrs. Kroeger (Chairman), Cunnane, Levy, McDonald, Vogt and Woolf and Ms.
Rimel, each of whom is not an "interested person" within the meaning of the
1940 Act. Mr. Woolf was a member of the Audit and Compliance Committee until
his retirement on December 31, 1996. The Audit and Compliance Committee met
four times during the fiscal year ended March 31, 1997. In such fiscal year,
all members attended at least 75% of the meetings of the Audit and Compliance
Committee held during their respective terms. The Chairman of the Audit and
Compliance Committee receives an aggregate annual fee of $10,000 from the Fund
Complex. Payment of such fee is allocated among all funds in the Fund Complex
in proportion to their relative net assets.

The Board of Directors has a Nominating Committee. The Nominating
Committee makes recommendations to the full Board of Directors with respect to
candidates for the Board of Directors. The members of the Nominating Committee
during the fiscal year ended March 31, 1997, were Messrs. McDonald (Chairman),
Cunnane, Kroeger, Levy, Vogt and Woolf and Ms. Rimel, each of whom is not an
"interested person" within the meaning of the 1940 Act. Mr. Woolf was a member
of the Nominating Committee until his retirement on December 31, 1996. The
Nominating Committee met once during the fiscal year ended March 31, 1997. In
such fiscal year, all members attended the meeting.

The Board of Directors has a Compensation Committee. The Compensation
Committee makes recommendations to the full Board of Directors with respect to
the compensation of Directors. The members of the Compensation Committee during
the fiscal year ended March 31, 1997, were Messrs. Woolf (Chairman) until his
retirement, Cunnane, Kroeger, Levy, McDonald and Vogt and Ms. Rimel, each of
whom is not an "interested person" within the meaning of the 1940 Act. Mr.
Cunnane became Chairman of the Compensation Committee upon Mr. Woolf's
retirement. The Compensation Committee met once during the fiscal year ended
March 31, 1997, and all members attended the meeting.

Board Approval of the Election of Directors

At a meeting of the Board of Directors held June 17, 1997, the Board of
Directors recommended that shareholders vote FOR each of the Nominees for
Director named herein. In recommending that shareholders elect the Nominees as
Directors of the Fund, the Board considered the Nominees' experience and
qualifications.

7
<PAGE>

Shareholder Approval of the Election of Directors

The Election of the Directors requires the affirmative vote of a majority
of all votes cast at the Special Meeting, provided that a majority of the
shares entitled to vote are present in person or by Proxy at the Special
Meeting. If you give no voting instructions, your shares will be voted FOR all
Nominees named herein. If the Directors are not approved by shareholders of the
Fund, the Board of Directors will consider alternative nominations.

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

PROPOSAL 2: To approve or disapprove a new Investment Advisory Agreement
between the Fund and Investment Company Capital Corp. with respect
to the Prime Series.

General Information

ICC is the Fund's investment advisor with respect to the Prime Series. ICC
is an indirect subsidiary of Alex. Brown Incorporated. Alex. Brown Incorporated
has entered into an Agreement and Plan of Merger with Bankers Trust New York
Corporation (together with its affiliates, "Bankers Trust") under which Alex.
Brown Incorporated would merge with and into a subsidiary of Bankers Trust New
York Corporation. Under the terms of the Merger, shares of Alex. Brown
Incorporated to be exchanged had an aggregate value of approximately $1.7
billion at the time the Merger was announced. As of December 31, 1996, Bankers
Trust New York Corporation was the seventh largest bank holding company in the
United States with total assets of approximately $120 billion. Its subsidiary,
Bankers Trust Company, is a worldwide merchant bank dedicated to serving the
needs of corporations, governments, financial institutions and private clients
through a global network of over 120 offices in more than 40 countries.
Investment management is a core business of Bankers Trust, built from its roots
as a trust bank founded in 1903. Bankers Trust Company is one of the nation's
largest and most experienced investment managers with approximately $227
billion in assets under management globally.

Bankers Trust is a registered bank holding company subject to the Bank
Holding Company Act of 1956, as amended ("BHCA"), and the rules and regulations
thereunder. The Board of Governors of the Federal Reserve System has
promulgated rules and regulations pursuant to its authority under the BHCA (and
taking into consideration certain provisions of the National Banking Act of
1933 generally referred to as the Glass-Steagall Act) that govern the
relationship between bank holding company affiliates and mutual funds, such as
the Fund, under which certain regulatory approvals will be necessary. After the
Merger, it is expected that ICC will continue to serve as the advisor with
respect to the Prime Series.

ICC does not anticipate any reduction in the quality of services now
provided the Prime Series and does not expect that the Merger will result in
any material changes in the business of ICC or in the manner in which ICC
renders services to the Fund. Nor does ICC anticipate that the Merger or any
ancillary transactions will have any adverse effect on its ability to fulfill
its obligations under the New Prime Advisory Agreement or to operate its
business in a manner consistent with past business practice.

In anticipation of the Merger, the Directors of the Fund, including the
Directors who are not (i) parties to the new Investment Advisory Agreement
between the Fund and ICC with respect to the Prime Series (the "New Prime
Advisory Agreement") or (ii) interested persons of any such party (the
"Disinterested Directors"), unanimously approved the New Prime Advisory
Agreement. The form of the New Prime Advisory Agreement is identical to the
Current Prime Advisory Agreement, except for the dates of execution,
effectiveness and initial term; the deletion of provisions relating to state
expense limits that have been preempted by federal law; a proviso to the effect
that the obligation of ICC to make its personnel available to serve as officers
of the Fund is subject to applicable banking regulations; and a provision
authorizing ICC, subject to the approval of the Fund's Board of Directors, to
delegate its responsibilities to corporate affiliates. The holders of a
majority of the outstanding voting securities (within the meaning of the 1940
Act) of the Prime Series are being asked to approve the New Prime Advisory
Agreement. See "The New Prime Advisory Agreement" below.

8
<PAGE>

The Current Prime Advisory Agreement

The current Investment Advisory Agreement between ICC and the Fund with
respect to the Prime Series, dated as of August 22, 1995 (the "Current Prime
Advisory Agreement"), was last approved by the shareholders of the Prime Series
on August 22, 1995. The Current Prime Advisory Agreement was most recently
approved by the Fund's Board of Directors, including a majority of the
Disinterested Directors, on March 26, 1997.

The Current Prime Advisory Agreement provides that the Advisor, in return
for its fee, will (a) supervise and manage the Prime Series' operations; (b)
formulate and implement continuing programs for the purchase and sale of
securities, consistent with the investment objective and policies of the Prime
Series; (c) provide the Fund with such executive, administrative and clerical
services as are deemed advisable by the Fund's Board of Directors; (d) provide
the Fund with, or obtain for it, adequate office space and all necessary office
equipment and services; (e) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data,
domestic, foreign and otherwise, whether affecting the economy generally or the
Prime Series, and whether concerning the individual issuers whose securities
are included in the Prime Series or the activities in which they engage, or
with respect to securities which the Advisor considers desirable for inclusion
in the Prime Series; (f) determine which issuers and securities shall be
represented in the Prime Series; (g) take all actions necessary to carry into
effect the Fund's purchase and sale programs; (h) supervise the operations of
the Fund's transfer and dividend disbursing agent; (i) provide the Fund with
such administrative and clerical services for the maintenance of certain
shareholder records as are deemed advisable by the Fund's Board of Directors;
and (j) arrange, but not pay for, the periodic updating of prospectuses and
supplements thereto, proxy materials, tax returns, reports to the Prime Series'
shareholders and reports to and filings with the SEC and state Blue Sky
authorities. Subject to the approval of the Board and the Prime Series'
shareholders, the Advisor may delegate certain of its duties enumerated above
to a sub-advisor.

Under the Current Prime Advisory Agreement, the Advisor receives a fee
from the Fund, calculated daily and paid at the end of each calendar month, at
the annual rate of .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. The Prime Series pays its
portion of the foregoing fee based on the proportion of its net assets relative
to the Fund's net assets. In addition, the Advisor is entitled to receive a fee
with respect to the Prime Series, calculated daily and paid monthly, at the
annual rate of .02% of the Prime Series' average daily net assets. The Advisor
may, from time to time, voluntarily waive a portion of its advisory fee with
respect to the Prime Series to preserve or enhance the performance of the Prime
Series.

The Current Prime Advisory Agreement provides that the Advisor will
furnish, at its expense and without cost to the Fund, the services of one or
more officers of the Fund to the extent that such officers may be required by
the Fund for the proper conduct of its affairs. The Fund assumes and pays all
other expenses of the Fund, including, without limitation: payments to the
Fund's distributor under the Fund's plan of distribution; the charges and
expenses of any registrar, any custodian or depository appointed by the Fund
for the safekeeping of its cash, portfolio securities and other property, and
any transfer, dividend or accounting agent or agents appointed by the Fund;
brokers' commissions chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party; all taxes, including
securities issuance and transfer taxes, and fees payable by the Fund to
federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing shares of the Fund; all
costs and expenses in connection with the registration and maintenance of
registration of the Fund and its shares with the SEC and various states and
other jurisdictions (including filing fees, legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Directors' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
Directors or Director members of any advisory board or committee; all expenses
incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of any outside
service used for pricing of the Fund's shares; charges and expenses of legal
counsel, including counsel to the

9
<PAGE>

Directors of the Fund who are not interested persons (as defined in the 1940
Act) of the Fund and of independent accountants, in connection with any matter
relating to the Fund; membership dues of industry associations; interest
payable on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and Directors) of the Fund which inure to its
benefit; extraordinary expenses (including but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
provided herein.

The services of the Advisor are not to be deemed exclusive, and the
Advisor and its officers and Directors are free to render investment advisory
and other services to others, including other investment companies, and to
engage in other activities, so long as its services under the agreement are not
impaired thereby. The Advisor's officers or Directors may serve as officers or
Directors of the Fund, and the Fund's officers or Directors may serve as
officers or Directors of the Advisor, to the extent permitted by law.

Following the expiration of its initial two-year term, the Current Prime
Advisory Agreement continues in full force and effect from year to year,
provided that such continuance is approved at least annually by the Fund's
Board or by the vote of a majority of the Prime Series' outstanding voting
securities, and by the affirmative vote of a majority of the Directors who are
not parties to the agreement or "interested persons" of a party to the
agreement (other than as Directors of the Fund) by votes cast in person at a
meeting specifically called for such purpose.

The Current Prime Advisory Agreement may be terminated at any time, on
waivable written notice within 60 days and without any penalty, by vote of the
Fund's Board of Directors, by vote of a majority of the Prime Series'
outstanding voting securities or by the Advisor. The agreement automatically
terminates in the event of its assignment.

The Current Prime Advisory Agreement obligates the Advisor to exercise
care and diligence and to act in good faith and to use its best efforts within
reasonable limits to ensure the accuracy of all services performed under the
agreement, but the Advisor is not liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part of
the Advisor or its officers, Directors or employees, or reckless disregard by
the Advisor of its duties under the agreement.

The New Prime Advisory Agreement

The Board of Directors approved a New Prime Advisory Agreement between the
Fund and ICC for the Prime Series on June 17, 1997, the form of which is
attached as Exhibit A. The form of the proposed New Prime Advisory Agreement is
identical to the Current Prime Advisory Agreement, except for the dates of
execution, effectiveness and initial term; the deletion of provisions relating
to state expense limits that have been preempted by federal law; a proviso to
the effect that the obligation of ICC to make its personnel available to serve
as officers of the Fund is subject to applicable banking regulations; and a
provision authorizing ICC, subject to the approval of the Fund's Board of
Directors, to delegate its responsibilities to corporate affiliates.

The investment advisory fee as a percentage of net assets payable by the
Fund will be the same under the New Prime Advisory Agreement as under the
Current Prime Advisory Agreement. If the investment advisory fee under the New
Prime Advisory Agreement had been in effect for the Fund's most recently
completed fiscal year, the advisory fee to which ICC would have been entitled
would have been identical to that to which it was entitled under the Current
Prime Advisory Agreement.

The Board held a meeting on June 17, 1997, at which the Board, including
the Disinterested Directors, unanimously approved the New Prime Advisory
Agreement for the Fund and recommended the New Prime Advisory Agreement for
approval by the shareholders of the Prime Series. The New Prime Advisory
Agreement would take effect upon the later to occur of (i) the obtaining of
shareholder approval or (ii) the closing of the Merger. The New Prime Advisory
Agreement will continue in effect for an initial two-year term and thereafter
for successive annual periods as long as such continuance is approved in
accordance with the 1940 Act.

In evaluating the New Prime Advisory Agreement, the Board based its
determination primarily on its conclusion that there would be a high degree of
continuity of services to the Fund and took into account that the Current Prime
Advisory Agreement and the New Prime Advisory Agreement, including their terms
relating to the services to be provided thereunder by ICC and the fees and
expenses payable by the Fund, are substantially identical.

10
<PAGE>

The Board was assured on behalf of Alex. Brown and Bankers Trust that they
intend to comply with the requirements of Section 15(f) of the 1940 Act.
Section 15(f) provides a non-exclusive safe harbor for an investment advisor to
an investment company or any of its affiliated persons to receive any amount or
benefit in connection with a change in control of the investment advisor that
results in an assignment so long as two conditions are met. First, for a period
of three years after the change of control, at least 75% of the board members
of the investment company must not be interested persons of the acquired
advisor or the acquiror (Alex. Brown and Bankers Trust, respectively, in this
case). The Fund would be in compliance with this provision of Section 15(f).
Second, an "unfair burden" must not be imposed upon the investment company as a
result of such transaction or any express or implied terms, conditions or
understandings applicable thereto. The term "unfair burden" is defined in
Section 15(f) to include any arrangement during the two-year period after the
Merger whereby the investment advisor, or any interested person of any such
advisor, receives or is entitled to receive any compensation, directly or
indirectly, from the investment company or its shareholders (other than fees
for bona fide investment advisory or other services) or from any person in
connection with the purchase or sale of securities or other property to, from
or on behalf of the investment company (other than bona fide ordinary
compensation as principal underwriter for such investment company). Alex. Brown
and Bankers Trust are not aware of any express or implied term, condition,
arrangement or understanding that would impose an "unfair burden" on the Fund
as a result of the Merger. Alex. Brown and Bankers Trust have agreed that they,
and their affiliates, will take no action that would have the effect of
imposing an "unfair burden" on the Fund as a result of the Merger.

The Board also considered the terms of the Merger and the possible effects
of the Merger upon ICC's organization and upon the ability of ICC to provide
advisory services to the Fund. The Board considered the skills and capabilities
of ICC in this regard and the representations of Alex. Brown and Bankers Trust
that no material change was planned in the current management or facilities of
ICC.

The Board was also informed of the resources of Bankers Trust that could
be made available to the Advisor and the Fund. Although the Board focused
primarily on the continuity of services to the Fund, the Directors did consider
Bankers Trust's experience as advisor and service provider to a family of
mutual funds. The Board took particular note of the experience of Bankers Trust
in managing money market funds and considered in general terms the possibility
that the Fund could benefit from this experience. While the Board reached no
conclusion on this matter, the Directors did determine that it would be
appropriate to ask shareholders to approve at this Special Meeting a provision
specifically authorizing the use of the resources of Bankers Trust to support
management of the assets of the Fund, including the Prime Series, subject to
Board approval but without requiring additional shareholder approval.
Accordingly, the New Prime Advisory Agreement would, as stated above, contain a
provision authorizing ICC, subject to the Fund's Board of Directors, to
delegate its responsibilities to corporate affiliates. The Board also received
preliminary information about Bankers Trust's ability to provide other
services, including custody.

The Board also considered other effects on the Fund of ICC becoming an
affiliated person of Bankers Trust. In particular, the Board considered the
potential impact of banking laws and steps that might be necessary to secure
Federal Reserve Board approval of the Merger. In this regard, the Board also
considered the likelihood that the Fund will have to engage an independent
principal underwriter after the Merger but that Alex. Brown & Sons Incorporated
will continue to be able to provide services to its clients in connection with
shareholder accounts with the Fund. The Board also considered the fact that the
continued ability of Alex. Brown personnel to serve as Directors or officers of
the Fund was subject to Federal Reserve Board approval. Following the Merger,
the 1940 Act will prohibit or impose certain conditions on the ability of the
Fund to engage in certain transactions with Bankers Trust. For example, absent
exemptive relief, the Fund will be prohibited from entering into securities
transactions in which Alex. Brown or Bankers Trust acts as a principal.
Currently the Fund is prohibited from entering into only those transactions in
which Alex. Brown acts as principal. The Fund will also have to satisfy certain
conditions in order to engage in securities transactions in which Alex. Brown
or Bankers Trust is acting as an underwriter. The Fund is already required to
satisfy such conditions when engaging in transactions in which Alex. Brown is
acting as an underwriter. In this connection, management of the Advisor
represented to the Board that it does not believe these prohibitions or
conditions will have a material effect on the management or performance of the
Fund.

The Board also considered that the costs of the Special Meeting, insofar
as they apply to approval of new Advisory Agreements, would be borne by the
Advisor.

11
<PAGE>

After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Board, including the
Disinterested Directors, unanimously approved the New Prime Advisory Agreement
and voted to recommend its approval to the shareholders of the Prime Series.

In the event that shareholders of the Prime Series do not approve the New
Prime Advisory Agreement, the Current Prime Advisory Agreement will remain in
effect and the Board will take such action as it deems in the best interest of
the Prime Series and its shareholders, which may include proposing that
shareholders approve an agreement in lieu of the New Prime Advisory Agreement.
If the Merger is not consummated, ICC will continue to serve as investment
advisor of the Prime Series pursuant to the terms of the Current Prime Advisory
Agreement.

Investment Company Capital Corp.

ICC is a registered investment advisor that had under management as of May
31, 1997 approximately $5.5 billion, including assets of the Fund and the
assets of ICC's other clients. ICC is an indirect subsidiary of Alex. Brown
Incorporated. The principal address of each is One South Street, Baltimore,
Maryland 21202.

The following information is provided for each Director and the principal
executive officer of ICC.

Directors and Principal Executive Officer
of Investment Company Capital Corp.

<TABLE>
<CAPTION>
Name and Position
with the Advisor Address Principal Occupation
------------------- ------- --------------------
<S> <C> <C>
Charles W. Cole, Jr. One South Street Managing Director, Alex.
Chairman Baltimore, Maryland 21202 Brown & Sons Incorporated
Richard T. Hale One South Street Managing Director, Alex.
Director and President Baltimore, Maryland 21202 Brown & Sons Incorporated
David L. Hopkins One South Street Managing Director, Alex.
Director Baltimore, Maryland 21202 Brown & Sons Incorporated
Alvin B. Krongard One South Street Chairman, Chief Executive
Director Baltimore, Maryland 21202 Officer and Director, Alex.
Brown Incorporated
Margaret-Mary V. Preston One South Street Managing Director, Alex.
Director Baltimore, Maryland 21202 Brown & Sons Incorporated
Robert F. Price One South Street Managing Director and
Director Baltimore, Maryland 21202 General Counsel, Alex.
Brown & Sons Incorporated
Mayo A. Shattuck III One South Street President, Chief Operating
Director Baltimore, Maryland 21202 Officer and Director, Alex.
Brown Incorporated
Truman T. Semans One South Street Managing Director, Alex.
Director Baltimore, Maryland 21202 Brown & Sons Incorporated
Beverly L. Wright One South Street Managing Director and Chief
Director Baltimore, Maryland 21202 Financial Officer, Alex.
Brown & Sons Incorporated
</TABLE>

For the fiscal year ended March 31, 1997, the Fund paid ICC an aggregate
fee of $10,806,028 for advisory services. For such fiscal year, the Fund also
paid ICC aggregate fees of $2,092,176 for transfer agency services

12
<PAGE>

provided to the Fund and $284,118 for accounting services provided to the Prime
and Treasury Series. For the fiscal year ended March 31, 1997, the Fund paid
Alex. Brown an aggregate distribution fee of $10,436,883 (net of fee waivers of
$120,055 for the Quality Cash Reserve Prime Shares). For such fiscal year, ICC
paid PIMC, the sub-advisor to the Fund's Tax-Free Series, an aggregate fee of
$800,837 for such services.

ICC does not provide investment advisory services to any other funds with
investment objectives similar to the Fund.

As of May 31, 1997, to Fund Management's knowledge as provided by the
Directors and officers of the Fund, the following Directors and officers of the
Fund beneficially owned shares of Alex. Brown Incorporated. Mr. Cole, Chairman
and a Director of the Fund and Chairman and a Director of ICC, beneficially
owned 4,356 shares of Alex. Brown Incorporated. Mr. Hale, President and a
Director of the Fund and President and a Director of ICC, beneficially owned
90,470 shares of Alex. Brown Incorporated. Mr. Semans, a Director of the Fund
and a Director of ICC, beneficially owned 25,433 shares of Alex. Brown
Incorporated. Edward J. Veilleux, Executive Vice President of the Fund and
Executive Vice President of ICC, beneficially owned 200 shares of Alex. Brown
Incorporated. Paul D. Corbin, Vice President of the Fund, beneficially owned
3,025 shares of Alex. Brown Incorporated. Monica M. Hausner, Vice President of
the Fund, beneficially owned 137 shares of Alex. Brown Incorporated. M.
Elliott Randolph, Jr., Vice President of the Fund, beneficially owned 4,441
shares of Alex. Brown Incorporated. Joseph A. Finelli, Treasurer of the Fund
and a Vice President of ICC, beneficially owned 33 shares of Alex. Brown
Incorporated and Laurie D. Collidge, Assistant Secretary of the Fund,
beneficially owned 48 shares of Alex. Brown Incorporated.

Shareholder Approval of the New Prime Advisory Agreement

Approval of the New Prime Advisory Agreement requires the affirmative vote
of a majority of the outstanding shares of the Prime Series. For purposes of
this proposal, "majority of the outstanding shares" means the vote of (i) 67%
or more of the Prime Series' outstanding shares present at the Special Meeting,
if the holders of more than 50% of the outstanding shares of the Prime Series
are present or represented by proxy, or (ii) more than 50% of the Prime Series'
outstanding shares, whichever is less.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE PRIME SERIES
VOTE FOR APPROVAL OF THE NEW PRIME ADVISORY AGREEMENT.
---
PROPOSAL 3: To approve or disapprove a new Investment Advisory Agreement
between the Fund and Investment Company Capital Corp. with respect
to the Treasury Series.

General Information

ICC is the Fund's investment advisor with respect to the Treasury Series.
ICC is an indirect subsidiary of Alex. Brown Incorporated. Alex. Brown
Incorporated has entered into an Agreement and Plan of Merger with Bankers
Trust. For more information regarding the Merger, see "General Information"
under Proposal 2 on page 8. After the Merger, it is expected that ICC will
continue to serve as the investment advisor with respect to the Treasury
Series.

ICC does not anticipate any reduction in the quality of services now
provided the Treasury Series and does not expect that the Merger will result in
any material changes in the business of ICC or in the manner in which ICC
renders services to the Fund. Nor does ICC anticipate that the Merger or any
ancillary transactions will have any adverse effect on its ability to fulfill
its obligations under the New Treasury Advisory Agreement or to operate its
business in a manner consistent with past business practice.

In anticipation of the Merger, the Directors of the Fund, including the
Directors who are not (i) parties to the new Investment Advisory Agreement
between the Fund and ICC with respect to the Treasury Series (the "New Treasury
Advisory Agreement") or (ii) interested persons of any such party, unanimously
approved the New Treasury Advisory Agreement. The form of the New Treasury
Advisory Agreement is identical to the Current Treasury Advisory Agreement,
except for the dates of execution, effectiveness and initial term; the deletion
of provisions relating to state expense limits that have been preempted by
federal law; a proviso to the effect that the obligation of ICC to make its
personnel available to serve as officers of the Fund is subject to applicable
banking regulations; and a provision authorizing ICC, subject to the approval
of the Fund's Board of Directors,

13
<PAGE>

to delegate its responsibilities to corporate affiliates. The holders of a
majority of the outstanding voting securities (within the meaning of the 1940
Act) of the Treasury Series are being asked to approve the New Treasury
Advisory Agreement. See "The New Treasury Advisory Agreement" below.

The Current Treasury Advisory Agreement

The current Investment Advisory Agreement between ICC and the Fund with
respect to the Treasury Series, dated as of August 22, 1995 (the "Current
Treasury Advisory Agreement"), was last approved by the shareholders of the
Fund on August 22, 1995. The Current Treasury Advisory Agreement was most
recently approved by the Fund's Board of Directors, including a majority of the
Disinterested Directors, on March 26, 1997.

The Current Treasury Advisory Agreement provides that the Advisor, in
return for its fee, will (a) supervise and manage the Treasury Series'
operations; (b) formulate and implement continuing programs for the purchase
and sale of securities consistent with the investment objective and policies of
the Treasury Series; (c) provide the Fund with such executive, administrative
and clerical services as are deemed advisable by the Fund's Board of Directors;
(d) provide the Fund with, or obtain for it, adequate office space and all
necessary office equipment and services; (e) obtain and evaluate pertinent
information about significant developments and economic, statistical and
financial data, domestic, foreign and otherwise, whether affecting the economy
generally or the 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; (g) take all actions
necessary to carry into effect the Fund's purchase and sale programs; (h)
supervise the operations of the Fund's transfer and dividend disbursing agent;
(i) provide the Fund with such administrative and clerical services for the
maintenance of certain shareholder records as are deemed advisable by the
Fund's Board of Directors; and (j) arrange, but not pay for, the periodic
updating of prospectuses and supplements thereto, proxy materials, tax returns,
reports to the Treasury Series' shareholders and reports to and filings with
the SEC and state Blue Sky authorities. Subject to the approval of the Board
and the Treasury Series' shareholders, the Advisor may delegate certain of its
duties enumerated above to a sub-advisor.

Under the Current Treasury Advisory Agreement, ICC receives a fee from the
Fund, calculated daily and paid at the end of each calendar month, at an annual
rate of .30% of the first $500 million of the Fund's aggregate average daily
net assets, .26% of the next $500 million of the Fund's aggregate average daily
net assets, .25% of the next $500 million of the Fund's aggregate average daily
net assets, .24% of the next $1 billion of the Fund's aggregate daily net
assets, .23% of the next $1 billion of the Fund's aggregate daily net assets
and .22% of that portion of the Fund's aggregate daily net assets in excess of
$3.5 billion. The Treasury Series pays its portion of the foregoing fee based
on the proportion of its net assets relative to the Fund's net assets. The
Advisor may, from time to time, voluntarily waive a portion of its advisory fee
with respect to the Treasury Series to preserve or enhance the performance of
the Treasury Series.

The Current Treasury Advisory Agreement provides that the Advisor will
furnish, at its expense and without cost to the Fund, the services of one or
more officers of the Fund to the extent that such officers may be required by
the Fund for the proper conduct of its affairs. The Fund assumes and pays all
other expenses of the Fund, including, without limitation: payments to the
Fund's distributor under the Fund's plan of distribution; the charges and
expenses of any registrar, any custodian or depository appointed by the Fund
for the safekeeping of its cash, portfolio securities and other property, and
any transfer, dividend or accounting agent or agents appointed by the Fund;
brokers' commissions chargeable to the Fund in connection with portfolio
securities 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

14
<PAGE>

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 interest payable on the 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.

Following the expiration of its initial two-year term, the Current
Treasury Advisory Agreement continues in force and effect from year to year,
provided that such continuance is approved at least annually by the Fund's
Board or by the vote of a majority of the Treasury Series' outstanding voting
securities, and by the affirmative vote of a majority of the Directors who are
not parties to the agreement or "interested persons" of a party to the
agreement (other than as Directors of the Fund) by votes cast in person at a
meeting specifically called for such purpose.

The Current Treasury Agreement may be terminated at any time, on waivable
written notice within 60 days and without any penalty, by vote of the Fund's
Board of Directors, by vote of a majority of the Treasury Series' outstanding
voting securities or by the Advisor. The agreement automatically terminates in
the event of its assignment.

The Current Treasury Agreement obligates the Advisor to exercise care and
diligence and to act in good faith and to use its best efforts within
reasonable limits to ensure the accuracy of all services performed under the
agreement, but the Advisor is not liable for any act or omission which does not
constitute willful malfeasance, bad faith or gross negligence on the part of
the Advisor or its officers, Directors or employees or reckless disregard by
the Advisor of its duties under the agreement.

The New Treasury Advisory Agreement

The Board of Directors approved a New Treasury Advisory Agreement between
the Fund and ICC for the Treasury Series on June 17, 1997, the form of which is
attached as Exhibit B. The form of the proposed New Treasury Advisory Agreement
is identical to the Current Treasury Advisory Agreement, except for the dates
of execution, effectiveness and initial term; the deletion of provisions
relating to state expense limits that have been preempted by federal law; a
proviso to the effect that the obligation of ICC to make its personnel
available to serve as officers of the Fund is subject to applicable banking
regulations; and a provision authorizing ICC, subject to the approval of the
Fund's Board of Directors, to delegate its responsibilities to corporate
affiliates.

The investment advisory fee as a percentage of net assets payable by the
Fund will be the same under the New Treasury Advisory Agreement as under the
Current Treasury Advisory Agreement. If the investment advisory fee under the
New Treasury Advisory Agreement had been in effect for the Fund's most recently
completed fiscal year, the advisory fee to which ICC would have been entitled
would have been identical to that to which it was entitled under the Current
Treasury Advisory Agreement.

The Board held a meeting on June 17, 1997, at which the Board, including
the Disinterested Directors, unanimously approved the New Treasury Advisory
Agreement for the Fund and recommended the New Treasury Advisory Agreement for
approval by the Shareholders of the Treasury Series. The New Treasury Advisory
Agreement would take effect upon the later to occur of (i) the obtaining of
shareholder approval or (ii) the closing of the Merger. The New Treasury
Advisory Agreement will continue in effect for an initial two year term and
thereafter for successive annual periods as long as such continuance is
approved in accordance with the 1940 Act.

15
<PAGE>

In evaluating the New Treasury Advisory Agreement, the Board based its
determination primarily on its conclusion that there would be a high degree of
continuity of services to the Fund and took into account that the Current
Treasury Advisory Agreement and the New Treasury Advisory Agreement, including
their terms relating to the services to be provided thereunder by ICC and the
fees and expenses payable by the Fund, are substantially identical.

The Board was also informed of the resources of Bankers Trust that could
be made available to the Advisor and the Fund. Although the Board focused
primarily on the continuity of services to the Fund, the Directors did consider
Bankers Trust's experience as advisor and service provider to a family of
mutual funds. The Board took particular note of the experience of Bankers Trust
in managing money market funds and considered in general terms the possibility
that the Fund could benefit from this experience. While the Board reached no
conclusion on this matter, the Directors did determine that it would be
appropriate to ask shareholders to approve at this Special Meeting a provision
specifically authorizing the use of the resources of Bankers Trust to support
management of the assets of the Fund, including the Treasury Series, subject to
Board approval but without requiring additional shareholder approval.
Accordingly, the New Treasury Advisory Agreement would, as stated above contain
a provision authorizing ICC, subject to the Fund's Board of Directors, to
delegate its responsibilities to corporate affiliates. The Board also received
preliminary information about Bankers Trust's ability to provide other
services, including custody.

16
<PAGE>

Bankers Trust is acting as an underwriter. The Fund is already required to
satisfy such conditions when engaging in transactions in which Alex. Brown is
acting as an underwriter. In this connection, management of the Advisor
represented to the Board that it does not believe these prohibitions or
conditions will have a material effect on the management or performance of the
Fund.

The Board also considered that the costs of the Special Meeting, insofar
as they apply to approval of new Advisory Agreements, would be borne by the
Advisor.

After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Board, including Disinterested
Directors, unanimously approved the New Treasury Advisory Agreement and voted
to recommend its approval to the shareholders of the Treasury Series.

In the event that shareholders of the Treasury Series do not approve the
New Treasury Advisory Agreement, the Current Treasury Advisory Agreement will
remain in effect and the Board will take such action as it deems in the best
interest of the Treasury Series and its Shareholders, which may include
proposing that Shareholders approve an agreement in lieu of the New Treasury
Advisory Agreement. If the Merger is not consummated, ICC will continue to
serve as investment advisor to the Treasury Series pursuant to the terms of the
Current Treasury Advisory Agreement.

The Advisor

For information concerning ICC and fees paid to ICC in the fiscal year
ended March 31, 1997, see "Investment Company Capital Corp." under Proposal 2
on pages 12-13.

Shareholder Approval of the New Treasury Advisory Agreement

Approval of the New Treasury Advisory Agreement requires the affirmative
vote of a majority of the outstanding shares of the Treasury Series. For
purposes of this proposal, "majority of the outstanding shares" means the vote
of (i) 67% or more of the Treasury Series' outstanding shares present at the
Special Meeting, if the holders of more than 50% of the outstanding shares of
the Treasury Series are present or represented by proxy, or (ii) more than 50%
of the Treasury Series' outstanding shares, whichever is less.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE TREASURY SERIES
VOTE FOR THE APPROVAL OF THE NEW TREASURY ADVISORY AGREEMENT.
---

PROPOSAL 4: To approve or disapprove a new Investment Advisory Agreement
between the Fund and Investment Company Capital Corp. with respect
to the Tax-Free Series.

General Information

ICC is the Fund's investment advisor with respect to the Tax-Free Series.
ICC is an indirect subsidiary of Alex. Brown Incorporated. Alex. Brown
Incorporated has entered into an Agreement and Plan of Merger with Bankers
Trust. For more information regarding the Merger, see "General Information"
under Proposal 2 on page 8. After the Merger, it is expected that ICC will
continue to serve as the advisor with respect to the Tax-Free Series.

ICC does not anticipate any reduction in the quality of services now
provided to the Tax-Free Series and does not expect that the Merger will result
in any material changes in the business of ICC or in the manner in which ICC
renders services to the Fund. Nor does ICC anticipate that the Merger or any
ancillary transactions will have any adverse effect on its ability to fulfill
its obligations under the New Tax-Free Advisory Agreement or to operate its
business in a manner consistent with past business practice.

17
<PAGE>

subject to applicable banking regulations; and a provision authorizing ICC,
subject to the approval of the Fund's Board of Directors, to delegate its
responsibilities to corporate affiliates. The holders of a majority of the
outstanding voting securities (within the meaning of the 1940 Act) of the
Tax-Free Series are being asked to approve the New Tax-Free Advisory Agreement.
See "The New Tax-Free Advisory Agreement" below.

The Current Tax-Free Advisory Agreement

The current Investment Advisory Agreement between ICC and the Fund with
respect to the Tax-Free Series, dated as of August 22, 1995 (the "Current
Tax-Free Advisory Agreement"), was last approved by the shareholders of the
Fund on August 22, 1995. The Current Tax-Free Advisory Agreement was most
recently approved by the Fund's Board of Directors, including a majority of the
Disinterested Directors, on March 26, 1997.

The Current Tax-Free Advisory Agreement provides that the Advisor, in
return for its fee, will (a) supervise and manage the Tax-Free Series'
operations; (b) formulate and implement continuing programs for the purchase and
sale of securities consistent with the investment objective and policies of the
Tax-Free Series; (c) provide the Fund with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of Directors; (d)
provide the Fund with, or obtain for it, adequate office space and all necessary
office equipment and services; (e) obtain and evaluate pertinent information
about significant developments and economic, statistical and financial data,
domestic, foreign and otherwise, whether affecting the economy generally or the
Tax-Free Series, and whether concerning the individual issuers whose securities
are included in the Tax-Free Series or the activities in which they engage, or
with respect to securities which the Advisor considers desirable for inclusion
in the Tax-Free Series; (f) determine which issuers and securities shall be
represented in the Tax-Free Series; (g) take all actions necessary to carry into
effect the Fund's purchase and sale programs; (h) supervise the operations of
the Fund's transfer and dividend disbursing agent; (i) provide the Fund with
such administrative and clerical services for the maintenance of certain
shareholder records as are deemed advisable by the Fund's Board of Directors;
and (j) arrange, but not pay for, the periodic updating of prospectuses and
supplements thereto, proxy materials, tax returns, reports to the Tax-Free
Series' shareholders and reports to and filings with the SEC and state Blue Sky
authorities. Subject to the approval of the Board and the Tax-Free Series'
shareholders, the Advisor may delegate certain of its duties enumerated above to
a sub-advisor.

Under the Current Tax-Free Advisory Agreement, ICC receives a fee from the
Fund, calculated daily and paid at the end of each calendar month, at an annual
rate of .30% of the first $500 million of the Fund's aggregate average daily
net assets, .26% of the next $500 million of the Fund's aggregate average daily
net assets, .25% of the next $500 million of the Fund's aggregate average daily
net assets, .24% of the next $1 billion of the Fund's aggregate daily net
assets, .23% of the next $1 billion of the Fund's aggregate daily net assets
and .22% of that portion of the Fund's average daily net assets in excess of
$3.5 billion. In addition, the Advisor is entitled to receive a fee with
respect to the Tax-Free Series, calculated daily and paid monthly, at the
annual rate of .03% of the Tax-Free Series' average daily net assets. The
Advisor may, from time to time, voluntarily waive a portion of its advisory fee
with respect to the Tax-Free Series to preserve or enhance the performance of
the Series.

The Current Tax-Free Advisory Agreement provides that the Advisor will
furnish, at its expense and without cost to the Fund, the services of one or
more officers of the Fund to the extent that such officers may be required by
the Fund for the proper conduct of its affairs. The Fund assumes and pays all
other expenses of the Fund, including, without limitation: payments to the
Fund's distributor under the Fund's plan of distribution; the charges and
expenses of any registrar, any custodian or depository appointed by the Fund
for the safekeeping of its cash, portfolio securities and other property, and
any transfer, dividend or accounting agent or agents appointed by the Fund;
brokers' commissions chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party; all taxes, including
securities issuance and transfer taxes, and fees payable by the Fund to
federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing shares of the Fund; all
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

18
<PAGE>

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.

Following the expiration of its initial two-year term, the Current
Tax-Free Advisory Agreement continues in force and effect from year to year,
provided that such continuance is approved at least annually by the Fund's
Board of Directors or by the vote of a majority of the Tax-Free Series'
outstanding voting securities, and by the affirmative vote of a majority of the
Directors who are not parties to the agreement or "interested parties" of a
party to the agreement (other than as Directors of the Fund) by votes cast in
person at a meeting specifically called for such purpose.

The Current Tax-Free Agreement may be terminated at any time, on waivable
written notice within 60 days and without any penalty, by vote of the Fund's
Board, by vote of a majority of the Tax-Free Series' outstanding voting
securities or by the Advisor. The agreement automatically terminates in the
event of its assignment.

The New Tax-Free Advisory Agreement

The Board of Directors approved a New Tax-Free Advisory Agreement between
the Fund and ICC for the Tax-Free Series on June 17, 1997, the form of which is
attached as Exhibit C. The form of the proposed New Tax-Free Advisory Agreement
is identical to the Current Tax-Free Advisory Agreement, except for the dates
of execution, effectiveness and initial term; the deletion of provisions
relating to state expense limits that have been preempted by federal law; a
proviso to the effect that the obligation of ICC to make its personnel
available to serve as officers of the Fund is subject to applicable banking
regulations; and a provision authorizing ICC, subject to the approval of the
Fund's Board of Directors, to delegate its responsibilities to corporate
affiliates.

The investment advisory fee as a percentage of net assets payable by the
Fund will be the same under the New Tax-Free Advisory Agreement as under the
Current Tax-Free Advisory Agreement. If the investment advisory fee under the
New Tax-Free Advisory Agreement had been in effect for the Fund's most recently
completed fiscal year, the advisory fee to which ICC would have been entitled
would have been identical to that to which it was entitled under the Current
Tax-Free Advisory Agreement.

The Board held a meeting on June 17, 1997, at which the Board, including
the Disinterested Directors, unanimously approved the New Tax-Free Advisory
Agreement and recommended the New Tax-Free Advisory Agreement for approval by
the shareholders of the Tax-Free Series. The New Tax-Free Advisory Agreement
would take effect upon the later to occur of (i) the obtaining of shareholder
approval or (ii) the closing of the Merger. The New Tax-Free Advisory Agreement
will continue in effect for an initial two-year term and thereafter for
successive annual periods as long as such continuance is approved in accordance
with the 1940 Act.

In evaluating the New Tax-Free Advisory Agreement, the Board based its
determination primarily on its conclusion that there would be a high degree of
continuity of services to the Fund and took into account that the Current
Tax-Free Advisory Agreement and the New Tax-Free Advisory Agreement, including
their terms relating to the services to be provided thereunder by ICC and the
fees and expenses payable by the Fund, are substantially identical.

19
<PAGE>

The Board was also informed of the resources of Bankers Trust that could
be made available to the Advisor and the Fund. Although the Board focused
primarily on the continuity of services to the Fund, the Directors did consider
Bankers Trust's experience as advisor and service provider to a family of
mutual funds. The Board took particular note of the experience of Bankers Trust
in managing money market funds and considered in general terms the possibility
that the Fund could benefit from this experience. While the Board reached no
conclusion on this matter, the Directors did determine that it would be
appropriate to ask shareholders to approve at this Special Meeting a provision
specifically authorizing the use of the resources of Bankers Trust to support
management of the assets of the Fund, including the Tax-Free Series, subject to
Board approval but without requiring additional shareholder approval.
Accordingly, the New Tax-Free Advisory Agreement would, as stated above contain
a provision authorizing ICC, subject to the Fund's Board of Directors, to
delegate its responsibilities to corporate affiliates. The Board also received
preliminary information about Bankers Trust's ability to provide other
services, including custody.

The Board also considered that the costs of the Special Meeting, insofar
as they apply to approval of new Advisory Agreements, would be borne by the
Advisor.

20
<PAGE>

After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Board, including the
Disinterested Directors, unanimously approved the New Tax-Free Advisory
Agreement and voted to recommend its approval to the shareholders of the
Tax-Free Series.

In the event that shareholders of the Tax-Free Series do not approve the
New Tax-Free Advisory Agreement, the Current Tax-Free Advisory Agreement will
remain in effect and the Board will take such action as it deems in the best
interest of the Tax-Free Series and its shareholders, which may include
proposing that shareholders approve an agreement in lieu of the New Tax-Free
Advisory Agreement. If the Merger is not consummated, ICC will continue to
serve as investment advisor to the Tax-Free Series pursuant to the terms of the
Current Tax-Free Advisory Agreement.

The Advisor

For information concerning ICC and fees paid to ICC in the fiscal year
ended March 31, 1997, see "Investment Company Capital Corp." under Proposal 2
on pages 12-13.

Shareholder Approval of the New Tax-Free Advisory Agreement

Approval of the New Tax-Free Advisory Agreement requires the affirmative
vote of a majority of the outstanding shares of the Tax-Free Series. For
purposes of this proposal, "majority of the outstanding shares" means the vote
of (i) 67% or more of the Tax-Free Series' outstanding shares present at the
Special Meeting, if the holders of more than 50% of the outstanding shares of
the Tax-Free Series are present or represented by proxy, or (ii) more than 50%
of the Tax-Free Series' outstanding shares, whichever is less.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE TAX-FREE SERIES
VOTE FOR APPROVAL OF THE NEW TAX-FREE ADVISORY AGREEMENT.
---
PROPOSAL 5: To approve or disapprove a new Sub-Advisory Agreement between
Investment Company Capital Corp. and PNC Institutional Management
Corporation with respect to the Tax-Free Series.

General Information

PIMC is the Fund's sub-advisor with respect to the Tax-Free Series.
Shareholders of the Tax-Free Series are being asked to approve a New
Sub-Advisory Agreement to take effect following the consummation of the Merger.
For more information regarding the Merger, see "General Information" under
Proposal 2 on page 8. As PIMC will be unaffected by the Merger, neither ICC nor
PIMC anticipates any reduction in the quality of services now provided to the
Tax-Free Series and does not expect that the Merger will result in any material
changes in the manner in which PIMC renders services to the Fund. Nor do ICC or
PIMC anticipate that the Merger or any ancillary transactions will have any
adverse effect on its ability to fulfill its obligations under the New
Sub-Advisory Agreement or to operate in a manner consistent with past business
practice.

In anticipation of the Merger, the Directors of the Fund, including a
majority of the Directors who are not (i) parties to the new Sub-Advisory
Agreement between ICC and PIMC with respect to the Tax-Free Series (the "New
Sub-Advisory Agreement") or (ii) interested persons of any such party,
unanimously approved the New Sub-Advisory Agreement. The form of the New
Sub-Advisory Agreement is identical to the Current Sub-Advisory Agreement,
except for the dates of execution, effectiveness and initial term. The holders
of a majority of the outstanding voting securities (within the meaning of the
1940 Act) of the Tax-Free Series are being asked to approve the New Sub-Advisory
Agreement. See "The New Sub-Advisory Agreement" below.

The Current Sub-Advisory Agreement

The current Sub-Advisory Agreement between ICC and PIMC, dated June 1, 1991
(the "Current Sub-Advisory Agreement"), was last approved by the shareholders
of the Tax-Free Series on May 28, 1991. The Current Sub-Advisory Agreement was
most recently approved by the Fund's Board of Directors, including a majority of
the Disinterested Directors, on March 26, 1997.

21
<PAGE>

The Current Sub-Advisory Agreement provides that PIMC, in return for its
fee, will (a) provide investment research and credit analysis concerning the
Fund's investments, (b) conduct a continual program of investment of the
Tax-Free Series assets, (c) place orders for all purchases and sales of the
investments made for the Tax-Free Series, and (d) maintain the books and
records required in connection with its duties hereunder; (e) keep ICC informed
of developments materially affecting the Tax-Free Series; and (f) render to the
Fund's Board of Directors such periodic and special reports as ICC may
reasonably request.

The Current Sub-Advisory Agreement provides for compensation from ICC to
PIMC a fee calculated daily and paid at the end of each calendar month, 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 average 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.

The Current Sub-Advisory Agreement provides that PIMC will bear all
expenses in connection with the performance of its services under this
Agreement. PIMC shall not bear certain other expenses related to the operation
of the Fund including, but not limited to: taxes, interest, brokerage fees and
commissions and any extraordinary expense items.

The services performed by PIMC are not deemed to be exclusive, and PIMC is
free to render similar services to others, including other investment
companies, so long as its services to the Fund are not impaired thereby.

After its initial two-year term, the Current Sub-Advisory Agreement
continues in force 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 Fund who are not parties to this
Agreement or interested persons of the Fund 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 Fund or by vote of a majority of the outstanding
voting securities of the Tax-Free Series.

The Current Sub-Advisory Agreement may be terminated with respect to the
Fund (i) by the Fund at any time, without the payment of any penalty by the
Board of Directors of the Fund, (ii) by vote of a majority of the outstanding
voting securities of the Tax-Free Series, (iii) by ICC, or (iv) by PIMC, in all
cases on 60-days' written notice. It will also immediately terminate in the
event of its assignment.

Under the Current Sub-Advisory Agreement, PIMC will not be liable for any
error or judgment or mistake of law or for any loss suffered by ICC or by the
Fund except a loss resulting from PIMC's 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
the Agreement.

The New Sub-Advisory Agreement

The Board of Directors approved a New Sub-Advisory Agreement between ICC
and PIMC on June 17, 1997, the form of which is attached as Exhibit D. The form
of the proposed New Sub-Advisory Agreement is identical to the Current
Sub-Advisory Agreement, except for the dates of execution, effectiveness and
initial term.

The investment sub-advisory fee as a percentage of net assets payable by
ICC will be the same under the New Sub-Advisory Agreement as under the Current
Sub-Advisory Agreement. If the investment sub-advisory fee under the New
Sub-Advisory Agreement had been in effect for the Fund's most recently
completed fiscal year the sub-advisory fee to which PIMC would have been
entitled would have been identical to that paid under the Current Sub-Advisory
Agreement.

The Board held a meeting on June 17, 1997, at which the Board, including
the Disinterested Directors, unanimously approved the New Sub-Advisory
Agreement for the Fund and recommended the New Sub-Advisory Agreement for
approval by the shareholders of the Tax-Free Series. The New Sub-Advisory
Agreement would take effect upon the later to occur of (i) the obtaining of
shareholder approval or (ii) the closing of the Merger. The New Sub-Advisory
Agreement will continue in effect for an initial two-year term and thereafter
for successive annual periods as long as such continuance is approved in
accordance with the 1940 Act.

22
<PAGE>

The Board considered the New Sub-Advisory Agreement in the context of the
New Tax-Free Advisory Agreement and based its determination on the continuity
of services to be provided to the Fund under both new Advisory Agreements and
took into account that the Current Sub-Advisory Agreement and the New Sub-
Advisory Agreement, including their terms relating to the services to be
provided thereunder by PIMC and the fees and expenses payable by the Fund, are
substantially identical.

After consideration of the above factors and such other factors and
information that the Board deemed relevant, the Board, including the
Disinterested Directors, unanimously approved the New Sub-Advisory Agreement
with respect to the Tax-Free Series and voted to recommend its approval to the
shareholders of the Tax-Free Series.

In the event that shareholders of the Tax-Free Series do not approve the
New Sub-Advisory Agreement, the Current Sub-Advisory Agreement will remain in
effect and the Board will take such action as it deems in the best interest of
the Tax-Free Series and its shareholders, which may include proposing that
shareholders approve an agreement in lieu of the New Sub-Advisory Agreement. If
the Merger is not consummated, PIMC will continue to serve as investment
Sub-Advisor to the Tax-Free Series pursuant to the terms of the Current Sub-
Advisory Agreement.

PNC Institutional Management Corporation

PIMC is a registered investment advisor that had under management as of
May 31, 1997 approximately $37.2 billion, including assets of the Fund and the
assets of PIMC's other clients. PIMC is a wholly owned subsidiary of PNC Bank,
National Association ("PNC"), a national banking association. The principal
business address of PNC is One PNC Plaza, Pittsburgh, Pennsylvania 15265. The
principal address of PIMC is 400 Bellevue Parkway, Wilmington, Delaware 19809.

The following information is provided for each director and the principal
executive officer of PIMC.

<TABLE>
<CAPTION>
Name and Position with PIMC Address Principal Occupation
- --------------------------- ------- --------------------
<S> <C> <C>
Ralph L. Schlosstein 345 Park Avenue Investment Management
Chairman and Chief Executive New York, NY 10154
Officer
Richard C. Caldwell 1600 Market Street Banking
Director Philadelphia, PA 19103
J. Richard Carnall 400 Bellevue Parkway Banking
Director Wilmington, DE 19809
Laurence D. Fink 345 Park Avenue Investment Management
Director New York, NY 10154
Nicholas M. Marsini, Jr. Fifth Avenue and Wood Sts. Finance
Director Pittsburgh, PA 15265
Richard L. Smoot 100 South Broad Street Banking
Director Philadelphia, PA 19110
</TABLE>

For the fiscal year ended March 31, 1997, ICC paid PIMC an aggregate fee
of $800,837 for sub-advisory services to the Tax-Free Series. In addition, the
Fund paid an aggregate fee of $63,954 to PFPC, Inc. ("PFPC") an affiliate of
PIMC, for accounting services to the Tax-Free Series. The principal address of
PFPC is 400 Bellevue Parkway, Wilmington, Delaware 19809.

Please refer to "Investment Company Capital Corp." under Proposal 2 on
pages 12-13 for information regarding fees paid to ICC by the Fund and
ownership in Alex. Brown by Directors and officers of the Fund.

Other Funds Advised by PIMC with Similar Objectives

PIMC acts as advisor or sub-advisor to a number of money market portfolios
which have investment objectives similar to those of the Fund. Appendix A
provides comparative information on fees paid to PIMC for investment advisory
or sub-advisory services to such funds.

23
<PAGE>

Shareholder Approval of the New Sub-Advisory Agreement

Approval of the New Sub-Advisory Agreement requires the affirmative vote
of a majority of the outstanding shares of the Tax-Free Series. For purposes of
this proposal, "majority of the outstanding shares" means the vote of (i) 67%
or more of the Tax-Free Series' outstanding shares present at the Special
Meeting, if the holders of more than 50% of the outstanding shares of the
Tax-Free Series are present or represented by proxy, or (ii) more than 50% of
the Tax-Free Series' outstanding shares whichever is less.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE TAX-FREE SERIES
VOTE FOR APPROVAL OF THE NEW TAX-FREE SUB-ADVISORY AGREEMENT.
---
ADDITIONAL INFORMATION

Directors and Executive Officers

Information about the Fund's current Directors and principal executive
officers, including their names, positions with the Fund, length of service in
such positions, ages, principal occupations or employment during the past five
years and amount of shares of the Fund beneficially owned as of May 31, 1997,
is set forth below. Each officer of the Fund will hold such office until a
successor has been elected by the Board of Directors. Directors and officers of
the Fund are also directors and officers of some or all of the other investment
companies managed, administered, advised or distributed by Alex. Brown.

<TABLE>
<CAPTION>
Position
Name With the Fund Age
- ----------------------- ----------------------------------- -----
<S> <C> <C>
Charles W. Cole, Jr.* Director since 1996 and Chairman 61
of the Board since 1997
James J. Cunnane Director since 1994 59
Richard T. Hale* Director and President since 1989 51
John F. Kroeger Director since 1981 72
Louis E. Levy Director since 1994 64
Eugene J. McDonald Director since 1992 65
Rebecca W. Rimel Director since 1995 46
Truman T. Semans* Director since 1995 70
Carl W. Vogt, Esq. Director since 1996 61

24
<PAGE>
<TABLE>
<CAPTION>
Position
Name With the Fund Age
- -------------------------- ---------------------------------- -----
<S> <C> <C>
Edward J. Veilleux Executive Vice President since 53
1985
M. Elliott Randolph, Jr. Vice President since 1992 55
Paul D. Corbin Vice President since 1992 44
Monica M. Hausner Vice President since 1995; 35
Assistant Vice President 1992-95
Scott J. Liotta Vice President since 1996; 32
Secretary since 1997
Joseph A. Finelli Treasurer since 1995 40
Laurie D. Collidge Assistant Secretary since 1992 31

<CAPTION>
Business Experience Shares Beneficially
During the Past Five Years Owned as of
Name (including all Directorships) May 31, 1997** Percentage
- -------------------------- --------------------------------- --------------------- -----------
<S> <C> <C> <C>
Edward J. Veilleux Principal, Alex. Brown & Sons None ***
Incorporated; Vice President,
Armata Financial Corp.
(registered broker-dealer);
Executive Vice President,
Investment Company Capital
Corp. (registered investment
advisor).
M. Elliott Randolph, Jr. Principal, Alex. Brown & Sons None ***
Incorporated, 1991-Present.
Paul D. Corbin Principal, Alex. Brown & Sons 3,617 shares ***
Incorporated, 1991-Present.
Monica M. Hausner Vice President, Fixed Income 70 shares ***
Management Department, Alex.
Brown & Sons Incorporated,
March 1992-Present. Formerly
Assistant Vice President, First
National Bank of Maryland,
1984-1992.
Scott J. Liotta Manager, Fund Administration, 2,279 shares ***
Alex. Brown & Sons
Incorporated, July 1996-Present.
Formerly, Manager and Foreign
Markets Specialist, Putnam
Investments Inc. (registered
investment companies), April
1994-July 1996; Supervisor,
Brown Brothers Harriman &
Co. (domestic and global
custody), August 1991-April
1994.
Joseph A. Finelli Vice President, Alex. Brown & 1,736 shares ***
Sons Incorporated and Vice
President, Investment Company
Capital Corp. (registered
investment advisor), September
1995-Present. Formerly, Vice
President and Treasurer, The
Delaware Group of Funds
(registered investment
companies) and Vice President,
Delaware Management
Company Inc. (investments),
1980-1995.
Laurie D. Collidge Asset Management Department, 1,867 shares ***
Alex. Brown & Sons
Incorporated, 1991-Present.
</TABLE>
- ------------
* Denotes an individual who is an "interested person" as defined in the 1940
Act.
** This information has been furnished by each Director and officer.
*** As of May 31, 1997, the Directors and officers of the Fund as a group (16
persons) beneficially owned an aggregate of less than 1% the Fund.

Investment Advisor and Sub-Advisor

See "Investment Company Capital Corp." on pages 12-13 and "PNC
Institutional Management Corporation" on page 23 for additional information
concerning the Advisors.

25
<PAGE>

Principal Underwriter

Alex. Brown & Sons Incorporated, a wholly-owned subsidiary of Alex. Brown
Incorporated, located at One South Street, Baltimore, Maryland 21202, acts as
the Fund's principal underwriter.

Portfolio Transactions

In the fiscal year ended March 31, 1997, the Fund paid no brokerage
commissions to Alex. Brown.

Independent Accountants

A majority of the Fund's Board of Directors who are not "interested
persons" of the Fund have selected Coopers & Lybrand L.L.P. as the independent
accountants of the Fund for the fiscal year ending March 31, 1998. A
representative of Coopers & Lybrand L.L.P. will be available by telephone
during the Special Meeting, if needed, to make a statement if desired and to
respond to appropriate questions from shareholders.

Beneficial Owners

To the knowledge of Fund Management, as of the Record Date, no persons
beneficially owned 5% or more of the outstanding shares of a Series of the
Fund.

Submission of Shareholder Proposals

As a Maryland corporation, the Fund is not required to hold annual
shareholder meetings, except in certain limited circumstances. Shareholders who
wish to present a proposal for action at the next meeting or suggestions as to
nominees for the Board of Directors should submit the proposal or suggestions
to be considered to the Fund 60 days in advance of any such meeting for
inclusion in the Fund's proxy statement and form of proxy for such meeting as
is held. The Nominating Committee of the Board of Directors will give
consideration to shareholder suggestions as to nominees for the Board of
Directors. Shareholders retain the right, under limited circumstances, to
request that a meeting of the shareholders be held for the purpose of
considering the removal of a Director from office and, if such a request is
made, the Fund will assist with shareholder communications in connection with
the meeting.

Required Vote

Approval of Proposal 1 requires the affirmative vote of a majority of all
votes cast at the Special Meeting, provided that a majority of the shares
entitled to vote are present in person or by Proxy at the Special Meeting.
Approval of Proposals 2, 3, 4, and 5 (the New Advisory and Sub-Advisory
Agreements) requires the affirmative vote of a majority of the outstanding
voting securities of the applicable Series of the Fund. As defined in the 1940
Act, the vote of a majority of the outstanding shares of a Series means the
vote of (i) 67% or more of the applicable Series' outstanding shares present at
a meeting, if the holders of more than 50% of the outstanding shares of that
Series are present or represented by proxy, or (ii) more than 50% of that
Series' outstanding shares, whichever is less.

Abstentions and "broker non-votes" will not be counted for or against the
Proposals but will be counted for purposes of determining whether a quorum is
present. Abstentions will be counted as votes present for purposes of
determining a "majority of the outstanding voting securities" present at the
Special Meeting and will therefore have the effect of counting against
Proposals 2 , 3, 4 and 5. The Fund believes that brokers who hold shares as
record owners for beneficial owners have the authority under the rules of the
various stock exchanges to vote those shares with respect to the Proposals when
they have not received instructions from beneficial owners.

Other Matters

No business other than the matters described above is expected to come
before the Special Meeting, but should any matter incident to the conduct of
the Special Meeting or any question as to an adjournment of the Special Meeting
arise, the persons named in the enclosed Proxy will vote thereon according to
their best judgment in the interest of the Fund.

26
<PAGE>

SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING AND
WHO WISH TO HAVE THEIR SHARES VOTED ARE REQUESTED TO FILL IN, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.

By Order of the Directors,
Scott J. Liotta
Vice President and Secretary

Dated: July 17, 1997

27
<PAGE>

Appendix A

<TABLE>
<CAPTION>
Advisory Fee*
Funds advised or sub-advised by PNC Size of Fund (as a percentage
Institutional Management Corporation (4/30/97) of average net assets)
------------------------------------ ------------ ----------------------
<S> <C> <C>
The Arbor Fund
California Tax-Exempt ..................... $ 475,362,530 0.095%
Institutional Tax-Free ..................... $ 57,326,516 0.095%
Municipal Fund for California Investors, Inc.
California Money Fund (a) .................. $ 493,260,569 0.20%
Municipal Fund for New York Investors, Inc.
New York Money Fund (a) ..................... $ 289,052,827 0.20%
Municipal Fund for Temporary Investment
MuniFund(b) ................................. $ 791,987,576 0.175% of first $1 billion(1)
MuniCash(c) ................................. $ 374,154,718 0.175% of first $1 billion(1)
Plan Investment Fund
Money Market Portfolio ..................... $ 462,933,000 0.20% of first $250 million(2)
Government/Repo Portfolio .................. $ 133,678,000 0.20% of first $250 million(2)
The RBB Fund, Inc.
Money Market .............................. $2,498,164,381 0.45% of first $250 million(3)
Government Obligations ..................... $ 576,026,000 0.45% of first $250 million(3)
Government Securities ..................... $ 6,910,153 0.40% of first $250 million(4)
Municipal Money Market ..................... $ 424,405,927 0.35% of first $250 million(5)
New York Municipal ........................ $ 96,064,658 0.35% of first $250 million(5)
Temporary Investment Fund, Inc.
TempFund(c) ................................. $7,979,711,321 0.175% of first $1 billion(6)
TempCash(c) ................................. $2,718,592,957 0.175% of first $1 billion(1)
Trust for Federal Securities
FedFund(a) ................................. $1,351,227,571 0.175% of first $1 billion(1)
Federal Trust Fund(a) ..................... $ 281,679,468 (based on aggregate assets
T-Fund(a) ................................. $ 891,711,482 of Trust's four portfolios)
Treasury Trust Fund(a) ..................... $1,228,726,380
Compass Capital Funds (Sub-Advised)
Money Market .............................. $2,718,397,193 0.40% of first $1 billion(7)
U.S. Treasury Money Market .................. $1,022,507,499 0.40% of first $1 billion(7)
Municipal Money Market ..................... $ 352,714,507 0.40% of first $1 billion(7)
New Jersey Municipal Money Market ......... $ 113,941,369 0.40% of first $1 billion(7)
North Carolina Municipal Money Market ...... $ 154,723,998 0.40% of first $1 billion(7)
Ohio Municipal Money Market ............... $ 102,705,447 0.40% of first $1 billion(7)
Pennsylvania Municipal Money Market ......... $ 512,410,184 0.40% of first $1 billion(7)
Virginia Municipal Money Market ............ $ 59,803,443 0.40% of first $1 billion(7)
First Funds (Sub-Advised)
Cash Reserve .............................. $ 54,204,076 0.08% of first $500 million(8)
U.S. Government Money Market ............... $ 57,558,380 0.08% of first $500 million(8)
U.S. Treasury Money Market .................. $ 65,389,677 0.08% of first $500 million(8)
Municipal Money Market ..................... $ 51,881,855 0.08% of first $500 million(8)
Warburg, Pincus Counsellors, Inc.
(Sub-Advised)
Cash Reserve Fund ........................... $ 511,268,189 0.25 %
New York Tax-Exempt Fund .................. $ 147,799,507 0.25 %
</TABLE>

- ------------
* Fee may have subsequent breakpoints as described in the End Notes

28
<PAGE>

End Notes:

- ------------
(a) PIMC has reduced and anticipates that it will continue to reduce the
advisory fees otherwise payable to it by FedFund, T-Fund, Treasury Trust
Fund, Federal Trust Fund, California Money Fund and New York Money Fund to
ensure that the ordinary operating expenses (excluding fees paid to
Service Organizations pursuant to Servicing Agreements) will annually
approximate .20% of the average net assets.

(b) PIMC has reduced and anticipates that it will continue to reduce the
advisory fees otherwise payable to it by MuniFund to ensure that the
ordinary operating expenses (excluding fees paid to Service Organizations
pursuant to Servicing Agreements) will annually approximate .27% of the
average net assets.

(c) PIMC has reduced and anticipates that it will continue to reduce the
advisory fees otherwise payable to it by TempFund, TempCash, and MuniCash
to ensure that the ordinary operating expenses (excluding fees paid to
Service Organizations pursuant to Servicing Agreements) will annually
approximate .18% of the average net assets.

(1) Subsequent break points are: .15% of next $1 billion; .125% of next $1
billion; .10% of next $1 billion; .095% of next $1 billion; .085% of next
$1 billion; and .08% of net assets over $7 billion.

(2) Subsequent break points are: .15% next $250 million; .12% of next $250
million; .10% of next $250 million; and .08% of net assets over $1
billion.

(3) Subsequent break points are: .40% of next $250 million; .35% of net assets
over $500 million.

(4) Subsequent break points are: .35% of next $250 million; .30% of net assets
over $500 million.

(5) Subsequent break points are: .30% of next $250 million; .25% of net assets
over $500 million.

(6) Subsequent break points are: .15% of next $1 billion; .125% of next $1
billion.10% of next $1 billion; .095% of next $1 billion; .09% of next $1
billion; .08% of next $1 billion; .75% of next $1 billion; and .07% of net
assets over $8 billion.

(7) Subsequent break points are: .35% of next $1 billion; .325% of next $3
billion; and .30% of net assets over $3 billion.

(8) Subsequent break points are: .06% of next $500 million and .05% of net
assets over $1 billion.

29
<PAGE>

EXHIBIT A

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

THIS AGREEMENT is made as of the ______ day of _____________ 1997 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 into an agreement to
provide investment advisory and administrative services for the Fund's Prime
Series (the "Prime Series") on the terms and conditions hereinafter set forth;

NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:

1. Appointment of Investment Advisor. The Fund hereby appoints the Advisor
to act as the investment advisor to the Prime Series. The Advisor shall manage
the Prime Series' affairs and shall supervise all aspects of the Prime Series'
operations (except as otherwise set forth herein), including the investment and
reinvestment of the cash, securities or other properties comprising the Prime
Series' assets, subject at all times to the policies and control of the Fund's
Board of Directors. The Advisor shall give the Prime Series the benefit of its
best judgment, efforts and facilities in rendering its services as Advisor.

2. Duties of Investment Advisor. In carrying out its obligations under
section 1 hereof, the Advisor shall:

(a) supervise and manage all aspects of the Prime Series' operations;

(b) formulate and implement continuing programs for the purchases and
sales of securities, consistent with the investment objective and policies
of the Prime Series;

(c) provide the Prime Series with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of Directors;

(d) provide the Prime Series with, or obtain for it, adequate office
space and all necessary office equipment and services, including telephone
service, heat, utilities, stationery supplies and similar items for the
Fund's principal office;

(e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Prime
Series, and whether concerning the individual issuers whose securities are
included in the Prime Series or the activities in which they engage, or
with respect to securities which the Advisor considers desirable for
inclusion in the Prime Series;

(f) determine which issuers and securities shall be represented in the
Prime Series and regularly report thereon to the Fund's Board of Directors;

A-1
<PAGE>

(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 Board of Directors of the Fund,
indicating the brokers to whom such allocations have been made and the basis
therefor.

4. Control by Board of Directors. Any management or supervisory activities
undertaken by the Advisor pursuant to this Agreement, as well as any other
activities undertaken by the Advisor on behalf of the Prime Series pursuant
thereto, shall at all times be subject to any applicable directives of the
Board of Directors of the Fund.

5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:

(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;

(b) the provisions of the Registration Statement of the Fund under the
Securities Act of 1933 and 1940 Act;

(d) the provisions of the By-laws of the Fund, as amended; and

(e) any other applicable provisions of state and federal law.

A-2
<PAGE>

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

(a) The Advisor shall, subject to compliance with applicable banking
regulations, furnish, at its expense and without cost to the Fund, the
services of one or more officers of the Fund, to the extent that such
officers may be required by the Fund for the proper conduct of its affairs.

(b) The Fund assumes and shall pay or cause to be paid all other
expenses of the Prime Series, including, without limitation, the Prime
Series' allocable portion of the following expenses: payments to the Fund's
distributor under the Prime Series' plans of distribution; the charges and
expenses of any registrar, any custodian or depository appointed by the
Fund for the safekeeping of its cash, portfolio securities and other
property, and any transfer, dividend or accounting agent or agents
appointed by the Fund; brokers' commissions chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a
party; all taxes, including securities issuance and transfer taxes, and
fees payable by the Fund to Federal, State or other governmental agencies;
the costs and expenses of engraving or printing of certificates
representing shares of the Fund; all costs and expenses in connection with
the registration and maintenance of registration of the Fund and its shares
with the SEC and various states and other jurisdictions (including filing
fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and
statements of additional information of the Fund and supplements thereto to
the Fund's shareholders; all expenses of shareholders' and directors'
meetings and of preparing, printing and mailing of proxy statements and
reports to shareholders; fees and travel expenses of directors or director
members of any advisory board or committee; all expenses incident to the
payment of any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used for
pricing of the Fund's shares; charges and expenses of legal counsel,
including counsel to the directors of the Fund who are not interested
persons (as defined in the 1940 Act) of the Fund and of independent
accountants, in connection with any matter relating to the Fund; membership
dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers
and directors) of the Fund which inure to its benefit; extraordinary
expenses (including but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other
charges and costs of the Fund's operation unless otherwise explicitly
provided herein.

7. Delegation of Responsibilities.

(a) Subject to the approval of the Board of Directors and shareholders
of the Prime Series, the Advisor may delegate to a sub-advisor certain of
its duties enumerated in section 2 hereof provided that the Advisor shall
continue to supervise the performance of any such sub-advisor. The Advisor
shall not be responsible for any such sub-advisor's performance under a
sub-advisory agreement.

(b) Subject to the approval of the Board of Directors and, to the extent
required by the 1940 Act, shareholders of the Prime Series, the Advisor may
delegate to any company that it controls, is controlled by, or is under
common control with (or to more than one such company), or to specified
employees of any such companies, certain of its duties enumerated in
Section 2 hereof provided that the Advisor shall continue to supervise the
performance of any such company and shall regularly report thereon to the
Fund's Board of Directors.

(c) 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

A-3
<PAGE>

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. Payment
of the Advisor's compensation for the preceding month shall be made as promptly
as possible.

9. 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.

10. 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
12 hereof, for two years from the date hereof.

11. 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.

12. 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.

13. 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.

14. 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 One South Street, Baltimore, Maryland
21202.

A-4
<PAGE>

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__________________________________
Name:
Title:
Attest:
_____________________

INVESTMENT COMPANY CAPITAL CORP.

By__________________________________
Name:
Title:
Attest:
______________________

A-5
<PAGE>
EXHIBIT B

FORM OF NEW INVESTMENT ADVISORY AGREEMENT
ALEX. BROWN CASH RESERVE FUND, INC. -- TREASURY SERIES

THIS AGREEMENT is made as of the ______ day of _____________, 1997 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 and the Advisor desire to enter into an agreement to
provide investment advisory and administrative services for the Fund's Treasury
Series (the "Treasury Series") on the terms and conditions hereinafter set
forth;

NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:

1. Appointment of Investment Advisor. The Fund hereby appoints the Advisor
to act as the investment advisor to the Treasury Series. The Advisor shall
manage the Treasury Series' affairs and shall supervise all aspects of the
Treasury Series' operations (except as otherwise set forth herein), including
the investment and reinvestment of the cash, securities or other properties
comprising the Treasury Series' assets, subject at all times to the policies
and control of the Fund's Board of Directors. The Advisor shall give the
Treasury Series the benefit of its best judgment, efforts and facilities in
rendering its services as Advisor.

2. Duties of Investment Advisor. In carrying out its obligations under
section 1 hereof, the Advisor shall:

(a) supervise and manage all aspects of the Treasury Series' operations;

(b) formulate and implement continuing programs for the purchases and
sales of securities, consistent with the investment objective and policies
of the Treasury Series;

(c) provide the Treasury Series with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of Directors;

(d) provide the Treasury Series with, or obtain for it, adequate office
space and all necessary office equipment and services, including telephone
service, heat, utilities, stationery supplies and similar items for the
Fund's principal office;

(e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Treasury Series, and whether concerning the individual issuers whose
securities are included in the Treasury Series or the activities in which
they engage, or with respect to securities which the Advisor considers
desirable for inclusion in the Treasury Series;

(f) determine which issuers and securities shall be represented in the
Treasury Series and regularly report thereon to the Fund's Board of
Directors;

B-1
<PAGE>
(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.

4. Control by Board of Directors. Any management or supervisory activities
undertaken by the Advisor pursuant to this Agreement, as well as any other
activities undertaken by the Advisor on behalf of the Treasury Series pursuant
thereto, shall at all times be subject to any applicable directives of the
Board of Directors of the Fund.

5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:

(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;

(b) the provisions of the Registration Statement of the Fund under the
Securities Act of 1933 and 1940 Act;

(d) the provisions of the By-laws of the Fund, as amended; and

(e) any other applicable provisions of state and federal law.

B-2
<PAGE>

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

(b) The Fund assumes and shall pay or cause to be paid all other
expenses of the Treasury Series, including, without limitation, the
Treasury Series' allocable portion of the following expenses: payments to
the Fund's distributor under the Treasury Series' plans of distribution;
the charges and expenses of any registrar, any custodian or depository
appointed by the Fund for the safekeeping of its cash, portfolio securities
and other property, and any transfer, dividend or accounting agent or
agents appointed by the Fund; brokers' commissions chargeable to the Fund
in connection with portfolio securities transactions to which the Fund is a
party; all taxes, including securities issuance and transfer taxes, and
fees payable by the Fund to Federal, State or other governmental agencies;
the costs and expenses of engraving or printing of certificates
representing shares of the Fund; all costs and expenses in connection with
the registration and maintenance of registration of the Fund and its shares
with the SEC and various states and other jurisdictions (including filing
fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and
statements of additional information of the Fund and supplements thereto to
the Fund's shareholders; all expenses of shareholders' and directors'
meetings and of preparing, printing and mailing of proxy statements and
reports to shareholders; fees and travel expenses of directors or director
members of any advisory board or committee; all expenses incident to the
payment of any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used for
pricing of the Fund's shares; charges and expenses of legal counsel,
including counsel to the directors of the Fund who are not interested
persons (as defined in the 1940 Act) of the Fund and of independent
accountants, in connection with any matter relating to the Fund; membership
dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers
and directors) of the Fund which inure to its benefit; extraordinary
expenses (including but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other
charges and costs of the Fund's operation unless otherwise explicitly
provided herein.

7. Delegation of Responsibilities.

(a) Subject to the approval of the Board of Directors and shareholders
of the Treasury Series, the Advisor may delegate to a sub-advisor certain
of its duties enumerated in section 2 hereof provided that the Advisor
shall continue to supervise the performance of any such sub-advisor. The
Advisor shall not be responsible for any such sub-advisor's performance
under a sub-advisory agreement.

(b) Subject to the approval of the Board of Directors and, to the extent
required by the 1940 Act, shareholders of the Treasury Series, the Advisor
may delegate to any company that it controls, is controlled by, or is under
common control with (or to more than one such company), or to specified
employees of any such companies, certain of its duties enumerated in
Section 2 hereof provided that the Advisor shall continue to supervise the
performance of any such company and shall regularly report thereon to the
Fund's Board of Directors.

(c) 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 Advissor, 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

B-3
<PAGE>

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.

10. 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
12 hereof, for two years from the date hereof.

(a) (i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the outstanding voting securities of the Treasury Series (as
defined in Section 2(a) (42) of the 1940 Act), and

12. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Fund's Board of Directors or by vote of
a majority of the Treasury Series' outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act), or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by either party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" having the meaning defined in Section
2(a)(4) of the 1940 Act.

B-4
<PAGE>

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 writte.

ALEX. BROWN CASH RESERVE FUND, INC.

By__________________________________
Name:
Title:
Attest:

________________________

INVESTMENT COMPANY CAPITAL CORP.

By__________________________________
Name:
Title:
Attest:
_________________________

B-5
<PAGE>

EXHIBIT C
FORM OF NEW INVESTMENT ADVISORY AGREEMENT
ALEX. BROWN CASH RESERVE FUND, INC. - TAX-FREE SERIES

THIS AGREEMENT is made as of the ____ day of _________, 1997 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 into an agreement to
provide investment advisory and administrative services for the Fund's Tax-Free
Series (the "Tax-Free Series") on the terms and conditions hereinafter set
forth;

NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:

1. Appointment of Investment Advisor. The Fund hereby appoints the Advisor
to act as the investment advisor to the Tax-Free Series. The Advisor shall
manage the affairs of the Tax-Free Series and shall supervise all aspects of
the Tax-Free Series' operations (except as otherwise set forth herein),
including the investment and reinvestment of the cash, securities or other
properties comprising the Tax-Free Series' assets, subject at all times to the
policies and control of the Fund's Board of Directors. The Advisor shall give
the Tax- Free Series the benefit of its best judgment, efforts and facilities
in rendering its services as Advisor.

2. Duties of Investment Advisor. In carrying out its obligations under
section 1 hereof, the Advisor shall:

(a) supervise and manage all aspects of the Tax-Free Series' operations;

(b) formulate and implement continuing programs for the purchases and
sales of securities, consistent with the investment objective and policies
of the Tax-Free Series;

(c) provide the Tax-Free Series with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of Directors;

(d) provide the Tax-Free Series with, or obtain for it, adequate office
space and all necessary office equipment and services, including telephone
service, heat, utilities, stationery supplies and similar items for the
Fund's principal office;

(e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Tax-Free Series, and whether concerning the individual issuers whose
securities are included in the Tax-Free Series or the activities in which
they engage, or with respect to securities which the Advisor considers
desirable for inclusion in the Tax-Free Series;

(f) determine which issuers and securities shall be represented in the
Tax-Free Series and regularly report thereon to the Fund's Board of
Directors;

(g) take all actions necessary to carry into effect the Fund's purchase
and sale programs, with respect to its Tax-Free Series;

C-1
<PAGE>
(h) supervise the operations of the Tax-Free Series' transfer and
dividend disbursing agent;

(i) provide the Tax-Free Series with such administrative and clerical
services for the maintenance of certain shareholder records, as are deemed
advisable by the Fund's Board of Directors; and,

(j) arrange, but not pay for, the periodic updating of prospectuses and
supplements thereto, proxy material, tax returns, reports to the
shareholders of the Tax-Free Series and reports to and filings with the
Securities and Exchange Commission (the "SEC") and state Blue Sky
authorities, which may be required for the Tax-Free Series.

3. Broker-Dealer Relationship. In the event that the Advisor is responsible
for decisions to buy and sell securities for the Tax-Free Series, broker-dealer
selection, and negotiation of its brokerage commission rates, the Advisor's
primary consideration in effecting a security transaction will be execution at
the most favorable price. The Fund understands that a substantial majority of
the Tax-Free Series' transactions will be transacted with primary market makers
acting as principal on a net basis, with no brokerage commissions being paid by
the Fund. Such principal transactions may, however, result in a profit to the
market makers. In certain instances the Advisor may make purchases of
underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Tax- Free Series on a
continuing basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Tax-Free Series. The
Advisor is further authorized to allocate the orders placed by it on behalf of
the Tax-Free Series to such brokers and dealers who also provide research or
statistical material or other services to the Fund or the Advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocation regularly to the Board
of Directors of the Fund, indicating the brokers to whom such allocations have
been made and the basis therefor.

4. Control by Board of Directors. Any management or supervisory activities
undertaken by the Advisor pursuant to this Agreement, as well as any other
activities undertaken by the Advisor on behalf of the Tax- Free Series pursuant
thereto, shall at all times be subject to any applicable directives of the
Board of Directors of the Fund.

5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:

(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;

(b) the provisions of the Registration Statement of the Fund under the
Securities Act of 1933 and 1940 Act;

(d) the provisions of the By-laws of the Fund, as amended; and

(e) any other applicable provisions of state and federal law.

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

C-2
<PAGE>

(a) The Advisor shall, subject to compliance with applicable banking
regulations, 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.

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) Subject to the approval of the Board of Directors and, to the extent
required by the 1940 Act, shareholders of the Tax-Free Series, the Advisor
may delegate to any company that it controls, is controlled by, or is under
common control with (or to more than one such company), or to specified
employees of any such companies, certain of its duties enumerated in
Section 2 hereof provided that the Advisor shall continue to supervise the
performance of any such company and shall regularly report thereon to the
Fund's Board of Directors.

(c) 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

C-3
<PAGE>

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.

10. 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
12 hereof, for two years from the date hereof.

(a) (i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the outstanding voting securities of the Tax-Free Series (as
defined in Section 2(a) (42) of the 1940 Act), and

12. 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.

15. 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.

C-4
<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 CASH RESERVE FUND, INC.

________________________________________

Attest:
_________________________
Secretary

INVESTMENT COMPANY CAPITAL CORP.

By ____________________________________

Attest:
_________________________
Secretary

C-5
<PAGE>

EXHIBIT D
FORM OF NEW SUB-ADVISORY AGREEMENT

AGREEMENT dated as of ______ day of _____________, 1997 between INVESTMENT
COMPANY CAPITAL CORP., a Maryland corporation (herein called the "Investment
Advisor") and PNC 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 ________,
1997 (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.

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

D-1
<PAGE>

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.

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 ____________, 1997. 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

D-2
<PAGE>

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.

INVESTMENT COMPANY CAPITAL CORP.

By: __________________________________

PNC INSTITUTIONAL
MANAGEMENT CORPORATION

By: __________________________________

D-3
<PAGE>

008

<PAGE>

[Form of Broker Card]

ALEX. BROWN CASH RESERVE FUND, INC.--PRIME SERIES
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
August 14, 1997 at 10:30 EST

Directors
- ---------

Directors Recommended: A Vote For Election Of The Following Directors:
1. 01-James J. Cunnane, 02-Richard T. Hale, 03-John F. Kroeger,
04-Louis E. Levy, 05-Eugene J. McDonald, 06-Rebecca W. Rimel,
07-Truman T. Semans, 08-Carl W. Vogt

o FOR ALL NOMINEES.

o WITHHOLD ALL NOMINEES.

o WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE. WRITE
NUMBER(S) OF NOMINEE(S) BELOW.

Use Number Only _____________________

Proposal(s)
- -----------

2. To approve or disapprove a new Investment Advisory Agreement between
the Fund and Investment Company Capital Corp. with respect to the
Prime Series.

o For o Against o Abstain

Note: Such Other Business As May Properly Come Before The Meeting Or
Any Adjournment Thereof.

51 Mercedes Way
Edgewood, N.Y. 11717

ALEX. BROWN CASH RESERVE FUND, INC.
ATTN: SCOTT LIOTTA
ONE SOUTH STREET
BALTIMORE, MD 21202

- -------------------------------------- -------------
Signature(s) Date
<PAGE>

[Form of Broker Card]

ALEX. BROWN CASH RESERVE FUND, INC.--TREASURY SERIES
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
August 14, 1997 at 10:30 EST

Directors
- ---------

o FOR ALL NOMINEES.

o WITHHOLD ALL NOMINEES.

o WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE. WRITE
NUMBER(S) OF NOMINEE(S) BELOW.

Use Number Only _____________________

Proposal(s)
- -----------

3. To approve or disapprove a new Investment Advisory Agreement between
the Fund and Investment Company Capital Corp. with respect to the
Treasury Series.

o For o Against o Abstain

Note: Such Other Business As May Properly Come Before The Meeting Or
Any Adjournment Thereof.

51 Mercedes Way
Edgewood, N.Y. 11717

ALEX. BROWN CASH RESERVE FUND, INC.
ATTN: SCOTT LIOTTA
ONE SOUTH STREET
BALTIMORE, MD 21202

- -------------------------------------- -------------
Signature(s) Date
<PAGE>

[Form of Broker Card]

ALEX. BROWN CASH RESERVE FUND, INC.--TAX-FREE SERIES
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
August 14, 1997 at 10:30 EST

Directors
- ---------

Directors Recommended: A Vote For Election Of The Following Directors:
1. 01-James J. Cunnane, 02-Richard T. Hale, 03-John F. Kroeger,
04-Louis E. Levy 05-Eugene J. McDonald, 06-Rebecca W. Rimel,
07-Truman T. Semans, 08-Carl W. Vogt

o FOR ALL NOMINEES.

o WITHHOLD ALL NOMINEES.

o WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE. WRITE
NUMBER(S) OF NOMINEE(S) BELOW.

Use Number Only _____________________

Proposal(s)
- -----------

4. To approve or disapprove a new Investment Advisory Agreement between
the Fund and Investment Company Capital Corp. with respect to the
Tax-Free Series.

o For o Against o Abstain

5. To approve or disapprove a new Sub-Advisory Agreement between the
Investment Company Capital Corp. And PNC Institutional Management
Corpoaration with respect to the Tax-Free Series.

o For o Against o Abstain

Note: Such Other Business As May Properly Come Before The Meeting Or
Any Adjournment Thereof.

51 Mercedes Way
Edgewood, N.Y. 11717

ALEX. BROWN CASH RESERVE FUND, INC.
ATTN: SCOTT LIOTTA
ONE SOUTH STREET
BALTIMORE, MD. 21202

- -------------------------------------- -------------
Signature(s) Date
<PAGE>

[LETTERHEAD OF QUALITY CASH RESERVE PRIME SHARES]

July 17, 1997

Dear Shareholders:

The enclosed proxy statement relates to a special meeting of the Shareholders of
the Alex. Brown Cash Reserve Fund, Inc. (the "Fund"). As a Shareholder of the
Quality Cash Reserve Prime Shares, a class of the Fund's Prime Series, you are
entitled to vote at the special meeting.

On April 6, 1997, Alex. Brown Incorporated, the parent corporation of the Fund's
investment advisor, entered into a definitive agreement to merge into a
subsidiary of Bankers Trust New York Corporation. Due to the pending change in
control of Alex. Brown Incorporated, we are asking you to approve a new
investment advisory agreement for the Prime Series of the Fund. The same advisor
will continue to provide these services and the new agreement is substantially
the same as the current agreement.

We are also asking Shareholders to elect a Board of Directors. All eight
nominees currently serve as Directors although two were appointed to fill
vacancies and were not previously elected by Shareholders. This election will
give the Fund flexibility to fill vacancies in the future. Also, with the
resignation of one existing interested Director, the percentage of independent
Directors is being increased to 75% of the Board members.

Richard T. Hale
President and Director

<PAGE>

QUALITY CASH RESERVE PRIME SHARES

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

One South Street
Baltimore, Maryland 21202

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

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
AUGUST 14, 1997

TO THE SHAREHOLDERS OF QUALITY CASH RESERVE PRIME SHARES:

PROPOSAL 1: To consider and act upon a proposal to elect a Board of
Directors of the Fund.

PROPOSAL 2: To approve or disapprove a new Investment Advisory Agreement
between the Fund and Investment Company Capital Corp. with
respect to the Prime Series.

Only shareholders of the Fund at the close of business on June 25, 1997
are entitled to notice of, and to vote at, this meeting or any adjournment
thereof.

Scott J. Liotta
Vice President and Secretary
Dated: July 17, 1997
<PAGE>

QUALITY CASH RESERVE PRIME SHARES

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

One South Street
Baltimore, Maryland 21202
---------------------
PROXY STATEMENT
---------------------

SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
AUGUST 14, 1997

The primary purpose of the Special Meeting is to permit the shareholders
of the Prime Series, which includes shareholders of the Quality Cash Reserve
Prime Shares, to consider a new Investment Advisory Agreement to take effect
following the consummation of the transactions contemplated by an Agreement and
Plan of Merger, dated as of April 6, 1997 (the "Merger"), between Bankers Trust
New York Corporation and Alex. Brown Incorporated. This action is necessary to
avoid the possibility that the Merger could result in assignment and,
therefore, termination of the Prime Series' current Investment Advisory
Agreement. It is contemplated that, after the Merger, Investment Company
Capital Corp. ("ICC" or the "Advisor") will remain the investment advisor to
the Prime Series. The proposed new Investment Advisory Agreement is identical
to the Prime Series' current Investment Advisory Agreement, except for the
dates of execution, effectiveness and initial term; the deletion of provisions
relating to state expense limits that have been preempted by federal law; a
proviso to the effect that the obligation of the Advisor to make its personnel
available to serve as officers of the Fund is subject to applicable banking
regulations; and a provision authorizing ICC, subject to the approval of the
Fund's Board of Directors, to delegate its responsibilities to corporate
affiliates. At the Special Meeting, shareholders will also be asked to elect a
slate of Directors.

If you do not expect to be present at the Special Meeting and wish your
shares to be voted, please date and sign the enclosed Proxy Card ("Proxy") and
mail it in the enclosed reply envelope, allowing sufficient time for the Proxy
to be received on or before 10:30 a.m. Eastern Standard Time on Thursday,
August 14, 1997. No postage is required if the Proxy is mailed in the United
States. If the accompanying Proxy is executed properly and returned, shares
represented by it will be voted at the Special Meeting in accordance with the
instructions on the Proxy. However, if no instructions are specified, shares
will be voted FOR the election of the proposed slate of Directors of the Fund
("Proposal 1") and FOR the new Investment Advisory Agreement with respect to
the Prime Series ("Proposal 2"). Shareholders may revoke their Proxies at any
time prior to the time they are voted by giving written notice to the Secretary
of the Fund, by delivering a subsequently dated Proxy or by attending and
voting at the Special Meeting.

1
<PAGE>

The expenses of the Special Meeting will be borne by the Fund, except that
the incremental costs associated with Proposal 2 will be borne by ICC, and will
include reimbursement to brokerage firms and others for expenses in forwarding
Proxy solicitation materials to beneficial owners. The solicitation of Proxies
will be largely by mail, but may include telephonic, telegraphic or oral
communication by employees and officers of ICC.

The Fund is registered as an open-end, diversified management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and its shares are registered under the Securities Act of 1933, as amended. The
Fund offers three series of shares (each a "Series" and collectively the
"Series"): Prime Series, Treasury Series and Tax-Free Series. ICC, One South
Street, Baltimore, Maryland 21202, an indirect subsidiary of Alex. Brown
Incorporated, acts as the Fund's investment advisor to each of the Series
pursuant to three separate Investment Advisory Agreements currently in effect.
It is proposed that shareholders of the Prime Series, which includes
shareholders of Quality Cash Reserve Prime Shares, approve a new Investment
Advisory Agreement substantially similar to the current Investment Advisory
Agreement. Shareholders of the other Series of the Fund will also be voting at
the Special Meeting on proposals to approve new Investment Advisory Agreements,
and in the case of the Tax-Free Series, a new Sub-Advisory Agreement,
substantially similar to the current Investment Advisory Agreements and
Sub-Advisory Agreement, respectively.

PROPOSAL 1: To consider and act upon a proposal to elect a Board of Directors
of the Fund.

2
<PAGE>

in compliance with the 1940 Act, to elect Directors under certain
circumstances. Shareholder meetings may also be held by the Fund for other
purposes, including to approve investment policy changes, a new Investment
Advisory or Sub-Advisory Agreement or other matters requiring shareholder
action under the 1940 Act.

Information Regarding Nominees

The following information is provided for each Nominee. It includes his or
her name, position with the Fund, length of directorship (if applicable), age,
principal occupations or employment during the past five years, directorships
with other companies which file reports periodically with the Securities and
Exchange Commission, number of directorships with the 12 registered investment
companies which hold themselves out to investors as related companies for
purposes of investment and investor services to which ICC or an affiliated
person of ICC provides investment advisory or administration services
(collectively, the "Fund Complex"), number of shares of the Fund beneficially
owned and percentage of shares of the Fund beneficially owned. As of May 31,
1997, the Directors and officers of the Fund as a group and the Nominees as a
group beneficially owned an aggregate of less than 1% of any Series of the
Fund.
<TABLE>
<CAPTION>
Business Experience Shares
Name and Position During the Past Five Years Beneficially Owned
with the Fund Age (including all Directorships) as of May 31, 1997** Percentage
- ---------------------- ----- -------------------------------------- ---------------------- -----------
<S> <C> <C> <C> <C>
James J. Cunnane 59 Managing Director, CBC Capital None ***
Director since 1994 (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). Director of
each fund in the Fund Complex.

Richard T. Hale* 51 Managing Director, Alex. Brown & 24,391 shares ***
Director since 1989 Sons Incorporated; Director and
President, Investment Company
Capital Corp. (registered
investment advisor); Chartered
Financial Analyst. Director of each
fund in the Fund Complex.

John F. Kroeger 72 Director/Trustee, AIM Funds 131,583 shares ***
Director since 1981 (registered investment companies).
Formerly, Consultant, Wendell &
Stockel Associates, Inc. (consulting
firm) and General Manager, Shell
Oil Company. Director of each
fund in the Fund Complex.
</TABLE>

3
<PAGE>

Eugene J. McDonald 65 President, Duke Management None ***
Director since 1995 Company (investments); Executive
Vice President, Duke University
(education, research and health
care); Director, Central Carolina
Bank & Trust (banking), Key
Funds (registered investment
companies), AMBAC Treasurers
Trust and DP Mann Holdings
(insurance). Director of each fund
in the Fund Complex.

Rebecca W. Rimel 46 President and Chief Executive None ***
Director since 1995 Officer, The Pew Charitable Trusts;
Director and Executive Vice
President, The Glenmede Trust
Company. Formerly, Executive
Director, The Pew Charitable
Trusts. Director of 10 funds in the
Fund Complex.

Truman T. Semans* 70 Managing Director, Alex. Brown & 418,902 shares ***
Director since 1995 Sons Incorporated; Director,
Investment Company Capital Corp.
(registered investment advisor).
Formerly, Vice Chairman, Alex.
Brown & Sons Incorporated.
Director of 10 funds in the Fund
Complex.
</TABLE>

4
<PAGE>

- ------------
* Denotes an individual who is an "interested person" as defined in the 1940
Act. Such individual's service as Director is conditioned upon Federal
Reserve Board approval. (See discussion of the New Prime Advisory Agreement
below.)
** This information has been provided by each Nominee for Director of the
Fund.
*** As of May 31, 1997, the Nominees of the Fund as a group beneficially owned
an aggregate of less than 1% of the Fund.

Compensation of Directors

5
<PAGE>

COMPENSATION TABLE

<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation Pension or Retirement From the Fund and Number of Funds in
Payable Benefits Accrued as Fund Complex Fund Complex for
Name and Position from the Fund Part of Fund Expenses Payable to Directors Which Director Serves
----------------- --------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Charles W. Cole, Jr., Director(1) $ 0 $0 $ 0 8
Richard T. Hale, Director(1) ...... $ 0 $0 $ 0 12
James J. Cunnane, Director ...... $27,801(3) + $39,000 12
John F. Kroeger, Director ...... $34,930(3) + $49,000 12
Louis E. Levy, Director ......... $27,801(3) + $39,000 12
Eugene J. McDonald, Director ... $27,801(3) + $39,000 12
W. James Price, Director(1)(2)..... $ 0 $0 $ 0 7
Rebecca W. Rimel, Director ...... $31,763(3) + $39,000 10(4)
Truman T. Semans, Director(1)...... $ 0 $0 $ 0 10
Carl W. Vogt, Director ......... $32,232(3) + $39,000 9(4)
Harry Woolf, Director2 ............ $20,880(3) + $29,250 12
</TABLE>

- ------------
(1) Denotes an individual who is an "interested person" as defined in the 1940
Act.
(2) Retired, effective December 31, 1996.
(3) Of the amounts payable to Messrs. Cunnane, Kroeger, Levy, McDonald, Vogt and
Woolf and Ms. Rimel, $27,801, $0, $19,500, $27,801, $32,232, $20,880 and
$31,763, respectively, were deferred pursuant to the Fund Complex's Deferred
Compensation Plan.
(4) Ms. Rimel and Mr. Vogt receive proportionately higher compensation from each
fund for which they serve as a Director.
+ The Fund Complex has adopted a retirement plan for eligible Directors, as
described below. The actuarially computed pension expense for the Fund for
the fiscal year ended March 31, 1997 was $47,681.

6
<PAGE>

Set forth in the table below are the estimated annual benefits payable to
a Participant upon retirement assuming various years of service and payment of
a percentage of the fee earned by such Participant in his or her last year of
service, as described below. The approximate credited years of service, shown
in parentheses, for each Participant at December 31, 1996, are as follows:
Messrs. Cunnane (2), Kroeger (14), Levy (2), McDonald (4) and Vogt (1) and Ms.
Rimel (1).
<TABLE>
<CAPTION>
Estimated Annual Benefits Payable By Fund Complex Upon Retirement
-----------------------------------------------------------------
Years of Service Chairman of Audit Committee Other Participants
- ------------------ ----------------------------- -------------------
<S> <C> <C>
6 years $ 4,900 $ 3,900
7 years $ 9,800 $ 7,800
8 years $14,700 $11,700
9 years $19,600 $15,600
10 years or more $24,500 $19,500
</TABLE>

Meetings and Committees of the Board of Directors

Board Approval of the Election of Directors

7
<PAGE>

Shareholder Approval of the Election of Directors

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

PROPOSAL 2: To approve or disapprove a new Investment Advisory Agreement
between the Fund and Investment Company Capital Corp. with respect
to the Prime Series.

General Information

8
<PAGE>

The Current Prime Advisory Agreement

9
<PAGE>

The New Prime Advisory Agreement

10
<PAGE>

The Board was also informed of the resources of Bankers Trust that could
be made available to the Advisor and the Fund. Although the Board focused
primarily on the continuity of services to the Fund, the Directors did consider
Bankers Trust's experience as advisor and service provider to a family of
mutual funds. The Board took particular note of the experience of Bankers Trust
in managing money market funds and considered in general terms the possibility
that the Fund could benefit from this experience. While the Board reached no
conclusion on this matter, the Directors did determine that it would be
appropriate to ask shareholders to approve at this Special Meeting a provision
specifically authorizing the use of the resources of Bankers Trust to support
management of the assets of the Fund, including the Prime Series, subject to
Board approval but without requiring additional shareholder approval.
Accordingly, the New Prime Advisory Agreement would, as stated above contain a
provision authorizing ICC, subject to the Fund's Board of Directors, to
delegate its responsibilities to corporate affiliates. The Board also received
preliminary information about Bankers Trust's ability to provide other
services, including custody.

The Board also considered that the costs of the Special Meeting, insofar
as they apply to approval of new Advisory Agreements, would be borne by the
Advisor.

11
<PAGE>

Investment Company Capital Corp.

The following information is provided for each Director and the principal
executive officer of ICC.

Directors and Principal Executive Officer
of Investment Company Capital Corp.
-----------------------------------------
<TABLE>
<CAPTION>
Name and Position
with the Advisor Address Principal Occupation
----------------- ------- --------------------
<S> <C> <C>
Charles W. Cole, Jr. One South Street Managing Director, Alex.
Chairman Baltimore, Maryland 21202 Brown & Sons Incorporated

Richard T. Hale One South Street Managing Director, Alex.
Director and President Baltimore, Maryland 21202 Brown & Sons Incorporated

David L. Hopkins One South Street Managing Director, Alex.
Director Baltimore, Maryland 21202 Brown & Sons Incorporated

Alvin B. Krongard One South Street Chairman, Chief Executive
Director Baltimore, Maryland 21202 Officer and Director, Alex.
Brown Incorporated

Margaret-Mary V. Preston One South Street Managing Director, Alex.
Director Baltimore, Maryland 21202 Brown & Sons Incorporated

Robert F. Price One South Street Managing Director and
Director Baltimore, Maryland 21202 General Counsel, Alex.
Brown & Sons Incorporated

Mayo A. Shattuck III One South Street President, Chief Operating
Director Baltimore, Maryland 21202 Officer and Director, Alex.
Brown Incorporated

Truman T. Semans One South Street Managing Director, Alex.
Director Baltimore, Maryland 21202 Brown & Sons Incorporated

Beverly L. Wright One South Street Managing Director and Chief
Director Baltimore, Maryland 21202 Financial Officer, Alex.
Brown & Sons Incorporated
</TABLE>
For the fiscal year ended March 31, 1997, the Fund paid ICC an aggregate
fee of $10,806,028 for advisory services. For such fiscal year, the Fund also
paid ICC aggregate fees of $2,092,176 for transfer agency services

12
<PAGE>

ICC does not provide investment advisory services to any other funds with
investment objectives similar to the Fund.

As of May 31, 1997, to Fund Management's knowledge as provided by the
Directors and officers of the Fund, the following Directors and officers of the
Fund beneficially owned shares of Alex. Brown Incorporated. Mr. Cole, Chairman
and a Director of the Fund and Chairman and a Director of ICC, beneficially
owned 4,356 shares of Alex. Brown Incorporated. Mr. Hale, President and a
Director of the Fund and President and a Director of ICC, beneficially owned
90,470 shares of Alex. Brown Incorporated. Mr. Semans, a Director of the Fund
and a Director of ICC, beneficially owned 25,433 shares of Alex. Brown
Incorporated. Edward J. Veilleux, Executive Vice President of the Fund and
Executive Vice President of ICC, beneficially owned 200 shares of Alex. Brown
Incorporated. Paul D. Corbin, Vice President of the Fund, beneficially owned
3,025 shares of Alex. Brown Incorporated. Monica M. Hausner, Vice President of
the Fund, beneficially owned 137 shares of Alex. Brown Incorporated. M. Elliott
Randolph, Jr., Vice President of the Fund, beneficially owned 4,441 shares of
Alex. Brown Incorporated. Joseph A. Finelli, Treasurer of the Fund and a Vice
President of ICC, beneficially owned 33 shares of Alex. Brown Incorporated and
Laurie D. Collidge, Assistant Secretary of the Fund, beneficially owned 48
shares of Alex. Brown Incorporated.

Shareholder Approval of the New Prime Advisory Agreement

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE PRIME SERIES
VOTE FOR APPROVAL OF THE NEW PRIME ADVISORY AGREEMENT.

13
<PAGE>

ADDITIONAL INFORMATION

Directors and Executive Officers

James J. Cunnane Director since 1994 59

Richard T. Hale* Director and President since 1989 51

John F. Kroeger Director since 1981 72

Louis E. Levy Director since 1994 64

Eugene J. McDonald Director since 1992 65

Rebecca W. Rimel Director since 1995 46

Truman T. Semans* Director since 1995 70

Carl W. Vogt, Esq. Director since 1996 61

Edward J. Veilleux Executive Vice President since 53
1985
</TABLE>

[BROKEN TABLE]
<PAGE>
<TABLE>
<CAPTION>
Business Experience Shares Beneficially
During the Past Five Years Owned as of
Name (including all Directorships) May 31, 1997** Percentage
---- ----------------------------- --------------------- ----------
<S> <C> <C> <C>
Charles W. Cole, Jr.* Vice Chairman, Alex. Brown 81,752 shares ***
Capital Advisory & Trust
Company (registered investment
advisor); Chairman, Investment
Company Capital Corp.
(registered investment advisor);
Director, Provident Bankshares
Corporation and Provident Bank
of Maryland. Formerly,
President and Chief Executive
Officer, Chief Administrative
Officer, and Director, First
Maryland Bancorp, The First
National Bank of Maryland and
First Omni Bank; Director, York
Bank and Trust Company.

James J. Cunnane See "Information Regarding None ***
Nominees."

Richard T. Hale* See "Information Regarding 24,391 shares ***
Nominees."

John F. Kroeger See "Information Regarding 131,583 shares ***
Nominees."

Louis E. Levy See "Information Regarding None ***
Nominees."

Eugene J. McDonald See "Information Regarding None ***
Nominees."

Rebecca W. Rimel See "Information Regarding None ***
Nominees."

Truman T. Semans* See "Information Regarding 418,902 shares ***
Nominees."

Carl W. Vogt, Esq. See "Information Regarding None ***
Nominees."

Edward J. Veilleux Principal, Alex. Brown & Sons None ***
Incorporated; Vice President,
Armata Financial Corp.
(registered broker-dealer);
Executive Vice President,
Investment Company Capital
Corp. (registered investment
advisor).
</TABLE>

14
<PAGE>
<TABLE>
<CAPTION>
Position
Name With the Fund Age
---- ------------- -----
<S> <C> <C>
M. Elliott Randolph, Jr. Vice President since 1992 55

Paul D. Corbin Vice President since 1992 44

Monica M. Hausner Vice President since 1995; 35
Assistant Vice President 1992-95

Scott J. Liotta Vice President since 1996; 32
Secretary since 1997

Joseph A. Finelli Treasurer since 1995 40

Laurie D. Collidge Assistant Secretary since 1992 31

Paul D. Corbin Principal, Alex. Brown & Sons 3,617 shares ***
Incorporated, 1991-Present.

Monica M. Hausner Vice President, Fixed Income 70 shares ***
Management Department, Alex.
Brown & Sons Incorporated,
March 1992-Present. Formerly
Assistant Vice President, First
National Bank of Maryland,
1984-1992.

Scott J. Liotta Manager, Fund Administration, 2,279 shares ***
Alex. Brown & Sons
Incorporated, July 1996-Present.
Formerly, Manager and Foreign
Markets Specialist, Putnam
Investments Inc. (registered
investment companies), April
1994-July 1996; Supervisor,
Brown Brothers Harriman &
Co. (domestic and global
custody), August 1991-April
1994.

Joseph A. Finelli Vice President, Alex. Brown & 1,736 shares ***
Sons Incorporated and Vice
President, Investment Company
Capital Corp. (registered
investment advisor), September
1995-Present. Formerly, Vice
President and Treasurer, The
Delaware Group of Funds
(registered investment
companies) and Vice President,
Delaware Management
Company Inc. (investments),
1980-1995.

Laurie D. Collidge Asset Management Department, 1,867 shares ***
Alex. Brown & Sons
Incorporated, 1991-Present.
</TABLE>

<PAGE>

- ------------
* Denotes an individual who is an "interested person" as defined in the 1940
Act.
** This information has been furnished by each Director and officer.
*** As of May 31, 1997, the Directors and officers of the Fund as a group (16
persons) beneficially owned an aggregate of less than 1% the Fund.

Investment Advisor

See "Investment Company Capital Corp." on pages 12-13 concerning the
Advisor.

Principal Underwriter

Alex. Brown & Sons Incorporated, a wholly-owned subsidiary of Alex. Brown
Incorporated, located at One South Street, Baltimore, Maryland 21202, acts as
the Fund's principal underwriter.

Portfolio Transactions

In the fiscal year ended March 31, 1997, the Fund paid no brokerage
commissions to Alex. Brown.

15
<PAGE>

Independent Accountants

Beneficial Owners

To the knowledge of Fund Management, as of the Record Date, no persons
owned beneficially 5% or more of the outstanding shares of a Series of the
Fund.

Submission of Shareholder Proposals

Required Vote

Approval of Proposal 1 requires the affirmative vote of a majority of all
votes cast at the Special Meeting, provided that a majority of the shares
entitled to vote are present in person or by Proxy at the Special Meeting.
Approval of Proposal 2 requires the affirmative vote of a majority of the
outstanding voting securities of the Prime Series of the Fund. As defined in
the 1940 Act, the vote of a majority of the outstanding shares of a Series
means the vote of (i) 67% or more of the Series' outstanding shares present at
a meeting, if the holders of more than 50% of the outstanding shares of the
Series are present or represented by proxy, or (ii) more than 50% of the
Series' outstanding shares, whichever is less.

Abstentions and "broker non-votes" will not be counted for or against the
Proposals but will be counted for purposes of determining whether a quorum is
present. Abstentions will be counted as votes present for purposes of
determining a "majority of the outstanding voting securities" present at the
Special Meeting and will therefore have the effect of counting against Proposal
2. The Fund believes that brokers who hold shares as record owners for
beneficial owners have the authority under the rules of the various stock
exchanges to vote those shares with respect to the Proposals when they have not
received instructions from beneficial owners.

Other Matters

16
<PAGE>

By Order of the Directors,

Scott J. Liotta
Vice President and Secretary