===============================================================================
PCS CASH FUND, INC.
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
DECEMBER 31, 1995
(UNAUDITED)
- -------------------------------------------------------------------------------
PCS MONEY MARKET PORTFOLIO
PCS GOVERNMENT OBLIGATIONS
MONEY MARKET PORTFOLIO
- -------------------------------------------------------------------------------
===============================================================================
COVER
<PAGE>
PCS CASH FUND, INC.
PRESIDENT'S LETTER
To our Shareholders:
We are pleased to present to you the semi-annual report for the PCS Cash Fund,
Inc. covering the period of July 1, 1995 to December 31, 1995. The Fund
currently operates two portfolios: PCS Money Market Portfolio and PCS Government
Obligations Money market Portfolio.
From the first of July of 1995 until the end of the year the size of both of the
PCS Cash Fund Portfolios increased by almost exactly 42%. PCS Money Market
Portfolio increased from $171.5 million to $243.4 million, while PCS Government
Obligations Money Market Portfolio increased from $67.5 million to $96.0
million.
In the second half of 1995 short term interest rates were less volatile than
they had been in the first half of the year. As market participants became more
comfortable with the basic facts that the U.S. economy was slowing down and that
the Federal Reserve was in an easing mode, short term rates began to move to
lower levels.
Recognition of these two facts led to an inversion of the yield curve, where the
rate available on overnight investments was at times substantially higher than
the rate of three- or even five-year Treasury notes.
This change in economic prospects along with the alteration in the shape of the
yield curve led us to make some strategic shifts in both portfolios. The
percentage of the portfolios which was devoted to investment in repurchase
agreements was increased whenever we felt repo rates represented a better
investment than one- to three-month Agency discount notes (and commercial paper
of a similar maturity) on a total return basis.
The Federal Reserve lowered their target for Fed Funds twice in the second half
of '95. And at year's end as recession fears sent short term rates lower,
further inverting the yield curve, we maintained our strategy of exploiting the
higher levels available for repurchase agreements.
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. We 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
February 20, 1996
<PAGE>
PCS CASH FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT
(000) VALUE
------- -----------
<S> <C> <C>
AGENCY OBLIGATIONS (31.9%)
Federal Home Loan Bank Discount Notes
6.10%, 01/02/96 .................................. $10,000 $ 9,998,306
5.61%, 01/22/96 .................................. 10,000 9,967,275
5.56%, 01/24/96 .................................. 5,000 4,982,239
5.43%, 02/05/96 .................................. 7,650 7,609,614
Federal Home Loan Mortgage Corporation Discount Note
5.55%, 01/18/96 .................................. 20,000 19,947,583
Federal National Mortgage Association Discount Notes
5.63%, 01/24/96 .................................. 5,000 4,982,015
5.58%, 01/26/96 .................................. 5,000 4,980,625
5.54%, 02/07/96 .................................. 5,000 4,971,531
5.39%, 04/26/96 .................................. 6,685 6,568,896
5.37%, 04/30/96 .................................. 3,725 3,658,323
-----------
TOTAL AGENCY OBLIGATIONS (COST $77,666,407) ........... 77,666,407
-----------
CERTIFICATES OF DEPOSIT (3.7%)
Deutsche Bank
5.64%, 03/08/96 .................................. 7,000 7,000,000
Rabobank
5.93%, 05/16/96 .................................. 2,000 2,000,655
-----------
TOTAL CERTIFICATES OF DEPOSIT (COST $9,000,655) ....... 9,000,655
-----------
COMMERCIAL PAPER (26.6%)
BANKING (4.1%)
ABBEY NATIONAL NORTH AMERICAN CORP. [A1+, P1]
5.62%, 01/16/96 ............................... 5,000 4,988,292
Commerz Bank U.S. Finance [A1+, P1]
5.58%, 01/31/96 ............................... 5,000 4,976,750
-----------
TOTAL BANKING ................................... 9,965,042
-----------
BEVERAGES (2.0%)
Coca-Cola Financial Corp. [A1+, P1]
5.45%, 03/14/96 ............................... 5,000 4,944,743
-----------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
PCS CASH FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT
(000) VALUE
-------- -----------
<S> <C> <C>
COMMERCIAL PAPER (CONTINUED)
EDUCATION (4.1%)
Harvard University [A1+, P1]
5.65%, 01/04/96 ......................... $10,000 $ 9,995,292
-----------
Financial (4.1%)
UBS Financial Inc. [A1+, P1]
6.00%, 01/02/96 ......................... 10,000 9,998,333
-----------
FOODS (4.1%)
Nestle Capital Corp. [A1+, P1]
5.64%, 01/05/96 ......................... 10,000 9,993,733
-----------
OIL & GAS (4.1%)
Koch Industries, Inc. [A1+, P1]
5.65%, 01/18/96 ......................... 10,000 9,973,319
-----------
PHARMACEUTICALS (4.1%)
Pfizer, Inc. [A1+, P1]
5.70%, 01/17/96 ......................... 5,000 4,987,333
5.70%, 01/19/96 ......................... 5,000 4,985,750
-----------
TOTAL PHARMACEUTICALS ........................ 9,973,083
-----------
TOTAL COMMERCIAL PAPER (COST $64,843,545) ....... 64,843,545
-----------
U.S. TREASURY OBLIGATIONS (2.0%)
U.S. Treasury STRIP Notes
5.75%, 05/15/96 ............................ 5,000 4,896,872
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST $4,896,872) 4,896,872
-----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
PCS CASH FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT
(000) VALUE
------- -----------
<S> <C> <C> <C>
VARIABLE RATE OBLIGATIONS (21.0%)
Federal National Mortgage Association Floating Rate Notes
5.26%, 01/02/96** ........................................ $11,000 $ 11,000,000
5.53%, 01/02/96** ........................................ 5,000 4,996,902
5.68%, 03/04/96** ........................................ 15,000 15,000,000
General Electric Capital Corporation Floating Rate Note
5.85%, 01/02/96** ........................................ 5,000 5,000,000
Student Loan Marketing Association Floating Rate Note
5.40%, 01/02/96** ........................................ 15,000 15,011,407
------------
TOTAL VARIABLE RATE OBLIGATIONS (COST $51,008,309) ............ 51,008,309
------------
REPURCHASE AGREEMENTS (14.8%)
Goldman, Sachs & Co. 5.83%, 01/02/96, (Agreement dated
12/29/95, to be repurchased at $35,986,296, collateralized
by $22,395,000, U.S. Treasury Bonds, 13.875%, due 05/15/11.
The total market value and accrued interest of the
collateral is $37,115,160) (cost $35,963,000) ............ 35,963 35,963,000
------------
TOTAL INVESTMENTS (COST $243,378,788*) ............... 100.0% $243,378,788
OTHER ASSETS 0.2% 542,451
LIABILITIES .......................................... (0.2%) (545,656)
------ ------------
NET ASSETS (BASED ON 243,387,250 SHARES, HAVING A PAR
VALUE OF $.001 PER SHARE) ......................... 100.0% $243,375,583
====== ============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE ($243,375,583 / 243,387,250 SHARES OUTSTANDING) $1.00
=====
<FN>
- --------------------
* Also cost for Federal income tax purposes.
** Variable Rate Obligations -- the interest rate shown is the rate as of
December 31, 1995 and the maturity date is the shorter of the next interest
readjustment date or the date the principal amount can be recovered through
demand.
</FN>
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
PCS CASH FUND, INC.
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT
(000) VALUE
------- -----------
<S> <C> <C>
AGENCY OBLIGATIONS (67.4%)
Federal Home Loan Bank Discount Notes
5.54%, 01/22/96 .................................................. $30,000 $29,903,050
5.61%, 01/22/96 .................................................. 10,000 9,967,275
Federal National Mortgage Association Discount Notes
5.56%, 01/10/96 .................................................. 15,000 14,979,150
5.63%, 01/24/96 .................................................. 5,000 4,982,015
5.39%, 04/26/96 .................................................. 5,000 4,913,161
-----------
TOTAL AGENCY OBLIGATIONS (COST $64,744,651) ........................... 64,744,651
-----------
U.S. TREASURY OBLIGATIONS (2.0%)
U.S. Treasury STRIP Notes
5.75%, 05/15/96 .................................................. 2,000 1,958,749
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST $1,958,749) ..................... 1,958,749
-----------
VARIABLE RATE OBLIGATIONS (11.5%)
Federal National Mortgage Association Floating Rate Note
5.26%, 01/02/96** ................................................ 11,000 11,000,000
-----------
TOTAL VARIABLE RATE OBLIGATIONS (COST $11,000,000) .................... 11,000,000
-----------
REPURCHASE AGREEMENTS (19.1%)
Goldman Sachs & Co. 5.83%, 01/02/96, (Agreement dated
12/29/95, to be repurchased at $18,391,906, collater-
alized by $13,365,000 U.S. Treasury Bonds, 9.25%, due
02/15/16. The total market value and accrued interest
of the collateral is $19,234,777) (cost $18,380,000) . 18,380 18,380,000
-----------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
PCS CASH FUND, INC.
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
-----------
<S> <C> <C>
TOTAL INVESTMENTS (COST $96,083,400*) ................ 100.0% $96,083,400
OTHER ASSETS ......................................... 0.2% 145,571
LIABILITIES .......................................... (0.2%) (224,553)
------ -----------
NET ASSETS (BASED ON 96,004,418 SHARES, HAVING A PAR
VALUE OF $.001 PER SHARE) ......................... 100.0% $96,004,418
====== ===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE ($96,004,418 / 96,004,418 SHARES OUTSTANDING) $1.00
=====
<FN>
- --------------------
* Also cost for Federal income tax purposes.
** Variable Rate Obligations -- the interest rate shown is the rate as of
December 31, 1995 and the maturity date is the shorter of the next interest
readjustment date or the date the principal amount can be recovered through
demand.
</FN>
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
PCS CASH FUND, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
GOVERNMENT OBLIGATIONS
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
DECEMBER 31, 1995 DECEMBER 31, 1995
----------------- ------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME
Interest ........................................ $5,281,592 $2,937,420
---------- ----------
EXPENSES
Distribution fees (Note 2) ...................... 454,080 252,186
Investment advisory fees (Note 2) ............... 408,672 226,968
Administration fees (Note 2) .................... 89,851 54,532
Registration fees ............................... 41,041 13,598
Transfer agent fees (Note 2) .................... 23,999 6,000
Custodian fees (Note 2) ......................... 20,251 15,420
Audit fees ...................................... 8,712 8,713
Insurance expense ............................... 8,303 7,621
Printing fees ................................... 7,711 6,313
Legal fees ...................................... 7,285 5,570
Directors' fees ................................. 5,279 5,279
Miscellaneous expense ........................... 2,525 2,273
---------- ----------
1,077,709 604,473
LESS FEES VOLUNTARILY WAIVED (NOTE 2) .............. (187,712) (125,319)
---------- ----------
Total Expenses .................................. 889,997 479,154
---------- ----------
NET INVESTMENT INCOME .............................. 4,391,595 2,458,266
NET REALIZED GAIN (LOSS) ON INVESTMENTS ............ -- --
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,391,595 $2,458,266
========== ==========
</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 SIX FOR THE YEAR
MONTHS ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1995
----------------- -------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ............................. $ 4,391,595 $ 6,917,658
Net realized loss on investments .................. -- (11,667)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . 4,391,595 6,905,991
------------ ------------
Dividends to shareholders from:
Net investment income ($.0243 and $.0446 per
share, respectively) ............................ (4,391,595) (6,917,658)
Net realized gains ($.0000 and $.0001 per
share, respectively) ............................ -- (7,700)
------------ ------------
Total dividends to shareholders ...................... (4,391,595) (6,925,358)
------------ ------------
Increase (decrease) in net assets derived from capital
share transactions (Note 3) ........................ 71,861,016 (5,064,947)
------------ ------------
Total increase (decrease) in net assets .............. 71,861,016 (5,084,314)
NET ASSETS:
Beginning of period .................................. 171,514,567 176,598,881
------------ ------------
End of period ........................................ $243,375,583 $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 SIX FOR THE YEAR
MONTHS ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1995
----------------- --------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income .............................. $ 2,458,266 $ 9,351,381
Net realized gain on investments ................... -- 11,936
----------- ------------
Net increase in net assets resulting from operations 2,458,266 9,363,317
----------- ------------
Dividends to shareholders from:
Net investment income ($.0245 and $.0448 per
share, respectively) ............................. (2,458,266) (9,351,381)
Net realized gains ($.0001 and $.0000 per
share, respectively) ............................. (11,936) (572)
----------- ------------
Total dividends to shareholders ....................... (2,470,202) (9,351,953)
----------- ------------
Increase (decrease) in net assets derived from capital
share transactions (Note 3) ......................... 28,511,796 (35,057,979)
----------- ------------
Total increase (decrease) in net assets ............... 28,499,860 (35,046,615)
NET ASSETS:
Beginning of period ................................... 67,504,558 102,551,173
----------- ------------
End of period ......................................... $96,004,418 $ 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)
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
DEC. 31, 1995 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1993 JUNE 30, 1992 JUNE 30, 1991
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income ........... 0.0243 0.0446 0.0246 0.0243 0.0402 0.0652
Net realized gains on investments -- 0.0001 -- 0.0001 -- --
Less dividends to shareholders from:
Net investment income ........... (0.0243) (0.0446) (0.0246) (0.0243) (0.0402) (0.0652)
Net realized gains .............. -- (0.0001) -- (0.0001) -- --
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return ....................... 4.94%(a) 4.55% 2.49% 2.47% 4.11% 6.72%
Ratios of expenses to average
net assets ...................... 0.98%(a)(b) 0.98%(b) 0.98%(b) 0.98%(b) 0.98%(b) 0.98%(b)
Ratios of net investment income to
average net assets .............. 4.84%(a)(b) 4.45%(b) 2.45%(b) 2.44%(b) 3.97%(b) 6.40%(b)
Net assets at end of period (000) .. $243,376 $171,515 $176,599 $156,310 $190,034 $140,594
</TABLE>
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX MARCH 12,1992
MONTHS ENDED FOR THE YEAR FOR THE YEAR FOR THE YEAR (COMMENCEMENT
DEC. 31, 1995 ENDED ENDED ENDED OF OPERATIONS)
(UNAUDITED) 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 .............. 0.0245 0.0448 0.0243 0.0246 0.0094
Net realized gains on investments .. -- 0.0001 0.0011 0.0002 --
Less dividends to shareholders from:
Net investment income .............. (0.0245) (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 .......................... 4.97%(a) 4.58% 2.45% 2.51% 0.94%(c)
Ratio of expenses to average net assets 0.95%(a)(b) 0.95%(b) 0.95%(b) 0.95%(b) 0.95%(a)(b)
Ratio of net investment income to
average net assets ................. 4.87%(a)(b) 4.61%(b) 2.40%(b) 2.50%(b) 3.07%(a)(b)
Net assets at end of period (000) ..... $96,004 $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 1.19% annualized, 1.18%,
1.19%, 1.20%, 1.27% and 1.27% for the Money Market Portfolio and 1.20%
annualized, 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 4.63% annualized, 4.25%, 2.24%, 2.22%,
3.68% and 6.11% for the Money Market Portfolio and 4.62% annualized, 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
DECEMBER 31, 1995
(UNAUDITED)
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.
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)
DECEMBER 31, 1995
(UNAUDITED)
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 six months ended December 31, 1995, advisory
fees, net of voluntary fee waivers, were $357,183 for the Money Market Portfolio
and $220,076 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 six months ended December 31, 1995.
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 six months ended
December 31, 1995, distribution fees, net of voluntary fee waivers, were
$317,857 for the Money Market Portfolio and $133,759 for the Government
Obligations Money Market Portfolio.
12
<PAGE>
PCS CASH FUND, INC.
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
DECEMBER 31, 1995
(UNAUDITED)
NOTE 3 -- CAPITAL STOCK
Transactions in capital stock for each Portfolio were as follows:
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
December 31, 1995 June 30, 1995
------------------------------ --------------------------------
(Unaudited)
Shares Value Shares Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Shares sold................................. 784,213,805 $784,213,805 1,261,410,987 $1,261,410,987
Shares issued in reinvestment of dividends.. 4,000,006 4,000,006 6,579,514 6,579,514
Shares redeemed............................. (716,352,795) (716,352,795) (1,273,055,448) (1,273,055,448)
------------ ------------ -------------- --------------
Net increase (decrease)..................... 71,861,016 $ 71,861,016 (5,064,947) $ (5,064,947)
============ ============ ============== ==============
</TABLE>
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
December 31, 1995 June 30, 1995
------------------------------ -------------------------------
(Unaudited)
Shares Value Shares Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Shares sold................................. 679,020,275 $679,020,275 2,017,389,099 $2,017,389,099
Shares issued in reinvestment of dividends.. 2,017,840 2,017,840 9,053,037 9,053,037
Shares redeemed............................. (652,526,319) (652,526,319) (2,061,500,115) (2,061,500,115)
....... ------------ ------------ -------------- --------------
Net increase (decrease)..................... 28,511,796 $ 28,511,796 (35,057,979) $ (35,057,979)
============ ============ ============ ==============
</TABLE>
NOTE 4 -- NET ASSETS
At December 31, 1995, net assets consisted of the following:
<TABLE>
<CAPTION>
Money Market Government Obligations
Portfolio Money Market Portfolio
------------ ----------------------
<S> <C> <C>
Capital Paid-in............................................ $243,387,250 $96,004,418
Accumulated Net Realized Gain on Investments............... (11,667) --
------------ -----------
$243,375,583 $96,004,418
============ ===========
</TABLE>
13
<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
===============================================================================
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