<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 fiduciaries 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 Free check redemption.
For current yield information and for purchase and redemption information, call
your securities dealer or (410) 895-5995.
This Prospectus sets forth basic information that you should know about the
Fund prior to investing. You should retain it for future reference. A Statement
of Additional Information dated August 1, 1998, 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
Table of Fees and Expenses 2
Financial Highlights 3
Investment Program 6
The Fund's Net Asset Value 9
How to Buy Shares 10
How to Redeem Shares 10
Dividends and Taxes 12
Management of the Fund 13
Current Yield 14
General Information 14
The Fund's shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank. The shares are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government
agency. Investment in the shares involves risk, including possible loss of
principal.
An investment in the Fund is neither insured nor guaranteed by the United
States Government. There can be no assurance that any Series will be able to
maintain a stable net asset value of $1.00 per share.
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, 1998
<PAGE>
Table of Fees and
Expenses
The following table of fees and expenses is provided to assist you in
understanding the various costs and expenses that you may bear indirectly. If
you purchase shares of the Fund through a financial institution, you may be
charged separate fees by the financial institution. Your 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")..... 0.26% 0.24% 0.27%
12b-1 Fees (See "Management of the Fund -- Distributor") ................ 0.25% 0.25% 0.25%
Other Expenses .......................................................... 0.16% 0.10% 0.08%
-------- ---- -------
Total Fund Operating Expenses ........................................... 0.67% 0.59% 0.60%
======== ==== =======
</TABLE>
Example
You would pay the following expenses on a $1,000 investment in each Series
assuming (1) 5% annual return, and (2) redemption at the end of each time
period:
Prime Treasury Tax-Free
Series Series Series
-------- ---------- ---------
1 year ........... $ 7 $ 6 $ 6
3 years .......... $21 $19 $19
5 years .......... $37 $33 $33
10 years ......... $83 $74 $75
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>
Financial Highlights
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, 1998 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,
-------------------------------------------------------------
1998(1) 1997(1) 1996(1)
------------------- ------------------- -------------------
<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 ............. 0.0494 0.0478 0.0524
Less Distributions:
Dividends from net
investment income and/or
short-term gains .................. (0.0494) (0.0478) (0.0524)
------------ ------------ --------------
Net asset value at end of
period ............................ $ 1.00 $ 1.00 $ 1.00
============ ============ ==============
Total Return:
Based on net asset value per
share ............................. 5.05% 4.88% 5.36%
Ratios to Average Daily Net
Assets:
Expenses .......................... 0.67% 0.63% 0.60%
Net investment income ............. 4.94% 4.78% 5.21%
Supplemental Data:
Net assets at end of period ....... $3,172,274,336 $2,552,053,912 $2,392,658,047
Number of shares outstanding
at end of period .................. 3,172,265,593 2,552,045,195 2,392,661,216
<CAPTION>
For the Year Ended March 31,
------------------------------------------------------------------------------------
1995(1) 1994(1) 1993(1) 1992(1)
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at beginning of
period ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------
Income from Investment
Operations:
Net investment income ............. 0.0442 0.0262 0.0295 0.0485
Less Distributions:
Dividends from net
investment income and/or
short-term gains .................. (0.0442) (0.0262) (0.0295) (0.0485)
------------ -------------- -------------- --------------
Net asset value at end of
period ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============== ============== ==============
Total Return:
Based on net asset value per
share ............................. 4.51% 2.65% 2.99% 4.96%
Ratios to Average Daily Net
Assets:
Expenses .......................... 0.61% 0.62% 0.63% 0.61%
Net investment income ............. 4.46% 2.62% 2.95% 4.84%
Supplemental Data:
Net assets at end of period ....... $1,479,806,435 $1,368,451,627 $1,481,103,834 $1,512,362,510
Number of shares outstanding
at end of period .................. 1,479,804,186 1,368,449,549 1,481,101,756 1,512,360,432
<CAPTION>
For the
Eleven
Months
For the Year Ended March 31, Ended
---------------------------------------- March 31,
1991(1) 1990 1989(2)
------------------- ------------------- ----------------------
<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 ............. 0.0734 0.0846 0.0712
Less Distributions:
Dividends from net
investment income and/or
short-term gains .................. (0.0734) (0.0846) (0.0712)
------------ -------------- -------------
Net asset value at end of
period ............................ $ 1.00 $ 1.00 $ 1.00
============ ============== =============
Total Return:
Based on net asset value per
share ............................. 7.59% 8.80% 8.01%(3)
Ratios to Average Daily Net
Assets:
Expenses .......................... 0.59% 0.52% 0.54%(3)
Net investment income ............. 7.31% 8.42% 7.81%(3)
Supplemental Data:
Net assets at end of period ....... $1,295,888,161 $1,312,276,151 $1,084,793,157
Number of shares outstanding
at end of period .................. 1,295,888,161 1,312,272,415 1,084,789,421
</TABLE>
- --------
(1) Financial information for fiscal years ended March 31, 1998, 1997, 1996,
1995, 1994, 1993, 1992 and 1991, respectively, is given for the BT Alex.
Brown Cash Reserve Shares class of the Prime Series.
(2) The Fund's fiscal year-end was changed from April 30 to March 31.
(3) Annualized.
3
<PAGE>
Financial Highlights (continued)
Treasury Series
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
For the Year Ended March 31,
-------------------------------------------------------
1998(1) 1997(1) 1996(1)
----------------- ----------------- -----------------
<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 ........ 0.0464 0.0453 0.0494
Less Distributions:
Dividends from net
investment income
and/or short-term gains....... (0.0464) (0.0453) (0.0494)
---------- ------------ ------------
Net asset value at end of
period ....................... $ 1.00 $ 1.00 $ 1.00
========== ============ ============
Total Return:
Based on net asset value per
share ........................ 4.74% 4.63% 5.05%
Ratios to Average Daily Net
Assets:
Expenses ..................... 0.59% 0.61% 0.58%
Net investment income ........ 4.65% 4.54% 4.94%
Supplemental Data:
Net assets at end of period... $798,426,658 $678,444,803 $666,814,158
Number of shares
outstanding at end of
period ....................... 798,354,129 678,391,386 666,762,028
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended March 31,
----------------------------------------------------------------------------------
1995(1) 1994(1) 1993(1) 1992(1)
------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at
beginning of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- -------- --------- ---------
Income from Investment
Operations:
Net investment income ........ 0.0411 0.0255 0.0285 0.0477
Less Distributions:
Dividends from net
investment income
and/or short-term gains....... (0.0411) (0.0255) (0.0285) (0.0477)
---------- -------- --------- ---------
Net asset value at end of
period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ======== ========= =========
Total Return:
Based on net asset value per
share ........................ 4.19% 2.58% 2.89% 4.88%
Ratios to Average Daily Net
Assets:
Expenses ..................... 0.55%(4) 0.54%(4) 0.55%(4) 0.55%
Net investment income ........ 4.09%(5) 2.55%(5) 2.87%(5) 4.76%
Supplemental Data:
Net assets at end of period... $512,167,212 $581,724,214 $618,175,839 $725,010,207
Number of shares
outstanding at end of
period ....................... 512,162,864 581,723,448 618,152,465 725,010,207
<CAPTION>
<PAGE>
For the
Eleven
Months
For the Year Ended March 31, Ended
------------------------------------ March 31,
1991(1) 1990 1989(2)
----------------- ----------------- -------------------
<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 ........ 0.0698 0.0829 0.0696
Less Distributions:
Dividends from net
investment income
and/or short-term gains....... (0.0698) (0.0829) (0.0696)
---------- ------------ --------------
Net asset value at end of
period ....................... $ 1.00 $ 1.00 $ 1.00
========== ============ ==============
Total Return:
Based on net asset value per
share ........................ 7.21% 8.61% 7.82%(3)
Ratios to Average Daily Net
Assets:
Expenses ..................... 0.56% 0.41% 0.44%(3)
Net investment income ........ 6.82% 8.25% 7.50%(3)
Supplemental Data:
Net assets at end of period... $716,551,599 $272,467,125 $235,086,589
Number of shares
outstanding at end of
period ....................... 716,551,599 272,509,276 235,197,074
</TABLE>
- --------
(1) Financial information for fiscal years ended March 31, 1998, 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 from April 30 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,
-------------------------------------------------------
1998(1) 1997 1996
----------------- ----------------- -----------------
<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 .......... 0.0306 0.0286 0.0318
Less Distributions:
Dividends from net
investment income and/or
short-term gains .............. (0.0306) (0.0286) (0.0318)
---------- ------------ ------------
Net asset value at end of
period ........................ $ 1.00 $ 1.00 $ 1.00
========== ============ ============
Total Return:
Based on net asset value per
share ......................... 3.10% 2.90% 3.23%
Ratios to Average Daily Net
Assets:
Expenses ....................... 0.60% 0.62% 0.60%
Net investment income .......... 3.05% 2.86% 3.16%
Supplemental Data:
Net assets at end of period..... $841,184,924 $647,212,025 $571,507,000
Number of shares
outstanding at end
of period ..................... 841,258,030 647,283,274 571,593,265
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the Period
For the Year Ended March 31, Dec. 17, 1990(2)
-------------------------------------------------------------------------- through
1995 1994 1993 1992 March 31, 1991
----------------- ----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value at
beginning of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- -----------
Income from Investment
Operations:
Net investment income .......... 0.0271 0.0184 0.0213 0.0353 0.0124
Less Distributions:
Dividends from net
investment income and/or
short-term gains .............. (0.0271) (0.0184) (0.0213) (0.0353) (0.0124)
---------- ---------- ---------- ---------- -----------
Net asset value at end of
period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ===========
Total Return:
Based on net asset value per
share ......................... 2.75% 1.86% 2.15% 3.59% 4.35%(3)
Ratios to Average Daily Net
Assets:
Expenses ....................... 0.57% 0.58% 0.60% 0.56%(4) 0.53%(3)
Net investment income .......... 2.74% 1.84% 2.13% 3.49%(5) 4.25%(3)
Supplemental Data:
Net assets at end of period..... $475,384,229 $378,859,232 $315,661,447 $304,987,823 $256,895,180
Number of shares
outstanding at end
of period ..................... 475,474,913 378,939,262 315,700,742 305,008,959 256,895,680
</TABLE>
- --------
(1) Financial information for the fiscal year ended March 31, 1998 is given for
the BT Alex. Brown Cash Reserve Shares class of the Tax-Free Series.
(2) Date operations commenced.
(3) Annualized.
(4) Ratio of expenses to average daily net assets prior to partial fee waivers
was 0.57% for the year ended March 31, 1992.
(5) 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>
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
seeks 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. (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 guaran-teed 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 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.
Further investment restrictions are listed in the Statement of Additional
Information.
The Fund's Net Asset Value
The following sections describe how to buy and redeem shares of the Fund.
The price you pay or receive is the Fund's net asset value per share.
The net asset values per share of the Treasury Series and the Tax-Free Series
are determined on each business day as of 11:00 a.m. (Eastern Time). The net
asset value per share of the Prime Series is determined daily on each business
day as of 12:00 noon (Eastern Time).
The Fund uses the amortized cost method of valuing portfolio securities and
rounds the per share net asset value of each Series to the nearest whole cent.
As a result, it is anticipated that the net asset value of each Series will
remain constant at $1.00 per share. There can be no assurance, however, that
this will always be the case.
9
<PAGE>
You may buy or redeem shares on any day on which both the New York Stock
Exchange and the Fund's custodian are open for business (a "Business Day"). If
your order is entered before the Series' net asset value per share is
determined for that day, the price you pay or receive will be based on that
day's net asset value per share. If your order is entered after the Series' net
asset value is determined for that day, the price you pay or receive will be
based on the next Business Day's net asset value per share.
How to Buy Shares
General Information on Purchases
You may buy any Series of the Fund's shares through your securities dealer or
through a financial institution that is authorized to act as a shareholder
servicing agent. Contact them for details on how to enter and pay for your
order.
Your purchase order may not be accepted if the sale of Fund shares has been
suspended or if it is determined that your purchase would be detrimental to the
interests of the Fund's shareholders.
Investment Minimums
Your initial investment in any Series must be at least $1,500. Subsequent
investments in the same Series must be at least $100.
There is no minimum investment requirement if you are buying shares through
your securities dealer's program for automatic investments and redemptions.
Purchase Price
The price you pay to buy shares will be the Fund's net asset value per share.
Investing Regularly
You may make regular investments in the Fund through either of the following
methods. Contact your securities dealer or servicing agent if you wish to
enroll in either of these programs or if you need any additional information.
Automatic Investment and Redemption Program. Your securities dealer or
servicing agent may have established a special procedure to automatically
invest proceeds from the sale of securities and other credit balances in your
account in shares of the Series you have selected and to redeem shares of the
Series you own to pay for securities purchases. Contact your securities dealer
or servicing agent for details.
Dividend Reinvestment Plan. Unless you elect otherwise, all distributions will
be reinvested in additional shares of the Series you own at net asset value. If
you prefer to receive your distributions in cash, notify your securities dealer
or your servicing agent at least five days before the date on which the next
distribution will be paid. If you have redeemed all of the shares of a Series,
your dividend will be paid in cash.
How to Redeem Shares
You may redeem any class of the Fund's shares through your securities dealer or
servicing agent. Contact them for details on how to enter your order and for
information as to how you will be paid.
Your securities dealer or servicing agent may require the following documents
before they redeem your shares.
1) A letter of instructions specifying your account number and the number of
shares or
10
<PAGE>
dollar amount you wish to redeem. All owners of the shares must sign the
letter exactly as their names appear on the account.
2) A guarantee of your signature by a member of the Federal Deposit Insurance
Corporation, a trust company, broker, dealer, securities exchange or
association, clearing agency, savings association or (if authorized by state
law) credit union.
3) Any additional documents that may be required if your account is in the name
of a corporation, partnership, trust or fiduciary.
Redemption Price
The price you receive when you redeem shares will be the net asset value of the
Series you are redeeming.
Other Redemption Information
Automatic Investment and Redemption Program. Your securities dealer or
servicing agent may have established a special procedure to automatically
invest proceeds from the sale of securities and other credit balances in your
account in shares of the Series you have selected and to redeem shares of the
Series you own to pay for securities purchases. Contact your securities dealer
or servicing agent for details.
Redemption by Check. You may establish special check redemption privileges that
will allow you to redeem shares of the Series you own by writing checks in
amounts of $500 or more. These checks may be cashed or deposited in the same
way as ordinary bank checks. You may use the same check regardless of which
Series of the Fund you own. If you own shares of more than one Series of the
Fund, your check will be honored first through redemption of shares of the Tax
Free Series, then through redemption of shares of the Prime Series and,
finally, through redemption of shares of the Treasury Series. You will continue
to earn dividends on your shares until the check is presented for payment and
the corresponding shares are redeemed. Check redemption information will appear
in your account with your securities dealer or servicing agent. Cancelled
checks will not be returned to you.
If the amount of your check exceeds the value of the shares of all Series you
own, the check will be returned to the payee marked "non-sufficient funds."
Checks written for amounts less than $500 may also be returned. The Fund, in
its discretion, will honor such checks but will charge you a servicing fee of
$15.
The Fund reserves the right to terminate or alter check redemption privileges
at any time, to impose a service charge, or to charge you for checks. The Fund
may also charge you for returned checks and for effecting stop payment orders.
If you are interested in establishing check redemption privileges, contact your
securities dealer or servicing agent.
Other Information. Any dividends payable on shares you redeem will be paid on
the next dividend payment date.
If you redeem sufficient shares to reduce your investment in a Series to $500
or less, the Fund has the power to redeem the remaining shares after giving you
60 days' notice.
If you paid for your purchase of shares by check, redemption of those shares
will be restricted for a period of fifteen calendar days unless you are using
the proceeds to purchase other securities through your securities dealer or
servicing agent.
11
<PAGE>
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 you
have 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 tax treatment of the Fund or its
shareholders, and the discussion here is not intended as a substitute for
careful tax planning. Accordingly, you are advised to consult with your tax
advisor regarding specific questions.
There is further information concerning taxes 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 pay federal income tax on amounts distributed to its
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.)
You will be taxed on distributions from a Series' net investment company
taxable income 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 capital gains, any distributions of
net capital gains (the excess of net long-term capital gains over net
short-term
12
<PAGE>
capital losses) will be taxable to you as either short-term or long-term
depending upon how long the Fund held the securities it sold to generate the
gains. You will be taxed on the distributions according to the category
stipulated by the Fund regardless of how long you have held your Fund shares.
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 paid by a Series and received by you 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 you.
If you own shares of the Treasury Series, you 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. Since state laws vary, you are encouraged to
consult with your tax advisor on this issue.
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, distributor, custodian and
transfer agent. The day-to-day operations of the Fund are delegated to the
Fund's executive officers, to the Fund's advisor and to the Fund's distributor.
A majority of the Board of Directors of the Fund have no affiliation with the
Fund's advisor or the Fund's distributor.
Investment Advisor
Investment Company Capital Corp. ("ICC"), an indirect subsidiary of Bankers
Trust 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 is investment
advisor to mutual funds having net assets of approximately $7.4 billion at May
31, 1998. In addition to the Fund, these include the funds in the Flag
Investors family of funds.
As compensation for providing investment advisory services to the Fund for the
fiscal year ended March 31, 1998, ICC received a fee equal to 0.26% of the
Prime Series' average daily net assets, 0.24% of the Treasury Series' average
daily net assets and 0.27% 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 each Series. An affiliate of ICC provides
custody services to the Fund. (See "Custodian, Transfer Agent and Accounting
Services.")
Distributor
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") has served as
distributor for the Fund's three Series since August 31, 1997. ICC Distributors
is a registered broker-dealer that
13
<PAGE>
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 the Fund's advisor. As compensation for providing
distribution services for the period from August 31, 1997 through March 31,
1998, ICC Distributors received a fee equal to 0.25% (annualized) of the Fund's
average daily net assets.
ICC Distributors may make payments to shareholder servicing agents, securities
dealers, banks and other financial institutions, that provide shareholder
services. Such financial institutions may charge you separately for these
services.
ICC Distributors may use a portion of the fee it receives from the Fund to
compensate securities dealers 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.
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.
You may obtain the yield for any Series or class of the Fund by calling your
securities dealer or (410) 895-5995.
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 9 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 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
14
<PAGE>
to voting, except that the holders of shares of a particular Series or class
will have the exclusive right to vote on matters affecting only the rights of
the holders of such Series or class. For example, holders of a particular
Series will have the exclusive right to vote on any investment advisory
agreement or investment restriction that relates only to such Series. In the
event of dissolution or liquidation, holders of shares of each Series will
receive pro rata, subject to the rights of creditors, (a) the proceeds of the
sale of the assets held in the respective Series less (b) the liabilities of
the Fund attributable to the respective Series or allocated among all Series
based on the respective liquidation value of each Series.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional series or classes of Fund shares
without shareholder approval.
Custodian, Transfer Agent and Accounting Services
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 each Series. As compensation for providing accounting services to
the Prime Series and the Treasury Series for the fiscal year ended March 31,
1998, ICC received from the Fund a fee equal to 0.01% of the Prime Series'
average daily net assets and 0.02% of the Treasury Series' average daily net
assets. As compensation for providing accounting services to the Tax-Free
Series, ICC receives from the Fund an annual fee equal to $13,000, plus a
percentage of the Tax-Free Series' average daily net assets in excess of $10
million at a maximum rate of 0.10% of net assets, and declining at various asset
levels to a minimum rate of 0.001% on assets of $1 billion or more. Bankers
Trust Company, a subsidiary of Bankers Trust Corporation acts as custodian of
the Fund's assets. (See the Statement of Additional Information.)
Annual Meetings
The Fund does not expect to hold annual meet-ings of shareholders unless
required by Maryland law. 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
You will be furnished 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, PricewaterhouseCoopers LLP.
Shareholder Inquiries
If you have questions concerning your shares, contact the Transfer Agent at
(800) 553-8080 or your securities dealer or servicing agent.
15
<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
Custodian Independent Accountants
BANKERS TRUST COMPANY PRICEWATERHOUSECOOPERS LLP
130 Liberty Street 250 West Pratt Street
New York, New York 10006 Baltimore, Maryland 21201
Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
(800) 553-8080
16
<PAGE>
- --------------------------------------------------------------------------------
BT Alex. Brown Cash Reserve Fund, Inc.
P.O. Box 17250
Baltimore, Maryland 21203
BT ALEX. BROWN
CASH RESERVE
FUND, INC.
Prime Series
Treasury Series
Tax-Free Series
Prospectus
August 1, 1998
BULK RATE
U.S. POSTAGE
PAID
Farmingdale, N.Y.
Permit No. 225
[GRAPHIC OMITTED]
- --------------------
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
FLAG INVESTORS
CASH RESERVE PRIME SHARES
(Class A and Class B Shares)
Prospectus & Application -- August 1, 1998
- --------------------------------------------------------------------------------
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 your securities dealer or the
Fund's transfer agent. 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 Buy Shares.")
You may obtain the Fund's Statement of Additional Information without charge
from the Fund or any securities dealer that has entered into a dealer agreement
with the Fund's distributor.
This Prospectus sets forth basic information that you should know about the
Flag Investors Shares prior to investing. You should retain it for future
reference. A Statement of Additional Information dated August 1, 1998, 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.
For current yield information and for purchase and redemption information, call
your securities dealer or (410) 895-5995.
TABLE OF CONTENTS
Fund Expenses ...................... 1
Financial Highlights ............... 2
Investment Program ................. 5
Investment Restrictions ............ 6
The Fund's Net Asset Value ......... 6
How to Buy Shares .................. 7
How to Redeem Shares ............... 8
Telephone Transactions ............. 9
Dividends and Taxes ................ 9
Management of the Fund ............. 10
Investment Advisor ................. 10
Distributor ........................ 10
Custodian, Transfer Agent and
Accounting Services ............ 11
Current Yield ...................... 11
General Information ................ 11
Application ........................ A-1
<PAGE>
The Fund's shares are not deposits or obligations of, or guaranteed or endorsed
by any bank. The shares are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government
agency. Investment in the shares involves risk, including possible loss of
principal.
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
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[THIS PAGE INTENTIONALLY LEFT BLANK]
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FUND EXPENSES
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses:
<TABLE>
<CAPTION>
Flag Flag
Investors Investors
Class A Class B
Shares Shares
----------- --------------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases .................................... None* None
Maximum Sales Charge Imposed on Reinvested Dividends ......................... None None
Maximum Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower) .................................... None* 4.00%**
Annual Fund Operating Expenses (as a percentage of average daily net assets):
Management Fees .............................................................. 0.26% 0.26%
12b-1 Fees ................................................................... 0.25% 0.75%
Other Expenses (including a 0.25% shareholder servicing fee for the Flag
Investors Class B Shares) ................................................... 0.16% 0.41%***
----- -----
Total Fund Operating Expenses ................................................ 0.67% 1.42%
===== =====
</TABLE>
- ---------------
* Flag Investors Class A Shares are not subject to a sales charge. However, if
you exchange Class A shares of another Flag Investors fund for Class A
Shares, you will retain liability for any contingent deferred sales charge
due on such shares upon redemption. (See "How to Buy Shares" and "How to
Redeem Shares.")
** You will be required to pay a contingent deferred sales charge if you redeem
your Class B Shares within six years of purchase. The amount of the charge
declines in relation to the time you hold your shares. Class B Shares will
automatically convert to Class A Shares six years after purchase. (See "How
to Redeem 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 your account,
responding to your inquiries and providing you with information on your
investments.
<PAGE>
<TABLE>
<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 .......................... $ 7 $21 $37 $ 83
Flag Investors Class B Shares .......................... $54 $75 $98 $ 131*
You would pay the following expenses on the same invest-
ment, assuming no redemption:
Flag Investors Class B Shares .......................... $14 $45 $78 $ 131*
</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 you will bear directly or indirectly when you invest in the Fund.
If you purchase Flag Investors Shares through a financial institution, you may
be charged separate fees by that institution.
Your actual expenses may be greater or less than those shown. Due to the
continuous nature of Rule 12b-1 fees, you 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. if you hold your shares for a
long time.
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, 1998
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,
--------------------
1998(1)
--------------------
<S> <C>
Per Share Operating Performance:
Net asset value at beginning of period ..... $ 1.00
-------------
Income from Investment Operations:
Net investment income ...................... 0.0494
Less Distributions:
Dividends from net investment income
and/or short-term gains .................. (0.0494)
---------------
Net asset value at end of period ........... $ 1.00
===============
Total Return
Based on net asset value per share ......... 5.05%
Ratios to Average Daily Net Assets:
Expenses ................................... 0.67%
Net investment income ...................... 4.94%
Supplemental Data:
Net assets at end of period ................ $3,172,274,336(4)
Number of shares outstanding at end of
period ................................... 3,172,265,593
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended March 31,
-------------------------------------------------------------
1997(1) 1996(1) 1995(1)
------------------- ------------------- -------------------
<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 ...................... 0.0478 0.0524 0.0442
Less Distributions:
Dividends from net investment income
and/or short-term gains .................. (0.0478) (0.0524) (0.0442)
------------ -------------- --------------
Net asset value at end of period ........... $ 1.00 $ 1.00 $ 1.00
============ ============== ==============
Total Return
Based on net asset value per share ......... 4.88% 5.36% 4.51%
Ratios to Average Daily Net Assets:
Expenses ................................... 0.63% 0.60% 0.61%
Net investment income ...................... 4.78% 5.25% 4.26%
Supplemental Data:
Net assets at end of period ................ $2,552,053,912 $2,392,658,047 $1,479,806,435
Number of shares outstanding at end of
period ................................... 2,552,045,195 2,392,661,216 1,479,804,186
</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 from April 30 to March 31.
(3) Annualized.
(4) Net assets consist of: Prime Shares -- $3,164,537,551 and Flag Investors
Class A Shares -- $7,736,785.
2
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Eleven
Months
Ended
For the Year Ended March 31, March 31,
- ------------------------------------------------------------------------------------------------------- -------------------
1994(1) 1993(1) 1992(1) 1991(1) 1990(1) 1989(1,2)
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------ ------------
0.0262 0.0295 0.0485 0.0734 0.0846 0.0712
(0.0262) (0.0295) (0.0485) ( 0.0734) ( 0.0846) ( 0.0712)
------------ -------------- -------------- -------------- -------------- --------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============== ============== ============== ============== ==============
2.65% 2.99% 4.96% 7.59% 8.80% 8.01%(3)
0.62% 0.63% 0.61% 0.59% 0.52% 0.54%(3)
2.62% 2.95% 4.84% 7.31% 8.42% 7.81%(3)
$1,368,451,627 $1,481,103,834 $1,512,362,510 $1,295,888,161 $1,312,276,151 $1,084,793,157
1,368,449,549 1,481,101,756 1,512,360,432 1,295,888,161 1,312,272,415 1,084,789,421
</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 Year Ended March 31, April 3, 1995(1)
----------------------------- through
1998 1997 March 31, 1996
------------ ------------ ---------------
<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 ................................. 0.0418 0.0414 0.0361
Less Distributions:
Dividends from net investment income and/or short-term
gains ............................................... (0.0418) (0.0414) (0.0361)
------- ------- -------
Net asset value at end of period ...................... $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total Return:
Based on net asset value per share .................... 4.27% 4.22% 3.69%(2)
Ratios to Average Daily Net Assets:
Expenses .............................................. 1.42% 1.38% 1.38%(2)
Net investment income ................................. 4.18% 4.14% 4.30%(2)
Supplemental Data:
Net assets at end of period ........................... $184,382 $227,098 $ 10,200
Number of shares outstanding at end of period ......... 184,382 227,098 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 seeks 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.)
<PAGE>
The Prime Series may enter into the following arrangements:
Repurchase Agreements under which the purchaser (for example, the Prime
Series) acquires ownership of an obligation and the seller agrees, at the time
of the sale, to repurchase the obligation at a mutually agreed upon time and
price, thereby determining the yield during the purchaser's holding period.
Although the underlying collateral for repurchase agreements may have
maturities exceeding 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
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<PAGE>
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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.
Further investment restrictions are listed in the Statement of Additional
Information.
<PAGE>
THE FUND'S NET ASSET VALUE
- --------------------------------------------------------------------------------
The following sections describe how to buy and redeem shares of the Fund.
The price you pay when you buy shares is the Fund's net asset value per
share. The price you receive when you redeem Class A Shares is also the Fund's
net asset value per share. The price you receive when you redeem Class B Shares
is based on the Fund's net asset value per share but may be reduced by a sales
charge. Read the section on how to redeem shares for details on how and when
these charges may or may not be imposed.
The net asset value per share of the Prime Series is determined on each
business day as of 12:00 noon (Eastern Time).
The Fund uses the amortized cost method of valuing portfolio securities
and rounds the per share net asset value to the nearest whole cent. As a
result, it is anticipated that the net asset value of the Prime Series will
remain constant at $1.00 per share. There can be no assurance, however, that
this will always be the case.
You may buy or redeem shares on any day on which both the New York Stock
Exchange and the Fund's custodian are open for business (a "Business Day"). If
your order is entered before the Prime Series' net asset value per share is
determined for that day, the price you pay or receive will be based on that
day's net asset value per share. If your order is entered after the Prime
Series' net asset value per share is determined for that day, the price you pay
or receive will be based on the next Business Day's net asset value per share.
6
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<PAGE>
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HOW TO BUY SHARES
- --------------------------------------------------------------------------------
General Information on Purchases
You may buy Class A Shares through your securities dealer or through any
financial institution that is authorized to act as a shareholder servicing
agent. Contact them for details on how to enter and pay for your order. You may
also buy Class A Shares by sending your check (along with a completed
Application Form) directly to the Fund. The Application Form, which includes
instructions, is attached to this Prospectus. In addition, you may buy Class A
Shares through the exchange of Class A shares of other funds in the Flag
Investors family of funds.
You may buy Class B Shares only through the exchange of Class B shares of
other funds in the Flag Investors family of funds. You may make an exchange
through your securities dealer or servicing agent.
Your order to purchase shares is effective only when your securities
dealer, or servicing agent receives your order in proper form and federal funds
are available to the Fund for investment. If you pay for shares by check, your
check is normally converted into federal funds within two business days. The
Fund reserves the right to reject any order for the purchase of shares. If you
purchase Flag Investors Shares by check, redemption of those shares may be
restricted. See the section on redemptions below.
Investment Minimums
Your initial investment in Class A Shares must be at least $2,000. Your
initial investment in Class B Shares, which are only available through
exchange, is $500. Subsequent investments must be at least $100. The following
are exceptions to these minimums:
o If you are investing in an IRA account, your initial investment in
Class A Shares may be as low as $1,000.
o If you are a shareholder of any other Flag Investors fund, your initial
investment in this Fund may be as low as $500.
o If you are a participant in the Class A Shares' Automatic Investing
Plan, your initial investment may be as low as $250. If you
participate in the monthly plan, your subsequent investments may be as
low as $100. If you participate in the quarterly plan, your subsequent
investments may be as low as $250. Refer to the section on the Fund's
Automatic Investing Plan for details.
o There is no minimum investment requirement for qualified retirement
plans such as 401(k), pension or profit sharing plans.
Purchase Price
The price you pay to buy shares will be the Fund's net asset value per
share.
<PAGE>
Purchases by Exchange
You may exchange shares of any other Flag Investors fund for an equal
dollar amount of Class A or Class B Shares, as applicable, without paying a
sales charge. The Fund may modify or terminate this offer of exchange upon 60
days' prior written notice.
You may request an exchange through your securities dealer or servicing
agent. Contact them for details on how to enter your order. If your shares are
in an account with the Fund's Transfer Agent, you may also request an exchange
directly through the Transfer Agent by mail or telephone.
Investing Regularly
You may make regular investments in the Fund through any of the following
methods. If you wish to enroll in any of these programs or if you need any
additional information, complete the appropriate section of the attached
Application Form, or contact your securities dealer, your servicing agent, or
the Transfer Agent.
Automatic Investing Plan. You may elect to make a regular monthly or
quarterly investment in Class A Shares. The amount you decide upon will be
withdrawn from your checking account using a pre-authorized check. When the
money is received by the Transfer Agent, it will be invested in Class A Shares
at that day's net asset value. Either you or the Fund may discontinue your
participation upon 30 days' notice.
Dividend Reinvestment Plan. Unless you elect otherwise, all income and
capital gains distributions will be reinvested in additional Fund shares of the
same class at net asset value. You may elect to receive your distributions in
cash or to have your distributions invested in shares of other Flag Investors
funds. To make either of these elections or to terminate automatic
reinvestment, complete the appropriate section of the attached Application Form
or notify the Transfer Agent, your securities dealer or your servicing agent at
least five days before the date on which the next dividend or distribution will
be paid.
Systematic Purchase Plan. You may also purchase any class of shares
through a systematic purchase plan. Contact your securities dealer or servicing
agent for details.
7
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<PAGE>
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HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
You may redeem either class of the Fund's shares through your securities
dealer or servicing agent. Contact them for details on how to enter your order
and for information on how you will be paid. If your shares are in an account
with the Fund, you may also redeem shares by contacting the Transfer Agent by
mail or (if you are redeeming less than $50,000) by telephone. The Transfer
Agent will mail your redemption check within seven days after it receives your
order in proper form. Refer to the section on telephone transactions for more
information on this method of redemption.
Your securities dealer, your servicing agent, or the Transfer Agent may
require the following documents before they redeem your shares:
1) A letter of instructions specifying your account number and the number
of shares or dollar amount of the class you wish to redeem. The
letter must be signed by all owners of the shares exactly as their
names appear on the account.
2) If you are redeeming more than $50,000, a guarantee of your signature
by a member of the Federal Deposit Insurance Corporation, a trust
company, broker, dealer, securities exchange or association, clearing
agency, savings association or (if authorized by state law) credit
union.
3) Any additional document that may be required if your account is in the
name of a corporation, partnership, trust or fiduciary.
Redemption Price
The price you receive when you redeem your Class A Shares will be net
asset value. The price you receive when you redeem your Class B Shares will be
net asset value less any applicable sales charge.
The amount of any sales charge deducted from your Class B Shares'
redemption price will be determined according to the following schedule:
Sales Charge as a Percentage
of the Dollar Amount
Years Since Purchase Subject to Charge
- --------------------------------------------------------
First .......................... 4.00%
Second ......................... 4.00%
Third .......................... 3.00%
Fourth ......................... 3.00%
Fifth .......................... 2.00%
Sixth .......................... 1.00%
Thereafter ..................... None
<PAGE>
Determination of Sales Charge: The sales charge applicable to your
redemption of Class B Shares is calculated in the manner that results in the
lowest possible rate:
1) The sales charge is applied to the lesser of the cost of the shares or
their current market value.
2) No sales charge will be applied to shares you own as a result of
reinvesting dividends or distributions.
3) If you have purchased shares at various times, the sales charge will
be applied first to shares you have owned for the longest period of
time.
4) If you acquired the shares through an exchange of shares of another
Flag Investors fund, the period of time you held the original shares
will be combined with the period of time you held the shares being
redeemed to determine the years since purchase.
Waiver of Sales Charge: You may redeem Class B Shares without paying a
sales charge under any of the following circumstances:
1) If you are exchanging your shares for Class B shares of another Flag
Investors fund.
2) If your redemption represents the minimum required distribution from
an individual retirement account or other retirement plan.
3) If shares are being redeemed in your account following your death or a
determination that you are disabled. This waiver applies only under
the following conditions:
(i) The account is registered in your name either individually, as
a joint tenant with rights of survivorship, as a participant in
community property, or as a minor child under the Uniform Gifts
or Uniform Transfers to Minors Act.
(ii) Either you or your representative notifies your securities
dealer, servicing agent or the Transfer Agent that such
circumstances exist.
Automatic Conversion of Class B Shares. Your Class B Shares, along with
any reinvested dividends or distributions associated with those shares, will be
automatically converted to Class A Shares six years after your purchase. This
conversion will be made on the basis of the relative net asset values of the
classes and will not be a taxable event to you.
8
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<PAGE>
- --------------------------------------------------------------------------------
Other Redemption Information
If you own Fund shares having a value of at least $10,000, you may arrange
to have some of your shares redeemed monthly or quarterly under the Fund's
Systematic Withdrawal Plan. Each redemption under this plan involves all the tax
and sales charge implications normally associated with Fund redemptions. Contact
your securities dealer, your servicing agent or the Transfer Agent for
information on this plan.
Any dividends payable on shares you redeem will be paid on the next
dividend payable date. If you have redeemed all of your shares by that time,
the dividend will be paid to you by check, whether or not that is the payment
option you have selected.
If you redeem sufficient shares to reduce your investment to $500 or
less, the Fund has the power to redeem the remaining shares after giving you 60
days' notice.
If you paid for your purchase of shares by check, redemption of those
shares will be restricted for a period of fifteen calendar days unless you are
redeeming shares through your securities dealer or servicing agent and are
using the proceeds to purchase other securities in that account.
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
If your shares are in an account with the Transfer Agent, you may redeem
them in any amount up to $50,000 or exchange them for shares in another Flag
Investors fund by calling the Transfer Agent on any Business Day between the
hours of 8:30 a.m. and 5:30 p.m (Eastern Time). You are automatically entitled
to telephone transaction privileges unless you specifically request that no
telephone redemptions or exchanges be accepted for your account. You may make
this election when you complete the Application Form or at any time thereafter
by completing and returning documentation supplied by the Transfer Agent.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephoned instructions are genuine. These procedures include
requiring you to provide certain personal identification information at the
time your account is opened and prior to effecting each telephone transaction.
You may be required to provide additional telecopied instructions. If these
procedures are employed, neither the Fund nor the Transfer Agent will bear any
liability for following instructions received by telephone that they reasonably
believe to be genuine. Your telephone transaction request will be recorded.
During periods of extreme economic or market changes, you may experience
difficulty in contacting the Transfer Agent by telephone. In such event, you
should make your request by mail.
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
Dividends
All of the net income earned on the Flag Investors Shares is normally
declared as dividends daily to the respective shareholders of record of such
shares. Dividends on Flag Investors Shares are normally payable on the first
day that a purchase or exchange order is effective but not on the date that a
redemption order is effective.
<PAGE>
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 tax treatment of the Fund or
its shareholders, and the discussion herein is not intended as a substitute for
careful tax planning. Accordingly, you are advised to consult with your tax
advisor regarding specific questions.
There is further information concerning taxes 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 pay federal
income taxes on amounts distributed to its shareholders; but shareholders,
unless otherwise exempt, will pay taxes on the amounts so distributed.
You will be taxed on distributions of net investment company taxable
income as ordinary income. Although the Prime Series does not expect to realize
any 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
you as either short-term or long-term depending upon how long the Fund held the
securities it sold to generate the gains. You will be taxed on the distributions
according to the category stipulated by the Fund regardless of how long you have
held your Fund shares. Distributions from the Fund will not be eligible for the
dividends received deduction otherwise available for corporate shareholders.
9
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<PAGE>
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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 you 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 Flag Investors Shares is a taxable
event for you.
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The overall business and affairs of the Fund are managed by its Board of
Directors. The Board of Directors approves all significant agreements between
the Fund and persons or companies furnishing services to the Fund, including
the Fund's agreements with its investment advisor, distributor, custodian and
transfer agent. The day-to-day operations of the Fund are delegated to the
Fund's executive officers, to the Advisor, and to the Distributor. A majority
of the Board of Directors of the Fund have no affiliation with the Distributor
or the Advisor.
INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
Investment Company Capital Corp. ("ICC" or the "Advisor"), an indirect
subsidiary of Bankers Trust 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 investment advisor to mutual funds having net
assets of approximately $7.4 billion as of May 31, 1998. In addition to this
Fund, these include the funds in the Flag Investors family of funds.
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, 1998, ICC received a fee equal
to 0.26% 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. An affiliate of ICC provides
custody services to the Fund. (See "Custodian, Transfer Agent and Accounting
Services.")
<PAGE>
DISTRIBUTOR
- --------------------------------------------------------------------------------
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") has
served as distributor of the Flag Investors Shares since August 31, 1997. ICC
Distributors is a registered broker-dealer that offers distribution services to
a variety of registered investment companies including other funds in the Flag
Investors family of funds. ICC Distributors is not affiliated with the Advisor.
The Fund has adopted a Distribution Agreement and related Plans of
Distribution with respect to the Class A and Class B Shares (the "Plans"),
pursuant to Rule 12b-1 under the 1940 Act. In addition, the Fund may enter into
agreements with certain financial institutions, including certain banks and BT
Alex. Brown Incorporated, to provide shareholder services, pursuant to which
the Distributor may allocate on a proportional basis up to all of its
distribution fee as compensation for such financial institutions' ongoing
shareholder services. Such financial institutions may charge you separately for
these services.
As compensation for providing distribution services for the Class A
Shares for the period from August 31, 1997 through March 31, 1998, the
Distributor received a fee equal to 0.25% (annualized) of the average daily net
assets of the Class A Shares.
As compensation for providing distribution and shareholder services for
the Class B Shares for the period from August 31, 1997 through March 31, 1998,
the Distributor received a distribution fee equal to 0.75% (annualized) of the
Class B Shares' average daily net assets and a shareholder servicing fee equal
to 0.25% of the Class B Shares' average daily net assets. The distribution fee
is used to compensate the Distributor for its services and expenses in
distributing
10
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<PAGE>
- --------------------------------------------------------------------------------
the Class B Shares. The shareholder servicing fee is used to compensate the
Distributor, securities dealers and servicing agents for services provided and
expenses incurred in maintaining your account, responding to your inquiries and
providing you with information on your investments.
Payments under the Plans are made as described above regardless of the
Distributor's actual cost of providing distribution services. If the cost of
providing distribution services to the Fund is less than the payments received,
the Distributor may retain the unexpended portion of the distribution fee. ICC
Distributors or the Advisor and their respective affiliates may make payments
from their own resources to securities dealers and servicing agents. Payments by
the Distributor may include additional discounts or promotional incentives in
the form of cash or other compensation (including merchandise or travel).
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, 1998, ICC received a fee equal to 0.01% of the Prime
Series' average daily net assets. Bankers Trust Company, a subsidiary of Bankers
Trust Corporation, acts as custodian of the Fund's assets. (See the Statement of
Additional Information.)
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. You may
obtain the yields for Flag Investors Class A or Class B Shares by calling the
Fund at (410) 895-5995.
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 9 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
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.
11
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<PAGE>
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Annual Meetings
The Fund does not expect to hold annual meetings of shareholders unless
required by Maryland law. 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
You will be furnished 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, PricewaterhouseCoopers LLP.
Shareholder Inquiries
If you have questions concerning your shares, contact the Fund at (800)
767-FLAG, the Transfer Agent at (800) 553-8080, or your securities dealer or
servicing agent.
12
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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
BANKERS TRUST COMPANY PRICEWATERHOUSECOOPERS LLP
130 Liberty Street 250 West Pratt Street
New York, New York 10006 Baltimore, Maryland 21201
Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
1-800-553-8080
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FLAG INVESTORS CASH RESERVE PRIME CLASS A SHARES
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
Make check payable to "Flag Investors Cash Reserve Prime Class A Shares" and
mail with this Application to:
Flag Investors Funds
P.O. Box 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 $__________________.
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
<PAGE>
Gifts to Minors
- --------------------------------------
Custodian's Name (only one allowed by law)
- --------------------------------------
Minor's Name (only one)
- ----------------- ------------------
Social Security Number of Minor Minor's Date of Birth (Mo./Day/Yr.)
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
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Automatic Investing Plan (Optional)
[ ] I authorize you as Agent for the Automatic Investing Plan to automatically
invest $_____________ in Flag Investors Class A Shares for me, on a monthly or
quarterly basis, on or about the 20th of each month or if quarterly, the 20th
of January, April, July and October, and to draw a bank draft in payment of the
investment against my checking account. (Bank drafts may be drawn on commercial
banks only.)
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)
Systematic Withdrawal Plan (Optional)
[ ] Beginning the month of ______________, 19___ please send me checks on a
monthly or quarterly basis, as indicated below, in the amount of _______________
$_____________ from Class A Shares that I own, payable to the account
registration address as shown above. (Participation requires minimum account
value of $10,000.)
Frequency (check one): [ ] Monthly
[ ] Quarterly (January, April, July and October)
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: ___________________
<PAGE>
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 your
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.
- --------------------------------------------------------------------------------
I acknowledge that I am of legal age in the state of my residence. I have
received a copy of the Fund's prospectus.
- --------------------------------------------------------------------------------
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)
- -------------------
For Dealer Use Only
- -------------------
Dealer's Name: ________________________________ Dealer Code:________________
Dealer's Address:________________________________ Branch Code:________________
Representative: ________________________________ Rep. No.: ________________
A-2
- --------------------------------------------------------------------------------
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
INSTITUTIONAL SHARES
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. The class of shares of the Fund offered
by this Prospectus may be purchased only by eligible institutions.
The Fund offers:
o Prime Series -- a portfolio invested in U.S. Treasury obligations,
repurchase agreements backed by such instruments, obligations issued
or guaranteed by agencies or instrumentalities of the U.S. Government,
domestic bank instruments and commercial paper of the highest quality;
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; and
o Dividends are declared daily and paid monthly in additional shares or cash.
For current yield information and for purchase and redemption information, call
(410) 895-5995.
This Prospectus sets forth basic information that you should know about the Fund
prior to investing. You should retain it for future reference. A Statement of
Additional Information dated August 1, 1998, 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.
TABLE OF CONTENTS
Page
Table of Fees and Expenses 2
Financial Highlights 3
Investment Program 6
The Fund's Net Asset Value 9
How to Buy Shares 10
How to Redeem Shares 10
Dividends and Taxes 11
Management of the Fund 12
Current Yield 13
General Information 14
The Fund's shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank. The shares are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government
agency. Investment in the shares involves risk, including possible loss of
principal.
An investment in the Fund is neither insured nor guaranteed by the United
States Government. There can be no assurance that any Series will be able to
maintain a stable net asset value of $1.00 per share.
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, 1998
<PAGE>
Table of Fees and
Expenses
The following table of fees and expenses is provided to assist you in
understanding the various costs and expenses that you may bear indirectly. Your
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") ....................................... 0.26% 0.24% 0.27%
12b-1 Fees (See "Management of the Fund -- Distributor") ..... None None None
Other Expenses ............................................... 0.16% 0.10% 0.08%
----- ----- -----
Total Fund Operating Expenses ................................ 0.42% 0.34% 0.35%
===== ===== =====
</TABLE>
Example
- -------
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return, and (2) redemption at the end of each time period:
Prime Treasury Tax-Free
Institutional Institutional Institutional
Shares Shares Shares
--------------- --------------- --------------
1 year ........... $ 4 $ 4 $ 4
3 years .......... $13 $11 $11
5 years .......... $24 $19 $20
10 years ......... $53 $43 $44
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>
Financial Highlights
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, 1998 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,
------------------------------------------------------
1998 1997 1996
----------------- ----------------- ----------------
<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 ..................... 0.0519 0.0503 0.0548
Less Distributions:
Dividends from net investment income
and/or short-term gains .................. (0.0519) (0.0503) (0.0548)
------------ ------------ -----------
Net asset value at end of period .......... $ 1.00 $ 1.00 $ 1.00
============ ============ ===========
Total Return:
Based on net asset value per share ........ 5.31% 5.15% 5.62%
Ratios to Average Daily Net Assets:
Expenses .................................. 0.42% 0.38% 0.35%
Net investment income ..................... 5.22% 5.04% 5.32%
Supplemental Data:
Net assets at end of period ............... $317,971,693 $117,812,047 $53,699,315
Number of shares outstanding at end
of period ................................ 317,971,413 117,811,768 53,699,535
Prime Institutional Shares
------------------------------------------------------------------------
For the Year Ended March 31,
----------------------------------------------------------------------
1995 1994 1993 1992
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- ---------
Income from Investment
Operations:
Net investment income ..................... 0.0472 0.0294 0.0327 0.0515
Less Distributions:
Dividends from net investment income
and/or short-term gains .................. (0.0472) (0.0294) (0.0327) (0.0515)
----------- ----------- ----------- -----------
Net asset value at end of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== ===========
Total Return:
Based on net asset value per share ........ 4.82% 2.98% 3.32% 5.27%
Ratios to Average Daily Net Assets:
Expenses .................................. 0.36% 0.30% 0.31% 0.32%
Net investment income ..................... 4.57% 2.94% 3.24% 5.34%
Supplemental Data:
Net assets at end of period ............... $11,904,716 $23,437,449 $28,884,078 $21,867,108
Number of shares outstanding at end
of period ................................ 11,904,663 23,437,512 28,884,132 21,867,108
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Prime
Institutional
Shares
-----------------
For the Period
June 4, 1990(1)
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 ..................... 0.0617
Less Distributions:
Dividends from net investment income
and/or short-term gains .................. (0.0617)
------------
Net asset value at end of period .......... $ 1.00
============
Total Return:
Based on net asset value per share ........ 7.70%(2)
Ratios to Average Daily Net Assets:
Expenses .................................. 0.35%(2)
Net investment income ..................... 7.53%(2)
Supplemental Data:
Net assets at end of period ............... $117,633,558
Number of shares outstanding at end
of period ................................ 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,
----------------------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Per Share Operating Perfor-
mance:
Net asset value at beginning of
period ............................. $ 1.00 $ 1.00 $ 1.00
---------- --------- ---------
Income from Investment
Operations:
Net investment income ............... 0.0489 0.0481 0.0523
Less Distributions:
Dividends from net investment
income and/or short-term
gains .............................. (0.0489) (0.0481) (0.0523)
----------- ----------- -----------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00
=========== =========== ===========
Total Return:
Based on net asset value per
share .............................. 5.00% 4.92% 5.36%
Ratios to Average Daily Net
Assets:
Expenses ............................ 0.34% 0.36% 0.33%
Net investment income ............... 4.91% 4.81% 5.12%
Supplemental Data:
Net assets at end of period ......... $98,780,023 $61,208,770 $51,822,757
Number of shares outstanding
at end of period ................... 98,768,925 61,199,345 51,813,226
Treasury Institutional Shares
---------------------------------------------------------------------------------------
For the Period
For the Year Ended March 31, June 4, 1990(1)
---------------------------------------------------------------------- through
1995 1994 1993 1992 1991
---------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Perfor-
mance:
Net asset value at beginning of
period ............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ----------
Income from Investment
Operations:
Net investment income ............... 0.0438 0.0282 0.0314 0.0504 0.0590
Less Distributions:
Dividends from net investment
income and/or short-term
gains .............................. (0.0438) (0.0282) ( 0.0314) (0.0504) (0.0590)
----------- ----------- ----------- ----------- -----------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
Total Return:
Based on net asset value per
share .............................. 4.47% 2.86% 3.19% 5.17% 7.36%(2)
Ratios to Average Daily Net
Assets:
Expenses ............................ 0.30%(3) 0.27%(3) 0.26%(3) 0.27% 0.29%(2)
Net investment income ............... 4.15%(4) 2.82%(4) 3.16%(4) 4.90% 7.02%(2)
Supplemental Data:
Net assets at end of period ......... $14,051,995 $39,692,848 $60,146,987 $63,834,323 $58,017,844
Number of shares outstanding
at end of period ................... 14,046,467 39,688,259 60,140,874 63,834,323 58,017,844
</TABLE>
- ------------
(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>
Tax-Free Institutional Shares
------------------------------
For the Period
June 1, 1997(1)
through
March 31,
1998
---------
<S> <C>
Per Share Operating Performance:
Net asset value at beginning of period ............................... $ 1.00
---------
Income from Investment
Operations:
Net investment income ................................................ 0.0273
Less Distributions:
Dividends from net investment income and/or short-term gains ......... (0.0273)
-----------
Net asset value at end of period ..................................... $ 1.00
===========
Total Return:
Based on net asset value per share ................................... 2.76%(2)
Ratios to Average Daily Net Assets:
Expenses ............................................................. 0.35%(2)
Net investment income ................................................ 3.29%(2)
Supplemental Data:
Net assets at end of period .......................................... $76,682,752
Number of shares outstanding at end of period ........................ 76,682,889
</TABLE>
- ------------
(1) The Tax-Free Institutional Shares commenced operations on June 1, 1997.
(2) Annualized.
5
<PAGE>
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
seeks 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. (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
Treasury 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
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 in municipal
securities.
7
<PAGE>
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.
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 that it
is obligated to repurchase.
8
<PAGE>
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 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 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.
Further investment restrictions are listed in the Statement of Additional
Information.
The Fund's
Net Asset Value
The following sections describe how to buy and redeem shares of the Fund.
The price you pay or receive is the Fund's net asset value per share.
The net asset values per share of the Treasury Series and the Tax Free Series
are determined on each business day as of 11:00 a.m. (Eastern
9
<PAGE>
Time). The net asset value per share of the Prime Series is determined on each
business day as of 12:00 noon (Eastern Time).
The Fund uses the amortized cost method of valuing portfolio securities and
rounds the per share net asset value to the nearest whole cent. As a result, it
is anticipated that the net asset value of each Series will remain constant at
$1.00 per share. There can be no assurance, however, that this will always be
the case.
You may buy or redeem shares on any day on which both the New York Stock
Exchange and the Fund's custodian are open for business (a "Business Day"). If
your order is entered before the Series' net asset value per share is
determined for that day, the price you pay or receive will be based on that
day's net asset value per share. If your order is entered after the Series' net
asset value per share is determined for that day, the price you pay or receive
will be based on the next Business Day's net asset value per share.
How to Buy
Shares
You may buy any Series of the Fund's shares through your securities dealer or
through a financial institution that is authorized to act as a shareholder
servicing agent. Contact them for details on how to enter and pay for your
order.
Your purchase order may not be accepted if the sale of Fund shares has been
suspended or if it is determined that your purchase would be detrimental to the
interests of the Fund's shareholders.
Investment Minimums
Your initial investment in any Series must be at least $1,000,000. There is no
minimum initial investment for investment advisory affiliates of BT Alex.
Brown. There is no minimum investment for subsequent purchases in the same
Series.
Purchase Price
The price you pay to buy shares will be the Fund's net asset value per share.
Investing Regularly
You may make regular investments in the Fund through either of the following
methods. Contact your securities dealer or servicing agent if you wish to
enroll in either of these programs or if you need any additional information.
Automatic Investment and Redemption Program. Your securities dealer or
servicing agent may have established a special procedure to automatically
invest proceeds from the sale of securities and other credit balances in your
account in shares of the Series you have selected and to redeem shares of the
Series you own to pay for securities purchases. Contact your securities dealer
or servicing agent for details.
Dividend Reinvestment Plan. Unless you elect otherwise, all distributions will
be reinvested in additional shares of the Series you own at net asset value. If
you prefer to receive your distributions in cash, notify your securities dealer
or your servicing agent at least five days before the date on which the next
distribution will be paid. If you have redeemed all of the shares of a Series,
your dividend will be paid in cash.
How to Redeem Shares
You may redeem any class of the Fund's shares through your securities dealer or
servicing agent. Contact them for details on how to enter your order and for
information as to how you will be paid.
10
<PAGE>
Your securities dealer or servicing agent may require the following documents
before they redeem your shares.
1) A letter of instructions specifying your account number and the number of
shares or dollar amount you wish to redeem. All owners of the shares must
sign the letter exactly as their names appear on the account.
2) A guarantee of your signature by a member of the Federal Deposit Insurance
Corporation, a trust company, broker, dealer, securities exchange or
association, clearing agency, savings association or (if authorized by state
law) credit union.
3) Any additional documents that may be required if your account is in the name
of a corporation, partnership, trust or fiduciary.
Redemption Price
The price you receive when you redeem shares will be the net asset value of the
Series you are redeeming.
Other Redemption Information
Automatic Investment and Redemption Program. Your securities dealer or
servicing agent may have established a special procedure to automatically
invest proceeds from the sale of securities and other credit balances in your
account in shares of the Series you have selected and to redeem shares of the
Series you own to pay for securities purchases. Contact your securities dealer
or servicing agent for details.
Other Information. Any dividends payable on shares you redeem will be paid on
the next dividend payment date.
If you redeem sufficient shares to reduce your investment in a Series to $500
or less, the Fund has the power to redeem the remaining shares after giving you
60 days' notice.
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 you
have 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 tax treatment of the Fund or its
shareholders, and the discussion here is not intended as a substitute for
careful tax planning. Accordingly, you are advised to consult with your tax
advisor regarding specific questions.
There is further information concerning taxes 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 pay federal income taxes on amounts distributed to
its 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,
11
<PAGE>
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 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.)
You will be taxed on distributions from a Series' net investment company taxable
income 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 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 you as either short-term or long-term depending upon
how long the Fund held the securities it sold to generate the gains. You will be
taxed on the distributions according to the category stipulated by the Fund
regardless of how long you have held your Fund shares.
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 paid by a Series and received by you 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 Institutional Shares is a taxable event for
you.
If you own shares of the Treasury Series, you 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. Since state laws vary, you are encouraged to
consult with your tax advisor on this issue.
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, distributor, custodian and
transfer
12
<PAGE>
agent. The day-to-day operations of the Fund are delegated to the Fund's
executive officers, to the Fund's advisor and to the Fund's distributor. A
majority of the Board of Directors of the Fund have no affiliation with the
Fund's advisor, or the Fund's distributor.
Investment Advisor
Investment Company Capital Corp. ("ICC"), an indirect subsidiary of Bankers
Trust 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 is investment
advisor to mutual funds having net assets of approximately $7.4 billion at May
31, 1998. In addition to the Fund, these include the funds in the Flag
Investors family of funds.
As compensation for providing investment advisory services to the Fund for the
fiscal year ended March 31, 1998, ICC received a fee equal to 0.26% of the
Prime Series' average daily net assets, 0.24% of the Treasury Series' average
daily net assets and 0.27% 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 each Series. An affiliate of ICC provides
custody services to the Fund. (See "Custodian, Transfer Agent and Accounting
Services.")
Distributor
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") acts as
distributor for the Fund's three Series. 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 the Fund's 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.
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
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.
13
<PAGE>
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 9 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 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.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional series or classes of Fund shares
without shareholder approval.
Custodian, Transfer Agent and Accounting Services
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 each Series. As compensation for providing accounting services to
the Prime Series and the Treasury Series for the fiscal year ended March 31,
1998, ICC received from the Fund an annual fee equal to 0.01% of the Prime
Series' average daily net assets and 0.02% of the Treasury Series' average
daily net assets.
As compensation for providing accounting services to the Tax-Free Series, ICC
receives from the Fund an annual fee equal to $13,000, plus a percentage of the
Tax-Free Series' average daily net assets in excess of $10 million at a maximum
rate of 0.10% of net assets, and declining at various asset levels to a minimum
rate of 0.001% on assets of $1 billion or more. Bankers Trust Company, a
subsidiary of Bankers Trust Corporation, acts as custodian of the Fund's assets.
(See the Statement of Additional Information.)
Annual Meetings
The Fund does not expect to hold annual meetings of shareholders unless
required by Maryland law. 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
You will be furnished with semi-annual reports containing information about the
Fund and its operations, including a list of investments held in
14
<PAGE>
the Fund's portfolio and financial statements. The annual financial statements
are audited by the Fund's independent accountants,
PricewaterhouseCoopers LLP.
Shareholder Inquiries
If you have questions concerning your Institutional shares, contact the Fund at
(800) 553-8080.
15
<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
Custodian Independent Accountants
BANKERS TRUST COMPANY PRICEWATERHOUSECOOPERS LLP
130 Liberty Street 250 West Pratt Street
New York, New York 10006 Baltimore, Maryland 21201
Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
(800) 553-8080
16
<PAGE>
- --------------------------------------------------------------------------------
BT Alex. Brown Cash Reserve Fund, Inc.
P.O. Box 17250
Baltimore, Maryland 21203
BT ALEX. BROWN
CASH RESERVE
FUND, INC.
INSTITUTIONAL
SHARES
Prime Series
Treasury Series
Tax-Free Series
Prospectus
August 1, 1998
BULK RATE
U.S. POSTAGE
PAID
Farmingdale, N.Y.
Permit No. 225
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
<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 securities dealers that provide certain shareholder services.
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;
o Free check redemption.
For current yield information and for purchase and redemption information, call
your securities dealer.
You may obtain the Fund's Statement of Additional Information without charge
from the Fund or any securities dealer that has entered into a dealer agreement
with the Fund's distributor (the "Distributor").
This Prospectus sets forth basic information that you should know about the
Fund prior to investing. You should retain it for future reference. A Statement
of Additional Information dated August 1, 1998, 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
Table of Fees and Expenses 2
Financial Highlights 3
Investment Program 4
The Fund's Net Asset Value 6
How to Buy Shares 6
How to Redeem Shares 7
Dividends and Taxes 8
Management of the Fund 9
Current Yield 10
General Information 10
The Shares are not deposits or obligations of, or guaranteed or endorsed by any
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.
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.
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, 1998
1
<PAGE>
Table of Fees and
Expenses
The following table of fees and expenses is provided to assist you in
understanding the various costs and expenses that you may bear indirectly. Your
actual expenses may be greater or less than those shown. Due to the continuous
nature of Rule 12b-1 fees, you 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. if you hold Shares for a long
time.
<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 ......................................................... 0.26%
12b-1 Fees (after fee waivers) .......................................... 0.54%*
Other Expenses .......................................................... 0.16%
-----
Total Fund Operating Expenses (after fee waivers) ....................... 0.96%*
=====
</TABLE>
- ------------
* The Distributor currently reduces its annual 12b-1 Fees, on a voluntary
basis, to 0.54% of the Shares' average daily net assets. Absent fee waivers,
12b-1 Fees would be 0.60% and Total Fund Operating Expenses would be 1.02%
of the Shares' average daily net assets.
Example of Quality Cash Reserve Prime Shares Expenses
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return on the investment, and (2) redemption at the end of the period:*
1 year .......... $ 10
3 years ......... $ 31
5 years ......... $ 53
10 years ......... $118
- ------------
* 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>
Financial Highlights
The financial highlights included in this table 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, 1998 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,
-------------------------------------------------------
1998 1997 1996
----------------- ----------------- -----------------
<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 ...................... 0.0465 0.0449 0.0493
Less Distributions:
Dividends from net investment income
and/or short-term gains ................... (0.0465) (0.0449) (0.0493)
------------ ------------ ------------
Net asset value at end of period ........... $ 1.00 $ 1.00 $ 1.00
============ ============ ============
Total Return:
Based on net asset value per share ......... 4.75% 4.59% 5.04%
Ratios to Average Daily Net Assets:
Expenses ................................... 0.96%(2) 0.91%(2) 0.90%(2)
Net investment income ...................... 4.66%(3) 4.50%(3) 4.91%(3)
Supplemental Data:
Net assets at end of period ................ $226,978,689 $197,370,530 $156,412,213
Number of shares outstanding at end of
period .................................... 226,978,007 197,369,848 156,412,393
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Quality Cash Reserve Prime Shares
----------------------------------------------------------------------
For the Period
May 6, 19911
For the Year Ended March 31,
-----------------------------------------------------
1995 1994 1993 March 31, 1992
---------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ------------ -----------
Income from Investment Operations:
Net investment income ...................... 0.0402 0.0218 0.0253 0.0399
Less Distributions:
Dividends from net investment income
and/or short-term gains ................... (0.0402) (0.0218) (0.0253) (0.0399)
----------- ----------- ------------ -----------
Net asset value at end of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== ============ ===========
Total Return:
Based on net asset value per share ......... 4.09% 2.20% 2.53% 4.30%(4)
Ratios to Average Daily Net Assets:
Expenses ................................... 0.96% 1.06% 1.04% 0.96%(4)
Net investment income ...................... 4.04% 2.18% 2.53% 4.30%(4)
Supplemental Data:
Net assets at end of period ................ $94,592,158 $92,678,440 $101,321,868 $94,887,669
Number of shares outstanding at end of
period .................................... 94,591,979 92,678,268 101,321,668 94,887,669
</TABLE>
- --------
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 1.02%, 0.98% and 0.95% for the years ended March 31, 1998, 1997 and
1996, respectively.
3 Ratio of net investment income to average daily net assets prior to partial
fee waivers was 4.60%, 4.43% and 4.86% for the years ended March 31,
1998, 1997 and 1996, respectively.
4 Annualized.
3
<PAGE>
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 seeks 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 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 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.)
4
<PAGE>
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.
Reverse Repurchase Agreements involving the sale of money market instruments
held by the Prime Series, with an agreement to repurchase the instruments at an
agreed upon price and date. The Prime Series will employ reverse repurchase
agreements only when necessary to meet unanticipated net redemptions so as to
avoid liquidating other money market instruments during unfavorable market
conditions. The Prime Series will utilize reverse repurchase agreements when
the interest income to be earned from portfolio investments, which would
otherwise have to be liquidated to meet redemptions, is greater than the
interest expense incurred as a result of the reverse repurchase transactions.
Reverse repurchase agreements involve the risk that the market value of
securities retained by the Prime Series in lieu of liquidation may decline
below the repurchase price of the securities sold by the Prime Series, which it
is obligated to repurchase.
Investment Restrictions
The Prime Series investment program is subject to a number of investment
restrictions 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
5
<PAGE>
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.
Further investment restrictions are listed in the Statement of Additional
Information.
The Fund's Net Asset Value
The following sections describe how to buy and redeem Shares.
The price you pay or receive is the Fund's net asset value per share.
The net asset value per share of the Prime Series is determined on each
business day as of 12:00 noon (Eastern Time).
The Fund uses the amortized cost method of valuing portfolio securities and
rounds the per share net asset value to the nearest whole cent. As a result, it
is anticipated that the net asset value will remain constant at $1.00 per
share. There can be no assurance, however, that this will always be the case.
You may buy or redeem Shares on any day on which both the New York Stock
Exchange and the Fund's custodian are open for business (a "Business Day"). If
your order is entered before the net asset value per share is determined for
that day, the price you pay or receive will be based on that day's net asset
value per share. If your order is entered after the net asset value per share
is determined for that day, the price you pay or receive will be based on the
next Business Day's net asset value per share.
How to Buy Shares
You may buy Shares through your securities dealer or through a financial
institution that is authorized to act as a shareholder servicing agent. Contact
them for details on how to enter and pay for your order.
Your purchase order may not be accepted if the sale of Shares has been suspended
or if it is determined that your purchase would be detrimental to the interests
of the Fund's shareholders.
Investment Minimums
Your initial investment must be at least $1,500. Subsequent investments must be
at least $100.
There is no minimum investment requirement if you are buying Shares through
your securities dealer's program for automatic investments and redemptions.
6
<PAGE>
Purchase Price
The price you pay to buy Shares will be the Fund's net asset value per share.
Investing Regularly
You may make regular investments in the Fund through either of the following
methods. Contact your securities dealer or servicing agent if you wish to
enroll in either of these programs or if you need any additional information.
Automatic Investment and Redemption Program. Your securities dealer or servicing
agent may have established a special procedure to automatically invest proceeds
from the sale of securities and other credit balances in your account in
Shares and to redeem Shares you own to pay for securities purchases. Contact
your securities dealer or servicing agent for details.
Dividend Reinvestment Plan. Unless you elect otherwise, all distributions will
be reinvested in additional Shares at net asset value. If you prefer to receive
your distributions in cash, notify your securities dealer or your servicing
agent at least five days before the date on which the next distribution will be
paid. If you have redeemed all of your Shares, your dividend will be paid in
cash.
How to Redeem Shares
You may redeem Shares through your securities dealer or servicing agent. Contact
them for details on how to enter your order and for information as to how you
will be paid.
Your securities dealer or servicing agent may require the following documents
before they redeem your Shares.
(1) A letter of instructions specifying your account number and the number of
Shares or dollar amount you wish to redeem. All owners of the Shares must sign
the letter exactly as their names appear on the account.
(2) A guarantee of your signature by a member of the Federal Deposit Insurance
Corporation, a trust company, broker, dealer, securities exchange or
association, clearing agency, savings association or (if authorized by state
law) credit union.
(3) Any additional documents that may be required if your account is in the
name of a corporation, partnership, trust or fiduciary.
Redemption Price
The price you receive when you redeem Shares will be the Fund's net asset value
per share.
Other Redemption Information
Automatic Investment and Redemption Program. Your securities dealer or servicing
agent may have established a special procedure to automatically invest proceeds
from the sale of securities and other credit balances in your account in Shares
and to redeem Shares you own to pay for securities purchases. Contact your
securities dealer or servicing agent for details.
Redemption by Check. You may establish special check redemption privileges that
will allow you to redeem Shares you own by writing checks in amounts of $250 or
more. These checks may be cashed or deposited in the same way as ordinary bank
checks. You will continue to earn dividends on your shares until the check is
presented for payment and the corresponding shares are redeemed. Check
redemption information will appear in your account with your securities dealer
or servicing agent. Cancelled checks will not be returned to you.
7
<PAGE>
If the amount of your check exceeds the value of the Shares you own, the check
will be returned to the payee marked "non-sufficient funds." Checks written for
amounts less than $250 may also be returned. The Fund, in its discretion, will
honor such checks but will charge you a servicing fee of $15.
The Funds reserves the right to terminate or alter check redemption privileges
at any time, to impose a service charge, or to charge you for checks. The Fund
may also charge you for returned checks and for effecting stop payment orders.
If you are interested in establishing check redemption privileges, contact your
securities dealer or servicing agent.
Other Information. Any dividends payable on Shares you redeem will be paid on
the next dividend payment date.
If you redeem sufficient Shares to reduce your investment in the Prime Series to
$500 or less, the Fund has the power to redeem the remaining Shares after giving
you 60 days' notice.
If you paid for your purchase of Shares by check, redemption of those Shares
will be restricted for a period of fifteen calendar days unless you are using
the proceeds to purchase other securities through your securities dealer or
servicing agent.
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 you have 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 tax treatment of the Fund or its
shareholders, and the discussion here is not intended as a substitute for
careful tax planning. Accordingly, you are advised to consult with your tax
advisor regarding specific questions.
There is further information concerning taxes 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 pay federal
income taxes on amounts distributed to its shareholders; but shareholders,
unless otherwise exempt, will pay taxes on amounts so distributed.
You will be taxed on distributions of net investment company taxable income 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 capital gains, any distributions of net
capital gains (the excess of net long-term capital gains over net short-term
8
<PAGE>
capital losses) will be taxable to you as either short-term, mid-term or
long-term depending upon how long the Fund held the securities it sold to
generate the gains. You will be taxed on the distributions according to the
category stipulated by the Fund regardless of how long you have held your
Shares.
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 paid by the Prime Series and received by you 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 you.
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, distributor, custodian and
transfer agent. The day-to-day operations of the Fund are delegated to the
Fund's executive officers, to the Fund's advisor and to the Distributor. A
majority of the Board of Directors of the Fund have no affiliation with the
Distributor or the Fund's advisor.
Investment Advisor
Investment Company Capital Corp. ("ICC"), an indirect subsidiary of Bankers
Trust 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 investment advisor to mutual funds having net assets of approximately
$7.4 billion at May 31, 1998. In addition to the Fund, these include the funds
in the Flag Investors family of funds.
As compensation for providing investment advisory services to the Prime Series
for the fiscal year ended March 31, 1998, ICC received a fee equal to 0.26% 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. An affiliate of ICC provides
custody services to the Fund. (See "Cus-todian, Transfer Agent and Accounting
Services.")
Distributor
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") has served as
distributor for the Shares since August 31, 1997. 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 the Fund's advisor.
9
<PAGE>
As compensation for its services for the period from August 31, 1997 through
March 31, 1998, ICC Distributors received a fee from the Fund, equal to 0.60%
(annualized) of the average daily net assets invested in Shares. ICC
Distributors currently reduces its distribution fee, on a voluntary basis, to
0.54% of the 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 securities 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 may 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 securities dealers.
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. You may obtain the yield for the Quality Cash Reserve
Prime Shares by calling your securities dealer.
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 9 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 of shares,
which 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 your
securities 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
10
<PAGE>
liquidation, holders of shares of each Series will receive pro rata, subject to
the rights of creditors, (a) the proceeds of the sale of the assets held in the
respective Series less (b) the liabilities of the Fund attributable to the
respective Series or allocated among all Series based on the respective
liquidation value of each Series.
There are no preemptive or conversion rights applicable to any of the Fund's
shares. The Fund's shares, when issued, will be fully paid and non-assessable.
The Board of Directors may create additional series or classes of Fund shares
without shareholder approval.
Custodian, Transfer Agent and Accounting
Services
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, 1998, ICC received a fee equal to 0.01% of the Prime Series' average
daily net assets. Bankers Trust Company, a subsidiary of Bankers Trust
Corporation acts as custodian of the Fund's assets. (See the Statement of
Additional Information.)
Annual Meetings
The Fund does not expect to hold annual meetings of shareholders unless
required by Maryland law. 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
You will be furnished 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, PricewaterhouseCoopers LLP.
Shareholder Inquiries
If you have questions concerning your Shares, contact your securities dealer.
11
<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
BANKERS TRUST COMPANY PRICEWATERHOUSECOOPERS LLP
130 Liberty Street 250 West Pratt Street
New York, New York 10006 Baltimore, Maryland 21201
Transfer Agent
INVESTMENT COMPANY CAPITAL CORP.
One South Street
Baltimore, Maryland 21202
(800) 553-8080
12
<PAGE>
- --------------------------------------------------------------------------------
Quality Cash Reserve Prime Shares
P.O. Box 17250
Baltimore, Maryland 21203
QUALITY
CASH RESERVE
PRIME SHARES
Prospectus
August 1, 1998
Bulk Rate
U.S. POSTAGE
PAID
Farmingdale, N.Y.
Permit No. 225
- --------------------
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
----------------------------------------
BT ALEX. BROWN CASH RESERVE FUND, INC.
----------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS FOR THE
APPROPRIATE CLASS OF SHARES, WHICH MAY BE OBTAINED FROM YOUR
SECURITIES DEALER, OR SHAREHOLDER SERVICING AGENT, OR BY
WRITING THE FUND AT P.O. BOX 17250, BALTIMORE, MARYLAND 21203,
OR BY CALLING THE FUND AT (800) 553-8080.
Statement of Additional Information dated August 1,
1998 Relating to Prospectuses dated, August 1, 1998, for:
BT Alex. Brown Cash Reserve Fund, Inc.
(Prime Series, Treasury Series and Tax-Free Series)
Quality Cash Reserve Prime Shares
Flag Investors Cash Reserve Prime Shares
(Class A and Class B) and
Institutional Shares
(Prime Series, Treasury Series and Tax-Free Series)
<PAGE>
TABLE OF CONTENTS
Introduction................................................................. 1
Year 2000 ................................................................... 1
General Information About the Fund........................................... 1
The Fund and Its Shares................................................ 1
Directors and Officers................................................. 3
The Investment Advisor................................................. 7
Distributor............................................................ 8
Expenses...............................................................12
Transfer Agent, Custodian and Accounting Services......................13
Sub-Accounting.........................................................14
Principal Holders of Securities........................................14
Semi-Annual Reports....................................................14
Independent Accountants................................................14
Legal Matters .........................................................14
Share Purchases and Redemptions..............................................14
Purchases and Redemptions..............................................15
Net Asset Value Determination..........................................15
Dividends and Taxes..........................................................16
Dividends..............................................................16
Taxes..................................................................17
Current Yield................................................................20
Investment Program and Restrictions..........................................21
Investment Restrictions......................................................23
Portfolio Transactions.......................................................24
Financial Statements.........................................................26
<PAGE>
INTRODUCTION
BT Alex. Brown Cash Reserve Fund, Inc. (the "Fund") is a mutual fund. The
rules and regulations of the Securities and Exchange Commission (the "SEC")
require all mutual funds to furnish prospective investors certain information
concerning the activities of the company being considered for investment. There
are four separate Prospectuses for the Fund's shares dated August 1, 1998: one
for the BT Alex. Brown Cash Reserve Classes of each Series, one for the
Institutional Classes of each Series, one for the Flag Investors Cash Reserve
Prime Class A and B Shares of the Prime Series and one for the Quality Cash
Reserve Prime Shares Class of the Prime Series. These prospectuses may be
obtained without charge from your Participating Dealer or Shareholder Serving
Agent or by writing the Fund, P.O. Box 17250, Baltimore, Maryland 21203.
Investors may also call (800) 553-8080. Some of the information required to be
in this Statement of Additional Information is also included in the Fund's
current Prospectuses; and, in order to avoid repetition, reference will be made
to sections of the Prospectuses. Unless otherwise noted, the term "Prospectus"
as used herein refers to the Prospectus for each class of the Fund's shares.
Additionally, the Prospectus and this Statement of Additional Information omit
certain information contained in the registration statement filed with the SEC.
Copies of the registration statement, including items omitted from the
Prospectus and this Statement of Additional Information, may be obtained from
the SEC by paying the charges prescribed under its rules and regulations.
Year 2000
The Fund depends on the smooth functioning of computer systems in almost
every aspect of its business. The Fund could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000 and distinguish between the year 2000 and the year
1900. The Fund has asked its service providers whether they expect to have their
computer systems adjusted for the year 2000 transition and received assurances
from each that its system is expected to accommodate the year 2000 without
material adverse consequences to the Fund. The Fund and its shareholders may
experience losses if these assurances prove to be incorrect or if issuers of
portfolio securities or third parties, such as custodians, banks, broker-dealers
or others with which the Fund does business, experience difficulties as a result
of year 2000 issues.
GENERAL INFORMATION ABOUT THE FUND
The Fund and Its Shares
The Fund is registered as an open-end diversified management investment
company under the Investment Company Act of 1940, as amended, (the "1940 Act")
and its shares are registered under the Securities Act of 1933. The Fund was
organized as a corporation under the laws of the State of Maryland on November
19, 1980, reorganized as a business trust under the laws of the Commonwealth of
Massachusetts on August 30, 1985 and, following certain changes in Maryland law,
reorganized as a Maryland corporation effective April 5, 1990.
The Fund offers three series of shares (each such series is referred to
herein as a "Series" and collectively as the "Series"):
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<PAGE>
o Prime Series
o Treasury Series
o Tax-Free Series
There are currently five classes of the Prime Series, designated as the BT
Alex. Brown Cash Reserve Prime Shares, the Flag Investors Cash Reserve Prime
Class A Shares, the Flag Investors Cash Reserve Prime Class B Shares, the BT
Alex. Brown Cash Reserve Prime Institutional Shares and the Quality Cash Reserve
Prime Shares. There are currently two classes of the Treasury Series, designated
as the BT Alex. Brown Cash Reserve Treasury Shares and the BT Alex. Brown Cash
Reserve Treasury Institutional Shares. There are currently two classes of the
Tax-Free Series, designated as the BT Alex. Brown Cash Reserve Tax-Free Shares
and the BT Alex. Brown Cash Reserve Tax-Free Institutional Shares.
As used in the Prospectus, the term "majority of the outstanding shares" of
either the Fund or a particular Series or class means, respectively, the vote of
the lesser of (i) 67% or more of the shares of the Fund or such Series or class
present or represented by proxy at a meeting, if the holders of more than 50% of
the outstanding shares of the Fund or such Series or class are present or
represented by proxy, or (ii) more than 50% of the outstanding shares of the
Fund or such Series or class.
Shareholders do not have cumulative voting rights, and therefore the
holders of more than 50% of the outstanding shares of all classes voting
together for the election of directors may elect all of the members of the Board
of Directors of the Fund. In such event, the remaining holders cannot elect any
members of the Board of Directors of the Fund.
The Board of Directors may classify or reclassify any unissued shares of
any class or classes in addition to those already authorized by setting or
changing in any one or more respects, from time to time, prior to the issuance
of such shares, the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption, of such shares. Any such classification or
reclassification will comply with the provisions of the 1940 Act.
The Fund's Articles of Incorporation authorize the issuance of 9 billion
shares, each with a par value of $.001. The Board of Directors may increase or
(within limits) decrease the number of authorized shares without shareholder
approval. A share of a Series represents an equal proportionate interest in such
Series with each other share of that Series and is entitled to a proportionate
interest in the dividends and distributions from that Series except to the
extent such dividends and distributions may be affected by differences in the
expenses allocated to a particular class. Additional information concerning the
rights of share ownership is set forth in the Prospectus.
The assets received by the Fund for the issue or sale of shares of each
Series and all income, earnings, profits, losses and proceeds therefrom, subject
only to the rights of creditors, are allocated to that Series, and constitute
the underlying assets of that Series. The underlying assets of each Series are
segregated and are charged with the expenses attributable to that Series and
with a share of the general expenses of the Fund as described below under
"Expenses." While the expenses of the Fund are allocated to the separate books
of account of each Series, certain expenses may be legally chargeable against
the assets of all Series. In addition, expenses of a Series that are
attributable to a particular class of shares offered by that Series are
allocated to that class. See "Expenses."
The Fund's Charter provides that the directors and officers of the Fund
will not be liable to the Fund or its shareholders for any action taken by such
director or officer while acting in his or her capacity as such, except for any
liability to which the director or officer would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office. The Fund's Charter provides
for indemnification by the Fund of the
-2-
<PAGE>
directors and officers of the Fund except with respect to any matter as to which
any such person did not act in good faith in the reasonable belief that his or
her action was in or not opposed to the best interests of the Fund. Such person
may not be indemnified against any liability to the Fund or the Fund's
shareholders to which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. The Fund's Charter also authorizes
the purchase of liability insurance on behalf of the directors and officers.
As described in the Prospectus, the Fund will not normally hold annual
shareholders' meetings. Directors may be removed from office by a vote of the
holders of two-thirds of the outstanding shares at a meeting duly called for
that purpose, which meeting shall be held upon written request of the holders of
not less than 10% of the outstanding shares of the Fund. Upon written request by
ten or more shareholders, who have been such for at least six months and who
hold shares constituting 1% of the outstanding shares, stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
director, the Fund has undertaken to provide a list of shareholders or to
disseminate appropriate materials.
Except as otherwise disclosed in the Prospectus and in this Statement of
Additional Information, the directors shall continue to hold office and may
appoint their successors.
Directors and Officers
The directors and executive officers of the Fund, their dates of birth and
their principal occupations during the last five years are set forth below.
Unless otherwise indicated, the address of each Director and executive officer
is One South Street, Baltimore, Maryland 21202.
*RICHARD T. HALE, Chairman and Director (7/17/45)
Managing Director, BT Alex. Brown Incorporated; Director and President,
Investment Company Capital Corp. (registered investment advisor); and Chartered
Financial Analyst.
*TRUMAN T. SEMANS, Director (10/27/26)
Managing Director Emeritus, BT Alex. Brown Incorporated; Vice Chairman, Alex.
Brown Capital Advisory & Trust Company and Director, Investment Company Capital
Corp. (registered investment advisor) and Director, Virginia Hot Springs Inc.
(property management); Formerly, Vice Chairman, Alex. Brown & Sons Incorporated
(now BT Alex. Brown Incorporated).
JAMES J. CUNNANE, Director (3/11/38)
60 Seagate Drive, Unit P106, Naples, Florida 34103. Managing
Director, CBC Capital (merchant banking), 1993-Present; Formerly, Senior Vice
President and Chief Financial Officer, General Dynamics Corporation (defense),
1989-1993 and Director, The Arch Fund (registered investment company).
JOHN F. KROEGER, Director (8/11/24)
37 Pippins Way, Morristown, New Jersey 07960. Formerly, Consultant, Wendell &
Stockel Associates, Inc. (consulting firm); General Manager, Shell Oil Company
and Director/Trustee, AIM Funds (registered investment companies).
LOUIS E. LEVY, Director (11/16/32)
26 Farmstead Road, Short Hills, New Jersey 07078. Director, Kimberly-Clark
Corporation (personal consumer products) and Household International (banking
and finance); Chairman of the Quality Control Inquiry Committee, American
Institute of Certified Public Accountants; Formerly, Trustee, Merrill Lynch
Funds for Institutions, 1991-1993; Adjunct Professor, Columbia
University-Graduate School of Business, 1991-1992; and Partner, KPMG Peat
Marwick, retired 1990.
-3-
<PAGE>
EUGENE J. McDONALD, Director (7/14/32)
Duke Management Company, Erwin Square, Suite 100, 2200 West Main Street, Durham,
North Carolina 27705. President, Duke Management Company (investments);
Executive Vice President, Duke University (education, research and health care);
Director, Central Carolina Bank & Trust (banking), Key Funds (registered
investment companies), and DP Mann Holdings (insurance); Formerly, Director,
AMBAC Treasurers Trust (registered investment company).
REBECCA W. RIMEL, Director (4/10/51)
The Pew Charitable Trusts, One Commerce Square, 2005 Market Street, Suite 1700,
Philadelphia, Pennsylvania 19103. President and Chief Executive Officer, The Pew
Charitable Trusts; Director and Executive Vice President, The Glenmede Trust
Company; Formerly, Executive Director, The Pew Charitable Trusts.
CARL W. VOGT, ESQ., Director (4/20/36)
Fulbright & Jaworski L.L.P., 801 Pennsylvania Avenue, N.W., Washington, D.C.
20004-2604. Senior Partner, Fulbright & Jaworski L.L.P. (law); Director, Yellow
Corporation (trucking); American Science & Engineering (x-ray detection
equipment); Formerly, Chairman and Member, National Transportation Safety Board;
Director, National Railroad Passenger Corporation (Amtrak) and Member, Aviation
System Capacity Advisory Committee (Federal Aviation Administration).
HARRY WOOLF, President (8/12/23)
Institute for Advanced Study, Olden Lane, Princeton, New Jersey 08540.
Professor-at-Large Emeritus, Institute for Advanced Study; Director, ATL and
Spacelabs Medical Corp. (medical equipment); Director Family Health
International (non-profit research and education) and Director, Research America
(non-profit medical research); Formerly, Trustee, Reed College (education);
Trustee, Rockefeller Foundation; and Director, Merrill Lynch Cluster C Funds and
Flag Investors/ISI/BT Alex. Brown Cash Reserve Fund, Inc. Family of funds
(registered investment companies).
JOSEPH A. FINELLI, Treasurer (1/24/57)
Vice President, BT Alex. Brown Incorporated and Vice President, Investment
Company Capital Corp., (registered investment advisor), September 1995-Present;
Formerly, Vice President and Treasurer, The Delaware Group of Funds (registered
investment companies) and Vice President, Delaware Management Company, Inc.
(investments), 1980 - August, 1995.
AMY M. OLMERT, Secretary (5/14/63)
Vice President, BT Alex. Brown Incorporated, June, 1997-Present. Formerly,
Senior Manager, Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP),
September, 1988-June, 1997.
SCOTT J. LIOTTA, Assistant Secretary (3/18/65)
Assistant Vice President, BT Alex. Brown Incorporated, July 1996-Present;
Formerly, Manager and Foreign Markets Specialist, Putnam Investments Inc.
(registered investment companies), April 1994-July 1996; Supervisor, Brown
Brothers Harriman & Co. (domestic and global custody), August 1991-April 1994.
- ----------
* Messrs. Hale and Semans are "interested persons," as defined in the 1940 Act.
Directors and officers of the Fund are also directors and officers of some
or all of the investment companies managed, administered or advised by BT Alex.
Brown Incorporated ("BT Alex. Brown") or its affiliates.
-4-
<PAGE>
There are currently 13 funds in the Flag Investors/ISI Funds and BT Alex.
Brown Cash Reserve Fund, Inc. fund complex (the "Fund Complex"). Mr. Hale serves
as Chairman of four funds and as a director of eight funds in the Fund Complex.
Mr. Semans serves as Chairman of five funds and as a director of six funds in
the Fund Complex. Messrs. Cunnane, Kroeger, Levy and McDonald serve as directors
of each fund in the Fund Complex. Ms. Rimel and Mr. Vogt serve as a director of
eleven funds in the Fund Complex. Mr. Woolf serves as President of seven funds
in the Fund Complex. Ms. Olmert serves as Secretary, Mr. Finelli serves as
Treasurer and Mr. Liotta serves as Assistant Secretary of each of the funds in
the Fund Complex.
With the exception of the Fund's President, officers of the Fund receive no
direct remuneration in such capacity from the Fund. Officers and directors of
the Fund who are officers or directors of BT Alex. Brown or ICC may be
considered to have received remuneration indirectly. Each director who is not an
"interested person" of the Fund (as defined in the Investment Company Act) (an
"Independent Director") and Mr. Woolf receives an aggregate annual fee (plus
reimbursement for reasonable out-of-pocket expenses incurred in connection with
his or her attendance at Board and committee meetings) from the Fund and from
all Flag Investors/ISI Funds for which he or she serves. In addition, the
Chairman of the Fund Complex's Audit Committee receives an aggregate annual fee
from the Fund Complex. Payment of such fees and expenses are allocated among all
such funds described above in proportion to their relative net assets. For the
fiscal year ended March 31, 1998, Independent Directors' fees attributable to
the assets of the Fund totaled $289,635.
The following table shows aggregate compensation payable to each of the
Fund's directors by the Fund and the Fund Complex, respectively, and pension or
retirement benefits accrued as part of Fund expenses in the fiscal year ended
March 31, 1998.
-5-
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
Total Compensation from the
Aggregate Compensation from Fund and the Fund Complex
the Fund Payable to Directors Pension or Retirement Payable to Directors for the
Name of Person, for the Fiscal Year Ended Benefits Accrued as Part of Fiscal Year Ended
Position March 31, 1998 Fund Expenses March 31, 1998
- ------------------------------ ------------------------------ ---------------------------- -----------------------------
<S> <C> <C> <C>
Richard T. Hale (1) $0 $0 $0
Chairman
Truman T. Semans (1) $0 $0 $0
Director
Charles W. Cole, Jr.(1)(2) $0 (4) $0
Director
James J. Cunnane $27,129(3) (4) $39,000 for service
Director on 13 Boards
John F. Kroeger $34,085 (4) $49,000 for service
Director on 13 Boards
Louis E. Levy $27,129(3) (4) $39,000 for service
Director on 13 Boards
Eugene J. McDonald $27,129(3) (4) $39,000 for service
Director on 13 Boards
Rebecca W. Rimel $27,663(3) (4) $39,000 for service
Director on 11 Boards(5)
Carl W. Vogt, Esq. $27,938(3) (4) $39,000 for service
Director on 11 Boards(5)
</TABLE>
- ----------
(1) A director who is, or may be, an "interested person" as defined in the 1940
Act.
(2) Retired as Director of the Fund effective September 1, 1997.
(3) Of amounts payable to Messrs. Cunnane, Levy, McDonald, Vogt, and Ms. Rimel,
$27,129, $19,500, $27,129, $27,938 and $27,663 was deferred pursuant to a
Deferred Compensation Plan.
(4) The Fund Complex has adopted a retirement plan for eligible directors, as
described below. The actuarially computed pension expense for the year ended
March 31, 1998 was approximately $165,530.
(5) Ms. Rimel and Mr. Vogt receive proportionately higher compensation from each
fund for which they serve as a Director.
The Fund Complex has adopted a retirement plan (the "Retirement Plan") for
Directors who are not employees of the Fund, the Fund's advisor or their
respective affiliates (the "Participants"). After completion of six years of
service, each Participant will be entitled to receive an annual retirement
benefit equal to a percentage of the fee earned by him or her in his or her last
year of service. Upon retirement, each Participant will receive annually 10% of
such fee for each year that he or she served after completion of the first five
years, up to a maximum annual benefit of 50% of the fee earned by him or her in
his or her last year of service. The fee will be paid quarterly, for life, by
each Fund for which he or she serves. The Retirement Plan is unfunded and
unvested. Mr. Kroeger has qualified but has not received benefits. The Fund has
two Participants, a director who retired effective December 31, 1994 and Mr.
Woolf who retired effective December 31, 1996, who have qualified for the
Retirement Plan by serving thirteen years and fourteen years, respectively, as
directors in the Fund Complex and each of whom will be paid a quarterly fee of
$4,875 by the Fund Complex for the rest of his or her life. Such fees are
allocated to each fund in the Fund Complex based upon the relative net assets of
such fund to the Fund Complex.
Set forth in the table below are the estimated annual benefits payable to a
Participant upon retirement assuming various years of service and payment of a
percentage of the fee earned by such Participant in his or her last year of
service, as described above. The approximate credited years of
-6-
<PAGE>
service at December 31, 1997 are as follows: for Mr. Cunnane, 3 years; for Mr.
Kroeger, 15 years; for Mr. Levy, 3 years; for Mr. McDonald, 5 years; for Mr.
Vogt, 2 years; and for Ms. Rimel, 2 years.
Estimated Annual Benefits Payable
By Fund Complex Upon Retirement
---------------------------------------------------------
Years of Service Chairman of Audit Committee Other Participants
- ---------------- --------------------------- ------------------
6 years $4,900 $3,900
7 years $9,800 $7,800
8 years $14,700 $11,700
9 years $19,600 $15,600
10 years or more $24,500 $19,500
Any director who receives fees from the Fund is permitted to defer a
minimum of 50%, or up to all, of his or her annual compensation pursuant to a
Deferred Compensation Plan. Messrs. Cunnane, Levy, McDonald and Vogt and Ms.
Rimel have each executed a Deferred Compensation Agreement. Currently, the
deferring directors may select from among various Flag Investors and BT Alex.
Brown Cash Reserve Funds and the BT International Equity Fund in which all or
part of their deferral account shall be deemed to be invested. Distributions
from the deferring directors' deferral accounts will be paid in cash, in
generally equal quarterly installments over a period of ten years.
The Investment Advisor
Investment Company Capital Corp. ("ICC" or the "Advisor"), an indirect
subsidiary of Bankers Trust Corporation, acts as the Fund's investment advisor
pursuant to three separate Investment Advisory Agreements dated as of September
1, 1997, one relating to the Prime Series, one relating to the Treasury Series
and one relating to the Tax-Free Series (the "Advisory Agreements"). ICC was
organized in 1987. The terms of the Advisory Agreements are the same except to
the extent specified below. Pursuant to the terms of the Advisory Agreements,
ICC (a) supervises and manages the Fund's operations; (b) formulates and
implements continuing programs for the purchases and sales of securities,
consistent with the investment objective and policies of each Series; (c)
provides the Fund with such executive, administrative and clerical services as
are deemed advisable by the Fund's Board of Directors; (d) provides the Fund
with, or obtains for it, adequate office space and all necessary office
equipment and services; (e) obtains and evaluates pertinent information about
significant developments and economic, statistical and financial data, domestic,
foreign and otherwise, whether affecting the economy generally or any Series of
the Fund, and whether concerning the individual issuers whose securities are
included in the Fund's Series or the activities in which they engage, or with
respect to securities which ICC considers desirable for inclusion in the
portfolio of any of the Fund's Series; (f) determines which issuers and
securities shall be represented in the Portfolio of any of the Fund's Series;
(g) takes all actions necessary to carry into effect the Fund's purchase and
sale programs; (h) supervises the operations of the Fund's transfer and dividend
disbursing agent; (i) provides the Fund with such administrative and clerical
services for the maintenance of certain shareholder records as are deemed
advisable by the Fund's Board of Directors; and (j) arranges, but does not pay
for, the periodic updating of prospectuses and supplements thereto, proxy
material, tax returns, reports to the Fund's shareholders and reports to and
filings with the SEC and state Blue Sky authorities. ICC may delegate its duties
under the Advisory Agreements, and has delegated certain of such duties with
respect to the Tax-Free Series to its affiliates.
-7-
<PAGE>
As compensation for its services for the Fund, ICC receives a fee from the
Fund, calculated daily and paid monthly, at the following annual rates based
upon the Fund's aggregate average daily net assets: 0.30% of the first $500
million, 0.26% of the next $500 million, 0.25% of the next $500 million, 0.24%
of the next $1 billion, 0.23% of the next $1 billion and 0.22% of that portion
in excess of $3.5 billion. In addition, the Advisor is entitled to receive an
additional fee with respect to the Prime Series as well as an additional fee
with respect to the Tax-Free Series, calculated daily and paid monthly, at the
annual rate of 0.02% of the Prime Series' average daily net assets and 0.03% of
the Tax-Free Series' average daily net assets. ICC may, from time to time,
voluntarily waive a portion of its advisory fee with respect to any Series to
preserve or enhance the performance of the Series.
Advisory fees paid by the Fund to ICC for the last three fiscal years were as
follows:
For the Fiscal Year Ended March 31
- --------------------------------------------------------------------------------
1998 | 1997 | 1996
- --------------------------------------------------------------------------------
$12,511,915 | $10,806,028 | $7,291,008
- --------------------------------------------------------------------------------
The Advisory Agreements continue in effect from year to year if each such
agreement is specifically approved at least annually by the Fund's Board of
Directors and by a majority of the Independent Directors by votes cast in person
at a meeting called for such purpose. The Fund or ICC may terminate any Advisory
Agreement on 60 days' written notice without penalty. The Advisory Agreements
terminate automatically in the event of an "assignment," as defined in the 1940
Act.
ICC also serves as the Fund's transfer and dividend disbursing agent and
provides accounting services to each Series. An affiliate of ICC serves as
custodian to the Fund. (See "Transfer Agent, Custodian and Accounting
Services.")
Distributor
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") serves as
the distributor for each class of the Fund's shares pursuant to a Distribution
Agreement dated August 31, 1997 (the "Distribution Agreement"). Prior to August
31, 1997, Alex. Brown & Sons Incorporated ("Alex. Brown") served as the Fund's
Distributor pursuant to five separate distribution agreements for the same rates
of compensation and on substantially the same terms as the current Distribution
Agreement. ICC Distributors serves as the distributor for other funds in the
Flag Investors family of funds.
The Distribution Agreement provides that ICC Distributors shall; (i) use
reasonable efforts to sell Shares upon the terms and conditions contained in the
Distribution Agreement and the Fund's then current Prospectus; (ii) use its best
efforts to conform with the requirements of all federal and state laws relating
to the sale of the Shares; (iii) adopt and follow procedures as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. and any other applicable self-regulatory organization; (iv)
perform its duties under the supervision of and in accordance with the
directives of the Fund's Board of Directors and the Fund's Articles of
Incorporation and By-Laws; and (v) provide the Fund's Board of Directors with a
-8-
<PAGE>
written report of the amounts expended in connection with the Distribution
Agreement. ICC Distributors shall devote reasonable time and effort to effect
sales of Shares but shall not be obligated to sell any specific number of
Shares. The services of ICC Distributors are not exclusive and ICC Distributors
shall not be liable to the Fund or its shareholders for any error of judgment or
mistake of law, for any losses arising out of any investment, or for any action
or inaction of ICC Distributors in the absence of bad faith, willful misfeasance
or gross negligence in the performance of its duties or obligations under the
Distribution Agreement or by reason of its reckless disregard of its duties and
obligations under the Distribution Agreement. The Distribution Agreement further
provides that the Fund and ICC Distributors will mutually indemnify each other
for losses relating to disclosures in the Fund's registration statement.
The Distribution Agreement may be terminated at any time upon 60 days'
written notice by the Fund, without penalty, by the vote of a majority of the
Fund's Independent Directors or by a vote of a majority of the Fund's
outstanding Shares of the related class (as defined under "Capital Stock") or
upon 60 days' written notice by the Distributor and shall automatically
terminate in the event of an assignment. The Distribution Agreement has an
initial term of one year from the date of effectiveness. It shall continue in
effect thereafter with respect to each class of the Fund provided that it is
approved at least annually by (i) a vote of a majority of the outstanding voting
securities of the related class of the Fund or (ii) a vote of a majority of the
Fund's Board of Directors including a majority of the Independent Directors and,
with respect to each class of the Fund for which there is a plan of
distribution, so long as such plan of distribution is approved at least annually
by the Independent Directors in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement, including the form of
Sub-Distribution Agreement, was initially approved by the Board of Directors,
including a majority of the Independent Directors, on August 4, 1997 and was
most recently approved on March 27, 1998.
As compensation for its services, ICC Distributors receives a distribution
fee from the Fund, calculated daily and paid monthly, at the annual rate of
0.25% of the aggregate average daily net assets of all classes of the Fund,
excluding net assets attributable to the Institutional Shares, the Quality Cash
Reserve Prime Shares and the Flag Investors Cash Reserve Prime Class B Shares.
ICC Distributors receives no compensation with respect to its services as
distributor for the Institutional Shares and none of ICC Distributors'
compensation as distributor of the Fund's shares is allocated to the
Institutional Shares. ICC Distributors receives a distribution fee from the
Fund, calculated daily and paid monthly, at the annual rates of 0.60% of the
average daily net assets of the Quality Cash Reserve Prime Shares and 0.75% of
the average daily net assets of the Flag Investors Cash Reserve Prime Class B
Shares. In addition, ICC Distributors receives a shareholder servicing fee, paid
monthly, at an annual rate equal to 0.25% of the Flag Investors Cash Reserve
Prime Class B Shares' average daily net assets.
As compensation for providing distribution and shareholder services to the
Fund for the last three fiscal years, the fund's distributor received fees in
the following amounts:
For the Fiscal Year Ended March 31
------------------------------------------------
Fee 1998 1997 1996
- ------------------------- ------------- ------------- ------------
Prime Series 12b-1 Fees $8,299,915(1) $7,398,316(5,6) $5,575,592(5,7)
Treasury Series 12b-1 Fee $1,700,377(2) $1,681,441(5) $1,549,949(5)
Tax-Free Series 12b-1 Fee $1,784,579(3) $1,479,582(5) $1,345,261(5)
Flag Investors Cash
Reserve Class B
Shareholder Servicing Fee $ 750(4) $ 231(5) $ 77(5)
-9-
<PAGE>
- ----------
(1) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $3,204,626 (net of waivers of $54,321 for the Quality Cash
Reserve Prime Shares Class) and ICC Distributors, the Fund's
distributor effective August 31, 1997, received $5,095,289 (net of waivers
of $81,870 for the Quality Cash Reserve Prime Shares Class).
(2) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $655,375 and ICC Distributors, the Fund's distributor
effective August 31, 1997, received $1,045,002.
(3) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $692,546 and ICC Distributors, the Fund's distributor
effective August 31, 1997, received $1,092,033.
(4) Of this amount, Alex. Brown, the Fund's distributor prior to August 31,
1997, received $315 and ICC Distributors, the Fund's distributor
effective August 31, 1997, received $435.
(5) Fees received by Alex. Brown, the Fund's distributor for the fiscal
years ended March 31, 1997 and March 31, 1996.
(6) Net of fee waivers of $120,055 for the Quality Cash Reserve Prime
Shares Class.
(7) Net of fee waivers of $59,331 for the Quality Cash Reserve Prime Shares
Class.
Pursuant to the Distribution Agreement, ICC Distributors may pay certain
promotional and advertising expenses and, except in the case of the
Institutional Shares, may compensate certain registered securities dealers and
banks and other financial institutions for services provided in connection with
the processing of orders for purchase or redemption of the Fund's shares and
furnishing other shareholder services. Payments by ICC Distributors to certain
registered securities dealers are paid by ICC Distributors out of fees received
by ICC Distributors from the Fund. In addition, the Fund may enter into
Shareholder Servicing Agreements pursuant to which the Advisor or its affiliates
will provide compensation out of its own resources for ongoing shareholder
services. Specifically, ICC Distributors may compensate certain registered
securities dealers for opening accounts, processing investor purchase and
redemption orders, responding to inquiries from Fund shareholders concerning the
status of their accounts and the operations of the Fund, and communicating with
the Fund and its transfer agent on behalf of Fund shareholders. ICC Distributors
may also enter into shareholder processing and servicing agreements
("Shareholder Servicing Agreements") with any securities dealer who is
registered under the Securities Exchange Act of 1934 and is a member in good
standing of the National Association of Securities Dealers, Inc. and (except for
the Quality Cash Reserve Prime Shares) with banks and other financial
institutions who may wish to establish accounts or sub-accounts on behalf of
their customers (collectively, such securities dealers, banks and financial
institutions are referred to as "Shareholder Servicing Agents").
For processing investor purchase and redemption orders, responding to
inquiries from Fund shareholders concerning the status of their accounts and
operations of the Fund and communicating with the Fund, its transfer agent and
ICC Distributors, ICC Distributors may make payments to Shareholder Servicing
Agents out of its distribution fee. The fees payable to Shareholder Servicing
Agents under Shareholder Servicing Agreements will be negotiated by ICC
Distributors. ICC Distributors will report quarterly to the Fund's Board of
Directors on the rate to be paid under each such agreement and the amounts paid
or payable under such agreements. The rate will be based upon ICC Distributors'
analysis of: (1) the nature, quality and scope of services being provided by the
Shareholder Servicing Agent; (2) the costs incurred by the Shareholder Servicing
Agent in connection with providing services to shareholders; (3) the amount of
assets being invested in shares of the Fund; and (4) the contribution being made
by the Shareholder Servicing Agent toward reducing the Fund's expense ratio. The
provisions of the Distribution Agreement authorizing payments by ICC
Distributors for advertisements, promotional materials, sales literature and
printing and mailing of prospectuses to other than Fund shareholders and
payments by ICC Distributors and the Fund to Shareholder Servicing Agents may be
deemed to constitute payments by the Fund to support distribution.
-10-
<PAGE>
The Glass-Steagall Act and other applicable laws, among other things,
generally prohibit federally chartered or supervised banks from engaging in the
business of underwriting, selling or distributing securities. Accordingly, ICC
Distributors will engage banks as Shareholder Servicing Agents only to perform
administrative and shareholder servicing functions. Management of the Fund
believes that such laws should not preclude a bank from acting as a Shareholder
Servicing Agent. However, judicial or administrative decisions or
interpretations of such laws as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or their
subsidiaries or affiliates, could prevent a bank from continuing to perform all
or a part of its servicing activities. If a bank were prohibited from so acting,
shareholder clients would be permitted to remain as Fund shareholders and
alternate means for continuing the servicing of such shareholders would be
sought. In such event, changes in the operation of the Fund might occur and
shareholders serviced by such bank might no longer be able to avail themselves
of any automatic investment or other services then being provided by such bank.
It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
Pursuant to Rule 12b-1 under the Investment Company Act, investment
companies may pay distribution expenses directly or indirectly, only pursuant to
a plan adopted by the investment company's board of directors and approved by
its shareholders. The Fund has adopted six separate distribution plans: one for
the Flag Investors Cash Reserve Prime Class A Shares; one for the Flag Investors
Cash Reserve Prime Class B Shares; one for the BT Alex. Brown Cash Reserve Prime
Shares; one for the BT Alex. Brown Cash Reserve Treasury Shares; one for the BT
Alex. Brown Cash Reserve Tax-Free Shares; and one for the Quality Cash Reserve
Prime Shares (the "Plans"). Amounts allocated to Participating Dealers or
Shareholder Servicing Agents may not exceed amounts payable to ICC Distributors
under the Plans with respect to shares held by or on behalf of customers of such
entities.
The Plans will remain in effect from year to year provided that each
agreement and Plan is specifically approved at least annually by the Fund's
Board of Directors and by the affirmative vote of a majority of the Independent
Directors by votes cast in person at a meeting called for such purpose. The
Plans were most recently approved in the foregoing manner on September 16, 1997.
In approving the Plans, the directors determined, in the exercise of their
business judgment and in light of their fiduciary duties as directors of the
Fund, that there was a reasonable likelihood that such Plans would benefit the
Fund and its shareholders. Although it is a primary objective of each Plan to
reduce expenses of the Fund by fostering growth in the Fund's net assets, there
can be no assurance that this objective of each Plan will be achieved; however,
based on the data and information presented to the Board of Directors by ICC
Distributors, the Board of Directors determined that there is a reasonable
likelihood that the benefits of growth in the size of the Fund can be
accomplished under the Plan.
Each Plan will be renewed only if the directors make a similar
determination prior to each renewal term. The Plans may not be amended to
increase the maximum amount of payments by ICC Distributors to Shareholder
Servicing Agents without shareholder approval, and all material amendments to
the provisions of any of the Distribution Agreement relating to the Plan must be
approved by a vote of the Board of Directors and of the directors who have no
direct or indirect interest in the Plan, cast in person at a meeting called for
the purpose of such vote. When the Board of Directors of the Fund approved the
Plans, the Board of Directors requested and evaluated such information as it
deemed reasonably necessary to make an informed determination that the
agreements and Plans should be approved. The Board considered and gave
appropriate weight to all pertinent factors necessary to reach the good faith
judgment that the Plans would benefit the Fund and its shareholders. During the
continuance of the Plans, ICC Distributors will report in writing to the Fund's
Board of Directors
-11-
<PAGE>
annually the amounts and purposes of such payments for services rendered to
shareholders by securities dealers and financial institutions who have executed
Shareholder Servicing Agreements.
Expenses
ICC and the Distributor furnish, without cost to the Fund, such personnel
as are required, subject to applicable banking laws, for the proper conduct of
the Fund's affairs and to carry out their obligations under the Distribution
Agreement and the Investment Advisory Agreements. The Advisor maintains, at its
own expense and without cost to the Fund, trading functions in order to carry
out its obligation to place orders for the purchase and sale of portfolio
securities for the Tax-Free, Prime or Treasury Series, as appropriate. ICC
Distributors bears the expenses of printing and distributing prospectuses (other
than those prospectuses distributed to existing shareholders of the Fund) and
any other promotional or sales literature used by ICC Distributors or furnished
by ICC Distributors to purchasers or dealers in connection with the public
offering of the Fund's shares, the expenses of advertising in connection with
such public offering and all legal expenses in connection with the foregoing.
The Fund pays or causes to be paid all other expenses of the Fund,
including, without limitation: the fees of ICC Distributors and ICC; the charges
and expenses of any registrar, any custodian or depository appointed by the Fund
for the safekeeping of its cash, portfolio securities and other property, and
any share transfer, dividend or accounting agent or agents appointed by the
Fund; brokers' commissions chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party; all taxes, including
securities issuance and transfer taxes, and fees payable by the Fund to federal,
state or other governmental agencies; the costs and expenses of engraving or
printing certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses of the Fund and
supplements thereto to the Fund's shareholders (prospectuses distributed to
prospective shareholders are paid for by ICC Distributors); all expenses of
shareholders' and directors' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
directors or director members of any advisory board or committee; all expenses
incident to the payment of any dividend,
-12-
<PAGE>
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's shares; fees
and expenses of legal counsel and of independent accountants, in connection with
any matter relating to the Fund; membership dues of industry associations;
interest payable on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and directors) of the Fund which inure to its
benefit; extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operations unless otherwise explicitly
assumed by ICC Distributors, or ICC.
Expenses which are attributable to any of the Fund's three Series are
charged against the income of such Series in determining net income for dividend
purposes. Expenses of the Fund which are not directly attributable to the
operations of a particular Series are allocated among the Series based upon the
relative net assets of each Series. Expenses attributable to a class of shares
of a Series are allocated to that class.
Transfer Agent, Custodian and Accounting Services
Bankers Trust Company ("Bankers Trust") serves as custodian of the Fund's
investments. Bankers Trust receives such compensation from the Fund for its
services as custodian as may be agreed to from time to time by Bankers Trust and
the Fund. For the period from September 22, 1997 to March 31, 1998, Bankers
Trust was paid $237,400 as compensation for providing custody services to the
Fund. ICC, the Fund's investment advisor, provides accounting services for each
Series. In addition, ICC serves as the Fund's transfer and dividend disbursing
agent. ICC receives such compensation from the Fund (or, with respect to
accounting fees, from the Tax-Free, Prime or Treasury Series, as appropriate)
for services in such capacities as are agreed to from time to time by ICC and
the Fund.
As compensation for providing accounting services to each Series of the
Fund, ICC receives an annual fee, calculated daily and paid monthly as shown
below.
Incremental Annual
Average Daily Net Assets Accounting Fee Per Series
- -------------------------------------------- -------------------------
$ 0 - $ 10,000,000 $13,000(fixed fee)
$ 10,000,000 - $ 20,000,000 0.100%
$ 20,000,000 - $ 30,000,000 0.080%
$ 30,000,000 - $ 40,000,000 0.060%
$ 40,000,000 - $ 50,000,000 0.050%
$ 50,000,000 - $ 60,000,000 0.040%
$ 60,000,000 - $ 70,000,000 0.030%
$ 70,000,000 - $ 100,000,000 0.020%
$ 100,000,000 - $ 500,000,000 0.015%
$ 500,000,000 - $ 1,000,000,000 0.005%
over $1,000,000,000 0.001%
In addition, each Series, as appropriate, will reimburse ICC for the
following out-of-pocket expenses incurred in connection with ICC's performance
of accounting services for such Series: express delivery, independent pricing
and storage.
For the fiscal year ended March 31, 1998, ICC received fees of $162,781 for
providing accounting services to the Prime Series and received fees of $127,485
for providing
-13-
<PAGE>
accounting services to the Treasury Series. For the fiscal year ended March 31,
1998, PFPC Inc. ("PFPC"), an affiliate of PNC Bank, National Association,
provided accounting services to the Tax Free Series and received fees of
$66,777.
As compensation for providing transfer agency services, the Fund pays ICC
up to $17.45 per account per year plus reimbursement for out-of-pocket
expenses incurred in connection therewith. For the fiscal year ended March 31,
1998, such fees totaled $2,661,928 for Prime Series, $274,991 for Treasury
Series and $162,558 for Tax-Free Series, respectively.
Sub-Accounting
The Fund and ICC have arranged for PFPC to offer sub-accounting services to
Fund shareholders and maintain information with respect to underlying owners.
Investors, such as financial institutions, investment counselors and brokers,
who purchase shares for the account of others, can make arrangements through the
Fund or ICC for these sub-accounting services.
Principal Holders of Securities
To Fund management's knowledge, the following persons owned beneficially or
of record 5% or more of the outstanding shares of the Tax-Free Series of the
Fund, as of July 8, 1998.*
Alex. Brown & Sons 6.11%
A/C 25010788
P. O. Box 1346
Baltimore, MD 21203-1346
As of July 8, 1998, the directors and officers of the Fund owned an
aggregate of less than 1% of the Fund's shares or any class thereof.
- ------------
* To Fund management's knowledge, BT Alex. Brown owned less than 1% of any
Series of the Fund, as of July 8, 1998.
Semi-Annual Reports
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a schedule of
investments held in the Fund's portfolios and its financial statements.
Independent Accountants
The annual financial statements are audited by the Fund's independent
accountants. The Board of Directors has selected PricewaterhouseCoopers LLP, 250
West Pratt Street, Baltimore, Maryland, 21201, as the Fund's independent
accountants to audit the Fund's financial statements and review the Fund's
federal tax returns for the fiscal year ending March 31, 1998.
Legal Matters
Morgan, Lewis & Bockius LLP serves as counsel to the Fund.
-14-
<PAGE>
SHARE PURCHASES AND REDEMPTIONS
Purchases and Redemptions
A complete description of the manner by which the Fund's Shares may be
purchased or redeemed appears in the Prospectus for that class under the
headings "How to Buy Shares" and "How to Redeem Shares." The Fund reserves the
right to suspend the sale of Shares at any time.
The right of redemption may be suspended or the date of payment postponed
when (a) trading on the New York Stock Exchange is restricted, as determined by
applicable rules and regulations of the SEC, (b) the New York Stock Exchange is
closed for other than customary weekend and holiday closings, (c) the SEC has by
order permitted such suspension, or (d) an emergency as determined by the SEC
exists making disposal of portfolio securities or the valuation of the net
assets of the Fund not reasonably practicable.
Net Asset Value Determination
The net asset value of 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 the
Prime Series is determined daily as of 12:00 noon Eastern time each day that
Bankers Trust and the New York Stock Exchange are open for business.
For the purpose of determining the price at which shares of each class of
each Series are issued and redeemed, the net asset value per share is calculated
immediately after the daily dividend declaration by: (a) valuing all securities
and instruments of such Series as set forth below; (b) deducting such Series'
and class' liabilities; (c) dividing the resulting amount by the number of
shares outstanding of such class; and (d) rounding the per share net asset value
to the nearest whole cent. As discussed below, it is the intention of the Fund
to maintain a net asset value per share of $1.00 for each class of each Series.
The instruments held in each Series' portfolio are valued on the basis of
amortized cost. This involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if it sold all the securities in its
portfolios. During periods of declining interest rates, the daily yield for any
Series computed as described under "Dividends and Taxes" below, may be higher
than a like computation made by a fund with identical investments utilizing a
method of valuation based upon market prices and estimates of market prices for
all of its portfolio instruments. Thus, if the use of amortized cost by the Fund
results in a lower aggregate portfolio value for a Series on a particular day, a
prospective investor in such Series would be able to obtain a somewhat higher
yield than would result from an investment in a fund utilizing solely market
values, and existing investors in such Series would receive less investment
income. The converse would apply in a period of rising interest rates.
The valuation of the portfolio instruments based upon their amortized cost,
the calculation of the per share net asset value to the nearest whole cent and
the concomitant maintenance of the net asset value per share of $1.00 for each
class of each Series is permitted in accordance with rules and regulations of
the SEC applicable to money market funds, as amended, effective June 1, 1991,
which require the Fund to adhere to certain quality, maturity and
diversification conditions. The Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less for each Series, purchases only
instruments
-15-
<PAGE>
having remaining maturities of 397 days or less and invests only in securities
determined by the Board of Directors to be of high quality with minimal credit
risk. The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably possible, the Fund's price per share at
$1.00 for each class of each Series as computed for the purpose of sales and
redemptions. Such procedures include review of each Series' portfolio holdings
by the Board of Directors, at such intervals as it may deem appropriate, to
determine whether the net asset value calculated by using available market
quotations or other reputable sources for any class of any Series deviates from
$1.00 per share and, if so, whether such deviation may result in material
dilution or is otherwise unfair to existing shareholders of the relevant class
or Series. In the event the Board of Directors determines that such a deviation
exists for any class of any Series, it will take such corrective action as the
Board of Directors deems necessary and appropriate with respect to any class of
such Series, including sales of portfolio instruments prior to maturity to
realize capital maturity; withholding of dividends; redemption of shares in
kind; or establishment of a net asset value per share by using available market
quotations.
DIVIDENDS AND TAXES
Dividends
All of the net income earned on the Prime Series, Treasury Series and the
Tax-Free Series is declared daily as dividends to the respective holders of
record of shares of each class of each Series. The net income of each Series for
dividend purposes (from the time of the immediately preceding determination
thereof) consists of (a) interest accrued and discount earned (including both
original issue and market discount), if any, on the assets of such Series and
any general income of the Fund prorated to the Series based on its relative net
assets, less (b) amortization of premium and accrued expenses for the applicable
dividend period attributable directly to such Series and general expenses of the
Fund prorated to each such Series based on its relative net assets. Expenses
attributable to a class of a Series are allocated to that class. Although
realized gains and losses on the assets of each Series are reflected in the net
asset value of such Series, they are not expected to be of an amount which would
affect the net asset value of any Series of $1.00 per share for the purposes of
purchases and redemptions. Realized gains and losses may be declared and paid
yearly or more frequently. The amount of discount or premium on instruments in
each portfolio is fixed at time of their purchase. See "Net Asset Value
Determination" above.
Should the Fund incur or anticipate any unusual expense or loss or
depreciation which would adversely affect the net asset value per share or net
income per share of any class of a Series for a particular period, the Board of
Directors would at that time consider whether to adhere to the present dividend
policy described above or to revise it in light of then prevailing
circumstances. For example, if the net asset value per share of any class of a
Series was reduced, or was anticipated to be reduced, below $1.00, the Board of
Directors might suspend further dividend payments with respect to such class or
Series until the net asset value returns to $1.00. Thus, the expense or loss or
depreciation might result in a shareholder (i) receiving no dividends for the
period during which the shareholder held shares of such class or Series or (ii)
receiving upon redemption a price per share lower than that which he paid.
Dividends on all classes of a Series are normally payable on the first day
that a share purchase or exchange order is effective but not on the day that a
redemption order is effective. Share purchases for the Treasury Series and the
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. Dividends are declared and reinvested
monthly in the form of additional full and fractional shares of the same Series
at net asset value unless the shareholder has elected to have dividends paid in
cash.
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<PAGE>
Taxes
The following is only a summary of certain additional federal income tax
considerations generally affecting the Fund and its shareholders that are not
described in the Fund's Prospectus. No attempt is made to present a detailed
explanation of the federal, state or local tax treatment of the Fund or its
shareholders, and the discussion here and in the Fund's Prospectus is not
intended as a substitute for careful tax planning.
The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.
1. Generally
Through payment of all or substantially all of its net investment company
taxable income (generally, net investment income plus net short term capital
gains) plus, in the case of the Tax-Free Series, all or substantially all of its
net exempt interest income, to shareholders and by meeting certain
diversification of assets and other requirements of the Code, each Series
expects to qualify as a regulated investment company under Subchapter M of the
Code. This will enable each Series to be relieved from payment of income taxes
on that portion of its net investment company taxable income and net capital
gains (the excess of net long-term capital gains over net short-term capital
losses) distributed to shareholders. Each Series also intends to meet the
distribution requirements of the Code to avoid the imposition of a 4% federal
excise tax.
In order to qualify for tax treatment as a regulated investment company
under the Code, each Series must distribute annually to its shareholders at
least the sum of 90% of its net interest income excludable from gross income
plus 90% of its investment company taxable income and also must meet several
additional requirements. Among those requirements are the following: (i) each
Series must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock or securities, or certain other income;
(ii) at the close of each quarter of each Series' taxable year, at least 50% of
the value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other registered investment companies and
other securities, with such other securities limited, in respect to any one
issuer, to an amount that does not exceed 5% of the value of the Series' assets
and that does not represent more than 10% of the outstanding voting securities
of such issuer; and (iii) at the close of each quarter of each Series' taxable
year, not more than 25% of the value of its assets may be invested in securities
(other than U.S. Government securities or the securities of other registered
investment companies) of any one issuer or of two or more issuers which the
Series controls and which are engaged in the same, similar or related trades or
businesses.
Each Series' policy is to distribute to its shareholders substantially all
of its investment company taxable income for each year. Such dividends generally
will be taxable to shareholders as ordinary income. Dividends will be subject to
taxation whether paid in the form of cash or additional shares of a Series.
Since all of each Series' net investment income is expected to be derived
from earned interest, it is anticipated that no part of any distribution will be
eligible for the dividends received deduction for corporate shareholders.
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<PAGE>
If for any taxable year, the Fund does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate income tax rates without any deduction for distribution to
shareholders, and all such distributions generally will be taxable to
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends received deduction for corporate shareholders.
Although no Series expects to recognize any long-term capital gains, each
Series' policy is to distribute substantially all of its net capital gains (the
excess of net long-term capital gains over net short-term capital losses). Any
such net capital gains distributions will be taxable to shareholders
as a long-term capital gain, currently taxed at a maximum rate of 20% with
respect to shareholders who are individuals, regardless of how long a
shareholder has held shares. An ordinary income dividend or a distribution of
net capital gains received after the purchase of a Series' shares reduces the
net asset value of the shares by the amount of such dividend or distribution and
will be subject to income taxes.
Generally, when establishing an account, an investor must supply a taxpayer
identification number to the Series and certify that the investor is not subject
to backup withholding. Failure to do so will result in the Series having to
withhold from distributions 31% of all amounts otherwise payable. Backup
withholding may also apply in certain other circumstances. The amounts withheld
will be credited against the shareholder's federal income tax liability, and if
withholding results in an overpayment of taxes, the shareholder may obtain a
refund from the Internal Revenue Service.
Dividends to shareholders who are non-resident individuals or entities may
be subject to a 30% United States withholding tax under existing provisions of
the Code applicable to foreign individuals and entities unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
Non-resident shareholders are urged to consult their own tax advisors concerning
the applicability of the U.S. withholding tax.
The Code imposes a 4% non-deductible federal excise tax on a regulated
investment company that fails to distribute by the end of any calendar year 98%
of its ordinary income for that year and 98% of its capital gain net income (the
excess of short and long term capital gains over short and long term capital
losses) for the one-year period ending on October 31 of such calendar year, plus
certain other amounts. Each Series intends to make sufficient distributions of
its ordinary income and capital gains net income prior to the end of each
calendar year to avoid liability for this excise tax.
Any gain or loss recognized on a sale or redemption of shares of the Series
by a shareholder who is not a dealer in securities generally will be treated as
a long-term capital gain or loss if the shares have been held for more than
twelve months and otherwise generally will be treated as a short-term capital
gain or loss. For individuals, long-term capital gains are currently taxed at a
maximum rate of 20% and short-term capital gains are currently taxed at ordinary
income tax rates. Any loss recognized by a Shareholder upon the sale or
redemption of shares of the Series held for six months or less, however, will be
disallowed to the extent of any exempt-interest dividends received by the
Shareholder with respect to such shares. If shares on which a net capital gain
distribution has been received are subsequently sold or redeemed, and such
shares have been held for six months or less, any loss recognized will be
treated as a long-term capital loss to the extent of the capital gain
distribution.
Dividends and capital gains distributions may also be subject to state and
local taxes. Shareholders are urged to consult their tax advisors regarding
specific questions as to federal, state, or local taxes.
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<PAGE>
2. Additional Considerations for Tax-Free Series
The following additional considerations relate to the Tax-Free Series. The
Tax-Free Series intends to invest in sufficient Municipal Securities so that it
will qualify to pay "exempt-interest dividends" (as defined in the Code) to
shareholders. The Tax-Free Series' dividends payable from net tax-exempt
interest earned from Municipal Securities will qualify as exempt-interest
dividends if, at the close of each quarter of the taxable year of the Series, at
least 50% of the value of the Series' total assets consists of Municipal
Securities. In addition, the Series must distribute an amount equal to at least
the sum of 90% of the net exempt-interest income and 90% of the investment
company taxable income earned by the Series during the taxable year.
Exempt-interest dividends distributed to shareholders are not includable in
the shareholders' gross income for regular federal income tax purposes. However,
while such interest is exempt from regular federal income tax, it may be subject
to the alternative minimum tax (the "Alternative Minimum Tax") imposed by
Section 55 of the Code and in the case of corporate shareholders, the
environmental tax (the "Environmental Tax") imposed by Section 59A of the Code.
The Alternative Minimum Tax will be imposed at rates of up to 28% in the case of
noncorporate taxpayers and at the rate of 20% in the case of corporate
taxpayers, to the extent it exceeds the taxpayer's regular tax liability. The
Environmental Tax is imposed at the rate of 0.12% and applies only to corporate
taxpayers. The Alternative Minimum Tax and the Environmental Tax may be imposed
in two circumstances. First, exempt-interest dividends derived from certain
Municipal Securities that are "private activity bonds" which are issued after
August 7, 1986, will generally constitute an item of tax preference (and
therefore potentially be subject to the Alternative Minimum Tax and the
Environmental Tax) for both corporate and non-corporate taxpayers. The Fund
intends, when possible, to avoid investing in such Municipal Securities. Second,
exempt-interest dividends derived from all Municipal Securities, regardless of
the date of issue, or whether derived from private activity bonds, must be taken
into account by corporate taxpayers in determining the amount of their "adjusted
current earnings," as defined in Section 56(g) of the Code, which is used in
calculating their alternative minimum taxable income for purposes of determining
the Alternative Minimum Tax and the Environmental Tax.
The percentage of income that constitutes "exempt-interest dividends" will
be determined for each year for the Series and will be applied uniformly to all
dividends declared with respect to the Series during that year. This percentage
may differ from the actual percentage for any particular day.
As noted, it is the present policy of the Series to invest only in
securities the interest on which is exempt from federal tax. However,
distributions of net investment income received by the Series from investments
in debt securities other than Municipal Securities and any net realized
short-term capital gains distributed by the Series will be taxable to
shareholders as ordinary income and will not be eligible for the dividends
received deduction for corporate shareholders. Further, any distribution of net
capital gains (the excess of net long-term capital gains over net short-term
capital losses), such as gains from the sale of Municipal Securities held by the
Series for more than eighteen months, will generally constitute taxable
long-term capital gains to shareholders.
Interest on indebtedness which is incurred or continued to purchase or
carry shares of an investment company which distributes exempt-interest
dividends during the year is not deductible for federal income tax purposes. The
deduction otherwise allowable to property and casualty insurance companies for
"losses incurred" will be reduced by an amount equal to a portion of
exempt-interest dividends received or accrued during any taxable year. Foreign
corporations engaged in a trade or business in the United States will be subject
to a "branch profits tax" on their "dividend equivalent amount" for the taxable
year, which will include exempt-interest dividends. Certain Subchapter S
corporations may also be subject to taxes on their "passive investment income,"
which could include exempt-interest
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<PAGE>
dividends. Up to 85% of the Social Security benefits or railroad retirement
benefits received by an individual during any taxable year will be included in
the gross income of such individual, depending upon the individual's "modified
adjusted gross income," which includes exempt-interest dividends. Further, the
Tax-Free Series may not be an appropriate investment for persons who are
"substantial users" of facilities financed by industrial development bonds or
are "related persons" to such users. A "substantial user" is defined generally
to include certain persons who regularly use a facility in their trade or
business. Such persons should consult with their own tax advisors before
investing in the Tax-Free Series.
Issuers of Municipal Securities (or the beneficiary of Municipal
Securities) may have made certain representations or covenants in connection
with the issuance of such Municipal Securities to satisfy certain requirements
of the Code that must be satisfied subsequent to the issuance of such Municipal
Securities. Exempt-interest dividends derived from such Municipal Securities may
become subject to federal income taxation retroactively to the date thereof if
such representations are determined to have been inaccurate or if the issuer of
such Municipal Securities (or the beneficiary of such Municipal Securities)
fails to comply with such covenants.
Receipt of exempt-interest dividends may also result in collateral federal
tax consequences to certain taxpayers. Prospective investors should consult
their own tax advisors as to such consequences.
CURRENT YIELD
Set forth below are the current, effective and taxable-equivalent yields,
as applicable, for each class or series of the Fund's shares for the seven-day
period ended March 31, 1998.
<TABLE>
<CAPTION>
Series or class Current Yield Effective Yield Taxable-Equivalent Yield***
- --------------- ------------- --------------- ---------------------------
<S> <C> <C> <C>
Prime Series* 4.96% 5.08% N/A
Institutional Prime Shares 5.21% 5.34% N/A
Quality Cash Reserve Prime Shares 4.67% 4.78% N/A
Flag Investors Cash Reserve Prime B Shares 4.20% 4.29% N/A
Treasury Series** 4.69% 4.79% N/A
Institutional Treasury Shares 4.93% 5.06% N/A
Tax-Free Series** 3.03% 3.08% 4.46%
Institutional Tax-Free Shares 3.28% 3.33% 4.83%
</TABLE>
- -----------------------
* Other than the Institutional, Quality Cash Reserve Prime Shares or Flag
Investors Cash Reserve Prime Class B Shares.
** Other than the Institutional Shares.
*** Assumes a tax rate of 31%.
The yield for each Series of the Fund can be obtained by calling your
Participating Dealer or Shareholder Servicing Agent. Quotations of yield on each
Series of the Fund may also appear from time to time in the financial press and
in advertisements.
The current yields quoted will be the net average annualized yield for an
identified period, usually seven consecutive calendar days. Yield for each
Series or class will be computed by assuming that an account was established
with a single share of a Series (the "Single Share Account") on the first day of
the period. To arrive at the quoted yield, the net change in the value of that
Single Share Account
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<PAGE>
for the period (which would include dividends accrued with respect to the share,
and dividends declared on shares purchased with dividends accrued and paid, if
any, but would not include realized gains and losses or unrealized appreciation
or depreciation) will be multiplied by 365 and then divided by the number of
days in the period, with the resulting figure carried to the nearest hundredth
of one percent. The Fund may also furnish a quotation of effective yield for
each Series or class that assumes the reinvestment of dividends for a 365 day
year and a return for the entire year equal to the average annualized yield for
the period, which will be computed by compounding the unannualized current yield
for the period by adding 1 to the unannualized current yield, raising the sum to
a power equal to 365 divided by the number of days in the period, and then
subtracting 1 from the result. In addition, the Fund may furnish a quotation of
the Tax-Free Series' taxable-equivalent yield, which will be computed by
dividing the tax-exempt portion of such Series' effective yield for a stated
consecutive seven day period by one minus the investor's income tax rate and
adding the product to the portion of the yield for the same consecutive seven
day period that is not tax-exempt. The resulting yield is what the investor
would need to earn from a taxable investment in order to realize an after-tax
benefit equal to the tax-free yield provided by the Tax-Free Series. Historical
yields are not necessarily indicative of future yields. Rates of return will
vary as interest rates and other conditions affecting money market instruments
change. Yields also depend on the quality, length of maturity and type of
instruments in each of the Fund's Series and each Series' or class' operating
expenses. Quotations of yields will be accompanied by information concerning the
average weighted maturity of the portfolio of a Series. Comparison of the quoted
yields of various investments is valid only if yields are calculated in the same
manner and for identical limited periods. When comparing the yield for either
Series of the Fund with yields quoted with respect to other investments,
shareholders should consider (a) possible differences in time periods, (b) the
effect of the methods used to calculate quoted yields, and (c) the quality and
average-weighted maturity of portfolio investments, expenses, convenience,
liquidity and other important factors.
INVESTMENT PROGRAM AND RESTRICTIONS
Information concerning the Fund's investment program is discussed in the
Fund's Prospectus.
Each Series may invest in instruments that have certain minimum ratings of
either Moody's Investor Services, Inc. ("Moody's") or Standard and Poor's
Corporation ("S&P") as permitted by the investment objective, policies and
restrictions of each such Series. See "Investment Program" in the Prospectus.
Investments of commercial paper may be precluded unless a particular instrument
is an "Eligible Security" as defined in Rule 2a-7 under the 1940 Act. Rule 2a-7
defines "Eligible Security" as follows:
(i) a security with a remaining maturity of 397 days or less that is rated
(or that has been issued by an issuer that is rated with respect to a class of
Short-term debt obligations, or any security within that class, that is
comparable in priority and security with the security) by the Requisite
NRSROs(1) in one of the two highest rating categories for Short-term debt
obligations (within which there may be sub-categories or gradations indicating
relative standing); or
- ----------
(1) "Requisite NRSRO" shall mean (a) any two nationally recognized
statistical rating organizations that have issued a rating with respect
to a security or class of debt obligations of an issuer, or (b) if only
one NRSRO has issued a rating with respect to such security or issuer
at the time the Fund purchases or rolls over the security, that NRSRO.
At present the NRSROs are: Standard & Poor's Ratings Group, Moody's
Investors Service, Inc., Duff and Phelps, Inc., Fitch Investors
Services, Inc. and, with respect to certain types of securities, IBCA
Limited and its affiliates, IBCA Inc. Subcategories or gradations in
ratings (such as a "+" or "-") do not count as rating categories.
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<PAGE>
(ii) a security:
(A) that at the time of issuance was a Long-term security but that has
a remaining maturity of 397 calendar days or less, and
(B) whose issuer has received from the Requisite NRSROs a rating, with
respect to a class of Short-term debt obligations (or any security within
that class) that is now comparable in priority and security with the
security, in one of the two highest rating categories for Short-term debt
obligations (within which there may be sub-categories or gradations
indicating relative standing); or
(iii) an Unrated Security that is of comparable quality to a security
meeting the requirements of paragraphs (i) or (ii) of this section, as
determined by the money market fund's board of directors; provided, however,
that:
(A) the board of directors may base its determination that a Standby
Commitment is an Eligible Security upon a finding that the issuer of the
commitment presents a minimal risk of default; and
(B) a security that at the time of issuance was a Long-term security
but that has a remaining maturity of 397 calendar days or less and that is
an Unrated Security(2) is not an Eligible Security if the security has a
Long-term rating from any NRSRO that is not within the NRSRO's two highest
categories (within which there may be sub-categories or gradations
indicating relative standing).
The following is a description of the minimum ratings of Moody's and S&P
for instruments in which each Series may invest.
Commercial Paper Ratings
Moody's - The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These factors are all
considered in determining whether the commercial paper is rated P-1, P-2 or P-3.
- --------
(2) An "unrated security" is a security (i) issued by an issuer that does
not have a current short-term rating from - any NRSRO, either as to the
particular security or as to any other short-term obligations of
comparable priority and security; (ii) that was a long-term security at
the time of issuance and whose issuer has not received from any NRSRO a
rating with respect to a class of short-term debt obligations now
comparable in priority and security; or (iii) a security that is rated
but which is the subject of an external credit support agreement not in
effect when the security was assigned its rating, provided that a
security is not an unrated security if any short-term debt obligation
issued by the issuer and comparable in priority and security is rated
by any NRSRO.
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<PAGE>
S & P - Commercial paper rated A-1+ or A-1 by S&P has the following
characteristics. Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better, although in some cases "BBB"
credits may be allowed. The issuer has access to at least two channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management is unquestioned. Relative strength or weakness of the
above factors determines whether the issuer's commercial paper is rated A-1, A-2
or A-3.
Short Term Debt Ratings
Moody's - State and municipal notes, as well as other short-term
obligations, are assigned a Moody's Investment Grade (MIG) rating. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in
evaluating bond risk may be less important over the short run.
MIG 1
Notes bearing this designation are of the best quality. Notes are
enjoying strong "protection" by established cash flows, superior liquidity
support or a demonstrated broad-based access to the market for refinancing.
MIG 2
Notes bearing this designation are of high quality. Margins of
protection are ample although not as large as in the preceding group.
S&P - The note rating reflects the liquidity concerns and market access
risks unique to notes. Notes due in 3 years or less will receive a note rating.
Notes rated "SP-1" have a strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are assigned a
plus (+) designation.
Tax-Exempt Demand Ratings
Moody's - Issues which have demand features (i.e., variable rate demand
obligations) are assigned a VMIG symbol. This symbol reflects such
characteristics as payment upon periodic demand rather than fixed maturity, and
payment relying on external liquidity. The VMIG rating is modified by the
numbers 1, 2 or 3. VMIG1 represents the best quality in the VMIG category, VMIG2
represents high quality, and VMIG3 represents favorable quality.
S&P - "dual" ratings are assigned to all long-term debt issues that have as
part of their provisions a demand feature. The first rating addresses the
likelihood of repayment of principal and interest as due, and the second rating
addresses only the demand feature. The long-term debt rating symbols are used
for bonds to denote the long-term maturity, and the commercial paper rating
symbols are used to denote the put option (e.g., "AAA/A-1+").
INVESTMENT RESTRICTIONS
The most significant investment restrictions applicable to the Fund's
investment program are set forth in the Prospectus under the heading "Investment
Program - Investment Restrictions." Additionally, as a matter of fundamental
policy which may not be changed without a majority vote of
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<PAGE>
shareholders (as that term is defined in this Statement of Additional
Information under the heading "General Information About the Fund"), no Series
will:
(1) buy common stocks or voting securities or invest in companies for the
purpose of exercising control or management; (2) mortgage, pledge or hypothecate
any assets except to secure permitted borrowings and reverse repurchase
agreements and then only in an amount up to 15% of the value of a Series' total
assets at the time of borrowing or entering into a reverse repurchase agreement;
(3) underwrite securities issued by any other person, except to the extent that
the purchase of securities and the later disposition of such securities in
accordance with a Series' investment program may be deemed an underwriting; (4)
invest in real estate (a Series may, however, purchase and sell securities
secured by real estate or interests therein or issued by issuers which invest in
real estate or interests therein); (5) purchase oil, gas or mineral interests (a
Series may, however, purchase and sell the securities of companies engaged in
the exploration, development, production, refining, transporting and marketing
of oil, gas or minerals); (6) purchase or sell commodities or commodity futures
contracts, purchase securities on margin, make short sales or invest in puts or
calls; or (7) acquire for value the securities of any other investment company,
except in connection with a merger, consolidation, reorganization or acquisition
of assets.
The following investment restriction may be changed by a vote of the
majority of the Board of Directors of the Fund. No Series will invest more than
10% of the value of its net assets in illiquid securities, including repurchase
agreements with remaining maturities in excess of seven days.
PORTFOLIO TRANSACTIONS
The Advisor is responsible for decisions to buy and sell securities for the
Fund, broker-dealer selection and negotiation of commission rates. Since
purchases and sales of portfolio securities by the Fund are usually principal
transactions, the Fund incurs little or no brokerage commissions. Portfolio
securities are normally purchased directly from the issuer or from a market
maker for the securities. The purchase price paid to dealers serving as market
makers may include a spread between the bid and asked prices. The Fund may also
purchase securities from underwriters at prices which include a commission paid
by the issuer to the underwriter. During the fiscal years ended March 31, 1998,
March 31, 1997, and March 31, 1996, the Fund incurred no brokerage commissions.
The Fund does not seek to profit from short-term trading, and will
generally (but not always) hold portfolio securities to maturity. The Fund's
fundamental policies require that investments mature within one year or less,
and the amortized cost method of valuing portfolio securities requires that the
Fund maintain an average weighted portfolio maturity of 90 days or less. Both
policies may result in relatively high portfolio turnover, but since brokerage
commissions are not normally paid on money market instruments, the high rate of
portfolio turnover is not expected to have a material effect on the Fund's net
income or expenses.
The Advisor's primary consideration in effecting a security transaction is
to obtain the best net price and the most favorable execution of the order. To
the extent that the executions and prices offered by more than one dealer are
comparable, the Advisor may, at its discretion, effect transactions with dealers
that furnish statistical, research or other information or services which are
deemed by the Advisor to be beneficial to the Fund's investment program. Certain
research services furnished by dealers may be useful to the Advisor with clients
other than the Fund. Similarly, any research services received by the Advisor
through placement of portfolio transactions of other clients may be of value to
the Advisor in fulfilling its obligations to the Fund. The Advisor is of the
opinion that the material received is beneficial in supplementing its research
and analysis, and, therefore, may benefit the Fund by improving the quality of
its investment advice. The advisory fee
-24-
<PAGE>
paid by the Fund is not reduced because the Advisor receives such services.
During the fiscal years ended March 31, 1998, March 31, 1997, and March 31,
1996, the Advisor directed no transactions to dealers and paid no related
commissions because of research services provided to the Fund.
The Fund is required to identify any securities of its "regular brokers or
dealers" (as such term is defined in the 1940 Act) which the Fund has acquired
during its most recent fiscal year. As of March 31, 1998, the Fund held a 5.86%
repurchase agreement issued by Goldman Sachs & Co. valued at $109,000,000 and a
5.80% repurchase agreement issued by Morgan Stanley & Co. valued at
$100,000,000.
The Advisor and its affiliates manage several other investment accounts,
some of which may have objectives similar to that of the Fund. It is possible
that at times, identical securities will be acceptable for one or more of such
investment accounts. However, the position of each account in the securities of
the same issue may vary and the length of time that each account may choose to
hold its investment in the securities of the same issue may likewise vary. The
timing and amount of purchase by each account will also be determined by its
cash position. If the purchase or sale of securities consistent with the
investment policies of the Fund and one or more of these accounts is considered
at or about the same time, transactions in such securities will be allocated in
good faith among the Fund and such accounts in a manner deemed equitable by the
Advisor. The Advisor may combine such transactions, in accordance with
applicable laws and regulations, in order to obtain the best net price and most
favorable execution. The allocation and combination of simultaneous securities
purchases on behalf of the Fund's three series will be made in the same way that
such purchases are allocated among or combined with those of other such
investment accounts. Simultaneous transactions could adversely affect the
ability of the Fund to obtain or dispose of the full amount of a security which
it seeks to purchase or sell.
Portfolio securities will not be purchased from or sold to or through any
"affiliated person" of the Advisor, as defined in the 1940 Act. In making
decisions with respect to purchase of portfolio securities for the Fund, the
Advisor will not take into consideration whether a dealer or other financial
institution has executed a Shareholder Servicing Agreement with ICC
Distributors.
Provisions of the 1940 Act and rules and regulations thereunder have been
construed to prohibit the Fund's purchasing securities or instruments from or
through, or selling securities or instruments to or through, any holder of 5% or
more of the voting securities of any investment company managed or advised by
the Advisor. The Fund has obtained an order of exemption from the SEC which
permits the Fund to engage in such transactions with a 5% holder, if the 5%
holder is one of the 50 largest U.S. banks measured by deposits. Purchases from
these 5% holders are subject to quarterly review by the Fund's Board of
Directors, including the Independent Directors. Additionally, such purchases and
sales are subject to the following conditions:
(1) The Fund will maintain and preserve a written copy of the internal
control procedures for the monitoring of such transactions, together
with a written record of any such transactions setting forth a
description of the security purchased or sold, the identity of the
purchaser or seller, the terms of the purchase or sale transactions and
the information or materials upon which the determinations to purchase
or sell each security were made;
(2) Each security to be purchased or sold by the Fund will be: (i)
consistent with the Fund's investment policies and objectives; (ii)
consistent with the interests of the Fund's shareholders; and (iii)
comparable in terms of quality, yield, and maturity to similar
securities purchased or sold during a comparable period of time;
-25-
<PAGE>
(3) The terms of each transaction will be reasonable and fair to the Fund's
shareholders and will not involve overreaching on the part of any
person; and
(4) Each commission, fee, spread or other remuneration received by a 5%
holder will be reasonable and fair compared to the commission, fee,
spread or other remuneration received by other brokers or dealers in
connection with comparable transactions involving similar securities
purchased or sold during a comparable period of time and will not
exceed the limitations set forth in Section 17(e)(2) of the 1940 Act.
FINANCIAL STATEMENTS
See next page.
-26-
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets March 31, 1998
Rating(g)
-------------- Par
PRIME SERIES S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Commercial Paper - 84.7%(a)
Automotive Finance - 3.8%
PACCAR Financial Corp.
5.35% 7/27/98 A-1+ P-1 $ 5,000 $ 4,913,062
Toyota Motor Credit Corp.
5.46% 5/1/98 A-1+ P-1 20,000 19,909,000
5.50% 5/4/98 A-1+ P-1 54,750 54,474,787
5.51% 5/6/98 A-1+ P-1 30,000 29,839,292
5.46% 5/8/98 A-1+ P-1 15,000 14,915,825
5.50% 5/14/98 A-1+ P-1 15,500 15,398,174
-----------
139,450,140
-----------
Banks - 0.8%
Republic New York Corp.
5.41% 5/1/98 A-1+ P-1 30,000 29,864,750
-----------
29,864,750
-----------
Beverages- Soft Drinks - 1.7%
Coca-Cola Co.
5.39% 4/3/98 A-1+ P-1 25,000 24,992,514
5.38% 4/21/98 A-1+ P-1 20,000 19,940,222
5.40% 4/23/98 A-1+ P-1 20,000 19,934,000
-----------
64,866,736
-----------
Chemicals, General - 2.9%
E.I. duPont de Nemours and Co.
5.34% 4/7/98 A-1+ P-1 15,000 14,986,650
5.34% 4/8/98 A-1+ P-1 25,000 24,974,042
5.46% 5/11/98 A-1+ P-1 25,000 24,848,333
5.44% 6/25/98 A-1+ P-1 25,000 24,678,889
5.345% 8/14/98 A-1+ P-1 20,000 19,599,125
-----------
109,087,039
-----------
Chemicals, Specialty - 0.8%
Lubrizol
5.50% 4/1/98 A-1+ P-1 30,000 30,000,000
-----------
30,000,000
-----------
Computer & Office Equipment - 1.4%
Pitney Bowes Credit Corp.
5.43% 4/10/98 A-1+ P-1 30,000 29,959,275
5.48% 5/14/98 A-1+ P-1 23,500 23,346,179
-----------
53,305,454
-----------
27
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Rating(g)
-------------- Par
PRIME SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Commercial Paper (continued)
Consumer Products - 3.6%
Eastman Kodak Co.
5.52% 4/10/98 A-1+ P-1 $15,000 $ 14,979,300
5.52% 4/14/98 A-1+ P-1 15,000 14,970,100
5.52% 4/21/98 A-1+ P-1 15,000 14,954,000
5.52% 4/22/98 A-1+ P-1 15,000 14,951,700
5.52% 4/23/98 A-1+ P-1 23,600 23,520,389
5.48% 5/5/98 A-1+ P-1 20,000 19,896,489
5.51% 5/12/98 A-1+ P-1 15,000 14,905,871
5.50% 5/21/98 A-1+ P-1 15,000 14,885,417
-----------
133,063,266
-----------
Electrical & Electronics - 5.7%
Emerson Electric Co.
5.50% 4/13/98 A-1+ P-1 40,000 39,926,667
5.49% 4/17/98 A-1+ P-1 25,000 24,939,000
5.48% 4/20/98 A-1+ P-1 22,000 21,936,372
Motorola Inc.
5.42% 4/6/98 A-1+ P-1 20,000 19,984,944
5.48% 5/12/98 A-1+ P-1 25,000 24,843,972
5.48% 5/21/98 A-1+ P-1 40,000 39,695,555
5.47% 6/25/98 A-1+ P-1 40,000 39,483,389
-----------
210,809,899
-----------
Electric Utility - 1.8%
Citizens Utilities Co.
5.48% 6/19/98 A-1+ P-1 20,000 19,759,489
Duke Energy Co.
5.43% 4/7/98 A-1+ P-1 25,000 24,977,375
5.47% 5/28/98 A-1+ P-1 20,600 20,421,587
-----------
65,158,451
-----------
Entertainment - 1.5%
Walt Disney Co.
5.63% 4/23/98 A-1 P-1 25,000 24,913,986
5.44% 7/16/98 A-1 P-1 30,000 29,519,467
-----------
54,433,453
-----------
Finance, Consumer - 4.1%
USAA Capital Corp.
5.41% 4/7/98 A-1+ P-1 15,000 14,986,475
5.46% 4/24/98 A-1+ P-1 25,000 24,912,792
5.44% 5/4/98 A-1+ P-1 25,000 24,875,333
5.42% 5/12/98 A-1+ P-1 30,000 29,814,817
5.47% 5/12/98 A-1+ P-1 20,000 19,781,200
5.47% 6/19/98 A-1+ P-1 15,000 14,819,946
5.47% 7/17/98 A-1+ P-1 25,000 24,593,549
-----------
153,784,112
-----------
28
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets March 31, 1998
Rating(g)
--------------- Par
PRIME SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Commercial Paper (continued)
Finance, Diversified - 3.9%
General Electric Capital Corp.
5.44% 4/14/98 A-1+ P-1 $20,000 $ 19,960,711
5.44% 4/21/98 A-1+ P-1 30,000 29,909,333
5.56% 4/23/98 A-1+ P-1 15,000 14,949,033
5.35% 5/12/98 A-1+ P-1 15,212 15,119,312
5.35% 6/19/98 A-1+ P-1 24,400 24,113,537
5.40% 7/6/98 A-1+ P-1 25,000 24,640,000
5.46% 7/9/98 A-1+ P-1 16,883 16,629,502
-----------
145,321,428
-----------
Food - 5.0%
Campbell Soup Co.
5.54% 4/17/98 A-1+ P-1 4,000 3,990,151
5.35% 10/5/98 A-1+ P-1 35,000 34,027,340
Cargill, Inc.
5.37% 4/23/98 A-1+ P-1 10,000 9,967,183
5.52% 5/5/98 A-1+ P-1 20,000 19,895,733
5.46% 5/12/98 A-1+ P-1 25,000 24,844,542
5.44% 5/26/98 A-1+ P-1 40,000 39,667,785
5.46% 6/2/98 A-1+ P-1 15,000 14,858,950
5.45% 6/10/98 A-1+ P-1 25,000 24,735,069
Kellogg Co.
5.51% 4/28/98 A-1+ P-1 12,364 12,312,906
-----------
184,299,659
-----------
Household Products - 3.3%
Colgate-Palmolive Co.
5.49% 4/30/98 A-1 P-1 35,000 34,845,212
Proctor & Gamble Co.
5.48% 5/4/98 A-1+ P-1 40,000 39,799,067
5.35% 6/2/98 A-1+ P-1 25,000 24,769,653
5.35% 6/26/98 A-1+ P-1 25,000 24,680,486
-----------
124,094,418
-----------
Insurance, Brokerage - 2.6%
Marsh & McLennan Companies Inc.
5.44% 6/11/98 A-1+ P-1 20,000 19,785,422
5.47% 7/23/98 A-1+ P-1 15,000 14,742,454
5.39% 9/8/98 A-1+ P-1 20,000 19,520,889
5.43% 9/16/98 A-1+ P-1 15,000 14,619,900
5.28% 10/20/98 A-1+ P-1 30,000 29,110,078
-----------
97,778,743
-----------
29
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Rating(g)
--------------- Par
PRIME SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Commercial Paper (continued)
Insurance, Property & Casualty - 3.9%
A.I. Credit Corp.
5.44% 4/9/98 A-1+ P-1 $15,000 $ 14,981,867
5.43% 5/6/98 A-1+ P-1 50,000 49,736,042
5.35% 5/11/98 A-1+ P-1 30,000 29,821,667
5.33% 6/12/98 A-1+ P-1 20,000 19,786,800
5.36% 7/7/98 A-1+ P-1 30,000 29,566,733
-----------
143,893,109
-----------
Integrated Oil - 6.3%
Amoco Co.
5.41% 4/7/98 A-1+ P-1 25,000 24,977,458
5.40% 4/16/98 A-1+ P-1 30,000 29,932,500
5.37% 4/27/98 A-1+ P-1 30,000 29,883,650
5.40% 5/12/98 A-1+ P-1 30,000 29,815,500
5.42% 6/16/98 A-1+ P-1 25,000 24,713,944
5.43% 7/21/98 A-1+ P-1 20,000 19,665,150
Shell Oil Co.
5.41% 4/9/98 A-1+ P-1 50,000 49,939,889
5.45% 6/12/98 A-1+ P-1 25,000 24,727,500
-----------
233,655,591
-----------
Machinery & Tools - 1.5%
Dover Corp.
5.48% 4/17/98 A-1 NR 17,500 17,457,378
5.53% 4/21/98 A-1 NR 20,000 19,938,556
Snap-On Incorporated
5.48% 4/9/98 A-1+ P-1 20,000 19,975,644
-----------
57,371,578
-----------
Natural Gas - 0.7%
Consolidated Natural Gas
5.50% 4/17/98 A-1+ P-1 25,000 24,938,889
-----------
24,938,889
-----------
Oil Transportation - 2.8%
Colonial Pipeline Co.
5.50% 4/6/98 A-1+ P-1 15,000 14,988,542
5.62% 4/22/98 A-1+ P-1 15,000 14,950,825
5.48% 4/28/98 A-1+ P-1 13,000 12,946,570
5.52% 5/27/98 A-1+ P-1 15,000 14,871,200
5.63% 6/10/98 A-1+ P-1 13,000 12,857,686
5.47% 6/23/98 A-1+ P-1 19,000 18,760,384
5.62% 6/29/98 A-1+ P-1 15,000 14,791,592
-----------
104,166,799
-----------
30
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets March 31, 1998
Rating(g)
--------------- Par
PRIME SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Commercial Paper (continued)
Paper - 4.5%
Kimberly-Clark Corp.
5.51% 4/29/98 A-1+ P-1 $50,500 $ 50,283,579
5.50% 4/30/98 A-1+ P-1 27,300 27,179,046
Minnesota Mining & Manufacturing Co.
5.38% 4/20/98 A-1+ P-1 38,910 38,799,412
5.35% 5/19/98 A-1+ P-1 20,000 19,857,333
5.35% 5/20/98 A-1+ P-1 30,000 29,781,542
-----------
165,900,912
-----------
Pharmaceuticals - 6.9%
Abbott Laboratories
5.48% 4/7/98 A-1+ P-1 30,000 29,972,600
5.47% 4/8/98 A-1+ P-1 36,000 35,961,710
Merck & Co., Inc.
5.38% 4/24/98 A-1+ P-1 75,000 74,742,208
Pfizer Inc.
5.46% 5/4/98 A-1+ P-1 48,000 47,759,760
Schering-Plough Corp.
5.42% 4/14/98 A-1+ P-1 11,835 11,811,836
5.36% 5/20/98 A-1+ P-1 8,000 7,941,636
Warner-Lambert Co.
5.36% 7/24/98 A-1+ P-1 50,000 49,151,333
-----------
257,341,083
-----------
Publishing - 1.5%
Gannett Co., Inc.
5.45% 4/9/98 A-1+ P-1 20,000 19,975,778
5.50% 4/14/98 A-1+ P-1 20,000 19,960,278
Times Mirror Co.
5.52% 6/5/98 A-1 P-1 16,000 15,840,533
-----------
55,776,589
-----------
Structured Finance - 9.0%
CIESCO, L.P.
5.43% 4/8/98 A-1+ P-1 20,000 19,978,883
5.50% 4/17/98 A-1+ P-1 25,000 24,938,889
5.43% 4/29/98 A-1+ P-1 30,000 29,873,300
5.50% 5/15/98 A-1+ P-1 15,000 14,899,167
5.47% 5/15/98 A-1+ P-1 20,000 19,866,289
5.47% 5/22/98 A-1+ P-1 15,000 14,883,762
5.50% 5/28/98 A-1+ P-1 25,000 24,782,292
31
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Rating(g)
--------------- Par
PRIME SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Commercial Paper (continued)
Structured Finance (concluded)
Corporate Receivables Corp.
5.45% 4/9/98 A-1 P-1 $ 25,000 $ 24,969,722
5.48% 5/13/98 A-1 P-1 20,000 19,872,133
Corporate Asset Funding Co., Inc.
5.43% 4/08/98 A-1+ P-1 35,000 34,963,104
5.40% 4/13/98 A-1+ P-1 15,000 14,973,000
5.44% 4/23/98 A-1+ P-1 25,000 24,916,889
5.43% 4/24/98 A-1+ P-1 22,250 22,172,811
5.45% 4/28/98 A-1+ P-1 20,000 19,918,250
5.50% 6/11/98 A-1+ P-1 25,000 24,728,819
-------------
335,737,310
-------------
Telephone - 4.7%
Ameritech Capital Funding Corp.
5.50% 4/9/98 A-1+ P-1 15,000 14,981,667
5.40% 4/24/98 A-1+ P-1 15,000 14,948,250
5.45% 4/27/98 A-1+ P-1 20,000 19,921,278
Ameritech Corp.
5.395% 6/9/98 A-1+ P-1 25,000 24,741,490
AT&T Corp.
5.50% 4/8/98 A-1+ P-1 20,000 19,978,611
Bell Atlantic Network Funding Corp.
5.52% 4/22/98 A-1+ P-1 20,000 19,935,600
Bell Atlantic Financial Services Corp.
5.51% 5/7/98 A-1 P-1 15,000 14,917,350
SBC Communications Inc.
5.33% 4/17/98 A-1+ P-1 20,000 19,952,622
5.44% 5/27/98 A-1+ P-1 25,000 24,788,444
-------------
174,165,312
-------------
Total Commercial Paper 3,148,264,720
-------------
Variable Rate Notes - 3.3%
Associates Corp. Master Note
5.497%(b) 6/1/98 A-1+ P-1 75,000 75,000,000
Coca-Cola Co. Master Note
5.417%(b) 9/9/98 A-1+ P-1 50,000 50,000,000
------------
Total Variable Rate Notes 125,000 125,000,000
------------
32
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- -----------------------------------------------------------------------------
Statement of Net Assets March 31, 1998
Rating(g)
--------------- Par
PRIME SERIES (continued) S&P Moody's (000) Value
- -----------------------------------------------------------------------------
Federal Home Loan Bank - 3.1%
FHLB
5.43% 5/6/98 AAA -- $ 20,000 $ 19,894,417
5.72% 6/30/98 AAA -- 20,000 20,000,000
5.24% 7/17/98 AAA -- 34,580 34,041,436
5.70% 3/17/99 AAA -- 20,000 20,000,000
5.65% 3/30/99 AAA -- 20,000 20,000,000
---------------
Total Federal Home Loan Bank 114,580 113,935,853
Federal National Mortgage Association - 3.6% ---------------
FNMA
Note
5.61% 5/14/98 -- P-1 20,000 20,000,000
5.74% 6/9/98 -- P-1 15,000 15,000,000
5.28% 7/13/98 -- P-1 25,000 24,622,333
5.35% 7/16/98 -- P-1 30,000 30,000,000
5.37% 8/12/98 -- P-1 20,000 20,000,000
5.47% 9/14/98 -- P-1 25,000 25,000,000
---------------
Total Federal National Mortgage Association 135,000 134,622,333
Repurchase Agreements - 5.4%(c) ---------------
Goldman, Sachs & Co.
5.86% 4/1/98(d) -- -- 100,900 100,900,000
Morgan Stanley & Co.
5.80% 4/1/98(e) -- -- 100,000 100,000,000
-------- ---------------
Total Repurchase Agreements 200,900 200,900,000
-------- ---------------
TOTAL INVESTMENTS - 100.1% $3,722,722,906(f)
LIABILITIES IN EXCESS OF OTHER ASSETS, NET - (0.1%) (5,313,806)
--------------
NET ASSETS - 100.0% $3,717,409,100
==============
33
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------------
PRIME SERIES (concluded) Value
- -------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption Price Per:
Prime Share
($3,164,537,551 / 3,164,529,071 shares outstanding) $1.00
=====
Flag Investors Class A Share
($7,736,785 / 7,736,522 shares outstanding) $1.00
=====
Flag Investors Class B Share
($184,382 / 184,382 shares outstanding) $1.00
=====
Institutional Prime Share
($317,971,693 / 317,971,413 shares outstanding) $1.00
=====
Quality Cash Reserve Prime Share
($226,978,689 / 226,978,007 SHARES OUTSTANDING) $1.00
=====
__________
(a) Most commercial paper is traded on a discount basis. In such cases, the
interest rate shown represents the yield at time of purchase by the Fund.
(b) Master note is payable upon demand by the Fund upon no more than five days'
notice. Interest rates on master notes are redetermined weekly. Rates shown
are the rates in effect on March 31, 1998.
(c) Collateral on Tri-Party repurchase agreements is taken into possession by
the Fund's agent upon entering into the Tri-Party repurchase agreement. The
collateral is marked to market daily to insure market value as being as
least 102 percent of the resale price of the repurchase agreement.
(d) Dated 3/31/98 to be repurchased on 4/1/98, collateralized by U.S. Treasury
Notes with a market value of $102,918,187.
(e) Dated 3/31/98 to be repurchased on 4/1/98, collateralized by U.S. Treasury
Notes with a market value of $102,178,538.
(f) Aggregate cost for financial reporting and federal tax purposes.
(g) The credit ratings are not covered by the report of independent accountants.
MOODY'S RATINGS:
Aaa Bonds that are judged to be of the best quality.
P-1 Commercial paper bearing this designation is of the best quality.
S&P RATINGS:
AAA Obligations that are of the highest quality.
A-1 Commercial paper that has a strong degree of safety regarding timely
payment
Those issues determined to possess very strong safety characteristics
are denoted with a plus (+) sign.
A detailed description of the above ratings can be found in the
Fund's Statement of Additional Information.
See Notes to Financial Statements.
34
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets March 31, 1998
Maturity Par
TREASURY SERIES Date (000) Value
- --------------------------------------------------------------------------------
U.S. Treasury Securities - 99.45%
U.S. Treasury Bills(a) - 63.32%
4.980% 4/2/98 $ 10,375 $ 10,373,565
5.080% 4/2/98 37,000 36,994,774
4.960% 4/9/98 1,594 1,592,243
4.960% 4/16/98 30,750 30,686,450
4.980% 4/16/98 1,860 1,856,141
5.000% 4/16/98 1,650 1,646,563
5.050% 4/16/98 2,025 2,020,739
5.130% 4/16/98 1,500 1,496,794
5.300% 4/16/98 8,550 8,531,119
5.330% 4/16/98 38,015 37,930,575
5.220% 4/23/98 15,000 14,952,150
5.230% 4/23/98 25,840 25,757,412
5.235% 4/23/98 21,900 21,829,938
5.275% 4/23/98 33,100 32,993,298
5.320% 4/23/98 4,725 4,709,639
5.020% 4/30/98 19,740 19,660,174
5.290% 4/30/98 15,400 15,334,375
5.300% 4/30/98 25,000 24,893,264
4.970% 5/7/98 1,300 1,293,539
5.060% 5/7/98 1,725 1,716,272
5.070% 5/7/98 4,000 3,979,700
5.080% 5/7/98 13,700 13,630,404
5.065% 5/21/98 48,725 48,382,233
5.070% 5/28/98 4,000 3,967,890
5.175% 5/28/98 39,100 38,779,624
5.000% 6/4/98 770 763,156
5.040% 6/4/98 6,700 6,639,968
4.970% 6/25/98 10,850 10,722,678
4.980% 6/25/98 2,600 2,569,428
5.040% 6/25/98 54,700 54,049,070
5.060% 6/25/98 2,450 2,420,729
5.110% 6/25/98 8,450 8,348,048
5.120% 6/25/98 3,000 2,963,733
4.960% 7/23/98 21,000 20,673,053
4.970% 7/23/98 14,500 14,273,796
5.030% 7/23/98 26,200 25,786,338
5.050% 7/23/98 14,100 13,876,495
-----------
Total U.S. Treasury Bills 568,095,367
-----------
35
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Maturity Par
TREASURY SERIES (concluded) Date (000) Value
- --------------------------------------------------------------------------------
U.S. Treasury Securities (concluded)
U.S. Treasury Notes - 36.13%
5.875% 4/30/98 $ 80,000 $ 80,034,987
6.125% 5/15/98 119,850 119,960,164
6.000% 5/31/98 50,000 50,050,872
5.125% 6/30/98 19,000 18,992,393
6.250% 6/30/98 30,000 30,065,918
6.250% 7/31/98 25,000 25,072,655
------------
Total U.S. Treasury Notes 324,176,989
------------
TOTAL U.S. TREASURY SECURITIES 892,272,356
-------------
TOTAL INVESTMENTS - 99.45% 892,272,356(b)
OTHER ASSETS LESS LIABILITIES, NET - 0.55% 4,934,325
---------------
NET ASSETS - 100.0% $897,206,681
============
Net Asset Value, Offering and Redemption Price Per:
Treasury Share
($798,426,658 / 798,354,129 shares outstanding) $1.00
=====
Institutional Treasury Share
($98,780,023 / 98,768,925 shares outstanding) $1.00
=====
(a) U.S. Treasury bills are traded on a discount basis. In such cases, the
interest rate shown represents the yield at the date of purchase.
(b) Aggregate cost for financial reporting and federal tax purposes.
See Notes to Financial Statements.
36
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets March 31, 1998
Rating(d)
--------------- Par
TAX-FREE SERIES S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Alabama -- 2.5%
Alabama Housing Finance Authority
Multifamily Housing Refunding RB
(Heatherbrooke Project) DN
(FNMA LOC)
3.70% 4/7/98(a) A-1+ -- $ 9,900 $ 9,900,000
Alabama Housing Finance Authority
Multifamily Housing Refunding RB
(Rime Village Hoover Project)
Series 1996a DN (FNMA LOC)
3.70% 4/7/98(a) A-1+ VMIG-1 5,800 5,800,000
University of Alabama,
University of Alabama-Birmingham
Hospital, Series A DN
3.70% 4/7/98(a) A-1+ VMIG-1 7,200 7,200,000
-----------
22,900,000
-----------
Arizona -- 3.4%
Apache County IDA RB (Tucson Electric
Power Co. Project) Series 1983 DN
(Toronto Dominion LOC)
3.75% 4/7/98(a) A-1+ -- 7,000 7,000,000
Salt River Project Agricultural Improvement
and Power District
3.60% 6/19/98(b) A-1+ P-1 23,900 23,900,000
-----------
30,900,000
-----------
Arkansas -- 0.2%
Arkansas Development Authority Health
Care Facility (Sisters of Mercy) DN
(ABN Amro Bank N.V. LOC)
3.65% 4/7/98(a) A-1+ VMIG-1 1,800 1,800,000
----------
Colorado -- 1.4%
Colorado Health Facilities Authority
Revenue Catholic Health Series B DN
3.70% 4/7/98(a) A-1+ VMIG-1 4,350 4,350,000
Colorado Housing Finance Authority
Multifamily Housing (Silver Reef
Project) DN (FNMA LOC)
3.75% 4/7/98(a) A-1+ VMIG-1 8,290 8,290,000
-----------
12,640,000
-----------
37
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Rating(d)
--------------- Par
TAX-FREE SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Connecticut -- 1.8%
Connecticut GO DN
3.65% 4/7/98(a) A-1+ VMIG-1 $ 9,500 $ 9,500,000
Connecticut State Board of Education
(Yale University)
3.40% 5/1/98(b) A-1+ P-1 7,000 7,000,000
-----------
16,500,000
-----------
Florida -- 1.3%
Orlando Special Assessment
RB Republic Drive Interchange DN
(Morgan Guaranty LOC)
3.65% 4/7/98(a) -- VMIG-1 10,100 10,100,000
Tampa Health Facilities Authority RB
(Lifelink Foundation Inc., Project) DN
(Suntrust Bank LOC)
3.70% 4/7/98(a) Aa3 -- 1,500 1,500,000
-----------
11,600,000
Georgia -- 8.7% -----------
Cobb County Housing Authority RB
(Post Bridge Project) Series 1995 DN
(FNMA LOC)
3.70% 4/7/98(a) A-1+ -- 9,380 9,380,000
Columbus Housing Authority RB
(Columbus State University
Foundation Inc.) Series 97 DN
(Suntrust Bank LOC)
3.70% 4/7/98(a) Aa3 -- 2,300 2,300,000
Dekalb County Housing Authority
Housing (Camden Brooke Project) DN
(FNMA LOC)
3.70% 4/7/98(a) -- VMIG-1 5,400 5,400,000
Dekalb County Housing Authority
Multifamily Housing (Clairmont
Crest Project) DN (FNMA LOC)
3.70% 4/7/98(a) A-1+ VMIG-1 1,400 1,400,000
Dekalb County Housing Authority
Multifamily Housing (Post Ashford
Project) DN (FNMA LOC)
3.70% 4/7/98(a) A-1+ -- 7,895 7,895,000
38
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets March 31, 1998
Rating(d)
--------------- Par
TAX-FREE SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Georgia (concluded)
Fulton County Development
Authority (Georgia Tech Athletic
Association Project) Series 1995 DN
(Suntrust Bank LOC)
3.70% 4/7/98(a) Aa3 -- $ 6,150 $ 6,150,000
GEORGIA MUNICIPAL ELECTRIC AUTHORITY
SERIES C DN (MORGAN GUARANTY LOC)
3.65% 4/7/98(a) A-1+ VMIG-1 18,600 18,600,000
Georgia Municipal Gas Authority RB
Agency Project DN (Wachovia LOC)
3.65% 4/7/98(a) A-1+ -- 2,400 2,400,000
Georgia Municipal Gas Authority RB
Agency Project DN (Wachovia LOC)
3.65% 4/7/98(a) A-1+ -- 5,000 5,000,000
Georgia Municipal Gas Authority RB
DN (Wachovia LOC)
3.65% 4/7/98(a) A-1+ -- 4,000 4,000,000
Macon-Bibb County Hospital Authority
(Medical Center of Central Georgia)
Series 1997 DN (Suntrust Bank LOC)
3.70% 4/7/98(a) Aa3 VMIG-1 3,000 3,000,000
Roswell Housing Authority Multifamily
Housing (Post Canyon Project) DN
(FNMA LOC)
3.70% 4/7/98(a) A-1+ -- 5,500 5,500,000
Smyrna Housing Authority Multifamily
Housing RB (F&M Villages Project)
DN (FNMA LOC)
3.70% 4/7/98(a) A-1+ -- 8,500 8,500,000
-----------
79,525,000
Idaho -- 0.8% -----------
Idaho State TAN
4.625% 6/30/98(b) SP-1+ MIG-1 7,500 7,513,259
-----------
Illinois -- 15.2%
Cook County GO DN
3.65% 4/7/98(a) A-1+ VMIG-1 7,400 7,400,000
Illinois Development Finance
Authority (Chicago Symphony
Orchestra Project) DN
(Northern Trust LOC)
3.70% 4/7/98(a) A-1 VMIG-1 11,300 11,300,000
39
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Rating(d)
--------------- Par
TAX-FREE SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Illinois (continued)
Illinois Development Finance
Authority Adjustable Demand RB
(Fenwick High School Project) DN
(Northern Trust LOC)
3.70% 4/7/98(a) A-1+ -- $ 8,200 $ 8,200,000
Illinois Development Finance Authority
PCR (Commonwealth Edison Co.
Project) Series 1994C DN
(ABN Amro Bank N.V. LOC)
3.70% 4/7/98(a) A-1+ P-1 7,700 7,700,000
Illinois Development Finance Authority
PCR (Illinois Power Co. Project)
(Canadian Imperial Bank LOC)
3.55% 11/5/98(b) A-1+ VMIG-1 15,000 15,000,000
Illinois Development Finance Authority
PCR Refunding (Illinois Power Co.
Project) DN (Canadian Imperial
Bank LOC)
3.70% 4/7/98(a) A-1+ VMIG-1 8,500 8,500,000
Illinois Education Facility Authority
(Museum of Science and Industry) DN
(Northern Trust LOC)
3.70% 4/7/98(a) -- VMIG-1 5,800 5,800,000
Illinois Educational Facilities Authority
(Field Museum of Natural History)
(Northern Trust LOC)
3.80% 6/17/98(b) -- VMIG-1 15,000 15,000,000
Illinois Educational Facilities Authority
Adjustable Demand MB
(John F. Kennedy Health Care
Foundation) (Harris Trust LOC)
3.50% 5/19/98(b) A-1+ -- 12,800 12,800,000
Illinois Health Facilities Authority
(Gottlieb Health Resources, Inc.) DN
(Harris Trust & Savings Bank LOC)
3.70% 4/7/98(a) -- VMIG-1 2,000 2,000,000
Illinois Health Facilities Authority RB
(Gottlieb Health) DN (Harris Trust LOC)
3.70% 4/7/98(a) -- VMIG-1 2,500 2,500,000
Illinois Health Facilities Authority (Carle
Foundation Project) DN (Northern
Trust LOC)
3.75% 4/7/98(a) -- VMIG-1 5,750 5,750,000
40
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets March 31, 1998
Rating(d)
--------------- Par
TAX-FREE SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Illinois (concluded)
Illinois Health Facility Authority
(Evanston Hospital Corp. Project)
SERIES 1990A MB
3.90% 10/15/98(b) A-1+ VMIG-1 $16,000 $ 16,000,000
Illinois Health Facility Authority
(Evanston Hospital Corp. Project)
Series 1996 MB
3.90% 7/31/98(b) A-1+ VMIG-1 5,000 5,000,000
Illinois Health Facilities Authority
Revolving Fund Pooled Financing
Program (The University of
Chicago Project)
3.75% 5/27/98(b) A-1+ VMIG-1 16,400 16,400,000
------------
139,350,000
------------
Indiana -- 1 .9%
Mt. Vernon PCR RB Solid Waste Disposal
(General Electric) Series L DN
3.60% 4/7/98(a) A-1+ VMIG-1 3,500 3,500,000
Petersburg PCR (Indianapolis Power &
Light Co.) DN (AMBAC Insurance)
3.70% 4/7/98(a) -- VMIG-1 4,100 4,100,000
Purdue University Student Fee Bonds DN
3.60% 4/7/98(a) A-1+ VMIG-1 10,000 10,000,000
------------
17,600,000
------------
Kentucky -- 2.2%
Kentucky Economic Development
Finance Authority Hospital Facilities RB
(Baptist Healthcare System) DN
3.60% 4/7/98(a) A-1+ -- 20,100 20,100,000
------------
Louisiana -- 3.2%
East Baton Rouge Parish (Georgia
Pacific Corp.) PCR DN
(Toronto Dominion LOC)
3.7% 4/7/98(a) -- P-1 2,700 2,700,000
Louisiana Offshore Terminal Authority
First Stage 1991 A (Loop Inc.) DN
(Morgan Guaranty LOC)
3.65% 4/7/98(a) A-1+ VMIG-1 8,600 8,600,000
41
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Rating(d)
-------------- Par
TAX-FREE SERIES (continued) S&P Moody's (000) Value
- -------------------------------------------------------------------------------
Louisiana (concluded)
Plaquemines Port, Harbor and Terminal
District, Marine Terminal Facilities
Refunding RB (Tampa Electric) Series A
3.55% 5/7/98(b) -- P-1 $ 6,325 $ 6,325,000
Plaquemines Port, Harbor and Terminal
District, Marine Terminal Facilities
Refunding RB (Tampa Electric) Series A
3.50% 6/10/98(b) -- P-1 4,325 4,325,000
Plaquemines Port, Harbor and Terminal
District, Marine Terminal Facilities
Refunding RB (Tampa Electric) Series A
3.55% 5/7/98(b) -- P-1 7,000 7,000,000
-----------
28,950,000
-----------
Maryland -- 7.0%
Community Development Administration
Multifamily Development RB
(Avalon Ridge Apartments) 97 DN
(FNMA LOC)
3.65% 4/7/98(a) -- VMIG-1 15,000 15,000,000
Community Development Administration
Multifamily Development RB (Avalon
Lea Apartments) DN (FNMA LOC)
3.65% 4/7/98(a) -- VMIG-1 6,000 6,000,000
Frederick County Variable Rate BAN
3.75% 4/7/98(a) A-1+ VMIG-1 3,000 3,000,000
Howard County Consolidated Public
Improvement TECP BANS
3.50% 6/19/98(b) A-1+ P-1 14,000 14,000,000
Montgomery County BAN TECP
Series 95
3.40% 5/6/98(b) A-1+ P-1 6,800 6,800,000
Washington Suburban Sanitary District
Montgomery, Prince George's Counties
GO BAN DN
3.75% 4/7/98(a) A-1+ VMIG-1 16,600 16,600,000
Washington Suburban Sanitary District
Sewer Disposal
5.90% 11/1/98(b) A-1+ VMIG-1 2,500 2,529,396
-----------
63,929,396
-----------
42
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets March 31, 1998
Rating(d)
--------------- Par
TAX-FREE SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Massachusetts -- 0.4%
Massachusetts Port Authority DN
3.70% 4/1/98(a) A-1+ VMIG-1 $ 2,600 $ 2,600,000
Massachusetts Health & Education
Authority RB (Partners Healthcare
System) DN P-2
3.45% 4/7/98(a) -- VMIG-1 1,400 1,400,000
-----------
4,000,000
-----------
Michigan -- 2.3%
Detroit Water Supply System DN
(FGIC Insurance)
3.65% 4/7/98(a) A-1+ VMIG-1 2,000 2,000,000
Michigan State Building Authority TECP
Notes (Canadian Imperial Bank LOC)
3.40% 4/9/98(b) A-1+ P-1 14,650 14,650,000
Strategic Fund (Consumer Power Co.)
PCR Series 1988A (Union Bank of
Switzerland LOC)
3.80% 4/1/98(a) -- P-1 3,900 3,900,000
-----------
20,550,000
-----------
Minnesota -- 0.3%
Becker PCR (Northern States Power)
3.60% 5/7/98(b) A-1+ P-1 3,000 3,000,000
-----------
Mississippi -- 1.0%
Jackson County Port Facility (Chevron
USA) Series 1993 DN
3.75% 4/1/98(a) -- P-1 9,300 9,300,000
-----------
Missouri -- 2.6%
Missouri Health & Education Facility
Authority (Sisters of Mercy)
Series D DN
3.65% 4/7/98(a) A-1+ VMIG-1 9,000 9,000,000
Missouri Health & Education Facility
Authority (Washington
University) DN
3.65% 4/7/98(a) A-1+ VMIG-1 8,600 8,600,000
Missouri Health & Education Facility
Authority RB (Sisters of Mercy) DN
3.65% 4/7/98(a) A-1+ VMIG-1 400 400,000
43
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Rating(d)
--------------- Par
TAX-FREE SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Missouri (concluded)
Missouri Health & Education Facility
Authority RB (Washington University)
Series B DN
3.80% 4/1/98(a) A-1+ VMIG-1 $ 1,200 $ 1,200,000
Missouri Health & Education Facility
Hospital RB (Barnes Hospital Project)
DN (Morgan Guaranty LOC)
3.65% 4/7/98(a) A-1+ VMIG-1 5,000 5,000,000
-----------
24,200,000
-----------
Montana -- 1.4%
Forsyth PCR (Portland General Electric
Project) Series 1983-B DN (Swiss
Bank LOC)
3.65% 4/7/98(a) A-1+ P-1 12,400 12,400,000
-----------
New Jersey -- 0.6%
Gloucester County PCR (Mobil Oil
Refining Co. Project) Series 1993 DN
3.375% 4/7/98(a) A-1+ VMIG-1 600 600,000
Mercer County Improvement Authority
(Pooled Government Loan Project)
Series 1985 DN (Credit Suisse LOC)
3.25% 4/7/98(a) A-1+ VMIG-1 1,300 1,300,000
New Jersey Economic Development
Authority (Public Service Electric
& Gas Company) Series 1995A DN
(Swiss Bank LOC)
3.375% 4/7/98(a) A-1+ VMIG-1 3,300 3,300,000
-----------
5,200,000
-----------
New York -- 1.3%
Municipal Assistance Corporation for
New York City (Westdeutsche LOC) DN
3.50% 4/7/98(a) A-1+ VMIG-1 9,500 9,500,000
Syracuse IDA Civic Facility RB DN
(Morgan Guaranty LOC)
3.70% 4/1/98(a) A-1+ VMIG-1 2,500 2,500,000
-----------
12,000,000
-----------
North Carolina -- 2.8%
Charlotte-Mecklenburg Hospital Authority
Health Care RB DN
3.70% 4/7/98(a) A-1+ VMIG-1 9,600 9,600,000
44
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets March 31, 1998
Rating(d)
--------------- Par
TAX-FREE SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
North Carolina (concluded)
North Carolina Medical Care Commission
(Moses H. Cone Memorial Hospital
Project) Series 1995 DN (Wachovia
Bank LOC)
3.70% 4/7/98(a) A-1+ VMIG-1 $ 1,200 $ 1,200,000
North Carolina Medical Care Commission
(Baptist Hospital Project)
Series 1992B DN
3.70% 4/7/98(a) A-1+ VMIG-1 3,000 3,000,000
North Carolina Medical Care Commission
RB (Baptist Hospital Project)
Series 1996 DN (Wachovia Bank LOC)
3.70% 4/7/98(a) A-1+ VMIG-1 5,700 5,700,000
North Carolina Medical Care Commission
RB (Moses H. Cone Memorial Hospital
Project) Series 1993 DN
(Wachovia Bank LOC)
3.70% 4/7/98(a) A-1+ VMIG-1 6,500 6,500,000
-----------
26,000,000
-----------
Ohio -- 4.6%
Clermont County Health Facilities
(Mercy Health System Project)
Series 1996A DN
3.65% 4/7/98(a) -- VMIG-1 20,100 20,100,000
Clermont County Health Facilities
(Mercy Health Systems Project)
Series 1994B DN
3.65% 4/7/98(a) A-1+ VMIG-1 17,400 17,400,000
Hamilton County Hospital Finance
Authority Revenue Bonds (Health
Alliance Hospital, Project Series B) DN
(Credit Suisse LOC)
3.75% 4/7/98(a) A-1+ VMIG-1 4,700 4,700,000
-----------
42,200,000
-----------
Oklahoma -- 1.5%
Oklahoma Industries Authority Hospital
RB (St. Anthony Parking Garage B)
(Morgan Guaranty LOC)
3.90% 6/1/98(b) -- VMIG-1 2,300 2,300,000
45
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Rating(d)
--------------- Par
TAX-FREE SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Oklahoma (concluded)
Oklahoma Industries Authority Medical
Practice Facility RB (SSM Health Care
Obligated Group) (St. Anthony
Physicians Building Project)
(Morgan Guaranty LOC)
3.90% 6/1/98(b) -- VMIG-1 $ 6,445 $ 6,445,000
Oklahoma Water Resources Board State
Loan Program RB (Swiss Bank LOC)
Series 1995
3.55% 9/1/98(b) A-1+ -- 5,180 5,180,000
-----------
13,925,000
-----------
Oregon -- 3.6%
Kalmath Falls Electric Revenue Salt
Caves Hydroelectric Series D
(Escrowed In U.S. Treasuries)
4.50% 5/1/98(b) SP-1+ -- 17,500 17,509,065
Umatilla County Hospital Authority RB
(Catholic Health Initiatives) DN
3.70% 4/7/98(a) A-1+ VMIG-1 15,600 15,600,000
-----------
33,109,065
-----------
Pennsylvania -- 2.8%
Delaware County IDA Solid Waste
(Kimberly Clark Project)
Series 1984B DN
3.65% 4/7/98(a) A-1+ P-1 8,000 8,000,000
Emmaus General Authority Pooled
Loan Series 1996 DN (Financial
Security Assurance LOC)
3.75% 4/7/98(a) A-1+ VMIG-1 6,400 6,400,000
Pennsylvania Higher Education Facilities
Authority RB (Carnegie Mellon
University Project) Series 1995C DN
(Mellon Bank LOC)
3.75% 4/1/98(a) A-1+ -- 6,700 6,700,000
Pennsylvania Higher Education RB
(Carnegie Mellon Project)
Series 1995B DN, (LOC Union
Bank of Switzerland)
3.75% 4/1/98(a) A-1+ -- 4,100 4,100,000
-----------
25,200,000
-----------
46
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets March 31, 1998
Rating(d)
--------------- Par
TAX-FREE SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
South Carolina -- 3.1%
Piedmont Municipal Power Agency
Electric Co. DN (Morgan
Guaranty LOC)
3.65% 4/7/98(a) A-1+ VMIG-1 $ 3,100 $ 3,100,000
Piedmont Municipal Power Agency
Electric RB Series B DN
(Credit Suisse LOC)
3.65% 4/7/98(a) A-1+ VMIG-1 20,000 20,000,000
Rock Hill Combined Utility System
RB DN (AMBAC Insurance LOC)
3.65% 4/7/98(a) A-1+ VMIG-1 5,000 5,000,000
-----------
28,100,000
Tennessee -- 0.9% -----------
Memphis GO Series A DN (Westdeutsche
Landesbank LOC)
3.80% 4/7/98(a) A-1+ VMIG-1 2,500 2,500,000
Tennessee GO BAN DN
3.65% 4/7/98(a) SP-1+ VMIG-1 6,000 6,000,000
-----------
8,500,000
-----------
Texas -- 14.7%
Board of Regents of The University
of Texas TECP Notes Series A
3.60% 5/8/98(b) A-1+ P-1 12,000 12,000,000
Board of Regents Texas A&M University
TECP Series 1998
3.10% 5/6/98(b) A-1+ P-1 15,000 15,000,000
City of Houston GO Series A
3.65% 5/1/98(b) A-1+ P-1 15,800 15,800,000
City of Houston GO Series A
3.50% 5/7/98(b) A-1+ P-1 10,000 10,000,000
City of Houston GO Series B
3.55% 5/1/98(b) A-1+ P-1 15,200 15,200,000
Harris County Toll Road Unlimited
Tax and Surbordinate Lien RB
Series G DN
3.65% 4/7/98(a) A-1+ VMIG-1 2,800 2,800,000
47
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Rating(d)
--------------- Par
TAX-FREE SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Texas (concluded)
Harris County Toll Road Unlimited
Tax and Surbordinate Lien RB
Series H DN
3.65% 4/7/98(a) A-1+ VMIG-1 $12,600 $ 12,600,000
Harris County IDA PCRB Exxon Corp.
Series 1984A DN
3.75% 4/1/98(a) A-1+ -- 5,000 5,000,000
Lower Colorado River Authority
Commercial Paper Notes
(Morgan Guaranty LOC)
3.35% 5/21/98(b) A-1+ P-1 15,200 15,200,000
San Antonio Electric and Gas Systems
Commercial Paper Notes
3.40% 5/6/98(b) -- P-1 9,500 9,500,000
Texas Higher Education Authority
Facilities Revenue Series 85b
(FGIC Insurance) DN
3.70% 4/7/98(a) A-1+ VMIG-1 3,460 3,460,000
Texas State TRAN
4.75% 8/31/98(b) SP-1 MIG 4,000 4,014,589
Texas State Veterans Housing Assistance
Fund DN
3.65% 4/7/98(a) A-1+ VMIG-1 5,995 5,995,000
Travis County Health Facilities
(Charity Obligation Group)
Series E DN
3.65% 4/7/98(a) A-1+ VMIG-1 7,800 7,800,000
------------
134,369,589
------------
Utah -- 1.2%
Salt Lake City Flexible Rate RB
(Pooled Hospital Financing
Program) DN
3.65% 4/7/98(a) A-1+ VMIG-1 11,350 11,350,000
------------
Virginia -- 0.3%
Hampton Roads Regional Jail Authority
Series 1996B DN (Wachovia Bank LOC)
3.60% 4/7/98(a) A-1+ VMIG-1 2,500 2,500,000
------------
48
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Asets March 31, 1998
Rating(d)
--------------- Par
TAX-FREE SERIES (continued) S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Washington -- 1.6%
Chelan County Public Utility District No. 1
(Chelan Hydro Consolidated System)
Series 1995a DN (Credit Suisse LOC)
3.60% 4/7/98(a) A-1+ VMIG-1 $ 2,700 $ 2,700,000
King County Sewer Authority
Series A TECP
3.55% 5/12/98(b) A-1 P-1 12,000 12,000,000
-----------
14,700,000
-----------
Wisconsin -- 1.9%
Oak Creek PCR (Wisconsin Electric
Power Co. Project) DN
3.70% 4/7/98(a) -- P-1 3,200 3,200,000
Pleasant Prairie Village PCR Refunding
(Wisconsin Electric Power Co.
Project) DN
3.75% 4/7/98(a) A-1+ P-1 10,000 10,000,000
Wisconsin State Health & Educational
Facilities Authority RB Series 1997F DN
3.65% 4/7/98(a) A-1+ VMIG-1 4,300 4,300,000
-----------
17,500,000
-----------
Wyoming -- 1.5%
Lincoln County PCR (Amoco Standard
Oil Co. Project) DN
3.75% 4/1/98(a) A-1+ -- 7,175 7,175,000
Unita County PCR (Chevron) Series
93 DN
3.85% 4/1/98(a) A-1+ VMIG-1 6,350 6,350,000
-----------
13,525,000
-----------
49
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
TAX-FREE SERIES Value
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.7% $914,936,309(c)
OTHER ASSETS IN EXCESS OF LIABILITIES, NET -- 0.3% 2,931,367
------------
NET ASSETS-- 100.0% $917,867,676
------------
Net Asset Value, Offering and Redemption Price Per:
Tax-Free Retail Share
($841,184,924 / 841,258,030 shares outstanding) $1.00
=====
Tax-Free Institutional Share
($76,682,752 / 76,682,889 shares outstanding) $1.00
=====
(a) Demand security; payable upon demand by the Fund with usually no more than
seven (7) calendar days' notice. Interest rates are redetermined
periodically. Rates shown are those in effect on March 31, 1998.
(b) Security has an outstanding call, mandatory put or optional put by the
issuer. Par value and maturity date reflect such call or put.
(c) Aggregate cost for financial reporting and federal tax purposes.
(d) The credit ratings are not covered by the report of independent auditors.
50
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets March 31, 1998
TAX-FREE SERIES (concluded)
- --------------------------------------------------------------------------------
INVESTMENT ABBREVIATIONS:
DN Demand Note
BAN Bond Anticipation Notes
GO General Obligation Bonds
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
LOC Letter of Credit
PCR Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
RB Revenue Bonds
TAN Tax Anticipation Notes
TECP Tax-Exempt Commercial Paper
TRAN Tax Revenue Anticipation Notes
INSURANCE ABBREVIATIONS:
AMBAC AMBAC Indemnity Corp.
FGIC Financial Guaranty Insurance Corporation
MBIA Municipal Bond Investors Assurance
MOODY'S MUNICIPAL BOND RATINGS:
Aaa Bonds that are judged to be of the best quality.
Aa Bonds that are judged to be of high quality by all standards. Issues
are sometimes rated with a 1, 2 or 3, which denote a high, medium or
low ranking within the rating.
MIG-1 Notes bearing this designation are of the best quality.
VMIG-1 Variable rate demand obligations bearing this designation are of the
best quality.
P-1 Commercial paper bearing this designation is of the best quality.
S&P MUNICIPAL BOND RATINGS:
AAA Obligations that are of the highest quality.
AA Obligations that have the second strongest capacity for payment of
debt service. Those issues determined to possess very strong safety
characteristics are denoted with a plus (+) sign.
SP-1 Notes that have a strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics are assigned a plus (+) designation.
A-1 Commercial paper that has a strong degree of safety regarding timely
payment. Those issues determined to possess very strong safety
characteristics are denoted with a plus (+) sign.
A detailed description of the above ratings can be found in the
Fund's Statement of Additional Information.
See Notes to Financial Statements.
51
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Operations
For the year ended March 31, 1998
Prime Treasury Tax-Free
Series Series Series
- --------------------------------------------------------------------------------
Investment Income:
Interest income $184,011,736 $39,284,838 $28,391,393
------------ ----------- -----------
Expenses:
Investment advisory fees 8,582,839 1,813,575 2,115,501
Distribution fee 8,299,915 1,700,377 1,784,579
Transfer agent fees 2,661,928 274,991 162,558
Custodian fees 349,351 86,735 63,076
Directors' fees 232,075 24,983 32,577
Registration fees 1,001,689 74,183 133,587
Miscellaneous 933,217 272,982 183,315
------------ ----------- -----------
Total expenses 22,061,014 4,247,826 4,475,193
Less: Fees waived (136,191) -- --
------------ ----------- -----------
Net expenses 21,924,823 4,247,826 4,475,193
------------ ----------- -----------
Net investment income 162,086,913 35,037,012 23,916,200
------------ ----------- -----------
Net realized gain (loss) from security
transactions -- 20,785 (1,994)
------------ ----------- -----------
Net increase in net assets resulting
from operations $162,086,913 $35,057,797 $23,914,206
============ =========== ===========
See Notes to Financial Statements.
52
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets March 31, 1998
PRIME SERIES
- --------------------------------------------------------------------------------
Year Ended Year Ended
March 31, March 31,
1998 1997
---------- ----------
Increase/(Decrease) in Net Assets
Operations:
Net investment income $ 162,086,913 $ 132,679,566
Net realized gain/(loss) on sales of
investments -- 13,047
-------------- --------------
Net increase in net assets resulting
from operations 162,086,913 132,692,613
Distributions to Shareholders From:
Net investment income:
BT Alex. Brown Cash Reserve Prime, Treasury
and Tax-Free Shares, respectively (138,011,807) (119,826,842)
BT Alex. Brown Cash Reserve
Institutional Shares (13,656,968) (4,256,297)
Flag Investors Class A Shares (341,197) (295,562)
Flag Investors Class B Shares (12,545) (1,260)
Quality Cash Reserve Prime Shares (10,064,396) (8,299,605)
------------- --------------
Total distributions (162,086,913) (132,679,566)
Capital Share Transactions, Net 849,945,486 264,670,792
-------------- --------------
Total increase in net assets 849,945,486 264,683,839
Net Assets:
Beginning of period 2,867,463,614 2,602,779,775
-------------- --------------
End of period $3,717,409,100 $2,867,463,614
============== ==============
53
<PAGE>
<TABLE>
<CAPTION>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------------------------------------------------------------
TREASURY SERIES TAX-FREE SERIES
- -------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
March 31, March 31, March 31, March 31,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S><C>
Increase/(Decrease) in Net Assets
Operations:
Net investment income $ 35,037,012 $ 33,069,786 $ 23,916,200 $ 16,906,007
Net realized gain/(loss) on sales of
investment 20,785 1,180 (1,994) 15,016
------------ -------------- ------------ ------------
Net increase in net assets resulting
from operations 35,057,797 33,070,966 23,914,206 16,921,023
Distributions to Shareholders From:
Net investment income:
BT Alex. Brown Cash Reserve Prime, Treasury
and Tax-Free Shares, respectively (31,623,993) (30,533,284) (21,792,392) (16,906,007)
BT Alex. Brown Cash Reserve
Institutional Shares (3,413,019) (2,536,502) (2,123,808) --
Flag Investors Class A Shares -- -- -- --
Flag Investors Class B Shares
Quality Cash Reserve Prime Shares -- -- -- --
------------ ------------ ------------ ------------
Total distributions (35,037,012) (33,069,786) (23,916,200) (16,906,007)
Capital Share Transactions, Net 157,532,323 21,015,478 270,657,645 75,690,009
------------ ------------ ------------ ------------
Total increase in net assets 157,553,108 21,016,658 270,655,651 75,705,025
Net Assets:
Beginning of period 739,653,573 718,636,915 647,212,025 571,507,000
------------ ------------ ------------- ------------
End of period $897,206,681 $739,653,573 $917,867,676 $647,212,025
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
54
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each year)
BT ALEX. BROWN CASH RESERVE PRIME SHARES
- --------------------------------------------------------------------------------
Year ended
March 31,
--------------
1998
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00
Income from Investment Operations: --------------
Net investment income 0.0494
Less Distributions:
Dividends from net investment income and/or
short-term gains (0.0494)
--------------
Net asset value at end of period $ 1.00
==============
Total Return:
Based on net asset value per share 5.05%
Ratios to Average Daily Net Assets:
Expenses 0.67%
Net investment income 4.94%
Supplemental Data:
Net assets at end of period $3,164,537,551
Number of shares outstanding at end of period 3,164,529,071
55
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------------
BT ALEX. BROWN CASH RESERVE PRIME SHARES (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended March 31,
- -------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
<S><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 and/or
short-term gains (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:
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% 5.21% 4.46% 2.62%
Supplemental Data:
Net assets at end of period $2,545,532,365 $2,386,681,216 $1,472,079,739 $1,350,334,979
Number of shares outstanding at end of period 2,545,523,885 2,386,684,392 1,472,077,488 1,350,332,916
</TABLE>
See Notes to Financial Statements.
56
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each year)
FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS A
- -------------------------------------------------------------------------------
Year ended
March 31,
-----------
1998
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00
Income from Investment Operations: ----------
Net investment income 0.0494
Less Distributions:
Dividends from net investment income and/or
short-term gains (0.0494)
----------
Net asset value at end of period $ 1.00
==========
Total Return:
Based on net asset value per share 5.05%
Ratios to Average Daily Net Assets:
Expenses 0.67%
Net investment income 4.94%
Supplemental Data:
Net assets at end of period $7,736,785
Number of shares outstanding at end of period 7,736,522
57
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------------
FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS A (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended March 31,
- -------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
<S><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 and/or
short-term gains (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:
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% 4.46% 2.62%
Supplemental Data:
Net assets at end of period $6,521,574 $5,976,831 $7,726,696 $18,116,648
Number of shares outstanding at end of period 6,521,310 5,976,824 7,726,698 18,116,633
</TABLE>
See Notes to Financial Statements.
58
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each year)
FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS B
- --------------------------------------------------------------------------------
Year ended
March 31,
---------
1998
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00
Income from Investment Operations: --------
Net investment income 0.0418
Less Distributions:
Dividends from net investment income and/or
short-term gains (0.0418)
--------
Net asset value at end of period $ 1.00
========
Total Return:
Based on net asset value per share 4.27%
Ratios to Average Daily Net Assets:
Expenses 1.42%
Net investment income 4.18%
Supplemental Data:
Net assets at end of period $184,382
Number of shares outstanding at end of period 184,382
- ----------
(1) Commencement of operations.
(2) Annualized.
59
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------------
FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS B (continued)
- -------------------------------------------------------------------------------
April 3, 1995(1)
Year ended through
March 31, March 31,
------------- ---------------
1997 1996
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 and/or
short-term gains (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%
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
See Notes to Financial Statements.
60
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each year)
BT ALEX. BROWN CASH RESERVE PRIME INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
Year ended
March 31,
------------
1998
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00
Income from Investment Operations: ------------
Net investment income 0.0519
Less Distributions:
Dividends from net investment income and/or
short-term gains (0.0519)
------------
Net asset value at end of period $ 1.00
============
Total Return:
Based on net asset value per share 5.31%
Ratios to Average Daily Net Assets:
Expenses 0.42%
Net investment income 5.22%
Supplemental Data:
Net assets at end of period $317,971,693
Number of shares outstanding at end of period 317,971,413
61
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------------
BT ALEX. BROWN CASH RESERVE PRIME INSTITUTIONAL SHARES (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended March 31,
- -------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
<S><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 0.0503 0.0548 0.0472 0.0294
Less Distributions:
Dividends from net investment income and/or
short-term gains (0.0503) (0.0548) (0.0472) (0.0294)
------------ ----------- ----------- ----------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ =========== =========== ==========
Total Return:
Based on net asset value per share 5.15% 5.62% 4.82% 2.98%
Ratios to Average Daily Net Assets:
Expenses 0.38% 0.35% 0.36% 0.30%
Net investment income 5.04% 5.32% 4.57% 2.94%
Supplemental Data:
Net assets at end of period $117,812,047 $53,699,315 $11,904,716 $23,437,449
Number of shares outstanding at end of period 117,811,768 53,699,535 11,904,663 23,437,512
</TABLE>
See Notes to Financial Statements.
62
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each year)
QUALITY CASH RESERVE PRIME SHARES
- --------------------------------------------------------------------------------
Year ended
March 31,
------------
1998
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00
Income from Investment Operations: ------------
Net investment income 0.0465
Less Distributions:
Dividends from net investment income and/or
short-term gains (0.0465)
------------
Net asset value at end of period $ 1.00
============
Total Return:
Based on net asset value per share 4.75%
Ratios to Average Daily Net Assets:
Expenses 0.96%(1)
Net investment income 4.66%(2)
Supplemental Data:
Net assets at end of period $226,978,689
Number of shares outstanding at end of period 226,978,007
- ----------
(1) Ratio of expenses to average net assets prior to partial fee waivers assumed
was 1.02%, 0.98% and 0.95% for the years ended March 31, 1998, 1997 and
1996, respectively.
(2) Ratio of net investment income to average net assets prior to partial fee
waivers was 4.60%, 4.43% and 4.86% for the years ended March 31, 1998, 1997
and 1996, respectively.
63
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------------
QUALITY CASH RESERVE PRIME SHARE (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended March 31,
- -------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
<S><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 0.0449 0.0493 0.0402 0.0218
Less Distributions:
Dividends from net investment income and/or
short-term gains (0.0449) (0.0493) (0.0402) (0.0218)
------------ ----------- ----------- ----------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ =========== =========== ==========
Total Return:
Based on net asset value per share 4.59% 5.04% 4.09% 2.20%
Ratios to Average Daily Net Assets:
Expenses 0.91%(1) 0.90%(1) 0.96% 1.06%
Net investment income 4.50%(2) 4.91%(2) 4.04% 2.18%
Supplemental Data:
Net assets at end of period $197,370,530 $156,412,213 $94,592,158 $92,678,440
Number of shares outstanding at end of period 197,369,848 156,412,393 94,591,979 92,678,268
</TABLE>
See Notes to Financial Statements.
64
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each year)
BT ALEX. BROWN CASH RESERVE TREASURY SHARES
- --------------------------------------------------------------------------------
Year ended
March 31,
------------
1998
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00
Income from Investment Operations: ------------
Net investment income 0.0464
Less Distributions:
Dividends from net investment income and/or
short-term gains (0.0464)
------------
Net asset value at end of period $ 1.00
============
Total Return:
Based on net asset value per share 4.74%
Ratios to Average Daily Net Assets:
Expenses 0.59%
Net investment income 4.65%
Supplemental Data:
Net assets at end of period $798,426,658
Number of shares outstanding at end of period 798,354,129
----------
(1) Ratio of expenses to average daily net assets prior to partial fee waiver
was 0.56% for the years ended March 31, 1995 and 1994, respectively.
(2) Ratio of net investment income to average daily net assets prior to partial
fee waivers was 4.08% and 2.53% for the years ended March 31, 1995 and 1994,
respectively.
65
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------------
BT ALEX. BROWN CASH RESERVE TREASURY SHARES (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended March 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
<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 and/or
short-term gains (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%(1) 0.54%(1)
Net investment income 4.54% 4.94% 4.09%(2) 2.55%(2)
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>
See Notes to Financial Statements.
66
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- -------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each year)
BT ALEX. BROWN CASH RESERVE TREASURY INSTITUTIONAL SHARES
- -------------------------------------------------------------------------------
Year ended
March 31,
- -------------------------------------------------------------------------------
1998
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00
-------
Income from Investment Operations:
Net investment income 0.0489
Less Distributions:
Dividends from net investment income and/or
short-term gains (0.0489)
-------
Net asset value at end of period $ 1.00
=======
Total Return:
Based on net asset value per share 5.00%
Ratios to Average Daily Net Assets:
Expenses 0.34%
Net investment income 4.91%
Supplemental Data:
Net assets at end of period $98,780,023
Number of shares outstanding at end of period 98,768,925
- ----------
(1) Ratio of expenses to average daily net assets prior to partial fee waivers
was 0.31% and 0.29% for the years ended March 31, 1995 and 1994,
respectively.
(2) Ratio of net investment income to average daily net assets prior to partial
fee waivers was 4.14% and 2.80% for the years ended March 31, 1995 and 1994,
respectively.
67
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
BT ALEX. BROWN CASH RESERVE TREASURY INSTITUTIONAL SHARES (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended March 31,
- ----------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
<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 0.0481 0.0523 0.0438 0.0282
Less Distributions:
Dividends from net investment income and/or
short-term gains (0.0481) (0.0523) (0.0438) (0.0282)
------- ------- ------- -------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total Return:
Based on net asset value per share 4.92% 5.36% 4.47% 2.86%
Ratios to Average Daily Net Assets:
Expenses 0.36% 0.33% 0.30%(1) 0.27%(1)
Net investment income 4.81% 5.12% 4.15%(2) 2.82%(2)
Supplemental Data:
Net assets at end of period $61,208,770 $51,822,757 $14,051,995 $39,692,848
Number of shares outstanding at end of period 61,199,345 51,813,226 14,046,467 39,688,259
</TABLE>
See Notes to Financial Statements.
68
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each year)
BT ALEX. BROWN CASH RESERVE TAX-FREE SERIES
- --------------------------------------------------------------------------------
Year ended
March 31,
----------
1998
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00
-------
Income from Investment Operations:
Net investment income 0.0306
Less Distributions:
Dividends from net investment income and
short-term gains (0.0306)
-------
Net asset value at end of period $ 1.00
=======
Total Return:
Based on net asset value per share 3.10%
Ratios to Average Daily Net Assets:
Expenses 0.60%
Net investment income 3.05%
Supplemental Data:
Net assets at end of period $841,184,924
Number of shares outstanding at end of period 841,258,030
- -----------------------------------------------------------------------------
69
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
BT ALEX. BROWN CASH RESERVE TAX-FREE SERIES (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended March 31,
--------------------------------------------------------------------
1997 1996 1995 1994
<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 0.0286 0.0318 0.0271 0.0184
Less Distributions:
Dividends from net investment income and
short-term gains (0.0286) (0.0318) (0.0271) (0.0184)
------- ------- ------- -------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total Return:
Based on net asset value per share 2.90% 3.23% 2.75% 1.86%
Ratios to Average Daily Net Assets:
Expenses 0.62% 0.60% 0.57% 0.58%
Net investment income 2.86% 3.16% 2.74% 1.84%
Supplemental Data:
Net assets at end of period $647,212,025 $571,507,000 $475,384,229 $378,859,232
Number of shares outstanding at end of period 647,283,274 571,593,265 475,474,913 378,939,262
</TABLE>
See Notes to Financial Statements.
70
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
BT ALEX. BROWN CASH RESERVE TAX-FREE INSTITUTIONAL SERIES
- --------------------------------------------------------------------------------
June 1, 1997(1)
through
March 31,
---------------
1998
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00
-----------
Income from Investment Operations:
Net investment income 0.0273
Less Distributions:
Dividends from net investment income and
short-term gains (0.0273)
-----------
Net asset value at end of period $ 1.00
===========
Total Return:
Based on net asset value per share 2.76%
Ratios to Average Daily Net Assets:
Expenses .35%(2)
Net investment income 3.29%(2)
Supplemental Data:
Net assets at end of period $76,682,752
Number of shares outstanding at end of period 76,682,889
- ----------
(1) Commencement of operations.
(2) Annualized.
71
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements
NOTE 1--Significant Accounting Policies
BT Alex. Brown Cash Reserve Fund, Inc. ("the Fund") commenced operations
August 11, 1981. The Fund is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end Investment Management Company. Its
objective is to seek as high a level of current income as is consistent with
preservation of capital and liquidity.
The Fund consists of three portfolios: the Prime Series, the Treasury
Series and the Tax-Free Series. The Prime Series consists of five classes: BT
Alex. Brown Cash Reserve Prime Shares ("Prime Shares"), Flag Investors Cash
Reserve Prime Shares Class A ("Flag Investors Class A Shares"), Flag Investors
Cash Reserve Prime Shares Class B ("Flag Investors Class B Shares"), Quality
Cash Reserve Prime Shares ("Quality Cash Shares") and BT Alex. Brown Cash
Reserve Prime Institutional Shares ("Prime Institutional Shares"). The Treasury
Series consists of two classes: BT Alex. Brown Cash Reserve Treasury Shares
("Treasury Shares") and BT Alex. Brown Cash Reserve Treasury Institutional
Shares ("Treasury Institutional Shares"). The Tax-Free Series consists of two
classes: BT Alex. Brown Cash Reserve Tax-Free Shares ("Tax-Free Shares") and BT
Alex. Brown Cash Reserve Tax Free Institutional Shares ("Tax Free Institutional
Shares"). Shareholders can vote only on issues that affect the share classes
they own.
When preparing the Fund's financial statements, management makes estimates
and assumptions to comply with generally accepted accounting principles. These
estimates affect 1) the assets and liabilities that we report at the date of the
financial statements; 2) the contingent assets and liabilities that we disclose
at the date of the financial statements; and 3) the revenues and expenses that
we report for the period. Our estimates could be different from the actual
results. The Fund's significant accounting policies are:
A. Security Valuation--Each portfolio has a weighted average maturity of 90
days or less. The Fund values portfolio securities on the basis of
amortized cost, which approximates market value. Using this method, the
Fund values a security at its cost. The Fund then assumes a constant
amortization to maturity of any discount or premium.
B. Repurchase Agreements--The Prime Series may enter into tri-party
repurchase agreements with broker-dealers and domestic banks. A
repurchase agreement is a short-term investment in which the Fund buys
a debt security that the broker agrees to repurchase at a set time and
price. The third party, which is the broker's custodial bank, holds
the collateral in a separate account until the repurchase agreement
matures. The agreement ensures that the collateral's market value,
including any accrued interest, is sufficient if the broker defaults.
The Fund's access to the collateral may be delayed or limited if the
broker defaults and the value of the collateral declines or if the
broker enters into an insolvency proceeding.
72
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 1--concluded
C. Federal Income Taxes--The Fund determines its distributions according to
income tax regulations, which may be different from generally accepted
accounting principles. As a result, the Fund occasionally makes
reclassifications within its capital accounts to reflect income and
gains that are available for distribution under income tax regulations.
The Fund is organized as a regulated investment company. As long as
it maintains this status and distributes to its shareholders
substantially all of its taxable net investment income and net realized
capital gains, it will be exempt from most, if not all, federal income
and excise taxes. As a result, the Fund has made no provisions for
federal income taxes. Each portfolio is treated as a separate entity for
federal income tax purposes.
D. Security Transactions, Investment Income and Distributions--The Fund
uses the trade date to account for security transactions and the
specific identification method for financial reporting and income tax
purposes to determine the cost of investments sold or redeemed. Interest
income is recorded on an accrual basis and includes the pro rata
amortization of premiums and accretion of discounts when appropriate.
Dividends to shareholders are declared daily. Dividend distributions or
reinvestments are made monthly.
E. Expenses--Operating expenses for each share class are recorded on an
accrual basis, and are charged to that class' operations. If a Fund
expense cannot be directly attributed to a share class, the expense is
prorated among the classes that the expense affects and is based on the
classes' relative net assets.
NOTE 2--Investment Advisory Fees, Transactions with Affiliates and Other Fees
Investment Company Capital Corp. ("ICC"), a subsidiary of Bankers Trust
Corporation, is the investment advisor for all series. Under the terms of the
investment advisory agreement, the Fund pays ICC a fee. This fee is calculated
daily and paid monthly, at the following annual rates based upon the Fund's
aggregate average daily net assets: .30% of the first $500 million, .26% of the
next $500 million, .25% of the next $500 million, .24% of the next $1 billion,
.23% of the next $1 billion and .22% of the amount over $3.5 billion. The Prime
Series pays an additional fee that is calculated daily and paid monthly at the
annual rate of .02% of its average daily net assets. The Tax-Free Series also
pays an additional fee that is calculated daily and paid monthly at the annual
rate of .03% of its average daily net assets.
PNC Institutional Management Corporation ("PIMC") has been the sub-advisor
for the Tax-Free Series through the fiscal year ending March 31, 1998. As
compensation for its subadvisory services, ICC paid PIMC a fee. This fee was
calculated daily and paid monthly, at the following annual rates based upon the
Tax-Free Series' aggregate average daily net assets: .15% of the first $250
million, .13% of the next $250 million, .11% of the next $250 million,
.09% of the next $250 million, .075% of the next $3 billion and .06% of the
amount over $4 billion. For the year ended March 31, 1998, ICC paid PIMC
73
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 2--continued
$1,119,488 for sub-advisory services for the Tax-Free Series. Effective April 1,
1998 sub-advisory services will no longer be provided to the Fund.
As compensation for its accounting services, the Prime Series and Treasury
Series pay ICC an annual fee that is calculated daily and paid monthly from the
two series' average daily net assets. The Prime Series paid $162,781 and the
Treasury Series paid $127,485 for accounting services for the year ended March
31, 1998.
As compensation for its accounting services, the Tax-Free Series pays PFPC
Inc. ("PFPC"), an affiliate of PIMC, an annual fee that is calculated daily and
paid monthly from its average daily net assets. The Tax-Free Series paid $66,777
to PFPC for accounting services for the year ended March 31, 1998. Effective
April 1, 1998 ICCbegan to perform accounting services for the Tax-Free Series.
As compensation for its transfer agent services, the three series pay ICC a
per account fee that is calculated and paid monthly. The Prime Series paid
$2,661,928, the Treasury Series paid $274,991 and the Tax-Free Series paid
$162,558 to ICC for transfer agent services for the year ended March 31, 1998.
As compensation for providing distribution services, the Prime Shares, Flag
Investors Class A Shares, Treasury Shares and the Tax-Free Shares pay ICC
Distributors, Inc. ("ICC Distributors"), which is not related to ICC, an annual
fee equal to 0.25% of these classes' average daily net assets. For the year
ended March 31, 1998, Distribution fees aggregated $6,983,764, $17,244,
$1,700,377 and $1,784,579 for distribution services for the Prime Shares, Flag
Investors Class A Shares, Treasury Shares and Tax-Free Shares, respectively. The
Quality Cash Shares and Flag Investors Class B Shares also pay ICC Distributors
an annual fee for distribution services. This fee is equal to .60% of the
Quality Cash Shares' aggregate average daily net assets or $1,295,907 for the
year ended March 31, 1998 and 1.00% of the Flag Investors Class B Shares'
aggregate average daily net assets or $3,000. Prior to September 1, 1997 Alex
Brown and Sons, Inc. served as the Fund's distributor for the same rate of
compensation and on substantially the same terms as ICC Distributors and earned
$2,742,862 for the Prime Shares, $7,178 for Flag Investors Class A Shares,
$507,956 for Quality Cash Shares, $1,266 for Flag Investors Class B Shares,
$655,375 for Treasury Shares, and $692,546 for Tax Free Shares for the year
ended March 31, 1998.
ICC and ICC Distributors may voluntarily waive or reimburse a portion of
their advisory or distribution fees for the Prime, Treasury and Tax-Free Series
to preserve or enhance each series' performance. These voluntary waivers and
reimbursements are not contractual and could change. Any reimbursements by ICC,
or ICC Distributors are limited to the fees they actually receive for the fiscal
year. ICC did not waive any advisory fees for the year ended March 31, 1998. BT
Alex. Brown voluntarily waived distribution fees of $54,321 for the Quality Cash
Shares for the period ended August 31, 1997 and ICC Distributors waived $81,870
for the period September 1, 1997 to March 31, 1998.
74
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 2--concluded
Effective September 22, 1997, Bankers Trust Company, a subsidiary of
Bankers Trust Corporation, became the Fund's custodian. Prior to September 22,
1997, PNC Bank served as the Fund's custodian. From September 22, 1997 to March
31, 1998, the Prime Series, Treasury Series, and Tax-Free Series paid $162,613,
$43,249, and $31,538 in custody expenses, respectively.
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the year ended
March 31, 1998 was $104,755 for the Prime Series, $32,916 for the Treasury
Series and $27,859 for the Tax-Free Series. The accrued liability at March 31,
1998 was $222,192 for the Prime Series, $79,512 for the Treasury Series and
$69,283 for the Tax-Free Series.
NOTE 3--Capital Stock and Share Information
The Fund is authorized to issue up to 6.4 billion shares of $.001 par value
capital stock (3.55 billion Prime Series, 1.5 billion Treasury Series, 1 billion
Tax-Free Series and 350 million undesignated). Transactions in shares of the
Fund were as follows:
March 31, 1998 March 31, 1997
-------------- --------------
Prime Series:
Sold:
Prime Shares 23,206,115,785 22,263,288,298
Flag Investors Class A Shares 6,559,775 9,331,912
Flag Investors Class B Shares 336,592 328,144
Institutional Prime Shares 4,625,290,052 912,825,877
Quality Cash Shares 1,179,123,143 1,001,597,821
Issued as reinvestment of dividends:
Prime Shares 129,425,606 113,931,978
Flag Investors Class A Shares 326,541 281,420
Flag Investors Class B Shares 8,133 1,264
Institutional Prime Shares 9,131,786 3,084,567
Quality Cash Shares 9,723,053 8,045,624
Redeemed:
Prime Shares (22,716,536,205) (22,218,380,783)
Flag Investors Class A Shares (5,671,105) (9,068,618)
Flag Investors Class B Shares (387,440) (112,510)
Institutional Prime Shares (4,434,262,192) (851,798,212)
Quality Cash Shares (1,159,238,038) (968,685,990)
--------------- ---------------
Net increase 849,945,486 264,670,792
=============== ===============
75
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
NOTE 3--concluded
March 31, 1998 March 31, 1997
-------------- --------------
Treasury Series:
Sold:
Treasury Shares 3,641,511,991 4,075,840,415
Institutional Treasury Shares 590,751,899 458,391,680
Issued as reinvestment of dividends:
Treasury Shares 30,209,607 29,377,891
Institutional Treasury Shares 2,007,274 1,597,049
Redeemed:
Treasury Shares (3,551,758,854) (4,093,588,948)
Institutional Treasury Shares (555,189,594) (450,602,609)
--------------- --------------
Net increase 157,532,323 21,015,478
=============== ==============
Tax-Free Series:
Sold:
Tax Free Shares 5,853,542,023 5,222,168,283
Institutional Tax Free Shares 730,445,736 --
Issued as reinvestment of dividends:
Tax Free Shares 20,778,337 16,162,636
Institutional Tax Free Shares 276,010 --
Redeemed:
Tax Free Shares (5,680,345,603) (5,162,640,910)
Institutional Tax Free Shares (654,038,858) --
-------------- --------------
Net increase 270,657,645 75,690,009
============== ==============
NOTE 4--Net Assets
<TABLE>
<CAPTION>
Prime Treasury Tax-Free
Series Series Series
-------------- ------------ ------------
<S><C>
Paid-in capital $3,717,402,132 $897,118,866 $917,940,919
Undistributed net investment income 8,488 -- --
Undistributed net realized gain/(loss)
on sales of investments (1,520) 87,815 (73,243)
-------------- ------------ ------------
$3,717,409,100 $897,206,681 $917,867,676
============== ============ ============
</TABLE>
NOTE 5--Shareholder Meeting
Alex. Brown Incorporated, which was the parent corporation of the Fund's
investment advisor, merged into a subsidiary of Bankers Trust Corporation on
September 1, 1997. Due to the change in control of Alex. Brown Incorporated,
the BT Alex. Brown Cash Reserve Fund held a special meeting of its shareholders
on August 14, 1997. During the meeting, shareholders approved a new Investment
Advisory Agreement between the Fund and each of its Series, and ICC and a
new Sub-Advisory Agreement among the Tax-Free Series, ICC, and PIMC. The
new agreements are substantially the same as the former agreements. In
addition, shareholders elected the following Directors: James J. Cunnane,
Richard T. Hale, John F. Kroeger, Louis E. Levy, Eugene J. McDonald, Rebecca W.
Rimel, Truman T. Semans, and Carl W. Vogt.
76
<PAGE>
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
BT Alex. Brown Cash Reserve Fund, Inc.
We have audited the accompanying statements of net assets of BT Alex. Brown
Cash Reserve Fund, Inc. (consisting of the Prime, Treasury and Tax-Free Series)
as of March 31, 1998, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
March 31, 1998 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective Series comprising the BT Alex. Brown Cash Reserve Fund,
Inc. as of March 31, 1998, and the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended and their financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
COOPERS &LYBRAND L.L.P.
Philadelphia, Pennsylvania
May 1, 1998
77
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Statement of Net Assets March 31, 1998
Rating(g)
-------------- Par
S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Commercial Paper - 84.7%(a)
Automotive Finance - 3.8%
PACCAR Financial Corp.
5.35% 7/27/98 A-1+ P-1 $ 5,000 $ 4,913,062
Toyota Motor Credit Corp.
5.46% 5/1/98 A-1+ P-1 20,000 19,909,000
5.50% 5/4/98 A-1+ P-1 54,750 54,474,787
5.51% 5/6/98 A-1+ P-1 30,000 29,839,292
5.46% 5/8/98 A-1+ P-1 15,000 14,915,825
5.50% 5/14/98 A-1+ P-1 15,500 15,398,174
------------
139,450,140
------------
Banks - 0.8%
Republic New York Corp.
5.41% 5/1/98 A-1+ P-1 30,000 29,864,750
------------
29,864,750
------------
Beverages- Soft Drinks - 1.7%
Coca-Cola Co.
5.39% 4/3/98 A-1+ P-1 25,000 24,992,514
5.38% 4/21/98 A-1+ P-1 20,000 19,940,222
5.40% 4/23/98 A-1+ P-1 20,000 19,934,000
------------
64,866,736
------------
Chemicals, General - 2.9%
E.I. duPont de Nemours and Co.
5.34% 4/7/98 A-1+ P-1 15,000 14,986,650
5.34% 4/8/98 A-1+ P-1 25,000 24,974,042
5.46% 5/11/98 A-1+ P-1 25,000 24,848,333
5.44% 6/25/98 A-1+ P-1 25,000 24,678,889
5.345% 8/14/98 A-1+ P-1 20,000 19,599,125
------------
109,087,039
------------
Chemicals, Specialty - 0.8%
Lubrizol
5.50% 4/1/98 A-1+ P-1 30,000 30,000,000
------------
30,000,000
------------
Computer & Office Equipment - 1.4%
Pitney Bowes Credit Corp.
5.43% 4/10/98 A-1+ P-1 30,000 29,959,275
5.48% 5/14/98 A-1+ P-1 23,500 23,346,179
------------
53,305,454
------------
4
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Rating(g)
-------------- Par
S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Commercial Paper (continued)
Consumer Products - 3.6%
Eastman Kodak Co.
5.52% 4/10/98 A-1+ P-1 $15,000 $ 14,979,300
5.52% 4/14/98 A-1+ P-1 15,000 14,970,100
5.52% 4/21/98 A-1+ P-1 15,000 14,954,000
5.52% 4/22/98 A-1+ P-1 15,000 14,951,700
5.52% 4/23/98 A-1+ P-1 23,600 23,520,389
5.48% 5/5/98 A-1+ P-1 20,000 19,896,489
5.51% 5/12/98 A-1+ P-1 15,000 14,905,871
5.50% 5/21/98 A-1+ P-1 15,000 14,885,417
------------
133,063,266
------------
Electrical & Electronics - 5.7%
Emerson Electric Co.
5.50% 4/13/98 A-1+ P-1 40,000 39,926,667
5.49% 4/17/98 A-1+ P-1 25,000 24,939,000
5.48% 4/20/98 A-1+ P-1 22,000 21,936,372
Motorola Inc.
5.42% 4/6/98 A-1+ P-1 20,000 19,984,944
5.48% 5/12/98 A-1+ P-1 25,000 24,843,972
5.48% 5/21/98 A-1+ P-1 40,000 39,695,555
5.47% 6/25/98 A-1+ P-1 40,000 39,483,389
------------
210,809,899
------------
Electric Utility - 1.8%
Citizens Utilities Co.
5.48% 6/19/98 A-1+ P-1 20,000 19,759,489
Duke Energy Co.
5.43% 4/7/98 A-1+ P-1 25,000 24,977,375
5.47% 5/28/98 A-1+ P-1 20,600 20,421,587
------------
65,158,451
------------
Entertainment - 1.5%
Walt Disney Co.
5.63% 4/23/98 A-1 P-1 25,000 24,913,986
5.44% 7/16/98 A-1 P-1 30,000 29,519,467
------------
54,433,453
------------
Finance, Consumer - 4.1%
USAA Capital Corp.
5.41% 4/7/98 A-1+ P-1 15,000 14,986,475
5.46% 4/24/98 A-1+ P-1 25,000 24,912,792
5.44% 5/4/98 A-1+ P-1 25,000 24,875,333
5.42% 5/12/98 A-1+ P-1 30,000 29,814,817
5.47% 5/12/98 A-1+ P-1 20,000 19,781,200
5.47% 6/19/98 A-1+ P-1 15,000 14,819,946
5.47% 7/17/98 A-1+ P-1 25,000 24,593,549
------------
153,784,112
------------
5
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Statement of Net Assets (continued) March 31, 1998
Rating(g)
-------------- Par
S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Commercial Paper (continued)
Finance, Diversified - 3.9%
General Electric Capital Corp.
5.44% 4/14/98 A-1+ P-1 $20,000 $ 19,960,711
5.44% 4/21/98 A-1+ P-1 30,000 29,909,333
5.56% 4/23/98 A-1+ P-1 15,000 14,949,033
5.35% 5/12/98 A-1+ P-1 15,212 15,119,312
5.35% 6/19/98 A-1+ P-1 24,400 24,113,537
5.40% 7/6/98 A-1+ P-1 25,000 24,640,000
5.46% 7/9/98 A-1+ P-1 16,883 16,629,502
------------
145,321,428
------------
Food - 5.0%
Campbell Soup Co.
5.54% 4/17/98 A-1+ P-1 4,000 3,990,151
5.35% 10/5/98 A-1+ P-1 35,000 34,027,340
Cargill, Inc.
5.37% 4/23/98 A-1+ P-1 10,000 9,967,183
5.52% 5/5/98 A-1+ P-1 20,000 19,895,733
5.46% 5/12/98 A-1+ P-1 25,000 24,844,542
5.44% 5/26/98 A-1+ P-1 40,000 39,667,785
5.46% 6/2/98 A-1+ P-1 15,000 14,858,950
5.45% 6/10/98 A-1+ P-1 25,000 24,735,069
Kellogg Co.
5.51% 4/28/98 A-1+ P-1 12,364 12,312,906
------------
184,299,659
------------
Household Products - 3.3%
Colgate-Palmolive Co.
5.49% 4/30/98 A-1 P-1 35,000 34,845,212
Proctor & Gamble Co.
5.48% 5/4/98 A-1+ P-1 40,000 39,799,067
5.35% 6/2/98 A-1+ P-1 25,000 24,769,653
5.35% 6/26/98 A-1+ P-1 25,000 24,680,486
------------
124,094,418
------------
Insurance, Brokerage - 2.6%
Marsh & McLennan Companies Inc.
5.44% 6/11/98 A-1+ P-1 20,000 19,785,422
5.47% 7/23/98 A-1+ P-1 15,000 14,742,454
5.39% 9/8/98 A-1+ P-1 20,000 19,520,889
5.43% 9/16/98 A-1+ P-1 15,000 14,619,900
5.28% 10/20/98 A-1+ P-1 30,000 29,110,078
------------
97,778,743
------------
6
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Rating(g)
-------------- Par
S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Commercial Paper (continued)
Insurance, Property & Casualty - 3.9%
A.I. Credit Corp.
5.44% 4/9/98 A-1+ P-1 $15,000 $ 14,981,867
5.43% 5/6/98 A-1+ P-1 50,000 49,736,042
5.35% 5/11/98 A-1+ P-1 30,000 29,821,667
5.33% 6/12/98 A-1+ P-1 20,000 19,786,800
5.36% 7/7/98 A-1+ P-1 30,000 29,566,733
------------
143,893,109
------------
Integrated Oil - 6.3%
Amoco Co.
5.41% 4/7/98 A-1+ P-1 25,000 24,977,458
5.40% 4/16/98 A-1+ P-1 30,000 29,932,500
5.37% 4/27/98 A-1+ P-1 30,000 29,883,650
5.40% 5/12/98 A-1+ P-1 30,000 29,815,500
5.42% 6/16/98 A-1+ P-1 25,000 24,713,944
5.43% 7/21/98 A-1+ P-1 20,000 19,665,150
Shell Oil Co.
5.41% 4/9/98 A-1+ P-1 50,000 49,939,889
5.45% 6/12/98 A-1+ P-1 25,000 24,727,500
------------
233,655,591
------------
Machinery & Tools - 1.5%
Dover Corp.
5.48% 4/17/98 A-1 NR 17,500 17,457,378
5.53% 4/21/98 A-1 NR 20,000 19,938,556
Snap-On Incorporated
5.48% 4/9/98 A-1+ P-1 20,000 19,975,644
------------
57,371,578
------------
Natural Gas - 0.7%
Consolidated Natural Gas
5.50% 4/17/98 A-1+ P-1 25,000 24,938,889
------------
24,938,889
------------
Oil Transportation - 2.8%
Colonial Pipeline Co.
5.50% 4/6/98 A-1+ P-1 15,000 14,988,542
5.62% 4/22/98 A-1+ P-1 15,000 14,950,825
5.48% 4/28/98 A-1+ P-1 13,000 12,946,570
5.52% 5/27/98 A-1+ P-1 15,000 14,871,200
5.63% 6/10/98 A-1+ P-1 13,000 12,857,686
5.47% 6/23/98 A-1+ P-1 19,000 18,760,384
5.62% 6/29/98 A-1+ P-1 15,000 14,791,592
------------
104,166,799
------------
7
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Statement of Net Assets (continued) March 31, 1998
Rating(g)
-------------- Par
S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Commercial Paper (continued)
Paper - 4.5%
Kimberly-Clark Corp.
5.51% 4/29/98 A-1+ P-1 $50,500 $ 50,283,579
5.50% 4/30/98 A-1+ P-1 27,300 27,179,046
Minnesota Mining & Manufacturing Co.
5.38% 4/20/98 A-1+ P-1 38,910 38,799,412
5.35% 5/19/98 A-1+ P-1 20,000 19,857,333
5.35% 5/20/98 A-1+ P-1 30,000 29,781,542
------------
165,900,912
------------
Pharmaceuticals - 6.9%
Abbott Laboratories
5.48% 4/7/98 A-1+ P-1 30,000 29,972,600
5.47% 4/8/98 A-1+ P-1 36,000 35,961,710
Merck & Co., Inc.
5.38% 4/24/98 A-1+ P-1 75,000 74,742,208
Pfizer Inc.
5.46% 5/4/98 A-1+ P-1 48,000 47,759,760
Schering-Plough Corp.
5.42% 4/14/98 A-1+ P-1 11,835 11,811,836
5.36% 5/20/98 A-1+ P-1 8,000 7,941,636
Warner-Lambert Co.
5.36% 7/24/98 A-1+ P-1 50,000 49,151,333
------------
257,341,083
------------
Publishing - 1.5%
Gannett Co., Inc.
5.45% 4/9/98 A-1+ P-1 20,000 19,975,778
5.50% 4/14/98 A-1+ P-1 20,000 19,960,278
Times Mirror Co.
5.52% 6/5/98 A-1 P-1 16,000 15,840,533
------------
55,776,589
------------
Structured Finance - 9.0%
CIESCO, L.P.
5.43% 4/8/98 A-1+ P-1 20,000 19,978,883
5.50% 4/17/98 A-1+ P-1 25,000 24,938,889
5.43% 4/29/98 A-1+ P-1 30,000 29,873,300
5.50% 5/15/98 A-1+ P-1 15,000 14,899,167
5.47% 5/15/98 A-1+ P-1 20,000 19,866,289
5.47% 5/22/98 A-1+ P-1 15,000 14,883,762
5.50% 5/28/98 A-1+ P-1 25,000 24,782,292
8
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Rating(g)
-------------- Par
S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Commercial Paper (continued)
Structured Finance (concluded)
Corporate Receivables Corp.
5.45% 4/9/98 A-1 P-1 $ 25,000 $ 24,969,722
5.48% 5/13/98 A-1 P-1 20,000 19,872,133
Corporate Asset Funding Co., Inc.
5.43% 4/08/98 A-1+ P-1 35,000 34,963,104
5.40% 4/13/98 A-1+ P-1 15,000 14,973,000
5.44% 4/23/98 A-1+ P-1 25,000 24,916,889
5.43% 4/24/98 A-1+ P-1 22,250 22,172,811
5.45% 4/28/98 A-1+ P-1 20,000 19,918,250
5.50% 6/11/98 A-1+ P-1 25,000 24,728,819
--------------
335,737,310
--------------
Telephone - 4.7%
Ameritech Capital Funding Corp.
5.50% 4/9/98 A-1+ P-1 15,000 14,981,667
5.40% 4/24/98 A-1+ P-1 15,000 14,948,250
5.45% 4/27/98 A-1+ P-1 20,000 19,921,278
Ameritech Corp.
5.395% 6/9/98 A-1+ P-1 25,000 24,741,490
AT&T Corp.
5.50% 4/8/98 A-1+ P-1 20,000 19,978,611
Bell Atlantic Network Funding Corp.
5.52% 4/22/98 A-1+ P-1 20,000 19,935,600
Bell Atlantic Financial Services Corp.
5.51% 5/7/98 A-1 P-1 15,000 14,917,350
SBC Communications Inc.
5.33% 4/17/98 A-1+ P-1 20,000 19,952,622
5.44% 5/27/98 A-1+ P-1 25,000 24,788,444
--------------
174,165,312
--------------
Total Commercial Paper 3,148,264,720
--------------
Variable Rate Notes - 3.3%
Associates Corp. Master Note
5.497%(b) 6/1/98 A-1+ P-1 75,000 75,000,000
Coca-Cola Co. Master Note
5.417%(b) 9/9/98 A-1+ P-1 50,000 50,000,000
-------- --------------
Total Variable Rate Notes 125,000 125,000,000
-------- --------------
9
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Statement of Net Assets (concluded) March 31, 1998
Rating(g)
-------------- Par
S&P Moody's (000) Value
- --------------------------------------------------------------------------------
Federal Home Loan Bank - 3.1%
FHLB
5.43% 5/6/98 AAA -- $ 20,000 $ 19,894,417
5.72% 6/30/98 AAA -- 20,000 20,000,000
5.24% 7/17/98 AAA -- 34,580 34,041,436
5.70% 3/17/99 AAA -- 20,000 20,000,000
5.65% 3/30/99 AAA -- 20,000 20,000,000
-------- --------------
Total Federal Home Loan Bank 114,580 113,935,853
-------- --------------
Federal National Mortgage Association - 3.6%
FNMA
Note
5.61% 5/14/98 -- P-1 20,000 20,000,000
5.74% 6/9/98 -- P-1 15,000 15,000,000
5.28% 7/13/98 -- P-1 25,000 24,622,333
5.35% 7/16/98 -- P-1 30,000 30,000,000
5.37% 8/12/98 -- P-1 20,000 20,000,000
5.47% 9/14/98 -- P-1 25,000 25,000,000
-------- --------------
Total Federal National Mortgage Association 135,000 134,622,333
-------- --------------
Repurchase Agreements - 5.4%(c)
Goldman, Sachs & Co.
5.86% 4/1/98(d) -- -- 100,900 100,900,000
Morgan Stanley & Co.
5.80% 4/1/98(e) -- -- 100,000 100,000,000
-------- --------------
Total Repurchase Agreements 200,900 200,900,000
-------- --------------
TOTAL INVESTMENTS - 100.1% $3,722,722,906(f)
LIABILITIES IN EXCESS OF OTHER ASSETS, NET - (0.1%) (5,313,806)
--------------
NET ASSETS - 100.0% $3,717,409,100
==============
10
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Value
- --------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption Price Per:
Prime Share
($3,164,537,551 / 3,164,529,071 shares outstanding) $1.00
=====
Flag Investors Class A Share
($7,736,785 / 7,736,522 SHARES OUTSTANDING) $1.00
=====
Flag Investors Class B Share
($184,382 / 184,382 shares outstanding) $1.00
=====
Institutional Prime Share
($317,971,693 / 317,971,413 shares outstanding) $1.00
=====
Quality Cash Reserve Prime Share
($226,978,689 / 226,978,007 shares outstanding) $1.00
=====
- ------------
(a) Most commercial paper is traded on a discount basis. In such cases, the
interest rate shown represents the yield at time of purchase by the Fund.
(b) Master note is payable upon demand by the Fund upon no more than five days'
notice. Interest rates on master notes are redetermined weekly. Rates shown
are the rates in effect on March 31, 1998.
(c) Collateral on Tri-Party repurchase agreements is taken into possession by
the Funds upon entering into the Tri-Party repurchase agreement. The
collateral is marked to market daily to insure market value as being at
least 102 percent of the resale price of the repurchase agreement.
(d) Dated 3/31/98 to be repurchased on 4/1/98, collateralized by U.S. Treasury
Notes with a market value of $102,918,187.
(e) Dated 3/31/98 to be repurchased on 4/1/98, collateralized by U.S. Treasury
Notes with a market value of $102,178,538.
(f) Aggregate cost for financial reporting and federal tax purposes.
(g) The credit ratings are not covered by the report of independent auditors.
MOODY'S RATINGS:
Aaa Bonds that are judged to be of the best quality.
P-1 Commercial paper bearing this designation is of the best quality.
S&P RATINGS:
AAA Obligations that are of the highest quality.
A-1 Commercial paper that has a strong degree of safety regarding
timely payment
Those issues determined to possess very strong safety
characteristics are denoted with a plus (+) sign.
A detailed description of the above ratings can be found in the
Fund's Statement of Additional Information.
See Notes to Financial Statements.
11
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Statement of Operations
For the year ended March 31, 1998
- --------------------------------------------------------------------------------
Investment Income:
Interest income $184,011,736
------------
Expenses:
Investment advisory fees 8,582,839
Distribution fee 8,299,915
Transfer agent fees 2,661,928
Custodian fees 349,351
Directors' fees 232,075
Registration fees 1,001,689
Miscellaneous 933,217
------------
Total expenses 22,061,014
Less: Fees waived (136,191)
------------
Net expenses 21,924,823
------------
Net investment income 162,086,913
------------
Net realized gain (loss) from security transactions --
------------
Net increase in net assets resulting from operations $162,086,913
============
See Notes to Financial Statements.
12
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets March 31, 1998
- --------------------------------------------------------------------------------
Year ended Year ended
March 31, March 31,
---------- ----------
1998 1997
Increase/(Decrease) in Net Assets
Operations:
Net investment income $ 162,086,913 $ 132,679,566
Net realized gain on sales of
investments -- 13,047
-------------- --------------
Net increase in net assets resulting
from operations 162,086,913 132,692,613
Distributions to Shareholders From:
Net investment income:
BT Alex. Brown Cash Reserve Prime Shares (138,011,807) (119,826,842)
BT Alex. Brown Cash Reserve Prime
Institutional Shares (13,656,968) (4,256,297)
Flag Investors Class A Shares (341,197) (295,562)
Flag Investors Class B Shares (12,545) (1,260)
Quality Cash Reserve Prime Shares (10,064,396) (8,299,605)
-------------- --------------
Total distributions (162,086,913) (132,679,566)
Capital Share Transactions, net 849,945,486 264,670,792
-------------- --------------
Total increase in net assets 849,945,486 264,683,839
Net Assets:
Beginning of period 2,867,463,614 2,602,779,775
-------------- --------------
End of period $3,717,409,100 $2,867,463,614
============== ==============
See Notes to Financial Statements.
13
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
PRIME SHARES
- --------------------------------------------------------------------------------
Year ended
March 31,
----------
1998
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00
--------------
Income from Investment Operations:
Net investment income 0.0494
Less Distributions:
Dividends from net investment income
and/or short-term gains (0.0494)
--------------
Net asset value at end of period $ 1.00
==============
Total Return:
Based on net asset value per share 5.05%
Ratios to Average Daily Net Assets:
Expenses 0.67%
Net investment income 4.94%
Supplemental Data:
Net assets at end of period $3,164,537,551
Number of shares outstanding at end of period 3,164,529,071
14
<PAGE>
PRIME SHARES
- --------------------------------------------------------------------------------
PRIME SHARES (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended March 31,
----------------------------------------------------------------------------
1997 1996 1995 1994
<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
and/or short-term gains (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:
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% 5.21% 4.46% 2.62%
Supplemental Data:
Net assets at end of period $2,545,532,365 $2,386,681,216 $1,472,079,739 $1,350,334,979
Number of shares outstanding at end of period 2,545,523,885 2,386,684,392 1,472,077,488 1,350,332,916
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS A
- --------------------------------------------------------------------------------
Year ended
March 31,
----------
1998
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00
----------
Income from Investment Operations:
Net investment income 0.0494
Less Distributions:
Dividends from net investment income
and/or short-term gains (0.0494)
----------
Net asset value at end of period $ 1.00
==========
Total Return:
Based on net asset value per share 5.05%
Ratios to Average Net Assets:
Expenses 0.67%
Net investment income 4.94%
Supplemental Data:
Net assets at end of period $7,736,785
Number of shares outstanding at end of period 7,736,522
16
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS A (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended March 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994
<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
and/or short-term gains (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:
Based on net asset value per share 4.88% 5.36% 4.51% 2.65%
Ratios to Average 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 $6,521,574 $5,976,831 $7,726,696 $18,116,648
Number of shares outstanding at end of period 6,521,310 5,976,824 7,726,698 18,116,633
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS B
- --------------------------------------------------------------------------------
Year ended
March 31,
----------
1998
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00
--------
Income from Investment Operations:
Net investment income 0.0418
Less Distributions:
Dividends from net investment income
and/or short-term gains (0.0418)
--------
Net asset value at end of period $ 1.00
========
Total Return:
Based on net asset value per share 4.27%
Ratios to Average Net Assets:
Expenses 1.42%
Net investment income 4.18%
Supplemental Data:
Net assets at end of period $184,382
Number of shares outstanding at end of period 184,382
- ----------
(1) Commencement of operations.
(2) Annualized.
18
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS B (continued)
- --------------------------------------------------------------------------------
April 3, 1995(1)
Year ended through
March 31, March 31,
---------- ----------------
1997 1996
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
and/or short-term gains (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%
Ratios to Average 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
See Notes to Financial Statements.
19
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
PRIME INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
Year ended
March 31,
----------
1998
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00
------------
Income from Investment Operations:
Net investment income 0.0519
Less Distributions:
Dividends from net investment income
and/or short-term gains (0.0519)
------------
Net asset value at end of period $ 1.00
============
Total Return:
Based on net asset value per share 5.31%
Ratios to Average Daily Net Assets:
Expenses 0.42%
Net investment income 5.22%
Supplemental Data:
Net assets at end of period $317,971,693
Number of shares outstanding at end of period 317,971,413
20
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
PRIME INSTITUTIONAL SHARES (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended March 31,
-----------------------------------------------------------------------------
1997 1996 1995 1994
<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 0.0503 0.0548 0.0472 0.0294
Less Distributions:
Dividends from net investment income
and/or short-term gains (0.0503) (0.0548) (0.0472) (0.0294)
------------ ----------- ----------- -----------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ =========== =========== ===========
Total Return:
Based on net asset value per share 5.15% 5.62% 4.82% 2.98%
Ratios to Average Daily Net Assets:
Expenses 0.38% 0.35% 0.36% 0.30%
Net investment income 5.04% 5.32% 4.57% 2.94%
Supplemental Data:
Net assets at end of period $117,812,047 $53,699,315 $11,904,716 $23,437,449
Number of shares outstanding at end of period 117,811,768 53,699,535 11,904,663 23,437,512
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
QUALITY CASH RESERVE PRIME SHARES
- --------------------------------------------------------------------------------
Year ended
March 31,
----------
1998
Per Share Operating Performance:
Net asset value at beginning of period $ 1.00
------------
Income from Investment Operations:
Net investment income 0.0465
Less Distributions:
Dividends from net investment income
and/or short-term gains (0.0465)
------------
Net asset value at end of period $ 1.00
============
Total Return:
Based on net asset value per share 4.75%
Ratios to Average Net Assets:
Expenses 0.96%(1)
Net investment income 4.66%(2)
Supplemental Data:
Net assets at end of period $226,978,689
Number of shares outstanding at end of period 226,978,007
- ------------
(1) Ratio of expenses to average net assets prior to partial fee waivers was
1.02%, 0.98% and 0.95% for the years ended March 31, 1998, 1997 and 1996,
respectively.
(2) Ratio of net investment income to average net assets prior to partial fee
waivers was 4.60%, 4.43% and 4.86% for the years ended March 31, 1998, 1997
and 1996, respectively.
22
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
QUALITY CASH RESERVE PRIME SHARES (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended March 31,
--------------------------------------------------------------------------------
1997 1996 1995 1994
<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 0.0449 0.0493 0.0402 0.0218
Less Distributions:
Dividends from net investment income
and/or short-term gains (0.0449) (0.0493) (0.0402) (0.0218)
------------ ------------ ----------- -----------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ =========== ===========
Total Return:
Based on net asset value per share 4.59% 5.04% 4.09% 2.20%
Ratios to Average Net Assets:
Expenses 0.91%(1) 0.90%(1) 0.96% 1.06%
Net investment income 4.50%(2) 4.91%(2) 4.04% 2.18%
Supplemental Data:
Net assets at end of period $197,370,530 $156,412,213 $94,592,158 $92,678,440
Number of shares outstanding at end of period 197,369,848 156,412,393 94,591,979 92,678,268
</TABLE>
See Notes to Financial Statements.
23
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Notes to Financial Statements
NOTE 1--Significant Accounting Policies
BT Alex. Brown Cash Reserve Fund, Inc. ("the Fund") commenced operations
August 11, 1981. The Fund is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end Investment Management Company. Its
objective is to seek as high a level of current income as is consistent with
preservation of capital and liquidity.
The Fund consists of three portfolios: the Prime Series, the Treasury
Series and the Tax-Free Series. The Prime Series consists of five classes: BT
Alex. Brown Cash Reserve Prime Shares ("Prime Shares"), Flag Investors Cash
Reserve Prime Shares Class A ("Flag Investors Class A Shares"), Flag Investors
Cash Reserve Prime Shares Class B ("Flag Investors Class B Shares"), Quality
Cash Reserve Prime Shares ("Quality Cash Shares") and BT Alex. Brown Cash
Reserve Prime Institutional Shares ("Prime Institutional Shares"). The Treasury
Series consists of two classes: BT Alex. Brown Cash Reserve Treasury Shares
("Treasury Shares") and BT Alex. Brown Cash Reserve Treasury Institutional
Shares ("Treasury Institutional Shares"). The Tax-Free Series consists of two
classes: BT Alex. Brown Cash Reserve Tax-Free Shares ("Tax-Free Shares") and BT
Alex. Brown Cash Reserve Tax Free Institutional Shares ("Tax Free Institutional
Shares"). Shareholders can vote only on issues that affect the share classes
they own.
When preparing the Fund's financial statements, management makes estimates
and assumptions to comply with generally accepted accounting principles. These
estimates affect 1) the assets and liabilities that we report at the date of the
financial statements; 2) the contingent assets and liabilities that we disclose
at the date of the financial statements; and 3) the revenues and expenses that
we report for the period. Our estimates could be different from the actual
results. The Fund's significant accounting policies are:
A. Security Valuation--Each portfolio has a weighted average maturity of 90
days or less. The Fund values portfolio securities on the basis of
amortized cost, which approximates market value. Using this method, the
Fund values a security at its cost. The Fund then assumes a constant
amortization to maturity of any discount or premium.
B. Repurchase Agreements--The Prime Series may enter into tri-party
repurchase agreements with broker-dealers and domestic banks. A
repurchase agreement is a short-term investment in which the Fund buys
a debt security that the broker agrees to repurchase at a set time and
price. The third party, which is the broker's custodial bank, holds
the collateral in a separate account until the repurchase agreement
matures. The agreement ensures that the collateral's market value,
including any accrued interest, is sufficient if the broker defaults.
The Fund's access to the collateral may be delayed or limited if the
broker defaults and the value of the collateral declines or if the
broker enters into an insolvency proceeding.
24
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 1--concluded
C. Federal Income Taxes--The Fund determines its distributions according to
income tax regulations, which may be different from generally accepted
accounting principles. As a result, the Fund occasionally makes
reclassifications within its capital accounts to reflect income and
gains that are available for distribution under income tax regulations.
The Fund is organized as a regulated investment company. As long as
it maintains this status and distributes to its shareholders
substantially all of its taxable net investment income and net realized
capital gains, it will be exempt from most, if not all, federal income
and excise taxes. As a result, the Fund has made no provisions for
federal income taxes. Each portfolio is treated as a separate entity for
federal income tax purposes.
D. Security Transactions, Investment Income and Distributions--The Fund
uses the trade date to account for security transactions and the
specific identification method for financial reporting and income tax
purposes to determine the cost of investments sold or redeemed. Interest
income is recorded on an accrual basis and includes the pro rata
amortization of premiums and accretion of discounts when appropriate.
Dividends to shareholders are declared daily. Dividend distributions or
reinvestments are made monthly.
E. Expenses--Operating expenses for each share class are recorded on an
accrual basis and are charged to that class' operations. If a Fund
expense cannot be directly attributed to a share class, the expense is
prorated among the classes that the expense affects and is based on the
classes' relative net assets.
NOTE 2--Investment Advisory Fees, Transactions with Affiliates and Other Fees
Investment Company Capital Corp. ("ICC"), a subsidiary of Bankers Trust
Corporation, is the investment advisor for all series. Under the terms of the
investment advisory agreement, the Fund pays ICC a fee. This fee is calculated
daily and paid monthly, at the following annual rates based upon the Fund's
aggregate average daily net assets: .30% of the first $500 million, .26% of the
next $500 million, .25% of the next $500 million, .24% of the next $1 billion,
.23% of the next $1 billion and .22% of the amount over $3.5 billion. The Prime
Series pays an additional fee that is calculated daily and paid monthly at the
annual rate of .02% of its average daily net assets. The Tax-Free Series also
pays an additional fee that is calculated daily and paid monthly at the annual
rate of .03% of its average daily net assets.
PNC Institutional Management Corporation ("PIMC") is the sub-advisor for
the Tax-Free Series. As compensation for its subadvisory services, ICC pays PIMC
a fee. This fee is calculated daily and paid monthly, at the following annual
rates based upon the Tax-Free Series' aggregate average daily net assets: .15%
of the first $250 million, .13% of the next $250 million, .11% of the next $250
million, .09% of the next $250 million, .075% of the next $3 billion and .06% of
the amount over $4 billion. For the year ended
25
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 2--continued
March 31, 1998, ICC paid PIMC $1,119,488 for sub-advisory services for the
Tax-Free Series. Effective April 1, 1998 sub-advisory services will no longer be
provided to the Fund.
As compensation for its accounting services, the Prime Series and Treasury
Series pay ICC an annual fee that is calculated daily and paid monthly from the
two series' average daily net assets. The Prime Series paid $162,781 and the
Treasury Series paid $127,485 to ICC for accounting services for the year ended
March 31, 1998.
As compensation for its accounting services, the Tax-Free Series pays PFPC
Inc. ("PFPC"), an affiliate of PIMC, an annual fee that is calculated daily and
paid monthly from its average daily net assets. The Tax-Free Series paid $66,777
to PFPC for accounting services for the year ended March 31, 1998. Effective
April 1, 1998 ICC began to perform accounting services for the Tax-Free Series.
As compensation for its transfer agent services, the three series pay ICC a
per account fee that is calculated and paid monthly. The Prime Series paid
$2,661,928, the Treasury Series paid $274,991 and the Tax-Free Series paid
$162,558 to ICC for transfer agent services for the year ended March 31, 1998.
As compensation for providing distribution services, the Prime Shares, Flag
Investors Class A Shares, Treasury Shares and the Tax-Free Shares pay ICC
Distributors, Inc. ("ICC Distributors"), which is not related to ICC an annual
fee equal to 0.25% of these classes' average daily net assets. For the year
ended March 31, 1998, distribution fees aggregated $6,983,764, $17,244,
$1,700,377 and $1,784,579 for distribution services for the Prime Shares, Flag
Investors Class A Shares, Treasury Shares and Tax-Free Shares, respectively. The
Quality Cash Shares and Flag Investors Class B Shares also pay ICC Distributors
an annual fee for distribution services. This fee is equal to .60% of the
Quality Cash Shares' aggregate average daily net assets or $1,295,907 for the
year ended March 31, 1998 and 1.00% of the Flag Investors Class B Shares'
aggregate average daily net assets or $3,000 for the year ended March 31, 1998.
Prior to September 1, 1997 Alex Brown and Sons, Inc. served as the Fund's
distributor for the same rate of compensation and on substantially the same
terms as ICC Distributors and earned $2,742,862 for the Prime Shares, $7,178 for
Flag Investors Class A Shares, $507,956 for Quality Cash Shares, $1,266 for Flag
Investors Class B Shares, $655,375 for Treasury Shares, and $692,546 for
Tax-Free Shares for the year ended March 31, 1998.
ICC and ICC Distributors may voluntarily waive a portion of their advisory
or distribution fees for the Prime, Treasury and Tax-Free Series to preserve or
enhance each series' performance. These voluntary waivers are not contractual
and could change. Any waivers by ICC or ICC Distributors are limited to the fees
they actually receive for the fiscal year. ICC did not waive any advisory fees
for the year ended March 31, 1998. Alex. Brown voluntarily waived distribution
fees of $54,321 for the Quality Cash
26
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 2--continued
Shares for the period ended August 31, 1997 and ICC Distributors waived $81,870
for the period September 1, 1997 to March 31, 1998.
Effective September 22, 1997, Bankers Trust Company, a subsidiary of
Bankers Trust Corporation, became the Fund's custodian. Prior to September 22,
1997, PNC Bank served as the Fund's custodian. From September 22, 1997 to March
31, 1998, the Prime Series, Treasury Series, and Tax-Free Series paid $162,613,
$43,249, and $31,538 in custody expenses, respectively.
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the year ended
March 31, 1998 was $104,755 for the Prime Series, $32,916 for the Treasury
Series and $27,859 for the Tax-Free Series. The accrued liability at March 31,
1998 was $222,192 for the Prime Series, $79,512 for the Treasury Series and
$69,283 for the Tax-Free Series.
NOTE 3--Capital Stock and Share Information
The Fund is authorized to issue up to 6.4 billion shares of $.001 par value
capital stock (3.55 billion Prime Series, 1.5 billion Treasury Series, 1 billion
Tax-Free Series and 350 million undesignated). Transactions in shares of the
Fund were as follows:
<TABLE>
<CAPTION>
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Prime Series:
Sold:
Prime Shares 23,206,115,785 22,263,288,298
Flag Investors Class A Shares 6,559,775 9,331,912
Flag Investors Class B Shares 336,592 328,144
Institutional Prime Shares 4,625,290,052 912,825,877
Quality Cash Shares 1,179,123,143 1,001,597,821
Issued as reinvestment of dividends:
Prime Shares 129,425,606 113,931,978
Flag Investors Class A Shares 326,541 281,420
Flag Investors Class B Shares 8,133 1,264
Institutional Prime Shares 9,131,786 3,084,567
Quality Cash Shares 9,723,053 8,045,624
Redeemed:
Prime Shares (22,716,536,205) (22,218,380,783)
Flag Investors Class A Shares (5,671,105) (9,068,618)
Flag Investors Class B Shares (387,440) (112,510)
Institutional Prime Shares (4,434,262,192) (851,798,212)
Quality Cash Shares (1,159,238,038) (968,685,990)
--------------- ---------------
Net increase 849,945,486 264,670,792
=============== ===============
</TABLE>
27
<PAGE>
PRIME SERIES
- --------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
NOTE 3--concluded
<TABLE>
<CAPTION>
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Treasury Series:
Sold:
Treasury Shares 3,641,511,991 4,075,840,415
Institutional Treasury Shares 590,751,899 458,391,680
Issued as reinvestment of dividends:
Treasury Shares 30,209,607 29,377,891
Institutional Treasury Shares 2,007,274 1,597,049
Redeemed:
Treasury Shares (3,551,758,854) (4,093,588,948)
Institutional Treasury Shares (555,189,594) (450,602,609)
-------------- --------------
Net increase 157,532,323 21,015,478
============== ==============
Tax-Free Series:
Sold:
Tax Free Shares 5,853,542,023 5,222,168,283
Institutional Tax Free Shares 730,445,736 --
Issued as reinvestment of dividends:
Tax Free Shares 20,778,337 16,162,636
Institutional Tax Free Shares 276,010 --
Redeemed:
Tax Free Shares (5,680,345,603) (5,162,640,910)
Institutional Tax Free Shares (654,038,858) --
-------------- --------------
Net increase 270,657,645 75,690,009
============== ==============
</TABLE>
NOTE 4--Net Assets
<TABLE>
<CAPTION>
Prime Treasury Tax-Free
Series Series Series
-------------- ------------ ------------
<S> <C> <C> <C>
Paid-in capital $3,717,402,132 $897,118,866 $917,940,919
Undistributed net investment income 8,488 -- --
Undistributed net realized gain/(loss) on
sales of investments (1,520) 87,815 (73,243)
-------------- ------------ ------------
$3,717,409,100 $897,206,681 $917,867,676
============== ============ ============
</TABLE>
NOTE 5--Shareholder Meeting
Alex. Brown Incorporated, which was the parent corporation of the Fund's
investment advisor, merged into a subsidiary of Bankers Trust Corporation on
September 1, 1997. Due to the change in control of Alex. Brown Incorporated, the
BTAlex Brown Cash Reserve Fund held a special meeting of its shareholders on
August 14, 1997. During the meeting, shareholders approved a new Investment
Advisory Agreement between the Fund and ICC. The new agreement is substantially
the same as the former agreement. In addition, shareholders elected the
following Directors: James J. Cunnane, Richard T. Hale, John F. Kroeger, Louis
E. Levy, Eugene J. McDonald, Rebecca W. Rimel, Truman T. Semans, and Carl W.
Vogt.
28
<PAGE>
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
BT Alex. Brown Cash Reserve Fund, Inc.
We have audited the accompanying statements of net assets of the Prime
Series of the BT Alex. Brown Cash Reserve Fund, Inc. as of March 31, 1998, and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
March 31, 1998 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Prime Series of the BT Alex. Brown Cash Reserve Fund, Inc. as of March 31, 1998,
and the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended and their
financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
May 1, 1998
29
