-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dnue5AFx4uPzbP03jom2bDzdrFWclUn026IcgsfeK/H9X3QwpJMRl1I9uTXtpi1q B82/SvrtyjsGxt8Ay2Hy1Q== 0000950116-99-001880.txt : 19991018 0000950116-99-001880.hdr.sgml : 19991018 ACCESSION NUMBER: 0000950116-99-001880 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19991015 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEUTSCHE BANC ALEX BROWN CASH RESERVE FUND INC CENTRAL INDEX KEY: 0000353447 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 621223991 STATE OF INCORPORATION: MD FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 497 SEC ACT: SEC FILE NUMBER: 002-72658 FILM NUMBER: 99728817 BUSINESS ADDRESS: STREET 1: ONE SOUTH STREET CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4108953761 MAIL ADDRESS: STREET 1: ONE SOUTH ST CITY: BALTIMORE STATE: MD ZIP: 21202 FORMER COMPANY: FORMER CONFORMED NAME: BT ALEX BROWN CASH RESERVE FUND INC DATE OF NAME CHANGE: 19970827 FORMER COMPANY: FORMER CONFORMED NAME: BROWN ALEX CASH RESERVE FUND INC DATE OF NAME CHANGE: 19920703 497 1 Supplement dated October 11, 1999 to the Prospectuses dated August 1, 1999, of Deutsche Banc Alex. Brown Cash Reserve Fund, Inc. The third paragraph of the section "Investment Advisor" in the prospectuses for Deutsche Banc Alex. Brown Cash Reserve Fund, Inc. (the "Fund") is amended and supplemented as follows: Prior to June 4, 1999, the Advisor was an indirect subsidiary of Bankers Trust Corporation. On June 4, 1999, Bankers Trust Corporation merged with a subsidiary of Deutsche Bank A.G. ("Deutsche Bank"). Deutsche Bank is a major global banking institution that is engaged in a wide range of financial services, including investment management, mutual funds, retail and commercial banking, investment banking and insurance. A Special Meeting of Shareholders was held on October 7, 1999, at which time shareholders voted to approve a new investment advisory agreement (the "Advisory Agreement") with ICC. Approval of the Investment Advisory Agreement was sought because Deutsche Bank indirectly became ICC's parent company and, therefore, controls its operations as investment advisor. The services provided to the Fund under the Advisory Agreement are the same as those provided under the previous Advisory Agreement with ICC. PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE SUPPCASH (10/99) STATEMENT OF ADDITIONAL INFORMATION ---------------------------------------- DEUTSCHE BANC 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 OR CALLING THE FUND AT P.O. BOX 17250, BALTIMORE, MARYLAND 21203, (800) 553-8080. Statement of Additional Information dated August 1, 1999, as supplemented through October 11, 1999, Relating to Prospectuses dated, August 1, 1999, as supplemented through October 11, 1999, for: Deutsche Banc 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) TABLE OF CONTENTS Introduction............................................................ 1 The Fund and Its Shares................................................. 1 Investment Program and Restrictions..................................... 3 Investment Restrictions................................................. 6 Share Purchases and Redemptions......................................... 8 Dividends and Taxes..................................................... 9 Directors and Officers.................................................. 14 The Investment Advisor.................................................. 18 Distributor............................................................. 19 Portfolio Transactions.................................................. 24 Semi-Annual Reports..................................................... 26 Independent Accountants................................................. 26 Sub-Accounting.......................................................... 26 Legal Matters .......................................................... 26 Transfer Agent, Custodian and Accounting Services....................... 26 Principal Holders of Securities......................................... 27 Current Yield........................................................... 29 Financial Statements.................................................... 30 Appendix A.............................................................. A-1 INTRODUCTION Deutsche Banc Alex. Brown Cash Reserve Fund, Inc. (formerly, 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 with 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, 1999: one for the Deutsche Banc 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 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"): o Prime Series o Treasury Series o Tax-Free Series There are currently five classes of the Prime Series, designated as the Deutsche Banc 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 Deutsche Banc 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 Deutsche Banc Alex. Brown Cash Reserve Treasury Shares and the Deutsche Banc Alex. Brown Cash Reserve Treasury Institutional Shares. There are currently two classes of the Tax-Free Series, designated as the Deutsche Banc Alex. Brown Cash Reserve Tax-Free Shares and the Deutsche Banc Alex. Brown Cash Reserve Tax-Free Institutional Shares. -1- 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 10 billion 550 million 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. 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 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. 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 -2- signatures necessary to demand a meeting to consider removal of a director, the Fund will undertake 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. INVESTMENT PROGRAM AND RESTRICTIONS - -- TREASURY SERIES The Treasury Series may invest in U.S. Treasury obligations consisting of marketable securities and instruments issued by the U.S. Treasury, including bills, notes, bonds and other obligations. It is management's intention to have 100% of the Treasury Series' assets invested in such instruments at all times. In unusual circumstances, up to 10% of the Treasury Series' assets may be invested in repurchase agreements collateralized by U.S. Treasury obligations. Such investments will be made only when it is necessary to ensure that the Series is fully invested while satisfying its liquidity requirements. - -- PRIME SERIES In addition to the U.S. Treasury obligations described above and repurchase agreements collateralized by U.S. Treasury securities, the Prime Series may invest in obligations issued or guaranteed as to principal and interest by agencies or instrumentalities of the U.S. Government. Some of these obligations are backed by the full faith and credit of the U.S. Government (e.g., the Government National Mortgage Association), others are supported by the issuing agency's right to borrow from the U.S. Treasury (e.g., securities of Federal Home Loan Banks) and still others are backed only by the credit of the instrumentality (e.g., the Federal National Mortgage Association). The Prime Series may also invest in a broad range of commercial and bank obligations that the Fund's investment advisor (the "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-I or A-l+ or A-1 instruments as determined by the Advisor; and (iii) are otherwise "Eligible Securities" as defined in Rule 2a-7 under the 1940 Act. 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. -3- 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 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-11 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 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. 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 income from any such investments will not be counted toward the 80% minimum discussed in the preceding paragraph. (See "Dividends and Taxes.") 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 -4- 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. Each Series may invest in instruments that have certain minimum ratings of either Moody's or S&P as permitted by the investment objective, policies and restrictions of each such Series. 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 (ii) a security: - -------- (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. -5- (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). See Appendix A following this Statement of Additional Information for a description of the minimum ratings of Moody's and S&P for instruments in which each Series may invest. INVESTMENT RESTRICTIONS The investment restrictions applicable to the Fund's investment program are set forth below. As a matter of fundamental policy which may not be changed without a majority vote of shareholders (as that term is defined in this Statement of Additional Information under the heading "General Information About the Fund"), no Series will: - -------- (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. -6- (1) 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 the Series' assets would be invested in such issuer; (2) borrow money or issue senior securities, except that (i) any Series may borrow money for temporary purposes in amounts up to 10% of the value of such Series' total assets at the time of borrowing; (ii) the Prime Series may enter into reverse repurchase agreements in accordance with its investment program and (iii) any Series may enter into commitments to purchase securities in accordance with its investment program; (3) make loans, except that each Series may purchase or hold debt instruments in accordance with its respective investment objectives and policies, and may loan portfolio securities and enter into repurchase agreements; (4) 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; (5) 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); (6) purchase or sell commodities or commodity contracts, provided that each Series may invest in financial futures and options on such futures. 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. The following investment restrictions apply to the Tax-Free Series: (1) 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% -7- 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 obliger of which are in the same industry; (2) The Tax-Free Series will be invested so that at least 80% of the Series' income will be exempt from federal income taxes. 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. The following investment restriction, that may be changed by a vote of the majority of the Board of Directors of the Fund, applies to the Treasury Series. The Treasury Series will limit investments in U.S. Government obligations to U.S. Treasury obligations. 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 Company 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. -8- 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 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 it deems necessary and appropriate, 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 -9- 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, 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, 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. TAXES The following is only a summary of certain additional federal income tax considerations generally affecting the Series and its shareholders that are not described in the Series' prospectus. No attempt is made to present a detailed explanation of the tax treatment of the Series or its shareholders, and the discussion here and in the Series' prospectus is not intended as a substitute for careful tax planning. Shareholders are urged to consult with their tax advisors with specific reference to their own tax situation, including their state and local tax liabilities. The following general discussion of certain 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. QUALIFICATION AS A REGULATED INVESTMENT COMPANY Each Series intends to qualify and elect to be treated as a "regulated investment company" ("RIC") as defined under Subchapter M of the Code. By following such a policy, each Series expects to eliminate or reduce to a nominal amount the federal taxes to which they may be subject. In order to qualify as a RIC, a Series must distribute at least 90% of its net investment income (that generally includes dividends, taxable interest, and the excess of net short-term capital gains over net long-term capital losses less operating expenses) and at least 90% of its net tax exempt interest income, for each tax year, if any, to its shareholders and also must meet several additional requirements. Included among these requirements are the following: (i) at least 90% of the Series' gross income each taxable year must be derived 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 the 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 -10- other RICs 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 the 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 RICs) 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. The Treasury Series may make investments in securities (such as STRIPS) that bear "original issue discount" or "acquisition discount" (collectively, "OID Securities"). The holder of such securities is deemed to have received interest income even though no cash payments have been received. Accordingly, OID Securities may not produce sufficient current cash receipts to match the amount of distributable net investment income the Series must distribute to satisfy the Distribution Requirement. In some cases, the Series may have to borrow money or dispose of other investments in order to make sufficient cash distributions to satisfy the Distribution Requirement. Although each Series intends to distribute substantially all of its net investment income and may distribute its capital gains for any taxable year, each Series will be subject to federal income taxation to the extent any such income or gains are not distributed. If the Series fail to qualify for any taxable year as a RIC, all of their taxable income will be subject to tax at regular corporate income tax rates without any deduction for distributions to shareholders and such distributions generally will be taxable to shareholders as ordinary dividends to the extent of a Series' current and accumulated earnings and profits. In this event, distributions generally will be eligible for the dividends-received deduction for corporate shareholders. SERIES DISTRIBUTIONS Distributions of investment company taxable income will be taxable to shareholders as ordinary income, regardless of whether such distributions are paid in cash or are reinvested in additional Shares, to the extent of a Series' earnings and profits. Each Series anticipates that it will distribute substantially all of its investment company taxable income for each taxable year. Each Series intends to distribute to shareholders its excess of net long-term capital gains over net short-term capital losses ("net capital gains"). Such distributions are taxable to shareholders who are individuals at a maximum rate of 20%, regardless of the length of time the shareholder has held their Series Shares. If any such gains are retained, however, a Series will pay federal income tax thereon. In the case of corporate shareholders, distributions (other than capital gains distributions) from a RIC generally qualify for the dividends-received deduction to the extent of the gross amount of qualifying dividends received by a Series for the year. Generally, and subject to certain limitations, a dividend will be treated as a qualifying dividend if it has been received from a domestic corporation. Accordingly, it is not expected that any Series distribution will qualify for the corporate dividends-received deduction. Ordinarily, investors should include all dividends as income in the year of payment. However, dividends declared payable to shareholders of record in October, November, or December of one year, but paid in January of the following year, will be deemed for tax purposes to have been received by the shareholder and paid by the Series in the year in which the dividends were declared. In certain cases, a Series will be required to withhold, and remit to the United States Treasury, 31% of any distributions paid to a shareholder who (1) has failed to provide a correct taxpayer -11- identification number, (2) is subject to backup withholding by the Internal Revenue Service, or (3) has failed to certify to the Series that such shareholder is not subject to backup withholding. Each Series will provide a statement annually to shareholders as to the federal tax status of distributions paid (or deemed to be paid) by the Series during the year, including the amount of dividends eligible for the corporate dividends-received deduction. SALE OR EXCHANGE OF SERIES SHARES Generally, gain or loss on the sale or exchange of a Series Share will be capital gain or loss that will be long-term if the Share has been held for more than twelve months and otherwise will be short-term. For individuals, long-term capital gains are currently taxed at a maximum rate of 20% and short-term capital gains are currently taxed at ordinary income tax rates. However, if a shareholder realizes a loss on the sale, exchange or redemption of a Share held for six months or less and has previously received a capital gains distribution with respect to the Share (or any undistributed net capital gains of a Series with respect to such Share are included in determining the shareholder's long-term capital gains), the shareholder must treat the loss as a long-term capital loss to the extent of the amount of the prior capital gains distribution (or any undistributed net capital gains of a Series that have been included in determining such shareholder's long-term capital gains). In addition, any loss realized on a sale or other disposition of Shares will be disallowed to the extent an investor repurchases (or enters into a contract or option to repurchase) Shares within a period of 61 days (beginning 30 days before and ending 30 days after the disposition of the Shares). This loss disallowance rule will apply to Shares received through the reinvestment of dividends during the 61-day period. FEDERAL EXCISE TAX If a Series fails to distribute in a calendar year at least 98% of its ordinary income for the 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 October 31 of that year (and any retained amount from the prior calendar year), the Series will be subject to a nondeductible 4% Federal excise tax on the undistributed amounts. Each Series intends to make sufficient distributions to avoid imposition of this tax, or to retain, at most its net capital gains and pay tax thereon. STATE AND LOCAL TAXES Depending upon state and local law, distributions by the Series to shareholders and the ownership of Shares may be subject to state and local taxes. Shareholders are urged to consult their tax advisors as to the consequences of these and other state and local tax rules affecting an investment in the Series. ADDITIONAL TAX INFORMATION FOR THE TAX-FREE SERIES The Series intends to qualify to pay "exempt interest dividends" to its shareholders by satisfying the Code's requirement that at the close of each quarter of its taxable year at least 50% of the value of its total assets consist of obligations the interest on which is exempt from federal income tax. As long as this and certain other requirements are met, dividends derived from the Series' net tax-exempt interest income will be "exempt interest dividends" that are excluded from your gross income for federal income tax purposes. Exempt interest dividends may, however, have collateral federal income tax consequences, including alternative minimum tax consequences, as discussed below. -12- 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. Exempt-interest dividends may be subject to the alternative minimum tax imposed by Section 55 of the Code (the "Alternative Minimum Tax"). The Alternative Minimum Tax is imposed at a rate of up to 28% in the case of non-corporate 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 Alternative Minimum Tax may be affected by the receipt of exempt-interest dividends in two circumstances. First, exempt-interest dividends derived from certain "private activity bonds" issued after August 7, 1986, will generally be an item of tax preference and therefore potentially subject to the Alternative Minimum Tax. The Series intends, when possible, to avoid investing in private activity bonds. Second, in the case of exempt-interest dividends received by corporate shareholders, all exempt-interest dividends, regardless of when the bonds from which they are derived were issued or whether they are derived from private activity bonds, will be included in the corporation's "adjusted current earnings," as defined in Section 56(g) of the Code, in calculating the corporation's alternative minimum taxable income for purposes of determining the Alternative Minimum Tax. Interest on indebtedness incurred or continued by shareholders to purchase or carry Shares of the Series will not be 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 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 if the individual's "modified adjusted gross income" (which includes exempt-interest dividends) plus one-half of the Social Security benefits or railroad retirement benefits received by such individual during that taxable year exceeds the base amount described in Section 86 of the Code. Entities or persons who are "substantial users" (or persons related to "substantial users") of facilities financed by industrial development bonds or private activity bonds should consult their tax advisors before purchasing Shares. "Substantial user" is defined generally as including a "non-exempt person" who regularly uses in trade or business a part of such a facility. Current federal 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 Series to purchase sufficient amounts of tax-exempt securities to satisfy the Code's requirements for the payment of exempt interest dividends. Issuers of bonds purchased by the Series (or the beneficiary of such bonds) may have made certain representations or covenants in connection with the issuance of such bonds to satisfy certain requirements of the Code that must be satisfied subsequent to the issuance of such bonds. Investors should be aware that exempt-interest dividends derived from such bonds 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 bonds (or the beneficiary of such bonds) fails to comply with such covenants. -13- The Series may not be a suitable investment for tax-exempt shareholders and plans because such shareholders and plans would not gain any additional benefit from the receipt of exempt-interest dividends. 5. MANAGEMENT OF THE FUND Directors and Officers The overall business and affairs of the Fund are managed by its Board of Directors. The Board 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 Directors and executive officers of the Fund, their respective 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, Deutsche Asset Management Americas; Director and President, Investment Company Capital Corp. (registered investment advisor); and Chartered Financial Analyst. RICHARD R. BURT, Director (2/3/47) IEP Advisors, LLP, 1275 Pennsylvania Avenue, NW, 10th Floor, Washington, DC 20004. Chairman, IEP Advisors, Inc.; Chairman of the Board, Weirton Steel Corporation; Member of the Board, Archer Daniels Midland Company, Hollinger International, Inc., Homestake Mining, HCL Technologies and Anchor Technologies, Director, Mitchell Hutchins family of funds; and Member, Textron Corporation International Advisory Council. Formerly, partner McKinsey & Company, 1991-1994; U.S. Chief Negotiator in Strategic Arms Reduction Talks (START) with former Soviet Union and U.S. Ambassador to the Federal Republic of Germany, 1985-1991. JOSEPH R. HARDIMAN, Director (5/27/37) 8 Bowen Mill Road, Baltimore, Maryland 21212. Private Equity Investor and Capital Markets Consultant; Director, The Nevis Fund (registered investment company) and Circon Corp. (medical instruments). Formerly, President and Chief Executive Officer, The National Association of Securities Dealers, Inc. and The NASDAQ Stock Market, Inc., 1987-1997; Chief Operating Officer of Alex. Brown & Sons Incorporated (now BT Alex. Brown Incorporated), 1985-1987; General Partner, Alex. Brown & Sons Incorporated (now BT Alex. Brown Incorporated), 1976-1985. 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. -14- EUGENE J. MCDONALD, Director (7/14/32) Duke Management Company, Erwin Square, Suite 1000, 2200 West Main Street, Durham, North Carolina 27705. President, Duke Management Company (investments); Executive Vice President, Duke University (education, research and health care); Executive Vice Chairman and Director, Central Carolina Bank & Trust (banking) and Director, Victory Funds (registered investment companies). Formerly, Director AMBAC Treasurers Trust (registered investment company) and DP Mann Holdings (insurance). REBECCA W. RIMEL, Director (4/10/51) The Pew Charitable Trusts, One Commerce Square, 2005 Market Street, Suite 1700, Philadelphia, Pennsylvania 19103-7017. 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. *TRUMAN T. SEMANS, Director (10/27/26) Brown Investment Advisory & Trust Company, 19 South Street, Baltimore, Maryland 21202. Vice Chairman, Brown Investment Advisory & Trust Company (formerly, Alex. Brown Capital Advisory & Trust Company); Director, Investment Company Capital Corp. (registered investment advisor) and Virginia Hot Springs Inc. (property management). Formerly, Managing Director and Vice Chairman, Alex. Brown Incorporated (now BT Alex. Brown Incorporated). ROBERT H. WADSWORTH, Director (1/29/40) 4455 E. Camelback Road, Suite 261 E., Phoenix, Arizona 85018. President, The Wadsworth Group, First Fund Distributors, Inc. and Guiness Flight Investments Funds, Inc.; Director, The Germany Fund, Inc., The Central European Equity Fund, Inc.; and Vice President, Professionally Managed Portfolios and Advisors Series Trust. CARL W. VOGT, Esq., President (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); Interim President of Williams College; Director, Yellow Corporation (trucking) and 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). -15- CHARLES A. RIZZO, Treasurer (8/5/57) Vice President and Department Head, Deutsche Asset Management Americas, since 1999; and Vice President and Department Head, BT Alex. Brown Incorporated, 1998-1999. Formerly, Senior Manager, PricewaterhouseCoopers LLP, 1993-1998. AMY M. OLMERT, Secretary (5/14/63) Vice President, Deutsche Asset Management Americas, since 1999; and Vice President, BT Alex. Brown Incorporated, 1997-1999. Formerly, Senior Manager, PricewaterhouseCoopers LLP, 1988-1997. DANIEL O. HIRSCH, Assistant Secretary (3/27/54) Director, Deutsche Asset Management Americas, since 1999. Principal, BT Alex. Brown Incorporated, 1998-1999. Formerly, Assistant General Counsel, United States Securities and Exchange Commission, 1993-1998. - ------------------- * Messrs. Semans and Hale are directors who 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 other investment companies managed, administered or advised by BT Alex. Brown Incorporated ("BT Alex. Brown") or its affiliates. There are currently eight funds in the Flag Investors Funds and Deutsche Banc Alex. Brown Cash Reserve Fund, Inc. fund complex (the "Fund Complex"). Mr. Semans serves as Chairman of five funds and as a Director of three other funds in the Fund Complex. Mr. Hale serves as Chairman of three funds and as Director of four funds in the Fund Complex. Ms. Rimel serves as Director of seven funds in the Fund Complex. Messrs. Burt, Hardiman, Levy, McDonald and Wadsworth serve as Directors of each of the funds in the Fund Complex. Mr. Vogt serves as President of each of the funds in the Fund Complex. Mr. Rizzo serves as Treasurer, Ms. Olmert serves as Secretary, and Mr. Hirsch serves as Assistant Secretary, for each of the funds in the Fund Complex. -16- 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 Deutsche Asset Management Americas 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 1940 Act) (an "Independent Director") and Mr. Vogt, the Fund's President, 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 Funds for which he or she serves. In addition, the Chairmen of the Fund Complex's Audit and Executive Committees receive an 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, 1999, Independent Directors' fees (including fees paid to the Fund's President) attributable to the assets of the Fund totaled $137,888. 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, 1999. -17-
- --------------------------------------------------------------------------------------------------------------------------- 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, 1999 Fund Expenses March 31, 1999 - --------------------------------------------------------------------------------------------------------------------------- Richard T. Hale (1) $0 $0 $0 Chairman Truman T. Semans (1) $0 $0 $0 Director James J. Cunnane (8) $25,427(2) (3) $39,000 for service Director on 13(4) Boards Joseph R. Hardiman(5) $20,384 (3) $29,250 for service on 12 Director Boards(6) John F. Kroeger (7) $24,230 (3) $36,750 for service Director on 13(4) Boards Louis E. Levy $30,300(2) (3) $46,500 for service Director on 13(4) Boards Eugene J. McDonald $28,656(2) (3) $44,000 for service Director on 13(4) Boards Rebecca W. Rimel $26,232(2) (3) $39,000 for service Director on 12 Boards(4,6) Carl W. Vogt, Esq. $25,982(2) (3) $39,000 for service Director on 13 Boards(4,6) Richard R. Burt (9) $0 $0 $0 Director Robert H. Wadsworth (9) $0 $0 $0 Director
(1) A director who is, or may be, an "interested person" as defined in the 1940 Act. (2) Of amounts payable to Ms. Rimel and Messrs. Cunnane, Levy, McDonald and Vogt, $25,823, $25,427, $23,250, $28,656 and $25,982 was deferred pursuant to a Deferred Compensation Plan. (3) The Fund Complex has adopted a retirement plan for eligible directors and the Fund's President, as described below. The actuarially computed pension expense for the year ended March 31, 1998 was approximately $287,906. (4) One of these Funds ceased operations on July 29, 1998. (5) Elected to the Fund's Board effective September 27, 1998. (6) Ms. Rimel receives and Messrs. Hardiman and Vogt received (prior to their appointment or election as Director to all of the funds in the Fund Complex) proportionately higher compensation from each fund for which they serve as Director. (7) Retired effective September 27, 1998; Deceased on November 26, 1998. (8) Retired, effective October 7, 1999. (9) Elected to the Fund's board effective October 7, 1999. The Fund Complex has adopted a retirement plan (the "Retirement Plan") for the Fund's President and 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. The Fund has two Participants, a director who retired effective December 31, 1994 and another Director, who retired effective December 31, 1996. These Participants 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 -18- service at December 31, 1998 are as follows: for Ms. Rimel, 3 years; for Mr. Levy, 4 years; for Mr. McDonald, 6 years; for Mr. Vogt, 3 years; and for Mr. Hardiman, 0 years.
Years of Service Estimated Annual Benefits Payable By Fund Complex Upon Retirement - ---------------- ----------------------------------------------------------------- Chairmen of Audit and Other Participants Executive Committees ------------------ -------------------- 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 50% to 100% of his or her annual compensation pursuant to a Deferred Compensation Plan. Ms. Rimel and Messrs. Levy, McDonald and Vogt have each executed a Deferred Compensation Agreement. Currently, the deferring directors may select from among various Flag Investors Funds, Deutsche Banc Alex. Brown Cash Reserve Fund, Inc. and 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 On March 30, 1999, the Board of Directors of the Fund, including a majority of the Independent Directors, approved new investment advisory agreements (the "Advisory Agreements") between the Fund and Investment Company Capital Corp. ("ICC" or the "Advisor") with respect to each Series. Shareholders approved the new Advisory Agreements at the Special Meeting of Shareholders held on October 7, 1999. The Advisor is an indirect subsidiary of Deutsche Bank AG. Deutsche Bank is a major global banking institution that is engaged in a wide range of financial services, including investment management, mutual funds, retail and commercial banking, investment banking and insurance. Deutsche Asset Management Americas is an operating unit of Deutsche Bank consisting of ICC and other asset management affiliates of Deutsche Bank. 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 -19- SEC and state Blue Sky authorities. ICC may delegate its duties under the Advisory Agreements, and has delegated certain of such duties to its affiliates. 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 and 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 --------------------------------------------------------------------- 1999 1998 1997 --------------------------------------------------------------------- $14,541,722 $12,511,915 $10,806,028 --------------------------------------------------------------------- The Advisory Agreements continue in effect from year to year if each such agreement is specifically approved at least annually by the Fund's Board of Directors and by a majority of the Independent Directors by votes cast in person at a meeting called for such purpose. The Fund or ICC may terminate any Advisory Agreement on 60 days' written notice without penalty. The Advisory Agreements terminate automatically in the event of an "assignment," as defined in the 1940 Act. ICC also serves as the Fund's transfer and dividend disbursing agent and provides accounting services to each Series. An affiliate of ICC serves as custodian to the Fund. (See "Transfer Agent, Custodian and Accounting Services.") DISTRIBUTOR ICC Distributors, Inc. ("ICC Distributors" or the "Distributor") serves as the distributor for each class of the Fund's shares pursuant to a Distribution Agreement dated August 31, 1997 (the "Distribution Agreement"). 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 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 -20- 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 September 27, 1999. 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 and 0.05% of the Deutsche Banc Alex. Brown Cash Reserve Shares' (Prime Series, Treasury Series, Tax-Free Series) 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 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------ Prime Series 12b-1 Fees $9,527,563(1) $8,299,915(3) $7,398,316(7,8) - ------------------------------------------------------------------------------------------------------------------ Treasury Series 12b-1 Fee $1,964,145(1) $1,700,377(4) $1,681,441(7) - ------------------------------------------------------------------------------------------------------------------ Tax-Free Series 12b-1 Fee $2,232,564(1) $1,784,579(5) $1,479,582(7) - ------------------------------------------------------------------------------------------------------------------ Flag Investors Cash $4,613(1) Reserve Class B Shareholder Servicing Fee $750(6) $231(7) - ------------------------------------------------------------------------------------------------------------------
-21- - ------------------------------------------------------------------------------------------------------------------ Prime Series Shareholder Service Fee $442,438(1,2) N/A N/A - ------------------------------------------------------------------------------------------------------------------ Treasury Series Shareholder Service Fee $99,136(1,2) N/A N/A - ------------------------------------------------------------------------------------------------------------------ Tax-Free Series Shareholder Service Fee $127,363(1,2) N/A N/A - ------------------------------------------------------------------------------------------------------------------
(1) Received by ICC Distributors. (2) For the period from January 12, 1999 through March 31, 1999. (3) 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). (4) 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. (5) 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. (6) 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. (7) Received by Alex. Brown. (8) Net of fee waivers of $120,055 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 -22- 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. 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 1940 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 Deutsche Banc Alex. Brown Cash Reserve Prime Shares; one for the Deutsche Banc Alex. Brown Cash Reserve Treasury Shares; one for the Deutsche Banc 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 29, 1998. 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 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 -23- 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 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. In addition, the Deutsche Banc Alex. Brown Cash Reserve Shares of the Prime, Treasury and Tax-Free Series have each adopted a Shareholder Service Plan. This plan compensates Shareholder Servicing Agents for services for which they are not otherwise being compensated under a dealer or shareholder servicing agreement entered into pursuant to the Plan for the shares. These plans will 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. 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 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, 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 -24- 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. 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, 1999, March 31, 1998, and March 31, 1997, 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 paid by the Fund is not reduced because the Advisor receives such services. During the fiscal years ended March 31, 1999, March 31, 1998, and March 31, 1997, the Advisor directed no transactions to dealers and paid no related commissions because of research services provided to the Fund. -25- 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, 1999, the Fund held a 4.90% repurchase agreement issued by Goldman Sachs & Co. valued at $85,721,970. Goldman Sachs & Co. is a regular broker-dealer of the Fund. 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; (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 -26- 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. 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 PricewaterhouseCoopers LLP, 250 West Pratt Street, Baltimore, Maryland, 21201, are the independent accountants to the Fund. 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. LEGAL MATTERS Morgan, Lewis & Bockius LLP serves as counsel to the Fund. TRANSFER AGENT, CUSTODIAN AND ACCOUNTING SERVICES Bankers Trust Company ("Bankers Trust") serves as custodian of the Fund's investments. Bankers Trust receives such compensation from the Fund for its services as custodian as may be agreed to from time to time by Bankers Trust and the Fund. For the fiscal year ended March 31, 1999, Bankers Trust was paid $604,985 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.
Average Daily Net Assets Incremental Annual 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, 1999, ICC received fees of $167,901 for providing accounting services to the Prime Series, $134,044 for providing accounting services to the Treasury Series and $137,933 for providing accounting services to the Tax-Free Series. As compensation for providing transfer agency services, the Fund pays ICC up to $18.13 per account per year plus reimbursement for out-of-pocket expenses incurred in connection therewith. For the fiscal year ended March 31, 1999, such fees totaled $2,213,530 for the Prime Series, $303,231 for the Treasury Series and $127,823 for the Tax-Free Series, respectively. -27- 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 a class of the Fund, as of May 11, 1999.*
- ------------------------------------------------------------------------------------------------------------------ Name and Address Owned of Beneficially Percentage of Ownership Record Owned - ------------------------------------------------------------------------------------------------------------------ Alex. Brown & Sons Inc X 13.86% of Prime Institutional A/C 0021031411 Shares PO Box 1346 Baltimore, MD 21203-1346 - ------------------------------------------------------------------------------------------------------------------ Alex. Brown & Sons Inc X 6.53% of Prime Institutional A/C 00024769660 Shares PO Box 1346 Baltimore, MD 21203-1346 - ------------------------------------------------------------------------------------------------------------------ Alex. Brown & Sons Inc X X 23.63% of Prime Institutional A/C 0025010788 Shares Brown Advisory House Acct PO Box 1346 Baltimore, MD 21203-1346 - ------------------------------------------------------------------------------------------------------------------ Alex. Brown & Sons Inc X 5.33% of Tax-Free Institutional A/C 00020170070 Shares PO Box 1346 Baltimore, MD 21203-1346 - ------------------------------------------------------------------------------------------------------------------ Alex. Brown & Sons Inc X 5.93% of Tax-Free Institutional A/C 23171040 Shares PO Box 1346 Baltimore, MD 21203-1346 - ------------------------------------------------------------------------------------------------------------------ Alex. Brown & Sons Inc X 54.86% of Tax-Free Institutional A/C 25010788 Shares Brown Investment Advisory House Acct. PO Box 1346 Baltimore, MD 21203-1346 - ------------------------------------------------------------------------------------------------------------------
-28- - ------------------------------------------------------------------------------------------------------------------ Alex. Brown & Sons Inc X X 31.17% of Tax-Free Institutional A/C 0025010788 Shares Brown Investment Advisory House Acct. PO Box 1346 Baltimore, MD 21203-1346 - ------------------------------------------------------------------------------------------------------------------ Brown Advisory Trust X 14.92% of Tax-Free Institutional FBO 01-01-170-7356004 Shares 1 South Street Baltimore, MD 21202 - ------------------------------------------------------------------------------------------------------------------ Frank Powell Sr Tr X 6.93% of Prime Class B Shares U/A 01/01/87 FTP Inc Retirement Account FBO Frank Powell Sr PO Box 469 Old Bridge, NJ - ------------------------------------------------------------------------------------------------------------------ Inv Fiduciary Trust Co Cust X 5.86% of Prime Class B Shares IRA r/o Gary D Lehman 1716 Willow Drive Easton, PA 18040-8130 - ------------------------------------------------------------------------------------------------------------------ Legg Mason Wood Walker Inc X 8.30% of Prime Class B Shares 301-08123-15 PO Box 1476 Baltimore, MD 21203-1476 - ------------------------------------------------------------------------------------------------------------------ US Clearing Corp X 5.60% of Prime Class B Shares FBO 136-40509-12 26 Broadway New York, NY 10004-1703 - ------------------------------------------------------------------------------------------------------------------ BT Alex. Brown Incorporated X 7.47% of Prime Class B Shares FBO 223-08887-17 PO Box 1346 Baltimore, MD 21203-1346 - ------------------------------------------------------------------------------------------------------------------ Prudential Securities Inc. FBO X 6.70% of Prime Class B Shares Mr. Robert Renna IRA dtd 02/22/85 2799 SE Bluem Way Port St. Lucie, FL 34952-5777 - ------------------------------------------------------------------------------------------------------------------ BT Alex. Brown Incorporated X 11.43% of Prime Class A Shares FBO 204-81237-11 PO Box 1346 Baltimore, MD 21203-1346 - ------------------------------------------------------------------------------------------------------------------
As of May 11, 1999, 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 Incorporated owned less than 1% of any Series of the Fund, as of May 11, 1999. -29- 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, 1999.
Series or class Current Yield Effective Yield Taxable-Equivalent Yield*** - --------------- ------------- --------------- --------------------------- Prime Series* 4.27% 4.36% N/A Institutional Prime Shares 4.57% 4.67% N/A Quality Cash Reserve Prime Shares 3.97% 4.05% N/A Flag Investors Cash Reserve Prime B Shares 3.56% 3.63% N/A Cash Reserve Treasury Shares 3.97% 4.04% N/A Institutional Treasury Shares 4.26% 4.35% N/A Cash Reserve Tax-Free Shares 2.39% 2.41% 2.41% Institutional Tax-Free Shares 2.69% 2.72% 2.72%
- ----------------------- * Cash Reserve Prime Shares and Flag Investors Cash Reserve Prime Class A Shares. ** Assumes a tax rate of 31%. The yield for each Series of the Fund can be obtained by calling your Participating Dealer or Shareholder Servicing Agent. Quotations of yield on each Series of the Fund may also appear from time to time in the financial press and in advertisements. The current yields quoted will be the net average annualized yield for an identified period, usually seven consecutive calendar days. Yield for each Series or class will be computed by assuming that an account was established with a single share of a Series (the "Single Share Account") on the first day of the period. To arrive at the quoted yield, the net change in the value of that Single Share Account 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. -30- 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. FINANCIAL STATEMENTS See next page. -31- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating (d) ---------- Par PRIME SERIES S&P Moody's (000) Value - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Commercial Paper - 88.4% - -------------------------------------------------------------------------------- Automotive Finance - 8.4% Ford Motor Credit Corp. 4.80% 4/9/99 A-1 P-1 $10,000 $ 9,989,333 4.84% 4/15/99 A-1 P-1 40,000 39,924,711 4.85% 4/23/99 A-1 P-1 20,000 19,940,722 4.79% 5/14/99 A-1 P-1 35,000 34,799,751 4.83% 7/15/99 A-1 P-1 6,500 6,408,431 PACCAR Financial Corp. 4.84% 4/1/99 A-1+ P-1 6,000 6,000,000 4.90% 4/16/99 A-1+ P-1 7,700 7,684,279 4.85% 4/26/99 A-1+ P-1 8,000 7,973,056 4.79% 5/11/99 A-1+ P-1 5,000 4,973,389 4.79% 5/12/99 A-1+ P-1 12,000 11,934,537 4.83% 6/1/99 A-1+ P-1 3,100 3,074,629 4.83% 6/2/99 A-1+ P-1 3,400 3,371,718 4.81% 6/22/99 A-1+ P-1 8,000 7,912,351 4.81% 6/24/99 A-1+ P-1 49,000 48,450,057 Toyota Motor Credit Corp. 5.00% 4/8/99 A-1+ P-1 10,000 9,990,278 4.78% 4/9/99 A-1+ P-1 20,000 19,978,756 4.80% 5/25/99 A-1+ P-1 45,000 44,676,000 4.84% 5/25/99 A-1+ P-1 23,218 23,049,437 4.81% 6/25/99 A-1+ P-1 25,000 24,716,076 4.81% 6/28/99 A-1+ P-1 20,000 19,764,844 ------------ 354,612,355 ------------ Banks - 4.5% Bank One Corp. 4.83% 9/17/99 A-1 P-1 30,000 29,319,775 Suntrust Bank 4.84% 5/26/99 A-1 P-1 15,000 14,889,083 Wells Fargo Bank 4.83% 4/9/99 A-1 P-1 25,000 24,973,167 4.81% 4/30/99 A-1 P-1 25,000 24,903,132 4.81% 5/28/99 A-1 P-1 25,000 24,809,604 4.82% 6/30/99 A-1 P-1 25,000 24,698,750 4.83% 7/19/99 A-1 P-1 20,000 19,707,517 4.83% 7/21/99 A-1 P-1 25,000 24,627,688 ------------ 187,928,716 ------------ Beverages - Soft Drinks - 3.6% Coca-Cola Co. 4.75% 4/27/99 A-1+ P-1 4,500 4,484,563 4.75% 4/28/99 A-1+ P-1 40,000 39,857,500 4.82% 5/17/99 A-1+ P-1 14,875 14,783,387 -32- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating (d) ---------- Par PRIME SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Commercial Paper (continued) - -------------------------------------------------------------------------------- Beverages - Soft Drinks (continued) 4.81% 5/28/99 A-1+ P-1 $50,000 $ 49,619,604 4.78% 5/21/99 A-1+ P-1 20,000 19,867,222 4.80% 6/23/99 A-1+ P-1 19,791 19,571,980 PepsiCo, Inc. 4.81% 8/19/99 A-1 P-1 5,000 4,996,830 ------------ 153,181,086 ------------ Chemicals, General - 3.6% E.I. duPont de Nemours and Co. 4.79% 4/12/99 A-1+ P-1 8,200 8,187,998 4.77% 4/29/99 A-1+ P-1 50,000 49,814,373 4.79% 4/29/99 A-1+ P-1 40,000 39,850,978 4.80% 5/13/99 A-1+ P-1 15,000 14,916,000 4.79% 5/14/99 A-1+ P-1 40,000 39,771,144 ------------ 152,540,493 ------------ Chemicals, Specialty - 2.2% Minnesota Mining & Manufacturing Co. 4.80% 4/19/99 A-1+ P-1 15,000 14,964,000 4.80% 5/21/99 A-1+ P-1 25,000 24,833,333 4.80% 7/19/99 A-1+ P-1 55,000 54,200,667 ------------ 93,998,000 ------------ Computer & Office Equipment - 1.2% Pitney Bowes Credit Corp. 4.84% 4/5/99 A-1+ P-1 25,000 24,986,556 4.90% 4/12/99 A-1+ P-1 24,300 24,263,618 ------------ 49,250,174 ------------ Electrical and Electronics - 3.7% Motorola Credit Corp. 4.81% 6/10/99 A-1+ P-1 30,000 29,719,417 4.81% 6/11/99 A-1+ P-1 26,000 25,753,354 Motorola Inc. 4.80% 4/16/99 A-1+ P-1 10,000 9,980,000 4.82% 5/27/99 A-1+ P-1 35,000 34,737,578 4.83% 5/27/99 A-1+ P-1 22,130 21,963,730 4.82% 6/4/99 A-1+ P-1 35,000 34,700,089 ------------ 156,854,168 ------------ Entertainment - 1.5% Walt Disney Co. 4.85% 4/15/99 A-1 P-1 25,000 24,952,847 4.82% 9/24/99 A-1 P-1 40,000 39,057,422 ------------ 64,010,269 ------------ -33- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating (d) ---------- Par PRIME SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Commercial Paper (continued) - -------------------------------------------------------------------------------- Finance, Consumer - 5.8% American General Finance Corp. 4.83% 6/10/99 A-1 P-1 $25,000 $ 24,765,208 4.84% 6/11/99 A-1 P-1 25,000 24,761,361 4.83% 7/26/99 A-1 P-1 35,000 34,455,283 USAA Capital Corp. 4.78% 4/7/99 A-1+ P-1 18,810 18,795,015 4.80% 4/14/99 A-1+ P-1 25,000 24,956,667 4.85% 4/15/99 A-1+ P-1 10,000 9,981,139 4.82% 4/16/99 A-1+ P-1 27,000 26,945,775 4.80% 4/30/99 A-1+ P-1 10,000 9,961,333 4.80% 5/13/99 A-1+ P-1 15,000 14,916,000 4.82% 5/13/99 A-1+ P-1 15,000 14,915,650 4.76% 5/28/99 A-1+ P-1 6,700 6,649,504 4.83% 6/4/99 A-1+ P-1 12,242 12,136,882 4.80% 6/25/99 A-1+ P-1 20,000 19,773,333 ------------ 243,013,150 ------------ Finance, Diversified - 6.6% Associates Corp.of North America 4.83% 4/12/99 A-1+ P-1 8,000 7,988,193 4.85% 4/30/99 A-1+ P-1 15,000 14,941,396 4.78% 5/14/99 A-1+ P-1 25,000 24,857,324 4.82% 5/17/99 A-1+ P-1 50,000 49,692,056 Associates First Capital Corp. 4.83% 5/24/99 A-1+ P-1 22,000 21,843,562 General Electric Capital Corp. 5.02% 4/23/99 A-1+ P-1 15,000 14,953,983 4.82% 5/5/99 A-1+ P-1 12,000 11,945,373 4.82% 6/3/99 A-1+ P-1 35,000 34,704,775 4.83% 6/4/99 A-1+ P-1 20,000 19,828,267 4.77% 6/18/99 A-1+ P-1 20,000 19,793,300 4.88% 7/6/99 A-1+ P-1 13,000 12,830,827 4.83% 7/28/99 A-1+ P-1 20,000 19,683,367 4.83% 8/16/99 A-1+ P-1 15,000 14,724,288 General Electric Co. 4.85% 6/3/99 A-1+ P-1 10,000 9,915,125 ------------ 277,701,836 ------------ Finance, Leasing - 2.6% International Lease Finance Corp. 4.81% 4/9/99 A-1+ P-1 25,000 24,973,278 4.83% 4/9/99 A-1+ P-1 20,000 19,978,533 -34- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating (d) ---------- Par PRIME SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Commercial Paper (continued) - -------------------------------------------------------------------------------- Finance, Leasing (continued) 4.83% 4/13/99 A-1+ P-1 $22,000 $ 21,964,580 4.81% 5/5/99 A-1+ P-1 25,000 24,886,431 4.83% 6/3/99 A-1+ P-1 8,100 8,031,535 4.73% 7/20/99 A-1+ P-1 6,000 5,913,283 4.84% 9/16/99 A-1+ P-1 4,450 4,349,489 ------------ 110,097,129 ------------ Food - 0.6% Campbell Soup Co. 4.80% 6/14/99 A-1+ P-1 23,790 23,555,272 ------------ Household Products - 6.8% Johnson & Johnson 4.85% 4/9/99 A-1+ P-1 30,000 29,967,667 4.75% 5/10/99 A-1+ P-1 50,000 49,742,708 4.75% 6/2/99 A-1+ P-1 28,200 27,969,308 4.78% 7/20/99 A-1+ P-1 6,900 6,799,222 4.78% 7/21/99 A-1+ P-1 22,500 22,168,388 Procter & Gamble Co. 4.75% 5/13/99 A-1+ P-1 34,000 33,811,583 4.78% 5/13/99 A-1+ P-1 50,000 49,721,167 4.80% 5/27/99 A-1+ P-1 40,000 39,701,333 4.82% 5/27/99 A-1+ P-1 5,000 4,962,511 4.82% 6/18/99 A-1+ P-1 20,000 19,791,133 ------------ 284,635,020 ------------ Insurance, Property and Casualty - 1.2% A.I. Credit Corp. 4.80% 4/8/99 A-1+ P-1 50,000 49,953,333 ------------ Integrated Oil - 3.5% Shell Oil Co. 4.78% 5/13/99 A-1+ P-1 50,000 49,721,167 4.79% 5/14/99 A-1+ P-1 50,000 49,713,931 4.82% 5/14/99 A-1+ P-1 50,000 49,712,139 ------------ 149,147,237 ------------ Oil Transportation - 0.9% Colonial Pipeline Co. 4.85% 4/23/99 A-1+ P-1 2,000 1,994,072 4.84% 5/10/99 A-1+ P-1 15,200 15,120,301 4.83% 6/21/99 A-1+ P-1 5,000 4,945,663 4.80% 7/9/99 A-1+ P-1 3,500 3,453,800 4.83% 7/28/99 A-1+ P-1 12,000 11,810,020 ------------ 37,323,856 ------------ -35- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating (d) ---------- Par PRIME SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Commercial Paper (continued) - -------------------------------------------------------------------------------- Pharmaceuticals - 7.9% Abbott Laboratories 4.82% 4/16/99 A-1+ P-1 $25,550 $ 25,498,687 4.88% 4/26/99 A-1+ P-1 28,500 28,403,417 Pfizer Inc. 4.82% 4/13/99 A-1+ P-1 60,000 59,903,600 4.85% 4/16/99 A-1+ P-1 50,000 49,898,958 4.82% 4/30/99 A-1+ P-1 40,000 39,844,689 Schering - Plough Corp. 4.75% 4/16/99 A-1+ P-1 22,399 22,354,669 4.85% 4/20/99 A-1+ P-1 4,800 4,787,713 4.82% 5/14/99 A-1+ P-1 22,000 21,873,341 4.83% 5/14/99 A-1+ P-1 23,000 22,867,309 4.82% 5/28/99 A-1+ P-1 18,000 17,862,630 Warner - Lambert Co. 4.79% 5/17/99 A-1+ P-1 30,000 29,816,383 4.82% 5/18/99 A-1+ P-1 11,150 11,079,836 ------------ 334,191,232 ------------ Publishing - 0.4% Gannett Co. 4.90% 4/23/99 A-1+ P-1 14,600 14,556,281 ------------ Retail - Food Chains - 1.2% McDonald's Corp. 4.95% 4/1/99 A-1+ P-1 50,000 50,000,000 ------------ Structured Finance - 11.2% CIESCO, L.P. 4.85% 4/7/99 A-1+ P-1 15,000 14,987,875 4.80% 4/9/99 A-1+ P-1 45,000 44,952,000 4.86% 4/13/99 A-1+ P-1 30,500 30,450,590 4.85% 5/7/99 A-1+ P-1 15,000 14,927,250 4.78% 5/11/99 A-1+ P-1 20,000 19,893,778 4.85% 5/14/99 A-1+ P-1 17,945 17,841,044 4.83% 6/8/99 A-1+ P-1 15,000 14,863,150 Corporate Receivables Corp. 4.83% 4/7/99 A-1+ P-1 40,000 39,967,800 4.83% 4/14/99 A-1+ P-1 10,000 9,982,558 4.82% 4/23/99 A-1+ P-1 15,000 14,955,817 4.83% 5/21/99 A-1+ P-1 30,000 29,798,750 4.84% 5/21/99 A-1+ P-1 35,000 34,764,722 4.87% 6/4/99 A-1+ P-1 28,000 27,757,582 -36- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating (d) ------------- Par PRIME SERIES (continued) S&P Moody's (000) Value COMMERCIAL PAPER (continued) Structured Finance (continued) Corporate Asset Funding Co., Inc. 4.81% 4/22/99 A-1+ P-1 $20,000 $ 19,943,883 4.88% 5/6/99 A-1+ P-1 40,000 39,810,222 4.87% 5/11/99 A-1+ P-1 12,000 11,935,067 4.84% 5/12/99 A-1+ P-1 45,000 44,751,950 4.86% 5/25/99 A-1+ P-1 25,000 24,817,750 4.84% 6/3/99 A-1+ P-1 15,000 14,872,950 ------------- 471,274,738 ------------- Telephone - 11.0% Ameritech Capital Funding Corp. 4.85% 4/22/99 A-1+ P-1 52,755 52,605,747 AT&T Corp. 4.84% 4/14/99 A-1+ P-1 20,000 19,965,044 4.83% 5/20/99 A-1+ P-1 30,000 29,802,775 4.81% 6/8/99 A-1+ P-1 40,000 39,636,578 Bell Atlantic Network Funding Corp. 4.76% 4/5/99 A-1+ P-1 20,000 19,989,422 4.80% 4/6/99 A-1+ P-1 17,000 16,988,667 Bell South Capital Funding Corp. 4.78% 4/13/99 A-1+ P-1 8,000 7,987,253 4.80% 4/14/99 A-1+ P-1 50,000 49,913,333 4.80% 4/23/99 A-1+ P-1 29,000 28,914,933 4.84% 4/23/99 A-1+ P-1 30,000 29,911,267 Bell South Telecommunications, Inc. 4.80% 4/9/99 A-1+ P-1 10,000 9,989,333 4.85% 4/14/99 A-1+ P-1 20,000 19,964,972 SBC Communications Inc. 5.00% 4/1/99 A-1+ P-1 75,000 75,000,000 4.81% 5/6/99 A-1+ P-1 40,000 39,812,944 4.81% 5/7/99 A-1+ P-1 25,000 24,879,750 ------------- 465,362,018 ------------- Total Commercial Paper (Cost $3,723,186,363) 3,723,186,363 ------------- FLOATING RATE - NOTES - 1.5% Associates Corp. of North America 4.89% 3/20/00 A-1+ P-1 40,000 39,973,208 Federal Home Loan Mortgage Corp. 4.77% 11/9/99 A-1+ P-1 25,000 24,989,569 ------------ Total Floating Rate - Notes (Cost $64,962,777) 64,962,777 -37- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating (d) ---------- Par PRIME SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- MEDIUM-TERM NOTE - 0.1% Pitney Bowes, Inc. 6.54% 7/15/99 A-1+ P-1 $ 5,000 $ 5,023,414 ------------ Total Medium-Term Note (Cost $5,023,414) 5,023,414 ------------ FEDERAL HOME LOAN BANK - 0.2% FHLB 5.53% 7/27/99 A-1+ P-1 10,425 10,423,310 ------------ Total Federal Home Loan Bank (Cost $10,423,310) 10,423,310 ------------ FEDERAL HOME LOAN MORTGAGE- 0.4% FHLM 4.70% 4/30/99 AAA -- 15,000 14,943,209 ------------ Total Federal Home Loan (Cost $14,943,209) 14,943,209 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.5% FNMA 4.92% 6/18/99 -- P-1 20,000 19,786,800 ------------ Total Federal National Mortgage Association (Cost $19,786,800) 19,786,800 ------------ CERTIFICATES OF DEPOSIT - 7.0% First Chicago NBD Corporation 4.83% 4/20/99 A-1+ P-1 10,000 10,000,000 4.85% 5/24/99 A-1+ P-1 50,000 50,000,000 4.90% 6/7/99 A-1+ P-1 40,000 40,000,000 4.88% 6/30/99 A-1+ P-1 25,000 25,000,000 NationsBank Corporation 5.02% 5/3/99 A-1+ P-1 25,000 25,000,000 5.00% 5/10/99 A-1+ P-1 35,000 35,000,000 4.92% 7/6/99 A-1+ P-1 10,000 10,000,000 Wachovia Bank 4.86% 4/22/99 A-1+ P-1 50,000 50,000,289 4.85% 5/20/99 A-1+ P-1 50,000 50,000,000 ------------ Certificates of Deposit (Cost $295,000,289) 295,000,289 -38- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating (d) ----------- Par PRIME SERIES (concluded) S&P Moody's (000) Value - -------------------------------------------------------------------------------- REPURCHASE AGREEMENT - 2.0%b Goldman Sachs & Co. 4.90% 4/1/99e $ 85,721 $85,721,970 ------------ TOTAL REPURCHASE AGREEMENT (Cost $85,721,970) 85,721,970 ------------ TOTAL INVESTMENTS--100.1% (Cost $4,219,048,132)c $4,219,048,132 LIABILITIES IN EXCESS OF OTHER ASSETS, NET--(0.1)% (5,281,780) -------------- NET ASSETS--100.0% $4,213,766,352 -------------- Net Asset Value, Offering and Redemption Price Per: Prime Share ($3,727,990,170 / 3,727,906,079 shares outstanding) $1.00 ===== Flag Investors Class A Share ($13,028,272 / 13,027,769 shares outstanding) $1.00 ===== Flag Investors Class B Share ($2,355,863 / 2,355,780 shares outstanding) $1.00 ===== Institutional Prime Share ($388,447,492 / 388,440,636 shares outstanding) $1.00 ===== Quality Cash Reserve Prime Share ($81,944,555 / 81,938,027 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) Collateral on tri party repurchase agreements held by the agent of the Fund upon entering into the 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 at time of purchase. (c) Aggregate cost for financial reporting and federal tax purposes. (d) The credit ratings are not covered by the report of independent accountants. (e) Dated 3/31/99 principal and interest in the amount of $85,733,638, due 04/01/99 (Collateralized by U.S. Treasury Note, par value of $48,920,000, coupon rate of 6.375, due 03/31/01, value of $50,185,071; U.S. Treasury Bond, par value of $1,789,000, coupon rate of 10.75%, due 08/15/05, value of $2,326,083; U.S. Treasury Bill, par value of $34,930,000, coupon rate of 4.51%, due 04/01/99, value of $34,925,564). 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. See Notes to Financial Statements -39- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Maturity Par TREASURY SERIES Date (000) Value - -------------------------------------------------------------------------------- U.S. TREASURY BILLS(a) - 71.5% 4.370% 4/1/99 $ 250 $ 250,000 4.400% 14/1/99 14,180 14,180,000 4.425% 4/1/99 18,815 18,815,000 4.305% 4/15/99 2,360 2,356,049 4.820% 4/15/99 560 558,950 4.850% 4/15/99 32,945 32,882,862 4.260% 4/22/99 22,310 22,254,560 4.470% 4/22/99 5,130 5,116,624 4.485% 4/22/99 75,000 74,803,781 4.730% 4/22/99 39,730 39,620,378 4.745% 4/22/99 45,000 44,875,444 4.800% 4/22/99 11,590 11,557,548 4.405% 5/13/99 20,000 19,897,217 4.410% 5/13/99 79,880 79,469,017 4.415% 5/20/99 30,000 29,819,721 4.400% 5/27/99 7,715 7,662,195 4.420% 5/27/99 16,680 16,565,316 4.430% 5/27/99 16,550 16,435,952 4.450% 5/27/99 32,385 32,160,824 4.470% 5/27/99 2,400 2,383,312 4.485% 5/27/99 38,000 37,734,887 4.490% 5/27/99 3,615 3,589,751 4.530% 5/27/99 25,000 24,823,833 4.390% 6/10/99 50,000 49,573,194 4.470% 6/10/99 41,000 40,643,642 4.505% 6/10/99 42,685 42,311,091 4.380% 6/24/99 1,155 1,143,196 ------------- Total U.S. Treasury Bills $ 671,484,344 -40- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Maturity Par TREASURY SERIES (concluded) Date (000) Value - -------------------------------------------------------------------------------- U.S. TREASURY NOTES - 31.4% 6.375% 4/30/99 $ 35,000 $ 35,047,578 6.500% 4/30/99 171,414 171,677,367 6.000% 6/30/99 30,000 30,102,434 6.750% 6/30/99 23,000 23,112,381 6.375% 7/15/99 15,000 15,067,252 6.875% 8/31/99 20,210 20,386,466 ------------ Total U.S. Treasury Notes 295,393,477 ------------ TOTAL U.S. TREASURY SECURITIES 966,877,821 ------------ TOTAL INVESTMENTS--102.9% (Cost $933,994,942) $ 966,877,821b LIABILITIES IN EXCESS OF ASSETS--(2.9)% (27,615,002) ------------- TOTAL NET ASSETS--100.0% $ 939,262,819 ============= Net Asset Value, Offering and Redemption Price Per: Treasury Share ($816,700,318 / 816,622,190 shares outstanding) $1.00 ===== Institutional Treasury Share ($122,561,713 / 122,561,713 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 -41- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating* ------------ Par TAX-FREE SERIES S&P Moody's (000) Value - -------------------------------------------------------------------------------- Alabama - 1.4% Alabama Housing Finance Authority, Multifamily Housing, Refunding RB (Heatherbrooke Project), (Guaranteed by FNMA), Variable Rate Weekly Demand Note, 3.00%, 6/15/26(a) A-1+ -- $9,900 $ 9,900,000 Alabama Housing Finance Authority, Multifamily Housing, Refunding RB (Rime Village Hoover Project), (Guaranteed by FNMA), Variable Rate Weekly Demand Note, 3.00%, 6/15/26(a) A-1+ -- 5,800 5,800,000 ------------- 15,700,000 ------------- Arizona - 0.1% Phoenix, Arizona, G.O., Series A 3.75%, 7/1/99 AA+ Aa1 1,200 1,202,054 ------------- Arkansas - 0.2% Arkansas State Development Finance Authority Health Care Facilities, (Sisters of Mercy Health), Series B, Variable Rate Weekly Demand Note, 3.00%, 6/1/12(a) AA+ VMIG-1 1,800 1,800,000 ------------- Colorado - 3.5% Colorado Health Facilities Authority Revenue, (Catholic Health Initiatives), Series B, Variable Rate Weekly Demand Note, 3.00%, 12/1/25(a) A-1+ VMIG-1 11,800 11,800,000 Colorado Housing Finance Authority, Multifamily Housing, (Huntington Project), (Guaranteed by FNMA), Variable Rate Weekly Demand Note, 3.00%, 10/15/16(a) A-1+ -- 2,400 2,400,000 Colorado Housing Finance Authority, Multifamily Housing, (Loretto Project), (Guaranteed by FNMA), Variable Rate Weekly Demand Note, 3.00%, 10/15/16(a) A-1+ -- 9,100 9,100,000 -42- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating* Par - -------------------------------------------------------------------------------- TAX-FREE SERIES (continued) S&P Moody's (000) Value Colorado (continued) Colorado Housing Finance Authority, Multifamily Housing, (Silver Reef Project), (Guaranteed by FNMA), Variable Rate Weekly Demand Note, 3.00%, 10/15/16(a) A-1+ -- $ 9,490 $ 9,490,000 Colorado State, General Fund Revenue, TRAN, Series A, 4.25%, 6/25/99 SP-1+ -- 4,000 4,006,694 Platte River Power Authority, Colorado, Series D, (MBIA Insured), 5.00%, 6/1/99 AAA Aaa 2,320 2,328,032 ------------- 39,124,726 ------------- Delaware - 0.4% Delaware State, G.O., Series A 4.60%, 3/1/00 AA+ Aa1 1,000 1,013,400 Delaware State, G.O., Series B 5.00%, 5/1/99 AA+ Aa1 1,500 1,501,592 Delaware State, G.O., Series B 6.85%, 5/1/99 AA+ Aa1 1,750 1,754,289 ------------- 4,269,281 ------------- Florida - 1.3% Florida State, Department of Environmental Preservation 2000-B, (FSA Insured), 4.50%, 7/1/99 AAA Aaa 1,000 1,002,425 Sunshine State, Local Government, Financing Commission, Adj Rate Revenue Bonds, (AMBAC Insured), Tax Exempt Commercial Paper Mode, 3.05%, 7/28/99 -- VMIG-1 5,000 5,000,000 Sunshine State, Local Government, Financing Commission, Adj Rate Revenue Bonds, (AMBAC Insured), Tax Exempt Commercial Paper Mode, 3.10%, 8/6/99 -- VMIG-1 7,000 7,000,000 Tampa Health Facilities Authority RB, (Lifelink Foundation Inc. Project), (LOC: SunTrust Bank), Variable Rate Weekly Demand Note, 3.10%, 8/1/22(a) -- Aa3 1,500 1,500,000 ------------- 14,502,425 ------------- -43- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Georgia - 5.9% Cobb County, Georgia, Housing Authority, (Post Mill Project), (Guaranteed by FNMA), Variable Rate Weekly Demand Note, 3.00%, 6/1/25(a) A-1+ -- $ 9,380 $ 9,380,000 Columbus County, Georgia, Housing Authority Revenue, (Columbus State University Foundation, Inc.), (LOC: SunTrust Bank), Variable Rate Weekly Demand Note, 3.10%, 11/7/17(a) -- Aa3 2,300 2,300,000 De Kalb County, Georgia, Housing Authority, Multifamily Housing, (Camden Brook Project), (Guaranteed by FNMA), Variable Rate Weekly Demand Note, 3.05%, 6/15/25(a) A-1+ -- 5,400 5,400,000 De Kalb County, Georgia, Housing Authority, Multifamily Housing, (Clairmont Crest Project), (Guaranteed by FNMA), Variable Rate Weekly Demand Note, 3.05%, 6/15/25(a) A-1+ -- 1,400 1,400,000 De Kalb County, Georgia, Housing Authority, Multifamily Housing, (Post Ashford Project), (Guaranteed by FNMA), Variable Rate Weekly Demand Note, 3.00%, 6/1/25(a) A-1+ -- 7,895 7,895,000 Fulton County, Georgia, Development Authority Revenue (Georgia Tech Athletic Association Project), (LOC: SunTrust Bank), Variable Rate Weekly Demand Note, 3.10%, 7/1/14(a) -- Aa3 8,050 8,050,000 Georgia State, G.O., Series A, 7.25%, 9/1/99 AAA Aaa 5,660 5,743,969 Macon-Bibb County, Georgia, Hospital Authority Revenue, (Medical Center of Central Georgia), (LOC: SunTrust Bank), Variable Rate Weekly Demand Note, 3.10%, 8/1/18 -- Aa3 2,900 2,900,000 -44- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating* ----------- Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Georgia (continued) Macon-Bibb County, Georgia, Hospital Authority Revenue, (Medical Center of Central Georgia), (LOC: SunTrust Bank), Variable Rate Weekly Demand Note, 3.10%, 12/1/18(a) A-1+ Aa3 $ 5,000 $ 5,000,000 Municipal Electric Authority of Georgia, Project One Bonds, Tax Exempt Commercial Paper Mode, (LOC: Morgan Guaranty Trust), 3.10%, 7/9/99 A-1+ VMIG-1 3,000 3,000,000 Roswell Housing Authority, Multifamily Housing, (Post Canyon Project), (Guaranteed by FNMA), Variable Rate Weekly Demand Note, 3.00%, 6/1/25(a) A-1+ -- 5,500 5,500,000 Smyrna Housing Authority, Multifamily Housing, (F&M Villages Project), (Guaranteed by FNMA), Variable Rate Weekly Demand Note, 3.00%, 6/6/25(a) A-1+ -- 9,700 9,700,000 ------------- 66,268,969 ------------- Idaho - 0.5% Idaho State, TANS 4.50%, 6/30/99 SP-1+ MIG-1 5,500 5,515,373 ------------- Illinois - 9.6% Chicago, Illinois, G.O. Adjustable Tender Notes, (LOC: Morgan Guaranty Trust), 2.85%, 10/28/99 A-1+ VMIG-1 4,500 4,500,000 Chicago, Illinois, Metro. Water Reclamation District, G.O., 4.15%, 12/1/99 AA Aa2 1,000 1,007,329 Chicago, Illinois, Metro. Water Reclamation District, G.O., 4.70%, 12/1/99 AA Aa2 1,500 1,515,745 Illinois Development Finance Authority, P.C.R., (Commonwealth Edison Company Project), Series C, (LOC: ABN AMRO Bank N.V.), Variable Rate Weekly Demand Note, 3.05%, 3/1/09(a) A-1+ P-1 7,700 7,700,000 -45- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating* ----------- Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Illinois (continued) Illinois Development Finance Authority, P.C.R., (Illinois Power Company Project), Series A, (LOC: ABN Amro Bank N.V.), Variable Rate Weekly Demand Note, 3.00%, 11/1/28(a) A-1+ VMIG-1 $ 2,500 $ 2,500,000 Illinois Development Finance Authority, P.C.R., (Illinois Power Company Project), Series B, (LOC: ABN Amro Bank N.V.), Variable Rate Weekly Demand Note, 3.05%, 11/1/28(a) A-1+ VMIG-1 2,700 2,700,000 Illinois Development Finance Authority, (Provena Health), Series B, (MBIA Insured), Variable Rate Daily Demand Note, 3.20%, 5/1/28(a) A-1+ VMIG-1 4,400 4,400,000 Illinois Development Finance Authority, (Provena Health), Series C, (MBIA Insured), Variable Rate Weekly Demand Note, 3.00%, 5/1/28(a) A-1+ VMIG-1 3,000 3,000,000 Illinois Development Finance Authority Revenue, (Chicago Symphony Orchestra), (LOC: Northern Trust), Variable Rate Weekly Demand Note, 2.95%, 12/1/28(a) A-1+ VMIG-1 11,300 11,300,000 Illinois Development Finance Authority Revenue, (Fenwick High School Project), (LOC: Northern Trust), Variable Rate Weekly Demand Note, 2.95%, 3/1/32(a) A-1+ -- 8,200 8,200,000 Illinois Educational Facilities Authority, (Field Museum of Natural History), (LOC: Northern Trust), 2.90%, 11/1/25, Mandatory Put - 11/23/99 @ $100 -- VMIG-1 10,000 10,000,000 Illinois Health Facilities Authority, (Evanston Hospital Corp. Project), 3.70%, 8/15/30 Mandatory Put - 7/15/99 @ $100 A-1+ VMIG-1 5,000 5,000,000 Illinois Health Facilities Authority, (Gottlieb Health Resources, Inc.), (LOC: Harris Trust and Savings Bank), Variable Rate Weekly Demand Note, 2.95%, 11/15/24 -- VMIG-1 2,500 2,500,000 -46- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Illinois (continued) Illinois Health Facilities Authority, (Gottlieb Health Resources, Inc.), (LOC: Harris Trust and Savings Bank), Variable Rate Weekly Demand Note, 2.95%, 11/15/25(a) -- VMIG-1 $6,300 $ 6,300,000 Illinois Health Facilities Authority, (Northwestern Memorial Hospital), Variable Rate Daily Demand Note, 3.10%, 8/15/25(a) A-1+ VMIG-1 10,900 10,900,000 Illinois Health Facilities Authority, Revolving Fund, Pooled Financing Program (University of Chicago Project), 2.95%, 8/1/15 Mandatory Put - 5/3/99 @ $100 A-1+ VMIG-1 10,000 10,000,000 Illinois Health Facilities Authority, Series A, (Evanston Hospital Corp. Project), 3.15%, 3/15/25 Mandatory Put - 8/2/99 @ $100 A-1+ VMIG-1 10,000 10,000,000 Illinois State, G.O., (MBIA Insured) 5.38%, 5/1/99 AAA Aaa 2,500 2,503,485 Illinois State, Sales Tax Revenue, Series U, 4.50%, 6/15/99 AAA Aa2 1,000 1,003,047 Illinois State, Sales Tax Revenue, Series V, 5.63%, 6/15/99 AAA Aa2 1,000 1,005,294 Schaumburg, Illinois, Series A, Variable Rate Weekly Demand Note, 3.00%, 12/1/13(a) A-1+ VMIG-1 1,200 1,200,000 ------------- 107,234,900 ------------- Indiana - 2.8% Indiana Health Facilities Authority, (Charity Obligated Group), Series F, Variable Rate Weekly Demand Note, 2.90%, 11/1/26(a) A-1+ VMIG-1 1,700 1,700,000 Purdue University, Student Fee Bonds, Series K, Variable Rate Weekly Demand Note, 2.90%, 7/1/20(a) A-1+ VMIG-1 20,625 20,625,000 Purdue University, Student Fee Bonds, Series L, Variable Rate Weekly Demand Note, 2.90%, 7/1/20(a) A-1+ VMIG-1 9,000 9,000,000 ------------- 31,325,000 ------------- -47- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Iowa - 0.3% Iowa Finance Authority, Hospital Facilities Revenue, (Iowa Health System), Series B, (AMBAC Insured), Variable Rate Weekly Demand Note, 3.05%, 7/1/20 (a) A-1+ VMIG-1 $ 2,900 $ 2,900,000 ------------- Kansas - 0.1% Johnson County, Kansas, Union School District No. 229, G.O., Series A, 6.40%, 10/1/99 AA Aa1 1,195 1,214,906 ------------- Kentucky - 0.2% Kentucky Asset/Liability Commission, General Fund, TRAN, Series B, 4.00%, 6/25/99 SP-1+ MIG-1 2,500 2,503,811 ------------- Louisiana - 2.6% East Baton Rouge Parish, Louisiana, P.C.R., (Georgia Pacific Corp.), (LOC: Wachovia Bank), Variable Rate Weekly Demand Note, 3.00%, 10/1/99(a) -- P-1 3,800 3,800,000 Louisiana Offshore Terminal Authority, Deepwater Port Revenue, First Stage 1991A (Loop Inc.), (LOC: Morgan Guaranty Trust), Variable Rate Weekly Demand Note, 2.95%, 9/1/17(a) A-1+ VMIG-1 17,610 17,610,000 Louisiana Offshore Terminal Authority, Deepwater Port Revenue, First Stage 1991A (Loop Inc.), (LOC: UBS AG), Variable Rate Daily Demand Note, 3.15%, 9/1/06(a) -- VMIG-1 7,600 7,600,000 ------------- 29,010,000 ------------- -48- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Maryland - 4.7% Baltimore County, Maryland, Metropolitan District 61st Issue, G.O., 6.75%, 4/1/99 AAA Aaa $ 1,000 $ 1,000,000 Community Development Administration Multifamily Development, (Avalon Lea Apartments Project), (Guaranteed by FNMA), Variable Rate Weekly Demand Note, 2.90%, 6/15/26(a) -- VMIG-1 6,800 6,800,000 Community Development Administration Multifamily Development, (Avalon Ridge Apartments Project), (Guaranteed by FNMA), Variable Rate Weekly Demand Note, 2.90%, 6/15/26(a) -- VMIG-1 12,400 12,400,000 Frederick County, Maryland, BAN, Variable Rate Weekly Demand Note, 3.05%, 10/1/07(a) A-1+ VMIG-1 2,800 2,800,000 Maryland State, G.O., 6.00%, 7/15/99 AAA Aaa 3,310 3,340,411 Maryland State, G.O., 6.70%, 7/15/99 AAA Aaa 1,000 1,008,670 Maryland State, G.O., 6.75%, 10/15/99 3,000 3,056,739 Maryland State Health & Higher Educational Facilities Authority, (Charity Obligated Group), Series F, Variable Rate Weekly Demand Note, 2.85%, 11/1/17(a) A-1+ VMIG-1 12,700 12,700,000 Montgomery County, Maryland, G.O., Series A, 4.88%, 5/1/99 AAA Aaa 4,060 4,063,815 Washington Suburban Sanitary District, G.O., Variable Rate Weekly Demand Note, 3.05%, 8/1/04(a) A-1+ VMIG-1 5,000 5,000,000 Washington Suburban Sanitary District, Water Supply, G.O., 4.00%, 6/1/99 AA Aa1 1,200 1,200,579 ------------- 53,370,214 ------------- -49- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Massachusetts - 2.9% Massachusetts Bay Transit Authority, RAN, Series A, 3.50%, 2/25/00 SP-1+ MIG-1 $10,500 $ 10,533,007 Massachusetts State, G.O., Series A, Variable Rate Weekly Demand Note, 2.85%, 9/1/16(a) A-1+ VMIG-1 18,100 18,100,000 Massachusetts State, G.O., Series B, Variable Rate Weekly Demand Note, 2.85%, 9/1/16(a) A-1+ VMIG-1 4,000 4,000,000 ------------- 32,633,007 ------------- Michigan - 6.1% Detroit Michigan Water Supply System, (FGIC Insured), Variable Rate Weekly Demand Note, 3.00%, 7/1/13(a) A-1+ VMIG-1 2,000 2,000,000 Michigan State Building Authority, Series 2, (LOC: Canadian Imperial Bank), Tax Exempt Commercial Paper, 3.15%, 8/5/99(a) A-1+ P-1 5,600 5,600,000 Michigan State Hospital Finance Authority, (Charity Obligated Group), Variable Rate Weekly Demand Note, 2.90%, 11/1/11(a) A-1+ VMIG-1 3,320 3,320,000 Michigan State Hospital Finance Authority, (Charity Obligated Group), Variable Rate Weekly Demand Note, 2.90%, 11/1/18 A-1+ VMIG-1 4,450 4,450,000 Michigan State, Strategic Fund, (Consumer Power Project), P.C.R., (LOC: Canadian Imperial Bank), Variable Rate Daily Demand Note, 3.10%, 6/15/10(a) A-1+ Aa3 3,400 3,400,000 Michigan State, Strategic Fund, (Consumer Power Project), P.C.R., (LOC: Union Bank of Switzerland), Variable Rate Daily Demand Note, 3.20%, 4/15/18(a) -- P-1 8,900 8,900,000 Michigan State University, General Revenue, Series A-2, Variable Rate Weekly Demand Note, 3.00%, 8/15/22(a) A-1+ VMIG-1 20,500 20,500,000 University of Michigan, Series B, Tax Exempt Commercial Paper, 2.80%, 5/12/99 A-1+ P-1 2,100 2,100,000 -50- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Michigan (continued) University of Michigan, Series B, Tax Exempt Commercial Paper, 3.00, 5/12/99 A-1+ P-1 $ 5,000 $ 5,000,000 University of Michigan, Series B, Tax Exempt Commercial Paper, 3.00, 7/20/99 A-1+ P-1 6,000 6,000,000 University of Michigan, Series B, Tax Exempt Commercial Paper, 3.00, 7/20/99 A-1+ P-1 2,750 2,750,000 University of Michigan, Series B, Tax Exempt Commercial Paper, 3.00, 7/21/99 A-1+ P-1 5,000 5,000,000 ------------- 69,020,000 ------------- Minnesota - 1.9% Minnesota State, G.O. 5.00%, 8/1/99 AAA Aaa 1,000 1,006,522 Minnesota State, G.O. 6.60%, 8/1/99 AAA Aaa 1,000 1,011,368 University of Minnesota, Series A, Variable Rate Weekly Demand Note, 3.00%, 1/1/34(a) A-1+ VMIG-1 19,000 19,000,000 ------------- 21,017,890 ------------- Mississippi - 4.1% Jackson County, Mississippi, Chevron USA Inc. Project, (Guaranteed by Chevron), Variable Rate Daily Demand Note, 3.10%, 12/1/16(a) -- P-1 1,800 1,800,000 Jackson County, Mississippi, Chevron USA Inc. Project, (Guaranteed by Chevron), Variable Rate Daily Demand Note, 3.10%, 6/1/23(a) -- P-1 7,700 7,700,000 Jackson County, Mississippi, Chevron USA Inc. Project, (Guaranteed by Chevron), Variable Rate Daily Demand Note, 3.15%, 6/1/23(a) -- P-1 5,660 5,660,000 Perry County, Mississippi, Leaf River Forest Project, (LOC: Wachovia Bank), Variable Rate Daily Demand Note, 3.15%, 3/1/02(a) -- P-1 30,850 30,850,000 ----------- 46,010,000 ----------- -51- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Missouri - 4.0% Bi-State Development Agency, Missouri, St. Clair County, (MBIA Insured), Variable Rate Weekly Demand Note, 3.00%, 7/1/28(a) A-1+ -- $19,500 $ 19,500,000 Missouri State, G.O., Fourth State Building, Series A, 5.00%, 6/1/99 AAA Aaa 1,150 1,152,406 Missouri State, Health & Educational Facilities Authority, (Barnes Hospital Project), (LOC: Morgan Guaranty Trust), Variable Rate Weekly Demand Note, 3.00%, 12/1/15(a) A-1+ VMIG-1 2,900 2,900,000 Missouri State, Health & Educational Facilities Authority, (Sisters of Mercy Health), Series D, Variable Rate Weekly Demand Note, 3.00%, 6/1/14(a) A-1+ VMIG-1 400 400,000 Missouri State, Health & Educational Facilities Authority, (Sisters of Mercy Health), Series D, Variable Rate Weekly Demand Note, 3.00%, 6/1/19(a) A-1+ VMIG-1 9,000 9,000,000 Missouri State, Health & Educational Facilities Authority, (Washington University Project), Series B, Variable Rate Daily Demand Note, 3.20%, 9/1/30(a) A-1+ VMIG-1 6,400 6,400,000 Missouri State, Health & Educational Facilities Authority, (Washington University Project), Series C, Variable Rate Daily Demand Note, 3.10%, 9/1/30(a) A-1+ VMIG-1 1,400 1,400,000 Missouri State, Health & Educational Facilities Authority, (Washington University Project), Variable Rate Weekly Demand Note, 3.00%, 9/1/09(a) A-1+ VMIG-1 4,600 4,600,000 ------------- 45,352,406 ------------- Montana - 0.7% Forsyth, Montana, P.C.R., (Pacificorp Project), (LOC: Rabobank Nederland), Variable Rate Daily Demand Note, 3.30%, 1/1/18(a) A-1+ P-1 7,750 7,750,000 ------------- -52- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Nevada - 1.4% Las Vegas Valley Water District, Nevada, (LOC: Westdeutsche Landesbank), Tax Exempt Commercial Paper, 2.80%, 5/11/99 A-1+ P-1 $ 4,000 $ 4,000,000 Las Vegas Valley Water District, Nevada, (LOC: Westdeutsche Landesbank), Tax Exempt Commercial Paper, 2.80%, 5/12/99 A-1+ P-1 10,000 10,000,000 Nevada State, G.O., Series A, 5.25%, 5/15/99 AA Aa2 1,615 1,617,842 ------------- 15,617,842 ------------- New Hampshire - 0.2% New Hampshire State, Capital Improvement, Series A, 4.00%, 10/1/99 AA+ Aa2 1,900 1,909,325 ------------- New Jersey - 2.5% New Jersey State, G.O. 5.00%, 7/15/99 AA+ AA1 3,000 3,013,042 New Jersey State, G.O., Series E, 5.00%, 7/15/99 AA+ Aa1 2,965 2,982,772 New Jersey State, Series A, TRAN, (Tax Exempt Commercial Paper Mode), 3.15%, 4/8/99 A-1+ P-1 3,000 3,000,000 New Jersey State, Series A, TRAN, (Tax Exempt Commercial Paper Mode), 2.95%, 5/6/99 A-1+ P-1 2,000 2,000,000 New Jersey State, Series A, TRAN, (Tax Exempt Commercial Paper Mode), 3.15%, 5/6/99 A-1+ P-1 2,000 2,000,000 New Jersey State, Series A, TRAN, (Tax Exempt Commercial Paper Mode), 3.05%, 5/13/99 A-1+ P-1 5,000 5,000,000 New Jersey State, Series A, TRAN, (Tax Exempt Commercial Paper Mode), 3.10%, 5/20/99 A-1+ P-1 3,000 3,000,000 New Jersey State, Series A, TRAN, (Tax Exempt Commercial Paper Mode), 3.20%, 6/4/99 A-1+ P-1 2,000 2,000,000 New Jersey State, Transportation Trust Fund, Series A, (Escrow in U.S. Government Securities), 5.90%, 6/15/99 -- AAA 5,000 5,031,718 ------------- 28,027,532 ------------- -53- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- New Mexico - 0.4% New Mexico State, TRAN, 4.25%, 6/30/99 SP-1+ MIG-1 $ 4,000 $ 4,006,188 ------------- New York - 6.9% Long Island Power Authority, New York, Electrical System Revenue, Series 5, (LOC: ABN Amro Bank N.V. 50%, Morgan Guaranty 50%), Variable Rate Daily Demand Note, 3.15%, 5/1/33(a) A-1+ VMIG-1 5,700 5,700,000 Long Island Power Authority, New York, Electric System Revenue, Variable Rate Demand Bonds, (Tax Exempt Commercial Paper Mode), (LOC: Westdeutsche Landesbank 50%, Bayerische Landesbank 50%), 2.80%, 4/7/99 A-1+ VMIG-1 3,000 3,000,000 Long Island Power Authority, New York, Electric System Revenue, Variable Rate Demand Bonds, (Tax Exempt Commercial Paper Mode), (LOC: Westdeutsche Landesbank 50%, Bayerische Landesbank 50%), 2.90%, 4/20/99 A-1+ VMIG-1 2,500 2,500,000 Long Island Power Authority, New York, Electric System Revenue, Variable Rate Demand Bonds, (Tax Exempt Commercial Paper Mode), (LOC: Westdeutsche Landesbank 50%, Bayerische Landesbank 50%), 3.05%, 4/26/99 A-1+ VMIG-1 6,000 6,000,000 Long Island Power Authority, New York, Electric System Revenue, Variable Rate Demand Bonds, (Tax Exempt Commercial Paper Mode), (LOC: Westdeutsche Landesbank 50%, Bayerische Landesbank 50%), 2.80%, 5/14/99 A-1+ VMIG-1 2,000 2,000,000 Long Island Power Authority, New York, Series 2, (LOC: Westdeutsche Landesbank 50%, Bayerische Landesbank 50%), Variable Weekly Demand Note, 2.80%, 5/1/33(a) A-1+ VMIG-1 3,500 3,500,000 -54- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- New York (continued) Metropolitan Transportation Authority, New York, Transit Facilities BAN, Tax Exempt Commercial Paper, 3.10%, 4/13/99 A-1+ P-1 $ 5,000 $ 5,000,000 Municipal Assistance Corp. for New York City, New York, Sub Series K-2, (LOC: Westdeutsche Landesbank), Variable Rate Weekly Demand Note, 3.15%, 7/1/08(a) A-1+ VMIG-1 5,800 5,800,000 New York, New York, G.O., Series B, (FGIC Insured), Variable Rate Daily Demand Note, 3.40%, 10/1/20(a) A-1+ VMIG-1 1,400 1,400,000 New York, New York, G.O., Series B, (FGIC Insured), Variable Rate Daily DA-1+d Note, 3.40%, 10/1/22(a) A-1+ VMIG-1 1,200 1,200,000 New York City, New York, Municipal Water Finance Authority, Water and Sewer System Revenue, Series A, (FGIC Insured), Variable Rate Daily Demand Note, 3.35%, 6/15/25(a) A-1+ VMIG-1 2,500 2,500,000 New York City, New York, Municipal Water Finance Authority, Water and Sewer System Revenue, Series G, (FGIC Insured), Variable Rate Daily Demand Note, 3.10%, 6/15/24(a) A-1+ VMIG-1 19,850 19,850,000 New York City, New York, Transitional Finance Authority Revenue, SubSeries B-1, 2.90%, 11/1/27, Mandatory Put - 11/1/99 @ $100 A-1+ VMIG-1 5,000 5,000,000 New York State, Energy Research and Development Authority, P.C.R., Niagara Mohawk Power, (LOC: Toronto Dominion Bank), Variable Rate Daily Demand Note, 3.30%, 7/1/15(a) A-1+ -- 5,700 5,700,000 Westchester County, New York, G.O., Series B, 4.00%, 11/15/99 AAA Aaa 8,500 8,554,169 ------------- 77,704,169 ------------- -55- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- North Carolina - 2.0% Charlotte-Mecklenberg Hospital Authority, North Carolina, Health Care System Revenue, Series C, Variable Rate Weekly Demand Note, 3.05%, 1/15/26(a) A-1+ VMIG-1 $10,000 $ 10,000,000 Charlotte-Mecklenberg Hospital Authority, North Carolina, Health Care System Revenue, Series D, Variable Rate Weekly Demand Note, 3.05%, 1/15/26(a) A-1+ VMIG-1 3,400 3,400,000 North Carolina Medical Care Commission Hospital Revenue, (North Carolina Baptist Hospital Project), Series B, Variable Rate Weekly Demand Note, 3.05%, 6/1/22(a) A-1+ VMIG-1 9,000 9,000,000 ------------- 22,400,000 ------------- Ohio - 1.9% Clermont County, Ohio, Hospital Facilities Revenue, Series B, (Catholic Health Partners), Variable Rate Weekly Demand Note, 3.00%, 9/1/21(a) A-1+ VMIG-1 16,720 16,720,000 Ohio State, G.O., Highway Capital Improvements, Series C, 4.00%, 5/1/99 AAA Aa1 1,100 1,100,321 Ohio State, G.O., Highway Capital Improvements, Series S, 4.40%, 5/15/99 AAA Aa1 1,835 1,836,331 Ohio State, G.O., Highway Capital Improvements, Series U, 4.40%, 5/15/99 AAA Aa1 1,000 1,000,761 Ohio State, G.O., Highway Capital Improvements, Series V, 4.70%, 5/15/99 AAA Aa1 1,350 1,351,706 ------------- 22,009,119 ------------- Oregon - 1.4% Umatilla County, Oregon, Hospital Facilities Authority, (Catholic Health Initiatives), Series B, Variable Rate Weekly Demand Note, 3.00%, 12/1/24(a) A-1+ VMIG-1 15,400 15,400,000 ------------- -56- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Pennsylvania - 0.5% Pennsylvania State, G.O., Second Series A, (MBIA Insured), 4.75%, 6/15/99 AAA Aaa $ 1,000 $ 1,002,191 Pennsylvania State, Higher Educational Facility Authority, Carnegie Mellon University, Series A, Variable Rate Daily Demand Note, 3.05%, 11/1/25(a) A-1+ -- 550 550,000 Pennsylvania State, Higher Educational Facility Authority, Carnegie Mellon University, Series D, Variable Rate Daily Demand Note, 3.05%, 11/1/30(a) A-1+ -- 900 900,000 Pottsville, Pennsylvania, Hospital Authority, Series F, (Charity Obligated Group), Variable Rate Weekly Demand Note, 2.90%, 11/1/19(a) A-1+ VMIG-1 1,500 1,500,000 York County, Pennsylvania, Industrial Development Authority, P.C.R., Philadelphia Electric Co., (LOC: Toronto Dominion Bank), Variable Rate Daily Demand Note, 3.05%, 8/1/16(a) A-1+ P-1 1,800 1,800,000 ------------- 5,752,191 ------------- South Carolina - 1.0% Rock Hill, South Carolina, Utility System Revenue, Series B, (AMBAC Insured), Variable Rate Weekly Demand Note, 2.90%, 1/1/23(a) A-1+ VMIG-1 5,515 5,515,000 South Carolina State, G.O., Capital Improvement, Series B, 5.75%, 8/1/99 AAA Aaa 1,500 1,513,752 South Carolina State, G.O., Series A, 4.50%, 8/1/99 AAA Aaa 2,970 2,979,473 South Carolina State, G.O., Series W, 6.00%, 5/1/99 AAA Aaa 1,125 1,127,071 ------------- 11,135,296 ------------- -57- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Tennessee - 3.3% Memphis, Tennessee, G.O., 5.00%, 10/1/99 AA Aa-1 $ 2,265 $ 2,286,816 Memphis, Tennessee, G.O., Series A, Variable Rate Weekly Demand Note, 3.15%, 8/1/04(a) A-1+ VMIG-1 2,500 2,500,000 Memphis, Tennessee, G.O., Series A, Variable Rate Weekly Demand Note, 3.15%, 8/1/07 A-1+ VMIG-1 2,800 2,800,000 Tennessee State, G.O., Variable Rate Weekly Demand Note, 2.90%, 7/1/01(a) A-1+ VMIG-1 20,600 20,600,000 Tennessee State, G.O., Variable Rate Weekly Demand Note, 2.90%, 7/2/01(a) A-1+ VMIG-1 9,000 9,000,000 Tennessee State, G.O., Variable Rate Weekly Demand Note, 2.90%, 7/2/01(a) A-1+ VMIG-1 400 400,000 ------------- 37,586,816 ------------- Texas - 15.1% Austin, Texas, Combined Utility System, Tax Exempt Commercial Paper, Series A, (LOC: Morgan Guaranty Trust), 2.70%, 4/7/99 A-1+ P-1 3,000 3,000,000 Austin, Texas, Combined Utility System, Tax Exempt Commercial Paper, Series A, (LOC: Morgan Guaranty Trust), 2.80%, 5/7/99 A-1+ P-1 3,000 3,000,000 Austin, Texas, Combined Utility System, Tax Exempt Commercial Paper, Series A, (LOC: Morgan Guaranty Trust), 2.85%, 5/7/99 A-1+ P-1 3,000 3,000,000 Austin, Texas, Combined Utility System, Tax Exempt Commercial Paper, Series A, (LOC: Morgan Guaranty Trust), 2.85%, 5/10/99 A-1+ P-1 1,000 1,000,000 Austin, Texas, Combined Utility System, Tax Exempt Commercial Paper, Series A, (LOC: Morgan Guaranty Trust), 2.95%, 5/11/99 A-1+ P-1 6,425 6,425,000 Austin, Texas, Combined Utility System, Tax Exempt Commercial Paper, Series A, (LOC: Morgan Guaranty Trust), 3.10%, 7/26/99 A-1+ P-1 2,340 2,340,000 -58- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Texas (continued) Austin, Texas, Independent School District, G.O., (PSF Guaranteed), 6.20%, 8/1/99 AAA Aaa $ 1,000 $ 1,010,934 City of Houston, Texas, G.O., Series B, Tax Exempt Commercial Paper, 2.95%, 4/6/99 A-1+ P-1 7,700 7,700,000 City of Houston, Texas, G.O., Series B, Tax Exempt Commercial Paper, 2.80%, 4/9/99 A-1+ P-1 3,000 3,000,000 City of Houston, Texas, G.O., Series B, Tax Exempt Commercial Paper, 2.85%, 4/12/99 A-1+ P-1 3,000 3,000,000 City of Houston, Texas, G.O., Series B, Tax Exempt Commercial Paper, 2.90%, 4/19/99 A-1+ P-1 3,000 3,000,000 City of Houston, Texas, G.O., Series B, Tax Exempt Commercial Paper, 3.10%, 4/23/99 A-1+ P-1 3,000 3,000,000 Dallas, Texas, G.O., 5.50%, 2/15/00 AAA Aaa 1,500 1,530,450 Dallas, Texas, Waterworks and Sewer System, 8.00%, 10/1/99 AAA Aa2 1,000 1,024,720 Deer Park, Texas, Independent School District, G.O., (PSF Guaranteed), 6.25%, 2/15/00 AAA Aaa 1,400 1,438,754 Harris County, Texas, G.O., Tax Exempt Commercial Paper, 3.00%, 4/14/99 A-1+ P-1 1,325 1,325,000 Harris County, Texas, G.O., Tax Exempt Commercial Paper, 3.15%, 5/10/99 A-1+ P-1 2,000 2,000,000 Harris County, Texas, G.O., Toll Road, 6.30%, 8/1/99 AA Aa2 1,150 1,161,577 Harris County, Texas, G.O., Toll Road, Series G, Variable Rate Weekly Demand Note, 3.00%, 8/1/20(a) A-1+ VMIG-1 2,800 2,800,000 Harris County, Texas, G.O., Toll Road, Series H, Variable Rate Weekly Demand Note, 3.00%, 8/1/20(a) A-1+ VMIG-1 4,600 4,600,000 Lower Colorado River Authority, Texas, (MBIA Insured), Variable Rate Weekly Demand Note, 2.90%, 1/1/13(a) A-1+ VMIG-1 28,600 28,600,000 -59- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Texas (continued) Sabine River Authority, Texas, P.C.R., Utilities Electric Company, (LOC: UBS AG), Variable Rate Daily Demand Note, 3.35%, 6/1/30(a) A-1+ VMIG-1 $ 3,700 $ 3,700,000 Texas A & M University, Texas, 5.35%, 5/15/99 AA Aa2 1,000 1,001,815 Texas A & M University, Texas, Tax Exempt Commercial Paper, 3.05%, 4/23/99 A-1+ P-1 4,000 4,000,000 Texas A & M University, Texas, Tax Exempt Commercial Paper, 2.80%, 5/11/99 A-1+ P-1 2,000 2,000,000 Texas A & M University, Texas, Tax Exempt Commercial Paper, 2.85%, 7/22/99 A-1+ P-1 12,000 12,000,000 Texas A & M University, Texas, Tax Exempt Commercial Paper, 3.00%, 7/23/99 A-1+ P-1 6,300 6,300,000 Texas Higher Education Authority, Series B, (FGIC Insured), Variable Rate Weekly Demand Note, 3.00%, 12/1/25(a) A-1+ VMIG-1 3,260 3,260,000 Texas Public Finance Authority, G.O., Tax Exempt Commercial Paper, 2.90%, 5/13/99 A-1+ P-1 2,500 2,500,000 Texas Public Finance Authority, G.O., Tax Exempt Commercial Paper, 3.10%, 7/19/99 A-1+ P-1 2,000 2,000,000 Texas Public Finance Authority, G.O., Tax Exempt Commercial Paper, 3.15%, 7/22/99 A-1+ P-1 3,500 3,500,000 Texas State, TRANS, 4.50%, 8/31/99 SP-1+ MIG-1 21,650 21,779,999 Travis County, Texas, Health Facilities Development Corporation, (Charity Obligation Group), Series E, Variable Rate Weekly Demand Note, 2.90%, 11/1/27(a) A-1+ VMIG-1 7,800 7,800,000 University of Texas, Texas, Tax Exempt Commercial Paper, 3.15%, 7/14/99 A-1+ P-1 4,000 4,000,000 University of Texas, Texas, Tax Exempt Commercial Paper, 3.05%, 7/19/99 A-1+ P-1 5,000 5,000,000 -60- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Texas (continued) University of Texas, Texas, Tax Exempt Commercial Paper, 3.05%, 7/21/99 A-1+ P-1 $ 5,000 $ 5,000,000 University of Texas, Texas, Tax Exempt Commercial Paper, 3.15%, 8/9/99 A-1+ P-1 2,000 2,000,000 Waco, Texas, Health Facilities Development Corporation, (Charity Obligated Group), Series F, Variable Rate Weekly Demand Note, 2.90%, 11/1/26(a) A-1+ VMIG-1 1,000 1,000,000 ------------- 170,798,249 ------------- Utah - 1.8% Utah State, G.O., 4.40%, 7/1/99 AAA Aaa $1,500 $ 1,503,019 Utah State, G.O., Series A, Tax Exempt Commercial Paper, 3.05%, 4/12/99 A-1+ P-1 4,500 4,500,000 Utah State, G.O., Series A, Tax Exempt Commercial Paper, 2.95%, 4/14/99 A-1+ P-1 4,000 4,000,000 Utah State, G.O., Series A, Tax Exempt Commercial Paper,, 3.05%, 4/19/99 A-1+ P-1 2,000 2,000,000 Utah State, G.O., Series A, Tax Exempt Commercial Paper, 3.00%, 5/6/99 A-1+ P-1 5,000 5,000,000 Utah Transit Authority Sales Tax & Transportation Revenue, (LOC: Bayerische Landesbank), Variable Rate Weekly Demand Note, 3.00%, 5/1/28(a) A-1+ -- 3,400 3,400,000 ------------- 20,403,019 ------------- Virginia - 1.5% Fairfax County, Virginia, G.O., Series B, 6.00%, 6/1/99 AAA Aaa 1,550 1,557,924 Hampton Roads, Virginia, Regional Jail Authority, Series B, (LOC: Wachovia Bank), Variable Rate Weekly Demand Note, 3.05%, 7/1/16(a) A-1+ VMIG-1 7,800 7,800,000 Virginia State, G.O., 4.00%, 6/1/99 AAA Aaa 1,400 1,402,307 Virginia State, G.O., 4.50%, 6/1/99 AAA Aaa 2,785 2,789,669 Virginia State, G.O., 5.00%, 6/1/99 AAA Aaa 1,875 1,881,583 Virginia State Public School Authority, Seriess I, 4.25%, 8/1/99 AA+ Aa1 2,000 2,007,984 ------------- 17,439,467 ------------- -61- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Washington - 1.2% King County, Washington, G.O., Series C, 4.00%, 6/1/99 AA+ Aa1 $ 3,000 $ 3,001,300 Thurston County, Washington, G.O., (MBIA Insured), 4.75%, 8/1/99 -- AAA 1,875 1,885,675 Washington State, G.O., Series A, 4.25, 7/1/99 AA+ Aa1 2,765 2,770,843 Washington State, G.O., Series C, 5.50, 7/1/99 AA+ Aa1 4,000 4,018,016 Washington State, G.O., 7.20%, 5/1/03, (Escrowed in U.S. Government Securities), Prerefunded, 5/1/99 @ $100 AA+ AAA 1,000 1,002,715 Washington State, G.O., 7.25%, 5/1/06, (Escrowed in U.S. Government Securities), Prerefunded, 5/1/99 @ $100 AA+ AAA 1,000 1,002,783 ------------- 13,681,332 ------------- Wisconsin - 4.4% Milwaukee, Wisconsin, G.O., Series A9, 3.85%, 3/1/00 AA+ Aa1 5,180 5,219,365 Milwaukee, Wisconsin, G.O., Series F, 5.00%, 11/15/99 AA+ Aa1 2,185 2,212,366 Milwaukee, Wisconsin, G.O., Series K, 4.25%, 6/15/99 AA+ Aa1 2,705 2,707,917 Oak Creek, Wisconsin, P.C.R., (Wisconsin Electric Power Company Project), Variable Rate Weekly Demand Note, 3.00%, 8/1/16(a) AA P-1 3,200 3,200,000 Pleasant Prairie, Wisconsin, P.C.R., (Wisconsin Electric Power Company Project), Series B, Variable Rate Weekly Demand Note, 3.05%, 9/1/30(a) A-1+ P-1 11,150 11,150,000 Wisconsin State, G.O., Series 1, 4.80%, 11/1/99 AA Aa2 1,975 1,994,476 Wisconsin State, Operating Notes, 4.50%, 6/15/99 SP-1+ MIG-1 20,000 20,038,399 -62- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Rating* ------------ Par TAX-FREE SERIES (continued) S&P Moody's (000) Value - -------------------------------------------------------------------------------- Wisconsin (continued) Wisconsin State, Transportation Revenue, (LOC: Bayerische Landesbank 33.3%, Westdeutsche Landesbank 66.7%), Tax Exempt Commercial Paper, 2.65%, 4/1/99 A-1+ P-1 $ 3,000 $ 3,000,000 -------------- 49,522,523 -------------- Wyoming - 0.7% Sweetwater County, Wyoming, P.C.R., Pacificorp Project, Series B, (LOC: Canadian Imperial Bank), Variable Rate Daily Demand Note, 3.30%, 1/1/14 A-1+ P-1 2,750 2,750,000 Uinta County, Wyoming, P.C.R., (Chevron U.S.A.), Variable Rate Daily Demand Note, 3.10%, 4/1/10 -- P-1 3,800 3,800,000 Uinta County, Wyoming, P.C.R., (Chevron U.S.A.), Variable Rate Daily Demand Note, 3.10%, 4/1/10 -- P-1 600 600,000 Uinta County, Wyoming, P.C.R., (Chevron U.S.A.), Variable Rate Daily Demand Note, 3.10%, 8/15/20(a) -- P-1 1,100 1,100,000 -------------- 8,250,000 -------------- TOTAL INVESTMENTS--98.9% (Cost $1,119,368,030) $1,119,368,030 OTHER ASSETS LESS LIABILITIES, NET--1.1% 12,623,023 -------------- NET ASSETS--100.0% $1,131,991,053 ============== Net Asset Value, Offering and Redemption Price Per: Tax-Free Retail Share ($1,047,391,315 divided by 1,047,493,793 shares outstanding) $1.00 ===== Tax-Free Institutional Share ($84,599,738 divided by 84,607,371 shares outstanding) $1.00 ===== -63- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1999 TAX-FREE SERIES (concluded) - -------------------------------------------------------------------------------- - --------------- (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, 1999. * The credit ratings are not covered by the report of independent accountants. INVESTMENT ABBREVIATIONS: AMBAC AMBAC Assurance Corporation BAN Bond Anticipation Notes FGIC Financial Guaranty Insurance Corporation FNMA Federal National Mortgage Association FSA Financial Security Assurance GO General Obligation Bond LOC Letter of Credit MBIA Municipal Bond Investors Assurance Corporation PCR Pollution Control Revenue Bonds PSF Public School Facilities RAN Revenue Anticipation Note RB Revenue Bond TAN Tax Anticipation Note TRAN Tax Revenue Anticipation Note INSURANCE ABBREVIATIONS: AMBAC AMBAC Indemnity Corp. FGIC Financial Guaranty Insurance Corporation MBIA Municipal Bond Investors Assurance MOODY'S MUNICIPAL RATINGS: Aaa Judged to be of the best quality. Aa 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 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. -64- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statements of Operations For the year ended March 31, 1999
Prime Treasury Tax-Free Series Series Series - ----------------------------------------------------------------------------------------------- Investment Income: Interest income $ 202,392,068 $ 42,584,715 $ 32,769,158 ------------- ------------- ------------- Expenses: Investment advisory fees 9,800,088 2,099,289 2,642,345 Distribution fees 9,527,563 1,964,145 2,232,564 Transfer agent fees 2,213,530 303,231 127,823 Registration fees 557,046 132,002 158,282 Custodian fees 476,010 68,093 60,882 Shareholder service fees 442,438 67,048 127,363 Professional fees 177,169 54,510 48,416 Accounting fees 167,901 134,044 137,933 Directors' fees 86,534 32,482 18,872 Miscelleaneous 368,231 161,793 7,555 ------------- ------------- ------------- Total expenses 23,816,510 5,016,637 5,562,035 Less: Fees waived (114,329) (113,581) -- ------------- ------------- ------------- Net expenses 23,702,181 4,903,056 5,562,035 ------------- ------------- ------------- Net investment income 78,689,887 37,681,659 27,207,123 ------------- ------------- ------------- Net realized gain from security transactions 88,481 156,495 18,413 ------------- ------------- ------------- Net increase in net assets resulting from operations $ 178,778,368 $ 37,838,154 $ 27,225,536 ============= ============= =============
See Notes to Financial Statements. -65- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statements of Changes in Net Assets March 31, 1999
PRIME SERIES - -------------------------------------------------------------------------------------------- For the For the Year Ended Year Ended March 31, March 31, ---------- ---------- 1999 1998 Increase (Decrease) in Net Assets Operations: Net investment income $ 178,689,887 $ 162,086,913 Net realized gain from security transactions 88,481 -- --------------- --------------- Net increase in net assets resulting from operations 178,778,368 162,086,913 --------------- --------------- Distributions to Shareholders From: Net investment income: BT Alex. Brown Cash Reserve Prime Shares, Treasury Shares and Tax-Free Shares, respectively (151,410,202) (138,011,807) BT Alex. Brown Cash Reserve Prime Institutional Shares, Treasury Institutional Shares and Tax-Free Institutional Shares, respectively (16,058,016) (13,656,968) Flag Investors Class A Shares (435,677) (341,197) Flag Investors Class B Shares (72,373) (12,545) Quality Cash Reserve Shares (10,713,744) (10,064,396) --------------- --------------- Total distributions (178,690,012) (162,086,913) --------------- --------------- Capital Share ransactions, net 496,268,896 849,945,486 --------------- --------------- Total increase in net assets 496,357,252 849,945,486 Net Assets: Beginning of period 3,717,409,100 2,867,463,614 --------------- --------------- End of period $ 4,213,766,352 $ 3,717,409,100 =============== ===============
-66-
TREASURY SERIES TAX-FREE SERIES - ----------------------------------------------------------------------------------------------------------------------------------- For the Years Ended March 31, ------------------------------------------------------------------------------ 1999 1998 1999 1998 Increase (Decrease) in Net Assets Operations: Net investment income $ 37,681,660 $ 35,037,012 $ 27,207,123 $ 23,916,200 Net realized gain from security transactions 156,495 20,785 18,413 (1,994) --------------- --------------- --------------- --------------- Net increase in net assets resulting from operations 37,838,155 35,057,797 27,225,536 23,914,206 --------------- --------------- --------------- --------------- Distributions to Shareholders From: Net investment income: BT Alex. Brown Cash Reserve Prime Shares, Treasury Shares and Tax-Free Shares, respectively (33,507,990) (31,623,993) (24,515,362) (21,792,392) BT Alex. Brown Cash Reserve Prime Institutional Shares, Treasury Institutional Shares and Tax-Free Institutional Shares, respectively (4,334,875) (3,413,019) (2,746,989) (2,123,808) Flag Investors Class A Shares -- -- -- -- Flag Investors Class B Shares -- -- -- -- Quality Cash Reserve Shares -- -- -- -- --------------- --------------- --------------- --------------- Total distributions (37,842,865) (35,037,012) (27,262,351) (23,916,200) --------------- --------------- --------------- --------------- Capital Share ransactions, net 42,060,849 157,532,323 214,160,192 270,657,645 --------------- --------------- --------------- --------------- Total increase in net assets 42,056,138 157,553,108 214,123,377 270,655,651 Net Assets: Beginning of period 897,206,681 739,653,573 917,867,676 647,212,025 --------------- --------------- --------------- --------------- End of period $ 939,262,819 $ 897,206,681 $ 1,131,991,053 $ 917,867,676 =============== =============== =============== ===============
See Notes to Financial Statements. -67- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each year) BT ALEX. BROWN CASH RESERVE PRIME SHARES - --------------------------------------------------------------------------------
For the Year Ended March 31, ---------- 1999 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 ---------------- Income from Investment Operations: Net investment income 0.0473 Less Distributions: Dividends from net investment income (0.0473 ---------------- Net asset value at end of period $ 1.00 ================ Total Return: Based on net asset value per share 4.84% Ratios to Average Net Assets: Expenses 0.63% Net investment income 4.71% Supplemental Data: Net assets at end of period $ 3,727,990,170 Number of shares outstanding at end of period 3,727,906,079
-68- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- BT ALEX. BROWN CASH RESERVE PRIME SHARES (continued) - --------------------------------------------------------------------------------
For the Years Ended March 31, -------------------------------------------------------------------------------- 1998 1997 1996 1995 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 0.0494 0.0478 0.0524 0.0442 Less Distributions: Dividends from net investment income (0.0494) (0.0478) (0.0524) (0.0442) ---------------- ---------------- ---------------- ---------------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ================ ================ ================ ================ Total Return: Based on net asset value per share 5.05% 4.88% 5.36% 4.51% Ratios to Average Net Assets: Expenses 0.67% 0.63% 0.60% 0.61% Net investment income 4.94% 4.78% 5.21% 4.46% Supplemental Data: Net assets at end of period $ 3,164,537,551 $ 2,545,532,365 $ 2,386,681,216 $ 1,472,079,739 Number of shares outstanding at end of period 3,164,529,071 2,545,523,885 2,386,684,392 1,472,077,488
See Notes to Financial Statements. -69- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each year) FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS A - --------------------------------------------------------------------------------
For the Year Ended March 31, - ------------------------------------------------------------------ 1999 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 ------------ Income from Investment Operations: Net investment income 0.0474 Less Distributions: Dividends from net investment income (0.0474) ------------ Net asset value at end of period $ 1.00 ============ Total Return: Based on net asset value per share 4.85% Ratios to Average Net Assets: Expenses 0.63% Net investment income 4.67% Supplemental Data: Net assets at end of period $ 13,028,272 Number of shares outstanding at end of period 13,027,769
See Notes to Financial Statements. -70- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS A (continued) - --------------------------------------------------------------------------------
For the Years Ended March 31, - --------------------------------------------------------------------------------------------------------------- 1998 1997 1996 1995 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 0.0494 0.0478 0.0524 0.0442 Less Distributions: Dividends from net investment income (0.0494) (0.0478) (0.0524) (0.0442) ----------- ----------- ----------- ----------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 =========== =========== =========== =========== Total Return: Based on net asset value per share 5.05% 4.88% 5.36% 4.51% Ratios to Average Net Assets: Expenses 0.67% 0.63% 0.60% 0.61% Net investment income 4.94% 4.78% 5.25% 4.26% Supplemental Data: Net assets at end of period $ 7,736,785 $ 6,521,574 $ 5,976,831 $ 7,726,696 Number of shares outstanding at end of period 7,736,522 6,521,310 5,976,824 7,726,698
See Notes to Financial Statements. -71- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For shares outstanding throughout each year) FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS B - --------------------------------------------------------------------------------
For the Year Ended March 31, - ---------------------------------------------------------------------- 1999 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 ----------- Income from Investment Operations: Net investment income 0.0400 Less Distributions: Dividends from net investment (0.0400) ----------- Net asset value at end of period $ 1.00 =========== Total Return: Based on net asset value per share 4.07% Ratios to Average Net Assets: Expenses 1.37% Net investment income 3.92% Supplemental Data: Net assets at end of period $ 2,355,863 Number of shares outstanding at end of period 2,355,780
- ------------------ (1) Commencement of operations. (2) Annualized. -72- BT ALEX. BROWN CASH RESERVE FUND. INC. - -------------------------------------------------------------------------------- FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS B (continued) - --------------------------------------------------------------------------------
For the Period April 3, 1995(1) For the Years Ended March 31, through March 31, - ---------------------------------------------------------------------------------------------------------------- 1998 1997 1996 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 (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% Ratios to Average 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
See Notes to Financial Statements. -73- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For shares outstanding throughout each year) BT ALEX. BROWN CASH RESERVE PRIME INSTITUTIONAL SHARES - --------------------------------------------------------------------------------
For the Year Ended March 31, - ----------------------------------------------------------------- 1999 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 ------------- Income from Investment Operations: Net investment income 0.0499 Less Distributions: Dividends from net investment income (0.0499) ------------- Net asset value at end of period $ 1.00 ============= Total Return: Based on net asset value per share 5.11% Ratios to Average Net Assets: Expenses 0.36% Net investment income 4.98% Supplemental Data: Net assets at end of period $ 388,447,492 Number of shares outstanding at end of period 388,440,636
-74- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- BT ALEX. BROWN CASH RESERVE PRIME INSTITUTIONAL SHARES (continued) - --------------------------------------------------------------------------------
For the Years Ended March 31, - -------------------------------------------------------------------------------------------------------------------- 1998 1997 1996 1995 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 0.0519 0.0503 0.0548 0.0472 Less Distributions: Dividends from net investment income (0.0519) (0.0503) (0.0548) (0.0472) ------------- ------------- ------------ ------------ Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============= ============= ============ ============ Total Return: Based on net asset value per share 5.31% 5.15% 5.62% 4.82% Ratios to Average Net Assets: Expenses 0.42% 0.38% 0.35% 0.36% Net investment income 5.22% 5.04% 5.32% 4.57% Supplemental Data: Net assets at end of period $ 317,971,693 $ 117,812,047 $ 53,699,315 $ 11,904,716 Number of shares outstanding at end of period 317,971,413 117,811,768 53,699,535 11,904,663
See Notes to Financial Statements. -75- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For shares outstanding throughout each year) QUALITY CASH RESERVE PRIME SHARES - --------------------------------------------------------------------------------
For the Year Ended March 31, - ---------------------------------------------------------------------- 1999 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 ------------ Income from Investment Operations: Net investment income 0.0444 Less Distributions: Dividends from net investment income (0.0444) ------------ Net asset value at end of period $ 1.00 ============ Total Return: Based on net asset value per share 4.53% Ratios to Average Net Assets: Expenses 0.92%(1) Net investment income 4.44%(2) Supplemental Data: Net assets at end of period $ 81,944,555 Number of shares outstanding at end of period 81,938,027
- -------------- (1) Ratios of expenses to average net assets prior fee wavers was 0.97%, 1.02%, 0.98% and 0.95% for the years ended March 31, 1999, 1998, 1997 and 1996, respectively. (2) Ratios of net investment income to average net assets prior to partial fee waivers was 4.39%, 4.60%, 4.43% and 4.86% for the years ended March 31, 1999, 1998, 1997 and 1996, respectively. -76- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- QUALITY CASH RESERVE PRIME SHARES (continued) - --------------------------------------------------------------------------------
For the Years Ended March 31, - ------------------------------------------------------------------------------------------------------------------------------ 1998 1997 1996 1995 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 0.0465 0.0449 0.0493 0.0402 Less Distributions: Dividends from net investment income (0.0465) (0.0449) (0.0493) (0.0402) ------------- ------------- ------------- ------------ Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============= ============= ============= ============ Total Return: Based on net asset value per share 4.75% 4.59% 5.04% 4.09% Ratios to Average Net Assets: Expenses 0.96%(1) 0.91%(1) 0.90%(1) 0.96% Net investment income 4.66%(2) 4.50%(2) 4.91%(2) 4.04% Supplemental Data: Net assets at end of period $ 226,978,689 $ 197,370,530 $ 156,412,213 $ 94,592,158 Number of shares outstanding at end of period 226,978,007 197,369,848 156,412,393 94,591,979
See Notes to Financial Statements. -77- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For shares outstanding throughout each year) BT ALEX. BROWN CASH RESERVE TREASURY SHARES - --------------------------------------------------------------------------------
For the Year Ended March 31, - -------------------------------------------------------------------- 1999 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 -------------- Income from Investment Operations: Net investment income 0.042 Less Distributions: Dividends from net investment income (0.042) -------------- Net asset value at end of period $ 1.00 ============== Total Return: Based on net asset value per share 4.35% Ratios to Average Net Assets: Expenses 0.58% Net investment income 4.26% Supplemental Data: Net assets at end of period $ 816,700,318 Number of shares outstanding at end of period 816,622,190
- -------------- (1) Ratio of expenses to average daily net assets prior to partial fee waiver was 0.56% for the year ended March 31, 1995. (2) Ratio of net investment income to average daily net assets prior to partial fee waiver was 4.08% for the year ended March 31, 1995. -78- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- BT ALEX. BROWN CASH RESERVE TREASURY SHARES (continued) - --------------------------------------------------------------------------------
For the Years Ended March 31, - -------------------------------------------------------------------------------------------------------------------------- 1998 1997 1996 1995 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 0.046 0.045 0.049 0.0411 Less Distributions: Dividends from net investment income (0.046) (0.045) (0.049) (0.0411) ------------- ------------- ------------- --------------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============= ============= ============= =============== Total Return: Based on net asset value per share 4.74% 4.63% 5.05% 4.19% Ratios to Average Net Assets: Expenses 0.59% 0.61% 0.58% 0.55%(1) Net investment income 4.65% 4.54% 4.94% 4.09%(2) Supplemental Data: Net assets at end of period $ 798,426,658 $ 678,444,803 $ 666,814,158 $ 512,167,212 Number of shares outstanding at end of period 798,354,129 678,391,386 666,762,028 512,162,864
See Notes to Financial Statements. -79- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For shares outstanding throughout each year) BT ALEX. BROWN CASH RESERVE TREASURY INSTITUTIONAL SHARES - --------------------------------------------------------------------------------
For the Year Ended March 31, - ------------------------------------------------------------------- 1999 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 ------------- Income from Investment Operations: Net investment income 0.0453 Less Distributions: Dividends from net investment income (0.0453) ------------- Net asset value at end of period $ 1.00 ============= Total Return: Based on net asset value per share 4.63% Ratios to Average Net Assets: Expenses 0.33% Net investment income 4.54% Supplemental Data: Net assets at end of period $ 122,562,501 Number of shares outstanding at end of period 122,561,713
- ------------------- (1) Ratio of expenses to average daily net assets prior to partial fee waiver was 0.31% for the year ended March 31, 1995. (2) Ratio of net investment income to average daily net assets prior to partial waiver was 4.14% for the year ended March 31, 1995. -80- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- BT ALEX. BROWN CASH RESERVE TREASURY INSTITUTIONAL SHARES (continued) - --------------------------------------------------------------------------------
For the Years Ended March 31, - ------------------------------------------------------------------------------------------------------------------- 1998 1997 1996 1995 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 0.0489 0.0481 0.0523 0.0438 Less Distributions: Dividends from net investment income (0.0489) (0.0481) (0.0523) (0.0438) ------------ ------------ ------------ ------------ Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============ ============ ============ ============ Total Return: Based on net asset value per share 5.00% 4.92% 5.36% 4.47% Ratios to Average Net Assets: Expenses 0.34% 0.33% 0.33% 0.30%(1) Net investment income 4.91% 4.81% 5.12% 4.15%(2) Supplemental Data: Net assets at end of period $ 98,780,023 $ 61,208,770 $ 51,822,757 $ 14,051,995 Number of shares outstanding at end of period 98,768,925 61,199,345 51,823,226 14,046,467
See Notes to Financial Statements. -81- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For shares outstanding throughout each year) BT ALEX. BROWN CASH RESERVE TAX-FREE SHARES - --------------------------------------------------------------------------------
For the Year Ended March 31, - -------------------------------------------------------------------- 1999 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 --------------- Income from Investment Operations: Net investment income 0.0277 Less Distributions: Dividends from net investment income (0.0277) --------------- Net asset value at end of period $ 1.00 =============== Total Return: Based on net asset value per share 2.81% Ratios to Average Net Assets: Expenses 0.58% Net investment income 2.74% Supplemental Data: Net assets at end of period $ 1,047,391,315 Number of shares outstanding at end of period 1,047,493,739
-82- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- BT ALEX. BROWN CASH RESERVE TAX-FREE SHARES (continued) - --------------------------------------------------------------------------------
For the Years Ended March 31, - ----------------------------------------------------------------------------------------------------------------------- 1998 1997 1996 1995 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 0.0306 0.0286 0.0318 0.0271 Less Distributions: Dividends from net investment income (0.0306) (0.0286) (0.0318) (0.0271) ------------- ------------- ------------- ------------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============= ============= ============= ============= Total Return: Based on net asset value per share 3.10% 2.90% 3.23% 2.75% Ratios to Average Net Assets: Expenses 0.60% 0.62% 0.60% 0.57% Net investment income 3.05% 2.86% 3.16% 2.74% Supplemental Data: Net assets at end of period $ 841,184,924 $ 647,212,025 $ 571,507,000 $ 475,384,229 Number of shares outstanding at end of period 841,258,030 647,283,274 571,593,265 475,474,913
See Notes to Financial Statements. -83- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For shares outstanding throughout each year) BT ALEX. BROWN CASH RESERVE TAX-FREE INSTITUTIONAL SERIES - -------------------------------------------------------------------------------- For the Period For the June 2, 1997(1) Year Ended through March 31, March 31, ------------ -------------- 1999 1998 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 ------------ ------------ Income from Investment Operations: Net investment income 0.0303 0.0273 Less Distributions: Dividends from net investment income and short-term gains (0.0303) (0.0273) ------------ ------------ Net asset value at end of period $ 1.00 $ 1.00 ============ ============ Total Return: Based on net asset value per share 3.07% 2.76% Ratios to Average Net Assets: Expenses 0.33% 0.35%(2) Net investment income 3.03% 3.29%(2) Supplemental Data: Net assets at end of period $ 84,599,738 $ 76,682,752 Number of shares outstanding at end of period 84,607,371 76,682,889 - --------------- (1) Commencement of operations. (2) Annualized -84- 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 is in accordance with Rule 2a-7 of the Investment Company Act of 1940 and, 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. -85- 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 gain or loss on 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. As compensation for accounting services, the Prime Series, Treasury Series, and Tax-Free Series pay ICC an annual fee that is calculated daily and paid monthly from the three series' average daily net assets. The Prime Series paid $167,901, the Treasury Series paid $134,044 and the Tax-Free Series paid $137,933, for accounting services for the year ended March 31, 1999. -86- BT ALEX. BROWN CASH RESERVE FUND, INC. - ------------------------------------------------------------------------------ Notes to Financial Statements (continued) NOTE 2--continued 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 $2,213,530, the Treasury Series paid $303,231 and the Tax-Free Series paid $127,823 to ICC for transfer agent services for the year ended March 31, 1999. 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., a member of the Forum Group of Companies, ("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, 1999, distribution fees aggregated $8,036,615, $23,274, $1,964,145 and $2,232,564 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 $1,449,220 for the year ended March 31, 1999 and 1.00% of the Flag Investors Class B Shares' aggregate average daily net assets or $18,454. 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. ICC did not waive any advisory fees for the year ended March 31, 1999. ICC Distributors voluntarily waived $114,329 of its distribution fees for the Quality Cash Shares for the period April 1, 1998 to December 31, 1998. There was no waiver for the period January 1 through March 31, 1999. 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, 1999 was $104,755 for the Prime Series, $32,916 for the Treasury Series and $15,403 for the Tax-Free Series. The accrued liability at March 31, 1999 was $267,276 for the Prime Series, $92,176 for the Treasury Series and $90,975 for the Tax-Free Series. Bankers Trust Company is a wholly owned subsidiary of Bankers Trust Corporation. On November 30, 1998, Bankers Trust Corporation entered into an Agreement and Plan of Merger with Deutsche Bank AG under which Bankers Trust Corporation would merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is engaged in a wide range of financial services, including investment management, mutual funds, retail and commercial banking, investment banking and insurance. The transaction is contingent upon various regulatory approvals, and continuation of the Fund's advisory relationship with Bankers Trust thereafter is subject to the approval of Fund shareholders. If the transaction is approved and completed, Deutsche Bank AG, as Bankers Trust's new parent company, will control its operations as investment advisor. Bankers Trust believes that, under this new arrangement, the services provided to the Fund will be maintained at their current level. -87- BT ALEX. BROWN CASH RESERVE FUND, INC. - ------------------------------------------------------------------------------ Notes to Financial Statements (continued) NOTE 2--concluded Effective January 1, 1999 BT Alex. Brown Cash Reserve Fund, Inc. (the "Fund") has adopted the Shareholder Service Plan (the "Plan") for the BT Alex. Brown Cash Reserve Shares of the Prime Treasury and Tax-Free Series of the Fund ("Shares") in order to provide compensation to third parties ("Shareholder Servicing Agents") who provide shareholder services to clients ("Clients") who from time to time beneficially own shares. In consideration of these services provided by any Shareholder Servicing Agent, the Fund will pay the Distributor an annual fee, calculated daily and paid monthly equal to 0.05% of the shares' average daily net assets. Effective January 1, 1999 the Advisor is waiving its fee on the Treasury Series by 0.05%. Absent such fee waivers, Management Fees would be 0.25% and Total Fund Operating Expenses should be 0.59% on the retail shares and Management Fees would be 0.25% and Total Fund Operating Expenses should be 0.34% on the institutional shares based on average daily net assets. The waiver is voluntary and may be terminated at any time. NOTE 3--Capital Stock and Share Information The Fund is authorized to issue up to 9 billion shares of $.001 par value capital stock (5.4 billion Prime Series, 1.5 billion Treasury Series, 1.75 billion Tax-Free Series and 350 million undesignated). Transactions in shares of the Fund were as follows: For the For the Year Ended Year Ended March 31, 1999 March 31, 1998 -------------- -------------- Prime Series: Sold: Prime Shares 21,238,313,843 23,206,115,785 Flag Investors Class A Shares 86,081,920 6,559,775 Flag Investors Class B Shares 8,010,702 336,592 Institutional Prime Shares 5,126,520,627 4,625,290,052 Quality Cash Shares 1,143,097,219 1,179,123,143 Issued as reinvestment of dividends: Prime Shares 143,654,045 129,425,606 Flag Investors Class A Shares 385,752 326,541 Flag Investors Class B Shares 55,849 8,133 Institutional Prime Shares 12,241,514 9,131,786 Quality Cash Shares 10,243,851 9,723,053 Redeemed: Prime Shares (20,818,590,880) (22,716,536,205) Flag Investors Class A Shares (81,176,425) (5,671,105) Flag Investors Class B Shares (5,895,153) (387,440) Institutional Prime Shares (5,068,292,918) (4,434,262,192) Quality Cash Shares (1,298,381,050) (1,159,238,038) --------------- --------------- Net increase 496,268,896 849,945,486 =============== =============== -88- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) NOTE 3--concluded For the For the Year Ended Year Ended March 31, 1999 March 31, 1998 -------------- -------------- Treasury Series: Sold: Treasury Shares 4,361,406,499 3,641,511,991 Institutional Treasury Shares 826,662,420 590,751,899 Issued as reinvestment of dividends: Treasury Shares 32,190,535 30,209,607 Institutional Treasury Shares 2,757,290 2,007,274 Redeemed: Treasury Shares (4,375,328,973) (3,551,758,854) Institutional Treasury Shares (805,626,922) (555,189,594) -------------- -------------- Net increase 42,060,849 157,532,323 ============== ============== Tax-Free Series: Sold: Tax-Free Shares 5,341,857,730 5,853,542,023 Institutional Tax-Free Shares 1,008,685,495 730,445,736 Issued as reinvestment of dividends: Tax-Free Shares 23,390,210 20,778,337 Institutional Tax-Free Shares 1,157,547 276,010 Redeemed: Tax-Free Shares (5,159,012,230) (5,680,345,603) Institutional Tax-Free Shares (1,001,918,516) (654,038,858) -------------- -------------- Net increase 214,160,192 270,657,645 ============== ============== Note 4--Net Assets
Prime Treasury Tax-Free Series Series Series -------------- --------------- --------------- Paid $4,213,671,028 $ 939,179,715 $ 1,132,102,494 Undistributed net investment income (distribution in excess) 8,345 (44,873) (55,228) Undistributed net realized gain/(loss) on sales of investments 86,979 127,977 (56,213) -------------- --------------- --------------- $4,213,766,352 $ 939,262,819 $ 1,131,991,053 ============== =============== ===============
-89- BT ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Notes to Financial Statements (concluded) Note 5--Capital Loss Carryforwards At March 31, 1999 capital loss carryforwards available as a reduction against future net realized capital gains aggregate as follow:
Capital Loss Carryforward Net Realized Expiration Year Capital Loss -------------------------------------------------------------------- Carryforwards 2000 2001 2002 2003 2004 2005 2006 ------------------- ---- ---- ---- ---- ---- ---- ---- Prime Series -- -- -- -- -- -- -- -- Treasury Series -- -- -- -- -- -- -- -- Tax Free Series $56,213 -- $6,268 $21,858 $26,991 -- -- $1,096
-90- Report of Independent Accountants - -------------------------------------------------------------------------------- To The Shareholders and Board of Directors of bt Alex. Brown Cash Reserve Fund, Inc.: In our opinion, the accompanying statement of net assets and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of BT Alex. Brown Cash Reserve Fund, Inc. (consisting of the Prime, Treasury and Tax-Free Series) (the "Fund") at March 31, 1999, and the results of its operations, the changes in its net assets and the financial highlights for each of the fiscal periods presented, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 1999 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PRICEWATERHOUSECOOPERS LLP Baltimore, Maryland April 30, 1999 -91- Appendix A 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. 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 A-1 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+"). A-2
-----END PRIVACY-ENHANCED MESSAGE-----