<PAGE>
As filed with the Securities and Exchange Commission on July 29, 1998
Registration No. 2-72658
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Post-Effective Amendment No. 30 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 31 [X]
(Check appropriate box or boxes.)
BT ALEX. BROWN CASH RESERVE FUND, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
One South Street, Baltimore, Maryland 21202
-----------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (410) 727-1700
Richard T. Hale
BT Alex. Brown Incorporated
One South Street, Baltimore, Maryland 21202
--------------------------------------------------
(Name and Address of Agent for Service)
Copies to:
Richard W. Grant, Esquire
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on August 1, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on [date] pursuant to paragraph (a) of rule 485
- --------------------------------------------------------------------------------
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
July 29, 1998
CROSS REFERENCE SHEET
(The Cross Reference Sheet relating to
BT Alex. Brown Cash Reserve Fund, Inc. - Flag Investors Cash
Reserve Prime Shares immediately precedes the Prospectus for Flag
Investors Cash Reserve Prime Shares.
The Cross Reference Sheet relating to
BT Alex. Brown Cash Reserve Fund, Inc. -
Institutional Shares immediately precedes the Prospectus
for BT Alex. Brown Cash Reserve Fund, Inc. - Institutional Shares.
The Cross Reference Sheet relating to the
BT Alex. Brown Cash Reserve Fund, Inc. - Quality Cash Reserve Prime
Shares immediately precedes the Prospectus
for the Quality Cash Reserve Prime Shares.)
<TABLE>
<CAPTION>
Items Required by Form N-1A
- ---------------------------
<S> <C> <C>
Registration
Part A Information Required in a Prospectus Statement Heading
- ------ ------------------------------------ -----------------
1. Cover Page.......................................... Cover Page
2. Synopsis............................................ Table of Fees and Expenses
3. Condensed Financial Information..................... Financial Highlights; Current Yield
4. General Description of Registrant................... Investment Program; Investment
Restrictions; General Information
5. Management of the Fund ............................. Management of the Fund;
Investment Advisor; Distributor;
Custodian, Transfer Agent and
Accounting Services
6. Capital Stock and Other Securities.................. Cover Page; Dividend and Taxes;
General Information
7. Purchase of Securities Being Offered................ The Fund's Net Asset Value; How to
Buy Shares; Distributor
8. Redemption or Repurchase............................ How to Redeem Shares
9. Pending Legal Proceedings........................... *
Information Required in a Statement
Part B of Additional Information (1)
- ------ -----------------------------------
10. Cover Page.......................................... Cover Page
11. Table of Contents................................... Table of Contents
12. General Information and History..................... Introduction; General Information
about the Fund
</TABLE>
- -------------
(1) The Statement of Additional Information relates to all classes of Shares.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
13. Investment Objectives and Policies.................. The Fund and Its Shares;
Investment Program and
Restrictions
14. Management of the Fund.............................. Directors and Officers
15. Control Persons and Principal Holders
of Securities.................................... Principal Holders of Securities
16. Investment Advisory and Other Services.............. The Investment Advisor; Distributor;
Expenses; Transfer Agent,
Custodian and Accounting
Services; Sub-Accounting; Semi-
Annual Reports
17. Brokerage Allocation................................ Portfolio Transactions
18. Capital Stock and Other Securities.................. General Information About the Fund
- The Fund and Its Shares
19. Purchase, Redemption and Pricing of Securities
Being Offered.................................. Share Purchases and Redemptions
20. Tax Status.......................................... Dividends and Taxes
21. Underwriters........................................ *
22. Calculation of Performance Data..................... Current Yield
23. Financial Statements................................ Financial Statements
Part C Other Information
- ------ -----------------
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this
Registration Statement.
</TABLE>
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
P. O. Box 17250
Baltimore, Maryland 21203
BT Alex. Brown Cash Reserve Fund, Inc. (the "Fund") is a money market fund
designed for individuals, businesses, institutions and fiduci-aries which seek
as high a level of current income (tax-exempt current income in the case of the
Tax-Free Series) as is consistent with preservation of capital and liquidity.
The Fund offers three Series of Shares:
o Prime Series
o Treasury Series
o Tax-Free Series
This Prospectus relates to the BT Alex. Brown Cash Reserve Shares of each of
the above Series.
Other principal features of the Fund are:
o Fund shares are sold without purchase or redemption charges;
o Dividends are declared daily and paid monthly in additional shares or cash;
and
o 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 value of the Treasury Series and the Tax-Free Series is
determined on each business day as of 11:00 a.m. (Eastern Time). The net asset
value 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 the 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 or 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 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.
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 the 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 Distributor. A
majority of the Board of Directors of the Fund have no affiliation with the
Fund's advisor or the 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 state-ments. The annual financial statements are
audited by the Fund's independent accountants, PricewaterhouseCoopers LLP.
Shareholder Inquiries
If you have questions concerning your shares, you should 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
Baltimore, MD.
Permit No. 8614
[GRAPHIC OMITTED]
- --------------------
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
July 29, 1998
CROSS REFERENCE SHEET RELATING TO
FLAG INVESTORS CASH RESERVE PRIME SHARES
(The Cross Reference Sheet relating to the
BT Alex. Brown Cash Reserve Fund, Inc. immediately precedes
the Prospectus for BT Alex. Brown Cash Reserve Fund, Inc.
The Cross Reference Sheet relating to the
BT Alex. Brown Cash Reserve Fund, Inc. -
Institutional Shares immediately precedes the Prospectus
for BT Alex. Brown Cash Reserve Fund, Inc. - Institutional Shares.
The Cross Reference Sheet relating to the
BT Alex. Brown Cash Reserve Fund, Inc. - Quality Cash Reserve Prime
Shares immediately precedes the Prospectus
for the Quality Cash Reserve Prime Shares.)
<TABLE>
<CAPTION>
Items Required by Form N-1A
- ---------------------------
<S> <C> <C>
Registration
Part A Information Required in a Prospectus Statement Heading
- ------ ------------------------------------ -----------------
1. Cover Page.......................................... Cover Page
2. Synopsis............................................ Fund Expenses
3. Condensed Financial Information..................... Financial Highlights; Current Yield
4. General Description of Registrant................... Investment Program; Investment
Restrictions; General Information
5. Management of the Fund ............................. Management of the Fund;
Investment Advisor; Distributor;
Custodian, Transfer Agent and
Accounting Services
6. Capital Stock and Other Securities.................. Cover Page; Dividend and Taxes;
General Information
7. Purchase of Securities Being Offered................ The Fund's Net Asset Value; How to
Buy Shares; Distributor
8. Redemption or Repurchase............................ How to Redeem Shares
9. Pending Legal Proceedings........................... *
Information Required in a Statement
Part B of Additional Information (1)
- ------ -----------------------------------
10. Cover Page.......................................... Cover Page
11. Table of Contents................................... Table of Contents
12. General Information and History..................... Introduction; General Information
about the Fund
</TABLE>
- -------------
(1) The Statement of Additional Information relates to all classes of Shares.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
13. Investment Objectives and Policies.................. The Fund and Its Shares;
Investment Program and
Restrictions
14. Management of the Fund.............................. Directors and Officers
15. Control Persons and Principal Holders
of Securities.................................... Principal Holders of Securities
16. Investment Advisory and Other Services.............. The Investment Advisor; Distributor;
Expenses; Transfer Agent,
Custodian and Accounting Services;
Sub-Accounting; Semi-Annual
Reports
17. Brokerage Allocation................................ Portfolio Transactions
18. Capital Stock and Other Securities.................. General Information About the Fund
- The Fund and Its Shares
19. Purchase, Redemption and Pricing of Securities
Being Offered.................................. Share Purchases and Redemptions
20. Tax Status.......................................... Dividends and Taxes
21. Underwriters........................................ *
22. Calculation of Performance Data..................... Current Yield
23. Financial Statements................................ Financial Statements
Part C Other Information
- ------ -----------------
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this
Registration Statement.
</TABLE>
- -------------
* Omitted since the answer is negative or the item is not applicable.
<PAGE>
- --------------------------------------------------------------------------------
[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 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 Expense (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 Flag Investors
Class B Shares) ............................................................. 0.16% 0.41%***
----- -----
Total 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
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Series, with an agreement to repurchase the instrument at an agreed upon price
and date. The Prime Series will employ reverse repurchase agreements only when
necessary to meet unanticipated net redemptions so as to avoid liquidating
other money market instruments during unfavorable market conditions. The Prime
Series will utilize reverse repurchase agreements when the interest income to
be earned from portfolio investments that would otherwise have to be liquidated
to meet redemptions is greater than the interest expense incurred as a result
of the reverse repurchase transactions. Reverse repurchase agreements involve
the risk that the market value of securities retained by the Prime Series in
lieu of liquidation may decline below the repurchase price of the securities
sold by the Prime Series, which it is obligated to repurchase.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The Prime Series' investment program is subject to a number of investment
restrictions that reflect self-imposed standards as well as federal regulatory
limitations. The Prime Series will not:
(1) purchase securities of any one issuer (other than obligations of the U.S.
Government, its agencies or instrumentalities), if immediately after such
purchase more than 5% of the value of the Prime Series' assets would be
invested in such issuer;
(2) purchase any commercial paper or variable rate demand notes that would
cause more than 25% of the value of the Prime Series' total assets at the
time of such purchase to be invested in the securities of one or more
issuers conducting their principal business activities in the same
industry;
(3) borrow money or issue senior securities, except that the Prime Series may
(a) borrow money from banks for temporary purposes in amounts up to 10% of
the value of the Prime Series' total assets at the time of borrowing,
provided that any such borrowings will be repaid prior to the purchase of
additional portfolio securities by the Prime Series, (b) enter into
reverse repurchase agreements in accordance with its investment program,
and (c) enter into commitments to purchase securities in accordance with
the Prime Series' investment program, which commitments may be considered
the issuance of senior securities; or
(4) lend money or securities except to the extent that the Prime Series'
investments may be considered loans.
The Prime Series' investment objective as described under "Investment
Objective" and the foregoing restrictions are matters of fundamental policy and
may not be changed without the affirmative vote of a majority of the
outstanding shares of the Prime Series.
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
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
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>
[There are other classes of BT Alex. Brown Cash Reserve Fund, Inc. that
may be purchased and redeemed without the payment of any sales charge.]
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
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Other Redemption Information
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 is made to present a detailed
explanation of the federal, state or local tax treatment of the Fund or the
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 as to federal, state and local income
taxes.
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 be
required to pay federal income taxes on amounts distributed to shareholders;
but you, unless otherwise exempt, will pay taxes on the amounts distributed to
you.
You will be taxed on distributions of net investment company taxable
income (generally, net investment income plus short-term capital gains, if any)
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, 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 Fund shares. Distributions from the Fund will
not be eligible for the dividends received deduction otherwise available for
corporate shareholders.
9
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
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 with net
assets of approximately $7.4 billion as of May 31, 1997. 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.
In the fiscal year ended March 31, 1997, the expenses borne by the Prime
Series, including the fees to ICC, amounted to 0.67% 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
- --------------------------------------------------------------------------------
<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 and may be used to
pay the Distributor's overhead expenses. 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
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
<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)
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>
- --------------------------------------------------------------------------------
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>
BT ALEX. BROWN CASH RESERVE FUND, INC.
July 29, 1998
CROSS REFERENCE SHEET RELATING TO THE INSTITUTIONAL SHARES
(The Cross Reference Sheet relating to BT Alex. Brown
Cash Reserve Fund, Inc. immediately precedes the Prospectus
for BT Alex. Brown Cash Reserve Fund, Inc.
The Cross Reference Sheet relating to
BT Alex. Brown Cash Reserve Fund, Inc. - Flag Investors
Cash Reserve Prime Shares immediately precedes
the Prospectus for BT Alex. Brown Cash Reserve Fund, Inc. -
Flag Investors Cash Reserve Prime Shares
The Cross Reference Sheet relating to the
BT Alex. Brown Cash Reserve Fund, Inc. - Quality Cash Reserve Prime
Shares immediately precedes the Prospectus
for the Quality Cash Reserve Prime Shares.)
<TABLE>
<CAPTION>
Items Required by Form N-1A
- ---------------------------
<S> <C> <C>
Registration
Part A Information Required in a Prospectus Statement Heading
- ------ ------------------------------------ -----------------
1. Cover Page.......................................... Cover Page
2. Synopsis............................................ Table of Fees and Expenses
3. Condensed Financial Information..................... Financial Highlights; Current Yield
4. General Description of Registrant................... Investment Program; Investment
Restrictions; General Information
5. Management of the Fund ............................. Management of the Fund;
Investment Advisor; Distributor;
Custodian, Transfer Agent and
Accounting Services
6. Capital Stock and Other Securities.................. Cover Page; Dividend and Taxes;
General Information
7. Purchase of Securities Being Offered................ The Fund's Net Asset Value; How to
Buy Shares; Distributor
8. Redemption or Repurchase............................ How to Redeem Shares
9. Pending Legal Proceedings........................... *
Information Required in a Statement
Part B of Additional Information (1)
- ------ -----------------------------------
10. Cover Page.......................................... Cover Page
11. Table of Contents................................... Table of Contents
12. General Information and History..................... Introduction; General Information
about the Fund
</TABLE>
- -------------
(1) The Statement of Additional Information relates to all classes of Shares.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
13. Investment Objectives and Policies.................. The Fund and Its Shares;
Investment Program and
Restrictions
14. Management of the Fund.............................. Directors and Officers
15. Control Persons and Principal Holders
of Securities.................................... Principal Holders of Securities
16. Investment Advisory and Other Services.............. The Investment Advisor; Distributor;
Expenses; Transfer Agent,
Custodian and Accounting Services;
Sub-Accounting; Semi-Annual
Reports
17. Brokerage Allocation................................ Portfolio Transactions
18. Capital Stock and Other Securities.................. General Information About the Fund
- The Fund and Its Shares
19. Purchase, Redemption and Pricing of Securities
Being Offered.................................. Share Purchases and Redemptions
20. Tax Status.......................................... Dividends and Taxes
21. Underwriters........................................ *
22. Calculation of Performance Data..................... Current Yield
23. Financial Statements................................ Financial Statements
Part C Other Information
- ------ -----------------
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this
Registration Statement.
</TABLE>
- -------------
* Omitted since the answer is negative or the item is not applicable.
<PAGE>
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;
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) 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 concerning 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, sub-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 Distributor. A majority of
the Board of Directors of the Fund have no affiliation with the Fund's advisor,
the Fund's sub-advisor or the Distributor.
Investment Advisor
Investment Company Capital Corp. ("ICC"), an indirect subsidiary of Bankers
Trust 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 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 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 21202
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
Baltimore, MD
Permit No. 8614
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
July 29, 1998
CROSS REFERENCE SHEET RELATING TO QUALITY CASH RESERVE PRIME SHARES
(The Cross Reference Sheet relating to
BT Alex. Brown Cash Reserve Fund, Inc. immediately
precedes the Prospectus for BT Alex. Brown Cash Reserve Fund, Inc.
The Cross Reference Sheet relating to
BT Alex. Brown Cash Reserve Fund, Inc. - Flag Investors Cash
Reserve Prime Shares immediately precedes the Prospectus for Flag
Investors Cash Reserve Prime Shares.
The Cross Reference Sheet relating to
BT Alex. Brown Cash Reserve Fund, Inc. -
Institutional Shares immediately precedes the Prospectus
for BT Alex. Brown Cash Reserve Fund, Inc. - Institutional Shares.
<TABLE>
<CAPTION>
Items Required by Form N-1A
- ---------------------------
<S> <C> <C>
Registration
Part A Information Required in a Prospectus Statement Heading
- ------ ------------------------------------ -----------------
1. Cover Page.......................................... Cover Page
2. Synopsis............................................ Table of Fees and Expenses
3. Condensed Financial Information..................... Financial Highlights; Current Yield
4. General Description of Registrant................... Investment Program; Investment
Restrictions; General Information
5. Management of the Fund ............................. Management of the Fund;
Investment Advisor; Distributor;
Custodian, Transfer Agent and
Accounting Services
6. Capital Stock and Other Securities.................. Cover Page; Dividend and Taxes;
General Information
7. Purchase of Securities Being Offered................ The Fund's Net Asset Value; How to
Buy Shares; Distributor
8. Redemption or Repurchase............................ How to Redeem Shares
9. Pending Legal Proceedings........................... *
Information Required in a Statement
Part B of Additional Information (1)
- ------ ----------------------------------
10. Cover Page.......................................... Cover Page
11. Table of Contents................................... Table of Contents
12. General Information and History..................... Introduction; General Information
about the Fund
</TABLE>
- -------------
(1) The Statement of Additional Information relates to all classes of Shares.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
13. Investment Objectives and Policies.................. The Fund and Its Shares;
Investment Program and
Restrictions
14. Management of the Fund.............................. Directors and Officers
15. Control Persons and Principal Holders
of Securities.................................... Principal Holders of Securities
16. Investment Advisory and Other Services.............. The Investment Advisor; Distributor;
Expenses; Transfer Agent,
Custodian and Accounting Services;
Sub-Accounting; Semi-Annual
Reports
17. Brokerage Allocation................................ Portfolio Transactions
18. Capital Stock and Other Securities.................. General Information About the Fund
- The Fund and Its Shares
19. Purchase, Redemption and Pricing of Securities
Being Offered.................................. Share Purchases and Redemptions
20. Tax Status.......................................... Dividends and Taxes
21. Underwriters........................................ *
22. Calculation of Performance Data..................... Current Yield
23. Financial Statements................................ Financial Statements
Part C Other Information
- ------ -----------------
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this
Registration Statement.
</TABLE>
- -------------
* Omitted since the answer is negative or the item is not applicable.
<PAGE>
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; and
o Free check redemptions.
For current yield information and for purchase and redemption information, call
your securities dealer.
The Fund's Statement of Additional Information may be obtained without charge
from the Fund or any securities dealer that has entered into a dealer agreement
with the Fund's distributor (the "Distributor") with respect to such other
Series or classes.
This Prospectus sets forth basic information that 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 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 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 Quality Cash Reserve Prime 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 Quality Cash Reserve Prime 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>
RESTUBBED
<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 of the Fund.
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 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 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 the Fund's shares and to redeem shares of the Fund 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 Fund at net asset value. If you
prefer to receive your distributions in cash, notify your securities dealer of
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 of the Fund 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 the Fund's shares and to redeem shares of the Fund 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 $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 Fund 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 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.
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 additional 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 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 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, sub-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.")
In the fiscal year ended March 31, 1998, the expenses borne by the Quality Cash
Reserve Prime Shares class of the Prime Series, including the fees to ICC,
amounted to 0.96% (net of fee waivers) of such class' average daily net assets.
Distributor
ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") has served as
distributor for the Quality Cash Reserve Prime 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
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 Quality Cash Reserve
Prime Shares. ICC Distributors currently reduces its distribution fee, on a
voluntary basis, to 0.54% of the Quality Cash Reserve Prime Shares' average
daily net assets. (See "Table of Fees and Expenses.")
ICC Distributors expects to allocate up to all of its annual fee received from
the Fund to 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, you should 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
Baltimore, MD
Permit No. 8614
- --------------------
<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
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.
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 it 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
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<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.;
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. Director/Trustee, AIM Funds
(registered investment companies); Formerly, Consultant, Wendell & Stockel
Associates, Inc. (consulting firm) and General Manager, Shell Oil Company.
LOUIS E. LEVY, Director (11/16/32)
26 Farmstead Road, Short Hills, New Jersey 07078. Director, Kimberly-Clark
Corporation (personal consumer products) and Household International (banking
and finance); Chairman of the Quality Control Inquiry Committee, American
Institute of Certified Public Accountants; Formerly, Trustee, Merrill Lynch
Funds for Institutions, 1991-1993; Adjunct Professor, Columbia
University-Graduate School of Business, 1991-1992; 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, 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, Director, Flag Investors/ISI/BT Alex.
Brown Family of funds; Trustee, Reed College (education); Trustee, Rockefeller
Foundation; and Director, Merrill Lynch Cluster C 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 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
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<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 August 14,
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.
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<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 Investment 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
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<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 Fee $8,299,915(1) $7,398,316(6) $5,575,592(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) $1,479,581(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.
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<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
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<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.
The Fund's distributor for the last three fiscal years received contingent
deferred sales charges on the Flag Investors Class B Shares and retained from
such sales charges the following amounts:
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,
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<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 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
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<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.
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<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
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<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 at a rate
of 20% or at a rate of 28% depending upon the holding period of the Fund in the
underlying asset generating the net capital gain and 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
eighteen months, mid-term capital gain or loss if the Shares are held for more
than twelve months, but not more than eighteen months and otherwise generally
will be treated as a short-term capital gain or loss. Any loss recognized by a
Shareholder upon the sale or redemption of shares of the Series held for six
months or less, however, will be disallowed to the extent of any exempt-interest
dividends received by the Shareholder with respect to such shares. If shares on
which a net capital gain distribution has been received are subsequently sold or
redeemed, and such shares have been held for six months or less, any loss
recognized will be treated as a long-term capital loss to the extent of the
capital gain distribution.
Dividends and capital gains distributions may also be subject to state and
local taxes. Shareholders are urged to consult their tax advisors regarding
specific questions as to federal, state, or local taxes.
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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 or the Fund. 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
-20-
<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.
-21-
<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.
-22-
<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
-23-
<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
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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
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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
<PAGE>
PART C
OTHER INFORMATION
Item 24
(a) Financial Statements
In Part A:
Financial Highlights
In Part B:
(1) Statement of Net Assets as of March 31, 1998
(2) Statement of Operations for the year ended March 31, 1998
(3) Statements of Changes in Net Assets for the years ended March 31,
1998 and March 31, 1997
(4) Notes to Financial Statements
(5) Report of Independent Accountants
(b) Exhibits
Exhibit
Number Description
- ------ -----------
(1) Charter
(a) Articles of Incorporation.(1)
(b) Articles Supplementary to Articles of Incorporation dated June 28,
1990.(1)
(c) Articles Supplementary to Articles of Incorporation dated July 31,
1990.(1)
(d) Articles Supplementary to Articles of Incorporation dated May 6,
1992.(1)
(e) Articles Supplementary to Articles of Incorporation, dated December
31, 1994.(1)
(f) Articles Supplementary to Articles of Incorporation dated December 29,
1995.(2)
(g) Articles Supplementary to Articles of Incorporation dated October 8,
1996.(2)
(h) Articles Supplementary to Articles of Incorporation dated March 28,
1997.(3)
(i) Articles Supplementary to Articles of Incorporation dated June 17,
1997.(3)
C-1
<PAGE>
(j) Articles of Amendment to Articles of Incorporation, as filed with the
Maryland State Department of Assessments and Taxation on August 29,
1997, filed herewith.
(k) Articles Supplementary to Articles of Incorporation, as filed with the
Maryland State Department of Assessments and Taxation on April 3,
1998, filed herewith.
(2) By-Laws.(1)
(3) Not Applicable
(4) Form of Specimen Certificate with respect to Prime Series Shares and
Treasury Shares is incorporated herein by reference to Exhibit (1)(a)
Articles of Incorporation and Exhibit (2) By-Laws.
(5)(a) Investment Advisory Agreement dated September 1, 1997 between
Registrant and Investment Company Capital Corp. with respect to the
Prime Series, filed herewith.
(b) Investment Advisory Agreement dated September 1, 1997 between
Registrant and Investment Company Capital Corp. with respect to the
Treasury Series, filed herewith.
(c) Investment Advisory Agreement dated September 1, 1997 between
Registrant and Investment Company Capital Corp. with respect to the
Tax-Free Series, filed herewith.
(6)(a) Distribution Agreement dated August 31, 1997 between ICC Distributors,
Inc. and Registrant, filed herewith.
(b) Form of Sub-Distribution Agreement, filed herewith.
(c) Form of Shareholder Servicing Agreement between ICC Distributors, Inc.
and Participating Broker-Dealers, filed herewith.
C-2
<PAGE>
(7) Not Applicable
(8) Custodian Agreement between Registrant and Bankers Trust Company
dated June 8, 1998, filed herewith.
(9) Master Services Agreement (for transfer agency and accounting
services for the Fund ) between Registrant and Investment Company
Capital Corp.(1)
(10) Opinion of Counsel.(1)
(11) Consent of PricewaterhouseCoopers LLP, filed herewith.
(12) Not Applicable.
(13) Not Applicable
(14) Not Applicable
(15)(a) Distribution Plan with respect to BT Alex. Brown Cash Reserve Prime
Shares, filed herewith.
(b) Distribution Plan with respect to Flag Investors Cash Reserve Prime
Shares - Class A, filed herewith.
(c) Distribution Plan with respect to Flag Investors Cash Reserve Prime
Shares-Class B, filed herewith.
(d) Distribution Plan with respect to Quality Cash Reserve Prime Shares,
filed herewith.
(e) Distribution Plan with respect to BT Alex. Brown Cash Reserve Treasury
Shares, filed herewith.
(f) Distribution Plan with respect to BT Alex. Brown Cash Reserve Tax-Free
Shares, filed herewith.
(16) Schedule of Computation of Performance Data (unaudited).(1)
C-3
<PAGE>
(18)(a) Registrant's 18f-3 Plan.(1)
(b) Registrant's Amended 18f-3 Plan.(3)
(c) Registrant's 18f-3 Plan, with exhibits through March 27, 1998,
filed herewith.
(24) Powers of Attorney, filed herewith.
(27) Financial Data Schedules, filed herewith.
- ---------------
(1) Incorporated by reference to Post-Effective Amendment No. 27 to Registrant's
Registration Statement on Form N-1A (File No. 2-72658), filed with the
Securities and Exchange Commission via EDGAR on July 29, 1996.
(2) Incorporated by reference to Post-Effective Amendment No. 28 to Registrant's
Registration Statement on Form N-1A (File No. 2-72658), filed with the
Securities and Exchange Commission via EDGAR on March 27, 1997.
(3) Incorporated by reference to Post-Effective Amendment No. 29 to Registrant's
Registration Statement on Form N-1A (File No. 2-72658), filed with the
Securities and Exchange Commission via EDGAR on July 29, 1997.
Item 25. Persons Controlled by or under Common Control With Registrant
Furnish a list or diagram of all persons directly or indirectly controlled
by or under common control with the Registrant and as to each such person
indicate (1) if a company, the state or other sovereign power under the laws of
which it is organized, and (2) the percentage of voting securities owned or
other basis of control by the person, if any, immediately controlling it.
None.
Item 26. Number of Holders of Securities
State in substantially the tabular form indicated, as of a specified date
within 90 days prior to the date of filing, the number of record holders of each
class of securities of the Registrant.
C-4
<PAGE>
<TABLE>
<CAPTION>
Number of Record Holders
of BT Alex. Brown Cash Reserve
Title of Class Fund, Inc. As of July 14, 1998
- -------------- ------------------------------
<S> <C>
Prime Series:
1. BT Alex. Brown Cash Reserve Prime Shares 96,048
2. Flag Investors Cash Reserve Prime Shares-Class A 797
3. Flag Investors Cash Reserve Prime Shares-Class B 66
4. Institutional Prime Shares 231
5. Quality Cash Reserve Prime Shares 13,183
Treasury Series:
1. BT Alex. Brown Cash Reserve Treasury Shares 16,520
2. Institutional Treasury Shares 115
Tax-Free Series:
1. BT Alex. Brown Cash Reserve Tax-Free Shares 8,528
2. Institutional Tax-Free Shares 19
</TABLE>
Item 27. Indemnification
State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified in any manner against any liability which may be
incurred in such capacity, other than insurance provided by any director,
officer, affiliated person or underwriter for their own protection.
Sections a, b, c and d of Article IX of Registrant's Articles of
Incorporation included as Exhibit 1 to this Registration Statement and
incorporated herein by reference, provide as follows:
(a) To the fullest extent that limitations on the liability of directors and
officers are permitted by the Maryland General Corporation Law, no director
or officer of the Corporation shall have any liability to the Corporation or
its stockholders for damages. This limitation on liability applies to events
occurring at the time a person serves as a director or officer of the
Corporation whether or not such person is a director or officer at the time
of any proceeding in which liability is asserted.
(b) The Corporation shall indemnify and advance expenses to its currently
acting and its former directors to the fullest extent that indemnification
of directors is permitted by the Maryland General Corporation Law. The
Corporation shall indemnify and advance expenses to its officers to the same
extent as its directors and to such further extent as is consistent with
law. The Board of Directors may by By-Law, resolution or agreement
C-5
<PAGE>
make further provisions for indemnification of directors, officers,
employees and agents to the fullest extent permitted by the Maryland General
Corporation Law.
(c) No provision of this Article shall be effective to protect any director
or officer of the Corporation against any liability to the Corporation or
its security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
(d) References to the Maryland General Corporation Law in this Article are
to the law as from time to time amended. No further amendment to the
Articles of Incorporation of the Corporation shall affect any right of any
person under this Article based on any event, omission or proceeding prior
to such amendment.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Investment Company Act of 1940 and will be governed
by the final adjudication of such issue. In the absence of a determination by a
court of competent jurisdiction, the determinations that indemnification against
such liabilities is proper, and advances can be made, are made by a majority of
a quorum of the disinterested directors of the Fund, or an independent legal
counsel in a written opinion, based on review of readily available facts.
Item 28. Business and Other Connections of Investment Advisor
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment advisor of the Registrant, and each
director, officer or partner of any such investments advisor, is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner, or trustee.
Investment Company Capital Corp.
During the last two fiscal years, no director or officer of Investment
Company Capital Corp. (formerly known as Flag Investors Management Corp.) the
Registrant's investment advisor, has engaged in any other business, profession,
vocation or employment of a substantial nature other than that of the business
of investment management and, through affiliates, investment banking.
C-6
<PAGE>
Item 29. Principal Underwriters
(a) ICC Distributors, Inc. acts as distributor for BT Alex. Brown Cash
Reserve Fund, Inc., Flag Investors Communications Fund, Inc. (formerly known as
Flag Investors Telephone Income Fund, Inc.), Flag Investors International Fund,
Inc., Flag Investors Emerging Growth Fund, Inc., Flag Investors Shares Class of
Total Return U.S. Treasury Fund, Inc., Flag Investors Shares Class of Managed
Municipal Fund, Inc., Flag Investors Short-Intermediate Income Fund, Inc.
(formerly known as Flag Investors Intermediate-Term Income Fund, Inc.), Flag
Investors Value Builder Fund, Inc., Flag Investors Real Estate Securities Fund,
Inc. and Flag Investors Equity Partners Fund, Inc., all registered open-end
management investment companies.
(b)
<TABLE>
<CAPTION>
Position and
Names and Principal Position and Offices Offices with
Business Address* with Principal Underwriter Registrant
- ----------------- -------------------------- ----------
<S> <C> <C>
John Y. Keffer President None
Sara M. Morris Treasurer None
David I. Goldstein Secretary None
Benjamin L. Niles Vice President None
Margaret J. Fenderson Assistant Treasurer None
Dana L. Lukens Assistant Secretary None
Nanette K. Chern Chief Compliance Officer None
</TABLE>
- ------------------
*One Portland Square
Portland, Maine
(c) Not Applicable.
Item 30. Location of Accounts and Records
With respect to each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to
31a-3) promulgated thereunder, furnish the name and address of each person
maintaining physical possession of each such account, book or other document.
Investment Company Capital Corp., One South Street, Baltimore, Maryland
21202, Registrant's Investment Advisor, Accounting Services Provider
and Transfer and Dividend Disbursing Agent, will maintain physical
possession of each such account, book or other document of the
Registrant except for those maintained by the Registrant's Custodian,
Bankers Trust Company, 130 Liberty Street, New York, New York, 10006.
C-7
<PAGE>
Item 31. Management Services
Furnish a summary of the substantive provisions of any management
related service contract not discussed in Part I of this Form (because the
contract was not believed to be material to a purchaser of securities of the
Registrant) under which services are provided to the Registrant, indicating the
parties to the contract, the total dollars paid and by whom, for the last three
fiscal years.
None.
Item 32. Undertakings
None.
C-8
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment No. 30 to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this amendment to the Registration Statement to be signed on
its behalf by the undersigned thereto duly authorized in the City of Baltimore,
in the State of Maryland, on the 29th day of July, 1998.
BT ALEX. BROWN CASH
RESERVE FUND, INC.
By: /s/ Harry Woolf
-------------------
Harry Woolf
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by the following
persons in the capacities on the date(s) indicated:
* Chairman and July 29, 1998
- ------------------- Director ------------------
Richard T. Hale Date
* Director July 29, 1998
- ------------------- ------------------
James J. Cunnane Date
* Director July 29, 1998
- ------------------- ------------------
John F. Kroeger Date
* Director July 29, 1998
- ------------------- ------------------
Louis E. Levy Date
* Director July 29, 1998
- ------------------- ------------------
Eugene J. McDonald Date
* Director July 29, 1998
- ------------------- ------------------
Rebecca W. Rimel Date
* Director July 29, 1998
- ------------------- ------------------
Truman T. Semans Date
* Director July 29, 1998
- ------------------- ------------------
Carl W. Vogt Date
/s/ Harry Woolf President July 29, 1998
- ------------------- ------------------
Harry Woolf Date
/s/ Joseph A. Finelli Chief Financial July 29, 1998
- ------------------- and Accounting ------------------
Joseph A. Finelli Officer Date
*By: /s/Amy M. Olmert
- -------------------
Amy M. Olmert
Attorney-In-Fact
<PAGE>
EXHIBIT INDEX
EDGAR
Exhibit
Number Description
- ------ -----------
(1) Charter
(a) Articles of Incorporation.(1)
(b) Articles Supplementary to Articles of Incorporation
dated June 28, 1990.(1)
(c) Articles Supplementary to Articles of Incorporation
dated July 31, 1990.(1)
(d) Articles Supplementary to Articles of Incorporation
dated May 6, 1992.(1)
(e) Articles Supplementary to Articles of Incorporation,
dated December 31, 1994.(1)
(f) Articles Supplementary to Articles of Incorporation
dated December 29, 1995.(2)
(g) Articles Supplementary to Articles of Incorporation
dated October 8, 1996.(2)
(h) Articles Supplementary to Articles of Incorporation
dated March 28, 1997.(3)
(i) Articles Supplementary to Articles of Incorporation
dated June 17, 1997.(3)
EX-99.B (j) Articles of Amendment to Articles of Incorporation,
as filed with the Maryland State Department of
Assessments and Taxation on August 29, 1997, filed
herewith.
EX-99.B (k) Articles Supplementary to Articles of Incorporation,
as filed with the Maryland State Department of
Assessments and Taxation on April 3, 1998, filed
herewith.
(2) By-Laws.(1)
(3) Not Applicable
(4) (a) Form of Specimen Certificate with respect to
Prime Series Shares and Treasury Shares is
incorporated herein by reference to Exhibit (1)(a)
Articles of Incorporation and Exhibit (2) By-Laws.
EX-99.B (5) (a) Investment Advisory Agreement dated September 1, 1997
between Registrant and Investment Company Capital
Corp. with respect to the Prime Series, filed
herewith.
EX-99.B (b) Investment Advisory Agreement dated September 1, 1997
between Registrant and Investment Company Capital
Corp. with respect to the Treasury Series, filed
herewith.
EX-99.B (c) Investment Advisory Agreement dated September 1, 1997
between Registrant and Investment Company Capital
Corp. with respect to the Tax-Free Series, filed
herewith.
EX-99.B (6) (a) Distribution Agreement dated August 31, 1997 between
ICC Distributors, Inc. and Registrant, filed
herewith.
EX-99.B (b) Form of Sub-Distribution Agreement for Flag
Investors Shares, filed herewith.
EX-99.B (c) Form of Shareholder Servicing Agreement between ICC
Distributors, Inc. and Participating Broker-Dealers,
filed herewith.
<PAGE>
(7) Not Applicable
EX-99.B (8) (a) Custodian Agreement between Registrant and Bankers
Trust Company dated June 5, 1998, filed herewith.
(9) Master Services Agreement (for transfer agency and
accounting services for the Fund ) between Registrant
and Investment Company Capital Corp.(1)
(10) Opinion of Counsel.(1)
EX-99.B (11) PricewaterhouseCoopers LLP, filed herewith.
(12) Not Applicable.
(13) Not Applicable
(14) Not Applicable
EX-99.B (15) (a) Distribution Plan with respect to BT Alex. Brown Cash
Reserve Prime Shares, filed herewith.
EX-99.B (b) Distribution Plan with respect to Flag Investors
Cash Reserve Prime Shares-Class A, filed herewith.
EX-99.B (c) Distribution Plan with respect to Flag Investors
Cash Reserve Prime Shares-Class B, filed herewith.
EX-99.B (d) Distribution Plan with respect to Quality Cash
Reserve Prime Shares, filed herewith.
EX-99.B (e) Distribution Plan with respect to BT Alex. Brown Cash
Reserve Treasury Shares, filed herewith.
EX-99.B (f) Distribution Plan with respect to BT Alex. Brown Cash
Reserve Tax-Free Shares, filed herewith.
(16) Schedule of Computation of Performance Data (unaudited).(1)
(18) (a) Registrant's 18f-3 Plan.(1)
(b) Registrant's Amended 18f-3 Plan.(3)
EX-99.B (c) Registrant's 18f-3 Plan, with exhibits through
March 27, 1998, filed herewith.
EX-99.B (24) Powers of Attorney, filed herewith.
EX-27 (27) Financial Data Schedules, filed herewith.
- -----------------------
(1) Incorporated by reference to Post-Effective Amendment No. 27 to
Registrant's Registration Statement on Form N-1A (File No. 2-72658),
filed with the Securities and Exchange Commission via EDGAR on July 29,
1996.
(2) Incorporated by reference to Post-Effective Amendment No. 28 to
Registrant's Registration Statement on Form N-1A (File No. 2-72658),
filed with the Securities and Exchange Commission via EDGAR on March
27, 1997.
(3) Incorporated by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement on Form N-1A (File No. 2-72658),
filed with the Securities and Exchange Commission via EDGAR on July 29,
1997.
<PAGE>
ARTICLES OF AMENDMENT
ALEX. BROWN CASH RESERVE FUND, INC.
ALEX. BROWN CASH RESERVE FUND, INC. (the "Corporation"), a corporation
organized under the laws of the State of Maryland, having its principal place of
business at One South Street, Baltimore, Maryland 21202, does hereby certify to
the State Department of Assessments and Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940.
SECOND: Pursuant to the authority contained in Section 2-605(a)(4) of
the Maryland General Corporation Law and under authority contained in Article
EIGHTH, Section (c) of the Articles of Incorporation of the Corporation, the
entire Board of Directors by unanimous written consent dated August 22, 1997,
have changed the name of the Corporation to BT Alex. Brown Cash Reserve Fund,
Inc.
THIRD: Pursuant to the requirements of Section 2-607 of the Maryland
General Corporation Law, the Board of Directors has determined to file of record
these Articles of Amendment, which Amendment is limited to changes expressly
permitted by Section 2-605 of the Maryland General Corporation Law to be made
without action by the stockholders and which Amendment is solely for the purpose
of changing the name of the Corporation and the name or other designation of
classes of stock of the Corporation.
FOURTH: Article SECOND of the Articles of Incorporation of the
Corporation is hereby amended to read in its entirety as follows:
The name of the Corporation is:
BT Alex. Brown Cash Reserve Fund, Inc.
FIFTH: All shares of the Prime Series previously classified as Alex.
Brown Cash Reserve Fund Shares are hereby reclassified as:
BT Alex. Brown Cash Reserve Fund Shares
SIXTH: All shares of the Treasury Series previously classified as Alex.
Brown Cash Reserve Fund Shares are hereby reclassified as:
BT Alex. Brown Cash Reserve Fund Shares
SEVENTH: All shares of the Tax-Free Series previously classified as
Alex. Brown Cash Reserve Fund Shares are hereby reclassified as:
BT Alex. Brown Cash Reserve Fund Shares
<PAGE>
IN WITNESS WHEREOF, Alex. Brown Cash Reserve Fund, Inc. has caused
these Articles of Amendment to be signed in its corporate name and on its behalf
by its President and its corporate seal to be hereunto affixed and attested by
its Secretary as of the 22nd day of August, 1997.
ALEX. BROWN CASH RESERVE FUND, INC.
By: /s/ Richard T. Hale
--------------------------------
Richard T. Hale
President
[SEAL]
Attest:
/s/Scott J. Liotta
- ------------------
Scott J. Liotta
Secretary
<PAGE>
THE UNDERSIGNED, President of Alex. Brown Cash Reserve Fund, Inc., who
executed on behalf of said corporation the foregoing Articles of Amendment of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said corporation, the foregoing Articles of Amendment to be the
corporate act of said corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth herein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
/s/ Richard T. Hale
------------------
Richard T. Hale
President
<PAGE>
ARTICLES SUPPLEMENTARY
BT ALEX. BROWN CASH RESERVE FUND, INC.
BT ALEX. BROWN CASH RESERVE FUND, INC. (the "Corporation") having its
principal office in the City of Baltimore, certifies that:
FIRST: The Corporation's Board of Directors in accordance with Section
2-105(c) of the Maryland General Corporation Law has adopted a resolution
increasing the total number of shares of Common Stock the corporation is
authorized to issue to nine billion (9,000,000,000) shares of Common Stock, par
value $.001 per share, and of the aggregate par value of nine million dollars
($9,000,000), as follows: five billion four hundred million (5,400,000,000)
shares are designated "Prime Series", one billion five hundred million
(1,500,000,000) shares are designated "Treasury Series", one billion seven
hundred fifty million (1,750,000,000) shares are designated "Tax-Free Series",
and the balance of which are unclassified. Of the five billion four hundred
million (5,400,000,000) shares designated for the Prime Series, four billion
(4,000,000,000) shares are classified as BT Alex. Brown Cash Reserve Fund
Shares, nine hundred fifty million (950,000,000) shares are classified as
Institutional Shares, fifty million (50,000,000) shares are classified as Flag
Investors Cash Reserve Prime Shares Class A, fifty million (50,000,000) shares
are classified as Flag Investors Cash Reserve Prime Shares Class B and three
hundred fifty million (350,000,000) shares are classified as Quality Cash
Reserve Prime Shares. Of the one billion five hundred million (1,500,000,000)
shares designated for the Treasury Series, one billion three hundred million
(1,300,000,000) shares are classified as BT Alex. Brown Cash Reserve Fund Shares
and two hundred million (200,000,000) shares are classified as Institutional
Shares. Of the one billion seven hundred fifty million (1,750,000,000) shares
designated for the Tax-Free Series, one billion five hundred million
(1,500,000,000) shares are classified as BT Alex. Brown Cash Reserve Fund Shares
and two hundred fifty million (250,000,000) shares are classified as
Institutional Shares.
SECOND: Immediately before the increase in authorized shares pursuant
to these Articles Supplementary, the Corporation was authorized to issue eight
billion (8,000,000,000) shares of Common Stock, par value $.001 per share, and
of the aggregate par value of eight million dollars ($8,000,000), as follows:
four billion nine hundred million (4,900,000,000) shares were designated "Prime
Series", one billion five hundred million (1,500,000,000) shares were designated
"Treasury Series", one billion two hundred fifty million (1,250,000,000) shares
were designated "Tax-Free Series", and the balance of which were unclassified.
Of the four billion nine hundred million (4,900,000,000) shares designated for
the Prime Series, three billion five hundred million (3,500,000,000) shares were
classified as BT Alex. Brown Cash Reserve Fund Shares, nine hundred fifty
million (950,000,000) shares were classified as Institutional Shares, fifty
million (50,000,000) shares were classified as Flag Investors Cash Reserve Prime
Shares Class A, fifty million (50,000,000) shares were classified as Flag
Investors Cash Reserve
<PAGE>
Prime Shares Class B and three hundred fifty million (350,000,000) shares were
classified as Quality Cash Reserve Prime Shares. Of the one billion five hundred
million (1,500,000,000) shares designated for the Treasury Series, one billion
three hundred million (1,300,000,000) shares were classified as BT Alex. Brown
Cash Reserve Fund Shares and two hundred million (200,000,000) shares were
classified as Institutional Shares. Of the one billion two hundred fifty million
(1,250,000,000) shares designated for the Tax-Free Series, one billion
(1,000,000,000) shares were classified as BT Alex. Brown Cash Reserve Fund
Shares and two hundred fifty million (250,000,000) shares were classified as
Institutional Shares.
THIRD: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, BT Alex. Brown Cash Reserve Fund, Inc. has caused these
Articles Supplementary to be executed by its President and its corporate seal to
be affixed and attested by its Assistant Secretary on this 27 day of March,
1998.
[CORPORATE SEAL]
BT ALEX. BROWN CASH RESERVE FUND, INC.
BY: /s/ Harry Woolf
------------------------
Harry Woolf
President
Attest: /s/ Scott J. Liotta
---------------------------
Scott J. Liotta
Assistant Secretary
The undersigned, President of BT ALEX. BROWN CASH RESERVE FUND, INC.,
who executed on behalf of said corporation the foregoing Articles Supplementary
to the Articles of Incorporation of which this certificate is made a part,
hereby acknowledges, in the name and on behalf of said corporation, the
foregoing Articles Supplementary to the Articles of Incorporation to be the
corporate act of said corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
/s/ Harry Woolf
--------------------
Harry Woolf
President
<PAGE>
Exhibit A
BT Alex. Brown Cash Reserve Fund, Inc.
Authorized Shares
Prime Series (5,400,000,000 shares)
BT Alex. Brown Shares.............................4,000,000,000 shares
Institutional Shares................................950,000,000 shares
Flag Investors Class A Shares........................50,000,000 shares
Flag Investors Class B Shares........................50,000,000 shares
Quality Cash Reserve Shares.........................350,000,000 shares
Treasury Series (1,500,000,000 shares)
BT Alex. Brown Shares.............................1,300,000,000 shares
Institutional Shares................................200,000,000 shares
Tax-Free Series (1,750,000,000 shares)
BT Alex. Brown Shares.............................1,500,000,000 shares
Institutional Shares................................250,000,000 shares
Unclassified Shares.........................................350,000,000 shares
-------------------
Total Shares 9,000,000,000 shares
============ --------------------
<PAGE>
INVESTMENT ADVISORY AGREEMENT
BT ALEX. BROWN CASH RESERVE FUND, INC. - PRIME SERIES
THIS AGREEMENT is made as of the 1st day of September, 1997 by and
between BT ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the
"Fund"), and INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation (the
"Advisor"), with respect to the following recital of fact:
WHEREAS, the Fund is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and
WHEREAS, the Fund's Articles of Incorporation authorize the Board of
Directors of the Fund to classify or reclassify authorized but unissued shares
of the Fund; and
WHEREAS, the Fund's Board of Directors has authorized the issuance of
three series of shares with a par value of $.001 representing interests in three
portfolios: the Prime Series, the Treasury Series and the Tax-Free Series (each
of the existing portfolios and any portfolios hereafter added shall be referred
to collectively as the "Series"); and
WHEREAS, the Fund and the Advisor desire to enter into an agreement to
provide investment advisory and administrative services for the Fund's Prime
Series (the "Prime Series") on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Investment Advisor. The Fund hereby appoints the
Advisor to act as the investment advisor to the Prime Series. The Advisor shall
manage the Prime Series' affairs and shall supervise all aspects of the Prime
Series' operations (except as otherwise set forth herein), including the
investment and reinvestment of the cash, securities or other properties
comprising the Prime Series' assets, subject at all times to the policies and
control of the Fund's Board of Directors. The Advisor shall give the Prime
Series the benefit of its best judgment, efforts and facilities in rendering its
services as Advisor.
2. Duties of Investment Advisor. In carrying out its obligations under
section 1 hereof, the Advisor shall:
(a) supervise and manage all aspects of the Prime Series'
operations;
(b) formulate and implement continuing programs for the
purchases and sales of securities, consistent with the investment objective and
policies of the Prime Series;
(c) provide the Prime Series with such executive,
administrative and clerical services as are deemed advisable by the Fund's Board
of Directors;
(d) provide the Prime Series with, or obtain for it, adequate
office space and all necessary office equipment and services, including
telephone service, heat, utilities, stationery supplies and similar items for
the Fund's principal office;
-1-
<PAGE>
(e) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Prime
Series, and whether concerning the individual issuers whose securities are
included in the Prime Series or the activities in which they engage, or with
respect to securities which the Advisor considers desirable for inclusion in the
Prime Series;
(f) determine which issuers and securities shall be
represented in the Prime Series and regularly report thereon to the Fund's Board
of Directors;
(g) take all actions necessary to carry into effect the Fund's
purchase and sale programs with respect to its Prime Series;
(h) supervise the operations of the Prime Series' transfer and
dividend disbursing agent;
(i) provide the Prime Series with such administrative and
clerical services for the maintenance of certain shareholder records, as are
deemed advisable by the Fund's Board of Directors; and,
(j) arrange, but not pay for, the periodic updating of
prospectuses and supplements thereto, proxy material, tax returns, reports to
the shareholders of the Prime Series and reports to and filings with the
Securities and Exchange Commission (the "SEC") and state Blue Sky authorities,
which may be required for the Prime Series.
3. Broker-Dealer Relationship. In the event that the Advisor is
responsible for decisions to buy and sell securities for the Prime Series,
broker-dealer selection, and negotiation of its brokerage commission rates, the
Advisor's primary consideration in effecting a security transaction will be
execution at the most favorable price. The Fund understands that a substantial
majority of the Prime Series' transactions will be transacted with primary
market makers acting as principal on a net basis, with no brokerage commissions
being paid by the Fund. Such principal transactions may, however, result in a
profit to the market makers. In certain instances the Advisor may make purchases
of underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Prime Series on a
continuing basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Prime Series. The Advisor
is further authorized to allocate the orders placed by it on behalf of the Prime
Series to such brokers and dealers who also provide research or statistical
material or other services to the Fund or the Advisor. Such allocation shall be
in such amounts and proportions as the Advisor shall determine and the Advisor
will report on said allocation regularly to the Board of Directors of the Fund,
indicating the brokers to whom such allocations have been made and the basis
therefor.
4. Control by Board of Directors. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as any
other activities undertaken by the Advisor on behalf of the Prime Series
pursuant thereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
-2-
<PAGE>
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder;
(b) the provisions of the Registration Statement of the Fund
under the Securities Act of 1933 and 1940 Act;
(c) the provisions of the Articles of Incorporation, as
amended;
(d) the provisions of the By-laws of the Fund, as amended; and
(e) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Prime Series shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall, subject to compliance with applicable
banking regulations, furnish, at its expense and without cost to the Fund, the
services of one or more officers of the Fund, to the extent that such officers
may be required by the Fund for the proper conduct of its affairs.
(b) The Fund assumes and shall pay or cause to be paid all
other expenses of the Prime Series, including, without limitation, the Prime
Series' allocable portion of the following expenses: payments to the Fund's
distributor under the Prime Series' plans of distribution; the charges and
expenses of any registrar, any custodian or depository appointed by the Fund for
the safekeeping of its cash, portfolio securities and other property, and any
transfer, dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and fees payable by the Fund to Federal, State or
other governmental agencies; the costs and expenses of engraving or printing of
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of directors or director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's shares;
charges and expenses of legal counsel, including counsel to the directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund and
of independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
directors) of the Fund which inure to its benefit; extraordinary expenses
(including but not limited to, legal claims and liabilities and litigation costs
and any indemnification related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
7. Delegation of Responsibilities.
(a) Subject to the approval of the Board of Directors and
shareholders of the Prime Series, the Advisor may delegate to a sub-advisor
certain of its duties enumerated in section 2 hereof provided that the Advisor
shall continue to supervise the performance of any such sub-advisor. The Advisor
shall not be responsible for any such sub-advisor's performance under a
sub-advisory agreement.
(b) Subject to the approval of the Board of Directors and, to
the extent required by the 1940 Act, shareholders of the Prime Series, the
Advisor may delegate to any company that it controls, is controlled by, or is
under common control with (or to more than one such company), or to specified
employees of any such companies, certain of its duties enumerated in Section 2
hereof provided that the Advisor shall continue to supervise the performance of
any such company and shall regularly report thereon to the Fund's Board of
Directors.
-3-
<PAGE>
(c) The Advisor may, but shall not be under any duty to,
perform services on behalf of the Prime Series which are not required by this
Agreement upon the request of the Fund's Board of Directors. Such services will
be performed on behalf of the Prime Series and the Advisor's charge in rendering
such services may be billed monthly to the Fund, subject to examination by the
Fund's independent accountants. Payment or assumption by the Advisor of any Fund
expense that the Advisor is not required to pay or assume under this Agreement
shall not relieve the Advisor of any of its obligations to the Prime Series nor
obligate the Advisor to pay or assume any similar Prime Series' expenses on any
subsequent occasions.
8. Compensation. For the services to be rendered and the expenses
assumed by the Advisor, the Prime Series shall pay to the Advisor monthly
compensation at an annual rate derived by: (1) calculating an amount equal to
.30% of the first $500 million of the Fund's aggregate average daily net assets,
.26% of the next $500 million of the Fund's aggregate average daily net assets,
.25% of the next $500 million of the Fund's aggregate average daily net assets,
.24% of the next $1 billion of the Fund's aggregate average daily net assets,
.23% of the next $1 billion of the Fund's aggregate average daily net assets and
.22% of that portion of the Fund's aggregate average daily net assets in excess
of $3.5 billion; (2) applying to this amount a fraction equal to the net assets
of the Prime Series divided by the net assets of the Fund; and (3) adding an
amount calculated daily and paid monthly, at the annual rate of .02% of the
Prime Series' average daily net assets.
Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Payment of the Advisor's compensation for the preceding month shall be
made as promptly as possible.
9. Non-Exclusivity. The services of the Advisor to the Fund are not to
be deemed to be exclusive, and the Advisor shall be free to render investment
advisory and corporate administrative or other services to others (including
other investment companies) and to engage in other activities, so long as its
services under this Agreement are not impaired thereby. It is understood and
agreed that officers or directors of the Advisor may serve as officers or
directors of the Fund, and that officers or directors of the Fund may serve as
officers or directors of the Advisor to the extent permitted by law; and that
the officers and directors of the Advisor are not prohibited from engaging in
any other business activity or from rendering services to any other person, or
from serving as partners, officers, trustees or directors of any other firm,
trust or corporation, including other investment companies.
10. Term. This Agreement shall become effective at the close of
business on the date hereof and shall continue in force and effect, subject to
section 12 hereof, for two years from the date hereof.
11. Renewal. Following the expiration of its initial two-year term,
this Agreement shall continue in force and effect from year to year, provided
that such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote
of a majority of the outstanding voting securities of the
Prime Series (as defined in Section 2(a) (42) of the 1940
Act), and
(b) by the affirmative vote of a majority of the directors who
are not parties to this Agreement or "interested persons" of a
party to this Agreement (other than as directors of the Fund)
by votes cast in person at a meeting specifically called for
such purpose.
12. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Fund's Board of Directors or by vote
of a majority of the Prime Series' outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act), or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by either party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" having the meaning defined in Section
2(a)(4) of the 1940 Act.
-4-
<PAGE>
13. Liability of Advisor. In the performance of its duties hereunder,
the Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Advisor shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor of its
duties under this Agreement.
14. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Fund and
the Advisor for this purpose shall be One South Street, Baltimore, Maryland
21202.
15. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to said Act.
In addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is revised by rule, regulation or order of the SEC,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
BT ALEX. BROWN CASH RESERVE FUND, INC.
By /s/ Harry Woolf
-------------------------------------
Name: Harry Woolf
Title: President
Attest:
/s/ Amy M. Olmert
- -----------------
Amy M. Olmert
INVESTMENT COMPANY CAPITAL CORP.
By /s/Edward J. Veilleux
-------------------------------------
Name: Edward J. Veilleux
Title: Executive Vice President
Attest:
/s/ Amy M. Olmert
- -----------------
Amy M. Olmert
-5-
<PAGE>
INVESTMENT ADVISORY AGREEMENT
BT ALEX. BROWN CASH RESERVE FUND, INC. - TREASURY SERIES
THIS AGREEMENT is made as of the 1st day of September, 1997 by and
between BT ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the
"Fund"), and INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation (the
"Advisor"), with respect to the following recital of fact:
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and
WHEREAS, the Fund's Articles of Incorporation authorize the Board of
Directors of the Fund to classify or reclassify authorized but unissued shares
of the Fund; and
WHEREAS, the Fund's Board of Directors has authorized the issuance of
three series of shares with a par value of $.001 representing interests in three
portfolios: the Prime Series, the Treasury Series and the Tax-Free Series (each
of the existing portfolios and any portfolios hereafter added shall be referred
to collectively as the "Series"); and
WHEREAS, the Fund and the Advisor desire to enter into an agreement to
provide investment advisory and administrative services for the Fund's Treasury
Series (the "Treasury Series") on the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Investment Advisor. The Fund hereby appoints the
Advisor to act as the investment advisor to the Treasury Series. The Advisor
shall manage the Treasury Series' affairs and shall supervise all aspects of the
Treasury Series' operations (except as otherwise set forth herein), including
the investment and reinvestment of the cash, securities or other properties
comprising the Treasury Series' assets, subject at all times to the policies and
control of the Fund's Board of Directors. The Advisor shall give the Treasury
Series the benefit of its best judgment, efforts and facilities in rendering its
services as Advisor.
2. Duties of Investment Advisor. In carrying out its obligations under
section 1 hereof, the Advisor shall:
(a) supervise and manage all aspects of the Treasury Series'
operations;
(b) formulate and implement continuing programs for the
purchases and sales of securities, consistent with the investment objective and
policies of the Treasury Series;
(c) provide the Treasury Series with such executive,
administrative and clerical services as are deemed advisable by the Fund's Board
of Directors;
(d) provide the Treasury Series with, or obtain for it,
adequate office space and all necessary office equipment and services, including
telephone service, heat, utilities, stationery supplies and similar items for
the Fund's principal office;
<PAGE>
(e) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Treasury
Series, and whether concerning the individual issuers whose securities are
included in the Treasury Series or the activities in which they engage, or with
respect to securities which the Advisor considers desirable for inclusion in the
Treasury Series;
(f) determine which issuers and securities shall be
represented in the Treasury Series and regularly report thereon to the Fund's
Board of Directors;
(g) take all actions necessary to carry into effect the Fund's
purchase and sale programs with respect to its Treasury Series;
(h) supervise the operations of the Treasury Series' transfer
and dividend disbursing agent;
(i) provide the Treasury Series with such administrative and
clerical services for the maintenance of certain shareholder records, as are
deemed advisable by the Fund's Board of Directors; and,
(j) arrange, but not pay for, the periodic updating of
prospectuses and supplements thereto, proxy material, tax returns, reports to
the shareholders of the Treasury Series and reports to and filings with the
Securities and Exchange Commission (the "SEC") and state Blue Sky authorities,
which may be required for the Treasury Series.
3. Broker-Dealer Relationship. In the event that the Advisor is
responsible for decisions to buy and sell securities for the Treasury Series,
broker-dealer selection, and negotiation of its brokerage commission rates, the
Advisor's primary consideration in effecting a security transaction will be
execution at the most favorable price. The Fund understands that a substantial
majority of the Treasury Series' transactions will be transacted with primary
market makers acting as principal on a net basis, with no brokerage commissions
being paid by the Fund. Such principal transactions may, however, result in a
profit to the market makers. In certain instances the Advisor may make purchases
of underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Treasury Series on a
continuing basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Treasury Series. The
Advisor is further authorized to allocate the orders placed by it on behalf of
the Treasury Series to such brokers and dealers who also provide research or
statistical material or other services to the Fund or the Advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocation regularly to the Board
of Directors of the Fund, indicating the brokers to whom such allocations have
been made and the basis therefor.
4. Control by Board of Directors. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as any
other activities undertaken by the Advisor on behalf of the Treasury Series
pursuant thereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
-2-
<PAGE>
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder;
(b) the provisions of the Registration Statement of the Fund
under the Securities Act of 1933 and 1940 Act;
(c) the provisions of the Articles of Incorporation, as
amended;
(d) the provisions of the By-laws of the Fund, as amended; and
(e) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Treasury Series shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall, subject to compliance with applicable
banking regulations, furnish, at its expense and without cost to the Fund, the
services of one or more officers of the Fund, to the extent that such officers
may be required by the Fund for the proper conduct of its affairs.
(b) The Fund assumes and shall pay or cause to be paid all
other expenses of the Treasury Series, including, without limitation, the
Treasury Series' allocable portion of the following expenses: payments to the
Fund's distributor under the Treasury Series' plans of distribution; the charges
and expenses of any registrar, any custodian or depository appointed by the Fund
for the safekeeping of its cash, portfolio securities and other property, and
any transfer, dividend or accounting agent or agents appointed by the Fund;
brokers' commissions chargeable to the Fund in connection with portfolio
securities transactions to which the Fund is a party; all taxes, including
securities issuance and transfer taxes, and fees payable by the Fund to Federal,
State or other governmental agencies; the costs and expenses of engraving or
printing of certificates representing shares of the Fund; all costs and expenses
in connection with the registration and maintenance of registration of the Fund
and its shares with the SEC and various states and other jurisdictions
(including filing fees, legal fees and disbursements of counsel); the costs and
expenses of printing, including typesetting, and distributing prospectuses and
statements of additional information of the Fund and supplements thereto to the
Fund's shareholders; all expenses of shareholders' and directors' meetings and
of preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of directors or director members of any
advisory board or committee; all expenses incident to the payment of any
dividend, distribution, withdrawal or redemption, whether in shares or in cash;
charges and expenses of any outside service used for pricing of the Fund's
shares; charges and expenses of legal counsel, including counsel to the
directors of the Fund who are not interested persons (as defined in the 1940
Act) of the Fund and of independent accountants, in connection with any matter
relating to the Fund; membership dues of industry associations; interest payable
on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and directors) of the Fund which inure to its benefit;
extraordinary expenses (including but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
provided herein.
7. Delegation of Responsibilities.
(a) Subject to the approval of the Board of Directors and
shareholders of the Treasury Series, the Advisor may delegate to a sub-advisor
certain of its duties enumerated in section 2 hereof provided that the Advisor
shall continue to supervise the performance of any such sub-advisor. The Advisor
shall not be responsible for any such sub-advisor's performance under a
sub-advisory agreement.
(b) Subject to the approval of the Board of Directors and, to
the extent required by the 1940 Act, shareholders of the Treasury Series, the
Advisor may delegate to any company that it controls, is controlled by, or is
under common control with (or to more than one such company), or to specified
employees of any such companies, certain of its duties enumerated in Section 2
hereof provided that the Advisor shall continue to supervise the performance of
any such company and shall regularly report thereon to the Fund's Board of
Directors.
-3-
<PAGE>
(c) The Advisor may, but shall not be under any duty to,
perform services on behalf of the Treasury Series which are not required by this
Agreement upon the request of the Fund's Board of Directors. Such services will
be performed on behalf of the Treasury Series and the Advisor's charge in
rendering such services may be billed monthly to the Fund, subject to
examination by the Fund's independent accountants. Payment or assumption by the
Advisor of any Fund expense that the Advisor is not required to pay or assume
under this Agreement shall not relieve the Advisor of any of its obligations to
the Treasury Series nor obligate the Advisor to pay or assume any similar
Treasury Series' expenses on any subsequent occasions.
8. Compensation. For the services to be rendered and the expenses
assumed by the Advisor, the Fund shall pay to the Advisor monthly compensation
at an annual rate derived by: (1) calculating an amount equal to .30% of the
first $500 million of the Fund's aggregate average daily net assets, .26% of the
next $500 million of the Fund's aggregate average daily net assets, .25% of the
next $500 million of the Fund's aggregate average daily net assets, .24% of the
next $1 billion of the Fund's aggregate average daily net assets, .23% of the
next $1 billion of the Fund's aggregate average daily net assets and .22% of
that portion of the Fund's aggregate average daily net assets in excess of $3.5
billion; and (2) applying to this amount a fraction equal to the net assets of
the Treasury Series divided by the net assets of the Fund.
Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Payment of the Advisor's compensation for the preceding month shall be
made as promptly as possible.
9. Non-Exclusivity. The services of the Advisor to the Fund are not to
be deemed to be exclusive, and the Advisor shall be free to render investment
advisory and corporate administrative or other services to others (including
other investment companies) and to engage in other activities, so long as its
services under this Agreement are not impaired thereby. It is understood and
agreed that officers or directors of the Advisor may serve as officers or
directors of the Fund, and that officers or directors of the Fund may serve as
officers or directors of the Advisor to the extent permitted by law; and that
the officers and directors of the Advisor are not prohibited from engaging in
any other business activity or from rendering services to any other person, or
from serving as partners, officers, trustees or directors of any other firm,
trust or corporation, including other investment companies.
10. Term. This Agreement shall become effective at the close of
business on the date hereof and shall continue in force and effect, subject to
section 12 hereof, for two years from the date hereof.
11. Renewal. Following the expiration of its initial two-year term,
this Agreement shall continue in force and effect from year to year, provided
that such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote
of a majority of the outstanding voting securities of the
Treasury Series (as defined in Section 2(a) (42) of the 1940
Act), and
(b) by the affirmative vote of a majority of the directors who
are not parties to this Agreement or "interested persons" of a
party to this Agreement (other than as directors of the Fund)
by votes cast in person at a meeting specifically called for
such purpose.
12. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Fund's Board of Directors or by vote
of a majority of the Treasury Series' outstanding voting securities (as defined
in Section 2(a)(42) of the 1940 Act), or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by either party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" having the meaning defined in Section
2(a)(4) of the 1940 Act.
-4-
<PAGE>
13. Liability of Advisor. In the performance of its duties hereunder,
the Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Advisor shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of the Advisor or its
officers, directors or employees, or reckless disregard by the Advisor of its
duties under this Agreement.
14. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Fund and
the Advisor for this purpose shall be One South Street, Baltimore, Maryland
21202.
15. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to said Act.
In addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is revised by rule, regulation or order of the SEC,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written .
BT ALEX. BROWN CASH RESERVE FUND, INC.
By /s/ Harry Woolf
-------------------------------------
Name: Harry Woolf
Title: President
Attest:
/s/ Amy M. Olmert
- -----------------
Amy M. Olmert
INVESTMENT COMPANY CAPITAL CORP.
By /s/Edward J. Veilleux
-------------------------------------
Name: Edward J. Veilleux
Title: Executive Vice President
Attest:
/s/ Amy M. Olmert
- -----------------
Amy M. Olmert
-5-
<PAGE>
INVESTMENT ADVISORY AGREEMENT
BT ALEX. BROWN CASH RESERVE FUND, INC. - TAX-FREE SERIES
THIS AGREEMENT is made as of the 1st day of September, 1997 by and
between BT ALEX. BROWN CASH RESERVE FUND, INC., a Maryland corporation (the
"Fund"), and INVESTMENT COMPANY CAPITAL CORP., a Maryland corporation (the
"Advisor"), with respect to the following recital of fact:
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940, as amended, and engages in the business of
acting as an investment advisor; and
WHEREAS, the Fund's Articles of Incorporation authorize the Board of
Directors of the Fund to classify or reclassify authorized but unissued shares
of the Fund; and
WHEREAS, the Fund's Board of Directors has authorized the issuance of
three series of shares with a par value of $.001 representing interests in three
portfolios: the Prime Series, the Treasury Series and the Tax-Free Series (each
of the existing portfolios and any portfolio hereafter added shall be referred
to collectively as the "Series"); and
WHEREAS, the Fund and the Advisor desire to enter into an agreement to
provide investment advisory and administrative services for the Fund's Tax-Free
Series (the "Tax-Free Series") on the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Investment Advisor. The Fund hereby appoints the
Advisor to act as the investment advisor to the Tax-Free Series. The Advisor
shall manage the affairs of the Tax-Free Series and shall supervise all aspects
of the Tax-Free Series' operations (except as otherwise set forth herein),
including the investment and reinvestment of the cash, securities or other
properties comprising the Tax-Free Series' assets, subject at all times to the
policies and control of the Fund's Board of Directors. The Advisor shall give
the Tax-Free Series the benefit of its best judgment, efforts and facilities in
rendering its services as Advisor.
2. Duties of Investment Advisor. In carrying out its obligations under
section 1 hereof, the Advisor shall:
(a) supervise and manage all aspects of the Tax-Free Series'
operations;
(b) formulate and implement continuing programs for the purchases and
sales of securities, consistent with the investment objective and policies of
the Tax-Free Series;
(c) provide the Tax-Free Series with such executive, administrative and
clerical services as are deemed advisable by the Fund's Board of Directors;
(d) provide the Tax-Free Series with, or obtain for it, adequate office
space and all necessary office equipment and services, including telephone
service, heat, utilities, stationery supplies and similar items for the Fund's
principal office;
<PAGE>
(e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Tax-Free Series, and
whether concerning the individual issuers whose securities are included in the
Tax-Free Series or the activities in which they engage, or with respect to
securities which the Advisor considers desirable for inclusion in the Tax-Free
Series;
(f) determine which issuers and securities shall be represented in the
Tax-Free Series and regularly report thereon to the Fund's Board of Directors;
(g) take all actions necessary to carry into effect the Fund's purchase
and sale programs, with respect to its Tax-Free Series;
(h) supervise the operations of the Tax-Free Series' transfer and
dividend disbursing agent;
(i) provide the Tax-Free Series with such administrative and clerical
services for the maintenance of certain shareholder records, as are deemed
advisable by the Fund's Board of Directors; and,
(j) arrange, but not pay for, the periodic updating of prospectuses and
supplements thereto, proxy material, tax returns, reports to the shareholders of
the Tax-Free Series and reports to and filings with the Securities and Exchange
Commission (the "SEC") and state Blue Sky authorities, which may be required for
the Tax-Free Series.
3. Broker-Dealer Relationship. In the event that the Advisor is
responsible for decisions to buy and sell securities for the Tax-Free Series,
broker-dealer selection, and negotiation of its brokerage commission rates, the
Advisor's primary consideration in effecting a security transaction will be
execution at the most favorable price. The Fund understands that a substantial
majority of the Tax-Free Series' transactions will be transacted with primary
market makers acting as principal on a net basis, with no brokerage commissions
being paid by the Fund. Such principal transactions may, however, result in a
profit to the market makers. In certain instances the Advisor may make purchases
of underwritten issues at prices which include underwriting fees. In selecting a
broker-dealer to execute each particular transaction, the Advisor will take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Tax-Free Series on a
continuing basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Directors may determine, the
Advisor shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides brokerage and research
services to the Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Tax-Free Series. The
Advisor is further authorized to allocate the orders placed by it on behalf of
the Tax-Free Series to such brokers and dealers who also provide research or
statistical material or other services to the Fund or the Advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocation regularly to the Board
of Directors of the Fund, indicating the brokers to whom such allocations have
been made and the basis therefor.
4. Control by Board of Directors. Any management or supervisory
activities undertaken by the Advisor pursuant to this Agreement, as well as any
other activities undertaken by the Advisor on behalf of the Tax-Free Series
pursuant thereto, shall at all times be subject to any applicable directives of
the Board of Directors of the Fund.
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;
-2-
<PAGE>
(b) the provisions of the Registration Statement of the Fund under the
Securities Act of 1933 and 1940 Act;
(c) the provisions of the Articles of Incorporation, as amended;
(d) the provisions of the By-laws of the Fund, as amended; and
(e) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Tax-Free Series shall be
allocable between the Fund and the Advisor as follows:
(a) The Advisor shall, subject to compliance with applicable
banking regulations, furnish, at its expense and without cost to the Fund, the
services of one or more of its officers to the extent that such officers may be
required by the Fund for the proper conduct of its affairs.
(b) The Fund assumes and shall pay or cause to be paid all
other expenses of the Tax-Free Series, including, without limitation, the
Tax-Free Series' allocable portion of the following expenses: payments to the
Fund's distributor under the Fund's plan of distribution; the charges and
expenses of any registrar, any custodian or depository appointed by the Fund for
the safekeeping of its cash, portfolio securities and other property, and any
transfer, dividend or accounting agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and fees payable by the Fund to Federal, State or
other governmental agencies; the costs and expenses of engraving or printing of
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of directors or director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's shares;
charges and expenses of legal counsel, including counsel to the directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund and
of independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
directors) of the Fund which inure to its benefit; extraordinary expenses
(including but not limited to, legal claims and liabilities and litigation costs
and any indemnification related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
7. Delegation of Responsibilities.
(a) Subject to the approval of the Board of Directors and
shareholders of the Tax-Free Series, the Advisor may delegate to a sub-advisor
certain of its duties enumerated in section 2 hereof provided that the Advisor
shall continue to supervise the performance of any such sub-advisor and shall
report regularly thereon to the Fund's Board of Directors. The Advisor shall not
be responsible for any such sub-advisor's performance under a sub-advisory
agreement.
(b) Subject to the approval of the Board of Directors and, to
the extent required by the 1940 Act, shareholders of the Tax-Free Series, the
Advisor may delegate to any company that it controls, is controlled by, or is
under common control with (or to more than one such company), or to specified
employees of any such companies, certain of its duties enumerated in Section 2
hereof provided that the Advisor shall continue to supervise the performance of
any such company and shall regularly report thereon to the Fund's Board of
Directors.
(c) The Advisor may, but shall not be under any duty to,
perform services on behalf of the Tax-Free Series which are not required by this
Agreement upon the request of the Fund's Board of Directors. Such services will
be performed on behalf of the Tax-Free Series and the Advisor's charge in
rendering such services may be billed
-3-
<PAGE>
monthly to the Fund, subject to examination by the Fund's independent
accountants. Payment or assumption by the Advisor of any Fund expense that the
Advisor is not required to pay or assume under this Agreement shall not relieve
the Advisor of any of its obligations to the Tax-Free Series nor obligate the
Advisor to pay or assume any similar expenses on any subsequent occasions.
8. Compensation. For the services to be rendered and the expenses
assumed by the Advisor, the Tax-Free Series shall pay to the Advisor monthly
compensation at an annual rate derived by: (1) calculating an amount equal to
.30% of the first $500 million of the Fund's aggregate average daily net assets,
.26% of the next $500 million of the Fund's aggregate average daily net assets,
.25% of the next $500 million of the Fund's aggregate average daily net assets,
.24% of the next $1 billion of the Fund's aggregate average daily net assets,
.23% of the next $1 billion of the Fund's aggregate average daily net assets and
.22% of that portion of the Fund's aggregate average daily net assets in excess
of $3.5 billion; (2) applying to this amount a fraction equal to the net assets
of the Tax-Free Series divided by the net assets of the Fund; and (3) adding an
amount calculated daily and paid monthly, at the annual rate of .03% of the
Tax-Free Series' average daily net assets.
Except as hereinafter set forth, compensation under this Agreement
shall be calculated and accrued daily and the amounts of the daily accruals
shall be paid monthly. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above. Payment of the Advisor's compensation for the preceding month shall be
made as promptly as possible.
9. Non-Exclusivity. The services of the Advisor to the Fund are not to
be deemed to be exclusive, and the Advisor shall be free to render investment
advisory and corporate administrative or other services to others (including
other investment companies) and to engage in other activities, so long as its
services under this Agreement are not impaired thereby. It is understood and
agreed that officers or directors of the Advisor may serve as officers or
directors of the Fund, and that officers or directors of the Fund may serve as
officers or directors of the Advisor to the extent permitted by law; and that
the officers and directors of the Advisor are not prohibited from engaging in
any other business activity or from rendering services to any other person, or
from serving as partners, officers, trustees or directors of any other firm,
trust or corporation, including other investment companies.
10. Term. This Agreement shall become effective at the close of
business on the date hereof and shall continue in force and effect, subject to
section 12 hereof, for two years from the date hereof.
11. Renewal. Following the expiration of its initial two-year term,
this Agreement shall continue in force and effect from year to year, provided
that such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the outstanding voting securities of the Tax-Free Series (as defined
in Section 2(a) (42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the directors who are not
parties to this Agreement or "interested persons" of a party to this Agreement
(other than as directors of the Fund) by votes cast in person at a meeting
specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Fund's Board of Directors or by vote
of a majority of the Tax-Free Series' outstanding voting securities (as defined
in Section 2(a)(42) of the 1940 Act), or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by either party. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" having the meaning defined in Section
2(a)(4) of the 1940 Act.
13. Liability of Advisor. In the performance of its duties hereunder,
the Advisor shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits to ensure the
accuracy of all services performed under this Agreement, but the Advisor shall
not be liable for any act or omission which
-4-
<PAGE>
does not constitute willful misfeasance, bad faith or gross negligence on the
part of the Advisor or its officers, directors or employees, or reckless
disregard by the Advisor of its duties under this Agreement.
14. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Fund and
the Advisor for this purpose shall be One South Street, Baltimore, Maryland
21202.
15. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by the
United States Courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC issued pursuant to said Act.
In addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is revised by rule, regulation or order of the SEC,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
BT ALEX. BROWN CASH RESERVE FUND, INC.
By /s/ Harry Woolf
-------------------------------------
Name: Harry Woolf
Title: President
Attest:
/s/ Amy M. Olmert
- -----------------
Amy M. Olmert
INVESTMENT COMPANY CAPITAL CORP.
By /s/Edward J. Veilleux
-------------------------------------
Name: Edward J. Veilleux
Title: Executive Vice President
Attest:
/s/ Amy M. Olmert
- -----------------
Amy M. Olmert
-5-
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 31st day of August, 1997, by and between BT
Alex. Brown Cash Reserve Fund, Inc., with its principal office and place of
business at One South Street, Baltimore, Maryland 21202 (the "Fund"), and ICC
Distributors, Inc., a Delaware corporation with its principal office and place
of business at Two Portland Square, Portland, Maine 04101 (the "Distributor").
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company,
may issue its shares of common stock (the "Shares") in separate series and
classes and continuously offers for sale its Shares to the public; and
WHEREAS, the Distributor is registered under the Securities Exchange
Act of 1934, as amended ("1934 Act"), as a broker-dealer and is engaged in the
business of selling shares of registered investment companies either directly to
purchasers or through other securities dealers;
WHEREAS, the Fund offers Shares in one or more series as listed in
Appendix A hereto (each such series, together with all other series subsequently
established by the Fund and made subject to this Agreement in accordance with
Section 16, being herein referred to as a "Series," and collectively as the
"Series") and the Fund offers shares of one or more classes (each such class
together with all other classes subsequently established by a Series being
herein referred to as a "Class," and collectively as the "Classes");
WHEREAS, the Fund desires that the Distributor offer the Shares of each
Series and Class thereof to the public and the Distributor is willing to provide
those services on the terms and conditions set forth in this Agreement in order
to promote the growth of the Fund and facilitate the distribution of the Shares;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Fund and the Distributor hereby agree as
follows:
SECTION 1. DELIVERY OF DOCUMENTS AND APPOINTMENT
(a) The Fund has delivered to the Distributor properly certified or
authenticated copies of its Articles of Incorporation and Bylaws (collectively,
as amended from time to time, "Organic Documents"), the Fund's Notification of
Registration filed with the U.S. Securities and Exchange Commission ("SEC")
pursuant to Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act, the
Fund's Registration Statement and all amendments thereto filed with the SEC
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or
the 1940 Act (the "Registration Statement") and its current Prospectuses and
Statements of Additional Information (collectively, as currently in effect and
as amended or supplemented, the "Prospectus") and shall promptly furnish
<PAGE>
the Distributor with all amendments of or supplements to the foregoing, each
properly certified or authenticated. In addition, the Fund shall furnish the
Distributor with properly certified or authenticated copies of all documents,
notices and reports filed with the SEC.
(b) The Fund has delivered to the Distributor certified copies of the
resolutions of the Board of Directors (the "Board") authorizing the appointment
of the Distributor as distributor and approving this Agreement.
(b) The Fund hereby appoints the Distributor as its principal
underwriter and distributor to sell its Shares to the public and hereby agrees
during the term of this Agreement to sell its Shares to the Distributor upon the
terms and conditions herein set forth.
SECTION 2. EXCLUSIVE NATURE OF DUTIES
The Distributor shall be the exclusive representative of the Fund to
act as its principal underwriter and distributor except that the rights given
under this Agreement to the Distributor shall not apply to Shares issued in
connection with the merger, consolidation or reorganization of any other
investment company with the Fund; the Fund's acquisition by purchase or
otherwise of all or substantially all of the assets or stock of any other
investment company; or the reinvestment in Shares by the Fund's shareholders of
dividends or other distributions or any other offering by the Fund of securities
to its shareholders.
SECTION 3. PURCHASE OF SHARES; OFFERING OF SHARES
(a) The Distributor shall have the right to buy from the Fund the
Shares needed to fill unconditional orders for unsold Shares of the Fund as
shall then be effectively registered under the Securities Act placed with the
Distributor by investors or securities dealers or depository institutions or
other financial intermediaries acting as agent for their customers or on their
own behalf. Alternatively, the Distributor may act as the Fund's agent, to
offer, and to solicit offers to subscribe to, unsold Shares of the Fund as shall
then be effectively registered under the Securities Act. The Distributor will
promptly forward all orders and subscriptions for Shares of the Fund. The price
which the Distributor shall pay for Shares purchased by it from the Fund shall
be the net asset value, determined as set forth in Section 3(c) hereof, used in
determining the public offering price on which the orders are based. The price
at which the Distributor shall offer and sell Shares to investors shall be the
public offering price, as set forth in Section 3(b) hereof. The Distributor may
sell Shares to securities dealers, depository institutions or other financial
intermediaries acting as agent for their customers that have entered into
agreements with the Distributor pursuant to Section 9 hereof or acting on their
own behalf. The Fund reserves the right to sell its Shares directly to investors
through subscriptions received by the Fund, but no such direct sales shall
affect the sales charges due to the Distributor hereunder.
(b) The public offering price of the Shares of the Fund, i.e., the
price per Share at which the Distributor or selected dealers or selected agents
(each as defined in Section 11 hereof) may sell Shares to the public or to those
persons eligible to invest in Shares as described in the Fund's Prospectus,
shall be the public offering price determined in accordance with the then
currently
<PAGE>
effective Prospectus of the Fund or Class thereof under the Securities Act,
relating to such Shares, but not to exceed the net asset value at which the
Distributor, when acting as principal, is to purchase such Shares, plus, in the
case of Shares for which an initial sales charge is assessed, an initial charge
equal to a specified percentage or percentages of the public offering price of
the Shares as set forth in the current Prospectus relating to the Shares. In the
case of Shares for which an initial sales charge may be assessed, Shares may be
sold to certain classes of persons at reduced sales charges or without any sales
charge as from time to time set forth in the current Prospectus relating to the
Shares. The Fund will advise the Distributor of the net asset value per Share at
each time as the net asset value per Share shall have been determined by the
Fund.
(c) The net asset value per Share of each Series or Class thereof shall
be determined by the Fund, or an agent of the Fund, as of the close of the New
York Stock Exchange or such other time as set forth in the applicable Prospectus
on the Fund business day in accordance with the method set forth in the
Prospectus and guidelines established by the Board.
(d) The Fund reserves the right to suspend the offering of Shares of
any Class at any time in the absolute discretion of the Board, and upon notice
of such suspension the Distributor shall cease to offer Shares of the Fund or
Classes thereof specified in the notice.
(e) The Fund, or any agent of the Fund designated in writing to the
Distributor by the Fund, shall be promptly advised by the Distributor of all
purchase orders for Shares received by the Distributor and all subscriptions for
Shares obtained by the Distributor as agent shall be directed to the Fund for
acceptance and shall not be binding until accepted by the Fund. Any order or
subscription may be rejected by the Fund; provided, however, that the Fund will
not arbitrarily or without reasonable cause refuse to accept or confirm orders
or subscriptions for the purchase of Shares. The Fund (or its agent) will
confirm orders and subscriptions upon their receipt, will make appropriate book
entries and, upon receipt by the Fund (or its agent) of payment thereof, will
issue such Shares in certificated or uncertificated form pursuant to the
instructions of the Distributor. The Distributor agrees to cause such payment
and such instructions to be delivered promptly to the Fund (or its agent).
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES
(a) Any of the outstanding Shares of the Fund may be tendered for
redemption at any time, and the Fund agrees to redeem or repurchase the Shares
so tendered in accordance with its obligations as set forth in the Fund's
Organic Documents and the Prospectus relating to the Shares. The price to be
paid to redeem or repurchase the Shares of the Fund shall be equal to the net
asset value calculated in accordance with the provisions of Section 3(b) hereof
less, in the case of Shares for which a deferred sales charge is assessed, a
deferred sales charge equal to a specified percentage or percentages of the net
asset value of those Shares as from time to time set forth in the Prospectus
relating to those Shares or their cost, whichever is less. Shares for which a
deferred sales charge may be assessed and that have been outstanding for a
specified period of time may be redeemed without payment of a deferred sales
charge as from time to time set forth in the Prospectus relating to those
Shares.
<PAGE>
(b) The Fund or its designated agent shall pay (i) the total amount of
the redemption price consisting of the redemption price less any applicable
deferred sales charge to the redeeming shareholder or its agent and (ii) except
as may be otherwise required by the Conduct Rules (the "Rules") of the National
Association of Securities Dealers, Inc. (the "NASD") and any interpretations
thereof, any applicable deferred sales charges to the Distributor in accordance
with the Distributor's instructions on or before the third business day
subsequent to each calendar month-end.
(c) Redemption of Shares or payment therefor may be suspended at times
when the New York Stock Exchange is closed for any reason other than its
customary weekend or holiday closings, when trading thereon is restricted, when
an emergency exists as a result of which disposal by the Fund of securities
owned by the Fund is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
during any other period when the SEC so permits.
SECTION 5. DUTIES AND REPRESENTATIONS OF THE DISTRIBUTOR
(a) The Distributor shall use reasonable efforts to sell Shares of the
Fund upon the terms and conditions contained herein and in the then current
Prospectus. The Distributor 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 the Distributor to the Fund hereunder are not to be
deemed exclusive, and nothing herein contained shall prevent the Distributor
from entering into like arrangements with other investment companies so long as
the performance of its obligations hereunder is not impaired thereby.
(b) In selling Shares of the Fund, the Distributor shall use its best
efforts in all material respects duly to conform with the requirements of all
federal and state laws relating to the sale of the Shares. None of the
Distributor, any selected dealer, any selected agent or any other person is
authorized by the Fund to give any information or to make any representations
other than as is contained in the Fund's Prospectus or any advertising materials
or sales literature specifically approved in writing by the Fund or its agents.
(c) The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers or selected agents, the
collection of amounts payable by investors and selected dealers or selected
agents on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the NASD and any other applicable
self-regulatory organization.
(d) The Distributor will perform its duties hereunder under the
supervision of and in accordance with the directives of the Board. The
Distributor will perform its duties hereunder in accordance with the Fund's
Organic Documents and Prospectuses and with the instructions and directions of
the Board and will conform to and comply with the requirements of the 1940 Act,
the Securities Act and other applicable laws.
<PAGE>
(e) The Distributor shall provide the Board with a written report of
the amounts expended in connection with this Agreement as requested by
the Board.
(f) The Distributor represents and warrants to the Fund that:
(i) It is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware and it is duly
qualified to carry on its business in the State of Maine;
(ii) It is empowered under applicable laws and by its Articles of
Incorporation to enter into and perform this Agreement;
(iii) All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement;
(iv) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement;
(v) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of the Distributor, enforceable
against the Distributor in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the rights and remedies of creditors and
secured parties;
(vi) It is registered under the 1934 Act with the SEC as a
broker-dealer, it is a member in good standing of the NASD, it will
abide by the rules and regulations of the NASD, and it will notify the
Fund if its membership in the NASD is terminated or suspended; and
(vii) The performance by the Distributor of its obligations hereunder
does not and will not contravene any provision of its Articles of
Incorporation.
(g) Notwithstanding anything in this Agreement, including the
Appendices, to the contrary, the Distributor makes no warranty or
representation as to the number of selected dealers or selected agents
with which it has entered into agreements in accordance with Section 11
hereof, as to the availability of any Shares to be sold through any
selected dealer, selected agent or other intermediary or as to any
other matter not specifically set forth herein.
SECTION 6. DUTIES AND REPRESENTATIONS OF THE FUND
(a) The Fund shall furnish to the Distributor copies of all financial
statements and other documents to be delivered to shareholders or investors at
least two Fund business days prior to such delivery and shall furnish the
Distributor copies of all other financial statements, documents and other papers
or information which the Distributor may reasonably request for use in
connection with the distribution of Shares. The Fund shall make available to the
Distributor the number of copies of its Prospectuses as the Distributor shall
reasonably request.
<PAGE>
(b) The Fund shall take, from time to time, subject to the approval of
its Board and any required approval of its shareholders, all action necessary to
fix the number of authorized Shares (if such number is not limited) and to
register the Shares under the Securities Act, to the end that there will be
available for sale the number of Shares as reasonably may be expected to be sold
pursuant to this Agreement.
(c) The Fund shall register or qualify its Shares for sale under the
securities laws of the various states of the United States and other
jurisdictions ("States") as the Fund, in its sole discretion shall determine.
Any registration or qualification may be withheld, terminated or withdrawn by
the Fund at any time in its discretion. The Distributor shall furnish such
information and other material relating to its affairs and activities as may be
required by the Fund in connection with such registration or qualification.
(d) The Fund represents and warrants to the Distributor that:
(i) It is a corporation duly organized and existing and in good
standing under the laws of the State of Maryland;
(ii) It is empowered under applicable laws and by its Organic Documents
to enter into and perform this Agreement;
(iii) All proceedings required by the Organic Documents have been taken
to authorize it to enter into and perform its duties under this Agreement;
(iv) It is registered as an open-end management investment company with
the SEC under the 1940 Act;
(v) All Shares, when issued, shall be validly issued, fully paid and
non-assessable;
(vi) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of the Fund, enforceable against the Fund in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and secured parties;
(vii) The performance by the Fund of its obligations hereunder does not
and will not contravene any provision of its Articles of Incorporation.
(viii) The Fund's Registration Statement is currently effective and
will remain effective with respect to all Shares of the Fund's Series and
Classes thereof being offered for sale;
(ix) It will use its best efforts to ensure that its Registration
Statement and Prospectuses have been or will be, as the case may be, carefully
prepared in conformity with the requirements of the Securities Act and the rules
and regulations thereunder;
<PAGE>
(x) It will use its best efforts to ensure that (A) its
Registration Statement and Prospectuses contain or will contain all
statements required to be stated therein in accordance with the
Securities Act and the rules and regulations thereunder, (B) all
statements of fact contained or to be contained in the Registration
Statement or Prospectuses are or will be true and correct at the time
indicated or on the effective date as the case may be and (C) neither
the Registration Statement nor any Prospectus, when they shall become
effective or be authorized for use, will include an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading to a
purchaser of Shares;
(xi) It will from time to time file such amendment or
amendments to its Registration Statement and Prospectuses as, in the
light of then-current and then-prospective developments, shall, in the
opinion of its counsel, be necessary in order to have the Registration
Statement and Prospectuses at all times contain all material facts
required to be stated therein or necessary to make any statements
therein not misleading to a purchaser of Shares ("Required
Amendments");
(xii) It shall not file any amendment to its Registration
Statement or Prospectuses without giving the Distributor reasonable
advance notice thereof (which shall be at least three Fund business
days); provided, however, that nothing contained in this Agreement
shall in any way limit the Fund's right to file at any time such
amendments to its Registration Statement or Prospectuses, of whatever
character, as the Fund may deem advisable, such right being in all
respects absolute and unconditional; and
(xiii) It will use its best efforts to ensure that (A) any
amendment to its Registration Statement or Prospectuses hereafter filed
will, when it becomes effective, contain all statements required to be
stated therein in accordance with the 1940 Act and the rules and
regulations thereunder, (B) all statements of fact contained in the
Registration Statement or Prospectuses will, when it becomes effective,
be true and correct at the time indicated or on the effective date as
the case may be and (C) no such amendment, when it becomes effective,
will include an untrue statement of a material fact or will omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading to a purchaser of the
Shares.
SECTION 7. STANDARD OF CARE
(a) The Distributor shall use its best judgment and efforts in
rendering services to the Fund under this Agreement but shall be under no duty
to take any action except as specifically set forth herein or as may be
specifically agreed to by the Distributor in writing. The Distributor shall not
be liable to the Fund or any of the Fund's shareholders for any error of
judgment or mistake of law, for any loss arising out of any investment, or for
any action or inaction of the Distributor in the absence of bad faith, willful
misfeasance or gross negligence in the performance of the Distributor's duties
or obligations under this Agreement or by reason of the Distributor's reckless
disregard of its duties and obligations under this Agreement
<PAGE>
(b) The Distributor shall not be liable to the Fund for any action
taken or failure to act in good faith reliance upon:
(i) the advice of the Fund or of counsel, who may be counsel to the
Fund or counsel to the Distributor;
(ii) any oral instruction which the Distributor receives and which it
reasonably believes in good faith was transmitted by the person or
persons authorized by the Board to give such oral instruction (the
Distributor shall have no duty or obligation to make any inquiry or
effort of certification of such oral instruction);
(iii) any written instruction or certified copy of any resolution of
the Board, and the Distributor may rely upon the genuineness of any
such document or copy thereof reasonably believed in good faith by the
Distributor to have been validly executed; or
(iv) any signature, instruction, request, letter of transmittal,
certificate, opinion of counsel, statement, instrument, report, notice,
consent, order, or other document reasonably believed in good faith by
the Distributor to be genuine and to have been signed or presented by
the Fund or other proper party or parties;
and the Distributor shall not be under any duty or obligation to inquire into
the validity or invalidity or authority or lack thereof of any statement, oral
or written instruction, resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice, consent, order, or
any other document or instrument which the Distributor reasonably believes in
good faith to be genuine.
(c) The Distributor shall not be responsible or liable for any failure
or delay in performance of its obligations under this Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its reasonable
control including, without limitation, acts of civil or military authority,
national emergencies, labor difficulties (other than those related to the
Distributor's employees), fire, mechanical breakdowns, flood or catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply. In addition, to the extent the Distributor's
obligations hereunder are to oversee or monitor the activities of third parties,
the Distributor shall not be liable for any failure or delay in the performance
of the Distributor's duties caused, directly or indirectly, by the failure or
delay of such third parties in performing their respective duties or cooperating
reasonably and in a timely manner with the Distributor.
SECTION 8. INDEMNIFICATION
(a) The Fund will indemnify, defend and hold the Distributor, its
employees, agents, directors and officers and any person who controls the
Distributor within the meaning of section 15 of the Securities Act or section 20
of the 1934 Act ("Distributor Indemnitees") free and harmless from and against
any and all claims, demands, actions, suits, judgments, liabilities, losses,
damages, costs, charges, reasonable counsel fees and other expenses of every
nature and character (including the cost of investigating or defending such
claims, demands, actions, suits or liabilities and any
<PAGE>
reasonable counsel fees incurred in connection therewith) which any Distributor
Indemnitee may incur, under the Securities Act, under the securities laws of the
various States or under common law or otherwise, arising out of or based upon
any alleged untrue statement of a material fact contained in the Fund's
Registration Statement or Prospectuses, arising out of or based upon any alleged
omission to state a material fact required to be stated in any one thereof or
necessary to make the statements in any one thereof not misleading, or arising
out of or based upon any filing made with the regulatory authorities of any
State unless such statement or omission was made in reliance upon, and in
conformity with, information furnished in writing to the Fund in connection with
the preparation of the Registration Statement, exhibits to the Registration
Statement or filings made with the regulatory authorities of any State by or on
behalf of the Distributor ("Distributor Claims").
After receipt of the Distributor's notice of termination under Section
13(e), the Fund shall indemnify and hold each Distributor Indemnitee free and
harmless from and against any Distributor Claim; provided, that the term
Distributor Claim for purposes of this sentence shall mean any Distributor Claim
related to the matters for which the Distributor has requested amendment to the
Fund's Registration Statement and for which the Fund has not filed a Required
Amendment, regardless of with respect to such matters whether any statement in
or omission from the Registration Statement was made in reliance upon, or in
conformity with, information furnished to the Fund by or on behalf of the
Distributor.
(b) The Fund may assume the defense of any suit brought to enforce any
Distributor Claim and may retain counsel of good standing chosen by the Fund and
approved by the Distributor, which approval shall not be withheld unreasonably.
The Fund shall advise the Distributor that it will assume the defense of the
suit and retain counsel within ten (10) days of receipt of the notice of the
claim. If the Fund assumes the defense of any such suit and retains counsel, the
defendants shall bear the fees and expenses of any additional counsel that they
retain. If the Fund does not assume the defense of any such suit, or if
Distributor does not approve of counsel chosen by the Fund or has been advised
that it may have available defenses or claims that are not available to or
conflict with those available to the Fund, the Fund will reimburse any
Distributor Indemnitee named as defendant in such suit for the reasonable fees
and expenses of any counsel that person retains. A Distributor Indemnitee shall
not settle or confess any claim without the prior written consent of the Fund,
which consent shall not be unreasonably withheld or delayed.
(c) The Distributor will indemnify, defend and hold the Fund and its
several officers and directors (collectively, the "Fund Indemnitees"), free and
harmless from and against any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees
and other expenses of every nature and character (including the cost of
investigating or defending such claims, demands, actions, suits or liabilities
and any reasonable counsel fees incurred in connection therewith), but only to
the extent that such claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, reasonable counsel fees and other expenses
result from, arise out of or are based upon:
(i) any alleged untrue statement of a material fact contained in the
Fund's Registration Statement or Prospectus or any alleged omission of
a material fact required to be stated or necessary to make the
statements therein not misleading, if such statement or omission was
<PAGE>
made in reliance upon, and in conformity with, information furnished to
the Fund in writing in connection with the preparation of the
Registration Statement or Prospectus by or on behalf of the
Distributor; or
(ii) any act of, or omission by, Distributor or its sales
representatives that does not conform to the standard of care set forth
in Section 7 of this Agreement (collectively, "Fund Claims").
(d) The Distributor may assume the defense of any suit brought to
enforce any Fund Claim and may retain counsel of good standing chosen by the
Distributor and approved by the Fund, which approval shall not be withheld
unreasonably. The Distributor shall advise the Fund that it will assume the
defense of the suit and retain counsel within ten (10) days of receipt of the
notice of the claim. If the Distributor assumes the defense of any such suit and
retains counsel, the defendants shall bear the fees and expenses of any
additional counsel that they retain. If the Distributor does not assume the
defense of any such suit, or if the Fund does not approve of counsel chosen by
the Distributor or has been advised that it may have available defenses or
claims that are not available to or conflict with those available to the
Distributor, the Distributor will reimburse any Fund Indemnitee named as
defendant in such suit for the reasonable fees and expenses of any counsel that
person retains. A Fund Indemnitee shall not settle or confess any claim without
the prior written consent of the Distributor, which consent shall not be
unreasonably withheld or delayed.
(e) The Fund's and the Distributor's obligations to provide
indemnification under this Section is conditioned upon the Fund or the
Distributor receiving notice of any action brought against a Distributor
Indemnitee or Fund Indemnitee, respectively, by the person against whom such
action is brought within twenty (20) days after the summons or other first legal
process is served. Such notice shall refer to the person or persons against whom
the action is brought. The failure to provide such notice shall not relieve the
party entitled to such notice of any liability that it may have to any
Distributor Indemnitee or Fund Indemnitee except to the extent that the ability
of the party entitled to such notice to defend such action has been materially
adversely affected by the failure to provide notice.
(f) The provisions of this Section and the parties' representations and
warranties in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Distributor
Indemnitee or Fund Indemnitee and shall survive the sale and redemption of any
Shares made pursuant to subscriptions obtained by the Distributor. The
indemnification provisions of this Section will inure exclusively to the benefit
of each person that may be a Distributor Indemnitee or Fund Indemnitee at any
time and their respective successors and assigns (it being intended that such
persons be deemed to be third party beneficiaries under this Agreement).
(g) The Distributor agrees promptly to notify the Fund of the
commencement of any litigation or proceeding of which it becomes aware arising
out of or in any way connected with the issuance or sale of Shares. The Fund
agrees promptly to notify the Distributor of the commencement of any litigation
or proceeding of which it becomes aware arising out of or in any way connected
with the issuance or sale of its Shares.
<PAGE>
(h) Nothing contained herein shall require the Fund to take any action
contrary to any provision of its Organic Documents or any applicable statute or
regulation or shall require the Distributor to take any action contrary to any
provision of its Articles of Incorporation or Bylaws or any applicable statute
or regulation; provided, however, that neither the Fund nor the Distributor may
amend their Organic Documents or Articles of Incorporation and Bylaws,
respectively, in any manner that would result in a violation of a representation
or warranty made in this Agreement, except if required by any applicable statute
or regulation.
(i) Nothing contained in this section shall be construed to protect the
Distributor against any liability to the Fund or the security holders of the
Fund to which the Distributor would otherwise be subject by reason of its
failure to satisfy the standard of care set forth in Section 7 of this
Agreement.
SECTION 9. NOTIFICATION TO THE DISTRIBUTOR
The Fund shall advise the Distributor immediately: (i) of any request
by the SEC for amendments to the Fund's Registration Statement or Prospectus or
for additional information; (ii) in the event of the issuance by the SEC of any
stop order suspending the effectiveness of the Fund's Registration Statement or
any Prospectus or the initiation of any proceedings for that purpose; (iii) of
the happening of any material event which makes untrue any statement made in the
Fund's then current Registration Statement or Prospectus or which requires the
making of a change in either thereof in order to make the statements therein not
misleading; and (iv) of all action of the SEC with respect to any amendments to
the Fund's Registration Statement or Prospectus which may from time to time be
filed with the Commission under the 1940 Act or the Securities Act.
SECTION 10. COMPENSATION; EXPENSES
(a) In consideration of the Distributor's services in connection with
the distribution of Shares of the Fund and each Class thereof, the Distributor
shall receive: (i) any applicable sales charge assessed upon investors in
connection with the purchase of Shares; (ii) from the Fund, any applicable
contingent deferred sales charge ("CDSC") assessed upon investors in connection
with the redemption of Shares; (iii) from the Fund, the distribution service
fees with respect to the Shares of those Classes as designated in Appendix A for
which a plan under Rule 12b-1 under the 1940 Act (a "Plan") is effective (the
"Distribution Fee"); and (iv) from the Fund, the shareholder service fees with
respect to the Shares of those Classes as designated in Appendix A (the "Service
Fee"). The Distribution Fee and Service Fee shall be accrued daily by each
applicable Fund or Class thereof and shall be paid monthly as promptly as
possible after the last day of each calendar month but in any event on or before
the fifth (5th) Fund business day after month-end, at the rate or in the amounts
set forth in Appendix A and, as applicable, the Plan(s). The Fund grants and
transfers to the Distributor a general unperfected lien and security interest in
any and all securities and other assets of the Fund now or hereafter maintained
in an account at the Fund's custodian on behalf of the Fund to secure any
Distribution Fees and Service Fees owed the Distributor by the Fund under this
Agreement.
<PAGE>
(b) The Fund shall cause its transfer agent (the "Transfer Agent") to
withhold, from redemption proceeds payable to holders of Shares of the Series
and the Classes thereof, all CDSCs properly payable by the shareholders in
accordance with the terms of the applicable Prospectus and shall cause the
Transfer Agent to pay such amounts over to the Distributor as promptly as
possible after each month end.
(c) Except as specified in Sections 8 and 10(a), the Distributor shall
be entitled to no compensation or reimbursement of expenses for the services
provided by the Distributor pursuant to this Agreement. The Distributor may
receive compensation from the Fund's investment advisors, other service
providers or their respective affiliates (collectively, the "Advisor") for its
services hereunder or for additional services all as may be agreed to between
the Advisor and the Distributor. Notwithstanding anything in this Agreement to
the contrary, to the extent the Distributor receives compensation from the
Advisor that is disclosed to the Board, the Fund will indemnify, defend and hold
each Distributor Indemnitees free and harmless from and against any and all
claims, demands, actions, suits, judgments, liabilities, losses, damages, costs,
charges, reasonable counsel fees and other expenses of every nature and
character (including the cost of investigating or defending such claims,
demands, actions, suits or liabilities and any reasonable counsel fees incurred
in connection therewith) related in any way to such payment.
(d) The Fund shall be responsible and assumes the obligation for
payment of all its expenses, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of the Registration
Statement and Prospectuses (including but not limited to the expense of setting
in type the Registration Statement and Prospectuses and printing sufficient
quantities for internal compliance, regulatory purposes and for distribution to
current shareholders).
(e) The Fund shall bear the cost and expenses (i) of the registration
of its Shares for sale under the Securities Act; (ii) of the registration or
qualification of its Shares for sale under the securities laws of the various
States; (iii) if necessary or advisable in connection therewith, of qualifying
the Fund, or its Series or the Classes thereof (but not the Distributor) as an
issuer or as a broker or dealer, in such States as shall be selected by the
Fund; and (iv) payable to each State for continuing registration or
qualification therein until the Fund decides to discontinue registration or
qualification. The Distributor shall pay all expenses relating to the
Distributor's broker-dealer qualification.
SECTION 11. SELECTED DEALER AND SELECTED AGENT AGREEMENTS
(a) The Distributor shall have the right to enter into sub-distribution
agreements with securities dealers of its choice ("selected dealers") and with
depository institutions and other financial intermediaries of its choice
("selected agents") for the sale of Shares and to fix therein the portion of the
sales charge, if any, that may be allocated to the selected dealers or selected
agents; provided, that all such agreements shall be in substantially the form of
agreement as set forth in Appendix B hereto. Shares of each Series or Class
thereof shall be resold by selected dealers or selected agents only at the
public offering price(s) set forth in the Prospectus relating to the Shares. The
Distributor shall offer and sell Shares of the Fund only to such selected
dealers as are members in good standing of the NASD. The Distributor shall have
the right to enter into shareholder
<PAGE>
servicing agreements with financial intermediaries of its choice; provided, that
all such agreements shall be in substantially the form of agreement as set forth
in Appendix C hereto.
(b) The Distributor will supervise the Fund's relationship with
selected dealers and agents and may make payments to those selected dealers and
agents in such amounts as the Distributor may determine from time to time in its
sole discretion. The amount of payments to selected dealers and agents by the
Distributor may be reviewed by the Board from time to time; provided, however,
that no payment by the Distributor to any selected dealer or agent with respect
to a Share shall exceed the amount of payments made to the Distributor hereunder
with respect to that Share.
SECTION 12. CONFIDENTIALITY
The Distributor agrees to treat all records and other information
related to the Fund as proprietary information of the Fund and, on behalf of
itself and its employees, to keep confidential all such information, except that
the Distributor may:
(i) prepare or assist in the preparation of periodic reports to
shareholders and regulatory bodies such as the SEC;
(ii) provide information typically supplied in the investment company
industry to companies that track or report price, performance or other
information regarding investment companies; and
(iii) release such other information as approved in writing by the
Fund, which approval shall not be unreasonably withheld;
provided, however, that the Distributor may release any information regarding
the Fund without the consent of the Fund if the Distributor reasonably believes
that it may be exposed to civil or criminal legal proceedings for failure to
comply, when requested to release any information by duly constituted
authorities or when so requested by the Fund.
SECTION 13. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to each series
or class listed in Appendix A on the later of (i) August 31, 1997 or (ii) the
date on which the Fund's Registration Statement relating to Shares of the Fund
becomes effective. Upon effectiveness of this Agreement, it shall supersede all
previous agreements between the parties hereto covering the subject matter
hereof insofar as such Agreement may have been deemed to relate to the Fund.
(b) This Agreement shall continue in effect with respect to a Series
Fund for a period of one year from its effectiveness and thereafter shall
continue in effect with respect to the Series until terminated; provided, that
continuance is specifically approved at least annually (i) by the Board or by a
vote of a majority of the outstanding voting securities of the Fund and (ii) by
a vote of a majority of Directors of the Fund (I) who are not parties to this
Agreement or interested persons of
<PAGE>
any such party (other than as Directors of the Fund) and (II) with respect to
each Class of a Series for which there is an effective Plan, who do not have any
direct or indirect financial interest in any such Plan applicable to the Class
or in any agreements related to the Plan, cast in person at a meeting called for
the purpose of voting on such approval.
(c) This Agreement may be terminated at any time with respect to a
Series, without the payment of any penalty, (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Series or, with respect to
each Class for which there is an effective Plan, a majority of Directors of the
Fund who do not have any direct or indirect financial interest in any such Plan
or in any agreements related to the Plan, on 60 days' written notice to the
Distributor or (ii) by the Distributor on 60 days' written notice to the Fund.
(d) This Agreement shall automatically terminate upon its assignment
and upon the termination of the Distributor's membership in the NASD.
(e) If the Fund does not file a Required Amendment within fifteen days
following receipt of a written request from the Distributor to do so, the
Distributor may, at its option, terminate this Agreement immediately.
(f) The obligations of Sections 5(e), 6(d), 8, 9 and 10 shall survive
any termination of this Agreement with respect to a Series or Class thereof.
SECTION 14. NOTICES
Any notice required or permitted to be given hereunder by the
Distributor to the Fund or the Fund to the Distributor shall be deemed
sufficiently given if personally delivered or sent by telegram, facsimile or
registered, certified or overnight mail, postage prepaid, addressed by the party
giving such notice to the other party at the last address furnished by the other
party to the party giving such notice, and unless and until changed pursuant to
the foregoing provisions hereof each such notice shall be addressed to the Fund
or the Distributor, as the case may be, at their respective principal places of
business.
SECTION 15. ACTIVITIES OF THE DISTRIBUTOR
Except to the extent necessary to perform the Distributor's obligations
hereunder, nothing herein shall be deemed to limit or restrict the Distributor's
right, or the right of any of the Distributor's employees, agents, officers or
directors who may also be a director, officer or employee of the Fund, or
affiliated persons of the Fund to engage in any other business or to devote time
and attention to the management or other aspects of any other business, whether
of a similar or dissimilar nature, or to render services of any kind to any
other corporation, trust, firm, individual or association.
<PAGE>
SECTION 16. ADDITIONAL FUNDS AND CLASSES
In the event that the Fund establishes one or more series of Shares or
one or more classes of Shares after the effectiveness of this Agreement, such
series of Shares or classes of Shares, as the case may be, shall become Series
and Classes under this Agreement upon approval of this Agreement by the Fund
with respect to the series of Shares or class of Shares and the execution of an
amended Appendix A reflecting the applicable names and terms. The Distributor
may elect not to make any such series or classes subject to this Agreement.
SECTION 17. MISCELLANEOUS
(a) The Distributor shall not be liable to the Fund and the Fund shall
not be liable to the Distributor for consequential damages under any provision
of this Agreement except that Distributor Claims, as that term is used in
Section 8(a), shall include consequential damages related to, arising out of or
based upon any filing made with the regulatory authorities of any State.
(b) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by the
Distributor and the Fund.
(c) This Agreement shall be governed by, and the provisions of this
Agreement shall be construed and interpreted under and in accordance with, the
laws of the State of Maryland.
(d) This Agreement constitutes the entire agreement between the
Distributor and the Fund and supersedes any prior agreement with respect to the
subject matter hereof, whether oral or written.
(e) This Agreement may be executed by the parties hereto on any number
of counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(f) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(g) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(h) No affiliated person, employee, agent, officer or director of the
Distributor shall be liable at law or in equity for the Distributor's
obligations under this Agreement.
(i) The Fund shall be liable to the Distributor only with respect to
those Series and Classes of the Fund and the Distributor shall look solely to
the Fund to satisfy any liability of a Series or Class thereof to the
Distributor.
<PAGE>
(j) Each of the undersigned warrants and represents that they have full
power and authority to sign this Agreement on behalf of the party indicated and
that their signature will bind the party indicated to the terms hereof.
(k) The terms "vote of a majority of the outstanding voting
securities," "interested person," "affiliated person" and "assignment" shall
have the meanings ascribed thereto in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
BT ALEX. BROWN CASH RESERVE
FUND, INC.
By: /s/ Amy M. Olmert
----------------------
Name:
Secretary
ICC DISTRIBUTORS, INC.
By: /s/ John Y. Keffer
----------------------
John Y. Keffer
President
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
DISTRIBUTION AGREEMENT
Appendix A
as of August 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Distribution Service
Series Class Fee Fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BT Alex. Brown Cash Reserve Fund, Inc.
Prime Series Portfolio Flag Investors Cash Reserves
Prime Shares - Class A 0.25% ----
Flag Investors Cash Reserves
Prime Shares - Class B(1) 0.75% 0.25%
Quality Cash Reserve Prime
Class 0.60% ----
Institutional Class ---- ----
ABCR Class(2) 0.25% ----
Tax Free Portfolio Institutional Class ---- ----
ABCR Tax Free Class(2) 0.25% ----
Treasury Portfolio Institutional Class ---- ----
ABCR Treasury Class(2) 0.25% ----
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Only available through exchange.
(2) BT Alex. Brown Cash Reserve is defined as ABCR
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
DISTRIBUTION AGREEMENT
Appendix B
[Form of Sub-Distribution Agreement]
FLAG INVESTORS FUNDS
SUB-DISTRIBUTION AGREEMENT
Ladies and Gentlemen:
ICC Distributors, Inc. ("ICC"), a Delaware corporation, serves as
Distributor (the "Distributor") of the Flag Investors Funds (collectively, the
"Funds", individually, a "Fund"). The Funds are open-end investment companies
(or series thereof) registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Funds offer their shares ("Shares")
to the public in accordance with the terms and conditions contained in the
Prospectus of each Fund. The term "Prospectus" as used herein refers to each
prospectus on file with the Securities and Exchange Commission which is part of
the registration statement of each Fund under the Securities Act of 1933 (the
"Securities Act"). In connection with the foregoing you may serve as a
participating dealer (and, therefore, accept orders for the purchase or
redemption of Shares, respond to shareholder inquiries and perform other related
functions) on the following terms and conditions:
1. Participating Dealer. You are hereby designated a Participating Dealer
and as such are authorized (i) to accept orders for the purchase of Shares and
to transmit to the Funds such orders and the payment made therefore, (ii) to
accept orders for the redemption of Shares and to transmit to the Funds such
orders and all additional material, including any certificates for Shares, as
may be required to complete the redemption and (iii) to assist shareholders with
the foregoing and other matters relating to their investments in each Fund, in
each case subject to the terms and conditions set forth in the Prospectus of
each Fund. You are to review each Share purchase or redemption order submitted
through you or with your assistance for completeness and accuracy. You further
agree to undertake from time to time certain shareholder servicing activities
for customers of yours who have purchased Shares and who use your facilities to
communicate with the Funds or to effect redemptions or additional purchases of
the Shares.
2. Limitation of Authority. No person is authorized to make any
representations concerning the Funds or the Shares except those contained in the
Prospectus of each Fund and in such printed information as the Distributor may
subsequently prepare. No person is authorized to distribute any sales material
relating to any Fund without the prior written approval of the Distributor.
<PAGE>
3. Compensation. As compensation for such services, you will look solely to
the Distributor, and you acknowledge that the Funds shall have no direct
responsibility for any compensation. In addition to any sales charge payable to
you by your customer pursuant to a Prospectus, the Distributor will pay you no
less often than annually a shareholder processing and service fee (as we may
determine from time to time in writing) computed as a percentage of the average
daily net assets maintained with each Fund during the preceding period by
shareholders who purchase their shares through you or with your assistance,
provided that said assets are at least $25,000 in the fund family for which you
are to be compensated, and provided that in all cases your name is transmitted
with each shareholder's purchase order.
4. Prospectus and Reports. You agree to comply with the provisions
contained in the Securities Act governing the distribution of prospectuses to
persons to whom you offer Shares. You further agree to deliver, upon our
request, copies of any amended Prospectus of the relevant Fund to purchasers
whose Shares you are holding as record owner and to deliver to such persons
copies of the annual and interim reports and proxy solicitation materials of the
Funds. We agree to furnish to you as many copies of each Prospectus, annual and
interim reports and proxy solicitation materials as you may reasonably request.
5. Qualification to Act. You represent that you are a member in good
standing of National Association of Securities Dealers, Inc. (the "NASD"). Your
expulsion or suspension from the NASD will automatically terminate this
Agreement on the effective date of such expulsion or suspension. You agree that
you will not offer Shares to persons in any jurisdiction in which you may not
lawfully make such offer due to the fact that you have not registered under, or
are not exempt from, the applicable registration or licensing requirements of
such jurisdiction. You agree that in performing the services under this
Agreement, you at all times, will comply with the Conduct Rules (formerly the
Rules of Fair Practice) of the NASD, including, without limitation, the
provisions of Rule 2830 (formerly Section 26) of such Rules. You agree that you
will not combine customer orders to reach breakpoints in commission for any
purposes whatsoever unless authorized by the then current Prospectus in respect
of a particular class of Shares or by us in writing. You also agree that you
will place orders immediately upon their receipt and will not withhold any order
so as to profit therefrom. In determining the amount payable to you hereunder,
we reserve the right to exclude any sales which we reasonably determine are not
made in accordance with the terms of the relevant prospectus and provisions of
the Agreement.
6. Blue Sky. The Funds have registered an indefinite number of Shares under
the Securities Act. The Funds intend to make appropriate notice filings in
certain states where such filing is required. We will inform you as to the
states or other jurisdictions in which we believe the Shares are eligible for
sale under the respective securities laws of such states. You agree that you
will offer Shares to your customers only in those states where such Shares are
eligible to be sold. We assume no responsibility or obligation as to your right
to sell Shares in any jurisdiction.
7. Authority of Fund. Each Fund shall have full authority to take such
action as it deems advisable in respect of all matters pertaining to the
offering of its Shares, including the right not to accept any order for the
purchase of Shares.
<PAGE>
8. Record Keeping. You will (i) maintain all records required by law to be
kept by you relating to transactions in Shares and, upon request by any Fund,
promptly make such of these records available to the Fund as the Fund may
reasonably request in connection with its operations and (ii) promptly notify
the Fund if you experience any difficulty in maintaining the records described
in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by it hereunder. In
carrying out your obligations, you agree to act in good faith and without
negligence. Nothing contained in this Agreement is intended to operate as a
waiver by the Distributor or you of compliance with any provisions of the
Investment Company Act, the Securities Act, the Securities Exchange Act of 1934,
as amended, or the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.
10. Termination. This Agreement may be terminated by either party, without
penalty, upon ten days' notice to the other party and shall automatically
terminate in the event of its assignment, as defined in the Investment Company
Act. This Agreement may also be terminated at any time for any particular Fund
without penalty by the vote of a majority of the members of the Board of
Directors or Trustees of such Fund who are not "interested persons" (as such
phrase is defined in the Investment Company Act) and who have no direct or
indirect financial interest in the operation of the Distribution Agreement
between such Fund and the Distributor or by the vote of a majority of the
outstanding voting securities of the Fund.
11. Communications. All communications other than this agreement and those
pertaining to this agreement should be sent to the address listed below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
Flag Investors Funds
330 West 9th Street, 1st Floor
Kansas City, MO 64105
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us both copies of this Agreement to:
Flag Investors Funds
c/o ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attn: Dealer Services
____________________________
ICC Distributors, Inc.
By: Richard C. Butt
Vice President
<PAGE>
Confirmed and accepted:
Firm Name: ___________________________________________________________
By: __________________________________________________________________
Signature
______________________________________________________________________
Printed Name and Title
Date: ________________________________________________________________
Address: _____________________________________________________________
______________________________________________________________________
______________________________________________________________________
Clears Through: ______________________________________________________
Phone No.: ___________________________________________________________
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
DISTRIBUTION AGREEMENT
Appendix C
[Form of Shareholder Services Agreement]
FLAG INVESTORS FAMILY OF FUNDS
SHAREHOLDER SERVICING AGREEMENT
[Date]
Ladies and Gentlemen:
We wish to enter into this Shareholder Servicing Agreement with you
concerning the provision of support services to your clients and customers
("Customers") who may from time to time beneficially own shares of our common
stock ("Shares").
The terms and conditions of this Servicing Agreement are as follows:
Section 1.
(a) You agree to provide the following services to Customers who may from
time to time beneficially own Shares: (i) aggregating and processing purchase
and redemption requests for Shares from Customers and placing net purchase and
redemption orders with our distributor; (ii) processing dividend payments from
us on behalf of Customers; (iii) providing information periodically to Customers
showing their positions in Shares; (iv) arranging for bank wires; (v) responding
to Customer inquiries relating to the services performed by you; (v) providing
subaccounting with respect to Shares beneficially owned by Customers; (vii) as
required by law, forwarding shareholder communications from us (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Customers; and (viii) providing such other
similar services as we may reasonably request to the extent you are permitted to
do so under applicable statutes, rules or regulations. You will provide to
Customers a schedule of any fees that you may charge directly to them for such
services. You hereby represent that such fees are not unreasonable or excessive.
Shares purchased by you on behalf of Customers will be registered with our
transfer agent in your name or in the name of your nominee. The Customer will be
the beneficial owner of Shares purchased and held by you in accordance with the
Customer's
<PAGE>
instructions ("Customers' Shares") and the Customer may exercise all rights of a
shareholder of the Fund.
(b) You agree that you will (i) maintain all records required by law
relating to transactions in Shares and, upon our request, promptly make such of
these records available to us as we may reasonably request in connection with
our operations, and (ii) promptly notify us if you experience any difficulty in
maintaining the records described in the foregoing clauses in an accurate and
complete manner.
Section 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be a part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
services to Customers.
Section 3. Neither you nor any of your officers, employees, agents or
assignees are authorized to make any representations concerning us or Shares
except those contained in our then current prospectus for such Shares, copies of
which will be supplied by us to you, or in such supplemental literature or
advertising as may be authorized by us in writing.
Section 4. For all purposes of this Agreement, you will be deemed to be an
independent contractor and will have no authority to act as agent for us in any
matter or in any respect. You may, upon prior written notice to us, delegate
your responsibilities hereunder to another person or persons; provided, however,
that notwithstanding any such delegation, you will remain responsible for the
performance of all your responsibilities under this Agreement. By your written
acceptance of this Agreement, you agree and do release, indemnify and hold us
harmless from and against any and all direct or indirect liabilities or losses
resulting from requests, directions, actions or inactions of or by you and your
offices, employees, agents or assigns regarding your responsibilities hereunder
or the purchase, redemption, transfer or registration of Shares by or on behalf
of Customers. You and your employees will, upon request, be available during
normal business hours to consult with us or our designees concerning the
performance of your responsibilities under this Agreement.
Section 5. In consideration of the services and facilities provided by you
hereunder, we will cause our distributor to pay you, and you will accept as full
payment therefore, a fee (as we may determine from time to time in writing)
computed as a percentage of the average daily net assets of the Customers'
Shares held of record by you from time to time, which fee will be computed daily
and payable no less often than annually. For purposes of determining the fees
payable under this Section 5, the average daily net assets of the Customer's
Shares will be computed in the manner specified in our registration statement
(as the same is in effect from time to time) in connection with the computation
of the net asset value of Shares for purposes of purchases and redemptions. The
fee rate stated above may be prospectively increased or decreased by us or by
our distributor, at any time upon notice to you. Further, we may, in our
discretion and without notice, suspend or withdraw the sale of Shares, including
the sale of such shares to you for the account of any Customer or Customers.
<PAGE>
Section 6. You will furnish us or our designees with such information
relating to your performance under this Agreement as we or they may reasonably
request (including, without limitation, periodic certifications confirming the
provision to Customers of the services described herein), and shall otherwise
cooperate with us and our designees (including, without limitation, any auditors
designated by us), in connection with the preparation of reports to our Board of
Directors concerning this Agreement and the monies paid or payable by us
pursuant hereto, as well as any other reports or filings that may be required by
law.
Section 7. We may enter into other similar services agreements with any
other person or persons without your consent.
Section 8. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or by our distributor, and is
terminable, without penalty, at any time by us or by you upon ten days' notice
to the other party hereto and shall automatically terminate in the event of its
assignment, as that term is defined in the Investment Company Act of 1940, as
amended.
Section 9. This Agreement will be construed in accordance with the laws of
the State of Maryland.
Section 10. All notices and other communications to either you or us will
be duly given if mailed, telegraphed, telexed, or transmitted by similar
telecommunications device, if to us at the address below, and if to you, at the
address specified by you after your signature below:
ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attention: Dealer Services
<PAGE>
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us at the address set forth in Section 10 above.
Very truly yours,
ICC DISTRIBUTORS, INC.
By: _______________________________
Richard C. Butt, Vice President
Confirmed and Accepted:
Firm Name: ___________________________________________________________
By: __________________________________________________________________
Name: ________________________________________________________________
Address: _____________________________________________________________
______________________________________________________________________
______________________________________________________________________
Date: ________________________________________________________________
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
[Form of Sub-Distribution Agreement]
FLAG INVESTORS FUNDS
SUB-DISTRIBUTION AGREEMENT
Ladies and Gentlemen:
ICC Distributors, Inc. ("ICC"), a Delaware corporation, serves as
Distributor (the "Distributor") of the Flag Investors Funds (collectively, the
"Funds", individually, a "Fund"). The Funds are open-end investment companies
(or series thereof) registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Funds offer their shares ("Shares")
to the public in accordance with the terms and conditions contained in the
Prospectus of each Fund. The term "Prospectus" as used herein refers to each
prospectus on file with the Securities and Exchange Commission which is part of
the registration statement of each Fund under the Securities Act of 1933 (the
"Securities Act"). In connection with the foregoing you may serve as a
participating dealer (and, therefore, accept orders for the purchase or
redemption of Shares, respond to shareholder inquiries and perform other related
functions) on the following terms and conditions:
1. Participating Dealer. You are hereby designated a Participating Dealer
and as such are authorized (i) to accept orders for the purchase of Shares and
to transmit to the Funds such orders and the payment made therefore, (ii) to
accept orders for the redemption of Shares and to transmit to the Funds such
orders and all additional material, including any certificates for Shares, as
may be required to complete the redemption and (iii) to assist shareholders with
the foregoing and other matters relating to their investments in each Fund, in
each case subject to the terms and conditions set forth in the Prospectus of
each Fund. You are to review each Share purchase or redemption order submitted
through you or with your assistance for completeness and accuracy. You further
agree to undertake from time to time certain shareholder servicing activities
for customers of yours who have purchased Shares and who use your facilities to
communicate with the Funds or to effect redemptions or additional purchases of
the Shares.
2. Limitation of Authority. No person is authorized to make any
representations concerning the Funds or the Shares except those contained in the
Prospectus of each Fund and in such printed information as the Distributor may
subsequently prepare. No person is authorized to distribute any sales material
relating to any Fund without the prior written approval of the Distributor.
<PAGE>
3. Compensation. As compensation for such services, you will look solely to
the Distributor, and you acknowledge that the Funds shall have no direct
responsibility for any compensation. In addition to any sales charge payable to
you by your customer pursuant to a Prospectus, the Distributor will pay you no
less often than annually a shareholder processing and service fee (as we may
determine from time to time in writing) computed as a percentage of the average
daily net assets maintained with each Fund during the preceding period by
shareholders who purchase their shares through you or with your assistance,
provided that said assets are at least $25,000 in the fund family for which you
are to be compensated, and provided that in all cases your name is transmitted
with each shareholder's purchase order.
4. Prospectus and Reports. You agree to comply with the provisions
contained in the Securities Act governing the distribution of prospectuses to
persons to whom you offer Shares. You further agree to deliver, upon our
request, copies of any amended Prospectus of the relevant Fund to purchasers
whose Shares you are holding as record owner and to deliver to such persons
copies of the annual and interim reports and proxy solicitation materials of the
Funds. We agree to furnish to you as many copies of each Prospectus, annual and
interim reports and proxy solicitation materials as you may reasonably request.
5. Qualification to Act. You represent that you are a member in good
standing of National Association of Securities Dealers, Inc. (the "NASD"). Your
expulsion or suspension from the NASD will automatically terminate this
Agreement on the effective date of such expulsion or suspension. You agree that
you will not offer Shares to persons in any jurisdiction in which you may not
lawfully make such offer due to the fact that you have not registered under, or
are not exempt from, the applicable registration or licensing requirements of
such jurisdiction. You agree that in performing the services under this
Agreement, you at all times, will comply with the Conduct Rules (formerly the
Rules of Fair Practice) of the NASD, including, without limitation, the
provisions of Rule 2830 (formerly Section 26) of such Rules. You agree that you
will not combine customer orders to reach breakpoints in commission for any
purposes whatsoever unless authorized by the then current Prospectus in respect
of a particular class of Shares or by us in writing. You also agree that you
will place orders immediately upon their receipt and will not withhold any order
so as to profit therefrom. In determining the amount payable to you hereunder,
we reserve the right to exclude any sales which we reasonably determine are not
made in accordance with the terms of the relevant prospectus and provisions of
the Agreement.
6. Blue Sky. The Funds have registered an indefinite number of Shares under
the Securities Act. The Funds intend to make appropriate notice filings in
certain states where such filing is required. We will inform you as to the
states or other jurisdictions in which we believe the Shares are eligible for
sale under the respective securities laws of such states. You agree that you
will offer Shares to your customers only in those states where such Shares are
eligible to be sold. We assume no responsibility or obligation as to your right
to sell Shares in any jurisdiction.
7. Authority of Fund. Each Fund shall have full authority to take such
action as it deems advisable in respect of all matters pertaining to the
offering of its Shares, including the right not to accept any order for the
purchase of Shares.
<PAGE>
8. Record Keeping. You will (i) maintain all records required by law to be
kept by you relating to transactions in Shares and, upon request by any Fund,
promptly make such of these records available to the Fund as the Fund may
reasonably request in connection with its operations and (ii) promptly notify
the Fund if you experience any difficulty in maintaining the records described
in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by it hereunder. In
carrying out your obligations, you agree to act in good faith and without
negligence. Nothing contained in this Agreement is intended to operate as a
waiver by the Distributor or you of compliance with any provisions of the
Investment Company Act, the Securities Act, the Securities Exchange Act of 1934,
as amended, or the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.
10. Termination. This Agreement may be terminated by either party, without
penalty, upon ten days' notice to the other party and shall automatically
terminate in the event of its assignment, as defined in the Investment Company
Act. This Agreement may also be terminated at any time for any particular Fund
without penalty by the vote of a majority of the members of the Board of
Directors or Trustees of such Fund who are not "interested persons" (as such
phrase is defined in the Investment Company Act) and who have no direct or
indirect financial interest in the operation of the Distribution Agreement
between such Fund and the Distributor or by the vote of a majority of the
outstanding voting securities of the Fund.
11. Communications. All communications other than this agreement and those
pertaining to this agreement should be sent to the address listed below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
Flag Investors Funds
330 West 9th Street, 1st Floor
Kansas City, MO 64105
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us both copies of this Agreement to:
Flag Investors Funds
c/o ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attn: Dealer Services
_____________________________
ICC Distributors, Inc.
By: Richard C. Butt
Vice President
<PAGE>
Confirmed and accepted:
Firm Name: ___________________________________________________________
By: __________________________________________________________________
Signature
______________________________________________________________________
Printed Name and Title
Date: ________________________________________________________________
Address: _____________________________________________________________
______________________________________________________________________
______________________________________________________________________
Clears Through: ______________________________________________________
Phone No.: ___________________________________________________________
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
[Form of Shareholder Services Agreement]
FLAG INVESTORS FAMILY OF FUNDS
SHAREHOLDER SERVICING AGREEMENT
[Date]
Ladies and Gentlemen:
We wish to enter into this Shareholder Servicing Agreement with you
concerning the provision of support services to your clients and customers
("Customers") who may from time to time beneficially own shares of our common
stock ("Shares").
The terms and conditions of this Servicing Agreement are as follows:
Section 1.
(a) You agree to provide the following services to Customers who may from
time to time beneficially own Shares: (i) aggregating and processing purchase
and redemption requests for Shares from Customers and placing net purchase and
redemption orders with our distributor; (ii) processing dividend payments from
us on behalf of Customers; (iii) providing information periodically to Customers
showing their positions in Shares; (iv) arranging for bank wires; (v) responding
to Customer inquiries relating to the services performed by you; (v) providing
subaccounting with respect to Shares beneficially owned by Customers; (vii) as
required by law, forwarding shareholder communications from us (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Customers; and (viii) providing such other
similar services as we may reasonably request to the extent you are permitted to
do so under applicable statutes, rules or regulations. You will provide to
Customers a schedule of any fees that you may charge directly to them for such
services. You hereby represent that such fees are not unreasonable or excessive.
Shares purchased by you on behalf of Customers will be registered with our
transfer agent in your name or in the name of your nominee. The Customer will be
the beneficial owner of Shares purchased and held by you in accordance with the
Customer's instructions ("Customers' Shares") and the Customer may exercise all
rights of a shareholder of the Fund.
(b) You agree that you will (i) maintain all records required by law
relating to transactions in Shares and, upon our request, promptly make such of
these records available to us as we may reasonably request in connection with
our operations, and (ii) promptly notify us if you experience any difficulty in
maintaining the records described in the foregoing clauses in an accurate and
complete manner.
<PAGE>
Section 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be a part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
services to Customers.
Section 3. Neither you nor any of your officers, employees, agents or
assignees are authorized to make any representations concerning us or Shares
except those contained in our then current prospectus for such Shares, copies of
which will be supplied by us to you, or in such supplemental literature or
advertising as may be authorized by us in writing.
Section 4. For all purposes of this Agreement, you will be deemed to be an
independent contractor and will have no authority to act as agent for us in any
matter or in any respect. You may, upon prior written notice to us, delegate
your responsibilities hereunder to another person or persons; provided, however,
that notwithstanding any such delegation, you will remain responsible for the
performance of all your responsibilities under this Agreement. By your written
acceptance of this Agreement, you agree and do release, indemnify and hold us
harmless from and against any and all direct or indirect liabilities or losses
resulting from requests, directions, actions or inactions of or by you and your
offices, employees, agents or assigns regarding your responsibilities hereunder
or the purchase, redemption, transfer or registration of Shares by or on behalf
of Customers. You and your employees will, upon request, be available during
normal business hours to consult with us or our designees concerning the
performance of your responsibilities under this Agreement.
Section 5. In consideration of the services and facilities provided by you
hereunder, we will cause our distributor to pay you, and you will accept as full
payment therefore, a fee (as we may determine from time to time in writing)
computed as a percentage of the average daily net assets of the Customers'
Shares held of record by you from time to time, which fee will be computed daily
and payable no less often than annually. For purposes of determining the fees
payable under this Section 5, the average daily net assets of the Customer's
Shares will be computed in the manner specified in our registration statement
(as the same is in effect from time to time) in connection with the computation
of the net asset value of Shares for purposes of purchases and redemptions. The
fee rate stated above may be prospectively increased or decreased by us or by
our distributor, at any time upon notice to you. Further, we may, in our
discretion and without notice, suspend or withdraw the sale of Shares, including
the sale of such shares to you for the account of any Customer or Customers.
Section 6. You will furnish us or our designees with such information
relating to your performance under this Agreement as we or they may reasonably
request (including, without limitation, periodic certifications confirming the
provision to Customers of the services described herein), and shall otherwise
cooperate with us and our designees (including, without limitation, any auditors
designated by us), in connection with the preparation of reports to our Board of
Directors concerning this Agreement and the monies paid or payable by us
pursuant hereto, as well as any other reports or filings that may be required by
law.
Section 7. We may enter into other similar services agreements with any
other person or persons without your consent.
<PAGE>
Section 8. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or by our distributor, and is
terminable, without penalty, at any time by us or by you upon ten days' notice
to the other party hereto and shall automatically terminate in the event of its
assignment, as that term is defined in the Investment Company Act of 1940, as
amended.
Section 9. This Agreement will be construed in accordance with the laws of
the State of Maryland.
Section 10. All notices and other communications to either you or us will
be duly given if mailed, telegraphed, telexed, or transmitted by similar
telecommunications device, if to us at the address below, and if to you, at the
address specified by you after your signature below:
ICC Distributors, Inc.
P.O. Box 7558
Portland, Maine 04101
Attention: Dealer Services
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us at the address set forth in Section 10 above.
Very truly yours,
ICC DISTRIBUTORS, INC.
By: _______________________________
Richard C. Butt, Vice President
Confirmed and accepted:
Firm Name: ___________________________________________________________
By: __________________________________________________________________
Name: ________________________________________________________________
Address: _____________________________________________________________
______________________________________________________________________
______________________________________________________________________
Date: ________________________________________________________________
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT dated as of June 5, 1998 between BANKERS TRUST COMPANY (the
"Custodian") and BT ALEX. BROWN CASH RESERVE FUND, INC. (the "Customer").
WHEREAS, the Customer may be organized with one or more series of
shares, each of which shall represent an interest in a separate portfolio of
Securities and Cash (each as hereinafter defined) (all such existing and
additional series now or hereafter listed on Exhibit A being hereafter referred
to individually as a "Portfolio" and collectively, as the "Portfolios"); and
WHEREAS, the Customer desires to appoint the Custodian as custodian on
behalf of the Portfolios under the terms and conditions set forth in this
Agreement, and the Custodian has agreed to so act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment of Custodian. The Customer hereby employs the Custodian
as custodian of all assets of each Portfolio which are delivered to and accepted
by the Custodian or any Subcustodian (as that term is defined in Section 4) (the
"Property") pursuant to the terms and conditions set forth herein. For purposes
of this Agreement, "delivery" of Property shall include the acquisition of a
security entitlement (as that term is defined in the New York Uniform Commercial
Code ("UCC")) with respect thereto. Without limitation, such Property shall
include stocks and other equity interests of every type, evidences of
indebtedness, other instruments representing same or rights or obligations to
receive, purchase, deliver or sell same and other non-cash investment property
of a Portfolio which is acceptable for deposit ("Securities") and cash from any
source and in any currency ("Cash"), provided that the Custodian shall have the
right, in its sole discretion, to refuse to accept as Property any property of a
Portfolio that the Custodian considers not to be appropriate or in proper form
for deposit for any reason. The Custodian shall not be responsible for any
property of a Portfolio held or received by the Customer or others and not
delivered to the Custodian or any Subcustodian.
2. Maintenance of Securities and Cash at Custodian and Subcustodian
Locations. Pursuant to Instructions, the Customer shall direct the Custodian to
(a) settle Securities transactions and maintain cash in the country or other
jurisdiction in which the principal trading market for such Securities is
located, where such Securities are to be presented for payment or where such
Securities are acquired and (b) maintain cash and cash equivalents in such
countries in amounts reasonably necessary to effect the Customer's transactions
in such Securities. Instructions to settle Securities transactions in any
country shall be deemed to authorize the holding of such Securities and Cash in
that country.
3. Custody Account. The Custodian agrees to establish and maintain one
or more custody accounts on its books each in the name of a Portfolio (each, an
"Account") for any and all Property from time to time received and accepted by
the Custodian or any Subcustodian for the account of such Portfolio. Upon
delivery by the Customer to the Custodian of any Property belonging to a
Portfolio, the Customer shall, by Instructions (as hereinafter defined in
Section 14), specifically indicate to which Portfolio such Property belongs or
if such Property belongs to more than one Portfolio shall allocate such Property
to the appropriate Portfolio, and the Custodian shall allocate such Property to
the Accounts in accordance with the Instructions.
- 1 -
<PAGE>
The Customer on behalf of each Portfolio, acknowledges its responsibility as a
principal for all of its obligations to the Custodian arising under or in
connection with this Agreement, warrants its authority to deposit in the
appropriate Account any Property received therefor by the Custodian or a
Subcustodian and to give, and authorize others to give, instructions relative
thereto. The Custodian may deliver securities of the same class in place of
those deposited in the Account.
The Custodian shall hold, keep safe and protect as custodian for each
Account, on behalf of the Customer, all Property in such Account and, to the
extent such Property constitutes financial assets for purposes of the New York
UCC, shall maintain those financial assets in such Account as security
entitlements in favor of the Portfolio in whose name the Account is maintained.
All transactions, including, but not limited to, foreign exchange transactions,
involving the Property shall be executed or settled solely in accordance with
Instructions (which shall specifically reference the Account for which such
transaction is being settled), except that until the Custodian receives
Instructions to the contrary, the Custodian will:
(a) collect all interest and dividends and all other income and
payments, whether paid in cash or in kind, on the Property, as
the same become payable and credit the same to the appropriate
Account;
(b) present for payment all Securities held in an Account which
are called, redeemed or retired or otherwise become payable
and all coupons and other income items which call for payment
upon presentation to the extent that the Custodian or
Subcustodian is actually aware of such opportunities and hold
the cash received in such Account pursuant to this Agreement;
(c) (i) exchange Securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the Securities themselves) and (ii) when
notification of a tender or exchange offer (other than
ministerial exchanges described in (i) above) is received for
an Account, endeavor to receive Instructions, provided that if
such Instructions are not received in time for the Custodian
to take timely action, no action shall be taken with respect
thereto;
(d) whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or
stock split is received for an Account and such rights
entitlement or fractional interest bears an expiration date,
if after endeavoring to obtain Instructions such Instructions
are not received in time for the Custodian to take timely
action or if actual notice of such actions was received too
late to seek Instructions, sell in the discretion of the
Custodian (which sale the Customer hereby authorizes the
Custodian to make) such rights entitlement or fractional
interest and credit the Account with the net proceeds of such
sale;
(e) execute in the Customer's name for an Account, whenever the
Custodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of
income from the Property in such Account;
(f) pay for each Account, any and all taxes and levies in the
nature of taxes imposed on interest, dividends or other
similar income on the Property in such Account by any
governmental
- 2 -
<PAGE>
authority. In the event there is insufficient Cash available
in such Account to pay such taxes and levies, the Custodian
shall notify the Customer of the amount of the shortfall and
the Customer, at its option, may deposit additional Cash in
such Account or take steps to have sufficient Cash available.
The Customer agrees, when and if requested by the Custodian
and required in connection with the payment of any such taxes
to cooperate with the Custodian in furnishing information,
executing documents or otherwise; and
(g) appoint brokers and agents for any of the ministerial
transactions involving the Securities described in (a) - (f),
including, without limitation, affiliates of the Custodian or
any Subcustodian.
4. Subcustodians and Securities Systems. The Customer authorizes and
instructs the Custodian to maintain the Property in each Account directly in one
of its U.S. branches or indirectly through custody accounts which have been
established by the Custodian with the following other securities intermediaries:
(a) another U.S. bank or trust company or branch thereof located in the U.S.
which is itself qualified under the Investment Company Act of 1940, as amended
("1940 Act"), to act as custodian (individually, a "U.S. Subcustodian"), or a
U.S. securities depository or clearing agency or system in which the Custodian
or a U.S. Subcustodian participates (individually, a "U.S. Securities System")
or (b) one of its non-U.S. branches or majority-owned non-U.S. subsidiaries, a
non-U.S. branch or majority-owned subsidiary of a U.S. bank or a non-U.S. bank
or trust company, acting as custodian (individually, a "non-U.S. Subcustodian";
U.S. Subcustodians and non-U.S. Subcustodians, collectively, "Subcustodians"),
or a non-U.S. depository or clearing agency or system in which the Custodian or
any Subcustodian participates (individually, a "non-U.S. Securities System";
U.S. Securities System and non-U.S. Securities System, collectively, Securities
System"), provided that in each case in which a U.S. Subcustodian or U.S.
Securities System is employed, each such Subcustodian or Securities System shall
have been approved by Instructions; provided further that in each case in which
a non-U.S. Subcustodian or non-U.S. Securities System is employed, (a) such
Subcustodian or Securities System either is (i) a "qualified U.S. bank" as
defined by Rule 17f-5 under the 1940 Act ("Rule 17f-5") or (ii) an "eligible
foreign custodian" within the meaning of Rule 17f-5 or such Subcustodian or
Securities System is the subject of an order granted by the U.S. Securities and
Exchange Commission ("SEC") exempting such agent or the subcustody arrangements
thereto from all or part of the provisions of Rule 17f-5 and (b) the agreement
between the Custodian and such non-U.S. Subcustodian has been approved by
Instructions; it being understood that the Custodian shall have no liability or
responsibility for determining whether the approval of any Subcustodian or
Securities System has been proper under the 1940 Act or any rule or regulation
thereunder.
Upon receipt of Instructions, the Custodian agrees to cease the
employment of any Subcustodian or Securities System with respect to the
Customer, and if desirable and practicable, appoint a replacement subcustodian
or securities system in accordance with the provisions of this Section. In
addition, the Custodian may, at any time in its discretion, upon written
notification to the Customer, terminate the employment of any Subcustodian or
Securities System.
Upon request of the Customer, the Custodian shall deliver to the
Customer annually a certificate stating: (a) the identity of each non-U.S.
Subcustodian and non-U.S. Securities System then acting on behalf of the
Custodian and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such non-U.S. Subcustodian and
non-U.S. Securities System; (b) the countries in which each non-U.S.
Subcustodian or non-U.S. Securities System is located; and (c) so long as Rule
17f-5
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requires the Customer's Board of Directors to directly approve its foreign
custody arrangements, such other information relating to such non-U.S.
Subcustodians and non-U.S. Securities Systems as may reasonably be requested by
the Customer to ensure compliance with Rule 17f-5. So long as Rule 17f-5
requires the Customer's Board of Directors to directly approve its foreign
custody arrangements, the Custodian also shall furnish annually to the Customer
information concerning such non-U.S. Subcustodians and non-U.S. Securities
Systems similar in kind and scope as that furnished to the Customer in
connection with the initial approval of this Agreement. Custodian agrees to
promptly notify the Customer if, in the normal course of its custodial
activities, the Custodian has reason to believe that any non-U.S. Subcustodian
or non-U.S. Securities System has ceased to be a qualified U.S. bank or an
eligible foreign custodian each within the meaning of Rule 17f-5 or has ceased
to be subject to an exemptive order from the SEC.
5. Use of Subcustodian. With respect to Property in an Account which is
maintained by the Custodian through a Subcustodian employed pursuant to Section
4:
(a) The Custodian will identify on its books as belonging to the
Customer on behalf of a Portfolio, any Property maintained
through such Subcustodian.
(b) Any Property in the Account held by a Subcustodian will be
subject only to the instructions of the Custodian or its
agents.
(c) Property deposited with a Subcustodian will be maintained in
an account holding only assets for customers of the Custodian.
(d) Any agreement the Custodian shall enter into with a non-U.S.
Subcustodian with respect to maintaining Property shall
require that (i) the Account will be adequately indemnified or
its losses adequately insured; (ii) the Securities so
maintained are not subject to any right, charge, security
interest, lien or claim of any kind in favor of such
Subcustodian or its creditors except a claim for payment in
accordance with such agreement for their safe custody or
administration and expenses related thereto, (iii) beneficial
ownership of such Securities be freely transferable without
the payment of money or value other than for safe custody or
administration and expenses related thereto, (iv) adequate
records will be maintained identifying the Property maintained
pursuant to such Agreement as belonging to the Custodian, on
behalf of its customers and (v) to the extent permitted by
applicable law, officers of or auditors employed by, or other
representatives of or designated by, the Custodian, including
the independent public accountants of or designated by, the
Customer be given access to the books and records of such
Subcustodian relating to its actions under its agreement
pertaining to any Property maintained by it thereunder or
confirmation of or pertinent information contained in such
books and records be furnished to such persons designated by
the Custodian.
6. Use of Securities System. With respect to Property in the Account(s)
which is maintained by the Custodian or any Subcustodian through a Securities
System employed pursuant to Section 4:
(a) The Custodian shall, and the Subcustodian will be required by
its agreement with the Custodian to, identify on its books
such Property as being maintained for the account of the
Custodian or Subcustodian for its customers.
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<PAGE>
(b) Any Property maintained through a Securities System for the
account of the Custodian or a Subcustodian will be subject
only to the instructions of the Custodian or such
Subcustodian, as the case may be.
(c) Property deposited with a Securities System will be maintained
in an account holding only assets for customers of the
Custodian or Subcustodian, as the case may be, unless
precluded by applicable law, rule, or regulation.
(d) The Custodian shall provide the Customer with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the Securities
System.
7. Agents. The Custodian may at any time or times in its sole
discretion appoint (or remove) any other U.S. bank or trust company which is
itself qualified under the 1940 Act to act as custodian, as its agent to carry
out such of the provisions of this Agreement as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
8. Records, Ownership of Property, Statements, Opinions of Independent
Certified Public Accountants.
(a) The ownership of the Property whether Securities, Cash and/or other
property, and whether maintained directly by the Custodian or indirectly through
a Subcustodian or a Securities System as authorized herein, shall be clearly
recorded on the Custodian's books as belonging to the appropriate Account and
not for the Custodian's own interest. The Custodian shall keep accurate and
detailed accounts of all investments, receipts, disbursements and other
transactions for each Account. All accounts, books and records of the Custodian
relating thereto shall be open to inspection and audit at all reasonable times
during normal business hours by any person designated by the Customer. All such
accounts shall be maintained and preserved in the form reasonably requested by
the Customer. The Custodian will supply to the Customer from time to time, as
mutually agreed upon, a statement in respect to any Property in an Account
maintained by the Custodian or by a Subcustodian. In the absence of the filing
in writing with the Custodian by the Customer of exceptions or objections to any
such statement within sixty (60) days of the mailing thereof, the Customer shall
be deemed to have approved such statement and in such case or upon written
approval of the Customer of any such statement, such statement shall be presumed
to be for all purposes correct with respect to all information set forth
therein.
(b) The Custodian shall take all reasonable action as the Customer may
request to obtain from year to year favorable opinions from the Customer's
independent certified public accountants with respect to the Custodian's
activities hereunder in connection with the preparation of the Customer's Form
N-1A and the Customer's Form N-SAR or other periodic reports to the SEC and with
respect to any other requirements of the SEC.
(c) At the request of the Customer, the Custodian shall deliver to the
Customer a written report prepared by the Custodian's independent certified
public accountants with respect to the services provided by the Custodian under
this Agreement, including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for safeguarding Cash and
Securities, including Cash and
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Securities deposited and/or maintained in a securities system or with a
Subcustodian. Such report shall be of sufficient scope and in sufficient detail
as may reasonably be required by the Customer and as may reasonably be obtained
by the Custodian.
(d) The Customer may elect to participate in any of the electronic
on-line service and communications systems offered by the Custodian which can
provide the Customer, on a daily basis, with the ability to view on-line or to
print on hard copy various reports of Account activity and of Securities and/or
Cash being held in any Account. To the extent that such service shall include
market values of Securities in an Account, the Customer hereby acknowledges that
the Custodian now obtains and may in the future obtain information on such
values from outside sources that the Custodian considers to be reliable and the
Customer agrees that the Custodian (i) does not verify or represent or warrant
either the reliability of such service nor the accuracy or completeness of any
such information furnished or obtained by or through such service and (ii) shall
be without liability in selecting and utilizing such service or furnishing any
information derived therefrom.
9. Holding of Securities, Nominees, etc. Securities in an Account which
are maintained by the Custodian or any Subcustodian may be held directly by such
entity in the name of the Customer or in bearer form or maintained on behalf of
a Portfolio, in the Custodian's or Subcustodian's name or in the name of the
Custodian's or Subcustodian's nominee. Securities that are maintained through a
Subcustodian or which are eligible for deposit in a Securities System as
provided above may be maintained with the Subcustodian or the Securities System
in an account for the Custodian's or Subcustodian's customers, unless prohibited
by law, rule, or regulation. The Custodian or Subcustodian, as the case may be,
may combine certificates representing Securities held in an Account with
certificates of the same issue held by it as fiduciary or as a custodian. In the
event that any Securities in the name of the Custodian or its nominee or held by
a Subcustodian and registered in the name of such Subcustodian or its nominee
are called for partial redemption by the issuer of such Security, the Custodian
may, subject to the rules or regulations pertaining to allocation of any
Securities System in which such Securities have been deposited, allot, or cause
to be allotted, the called portion of the respective beneficial holders of such
class of security in any manner the Custodian deems to be fair and equitable.
Securities maintained with a Securities System shall be maintained subject to
the rules of that Securities System governing the rights and obligations among
the Securities System and its participants.
10. Proxies, etc. With respect to any proxies, notices, reports or
other communications relative to any of the Securities in any Account, the
Custodian shall perform such services and only such services relative thereto as
are (i) set forth in Section 3 of this Agreement, (ii) described in Exhibit B
attached hereto (as such service therein described may be in effect from time to
time) (the "Proxy Service") and (iii) as may otherwise be agreed upon between
the Custodian and the Customer. The liability and responsibility of the
Custodian in connection with the Proxy Service referred to in (ii) of the
immediately preceding sentence and in connection with any additional services
which the Custodian and the Customer may agree upon as provided in (iii) of the
immediately preceding sentence shall be as set forth in the description of the
Proxy Service and as may be agreed upon by the Custodian and the Customer in
connection with the furnishing of any such additional service and shall not be
affected by any other term of this Agreement. Neither the Custodian nor its
nominees or agents shall vote upon or in respect of any of the Securities in an
Account, execute any form of proxy to vote thereon, or give any consent or take
any action (except as provided in Section 3) with respect thereto except upon
the receipt of Instructions relative thereto.
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<PAGE>
11. Segregated Account. To assist the Customer in complying with the
requirements of the 1940 Act and the rules and regulations thereunder, the
Custodian shall, upon receipt of Instructions, establish and maintain a
segregated account or accounts on its books for and on behalf of a Portfolio.
12. Settlement Procedures. Securities will be transferred, exchanged or
delivered by the Custodian or a Subcustodian upon receipt by the Custodian of
Instructions which include all information required by the Custodian. Settlement
and payment for Securities received for an Account and delivery of Securities
out of such Account may be effected in accordance with the customary or
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering Securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such Securities from such
purchaser or dealer, as such practices and procedures may be modified or
supplemented in accordance with the standard operating procedures of the
Custodian in effect from time to time for that jurisdiction or market. The
Custodian shall not be liable for any loss which results from effecting
transactions in accordance with the customary or established securities trading
or securities processing practices and procedures in the applicable jurisdiction
or market.
Notwithstanding that the Custodian may settle purchases and sales
against, or credit income to, an Account, on a contractual basis, as outlined in
the Investment Manager User Guide provided to the Customer by the Custodian, the
Custodian may, at its sole option, reverse such credits or debits to the
appropriate Account in the event that the transaction does not settle, or the
income is not received in a timely manner, and the Customer agrees to hold the
Custodian harmless from any losses which may result therefrom.
13. Conditional Credits.
(a) Notwithstanding any other provision of this Agreement, the
Custodian shall not be required to comply with any Instructions to settle the
purchase of any securities for the Account, unless there are sufficient
immediately available funds in the relevant currency in the Account, provided
that, if, after all expenses, debits and withdrawals of Cash in the relevant
currency ("Debits") applicable to the Account have been made and if after all
Conditional Credits, as defined below, applicable to the Account have been made
final entries as set forth in (c) below, the amount of immediately available
funds of the relevant currency in such Account is at least equal to the
aggregate purchase price of all securities for which the Custodian has received
Instructions to settle on that date ("Settlement Date"), the Custodian, upon
settlement, shall credit the Securities to the Account by making a final entry
on its books and records.
(b) Notwithstanding the foregoing, if after all Debits applicable to
the Account have been made, there remains outstanding any Conditional Credit (as
defined below) applicable to the Account or the amount of immediately available
funds in a given currency in such Account are less than the aggregate purchase
price in such currency of all securities for which the Custodian has received
Instructions to settle on the Settlement Date, the Custodian, upon settlement,
may credit the securities to the Account by making a conditional entry on its
books and records ("Conditional Credit"), pending receipt of sufficient
immediately available funds in the relevant currency in the Account.
(c) If, within a reasonable time from the posting of a Conditional
Credit and after all Debits applicable to the Account have been made,
immediately available funds in the relevant currency at least equal to the
aggregate purchase price in such currency of all securities subject to a
Conditional Credit on a
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<PAGE>
Settlement Date are deposited into the Account, the Custodian shall make the
Conditional Credit a final entry on its books and records. In such case, the
Customer shall be liable to the Custodian only for late charges at a rate which
the Custodian customarily charges for similar extensions of credit.
(d) ) If (i) within a reasonable time from the posting of a Conditional
Credit, immediately available funds at least equal to the resultant Debit on a
Settlement Date are not on deposit in the Account, or (ii) any Proceeding shall
occur, the Custodian may sell such of the Securities subject to the Conditional
Credit as it selects in its sole discretion and shall apply the net proceeds of
such sale to cover such Debit, including related late charges, and any remaining
proceeds shall be credited to the Account. If such proceeds are insufficient to
satisfy such debt in full, the Customer shall continue to be liable to the
Custodian for any shortfall. The Custodian shall make the Conditional Credit a
final entry on its books as to the Securities not required to be sold to satisfy
such Debit. Pending payment in full by the Customer of the purchase price for
Securities subject to a Conditional Credit, and the Custodian's making a
Conditional Credit a final entry on its books and unless consented to by the
Custodian, the Customer shall have no right to give further Instructions in
respect of Securities subject to a Conditional Credit. The Custodian shall have
the sole discretion to determine which Securities shall be deemed to have been
paid for by the Customer out of funds available in the Account. Any such
Conditional Credit may be reversed (and any corresponding Debit shall be
canceled) by the Custodian unless and until the Custodian makes a final entry on
its books crediting such Securities to the Account. The term "Proceeding" shall
mean any insolvency, bankruptcy, receivership, reorganization or similar
proceeding relating to the Customer, whether voluntary or involuntary.
(e) The Customer agrees that it will not use the Account to facilitate
the purchase of securities without sufficient funds in the Account (which funds
shall not include the expected proceeds of the sale of the purchased
securities).
14. Permitted Transactions. The Customer agrees that it will cause
transactions to be made pursuant to this Agreement only upon Instructions in
accordance Section 14 and only for the purposes listed below.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise
become payable.
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed or in order
to satisfy requirements for additional or substitute collateral.
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<PAGE>
(h) In connection with any loans, but only against receipt of
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of the
Customer against delivery of the shares to be redeemed to the Custodian, a
Subcustodian or the Customer's transfer agent.
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Custodian, a Subcustodian or the
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement
among the Customer, on behalf of a Portfolio, the Portfolio's investment adviser
and a broker-dealer registered under the Securities Exchange Act of 1934 and a
member of the National Association of Securities Dealers, Inc., relating to
compliance with the rules of The Options Clearing Corporation, the Commodities
Futures Trading Commission and of any registered national securities exchange,
or of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Customer.
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Custodian of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Custodian will receive the Securities previously deposited from
broker. The Custodian will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading or receipt of income from Securities related transactions.
(n) Upon the termination of this Agreement as set forth in Section 20.
(o) For other proper purposes.
The Customer agrees that the Custodian shall have no obligation to
verify the purpose for which a transaction is being effected.
15. Instructions. The term "Instructions" means instructions from the
Customer in respect of any of the Custodian's duties hereunder which have been
received by the Custodian at its address set forth in Section 21 below (i) in
writing (including, without limitation, facsimile transmission) or by tested
telex signed or given by such one or more person or persons as the Customer
shall have from time to time authorized in writing to give the particular class
of Instructions in question and whose name and (if applicable) signature and
office address have been filed with the Custodian, or (ii) which have been
transmitted electronically through an electronic on-line service and
communications system offered by the Custodian or other electronic instruction
system acceptable to the Custodian, or (iii) a telephonic or oral communication
by one or more persons as the Customer shall have from time to time authorized
to give the particular class of Instructions in question and whose name has been
filed with the Custodian; or (iv) upon receipt of such other form of
instructions as the Customer may from time to time authorize in writing and
which the Custodian has agreed in writing to accept. Instructions in the form of
oral communications shall
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be confirmed by the Customer by tested telex or writing in the manner set forth
in clause (i) above, but the lack of such confirmation shall in no way affect
any action taken by the Custodian in reliance upon such oral instructions prior
to the Custodian's receipt of such confirmation. Instructions may relate to
specific transactions or to types or classes of transactions, and may be in the
form of standing instructions.
The Custodian shall have the right to assume in the absence of notice
to the contrary from the Customer that any person whose name is on file with the
Custodian pursuant to this Section has been authorized by the Customer to give
the Instructions in question and that such authorization has not been revoked.
The Custodian may act upon and conclusively rely on, without any liability to
the Customer or any other person or entity for any losses resulting therefrom,
any Instructions reasonably believed by it to be furnished by the proper person
or persons as provided above.
16. Standard of Care. The Custodian shall be responsible for the
performance of only such duties as are set forth herein or contained in
Instructions given to the Custodian which are not contrary to the provisions of
this Agreement. The Custodian will use reasonable care with respect to the
safekeeping of Property in each Account and, except as otherwise expressly
provided herein, in carrying out its obligations under this Agreement. So long
as and to the extent that it has exercised reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any Property or
other property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in acting upon, and may
conclusively rely on, without liability for any loss resulting therefrom, any
notice, request, consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed or furnished by the proper party or parties,
including, without limitation, Instructions, and shall be indemnified by the
Customer for any losses, damages, costs and expenses (including, without
limitation, the fees and expenses of counsel) incurred by the Custodian and
arising out of action taken or omitted with reasonable care by the Custodian
hereunder or under any Instructions. The Custodian shall be liable to the
Customer for any act or omission to act of any Subcustodian to the same extent
as if the Custodian committed such act itself. With respect to a Securities
System, the Custodian shall only be responsible or liable for losses arising
from employment of such Securities System caused by the Custodian's own failure
to exercise reasonable care. In the event of any loss to the Customer by reason
of the failure of the Custodian or a Subcustodian to utilize reasonable care,
the Custodian shall be liable to the Customer to the extent of the Customer's
actual damages at the time such loss was discovered without reference to any
special conditions or circumstances. In no event shall the Custodian be liable
for any consequential or special damages. The Custodian shall be entitled to
rely, and may act, on advice of counsel (who may be counsel for the Customer) on
all matters and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
In the event the Customer subscribes to an electronic on-line service
and communications system offered by the Custodian, the Customer shall be fully
responsible for the security of the Customer's connecting terminal, access
thereto and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards with respect thereto and agree to
defend and indemnify the Custodian and hold the Custodian harmless from and
against any and all losses, damages, costs and expenses (including the fees and
expenses of counsel) incurred by the Custodian as a result of any improper or
unauthorized use of such terminal by the Customer or by any others.
All collections of funds or other property paid or distributed in
respect of Securities in an Account, including funds involved in third-party
foreign exchange transactions, shall be made at the risk of the
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Customer.
Subject to the exercise of reasonable care, the Custodian shall have no
liability for any loss occasioned by delay in the actual receipt of notice by
the Custodian or by a Subcustodian of any payment, redemption or other
transaction regarding Securities in each Account in respect of which the
Custodian has agreed to take action as provided in Section 3 hereof. The
Custodian shall not be liable for any loss resulting from, or caused by, or
resulting from acts of governmental authorities (whether de jure or de facto),
including, without limitation, nationalization, expropriation, and the
imposition of currency restrictions; devaluations of or fluctuations in the
value of currencies; changes in laws and regulations applicable to the banking
or securities industry; market conditions that prevent the orderly execution of
securities transactions or affect the value of Property; acts of war, terrorism,
insurrection or revolution; strikes or work stoppages; the inability of a local
clearing and settlement system to settle transactions for reasons beyond the
control of the Custodian; hurricane, cyclone, earthquake, volcanic eruption,
nuclear fusion, fission or radioactivity, or other acts of God.
The Custodian shall have no liability in respect of any loss, damage or
expense suffered by the Customer, insofar as such loss, damage or expense arises
from the performance of the Custodian's duties hereunder by reason of the
Custodian's reliance upon records that were maintained for the Customer by
entities other than the Custodian prior to the Custodian's employment under this
Agreement.
The provisions of this Section shall survive termination of this
Agreement.
17. Investment Limitations and Legal or Contractual Restrictions or
Regulations. The Custodian shall not be liable to the Customer and the Customer
agrees to indemnify the Custodian and its nominees, for any loss, damage or
expense suffered or incurred by the Custodian or its nominees arising out of any
violation of any investment restriction or other restriction or limitation
applicable to the Customer or any Portfolio pursuant to any contract or any law
or regulation. The provisions of this Section shall survive termination of this
Agreement.
18. Fees and Expenses. The Customer agrees to pay to the Custodian such
compensation for its services pursuant to this Agreement as may be mutually
agreed upon in writing from time to time and the Custodian's reasonable
out-of-pocket or incidental expenses in connection with the performance of this
Agreement, including (but without limitation) legal fees as described herein
and/or deemed necessary in the judgment of the Custodian to keep safe or protect
the Property in the Account. The initial fee schedule is attached hereto as
Exhibit C. Such fees will not be abated by, nor shall the Custodian be required
to account for, any profits or commissions received by the Custodian in
connection with its provision of custody services under this Agreement. The
Customer hereby agrees to hold the Custodian harmless from any liability or loss
resulting from any taxes or other governmental charges, and any expense related
thereto, which may be imposed, or assessed with respect to any Property in an
Account and also agrees to hold the Custodian, its Subcustodians, and their
respective nominees harmless from any liability as a record holder of Property
in such Account. The Custodian is authorized to charge the applicable Account
for such items and the Custodian shall have a lien on the Property in the
applicable Account for any amount payable to the Custodian under this Agreement,
including but not limited to amounts payable pursuant to the last paragraph of
Section 12 and pursuant to indemnities granted by the Customer under this
Agreement. The provisions of this Section shall survive the termination of this
Agreement.
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<PAGE>
19. Tax Reclaims. With respect to withholding taxes deducted and which
may be deducted from any income received from any Property in an Account, the
Custodian shall perform such services with respect thereto as are described in
Exhibit D attached hereto and shall in connection therewith be subject to the
standard of care set forth in such Exhibit D. Such standard of care shall not be
affected by any other term of this Agreement.
20. Amendment, Modifications, etc. No provision of this Agreement may
be amended, modified or waived except in a writing signed by the parties hereto.
No waiver of any provision hereto shall be deemed a continuing waiver unless it
is so designated. No failure or delay on the part of either party in exercising
any power or right under this Agreement operates as a waiver, nor does any
single or partial exercise of any power or right preclude any other or further
exercise thereof or the exercise of any other power or right.
21. Termination. (a) Termination of Entire Agreement. This Agreement
may be terminated by the Customer or the Custodian by ninety (90) days' written
notice to the other; provided that notice by the Customer shall specify the
names of the persons to whom the Custodian shall deliver the Securities in each
Account and to whom the Cash in such Account shall be paid. If notice of
termination is given by the Custodian, the Customer shall, within ninety (90)
days following the giving of such notice, deliver to the Custodian a written
notice specifying the names of the persons to whom the Custodian shall deliver
the Securities in each Account and to whom the Cash in such Account shall be
paid. In either case, the Custodian will deliver such Securities and Cash to the
persons so specified, after deducting therefrom any amounts which the Custodian
determines to be owed to it under Sections 12, 17, and 23. In addition, the
Custodian may in its discretion withhold from such delivery such Cash and
Securities as may be necessary to settle transactions pending at the time of
such delivery. The Customer grants to the Custodian a lien and right of setoff
against the Account and all Property held therein from time to time in the full
amount of the foregoing obligations. If within ninety (90) days following the
giving of a notice of termination by the Custodian, the Custodian does not
receive from the Customer a written notice specifying the names of the persons
to whom the Custodian shall deliver the Securities in each Account and to whom
the Cash in such Account shall be paid, the Custodian, at its election, may
deliver such Securities and pay such Cash to a bank or trust company doing
business in the State of New York to be held and disposed of pursuant to the
provisions of this Agreement, or may continue to hold such Securities and Cash
until a written notice as aforesaid is delivered to the Custodian, provided that
the Custodian's obligations shall be limited to safekeeping.
(b) Termination as to One or More Portfolios. This Agreement may be
terminated by the Customer or the Custodian as to one or more Portfolios (but
less than all of the Portfolios) by delivery of an amended Exhibit A deleting
such Portfolios, in which case termination as to such deleted Portfolios shall
take effect ninety (90) days after the date of such delivery, or such earlier
time as mutually agreed. The execution and delivery of an amended Exhibit A
which deletes one or more Portfolios shall constitute a termination of this
Agreement only with respect to such deleted Portfolio(s), shall be governed by
the preceding provisions of Section 20 as to the identification of a successor
custodian and the delivery of Cash and Securities of the Portfolio(s) so deleted
to such successor custodian, and shall not affect the obligations of the
Custodian and the Customer hereunder with respect to the other Portfolios set
forth in Exhibit A, as amended from time to time.
22. Notices. Except as otherwise provided in this Agreement, all
requests, demands or other
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<PAGE>
communications between the parties or notices in connection herewith (a) shall
be in writing, hand delivered or sent by registered mail, telex or facsimile
addressed to such other address as shall have been furnished by the receiving
party pursuant to the provisions hereof and (b) shall be deemed effective when
received, or, in the case of a telex, when sent to the proper number and
acknowledged by a proper answerback.
23. Several Obligations of the Portfolios. With respect to any
obligations of the Customer on behalf of each Portfolio and each of its related
Accounts arising out of this Agreement, the Custodian shall look for payment or
satisfaction of any obligation solely to the assets and property of the
Portfolio and such Accounts to which such obligation relates as though the
Customer had separately contracted with the Custodian by separate written
instrument with respect to each Portfolio and its related Accounts.
24. Security for Payment. To secure payment of all obligations due
hereunder, the Customer hereby grants to Custodian a continuing security
interest in and right of setoff against each Account and all Property held
therein from time to time in the full amount of such obligations; provided that,
if there is more than one Account and the obligations secured pursuant to this
Section can be allocated to a specific Account or the Portfolio related to such
Account, such security interest and right of setoff will be limited to Property
held for that Account only and its related Portfolio. Should the Customer fail
to pay promptly any amounts owed hereunder, Custodian shall be entitled to use
available Cash in the Account or applicable Account, as the case may be, and to
dispose of Securities in the Account or such applicable Account as is necessary.
In any such case and without limiting the foregoing, Custodian shall be entitled
to take such other action(s) or exercise such other options, powers and rights
as Custodian now or hereafter has as a secured creditor under the New York
Uniform Commercial Code or any other applicable law.
25. Representations and Warranties.
(a) The Customer hereby represents and warrants to the Custodian that:
(i) the employment of the Custodian and the allocation of
fees, expenses and other charges to any Account as herein provided, is not
prohibited by law or any governing documents or contracts to which the Customer
is subject;
(ii) the terms of this Agreement do not violate any obligation
by which the Customer is bound, whether arising by contract, operation of law or
otherwise;
(iii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon the Customer and
each Portfolio in accordance with its terms; and
(iv) the Customer will deliver to the Custodian such evidence
of such authorization as the Custodian may reasonably require, whether by way of
a certified resolution or otherwise.
(b) The Custodian hereby represents and warrants to the Customer that:
(i) the terms of this Agreement do not violate any obligation
by which the Custodian is bound, whether arising by contract, operation of law
or otherwise;
(ii) this Agreement has been duly authorized by appropriate
action and when executed and
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<PAGE>
delivered will be binding upon the Custodian in accordance with its terms;
(iii) the Custodian will deliver to the Customer such evidence
of such authorization as the Customer may reasonably require, whether by way of
a certified resolution or otherwise; and
(iv) Custodian is qualified as a custodian under Section 26(a)
of the 1940 Act and warrants that it will remain so qualified or upon ceasing to
be so qualified shall promptly notify the Customer in writing.
26. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Custodian.
27. Publicity. Customer shall furnish to Custodian at its office
referred to in Section 21 above, prior to any distribution thereof, copies of
any material prepared for distribution to any persons who are not parties hereto
that refer in any way to the Custodian. Customer shall not distribute or permit
the distribution of such materials if Custodian reasonably objects in writing
within ten (10) business days of receipt thereof (or such other time as may be
mutually agreed) after receipt thereof. The provisions of this Section shall
survive the termination of this Agreement.
28. Submission to Jurisdiction. Any suit, action or proceeding arising
out of this Agreement may be instituted in any State or Federal court sitting in
the City of New York, State of New York, United States of America, and the
Customer irrevocably submits to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding and waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any such suit, action or proceeding brought in such a court and any
claim that such suit, action or proceeding was brought in an inconvenient forum.
29. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties hereto.
30. Confidentiality. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is publicly
available when provided or thereafter becomes publicly available other than
through a breach of this Agreement, or that is required or requested to be
disclosed by any bank or other regulatory examiner of the Custodian, Customer,
or any Subcustodian, any auditor of the parties hereto, by judicial or
administrative process or otherwise by applicable law or regulation.
31. Severability. If any provision of this Agreement is determined to
be invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provision of this Agreement.
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<PAGE>
32. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
Dated as of: BT ALEX. BROWN CASH RESERVE FUND,
INC.
By: /s/ Amy M. Olmert
------------------------
Name: Amy M. Olmert
Title: Secretary
BANKERS TRUST COMPANY
By: /s/ Richard Fogarty
------------------------
Name: Richard Fogarty
Title: Vice President
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<PAGE>
EXHIBIT A
To Custodian Agreement dated as of June 5, 1998 between Bankers Trust
Company and BT ALEX. BROWN CASH RESERVE FUND, INC..
LIST OF PORTFOLIOS
The following is a list of Portfolios referred to in the first WHEREAS
clause of the above-referred to Custodian Agreement. Terms used herein as
defined terms unless otherwise defined shall have the meanings ascribed to them
in the above-referred to Custodian Agreement.
Prime Series
Treasury Series
Tax-Free Series
Dated as of: BT ALEX. BROWN CASH RESERVE FUND,
INC.
By: /s/ Amy M. Olmert
---------------------------
Name: Amy M. Olmert
Title: Secretary
BANKERS TRUST COMPANY
By: /s/ Richard Fogarty
---------------------------
Name: Richard Fogarty
Title: Vice President
<PAGE>
EXHIBIT B
To Custodian Agreement dated as of June 5, 1998 between Bankers Trust
Company and BT Alex. Brown Cash Reserve Fund, Inc..
PROXY SERVICE
The following is a description of the Proxy Service referred to in
Section 10 of the above referred to Custodian Agreement. Terms used herein as
defined terms shall have the meanings ascribed to them therein unless otherwise
defined below.
The Custodian provides a service, described below, for the transmission
of corporate communications in connection with shareholder meetings relating to
Securities held in the countries specified in the applicable Service Standards.
For the United States and Canada, the term "corporate communications" means the
proxy statements or meeting agenda, proxy cards, annual reports and any other
meeting materials received by the Custodian. For countries other than the United
States and Canada, the term "corporate communications" means the meeting agenda
only and does not include any meeting circulars, proxy statements or any other
corporate communications furnished by the issuer in connection with such
meeting. Non-meeting related corporate communications are not included in the
transmission service to be provided by the Custodian except upon request as
provided below.
The Custodian's process for transmitting and translating meeting
agendas will be as follows:
1) If the meeting agenda is not provided by the issuer in the
English language, and if the language of such agenda is in the
official language of the country in which the related security
is held, the Custodian will as soon as practicable after
receipt of the original meeting agenda by a Subcustodian
provide an English translation prepared by that Subcustodian.
2) If an English translation of the meeting agenda is furnished,
the local language agenda will not be furnished unless
requested.
Translations will be free translations and neither the Custodian nor
any Subcustodian will be liable or held responsible for the accuracy thereof or
any direct or indirect consequences arising therefrom, including without
limitation arising out of any action taken or omitted to be taken based thereon.
If requested, the Custodian will, on a reasonable efforts basis,
endeavor to obtain any additional corporate communication such as annual or
interim reports, proxy statements, meeting circulars, or local language agendas,
and provide them in the form obtained.
Timing in the voting process is important and, in that regard, upon
receipt by the Custodian of notice from a Subcustodian, the Custodian will
provide a notice to the Customer indicating the deadline for receipt of its
instructions to enable the voting process to take place effectively and
efficiently. As voting procedures will vary from market to market, attention to
any required procedures will be very important. Upon timely
<PAGE>
receipt of voting instructions, the Custodian will promptly forward such
instructions to the applicable Subcustodian. If voting instructions are not
timely received, the Custodian shall have no liability or obligation to take any
action.
For Securities held in markets other than those set forth in the first
paragraph, the Custodian will not furnish the material described above or seek
voting instructions. However, if requested to exercise voting rights at a
specific meeting, the Custodian will endeavor to do so on a reasonable efforts
basis without any assurance that such rights will be so exercised at such
meeting.
If the Custodian or any Subcustodian incurs extraordinary expenses in
exercising voting rights related to any Securities pursuant to appropriate
instructions or direction (e.g., by way of illustration only and not by way of
limitation, physical presence is required at a meeting and/or travel expenses
are incurred), such expenses will be reimbursed out of the Account containing
such Securities unless other arrangements have been made for such reimbursement.
It is the intent of the Custodian to expand the Proxy Service to
include jurisdictions which are not currently included as set forth in the
applicable Service Standards. The Custodian will notify the Customer as to the
inclusion of additional countries or deletion of existing countries after their
inclusion or deletion and this Exhibit B will be deemed to be automatically
amended to include or delete such countries as the case may be.
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<PAGE>
EXHIBIT C
To Custodian Agreement dated as of June 5, 1998 between Bankers Trust
Company and BT Alex. Brown Cash Reserve Fund, Inc..
CUSTODY FEE SCHEDULE
BANKERS TRUST CUSTODY FEE SCHEDULE
FOR
BT ALEX. BROWN MUTUAL FUNDS
(FLAG INVESTORS FUNDS AND ISI FUNDS)
Effective October 1, 1997
CUSTODY FEES
1. DOMESTIC SAFEKEEPING FEES
ANNUAL ASSET FEE (BY FUND- EXCEPT CASH RESERVE)
Market Value Basis Point
$0 - $100 million 1.00
Over $100 million 0.75
ANNUAL ASSET FEE (CASH RESERVE FUND)
Market Value Basis Point
$0 - $1 billion 1.00
$1 billion - $3 billion 0.75
Over $3 billion 0.50
2. DOMESTIC TRANSACTION FEES
TRANSACTION TYPE $USD
AUTOMATED DEPOSITORY: DTC/PTC/FED 10.00
MANUAL DEPOSITORY: DTC/PTC/ FED 15.00
PHYSICAL AUTOMATED 15.00
PHYSICAL MANUAL 20.00
P&I PAYMENTS 5.00
REDEMPTIONS 10.00
REORGANIZATIONS Included in safekeeping charge
<PAGE>
3. GLOBAL SAFEKEEPING AND ASSET FEES
Annual Receive and
Country Asset Fee Deliver
Transactions
Argentina 35 Basis $100
Points
Australia 3 Basis Points $50
Austria 5 Basis Points $75
Bangladesh 40 Basis $150
Points
Belgium 4 Basis Points $60
Botswana 50 Basis $150
Points
Brazil 30 Basis $70
Points
Canada 2 Basis Points $20
Cedel/Euroclear 3 Basis Points $20
Chile 30 Basis $80
Points
China 30 Basis $75
Points
Columbia 35 Basis $100
Points
Czech Republic 20 Basis $70
Points
Denmark 4 Basis Points $50
Ecuador 45 Basis $100
Points
Egypt 45 Basis $80
Points
Finland 10 Basis $75
Points
France 5 Basis Points $50
Germany 3 Basis Points $30
Ghana 50 Basis $150
Points
Greece 35 Basis $120
Points
Hong Kong 5 Basis Points $30
Hungary 45 Basis $150
Points
India (Physical) 60 Basis $200
Points
India (Dematerialized) 25 Basis $140
Points
- 2 -
<PAGE>
Indonesia 8 Basis Points $35
Ireland 5 Basis Points $50
Israel 40 Basis $50
Points
Italy 3 Basis Points $50
Japan 3 Basis Points $35
Jordan 30 Basis $100
Points
Kenya 50 Basis $150
Points
Luxembourg 4 Basis Points $60
Malaysia 7 Basis Points $50
Mauritius 50 Basis $140
Points
Mexico 5 Basis Points $30
Morocco 30 Basis $130
Points
Netherlands 4 Basis Points $45
New Zealand 4 Basis Points $50
Norway 5 Basis Points $50
Pakistan 30 Basis $150
Points
Peru 50 Basis $100
Points
Philippines 8 Basis Points $30
Poland 45 Basis $100
Points
Portugal 4 Basis Points $75
Russia 50 Basis $300
Points
Singapore 7 Basis Points $50
Slovakia 25 Basis $100
Points
South Africa 5 Basis Points $30
South Korea 15 Basis $50
Points
Spain 6 Basis Points $50
Sri Lanka 12 Basis $60
Points
Sweden 4 Basis Points $50
Switzerland 3 Basis Points $50
Taiwan 15 Basis $100
Points
Thailand 7 Basis Points $100
- 3 -
<PAGE>
Tunisia 45 Basis $50
Points
Turkey 15 Basis $50
Points
United Kingdom 2 Basis Points $15
Venezuela 35 Basis $100
Points
Zambia 50 Basis $150
Points
Zimbabwe 50 Basis $150
Points
4. DDA RELATED CHARGES
Cash Connector Services $25 per month per account
(MTC, MTD, EBR, BTC Reporting)
Statement Rendition (CDS) Services
Account Maintenance $50 per month per account
Debit Postings $0.35 per posting
Credit Postings $0.35 per posting
Money Transfer Charges*
Outgoing Payments $6.00
Incoming Payments No Charge
Book to Book Transfers No Charge
*Above Money Transfer Charges assume electronic instruction via bank-provided
software. Manual instructions received via facsimile, etc. will incur a charge
of $25 per transaction.
Overdraft Rate: Prime + 1.00%
NOTES
o Market Values will be provided by the Fund Accountant at
month-end to determine monthly assets for billing purposes.
o A manual transaction is an instruction that is received in
writing, i.e. facsimile
o The standard Global Custody Service includes: asset
safekeeping, trade settlement, income collection, corporate
action processing including proxy voting and tax reclaims
where appropriate.
- 4 -
<PAGE>
o Third party FX transactions and other cash movements with no
associated security transaction (e.g. free payments/receipts)
are charged at $10 per U.S. wire and $25 per non-U.S. wire. No
fee is levied for FX transactions executed with Bankers Trust.
o Fees are billed monthly in arrears.
This Exhibit C shall be amended upon delivery by the Custodian of a new Exhibit
C to the Customer and acceptance thereof by the Customer and shall be effective
as of the date of acceptance by the Customer or a date agreed upon between the
Custodian and the Customer.
- 5 -
<PAGE>
EXHIBIT D
To Custodian Agreement dated as of June 5, 1998 between Bankers Trust
Company and BT Alex. Brown Cash Reserve Fund, Inc..
TAX RECLAIMS
Pursuant to Section 18 of the above referred to Custodian Agreement,
the Custodian shall perform the following services with respect to withholding
taxes imposed or which may be imposed on income from Property in any Account in
the countries specified in the applicable Service Standards. Terms used herein
as defined terms shall unless otherwise defined have the meanings ascribed to
them in the above referred to Custodian Agreement.
When withholding tax has been deducted with respect to income from any
Property in an Account, the Custodian will actively pursue on a reasonable
efforts basis the reclaim process, provided that the Custodian shall not be
required to institute any legal or administrative proceeding against any
Subcustodian or other person. The Custodian will provide fully detailed
advices/vouchers to support reclaims submitted to the local authorities by the
Custodian or its designee. In all cases of withholding, the Custodian will
provide full details to the Customer. If exemption from withholding at the
source can be obtained in the future, the Custodian will notify the Customer and
advise what documentation, if any, is required to obtain the exemption. Upon
receipt of such documentation from the Customer, the Custodian will file for
exemption on the Customer's behalf and notify the Customer when it has been
obtained.
In connection with providing the foregoing service, the Custodian shall
be entitled to apply categorical treatment of the Customer according to the
Customer's nationality, the particulars of its organization and other relevant
details that shall be supplied by the Customer. It shall be the duty of the
Customer to inform the Custodian of any change in the organization, domicile or
other relevant fact concerning tax treatment of the Customer and further to
inform the Custodian if the Customer is or becomes the beneficiary of any
special ruling or treatment not applicable to the general nationality and
category or entity of which the Customer is a part under general laws and treaty
provisions. The Custodian may rely on any such information provided by the
Customer.
In connection with providing the foregoing service, the Custodian may
also rely on professional tax services published by a major international
accounting firm and/or advice received from a Subcustodian in the jurisdictions
in question. In addition, the Custodian may seek the advice of counsel or other
professional tax advisers in such jurisdictions. The Custodian is entitled to
rely, and may act, on information set forth in such services and on advice
received from a Subcustodian, counsel or other professional tax advisers and
shall be without liability to the Customer for any action reasonably taken or
omitted pursuant to information contained in such services or such advice.
<PAGE>
EXHIBIT E
CASH MANAGEMENT ADDENDUM (this "Addendum") to the CUSTODIAN
AGREEMENT (the "Agreement") between BANKERS TRUST COMPANY (the "Custodian") and
BT ALEX. BROWN CASH RESERVE FUND, INC. (the "Customer").
WHEREAS, the Customer may be organized with one of more series
of shares, each of which shall represent an interest in a separate portfolio of
Securities and Cash (all such existing and additional series now or hereafter
listed in Exhibit A being hereafter referred to individually as a "Portfolio"
and collectively as "Portfolios"); and
WHEREAS, the Custodian will provide cash management services
to the Customer, and the Custodian and the Customer desire to confirm their
understanding with respect to such services;
NOW, THEREFORE, the Custodian and the Customer agree as
follows:
1. Until the Custodian receives Instructions to the contrary,
the Custodian will (a) hold with Subcustodians, in deposit accounts maintained
for the benefit of the Custodian's clients, all Cash received for the Account,
(b) credit such interest, if any, on Cash in the Account as the Custodian shall
from time to time determine and (c) receive compensation out of any amounts paid
by Subcustodians in respect of Cash in the Account.
2. Pursuant to procedures approved by the Fund, the Custodian
may (on an overnight or other short-term basis) move certain, or all, currencies
of Cash in the Account from any Subcustodian and place it, as deposits or
otherwise, with one or more other Subcustodians (including branches and
affiliates of the Custodian). The Custodian will notify the Customer of any
placement procedures it implements and will move Cash in accordance with such
procedures until it notifies the Customer otherwise or receives Instructions to
the contrary. The Custodian may credit interest and receive compensation as
described in 1 above with respect to any Cash moved. If any Cash is held in an
investment fund managed by Bankers Trust, it will notify the fund (as opposed to
the Customer) as provided herein with respect to such Cash.
3. The Customer acknowledges that it has received and reviewed
the current policies of the Custodian regarding cash management services, which
are attached to this Addendum.
4. To the extent any of the Property or Cash in the Account is
subject to the Employee Retirement Income Security Act of 1974, the Customer (a)
represents and warrants that it, at all times during the duration of the
Agreement, will be a qualified professional asset manager as defined in the
prohibited transaction exemption 84-14 and that the provisions of the exemption
apply to the Agreement (and transactions thereunder) and (b) agrees to maintain
such records as are necessary to comply with the exemption or to enable
interested persons to determine that the conditions of the exemption are met.
5. Capitalized terms used but not defined in this Addendum are
used with the respective meanings assigned to them in the Agreement.
IN WITNESS WHEREOF, this Addendum has been executed as of the
date of the Agreement.
BANKERS TRUST COMPANY
By: /s/ Richard Fogarty
---------------------------------------
BT ALEX. BROWN CASH RESERVE FUND, INC.
By: /s/ Amy M. Olmert
---------------------------------------
- 2 -
<PAGE>
Global Custody Cash Management Program
In the Global Custody cash management program, currencies on
which Bankers Trust pays interest are divided into two categories: (1)
currencies on which we pay interest based on a market benchmark rate for
overnight deposits, and (2) currencies on which we pay interest based on a rate
paid by the London branch of Bankers Trust Company or the local subcustodian.
Currencies on which we pay interest based on a market
benchmark rate for overnight deposits (which we call "Benchmark Rate
Currencies"):
o For each of these currencies, the interest rate we pay is based on a
specific market benchmark (such as Effective Fed Funds) and is
calculated by taking an average of the benchmark rate and subtracting
a spread. (See Schedule A)
o Currently, the only Benchmark Rate Currency is the U.S. Dollar. Over
time we will be considering additional currencies to include in this
category.
o Operationally, most balances in Benchmark Rate Currencies are swept
overnight into deposits at the London branch of Bankers Trust Company.
Where you have selected a short-term investment fund, your U.S. Dollar
balances in the U.S. will be swept overnight in accordance with your
instructions.
Currencies on which we pay interest based on a rate paid by
the London branch of Bankers Trust Company or the local subcustodian (which we
call "Base Rate Currencies"):
o For each of these currencies, the interest rate we pay is based on the
rate paid by the London branch or the local subcustodian on overnight
deposits in the currency. In either case, interest is calculated by
using the overnight rate (which will be the actual overnight, a weekly
average, or monthly average rate, depending on the currency) and
subtracting a spread. (See Schedule A)
o Currencies that are part of the sweep program will earn interest based
on the base rate, which will be the higher of the rate offered by the
London branch of Bankers Trust Company or the local subcustodian.
o Currencies that are not part of the sweep program will generally earn
interest based on the rate paid by the local subcustodian. We may at
times be able to sweep certain currency balances into deposits of
Bankers Trust Company's London branch in order to be able to earn a
higher rate for you. On those days, any such currency will be treated
as part of the sweep program, and you will earn interest on all of
your balances in that currency at the higher rate for that day.
o Currently, there are 39 Base Rate Currencies, 21 of which are included
in our sweep program to the London branch.
o Operationally, most balances in Base Rate Currencies that are part of
our sweep program are swept overnight into deposits at the London
branch, while balances in Base Rate Currencies that are not part of
our sweep program remain with the local subcustodian.
- 3 -
<PAGE>
For each currency on which we pay interest:
o We will notify you periodically in writing of changes in spreads and
updates to the cash management program. These program updates also
will be available through Global Custody Flash Notices.
o You earn interest at the calculated rate on your entire contractual
balance without any action on your part and without any minimum
balance requirements. This is the case regardless of whether we are
able to invest your balances at or near the applicable benchmark or
base rate and regardless of whether your contractual balance may
exceed your actual balance.
o Our program generally requires that overnight balances in each
currency remain with (or are swept to) a subcustodian we designate for
that currency. Nevertheless, we pay our stated rate of interest on any
balances that, because of transactions in your account, are held
overnight with an alternate subcustodian if we receive interest on
that currency from that subcustodian. If the alternate subcustodian
does not pay interest, however, these balances are excluded from our
program.
o The minimum rate paid is 0.50%, except for the Japanese Yen (for which
it is 0.05%) and the Singapore Dollar (for which it is 0.25%). Please
note that this is also subject to change as appropriate for any
currency.
o You will have continuous access through Globe*View, BTWorld, or
Globe*Link or other agreed electronic on-line system to the interest
rate earned during the previous "rate averaging period". Because we
may use weekly or monthly average rates to calculate the interest you
earn, we do not know the actual interest rate until the weekly or
monthly period is completed.
o For swept currencies, from time to time we may not be able to sweep
the full amount of your balances to the London branch because of
operational constraints or because your balance on a contractual basis
temporarily exceeds your actual balance. You will, however, always
receive credit for interest based on your entire contractual balance.
To the extent you would have earned a lower rate on balances not
swept, we will make up the difference. To the extent that actual
balances are higher than contractually posted balances due to purchase
fails or otherwise, we will retain the interest earned as
compensation.
o The effective rate we pay on overnight balances will generally differ
from the effective rate we receive (whether from the London branch or
the local subcustodian). Any difference between the effective rate we
receive and the effective rate we pay (which may be positive or
negative, but is generally positive) is kept by us and covers our fee
for running the cash management program and the related costs we
absorb.
Obviously, there will be currencies on which we will not pay
interest because of local regulations, insufficient scale, or other reasons.
However, we hope to identify additional currencies where we can begin paying
interest and we will announce those to you as soon as practical.
Although currently most cash balances in our overnight sweep
program are swept into deposits at the London branch of Bankers Trust Company,
we reserve the right to utilize other branches or affiliates for the overnight
sweep program.
- 4 -
<PAGE>
As you know, overdrafts are not permitted in the normal course
of business in any currency. Should they occur in any currency, your account
will be charged a fee to settle transactions in advance of receipt of funds. If
the overdraft is not promptly cured (and in any event upon the expiration of 30
days) after the investment manager has been notified of the outstanding
overdraft, the account's home currency will be used to cure the overdraft and
the associated foreign exchange will be done by Bankers Trust at market rates.
(Other currencies may be utilized to the extent the home currency is
insufficient.) Investment managers that have not cured overdrafts within such
period will be deemed to have directed such foreign exchange transaction.
Accounts subject to ERISA will be deemed to have engaged in the transaction
under the authority of the class exemptions available to qualified professional
asset managers and in-house investment managers. To the extent that the
overdraft is less than the U.S. dollar equivalent of $50,000, Bankers Trust's
foreign exchange desk will bundle the transaction with other small amounts for
other clients.
- 5 -
<PAGE>
Schedule A
New Cash Management Program - Global Custody
Overnight Uninvested Cash Balances
(* - Denotes currencies in sweep program)
Currencies Rates
---------- -----
Argentine Peso Base Rate less 100
Australian Dollar* Base Rate less 130
Austrian Schilling* Base Rate less 125
Belgian Franc* Base Rate less 225
British Pound Sterling* Base Rate less 165
Canadian Dollar* Base Rate less 150
Czech Koruna Base Rate less 75
Danish Krone* Base Rate less 100
Deutsche Mark* Base Rate less 150
Dutch Guilder* Base Rate less 175
European Currency Unit* Base Rate less 125
Finnish Markka* Base Rate less 150
French Franc* Base Rate less 110
Greek Drachma Base Rate less 75
Hong Kong Dollar* Base Rate less 225
Hungarian Forint Base Rate less 75
Indonesian Rupiah Base Rate less 100
Irish Punt* Base Rate less 100
Israeli Shekel Base Rate less 75
Italian Lira* Base Rate less 125
Japanese Yen Base Rate less 75
Jordanian Dinar Base Rate less 150
Korean Won Base Rate less 75
Malaysian Ringgit Base Rate less 150
Mexican Peso Base Rate less 150
New Taiwan Dollar Base Rate less 75
New Zealand Dollar* Base Rate less 100
Norwegian Krone* Base Rate less 150
Philippine Peso Base Rate less 100
Polish Zloty Base Rate less 150
Portuguese Escudo* Base Rate less 125
Singapore Dollar Base Rate less 150
Slovak Koruna Base Rate less 100
South African Rand* Base Rate less 200
Spanish Peseta* Base Rate less 200
Swedish Krona* Base Rate less 200
Swiss Franc* Base Rate less 100
Thai Baht Base Rate less 150
Turkish Lira Base Rate less 75
- 6 -
<PAGE>
U.S. Dollar* Effective Fed Funds less 100(1)
We reserve the right, in our sole discretion, to adjust the base rates and
benchmark rates used and the spreads charged at any time and for any reason. We
will notify you periodically in writing of changes in spreads and updates to the
cash management program. These program updates also will be available through
Global Custody Flash Notices.
(1) Not applicable if U.S. Dollars are swept to a short-term investment fund.
- 7 -
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
BT Alex. Brown Cash Reserve Fund, Inc.
We consent to the inclusion of our report dated May 1, 1998 on our audit of the
financial statements and financial highlights of BT Alex. Brown Cash Reserve
Fund, Inc. in the Statement of Additional Information with respect to this
Post-Effective Amendment No. 30 to the Registration Statement (No. 2-72658) on
form N-1A under the Securities Act of 1933 and the Investment Company Act of
1940, respectively, of BT Alex. Brown Cash Reserve Fund, Inc. We also consent to
the references to our Firm under the heading "General Information" in the
Prospectuses and "Independent Accountants" in the Statement of Additional
Information.
/s/PRICEWATERHOUSECOOPERS LLP
- -------------------------------
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, Maryland
July 27, 1998
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
BT ALEX BROWN CASH RESERVE PRIME SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of the BT Alex. Brown Cash Reserve Prime Shares (the
"Shares") of BT Alex. Brown Cash Reserve Fund, Inc. (the "Fund"). Other
capitalized terms herein have the meaning given to them in the Fund's
prospectus.
2. Payments Authorized. (a) The Fund's distributor (the
"Distributor") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments made
to it under the Distribution Agreement and to make payments on behalf of the
Fund to Shareholder Servicing Agents under Shareholder Servicing Agreements.
(b) The Distributor may make payments in any amount,
provided that the total amount of all payments made during a fiscal year of the
Fund do not exceed, in any fiscal year of the Fund, the amount paid to the
Distributor under the Distribution Agreement which is an annual fee, calculated
on an average daily net basis and paid monthly, equal to .25% of the average
daily net assets of the Shares of the Fund.
3. Expenses Authorized. The Distributor is authorized,
pursuant to the Plan, from sums paid to it under the Distribution Agreement, to
purchase advertising for the Shares, to pay for promotional or sales literature
and to make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which the Distributor
is authorized to pay or cause to be paid on its behalf and such payments shall
not be included in the limitations contained in this Plan. These expenses
include: the fees of the Fund's investment advisor and the Distributor; the
charges and expenses of any registrar, any custodian or depository appointed by
the Fund for the safekeeping of its cash, portfolio securities and other
property, and any transfer, dividend or accounting agent or agents appointed by
the Fund; brokers' commissions chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing shares of the Fund; all costs
and expenses in connection with maintenance of registration of the Fund and its
shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Directors' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Directors or
Director members of any advisory board or committee; all expenses incident to
the payment of any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used for pricing
of the Fund's shares; charges and expenses of legal counsel, including counsel
to the Directors of the Fund who are not
<PAGE>
interested persons (as defined in the 1940 Act) of the Fund and of independent
certified public accountants, in connection with any matter relating to the
Fund; membership dues of industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and Directors) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other charges
and costs of the Fund's operation unless otherwise explicitly provided herein.
5. Other Distribution Resources. The Distributor and
Participating Dealers may expend their own resources separate and apart from
amounts payable under the Plan to support the Fund's distribution effort. The
Distributor will report to the Board of Directors on any such expenditures as
part of its regular reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, the Distributor
shall report in writing at least quarterly to the Fund's Board of Directors, and
the Board shall review, the following: (i) the amounts of all payments under the
Plan, the identity of the recipients of each such payment; (ii) the basis on
which the amount of the payment to such recipient was made; (iii) the amounts of
expenses authorized under this Plan and the purpose of each such expense; and
(iv) all costs of each item specified in Section 4 of this Plan (making
estimates of such costs where necessary or desirable), in each case during the
preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. (a)
This Plan has been approved by a vote of the Board of Directors of the Fund and
of a majority of the Directors who are not interested persons (as defined in the
1940 Act), cast in person at a meeting called for the purpose of voting on this
Plan. This Plan shall, unless terminated as hereinafter provided, continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by the vote of the Fund's Board of Directors and by
the vote of a majority of the Directors of the Fund who are not interested
persons (as defined in the 1940 Act), cast in person at a meeting called for the
purpose of voting on such continuance.
(b) This Plan may be terminated at any time by a vote
of a majority of the Directors who are not interested persons (as defined in the
1940 Act) or by the vote of the holders of a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act).
(c) This Plan may not be amended to increase
materially the amount of payments to be made without approval by a vote of the
holders of at least a majority of the Fund's outstanding voting securities (as
defined in the 1940 Act) and all amendments must be approved by the Board of
Directors in the manner set forth under (a) above.
<PAGE>
FLAG INVESTORS CASH RESERVE PRIME SHARES - CLASS A
(A Class of BT Alex. Brown Cash Reserve Fund, Inc.)
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of the Flag Investors Class A Shares (the "Shares")
of BT Alex. Brown Cash Reserve Fund, Inc. (the "Fund"). Other capitalized terms
herein have the meaning given to them in the Fund's prospectus.
2. Payments Authorized. (a) The Fund's distributor (the
"Distributor") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments made
to it under the Distribution Agreement and to make payments on behalf of the
Fund to Shareholder Servicing Agents under Shareholder Servicing Agreements.
(b) The Distributor may make payments in any amount,
provided that the total amount of all payments made during a fiscal year of the
Fund do not exceed, in any fiscal year of the Fund, the amount paid to the
Distributor under the Distribution Agreement which is an annual fee, calculated
on an average daily net basis and paid monthly, equal to .25% of the average
daily net assets of the Shares of the Fund.
3. Expenses Authorized. The Distributor is authorized,
pursuant to the Plan, from sums paid to it under the Distribution Agreement, to
purchase advertising for the Shares, to pay for promotional or sales literature
and to make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which the Distributor
is authorized to pay or cause to be paid on its behalf and such payments shall
not be included in the limitations contained in this Plan. These expenses
include: the fees of the Fund's investment advisor and the Distributor; the
charges and expenses of any registrar, any custodian or depository appointed by
the Fund for the safekeeping of its cash, portfolio securities and other
property, and any transfer, dividend or accounting agent or agents appointed by
the Fund; brokers' commissions chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing shares of the Fund; all costs
and expenses in connection with maintenance of registration of the Fund and its
shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Directors' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Directors or
Director members of any advisory board or committee; all
<PAGE>
expenses incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of any outside
service used for pricing of the Fund's shares; charges and expenses of legal
counsel, including counsel to the Directors of the Fund who are not interested
persons (as defined in the 1940 Act) of the Fund and of independent certified
public accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
Directors) of the Fund which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto); and all other charges and costs
of the Fund's operation unless otherwise explicitly provided herein.
5. Other Distribution Resources. The Distributor and
Participating Dealers may expend their own resources separate and apart from
amounts payable under the Plan to support the Fund's distribution effort. The
Distributor will report to the Board of Directors on any such expenditures as
part of its regular reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, the Distributor
shall report in writing at least quarterly to the Fund's Board of Directors, and
the Board shall review, the following: (i) the amounts of all payments under the
Plan, the identity of the recipients of each such payment; (ii) the basis on
which the amount of the payment to such recipient was made; (iii) the amounts of
expenses authorized under this Plan and the purpose of each such expense; and
(iv) all costs of each item specified in Section 4 of this Plan (making
estimates of such costs where necessary or desirable), in each case during the
preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. (a)
This Plan has been approved by a vote of the Board of Directors of the Fund and
of a majority of the Directors who are not interested persons (as defined in the
1940 Act), cast in person at a meeting called for the purpose of voting on this
Plan. This Plan shall, unless terminated as hereinafter provided, continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by the vote of the Fund's Board of Directors and by
the vote of a majority of the Directors of the Fund who are not interested
persons (as defined in the 1940 Act), cast in person at a meeting called for the
purpose of voting on such continuance.
(b) This Plan may be terminated at any time by a vote
of a majority of the Directors who are not interested persons (as defined in the
1940 Act) or by the vote of the holders of a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act).
(c) This Plan may not be amended to increase
materially the amount of payments to be made without approval by a vote of the
holders of at least a majority of the Fund's outstanding voting securities (as
defined in the 1940 Act) and all amendments must be approved by the Board of
Directors in the manner set forth under (a) above.
<PAGE>
Amended
August 4, 1997
FLAG INVESTORS CASH RESERVE PRIME SHARES - CLASS B
(A Class of BT Alex. Brown Cash Reserve Fund, Inc.)
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of the Flag Investors Cash Reserve Prime Shares -
Class B (the "Shares") of BTAlex. Brown Cash Reserve Fund, Inc. (the "Fund").
Other capitalized terms herein have the meaning given to them in the Fund's
prospectus.
2. Payments Authorized. (a) The Fund's Distributor (the
"Distributor") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments made
to it under the Distribution Agreement and to make payments on behalf of the
Fund to Shareholder Servicing Agents under Shareholder Servicing Agreements.
(b) The Distributor may make payments in any amount,
provided that the total amount of all payments made during a fiscal year of the
Fund do not exceed, in any fiscal year of the Fund, the amount paid to the
Distributor under the Distribution Agreement with respect to distribution of the
Shares which is an annual fee, calculated on an average daily net basis and paid
monthly, equal to .75% of the average daily net assets of the Shares of the
Fund.
3. Expenses Authorized. The Distributor is authorized,
pursuant to the Plan, from sums paid to it under the Distribution Agreement, to
purchase advertising for the Shares, to pay for promotional or sales literature
and to make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which the Distributor
is authorized to pay or cause to be paid on its behalf and such payments shall
not be included in the limitations contained in this Plan. These expenses
include: the fees of the Fund's investment advisor and The Distributor; the
charges and expenses of any registrar, any custodian or depository appointed by
the Fund for the safekeeping of its cash, portfolio securities and other
property, and any transfer, dividend or accounting agent or agents appointed by
the Fund; brokers' commissions chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing shares of the Fund; all costs
and expenses in connection with maintenance of registration of the Fund and its
shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Directors' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Directors or
Director members of any advisory board or committee; all expenses incident to
the payment of any dividend, distribution, withdrawal or redemption, whether in
<PAGE>
shares or in cash; charges and expenses of any outside service used for pricing
of the Fund's shares; charges and expenses of legal counsel, including counsel
to the Directors of the Fund who are not interested persons (as defined in the
1940 Act) of the Fund and of independent certified public accountants, in
connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and Directors) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's operation unless
otherwise explicitly provided herein.
5. Other Distribution Resources. The Distributor and
Participating Dealers may expend their own resources separate and apart from
amounts payable under the Plan to support the Fund's distribution effort. The
Distributor will report to the Board of Directors on any such expenditures as
part of its regular reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, the Distributor
shall report in writing at least quarterly to the Fund's Board of Directors, and
the Board shall review, the following: (i) the amounts of all payments under the
Plan, the identity of the recipients of each such payment; (ii) the basis on
which the amount of the payment to such recipient was made; (iii) the amounts of
expenses authorized under this Plan and the purpose of each such expense; and
(iv) all costs of each item specified in Section 4 of this Plan (making
estimates of such costs where necessary or desirable), in each case during the
preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. (a)
This Plan has been approved by a vote of the Board of Directors of the Fund and
of a majority of the Directors who are not interested persons (as defined in the
1940 Act), cast in person at a meeting called for the purpose of voting on this
Plan. This Plan shall, unless terminated as hereinafter provided, continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by the vote of the Fund's Board of Directors and by
the vote of a majority of the Directors of the Fund who are not interested
persons (as defined in the 1940 Act), cast in person at a meeting called for the
purpose of voting on such continuance.
(b) This Plan may be terminated at any time by a vote
of a majority of the Directors who are not interested persons (as defined in the
1940 Act) or by the vote of the holders of a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act).
(c) This Plan may not be amended to increase
materially the amount of payments to be made without approval by a vote of the
holders of at least a majority of the Fund's outstanding voting securities (as
defined in the 1940 Act) and all amendments must be approved by the Board of
Directors in the manner set forth under (a) above.
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
QUALITY CASH RESERVE PRIME SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of the Quality Cash Reserve Prime Shares (the
"Shares") of BT Alex. Brown Cash Reserve Fund, Inc. (the "Fund"). Other
capitalized terms herein have the meaning given to them in the Fund's
prospectus.
2. Payments Authorized. (a) The Fund's distributor (the
"Distributor") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments made
to it under the Distribution Agreement and to make payments on behalf of the
Fund to Shareholder Servicing Agents under Shareholder Servicing Agreements.
(b) The Distributor may make payments in any amount,
provided that the total amount of all payments made during a fiscal year of the
Fund do not exceed, in any fiscal year of the Fund, the amount paid to the
Distributor under the Distribution Agreement which is an annual fee, calculated
on an average daily net basis and paid monthly, equal to .25% of the average
daily net assets of the Shares of the Fund.
3. Expenses Authorized. The Distributor is authorized,
pursuant to the Plan, from sums paid to it under the Distribution Agreement, to
purchase advertising for the Shares, to pay for promotional or sales literature
and to make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which the Distributor
is authorized to pay or cause to be paid on its behalf and such payments shall
not be included in the limitations contained in this Plan. These expenses
include: the fees of the Fund's investment advisor and the Distributor; the
charges and expenses of any registrar, any custodian or depository appointed by
the Fund for the safekeeping of its cash, portfolio securities and other
property, and any transfer, dividend or accounting agent or agents appointed by
the Fund; brokers' commissions chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing shares of the Fund; all costs
and expenses in connection with maintenance of registration of the Fund and its
shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Directors' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Directors or
Director members of any advisory board or committee; all expenses incident to
the payment of any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used for pricing
of the Fund's shares; charges and expenses of legal counsel, including counsel
to the Directors of the Fund who are not
<PAGE>
interested persons (as defined in the 1940 Act) of the Fund and of independent
certified public accountants, in connection with any matter relating to the
Fund; membership dues of industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and Directors) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other charges
and costs of the Fund's operation unless otherwise explicitly provided herein.
5. Other Distribution Resources. The Distributor and
Participating Dealers may expend their own resources separate and apart from
amounts payable under the Plan to support the Fund's distribution effort. The
Distributor will report to the Board of Directors on any such expenditures as
part of its regular reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, the Distributor
shall report in writing at least quarterly to the Fund's Board of Directors, and
the Board shall review, the following: (i) the amounts of all payments under the
Plan, the identity of the recipients of each such payment; (ii) the basis on
which the amount of the payment to such recipient was made; (iii) the amounts of
expenses authorized under this Plan and the purpose of each such expense; and
(iv) all costs of each item specified in Section 4 of this Plan (making
estimates of such costs where necessary or desirable), in each case during the
preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. (a)
This Plan has been approved by a vote of the Board of Directors of the Fund and
of a majority of the Directors who are not interested persons (as defined in the
1940 Act), cast in person at a meeting called for the purpose of voting on this
Plan. This Plan shall, unless terminated as hereinafter provided, continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by the vote of the Fund's Board of Directors and by
the vote of a majority of the Directors of the Fund who are not interested
persons (as defined in the 1940 Act), cast in person at a meeting called for the
purpose of voting on such continuance.
(b) This Plan may be terminated at any time by a vote
of a majority of the Directors who are not interested persons (as defined in the
1940 Act) or by the vote of the holders of a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act).
(c) This Plan may not be amended to increase
materially the amount of payments to be made without approval by a vote of the
holders of at least a majority of the Fund's outstanding voting securities (as
defined in the 1940 Act) and all amendments must be approved by the Board of
Directors in the manner set forth under (a) above.
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
BT ALEX BROWN CASH RESERVE TREASURY SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of the BT Alex. Brown Cash Reserve Treasury Shares
(the "Shares") of BT Alex. Brown Cash Reserve Fund, Inc. (the "Fund"). Other
capitalized terms herein have the meaning given to them in the Fund's
prospectus.
2. Payments Authorized. (a) The Fund's distributor (the
"Distributor") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments made
to it under the Distribution Agreement and to make payments on behalf of the
Fund to Shareholder Servicing Agents under Shareholder Servicing Agreements.
(b) The Distributor may make payments in any amount, provided
that the total amount of all payments made during a fiscal year of the Fund do
not exceed, in any fiscal year of the Fund, the amount paid to the Distributor
under the Distribution Agreement which is an annual fee, calculated on an
average daily net basis and paid monthly, equal to .25% of the average daily net
assets of the Shares of the Fund.
3. Expenses Authorized. The Distributor is authorized,
pursuant to the Plan, from sums paid to it under the Distribution Agreement, to
purchase advertising for the Shares, to pay for promotional or sales literature
and to make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which the Distributor
is authorized to pay or cause to be paid on its behalf and such payments shall
not be included in the limitations contained in this Plan. These expenses
include: the fees of the Fund's investment advisor and the Distributor; the
charges and expenses of any registrar, any custodian or depository appointed by
the Fund for the safekeeping of its cash, portfolio securities and other
property, and any transfer, dividend or accounting agent or agents appointed by
the Fund; brokers' commissions chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing shares of the Fund; all costs
and expenses in connection with maintenance of registration of the Fund and its
shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Directors' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Directors or
Director members of any advisory board or committee; all expenses incident to
the payment of any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used for pricing
of the Fund's shares; charges and expenses of legal counsel, including counsel
to the Directors of the Fund who are not
<PAGE>
interested persons (as defined in the 1940 Act) of the Fund and of independent
certified public accountants, in connection with any matter relating to the
Fund; membership dues of industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and Directors) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other charges
and costs of the Fund's operation unless otherwise explicitly provided herein.
5. Other Distribution Resources. The Distributor and
Participating Dealers may expend their own resources separate and apart from
amounts payable under the Plan to support the Fund's distribution effort. The
Distributor will report to the Board of Directors on any such expenditures as
part of its regular reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, the Distributor
shall report in writing at least quarterly to the Fund's Board of Directors, and
the Board shall review, the following: (i) the amounts of all payments under the
Plan, the identity of the recipients of each such payment; (ii) the basis on
which the amount of the payment to such recipient was made; (iii) the amounts of
expenses authorized under this Plan and the purpose of each such expense; and
(iv) all costs of each item specified in Section 4 of this Plan (making
estimates of such costs where necessary or desirable), in each case during the
preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. (a)
This Plan has been approved by a vote of the Board of Directors of the Fund and
of a majority of the Directors who are not interested persons (as defined in the
1940 Act), cast in person at a meeting called for the purpose of voting on this
Plan. This Plan shall, unless terminated as hereinafter provided, continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by the vote of the Fund's Board of Directors and by
the vote of a majority of the Directors of the Fund who are not interested
persons (as defined in the 1940 Act), cast in person at a meeting called for the
purpose of voting on such continuance.
(b) This Plan may be terminated at any time by a vote of a
majority of the Directors who are not interested persons (as defined in the 1940
Act) or by the vote of the holders of a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act).
(c) This Plan may not be amended to increase materially the
amount of payments to be made without approval by a vote of the holders of at
least a majority of the Fund's outstanding voting securities (as defined in the
1940 Act) and all amendments must be approved by the Board of Directors in the
manner set forth under (a) above.
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
BT ALEX BROWN CASH RESERVE TAX-FREE SHARES
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") of the BT Alex. Brown Cash Reserve Tax-Free Shares
(the "Shares") of BT Alex. Brown Cash Reserve Fund, Inc. (the "Fund"). Other
capitalized terms herein have the meaning given to them in the Fund's
prospectus.
2. Payments Authorized. (a) The Fund's distributor (the
"Distributor") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments made
to it under the Distribution Agreement and to make payments on behalf of the
Fund to Shareholder Servicing Agents under Shareholder Servicing Agreements.
(b) The Distributor may make payments in any amount, provided
that the total amount of all payments made during a fiscal year of the Fund do
not exceed, in any fiscal year of the Fund, the amount paid to the Distributor
under the Distribution Agreement which is an annual fee, calculated on an
average daily net basis and paid monthly, equal to .25% of the average daily net
assets of the Shares of the Fund.
3. Expenses Authorized. The Distributor is authorized,
pursuant to the Plan, from sums paid to it under the Distribution Agreement, to
purchase advertising for the Shares, to pay for promotional or sales literature
and to make payments to sales personnel affiliated with it for their efforts in
connection with sales of Shares. Any such advertising and sales material may
include references to other open-end investment companies or other investments,
provided that expenses relating to such advertising and sales material will be
allocated among such other investment companies or investments in an equitable
manner, and any sales personnel so paid are not required to devote their time
solely to the sale of Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Fund assumes certain expenses, which the Distributor
is authorized to pay or cause to be paid on its behalf and such payments shall
not be included in the limitations contained in this Plan. These expenses
include: the fees of the Fund's investment advisor and the Distributor; the
charges and expenses of any registrar, any custodian or depository appointed by
the Fund for the safekeeping of its cash, portfolio securities and other
property, and any transfer, dividend or accounting agent or agents appointed by
the Fund; brokers' commissions chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party; all taxes,
including securities issuance and transfer taxes, and fees payable by the Fund
to federal, state or other governmental agencies; the costs and expenses of
engraving or printing of certificates representing shares of the Fund; all costs
and expenses in connection with maintenance of registration of the Fund and its
shares with the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel); the costs and expenses of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
supplements thereto to the Fund's shareholders; all expenses of shareholders'
and Directors' meetings and of preparing, printing and mailing of proxy
statements and reports to shareholders; fees and travel expenses of Directors or
Director members of any advisory board or committee; all expenses incident to
the payment of any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used for pricing
of the Fund's shares; charges and expenses of legal counsel, including counsel
to the Directors of the Fund who are not
<PAGE>
interested persons (as defined in the 1940 Act) of the Fund and of independent
certified public accountants, in connection with any matter relating to the
Fund; membership dues of industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and Directors) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other charges
and costs of the Fund's operation unless otherwise explicitly provided herein.
5. Other Distribution Resources. The Distributor and
Participating Dealers may expend their own resources separate and apart from
amounts payable under the Plan to support the Fund's distribution effort. The
Distributor will report to the Board of Directors on any such expenditures as
part of its regular reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, the Distributor
shall report in writing at least quarterly to the Fund's Board of Directors, and
the Board shall review, the following: (i) the amounts of all payments under the
Plan, the identity of the recipients of each such payment; (ii) the basis on
which the amount of the payment to such recipient was made; (iii) the amounts of
expenses authorized under this Plan and the purpose of each such expense; and
(iv) all costs of each item specified in Section 4 of this Plan (making
estimates of such costs where necessary or desirable), in each case during the
preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment. (a)
This Plan has been approved by a vote of the Board of Directors of the Fund and
of a majority of the Directors who are not interested persons (as defined in the
1940 Act), cast in person at a meeting called for the purpose of voting on this
Plan. This Plan shall, unless terminated as hereinafter provided, continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by the vote of the Fund's Board of Directors and by
the vote of a majority of the Directors of the Fund who are not interested
persons (as defined in the 1940 Act), cast in person at a meeting called for the
purpose of voting on such continuance.
(b) This Plan may be terminated at any time by a vote of a
majority of the Directors who are not interested persons (as defined in the 1940
Act) or by the vote of the holders of a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act).
(c) This Plan may not be amended to increase materially the
amount of payments to be made without approval by a vote of the holders of at
least a majority of the Fund's outstanding voting securities (as defined in the
1940 Act) and all amendments must be approved by the Board of Directors in the
manner set forth under (a) above.
<PAGE>
BT Alex. Brown Cash Reserve Fund, Inc.
Rule 18f-3 Multiple Class Plan
for
BT Alex. Brown Cash Reserve Prime Shares
Flag Investors Cash Reserve Prime Class A Shares
Flag Investors Cash Reserve Prime Class B Shares
BT Alex. Brown Cash Reserve Prime Institutional Shares
Quality Cash Reserve Prime Shares
BT Alex. Brown Cash Reserve Treasury Shares
BT Alex. Brown Cash Reserve Treasury Institutional Shares
BT Alex. Brown Cash Reserve Tax-Free Shares
BT Alex. Brown Cash Reserve Tax-Free Institutional Shares
Adopted December 13, 1995
Amended through March 26, 1997
With Exhibits through March 27, 1998
I. Introduction.
A. Authority. This Rule 18f-3 Multiple Class Plan (the "Plan") has been
adopted by the Board of Directors (the "Board") of BT Alex. Brown Cash Reserve
Fund, Inc. (the "Fund"), including a majority of the Directors of the Fund who
are not "interested persons" of the Fund (the "Independent Directors") pursuant
to Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940
Act"),
B. History. The Fund is entitled to rely on an exemptive order dated
December 30, 1994, which amended and supplemented prior multi-class exemptive
orders dated August 27, 1985 and February 27, 1987, respectively, (Inv. Co. Act
Releases Nos. IC-20813, IC- 14695 and IC-15592, respectively) (collectively, the
"Order"). On December 13, 1995, the Fund elected to rely on Rule 18f-3 rather
than the Order, as permitted by Rule 18f-3 subject to certain conditions, and
created a multiple class distribution arrangement for the multiple classes of
shares of common stock of the Fund's three existing series (the "Series") and
filed a post-effective amendment incorporating this arrangement on July 29,
1996, which was effective on August 1, 1996. The multiple class distribution
arrangement will be effective on the date of effectiveness of the post-effective
amendment to the Fund's registration statement that incorporates the
arrangement. The multi-class distribution arrangement will apply to all existing
BT Alex. Brown Cash Reserve Prime Shares, Flag Investors Cash Reserve Prime
Class A Shares, Flag Investors Cash Reserve Prime Class B Shares, BT Alex. Brown
Cash Reserve Prime Institutional Shares, Quality Cash Reserve Prime Shares, BT
Alex. Brown Cash Reserve Treasury Shares, BT Alex. Brown Cash Reserve Treasury
Institutional Shares, BT Alex. Brown Cash Reserve Tax-Free Shares and future
classes of the Fund. The BT Alex. Brown Cash Reserve Prime Shares, the Flag
Investors Cash Reserve Prime Class A Shares and the BT Alex. Brown Cash Reserve
Treasury Shares have been offered since the Fund's inception on November 8,
1980. The Institutional Shares of the Prime and the Treasury Series have been
offered since June 4, 1990. The Flag Investors Cash Reserve Prime Class B Shares
<PAGE>
are available solely through exchange and have been available since April 3,
1995. The BT Alex. Brown Cash Reserve Tax-Free Institutional Shares have been
offered since June 2, 1997.
C. Adoption of Plan; Amendment of Plan; and Periodic Review. Pursuant
to Rule 18f-3, the Fund is required to create a written plan specifying all of
the differences among the Fund's classes, including shareholder services,
distribution arrangements, expense allocations, and any related conversion
features or exchange options. The Board has created the Plan to meet this
requirement. The Board, including a majority of the Independent Directors, must
periodically review the Plan for its continued appropriateness, and must approve
any material amendment of the Plan as it relates to any class of any Series
covered by the Plan. This Plan must be amended to properly describe (through
additional exhibits hereto or otherwise) each additional class of shares
approved by the Fund's Board of Directors. Before any material amendment of the
Plan, the Fund is required to obtain a finding by a majority of the Board, and a
majority of the Independent Directors, that the Plan as proposed to be amended,
including the expense allocations, is in the best interests of each class
individually and the Fund as a whole.
II. Attributes of Share Classes
A. The rights of each existing class of the Fund are not being changed
hereby, and the rights, obligations and features of each of the classes of the
Fund shall be as set forth in the Fund's Articles of Incorporation and Bylaws,
as each such document is amended or restated to date, the resolutions that are
adopted with respect to the classes of the Fund and that are adopted pursuant to
the Plan to date, and related materials of the Board, as set forth in Exhibit A
hereto.
B. With respect to any class of shares of a Series, the following
requirements shall apply. Each share of a particular Series shall represent an
equal pro rata interest in the Series and shall have identical voting, dividend,
liquidation and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that (i) each
class shall have a different class designation (e.g., Class A, Class B, Class C,
etc.); (ii) each class of shares shall separately bear any distribution expenses
in connection with the plan adopted pursuant to Rule 12b-1 under the 1940 Act (a
"Rule 12b-1 Plan"), if any, for such class (and any other costs relating to
obtaining shareholder approval of the Rule 12b-1 Plan for such class, or an
amendment of such plan) and shall separately bear any expenses associated with
any non-Rule 12b-1 Plan service payments ("service fees") that are made under
any servicing agreement, if any, entered into with respect to that class; (iii)
holders of the shares of the class shall have exclusive voting rights regarding
the Rule 12b-1 Plan relating to such class (e.g., the adoption, amendment or
termination of a Rule 12b-1 Plan), regarding the servicing agreements relating
to such class and regarding any matter submitted to shareholders in which the
interests of that class differ from the interests of any other class; (iv) each
new class of shares may bear, to the extent consistent with rulings and other
published statements of position by the Internal Revenue Service, the expenses
of the Fund's operation that are directly
<PAGE>
attributable to such class ("Class Expenses")*/; and (v) each class may have
conversion features unique to such class, permitting conversion of shares of
such class to shares of another class, subject to the requirements set forth in
Rule 18f-3.
III. Expense Allocations
Expenses of each class created after the date hereof must be
allocated as follows: (i) distribution and shareholder servicing payments
associated with any Rule 12b-1 Plan or servicing agreement, if any, relating to
each respective class of shares (including any costs relating to implementing
such plans or any amendment thereto) will be borne exclusively by that class;
(ii) any incremental transfer agency fees relating to a particular class will be
borne exclusively by that class; and (iii) Class Expenses relating to a
particular class will be borne exclusively by that class.
The methodology and procedures for calculating the net asset
value and dividends and distributions of the various classes of shares of the
Fund and the proper allocation of income and expenses among the various classes
of shares of the Fund are required to comply with the Fund's internal control
structure pursuant to applicable auditing standards, including Statement on
Auditing Standards No. 55, and to be reviewed as part of the independent
accountants' review of such internal control structure. The independent
accountants' report on the Fund's system of internal controls required by Form
N-SAR, Item 77B, is not required to refer expressly to the procedures for
calculating the classes' net asset values.
- --------
*/ Class Expenses are limited to any or all of the following: (i) transfer agent
fees identified as being attributable to a specific class of shares, (ii)
stationery, printing, postage, and delivery expenses related to preparing and
distributing materials such as shareholder reports, prospectuses, and proxy
statements to current shareholders of a specific class, (iii) Blue Sky
registration fees incurred by a class of shares, (iv) SEC registration fees
incurred by a class of shares, (v) expenses of administrative personnel and
services as required to support the shareholders of a specific class, (vi)
directors' fees or expenses incurred as a result of issues relating solely to a
class of shares, (vii) account expenses relating solely to a class of shares,
(viii) auditors' fees, litigation expenses, and legal fees and expenses relating
solely to a class of shares, and (ix) expenses incurred in connection with
shareholder meetings as a result of issues relating solely to a class of shares.
<PAGE>
EXHIBIT A
Exhibits to Registrant's 18f-3 Plan
1. Articles of Incorporation filed as Exhibit (1)(a)to Post-Effective
Amendment No. 27 to Registrant's Registration Statement on Form N-1A
(Registration No. 2-72658), filed with the Securities and Exchange
Commission via EDGAR (Accession No. 950116-96-000690) on July 29, 1996
is herein incorporated by reference.
2. Articles Supplementary filed as Exhibits (1)(b), (1)(c), (1)(d) and
(1)(e) to Post-Effective Amendment No. 27 to Registrant's Registration
Statement on Form N-1A (Registration No. 2-72658), filed with the
Securities and Exchange Commission via EDGAR (Accession No.
950116-96-000690) on July 29, 1996 are herein incorporated by
reference.
3. Articles Supplementary filed as Exhibits (1)(f) and (1)(g) to
Post-Effective Amendment No. 28 to Registrant's Registration Statement
on Form N-1A (Registration No. 2-72658), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 950116-97-000573) on
March 27, 1997 are herein incorporated by reference.
4. Articles Supplementary filed as Exhibits (1)(h) and (1)(i) to
Post-Effective Amendment No. 29 to Registrant's Registration Statement
on Form N-1A (Registration No. 2-72658), filed with the Securities and
Exchange Commission via EDGAR (Accession No. 950116-97-001360) on July
29, 1997 are herein incorporated by reference.
5. Articles Supplementary filed as Exhibits (1)(j) and (1)(k) to this
Post-Effective Amendment No. 30 to Registrant's Registration Statement
on Form N-1A (Registration No. 2-72658) and are herein incorporated by
reference.
6. By-Laws filed as Exhibit (2) to Post-Effective Amendment No. 27 to
Registrant's Registration Statement on Form N-1A (Registration No.
2-72658), filed with the Securities and Exchange Commission via EDGAR
(Accession No. 950116-96-000690) on July 29, 1996 are herein
incorporated by reference.
7. Distribution Agreement between Registrant and ICC Distributors, Inc.
filed as Exhibit (6)(a) to this Post-Effective Amendment No. 30 to
Registrant's Registration Statement on Form N-1A (Registration No.
2-72658), and is herein incorporated by reference.
8. Distribution Plan with respect to BT Alex. Brown Cash Reserve Prime
Shares filed as Exhibit (15)(a) to this Post-Effective Amendment No. 30
to Registrant's Registration Statement on Form N-1A (Registration No.
2-72658), and is herein incorporated by reference.
9. Distribution Plan with respect to Flag Investors Cash Reserve Prime
Shares Class A filed as Exhibit (15)(b) to this Post-Effective
Amendment No. 30 to Registrant's Registration
<PAGE>
Statement on Form N-1A (Registration No. 2-72658), and is herein
incorporated by reference.
10. Distribution Plan with respect to Flag Investors Cash Reserve Prime
Shares Class B filed as Exhibit (15)(c) to this Post-Effective
Amendment No. 30 to Registrant's Registration Statement on Form N-1A
(Registration No. 2-72658), and is herein incorporated by reference.
11. Distribution Plan with respect to Quality Cash Reserve Prime Shares
filed as Exhibit (15)(d) to this Post-Effective Amendment No. 30 to
Registrant's Registration Statement on Form N-1A (Registration No.
2-72658), and is herein incorporated by reference.
12. Distribution Plan with respect to BT Alex. Brown Cash Reserve Treasury
Shares filed as Exhibit (15)(e) to this Post-Effective Amendment No. 30
to Registrant's Registration Statement on Form N-1A (Registration No.
2-72658), and is herein incorporated by reference.
13. Distribution Plan with respect to BT Alex. Brown Cash Reserve Tax-Free
Shares filed as Exhibit (15)(f) to this Post-Effective Amendment No. 30
to Registrant's Registration Statement on Form N-1A (Registration No.
2-72658), and is herein incorporated by reference.
14. Form of Sub-Distribution Agreement between ICC Distributors, Inc. and
Participating Dealers is filed as Exhibit (6)(b) to this Post-Effective
Amendment No. 30 to Registrant's Registration Statement on Form N-1A
(Registration No. 2-72658) and is herein incorporated by reference.
15. Form of Shareholder Servicing Agreement filed as Exhibit (6)(c) to this
Post-Effective Amendment No. 30 to Registrant's Registration Statement
on Form N-1A (Registration No. 2-72658) and is herein incorporated by
reference.
16. Prospectus relating to the BT Alex. Brown Cash Reserve Shares is filed
as part of this Registration Statement on Form N-1A (Registration No.
2-72658) and, as amended from time to time, is herein incorporated by
reference.
17. Prospectus relating to Flag Investors Cash Reserve Prime Shares is
filed as part of this Registration Statement on Form N-1A (Registration
No. 2-72658) and, as amended from time to time, is herein incorporated
by reference.
18. Prospectus relating to Quality Cash Reserve Prime Shares is filed as
part of this Registration Statement on Form N-1A (Registration No.
2-72658) and, as amended from time to time, is herein incorporated by
reference.
19. Prospectus relating to Institutional Shares is filed as part of this
Registration Statement on Form N-1A (Registration No. 2-72658) and, as
amended from time to time, is herein incorporated by reference.
<PAGE>
BOARD APPROVALS
Date Approved: July 1990
FURTHER RESOLVED, The total number of shares of capital stock
which the Corporation shall have the authority to issue is 4,000,000,000 shares
of common stock of the par value of $.001 each, of which 2,500,000,000 shares
are designated "Prime Series", 1,000,000,000 shares are designated "Treasury
Series", 400,000,000 shares are designated "Flag Investors Series" and the
balance of which are unclassified. Unissued shares of the capital stock may be
classified and reclassified by the Board of Directors. The aggregate par value
of capital stock of all classes is $4,000,000.
FURTHER RESOLVED, that the Articles Supplementary to the
Articles of Incorporation of the Fund be, and they hereby are, approved and
adopted.
Date Approved: January 30, 1991
RESOLVED, that the Distribution Agreement (containing a plan
of distribution under Rule 12b-1) for the Fund's Quality Cash Reserve Shares
adopted by the Board of Directors on December 7, 1990 be, and it hereby is,
approved and adopted as the Distribution Agreement for the Quality Cash Reserve
Shares of the Fund.
Date Approved: September 22-23, 1994
FURTHER RESOLVED, that the shares of common stock, par value
$.001 per share of Alex. Brown Cash Reserve Fund, Inc., previously designated as
the "Flag Investors Prime Shares" be, and they hereby are, further designated as
the "Flag Investors Prime Shares - Class A."
FURTHER RESOLVED, that an additional class of shares of each
of the Funds listed below be, and each of them hereby is, classified and
designated as the "Flag Investors Class B Shares" and that unissued shares of
common stock, par value $.001 per share of the Funds listed below be, and the
same hereby are, reclassified as follows:
Class of Shares # of Shares
- --------------- -----------
Prime Series 2,550,000,000 shares
Flag Investors Class A 50,000,000 shares
Flag Investors Class B 50,000,000 shares
Alex. Brown Cash Reserve Prime 2,000,000,000 shares
Quality Cash Reserve Prime 250,000,000 shares
<PAGE>
Class of Shares # of Shares
- --------------- -----------
Institutional Prime 200,000,000 shares
Treasury Series 1,500,000,000 shares
Alex. Brown Cash Reserve Treasury 1,300,000,000 shares
Institutional Treasury 200,000,000 shares
Tax-Free Series 600,000,000 shares
Unclassified 350,000,000 shares
Total Shares 5,000,000,000 shares
FURTHER RESOLVED, that the proper officers of each of the
foregoing Funds be, and each of them hereby is, authorized and directed to file
articles supplementary to the relevant Fund's Articles of Incorporation and to
take such other action as may be necessary to designate and reclassify shares in
the foregoing manner.
RESOLVED, that the Distribution Agreement between Alex. Brown
Cash Reserve Fund, Inc. And Alex. Brown & Sons Incorporated for the Flag
Investors Class B Shares (the "Class B Shares") of said Fund be, and the same
hereby is, approved;
FURTHER RESOLVED, that at such time as the Fund offers the
Class B Shares, the Plan of Distribution presented at this meeting shall govern
the payment of 12b-1 fees by that class;
FURTHER RESOLVED, that the Plan of Distribution for the Class
B Shares of said Fund is determined to be reasonably likely to benefit the Fund
and its shareholders;
<PAGE>
Date Approved: December 29, 1995
RESOLVED, that the total number of shares of Common Stock, par
value $.001 per share, which the Fund shall have the authority to issue be, and
hereby is, increased to six billion four hundred million (6,400,000,000) shares
having the aggregate par value of six million four hundred thousand dollars
($6,400,000), of which three billion five hundred fifty million (3,550,000,000)
shares are designated "Prime Series", one billion five hundred million
(1,500,000,000) shares are designated "Treasury Series", one billion
(1,000,000,000) shares are designated "Tax-Free Series" and the remainder are
unclassified. Of the three billion five hundred fifty million (3,550,000,000)
shares designated for the Prime Series, three billion (3,000,000,000) shares are
classified as Alex. Brown Cash Reserve Fund Shares, two hundred million
(200,000,000) shares are classified as Institutional Shares, fifty million
(50,000,000) shares are classified as Flag Investors Cash Reserve Prime Shares
Class A, fifty million (50,000,000) shares are classified as Flag Investors Cash
Reserve Prime Shares Class B, and two hundred fifty million (250,000,000) shares
are classified as Quality Cash Reserve Prime Shares. Of the one billion five
hundred million (1,500,000,000) shares designated for the Treasury Series, one
billion three hundred million (1,300,000,000) shares are classified as Alex.
Brown Cash Reserve Fund Shares and two hundred million (200,000,000) share are
classified as Institutional Shares. All of the one billion (1,000,000,000)
shares designated for the Tax-Free Series are classified as Alex. Brown Cash
Reserve Fund Series;
FURTHER RESOLVED, that the Articles Supplementary to the
Fund's Articles of Incorporation in the form attached hereto as Exhibit A be,
and hereby are, approved and adopted;
FURTHER RESOLVED, that the proper officers of the Fund be, and
they hereby are, authorized and directed in the name and on behalf of the Fund
to take any other action that the officer so acting may deem necessary or
appropriate to effectuate the filing and recording of the Articles Supplementary
in the appropriate offices in the State of Maryland.
Date Approved: March 26, 1997
Approval of Increase in Authorized Shares and Designation of New Class
of Shares; Authorization to File Articles Supplementary
RESOLVED, that the total number of shares of common stock, par value
$.001 per share, that Alex. Brown Cash Reserve Fund, Inc. (the "Fund") is
authorized to issue is hereby increased from seven billion (7,000,000,000) to
seven billion two hundred fifty million (7,250,000,000) and that from such
amount, two hundred fifty million (250,000,000) authorized and unissued shares
be, and hereby are, designated and classified as the "Alex. Brown Cash Reserve
Tax-Free Institutional Shares" in the manner set forth on Exhibit A attached
hereto;
<PAGE>
FURTHER RESOLVED, that the proper officers of the Fund be, and each of
them hereby is, authorized and directed to file with the State of Maryland
Articles Supplementary to the Fund's Articles of Incorporation ("Articles
Supplementary") to effectuate the increase in authorized shares and to designate
and classify the new class;
FURTHER RESOLVED, that the Proposed Articles Supplementary, in
substantially the form presented to this meeting be, and hereby are approved;
Approval and Adoption of Distribution Agreement for Institutional Shares
RESOLVED, that the Distribution Agreement dated as of April 4, 1990,
between Alex. Brown Cash Reserve Fund, Inc. (the "Fund") and Alex. Brown & Sons
Incorporated for the Fund's Institutional Shares of the Prime and Treasury
Series be, and the same hereby is, approved and adopted as the Distribution
Agreement for the Institutional Shares of the Tax-Free Series.
<PAGE>
Date Approved: March 26, 1997
Approval of Amended Rule 18f-3 Plan
RESOLVED, based upon information presented to the Board of Directors of
Flag Investors Value Builder Fund, Inc. (the "Fund"), that the Directors,
including a majority of the Directors who are not "interested persons" of the
Fund, have determined that the Fund's amended Rule 18f-3 Plan, including the
expense allocations described therein, is in the best interests of the fund and
each of its classes;
FURTHER RESOLVED, that the amended Rule 18f-3 Plan for the Fund be, and
hereby is, approved, in substantially the form presented to this meeting; and
FURTHER RESOLVED, that the proper officers of the Fund be, and they
hereby are, authorized and directed to take any and all actions necessary or
appropriate to cause the amended Rule 18f-3 Plan to be filed with the Securities
and Exchange Commission.
Approved: June 17, 1997
Approval of Increase in Authorized Shares
Authorization to File Articles Supplementary
RESOLVED, that the total number of shares of Common Stock, par
value $.001 per share, that Alex. Brown Cash Reserve Fund, Inc. (the "Fund") is
authorized to issue is hereby increased from seven billion two hundred fifty
million (7,250,000,000) shares having the aggregate par value of seven million
two hundred fifty thousand dollars ($7,250,000) to eight billion (8,000,000,000)
shares having the aggregate par value of eight million dollars ($8,000,000) and
that the number of shares of Common Stock, par value $.001 per share previously
designated and classified as Alex. Brown Cash Reserve Prime Institutional Shares
be, and hereby is, increased from two hundred million (200,000,000) shares to
nine hundred fifty million (950,000,000) shares in the manner set forth on
Exhibit A attached hereto;
FURTHER RESOLVED, that the Articles Supplementary to the
Fund's Articles of Incorporation in the form attached hereto as Exhibit B be,
and hereby are, approved and adopted;
FURTHER RESOLVED, that the proper officers of the Fund be, and
they hereby are, authorized and directed in the name and on behalf of the Fund
to take any other action that the officer so acting may deem necessary or
appropriate to effectuate the filing and recording of the Articles Supplementary
in the appropriate offices in the State of Maryland, the taking of any such
action to establish conclusively such officer's authority therefore and the
approval and ratification thereof by the Fund.
Approved: September 16, 1997
<PAGE>
Approval of Distribution Plans
RESOLVED, that the Plan of Distribution for the BT Alex. Brown
Cash Reserve Prime Shares of BT Alex. Brown Cash Reserve Fund, Inc. be, and
hereby is, determined to be reasonably likely to benefit such class and its
shareholders and that based on information reasonably available to the
Directors, expenditures contemplated by such Plan are comparable to expenditures
for other similar plans;
FURTHER RESOLVED, that the continuation of said Plan be, and
the same hereby is, approved;
FURTHER RESOLVED, that the Plan of Distribution for the Flag
Investors Cash Reserve Prime Class A Shares of BT Alex. Brown Cash Reserve Fund,
Inc. be, and hereby is, determined to be reasonably likely to benefit such class
and its shareholders and that based on information reasonably available to the
Directors, expenditures contemplated by such Plan are comparable to expenditures
for other similar plans;
FURTHER RESOLVED, that the continuation of said Plan be, and
the same hereby is, approved;
FURTHER RESOLVED, that the Plan of Distribution for the Flag
Investors Cash Reserve Prime Class B Shares of BT Alex. Brown Cash Reserve Fund,
Inc. be, and hereby is, determined to be reasonably likely to benefit such class
and its shareholders and that based on information reasonably available to the
Directors, expenditures contemplated by such Plan are comparable to expenditures
for other similar plans;
FURTHER RESOLVED, that the continuation of said Plan be, and
the same hereby is, approved;
FURTHER RESOLVED, that the Plan of Distribution for the
Quality Cash Reserve Prime Shares of BT Alex. Brown Cash Reserve Fund, Inc. be,
and hereby is, determined to be reasonably likely to benefit such class and its
shareholders and that based on information reasonably available to the
Directors, expenditures contemplated by such Plan are comparable to expenditures
for other similar plans;
FURTHER RESOLVED, that the continuation of said Plan be, and
the same hereby is, approved;
FURTHER RESOLVED, that the Plan of Distribution for the BT
Alex. Brown Cash Reserve Treasury Shares of BT Alex. Brown Cash Reserve Fund,
Inc. be, and hereby is, determined to be reasonably likely to benefit such class
and its shareholders and that based on information reasonably available to the
Directors, expenditures contemplated by such Plan are comparable to expenditures
for other similar plans;
FURTHER RESOLVED, that the continuation of said Plan be, and
the same hereby is, approved;
FURTHER RESOLVED, that the Plan of Distribution for the BT
Alex. Brown Cash Reserve Tax-Free Shares of BT Alex. Brown Cash Reserve Fund,
Inc. be, and hereby is, determined to be reasonably likely to benefit such class
and its shareholders and that based on information reasonably available to the
Directors, expenditures contemplated by such Plan are comparable to expenditures
for other similar plans; and
FURTHER RESOLVED, that the continuation of said Plan be, and
the same hereby is, approved.
Approved: March 27, 1998
Approval of Restated Distribution Agreement and Forms
of Sub-Distribution and Shareholder Servicing Agreements
<PAGE>
RESOLVED, that the proposed Restated Distribution Agreement between BT Alex.
Brown Cash Reserve Fund, Inc. and ICC Distributors, Inc. for each class of the
Fund's shares, be, and the same hereby is, approved in substantially the form
presented to this meeting and that the appropriate officers of the Fund be, and
they hereby are, authorized and directed to enter into and execute such
Distribution Agreement with such modifications as said officers shall deem
necessary or appropriate or as may be required to conform with the requirements
of any applicable statute, regulation or regulatory body.
Approved: March 27, 1998
Approval of Increase in Authorized Shares and
Authorization to File Articles Supplementary (Cash Reserve only)
RESOLVED, that the total number of shares of Common
Stock, par value $.001 per share, that BT Alex. Brown Cash Reserve Fund,
Inc. is authorized to issue is hereby increased from eight billion
(8,000,000,000) shares, having the aggregate par value of eight million
dollars ($8,000,000) to nine billion (9,000,000,000) shares, having the
aggregate par value of nine million dollars ($9,000,000) in order to
increase, by five hundred million (500,000,000) shares each, the number
of authorized shares of the BT Alex. Brown Prime Shares and BT Alex.
Brown Tax-Free Shares classes of the Fund;
FURTHER RESOLVED, that following the increase authorized
by the above resolution, the Fund's shares of Common Stock, par value
$.001 per share, shall be designated and classified as follows:
Prime Series (5,400,000,000 shares)
-----------------------------------
BT Alex. Brown Shares . . . . . . . 4,000,000,000 shares
Institutional Shares . . . . . . . 950,000,000 shares
Flag Investors Class A Shares. . . 50,000,000 shares
Flag Investors Class B Shares. . . 50,000,000 shares
Quality Cash Reserve Shares. . . . 350,000,000 shares
Treasury Series (1,500,000,000 shares)
--------------------------------------
BT Alex. Brown Shares . . . . . . . 1,300,000,000 shares
Institutional Shares . . . . . . . 200,000,000 shares
Tax-Free Series (1,750,000,000 shares)
--------------------------------------
BT Alex. Brown Shares . . . . . . . 1,500,000,000 shares
Institutional Shares . . . . . . . 250,000,000 shares
Unclassified Shares . . . . . . . . . . . . 350,000,000 shares
------------------
Total Shares 9,000,000,000 shares
<PAGE>
FURTHER RESOLVED, that Articles Supplementary to the
Fund's Articles of Incorporation in the form attached hereto as Exhibit
A be, and hereby are, approved and adopted;
FURTHER RESOLVED, that the proper officers of the Fund
be, and there hereby are, authorized and directed in the name and on
behalf of the Fund, to take any other action that the officer so acting
may deem necessary or appropriate to effectuate the filing and recording
of the Articles Supplementary in the appropriate offices of the State of
Maryland, the taking of any such action to establish conclusively such
officer's authority therefor and the approval and ratification thereof
by the Fund.
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, James J. Cunnane, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable BT Alex. Brown Cash Reserve Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ James J. Cunnane
--------------------
James J. Cunnane
Date: July 29, 1998
----------------
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Richard T. Hale, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable BT Alex. Brown Cash Reserve Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as Chairman and a director of the Fund
such Registration Statement and any and all such pre- and post-effective
amendments filed with the Securities and Exchange Commission under the 1933 Act
and the 1940 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorney-in-fact
and agent, or either of them or their substitute or substitutes, shall lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Richard T. Hale
-------------------
Richard T. Hale
Date: July 29, 1998
----------------
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, John F. Kroeger, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable BT Alex. Brown Cash Reserve Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ John F. Kroeger
-------------------
John F. Kroeger
Date: July 29, 1998
----------------
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Louis E. Levy, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable BT Alex. Brown Cash Reserve Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Louis E. Levy
-----------------
Louis E. Levy
Date: July 29, 1998
----------------
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Eugene J. McDonald, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable BT Alex. Brown Cash Reserve Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Eugene J. McDonald
----------------------
Eugene J. McDonald
Date: July 29, 1998
----------------
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Truman T. Semans, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in his name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable BT Alex. Brown Cash Reserve Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Truman T. Semans
--------------------
Truman T. Semans
Date: July 29, 1998
----------------
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Carl W. Vogt, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux and Amy M.
Olmert, and each of them singly, his true and lawful attorney-in-fact and agent,
with full power of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place and stead,
which said attorney-in-fact and agent may deem necessary or advisable or which
may be required to enable BT Alex. Brown Cash Reserve Fund, Inc. (the "Fund") to
comply with the Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the Fund's Registration Statement on Form N-1A
pursuant to the 1933 Act and the 1940 Act, together with any and all pre- and
post-effective amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a director of the Fund such Registration
Statement and any and all such pre- and post-effective amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney-in-fact and agent, or either of them
or their substitute or substitutes, shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Carl W. Vogt
----------------
Carl W. Vogt
Date: July 29, 1998
----------------
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Rebecca W. Rimel, whose
signature appears below, does hereby constitute and appoint Edward J. Veilleux
and Amy M. Olmert, and each of them singly, her true and lawful attorney-in-fact
and agent, with full power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments, in her name, place and
stead, which said attorney-in-fact and agent may deem necessary or advisable or
which may be required to enable BT Alex. Brown Cash Reserve Fund, Inc. (the
"Fund") to comply with the Securities Act of 1933, as amended (the "1933 Act")
and the Investment Company Act of 1940, as amended (the "1940 Act"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the Fund's Registration Statement on Form
N-1A pursuant to the 1933 Act and the 1940 Act, together with any and all pre-
and post-effective amendments thereto, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director of the Fund such
Registration Statement and any and all such pre- and post-effective amendments
filed with the Securities and Exchange Commission under the 1933 Act and the
1940 Act, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorney-in-fact and
agent, or either of them or their substitute or substitutes, shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and seal
as of the date set forth below.
/s/ Rebecca W. Rimel
--------------------
Rebecca W. Rimel
Date: July 29, 1998
----------------
<PAGE>
BT ALEX. BROWN CASH RESERVE FUND, INC.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that, Harry Woolf, whose signature
appears below, does hereby constitute and appoint Edward J. Veilleux and Amy M.
Olmert, and each of them singly, his true and lawful attorney-in-fact and agent,
with full power of substitution or resubstitution, to do any and all acts and
things and to execute any and all instruments, in his name, place and stead,
which said attorney-in-fact and agent may deem necessary or advisable or which
may be required to enable BT Alex. Brown Cash Reserve Fund, Inc. (the "Fund") to
comply with the Securities Act of 1933, as amended (the "1933 Act") and the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the Fund's Registration Statement on Form N-1A
pursuant to the 1933 Act and the 1940 Act, together with any and all pre- and
post-effective amendments thereto, including specifically, but without limiting
the generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as President of the Fund such Registration
Statement and any and all such pre- and post-effective amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney-in-fact and agent, or either of them
or their substitute or substitutes, shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Harry Woolf
---------------
Harry Woolf
Date: July 29, 1998
----------------
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<PAGE>
<ARTICLE> 6
<CIK> 0000353447
<NAME> ALEX BROWN CASH RESERVE
<SERIES>
<NUMBER> 001
<NAME> TREASURY RETAIL CLASS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 892,272,356
<INVESTMENTS-AT-VALUE> 892,272,356
<RECEIVABLES> 6,735,431
<ASSETS-OTHER> 233,176
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 899,240,963
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,034,282
<TOTAL-LIABILITIES> 2,034,282
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 798,354,129
<SHARES-COMMON-STOCK> 798,354,129
<SHARES-COMMON-PRIOR> 702,733,598
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 87,815
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 798,426,658
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 39,284,838
<OTHER-INCOME> 0
<EXPENSES-NET> 4,247,826
<NET-INVESTMENT-INCOME> 35,037,012
<REALIZED-GAINS-CURRENT> 20,785
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 35,057,797
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 31,623,993
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,641,511,991
<NUMBER-OF-SHARES-REDEEMED> 3,551,758,854
<SHARES-REINVESTED> 30,209,607
<NET-CHANGE-IN-ASSETS> 157,553,108
<ACCUMULATED-NII-PRIOR> 65,850
<ACCUMULATED-GAINS-PRIOR> 1,180
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,813,575
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,247,826
<AVERAGE-NET-ASSETS> 680,180,240
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.046
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.046
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000353447
<NAME> ALEX BROWN CASH RESERVE
<SERIES>
<NUMBER> 002
<NAME> TREASURY INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 892,272,356
<INVESTMENTS-AT-VALUE> 892,272,356
<RECEIVABLES> 6,735,431
<ASSETS-OTHER> 233,176
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 899,240,963
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,034,282
<TOTAL-LIABILITIES> 2,034,282
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 98,768,925
<SHARES-COMMON-STOCK> 98,768,925
<SHARES-COMMON-PRIOR> 71,655,199
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 87,815
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 798,426,658
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 39,284,838
<OTHER-INCOME> 0
<EXPENSES-NET> 4,247,826
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<CIK> 0000353447
<NAME> BT ALEX BROWN CASH RESERVE
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<NAME> PRIME QUALITY
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<PAGE>
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<NAME> ALEX BROWN CASH RESERVE
<SERIES>
<NUMBER> 008
<NAME> TAX FREE SERIES
<S> <C>
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<PAGE>
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<CIK> 0000353447
<NAME> ALEX BROWN CASH RESERVE
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<NAME> TAX FREE SERIES - INSTITUTIONAL SHARES
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