BT ALEX BROWN CASH RESERVE FUND INC, 497, 1997-09-02

BT ALEX BROWN CASH RESERVE FUND INC
497, 1997-09-02

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

-------------------
BULK RATE
U.S. POSTAGE
PAID
Baltimore, MD.
Permit No. 8614
-------------------

BT ALEX. BROWN
CASH RESERVE
FUND, INC.

Prime Series
Treasury Series
Tax-Free Series

Prospectus
& Application

August 1, 1997, as
supplemented through
September 1, 1997

[GRAPHIC OMITTED]

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

<PAGE>

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

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

The Fund offers three Series of Shares:

o Prime Series

o Treasury Series

o Tax-Free Series

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

Other principal features of the Fund are:

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

For current yield information and for purchase and redemption information, call
your BT Alex. Brown Incorporated investment representative or (410) 895-5995.

This Prospectus sets forth basic information that investors should know about
the Fund prior to investing and should be read and retained for future
reference. A statement of additional information dated August 1, 1997, as
supplemented through September 1, 1997, has been filed with the Securities and
Exchange Commission and is hereby incorporated by reference. It is available
upon request and without charge by calling the Fund at (800) 553-8080.

<PAGE>

TABLE OF CONTENTS

Page
1. Table of Fees and Expenses 2
2. Financial Highlights 3
3. Investment Program 6
4. How to Invest in the Fund 9
5. How to Redeem Shares 11
6. Dividends and Taxes 13
7. Management of the Fund 14
8. Current Yield 16
9. General Information 16
Application A-1

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

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

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

Prospectus Dated: August 1, 1997, as
supplemented through September 1, 1997

<PAGE>

1 Table of Fees and
Expenses

The following table of fees and expenses is provided to assist investors in
understanding the various costs and expenses that an investor in each Series of
the Fund may bear directly and indirectly. A person who purchases shares of the
Fund through a financial institution may be charged separate fees by the
financial institution. Actual expenses may be greater or less than those shown.

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

Annual Fund Operating Expenses As a % of Average Daily Net Assets
- ------------------------------ ----------------------------------
Management Fees (See "Management of the Fund -- Investment Advisor
and Sub-Advisor") ............................................. .27% .25% .28%
12b-1 Fees (See "Management of the Fund -- Distributor") ...... .25% .25% .25%
Other Expenses ................................................ .11% .11% .09%
---- ---- ----
Total Fund Operating Expenses ................................. .63% .61% .62%
==== ==== ====
</TABLE>

Example

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

Prime Treasury Tax-Free
Series Series Series
-------- ---------- ---------
1 year ......... $ 6 $ 6 $ 6
3 years ...... $20 $20 $20
5 years ...... $35 $34 $35
10 years ...... $79 $76 $77

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

2
<PAGE>

2 Financial Highlights

The financial highlights included in these tables are a part of the Fund's
financial statements for the Prime Series, the Treasury Series and the Tax-Free
Series for the indicated fiscal periods that have been audited by the Fund's
independent

accountants. The financial statements and financial highlights for the fiscal
year ended March 31, 1997 and the report of the Fund's independent accountants
thereon are included in the Statement of Additional Information, which can be
obtained at no charge by calling the Fund at (800) 553-8080.

Prime Series

(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
For the Year Ended March 31,
--------------------------------------------------------------------------
1997(1) 1996(1) 1995(1) 1994(1) 1993(1)
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at beginning of
period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------- -------------- -------------- -------------- --------------
Income from Investment
Operations:
Net investment income ......... 0.0478 0.0524 0.0442 0.0262 0.0295
Less Distributions:
Dividends from net
investment income .............. (0.0478) (0.0524) (0.0442) (0.0262) (0.0295)
-------------- -------------- -------------- -------------- --------------
Net asset value at end of
period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ============== ==============
Total Return:
Based on net asset value per
share .......................... 4.88% 5.36% 4.51% 2.65% 2.99%
Ratios to Average Daily Net
Assets:
Expenses ........................ 0.63% 0.60% 0.61% 0.62% 0.63%
Net investment income ......... 4.78% 5.21% 4.46% 2.62% 2.95%
Supplemental Data:
Net assets at end of period ... $2,552,053,912 $2,392,658,047 $1,479,806,435 $1,368,451,627 $1,481,103,834
Number of shares outstanding
at end of period .............. 2,552,045,195 2,392,661,216 1,479,804,186 1,368,449,549 1,481,101,756
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
For the
Eleven For the
Months Year Ended
Ended April 30,
March 31, --------------
1992(1) 1991(1) 1990 1989(2) 1988
----------------- ----------------- ----------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at beginning of
period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------- -------------- -------------- -------------- ------------
Income from Investment
Operations:
Net investment income ......... 0.0485 0.0734 0.0846 0.0712 0.0647
Less Distributions:
Dividends from net
investment income .............. (0.0485) (0.0734) (0.0846) (0.0712) (0.0647)
-------------- -------------- -------------- -------------- ------------
Net asset value at end of
period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ============== ============
Total Return:
Based on net asset value per
share .......................... 4.96% 7.59% 8.80% 8.01%(3) 6.67%
Ratios to Average Daily Net
Assets:
Expenses ........................ 0.61% 0.59% 0.52% 0.54%(3) 0.52%
Net investment income ......... 4.84% 7.31% 8.42% 7.81%(3) 6.46%
Supplemental Data:
Net assets at end of period ... $1,512,362,510 $1,295,888,161 $1,312,276,151 $1,084,793,157 $874,051,953
Number of shares outstanding
at end of period .............. 1,512,360,432 1,295,888,161 1,312,272,415 1,084,789,421 874,047,336

</TABLE>

3
<PAGE>

Financial Highlights (continued)
Treasury Series

(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
For the Year Ended March 31,
----------------------------------------------------------------
1997(1) 1996(1) 1995(1) 1994(1)
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at
beginning of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------
Income from Investment
Operations:
Net investment income ......... 0.0453 0.0494 0.0411 0.0255
Less Distributions:
Dividends from net
investment income ............ (0.0453) (0.0494) (0.0411) (0.0255)
------------ ------------ ------------ ------------
Net asset value at end of
period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============
Total Return:
Based on net asset value per
share ....................... 4.63% 5.05% 4.19% 2.58%
Ratios to Average Daily Net
Assets:
Expenses ..................... 0.61% 0.58% 0.55%) 0.54%
Net investment income ......... 4.54% 4.94% 4.09%) 2.55%
Supplemental Data:
Net assets at end of period $678,444,803 $666,814,158 $512,167,212 $581,724,214
Number of shares
outstanding at end of
period ....................... 678,391,386 666,762,028 512,162,864 581,723,448

</TABLE>
<TABLE>
<CAPTION>
For the
Eleven
Months For the
Ended Year Ended
March 31, April 30,
1993(1) 1992(1) 1991(1) 1990 1989(2) 1988
--------------- -------------- -------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at
beginning of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------ ------------
Income from Investment
Operations:
Net investment income ......... 0.0285 0.0477 0.0698 0.0829 0.0696 0.0617
Less Distributions:
Dividends from net
investment income ........... (0.0285) (0.0477) (0.0698) (0.0829) (0.0696) (0.0617)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value at end of
period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============ ============ ============
Total Return:
Based on net asset value per
share ........................ 2.89% 4.88% 7.21% 8.61% 7.82%) 6.35
Ratios to Average Daily Net
Assets:
Expenses ..................... 0.55%) 0.55% 0.56% 0.41% 0.44%) 0.45
Net investment income ......... 2.87%) 4.76% 6.82% 8.25% 7.50%) 6.17
Supplemental Data:
Net assets at end of period $618,175,839 $725,010,207 $716,551,599 $272,467,125 $235,086,589 $280,628,025
Number of shares
outstanding at end of
period ....................... 618,152,465 725,010,207 716,551,599 272,509,276 235,197,074 280,519,083

</TABLE>

<PAGE>

- --------
(1) Financial information for fiscal years ended March 31, 1997, 1996, 1995,
1994, 1993, 1992 and 1991, respectively, is given for the BT Alex. Brown
Cash Reserve Shares class of the Treasury Series.
(2) The Fund's fiscal year-end was changed to March 31.
(3) Annualized.
(4) Ratio of expenses to average daily net assets prior to partial fee waivers
was 0.56% for the fiscal years ended March 31, 1995, 1994 and 1993,
respectively.
(5) Ratio of net investment income to average daily net assets prior to partial
fee waivers was 4.08%, 2.53%, and 2.86% for the years ended March 31, 1995,
1994 and 1993, respectively.

4
<PAGE>

Financial Highlights (concluded)
Tax-Free Series

(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
For the Year Ended March 31,
----------------------------------------------------------------------------------------------
1997 1995 1994 1993 1992
-------------- 1996 -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at
beginning of period ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------ -------------
Income from Investment
Operations:
Net investment income 0.0286 0.0318 0.0271 0.0184 0.0213 0.0353
Less Distributions:
Dividends from net
investment income ...... (0.0286) (0.0318) (0.0271) (0.0184) (0.0213) (0.0353)
------------ ------------ ------------ ------------ ------------ -------------
Net asset value at end of
period .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============ ============ =============
Total Return:
Based on net asset value
per share ............... 2.90% 3.23% 2.75% 1.86% 2.15% 3.59%
Ratios to Average Daily
Net Assets:
Expenses .................. 0.62% 0.60% 0.57% 0.58% 0.60% 0.56%(3)
Net investment income 2.86% 3.16% 2.74% 1.84% 2.13% 3.49%(4)
Supplemental Data:
Net assets at end of
period .................. $647,212,025 $571,507,000 $475,384,229 $378,859,232 $315,661,447 $304,987,823
Number of shares
outstanding at end
of period ............... 647,283,274 571,593,265 475,474,913 378,939,262 315,700,742 305,008,959

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
For the Period
Dec. 17, 19901
through
March 31, 1991
---------------
<S> <C>
Per Share Operating
Performance:
Net asset value at
beginning of period ...... $ 1.00
--------------
Income from Investment
Operations:
Net investment income 0.0124
Less Distributions:
Dividends from net
investment income ...... (0.0124)
--------------
Net asset value at end of
period .................. $ 1.00
==============
Total Return:
Based on net asset value
per share ............... 4.35%(2)
Ratios to Average Daily
Net Assets:
Expenses .................. 0.53%(2)
Net investment income 4.25%(2)
Supplemental Data:
Net assets at end of
period .................. $256,895,180
Number of shares
outstanding at end
of period ............... 256,895,680
</TABLE>

- --------

(1) Date operations commenced.
(2) Annualized.
(3) Ratio of expenses to average daily net assets prior to partial fee waivers
was .57% for the year ended March 31, 1992.
(4) Ratio of net investment income to average daily net assets prior to partial
fee waivers was 3.48% for the year ended March 31, 1992.

5
<PAGE>

3 Investment Program

Investment Objectives

The investment objective of each Series of the Fund is to seek as high a level
of current income as is consistent with preservation of capital and liquidity.
The Tax-Free Series seeks income exempt from federal income taxes. Each Series
endeavors to achieve its objective by investing in a diversified portfolio of
domestic money market instruments that satisfy strict credit quality standards
and that mature within 397 days or less from the date of purchase. The Tax-Free
Series endeavors to achieve its objective by investing in a diversified
portfolio of high quality, short-term municipal obligations. (See "Portfolio
Investments -- Treasury Series -- Prime Series -- Tax-Free Series.")

Portfolio Investments

-- Treasury Series

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

-- Prime Series

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

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

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

6
<PAGE>

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

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

-- Tax-Free Series

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

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

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

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

7
<PAGE>

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

Other Investment Practices

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

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

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

Repurchase Agreements under which the purchaser (for example, a Series of the
Fund) acquires ownership of an obligation and the seller agrees, at the time of
the sale, to repurchase the obligation at a mutually agreed upon time and
price, thereby determining the yield during the purchaser's holding period.
Although the underlying collateral for repurchase agreements may have
maturities exceeding 397 days, repurchase agreements entered into by a Series
will not have a stated maturity in excess of seven days from the date of
purchase. A Series may enter into repurchase agreements with institutions that
the Fund's Board of Directors believes present minimal credit risk. Default by,
or bankruptcy proceedings with respect to the seller may, however, expose the
Series to possible loss because of adverse market action or delay in connection
with the disposition of the underlying obligations.

The Prime Series may also enter into the following arrangements:

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

Investment Restrictions

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

(1) No Series may purchase securities of any issuer (other than obligations of
the U.S. Government, its agencies or instrumentalities and any

8
<PAGE>

municipal securities guaranteed by the U.S. Government), if immediately after
such purchase more than 5% of the value of such Series' assets would be
invested in such issuer;

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

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

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

(5) The Tax-Free Series may not purchase any securities (other than obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
certificates of deposit and guarantees of banks) that would cause more than 25%
of the value of the Series' total net assets at the time of such purchase to be
invested in: (i) securities of one or more issuers conducting their principal
activities in the same state; (ii) securities, the interest on which is paid
from revenues of projects with similar characteristics; or (iii) industrial
development bonds the obligors of which are in the same industry.

(6) The Tax-Free Series will be invested so that at least 80% of the Series'
income will be exempt from federal income taxes.

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

The Fund is subject to further investment restrictions that are set forth in
the Statement of Additional Information.

4 How to Invest in the Fund

General Information on Purchases

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

The minimum initial investment in any Series of the Fund is $1,500. Subsequent
investments in

9
<PAGE>

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

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

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

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

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

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

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

10
<PAGE>

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

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

Purchases through Dealers and Institutions

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

5 How to Redeem Shares

In addition to participation in the automatic purchase and redemption program
described above, shareholders may redeem all or part of their shares of any
Series on any business day of the Fund by transmitting a redemption order to BT
Alex. Brown by any of three convenient methods outlined below. A redemption
request is effected at the net asset value next determined after tender of
shares for redemption. Redemption orders for the Treasury Series and the
Tax-Free Series received after 11:00 a.m. (Eastern Time) and redemption orders
for the Prime Series received after 12:00 noon (Eastern Time) will be executed
on the following business day of the Fund at the net asset value of the Series
to be redeemed next determined after receipt of the order. If the shares to be
redeemed were purchased by check, the Fund reserves the right not to honor the
redemption request until the check has cleared, and redemption of such shares
by wire or by check redemption will be restricted for a period of fifteen
calendar days unless the proceeds of redemption are used to purchase other
securities through BT Alex. Brown. The right to redeem shares may be affected
by the terms and conditions of the shareholder's account agreement with BT
Alex. Brown, a Participating Dealer or other institution.

Redemption by Check

11
<PAGE>

funds." Checks written in amounts less than $500 may also be returned. The Fund
in its discretion will honor such checks but will charge the account a
servicing fee of $15. Cancelled checks will not be returned to the shareholder,
but the amounts will be reflected on the shareholder's monthly BT Alex. Brown
statement of account. Since the total amount of shares in an account may vary,
shareholders should not attempt to redeem their entire account by check.

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

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

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

Redemption by Wire

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

Redemption by Mail

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

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

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

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

Additional Information on Redemption

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

The Board of Directors may authorize redemption of all shares in an account of
any Series that has been reduced by the shareholder to less than $500, if the
Board of Directors determines that it is necessary to reduce disproportionately
burdensome expenses of servicing small accounts or is

12
<PAGE>

otherwise in the best interest of the Fund. At least 60 days' prior notice will
be given to allow a shareholder to make an additional minimum investment set by
the Board of Directors to avoid redemption.

6 Dividends and Taxes

Dividends

All of the net income earned on each Series is normally declared as dividends
daily to the respective shareholders of record of each Series. Dividends on
each Series are normally payable on the first day that a share purchase order
is effective but not on the date that a redemption order is effective.
Dividends are declared daily and reinvested monthly in the form of additional
full and fractional shares of the same Series at net asset value, unless the
shareholder has elected to have dividends paid in cash.

Taxes

The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislative, judicial
or administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of the Fund or
the shareholders, and the discussion herein is not intended as a substitute for
careful tax planning. Accordingly, shareholders are advised to consult with
their own tax advisors concerning the application of state and local taxes to
investments in the Fund, which may differ from the federal income tax
consequences described above. Additional information concerning taxes is set
forth in the Statement of Additional Information.

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

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

Current federal tax law limits the types and volume of securities qualifying
for the federal income tax exemption of interest, which may have an effect on
the ability of the Fund to purchase sufficient amounts of tax-exempt securities
to satisfy the Code's requirements for the payment of exempt-interest
dividends. All or a portion of the interest on indebtedness incurred or
continued by a shareholder to purchase or carry Shares is not deductible for
federal income tax purposes. Furthermore, entities or persons who are
"substantial users" (or persons related to "substantial users") of facilities
financed by "private activity bonds" or "industrial development bonds" should
consult their tax advisors before purchasing Shares. (See the Statement of
Additional Information.)

13
<PAGE>

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

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

The Fund intends to make sufficient distributions of its ordinary income and
capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.

The sale, exchange or redemption of shares is a taxable event for the
shareholder.

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

7 Management of the Fund

Board of Directors

The overall business and affairs of the Fund are managed by its Board of
Directors. The Board of Directors approves all significant agreements between
the Fund and persons or companies furnishing services to the Fund, including
the Fund's agreements with its investment advisor, sub-advisor, distributor,
custodian and transfer agent. A majority of the Board of Directors of the Fund
have no affiliation with the Fund's advisor, the Fund's sub-advisor or the
Distributor.

Investment Advisor

Investment Company Capital Corp. ("ICC"), an indirect subsidiary of Bankers
Trust New York Corporation, was organized in 1987 and acts as the Fund's
investment advisor. ICC supervises and manages the Fund's operations and
generally provides management and administrative services for the Fund. ICC may
delegate its duties and has delegated certain of such duties for the Tax-Free
Series to the Fund's sub-advisor as described below. ICC is also investment
advisor to several funds in the Flag Investors family of funds which, as of May
31, 1997, had net assets of approximately $5.5 billion.

14
<PAGE>

daily net assets. ICC may, from time to time, voluntarily waive a portion of
its advisory fee with respect to any Series to preserve or enhance the
performance of the Series.

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

Sub-Advisor

PNC Institutional Management Corporation ("PIMC") acts as sub-advisor to the
Tax-Free Series pursuant to a sub-advisory agreement between ICC and PIMC. PIMC
is a wholly-owned subsidiary of PNC, the Fund's custodian. Subject to the
oversight of ICC, PIMC is responsible for managing the Tax-Free Series'
investments. PIMC was organized in 1977 to perform advisory services for
investment companies. PNC and its predecessors have been in the business of
managing the investments of fiduciary and other accounts in the Philadelphia,
Pennsylvania area since 1847. PIMC advises or manages approximately 43
investment portfolios with total assets of approximately $37.2 billion as of
May 31, 1997.

As compensation for its services as sub-advisor to the Tax-Free Series for the
fiscal year ended March 31, 1997, PIMC received a fee from ICC equal to .14% of
the average daily net assets of the Tax-Free Series. If ICC voluntarily waives
a portion of its fee with respect to the Tax-Free Series (see "Investment
Advisor"), PIMC has agreed to waive a portion of its fee in the same proportion
and for the same time periods as ICC's waiver.

In the fiscal year ended March 31, 1997, the expenses borne by each Series of
the Fund, including the fees to ICC, amounted to .63% of the Prime Series'
average daily net assets, .61% of the Treasury Series' average daily net assets
and .62% of the Tax-Free Series' average daily net assets.

Distributor

Effective September 1, 1997, ICC Distributors, Inc. ("ICC Distributors" or the
"Distributor") acts as distributor for the Fund's three Series. Prior to
September 1, 1997, Alex. Brown & Sons Incorporated served as distributor for
the Fund's three Series for the same compensation and on substantially the same
terms and conditions as ICC Distributors. ICC Distributors is a registered
broker-dealer that offers distribution services to a variety of registered
investment companies including the funds in the Flag Investors family of funds.
ICC Distributors is not affiliated with either the Fund's advisor or
sub-advisor. As compensation for providing distribution services, ICC
Distributors receives a fee that represents .25% of the Fund's average daily
net assets.

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

ICC Distributors may use a portion of the fee it receives from the Fund to
compensate Participating Dealers for opening shareholder accounts, processing
investor purchase and redemption

15
<PAGE>

orders, responding to inquiries from Fund shareholders concerning the status of
their accounts and operations of the Fund, and communicating with the Fund and
its transfer agent on behalf of the Fund's shareholders. Additionally, ICC
Distributors bears all expenses associated with advertisements, promotional
materials, sales literature and printing and mailing prospectuses to other than
Fund shareholders.

8 Current Yield

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

The yield for any Series or class of the Fund can be obtained by calling a BT
Alex. Brown investment representative or (410) 895-5995.

9 General Information

Description of Shares

The Fund is an open-end, diversified management investment company. The Fund
was reorganized under the laws of the State of Maryland on April 5, 1990. The
Fund is authorized to issue 8 billion shares of common stock, with a par value
of $.001 per Share. Shares of the Fund are divided into three series, each with
a par value of $.001 - the Prime Series, the Treasury Series and the Tax-Free
Series. Each of the Series currently offers one or more classes, which classes
differ from each other principally in distribution fees, in some instances
shareholder servicing fees, and the method of distribution, which may affect
performance. For information regarding the other classes of shares, please call
(800) 553-8080. Shares of the Fund have equal rights with respect to voting,
except that the holders of shares of a particular Series or class will have the
exclusive right to vote on matters affecting only the rights of the holders of
such Series or class. For example, holders of a particular Series will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such Series. In the event of dissolution or
liquidation, holders of shares of each Series will receive pro rata, subject to
the rights of creditors, (a) the proceeds of the sale of the assets held in the
respective Series less (b) the liabilities of the Fund attributable to the
respective Series or allocated among all Series based on the respective
liquidation value of each Series.

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

16
<PAGE>

Custodian, Transfer Agent and Accounting Services

Investment Company Capital Corp., the Fund's investment advisor, also serves as
the Fund's transfer and dividend disbursing agent and provides accounting
services to the Prime Series and the Treasury Series. As compensation for
providing accounting services to the Prime Series and the Treasury Series for
the fiscal year ended March 31, 1997, ICC received from the Fund a fee equal to
.01% of the Prime Series' average daily net assets and .02% of the Treasury
Series' average daily net assets. PNC acts as custodian for the Fund's
portfolio securities and cash. The Fund's Board of Directors has approved
Bankers Trust Company, a subsidiary of Bankers Trust New York Corporation and
an affiliate of the Fund, as custodian. Currently, it is anticipated that
Bankers Trust Company will provide custodial services to the Fund effective
September 22, 1997. PFPC Inc., an affiliate of PNC, provides accounting
services to the Tax-Free Series. (See the Statement of Additional Information.)

Annual Meetings

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

Reports

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

Shareholder Inquiries

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

17
<PAGE>

BT ALEX. BROWN CASH RESERVE FUND, INC.

Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202

Distributor Fund Counsel
ICC DISTRIBUTORS, INC. MORGAN, LEWIS & BOCKIUS LLP
P.O. Box 7558 2000 One Logan Square
Portland, Maine 04101 Philadelphia, Pennsylvania 19103

Sub-Advisor Independent Accountants
Tax-Free Series COOPERS & LYBRAND L.L.P.
PNC INSTITUTIONAL 2400 Eleven Penn Center
MANAGEMENT CORP. Philadelphia, Pennsylvania 19103
400 Bellevue Parkway
Wilmington, Delaware 19809

Custodian Transfer Agent
PNC BANK INVESTMENT COMPANY CAPITAL CORP.
Airport Business Center One South Street
200 Stevens Drive Baltimore, Maryland 21202
Lester, Pennsylvania 19113 (800) 553-8080

<PAGE>

BT Alex. Brown Cash Reserve Fund, Inc.
Application Form
<TABLE>
<CAPTION>

- ----------------------------------------------------------------------------------------------------------
<S> <C>
TO OPEN A NEW ACCOUNT EXISTING BT ALEX. BROWN ACCOUNTS

1.) Complete application below in full. 1.) My account number is -----------
2.) Check enclosed for $------------------ 2.) Name(s) ------------------------
3. (a). $-------- to be invested in Prime Series. 3.) Check enclosed for $------------
(b). $-------- to be invested in Treasury Series. 4. (a). $----- to be invested in Prime Series.
(c). $-------- to be invested in Tax-Free Series. (b). $----- to be invested in Treasury Series.
(c). $----- to be invested in Tax-Free Series.
</TABLE>

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

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

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

1. ACCOUNT REGISTRATION -- Please Print

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

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

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

* In the case of joint ownership, joint tenancy with right of
survivorship will be presumed unless otherwise indicated.

** Enter "Applied" if number has been applied for and not received.

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

2. DIVIDEND INSTRUCTIONS

/ / Place an "X" in this box if you want your dividends paid to you in cash.
Otherwise, they will be reinvested in additional shares of the Fund.

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

3. CHECK REDEMPTION PRIVILEGE (Optional)
/ / Place an "X" in this box if you want information regarding the Check
Redemption Privilege.

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

A-1

(Please cut along dotted line)
<PAGE>

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

BT Alex. Brown Cash Reserve Fund, Inc.

P.O. Box 17250
Baltimore, Maryland 21203

------------------
BULK RATE
U.S. POSTAGE
PAID
Baltimore, MD
Permit No. 8614
------------------

BT ALEX. BROWN
CASH RESERVE
FUND, INC.

INSTITUTIONAL
SHARES

Prime Series
Treasury Series
Tax-Free Series

Prospectus

August 1, 1997, as
supplemented through
September 1, 1997

[BT Alex. Brown logo]

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

<PAGE>

BT ALEX. BROWN CASH RESERVE FUND, INC.

INSTITUTIONAL SHARES
P. O. Box 17250
Baltimore, Maryland 21203

The Fund offers:

o Prime Series -- a portfolio invested in U.S. Treasury obligations, repurchase
agreements backed by such instruments, obligations issued or guaranteed by
agencies or instrumentalities of the U.S. Government, domestic bank
instruments and commercial paper of the highest quality;
o Treasury Series -- a portfolio invested in U.S. Treasury bills, notes, bonds
and other obligations issued by the U.S. Treasury; and
o Tax-Free Series -- a portfolio invested in high quality, short-term municipal
obligations.

Other principal features of the Fund are:
o No direct or indirect purchase or redemption charges;

o Dividends are declared daily and paid monthly in additional shares or cash;
and
o Wire and telephone transfers.
For current yield information and for purchase and redemption information, call
(410) 895-5995.

This Prospectus sets forth basic information that investors should know about
the Fund prior to investing and should be read and retained for future
reference. A Statement of Additional Information dated August 1, 1997, as
supplemented through September 1, 1997, has been filed with the Securities and
Exchange Commission and is hereby incorported by reference. It is available
upon request and without charge by calling the Fund at (800) 553-8080.

<PAGE>

TABLE OF CONTENTS

Page
1. Table of Fees and Expenses 2
2. Financial Highlights 3
3. The Fund and the Institutional Shares 6
4. Investment Program 6
5. How to Invest in Institutional Shares
of the Fund 10
6. Dividends and Taxes 11
7. How to Redeem Institutional Shares 12
8. Management of the Fund 13
9. Current Yield 14
10. General Information 15

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

Prospectus Dated: August 1, 1997, as
supplemented through September 1, 1997

<PAGE>

1 Table of Fees and
Expenses

The following table of fees and expenses is provided to assist investors in
understanding the various costs and expenses that an investor in Institutional
Shares of the Prime, Treasury or Tax-Free Series of the Fund may bear directly
and indirectly. The percentages shown below expressing Annual Fund Operating
Expenses for the Institutional Shares of the Prime Series ("Prime Institutional
Shares") and the Treasury Series ("Treasury Institutional Shares") are based on
the Fund's expenses for the fiscal year ended March 31, 1997. The Expenses and
Example for the Institutional Shares of the Tax-Free Series ("Tax-Free
Institutional Shares"), which have been in operation only since June 2, 1997,
are based on the expenses for the BT Alex. Brown Cash Reserve Shares of the
Tax-Free Series, another class of shares offered by the Tax-Free Series, less
12b-1 fees of .25%. Actual expenses may be greater or less than those shown.

<TABLE>
<CAPTION>
Prime Treasury Tax-Free
Institutional Institutional Institutional
Shareholder Transaction Expenses Shares Shares Shares
- -------------------------------- ------ ------ ------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases ............... None None None
Maximum Sales Charge Imposed on Reinvested Dividends ... None None None
Maximum Deferred Sales Charge ........................... None None None
Redemption Fees .......................................... None None None

As a % of Average
Annual Fund Operating Expenses Daily Net Assets
- ------------------------------ ---------------------------------------
Management Fees (See "Management of the Fund --
Investment Advisor") .................................... .27% .25% .28%
12b-1 Fees (See "Management of the Fund -- Distributor") None None None
Other Expenses .......................................... .11% .11% .09%
----- ----- -----
Total Fund Operating Expenses ........................... .38% .36% .37%
===== ===== =====
</TABLE>

Example
- -------

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

Prime Treasury Tax-Free
Institutional Institutional Institutional
Shares Shares Shares
------ ------ ------
1 year ......... $ 4 $ 4 $ 4
3 years ...... $12 $12 $12
5 years ...... $21 $20 --
10 years ...... $48 $46 --

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

2
<PAGE>

2 Financial Highlights

The Fund has offered the Prime Institutional Shares and the Treasury
Institutional Shares since June 4, 1990. The Fund commenced operations of the
Tax-Free Institutional Shares on June 2, 1997. However, the Fund has offered
another class of the Tax-Free Series since December 17, 1990. Historical
financial information about this class is not fully applicable to the Tax-Free
Institutional Shares because the expenses paid by the class differ from those
the Tax-Free Institutional Shares will incur. (See "Table of Fees and
Expenses.") Accordingly, the financial highlights included in these tables are
a part of the Fund's financial statements for the periods indicated and have
been audited by the Fund's independent accountants. The financial statements
and financial highlights for the fiscal year ended March 31, 1997 and the
report of the Fund's independent accountants thereon are included in the
Statement of Additional Information, which can be obtained at no charge by
calling the Fund at (800) 553-8080.

Financial Highlights
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
Prime Institutional Shares
-----------------------------------------------
For the Year Ended March 31,
-----------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
period ........................... $ 1.00 $ 1.00 $ 1.00
------------ ----------- -----------
Income from Investment
Operations:
Net investment income ............ 0.0503 0.0548 0.0472
Less Distributions:
Dividends from net investment
income ........................ (0.0503) (0.0548) (0.0472)
------------ ----------- -----------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00
============ =========== ===========
Total Return:
Based on net asset value per
share ........................... 5.15% 5.62% 4.82%
Ratios to Average Daily Net
Assets:
Expenses ........................ 0.38% 0.35% 0.36%
Net investment income ............ 5.04% 5.32% 4.57%
Supplemental Data:
Net assets at end of period ...... $117,812,047 $53,699,315 $11,904,716
Number of shares outstanding at
end of period .................. 117,811,768 53,699,535 11,904,663

</TABLE>

<PAGE>

For the Period
June 4, 1990(1)
through
March 31,
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
period ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- --------------
Income from Investment
Operations:
Net investment income ............ 0.0294 0.0327 0.0515 0.0617
Less Distributions:
Dividends from net investment
income ........................ (0.0294) (0.0327) (0.0515) (0.0617)
----------- ----------- ----------- --------------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== ==============
Total Return:
Based on net asset value per
share ........................... 2.98% 3.32% 5.27% 7.70%(2)
Ratios to Average Daily Net
Assets:
Expenses ........................ 0.30% 0.31% 0.32% 0.35%(2)
Net investment income ............ 2.94% 3.24% 5.34% 7.53%(2)
Supplemental Data:
Net assets at end of period ...... $23,437,449 $28,884,078 $21,867,108 $117,633,558
Number of shares outstanding at
end of period .................. 23,437,512 28,884,132 21,867,108 117,633,558
</TABLE>

(1) The Prime Institutional Shares commenced operations on June 4, 1990.
(2) Annualized.

3
<PAGE>

Financial Highlights (continued)
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
Treasury Institutional Shares
---------------------------------------------
For the Year Ended March 31,
---------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at beginning of
period ........................ $ 1.00 $ 1.00 $ 1.00
----------- ----------- -------------
Income from Investment
Operations:
Net investment income ............ 0.0481 0.0523 0.0438
Less Distributions:
Dividends from net investment
income ........................ (0.0481) (0.0523) (0.0438)
----------- ----------- -------------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00
=========== =========== =============
Total Return:
Based on net asset value per
share ........................... 4.92% 5.36% 4.47%
Ratios to Average Daily Net
Assets:
Expenses ........................ 0.36% 0.33% 0.30%(3)
Net investment income ............ 4.81% 5.12% 4.15%(4)
Supplemental Data:
Net assets at end of period ...... $61,208,770 $51,822,757 $14,051,995
Number of shares outstanding
at end of period ............... 61,199,345 51,813,226 14,046,467

</TABLE>

<PAGE>

For the Period
June 4, 1990(1)
through
March 31,
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at beginning of
period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- ------------- ----------- -------------
Income from Investment
Operations:
Net investment income ............ 0.0282 0.0314 0.0504 0.0590
Less Distributions:
Dividends from net investment
income ........................ (0.0282) (0.0314) (0.0504) (0.0590)
------------- ------------- ----------- -------------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= =========== =============
Total Return:
Based on net asset value per
share ........................... 2.86% 3.19% 5.17% 7.36%(2)
Ratios to Average Daily Net
Assets:
Expenses ........................ 0.27%(3) 0.26%(3) 0.27% 0.29%(2)
Net investment income ............ 2.82%(4) 3.16%(4) 4.90% 7.02%(2)
Supplemental Data:
Net assets at end of period ...... $39,692,848 $60,146,987 $63,834,323 $58,017,844
Number of shares outstanding
at end of period ............... 39,688,259 60,140,874 63,834,323 58,017,844
</TABLE>

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

(1) The Treasury Institutional Shares commenced operations on June 4, 1990.
(2) Annualized.
(3) Ratio of expenses to average daily net assets prior to partial fee waivers
was 0.31%, 0.29% and 0.27% for the years ended March 31, 1995, 1994 and
1993, respectively.
(4) Ratio of net investment income to average daily net assets prior to partial
fee waivers was 4.14%, 2.80% and 3.15% for the years ended March 31, 1995,
1994 and 1993, respectively.

4
<PAGE>

Financial Highlights (concluded)
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
BT Alex. Brown Cash Reserve Tax-Free Shares
-------------------------------------------------
For the Year Ended March 31,
-------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
period ........................... $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------
Income from Investment
Operations:
Net investment income ............ 0.0286 0.0318 0.0271
Less Distributions:
Dividends from net investment
income ........................ (0.0286) (0.0318) (0.0271)
------------ ------------ ------------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00
============ ============ ============
Total Return:
Based on net asset value per
share ........................... 2.90% 3.23% 2.75%
Ratios to Average Daily Net
Assets:
Expenses ........................ 0.62% 0.60% 0.57%
Net investment income ............ 2.86% 3.16% 2.74%
Supplemental Data:
Net assets at end of period ...... $647,212,025 $571,507,000 $475,384,229
Number of shares outstanding at
end of period .................. 647,283,274 571,593,265 475,474,913

</TABLE>

<TABLE>
<CAPTION>
For the Period
Dec. 17, 1990(1)
through
March 31,
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of
period ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ -------------- --------------
Income from Investment
Operations:
Net investment income ............ 0.0184 0.0213 0.0353 0.0124
Less Distributions:
Dividends from net investment
income ........................ (0.0184) (0.0213) (0.0353) (0.0124)
------------ ------------ -------------- --------------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============== ==============
Total Return:
Based on net asset value per
share ........................... 1.86% 2.15% 3.59% 4.35%(2)
Ratios to Average Daily Net
Assets:
Expenses ........................ 0.58% 0.60% 0.56%(3) 0.53%(2)
Net investment income ............ 1.84% 2.13% 3.49%(4) 4.25%(2)
Supplemental Data:
Net assets at end of period ...... $378,859,232 $315,661,447 $304,987,823 $256,895,180
Number of shares outstanding at
end of period .................. 378,939,262 315,700,742 305,008,959 256,895,680
</TABLE>

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

(1) The BT Alex. Brown Cash Reserve Tax-Free Shares commenced operations on
December 17, 1990.
(2) Annualized.
(3) Ratio of expenses to average daily net assets prior to partial fee waivers
was 0.57% for the year ended March 31, 1992.
(4) Ratio of net investment income to average daily net assets prior to partial
fee waivers was 3.48% for the year ended March 31, 1992.

5
<PAGE>

3 The Fund and
the Institutional Shares

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

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

4 Investment Program

Investment Objectives

Portfolio Investments

-- Treasury Series

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

6
<PAGE>

-- Prime Series

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

-- Tax-Free Series

The Tax-Free Series invests in high quality municipal securities that the
investment advisor

7
<PAGE>

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

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

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

Other Investment Practices

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

The Prime Series and the Treasury Series may also enter into the following
arrangements: Repurchase Agreements under which the purchaser (for example, a
Series of the Fund) acquires ownership of an obligation and the seller agrees,
at the time of the sale, to repurchase the obligation at a mutually agreed upon
time and price, thereby determining the yield during the purchaser's holding
period. Although the underlying collateral for repurchase agreements may have
maturities exceeding 397 days, repurchase agreements entered into by a Series
will not have a stated maturity in excess of seven days from the date of
purchase. A Series may enter into repurchase agreements with institutions that
the Fund's Board of Directors believes present

8
<PAGE>

minimal credit risk. Default by, or bankruptcy proceedings with respect to the
seller may, however, expose the series to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations.

The Prime Series may also enter into the following arrangements:

Investment Restrictions

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

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

9
<PAGE>

(6) The Tax-Free Series will be invested so that at least 80% of the Series'
income will be exempt from federal income taxes.

The Fund is subject to further investment restrictions that are set forth in
the Statement of Additional Information.

How to Invest in
Institutional Shares
5 of the Fund

General Information on Purchases

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

The minimum initial investment in Institutional Shares of any Series of the
Fund is $1,000,000; there is no minimum for clients of investment advisory
affiliates of BT Alex. Brown; and there is no minimum for subsequent
investments in the same Series. Orders for the purchase of Institutional Shares
are accepted only on a "business day of the Fund," which means any day on which
PNC Bank, National Association ("PNC"), the Fund's custodian, and the New York
Stock Exchange are open for business (a "Business Day"). It is expected that
during the next twelve months, PNC and/or the New York Stock Exchange will be
closed on Saturdays and Sundays and on New Year's Day, Martin Luther King,
Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.

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

10
<PAGE>

times begin to earn dividends on the following day.

Institutions may place orders to purchase Institutional Shares either by
calling BT Alex. Brown at (410) 727-1700 and then wiring federal funds, or by
wiring federal funds with the necessary instructions as described below. A
shareholder who places an order by telephone will be asked to furnish:

--The shareholder's Fund account number

--The amount to be invested

--The Series selected for investment (Prime Series, Treasury Series or
Tax-Free Series)

Federal Funds should be wired to:

PNC Bank
a/c BT Alex. Brown Incorporated

Acct. #5918197
Philadelphia, PA 19103

referring in the wire to:

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

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

--The amount to be invested

--Either the Prime Series, the Treasury Series or the Tax-Free Series

Other Information

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

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

6 Dividends and Taxes

Dividends

Taxes

Each Series of the Fund has elected to be taxed as a regulated investment
company under Subchapter M of the Code. As long as a Series qualifies for this
tax treatment, it will not be required

11
<PAGE>

to pay federal income taxes on amounts distributed to shareholders; but
shareholders, unless otherwise exempt, will pay taxes on taxable amounts so
distributed.

Current federal tax law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Fund to purchase sufficient amounts of tax-exempt securities to
satisfy the Code's requirements for the payment of exempt-interest dividends.
All or a portion of the interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares is not deductible for federal income
tax purposes. Furthermore, entities or persons who are "substantial users" (or
persons related to "substantial users") of facilities financed by "private
activity bonds" or "industrial development bonds" should consult their tax
advisors before purchasing shares. (See the Statement of Additional
Information.)

The Fund intends to make sufficient distributions of its ordinary income and
capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.

The sale, exchange or redemption of Institutional Shares is a taxable event for
the shareholder.

7 How to Redeem
Institutional Shares

Shareholders may redeem all or part of their Institutional Shares of any Series
on any business

12
<PAGE>

day of the Fund by transmitting a redemption order to BT Alex. Brown by either
of the methods outlined below. A redemption request is effected at the net
asset value next determined after tender of Institutional Shares for
redemption.

Shareholders may submit redemption orders by calling BT Alex. Brown at (410)
727-1700. Telephone redemption privileges are automatic. Both BT Alex. Brown
and the Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures include requiring the
investor to provide certain personal identification information at the time the
account is opened and prior to effecting each transaction requested by
telephone. In addition, investors may be required to provide additional
telecopied instructions of redemption requests. The Fund or BT Alex. Brown may
be liable for any losses due to unauthorized or fraudulent telephone
instructions if either of them does not employ these procedures. During periods
of extreme economic or market changes, shareholders may experience difficulty
in effecting telephone redemptions. In such event, requests should be made by
regular or express mail to BT Alex. Brown or to the Fund's transfer agent at
their addresses listed on page 17 of this Prospectus.

Redemption orders for the Treasury Series and the Tax-Free Series received
after 11:00 a.m. (Eastern Time) and redemption orders for the Prime Series
received after 12:00 noon (Eastern Time) will be executed on the following
Business Day of the Fund at the net asset value of the Series to be redeemed
next determined after the receipt of the order.

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

8 Management of the Fund

Board of Directors

Investment Advisor

13
<PAGE>

As compensation for providing investment advisory services to the Fund for the
fiscal year ended March 31, 1997, ICC received a fee equal to .27% of the Prime
Series' average daily net assets, .25% of the Treasury Series' average daily
net assets and .28% of the Tax-Free Series' average daily net assets. ICC may,
from time to time, voluntarily waive a portion of its advisory fee with respect
to any Series to preserve or enhance the performance of the Series. ICC also
serves as the Fund's transfer and dividend disbursing agent and provides
accounting services to the Prime and Treasury Series. (See "Custodian, Transfer
Agent and Accounting Services.")

Sub-Advisor

As compensation for its services as sub-advisor to the Tax-Free Series for the
fiscal year ended March 31, 1997, PIMC received a fee from ICC equal to .14% of
the average daily net assets of the Tax-Free Series. If ICC voluntarily waives
a portion of its fee with respect to the Tax-Free Series, PIMC has agreed to
waive a portion of its fee in the same proportion and for the same time periods
as ICC's waiver.

Distributor

Effective September 1, 1997, ICC Distributors, Inc. ("ICC Distributors" or the
"Distributor") acts as distributor for the Fund's three Series. Prior to
September 1, 1997, Alex Brown & Sons Incorporated served as distributor for the
Fund's three Series for the same compensation and on substantially the same
terms and conditions as ICC Distributors. ICC Distributors is a registered
broker-dealer that offers distribution services to a variety of registered
investment companies including the Flag Investors family of funds. ICC
Distributors is not affiliated with either the Fund's advisor or sub-advisor.

ICC Distributors receives no compensation for its services with respect to the
Institutional Shares. ICC Distributors bears all expenses associated with
advertisements, promotional materials, sales literature and printing and
mailing prospectuses to other than Fund shareholders.

9 Current Yield

From time to time the Fund advertises the "yield" and "effective yield" of the
Institutional Shares of a particular Series. Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the Series refers to the income generated by an investment in the
Series over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized," that is, the amount of income

14
<PAGE>

generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly, but when annualized, the income
earned by an investment in the Series is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. The Tax-Free Series may also
advertise a taxable-equivalent yield or effective yield, which are calculated
by applying a stated income tax rate to the Series' tax-exempt income for the
same periods and annualized as described above.

10 General Information

Description of Shares

The Fund is an open-end, diversified management investment company. The Fund
was reorganized under the laws of the State of Maryland on April 5, 1990. The
Fund is authorized to issue $8 billion shares of common stock, with a par value
of $.001 per share. Shares of the Fund are divided into three series -- the
Prime Series, the Treasury Series and the Tax-Free Series. Each of the Series
currently offers one or more classes, which classes differ from each other
principally in distribution fees, in some instances shareholder servicing fees,
and the method of distribution, which may affect performance. For information
regarding the other classes of shares, please call (800) 553-8080. Shares of
the Fund have equal rights with respect to voting, except that the holders of
shares of a particular Series or class will have the exclusive right to vote on
matters affecting only the rights of the holders of such Series or class. For
example, holders of a particular Series will have the exclusive right to vote
on any investment advisory agreement or investment restriction that relates
only to such Series. In the event of dissolution or liquidation, holders of
each Series will receive pro rata, subject to the rights of creditors, (a) the
proceeds of the sale of the assets held in the respective Series less (b) the
liabilities of the Fund attributable to the respective Series or allocated
among all Series based on the respective liquidation value of each Series.

Custodian, Transfer Agent and Accounting Services

Investment Company Capital Corp., the Fund's investment advisor, also serves as
the Fund's transfer and dividend disbursing agent and provides accounting
services to the Prime Series and the Treasury Series. As compensation for
providing accounting services to the Prime Series and the Treasury Series for
the fiscal year ended March 31, 1997, ICC received from the Fund an annual fee
equal to .01% of the Prime Series' average daily net assets and .02% of the
Treasury Series' average daily net assets. PNC acts as custodian for the Fund's
portfolio securities and cash. PFPC Inc., an affiliate of PNC, provides
accounting services to the Tax-Free Series. The Fund's Board of Directors has
approved Bankers Trust Company, a subsidiary of Bankers Trust New York
Corporation and an affiliate of the Fund, as custodian. Currently, it is
anticipated

15
<PAGE>

that Bankers Trust Company will provide custodial services to the Fund
effective September 22, 1997. (See the Statement of Additional Information.)

Annual Meetings

Reports

Shareholder Inquiries

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

16
<PAGE>

BT ALEX. BROWN CASH RESERVE FUND, INC.

Institutional Shares

Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202

Distributor Fund Counsel
ICC DISTRIBUTORS, INC. MORGAN, LEWIS & BOCKIUS LLP
P.O. Box 7558 2000 One Logan Square
Portland, Maine 04101 Philadelphia, Pennsylvania 19103

Sub-Advisor
Tax-Free Series
PNC INSTITUTIONAL Independent Accountants
MANAGEMENT CORP. COOPERS & LYBRAND L.L.P.
400 Bellevue Parkway 2400 Eleven Penn Center
Wilmington, Delaware 19809 Philadelphia, Pennsylvania 19103

Custodian Transfer Agent
PNC BANK INVESTMENT COMPANY CAPITAL CORP.
Airport Business Center One South Street
200 Stevens Drive Baltimore, Maryland 21202
Lester, Pennsylvania 19113 (800) 553-8080

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

Quality Cash Reserve Prime Shares
P.O. Box 17250
Baltimore, Maryland 21203

Bulk Rate
U.S. POSTAGE
PAID
Baltimore, MD
Permit No. 8614

QUALITY

CASH RESERVE

PRIME SHARES

Prospectus

August 1, 1997, as
supplemented through
September 1, 1997

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

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

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

Other principal features of the Shares are:

o Shares are sold without purchase or redemption charges;

o Dividends are declared daily and paid monthly in additional shares or cash;
and
o Wire and telephone transfers, free check redemptions and other convenient
cash management services are available.

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

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

This Prospectus sets forth basic information that investors should know about
the Fund prior to investing and should be read and retained for future
reference. A Statement of Additional Information dated August 1, 1997, as
supplemented through September 1, 1997, has been filed with the Securities and
Exchange Commission and is hereby incorporated by reference. It is available
upon request and without charge by calling the Fund at (800) 553-8080.

TABLE OF CONTENTS

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

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

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

Prospectus Dated: August 1, 1997, as
supplemented through September 1, 1997

1
<PAGE>

1 Table of Fees and
Expenses

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

<TABLE>
<S> <C>
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases .............................. None
Maximum Sales Charge Imposed on Reinvested Dividends .................. None
Maximum Deferred Sales Charge .......................................... None
Redemption Fees ...................................................... None
Annual Fund Operating Expenses (as a percentage of average daily net assets)
- ----------------------------------------------------------------------------
Management Fees ...................................................... .27%
12b-1 Fees (after fee waivers) .......................................... .53%*
Other Expenses ......................................................... .11%
------
Total Fund Operating Expenses (after fee waivers) ..................... .91%*
======
</TABLE>

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

* The Distributor currently reduces its annual 12b-1 Fees, on a voluntary
basis, to .53% of the Quality Cash Reserve Prime Shares' average daily net
assets. Absent fee waivers, 12b-1 Fees would be .60% and Total Fund
Operating Expenses would be .98% of the Quality Cash Reserve Prime Shares'
average daily net assets.

Example of Quality Cash Reserve Prime Shares Expenses

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

1 year ............................................... $ 9
3 years ............................................... $ 29
5 years ............................................... $ 50
10 years ............................................... $112

- ------------
* The example is based on Total Fund Operating Expenses after fee waivers.
Absent fee waivers, expenses would be higher.

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

2
<PAGE>

2 Financial Highlights

The Fund has offered the Quality Cash Reserve Prime Shares since May 6, 1991.
The financial highlights included in this table are a part of the Fund's
financial statements for the periods indicated that have been audited by the
Fund's independent accountants. The financial statements

and financial highlights for the fiscal year ended March 31, 1997 and the
report of the Fund's independent accountants thereon are included in the
Statement of Additional Information, which can be obtained at no charge by
calling the Fund at (800) 553-8080.

Financial Highlights
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
Quality Cash Reserve Prime Shares
-------------------------------------------------------------------------------
For the Year Ended March 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------- -------------- ----------- ----------- ------------
Income from Investment Operations:
Net investment income ..................... 0.0449 0.0493 0.0402 0.0218 0.0253
Less Distributions:
Dividends from net investment income ...... (0.0449) (0.0493) (0.0402) (0.0218) (0.0253)
-------------- -------------- ----------- ----------- ------------
Net asset value at end of period ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== =========== =========== ============
Total Return:
Based on net asset value per share ...... 4.59 5.04% 4.09% 2.20% 2.53%
Ratios to Average Daily Net Assets:
Expenses ................................. 0.91%(2) 0.90%(2) 0.96% 1.06% 1.04%
Net investment income ..................... 4.50%(3) 4.91%(3) 4.04% 2.18% 2.53%
Supplemental Data:
Net assets at end of period ............... $197,370,530 $156,412,213 $94,592,158 $92,678,440 $101,321,868
Number of shares outstanding at end of
period ................................. 197,369,848 156,412,393 94,591,979 92,678,268 101,321,668

<CAPTION>
For the Period
May 6, 1991(1)
through
March 31, 1992
----------------
<S> <C>
Per Share Operating Performance:
Net asset value at beginning of period ... $ 1.00
-------------
Income from Investment Operations:
Net investment income ..................... 0.0399
Less Distributions:
Dividends from net investment income ...... (0.0399)
-------------
Net asset value at end of period ......... $ 1.00
=============
Total Return:
Based on net asset value per share ...... 4.30%(4)
Ratios to Average Daily Net Assets:
Expenses ................................. 0.96%(4)
Net investment income ..................... 4.30%(4)
Supplemental Data:
Net assets at end of period ............... $94,887,669
Number of shares outstanding at end of
period ................................. 94,887,669
</TABLE>

- --------
(1) The Quality Cash Reserve Prime Shares commenced operations on May 6, 1991
(2) Ratio of expenses to average daily net assets prior to partial fee waivers
was 0.98% and 0.95% for the years ended March 31, 1997 and March 31, 1996,
respectively.
(3) Ratio of net investment income to average daily net assets prior to partial
fee waivers was 4.43% and 4.86% for the years ended March 31, 1997 and
March 31, 1996, respectively.
(4) Annualized.

3
<PAGE>

3 The Fund and the Quality
Cash Reserve Prime Shares

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

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

4 Investment Program

Investment Objective

The investment objective of the Prime Series is to seek as high a level of
current income as is consistent with preservation of capital and liquidity. The
Prime Series endeavors to achieve this objective by investing in a diversified
portfolio of domestic money market instruments that satisfy strict credit
quality standards and that mature within 397 days or less from the date of
purchase.

Portfolio Investments

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

The Prime Series may invest in instruments consisting of commercial paper and
variable amount

4
<PAGE>

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

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

Other Investment Practices

The Prime Series may enter into the following arrangements:

Repurchase Agreements under which the purchaser (for example, the Prime Series)
acquires ownership of an obligation and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed upon time and price,
thereby determining the yield during the purchaser's holding period. Although
the underlying collateral for repurchase agreements may have maturities
exceeding 397 days, repurchase agreements entered into by the Prime Series will
not have a stated maturity in excess of seven days from the date of purchase.
Default by, or bankruptcy proceedings with respect to the seller may, however,
expose the Series to possible loss because of the adverse market action or
delay in connection with the disposition of the underlying obligations.

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

5
<PAGE>

reverse repurchase transactions. Reverse repurchase agreements involve the risk
that the market value of securities retained by the Prime Series in lieu of
liquidation may decline below the repurchase price of the securities sold by
the Prime Series, which it is obligated to repurchase.

Investment Restrictions

The Prime Series investment program is subject to a number of investment
restrictions that reflect self-imposed standards as well as federal regulatory
limitations. The Prime Series will not:

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

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

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

(4) purchase any commercial paper or variable rate demand notes that would
cause more than 25% of the value of the Prime Series' total assets at the time
of such purchase to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry. The
investment objective of the Prime Series as described under "Investment
Objective" and the foregoing restrictions are matters of fundamental policy
except where noted and may not be changed without the affirmative vote of a
majority of the outstanding shares of the Prime Series.

The Prime Series is subject to further investment restrictions that are set
forth in the Statement of Additional Information.

5 How to Invest in the Quality Cash Reserve Prime Shares

General Information on Purchases

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

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

6
<PAGE>

Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and
Christmas Day.

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

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

Purchases through an Account

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

Automatic Investment and Redemption
Program

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

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

6 How to Redeem Shares
Shareholders may redeem all or part of their Quality Cash Reserve Prime Shares
on any business day of the Fund by transmitting a redemption order to a
Participating Dealer. A redemption

7
<PAGE>

request is effected at the net asset value next determined after tender of
shares for redemption. Redemption orders received after 12:00 noon (Eastern
Time) will be executed the following business day at the net asset value of the
Prime Series to be redeemed next determined after receipt of the order. The
terms and conditions under which redemptions may be effected are governed by
the shareholder's agreement with the Participating Dealer.

Redemption by Check

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

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

Redemption by Wire

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

Redemption by Mail

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

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

8
<PAGE>

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

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

Additional Information on Redemption

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

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

7 Dividends and Taxes

Dividends

All of the net income earned on the Prime Series is normally declared as
dividends daily to the respective shareholders of record of the Prime Series.
Dividends on the Prime Series are normally payable on the first day that a
share purchase order is effective but not on the date that a redemption order
is effective. Dividends are declared daily and reinvested monthly in the form
of additional full and fractional shares of the Prime Series at net asset
value, unless the shareholder has elected to have dividends paid in cash.

Taxes

The following summary of certain federal income tax consequences is based on
current tax laws and regulations, which may be changed by legislation, judicial
or administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of the Fund or
the shareholders, and the discussion herein is not intended as a substitute for
careful tax planning. Accordingly, shareholders are advised to consult with
their own tax advisors concerning the application of state and local taxes to
investments in the Prime Series, which may differ from the federal income tax
consequences described above. Additional information concerning taxes is set
forth in the Statement of Additional Information.

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

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

9
<PAGE>

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

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

The Fund intends to make sufficient distributions of its ordinary income and
capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.

The sale, exchange or redemption of shares is a taxable event for the
shareholder.

8 Management of the Fund
Board of Directors

Investment Advisor

Investment Company Capital Corp. ("ICC"), an indirect subsidiary of Bankers
Trust New York Corporation, was organized in 1987 and acts as the investment
advisor to the Prime Series. ICC supervises and manages the Prime Series'
operations and generally provides management and administrative services for
the Prime Series. ICC is also investment advisor to several funds in the Flag
Investors family of funds which, as of May 31, 1997, had net assets of
approximately 5.5 billion.

As compensation for providing investment advisory services to the Prime Series
for the fiscal year ended March 31, 1997, ICC received a fee equal to .27% of
the Prime Series' average daily net assets. ICC may, from time to time,
voluntarily waive a portion of its advisory fee with respect to the Prime
Series to preserve or enhance the performance of such Series.

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

In the fiscal year ended March 31, 1997, the expenses borne by the Quality Cash
Reserve Prime Shares class of the Prime Series, including the fees to ICC,
amounted to .91% (net of fee waivers) of such class' average daily net assets.

Distributor

Effective September 1, 1997, ICC Distributors, Inc. ("ICC Distributors" or the
"Distributor") acts

10
<PAGE>

as distributor for the Quality Cash Reserve Prime Shares. Prior to September 1,
1997, Alex Brown & Sons Incorporated served as distributor for the Quality Cash
Reserve Prime Shares for the same compensation and on substantially the same
terms and conditions as ICC Distributors. ICC Distributors is a registered
broker-dealer that offers distribution services to a variety of registered
investment companies including the Flag Investors family of funds. ICC
Distributors is not affiliated with the Prime Series' advisor.

As compensation for its services, ICC Distributors is entitled to receive an
annual fee from the Fund, equal to .60% of the average daily net assets
invested in Quality Cash Reserve Prime Shares. ICC Distributors currently
reduces its distribution fee, on a voluntary basis, to .53% of the Quality Cash
Reserve Prime Shares' average daily net assets. (See "Table of Fees and
Expenses.")

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

9 Current Yield

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

10 General Information

Description of Shares

11
<PAGE>

the Tax-Free Series. Each of the Series currently offers one or more classes of
shares, which classes differ from each other principally in the allocation of
certain expenses and the method of distribution, which may affect performance.
For information regarding the other classes of shares, please call (800)
553-8080 or a Participating Dealer. Shares of the Fund have equal rights with
respect to voting, except that the holders of shares of a particular Series or
class will have the exclusive right to vote on matters affecting only the
rights of the holders of such Series or class. For example, holders of a
particular Series will have the exclusive right to vote on any investment
advisory agreement or investment restriction that relates only to such Series.
In the event of dissolution or liquidation, holders of shares of each Series
will receive pro rata, subject to the rights of creditors, (a) the proceeds of
the sale of the assets held in the respective Series less (b) the liabilities
of the Fund attributable to the respective Series or allocated among all Series
based on the respective liquidation value of each Series.

Custodian, Transfer Agent and Accounting
Services

Investment Company Capital Corp. is the Fund's transfer and dividend disbursing
agent and provides accounting services to the Prime Series. As compensation for
providing accounting services to the Prime Series for the fiscal year ended
March 31, 1997, ICC received a fee equal to .01% of the Prime Series' average
daily net assets. (See the Statement of Additional Information.) PNC acts as
custodian for the Fund's portfolio securities and cash. The Fund's Board of
Directors has approved Bankers Trust Company, a subsidiary of Bankers Trust New
York Corporation and an affiliate of the Fund, as custodian. Currently, it is
anticipated that Bankers Trust Company will provide custodial services to the
Fund effective September 22, 1997.

Annual Meetings

Reports

Shareholder Inquiries

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

12
<PAGE>

QUALITY CASH RESERVE PRIME SHARES
(A Class of BT Alex. Brown Cash Reserve Fund, Inc.)

Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202

Distributor Fund Counsel
ICC DISTRIBUTORS, INC. MORGAN, LEWIS & BOCKIUS LLP
P.O. Box 7558 2000 One Logan Square
Portland, Maine 04101 Philadelphia, Pennsylvania 19103

Custodian Independent Accountants
PNC BANK COOPERS & LYBRAND L.L.P.
Airport Business Center 2400 Eleven Penn Center
200 Stevens Drive Philadelphia, Pennsylvania 19103
Lester, Pennsylvania 19113

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

13
<PAGE>

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

[GRAPHIC OMITTED]

FLAG INVESTORS
CASH RESERVE PRIME SHARES
(Class A and Class B Shares)

Prospectus & Application -- August 1, 1997
As Supplemented Through September 1, 1997

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

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

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

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

This Prospectus sets forth basic information that investors should know about
the Flag Investors Shares prior to investing and should be read and retained
for future reference. A Statement of Additional Information dated August 1,
1997, as supplemented through September 1, 1997, has been filed with the
Securities and Exchange Commission (the "SEC") and is hereby incorporated by
reference. It is available upon request and without charge by calling the Fund
at (800) 553-8080.

For current yield information and for purchase and redemption information, call
your investment representative or 410-895-5995.

TABLE OF CONTENTS

Fund Expenses .................. 1
Financial Highlights ............ 2
Investment Program ............ 5
Investment Restrictions ......... 6
How to Invest in the Fund ...... 6
How to Redeem Shares ............ 9
Telephone Transactions ......... 9
Dividends and Taxes ............ 10
Management of the Fund ......... 11
Investment Advisor ............ 11
Distributor ..................... 11
Custodian, Transfer Agent and
Accounting Services ......... 12
Current Yield .................. 12
General Information ............ 12
Application ..................... A-1

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

Flag Investors Funds
P.O. Box 515
Baltimore, Maryland 21203

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

<PAGE>

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

FUND EXPENSES

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

<TABLE>
<CAPTION>
Flag Flag
Investors Investors
Class A Class B
Shares Shares
----------- --------------
<S> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases ................................. None* None
Maximum Sales Charge Imposed on Reinvested Dividends ........................ None None
Maximum Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower) ................................. None* 4.00%**

Annual Fund Operating Expense (as a percentage of average daily net assets):
Management Fees ............................................................ .27% .27%
12b-1 Fees .................................................................. .25% .75%
Other Expenses (including a .25% shareholder servicing fee for Flag Investors
Class B Shares) ............................................................ .11% .36%***
----- -------
Total Operating Expenses ................................................... .63% 1.38%
===== =======
</TABLE>
- ---------------
* Flag Investors Class A Shares are not subject to a sales charge; however,
shareholders of other Flag Investors funds who exchange their Class A
shares of such funds for Flag Investors Class A Shares will retain
liability for any contingent deferred sales charge due on such shares upon
redemption. (See "How to Invest in the Fund -- Purchases by Exchange.")

** A declining contingent deferred sales charge will be imposed on redemptions
of Flag Investors Class B Shares made within six years of purchase. Flag
Investors Class B Shares will automatically convert to Flag Investors Class
A Shares six years after purchase. (See "How to Invest in the Fund -- Flag
Investors Class B Shares.")

*** A portion of the shareholder servicing fee is allocated to member firms of
the National Association of Securities Dealers, Inc. and qualified banks
for services provided and expenses incurred in maintaining shareholder
accounts, responding to shareholder inquiries and providing information on
their investments.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Example: 1 year 3 years 5 years 10 years
- -------- ------- -------- -------- ---------
You would pay the following expenses on a $1,000 invest-
ment, assuming (1) 5% annual return and (2) redemption at
the end of each time period:

Flag Investors Class A Shares ........................ $ 6 $20 $35 $ 79
Flag Investors Class B Shares ........................ $54 $74 $96 $126*
You would pay the following expenses on the same invest-
ment, assuming no redemption:
Flag Investors Class B Shares ........................ $14 $44 $76 $126*
</TABLE>

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

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

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

Actual expenses may be greater or less than those shown. Due to the
continuous nature of Rule 12b-1 fees, long-term shareholders of the Fund may
pay more than the equivalent of the maximum front-end sales charges permitted
by the Conduct Rules of the National Association of Securities Dealers, Inc.

1
- --------------------------------------------------------------------------------
<PAGE>

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

FINANCIAL HIGHLIGHTS

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

The financial highlights included in this table are a part of the Fund's
financial statements for the Prime Series for the indicated fiscal periods that
have been audited by the Fund's independent accountants. The financial
statements and financial highlights for the fiscal year ended March 31, 1997
and the report of the Fund's independent accountants thereon are included in
the Statement of Additional Information, which can be obtained at no charge by
calling the Fund at (800) 767-FLAG.

Prime Series (including Flag Investors Class A Shares(1)

(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the Year Ended March 31,
--------------------------------------------------------------------------
1997(1) 1996(1) 1995(1) 1994(1)
------------------ ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------- -------------- -------------- --------------
Income from Investment Operations:
Net investment income .................. 0.0478 0.0524 0.0442 0.0262
Less Distributions:
Dividends from net investment income ... (0.0478) (0.0524) (0.0442) (0.0262)
--------------- -------------- -------------- --------------
Net asset value at end of period ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00
=============== ============== ============== ==============
Total Return(3)
Based on net asset value per share ...... 4.88% 5.36% 4.51% 2.65%
Ratios to Average Daily Net Assets:
Expenses .............................. 0.63% 0.60% 0.61% 0.62%
Net investment income .................. 4.78% 5.25% 4.26% 2.62%
Supplemental Data:
Net assets at end of period ............ $2,552,053,912(5) $2,392,658,047 $1,479,806,435 $1,368,451,627
Number of shares outstanding at end of
period .............................. 2,552,045,195 2,392,661,216 1,479,804,186 1,368,449,549
</TABLE>

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

(1) Per share information and ratios of the Flag Investors Class A Shares are
identical to the Prime Shares since January 5, 1989 (the date Flag Investors
Class A Shares commenced operations).
(2) The Fund's fiscal year-end was changed to March 31.
(3) Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
(4) Annualized.
(5) Net assets consist of: Prime Shares -- $2,545,532,365 and Flag Investors
Class A Shares -- $6,521,574.

2
- --------------------------------------------------------------------------------
<PAGE>

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

FINANCIAL HIGHLIGHTS(continued)

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

<TABLE>
<CAPTION>
For the
Eleven
Months
Ended For the
For the Year Ended March 31, March 31, Year Ended April 30,
- ----------------------------------------------------------------------------- ---------------- ---------------------
1993(1) 1992(1) 1991(1) 1990(1) 1989(1)(2) 1988
- ----------------- ----------------- ----------------- ----------------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------- -------------- -------------- -------------- --------------- ------------

0.0295 0.0485 0.0734 0.0846 0.0712 0.0647

(0.0295) (0.0485) (0.0734) (0.0846) (0.0712) (0.0647)
-------------- -------------- -------------- -------------- --------------- ------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== ============== =============== ============
2.99% 4.96% 7.59% 8.80% 8.01%(4) 6.67%

0.63% 0.61% 0.59% 0.52% 0.54%(4) 0.52%
2.95% 4.84% 7.31% 8.42% 7.81%(4) 6.46%

$1,481,103,834 $1,512,362,510 $1,295,888,161 $1,312,276,151 $1,084,793,157 $874,051,953
1,481,101,756 1,512,360,432 1,295,888,161 1,312,272,415 1,084,789,421 874,047,336
</TABLE>

3
- --------------------------------------------------------------------------------
<PAGE>

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

FINANCIAL HIGHLIGHTS(concluded)

- --------------------------------------------------------------------------------
Prime Series (Flag Investors Class B Shares)

(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the Period
For the April 3, 1995(1)
Year Ended through
March 31, 1997 March 31, 1996
---------------- ---------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ............ $ 1.00 $ 1.00
--------- -----------
Income from Investment Operations:
Net investment income .............................. 0.0414 0.0361

Less Distributions:
Dividends from net investment income ............... (0.0414) (0.0361)
--------- -----------
Net asset value at end of period .................. $ 1.00 $ 1.00
========= ===========
Total Return:
Based on net asset value per share .................. 4.22% 3.69%(2)
Ratios to Average Daily Net Assets:
Expenses .......................................... 1.38% 1.38%(2)
Net investment income .............................. 4.14% 4.30%(2)
Supplemental Data:
Net assets at end of period ........................ $ 227,098 $ 10,200
Number of shares outstanding at end of period ...... 227,098 10,200
</TABLE>
- -----------
(1) Commencement of operations.
(2) Annualized.

4
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------

INVESTMENT PROGRAM

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

Investment Objective

The investment objective of the Prime Series is to seek as high a level
of current income as is consistent with preservation of capital and liquidity.
The Prime Series endeavors to achieve its objective by investing in a
diversified portfolio of high quality money market instruments with maturities
of 397 days or less from the date of purchase.

Portfolio Investments

The Prime Series seeks to achieve its objective by investing in domestic
money market instruments that satisfy strict credit quality standards and that
mature within 397 days or less from the date of purchase. The Prime Series may
invest in U.S. Treasury obligations, obligations issued or guaranteed by
agencies or instrumentalities of the U.S. Government and a broad range of bank
and commercial obligations that the investment advisor, under guidelines
established by the Board of Directors, believes present minimal credit risk and
that satisfy the criteria for such obligations discussed below:

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

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

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

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

The Prime Series may enter into the following arrangements:

Repurchase Agreements under which the purchaser (for example, the Prime
Series) acquires ownership of an obligation and the seller agrees, at the time
of the sale, to repurchase the obligation at a mutually agreed upon time and
price, thereby determining the yield during the purchaser's holding period.
Although the underlying collateral for repurchase agreements may have
maturities exceeding 397 days, repurchase agreements entered into by the Prime
Series will not have a stated maturity in excess of seven days from the date of
purchase. Default by, or bankruptcy proceedings with respect to the seller may,
however, expose the Series to possible loss because of adverse market action or
delay in connection with the disposition of the underlying obligations.

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

Reverse Repurchase Agreements involving the sale of money market
instruments held by the Prime

5
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------

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

INVESTMENT RESTRICTIONS

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

The Prime Series' investment program is subject to a number of investment
restrictions that reflect self-imposed standards as well as federal regulatory
limitations. The Prime Series will not:

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

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

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

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

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

The Prime Series is subject to further investment restrictions that are
set forth in the Statement of Additional Information.

HOW TO INVEST IN THE FUND

- --------------------------------------------------------------------------------
General Information on Purchases

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

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

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

The minimum initial investment in Flag Investors Class A Shares is
$2,000, except that the minimum initial investment for shareholders of any
other Flag Investors fund or class is $500 and the minimum initial investment
for participants in the Flag Investors Class A Shares' Automatic Investing Plan
is $250. The minimum initial investment in Flag Investors Class B Shares, which
are available only through exchange, is $500. Each subsequent investment must
be at least $100 per class, except that the minimum subsequent

6
- --------------------------------------------------------------------------------
<PAGE>

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

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

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

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

Offering Price

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

<PAGE>

Flag Investors Class B Shares

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

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

Contingent Deferred Sales Charge
Year Since Purchase (as a percentage of the dollar
Payment was Made amount subject to charge)
- --------------------------------------------------------------
First............................... 4.0%
Second ............................. 4.0%
Third .............................. 3.0%
Fourth ............................. 3.0%
Fifth............................... 2.0%
Sixth............................... 1.0%
Thereafter.......................... None*
- --------------------------------------------------------------
* As described more fully below, Flag Investors Class B Shares automatically
convert to Flag Investors Class A Shares six years after the beginning of
the calendar month in which the purchase order is accepted.

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

Waiver of Contingent Deferred Sales Charge. The contingent deferred sales
charge will be waived on the redemption of Flag Investors Class B Shares (i)
following the death or initial determination of disability (as defined in the
Internal Revenue Code of 1986, as amended) of a shareholder; or (ii) to the
extent that the redemption represents a minimum required distribution from an
individual retirement account or other
7
- --------------------------------------------------------------------------------
<PAGE>

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

retirement plan to a shareholder who has attained the age of 70 1/2. The waiver
with respect to (i) above is only applicable in cases where the shareholder
account is registered (a) in the name of an individual person, (b) as a joint
tenancy with rights of survivorship, (c) as community property or (d) in the
name of a minor child under the Uniform Gifts or Uniform Transfers to Minors
Act. A shareholder, or his or her representative, must notify the Fund's
transfer agent (the "Transfer Agent") prior to the time of redemption if such
circumstances exist and the shareholder is eligible for this waiver. For
information on the imposition and waiver of the contingent deferred sales
charge, contact the Transfer Agent at (800) 553-8080.

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

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

Systematic Purchase Plan

The Fund has established a Systematic Purchase Plan pursuant to which
shareholders may elect to have a predetermined amount of their Flag Investors
Class A Shares redeemed, on a regular basis (for example, monthly), and the
proceeds of such redemption used to purchase (at net asset value plus any
applicable front-end sales charge) shares of any other fund or funds in the
Flag Investors family of mutual funds selected in advance by the shareholder.
Shareholders may establish a Systematic Purchase Plan at any time by completing
a Systematic Purchase Plan Participation and Authorization Form and delivering
or mailing the completed form to the Distributor, a Participating Dealer or a
Shareholder Servicing Agent. For more information and to obtain a form,
shareholders should contact the Distributor, a Participating Dealer or a
Shareholder Servicing Agent.

Purchases by Exchange

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

Flag Investors Class A Shares may be exchanged for Class A shares of
other Flag Investors funds upon payment of the applicable sales charges. An
investor who has paid a sales charge on Class A shares may thereafter exchange
those Class A shares for Class A shares of other Flag Investors funds with i) a
higher sales charge, upon payment of an incremental sales charge or ii) an
equal or lower sales charge, at net asset value (i.e., without a sales charge).

The net asset value of shares purchased and redeemed in an exchange
request received on a Business Day will be determined on the same day, provided
that the exchange request is received prior to 12:00 noon (Eastern Time).
Exchange requests received after 12:00 noon (Eastern Time) will be effected on
the next Business Day.

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

Investors should receive and read the applicable prospectus prior to
tendering shares for exchange. The Fund may modify or terminate this offer of
exchange at any time on 60 days' prior written notice to shareholders.

Purchases Through Automatic Investing Plan

Shareholders may purchase Flag Investors Class A Shares regularly by
means of an Automatic Investing Plan with a pre-authorized check drawn on their
checking accounts. Under this plan, the shareholder may elect to have a
specified amount invested monthly or quarterly in Flag Investors Class A
Shares. The amount specified by the shareholder will be withdrawn from the
shareholder's checking account using the preauthorized check. This amount will
be invested in Flag

8
- --------------------------------------------------------------------------------
<PAGE>

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

Investors Class A Shares at net asset value. Participation in the Automatic
Investing Plan may be discontinued either by the Fund or the shareholder upon
30 days' prior written notice to the other party. A shareholder who wishes to
enroll in the Automatic Investing Plan or who wishes to obtain additional
purchase information may do so by completing the appropriate section of the
Application Form attached to this Prospectus.

Purchases Through Dividend Reinvestment

Dividends are declared daily and reinvested monthly in the form of
additional full and fractional Flag Investors Shares of the same class at net
asset value, unless a shareholder has elected on his account application to
have dividends paid in cash.

Alternatively, shareholders may have their distributions invested in
shares of other funds in the Flag Investors family of funds. Shareholders who
are interested in this option should call (800) 553-8080 for additional
information.

Reinvestments of distributions will be effected without a sales charge.

HOW TO REDEEM SHARES

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

Shareholders may redeem all or part of their Flag Investors Shares on any
Business Day by transmitting a redemption order through the Distributor, a
Participating Dealer, a Shareholder Servicing Agent or by regular or express
mail to the Transfer Agent. Shareholders may also redeem Flag Investors Shares
by telephone (in amounts up to $50,000). (See "Telephone Transactions" below.)
Redemption orders received after 12:00 noon (Eastern Time) will be effected the
following Business Day at the net asset value per share (reduced by any
applicable contingent deferred sales charge) next determined after receipt of
the order. If the shares to be redeemed were purchased by check, the Fund
reserves the right not to honor the redemption request until the check has
cleared, and redemption of such shares by wire, by check redemption or by
telephone will be restricted for a period of fifteen calendar days unless the
proceeds of redemption are used to purchase other securities through the
Distributor. Exchange privileges terminate upon redemption of shares.

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

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

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

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

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

TELEPHONE TRANSACTIONS

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Shareholders may exercise the exchange privilege with respect to other
Flag Investors funds, or redeem Flag Investors Shares of either class in
amounts up to $50,000, by notifying the Transfer Agent by telephone at (800)
553-8080 on any Business Day between the hours of 8:30 a.m. and 5:30 p.m.
(Eastern Time) or by regular or express mail to its address listed on the
inside back cover of this prospectus.

9
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<PAGE>

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Telephone transaction privileges are automatic. However, shareholders may
specifically request that no telephone redemptions or exchanges be accepted for
their accounts. This election may be made on the Application Form or at any time
thereafter by completing and returning appropriate documentation supplied by the
Transfer Agent.

A telephone exchange or redemption placed by 12:00 noon (Eastern Time) is
effective that day. Telephone orders placed after 12:00 noon (Eastern Time)
will be effected on the following Business Day at the net asset value (less any
applicable contingent deferred sales charge on redemptions) next determined
after receipt of the order.

The Fund and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These proce-
dures include requiring the investor to provide certain personal identification
information at the time an account is opened and prior to effecting each
transaction requested by telephone. In addition, all telephone transaction
requests will be recorded and investors may be required to provide additional
telecopied instructions of such transaction requests. If these procedures are
followed, neither the Fund nor the Transfer Agent will be responsible for any
loss, liability, cost or expense for following instructions received by
telephone that either of them reasonably believes to be genuine. During periods
of extreme economic or market changes, shareholders may experience difficulty
in effecting telephone transactions. In such event, requests should be made by
regular or express mail. (See "How to Invest in the Fund -- Purchases by
Exchange" and "How to Redeem Shares.")

DIVIDENDS AND TAXES

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Dividends

All of the net income earned on the Flag Investors Shares is normally
declared as dividends daily to the respective shareholders of record of such
shares. Dividends on Flag Investors Shares are normally payable on the first
day that a purchase or exchange order is effective but not on the date that a
redemption order is effective.

Taxes

The following summary of certain federal income tax consequences is based
on current tax laws and regulations, which may be changed by legislative,
judicial or administrative action. No attempt is made to present a detailed
explanation of the federal, state or local income tax treatment of the Fund or
the shareholders, and the discussion herein is not intended as a substitute for
careful tax planning. Accordingly, shareholders are advised to consult with
their own tax advisors concerning the application of state, local or other
taxes to investments in the Prime Series, which may differ from the federal
income tax consequences described above. Additional information concerning
taxes is set forth in the Statement of Additional Information.

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

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

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

The Fund intends to make sufficient distributions of its ordinary income
and capital gain net income prior to the end of each calendar year to avoid
liability for federal excise tax.

The sale, exchange or redemption of Flag Investors Shares is a taxable
event for the shareholder.

10
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<PAGE>

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MANAGEMENT OF THE FUND

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INVESTMENT ADVISOR

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

Investment Company Capital Corp. ("ICC" or the "Advisor"), an indirect
subsidiary of Bankers Trust New York Corporation, was organized in 1987 and
acts as investment advisor to the Prime Series. ICC supervises and manages the
Prime Series' operations and generally provides management and administrative
services for the Prime Series. In addition, ICC is responsible for managing the
Prime Series' investments. ICC is also investment advisor to several funds in
the Flag Investors family of funds which, as of May 31, 1997, had net assets of
approximately $5.5 billion.

ICC may, from time to time, voluntarily waive a portion of its advisory
fee with respect to the Prime Series to preserve or enhance the performance of
the Series. As compensation for providing investment advisory services to the
Prime Series for the fiscal year ended March 31, 1997, ICC received a fee equal
to .27% of the Prime Series' average daily net assets.

In the fiscal year ended March 31, 1997, the expenses borne by the Prime
Series, including the fees to ICC, amounted to .63% of the Prime Series'
average daily net assets.

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

DISTRIBUTOR

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

Effective September 1, 1997, ICC Distributors, Inc. ("ICC Distributors"
or the "Distributor") acts as distributor for the Flag Investors Shares. Prior
to September 1, 1997, Alex. Brown & Sons Incorporated served as distributor for
the Flag Investors Shares for the same compensation and on substantially the
same terms and conditions as ICC Distributors. ICC Distributors is a registered
broker-dealer that offers distribution services to a variety of registered
investment companies including the other funds in the Flag Investors family of
funds. ICC Distributors is not affiliated with the Advisor.

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

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

Financial institutions that act as Shareholder Servicing Agents may
impose separate fees in connection with these services, and investors should
review this Prospectus in conjunction with any such institution's fee schedule.

11
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<PAGE>

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CUSTODIAN, TRANSFER AGENT AND ACCOUNTING SERVICES

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

Investment Company Capital Corp. is the Fund's transfer and dividend
disbursing agent and provides accounting services to the Prime Series. As
compensation for providing accounting services to the Prime Series for the
fiscal year ended March 31, 1997, ICC received a fee equal to .01% of the Prime
Series' average daily net assets. PNC acts as custodian for the Fund's
portfolio securities and cash. (See the Statement of Additional Information.)
The Fund's Board of Directors has approved Bankers Trust Company, a subsidiary
of Bankers Trust New York Corporation and an affiliate of the Fund, as
custodian. Currently, it is anticipated that Bankers Trust Company will provide
custodial services to the Fund effective September 22, 1997.

CURRENT YIELD

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

From time to time the Fund advertises the "yield" and "effective yield"
of a particular Series or class. Both figures are based on historical earnings
and are not intended to indicate future performance. The "yield" of a Series or
class refers to the income generated by an investment in that Series or class
over a seven-day period (which period will be stated in the advertisement).
This income is then "annualized," that is, the income earned in the period is
assumed to be earned every seven days over a 52-week period and is stated as a
percentage of the investment. The "effective yield" is calculated similarly but
when annualized, the income earned by the investment is assumed to be
reinvested in Flag Investors Class A or Class B Shares and thus compounded in
the course of a 52-week period. The effective yield will be slightly higher
than the yield because of the compounding effect of this assumed reinvestment.
Yields may vary between classes as a result of differences in expenses. The
yields for Flag Investors Class A or Class B Shares can be obtained by calling
the Fund at (410) 895-5995.

GENERAL INFORMATION

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Description of Shares

The Fund is an open-end, diversified management investment company. The
Fund was reorganized under the laws of the State of Maryland on April 5, 1990.
The Fund is authorized to issue 8 billion shares of common stock, with a par
value of $.001 per share. Shares of the Fund are divided into three series,
each with a par value of $.001 -- the Prime Series, the Treasury Series and the
Tax-Free Series. Each of the Series currently offers one or more classes, which
classes differ from each other principally in distribution fees, in some
instances shareholder servicing fees, and the method of distribution, which may
affect performance. For information regarding the other classes, please call
1-800-553-8080. Shares of the Fund have equal rights with respect to voting,
except that the holders of shares of a particular Series or class will have the
exclusive right to vote on matters affecting only the rights of the holders of
such Series or class. For example, holders of a particular Series will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such Series. In the event of dissolution or
liquidation, holders of each Series will receive pro rata, subject to the
rights of creditors, (a) the proceeds of the sale of the assets held in the
respective Series, less (b) the liabilities of the Fund attributable to the
respective Series or allocated among all Series based on the respective
liquidation value of each Series.

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

Annual Meetings

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

12
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<PAGE>

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Reports

Shareholder Inquiries

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

13
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<PAGE>
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FLAG INVESTORS CASH RESERVE PRIME CLASS A SHARES
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------

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

BT Alex. Brown Incorporated/Flag Investors Funds
P.O. Box 419663
Kansas City, MO 64141-6663
Attn: Flag Investors Cash Reserve Prime Class A Shares

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

To open an IRA account please call 1-800-767-3524 for an IRA information kit.

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

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

Your Account Registration (Please Print)

Existing Account No., if any: ____________

Individual or Joint Tenant
________________________________________________________
First Name Initial Last Name
________________________________________________________
Social Security Number
________________________________________________________
Joint Tenant Initial Last Name

Corporations, Trusts, Partnerships, etc.
________________________________________________________
Name of Corporation, Trust or Partnership
________________________________________________________
Tax ID Number Date of Trust
________________________________________________________
Name of Trustees (If to be included in the Registration)
________________________________________________________
For the Benefit of

Gifts to Minors
________________________________________________________
Custodian's Name (only one allowed by law)
________________________________________________________
Minor's Name (only one)
________________________________________________________
Social Security Number of Minor

under the __________________ Uniform Gifts to Minors Act
State of Residence

Mailing Address
________________________________________________________
Street
________________________________________________________
City State Zip
________________________________________________________
Daytime Phone

Distribution Options

Please check appropriate boxes. If none of the options are selected, all
distributions will be reinvested in additional Flag Investors Class A Shares at
no sales charge.

Income Dividends Capital Gains
[ ] Reinvested in additional shares [ ] Reinvested in additional shares
[ ] Paid in Cash [ ] Paid in Cash

Call (800) 553-8080 for information about reinvesting your dividends in other
funds in the Flag Investors Family of Funds.

A-1

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<PAGE>

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Automatic Investing Plan (Optional)

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

Please attach a voided check.
Minimum Initial Investment: $250
Subsequent Investment (check one): [ ] Monthly ($100 minimum) [ ] Quarterly
($250 minimum)

________________________________________________________________________________
Bank Name ________________________________________________
Depositor's Signature Date
________________________________________________________________________________
Existing Flag Investors Fund Account No., if any
________________________________________________
Depositor's Signature Date
(if joint acct., both must sign)

Telephone Transactions

I understand that I will automatically have telephone redemption privileges
(for amounts up to $50,000) and telephone exchange privileges (with respect to
other Flag Investors Funds) unless I mark one or both of the boxes below.

No, I/We do not want: [ ] Telephone redemption privileges [ ] Telephone
exchange privileges

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

Bank:___________________________ Bank Account No.: _______________________
Address:___________________________ Bank Account Name:________________________

Signature and Taxpayer Certification

The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
taxable dividends, capital gains distributions and redemption proceeds paid to
any individual or certain other non-corporate shareholders who fail to provide
the information and/or certifications required below. This backup withholding
is not an additional tax, and any amounts withheld may be credited against the
shareholder's ultimate U.S. tax liability.

By signing this Application, I hereby certify under penalties of perjury that
the information on this Application is complete and correct and that as
required by federal law: (Please check applicable boxes)
[ ] U.S. Citizen/Taxpayer:
[ ] I certify that (1) the number shown above on this form is the correct
Social Security Number or Tax ID Number and (2) I am not subject to any
backup withholding either because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding.
[ ] If no Tax ID Number or Social Security Number has been provided above,
I have applied, or intend to apply, to the IRS or the Social Security
Administration for a Tax ID Number or a Social Security Number, and I
understand that if I do not provide either number to the Transfer Agent
within 60 days of the date of this Application or if I fail to furnish
my correct Social Security Number or Tax ID Number, I may be subject to
a penalty and a 31% backup withholding on distributions and redemption
proceeds. (Please provide either number on IRS Form W-9. You may
request such form by calling the Transfer Agent at 800-553-8080).
[ ] Non-U.S. Citizen/Taxpayer:
Indicated country of residence for tax purposes:___________________________
Under penalties of perjury, I certify that I am not a U.S. citizen or
resident and I am an exempt foreign person as defined by the Internal
Revenue Service.

<PAGE>

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

The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
_________________________ ____________________________________________________
Signature Date Signature (if joint acct., both must sign) Date

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For Dealer Use Only

Dealer's Name: ________________________ Dealer Code: __________________________

Dealer's Address:______________________ Branch Code: __________________________

______________________

Representative: ______________________ Rep. No.: __________________________

A-2

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<PAGE>

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FLAG INVESTORS CASH RESERVE PRIME SHARES
(Class A and Class B Shares)

Investment Advisor
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202

Distributor Fund Counsel
ICC DISTRIBUTORS, INC. MORGAN, LEWIS & BOCKIUS LLP
P.O. Box 7558 2000 One Logan Square
Portland, Maine 04101 Philadelphia, Pennsylvania 19103

Custodian Independent Accountants
PNC BANK, NATIONAL ASSOCIATION COOPERS & LYBRAND L.L.P.
Airport Business Park 2400 Eleven Penn Center
200 Stevens Drive Philadelphia, Pennsylvania 19103
Lester, Pennsylvania 19113

Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
1-800-553-8080

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