==============================
PCS CASH FUND, INC.
---------------------------------
ANNUAL REPORT
JUNE 30, 1996
---------------------------------
PCS MONEY MARKET PORTFOLIO
PCS GOVERNMENT OBLIGATIONS
MONEY MARKET PORTFOLIO
---------------------------------
==============================
<PAGE>
PCS CASH FUND, INC.
PRESIDENT'S LETTER
To Our Shareholders:
Enclosed is the annual report for the PCS Cash Fund,Inc. The Fund is currently
operating two portfolios: PCS Money Market Portfolio and PCS Government
Obligations Money Market Portfolio. At year end on June 30, 1996 the size of
PCS Money Market Portfolio remained basically unchanged from the Portfolio's
size at the beginning of the year (approximately $171.5 million on July 1, 1995
to $170.9 million at June 30, 1996), while the PCS Government Obligations Money
Market Portfolio net assets increased from $67.5 million to $145.9 million for
the same period.
We are pleased to report that the PCS Cash Fund continues to meet its goal of
providing as high a level of interest income as is consistent with maintaining
liquidity and stability of principal, and that the Fund holds only high quality
securities with over 90% invested in securities rated A1+/P1.
In the coming months the Fund will continue to emphasize performance, quality
and service to its shareholders. As we have previously reported to you, the
Fund's Board of Directors has recommended that the Fund's Portfolios be
reorganized into the Morgan Stanley Fund, Inc., and I urge you to vote in favor
of this proposal. Upon completion of the reorganization, your Fund will continue
to have the same portfolio management and shareholders will experience no change
in our emphasis on performance, quality and service. Additionally, the overall
fees charged to the Fund by its various service providers will not change. Over
time, we anticipate that the reorganization will help us increase assets under
management and achieve certain efficiencies. Finally, management of the Fund,
including your Board ofDirectors, will remain in place.
We sincerely value your participation as a shareholder and if you have any
suggestions regarding the Fund, please let us know.
Very truly yours,
/s/ WARREN J. OLSEN
Warren J. Olsen
President
August 6, 1996
<PAGE>
PCS CASH FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS
JUNE 30, 1996
FACE
AMOUNT
(000) VALUE
----- -----
AGENCY OBLIGATIONS (11.6%)
Federal Home Loan Bank Discount Note
5.52%, 07/01/96 ............................. $10,000 $10,000,000
Federal National Mortgage Association
Discount Note
5.18%, 09/20/96 ............................. 10,000 9,883,450
-----------
TOTAL AGENCY OBLIGATIONS (COST $19,883,450) ...... 19,883,450
-----------
CERTIFICATES OF DEPOSIT (10.5%)
BANKS
Duetsche Bank Financial, Inc.
5.37%, 07/10/96 ........................... 6,000 6,000,000
National Westminister Bank (NY)
5.36%, 07/10/96 ........................... 6,000 6,000,015
Royal Bank of Canada (NY) (Banks LOC)
6.05%, 06/11/97 ........................... 6,000 6,000,000
-----------
TOTAL CERTIFICATES OF DEPOSIT (COST $18,000,015) . 18,000,015
-----------
COMMERCIAL PAPER (35.4%)
BEVERAGES (3.5%)
Coca-Cola Financial Corp.
5.28%, 08/08/96 ........................... 6,000 5,966,560
-----------
COMPUTER & OFFICE EQUIPMENT (4.0%)
Hewlett-Packard Co.
5.38%, 09/24/96 ........................... 7,000 6,911,081
-----------
FINANCIAL (8.7%)
Abbey Nat'l North Amer. Corp.
5.35%, 11/29/96 ........................... 3,000 2,932,679
ABN-AMRO North American Finance Corp.
5.30%, 07/11/96 ........................... 6,000 5,991,167
UBS Financial, Inc.
5.55%, 07/01/96 ........................... 6,000 6,000,000
-----------
TOTAL FINANCIAL ............................... 14,923,846
-----------
See accompanying notes to financial statements.
2
<PAGE>
PCS CASH FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1996
FACE
AMOUNT
(000) VALUE
----- -----
COMMERCIAL PAPER (CONTINUED)
MOTOR VEHICLES & CAR BODIES (4.6%)
Daimler Benz
5.38%, 08/02/96 ...................... $ 3,000 $ 2,985,653
5.44%, 11/14/96 ...................... 5,000 4,897,339
-----------
TOTAL MOTOR VEHICLES & CAR BODIES ........ 7,882,992
-----------
OIL & GAS (3.5%)
Koch Industries, Inc.
5.30%, 07/15/96 ...................... 6,000 5,987,633
-----------
RESTAURANTS (4.1%)
McDonald's Corp.
5.35%, 07/15/96 ...................... 7,000 6,985,436
-----------
SERVICES - EDUCATIONAL (3.5%)
Harvard University
5.34%, 07/23/96 ...................... 6,000 5,980,420
-----------
TELECOMMUNICATIONS (3.5%)
Ameritech Capital Funding Corp.
5.28%, 07/16/96 ...................... 6,000 5,986,800
-----------
TOTAL COMMERCIAL PAPER (COST $60,624,768).... 60,624,768
-----------
See accompanying notes to financial statements.
3
<PAGE>
PCS CASH FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
JUNE 30, 1996
FACE
AMOUNT
(000) VALUE
----- -----
VARIABLE RATE OBLIGATIONS (25.2%)
Federal National Mortgage Association
Floating Rate Notes
5.18%, 07/01/96** ........................ $ 5,000 $ 4,998,642
5.19%, 09/02/96** ........................ 15,000 15,000,000
5.25%, 10/11/96** ........................ 3,000 2,999,176
Federal National Mortgage Association
Medium Term Note
5.28%, 07/16/96** ........................ 5,000 4,999,626
Student Loan Marketing Association
Floating Rate Note
5.59%, 07/02/96** ........................ 15,000 15,008,299
------------
TOTAL VARIABLE RATE OBLIGATIONS
(COST $43,005,743) ....................... 43,005,743
------------
REPURCHASE AGREEMENT (17.2%)
Goldman, Sachs & Co. 5.38%, 07/01/96
(Agreement dated 06/28/96, to be
repurchased at $29,379,154
collateralized by $29,325,000, U.S.
Treasury Bonds 7.25%, due 05/15/16.
The total market value and accrued
interest of the collateral is
$30,235,908) (cost $29,366,000) .......... 29,366 29,366,000
------------
TOTAL INVESTMENTS (COST $170,879,976*) ... 99.9% $170,879,976
OTHER ASSETS ............................. 0.3% 447,415
LIABILITIES .............................. (0.2%) (354,365)
------------
NET ASSETS (BASED ON 171,084,598
SHARES, HAVING A PAR VALUE OF
$.001 PER SHARE) ...................... 100.0% $170,973,026
====== ============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE ($170,973,026 (DIVIDE)
171,084,598 SHARES OUTSTANDING) ............... $1.00
=====
- ----------
* Also cost for Federal income tax purposes.
** Variable Rate Obligations -- the interest rate shown is the rate as of
June 30, 1996 and the maturity date is the shorter of the next interest
readjustment date or the date the principal amount can be recovered through
demand.
See accompanying notes to financial statements.
4
<PAGE>
PCS CASH FUND, INC.
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS
JUNE 30, 1996
FACE
AMOUNT
(000) VALUE
----- -----
AGENCY OBLIGATIONS (82.1%)
Federal Farm Credit Bank Discount Note
5.29%, 07/02/96 ....................... $10,000 $ 9,998,531
Federal Home Loan Bank Discount Notes
5.52%, 07/01/96 ....................... 30,000 30,000,000
5.26%, 07/05/96 ....................... 10,000 9,994,156
Federal Home Loan Mortgage Corporation
Discount Notes
5.24%, 07/03/96 ....................... 10,000 9,996,846
5.31%, 07/08/96 ....................... 10,000 9,989,675
5.26%, 07/10/96 ....................... 10,000 9,986,850
5.28%, 07/15/96 ....................... 10,000 9,979,467
5.29%, 07/16/96 ....................... 10,000 9,977,958
5.29%, 07/18/96 ....................... 10,000 9,975,019
5.30%, 07/23/96 ....................... 10,000 9,967,611
------------
TOTAL AGENCY OBLIGATIONS (COST $119,866,113) 119,866,113
------------
VARIABLE RATE OBLIGATIONS (4.8%)
Federal National Mortgage Association
Floating Rate Note
5.25%, 10/11/96** ..................... 2,000 1,999,451
Federal National Mortgage Association
Medium Term Note
5.28%, 07/16/96** ..................... 5,000 4,999,626
------------
TOTAL VARIABLE RATE OBLIGATIONS
(COST $6,999,077) ........................ 6,999,077
------------
REPURCHASE AGREEMENT (13.2%)
Goldman, Sachs & Co. 5.38%, 07/01/96
(Agreement dated 06/28/96, to
be repurchased at $19,294,639
collateralized by $19,260,000,
U.S. Treasury Bonds 7.25%, due
05/15/16. The total market value
and accrued interest of the
collateral is $19,858,264)
(cost $19,286,000) .................... 19,286 19,286,000
------------
See accompanying notes to financial statements.
5
<PAGE>
PCS CASH FUND, INC.
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
JUNE 30, 1996
VALUE
-----
TOTAL INVESTMENTS (COST $146,151,190) 100.1% $ 146,151,190
OTHER ASSETS ......................... 0.0% 43,994
LIABILITIES .......................... (0.1%) (217,628)
-------------
NET ASSETS (BASED ON 146,076,545
SHARES, HAVING A PAR VALUE OF
$.001 PER SHARE)................... 100.0% $ 145,977,556
====== =============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE ($145,977,556 (DIVIDE)
146,076,545 SHARES OUTSTANDING) $1.00
=====
- ----------
* Also cost for Federal income tax purposes.
** Variable Rate Obligations -- the interest rate shown is the rate as of
June 30, 1996 and the maturity date is the shorter of the next interest
readjustment date or the date the principal amount can be recovered through
demand.
See accompanying notes to financial statements.
6
<PAGE>
PCS CASH FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
GOVERNMENT OBLIGATIONS
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
------------ ----------------------
<S> <C> <C>
INVESTMENT INCOME
Interest ........................................ $9,502,974 $4,948,893
---------- ----------
EXPENSES
Distribution fees (Note 2) ...................... 843,776 439,236
Investment advisory fees (Note 2) ............... 759,398 395,312
Administration fees (Note 2) .................... 167,790 105,462
Registration fees ............................... 95,232 26,020
Custodian fees (Note 2) ......................... 50,957 26,756
Transfer agent fees (Note 2) .................... 49,945 12,000
Printing fees ................................... 26,500 22,500
Audit fees ...................................... 17,250 16,445
Insurance expense ............................... 15,485 15,485
Legal fees ...................................... 15,356 12,978
Directors' fees ................................. 8,597 8,597
Miscellaneous expense ........................... 10,443 10,959
---------- ----------
2,060,729 1,091,750
LESS FEES VOLUNTARILY WAIVED (NOTE 2) .............. (406,928) (257,203)
---------- ----------
Total Expenses .................................. 1,653,801 834,547
---------- ----------
NET INVESTMENT INCOME .............................. 7,849,173 4,114,346
NET REALIZED LOSS ON INVESTMENTS ................... (99,906) (98,989)
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,749,267 $4,015,357
========== ==========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
PCS CASH FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income .............................. $ 7,849,173 $ 6,917,658
Net realized loss on investments ................... (99,906) (11,667)
------------ ------------
Net increase in net assets resulting from operations 7,749,267 6,905,991
------------ ------------
Dividends to shareholders from:
Net investment income ($.0463 and $.0446 per
share, respectively) ............................. (7,849,173) (6,917,658)
Net realized gains ($.0000 and $.0001 per
share, respectively) ............................. -- (7,700)
------------ ------------
Total dividends to shareholders ....................... (7,849,173) (6,925,358)
------------ ------------
Decrease in net assets derived from capital
share transactions (Note 3) ......................... (441,635) (5,064,947)
------------ ------------
Total decrease in net assets .......................... (541,541) (5,084,314)
NET ASSETS:
Beginning of year ..................................... 171,514,567 176,598,881
------------ ------------
End of year ........................................... $170,973,026 $171,514,567
============ ============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
PCS CASH FUND, INC.
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income .............................. $ 4,114,346 $ 9,351,381
Net realized gain (loss) on investments ............ (98,989) 11,936
------------ ------------
Net increase in net assets resulting from operations 4,015,357 9,363,317
------------ ------------
Dividends to shareholders from:
Net investment income ($.0464 and $.0448 per
share, respectively) ............................. (4,114,346) (9,351,381)
Net realized gains ($.0001 and $.0000 per
share, respectively) ............................. (11,936) (572)
------------ ------------
Total dividends to shareholders ....................... (4,126,282) (9,351,953)
------------ ------------
Increase (decrease) in net assets derived from capital
share transactions (Note 3) ......................... 78,583,923 (35,057,979)
------------ ------------
Total increase (decrease) in net assets ............... 78,472,998 (35,046,615)
NET ASSETS:
Beginning of year ..................................... 67,504,558 102,551,173
------------ ------------
End of year ........................................... $145,977,556 $ 67,504,558
============ ============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
PCS CASH FUND, INC.
FINANCIAL HIGHLIGHTS
(for a share outstanding through each period)
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1993 JUNE 30, 1992
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from investment operations:
Net investment income .................... 0.0463 0.0446 0.0246 0.0243 0.0402
Net realized gains/(losses) on investments (.0006) 0.0001 -- 0.0001 --
Less dividends to shareholders from:
Net investment income .................... (0.0463) (0.0446) (0.0246) (0.0243) (0.0402)
Net realized gains ....................... -- (0.0001) -- (0.0001) --
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return ................................ 4.72% 4.55% 2.49% 2.47% 4.11%
Ratios of expenses to average net assets .... 0.98%(b) 0.98%(b) 0.98%(b) 0.98%(b) 0.98%(b)
Ratios of net investment income to
average net assets ....................... 4.65%(b) 4.45%(b) 2.45%(b) 2.44%(b) 3.97%(b)
Net assets at end of period (000) ........... $170,973 $171,515 $176,599 $156,310 $190,034
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
FOR THE PERIOD
MARCH 12, 1992
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR (COMMENCEMENT
ENDED ENDED ENDED ENDED OF OPERATIONS)
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1993 TO JUNE 30, 1992
------------- ------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from investment operations:
Net investment income .................... 0.0464 0.0448 0.0243 0.0246 0.0094
Net realized gains/(losses) on investments (0.0011) -- 0.0011 0.0002 --
Less dividends to shareholders from:
Net investment income .................... (0.0464) (0.0448) (0.0243) (0.0246) (0.0094)
Net realized gains ....................... (0.0001) -- (0.0011) (0.0002) --
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return ................................ 4.72% 4.58% 2.45% 2.51% 0.94%(c)
Ratio of expenses to average net assets ..... 0.95%(b) 0.95%(b) 0.95%(b) 0.95%(b) 0.95%(a)(b)
Ratio of net investment income to
average net assets ....................... 4.68%(b) 4.61%(b) 2.40%(b) 2.50%(b) 3.07%(a)(b)
Net assets at end of period (000) ........... $145,978 $67,505 $102,551 $101,736 $269,627
<FN>
- ----------
(a) Annualized.
(b) Without the voluntary waiver of advisory and distribution fees, the ratios
of expenses to average net assets would have been 1.22%, 1.18%, 1.19%,
1.20%, and 1.27% for the Money Market Portfolio and 1.24%, 1.12%, 1.22%,
1.19% and 1.29% annualized for the Government Obligations Money Market
Portfolio. The ratios of net investment income to average net assets would
have been 4.41%, 4.25%, 2.24%, 2.22%, and 3.68% for the Money Market
Portfolio and 4.39%, 4.44%, 2.13%, 2.26% and 2.73% annualized for the
Government Obligations Money Market Portfolio.
(c) Not annualized. Total return, if on annualized basis, would have been 3.16%
for the Government Obligations Money Market Portfolio.
</FN>
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
PCS CASH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PCS Cash Fund, Inc. (The "Fund"), an open-end diversified management
investment company, was incorporated in Maryland on January 5, 1989, and is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940.
The Fund is authorized to issue 10 billion shares, $.001 par value per
share, of which 1 billion are classified in each of the following three
portfolios: PCS Money Market Portfolio, PCS Tax-Free Money Market Portfolio, and
PCS Government Obligations Money Market Portfolio. There are currently no shares
outstanding in the Tax-Free Money Market Portfolio.
Preparation of the financial statements in accordance with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions that effect reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the
period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by
the fund in the preparation of their financial statements:
A) SECURITY VALUATION--Portfolio securities are valued under the
amortized cost method, which approximates current market value. Under
this method, securities are valued at cost when purchased and,
thereafter, a constant proportionate amortization of any discount or
premium is recorded until maturity of the security. Regular review and
monitoring of the valuation is performed in an attempt to avoid dilution
or other unfair results to shareholders. The Fund seeks to maintain net
asset value per share at $1.00. INVESTMENT IN SHARES OF THE FUND IS
NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE IS NO
ASSURANCE THAT THE FUND WILL MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
B) SECURITY TRANSACTIONS AND INVESTMENT INCOME--Security
transactions are accounted for on the trade date. The cost of investments
sold is determined by use of the specific identification method for both
financial reporting and income tax purposes. Interest income is recorded
on the accrual basis.
C) DIVIDENDS TO SHAREHOLDERS--Dividends from net investment income
are declared daily and paid monthly. Any net realized capital gains will
be distributed at least annually.
D) FEDERAL INCOME TAXES--The Fund intends to continue to qualify for
the tax treatment applicable to regulated investment companies under the
Internal Revenue Code and make the requisite distributions to its
shareholders which will be sufficient to relieve it from Federal income
and Federal excise taxes. Therefore, no provision has been recorded for
Federal income or Federal excise taxes.
E) REPURCHASE AGREEMENTS--The Fund may purchase money market
instruments from financial institutions, such as banks and non-bank
dealers, subject to the seller's agreement to repurchase them at an
agreed upon date and price (repurchase agreements). Collateral for
repurchase agreements may have longer maturities than the maximum
permissible remaining maturity of portfolio investments. The seller will
be required on a daily basis to maintain the value of the securities
subject to the agreement at not less than the repurchase price,
marked-to-market daily. The agreements are conditioned upon the
collateral being deposited under the Federal Reserve book-entry system or
with the Fund's custodian or a third party sub-custodian.
11
<PAGE>
PCS CASH FUND, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1996
NOTE 2--TRANSACTIONS WITH AFFILIATES AND OTHERS
The Fund has entered into an investment advisory agreement with Morgan
Stanley Asset Management Inc. (The "Advisor"), a wholly owned subsidiary of
Morgan Stanley Group Inc. The Fund has also entered into an Administration and
Accounting Services Agreement with PFPC Inc., a wholly owned subsidiary of PNC
Bank Corp., and a distribution agreement with Morgan Stanley & Co. Inc. PNC Bank
Corp. serves as custodian for each of the Fund's portfolios. PFPC Inc. also
serves as the Fund's transfer agent.
For the advisory services provided and expenses assumed by it, the Advisor
is entitled to receive from each Portfolio a fee, computed daily and payable
monthly, at an annual rate of .45% of the first $250 million of the Portfolio's
daily net assets, .40% of the next $250 million of the portfolio's daily net
assets and .35% of the Portfolio's daily net assets in excess of $500 million.
The Advisor may, at its discretion from time to time, waive voluntarily all or
any portion of its advisory fee or reimburse the Portfolio for a portion of the
expenses of its operations. For the year ended June 30, 1996, advisory fees, net
of voluntary fee waivers, were $605,601 for the Money Market Portfolio and
$350,061 for the Government Obligations Money Market Portfolio.
As required by various state regulations in which the Fund is registered
to sell shares, the Advisor will reimburse each Portfolio if and to the extent
that the aggregate operating expenses of the Portfolio exceed applicable state
limits for the fiscal year. Currently, the most restrictive of such applicable
limits is 2.5% of the first $30 million of average annual net assets, 2.0% of
the next $70 million of average annual net assets, and 1.5% of the remaining
average annual net assets. Certain expenses such as brokerage commissions,
taxes, interest, and extraordinary items are excluded from this limitation. No
such reimbursements were required for the year ended June 30, 1996.
For administration services provided, PFPC Inc. is entitled to receive
from each Portfolio a fee, computed daily and payable monthly, at an annual rate
of .10% of the first $200 million daily net assets, .075% of the next $200
million of daily net assets, .05% of the next $200 million of daily net assets
and .03% of the daily assets in excess of $600 million.
The Fund has adopted a Plan of Distribution and pursuant thereto has
entered into an agreement under which the distributor, Morgan Stanley & Co.
Inc., (the "Distributor") is entitled to receive from each Portfolio
compensation of its distribution costs at an annual rate of up to .50% of daily
net assets. The Distributor may at its discretion from time to time waive
voluntarily all or any portion of its distribution fee. For the year ended June
30, 1996, distribution fees, net of voluntary fee waivers, were $590,645 for the
Money Market Portfolio and $227,284 for the Government Obligations Money Market
Portfolio.
12
<PAGE>
PCS CASH FUND, INC.
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
JUNE 30, 1996
NOTE 3 -- CAPITAL STOCK
Transactions in capital stock for each Portfolio were as follows:
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
For the For the
Year Ended Year Ended
June 30, 1996 June 30, 1995
-------------------------------- ------------------------------
Shares Value Shares Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Shares sold................................. 1,390,773,760 $1,390,773,760 1,261,410,987 $1,261,410,987
Shares issued in reinvestment of dividends.. 7,425,521 7,425,521 6,579,514 6,579,514
Shares redeemed............................. (1,398,640,916) (1,398,640,916) (1,273,055,448) (1,273,055,448)
-------------- -------------- -------------- --------------
Net decrease................................ (441,635) $ (441,635) (5,064,947) $ (5,064,947)
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
For the For the
Year Ended Year Ended
June 30, 1996 June 30, 1995
-------------------------------- ------------------------------
Shares Value Shares Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Shares sold................................. 1,373,640,193 $1,373,640,193 2,017,389,099 $2,017,389,099
Shares issued in reinvestment of dividends.. 3,510,973 3,510,973 9,053,037 9,053,037
Shares redeemed............................. (1,298,567,243) (1,298,567,243) (2,061,500,115) (2,061,500,115)
-------------- -------------- -------------- --------------
Net increase (decrease)..................... 78,583,923 $ 78,583,923 (35,057,979) $ (35,057,979)
============== ============== ============== ==============
</TABLE>
NOTE 4 -- NET ASSETS
At June 30, 1996, net assets consisted of the following:
<TABLE>
<CAPTION>
Money Market Government Obligations
Portfolio Money Market Portfolio
------------ ----------------------
<S> <C> <C>
Capital Paid-in............................................ $171,084,599 $146,076,545
Accumulated Net Realized Loss on Investments............... (111,573) (98,989)
------------ ------------
$170,973,026 $145,977,556
============ ============
</TABLE>
NOTE 5 -- SUBSEQUENT EVENTS
On July 16, 1996 the Board of Directors of the Fund approved an Agreement
and Plan of Reorganization and Liquidation by and between the Fund and Morgan
Stanley Fund, Inc. The Plan, subject to shareholder approval, provides for the
transfer of all or substantially all of the Fund's assets and liabilities to
Morgan Stanley Fund, Inc. in exchange for shares of Morgan Stanley Fund,Inc.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of The PCS Cash Fund, Inc.:
We have audited the accompanying statements of net assets of the PCS Cash Fund,
Inc. (Money Market and Government Obligations Money Market Portfolios), as of
June 30, 1996, and the related statements of operations for the year then ended,
the statements of changes in net assets for each of the periods in the two years
then ended, and the financial highlights for each of the periods presented.
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 held by the
custodian as of June 30, 1996. 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
PCS Cash Fund, Inc.(Money Market and Government Obligations Money Market
Portfolios) as of June 30, 1996 and the results of their operations for the year
then ended, the changes in their net assets for each of the periods in the two
years then ended and the financial highlights for each of the periods presented,
in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
July 31, 1996
14
<PAGE>
===================================
INVESTMENT ADVISOR
Morgan Stanley Asset Management Inc.
New York, New York
DISTRIBUTOR
Morgan Stanley & Co. Incorporated
New York, New York
CUSTODIAN
PNC Bank
Philadelphia, Pennsylvania
ADMINISTRATOR/TRANSFER AGENT
PFPC Inc.
Wilmington, Delaware
COUNSEL
Morgan, Lewis & Bockius
Philadelphia, Pennsylvania
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
===================================
