<PAGE>
Registration Statement Nos. 2-70831
811-3141
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
....
Post-Effective Amendment No. 35 [X]
....
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 31 [X]
(Check appropriate box or boxes.)
...........................................................................
(Exact Name of Registrant as Specified in Charter)
RESERVE INSTITUTIONAL TRUST
...........................................................................
(Address of Principal Executive Offices) 1250 BROADWAY, NEW YORK, NY 10001-3701
(Zip Code)
Registrant's Telephone Number, including Area Code (212) 401-5500
..........................
...............................................................................
(Name and Address of Agent for Service)
MaryKathleen Foynes, Esq.
The Reserve Funds
1250 Broadway
New York, NY 10001-3701
Approximate date of Proposed Public Offering ................................
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on July 31, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If approriate, check the following box:
[ ] this post-effective amendment designates a new effective data for a
previously filed post-effective amendment.
The Commission is requested to send copies of all communications to:
MaryKathleen Foynes, Esq.
The Reserve Funds
1250 Broadway
New York, NY 10001-3701
<PAGE>
[THE RESERVE FUNDS LOGO]
Reserve Institutional Trust
of Money-Market Funds
Prospectus
July 31, 1999
The Reserve Institutional Trust (the "Trust"), is a registered investment
company, which offers four no-load money-market funds:
o Primary Institutional Fund,
o U.S. Government Institutional Fund,
o U.S. Treasury Institutional Fund, and
o Interstate Tax-Exempt Institutional Fund
(collectively "the Funds").
---------------
These Securities Have Not Been Approved Or Disapproved By The
Securities And Exchange Commission Nor Has The Commission Passed
Upon The Accuracy Or Adequacy Of This Prospectus. Any
Representation To The Contrary Is A Criminal Offense.
---------------
<PAGE>
TABLE OF CONTENTS
Page
----
Investment Objectives & Principal
Strategies ...................... 2
Performance History ............. 4
Fees & Expenses of the Funds .... 5
Management ...................... 6
How to Buy Shares ............... 7
Selling Fund Shares ............. 8
Tax Consequences ................ 10
General Information ............. 10
Financial Highlights ............ 11
INVESTMENT OBJECTIVES & PRINCIPAL STRATEGIES
The investment objective of the Primary, U.S. Government and U.S.
Treasury Institutional Funds is to seek as high a level of current income as is
consistent with preservation of capital and liquidity. The investment objective
of the Interstate Tax-Exempt Institutional Fund is to seek to have its interest
income exempt from federal income taxes, as is consistent with preservation of
capital and liquidity. However, achievement of the objectives cannot be assured.
The Funds are designed for institutional investors as a convenient
investment vehicle for short-term funds. The Funds seek to employ idle cash at
yields competitive with yields of other comparable short-term investments, and
are designed to reduce or eliminate for the investor the mechanical problems of
direct investment in money-market instruments such as scheduling maturities,
evaluating the credit of issuers, investing in round lots, safeguarding receipt
and delivery of securities and reinvesting.
The Funds seek to maintain a stable $1.00 share price. The portfolio
managers monitor a range of economic and financial factors. Based on their
analysis, the Funds are invested in a mix of U.S. dollar denominated
money-market securities, that are intended to provide as high a yield as
possible without violating the Fund's credit quality policies or jeopardizing
the stability of its share price.
Primary Institutional Fund. The Primary Institutional Fund seeks to attain its
objective by investing in instruments issued by the U.S. government, its
agencies and instrumentalities ("U.S. government securities"), deposit-type
obligations, such as negotiable certificates of deposit and time deposits,
bankers' acceptances and letters of credit of domestic and foreign banks,
savings and loan associations and savings banks, high-quality domestic and
foreign commercial paper as determined by nationally recognized statistical
rating organizations, non-rated instruments of comparable quality as determined
by the Board of Trustees ("Trustees"), other short-term instruments of similar
quality, and instruments fully collateralized by such obligations.
The Primary Institutional Fund will invest in obligations of U.S. banking
institutions that are insured by the Federal Deposit Insurance Corporation and
commercial paper, which is rated at the time of investment, P-1 by Moody's
Investors Service, Inc. ("Moody's"), A-1 by Standard & Poor's Corporation
("S&P") or the equivalent if rated by another rating agency. The Primary
Institutional Fund may also invest in obligations of foreign branches of both
U.S. banks and foreign banks (Eurodollars). Investment in foreign banks will be
limited to those located in Australia, Canada, Western Europe and Japan and
which, at the time of investment, have more than $25 billion (or the equivalent
in other currencies) in total assets and which, in the opinion of the Fund's
Adviser, are of comparable quality to the U.S. banks which may be purchased by
the Fund. The Primary Institutional Fund may also invest in municipal
obligations, the interest on which is not exempt from federal income taxation.
U.S. Government Institutional Fund. The U.S. Government Fund seeks to attain its
objective by investing exclusively in securities backed by full faith and credit
of the U.S. government, such as U.S. Treasury securities, obligations issued or
guaranteed by the U.S. government, its agencies and instrumentalities, and
repurchase agreements supported by such investments.
2
<PAGE>
U.S. Treasury Institutional Fund. The U.S. Treasury Fund seeks to attain its
objective by investing exclusively in securities backed by the full faith and
credit of the U.S government which provide interest income exempt in most states
from state and local personal income taxes. Typically, the Fund's assets will be
invested in U.S. Treasury securities.
The "full faith and credit" backing is considered the strongest backing
offered by the U.S. government and to be the highest degree of safety with
respect to the payment of principal and interest.
Interstate Tax-Exempt Institutional Fund. The Interstate Tax-Exempt
Institutional Fund's investment objective is to seek as high a level of
short-term interest income exempt from federal income taxes as is consistent
with preservation of capital and liquidity. The Fund invests principally in
short-term obligations issued by the states, territories and possessions of the
United States and their political subdivisions, duly constituted authorities and
corporations.
The Interstate Tax-Exempt Institutional Fund's principal investment
strategies include investing primarily in municipal money-market securities. The
Fund invests principally in high-quality, tax-exempt obligations issued by
states, counties, municipalities, authorities or other political subdivisions.
These securities are generally referred to as "municipal obligations". The Fund
intends to invest at least 80% of the value of the Fund's net assets in
municipal obligations which are exempt from federal income tax, unless it has
adopted a temporary defensive position.
The interest on securities generally known as municipal obligations is
exempt from federal income tax in the opinion of either bond counsel for the
issuers or, in some instances, the issuer itself. These securities may be issued
to raise money for various public purposes such as constructing public
facilities, while others are issued to obtain funding for privately operated
facilities. General obligation bonds and notes are backed by the taxing power of
the issuer. Revenue bonds and notes are backed by the revenues of a project or
facility such as tolls from a toll road or, in some cases, from the proceeds of
a special excise tax, but not by the general taxing power. Industrial
development revenue bonds and notes are a specific type of revenue bond or note
backed by the credit of a private issuer. Municipal obligations bear fixed,
variable or floating rates of interest.
The Fund will purchase tax-exempt securities which are rated MIG1 or MIG2 by
Moody's, SP-1 or SP-2 by S&P or the equivalent. Municipal obligations which
are not rated may also be purchased provided Reserve Management Company Inc.
("RMCI"), the Adviser, determines them to be of comparable quality pursuant to
guidelines established by the Trustees.
Other Investment Strategies of the Funds. The Funds may invest in repurchase
agreements ("repos") but will limit them to those banks and securities dealers
who are deemed creditworthy pursuant to the guidelines adopted by the Trustees.
The U.S. Government and U.S. Treasury Institutional Funds will further limit
their investment in repos to those whose underlying obligations are backed by
the full faith and credit of the United States, and, in the case of the U.S.
Treasury Institutional Fund, repos will not exceed 5% of its total assets except
for temporary or emergency purposes. Securities subject to repos will be placed
in a segregated account and will be monitored to ensure that the market value of
the securities plus any accrued interest will at least equal the repurchase
price.
Although not a principal strategy, all the Funds are allowed to invest all,
or substantially all, of their investable assets in other open-end management
companies having the same investment objective and substantially similar
policies and restrictions.
RMCI uses its reasonable business judgment in selecting investments in
addition to considering the ratings of Moody's, S&P and other rating services
when available.
The investment objective and principal strategies are summarized here. For
more information on the investment objective and strategies of all the Funds,
please read the Statement of Additional Information ("SAI"). A Fund may have to
adopt a temporary defensive position. In that event, the Fund might not be able
to attain its objective.
Principal Risks of Investing in the Funds. The Funds are money-market funds
which are a specific type of fund that seeks to maintain a $1.00 price per
share. An investment in a Fund is not insured or guaranteed by the U.S.
government, Federal Deposit Insurance Corporation or any other government
agency. Although each Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in a Fund.
Additionally, each Fund's yield
3
<PAGE>
will vary as the short-term securities in its portfolio mature and the proceeds
are reinvested in securities with different interest rates.
While each Fund has maintained a constant share price since inception, and
will strive to do so, the following factors could reduce the Fund's income level
and/or share price:
o as to all Funds, interest rates could rise sharply, causing the value of
the Funds' securities, and share price, to drop.
o as to all Funds, repos could involve risks in the event of a default of
the repo counterparty, including possible delays, losses or restrictions
upon a Fund's ability to dispose of the underlying securities.
o as to the Primary Institutional Fund, there are risks generally
associated with investing in the banking industry, such as interest
rate risk, credit risk and regulatory developments relating to the
banking industry.
o as to the Primary Institutional Fund, Euro and Yankee dollar investments
involve certain risks that are different from investments in domestic
obligations of U.S. banks. These risks may include unfavorable political
and economic developments, possible withholding taxes, seizure of
foreign deposits, currency controls or other governmental restrictions
which might affect payment of principal or interest. In addition,
foreign banks are not regulated by U.S. banking authorities and are
generally not bound by financial reporting standards comparable to U.S.
banks. Further, adverse political, regulatory, market or economic
developments in foreign countries can affect entities located in those
countries.
o as to the Primary and Interstate Tax-Exempt Institutional Funds,
investments in municipal obligations are subject to market volatility
and can be significantly affected by adverse economic or political
changes and the financial condition of the issuers of municipal
securities. For example, a decline in the credit quality of an issuer or
the provider of credit support or a maturity-shortening structure for a
security can cause the price of a money-market security to decrease.
o as to the Primary and Interstate Tax-Exempt Institutional Funds, the
value of municipal securities may be affected by uncertainties and
changes in municipal market-related legislation or litigation.
o as to the Interstate Tax-Exempt Institutional Fund, as to investments in
industrial revenue development bonds and notes secured by letters of
credit or guarantees of banks, there are risks generally associated with
investing in the banking industry, such as interest rate risk, credit
risk and regulatory developments relating to the banking industry.
o as to the Interstate Institutional Tax-Exempt Fund, interest received on
certain otherwise tax-exempt securities ("private activity bonds") is
subject to a federal Alternative Minimum Tax ("AMT"). It is the position
of the SEC that in order for a fund to call itself "tax-free", not more
than 20% of its net assets may be invested in municipal securities
subject to the AMT or at least 80% of its income will be tax-exempt.
Income received on such securities is classified as a "tax preference
item," which could subject certain shareholders of the Fund to the AMT.
Year 2000. Many computer software systems in use today cannot distinguish the
year 2000 from the year 1900. Most of the services provided to the Trust depend
on the smooth functioning of computer systems. The Trust could be adversely
affected if the computer systems and service providers that interface with it
are unable to process data from January 1, 2000 and after; however, steps are
being taken to reasonably address this issue and to obtain assurance that
comparable efforts are being made by service providers. There can be no
assurance that these steps will be sufficient to avoid any adverse impact to the
Trust. In addition, because the Year 2000 issue affects virtually all
organizations, the extent of its impact cannot be predicted.
Other Risks. These risks are discussed in more detail in the SAI. Most of the
Funds' performance depends on interest rates. When interest rates fall, the
Funds' yields will typically fall as well.
The Reserve Funds' emphasis on the high credit quality of its investments
may mean that its yields are lower than those available from certain other
money-market funds, who may invest in commercial paper. Because of the low level
of risk, over time, a money-market fund may produce lower returns than bond or
stock investments which entail higher levels of risk.
PERFORMANCE HISTORY
The bar charts below show the Funds' annual returns for the full
calendar years since inception, together with the best and worst quarters. The
tables assume reinvestment of dividends and distributions, if any. The annual
returns are for Class B. The annual returns of the other classes (A, Treasurer's
Trust, C and D) are substantially similar because the shares are invested in the
same portfolio of securities and the annual returns would differ only to the
extent that the classes do not have the same expenses. The U.S. Treasury and
Interstate Tax-Exempt Institutional Funds do not appear because a full calendar
year does not exist. The accompanying "Average
4
<PAGE>
Annual Total Return as of December 31, 1998" table gives some indication of risk
of an investment in the Funds. As with all mutual funds, the past is not a
prediction of the future.
Primary Institutional Fund - Class B
Annual Total Returns as of December 31,
5.02% 5.33%
1997 1998
Best Quarter: 4th Q 1997 1.36%
Worst Quarter: 4th Q 1998 0.13%
Most Recent Calendar Quarter: 2nd Q 1999 4.55 %
Average Annual Total Returns as of December 31, 1998
1 Year Since Inception
- ------ ---------------
5.33% 5.32%
U.S. Government Institutional Fund - Class B
Annual Total Returns as of December 31,
1.51% 5.14%
1997 1998
Best Quarter: 3rd Q 1998 1.31%
Worst Quarter: 4th Q 1998 1.18%
Most Recent Calendar Quarter: 2nd Q 1999 4.42 %
Average Annual Total Returns as of December 31, 1998
1 Year Since Inception
- ------ ---------------
5.14% 5.15%
Average Annual Total Returns as of December 31, 1998
<TABLE>
<CAPTION>
1 Since
Year Inception
---- ---------
<S> <C> <C>
Primary Institutional Fund - Class A 5.56% 5.57%
Primary Institutional Fund - Treasurer's Trust 5.17% 5.18%
U.S. Government Institutional Fund - Class A 0.38% 4.72%
U.S. Government Institutional Fund - Treasurer's Trust 3.17% 4.84%
Interstate Tax-Exempt Institutional Fund - Class A 0.53% 3.11%
Interstate Tax-Exempt Institutional Fund - Class B 1.01% 2.48%
Interstate Tax-Exempt Institutional Fund - Treasurer's Trust 1.96% 3.10%
</TABLE>
For the Funds' current yield, call toll-free (800) 637-1700 or
visit our web site at www.reservefunds.com.
FEES & EXPENSES OF THE FUNDS
If you buy and hold shares of the Funds, you may pay certain fees and
expenses which are described in the table below. There are no sales charges
(loads) or exchange fees associated with an investment in the Funds. Annual fund
operating expenses are paid out of the assets of each Fund, so their effect is
included in each Fund's share price. Annual fund operating expenses, indicated
in the table below, reflect expenses for the Funds' fiscal year ended May 31,
1999.
Shareholder Fees for all Funds
(Fees paid directly from your investment)
Sales Load Imposed on Purchases............................ None
Sales Load Imposed on Reinvested Dividends................. None
These are all no-load funds. There are no direct shareholder fees. Please
read "Annual Fund Operating Expenses for all Funds" table below.
5
<PAGE>
Annual Fund Operating Expenses for all Funds
(Expenses that are deducted from Fund Assets)
<TABLE>
<CAPTION>
Treasurer's
Class A Class B Trust Class C* Class D*
------- ------- ----- -------- --------
<S> <C> <C> <C> <C> <C>
Comprehensive Management Fee(a)............ 0.25% 0.25% 0.25% 0.25% 0.25%
Distribution (12b-1) Fees (b).............. 0.00 0.00 0.00 0.25 0.50
Other Operating Expenses** 0.00 0.20 0.35 0.25 0.25
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses....... 0.25% 0.45% 0.60% 0.75% 1.00%
==== ==== ==== ==== ====
</TABLE>
- --------------
* With the exception of the Primary Institutional Fund-Class C, Class C and D
were not opened as of May 31, 1999.
(a) The comprehensive management fee of 0.25% per annum of its average daily net
assets which includes advisory and customary operating expenses, but does not
include 12b-1 and shareholder service fees. However, the Funds may be charged
for certain non-recurring extraordinary expenses and its allocated or direct
share of certain other expenses. See "Management".
(b) The Funds have adopted a Rule 12b-1 plan which allows the Funds to pay
distribution fees for the sale and distribution of its shares. The maximum level
of distribution expenses is 0.20% for Class C and Class D. As these fees are
paid out of each Fund's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
** "Other Operating Expenses" include shareholder services fees and are based on
an estimated amount for the current fiscal year.
Example: This example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The example should
not be considered indicative of future investment returns and operating expenses
which may be more or less than those shown. This example is based on the annual
fund operating expenses described in the table.
This example assumes that you invest $10,000 in a fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that each Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class A $ 26 $ 80 $ 141 $ 318
Class B 46 144 252 567
Treasurer's Trust 61 192 335 750
Class C 77 240 417 930
Class D 102 318 552 1225
</TABLE>
Please note that the above example is an estimate of the
expenses to be incurred by shareholders of the Funds. Actual
expenses may be higher or lower than those reflected above.
You would pay the same if you did not redeem your shares.
MANAGEMENT
Investment Adviser. Since November 15, 1971, Reserve Management Company, Inc.
("RMCI") 1250 Broadway, New York, NY 10001 and its affiliates have provided
investment advice to The Reserve Funds. RMCI serves as the investment adviser to
the Funds under an Investment Management Agreement (the "Agreement") with the
Reserve Institutional Trust (the "Trust"). The Agreement provides that RMCI will
furnish continuous investment advisory and management services to the Funds. In
addition to the Funds, RMCI provides investment management services to other
mutual funds within the Reserve family of funds and, as of May 31, 1999, had
approximately $5.6 billion under management.
RMCI manages the investment portfolios of the Funds, subject to policies
adopted by the Trustees. For its services, RMCI receives a fee of 0.25% per year
of the average daily net assets of each Fund. RMCI pays all employee and
customary operating expenses of the Fund. Excluded from the definition of
customary operating expenses are interest,
6
<PAGE>
taxes, brokerage fees, extraordinary legal and accounting fees and expenses, and
the fees of the disinterested Trustees, for which each Fund pays its direct or
allocated share. For the fiscal year ended May 31, 1999, the Primary, U.S.
Government, U.S. Treasury and Interstate Tax-Exempt Institutional Fund paid RMCI
$471,714, $109,902, $18,824 and $41,856, respectively.
Shareholder Service Fees. Under the plan, shareholders of Class B, Treasurer's
Trust, C and D pay Firms a service fee at an annual rate up to 0.20%, 0.35%,
0.25% and 0.25%, respectively of the average daily NAV for which the Firm
provides personal service, including maintaining shareholder accounts,
responding to inquiries, providing information about investments and providing
certain other services. Class A shares do not participate in the Service Plan.
It is expected that the holders of the Treasurer's Trust shares will be
wrap fee accounts, trust accounts, omnibus accounts and other accounts of
smaller investors which require sub-accounting and other such services which are
unique to the Treasurer's Trust shares of each Fund. Payment for these services
will be made by the Funds and charged against the average daily net assets
attributable to the Treasurer's Trust shares, rather than being paid by the
Adviser as part of its comprehensive fee.
HOW TO BUY SHARES
Each Fund offers five classes of shares to investors, with each class
subject to differing service fees and distribution fees, as follows:
<TABLE>
<CAPTION>
Maximum Maximum Maximum
Annual Annual Total Annual Minimum
Shareholder Distribution Operating Initial
Services Fee* (12b-1) Fee* Expenses** Investment
------------- ------------- ------------ ----------
<S> <C> <C> <C> <C>
Class A 0% 0% 0.25% $ 10 million
Class B 0.20% 0% 0.45% $ 5 million
Treasurer's Trust 0.35% 0% 0.60% None
Class C 0.25% 0.25% 0.75% $ 1 million
Class D 0.25% 0.50% 1.00% $ 250,000
</TABLE>
- --------------
*As a percentage of average daily net assets.
**As a percentage of average net assets (exclusive of brokerage fees,
extraordinary legal and accounting fees and expenses).
Share Price: Net Asset Value. Investors pay no sales charges to invest in the
Funds. The price you pay for a share of a Fund, and the price you receive upon
selling or redeeming a share of a Fund, is called the Fund's net asset value
("NAV") per share. The NAV is calculated by taking the total value of a Fund's
assets, subtracting its liabilities, and then dividing by the number of shares
that have already been issued. Each Fund uses the amortized cost method of
valuing its securities under Rule 2a-7 of the 1940 Act. This is a standard
calculation, and forms the basis for all transactions involving buying, selling,
exchanging or reinvesting shares. The NAV is generally calculated as of the
close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern time)
every day the Exchange is open. NAV is not calculated on days the Exchange is
closed and regional bank holidays. Your order will be priced at the next NAV
calculated after your order is accepted (i.e., converted to federal funds) by
the Funds.
Purchase of Shares. The minimum initial investment in each Fund is $10 million
for Class A, $5 million for Class B, $1 million for Class C, and $250,000 for
Class D shares. The Treasurer's Trust shares of each Fund are not subject to any
minimum initial investment amount. There is no minimum subsequent investment for
any of the classes. The Funds reserve the right to waive the minimum investment
requirement. All investments must be in U.S. dollars. Third-party, foreign and
travellers checks, as well as cash investments will not be accepted. For clients
of certain broker-dealers and financial institutions ("Firms"), shares may be
purchased directly through such Firms. However, purchases may be subject to the
Firms' own minimums and purchase requirements. Purchase orders are not accepted
on days the Exchange is closed for trading and regional bank holidays.
Shares of the Funds may only be purchased by wire. Prior to calling your
bank, call The Reserve Funds at 800-637-1700 for specific instructions or the
Firm from which you received this Prospectus.
7
<PAGE>
Wires which do not correctly identify the account to be credited may be
returned or delay the purchase of shares. Only federal funds wires and checks
drawn on the Fund's bank are eligible for entry as of the business day received.
For federal funds wires to be eligible for same-day order entry, the Funds must
be notified before 2:00 PM (Eastern time, 11:00 AM for the U.S. Treasury and
Interstate Tax-Exempt Institutional Funds) of the amount to be transmitted and
the account to be credited. Payment not immediately convertible into federal
funds will be entered as of the business day when covering federal funds are
received or bank checks are converted into federal funds. This usually occurs
within one (1) business day of receipt of bank wire, but may take longer.
Reserve Automatic Asset-Builder Plan. (Treasurer's Trust and Class D
shareholders only). If you have an account, you may purchase shares of a Fund
($25 suggested minimum) from a checking, NOW, or bank money-market deposit
account or from a U.S. government distribution ($25 suggested minimum) such as
social security, federal salary, or certain veterans' benefits, or other payment
from the federal government. You may also purchase shares automatically by
arranging to have your payroll deposited directly into your Reserve account.
Please call The Reserve Funds at 800-637-1700 for an application.
Individual Retirement Accounts. (Treasurer's Trust and Class D shareholders
only). Investors may use the Funds as an investment for Individual Retirement
Accounts ("IRAs"). A master IRA plan with information regarding administration
fees, investment minimums and other details is available from the Funds.
Third-party Investments. Investments made through a third party (rather than
directly with Reserve) such as a financial services agent may be subject to
policies and fees different than those described here. Banks, brokers, 401(k)
plans, financial advisers and financial supermarkets may charge transaction fees
and may set different minimum investments or limitations on buying or selling
shares. Investors should consult a representative of the plan or financial
institution if in doubt.
Distributors. The Funds' distributor is Resrv Partners, Inc. ("RESRV"), 1250
Broadway, New York, NY 10001-3701.
Restrictions. Certain other restrictions and conditions for buying shares apply
to the Funds. Please see the SAI for more information.
SELLING FUND SHARES
Investors may sell shares at any time. Shares will be sold at NAV
determined after the redemption request is received by the Fund. Each Fund
usually transmits payments the same day when requests are received before 12:00
noon (Eastern time, 11:00 AM for the U.S. Treasury and Interstate Tax-Exempt
Institutional Funds) and the next business day for requests received after the
time specified to enable shareholders to receive additional dividends. Shares do
not earn dividends on the day a redemption is effected, regardless of the time
the order is received. Orders will be processed promptly and investors will
generally receive the proceeds within a week after receiving your properly
completed request. The Funds strongly suggest (but does not require) that each
written redemption be at least $100,000 and require that each telephone
redemption be at least $100,000, except for redemptions which are intended to
liquidate your account. A shareholder will be charged $100 for redemption checks
for less than $100,000, except for Class D shareholders who will be charged
$2.00 for redemption checks of less than $100. A shareholder will be charged
$100 for wires of less than $100,000, except for Class D shareholders who will
be charged $10 for wires less than $10,000. Shareholders of the Treasurer's
Trust shares will not be charged any fees on redemptions by telephone or wire.
The Funds assume no responsibility for delays in the receipt of wired or mailed
funds.
Written and telephone requests. Redemption instructions and options should be
specified when your account is opened. Subsequent elections and changes in
instructions must be in writing with the signature(s) guaranteed. Changes in
registration or authorized signatories may require additional documentation. One
way to redeem shares is to write a letter of instruction which states: the
name(s) and signature(s) of all accountholders (signature(s) guaranteed, if
necessary), account number, Fund name, the dollar amount you want to sell, and
how and where to send the proceeds. If you are redeeming your IRA, please note
the applicable withholding requirements.
To reduce the risk of loss, certain situations require written
instructions along with signature guarantees. These include:
8
<PAGE>
(1) redemptions for more than $5,000; or
(2) redemptions on accounts whose address has been changed within the past
30 days; or
(3) redemption requests to be sent to someone other than the account owner
or the address of record for the past 30 days.
You may redeem by calling the Funds at 800-637-1700. Unless you decline
telephone privileges on your application and the Funds fail to take reasonable
measures to verify the request, the Funds will not be liable for any
unauthorized telephone redemption, or for any loss, cost or expense for acting
upon an investor's telephone instructions. Telephone redemptions may be sent to
the bank or brokerage account designated by the shareholder on the application
or in a letter with signature guarantee. To change the designated brokerage or
bank account it is necessary to contact the Firm through which shares of the
Fund were purchased or, if purchased directly from the Funds, it is necessary to
send a written request to the Funds with signature(s) guaranteed. The Fund
reserves the right to refuse a telephone redemption if it believes it is
advisable to do so.
Signature guarantees are designed to protect both you and the Funds from
fraud. Signature guarantees can be obtained from most banks, credit unions or
savings associations, or from broker/dealers, national securities exchanges or
clearing agencies. Notaries public cannot provide signature guarantees. For more
information about redemption procedures, please read the SAI.
Checking, VISA and ATM Access. (Treasurer's Trust and Class D shareholders
only). You may redeem shares of the Fund by using your Reserve checks and VISA
check card. By completing the application or a signature card (for existing
accounts) and certain other documentation, you can write checks in any amount
against your account. A check will be returned (bounced) and a fee charged if
you request a stop payment; the check is postdated; contains an irregularity in
the signature, amount or otherwise; or, is written against accounts with
insufficient or uncollected funds. Please do not postdate your checks or use
them to close your account. Upon proper notice, the Funds may choose to impose a
fee if it deems a shareholder's actions to be burdensome. Checking may not be
available to clients of some Firms, and some Firms may establish their own
minimum check amount. Shareholders may use their VISA card at ATM's to receive
cash. Please see the SAI for more information, including charges, fees,
etcetera.
Exchange Privilege. Investors can exchange all or some of their shares offered
for shares in other Reserve money-market and equity funds. Investors can request
an exchange in writing or by telephone. The shares of the other funds are not
offered by this Prospectus. Be sure to read the current prospectus for any fund
into which you are exchanging. Any new account established through an exchange
will have the same privileges as an original account (as long as they are
available). Please see the SAI for more information.
Other Redemption Options and Automatic Services. (Treasurer's Trust and Class D
shareholders only). Certain other services and restrictions for selling shares
automatically are offered by the Funds. Please see the SAI for more information
about these services and restrictions.
Redemptions Through Brokers And Financial Institutions. Redemptions through
brokers and financial institutions may involve such Firms' own redemption
minimums, services fees, and other redemption requirements.
Other. The Funds also reserve the right to make a "redemption in kind", (payment
in portfolio securities rather than cash), without notice, if the amount the
investor is redeeming is large enough to affect fund operations (for example, if
it represents more than 1% of the Fund's assets). Further, each Fund reserves
the right to:
o refuse any purchase or exchange request,
o change or discontinue its exchange privilege,
o change its minimum investment amounts, and
o delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions).
9
<PAGE>
TAX CONSEQUENCES
The following discussion is intended as general information only. Because
everyone's tax situation is unique, you should consult your own tax advisor(s)
with regard to the applicability of state and local tax laws on Fund
distributions. The applicable tax laws which affect the Funds and their
shareholders are subject to change and may be retroactive. For more information,
please see the SAI.
Dividends, Distributions and Taxes. Each Fund declares dividends daily and
automatically reinvests them in additional shares except for shareholders who
elect in writing to receive cash dividends, in which case monthly or quarterly
dividend checks are sent to the shareholder. There are no fees or sales charges
on reinvestments.
Dividends and distributions are taxable to most shareholders as ordinary
income (unless an investment is in an IRA or other tax-advantaged account).
Distributions of long-term capital gains, if any, are taxable to shareholders as
long-term capital gains. The tax status of any distribution is the same
regardless of how long an investor has been in the fund and whether
distributions are reinvested or taken in cash. The tax status of dividends and
distributions will be detailed in annual tax statements from the Funds. An
exchange of a Fund's shares for the shares of another fund will be treated as a
sale of The Fund's shares and any gain may be subject to federal income tax.
The U.S. Treasury Institutional Fund intends to invest only in U.S.
Treasury securities and obligations of those agencies and instrumentalities of
the U.S. government that provide interest income exempt in most states from
state and local personal income taxes, except to the extent uninvested cash is
invested in repurchase agreements. Some states have minimum investment
requirements that must be met by the U.S. Treasury Institutional Fund.
Distributions attributable to net capital gains, if any, are generally subject
to state and local taxes. It is possible that a state or local taxing authority
may in the future seek to tax an investor on a portion of the interest income of
an obligation held by the U.S. Treasury Institutional Fund.
As to the Interstate Tax-Exempt Institutional Fund, dividends derived
from the interest earned on municipal obligations and designated by the Fund as
"exempt-interest dividends" are not subject to federal income taxes. Any
distributions of net short-term capital gains and taxable interest income, if
any, are taxable as ordinary income. Any distributions of net realized long-term
capital gains earned by the Fund are taxable to shareholders as long-term
capital gains, regardless of the length of time the Fund's shares have been
owned by the shareholder.
Backup Withholding. Fund may be required to withhold U.S. federal income tax at
the rate of 31% of all taxable distributions payable to certain shareholders who
fail to provide the Fund with their correct taxpayer identification number or to
make required certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Backup withholding is not
an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. federal income tax liability. However, special rules apply
for certain accounts. For example, for an account established under the Uniform
Gift to Minors Act, the TIN of the minor should be furnished. Shareholders
should be aware that, under regulations promulgated by the IRS a Fund may be
fined $50 annually for each account for which a certified TIN is not provided or
is incorrect. In the event that such a fine is imposed with respect to an
account in any year, a corresponding charge will be made against the account.
The Funds will not accept purchase orders for accounts for which a correct and
certified TIN is not provided or which is otherwise subject to backup
withholding, except in the case of certain non-resident alien account holders.
GENERAL INFORMATION
Small Balances. Because of the expense of maintaining accounts with small
balances (less than $1,000 for Class D and less than $100,000 for Class A, Class
B and Class C), the Funds may choose to, without notice, to either levy a
monthly charge (currently $5 for Class D and $100 for Class A, B and C) or
reduce the account and remit the proceeds. Some Firms may establish variations
of minimum balances and monthly charges if those variations are approved by the
Funds.
10
<PAGE>
Reserve Easy Access. Easy Access is The Reserve Funds' 24-hour toll-free
telephone service that lets customers use a touch-tone phone for a variety of
options, which include yields, account balances, check reorders and other
options. To use it, call 800-637-1700 and follow the instructions. Clients may
also access full account activity for the previous six months on the Internet at
www.reservefunds.com.
Inquiries. Shareholders should direct their inquiries to the Firm from which
they received this Prospectus or to The Reserve Funds.
Special Shareholder Services. The Funds reserve the right to charge shareholder
accounts for specific costs incurred in processing unusual transactions. Such
transactions include, but are not limited to, stop payment requests, copies of
Fund redemption or shareholder checks, copies of statements and special research
services.
Account Statements. Shareholders are advised to retain all account statements.
FINANCIAL HIGHLIGHTS
This section provides further details about The Funds' recent financial
history. "Total Return" shows how much an investment in a series would have
increased (or decreased) during each period, assuming reinvestment of all
dividends and distributions, if any. These figures have been audited by
PricewaterhouseCoopers LLP, the Trust's independent accountants, whose report,
along with each Funds' financial statements, is included in the Trust's Annual
Report which is available upon request by calling 800-637-1700.
11
<PAGE>
<TABLE>
<CAPTION>
PRIMARY INSTITUTIONAL FUND
CLASS A CLASS B
--------------------------------- -------------------------------------------------
Fiscal Year Period Ended Period Ended
Ended May 31, May 31, Fiscal Years Ended May 31, May 31,
------------------ --------------- ------------------------------ --------------
1999 1998 (a) 1999 1998 1997 (b)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
-------- -------- -------- -------- --------
Net investment income
from investment
operations .0509 .0332 .0488 .0529 .0179
Less dividends from
net investment income (.0509) (.0332) (.0488) (.0529) (.0179)
--------- -------- --------- -------- --------
Net asset value at
end of period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======== ======== ======== ========
Total Return 5.09% 5.49% (d) 4.88% 5.29% 4.95% (d)
Ratios/Supplemental Data
- ------------------------
Net assets end of
period (millions) $ 75.8 $ 4.4 $ 4.2 $ 10.4 $ 2.0
Ratio of expenses to
average net assets .25% .25% (d) .45% .45% .50% (d)(e)
Ratio of net investment
income to average
net assets 4.79% 5.35% (d) 4.79% 5.16% 4.81% (d)(e)
</TABLE>
<TABLE>
<CAPTION>
TREASURER'S TRUST CLASS C
------------------------------ -----------------
Fiscal Year Period Ended Period Ended
Ended May 31, May 31, May 31,
-----------------
1999 1998 (c) 1999 (f)
---- ---- --------
<S> <C> <C> <C>
Net asset value at
beginning of period $1.0000 $1.0000 $1.0000
------- -------- -------
Net investment income
from investment
operations .0470 .0322 .0036
Less dividends from
net investment income (.0470) (.0322) (.0036)
-------- --------- --------
Net asset value at
end of period $1.0000 $1.0000 $1.0000
======= ======== =======
Total Return 4.70% 5.13% (d) 4.11% (d)
Ratios/Supplemental Data
- ------------------------
Net assets end of
period (millions) $ 154.1 $ 171.7 $ 58.4
Ratio of expenses to
average net assets .60% .60% (d) .75% (d)
Ratio of net investment
income to average
net assets 4.59% 5.00% (d) 4.12% (d)
</TABLE>
(a) From October 23, 1997 (Commencement of Operations) to May 31, 1998.
(b) From January 21, 1997 (Commencement of Operations) to May 31, 1997.
(c) From October 15, 1997 (Commencement of Operations) to May 31, 1998.
(d) Annualized.
(e) Due to the voluntary waiver of certain expenses by RMCI, the net expense
ratio and net investment income amounted to .48% and 4.83%, respectively, for
the period ended May 31, 1997.
(f) From April 30, 1999 (Commencement of Operations) to May 31, 1999.
12
<PAGE>
U.S. GOVERNMENT INSTITUTIONAL FUND
<TABLE>
<CAPTION>
CLASS A CLASS B TREASURER'S TRUST
------- ------- -----------------
Period Ended Fiscal Year Period Ended Fiscal Year Ended Period Ended
May 31, Ended May 31, May 31, May 31, May 31,
---------------- ------------------------------------- ------------------ ----------------
1999 (a) 1999 1998 (b) 1999 1998 (c)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
-------- -------- -------- -------- -------
Net investment income
from investment
operations .0228 .0471 .0364 .0455 .0036
Less dividends from
net investment
income (.0228) (.0471) (.0364) (.0455) (.0036)
-------- --------- -------- -------- --------
Net asset value at
end of period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======== ======== ======== ======= ========
Total Return 4.60% (d) 4.71% 5.13% (d) 4.55% 4.85% (d)
Ratios/Supplemental Data
- ------------------------
Net assets end of
period (millions) $36.5 $6.4 $5.8 $4.9 $3.3
Ratio of expenses to
average net assets .25% (d) .45% .45% (d) .60% .60% (d)
Ratio of net investment
income to average
net assets 4.55% (d) 4.70% 5.00% (d) 4.42% 4.73% (d)
</TABLE>
- ------------------------
(a) From December 2, 1998 (Commencement of Operations) to May 31, 1999.
(b) From September 15, 1997 (Commencement of Operations) to May 31, 1998.
(c) From May 5, 1998 (Commencement of Operations) to May 31, 1998.
(d) Annualized.
US TREASURY INSTITUTIONAL FUND- TREASURER'S TRUST
- -------------------------------------------------
Fiscal Year
Ended
May 31,
1999 (a)
----
Net asset value
beginning of period $1.0000
Net investment income
from investment
operations .0245
Less dividends from
net investment
income (.0245)
Net asset value at
end of period $1.0000
Total Return 4.03% (b)
Ratios/Supplemental Data
- ------------------------
Net assets end of
period (millions) $15.7
Ratio of expenses to
average net assets .60% (b, c)
Ratio of net investment
income to average
net assets 3.66% (b, c)
- ------------------------------------
(a) From October 21, 1998 (Commencement of Operations) to May 31, 1999.
(b) Annualized.
(c) During this period ended May 31, 1999, RMCI voluntarily waived a
portion of its fee. Due to the voluntary waiver of certain expenses by RMCI,
the net expense ratio and net investment income amounted to .24% and 4.02%,
respectively.
13
<PAGE>
INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND
- ----------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B TREASURER'S TRUST
---------------- -------------------- ----------------------------------
Fiscal Year
Period Ended Period Ended Ended Period Ended
May 31, May 31, May 31, May 31,
---------------- -------------------- ---------------- -----------------
1999 (a) 1999 (d) 1999 1998 (b)
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net asset value at
Beginning of period $1.0000 $1.0000 $1.0000 $1.0000
-------- -------- -------- -------
Net investment income
From investment
Operations .0175 .0101 .0284 .0018
=====
Less dividends from
net investment
Income (.0175) (.0101) (.0284) (.0018)
--------- ------ --------- ---------
Net asset value at
end of period $1.0000 $1.000 $1.0000 $1.0000
======== ====== ======== =======
Total Return 3.06% (c) 3.12% (c) 2.84% 3.39% (c)
Ratios/Supplemental Data
- ------------------------
Net assets end of
period (millions) $11.2 - $23.7 $14.0
Ratio of expenses to
average net assets .25% (c) .45% (c) .60% .60% (c)
Ratio of net investment
income to average
net assets 3.13% (c) 3.04% (c) 2.79% 3.33% (c)
</TABLE>
(a) From November 3, 1998 (Commencement of Operations) to May 31, 1999.
(b) From May 13, 1998 (Commencement of Operations) to May 31, 1998.
(c) Annualized.
(d) From August 4, 1998 (Commencement of Operations) to December 31, 1998 (the
final redemption of all outstanding shares.)
14
<PAGE>
This Prospectus contains the information about
each Fund, which a prospective investor should [THE RESERVE FUNDS LOGO]
know before investing. Founders of
"America's First
The Statement of Additional Information ("SAI") Money Fund"
contains additional and more detailed
information about the Funds, and is considered
part of this Prospectus. Our Annual and
Semi-Annual Reports list the holdings in each
Fund, describe Fund performance, include
financial statements for the Funds, and discuss
market conditions and strategies that
significantly affected the Funds' performance.
These documents may be obtained without charge Primary Institutional Fund
by writing to the address below or calling The U.S. Government
Reserve Funds at 800-637-1700. You can Institutional Fund
download the documents from the SEC's web U.S. Treasury
site (http://www.sec.gov) or you can obtain Institutional Fund
copies by visiting the SEC's Public Reference Interstate Tax-Exempt
Room in Washington, DC (800-SEC-0330) Institutional Fund
or by sending your request and duplicating
fee to the SEC's Public Reference Section,
Washington, DC 20549-6009
Investors are advised to read and retain this
prospectus for future reference.
[THE RESERVE FUNDS LOGO]
Founders of
"America's First
Money Fund"
1250 Broadway, New York, NY 10001-3701
(212) 401-5500 Prospectus
July 31, 1999
General Information and 24-Hour Yield and
Balance Information
800-637-1700 - www.reservefunds.com
Distributor - Resrv Partners, Inc.
RIT-07/99
SEC File Number
Reserve Institutional Trust
811-3141
<PAGE>
RESERVE INSTITUTIONAL TRUST
1250 BROADWAY, NEW YORK, NY 10001-3701
212-401-5500 . 800-637-1700
--------------------------------------------
24-HOUR YIELD AND BALANCE INFORMATION
Nationwide 800-637-1700 . www.reservefunds.com
Reserve Institutional Trust
of Money Market Funds
Statement Of Additional Information
This Statement of Additional Information ("SAI") describes the Reserve
Institutional Trust ("Trust") and its four money funds: Primary, U.S.
Government, U.S. Treasury and Interstate Tax-Exempt Institutional Funds (each a
"Fund", together the "Funds"). The Reserve Institutional Trust was originally
organized as a Maryland corporation on February 5, 1981 and reorganized on
September 16, 1986 as a Massachusetts business trust, and is an open-end
management investment company commonly known as a mutual fund. At the date of
this Prospectus and SAI, there were four separate series (funds) authorized and
outstanding. Additional series (fund) may be added in the future by the Board of
Trustees. This Statement is not a Prospectus, but provides detailed information
to supplement the Prospectus dated July 31, 1999 and should be read in
conjunction with it. A copy of the Prospectus may be obtained without charge by
writing or calling the Fund at the above address or telephone number. The
Securities and Exchange Commission ("SEC") maintains a web site
(http://www.sec.gov) where you can download the SAI, the Prospectus, material
incorporated by reference & other information regarding the Fund. This Statement
is dated July 31, 1999.
TABLE OF CONTENTS PAGE
----------------- ----
Description of Funds.................................................2
Management of the Trust.............................................10
Investment Management, Distribution and Custodian Agreements........16
Information About the Trust.........................................18
How to Buy and Sell Shares..........................................19
Dividends, Distributions and Taxes..................................25
Yield Information...................................................27
General Information.................................................28
Shares Of The Funds Are Neither Guaranteed Nor Insured By The U.S. Government
And There Can Be No Assurance That The Funds Will Be Able To Maintain A Stable
Net Asset Value Of $1.00 Per Share.
1
<PAGE>
DESCRIPTION OF THE FUNDS
The investment objective of each Fund, with the exception of the Interstate
Tax-Exempt Institutional Fund is to seek as high a level of current income as is
consistent with preservation of capital and liquidity. The Interstate Tax-Exempt
Institutional Fund seeks to have its interest income exempt from federal income
taxes, as is consistent with preservation of capital and liquidity. However,
achievement of these objectives is not guaranteed. The investment objectives may
not be changed without the vote of a majority of the outstanding shares of the
Fund as defined in the Investment Company Act of 1940 ("1940 Act").
Investment in the Funds is not insured or guaranteed by the U.S. government,
Federal Deposit Insurance Corporation or any other government agency. Although
each Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money investing in the Funds.
Money-market funds are subject to federal regulations designed to help
maintain liquidity. The regulations set strict standards for credit quality,
diversification and maturity (397 days or less for individual securities, 90
days or less for the average portfolio life).
Investment management companies can be divided into "diversified" and
"non-diversified". Under Section 5(b), a diversified company must have 75% of
the value of its total assets in cash and cash items (including receivables),
U.S. government securities, securities of other investment companies, and other
securities. Any management company other than a diversified company is defined
as a "non-diversified" company pursuant to Section 5(b)(2). The Reserve
Institutional Trust is a non-diversified mutual fund. However, each of its
separate investment portfolios (Funds) intends to comply with the
diversification requirement of Rule 2a-7 under the 1940 Act which places certain
limits on a Fund's investments in any one issuer's securities in order to limit
investment risk. With few exceptions, under Rule 2a-7, a Fund may invest no more
than 5% of its assets in securities of any one issuer, except U.S.
government securities.
Reserve Management Co., Inc. ("RMCI") serves as the Funds' Investment
Adviser. Resrv Partners, Inc. ("RESRV"), which is a wholly owned subsidiary of
RMCI, is the distributor of the Funds' shares. RESRV is located at 1250
Broadway, New York, NY 10001-3701.
The following information supplements and should be read in conjunction with
the Prospectus.
SUPPLEMENTAL INVESTMENT POLICIES. Each Fund's investment objective and the
following investment policies may not be changed without the affirmative vote of
a majority of the outstanding shares of a Fund. A majority of the outstanding
shares of a Fund means the vote of the lesser of (i) 67% or more of the shares
of a Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii) more
than 50% of the outstanding shares of the Fund. A Fund cannot:
(1) borrow money except as a temporary or emergency measure and not in an
amount to exceed 5% of the market value of its total assets;
(2) issue senior securities except in compliance with the Investment Company
Act of 1940 ("1940 Act");
(3) act as an underwriter with respect to the securities of others to the
extent that, in connection with the disposition of portfolio securities,
it may be deemed to be an underwriter under certain federal securities
laws;
(4) concentrate investments in any particular industry except to the extent
that its investments are concentrated exclusively in U.S. government
securities, bank obligations, including obligations of foreign branches
of domestic banks where the domestic parent would be unconditionally
liable in the event that the foreign branch failed to pay on its
instruments for any reason, and Municipal Obligations or instruments
secured by such obligations;
(5) purchase, sell or otherwise invest in real estate or commodities or
commodity contracts; however, the Interstate Fund may purchase municipal
obligations secured by interests in real estate;
(6) lend more than 33 1/3% of the value of its total assets except to the
extent its investments may be considered loans;
2
<PAGE>
(7) sell any security short or write, sell or purchase any futures contract
or put or call option; and
(8) make investments on a margin basis.
Notwithstanding the foregoing investment restrictions, each Fund may invest
substantially all of its assets in another open-end investment company with
substantially the same investment objective as the Fund.
Although not currently using a "master/feeder" structure, based upon
shareholder approval, the Trust may use a "master/feeder" structure. Rather than
investing directly in securities, the Fund is a "feeder fund," meaning that it
invests in a corresponding "master fund". The master fund, in turn invests in
securities using the strategies described in this Prospectus. One potential
benefit of this structure is lower costs, because the expenses of the master
fund can be shared with any other feeder funds.
OTHER POLICIES OF THE PRIMARY, U.S. GOVERNMENT AND U.S. TREASURY INSTITUTIONAL
FUNDS. The Primary and U.S. Government Funds may from time to time lend
securities on a short-term basis to banks, brokers and dealers (but not
individuals) and receive as collateral cash or securities issued by the U.S.
government or its agencies or instrumentalities. The collateral will be required
to be maintained at all times in an amount equal to at least 100% of the current
value of the loaned securities plus accrued interest. The Primary and U.S.
Government Funds may, to increase their income, lend their securities to
brokers, dealers and institutional investors if the loan is collateralized in
accordance with applicable regulatory requirements (the "Guidelines") and if,
after any loan, the value of the securities loaned does not exceed 25% of the
value of its assets. Under the present Guidelines, the loan collateral must, on
each business day, be at least equal to the value of the loaned securities plus
accrued interest and must consist of cash or securities of the U.S. government
(or its agencies or instrumentalities). The Funds receive an amount equal to the
interest on loaned securities and also receive negotiated loan fees. The Funds
may also pay reasonable finders, custodian and administrative fees. Loan
arrangements made by a Fund will comply with all other applicable regulatory
requirements including the rules of the New York Stock Exchange ("NYSE or
Exchange"), which require the borrower, after notice, to redeliver the
securities within the normal settlement time of three (3) business days.
A Fund will not invest more than 10% of its net assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven (7) days after notice and will not concentrate more than 25% of its
total assets in the securities of issuers in a single industry, except that the
Primary Fund may invest more than 25% of its assets in banking. In addition, a
Fund will not invest more than 5% of its assets in the securities of any single
issuer (except U.S. government securities or repos collateralized by U.S.
government securities). Each Fund has the authority to borrow money (including
reverse repos involving sales by a Fund of portfolio securities concurrently
with an agreement by the Fund to repurchase the same securities at a later date
at a fixed price) for extraordinary or emergency purposes but not in an amount
exceeding 5% of its total assets.
OTHER POLICIES OF THE INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND. The Interstate
Tax-Exempt Institutional Fund may purchase floating and variable rate demand
bonds, which are municipal obligations normally having stated maturities in
excess of one year, but which permit the holder to demand payment of principal
and accrued interest at any time, or at specified intervals not exceeding one
year, usually upon not more than seven (7) days' notice. The Fund will not
invest more than 10% of the value of its assets in floating or variable rate
demand bonds for which there is no secondary market if the demand feature on
such municipal obligations requires more than seven (7) days' notice. Municipal
obligations are sometimes offered on a "when-issued" or delayed-delivery basis.
There is no limit on the Fund's ability to purchase municipal securities on a
when-issued basis. The price of when-issued securities, which is generally
expressed in yield terms, is fixed at the time the commitment to purchase is
made but delivery and payment for the when-issued securities takes place at a
later date. Normally, the settlement date occurs within one month of the
purchase of such municipal obligations. During the period between the purchase
and settlement dates, no payment is made by the Fund to the issuer and no
interest accrues to the Fund on such securities. To the extent that assets of
the Fund purchasing such securities are not invested prior to the settlement of
a purchase of securities, the Fund will earn no income, however, it is the
Fund's intent to be as fully invested as is practicable. While when-issued
securities may be sold prior to settlement date, the Fund intends to purchase
such securities with the purpose of actually acquiring them unless a sale
appears desirable for investment reasons. At the time the Fund makes the
commitment to purchase a municipal obligation on a when-issued basis, it
3
<PAGE>
will record the transaction and reflect the value of the security in determining
its net asset value ("NAV"). The Fund will also maintain readily marketable
assets at least equal in value to commitments for when-issued securities
specifically for the settlement of such commitments. RMCI does not believe that
the Fund's NAV or income will be adversely affected by the purchase of municipal
obligations on a when-issued basis.
The Fund may purchase participation interests in municipal obligations from
financial institutions. A participation interest gives a Fund an undivided
interest in the municipal obligation in the proportion that the Fund's
participation interest bears to the total principal amount of the municipal
obligation. These instruments may have fixed, floating or variable rates of
interest. Frequently, such instruments are secured by letters of credit or other
credit support arrangements provided by banks.
Interest received on certain otherwise tax-exempt securities ("private
activity bonds") is subject to a federal Alternative Minimum Tax ("AMT"). It is
the position of the SEC that in order for a fund to call itself "tax-free", not
more than 20% of its net assets may be invested in municipal securities subject
to the AMT or at least 80% of its income will be tax-exempt. Income received on
such securities is classified as a "tax preference item," which could subject
certain shareholders of the Fund to the AMT. However, as of the date of this
Prospectus, the Fund has not and does not purchase such securities, but reserves
the right to do so depending on market conditions in the future.
Although it is not the current intention, from time to time the Fund may
invest in taxable short-term investments ("taxable investments") consisting of
obligations backed by the full faith and credit of the U.S. government, its
agencies or instrumentalities ("U.S. Governments"), deposit-type obligations,
acceptances, letters of credit of Federal Deposit Insurance Corporation member
banks and instruments fully collateralized by such obligations, including
repurchase agreements. Unless the Fund has adopted a temporary defensive
position, no more than 20% of the net assets of the Fund will be invested in
taxable investments at any time
RMCI uses its reasonable business judgment in selecting investments in
addition to considering the ratings of Moody's, Standard and Poor's and other
rating services, when available. This analysis considers, among other things,
the financial condition of the issuer by taking into account present and future
liquidity, cash flow and capacity to meet debt service requirements. Since the
market value of debt obligations fluctuates as an inverse function of changing
interest rates, the Fund seeks to minimize the effect of such fluctuations by
investing in instruments with remaining maturities of 397 days or less and
limiting its average maturity to 90 days or less.
Types of Securities. Money-market securities are high-quality, short-term
securities that pay a fixed, variable or floating interest rate. Securities are
often specifically structured so that they are eligible investments for a
money-market fund having demand or put features which have the effect of
shortening the security's maturity. Municipal money-market securities include
variable rate demand bonds, commercial paper, municipal notes and shares of
municipal money-market funds.
Debt securities are used by issuers to borrow money. The issuer usually pays
a fixed, variable or floating rate of interest, and must repay the amount
borrowed at the maturity of the security. Some debt securities, such as zero
coupon bonds, do not pay current interest, but are sold at a discount from their
face values. Municipal debt securities include general obligation bonds of
municipalities, local or state governments, project or revenue-specific bonds,
or pre-refunded or escrowed bonds.
Municipal securities are issued to raise money for a variety of public and
private purposes, including general financing for state and local governments,
or financing for a specific project or public facility. Municipal securities may
be fully or partially backed by the local government, by the credit of a private
issuer, by the current or anticipated revenues from a specific project or
specific assets, or by domestic or foreign entities providing credit support
such as letters of credit, guarantees or insurance.
A repurchase agreement ("repo") transaction occurs when the Fund purchases
and simultaneously contracts to resell securities at fixed prices determined by
the negotiated yields. The Fund will limit repo transactions to those financial
institutions and securities dealers who are deemed credit worthy pursuant to
guidelines established by the Funds' Board of Trustees. Repos are considered by
the SEC staff to be loans by the Fund that enters into them.
4
<PAGE>
Repos could involve risks in the event of a default or insolvency of the repo
counter-party to the agreement, including possible delays or restrictions upon
the Fund's ability to dispose of the underlying securities. In an attempt to
reduce the risk of incurring a loss on a repo, RMCI will follow procedures
intended to provide that all repos are at least 100% collateralized as to
principal and interest. The Fund will make payment for such instruments only
upon their physical delivery to, or evidence of their book-entry transfer to,
the account of the Fund's Custodian. If the seller defaults on the repurchase
obligation, the Fund could incur a loss and may incur costs in disposing of the
underlying security. The Fund will not hold more than 10% of its net assets in
illiquid securities, including repurchase agreements with a term greater than
seven (7) days.
RISKS OF INVESTING IN THE PRIMARY, U.S. GOVERNMENT AND U.S. TREASURY
INSTITUTIONAL FUNDS. Money-market securities are high-quality, short-term
securities that pay a fixed, variable or floating interest rate. Securities are
often specifically structured so that they are eligible investments for a
money-market fund. For example, in order to satisfy the maturity restrictions
for a money market fund, some money-market securities have demand or put
features which have the effect of shortening the security's maturity. Further,
the principal risk factors associated with investment in each Fund are the risk
of fluctuations in short-term interest rates, the risk of default among one or
more issuers of securities which comprise a Fund's assets; consequently when you
sell (redeem) your shares of a Fund, they could be worth more or less than what
you paid for them. In addition to the general investment risks of the Funds that
are common to and may affect the money-market industry as a whole, there are
risks specific to the types of securities held.
U.S. Government Securities. U.S. government securities include a variety of
instruments which are issued or guaranteed by the U.S. Treasury, various
agencies of the federal government and various instrumentalitites which have
been established or sponsored by the U.S. government, and certain interests in
the foregoing types of securities such as U.S. Treasury STRIPS. U.S. government
securities include direct obligations of the U.S. Treasury (such as Treasury
bills, Treasury notes, and Treasury bonds). Obligations such as securities
issued by the Government National Mortgage Association ("GNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC"), the Federal National Mortgage
Association ("FNMA"), the Student Loan Marketing Association ("SLMA") and the
Federal Home Loan Bank ("FHLB") are also considered U.S. government securities.
Some obligations of agencies and instrumentalities of the U.S. government, such
as GNMA, are supported by the full faith and credit of the U.S. government.
Other securities, such as obligations issued by FNMA and SLMA, are supported by
the right of the issuer to borrow from the U.S. Treasury; and others, such as
obligations issued by FHLB and FHLMC, are supported only by the credit of the
agency or instrumentality issuing the obligation. In the case of securities not
backed by the full faith and credit of the U.S., the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment.
U.S. Treasury STRIPS permit the separate ownership and trading of the
interest and principal components of direct obligations of the U.S. Treasury.
These obligations may take the form of (i) obligations from which interest
coupons have been stripped; (ii) the interest coupons that are stripped; or
(iii) book-entries at a Federal Reserve member bank representing ownership of
obligation components.
Bank Obligations. The Primary Institutional Fund may invest in bank obligations
that include certificates of deposit, bankers' acceptances, letters of credit
and time deposits. A certificate of deposit is a negotiable certificate
representing a financial institution's obligation to repay funds deposited with
it, earning a specified rate of interest over a given period. A bankers'
acceptance is a negotiable obligation of a bank to pay a draft which has been
drawn on it by a customer. A time deposit is a non-negotiable deposit in a
financial institution earning a specified interest rate over a given period of
time. A letter of credit is an unconditional guarantee by the issuing bank to
pay principal and interest on a note a corporation has issued.
Domestic banks are subject to extensive but different government regulations
which may limit both the amount and types of loans which may be made and
interest rates which may be charged. In addition, the profitability of the
banking industry is dependent largely upon the availability and cost of funds.
General economic conditions as well as exposure to credit losses arising from
possible financial difficulties of borrowers play an important part in the
operations of the banking industry. Domestic commercial banks organized under
federal law are supervised and examined by the Controller of the Currency and
are required to be members of the Federal Reserve System and to
5
<PAGE>
have their deposits insured by the Federal Deposit Insurance Corporation.
Domestic banks organized under state law are supervised and examined by state
banking authorities but are members of Federal Reserve System only if they elect
to join. As a result of federal and state laws and regulations, domestic banks
are, among other things, generally required to maintain specified levels of
reserves and are subject to other regulations designed to promote financial
soundness.
Foreign Banks. The Primary Institutional Fund may invest in obligations of
foreign banks and foreign branches of U.S and foreign banks. Investment in these
securities involve risks which may include unfavorable political and economic
developments, possible withholding taxes, seizure of foreign deposits, currency
controls or other governmental restrictions which might affect payment of
principal or interest. Furthermore, foreign banks are not regulated by U.S.
banking authorities and are generally not bound by financial reporting standards
comparable to U.S. banks.
Municipal Obligations. The Primary Institutional Fund may invest in municipal
obligations, the interest on these municipal obligations is not exempt from
federal income tax. They may be issued to raise money for various public
purposes such as constructing public facilities. Certain types of municipal
obligations are issued to obtain funding for privately operated facilities.
General obligation bonds and notes are backed by the taxing power of the issuer.
Revenue bonds and notes are backed by the revenues of a project or facility such
as tolls from a toll road or, in some cases, from the proceeds of a special
excise tax, but not by the general taxing power. Industrial development revenue
bonds and notes are a specific type of revenue bond or note backed by the credit
of a private issuer. Municipal obligations bear fixed, variable or floating
rates of interest.
Municipal obligations are sometimes offered on a "when-issued" or delayed
delivery basis. There is no limit on the Primary Institutional Fund's ability to
purchase municipal securities on a when-issued basis. At the time a Fund makes
the commitment to purchase a municipal obligation on a when-issued basis, it
will record the transaction and reflect the value of the security in determining
its net asset value ("NAV"). Each Fund will also maintain readily marketable
assets at least equal in value to commitments for when-issued securities
specifically for the settlement of such commitments. RMCI does not believe that
a Fund's NAV or income will be adversely affected by the purchase of municipal
obligations on a when-issued basis.
Municipal securities can be significantly affected by economic and political
changes, as well as uncertainties in the municipal market related to taxation,
legislative changes, or the rights of municipal security holders. Because many
municipal securities are issued to finance similar projects, especially those
relating to education, health care, transportation and various utilities,
conditions in those sectors and the financial condition of an individual
municipal issuer can affect the overall municipal market.
Commercial Paper. The Primary Institutional Fund has never purchased commercial
paper and has no current interest of doing so. However, it may purchase
commercial paper consisting only of short-term, unsecured promissory notes
issued to finance short-term credit needs which are direct obligations issued by
domestic entities. The other corporate obligations in which the Primary
Institutional Fund may invest consist of high-quality, short-term bonds and
notes (including variable amount master demand notes) issued by domestic
corporations, including banks.
Repurchase and Reverse Repurchase Agreements. A repurchase agreement ("repo")
transaction occurs when the Fund purchases and simultaneously contracts to
resell securities at fixed prices. Each Fund will limit repos to those financial
institutions and securities dealers who are deemed credit-worthy pursuant to
guidelines established by the Funds' Board of Trustees ("Trustees"). Repos are
considered by the SEC staff to be loans by the Fund that enters into them. Repos
could involve risks in the event of a default of the repo counter-party to the
agreement, including
6
<PAGE>
possible delays, losses or restrictions upon the Fund's ability to dispose of
the underlying securities. In an attempt to reduce the risk of incurring a loss
on a repo, RMCI will follow procedures intended to provide that all repos are at
least 100% collateralized as to principal and interest. A Fund will make payment
for such instruments only upon their physical delivery to, or evidence of their
book-entry transfer to, the account of the Fund's Custodian. If the seller
defaults on the repurchase obligation, the Fund could incur a loss and may incur
costs in disposing of the underlying security. A Fund will not hold more than
10% of its net assets in illiquid securities, including repurchase agreements,
providing for settlement in more than seven (7) days after notice.
The Primary and U.S. Government Institutional Funds may sell securities in a
reverse repo when it is considered advantageous, such as to cover net
redemptions or to avoid a premature outright sale of its portfolio securities.
In a typical reverse repo transaction, the seller (Fund) retains the right to
receive interest and principal payments on the security, but transfers title to
and possession of it to a second party in return for receiving a percentage of
its value. By repaying the repo counterparty the value received plus interest,
the Fund repurchases the transferred security. It is the Fund's policy that
entering into a reverse repo transaction will be for temporary purposes only
and, when aggregated with other borrowings, may not exceed 5% of the value of
the total assets of the Fund at the time of the transaction.
RISKS OF INVESTING IN THE INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND. The
investment risks of the fund are specific to the particular type of municipal
obligations, as well as general risks that may affect the municipal money-market
industry as a whole.
There are two types of education-related bonds: (i) those issued to finance
projects for public and private colleges and universities, and (ii) those
representing pooled interests in student loans. Bonds issued to supply
educational institutions with funds are subject to the risk of unanticipated
revenue decline, primarily the result of decreasing student enrollment or
decreasing state and federal funding. Student loan revenue bonds are generally
offered by state authorities or commissions and are backed by pools of student
loans. Underlying student loans may be guaranteed by state guarantee agencies
and may be subject to reimbursement by the U.S. Department of Education through
its guaranteed student loan program. Others may be private, uninsured loans made
to parents or students which are supported by reserves or other forms of credit
enhancement. Recoveries of principal due to loan defaults may be applied to
redemption of bonds or may be used to re-lend, depending on program latitude and
demand for loans. Cash flows supporting student loan revenue bonds are impacted
by numerous factors, including the rate of student loan defaults, seasoning of
the loan portfolio, and student repayment deferral periods of forbearance. Other
risks associated with student loan revenue bonds include potential changes in
federal legislation regarding student loan revenue bonds, state guarantee agency
reimbursement and continued federal interest and other program subsidies
currently in effect.
The risks associated with electric utilities include the availability and
cost of fuel and capital, the effects of conservation on energy demand, the
effects of rapidly changing environmental, safety, and licensing requirements,
and other federal, state, and local regulations, timely and sufficient rate
increases, increasing competition, opposition to nuclear power and legislative
changes.
A major revenue source for the health care industry is payments from the
Medicare and Medicaid programs and, consequently, the industry is sensitive to
legislative changes and reductions in spending for such programs. Many other
factors may affect health care-related obligations, such as general and local
economic conditions; demand for services; expenses (including malpractice
insurance premiums); legislative and regulatory changes by private and
governmental agencies, as well as competition among health care providers.
Housing revenue bonds are generally issued by a state, county, city, local
housing authority, or other public agency. Generally they are secured by the
revenues derived from mortgages purchased with the proceeds of the bond issue.
It is extremely difficult to predict the supply of available mortgages to be
purchased with the proceeds of an issue or the future cash flow from the
underlying mortgages. Therefore, there are risks that proceeds will exceed
supply, resulting in early retirement of bonds, or that homeowner repayments
will create an irregular cash flow. Many factors may affect the financing of
housing projects, including but not limited to: acceptable
7
<PAGE>
completion of construction, proper management, occupancy and rent levels,
economic conditions, and changes to current laws and regulations.
Transportation-related municipal securities may be issued to finance the
construction of toll roads, highways, airports, or other transit facilities.
Airport bonds are dependent on the stability of the airline industry and a
specific carrier who uses the airport as a hub. Air traffic generally follows
broader economic trends, as well as the price and availability of fuel. The cost
and availability of fuel affects toll road bonds as do toll levels, the presence
of competing roads and the general economic health of an area. Fuel costs and
availability generally affect all transportation-related securities, as do the
presence of alternate forms of transportation, such as public transportation.
Water and sewer revenue bonds are often considered to have relatively
secure credit due to their issuer's importance, monopoly status, and generally
unimpeded ability to raise rates. Despite this, lack of water supply due to
insufficient rain, run-off, or snow pack is a concern that has led to past
defaults and could in the future. Further, public resistance to rate increases,
costly environmental litigation, and federal environmental mandates are
challenges faced by issuers.
In view of the Fund's investment in industrial development revenue bonds
and notes secured by letters of credit or guarantees of banks, an investment in
the Fund's shares should be made with an understanding of the characteristics of
the banking industry and the risks such an investment may entail. Banks are
subject to extensive government regulations which may limit both the amounts and
types of loans and other financial commitments which may be made and interest
rates and fees which may be charged. The profitability of the banking industry
is largely dependent upon the availability and cost of capital funds for the
purpose of financing lending operations under prevailing money-market
conditions. In addition, general economic conditions play an important part in
the operations of this industry, and exposure to credit losses arising from
possible financial difficulties of borrowers might affect a bank's ability to
meet its obligations under a letter of credit.
Many factors affect the Fund's performance therefore, the Fund's yield will
change daily based on changes in interest rates and market conditions. Although
the Fund has managed to maintain a stable $1.00 share price, since its
inception, there is no guarantee that the Fund will be able to do so.
The principal risk factors associated with investment in the Fund are the
risk of fluctuations in short-term interest rates and the risk of default among
one or more issuers of securities which comprise the Fund's assets; consequently
when you sell (redeem) your shares of the Fund, they could be worth more or less
than what you paid for them.
Municipal securities can be significantly affected by economic and
political changes, as well as uncertainties in the municipal market related to
taxation, legislative changes, or the rights of municipal security holders.
Because many municipal securities are issued to finance similar projects,
especially those relating to education, health care, transportation and various
utilities, conditions in those sectors and the financial condition of an
individual municipal issuer can affect the overall municipal market.
The value of municipal securities may be affected by uncertainties in the
municipal market-related to legislation or litigation involving the taxation of
municipal securities or the rights of municipal securities holders in the event
of a bankruptcy. Proposals to restrict or eliminate the federal income tax
exemption for interest on municipal securities are introduced from time to time.
Proposals also may be introduced before the individual state legislatures that
would affect the state tax treatment of a municipal fund's distributions. This
could have a significant impact on the prices of some or all of the municipal
securities held by the Fund, making it more difficult for a money-market fund to
maintain a stable net asset value ("NAV") per share.
Debt and money-market securities have varying levels of sensitivity to
changes in interest rates. In general, the price of a debt or money-market
security can fall when interest rates rise and can rise when interest rates
fall. Securities with longer maturities can be more sensitive to interest rate
changes. The longer the maturity of a security, the greater the impact a change
in interest rates could have on the security's price. In addition, short-term
8
<PAGE>
and long-term interest rates do not necessarily move in the same amount or the
same direction. Short-term securities tend to react to changes in short-term
interest rates, and long-term securities tend to react to changes in long-term
interest rates. For example, a major increase in interest rates or a decrease in
the credit quality of the issuer of one of a fund's investments could cause the
fund's share price to decrease.
Changes in the financial condition of an issuer, changes in specific
economic or political conditions that affect a particular type of security or
issuer, and changes in general economic or political conditions can affect the
credit quality or value of an issuer's securities. Lower-quality debt securities
(those of less than investment-grade quality) tend to be more sensitive to these
changes than higher-quality debt securities. Entities providing credit support
or a maturity-shortening structure also can be affected by these types of
changes. Municipal securities backed by current or anticipated revenues from a
specific project or specific assets can be negatively affected by the
discontinuance of the taxation supporting the project or assets or the inability
to collect revenues for the project or from the assets. If the Internal Revenue
Service determines an issuer of a municipal security has not complied with
applicable tax requirements, interest from the security could become taxable and
the security could decline significantly in value. In addition, if the structure
of a security fails to function as intended, interest from the security could
become taxable or the security could decline in value. In response to market,
economic, political or other conditions, RMCI may temporarily use a different
investment strategy for defensive purposes. If RMCI does so, different factors
could affect the Fund's performance, and the Fund may distribute income subject
to federal income tax.
Certain banks and other municipal securities dealers have indicated a
willingness to sell municipal obligations to the Fund accompanied by a
commitment to repurchase the securities at the Fund's option or at a specified
date, at an agreed upon price or yield within a specified period prior to the
maturity date of such securities at amortized cost. If a bank or other municipal
securities dealer were to default under such standby commitment and fail to pay
the exercise price, the Fund could suffer a potential loss to the extent that
the amount paid by the Fund, if any, for the municipal obligation with a standby
commitment exceeded the current value of the underlying municipal obligation. If
a bank or other municipal securities dealer defaults under its standby
commitment, the liquidity of the security subject to such commitment may be
adversely affected.
Yields on municipal securities depend on a variety of factors, including
general economic and monetary conditions, money-market factors, conditions in
the tax-exempt securities market, size of a particular offering, maturity of the
obligation and rating of the issue. The ability of the Fund to achieve its
investment objective is also dependent on the continuing ability of issuers of
municipal securities to meet their obligations for the payment of interest and
principal when due.
Another risk factor associated with investment in the Fund is
"non-diversification". As a non-diversified investment company, the Fund is
permitted to have all its assets invested in a limited number of issuers.
Accordingly, since a relatively high percentage of the Fund's assets may be
invested in the securities of a limited number of issuers, the Fund's investment
securities may be more susceptible to any single economic, political or
regulatory occurrence than the investment securities of a diversified investment
company. However, the Fund intends to qualify as a "regulated investment
company" for purposes of the Internal Revenue Code. This limits the aggregate
value of all investments (except U.S. government securities, securities of other
regulated investment companies, cash and cash items) so that, with respect to at
least 50% of its total assets, not more than 5% of such assets are invested in
the securities of a single issuer.
TRANSACTION CHARGES AND ALLOCATION. As investment securities transactions made
by the Fund are normally principal transactions at net prices, the Fund does not
normally incur brokerage commissions. Purchases of securities from underwriters
involve a commission or concession paid by the issuer to the underwriter and
after market transactions with dealers involve a spread between the bid and
asked prices. The Fund has not paid any brokerage commissions during the past
three fiscal years.
Subject to the overall supervision of the officers of the Fund and the
Trustees, RMCI places all orders for the purchase and sale of the Fund's
investment securities. In the purchase and sale of investment securities, RMCI
will seek to obtain prompt and reliable execution of orders at the most
favorable prices and yields. In determining best
9
<PAGE>
price and execution, RMCI may take into account a dealer's operational and
financial capabilities, the type of transaction involved, the dealer's general
relationship with RMCI, and any statistical, research, or other services
provided by the dealer to RMCI. To the extent such non-price factors are taken
into account the execution price paid may be increased, but only in reasonable
relation to the benefit of such non-price factors to the Fund as determined by
RMCI. Brokers or dealers who execute investment securities transactions may also
sell shares of the Fund; however, any such sales will be neither a qualifying
nor disqualifying factor in the selection of brokers or dealers.
When orders to purchase or sell the same security on identical terms are
simultaneously placed for the Fund and other investment companies managed by
RMCI, the transactions are allocated as to amount in accordance with each order
placed for each Fund. However, RMCI may not always be able to purchase or sell
the same security on identical terms for all investment companies affected.
MANAGEMENT OF THE TRUST
The Funds' Trustees are responsible for the management and supervision of
the Trust. The Trustees approve all significant agreements between the Funds and
those companies that furnish services to the Funds.
Trustees and executive officers of the Funds, together with information as
to their principal business occupations during at least the last five years, are
shown below:
*++BRUCE R. BENT, 62, President, Treasurer and Trustee, 1250 Broadway, New York,
NY 10001-3701.
Mr. Bent is President, Treasurer, and Trustee of The Reserve Fund ("RF"),
Reserve Institutional Trust ("RIT"), Reserve Tax-Exempt Trust ("RTET"), Reserve
New York Tax-Exempt Trust ("RNYTET") and Reserve Private Equity Series ("RPES");
Director and President of Reserve Management Company, Inc. ("RMCI") and Reserve
Management Corporation ("RMC"); and Chairman and Director of Resrv Partners,
Inc. ("RESRV").
Mr. Bent co-founded The Reserve Funds in 1970 and has been an executive
officer since then.
*++BRUCE R. BENT II, 33, Trustee, Senior Vice President and Assistant Secretary,
1250 Broadway, New York, NY 10001-3701.
Mr. Bent II joined The Reserve Funds in 1992 and is Senior Vice President
and Assistant Secretary of RF, RIT, RTET, RNYTET and RPES. Mr. Bent II is also
Vice President and Secretary of Reserve Management Company, Inc. ("RMCI") and
Reserve Management Corporation ("RMC"); and Secretary and Director of Resrv
Partners, Inc. ("RESRV").
+RICHARD BASSUK, 57 Trustee, c/o The Singer & Bassuk Organization, 767 Third
Avenue, 28th Floor, New York, NY 10017.
From 1995 to present Mr. Bassuk has been a founding principal and President
of Singer & Bassuk Organization. From 1994 to present, Mr. Bassuk served as
Chairman of R.E. Bases Enterprises Corporation. He is currently Trustee of RF,
RIT, RTET, RNYTET and RPES.
+EDWIN EHLERT, JR., 66, Trustee, 125 Elm Street, Westfield, NJ 07091.
Mr. Ehlert is President and Director of Ehlert Travel Associates, Inc.
(travel agency) and Ehlert Travel Associates of Florida, Inc. (travel agency),
and Trustee of RF, RIT, RTET, RNYTET and RPES.
+HENRI W. EMMET, 72, Trustee, 1535 Presidential Drive, Apt. 4A, Columbus, OH
43212.
Mr. Emmet retired as the Managing Director of Servus Associates, Inc. in
1994 and U.S.A. Representative of the First National Bank of Southern Africa in
1996. Since 1995, Mr. Emmet has served as a Principal of Global
10
<PAGE>
Interaction, which provides consulting services to international banking
interests. He is currently Trustee of RF, RIT, RTET, RNYTET and RPES.
+DONALD J. HARRINGTON, C.M., 53, Trustee, St. John's University, Grand Central &
Utopia Parkways, Jamaica, NY 11439.
The Reverend Harrington is currently President of St. John's University, NY,
and a Director of the Bear Stearns Companies, Inc. since 1993. He is currently a
Trustee RF, RIT, RTET, RNYTET and RPES.
+DIANA P. HERRMANN, 40, Trustee, 380 Madison Avenue, Suite 2300, New York, NY
10017.
Ms. Herrmann has been President and COO of Aquila Management Corporation
("Aquila"), sponsors of 14 mutual funds with over $3.2 billion in assets as of
June 30, 1999. Ms. Herrmann has been employed with Aquila since 1986. She is
currently Trustee of RF, RIT, RTET, RNYTET and RPES.
+WILLIAM J. MONTGORIS, 52, Trustee, 286 Gregory Road, Franklin Lakes, NJ 07417.
Mr. Montgoris is formerly Chief Operating Officer of the Bear Stearns
Companies, Inc. (1979-1999). He is currently Trustee of RF, RIT, RTET, RNYTET
and RPES.
+WILLIAM E. VIKLUND, 58, Trustee, 110 Grist Mill Lane, Plandome Manor, NY
11030-1110.
Mr. Viklund is formerly President and COO of Long Island Bankcorp and
President and CEO of Long Island Savings Bank (1980-1996). He is currently
Trustee of RF, RIT, RTET, RNYTET and RPES.
*ARTHUR T. BENT III, 31, Vice President and Assistant Secretary, 1250 Broadway,
New York, NY 10001-3701.
Mr. Bent III joined The Reserve Funds in 1997 and is Vice President and
Assistant Secretary of RF, RIT, RTET, RNYTET and RPES. Mr. Bent III is also Vice
President and Treasurer of Reserve Management Company, Inc. ("RMCI") and Reserve
Management Corporation ("RMC"); and Treasurer and Director of Resrv Partners,
Inc. ("RESRV"). Before joining Reserve, he was a private investor.
MARYKATHLEEN FOYNES, 29, Counsel and Secretary, 1250 Broadway, New York, NY
10001-3701.
Ms. Foynes is Counsel and Secretary of RF, RIT, RNYTET, RTET and RPES.
Before joining The Reserve Funds in 1998, Ms. Foynes was a staff attorney at
PaineWebber, Inc. (1997-1998). Prior to that, Ms. Foynes worked for the U.S.
House of Representatives as a District Manager for a Member of Congress
(1995-1997).
JAMES M. FREISEN, 41, Controller, 1250 Broadway, New York, NY 10001-3701.
Mr. Freisen is Controller. Before joining The Reserve Funds in 1999, Mr.
Freisen was an Assistant Vice President at Paine Webber, Inc. (1998-1999). Prior
to that, he was Assistant Vice President, Bank of New York (1997-1998);
Assistant Vice President, Fifth Third Bank (1995-1997); and Vice President,
Smith Barney (1991-1995).
- ------------
+ Messrs. Bassuk, Ehlert, Emmet, Harrington, Montgoris, Viklund and Ms. Herrmann
are members of a Review Committee which performs the functions of an Audit
Committee and reviews compliance procedures and practices.
++ Interested Trustee within the meaning of the 1940 Act. The members of the
Board of Trustees who are not Interested Trustees will be paid a stipend of
$3,500 for each joint Board meeting they attend and an annual fee of $16,000 for
service to all of the trusts in the complex.
* Mr. Bent is the father of Mr. Bent II and Mr. Bent III.
Under the Declaration of Trust, the Trustees and officers are entitled to be
indemnified by the Trust to the fullest extent permitted by law against all
liabilities and expenses reasonably incurred by them in connection with any
11
<PAGE>
claim, suit or judgment or other liability of obligation of any kind in which
they become involved by virtue of their service as a Trustee or officer of the
Trust, except liabilities incurred by reason of their willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of their office.
As of June 30, 1999, the Trust's records reflect that the Trustees and
officers directly or indirectly as a group owned less than 1% of the outstanding
shares of the Funds. The Trust does not pay any pension or retirement benefits
to its Trustees.
COMPENSATION TABLE
FOR FISCAL YEAR ENDED MAY 31, 1999
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST AND TRUST COMPLEX
NAME OF TRUSTEE, POSITION FROM TRUST (4 ADDITIONAL TRUSTS) PAID TO TRUSTEE
---------------------------------------------- -------------------- ---------------------------------------------------
<S> <C> <C>
Bruce R. Bent, President and Trustee $ 0 $ 0
Bruce R. Bent II, Vice President and Trustee 0 0
Richard Bassuk, Trustee 167 3,500
Edwin Ehlert, Jr., Trustee 1,455 30,500
Henri W. Emmet, Trustee 1,455 30,500
Rev. Donald J. Harrington, Trustee 1,455 30,500
Diana P. Herrmann, Trustee 167 3,500
William J. Montgoris, Trustee 0 0
William E. Viklund, Trustee 1,097 23,000
</TABLE>
None of the executive officers of the Fund had allocated cash remuneration in
excess of $60,000 during the last fiscal year ending May 31, 1999 for services
rendered to the Fund.
The Trustees serve indefinite terms (subject to certain removal procedures)
and they appoint their own successors, provided that at least a majority of the
Trustees have been elected by shareholders. A Trustee may be removed at any
meeting of shareholders by a vote of a majority of the Fund's shareholders.
As of July 9, 1999, the following persons were known by the Fund to own of
record or beneficially 5% or more of the outstanding shares of the Fund.
Primary Institutional Fund - Class A
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OUTSTANDING
Name and Address of Beneficial Owner OWNED (1) SHARES OWNED
- ------------------------------------ --------- ------------
<S> <C> <C>
Reserve Management Corporation 6,901,483 10.0%
Attn: Account No. 51083483
1250 Broadway
New York, NY 10001
MBG, LLC 9,455,601 13.8%
6 Point Road - Wilson Point
Norwalk, CT 06854
Bear Stearns Sec. Corp. Cust. 6,632,872 9.6%
Account No. 271059504512
40900 Grimmer Blvd.
Fremont, CA 94538-2865
Bear Stearns Sec. Corp. Cust 6,172,576 9.0%
Account No. 271059504512
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
40900 Grimmer Blvd.
Fremont, CA 94538-2865
GAMCO Investment Account 8,981,097 13.1%
P. O. Box 52-3223
Miami, FL 33152-3223
Primary Institutional Fund - Class B
<CAPTION>
SHARES PERCENT
BENEFICIALLY OUTSTANDING
Name and Address of Beneficial Owner OWNED (1) SHARES OWNED
- ------------------------------------ --------- ------------
<S> <C> <C>
Bear Stearns Sec. Corp. Cust 344,820 9.5%
Account No. 274749524619
226 S. Grove Park Road
Memphis, TN 38117-3506
Bear Stearns Sec. Corp. Cust 321,197 8.8%
Account No. 274749524411
226 S. Grove Park Road
Memphis, TN 38117-3506
Bear Stearns Sec. Corp. Cust 226,352 6.2%
Account No. 278769523112
4261 Norwalk Drive, #107
San Jose, CA 95129-1776
Sher Distributing Co. 858,306 23.7%
8 Vreeland Avenue
Totowa, NJ 07512-1167
Marpro Wear Corporation 342,191 9.4%
10 Commerce Road
Fairfield, NJ 07004-1602
Reserve Management Corporation 601,508 16.6%
Account No. 51102754
1250 Broadway
New York, NY 10001
Primary Institutional Fund - Treasurer's Trust
<CAPTION>
SHARES PERCENT
BENEFICIALLY OUTSTANDING
Name and Address of Beneficial Owner OWNED (1) SHARES OWNED
- ------------------------------------ --------- ------------
<S> <C> <C>
The Entrepreneurial Value Fund, L.P. 30,316,116 14.2%
3003 Tamiami Trail North
Naples, FL 34103-2714
Private Value Fund, L.P. 12,178,434 5.7%
3003 Tamiami Trail North
Naples, FL 33940-2714
Mesirow Financial, Inc. - Special Custody A/C 29,721,027 13.9%
for the Exclusive Benefit of Customers-Primary
Treasurer's Trust Omnibus A/C
350 North Clark Street
Chicago, IL 60610
</TABLE>
13
<PAGE>
Primary Institutional Fund - Class C
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OUTSTANDING
Name and Address of Beneficial Owner OWNED (1) SHARES OWNED
- ------------------------------------ --------- ------------
<S> <C> <C>
Meridian Insurance Company 7,843,201 12.4%
Attn: Shannon Domaille
6133 Bristol Parkway, Suite 300
Culver City, CA 90230-6632
Sierra Land Group Inc. 3,872,756 6.1%
801 N. Brand Blvd. #1010
Glendale, CA 91203-1299
Interstate Tax-Exempt Institutional Fund - Class B
<CAPTION>
SHARES PERCENT
BENEFICIALLY OUTSTANDING
Name and Address of Beneficial Owner OWNED (1) SHARES OWNED
- ------------------------------------ --------- ------------
<S> <C> <C>
Reserve Management Corporation 6,963,823 68.3%
Attn: Account No. 30010942
1250 Broadway
New York, NY 10001
Reserve Management Corporation 1,158,318 11.3%
Attn: Account No. 50001349
1250 Broadway
New York, NY 10001
Reserve Management Corporation 1,517,982 14.8%
Attn: Account No. 50001351
1250 Broadway
New York, NY 10001
Reserve Management Corporation 537,043 5.2%
Attn: Account No. 50031651
1250 Broadway
New York, NY 10001
Interstate Tax-Exempt Institutional Fund - Treasurer's Trust
<CAPTION>
SHARES PERCENT
BENEFICIALLY OUTSTANDING
Name and Address of Beneficial Owner OWNED (1) SHARES OWNED
- ------------------------------------ --------- ------------
<S> <C> <C>
Reserve Management Corporation 12,122.681 47.4%
Attn: Account No. 2492663
1250 Broadway
New York, NY 10001
Volunteer Limited Liability Co. 1,349,705 5.2%
483 Kyle Lane
Cleveland, TN 37312-6440
Mesirow Financial, Inc. - Special Custody
A/C for the Exclusive Benefit of Customers 9,866,361 38.6%
Interstate Treasurer's Trust Omnibus A/C
350 North Clark Street
Chicago, IL 60610
</TABLE>
14
<PAGE>
U.S. Government Institutional Fund - Class A
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OUTSTANDING
Name and Address of Beneficial Owner OWNED (1) SHARES OWNED
- ------------------------------------ --------- ------------
<S> <C> <C>
Reserve Management Corporation 4,162,729 14.1%
Attn: Account No. 52325107
1250 Broadway
New York, NY 10001
Reserve Management Corporation 22,771,727 77.1%
Attn: Account No. 52463049
1250 Broadway
New York, NY 10001
U.S. Government Institutional Fund - Class B
<CAPTION>
SHARES PERCENT
BENEFICIALLY OUTSTANDING
Name and Address of Beneficial Owner OWNED (1) SHARES OWNED
- ------------------------------------ --------- ------------
<S> <C> <C>
Mesirow Financial, Inc. - Special Custody A/C for the Exclusive 11,628,835 99.8%
Benefit of Customers - Government Class B Omnibus A/C
350 North Clark Street
Chicago, IL 60610
U.S. Government Institutional Fund - Treasurer's Trust
<CAPTION>
SHARES PERCENT
BENEFICIALLY OUTSTANDING
Name and Address of Beneficial Owner OWNED (1) SHARES OWNED
- ------------------------------------ --------- ------------
<S> <C> <C>
Harco Laboratories, Inc. 374,301 5.1%
P. O. Box 1012
Stamford, CT
Mesirow Financial, Inc. - Special Custody A/C for the Exclusive 4,122,981 56.7%
Benefit of Customers - Government Treasurer's Trust
Omnibus A/C
350 North Clark Street
Chicago, IL 60610
Reserve Management Corporation 2,227.170 30.6%
Attn: Account No. 53371696
1250 Broadway
New York, NY 10001
U.S. Treasury Institutional Fund - Treasurer's Trust
<CAPTION>
SHARES PERCENT
BENEFICIALLY OUTSTANDING
Name and Address of Beneficial Owner OWNED (1) SHARES OWNED
- ------------------------------------ --------- ------------
<S> <C> <C>
W. H. Reaves & Co. Inc., 1,355,430 7.9%
"IRA Advisory" Customers
10 Exchange Place
Jersey City, NJ 07302
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
W. H. Reaves & Co. Inc., 8,377,742 49.0%
Advisory Customers
10 Exchange Place
Jersey City, NJ 07302
The Philadelphia Trust Company 1,502,458 8.7%
1735 Market Street, 27th Floor
Philadelphia, PA 19103
Charles Ivey Ltd. 1,318,380 7.7%
P. O. Box 47
Tornillo, TX 79853-0047
SEI Trust Co. 4,533,763 26.5%
C/O Philadelphia Trust Co
1735 Market Street, 27th Floor
Philadelphia, PA 19103
</TABLE>
- --------------
(1) Fractional shares have been omitted.
INVESTMENT MANAGEMENT, DISTRIBUTION
AND CUSTODIAN AGREEMENTS
Investment Management Agreement. Reserve Management Company, Inc. ("RMCI" or
"Adviser"), 1250 Broadway, New York, NY 10001-3701, a registered investment
adviser, manages the Funds and provides them with investment advice. Under the
Investment Management Agreement, RMCI manages the Funds' investment in
accordance with each Fund's investment objective and policies, subject to
overall approval by the Trustees.
Presently, under the terms of the Investment Management Agreements with the
Funds, the Funds pay RMCI a comprehensive management fee at an annual rate of
0.25% of average daily net assets. RMCI pays all employee and customary
operating expenses of the Funds. Excluded from the definition of customary
operating expenses are interest, taxes, brokerage fees, extraordinary legal and
accounting fees and expenses, and fees of the disinterested Trustees, for which
each Fund it pays its direct or allocated share.
It is expected that the holders of the Treasurer's Trust shares will be wrap
fee accounts, trust accounts, omnibus accounts and other accounts of smaller
investors which require subaccounting and other such services. Because these
additional services will be provided only to the holders of the Treasurer's
Trust shares, payment for these services will be made by the Fund and charged
against the average daily net assets attributable to the Treasurer's Trust
shares, rather than being paid by the Adviser as part of its comprehensive
management fee.
For the fiscal years ended May 31, 1998 and 1999, the Adviser received
management fees of $677,424 and $642,296 from the Trust.
From time to time, RMCI may waive receipt of its fees and/or voluntarily
assume certain expenses of a Fund that would have the effect of lowering the
Fund expense ratio and increasing yield to investors at the time such amounts
are assumed or waived, as the case may be. RMCI may also make such advertising
and promotional expenditures, using its own resources, as it from time to time
deems appropriate.
The Investment Management Agreements for each of the Funds were duly
approved by shareholders in 1999, and may be renewed annually if specifically
approved by the Trustees and by the vote of a majority of the disinterested
Trustees cast in person at a meeting called for the purpose of voting on such
renewal. The Agreements terminate automatically upon their assignment and may be
terminated without penalty upon sixty (60) days' written notice by a vote of the
Trustees or by vote of a majority of outstanding voting shares of a Fund or by
RMCI.
16
<PAGE>
Distribution Agreement. The Fund's Distributor is RESRV. The Fund has authorized
the Distributor, in connection with their sale of Fund shares, to give only such
information and to make only such statements and representations as are
contained in the Prospectus. Sales may be made only by the Prospectus. The
Distributor are "principal underwriters" for the Funds within the meaning of the
Investment Company Act of 1940, and as such act as agent in arranging for the
continuous offering of Fund shares. The Distributor has the right to enter into
selected dealer agreements with brokers or other persons of their choice for the
sale of Fund shares. Parties to selected dealer agreements may receive
assistance payments if they qualify for such payments under the Plan of
Distribution described below. RESRV's, principal business is the distribution of
mutual fund shares. No Distributor has retained underwriting commissions on the
sale of Fund shares during the last four fiscal years. During the fiscal year
ended May 31, 1999, no distribution assistance payments were made to RESRV.
The Distribution Agreements may be renewed annually if specifically approved
by the Board of Trustees, and by the vote of a majority of the disinterested
Trustees cast in person at a meeting called for the purpose of voting on such
approval or by the vote of a majority of the outstanding voting securities of
the Fund.
Plan of Distribution and Service Plan. The Fund maintains a Plan of Distribution
("Plan") and related agreements, as amended, under Rule 12b-1 of the Investment
Company Act of 1940, which provides that investment companies may pay
distribution expenses, directly or indirectly, pursuant to a Plan adopted by the
investment company's Board and approved by its shareholders. Under the
Distribution Plan, each Fund makes assistance payments to brokers, financial
institutions and other financial intermediaries ("payee(s)") for shareholder
accounts ("qualified accounts") as to which a payee has rendered distribution
assistance services to the Class C and D shares at an annual rate of 0.25% and
0.50%, respectively, of the average daily net asset value ("NAV") of all Firms'
qualified accounts. Class A, B and Treasurer's Trust shares do not participate
in a distribution plan. Such distribution assistance may include, but is not
limited to, establishment of shareholder accounts, delivering prospectuses to
prospective investors and processing automatic investment in Fund shares of
client account balances. Substantially all such monies (together with
significant amounts from RMCI's own resources) are paid by RMCI to payees for
their distribution assistance or administrative services, with any remaining
amounts being used to partially defray other expenses incurred by RMCI in
distributing Fund shares. In addition to the amounts required by the Plan, RMCI
may, at its discretion, pay additional amounts from its resources. The rate of
any additional amounts that may be paid will be based upon RESRV and RMCI's
analysis of the contribution that a Firm makes to the Fund by increasing assets
under management, and reducing expense ratios and the cost to the Fund if such
services were provided directly by the Fund or other authorized persons and
RESRV and RMCI will also consider the need to respond to competitive offers of
others, which could result in assets being withdrawn from the Fund and an
increase in the expense ratio for the Fund. RMCI may elect to retain a portion
of the distribution assistance payments to pay for sales materials or other
promotional activities. The Trustees have determined that there is a reasonable
likelihood the Plan will benefit the Fund and its shareholders.
Under the Plan, the Fund's Controller or Treasurer reports quarterly the
amounts and purposes of assistance payments. During the continuance of the Plan,
the selection and nomination of the disinterested Trustees are at the discretion
of the disinterested Trustees currently in office.
During the fiscal year ended May 31, 1999, $8,367 was paid under the Plan by
the Trust. Any such payments are intended to benefit the Fund by maintaining or
increasing net assets to permit economies of scale in providing services to
shareholders and to contribute to the stability of such shareholder services.
During the fiscal year ended May 31, 1999, substantially all payments made by
the Fund were to brokers or other financial institutions and intermediaries for
share balances in the Fund.
The Plan and related agreements were duly approved by shareholders and may
be terminated at any time by a vote of the majority of the outstanding voting
securities of each Fund, or by vote of the disinterested Trustees. The Plan and
related agreements may be renewed from year to year, if approved by the vote of
a majority of the disinterested Trustees cast in person at a meeting called for
the purpose of voting on such renewal. The Plan may not be amended to increase
materially the amount to be spent for distribution without shareholder approval.
All material amendments to the Plan must be approved by a vote of the Board of
Trustees and of the disinterested Trustees, cast in person at a meeting called
for the purpose of such vote.
17
<PAGE>
Under the Service Plan, each Fund may pay Firms a service fee at an annual
rate of up to 0.25% of the average daily net asset value of such Fund's Class B,
Treasurer's Trust, Class C and D shares owned by investors for which such Firm
provides personal services, including maintaining shareholder accounts,
responding to inquiries, providing information about investments and providing
certain other services. Class A shares do not participate in the Service Plan.
Transfer Agent and Dividend-Paying Agent. Reserve Institutional Trust acts as
its own transfer agent and dividend-paying agent.
Custodian, Independent Accountant and Counsel. The Chase Manhattan Bank, 4 New
York Plaza, New York, NY 10004 is Custodian of the Funds' securities and cash
pursuant to a Custodian Agreement. The Bank of New York, 1 Wall Street, New
York, NY 10286 and Custodial Trust Company, 101 Carnegie Center, Princeton, NJ
08540 are Custodians for the Funds for limited purposes in connection with
certain repurchase agreements. The Custodian has no part in determining the
investment policies of the Fund or which securities are to be purchased or sold
by the Fund. PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York,
NY 10036 is the Funds' independent accountant. Dechert, Price & Rhoads, 1775 Eye
Street NW, Washington, DC 20006, is the Funds' outside counsel and has rendered
its opinion as to certain legal matters regarding the due authorization and
valid issuance of the shares being sold pursuant to the Funds' Prospectus.
INFORMATION ABOUT THE TRUST
The Reserve Institutional Trust's Declaration of Trust permits the Trust to
issue an unlimited number of full and fractional shares of beneficial interest
that may be issued in any number of series (funds) and/or classes. Shares issued
will be fully paid and non-assessable and will have no preemptive rights. The
shareholders of each Fund are entitled to a full vote for each full share held
(and fractional votes for fractional shares) and have equal rights to earnings,
dividends, redemptions and in the net assets of their Fund upon liquidation. The
Trustees do not intend to hold annual meetings but will call such special
meetings of shareholders as may be required under the 1940 Act (e.g., to approve
a new Investment Advisory Agreement or change the fundamental investment
policies) or by the Declaration of Trust.
Further, the Trust is allowed to divide or combine the shares into a greater
or lesser number of shares without thereby changing the proportionate beneficial
interests in the Fund. If they deem it advisable and in the best interests of
shareholders, the Trustees may classify or reclassify any unissued shares of the
Fund by setting or changing the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms and
conditions of redemption of the stock. Any changes would be required to comply
with all applicable state and federal securities laws. These currently require
that each class be preferred over all other classes in respect to assets
specifically allocated to such class. It is anticipated that, under most
circumstances, the rights of any additional classes would be comparable, unless
otherwise required, to respond to the particular situation. Upon liquidation of
any Fund, shareholders are entitled to share, pro rata, in the net assets of
their respective Funds available for distribution to such shareholders. It is
possible, although considered highly unlikely in view of the method of operation
of mutual funds, that should the assets of one class of shares be insufficient
to satisfy its liabilities, the assets of another class could be subject to
claims arising from the operations of the first class of shares. No changes can
be made to the Fund's issued shares without shareholder approval.
Each Fund share, when issued, is fully paid, non-assessable and fully
transferable or redeemable at the shareholder's option. Each share has an equal
interest in the net assets of the respective Funds, equal rights to all
dividends and other distributions, and one vote for all purposes. Shares of all
classes vote together for the election of Trustees and have non-cumulative
voting rights, meaning that the holders of more than 50% of the shares voting
for the election of Trustees could elect all Trustees if they so choose, and in
such event the holders of the remaining shares could not elect any person to the
Board of Trustees. The Funds intend to conduct their operations in such a way as
to avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Funds.
18
<PAGE>
To date, the Board has authorized the creation of four series (funds):
Primary, U.S. Government, U.S. Treasury and Interstate Tax-Exempt Institutional
Funds. All consideration received by the Trust for shares of one of the Fund and
all assets in which such consideration is invested will belong to that Fund
(subject only to rights of creditors of the Fund) and will be subject to the
liabilities related thereto. The income attributable to, and the expenses of,
one series are treated separately from those of the other series. The Trust has
the ability to create, from time to time, new series without shareholder
approval.
Under Massachusetts law, the shareholders and trustees of a business trust
can be personally liable for the Funds' obligations unless, as in this instance,
the Declaration of Trust provides, in substance, that no shareholder or trustee
shall be personally liable for the Funds, and each investment portfolio's,
obligations to third parties, and requires that every written contract made by a
Fund contain a provision to that effect. The Declaration of Trust also requires
the Fund to indemnify its shareholders and Trustees against such liabilities and
any related claims or expenses.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration protects a Trustee against any liability to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
SEC regulations provide that if a class is separately affected by a matter
requiring shareholder vote (election of Trustees, ratification of independent
auditor selection, and approval of an underwriting agreement are not considered
to have such separate effect and may be voted upon by the shareholders of the
Fund as a whole), each class will vote separately on such matters as approval of
the Investment Management Agreement, material amendments to the Plan of
Distribution, and changes in the fundamental policies of the Fund. These items
require approval by a majority of the affected shareholders. For this purpose a
"majority" is constituted by either 50 percent of all shares voting as a group
or 67 percent of the shares voted as a group at an annual meeting of
shareholders at which at least 50 percent of the shares of each group are
represented.
HOW TO BUY AND SELL SHARES
Purchases - General. Shares of each Fund are sold without a sales charge and may
only be surcharged by wire. You may be charged a fee if you effect transactions
in shares of a Fund through a securities dealer, bank or other financial
institution. Share certificates are not issued. The Fund reserves the right to
reject any purchase order.
Each Fund offers five Classes of shares to investors, with each Class
subject to differing service fees and distribution fees, as follows:
<TABLE>
<CAPTION>
Maximum Maximum Maximum
Annual Annual Total Annual Minimum
Shareholder Distribution Fund Operating Initial
Services Fee* (12b-1) Fee* Expenses+ Investment
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 0% 0% 0.25% $ 10 million
Class B 0.20% 0% 0.45% $ 5 million
Treasurer's Trust 0.35% 0% 0.60% None
Class C 0.25% 0.25% 0.75% $ 1 million
Class D 0.25% 0.50% 1.00% $ 250,000
</TABLE>
- ----------
* As a percentage of average daily net assets.
+ As a percentage of average net assets (exclusive of brokerage fees,
extraordinary legal and accounting fees and expenses).
In all other respects, all classes of shares represent the same interest in
the income and assets of each respective Fund. You will need to choose a share
class before making your initial investment. Before you choose, you should weigh
the impact of all potential costs over the life of your investment. The minimum
initial investment in each Fund is $10 million for Class A, $5 million for Class
B, $1 million for Class C, and $250,000 for Class D shares. The Treasurer's
Trust shares of each Fund are not subject to any minimum initial investment
amount. There is no
19
<PAGE>
minimum subsequent investment for any of the classes. The Funds reserve the
right to waive the minimum investment requirement.
The initial investment must be accompanied by an Account Application or
equivalent information. In addition, the Fund does not accept cash investments
or travellers or third party checks. The Fund reserves the right to reject any
investment in the Fund for any reason and may, at any time, suspend all new
investment in the Fund. Shares also may be purchased through Reserve Automatic
Asset Builder (see below). In addition, the Funds reserve the right to change
the minimum investment amount at any time.
Each Fund's shares are sold on a continuous basis at the NAV per share.
Wires which do not correctly identify the account to be credited may be returned
or delay the purchase of shares. Only federal funds wires drawn on the Fund's
bank are eligible for entry as of the business day received. For federal funds
wires to be eligible for same-day order entry, the Funds must be notified before
2:00 PM (Eastern time, 11:00 AM for the U.S. Treasury and Interstate Tax-Exempt
Institutional Funds) of the amount to be transmitted and the account to be
credited. A Federal Reserve wire system transfer ("Fed wire") is the only type
of wire transfer that is reliably available in federal funds on the day sent.
For a Fed wire to receive same day credit, the Fund must be notified before 2:00
PM (Eastern time) (11:00 AM Eastern time for the U.S. Treasury and Interstate
Tax-Exempt Funds) of the amount to be transmitted and the account to be
credited. Items submitted to the Fund for investment are only accepted when
submitted in proper form (i.e., receipt of all necessary information, signatures
and documentation), denominated in U.S. dollars, and are credited to shareholder
accounts only upon their conversion into federal funds, which normally takes one
or two business days following receipt.
If shares of the Fund are purchased by Reserve Automatic Transfer, the Fund
may delay transmittal of redemption proceeds until such time as it has assured
itself that good payment has been collected for the purchase of such shares,
which may be up to 10 calendar days from date of purchase.
Share Price: NAV. The valuation of a Fund's portfolio securities is based upon
their amortized cost, which does not take into account unrealized gains or
losses. This involves valuing an instrument at its cost and thereafter assuming
a constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, there may be some periods
during which value, as determined by amortized cost, is higher or lower than the
price the Fund would receive if it sold the instrument.
The Fund's Board has established, as a particular responsibility within the
overall duty of care owed to the Fund's investors, procedures reasonably
designed to stabilize the Fund's price per share as computed for the purpose of
purchases and redemptions at $1.00. Such procedures include review of the Fund's
portfolio holdings by the Board, at such intervals as it may deem appropriate,
to determine whether the Fund's NAV calculated by using available market
quotations or market equivalents deviates from $1.00 per share based on
amortized cost. In such review, investments for which market quotations are
readily available will be valued at the most recent comparable maturity, quality
and type, as obtained from one or more of the major market makers for the
securities to be valued. Other investments and assets will be valued at fair
value as determined in good faith by the Board.
The extent of any deviation between the Fund's NAV based upon available
market quotations or market equivalents and $1.00 per share based on amortized
cost will be examined by the Fund's Board. If such deviation exceeds 1/4 of 1%,
the Board will consider promptly what action, if any, will be initiated (The
Reserve Fund is required by the SEC to contact the Board if the deviation is 1/2
of 1%). In the event the Board determines that a deviation exists which may
result in material dilution or other unfair results to investors or existing
shareholders, it has agreed to take such corrective action as it regards as
necessary and appropriate, including: selling Fund instruments prior to maturity
to realize capital gains or losses or to shorten average Fund maturity;
withholding dividends or paying distributions from capital gains; redeeming
shares in kind; or establishing a NAV per share by using available market
quotations. Shares are offered at their NAV, which is calculated at the close of
each business day as defined in the Prospectus. The NAV is not calculated on
days the Exchange is closed for trading and on certain regional banking
holidays. The holidays (as observed) on which the Exchange and The Reserve Fund
are
20
<PAGE>
closed currently are: New Year's Day, Martin Luther King Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. In addition, The Reserve Fund is closed on Columbus Day and Veterans
Day. The NAV of each Fund is normally maintained at $1.00 per share. No Fund can
guarantee that its NAV will always remain at $1.00 per share although the Funds
have managed to do so since inception.
The NAV per share of each Fund is computed by dividing the value of the net
assets of each Fund (i.e., the value of its assets less liabilities) by the
total number of shares of such Fund outstanding. The Board of Trustees have
determined the most practical method currently available for valuing investment
securities is the amortized cost method. This procedure values a money-market
fund's portfolio securities, which does not take into account unrealized gains
and losses. As a result, portfolio securities are valued at their acquisition
cost, adjusted over time based on the discounts or premiums reflected in their
purchase price. This method of valuation is designed to permit a fund to be able
to maintain a stable NAV.
In order to maintain a $1.00 share price, the Fund will utilize the
following practices: maintain a dollar-weighted average portfolio maturity of 90
days or less; purchase only instruments having remaining maturities of 397 days
or less; and invest only in securities determined by the Board of Trustees to be
of high quality with minimal credit risk. To assess whether repurchase agreement
transactions present more than minimal credit risk, the Trustees have
established guidelines and monitor the creditworthiness of all entities,
including banks and broker-dealers, with whom the Fund proposes to enter into
repurchase agreements. In addition, Customers - Government Class such procedures
are reasonably designed, taking into account current market conditions and the
investment objective of the Fund, to attempt to maintain the Fund's NAV as
computed for the purpose of sales and redemptions at $1.00 per share
Share Certificates. Share certificates are not issued by the Funds.
Reserve Automatic Asset-Builder Plan. If you have an account, you may purchase
shares of a Fund ($25 suggested minimum) from a checking, NOW, or bank
money-market deposit account; from a U.S. government distribution ($25 suggested
minimum) such as a social security, federal salary, or certain veterans'
benefits, or other payment from the federal government. You may also make
arrangements for the direct deposit of your payroll into your Fund account.
Please call the Funds at 800-637-1700 for an application.
Redemptions -- General. Redemption payments will normally be made by check or
wire transfer but the Fund is authorized to make payment of redemptions partly
or wholly in kind (that is, by delivery of investment securities valued at the
same time as the redemption NAV is determined). The Fund has elected to permit
any shareholder of record to make redemptions wholly in cash to the extent the
shareholder's redemptions in any 90-day period do not exceed the lesser of
$250,000 or 1% of the net assets of the respective Fund. The election is
irrevocable pursuant to rules and regulations under the 1940 Act unless
withdrawal is permitted by order of the SEC. Redemptions in kind are further
limited by the Fund's practice of holding instruments typically with a minimum
value of $1,000,000 and its intention to redeem in kind only when necessary to
reduce a disparity between amortized cost and market value. In disposing of such
securities, an investor might incur transaction costs and on the date of
disposition might receive an amount less than the NAV of the redemption.
Written and telephone requests. Redemption instructions and options should be
specified when your account is opened. Subsequent elections and changes in
instructions must be in writing with the signature(s) guaranteed. Changes in
registration or authorized signatories may require additional documentation. One
way to redeem shares is to write a letter of instruction which states: the
name(s) and signature(s) of all accountholders (signature(s) guaranteed, if
necessary), account number, Fund name, the dollar amount you want to sell, and
how and where to send the proceeds. If you are redeeming your IRA, please note
the applicable withholding requirements.
To reduce the risk of loss, certain situations require written instructions
along with signature guarantees. These include:
(1) redemptions for more than $5,000; or
(2) redemptions on accounts whose address has been changed within the
past 30 days; or
21
<PAGE>
(3) redemption requests to be sent to someone other than the account
owner or the address of record for the past 30 days.
You may redeem by calling the Funds at 800-637-1700. Unless you decline
telephone privileges on your application and the Funds fail to take reasonable
measures to verify the request, the Funds will not be liable for any
unauthorized telephone redemption, or for any loss, cost or expense for acting
upon an investor's telephone instructions. Telephone redemptions may be sent to
the bank or brokerage account designated by the shareholder on the application
or in a letter with signature guarantee. To change the designated brokerage or
bank account it is necessary to contact the Firm through which shares of the
Fund were purchased or, if purchased directly from the Funds, it is necessary to
send a written request to the Funds with signature(s) guaranteed. The Fund
reserves the right to refuse a telephone redemption if it believes it is
advisable to do so.
Signature guarantees are designed to protect both you and the Funds from
fraud. Signature guarantees can be obtained from most banks, credit unions or
savings associations, or from broker/dealers, national securities exchanges or
clearing agencies deemed eligible by the Securities and Exchange Commission.
Notaries public cannot provide signature guarantees. For more information about
redemption procedures, please read the SAI.
Reserve Cash Performance Account. (Treasurer's Trust and Class D shareholders
only). The Reserve Cash Performance Account ("CPA") and the Reserve Cash
Performance Account Plus ("CPA Plus") provide a comprehensive package of
additional services to investors. These packages provide a check arrangement
where checks are issued to Reserve shareholders. By completing the application
or a signature card (for existing accounts) and certain other documentation, you
can write checks in any amount against your account. Redemptions by check
lengthen the time your money earns dividends, since redemptions are not made
until the check is processed by the Fund. Because of this, you cannot write a
check to completely liquidate your account, nor may a check be presented for
certification or immediate payment. Your checks will be returned (bounced) and a
fee charged if they are postdated, contain an irregularity in the signature,
amount or otherwise, or are written against accounts with insufficient or
uncollected funds. All transactions activity, including check redemptions, will
be reported on your account statement. Checking may not be available to clients
of some Firms.
A VISA Check Card (a debit card) is also available with these packages for
Treasurer's Trust and Class D shareholders only. The VISA card functions exactly
as does a conventional VISA credit card except that the cardholder's Reserve
account is automatically charged for all purchases and cash advances, thus
eliminating the usual monthly finance charges. You may also use your VISA card
to get cash at ATMs. Investors receive a 1% cash rebate on all VISA purchases
which is credited to their Reserve account. As with the checking facility, VISA
charges are paid by liquidating shares in your Reserve account, but any charges
that exceed the balance will be rejected. VISA card issuance is subject to
credit approval. Reserve, VISA or the bank may reject any application for checks
or cards and may terminate an account at any time. Conditions for obtaining a
VISA Check Card may be altered or waived by the Funds either generally or in
specific instances. The checks and VISA cards are intended to provide investors
with easy access to their account balances.
VISA cardholders may be liable for the unauthorized use of their card up to
the amount set by governing Federal regulations, currently $50 if the Fund or
the bank is not notified of the theft or loss within two (2) business days.
Participants should refer to the VISA Account Shareholder Agreement for complete
information regarding responsibilities and liabilities with respect to the VISA
Check Card. If a card is lost or stolen, the cardholder should report the loss
immediately by telephoning the issuing bank, currently BankOne at 614-248-4242
or 800-996-4324, which can be reached 24 hours a day, seven (7) days a week or
the Funds at 800-631-7784 or 212-401-5500 during normal business hours (Monday
through Friday, 9:00 A.M. to 5:00 P.M., Eastern time).
For the different attributes associated with CPA and CPA Plus packages,
please call The Reserve Funds at 800- 637-1700. The Funds will charge a
nonrefundable annual CPA Plus service fee (currently $60 which may be charged to
the account at the rate of $5 monthly). CPA and CPA Plus participants will be
charged for specific costs incurred in placing stop payment orders, obtaining
check copies and in processing returned checks. These charges may be changed at
any time upon 30 days' notice to participants. Upon proper notice, the Funds may
choose to
22
<PAGE>
impose a fee if it deems a shareholder's actions to be burdensome. In addition,
Firms in this program may charge their own additional service fees and may
establish their own minimum check amount.
The use of checks and VISA cards by participants will be subject to the
terms of your Reserve CPA Application and VISA Account Shareholder Agreement.
Touch-Tone Bill Payment Service. (Treasurer's Trust and Class D shareholders
only). In the near future, the Funds will offer its shareholders touch-tone bill
payment which gives you the flexibility of paying bills over the telephone on an
automatic or variable basis. Terms, conditions and restrictions will be outlined
in the User's Guide and Application
Stop Payments. (Treasurer's Trust and Class D shareholders only). The Funds will
honor stop payment requests on unpaid shareholder checks provided they are
advised of the correct check number, payee, check amount and date. Stop payment
requests received by the Funds by 2:00 PM (Eastern time) will be effective the
next business day. Oral stop payment requests are effective for fourteen (14)
calendar days, at which time they will be cancelled unless confirmed in writing.
Written stop payment requests will remain in effect for one year. A fee will be
charged for this service.
Automatic Withdrawal Plans. (Treasurer's Trust and Class D shareholders only).
If you have an account with a balance of at least $5,000, you may elect in
writing to participate in either of the following: (i) an Income Distribution
Plan providing for monthly, quarterly or annual payments by redemption of shares
from reinvested dividends or distributions paid to your account during the
preceding period; or (ii) a Fixed Amount Withdrawal Plan providing for the
automatic redemption of a sufficient number of shares of your account to make a
specified monthly, quarterly or annual payment of a fixed amount. Changes to
instructions must be in writing with signature(s) guaranteed. In order for such
payments to continue under the Plan, there must be a minimum of $25 available
from reinvested dividends or distributions. Payments can be made to you or your
designee. An application for the Automatic Withdrawal Plans can be obtained from
the Funds. The amount, frequency and recipient of the payments may be changed by
giving proper written notice to the Funds. The Funds may impose a charge, modify
or terminate any Automatic Withdrawal Plan at any time after the participant has
been notified. This privilege may not be available to clients of some Firms or
may be available subject to conditions or limitations.
Automatic Transfer Plans (ACH). (Treasurer's Trust and Class D shareholders
only). You may redeem shares of a Fund (minimum $100) without charge by
telephone if you have filed a separate Reserve Automatic Transfer application
with the Fund. The proceeds will be transferred between your Fund account and
the checking, NOW or bank money-market deposit account (must be an Automated
Clearing House member bank) designated in your application. Redemption proceeds
will be on deposit in your account at the Automated Clearing House member bank
ordinarily two (2) business days after receipt of the request. The Funds may
impose a charge, modify or terminate this privilege at any time after the
participant has been duly notified. This privilege may not be available to
clients of some Firms or may be available subject to conditions or limitations.
Exchange Privilege. A shareholder may exchange shares at NAV with all Reserve
money-market funds and the Reserve Private Equity Series. Shares to be acquired
in an exchange must be registered for sale in the investor's state. The Funds
reserve the right to record all exchange requests.
The exchange privilege is not available for shares which have been held for
less than fifteen (15) days. Exchanges by telephone are an automatic privilege
unless the shareholder notifies the Funds on the Account Application that this
authorization has been withheld. Unless authorization is withheld, the Funds
will honor requests by any person by telephone at 800-637-1700, that the Funds
deem to be valid. The Funds and their affiliates may be liable for any losses
caused by their failure to employ reasonable procedures to avoid unauthorized or
fraudulent instructions. To reduce such risk, the registration of the account
into which shares are to be exchanged must be identical to the registration of
the originating account and all telephone exchange requests will be recorded.
The Funds may also require the use of a password or other form of personal
identification. In addition, each Fund will provide written confirmation of
exchange transactions. During periods of volatile economic and market
23
<PAGE>
conditions, a shareholder may have difficulty making an exchange request by
telephone, in which case an exchange request would have to be made in writing.
Exchanges of shares of one fund for another is a taxable event and may
result in a gain or loss for federal income tax purposes. The exchange privilege
described under this heading may not be available to clients of some Firms and
some Firms may impose conditions on their clients that are different from those
described in the Prospectus or SAI.
The exchange privilege may be modified or terminated at any time, or from
time to time, upon 60 days' notice to shareholders if such notice is required by
the 1940 Act. The notice period may be shorter if applicable law permits. The
Trust reserves the right to reject telephone or written requests submitted in
bulk on behalf of ten (10) or more accounts. A pattern of frequent exchanges may
be deemed by the Adviser to be abusive and contrary to the best interests of the
Fund's other shareholders and, at the Adviser's discretion, may be limited by
the Fund's refusal to accept additional purchases and/or exchanges from the
investor and/or the imposition of fees. The Funds do not have any specific
definition of what constitutes a pattern of frequent exchanges. Any such
restriction will be made on a prospective basis, upon notice to the shareholder
not later than ten (10) days following such shareholder's most recent exchange.
Telephone and written exchange requests must be received by the Funds by 4:00 PM
(Eastern time) on a regular business day to take effect that day. Exchange
requests received after 4:00 PM (Eastern time) will be effected at the next
calculated NAV.
Suspension of Redemptions. The right of redemption may be suspended or the date
of payment postponed for more than seven (7) days only (a) when the Exchange is
closed (other than for customary closings), (b) when, as determined by the SEC,
trading on the Exchange is restricted or an emergency exists making it not
reasonably practicable to dispose of securities owned by a Fund or for it to
determine fairly the value of its net assets, or (c) for such periods as the SEC
may permit. If shares of a Fund are purchased by check or Reserve Automatic
Transfer, the Fund may delay transmittal of redemption proceeds until such time
as it has assured itself that good payment has been collected for the purchase
of such shares, which may generally take up to ten (10) business days.
Shareholder checks written against funds, which are not yet considered
collected, will be returned and a fee charged against the account. When a
purchase is made by wire and subsequently redeemed, the proceeds from such
redemptions normally will not be transmitted until two (2) business days after
the purchase.
Shareholder Service Policies. The Fund's policies concerning the shareholder
services are subject to change from time to time. The Fund reserves the right to
change the minimum account size subject to the $5 monthly service charge or
involuntary redemption. The Fund further reserves the right to impose special
service charges for services provided to individual shareholders generally
including, but not limited to, fees for returned checks, stop payment orders on
official checks and shareholder checks, and special research services. The
Fund's standard service charges as described in the Prospectus are also subject
to adjustment from time to time. In addition, the Fund reserves the right to
increase its minimum initial investment amount at any time.
If shares purchased are to be paid for by wire and the wire is not received
by the Fund or if shares are purchased by check, which, after deposit, is
returned unpaid or proves uncollectible, the purchase may be canceled or
redeemed immediately. The investor who gave notice of the intended wire or
submitted the check will be held fully responsible for any losses incurred by
the Fund, the investment adviser or the distributor. The Fund may redeem shares
from any account registered in that purchaser's name and apply the proceeds
therefrom to the payment of any amounts due the fund, the investment adviser or
the distributor.
Purchases and Redemptions through Others. Share purchases and redemptions may
also be made through brokers and financial institutions ("Firms"), which may
involve such Firms' own redemption minimums, services fees, and other redemption
requirements. Firms may provide varying arrangements for their clients with
respect to the purchase and redemption of Fund shares and may arrange with their
clients for other investment or administrative services. Firms are responsible
for the prompt transmission of purchase and redemption orders. Some Firms which
utilize a centralized purchase method for shares may have an earlier cut-off for
purchase orders than stated above and may establish higher minimum investment
requirements than set forth above. Some Firms may independently establish and
charge additional fees for their services, which would reduce their clients'
yield or
24
<PAGE>
return. Firms may also hold shares in nominee or street name on behalf of their
clients. In such instances, the Fund's transfer agents will have no information
about their accounts, which will be available only from their Firm. Some of
these firms participate in the Fund's Plan of Distribution ("Plan"). Under the
Plan, Firms may receive compensation for recordkeeping and other services and
assistance in distributing Fund shares. In addition, certain privileges with
respect to the purchase and redemption of shares (such as check writing
redemptions) or the reinvestment of dividends may not be available through such
Firms or may only be available subject to certain conditions or limitations.
Some Firms may participate in a program allowing them access to their clients'
accounts for servicing including, without limitation, changes of registration
and dividend-payees and may perform functions such as generation of
confirmations and periodic statements and disbursement of cash dividends. The
Prospectus should be read in connection with such Firm's material regarding its
fees and services.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended ("the Code"), so
long as such qualification is in the best interests of shareholders. Such
qualification relieves the Fund of any liability for federal income tax to the
extent its earnings are distributed in accordance with applicable provisions of
the Code. If a Fund did not qualify as a regulated investment company, it would
be treated for tax purposes as an ordinary corporation subject to federal income
tax.
Each Fund ordinarily declares dividends from its net investment income on
each day the Exchange and The Reserve Fund is open for business. Each Fund's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
preceding business day. Dividends paid out of a Fund's investment company
taxable income will be taxable to a U.S. shareholder as ordinary income. Because
no portion of a Fund's income is expected to consist of dividends paid by U.S.
corporations, no portion of the dividends paid by the Funds is expected to be
eligible for the corporate dividends-received deduction. Distributions of net
capital gains, if any, designated as capital gain dividends are taxable to
shareholders as long-term capital gains, regardless of how long the shareholder
has held the Fund's shares, and are not eligible for the dividends-received
deduction. Shareholders receiving distributions in the form of additional
shares, rather than cash, generally will have a cost basis in each such share
equal to the NAV of a share of the Fund on the reinvestment date. Shareholders
will be notified annually as to the U.S. federal tax status of distributions,
and shareholders receiving distributions in the form of additional shares will
receive a report as to the NAV of those shares.
If you elect to receive dividends and distributions in cash, and your
dividend or distribution check is returned to a Fund as undeliverable or remains
uncashed for six months, the Fund reserves the right to reinvest such dividends
or distributions and all future dividends and distributions payable to you in
additional Fund shares at NAV. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gains or losses. However, all or a portion of any gain
realized from the sale or other disposition of certain market discount bonds
will be treated as ordinary income under Section 1276 of the Code. The U.S.
Treasury Institutional Fund intends to invest only in the U.S. government
securities that provide interest income exempt in most states from state and
local personal income taxes, but may invest up to 5 percent of its assets in
repurchase agreements pending the investment of un- invested cash. Distributions
attributable to net capital gains, if any, are generally subject to state and
local taxes. It is possible that a state or local taxing authority may in the
future seek to tax an investor on a portion of the interest income of an
obligation held by the U.S. Treasury Institutional Fund. Investments by a Fund
in zero coupons generally will result in income to the Fund equal to a portion
of the excess of the face value of the securities over their issue price (the
"original issue discount") each year that the securities are held, even though
the Fund receives no cash interest payments.
Gain derived by a Fund from the disposition of any market discount bonds
(i.e., bonds purchased other than at original issue, where the face value of the
bonds exceeds their purchase price) held by the Fund generally will be taxed as
ordinary income to the extent of the accrued market discount on the bonds,
unless the Fund elects to include the market discount in income as it accrues.
Gains or losses attributable to fluctuations in exchange rates which occur
between the time the Primary Fund accrues receivables or liabilities denominated
in a foreign currency, and the time the Primary Institutional Fund actually
collects
25
<PAGE>
such receivables or pays such liabilities, generally are treated as ordinary
income or ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency, gains or losses attributable to fluctuations
in the value of foreign currency between the date of acquisition of the security
and the date of disposition also are treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "section 988" gains or losses,
may increase or decrease the amount of the Primary Fund's investment company
taxable income to be distributed to its shareholders as ordinary income.
Income received by the Primary Institutional Fund from sources within
foreign countries may be subject to withholding and other taxes imposed by such
countries.
The Interstate Tax-Exempt Institutional Fund intends to qualify to pay
"exempt-interest dividends" to its shareholders. To so qualify, at the close of
each quarter of its taxable year, at least 50% of the value of its total assets
must consist of municipal obligations. Properly designated exempt-interest
dividends distributed to shareholders are not includable in the shareholder's
gross income for federal income tax purposes. Distributions of net investment
income received by the Fund from investments in debt securities other than
municipal obligations and any net realized short-term capital gains distributed
by the Interstate Tax-Exempt Institutional Fund will be taxable as ordinary
income. Distributions of net long-term capital gains, if any, will be taxable to
shareholders at applicable capital gains rate, regardless of how long a
shareholder has held the Interstate Tax-Exempt Institutional Fund's shares.
Shareholders will be advised annually as to the federal income tax consequences
of distributions made during the year.
In the event the Interstate Tax-Exempt Institutional Fund should hold
certain private activity bonds, shareholders must include as an item of tax
preference, the portion of dividends paid by the Fund that is attributable to
interest on such bonds in their federal alternative minimum taxable income for
purposes of determining any liability for the alternative minimum tax applicable
to individuals and corporations. Shareholders receiving Social Security and
certain railroad retirement benefits should note that exempt-interest dividends
will be taken into account in determining the taxability of such benefits.
With respect to a shareholder who received exempt-interest dividends on
shares held for less than six months, any loss on the sale or exchange of such
shares will, to the extent of the amount of such exempt-interest dividends, be
disallowed. A shareholder may not deduct that portion of interest in
indebtedness incurred or continued to purchase or carry shares of an investment
company paying exempt-interest dividends (such as those of the Interstate
Tax-Exempt Institutional Fund) which bears the same ratio to the total dividends
(excluding capital gains dividends) received by the shareholder. In addition,
the purchase of shares may be considered to have been made with borrowed funds
even though the borrowed funds are not directly traceable to such purchase.
Persons who may be "substantial users" (or "related persons" of substantial
users) of facilities financed by industrial development bonds should consult
their tax advisers before purchasing shares of the Interstate Tax-Exempt
Institutional Fund. The term "substantial user" generally includes any
"non-exempt person" who regularly uses in his or her trade or business a part of
a facility financed by industrial development bonds. Generally, an individual
will not be a "related person" of a substantial user unless the person or his or
her immediate family owns directly or indirectly in the aggregate more than 50%
equity interest in the substantial user. Further, the applicability of state and
local taxes to all investments in a Fund or income derived from, may differ from
the federal income tax consequences described above.
Upon the sale or other disposition of shares of the Fund, in the event that
the Fund fails to maintain a constant NAV per share, a shareholder may realize a
capital gain or loss which will be long-term or short-term, generally depending
upon the shareholder's holding period for the shares. Any loss realized on a
sale or exchange will be disallowed to the extent the shares disposed of are
replaced (including shares acquired pursuant to a dividend reinvestment plan)
within a period of 61 days beginning 30 days before and ending 30 days after
disposition of the shares. In such a case, the basis of the shares acquired will
be adjusted to reflect the disallowed loss. Any loss realized by a shareholder
on a disposition of Fund shares held by the shareholder for six months or less
will be treated as a long-term capital loss to the extent of any distributions
of net capital gains received by the shareholder with respect to such shares.
Furthermore, a loss realized by a shareholder on the redemption, sale or
exchange of
26
<PAGE>
shares of the Fund with respect to which exempt-interest dividends have been
paid will, to the extent of such exempt-interest dividends, be disallowed if
such shares have been held by the shareholder for less than six months.
The Funds are required by federal law to withhold 31% of dividends and
other distributions that are subject to federal income tax if (i) a correct and
certified Taxpayer Identification Number ("TIN") is not provided for your
account, (ii) you fail to certify that you have not been notified by the IRS
that you underreported taxable interest or dividend payments, or (iii) a fund is
notified by the IRS (or a broker) that the TIN provided is incorrect or you are
otherwise subject to backup withholding. Amounts withheld and forwarded to the
IRS can be credited as a payment of tax when completing your federal income tax
return. For individual shareholders, the TIN is the social security number.
Corporate shareholders and certain other shareholders specified in the Code
generally are exempt from such backup withholding. Backup withholding is not an
additional tax.
The tax consequences to a foreign shareholder of an investment in a Fund
may be different from those described herein.
Investors are advised to consult their own tax advisor(s) with respect to
the particular tax consequences to them of an investment in a Fund.
Statements as to the tax status of each investor's dividends and other
distributions will be mailed annually.
YIELD INFORMATION
For the seven-day period ended May 31, 1999, the Primary Institutional
Fund's Class A, B, Treasurer's Trust and Class C yields were 4.67%, 4.47%, 4.32%
and 4.17%, respectively, and their effective yields were 4.78%, 4.57%, 4.41% and
4.26%, respectively. For the seven-day period ended May 31, 1999, the U.S.
Government Institutional Fund's Class A, B and Treasurer's Trust yields were
4.56%, 4.36%, and 4.21%, respectively, and their effective yields were 4.66%,
4.45% and 4.30%, respectively. For the seven-day period ended May 31, 1999, the
U.S. Treasury Institutional Fund's Class Treasurer's Trust yield was 4.34% and
its effective yield was 4.44%, respectively. For the seven-day period ended May
31, 1999, the Interstate Tax-Exempt Institutional Fund's Class A and Treasurer's
Trust yields were 3.10% and 2.75%,respectively, and its effective yields were
3.15% and 2.79%, respectively.
Yield is computed in accordance with a standardized method which involves
determining the net change in the value of a hypothetical pre-existing Fund
account having a balance of one share at the beginning of a seven calendar day
period for which the yield is to be quoted, dividing the net change by the value
of the account at the beginning of the period to obtain the base period return,
and annualizing the results (i.e., multiplying the base period return by 365/7).
The net change in the value of the account reflects the value of additional
shares purchased with dividends declared on the original share and any such
additional shares and fees that may be charged to shareholder accounts, in
proportion to the length of the base period and the Fund's average account size,
but does not include realized gains and losses or unrealized appreciation and
depreciation. Effective yield is computed by adding 1 to the base period return
(calculated as described above), raising the sum to a power equal to 365 divided
by 7, and subtracting 1 from the result.
Yields will fluctuate and are not necessarily representative of future
results. You should remember that yield is a function of the type and quality of
the instruments in the portfolio, portfolio maturity and operating expenses.
Your principal in the Fund is not guaranteed. See above "Share Price: NAV" for a
discussion of the manner in which the Fund's price per share is determined.
Yield information is useful in reviewing each Fund's performance relative
to other funds that hold investments of similar quality. Because yields will
fluctuate, yield information may not provide a basis for comparison with bank
and thrift certificates of deposit which normally pay a fixed rate for a fixed
term and are subject to a penalty for withdrawals prior to maturity which will
reduce their return.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data various industry
publications. From time to time, the Funds in its advertising and sales
literature may refer to the growth of assets managed or administered by RMCI
over certain time periods.
27
<PAGE>
GENERAL INFORMATION
Joint Ownership. When an account is registered in the name of one person or
another, for example a husband or wife, either person is entitled to redeem
shares in the account. The Funds assume no responsibility to either owner for
actions taken by the other with respect to an account so registered. The
Application provides that persons who register their account indemnify and hold
the Funds harmless for actions taken by either party.
Use of Joint Prospectus and Statement of Additional Information. Although each
Fund is offering only its own shares, it is possible that a Fund might become
liable for any misstatement in the Prospectus and SAI about the other Funds.
However, each Fund has acknowledged that it, and not any of the other Funds, is
liable for any material misstatement or omission about it in the Prospectus or
SAI.
Reports and Statements. Shareholders receive an Annual Report containing audited
financial statements and an unaudited Semi-Annual Report. An account statement
is sent to each shareholder at least quarterly. Shareholders who are clients of
some Firms will receive an account statement combining transactions in Fund
shares with account statements covering other brokerage or mutual fund accounts.
Shareholders have a duty to examine their account statement(s) and report any
discrepancies to The Reserve Funds immediately. Failure to do so could result in
the shareholder suffering a loss. Further, shareholders are advised to retain
account statements.
Reserve Easy Access. Easy Access is The Reserve Funds' 24-hour toll-free
telephone service that lets customers use a touch-tone phone for a variety of
options including yields, account balances, check reorders, touch tone bill
payment and other options. To use it, call 800-637-1700 and follow the
instructions. Clients may also access full account activity for the previous six
months on the Internet at www.reservefunds.com.
Inquiries. Shareholders should direct their inquiries to the firm from which
they received this Prospectus or to The Reserve Funds, 1250 Broadway, New York,
NY 10001-3701 or 800-637-1700.
RATINGS
The following are the rating designations of short-term
instruments and their respective meanings.
STANDARD & POOR'S CORPORATION. A-1: This designation is the highest category of
S&P and indicates that the degree of safety regarding timely payment is strong.
Those short-term obligations that are extremely strong characteristics will be
denoted with a plus (+).
MOODY'S INVESTORS SERVICE, INC. Prime-1 (P-1): Issuers rated P-1 (or supporting
institutions) have a superior ability for repayment of senior short-term debt
obligations. P-1 repayment will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternative liquidity.
There are three categories for short-term obligations that define an
investment grade situation designated Moody's Investment Grade as MIG1 (best)
through MIG3. MIG 1 denotes best quality, i.e., there is a strong protection by
established cash flows, superior liquidity support or demonstrated broad-based
market access for re-financing. MIG2 denotes high quality, the margins of
protection are ample but not as large as MIG1.
DUFF & PHELPS CREDIT RATING CO. Duff-1: Very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor. Those issues determined to have the highest
certainty of timely payment and whose safety is just below risk-free U.S.
Treasury short-term obligations will be denoted with a plus (+) sign
designation. Those issues determined to have a high certainty of timely payment
and whose risk factors are very small will be denoted with a minus (-) sign
designation.
28
<PAGE>
FITCH IBCA. F1: This designation indicates the strongest credit quality. Issues
assigned this rating reflect an assurance of timely payment. Those obligations
with an exceptionally strong credit quality will be denoted with a plus (+)
sign. Issues assigned the rating of F1+ are regarded as having the strongest
degree assurance for timely payment.
FINANCIAL STATEMENTS
Financial Statements (audited) for the Reserve Institutional Trust for the
fiscal year ended May 31, 1999, including notes thereto, are incorporated by
reference in the SAI from the Trust's Annual Report to Shareholders dated May
31, 1999 filed with the SEC on July 30, 1999.
29
<PAGE>
[THE RESERVE FUNDS LOGO]
Treasurer's Trust
of the Reserve Institutional Trust Money-Market Funds
Prospectus
July 31, 1999
Treasurer's Trust is a class of shares of the Reserve Institutional Trust (the
"Trust"), which is a registered investment company, offering four no-load
money-market funds:
o Primary Institutional Fund,
o U.S. Government Institutional Fund,
o U.S. Treasury Institutional Fund, and
o Interstate Tax-Exempt Institutional Fund
(each a "Fund", collectively "the Funds").
---------------
These Securities Have Not Been Approved Or Disapproved By The Securities And
Exchange Commission Nor Has The Commission Passed Upon The Accuracy Or Adequacy
Of This Prospectus. Any Representation To The Contrary Is A Criminal Offense.
---------------
<PAGE>
TABLE OF CONTENTS
Page
Investment Objectives & Principal
Strategies....................... 2
Performance History................. 4
Fees & Expenses of the Fund......... 5
Management.......................... 6
How to Buy Shares................... 7
Selling Fund Shares................. 7
Tax Consequences.................... 9
General Information................. 10
Financial Highlights................ 10
INVESTMENT OBJECTIVES & PRINCIPAL STRATEGIES
The investment objective of the Primary, U.S. Government and U.S.
Treasury Institutional Funds is to seek as high a level of current income as is
consistent with preservation of capital and liquidity. The investment objective
of the Interstate Tax-Exempt Institutional Fund is to seek to have its interest
income exempt from federal income taxes, as is consistent with preservation of
capital and liquidity. However, achievement of the objectives cannot be assured.
The Funds are designed for institutional investors as a convenient
investment vehicle for short-term funds. The Funds seek to employ idle cash at
yields competitive with yields of other comparable short-term investments, and
are designed to reduce or eliminate for the investor the mechanical problems of
direct investment in money-market instruments such as scheduling maturities,
evaluating the credit of issuers, investing in round lots, safeguarding receipt
and delivery of securities and reinvesting.
The Funds seek to maintain a stable $1.00 share price. The portfolio
managers monitor a range of economic and financial factors. Based on their
analysis, the Funds are invested in a mix of U.S. dollar denominated
money-market securities, that are intended to provide as high a yield as
possible without violating the Fund's credit quality policies or jeopardizing
the stability of its share price.
Primary Institutional Fund. The Primary Institutional Fund seeks to attain its
objective by investing in instruments issued by the U.S. government, its
agencies and instrumentalities ("U.S. government securities"), deposit-type
obligations, such as negotiable certificates of deposit and time deposits,
bankers' acceptances and letters of credit of domestic and foreign banks,
savings and loan associations and savings banks, high-quality domestic and
foreign commercial paper as determined by nationally recognized statistical
rating organizations, non-rated instruments of comparable quality as determined
by the Board of Trustees, other short-term instruments of similar quality, and
instruments fully collateralized by such obligations.
The Primary Institutional Fund will invest in obligations of U.S. banking
institutions that are insured by the Federal Deposit Insurance Corporation and
commercial paper, which is rated at the time of investment, P-1 by Moody's
Investors Service, Inc. ("Moody's"), A-1 by Standard & Poor's Corporation
("S&P") or the equivalent if rated by another rating agency. The Primary
Institutional Fund may also invest in obligations of foreign branches of both
U.S. banks and foreign banks (Eurodollars). Investment in foreign banks will be
limited to those located in Australia, Canada, Western Europe and Japan and
which, at the time of investment, have more than $25 billion (or the equivalent
in other currencies) in total assets and which, in the opinion of the Fund's
Adviser, are of comparable quality to the U.S. banks which may be purchased by
the Fund. The Primary Institutional Fund may also invest in municipal
obligations, the interest on which is not exempt from federal income taxation.
U.S. Government Institutional Fund. The U.S. Government Fund seeks to attain its
objective by investing exclusively in securities backed by full faith and credit
of the U.S. government, such as U.S. Treasury securities, obligations issued or
guaranteed by the U.S. government, its agencies and instrumentalities, and
repurchase agreements supported by such investments.
U.S. Treasury Institutional Fund. The U.S. Treasury Fund seeks to attain its
objective by investing exclusively in securities backed by the full faith and
credit of the U.S government which provide interest income exempt in most states
from state and local personal income taxes. Typically, the Fund's assets will be
invested in U.S. Treasury securities.
2
<PAGE>
The "full faith and credit" backing is considered the strongest backing offered
by the U.S. government and to be the highest degree of safety with respect to
the payment of principal and interest.
Interstate Tax-Exempt Institutional Fund. The Interstate Tax-Exempt
Institutional Fund's investment objective is to seek as high a level of
short-term interest income exempt from federal income taxes as is consistent
with preservation of capital and liquidity. The Fund invests principally in
short-term obligations issued by the states, territories and possessions of the
United States and their political subdivisions, duly constituted authorities and
corporations.
The Interstate Tax-Exempt Institutional Fund's principal investment
strategies include investing primarily in municipal money-market securities. The
Fund invests principally in high-quality, tax-exempt obligations issued by
states, counties, municipalities, authorities or other political subdivisions.
These securities are generally referred to as "municipal obligations". The Fund
intends to invest at least 80% of the value of the Fund's net assets in
municipal obligations which are exempt from federal income tax, unless it has
adopted a temporary defensive position.
The interest on securities generally known as municipal obligations is
exempt from federal income tax in the opinion of either bond counsel for the
issuers or, in some instances, the issuer itself. These securities may be issued
to raise money for various public purposes such as constructing public
facilities, while others are issued to obtain funding for privately operated
facilities. General obligation bonds and notes are backed by the taxing power of
the issuer. Revenue bonds and notes are backed by the revenues of a project or
facility such as tolls from a toll road or, in some cases, from the proceeds of
a special excise tax, but not by the general taxing power. Industrial
development revenue bonds and notes are a specific type of revenue bond or note
backed by the credit of a private issuer. Municipal obligations bear fixed,
variable or floating rates of interest.
The Fund will purchase tax-exempt securities which are rated MIG1 or MIG2 by
Moody's, SP-1 or SP-2 by S&P or the equivalent. Municipal obligations which are
not rated may also be purchased provided Reserve Management Company, Inc.
("RMCI"), the Adviser determines them to be of comparable quality pursuant to
guidelines established by the Board of Trustees ("Trustees").
Other Investment Strategies of the Funds. The Funds may invest in repurchase
agreements ("repos") but will limit them to those banks and securities dealers
who are deemed creditworthy pursuant to the guidelines adopted by the Trust's
Board of Trustees ("Trustees"). The U.S. Government and U.S. Treasury
Institutional Funds will further limit their investment in repos to those whose
underlying obligations are backed by the full faith and credit of the United
States and, in the case of the U.S. Treasury Institutional Fund, repos will not
exceed 5% of its total assets except for temporary or emergency purposes.
Securities subject to repos will be placed in a segregated account and will be
monitored to ensure that the market value of the securities plus any accrued
interest will at least equal the repurchase price.
Although not a principal strategy, all of the Funds are allowed to invest
all, or substantially all, of their investable assets in other open-end
management companies having the same investment objective and substantially
similar policies and restrictions.
RMCI uses its reasonable business judgment in selecting investments in
addition to considering the ratings of Moody's, S&P and other rating services
when available.
The investment objectives and principal strategies are summarized here. For
more information on the investment objective and strategies of all the Funds,
please read the Statement of Additional Information ("SAI"). A Fund may have to
adopt a temporary defensive position. In that event, the Fund may not be able to
attain its objective.
Principal Risks of Investing in the Funds. The Funds are money-market funds
which are a specific type of fund that seeks to maintain a $1.00 price per
share. An investment in a Fund is not insured or guaranteed by the U.S.
government, Federal Deposit Insurance Corporation or any other government
agency. Although each Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in a Fund.
Additionally, each Fund's yield will vary as the short-term securities in its
portfolio mature and the proceeds are reinvested in securities with different
interest rates.
3
<PAGE>
While each Fund has maintained a constant share price since inception, and
will strive to do so, the following factors could reduce the Fund's income level
and/or share price:
o as to all Funds, interest rates could rise sharply, causing the value
of the Funds' securities, and share price, to drop.
o as to all Funds, repos could involve risks in the event of a default
of the repo counterparty, including possible delays, losses or
restrictions upon a Fund's ability to dispose of the underlying
securities.
o as to the Primary Institutional Fund, there are risks generally
associated with investing in the banking industry, such as interest
rate risk, credit risk and regulatory developments relating to the
banking industry.
o as to the Primary Institutional Fund, Euro and Yankee dollar
investments involve certain risks that are different from investments
in domestic obligations of U.S. banks. These risks may include
unfavorable political and economic developments, possible withholding
taxes, seizure of foreign deposits, currency controls or other
governmental restrictions which might affect payment of principal or
interest. In addition, foreign banks are not regulated by U.S. banking
authorities and are generally not bound by financial reporting
standards comparable to U.S. banks. Further, political, regulatory,
market or economic developments in foreign countries can affect
entities located in those countries.
o as to the Primary and Interstate Tax-Exempt Institutional Funds,
investments in municipal obligations are subject to market volatility
and can be significantly affected by adverse economic or political
changes and the financial condition of the issuers of municipal
securities. For example, a decline in the credit quality of an issuer
or the provider of credit support or a maturity-shortening structure
for a security can cause the price of a money-market security to
decrease.
o as to the Interstate Tax-Exempt Institutional Fund, the value of
municipal securities may be affected by uncertainties and changes in
municipal market-related legislation or litigation.
o as to the Interstate Tax-Exempt Institutional Fund, as to investments
in industrial revenue development bonds and notes secured by letters
of credit or guarantees of banks, there are risks generally associated
with concentrating investments in the banking industry, such as
interest rate risk, credit risk and regulatory developments relating
to the banking industry.
o as to the Interstate Tax-Exempt Institutional Fund, interest received
on certain otherwise tax-exempt securities ("private activity bonds")
is subject to a federal Alternative Minimum Tax ("AMT"). It is the
position of the SEC that in order for a fund to call itself
"tax-free", not more than 20% of its net assets may be invested in
municipal securities subject to the AMT or at least 80% of its income
will be tax-exempt. Income received on such securities is classified
as a "tax preference item," which could subject certain shareholders
of the Fund to the AMT.
Year 2000. Many computer software systems in use today cannot distinguish the
year 2000 from the year 1900. Most of the services provided to the Trust depend
on the smooth functioning of computer systems. The Trust could be adversely
affected if the computer systems and service providers that interface with it
are unable to process data from January 1, 2000 and after; however, steps are
being taken to reasonably address this issue and to obtain assurance that
comparable efforts are being made by service providers. There can be no
assurance that these steps will be sufficient to avoid any adverse impact to the
Trust. In addition, because the Year 2000 issue affects virtually all
organizations, the extent of its impact cannot be predicted.
Other Risks. These risks are discussed in more detail in the SAI. Most of the
Funds' performances depend on interest rates. When interest rates fall, the
Funds' yields will typically fall as well.
The Reserve Funds' emphasis on the high credit quality of its investments
may mean that its yields are lower than those available from certain other
money-market funds, either on a before or after-tax basis. Because of the low
level of risk, over time, a money-market fund may produce lower returns than
bond or stock investments which entail higher levels of risk.
PERFORMANCE HISTORY
The bar chart below shows the Primary Institutional Fund's annual
returns for the first calendar year since inception, together with the best and
worst quarters. The tables assume reinvestment of dividends and distributions,
if any. The bar chart shows the annual returns of Treasurer's Trust. The annual
returns of the other classes (A, B, C and D) that are not offered in this
Prospectus are substantially similar because the shares are invested in the same
portfolio of securities and the annual returns would differ only to the extent
the classes do not have the same expenses. The U.S. Government, U.S. Treasury
and Interstate Tax-Exempt Institutional Funds do not appear in the bar chart
because a full calendar year does not exist for Treasurer's Trust. The
accompanying "Average Annual Total Return as of December 31, 1998" table gives
some indication of risk of an investment in the Funds. As with all mutual
funds, the past is not a prediction of the future.
<PAGE>
Primary Institutional Fund - Treasurer's Trust
Annual Total Returns as of December 31,
5.17%
1998
Best Quarter 3rd Q 1998 1.30%
Worst Quarter 4th Q 1998 0.12%
Most Recent Calendar Quarter 2nd Q 1999 4.39 %
Average Annual Total Returns as of December 31, 1998
1 Since
Year Inception
---- ---------
5.17% 5.18%
Average Annual Total Returns as of December 31, 1998
<TABLE>
<CAPTION>
1 Since
Year Inception
<S> <C> <C>
Primary Institutional Fund - Class A 5.56% 5.57%
Primary Institutional Fund - Class B 5.33% 5.32%
U.S. Government Institutional Fund - Class A 0.38% 4.72%
U.S. Government Institutional Fund - Class B 5.14% 5.15%
U.S. Government Institutional Fund - Treasurer's Trust 3.17% 4.84%
Interstate Tax-Exempt Institutional Fund - Class A 0.53% 3.11%
Interstate Tax-Exempt Institutional Fund - Class B 1.01% 2.48%
Interstate Tax-Exempt Institutional Fund - Treasurer's Trust 1.96% 3.10%
</TABLE>
For the Funds' current yield, call toll-free (800) 637-1700 or visit our
web site at www.reservefunds.com.
FEES & EXPENSES OF THE FUNDS
If you buy and hold shares of the Funds, you may pay certain fees and
expenses which are described in the table below. There are no sales charges
(loads) or exchange fees associated with an investment in the Funds. Annual fund
operating expenses are paid out of the assets of each Fund, so their effect is
included in each Fund's share price. Annual fund operating expenses, indicated
in the table below, reflect expenses for the Funds' fiscal year ended May 31,
1999.
Shareholder Fees for all Funds
(Fees paid directly from your investment)
Sales Load Imposed on Purchases......................... None
Sales Load Imposed on Reinvested Dividends.............. None
These are all no-load funds. There are no direct shareholder fees. Please read
the "Annual Fund Operating Expenses for all Funds" table below.
Annual Fund Operating Expenses for Treasurer's Trust Class of all Funds
(Expenses that are deducted from Fund assets)
Treasurer's
Trust
-----
Comprehensive Management Fee(a)............ 0.25%
Distribution (12b)-1 Fees.................. 0.00
Other Operating Expenses*.................. 0.35
----
Total Annual Fund Operating Expenses....... 0.60%
====
- ----------
(a) The comprehensive management fee of 0.25% per annum of its average daily
net assets includes advisory and customary operating expenses, but
does not include shareholder service fees. However, the Funds may be
charged for certain non-recurring extraordinary expenses and its allocated
or direct share of certain other expenses. See "Management".
5
<PAGE>
* "Other Operating Expenses" include shareholder services fees and are based
on an estimated amount for the current fiscal year.
Example: This example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The example should
not be considered indicative of future investment returns and operating expenses
which may be more or less than those shown. This example is based on the annual
fund operating expenses described in the table.
This example assumes that you invest $10,000 in a fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that each Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
Treasurer's Trust $61 $192 $335 $750
Please note that the above example is an estimate of the expenses to
be incurred by shareholders of the Funds. Actual expenses may be
higher or lower than those reflected above. You would pay the same if
you did not redeem your shares.
MANAGEMENT
Investment Adviser. Since November 15, 1971, Reserve Management Company, Inc.
("RMCI") 1250 Broadway, New York, NY 10001 and its affiliates have provided
investment advice to The Reserve Funds. RMCI serves as the investment adviser to
the Funds under an Investment Management Agreement (the "Agreement") with the
Reserve Institutional Trust (the "Trust"). The Agreement provides that RMCI will
furnish continuous investment advisory and management services to the Funds. In
addition to the Funds, RMCI provides investment management services to other
mutual funds within the Reserve family of funds and, as of May 31, 1999, had
approximately $5.6 billion under management.
RMCI manages the investment portfolios of the Funds, subject to policies
adopted by the Trustees. For its services, RMCI receives a fee of 0.25% per year
of the average daily net assets of each Fund. RMCI pays all employee and
customary operating expenses of the Fund. Excluded from the definition of
customary operating expenses are interest, taxes, brokerage fees, extraordinary
legal and accounting fees and expenses, and the fees of the disinterested
Trustees, for which each Fund pays its direct or allocated share. For the fiscal
year ended May 31, 1999, the Primary, U.S. Government, U.S. Treasury and
Interstate Tax-Exempt Institutional Funds paid RMCI $471,714, $109,902, $18,824
and $41,856, respectively.
Shareholder Services Fees. Under the plan, shareholders of Treasurer's Trust,
pay Firms a service fee at an annual rate up to 0.35% of the average daily NAV,
for which the Firm provides personal service, including maintaining shareholder
accounts, responding to inquiries, providing information about investments and
providing certain other services. Class A shares do not participate in the
Service Plan.
It is expected that the holders of the Treasurer's Trust shares will be
wrap fee accounts, trust accounts, omnibus accounts and other accounts of
smaller investors which require sub-accounting and other such services which are
unique to the Treasurer's Trust shares of each Fund. Payment for these services
will be made by the Funds and charged against the average daily net assets
attributable to the Treasurer's Trust shares, rather than being paid by the
Adviser as part of its comprehensive fee.
6
<PAGE>
HOW TO BUY SHARES
Share Price: Net Asset Value. Investors pay no sales charges to invest in the
Funds. The price you pay for a share of a Fund, and the price you receive upon
selling or redeeming a share of a Fund, is called the Fund's net asset value
("NAV") per share. The NAV is calculated by taking the total value of a Fund's
assets, subtracting its liabilities, and then dividing by the number of shares
that have already been issued. Each Fund uses the amortized cost method of
valuing its securities under Rule 2a-7 of the 1940 Act. This is a standard
calculation, and forms the basis for all transactions involving buying, selling,
exchanging or reinvesting shares. The NAV is generally calculated as of the
close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern time)
every day the Exchange is open. NAV is not calculated on days the Exchange is
closed and regional bank holidays. Your order will be priced at the next NAV
calculated after your order is accepted (i.e., converted to federal funds) by
the Funds.
Purchase of Shares. The Treasurer's Trust class of shares of each Fund are not
subject to any minimum initial investment amount. There is no minimum subsequent
investment. All investments must be in U.S. dollars. Third-party, foreign and
travellers checks, as well as cash investments will not be accepted. For clients
of certain broker-dealers and financial institutions ("Firms"), shares may be
purchased directly through such Firms. However, purchases may be subject to the
Firms' own minimums and purchase requirements. Purchase orders are not accepted
on days the Exchange is closed for trading and regional bank holidays.
Shares of the Funds may only be purchased by wire. Prior to calling your
bank, call The Reserve Funds at 800-637-1700 for specific instructions or the
Firm from which you received this Prospectus.
Wires which do not correctly identify the account to be credited may be
returned or delay the purchase of shares. Only federal funds wires and checks
drawn on the Fund's bank are eligible for entry as of the business day received.
For federal funds wires to be eligible for same-day order entry, the Funds must
be notified before 2:00 PM (Eastern time, 11:00 AM for the U.S. Treasury and
Interstate Tax-Exempt Institutional Funds) of the amount to be transmitted and
the account to be credited. Payment not immediately convertible into federal
funds will be entered as of the business day when covering federal funds are
received or bank checks are converted into federal funds. This usually occurs
within one (1) business day of receipt of the bank wire, but may take longer.
Reserve Automatic Asset-Builder Plan. If you have an account, you may purchase
shares of a Fund ($25 suggested minimum) from a checking, NOW, or bank
money-market deposit account or from a U.S. government distribution ($25
suggested minimum) such as social security, federal salary, or certain veterans'
benefits, or other payment from the federal government. You may also purchase
shares automatically by arranging to have your payroll deposited directly into
your Reserve account. Please call The Reserve Funds at 800-637-1700 for an
application.
Individual Retirement Accounts. Investors may use the Funds as an investment for
Individual Retirement Accounts ("IRAs"). A master IRA plan with information
regarding administration fees, investment minimums and other details is
available from the Funds.
Third-party Investments. Investments made through a third party (rather than
directly with Reserve) such as a financial services agent may be subject to
policies and fees different than those described here. Banks, brokers, 401(k)
plans, financial advisers and financial supermarkets may charge transaction fees
and may set different minimum investments or limitations on buying or selling
shares. Investors should consult a representative of the plan or financial
institution if in doubt.
Distributors. The Funds' distributor is Resrv Partners, Inc. ("RESRV"), 1250
Broadway, New York, NY 10001-3701.
Restrictions. Certain other restrictions and conditions for buying shares apply
to the Funds. Please see the Trust's SAI for more information.
SELLING FUND SHARES
Investors may sell shares at any time. Shares will be sold at NAV
determined after the redemption request is received by the Fund. Each Fund
usually transmits payments the same day when requests are received before 12:00
noon (Eastern time, 11:00 AM for the U.S. Treasury and Interstate Tax-Exempt
Institutional Funds) and the next business day for requests received after the
time specified to enable shareholders to receive additional dividends. Shares do
not earn dividends on the day a redemption is effected, regardless of the time
the order is received. Orders will be processed promptly and investors will
generally receive the proceeds within a week after receiving your properly
completed request.
7
<PAGE>
Shareholders of the Treasurer's Trust shares will not be charged any fees on
redemptions by telephone or wire. If you use your VISA card at an ATM, the owner
of the ATM may charge you a surcharge. The Funds assume no responsibility for
delays in the receipt of wired or mailed funds.
Written and telephone requests. Redemption instructions and options should be
specified when your account is opened. Subsequent elections and changes in
instructions must be in writing with the signature(s) guaranteed. Changes in
registration or authorized signatories may require additional documentation. One
way to redeem shares is to write a letter of instruction which states: the
name(s) and signature(s) of all accountholders (signature(s) guaranteed, if
necessary), account number, Fund name, the dollar amount you want to sell, and
how and where to send the proceeds. If you are redeeming your IRA, please note
the applicable withholding requirements.
To reduce the risk of loss, certain situations require written
instructions along with signature guarantees. These include:
(1) redemptions for more than $5,000; or
(2) redemptions on accounts whose address has been changed within the
past 30 days; or
(3) redemption requests to be sent to someone other than the account
owner or the address of record for the past 30 days.
You may redeem by calling the Funds at 800-637-1700. Unless you decline
telephone privileges on your application and the Funds fail to take reasonable
measures to verify the request, the Funds will not be liable for any
unauthorized telephone redemption, or for any loss, cost or expense for acting
upon an investor's telephone instructions. Telephone redemptions may be sent to
the bank or brokerage account designated by the shareholder on the application
or in a letter with signature guarantee. To change the designated brokerage or
bank account it is necessary to contact the Firm through which shares of the
Fund were purchased or, if purchased directly from the Funds, it is necessary to
send a written request to the Funds with signature(s) guaranteed. The Fund
reserves the right to refuse a telephone redemption if it believes it is
advisable to do so.
Signature guarantees are designed to protect both you and the Funds from
fraud. Signature guarantees can be obtained from most banks, credit unions or
savings associations, or from broker/dealers, national securities exchanges or
clearing agencies. Notaries public cannot provide signature guarantees. For more
information about redemption procedures, please read the SAI.
Checking, VISA and ATM Access. You may redeem shares of the Fund by using your
Reserve checks and VISA check card. By completing the application or a signature
card (for existing accounts) and certain other documentation, you can write
checks in any amount against your account. A check will be returned (bounced)
and a fee charged if you request a stop payment; the check is postdated;
contains an irregularity in the signature, amount or otherwise; or, is written
against accounts with insufficient or uncollected funds. Please do not postdate
your checks or use them to close your account. Upon proper notice, the Funds may
choose to impose a fee if it deems a shareholder's actions to be burdensome.
Checking may not be available to clients of some Firms, and some Firms may
establish their own minimum check amount. Shareholders may use their VISA card
at ATM's to receive cash. Please see the Trust's SAI for more information
including charges, fees, etcetera.
Exchange Privilege. Investors can exchange all or some of their shares offered
for shares in other Reserve money-market and equity funds. Investors can request
an exchange in writing or by telephone. The shares of the other funds are not
offered by this Prospectus. Be sure to read the current prospectus for any fund
into which you are exchanging. Any new account established through an exchange
will have the same privileges as an original account (as long as they are
available). Please see the Trust's SAI for more information.
Other Redemption Options and Automatic Services. Certain other services and
restrictions for selling shares automatically are offered by the Funds. Please
see the SAI for more information about these services and restrictions.
Redemptions Through Brokers And Financial Institutions. Redemptions through
brokers and financial institutions may involve such Firms' own redemption
minimums, services fees, and other redemption requirements.
8
<PAGE>
Other. The Funds also reserve the right to make a "redemption in kind", (payment
in portfolio securities rather than cash), without notice, if the amount the
investor is redeeming is large enough to affect fund operations (for example, if
it represents more than 1% of the Fund's assets). Each Fund reserves the right
to:
o refuse any purchase or exchange request,
o change or discontinue its exchange privilege,
o change its minimum investment amounts, and
o delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions).
TAX CONSEQUENCES
The following discussion is intended as general information only. Because
everyone's tax situation is unique, you should consult your own tax advisor(s)
with regard to the applicability of state and local tax laws on Fund
distributions. The applicable tax laws which affect the Funds and their
shareholders are subject to change and may be retroactive. For more information,
please see the Trust's SAI.
Dividends, Distributions and Taxes. Each Fund declares dividends daily and
automatically reinvests them in additional shares except for shareholders who
elect in writing to receive cash dividends, in which case monthly or quarterly
dividend checks are sent to the shareholder. There are no fees or sales charges
on reinvestments.
Dividends and distributions are taxable to most shareholders as ordinary
income (unless an investment is in an IRA or other tax-advantaged account).
Distributions of long-term capital gains, if any, are taxable to shareholders as
long-term capital gains. The tax status of any distribution is the same
regardless of how long an investor has been in the fund and whether
distributions are reinvested or taken in cash. The tax status of dividends and
distributions will be detailed in annual tax statements from the Funds. An
exchange of a Fund's shares for the shares of another fund will be treated as a
sale of The Fund's shares and any gain may be subject to federal income tax.
The U.S. Treasury Institutional Fund intends to invest only in U.S.
Treasury securities and obligations of those agencies and instrumentalities of
the U.S. government that provide interest income exempt in most states from
state and local personal income taxes, except to the extent uninvested cash is
invested in repurchase agreements. Some states have minimum investment
requirements that must be met by the U.S. Treasury Institutional Fund.
Distributions attributable to net capital gains, if any, are generally subject
to state and local taxes. It is possible that a state or local taxing authority
may in the future seek to tax an investor on a portion of the interest income of
an obligation held by the U.S. Treasury Institutional Fund.
As to the Interstate Tax-Exempt Institutional Fund, dividends derived
from the interest earned on Municipal Obligations and designated by the Fund as
"exempt-interest dividends" are not subject to federal income taxes. Any
distributions of net short-term capital gains and taxable interest income, if
any, are taxable as ordinary income. Any distributions of net realized long-term
capital gains earned by the Fund are taxable to shareholders as long-term
capital gains, regardless of the length of time the Fund's shares have been
owned by the shareholder.
Backup Withholding. A Fund may be required to withhold U.S. federal income tax
at the rate of 31% of all taxable distributions payable to certain shareholders
who fail to provide the Fund with their correct taxpayer identification number
or to make required certifications, or who have been notified by the Internal
Revenue Service that they are subject to backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. federal income tax liability. However, special rules apply
for certain accounts. For example, for an account established under the Uniform
Gift to Minors Act, the TIN of the minor should be furnished. Shareholders
should be aware that, under regulations promulaged by the IRS a Fund may be
fined $50 annually for each account for which a certified TIN is not provided or
is incorrect. In the event that such a fine is imposed with respect to an
account in any year, a corresponding charge will be made against the account.
The Funds will not accept purchase orders for accounts for which a correct and
certified TIN is not provided or which is otherwise subject to backup
withholding, except in the case of certain non-resident alien account holders.
9
<PAGE>
GENERAL INFORMATION
Small Balances. Because of the expense of maintaining accounts with small
balances (less than $1,000), the Funds, without notice may choose to either levy
a monthly charge (currently $5) or redeem the account and remit the proceeds.
Some Firms may establish variations of minimum balances and monthly charges if
approved by the Funds.
Reserve Easy Access. Easy Access is The Reserve Funds' 24-hour toll-free
telephone service that lets customers use a touch-tone phone for a variety of
options, which include yields, account balances, check reorders and other
options. To use it, call 800-637-1700 and follow the instructions. Clients may
also access full account activity for the previous six months on the Internet at
www.reservefunds.com.
Inquiries. Shareholders should direct their inquiries to the Firm from which
they received this Prospectus or to The Reserve Funds.
Special Shareholder Services. The Funds reserve the right to charge shareholder
accounts for specific costs incurred in processing unusual transactions. Such
transactions include, but are not limited to, stop payment requests, copies of
Fund redemption or shareholder checks, copies of statements and special research
services.
Account Statements. Shareholders are advised to retain all account statements.
FINANCIAL HIGHLIGHTS
This section provides further details about the Funds' recent financial
history. "Total Return" shows how much an investment in a series would have
increased (or decreased) during each period, assuming reinvestment of all
dividends and distributions, if any. These figures have been audited by
PricewaterhouseCoopers LLP, the Trust's independent accountants, whose report,
along with each Funds' financial statements, is included in the Trust's Annual
Report, which is available upon request by calling 800-637-1700.
10
<PAGE>
PRIMARY INSTITUTIONAL FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------- --------------------------------------------------
Fiscal Year Period Ended Period Ended
Ended May 31, May 31, Fiscal Years Ended May 31, May 31,
----------------- ---------------- ------------------------------ ---------------
1999 1998 (a) 1999 1998 1997 (b)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
-------- -------- -------- -------- --------
Net investment income
from investment
operations .0509 .0332 .0488 .0529 .0179
Less dividends from
net investment income (.0509) (.0332) (.0488) (.0529) (.0179)
-------- -------- --------- -------- --------
Net asset value at
end of period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======== ======== ======== ========
Total Return 5.09% 5.49% (d) 4.88% 5.29% 4.95% (d)
Ratios/Supplemental Data
Net assets end of
period (millions) $ 75.8 $ 4.4 $ 4.2 $ 10.4 $ 2.0
Ratio of expenses to
average net assets .25% .25% (d) .45% .45% .50% (d)(e)
Ratio of net investment
income to average
net assets 4.79% 5.35% (d) 4.79% 5.16% 4.81% (d)(e)
<CAPTION>
TREASURER'S TRUST CLASS C
-------------------------------- -----------------
Period Ended
May 31,
Fiscal Years -----------------
Ended Period Ended
May 31, May 31,
1999 1998 (c) 1999 (f)
---- ---- --------
<S> <C> <C> <C>
Net asset value at
beginning of period $1.0000 $1.0000 $1.0000
------- -------- -------
Net investment income
from investment
operations .0470 .0322 .0036
Less dividends from
net investment income (.0470) (.0322) (.0036)
-------- --------- --------
Net asset value at
end of period $1.0000 $1.0000 $1.0000
======= ======== =======
Total Return 4.70% 5.13% (d) 4.11% (d)
Ratios/Supplemental Data
Net assets end of
period (millions) $ 154.1 $171.7 $ 58.4
Ratio of expenses to
average net assets .60% .60% (d) .75% (d)
Ratio of net investment
income to average
net assets 4.59% 5.00% (d) 4.12% (d)
</TABLE>
(a) From October 23, 1997 (Commencement of Operations) to May 31, 1998.
(b) From January 21, 1997 (Commencement of Operations) to May 31, 1997.
(c) From October 15, 1997 (Commencement of Operations) to May 31, 1998.
(d) Annualized.
(e) Due to the voluntary waiver of certain expenses by RMCI, the net expense
ratio and net investment income amounted to .48% and 4.83%, respectively,
for the period ended May 31, 1997.
(f) From April 30, 1999 (Commencement of Operations) to May 31, 1999.
11
<PAGE>
U.S. GOVERNMENT INSTITUTIONAL FUND
<TABLE>
<CAPTION>
CLASS A CLASS B TREASURER'S TRUST
Fiscal Year
Period Ended Fiscal Year Period Ended Ended Period Ended
May 31, Ended May 31, May 31, May 31, May 31,
---------------- ------------------------------------- ------------------ ----------------
1999 (a) 1999 1998 (b) 1999 1998 (c)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
-------- -------- -------- -------- -------
Net investment income
from investment
operations .0228 .0471 .0364 .0455 .0036
Less dividends from
net investment
income (.0228) (.0471) (.0364) (.0455) (.0036)
------- -------- ------- ------- -------
Net asset value at
end of period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======== ======== ======== ======= =======
Total Return 4.60% (d) 4.71% 5.13% (d) 4.55% 4.85% (d)
Ratios/Supplemental Data
Net assets end of
period (millions) $36.5 $6.4 $5.8 $4.9 $3.3
Ratio of expenses to
average net assets .25% (d) .45% .45% (d) .60% .60% (d)
Ratio of net investment
income to average
net assets 4.55% (d) 4.70% 5.00% (d) 4.42% 4.73% (d)
</TABLE>
- ------------------------
(a) From December 2, 1998 (Commencement of Operations) to May 31, 1999.
(b) From September 15, 1997 (Commencement of Operations) to May 31, 1998.
(c) From May 5, 1998 (Commencement of Operations) to May 31, 1998.
(d) Annualized.
12
<PAGE>
US TREASURY INSTITUTIONAL FUND- TREASURER'S TRUST
Fiscal Year
Ended
May 31,
1999 (a)
----
Net asset value
beginning of period $1.0000
-------
Net investment income
from investment
operations .0245
Less dividends from
net investment
income (.0245)
-------
Net asset value at
end of period $1.0000
=======
Total Return 4.03% (b)
Ratios/Supplemental Data
Net assets end of
period (millions) $15.7
Ratio of expenses to
average net assets .60% (b, c)
Ratio of net investment
income to average
net assets 3.66% (b, c)
- ------------------------------------
(a) From October 21, 1998 (Commencement of Operations) to May 31, 1999.
(b) Annualized.
(c) During this period ended May 31, 1999, RMCI voluntarily waived a portion of
its fee. Due to the voluntary waiver of certain expenses by RMCI, the net
expense ratio and net investment income amounted to .24% and 4.02%,
respectively.
13
<PAGE>
INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND
<TABLE>
<CAPTION>
CLASS A CLASS B TREASURER'S TRUST
---------------- -------------------- ----------------------------------
Fiscal
Period Ended Period Ended Year Ended Period Ended
May 31, May 31, May 31, May 31,
---------------- -------------------- ---------------- -----------------
1999 (a) 1999 (d) 1999 1998 (b)
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net asset value at
Beginning of period $1.0000 $1.0000 $1.0000 $1.0000
-------- -------- -------- -------
Net investment income
From investment
Operations .0175 .0101 .0284 .0018
=====
Less dividends from
net investment
Income (.0175) (.0101) (.0284) (.0018)
--------- ------ --------- ---------
Net asset value at
end of period $1.0000 $1.000 $1.0000 $1.0000
======== ====== ======== =======
Total Return 3.06% (c) 3.12% (c) 2.84% 3.39% (c)
Ratios/Supplemental Data
Net assets end of
period (millions) $11.2 - $23.7 $14.0
Ratio of expenses to
average net assets .25% (c) .45% (c) .60% .60% (c)
Ratio of net investment
income to average
net assets 3.13% (c) 3.04% (c) 2.79% 3.33% (c)
</TABLE>
(a) From November 3, 1998 (Commencement of Operations) to May 31, 1999.
(b) From May 13, 1998 (Commencement of Operations) to May 31, 1998.
(c) Annualized.
(d) From August 4, 1998 (Commencement of Operations) to December 31, 1998 (the
final redemption of all outstanding shares.)
----------
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and, if given or
made, such information or representations must not be relied upon. This
Prospectus does not constitute an offering in any jurisdiction in which such
offering may not lawfully be made.
----------
14
<PAGE>
This Prospectus contains the information
about each Fund, which a prospective
investor should know before investing.
[THE RESERVE FUNDS LOGO]
The Statement of Additional Information Founders of
("SAI") contains additional and more "America's First
detailed information about the Funds, and Money Fund"
is considered part of this Prospectus.
Our Annual and Semi-Annual Reports list
the holdings in each Fund, describe Fund
performance, include financial statements
for the Funds, and discuss market
conditions and strategies that
significantly affected the Funds'
performance.
These documents may be obtained without
charge by writing to the address below or
calling The Reserve Funds at
800-637-1700. You can download the
documents from the SEC's web site Treasurer's Trust:
(http://www.sec.gov) or you can obtain Primary Institutional Fund
copies by visiting the SEC's Public U.S. Government Institutional
Reference Room in Washington, DC Fund
(800-SEC-0330) or by sending your request U.S. Treasury Institutional Fund
and duplicating fee to the SEC's Public Interstate Tax-Exempt
Reference Section, Washington, DC Institutional Fund
20549-6009. Money-Market Funds
Investors are advised to read and retain
this prospectus for future reference.
[THE RESERVE FUNDS LOGO]
Founders of
"America's First
Money Fund"
1250 Broadway, New York, NY
10001-3701
(212) 401-5500
General Information and 24-Hour Yield
and Balance Information Prospectus
800-637-1700 - www.reservefunds.com July 31, 1999
Distributor - Resrv Partners, Inc.
RIT/TT-07/99
SEC File Number
Reserve Institutional Trust
811-3141
15
<PAGE>
PART C
Item 23. Exhibits
(a) Declaration of Trust and Amendments*
(b) Bylaws and Amendments*
(c) Not Applicable
(d) Form of Investment Management Agreement for the Funds*
(e) Form of Distribution Agreement and Plan of Distribution filed as an
exhibit to Registrant's Post-Effective Amendment No. 9 dated August 31,
1986. Notice pursuant to such Agreement filed as an exhibit to
Post-Effective Amendment No. 27 dated December 31, 1996. All are
incorporated by reference.
(f) Pension Plan of Reserve Management Corporation was filed as an exhibit
to Post-Effective Amendment No. 32 of The Reserve Fund, File No. 811-2033;
Amendments to Pension Plan filed as an exhibit to Post-Effective Amendment
No. 45 of The Reserve Fund (File No. 811-2033) dated July 31, 1989 and all
are incorporated by reference.
(g) Custodian Agreement with Chase Manhattan Bank*
(h) Not applicable
(i) Opinion of Counsel*
(j) Consent of Independent Auditors*
(k) Not applicable
(l) Not applicable
(m) Form of Registered Dealer Agreement*
(n) Financial Data Schedules*
(o) Not applicable
-------
* Filed herewith
Item 24. Persons Controlled by or Under Common Control with Registrant
Not Applicable
Item 25. Indemnification
Each Trustee, officer, employee or agent of the Registrant, and any person who
has served at its request as a Director, Trustee, officer or employee of another
business entity, shall be entitled to be indemnified by the Registrant to the
fullest extent permitted by the laws of the Commonwealth of Massachusetts,
subject to the provisions of the Investment Company Act of 1940 and the rules
and regulations thereunder. Insofar as indemnification for liability arising
under the Securities Act of 1933 may be permitted to Trustees, officers and
controlling persons of the Registrant pursuant to the Declaration of Trust or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of any expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser
Name Position with the Adviser Other Businesses
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Bruce R. Bent President President and Director of Reserve
Management Corporation and Chairman
and Director and of Resrv Partners, Inc.
both of the same address as the Trust.
- ------------------------------------------------------------------------------------------------------------------
Bruce R. Bent II Vice President and Vice President, Secretary and
Secretary Director of Reserve Management
Corporation and Secretary and
Director of Resrv Partners, Inc.
both of the same address as the
Trust.
- ------------------------------------------------------------------------------------------------------------------
Arthur T. Bent III Vice President and Vice President, Treasurer and
Treasurer Director of Reserve Management
Corporation and Treasurer
and Director of Resrv Partners, Inc.
both of the same address as the
Trust.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 27. Principal Underwriters
(a) Resrv Partners, Inc., a principal underwriter of the Registrant, also acts
as principal underwriter to Reserve Tax-Exempt Trust, The Reserve Fund, Reserve
New York Tax-Exempt Trust and Reserve Private Equity Series.
Name and Principal Positions and Offices Positions and Offices Business Address
with Resrv Partners, Inc. with Registrant
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
Bruce R. Bent Chairman and Director
1250 Broadway
New York, New York 10001-3701
- --------------------------------------------------------------------------
Mary A. Belmonte President
1250 Broadway
New York, New York 10001-3701
- --------------------------------------------------------------------------
Bruce R. Bent II Secretary and Director
1250 Broadway
New York, New York 10001-3701
- --------------------------------------------------------------------------
Arthur Bent III Treasurer and Director
1250 Broadway
New York, New York 10001-3701
- --------------------------------------------------------------------------
MaryKathleen Foynes Counsel & Assistant Secretary
1250 Broadway
New York, New York 10001-3701
- --------------------------------------------------------------------------
James Freisen Controller
1250 Broadway
New York, New York 10001-3701
- --------------------------------------------------------------------------
</TABLE>
Item 28. Location of Accounts and Records All records required to be maintained
by Section 31(a) of the 1940 Act and the Rules promulgated thereunder are
maintained at 1250 Broadway, New York, NY 10001-3701 except those relating to
receipts and deliveries of securities, which are maintained by the Registrant's
Custodian.
Item 29. Management Services
See "Investment Management, Distribution, Service and Custodian
Agreements" in Part B.
Item 32. Undertakings
Not Applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this
Post-Effective Amendment to its Registration Statement meets all of the
requirements for effectiveness pursuant to Rule 485 (b) under the Securities Act
of 1933 and Registrant has duly caused this Post-Effective Amendment No. 35 its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of New York, and State of New York, on the 30th
day of July, 1999.
RESERVE INSTITUTIONAL TRUST
By: /s/ Bruce R. Bent
--------------------------------
Bruce R. Bent, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 34 to Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
/s/ Bruce R. Bent President, Treasurer and Trustee July 30, 1999
- ------------------------------------- (principal executive operating and
Bruce R. Bent financial officer)
* Trustee July 30, 1999
- -------------------------------------
Edwin Ehlert Jr.
* Trustee July 30, 1999
- -------------------------------------
Henri W. Emmet
* Trustee July 30, 1999
- -------------------------------------
Donald J. Harrington
Trustee July 30, 1999
- -------------------------------------
Bruce R. Bent II
* Trustee July 30, 1999
- -------------------------------------
William E. Viklund
* Trustee July 30, 1999
- -------------------------------------
Diana P Hermann
* Trustee July 30, 1999
- -------------------------------------
Richard Bassuk
/s/ MaryKathleen Foynes Counsel and Secretary July 30, 1999
- -------------------------------------
MaryKathleen Foynes
*Attorney-in-Fact
</TABLE>
<PAGE>
EX-99.A
RESERVE INSTITUTIONAL TRUST
AMENDMENT NUMBER TWO TO
AND RESTATEMENT OF
THE DECLARATION OF TRUST
AMENDMENT NUMBER TWO TO, AND RESTATEMENT OF, THE
DECLARATION OF TRUST, made July 15, 1987, by and among the individuals who
executed the Declaration of Trust on June 10, 1986, as amended October 6, 1986,
as the initial Trustees:
WHEREAS, the Trustees desire to amend and restate in its
entirety the Trust's Declaration of Trust dated June 10, 1986, as amended
October 6, 1986, formed to establish a trust fund under the laws of the
Commonwealth of Massachusetts for the investment and reinvestment of funds
contributed thereto;
WHEREAS, no Shares of such Trust have been issued or are
outstanding;
NOW THEREFORE, the Trustees declare that Declaration of
Trust dated June 10, 1986, as amended October 6, 1986, amended and restated in
its entirety by substituting the following for the text thereof, and (ii) all
money and property contributed to the trust fund shall be held and managed under
this amended and restated Declaration (hereinafter referred to as the
"Declaration of Trust") IN TRUST as forth below.
FIRST: This Trust shall be known as RESERVE INSTITUTIONAL
TRUST.
SECOND: Whenever used herein, unless otherwise re the
context or specifically provided:
1. All terms used in this Declaration of Trust defined in
the 1940 Act shall have the meaning given to them in the 1940.
2. The "Trust" refers to RESERVE INSTITUTIONAL TRUST.
3. "Shareholder" means a record owner of Shares of the
Trust.
4. The "Trustees" refer to the individual trustee capacity
as trustees hereunder of the Trust and their successor or such the time being in
office as such trustees.
5. "Shares" means the equal proportionate units into which
the beneficial interest in the Trust shall be divided from time to time and
includes fractions of Shares as well as whole Shares.
1
<PAGE>
6. The "1940 Act" refers to the Investment Company Act of
1940, as amended from time to time.
7. "Commission" means the Securities and Exchange
Commission.
8. "Board" means the Board of Trustees of the Trust.
THIRD: The purpose or purposes for which the Trust is
formed and the business or objects to be transacted, carried on and promoted by
it are as follows:
1. To hold, invest and reinvest its funds, and in
connection therewith to hold part or all of its funds in cash, and to purchase
or otherwise acquire, hold for investment or otherwise, sell, sell short,
assign, negotiate, transfer, exchange or otherwise dispose of or turn to account
or realize upon, securities (which term "securities" shall for the purposes of
this Declaration of Trust, without limitation of the generality thereof, be
deemed to include any stocks, shares, bonds, debentures, notes, mortgages or
other obligations, and any certificates, receipts, warrants or other instruments
representing rights to receive, purchase or subscribe for the same, or
evidencing or representing any other rights or interests therein, or in any
property or assets) created or issued by any issuer (which term "issuer" shall
for the purposes of this Declaration of Trust, without limitation of the
generality thereof be deemed to include any persons, firms, associations,
corporations, syndicates, combinations, organizations, governments, or
subdivisions thereof); and to exercise, as owner or holder of any securities,
all rights, powers and privileges in respect thereof and to do any and all acts
and things for the preservation, protection, improvement and enhancement in
value of any or all such securities.
2. To borrow money and pledge assets in connection with any
of the objects or purposes of the Trust, and to issue notes or other obligations
evidencing such borrowings, to the extent permitted by the 1940 Act and by the
Trust's fundamental investment policies under the 1940 Act.
3. To issue and sell its Shares in such amounts and on such
terms and conditions, for such purposes and for such amount or kind of
consideration (including without limitation thereto, securities) now or
hereafter permitted by the laws of the Commonwealth of Massachusetts and by this
Declaration of Trust, as the Trustees may determine.
4. To purchase or otherwise acquire, hold, dispose of,
resell, transfer, reissue or cancel (all without the vote or consent of the
Shareholders of the Trust) its Shares, in any manner and to the extent now or
hereafter permitted by the laws of said Commonwealth and by this Declaration of
Trust.
2
<PAGE>
5. To conduct its business in all its branches at one or
more offices in Massachusetts and elsewhere in any part of the world, without
restriction or limit as to extent.
6. To carry out all or any of the foregoing objects and
purposes as principal or agent, and along or with associates or, to the extent
now or hereafter permitted by the laws of Massachusetts, as a member of, or as
the owner or holder of any stock of, or share of interest in, any issuer, and in
connection therewith to make or enter into such deeds or contracts with any
issuers and to do such acts and things and to exercise such powers, as a natural
person could lawfully make, enter into, do or exercise.
7. To do any and all such further acts and things and to
exercise any and all such further powers as may be necessary, incidental,
relative, conducive, appropriate or desirable for the accomplishment, carrying
out or attainment of all or any of the foregoing purposes or objects.
The foregoing objects and purposes shall, except as
otherwise expressly provided, be in no way limited or restricted by reference
to, or inference from, the terms of any other clause of this or any other
Articles of this Declaration of Trust, and shall each be regarded as independent
and construed as powers as well as objects and purposes, and the enumeration of
specific purposes, objects and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or the general powers of the
Trust now or hereafter conferred by the laws of the Commonwealth of
Massachusetts nor shall the expression of one thing be deemed to exclude
another, though it be of like nature, not expressed; provided, however, that the
Trust shall not carry on any business, or exercise any powers, in any state,
territory, district or country except to the extent that the same may lawfully
be carried on or exercised under the laws thereof.
FOURTH: The beneficial interest in the Trust shall at all
times be divided into an unlimited number of transferrable Shares, par value of
$.001 per share, each of which shall represent an equal proportionate interest
in the Trust with each other Share outstanding, none having priority or
preference over another. The Trustees may from time to time divide or combine
the Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust. Contributions to the Trust may
be accepted for, and Shares shall be redeemed, whole Shares and/or 1/100ths of a
Share or multiples thereof. The Board of Trustees of the Trust may classify
unissued Shares into one or more additional classes which shall, together with
the issued Shares of beneficial interest of the Trust have such designations as
the Board shall determine, and which shall be treated for all purposes other
than as to dividends as if all Shares were Shares of one class. The dividends
payable to the holders of each such class shall, subject to any applicable rule,
regulation or order of
3
<PAGE>
the Securities and Exchange Commission or other applicable law or regulation, be
determined by the Board and need not be individually declared but may be
declared and paid in accordance with a formula adopted by the Board. The Board
of Trustees of the Trust may in the alternative classify unissued Shares into
one or more additional classes which shall, together with the issued Shares of
beneficial interest of the Trust, have such designations as the Board may
determine and shall, subject to any applicable rule, regulation or order of the
Securities and Exchange Commission or other applicable law or regulation, have
the following characteristics.
(a) All consideration received by the Trust for the issue
or sale of Shares of each such class, together with all income,
earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any
funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to the
class of Shares with respect to which such assets, payments, or
funds were received by the Trust for all purposes, subject only to
the rights of creditors, and shall be so handled upon the books of
account of the Trust. Such assets, income, earnings, profits and
proceeds thereof, any asset derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein referred to
as "assets belonging to" such class.
(b) Dividends or distributions on Shares of any such
class, whether payable in Shares or cash, shall be paid only out of
earnings, surplus or other assets belonging to such class.
(c) In the event of the liquidation or dissolution of the
Trust Shareholders of each such class shall be entitled to receive,
as a class, out of the assets of the Trust available for
distribution to shareholders, but other than general assets not
belonging to any particular class, the assets belonging to such
class; and the assets so distributable to the shareholders of any
such class shall be distributed among such shareholders in
proportion to the number of shares of such class held by them and
recorded on the books of the Trust. In the event that there are any
general assets not belonging to any particular class of Shares and
available for distribution, such distribution shall be made to the
holders of Shares of all classes in proportion to the asset value
of the respective classes.
(d) The assets belonging to any such class of Shares shall
be charged with the liabilities in respect to such class and shall
be charged with their share of the general liabilities of the
Trust, in proportion to the asset value of the respective classes.
The
4
<PAGE>
determination of the Board of Trustees shall be conclusive as to
the amount of liabilities, including accrued expenses and
reserves, and as to the allocation of the same as to a given
class, and as to whether the same, or general assets of the
Trust, are allocable to one or more classes. The liabilities so
allocated to a class are herein referred to as "liabilities
belonging to" such class.
(e) At all meetings of shareholders, each shareholder of
each Share of each such class of the Trust shall be entitled to one
vote for each Share, irrespective of the class, standing in his
name on the books of the Trust, except that where a vote of the
holders of the Shares of any class, or of more than one class,
voting by class, is required by the Investment Company Act of 1940
and/or Massachusetts law as to any proposal, only the holders of
such class or classes, voting by class, shall be entitled to vote
upon such proposal and the holders of any other class or classes
shall not be entitled to vote thereon. Any fractional Share, if any
such fractional Shares are outstanding, shall carry proportionately
all the rights of a whole Share, including the right to vote and
the right to receive dividends. There shall be no cumulative voting
rights with respect to any Shares or class of Shares of the Trust.
(f) The provision of Article FIFTH relating to voting shall
apply when the Trust has only one class of Shares outstanding or
when the Trust has more than one class of Shares outstanding which
differ only as to their dividend rights.
(g) When the Trust has more than one class of Shares
outstanding having separate assets and liabilities: (i) the
redemption rights provided to the holders of the Trust's Shares
shall be deemed to apply only to the assets belonging to the class
of stock in question; and (ii) the net asset value per share
computation as provided for in Article SEVENTH, Section 12, shall
be applied as if each such class of Shares were the Trust as
referred to in such computation, but with its assets limited to
the assets belonging to such class and its liabilities limited to
the liabilities belonging to such class.
(h) The ownership of Shares shall be recorded in the books
of the Trust or a transfer agent. The Trustees may make such rules
as they consider appropriate for the transfer of Shares and
similar matters. The record books of the Trust or any transfer
agent, as the case may be, shall be conclusive as to who are the
holders of Shares and as to the number of Shares held from time to
time by each. Anything in this Declaration of Trust to the
contrary notwithstanding, when Shares of the Trust are registered
in the name
5
<PAGE>
of one Shareholder or another, either Shareholder is entitled to
act regarding the Shares so registered and such Shareholders will
indemnify and hold the Trust, its investment adviser, principal
underwriter, custodian or affiliates thereof, harmless for such
actions.
(i) The Trustees shall accept investments in the Trust
from such persons and on such terms as they may from time to time authorize.
After the date of the initial contribution of capital (which shall occur prior
to the initial public offering of Shares of the Trust), the number of Shares to
represent the initial contribution shall be considered as outstanding and the
amount received by the Trustees on account of the contribution shall be treated
as an asset of the Trust. Subsequent to such initial contribution of capital,
shares (including Shares which may have been redeemed or repurchased by the
Trust) may be issued or sold at a price which will net the Trust, before paying
any taxes in connection with such issue or sale, not less than the net asset
value (as defined in Article SEVENTH, Section 12) thereof; provided, however,
that the Trustees may in their discretion impose a sales charge upon investments
in the Trust.
(j) Shareholders shall have no pre-emptive or other right
to subscribe to any additional Shares or other securities
issued by the Trust or the Trustees.
FIFTH: The following provisions are hereby adopted with
respect to voting Shares of the Trust and certain other rights:
1. The Shareholders shall have power to vote (i) for the
election of Trustees, (ii) with respect to the amendment of this Declaration of
Trust, (iii) to the same extent as the shareholders of a Massachusetts business
corporation, as to whether or not a court action, proceeding or claim should be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (iv) with respect to such additional matters relating
to the Trust as may be required by the 1940 Act or authorized by law, by this
Declaration of Trust, or the By-Laws of the Trust or any registration statement
of the Trust with the Commission or any State, or as the Trustees may consider
desirable.
2. At all meetings of Shareholders each Shareholder shall
be entitled to one vote for each Share standing in his name on the books of the
Trust on the date fixed in accordance with the By-Laws, for determination of
Shareholders entitled to vote at such meeting except for Shares redeemed prior
to the meeting. Any fractional Share shall carry proportionately all the rights
of a whole Share, including the right to vote and the right to receive
dividends. The presence in person or by proxy of the holders of one-third of the
Shares outstanding and entitled to
6
<PAGE>
vote thereat shall constitute a quorum at any meeting of the Shareholders. If at
any meeting of the Shareholders there shall be less than a quorum present, the
Shareholders present at such meeting may, without further notice, adjourn the
same from time to time until a quorum shall attend, but no business shall be
transacted at any such adjourned meeting except such as might have been lawfully
transacted had the meeting not been adjourned.
3. Each Shareholder, upon request to the Trust in proper
form determined by the Trust, shall be entitled to require the Trust to redeem
all or any part of the Shares standing in the name of such Shareholder. The
method of computing such net asset value, the time at which such net asset value
shall be computed and the time within which the Trust shall make payment
therefor, shall be determined as hereinafter provided in Article SEVENTH of this
Declaration of Trust. Notwithstanding the foregoing, the Trustees, when
permitted or required to do so by the 1940 Act, may suspend the right of
Shareholders to require the Trust to redeem Shares.
4. No Shareholder shall as such have any right to purchase
or subscribe for any security of the Trust which it may issue or sell, other
than such right, if any, as the Trustees, in their discretion, may determine.
5. All persons who shall acquire Shares shall acquire the
same subject to the provisions of the Declaration of Trust.
SIXTH: Each Trustee shall hold office until he resigns, is
removed or until his successor is duly elected and qualified. The initial number
of Trustees shall be six and the persons who shall act as such to execute this
Declaration of Trust or any counterpart thereof are the initial trustees until
their successors are duly chosen and qualified.
However, the By-Laws of the Trust may fix the number of
Trustees at a number greater than that named in this Declaration of Trust and
may authorize the Trustees, by the vote of a majority of the entire number of,
Trustees, to increase or decrease the number of Trustees fixed by this
Declaration of Trust or by the By-Laws within limits specified in the By-Laws,
provided that in no case shall the number of Trustees be less then three, and to
fill the vacancies created by any such increase in the number of Trustees.
Unless otherwise provided by the By-Laws of the Trust, the Trustees need not be
Shareholders.
A meeting of shareholders shall be called for the purpose
of removing a Trustee upon receipt by the Trust of the request in writing signed
by Shareholders holding not less than ten percent of the outstanding Shares of
the Trust.
7
<PAGE>
SEVENTH: The following provisions are hereby adopted for
the purpose of defining, limiting and regulating the powers of the Trust and of
the Trustees and Shareholders.
1. As soon as any Trustee is duly elected by the
Shareholders or the Trustees and shall have accepted this trust, the Trust
estate shall vest in the new Trustee or Trustees, together with the continuing
Trustees, without any further act or conveyance, and he shall be deemed a
Trustee hereunder.
2. The death, declination, resignation, retirement,
removal, or incapacity of the Trustees, or any one of them, shall not operate to
annul the Trust or to revoke any existing agency created pursuant to the terms
of this Declaration of Trust.
3. The assets of the Trust shall be held separate and apart
from any assets now or hereafter held in any capacity other than as Trustee
hereunder by the Trustees or any successor Trustees. All of the assets of the
Trust shall at all times be considered as vested in the Trustees. Except as
provided in this Declaration of Trust, no Shareholder shall have, as such holder
of beneficial interest in the Trust, (a) any authority, power or right
whatsoever to transact business for or on behalf of the Trust, or on behalf of
the Trustees, in connection with the property or assets of the Trust, nor (b)
any interest in the specific property or assets of the Trust, or in any part
thereof, except the rights to receive the income and distributable amounts
arising therefrom as set forth herein.
4. The Trustees in all instances shall act as principals,
and are and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider necessary
or appropriate in connection with the management of the Trust. The Trustees
shall not in any way be bound or limited by present or future laws or customs in
regard to Trust investments, but shall have full authority and power to make any
and all investments which they, in their uncontrolled discretion, shall deem
proper to accomplish the purpose of this Trust. Subject to any applicable
limitation in this Declaration of Trust or by the By-Laws of the Trust, the
Trustees shall have power and authority:
(a) to adopt By-Laws not inconsistent with this Declaration
of Trust providing for the conduct of the business of the Trust and
to amend and repeal them to the extent that they do not reserve that
right to the Shareholders;
(b) to elect and remove such officers and appoint and
terminate such officers as they consider appropriate with or without
cause;
8
<PAGE>
(c) to employ a bank or trust company as custodian of any
assets of the Trust subject to any conditions set forth in this
Declaration of Trust or in the By-Laws;
(d) to retain a transfer agent and Shareholder servicing
agent, or both;
(e) to provide for the distribution of Shares either
through a principal underwriter or by the Trust itself;
(f) to set record dates in the manner provided for in the
By-Laws of the Trust;
(g) to delegate such authority as they consider desirable
to any officers of the Trust and to any agent, custodian or
underwriter;
(h) to vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property
held in trust hereunder; and to execute and deliver powers of
attorney to such person or persons as the Trustees shall deem
proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem
proper;
(i) to exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities
held in trust hereunder;
(j) to hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or other
negotiable form, or either in its own name or in the name of a
custodian or a nominee or nominees, subject in either case to proper
safeguards according to the usual practice of Massachusetts Business
trusts or investment companies;
(k) to consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or
concern, any security of which is held in the Trust; to consent to
any contract, lease, mortgage, purchase, or sale of property by such
corporation or concern, and to pay calls or subscriptions with
respect to any security held in the Trust;
(1) to compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust or any matter in controversy including,
but not limited to claims for taxes;
(m) to make, in the manner provided in the By-Laws,
distributions of income and of capital gains to Shareholders;
(n) to borrow money to the extent and in the manner
permitted by the 1940 Act and the Trust's fundamental policy
thereunder as to borrowing; and
(o) to enter into investment advisory or management
contracts, subject to the 1940 Act, with any one or more corporations,
partnerships, trusts, associations or other persons; if the other party
or parties to any such contract are authorized to enter into securities
9
<PAGE>
transactions on behalf of the Trust such transactions shall be deemed
to have been authorized by all of the Trustees.
5. No one dealing with the Trustees shall be under any obligation to
make any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
6. (a) No Shareholder, officer, trustee, employee, or agent of
the Trust shall be subject to any personal liability for acts or
obligations of the Trust and every written agreement, obligation or
other undertaking made or issued by the Trust shall contain a
provision to the effect that Shareholders, officers, trustees,
employees, or agents of the Trust are not personally liable
thereunder (but the omission of such a provision shall not operate
to bind any Shareholder, officer, trustee, employee, or agent of
the Trust). The Trustees shall have no power to call upon any
Shareholder, officer, trustee, employee, or agent of the Trust for
the payment of any sum of money or assessment whatsoever other than
such as the Shareholder, officer, trustee, employee, or agent of
the Trust may be obligated by under applicable laws, rules or
regulations, or may at any time personally agree to pay by way of
subscription to any Shares or otherwise.
(b) Whenever this Declaration of Trust calls for or
permits any action to be taken by the Trustees hereunder, such
action shall mean that taken by the Board of Trustees by vote of
the majority of trustees as set forth from time to time in the
By-Laws of the Trust or as required pursuant to the provisions of
the 1940 Act and the rules and regulations promulgated thereunder.
(c) The Trustees shall possess and exercise any and all
such additional powers as are reasonably implied from the powers
herein contained such as may be necessary or convenient in the
conduct of any business or enterprise of the Trust, to do and
perform anything necessary, suitable, or proper for the
accomplishment of any of the purposes, or the attainment of any one
or more of the objects, herein enumerated, or which shall at any
time appear conducive to or expedient for the protection or benefit
of the Trust, and to do and perform all other acts or things
necessary or incidental to the purposes herein before set forth, or
that may be deemed necessary by the Trustees.
(d) The Trustees shall have the power to determine
conclusively whether any moneys, securities, or other properties of
the Trust property are, for the purpose of this Trust, to be
considered as capital or income and in what manner any expenses or
10
<PAGE>
disbursements are to be borne as between capital and income whether
or not in the absence of this provision such moneys, securities or
other properties would be regarded as capital or income and whether
or not in the absence of this provision such expenses or
disbursements would ordinarily be charged to capital or to income.
7. The Shareholders shall have the right to inspect the
records, documents, accounts and books of the Trust, subject to reasonable
regulations of the Trustees, not contrary to Massachusetts law, as to whether
and to what extent, and at what times and places, and under what conditions and
regulations, such right shall be exercised.
8. Any Trustee, or any officer elected or appointed by the
Trustees or by any committee of the Trustees or by the Shareholders or
otherwise, may be removed at any time, with or without cause, in such lawful
manner as may be provided in the By-Laws of the Trust.
9. If the By-Laws so provide, the Trustees shall have power
to hold their meetings, to have an office or offices and, subject to the
provisions of the laws of Massachusetts, to keep the books of the Trust outside
of said Commonwealth at such places as may from time to time be designated by
them.
10. Securities held by the Trust shall be voted in person
or by proxy by the Chairman, President or Vice-President, or such officer or
officers of the Trust as the Trustees shall designate for the purpose, or by a
proxy or proxies thereunto duly authorized by the Trustees, except as otherwise
ordered by vote of the holders of a majority of the Shares outstanding and
entitled to vote in respect thereto.
11. (a) Subject to the provisions on the 1940 Act, any
Trustee, officer or employee individually, or any partnership of
which any Trustee, officer or employee may be a member, or any
corporation or association of which any Trustee, officer or
employee may be an officer, director, trustee, employee or
stockholder, may be a party to, or may be pecuniarily or otherwise
interested in, any contract or transaction of the Trust, and in the
absence of fraud no contract or other transaction shall be thereby
affected or invalidated; provided that in me a Trustee, or a
partnership, corporation or association of which a Trustee is a
member, officer, director, trustee, employee or stockholder is so
interested, such fact shall be disclosed or shall have been known
to the Trustees or a majority thereof; and any Trustee who is so
interested, or who is also a director, officer, trustee, employee
or stockholder of such other corporation or association or a member
of such partnership which is so interested, may be counted in
determining the existence of a quorum at any
11
<PAGE>
meeting of the Trustees which shall authorize any such contract
or transaction, and may vote thereat to authorize any such
contract or transaction, with like force and effect as if he were
not such director, officer, trustee, employee or stockholder of
such other trust or corporation or association or a member of a
partnership so interested.
(b) Specifically, but without limitation of the foregoing,
the Trust may enter into a management or investment advisory
contract or underwriting contract and other contracts with, and may
otherwise do business with any manager or investment adviser for
the Trust and/or principal underwriter of the Shares of the Trust
or any subsidiary or affiliate of any such manager or investment
adviser and/or principal underwriter and may permit any such firm
or corporation to enter into any contracts or other arrangements
with any other firm or corporation relating to the Trust
notwithstanding that the Trustees of the Trust may be composed in
part of partners, directors, officers or employees of any such firm
or corporation, and in the absence of fraud the Trust and any such
firm or corporation may deal freely with each other, and no such
contract or transaction between the Trust and any such firm or
corporation shall be invalidated or in any wise affected thereby,
nor shall any Trustee or officer of the Trust be liable to the
Trust or to any shareholder or creditor thereof or to any other
person for any loss incurred by it or him solely because of the
existence of any such contract or transaction; provided that
nothing herein shall protect any director or officer of the Trust
against any liability to the Trust or to its security holders to
which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
(c) (1) As used in this paragraph the following terms
shall have the meanings set forth below:
(i) the term "indemnitee" shall mean any present
or former Trustee or officer of the Trust, any
present or former Trustee or officer of another
Trust whose securities are or were owned by the
Trust or of which the Trust is or was a creditor
and who served or serves in such capacity at the
request of the Trust and the heirs, executors and
administrators of any of the foregoing; however,
whenever conduct by an indemnitee is referred to,
the conduct shall be that of the original
indemnitee rather than that of the heir, executor
or administrator:
12
<PAGE>
(ii) the term "covered proceeding" shall mean any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal,
administrative or investigative, to which an
indemnitee is or was a party or is threatened to
be made a party by reason of the fact or facts
under which he is an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean
willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in
the conduct of the office in question;
(iv) the term "covered expenses" shall mean
expenses (including attorney's fees), judgments,
fines and amounts paid in settlement actually and
reasonably incurred by an indemnitee in
connection with a covered proceeding; and
(v) the term "adjudication of liability" shall
mean, as to any covered proceeding and as to any
indemnitee, an adverse determination as to the
indemnitee whether by judgment, order,
settlement, conviction or upon a plea of nolo
contendere or its equivalent.
(d) The Trust shall not indemnify any indemnitee for any
covered expenses in any covered proceeding if there has been
adjudication of liability against such indemnitee expressly based on
a finding of disabling conduct.
(e) Except as set forth in (d) above, the Trust shall
indemnify any indemnitee for covered expenses in any covered
proceeding, whether or not there is an adjudication of liability as
to such indemnitee, if a determination has been made that the
indemnitee was not liable by reason of disabling conduct by (i) a
final decision of the court or other body before which the covered
proceeding was brought; or (ii) in the absence of such decision, a
reasonable determination, based on a review of the facts, by either
(a) the vote of a majority of a quorum of trustees who are neither
"interested persons", as defined in the Investment Company Act of
1940 (the "1940 Act") nor parties to the covered proceeding or (b) an
independent legal counsel in a written opinion; provided that such
trustees or counsel, in reaching such determination, may but need not
presume the absence of disabling conduct on the part of the
indemnitee by reason of the manner in which the covered proceeding
was terminated.
13
<PAGE>
(f) Covered expenses incurred by an indemnitee in connection
with a covered proceeding shall be advanced by the Trust to an
indemnitee prior to the final disposition of a covered proceeding
upon the request of the indemnitee for such advance and the
undertaking by or on behalf of the indemnitee to repay the advance
unless it is ultimately determined that the indemnitee is entitled to
indemnification hereunder, but only if one or more of the following
is the case: (i) the indemnitee shall provide a security for such
undertaking: (ii) the Trust shall be insured against losses arising
out of any lawful advances: or (iii) there shall have been a
determination, based on a review of the readily available facts (as
opposed to a full trial-type inquiry) that there is a reason to
believe that the indemnitee ultimately will be found entitled to
indemnification by either independent legal counsel in a written
opinion or by the vote of a majority of a quorum of trustees who are
neither "interested persons" as defined in the 1940 Act nor parties
to the covered proceeding.
(g) Nothing herein shall be deemed to affect the right of
the Trust and/or any indemnitee to acquire and pay for any insurance
covering any or all indemnitees to the extent permitted by the 1940
Act or to affect any other indemnification rights to which any
indemnitee may be entitled to the extent permitted by the 1940 Act.
12. For purposes of the computation of net asset value, as
in this Declaration of Trust referred to, the following rules shall apply:
(a) Net asset value of Shares of the Trust shall be
calculated at such time or times as the Trustees may deem advisable
on each Business Day for each class of Shares. A "Business Day" is a
day when the Trust must be open as disclosed in its current
prospectus and/or statement of additional information pursuant to the
1940 Act and the Securities Act of 1933.
(b) Shares will be redeemed at their net asset value next
determined after receipt by the Trust of a request in proper form;
unless otherwise specified, redemption requests received after noon
are not entered until the next Business Day to enable Shareholders to
receive additional dividends;
(c) Shares will be purchased each Business Day at the net
asset value next determined after receipt by the Trust of a properly
completed order and payment in Federal Funds (members bank deposits
with the Federal Reserve Bank);
14
<PAGE>
(d) The net asset value of each Share of the Trust is
determined by adding the fair value of all the Trust's securities,
cash and other assets, subtracting its liabilities, and dividing the
result by the number of Shares outstanding.
(e) The Trustees are empowered, in their absolute
discretion, to establish bases or times or both, for determining the
net asset value of each Share of the Trust in accordance with the
1940 Act and to authorize the voluntary purchase by the Trust, either
directly or through an agent, of Shares of the Trust upon such terms
and conditions and for such consideration as the Trustees shall deem
advisable in accordance with any such provision, rule or regulation.
(f) Payment of the net asset value of Shares of the Trust
properly surrendered to it for redemption shall be made by the Trust
within seven days after tender of such stock to the Trust for such
purpose plus any period of time during which the right of the holders
of the shares of the Trust to require the Trust to redeem such shares
has been suspended. Any such payment may be made in portfolio
securities of the Trust and/or in cash, as the Trustees shall deem
advisable, and no Shareholder shall have a right, other than as
determined by the Trustees, to have his Shares redeemed in kind.
EIGHTH: The name "Reserve" included in the name of the
Trust shall be used pursuant to a royalty-free, non-exclusive license from
Reserve Management Company, Inc., incidental to and as part of an advisory,
management or supervisory contract which may be entered into by the Trust with
Reserve Management Company, Inc. The license may be terminated by Reserve
Management Company upon termination of such advisory management or supervisory
contract or without cause upon 60 days' notice, in which case the Trust shall
have no further right to use the name "Reserve" in its name or otherwise and the
Trust, the Shareholders and its officers and Trustees shall promptly take
whatever action may be necessary to change its name accordingly.
NINTH:
1. In case any Shareholder or former Shareholder shall be
held to be personally liable solely by reason of his being or having been a
Shareholder and not because of his acts or omissions or for some other reason,
the Shareholder or former Shareholder (or his heirs, executors, administrators
or other legal representatives or in the case of a corporation or other entity,
its corporate or other general successor) shall be entitled out of the Trust
estate to be held harmless from and indemnified against all loss and expense
arising from such liability. This Trust shall, upon
15
<PAGE>
request by the Shareholder, assume the defense of any claim made against any
Shareholder for any act or obligation of the Trust and satisfy any judgment
thereon.
2. It As hereby expressly declared that a trust and not a
partnership is created hereby. No Trustee hereunder shall have any power to bind
personally either the Trust's officers or any Shareholder. All persons extending
credit to, contracting with or having any claim against the Trust or the
Trustees shall look to the assets of the Trust for payment under such credit,
contract or claim; and neither the Shareholders nor the Trustees, nor any of
their agents, whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect a Trustee against
any liability to which such Trustee would otherwise be subject by reason of
willfull misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee hereunder.
3. The exercise by the Trustees of their powers and
discretion hereunder in good faith and with reasonable care under the
circumstances then prevailing, shall be binding upon everyone interested.
Subject to the provisions of paragraph 2 of this Article NINTH, the Trustees
shall not be liable for errors of judgments or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operations of this Declaration of Trust, and subject to the provisions of
paragraph 2 of this Article NINTH, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is required.
4. This Trust shall continue without limitation of time but
subject to the provisions of subsections (a),(b), and (c) of this paragraph 4.
(a) The Trustees, with the favorable vote of the
holders of more than 50% of the outstanding Shares entitled
to vote may sell and convey the assets of the Trust (which
sale may be subject to the retention of assets for the
payment of liabilities and expenses) to another issuer.
Upon making provision for the payment of liabilities, by
assumption by such issuer or otherwise, the Trustees shall
distribute the remaining proceeds ratably among the holders
of the Shares of the Trust then outstanding.
(b) The Trustees with the favorable vote of the
holders of more than 50% of the outstanding Shares entitled
to vote, may at any time sell and convert into money all
the assets of the Trust. Upon making provision for the
payment of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of the
16
<PAGE>
Trust, the Trustees shall distribute the remaining assets
of the trust ratably among the holders of the outstanding
Shares.
(c) Upon completion of the distribution of the
remaining proceeds or the remaining assets as provided in
sub-sections (a) and (b), the Trust shall terminate and the
Trustees shall be discharged of any and all further
liabilities and duties hereunder and the right, title and
interest of all parties shall be cancelled and discharged.
5. The original or a copy of this instrument and of each
declaration of trust supplemental hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this instrument
and of each supplemental declaration of trust shall be filed by the Trustees
with the Massachusetts Secretary of State, as well as any other governmental
office where such filing may from time to time be required. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to whether or
not any such supplemental declarations of trust have been made and as to any
matters in connection with the Trust hereunder, and with the same affect as if
it were the original, may rely on a copy certified by an officer of the Trust to
be a copy of this instrument or of any such supplemental declaration of trust.
In this instrument or in any such supplemental declaration of trust, references
to this instrument, and all expressions like "herein", "hereof" and "hereunder"
shall be deemed to refer to this instrument as amended or affected by any such
supplemental declaration of trust. This instrument may be executed in any number
of counterparts, each of which shall be deemed an original.
6. The Trust set forth in this instrument is created under
and is to be governed by and construed and administered according to the laws of
the Commonwealth of Massachusetts. The Trust shall be of the type commonly
called a Massachusetts business trust, and without limiting the provisions
hereof, the Trust may exercise all powers which are ordinarily exercised by such
a trust.
7. If authorized by vote of the Trustees and the favorable
vote of the holders of more than 50% of the outstanding Shares entitled to vote,
or by any larger vote which may be required by applicable law in any particular
case, the Trustees shall amend or otherwise supplement this instrument, by
making a Declaration of Trust supplemental hereto, which thereafter shall form a
part hereof.
17
<PAGE>
IN WITINESS WHEREOF, the undersigned have executed this instrument this 5th
day of July, 1987.
-------------------------- ------------------------------
Bruce R. Bent, Trustee Edwin Ehlert, Jr., Trustee
810 Seventh Avenue 122 Elm Street
New York, NY 10019 Westfield, NJ 07091
-------------------------- ------------------------------
Henri W. Emmet, Trustee Peter D. Falk, Trustee
499 Park Avenue 800 East Gulf Drive
New York, NY 10002 Sanibel, FL 33957
-------------------------- ------------------------------
Niels W. Johnsen, Trustee Walter H. Saunders, Trustee
1 Whitehall Street 580 Park Avenue
New York. NY 10004 New York, NY 10021
18
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
DECLARATION OF TRUST
OF RESERVE INSTITUTIONAL TRUST
DATED JULY 17, 1999
WHEREAS, a majority of the Board of Trustees, including a majority of
Independent Trustees determined on October 7, 1998 to consider and approve
various amendments to the Declaration of Trust, as amended (the "Declaration of
Trust") of Reserve Institutional Trust (the "Trust"); and
WHEREAS, the Board of Trustees voted to submit to Shareholders
amendments to the Declaration of Trust to permit issuance of multiple classes of
shares; and
WHEREAS, the Board of Trustees voted to submit to Shareholders
amendments to the Declaration of Trust to eliminate the policy pricing
securities in its portfolio; and
WHEREAS, the Board of Trustees voted to submit to Shareholders
amendments to the Declaration of Trust to permit: (i) Shareholder approval of
amendments to the Declaration of Trust, except as may be necessary to conform
the Declaration to provisions of federal or state regulation and provisions of
the Internal Revenue Service; and (ii) Trustee amendments to the Declaration of
Trust with out Shareholder approval if the Trustees deem it necessary to change
the name of the Trust or make changes which do not materially adversely affect
rights of Shareholders; and
WHEREAS, the Board of Trustees voted to submit to Shareholders
amendments to the Declaration of Trust to vest exclusive power to vote the
portfolio securities of the Trust in the Trustees or their delegates; and
WHEREAS, the Shareholders of the Trust held several special meetings
from January 15 through June 17, 1999; and
WHEREAS, the Shareholders voted to amend the Declaration of Trust to
permit issuance of multiple classes of shares; and
WHEREAS, the Shareholders voted to amend to the Declaration of Trust to
eliminate the policy of pricing securities in its portfolio stated in the
Declaration of Trust; and
WHEREAS, the Shareholders voted to amend the Declaration of Trust to
permit: (i) Shareholder approval of amendments to the Declaration of Trust,
except as may be necessary to conform the Declaration to provisions of federal
or state regulation and provisions of the Internal Revenue Service; and (ii)
Trustee amendments to the Declaration of Trust with out Shareholder approval if
the Trustees deem it necessary to change the name of the Trust or make changes
which do not materially adversely affect rights of Shareholders; and
WHEREAS, the Shareholders voted to amend the Declaration of Trust to
vest exclusive power to vote the portfolio securities of the Trust in the
Trustees or their delegates; and
NOW THEREFORE, the Trustees hereby adopt the following amendments to
the Declaration of Trust as set forth below:
<PAGE>
Article SEVENTH (12) is deleted in its entirety.
**********
Article FIFTH (3) is amended to read:
The method of computing such net asset value, the time at which such
net asset value shall be computed and the time within which the Trust
shall make payments therefore, shall be determined in accordance with
procedures set forth in each Fund's currently effective prospectus and
statement of additional information.
**********
The following sentence is added to the end of Article FIFTH (1):
The Trustees may also amend this Declaration with out the vote or
consent of shareholders if they deem it necessary or desirable to (i)
conform the Declaration to provisions of federal or state law or
regulations, or to the provision of the Internal Revenue Code; (ii)
change the name of the Trust; or (iii) make any other changes in the
Declaration which do not materially adversely affect the rights of
Shareholders here under.
**********
Article EIGHTH is amended to read:
The license may be terminated by Reserve Management Company upon
termination of such advisory management or supervisory contract or
without cause upon 60 days notice, in which case the Trust shall have
no further right to use the name of Reserve in its name or otherwise
and the Trust, its officers and Trustees shall promptly take whatever
action may be necessary to change its name accordingly.
**********
Article SEVENTH (10) is to be amended as follows:
Securities held by the Trust shall be voted in person or by proxy by
the Chairman, President, or Vice President, or such officer or officers
of the Trust as the Trustees shall designate for the purpose, or by a
proxy or proxies thereunto duly authorized by the Trustees.
**********
<PAGE>
Article NINTH (4) is amended as follows:
(a) The Trustees, with the favorable vote of the holders of
more than 50% of the outstanding Shares entitled to vote may merge,
consolidate, sell, lease, exchange, or convey all or substantially all
of the assets, including its goodwill, of the Trust, or any series
thereof, (which transaction may be subject to the retention of assets
for the payment of liabilities and expenses) to any other corporation,
association, trust, or other organization. Upon making provision for
the payment of liabilities, by assumption by such other organization or
otherwise, the Trustees shall distribute the remaining proceeds ratably
among the holders of the Shares of the Trust or series then
outstanding.
(b) The Trustees, by execution of an instrument in writing
signed by a majority of the Trustees, or by the favorable vote of the
holders of more than 50% of the outstanding Shares entitled to vote,
may at any time sell and convert into money all or substantially all of
the assets of the Trust, or any series thereof. Upon making provision
for the payment of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of the Trust, the Trustees shall
distribute the remaining assets of the Trust or series ratably among
the holders of the outstanding Shares.
(c) Upon completion of the distribution of the remaining
proceeds or the remaining assets as provided in sub-sections (a) and
(b), the Trust or series shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder with
respect to the Trust or such series, and the right, title and interest
of all parties shall be canceled and discharged.
IN WITNESS WHEREOF, the undersigned, the Secretary of the Trust, duly authorized
and having power of attorney for the Trustees, has executed this instrument this
day of July 17, 1999.
------------------
MaryKathleen Foynes
<PAGE>
Exhibit 99.(b)
SECOND AMENDMENT OF BY-LAWS
OF RESERVE INSTITUTIONAL TRUST
DATED JULY 17, 1999
Article VIII "Amendments of By-laws" is hereby deleted in its entirety
and replaced with the following:
ARTICLE VIII
The Bylaws of the Trust may be altered, amended, added to or
replaced by the Shareholders or a majority vote of the entire
Board of Trustees. This Article VIII may be altered, amended
or repealed only by the vote of the holders of a majority of
the Shareholders present at a meeting of the Shareholders
provided that a quorum is present in person or by proxy at
such meeting.
<PAGE>
AMENDMENT TO BY-LAWS
OF
RESERVE INSTITUTIONAL TRUST
Article II ("The Trustees"), Section 1 (Number and Tenure of Office) is deleted
in its entirety and the following is substituted in its entirety:
Section 1. Number and Tenure of Office.
The business and property of the Trust shall be conducted and managed by the
Board of Trustees, consisting of that number of Trustees specified in the
Declaration of Trust, which number may be increased or decreased as provided in
the Declaration of Trust as amended from time to time and in Section 2 of this
Article. Each Trustee shall hold office until he resigns, is removed, retires or
until his successor is duly elected and qualified. A Trustee shall retire upon
attaining the age of seventy-five (75) years. Trustees need not be Shareholders.
2
<PAGE>
RESERVE INSTITUTIONAL TRUST
BY-LAWS
ARTICLE I
SHAREHOLDERS
Section 1. Place of Meeting. All meetings of the Shareholders (which
term as used herein shall, together with all other terms defined in the
Declaration of Trust, have the same meaning as in the Declaration of Trust)
shall be held at the principal office of the Trust in the State of Massachusetts
or at such other place within or without the State of Massachusetts as may from
time to time be designated by the Trustees and stated in the notice of meeting.
Section 2. Special or Extraordinary Meeting. Special or extraordinary
meetings of the Shareholders for any purpose or purposes may be called for by
the Chairman of the Trustees, if any, or by the President or by the Trustees and
shall be called by the Secretary upon receipt of the request in writing signed
by Shareholders holding not less than one third (ten percent in the event the
purpose of the meeting is to vote on the removal of a trustee) in amount of the
entire number of shares issued and outstanding and entitled to vote thereat.
Such request shall state the purpose or purposes of the proposed meeting.
Section 3. Notice of Meetings of Shareholders. Not less than ten days'
and not more than ninety days' written or printed notice of every meeting of
Shareholders, stating the time and place thereof (and the general nature of the
business proposed to be transacted at any special or extraordinary meeting),
shall be given to each Shareholder entitled to vote thereat by leaving the same
with him or at his residence or usual place of business or by mailing it,
postage prepaid, and addressed to him at his address as it appears upon the
books of the Trust. No notice of the time, place or purpose of any meeting of
shareholder need be given to any Shareholder who attends in person or by proxy
or to any Shareholder who, in writing executed and filed with the records of the
meeting, either before or after the holding thereof, waives such notice.
Section 4. Record Dates. The Trustees may fix in advance, a date, not
exceeding sixty days and not less than ten days preceding the date of any
meeting of Shareholders and not exceeding sixty days preceding any dividend
payment date or any date for the allotment of
3
<PAGE>
rights, as a record date for the determination of the Shareholders entitled to
notice of and to vote at such meeting, or entitled to receive such dividends or
rights, as the case may be.
Section 5. Quorum, Adjournment of Meetings. The presence in person or by
proxy of the holders of record of one-third of the Shares of the Trust issued
and outstanding and entitled to vote thereat, shall constitute a quorum at all
meetings of the Shareholders. The Shareholders present at any such meeting may,
without further notice, and whether or not a quorum is present, adjourn the same
from time to time (and until a quorum shall attend, in the case of meetings
adjourned without the presence of a quorum), but no business shall be transacted
at any such adjourned meeting except such as might have been lawfully transacted
had the meeting not been adjourned.
Section 6. Voting and Inspectors. At all meetings of Shareholders every
Shareholder of record entitled to vote thereat shall be entitled to vote at such
meeting either in person or by proxy appointed by instrument in writing
subscribed by such Shareholder or his duly authorized attorney-in-fact. No proxy
which is dated more than three months before the meeting at which it is offered
shall be accepted, unless such proxy shall, on its face, name a longer period
for which it is to remain in force.
All elections shall be had and all questions decided by a majority of
the votes, as defined in the Investment Company Act of 1940, cast at a duly
constituted meeting, except as otherwise provided in the Declaration of Trust or
in these By-Laws.
At any election of Trustees, the Trustees prior thereto may or, if they
have not so acted, the Chairman of the meeting may, and upon the request of the
holders of ten per cent (10%) of the Shares entitled to vote at such election
shall, appoint two inspectors of election who shall first subscribe an oath or
affirmation to execute faithfully the duties of inspectors at such election with
strict impartiality and according to the best of their ability, and shall after
the election make a certificate of the result of the vote taken. No candidate
for the office of Trustee shall be appointed such Inspector.
The Chairman of the meeting may cause a vote by ballot to be taken upon
any election or matter, and such vote shall be taken upon the request of the
holders of ten per cent (10%) of the Shares entitled to vote on such election or
matter.
4
<PAGE>
Section 7. Conduct of Shareholders' Meetings. The meeting of the
Shareholders shall be presided over by the Chairman of the Trustees, if any, or
if he shall not be present, by the President, or if he shall not be present, by
a Vice-President, or if neither the Chairman of the Trustees, the President nor
any Vice-President is present, by a chairman to be elected at the meeting. The
Secretary of the Trust, if present, shall act as Secretary of such meetings, or
if he is not present, an Assistant Secretary shall so act, if neither the
Secretary nor an Assistant Secretary is present, then the meeting shall elect
its secretary.
Section 8. Concerning Validity of Proxies, Ballots, Etc. At every
meeting of the Shareholders, all proxies shall be received and taken in charge
of and all ballots shall be received, tabulated and canvassed by the secretary
of the meeting, who shall decide all questions touching the existence of a
quorum, the qualification of voters, the validity and effect of the proxies, and
the acceptance or rejection of votes, unless inspectors of election shall have
been appointed in Section 6, in which event such inspectors of election shall
decide all such questions.
ARTICLE II
THE TRUSTEES
Section 1. Number and Tenure of Office. The business and property of the
Trust shall be conducted and managed by the Board of Trustees, consisting of
that number of Trustees specified in the Declaration of Trust, which number may
be increased or decreased as provided in the Declaration of Trust as amended
from time to time and in Section 2 of this Article. Each Trustee shall hold
office until he resigns, is removed or until his successor is duly elected and
qualified. Trustees need not be Shareholders.
Section 2. Increase or Decrease in Number of Trustees; Removal. The
Trustees, by the vote of a majority of the entire Board of Trustees, may
increase the number of Trustees to a number not exceeding fifteen, and may elect
Trustees to fill the vacancies created by any such increase in the number of
Trustees until the next meeting of shareholders or until their successors are
duly elected and qualified. Vacancies occurring other than by the reason of any
such increase shall be filled in the manner provided for a Massachusetts
business trust. The Trustees, by the vote of a majority of the entire Board of
Trustees, may likewise decrease the number of Trustees to a number not less than
three, but the tenure of office shall not be affected by any such
5
<PAGE>
decrease effected by the Board. Any Trustee at any time may be removed either
with or without cause by resolution duly adopted by the affirmative votes of the
holders of the majority of the shares of the Trust present in person or by proxy
at any meeting of Shareholders at which such vote may be taken, provided that a
quorum is present, or by such larger vote as may be required by Massachusetts
law. Any Trustee at any time may be removed for cause by resolution duly adopted
at any meeting of the Board of Trustees provided that notice thereof is
contained in the notice of such meeting and that such resolution is adopted by
the vote of at least two thirds of the Trustees whose removal is not proposed.
As used herein, "for cause" shall mean any cause which under Massachusetts law
would permit the removal of a Trustee of a business trust.
Section 3. Place of Meeting. The Trustees may hold their meetings within
or outside the Commonwealth of Massachusetts, at any office or offices of the
Trust or at any other place as they may from time to time by resolution
determine, or, in the case of telephonic meetings, as they may from time to time
by resolution determine or as shall be specified or fixed in the respective
notices or waivers of notice thereof.
Section 4. (a) Regular Meetings. Regular meetings of the Trustees shall
be held at such time and on such notice, if any, as the Trustees may from time
to time determine.
(b) Annual Meetings. The annual meeting of the Trustees
shall be held annually at such time and on such notice, if any, as the Trustees
may determine.
Section 5. Special Meetings. Special meetings of the Trustees may be
held from time to time upon call of the Chairman of the Trustees, if any, the
President or two or more of the Trustees, by oral or telegraphic or written
notice duly served on or sent or mailed to each Trustee not less than one day
before such meeting. No notice need be given to any Trustee who attends in
person or to any Trustee who, in writing executed and filed with the records of
the meeting either before or after the holding thereof, waives such notice. Such
notice or waiver of notice need not state the purpose or purposes of such
meeting.
Section 6. Quorum. One third of the Trustees then in office shall
constitute a quorum for the transaction of business, provided that a quorum
shall in no case be less than two Trustees. If at any meeting of the Trustees
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
The act of the majority of the Trustees present at any meeting at which there is
a quorum shall be the
6
<PAGE>
act of the Trustees, except as may be otherwise specia1ly provided by statute,
by the Declaration of Trust or by these By-Laws.
Section 7. Executive Committee. The Trustees may, in each year, by the
affirmative vote of a majority of the entire number of Trustees, elect from the
Trustees an Executive Committee to consist of such number of Trustees as the
Trustees may from time to time determine. The Trustees by such affirmative vote
shall have power at any time to change the members of such Committee and may fin
vacancies in the Committee by election from the Trustees. When the Trustees are
not in session, the Executive Committee shall have and may exercise any or all
of the powers of the Board in the management of the business and affairs of the
Trust (including the power to authorize the seal of the trust to be affixed to
all papers which may require it) except as provided by law and except the power
to increase or decrease the size of, or fill vacancies as to the Board of
Trustees. The Executive Committee may fix its own rules of procedure, and may
meet, when and as provided by such rules or by resolution of the Board, but in
every case the presence of a majority shall be necessary to constitute a quorum.
In the absence of any member of the Executive Committee, the members thereof
present at any meeting, whether or not they constitute a quorum, may appoint a
Trustee to act in the place of such absent member.
Section 8. Other Committees. The Trustees, by the affirmative vote of a
majority of the entire Board of Trustees, may appoint other committees which
shall in each case consist of such number of members (not less than two) and
shall have and may exercise such powers as the Board may determine in the
resolution appointing them. A majority of all members of any such committee may
determine its action, and fix the time and place of its meetings, unless the
Trustees shall otherwise provide. The Trustees shall have power at any time to
change the members and powers of any such committee, to fill vacancies, and to
discharge any such committee.
Section 9. Informal Action by Trustees and Committees. Any action
required or permitted to be taken at any meeting of the Trustees or any
committee thereof may be taken at any meeting of the Trustees or any committee
thereof may be taken without a meeting, if each Trustee or all members of such
committee, as the case may be, signs a written consent to such action.
Section 10. Compensation of Trustees. No Trustee shall receive any
stated salary or fees from the Trust for his services as Trustee if such Trustee
is, otherwise than by reason of being such Trustee, affiliated (as such term is
defined in the 1940 Act) with the Trust or with any
7
<PAGE>
investment adviser of the Trust. Except as provided in the preceding sentence,
Trustees shall be entitled to receive such compensation from the Trust for their
services as may from time to time be voted by the Trustees.
Section 11. Dividends. Dividends or distributions payable on the Shares
may, but need not be, declared by specified resolution of the Board as to each
dividend or distribution; in lieu of such specific resolutions, the Board may,
by general resolution, determine the method of computation thereof, the method
of determining the Shareholders to which they are payable and the methods of
determining whether and to which Shareholders they are to be paid in cash or in
additional shares.
8
<PAGE>
ARTICLE III
OFFICERS
Section 1. Executive officers. The executive officers of the Trust shall
be chosen by the Board annually at such time as the Trustees may determine.
These may include a Chairman of the Board of Trustees, and shall include a
President, one or more Vice Presidents (the number thereof to be determined by
the Board), a Secretary and a Treasurer. The Chairman of the Board, if any, and
the President shall be selected from among the Trustees. The Trustees may also
in its discretion appoint Assistant Secretaries, Assistant Treasurers, and other
officers, agents and employees, who shall have such authority and perform such
duties as the Board or the Executive Committee may determine. The Board may fill
any vacancy which may occur in any office. Any two offices, except those of
President and Secretary, may be held by the same person, but no officers shall
execute, acknowledge or verify any instrument in more than one capacity, if such
instrument is required by law or these By-Laws to be executed, acknowledged or
verified by two or more officers.
Section 2. Term of Office. Each officer shall hold office until the
annual meeting of the Board of Trustees next succeeding his election or until
his successor is duly elected and qualifies, subject, however, to any provision
for removal contained in the Declaration of Trust and these By-Laws. Any officer
may be removed from office at any time with or without cause by the vote of a
majority of the Board of Trustees.
Section 3. Powers of Duties. The officers of the Trust shall have such
powers and duties as generally pertain to their respective offices, as well as
such powers and duties as may from time to time be conferred by the Board or the
Executive Committee.
ARTICLE IV
SHARES
Section 1. Certificate of Shares. Certificates representing Trust shares
will not be physically issued. Shares will be maintained on the books of the
Trust's transfer agent and Shareholders will have the same rights of ownership
with respect to such shares as if certificates had been issued.
9
<PAGE>
Section 2. Transfer of Shares. Shares of the Trust shall be transferable
on the books of the Trust by the holder thereof in person or by his duly
authorized attorney or legal representative for the same number of shares,
accompanied by proper instruments of assignment and transfer, with such proof of
the authenticity of the signature as the Trust or its agents may reasonably
require.
Section 3. Stock Ledgers; Books and Records. The stock ledgers of the
Trust containing the name and address of the Shareholders and the number of
shares held by them respectively, and all books and records of the Trust shall
be kept at the principal offices of the Trust within or without the Commonwealth
of Massachusetts or, if the Trust employs a transfer agent, at the offices of
the transfer agent of the Trust or without said Commonwealth.
ARTICLE V
SEAL
The Board of Trustees may authorize a suitable seal of the Trust, in
such form and bearing such inscriptions as it may determine.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Trust shall be fixed from time to time by
resolution of the Board of Trustees.
10
<PAGE>
ARTICLE VII
CUSTODIANSHIP
All cash and securities owned by the Trust shall be held in accordance
with the requirements of the 1940 Act as in effect from time to time, by a bank
or trust company of good standing, having a capital, surplus and undivided
profits aggregating not less than two million ($2,000,000), provided such a bank
or trust company can be found ready and willing to so act. Upon the resignation
or inability to serve of any such bank or trust company the Trust shall (i) use
its best efforts to obtain a qualified successor, (ii) require the cash and
securities of the Trust held by such bank or trust company to be delivered
directly to the successor, and (iii) in the event that no qualified successor
can be found, submit to the holders of the Shares of the Trust at the time
outstanding and entitled to vote, before permitting delivery of such cash and
securities to anyone other than a qualified successor, the question whether the
Trust shall be dissolved and liquidated or shall function without a qualified
bank or trust company to hold" such cash and securities. Upon such resignation
or inability to serve, such bank or trust company may deliver any assets of the
Trust held by it to a qualified bank or trust company selected by it, such
assets to be held subject to the terms of the agreement which governed such
retiring bank or trust company, pending action by the Trust as set forth in this
Article VII. Nothing herein contained, however, shall prevent the termination of
any agreement between the Trust and any such bank or trust company by the Trust
at the discretion of the Board, and any such agreement shall be terminated upon
the affirmative vote of the holders of a majority of all the Shares of the Trust
at the time outstanding and entitled to vote.
ARTICLE VIII
AMENDMENT'S OF BY-LAWS
Except as set forth below, the By-Laws of the Trust may be altered,
amended, added to or replaced by the Shareholders or by majority vote of the
entire Board of Trustees; but any such alteration, amendment, addition or repeal
of the By-Laws by action of the Board may be altered or repealed by the
Shareholders. Article VII and Article VIII may be altered, amended or repealed
only by the vote of the holders of a majority of the Shareholders present at a
meeting of Shareholders provided that a quorum is present in person or by proxy
at such meeting.
11
<PAGE>
Exhibit 99.(d)
"COMPREHENSIVE FEE"
INVESTMENT MANAGEMENT AGREEMENT
THIS AGREEMENT ("Agreement'), dated the ____ day of June, 1999, made and
entered into by and between RESERVE ___________, a Massachusetts business trust
(the "Trust"), on behalf of the ______________ Fund (the "Portfolio"), and
RESERVE MANAGEMENT COMPANY, INC., a New Jersey corporation having its principal
place of business in New York (the "Manager").
WHEREAS, the Trust is a non-diversified management investment company and
is registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares
of beneficial interest, par value of $.001 per share, in separate series or
classes of series, with each such separate series representing an interest in a
separate portfolio of investment securities and other assets;
The parties agree as follows:
1. Investment Services. The Manager shall select and manage the
Portfolio's investments and shall determine what investments shall be made or
disposed of by the Portfolio and shall effect such acquisitions and
dispositions, all in furtherance of the Portfolio's investment objective and
policies, subject to the overall control and direction of the Trust's Board of
Trustees. The Manager shall report on such activities to the Board of Trustees
of the Trust and shall submit such reports and other information thereon as the
Board of Trustees shall from time to time request. Notwithstanding any other
provision hereof, the Manager, with the approval of the Board of Trustees, may
contract with one or more Sub-Investment Managers to perform any of the
investment management services; provided, however, any compensation paid will be
the sole responsibility of the Manager.
2. Other Services and Assumption of Certain Expenses. The Manager shall
furnish to the Trust, on behalf of the Portfolio: (i) the services of a
President and such other executive officers as may be requested by the
Portfolio, (ii) office space and customary office facilities to the extent that
the Portfolio's activities occur in New York, (iii) maintain Portfolio records
not otherwise maintained by the Portfolio's custodian, distributor or
sub-investment managers, and (iv) all accounting, administrative, clerical,
secretarial and statistical services as may be required by the Portfolio for the
operation of its business and compliance with applicable laws. The Manager shall
pay the compensation of all officers of the Trust on behalf of the Portfolio and
all operating and other expenses of the Portfolio except interest charges,
taxes, brokerage fees and commissions, extraordinary legal and accounting fees
and other extraordinary expenses including expenses incurred in connection with
litigation proceedings, other claims and the legal obligations of the Trust to
indemnify its trustees, officers, employees, shareholders, distributors and
other agents of the Trust, payments made pursuant to the Trust's Distribution
Plan, and the fees of the disinterested Trustees. The Manager may contract with
other parties to
<PAGE>
perform any of the ordinary administrative services required of the Manager;
provided, however any such compensation will be the responsibility of the
Manager.
3. Compensation of the Manager. The Portfolio shall pay to the Manager as
compensation for the services rendered hereunder and as full reimbursement for
all officers compensation and ordinary operating expenses of the Portfolio paid
by the Manager under paragraph 2 hereof, a management fee at an annual rate of
0.80% of the average daily net asset value of the Portfolio (the "Management
Fee").
The Management Fee shall be computed and accrued daily and shall be paid
by the Portfolio to the Manager monthly.
4. Compliance with Applicable Requirements. This Agreement will be
performed in accordance with the requirements of the 1940 Act and the Investment
Advisers Act of 1940, as amended, and the rules and regulations under such acts,
to the extent that the subject matter of the Agreement is within the purview of
such acts and such rules and regulations. The Manager will assist the Trust on
behalf of the Portfolio in complying with the requirements of the 1940 Act, and
the Securities Act of 1933, as amended (the "1933 Act'), and the rules and
regulations under such acts and in qualifying as a regulated investment company
under the Internal Revenue Code of 1986, as amended, and applicable regulations
of the Internal Revenue Service thereunder. In carrying out its obligations
under this Agreement the Manager shall at all times conform to the provisions of
the Declaration of Trust and By-Laws, the provisions of the currently effective
Registration Statement of the Trust under the 1940 Act and the 1933 Act, and any
other applicable provisions of state or Federal law.
5. Termination. This Agreement shall be in effect until the close of
business on June 30, 2000 and shall continue in effect from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually by (i) either the Board of Trustees of the Trust or a majority
vote of the outstanding voting securities of the Portfolio, provided, however,
that if the shareholders of the Portfolio fail to approve the Agreement, as
provided herein, the Manager may continue to serve in such capacity in the
manner and to the extent permitted by the 1940 Act, and the rules thereunder,
and (ii) the vote of a majority of the Trustees of the Trust who are not parties
to this Agreement or interested persons (as defined in the 1940 Act) of either
party of this Agreement, cast in person at a meeting called for the purpose of
voting on such approval.
Notwithstanding anything herein to the contrary, this Agreement may be
terminated at any time, without payment of any penalty, by the Board of Trustees
of the Trust or by vote of a majority of the outstanding voting securities of
the Portfolio, on 60 days' written notice to the Manager, or by the Manager on
like notice to the Trust.
The name "Reserve" shall be deemed to have been licensed to the Trust by
the Manager. In the event of termination of this Agreement, the Manager may
terminate or revoke such license
-2-
<PAGE>
on 90 days' written notice to the Trust. On or before the date of such
revocation or termination, the Trust will change its name to another name which
does not include the word "Reserve."
6. Non-Assignability. This Agreement shall not be assignable by either
party hereto and shall automatically terminate forthwith in the event of such
assignment (within the meaning of the 1940 Act).
7. Approval of Agreement and Amendments. This Agreement and any material
amendments hereto shall be approved by vote of the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Portfolio;
provided, however, that if the shareholders of the Portfolio fail to approve the
Agreement as provided herein, the Manager may continue to serve in such capacity
in the manner and to the extent permitted by the 1940 Act and the rules
thereunder.
8. Non-Exclusivity. The services of the Manager to the Trust are not to
be deemed exclusive and the Trust agrees that the Manager is free to act as
investment manager to various investment companies and other managed accounts.
For purposes of this Agreement and the undertakings provided for herein, the
Manager shall at all times be considered as an independent contractor, and shall
not be considered as an agent of the Trust and shall have no authority to act
for or represent the Trust in any way.
9. Liability of the Manager. In performing its duties hereunder, the
Manager may rely on all documentation and information furnished it by the Trust.
Except as may otherwise be provided by the 1940 Act, neither the Manager nor its
officers, directors, employees or agents shall be subject to any liability for
any act or omission in the course of, connected with or arising out of any
services to be rendered hereunder, except by reason of willful misfeasance, bad
faith or gross negligence in the performance of the Manager's duties or by
reason of reckless disregard of the Manager's obligations and duties under this
Agreement.
10. Notices. Any notices and communications required hereunder shall be
in writing and shall be deemed given when delivered in person or when sent by
first-class, registered or certified mail to the Manager or to the Trust at 1250
Broadway, 32nd Floor, New York, New York 10001, or at such addresses as either
party may from time to time specify by notice to the other.
11. Definitions. The terms "assignment," "interested person," and
"majority of the outstanding voting securities," when used in this Agreement,
shall have the respective meanings specified under the 1940 Act and the rules
thereunder.
12. Governing Law. The terms and provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the 1940 Act. To the
extent that the applicable law of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control.
-3-
<PAGE>
13. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall be deemed to be severable.
14. Shareholder Liability. The Manager understands and agrees that the
obligations of the Trust under this Agreement are not binding upon any
shareholder of the Trust personally, but bind only the Portfolio and the
property of the Portfolio. The Manager represents that it has notice of the
provisions of the Declaration of Trust of the Trust disclaiming shareholder
liability for acts or obligations of the Trust.
15. Enforcement Limited to Portfolio. The Manager understands and agrees
that any debts, liabilities, obligations, and expenses incurred, contracted for
or otherwise existing under this Agreement shall be enforceable against the
assets of the Portfolio only, and not against the assets of the Trust,
generally, or the assets of any other separate series of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed on the day and year first above written.
RESERVE _____________, on behalf of
____________________ Fund
By ________________________________
President
ATTEST:
_________________________
Secretary
RESERVE MANAGEMENT COMPANY, INC.
By ________________________________
President
ATTEST
_________________________
Secretary
-4-
<PAGE>
Exhibit 99.(g)
CHASE
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective January 6, 1998, and is between THE CHASE
MANHATTAN BANK ("Bank") and each of the funds set forth in Schedule A hereto
(with each fund a "Customer").
It is hereby agreed as follows:
1. Customer Accounts.
Bank shall establish and maintain the following accounts ("Accounts"):
(a) A custody account in the name of Customer ("Custody Account") for any
and all stocks, shares, bonds, debentures, notes, mortgages or other obligations
for the payment of money, bullion, coin and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase or subscribe for
the same or evidencing or representing any other rights or interests therein and
other similar property whether certificated or uncertificated as may be received
by Bank or its Subcustodian (as defined in Section 3) for the account of
Customer ("Securities"); and
(b) A deposit account in the name of Customer ("Deposit Account") for any
and all cash in any currency received by Bank or its Subcustodian for the
account of Customer, which cash shall not be subject to withdrawal by draft or
check.
Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. Bank may deliver securities of the same
class in place of those deposited in the Custody Account.
Upon written agreement between Bank and Customer, additional Accounts may
be established and separately accounted for as additional Accounts hereunder.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to
Bank:
(a) Securities shall be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash shall be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and Bank can comply with such
Instructions, Bank is authorized to maintain cash balances on deposit for
Customer with itself or one of its "Affiliates" at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as Customer may direct, if acceptable to Bank. For purposes
hereof, the term "Affiliate" shall mean an entity controlling, controlled by, or
under common control with, Bank.
If Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3 (or
their securities depositories), such arrangement must be authorized by a written
agreement, signed by Bank and Customer.
1
<PAGE>
3. Subcustodians and Securities Depositories.
Bank may act hereunder through the subcustodians listed in Schedule B
hereof with which Bank has entered into subcustodial agreements
("Subcustodians"). Customer authorizes Bank to hold Assets in the Accounts in
accounts which Bank has established with one or more of its branches or
Subcustodians. Bank and Subcustodians are authorized to hold any of the
Securities in their account with any securities depository in which they
participate.
Bank reserves the right to add new, replace or remove Subcustodians.
Customer shall be given reasonable notice by Bank of any amendment to Schedule
B. Upon request by Customer, Bank shall identify the name, address and principal
place of business of any Subcustodian of Customer's Assets and the name and
address of the governmental agency or other regulatory authority that supervises
or regulates such Subcustodian.
4. Use of Subcustodian.
(a) Bank shall identify the Assets on its books as belonging to Customer.
(b) A Subcustodian shall hold such Assets together with assets belonging
to other customers of Bank in accounts identified on such subcustodian's books
as custody accounts for the exclusive benefit of customers of Bank.
(c) Any Assets in the Accounts held by a Subcustodian shall be subject
only to the instructions of Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian shall be subject only to
the instructions of such Subcustodian.
(d) Any agreement Bank enters into with a Subcustodian for holding Bank's
customers' assets shall provide that such assets shall not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets shall be freely transferable without the payment of
money or value other than for safe custody or administration or, in the case of
cash deposits, except for liens or rights in favor of creditors of the
Subcustodian arising under bankruptcy, insolvency or similar laws. Where
Securities are deposited by a Subcustodian with a securities depository, Bank
shall cause the Subcustodian to identify on its books as belonging to Bank, as
agent, the Securities shown on the Subcustodian's account on the books of such
securities depository. The foregoing shall not apply to the extent of any
special agreement or arrangement made by Customer with any particular
Subcustodian.
5. Deposit Account Transactions.
(a) Bank or its Subcustodians shall make payments from the Deposit
Account upon receipt of Instructions which include all information required by
Bank.
(b) In the event that any payment to be made under this Section 5 exceeds
the funds available in the Deposit Account, Bank, in its discretion, may advance
Customer such excess amount which shall be deemed a loan payable on demand,
bearing interest at the rate customarily charged by Bank on similar loans.
(c) If Bank credits the Deposit Account on a payable date, or at any time
prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, Customer shall
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If Customer does not promptly return any
amount upon such notification, Bank shall be entitled, upon oral or written
notification to Customer, to reverse such credit by debiting the Deposit Account
for the amount previously credited. Bank or its Subcustodian shall have no duty
or obligation to institute legal proceedings, file a claim or a proof of claim
in any insolvency proceeding or take any other action with respect to the
collection of such amount, but may act for Customer upon Instructions after
consultation with Customer.
6. Custody Account Transactions.
(a) Securities shall be transferred, exchanged or delivered by Bank or
its Subcustodian upon receipt by Bank of Instructions which include all
information required by Bank. Settlement and payment for Securities received
2
<PAGE>
for, and delivery of Securities out of, the Custody Account may be made in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to Bank.
(b) Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions shall be
credited or debited to the Accounts on the date cash or Securities are actually
received by Bank and reconciled to the Account.
(i) Bank, upon oral or written notice to Customer, may reverse
credits or debits made to the Accounts in its discretion if the related
transaction fails to settle within a reasonable period, determined by
Bank in its discretion, after the contractual settlement date for the
related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, Bank may reverse the credits and
debits of the particular transaction at any time.
7. Actions of Bank.
Bank shall follow Instructions received regarding Assets held in the
Accounts. However, until it receives Instructions to the contrary, Bank shall:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that Bank or Subcustodian is
actually aware of such opportunities.
(b) Execute in the name of Customer such ownership and other certificates
as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction for which Bank has
received Instructions involving the Securities, including, without limitation,
Affiliates of Bank or any Subcustodian.
(e) Issue statements to Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
Bank shall send Customer an advice or notification of any transfers of
Assets to or from the Accounts. Such statements, advices or notifications shall
indicate the identity of the entity having custody of the Assets. Unless
Customer sends Bank a written exception or objection to any Bank statement
within sixty (60) days of receipt, Customer shall be deemed to have approved
such statement. In such event, or where Customer has otherwise approved any such
statement, Bank shall, to the extent permitted by law, be released, relieved and
discharged with respect to all matters set forth in such statement or reasonably
implied therefrom and based on information which Customer knew or reasonably
should have known as though it had been settled by the decree of a court of
competent jurisdiction in an action where Customer and all persons having or
claiming an interest in Customer or Customer's Accounts were parties.
Provided that Bank has acted in accordance with the standard of care in
Section 12 (a) hereof, all collections of funds or other property paid or
distributed in respect of Securities in the Custody Account shall be made at the
risk of Customer. Provided that Bank has acted in accordance with the standard
of care in Section 12(a) hereof, Bank shall have no liability for any loss
occasioned by delay in the actual receipt of notice by Bank or by its
Subcustodians of any payment, redemption or other transaction regarding
Securities in the Custody Account in respect of which Bank has agreed to take
any action hereunder.
3
<PAGE>
8. Corporate Actions; Proxies; Tax Reclaims.
(a) Corporate Actions. Whenever Bank receives information concerning the
Securities which requires discretionary action by the beneficial owner of the
Securities (other than a proxy), such as subscription rights, bonus issues,
stock repurchase plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate Actions"), Bank
shall give Customer prompt notice of such Corporate Actions to the extent that
Bank has received actual notice of the Corporate Action from the relevant issuer
or issuer's agent or as to which notice is published in publications routinely
utilized by Bank for this purpose.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split is received which bears an expiration
date, Bank shall endeavor to obtain Instructions from Customer or its Authorized
Person (as defined in Section 10 hereof), but if Instructions are not received
in time for Bank to take timely action, or actual notice of such Corporate
Action was received too late to seek Instructions, Bank is authorized but need
not sell such rights entitlement or fractional interest and to credit the
Deposit Account with the proceeds, if Bank, in good faith, deems such action to
be appropriate in which case it shall be held harmless for any such action.
(b) Proxy Voting. Bank shall provide proxy voting services, if elected by
Customer, in accordance with the terms of the proxy voting services rider
hereto. Proxy voting services may be provided by Bank or, in whole or in part,
by one or more third parties appointed by Bank (which may be Affiliates of
Bank).
(c) Tax Reclaims.
(i) Subject to the provisions hereof, Bank shall apply for a
reduction of withholding tax and any refund of any tax paid or tax
credits which apply in each applicable market in respect of income
payments on Securities for the benefit of Customer which Bank believes
may be available to such Customer.
(ii) The provision of tax reclaim services by Bank is conditional
upon Bank receiving from the beneficial owner of Securities (A) a
declaration of its identity and place of residence and (B) certain other
documentation (pro forma copies of which are available from Bank).
Customer acknowledges that, if Bank does not receive such declarations,
documentation and information, additional United Kingdom taxation shall
be deducted from all income received in respect of Securities issued
outside the United Kingdom and that U.S. non-resident alien tax or U.S.
backup withholding tax shall be deducted from U.S. source income.
Customer shall provide to Bank such documentation and information as it
may require in connection with taxation, and warrants that, when given,
this information shall be true and correct in every respect, not
misleading in any way, and contain all material information. Customer
undertakes to notify Bank immediately if any such information requires
updating or amendment.
(iii) Provided that Bank has acted in accordance with the standard
of care in Section 12(a) hereof, Bank shall not be liable to Customer or
any third party for any taxes, fines or penalties payable by Bank or
Customer, and shall be indemnified accordingly, whether these result from
the inaccurate completion of documents by Customer or any third party
acting as agent for Customer, or as a result of the provision to Bank or
any third party of inaccurate or misleading information or the
withholding of material information by Customer or any other third party,
or as a result of any delay of any revenue authority or any other matter
beyond the control of Bank.
(iv) Customer confirms that Bank is authorized to deduct from any
cash received or credited to the Deposit Account any taxes or levies
required by any revenue or governmental authority for whatever reason in
respect of the Securities or Cash Accounts.
(v) Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to
Customer from time to time and Bank may, by notification in writing, at
its absolute discretion, supplement or amend the markets in which the tax
reclaim services are offered. Other than as expressly provided in this
sub-clause, Bank shall have no responsibility with regard to Customer's
tax position or status in any jurisdiction.
(vi) Customer confirms that Bank is authorized to disclose any
information requested by any revenue authority or any governmental body
in relation to Customer or the Securities and/or Cash held for Customer.
4
<PAGE>
(vii) Tax reclaim services may be provided by Bank or, in whole or
in part, by one or more third parties appointed by Bank (which may be
Affiliates of Bank); provided that. Bank shall be liable for the
performance of any such third party to the same extent as Bank would have
been if it performed such services itself
9. Nominees.
Securities which are ordinarily held in registered form may be registered
in a nominee name of Bank, Subcustodian or securities depository, as the case
may be. Bank may without notice to Customer cause any such Securities to cease
to be registered in the name of any such nominee and to be registered in the
name of Customer. In the event that any Securities registered in a nominee name
are called for partial redemption by the issuer, Bank may allot the called
portion to the respective beneficial holders of such class of security in any
manner Bank deems to be fair and equitable. Customer shall hold Bank,
Subcustodians, and their respective nominees harmless from any liability arising
directly or indirectly from their status as a mere record holder of Securities
in the Custody Account.
10. Authorized Persons.
As used herein, the term "Authorized Person" means employees or agents
including investment managers as have been designated by written notice from
Customer or its designated agent to act on behalf of Customer hereunder. Such
persons shall continue to be Authorized Persons until such time as Bank receives
Instructions from Customer or its designated agent that any such employee or
agent is no longer an Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by Bank, via telephone, telex, facsimile transmission, bank wire or
other teleprocess or electronic instruction or trade information system
acceptable to Bank which Bank believes in good faith to have been given by
Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which Bank may specify. Unless
otherwise expressly provided, all Instructions shall continue in full force and
effect until canceled or superseded. I
Any Instructions delivered to Bank by telephone shall promptly thereafter
be confirmed in writing by an Authorized Person (which confirmation may bear the
facsimile signature of such Person), but Customer shall hold Bank harmless for
the failure of an Authorized Person to send such confirmation in writing, the
failure of such confirmation to conform to the telephone instructions received
or Bank's failure to produce such confirmation at any subsequent time. Bank may
electronically record any Instructions given by telephone, and any other
telephone discussions with respect to the Custody Account. Customer shall be
responsible for safeguarding any testkeys, identification codes or other
security devices which Bank shall make available to Customer or its Authorized
Persons.
12. Standard of Care; Liabilities.
(a) Bank shall be responsible for the performance of only such duties as
are set forth herein or expressly contained in Instructions which are consistent
with the provisions hereof as follows:
(i) Bank shall use reasonable care with respect to its obligations
hereunder and the safekeeping of Assets. Bank shall be liable to Customer
for any loss which shall occur as the result of the failure of a
Subcustodian to exercise reasonable care with respect to the safekeeping
of such Assets to the same extent that Bank would be liable to Customer
if Bank were holding such Assets in New York. In the event of any loss to
Customer by reason of the failure of Bank or its Subcustodian to utilize
reasonable care (including, but not limited to, as respects corporate
actions), Bank shall be liable to Customer only to the extent of
Customer's direct damages, to be determined based on the market value of
the property which is the subject of the loss at the date of discovery of
such loss and without reference to any special conditions or
circumstances. Bank shall have no liability whatsoever for any
consequential, special, indirect or speculative loss or damages
(including, but not limited to, lost profits) suffered by Customer in
connection with the transactions contemplated hereby
5
<PAGE>
and the relationship established hereby even if Bank has been advised as
to the possibility of the same and regardless of the form of the action.
(ii) Bank shall not be responsible for the insolvency of any
Subcustodian which is not a branch or Affiliate of Bank. Bank shall not
be responsible for any act, omission, default or the solvency of any
broker or agent which it or a Subcustodian appoints unless such
appointment was made negligently or in bad faith.
(iii) Bank shall be indemnified by, and without liability to
Customer for any action taken or omitted by Bank whether pursuant to
Instructions or otherwise within the scope hereof if such act or omission
was in good faith, without negligence. In performing its obligations
hereunder, Bank may rely on the genuineness of any document which it
believes in good faith to have been validly executed.
(iv) Customer shall pay for and hold Bank harmless from any
liability or loss resulting from the imposition or assessment of any
taxes or other governmental charges, and any related expenses with
respect to income from or Assets in the Accounts.
(v) Bank shall be entitled to rely, and may act, upon the advice
of counsel (who may be counsel for Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice.
(vi) Bank need not maintain any insurance for the benefit of
Customer.
(vii) Without limiting the foregoing, Bank shall not be liable for
any loss which results from: 1) the general risk of investing, or 2)
investing or holding Assets in a particular country including, but not
limited to, losses resulting from malfunction, interruption of or error
in the transmission of information caused by any machines or system or
interruption of communication facilities, abnormal operating conditions,
nationalization, expropriation or other governmental actions; regulation
of the banking or securities industry; currency restrictions,
devaluations or fluctuations; and market conditions which prevent the
orderly execution of securities transactions or affect the value of
Assets; except that, with respect to the failure of machines, systems,
interruption of communication facilities or abnormal operating conditions
on Bank or a Subcustodian's premises or otherwise within the control of
Bank or a Subcustodian, Bank shall not be so excused to the extent that
such failure was on account of Bank's or the Subcustodian's (as the case
may be) negligence (such as a failure to have had routine maintenance
performed or to have selected equipment reasonably suitable for the
purposes contemplated hereby given, in the case of Subcustodians, local
market practices with respect to such matters). Bank confirms that it has
in place backup procedures, periodically tested by it, that would permit
continued operation of its Brooklyn, New York and Bournemouth, England
data centers in the event of a failure of its systems or equipment.
(viii) Neither party shall be liable to the other for any loss due
to forces beyond their control including, but not limited to strikes or
work stoppages, acts of war (whether declared or undeclared) or
terrorism, insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to Customer or
an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments
or the retention of Securities;
(iii) advise Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other than
as provided in Section 5(c) hereof;
(iv) evaluate or report to Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party to
which Securities are delivered or payments are made pursuant hereto; and
6
<PAGE>
(v) review or reconcile trade confirmations received from brokers.
Customer or its Authorized Persons issuing Instructions shall bear any
responsibility to review such confirmations against Instructions issued
to and statements issued by Bank.
(c) Customer authorizes Bank to act hereunder notwithstanding that Bank
or any of its divisions or Affiliates may have a material interest in a
transaction, or circumstances are such that Bank may have a potential conflict
of duty or interest including the fact that Bank or any of its Affiliates may
provide brokerage services to other customers, act as financial advisor to the
issuer of Securities, act as a lender to the issuer of Securities, act in the
same transaction as agent for more than one customer, have a material interest
in the issue of Securities, or earn profits from any of the activities listed
herein.
13. Fees and Expenses.
Customer shall pay Bank for its services hereunder the fees set forth in
Schedule C hereto or such other amounts as may be agreed upon in writing,
together with Bank's reasonable out-of-pocket or incidental expenses, such as,
but not limited to, scrip and stamp fees, legal fees registration fees, and
other costs that Bank pays on behalf of Customer. Bank shall have a lien on and
is authorized to charge any Accounts of Customer for any amount owing to Bank
under any provision hereof upon oral or written notice to Customer.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration of
Customer's trading and investment activity, subject to Instructions (which may
be standing Instructions) Bank is authorized to enter into spot or forward
foreign exchange contracts with Customer and may also provide foreign exchange
through its subsidiaries, Affiliates or Subcustodians. Instructions, including
standing instructions, may be issued with respect to such contracts but Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where Bank, its subsidiaries, Affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of Bank, its
subsidiary, Affiliate or Subcustodian and, to the extent not inconsistent, this
Agreement shall apply to such transaction.
(b) Certification of Residency, etc. Customer certifies that it is a
resident of the United States and shall notify Bank of any changes in residency.
Bank may rely upon this certification or the certification of such other facts
as may be required to administer Bank's obligations hereunder. Customer shall
indemnify Bank against all losses, liability, claims or demands arising directly
or indirectly from any such certifications.
(c) Access to Records. Bank shall allow Customer's independent public
accountant reasonable access to the records of Bank relating to the Assets as is
required in connection with their examination of books and records pertaining to
Customer's affairs. Subject to restrictions under applicable law, Bank shall
also obtain an undertaking to permit Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the examination
of Customer's books and records.
(d) Governing Law Successors and Assigns, Captions THIS AGREEMENT SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN NEW YORK and shall not be assignable by either party, but
shall bind the successors in interest of Customer and Bank. The captions given
to the sections and subsections of this Agreement are for convenience of
reference only and are not to be used to interpret this Agreement.
(e) Entire Agreement: Applicable Riders. Customer represents that the
Assets deposited in the Accounts are (Check one):
- Employee Benefit Plan or other assets subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
7
<PAGE>
X Investment Company assets subject to certain U.S. Securities and
Exchange Commission rules and regulations;
___ Neither of the above.
This Agreement consists exclusively of this document together with
Schedules A-C, and the following Rider(s) [Check applicable rider(s)]:
___ ERISA
X INVESTMENT COMPANY.
X PROXY VOTING
X SPECIAL TERMS AND CONDITIONS
There are no other provisions hereof and this Agreement supersedes any
other agreements, whether written or oral, between the parties. Any amendment
hereto must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions hereof are
held invalid, illegal or unenforceable in any respect on the basis of any
particular circumstances or in any jurisdiction, the validity, legality and
enforceability of such provision or provisions under other circumstances or in
other jurisdictions and of the remaining provisions shall not in any way be
affected or impaired.
(g) Waiver. Except as otherwise provided herein, no failure or delay on
the part of either party in exercising any power or right hereunder operates as
a waiver, nor does any single or partial exercise of any power or right preclude
any other or further exercise, or the exercise of any other power or right. No
waiver by a party of any provision hereof, or waiver of any breach or default,
is effective unless in writing and signed by the parry against whom the waiver
is to be enforced.
(h) Representations and Warranties. (i) Customer hereby represents and
warrants to Bank that: (A) it has full authority and power to deposit and
control the Securities and cash deposited in the Accounts; (B) it has all
necessary authority to use Bank as its custodian; (C) this Agreement constitutes
its legal, valid and binding obligation, enforceable in accordance with its
terms; (D) it shall have full authority and power to borrow moneys and enter
into foreign exchange transactions; and (E) it has not relied on any oral or
written representation made by Bank or any person on its behalf, and
acknowledges that this Agreement sets out to the fullest extent the duties of
Bank. (ii) Bank hereby represents and warrants to Customer that: (A) it has the
full power and authority to perform its obligations hereunder, (B) this
Agreement constitutes its legal, valid and binding obligation; enforceable in
accordance with its terms; (C) that it has taken all necessary action to
authorize the execution and delivery hereof.
(i) Notices. All notices hereunder shall be effective when actually
received. Any notices other communications which may be required hereunder are
to be sent to the parties at the following address or such other addresses as
may subsequently be given to the other party in writing: (a) Bank: The Chase
Manhattan Bank, 4 Chase MetroTech Center, l8th Floor, Brooklyn, N.Y. 11245,
Attention: Global Investor Services, Investment Management Group (Reserve Funds
Relationship Manager) and to The Chase Manhattan Bank, 3 Chase MetroTech Center,
8th floor, Brooklyn, N.Y. 11245, Attention: Reserve Funds Service Manager; and
(b) Customer: [Fund name) c/o The Reserve Funds, 810 Seventh Avenue, New York,
10019-5868. Attn: Operations Manager.
(j) Termination. This Agreement may be terminated by Customer or Bank by
giving ninety (90) days written notice to the other, provided that such notice
to Bank shall specify the names of the persons whom Bank shall deliver the
Assets in the Accounts. If notice of termination is given by Bank, Customer
shall within ninety (90) days following receipt of the notice, deliver to Bank
Instructions specifying the name of the persons to whom Bank shall deliver the
Assets. In either case Bank shall deliver the Assets to persons so specified,
after deducting any amounts which Bank determines in good faith to be owed to it
under Section 13, an explanation for any such deductions shall be furnished to
Customer. If within ninety (90) days following receipt of a notice of
termination by Bank, Bank does not receive Instructions from Customer specifying
the names of the persons to whom Bank shall deliver the Assets, Bank, at its
8
<PAGE>
election, may deliver the Assets to a bank or trust company doing business in
the State of New York to be held and disposed pursuant to the provisions hereof,
or to Authorized Persons, or may continue to hold the Assets Instructions are
provided to Bank.
(k) Imputation of certain information. Bank shall not be held responsible
for and shall not required to have regard to information held by any person by
imputation or information of which Bank not aware by virtue of a "Chinese Wall"
arrangement. If Bank becomes aware of confidential information which in good
faith it feels inhibits it from effecting a transaction hereunder Bank may
refrain from effecting it.
(l) Year 2000. Bank confirms that it is aware of the problem that may be
presented for certain computer systems by use of date fields and the like on and
after January 1, 2000 and that Bank has developed and is implementing a plan to
help assure that Bank's systems as the same relate to services provided
hereunder will be unaffected by such problems.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first-above written.
THE RESERVE FUNDS THE CHASE MANHATTAN BANK
By:_______________ ____________________________
Title:____________ Title:
Date______________ Date:
9
<PAGE>
STATE OF NY )
: ss
COUNTY OF NY )
On this 9th day of January 1998 before me personally came Michelle L.
Neufield, to me known, who being by me duly sworn, did depose and say that
he/she resides in Fairfield, Ct. at 325 Romanock Rd., that her/she is General
Counsel & Secy of The Reserve Funds & all affiliates, the entity described in
and which executed the foregoing instrument; that he/she knows the seal of said
entity, that the seal affixed to said instrument is such seal, that it was so
affixed by order of said entity, and that he/she signed his/her name thereto by
like order.
Sworn to before me this 9th
Day of January, 1998.
Notary
/s/ PATRICIA Maldonado
Notary Public, State of New York
No. 01MA5014011
Qualified in Bronx County
Commission Expires July 6, 1999.
10
<PAGE>
Investment Company Rider to Global Custody Agreement
Between The Chase Manhattan Bank and
The Reserve Funds
Effective January 6, 1998
The following modifications are made to the Agreement:
The following modifications are made to the Agreement:
A. Add a new Section 15 to the Agreement as follows:
15. Compliance with SEC rule 17f-5.
(a) Customer's board of directors (or equivalent body) (hereinafter
'Board') hereby delegates to Bank, and, except as to the country or countries as
to which Bank may, from time to time, advise Customer that it does not accept
such delegation, Bank hereby accepts the delegation to it, of the obligation to
perform as Customer's 'Foreign Custody Manager' (as that term is defined in SEC
rule l7f-5 (a)(2)), both for the purpose of selecting Eligible Foreign
Custodians (as that term is defined in SEC rule l7f-5(a)(1), and as the same may
be amended from time to time, or that have otherwise been made exempt pursuant
to an SEC exemptive order) to hold Assets and of evaluating the contractual
arrangements with such Eligible Foreign Custodians (as set forth in SEC rule
17f-5(c)(2)); provided that, the term Eligible Foreign Custodian shall not
include any 'Compulsory Depository. A Compulsory Depository shall mean a
securities depository or clearing agency the use of which is compulsory because:
(1) its use is required by law or regulation, (2) securities cannot be withdrawn
from the depository, or (3) maintaining securities outside the depository is not
consistent with prevailing custodial practices in the country which the
depository serves. Compulsory Depositories used by Chase as of the date hereof
are set forth in Appendix 1-A hereto, and as the same may be amended on notice
to Customer from time to time.
(b) In connection with the foregoing, Bank shall:
(i) provide written reports notifying Customer's Board of the
placement of Assets with particular Eligible Foreign Custodians
and of any material change in the arrangements with such Eligible
Foreign Custodians, with such reports to be provided to Customer's
Board at such times as the Board deems reasonable and appropriate
based on the circumstances of Customer's foreign custody
arrangements (and until further notice from Customer such reports
shall be provided not less than quarterly with respect to the
placement of Assets with particular Eligible Foreign Custodians
and with reasonable promptness upon the occurrence of any material
change in the arrangements with such Eligible Foreign Custodians);
(ii) exercise such reasonable care, prudence and diligence in
performing as Customer's Foreign Custody Manager as a person
having responsibility for the safekeeping of Assets would
exercise;
(iii) in selecting an Eligible Foreign Custodian, first have
determined that Assets placed and in the safekeeping of such
Eligible Foreign Custodian shall be subject to reasonable care,
based on the standards applicable to custodians in the relevant
market, after having considered all factors relevant to the
safekeeping of such Assets, including, without limitation, those
factors set forth in SEC rule l7f-5(c)(l)(i)-(iv);
(iv) determine that the written contract with the Eligible Foreign
Custodian (or, in the case of an Eligible Foreign Custodians that
is a securities depository or clearing agency, such contract, the
rules or established practices or procedures of the depository, or
any combination of the foregoing) requires that the Eligible
Foreign Custodian will provide reasonable care for Assets based on
the standards applicable to custodians in the relevant market. In
making this determination, Bank shall consider the provisions of
Rule l7f-5(c)(2),
11
<PAGE>
together with whether Bank shall be liable to Customer for any
loss which shall occur as the result of the failure of the
Eligible Foreign Custodian to exercise reasonable ca with respect
to the safekeeping of such Assets to the same extent that Bank
would be liable to Customer if Bank were holding such Assets in
New York; and
(v) have established a system to monitor the continued
appropriateness of maintaining Assets with particular Eligible
Foreign Custodians and of the governing contractual arrangements;
it being understood, however, that in the event that Bank shall
have determined that the existing Eligible Foreign Custodian in a
given country would no longer afford Assets reasonable care and
that no other Eligible Foreign Custodian in that country would
afford reasonable care, Bank shall promptly so advise Customer and
shall then act in accordance with the Instructions of Customer
with respect to the disposition of the affected Assets.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Assets on behalf of Customer with Eligible Foreign Custodians pursuant to a
written contract deemed appropriate by Bank.
(c) Except as expressly provided herein, Customer shall be solely
responsible to assure that the maintenance of Assets hereunder complies with the
rules, regulations, interpretations and exemptive orders promulgated by or under
the authority of the SEC.
(d) Bank represents to Customer that it is a U.S. Bank as defined in Rule
l7f-5(a)(7). Customer represents to Bank that: (1) the Assets being placed and
maintained in Bank's custody are subject to the Investment Company Act of 1940,
as amended (the '1940 Act'), as the same may be amended from time to time; (2)
its Board: (i) has determined that it is reasonable to rely on Bank to perform
as Customer's Foreign Custody Manager (ii) or its investment advisor shall have
determined that Customer may maintain Assets in each country in which Customer's
Assets shall be held hereunder and determined to accept the risks arising
therefrom (including, but not limited to, a country's financial infrastructure
(and including any Compulsory Depository operating in such country), prevailing
custody and settlement practices, laws applicable to the safekeeping and
recovery of Assets held in custody, and the likelihood of nationalization,
currency controls and the like)."
B. Add the following after the first sentence of Section 3 of the
Agreement: "At the request of Customer, Bank may, but need not, add to Schedule
B an Eligible Foreign Custodian that is either a bank or a non-Compulsory
Depository where Bank has not acted as Foreign Custody Manager with respect to
the selection thereof. Bank shall notify Customer in the event that it elects
not to add any such entity."
C. Add the following language to the end of Section 3 of the Agreement:
The term Subcustodian as used herein shall mean the following:
(a) a U.S. Bank, which shall mean a U.S. bank as defined in SEC rule
l7f-5(a)(7);
(b) an 'Eligible Foreign Custodian,' which shall mean (i) a banking
institution or trust company, incorporated or organized under the laws of
a country other than the United States, that is regulated as such by that
country's government or an agency thereof, (ii) a majority-owned direct
or indirect subsidiary of a U.S. bank or bank holding company which
subsidiary is incorporated or organized under the laws of a country other
than the United States; (iii) a securities depository or clearing agency,
incorporated or organized under the laws of a country other than the
United States, that acts as a system for the central handling of
securities or equivalent book-entries in that country and that is
regulated by a foreign financial regulatory authority as defined under
section 2(a)(5) of the 1940 Act, (iv) a securities depository or clearing
agency organized under the laws of a country other than the United States
to the extent acting as a transnational system for the central handling
of securities or equivalent book-entries, and (v) any other entity that
shall have been so qualified by exemptive order, rule or other
appropriate action of the SEC.
12
<PAGE>
For purposes of clarity, it is agreed that as used in Section 12(a)(i), the term
Subcustodian shall include neither any Eligible Foreign Custodian as to which
Bank has not acted as Foreign Custody Manager nor any Compulsory Depository."
D. Insert the following language at the beginning of the second sentence
of Section 12(a)(i):
"Except with respect to those countries as to which the parties may from
time to time agree in writing otherwise".
E. In recognition of the fact that compliance with amended Rule l7f-5 is
in an early stage of development and of the importance to Bank of the
relationship between Bank and Customer, Bank hereby agrees that, if prior to
June 15, 1998, Bank makes any material change to this rider for its mutual fund
customers, Customer shall be given the option of continuing to operate under
this rider or pursuant to the changed rider. Customer shall promptly notify Bank
of whether or not it elects to operate pursuant to the changed rider, and if it
does so elect, such election shall be effective on and after the date that Bank
receives such notice.
13
<PAGE>
GLOBAL PROXY SERVICE RIDER
To Global Custody Agreement
Between
THE CHASE MANHATTAN BANK
AND
THE RESERVE FUNDS
January 6, 1998
1. Global Proxy Services ("Proxy Services") shall be provided for the
countries listed in the procedures and guidelines ("Procedures")
furnished to Customer, as the same may be amended by Bank from time to
time on prior notice to Customer. The Procedures are incorporated by
reference herein and form a part of this Rider.
2. Proxy Services shall consist of those elements as set forth in the
Procedures, and shall include (a) notifications ("Notifications") by Bank
to Customer of the dates of pending shareholder meetings, resolutions to
be voted upon and the return dates as may be received by Bank or provided
to Bank by its Subcustodians or third parties, and (b) voting by Bank of
proxies based on Customer directions. Original proxy materials or copies
thereof shall not be provided. Notifications shall generally be in
English and, where necessary, shall be summarized and translated from
such non-English materials as have been made available to Bank or its
Subcustodian. In this respect Bank's only obligation is to provide
information from sources it believes to be reliable and/or to provide
materials summarized and/or translated in good faith. Bank reserves the
right to provide Notifications, or parts thereof, in the language
received. Upon reasonable advance request by Customer, backup information
relative to Notifications, such as annual reports, explanatory material
concerning resolutions, management recommendations or other material
relevant to the exercise of proxy voting rights shall be provided as
available, but without translation.
3. While Bank shall attempt to provide accurate and complete Notifications,
whether or not translated, Bank shall not be liable for any losses or
other consequences that may result from reliance by Customer upon
Notifications where Bank prepared the same in good faith.
4. Notwithstanding the fact that Bank may act in a fiduciary capacity with
respect to Customer under other agreements or otherwise under the
Agreement, in performing Proxy Services Bank shall be acting solely as
the agent of Customer, and shall not exercise any discretion with regard
to such Proxy Services.
5. Proxy voting may be precluded or restricted in a variety of
circumstances, including, without limitation, where the relevant
Securities are: (i) on loan; (ii) at registrar for registration or
reregistration; (iii) the subject of a conversion or other corporate
action; (iv) not held in a name subject to the control of Bank or its
Subcustodian or are otherwise held in a manner which precludes voting;
(v) not capable of being voted on account of local market regulations or
practices or restrictions by the issuer; or (vi) held in a margin or
collateral account.
6. Customer acknowledges that in certain countries Bank may be unable to
vote individual proxies but shall only be able to vote proxies on a net
basis (e.g. a net yes or no vote given the voting instructions received
from all customers).
7. Customer shall not make any use of the information provided hereunder,
except in connection with the funds or plans covered hereby, and shall in
no event sell, license, give or otherwise make the information provided
hereunder available, to any third party, and shall not directly or
indirectly compete with Bank or diminish the market for Proxy Services by
provision of such information, in whole or in part, for compensation or
otherwise, to any third party.
8. The names of Authorized Persons for Proxy Services shall be furnished to
Bank in accordance with (Section)10 of the Agreement. Proxy Services fees
shall be as set forth in (Section)13 of the Agreement or as separately
agreed.
14
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Appendix 1-A
Compulsory Depositories
As of January 6,1998
- ----------------------------------------------------------------------------------------------------------------------
COUNTRY DEPOSITORY INSTRUMENT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Argentina Caja de Valores Equity Corporate & Government Debt
- ----------------------------------------------------------------------------------------------------------------------
Australia Austraclear Ltd. Corporate Debt, Money Market & Semi
Government Debt
- ----------------------------------------------------------------------------------------------------------------------
CHESS Equity
(Clearing House Electronic Sub-register
- ----------------------------------------------------------------------------------------------------------------------
RITS Government Debt
(Reserve Bank Information and Transfer
- ----------------------------------------------------------------------------------------------------------------------
Austria Oesterreichischer Kontrolbank AG Equity, Corporate + Government Debt
- ----------------------------------------------------------------------------------------------------------------------
Belgium CIK Equity + Corporate Debt
(Caiss Interprofessionnelle de Deposits de
- ----------------------------------------------------------------------------------------------------------------------
Bank Nationale de Belgique Treasury Bills + Government Debt
- ----------------------------------------------------------------------------------------------------------------------
Brazil BOVESPA Equity
(Bolsa de Valores de Sao Paolo)
- ----------------------------------------------------------------------------------------------------------------------
BVRJ Equity
(Bolsa de Valores de Rio de Janeiro)
- ----------------------------------------------------------------------------------------------------------------------
Bulgaria BNB Government Debt
(Bulgaria National Bank)
- ----------------------------------------------------------------------------------------------------------------------
Canada CDS Equity, Corporate + Government Debt
(Canadian Depository for Securities)
- ----------------------------------------------------------------------------------------------------------------------
China, SSCCRC Equity
Shanghai (Shanghai Securities Central Clearing and
- ----------------------------------------------------------------------------------------------------------------------
China, SSCC Equity
Shenzhen (Shenzhen Securities Registration Co.,
- ----------------------------------------------------------------------------------------------------------------------
Czech SCP Equity + Long-Term Government Debt
Republic (Securities Center)
- ----------------------------------------------------------------------------------------------------------------------
TKD Treasury Bills + Money Market
(Trh Kratkododich Dlluhopisu or Short-
- ----------------------------------------------------------------------------------------------------------------------
Denmark VP Equity, Corporate + Government Debt
(Vaerdipapircentralen)
- ----------------------------------------------------------------------------------------------------------------------
Egypt Misr Clearing & Sec. Dep. Equity
- ----------------------------------------------------------------------------------------------------------------------
Estonia EVK Equity
(Estonian Central Depository for
- ----------------------------------------------------------------------------------------------------------------------
Euromarket Cedel & Euroclear Euro-Debt
- ----------------------------------------------------------------------------------------------------------------------
Finland CSR Equity + Government Debt
(Central Share Registry Finland)
- ----------------------------------------------------------------------------------------------------------------------
Helsinki Money Market Center Ltd. Money Market
- ----------------------------------------------------------------------------------------------------------------------
France SICOVAM Equity + Corporate Debt.
(Banque de France)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Appendix 1-A
Compulsory Depositories
As of January 6,1998
- ----------------------------------------------------------------------------------------------------------------------
COUNTRY DEPOSITORY INSTRUMENT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
France SATURNE Government Debt
(Banque de France)
- ----------------------------------------------------------------------------------------------------------------------
Germany DKV Equity, Corporate + Government Debt
(Deutscheer Kassenverein)
- ----------------------------------------------------------------------------------------------------------------------
Greece Apothetirio Titlon A.E. Equity
- ----------------------------------------------------------------------------------------------------------------------
Bank of Greece Government Debt
- ----------------------------------------------------------------------------------------------------------------------
Hong Kong CCASS Equity
(Central Clearing and Settlement System)
- ----------------------------------------------------------------------------------------------------------------------
CMU Corporate + Government Debt
(Central Money-markets Units)
- ----------------------------------------------------------------------------------------------------------------------
Hungary Keler Ltd. Equity + Government Debt
- ----------------------------------------------------------------------------------------------------------------------
India NSDL Equity + Corporate Debt
(National Securities Depository Ltd)
- ----------------------------------------------------------------------------------------------------------------------
Ireland CREST Equity
- ----------------------------------------------------------------------------------------------------------------------
GSO Government Debt
(Gilt Settlement Office)
- ----------------------------------------------------------------------------------------------------------------------
Israel TASE Clearing House Equity, Corporate + Government Debt
(Tel Aviv Stock Exchange Clearing
- ----------------------------------------------------------------------------------------------------------------------
Italy Monte Titoli Equity + Corporate Debt
- ----------------------------------------------------------------------------------------------------------------------
Bank of Italy Government Debt
- ----------------------------------------------------------------------------------------------------------------------
Japan Bank of Japan Registered Government Debt
- ----------------------------------------------------------------------------------------------------------------------
Latvia LCD Equity + Government Debt
(Latvian Central Depository)
- ----------------------------------------------------------------------------------------------------------------------
Lebanon Midclear Equity
(Custodian and Clearing Center of
- ----------------------------------------------------------------------------------------------------------------------
Luxenbourg Cedel Equity
- ----------------------------------------------------------------------------------------------------------------------
Malaysia MCD Equity
(Malaysian Central Depository Snd Bhd)
- ----------------------------------------------------------------------------------------------------------------------
Mauritius CDS Equity
(Central Depository System)
- ----------------------------------------------------------------------------------------------------------------------
Mexico Indeval Equity, Corporate + Government Debt.
(Institucion para el Deposito de Valores
- ----------------------------------------------------------------------------------------------------------------------
Morocco Maroclear Equity + Corporate Debt
- ----------------------------------------------------------------------------------------------------------------------
Morroco, cont. Bank Al'Maghrib Government Debt
- ----------------------------------------------------------------------------------------------------------------------
Netherlands NECIGEF/KAS Associate NV Equity, Corporate + Government Debt
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Appendix 1-A
Compulsory Depositories
As of January 6,1998
- ----------------------------------------------------------------------------------------------------------------------
COUNTRY DEPOSITORY INSTRUMENT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
De Nederlandsche Bank N.V. Money-Market
- ----------------------------------------------------------------------------------------------------------------------
NIEC Premium Bonds
(Netherlands Interprofessioneel
- ----------------------------------------------------------------------------------------------------------------------
New Zealand Austraclear New Zealand Equity, Corporate + Government Debt
- ----------------------------------------------------------------------------------------------------------------------
Norway VPS Equity, Corporate + Government Debt
(Verdipapiresentralen)
- ----------------------------------------------------------------------------------------------------------------------
Pakistan CDC Equity
(Central Depository Company of Pakistan)
- ----------------------------------------------------------------------------------------------------------------------
Peru CAVALI Equity
(Caja de Valores)
- ----------------------------------------------------------------------------------------------------------------------
Philippines PCD Equity
(Phillippine Central Depository)
- ----------------------------------------------------------------------------------------------------------------------
Poland NDS Equity, Long-Term Government Debt + Vouchers
(National Securities Depository) Vouchers
- ----------------------------------------------------------------------------------------------------------------------
CRT Treasury Bills
(Central Registry of Treasury Bills)
- ----------------------------------------------------------------------------------------------------------------------
Portugal Interbolsa Equity, Corporate + Government Debt
- ----------------------------------------------------------------------------------------------------------------------
Romania SNCDD - RASDAQ Equity
(National Company for Clearing,
- ----------------------------------------------------------------------------------------------------------------------
Bucharest Stock Exchange Registry Equity
- ----------------------------------------------------------------------------------------------------------------------
National Bank of Romania Treasury Bills
- ----------------------------------------------------------------------------------------------------------------------
Russia MICEX GKO's
(Moscow Interbank Currency Exchange) (Gosudarstvennye Kratkosrochnye
- ----------------------------------------------------------------------------------------------------------------------
Singapore CDP Equity + Corporate Debt and Malaysian
(Central Depository Pte. Ltd.) equities traded on CLOB
- ----------------------------------------------------------------------------------------------------------------------
Monetary Authority of Singapore Government Debt
- ----------------------------------------------------------------------------------------------------------------------
Slovak SCP Equity + Government Debt
Republic (Stredisko Cennych Papiru)
- ----------------------------------------------------------------------------------------------------------------------
National Bank of Slovakia Treasury Bills
- ----------------------------------------------------------------------------------------------------------------------
So. Africa CD Corporate + Government Debt
(Central Depository)
- ----------------------------------------------------------------------------------------------------------------------
So. Korea KSD Equity, Corporate + Government Debt
- ----------------------------------------------------------------------------------------------------------------------
Spain SCLV Equity, + Corporate Debt
(Servicio de Compensacion y Liquidacion)
- ----------------------------------------------------------------------------------------------------------------------
Spain CBEO Government Debt
(Central Book Entry Office)
- ----------------------------------------------------------------------------------------------------------------------
Sri Lanka CDS Equity
(Central Depository System (Private))
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Appendix 1-A
Compulsory Depositories
As of January 6,1998
- ----------------------------------------------------------------------------------------------------------------------
COUNTRY DEPOSITORY INSTRUMENT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Sweden VPC Equity, Corporate + Government Debt
(Vardepapperscentralen AB)
- ----------------------------------------------------------------------------------------------------------------------
Switzerland SEGA Equity, Corporate + Government Debt
(Schweizerische Effekten-Giro AG)
- ----------------------------------------------------------------------------------------------------------------------
Taiwan TSCD Equity + Government Debt
(Taiwan Securities Central Depository)
- ----------------------------------------------------------------------------------------------------------------------
Thailand TSDC Equity, Corporate + Government Debt
(Thailand Securities Depository Company)
- ----------------------------------------------------------------------------------------------------------------------
Tunisia STICODEVAM Equity
(Societe Tunisienne Interprofessionnelle
- ----------------------------------------------------------------------------------------------------------------------
Ministry of Finance Government Debt tradable on the stock
exchange (BTNBs)
- ----------------------------------------------------------------------------------------------------------------------
Central Bank of Tunisia Government Debt tradable on the stock
exchange (BTCs)
- ----------------------------------------------------------------------------------------------------------------------
Turkey Takas Bank Equity + Corporate Debt
- ----------------------------------------------------------------------------------------------------------------------
Central Bank of Turkey Government Debt
- ----------------------------------------------------------------------------------------------------------------------
United CREST Equity + Corporate Debt
(Clearing & settlement system)
- ----------------------------------------------------------------------------------------------------------------------
CMO Sterling CD's & CP
(Central Money-market Office)
- ----------------------------------------------------------------------------------------------------------------------
CGO Gilts
(Central Gilts Office)
- ----------------------------------------------------------------------------------------------------------------------
United States DTC Equity + Corporate Debt
(Depository Trust Company)
- ----------------------------------------------------------------------------------------------------------------------
PTC Mortgage Back Debt
(Participants Trust Company)
- ----------------------------------------------------------------------------------------------------------------------
Fed Book-Entry Government Debt
- ----------------------------------------------------------------------------------------------------------------------
Zambia LuSE Equity + Government Debt
(LuSE Central Shares Depository Ltd.)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
DOMESTIC AND GLOBAL
SPECIAL TERMS AND CONDITIONS RIDER
Domestic Corporate Actions and Proxies
With respect to domestic U.S. and Canadian Securities (the latter if held in
DTC), the following provisions shall apply rather than the pertinent provisions
of Section 8 of the Agreement and the Global Proxy Service rider:
Bank shall send to Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of Bank's
nominee or the nominee of a central depository) and communications with
respect to Securities in the Custody Account as call for voting or
relate to legal proceedings within a reasonable time after sufficient
copies are received by Bank for forwarding to its customers. In
addition, Bank shall follow coupon payments, redemptions, exchanges or
similar matters with respect to Securities in the Custody Account and
advise Customer or the Authorized Person for such Account of rights
issued, tender offers or any other discretionary rights with respect to
such Securities, in each case, of which Bank has received notice from
the issuer of the Securities, or as to which notice is published in
publications routinely utilized by Bank for this purpose
19
<PAGE>
Schedule A
Portfolios of the Reserve Funds:
Reserve Primary Fund
Reserve Government Fund
Reserve Interstate Fund
Reserve New York Tax-Exempt Fund
Reserve Connecticut Tax-Exempt Fund
Reserve Massachusetts Tax-Exempt Fund
Reserve New Jersey Tax-Exempt Fund
Reserve U.S. Treasury Fund
Reserve Convertible Securities Fund
Reserve Florida Tax-Exempt Fund
Reserve Offshore Fund
Reserve Mid-Cap Growth Fund
Reserve Large-Cap Value Fund
Reserve Strategist Money-Market Fund
Reserve Small-Cap Growth Fund
Reserve California Tax-Exempt Fund
Reserve, Blue Chip Growth Fund
Reserve Informed Investor Growth Fund
Reserve Pennsylvania Tax-Exempt Fund
Reserve International Equity Fund
Reserve Primary Institution Fund
Reserve U.S. Government Institutional Fund
Reserve U.S. Treasury Institutional Fund
Reserve Interstate Tax-Exempt Institutional Fund
Reserve Ohio Tax-Exempt Fund
Reserve Michigan Tax-Exempt Fund
The InterVest Fund
- InverVest Fixed-Rate Fund
- InterVest Variable-Rate Fund
20
<PAGE>
July 30, 1999
Reserve Institutional Trust
1250 Broadway
New York, NY 10001
Ladies and Gentlemen:
I have acted as counsel to the Reserve Institutional Trust ("Trust"),
Massachusetts business trust, in connection with the preparation and filing of
their Registration Statements on Form N-1A (the "Registration Statements")
covering shares of beneficial interest, no par value per share, of the Trust, on
behalf of the Primary Institutional, U.S. Government Institutional, U.S.
Treasury Institutional and Interstate Tax-Exempt Institutional Funds.
I have examined copies of the Declaration of Trust and By-Laws of the Trust, the
Registration Statements, and such other records, proceedings and documents, as I
have deemed necessary for the purpose of this opinion. I have also examined such
other documents, papers, statutes and authorities as I deemed necessary to form
a basis for the opinion hereinafter expressed. In my examination of such
material, I have assumed the genuineness of all signatures and the conformity to
original documents of all copies.
Based upon the foregoing, I am of the opinion that the shares of beneficial
interest, no par value per share, of the Trusts to be issued in accordance with
the terms of the offering, as set forth in the Registration Statements, when so
issued and paid for will constitute validly authorized and legally issued shares
of beneficial interest, fully paid and non-assessable by the Trust.
Very truly yours,
\s\ MaryKathleen Foynes
- -----------------------
MaryKathleen Foynes
General Counsel
Reserve Funds
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this registration
statement on Form N-1A (Securities Act File No. 2-70831 and Investment Company
Act File No. 811-3141 of our report dated July 23, 1999 on our audit of the
financial statements and financial highlights of the Reserve Institutional
Trust. We also consent to the reference to our firm under the captions
"Financial Highlights" and "Custodian, Independent Accountant and Counsel".
PricewaterhouseCoopers LLP
New York, New York
July 29,1999
<PAGE>
Exhibit 99.(m)
REGISTERED DEALER AGREEMENT
Resrv Partners, Inc. ("RESRV") is the Principal Underwriter for the
shares (the "Shares") of The Reserve Funds (the "Funds"), which are registered
under the Investment Company Act of 1940 as open-end investment companies. The
Shares are offered for sale under the terms specified in the Fund's prospectus
in effect from time to time (the "Prospectus").
The terms of mutual agreement ("Agreement") between RESRV ("Distributor")
and the undersigned brokerage firm, financial planner, bank, trust company and
other qualified entities, as well as Successor firms (the "Dealer") concerning
the sale of Shares are as follows:
1. Appointment: The Dealer is hereby appointed by RESRV as a non-exclusive
distributor for the sale of the Shares in those states and jurisdictions of the
United States in which the Dealer and the Shares of the Fund are qualified for
sale. RESRV will notify Dealer in writing as to the states in which the shares
of the Fund have qualified for sale under, or are exempt from the requirements
of the respective securities laws of such states.
2. Sale of Fund Shares: The Dealer agrees to use its best efforts to solicit
qualified investors for orders to purchase shares and to determine suitability.
The Dealer shall place orders for sale of Shares only at their public offering
price and under terms as specified in the Prospectus and Statement of Additional
Information then in effect (collectively referred to as the "Prospectus").
Dealer agrees to provide, or cause to be provided, prospective investors with a
Fund Prospectus. The Dealer agrees not to make any representations about such
Shares not included in said Prospectus or in any authorized supplemental
materials supplied or authorized by RESRV. Dealer represents that the Shares
will be offered and sold in accordance with the terms and conditions of this
Agreement and all applicable laws, rules and regulations and agrees to hold
RESRV harmless and to indemnify RESRV in the event that the Dealer, or any of
its representatives, employees or agents should violate any law, rule or
regulation, or provisions of this Agreement, which violation may result in any
loss or liability (including costs of investigation and counsel fees) to RESRV
or the Fund or any of its portfolios. If RESRV determines to refund any amounts
paid by an investor by reason of such violation by the Dealer, the Dealer shall
promptly return on demand any commissions previously paid or discounts allowed
by RESRV with respect to the transaction for which the refund is made. RESRV
agrees to indemnify and hold harmless Dealer and Dealer's affiliates, officers,
directors and employees from and against any and all losses, liabilities, claims
and costs (including reasonable attorneys' fees) resulting from RESRV's failure
to fulfill its obligations hereunder or from any alleged inaccuracy, omission or
misrepresentation contained in any prospectus, statement of additional
information, any printed information issued by RESRV as information supplemental
to such prospectuses and statements of additional information, or any
advertising or sales materials prepared by RESRV. All expenses, which the Dealer
incurs in connection with activities under this Agreement, shall be borne by the
Dealer.
3. Dealer Relationship: The Dealer shall act in a dealer capacity with respect
to investors and the Dealer shall not have any authority to act as agent of the
Fund, RESRV, or any affiliate of RESRV (including, but not limited to, Reserve
Management Company, Inc. ("RMCI") and any mutual fund managed by RMCI (such
affiliates being "RESRV Affiliates"). The Dealer and its employees are not
authorized to make any representation concerning the Fund, RESRV, or RESRV
Affiliates except those contained in the Prospectus. Dealer may include the name
of any Fund in any printed list of funds which it makes available.
4. Dealer Commissions: During the term of this Agreement, the Dealer shall
receive from RESRV a commission with respect to all accounts accepted by RESRV
in which the executed account application form on file with the Fund is marked
or designated to show that it was provided to the investor by the Dealer (each
such marked account being a "Dealer Account"). The commission to be paid to the
Dealer with respect to each Dealer Account shall be an amount equal to the
dealer commission specified from time to time in the Prospectus.
<PAGE>
Any assistance payments and/or administrative service fees for
distribution pursuant to a distribution plan ("Plan") adopted by the Fund in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended,
due to the Dealer hereunder shall be paid at the end of the month. RESRV will
pay Dealer a monthly fee as set forth in the Plan and current Fund prospectus
based on the net asset value of Fund shares, which are held in accounts which
are designated as a Dealer Account. Payment shall be made within 30 days after
the close of each month for which such fee(s) is payable. No such monthly
payment will be paid if the average net asset value of all Dealer Accounts upon
which the fee is based is less than $25,000.
5. Purchase Orders: Payments for purchases of Shares made by telephone or wire
order by the Dealer shall be made to the order of RESRV or the Fund
(collectively, "Dealer") and received by Dealer, and all necessary applications
and other documents required by Dealer to establish an account or to settle a
redemption order, within five business days after Dealer's acceptance of our
order or such shorter time as may be required by law. If such payments or other
settlement documents are not timely received by Dealer, we understand that
Dealer reserve the right, without notice, to cancel the purchase or redemption
order, or, at Dealer's option in the case of a purchase order, to sell the
Shares ordered by us back to the Fund, and in either case we shall promptly
reimburse Dealer for any loss to Dealer or the Fund, including without
limitation loss of Dealer's profit, suffered by Dealer resulting from our
failure to make the aforesaid timely payment or settlement. If sales of any
Fund's Shares are contingent upon the Funds receipt of Federal Funds in payment
therefore, we will forward promptly to Dealer any purchase orders and/or
payments received by us for Shares from our customers.
6. Redemption Orders: Dealer may place redemption orders with Dealer for Shares
owned by Dealer's customers, but only in accordance with the terms of the
applicable Fund Prospectus. Dealer understands and agrees that by placing a
redemption order with the Fund or RESRV (collectively "Dealer") by wire or
telephone, it represents that a request for the redemption of the Shares covered
by the redemption order has been delivered to the Dealer by the registered
owner(s) of such Shares, and that such request has been executed in the manner
and with the signature(s) of such registered owners guaranteed as required by
the then current Prospectus of the applicable Fund. Such redemption orders shall
be subject to the following additional conditions:
(a) Dealer shall furnish Dealer with exact registration and account number for
the Shares to be redeemed at the time we place a redemption order by wire or
telephone and shall tender to Dealer, within five business days of our placing
such a redemption order: (i) a stock power or letter, duly signed by the
registered owner(s) of the Shares which are the subject of the order, duly
guaranteed, (ii) any Share certificates required for such redemption, and (iii)
any additional documents which may be required by the applicable fund or its
transfer agent, in accordance with the terms of the then current Prospectus of
the applicable Fund and the policies of the transfer agent. In the alternative,
Dealer shall provide a letter of indemnity in a form approved by the Fund and
RESRV stating that all necessary authorizations have been received from the
registered owner(s) of the Shares.
(b) The redemption price will be the next net asset value per share of the
Shares computed after Dealer receipt, prior the close of the New York Stock
Exchange ("NYSE"), of an order placed by us to redeem such Shares, except that
orders placed by us after the close of the NYSE on a business day will be based
on the Fund's net asset value per share determined that day, but only if such
orders were received by us from our customer prior to the close of business of
the NYSE that day and if we place our redemption order with Dealer prior to
Dealer's normal close of business that day.
(c) In connection with a redemption order we have placed, if Dealer fails to
make delivery of all required certificates and documents in a timely manner as
stated above, Dealer have the right to cancel our redemption order. If any
cancellation of a redemption order or if any error in the timing of the
acceptance of a redemption order placed by Dealer shall result in a loss to
Dealer or the Fund, we shall promptly reimburse Dealer for such loss.
<PAGE>
If any Shares sold by us under the terms of this Agreement are redeemed
by any of the Funds (including without limitation redemptions resulting from an
exchange for Shares of another fund) or are purchased by Dealer as an agent for
the Fund or are tendered to the Fund for redemption within seven business days
after Dealer's confirmation to us of our original purchase order for such
Shares, we shall promptly repay to Dealer the full amount of the commission
allowed to us on the original sales, provided Dealer notify us of such
repurchase or redemption.
7. Representations: The Dealer represents and warrants that it is a registered
securities dealer and is a member in good standing with the National Association
of Securities Dealers, Inc. ("NASD") or in the alternative, it is a foreign
dealer not eligible for membership in the NASD, and is fully licensed and
legally empowered to act as a securities broker-dealer under the laws of each
jurisdiction in which it conducts business or in the alternative, it is a
financial planner, bank, trust company and other qualified entity governed by
applicable laws and regulations. Dealer agrees to abide by the rules and
regulations of the Securities and Exchange Commission and the NASD, where
applicable, relating to the performance of its obligations hereunder, including,
without limitation, Section 26 of Articles III of the NASD Rules of Fair
Practice, and all other applicable laws and regulations, all of which are
incorporated herein by reference.
8. Compensation: Dealer will be paid in accordance with Schedule A (attached and
incorporated herein).
9. Termination: This Agreement may be terminated by either party upon fifteen
(15) days' written notice to the other and will be automatically terminated upon
the Dealer expulsion form. Dealer's suspension from the NASD for the violation
of any law, rule or regulation relating to the performance of Dealer's
obligations hereunder will terminate this Agreement effective immediately upon
our written notice of termination to the Dealer.
10. Arbitration: Dealer and RESRV agree that all disputes between the parties of
whatever subject matter, whether existing on the date thereof or arising
hereafter, shall be submitted to arbitration in accordance with the code of
Arbitration Procedure of the NASD or the New York Stock Exchange, or similar
rules or code, in effect at the time of the submission of any such dispute.
11. Notices: All communications shall be sent to RESRV to our offices at 1250
Broadway, 32nd Floor, New York, NY 10001. Any notice to Dealer shall be duly
given if mailed or telegraphed to Dealer at the address shown on this Agreement.
12. Governing Law: This Agreement shall be effective as of the date it is
executed and dated by Dealer below. This Agreement and all the rights and
obligations of the parties hereunder shall be governed by and construed under
the laws of the State of New York.
RESRV PARTNERS, INC.
By: _____________________________
Name & Title (print): _____________________________
Date: _____________________________
Dealer: ____________________________________
By: ____________________________________
(Authorized Signature)
<PAGE>
<TABLE>
<S> <C>
Name: ____________________________________ Dealer Code: ______________________
Title: ____________________________________ Phone: ______________________
Address: ____________________________________ NASD B/D No: ______________________
____________________________________
Date: ____________________________________
</TABLE>
<PAGE>
SCHEDULE A
Effective March 11, 1999
MONEY-MARKET FUNDS
A. Money-market funds with the exception of the Reserve Institutional Trust
Subject to the limit of the Plan of each Money-Market Fund, assistance payments
to a selected dealer with an automated interface will be at an annual rate
determined and paid monthly at a rate not less than 0.40% of the average daily
net asset value of each Fund's Qualified Accounts, or in accordance with any
subsequent Notice which may be provided by Resrv Partners, Inc., pursuant to the
Dealer Agreement.
For a Dealer who, in the opinion of Resrv Partners, is making a "good faith"
effort toward economical centralized purchases and sales to facilitate expedited
processing, such as an "automatic sweep," such assistance payments may be at an
annual rate so determined and paid not less than 0.40% of such net asset value
regardless of the schedules above in the discretion of Resrv but for a period
not to exceed 90 days. An "automatic sweep" requires the dealer's computer to
effect the daily movement of purchases, redemptions, and account maintenance
transactions directly to the Fund's computer to the satisfaction of the
management of the Fund which, in turn, will return acknowledgments and account
balances.
For all other Dealers, such assistance payments will be at an annual rate
determined and paid monthly as follows: average daily net asset of less than $2
million, 0.10%; $2 million but less than $5 million, 0.15%; $5 million but less
than $10 million, 0.20% and $10 million or more, 0.30%.
B. Reserve Institutional Trust
With regard to the Reserve Institutional Trust, assistance payments to a
selected dealer will be at an annual rate determined and paid monthly at a rate
not to exceed 0.10%, 0.20%, 0.30% and 0.45% of the average daily net asset value
of the Institutional Funds Class A, Class B, Treasurer's Trust and Class C
Qualified Accounts, respectively.
EQUITY FUNDS
A Dealer, who is responsible for the sale of shares shall be compensated in
accordance with the 0.25% annual 12b-1 fee, paid monthly.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> U.S. GOVERNMENT INSTITUTIONAL FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> MAY-31-1999
<INVESTMENTS-AT-COST> 47,000,000
<INVESTMENTS-AT-VALUE> 47,000,000
<RECEIVABLES> 25,313
<ASSETS-OTHER> 877,205
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 47,902,519
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,642
<TOTAL-LIABILITIES> 1,642
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47,900,877
<SHARES-COMMON-STOCK> 47,900,877
<SHARES-COMMON-PRIOR> 9,069,430
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 47,900,877
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,137,540
<OTHER-INCOME> 0
<EXPENSES-NET> 139,737
<NET-INVESTMENT-INCOME> 1,997,803
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,997,803
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,997,803
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 185,966,100
<NUMBER-OF-SHARES-REDEEMED> 149,132,456
<SHARES-REINVESTED> 1,997,803
<NET-CHANGE-IN-ASSETS> 38,831,447
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 109,902
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 139,737
<AVERAGE-NET-ASSETS> 77,969,979
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.047
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.047
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.25
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> PRIMARY INSTITUTIONAL FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> MAY-31-1999
<INVESTMENTS-AT-COST> 304,932,656
<INVESTMENTS-AT-VALUE> 304,932,656
<RECEIVABLES> 626,465
<ASSETS-OTHER> 3,263
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 305,562,385
<PAYABLE-FOR-SECURITIES> 13,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,211
<TOTAL-LIABILITIES> 13,017,211
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 292,545,173
<SHARES-COMMON-STOCK> 292,545,173
<SHARES-COMMON-PRIOR> 186,488,476
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 292,545,173
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,718,458
<OTHER-INCOME> 0
<EXPENSES-NET> 994,496
<NET-INVESTMENT-INCOME> 8,723,962
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 8,723,962
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,723,962
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,544,713,374
<NUMBER-OF-SHARES-REDEEMED> 1,447,380,639
<SHARES-REINVESTED> 8,723,962
<NET-CHANGE-IN-ASSETS> 106,056,697
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 471,714
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 994,496
<AVERAGE-NET-ASSETS> 223,514,232
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.047
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.047)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.44
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> U.S. TREASURY INSTITUTIONAL FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> OCT-21-1998
<PERIOD-END> MAY-31-1999
<INVESTMENTS-AT-COST> 15,649,183
<INVESTMENTS-AT-VALUE> 15,649,183
<RECEIVABLES> 0
<ASSETS-OTHER> 75,256
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,724,438
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 344
<TOTAL-LIABILITIES> 344
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,724,094
<SHARES-COMMON-STOCK> 15,724,094
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 15,724,094
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 319,321
<OTHER-INCOME> 0
<EXPENSES-NET> 17,915
<NET-INVESTMENT-INCOME> 301,406
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 301,406
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 301,406
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 48,349,768
<NUMBER-OF-SHARES-REDEEMED> 32,927,080
<SHARES-REINVESTED> 301,406
<NET-CHANGE-IN-ASSETS> 15,724,094
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 18,824
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 45,168
<AVERAGE-NET-ASSETS> 12,324,547
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.025
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.025)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.60
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> MAY-31-1999
<INVESTMENTS-AT-COST> 34,099,870
<INVESTMENTS-AT-VALUE> 34,099,870
<RECEIVABLES> 108,560
<ASSETS-OTHER> 706,727
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,915,157
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,866
<TOTAL-LIABILITIES> 1,866
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34,913,291
<SHARES-COMMON-STOCK> 34,913,291
<SHARES-COMMON-PRIOR> 14,030,936
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 34,913,291
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 567,078
<OTHER-INCOME> 0
<EXPENSES-NET> 94,308
<NET-INVESTMENT-INCOME> 472,770
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 472,770
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 472,770
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 102,124,017
<NUMBER-OF-SHARES-REDEEMED> 81,714,432
<SHARES-REINVESTED> 472,770
<NET-CHANGE-IN-ASSETS> 20,882,355
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 41,856
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 94,308
<AVERAGE-NET-ASSETS> 18,021,881
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.028
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.028)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.60
</TABLE>
