-----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, RDyQyJykpYw2XbfK6/gw7Mjn96ovOj4ma89pkUv4DD0SpAGKmVr3k7P3y/QDKe5U P32ufTuiTlwCB2R2uJa++A== 0000950168-96-002253.txt : 19961122 0000950168-96-002253.hdr.sgml : 19961122 ACCESSION NUMBER: 0000950168-96-002253 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961121 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROWN ALEX CASH RESERVE FUND INC CENTRAL INDEX KEY: 0000353447 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 621223991 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03196 FILM NUMBER: 96670390 BUSINESS ADDRESS: STREET 1: 135 E BALTIMORE ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4107271700 MAIL ADDRESS: STREET 1: 135 E BALTIMORE STREET CITY: BALTIMORE STATE: MD ZIP: 21202 N-30D 1 ABROWN FLAG CASH RESERVE SAR, PRIME, QUALITY ALEX. BROWN CASH RESERVE FUND, INC. Prime Series Treasury Series Tax-Free Series Semi-Annual Report September 30, 1996 [Alex. Brown logo] ALEX. BROWN Fund Features - -------------------------------------------------------------------------------- (bullet) Daily Dividends The Fund declares dividends daily and distributes them monthly in the form of additional shares or, at your option, credits the dividends in cash to your account at Alex. Brown. (bullet) Check Redemption Privilege After completing an authorization form, you may redeem your shares by writing a check (in a minimum amount of $500) on your account. You will continue to earn dividends until your check reaches the bank for clearance. (bullet) Purchases by Mail You may purchase shares by mailing a check and a completed order form to the Fund at P.O. Box 1346, Baltimore, MD 21203. Order forms may be obtained from your Alex. Brown investment representative. (bullet) No Sales Charge and Immediate Liquidity You may buy or redeem shares in your account at any time. There is no sales charge or penalty imposed by the Fund for the purchase or redemption of shares. (bullet) Automatic Purchase and Sale You may participate in a program that results in the automatic purchase and sale of Fund shares in conjunction with security transactions as well as cash balances accumulated in your Alex. Brown accounts. (bullet) Constant Net Asset Value The Fund will attempt to maintain a constant net asset value of $1.00 per share. Since the Fund's inception on August 11, 1981, a constant net asset value of $1.00 per share has been maintained for each Series. (bullet) Minimum Investment The minimum initial investment is $1,500. Subsequent investments may be made in an amount of $100 or more. The minimum amounts do not apply if you participate in the automatic purchase and sale program. (bullet) Current Yield Information Available For current yield information, call (410) 234-3737. Letter to Shareholders - -------------------------------------------------------------------------------- October 18, 1996 We are pleased to report on the progress of your Fund for the six months ended September 30, 1996. The Fund's net assets at the end of the period totaled $3.9 billion, remaining relatively stable since the Fund's fiscal year-end of March 31, 1996. The pie chart below illustrates the breakdown of assets among each of the Fund's series as of September 30, 1996. Asset Breakdown by Series [Pie Chart appears here--see values below] Prime Series $2.7 billion Treasury Series $685 million Tax-Free Series $558 million PERIOD IN REVIEW The Federal Reserve Bank, under increasing scrutiny with each of its meetings, determined the economy was stable enough to leave the Fed Funds rate unchanged at its September 1996 meeting. This decision has left interest rates fairly stable over this time period, albeit with some occasional swings. The 30-year bond yield has fluctuated in a trading range between 6.55% and 7.20% for most of the past six months. The 3-month Treasury bill rate has reflected the Fed's "wait and see" attitude, with its yield ranging between 5.00% and 5.35%. These yields indicate a rather narrow spread between short-term and long-term rates. We continue to manage the Fund conservatively, as evidenced by our "AAA" rating from Standard &Poor's. Even with our cautious style, each of the Fund's three series has provided a competitive return for the past twelve months, as the chart on page 2 illustrates. 1 Letter to Shareholders (continued) Performance Comparisons 30-Day Yield - -------------------------------------------------------------------------------- As of 10/1/96: - -------------------------------------------------------------------------------- Prime Series 4.82% First Tier Rated Money Fund Average 4.71% - -------------------------------------------------------------------------------- Treasury Series 4.60% 100% U.S. Treasury Rated Money Fund Average 4.63% - -------------------------------------------------------------------------------- As of 9/30/96: - -------------------------------------------------------------------------------- Tax-Free Series 2.94% Tax-Free Rated Money Fund Average 2.92% - -------------------------------------------------------------------------------- Source: IBC/Donoghue, Inc. "Rated Money Fund Report," October 1996. The yields shown represent past performance, which is no guarantee of future results. An investment in a money market fund is neither insured nor guaranteed by the U.S. Government. There can be no assurance that the Fund will be able to maintain a stable net asset value of $1.00 per share. The Rated Money Fund Averages are average yields of all funds rated AAA by Standard & Poor's in their respective categories. MARKET OUTLOOK The final quarter of 1996 raises several questions, and the answers will dictate which way the markets will move for the remainder of the year, as well as the beginning of 1997. (bullet) First, with regard to politics and the upcoming Presidential and Congressional elections, will lowering the budget deficit continue to be a top priority? (bullet) Second, with regard to the Federal Reserve Bank, is the Fed waiting until after the election to raise or lower interest rates? Are the members concerned with the relatively low economic growth rate (1.5% to 3%), or are they watching building inflationary pressures, particularly in labor markets and energy prices? (bullet) Finally, in general, just how high will the stock market go? Will corporate profits continue to rise, or will wage pressures begin to affect the bottom line? How will the traditional Christmas rush turn out for retailers? 2 Regardless of the answers to these questions, it is our belief that the conservative approach we apply to investing on behalf of the Fund's three series will provide comfort to our shareholders, and in turn will continue to offer competitive yields, without sacrificing quality. As always, we appreciate your continued support. Sincerely, /s/ W. James Price /s/ Richard T. Hale W. James Price Richard T. Hale Chairman President 3 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets September 30, 1996 (Unaudited)
Rating Par PRIME SERIES S&P Moody's (000) Value - ---------------------------------------------------------------------------------------- Commercial Paper - 84.9%(a) Automobiles & Trucks - 2.6% PACCAR Financial Corp. 5.33% 10/21/96 A-1+ P-1 $10,000 $ 9,970,389 5.40% 10/28/96 A-1+ P-1 9,000 8,963,550 5.29% 11/18/96 A-1+ P-1 5,000 4,964,733 Toyota Motor Credit Corp. 5.32% 10/31/96 A-1+ P-1 15,000 14,933,500 5.25% 11/8/96 A-1+ P-1 15,000 14,916,875 5.36% 12/13/96 A-1+ P-1 14,000 13,847,836 - ---------------------------------------------------------------------------------------- 67,596,883 - ---------------------------------------------------------------------------------------- Beverages - 3.1% Anheuser-Busch Companies Inc. 5.28% 10/7/96 A-1+ P-1 15,000 14,986,800 5.34% 10/7/96 A-1+ P-1 17,300 17,284,603 4.90% 10/21/96 A-1+ P-1 20,000 19,945,556 4.75% 10/28/96 A-1+ P-1 15,000 14,946,563 5.25% 1/1/97 A-1+ P-1 15,000 14,781,250 - ---------------------------------------------------------------------------------------- 81,944,772 - ---------------------------------------------------------------------------------------- Chemicals, General - 3.8% E.I. duPont de Nemours 5.35% 10/18/96 A-1+ P-1 10,000 9,974,736 5.40% 11/22/96 A-1+ P-1 15,000 14,883,000 5.30% 11/27/96 A-1+ P-1 15,000 14,874,125 5.29% 12/18/96 A-1+ P-1 10,000 9,885,383 5.30% 12/20/96 A-1+ P-1 25,000 24,705,556 5.38% 1/30/97 A-1+ P-1 10,000 9,819,172 5.46% 3/26/97 A-1+ P-1 16,000 15,572,907 - ---------------------------------------------------------------------------------------- 99,714,879 - ---------------------------------------------------------------------------------------- Chemicals, Specialty - 1.2% Air Products & Chemicals, Inc. 5.35% 10/25/96 A-1 P-1 11,000 10,960,767 5.33% 11/5/96 A-1 P-1 20,000 19,896,361 - ---------------------------------------------------------------------------------------- 30,857,128 - ---------------------------------------------------------------------------------------- Computer & Office Equipment - 7.4% Hewlett-Packard 5 42% 10/9/96 A-1+ P-1 15,000 14,981,933 5.35% 10/30/96 A-1+ P-1 20,000 19,913,806 5.40% 12/3/96 A-1+ P-1 10,000 9,905,500 ========================================================================================
4 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
Rating Par PRIME SERIES (continued) S&P Moody's (000) Value - ---------------------------------------------------------------------------------------- Commercial Paper (continued) Computer & Office Equipment (concluded) Pitney Bowes Credit Corp. 5.02% 10/3/96 A-1+ P-1 $15,000 $ 14,995,817 5.03% 10/3/96 A-1+ P-1 15,000 14,995,808 5.02% 10/4/96 A-1+ P-1 20,000 19,991,633 5.04% 10/4/96 A-1+ P-1 17,000 16,992,860 5.35% 2/19/97 A-1+ P-1 19,000 18,601,871 5.52% 2/19/97 A-1+ P-1 14,775 14,455,565 5.50% 3/21/97 A-1+ P-1 10,000 9,738,750 Xerox Credit Corp. 5.32% 11/8/96 A-1 P-1 20,480 20,364,993 5.32% 12/5/96 A-1 P-1 19,700 19,510,771 - ---------------------------------------------------------------------------------------- 194,449,307 - ---------------------------------------------------------------------------------------- Credit Unions - 2.5% Mid-States Corporate Federal Credit Union 5.37% 10/1/96 A-1+ P-1 20,500 20,469,420 U.S. Central Credit Union 5.30% 10/10/96 A-1+ P-1 15,000 14,980,125 5.40% 10/23/96 A-1+ P-1 15,000 14,950,500 5.31% 12/3/96 A-1+ P-1 15,000 14,860,613 - ---------------------------------------------------------------------------------------- 65,260,658 - ---------------------------------------------------------------------------------------- Defense & Aircraft - 0.9% Rockwell International Corp. 5.28% 10/29/96 A-1+ P-1 25,000 24,897,333 - ---------------------------------------------------------------------------------------- Electrical & Electronics - 3.5% Emerson Electric Co. 5.32% 10/25/96 A-1+ P-1 25,000 24,911,332 Motorola Inc. 5.32% 10/7/96 A-1+ P-1 20,000 19,982,267 5.28% 10/24/96 A-1+ P-1 15,000 14,949,400 5.35% 10/25/96 A-1+ P-1 17,000 16,939,367 5.32% 11/8/96 A-1+ P-1 15,000 14,915,767 - ---------------------------------------------------------------------------------------- 91,698,133 - ---------------------------------------------------------------------------------------- Electric Utility - 1.0% Northern States Power Co. 5.30% 11/4/96 A-1+ P-1 7,000 6,964,961 5.27% 11/22/96 A-1+ P-1 19,000 18,855,368 - ---------------------------------------------------------------------------------------- 25,820,329 - ----------------------------------------------------------------------------------------
5 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets September 30, 1996 (Unaudited)
Rating Par PRIME SERIES (continued) S&P Moody's (000) Value - ---------------------------------------------------------------------------------------- Commercial Paper (continued) Entertainment - 2.8% Walt Disney Co. 5.24% 10/9/96 A-1 P-1 $15,000 $14,982,533 5.28% 10/11/96 A-1 P-1 15,000 14,978,000 5.40% 10/15/96 A-1 P-1 10,000 9,979,000 5.18% 12/6/96 A-1 P-1 10,000 9,905,033 5.18% 12/9/96 A-1 P-1 15,000 14,851,075 5.38% 1/29/97 A-1 P-1 10,000 9,820,667 - ---------------------------------------------------------------------------------------- 74,516,308 - ---------------------------------------------------------------------------------------- Finance, Commercial - 2.2% CIT Group Holdings Inc. 5.29% 12/10/96 A-1 P-1 40,000 39,588,555 PHH Corp. 5.42% 10/30/96 A-1 P-1 20,000 19,912,678 - ---------------------------------------------------------------------------------------- 59,501,233 - ---------------------------------------------------------------------------------------- Finance, Consumer - 3.6% USAA Capital Corp. 5.27% 10/30/96 A-1+ P-1 10,000 9,957,547 5.44% 11/4/96 A-1+ P-1 18,000 17,907,520 5.40% 11/14/96 A-1+ P-1 22,000 21,854,800 5.30% 11/27/96 A-1+ P-1 10,000 9,916,083 5.40% 12/17/96 A-1+ P-1 20,000 19,769,000 5.27% 12/20/96 A-1+ P-1 10,000 9,882,889 5.47% 1/2/97 A-1+ P-1 7,423 7,318,107 - ---------------------------------------------------------------------------------------- 96,605,946 - ---------------------------------------------------------------------------------------- Finance, Diversified - 3.3% General Electric Capital Corp. 5.28% 10/7/96 A-1+ P-1 15,000 14,986,800 5.30% 11/27/96 A-1+ P-1 15,000 14,874,125 5.36% 1/3/97 A-1+ P-1 15,000 14,790,067 5.35% 1/17/97 A-1+ P-1 15,000 14,759,250 5.31% 1/23/97 A-1+ P-1 15,000 14,747,775 5.49% 2/5/97 A-1+ P-1 13,875 13,606,276 - ---------------------------------------------------------------------------------------- 87,764,293 - ---------------------------------------------------------------------------------------- Food - 8.4% Campbell Soup Co. 4.98% 10/4/96 A-1+ P-1 10,000 9,995,850 5.46% 12/5/96 A-1+ P-1 15,000 14,852,125 5.47% 12/16/96 A-1+ P-1 17,000 16,803,688
6 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
Rating Par PRIME SERIES (continued) S&P Moody's (000) Value - ---------------------------------------------------------------------------------------- Commercial Paper (continued) Food (concluded) Cargill, Inc. 5.45% 10/8/96 A-1+ P-1 $15,000 $ 14,984,104 5.32% 11/4/96 A-1+ P-1 20,000 19,899,511 5.36% 12/12/96 A-1+ P-1 15,000 14,839,200 5.39% 12/18/96 A-1+ P-1 20,000 19,766,433 H.J. Heinz 5.25% 10/3/96 A-1+ P-1 9,000 8,997,375 5.33% 10/18/96 A-1+ P-1 15,900 15,859,981 Hershey Foods 5.26% 10/15/96 A-1+ P-1 10,500 10,478,522 5.26% 10/18/96 A-1+ P-1 27,500 27,431,693 Kellogg Company 5.33% 11/14/96 A-1+ P-1 25,000 24,837,138 5.33% 11/15/96 A-1+ P-1 10,000 9,933,375 5.33% 11/27/96 A-1+ P-1 15,000 14,873,413 - ---------------------------------------------------------------------------------------- 223,552,408 - ---------------------------------------------------------------------------------------- Household Products - 2.8% Clorox Company 5.30% 11/26/96 A-1+ P-1 23,540 23,345,926 Colgate-Palmolive Co. 5.35% 10/8/96 A-1 P-1 22,000 21,977,114 Procter & Gamble Co. 5.30% 11/18/96 A-1 P-1 10,200 10,127,920 5.38% 12/20/96 A-1 P-1 17,730 17,518,028 - ---------------------------------------------------------------------------------------- 72,968,988 - ---------------------------------------------------------------------------------------- Insurance, Property & Casualty - 3.8% Chubb Capital Corp. 5.27% 10/11/96 A-1+ P-1 18,000 17,973,650 5.33% 10/17/96 A-1+ P-1 18,069 18,026,197 Marsh & McClennan Companies Inc. 5.48% 12/13/96 A-1+ P-1 20,000 19,777,756 5.65% 2/10/97 A-1+ P-1 10,000 9,792,833 5.60% 2/27/97 A-1+ P-1 15,000 14,652,333 5.63% 3/20/97 A-1+ P-1 20,000 19,468,278 - ---------------------------------------------------------------------------------------- 99,691,047 - ---------------------------------------------------------------------------------------- Integrated Oil - 0.9% Shell Oil Co. 5.25% 11/22/96 A-1+ P-1 25,000 24,810,417 - ---------------------------------------------------------------------------------------- Machinery & Tools - 1.7% Dover Corp. 5.35% 10/24/96 A-1+ -- 20,000 19,931,639 5.40% 10/25/96 A-1+ -- 20,000 19,928,000 ========================================================================================
7 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets September 30, 1996 (Unaudited)
Rating Par PRIME SERIES (continued) S&P Moody's (000) Value - ---------------------------------------------------------------------------------------- Commercial Paper (continued) Machinery & Tools (concluded) Illinois Tool Works 5.35% 10/1/96 A-1+ P-1 $ 5,000 $ 5,000,000 - ---------------------------------------------------------------------------------------- 44,859,639 - ---------------------------------------------------------------------------------------- Oil Transportation - 3.2% Colonial Pipeline 5.43% 10/15/96 A-1+ P-1 17,000 16,964,102 5.45% 10/16/96 A-1+ P-1 20,200 20,154,129 5.39% 11/12/96 A-1+ P-1 15,000 14,905,675 5.43% 12/16/96 A-1+ P-1 6,500 6,425,488 5.44% 1/15/97 A-1+ P-1 12,000 11,807,787 5.47% 2/6/97 A-1+ P-1 14,500 14,217,991 - ---------------------------------------------------------------------------------------- 84,475,172 - ---------------------------------------------------------------------------------------- Paper - 0.4% Weyerhaeuser Co. 5.31% 12/3/96 A-1 P-1 11,600 11,492,207 - ---------------------------------------------------------------------------------------- Pharmaceuticals - 8.8% Abbott Laboratories 5.33% 10/22/96 A-1+ P-1 10,059 10,027,725 5.32% 10/23/96 A-1+ P-1 25,000 24,918,722 5.33% 10/23/96 A-1+ P-1 13,429 13,385,259 Eli Lilly & Co. 5.28% 11/15/96 A-1+ P-1 10,000 9,934,000 5.33% 2/6/97 A-1+ P-1 12,000 11,772,587 5.57% 2/24/97 A-1+ P-1 7,500 7,330,579 Pfizer, Inc. 5.30% 10/10/96 A-1+ P-1 15,000 14,980,125 Schering-Plough Corp. 5.32% 9/18/96 A-1+ P-1 19,700 19,589,374 5.41% 11/14/96 A-1+ P-1 4,400 4,370,906 5.40% 11/19/96 A-1+ P-1 10,000 9,926,500 5.42% 11/26/96 A-1+ P-1 7,000 6,940,982 5.27% 11/26/96 A-1+ P-1 15,000 14,877,033 Warner-Lambert Co. 5.27% 10/4/96 A-1+ P-1 40,000 39,982,433 5.30% 10/30/96 A-1+ P-1 15,000 14,935,958 5.27% 12/6/96 A-1+ P-1 20,000 19,806,767 5.25% 1/15/97 A-1+ P-1 10,000 9,845,417 - ---------------------------------------------------------------------------------------- 232,624,367 - ---------------------------------------------------------------------------------------- Publishing - 0.7% Knight-Ridder Inc. 5.35% 10/18/96 A-1+ P-1 7,500 7,481,052
8 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
Rating Par PRIME SERIES (continued) S&P Moody's (000) Value - ---------------------------------------------------------------------------------------- Commercial Paper (continued) Publishing (concluded) RR Donnelley & Sons, Inc. 5.27% 10/7/96 A-1+ P-1 $12,000 $ 11,989,460 - ---------------------------------------------------------------------------------------- 19,470,512 - ---------------------------------------------------------------------------------------- Railroad - 1.1% Norfolk Southern Corp. 5.42% 10/29/96 A-1+ P-1 30,000 29,873,533 - ---------------------------------------------------------------------------------------- Retail, General - 1.9% J.C. Penney Fund Co. 5.28% 10/29/96 A-1+ P-1 20,000 19,920,800 5.39% 11/13/96 A-1+ P-1 15,000 14,903,429 Wal-Mart Stores 5.27% 10/29/96 A-1+ P-1 15,000 14,938,517 - ---------------------------------------------------------------------------------------- 49,762,746 - ---------------------------------------------------------------------------------------- Structured Finance - 4.5% CIESCO, L.P. 5.28% 10/30/96 A-1+ P-1 10,000 9,957,466 5.32% 11/26/96 A-1+ P-1 25,000 24,793,111 Corporate Asset Funding Company, Inc. 5.27% 10/10/96 A-1+ P-1 11,000 10,985,508 5.43% 10/16/96 A-1+ P-1 20,000 19,954,750 5.30% 10/25/96 A-1+ P-1 20,000 19,929,333 5.37% 11/21/96 A-1+ P-1 20,000 19,847,850 5.35% 12/20/96 A-1+ P-1 15,000 14,821,667 - ---------------------------------------------------------------------------------------- 120,289,685 - ---------------------------------------------------------------------------------------- Telephone - 5.7% Ameritech Capital Funding Corp. 5.34% 10/30/96 A-1+ P-1 20,000 19,913,966 5.29% 12/6/96 A-1+ P-1 25,000 24,757,542 5.20% 12/10/96 A-1+ P-1 15,000 14,848,333 5.40% 1/27/97 A-1+ P-1 15,000 14,734,500 Ameritech Corp. 5.27% 10/18/96 A-1+ P-1 10,000 9,975,114 5.40% 12/2/96 A-1+ P-1 15,000 14,860,500 BellSouth Telecommunications 5.27% 10/11/96 A-1+ P-1 8,000 7,988,289 5.28% 10/24/96 A-1+ P-1 8,000 7,973,013 Southwestern Bell Telephone Co. 5.39% 10/25/96 A-1+ P-1 25,000 24,910,167 5.31% 10/31/96 A-1+ P-1 11,580 11,528,759 - ---------------------------------------------------------------------------------------- 151,490,183 - ----------------------------------------------------------------------------------------
9 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets September 30, 1996 (Unaudited)
Rating Par PRIME SERIES (continued) S&P Moody's (000) Value - ---------------------------------------------------------------------------------------- Commercial Paper (concluded) Waste Management - 3.1% WMX Technologies 4.78% 11/1/96 A-1 P-1 $10,000 $ 9,958,838 5.32% 11/5/96 A-1 P-1 15,000 14,922,417 5.50% 12/11/96 A-1 P-1 15,000 14,837,292 5.35% 1/24/97 A-1 P-1 15,000 14,743,646 5.67% 4/11/97 A-1 P-1 15,000 14,546,400 5.54% 5/13/97 A-1 P-1 15,000 14,482,933 - ---------------------------------------------------------------------------------------- 83,491,526 - ---------------------------------------------------------------------------------------- Total Commercial Paper 2,249,479,632 - ---------------------------------------------------------------------------------------- Variable Rate Note - 4.7% Associates Corp. Master Note 5.20%(b) 12/1/96 A-1+ P-1 75,000 75,000,000 Coca-Cola Master Note 5.46%(b) 1/17/97 A-1+ P-1 50,000 50,000,000 - ---------------------------------------------------------------------------------------- Total Variable Rate Note 125,000,000 - ---------------------------------------------------------------------------------------- Federal Home Loan Bank - 1.3% FHLB 6.00% 11/1/96 AAA -- 25,000 24,885,042 5.28% 1/6/97 AAA -- 10,000 9,857,733 - ---------------------------------------------------------------------------------------- Total Federal Home Loan Bank 34,742,775 - ---------------------------------------------------------------------------------------- Federal National Mortgage Association - 3.9% FNMA Discount Note 5.32% 10/3/96 -- P-1 10,000 9,997,044 5.46% 11/15/96 -- P-1 9,000 8,998,663 Note 5.68% 10/7/96 -- P-1 20,000 20,000,561 5.31% 10/18/96 -- P-1 20,000 20,000,000 5.39% 12/4/96 -- P-1 10,000 10,004,361 5.63% 12/19/96 -- P-1 20,000 20,000,000 5.45% 2/13/97 -- P-1 15,000 15,000,000 - ---------------------------------------------------------------------------------------- Total Federal National Mortgage Association 104,000,629 - ----------------------------------------------------------------------------------------
10 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
Rating Par PRIME SERIES (concluded) S&P Moody's (000) Value - ---------------------------------------------------------------------------------------- Repurchase Agreements - 5.2%(c) Goldman Sachs 5.65%(d) 10/1/96 -- -- $ 38,600 $ 38,600,000 Morgan Stanley & Co. 5.65%(e) 10/1/96 -- -- 100,000 100,000,000 - ---------------------------------------------------------------------------------------- Total Repurchase Agreements 138,600,000 - ---------------------------------------------------------------------------------------- TOTAL INVESTMENTS - 100.0% 2,651,823,036(f) LIABILITIES IN EXCESS OF OTHER ASSETS, NET - 0.0% (307,662) - ---------------------------------------------------------------------------------------- NET ASSETS - 100.0% $2,651,515,374 ======================================================================================== Net Asset Value, Offering and Redemption Price Per: Prime Share ($2,396,184,930 / 2,396,188,105 shares outstanding) $1.00 ======================================================================================== Flag Investors Class A Share ($6,071,072 / 6,070,838 shares outstanding) $1.00 ======================================================================================== Flag Investors Class B Share ($599 / 599 shares outstanding) $1.00 ======================================================================================== Prime Institutional Share ($55,411,841 / 55,412,061 shares outstanding) $1.00 ======================================================================================== Quality Cash Reserve Prime Share ($193,846,932 / 193,847,114 shares outstanding) $1.00 ========================================================================================
(a) Most commercial paper is traded on a discount basis. In such cases, the interest rate shown represents the rate of discount paid or received at time of purchase by the Fund. (b) Master note is payable upon demand by the Fund upon no more than five days' notice. Interest rates on master notes are redetermined weekly. Rates shown are those in effect on September 30, 1996. (c) Collateral on repurchase agreements is taken into possession by 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. (d) Dated 9/30/96 to be repurchased on 10/1/96, collateralized by U.S. Treasury Notes with a market value of $39,372,757. (e) Dated 9/30/96 to be repurchased on 10/1/96, collateralized by U.S. Treasury Notes with a market value of $101,280,062. (f) Aggregate cost for financial reporting and federal tax purposes. MOODY'S RATINGS: Aaa Bonds that are judged to be of the best quality. P-1 Commercial paper bearing this designation is of the best quality. S&P RATINGS: AAA Obligations that are of the highest quality. A-1 Commercial paper that has a strong degree of safety regarding timely payment. Those issues determined to possess very strong safety characteristics are denoted with a plus (+) sign. A detailed description of the above ratings can be found in the Fund's Statement of Additional Information. See Notes to Financial Statements. 11 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets September 30, 1996 (Unaudited)
Maturity Par TREASURY SERIES Date (000) Value ======================================================================================== U.S. Treasury Securities - 99.5% U.S. Treasury Bills(a) - 71.0% 5.150% 10/3/96 $ 8,700 $ 8,697,511 5.175% 10/3/96 38,000 37,989,075 5.110% 10/10/96 26,100 26,066,657 5.110% 10/10/96 9,900 9,887,353 5.130% 10/10/96 1,100 1,098,589 4.900% 10/17/96 32,000 31,930,311 5.145% 10/24/96 12,000 11,960,555 5.180% 10/24/96 3,000 2,990,072 5.000% 11/7/96 10,000 9,948,611 5.000% 11/7/96 24,800 24,672,556 5.020% 11/7/96 1,000 994,841 5.060% 11/7/96 1,600 1,591,679 5.095% 11/7/96 1,900 1,890,051 5.030% 11/14/96 12,000 11,926,227 5.170% 11/14/96 20,000 19,873,500 5.190% 11/14/96 30,200 30,008,431 4.970% 11/21/96 50,000 49,647,958 4.990% 11/21/96 18,000 17,872,755 5.000% 11/21/96 4,800 4,766,000 5.035% 11/21/96 4,000 3,971,468 4.970% 11/29/96 18,000 17,853,385 5.030% 11/29/96 4,000 3,967,026 5.100% 11/29/96 27,700 27,468,474 5.040% 12/5/96 30,000 29,727,000 5.045% 12/5/96 1,300 1,288,158 5.090% 12/5/96 22,500 22,293,219 5.110% 12/5/96 25,000 24,769,340 5.160% 12/5/96 14,800 14,662,113 5.050% 12/12/96 10,800 10,690,920 5.060% 12/12/96 13,100 12,967,428 5.220% 1/9/97 12,500 12,318,750 - ---------------------------------------------------------------------------------------- Total U.S. Treasury Bills 485,790,013 - ----------------------------------------------------------------------------------------
12 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
Maturity Par TREASURY SERIES (concluded) Date (000) Value ======================================================================================== U.S. Treasury Securities (concluded) U.S. Treasury Notes - 28.5% 6.875% 10/31/96 $55,300 $ 55,367,766 4.375% 11/15/96 40,000 39,955,377 7.250% 11/15/96 65,000 65,142,877 7.500% 12/31/96 34,800 34,940,750 - ---------------------------------------------------------------------------------------- Total U.S. Treasury Notes 195,406,770 - ---------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN U.S. TREASURY SECURITIES - 99.5% 681,196,783(b) OTHER ASSETS LESS LIABILITIES, NET - 0.5% 3,508,360 - ---------------------------------------------------------------------------------------- NET ASSETS - 100.0% $684,705,143 ======================================================================================== Net Asset Value, Offering and Redemption Price Per: Treasury Share ($638,170,387 / 638,110,342 shares outstanding) $1.00 ======================================================================================== Treasury Institutional Share ($46,534,756 / 46,524,573 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. 13 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets September 30, 1996 (Unaudited)
Rating Par TAX-FREE SERIES S&P Moody's (000) Value ======================================================================================== Alabama - 3.6% Alabama Housing Finance Authority Multi- Family Housing Revenue (Heatherbrooke Project), Series C (FNMA LOC) 3.85% 10/7/96(a) A-1+ -- $ 9,900 $ 9,900,000 Homewood Educational Building Authority (Sanford University), Series 1988 A (First Alabama Bank LOC) 3.95% 10/7/96(a) -- VMIG-1 4,720 4,720,000 Homewood Educational Building Authority (Sanford University), Series 1988 B (First Alabama Bank LOC) 3.95% 10/7/96(a) -- VMIG-1 5,665 5,665,000 - ---------------------------------------------------------------------------------------- 20,285,000 - ---------------------------------------------------------------------------------------- Arizona - 2.9% Salt River Project, Agricultural Improvement and Power District 3.65% 10/11/96(b) A-1+ P-1 16,198 16,198,000 - ---------------------------------------------------------------------------------------- Arkansas - 1.5% Arkansas State Development Authority Health Care Facility (Sisters of Mercy) (ABN-Amro Bank N.V. LOC) 3.80% 10/7/96(a) A-1+ VMIG-1 8,100 8,100,000 - ---------------------------------------------------------------------------------------- Colorado - 4.6% Colorado Health Facility Authority (Boulder Community Hospital),Series 1989 B (MBIA Insurance) 3.80% 10/7/96(a) A-1+ VMIG-1 4,685 4,685,000 Colorado State General Fund TRAN 4.50% 6/27/97(b) SP-1+ MIG-1 15,000 15,071,995 Moffat County PCR Bonds, Series 1984 (Tri-State) 3.95% 10/7/96(a) A-1+ P-1 6,100 6,100,000 - ---------------------------------------------------------------------------------------- 25,856,995 - ---------------------------------------------------------------------------------------- Florida - 1.6% Sunshine State Government Financing Authority 3.60% 10/15/96(b) A-1+ -- 8,975 8,975,000 - ----------------------------------------------------------------------------------------
14 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
Rating Par TAX-FREE SERIES (continued) S&P Moody's (000) Value ======================================================================================== Georgia - 7.1% Burke County Development Authority PCR (Georgia Power Co. Vogtle Project) 4.00% 10/1/96(a) A-1 VMIG-1 $ 6,900 $ 6,900,000 Clayton County Housing Authority, Multi-Family Housing Revenue Refunding (Chateau Forest Apartments Project) (FGICInsurance) 3.90% 10/7/96(a) A-1+ VMIG-1 10,300 10,300,000 Cobb County Housing Authority RB(Post Mill Project), Series 1995 DN (FNMALOC) 3.85% 10/7/96(a) A-1+ -- 6,100 6,100,000 Dekalb County Multi-Family Housing Bonds (Camden Brooke Project) (FNMALOC) 3.85% 10/7/96(a) -- VMIG-1 4,500 4,500,000 Smyrna Housing Authority RB(Post Valley Project), Series 1995 DN (FNMALOC) 3.85% 10/7/96(a) A-1+ -- 12,000 12,000,000 - ---------------------------------------------------------------------------------------- 39,800,000 - ---------------------------------------------------------------------------------------- Idaho - 4.1% Custer County PCR (Amoco Project) 3.40% 10/1/96(b) A-1+ VMIG-1 6,000 6,000,000 Idaho State TAN 4.50% 6/30/97(b) SP-1+ MIG-1 17,000 17,073,118 - ---------------------------------------------------------------------------------------- 23,073,118 - ---------------------------------------------------------------------------------------- Illinois - 14.3% Chicago Tender Notes, Series A (Morgan Guaranty LOC) 3.65% 10/31/96(b) A-1+ VMIG-1 12,600 12,600,000 Cook County Tender Notes Capital Equipment, Series A (Northern Trust LOC) 3.90% 10/7/96(a) SP-1+ VMIG-1 4,800 4,800,000 Illinois Development Finance Authority PCR (Commonwealth Edison Co. Project), Series 94C (ABN-Amro Bank N.V. LOC) 3.85% 10/7/96(a) A-1+ P-1 7,700 7,700,000 Illinois Development Finance Authority RB (Chicago Symphony Orchestra Project) (Northern Trust LOC) 3.90% 10/7/96(a) A-1 VMIG-1 11,300 11,300,000
15 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets September 30, 1996 (Unaudited)
Rating Par TAX-FREE SERIES (continued) S&P Moody's (000) Value ======================================================================================== Illinois (continued) Illinois Educational Facilities Authority Adjustable Demand RB (John F. Kennedy Health Care Foundation) (Harris Trust & Savings Bank LOC) 3.75% 2/13/97(b) A-1+ -- $12,800 $12,800,000 Illinois Health Facilities Authority (Evanston Hospital Corp.), Series 96 3.95% 8/15/97(b) A-1+ VMIG-1 5,000 5,000,000 Illinois Health Facilities Authority RB (Lutheran Institute), Series 1985 DN (Credit Suisse LOC) 3.50% 10/7/96(a) A-1+ VMIG-1 13,000 13,000,000 Illinois Health Facilities Authority Variable Rate Demand RB, Revolving Fund Pooled Financing Program (The University of Chicago Project) 3.75% 1/30/97(b) A-1+ VMIG-1 11,400 11,400,000 Illinois State Toll Highway Authority, Toll Highway Priority, Series B (Societe Generale LOC) 3.80% 10/7/96(a) A-1+ VMIG-1 1,400 1,400,000 - ---------------------------------------------------------------------------------------- 80,000,000 - ---------------------------------------------------------------------------------------- Indiana - 8.4% Evansville Hospital Authority Hospital Revenue (Daughters of Charity, St. Mary's Medical Center) 3.85% 10/7/96(a) A-1+ VMIG-1 7,000 7,000,000 Hamilton County Hospital Authority RB (Daughters of Charity), Series 1983 D 3.85% 10/7/96(a) A-1+ VMIG-1 4,660 4,660,000 Indiana Health Facilities Financing Authority Hospital RB (Methodist Hospital) (Credit Suisse LOC) 3.90% 10/7/96(a) A-1+ VMIG-1 5,000 5,000,000 Indianapolis Gas Utility System, Citizens' Gas and Coke Utility 3.70% 10/11/96(b) A-1+ P-1 5,000 5,000,000
16 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
Rating Par TAX-FREE SERIES (continued) S&P Moody's (000) Value ======================================================================================== Petersburg PCR (Indianapolis Power & Light Company) (AMBAC Insurance) 3.80% 10/7/96(a) -- VMIG-1 $14,100 $14,100,000 Petersburg Refunding PCR (Indianapolis Power & Light Company) 3.70% 12/13/96(b) A-1+ VMIG-1 7,500 7,500,000 Purdue University, Trustees of Student Fee Bonds 3.80% 10/7/96(a) A-1+ VMIG-1 3,600 3,600,000 - ---------------------------------------------------------------------------------------- 46,860,000 - ---------------------------------------------------------------------------------------- Iowa - 4.9% Council Bluffs PCR (Illinois Gas and Electric Company) 3.90% 10/7/96(a) A-1+ VMIG-1 7,600 7,600,000 Louisa County Refunding PCR (Rabo Bank Nederland LOC) 3.80% 10/7/96(a) A-1+ VMIG-1 19,500 19,500,000 - ---------------------------------------------------------------------------------------- 27,100,000 - ---------------------------------------------------------------------------------------- Louisiana - 5.5% East Baton Rouge Parish (Georgia Pacific Corp.) PCR (Toronto Dominion LOC) 3.80% 10/7/96(a) -- P-1 2,700 2,700,000 Louisiana Offshore Terminal Authority Deepwater Port Refunding RB (Union Bank of Switzerland LOC) 3.90% 10/7/96(a) A-1+ -- 3,300 3,300,000 Louisiana Public Facilities Authority College and Equipment, Series A (Societe Generale LOC) 3.90% 10/7/96(a) A-1+ VMIG-1 10,600 10,600,000 Plaquemines Port, Harbor and Terminal Facilities Refunding RB (Electro-Coal Transfer Corporation Project) 3.55% 11/20/96(b) -- P-1 2,600 2,600,000 3.65% 12/2/96(b) -- P-1 11,325 11,325,000 - ---------------------------------------------------------------------------------------- 30,525,000 - ----------------------------------------------------------------------------------------
17 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets September 30, 1996 (Unaudited)
Rating Par TAX-FREE SERIES (continued) S&P Moody's (000) Value ======================================================================================== Maryland - 3.4% Maryland Health & Higher Education Facility Authority (Daughters of Charity, National Health System, St. Agnes Hospital) 3.85% 10/7/96(a) A-1+ VMIG-1 $ 5,200 $ 5,200,000 Maryland State Community Development Administration, Department of Housing and Community Development, Single Family Program, First Series RB 3.45% 10/1/96(b) -- VMIG-1 7,500 7,500,000 Maryland State Health & Higher Education Authority (Daughters of Charity) 3.85% 10/7/96(a) -- VMIG-1 3,300 3,300,000 University of Maryland University Revenue, Revolving Equipment Loan Series (Student Loan Marketing Assoc. LOC) 3.70% 10/7/96(a) A-1+ VMIG-1 3,200 3,200,000 - ---------------------------------------------------------------------------------------- 19,200,000 - ---------------------------------------------------------------------------------------- Massachusetts - 2.5% Massachusetts Health and Education Facility Authority (Capital Assets), Series D (MBIA Insurance) 3.85% 10/7/96(a) A-1+ VMIG-1 14,000 14,000,000 - ---------------------------------------------------------------------------------------- Minnesota - 2.2% Becker PCR (Northern States Power Company - Sherbourne Generating Station Project) 3.65% 11/1/96(b) A-1+ VMIG-1 6,700 6,700,000 Regents of The University of Minnesota TECP 3.65% 10/25/96(b) A-1+ P-1 3,300 3,300,000 3.65% 10/25/96(b) A-1+ P-1 2,000 2,000,000 - ---------------------------------------------------------------------------------------- 12,000,000 - ---------------------------------------------------------------------------------------- Missouri - 1.1% Missouri Environmental Improvement PCR (National Rural Utilities), Series M 3.95% 10/7/96(a) A-1+ VMIG-1 5,800 5,800,000 - ----------------------------------------------------------------------------------------
18 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
Rating Par TAX-FREE SERIES (continued) S&P Moody's (000) Value ======================================================================================== New Jersey - 1.5% Gloucester County Pollution Control Authority Refunding RB (Mobil Oil Refining Corporation Project) 3.50% 10/7/96(a) A-1+ VMIG-1 $3,000 $ 3,000,000 Mercer County Improvement RB (Credit Suisse LOC) 3.60% 10/7/96(a) A-1+ VMIG-1 1,800 1,800,000 New Jersey Economic Development Authority PCR Refunding Bonds (Public Service Electric & Gas Co. Project) (Swiss Bank LOC) 3.50% 10/7/96(a) A-1+ VMIG-1 3,300 3,300,000 - ---------------------------------------------------------------------------------------- 8,100,000 - ---------------------------------------------------------------------------------------- New York - 0.1% Triborough Bridge and Tunnel Authority (FGIC Insurance) 3.80% 10/7/96(a) A-1+ VMIG-1 600 600,000 - ---------------------------------------------------------------------------------------- North Carolina - 0.2% North Carolina Educational Facilities Finance Agency (Duke University) 3.75% 10/7/96(a) A-1+ VMIG-1 500 500,000 North Carolina Educational Facilities Finance Agency (Duke University), Series 1987 A 3.75% 10/7/96(a) A-1+ VMIG-1 800 800,000 - ---------------------------------------------------------------------------------------- 1,300,000 - ---------------------------------------------------------------------------------------- Ohio - 2.2% Clermont County Adjustable Rate Hospital Facilities RB (Mercy Health System) 3.95% 10/7/96(a) A-1+ VMIG-1 6,436 6,436,000 Ohio Air Pollution Control Variable Rate Demand Refunding RB (PPG Industries) 4.05% 10/7/96(a) A-1 VMIG-1 6,000 6,000,000 - ---------------------------------------------------------------------------------------- 12,436,000 - ----------------------------------------------------------------------------------------
19 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets September 30, 1996 (Unaudited)
Rating Par TAX-FREE SERIES (continued) S&P Moody's (000) Value ======================================================================================== Oklahoma - 2.0% Oklahoma Industries Authority Hospital Revenue, St. Anthony Parking Garage B (Morgan Guaranty LOC) 3.65% 12/3/96(b) -- VMIG-1 $ 2,365 $ 2,365,000 Oklahoma Industries Authority, Medical Practice Facility RB (SSM Health Care) (Morgan Guaranty LOC) 3.65% 12/3/96(b) -- VMIG-1 5,560 5,560,000 Oklahoma Water Resources Board, State Loan Program RB (Swiss Bank LOC) 3.70% 3/3/97(b) A-1+ -- 3,000 3,000,000 - ---------------------------------------------------------------------------------------- 10,925,000 - ---------------------------------------------------------------------------------------- Pennsylvania - 0.3% Philadelphia Higher Education & Hospital Authority (Children's Hospital of Philadelphia Project) 4.00% 10/1/96(a) A-1+ -- 1,500 1,500,000 - ---------------------------------------------------------------------------------------- Tennessee - 1.6% Metropolitan Nashville Airport Authority, Airport Improvement Refunding RB (Societe Generale LOC) 3.85% 10/7/96(a) A-1+ VMIG-1 8,900 8,900,000 - ---------------------------------------------------------------------------------------- Texas - 13.4% Austin Utility System (Travis and Williamson Counties) (Swiss Bank LOC) 3.65% 10/25/96(b) A-1+ P-1 3,900 3,900,000 Dallas Area Rapid Transportation Sales Tax Revenue, Series A (Credit Suisse LOC) 3.65% 10/25/96(b) A-1+ P-1 5,000 5,000,000 Gulf Coast Waste Disposal Authority PCR (Exxon) 3.90% 10/1/96(a) A-1+ VMIG-1 2,100 2,100,000 Harris County Health Facilities Development Hospital RB (San Jacinto Methodist Hospital Project) (Morgan Guaranty LOC) 3.60% 12/2/96(b) -- VMIG-1 20,250 20,247,971
20 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
Rating Par TAX-FREE SERIES (continued) S&P Moody's (000) Value ======================================================================================== Harris County Toll Road, Series H 3.80% 10/7/96(a) A-1+ VMIG-1 $ 3,800 $ 3,800,000 Hockley County Industrial Development Corp. (Amoco Project) 3.60% 11/1/96(b) A-1+ P-1 8,000 8,000,000 Lower Neches Valley Authority (Chevron Inc.) 3.65% 2/18/97(b) A-1+ -- 6,500 6,500,000 State of Texas Public Finance Authority GO 3.70% 12/12/96(b) A-1+ P-1 9,600 9,600,000 State of Texas TRAN 4.75% 8/29/97(b) SP-1+ MIG-1 5,000 5,034,285 Texas Higher Education Authority Facilities Revenue, Series 85B (FGIC Insurance) 3.90% 10/7/96(a) A-1+ VMIG-1 5,150 5,150,000 Yoakum County Industrial Development Adjustable Rate PCR (Amoco Company Project) 3.60% 11/1/96(b) A-1+ VMIG-1 5,265 5,265,000 - ---------------------------------------------------------------------------------------- 74,597,256 - ---------------------------------------------------------------------------------------- Utah - 3.7% Intermountain Power Agency, Power Supply RB (Morgan Guaranty LOC) 3.93% 6/16/97(b) A-1+ VMIG-1 7,500 7,500,000 Intermountain Power Agency, Power Supply RB (Swiss Bank LOC) 3.50% 10/15/96(b) A-1+ VMIG-1 13,000 13,000,000 - ---------------------------------------------------------------------------------------- 20,500,000 - ---------------------------------------------------------------------------------------- Virginia - 0.1% Hampton Roads Regional Jail Authority, Variable Rate Demand RB (Regional Jail Facility) (Wachovia LOC) 3.90% 10/7/96(a) A-1+ VMIG-1 800 800,000 - ----------------------------------------------------------------------------------------
21 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets September 30, 1996 (Unaudited)
Rating Par TAX-FREE SERIES (continued) S&P Moody's (000) Value ======================================================================================== Washington - 3.0% Chelan County Public Utility District No.1 (Chelan Hydro Consolidated System), Series 1995 A DN (Credit Suisse LOC) 3.80% 10/7/96(a) A-1+ VMIG-1 $ 3,475 $ 3,475,000 King County Sewer Revenue Notes 3.70% 10/1/96(b) A-1 P-1 8,500 8,500,000 King County Sewer Revenue Notes, Series A 3.70% 12/12/96(b) A-1 P-1 5,000 5,000,000 - ---------------------------------------------------------------------------------------- 16,975,000 - ---------------------------------------------------------------------------------------- Wisconsin - 2.5% Pleasant Prairie Village Refunding PCR (Wisconsin Electric Power Company Project) 3.85% 10/7/96(a) A-1+ P-1 10,000 10,000,000 Wisconsin Health Facilities Authority RB (Daughters of Charity, St. Mary's Hospital) 3.85% 10/7/96(a) -- VMIG-1 3,800 3,800,000 - ---------------------------------------------------------------------------------------- 13,800,000 - ---------------------------------------------------------------------------------------- Wyoming - 1.3% Sweetwater County PCR (Idaho Power Co.), Series B 4.08% 10/7/96(a) A-1 VMIG-1 7,100 7,100,000 - ----------------------------------------------------------------------------------------
22 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
TAX-FREE SERIES (continued) Value ======================================================================================== TOTAL INVESTMENTS - 99.6% $555,306,369(c) OTHER ASSETS IN EXCESS OF LIABILITIES, NET - 0.4% 2,217,479 - ---------------------------------------------------------------------------------------- NET ASSETS - 100.0% $557,523,848 - ---------------------------------------------------------------------------------------- Net Asset Value, Offering and Redemption Price Per Share ($557,523,848 / 557,597,126 shares outstanding) $1.00 ======================================================================================== (a) Demand security; payable upon demand by the Fund with usually no more than seven (7) calendar days'notice. Interest rates are redetermine periodically. Rates shown are those in effect on September 30, 1996. (b) Security has an outstanding call, mandatory put or optional put by the issuer. Par value and maturity date reflect such call or put. (c) Aggregate cost for financial reporting and federal tax purposes. See Notes to Financial Statements. 23 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Net Assets September 30, 1996 (Unaudited) Rating Par TAX-FREE SERIES (concluded) ================================================================================ Investment Abbreviations: BAN Bond Anticipation Notes GO General Obligation Bonds IDA Industrial Development Authority IDR Industrial Development Revenue Bonds LOC Letter of Credit PCR Pollution Control Revenue Bonds RAN Revenue Anticipation Notes RB Revenue Bonds TAN Tax Anticipation Notes TECP Tax-Exempt Commercial Paper TRAN Tax Revenue Anticipation Notes INSURANCE ABBREVIATIONS: AMBAC AMBAC Indemnity Corp. MBIA Municipal Bond Investors Assurance FGIC Financial Guaranty Insurance Corporation MOODY'S MUNICIPAL BOND RATINGS: Aaa Bonds that are judged to be of the best quality. Aa Bonds that are judged to be of high quality by all standards. Issues are sometimes rated with a 1, 2 or 3, which denote a high, medium or low ranking within the rating. MIG-1 Notes bearing this designation are of the best quality. VMIG-1 Variable rate demand obligations bearing this designation are of the best quality. P-1 Commercial paper bearing this designation is of the best quality. S&P MUNICIPAL BOND RATINGS: AAA Obligations that are of the highest quality. AA Obligations that have the second strongest capacity for payment of debt service. Those issues determined to possess very strong safety characteristics are denoted with a plus (+) sign. SP-1 Notes that have a strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics are assigned a plus (+) designation. A-1 Commercial paper that has a strong degree of safety regarding timely payment. Those issues determined to possess very strong safety characteristics are denoted with a plus (+) sign. A detailed description of the above ratings can be found in the Fund's Statement of Additional Information. See Notes to Financial Statements. 24 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Statement of Operations (Unaudited) For the six months ended September 30, 1996
Prime Treasury Tax-Free Series Series Series - ---------------------------------------------------------------------------------------- Investment Income (Note 1): Interest income $73,729,458 $18,174,027 $10,020,531 Expenses: Distribution fee (Note 2) 3,661,677 820,459 720,001 Investment advisory fee (Note 2) 3,651,417 869,155 794,633 Transfer agent fee 540,474 120,000 78,087 Custodian fee 156,070 75,001 45,661 Accounting fee (Note 2) 78,911 62,795 31,922 Directors' fees 48,158 12,534 24,066 Registration fees 84,868 25,073 48,877 Legal fees 28,894 12,534 10,027 Printing and postage fees 191,225 47,300 37,777 Other expenses 65,107 53,946 26,958 Total expenses 8,506,801 2,098,797 1,818,009 Less: Fees waived (Note 2) (57,988) -- -- Net expenses 8,448,813 2,098,797 1,818,009 Net investment income 65,280,645 16,075,230 8,202,522 Net realized gain from security transactions -- 8,567 12,136 Net increase in net assets resulting from operations $65,280,645 $16,083,797 $ 8,214,658
See Notes to Financial Statements. 25 ALEX. BROWN CASH RESERVE FUND. INC. - -------------------------------------------------------------------------------- Statement of Changes in Net Assets September 30, 1996
PRIME SERIES - --------------------------------------------------------------------------------------------- Six Months Ended Year Ended September 30, March 31, 1996(1) 1996 ---------------- ---------- Increase/(Decrease) in Net Assets Operations: Net investment income $ 65,280,645 $ 107,454,378 Net realized gain/(loss) on sales of investments -- (6,050) -------------- -------------- Net increase in net assets resulting from operations 65,280,645 107,448,328 Distributions to Shareholders From: Net investment income: Alex. Brown Cash Reserve Prime, Treasury and Tax-Free Shares, respectively (59,516,901) (99,181,255) Alex. Brown Cash Reserve Institutional Shares (1,619,636) (1,334,079) Flag Investors Class A Shares (140,207) (402,702) Flag Investors Class B Shares (132) (300) Quality Cash Reserve Prime Shares (4,003,769) (6,536,042) -------------- -------------- Total distributions (65,280,645) (107,454,378) Capital Share Transactions, net -- (Note 3) 48,735,599 1,016,482,516 -------------- -------------- Total increase/(decrease) in net assets 48,735,599 1,016,476,466 Net Assets: Beginning of period 2,602,779,775 1,586,303,309 -------------- -------------- End of period $2,651,515,374 $2,602,779,775 ============== ==============
- ----------- (1) Unaudited. 26 ALEX. BROWN CASH RESERVE FUND. INC. - -------------------------------------------------------------------------------- Statement of Changes in Net Assets (continued)
TREASURY SERIES TAX-FREE SERIES - --------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended Six Months Ended Year Ended September 30, March 31, September 30, March 31, 1996(1) 1996 1996(1) 1996 ---------------- ---------- ---------------- ---------- Increase/(Decrease) in Net Assets Operations: Net investment income $ 16,075,230 $ 32,463,791 $ 8,202,522 $ 17,012,671 Net realized gain/(loss) on sales of investments 8,567 51,785 12,136 4,419 ------------ ------------ ------------ ------------ Net increase in net assets resulting from operations 16,083,797 32,515,576 8,214,658 17,017,090 Distributions to Shareholders From: Net investment income: Alex. Brown Cash Reserve Prime, Treasury and Tax-Free Shares, respectively (14,857,570) (30,565,630) (8,201,671) (17,012,671) Alex. Brown Cash Reserve Institutional Shares (1,217,660) (1,898,161) -- -- Flag Investors Class A Shares -- -- -- -- Flag Investors Class B Shares -- -- -- -- Quality Cash Reserve Prime Shares -- -- -- -- ------------ ------------ ------------ ------------ Total distributions (16,075,230) (32,463,791) (8,201,671) (17,012,671) Capital Share Transactions, net -- (Note 3) (33,940,339) 192,365,923 (13,996,139) 96,118,352 ------------ ------------ ------------ ------------ Total increase/(decrease) in net assets (33,931,772) 192,417,708 (13,983,152) 96,122,771 Net Assets: Beginning of period 718,636,915 526,219,207 571,507,000 475,384,229 ------------ ------------ ------------ ------------ End of period $684,705,143 $718,636,915 $557,523,848 $571,507,000 ============ ============ ============ ============
See Notes to Financial Statements. 27 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) ALEX. BROWN CASH RESERVE PRIME SHARES - -------------------------------------------------------------------------------- Six months ended September 30, 1996(1) ================================================================================ Per Share Operating Performance: Net asset value at beginning of period $ 1.00 Income from Investment Operations: Net investment income 0.0239 Less Distributions: Dividends from net investment income and/or short-term gains (0.0239) ------- Net asset value at end of period $ 1.00 ======= Total Return: Based on net asset value per share 4.82%(2) Ratios to Average Daily Net Assets: Expenses 0.60%(2) Net investment income 4.77%(2) Supplemental Data: Net assets at end of period $2,396,184,930 Number of shares outstanding at end of period 2,396,188,105 - ----------- (1) Unaudited. (2) Annualized. 28 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
ALEX. BROWN CASH RESERVE PRIME SHARES (continued) - ---------------------------------------------------------------------------------------------------------------------------------- Year ended March 31, ================================================================================================================================== 1996 1995 1994 1993 1992 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from Investment Operations: Net investment income 0.0524 0.0442 0.0262 0.0295 0.0485 Less Distributions: Dividends from net investment income and/or short-term gains (0.0524) (0.0442) (0.0262) (0.0295) (0.0485) ------- ------- ------- ------- ------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======= ======= Total Return: Based on net asset value per share 5.36% 4.51% 2.65% 2.99% 4.96% Ratios to Average Daily Net Assets: Expenses 0.60% 0.61% 0.62% 0.63% 0.61% Net investment income 5.21% 4.46% 2.62% 2.95% 4.84% Supplemental Data: Net assets at end of period $2,386,681,216 $1,472,079,739 $1,350,334,979 $1,470,711,552 $1,505,012,086 Number of shares outstanding at end of period 2,386,684,392 1,472,077,488 1,350,332,916 1,470,709,489 1,505,010,023
See Notes to Financial Statements. 29 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period)
FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS A - -------------------------------------------------------------------------------- Six months ended September 30, 1996(1) --------------------- Per Share Operating Performance: Net asset value at beginning of period $ 1.00 Income from Investment Operations: Net investment income 0.0239 Less Distributions: Dividends from net investment income and/or short-term gains (0.0239) Net asset value at end of period $ 1.00 Total Return: Based on net asset value per share 4.82%(2) Ratios to Average Daily Net Assets: Expenses 0.60%(2) Net investment income 4.77%(2) Supplemental Data: Net assets at end of period $6,071,072 Number of shares outstanding at end of period 6,070,838 - --------------------------------------------------------------------------------
- -------------- (1) Unaudited. (2) Annualized. 30 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS A (continued) - ----------------------------------------------------------------------------------------------------------------------- Year ended March 31, - ----------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from Investment Operations: Net investment income 0.0524 0.0442 0.0262 0.0295 0.0485 Less Distributions: Dividends from net investment income and/or short-term gains (0.0524) (0.0442) (0.0262) (0.0295) (0.0485) Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return: Based on net asset value per share 5.36% 4.51% 2.65% 2.99% 4.96% Ratios to Average Daily Net Assets: Expenses 0.60% 0.61% 0.62% 0.63% 0.61% Net investment income 5.25% 4.26% 2.62% 2.95% 4.84% Supplemental Data: Net assets at end of period $5,976,831 $7,726,696 $18,116,648 $10,392,282 $7,350,424 Number of shares outstanding at end of period 5,976,824 7,726,698 18,116,633 10,392,267 7,350,409
See Notes to Financial Statements. 31 ALEX. BROWN CASH RESERVE FUND, INC. ALEX. BROWN CASH RESERVE FUND, INC. - ------------------------------------------------------------------- ------------------------------------------------------------- (For a share outstanding throughout each period)
FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS B FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS B (continued) - ------------------------------------------------------------------- ------------------------------------------------------------- April 3, 1995(2) Six months ended through September 30, 1996(1) March 31, 1996 - ------------------------------------------------------------------- ------------------------------------------------------------- Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 ------- ------- Income from Investment Operations: Net investment income 0.0200 0.0361 Less Distributions: Dividends from net investment income (0.0200) (0.0361) ------- ------- Net asset value at end of period $ 1.00 $ 1.00 ======= ======= Total Return: Based on net asset value per share 4.07%(3) 3.69%(3) Ratios to Average Daily Net Assets: Expenses 1.35%(3) 1.38%(3) Net investment income 4.02%(3) 4.30%(3) Supplemental Data: Net assets at end of period $ 599 $10,200 Number of shares outstanding at end of period 599 10,200 - ------------------------------------------------------------------- -------------------------------------------------------------
- ------------ (1) Unaudited. (2) Commencement of operations. (3) Annualized. See Notes to Financial Statements. 32 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) ALEX. BROWN CASH RESERVE PRIME INSTITUTIONAL SHARES - -------------------------------------------------------------------------------- Six months ended September 30, 1996(1) ----------------------- Per Share Operating Performance: Net asset value at beginning of period $ 1.00 Income from Investment Operations: Net investment income 0.0252 Less Distributions: Dividends from net investment income and/or short-term gains (0.0252) Net asset value at end of period $ 1.00 Total Return: Based on net asset value per share 5.07%(2) Ratios to Average Daily Net Assets: Expenses 0.35%(2) Net investment income 5.02%(2) Supplemental Data: Net assets at end of period $55,411,841 Number of shares outstanding at end of period 55,412,061 - -------------------------------------------------------------------------------- - ------------ (1) Unaudited. (2) Annualized. 34 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
ALEX. BROWN CASH RESERVE PRIME INSTITUTIONAL SHARES (continued) - ----------------------------------------------------------------------------------------------------------------------------------- Year ended March 31, - ----------------------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from Investment Operations: Net investment income 0.0548 0.0472 0.0294 0.0327 0.0515 Less Distributions: Dividends from net investment income and/or short-term gains (0.0548) (0.0472) (0.0294) (0.0327) (0.0515) Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return: Based on net asset value per share 5.62% 4.82% 2.98% 3.32% 5.27% Ratios to Average Daily Net Assets: Expenses 0.35% 0.36% 0.30% 0.31% 0.32% Net investment income 5.32% 4.57% 2.94% 3.24% 5.34% Supplemental Data: Net assets at end of period $53,699,315 $11,904,716 $23,437,449 $28,884,078 $21,867,108 Number of shares outstanding at end of period 53,699,535 11,904,663 23,437,512 28,884,132 21,867,108
See Notes to Financial Statements. 35 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) QUALITY CASH RESERVE PRIME SHARES - -------------------------------------------------------------------------------- Six months ended September 30, 1996(1) - -------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value at beginning of period $ 1.00 Income from Investment Operations: Net investment income 0.0225 Less Distributions: Dividends from net investment income and/or short-term gains (0.0225) Net asset value at end of period $ 1.00 Total Return: Based on net asset value per share 4.47%(3) Ratios to Average Daily Net Assets: Expenses 0.89%(3,4) Net investment income 4.48%(3,5) Supplemental Data: Net assets at end of period $193,846,933 Number of shares outstanding at end of period 193,847,114 - -------------------------------------------------------------------------------- (1) Unaudited. (2) Commencement of operations. (3) Annualized. (4) Ratio of expenses to average daily net assets prior to partial fee waivers was 0.95% and 0.95% for the six months ended September 30, 1996 and the year ended March 31, 1996, respectively. (5) Ratio of net investment income to average daily net assets prior to partial fee waivers was 4.42% and 4.86% for the six months ended September 30, 1996 and the year ended March 31, 1996, respectively. 36 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
QUALITY CASH RESERVE PRIME SHARES (continued) - ----------------------------------------------------------------------------------------------------------------------------------- May 6, 1991(2) through Year ended March 31, March 31, 1992 - ----------------------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from Investment Operations: ------- ------- ------- ------- ------- Net investment income 0.0493 0.0402 0.0218 0.0253 0.0399 Less Distributions: Dividends from net investment income and/or short-term gains (0.0493) (0.0402) (0.0218) (0.0253) (0.0399) ------- ------- ------- ------- ------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======= ======= Total Return: Based on net asset value per share 5.04% 4.09% 2.20% 2.53% 4.30%(3) Ratios to Average Daily Net Assets: Expenses 0.90%(4) 0.96% 1.06% 1.04% 0.96%(3) Net investment income 4.91%(5) 4.04% 2.18% 2.53% 4.30%(3) Supplemental Data: Net assets at end of period $156,412,213 $94,592,158 $92,678,440 $101,321,868 $94,887,669 Number of shares outstanding at end of period 156,412,393 94,591,979 92,678,268 101,321,668 94,887,669
See Notes to Financial Statements. 37 ALEX. BROWN CASH RESERVE FUND, INC. - ----------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) ALEX. BROWN CASH RESERVE TREASURY SHARES - ----------------------------------------------------------------------------- Six months ended September 30, 1996(1) - ----------------------------------------------------------------------------- Per Share Operating Performance: Net asset value at beginning of period $ 1.00 ------ Income from Investment Operations: Net investment income 0.0143 Less Distributions: Dividends from net investment income and/or short-term gains (0.0143) ------- Net asset value at end of period $ 1.00 Total Return: Based on net asset value per share 4.62%(2) Ratios to Average Daily Net Assets: Expenses 0.58%(2) Net investment income 4.59%(2) Supplemental Data: Net assets at end of period $638,170,387 Number of shares outstanding at end of period 638,110,342 - -------------------------------------------------------------------------------- (1) Unaudited. (2) Annualized. (3) Ratio of expenses to average daily net assets prior to partial fee waivers was 0.56% for the years ended March 31, 1995, 1994 and 1993, respectively. (4) Ratio of net investment income to average daily net assets prior to partial fee waivers was 4.08%, 2.53% and 2.86% for the years ended March 31, 1995, 1994 and 1993, respectively. 38 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
ALEX. BROWN CASH RESERVE TREASURY SHARES (continued) - ----------------------------------------------------------------------------------------------------------------------------------- Year ended March 31, - ----------------------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- ------- ------- Income from Investment Operations: Net investment income 0.0494 0.0411 0.0255 0.0285 0.0477 Less Distributions: Dividends from net investment income and/or short-term gains (0.0494) (0.0411) (0.0255) (0.0285) (0.0477) ------- ------- ------- ------- ------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======= ======= Total Return: Based on net asset value per share 5.05% 4.19% 2.58% 2.89% 4.88% Ratios to Average Daily Net Assets: Expenses 0.58% 0.55%(3) 0.54%(3) 0.55%(3) 0.55% Net investment income 4.94% 4.09%(4) 2.55%(4) 2.87%(4) 4.76% Supplemental Data: Net assets at end of period $666,814,158 $512,167,212 $581,724,214 $618,175,839 $725,010,207 Number of shares outstanding at end of period 666,762,028 512,162,864 581,723,448 618,152,465 725,010,207 - ----------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 39 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) ALEX. BROWN CASH RESERVE TREASURY INSTITUTIONAL SHARES - -------------------------------------------------------------------------------- Six months ended September 30, 1996(1) - -------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value at beginning of period $ 1.00 ------ Income from Investment Operations: Net investment income 0.0227 Less Distributions: Dividends from net investment income and/or short-term gains (0.0227) ------- Net asset value at end of period $ 1.00 ======= Total Return: Based on net asset value per share 4.87%(2) Ratios to Average Daily Net Assets: Expenses 0.33%(2) Net investment income 4.84%(2) Supplemental Data: Net assets at end of period $46,534,756 Number of shares outstanding at end of period 46,524,573 - -------------------------------------------------------------------------------- (1) Unaudited. (2) Annualized. (3) Ratio of expenses to average daily net assets prior to partial fee waivers was 0.31%, 0.29% and 0.27% for the years ended March 31, 1995, 1994 and 1993, respectively. (4) Ratio of net investment income to average daily net assets prior to partial fee waivers was 4.14%, 2.80% and 3.15% for the years ended March 31, 1995, 1994 and 1993, respectively. 40 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
ALEX. BROWN CASH RESERVE TREASURY INSTITUTIONAL SHARES (continued) - ----------------------------------------------------------------------------------------------------------------------------------- Year ended March 31, - ----------------------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- ------- ------- Income from Investment Operations: Net investment income 0.0523 0.0438 0.0282 0.0314 0.0504 Less Distributions: Dividends from net investment income and/or short-term gains (0.0523) (0.0438) (0.0282) (0.0314) (0.0504) ------- ------- ------- ------- ------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======= ======= Total Return: Based on net asset value per share 5.36% 4.47% 2.86% 3.19% 5.17% Ratios to Average Daily Net Assets: Expenses 0.33% 0.30%(3) 0.27%(3) 0.26%(3) 0.27% Net investment income 5.12% 4.15%(4) 2.82%(4) 3.16%(4) 4.90% Supplemental Data: Net assets at end of period $51,822,757 $14,051,995 $39,692,848 $60,146,987 $63,834,323 Number of shares outstanding at end of period 51,813,226 14,046,467 39,688,259 60,140,874 63,834,323 - -----------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 41 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) ALEX. BROWN CASH RESERVE TAX-FREE SHARES - -------------------------------------------------------------------------------- Six months ended September 30, 1996(1) - -------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value at beginning of period $ 1.00 Income from Investment Operations: Net investment income 0.0241 Less Distributions: Dividends from net investment income and/or short-term gains (0.0241) Net asset value at end of period $ 1.00 Total Return: Based on net asset value per share 2.87%(2) Ratios to Average Daily Net Assets: Expenses 0.63%(2) Net investment income 2.85%(2) Supplemental Data: Net assets at end of period $557,523,848 Number of shares outstanding at end of period 557,597,126 - -------------------------------------------------------------------------------- (1) Unaudited. (2) Annualized. (3) Ratio of expenses to average daily net assets prior to partial fees was 0.57% for the year ended March 31, 1992. (4) Ratio of net investment income to average daily net assets prior to partial fees was 3.48% for the year ended March 31, 1992. 42 ALEX. BROWN CASH RESERVE FUND, INC. - --------------------------------------------------------------------------------
ALEX. BROWN CASH RESERVE TAX-FREE SHARES (continued) - ----------------------------------------------------------------------------------------------------------------------------------- Year ended March 31, - ----------------------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- ------- ------- Income from Investment Operations: Net investment income 0.0318 0.0271 0.0184 0.0213 0.0353 Less Distributions: Dividends from net investment income and/or short-term gains (0.0318) (0.0271) (0.0184) (0.0213) (0.0353) ------- ------- ------- ------- ------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======= ======= Total Return: Based on net asset value per share 3.23% 2.75% 1.86% 2.15% 3.59% Ratios to Average Daily Net Assets: Expenses 0.60% 0.57% 0.58% 0.60% 0.56%(3) Net investment income 3.16% 2.74% 1.84% 2.13% 3.49%(4) Supplemental Data: Net assets at end of period $571,507,000 $475,384,229 $378,859,232 $315,661,447 $304,987,823 Number of shares outstanding at end of period 571,593,265 475,474,913 378,939,262 315,700,742 305,008,959
See Notes to Financial Statements. 43 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Notes to Financial Statements NOTE 1--Significant Accounting Policies Alex. Brown Cash Reserve Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Fund is organized as a Maryland corporation consisting of three different portfolios, the Prime Series, the Treasury Series and the Tax-Free Series. The Prime Series consists of five different classes of shares: 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 Alex. Brown Cash Reserve Prime Institutional Shares ("Prime Institutional Shares"). The Treasury Series offers two classes of shares: Alex. Brown Cash Reserve Treasury Shares ("Treasury Shares") and Alex. Brown Cash Reserve Treasury Institutional Shares ("Treasury Institutional Shares"). The Alex. Brown Cash Reserve Tax-Free Series ("Tax-Free Series") offers only one class of shares. Matters affecting each class are voted on exclusively by the shareholders of that class. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuation--The Fund maintains a dollar-weighted average maturity of 90 days or less for each portfolio. The securities of each portfolio are valued on the basis of amortized cost, which approximates market value. This method values a security at its cost on the date of purchase, and thereafter, assumes a constant amortization to maturity of any original issue or other discount or premium. B. Security Transactions, Investment Income and Distributions--Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales, if any, are computed on the basis of specific identification of the securities sold. Interest income is recorded on an accrual basis and includes, when applicable, amortization of premiums and accretion of discounts. Dividends to shareholders are declared daily and distributions or reinvestments of the dividends are made monthly. C. Repurchase Agreement--The Prime Series may agree to purchase money market instruments subject to the seller's agreement to repurchase them at an agreed upon date and price. The seller, under a repurchase agreement, will be required on a daily basis to maintain the value of the securities subject to the agreement at not less than the repurchase price. The agreement is conditioned upon the collateral being deposited under the Federal Reserve book-entry system. D. Federal Income Taxes--The Fund intends to comply with the requirements of the Internal Revenue Code necessary to continue to qualify as a regulated invest- 44 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) NOTE 1--concluded ment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) that is distributed to shareholders. Each portfolio is treated as a separate entity for federal income tax purposes. The Tax-Free Series has a capital loss carryforward of $87,648 (which may be carried forward to offset future taxable capital gains, if any), which begins to expire, if not previously utilized, in the year 2000. E. Expenses--Operating expenses directly attributable to a class of shares are charged to that class' operations. Expenses of the Fund that are not directly attributable to a specific class are prorated among the classes to which the expense relates based on the relative net assets of each class. NOTE NOTE 2--Advisory Fees and Transactions with Other Affiliates The Fund has entered into an investment advisory agreement with Investment Company Capital Corp. ("ICC"), a subsidiary of Alex. Brown Financial Corp., with respect to all Series, and a sub-advisory agreement with PNC Institutional Management Corporation ("PIMC") with respect to the Tax-Free Series. Under the terms of the investment advisory agreement, 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: .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 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, calculated daily and paid monthly, at the annual rate of .02% of the Prime Series' average daily net assets as well as an additional fee with respect to the Tax-Free Series, calculated daily and paid monthly, at the annual rate of .03% of the Tax-Free Series' average daily net assets. Prior to August 23, 1995, ICC received 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: .25% of the first $500 million, .21% of the next $500 million, .20% of the next $500 million and .19% of that portion in excess of $1.5 billion. As compensation for its subadvisory services, PIMC receives a fee from ICC, calculated daily and paid monthly, at the following annual rates based upon the Tax-Free Series' aggregate average daily net assets: .15% of the first $250 million, .13% of the next $250 million, .11% of the next $250 million, .09% of the next $250 million, .075% of the next $3 billion and .06% of that portion in excess of $4 billion. For the six months ended September 30, 1996, the Fund paid PIMC$399,190 for sub-advisory services for the Tax-Free Series. The Fund has agreed to reimburse PFPC Inc., an affiliate of PIMC, for certain costs incurred in providing accounting services to the Tax-Free Series. For the six months ended September 30, 1996, the Fund paid PFPC $31,922 for accounting services for the Tax-Free Series. 45 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) NOTE 2--concluded ICC may, from time to time, voluntarily waive a portion of its advisory fee with respect to the Prime, Treasury and Tax-Free Series to preserve or enhance the performance of each Series as compared to certain industry benchmarks, and, if ICC elects to so waive a portion of its fee, PIMC has agreed that it would waive a portion of its fee in the same proportion and for the same time periods as any ICC waiver. No advisory fees were waived for the six months ended September 30, 1996. Under the terms of these agreements, ICC and the Fund's distributor will, if necessary, reimburse the Fund for any fiscal year to the extent that expenses (exclusive of any interest, taxes, brokerage commissions and extraordinary expenses) exceed 1% of aggregate average daily net assets of each of the Fund's three Series. The obligation of ICC to reimburse the Fund is limited to the fees actually received by ICC for such fiscal year. As compensation for its accounting services, ICC receives from the Prime and Treasury Series an annual fee, calculated daily and paid monthly, based on the two Series' average daily net assets. lCC received $78,911 and $62,795 for accounting services for the six months ended September 30, 1996 for the Prime and Treasury Series, respectively. As compensation for its transfer agent services, ICC receives from the Fund's three Series a per account fee, calculated and paid monthly. ICC received $540,474, $120,000 and $78,087 for transfer agent services for the six months ended September 30, 1996 for the Prime, Treasury and Tax-Free Series, respectively. The Fund has entered into a distribution agreement with Alex. Brown & Sons Incorporated ("Alex. Brown"). Under the terms of the distribution agreement, Alex. Brown receives a fee from the Prime Shares, Flag Investors Class A Shares, Treasury Shares and the Tax-Free Series, at the annual rate of .25% of the aggregate average daily net assets of these classes of shares. Alex. Brown also receives a fee from the Quality Cash Shares and Flag Investors Class B Shares at the annual rate of .60% and 1.00%, respectively, of the aggregate average daily net assets of each class. Alex. Brown voluntarily waived distribution fees in the amount of $57,988 for the Quality Cash Shares for the six months ended September 30, 1996. The Fund complex of which the Fund is a part has adopted a retirement plan for eligible Directors. The actuarially computed pension expense allocated to the Fund for the period January 1, 1996 through September 30, 1996 was approximately $40,500, $14,500 and $10,000 for the Prime, Treasury and Tax-Free Series, respectively, and the accrued liability was approximately $211,000, $75,000 and $52,000 for the Prime, Treasury and Tax-Free Series, respectively. NOTE 3--Capital Stock and Share Information The Fund is authorized to issue up to 6,400,000,000 shares of $.001 par value capital stock (3,550,000,000 Prime Series, 1,500,000,000 Treasury Series, 1,000,000,000 Tax-Free Series and 350,000,000 not classified). Changes in shares outstanding during the periods ended September 30, 1996 and March 31, 1996 are listed on the following page. 46 ALEX. BROWN CASH RESERVE FUND, INC. - -------------------------------------------------------------------------------- Notes to Financial Statements (concluded) NOTE 3--concluded September 30, 1996 (Unaudited) March 31, 1996 Prime Series: Sold: Prime Shares 10,938,844,772 19,439,463,533 Flag Investors Class A Shares 3,613,116 12,118,053 Flag Investors Class B Shares 4,670 24,535 Prime Institutional Shares 203,535,745 213,159,539 Quality Cash Shares 503,778,591 1,285,040,597 Issued as reinvestment of dividends: Prime Shares 56,307,220 93,103,137 Flag Investors Class A Shares 133,453 374,561 Flag Investors Class B Shares 399 -- Prime Institutional Shares 1,211,277 753,855 Quality Cash Shares 3,842,527 6,300,386 Redeemed: Prime Shares (10,985,648,278) (18,617,959,766) Flag Investors Class A Shares (3,652,327) (14,242,488) Flag Investors Class B Shares (14,671) (14,335) Prime Institutional Shares (203,034,496) (172,118,522) Quality Cash Shares (470,186,399) (1,229,520,569) --------------- --------------- Net increase 48,735,599 1,016,482,516 =============== =============== Treasury Series: Sold: Treasury Shares 2,164,014,641 4,043,423,430 Treasury Institutional Shares 211,355,409 396,793,576 Issued as reinvestment of dividends: Treasury Shares 14,255,334 28,890,267 Treasury Institutional Shares 782,613 417,316 Redeemed: Treasury Shares (2,206,921,661) (3,917,714,533) Treasury Institutional Shares (217,426,675) (359,444,133) -------------- -------------- Net increase/(decrease) (33,940,339) 192,365,923 ============== ============== Tax-Free Series: Sold 2,518,447,605 4,817,984,787 Issued as reinvestment of dividends 7,795,188 16,116,851 Redeemed (2,540,238,932) (4,737,983,286) -------------- -------------- Net increase/(decrease) (13,996,139) 96,118,352 ============== ============== NOTE 4--Net Assets At September 30, 1996, net assets consisted of:
Prime Treasury Tax-Free Series Series Series ------ -------- -------- Paid-in capital $2,651,518,882 $684,634,915 $557,597,126 Undistributed net investment income 2,187 427 -- Undistributed net realized gain/(loss) on sales of investments (5,695) 69,801 (73,278) -------------- ------------ ------------ $2,651,515,374 $684,705,143 $557,523,848 ============== ============ ============
47 Board of Directors - -------------------------------------------------------------------------------- W. JAMES PRICE Chairman CHARLES W. COLE JR. EUGENE J. McDONALD Director Director JAMES J. CUNNANE REBECCA W. RIMEL Director Director RICHARD T. HALE TRUMAN T. SEMANS Director Director JOHN F. KROEGER CARL W. VOGT, Esq. Director Director LOUIS E. LEVY HARRY WOOLF Director Director Officers - -------------------------------------------------------------------------------- W. JAMES PRICE M. ELLIOTT RANDOLPH, JR. JOSEPH A. FINELLI Chairman Vice President Treasurer RICHARD T. HALE PAUL D. CORBIN EDWARD J. STOKEN President Vice President Secretary EDWARD J. VEILLEUX MONICA M. HAUSNER LAURIE D. DEPRINE Executive Vice President Vice President Assistant Secretary SCOTT J. LIOTTA Vice President - -------------------------------------------------------------------------------- Distributor Custodian ALEX. BROWN & SONS PNC BANK, N.A. INCORPORATED 17th and Chestnut Streets 135 East Baltimore Street Philadelphia, PA 19101 Baltimore, MD 21202 (410) 727-1700 Transfer Agent INVESTMENT COMPANY CAPITAL CORP. Investment Advisor 135 East Baltimore Street INVESTMENT COMPANY CAPITAL CORP. Baltimore, MD 21202 135 East Baltimore Street (800) 553-8080 Baltimore, MD 21202 Auditors Sub-Advisor COOPERS & LYBRAND L.L.P. (Tax-Free Series) 217 E. Redwood Street PNC INSTITUTIONAL Baltimore, MD 21202 MANAGEMENT CORPORATION 103 Bellevue Parkway Wilmington, DE 19809 - -------------------------------------------------------------------------------- 48 (C) BY ALEX. BROWN & SONS INCORPORATED This report is prepared for the general information of shareholders of Alex. Brown Cash Reserve Fund, Inc. It may be distributed only to current shareholders or to persons who have received a current prospectus. ALEX. BROWN CASH RESERVE FUND, INC. BULK RATE P.O. Box 1346 U.S. Postage Baltimore, MD 21203 PAID Richmond, VA Permit No. 930 QUALITY CASH RESERVE PRIME SHARES Semi-Annual Report September 30, 1996 Fund Features (bullet) Daily Dividends The Fund declares dividends daily and distributes them monthly in the form of additional shares. (bullet) Check Redemption Privilege After completing an authorization form, you may redeem your shares by writing a check (in a minimum amount of $250) on your account. You will continue to earn dividends until your check reaches the bank for clearance. (bullet) No Sales Charge and Immediate Liquidity You may buy or redeem shares in your account at any time. There is no sales charge or penalty imposed by the Fund for the purchase or redemption of shares. (bullet) Constant Net Asset Value The Fund will attempt to maintain a constant net asset value of $1.00 per share and has done so since its inception on May 6, 1991. However, there can be no assurance that the Fund will be able to maintain a constant net asset value of $1.00 per share. An investment in a money market fund is neither insured nor guaranteed by the U.S. Government. (bullet) Minimum Investment The minimum initial investment is $1,500. Subsequent investments may be made in an amount of $100 or more. This report is submitted for the general information of the shareholders of Quality Cash Reserve Prime Shares. The report may only be distributed to current shareholders or to persons who have received a current prospectus. Letter to Shareholders November 6, 1996 We are pleased to report on the progress of your Fund for the six months ended September 30, 1996. PERIOD IN REVIEW The Federal Reserve Bank, under increasing scrutiny with each of its meetings, determined the economy was stable enough to leave the Fed Funds rate unchanged at its September 1996 meeting. This decision has left interest rates fairly stable over this time period, albeit with some occasional swings. The 30-year bond yield has fluctuated in a trading range between 6.55% and 7.20% for most of the past six months. The 3-month Treasury bill rate has reflected the Fed's "wait and see" attitude, with its yield ranging between 5.00% and 5.35%. These yields indicate a rather narrow spread between short-term and long-term rates. We continue to manage the Fund conservatively, as evidenced by the rating that Standard & Poor's (S&P) has awarded to the portfolio of which Quality Cash Reserve Prime Shares is a class. The portfolio maintains a "AAAm" rating, the highest that S&P awards to money market funds. MARKET OUTLOOK The final quarter of 1996 raises several questions, and the answers will dictate which way the markets will move for the remainder of the year, as well as the beginning of 1997. (bullet) First, with regard to politics and the Presidential and Congressional elections, will lowering the budget deficit continue to be a top priority? (bullet) Second, with regard to the Federal Reserve Bank, is the Fed waiting to raise or lower interest rates? Are the members concerned with the relatively low economic growth rate (1.5% to 3%), or are they watching building inflationary pressures, particularly in labor markets and energy prices? (bullet) Finally, in general, just how high will the stock market go? Will corporate profits continue to rise, or will wage pressures begin to affect the bottom line? How will the traditional Christmas rush turn out for retailers? 1 Letter to Shareholders (continued) - -------------------------------------------------------------------------------- Regardless of the answers to these questions, it is our belief that the conservative approach we apply to investing on behalf of the Fund will provide comfort to our shareholders, and in turn will continue to offer competitive yields, without sacrificing quality. As always, we appreciate your continued support. Sincerely, /s/ W. James Price /s/ Richard T. Hale - ----------------------- ------------------------- W. James Price Richard T. Hale Chairman President 2 Prime Series - -------------------------------------------------------------------------------- Statement of Net Assets September 30, 1996 (Unaudited)
Rating ------------ Par S&P Moody's (000) Value Commercial Paper - 84.9%(a) Automobiles & Trucks - 2.6% PACCAR Financial Corp. 5.33% 10/21/96 A-1+ P-1 $10,000 $ 9,970,389 5.40% 10/28/96 A-1+ P-1 9,000 8,963,550 5.29% 11/18/96 A-1+ P-1 5,000 4,964,733 Toyota Motor Credit Corp. 5.32% 10/31/96 A-1+ P-1 15,000 14,933,500 5.25% 11/8/96 A-1+ P-1 15,000 14,916,875 5.36% 12/13/96 A-1+ P-1 14,000 13,847,836 ---------- 67,596,883 ---------- Beverages - 3.1% Anheuser-Busch Companies Inc. 5.28% 10/7/96 A-1+ P-1 15,000 14,986,800 5.34% 10/7/96 A-1+ P-1 17,300 17,284,603 4.90% 10/21/96 A-1+ P-1 20,000 19,945,556 4.75% 10/28/96 A-1+ P-1 15,000 14,946,563 5.25% 1/1/97 A-1+ P-1 15,000 14,781,250 ---------- 81,944,772 ---------- Chemicals, General - 3.8% E.I. duPont de Nemours 5.35% 10/18/96 A-1+ P-1 10,000 9,974,736 5.40% 11/22/96 A-1+ P-1 15,000 14,883,000 5.30% 11/27/96 A-1+ P-1 15,000 14,874,125 5.29% 12/18/96 A-1+ P-1 10,000 9,885,383 5.30% 12/20/96 A-1+ P-1 25,000 24,705,556 5.38% 1/30/97 A-1+ P-1 10,000 9,819,172 5.46% 3/26/97 A-1+ P-1 16,000 15,572,907 ---------- 99,714,879 ---------- Chemicals, Specialty - 1.2% Air Products & Chemicals, Inc. 5.35% 10/25/96 A-1 P-1 11,000 10,960,767 5.33% 11/5/96 A-1 P-1 20,000 19,896,361 ---------- 30,857,128 ---------- Computer & Office Equipment - 7.4% Hewlett-Packard 5.42% 10/9/96 A-1+ P-1 15,000 14,981,933 5.35% 10/30/96 A-1+ P-1 20,000 19,913,806 5.40% 12/3/96 A-1+ P-1 10,000 9,905,500
3 Prime Series - -------------------------------------------------------------------------------- Statement of Net Assets (continued) September 30, 1996 (Unaudited) Commercial Paper (continued) Computer & Office Equipment (concluded)
Rating ------------ Par S&P Moody's (000) Value Pitney Bowes Credit Corp. 5.02% 10/3/96 A-1+ P-1 $15,000 $ 14,995,817 5.03% 10/3/96 A-1+ P-1 15,000 14,995,808 5.02% 10/4/96 A-1+ P-1 20,000 19,991,633 5.04% 10/4/96 A-1+ P-1 17,000 16,992,860 5.35% 2/19/97 A-1+ P-1 19,000 18,601,871 5.52% 2/19/97 A-1+ P-1 14,775 14,455,565 5.50% 3/21/97 A-1+ P-1 10,000 9,738,750 Xerox Credit Corp. 5.32% 11/8/96 A-1 P-1 20,480 20,364,993 5.32% 12/5/96 A-1 P-1 19,700 19,510,771 ----------- 194,449,307 ----------- Credit Unions - 2.5% Mid-States Corporate Federal Credit Union 5.37% 10/1/96 A-1+ P-1 20,500 20,469,420 U.S. Central Credit Union 5.30% 10/10/96 A-1+ P-1 15,000 14,980,125 5.40% 10/23/96 A-1+ P-1 15,000 14,950,500 5.31% 12/3/96 A-1+ P-1 15,000 14,860,613 ---------- 65,260,658 ---------- Defense & Aircraft - 0.9% Rockwell International Corp. 5.28% 10/29/96 A-1+ P-1 25,000 24,897,333 Electrical & Electronics - 3.5% Emerson Electric Co. 5.32% 10/25/96 A-1+ P-1 25,000 24,911,332 Motorola Inc. 5.32% 10/7/96 A-1+ P-1 20,000 19,982,267 5.28% 10/24/96 A-1+ P-1 15,000 14,949,400 5.35% 10/25/96 A-1+ P-1 17,000 16,939,367 5.32% 11/8/96 A-1+ P-1 15,000 14,915,767 ---------- 91,698,133 ----------
4 Prime Series - ------------------------------------------------------------------------------- Commercial Paper (continued)
Rating ------------ Par S&P Moody's (000) Value Electric Utility - 1.0% Northern States Power Co. 5.30% 11/4/96 A-1+ P-1 $ 7,000 $ 6,964,961 5.27% 11/22/96 A-1+ P-1 19,000 18,855,368 ----------- 25,820,329 ----------- Entertainment - 2.8% Walt Disney Co. 5.24% 10/9/96 A-1 P-1 15,000 14,982,533 5.28% 10/11/96 A-1 P-1 15,000 14,978,000 5.40% 10/15/96 A-1 P-1 10,000 9,979,000 5.18% 12/6/96 A-1 P-1 10,000 9,905,033 5.18% 12/9/96 A-1 P-1 15,000 14,851,075 5.38% 1/29/97 A-1 P-1 10,000 9,820,667 ---------- 74,516,308 ---------- Finance, Commercial - 2.2% CIT Group Holdings Inc. 5.29% 12/10/96 A-1 P-1 40,000 39,588,555 PHH Corp. 5.42% 10/30/96 A-1 P-1 20,000 19,912,678 ---------- 59,501,233 ---------- Finance, Consumer - 3.6% USAA Capital Corp. 5.27% 10/30/96 A-1+ P-1 10,000 9,957,547 5.44% 11/4/96 A-1+ P-1 18,000 17,907,520 5.40% 11/14/96 A-1+ P-1 22,000 21,854,800 5.30% 11/27/96 A-1+ P-1 10,000 9,916,083 5.40% 12/17/96 A-1+ P-1 20,000 19,769,000 5.27% 12/20/96 A-1+ P-1 10,000 9,882,889 5.47% 1/2/97 A-1+ P-1 7,423 7,318,107 ---------- 96,605,946 ---------- Finance, Diversified - 3.3% General Electric Capital Corp. 5.28% 10/7/96 A-1+ P-1 15,000 14,986,800 5.30% 11/27/96 A-1+ P-1 15,000 14,874,125 5.36% 1/3/97 A-1+ P-1 15,000 14,790,067 5.35% 1/17/97 A-1+ P-1 15,000 14,759,250 5.31% 1/23/97 A-1+ P-1 15,000 14,747,775 5.49% 2/5/97 A-1+ P-1 13,875 13,606,276 ---------- 87,764,293 ----------
5 Prime Series - -------------------------------------------------------------------------------- Statement of Net Assets (continued) September 30, 1996 (Unaudited) Commercial Paper (continued)
Rating ------------ Par S&P Moody's (000) Value Food - 8.4% Campbell Soup Co. 4.98% 10/4/96 A-1+ P-1 $10,000 $ 9,995,850 5.46% 12/5/96 A-1+ P-1 15,000 14,852,125 5.47% 12/16/96 A-1+ P-1 17,000 16,803,688 Cargill, Inc. 5.45% 10/8/96 A-1+ P-1 15,000 14,984,104 5.32% 11/4/96 A-1+ P-1 20,000 19,899,511 5.36% 12/12/96 A-1+ P-1 15,000 14,839,200 5.39% 12/18/96 A-1+ P-1 20,000 19,766,433 H.J. Heinz 5.25% 10/3/96 A-1+ P-1 9,000 8,997,375 5.33% 10/18/96 A-1+ P-1 15,900 15,859,981 Hershey Foods 5.26% 10/15/96 A-1+ P-1 10,500 10,478,522 5.26% 10/18/96 A-1+ P-1 27,500 27,431,693 Kellogg Company 5.33% 11/14/96 A-1+ P-1 25,000 24,837,138 5.33% 11/15/96 A-1+ P-1 10,000 9,933,375 5.33% 11/27/96 A-1+ P-1 15,000 14,873,413 ----------- 223,552,408 ----------- Household Products - 2.8% Clorox Company 5.30% 11/26/96 A-1+ P-1 23,540 23,345,926 Colgate-Palmolive Co. 5.35% 10/8/96 A-1 P-1 22,000 21,977,114 Procter & Gamble Co. 5.30% 11/18/96 A-1 P-1 10,200 10,127,920 5.38% 12/20/96 A-1 P-1 17,730 17,518,028 ----------- 72,968,988 ----------- Insurance, Property & Casualty - 3.8% Chubb Capital Corp. 5.27% 10/11/96 A-1+ P-1 18,000 17,973,650 5.33% 10/17/96 A-1+ P-1 18,069 18,026,197 Marsh & McClennan Companies Inc. 5.48% 12/13/96 A-1+ P-1 20,000 19,777,756 5.65% 2/10/97 A-1+ P-1 10,000 9,792,833 5.60% 2/27/97 A-1+ P-1 15,000 14,652,333 5.63% 3/20/97 A-1+ P-1 20,000 19,468,278 ----------- 99,691,047 -----------
6 Prime Series - -------------------------------------------------------------------------------- Commercial Paper (continued)
Rating ------------ Par S&P Moody's (000) Value Integrated Oil - 0.9% Shell Oil Co. 5.25% 11/22/96 A-1+ P-1 $25,000 $ 24,810,417 Machinery & Tools - 1.7% Dover Corp. 5.35% 10/24/96 A-1+ -- 20,000 19,931,639 5.40% 10/25/96 A-1+ -- 20,000 19,928,000 Illinois Tool Works 5.35% 10/1/96 A-1+ P-1 5,000 5,000,000 ------------ 44,859,639 ------------ Oil Transportation - 3.2% Colonial Pipeline 5.43% 10/15/96 A-1+ P-1 17,000 16,964,102 5.45% 10/16/96 A-1+ P-1 20,200 20,154,129 5.39% 11/12/96 A-1+ P-1 15,000 14,905,675 5.43% 12/16/96 A-1+ P-1 6,500 6,425,488 5.44% 1/15/97 A-1+ P-1 12,000 11,807,787 5.47% 2/6/97 A-1+ P-1 14,500 14,217,991 ------------ 84,475,172 ------------ Paper - 0.4% Weyerhaeuser Co. 5.31% 12/3/96 A-1 P-1 11,600 11,492,207 ------------ Pharmaceuticals - 8.8% Abbott Laboratories 5.33% 10/22/96 A-1+ P-1 10,059 10,027,725 5.32% 10/23/96 A-1+ P-1 25,000 24,918,722 5.33% 10/23/96 A-1+ P-1 13,429 13,385,259 Eli Lilly & Co. 5.28% 11/15/96 A-1+ P-1 10,000 9,934,000 5.33% 2/6/97 A-1+ P-1 12,000 11,772,587 5.57% 2/24/97 A-1+ P-1 7,500 7,330,579 Pfizer, Inc. 5.30% 10/10/96 A-1+ P-1 15,000 14,980,125 Schering-Plough Corp. 5.32% 9/18/96 A-1+ P-1 19,700 19,589,374 5.41% 11/14/96 A-1+ P-1 4,400 4,370,906 5.40% 11/19/96 A-1+ P-1 10,000 9,926,500 5.42% 11/26/96 A-1+ P-1 7,000 6,940,982 5.27% 11/26/96 A-1+ P-1 15,000 14,877,033
7 Prime Series - -------------------------------------------------------------------------------- Statement of Net Assets (continued) September 30, 1996 (Unaudited) Commercial Paper (continued) Pharmaceuticals (concluded)
Rating ------------ Par S&P Moody's (000) Value Warner-Lambert Co. 5.27% 10/4/96 A-1+ P-1 $40,000 $ 39,982,433 5.30% 10/30/96 A-1+ P-1 15,000 14,935,958 5.27% 12/6/96 A-1+ P-1 20,000 19,806,767 5.25% 1/15/97 A-1+ P-1 10,000 9,845,417 ------------ 232,624,367 ------------ Publishing - 0.7% Knight-Ridder Inc. 5.35% 10/18/96 A-1+ P-1 7,500 7,481,052 RR Donnelley & Sons, Inc. 5.27% 10/7/96 A-1+ P-1 12,000 11,989,460 ------------ 19,470,512 ------------ Railroad - 1.1% Norfolk Southern Corp. 5.42% 10/29/96 A-1+ P-1 30,000 29,873,533 ------------ Retail, General - 1.9% J.C. Penney Fund Co. 5.28% 10/29/96 A-1+ P-1 20,000 19,920,800 5.39% 11/13/96 A-1+ P-1 15,000 14,903,429 Wal-Mart Stores 5.27% 10/29/96 A-1+ P-1 15,000 14,938,517 ------------ 49,762,746 ------------ Structured Finance - 4.5% CIESCO, L.P. 5.28% 10/30/96 A-1+ P-1 10,000 9,957,466 5.32% 11/26/96 A-1+ P-1 25,000 24,793,111 Corporate Asset Funding Company, Inc. 5.27% 10/10/96 A-1+ P-1 11,000 10,985,508 5.43% 10/16/96 A-1+ P-1 20,000 19,954,750 5.30% 10/25/96 A-1+ P-1 20,000 19,929,333 5.37% 11/21/96 A-1+ P-1 20,000 19,847,850 5.35% 12/20/96 A-1+ P-1 15,000 14,821,667 ------------ 120,289,685 ------------ Telephone - 5.7% Ameritech Capital Funding Corp. 5.34% 10/30/96 A-1+ P-1 20,000 19,913,966 5.29% 12/6/96 A-1+ P-1 25,000 24,757,542 5.20% 12/10/96 A-1+ P-1 15,000 14,848,333 5.40% 1/27/97 A-1+ P-1 15,000 14,734,500
8 Prime Series - ------------------------------------------------------------------------------- Commercial Paper (concluded) Telephone (concluded)
Rating ------------ Par S&P Moody's (000) Value Ameritech Corp. 5.27% 10/18/96 A-1+ P-1 $10,000 $ 9,975,114 5.40% 12/2/96 A-1+ P-1 15,000 14,860,500 BellSouth Telecommunications 5.27% 10/11/96 A-1+ P-1 8,000 7,988,289 5.28% 10/24/96 A-1+ P-1 8,000 7,973,013 Southwestern Bell Telephone Co. 5.39% 10/25/96 A-1+ P-1 25,000 24,910,167 5.31% 10/31/96 A-1+ P-1 11,580 11,528,759 ------------ 151,490,183 ------------ Waste Management - 3.1% WMX Technologies 4.78% 11/1/96 A-1 P-1 10,000 9,958,838 5.32% 11/5/96 A-1 P-1 15,000 14,922,417 5.50% 12/11/96 A-1 P-1 15,000 14,837,292 5.35% 1/24/97 A-1 P-1 15,000 14,743,646 5.67% 4/11/97 A-1 P-1 15,000 14,546,400 5.54% 5/13/97 A-1 P-1 15,000 14,482,933 ------------- 83,491,526 ------------- Total Commercial Paper 2,249,479,632 ------------- Variable Rate Note - 4.7% Associates Corp. Master Note 5.20%(b) 12/1/96 A-1+ P-1 75,000 75,000,000 Coca-Cola Master Note 5.46%(b) 1/17/97 A-1+ P-1 50,000 50,000,000 ------------- Total Variable Rate Note 125,000,000 ------------- Federal Home Loan Bank - 1.3% FHLB 6.00% 11/1/96 AAA -- 25,000 24,885,042 5.28% 1/6/97 AAA -- 10,000 9,857,733 ------------ Total Federal Home Loan Bank 34,742,775 ------------ Federal National Mortgage Association - 3.9% FNMA Discount Note 5.32% 10/3/96 -- P-1 10,000 9,997,044 5.46% 11/15/96 -- P-1 9,000 8,998,663
9 Prime Series - -------------------------------------------------------------------------------- Statement of Net Assets (concluded) September 30, 1996 (Unaudited) Federal National Mortgage Association (concluded)
Rating ------------ Par S&P Moody's (000) Value Note 5.68% 10/7/96 -- P-1 $ 20,000 $ 20,000,561 5.31% 10/18/96 -- P-1 20,000 20,000,000 5.39% 12/4/96 -- P-1 10,000 10,004,361 5.63% 12/19/96 -- P-1 20,000 20,000,000 5.45% 2/13/97 -- P-1 15,000 15,000,000 ------------ Total Federal National Mortgage Association 104,000,629 ------------ Repurchase Agreements - 5.2%(c) Goldman Sachs 5.65%(d) 10/1/96 -- -- 38,600 38,600,000 Morgan Stanley & Co. 5.65%(e) 10/1/96 -- -- 100,000 100,000,000 ----------- Total Repurchase Agreements 138,600,000 ----------- TOTAL INVESTMENTS - 100.0% 2,651,823,036(f) LIABILITIES IN EXCESS OF OTHER ASSETS, NET - 0.0% (307,662) -------------- NET ASSETS - 100.0% $2,651,515,374 ============== Net Asset Value, Offering and Redemption Price Per: Prime Share ($2,396,184,930 / 2,396,188,105 shares outstanding) $1.00 Flag Investors Class A Share ===== ($6,071,072 / 6,070,838 shares outstanding) $1.00 Flag Investors Class B Share ===== ($599 / 599 shares outstanding) $1.00 Prime Institutional Share ===== ($55,411,841 / 55,412,061 shares outstanding) $1.00 Quality Cash Reserve Prime Share ===== ($193,846,932 / 193,847,114 shares outstanding) $1.00 =====
10 Prime Series - ------------------------------------------------------------------------------- (a) Most commercial paper is traded on a discount basis. In such cases, the interest rate shown represents the rate of discount paid or received at time of purchase by the Fund. (b) Master note is payable upon demand by the Fund upon no more than five days' notice. Interest rates on master notes are redetermined weekly. Rates shown are those in effect on September 30, 1996. (c) Collateral on repurchase agreements is taken into possession by 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. (d) Dated 9/30/96 to be repurchased on 10/1/96, collateralized by U.S. Treasury Notes with a market value of $39,372,757. (e) Dated 9/30/96 to be repurchased on 10/1/96, collateralized by U.S. Treasury Notes with a market value of $101,280,062. (f) Aggregate cost for financial reporting and federal tax purposes. MOODY'S RATINGS: Aaa Bonds that are judged to be of the best quality. P-1 Commercial paper bearing this designation is of the best quality. S&P RATINGS: AAA Obligations that are of the highest quality. A-1 Commercial paper that has a strong degree of safety regarding timely payment. Those issues determined to possess very strong safety characteristics are denoted with a plus (+) sign. A detailed description of the above ratings can be found in the Fund's Statement of Additional Information. See Notes to Financial Statements. 11 Prime Series - -------------------------------------------------------------------------------- Statement of Operations (Unaudited) For the six months ended September 30, 1996 Investment Income (Note 1): Interest income $73,729,458 ----------- Expenses: Distribution fee (Note 2) 3,661,677 Investment advisory fee (Note 2) 3,651,417 Transfer agent fee 540,474 Printing and postage fees 191,225 Custodian fee 156,070 Registration fees 84,868 Accounting fee (Note 2) 78,911 Other expenses 65,107 Directors' fees 48,158 Legal fees 28,894 ---------- Total expenses 8,506,801 Less: Fees waived (Note 2) (57,988) ---------- Net expenses 8,448,813 ---------- Net investment income 65,280,645 Net realized gain from security transactions -- ---------- Net increase in net assets resulting from operations $65,280,645 ---------- See Notes to Financial Statements. 12 Prime Series - -------------------------------------------------------------------------------- Statement of Changes in Net Assets September 30, 1996
Six Months Ended Year Ended September 30, March 31, 1996(1) 1996 Increase in Net Assets Operations: Net investment income $ 65,280,645 $ 107,454,378 Net realized loss on sales of investments -- (6,050) -------------- -------------- Net increase in net assets resulting from operations 65,280,645 107,448,328 Distributions to Shareholders From: Net investment income: Prime Shares (59,516,901) (99,181,255) Prime Institutional Shares (1,619,636) (1,334,079) Flag Investors Class A Shares (140,207) (402,702) Flag Investors Class B Shares (132) (300) Quality Cash Reserve Prime Shares (4,003,769) (6,536,042) -------------- -------------- Total distributions (65,280,645) (107,454,378) Capital Share Transactions, net - (Note 3) 48,735,599 1,016,482,516 -------------- -------------- Total increase in net assets 48,735,599 1,016,476,466 Net Assets: Beginning of period 2,602,779,775 1,586,303,309 -------------- -------------- End of period $2,651,515,374 $2,602,779,775 ============== ==============
- -------------- (1) Unaudited. See Notes to Financial Statements. 13 Prime Series - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) PRIME SHARES Six months ended September 30, 1996(1) Per Share Operating Performance: Net asset value at beginning of period $ 1.00 -------- Income from Investment Operations: Net investment income 0.0239 Less Distributions: Dividends from net investment income and/or short-term gains (0.0239) -------- Net asset value at end of period $ 1.00 ======== Total Return: Based on net asset value per share 4.82%(2) Ratios to Average Daily Net Assets: Expenses 0.60%(2) Net investment income 4.77%(2) Supplemental Data: Net assets at end of period $2,396,184,930 Number of shares outstanding at end of period 2,396,188,105 (1) Unaudited. (2) Annualized. 14 Prime Series - -------------------------------------------------------------------------------- PRIME SHARES (continued)
Year ended March 31, 1996 1995 1994 1993 1992 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 --------- -------- -------- -------- -------- Income from Investment Operations: Net investment income 0.0524 0.0442 0.0262 0.0295 0.0485 Less Distributions: Dividends from net investment income and/or short-term gains (0.0524) (0.0442) (0.0262) (0.0295) (0.0485) --------- -------- -------- -------- -------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========= ======== ======== ======== ======== Total Return: Based on net asset value per share 5.36% 4.51% 2.65% 2.99% 4.96% Ratios to Average Daily Net Assets: Expenses 0.60% 0.61% 0.62% 0.63% 0.61% Net investment income 5.21% 4.46% 2.62% 2.95% 4.84% Supplemental Data: Net assets at end of period $2,386,681,216 $1,472,079,739 $1,350,334,979 $1,470,711,552 $1,505,012,086 Number of shares outstanding at end of period 2,386,684,392 1,472,077,488 1,350,332,916 1,470,709,489 1,505,010,023 See Notes to Financial Statements. 15 Prime Series - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS A Six months ended September 30, 1996(1) ----------------------- Per Share Operating Performance: Net asset value at beginning of period $ 1.00 -------- Income from Investment Operations: Net investment income 0.0239 Less Distributions: Dividends from net investment income and/or short-term gains (0.0239) -------- Net asset value at end of period $ 1.00 ======== Total Return: Based on net asset value per share 4.82%(2) Ratios to Average Daily Net Assets: Expenses 0.60%(2) Net investment income 4.77%(2) Supplemental Data: Net assets at end of period $6,071,072 Number of shares outstanding at end of period 6,070,838 (1) Unaudited. (2) Annualized. 16 Prime Series - -------------------------------------------------------------------------------- FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS A (continued)
- -------------------------------------------------------------------------------------------------------------------------- Year ended March 31, - -------------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from Investment Operations: Net investment income 0.0524 0.0442 0.0262 0.0295 0.0485 Less Distributions: Dividends from net investment income and/or short-term gains (0.0524) (0.0442) (0.0262) (0.0295) (0.0485) -------- -------- -------- -------- -------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return: Based on net asset value per share 5.36% 4.51% 2.65% 2.99% 4.96% Ratios to Average Daily Net Assets: Expenses 0.60% 0.61% 0.62% 0.63% 0.61% Net investment income 5.25% 4.26% 2.62% 2.95% 4.84% Supplemental Data: Net assets at end of period $5,976,831 $7,726,696 $18,116,648 $10,392,282 $7,350,424 Number of shares outstanding at end of period 5,976,824 7,726,698 18,116,633 10,392,267 7,350,409
See Notes to Financial Statements. 17 Prime Series - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS B Six months ended September 30, 1996(1) Per Share Operating Performance: $ 1.00 Net asset value at beginning of period -------- Income from Investment Operations: 0.0200 Net investment income Less Distributions: (0.0200) Dividends from net investment income -------- $ 1.00 Net asset value at end of period ======== Total Return: 4.07%(3) Based on net asset value per share Ratios to Average Daily Net Assets: 1.35%(3) Expenses 4.02%(3) Net investment income Supplemental Data: $ 599 Net assets at end of period Number of shares outstanding at end 599 of period (1) Unaudited. (2) Commencement of operations. (3) Annualized. 18 Prime Series - -------------------------------------------------------------------------------- Flag Investors Cash Reserve Prime Shares--Class B (continued) April 3, 1995(2) through March 31, 1996 Per Share Operating Performance: $ 1.00 Net asset value at beginning of period -------- Income from Investment Operations: 0.0361 Net investment income Less Distributions: (0.0361) Dividends from net investment income -------- $ 1.00 Net asset value at end of period ======== Total Return: 3.69%(3) Based on net asset value per share Ratios to Average Daily Net Assets: 1.38%(3) Expenses 4.30%(3) Net investment income Supplemental Data: $10,200 Net assets at end of period Number of shares outstanding at end 10,200 of period See Notes to Financial Statements. 19 Prime Series - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) PRIME INSTITUTIONAL SHARES Six months ended September 30, 1996(1) Per Share Operating Performance: Net asset value at beginning of period $ 1.00 --------- Income from Investment Operations: Net investment income 0.0252 Less Distributions: Dividends from net investment income and/or short-term gains (0.0252) --------- Net asset value at end of period $ 1.00 ========= Total Return: Based on net asset value per share 5.07%(2) Ratios to Average Daily Net Assets: Expenses 0.35%(2) Net investment income 5.02%(2) Supplemental Data: Net assets at end of period $55,411,841 Number of shares outstanding at end of period 55,412,061 (1) Unaudited. (2) Annualized. 20 Prime Series - -------------------------------------------------------------------------------- PRIME INSTITUTIONAL SHARES (continued)
Year ended March 31, 1996 1995 1994 1993 1992 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 --------- --------- --------- --------- --------- Income from Investment Operations: Net investment income 0.0548 0.0472 0.0294 0.0327 0.0515 Less Distributions: Dividends from net investment income and/or short-term gains (0.0548) (0.0472) (0.0294) (0.0327) (0.0515) --------- --------- --------- --------- --------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========= ========= ========= ========= ========= Total Return: Based on net asset value per share 5.62% 4.82% 2.98% 3.32% 5.27% Ratios to Average Daily Net Assets: Expenses 0.35% 0.36% 0.30% 0.31% 0.32% Net investment income 5.32% 4.57% 2.94% 3.24% 5.34% Supplemental Data: Net assets at end of period $53,699,315 $11,904,716 $23,437,449 $28,884,078 $21,867,108 Number of shares outstanding at end of period 53,699,535 11,904,663 23,437,512 28,884,132 21,867,108
See Notes to Financial Statements. 21 Prime Series - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) QUALITY CASH RESERVE PRIME SHARES Six months ended September 30, 1996(1) Per Share Operating Performance: Net asset value at beginning of period $ 1.00 ---------- Income from Investment Operations: Net investment income 0.0225 Less Distributions: Dividends from net investment income and/or short-term gains (0.0225) ---------- Net asset value at end of period $ 1.00 ========== Total Return: Based on net asset value per share 4.47%(3) Ratios to Average Daily Net Assets: Expenses 0.89%(3,4) Net investment income 4.48%(3,5) Supplemental Data: Net assets at end of period $193,846,933 Number of shares outstanding at end of period 193,847,114 (1) Unaudited. (2) Commencement of operations. (3) Annualized. (4) Ratio of expenses to average daily net assets prior to partial fee waivers was 0.95% and 0.95% for the six months ended September 30, 1996 and the year ended March 31, 1996, respectively. (5) Ratio of net investment income to average daily net assets prior to partial fee waivers was 4.42% and 4.86% for the six months ended September 30, 1996 and the year ended March 31, 1996, respectively. 22 Prime Series - -------------------------------------------------------------------------------- QUALITY CASH RESERVE PRIME SHARES (continued)
May 6, 1991(2) through Year ended March 31, March 31, 1992 1996 1995 1994 1993 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 --------- --------- --------- --------- --------- Income from Investment Operations: Net investment income 0.0493 0.0402 0.0218 0.0253 0.0399 Less Distributions: Dividends from net investment income and/or short-term gains (0.0493) (0.0402) (0.0218) (0.0253) (0.0399) --------- --------- --------- --------- --------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========= ========= ========= ========= ========= Total Return: Based on net asset value per share 5.04% 4.09% 2.20% 2.53% 4.30%(3) Ratios to Average Daily Net Assets: Expenses 0.90%(4) 0.96% 1.06% 1.04% 0.96%(3) Net investment income 4.91%(5) 4.04% 2.18% 2.53% 4.30%(3) Supplemental Data: Net assets at end of period $156,412,213 $94,592,158 $92,678,440 $101,321,868 $94,887,669 Number of shares outstanding at end of period 156,412,393 94,591,979 92,678,268 101,321,668 94,887,669
See Notes to Financial Statements. 23 Prime Series - -------------------------------------------------------------------------------- Notes to Financial Statements NOTE 1--Significant Accounting Policies Alex. Brown Cash Reserve Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Fund is organized as a Maryland corporation consisting of three different portfolios, the Prime Series, the Treasury Series and the Tax-Free Series. The Prime Series consists of five different classes of shares: 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 Alex. Brown Cash Reserve Prime Institutional Shares ("Prime Institutional Shares"). Matters affecting each class are voted on exclusively by the shareholders of that class. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuation--The Fund maintains a dollar-weighted average maturity of 90 days or less for each portfolio. The securities of each portfolio are valued on the basis of amortized cost, which approximates market value. This method values a security at its cost on the date of purchase, and thereafter, assumes a constant amortization to maturity of any original issue or other discount or premium. B. Security Transactions, Investment Income and Distributions--Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales, if any, are computed on the basis of specific identification of the securities sold. Interest income is recorded on an accrual basis and includes, when applicable, amortization of premiums and accretion of discounts. Dividends to shareholders are declared daily and distributions or reinvestments of the dividends are made monthly. C. Repurchase Agreement--The Prime Series may agree to purchase money market instruments subject to the seller's agreement to repurchase them at an agreed upon date and price. The seller, under a repurchase agreement, will be required on a daily basis to maintain the value of the securities subject to the agreement at not less than the repurchase price. The agreement is conditioned upon the collateral being deposited under the Federal Reserve book-entry system. 24 Prime Series - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) D. Federal Income Taxes--The Fund intends to comply with the requirements of the Internal Revenue Code necessary to continue to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) that is distributed to shareholders. Each portfolio is treated as a separate entity for federal income tax purposes. E. Expenses--Operating expenses directly attributable to a class of shares are charged to that class' operations. Expenses of the Fund that are not directly attributable to a specific class are prorated among the classes to which the expense relates based on the relative net assets of each class. NOTE 2--Advisory Fees and Transactions with Other Affiliates The Fund has entered into an investment advisory agreement with Investment Company Capital Corp. ("ICC"), a subsidiary of Alex. Brown Financial Corp., with respect to the Prime Series. Under the terms of the investment advisory agreement, 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: .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 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, calculated daily and paid monthly, at the annual rate of .02% of the Prime Series' average daily net assets. Prior to August 23, 1995, ICC received 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: .25% of the first $500 million, .21% of the next $500 million, .20% of the next $500 million and .19% of that portion in excess of $1.5 billion. ICC may, from time to time, voluntarily waive a portion of its advisory fee with respect to the Prime Series to preserve or enhance the performance of the Series as compared to certain industry benchmarks. No advisory fees were waived for the six months ended September 30, 1996. Under the terms of these agreements, ICC and the Fund's distributor will, from time to time, voluntarily waive or reimburse a portion of their advisory or distribution fees, respectively, with respect to the Prime Series or any class to preserve or enhance the Series' or class' performance. Such voluntary waivers would not be contractual and would be subject to change. Any reimbursement by ICC or the distributor would be limited to the fees actually received by them for such fiscal year. 25 Prime Series - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) NOTE 2--concluded As compensation for its accounting services, ICC receives from the Prime Series an annual fee, calculated daily and paid monthly, based on the Series' average daily net assets. lCC received $78,911 for accounting services for the six months ended September 30, 1996 for the Prime Series. As compensation for its transfer agent services, ICC receives from the Prime Series a per account fee, calculated and paid monthly. ICC received $540,474 for transfer agent services for the six months ended September 30, 1996 for the Prime Series. The Fund has entered into a distribution agreement with Alex. Brown & Sons Incorporated ("Alex. Brown"). Under the terms of the distribution agreement, Alex. Brown receives a fee from the Prime Shares and Flag Investors Class A Shares at the annual rate of .25% of the aggregate average daily net assets of these classes of shares. Alex. Brown also receives a fee from the Quality Cash Shares and Flag Investors Class B Shares at the annual rate of .60% and 1.00%, respectively, of the aggregate average daily net assets of each class. Alex. Brown voluntarily waived distribution fees in the amount of $57,988 for the Quality Cash Shares for the six months ended September 30, 1996. The Fund complex of which the Fund is a part has adopted a retirement plan for eligible Directors. The actuarially computed pension expense allocated to the Fund for the period January 1, 1996 through September 30, 1996 was approximately $40,500 and the accrued liability was approximately $211,000 for the Prime Series. NOTE 3--Capital Stock and Share Information The Fund is authorized to issue up to 6,400,000,000 shares of $.001 par value capital stock (3,550,000,000 Prime Series). Changes in shares outstanding during the periods ended September 30, 1996 and March 31, 1996 are listed on the following page. 26 Prime Series - -------------------------------------------------------------------------------- Notes to Financial Statements (concluded) NOTE 3--concluded September 30, 1996 (Unaudited) March 31, 1996 Prime Series: Sold: Prime Shares 10,938,844,772 19,439,463,533 Flag Investors Class A Shares 3,613,116 12,118,053 Flag Investors Class B Shares 4,670 24,535 Prime Institutional Shares 203,535,745 213,159,539 Quality Cash Shares 503,778,591 1,285,040,597 Issued as reinvestment of dividends: Prime Shares 56,307,220 93,103,137 Flag Investors Class A Shares 133,453 374,561 Flag Investors Class B Shares 399 -- Prime Institutional Shares 1,211,277 753,855 Quality Cash Shares 3,842,527 6,300,386 Redeemed: Prime Shares (10,985,648,278) (18,617,959,766) Flag Investors Class A Shares (3,652,327) (14,242,488) Flag Investors Class B Shares (14,671) (14,335) Prime Institutional Shares (203,034,496) (172,118,522) Quality Cash Shares (470,186,399) (1,229,520,569) --------------- --------------- Net increase 48,735,599 1,016,482,516 =============== =============== NOTE 4--Net Assets At September 30, 1996, net assets consisted of: Prime Series Paid-in capital $2,651,518,882 Undistributed net investment income 2,187 Undistributed net realized loss on sales of investments (5,695) -------------- $2,651,515,374 ============== 27 Board of Directors W. JAMES PRICE Chairman CHARLES W. COLE JR. EUGENE J. McDONALD Director Director JAMES J. CUNNANE REBECCA W. RIMEL Director Director RICHARD T. HALE TRUMAN T. SEMANS Director Director JOHN F. KROEGER CARL W. VOGT, Esq. Director Director LOUIS E. LEVY HARRY WOOLF Director Director Officers W. JAMES PRICE M. ELLIOTT RANDOLPH, JR. JOSEPH A. FINELLI Chairman Vice President Treasurer RICHARD T. HALE PAUL D. CORBIN EDWARD J. STOKEN President Vice President Secretary EDWARD J. VEILLEUX MONICA M. HAUSNER LAURIE D. DEPRINE Executive Vice President Vice President Assistant Secretary SCOTT J. LIOTTA Vice President Distributor Custodian ALEX. BROWN & SONS PNC BANK, N.A. INCORPORATED 17th and Chestnut Streets 135 East Baltimore Street Philadelphia, PA 19101 Baltimore, MD 21202 (410) 727-1700 Transfer Agent INVESTMENT COMPANY CAPITAL CORP. Investment Advisor 135 East Baltimore Street INVESTMENT COMPANY CAPITAL CORP. Baltimore, MD 21202 135 East Baltimore Street (800) 553-8080 Baltimore, MD 21202 Auditors COOPERS & LYBRAND L.L.P. 217 E. Redwood Street Baltimore, MD 21202 28 THIS PAGE INTENTIONALLY LEFT BLANK Quality Cash Reserve Prime Shares BULK RATE P.O. Box 1346 U.S. POSTAGE Baltimore, MD 21203 PAID BALTIMORE, MD PERMIT NO. 8614 Flag Investors Cash Reserve Prime Shares Semi-Annual Report September 30, 1996 [Flag Investors Logo] FLAG INVESTORS Fund Features - -------------------------------------------------------------------------------- (bullet) Daily Dividends The Fund declares dividends daily and distributes them monthly in the form of additional shares. (bullet) Constant Net Asset Value The Fund will attempt to maintain a constant net asset value of $1.00 per share. Since the Fund's inception on January 5, 1989, a constant net asset value of $1.00 per share has been maintained. (bullet) Minimum Investment The minimum initial investment is $2,000. Subsequent investments may be made in an amount of $100 or more. Letter to Shareholders October 18, 1996 We are pleased to report on the progress of your Fund for the six months ended September 30, 1996. PERIOD IN REVIEW The Federal Reserve Bank, under increasing scrutiny with each of its meetings, determined the economy was stable enough to leave the Fed Funds rate unchanged at its September 1996 meeting. This decision has left interest rates fairly stable over this time period, albeit with some occasional swings. The 30-year bond yield has fluctuated in a trading range between 6.55% and 7.20% for most of the past six months. The 3-month Treasury bill rate has reflected the Fed's "wait and see" attitude, with its yield ranging between 5.00% and 5.35%. These yields indicate a rather narrow spread between short-term and long-term rates. We continue to manage the Fund conservatively, as evidenced by the rating that Standard & Poor's (S&P) has awarded to the portfolio of which Flag Investors Cash Reserve Prime Shares is a class. The portfolio maintains a "AAAm" rating, the highest that S&P awards to money market funds. Even with our cautious style, the Fund has provided a competitive return for the past twelve months, as the chart below illustrates. Performance Comparison 30-Day Yield as of 10/1/96 Flag Investors Cash Reserve Prime Shares--Class A 4.82% First Tier Rated Money Fund Average 4.71% Source: IBC/Donoghue, Inc. "Rated Money Fund Report,"October 1996. The yields shown represent past performance, which is no guarantee of future results. An investment in a money market fund is neither insured nor guaranteed by the U.S. Government.There can be no assurance that the Fund will be able to maintain a stable net asset value of $1.00 per share. The Rated Money Fund Average is an average yield of all funds rated AAA by Standard & Poor's in their respective categories. 1 Letter to Shareholders (continued) MARKET OUTLOOK The final quarter of 1996 raises several questions, and the answers will dictate which way the markets will move for the remainder of the year, as well as the beginning of 1997. (bullet) First, with regard to politics and the Presidential and Congressional elections, will lowering the budget deficit continue to be a top priority? (bullet) Second, with regard to the Federal Reserve Bank, is the Fed waiting to raise or lower interest rates? Are the members concerned with the relatively low economic growth rate (1.5% to 3%), or are they watching building inflationary pressures, particularly in labor markets and energy prices? (bullet) Finally, in general, just how high will the stock market go? Will corporate profits continue to rise, or will wage pressures begin to affect the bottom line? How will the traditional Christmas rush turn out for retailers? Regardless of the answers to these questions, it is our belief that the conservative approach we apply to investing on behalf of the Fund will provide comfort to our shareholders, and in turn will continue to offer competitive yields, without sacrificing quality. As always, we appreciate your continued support. Sincerely, /s/ W. James Price /s/ Richard T. Hale - ------------------ ------------------- W. James Price Richard T. Hale Chairman President 2 Prime Series Statement of Net Assets September 30, 1996 (Unaudited) Rating ---------------- Par S&P Moody's (000) Value - -------------------------------------------------------------------------------- Commercial Paper - 84.9%(a) Automobiles & Trucks - 2.6% PACCAR Financial Corp. 5.33% 10/21/96 A-1+ P-1 $10,000 $ 9,970,389 5.40% 10/28/96 A-1+ P-1 9,000 8,963,550 5.29% 11/18/96 A-1+ P-1 5,000 4,964,733 Toyota Motor Credit Corp. 5.32% 10/31/96 A-1+ P-1 15,000 14,933,500 5.25% 11/8/96 A-1+ P-1 15,000 14,916,875 5.36% 12/13/96 A-1+ P-1 14,000 13,847,836 ----------- 67,596,883 ----------- Beverages - 3.1% Anheuser-Busch Companies Inc. 5.28% 10/7/96 A-1+ P-1 15,000 14,986,800 5.34% 10/7/96 A-1+ P-1 17,300 17,284,603 4.90% 10/21/96 A-1+ P-1 20,000 19,945,556 4.75% 10/28/96 A-1+ P-1 15,000 14,946,563 5.25% 1/1/97 A-1+ P-1 15,000 14,781,250 ----------- 81,944,772 ----------- Chemicals, General - 3.8% E.I. duPont de Nemours 5.35% 10/18/96 A-1+ P-1 10,000 9,974,736 5.40% 11/22/96 A-1+ P-1 15,000 14,883,000 5.30% 11/27/96 A-1+ P-1 15,000 14,874,125 5.29% 12/18/96 A-1+ P-1 10,000 9,885,383 5.30% 12/20/96 A-1+ P-1 25,000 24,705,556 5.38% 1/30/97 A-1+ P-1 10,000 9,819,172 5.46% 3/26/97 A-1+ P-1 16,000 15,572,907 ----------- 99,714,879 ----------- Chemicals, Specialty - 1.2% Air Products & Chemicals, Inc. 5.35% 10/25/96 A-1 P-1 11,000 10,960,767 5.33% 11/5/96 A-1 P-1 20,000 19,896,361 ----------- 30,857,128 ----------- Computer & Office Equipment - 7.4% Hewlett-Packard 5.42% 10/9/96 A-1+ P-1 15,000 14,981,933 5.35% 10/30/96 A-1+ P-1 20,000 19,913,806 5.40% 12/3/96 A-1+ P-1 10,000 9,905,500 3 Prime Series Statement o Net Assets (continued) (Unaudited)
September 30, 1996 Rating ---------------- Par S&P Moody's (000) Value - ------------------------------------------------------------------------------------------ Commercial Paper (continued) Computer & Office Equipment (concluded) Pitney Bowes Credit Corp. 5.02% 10/3/96 A-1+ P-1 $15,000 $ 14,995,817 5.03% 10/3/96 A-1+ P-1 15,000 14,995,808 5.02% 10/4/96 A-1+ P-1 20,000 19,991,633 5.04% 10/4/96 A-1+ P-1 17,000 16,992,860 5.35% 2/19/97 A-1+ P-1 19,000 18,601,871 5.52% 2/19/97 A-1+ P-1 14,775 14,455,565 5.50% 3/21/97 A-1+ P-1 10,000 9,738,750 Xerox Credit Corp. 5.32% 11/8/96 A-1 P-1 20,480 20,364,993 5.32% 12/5/96 A-1 P-1 19,700 19,510,771 ------------ 194,449,307 ------------ Credit Unions - 2.5% Mid-States Corporate Federal Credit Union 5.37% 10/1/96 A-1+ P-1 20,500 20,469,420 U.S. Central Credit Union 5.30% 10/10/96 A-1+ P-1 15,000 14,980,125 5.40% 10/23/96 A-1+ P-1 15,000 14,950,500 5.31% 12/3/96 A-1+ P-1 15,000 14,860,613 ------------ 65,260,658 ------------ Defense & Aircraft - 0.9% Rockwell International Corp. 5.28% 10/29/96 A-1+ P-1 25,000 24,897,333 ------------ Electrical & Electronics - 3.5% Emerson Electric Co. 5.32% 10/25/96 A-1+ P-1 25,000 24,911,332 Motorola Inc. 5.32% 10/7/96 A-1+ P-1 20,000 19,982,267 5.28% 10/24/96 A-1+ P-1 15,000 14,949,400 5.35% 10/25/96 A-1+ P-1 17,000 16,939,367 5.32% 11/8/96 A-1+ P-1 15,000 14,915,767 ------------ 91,698,133 ------------
4 Prime Series
Rating ---------------- Par S&P Moody's (000) Value - ------------------------------------------------------------------------------------------ Commercial Paper (continued) Electric Utility - 1.0% Northern States Power Co. 5.30% 11/4/96 A-1+ P-1 $ 7,000 $ 6,964,961 5.27% 11/22/96 A-1+ P-1 19,000 18,855,368 ------------ 25,820,329 ------------ Entertainment - 2.8% Walt Disney Co. 5.24% 10/9/96 A-1 P-1 15,000 14,982,533 5.28% 10/11/96 A-1 P-1 15,000 14,978,000 5.40% 10/15/96 A-1 P-1 10,000 9,979,000 5.18% 12/6/96 A-1 P-1 10,000 9,905,033 5.18% 12/9/96 A-1 P-1 15,000 14,851,075 5.38% 1/29/97 A-1 P-1 10,000 9,820,667 ------------ 74,516,308 ------------ Finance, Commercial - 2.2% CIT Group Holdings Inc. 5.29% 12/10/96 A-1 P-1 40,000 39,588,555 PHH Corp. 5.42% 10/30/96 A-1 P-1 20,000 19,912,678 ------------ 59,501,233 ------------ Finance, Consumer - 3.6% USAA Capital Corp. 5.27% 10/30/96 A-1+ P-1 10,000 9,957,547 5.44% 11/4/96 A-1+ P-1 18,000 17,907,520 5.40% 11/14/96 A-1+ P-1 22,000 21,854,800 5.30% 11/27/96 A-1+ P-1 10,000 9,916,083 5.40% 12/17/96 A-1+ P-1 20,000 19,769,000 5.27% 12/20/96 A-1+ P-1 10,000 9,882,889 5.47% 1/2/97 A-1+ P-1 7,423 7,318,107 ------------ 96,605,946 ------------ Finance, Diversified - 3.3% General Electric Capital Corp. 5.28% 10/7/96 A-1+ P-1 15,000 14,986,800 5.30% 11/27/96 A-1+ P-1 15,000 14,874,125 5.36% 1/3/97 A-1+ P-1 15,000 14,790,067 5.35% 1/17/97 A-1+ P-1 15,000 14,759,250 5.31% 1/23/97 A-1+ P-1 15,000 14,747,775 5.49% 2/5/97 A-1+ P-1 13,875 13,606,276 ------------ 87,764,293 ------------
5 Prime Series Statement of Net Assets (continued) (Unaudited)
September 30, 1996 Rating ---------------- Par S&P Moody's (000) Value - ------------------------------------------------------------------------------------------ Commercial Paper (continued) Food - 8.4% Campbell Soup Co. 4.98% 10/4/96 A-1+ P-1 $10,000 $ 9,995,850 5.46% 12/5/96 A-1+ P-1 15,000 14,852,125 5.47% 12/16/96 A-1+ P-1 17,000 16,803,688 Cargill, Inc. 5.45% 10/8/96 A-1+ P-1 15,000 14,984,104 5.32% 11/4/96 A-1+ P-1 20,000 19,899,511 5.36% 12/12/96 A-1+ P-1 15,000 14,839,200 5.39% 12/18/96 A-1+ P-1 20,000 19,766,433 H.J. Heinz 5.25% 10/3/96 A-1+ P-1 9,000 8,997,375 5.33% 10/18/96 A-1+ P-1 15,900 15,859,981 Hershey Foods 5.26% 10/15/96 A-1+ P-1 10,500 10,478,522 5.26% 10/18/96 A-1+ P-1 27,500 27,431,693 Kellogg Company 5.33% 11/14/96 A-1+ P-1 25,000 24,837,138 5.33% 11/15/96 A-1+ P-1 10,000 9,933,375 5.33% 11/27/96 A-1+ P-1 15,000 14,873,413 ------------ 223,552,408 ------------ Household Products - 2.8% Clorox Company 5.30% 11/26/96 A-1+ P-1 23,540 23,345,926 Colgate-Palmolive Co. 5.35% 10/8/96 A-1 P-1 22,000 21,977,114 Procter & Gamble Co. 5.30% 11/18/96 A-1 P-1 10,200 10,127,920 5.38% 12/20/96 A-1 P-1 17,730 17,518,028 ------------ 72,968,988 ------------ Insurance, Property & Casualty - 3.8% Chubb Capital Corp. 5.27% 10/11/96 A-1+ P-1 18,000 17,973,650 5.33% 10/17/96 A-1+ P-1 18,069 18,026,197 Marsh & McClennan Companies Inc. 5.48% 12/13/96 A-1+ P-1 20,000 19,777,756 5.65% 2/10/97 A-1+ P-1 10,000 9,792,833 5.60% 2/27/97 A-1+ P-1 15,000 14,652,333 5.63% 3/20/97 A-1+ P-1 20,000 19,468,278 ------------ 99,691,047 ------------
6 Prime Series
Rating ---------------- Par S&P Moody's (000) Value - ------------------------------------------------------------------------------------------ Commercial Paper (continued) Integrated Oil - 0.9% Shell Oil Co. 5.25% 11/22/96 A-1+ P-1 $25,000 $ 24,810,417 ------------ Machinery & Tools - 1.7% Dover Corp. 5.35% 10/24/96 A-1+ -- 20,000 19,931,639 5.40% 10/25/96 A-1+ -- 20,000 19,928,000 Illinois Tool Works 5.35% 10/1/96 A-1+ P-1 5,000 5,000,000 ------------ 44,859,639 ------------ Oil Transportation - 3.2% Colonial Pipeline 5.43% 10/15/96 A-1+ P-1 17,000 16,964,102 5.45% 10/16/96 A-1+ P-1 20,200 20,154,129 5.39% 11/12/96 A-1+ P-1 15,000 14,905,675 5.43% 12/16/96 A-1+ P-1 6,500 6,425,488 5.44% 1/15/97 A-1+ P-1 12,000 11,807,787 5.47% 2/6/97 A-1+ P-1 14,500 14,217,991 ------------ 84,475,172 ------------ Paper - 0.4% Weyerhaeuser Co. 5.31% 12/3/96 A-1 P-1 11,600 11,492,207 ------------ Pharmaceuticals - 8.8% Abbott Laboratories 5.33% 10/22/96 A-1+ P-1 10,059 10,027,725 5.32% 10/23/96 A-1+ P-1 25,000 24,918,722 5.33% 10/23/96 A-1+ P-1 13,429 13,385,259 Eli Lilly & Co. 5.28% 11/15/96 A-1+ P-1 10,000 9,934,000 5.33% 2/6/97 A-1+ P-1 12,000 11,772,587 5.57% 2/24/97 A-1+ P-1 7,500 7,330,579 Pfizer, Inc. 5.30% 10/10/96 A-1+ P-1 15,000 14,980,125 Schering-Plough Corp. 5.32% 9/18/96 A-1+ P-1 19,700 19,589,374 5.41% 11/14/96 A-1+ P-1 4,400 4,370,906 5.40% 11/19/96 A-1+ P-1 10,000 9,926,500 5.42% 11/26/96 A-1+ P-1 7,000 6,940,982 5.27% 11/26/96 A-1+ P-1 15,000 14,877,033
7 Prime Series Statement of Net Assets (continued) (Unaudited)
Rating September 30, 1996 ---------------- Par S&P Moody's (000) Value - ------------------------------------------------------------------------------------------ Commercial Paper (continued) Pharmaceuticals (concluded) Warner-Lambert Co. 5.27% 10/4/96 A-1+ P-1 $40,000 $ 39,982,433 5.30% 10/30/96 A-1+ P-1 15,000 14,935,958 5.27% 12/6/96 A-1+ P-1 20,000 19,806,767 5.25% 1/15/97 A-1+ P-1 10,000 9,845,417 ------------ 232,624,367 ------------ Publishing - 0.7% Knight-Ridder Inc. 5.35% 10/18/96 A-1+ P-1 7,500 7,481,052 RR Donnelley & Sons, Inc. 5.27% 10/7/96 A-1+ P-1 12,000 11,989,460 ------------ 19,470,512 ------------ Railroad - 1.1% Norfolk Southern Corp. 5.42% 10/29/96 A-1+ P-1 30,000 29,873,533 ------------ Retail, General - 1.9% J.C. Penney Fund Co. 5.28% 10/29/96 A-1+ P-1 20,000 19,920,800 5.39% 11/13/96 A-1+ P-1 15,000 14,903,429 Wal-Mart Stores 5.27% 10/29/96 A-1+ P-1 15,000 14,938,517 ------------ 49,762,746 ------------ Structured Finance - 4.5% CIESCO, L.P. 5.28% 10/30/96 A-1+ P-1 10,000 9,957,466 5.32% 11/26/96 A-1+ P-1 25,000 24,793,111 Corporate Asset Funding Company, Inc. 5.27% 10/10/96 A-1+ P-1 11,000 10,985,508 5.43% 10/16/96 A-1+ P-1 20,000 19,954,750 5.30% 10/25/96 A-1+ P-1 20,000 19,929,333 5.37% 11/21/96 A-1+ P-1 20,000 19,847,850 5.35% 12/20/96 A-1+ P-1 15,000 14,821,667 ------------ 120,289,685 ------------ Telephone - 5.7% Ameritech Capital Funding Corp. 5.34% 10/30/96 A-1+ P-1 20,000 19,913,966 5.29% 12/6/96 A-1+ P-1 25,000 24,757,542 5.20% 12/10/96 A-1+ P-1 15,000 14,848,333 5.40% 1/27/97 A-1+ P-1 15,000 14,734,500
8 Prime Series
Rating ---------------- Par S&P Moody's (000) Value - ------------------------------------------------------------------------------------------ Commercial Paper (concluded) Telephone (concluded) Ameritech Corp. 5.27% 10/18/96 A-1+ P-1 $10,000 $ 9,975,114 5.40% 12/2/96 A-1+ P-1 15,000 14,860,500 BellSouth Telecommunications 5.27% 10/11/96 A-1+ P-1 8,000 7,988,289 5.28% 10/24/96 A-1+ P-1 8,000 7,973,013 Southwestern Bell Telephone Co. 5.39% 10/25/96 A-1+ P-1 25,000 24,910,167 5.31% 10/31/96 A-1+ P-1 11,580 11,528,759 -------------- 151,490,183 -------------- Waste Management - 3.1% WMX Technologies 4.78% 11/1/96 A-1 P-1 10,000 9,958,838 5.32% 11/5/96 A-1 P-1 15,000 14,922,417 5.50% 12/11/96 A-1 P-1 15,000 14,837,292 5.35% 1/24/97 A-1 P-1 15,000 14,743,646 5.67% 4/11/97 A-1 P-1 15,000 14,546,400 5.54% 5/13/97 A-1 P-1 15,000 14,482,933 -------------- 83,491,526 -------------- Total Commercial Paper 2,249,479,632 -------------- Variable Rate Note - 4.7% Associates Corp. Master Note 5.20%(b) 12/1/96 A-1+ P-1 75,000 75,000,000 Coca-Cola Master Note 5.46%(b) 1/17/97 A-1+ P-1 50,000 50,000,000 -------------- Total Variable Rate Note 125,000,000 -------------- Federal Home Loan Bank - 1.3% FHLB 6.00% 11/1/96 AAA -- 25,000 24,885,042 5.28% 1/6/97 AAA -- 10,000 9,857,733 -------------- Total Federal Home Loan Bank 34,742,775 -------------- Federal National Mortgage Association - 3.9% FNMA Discount Note 5.32% 10/3/96 -- P-1 10,000 9,997,044 5.46% 11/15/96 -- P-1 9,000 8,998,663
9 Prime Series Statement of Net Assets (concluded) (Unaudited)
Rating September 30, 1996 ---------------- Par S&P Moody's (000) Value - ------------------------------------------------------------------------------------------ Federal National Mortgage Association (concluded) Note 5.68% 10/7/96 -- P-1 $ 20,000 $ 20,000,561 5.31% 10/18/96 -- P-1 20,000 20,000,000 5.39% 12/4/96 -- P-1 10,000 10,004,361 5.63% 12/19/96 -- P-1 20,000 20,000,000 5.45% 2/13/97 -- P-1 15,000 15,000,000 -------------- Total Federal National Mortgage Association 104,000,629 -------------- Repurchase Agreements - 5.2%(c) Goldman Sachs 5.65%(d) 10/1/96 -- -- 38,600 38,600,000 Morgan Stanley & Co. 5.65%(e) 10/1/96 -- -- 100,000 100,000,000 -------------- Total Repurchase Agreements 138,600,000 -------------- TOTAL INVESTMENTS - 100.0% 2,651,823,036(f) LIABILITIES IN EXCESS OF OTHER ASSETS, NET - 0.0% (307,662) -------------- NET ASSETS - 100.0% $2,651,515,374 -------------- Net Asset Value, Offering and Redemption Price Per: Prime Share ($2,396,184,930 / 2,396,188,105 shares outstanding) $1.00 ----- Flag Investors Class A Share ($6,071,072 / 6,070,838 shares outstanding) $1.00 ----- Flag Investors Class B Share ($599 / 599 shares outstanding) $1.00 ----- Prime Institutional Share ($55,411,841 / 55,412,061 shares outstanding) $1.00 ----- Quality Cash Reserve Prime Share ($193,846,932 / 193,847,114 shares outstanding) $1.00 -----
10 Prime Series (a) Most commercial paper is traded on a discount basis. In such cases, the interest rate shown represents the rate of discount paid or received at time of purchase by the Fund. (b) Master note is payable upon demand by the Fund upon no more than five days' notice. Interest rates on master notes are redetermined weekly. Rates shown are those in effect on September 30, 1996. (c) Collateral on repurchase agreements is taken into possession by 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. (d) Dated 9/30/96 to be repurchased on 10/1/96, collateralized by U.S. Treasury Notes with a market value of $39,372,757. (e) Dated 9/30/96 to be repurchased on 10/1/96, collateralized by U.S. Treasury Notes with a market value of $101,280,062. (f) Aggregate cost for financial reporting and federal tax purposes. MOODY'S RATINGS: Aaa Bonds that are judged to be of the best quality. P-1 Commercial paper bearing this designation is of the best quality. S&P RATINGS: AAA Obligations that are of the highest quality. A-1 Commercial paper that has a strong degree of safety regarding timely payment. Those issues determined to possess very strong safety characteristics are denoted with a plus (+) sign. A detailed description of the above ratings can be found in the Fund's Statement of Additional Information. See Notes to Financial Statements. 11 Prime Series Statement of Operations (Unaudited) For the six months ended September 30, 1996 Investment Income (Note 1): Interest income $73,729,458 ----------- Expenses: Distribution fee (Note 2) 3,661,677 Investment advisory fee (Note 2) 3,651,417 Transfer agent fee 540,474 Printing and postage fees 191,225 Custodian fee 156,070 Registration fees 84,868 Accounting fee (Note 2) 78,911 Other expenses 65,107 Directors' fees 48,158 Legal fees 28,894 ----------- Total expenses 8,506,801 Less: Fees waived (Note 2) (57,988) ----------- Net expenses 8,448,813 ----------- Net investment income 65,280,645 Net realized gain from security transactions -- Net increase in net assets resulting from operations $65,280,645 ----------- See Notes to Financial Statements. 12 Prime Series Statement of Changes in Net Assets September 30, 1996 Six Months Ended Year Ended September 30, March 31, 1996(1) 1996 Increase in Net Assets Operations: Net investment income $ 65,280,645 $ 107,454,378 Net realized loss on sales of investments -- (6,050) -------------- -------------- Net increase in net assets resulting from operations 65,280,645 107,448,328 Distributions to Shareholders From: Net investment income: Prime Shares (59,516,901) (99,181,255) Prime Institutional Shares (1,619,636) (1,334,079) Flag Investors Class A Shares (140,207) (402,702) Flag Investors Class B Shares (132) (300) Quality Cash Reserve Prime Shares (4,003,769) (6,536,042) -------------- -------------- Total distributions (65,280,645) (107,454,378) Capital Share Transactions, net - (Note 3) 48,735,599 1,016,482,516 -------------- -------------- Total increase in net assets 48,735,599 1,016,476,466 Net Assets: Beginning of period 2,602,779,775 1,586,303,309 -------------- -------------- End of period $2,651,515,374 $2,602,779,775 (1) Unaudited. See Notes to Financial Statements. 13 Prime Series - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) Prime Shares - -------------------------------------------------------------------------------- Six months ended September 30, 1996(1) - -------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value at beginning of period $ 1.00 Income from Investment Operations: Net investment income 0.0239 Less Distributions: Dividends from net investment income and/or short-term gains (0.0239) Net asset value at end of period $ 1.00 Total Return: Based on net asset value per share 4.82%(2) Ratios to Average Daily Net Assets: Expenses 0.60%(2) Net investment income 4.77%(2) Supplemental Data: Net assets at end of period $2,396,184,930 Number of shares outstanding at end of period 2,396,188,105 - -------------------- (1) Unaudited. (2) Annualized. 14 Prime Series - -------------------------------------------------------------------------------- Prime Shares (continued) - --------------------------------------------------------------------------------
Year ended March 31, - ------------------------------------------------------------------------------------------------------------------------------------ 1996 1995 1994 1993 1992 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from Investment Operations: Net investment income 0.0524 0.0442 0.0262 0.0295 0.0485 Less Distributions: Dividends from net investment income and/or short-term gains (0.0524) (0.0442) (0.0262) (0.0295) (0.0485) Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return: Based on net asset value per share 5.36% 4.51% 2.65% 2.99% 4.96% Ratios to Average Daily Net Assets: Expenses 0.60% 0.61% 0.62% 0.63% 0.61% Net investment income 5.21% 4.46% 2.62% 2.95% 4.84% Supplemental Data: Net assets at end of period $2,386,681,216 $1,472,079,739 $1,350,334,979 $1,470,711,552 $1,505,012,086 Number of shares outstanding at end of period 2,386,684,392 1,472,077,488 1,350,332,916 1,470,709,489 1,505,010,023
See Notes to Financial Statements. 15 Prime Series - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) Flag Investors Cash Reserve Prime Shares--Class A - -------------------------------------------------------------------------------- Six months ended September 30, 1996(1) - -------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value at beginning of period $ 1.00 Income from Investment Operations: Net investment income 0.0239 Less Distributions: Dividends from net investment income and/or short-term gains (0.0239) Net asset value at end of period $ 1.00 Total Return: Based on net asset value per share 4.82%(2) Ratios to Average Daily Net Assets: Expenses 0.60%(2) Net investment income 4.77%(2) Supplemental Data: Net assets at end of period $6,071,072 Number of shares outstanding at end of period 6,070,838 - ------------------ (1) Unaudited. (2) Annualized. 16 Prime Series - -------------------------------------------------------------------------------- Flag Investors Cash Reserve Prime Shares--Class A (continued) - --------------------------------------------------------------------------------
Year ended March 31, - --------------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from Investment Operations: Net investment income 0.0524 0.0442 0.0262 0.0295 0.0485 Less Distributions: Dividends from net investment income and/or short-term gains (0.0524) (0.0442) (0.0262) (0.0295) (0.0485) Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return: Based on net asset value per share 5.36% 4.51% 2.65% 2.99% 4.96% Ratios to Average Daily Net Assets: Expenses 0.60% 0.61% 0.62% 0.63% 0.61% Net investment income 5.25% 4.26% 2.62% 2.95% 4.84% Supplemental Data: Net assets at end of period $5,976,831 $7,726,696 $18,116,648 $10,392,282 $7,350,424 Number of shares outstanding at end of period 5,976,824 7,726,698 18,116,633 10,392,267 7,350,409
See Notes to Financial Statements. 17 Prime Series - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) Flag Investors Cash Reserve Prime Shares--Class B - -------------------------------------------------------------------------------- Six months ended September 30, 1996(1) - -------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value at beginning of period $ 1.00 Income from Investment Operations: Net investment income 0.0200 Less Distributions: Dividends from net investment income (0.0200) Net asset value at end of period $ 1.00 Total Return: Based on net asset value per share 4.07%(3) Ratios to Average Daily Net Assets: Expenses 1.35%(3) Net investment income 4.02%(3) Supplemental Data: Net assets at end of period $ 599 Number of shares outstanding at end of period 599 - ------------------ (1) Unaudited. (2) Commencement of operations. (3) Annualized. 18 Prime Series - -------------------------------------------------------------------------------- Flag Investors Cash Reserve Prime Shares--Class B (continued) - -------------------------------------------------------------------------------- April 3, 1995(2) through March 31, 1996 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 Income from Investment Operations: Net investment income 0.0361 Less Distributions: Dividends from net investment income (0.0361) Net asset value at end of period $ 1.00 Total Return: Based on net asset value per share 3.69%(3) Ratios to Average Daily Net Assets: Expenses 1.38%(3) Net investment income 4.30%(3) Supplemental Data: Net assets at end of period $10,200 Number of shares outstanding at end of period 10,200 See Notes to Financial Statements. 19 Prime Series - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) Prime Institutional Shares - -------------------------------------------------------------------------------- Six months ended September 30, 1996(1) - -------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value at beginning of period $ 1.00 Income from Investment Operations: Net investment income 0.0252 Less Distributions: Dividends from net investment income and/or short-term gains (0.0252) Net asset value at end of period $ 1.00 Total Return: Based on net asset value per share 5.07%(2) Ratios to Average Daily Net Assets: Expenses 0.35%(2) Net investment income 5.02%(2) Supplemental Data: Net assets at end of period $55,411,841 Number of shares outstanding at end of period 55,412,061 - ---------------- (1) Unaudited. (2) Annualized. 20 Prime Series - -------------------------------------------------------------------------------- Prime Institutional Shares (continued) - --------------------------------------------------------------------------------
Year ended March 31, - ----------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from Investment Operations: Net investment income 0.0548 0.0472 0.0294 0.0327 0.0515 Less Distributions: Dividends from net investment income and/or short-term gains (0.0548) (0.0472) (0.0294) (0.0327) (0.0515) Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total Return: Based on net asset value per share 5.62% 4.82% 2.98% 3.32% 5.27% Ratios to Average Daily Net Assets: Expenses 0.35% 0.36% 0.30% 0.31% 0.32% Net investment income 5.32% 4.57% 2.94% 3.24% 5.34% Supplemental Data: Net assets at end of period $53,699,315 $11,904,716 $23,437,449 $28,884,078 $21,867,108 Number of shares outstanding at end of period 53,699,535 11,904,663 23,437,512 28,884,132 21,867,108
See Notes to Financial Statements. 21 Prime Series - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) Quality Cash Reserve Prime Shares - -------------------------------------------------------------------------------- Six months ended September 30, 1996(1) - -------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value at beginning of period $ 1.00 Income from Investment Operations: Net investment income 0.0225 Less Distributions: Dividends from net investment income and/or short-term gains (0.0225) Net asset value at end of period $ 1.00 Total Return: Based on net asset value per share 4.47%(3) Ratios to Average Daily Net Assets: Expenses 0.89%(3,4) Net investment income 4.48%(3,5) Supplemental Data: Net assets at end of period $193,846,933 Number of shares outstanding at end of period 193,847,114 - ---------------- (1) Unaudited. (2) Commencement of operations. (3) Annualized. (4) Ratio of expenses to average daily net assets prior to partial fee waivers was 0.95% and 0.95% for the six months ended September 30, 1996 and the year ended March 31, 1996, respectively. (5) Ratio of net investment income to average daily net assets prior to partial fee waivers was 4.42% and 4.86% for the six months ended September 30, 1996 and the year ended March 31, 1996, respectively. 22 Prime Series - -------------------------------------------------------------------------------- Quality Cash Reserve Prime Shares (continued) - --------------------------------------------------------------------------------
May 6, 1991(2) through Year ended March 31, March 31, 1992 - ----------------------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- ------- ------- Income from Investment Operations: Net investment income 0.0493 0.0402 0.0218 0.0253 0.0399 Less Distributions: Dividends from net investment income and/or short-term gains (0.0493) (0.0402) (0.0218) (0.0253) (0.0399) ------- ------- ------- ------- ------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======= ======= Total Return: Based on net asset value per share 5.04% 4.09% 2.20% 2.53% 4.30%(3) Ratios to Average Daily Net Assets: Expenses 0.90%(4) 0.96% 1.06% 1.04% 0.96%(3) Net investment income 4.91%(5) 4.04% 2.18% 2.53% 4.30%(3) Supplemental Data: Net assets at end of period $156,412,213 $94,592,158 $92,678,440 $101,321,868 $94,887,669 Number of shares outstanding at end of period 156,412,393 94,591,979 92,678,268 101,321,668 94,887,669
See Notes to Financial Statements. 23 Prime Series Notes to Financial Statements NOTE 1--Significant Accounting Policies Alex. Brown Cash Reserve Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Fund is organized as a Maryland corporation consisting of three different portfolios, the Prime Series, the Treasury Series and the Tax-Free Series. The Prime Series consists of five different classes of shares: 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 Alex. Brown Cash Reserve Prime Institutional Shares ("Prime Institutional Shares"). Matters affecting each class are voted on exclusively by the shareholders of that class. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuation--The Fund maintains a dollar-weighted average maturity of 90 days or less for each portfolio. The securities of each portfolio are valued on the basis of amortized cost, which approximates market value. This method values a security at its cost on the date of purchase, and thereafter, assumes a constant amortization to maturity of any original issue or other discount or premium. B. Security Transactions, Investment Income and Distributions--Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales, if any, are computed on the basis of specific identification of the securities sold. Interest income is recorded on an accrual basis and includes, when applicable, amortization of premiums and accretion of discounts. Dividends to shareholders are declared daily and distributions or reinvestments of the dividends are made monthly. C. Repurchase Agreement--The Prime Series may agree to purchase money market instruments subject to the seller's agreement to repurchase them at an agreed upon date and price. The seller, under a repurchase agreement, will be required on a daily basis to maintain the value of the securities subject to the agreement at not less than the repurchase price. The agreement is conditioned upon the collateral being deposited under the Federal Reserve book-entry system. 24 Prime Series Notes to Financial Statements (continued) NOTE 1--concluded D. Federal Income Taxes--The Fund intends to comply with the requirements of the Internal Revenue Code necessary to continue to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) that is distributed to shareholders. Each portfolio is treated as a separate entity for federal income tax purposes. E. Expenses--Operating expenses directly attributable to a class of shares are charged to that class' operations. Expenses of the Fund that are not directly attributable to a specific class are prorated among the classes to which the expense relates based on the relative net assets of each class. NOTE 2--Advisory Fees and Transactions with Other Affiliates The Fund has entered into an investment advisory agreement with Investment Company Capital Corp. ("ICC"), a subsidiary of Alex. Brown Financial Corp., with respect to the Prime Series. Under the terms of the investment advisory agreement, 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: .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 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, calculated daily and paid monthly, at the annual rate of .02% of the Prime Series' average daily net assets. Prior to August 23, 1995, ICC received 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: .25% of the first $500 million, .21% of the next $500 million, .20% of the next $500 million and .19% of that portion in excess of $1.5 billion. ICC may, from time to time, voluntarily waive a portion of its advisory fee with respect to the Prime Series to preserve or enhance the performance of the Series as compared to certain industry benchmarks. No advisory fees were waived for the six months ended September 30, 1996. Under the terms of these agreements, ICC and the Fund's distributor will, from time to time, voluntarily waive or reimburse a portion of their advisory or distribution fees, respectively, with respect to the Prime Series or any class to preserve or enhance the Series' or class' performance. Such voluntary waivers would not be contractual and would be subject to change. Any reimbursement by ICC or the distributor would be limited to the fees actually received by them for such fiscal year. 25 Prime Series Notes to Financial Statements (continued) NOTE 2--concluded As compensation for its accounting services, ICC receives from the Prime Series an annual fee, calculated daily and paid monthly, based on the Series' average daily net assets. ICC received $78,911 for accounting services for the six months ended September 30, 1996 for the Prime Series. As compensation for its transfer agent services, ICC receives from the Prime Series a per account fee, calculated and paid monthly. ICC received $540,474 for transfer agent services for the six months ended September 30, 1996 for the Prime Series. The Fund has entered into a distribution agreement with Alex. Brown & Sons Incorporated ("Alex. Brown"). Under the terms of the distribution agreement, Alex. Brown receives a fee from the Prime Shares and Flag Investors Class A Shares, at the annual rate of .25% of the aggregate average daily net assets of these classes of shares. Alex. Brown also receives a fee from the Quality Cash Shares and Flag Investors Class B Shares at the annual rate of .60% and 1.00%, respectively, of the aggregate average daily net assets of each class. Alex. Brown voluntarily waived distribution fees in the amount of $57,988 for the Quality Cash Shares for the six months ended September 30, 1996. The Fund complex of which the Fund is a part has adopted a retirement plan for eligible Directors. The actuarially computed pension expense allocated to the Fund for the period January 1, 1996 through September 30, 1996 was approximately $40,500 and the accrued liability was approximately $211,000 for the Prime Series. NOTE 3--Capital Stock and Share Information The Fund is authorized to issue up to 6,400,000,000 shares of $.001 par value capital stock (3,550,000,000 Prime Series). Changes in shares outstanding during the periods ended September 30, 1996 and March 31, 1996 are listed on the following page. 26 Prime Series Notes to Financial Statements (concluded) NOTE 3--concluded September 30, 1996 (Unaudited) March 31, 1996 ------------------ -------------- Prime Series: Sold: Prime Shares 10,938,844,772 19,439,463,533 Flag Investors Class A Shares 3,613,116 12,118,053 Flag Investors Class B Shares 4,670 24,535 Prime Institutional Shares 203,535,745 213,159,539 Quality Cash Shares 503,778,591 1,285,040,597 Issued as reinvestment of dividends: Prime Shares 56,307,220 93,103,137 Flag Investors Class A Shares 133,453 374,561 Flag Investors Class B Shares 399 -- Prime Institutional Shares 1,211,277 753,855 Quality Cash Shares 3,842,527 6,300,386 Redeemed: Prime Shares (10,985,648,278) (18,617,959,766) Flag Investors Class A Shares (3,652,327) (14,242,488) Flag Investors Class B Shares (14,671) (14,335) Prime Institutional Shares (203,034,496) (172,118,522) Quality Cash Shares (470,186,399) (1,229,520,569) --------------- --------------- Net increase 48,735,599 1,016,482,516 =============== =============== NOTE 4--Net Assets At September 30, 1996, net assets consisted of: Prime Series ------ Paid-in capital $2,651,518,882 Undistributed net investment income 2,187 Undistributed net realized loss on sales of investments (5,695) -------------- $2,651,515,374 ============== 27 Board of Directors - -------------------------------------------------------------------------------- W. JAMES PRICE Chairman CHARLES W. COLE JR. EUGENE J. McDONALD Director Director JAMES J. CUNNANE REBECCA W. RIMEL Director Director RICHARD T. HALE TRUMAN T. SEMANS Director Director JOHN F. KROEGER CARL W. VOGT, Esq. Director Director LOUIS E. LEVY HARRY WOOLF Director Director Officers - -------------------------------------------------------------------------------- W. James Price M. Elliott Randolph, Jr. Joseph A. Finelli Chairman Vice President Treasurer Richard T. Hale Paul D. Corbin Edward J. Stoken President Vice President Secretary Edward J. Veilleux Monica M. Hausner Laurie D. DePrine Executive Vice President Vice President Assistant Secretary Scott J. Liotta Vice President - -------------------------------------------------------------------------------- Distributor Custodian Alex. Brown & Sons PNC Bank, N.A. Incorporated 17th and Chestnut Streets 135 East Baltimore Street Philadelphia, PA 19101 Baltimore, MD 21202 (410) 727-1700 Transfer Agent Investment Company Capital Corp. Investment Advisor 135 East Baltimore Street Investment Company Capital Corp. Baltimore, MD 21202 135 East Baltimore Street (800) 553-8080 Baltimore, MD 21202 Auditors Coopers & Lybrand L.L.P. 217 E. Redwood Street Baltimore, MD 21202 - -------------------------------------------------------------------------------- 28 This report is submitted for the general information of shareholders of Flag Investors Cash Reserve Prime Shares. The report may be distributed only to current shareholders or to persons who have received a current prospectus. For more complete information regarding any of the Flag Investors Funds, including charges and expenses, obtain a prospectus from your investment representative or directly from the Fund at 1-800-767-FLAG. Read it carefully before you invest. [FLAG INVESTORS LOGO] FLAG INVESTORS Growth Flag Investors Emerging Growth Fund Flag Investors Equity Partners Fund Flag Investors International Fund Equity Income Flag Investors Real Estate Securities Fund Flag Investors Telephone Income Fund Balanced Flag Investors Value Builder Fund Income Flag Investors Intermediate-Term Income Fund Flag Investors Total Return U.S. Treasury Fund Shares Tax-Free Income Flag Investors Managed Municipal Fund Shares Flag Investors Maryland Intermediate Tax-Free Income Fund Current Income Flag Investors Cash Reserve Prime Shares P.O. Box 515 Baltimore, Maryland 800-767-FLAG Distributed by: Alex. Brown & Sons INCORPORATED -----END PRIVACY-ENHANCED MESSAGE-----