<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION NO. 811-7734
33-63300
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 7 X
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 9
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(Check appropriate box or boxes.)
RESERVE PRIVATE EQUITY SERIES
(Exact Name of Registrant as Specified in Charter)
810 Seventh Avenue, New York, NY 10019
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 977-9982
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Marc C. Cozzolino, Esq., 810 Seventh Avenue, 17th Floor, New York, NY
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10019 (Name and Address of Agent for service)
It is proposed that filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485
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on (date) pursuant to paragraph (b) of Rule 485
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X 75 days after filing pursuant to paragraph (a) of Rule 485
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on (date) pursuant to paragraph (a) of Rule 485
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The Commission is requested to send copies of all communications to:
Paul F. Roye, Esq.
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
The Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 electing to register an indefinite number of
shares of beneficial interest. Registrant intends to file the notice required
by Rule 24f-2 with respect to its fiscal year ending May 31, 1996 on or before
July 31, 1996.
Total Pages
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<PAGE> 2
CROSS-REFERENCE SHEET PURSUANT TO RULE 495(a)
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FORM PROSPECTUS AND STATEMENT
N-1A OF ADDITIONAL INFORMATION
ITEM FORM CAPTION CAPTION
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PART A
1 Cover Page Cover Page
2 Synopsis Fund Expenses
3 Condensed Financial Information (omitted)
4 General Description of Registrant The Trust; Investment Objective and Policies;
Investment Techniques and Investments
5 Management of the Fund Management, Trustees and Officers of the Trust
6 Capital Stock and Other Securities Shares of Beneficial Interest; Taxes; Dividends and Distributions
7 Purchase of Securities Being Offered How to Buy shares
8 Redemption or Repurchase Redemptions
9 Legal Proceedings (omitted)
Part B
10 Cover Page Statement of Additional Information
11 Table of Contents Table of Contents
12 General Information and History (omitted)
13 Investment Objective and Policies Investment Policies; Other Policies
14 Management of the Registrant Trustees and Officers of the Trust
15 Control Person and Principal Trustees and Officers of the Trust
Holders of Securities
16 Investment Advisory and Other Investment Management and Other Agreement
Services
17 Brokerage Allocation Portfolio Turnover, Transaction Charges and
Allocation
18 Capital Stock and Other Securities Shares of Beneficial Interest
19 Purchase, Redemption, and Pricing Purchase, Redemption and Pricing of Shares;
of Securities Being Offered Dividends and Taxes
20 Tax Status Distributions and Taxes
21 Underwriters Investment Management and Other Agreements
22 Calculation of Performance Date Performance Informance
23 Financial Statements (omitted)
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<PAGE> 3
THE GENERAL INFORMATION, PURCHASES AND REDEMPTIONS
RESERVE NATIONWIDE 800-637-1700
FUNDS
RESERVE GROWTH AND INCOME FUND
The RESERVE GROWTH AND INCOME FUND (the "Fund" or "Growth and Income Fund")
is a newly offered series of shares issued by The Reserve Private Equity Series
("Trust") an open-end management investment company.
The Fund's investment objective is to provide income and some growth of
principal while moderating risk through diversification and hedging strategies.
Additionally a portion of the portfolio may be invested in natural resource
securities in an attempt to hedge the erosion of the purchasing power of the
assets resulting from inflation. The Fund seeks to achieve its objective by
primarily investing in convertible bonds, convertible preferred stocks, and
common stocks of companies that demonstrate favorable yields. Other debt
instruments including government and corporate bonds may also be included in
the portfolio. Typically, the Fund will seek to invest in companies where
emphasis is placed upon sound balance sheets, steady dividend growth, high
cash-flow, and low debt.
This Prospectus sets forth concisely the information about the Fund which a
prospective investor should know before investing. A Statement of Additional
Information dated______________, providing further details about the Fund, has
been filed with the Securities and Exchange Commission. The Statement of
Additional Information may be obtained upon request and without charge by
writing or calling the Fund at the telephone number shown above. The
Statement of Additional Information is hereby incorporated by reference into
this Prospectus.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Prospectus dated______________.
Investors are advised to read and retain this Prospectus for future reference.
<PAGE> 4
FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder of the
Fund will incur.
SHAREHOLDER TRANSACTION EXPENSES
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Maximum Sales Load Imposed on Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.50%
Maximum Sales Load Imposed on Reinvested Dividends . . . . . . . . . . . . . . . . . . . . . . . . None
Deferred Sales Load . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Redemption Fees* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Exchange Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
</TABLE>
*The Fund charges a $10 fee for wire redemptions of less than $10,000.
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
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GROWTH AND INCOME FUND
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Comprehensive Fee 1.50%
12b-1 Fee .25%
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Total Operating Expenses 1.75%
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The purpose of this table is to assist the investor in understanding the
costs and expenses that a shareholder in the Fund will bear directly or
indirectly. Because the 12b-1 fee is an annual charge, long-term shareholders
in the Fund may pay more than the economic equivalent of the maximum front-end
sales charges permitted by rules of the National Association of Securities
Dealers, Inc.
The Fund is charged a comprehensive fee (see "Management of the Fund" on
page __) which includes all management fees and ordinary operating expenses.
The following example illustrates the expenses a shareholder would pay on a
$1,000 investment over various time periods assuming: (1) a 5% annual rate of
return and (2) redemption at the end of each time period.
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1 YEAR 3 YEARS
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Growth and Income Fund $62 $98
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
THE TRUST
The Trust was formed on April 22, 1993 under Delaware law and is commonly
known as a Delaware business trust. It is an open-end management investment
company consisting, as of the date of this Prospectus, of seven separate
series. Additional series may be added in the future by the Board of Trustees.
The Reserve Growth and Income Fund (the "Fund", or "Growth and Income Fund")
which is offered by this Prospectus is a non-diversified mutual fund.
<PAGE> 5
The Growth and Income Fund is advised and managed by Reserve Management
Company, Inc. (the "Adviser"), which supervises the day-to-day investment
operations of the Fund. The Adviser and the Trust, on behalf of the Fund, have
entered into sub-advisory agreement with Kenneth J. Gerbino & Company, a
registered investment adviser.
INVESTMENT OBJECTIVE AND POLICIES
The Growth and Income Fund's investment objective is to provide income and
some growth of principal while moderating risk through diversification and
hedging strategies. Additionally a portion of the portfolio may be invested in
natural resource securities in an attempt to hedge the erosion of the
purchasing power of the assets resulting from inflation. The Fund seeks to
achieve its objective by primarily investing in convertible bonds, convertible
preferred stocks, and common stocks of companies that pay good yields. Other
debt instruments including government and corporate bonds may also be included
in the portfolio. Typically the fund will seek to invest in companies where
emphasis is placed upon sound balance sheets, steady dividend growth, high
cash-flow and low debt. There can be no assurance that the Fund will achieve
its investment objective.
When the Sub-Adviser deems it advisable because of unusual economic and
market conditions, the Fund may adopt a temporary defensive position and invest
all or a portion of its assets in cash or cash equivalents. To the extent the
Funds' assets are held in a temporary defensive position, the Fund will not be
achieving its investment objectives. The type of short-term investments the
Fund may hold includes but is not limited to obligations issued or guaranteed
by the U.S. Government or its agencies or instrumentalities, certificates of
deposit, time deposits and bankers' acceptances, letters of credit, short-term
notes and repurchase agreements, and instruments secured by any of the
foregoing or the equivalent thereof.
As a non-diversified investment company, the Fund is permitted to have all
its assets invested in a limited number of issuers. As a result, an investment
in the Fund could entail greater risk than a mutual fund with a policy of
diversification.
The Fund will not invest more than 15% of its net assets in illiquid
securities, including repurchase agreements maturing in more than seven days.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have a readily available market are not considered
illiquid for purposes of this limitation. The Fund will not make investments
in excess of 5% of its total assets in securities of companies that have
operated for less than three years, including the operations of predecessors,
and will not make any direct investment in oil, gas and mineral leases and real
estate except the Fund may acquire the securities of companies holding oil, gas
and mineral leases and real estate. The Fund will not invest more than 25% of
the value of its total assets in securities of issuers in any particular
industry or of any single foreign country (except U.S. Government securities).
INVESTMENT TECHNIQUES AND INVESTMENTS
PUT AND CALL OPTIONS ON SPECIFIC SECURITIES. The Fund may invest up to 5% of
the value of its total assets, represented by the premium paid, in the purchase
of put and call options on specific securities. Such options may be traded on
national securities exchanges or over-the-counter. The Fund may write and sell
covered put option contracts to the extent of 25% of the value of its total
assets at the time such option contracts are written. The Sub-Adviser has
extensive experience in the area of stock index options.
There is no limitation on the amount of call options the Fund may write. A
call option gives the purchaser of the option, in exchange for the premium
paid, the right to buy the security subject to the option at the exercise price
at any time prior to expiration of the option. The writer of a call option, in
return for the premium, has the obligation, upon the exercise of the option, to
deliver, depending upon the terms of the options contract, the underlying
securities or a specified amount of cash to the purchaser upon receipt of the
exercise price. A put option gives the purchaser, in return for a premium, the
right to sell the security subject to the option at the exercise price at any
time prior to the expiration of the option. The writer of a
<PAGE> 6
put option, in return for the premium, has the obligation, upon exercise of the
option, to acquire the security underlying the option at the exercise price.
If a call written by the Fund is exercised, the Fund forgoes any possible
profit from an increase in the market price of the underlying security or other
asset over the exercise price plus the premium paid. In writing puts, there is
a risk that the Fund may be required to take delivery of the underlying
security or other asset at a disadvantageous price. Also, an option purchased
by the Fund may expire worthless, in which case the Fund would lose the premium
paid therefor.
Over-the-counter options ("OTC options") differ from exchange traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of non-performance by the
dealer as a result of insolvency of the dealer or otherwise, in which event the
Fund may experience material losses. However, in writing options the premium
is paid in advance by the dealer. OTC options are available for a greater
variety of securities and other assets, and a wider range of expiration dates
and exercise prices, than for exchange traded options.
The Fund will only write covered options. An option is covered if, so long
as the Fund is obligated under the option, it owns an offsetting position in
the underlying security or maintains cash, U.S. Government securities or other
liquid high-grade debt obligations with a market value sufficient to cover its
obligations in a segregated account with its Custodian bank.
The successful use of options by the Fund is subject to the Sub-Adviser's
ability to correctly predict movements in the market. If the Sub-Adviser is
not successful in employing options in managing the Fund's investments, the
Fund's performance will be worse than if the Fund did not make such
investments. In addition, the Fund would pay commissions and other costs in
connection with such investments, which may increase the Fund's expenses and
reduce its return.
STOCK INDEX OPTIONS. The Fund may purchase and write put and call options on
stock indexes listed on national securities exchanges or traded in the
over-the-counter market as an investment vehicle for the purpose of realizing
its investment objective or for the purpose of hedging its portfolio. A stock
index fluctuates with changes in the market values of the stocks included in
the index.
The effectiveness of purchasing or writing stock index options will depend
upon the extent to which price movements in the Fund's underlying investment
securities correlate with the price movements of the stock index selected.
Because the value of an index option depends upon movements in the level of the
index rather than the price of an individual stock, whether the Fund will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of stock prices generally or, in the case
of certain indexes, in an industry or market segment, rather than movements in
the price of an individual stock. As a result, successful use by the Fund of
options on stock indexes will be subject to the Sub-Adviser's ability to
correctly predict movements in the direction of the stock market generally or
of a particular industry. This requires different skills and techniques than
those used in predicting changes in the price of individual stocks. The
Sub-Adviser has extensive experience in the area of stock index options.
When the Fund writes an option on a stock index, the Fund will place in a
segregated account with its custodian cash or liquid securities in an amount at
least equal to the market value of the underlying stock index and will maintain
the account while the option is open or will otherwise cover the transaction.
Index options also involve risks similar to those risks relating to futures
contracts described below.
FUTURES TRANSACTIONS IN GENERAL. The Fund is not a commodity pool but may
engage in futures and options on futures transactions as described below for
the purpose of hedging against changes in values of the Fund's investment
securities. Futures transactions require different skills and techniques than
those used in predicting changes in the price of individual investment
securities.
The Fund's ability to invest in futures and options thereon is limited to
bona fide hedging pursuant to regulations promulgated by the Commodity Futures
Trading Commission. In addition, the Fund may not engage in such activities if
the sum of the amount of initial margin deposits and premiums paid for
unexpired options on futures contracts will exceed 5% of the value of the
Fund's total assets, after taking into account unrealized profits and
unrealized losses on such contracts it has entered into; provided,
<PAGE> 7
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount is excluded in calculating the 5%.
Initially, the Fund will be required to deposit with the broker an amount
of cash or cash equivalents equal to approximately 5% of the contract amount.
This amount is known as "initial margin" and is in the nature of a deposit on
the contract which is returned to the Fund upon termination of the futures
contract, assuming all obligations thereunder have been satisfied. Subsequent
payments, known as "variation margin," to and from the broker, are made daily
as the price of the index or securities underlying the futures contract
fluctuates, making the long and short positions in the futures contract more or
less valuable, a process known as "marking-to-market". At any time prior to
the expiration of a futures contract, the Fund may elect to close the position
by taking an opposite position at the then prevailing price, which will
terminate the Fund's existing position in the contract.
Although the Fund intends to purchase or sell futures contracts only if
there is an active market for such contracts, no assurance can be given that a
liquid market will exist for the contracts at any particular time. Most
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single trading day. Once the daily limit
has been reached in a particular contract, no trades may be made that day at a
price beyond that limit. Futures contract prices could move to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and possibly subjecting some
traders therein to substantial losses. If the Fund cannot close a futures
position in anticipation of adverse price movements, the Fund will be required
to make daily cash payments of variation margin. In such circumstances, an
increase in the value of the investment securities being hedged, if any, may
offset partially or completely losses on the futures contract. However, no
assurance can be given that the price of the securities being hedged will
correlate with the price movements in a futures contract and thus provide an
offset to losses on the futures contract.
In addition, due to the risk of an imperfect correlation between the Fund's
investment securities that are subject to the hedging transaction and the
futures contract being used as a hedging device, it is possible that the hedge
will not be fully effective, in that losses on the investment securities may be
in excess of gains on the futures contract, or losses on the futures contract
may be in excess of the gains on the investment securities that were the
subject of the hedge. If the Sub-Adviser is not successful in employing
futures contracts and options thereon as hedging transactions, the Fund's
performance will be worse than if the Fund did not make such investments. In
futures contracts based on indexes, the risk of improper correlation increases
as the composition of the Fund's investment securities varies from the
composition of the index. In an effort to compensate for the imperfect
correlation of movements in the price of the securities being hedged and
movements in the price of the futures contracts, the Fund may buy or sell
futures contracts in a greater or lesser dollar amount than the dollar amount
of the securities being hedged if the historical volatility of the futures
contract has been lesser or greater than that of the underlying securities.
Such "over hedging" or "under hedging" may adversely affect the net asset value
of the Fund if market movements are not as anticipated when the hedge was
established.
The Fund will not purchase or sell futures contracts or related options for
which the aggregate initial margin and initial premiums exceed 5% of the value
of the Fund's total assets. In order to prevent leverage in connection with
the purchase of futures contracts or options thereon by the Fund, an amount of
cash, U.S. Government securities or other liquid high-grade debt obligations
with a daily market value equal to the value of the obligation under the
futures contract or option thereon (less any related margin deposits) will be
maintained in a segregated account at the Custodian Bank. Further, the
Internal Revenue Code's requirements for qualification as a regulated
investment company may also limit the extent to which the Fund can engage in
futures transactions. See "Distributions and Taxes" in the Statement of
Additional Information.
Participation in the options or futures markets involves investment risks
and transaction costs to which the Fund would not be subject absent the use of
these strategies. If the Sub-Adviser's predictions of movements in the
direction of the securities and interest rate markets are inaccurate, the
adverse consequences to the Fund may leave the Fund in a worse position than if
such strategies were not used. Risks inherent in the use of options and
futures contracts and options on futures contracts include (1)
<PAGE> 8
dependence on the Investment Adviser's ability to predict correctly movements
in the direction of interest rates, securities prices and markets; (2)
imperfect correlation between the price of futures contracts and options
thereon and movements in the prices of the securities being hedged; (3) the
fact that skills needed to use these strategies are different from those needed
to select portfolio securities; (4) the possible absences of a liquid secondary
market for any particular instrument at any time; (5) the possible need to
defer closing out certain hedged positions to avoid adverse consequences; and
(6) the possible inability of the Fund to purchase or sell a portfolio security
at a time that otherwise would be favorable to do so, or the possible need for
the Fund to sell a portfolio security at a disadvantageous time, due to the
need for the Fund to maintain "cover" or to segregate securities in connection
with hedging transactions. See "Distributions and Taxes" in the Statement of
Additional Information.
STOCK INDEX FUTURES. The Fund may purchase and sell stock index futures. A
stock index future obligates the seller to deliver (and the purchaser to take)
an amount of cash equal to a specific dollar amount times the difference
between the value of a specific stock index at the close of the last trading
day of the contract and the price at which the agreement is made. No physical
delivery of the underlying stocks in the index is made.
There can be no assurance of the successful use of stock index futures as a
hedging device. In addition to the possibility that there may be an imperfect
correlation between movements in the stock index future and the investment
securities being hedged, the price of stock index futures may not correlate
perfectly with the movement in the stock index because of various market
distortions. The risk of imperfect correlation increases as the composition of
the Fund's investment securities differs from the securities contained in the
applicable stock index. Although all participants in the futures market are
subject to margin deposit and maintenance requirements, certain investors may
close futures contracts through offsetting transactions rather than meeting
additional margin deposit requirements thus distorting the normal relationship
between the index and futures markets. In addition, for speculators the
deposit requirements in the futures market are less burdensome than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price distortions.
As a result of the foregoing, a correct forecast for general market trends by
the Sub-Adviser still may not result in a successful hedging transaction.
The successful use of stock index futures by the Fund is also subject to
the Sub-Adviser's ability to correctly predict movements in the market. If,
for example, the Fund has hedged against the possibility of a decline in the
market adversely affecting its investment securities and stock prices increase
instead, the Fund will lose part or all of the benefit of the increased value
of the stocks it has hedged due to the offsetting losses in its futures
positions. In addition, in such situations, if the Fund has insufficient cash
to meet its daily variation margin requirements, it may have to sell its
investment securities. Such sales may be, but will not necessarily be, at
increased prices which reflect the rising market. The Fund may have to sell
investment securities at a time when it is not advantageous to do so.
ILLIQUID SECURITIES. The Fund may hold up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist. Such
securities include securities that are not readily marketable, such as certain
securities that are subject to legal or contractual restrictions on resale,
repurchase agreements providing for settlement in more than seven (7) days
after notice, and certain asset-backed and mortgage backed securities. The
Fund will treat non-U.S. Government POs and IOs as defined on page __ as
illiquid securities so long as the staff of the Securities and Exchange
Commission maintains its position that such securities are illiquid.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that have a readily available market are not considered
illiquid for purposes of this limitation if they meet guidelines established
by the Board of Trustees.
Purchased OTC options and the assets used as cover for written OTC options
will be treated as illiquid securities so long as the staff of the Securities
and Exchange Commission maintains its position that such securities are
illiquid. However, the Fund may treat a certain portion of the securities it
uses as cover for written OTC options as liquid provided it follows a specified
procedure. The Fund may sell OTC options only to qualified dealers who agree
that the Fund may repurchase any options it writes for a maximum price
<PAGE> 9
to be calculated by a predetermined formula. In such cases, OTC options would
be considered liquid only to the extent that the maximum repurchase price under
the formula exceeds the intrinsic value of the option.
The Sub-Adviser will monitor the liquidity of such restricted securities
under the supervision of the Adviser and Board of Trustees.
CASH EQUIVALENTS. The Fund may invest in cash equivalents, which are
short-term obligations issued or guaranteed as to interest and principal by the
U.S. Government or any instrumentality thereof (including repurchase agreements
collateralized by such securities); and deposit type obligations of domestic
and foreign banks or the equivalent thereof. Instruments which are not rated
may also be purchased by the Fund provided such instruments are determined to
be of comparable quality by the Sub-Adviser under the supervision of the
Adviser and the Board of Trustees of the Trust to those instruments in which
the Fund may invest.
REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreement
transactions. A repurchase agreement is a transaction by which the Fund
purchases a security and simultaneously commits to resell that security to the
seller (a bank or securities dealer) at an agreed upon price at a later date.
The Fund will limit repurchase agreements to those securities dealers who are
deemed credit worthy pursuant to guidelines adopted by the Board of Trustees.
The Adviser will follow procedures to assure that all repurchase agreements are
always fully collateralized as to principal and interest. If the other party
to the repurchase agreement defaults on its obligation to repurchase the
underlying securities, the Fund may incur a loss upon disposition of them if
the value of those securities has declined. In the event of insolvency or
bankruptcy of the other party to a repurchase agreement, the Fund may encounter
difficulties and might incur costs upon exercise of its rights under the
repurchase agreement.
LENDING OF PORTFOLIO SECURITIES. The Fund 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, bank letters of credit or
securities issued by the U.S. Government or its agencies or instrumentalities
(or any combination thereof), which 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 value of the
securities loaned cannot exceed 25% of the Fund's total assets. Loan
arrangements made by the Fund will require the borrower, after notice, to
redeliver the securities within the normal settlement time of three (3)
business days. In connection with a loan of securities, the Fund may pay
reasonable finders, custodian and administrative fees. Loans of securities
involve risks of delay in receiving additional collateral or in recovering the
securities lent or even loss of rights in the collateral in the event of
insolvency of the borrower of the securities. The Statement of Additional
Information further explains the Fund's securities lending policies.
U.S. TREASURY SECURITIES. The Fund may invest in U.S. Treasury securities,
including Bills, Notes, Bonds and other debt securities issued by the U.S.
Treasury. These instruments are direct obligations of the U.S. Government and,
as such, are backed by the full faith and credit of the United States.
SECURITIES OF U.S. GOVERNMENT AGENCIES AND INSTRUMENTALITIES. The Fund may
invest in both adjustable rate and fixed rate securities issued or guaranteed
by agencies or instrumentalities of the U.S. Government, including, but not
limited to, Government National Mortgage Association (GNMA), Federal National
Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC)
securities. Obligations of GNMA, the Farmers Home Administration and the
Export-Import Bank are backed by the full faith and credit of the United
States. In the case of securities not backed by the full faith and credit of
the United States, the Fund must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment. Such securities include
obligations issued by the Student Loan Marketing Association (SLMA), FNMA and
FHLMC, each of which may borrow from the U.S. Treasury to meet its obligations
although the U.S. Treasury IS under no obligation to lend to such entities.
GNMA, FNMA and FHLMC may also issue collateralized mortgage obligations.
The Fund may invest in component parts of U.S. Government securities,
namely either the corpus (principal) of such obligations (principal only or
"PO" class) or one of the interest payments scheduled to be paid on such
obligations (interest only or "IO" class). These obligations may take the form
of (i) obligations
<PAGE> 10
from which the interest coupons have been stripped; (ii) the interest coupons
that are stripped: (iii) book-entries at a Federal Reserve member bank
representing ownership of obligation components; or (iv) receipts evidencing
the component parts (corpus or coupons) of U.S. Government obligations that
have not actually been stripped. Such receipts evidence ownership of component
parts of U.S. Government obligations (corpus or coupons) purchased by a third
party (typically an investment banking firm)and held on behalf of the third
party in physical or book-entry form by a major commercial bank or trust
company pursuant to a custody agreement with the third party. A "stripped
security" issued by an investment banking firm or other private organization is
not considered to be a U.S. Government security.
MANAGEMENT OF THE FUND
THE ADVISER. The Fund's Investment Adviser is Reserve Management Company,
Inc., 14 Locust Place, Manhasset, New York 11030, which manages The Reserve
Funds with over $3 billion in assets. The Adviser supervises a continuous
investment program for the Fund, evaluates and monitors the Sub-Adviser's
performance, investment program and compliance with applicable laws and
regulations and recommends to the Board of Trustees whether the Sub-Adviser's
contract should be continued or modified. The Adviser is also responsible for
the day-to-day administration of the Fund's activities. Under the Investment
Management Agreement, the Adviser pays all employee costs, costs of the
Sub-Adviser and other ordinary operating expenses of the Fund. Excluded from
ordinary operating expenses are interest, taxes, brokerage fees, extraordinary
legal and accounting fees and expenses, payments made pursuant to the Trust's
Distribution Plan and the fees of the disinterested Trustees.
For its services under the Investment Management Agreement and for paying
the Fund's ordinary operating expenses, the Adviser is paid a comprehensive fee
of 1.50% per annum of the average daily net assets of the Fund.
THE SUB-ADVISER. The Adviser and Trust have retained Gerbino & Company, 9595
Wilshire Boulevard, Suite 200, Beverly Hills, CA 90212 ("Sub-Adviser" or
"Gerbino & Company") as Sub-Adviser. Under the Sub-Advisory Agreement, Gerbino
& Company manages the assets of the Fund in accordance with its investment
objectives, investment programs, policies, and restrictions under the
supervision of the Adviser and Board of Trustees. The Adviser (not the Fund)
pays the Sub-Adviser for its services from the Investment Management Agreement.
The Sub-Adviser which was formed in 1977 currently manages $60 million for
high net worth individuals, pensions, and trusts, and has not previously served
as an Adviser or Sub-Adviser to a registered investment company. However, the
principals of the company have over 50 years experience in using the investment
policies discussed herein.
For its services, Gerbino & Co. receives a sub-advisory fee up to .75% per
annum of the Fund's average daily net assets.
The Investment Management Agreement and Sub-Advisory Agreement provide that
the Adviser and Sub-Adviser, respectively, shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which the agreements relate, except a loss resulting from
the willful misfeasance, bad faith or gross negligence on the part of the
Adviser or Sub-Adviser in the performance of their duties or from reckless
disregard by them of their duties under each respective agreement.
PORTFOLIO MANAGERS. Mr. Kenneth J. Gerbino has been an independent money
manager for 20 years and is a registered investment adviser. Mr. Gerbino is
responsible for macro economic trends and appropriate investment strategies for
the Fund. Mr. Raymond Baker has thirty two years of investment experience and
is Director of Investments at Gerbino & Co. Mr. Baker will be responsible for
the day-to-day investment recommendations and decisions for the Fund.
PERFORMANCE INFORMATION. Set forth below are certain performance data provided
by the Sub-Adviser.
<PAGE> 11
The following performance calculation was used to prepare the Sub-Adviser's
Investment Performance. In order to calculate investment performance, the
annual market value of the Sub-Adviser's portfolio was determined as the sum of
the market value of all of its assets (including cash, cash equivalents,
interest, dividends and securities). The annual rate of return was determined
on a time weighted basis as the percentage change of the Sub-Adviser's assets
after allowing for the effect of any cash additions or withdrawals which
occurred during the year. The investment performance reflects the cost of
brokerage commissions and most other expenses. The accounts were managed
utilizing the same investment objectives and policies as the Fund.
<TABLE>
<CAPTION>
Year Ended Sub-Adviser's S&P
December 31 Total Return 500
- ----------- -------------------- ------------
<S> <C> <C>
1991 24.3% 30.5%
1992 18.3% 7.7%
1993 34.5% 10.0%
1994 (7.0%) 1.3%
January 1, 1995 to
June 30, 1995 2.7% 20.2%
Annualized return for the
period January 1, 1991 to
June 30, 1995 15.2% 15.1%
</TABLE>
There are no advisory fees included in the gross return calculations.
These performance calculations assume the reinvestment of dividends and
distributions.
Investors should not rely on the above performance data of the Sub-Adviser
as an indication of the future performance of the Fund. It should be noted
that management of the Fund will be affected by the Fund's obligation to redeem
its shares upon request, regulatory requirements of the Investment Company Act
of 1940 and requirements of the Internal Revenue Code of 1986, as amended, to
qualify as a regulated investment company.
The Sub-Adviser's performance is compared to one stock market index.
Standard & Poor's 500 Stock Price Index is widely regarded by investors as
representative of the securities markets in general.
PORTFOLIO TRANSACTIONS. Decisions as to the purchase and sale of securities for
the Fund and the execution of these transactions, including the negotiation of
brokerage commissions on such transactions, are the responsibility of the
Sub-Adviser. In general, the Sub-Adviser seeks to obtain prompt and reliable
execution of purchase and sale orders at the most favorable net prices or
yields. In determining the best net price and execution, the Sub-Adviser may
take into account a broker's or dealer's operational and financial capabilities
and the type of transaction involved.
The Sub-Adviser may consider statistical, research, or other services
provided by the broker or dealers, some of which may be useful to the
Sub-Adviser in its other business functions. 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 as
determined in good faith by the Sub-Adviser. The Sub-Adviser is authorized to
place portfolio transactions with brokers or dealers participating in the
distribution of shares of the Fund, but only if the Sub-Adviser reasonably
believes that the execution and commission are comparable to those available
from other qualified firms. Further, subject to procedures adopted by, and
under the supervision of, the Board of Trustees, the Sub-Adviser is authorized
to place portfolio transactions with brokers or dealers affiliated with it,
provided the commission or fee paid on the transaction is reasonable and fair
when compared to the commission or fee charged by other brokers or dealers on
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time.
<PAGE> 12
The annual portfolio turnover rate of the Fund is expected to approximate
100% under normal market conditions. See "Portfolio Turnover, Transaction
Charges and Allocation" in the Statement of Additional Information.
TRUSTEES. Under the Declaration of Trust, which is governed by the laws of the
State of Delaware, the Trustees of the Trust are ultimately responsible for the
conduct of its affairs. 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.
The Declaration of Trust provides that a Trustee may be removed at any special
meeting of shareholders by a vote of a majority of the Trust's outstanding
shares.
TRANSFER AGENT AND DIVIDEND PAYING AGENT. The Trust acts as its own transfer
agent and dividend paying agent.
HOW TO BUY SHARES
METHOD OF PAYMENT. The minimum initial investment is $1,000 and the minimum
subsequent investment is $100, except for IRAs. The initial minimum investment
for an IRA is $250, and subsequent investments are accepted in any amount. The
Fund reserves the right, with respect to any person or class of persons, under
certain circumstances to waive or lower investment minimums. An initial
purchase must be accompanied by an Investment Application. If no dealer or
broker is named in the Investment Application, the Distributor will act as
dealer for you. You can buy shares of the Fund each business day at the public
offering price next determined after receipt of payment by the Fund or an
investment dealer which has a sales agreement with the Fund's Distributor of a
request in proper form. The public offering price is equal to net asset value
of the Fund plus a sales charge as set forth in the table below. Payments
(denominated in U.S. dollars) must be made (if purchasing directly from the
Fund):
- By check (drawn on a U.S. bank) payable to or endorsed to
Reserve Private Equity Series. You must include your account
number on each check unless it is an initial purchase. Checks
should be mailed to Reserve Private Equity Series, 810 Seventh
Avenue, New York, N.Y. 10019-5868. A fee (currently $15) will
be imposed if any check used for investment in your account
does not clear. The investor is also liable to reimburse the
Fund for any loss incurred due to a returned check.
- By wire: Prior to calling your bank, call the Fund for specific
instructions at 800-637-1700.
Investments in the Fund may also be made through investment dealers which
have sales agreements with Resrv Partners, Inc., the distributor of the Fund's
shares ("Authorized Dealer"). Such dealers should send the investor's
Investment Application and payment to the Fund. Payment should be made by
check or wire. Purchase orders will be confirmed at the public offering price
calculated next after receipt by the Fund or an Authorized Dealer, which order
must be promptly transmitted to the Fund, of the properly completed Investment
Application and payment. The Fund must be notified before 4:00 P.M. (New York
time) of the amount to be transmitted and the account to be credited and the
Fund must receive the credit at its bank by 4:00 P.M. (New York time). Orders
received by the Fund or an Authorized Dealer after 4:00 P.M. (New York time)
will be priced at the public offering price in effect at 4:00 P.M. (New York
time) on the next business day.
SALES CHARGE TABLE. Share purchases of the Fund are made at the public
offering price. The public offering price is the net asset value per share
plus a sales charge as shown below:
<PAGE> 13
<TABLE>
<CAPTION>
Dealers'
As a % As a % Reallowance
of Offering of Net Asset as a % of
Amount of Transaction Price per Share Value per Share Offering Price
- --------------------- --------------- --------------- --------------
<S> <C> <C> <C>
Less than $50,000 4.50 4.71 4.00
$50,000 to less than $100,000 3.50 3.63 3.00
$100,000 to less than $250,000 3.00 3.09 2.50
$250,000 to less than $500,000 2.50 2.56 2.00
$500,000 to less than $1,000,000 1.50 1.52 1.00
Over $1,000,000 0 0 0
</TABLE>
It is the position of the staff of the Securities and Exchange Commission
that if the dealer reallowance exceeds 90% a dealer may be considered an
underwriter under the Securities Act of 1933.
Shares of the Fund may be purchased at net asset value, without sales
charge, by brokers or broker-dealers who have a signed dealer agreement with
the Fund, by full time employees, their spouses and minor children of the
Adviser, Sub-Adviser, Resrv Partners, Inc., and other affiliated companies; any
Trustee of the Fund and their spouses; any trust, pension, profit sharing, or
other benefit plan in which any such foregoing person is a participant;
Sub-Adviser advisory clients and related persons of such; by a bank or broker
- -dealer that charges an asset management fee, provided the bank or
broker-dealer has an agreement with the Fund; and through reinvestment of
dividends and capital gains distributions.
Direct clients of Resrv Partners, Inc. who were Reserve money fund
shareholders as of September 30, 1995, may purchase shares of the Fund at net
asset value plus a maximum sales charge of 1%.
RIGHT OF ACCUMULATION. Reduced sales charges apply to any purchase of shares
of the Fund where the aggregate investment, including such purchase, is $50,000
or more. If, for example, you previously purchased and still hold shares of
the Fund with a current market value of $50,000 and subsequently purchase
shares of the Fund having a current value of $10,000, the sales charge
applicable to the subsequent purchase would be reduced to 3.50% of the offering
price.
To qualify for reduced sales charges, at the time of purchase you or your
dealer must notify the Fund or Resrv Partners, Inc., that such purchase should
be combined.
LETTER OF INTENT. Investors who anticipate that they will invest $50,000 (other
than through exchanges) or more in shares of the Fund within thirteen months
may execute a Letter of Intent on the form in the Investment Application. The
execution of a Letter of Intent will result in an investor paying a lower sales
charge, at the appropriate quantity purchase level shown above on all purchases
during a thirteen month period. Purchases of other Trust separate investment
portfolios that may be offered may be included to fulfill the Letter of Intent.
A purchase not originally made pursuant to a Letter of Intent may be included
under a backdated letter executed within 90 days of such purchase (accumulation
credit).
Out of an investor's initial purchase (or subsequent purchases) 5% of the
specified dollar amount of this Letter of Intent will be held in escrow by the
transfer agent in his/her account until his/her total purchases of the Fund
plus his/her accumulation credit (if any) equal the amount specified.
If total purchases plus an investor's accumulation credit are less than
specified amount, the investor agrees to remit to the distributor an amount
equal to the difference in dollar amount of sales charge the investor has
actually paid and the amount of sales charges which he/she would have paid on
his/her aggregate purchases if the total of such purchases had been made at a
single time. If the investor does not pay such difference in sales charges
within 20 business days after written request by the dealer, bank or
distributor, the transfer agent, upon instructions from the distributor is
authorized to effect the repurchase of an appropriate number of escrowed shares
in order to realize such difference.
<PAGE> 14
NET ASSET VALUE. Fund shares are issued at net asset value plus a sales charge
(if applicable) and redeemed at the net asset value next determined after
receipt by the Fund of a request in proper form. The net asset value of the
shares of the Fund is calculated at the close of business of the New York Stock
Exchange, on each day the New York Stock Exchange is open, which is currently
4:00 P.M. (New York time). The net asset value of the Fund will not be
determined on those days that the New York Stock Exchange is closed for trading
or on days on which no orders to purchase, sell or redeem shares have been
received by the Fund. The New York Stock Exchange is closed on the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas. The net asset
value per share of the Fund is determined by adding the value of all the Fund's
securities, cash and other assets, subtracting its liabilities, and dividing
the result by the number of its shares outstanding. Business days are days
when the New York Stock Exchange is open for regular trading.
INDIVIDUAL RETIREMENT ACCOUNTS. Investors may use the Fund as an investment
for Individual Retirement Accounts ("IRAs"). A master IRA plan, with
information regarding administration fees and other details are available from
Resrv Partners, Inc. The initial minimum investment is $250. Subsequent
investments are accepted in any amount.
DISTRIBUTOR. The Fund's distributor is Resrv Partners, Inc., 810 Seventh
Avenue, New York, N.Y. 10019. The distributor is a wholly-owned subsidiary of
the Adviser.
All orders for the purchase of shares of the Fund are subject to
acceptance or rejection by Resrv Partners, Inc. in its sole discretion. The
sale of shares will be suspended during any period when the determination of
net asset value is suspended, and may be suspended by the Board of Trustees
whenever in its judgment it is in the best interests of the Fund to do so.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares in the
Reserve money market funds at net asset value and other separate investment
portfolios that may be offered by the Trust at net asset value. No sales
charge applies to exchanges between identical classes of shares or from the
Reserve money market funds to no-load classes of shares. Exchanges of shares
from the Reserve money market funds to classes other than no-load classes are
subject to applicable sales charges on the Fund unless a waiver of the sales
charge is applicable. A waiver of the sales charge may apply if the shares
being exchanged from the Reserve money market funds were acquired: (a) by a
previous exchange from shares of the portfolio purchased with a sales charge,
or (b) through investments of dividends or capital gains distributions with
respect to the foregoing category of shares. Shares of any of the money market
funds or the Fund must be registered for sale in the investor's state.
The exchange privilege is not available for shares which have been held
for less than 15 days. Exchanges by telephone are an automatic privilege
unless the shareholder notifies the Fund on the Investment Application that his
authorization has been withheld. Unless authorization is withheld, the Fund
will honor requests by any person by telephone at (212) 977-9880 or (800)
637-1700. The Fund and its 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 Fund also may require the use of a password or other form of personal
identification. In addition, the Fund will provide written confirmation of
exchange transactions. During periods of volatile economic and market
conditions, a shareholder may have difficulty making a exchange request by
telephone, in which case an exchange request would have to be made in writing.
The Trust may modify or discontinue the exchange privilege at any time,
and will do so on sixty (60) days' notice, if such notice is required by
regulations adopted under the Investment Company Act of 1940. 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. Purchases and exchanges should be made for investment
purposes only. 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
<PAGE> 15
investor. The Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the best
interests of the Fund and its other shareholders. The Fund may take such
action, which includes, but is not limited to the imposition of fees.
Investors should be aware that the Fund may, in its discretion, limit or
otherwise restrict the number of times this Exchange Privilege may be exercised
by any investor. Any such restriction will be made on a prospective basis,
upon notice to the shareholder not later than 10 days following such
shareholder's most recent exchange. Telephone and written exchange requests
must be received by the Fund by 4:00 P.M. (New York time) on a regular business
day to take effect that day. Telephone exchanges may be effected on regular
business days from 9:00 A.M. to 4:00 P.M. (New York time). Exchange requests
received after 4:00 P.M. (New York time) will be effected at the next
calculated net asset value plus a sales charge (if applicable).
Exchanges of shares are taxable events and may result in a gain or loss
for federal income tax purposes. A prospectus for any of the Reserve money
market funds or other series of the Trust may be obtained from the Distributor
or any Authorized Dealer. An investor considering an exchange should refer to
the appropriate fund prospectus for additional information since each Reserve
money market fund and series of the Trust has different investment objectives
and policies.
DISTRIBUTION PLAN. Under the Plan of Distribution ("Plan"), adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, the Fund pays Resrv
Partners, Inc. for advertising, marketing and distributing the Fund's shares
and for servicing Fund shareholders at an annual rate of .25% of the value of
the Fund's average daily net assets. The Fund is not obligated to pay any
distribution expense in excess of such distribution services fee. If the Plan
were terminated or not continued, no amounts (other than amounts accrued but
not yet paid) would be owed by the Fund.
Under the Plan, Resrv Partners, Inc. may make payments to brokers,
financial institutions and financial intermediaries for administration, for
servicing Portfolio shareholders who are also their clients and/or for
distribution. Resrv Partners, Inc. determines the amounts to be paid to
brokers, financial institutions and financial intermediaries ("Firms"). Firms
receive such fees in respect of the average daily net asset value of the Fund's
shares owned by shareholders for whom the Firm performs servicing or for whom
the Firm is the dealer of record. Financial institutions providing
distribution assistance or administrative services for the Fund may be required
to register as securities dealers in certain states. The fees payable to Resrv
Partners, Inc. under the Plan for advertising, marketing and distributing the
Fund's shares and for payments to Firms are payable without regard to actual
expenses incurred. Resrv Partners, Inc. may use such fees to promote the sale
of shares such as by paying for the preparation, printing and distribution of
prospectuses to other than current shareholders or other promotional
activities.
The Glass-Steagall Act and other applicable laws prohibit federally
chartered or supervised banks from engaging in the business of issuing,
underwriting, selling or distributing securities although national and state
chartered banks are permitted to purchase and sell securities upon the order
and for the accounts of their customers. Those persons who wish to provide
assistance in the form of activities not primarily intended to result in the
sale of Trust shares (such as administrative and account maintenance services)
may include banks, upon advice of counsel that they are permitted to do so
under applicable laws and regulations, including the Glass-Steagall Act. In
such event, no preference will be given to securities issued by such banks as
investments and the assistance payments received by such banks under the Plan
may or may not compensate the banks for their administrative and account
maintenance services for which the bank may also receive compensation from the
bank accounts they service. It is management's position that payments to banks
pursuant to the Plan for activities not primarily intended to result in the
sale of Trust shares, such as administrative and account maintenance services,
do not violate the Glass-Steagall Act. However, this is an unsettled area of
the law and if a determination contrary to management's position is made by a
bank regulatory agency or court concerning payments to banks contemplated by
the Plan, any such payments will be terminated and any shares registered in the
bank's name, for its underlying customer, will be registered in the name of
that customer.
<PAGE> 16
SHARES OF BENEFICIAL INTEREST
The Trust is an open-end management investment company commonly known as
a mutual fund. The Trust was organized as an unincorporated Delaware business
trust on April 22, 1993 and is authorized to issue an unlimited number of
shares of beneficial interest, which may be issued in any number of series.
Shareholders are entitled to a full vote for each full share held (and
fractional votes for fractional shares) and have equal rights with respect to
earnings, dividends, redemption and in the net assets of their respective
series on liquidation. The Trust has no intention of issuing share
certificates. All shares issued will be fully paid and non-assessable and will
have no preemptive or conversion rights. The Trustees do not intend to hold
annual meetings of shareholders. The Trustees will call such special meetings
of Shareholders as may be required under the Investment Company Act of 1940
(e.g., to approve a new investment advisory agreement or to change the
fundamental investment policies) or by the Declaration of Trust.
TAXES
The Fund intends to maintain its regulated investment company status for
federal income tax purposes, so that it will not be liable for federal income
taxes to the extent its net income and net capital gains are distributed. The
requirement for maintaining its status as a regulated investment company under
the Internal Revenue Code ("Code") may cause the Fund to restrict the degree to
which it engages in short term trading, short sales and transactions in options
and futures contracts. Dividends paid by the Fund from net investment income,
including net short term capital gains, whether in cash or in additional shares
of the Fund, will be taxable as ordinary income.
The Code imposes a non-deductible, 4% excise tax on regulated investment
companies that do not distribute to their shareholders in each calendar year an
amount equal to (i) 98% of their calendar year ordinary income, plus 98% of
their capital gain net income (the excess of short and long term capital gains
over short and long term capital losses) for the one year period ending October
31. Dividends declared in December of any year to shareholders of record on
any date in December will be deemed to have been received by the shareholders
and paid by the Fund on the record date, provided such dividends are paid
during January of the following year.
Distributions from long term capital gains designated by the Fund as
capital gain dividends whether paid in cash or additional shares of the Fund,
are taxable for Federal income tax purposes as long term capital gains,
regardless of the length of time Trust shares have been held and are not
eligible for the dividends received deduction available to corporations.
Dividends and other distributions may also be subject to state and local taxes.
A purchase of Fund shares shortly before the ex-dividend date or capital gains
distribution could result in the receipt of an amount which, although in effect
a return of principal, is subject to income taxes.
Under the Code exchanges and redemptions of shares, including transfers
of shares of the Fund for shares of another fund with which the Fund has
exchange privileges, are taxable events and, accordingly, may result in capital
gain or loss for shareholders participating in such transactions. Deductions
for losses recognized on the disposition of shares may in some circumstances be
disallowed or deferred. However, if the shares exchanged have been held less
than 91 days, the sales charge paid on such shares is not included in the tax
basis of the exchanged shares, but is carried over and included in the tax
basis of the shares acquired. Furthermore, shareholders electing to reinvest
dividends or other distributions in new shares will nevertheless be treated as
having received such distributions for tax purposes.
For tax purposes, the Fund will send shareholders an annual notice of
dividends and distributions paid during the prior year. Shareholders are
advised to retain all statements received from the Fund to maintain accurate
records of their investments. The tax treatment of non-resident alien
individuals, foreign corporations, and other non-U.S. shareholders may differ
from that described above. Shareholders should consult their own tax advisers
regarding specific questions as to federal, state and local taxes with specific
reference to their own tax situation.
<PAGE> 17
DIVIDENDS AND DISTRIBUTIONS
Shareholders may receive two kinds of distributions from the Fund: dividends
and capital gains distributions. All dividends and capital gains distributions
are paid in the form of additional shares credited to an investor's account at
net asset value unless the shareholder has requested on the Investment
Application or in writing to the Fund one of the following three options:
(1) Dividend Option - to receive income dividends in cash and capital
gains distributions in additional shares.
(2) Distribution Option - to receive capital gains distributions in
cash and income dividends in additional shares.
(3) Dividend and Distribution Option - to receive both income dividends
and capital gains distributions in cash.
These three options are not available, however, for retirement plans or an
account with a net asset value of less than $1,000.
Any net investment income will be distributed quarterly as dividends to
shareholders. Any net realized short and long term capital gains, if any, will
be paid to shareholders at least annually.
REDEMPTIONS
TIME AND METHOD OF REDEMPTION. Fund shares are redeemed at net asset value
determined as of the next close of the New York Stock Exchange on a regular
business day after the written request by any person in proper form is received
by the Fund, at 810 Seventh Avenue, 17th Floor, New York, New York 10019-5868.
Redemptions may be effected during regular business days from 9:00 A.M. to 4:00
P.M. (New York time). Redemption requests received after 4:00 P.M. (New York
time) will be effected at the next calculated net asset value. If the Fund has
previously been advised in writing of your brokerage or bank account, telephone
requests by any person are accepted for payment to such account by calling
800-637-1700. The procedures and potential liability of the Fund and its
affiliates in connection with telephone exchanges as discussed in "Exchange
Privilege" above also apply to telephone redemptions. To reduce such risk,
proceeds of telephone redemptions may be sent only to a bank or brokerage
account designated by the shareholder, in writing, on the Investment
Application or in a letter with the signature(s) guaranteed and telephone
redemption requests will be recorded. All other redemption requests must be
signed by the registered owner(s) with signature(s) guaranteed by a member firm
of a national securities exchange, a domestic commercial bank, credit union,
savings bank, savings and loan association or domestic trust company. If an
account has multiple owners, the Fund may rely on the instructions of any one
owner unless otherwise instructed in writing. Guarantees from notaries public
are unacceptable. Additional documentary evidence of authority is required in
the event redemption is requested by a corporation, partnership, trust,
fiduciary, executor, or administrator. Changes in redemption instructions,
registration or authorized signatures must be in writing with the signature(s)
guaranteed. Payments of $10,000 or more will be wired upon request without
charge. A shareholder will be charged $10 for wires of less than $10,000. The
Fund assumes no responsibility for delays in the receipt of wired or mailed
funds. The use of a predesignated financial institution, such as a savings
bank, savings and loan association or credit union, which is not a member of
the Federal Reserve wire system to receive your wire could cause such a delay.
The Fund ordinarily will make payment for all shares redeemed within seven
(7) days after receipt of a redemption request in proper form except as
provided by rules of the Securities and Exchange Commission or until your
purchase check has cleared (see "Restrictions", below). The Fund will provide
written confirmation of redemption transactions.
<PAGE> 18
The Fund reserves the right to refuse a telephone redemption if its
believes it is advisable to do so. Procedures for telephone redemptions may be
modified or terminated by the Fund at any time upon proper notice to
shareholder. During times of drastic economic or market conditions,
shareholders may experience difficulty in contacting the Trust by telephone to
request a redemption of shares. In such cases shareholders should consider
using another method of redemption, such as a written request.
REDEMPTIONS THROUGH BROKERS AND FINANCIAL INSTITUTIONS. Redemptions through
brokers and financial institutions may involve such other parties' own
redemption minimums, service fees, and other redemption requirements.
SMALL ACCOUNTS. The Fund reserves the right to redeem shares in any account
with a balance of less than $1,000 in share value. Prior to any such
redemption, the Fund will give the shareholder thirty (30) days' written notice
during which time the shareholder may increase their investment to avoid having
their shares redeemed. The $1,000 minimum balance will be waived if the
account balance drops below $1,000 due to market activity. IRA accounts would
not be subject to this requirement. Shareholders whose account has a balance of
$1,000 must achieve a balance of $2,500 within 12 months or the Funds may
choose to impose a fee (currently $5.00 monthly).
RESTRICTIONS. The right of redemption may be suspended or the date of payment
postponed for more than seven (7) days only (a) when the New York Stock
Exchange is closed (other than for customary closings); (b) when, as determined
by the Securities and Exchange Commission ("SEC"), trading on the Exchange is
restricted or an emergency exists making it not reasonably practicable to
dispose of securities owned by the Fund or for it to determine the fair value
of its net assets; or (c) for such periods as the SEC may by order permit. If
shares of the Fund are purchased by check, 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 will generally be up
to ten (10) business days. When a purchase is made by wire and subsequently
redeemed, the proceeds from such redemption normally will not be transmitted
until two (2) business days after the purchase by wire.
GENERAL INFORMATION
BACKUP WITHHOLDING. The Fund is required by Federal law, subject to certain
exemptions, to withhold 31% of dividends, capital gains distributions and
payments for shares redeemed. In order to avoid this withholding requirement
investors are required to certify, on the account application or separate W-9
Form, that their taxpayer identification number is correct, that they are not
currently subject to backup withholding, or that they are exempt from backup
withholding and the Fund must not have been directed by the IRS to backup
withhold. Shareholders should be aware that, under regulations promulgated by
the Internal Revenue Service, the Fund may be fined $50 annually for each
account for which a certified taxpayer identification number is not provided.
In the event that such a fine is imposed with respect to an uncertified account
in any year, a corresponding charge will be made against the account.
REPORTS AND STATEMENTS. Shareholders receive an annual report containing
audited financial statements and an unaudited semi-annual report. A statement
is mailed to each shareholder at least quarterly.
SPECIAL SERVICES. The Fund reserves the right, upon notice, to charge
shareholder accounts for specific costs incurred in processing unusual
transactions for shareholders. Such transactions include, but are not limited
to, stop payment requests on official Trust checks, returned checks and special
research services.
PERFORMANCE. From time to time, in advertisements and sales literature, the
Fund may present information regarding the total return on a hypothetical
investment in the Fund for various periods of performance and may make
comparisons of such total return to various stock indices (group of unmanaged
common stocks), including the New York Stock Exchange Composite Index, Standard
& Poor's 500 Stock Index, and the Dow Jones Industrial Average, the NASDAQ
Composite Index, or to groups of comparable mutual funds.
<PAGE> 19
Total return for a period is the percentage change in value during the
period of an investment in the Fund's shares, including the value of shares
acquired through reinvestment of all dividends and capital gains distributions.
The average annual total return for a given period may be calculated by finding
the average annual compounded rate of return that would equate to a
hypothetical $1,000 investment to the value of that investment that could be
redeemed at the end of the period, assuming reinvestment of all distributions.
All of the calculations described above will assume the reinvestment of
dividends and distributions in additional shares of the Fund and the deduction
of the maximum sales load from the initial investment.
In addition to the figures described above, the Fund might use rankings or
ratings determined by Lipper Analytical Services, Inc., an independent service
that monitors the performance of over 1,000 mutual funds, Morningstar, Inc., or
another service to compare the performance of the Fund with the performance of
(i) other funds of similar size and investment objective or (ii) broader groups
of funds. Such comparative performance information will also be stated in the
same terms in which the comparative data or indices are stated. For these
purposes, the performance of the Fund, as well as the performance of the mutual
funds, do not reflect sales loads, the inclusion of which would reduce Fund
performance.
Performance of the Fund will vary from time to time, and past results are
not necessarily indicative of future results. Performance information supplied
by the Fund may not provide a basis of comparison with other investments using
different reinvestment assumptions or time periods.
---------------------------
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.
----------------------------
<PAGE> 20
RESERVE PRIVATE EQUITY SERIES
RESERVE GROWTH AND INCOME FUND
810 SEVENTH AVENUE, NEW YORK, N.Y. 10019
(800) 637-1700
----------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information describes Reserve Private
Equity Series ("Trust") and the Reserve Growth and Income Fund ("Growth and
Income Fund" or "Fund"). This Statement is not a Prospectus, but provides
detailed information to supplement the Prospectus and should be read in
conjunction with the Prospectus. A copy of the Prospectus may be obtained
(without charge) from Reserve Private Equity Series. This Statement is dated
__________________, 1995.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies . . . . . . . . . . . . . . . . . . . . . . . .
Other Policies . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trustees and Officers of the Trust . . . . . . . . . . . . . . . . .
Investment Management and Other Agreements . . . . . . . . . . . . .
Portfolio Turnover, Transaction Charges and . . . . . . . . . . . .
Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares of Beneficial Interest . . . . . . . . . . . . . . . . . . .
Purchase, Redemption and Pricing of Shares . . . . . . . . . . . . .
Distributions and Taxes . . . . . . . . . . . . . . . . . . . . . .
Performance Information . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 21
INVESTMENT POLICIES
The Fund has adopted as fundamental policies the following limitations
on its investment activities. These fundamental policies may not be changed
without a majority vote of the Fund shareholders, as defined in the Investment
Company Act of 1940. The Large-Cap Value Equity Fund may not:
(1) borrow money except as a temporary measure for extraordinary or emergency
proposes and then only in an amount not to exceed 33 1/3% of the market value
of its assets; (2) issue senior securities as defined in the Investment
Company Act of 1940 except that the Fund may borrow money in accordance with
limitation (1); (3) act as an underwriter with respect to the securities of
others except 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) invest 25% or more of the value of its total
assets in the securities of issues in any particular industry; (5) purchase,
sell or otherwise invest in real estate or commodities or commodity contracts
except the Fund may purchase readily marketable securities of companies holding
real estate or interests therein and interest rate futures contracts, stock
index futures contracts, and put and call options on interest rate futures
contracts; (6) invest in voting securities or in companies for the purpose of
exercising control; and (7) purchase securities on margin, except to obtain
such short-term credits as may be necessary for the clearance of transactions;
however, the Fund may make margin deposits in connection with options and
financial futures transactions.
In addition to the fundamental investment policies listed above, the
Fund has voluntarily adopted certain policies that may be changed or amended by
action of the Trustees without requiring prior notice to or approval of
shareholders. In accordance with such policies and restrictions the Fund
cannot:
(1) purchase from or sell investment securities to any of the officers
or Trustees of the Trust, its investment adviser, its investment sub-adviser,
its principal underwriter or the officers, principals or directors of its
investment adviser, investment sub-adviser or principal underwriter; and (2)
purchase or retain securities of an issuer any of whose officers, directors,
trustees or securityholders is an officer or Trustee of the Trust or a member,
officer, director or trustee of the investment adviser or sub-adviser of the
Fund if one or more of such individuals owns beneficially more than one-half of
one percent (1/2 of 1%) of the securities (taken at market value) of such
issuer and such individuals owning more than one-half of one percent (1/2 of
1%) of such securities together beneficially own more than 5% of such
securities or both.
As a non-diversified company, the Fund is permitted to invest all of
its assets in a limited number of issuers. However, it intends to comply with
Subchapter M of the Internal Revenue Code in order to qualify as a regulated
investment company for federal income tax purposes. To so qualify, the Fund
must diversify its holdings so that, at the close of each quarter of its
taxable year, (a) at least 50% of the value of its total assets is represented
by cash, cash items, securities issued by the U.S. Government or its agencies
or instrumentalities, securities of other regulated investment companies, and
other securities limited generally with respect to any one issuer to an amount
not more than 5% of the total assets of the Fund and not more than 10% of the
outstanding voting securities of such issuer, and (b) not more than 25% of the
value of its total assets is invested in the securities of any one issuer
(other than the U.S. Government or its agencies or instrumentalities or
regulated investment companies), or in two or more issuers that the Fund
controls and that are engaged in the same or similar trades or businesses. In
the event of a decline in the market value of the securities of one or more
such issuers exceeding 5%, an investment in the Fund could entail greater risk
than in a fund which has a policy of diversification.
<PAGE> 22
OTHER POLICIES
LENDING OF SECURITIES. The Fund may, to increase its income, lend its
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, at least equal the value of the
loaned securities and must consist of cash, bank letters of credit or
securities of the United States Government (or its agencies or
instrumentalities). To be acceptable as collateral, letters of credit must
obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. Such terms and the issuing bank would have to be
satisfactory to the Fund. Any loan might be secured by any one or more of the
three types of collateral. The Fund receives amounts equal to the dividends or
interest on loaned securities and also receives one or more negotiated loan
fees, interest on securities used as collateral or interest on short term debt
securities purchased with such collateral, either of which type of interest may
be shared with the borrower. The Fund may also pay reasonable finders,
custodian and administrative fees. Loan arrangements made by the Fund will
comply with all other applicable regulatory requirements including the rules of
The New York Stock Exchange, which require the borrower, after notice, to
redeliver the securities within the normal settlement time of three business
days. While voting rights may pass with the loaned securities, if a material
event will occur affecting an investment on loan, the loan must be called and
the securities voted.
WARRANTS. The Fund also may invest up to 5% of its net assets in warrants.
Included within this amount, may be warrants which are not listed on the New
York or American Stock Exchanges. A reason for investing in warrants is to
permit the Fund to participate in an anticipated increase in the market value
of a security without having to purchase the security to which the warrants
relate. Warrants convey no rights to dividends or voting rights, but only an
option to purchase equity securities of the issuer at a fixed price. If such
securities appreciate, the warrants may be exercised and sold at a gain, but a
loss will be incurred if such securities decrease in value or the term of the
warrant expires before it is exercised. The 5% limitation does not include
warrants acquired by the Fund in units or attached to other securities.
ILLIQUID SECURITIES. The Fund may not invest more than 15% of its net assets
in repurchase agreements which have a maturity of longer than seven days or in
other illiquid securities, including securities that are illiquid by virtue of
the absence of a readily available market or legal or contractual restriction
on resale. Historically, illiquid securities have included securities subject
to contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended ("Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have
an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might also have to
register such restricted securities in order to dispose of them resulting in
additional expense and delay. Adverse market conditions could impede such a
public offering of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. Institutional investors
depend on an efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor
<PAGE> 23
a demand for repayment. The fact that there are contractual or legal
restrictions on resale to the general public or to certain institutions may
not be indicative of the liquidity of such investments.
Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. The Sub Adviser anticipates that the market
for certain restricted securities such as institutional commercial paper will
expand further as a result of this new regulation and the development of
automated systems for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers, such as the PORTAL System sponsored
by the NASD.
Restricted securities eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 for which there is a readily available market will
not be deemed to be illiquid if they meet guidelines established by the Board
of the Trustees. The Adviser will monitor the liquidity of such restricted
securities subject to the supervision of the Board of Trustees. In reaching
liquidity decisions, the Adviser will consider, inter alia, the following
factors: (1) the frequency of trades and quotes for the security; (2) the
number of dealers wishing to purchase or sell the security and the number of
potential purchasers; (3) dealer undertakings to make a market in the security
and (4) the nature of the security and the nature of the marketplace trades
(e.g. the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer). Repurchase agreements subject to
demand are deemed to have a maturity equal to the notice period.
RISKS OF OPTIONS TRANSACTIONS. An exchange-traded option position may be
closed out only on a national securities exchange ("Exchange") which provides a
secondary market for an option of the same series. Although the Fund will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market
on an Exchange will exist for any particular option at any particular time, and
for some exchange-traded options, no secondary market on an Exchange may exist.
In such event, it might not be possible to effect closing transactions in
particular options with the result that the Fund would have to exercise its
exchange-traded options in order to realize any profit and may incur
transaction costs in connection therewith. If the Fund as a covered call
option writer is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an Exchange
include the following (a) insufficient trading interest in certain options; (b)
restrictions or transactions imposed by an Exchange; (c) trading halts,
suspension or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (d) interruption of the normal
operations on an Exchange; (e) inadequacy of the facilities of an Exchange or
the Options Clearing Corporation ("OCC") to handle current trading volume; or
(f) a decision by one or more Exchanges to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on the Exchange (or in the class or series of options) would cease to
exist, although outstanding options on that Exchange that had been issued by
the OCC as a result of trades on that Exchange would generally continue to be
exercisable in accordance with their terms.
In the event of the bankruptcy of a broker through which the Fund
engages in options transactions, the Fund could experience delays and/or losses
in liquidating open positions purchased or sold through the broker and/or incur
a loss of all or part of its margin deposits with the broker. Similarly, in
the event of the bankruptcy of the writer of an over-the-counter option with a
recognized United States securities dealer ("OTC option") purchased by the
Fund, the Fund could experience a loss of all or part of the value of the
<PAGE> 24
option. Transactions are entered into by the Fund only with brokers or
financial institutions deemed creditworthy by the Sub-Adviser.
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the option
markets close before the market for the underlying securities, significant
price and rate movements can take place in the underlying markets that cannot
be reflected in the option markets.
FINANCIAL FUTURES CONTRACTS, INCLUDING STOCK INDEX FUTURES, AND OPTIONS ON
FUTURES CONTRACTS. The Fund may enter into financial futures contracts,
including contracts for the purchase or sale for future delivery of foreign
currencies and futures contracts based on stock indices and may purchase and
write put and call options to buy or sell futures contracts ("options on
futures contracts"). A sale of a futures contract entails the acquisition of a
contractual obligation to deliver the foreign currency or other commodity
called for by the contract at a specified price on a specified date. A
purchase of a futures contract entails the incurring of a contractual
obligation to acquire the commodity called for by the contract at a specified
price on a specified date. The Fund's Custodian will place cash not available
for investment or U.S. Government Securities or other liquid high-quality debt
securities in a separate account of the Fund having a value equal to the
aggregate amount of the Fund's commitments in futures contracts. The purchaser
of a futures contract on an index agrees to take or make delivery of an amount
of cash equal to the difference between a specified dollar multiple of the
value of the index on the expiration date of the contract and the price at
which the contract was originally struck. No physical delivery of the
securities underlying the index is made. In connection with its purchase of
stock index futures contracts, the Fund will deposit in a segregated account
with the Fund's Custodian an amount of cash or U.S. Government Securities (as
defined below) or other liquid high-quality debt securities equal to the market
value of the futures contracts less any amounts maintained in a margin account
with the Fund's broker. Options on futures contracts to be written or
purchased by the Fund will be traded on U.S. or foreign exchanges or over the
counter.
With respect to futures contracts and options on futures contracts
that are purchased for purposes other than for "bona fide hedging purposes" (as
defined in Commodity Futures Trading Regulations promulgated under the
Commodity Exchange Act), the aggregate initial margin and premiums required to
be paid by the Fund to establish such positions will not exceed on all
outstanding futures contracts of the Fund and premiums paid on outstanding
options on futures contracts 5% of the liquidation value of the total assets of
the Fund, after taking into account unrealized profits and unrealized losses on
any such contracts the Fund has entered into.
GENERAL. The successful use of the foregoing derivative investment products
draws upon the Adviser's special skills and substantial experience with respect
to such products and depends on the Adviser's ability to forecast currency
exchange rate movements correctly. Should exchange rates move in an unexpected
manner, the Fund may not necessarily achieve the anticipated benefits of
futures contracts, options, or forward contracts, or may realize losses and
thus be in a worse position than if such products had not been used. Unlike
many exchange-traded futures contracts and options on futures contracts, there
are no daily price fluctuation limits with respect to options on currencies and
forward contracts, and adverse market movements could therefore continue to an
unlimited extent over a period of time. In addition, the correlation between
movements in the price of securities and currencies hedged or used for cover
will not be perfect and could produce unanticipated losses.
The Fund's ability to dispose of its positions in futures contracts,
options, and forward contracts will depend on the availability of liquid
markets in such instruments. Markets in options and futures with respect to a
number of securities and currencies are relatively new and still developing.
It is impossible to
<PAGE> 25
predict the amount of trading interest that may exist in various types of
futures contracts, option and forward contracts. If a secondary market does
not exist with respect to an over-the-counter option purchased or written by
the Fund, it might not be possible to effect closing transactions in the option
(i.e., dispose of the option), with the result that Ii) an option purchased by
the Fund to realize any profit and (ii) the Fund may not be able to sell
currencies or portfolio securities covering an option written by the Fund until
the option expires or it delivers the underlying futures contract or currency
upon exercise. Therefore, no assurance can be given that the Fund will be able
to utilize these instruments effectively for the purposes set forth above.
Furthermore, the Fund's ability to engage in options and futures transactions
may be limited by tax considerations. See "Dividends, Distributions and
Taxes-U.S. Federal Income Taxes."
TRUSTEES AND OFFICERS OF THE TRUST
BRUCE R. BENT, President, Treasurer and Trustee, 810 Seventh Avenue, New York,
New York 10019.
Mr. Bent is President, Treasurer, and Trustee of The Reserve Fund
("RF"), Reserve Institutional Trust ("RIT"), Reserve Tax-Exempt Trust ("RTET")
and Reserve New York Tax-Exempt Trust ("RNYTET"), Director, Vice President and
Secretary of Reserve Management Company, Inc. ("RMCI") and Reserve Management
Corporation, and Chairman and Director of Resrv Partners, Inc. Before 1968, he
was associated with Stone & Webster Securities Corp., and previously, Teachers
Insurance and Annuity Association.
EDWIN EHLERT, JR., Trustee, 125 Elm Street, Westfield, New Jersey
07091.
Mr. Ehlert is President and Director of Ehlert Travel Associates, Inc.
(travel agency formerly called Travelong of Westfield, Inc.) and Ehlert Travel
Associates of Florida, Inc. (travel agency), and Trustee of RF, RIT, RNYTET and
RTET.
HENRI W. EMMET, Trustee, 176 East 71st Street, New York, New York
10021.
Mr. Emmet is the Managing Director of Servus Associates, Inc, and
U.S.A. Representative of the First National Bank of Southern Africa and Trustee
of RF, RET, RNYTET and RTET. Until 1989, he was Senior Vice President of the
New York branch of Banque Nationale de Paris.
BURTT R. EHRLICH, Trustee, 667 Madison Avenue, New York, New York
10021.
Mr. Ehrlich is a Director of Benson Eye Care Corp and a private
investor. Until 1992, he was President and Chairman of Ehrlich Bober Financial
Corp., a municipal securities investment firm.
DONALD J. HARRINGTON*, C.M, Trustee, St. John's University, Jamaica,
New York 11439.
The Reverend Harrington is President of St. John's University (NY) and
a Trustee of RF, RIT, RNYTET and RTET. The Reverend Harrington served as
President of Niagara University from 1984 to 1989 and was Executive Vice
President of Niagara University from 1981 to 1984.
NIELS W. JOHNSEN, Trustee, 1 Whitehall Street, New York, New York
10004.
Mr. Johnsen is Chairman of the Board of International Shipholding
Corp. and Central Gulf Lines, Inc. (ship cargo carrier), Director of Centennial
Insurance Co. and Trustee of The Atlantic companies (insurance), RF, RIT,
RNYTET and RTET.
<PAGE> 26
THOMAS L. RHODES, Trustee, 150 East 35th Street, New York, New York 10016
Mr. Rhodes is President and a member of the Board of Directors of the
National Review. From 1976 to 1992 Mr. Rhodes was a partner with Goldman,
Sachs & Co., an investment banking firm.
MARC C. COZZOLINO, Counsel and Secretary, 810 Seventh Avenue, New
York, NY 10019.
Mr. Cozzolino is Counsel and Secretary of RF, RIT, RTET, and RNYTET.
Before joining The Reserve Funds in 1994, Mr. Cozzolino was a staff attorney
at the New Jersey Bureau of Securities.
PAT A. COLLETTI, Controller, 810 Seventh Avenue, New York, New York
10019.
Mr. Colletti is Controller of RF, RIT, RTET and RNYTET. Prior to
joining The Reserve Funds in 1985, Mr. Colletti was Supervisor of Accounting of
Money Market Funds for the Dreyfus Corporation.
- ------------------------------
* Interested Trustee within the meaning of the Investment Company Act of 1940.
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
claim, suit or judgment or other liability or 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 regard of the duties involved in the
conduct of their office.
<TABLE>
<CAPTION>
COMPENSATION TABLE
------------------
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM FUND AND FUND COMPLEX
NAME OF TRUSTEE FROM FUND** (4 ADDITIONAL TRUSTS) PAID TO TRUSTEE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Edwin Ehlert, Jr. $0 $16,500
Henri W. Emmet $0 $16,500
Rev. Donald J. Harrington $0 $16,500
Niels W. Johnsen $0 $16,500
Burtt R. Ehrlich $0 $0
Thomas L. Rhodes $0 $0
</TABLE>
**Amount shown are for the Fund's fiscal year ending May 31, 1995.
INVESTMENT MANAGEMENT AND OTHER AGREEMENTS
THE ADVISER. Reserve Management Company, Inc. ("Adviser"),14 Locust Place,
Manhasset, New York, NY 11030, a registered investment adviser, manages the
Trust and provides it with investment advice pursuant to an Investment
Management Agreement. Under the Investment Management Agreement, the Adviser
manages the Fund, is responsible for the day-to-day oversight of the Trust's
operations and
<PAGE> 27
otherwise administers the affairs of the Trust as it deems advisable subject to
the overall control and direction of the Trustees and the investment policies
and limitations of the Trust described in the Prospectus and Statement of
Additional Information. RMCI pays all employee costs and other ordinary
operating costs of the Fund pursuant to the Investment Management Agreement.
Excluded from ordinary operating costs are interest charges, taxes, brokerage
fees, extraordinary legal and accounting fees and expenses, payments made
pursuant to the Trust's Distribution Plan and the fees of the disinterested
Trustees, for which the Fund pays its direct or allocated share.
For its management services, and for paying all of the employee costs,
costs of the Sub-Adviser and other ordinary operating expenses of the Trust,
RMCI is periodically paid a comprehensive fee, at the annual rate of 1.50% per
annum of the average daily net assets of the Fund.
The Investment Management Agreement is subject to annual review by and
must be approved at least annually by a vote of a majority of the Board of
Trustees, including a majority of those who are not "interested persons" as
defined in the Investment Company Act of 1940, cast in person at a meeting
called for the purpose of voting on such renewal. The Agreement terminates
automatically upon its assignment and may be terminated without penalty upon 60
days' written notice by vote of the Trustees, by vote of a majority of
outstanding voting shares of the Fund or by the Adviser.
THE SUB-ADVISER. Kenneth J. Gerbino & Company ("Sub-Adviser"), 9595 Wilshire
Boulevard, Suite 200, Beverly Hills, California 90212, a registered investment
Adviser, acts as Sub-Adviser to the Fund. The Adviser and Trust have entered
into a Sub-Advisory Agreement with the Sub-Adviser pursuant to which the
Adviser will pay any fees of the Sub-Adviser. The Sub-Advisory Agreement is
subject to annual review by and must be approved annually by the Trustees,
including a majority of those who are not "interested persons" as defined in
the Investment Company Act of 1940, cast in person at a meeting called for
purpose of voting on such renewal. The agreement automatically terminates upon
its assignment and may be terminated without penalty upon 60 days' written
notice by vote of the Trustees, by vote of a majority of outstanding voting
shares of the Fund or by the Sub-Adviser.
CUSTODIAN. Chemical Bank, 4 New York Plaza, New York, New York 10004 is
Custodian for the cash and securities of the Trust. The Custodian maintains
custody of the Trust's cash and securities, handles its securities settlements
and performs transaction processing for receipts and disbursements in
connection with the purchase and sale of the Trust's shares.
DISTRIBUTION AGREEMENT. Resrv Partners, Inc. ("RESRV"), 810 Seventh Avenue, New
York, New York 10019, is a distributor of the shares of the Trust. RESRV is a
"principal underwriter" for the Trust within the meaning of the Investment
Company Act of 1940, and as such acts as agent in arranging for the continuous
offering of Trust shares. RESRV has the right to enter into dealer agreements
with brokers or other persons of its choice for the sale of Trust shares.
RESRV's principal business is the distribution of shares of mutual funds and it
has retained no underwriting commissions during the last three fiscal years.
The Distribution Agreement must be approved annually by the Trustees,
including a majority of those who are not "interested persons," as defined in
the Investment Company Act of 1940.
DISTRIBUTION PLAN. The Trust maintains a Distribution Plan ("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 Board and
approved by its shareholders. Pursuant to the Plan, the Distributor or its
affiliates may make payments ("assistance payments") to brokers, financial
institutions and financial intermediaries ("payees") in respect of Trust
<PAGE> 28
shareholder accounts ("qualified accounts") as to which the payee has rendered
distribution assistance or other services. The Distributor may also retain
amounts to pay for advertising and marketing expenses. Assistance payments by
the Distributor are made to payees at an annual rate not to exceed .25% of the
average net asset value of all payees' qualified accounts. The Trustees have
determined that there is a reasonable likelihood that the Plan will benefit the
Trust and its shareholders and that its costs are primarily intended to result
in the sale of the Trust's shares.
Under the Plan, the Trust's officers report quarterly the amounts and
purposes of assistance payments to the Trustees. During the continuance of the
Plan the selection and nomination of the disinterested Trustees of the Trust
are at the discretion of the disinterested Trustees currently in office.
The Plan and related agreements may be terminated at any time by a
vote of a majority of the outstanding voting securities of the Fund. The Plan
and related agreements may be renewed from year to year if approved by a vote
of a majority of the Board of Trustees, including a majority of those who are
not "interested persons", as defined in the Investment Company Act of 1940.
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 majority vote of the Board of Trustees, including a
majority of the disinterested Trustees, cast in person at a meeting called for
the purpose of such vote.
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P., 1301 Avenue of the
Americas, New York, New York 10019 is the Trust's independent accountants.
PORTFOLIO TURNOVER, TRANSACTION CHARGES AND ALLOCATION
Subject to the overall supervision of the officers of the Trust, its
Board of Trustees, and the Adviser, the Sub-Adviser places all orders for the
purchase and sale of the Fund's investment securities. In general, in the
purchase and sale of investment securities the Sub-Adviser will seek to obtain
prompt and reliable execution of orders at the most favorable prices or yields.
In determining best price and execution, the Sub-Adviser may take into account
a dealer's operational and financial capabilities, the type of transaction
involved, the dealer's general relationship with the Fund's Sub-Adviser, and
any statistical, research, or other services provided by the dealer. 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 in good faith by the Fund's
Sub-Adviser. Brokers or dealers who execute investment securities transactions
for the Fund may also sell its shares; however, any such sales will not be
either a qualifying or disqualifying factor in the selection of brokers or
dealers. Subject to procedures adopted by, and the supervision of, the Board
of Trustees, the Sub-Adviser is authorized to place portfolio transactions
with brokers or dealers affiliated with it provided the commission or fee
charged is comparable to that charged by non-affiliated brokers or dealers on
comparable transactions involving similar securities being purchased or sold
during a comparable period of time on a securities exchange. Any such
transactions will be in accordance with Rule 17e-1 under the Investment Company
Act of 1940.
When transactions are made in the over-the-counter market, the Fund
deals with the primary market makers unless more favorable prices are otherwise
obtainable.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trust to issue an unlimited
number of full and fractional shares of beneficial interest, and to divide or
combine the shares into a greater or lesser number of shares
<PAGE> 29
without thereby changing the proportionate beneficial interests in the Trust.
Each share represents an interest in the respective series of the Trust
proportionately equal to the interest of each other share. If they deem it
advisable in the best interests of shareholders, the Trustees of the Trust may
classify or reclassify any unissued shares of the Trust by setting or changing
the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption of the stock. Any changes would be required to comply with any
applicable state and Federal securities laws. These currently require that
each series be preferred over all other series in respect of assets
specifically allocated to such class. It is anticipated that under most
circumstances, the rights of any additional series would be comparable unless
otherwise required to respond to the particular situation. Upon liquidation of
the Trust, shareholders are entitled to share pro rata in the net assets of
their respective series of the Trust available for distribution to such
shareholders. No changes can be made to the Trust's issued shares without
shareholder approval.
Each Fund share when issued is fully paid, nonassessable and fully
transferable or redeemable at the shareholder's option. Each share has an
equal interest in the net assets of its series, equal rights to all dividends
and other distributions from its series, and one vote for all purposes. Shares
of separate series vote together for the election of Trustees and have
noncumulative 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 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.
Regulations of the Securities and Exchange Commission provide that if
a series is separately affected by a matter requiring a vote (election of
Trustees, ratification of independent accountant selection, and approval of an
underwriting agreement are not considered to have such separate effect and may
be voted upon by the Trust as a whole), each such series votes separately. Each
series votes separately on such matters as approval of the Investment
Management Agreement and material amendments to the Plan, which require
approval by a majority of the effected 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 a meeting of shareholders at
which at least 50 percent of the shares of each group are represented.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Redemption payments are normally made by check or wire transfer, but
the Trust may be authorized to make payment of redemptions partly or wholly in
kind (that is, by delivery of portfolio instruments valued at the same time as
the redemption net asset value is determined). The Trust has made an election
committing it to pay in cash all requests for redemption from the series
involved, by any shareholder or record, limited during any 90-day period to the
lesser of $250,000 or 1% of the net assets of the series at the beginning of
the period. The election is irrevocable pursuant to rules and regulations
under the Investment Company Act or 1940 unless withdrawal is permitted by
order of the Securities and Exchange Commission. In disposing of such
securities an investor might incur transaction costs and on the date of
disposition might receive an amount less than the net asset value of the
redemption.
DETERMINATION OF NET ASSET VALUE. Shares are offered at net asset value plus a
sales charge. The net asset value of the Fund is calculated at the end of each
business day (currently 4:00 PM New York time)
<PAGE> 30
that the New York Stock Exchange is open for trading and on other days there is
a sufficient degree of trading to materially affect the Fund's net asset value.
The net asset value is not calculated on New Year's Day, Presidents' Day, Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day,
Christmas Day and on other days the New York Stock Exchange is closed for
trading. The net asset value per share of the Fund is determined by adding the
value of all its securities and other assets, subtracting its liabilities and
dividing the result by the total number of outstanding shares that represent an
interest in the Fund.
Investment securities are valued at the last sale price on the
securities exchange or national securities market on which such securities are
primarily traded. Securities not listed on an exchange or national securities
market, or securities in which there were no transactions, are valued at the
average of the last bid and asked prices, except in the case of open short
positions where the asked price is used for valuation purposes. Bid price is
used when no asked price is available. Market quotations for foreign
securities in foreign currencies are translated into United States dollars at
the prevailing rates of exchange. Any securities or other assets for which
recent market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Trustees.
REDUCED SALES CHARGE. Officers, directors, full time employees and Trustees,
and any trust, pension, profit sharing or qualified retirement plan of the
Adviser, Sub-Adviser, the distributor, the Trust and any affiliate thereof may
purchase shares of the Fund at the net asset value per share. Spouses and
minor children of the foregoing may also purchase shares at net asset value.
In addition, Sub-Adviser advisory clients and related persons of such may
purchase shares at net asset value.
DISTRIBUTIONS AND TAXES
The following is a general description of certain tax rules relating
to the Fund. It is not exhaustive and prospective investors may wish to
consult their tax advisers.
The Fund intends to qualify as a regulated investment company under
the Internal Revenue Code of 1986 ("Code") so long as such qualification is in
the best interests of shareholders. If it so qualifies, in any fiscal year in
which it distributes at least 90 percent of its taxable net income, the Fund
generally will not be subjected to federal income tax on such distributed
amounts. Shareholders of the Fund, however, will be subject to federal income
tax on any ordinary net income and net capital gains realized by the Fund and
distributed to shareholders as regular or capital gains dividends, whether
distributed in cash or in the form of additional shares. Net long term capital
gains distributions will be taxable to shareholders as long term capital gains,
regardless of the length of time the corresponding shares have been held.
Upon the taxable disposition (including a sale or redemption) of
shares of the Fund, a shareholder may realize a gain or loss depending upon his
basis in his shares. Such gain or loss generally will be treated as capital
gain or loss (if the shares are capital assets in the shareholder's hands) and
will be long-term or short-term, generally depending upon the shareholder's
holding period for the shares. However, a loss realized by a shareholder on
the disposition of Fund shares with respect to which capital gain dividends
have been paid will, to the extent of such capital gain dividends, be treated
as long-term capital loss if such shares have been held by the shareholder for
six months or less. Further, a loss realized on disposition will be disallowed
to the extent the shares disposed of are replaced (whether by reinvestment of
distributions or otherwise) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss.
Shareholders receiving distributions in the form of additional shares will have
a cost basis for Federal
<PAGE> 31
income tax purposes in each share received equal to the net asset value of a
share of the Funds on the reinvestment date.
In order to qualify as a "regulated investment company" under the
Code, the Fund must, among other things, in each taxable year distribute at
least 90 percent of its taxable income to shareholders, derive at least 90
percent of its gross income from dividends, interest and gains from the sale or
disposition of securities and derive less than 30 percent of its gross income
from the sale or disposition of securities held for less than three months.
Accordingly, the Fund will be subject to certain restrictions including
restrictions in the writing of options on securities which have been held for
less than three months, purchasing and selling futures contracts held for less
than three months, in the writing of options which expire in less than three
months, and in effecting closing purchase transactions, with respect to options
which have been written less than three months prior to such transactions.
The Code imposes a non-deductible, 4% excise tax on regulated
investment companies that do not distribute to their shareholders in each
calendar year an amount equal to (i) 98% of their calendar year ordinary
income; plus 98% of their capital gain net income (the excess of short and long
term capital losses) for the one year period ending October 31. Dividends
declared in December of any year to shareholders of record on any date in
December will be deemed to have been received by the shareholders and paid by
the Fund on the record date, provided such dividends are paid by February 1 as
of the following year.
Dividends and distributions declared payable to shareholders of record
after September 30 of any year and paid before February 1 of the following
year, are considered taxable income to shareholders on December 31 in the year
declared even though paid in the next year.
Dividends to shareholders who are non-resident aliens may be subject
to a United States withholding tax at a rate of up to 30% under existing
provisions of the code applicable to foreign individuals and entities unless a
reduced rate of withholding or a withholding exemption is provided under
applicable treaty laws. Non-resident aliens are urged to consult their own tax
adviser concerning the applicability of the United States withholding tax.
The Code includes rules applicable to certain listed options, futures
contracts, and options on futures contracts which the Fund may write, purchase
or sell. Such options and contracts are classified as Section 1256 contracts
under the Code. The character of gain or loss resulting from the sale,
disposition, closing out, expiration or other termination of Section 1256
contracts is generally treated as long-term capital gain or loss to the extent
of 60% thereof and short-term capital gain or loss to the extent of 40% thereof
("60/40 gain or loss"). Such contracts, generally are required to be treated
as sold at market value on the last day of such fiscal year and on certain
other dates for federal income tax purposes ("marked-to-market"). Generally,
over-the-counter options are not classified as Section 1256 contracts and are
not subject to the mark-to market rule or to 60/40 gain or loss treatment. Any
gains or losses recognized by the Fund from transactions in over-the-counter
options generally constitute short-term capital gains or losses. If
over-the-counter call options written, or over-the-counter put options
purchased, by the Fund are exercised, the gain or loss realized on the sale of
the underlying securities may be either short-term or long-term, depending on
the holding period of the securities. In determining the amount of gain or
loss, the sales proceeds are reduced by the premium paid for over-the-counter
puts or increased by the premium received for over-the counter calls.
Generally, the hedging transactions undertaken by the Fund may result
in "straddles" for U.S. federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund. In addition,
losses realized by the Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year
<PAGE> 32
in which the losses are realized. Because only a few regulations implementing
the straddle rules have been promulgated, the tax consequences to the Fund of
engaging in hedging transactions are not entirely clear. Hedging transactions
may increase the amount of short-term capital gain realized by the Fund which
is taxed as ordinary income when distributed to Shareholders.
The Fund may make one or more of the elections available under the
Code which are applicable to straddles. If the Fund makes any of the
elections, this amount, character and timing of gains or losses form the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections
may operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle position, the amount which may be distributed to
Shareholder, and which, will be taxed to them as ordinary income or long-term
capital gain, may be increased or decreased as compared to a fund that did not
engage in such hedging transactions.
The Code and the Treasury Regulations thereunder are subject to change
by legislative or administrative action either prospectively or retroactively.
Dividends paid by the Fund are generally expected to be subject to any
state or local taxes on income. Shareholders should consult their own
attorneys or tax advisers about the tax consequences related to investing in
the Fund.
PERFORMANCE INFORMATION
The Fund may from time to time advertise its total return. Total
return is computed by finding the average annual compounded rates of return
over the 1,5 and 10 year periods or up to the life of the Fund that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
<TABLE>
<S> <C>
P (1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1,5 or 10 year
periods at the end of the 1,5 or 10 year periods
(or fractional portion thereof)
</TABLE>
In advertising and sales literature, the Fund may compare its
performance to (i) the Standard & Poor's 500 Stock Index ("S&P 500"), Dow Jones
Industrial Average ("DJIA"), the Russell 2000, or other unmanaged indices so
that investors may compare the Fund's results with those of a group of
unmanaged securities widely regarded by investors as representative of the
securities markets in general; (ii) other groups of mutual funds tracked by
Lipper Analytical Services, Inc. a widely used independent research firm which
ranks mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications, or persons who rank mutual
funds on overall performance or other criteria; and (iii) the Consumer Price
Index (measure for inflation) to assess the real rate of return from an
<PAGE> 33
investment in the Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs and expenses.
The Fund may also compute aggregate total return for specified periods
based on a hypothetical Fund account with an assumed initial investment of
$10,000. The aggregate total return is determined by dividing the net asset
value of the account at the end of the specified period by the value of the
initial investment and is expressed as a percentage. Calculation of aggregate
total return reflects payment of the maximum sales charge and assumes
reinvestment of all income dividends and capital gain distributions during the
period.
The Fund may also quote annual, average annual and annualized total
return and aggregate total performance data both as a percentage and as a
dollar amount based on a hypothetical $10,000 investment for various periods.
Such data will be computed as described above, except that (1) the rates of
return calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return and (2) the maximum sales charge will
not be included with respect to annual, annualized or aggregate rates of return
calculations.
<PAGE> 34
Part C
Item 24. Financial Statements and Exhibits
(a) Financial Statements Included in Part A:
None
Financial Statements Included in Part B:
None
(b) Exhibits
(1) Amended Declaration of Trust was filed as an Exhibit
to Registrant's Pre-effective Amendment No. 1 filed
September 3, 1993 and is herewith incorporated by
reference.
(2) Amended Bylaws of the Registrant were filed as an
Exhibit to Registrant's Pre-effective Amendment No. 1
filed September 3, 1993 and is herewith incorporated
by reference.
(3) Not Applicable
(4) Not Applicable
(5) (a) Form of Investment Management Agreement between
the Registrant and Reserve Management Company, Inc.
was filed as an Exhibit to the Registrant's
Registration Statement filed May 25, 1993 and is
herewith incorporated by reference.
(b) Form of Sub-Investment Management Agreements
between the Registrant, Reserve Management Company,
Inc. and Sub-Adviser, is herewith incorporated by
reference.
(6) (a) Form of Distribution Agreement between the
Registrant and Resrv Partners, Inc. was filed as an
Exhibit to the Registrant's Registration Statement
filed May 25, 1993 and is herewith incorporated by
reference.
(b) Form of Dealer Agreement. was filed as an Exhibit
to the Registrant's Registration Statement filed May
25, 1993 and is herewith incorporated by reference.
(7) Pension Plan of Reserve Management corporation was
filed as an exhibit to Post-Effective Amendment No.
32 of The Reserve Fund, File No. 2-36429; amendments
to Pension Plan filed as an exhibit to Post-Effective
No. 45 of The Reserve Fund (File No. 2-36429) dated
July 31, 1989 and is herewith incorporated by
reference.
(8) Form of Custodian Agreement between Registrant and
Custodial Trust Company was filed as an Exhibit to
Pre- effective Amendment No.1 filed September 3, 1993
and is herewith incorporated by reference.
(9) Not Applicable
(10) Opinion of counsel*
(11) Consent of Independent Accountants - Not Applicable
(12) Not Applicable
- -----------------------------------
*Filed herewith
<PAGE> 35
(13) Form of Subscription Agreement was filed as an
Exhibit to the Registrant's Registration Statement
filed May 25, 1993 and is herewith incorporated by
reference.
(14) Not Applicable.
(15) Form of Service Plan was filed as an Exhibit to the
Registrant's Registration Statement filed May 25,
1993 and is herewith incorporated by reference.
(16) Not Applicable.
(17) Powers of Attorney*
(18) Rule 18f-3 Plan
Item 25. Persons Controlled by or Under Common Control with Registrant
As of January 1, 1995, Reserve Management Company, Inc., a New
Jersey corporation, was a shareholder of Registrant.
Item 26. Number of Holders of Securities
As of July 31, 1995 there were 269 recordholders of the
Registrant.
Item 27. Indemnification
Reference is made to Section 10.02 of the Registrant's
Declaration of Trust. No indemnification shall be provided
hereunder to a Covered person:
Section 10.02 provides that
i) who shall have been adjudicated by a court or
other body including, without limitation, arbitration panels
or self-regulatory organizations before which the proceeding
was brought (A) to be liable to the trust or its Shareholders
by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of
his office or (B) not to have acted in good faith in the
reasonable belief that his action was in the best interest of
the trust; or
ii) in the event of a settlement, unless there has
been a determination that such Trustee or officer did not
engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
his office, (A) by the court or other body approving the
settlement; (B) by at lease a majority of those Trustees who
are neither Interested Persons of the Trust nor are parties to
the matter based upon a review of readily available facts (as
opposed to a full trial-type inquiry); or (C) by written
opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type
inquiry); provided, however, that any Shareholder may, by
appropriate legal proceedings, challenge any such
determination by the Trustees or by independent counsel.
- -------------------------
*Filed herewith
<PAGE> 36
c) The rights of indemnification herein provided may
be insured against by policies maintained by the Trust, shall
be severable, shall not be exclusive of or affect any other
rights to which any Covered Person may now or hereafter be
entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs,
executors and administrators of such a person. Nothing
contained herein shall affect any rights to indemnification to
which Trust personnel, other than Covered Persons, and other
persons may be entitled by contract or otherwise under law.
d) Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or
proceeding of the character described in Subsection 10.02(a)
of this Section 10.02 may be paid by the Trust or Series from
time to time prior to final disposition thereof upon receipt
of an undertaking by or on behalf of such Covered Person that
such amount will be paid over by him to the Trust or Series if
it is ultimately determined that he is not entitled to
indemnification under this Section 10.02; provided, however,
that either (i) such Covered Person shall have provided
appropriate security for such undertaking, (ii) the Trust is
insured against losses arising out of any such advance
payments or (iii) either a majority of the Trustees who are
neither Interested Persons of the Trust nor parties to the
matter, or independent legal counsel in a written opinion,
shall have determined, based upon a review of readily
available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such
Covered Person will be found entitled to indemnification under
Section 10.02.
Each Trustee, officer, employee or agent of the registrant,
and any person who has served at it request as 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 State of Delaware, 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, officer
and controlling persons of the Registrant pursuant to the
Declaration to Trust or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
commission such indemnification against such liabilities
(other than the payment by the Registrant of any expenses
incurred or paid by a 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 public policy as express in the Act and
will governed the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
<TABLE>
<CAPTION>
Position with
Name the Adviser Other Business
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Henry B.R. Brown President, Treasurer and Director President, Treasurer and Director of Reserve Management
Corporation of the same address as the Trust; Director and
Treasurer of Transfer Agent Inc., 14 Locust Place, Manhasset, NY
11030.
</TABLE>
<PAGE> 37
<TABLE>
<S> <C> <C>
Bruce R. Bent Vice President, Secretary and Vice President, Secretary, and Director
Director of Reserve Management Corporation and Director of Resrv Partners,
Inc. both of the same address as the Trust.
Marc C. Cozzolino Counsel Counsel of Reserve Management Corporation and Counsel and
Secretary of Resrv Partners, Inc. both of the same address as the
Trust.
</TABLE>
Item 29. Principal Underwriters
(a) Resrv Partners, Inc., the principal underwriter of
the Registrant, also acts as principal underwriter to
The Reserve Fund, Reserve Institutional Trust,
Reserve Tax-Exempt Trust, and Reserve New York
Tax-Exempt Trust.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Position and Offices
Business Address With Resrv Partners, Inc. With Registrant
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bruce R. Bent Chairman and Director President, Treasurer & Trustee
Marc C. Cozzolino Counsel & Secretary Counsel & Secretary
</TABLE>
Item 30. Location of Accounts and Records
All records required to maintained by Section 31(a) of the 1940
Act and the Rules promulgated thereunder are maintained at 810
Seventh Avenue, New York NY 10019 except those relating to
receipts and deliveries of securities, which are maintained by
the Registrant's Custodians and certain records regarding
portfolio transactions which are maintained at the offices of
the Sub-Advisers: T.H. Fitzgerald & Co., Research Center, 305
Center Rd., Easton, CT 00612; Trainer, Wortham & Company, Inc.,
845 Third Avenue, New York, NY 10022; Roanoke Asset Management,
529 Fifth Avenue, New York, NY 10017. Cambridge Equity
Advisors, 5214 Mayland Way, Suite 309, Brentwood, TN 37027.
Southern Capital Advisors, 50 Front Street, Morgan Keegan Tower,
Memphis, TN 38103. Pinnacle Associates Ltd., 666 Fifth Avenue,
14th Floor, New York, NY 10103. Siphron Capital Management, 280
S. Beverly Drive, Beverly Hills, California 90212. Kenneth J.
Gerbino & Company, 9595 Wilshire Boulevard, Suite 200, Beverly
Hills, California 90212.
Item 31. Management Services
See "Investment Management and Other Agreements" in Part B.
Item 32. Undertakings
Registrant makes the following undertakings:
(a) to file a post effective amendment, using financial
statements which may not be certified, with four to
six months from the effective date of this
Registration Statement.
<PAGE> 38
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(a) under the Securities Act
of 1933 and Registrant has duly caused this Post-Effective Amendment No. 7 to
its Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of New York and State of New York, on
the 20th day of October, 1995
<TABLE>
<S> <C>
/s/ Bruce R. Bent
-------------------------------------------
Bruce R. Bent, President
Attest:
/s/ Marc C. Cozzolino
- ---------------------------------------------------
Marc C. Cozzolino, Secretary
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 7 to its Registration Statement has been below
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ Bruce R. Bent Date 10/20/95
- ------------------------------------------------------------ -----------------------------
Bruce R. Bent, President, Treasurer
and Board Member (principal executive,
operating and financial officer)
* /s/ Date:
----------------------------------------------------------- -------------------
Edwin Ehlert Jr., Board Member
* /s/ Date
----------------------------------------------------------- -------------------
Henri W. Emmet, Board Member
* /s/ Date
----------------------------------------------------------- -------------------
Donald J. Harrington, Board Member
* /s/ Date
----------------------------------------------------------- -------------------
Niels W. Johnsen, Board Member
* /s/ Date
----------------------------------------------------------- -------------------
Burtt R. Ehrlich, Board Member
* /s/ Date
----------------------------------------------------------- -------------------
Thomas L. Rhodes, Board Member
/s/ Marc C. Cozzolino Date 10/20/95
- ------------------------------------------------------------ ---------------------
Marc C. Cozzolino, *Attorney-in-Fact
Counsel and Secretary
</TABLE>
<PAGE> 39
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description
- ----------- -----------
<S> <C>
1. Declaration of Trust of Registrant.**
2. Bylaws of Registrant.**
3. Not Applicable.
4. Not Applicable.
5. (a) Form of Investment Management Agreement between
the registrant and Reserve Management Company Inc.**
(b) Form of Sub-Investment Management Agreement
between Registrant, Reserve Management Company, Inc.
and Pinnacle Associates Ltd.
6. (a) Form of Distribution Agreement between the
Registrant and Resrv Partners, Inc.**
(b) Form of Selected Dealer Agreement.**
7. Pension Plan of Reserve Management Corp. filed as an
exhibit to Post-Effective Amendment No., 32 of The
Reserve Fund (File No. 2-36429); amendments thereto
filed as an exhibit to Post-Effective Amendment No.
45 and all are incorporated by reference.
8. Form of Custodian Agreements between Registrant and
Custodial Trust Company.**
9. Not Applicable.
10. Opinion of Counsel.
11. Consent of Independent Accountants - Not Applicable
12. Not Applicable
13. Form of Subscription Agreement between the Registrant
and Reserve Management Company, Inc.**
14. Not Applicable
15. Form of Service Plan**
16. Not Applicable.
17. Powers of Attorney
18. Not Applicable
</TABLE>
**Previously filed
<PAGE> 1
[THE RESERVE FUNDS LETTERHEAD]
Exhibit 10
October 20, 1995
Board of Trustees
Reserve Private Equity Series
810 Seventh Avenue
New York, New York 10019
Gentlemen:
I have acted as counsel to the Reserve Private Equity Series, a
Delaware business trust (the "Fund"), in connection with the registration of
shares of the Growth and Income Fund ("Fund") with the Securities and Exchange
Commission.
As counsel to the Fund, I have made such investigations and have
examined and relied upon the originals or copies, certified or otherwise
identified to my satisfaction, of such records, instruments, certificates,
memoranda and other documents as I have deemed necessary or advisable for the
purposes of this opinion.
1. The Fund has been duly incorporated and is validly existing
under the laws of Delaware.
2. To the best of my knowledge, no further approval, consent or
other order of the Board of Trustees is legally required in
connection with the organization of the Portfolio and the
registration of their shares.
3. To the best of my knowledge, the shares of the Portfolio, when
issued, will be legally issued, non-assessable and, when
subscribed to, fully paid.
I consent to the filing of this opinion as an exhibit to the Fund's
registration statement under the Securities Act of 1933.
Very truly yours,
/s/ Marc C. Cozzolino
Marc C. Cozzolino
Counsel
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Exhibit 17
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of THE
RESERVE PRIVATE EQUITY SERIES, a Delaware business trust, does hereby
constitute and appoint Marc C. Cozzolino and William Goodwin, and each of them,
his true and lawful attorney and agent to do any and all acts and things and to
execute any and all instruments which said attorney and agent may deem
necessary or advisable; (i) to enable the said Trust to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission in respect thereof, in connection
with the registration under said Securities Act of the shares of beneficial
interest of said Trust (the "Securities"), including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as trustee of said
Trust to a Registration Statement or to any amendment thereto filed with the
Securities and Exchange Commission in respect of said Securities and to any
instrument or document filed as part of, as an exhibit to or in connection with
said Registration Statement or amendment; (ii) to enable said Trust to comply
with the Investment Company act of 1940, as amended, and any rules, regulations
and requirements of the Securities and Exchange Commission in respect thereof,
in connection with the registration under said Investment Company Act of the
Trust, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign for and on behalf of the undersigned
the name of the undersigned as trustee of said Trust to a Registration
Statement or to any amendment thereto filed with the Securities and Exchange
Commission in respect of said Trust and to any instrument or document filed as
part of, as an exhibit to or in connection with said Registration Statement or
amendment; and (iii) to register or qualify said Securities for sale and to
register or license said Trust as a broker or dealer in said Securities under
the securities or Blue Sky laws of all such states as may be necessary or
appropriate to permit therein the offering and sale of said Securities as
contemplated by said Registration Statement, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign for and on behalf of the undersigned the name of the undersigned as
trustee of said Trust to any application, statement, petition, prospectus,
notice or other instrument or document, or to any amendment thereto, or to any
exhibit filed as a part thereof or in connection therewith, which is required
to be signed by the undersigned and to be filed with the public authority or
authorities administering said securities or Blue Sky laws for the purpose of
so registering or qualifying said Securities or registering or licensing said
Trust, and the undersigned does hereby ratify and confirm as his own act and
deed all that said attorney and agent shall do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
21st day of June 1995.
/s/ Edwin Ehlert, Jr.
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Edwin Ehlert, Jr., Board Member
/s/ Henri W. Emmet
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Henri W. Emmet, Board Member
/s/ Donald J. Harrington
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Donald J. Harrington, Board Member
/s/ Niels W. Johnsen
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Niels W. Johnsen, Board Member
/s/ Burtt R. Ehrlich
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Burtt R. Ehrlich, Board Member
/s/ Thomas L. Rhodes
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Thomas L. Rhodes, Board Member
