-----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, RcSyO0c6dToIO5s7+5mGVqlBLSO0SrLnljK9oAjmE4ia2k9qhigppGBuY+8BGriG jKzd9bZak2rhU0yjkr/6RQ== 0000950169-98-000576.txt : 19980527 0000950169-98-000576.hdr.sgml : 19980527 ACCESSION NUMBER: 0000950169-98-000576 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980526 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BT ALEX BROWN 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: SEC FILE NUMBER: 811-03196 FILM NUMBER: 98631109 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 FORMER COMPANY: FORMER CONFORMED NAME: BROWN ALEX CASH RESERVE FUND INC DATE OF NAME CHANGE: 19920703 N-30D 1 QUALITY CASH RESERVE PRIME SHARES QUALITY CASH RESERVE PRIME SHARES Annual Report March 31, 1998 Fund Features - -------------------------------------------------------------------------------- o Daily Dividends The Fund declares dividends daily and distributes them monthly in the form of additional shares. o 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. o 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. o 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 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. o Minimum Investment The minimum initial investment is $1,500. Subsequent investments may be made in an amount of $100 or more. o Current Yield Information Available For current yield information, call (410) 895-5995. This report is prepared for the general information of shareholders of Quality Cash Reserve Prime Shares. It may be distributed only to current shareholders or to persons who have received a current prospectus. Letter to Shareholders - -------------------------------------------------------------------------------- May 4, 1998 We are pleased to report on the progress of your Fund for the fiscal year ended March 31, 1998. YEAR IN REVIEW The current U.S. economic environment is near perfect. Steady growth and low inflation are fueling the expansion into a seventh year. The economic impact of an unseasonably warm winter has been a surge in single family home sales and residential construction. The latest National Purchasing Managers report indicates continued strength in private domestic demand while the latest unemployment statistics show persistent tightness of labor markets. Over the six months ended March 31, the Dow Jones Industrial Average has returned 12%, the yield on the ten year Treasury Note has decreased from 6.10% to 5.65% and consumer inflation has fallen to 2%. In the money market arena, the yield curve remains flat with Federal Funds at 5.50%, and top tier commercial paper in one, three and six month maturities yielding 5.55%, 5.60% and 5.62% respectively. The Federal Reserve Board's Open Market Committee met on March 31st and decided to keep interest rates steady, continuing a policy which favors neither tightening nor easing. [CHART APPEARS HERE -- SEE PLOT POINTS BELOW] Historical Yield Chart (For the year ended March 31, 1998) Quality Cash Reserve Prime Shares 3/31/97 4.45 4/30/97 4.53 5/31/97 4.61 6/30/97 4.65 7/30/97 4.66 8/31/97 4.65 9/30/97 4.64 10/31/97 4.66 11/30/97 4.68 12/31/97 4.78 1/31/98 4.71 2/28/98 4.66 3/31/98 4.65 1 Letter to Shareholders (continued) - -------------------------------------------------------------------------------- PORTFOLIO QUALITY In keeping with our conservative investment policies, the Fund has maintained a relatively short weighted average maturity as noted in the chart below. - ---------------------------------------------------- Weighted Average Maturity (As of March 31, 1998) - ---------------------------------------------------- Quality Cash Reserve Prime Shares 47 days First Tier Money Fund Average 62 days - ---------------------------------------------------- Source: IBC/Donoghue, Inc. "Money Fund Report," April 4, 1998. The Money Fund Average is the average maturity of all funds in the category. In addition to conservative maturity management, Fund policy requires that the Fund invest only in the highest quality issues. Evidence of our insistence on high quality can be found in the Standard & Poor's (S&P) ratings of 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. Our conservative approach can be seen in every aspect of portfolio construction. This includes unusually strict limits on exposure to any issue and a predominance of the very highest rated paper. We have always believed that a money fund is not a place to take chances or to speculate for additional yield. 2 Letter to Shareholders (concluded) - -------------------------------------------------------------------------------- MARKET OUTLOOK Despite all this good news, there are economic storm clouds that bear watching. Stock market performance has made a significant contribution to the support of economic growth. If there is a change in consumer confidence or foreign investor attitudes toward U.S. financial assets, any resulting weakness in the equity market could have a negative influence on the economy. On the interest rate front there seems to be an absence of factors acting as a restraint on the economy. The Asian crisis, which was initially perceived as providing this influence, has seemingly retreated to the sidelines as a threat. The slope of the yield curve and the level of real interest rates are proving equally ineffective as moderating influences. The Federal Reserve Board may feel compelled to act by adopting a tightening bias in the near future. As always, we appreciate your continued support. Sincerely, /s/ Richard T. Hale ___________________ Richard T. Hale Chairman 3 PRIME SERIES - -------------------------------------------------------------------------------- Statement of Net Assets March 31, 1998 Rating(g) -------------- Par S&P Moody's (000) Value - -------------------------------------------------------------------------------- Commercial Paper - 84.7%(a) Automotive Finance - 3.8% PACCAR Financial Corp. 5.35% 7/27/98 A-1+ P-1 $ 5,000 $ 4,913,062 Toyota Motor Credit Corp. 5.46% 5/1/98 A-1+ P-1 20,000 19,909,000 5.50% 5/4/98 A-1+ P-1 54,750 54,474,787 5.51% 5/6/98 A-1+ P-1 30,000 29,839,292 5.46% 5/8/98 A-1+ P-1 15,000 14,915,825 5.50% 5/14/98 A-1+ P-1 15,500 15,398,174 ------------ 139,450,140 ------------ Banks - 0.8% Republic New York Corp. 5.41% 5/1/98 A-1+ P-1 30,000 29,864,750 ------------ 29,864,750 ------------ Beverages- Soft Drinks - 1.7% Coca-Cola Co. 5.39% 4/3/98 A-1+ P-1 25,000 24,992,514 5.38% 4/21/98 A-1+ P-1 20,000 19,940,222 5.40% 4/23/98 A-1+ P-1 20,000 19,934,000 ------------ 64,866,736 ------------ Chemicals, General - 2.9% E.I. duPont de Nemours and Co. 5.34% 4/7/98 A-1+ P-1 15,000 14,986,650 5.34% 4/8/98 A-1+ P-1 25,000 24,974,042 5.46% 5/11/98 A-1+ P-1 25,000 24,848,333 5.44% 6/25/98 A-1+ P-1 25,000 24,678,889 5.345% 8/14/98 A-1+ P-1 20,000 19,599,125 ------------ 109,087,039 ------------ Chemicals, Specialty - 0.8% Lubrizol 5.50% 4/1/98 A-1+ P-1 30,000 30,000,000 ------------ 30,000,000 ------------ Computer & Office Equipment - 1.4% Pitney Bowes Credit Corp. 5.43% 4/10/98 A-1+ P-1 30,000 29,959,275 5.48% 5/14/98 A-1+ P-1 23,500 23,346,179 ------------ 53,305,454 ------------ 4 PRIME SERIES - -------------------------------------------------------------------------------- Rating(g) -------------- Par S&P Moody's (000) Value - -------------------------------------------------------------------------------- Commercial Paper (continued) Consumer Products - 3.6% Eastman Kodak Co. 5.52% 4/10/98 A-1+ P-1 $15,000 $ 14,979,300 5.52% 4/14/98 A-1+ P-1 15,000 14,970,100 5.52% 4/21/98 A-1+ P-1 15,000 14,954,000 5.52% 4/22/98 A-1+ P-1 15,000 14,951,700 5.52% 4/23/98 A-1+ P-1 23,600 23,520,389 5.48% 5/5/98 A-1+ P-1 20,000 19,896,489 5.51% 5/12/98 A-1+ P-1 15,000 14,905,871 5.50% 5/21/98 A-1+ P-1 15,000 14,885,417 ------------ 133,063,266 ------------ Electrical & Electronics - 5.7% Emerson Electric Co. 5.50% 4/13/98 A-1+ P-1 40,000 39,926,667 5.49% 4/17/98 A-1+ P-1 25,000 24,939,000 5.48% 4/20/98 A-1+ P-1 22,000 21,936,372 Motorola Inc. 5.42% 4/6/98 A-1+ P-1 20,000 19,984,944 5.48% 5/12/98 A-1+ P-1 25,000 24,843,972 5.48% 5/21/98 A-1+ P-1 40,000 39,695,555 5.47% 6/25/98 A-1+ P-1 40,000 39,483,389 ------------ 210,809,899 ------------ Electric Utility - 1.8% Citizens Utilities Co. 5.48% 6/19/98 A-1+ P-1 20,000 19,759,489 Duke Energy Co. 5.43% 4/7/98 A-1+ P-1 25,000 24,977,375 5.47% 5/28/98 A-1+ P-1 20,600 20,421,587 ------------ 65,158,451 ------------ Entertainment - 1.5% Walt Disney Co. 5.63% 4/23/98 A-1 P-1 25,000 24,913,986 5.44% 7/16/98 A-1 P-1 30,000 29,519,467 ------------ 54,433,453 ------------ Finance, Consumer - 4.1% USAA Capital Corp. 5.41% 4/7/98 A-1+ P-1 15,000 14,986,475 5.46% 4/24/98 A-1+ P-1 25,000 24,912,792 5.44% 5/4/98 A-1+ P-1 25,000 24,875,333 5.42% 5/12/98 A-1+ P-1 30,000 29,814,817 5.47% 5/12/98 A-1+ P-1 20,000 19,781,200 5.47% 6/19/98 A-1+ P-1 15,000 14,819,946 5.47% 7/17/98 A-1+ P-1 25,000 24,593,549 ------------ 153,784,112 ------------ 5 PRIME SERIES - -------------------------------------------------------------------------------- Statement of Net Assets (continued) March 31, 1998 Rating(g) -------------- Par S&P Moody's (000) Value - -------------------------------------------------------------------------------- Commercial Paper (continued) Finance, Diversified - 3.9% General Electric Capital Corp. 5.44% 4/14/98 A-1+ P-1 $20,000 $ 19,960,711 5.44% 4/21/98 A-1+ P-1 30,000 29,909,333 5.56% 4/23/98 A-1+ P-1 15,000 14,949,033 5.35% 5/12/98 A-1+ P-1 15,212 15,119,312 5.35% 6/19/98 A-1+ P-1 24,400 24,113,537 5.40% 7/6/98 A-1+ P-1 25,000 24,640,000 5.46% 7/9/98 A-1+ P-1 16,883 16,629,502 ------------ 145,321,428 ------------ Food - 5.0% Campbell Soup Co. 5.54% 4/17/98 A-1+ P-1 4,000 3,990,151 5.35% 10/5/98 A-1+ P-1 35,000 34,027,340 Cargill, Inc. 5.37% 4/23/98 A-1+ P-1 10,000 9,967,183 5.52% 5/5/98 A-1+ P-1 20,000 19,895,733 5.46% 5/12/98 A-1+ P-1 25,000 24,844,542 5.44% 5/26/98 A-1+ P-1 40,000 39,667,785 5.46% 6/2/98 A-1+ P-1 15,000 14,858,950 5.45% 6/10/98 A-1+ P-1 25,000 24,735,069 Kellogg Co. 5.51% 4/28/98 A-1+ P-1 12,364 12,312,906 ------------ 184,299,659 ------------ Household Products - 3.3% Colgate-Palmolive Co. 5.49% 4/30/98 A-1 P-1 35,000 34,845,212 Proctor & Gamble Co. 5.48% 5/4/98 A-1+ P-1 40,000 39,799,067 5.35% 6/2/98 A-1+ P-1 25,000 24,769,653 5.35% 6/26/98 A-1+ P-1 25,000 24,680,486 ------------ 124,094,418 ------------ Insurance, Brokerage - 2.6% Marsh & McLennan Companies Inc. 5.44% 6/11/98 A-1+ P-1 20,000 19,785,422 5.47% 7/23/98 A-1+ P-1 15,000 14,742,454 5.39% 9/8/98 A-1+ P-1 20,000 19,520,889 5.43% 9/16/98 A-1+ P-1 15,000 14,619,900 5.28% 10/20/98 A-1+ P-1 30,000 29,110,078 ------------ 97,778,743 ------------ 6 PRIME SERIES - -------------------------------------------------------------------------------- Rating(g) -------------- Par S&P Moody's (000) Value - -------------------------------------------------------------------------------- Commercial Paper (continued) Insurance, Property & Casualty - 3.9% A.I. Credit Corp. 5.44% 4/9/98 A-1+ P-1 $15,000 $ 14,981,867 5.43% 5/6/98 A-1+ P-1 50,000 49,736,042 5.35% 5/11/98 A-1+ P-1 30,000 29,821,667 5.33% 6/12/98 A-1+ P-1 20,000 19,786,800 5.36% 7/7/98 A-1+ P-1 30,000 29,566,733 ------------ 143,893,109 ------------ Integrated Oil - 6.3% Amoco Co. 5.41% 4/7/98 A-1+ P-1 25,000 24,977,458 5.40% 4/16/98 A-1+ P-1 30,000 29,932,500 5.37% 4/27/98 A-1+ P-1 30,000 29,883,650 5.40% 5/12/98 A-1+ P-1 30,000 29,815,500 5.42% 6/16/98 A-1+ P-1 25,000 24,713,944 5.43% 7/21/98 A-1+ P-1 20,000 19,665,150 Shell Oil Co. 5.41% 4/9/98 A-1+ P-1 50,000 49,939,889 5.45% 6/12/98 A-1+ P-1 25,000 24,727,500 ------------ 233,655,591 ------------ Machinery & Tools - 1.5% Dover Corp. 5.48% 4/17/98 A-1 NR 17,500 17,457,378 5.53% 4/21/98 A-1 NR 20,000 19,938,556 Snap-On Incorporated 5.48% 4/9/98 A-1+ P-1 20,000 19,975,644 ------------ 57,371,578 ------------ Natural Gas - 0.7% Consolidated Natural Gas 5.50% 4/17/98 A-1+ P-1 25,000 24,938,889 ------------ 24,938,889 ------------ Oil Transportation - 2.8% Colonial Pipeline Co. 5.50% 4/6/98 A-1+ P-1 15,000 14,988,542 5.62% 4/22/98 A-1+ P-1 15,000 14,950,825 5.48% 4/28/98 A-1+ P-1 13,000 12,946,570 5.52% 5/27/98 A-1+ P-1 15,000 14,871,200 5.63% 6/10/98 A-1+ P-1 13,000 12,857,686 5.47% 6/23/98 A-1+ P-1 19,000 18,760,384 5.62% 6/29/98 A-1+ P-1 15,000 14,791,592 ------------ 104,166,799 ------------ 7 PRIME SERIES - -------------------------------------------------------------------------------- Statement of Net Assets (continued) March 31, 1998 Rating(g) -------------- Par S&P Moody's (000) Value - -------------------------------------------------------------------------------- Commercial Paper (continued) Paper - 4.5% Kimberly-Clark Corp. 5.51% 4/29/98 A-1+ P-1 $50,500 $ 50,283,579 5.50% 4/30/98 A-1+ P-1 27,300 27,179,046 Minnesota Mining & Manufacturing Co. 5.38% 4/20/98 A-1+ P-1 38,910 38,799,412 5.35% 5/19/98 A-1+ P-1 20,000 19,857,333 5.35% 5/20/98 A-1+ P-1 30,000 29,781,542 ------------ 165,900,912 ------------ Pharmaceuticals - 6.9% Abbott Laboratories 5.48% 4/7/98 A-1+ P-1 30,000 29,972,600 5.47% 4/8/98 A-1+ P-1 36,000 35,961,710 Merck & Co., Inc. 5.38% 4/24/98 A-1+ P-1 75,000 74,742,208 Pfizer Inc. 5.46% 5/4/98 A-1+ P-1 48,000 47,759,760 Schering-Plough Corp. 5.42% 4/14/98 A-1+ P-1 11,835 11,811,836 5.36% 5/20/98 A-1+ P-1 8,000 7,941,636 Warner-Lambert Co. 5.36% 7/24/98 A-1+ P-1 50,000 49,151,333 ------------ 257,341,083 ------------ Publishing - 1.5% Gannett Co., Inc. 5.45% 4/9/98 A-1+ P-1 20,000 19,975,778 5.50% 4/14/98 A-1+ P-1 20,000 19,960,278 Times Mirror Co. 5.52% 6/5/98 A-1 P-1 16,000 15,840,533 ------------ 55,776,589 ------------ Structured Finance - 9.0% CIESCO, L.P. 5.43% 4/8/98 A-1+ P-1 20,000 19,978,883 5.50% 4/17/98 A-1+ P-1 25,000 24,938,889 5.43% 4/29/98 A-1+ P-1 30,000 29,873,300 5.50% 5/15/98 A-1+ P-1 15,000 14,899,167 5.47% 5/15/98 A-1+ P-1 20,000 19,866,289 5.47% 5/22/98 A-1+ P-1 15,000 14,883,762 5.50% 5/28/98 A-1+ P-1 25,000 24,782,292 8 PRIME SERIES - -------------------------------------------------------------------------------- Rating(g) -------------- Par S&P Moody's (000) Value - -------------------------------------------------------------------------------- Commercial Paper (continued) Structured Finance (concluded) Corporate Receivables Corp. 5.45% 4/9/98 A-1 P-1 $ 25,000 $ 24,969,722 5.48% 5/13/98 A-1 P-1 20,000 19,872,133 Corporate Asset Funding Co., Inc. 5.43% 4/08/98 A-1+ P-1 35,000 34,963,104 5.40% 4/13/98 A-1+ P-1 15,000 14,973,000 5.44% 4/23/98 A-1+ P-1 25,000 24,916,889 5.43% 4/24/98 A-1+ P-1 22,250 22,172,811 5.45% 4/28/98 A-1+ P-1 20,000 19,918,250 5.50% 6/11/98 A-1+ P-1 25,000 24,728,819 -------------- 335,737,310 -------------- Telephone - 4.7% Ameritech Capital Funding Corp. 5.50% 4/9/98 A-1+ P-1 15,000 14,981,667 5.40% 4/24/98 A-1+ P-1 15,000 14,948,250 5.45% 4/27/98 A-1+ P-1 20,000 19,921,278 Ameritech Corp. 5.395% 6/9/98 A-1+ P-1 25,000 24,741,490 AT&T Corp. 5.50% 4/8/98 A-1+ P-1 20,000 19,978,611 Bell Atlantic Network Funding Corp. 5.52% 4/22/98 A-1+ P-1 20,000 19,935,600 Bell Atlantic Financial Services Corp. 5.51% 5/7/98 A-1 P-1 15,000 14,917,350 SBC Communications Inc. 5.33% 4/17/98 A-1+ P-1 20,000 19,952,622 5.44% 5/27/98 A-1+ P-1 25,000 24,788,444 -------------- 174,165,312 -------------- Total Commercial Paper 3,148,264,720 -------------- Variable Rate Notes - 3.3% Associates Corp. Master Note 5.497%(b) 6/1/98 A-1+ P-1 75,000 75,000,000 Coca-Cola Co. Master Note 5.417%(b) 9/9/98 A-1+ P-1 50,000 50,000,000 -------- -------------- Total Variable Rate Notes 125,000 125,000,000 -------- -------------- 9 PRIME SERIES - -------------------------------------------------------------------------------- Statement of Net Assets (concluded) March 31, 1998 Rating(g) -------------- Par S&P Moody's (000) Value - -------------------------------------------------------------------------------- Federal Home Loan Bank - 3.1% FHLB 5.43% 5/6/98 AAA -- $ 20,000 $ 19,894,417 5.72% 6/30/98 AAA -- 20,000 20,000,000 5.24% 7/17/98 AAA -- 34,580 34,041,436 5.70% 3/17/99 AAA -- 20,000 20,000,000 5.65% 3/30/99 AAA -- 20,000 20,000,000 -------- -------------- Total Federal Home Loan Bank 114,580 113,935,853 -------- -------------- Federal National Mortgage Association - 3.6% FNMA Note 5.61% 5/14/98 -- P-1 20,000 20,000,000 5.74% 6/9/98 -- P-1 15,000 15,000,000 5.28% 7/13/98 -- P-1 25,000 24,622,333 5.35% 7/16/98 -- P-1 30,000 30,000,000 5.37% 8/12/98 -- P-1 20,000 20,000,000 5.47% 9/14/98 -- P-1 25,000 25,000,000 -------- -------------- Total Federal National Mortgage Association 135,000 134,622,333 -------- -------------- Repurchase Agreements - 5.4%(c) Goldman, Sachs & Co. 5.86% 4/1/98(d) -- -- 100,900 100,900,000 Morgan Stanley & Co. 5.80% 4/1/98(e) -- -- 100,000 100,000,000 -------- -------------- Total Repurchase Agreements 200,900 200,900,000 -------- -------------- TOTAL INVESTMENTS - 100.1% $3,722,722,906(f) LIABILITIES IN EXCESS OF OTHER ASSETS, NET - (0.1%) (5,313,806) -------------- NET ASSETS - 100.0% $3,717,409,100 ============== 10 PRIME SERIES - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- Net Asset Value, Offering and Redemption Price Per: Prime Share ($3,164,537,551 / 3,164,529,071 shares outstanding) $1.00 ===== Flag Investors Class A Share ($7,736,785 / 7,736,522 SHARES OUTSTANDING) $1.00 ===== Flag Investors Class B Share ($184,382 / 184,382 shares outstanding) $1.00 ===== Institutional Prime Share ($317,971,693 / 317,971,413 shares outstanding) $1.00 ===== Quality Cash Reserve Prime Share ($226,978,689 / 226,978,007 shares outstanding) $1.00 ===== - ------------ (a) Most commercial paper is traded on a discount basis. In such cases, the interest rate shown represents the yield at time of purchase by the Fund. (b) Master note is payable upon demand by the Fund upon no more than five days' notice. Interest rates on master notes are redetermined weekly. Rates shown are the rates in effect on March 31, 1998. (c) Collateral on Tri-Party repurchase agreements is taken into possession by the Funds upon entering into the Tri-Party repurchase agreement. The collateral is marked to market daily to insure market value as being at least 102 percent of the resale price of the repurchase agreement. (d) Dated 3/31/98 to be repurchased on 4/1/98, collateralized by U.S. Treasury Notes with a market value of $102,918,187. (e) Dated 3/31/98 to be repurchased on 4/1/98, collateralized by U.S. Treasury Notes with a market value of $102,178,538. (f) Aggregate cost for financial reporting and federal tax purposes. (g) The credit ratings are not covered by the report of independent auditors. MOODY'S RATINGS: Aaa Bonds that are judged to be of the best quality. P-1 Commercial paper bearing this designation is of the best quality. S&P RATINGS: AAA Obligations that are of the highest quality. A-1 Commercial paper that has a strong degree of safety regarding timely payment Those issues determined to possess very strong safety characteristics are denoted with a plus (+) sign. A detailed description of the above ratings can be found in the Fund's Statement of Additional Information. See Notes to Financial Statements. 11 PRIME SERIES - -------------------------------------------------------------------------------- Statement of Operations For the year ended March 31, 1998 - -------------------------------------------------------------------------------- Investment Income: Interest income $184,011,736 ------------ Expenses: Investment advisory fees 8,582,839 Distribution fee 8,299,915 Transfer agent fees 2,661,928 Custodian fees 349,351 Directors' fees 232,075 Registration fees 1,001,689 Miscellaneous 933,217 ------------ Total expenses 22,061,014 Less: Fees waived (136,191) ------------ Net expenses 21,924,823 ------------ Net investment income 162,086,913 ------------ Net realized gain (loss) from security transactions -- ------------ Net increase in net assets resulting from operations $162,086,913 ============ See Notes to Financial Statements. 12 PRIME SERIES - -------------------------------------------------------------------------------- Statement of Changes in Net Assets March 31, 1998 - -------------------------------------------------------------------------------- Year ended Year ended March 31, March 31, ---------- ---------- 1998 1997 Increase/(Decrease) in Net Assets Operations: Net investment income $ 162,086,913 $ 132,679,566 Net realized gain on sales of investments -- 13,047 -------------- -------------- Net increase in net assets resulting from operations 162,086,913 132,692,613 Distributions to Shareholders From: Net investment income: BTAlex. Brown Cash Reserve Prime Shares (138,011,807) (119,826,842) BTAlex. Brown Cash Reserve Prime Institutional Shares (13,656,968) (4,256,297) Flag Investors Class A Shares (341,197) (295,562) Flag Investors Class B Shares (12,545) (1,260) Quality Cash Reserve Prime Shares (10,064,396) (8,299,605) -------------- -------------- Total distributions (162,086,913) (132,679,566) Capital Share Transactions, net 849,945,486 264,670,792 -------------- -------------- Total increase in net assets 849,945,486 264,683,839 Net Assets: Beginning of period 2,867,463,614 2,602,779,775 -------------- -------------- End of period $3,717,409,100 $2,867,463,614 ============== ============== See Notes to Financial Statements. 13 PRIME SERIES - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) PRIME SHARES - -------------------------------------------------------------------------------- Year ended March 31, ---------- 1998 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 -------------- Income from Investment Operations: Net investment income 0.0494 Less Distributions: Dividends from net investment income and/or short-term gains (0.0494) -------------- Net asset value at end of period $ 1.00 ============== Total Return: Based on net asset value per share 5.05% Ratios to Average Daily Net Assets: Expenses 0.67% Net investment income 4.94% Supplemental Data: Net assets at end of period $3,164,537,551 Number of shares outstanding at end of period 3,164,529,071 14 PRIME SHARES - -------------------------------------------------------------------------------- PRIME SHARES (continued) - --------------------------------------------------------------------------------
Year ended March 31, ---------------------------------------------------------------------------- 1997 1996 1995 1994 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------------- -------------- -------------- -------------- Income from Investment Operations: Net investment income 0.0478 0.0524 0.0442 0.0262 Less Distributions: Dividends from net investment income and/or short-term gains (0.0478) (0.0524) (0.0442) (0.0262) -------------- -------------- -------------- -------------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============== ============== ============== ============== Total Return: Based on net asset value per share 4.88% 5.36% 4.51% 2.65% Ratios to Average Daily Net Assets: Expenses 0.63% 0.60% 0.61% 0.62% Net investment income 4.78% 5.21% 4.46% 2.62% Supplemental Data: Net assets at end of period $2,545,532,365 $2,386,681,216 $1,472,079,739 $1,350,334,979 Number of shares outstanding at end of period 2,545,523,885 2,386,684,392 1,472,077,488 1,350,332,916
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 - -------------------------------------------------------------------------------- Year ended March 31, ---------- 1998 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 ---------- Income from Investment Operations: Net investment income 0.0494 Less Distributions: Dividends from net investment income and/or short-term gains (0.0494) ---------- Net asset value at end of period $ 1.00 ========== Total Return: Based on net asset value per share 5.05% Ratios to Average Net Assets: Expenses 0.67% Net investment income 4.94% Supplemental Data: Net assets at end of period $7,736,785 Number of shares outstanding at end of period 7,736,522 16 PRIME SERIES - -------------------------------------------------------------------------------- FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS A (continued) - --------------------------------------------------------------------------------
Year ended March 31, ------------------------------------------------------------------------------- 1997 1996 1995 1994 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ---------- ---------- ---------- ----------- Income from Investment Operations: Net investment income 0.0478 0.0524 0.0442 0.0262 Less Distributions: Dividends from net investment income and/or short-term gains (0.0478) (0.0524) (0.0442) (0.0262) ---------- ---------- ---------- ----------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========== ========== ========== =========== Total Return: Based on net asset value per share 4.88% 5.36% 4.51% 2.65% Ratios to Average Net Assets: Expenses 0.63% 0.60% 0.61% 0.62% Net investment income 4.78% 5.25% 4.26% 2.62% Supplemental Data: Net assets at end of period $6,521,574 $5,976,831 $7,726,696 $18,116,648 Number of shares outstanding at end of period 6,521,310 5,976,824 7,726,698 18,116,633
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 - -------------------------------------------------------------------------------- Year ended March 31, ---------- 1998 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 -------- Income from Investment Operations: Net investment income 0.0418 Less Distributions: Dividends from net investment income and/or short-term gains (0.0418) -------- Net asset value at end of period $ 1.00 ======== Total Return: Based on net asset value per share 4.27% Ratios to Average Net Assets: Expenses 1.42% Net investment income 4.18% Supplemental Data: Net assets at end of period $184,382 Number of shares outstanding at end of period 184,382 - ---------- (1) Commencement of operations. (2) Annualized. 18 PRIME SERIES - -------------------------------------------------------------------------------- FLAG INVESTORS CASH RESERVE PRIME SHARES--CLASS B (continued) - -------------------------------------------------------------------------------- April 3, 1995(1) Year ended through March 31, March 31, ---------- ---------------- 1997 1996 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 -------- -------- Income from Investment Operations: Net investment income 0.0414 0.0361 Less Distributions: Dividends from net investment income and/or short-term gains (0.0414) (0.0361) -------- -------- Net asset value at end of period $ 1.00 $ 1.00 ======== ======== Total Return: Based on net asset value per share 4.22% 3.69% Ratios to Average Net Assets: Expenses 1.38% 1.38%(2) Net investment income 4.14% 4.30%(2) Supplemental Data: Net assets at end of period $227,098 $ 10,200 Number of shares outstanding at end of period 227,098 10,200 See Notes to Financial Statements. 19 PRIME SERIES - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) PRIME INSTITUTIONAL SHARES - -------------------------------------------------------------------------------- Year ended March 31, ---------- 1998 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 ------------ Income from Investment Operations: Net investment income 0.0519 Less Distributions: Dividends from net investment income and/or short-term gains (0.0519) ------------ Net asset value at end of period $ 1.00 ============ Total Return: Based on net asset value per share 5.31% Ratios to Average Daily Net Assets: Expenses 0.42% Net investment income 5.22% Supplemental Data: Net assets at end of period $317,971,693 Number of shares outstanding at end of period 317,971,413 20 PRIME SERIES - -------------------------------------------------------------------------------- PRIME INSTITUTIONAL SHARES (continued) - --------------------------------------------------------------------------------
Year ended March 31, ----------------------------------------------------------------------------- 1997 1996 1995 1994 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------------ ----------- ----------- ----------- Income from Investment Operations: Net investment income 0.0503 0.0548 0.0472 0.0294 Less Distributions: Dividends from net investment income and/or short-term gains (0.0503) (0.0548) (0.0472) (0.0294) ------------ ----------- ----------- ----------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============ =========== =========== =========== Total Return: Based on net asset value per share 5.15% 5.62% 4.82% 2.98% Ratios to Average Daily Net Assets: Expenses 0.38% 0.35% 0.36% 0.30% Net investment income 5.04% 5.32% 4.57% 2.94% Supplemental Data: Net assets at end of period $117,812,047 $53,699,315 $11,904,716 $23,437,449 Number of shares outstanding at end of period 117,811,768 53,699,535 11,904,663 23,437,512
See Notes to Financial Statements. 21 PRIME SERIES - -------------------------------------------------------------------------------- Financial Highlights (For a share outstanding throughout each period) QUALITY CASH RESERVE PRIME SHARES - -------------------------------------------------------------------------------- Year ended March 31, ---------- 1998 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 ------------ Income from Investment Operations: Net investment income 0.0465 Less Distributions: Dividends from net investment income and/or short-term gains (0.0465) ------------ Net asset value at end of period $ 1.00 ============ Total Return: Based on net asset value per share 4.75% Ratios to Average Net Assets: Expenses 0.96%(1) Net investment income 4.66%(2) Supplemental Data: Net assets at end of period $226,978,689 Number of shares outstanding at end of period 226,978,007 - ------------ (1) Ratio of expenses to average net assets prior to partial fee waivers was 1.02%, 0.98% and 0.95% for the years ended March 31, 1998, 1997 and 1996, respectively. (2) Ratio of net investment income to average net assets prior to partial fee waivers was 4.60%, 4.43% and 4.86% for the years ended March 31, 1998, 1997 and 1996, respectively. 22 PRIME SERIES - -------------------------------------------------------------------------------- QUALITY CASH RESERVE PRIME SHARES (continued) - --------------------------------------------------------------------------------
Year ended March 31, -------------------------------------------------------------------------------- 1997 1996 1995 1994 Per Share Operating Performance: Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------------ ------------ ----------- ----------- Income from Investment Operations: Net investment income 0.0449 0.0493 0.0402 0.0218 Less Distributions: Dividends from net investment income and/or short-term gains (0.0449) (0.0493) (0.0402) (0.0218) ------------ ------------ ----------- ----------- Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ============ ============ =========== =========== Total Return: Based on net asset value per share 4.59% 5.04% 4.09% 2.20% Ratios to Average Net Assets: Expenses 0.91%(1) 0.90%(1) 0.96% 1.06% Net investment income 4.50%(2) 4.91%(2) 4.04% 2.18% Supplemental Data: Net assets at end of period $197,370,530 $156,412,213 $94,592,158 $92,678,440 Number of shares outstanding at end of period 197,369,848 156,412,393 94,591,979 92,678,268
See Notes to Financial Statements. 23 PRIME SERIES - -------------------------------------------------------------------------------- Notes to Financial Statements NOTE 1--Significant Accounting Policies BT Alex. Brown Cash Reserve Fund, Inc. ("the Fund") commenced operations August 11, 1981. The Fund is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end Investment Management Company. Its objective is to seek as high a level of current income as is consistent with preservation of capital and liquidity. The Fund consists of three portfolios: the Prime Series, the Treasury Series and the Tax-Free Series. The Prime Series consists of five classes: BT Alex. Brown Cash Reserve Prime Shares ("Prime Shares"), Flag Investors Cash Reserve Prime Shares Class A ("Flag Investors Class A Shares"), Flag Investors Cash Reserve Prime Shares Class B ("Flag Investors Class B Shares"), Quality Cash Reserve Prime Shares ("Quality Cash Shares") and BT Alex. Brown Cash Reserve Prime Institutional Shares ("Prime Institutional Shares"). The Treasury Series consists of two classes: BT Alex. Brown Cash Reserve Treasury Shares ("Treasury Shares") and BT Alex. Brown Cash Reserve Treasury Institutional Shares ("Treasury Institutional Shares"). The Tax-Free Series consists of two classes: BT Alex. Brown Cash Reserve Tax-Free Shares ("Tax-Free Shares") and BT Alex. Brown Cash Reserve Tax Free Institutional Shares ("Tax Free Institutional Shares"). Shareholders can vote only on issues that affect the share classes they own. When preparing the Fund's financial statements, management makes estimates and assumptions to comply with generally accepted accounting principles. These estimates affect 1) the assets and liabilities that we report at the date of the financial statements; 2) the contingent assets and liabilities that we disclose at the date of the financial statements; and 3) the revenues and expenses that we report for the period. Our estimates could be different from the actual results. The Fund's significant accounting policies are: A. Security Valuation--Each portfolio has a weighted average maturity of 90 days or less. The Fund values portfolio securities on the basis of amortized cost, which approximates market value. Using this method, the Fund values a security at its cost. The Fund then assumes a constant amortization to maturity of any discount or premium. B. Repurchase Agreements--The Prime Series may enter into tri-party repurchase agreements with broker-dealers and domestic banks. A repurchase agreement is a short-term investment in which the Fund buys a debt security that the broker agrees to repurchase at a set time and price. The third party, which is the broker's custodial bank, holds the collateral in a separate account until the repurchase agreement matures. The agreement ensures that the collateral's market value, including any accrued interest, is sufficient if the broker defaults. The Fund's access to the collateral may be delayed or limited if the broker defaults and the value of the collateral declines or if the broker enters into an insolvency proceeding. 24 PRIME SERIES - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) NOTE 1--concluded C. Federal Income Taxes--The Fund determines its distributions according to income tax regulations, which may be different from generally accepted accounting principles. As a result, the Fund occasionally makes reclassifications within its capital accounts to reflect income and gains that are available for distribution under income tax regulations. The Fund is organized as a regulated investment company. As long as it maintains this status and distributes to its shareholders substantially all of its taxable net investment income and net realized capital gains, it will be exempt from most, if not all, federal income and excise taxes. As a result, the Fund has made no provisions for federal income taxes. Each portfolio is treated as a separate entity for federal income tax purposes. D. Security Transactions, Investment Income and Distributions--The Fund uses the trade date to account for security transactions and the specific identification method for financial reporting and income tax purposes to determine the cost of investments sold or redeemed. Interest income is recorded on an accrual basis and includes the pro rata amortization of premiums and accretion of discounts when appropriate. Dividends to shareholders are declared daily. Dividend distributions or reinvestments are made monthly. E. Expenses--Operating expenses for each share class are recorded on an accrual basis and are charged to that class' operations. If a Fund expense cannot be directly attributed to a share class, the expense is prorated among the classes that the expense affects and is based on the classes' relative net assets. NOTE 2--Investment Advisory Fees, Transactions with Affiliates and Other Fees Investment Company Capital Corp. ("ICC"), a subsidiary of Bankers Trust Corporation, is the investment advisor for all series. Under the terms of the investment advisory agreement, the Fund pays ICC a fee. This fee is calculated daily and paid monthly, at the following annual rates based upon the Fund's aggregate average daily net assets: .30% of the first $500 million, .26% of the next $500 million, .25% of the next $500 million, .24% of the next $1 billion, .23% of the next $1 billion and .22% of the amount over $3.5 billion. The Prime Series pays an additional fee that is calculated daily and paid monthly at the annual rate of .02% of its average daily net assets. The Tax-Free Series also pays an additional fee that is calculated daily and paid monthly at the annual rate of .03% of its average daily net assets. PNC Institutional Management Corporation ("PIMC") is the sub-advisor for the Tax-Free Series. As compensation for its subadvisory services, ICC pays PIMC a fee. This fee is calculated daily and paid monthly, at the following annual rates based upon the Tax-Free Series' aggregate average daily net assets: .15% of the first $250 million, .13% of the next $250 million, .11% of the next $250 million, .09% of the next $250 million, .075% of the next $3 billion and .06% of the amount over $4 billion. For the year ended 25 PRIME SERIES - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) NOTE 2--continued March 31, 1998, ICC paid PIMC $1,119,488 for sub-advisory services for the Tax-Free Series. Effective April 1, 1998 sub-advisory services will no longer be provided to the Fund. As compensation for its accounting services, the Prime Series and Treasury Series pay ICC an annual fee that is calculated daily and paid monthly from the two series' average daily net assets. The Prime Series paid $162,781 and the Treasury Series paid $127,485 to ICC for accounting services for the year ended March 31, 1998. As compensation for its accounting services, the Tax-Free Series pays PFPC Inc. ("PFPC"), an affiliate of PIMC, an annual fee that is calculated daily and paid monthly from its average daily net assets. The Tax-Free Series paid $66,777 to PFPC for accounting services for the year ended March 31, 1998. Effective April 1, 1998 ICC began to perform accounting services for the Tax-Free Series. As compensation for its transfer agent services, the three series pay ICC a per account fee that is calculated and paid monthly. The Prime Series paid $2,661,928, the Treasury Series paid $274,991 and the Tax-Free Series paid $162,558 to ICC for transfer agent services for the year ended March 31, 1998. As compensation for providing distribution services, the Prime Shares, Flag Investors Class A Shares, Treasury Shares and the Tax-Free Shares pay ICC Distributors, Inc. ("ICC Distributors"), which is not related to ICC an annual fee equal to 0.25% of these classes' average daily net assets. For the year ended March 31, 1998, distribution fees aggregated $6,983,764, $17,244, $1,700,377 and $1,784,579 for distribution services for the Prime Shares, Flag Investors Class A Shares, Treasury Shares and Tax-Free Shares, respectively. The Quality Cash Shares and Flag Investors Class B Shares also pay ICC Distributors an annual fee for distribution services. This fee is equal to .60% of the Quality Cash Shares' aggregate average daily net assets or $1,295,907 for the year ended March 31, 1998 and 1.00% of the Flag Investors Class B Shares' aggregate average daily net assets or $3,000 for the year ended March 31, 1998. Prior to September 1, 1997 Alex Brown and Sons, Inc. served as the Fund's distributor for the same rate of compensation and on substantially the same terms as ICC Distributors and earned $2,742,862 for the Prime Shares, $7,178 for Flag Investors Class A Shares, $507,956 for Quality Cash Shares, $1,266 for Flag Investors Class B Shares, $655,375 for Treasury Shares, and $692,546 for Tax-Free Shares for the year ended March 31, 1998. ICC and ICC Distributors may voluntarily waive a portion of their advisory or distribution fees for the Prime, Treasury and Tax-Free Series to preserve or enhance each series' performance. These voluntary waivers are not contractual and could change. Any waivers by ICC or ICC Distributors are limited to the fees they actually receive for the fiscal year. ICC did not waive any advisory fees for the year ended March 31, 1998. Alex. Brown voluntarily waived distribution fees of $54,321 for the Quality Cash 26 PRIME SERIES - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) NOTE 2--continued Shares for the period ended August 31, 1997 and ICC Distributors waived $81,870 for the period September 1, 1997 to March 31, 1998. Effective September 22, 1997, Bankers Trust Company, a subsidiary of Bankers Trust Corporation, became the Fund's custodian. Prior to September 22, 1997, PNC Bank served as the Fund's custodian. From September 22, 1997 to March 31, 1998, the Prime Series, Treasury Series, and Tax-Free Series paid $162,613, $43,249, and $31,538 in custody expenses, respectively. The Fund's complex offers a retirement plan for eligible Directors. The actuarially computed pension expense allocated to the Fund for the year ended March 31, 1998 was $104,755 for the Prime Series, $32,916 for the Treasury Series and $27,859 for the Tax-Free Series. The accrued liability at March 31, 1998 was $222,192 for the Prime Series, $79,512 for the Treasury Series and $69,283 for the Tax-Free Series. NOTE 3--Capital Stock and Share Information The Fund is authorized to issue up to 6.4 billion shares of $.001 par value capital stock (3.55 billion Prime Series, 1.5 billion Treasury Series, 1 billion Tax-Free Series and 350 million undesignated). Transactions in shares of the Fund were as follows:
March 31, 1998 March 31, 1997 -------------- -------------- Prime Series: Sold: Prime Shares 23,206,115,785 22,263,288,298 Flag Investors Class A Shares 6,559,775 9,331,912 Flag Investors Class B Shares 336,592 328,144 Institutional Prime Shares 4,625,290,052 912,825,877 Quality Cash Shares 1,179,123,143 1,001,597,821 Issued as reinvestment of dividends: Prime Shares 129,425,606 113,931,978 Flag Investors Class A Shares 326,541 281,420 Flag Investors Class B Shares 8,133 1,264 Institutional Prime Shares 9,131,786 3,084,567 Quality Cash Shares 9,723,053 8,045,624 Redeemed: Prime Shares (22,716,536,205) (22,218,380,783) Flag Investors Class A Shares (5,671,105) (9,068,618) Flag Investors Class B Shares (387,440) (112,510) Institutional Prime Shares (4,434,262,192) (851,798,212) Quality Cash Shares (1,159,238,038) (968,685,990) --------------- --------------- Net increase 849,945,486 264,670,792 =============== ===============
27 PRIME SERIES - -------------------------------------------------------------------------------- Notes to Financial Statements (concluded) NOTE 3--concluded
March 31, 1998 March 31, 1997 -------------- -------------- Treasury Series: Sold: Treasury Shares 3,641,511,991 4,075,840,415 Institutional Treasury Shares 590,751,899 458,391,680 Issued as reinvestment of dividends: Treasury Shares 30,209,607 29,377,891 Institutional Treasury Shares 2,007,274 1,597,049 Redeemed: Treasury Shares (3,551,758,854) (4,093,588,948) Institutional Treasury Shares (555,189,594) (450,602,609) -------------- -------------- Net increase 157,532,323 21,015,478 ============== ============== Tax-Free Series: Sold: Tax Free Shares 5,853,542,023 5,222,168,283 Institutional Tax Free Shares 730,445,736 -- Issued as reinvestment of dividends: Tax Free Shares 20,778,337 16,162,636 Institutional Tax Free Shares 276,010 -- Redeemed: Tax Free Shares (5,680,345,603) (5,162,640,910) Institutional Tax Free Shares (654,038,858) -- -------------- -------------- Net increase 270,657,645 75,690,009 ============== ==============
NOTE 4--Net Assets
Prime Treasury Tax-Free Series Series Series -------------- ------------ ------------ Paid-in capital $3,717,402,132 $897,118,866 $917,940,919 Undistributed net investment income 8,488 -- -- Undistributed net realized gain/(loss) on sales of investments (1,520) 87,815 (73,243) -------------- ------------ ------------ $3,717,409,100 $897,206,681 $917,867,676 ============== ============ ============
NOTE 5--Shareholder Meeting Alex. Brown Incorporated, which was the parent corporation of the Fund's investment advisor, merged into a subsidiary of Bankers Trust Corporation on September 1, 1997. Due to the change in control of Alex. Brown Incorporated, the BTAlex Brown Cash Reserve Fund held a special meeting of its shareholders on August 14, 1997. During the meeting, shareholders approved a new Investment Advisory Agreement between the Fund and ICC. The new agreement is substantially the same as the former agreement. In addition, shareholders elected the following Directors: James J. Cunnane, Richard T. Hale, John F. Kroeger, Louis E. Levy, Eugene J. McDonald, Rebecca W. Rimel, Truman T. Semans, and Carl W. Vogt. 28 Report of Independent Accountants - -------------------------------------------------------------------------------- To the Shareholders and Board of Directors of BT Alex. Brown Cash Reserve Fund, Inc. We have audited the accompanying statements of net assets of the Prime Series of the BT Alex. Brown Cash Reserve Fund, Inc. as of March 31, 1998, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of March 31, 1998 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Prime Series of the BT Alex. Brown Cash Reserve Fund, Inc. as of March 31, 1998, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Philadelphia, Pennsylvania May 1, 1998 29 Board of Directors - -------------------------------------------------------------------------------- RICHARD T. HALE EUGENE J. McDONALD Chairman Director JAMES J. CUNNANE REBECCA W. RIMEL Director Director JOHN F. KROEGER TRUMAN T. SEMANS Director Director LOUIS E. LEVY CARL W. VOGT, Esq. Director Director Officers - -------------------------------------------------------------------------------- HARRY WOOLF AMY M. OLMERT President Secretary JOSEPH A. FINELLI SCOTT J. LIOTTA Treasurer Assistant Secretary - -------------------------------------------------------------------------------- Distributor Transfer Agent ICC DISTRIBUTORS, INC. INVESTMENT COMPANY CAPITAL CORP. P.O. Box 7558 One South Street Portland, ME 04101 Baltimore, MD 21202 (207) 879-6200 (800) 553-8080 Investment Advisor Auditors INVESTMENT COMPANY CAPITAL CORP. COOPERS & LYBRAND L.L.P. One South Street 2400 Eleven Penn Center Baltimore, MD 21202 Philadelphia, PA 19103 Custodian BANKERS TRUST COMPANY 130 Liberty Street New York, NY 10006 30 QUALITY CASH RESERVE PRIME SHARES --------------- P.O. Box 1346 BULK RATE Baltimore, MD 21203 U.S. Postage PAID Baltimore, MD Permit No. 2139 --------------- -----END PRIVACY-ENHANCED MESSAGE-----