<PAGE> 1
General Information, Purchases and
Redemptions
-------------------------------------
Call 800-637-1700 Fax 212-977-9897
THE RESERVE PRIVATE EQUITY SERIES
Each "Fund" or "Portfolio" (is a series of shares issued by THE RESERVE
PRIVATE EQUITY SERIES ("Trust"), an open-end mutual fund. This Prospectus, dated
July 31, 1996, sets forth concisely the information which a prospective investor
should know about each Fund before investing. A Statement of Additional
Information, dated July 31, 1996, for each Fund has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. A
copy of each Statement of Additional Information may be obtained without charge
by writing or calling the Fund at the telephone number shown above.
Each Fund offers two classes of shares which may be purchased at a price
equal to their net asset value (i) plus an initial sales charge imposed at the
time of purchase (the "Class A shares"), or (ii) without any initial sales
charge (the "Class D shares"). See "How to Buy Shares."
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND 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 SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
Prospectus dated July 31, 1996
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
<PAGE> 2
ANNUAL FUND EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES are one of several factors to consider when
you invest in a Fund. The following tables summarize your maximum transaction
costs when investing in a Fund and the annual expenses for each class of shares
of each Fund.
<TABLE>
<CAPTION>
CLASS A CLASS D
SHARES SHARES
------- --------
<S> <C> <C>
Maximum Sales charge imposed on Purchases (as a percentage of offering
price).............................................................. 4.50%(1) None
Sales charges imposed on Dividend Reinvestment........................ None None
Deferred Sales charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower)............................ None 1.00%
Redemption Fee*....................................................... None None
Exchange Fee.......................................................... None None
</TABLE>
- ---------------
* The Fund charges a $10 fee for wire redemptions of less than
$10,000.
(1) Sales Charges may be reduced or eliminated for larger investments
and certain classes of investors. See "How to Buy Shares."
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets).
Listed below are the annual expenses paid by each class of shares for each Fund
regardless of the amount of your investment.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS D SHARES
--------------------------------- ---------------------------------
COMPREHENSIVE TOTAL COMPREHENSIVE TOTAL
MANAGEMENT 12B-1 OPERATING MANAGEMENT 12B-1 OPERATING
FEE FEE EXPENSES FEE FEE EXPENSES
------------- ----- --------- ------------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Reserve Blue Chip Growth......................... 1.50% 0.25% 1.75% 1.50% 1.00% 2.50%
Reserve Emerging Growth.......................... 1.50% 0.25% 1.75% 1.50% 1.00% 2.50%
Reserve Growth and Income........................ 1.50% 0.25% 1.75% 1.50% 1.00% 2.50%
Reserve Informed Investors Growth................ 1.50% 0.25% 1.75% 1.50% 1.00% 2.50%
Reserve International Equity..................... 1.75% 0.25% 2.00% 1.75% 1.00% 2.75%
Reserve Large-Cap Value.......................... 1.50% 0.25% 1.75% 1.50% 1.00% 2.50%
Reserve Mid-Cap Growth........................... 1.50% 0.25% 1.75% 1.50% 1.00% 2.50%
</TABLE>
The purpose of this table is to assist the shareholder in understanding the
costs and expenses that shareholders of each Fund will bear directly or
indirectly. Because the 12b-1 fee is an annual charge, long-term shareholders in
a Fund may pay more than the economic equivalent of the maximum front-end sales
charge permitted by the rules of the National Association of Securities Dealers,
Inc.
The Funds are charged a comprehensive fee (see "Management of the Funds" on
page 16) which includes all management fees and ordinary operating expenses.
The following example illustrates the expenses that 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.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS D SHARES
------------------------------- -------------------------------
1 3 5 10 1 3 5 10
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
---- ----- ----- ----- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Reserve Blue Chip Growth.............................. $62 $ 98 $136 $242 $25 $78 $133 $284
Reserve Emerging Growth............................... $62 $ 98 $136 $242 $25 $78 $133 $284
Reserve Growth and Income............................. $62 $ 98 $136 $242 $25 $78 $133 $284
Reserve Informed Investors Growth..................... $62 $ 98 $136 $242 $25 $78 $133 $284
Reserve International Equity.......................... $64 $105 $148 $267 $28 $85 $145 $308
Reserve Large-Cap Value............................... $62 $ 98 $136 $242 $25 $78 $133 $284
Reserve Mid-Cap Growth................................ $62 $ 98 $136 $242 $25 $78 $133 $284
</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.
2
<PAGE> 3
FINANCIAL HIGHLIGHTS
The following information applies to a share of the Reserve Private Equity
Series -- Reserve Blue Chip Growth Fund ("Blue Chip"), Reserve Emerging Growth
Fund ("Emerging"), Reserve Growth and Income Fund ("Growth"), Reserve
International Equity Fund ("International"), Reserve Informed Investors Growth
Fund ("Informed"), Reserve Large-Cap Value Fund ("Large-Cap") and Reserve
Mid-Cap Growth Fund ( formerly "North American") outstanding throughout each
period. It should be read in conjunction with the financial statements and
related notes appearing in the Statement of Additional Information for each
Fund. Such information has been audited by Coopers & Lybrand L.L.P. as indicated
in their reports appearing in the Statements of Additional Information.
<TABLE>
<CAPTION>
CLASS D
CLASS A ----------------
-------------------------------- FEBRUARY 13,
OCTOBER 28, 1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE BLUE CHIP GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- -------------------------------------------------------------- ------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period.......................... $ 12.03 $10.00 $13.49
Income from investment operations.............................
Net investment loss....................................... (.10) (.03) (.04)
Net realized and unrealized gain.......................... 3.62 2.06 1.43
------------- ------- -------
Total from investment operations.............................. 3.52 2.03 1.39
Less distribution from net realized gain...................... (.64) 0 0
------------- ------- -------
Net asset value, end of period................................ $ 14.91 $12.03 $14.88
============ ================= =================
Total Return.................................................. 30.10% 20.30%(2) 10.30%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period........................ $ 5,130 $1,993 $ 43
Ratio of expenses to average net assets before waiver......... 1.75% 1.75%(1) 2.50%(1)
Ratio of expenses to average net assets, net of waiver........ 1.75% 1.73%(1) 2.50%(1)
Ratio of net investment loss to average net assets, before
waivers..................................................... -.94% -.72%(1) -1.70%(1)
Ratio of net investment loss to average net assets, net of
waiver...................................................... -.94% -.70%(1) -1.70%(1)
Portfolio turnover rate....................................... 72% 68% 72%
Average commission per share on portfolio transactions........ $ .06 N/A $ .06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
-------------------------------- ----------------
NOVEMBER 14, FEBRUARY 26,
1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE EMERGING GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- -------------------------------------------------------------- ------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period.......................... $ 12.21 $10.00 $16.88
Income from investment operations.............................
Net investment loss....................................... (.17) (.09) (.04)
Net realized and unrealized gain.......................... 8.05 2.30 2.68
------------- ------- -------
Total from investment operations.............................. 7.88 2.21 2.64
Less distribution from net realized gain...................... (.53) -- --
------------- ------- -------
Net asset value, end of period................................ $ 19.56 $12.21 $19.52
============ ================= =================
Total Return.................................................. 65.55% 22.10%(2) 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period........................ $ 6,657 $1,241 $ 243
Ratio of expenses to average net assets....................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets............ -1.70% -1.62%(1) -2.48%(1)
Portfolio turnover rate....................................... 38% 43% 38%
Average commission per share on portfolio transactions........ $ .01 N/A $ .01
</TABLE>
3
<PAGE> 4
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JANUARY 2, 1996 MAY 13, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE GROWTH AND INCOME FUND MAY 31, 1996 MAY 31, 1996
- -------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Net asset value, beginning of period...................................... $10.00 $10.19
Income from investment operations.........................................
Net investment income (loss).......................................... .09 0
Net realized and unrealized gain (loss)............................... .08 (.02)
------- -------
Total from investment operations.......................................... .17 (.02)
------- -------
Net asset value, end of period............................................ $10.17 $10.17
================= =================
Total Return.............................................................. 1.70%(2) (.2)%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period.................................... $1,051 $ 1
Ratio of expenses to average net assets................................... 1.75%(1) 2.23%(1)
Ratio of net investment income to average net assets...................... 3.15%(1) 0%(1)
Portfolio turnover rate................................................... 17% 17%
Average commission per share on portfolio transactions.................... $ .08 $ .08
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JULY 13, 1995 MARCH 11, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE INTERNATIONAL EQUITY FUND MAY 31, 1996 MAY 31, 1996
- -------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Net asset value, beginning of period...................................... $10.00 $10.79
Income from investment operations.........................................
Net investment loss................................................... (.05) (.01)
Net realized and unrealized gain...................................... 1.31 .47
------- -------
Total from investment operations.......................................... 1.26 .46
------- -------
Net asset value, end of period............................................ $11.26 $11.25
================= =================
Total Return.............................................................. 12.60%(2) 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period.................................... $3,578 $ 6
Ratio of expenses to average net assets before waiver..................... 2.00%(1) 2.75%(1)
Ratio of expenses to average net assets, net of waiver.................... 1.99%(1) 2.75%(1)
Ratio of net investment loss to average net assets, before waiver......... -.92%(1) -.70%(1)
Ratio of net investment loss to average net assets, net of waiver......... -.91%(1) -.70%(1)
Portfolio turnover rate................................................... 70% 70%
Average commission per share on portfolio transactions.................... $ .02 $ .02
</TABLE>
4
<PAGE> 5
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS A
-------------------------------- CLASS D
DECEMBER 28, ----------------
1994 MARCH 22, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE INFORMED INVESTORS GROWTH FUND MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
- -------------------------------------------------------------- ------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period.......................... $ 11.99 $10.00 $12.29
Income from investment operations.............................
Net investment loss....................................... (.33) (.07) (.06)
Net realized and unrealized gain.......................... 3.87 2.06 2.10
------------- ------- -------
Total from investment operations.............................. 3.54 1.99 2.04
Less distribution from net realized gain...................... (1.17) -- --
------------- ------- -------
Net asset value, end of period................................ $ 14.36 $11.99 $14.33
============ ================= =================
Total Return.................................................. 29.75% 19.90%(2) 16.60%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period........................ $ 6,393 $6,837 $ 15
Ratio of expenses to average net assets....................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets............ -1.57% -1.62%(1) -2.32%(1)
Portfolio turnover rate....................................... 132% 59% 132%
Average commission per share on portfolio transactions........ $ .05 N/A $ .05
</TABLE>
<TABLE>
<CAPTION>
CLASS A
----------------
JANUARY 2, 1996
(COMMENCEMENT OF
OPERATIONS) TO
RESERVE LARGE-CAP VALUE FUND MAY 31, 1996
- ------------------------------------------------------------------------------------------- ----------------
<S> <C>
Net asset value, beginning of period....................................................... $10.00
Income from investment Operations..........................................................
Net investment loss.................................................................... (.01)
Net realized and unrealized gain....................................................... .96
-------
Total from investment operations........................................................... .95
-------
Net asset value, end of period............................................................. $10.95
=================
Total Return............................................................................... 9.50%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period..................................................... $1,231
Ratio of expenses to average net assets.................................................... 1.75%(1)
Ratio of net investment loss to average net assets......................................... -.32%(1)
Portfolio turnover rate.................................................................... 0%
Average commission per share on portfolio transactions..................................... $ .08
</TABLE>
5
<PAGE> 6
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS A
----------------
MARCH 13, 1996 CLASS D
(COMMENCEMENT OF -------------
OPERATIONS) TO YEAR ENDED
RESERVE MID-CAP GROWTH FUND* MAY 31, 1996 MAY 13, 1996
- ------------------------------------------------------------------------------ ---------------- -------------
<S> <C> <C>
Net asset value, beginning of period.......................................... $10.94 $ 10.00
Income from investment operations.............................................
Net investment loss....................................................... (.01) (.17)
Net realized and unrealized gain.......................................... 1.36 2.44
------- -------------
Total from investment operations.............................................. 1.35 2.27
------- -------------
Net asset value, end of period................................................ $12.29 $ 12.27
================= ============
Total Return.................................................................. 12.34%(2) 22.70%
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period........................................ $ 131 $ 2,408
Ratio of expenses to average net assets....................................... 1.74%(1) 2.49%(1)
Ratio of net investment loss to average net assets............................ -.97%(1) -2.00%(1)
Portfolio turnover rate....................................................... 85% 85%
Average commission per share on portfolio transactions........................ $ .04 $ .04
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
* Formerly, Reserve North American Growth Fund.
6
<PAGE> 7
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 Blue Chip Growth Fund, Reserve Emerging Growth Fund, Reserve Growth and
Income Fund, Reserve Informed Investors Growth Fund, Reserve International
Equity Fund , Reserve Large-Cap Value Fund, and Reserve Mid-Cap Growth Fund,
which are offered by this Prospectus, are classified as non-diversified mutual
funds.
The Funds are advised and managed by Reserve Management Company, Inc. (the
"Adviser"), which supervises the day-to-day investment operations of the Funds.
The Adviser and the Trust, on behalf of each Fund, have entered into
sub-advisory agreements with each of the registered investment advisers (the
"Sub-Advisers"): Trainer, Wortham & Company, Inc. ("Trainer"), 845 Third Avenue,
New York, NY 10022 for Reserve Blue Chip Growth Fund; Roanoke Asset Management
("Roanoke"), 529 Fifth Avenue, New York, NY 10017, for the Reserve Emerging
Growth Fund; Kenneth J. Gerbino & Company ("Gerbino"), 9595 Wilshire Boulevard,
Suite 200, Beverly Hills, CA 90212, for Reserve Growth and Income Fund; T.H.
Fitzgerald & Co. ("Fitzgerald"), 180 Church Street, Naugatuck, CT 06770, for
Reserve Informed Investors Growth Fund; Pinnacle Associates, Ltd. ("Pinnacle"),
666 Fifth Avenue, New York, NY 10103, for Reserve International Equity Fund;
Siphron Capital Management ("Siphron"), 280 S. Beverly Drive, Beverly Hills, CA
90212, for Reserve Large-Cap Value Fund; and Southern Capital Advisors ("SCA"),
50 Front Street, Memphis, TN 38103, for Reserve Mid-Cap Growth Fund (formerly,
Reserve North American Growth Fund).
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Funds are not fundamental and may be
changed without the approval of shareholders.
RESERVE BLUE CHIP GROWTH FUND. The Reserve Blue Chip Growth Fund's investment
objective is to seek capital appreciation through investment in a portfolio of
U.S. common stocks believed to offer favorable possibilities of capital
appreciation. Any production of income is secondary to this objective. There can
be no assurance that the Fund will achieve its investment objective.
Generally, the Fund will seek to invest in U.S. equities with investment
characteristics such as earnings growth, financial strength and projected
positive cash flow. These equity securities are usually traded as shares in the
U.S. but sometimes they may be represented by American Depository Receipts
("ADRs"). The Fund will invest at least 65% of its total assets in securities of
"blue chip" companies that have demonstrated long-term earnings growth,
financial stability and attractive valuation, unless the Fund has adopted a
temporary defensive position.
RESERVE EMERGING GROWTH FUND. The Reserve Emerging Growth Fund's investment
objective is to seek capital appreciation through investment in a portfolio of
small and medium sized U.S. companies. Any production of income is secondary to
this objective. There can be no assurance that the Fund will achieve its
investment objective.
Generally, the Fund will seek to invest in equity securities issued by
companies with investment characteristics such as accelerating rates of revenue
and earnings growth, market dominance or a strong defensible market niche, unit
growth coupled with stable or rising profit margins, a sound balance sheet and
skilled management with an ownership stake. The Fund is designed for investors
seeking the opportunity for substantial long-term growth who can accept
above-average stock market risk and little or no current income. At least 65% of
the value of the Fund's assets will be invested in smaller-sized companies whose
outstanding shares have an aggregate market value of $1 billion or less, unless
the Fund has adopted a temporary defensive position.
It is the Sub-Adviser's view that small and medium sized companies are
generally expected to show growth over time that is above the growth rate of the
overall economy and that of large established companies. The Fund may also
invest in companies presenting special situations when it is believed that the
shares offer a strong potential for capital appreciation due to the market
underestimating earnings potential, changes in management or other similar
opportunities.
Investing in small and medium sized companies involves greater risk than is
customarily associated with investments in larger, more established companies
due to the greater business risks of small size, limited markets and financial
resources and lack of information. The securities of smaller companies are often
traded over-the-counter and have less liquidity than larger stocks. Therefore,
shares of the Fund may be subject to greater fluctuation on value than shares of
a conservative equity fund which invests in larger capitalization companies.
RESERVE GROWTH AND INCOME FUND. The Reserve Growth and Income Fund's investment
objective is to provide income and some growth of principal while moderating
risk through variation and hedging strategies. Additionally a portion of the
Fund 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, higher yielding common stocks, and other debt
instruments including government and corporate bonds unless the Fund has adopted
a temporary defensive position. 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.
7
<PAGE> 8
RESERVE INFORMED INVESTORS GROWTH FUND. The Reserve Informed Investors Growth
Fund's investment objective is to seek growth through investment in a portfolio
of U.S. securities which are seasoned, well-managed, financially sound companies
with demonstrated superior earnings growth, accelerating cash flow and profit
margins and high or sharply rising return-on-equity. Priority companies are
those where management and/or large outside investors are buyers or owners of
the stock, or where the company itself is repurchasing its own shares on the
open market. These are the "Informed Investors". Any production of income is
secondary to this objective. There can be no assurance that the Fund will
achieve its investment objective.
Common sense suggests that the "Informed Investors" of the corporate world
are far closer to the day-to-day activities of the companies they own or
manage -- and often in a much more informed position to gauge the long-term
effect certain publicly disclosed information or developments may have on the
future price of their company's stock. Basic to the "Informed Investors"
strategy is the belief that it is far more prudent to invest in intrinsically
under-valued stocks which some of the nation's more knowledgeable investors own
or are buying with their own money, rather than to chase fad or glamour stocks
masquerading as disciplines.
The Fund emphasizes investment in small and medium-sized companies whose
outstanding shares have an aggregate market value of $200 million to $4 billion.
At least 65% of the value of the Fund's total assets will be invested in such
companies, unless the Fund has adopted a temporary defensive position. It is
expected that under normal market conditions the Fund will be substantially
fully invested in equity securities believed to have a potential for capital
growth which will result in greater-than-average share price fluctuations and
greater market risk than is involved in other securities.
RESERVE INTERNATIONAL EQUITY FUND. The Reserve International Equity Fund's
investment objective is to seek capital appreciation through investment in a
portfolio of equity securities. Companies of resident in countries experiencing
more rapid economic growth than mature economies such as the U.S. and Western
Europe. Any production of income is secondary to this objective. There can be no
assurance that the Fund will achieve its investment objective.
The Fund seeks to achieve its objective by following a structured and
disciplined investment policy of making investments in ADR's and common stocks
of non-U.S. companies. On occasion, warrants, convertible securities and fixed
income instruments will also be used. Generally, the Fund will seek to invest in
foreign equity securities listed on foreign exchanges and issued by companies
with investment characteristics, such as earnings growth, financial strength,
and projected positive cash flow as significant factors in assessing value. When
the Sub-Adviser deems it advisable because of unusual economic, political or
market conditions, the Fund may reduce or eliminate positions in one country and
switch the funds to other countries.
The Fund focuses on quality companies with high visibility and growth
characteristics in sales and earnings. Companies frequently are dominant within
their industry niche and many have a near monopoly position within their
country. Every stock in the Fund has been carefully selected through research
and often direct management contact.
The Sub-Adviser favors companies where management has a significant
ownership stake. The companies that are usually avoided are those that depend
heavily on commodity price levels for their future earnings growth. Portfolios
are structured by combining a top-down quantitative country weighting process,
which looks at macroeconomics factors nationally and internationally, with a
bottom-up individual company selection procedure, which focuses on microeconomic
factors in a particular company. To attempt to control risk the Fund spreads its
assets among 80 to 110 companies in 15 to 23 foreign markets with an initial
position in any single issue between 1% and 2% of assets. Since investments are
in companies that have strong earnings growth, the policy is to keep the Fund as
fully invested as is prudently possible. Therefore, portfolio investments in
cash equivalents usually will not exceed 10% of assets. Stocks are selected for
their long-term investment attractiveness. With a three to five-year time
horizon usual minimum holding period; therefore, portfolio turnover is low. In
all circumstances, the Fund will invest at least 65% of its total assets in
equity securities of issuers associated with at least three different countries,
excluding the United States, unless the Fund has taken a temporary defensive
position. The Fund will restrict investment in the combination of warrants, and
stock options to 5% of total assets at the time of purchase. Short-term profits
are not pursued as an objective, and there is no trading type activity in
stocks.
Summary of Investment Philosophy. The primary goal is to obtain consistent
portfolio performance by investing in quality companies with superior growth
records in sales and earnings. The Sub-Adviser's experience has shown that the
best way to make money in common stocks is to buy growth companies at attractive
prices and to maintain those positions for as long as the growth momentum
continues and their valuations do not reach extremes after an advance.
Portfolios of foreign investments are affected by different economic trends. By
participating in a large variety of investment opportunities, the probability of
investment success increases, and international diversification reduces the
effect that events in any one country will have on the portfolios. Portfolios of
foreign securities are often effected by different economic trends than those
which effect U.S. securities, which is a basic reason to diversify the
traditional U.S. based portfolio.
Investment Process
Country Allocation. Nine variables have been identified by the Sub-Adviser
which are deemed to be key in determining the future direction of stock markets.
The five macro economic factors are: real GDP growth rate and outlook; current
inflation rate and its trend;
8
<PAGE> 9
relative interest rates and their trend; outlook for the currency; and current
account/trade balance levels. The four stock market technical variables are:
intermediate and long-term trends of the stock prices versus the outlook for
corporate profit; relative price/earnings ratios and dividend yields; country
pension fund regulations that can affect the supply/demand factors for equities;
and political stability and government efforts to promote equity investments.
Stock Selection. After the top-down country allocation is in place, bottom-up
stock selection becomes the dominant activity. The focus is on quality
individual stock selection of companies with high visibility and growth in sales
and earnings. In emerging economies with less developed capital markets, a
strong balance sheet is essential. Stocks are not selected for industry
balancing purposes. Highly cyclical stocks and recovery situations are rarely
used as is the case with companies that are primarily market-share and sales
driven, regardless of profitability and shareholder benefit.
Selling Disciplines. A stock is sold when the fundamental factors (excessive
price/exchange ratio, slowed growth, excessive debt, etc.) have changed to such
an extent that the company no longer qualifies or when industry conditions or
governmental regulations have changed so that they negatively impact the
company's future. On rare occasions, a stock is sold if a significantly more
attractive opportunity develops in that country.
RESERVE LARGE-CAP VALUE FUND. The Reserve Large-Cap Value Fund's investment
objective is to seek long term capital appreciation through investment in a
portfolio of large, high quality U.S. companies. Any production of income is
secondary to this objective. There can be no assurance that the Fund will
achieve its investment objective.
The Fund seeks to achieve its objective by primarily investing in
attractively valued and undervalued equity securities believed to offer
favorable possibilities of capital appreciation. Generally, the Fund will seek
to invest in equity securities issued by companies with investment
characteristics such as high return on shareholder's equity, strong company
management that enhances shareholder value, good cash flow generation and
favorable profit trends. Fundamentally, investment candidates are understandable
businesses that can generate consistent earnings growth where the company is
believed to be undervalued as a whole. The Fund emphasizes investment in larger
U.S. companies whose outstanding shares have an aggregate market value of $5
billion or more and is designed for investors seeking the opportunity for
above-average, long-term growth with below-average overall risk (defined as loss
capital) and nominal current income. The Fund will invest at least 65% of its
total assets in equity securities and at least 65% of total assets in the
securities of companies, whose aggregate market value is $5 billion or more,
i.e., "large cap," unless the Fund has adopted a temporary defensive position.
It is the Sub-Adviser's view that high quality, large companies can generate
consistent growth over time that is above the growth rate of the overall
economy. The Fund may also invest in companies presenting special situations
when it is believed that the shares offer a strong potential for capital
appreciation due to the market underestimating earnings potential, changes in
management or other similar opportunities.
RESERVE MID-CAP GROWTH FUND. The Reserve Mid-Cap Growth Fund's (formerly,
Reserve North American Growth Fund) investment objective is to seek capital
appreciation through investment in a portfolio of medium sized companies. It is
the Sub-Adviser's view that mid-size companies in the United States are
generally expected to show growth over time that is above the growth rate of the
overall U.S. economy and that of larger companies. The Fund will invest at least
65% of its total assets in securities of companies considered to be "mid-cap" or
medium sized companies, unless the Fund has adopted a temporary defensive
position. The Fund does not choose investments for dividend or interest income,
nor does it try to "time" the market. The Fund will not employ any hedging
strategies, and, in all but the more dire of political or economic circumstances
intends to stay fully invested. Any production of income is secondary to this
objective. There can be no assurance that the Fund will achieve its investment
objective.
A varied portfolio of stocks will generally be selected based on the
following criteria: accelerating year-over-year, quarterly and annual per share
earnings; rising quarterly, year-over-year and annual profit margins; a
price-earnings multiple which is below that of the company's projected growth
rate; a company which occupies a significant position in its industry; a balance
sheet that is above average in quality for the company relative to its recent
past or for the industry in which it operates; a definitive source of the
earnings acceleration; and stocks which have a relative strength which is above
the average for all stocks.
The Fund may also invest in companies presenting special situations when it
is believed the shares offer a strong potential for capital appreciation due to
the market underestimating future earnings, changes in management or other
similar opportunities.
A result of the Fund's stock selection criteria is likely that the median
market capitalization for its portfolio companies will be about $1 billion and
such companies would be considered be "mid-cap" or medium sized companies. The
Fund will not invest in any company with a market capitalization of less than
$150 million or more than $5 billion. The "mid-cap" nature of the portfolio may
result in some increased volatility over that of the general market average. The
Fund intends to be fully invested in U.S. based companies, unless it has adopted
a temporary defensive position.
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INVESTMENT TECHNIQUES AND INVESTMENTS
The investments and techniques described in this section are subject to the
specific requirements or minimum investment policies found in the Investment
Objectives and Policies section of each Fund.
CASH EQUIVALENTS. Each 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 a 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 to those instruments in which the Fund may invest.
REPURCHASE AGREEMENTS. Each Fund may engage in repurchase agreement
transactions. A repurchase agreement is a transaction by which a 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. Each Fund
will limit repurchase agreements to those securities dealers who are deemed
credit worthy pursuant to guidelines adopted by the Board of Trustees. The
Sub-Advisers 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 or becomes insolvent or declares bankruptcy, a
Fund may encounter difficulties and incur costs and possibly a loss upon
disposition of the underlying securities.
LENDING OF PORTFOLIO SECURITIES. Each 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 each Fund's total assets. Loan arrangements made by a 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, a 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. Each
Statement of Additional Information further explains each Fund's securities
lending policies.
U.S. TREASURY SECURITIES. Each Fund may invest in securities issued, guaranteed
or collateralized by U.S. Treasury obligations, including Bills, Notes, Bonds,
all of which are backed by the full faith and credit of the United States.
SECURITIES OF U.S. GOVERNMENT AGENCIES AND INSTRUMENTALITIES. Each Fund may
invest in both adjustable rate and fixed rate securities issued, guaranteed, or
collateralized 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 Funds 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.
Each Fund may also invest in component parts of these securities or
instruments collateralized thereby, 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 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.
CONVERTIBLE SECURITIES. The Reserve Growth and Income and Reserve International
Equity Funds may invest in convertible securities. Prior to conversion,
convertible securities have the same general characteristics as non-convertible
debt securities, which provide a stable stream of income with generally higher
yields than those of equity securities of the same or similar issuers. The price
of a convertible security will normally vary with changes in the price of the
underlying stock, although the higher yield tends to make the convertible
security less volatile than the underlying common stock. As with debt
securities, the market value of convertible securities tends to decline as
interest rates increase, and increase as interest rates decline. While
convertible securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they enable investors to
benefit from increases in the market price of the underlying common stock. The
Funds will invest in such securities that are investment grade, rated Baa/BBB or
higher. These bonds have speculative characteristics and share some of the same
characteristics of lower-rated securities. For example,
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sustained periods of deteriorating economic conditions or of rising interest
rates are more likely to lead to a weakening in the issuer's capacity to pay
interest and repay principal than would be the case of higher-rated securities.
If a downgrade below the minimum rating occurs, the Funds will sell the
securities. Foreign convertible securities, which may be held by the Reserve
International Equity Fund, are not rated.
RIGHTS AND WARRANTS. The Reserve International Equity Fund will invest in
rights or warrants only if the underlying equity securities themselves are
deemed appropriate by the Sub-Adviser for inclusion in the Fund's portfolio.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities, nor do they represent any
rights to the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
it may decline because of a decrease in the value of the underlying security,
the passage of time or a change in perception as to the potential of the
underlying security, or any combination thereof. If the market price of the
underlying security is below the exercise price set forth in the warrant on the
expiration date, the warrant will expire worthless. Moreover, a right or warrant
ceases to have value if it is not exercised prior to the expiration date.
DEPOSITORY RECEIPTS. The Reserve International Equity Fund may invest in
depository receipts which may not necessarily be denominated in the same
currency as the underlying securities into which they may be converted. In
addition, the issuers of the stock of unsponsored depository receipts are not
obligated to disclose material information in the United States and, therefore,
there may not be a correlation between such information and the market value of
the depository receipts. ADRs are depository receipts typically issued by a U.S.
bank or trust company that evidence ownership of underlying securities issued by
a foreign corporation. Global Depository Receipts ("GDRs") and other types of
depository receipts are typically issued by foreign banks or trust companies and
evidence ownership of underlying securities issued by either a foreign or a U.S.
company. Generally, depository receipts in registered form are designed for use
in the U.S. securities markets, and depository receipts in bearer form are
designed for use in foreign securities markets. Investments of the Fund in ADRs
are deemed to be investments in securities issued by U.S. issuers and those in
GDRs and other types of depository receipts are deemed to be investments in the
underlying foreign securities.
The Fund may also invest in securities of supernational entities such as the
World Bank or the European Investment Bank.
ILLIQUID SECURITIES. The Funds may hold up to 15% or the value of their net
assets in securities as to which a liquid trading market does not exist and
therefore may not be able to readily sell such securities. Such securities
include securities that are not readily marketable, such as certain securities
that are subject to legal or contractual restrictions on resales, 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
U.S. Government POs and IOs 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 over-the-counter ("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 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-Advisers will monitor the liquidity of such restricted securities under
the supervision of the Adviser and Board of Trustees.
Many of the foreign countries in which the Reserve International Equity Fund
invests do not have a Securities Act similar to the United States requiring an
issuer to register the sale of securities with a governmental agency or imposing
legal restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resale of securities.
PUT AND CALL OPTIONS ON SPECIFIC SECURITIES. The Reserve Emerging Growth,
Reserve Growth and Income, and Reserve Informed Investors Growth Funds may
invest up to 5% of the value of their 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
Funds 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.
There is no limitation on the amount of call options a Funds 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 put option, in
return for the premium, has the obligation, upon exercise of the
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option, to acquire the security underlying the option at the exercise price. If
a call written by the Funds is exercised, the Funds forgo 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 Funds may be required to take delivery of the underlying security or
other asset at a disadvantageous price. Also, an option purchased by the Funds
may expire worthless, in which case the Funds would lose the premium paid
therefor.
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 Funds 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 Funds will only write covered options. An option is covered if, so long
as a Fund is obligated under the option 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 a Fund is subject to its Sub-Adviser's
ability to correctly predict movements in the market. If the Sub-Adviser is not
successful in employing options in managing a Fund's investments, performance
will be worse than if the Fund did not make such investments. In addition, a
Fund would pay commissions and other costs in connection with such investments,
which may increase its expenses and reduce its return.
STOCK INDEX OPTIONS. The Reserve Growth and Income 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. The Fund may invest up to 5% of the value of its total assets,
represented by the price paid, in the purchase of put and call options on stock
indexes. A stock index fluctuates with changes in the market values of the
stocks included in the index. The Funds may write put options on stock indexes
to the extent of 25% of the value of its total assets at the time such options
are written.
The effectiveness of purchasing or writing stock index options will depend
upon the extent to which price movements in the Funds' 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, their successful use is
dependent upon 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.
When a Fund writes an option on a stock index, it 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 put and call
options described previously.
FUTURES TRANSACTIONS IN GENERAL. The Reserve Growth and Income 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, 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
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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) 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 Reserve Growth and Income 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
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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.
INVESTMENT IN FOREIGN SECURITIES. The Reserve International Equity Fund may
purchase foreign equity and debt securities, including foreign government
securities. The Reserve International Equity Fund will not invest more than 10%
of its total assets in the securities of issuers of any single foreign country.
Foreign securities markets generally are not as developed or efficient as those
in the United States and securities traded there are less liquid and more
volatile than those traded in the U.S.
The Funds may be subject to additional risks because stock certificates and
other evidence of ownership of foreign issuers may be held outside the United
States. Such additional risks include: adverse political and economic
developments; nationalization of foreign issuers and possible adoption of
government restrictions which might affect the payment of principal, interest
and dividends to U.S. investors. In addition, there may be less publicly
available information about a foreign issuer, since they are generally not
subject to the timely accounting and financial reporting disclosure standards of
U.S. companies.
In making the allocation of assets in foreign markets, the Sub-Advisers will
consider such factors as prospects for relative economic growth, inflation,
interest rates, government policies influencing business conditions, the range
of individual investment opportunities available, and other pertinent financial,
tax, social, political and national factors, all in relation to the prevailing
prices of securities in each country. Nearly all foreign securities in which the
Reserve International Equity Fund may invest will be traded on foreign stock
exchanges or issued by foreign governments.
The Reserve International Equity Fund will invest in developing countries,
which involves exposure to economic structures that are typically less diverse
and mature than in the United States, and to political systems which are less
stable. A developing country may be considered to be one which is in the initial
stages of its conversion from an agrarian insular society to an international
manufacturing participant.
FOREIGN CURRENCY TRANSACTIONS. The Reserve International Equity Fund may engage
in foreign currency transactions in connection with its investment in foreign
securities but will not speculate in foreign currency exchange. The value of the
assets of a Fund as measured in U.S. dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and a Fund may incur costs in connection with conversions between
various currencies. A Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market or through forward contracts to purchase or
sell foreign currencies. A forward foreign currency exchange contract involves
an obligation to purchase or sell a specific currency at a future date, which
may be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
directly between currency traders (usually large commercial banks) and their
customers.
When the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the U.S. dollar cost
or proceeds, as the case may be. By entering into a forward contract in U.S.
dollars for the purchase or sale of the amount of foreign currency involved in
an underlying security transaction, the Fund is able to protect itself from
possible loss between trade and settlement dates resulting from an adverse
change in the relationship between the U.S. dollar and such foreign currency.
However, this tends to limit potential gains that might result from a positive
change in such currency relationships. The Fund may also hedge its foreign
currency exchange rate risk by engaging in foreign currency financial futures
and options transactions.
When the Fund's Sub-Adviser believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar, it may
enter into a forward contract to sell an amount of foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed U.S.
dollar amount where the Fund's Sub-Adviser believes that the U.S. dollar value
of the currency to be sold pursuant to the forward contract will fall whenever
there is a decline in the U.S. dollar value of the currency in which portfolio
securities of the Fund are denominated ("cross-hedge"). The forecasting of
short-term currency market movements is extremely difficult and whether such a
short-term hedging strategy will be successful is highly uncertain.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a contract. Accordingly, it may be
necessary for the Fund to purchase additional currency on the spot market (and
bear the expense of such purchase) if the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver when a
decision is made to sell the security and make delivery of the foreign currency
in settlement of a forward contract. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver.
The Fund will not enter into forward contracts or maintain a net exposure in
such contracts where the Fund would be obligated to deliver an amount of foreign
currency in excess of the value of the Fund's securities or other assets (a)
denominated in that currency or (b) in the case of a "cross-hedge," denominated
in a currency or currencies that the Fund's Sub-Adviser believes will have price
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movements that tend to correlate closely with that currency. The Fund's
Custodian bank segregates cash or liquid high-grade debt securities in an amount
not less than the value of the Fund's total assets committed to forward foreign
currency exchange contracts entered into for the purchase of a foreign currency.
If the value of the securities segregated declines, additional cash or
securities are added so that the segregated amount is not less than the amount
of the Fund's commitments with respect to such contracts. There is no limitation
as to the percentage of the Fund's assets that may be committed to such foreign
currency exchange contracts. The Fund generally will not enter into a forward
contract with a term longer than one year.
DEFENSIVE POSITION. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high-grade debt securities. These
securities may include U.S. Government securities, qualifying bank deposits,
money market instruments, and other types of short-term debt securities
including notes and bonds. For Funds that may invest in foreign countries, such
securities may also include short-term, foreign-currency denominated securities
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities each Fund
may invest in while in a temporary defensive position, please see such Fund's
Statement of Additional Information.
NON-DIVERSIFIED STATUS. As a non-diversified mutual fund, each Fund is
permitted to have all its assets invested in a limited number of issuers. As a
result, an investment in a Fund could entail greater risk than a mutual fund
with a policy of diversification.
RISK CONSIDERATIONS
Investment in certain Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
CURRENCY CONSIDERATIONS. Some of the assets of the Reserve International Equity
Fund will be invested in securities denominated in foreign currencies, and a
corresponding portion of the Fund's revenues will be received in such
currencies. Therefore, the dollar equivalent of their net assets, distributions
and income will be adversely affected by reductions in the value of certain
foreign currencies relative to the U.S. dollar. If the value of the foreign
currencies in which a Fund receives its income falls relative to the U.S. dollar
between receipt of the income and the making of Fund distributions, the Fund may
be required to liquidate securities in order to make distributions if it has
insufficient cash in U.S. dollars to meet distribution requirements that the
Fund must satisfy to qualify as a regulated investment company for federal
income tax purposes. Similarly, if an exchange rate declines between the time a
Fund incurs expenses in U.S. dollars and the time cash expenses are paid, the
amount of the currency required to be converted into U.S. dollars in order to
pay expenses in U.S. dollars, could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, a Fund may engage in certain currency hedging transactions, which
themselves involve certain special risks. See " Investment Techniques and
Investments."
FOREIGN INVESTMENT. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, the Funds whose investment portfolios include such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
affecting the general market, and by large investors trading significant blocks
of securities, than is usual in the U.S. Securities settlements may in some
instances be subject to delays and related administrative uncertainties. These
problems are particularly severe in India, where settlement is through physical
delivery and where a severe shortage of vault capacity exists among custodial
banks. Efforts are being undertaken to alleviate the shortage. Certain foreign
countries require governmental approval prior to investments by foreign persons
or limit investment by foreign persons to only a specified percentage of an
issuer's outstanding securities or a specific class of securities which may have
less advantageous terms (including price) than securities of the company
available for purchase by nationals. These restrictions or controls may at times
limit or preclude investment in certain securities and may increase the costs
and expenses of a Fund. In addition, the repatriation of investment income,
capital or the proceeds of sales of securities from certain of the countries is
controlled under regulations, including, in some cases, the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
A Fund could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investments. Investing in local markets may
require a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a Fund's investments in any country in which any of
these factors exist could be affected and the Sub-Adviser will monitor the
effect of any such factor or factors on a Fund's investments. Furthermore,
transaction costs including brokerage commissions for transactions both on and
off the securities exchanges in many foreign countries are generally higher than
in the U.S.
Issuers of securities in foreign jurisdictions are generally not subject to
the same degree of regulation as are U.S. issuers with respect to such matters
as insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely
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<PAGE> 16
disclosure of information. The reporting, accounting and auditing standards of
foreign countries may differ, in some cases significantly, from U.S. standards
in important respects and less information may be available to investors than is
available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as to growth of the gross
domestic product or gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Nationalization, expropriation or confiscator taxation, currency blockage,
political changes, government regulation, political or social instability or
diplomatic developments could affect adversely the economy of a foreign country
or the Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
U.S. AND FOREIGN TAXES. Foreign taxes paid by a Fund may be creditable or
deductible by U.S. shareholders for U.S. income tax purposes. No assurance can
be given that applicable tax laws and interpretations will not change in the
future. Moreover, non-U.S. investors may not be able to credit or deduct such
foreign taxes. Investors should review carefully the information discussed under
the heading "Taxes" and "Foreign Taxes" and should discuss with their tax
advisers the specific tax consequences of investing in a Fund.
FIXED-INCOME SECURITIES. The value of the Fund's shares will fluctuate with the
value of its investments. The value of fixed-income securities will decline in
value as interest rates rise and increase in value as interest rates decline.
MANAGEMENT OF THE FUNDS
RESERVE PRIVATE EQUITY SERIES -- ADVISER. The Funds' Investment Adviser is
Reserve Management Company, Inc.("RMCI" or "Adviser"), 14 Locust Place,
Manhasset, N.Y. 11030, which manages The Reserve Funds with over $3 billion in
assets. The Adviser supervises a continuous investment program for the Funds,
evaluates and monitors each of the Sub-Advisers' performances, investment
programs, 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-Advisers and other ordinary operating
expenses of each 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, the Adviser is
paid a comprehensive fee of 1.50% per annum of the average daily net assets of
each Fund, except for the Reserve International Equity Fund, for which the
Adviser is paid a comprehensive fee of 1.75%.
SUB-ADVISERS. The Investment Management Agreement and Sub-Advisory Agreement
provide that the Adviser and each Sub-Adviser, respectively, shall not be liable
for any error of judgment or mistake of law or for any loss suffered by a 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.
The Adviser and Trust have retained the following Sub-Advisers: Trainer,
Wortham & Company, Inc., 845 Third Avenue, New York, NY 10022 for Reserve Blue
Chip Growth Fund; Roanoke Asset Management, 529 Fifth Avenue, New York, NY
10017, for Reserve Emerging Growth Fund; Kenneth J. Gerbino & Company, 9595
Wilshire Boulevard, Suite 200, Beverly Hills, CA 90212, for Reserve Growth and
Income Fund; T.H. Fitzgerald & Co., 180 Church Street, Naugatuck, CT 06770, for
Reserve Informed Investors Growth Fund; Pinnacle Associates, Ltd., 666 Fifth
Avenue, New York, NY 10103, for Reserve International Equity Fund; Siphron
Capital Management, 280 S. Beverly Drive, Beverly Hills, CA 90212, for the
Reserve Large-Cap Value Fund; and Southern Capital Advisors, 50 Front Street,
Memphis, TN 38103, for Reserve Mid-Cap Growth Fund. None of these organizations
have previously served as either Adviser or Sub-Adviser to a registered
investment company.
TRAINER, WORTHAM & COMPANY, INC. was formed in 1924 and manages over $1
billion for individuals, family trusts and employee benefit plans and has over
seventy years experience using the investment policies discussed herein. Charles
V. Moore, the Fund's portfolio manager has been the President of the Sub-Adviser
since 1978 years and is responsible for the day-to-day investment decisions of
the Fund.
ROANOKE ASSET MANAGEMENT was formed in 1978 and currently manages over $200
million for high net worth individuals, foundations, endowments, corporations
and municipalities and has over fifteen years experience in using the investment
policies discussed herein. Edwin G. Vroom, President, Brian J. O'Connor,
Executive Vice President, and Adele S. Weisman, Senior Vice President, serve as
the Fund's portfolio managers, and have worked together as a team for over
twenty years.
KENNETH J. GERBINO & COMPANY was formed in 1977 and currently manages $60
million for high net worth individuals, pensions, and trusts. The principals of
the company have a combined experience of over fifty years in using the
investment policies discussed
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<PAGE> 17
herein. Kenneth J. Gerbino has been an independent money manager for over twenty
years and is responsible for macroeconomic trends and investment strategies for
the Fund. Raymond Baker has over thirty years of investment experience and is
Director of Investments at Kenneth J. Gerbino & Company, and will be responsible
for the day-to-day investment recommendations and decisions for the Fund.
T.H. FITZGERALD & CO. was formed in 1959 and currently manages over $200
million for employee benefit plans, bank trust departments, an insurance company
and a public authority and has over ten years' experience in using the
investment policies discussed herein. Thomas H. Fitzgerald, Jr., who founded his
firm in 1959, serves as the Fund's portfolio manager and is responsible for the
day-to-day investment decisions.
PINNACLE ASSOCIATES, LTD. was formed in 1984 and currently manages over $400
million for individuals, family trusts and employee benefit plans. Nicholas
Reitenbach is Director of International Investments, Partner of Pinnacle
Associates, Ltd., and serves as the Fund's primary portfolio manager. Mr.
Reitenbach has over thirty years' experience in utilizing the investment
techniques discussed herein.
SIPHRON CAPITAL MANAGEMENT was formed in 1991 and currently manages over
$200 million for tax-exempt, institutional clients. The senior management of
Siphron Capital has over thirty years' experience in using the investment
policies discussed herein. David C. Siphron and Peter D. Siphron, both partners
of the firm, serve as the Fund's portfolio managers, providing investment
recommendations based on a proprietary combination of fundamental and technical
analysis. Portfolio actions are based on mutual consent, with David Siphron
having final approval.
SOUTHERN CAPITAL ADVISORS has been in existence since 1986 as part of Morgan
Keegan, Inc., a financial services holding company. SCA manages approximately
$260 million for individuals, employee benefit plans, foundations and
endowments, and has over nine years experience in dealing with the investment
policies discussed herein. Richard A. McStay, C.F.A., its President, has more
than thirty years of experience in the investment business, and is the principal
portfolio manager for the Fund. He has been associated with Morgan Keegan & Co.,
Inc., since 1974.
For their services, all of the Sub-Advisers receive a fee of up to .75% per
annum of the respective Fund's average daily net assets except for Pinnacle
Associates, Ltd., who receives a fee of up to .875%.
PORTFOLIO TRANSACTIONS. Decisions as to the purchase and sale of securities for
each Fund and the execution of these transactions, including the negotiation of
brokerage commission on such transactions, are the responsibility of each
Sub-Adviser. In general, each 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, each Sub-Adviser may
take into account a broker's or dealer's operational and financial capabilities
and the type of transaction involved.
The Sub-Advisers may consider statistical, research, or other services
provided by brokers or dealers, some of which may be useful to each Sub-Adviser
in their 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 each Sub-Adviser. Each Sub-Adviser is authorized to place
portfolio transactions with brokers or dealers participating in the distribution
of shares of a Fund, but only if the Sub-Advisers reasonably believe 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, each Sub-Adviser is authorized to place portfolio
transactions with brokers or dealers affiliated with each Sub-Adviser, 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.
The annual portfolio turnover rate of each Fund is expected to approximate
100%, except for Reserve International Equity Fund, which is expected to be less
than 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 are ultimately responsible for the conduct of
the 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 divided paying agent.
HOW TO BUY SHARES
METHOD OF PAYMENT. The minimum initial investment is $1,000 for Class A shares
and $250 for Class D shares and the minimum subsequent investment for both
Classes of shares is $100, except for IRAs. However, shareholders (except IRAs)
must achieve a balance of $2,500 within twelve (12) months or the Fund may
choose to impose a fee (currently $5 monthly), see "Small Accounts".
17
<PAGE> 18
The initial minimum investment for an IRA is $250, and subsequent investments
are accepted in any amount. The Funds reserve 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 Account
Application. If no dealer or broker is named in the Account Application, the
Distributor will act as dealer for you. You can buy shares of a Fund each
business day at the public offering price next determined after receipt of
payment and a request in proper form by a Fund or by an investment dealer which
has a sales agreement with the Fund's Distributor. The public offering price is
equal to the net asset value of a Fund (plus a sales charge for Class A shares
as set forth in the table below). Payments (denominated in U.S. dollars) must be
made (if purchasing directly from a 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 a 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 Account
Application and payment to the Fund. Payment may be made by check or wire.
Purchase orders will be confirmed at the public offering price calculated next
after receipt by a Fund or an Authorized Dealer, (which order must be promptly
transmitted to the Fund), of a properly completed Account 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
a 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.
GENERAL INFORMATION. Each class of shares of each Fund will have the same
relative rights and privileges and be subject to the same sales charges, fees
and expenses except as set forth below. The Board of Trustees may determine in
the future that other allocations of expenses are appropriate and amend this
plan accordingly without the approval of shareholders of any class. Unless a
class of shares is otherwise designated, it shall have the terms set forth below
with respect to Class A shares. Income, realized and unrealized capital gains
and losses, and expenses of a Fund of the Trust not allocated to a particular
class as set forth below shall be allocated to each class of shares of a Fund on
the basis of net asset value of that class in relation to the net asset value of
the Fund. Expenses of the Trust not allocable to a specific Fund shall be
allocated to each Fund on the basis of the net asset value of that Fund in
relation to the net asset value of the Trust.
The Distributor, at its expense, will also provide additional compensation
to broker-dealers, financial consultants and financial institutions in
connection with actual or anticipated sales of Shares of a Fund, but only to the
extent permitted by law or regulation.
CLASS A SHARES -- INITIAL SALES CHARGE ALTERNATIVE. Class A shares of each Fund
of the Trust are sold at net asset value plus a maximum sales charge of 4.50%,
of the public offering price imposed at the time of purchase and are subject to
the minimum purchase requirements set forth in this prospectus. The initial
sales charge may be reduced or waived for certain purchases.
The load for Class A shares will be waived on all assets transferred
directly to The Reserve Private Equity Series from funds outside of Reserve on
which a similar load has already been paid.
SALES TABLE. Share purchases of each 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:
<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 or more................................. 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.
Class A shares of each Fund may be purchased at net asset value, without
sales charge, by employees of brokers or broker-dealers who have a signed dealer
agreement with the Fund, full time employees, their spouses and minor children
of the Adviser, Sub-Adviser, Resrv Partners, Inc., and other affiliated
companies; any Trustee of a Fund and their spouses; any trust, pension, profit
sharing, or other
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<PAGE> 19
benefit plan; 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 Funds; 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 Class A shares of each Fund
at net asset value until February 1, 1996, and thereafter as long as they are
qualified shareholders of Reserve money funds at net asset value plus a maximum
sales charge of 1%.
CLASS D SHARES -- ASSET-BASED SALES CHARGE ALTERNATIVE. Class D shares of each
Fund of the Trust are sold at net asset value without a sales charge and are
subject to the minimum purchase requirements set forth in this prospectus.
A Fund will thus receive the full amount of your purchase, and you will
receive the entire net asset value of your shares upon redemption. Class D
shares incur higher distribution fees than Class A shares and do not convert to
any other class of shares of a Fund. The higher fees mean a higher expense
ratio, so Class D shares pay correspondingly lower dividends and may have a
lower net asset value than Class A shares. A deferred sales charge of 1% is
assessed on redemptions made within the first year of investing.
CONTINGENT DEFERRED SALES CHARGE. Fund shares which are redeemed within one
year of purchase will be subject to a contingent deferred sales charge equal to
1% of the dollar amount subject thereto. The charge will be assessed on an
amount equal to the lesser of the current market value or the cost of the shares
being redeemed. Accordingly, no sales charge will be imposed on increases in net
asset value above the initial purchase price. In addition, no charge will be
assessed on shares derived from reinvestment of dividends or capital gains
distributions.
Solely for purposes of determining whether one year has elapsed from the
time of any payment for the purchases of shares, all payments during a month
will be aggregated and deemed to have been made on the last day of the month.
In determining whether a contingent deferred sales charge is applicable to a
redemption, the calculation will be determined in the manner that results in the
lowest possible rate being charged. Therefore, it will be assumed that the
redemption is of shares held for over one year or shares acquired pursuant to
reinvestment of dividends or distributions. The charge will not be applied to
dollar amounts representing an increase in the net asset value since the time of
purchase.
To provide an example, assume an investor purchased 1,000 shares at $10.00
per share (at a cost of $10,000) and in the eleventh month after purchase, the
net asset value per share is $12.00 and, during such time, the investor has
acquired 100 additional shares upon dividend reinvestment. If, at such time the
investor makes his first redemption of 500 shares (proceeds of $6,000) 100
shares will not be subject to charge because of dividend reinvestment. With
respect to the remaining 400 shares, the charge is applied only to the original
cost of $10.00 per share and not to the increase in net asset value of $2.00 per
share. Therefore, $4,000 of the $6,000 redemption proceeds will be charged at
the 1% rate.
The contingent deferred sales charge is waived on redemptions of shares
redeemed by a shareholder (i) who did not acquire his or her shares through a
broker-dealer (or other financial intermediary), or (ii) who acquired his or her
shares through a broker-dealer (or other financial intermediary) that has
elected to receive 12b-1 payments, as a trail and not up-front, beginning the
day the shares are issued.
VOTING RIGHTS. Each class of shares of a Fund shall have exclusive voting
rights on any matter submitted to shareholders that relates solely to its
arrangement. Each class of shares of a Fund shall have separate voting rights on
any matter submitted to shareholders in which the interests of one class differ
from the interests of any other class.
RIGHT OF ACCUMULATION (ROA). Reduced sales charges apply to any purchase of
Class A shares of a Fund where the aggregate investment, among all the Reserve
Private Series Class A Shares, including such purchase, is $50,000 or more. If,
for example, you previously purchased and still hold shares of a Fund with a
current market value of $50,000 and subsequently purchase shares of a 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 (LOI). Investors who anticipate that they will invest $50,000
(other than through exchanges) or more in Class A shares of a Fund within
thirteen months may execute an LOI on the form in the Account Application. The
execution of an LOI 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 Class A shares in other Funds in the Reserve
Private Equity Series, other than money funds, that may be offered, can be
included to fulfill the LOI.
Out of an investor's initial purchase (or subsequent purchases) 5% of the
specified dollar amount of the LOI will be held in escrow by the transfer agent
in their account until their total purchases of the Fund plus their accumulation
credit (if any) equal the amount
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<PAGE> 20
specified. A purchase not originally made pursuant to an LOI may be included
under a backdated letter executed within ninety (90) days of such purchase
(accumulation credit).
If total purchases plus an investor's accumulation credit are less than the
specified amount, the investor agrees to remit to the distributor an amount
equal to the difference in the dollar amount of the sales charge the investor
had actually paid and the amount of the sales charges which they would have paid
on their 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 twenty (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.
RESERVE PRIVATE EQUITY SERIES AUTOMATIC ASSET-BUILDER PLAN. If you have an
account balance of $5,000 or more, you may purchase shares of a Fund ($25
minimum) from a checking, NOW, or bank money market deposit account or from a
U.S. Government distribution ($25 minimum) such as Social Security, federal
salary, or certain veteran's benefits, or other payments from the federal
government. Fill out the Reserve Private Equity Series Automatic Asset-Builder
form included in the account application or call the Funds at (800) 637-1700.
DOLLAR COST AVERAGING. Shareholders may elect to have a specified amount
automatically exchanged, either monthly or quarterly (on or about the 10th or
25th day of the applicable month), from one of their accounts into one or more
Reserve Private Equity Series Funds, provided that Class A or D shares may only
be exchanged for Class A or D shares of another Reserve Private Equity Series
Fund. The account from which exchanges are to be made must have a value of at
least $5,000 when a shareholder elects to begin this program, and the exchange
minimum is $50 per transaction. All of the accounts that are part of this
program must have identical registrations. The net asset value of shares
purchased under this program may vary, and may be more or less advantageous than
if shares were not exchanged automatically. There is no charge for entering the
Dollar Cost Averaging program. Sales charges may apply, as described under the
caption "Exchange Privilege."
PRIVATE EQUITY CASH ACCOUNT. The Private Equity Cash Account acts as an omnibus
account of The Reserve a U.S. Treasury Fund, a money market fund which invests
exclusively in full-faith and credit obligations of the United States Treasury,
and may be utilized for dollar-cost averaging.
NET ASSET VALUE. Fund shares are issued at net asset value plus a sales charge
(for Class A shares) and redeemable 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 each Fund and each class 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 each Fund and each
class 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 a Fund. The New York Stock Exchange is closed on
the following holidays: New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas. The net asset
value per share of each Fund and each class is determined by adding the value of
a Fund's portfolio securities, cash and other assets, subtracting its
liabilities, and dividing the result by the number of class' shares outstanding.
INDIVIDUAL RETIREMENT ACCOUNTS. Investors may use each 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 Funds' Distributor is Resrv Partners, Inc. ("RPI"), 810
Seventh Avenue, New York, N.Y. 10019-5868. The Distributor is a wholly owned
subsidiary of the Adviser.
All orders for the purchase of shares of each 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 Funds to do so.
EXCHANGE PRIVILEGE. Shares of each Fund may be exchanged for shares in the
Reserve money market funds 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 a
Fund 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 any Reserve Private Equity Series
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 fifteen (15) days. Exchanges by telephone are an automatic privilege
unless the shareholder notifies the Fund on the Account Application that his
authorization has been withheld. Unless authorization is withheld, the Fund will
honor requests by any person by telephone at (800) 637-1700, that the Fund deems
to
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<PAGE> 21
be valid. The Funds and their affiliates may be liable for any losses caused by
their failure to employ reasonable procedures to avoid unauthorized or
fraudulent instructions.
To reduce such risk, the registration of the account into which shares are
to be exchanged must be identical to the registration of the originating account
and all telephone exchange requests will be recorded. The Fund may also require
the use of a password or other form of personal identification. In addition,
each Fund will provide written confirmation of exchange transactions. During
periods of volatile economic and market conditions, a shareholder may have
difficulty making an exchange request by telephone, in which case an exchange
request would have to be made in writing.
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. A pattern of frequent exchanges may be deemed by the Adviser to be
abusive and contrary to the best interests of the Fund's other shareholders and,
at the Adviser's discretion, may be limited by the Fund's refusal to accept
additional purchases and/or exchanges from the investor and/or the imposition of
fees. The Funds do not have any specific definition of what constitutes a
pattern of frequent exchanges. Any such restriction will be made on a
prospective basis, upon notice to the shareholder not later than ten (10) days
following such shareholder's most recent exchange. Telephone and written
exchange requests must be received by the Funds by 4:00 P.M. (New York time) on
a regular business day to take effect that day. 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 for Class A shares).
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 Fund 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, each Fund pays Resrv
Partners, Inc., for advertising, marketing and distributing each Fund's shares
and for servicing each Fund's shareholders at an annual rate of .25% of the
value of each Fund's average daily net assets for Class A shares and 1.00% of
the value of each Fund's average daily net assets for Class D shares. The Funds
are not obligated to pay any distribution expense in excess of such distribution
service fee. If the Plan were terminated or not continued, no amounts (other
than amounts accrued but not yet paid) would be owed by the Funds.
Under the Plan, Resrv Partners, Inc., may make payments to brokers,
financial institutions and financial intermediaries for administration and for
servicing Fund shareholders who are also their clients and/or for distribution.
RPI determines the amounts to be paid to brokers, financial institutions and
financial intermediaries ("Firms"). Firms receive such fees with respect to the
average daily net asset value of each Fund's shares owned by shareholders for
whom the Firm performs services or for whom the Firm is the dealer of record.
Financial institutions providing distribution assistance or administrative
services for each Fund may be required to register as securities dealers in
certain states. The fees, payable to "RPI," under the Plan for advertising,
marketing and distributing each Fund's shares and for payments to Firms are
payable without regard to actual expenses incurred. Thus, if fees exceed
distribution expenses, RPI will incur a profit; however, if expenses exceed
fees, then they will incur a loss. RPI may use such fees to promote the sale of
shares for 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 account 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 their 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.
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
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<PAGE> 22
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
Each 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 Funds to restrict the degree to
which they engage in short-term trading, short sales and transactions in options
and futures contracts. Dividends paid by each Fund from net investment income,
including net short term capital gains, whether in cash or in additional shares
of each 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 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
each Fund on the record date, provided such dividends are paid during January of
the following year.
Distributions from long term capital gains designated by each Fund as
capital gain dividends, whether paid in cash or additional shares of each 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 each Fund for shares of another fund with which the Funds have
exchange privileges, are taxable events and, accordingly, may result in a
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 ninety-one (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, each 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 each 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 foreign, federal, state and local taxes with specific reference
to their own tax situation.
FOREIGN INCOME TAXES
Investment income received by the Reserve International Equity Fund from
sources within foreign countries may be subject to foreign income taxes withheld
at the source. To the extent that a Fund is liable for such foreign income
taxes, it will attempt to meet the requirements of the Code to "pass through" to
its shareholders credits for such taxes, but there can be no assurance that it
will be able to do so.
DIVIDENDS AND DISTRIBUTIONS
All dividends and capital gains distributions, if any, 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 Account 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) 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 and/or if the distribution
would be less than $25.
22
<PAGE> 23
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. The payment date will be used to
determine net asset value when dividends and capital gains distributions are
reinvested.
REDEMPTIONS
TIME AND METHOD OF REDEMPTION. Each Fund's 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, 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 the close of business
will be effected at the next calculated net asset value. If the Funds have
previously been advised in writing of your brokerage or bank account, telephone
requests by any person for redemptions are accepted for payment to such account
by calling (800) 637-1700.
WRITTEN AND TELEPHONE REDEMPTION REQUESTS. The Funds strongly suggest (but does
not require) that each written redemption be at least $1,000 and requires that
each telephone redemption be at least $1,000, except for redemptions which are
intended to liquidate your account. A shareholder will be charged $2 for
redemption checks issued by the Funds of less than $100. 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 Funds assume no responsibility for
delays in the receipt of wired or mailed funds. The use of a predesignated
financial institution, such as a savings bank, credit union or savings and loan
association, which is not a member of the Federal Reserve wire system to receive
your wire could cause such a delay. If a 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 Funds may be
liable for any losses caused by their failure to employ reasonable procedures.
To reduce the risk of loss, proceeds of telephone redemptions may be sent only
(1) to the bank or brokerage account designated by the shareholder, in writing,
on the investment application or in a letter with the signature(s) guaranteed;
or (2) to the address of record if all the conditions listed below are met. To
change the designated brokerage or bank account it is necessary to contact the
firm through which shares of the Fund were purchased or if purchased directly
from the Funds, it is necessary to send a written request to the Funds with
signature(s) guaranteed as described below. Other redemption orders must be in
writing with the necessary signature(s) guaranteed by a domestic commercial
bank; a domestic trust company; a domestic savings bank, credit union or savings
association; or a member firm of a national securities exchange. Guarantees from
notaries public are unacceptable. The Funds will waive the signature guarantee
requirement on a redemption request once every thirty (30) days if all of the
following conditions apply: (1) the redemption is for $5,000 or less; (2) the
redemption check is payable to the shareholder(s) of record; and (3) the
redemption check is mailed to the shareholder(s) at the address of record. The
requirement of a guaranteed signature protects against an unauthorized person
redeeming shares and obtaining the redemption proceeds. Redemption instructions
and election of the plans described below may be made when your account is
opened. Subsequent elections and changes in instructions must be in writing with
the signature(s) guaranteed. Changes in registration or authorized signatories
may require additional documentation.
The Funds reserve the right to refuse a telephone redemption if it believes
it is advisable to do so. Procedures for telephone redemptions may be modified
or terminated by the Fund at any time. During times of drastic economic or
market conditions shareholders may experience difficulty in contacting the Funds
by telephone to request a redemption or exchange of a Fund's shares. In such
cases shareholders should consider using another method of redemption, such as a
written request or a redemption by check.
REDEMPTION BY CHECK. By completing a signature card (and certain other
documentation if the record owner is a fiduciary, corporation, partnership,
trust or other organization) which is available from the Funds or the firm
through which shares of the Funds were purchased, you can write checks against
your account. This privilege may not be available to clients of certain firms.
There is no minimum amount for check redemptions, however, the Fund, upon proper
notice to the shareholder may choose to impose a fee if it deems a shareholder's
actions to be burdensome to the Funds. A firm may establish variations of
minimum check amounts for their customers if such variations are approved by the
Funds. This procedure lengthens the time your money earns dividends, since
redemptions are not made until the check is processed by the Funds. Because of
this, a check cannot completely liquidate your account, nor may a check be
presented for certification or immediate payment. Otherwise, you may deposit a
check in your bank account or use it to pay any third party obligation not
requiring certification. Shareholder checks written against accounts with
insufficient funds, postdated checks and checks which contain an irregularity in
the signature, amount or otherwise will be returned by the Funds and a fee
charged against the account. Because check redemptions are reported on account
statements, they will not be confirmed separately. A fee is charged for
providing check copies.
STOP PAYMENTS. The Funds will honor stop payment requests on unpaid shareholder
checks provided the Funds are advised of the correct check number, payee, check
amount and date. Stop payment requests received by the Funds by 2:00 P.M. (New
York time) in proper form will be effective the next business day. Oral stop
payment requests are effective for fourteen (14) calendar days, at which
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<PAGE> 24
time they will be canceled unless confirmed in writing. Written stop payment
orders are effective for one year. A fee is charged for this service.
AUTOMATIC WITHDRAWAL PLANS. If you have an account with a balance of at least
$5,000, you may make a written election to participate in either of the
following: (i) an Income Distribution Plan providing for monthly, quarterly or
annual payments by redemption of shares from reinvested dividends or
distributions paid to your account during the preceding period; or (ii) a Fixed
Amount Withdrawal Plan providing for the automatic redemption of a sufficient
number of shares of your account to make a specified monthly, quarterly or
annual payment of a fixed amount. Changes to instructions must be in writing
with signature(s) guaranteed. In order for such payments to continue under
either Plan, there must be a minimum of $25 available from reinvested dividends
or distributions. Payments can be made to you or your designee. An application
for the Automatic Withdrawal Plans can be obtained from the Funds. The amount,
frequency and recipient of the payments may be changed by giving proper written
notice to the Funds. The Funds may impose a charge or modify or terminate any
Automatic Withdrawal Plan at any time after the participant has been duly
notified. This privilege may not be available to clients of certain firms or may
be available subject to conditions or limitations.
RESERVE AUTOMATIC TRANSFER PLAN. You may redeem shares of a Fund (minimum $100)
without charge by telephone if you have filed a separate Reserve Automatic
Transfer application with the Fund. The proceeds will be transferred between
your Fund account and the checking, NOW or bank money market deposit account (as
permitted) designated in the application. Only such an account maintained in a
domestic financial institution which is an Automated Clearing House member may
be so designated. Redemption proceeds will be on deposit in your account at the
Automated Clearing House member bank ordinarily two (2) business days after
receipt of the redemption request. The Funds may impose a charge or modify or
terminate this privilege at any time after the participant has been duly
notified. This privilege may not be available to clients of certain firms or may
be available subject to conditions or limitations.
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. If a shareholder account (other than an IRA) does not achieve a
balance of $2,500 within twelve (12) months, the Fund reserves the right to
impose a fee (currently $5 monthly), after thirty (30) days' written notice to
the shareholder. The minimum balance requirement will be waived if the account
balance drops below $2,500 due to market depreciation. Class D-share accounts
offered in conjunction with a broker sweep are exempt unless shareholders have
been notified to the contrary.
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 fairly the value
of its net assets, or (c) for such periods as the SEC may by order permit. If
shares of a Fund are purchased by check or Reserve Automatic Transfer Plan, 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. Shareholder checks
written against Funds which are not yet considered collected will be returned
and a fee charged against the account. When a purchase is made by wire and
subsequently redeemed, the proceeds from such redemptions normally will not be
transmitted until two business days after the purchase by wire.
GENERAL INFORMATION
JOINT OWNERSHIP. When an account is registered in the name of one person or
another, for example a husband or wife, either person is entitled to redeem
shares in the account. The Funds assume no responsibility to either person for
actions taken by the other person with respect to an account so registered. The
investment application provides that persons so registering their account
indemnify and hold the Fund harmless for actions taken by either party.
BACKUP WITHHOLDING. Each 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, or that they are not
currently subject to backup withholding. Shareholders should be aware that,
under regulations promulgated by the IRS, the Funds 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 a corresponding charge will
be made against the account.
USE OF JOINT PROSPECTUS. Although each Fund is offering only its own shares, it
is possible that a Fund might become liable for any misstatement in the
Prospectus about the other Funds.
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.
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<PAGE> 25
SPECIAL SERVICES. The Funds reserve 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
Funds may present information regarding the total return on a hypothetical
investment in a 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, the Dow Jones Industrial Average, the NASDAQ Composite
Index, the Russell 2000 Index, and the Morgan Stanley Capital International EAFE
Index, or to groups of comparable mutual funds.
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 a hypothetical
$1,000 investment to the value that the investment could be redeemed for at the
end of the period. 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 charge (Class A shares) from the initial
investment.
In addition to the figures described above, a 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 a Fund, as well as the performance of the mutual
funds, do not reflect sales charges, the inclusion of which would reduce a
Fund's performance.
Performance of a Fund will vary from time to time, and past results are not
necessarily indicative of future results. Performance information supplied by
each Fund may not provided a basis of comparison with other investments using
different reinvestment assumptions or time periods.
------------------------
THIS PROSPECTUS IS INTENDED TO CONSTITUTE AN OFFER BY EACH FUND ONLY OF THE
SECURITIES OF WHICH IT IS THE ISSUER AND IS NOT INTENDED TO CONSTITUTE AN OFFER
BY ANY FUND OF THE SECURITIES OF ANY OTHER FUND WHOSE SECURITIES ARE ALSO
OFFERED BY THIS PROSPECTUS. NO FUND INTENDS TO MAKE ANY REPRESENTATION AS TO THE
ACCURACY OR COMPLETENESS OF THE DISCLOSURE IN THIS PROSPECTUS RELATING TO ANY
OTHER FUND.
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.
------------------------
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<PAGE> 26
GLOSSARY
The following terms are frequently used in this Prospectus.
EQUITY SECURITIES are, (i) common stocks, partnership interests,
business trust shares and other equity or ownership interests in business
enterprises, and (ii) securities convertible into, and rights and warrants
to subscribe for the purchase of, such stocks, shares and interests.
DEBT SECURITIES are bonds, debentures, notes, bills, repurchase
agreements, loans, other direct debt instruments and other fixed, floating
and variable rate debt obligations.
FIXED-INCOME SECURITIES are debt securities and dividend-paying
preferred stocks and include floating rate and variable rate instruments.
CONVERTIBLE SECURITIES are fixed-income securities that are convertible
into common stock.
U.S. GOVERNMENT SECURITIES are securities issued or guaranteed by the
United States Government, its agencies or other federal governmental
entities.
FOREIGN GOVERNMENT SECURITIES are securities issued or guaranteed, as to
payment of principal and interest, by governments, quasi-governmental
entities, governmental agencies or other federal governmental entities,
other than the U.S. Government.
QUALIFYING BANK DEPOSITS are certificates of deposit, bankers'
acceptances and interest-bearing savings deposits of banks having total
assets of more than $1 billion and which may or may not be members of the
Federal Deposit Insurance Corporation.
RULE 144A SECURITIES are securities that may be resold without
registration pursuant to Rule 144A under the Securities Act of 1933, as
amended (the "SECURITIES ACT").
COMMISSION is the Securities and Exchange Commission.
1940 ACT is the Investment Company Act of 1940, as amended.
CODE is the Internal Revenue Code of 1986, as amended.
26
<PAGE> 27
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
<CAPTION>
PAGE
----
<S> <C>
Annual Fund Expense Information.......... 2
Financial Highlights..................... 3
The Trust................................ 7
Investment Objectives and Policies....... 7
Investment Techniques and Investments.... 10
Risk Considerations...................... 15
Management of the Funds.................. 16
How to Buy Shares........................ 17
Shares of Beneficial Interest............ 21
Taxes.................................... 22
Foreign Income Taxes..................... 22
Dividends and Distributions.............. 22
Redemptions.............................. 23
General Information...................... 24
Glossary................................. 26
Investors are advised to read and retain
this Prospectus for future reference.
</TABLE>
Founders of
"America's First
Money Fund"
810 Seventh Avenue, New York, NY 10019-5868
GENERAL INFORMATION, PURCHASES AND REDEMPTIONS
Call 800-637-1700. Fax 212-977-9897
Distributor -- Resrv Partners, Inc.
RF/EG 7/96
Founders of
"America's First
Money Fund"
-------------------------------------------------------------------------
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RESERVE BLUE CHIP GROWTH FUND
RESERVE EMERGING GROWTH FUND
RESERVE GROWTH AND INCOME FUND
RESERVE INFORMED INVESTORS
GROWTH FUND
RESERVE INTERNATIONAL EQUITY FUND
RESERVE LARGE-CAP VALUE FUND
RESERVE MID-CAP GROWTH FUND
<PAGE> 28
RESERVE PRIVATE EQUITY SERIES
RESERVE EMERGING GROWTH 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 Emerging Growth Fund ("Emerging Growth 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 July 31, 1996.
TABLE OF CONTENTS
Page
----
Investment Policies 2
Other Policies 2
Trustees and Officers of the Trust 5
Investment Management and Other Agreements 7
Portfolio Turnover, Transaction Charges and
Allocation 8
Shares of Beneficial Interest 8
Purchase, Redemption and Pricing of Shares 9
Distributions and Taxes 10
Performance Information 12
Report of Independent Accountants 14
Financial Statements 15
<PAGE> 29
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 Emerging Growth Fund may not:
(1) borrow money except as a temporary measure for extraordinary or emergency
purposes 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 issuers
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.
The Fund has reserved the right to purchase and write interest rate
futures contracts, and put and call options on interest rate futures
contracts. The Fund does not intend to use these techniques for the
foreseeable future and that shareholders will be given notice should the Fund
determine that they will be used.
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.
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
<PAGE> 30
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 five 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.
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 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
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
<PAGE> 31
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
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.
DEFENSIVE POSITION. For temporary defensive purposes, the Fund may vary from
its investment policy during periods in which conditions in securities markets
or other economic or political conditions warrant. In such circumstances, the
Fund will increase its position in debt securities, which may include short-term
U.S. Government securities and U.S. dollar- or foreign currency-denominated
short-term indebtedness, cash equivalents and fixed-income securities issued or
guaranteed by governmental entities, or by companies or supranational
organizations (e.g., International Bank for Reconstruction and Development and
the European community) rated AA or better by Standard & Poor's Corporation, or
Aa or better by Moody's Investor Service, Inc.; or if not so rated, of
equivalent investment quality as determined by the Adviser. Apart from periods
of defensive investment, the Fund may also at any time temporarily invest funds
awaiting reinvestment or held as reserves for dividends and other distributions
to shareholders in U.S. dollar-denominated money-market instruments.
<PAGE> 32
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"),
Reserve New York Tax-Exempt Trust ("RNYTET") and Reserve Private Equity Series
("RPES"), 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.
<PAGE> 33
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,
RTET and RPES.
HENRI W. EMMET, Trustee, 176 East 71st Street, New York, New York 10021.
Mr. Emmet is the Managing Director of Global Interaction, Inc., and
formerly served as the Managing Director of Servus Associates, Inc.; U.S.A.
Representative of the First National Bank of Southern Africa, and Trustee of RF,
RET, RNYTET, RTET and RPES. 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, RTET, and RPES. 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, RTET, and RPES.
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, RNYTET, and
RPES. 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, RNYTET, and RPES. 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.
** Father Harrington is a member of the Board of Directors of Bear, Sterns & Co.
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.
COMPENSATION TABLE
<TABLE>
<CAPTION>
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 $22,197
Henri W. Emmet $0 $22,197
Rev. Donald J. Harrington $0 $22,197
Niels W. Johnsen $0 $22,197
Burtt R. Ehrlich $0 $0
Thomas L. Rhodes $0 $0
</TABLE>
Amount shown are for the Fund's fiscal year ending May 31, 1996.
<PAGE> 34
INVESTMENT MANAGEMENT AND OTHER AGREEMENTS
THE ADVISER. Reserve Management Company, Inc. ("RMCI" or "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 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 which include: registration fees paid to the commission
and state regulators, costs associated with the annual update of each Fund's
registration statement, auditing annual financial statements, and printing and
mailing costs (exclusive of those associated with the Rule 12b-1 Plans).
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. Roanoke Asset Management ("Sub-Adviser"), 529 Fifth
Avenue, New York, New York 10017, 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. The Chase Manhattan 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 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 of .25% of the average net
asset value for Class A shares and of 1.00% of the average net asset value for
Class D shares. The Trustees have determined that there is a reasonable
<PAGE> 35
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
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 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
<PAGE> 36
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.
As of June 30, 1996, the following persons owned of record or beneficially
5% or more of the outstanding shares of the Fund: Bruce R. Bent, 810 Seventh
Avenue, NY, NY 10019 (5.4%); Arthur T. Bent, 18 Heights Road, Plandome, NY 11030
(8.5%); Bruce Bent II, 18 Heights Road, Plandome, NY 11030 (7.5%); Christopher
Vroom, 3011 Saint Paul St., Baltimore, MD 21218 (7.4%); and Reserve Management
Corporation, 810 Seventh Avenue, NY, NY 10019 (8.7%).
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 (if applicable). The net asset value of each Fund
and each class is calculated at the end of each business day (currently 4:00 PM
New York time) 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 each class 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 of each class 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.
<PAGE> 37
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 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
<PAGE> 38
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 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 from 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 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:
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)
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
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.
<PAGE> 39
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> 40
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Trustees of The Reserve Private Equity
Series:
We have audited the accompanying statements of assets and liabilities of The
Reserve Private Equity Series (comprising, respectively, Reserve Blue Chip
Growth Fund, Reserve Emerging Growth Fund, Reserve Growth and Income Fund,
Reserve Informed Investors Growth Fund, Reserve International Equity Fund,
Reserve Large-Cap Value Fund, Reserve Mid-Cap Growth Fund, and Reserve North
American Growth Fund) (collectively the "Trust"), including the schedules of
portfolio investments, as of May 31, 1996, and the related statements of
operations for the period presented, and the statements of changes in net assets
and the financial highlights for each period presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the series constituting The Reserve Private Equity Series as of May 31,
1996, the results of their operations, the changes in their net assets, and
their financial highlights for the periods referred to above, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
June 28, 1996
2
<PAGE> 41
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
BLUE CHIP EMERGING GROWTH AND
GROWTH FUND GROWTH FUND INCOME FUND
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investment in securities, at value (cost $3,765,486, $4,765,851,
$794,268, respectively)............................................ $4,910,081 $6,589,386 $ 798,545
Cash................................................................. 201,401 756,193 255,213
Receivable for investment securities sold............................ 271,837 99,208 --
Dividends receivable................................................. 2,620 120 3,376
Interest receivable.................................................. -- -- 1,041
----------- ----------- -----------
Total assets....................................................... 5,385,939 7,444,907 1,058,175
----------- ----------- -----------
LIABILITIES
Accrued comprehensive fee............................................ -- 10,836 4,527
Payable for investment securities purchased.......................... 213,700 518,939 --
Other payables and accrued expenses.................................. 81 15,692 1,492
----------- ----------- -----------
Total liabilities.................................................. 213,781 545,467 6,019
----------- ----------- -----------
NET ASSETS............................................................. $5,172,158 $6,899,440 $1,052,156
=========== =========== ===========
NET ASSETS CONSIST OF (NOTE 1):
Capital stock (Par Value $.001 per share)............................ $ 347 $ 353 $ 103
Additional paid in capital........................................... 4,141,875 5,086,032 1,038,372
Accumulated net realized loss on investments......................... (114,659) (10,480) (111)
Accumulated undistributed net investment income...................... -- -- 9,515
Net unrealized appreciation on investments........................... 1,144,595 1,823,535 4,277
----------- ----------- -----------
NET ASSETS, at value, applicable to Shares of Beneficial Interest
outstanding (Note 5)................................................. $5,172,158 $6,899,440 $1,052,156
=========== =========== ===========
CLASS A:
Net Assets........................................................... $5,129,524 $6,656,511 $1,050,657
----------- ----------- -----------
Shares Outstanding................................................... 344,082 340,243 103,341
----------- ----------- -----------
Net Asset Value and redemption value per share (net assets/shares
outstanding)....................................................... $ 14.91 $ 19.56 $ 10.17
=========== =========== ===========
Maximum offering price per share (net asset value plus sales charge
of 4.50% of offering price)........................................ $ 15.61 $ 20.48 $ 10.65
=========== =========== ===========
CLASS D:
Net Assets........................................................... $ 42,634 $ 242,929 $ 1,499
----------- ----------- -----------
Shares Outstanding................................................... 2,865 12,448 147*
----------- ----------- -----------
Net Asset Value, offering and redemption value per share (net
assets/shares outstanding)......................................... $ 14.88 $ 19.52 $ 10.17
=========== =========== ===========
</TABLE>
- ---------------
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 42
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
INFORMED INVESTORS INTERNATIONAL LARGE-CAP
GROWTH FUND EQUITY FUND VALUE FUND
------------------ ------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investment in securities, at value (cost $3,783,862, $2,944,304,
$1,115,010, respectively)........................................ $6,224,000 $ 3,275,290 $ 1,185,133
Cash............................................................... 188,426 224,557 50,557
Receivable for investment securities sold.......................... -- 152,147 --
Dividends receivable............................................... 553 4,256 1,583
--------------- ------------ ------------
Total assets..................................................... 6,412,979 3,656,250 1,237,273
--------------- ------------ ------------
LIABILITIES:
Accrued comprehensive fee.......................................... -- -- 5,046
Payable for investment securities purchased........................ -- 69,961 --
Payable for fund shares redeemed................................... 3,684 -- --
Other payables and accrued expenses................................ 1,232 1,765 1,167
--------------- ------------ ------------
Total liabilities................................................ 4,916 71,726 6,213
--------------- ------------ ------------
NET ASSETS........................................................... $6,408,063 $ 3,584,524 $ 1,231,060
=============== ============ ============
NET ASSETS CONSIST OF (NOTE 1):
Capital Stock (Par Value $.001 per share).......................... $ 446 $ 318 $ 112
Additional paid in capital......................................... 4,281,103 3,325,152 1,160,825
Accumulated net realized loss on investments and foreign currency
transactions..................................................... (313,624) (71,968) --
Net unrealized appreciation on investments and foreign currency
transactions..................................................... 2,440,138 331,022 70,123
--------------- ------------ ------------
NET ASSETS, at value, applicable to Shares of Beneficial Interest
outstanding (Note 5)............................................... $6,408,063 $ 3,584,524 $ 1,231,060
=============== ============ ============
CLASS A:
Net Assets......................................................... $6,393,103 $ 3,578,313 $ 1,231,060
--------------- ------------ ------------
Shares Outstanding................................................. 445,181 317,927 112,437
--------------- ------------ ------------
Net Asset Value and redemption value per share (net assets/shares
outstanding)..................................................... $ 14.36 $ 11.26 $ 10.95
=============== ========== ============
Maximum offering price per share (net asset value plus sales charge
of 4.50% of
offering price).................................................. $ 15.04 $ 11.79 $ 11.47
=============== =========== ============
CLASS D:
Net Assets......................................................... $ 14,960 $ 6,211 --
--------------- ------------ ------------
Shares Outstanding................................................. 1,044 552 --
--------------- ------------ ------------
Net Asset Value, offering and redemption value per share (net
assets/shares
outstanding)..................................................... $ 14.33 $ 11.25 --
=============== =========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 43
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE
MID-CAP NORTH AMERICAN
GROWTH FUND GROWTH FUND
----------- --------------
<S> <C> <C>
ASSETS:
Investment in securities, at value (cost $1,284,178, $1,935,729,
respectively)................................................................ $1,449,144 $2,389,400
Cash........................................................................... 52,635 343,800
Receivable for fund shares sold................................................ -- 10,453
Dividends receivable........................................................... 738 1,361
----------- --------------
Total assets................................................................. 1,502,517 2,745,014
----------- --------------
LIABILITIES:
Payable for investment securities purchased.................................... -- 205,459
Payable for fund shares redeemed............................................... 3,393 --
----------- --------------
Total liabilities............................................................ 3,393 205,459
----------- --------------
NET ASSETS....................................................................... $1,499,124 $2,539,555
=========== =============
NET ASSETS CONSIST OF (NOTE 1):
Capital Stock (Par Value $.001 per share)...................................... $ 124 $ 207
Additional paid in capital..................................................... 1,334,034 2,169,202
Accumulated net realized loss on investments................................... -- (83,525)
Net unrealized appreciation on investments..................................... 164,966 453,671
----------- --------------
NET ASSETS, at value, applicable to Shares of Beneficial Interest outstanding
(Note 5)....................................................................... $1,499,124 $2,539,555
----------- --------------
CLASS A:
Net Assets..................................................................... $1,494,616 $ 131,226
----------- --------------
Shares Outstanding............................................................. 123,683 10,681
----------- --------------
Net Asset Value and redemption value per share (net assets/shares
outstanding)................................................................. $ 12.08 $ 12.29
=========== =============
Maximum offering price per share (net asset value plus sales charge of 4.50% of
offering price).............................................................. $ 12.65 $ 12.87
=========== =============
CLASS D:
Net Assets..................................................................... $ 4,508 $2,408,329
----------- --------------
Shares Outstanding............................................................. *374 196,199
----------- --------------
Net Asset Value, offering and redemption value per share (net assets/shares
outstanding)................................................................. $ 12.07 $ 12.27
=========== =============
</TABLE>
- ---------------
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 44
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
RESERVE
GROWTH AND
RESERVE RESERVE INCOME FUND RESERVE
BLUE CHIP EMERGING ---------------- INFORMED INVESTORS
GROWTH FUND GROWTH FUND JANUARY 2, 1996 GROWTH FUND
------------ ------------ (COMMENCEMENT OF ------------------
YEAR ENDED YEAR ENDED OPERATIONS) TO YEAR ENDED
MAY 31, 1996 MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends..................................... $ 29,978 $ 1,869 $ 10,672 $ 8,787
Interest...................................... -- -- 4,124 8,626
------------ ------------ -------- ------------------
Total investment income................... 29,978 1,869 14,796 17,413
EXPENSES
Comprehensive fee (Note 3).................... 55,581 51,177 4,527 141,751
12b-1 Fee (Note 4)
Class A..................................... 9,247 8,481 754 23,619
Class D..................................... 66 191 -- 26
------------ ------------ -------- ------------------
Total expenses............................ 64,894 59,849 5,281 165,396
------------ ------------ -------- ------------------
NET INVESTMENT INCOME (LOSS).................... (34,916) (57,980) 9,515 (147,983)
------------ ------------ -------- ------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Proceeds from sales of securities............. 2,573,864 1,201,292 28,149 13,684,285
Cost of securities sold....................... 2,575,909 1,120,746 28,260 12,834,099
------------ ------------ -------- ------------------
Net realized gain (loss) on investments (Note
1).......................................... (2,045) 80,546 (111) 850,186
Net unrealized appreciation on investments.... 975,733 1,655,638 4,277 1,109,280
------------ ------------ -------- ------------------
Net realized and unrealized gain on
investments................................. 973,688 1,736,184 4,166 1,959,466
------------ ------------ -------- ------------------
Net increase in net assets resulting from
operations.................................. $ 938,772 $1,678,204 $ 13,681 $ 1,811,483
============ ============ ================= ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 45
THE RESERVE PRIVATE EQUITY SERIES
STATEMENT OF OPERATIONS--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE
INTERNATIONAL RESERVE
EQUITY FUND LARGE-CAP
---------------- VALUE FUND RESERVE RESERVE
JULY 13, 1995 --------------- MID-CAP NORTH AMERICAN
(COMMENCEMENT JANUARY 2, 1996 GROWTH FUND GROWTH FUND
OF OPERATIONS) (COMMENCEMENT ------------ --------------
TO OF OPERATIONS) YEAR ENDED YEAR ENDED
MAY 31, 1996 TO MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
---------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends....................................... $ 18,854* $ 4,796 $ 1,923 $ 8,135
Interest........................................ 1,688 -- -- --
---------------- --------------- ------------ --------------
Total investment income....................... 20,542 4,796 1,923 8,135
EXPENSES
Comprehensive fee (Note 3)...................... 33,158 5,046 22,987 24,506
12b-1 Fee (Note 4)
Class A....................................... 4,734 841 3,830 17
Class D....................................... 12 -- 5 16,268
---------------- --------------- ------------ --------------
Total expenses.................................... 37,904 5,887 26,822 40,791
Less fees waived.............................. (217) -- -- --
---------------- --------------- ------------ --------------
Net Expenses.................................. 37,687 5,887 26,822 40,791
---------------- --------------- ------------ --------------
NET INVESTMENT LOSS............................... (17,145) (1,091) (24,899) (32,656)
---------------- --------------- ------------ --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales of securities............... 1,374,797 -- 3,071,543 1,272,486
Cost of securities sold......................... 1,446,765 -- 3,054,352 1,356,011
---------------- --------------- ------------ --------------
Net realized gain (loss) on investments and
foreign currency transactions (Note 1)........ (71,968) -- 17,191 (83,525)
Net unrealized appreciation on investments and
foreign currency transactions................. 331,022 70,123 164,966 453,671
---------------- --------------- ------------ --------------
Net realized and unrealized gain on investments
and foreign currency transactions............. 259,054 70,123 182,157 370,146
---------------- --------------- ------------ --------------
Net increase in net assets resulting from
operations.................................... $ 241,909 $69,032 $ 157,258 $ 337,490
=============== ============== ============ =============
</TABLE>
- ---------------
* Net of foreign taxes withheld of $1,774
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE> 46
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVE GROWTH
RESERVE BLUE CHIP GROWTH FUND AND INCOME FUND
-------------------------------- ----------------
OCTOBER 28, 1994 JANUARY 2, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment income (loss).................................. $ (34,916) $ (5,361) $ 9,515
Net realized gain (loss) from investments..................... (2,045) 92,552 (111)
Net unrealized appreciation from investments.................. 975,733 168,862 4,277
------------ ---------------- ----------------
Net increase in net assets resulting from operations.......... 938,772 256,053 13,681
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A....................................... (164,889) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares............................. 2,757,098 2,257,822 1,044,319
Reinvestment of distributions................................. 164,889 -- --
Cost of shares redeemed....................................... (517,167) (520,420) (5,844)
------------ ---------------- ----------------
Net increase in net assets resulting from capital share
transactions................................................ 2,404,820 1,737,402 1,038,475
------------ ---------------- ----------------
Net increase in net assets.................................... 3,178,703 1,993,455 1,052,156
NET ASSETS:
Beginning of period........................................... 1,993,455 -- --
------------ ---------------- ----------------
End of period (including undistributed net investment income
of $0, $0, and $9,515, respectively)........................ $5,172,158 $1,993,455 $1,052,156
============ ================= =================
</TABLE>
<TABLE>
<CAPTION>
RESERVE
RESERVE EMERGING GROWTH FUND INTERNATIONAL
-------------------------------- EQUITY FUND
NOVEMBER 14, ----------------
1994 JULY 13, 1995
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss........................................... $ (57,980) $ (9,569) $ (17,145)
Net realized gain (loss) from investments and foreign currency
transactions................................................ 80,546 65,542 (71,968)
Net unrealized appreciation from investments and foreign
currency transactions....................................... 1,655,638 167,897 331,022
------------ ---------------- ----------------
Net increase in net assets resulting from operations.......... 1,678,204 223,870 241,909
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A....................................... (93,899) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares............................. 4,281,980 2,268,282 3,465,234
Reinvestment of distributions................................. 93,770 -- --
Cost of shares redeemed....................................... (301,485) (1,251,282) (122,619)
------------ ---------------- ----------------
Net increase in net assets resulting from capital share
transactions................................................ 4,074,265 1,017,000 3,342,615
------------ ---------------- ----------------
Net increase in net assets.................................... 5,658,570 1,240,870 3,584,524
NET ASSETS:
Beginning of period........................................... 1,240,870 -- --
------------ ---------------- ----------------
End of period................................................. $6,899,440 $1,240,870 $3,584,524
============ ================= =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> 47
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE INFORMED RESERVE
INVESTORS GROWTH FUND LARGE-CAP VALUE
-------------------------------- FUND
DECEMBER 28, ----------------
1994 JANUARY 2, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss....................................... $ (147,983) $ (38,948) $ (1,091)
Net realized gain (loss) from investments................. 850,186 (220,490) --
Net unrealized appreciation from investments.............. 1,109,280 1,330,859 70,123
------------ ---------------- ----------------
Net increase in net assets resulting from operations...... 1,811,483 1,071,421 69,032
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A................................... (795,337) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares......................... 6,254,939 6,422,521 1,165,180
Reinvestment of distributions............................. 790,060 -- --
Cost of shares redeemed................................... (8,490,282) (656,742) (3,152)
------------ ---------------- ----------------
Net increase (decrease) in net assets resulting from
capital share transactions.............................. (1,445,283) 5,765,779 1,162,028
------------ ---------------- ----------------
Net increase (decrease) in net assets..................... (429,137) 6,837,200 1,231,060
NET ASSETS:
Beginning of period....................................... 6,837,200 -- --
------------ ---------------- ----------------
End of period............................................. $6,408,063 $6,837,200 $1,231,060
============ ================= =================
</TABLE>
<TABLE>
<CAPTION>
RESERVE RESERVE
MID-CAP NORTH AMERICAN
GROWTH FUND GROWTH FUND
--------------- --------------
YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1996
--------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss......................................................... $ (24,899) $ (32,656)
Net realized gain (loss) from investments................................... 17,191 (83,525)
Net unrealized appreciation from investments................................ 164,966 453,671
--------------- --------------
Net increase in net assets resulting from operations........................ 157,258 337,490
--------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares........................................... 2,008,337 2,345,759
Cost of shares redeemed..................................................... (666,471) (143,694)
--------------- --------------
Net increase in net assets resulting from capital share transactions........ 1,341,866 2,202,065
--------------- --------------
Net increase in net assets.................................................. 1,499,124 2,539,555
NET ASSETS:
Beginning of period......................................................... -- --
--------------- --------------
End of period............................................................... $ 1,499,124 $2,539,555
============== =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE> 48
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reserve Private Equity Series (the "Trust") consists of the following
funds: Reserve Blue Chip Growth Fund, Reserve Emerging Growth Fund, Reserve
Growth and Income Fund, Reserve Informed Investors Growth Fund, Reserve
International Equity Fund, Reserve Large-Cap Value Fund, Reserve Mid-Cap
Growth Fund, and Reserve North American Growth Fund. The Trust was formed
under Delaware law as a Delaware business trust. The Trust is registered
under the Investment Company Act of 1940, as amended, as a non-diversified
open-end management investment company. There are an unlimited number of
shares of beneficial interest of $.001 par value authorized in each series.
The Trust offers both Class A and Class D shares of each Fund. Class A shares
are sold with an initial sales charge and Class D shares are sold without an
initial sales charge. Both classes of shares have identical voting, dividend,
liquidation and other rights, and the same terms and conditions, except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan.
The accounting policies summarized below are consistently followed in
preparation of the financial statements in conformity with generally accepted
accounting principles.
SECURITY VALUATION
Portfolio securities are stated at value. A security listed or traded on an
exchange is valued at its last sale price on the exchange where the security
is principally traded or, lacking any sales on a particular day, the security
is valued at the mean between the closing bid and asked prices on that day.
Each security traded in the over-the-counter market is valued at the mean
between its quoted bid and asked prices. Where market quotations are not
readily available, the securities are valued at their fair value as
determined in good faith by or under direction of the Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date. Dividend income and
distributions to shareholders are recorded on the ex-dividend dates. Interest
income is accrued daily. Realized gains and losses from securities
transactions and unrealized appreciation or depreciation of securities are
reported on the identified cost basis for both financial statement and
federal income tax purposes.
Income and capital gain distributions are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for net operating losses and the recognition of net realized gains
and losses. Accordingly, the effect of differing financial reporting and
federal income tax treatments have been reclassified among the components of
net assets at May 31, 1996 as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
----------------------------------------
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT REALIZED
CAPITAL INCOME GAIN (LOSS)
------- -------------- -----------
<S> <C> <C> <C>
Reserve Blue Chip Growth Fund......................................... 5,361 34,916 (40,277)
Reserve Emerging Growth Fund.......................................... 4,689 57,980 (62,669)
Reserve Informed Investors Growth Fund................................ -- 147,983 (147,983)
Reserve International Equity Fund..................................... (17,145) 17,145 --
Reserve Large-Cap Value Equity Fund................................... (1,091) 1,091 --
Reserve Mid-Cap Growth Fund........................................... (7,708) 24,899 (17,191)
Reserve North American Growth Fund.................................... (32,656) 32,656 --
</TABLE>
These reclassifications had no effect on net investment income, net realized
gain on investments, or net assets for the year ended May 31, 1996.
FOREIGN CURRENCY TRANSLATION
With respect to the Reserve International Equity Fund, assets and liabilities
denominated in a foreign currency are translated into U.S. dollars using
exchange rates on the valuation date. Purchases and sales of securities,
expense payments and income receipts are translated into U.S. dollars using
the exchange rate on the transaction date. The Trust does not segregate that
portion of the results of operations resulting from changes in foreign
exchange rates from the portion resulting from changes in market prices of
securities held; both are included in net realized and unrealized gains or
losses on investments and foreign currency transactions.
33
<PAGE> 49
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
FEDERAL INCOME TAXES
It is the Trust's policy for each Fund to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended, by
complying with the requirements of the Internal Revenue Code applicable to
regulated investment companies, and to distribute substantially all of its
taxable income, including net realized capital gains to its shareholders.
Accordingly, no federal income tax provision is required.
For federal income tax purposes, the following Funds indicated below had
capital loss carryforwards at May 31, 1996, which are available to offset
future realized capital gains, if any:
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
CARRYFORWARD YEAR
------------ -----------
<S> <C> <C>
Reserve Growth and Income Fund..................................................... $ 111 2004
Reserve International Equity Fund.................................................. 71,968 2004
Reserve North American Growth Fund................................................. 83,525 2004
</TABLE>
2. INVESTMENT ACTIVITY
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the period ended May 31, 1996, were as
follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
RESERVE FUND PURCHASES SALES
------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Blue Chip Growth Fund.......................................................... $ 4,629,931 $ 2,573,982
Emerging Growth Fund........................................................... 4,850,242 1,201,292
Growth and Income Fund......................................................... 822,642 28,263
Informed Investors Growth Fund................................................. 11,122,332 13,684,285
International Equity Fund...................................................... 4,384,944 1,368,647
Large-Cap Value Fund........................................................... 1,115,010 --
Mid-Cap Growth Fund............................................................ 4,338,530 3,071,543
North American Growth Fund..................................................... 3,291,738 1,272,486
</TABLE>
3. INVESTMENT MANAGEMENT AGREEMENT
Reserve Management Company, Inc. (RMCI), serves as the Funds' investment
adviser and pays substantially all ordinary operating expenses of the Funds
for which it receives a comprehensive fee at an annual rate of 1.50% of the
average daily net assets of each Fund other than the International Equity
Fund for which it receives 1.75%. RMCI is currently waiving a portion of its
comprehensive fee.
For each Fund, RMCI has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with the Sub-Advisers. It is the responsibility of a
Sub-Adviser to make the day-to-day investment decision of the Funds and to
place the purchase and sales orders for securities transactions, subject in
all cases to the general supervision of RMCI. For services under each
Subadvisory Agreement, RMCI pays a fee up to an annual rate equal to the
percentages specified in the table below of the corresponding Funds' average
net assets.
<TABLE>
<CAPTION>
SUB-ADVISER'S
RESERVE FUND PORTFOLIO SUB-ADVISER FEE
----------------------------------------- ------------------------------------------------- -------------
<S> <C> <C>
Blue Chip Growth Fund Trainer, Wortham & Company, Inc. 0.75%
Emerging Growth Fund Roanoke, Asset Management Corp. 0.75%
Growth and Income Fund Kenneth J. Gerbino & Company 0.75%
Informed Investors Growth Fund T. H. Fitzgerald & Company 0.75%
International Equity Fund Pinnacle Associates Limited 0.875%
Large-Cap Value Fund Siphron Capital Management 0.75%
Mid-Cap Growth Fund Cambridge Equity Advisors (6/1/95-4/18/96) 0.75%
Southern Capital Advisors (4/19/96-5/31/96) 0.75%
North American Growth Fund Southern Capital Advisors 0.75%
</TABLE>
Trainer, Wortham & Company, Inc. owns 33% of the outstanding shares of the
Reserve Blue Chip Growth Fund at May 31, 1996.
34
<PAGE> 50
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
4. DISTRIBUTION ASSISTANCE
Pursuant to a Distribution Plan under Rule 12b-1, the Funds will make
payments to Resrv Partners, Inc. (RPI), the Funds' distributor of .25% per
annum for Class A and 1.00% per annum for Class D of the average daily net
assets of shareholder accounts as to which the payee has rendered
distribution assistance. During the period, the Funds paid distribution
expenses to RPI as follows:
<TABLE>
<CAPTION>
RESERVE FUND CLASS A CLASS D
------------------------------------------------------------------------------------- ------- -------
<S> <C> <C>
Blue Chip Growth Fund................................................................ $ 9,247 $ 66
Emerging Growth Fund................................................................. 8,481 192
Growth and Income Fund............................................................... 754 0
Informed Investors Growth Fund....................................................... 23,619 26
International Equity Fund............................................................ 4,734 12
Large-Cap Value Fund................................................................. 841 0
Mid-Cap Growth Fund.................................................................. 3,830 5
North American Growth Fund........................................................... 17 16,268
</TABLE>
As of May 31, 1996, RPI owned 4%, 24%, 31%, 21%, 6%, and 24% of the Reserve
Emerging Growth Fund, Reserve Growth and Income Fund, Reserve International
Equity Fund, Reserve Large-Cap Value Fund, Reserve Mid-Cap Growth Fund and
Reserve North American Growth Fund, respectively.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock of each Fund for the period ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- -----------------
FEBRUARY 13, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
--------------------- -----------------
RESERVE BLUE CHIP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------- ------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold............................................................... 203,145 $2,716,393 2,865 $40,705
Reinvested......................................................... 12,752 164,889 -- --
Redeemed........................................................... (37,574) (517,167) -- --
------- ---------- ------ -------
Net increase....................................................... 178,323 $2,364,115 2,865 $40,705
======== ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ------------------
FEBRUARY 26, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
--------------------- ------------------
RESERVE EMERGING GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------- ------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold................................................................ 251,367 $4,052,411 12,448 $229,569
Reinvested.......................................................... 5,916 93,770 -- --
Redeemed............................................................ (18,653) (301,485) -- --
------- ---------- ------ --------
Net increase........................................................ 238,630 $3,844,696 12,448 $229,569
======== ========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MAY 13, 1996
JANUARY 2, 1996 (COMMENCEMENT
(COMMENCEMENT OF OPERATIONS)
OF OPERATIONS) TO TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE GROWTH AND INCOME FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold................................................................ 103,914 $1,042,819 147 $1,500
Redeemed............................................................ (573) (5,844) -- --
------- ---------- ------ ------
Net increase........................................................ 103,341 $1,036,975 147 $1,500
======== ========== ====== ======
</TABLE>
35
<PAGE> 51
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
----------------------- ------------------
FEBRUARY 13, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
----------------------- ------------------
RESERVE INFORMED INVESTORS GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- -------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold............................................................. 458,428 $ 6,230,788 1,953 $ 24,151
Reinvested....................................................... 56,312 790,060 -- --
Redeemed......................................................... (639,631) (8,479,206) (909) (11,076)
-------- ----------- ------ --------
Net increase..................................................... (124,891) $(1,458,358) 1,044 $ 13,075
========= ============ ====== =========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MARCH 11, 1996
JULY 13, 1995 (COMMENCEMENT
(COMMENCEMENT OF OPERATIONS)
OF OPERATIONS) TO TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE INTERNATIONAL EQUITY FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold............................................................. 329,964 $3,459,234 552 $6,000
Redeemed......................................................... (12,037) (122,619) -- --
------- ---------- ------ ------
Net increase..................................................... 317,927 $3,336,615 552 $6,000
======== ========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CLASS A
---------------------
JANUARY 2, 1996
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1996
---------------------
RESERVE LARGE-CAP VALUE FUND SHARES AMOUNT
- ----------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................. 112,729 $1,165,180
Redeemed......................................................... (292) (3,152)
------- ----------
Net increase..................................................... 112,437 $1,162,028
======== ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MARCH 29, 1996
(COMMENCEMENT
OF OPERATIONS)
YEAR ENDED TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE MID-CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold............................................................. 183,603 $2,004,087 374 $4,250
Redeemed......................................................... (59,920) (666,471) -- --
------- ---------- ------ ------
Net increase..................................................... 123,683 $1,337,616 374 $4,250
======== ========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
------------------ ---------------------
MARCH 13, 1996
(COMMENCEMENT
OF OPERATIONS) TO YEAR ENDED
MAY 31, 1996 MAY 31, 1996
------------------ ---------------------
RESERVE NORTH AMERICAN GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------ -------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................................................. 11,491 $139,077 207,997 $2,206,682
Redeemed......................................................... (810) (10,000) (11,798) (133,694)
------ -------- ------- ----------
Net increase..................................................... 10,681 $129,077 196,199 $2,072,988
====== ========= ======== ==========
</TABLE>
36
<PAGE> 52
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
Transactions in capital stock of each Fund for the period ended May 31, 1995,
were as follows:
<TABLE>
<CAPTION>
OCTOBER 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
-----------------------
RESERVE BLUE CHIP GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................................... 214,923 $2,257,822
Redeemed........................................................................... (49,164) (520,420)
------- ----------
Net increase....................................................................... 165,759 $1,737,402
======== ==========
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 14, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
------------------------
RESERVE EMERGING GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- -------- ----------
<S> <C> <C>
Sold............................................................................... 218,209 $2,268,282
Redeemed........................................................................... (116,596) (1,251,282)
-------- ----------
Net increase....................................................................... 101,613 $1,017,000
========= ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
-----------------------
RESERVE INFORMED INVESTORS GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................................... 634,326 $6,422,521
Redeemed........................................................................... (64,254) (656,742)
------- ----------
Net increase....................................................................... 570,072 $5,765,779
======== ==========
</TABLE>
6. MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
37
<PAGE> 53
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31,
1996--(CONTINUED)
7. SUPPLEMENTARY INFORMATION (FOR EACH SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
CLASS D
CLASS A ----------------
-------------------------------- FEBRUARY 13,
OCTOBER 28, 1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE BLUE CHIP GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $12.03 $10.00 $13.49
------ ------ ------
Income from investment operations
Net investment loss....................................... (.10) (.03) (.04)
Net realized and unrealized gain.......................... 3.62 2.06 1.43
------ ------ ------
Total from investment operations............................ 3.52 2.03 1.39
Less distribution from net realized gain.................... (.64) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $14.91 $12.03 $14.88
====== ====== ======
Total Return................................................ 30.10% 20.30%(2) 10.30%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $5,130 $1,993 $ 43
Ratio of expenses to average net assets before waiver....... 1.75% 1.75%(1) 2.50%(1)
Ratio of expenses to average net assets, net of waiver...... 1.75% 1.73%(1) 2.50%(1)
Ratio of net investment loss to average net assets, before
waiver.................................................... (0.94)% (0.72)%(1) (1.70)%(1)
Ratio of net investment loss to average net assets, net of
waiver.................................................... (0.94)% (0.70)%(1) (1.70)%(1)
Portfolio turnover rate..................................... 72% 68% 72%
Average commission per share on Macromedia portfolio
transactions.............................................. $ 0.06 N/A $ 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
-------------------------------- ----------------
NOVEMBER 14, FEBRUARY 26,
1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE EMERGING GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $12.21 $10.00 $16.88
------ ------ ------
Income from investment operations
Net investment loss....................................... (.17) (.09) (.04)
Net realized and unrealized gain.......................... 8.05 2.30 2.68
------ ------ ------
Total from investment operations............................ 7.88 2.21 2.64
Less distribution from net realized gain.................... (0.53) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $19.56 $12.21 $19.52
====== ====== ======
Total Return................................................ 65.55% 22.10%(2) 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $6,657 $1,241 $ 243
Ratio of expenses to average net assets..................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets.......... (1.70)% (1.62)%(1) (2.48)%(1)
Portfolio turnover rate..................................... 38% 43% 38%
Average commission per share on portfolio transactions...... $ 0.01 N/A $ 0.01
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
38
<PAGE> 54
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JANUARY 2, 1996 MAY 13, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE GROWTH AND INCOME FUND MAY 31, 1996 MAY 31, 1996
- ------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period..................................... $10.00 $10.19
------ ------
Income from investment operations
Net investment income (loss)........................................... 0.09 0.00
Net realized and unrealized gain (loss)................................ 0.08 (0.02)
------ ------
Total from investment operations......................................... 0.17 (0.02)
------ ------
NET ASSET VALUE, end of period........................................... $10.17 $10.17
====== ======
Total Return............................................................. 1.70%(2) (0.2)%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................................... $1,051 $ 1
Ratio of expenses to average net assets.................................. 1.75%(1) 2.23%(1)
Ratio of net investment income to average net assets..................... 3.15%(1) 0.00%(1)
Portfolio turnover rate.................................................. 17% 17%
Average commission per share on portfolio transactions................... $ 0.08 $ 0.08
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JULY 13, 1995 MARCH 11, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE INTERNATIONAL EQUITY FUND MAY 31, 1996 MAY 31, 1996
- ------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period..................................... $10.00 $10.79
------ ------
Income from investment operations
Net investment loss.................................................... (0.05) (0.01)
Net realized and unrealized gain....................................... 1.31 0.47
------ ------
Total from investment operations......................................... 1.26 0.46
------ ------
NET ASSET VALUE, end of period........................................... $11.26 $11.25
====== ======
Total Return............................................................. 12.60%(2) 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................................... $3,578 $ 6
Ratio of expenses to average net assets before waiver.................... 2.00%(1) 2.75%(1)
Ratio of expenses to average net assets, net of waiver................... 1.99%(1) 2.75%(1)
Ratio of net investment loss to average net assets, before waiver........ (0.92)%(1) (0.70)%(1)
Ratio of net investment loss to average net assets, net of waiver........ (0.91)%(1) (0.70)%(1)
Portfolio turnover rate.................................................. 70% 70%
Average commission per share on portfolio transactions................... $ 0.02 $ 0.02
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
39
<PAGE> 55
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------------------- ----------------
DECEMBER 28, 1994 MARCH 22, 1996
(COMMENCEMENT (COMMENCEMENT OF
YEAR ENDED OF OPERATIONS) TO OPERATIONS) TO
RESERVE INFORMED INVESTORS GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ----------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $11.99 $ 10.00 $12.29
------ ------ ------
Income from investment operations
Net investment loss....................................... (0.33) (.07) (.06)
Net realized and unrealized gain.......................... 3.87 2.06 2.10
------ ------ ------
Total from investment operations............................ 3.54 1.99 2.04
Less distribution from net realized gain.................... (1.17) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $14.36 $ 11.99 $14.33
====== ====== ======
Total Return................................................ 29.75% 19.90%(2) 16.60%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $6,393 $ 6,837 $ 15
Ratio of expenses to average net assets..................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets.......... (1.57)% (1.62)%(1) (2.32)%(1)
Portfolio turnover rate..................................... 132% 59% 132%
Average commission per share on portfolio transactions...... $ 0.05 N/A $ 0.05
</TABLE>
<TABLE>
<CAPTION>
CLASS A
----------------
JANUARY 2, 1996
(COMMENCEMENT OF
OPERATIONS) TO
RESERVE LARGE-CAP VALUE FUND MAY 31, 1996
- ------------------------------------------------------------------------------------------ ----------------
<S> <C>
NET ASSET VALUE, beginning of period...................................................... $10.00
------
Income from investment operations
Net investment loss..................................................................... (0.01)
Net realized and unrealized gain........................................................ 0.96
------
Total from investment operations.......................................................... 0.95
------
NET ASSET VALUE, end of period............................................................ $10.95
======
Total Return.............................................................................. 9.50%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period.................................................... $1,231
Ratio of expenses to average net assets................................................... 1.75%(1)
Ratio of net investment loss to average net assets........................................ (0.32)%(1)
Portfolio turnover rate................................................................... 0%
Average commission per share on portfolio transactions.................................... $ 0.08
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
40
<PAGE> 56
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
------------ ----------------
MARCH 29, 1996
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
RESERVE MID-CAP GROWTH FUND MAY 31, 1996 MAY 31, 1996
- ----------------------------------------------------------------------------- ------------ ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period......................................... $10.00 $11.03
------ ------
Income from investment operations
Net investment loss........................................................ (.20) (.03)
Net realized and unrealized gain........................................... 2.28 1.07
------ ------
Total from investment operations............................................. 2.08 1.04
------ ------
NET ASSET VALUE, end of period............................................... $12.08 $12.07
====== ======
Total Return................................................................. 20.80% 9.43%(2)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period....................................... $1,495 $ 5
Ratio of expenses to average net assets...................................... 1.75% 2.50%(1)
Ratio of net investment loss to average net assets........................... (1.62)% (2.04)%
Portfolio turnover rate...................................................... 225% 225%
Average commission per share on portfolio transactions....................... $ 0.06 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ------------
MARCH 13, 1996
(COMMENCEMENT OF
OPERATIONS) TO YEAR ENDED
RESERVE NORTH AMERICAN GROWTH FUND MAY 31, 1996 MAY 31, 1996
- ----------------------------------------------------------------------------- ---------------- ------------
<S> <C> <C>
NET ASSET VALUE, beginning of period......................................... $10.94 $10.00
------ ------
Income from investment operations
Net investment loss........................................................ (0.01) (0.17)
Net realized and unrealized gain........................................... 1.36 2.44
------ ------
Total from investment operations............................................. 1.35 2.27
------ ------
NET ASSET VALUE, end of period............................................... $12.29 $12.27
====== ======
Total Return................................................................. 12.34%(2) 22.70%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period....................................... $ 131 $2,408
Ratio of expenses to average net assets...................................... 1.74%(1) 2.49%(1)
Ratio of net investment loss to average net assets........................... (0.97)%(1) (2.00)%(1)
Portfolio turnover rate...................................................... 85% 85%
Average commission per share on portfolio transactions....................... $ 0.04 $ 0.04
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
41
<PAGE> 57
THE RESERVE PRIVATE EQUITY SERIES--RESERVE BLUE CHIP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BANKS (3.5%)
Banc One Corporation................................................................. 4,850 $ 179,450
----------
BUSINESS EQUIPMENT (3.0%)
Xerox Corporation.................................................................... 1,000 157,375
----------
COMPUTER NETWORKING (3.4%)
Cisco Systems, Inc.*................................................................. 3,200 175,200
----------
COMPUTER SOFTWARE (11.8%)
CUC International, Inc.*............................................................. 5,000 203,500
Microsoft Corporation*............................................................... 1,500 178,125
National Data Corporation............................................................ 6,000 226,500
----------
608,125
----------
ELECTRICAL EQUIPMENT (1.9%)
American Superconductor Corporation*................................................. 7,000 98,000
----------
ELECTRONICS (3.5%)
Perceptron, Inc.*.................................................................... 5,000 180,625
----------
FINANCIAL SERVICES (3.6%)
Citicorp............................................................................. 2,200 184,800
----------
MEDICAL SUPPLIES (2.2%)
LaserSight Corporation*.............................................................. 10,000 115,000
----------
MISCELLANEOUS MANUFACTURING (4.4%)
Warnaco Group, Inc. ................................................................. 8,000 227,000
----------
MULTI-LINE INSURANCE (4.5%)
American International Group, Inc. .................................................. 2,500 235,625
----------
OIL/GAS EQUIPMENT SERVICES (9.0%)
Petroleum Geo-Services--ADR*......................................................... 7,000 214,375
Schlumberger, Ltd. .................................................................. 3,000 250,125
----------
464,500
----------
PACKAGED SOFTWARE (2.8%)
Computer Associates International, Inc. ............................................. 2,000 145,500
----------
PHARMACEUTICALS (8.8%)
Johnson & Johnson.................................................................... 2,000 194,750
Eli Lilly & Company.................................................................. 1,000 64,250
Merck & Company, Inc. ............................................................... 3,000 193,875
----------
452,875
----------
PUBLISHING (5.3%)
Harte-Hanks Communications........................................................... 10,500 276,938
----------
PUBLISHING--NEWSPAPERS (2.8%)
Tribune Company...................................................................... 2,000 148,250
----------
REAL ESTATE (4.5%)
Insignia Financial Group, Inc. Class A*.............................................. 9,000 234,000
----------
RETAIL SPECIALTY (3.0%)
Home Depot, Inc. .................................................................... 3,000 153,375
----------
</TABLE>
10
<PAGE> 58
THE RESERVE PRIVATE EQUITY SERIES--RESERVE BLUE CHIP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
SPECIAL INDUSTRIAL MACHINERY (6.2%)
Thermo Electron Corporation*......................................................... 5,000 $ 318,750
----------
TELECOMMUNICATIONS (4.0%)
CommNet Cellular, Inc.*.............................................................. 6,000 206,250
----------
TELECOMMUNICATIONS EQUIPMENT (6.7%)
Glenayre Technologies, Inc.*......................................................... 7,075 348,443
----------
TOTAL COMMON STOCKS (Cost $3,765,486) (94.9%).......................................... 4,910,081
Other assets, less liabilities (5.1%).................................................. 262,077
----------
NET ASSETS (100%)...................................................................... $5,172,158
==========
</TABLE>
- ------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $3,765,486, the aggregate gross unrealized appreciation for all
investments was $1,159,820 and aggregate gross unrealized depreciation for all
investments was $15,225.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BIO-TECHNOLOGY (3.3%)
Alliance Pharmaceutical Corporation*.................................................. 4,000 $ 86,500
Genzyme Corporation*.................................................................. 2,400 139,800
----------
226,300
----------
CAPITAL GOODS -- DIVERSIFIED (1.8%)
Danaher Corporation................................................................... 3,000 124,500
----------
CAPITAL GOODS/INDUSTRIAL (1.5%)
Vishay Intertechnology, Inc.*......................................................... 3,654 100,943
----------
COMMUNICATION -- EQUIPMENT (5.1%)
ANADIGICS, Inc.*...................................................................... 3,000 79,500
ECI Telecommunications Ltd. Designs................................................... 5,000 132,500
FORE Systems, Inc.*................................................................... 1,700 137,700
----------
349,700
----------
COMMUNICATION -- NETWORK (8.8%)
Heartland Wireless Communications, Inc.*.............................................. 3,500 94,500
IntelCom Group Inc.*.................................................................. 5,000 132,500
Pairgain Technologies, Inc.*.......................................................... 1,500 152,625
People's Choice TV Corporation*....................................................... 4,000 68,000
Wireless One, Inc.*................................................................... 8,500 157,250
----------
604,875
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 59
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
COMPUTER NETWORKING (8.7%)
Ascend Communications, Inc.*.......................................................... 3,600 $ 240,750
Bay Networks Inc.*.................................................................... 1,950 56,550
Shiva Corporation*.................................................................... 2,400 179,400
3Com Corporation*..................................................................... 2,500 123,125
----------
599,825
----------
COMPUTER SOFTWARE (11.0%)
Business Objects S. A. -- ADR*........................................................ 2,000 93,000
Data Translation, Inc.*............................................................... 8,000 212,000
Dendrite International, Inc.*......................................................... 3,500 95,375
Edify Corporation*.................................................................... 1,000 42,000
EPIC Design Technology, Inc.*......................................................... 3,000 88,500
Fractal Design Corp.*................................................................. 5,000 77,500
Oacis Healthcare Holding Corp.*....................................................... 3,000 49,500
Sapient Corporation*.................................................................. 2,000 100,000
----------
757,875
----------
CONSUMER GROWTH (3.8%)
Activision, Inc.*..................................................................... 5,000 68,125
Conso Products Company*............................................................... 5,750 100,625
Electronic Arts, Inc.*................................................................ 1,200 37,950
Lin Television Corporation*........................................................... 1,700 54,400
----------
261,100
----------
ELECTRIC MEASUREMENT & TESTING INSTRUMENTS (1.4%)
Opal, Inc.*........................................................................... 5,500 100,375
----------
ENERGY (1.8%)
Cross Timbers Oil Company............................................................. 5,500 123,062
----------
HEALTH (5.6%)
HCIA, Inc.*........................................................................... 2,300 148,925
National Dentex Corporation*.......................................................... 6,000 138,000
PacifiCare Health Systems, Inc.*...................................................... 1,200 99,300
----------
386,225
----------
MANAGED CARE (4.8%)
Healthsource, Inc.*................................................................... 4,000 90,500
MedPartners/Mullikin, Inc.*........................................................... 4,500 105,188
PhyCor, Inc.*......................................................................... 2,525 136,981
----------
332,669
----------
MISCELLANEOUS CONSUMER (1.4%)
On Assignment, Inc.*.................................................................. 2,500 100,625
----------
OFFICE-BUSINESS EQUIPMENT (1.3%)
HPR Inc.*............................................................................. 4,000 93,000
----------
PAPER (1.1%)
Data Documents, Inc.*................................................................. 6,000 76,500
----------
</TABLE>
12
<PAGE> 60
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
PHARMACEUTICALS (3.4%)
Centocor, Inc.*....................................................................... 3,200 $ 113,200
Dura Pharmaceuticals, Inc.*........................................................... 2,000 123,250
----------
236,450
----------
RADIO, TV & BROADCAST COMM. EQUIP. (1.5%)
American Telecasting, Inc.*........................................................... 7,500 105,937
----------
RESTAURANTS (3.2%)
Cheesecake Factory (The)*............................................................. 2,500 66,250
Outback Steakhouse, Inc.*............................................................. 3,000 113,625
Volunteer Capital Corporation*........................................................ 4,000 43,500
----------
223,375
----------
RETAIL -- SPECIALTY (8.1%)
Borders Group, Inc.*.................................................................. 4,500 147,375
PetSmart, Inc.*....................................................................... 3,000 133,500
Staples, Inc.*........................................................................ 6,325 126,500
The Sports Authority, Inc.*........................................................... 5,000 148,750
----------
556,125
----------
SEMICONDUCTOR-RELATED DEVICE (5.2%)
Credence Systems Corporation*......................................................... 2,500 50,625
Intel Corporation..................................................................... 1,800 135,900
KLA Instruments Corporation*.......................................................... 3,000 81,000
LSI Logic Corporation*................................................................ 3,000 93,375
----------
360,900
----------
SYSTEM SOFTWARE/CLIENT SERVER (4.0%)
Hummingbird Communications Ltd.*...................................................... 3,400 138,125
Informix Corporation*................................................................. 6,000 136,500
----------
274,625
----------
TELECOMMUNICATIONS (2.5%)
Cascade Communications Corp.*......................................................... 3,000 169,125
----------
TELECOMMUNICATIONS EQUIPMENT (6.2%)
Comverse Technology, Inc.*............................................................ 4,000 117,500
DSC Communications Corporation*....................................................... 2,000 60,250
Newbridge Networks Corporation*....................................................... 1,800 128,025
P-COM, Inc.*.......................................................................... 4,000 119,500
----------
425,275
----------
TOTAL COMMON STOCKS (Cost $4,765,851) (95.5%)........................................... 6,589,386
Other assets, less liabilities (4.5%)................................................... 310,054
----------
NET ASSETS (100%)....................................................................... $6,899,440
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets
* Non-income producing security.
For Federal income tax purposes the tax basis of investments owned at May 31,
1996 was $4,765,851, the aggregate gross unrealized appreciation for all
investments was $1,941,417 and aggregate gross unrealized depreciation for all
investments was $117,882.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 61
THE RESERVE PRIVATE EQUITY SERIES--RESERVE GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- -------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
AUTO (1.9%)
Chrysler Corporation................................................................ 300 $ 19,988
----------
BANKS (5.3%)
Bankers Trust New York Corporation.................................................. 500 37,563
First of America Bank Corporation................................................... 400 18,300
----------
55,863
----------
COMPUTER NETWORKING (3.1%)
Cisco Systems, Inc. ................................................................ 600 32,850
----------
COMPUTERS (3.0%)
Hewlett-Packard Company............................................................. 300 32,025
----------
ELECTRIC UTILITIES (15.5%)
Consolidated Edison Company of New York, Inc. ...................................... 1,400 39,025
Hawaiian Electric Industries, Inc. ................................................. 1,300 44,200
Minnesota Power and Light Company................................................... 1,500 40,313
Southwestern Public Service Company................................................. 1,300 39,812
----------
163,350
----------
FERTILIZERS (1.9%)
Freeport McMoran Resource Partners Ltd. ............................................ 1,000 20,000
----------
MISCELLANEOUS ENERGY (2.0%)
LL & E Royalty Trust................................................................ 4,500 21,375
----------
OIL-INTERNATIONAL (2.3%)
Chevron Corporation................................................................. 400 23,900
----------
PHARMACEUTICALS (1.2%)
Merck & Company Inc. ............................................................... 200 12,925
----------
REAL ESTATE (1.9%)
Commercial Net Lease Realty Inc. ................................................... 1,500 20,063
----------
RESTAURANTS (1.9%)
Lone Star Steakhouse & Saloon....................................................... 500 20,188
----------
RETAIL-SPECIALTY (3.6%)
Home Depot, Inc. ................................................................... 300 15,338
Tiffany & Company................................................................... 300 22,762
----------
38,100
----------
SEMICONDUCTOR-RELATED DEVICE (3.2%)
Texas Instruments, Inc. ............................................................ 600 33,750
----------
TELECOMMUNICATIONS (3.5%)
GTE Corporation..................................................................... 400 17,100
Telecom Corporation of New Zealand, Ltd. (ADR)...................................... 300 19,688
----------
36,788
----------
TELEPHONE (3.0%)
AT & T Corporation.................................................................. 500 31,188
----------
</TABLE>
14
<PAGE> 62
THE RESERVE PRIVATE EQUITY SERIES--RESERVE GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL VALUE
COMMON STOCKS AMOUNT (NOTE 1)
- -------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
UTILITIES-TELECOMMUNICATION (1.8%)
NYNEX Corporation................................................................... 400 $ 18,450
----------
TOTAL COMMON STOCKS (Cost $576,535) (55.1%)........................................... $ 580,803
==========
<CAPTION>
PREFERRED STOCKS
- --------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (4.0%)
Lehman Brothers Holdings, Inc. Series A 8.30%....................................... 1,000 24,625
Sunamerica Capital Trust, 8.35%..................................................... 700 17,500
----------
42,125
----------
GOLD MINING (1.5%)
Battle Mountain Gold Company, $3.25................................................. 300 15,525
----------
LIFE INSURANCE (2.2%)
Conseco Inc., 6.50% Series D........................................................ 400 23,100
----------
PROPERTY-LIABILITY INSURANCE (3.5%)
Travelers/P&C Cap I Preferred Trust, 8.08%.......................................... 1,500 36,938
----------
TOTAL PREFERRED STOCKS (Cost $117,775) (11.2%)........................................ $ 117,688
==========
<CAPTION>
CONVERTIBLE BONDS
- --------------------------------------------------------------------------------------
<S> <C> <C>
HOTEL-MOTEL (2.4%)
Hilton Hotels Corp. 5.00%, 05/15/06................................................. 25,000 25,062
----------
STEEL (2.4%)
USX Corp. 7.00%, 06/15/17........................................................... 25,000 24,125
----------
TOTAL CONVERTIBLE BONDS (Cost $49,045) (4.8%)......................................... $ 49,187
==========
US TREASURY NOTES
- --------------------------------------------------------------------------------------
US Treasury Notes, 7.375%, 11/15/97 (Cost $50,913)(4.9%)............................ 50,000 50,867
----------
TOTAL INVESTMENT SECURITIES (Cost $794,268) (76.0%)................................... 798,545
Other assets, less liabilities (24.0%)................................................ 253,611
----------
NET ASSETS (100%)..................................................................... $1,052,156
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $794,268, the aggregate gross unrealized appreciation for all
investments was $30,992, and aggregate gross unrealized depreciation for all
investments was $26,715.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 63
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INFORMED INVESTORS GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
SHARES/ VALUE
COMMON STOCKS UNITS (NOTE 1)
- --------------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
AIR TRANSPORT (4.0%)
Comair Holdings, Inc. ............................................................... 9,750 $ 255,938
----------
BUSINESS EQUIPMENT/SERVICES (2.6%)
Equifax, Inc......................................................................... 6,700 165,825
----------
COMPUTER NETWORKING (4.4%)
Cisco Systems, Inc.*................................................................. 5,200 284,700
----------
COMPUTER SOFTWARE (3.9%)
CompUSA, Inc.*....................................................................... 5,700 249,375
----------
COMPUTERS (9.6%)
Sun Microsystems, Inc.*.............................................................. 9,800 613,725
----------
FOOD (3.7%)
Safeway, Inc.*....................................................................... 7,000 236,250
----------
MACHINERY-CONSTRUCTION (3.7%)
JLG Industries, Inc.................................................................. 3,000 237,375
----------
MAGNETIC OPTICAL RECORDING MEDIA (5.5%)
Komag, Inc.*......................................................................... 10,200 353,175
----------
PACKAGED SOFTWARE (11.2%)
Cadence Design Systems, Inc.*........................................................ 12,700 720,725
----------
SEMICONDUCTOR, RELATED DEVICE (9.1%)
Analog Devices, Inc.*................................................................ 1,100 30,387
Atmel Corporation*................................................................... 15,500 550,250
----------
580,637
----------
SHOES (5.3%)
Nike, Inc. .......................................................................... 3,400 341,275
----------
SPECIAL INDUSTRIAL MACHINERY (5.1%)
Applied Materials, Inc.*............................................................. 8,700 324,075
----------
TELEPHONE & TELGRAPH APPARATUS (29.0%)
Aspect Telecommunications Corporation*............................................... 7,500 425,625
Tellabs, Inc.*....................................................................... 1,200 77,400
U.S. Robotics Corporation*........................................................... 14,800 1,357,900
----------
1,860,925
----------
TOTAL COMMON STOCKS (Cost $3,783,862) (97.1%).......................................... 6,224,000
Other assets, less liabilities (2.9%).................................................. 184,063
----------
NET ASSETS (100%)...................................................................... $6,408,063
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For Federal income tax purposes the tax basis of investments owned at May 31,
1996 was $3,783,862, the aggregated gross unrealized appreciation for all
investments was $2,494,427 and aggregate gross unrealized depreciation for all
investments was $54,289.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 64
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AUSTRALIA (1.2%)
Coca Cola Amatil Ltd. ............................................................... 4,074 $ 44,377
----------
FRANCE (4.7%)
Altran Technologies.................................................................. 120 34,918
Axime................................................................................ 260 35,305
Carrefour............................................................................ 120 65,777
Carrefour (Rights expiring 7/2/96)................................................... 120 33,040
----------
169,040
----------
GERMANY (3.7%)
Altana AG............................................................................ 50 31,550
Fresenius AG......................................................................... 350 61,244
Gehe AG.............................................................................. 65 41,825
----------
134,619
----------
HONG KONG (10.1%)
CDL Hotels International Limited..................................................... 68,000 38,676
Giordano International Ltd. ......................................................... 24,000 21,562
Goldlion Holdings Ltd. .............................................................. 25,000 20,521
Hang Seng Bank Ltd. ................................................................. 7,000 73,067
Hong Kong & China Gas Company........................................................ 31,800 50,561
Hong Kong & China Gas Company (Warrants -- expires 9/30/97).......................... 1,900 87
Manhattan Card Company Ltd. ......................................................... 68,000 32,743
National Mutual Asia Ltd. ........................................................... 44,000 39,814
Sun Hung Kai Properties Ltd. ........................................................ 6,000 61,272
Wing Hang Bank Ltd. ................................................................. 6,000 23,423
----------
361,726
----------
INDONESIA (5.6%)
PT Bank Internasional Indonesia...................................................... 10,000 52,220
PT Darya Varia Laboratoria........................................................... 20,000 42,033
PT Darya Varia Laboratoria (Rights expiring 6/3/96).................................. 2,400 0
PT Gudang Garam...................................................................... 4,000 32,597
PT Steady Safe....................................................................... 11,000 14,626
PT Telekomunikasi Indonesia.......................................................... 38,000 57,860
----------
199,336
----------
ITALY (1.4%)
Telecom Italia SpA................................................................... 8,000 16,145
Telecom Italia Mobile SpA............................................................ 25,000 33,041
----------
49,186
----------
JAPAN (1.0%)
Paris Miki, Inc. .................................................................... 800 35,057
----------
</TABLE>
17
<PAGE> 65
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
MALAYSIA (8.3%)
Arab-Malaysian Merchant Bank Berhad.................................................. 2,000 $ 27,043
Commerce Asset Holding Berhad........................................................ 10,000 67,308
DCB Holdings Berhad.................................................................. 8,000 26,603
Malayan Banking Berhad............................................................... 4,000 37,981
Malaysian Assurance Alliance Berhad.................................................. 11,625 57,287
O.Y.L. Industries Berhad............................................................. 6,000 59,615
United Engineers (Malaysia) Ltd. .................................................... 3,000 20,913
----------
296,750
----------
NETHERLANDS (4.4%)
Elsevier............................................................................. 4,000 62,207
Heineken............................................................................. 200 40,786
Wolters Kluwer....................................................................... 502 56,239
----------
159,232
----------
NORWAY (1.4%)
Tomra Systems........................................................................ 5,000 48,779
----------
PHILIPPINES (1.6%)
Bankard, Inc. ....................................................................... 60,000 29,221
DMCI Holdings Inc. .................................................................. 37,000 27,206
----------
56,427
----------
SINGAPORE (5.6%)
City Developments Limited............................................................ 6,000 46,055
DBS Land Limited..................................................................... 12,000 39,915
Development Bank of Singapore Limited................................................ 3,000 35,608
Oversea-Chinese Banking Corporation Ltd. ............................................ 3,000 38,380
Overseas Union Bank Ltd. ............................................................ 6,000 42,644
----------
202,602
----------
SOUTH KOREA (3.1%)
Seoul City Gas Co. Ltd. ............................................................. 500 41,476
Sungmi Telecom Electronics........................................................... 300 68,807
----------
110,283
----------
SPAIN (7.5%)
Centros Comerciales Pryca............................................................ 1,000 23,579
Empresa Nacional de Electridad....................................................... 2,300 142,529
Gas Natural.......................................................................... 360 63,699
Iberdrola............................................................................ 3,900 39,672
----------
269,479
----------
SWEDEN (4.5%)
Astra AB Series A.................................................................... 1,400 64,215
Elekta Instrument AB Series B........................................................ 500 18,496
Ericsson Telefonaktiebolaget......................................................... 1,200 26,939
Frontec AB Series B.................................................................. 400 19,690
Wm Data AB Series B.................................................................. 500 30,280
----------
159,620
----------
</TABLE>
18
<PAGE> 66
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
SWITZERLAND (6.2%)
Nestle SA............................................................................ 70 $ 79,087
Roche Holding AG..................................................................... 8 61,538
Sandoz AG............................................................................ 60 62,596
Zurich Versicherungs................................................................. 70 18,510
----------
221,731
----------
THAILAND (5.1%)
Bangkok Bank Public Company Ltd. .................................................... 4,000 58,113
Central Pattana Public Company Ltd. ................................................. 7,000 29,017
Grammy Entertainment Public Company Ltd. ............................................ 1,500 20,371
Krung Thai Bank Public Company Ltd. ................................................. 6,000 29,135
Thai Farmers Bank Public Company Ltd. ............................................... 4,000 45,795
----------
182,431
----------
UNITED KINGDOM (10.5%)
Dixons Group plc..................................................................... 6,800 52,787
HSBC Holdings plc.................................................................... 3,726 56,779
J.D. Wetherspoon plc................................................................. 1,000 14,486
Logica plc........................................................................... 2,900 27,775
Reed International plc............................................................... 3,700 64,044
Reuters Holding plc.................................................................. 7,500 87,302
Standard Chartered plc............................................................... 7,343 73,572
----------
376,745
----------
UNITED STATES (5.5%)
Embotelladora Andina ADR............................................................. 1,000 35,500
Larsen & Toubro Ltd. ................................................................ 2,000 39,260
Santa Isabel ADR..................................................................... 1,300 34,450
Tata Engineering and Locomotive Company Ltd. ........................................ 3,000 52,260
Total Access Communication plc....................................................... 4,000 36,400
----------
197,870
----------
TOTAL COMMON STOCKS (Cost $2,944,304) (91.4%).......................................... 3,275,290
Other assets, less liabilities (8.6%).................................................. 309,234
----------
NET ASSETS (100%)...................................................................... $3,584,524
==========
</TABLE>
19
<PAGE> 67
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
INDUSTRY COMPOSITION
<TABLE>
<CAPTION>
INDUSTRY PERCENT
- ------------------------------------------- -------
<S> <C>
Auto/Truck Manufacturers................... 1.5%
Beverages.................................. 3.4
Biotechnology & Medical Devices............ 2.2
Commercial Banks........................... 16.6
Computer Software.......................... 3.6
Computers & Peripherals.................... 0.5
Construction............................... 2.4
Drugs & Health Care........................ 7.6
Financial Services......................... 10.9
Food Processing............................ 2.2
Lodging & Restaurants...................... 1.5
Machinery.................................. 3.0
<CAPTION>
INDUSTRY PERCENT
- ------------------------------------------- -------
<S> <C>
Public Utilities........................... 9.4%
Publishing................................. 5.1
Real Estate Development.................... 2.8
Real Estate Investment..................... 2.1
Retailing.................................. 9.5
Telecommunications......................... 6.7
Transportation............................. 0.4
-------
Industry percent of net assets............. 91.4%
-------
Other assets, less liabilities............. 8.6
-------
PERCENT OF NET ASSETS...................... 100.0%
======
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $2,944,304, the aggregate gross unrealized appreciation for all
investments was $371,871 and aggregate gross unrealized depreciation for all
investments was $40,885.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE LARGE-CAP VALUE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BANKS (2.0%)
Wells Fargo & Company................................................................. 100 $ 24,100
----------
BEVERAGES (14.0%)
Anheuser-Busch Companies, Inc. ....................................................... 800 57,000
Coca-Cola Company..................................................................... 1,200 55,200
Earthgrains Company................................................................... 20 720
PepsiCo, Inc. ........................................................................ 1,800 59,850
----------
172,770
----------
COMPUTER SOFTWARE (4.8%)
Microsoft Corporation................................................................. 500 59,375
----------
COMPUTER-PERIPHERAL EQUIPMENT (3.8%)
Motorola, Inc. ....................................................................... 700 46,725
----------
COSMETICS (11.5%)
Clorox Company........................................................................ 600 51,075
Gillette Company...................................................................... 900 53,213
Tambrands, Inc. ...................................................................... 800 36,900
----------
141,188
----------
DRUGS (1.8%)
Warner Lambert Company................................................................ 400 22,400
----------
ENTERTAINMENT (3.9%)
Walt Disney Company (Holding Co.)..................................................... 800 48,600
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 68
THE RESERVE PRIVATE EQUITY SERIES--RESERVE LARGE-CAP VALUE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
FINANCIAL/BUSINESS SERVICES (8.2%)
American Express Company.............................................................. 1,100 $ 50,325
Charles Schwab Corporation............................................................ 2,100 50,925
----------
101,250
----------
FOOD (21.5%)
CPC International, Inc. .............................................................. 800 55,300
Campbell Soup Company................................................................. 900 58,050
Hershey Foods Corporation............................................................. 700 50,925
Quaker Oats Company................................................................... 1,500 52,687
Wrigley (WM) Jr. Company.............................................................. 900 47,138
----------
264,100
----------
PHARMACEUTICALS (7.4%)
Johnson & Johnson..................................................................... 400 38,950
Merck & Company, Inc. ................................................................ 800 51,700
----------
90,650
----------
PUBLISHING (4.5%)
Gannett Company, Inc. ................................................................ 800 55,800
----------
PUBLISHING -- NEWSPAPERS (3.8%)
New York Times Company Class A........................................................ 1,400 46,025
----------
RETAIL STORES -- GENERAL MERCHANDISING (4.2%)
Wal-Mart Stores, Inc. ................................................................ 2,000 51,750
----------
SEMICONDUCTOR -- RELATED DEVICE (4.9%)
Intel Corporation..................................................................... 800 60,400
----------
TOTAL COMMON STOCKS (Cost $1,115,010)(96.3%)............................................ 1,185,133
Other assets, less liabilities (3.7%)................................................... 45,927
----------
NET ASSETS (100%)....................................................................... $1,231,060
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,115,010, the aggregate gross unrealized appreciation for all
investments was $84,608 and aggregate gross unrealized depreciation for all
investments was $14,485.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 69
THE RESERVE PRIVATE EQUITY SERIES--RESERVE MID-CAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AIR TRANSPORT (3.0%)
Delta Air Lines, Inc. ................................................................ 550 $ 45,581
----------
AUTO PARTS (3.6%)
Gentex Corporation*................................................................... 1,200 54,300
----------
BANKS (2.7%)
Cole Taylor Financial Group, Inc. .................................................... 1,500 39,750
----------
BUSINESS EQUIPMENT/SERVICE (8.4%)
Equifax, Inc. ........................................................................ 2,800 69,300
Interim Services, Inc.*............................................................... 1,200 57,000
----------
126,300
----------
CHEMICAL SPECIALTY (4.5%)
Raychem Corporation................................................................... 900 67,275
----------
COMMUNICATION -- NETWORK (4.0%)
LCI International, Inc.*.............................................................. 1,900 60,563
----------
COMPUTER SERVICES (2.7%)
Acxiom Corporation*................................................................... 1,300 40,625
----------
COMPUTER SOFTWARE (2.1%)
Black Box Corporation*................................................................ 1,500 31,125
----------
COMPUTER -- PERIPHERAL EQUIPMENT (2.9%)
Dialogic Corporation*................................................................. 800 43,200
----------
COMPUTERS (4.3%)
Gateway 2000, Inc.*................................................................... 1,700 64,387
----------
ELECTRIC MEASUREMENT & TESTING INST. (5.1%)
Input/Output, Inc. ................................................................... 1,900 76,713
----------
FINANCE-PERSONAL LOANS (4.1%)
MBNA Corporation...................................................................... 2,000 61,250
----------
FOOD CHAINS (2.0%)
Whole Foods Market, Inc.*............................................................. 1,200 29,550
----------
HEALTH (2.7%)
American Medical Response, Inc.*...................................................... 1,100 40,012
----------
HOME BUILDINGS (4.5%)
Oakwood Homes Corp. .................................................................. 1,400 67,900
----------
HOSPITAL SUPPLIES (5.4%)
Advanced Technology Laboratories, Inc.*............................................... 1,400 49,350
Sofamor Danek Group, Inc.*............................................................ 900 32,175
----------
81,525
----------
HOUSEHOLD FURNISHINGS & APPLIANCES (5.2%)
Heilig-Meyers Company................................................................. 2,000 41,250
Herman Miller, Inc. .................................................................. 1,200 37,050
----------
78,300
----------
LIFE INSURANCE (3.3%)
Protective Life Corporation........................................................... 1,300 48,588
----------
</TABLE>
22
<PAGE> 70
THE RESERVE PRIVATE EQUITY SERIES--RESERVE MID-CAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
MISCELLANEOUS METALS (3.4%)
Wolverine Tube Inc.*.................................................................. 1,400 $ 51,100
----------
MOBIL HOMES (2.2%)
Palm Harbor Homes, Inc.*.............................................................. 1,200 33,300
----------
OIL/GAS EQUIPMENT SERVICES (6.5%)
Rowan Companies, Inc.*................................................................ 2,600 39,325
Tidewater, Inc. ...................................................................... 1,400 57,750
----------
97,075
----------
POLLUTION CONTROL (4.4%)
Newpark Resources, Inc.*.............................................................. 1,800 65,250
----------
RESTAURANTS (2.1%)
Sonic Corporation*.................................................................... 1,300 31,200
----------
RETAIL (3.8%)
Casey's General Stores, Inc. ......................................................... 2,400 56,700
----------
SPECIAL INDUSTRIAL MACHINERY (3.8%)
Black & Decker Corp. ................................................................. 1,400 57,575
----------
TOTAL COMMON STOCK (Cost $1,284,178) (96.7%)............................................ 1,449,144
Other assets, less liabilities (3.3%)................................................... 49,980
----------
NET ASSETS (100%)....................................................................... $1,499,124
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,284,178, the aggregate gross unrealized appreciation for all
investments was $181,516 and aggregate gross unrealized depreciation for all
investments was $16,550.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AIR TRANSPORTATION (3.1%)
Delta Air Lines, Inc. ................................................................ 950 $ 78,731
----------
AUTO PARTS (4.3%)
Gentex Corporation*................................................................... 2,400 108,600
----------
BANKS (2.3%)
Cole Taylor Financial Group, Inc. .................................................... 2,200 58,300
----------
BUSINESS EQUIPMENT/SERVICE (8.0%)
Equifax Inc. ......................................................................... 4,400 108,900
Interim Services, Inc.*............................................................... 2,000 95,000
----------
203,900
----------
CHEMICAL SPECIALTY (4.0%)
Raychem Corporation................................................................... 1,350 100,913
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 71
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
COMMUNICATION -- NETWORK (3.6%)
LCI International, Inc.*.............................................................. 2,900 $ 92,438
----------
COMPUTER SERVICES (2.9%)
Acxiom Corporation*................................................................... 2,400 75,000
----------
COMPUTER SOFTWARE (2.3%)
Black Box Corporation*................................................................ 2,800 58,100
----------
COMPUTERS (3.9%)
Gateway 2000, Inc.*................................................................... 2,600 98,475
----------
COMPUTERS -- PERIPHERAL EQUIPMENT (3.4%)
Dialogic Corporation*................................................................. 1,600 86,400
----------
ELECTRIC MEASUREMENT & TESTING INSTRUMENT (4.8%)
Input/Output, Inc.*................................................................... 3,000 121,125
----------
FINANCE -- PERSONAL LOANS (3.5%)
MBNA Corporation...................................................................... 2,900 88,812
----------
FOOD CHAINS (1.9%)
Whole Foods Market, Inc.*............................................................. 2,000 49,250
----------
HEALTH (2.5%)
American Medical Response, Inc.*...................................................... 1,750 63,656
----------
HOME BUILDINGS (4.4%)
Oakwood Homes Corp. .................................................................. 2,300 111,550
----------
HOSPITAL SUPPLIES (5.2%)
Advanced Technology Laboratories, Inc.*............................................... 2,300 81,075
Sofamor Danek Group, Inc.*............................................................ 1,400 50,050
----------
131,125
----------
HOUSEHOLD FURNISHINGS APPLIANCE (5.3%)
Heilig-Meyers Company................................................................. 3,300 68,063
Herman Miller, Inc. .................................................................. 2,200 67,925
----------
135,988
----------
LIFE INSURANCE (4.8%)
American Bankers Insurance Group, Inc. ............................................... 1,200 46,500
Protective Life Corporation........................................................... 2,000 74,750
----------
121,250
----------
MISCELLANEOUS METALS (3.0%)
Wolverine Tube, Inc.*................................................................. 2,100 76,650
----------
MOBIL HOMES (2.0%)
Palm Harbor Homes, Inc.*.............................................................. 1,800 49,950
----------
OIL/GAS EQUIPMENT SERVICES (5.9%)
Rowan Companies, Inc.*................................................................ 4,000 60,500
Tidewater Inc. ....................................................................... 2,150 88,687
----------
149,187
----------
POLLUTION CONTROL (4.1%)
Newpark Resources, Inc.*.............................................................. 2,870 104,037
----------
</TABLE>
24
<PAGE> 72
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
RESTAURANTS (2.1%)
Sonic Corporation*.................................................................... 2,200 $ 52,800
----------
RETAIL (3.3%)
Casey's General Stores, Inc. ......................................................... 3,500 82,688
----------
SPECIAL INDUSTRIAL MACHINERY (3.5%)
Black & Decker Corporation............................................................ 2,200 90,475
----------
TOTAL COMMON STOCKS (Cost $1,935,729) (94.1%)........................................... 2,389,400
Other assets, less liabilities (5.9%)................................................... 150,155
----------
NET ASSETS (100%)....................................................................... $2,539,555
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,935,729, the aggregate gross unrealized appreciation for all
investments was $472,445 and aggregate gross unrealized depreciation for all
investments was $18,774.
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 73
RESERVE EMERGING GROWTH FUND
<TABLE>
<CAPTION>
MEASUREMENT PERIOD EMERGING
(FISCAL YEAR COVERED) GROWTH S&P 500
<S> <C> <C>
11/14/94 10000 10000
05/31/96 19300 14360
</TABLE>
The performance of Reserve Emerging Growth Fund reflects the maximum
4.5% sales load.
The chart above reflects the performance of the Reserve Emerging
Growth Fund class A shares. The performance of the Reserve
Emerging Growth Fund class D shares will be greater or less than
the line shown based on the differences in original share
inception dates, fees, and sales charges.
Past performance is not indicative of future performance.
To the Shareholders of the Reserve Emerging Growth Fund:
The Fund's performance for the year ended May 31, 1996, as well as from its
inception on November 14, 1994 through May 31, 1996, has been outstanding. Our
Fund ranks among the very highest in its peer group as well as among other
mutual funds. During most of this period, we have experienced a positive
environment for stocks overall, but particularly for smaller companies with
above average growth rates. Our strategy in periods like the recent correction,
is to use price weakness as an opportunity to establish commitments to companies
with clear and visible growth prospects at somewhat distressed valuations.
Looking ahead, we are confident that the environment for our type of investments
continues to be excellent as major secular changes are occurring in
telecommunications, health care and technology that provide significant growth
paths for smaller companies who have a clear focus and a sound business plan.
EDWIN G. VROOM, PRESIDENT, ROANOKE ASSET MANAGEMENT, SUB-ADVISER
4
<PAGE> 74
RESERVE PRIVATE EQUITY SERIES
RESERVE BLUE CHIP GROWTH 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 and the Reserve Blue Chip Growth Fund ("Growth 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 July 31, 1996.
TABLE OF CONTENTS
Page
----
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
Report of Independent Accountants
Financial Statements
<PAGE> 75
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 Blue Chip Growth Fund may not:
(1) borrow money except as a temporary measure for extraordinary or emergency
purposes 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 issuers 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.
The Fund has reserved the right to purchase and write interest rate
futures contracts, and put and call options on interest rate futures
contracts. The Fund does not intend to use these techniques for the
foreseeable future and that shareholders will be given notice should the Fund
determine that they will be used.
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.
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
<PAGE> 76
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 five 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.
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 a demand 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
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.
DEFENSIVE POSITION. For temporary defensive purposes, the Fund may vary from
its investment policy during periods in which conditions in securities markets
or other economic or political conditions warrant. In such circumstances, the
Fund will increase its position in debt securities, which may include short-term
U.S. Government securities and U.S. dollar- or foreign currency-denominated
short-term indebtedness, cash equivalents and fixed-income securities issued or
guaranteed by governmental entities, or by companies or supranational
organizations (e.g., International Bank for Reconstruction and Development and
the European community) rated AA or better by Standard & Poor's Corporation, or
Aa or better by Moody's Investor Service, Inc.; or if not so rated, of
equivalent investment quality as determined by the Adviser. Apart from periods
of defensive investment, the Fund may also at any time temporarily invest funds
awaiting reinvestment or held as reserves for dividends and other distributions
to shareholders in U.S. dollar-denominated money-market instruments.
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"),
Reserve New York Tax-Exempt Trust ("RNYTET") and Reserve Private Equity
Series ("RPES"), Director, Vice President and Secretary of Reserve Management
Company, Inc. ("RMCI") and Reserve Management
<PAGE> 77
Corporation, and Chairman and Director of Reserv Partner, 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,
RTET, and RPES.
HENRI W. EMMET, Trustee, 176 East 71st Street, New York, New York 10021.
Mr. Emmet is the Managing Director of Global Interaction, Inc., and formerly
served as the Managing Director of Servus Associates, Inc.; U.S.A.
Representative of the First National Bank of Southern Africa, and Trustee of
RF, RET, RNYTET, RTET and RPES. 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, RTET, and RPES. 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, RTET, and RPES.
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,
New York 10019.
Mr. Cozzolino is Counsel and Secretary of RF, RIT, RTET, RNYTET, and RPES.
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, RNYTET, and RPES. 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.
** Father Harrington is a member of the Board of Directors of Bear,
Stearns & Co.
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.
COMPENSATION TABLE
<TABLE>
<CAPTION>
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 $22,197
Henri W. Emmet $0 $22,197
Rev. Donald J. Harrington $0 $22,197
Niels W. Johnsen $0 $22,197
Burtt R. Ehrlich $0 $0
Thomas L. Rhodes $0 $0
</TABLE>
Amount shown are for the Fund's fiscal year ending May 31, 1996.
<PAGE> 78
INVESTMENT MANAGEMENT AND OTHER AGREEMENTS
THE ADVISER. Reserve Management Company, Inc. ("Adviser"), 14 Locust Place,
Manhasset, New York 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, including effecting purchases and sales of investment securities, is
responsible for the day-to-day oversight of the Trust's operations and to
otherwise administer 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 each Fund pursuant to the Investment Management Agreement
which include: registration fees paid to the commission and state
regulators, costs associated with the annual update of each Fund's registration
statement, auditing annual financial statements, and printing and mailing costs
(exclusive of those associated with the Rule 12b-1 Plans). 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. Trainer, Wortham & Company, Inc. ("Sub-Adviser"), 845
Third Avenue, New York, New York 10022, 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 person" 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. The Chase Manhattan 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 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 of .25% of the average net asset
value for Class A shares and of 1.00% of the
<PAGE> 79
average net asset value for Class D shares. 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
Americas, New York, New York 10019 is the Trust's independent accountants.
PORTFOLIO TURNOVER, TRANSACTION CHARGES AND ALLOCATION
The Fund will not attempt to achieve, nor will it be limited to, a
predetermined rate of portfolio turnover. Turnover rate is the lesser of
purchases or sales of portfolio securities for a year (excluding all securities
with maturities of one year or less) divided by the monthly average of the
market value of such securities.
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. 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 Trustees 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 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
<PAGE> 80
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, material amendments to the Service Plan, and 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
an annual meeting of shareholders at which at least 50 percent of the shares of
each group are represented.
As of June 30, 1996, the following persons owned of record or
beneficially 5% or more of the Fund's outstanding shares: Bruce Bent II, 18
Heights Road, Plandome, NY 11030 (5.5%); Reserve Management Corporation, 810
Seventh Avenue, New York, NY 10019 (8.1%); and Trainer Wortham & Co., Inc.
845 Third Avenue, New York, NY 10022 (37.1%).
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
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 (if applicable). The net asset value of each Fund is
calculated at the end of each business day (currently 4:00 PM New York time)
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 the class' outstanding shares that
represent the class' proportionate 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.
<PAGE> 81
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 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 date 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,
<PAGE> 82
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 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 from 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 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 Fund may be subject to non-U.S. tax on income and gains received from
securities of non-U.S. issuers which generally is withheld by a foreign country
at the source. The United States has entered into tax treaties with many foreign
countries which may entitle the Fund to a reduced rate of tax or exemption from
tax on income. It is impossible to determine the effective rate of foreign tax
in advance since the amount of the Fund's assets to be invested within various
countries is not known. The Fund intends to operate so as to qualify for tax
treaty benefits where applicable. To the extent that the Fund is liable for
foreign income taxes withheld at the source, the Fund may operate so as to meet
the requirements of the Code to "pass through" to its shareholders tax benefits
attributable to foreign income taxes paid by the Fund. If more than 50% of the
value of the Fund's total assets at the close of its taxable year is comprised
of securities issued by foreign corporations, the Fund may elect to "pass
through" to its shareholder the amount of foreign income taxes paid by the Fund.
Pursuant to this election, shareholders will be required to (i) include in gross
income, even though not actually received, their respective pro rata share of
foreign taxes paid by the Fund; (ii) treat their pro rata share of foreign taxes
as paid by them; and (iii) subject to certain limitations, either deduct their
pro rata share of foreign taxes in computing their taxable income, or use such
share as foreign tax credit against U.S. income tax (but not both). No deduction
for foreign taxes may be claimed by a non-corporate shareholder who does not
itemize deductions. The Fund may meet the requirements to "pass through" to its
shareholders foreign income taxes paid, but there can be no assurance that the
Fund will be able to do so. Each shareholder will be notified within 60 days
after the close of the taxable year of the Fund if the foreign taxes paid by the
Fund will "pass through" for that year, and, if so, the amount of each
shareholder's pro rata share (by country) of (i) the foreign taxes paid and (ii)
the Fund's gross income from foreign sources.
Generally, a credit for foreign taxes paid or accrued is subject to the
limitation that it may not exceed the shareholder's U.S. tax attributable to his
or her total foreign source taxable income. For this purpose, the source of the
Fund's income flows through to its shareholders. Gains from the sale of
securities by the Fund will be treated as derived from U.S. sources and Section
988 gains will be treated as derived from U.S. sources. The limitation on the
foreign tax credit is applied separately to foreign source passive income,
including foreign source passive income received from the Fund. Shareholders may
be unable to claim a credit for the full amount of their proportionate share of
the foreign taxes paid by the Fund. The foreign tax credit can be applied to
offset no more than 90% of the alternative minimum tax imposed on corporations
and individuals. The foregoing is only a general
<PAGE> 83
description of the foreign tax credit. Because application of a credit depends
on the particular circumstances of each shareholder, shareholders are advised to
consult their own tax advisers.
The Fund may invest in shares of foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC if at least one-half of
its assets constitute investment-type assets, or 75% or more of its gross income
is investment-type income. If the Fund receives a so-called "excess
distribution" with respect to PFIC stock, the Fund itself may be subject to a
tax on a portion of the excess distribution, whether or not the corresponding
income is distributed by the Fund to shareholders. In general, under the PFIC
rules, an excess distribution is treated as having been realized ratably over
the period during which the Fund held the PFIC shares. The Fund itself will be
subject to tax on the portion, if any, of an excess distribution that is so
allocated to prior Fund taxable years and an interest factor will be added to
the tax, as if the tax had been payable in such prior taxable years. Certain
distributions from a PFIC as well as gain from the sale of PFIC share are
treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment with respect
to PFIC shares. Under an election that currently is available in some
circumstances, the Fund generally would be required to include in its gross
income its share of the earnings of a PFIC on a current basis, regardless of
whether distributions are received from the PFIC in a given year. If this
election were made, the special rules, discussed above, relating to the taxation
of excess distributions, would not apply. In addition, another election may be
available that would involve marking to market the Fund's PFIC shares at the end
of each taxable year (and on certain other dates prescribed in the Code), with
the result that unrealized gains are treated as though they were realized. If
this election were made, tax at the Fund level under the PFIC rules would
generally be eliminated, but the Fund could, in limited circumstances, incur
nondeductible interest charges. The Fund's intention to qualify annually as a
regulated investment company may limit its elections with respect to PFIC
shares.
Because the application of the PFIC rules may affect, among other things,
the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC shares, as well as subject the Fund
itself to tax on certain income from PFIC shares, the amount that must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not invest in PFIC shares.
The foregoing is a general summary of certain provisions of the Code and
Treasury Regulations in effect. For the complete provisions, reference should be
made to the pertinent Code sections and Treasury Regulations promulgated
thereunder. 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:
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)
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
<PAGE> 84
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
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> 85
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Trustees of The Reserve Private Equity
Series:
We have audited the accompanying statements of assets and liabilities of The
Reserve Private Equity Series (comprising, respectively, Reserve Blue Chip
Growth Fund, Reserve Emerging Growth Fund, Reserve Growth and Income Fund,
Reserve Informed Investors Growth Fund, Reserve International Equity Fund,
Reserve Large-Cap Value Fund, Reserve Mid-Cap Growth Fund, and Reserve North
American Growth Fund) (collectively the "Trust"), including the schedules of
portfolio investments, as of May 31, 1996, and the related statements of
operations for the period presented, and the statements of changes in net assets
and the financial highlights for each period presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the series constituting The Reserve Private Equity Series as of May 31,
1996, the results of their operations, the changes in their net assets, and
their financial highlights for the periods referred to above, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
June 28, 1996
2
<PAGE> 86
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
BLUE CHIP EMERGING GROWTH AND
GROWTH FUND GROWTH FUND INCOME FUND
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investment in securities, at value (cost $3,765,486, $4,765,851,
$794,268, respectively)............................................ $4,910,081 $6,589,386 $ 798,545
Cash................................................................. 201,401 756,193 255,213
Receivable for investment securities sold............................ 271,837 99,208 --
Dividends receivable................................................. 2,620 120 3,376
Interest receivable.................................................. -- -- 1,041
----------- ----------- -----------
Total assets....................................................... 5,385,939 7,444,907 1,058,175
----------- ----------- -----------
LIABILITIES
Accrued comprehensive fee............................................ -- 10,836 4,527
Payable for investment securities purchased.......................... 213,700 518,939 --
Other payables and accrued expenses.................................. 81 15,692 1,492
----------- ----------- -----------
Total liabilities.................................................. 213,781 545,467 6,019
----------- ----------- -----------
NET ASSETS............................................................. $5,172,158 $6,899,440 $1,052,156
=========== =========== ===========
NET ASSETS CONSIST OF (NOTE 1):
Capital stock (Par Value $.001 per share)............................ $ 347 $ 353 $ 103
Additional paid in capital........................................... 4,141,875 5,086,032 1,038,372
Accumulated net realized loss on investments......................... (114,659) (10,480) (111)
Accumulated undistributed net investment income...................... -- -- 9,515
Net unrealized appreciation on investments........................... 1,144,595 1,823,535 4,277
----------- ----------- -----------
NET ASSETS, at value, applicable to Shares of Beneficial Interest
outstanding (Note 5)................................................. $5,172,158 $6,899,440 $1,052,156
=========== =========== ===========
CLASS A:
Net Assets........................................................... $5,129,524 $6,656,511 $1,050,657
----------- ----------- -----------
Shares Outstanding................................................... 344,082 340,243 103,341
----------- ----------- -----------
Net Asset Value and redemption value per share (net assets/shares
outstanding)....................................................... $ 14.91 $ 19.56 $ 10.17
=========== =========== ===========
Maximum offering price per share (net asset value plus sales charge
of 4.50% of offering price)........................................ $ 15.61 $ 20.48 $ 10.65
=========== =========== ===========
CLASS D:
Net Assets........................................................... $ 42,634 $ 242,929 $ 1,499
----------- ----------- -----------
Shares Outstanding................................................... 2,865 12,448 147*
----------- ----------- -----------
Net Asset Value, offering and redemption value per share (net
assets/shares outstanding)......................................... $ 14.88 $ 19.52 $ 10.17
=========== =========== ===========
</TABLE>
- ---------------
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 87
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
INFORMED INVESTORS INTERNATIONAL LARGE-CAP
GROWTH FUND EQUITY FUND VALUE FUND
------------------ ------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investment in securities, at value (cost $3,783,862, $2,944,304,
$1,115,010, respectively)........................................ $6,224,000 $ 3,275,290 $ 1,185,133
Cash............................................................... 188,426 224,557 50,557
Receivable for investment securities sold.......................... -- 152,147 --
Dividends receivable............................................... 553 4,256 1,583
--------------- ------------ ------------
Total assets..................................................... 6,412,979 3,656,250 1,237,273
--------------- ------------ ------------
LIABILITIES:
Accrued comprehensive fee.......................................... -- -- 5,046
Payable for investment securities purchased........................ -- 69,961 --
Payable for fund shares redeemed................................... 3,684 -- --
Other payables and accrued expenses................................ 1,232 1,765 1,167
--------------- ------------ ------------
Total liabilities................................................ 4,916 71,726 6,213
--------------- ------------ ------------
NET ASSETS........................................................... $6,408,063 $ 3,584,524 $ 1,231,060
=============== ============ ============
NET ASSETS CONSIST OF (NOTE 1):
Capital Stock (Par Value $.001 per share).......................... $ 446 $ 318 $ 112
Additional paid in capital......................................... 4,281,103 3,325,152 1,160,825
Accumulated net realized loss on investments and foreign currency
transactions..................................................... (313,624) (71,968) --
Net unrealized appreciation on investments and foreign currency
transactions..................................................... 2,440,138 331,022 70,123
--------------- ------------ ------------
NET ASSETS, at value, applicable to Shares of Beneficial Interest
outstanding (Note 5)............................................... $6,408,063 $ 3,584,524 $ 1,231,060
=============== ============ ============
CLASS A:
Net Assets......................................................... $6,393,103 $ 3,578,313 $ 1,231,060
--------------- ------------ ------------
Shares Outstanding................................................. 445,181 317,927 112,437
--------------- ------------ ------------
Net Asset Value and redemption value per share (net assets/shares
outstanding)..................................................... $ 14.36 $ 11.26 $ 10.95
=============== ========== ============
Maximum offering price per share (net asset value plus sales charge
of 4.50% of
offering price).................................................. $ 15.04 $ 11.79 $ 11.47
=============== =========== ============
CLASS D:
Net Assets......................................................... $ 14,960 $ 6,211 --
--------------- ------------ ------------
Shares Outstanding................................................. 1,044 552 --
--------------- ------------ ------------
Net Asset Value, offering and redemption value per share (net
assets/shares
outstanding)..................................................... $ 14.33 $ 11.25 --
=============== =========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 88
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE
MID-CAP NORTH AMERICAN
GROWTH FUND GROWTH FUND
----------- --------------
<S> <C> <C>
ASSETS:
Investment in securities, at value (cost $1,284,178, $1,935,729,
respectively)................................................................ $1,449,144 $2,389,400
Cash........................................................................... 52,635 343,800
Receivable for fund shares sold................................................ -- 10,453
Dividends receivable........................................................... 738 1,361
----------- --------------
Total assets................................................................. 1,502,517 2,745,014
----------- --------------
LIABILITIES:
Payable for investment securities purchased.................................... -- 205,459
Payable for fund shares redeemed............................................... 3,393 --
----------- --------------
Total liabilities............................................................ 3,393 205,459
----------- --------------
NET ASSETS....................................................................... $1,499,124 $2,539,555
=========== =============
NET ASSETS CONSIST OF (NOTE 1):
Capital Stock (Par Value $.001 per share)...................................... $ 124 $ 207
Additional paid in capital..................................................... 1,334,034 2,169,202
Accumulated net realized loss on investments................................... -- (83,525)
Net unrealized appreciation on investments..................................... 164,966 453,671
----------- --------------
NET ASSETS, at value, applicable to Shares of Beneficial Interest outstanding
(Note 5)....................................................................... $1,499,124 $2,539,555
----------- --------------
CLASS A:
Net Assets..................................................................... $1,494,616 $ 131,226
----------- --------------
Shares Outstanding............................................................. 123,683 10,681
----------- --------------
Net Asset Value and redemption value per share (net assets/shares
outstanding)................................................................. $ 12.08 $ 12.29
=========== =============
Maximum offering price per share (net asset value plus sales charge of 4.50% of
offering price).............................................................. $ 12.65 $ 12.87
=========== =============
CLASS D:
Net Assets..................................................................... $ 4,508 $2,408,329
----------- --------------
Shares Outstanding............................................................. *374 196,199
----------- --------------
Net Asset Value, offering and redemption value per share (net assets/shares
outstanding)................................................................. $ 12.07 $ 12.27
=========== =============
</TABLE>
- ---------------
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 89
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
RESERVE
GROWTH AND
RESERVE RESERVE INCOME FUND RESERVE
BLUE CHIP EMERGING ---------------- INFORMED INVESTORS
GROWTH FUND GROWTH FUND JANUARY 2, 1996 GROWTH FUND
------------ ------------ (COMMENCEMENT OF ------------------
YEAR ENDED YEAR ENDED OPERATIONS) TO YEAR ENDED
MAY 31, 1996 MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends..................................... $ 29,978 $ 1,869 $ 10,672 $ 8,787
Interest...................................... -- -- 4,124 8,626
------------ ------------ -------- ------------------
Total investment income................... 29,978 1,869 14,796 17,413
EXPENSES
Comprehensive fee (Note 3).................... 55,581 51,177 4,527 141,751
12b-1 Fee (Note 4)
Class A..................................... 9,247 8,481 754 23,619
Class D..................................... 66 191 -- 26
------------ ------------ -------- ------------------
Total expenses............................ 64,894 59,849 5,281 165,396
------------ ------------ -------- ------------------
NET INVESTMENT INCOME (LOSS).................... (34,916) (57,980) 9,515 (147,983)
------------ ------------ -------- ------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Proceeds from sales of securities............. 2,573,864 1,201,292 28,149 13,684,285
Cost of securities sold....................... 2,575,909 1,120,746 28,260 12,834,099
------------ ------------ -------- ------------------
Net realized gain (loss) on investments (Note
1).......................................... (2,045) 80,546 (111) 850,186
Net unrealized appreciation on investments.... 975,733 1,655,638 4,277 1,109,280
------------ ------------ -------- ------------------
Net realized and unrealized gain on
investments................................. 973,688 1,736,184 4,166 1,959,466
------------ ------------ -------- ------------------
Net increase in net assets resulting from
operations.................................. $ 938,772 $1,678,204 $ 13,681 $ 1,811,483
============ ============ ================= ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 90
THE RESERVE PRIVATE EQUITY SERIES
STATEMENT OF OPERATIONS--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE
INTERNATIONAL RESERVE
EQUITY FUND LARGE-CAP
---------------- VALUE FUND RESERVE RESERVE
JULY 13, 1995 --------------- MID-CAP NORTH AMERICAN
(COMMENCEMENT JANUARY 2, 1996 GROWTH FUND GROWTH FUND
OF OPERATIONS) (COMMENCEMENT ------------ --------------
TO OF OPERATIONS) YEAR ENDED YEAR ENDED
MAY 31, 1996 TO MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
---------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends....................................... $ 18,854* $ 4,796 $ 1,923 $ 8,135
Interest........................................ 1,688 -- -- --
---------------- --------------- ------------ --------------
Total investment income....................... 20,542 4,796 1,923 8,135
EXPENSES
Comprehensive fee (Note 3)...................... 33,158 5,046 22,987 24,506
12b-1 Fee (Note 4)
Class A....................................... 4,734 841 3,830 17
Class D....................................... 12 -- 5 16,268
---------------- --------------- ------------ --------------
Total expenses.................................... 37,904 5,887 26,822 40,791
Less fees waived.............................. (217) -- -- --
---------------- --------------- ------------ --------------
Net Expenses.................................. 37,687 5,887 26,822 40,791
---------------- --------------- ------------ --------------
NET INVESTMENT LOSS............................... (17,145) (1,091) (24,899) (32,656)
---------------- --------------- ------------ --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales of securities............... 1,374,797 -- 3,071,543 1,272,486
Cost of securities sold......................... 1,446,765 -- 3,054,352 1,356,011
---------------- --------------- ------------ --------------
Net realized gain (loss) on investments and
foreign currency transactions (Note 1)........ (71,968) -- 17,191 (83,525)
Net unrealized appreciation on investments and
foreign currency transactions................. 331,022 70,123 164,966 453,671
---------------- --------------- ------------ --------------
Net realized and unrealized gain on investments
and foreign currency transactions............. 259,054 70,123 182,157 370,146
---------------- --------------- ------------ --------------
Net increase in net assets resulting from
operations.................................... $ 241,909 $69,032 $ 157,258 $ 337,490
=============== ============== ============ =============
</TABLE>
- ---------------
* Net of foreign taxes withheld of $1,774
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE> 91
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVE GROWTH
RESERVE BLUE CHIP GROWTH FUND AND INCOME FUND
-------------------------------- ----------------
OCTOBER 28, 1994 JANUARY 2, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment income (loss).................................. $ (34,916) $ (5,361) $ 9,515
Net realized gain (loss) from investments..................... (2,045) 92,552 (111)
Net unrealized appreciation from investments.................. 975,733 168,862 4,277
------------ ---------------- ----------------
Net increase in net assets resulting from operations.......... 938,772 256,053 13,681
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A....................................... (164,889) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares............................. 2,757,098 2,257,822 1,044,319
Reinvestment of distributions................................. 164,889 -- --
Cost of shares redeemed....................................... (517,167) (520,420) (5,844)
------------ ---------------- ----------------
Net increase in net assets resulting from capital share
transactions................................................ 2,404,820 1,737,402 1,038,475
------------ ---------------- ----------------
Net increase in net assets.................................... 3,178,703 1,993,455 1,052,156
NET ASSETS:
Beginning of period........................................... 1,993,455 -- --
------------ ---------------- ----------------
End of period (including undistributed net investment income
of $0, $0, and $9,515, respectively)........................ $5,172,158 $1,993,455 $1,052,156
============ ================= =================
</TABLE>
<TABLE>
<CAPTION>
RESERVE
RESERVE EMERGING GROWTH FUND INTERNATIONAL
-------------------------------- EQUITY FUND
NOVEMBER 14, ----------------
1994 JULY 13, 1995
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss........................................... $ (57,980) $ (9,569) $ (17,145)
Net realized gain (loss) from investments and foreign currency
transactions................................................ 80,546 65,542 (71,968)
Net unrealized appreciation from investments and foreign
currency transactions....................................... 1,655,638 167,897 331,022
------------ ---------------- ----------------
Net increase in net assets resulting from operations.......... 1,678,204 223,870 241,909
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A....................................... (93,899) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares............................. 4,281,980 2,268,282 3,465,234
Reinvestment of distributions................................. 93,770 -- --
Cost of shares redeemed....................................... (301,485) (1,251,282) (122,619)
------------ ---------------- ----------------
Net increase in net assets resulting from capital share
transactions................................................ 4,074,265 1,017,000 3,342,615
------------ ---------------- ----------------
Net increase in net assets.................................... 5,658,570 1,240,870 3,584,524
NET ASSETS:
Beginning of period........................................... 1,240,870 -- --
------------ ---------------- ----------------
End of period................................................. $6,899,440 $1,240,870 $3,584,524
============ ================= =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> 92
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE INFORMED RESERVE
INVESTORS GROWTH FUND LARGE-CAP VALUE
-------------------------------- FUND
DECEMBER 28, ----------------
1994 JANUARY 2, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss....................................... $ (147,983) $ (38,948) $ (1,091)
Net realized gain (loss) from investments................. 850,186 (220,490) --
Net unrealized appreciation from investments.............. 1,109,280 1,330,859 70,123
------------ ---------------- ----------------
Net increase in net assets resulting from operations...... 1,811,483 1,071,421 69,032
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A................................... (795,337) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares......................... 6,254,939 6,422,521 1,165,180
Reinvestment of distributions............................. 790,060 -- --
Cost of shares redeemed................................... (8,490,282) (656,742) (3,152)
------------ ---------------- ----------------
Net increase (decrease) in net assets resulting from
capital share transactions.............................. (1,445,283) 5,765,779 1,162,028
------------ ---------------- ----------------
Net increase (decrease) in net assets..................... (429,137) 6,837,200 1,231,060
NET ASSETS:
Beginning of period....................................... 6,837,200 -- --
------------ ---------------- ----------------
End of period............................................. $6,408,063 $6,837,200 $1,231,060
============ ================= =================
</TABLE>
<TABLE>
<CAPTION>
RESERVE RESERVE
MID-CAP NORTH AMERICAN
GROWTH FUND GROWTH FUND
--------------- --------------
YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1996
--------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss......................................................... $ (24,899) $ (32,656)
Net realized gain (loss) from investments................................... 17,191 (83,525)
Net unrealized appreciation from investments................................ 164,966 453,671
--------------- --------------
Net increase in net assets resulting from operations........................ 157,258 337,490
--------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares........................................... 2,008,337 2,345,759
Cost of shares redeemed..................................................... (666,471) (143,694)
--------------- --------------
Net increase in net assets resulting from capital share transactions........ 1,341,866 2,202,065
--------------- --------------
Net increase in net assets.................................................. 1,499,124 2,539,555
NET ASSETS:
Beginning of period......................................................... -- --
--------------- --------------
End of period............................................................... $ 1,499,124 $2,539,555
============== =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE> 93
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reserve Private Equity Series (the "Trust") consists of the following
funds: Reserve Blue Chip Growth Fund, Reserve Emerging Growth Fund, Reserve
Growth and Income Fund, Reserve Informed Investors Growth Fund, Reserve
International Equity Fund, Reserve Large-Cap Value Fund, Reserve Mid-Cap
Growth Fund, and Reserve North American Growth Fund. The Trust was formed
under Delaware law as a Delaware business trust. The Trust is registered
under the Investment Company Act of 1940, as amended, as a non-diversified
open-end management investment company. There are an unlimited number of
shares of beneficial interest of $.001 par value authorized in each series.
The Trust offers both Class A and Class D shares of each Fund. Class A shares
are sold with an initial sales charge and Class D shares are sold without an
initial sales charge. Both classes of shares have identical voting, dividend,
liquidation and other rights, and the same terms and conditions, except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan.
The accounting policies summarized below are consistently followed in
preparation of the financial statements in conformity with generally accepted
accounting principles.
SECURITY VALUATION
Portfolio securities are stated at value. A security listed or traded on an
exchange is valued at its last sale price on the exchange where the security
is principally traded or, lacking any sales on a particular day, the security
is valued at the mean between the closing bid and asked prices on that day.
Each security traded in the over-the-counter market is valued at the mean
between its quoted bid and asked prices. Where market quotations are not
readily available, the securities are valued at their fair value as
determined in good faith by or under direction of the Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date. Dividend income and
distributions to shareholders are recorded on the ex-dividend dates. Interest
income is accrued daily. Realized gains and losses from securities
transactions and unrealized appreciation or depreciation of securities are
reported on the identified cost basis for both financial statement and
federal income tax purposes.
Income and capital gain distributions are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for net operating losses and the recognition of net realized gains
and losses. Accordingly, the effect of differing financial reporting and
federal income tax treatments have been reclassified among the components of
net assets at May 31, 1996 as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
----------------------------------------
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT REALIZED
CAPITAL INCOME GAIN (LOSS)
------- -------------- -----------
<S> <C> <C> <C>
Reserve Blue Chip Growth Fund......................................... 5,361 34,916 (40,277)
Reserve Emerging Growth Fund.......................................... 4,689 57,980 (62,669)
Reserve Informed Investors Growth Fund................................ -- 147,983 (147,983)
Reserve International Equity Fund..................................... (17,145) 17,145 --
Reserve Large-Cap Value Equity Fund................................... (1,091) 1,091 --
Reserve Mid-Cap Growth Fund........................................... (7,708) 24,899 (17,191)
Reserve North American Growth Fund.................................... (32,656) 32,656 --
</TABLE>
These reclassifications had no effect on net investment income, net realized
gain on investments, or net assets for the year ended May 31, 1996.
FOREIGN CURRENCY TRANSLATION
With respect to the Reserve International Equity Fund, assets and liabilities
denominated in a foreign currency are translated into U.S. dollars using
exchange rates on the valuation date. Purchases and sales of securities,
expense payments and income receipts are translated into U.S. dollars using
the exchange rate on the transaction date. The Trust does not segregate that
portion of the results of operations resulting from changes in foreign
exchange rates from the portion resulting from changes in market prices of
securities held; both are included in net realized and unrealized gains or
losses on investments and foreign currency transactions.
33
<PAGE> 94
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
FEDERAL INCOME TAXES
It is the Trust's policy for each Fund to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended, by
complying with the requirements of the Internal Revenue Code applicable to
regulated investment companies, and to distribute substantially all of its
taxable income, including net realized capital gains to its shareholders.
Accordingly, no federal income tax provision is required.
For federal income tax purposes, the following Funds indicated below had
capital loss carryforwards at May 31, 1996, which are available to offset
future realized capital gains, if any:
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
CARRYFORWARD YEAR
------------ -----------
<S> <C> <C>
Reserve Growth and Income Fund..................................................... $ 111 2004
Reserve International Equity Fund.................................................. 71,968 2004
Reserve North American Growth Fund................................................. 83,525 2004
</TABLE>
2. INVESTMENT ACTIVITY
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the period ended May 31, 1996, were as
follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
RESERVE FUND PURCHASES SALES
------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Blue Chip Growth Fund.......................................................... $ 4,629,931 $ 2,573,982
Emerging Growth Fund........................................................... 4,850,242 1,201,292
Growth and Income Fund......................................................... 822,642 28,263
Informed Investors Growth Fund................................................. 11,122,332 13,684,285
International Equity Fund...................................................... 4,384,944 1,368,647
Large-Cap Value Fund........................................................... 1,115,010 --
Mid-Cap Growth Fund............................................................ 4,338,530 3,071,543
North American Growth Fund..................................................... 3,291,738 1,272,486
</TABLE>
3. INVESTMENT MANAGEMENT AGREEMENT
Reserve Management Company, Inc. (RMCI), serves as the Funds' investment
adviser and pays substantially all ordinary operating expenses of the Funds
for which it receives a comprehensive fee at an annual rate of 1.50% of the
average daily net assets of each Fund other than the International Equity
Fund for which it receives 1.75%. RMCI is currently waiving a portion of its
comprehensive fee.
For each Fund, RMCI has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with the Sub-Advisers. It is the responsibility of a
Sub-Adviser to make the day-to-day investment decision of the Funds and to
place the purchase and sales orders for securities transactions, subject in
all cases to the general supervision of RMCI. For services under each
Subadvisory Agreement, RMCI pays a fee up to an annual rate equal to the
percentages specified in the table below of the corresponding Funds' average
net assets.
<TABLE>
<CAPTION>
SUB-ADVISER'S
RESERVE FUND PORTFOLIO SUB-ADVISER FEE
----------------------------------------- ------------------------------------------------- -------------
<S> <C> <C>
Blue Chip Growth Fund Trainer, Wortham & Company, Inc. 0.75%
Emerging Growth Fund Roanoke, Asset Management Corp. 0.75%
Growth and Income Fund Kenneth J. Gerbino & Company 0.75%
Informed Investors Growth Fund T. H. Fitzgerald & Company 0.75%
International Equity Fund Pinnacle Associates Limited 0.875%
Large-Cap Value Fund Siphron Capital Management 0.75%
Mid-Cap Growth Fund Cambridge Equity Advisors (6/1/95-4/18/96) 0.75%
Southern Capital Advisors (4/19/96-5/31/96) 0.75%
North American Growth Fund Southern Capital Advisors 0.75%
</TABLE>
Trainer, Wortham & Company, Inc. owns 33% of the outstanding shares of the
Reserve Blue Chip Growth Fund at May 31, 1996.
34
<PAGE> 95
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
4. DISTRIBUTION ASSISTANCE
Pursuant to a Distribution Plan under Rule 12b-1, the Funds will make
payments to Resrv Partners, Inc. (RPI), the Funds' distributor of .25% per
annum for Class A and 1.00% per annum for Class D of the average daily net
assets of shareholder accounts as to which the payee has rendered
distribution assistance. During the period, the Funds paid distribution
expenses to RPI as follows:
<TABLE>
<CAPTION>
RESERVE FUND CLASS A CLASS D
------------------------------------------------------------------------------------- ------- -------
<S> <C> <C>
Blue Chip Growth Fund................................................................ $ 9,247 $ 66
Emerging Growth Fund................................................................. 8,481 192
Growth and Income Fund............................................................... 754 0
Informed Investors Growth Fund....................................................... 23,619 26
International Equity Fund............................................................ 4,734 12
Large-Cap Value Fund................................................................. 841 0
Mid-Cap Growth Fund.................................................................. 3,830 5
North American Growth Fund........................................................... 17 16,268
</TABLE>
As of May 31, 1996, RPI owned 4%, 24%, 31%, 21%, 6%, and 24% of the Reserve
Emerging Growth Fund, Reserve Growth and Income Fund, Reserve International
Equity Fund, Reserve Large-Cap Value Fund, Reserve Mid-Cap Growth Fund and
Reserve North American Growth Fund, respectively.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock of each Fund for the period ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- -----------------
FEBRUARY 13, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
--------------------- -----------------
RESERVE BLUE CHIP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------- ------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold............................................................... 203,145 $2,716,393 2,865 $40,705
Reinvested......................................................... 12,752 164,889 -- --
Redeemed........................................................... (37,574) (517,167) -- --
------- ---------- ------ -------
Net increase....................................................... 178,323 $2,364,115 2,865 $40,705
======== ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ------------------
FEBRUARY 26, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
--------------------- ------------------
RESERVE EMERGING GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------- ------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold................................................................ 251,367 $4,052,411 12,448 $229,569
Reinvested.......................................................... 5,916 93,770 -- --
Redeemed............................................................ (18,653) (301,485) -- --
------- ---------- ------ --------
Net increase........................................................ 238,630 $3,844,696 12,448 $229,569
======== ========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MAY 13, 1996
JANUARY 2, 1996 (COMMENCEMENT
(COMMENCEMENT OF OPERATIONS)
OF OPERATIONS) TO TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE GROWTH AND INCOME FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold................................................................ 103,914 $1,042,819 147 $1,500
Redeemed............................................................ (573) (5,844) -- --
------- ---------- ------ ------
Net increase........................................................ 103,341 $1,036,975 147 $1,500
======== ========== ====== ======
</TABLE>
35
<PAGE> 96
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
----------------------- ------------------
FEBRUARY 13, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
----------------------- ------------------
RESERVE INFORMED INVESTORS GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- -------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold............................................................. 458,428 $ 6,230,788 1,953 $ 24,151
Reinvested....................................................... 56,312 790,060 -- --
Redeemed......................................................... (639,631) (8,479,206) (909) (11,076)
-------- ----------- ------ --------
Net increase..................................................... (124,891) $(1,458,358) 1,044 $ 13,075
========= ============ ====== =========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MARCH 11, 1996
JULY 13, 1995 (COMMENCEMENT
(COMMENCEMENT OF OPERATIONS)
OF OPERATIONS) TO TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE INTERNATIONAL EQUITY FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold............................................................. 329,964 $3,459,234 552 $6,000
Redeemed......................................................... (12,037) (122,619) -- --
------- ---------- ------ ------
Net increase..................................................... 317,927 $3,336,615 552 $6,000
======== ========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CLASS A
---------------------
JANUARY 2, 1996
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1996
---------------------
RESERVE LARGE-CAP VALUE FUND SHARES AMOUNT
- ----------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................. 112,729 $1,165,180
Redeemed......................................................... (292) (3,152)
------- ----------
Net increase..................................................... 112,437 $1,162,028
======== ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MARCH 29, 1996
(COMMENCEMENT
OF OPERATIONS)
YEAR ENDED TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE MID-CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold............................................................. 183,603 $2,004,087 374 $4,250
Redeemed......................................................... (59,920) (666,471) -- --
------- ---------- ------ ------
Net increase..................................................... 123,683 $1,337,616 374 $4,250
======== ========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
------------------ ---------------------
MARCH 13, 1996
(COMMENCEMENT
OF OPERATIONS) TO YEAR ENDED
MAY 31, 1996 MAY 31, 1996
------------------ ---------------------
RESERVE NORTH AMERICAN GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------ -------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................................................. 11,491 $139,077 207,997 $2,206,682
Redeemed......................................................... (810) (10,000) (11,798) (133,694)
------ -------- ------- ----------
Net increase..................................................... 10,681 $129,077 196,199 $2,072,988
====== ========= ======== ==========
</TABLE>
36
<PAGE> 97
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
Transactions in capital stock of each Fund for the period ended May 31, 1995,
were as follows:
<TABLE>
<CAPTION>
OCTOBER 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
-----------------------
RESERVE BLUE CHIP GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................................... 214,923 $2,257,822
Redeemed........................................................................... (49,164) (520,420)
------- ----------
Net increase....................................................................... 165,759 $1,737,402
======== ==========
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 14, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
------------------------
RESERVE EMERGING GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- -------- ----------
<S> <C> <C>
Sold............................................................................... 218,209 $2,268,282
Redeemed........................................................................... (116,596) (1,251,282)
-------- ----------
Net increase....................................................................... 101,613 $1,017,000
========= ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
-----------------------
RESERVE INFORMED INVESTORS GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................................... 634,326 $6,422,521
Redeemed........................................................................... (64,254) (656,742)
------- ----------
Net increase....................................................................... 570,072 $5,765,779
======== ==========
</TABLE>
6. MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
37
<PAGE> 98
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31,
1996--(CONTINUED)
7. SUPPLEMENTARY INFORMATION (FOR EACH SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
CLASS D
CLASS A ----------------
-------------------------------- FEBRUARY 13,
OCTOBER 28, 1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE BLUE CHIP GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $12.03 $10.00 $13.49
------ ------ ------
Income from investment operations
Net investment loss....................................... (.10) (.03) (.04)
Net realized and unrealized gain.......................... 3.62 2.06 1.43
------ ------ ------
Total from investment operations............................ 3.52 2.03 1.39
Less distribution from net realized gain.................... (.64) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $14.91 $12.03 $14.88
====== ====== ======
Total Return................................................ 30.10% 20.30%(2) 10.30%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $5,130 $1,993 $ 43
Ratio of expenses to average net assets before waiver....... 1.75% 1.75%(1) 2.50%(1)
Ratio of expenses to average net assets, net of waiver...... 1.75% 1.73%(1) 2.50%(1)
Ratio of net investment loss to average net assets, before
waiver.................................................... (0.94)% (0.72)%(1) (1.70)%(1)
Ratio of net investment loss to average net assets, net of
waiver.................................................... (0.94)% (0.70)%(1) (1.70)%(1)
Portfolio turnover rate..................................... 72% 68% 72%
Average commission per share on Macromedia portfolio
transactions.............................................. $ 0.06 N/A $ 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
-------------------------------- ----------------
NOVEMBER 14, FEBRUARY 26,
1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE EMERGING GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $12.21 $10.00 $16.88
------ ------ ------
Income from investment operations
Net investment loss....................................... (.17) (.09) (.04)
Net realized and unrealized gain.......................... 8.05 2.30 2.68
------ ------ ------
Total from investment operations............................ 7.88 2.21 2.64
Less distribution from net realized gain.................... (0.53) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $19.56 $12.21 $19.52
====== ====== ======
Total Return................................................ 65.55% 22.10%(2) 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $6,657 $1,241 $ 243
Ratio of expenses to average net assets..................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets.......... (1.70)% (1.62)%(1) (2.48)%(1)
Portfolio turnover rate..................................... 38% 43% 38%
Average commission per share on portfolio transactions...... $ 0.01 N/A $ 0.01
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
38
<PAGE> 99
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JANUARY 2, 1996 MAY 13, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE GROWTH AND INCOME FUND MAY 31, 1996 MAY 31, 1996
- ------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period..................................... $10.00 $10.19
------ ------
Income from investment operations
Net investment income (loss)........................................... 0.09 0.00
Net realized and unrealized gain (loss)................................ 0.08 (0.02)
------ ------
Total from investment operations......................................... 0.17 (0.02)
------ ------
NET ASSET VALUE, end of period........................................... $10.17 $10.17
====== ======
Total Return............................................................. 1.70%(2) (0.2)%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................................... $1,051 $ 1
Ratio of expenses to average net assets.................................. 1.75%(1) 2.23%(1)
Ratio of net investment income to average net assets..................... 3.15%(1) 0.00%(1)
Portfolio turnover rate.................................................. 17% 17%
Average commission per share on portfolio transactions................... $ 0.08 $ 0.08
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JULY 13, 1995 MARCH 11, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE INTERNATIONAL EQUITY FUND MAY 31, 1996 MAY 31, 1996
- ------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period..................................... $10.00 $10.79
------ ------
Income from investment operations
Net investment loss.................................................... (0.05) (0.01)
Net realized and unrealized gain....................................... 1.31 0.47
------ ------
Total from investment operations......................................... 1.26 0.46
------ ------
NET ASSET VALUE, end of period........................................... $11.26 $11.25
====== ======
Total Return............................................................. 12.60%(2) 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................................... $3,578 $ 6
Ratio of expenses to average net assets before waiver.................... 2.00%(1) 2.75%(1)
Ratio of expenses to average net assets, net of waiver................... 1.99%(1) 2.75%(1)
Ratio of net investment loss to average net assets, before waiver........ (0.92)%(1) (0.70)%(1)
Ratio of net investment loss to average net assets, net of waiver........ (0.91)%(1) (0.70)%(1)
Portfolio turnover rate.................................................. 70% 70%
Average commission per share on portfolio transactions................... $ 0.02 $ 0.02
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
39
<PAGE> 100
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------------------- ----------------
DECEMBER 28, 1994 MARCH 22, 1996
(COMMENCEMENT (COMMENCEMENT OF
YEAR ENDED OF OPERATIONS) TO OPERATIONS) TO
RESERVE INFORMED INVESTORS GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ----------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $11.99 $ 10.00 $12.29
------ ------ ------
Income from investment operations
Net investment loss....................................... (0.33) (.07) (.06)
Net realized and unrealized gain.......................... 3.87 2.06 2.10
------ ------ ------
Total from investment operations............................ 3.54 1.99 2.04
Less distribution from net realized gain.................... (1.17) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $14.36 $ 11.99 $14.33
====== ====== ======
Total Return................................................ 29.75% 19.90%(2) 16.60%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $6,393 $ 6,837 $ 15
Ratio of expenses to average net assets..................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets.......... (1.57)% (1.62)%(1) (2.32)%(1)
Portfolio turnover rate..................................... 132% 59% 132%
Average commission per share on portfolio transactions...... $ 0.05 N/A $ 0.05
</TABLE>
<TABLE>
<CAPTION>
CLASS A
----------------
JANUARY 2, 1996
(COMMENCEMENT OF
OPERATIONS) TO
RESERVE LARGE-CAP VALUE FUND MAY 31, 1996
- ------------------------------------------------------------------------------------------ ----------------
<S> <C>
NET ASSET VALUE, beginning of period...................................................... $10.00
------
Income from investment operations
Net investment loss..................................................................... (0.01)
Net realized and unrealized gain........................................................ 0.96
------
Total from investment operations.......................................................... 0.95
------
NET ASSET VALUE, end of period............................................................ $10.95
======
Total Return.............................................................................. 9.50%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period.................................................... $1,231
Ratio of expenses to average net assets................................................... 1.75%(1)
Ratio of net investment loss to average net assets........................................ (0.32)%(1)
Portfolio turnover rate................................................................... 0%
Average commission per share on portfolio transactions.................................... $ 0.08
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
40
<PAGE> 101
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
------------ ----------------
MARCH 29, 1996
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
RESERVE MID-CAP GROWTH FUND MAY 31, 1996 MAY 31, 1996
- ----------------------------------------------------------------------------- ------------ ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period......................................... $10.00 $11.03
------ ------
Income from investment operations
Net investment loss........................................................ (.20) (.03)
Net realized and unrealized gain........................................... 2.28 1.07
------ ------
Total from investment operations............................................. 2.08 1.04
------ ------
NET ASSET VALUE, end of period............................................... $12.08 $12.07
====== ======
Total Return................................................................. 20.80% 9.43%(2)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period....................................... $1,495 $ 5
Ratio of expenses to average net assets...................................... 1.75% 2.50%(1)
Ratio of net investment loss to average net assets........................... (1.62)% (2.04)%
Portfolio turnover rate...................................................... 225% 225%
Average commission per share on portfolio transactions....................... $ 0.06 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ------------
MARCH 13, 1996
(COMMENCEMENT OF
OPERATIONS) TO YEAR ENDED
RESERVE NORTH AMERICAN GROWTH FUND MAY 31, 1996 MAY 31, 1996
- ----------------------------------------------------------------------------- ---------------- ------------
<S> <C> <C>
NET ASSET VALUE, beginning of period......................................... $10.94 $10.00
------ ------
Income from investment operations
Net investment loss........................................................ (0.01) (0.17)
Net realized and unrealized gain........................................... 1.36 2.44
------ ------
Total from investment operations............................................. 1.35 2.27
------ ------
NET ASSET VALUE, end of period............................................... $12.29 $12.27
====== ======
Total Return................................................................. 12.34%(2) 22.70%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period....................................... $ 131 $2,408
Ratio of expenses to average net assets...................................... 1.74%(1) 2.49%(1)
Ratio of net investment loss to average net assets........................... (0.97)%(1) (2.00)%(1)
Portfolio turnover rate...................................................... 85% 85%
Average commission per share on portfolio transactions....................... $ 0.04 $ 0.04
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
41
<PAGE> 102
THE RESERVE PRIVATE EQUITY SERIES--RESERVE BLUE CHIP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BANKS (3.5%)
Banc One Corporation................................................................. 4,850 $ 179,450
----------
BUSINESS EQUIPMENT (3.0%)
Xerox Corporation.................................................................... 1,000 157,375
----------
COMPUTER NETWORKING (3.4%)
Cisco Systems, Inc.*................................................................. 3,200 175,200
----------
COMPUTER SOFTWARE (11.8%)
CUC International, Inc.*............................................................. 5,000 203,500
Microsoft Corporation*............................................................... 1,500 178,125
National Data Corporation............................................................ 6,000 226,500
----------
608,125
----------
ELECTRICAL EQUIPMENT (1.9%)
American Superconductor Corporation*................................................. 7,000 98,000
----------
ELECTRONICS (3.5%)
Perceptron, Inc.*.................................................................... 5,000 180,625
----------
FINANCIAL SERVICES (3.6%)
Citicorp............................................................................. 2,200 184,800
----------
MEDICAL SUPPLIES (2.2%)
LaserSight Corporation*.............................................................. 10,000 115,000
----------
MISCELLANEOUS MANUFACTURING (4.4%)
Warnaco Group, Inc. ................................................................. 8,000 227,000
----------
MULTI-LINE INSURANCE (4.5%)
American International Group, Inc. .................................................. 2,500 235,625
----------
OIL/GAS EQUIPMENT SERVICES (9.0%)
Petroleum Geo-Services--ADR*......................................................... 7,000 214,375
Schlumberger, Ltd. .................................................................. 3,000 250,125
----------
464,500
----------
PACKAGED SOFTWARE (2.8%)
Computer Associates International, Inc. ............................................. 2,000 145,500
----------
PHARMACEUTICALS (8.8%)
Johnson & Johnson.................................................................... 2,000 194,750
Eli Lilly & Company.................................................................. 1,000 64,250
Merck & Company, Inc. ............................................................... 3,000 193,875
----------
452,875
----------
PUBLISHING (5.3%)
Harte-Hanks Communications........................................................... 10,500 276,938
----------
PUBLISHING--NEWSPAPERS (2.8%)
Tribune Company...................................................................... 2,000 148,250
----------
REAL ESTATE (4.5%)
Insignia Financial Group, Inc. Class A*.............................................. 9,000 234,000
----------
RETAIL SPECIALTY (3.0%)
Home Depot, Inc. .................................................................... 3,000 153,375
----------
</TABLE>
10
<PAGE> 103
THE RESERVE PRIVATE EQUITY SERIES--RESERVE BLUE CHIP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
SPECIAL INDUSTRIAL MACHINERY (6.2%)
Thermo Electron Corporation*......................................................... 5,000 $ 318,750
----------
TELECOMMUNICATIONS (4.0%)
CommNet Cellular, Inc.*.............................................................. 6,000 206,250
----------
TELECOMMUNICATIONS EQUIPMENT (6.7%)
Glenayre Technologies, Inc.*......................................................... 7,075 348,443
----------
TOTAL COMMON STOCKS (Cost $3,765,486) (94.9%).......................................... 4,910,081
Other assets, less liabilities (5.1%).................................................. 262,077
----------
NET ASSETS (100%)...................................................................... $5,172,158
==========
</TABLE>
- ------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $3,765,486, the aggregate gross unrealized appreciation for all
investments was $1,159,820 and aggregate gross unrealized depreciation for all
investments was $15,225.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BIO-TECHNOLOGY (3.3%)
Alliance Pharmaceutical Corporation*.................................................. 4,000 $ 86,500
Genzyme Corporation*.................................................................. 2,400 139,800
----------
226,300
----------
CAPITAL GOODS -- DIVERSIFIED (1.8%)
Danaher Corporation................................................................... 3,000 124,500
----------
CAPITAL GOODS/INDUSTRIAL (1.5%)
Vishay Intertechnology, Inc.*......................................................... 3,654 100,943
----------
COMMUNICATION -- EQUIPMENT (5.1%)
ANADIGICS, Inc.*...................................................................... 3,000 79,500
ECI Telecommunications Ltd. Designs................................................... 5,000 132,500
FORE Systems, Inc.*................................................................... 1,700 137,700
----------
349,700
----------
COMMUNICATION -- NETWORK (8.8%)
Heartland Wireless Communications, Inc.*.............................................. 3,500 94,500
IntelCom Group Inc.*.................................................................. 5,000 132,500
Pairgain Technologies, Inc.*.......................................................... 1,500 152,625
People's Choice TV Corporation*....................................................... 4,000 68,000
Wireless One, Inc.*................................................................... 8,500 157,250
----------
604,875
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 104
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
COMPUTER NETWORKING (8.7%)
Ascend Communications, Inc.*.......................................................... 3,600 $ 240,750
Bay Networks Inc.*.................................................................... 1,950 56,550
Shiva Corporation*.................................................................... 2,400 179,400
3Com Corporation*..................................................................... 2,500 123,125
----------
599,825
----------
COMPUTER SOFTWARE (11.0%)
Business Objects S. A. -- ADR*........................................................ 2,000 93,000
Data Translation, Inc.*............................................................... 8,000 212,000
Dendrite International, Inc.*......................................................... 3,500 95,375
Edify Corporation*.................................................................... 1,000 42,000
EPIC Design Technology, Inc.*......................................................... 3,000 88,500
Fractal Design Corp.*................................................................. 5,000 77,500
Oacis Healthcare Holding Corp.*....................................................... 3,000 49,500
Sapient Corporation*.................................................................. 2,000 100,000
----------
757,875
----------
CONSUMER GROWTH (3.8%)
Activision, Inc.*..................................................................... 5,000 68,125
Conso Products Company*............................................................... 5,750 100,625
Electronic Arts, Inc.*................................................................ 1,200 37,950
Lin Television Corporation*........................................................... 1,700 54,400
----------
261,100
----------
ELECTRIC MEASUREMENT & TESTING INSTRUMENTS (1.4%)
Opal, Inc.*........................................................................... 5,500 100,375
----------
ENERGY (1.8%)
Cross Timbers Oil Company............................................................. 5,500 123,062
----------
HEALTH (5.6%)
HCIA, Inc.*........................................................................... 2,300 148,925
National Dentex Corporation*.......................................................... 6,000 138,000
PacifiCare Health Systems, Inc.*...................................................... 1,200 99,300
----------
386,225
----------
MANAGED CARE (4.8%)
Healthsource, Inc.*................................................................... 4,000 90,500
MedPartners/Mullikin, Inc.*........................................................... 4,500 105,188
PhyCor, Inc.*......................................................................... 2,525 136,981
----------
332,669
----------
MISCELLANEOUS CONSUMER (1.4%)
On Assignment, Inc.*.................................................................. 2,500 100,625
----------
OFFICE-BUSINESS EQUIPMENT (1.3%)
HPR Inc.*............................................................................. 4,000 93,000
----------
PAPER (1.1%)
Data Documents, Inc.*................................................................. 6,000 76,500
----------
</TABLE>
12
<PAGE> 105
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
PHARMACEUTICALS (3.4%)
Centocor, Inc.*....................................................................... 3,200 $ 113,200
Dura Pharmaceuticals, Inc.*........................................................... 2,000 123,250
----------
236,450
----------
RADIO, TV & BROADCAST COMM. EQUIP. (1.5%)
American Telecasting, Inc.*........................................................... 7,500 105,937
----------
RESTAURANTS (3.2%)
Cheesecake Factory (The)*............................................................. 2,500 66,250
Outback Steakhouse, Inc.*............................................................. 3,000 113,625
Volunteer Capital Corporation*........................................................ 4,000 43,500
----------
223,375
----------
RETAIL -- SPECIALTY (8.1%)
Borders Group, Inc.*.................................................................. 4,500 147,375
PetSmart, Inc.*....................................................................... 3,000 133,500
Staples, Inc.*........................................................................ 6,325 126,500
The Sports Authority, Inc.*........................................................... 5,000 148,750
----------
556,125
----------
SEMICONDUCTOR-RELATED DEVICE (5.2%)
Credence Systems Corporation*......................................................... 2,500 50,625
Intel Corporation..................................................................... 1,800 135,900
KLA Instruments Corporation*.......................................................... 3,000 81,000
LSI Logic Corporation*................................................................ 3,000 93,375
----------
360,900
----------
SYSTEM SOFTWARE/CLIENT SERVER (4.0%)
Hummingbird Communications Ltd.*...................................................... 3,400 138,125
Informix Corporation*................................................................. 6,000 136,500
----------
274,625
----------
TELECOMMUNICATIONS (2.5%)
Cascade Communications Corp.*......................................................... 3,000 169,125
----------
TELECOMMUNICATIONS EQUIPMENT (6.2%)
Comverse Technology, Inc.*............................................................ 4,000 117,500
DSC Communications Corporation*....................................................... 2,000 60,250
Newbridge Networks Corporation*....................................................... 1,800 128,025
P-COM, Inc.*.......................................................................... 4,000 119,500
----------
425,275
----------
TOTAL COMMON STOCKS (Cost $4,765,851) (95.5%)........................................... 6,589,386
Other assets, less liabilities (4.5%)................................................... 310,054
----------
NET ASSETS (100%)....................................................................... $6,899,440
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets
* Non-income producing security.
For Federal income tax purposes the tax basis of investments owned at May 31,
1996 was $4,765,851, the aggregate gross unrealized appreciation for all
investments was $1,941,417 and aggregate gross unrealized depreciation for all
investments was $117,882.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 106
THE RESERVE PRIVATE EQUITY SERIES--RESERVE GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- -------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
AUTO (1.9%)
Chrysler Corporation................................................................ 300 $ 19,988
----------
BANKS (5.3%)
Bankers Trust New York Corporation.................................................. 500 37,563
First of America Bank Corporation................................................... 400 18,300
----------
55,863
----------
COMPUTER NETWORKING (3.1%)
Cisco Systems, Inc. ................................................................ 600 32,850
----------
COMPUTERS (3.0%)
Hewlett-Packard Company............................................................. 300 32,025
----------
ELECTRIC UTILITIES (15.5%)
Consolidated Edison Company of New York, Inc. ...................................... 1,400 39,025
Hawaiian Electric Industries, Inc. ................................................. 1,300 44,200
Minnesota Power and Light Company................................................... 1,500 40,313
Southwestern Public Service Company................................................. 1,300 39,812
----------
163,350
----------
FERTILIZERS (1.9%)
Freeport McMoran Resource Partners Ltd. ............................................ 1,000 20,000
----------
MISCELLANEOUS ENERGY (2.0%)
LL & E Royalty Trust................................................................ 4,500 21,375
----------
OIL-INTERNATIONAL (2.3%)
Chevron Corporation................................................................. 400 23,900
----------
PHARMACEUTICALS (1.2%)
Merck & Company Inc. ............................................................... 200 12,925
----------
REAL ESTATE (1.9%)
Commercial Net Lease Realty Inc. ................................................... 1,500 20,063
----------
RESTAURANTS (1.9%)
Lone Star Steakhouse & Saloon....................................................... 500 20,188
----------
RETAIL-SPECIALTY (3.6%)
Home Depot, Inc. ................................................................... 300 15,338
Tiffany & Company................................................................... 300 22,762
----------
38,100
----------
SEMICONDUCTOR-RELATED DEVICE (3.2%)
Texas Instruments, Inc. ............................................................ 600 33,750
----------
TELECOMMUNICATIONS (3.5%)
GTE Corporation..................................................................... 400 17,100
Telecom Corporation of New Zealand, Ltd. (ADR)...................................... 300 19,688
----------
36,788
----------
TELEPHONE (3.0%)
AT & T Corporation.................................................................. 500 31,188
----------
</TABLE>
14
<PAGE> 107
THE RESERVE PRIVATE EQUITY SERIES--RESERVE GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL VALUE
COMMON STOCKS AMOUNT (NOTE 1)
- -------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
UTILITIES-TELECOMMUNICATION (1.8%)
NYNEX Corporation................................................................... 400 $ 18,450
----------
TOTAL COMMON STOCKS (Cost $576,535) (55.1%)........................................... $ 580,803
==========
<CAPTION>
PREFERRED STOCKS
- --------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (4.0%)
Lehman Brothers Holdings, Inc. Series A 8.30%....................................... 1,000 24,625
Sunamerica Capital Trust, 8.35%..................................................... 700 17,500
----------
42,125
----------
GOLD MINING (1.5%)
Battle Mountain Gold Company, $3.25................................................. 300 15,525
----------
LIFE INSURANCE (2.2%)
Conseco Inc., 6.50% Series D........................................................ 400 23,100
----------
PROPERTY-LIABILITY INSURANCE (3.5%)
Travelers/P&C Cap I Preferred Trust, 8.08%.......................................... 1,500 36,938
----------
TOTAL PREFERRED STOCKS (Cost $117,775) (11.2%)........................................ $ 117,688
==========
<CAPTION>
CONVERTIBLE BONDS
- --------------------------------------------------------------------------------------
<S> <C> <C>
HOTEL-MOTEL (2.4%)
Hilton Hotels Corp. 5.00%, 05/15/06................................................. 25,000 25,062
----------
STEEL (2.4%)
USX Corp. 7.00%, 06/15/17........................................................... 25,000 24,125
----------
TOTAL CONVERTIBLE BONDS (Cost $49,045) (4.8%)......................................... $ 49,187
==========
US TREASURY NOTES
- --------------------------------------------------------------------------------------
US Treasury Notes, 7.375%, 11/15/97 (Cost $50,913)(4.9%)............................ 50,000 50,867
----------
TOTAL INVESTMENT SECURITIES (Cost $794,268) (76.0%)................................... 798,545
Other assets, less liabilities (24.0%)................................................ 253,611
----------
NET ASSETS (100%)..................................................................... $1,052,156
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $794,268, the aggregate gross unrealized appreciation for all
investments was $30,992, and aggregate gross unrealized depreciation for all
investments was $26,715.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 108
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INFORMED INVESTORS GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
SHARES/ VALUE
COMMON STOCKS UNITS (NOTE 1)
- --------------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
AIR TRANSPORT (4.0%)
Comair Holdings, Inc. ............................................................... 9,750 $ 255,938
----------
BUSINESS EQUIPMENT/SERVICES (2.6%)
Equifax, Inc......................................................................... 6,700 165,825
----------
COMPUTER NETWORKING (4.4%)
Cisco Systems, Inc.*................................................................. 5,200 284,700
----------
COMPUTER SOFTWARE (3.9%)
CompUSA, Inc.*....................................................................... 5,700 249,375
----------
COMPUTERS (9.6%)
Sun Microsystems, Inc.*.............................................................. 9,800 613,725
----------
FOOD (3.7%)
Safeway, Inc.*....................................................................... 7,000 236,250
----------
MACHINERY-CONSTRUCTION (3.7%)
JLG Industries, Inc.................................................................. 3,000 237,375
----------
MAGNETIC OPTICAL RECORDING MEDIA (5.5%)
Komag, Inc.*......................................................................... 10,200 353,175
----------
PACKAGED SOFTWARE (11.2%)
Cadence Design Systems, Inc.*........................................................ 12,700 720,725
----------
SEMICONDUCTOR, RELATED DEVICE (9.1%)
Analog Devices, Inc.*................................................................ 1,100 30,387
Atmel Corporation*................................................................... 15,500 550,250
----------
580,637
----------
SHOES (5.3%)
Nike, Inc. .......................................................................... 3,400 341,275
----------
SPECIAL INDUSTRIAL MACHINERY (5.1%)
Applied Materials, Inc.*............................................................. 8,700 324,075
----------
TELEPHONE & TELGRAPH APPARATUS (29.0%)
Aspect Telecommunications Corporation*............................................... 7,500 425,625
Tellabs, Inc.*....................................................................... 1,200 77,400
U.S. Robotics Corporation*........................................................... 14,800 1,357,900
----------
1,860,925
----------
TOTAL COMMON STOCKS (Cost $3,783,862) (97.1%).......................................... 6,224,000
Other assets, less liabilities (2.9%).................................................. 184,063
----------
NET ASSETS (100%)...................................................................... $6,408,063
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For Federal income tax purposes the tax basis of investments owned at May 31,
1996 was $3,783,862, the aggregated gross unrealized appreciation for all
investments was $2,494,427 and aggregate gross unrealized depreciation for all
investments was $54,289.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 109
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AUSTRALIA (1.2%)
Coca Cola Amatil Ltd. ............................................................... 4,074 $ 44,377
----------
FRANCE (4.7%)
Altran Technologies.................................................................. 120 34,918
Axime................................................................................ 260 35,305
Carrefour............................................................................ 120 65,777
Carrefour (Rights expiring 7/2/96)................................................... 120 33,040
----------
169,040
----------
GERMANY (3.7%)
Altana AG............................................................................ 50 31,550
Fresenius AG......................................................................... 350 61,244
Gehe AG.............................................................................. 65 41,825
----------
134,619
----------
HONG KONG (10.1%)
CDL Hotels International Limited..................................................... 68,000 38,676
Giordano International Ltd. ......................................................... 24,000 21,562
Goldlion Holdings Ltd. .............................................................. 25,000 20,521
Hang Seng Bank Ltd. ................................................................. 7,000 73,067
Hong Kong & China Gas Company........................................................ 31,800 50,561
Hong Kong & China Gas Company (Warrants -- expires 9/30/97).......................... 1,900 87
Manhattan Card Company Ltd. ......................................................... 68,000 32,743
National Mutual Asia Ltd. ........................................................... 44,000 39,814
Sun Hung Kai Properties Ltd. ........................................................ 6,000 61,272
Wing Hang Bank Ltd. ................................................................. 6,000 23,423
----------
361,726
----------
INDONESIA (5.6%)
PT Bank Internasional Indonesia...................................................... 10,000 52,220
PT Darya Varia Laboratoria........................................................... 20,000 42,033
PT Darya Varia Laboratoria (Rights expiring 6/3/96).................................. 2,400 0
PT Gudang Garam...................................................................... 4,000 32,597
PT Steady Safe....................................................................... 11,000 14,626
PT Telekomunikasi Indonesia.......................................................... 38,000 57,860
----------
199,336
----------
ITALY (1.4%)
Telecom Italia SpA................................................................... 8,000 16,145
Telecom Italia Mobile SpA............................................................ 25,000 33,041
----------
49,186
----------
JAPAN (1.0%)
Paris Miki, Inc. .................................................................... 800 35,057
----------
</TABLE>
17
<PAGE> 110
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
MALAYSIA (8.3%)
Arab-Malaysian Merchant Bank Berhad.................................................. 2,000 $ 27,043
Commerce Asset Holding Berhad........................................................ 10,000 67,308
DCB Holdings Berhad.................................................................. 8,000 26,603
Malayan Banking Berhad............................................................... 4,000 37,981
Malaysian Assurance Alliance Berhad.................................................. 11,625 57,287
O.Y.L. Industries Berhad............................................................. 6,000 59,615
United Engineers (Malaysia) Ltd. .................................................... 3,000 20,913
----------
296,750
----------
NETHERLANDS (4.4%)
Elsevier............................................................................. 4,000 62,207
Heineken............................................................................. 200 40,786
Wolters Kluwer....................................................................... 502 56,239
----------
159,232
----------
NORWAY (1.4%)
Tomra Systems........................................................................ 5,000 48,779
----------
PHILIPPINES (1.6%)
Bankard, Inc. ....................................................................... 60,000 29,221
DMCI Holdings Inc. .................................................................. 37,000 27,206
----------
56,427
----------
SINGAPORE (5.6%)
City Developments Limited............................................................ 6,000 46,055
DBS Land Limited..................................................................... 12,000 39,915
Development Bank of Singapore Limited................................................ 3,000 35,608
Oversea-Chinese Banking Corporation Ltd. ............................................ 3,000 38,380
Overseas Union Bank Ltd. ............................................................ 6,000 42,644
----------
202,602
----------
SOUTH KOREA (3.1%)
Seoul City Gas Co. Ltd. ............................................................. 500 41,476
Sungmi Telecom Electronics........................................................... 300 68,807
----------
110,283
----------
SPAIN (7.5%)
Centros Comerciales Pryca............................................................ 1,000 23,579
Empresa Nacional de Electridad....................................................... 2,300 142,529
Gas Natural.......................................................................... 360 63,699
Iberdrola............................................................................ 3,900 39,672
----------
269,479
----------
SWEDEN (4.5%)
Astra AB Series A.................................................................... 1,400 64,215
Elekta Instrument AB Series B........................................................ 500 18,496
Ericsson Telefonaktiebolaget......................................................... 1,200 26,939
Frontec AB Series B.................................................................. 400 19,690
Wm Data AB Series B.................................................................. 500 30,280
----------
159,620
----------
</TABLE>
18
<PAGE> 111
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
SWITZERLAND (6.2%)
Nestle SA............................................................................ 70 $ 79,087
Roche Holding AG..................................................................... 8 61,538
Sandoz AG............................................................................ 60 62,596
Zurich Versicherungs................................................................. 70 18,510
----------
221,731
----------
THAILAND (5.1%)
Bangkok Bank Public Company Ltd. .................................................... 4,000 58,113
Central Pattana Public Company Ltd. ................................................. 7,000 29,017
Grammy Entertainment Public Company Ltd. ............................................ 1,500 20,371
Krung Thai Bank Public Company Ltd. ................................................. 6,000 29,135
Thai Farmers Bank Public Company Ltd. ............................................... 4,000 45,795
----------
182,431
----------
UNITED KINGDOM (10.5%)
Dixons Group plc..................................................................... 6,800 52,787
HSBC Holdings plc.................................................................... 3,726 56,779
J.D. Wetherspoon plc................................................................. 1,000 14,486
Logica plc........................................................................... 2,900 27,775
Reed International plc............................................................... 3,700 64,044
Reuters Holding plc.................................................................. 7,500 87,302
Standard Chartered plc............................................................... 7,343 73,572
----------
376,745
----------
UNITED STATES (5.5%)
Embotelladora Andina ADR............................................................. 1,000 35,500
Larsen & Toubro Ltd. ................................................................ 2,000 39,260
Santa Isabel ADR..................................................................... 1,300 34,450
Tata Engineering and Locomotive Company Ltd. ........................................ 3,000 52,260
Total Access Communication plc....................................................... 4,000 36,400
----------
197,870
----------
TOTAL COMMON STOCKS (Cost $2,944,304) (91.4%).......................................... 3,275,290
Other assets, less liabilities (8.6%).................................................. 309,234
----------
NET ASSETS (100%)...................................................................... $3,584,524
==========
</TABLE>
19
<PAGE> 112
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
INDUSTRY COMPOSITION
<TABLE>
<CAPTION>
INDUSTRY PERCENT
- ------------------------------------------- -------
<S> <C>
Auto/Truck Manufacturers................... 1.5%
Beverages.................................. 3.4
Biotechnology & Medical Devices............ 2.2
Commercial Banks........................... 16.6
Computer Software.......................... 3.6
Computers & Peripherals.................... 0.5
Construction............................... 2.4
Drugs & Health Care........................ 7.6
Financial Services......................... 10.9
Food Processing............................ 2.2
Lodging & Restaurants...................... 1.5
Machinery.................................. 3.0
<CAPTION>
INDUSTRY PERCENT
- ------------------------------------------- -------
<S> <C>
Public Utilities........................... 9.4%
Publishing................................. 5.1
Real Estate Development.................... 2.8
Real Estate Investment..................... 2.1
Retailing.................................. 9.5
Telecommunications......................... 6.7
Transportation............................. 0.4
-------
Industry percent of net assets............. 91.4%
-------
Other assets, less liabilities............. 8.6
-------
PERCENT OF NET ASSETS...................... 100.0%
======
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $2,944,304, the aggregate gross unrealized appreciation for all
investments was $371,871 and aggregate gross unrealized depreciation for all
investments was $40,885.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE LARGE-CAP VALUE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BANKS (2.0%)
Wells Fargo & Company................................................................. 100 $ 24,100
----------
BEVERAGES (14.0%)
Anheuser-Busch Companies, Inc. ....................................................... 800 57,000
Coca-Cola Company..................................................................... 1,200 55,200
Earthgrains Company................................................................... 20 720
PepsiCo, Inc. ........................................................................ 1,800 59,850
----------
172,770
----------
COMPUTER SOFTWARE (4.8%)
Microsoft Corporation................................................................. 500 59,375
----------
COMPUTER-PERIPHERAL EQUIPMENT (3.8%)
Motorola, Inc. ....................................................................... 700 46,725
----------
COSMETICS (11.5%)
Clorox Company........................................................................ 600 51,075
Gillette Company...................................................................... 900 53,213
Tambrands, Inc. ...................................................................... 800 36,900
----------
141,188
----------
DRUGS (1.8%)
Warner Lambert Company................................................................ 400 22,400
----------
ENTERTAINMENT (3.9%)
Walt Disney Company (Holding Co.)..................................................... 800 48,600
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 113
THE RESERVE PRIVATE EQUITY SERIES--RESERVE LARGE-CAP VALUE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
FINANCIAL/BUSINESS SERVICES (8.2%)
American Express Company.............................................................. 1,100 $ 50,325
Charles Schwab Corporation............................................................ 2,100 50,925
----------
101,250
----------
FOOD (21.5%)
CPC International, Inc. .............................................................. 800 55,300
Campbell Soup Company................................................................. 900 58,050
Hershey Foods Corporation............................................................. 700 50,925
Quaker Oats Company................................................................... 1,500 52,687
Wrigley (WM) Jr. Company.............................................................. 900 47,138
----------
264,100
----------
PHARMACEUTICALS (7.4%)
Johnson & Johnson..................................................................... 400 38,950
Merck & Company, Inc. ................................................................ 800 51,700
----------
90,650
----------
PUBLISHING (4.5%)
Gannett Company, Inc. ................................................................ 800 55,800
----------
PUBLISHING -- NEWSPAPERS (3.8%)
New York Times Company Class A........................................................ 1,400 46,025
----------
RETAIL STORES -- GENERAL MERCHANDISING (4.2%)
Wal-Mart Stores, Inc. ................................................................ 2,000 51,750
----------
SEMICONDUCTOR -- RELATED DEVICE (4.9%)
Intel Corporation..................................................................... 800 60,400
----------
TOTAL COMMON STOCKS (Cost $1,115,010)(96.3%)............................................ 1,185,133
Other assets, less liabilities (3.7%)................................................... 45,927
----------
NET ASSETS (100%)....................................................................... $1,231,060
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,115,010, the aggregate gross unrealized appreciation for all
investments was $84,608 and aggregate gross unrealized depreciation for all
investments was $14,485.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 114
THE RESERVE PRIVATE EQUITY SERIES--RESERVE MID-CAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AIR TRANSPORT (3.0%)
Delta Air Lines, Inc. ................................................................ 550 $ 45,581
----------
AUTO PARTS (3.6%)
Gentex Corporation*................................................................... 1,200 54,300
----------
BANKS (2.7%)
Cole Taylor Financial Group, Inc. .................................................... 1,500 39,750
----------
BUSINESS EQUIPMENT/SERVICE (8.4%)
Equifax, Inc. ........................................................................ 2,800 69,300
Interim Services, Inc.*............................................................... 1,200 57,000
----------
126,300
----------
CHEMICAL SPECIALTY (4.5%)
Raychem Corporation................................................................... 900 67,275
----------
COMMUNICATION -- NETWORK (4.0%)
LCI International, Inc.*.............................................................. 1,900 60,563
----------
COMPUTER SERVICES (2.7%)
Acxiom Corporation*................................................................... 1,300 40,625
----------
COMPUTER SOFTWARE (2.1%)
Black Box Corporation*................................................................ 1,500 31,125
----------
COMPUTER -- PERIPHERAL EQUIPMENT (2.9%)
Dialogic Corporation*................................................................. 800 43,200
----------
COMPUTERS (4.3%)
Gateway 2000, Inc.*................................................................... 1,700 64,387
----------
ELECTRIC MEASUREMENT & TESTING INST. (5.1%)
Input/Output, Inc. ................................................................... 1,900 76,713
----------
FINANCE-PERSONAL LOANS (4.1%)
MBNA Corporation...................................................................... 2,000 61,250
----------
FOOD CHAINS (2.0%)
Whole Foods Market, Inc.*............................................................. 1,200 29,550
----------
HEALTH (2.7%)
American Medical Response, Inc.*...................................................... 1,100 40,012
----------
HOME BUILDINGS (4.5%)
Oakwood Homes Corp. .................................................................. 1,400 67,900
----------
HOSPITAL SUPPLIES (5.4%)
Advanced Technology Laboratories, Inc.*............................................... 1,400 49,350
Sofamor Danek Group, Inc.*............................................................ 900 32,175
----------
81,525
----------
HOUSEHOLD FURNISHINGS & APPLIANCES (5.2%)
Heilig-Meyers Company................................................................. 2,000 41,250
Herman Miller, Inc. .................................................................. 1,200 37,050
----------
78,300
----------
LIFE INSURANCE (3.3%)
Protective Life Corporation........................................................... 1,300 48,588
----------
</TABLE>
22
<PAGE> 115
THE RESERVE PRIVATE EQUITY SERIES--RESERVE MID-CAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
MISCELLANEOUS METALS (3.4%)
Wolverine Tube Inc.*.................................................................. 1,400 $ 51,100
----------
MOBIL HOMES (2.2%)
Palm Harbor Homes, Inc.*.............................................................. 1,200 33,300
----------
OIL/GAS EQUIPMENT SERVICES (6.5%)
Rowan Companies, Inc.*................................................................ 2,600 39,325
Tidewater, Inc. ...................................................................... 1,400 57,750
----------
97,075
----------
POLLUTION CONTROL (4.4%)
Newpark Resources, Inc.*.............................................................. 1,800 65,250
----------
RESTAURANTS (2.1%)
Sonic Corporation*.................................................................... 1,300 31,200
----------
RETAIL (3.8%)
Casey's General Stores, Inc. ......................................................... 2,400 56,700
----------
SPECIAL INDUSTRIAL MACHINERY (3.8%)
Black & Decker Corp. ................................................................. 1,400 57,575
----------
TOTAL COMMON STOCK (Cost $1,284,178) (96.7%)............................................ 1,449,144
Other assets, less liabilities (3.3%)................................................... 49,980
----------
NET ASSETS (100%)....................................................................... $1,499,124
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,284,178, the aggregate gross unrealized appreciation for all
investments was $181,516 and aggregate gross unrealized depreciation for all
investments was $16,550.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AIR TRANSPORTATION (3.1%)
Delta Air Lines, Inc. ................................................................ 950 $ 78,731
----------
AUTO PARTS (4.3%)
Gentex Corporation*................................................................... 2,400 108,600
----------
BANKS (2.3%)
Cole Taylor Financial Group, Inc. .................................................... 2,200 58,300
----------
BUSINESS EQUIPMENT/SERVICE (8.0%)
Equifax Inc. ......................................................................... 4,400 108,900
Interim Services, Inc.*............................................................... 2,000 95,000
----------
203,900
----------
CHEMICAL SPECIALTY (4.0%)
Raychem Corporation................................................................... 1,350 100,913
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 116
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
COMMUNICATION -- NETWORK (3.6%)
LCI International, Inc.*.............................................................. 2,900 $ 92,438
----------
COMPUTER SERVICES (2.9%)
Acxiom Corporation*................................................................... 2,400 75,000
----------
COMPUTER SOFTWARE (2.3%)
Black Box Corporation*................................................................ 2,800 58,100
----------
COMPUTERS (3.9%)
Gateway 2000, Inc.*................................................................... 2,600 98,475
----------
COMPUTERS -- PERIPHERAL EQUIPMENT (3.4%)
Dialogic Corporation*................................................................. 1,600 86,400
----------
ELECTRIC MEASUREMENT & TESTING INSTRUMENT (4.8%)
Input/Output, Inc.*................................................................... 3,000 121,125
----------
FINANCE -- PERSONAL LOANS (3.5%)
MBNA Corporation...................................................................... 2,900 88,812
----------
FOOD CHAINS (1.9%)
Whole Foods Market, Inc.*............................................................. 2,000 49,250
----------
HEALTH (2.5%)
American Medical Response, Inc.*...................................................... 1,750 63,656
----------
HOME BUILDINGS (4.4%)
Oakwood Homes Corp. .................................................................. 2,300 111,550
----------
HOSPITAL SUPPLIES (5.2%)
Advanced Technology Laboratories, Inc.*............................................... 2,300 81,075
Sofamor Danek Group, Inc.*............................................................ 1,400 50,050
----------
131,125
----------
HOUSEHOLD FURNISHINGS APPLIANCE (5.3%)
Heilig-Meyers Company................................................................. 3,300 68,063
Herman Miller, Inc. .................................................................. 2,200 67,925
----------
135,988
----------
LIFE INSURANCE (4.8%)
American Bankers Insurance Group, Inc. ............................................... 1,200 46,500
Protective Life Corporation........................................................... 2,000 74,750
----------
121,250
----------
MISCELLANEOUS METALS (3.0%)
Wolverine Tube, Inc.*................................................................. 2,100 76,650
----------
MOBIL HOMES (2.0%)
Palm Harbor Homes, Inc.*.............................................................. 1,800 49,950
----------
OIL/GAS EQUIPMENT SERVICES (5.9%)
Rowan Companies, Inc.*................................................................ 4,000 60,500
Tidewater Inc. ....................................................................... 2,150 88,687
----------
149,187
----------
POLLUTION CONTROL (4.1%)
Newpark Resources, Inc.*.............................................................. 2,870 104,037
----------
</TABLE>
24
<PAGE> 117
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
RESTAURANTS (2.1%)
Sonic Corporation*.................................................................... 2,200 $ 52,800
----------
RETAIL (3.3%)
Casey's General Stores, Inc. ......................................................... 3,500 82,688
----------
SPECIAL INDUSTRIAL MACHINERY (3.5%)
Black & Decker Corporation............................................................ 2,200 90,475
----------
TOTAL COMMON STOCKS (Cost $1,935,729) (94.1%)........................................... 2,389,400
Other assets, less liabilities (5.9%)................................................... 150,155
----------
NET ASSETS (100%)....................................................................... $2,539,555
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,935,729, the aggregate gross unrealized appreciation for all
investments was $472,445 and aggregate gross unrealized depreciation for all
investments was $18,774.
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 118
RESERVE BLUE CHIP GROWTH FUND
<TABLE>
<CAPTION>
MEASUREMENT PERIOD BLUE CHIP
(FISCAL YEAR COVERED) GROWTH S&P 500
<S> <C> <C>
10/28/94 10000 10000
05/31/96 14950 14120
</TABLE>
The performance of Reserve Blue Chip Growth Fund reflects the maximum
4.5% sales load.
The chart above reflects the performance of the Reserve Blue
Chip Growth Fund class A shares. The performance of the Reserve
Blue Chip Growth Fund class D shares will be greater or less
than the line shown based on the differences in original share
inception dates, fees, and sales charges.
Past performance is not indicative of future performance.
To the Shareholders of the Reserve Blue Chip Growth Fund:
A year ago we looked for higher stock prices against a background of rising
corporate profits, an accommodative Federal Reserve, modest economic growth and
little inflation which proved to be correct. While the economy has been stronger
than expected in the first half of 1996, leading to sharply higher bond yields,
we continue to look for moderate growth later this year and as a result believe
interest rates will be lower by year end.
Given our belief that earnings growth over the intermediate to long term
time horizon is moderate from the strong gains of recent years, we have been
emphasizing companies with relatively consistent and highly visible earnings
growth. We are continuing to focus investments in the following areas: consumer
non-durables, health care, and the financial sector. While we also like
technology stocks, some companies will see varying degrees of moderation in
earnings growth, while others will continue to experience strong results.
In summary, we all recognize the high valuations at which the market is
currently selling; so more than ever, stock selection will be the key to
superior performance.
CHARLES V. MOORE, PRESIDENT, TRAINER, WORTHAM & COMPANY, INC., SUB-ADVISER
3
<PAGE> 119
RESERVE PRIVATE EQUITY SERIES
RESERVE INFORMED INVESTORS GROWTH 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 and the Reserve Informed Investors Growth Fund ("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 July 31, 1996.
TABLE OF CONTENTS
Page
----
Investment 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
Report of Independent Accounts
Financial Statements
<PAGE> 120
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 Fund may not:
(1) borrow money except as a temporary measure for extraordinary or
emergency purposes 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 issuers 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.
The Fund has reserved the right to purchase and write interest rate
futures contracts, and put and call options on interest rate futures
contracts. The Fund does not intend to use these techniques for the
foreseeable future and that shareholders will be given notice should the Fund
determine that they will be used.
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 that 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; (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;
and (3) invest in initial public offerings.
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 business. 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.
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 amount 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 five 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.
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 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
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.
DEFENSIVE POSITION. For temporary defensive purposes, the Fund may vary from
its investment policy during periods in which conditions in securities markets
or other economic or political conditions warrant. In such circumstances, the
Fund will increase its position in debt securities, which may include
short-term U.S. Government securities and U.S. dollar- or foreign
currency-denominated short-term indebtedness, cash equivalents and fixed-income
securities issued or guaranteed by governmental entities, or by companies or
supranational organizations (e.g., International Bank for Reconstruction and
Development and the European community) rated AA or better by Standard & Poor's
Corporation, or Aa or better by Moody's Investor Service, Inc.; or if not so
rated, of equivalent investment quality as determined by the Adviser. Apart
from periods of defensive investment, the Fund may also at any time temporarily
invest funds awaiting reinvestment or held as reserves for dividends and other
distributions to shareholders in U.S. dollar-denominated money-market
instruments.
TRUSTEES AND OFFICERS OF THE TRUST
*BRUCE R. BENT, President, Treasurer and Trustee, 810 Seventh Avenue, New
York, NY 10019.
<PAGE> 121
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") and Reserve Private Equity Series
("RPES"), Director, Vice President and Secretary of Reserve Management Company,
Inc. ("RMCI") and Reserve Management Corporation, and Chairman and Director of
Resrv Partner, 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
RTET and RPES.
HENRI W. EMMET, Trustee, 176 East 71st Street, New York, New York 10021.
Mr. Emmet is the Managing Director of Global Interaction, Inc., and
formerly served as the Managing Director of Servus Associates, Inc.; U.S.A.
Representative of the First National Bank of Southern Africa, and Trustee of RF,
RET, RNYTET, RTET and RPES. 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, RTET and RPES. 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, RTET and RPES.
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,
New York 10019.
Mr. Cozzolino is Counsel and Secretary of RF, RIT, RTET, RNYTET and RPES.
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, RNYTET and RPES. 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.
** Father Harrington is a member of the Board of Directors of Bear, Stearns &
Co.
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
<PAGE> 122
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.
COMPENSATION TABLE
<TABLE>
<CAPTION>
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 $22,197
Henri W. Emmet $0 $22,197
Rev. Donald J. Harrington $0 $22,197
Niels W. Johnsen $0 $22,197
Burtt R. Ehrlich $0 $0
Thomas L. Rhodes $0 $0
</TABLE>
Amount shown are for the Fund's fiscal year ending May 31, 1996.
INVESTMENT MANAGEMENT AND OTHER AGREEMENTS
THE ADVISER. Reserve Management Company, Inc. ("Adviser"), 14 Locust
Place, Manhasset, New York, New York 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 Portfolio, including effecting purchases and sales of
investment securities, is responsible for the day-to-day oversight of the
Trust's operations and to otherwise administer 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 each Fund pursuant to the Investment Management
Agreement which include: registration fees paid to the commission and state
regulators, costs associated with the annual update of each Fund's registration
statement, auditing annual financial statements, and printing and mailing
costs (exclusive of those associated with the Rule 12b-1 Plans).
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 Fund's comprehensive fee
is higher than the advisory fee of most other funds; however, this comprehensive
fee covers most operating expenses.
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 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 a Fund or by the Adviser.
THE SUB-ADVISER. T.H. Fitzgerald & Co., ("Sub-Adviser"), 80 Wall Street,
New York, New York 10005, 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 person" 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. The Chase Manhattan 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
<PAGE> 123
to the Plan, the Distributor or its affiliates may make payments ("assistance
payments") to brokers and financial institutions ("payees") in respect of Trust
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 of .25% of the
average net asset value for Class A shares and 1.00% of the average net
asset value for Class D shares. 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
Americas, New York, New York 10019 is the Trust's independent accountants.
PORTFOLIO TURNOVER, TRANSACTION CHARGES AND ALLOCATION
The Fund will not attempt to achieve, nor will it be limited to, a
predetermined rate of portfolio turnover. Turnover rate is the lesser of
purchases or sales of portfolio securities for a year (excluding all securities
with maturities of one year or less) divided by the monthly average of the
market value of such securities.
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 Trust's investment securities. In general, in the purchase and
sale of investment securities the investment 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 investment Adviser may take into
account a dealer's operational and financial capabilities, the type of
transaction involved, the dealer's general relationship with the Trust's
investment 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 Trust as determined in good faith by
the Trust's investment Adviser. Brokers or dealers who execute investment
securities transactions for the Trust 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.
When transactions are made in the over-the-counter market, the Trust deals
with the primary market makers unless more favorable prices are otherwise
obtainable.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees 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 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
<PAGE> 124
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, material amendments to the Service Plan, and 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
an annual meeting of shareholders at which at least 50 percent of the shares of
each group are represented.
As of June 30, 1996, the following persons owned at record or
beneficially 5% or more of the Fund's outstanding shares: Arthur T. Bent III, 18
Heights Road, Plandome, NY 11030 (5.1%); Nations Bank, P.O. Box 831575, Dallas,
TX 75283 (27.9%); and Trust Co. of Knoxville, P.O. Box 789, Knoxville, TN 37901
(18.6%).
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
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 (if applicable). The net asset value of the Fund is
calculated at the end of each business day (currently 4:00 PM New York time)
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 each class'
outstanding shares that represent each class' proportionate 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.
<PAGE> 125
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 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, on 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.
<PAGE> 126
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 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.
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.
The foregoing is a general summary of certain provisions of the Code and
Treasury Regulations in effect. For the complete provisions, reference should be
made to the pertinent Code sections and Treasury Regulations promulgated
thereunder. The Code and the Treasury Regulations thereunder are subject to
change by legislative or administrative action either prospectively or
retroactively.
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:
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)
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 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.
<PAGE> 127
The Fund may also quote annual, average annual and annualized total return
and aggregate total performance data both as 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> 128
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Trustees of The Reserve Private Equity
Series:
We have audited the accompanying statements of assets and liabilities of The
Reserve Private Equity Series (comprising, respectively, Reserve Blue Chip
Growth Fund, Reserve Emerging Growth Fund, Reserve Growth and Income Fund,
Reserve Informed Investors Growth Fund, Reserve International Equity Fund,
Reserve Large-Cap Value Fund, Reserve Mid-Cap Growth Fund, and Reserve North
American Growth Fund) (collectively the "Trust"), including the schedules of
portfolio investments, as of May 31, 1996, and the related statements of
operations for the period presented, and the statements of changes in net assets
and the financial highlights for each period presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the series constituting The Reserve Private Equity Series as of May 31,
1996, the results of their operations, the changes in their net assets, and
their financial highlights for the periods referred to above, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
June 28, 1996
2
<PAGE> 129
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
BLUE CHIP EMERGING GROWTH AND
GROWTH FUND GROWTH FUND INCOME FUND
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investment in securities, at value (cost $3,765,486, $4,765,851,
$794,268, respectively)............................................ $4,910,081 $6,589,386 $ 798,545
Cash................................................................. 201,401 756,193 255,213
Receivable for investment securities sold............................ 271,837 99,208 --
Dividends receivable................................................. 2,620 120 3,376
Interest receivable.................................................. -- -- 1,041
----------- ----------- -----------
Total assets....................................................... 5,385,939 7,444,907 1,058,175
----------- ----------- -----------
LIABILITIES
Accrued comprehensive fee............................................ -- 10,836 4,527
Payable for investment securities purchased.......................... 213,700 518,939 --
Other payables and accrued expenses.................................. 81 15,692 1,492
----------- ----------- -----------
Total liabilities.................................................. 213,781 545,467 6,019
----------- ----------- -----------
NET ASSETS............................................................. $5,172,158 $6,899,440 $1,052,156
=========== =========== ===========
NET ASSETS CONSIST OF (NOTE 1):
Capital stock (Par Value $.001 per share)............................ $ 347 $ 353 $ 103
Additional paid in capital........................................... 4,141,875 5,086,032 1,038,372
Accumulated net realized loss on investments......................... (114,659) (10,480) (111)
Accumulated undistributed net investment income...................... -- -- 9,515
Net unrealized appreciation on investments........................... 1,144,595 1,823,535 4,277
----------- ----------- -----------
NET ASSETS, at value, applicable to Shares of Beneficial Interest
outstanding (Note 5)................................................. $5,172,158 $6,899,440 $1,052,156
=========== =========== ===========
CLASS A:
Net Assets........................................................... $5,129,524 $6,656,511 $1,050,657
----------- ----------- -----------
Shares Outstanding................................................... 344,082 340,243 103,341
----------- ----------- -----------
Net Asset Value and redemption value per share (net assets/shares
outstanding)....................................................... $ 14.91 $ 19.56 $ 10.17
=========== =========== ===========
Maximum offering price per share (net asset value plus sales charge
of 4.50% of offering price)........................................ $ 15.61 $ 20.48 $ 10.65
=========== =========== ===========
CLASS D:
Net Assets........................................................... $ 42,634 $ 242,929 $ 1,499
----------- ----------- -----------
Shares Outstanding................................................... 2,865 12,448 147*
----------- ----------- -----------
Net Asset Value, offering and redemption value per share (net
assets/shares outstanding)......................................... $ 14.88 $ 19.52 $ 10.17
=========== =========== ===========
</TABLE>
- ---------------
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 130
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
INFORMED INVESTORS INTERNATIONAL LARGE-CAP
GROWTH FUND EQUITY FUND VALUE FUND
------------------ ------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investment in securities, at value (cost $3,783,862, $2,944,304,
$1,115,010, respectively)........................................ $6,224,000 $ 3,275,290 $ 1,185,133
Cash............................................................... 188,426 224,557 50,557
Receivable for investment securities sold.......................... -- 152,147 --
Dividends receivable............................................... 553 4,256 1,583
--------------- ------------ ------------
Total assets..................................................... 6,412,979 3,656,250 1,237,273
--------------- ------------ ------------
LIABILITIES:
Accrued comprehensive fee.......................................... -- -- 5,046
Payable for investment securities purchased........................ -- 69,961 --
Payable for fund shares redeemed................................... 3,684 -- --
Other payables and accrued expenses................................ 1,232 1,765 1,167
--------------- ------------ ------------
Total liabilities................................................ 4,916 71,726 6,213
--------------- ------------ ------------
NET ASSETS........................................................... $6,408,063 $ 3,584,524 $ 1,231,060
=============== ============ ============
NET ASSETS CONSIST OF (NOTE 1):
Capital Stock (Par Value $.001 per share).......................... $ 446 $ 318 $ 112
Additional paid in capital......................................... 4,281,103 3,325,152 1,160,825
Accumulated net realized loss on investments and foreign currency
transactions..................................................... (313,624) (71,968) --
Net unrealized appreciation on investments and foreign currency
transactions..................................................... 2,440,138 331,022 70,123
--------------- ------------ ------------
NET ASSETS, at value, applicable to Shares of Beneficial Interest
outstanding (Note 5)............................................... $6,408,063 $ 3,584,524 $ 1,231,060
=============== ============ ============
CLASS A:
Net Assets......................................................... $6,393,103 $ 3,578,313 $ 1,231,060
--------------- ------------ ------------
Shares Outstanding................................................. 445,181 317,927 112,437
--------------- ------------ ------------
Net Asset Value and redemption value per share (net assets/shares
outstanding)..................................................... $ 14.36 $ 11.26 $ 10.95
=============== ========== ============
Maximum offering price per share (net asset value plus sales charge
of 4.50% of
offering price).................................................. $ 15.04 $ 11.79 $ 11.47
=============== =========== ============
CLASS D:
Net Assets......................................................... $ 14,960 $ 6,211 --
--------------- ------------ ------------
Shares Outstanding................................................. 1,044 552 --
--------------- ------------ ------------
Net Asset Value, offering and redemption value per share (net
assets/shares
outstanding)..................................................... $ 14.33 $ 11.25 --
=============== =========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 131
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE
MID-CAP NORTH AMERICAN
GROWTH FUND GROWTH FUND
----------- --------------
<S> <C> <C>
ASSETS:
Investment in securities, at value (cost $1,284,178, $1,935,729,
respectively)................................................................ $1,449,144 $2,389,400
Cash........................................................................... 52,635 343,800
Receivable for fund shares sold................................................ -- 10,453
Dividends receivable........................................................... 738 1,361
----------- --------------
Total assets................................................................. 1,502,517 2,745,014
----------- --------------
LIABILITIES:
Payable for investment securities purchased.................................... -- 205,459
Payable for fund shares redeemed............................................... 3,393 --
----------- --------------
Total liabilities............................................................ 3,393 205,459
----------- --------------
NET ASSETS....................................................................... $1,499,124 $2,539,555
=========== =============
NET ASSETS CONSIST OF (NOTE 1):
Capital Stock (Par Value $.001 per share)...................................... $ 124 $ 207
Additional paid in capital..................................................... 1,334,034 2,169,202
Accumulated net realized loss on investments................................... -- (83,525)
Net unrealized appreciation on investments..................................... 164,966 453,671
----------- --------------
NET ASSETS, at value, applicable to Shares of Beneficial Interest outstanding
(Note 5)....................................................................... $1,499,124 $2,539,555
----------- --------------
CLASS A:
Net Assets..................................................................... $1,494,616 $ 131,226
----------- --------------
Shares Outstanding............................................................. 123,683 10,681
----------- --------------
Net Asset Value and redemption value per share (net assets/shares
outstanding)................................................................. $ 12.08 $ 12.29
=========== =============
Maximum offering price per share (net asset value plus sales charge of 4.50% of
offering price).............................................................. $ 12.65 $ 12.87
=========== =============
CLASS D:
Net Assets..................................................................... $ 4,508 $2,408,329
----------- --------------
Shares Outstanding............................................................. *374 196,199
----------- --------------
Net Asset Value, offering and redemption value per share (net assets/shares
outstanding)................................................................. $ 12.07 $ 12.27
=========== =============
</TABLE>
- ---------------
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 132
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
RESERVE
GROWTH AND
RESERVE RESERVE INCOME FUND RESERVE
BLUE CHIP EMERGING ---------------- INFORMED INVESTORS
GROWTH FUND GROWTH FUND JANUARY 2, 1996 GROWTH FUND
------------ ------------ (COMMENCEMENT OF ------------------
YEAR ENDED YEAR ENDED OPERATIONS) TO YEAR ENDED
MAY 31, 1996 MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends..................................... $ 29,978 $ 1,869 $ 10,672 $ 8,787
Interest...................................... -- -- 4,124 8,626
------------ ------------ -------- ------------------
Total investment income................... 29,978 1,869 14,796 17,413
EXPENSES
Comprehensive fee (Note 3).................... 55,581 51,177 4,527 141,751
12b-1 Fee (Note 4)
Class A..................................... 9,247 8,481 754 23,619
Class D..................................... 66 191 -- 26
------------ ------------ -------- ------------------
Total expenses............................ 64,894 59,849 5,281 165,396
------------ ------------ -------- ------------------
NET INVESTMENT INCOME (LOSS).................... (34,916) (57,980) 9,515 (147,983)
------------ ------------ -------- ------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Proceeds from sales of securities............. 2,573,864 1,201,292 28,149 13,684,285
Cost of securities sold....................... 2,575,909 1,120,746 28,260 12,834,099
------------ ------------ -------- ------------------
Net realized gain (loss) on investments (Note
1).......................................... (2,045) 80,546 (111) 850,186
Net unrealized appreciation on investments.... 975,733 1,655,638 4,277 1,109,280
------------ ------------ -------- ------------------
Net realized and unrealized gain on
investments................................. 973,688 1,736,184 4,166 1,959,466
------------ ------------ -------- ------------------
Net increase in net assets resulting from
operations.................................. $ 938,772 $1,678,204 $ 13,681 $ 1,811,483
============ ============ ================= ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 133
THE RESERVE PRIVATE EQUITY SERIES
STATEMENT OF OPERATIONS--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE
INTERNATIONAL RESERVE
EQUITY FUND LARGE-CAP
---------------- VALUE FUND RESERVE RESERVE
JULY 13, 1995 --------------- MID-CAP NORTH AMERICAN
(COMMENCEMENT JANUARY 2, 1996 GROWTH FUND GROWTH FUND
OF OPERATIONS) (COMMENCEMENT ------------ --------------
TO OF OPERATIONS) YEAR ENDED YEAR ENDED
MAY 31, 1996 TO MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
---------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends....................................... $ 18,854* $ 4,796 $ 1,923 $ 8,135
Interest........................................ 1,688 -- -- --
---------------- --------------- ------------ --------------
Total investment income....................... 20,542 4,796 1,923 8,135
EXPENSES
Comprehensive fee (Note 3)...................... 33,158 5,046 22,987 24,506
12b-1 Fee (Note 4)
Class A....................................... 4,734 841 3,830 17
Class D....................................... 12 -- 5 16,268
---------------- --------------- ------------ --------------
Total expenses.................................... 37,904 5,887 26,822 40,791
Less fees waived.............................. (217) -- -- --
---------------- --------------- ------------ --------------
Net Expenses.................................. 37,687 5,887 26,822 40,791
---------------- --------------- ------------ --------------
NET INVESTMENT LOSS............................... (17,145) (1,091) (24,899) (32,656)
---------------- --------------- ------------ --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales of securities............... 1,374,797 -- 3,071,543 1,272,486
Cost of securities sold......................... 1,446,765 -- 3,054,352 1,356,011
---------------- --------------- ------------ --------------
Net realized gain (loss) on investments and
foreign currency transactions (Note 1)........ (71,968) -- 17,191 (83,525)
Net unrealized appreciation on investments and
foreign currency transactions................. 331,022 70,123 164,966 453,671
---------------- --------------- ------------ --------------
Net realized and unrealized gain on investments
and foreign currency transactions............. 259,054 70,123 182,157 370,146
---------------- --------------- ------------ --------------
Net increase in net assets resulting from
operations.................................... $ 241,909 $69,032 $ 157,258 $ 337,490
=============== ============== ============ =============
</TABLE>
- ---------------
* Net of foreign taxes withheld of $1,774
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE> 134
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVE GROWTH
RESERVE BLUE CHIP GROWTH FUND AND INCOME FUND
-------------------------------- ----------------
OCTOBER 28, 1994 JANUARY 2, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment income (loss).................................. $ (34,916) $ (5,361) $ 9,515
Net realized gain (loss) from investments..................... (2,045) 92,552 (111)
Net unrealized appreciation from investments.................. 975,733 168,862 4,277
------------ ---------------- ----------------
Net increase in net assets resulting from operations.......... 938,772 256,053 13,681
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A....................................... (164,889) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares............................. 2,757,098 2,257,822 1,044,319
Reinvestment of distributions................................. 164,889 -- --
Cost of shares redeemed....................................... (517,167) (520,420) (5,844)
------------ ---------------- ----------------
Net increase in net assets resulting from capital share
transactions................................................ 2,404,820 1,737,402 1,038,475
------------ ---------------- ----------------
Net increase in net assets.................................... 3,178,703 1,993,455 1,052,156
NET ASSETS:
Beginning of period........................................... 1,993,455 -- --
------------ ---------------- ----------------
End of period (including undistributed net investment income
of $0, $0, and $9,515, respectively)........................ $5,172,158 $1,993,455 $1,052,156
============ ================= =================
</TABLE>
<TABLE>
<CAPTION>
RESERVE
RESERVE EMERGING GROWTH FUND INTERNATIONAL
-------------------------------- EQUITY FUND
NOVEMBER 14, ----------------
1994 JULY 13, 1995
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss........................................... $ (57,980) $ (9,569) $ (17,145)
Net realized gain (loss) from investments and foreign currency
transactions................................................ 80,546 65,542 (71,968)
Net unrealized appreciation from investments and foreign
currency transactions....................................... 1,655,638 167,897 331,022
------------ ---------------- ----------------
Net increase in net assets resulting from operations.......... 1,678,204 223,870 241,909
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A....................................... (93,899) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares............................. 4,281,980 2,268,282 3,465,234
Reinvestment of distributions................................. 93,770 -- --
Cost of shares redeemed....................................... (301,485) (1,251,282) (122,619)
------------ ---------------- ----------------
Net increase in net assets resulting from capital share
transactions................................................ 4,074,265 1,017,000 3,342,615
------------ ---------------- ----------------
Net increase in net assets.................................... 5,658,570 1,240,870 3,584,524
NET ASSETS:
Beginning of period........................................... 1,240,870 -- --
------------ ---------------- ----------------
End of period................................................. $6,899,440 $1,240,870 $3,584,524
============ ================= =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> 135
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE INFORMED RESERVE
INVESTORS GROWTH FUND LARGE-CAP VALUE
-------------------------------- FUND
DECEMBER 28, ----------------
1994 JANUARY 2, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss....................................... $ (147,983) $ (38,948) $ (1,091)
Net realized gain (loss) from investments................. 850,186 (220,490) --
Net unrealized appreciation from investments.............. 1,109,280 1,330,859 70,123
------------ ---------------- ----------------
Net increase in net assets resulting from operations...... 1,811,483 1,071,421 69,032
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A................................... (795,337) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares......................... 6,254,939 6,422,521 1,165,180
Reinvestment of distributions............................. 790,060 -- --
Cost of shares redeemed................................... (8,490,282) (656,742) (3,152)
------------ ---------------- ----------------
Net increase (decrease) in net assets resulting from
capital share transactions.............................. (1,445,283) 5,765,779 1,162,028
------------ ---------------- ----------------
Net increase (decrease) in net assets..................... (429,137) 6,837,200 1,231,060
NET ASSETS:
Beginning of period....................................... 6,837,200 -- --
------------ ---------------- ----------------
End of period............................................. $6,408,063 $6,837,200 $1,231,060
============ ================= =================
</TABLE>
<TABLE>
<CAPTION>
RESERVE RESERVE
MID-CAP NORTH AMERICAN
GROWTH FUND GROWTH FUND
--------------- --------------
YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1996
--------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss......................................................... $ (24,899) $ (32,656)
Net realized gain (loss) from investments................................... 17,191 (83,525)
Net unrealized appreciation from investments................................ 164,966 453,671
--------------- --------------
Net increase in net assets resulting from operations........................ 157,258 337,490
--------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares........................................... 2,008,337 2,345,759
Cost of shares redeemed..................................................... (666,471) (143,694)
--------------- --------------
Net increase in net assets resulting from capital share transactions........ 1,341,866 2,202,065
--------------- --------------
Net increase in net assets.................................................. 1,499,124 2,539,555
NET ASSETS:
Beginning of period......................................................... -- --
--------------- --------------
End of period............................................................... $ 1,499,124 $2,539,555
============== =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE> 136
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reserve Private Equity Series (the "Trust") consists of the following
funds: Reserve Blue Chip Growth Fund, Reserve Emerging Growth Fund, Reserve
Growth and Income Fund, Reserve Informed Investors Growth Fund, Reserve
International Equity Fund, Reserve Large-Cap Value Fund, Reserve Mid-Cap
Growth Fund, and Reserve North American Growth Fund. The Trust was formed
under Delaware law as a Delaware business trust. The Trust is registered
under the Investment Company Act of 1940, as amended, as a non-diversified
open-end management investment company. There are an unlimited number of
shares of beneficial interest of $.001 par value authorized in each series.
The Trust offers both Class A and Class D shares of each Fund. Class A shares
are sold with an initial sales charge and Class D shares are sold without an
initial sales charge. Both classes of shares have identical voting, dividend,
liquidation and other rights, and the same terms and conditions, except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan.
The accounting policies summarized below are consistently followed in
preparation of the financial statements in conformity with generally accepted
accounting principles.
SECURITY VALUATION
Portfolio securities are stated at value. A security listed or traded on an
exchange is valued at its last sale price on the exchange where the security
is principally traded or, lacking any sales on a particular day, the security
is valued at the mean between the closing bid and asked prices on that day.
Each security traded in the over-the-counter market is valued at the mean
between its quoted bid and asked prices. Where market quotations are not
readily available, the securities are valued at their fair value as
determined in good faith by or under direction of the Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date. Dividend income and
distributions to shareholders are recorded on the ex-dividend dates. Interest
income is accrued daily. Realized gains and losses from securities
transactions and unrealized appreciation or depreciation of securities are
reported on the identified cost basis for both financial statement and
federal income tax purposes.
Income and capital gain distributions are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for net operating losses and the recognition of net realized gains
and losses. Accordingly, the effect of differing financial reporting and
federal income tax treatments have been reclassified among the components of
net assets at May 31, 1996 as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
----------------------------------------
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT REALIZED
CAPITAL INCOME GAIN (LOSS)
------- -------------- -----------
<S> <C> <C> <C>
Reserve Blue Chip Growth Fund......................................... 5,361 34,916 (40,277)
Reserve Emerging Growth Fund.......................................... 4,689 57,980 (62,669)
Reserve Informed Investors Growth Fund................................ -- 147,983 (147,983)
Reserve International Equity Fund..................................... (17,145) 17,145 --
Reserve Large-Cap Value Equity Fund................................... (1,091) 1,091 --
Reserve Mid-Cap Growth Fund........................................... (7,708) 24,899 (17,191)
Reserve North American Growth Fund.................................... (32,656) 32,656 --
</TABLE>
These reclassifications had no effect on net investment income, net realized
gain on investments, or net assets for the year ended May 31, 1996.
FOREIGN CURRENCY TRANSLATION
With respect to the Reserve International Equity Fund, assets and liabilities
denominated in a foreign currency are translated into U.S. dollars using
exchange rates on the valuation date. Purchases and sales of securities,
expense payments and income receipts are translated into U.S. dollars using
the exchange rate on the transaction date. The Trust does not segregate that
portion of the results of operations resulting from changes in foreign
exchange rates from the portion resulting from changes in market prices of
securities held; both are included in net realized and unrealized gains or
losses on investments and foreign currency transactions.
33
<PAGE> 137
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
FEDERAL INCOME TAXES
It is the Trust's policy for each Fund to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended, by
complying with the requirements of the Internal Revenue Code applicable to
regulated investment companies, and to distribute substantially all of its
taxable income, including net realized capital gains to its shareholders.
Accordingly, no federal income tax provision is required.
For federal income tax purposes, the following Funds indicated below had
capital loss carryforwards at May 31, 1996, which are available to offset
future realized capital gains, if any:
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
CARRYFORWARD YEAR
------------ -----------
<S> <C> <C>
Reserve Growth and Income Fund..................................................... $ 111 2004
Reserve International Equity Fund.................................................. 71,968 2004
Reserve North American Growth Fund................................................. 83,525 2004
</TABLE>
2. INVESTMENT ACTIVITY
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the period ended May 31, 1996, were as
follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
RESERVE FUND PURCHASES SALES
------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Blue Chip Growth Fund.......................................................... $ 4,629,931 $ 2,573,982
Emerging Growth Fund........................................................... 4,850,242 1,201,292
Growth and Income Fund......................................................... 822,642 28,263
Informed Investors Growth Fund................................................. 11,122,332 13,684,285
International Equity Fund...................................................... 4,384,944 1,368,647
Large-Cap Value Fund........................................................... 1,115,010 --
Mid-Cap Growth Fund............................................................ 4,338,530 3,071,543
North American Growth Fund..................................................... 3,291,738 1,272,486
</TABLE>
3. INVESTMENT MANAGEMENT AGREEMENT
Reserve Management Company, Inc. (RMCI), serves as the Funds' investment
adviser and pays substantially all ordinary operating expenses of the Funds
for which it receives a comprehensive fee at an annual rate of 1.50% of the
average daily net assets of each Fund other than the International Equity
Fund for which it receives 1.75%. RMCI is currently waiving a portion of its
comprehensive fee.
For each Fund, RMCI has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with the Sub-Advisers. It is the responsibility of a
Sub-Adviser to make the day-to-day investment decision of the Funds and to
place the purchase and sales orders for securities transactions, subject in
all cases to the general supervision of RMCI. For services under each
Subadvisory Agreement, RMCI pays a fee up to an annual rate equal to the
percentages specified in the table below of the corresponding Funds' average
net assets.
<TABLE>
<CAPTION>
SUB-ADVISER'S
RESERVE FUND PORTFOLIO SUB-ADVISER FEE
----------------------------------------- ------------------------------------------------- -------------
<S> <C> <C>
Blue Chip Growth Fund Trainer, Wortham & Company, Inc. 0.75%
Emerging Growth Fund Roanoke, Asset Management Corp. 0.75%
Growth and Income Fund Kenneth J. Gerbino & Company 0.75%
Informed Investors Growth Fund T. H. Fitzgerald & Company 0.75%
International Equity Fund Pinnacle Associates Limited 0.875%
Large-Cap Value Fund Siphron Capital Management 0.75%
Mid-Cap Growth Fund Cambridge Equity Advisors (6/1/95-4/18/96) 0.75%
Southern Capital Advisors (4/19/96-5/31/96) 0.75%
North American Growth Fund Southern Capital Advisors 0.75%
</TABLE>
Trainer, Wortham & Company, Inc. owns 33% of the outstanding shares of the
Reserve Blue Chip Growth Fund at May 31, 1996.
34
<PAGE> 138
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
4. DISTRIBUTION ASSISTANCE
Pursuant to a Distribution Plan under Rule 12b-1, the Funds will make
payments to Resrv Partners, Inc. (RPI), the Funds' distributor of .25% per
annum for Class A and 1.00% per annum for Class D of the average daily net
assets of shareholder accounts as to which the payee has rendered
distribution assistance. During the period, the Funds paid distribution
expenses to RPI as follows:
<TABLE>
<CAPTION>
RESERVE FUND CLASS A CLASS D
------------------------------------------------------------------------------------- ------- -------
<S> <C> <C>
Blue Chip Growth Fund................................................................ $ 9,247 $ 66
Emerging Growth Fund................................................................. 8,481 192
Growth and Income Fund............................................................... 754 0
Informed Investors Growth Fund....................................................... 23,619 26
International Equity Fund............................................................ 4,734 12
Large-Cap Value Fund................................................................. 841 0
Mid-Cap Growth Fund.................................................................. 3,830 5
North American Growth Fund........................................................... 17 16,268
</TABLE>
As of May 31, 1996, RPI owned 4%, 24%, 31%, 21%, 6%, and 24% of the Reserve
Emerging Growth Fund, Reserve Growth and Income Fund, Reserve International
Equity Fund, Reserve Large-Cap Value Fund, Reserve Mid-Cap Growth Fund and
Reserve North American Growth Fund, respectively.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock of each Fund for the period ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- -----------------
FEBRUARY 13, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
--------------------- -----------------
RESERVE BLUE CHIP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------- ------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold............................................................... 203,145 $2,716,393 2,865 $40,705
Reinvested......................................................... 12,752 164,889 -- --
Redeemed........................................................... (37,574) (517,167) -- --
------- ---------- ------ -------
Net increase....................................................... 178,323 $2,364,115 2,865 $40,705
======== ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ------------------
FEBRUARY 26, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
--------------------- ------------------
RESERVE EMERGING GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------- ------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold................................................................ 251,367 $4,052,411 12,448 $229,569
Reinvested.......................................................... 5,916 93,770 -- --
Redeemed............................................................ (18,653) (301,485) -- --
------- ---------- ------ --------
Net increase........................................................ 238,630 $3,844,696 12,448 $229,569
======== ========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MAY 13, 1996
JANUARY 2, 1996 (COMMENCEMENT
(COMMENCEMENT OF OPERATIONS)
OF OPERATIONS) TO TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE GROWTH AND INCOME FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold................................................................ 103,914 $1,042,819 147 $1,500
Redeemed............................................................ (573) (5,844) -- --
------- ---------- ------ ------
Net increase........................................................ 103,341 $1,036,975 147 $1,500
======== ========== ====== ======
</TABLE>
35
<PAGE> 139
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
----------------------- ------------------
FEBRUARY 13, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
----------------------- ------------------
RESERVE INFORMED INVESTORS GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- -------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold............................................................. 458,428 $ 6,230,788 1,953 $ 24,151
Reinvested....................................................... 56,312 790,060 -- --
Redeemed......................................................... (639,631) (8,479,206) (909) (11,076)
-------- ----------- ------ --------
Net increase..................................................... (124,891) $(1,458,358) 1,044 $ 13,075
========= ============ ====== =========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MARCH 11, 1996
JULY 13, 1995 (COMMENCEMENT
(COMMENCEMENT OF OPERATIONS)
OF OPERATIONS) TO TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE INTERNATIONAL EQUITY FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold............................................................. 329,964 $3,459,234 552 $6,000
Redeemed......................................................... (12,037) (122,619) -- --
------- ---------- ------ ------
Net increase..................................................... 317,927 $3,336,615 552 $6,000
======== ========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CLASS A
---------------------
JANUARY 2, 1996
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1996
---------------------
RESERVE LARGE-CAP VALUE FUND SHARES AMOUNT
- ----------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................. 112,729 $1,165,180
Redeemed......................................................... (292) (3,152)
------- ----------
Net increase..................................................... 112,437 $1,162,028
======== ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MARCH 29, 1996
(COMMENCEMENT
OF OPERATIONS)
YEAR ENDED TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE MID-CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold............................................................. 183,603 $2,004,087 374 $4,250
Redeemed......................................................... (59,920) (666,471) -- --
------- ---------- ------ ------
Net increase..................................................... 123,683 $1,337,616 374 $4,250
======== ========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
------------------ ---------------------
MARCH 13, 1996
(COMMENCEMENT
OF OPERATIONS) TO YEAR ENDED
MAY 31, 1996 MAY 31, 1996
------------------ ---------------------
RESERVE NORTH AMERICAN GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------ -------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................................................. 11,491 $139,077 207,997 $2,206,682
Redeemed......................................................... (810) (10,000) (11,798) (133,694)
------ -------- ------- ----------
Net increase..................................................... 10,681 $129,077 196,199 $2,072,988
====== ========= ======== ==========
</TABLE>
36
<PAGE> 140
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
Transactions in capital stock of each Fund for the period ended May 31, 1995,
were as follows:
<TABLE>
<CAPTION>
OCTOBER 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
-----------------------
RESERVE BLUE CHIP GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................................... 214,923 $2,257,822
Redeemed........................................................................... (49,164) (520,420)
------- ----------
Net increase....................................................................... 165,759 $1,737,402
======== ==========
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 14, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
------------------------
RESERVE EMERGING GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- -------- ----------
<S> <C> <C>
Sold............................................................................... 218,209 $2,268,282
Redeemed........................................................................... (116,596) (1,251,282)
-------- ----------
Net increase....................................................................... 101,613 $1,017,000
========= ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
-----------------------
RESERVE INFORMED INVESTORS GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................................... 634,326 $6,422,521
Redeemed........................................................................... (64,254) (656,742)
------- ----------
Net increase....................................................................... 570,072 $5,765,779
======== ==========
</TABLE>
6. MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
37
<PAGE> 141
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31,
1996--(CONTINUED)
7. SUPPLEMENTARY INFORMATION (FOR EACH SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
CLASS D
CLASS A ----------------
-------------------------------- FEBRUARY 13,
OCTOBER 28, 1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE BLUE CHIP GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $12.03 $10.00 $13.49
------ ------ ------
Income from investment operations
Net investment loss....................................... (.10) (.03) (.04)
Net realized and unrealized gain.......................... 3.62 2.06 1.43
------ ------ ------
Total from investment operations............................ 3.52 2.03 1.39
Less distribution from net realized gain.................... (.64) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $14.91 $12.03 $14.88
====== ====== ======
Total Return................................................ 30.10% 20.30%(2) 10.30%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $5,130 $1,993 $ 43
Ratio of expenses to average net assets before waiver....... 1.75% 1.75%(1) 2.50%(1)
Ratio of expenses to average net assets, net of waiver...... 1.75% 1.73%(1) 2.50%(1)
Ratio of net investment loss to average net assets, before
waiver.................................................... (0.94)% (0.72)%(1) (1.70)%(1)
Ratio of net investment loss to average net assets, net of
waiver.................................................... (0.94)% (0.70)%(1) (1.70)%(1)
Portfolio turnover rate..................................... 72% 68% 72%
Average commission per share on Macromedia portfolio
transactions.............................................. $ 0.06 N/A $ 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
-------------------------------- ----------------
NOVEMBER 14, FEBRUARY 26,
1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE EMERGING GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $12.21 $10.00 $16.88
------ ------ ------
Income from investment operations
Net investment loss....................................... (.17) (.09) (.04)
Net realized and unrealized gain.......................... 8.05 2.30 2.68
------ ------ ------
Total from investment operations............................ 7.88 2.21 2.64
Less distribution from net realized gain.................... (0.53) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $19.56 $12.21 $19.52
====== ====== ======
Total Return................................................ 65.55% 22.10%(2) 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $6,657 $1,241 $ 243
Ratio of expenses to average net assets..................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets.......... (1.70)% (1.62)%(1) (2.48)%(1)
Portfolio turnover rate..................................... 38% 43% 38%
Average commission per share on portfolio transactions...... $ 0.01 N/A $ 0.01
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
38
<PAGE> 142
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JANUARY 2, 1996 MAY 13, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE GROWTH AND INCOME FUND MAY 31, 1996 MAY 31, 1996
- ------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period..................................... $10.00 $10.19
------ ------
Income from investment operations
Net investment income (loss)........................................... 0.09 0.00
Net realized and unrealized gain (loss)................................ 0.08 (0.02)
------ ------
Total from investment operations......................................... 0.17 (0.02)
------ ------
NET ASSET VALUE, end of period........................................... $10.17 $10.17
====== ======
Total Return............................................................. 1.70%(2) (0.2)%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................................... $1,051 $ 1
Ratio of expenses to average net assets.................................. 1.75%(1) 2.23%(1)
Ratio of net investment income to average net assets..................... 3.15%(1) 0.00%(1)
Portfolio turnover rate.................................................. 17% 17%
Average commission per share on portfolio transactions................... $ 0.08 $ 0.08
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JULY 13, 1995 MARCH 11, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE INTERNATIONAL EQUITY FUND MAY 31, 1996 MAY 31, 1996
- ------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period..................................... $10.00 $10.79
------ ------
Income from investment operations
Net investment loss.................................................... (0.05) (0.01)
Net realized and unrealized gain....................................... 1.31 0.47
------ ------
Total from investment operations......................................... 1.26 0.46
------ ------
NET ASSET VALUE, end of period........................................... $11.26 $11.25
====== ======
Total Return............................................................. 12.60%(2) 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................................... $3,578 $ 6
Ratio of expenses to average net assets before waiver.................... 2.00%(1) 2.75%(1)
Ratio of expenses to average net assets, net of waiver................... 1.99%(1) 2.75%(1)
Ratio of net investment loss to average net assets, before waiver........ (0.92)%(1) (0.70)%(1)
Ratio of net investment loss to average net assets, net of waiver........ (0.91)%(1) (0.70)%(1)
Portfolio turnover rate.................................................. 70% 70%
Average commission per share on portfolio transactions................... $ 0.02 $ 0.02
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
39
<PAGE> 143
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------------------- ----------------
DECEMBER 28, 1994 MARCH 22, 1996
(COMMENCEMENT (COMMENCEMENT OF
YEAR ENDED OF OPERATIONS) TO OPERATIONS) TO
RESERVE INFORMED INVESTORS GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ----------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $11.99 $ 10.00 $12.29
------ ------ ------
Income from investment operations
Net investment loss....................................... (0.33) (.07) (.06)
Net realized and unrealized gain.......................... 3.87 2.06 2.10
------ ------ ------
Total from investment operations............................ 3.54 1.99 2.04
Less distribution from net realized gain.................... (1.17) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $14.36 $ 11.99 $14.33
====== ====== ======
Total Return................................................ 29.75% 19.90%(2) 16.60%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $6,393 $ 6,837 $ 15
Ratio of expenses to average net assets..................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets.......... (1.57)% (1.62)%(1) (2.32)%(1)
Portfolio turnover rate..................................... 132% 59% 132%
Average commission per share on portfolio transactions...... $ 0.05 N/A $ 0.05
</TABLE>
<TABLE>
<CAPTION>
CLASS A
----------------
JANUARY 2, 1996
(COMMENCEMENT OF
OPERATIONS) TO
RESERVE LARGE-CAP VALUE FUND MAY 31, 1996
- ------------------------------------------------------------------------------------------ ----------------
<S> <C>
NET ASSET VALUE, beginning of period...................................................... $10.00
------
Income from investment operations
Net investment loss..................................................................... (0.01)
Net realized and unrealized gain........................................................ 0.96
------
Total from investment operations.......................................................... 0.95
------
NET ASSET VALUE, end of period............................................................ $10.95
======
Total Return.............................................................................. 9.50%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period.................................................... $1,231
Ratio of expenses to average net assets................................................... 1.75%(1)
Ratio of net investment loss to average net assets........................................ (0.32)%(1)
Portfolio turnover rate................................................................... 0%
Average commission per share on portfolio transactions.................................... $ 0.08
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
40
<PAGE> 144
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
------------ ----------------
MARCH 29, 1996
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
RESERVE MID-CAP GROWTH FUND MAY 31, 1996 MAY 31, 1996
- ----------------------------------------------------------------------------- ------------ ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period......................................... $10.00 $11.03
------ ------
Income from investment operations
Net investment loss........................................................ (.20) (.03)
Net realized and unrealized gain........................................... 2.28 1.07
------ ------
Total from investment operations............................................. 2.08 1.04
------ ------
NET ASSET VALUE, end of period............................................... $12.08 $12.07
====== ======
Total Return................................................................. 20.80% 9.43%(2)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period....................................... $1,495 $ 5
Ratio of expenses to average net assets...................................... 1.75% 2.50%(1)
Ratio of net investment loss to average net assets........................... (1.62)% (2.04)%
Portfolio turnover rate...................................................... 225% 225%
Average commission per share on portfolio transactions....................... $ 0.06 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ------------
MARCH 13, 1996
(COMMENCEMENT OF
OPERATIONS) TO YEAR ENDED
RESERVE NORTH AMERICAN GROWTH FUND MAY 31, 1996 MAY 31, 1996
- ----------------------------------------------------------------------------- ---------------- ------------
<S> <C> <C>
NET ASSET VALUE, beginning of period......................................... $10.94 $10.00
------ ------
Income from investment operations
Net investment loss........................................................ (0.01) (0.17)
Net realized and unrealized gain........................................... 1.36 2.44
------ ------
Total from investment operations............................................. 1.35 2.27
------ ------
NET ASSET VALUE, end of period............................................... $12.29 $12.27
====== ======
Total Return................................................................. 12.34%(2) 22.70%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period....................................... $ 131 $2,408
Ratio of expenses to average net assets...................................... 1.74%(1) 2.49%(1)
Ratio of net investment loss to average net assets........................... (0.97)%(1) (2.00)%(1)
Portfolio turnover rate...................................................... 85% 85%
Average commission per share on portfolio transactions....................... $ 0.04 $ 0.04
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
41
<PAGE> 145
THE RESERVE PRIVATE EQUITY SERIES--RESERVE BLUE CHIP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BANKS (3.5%)
Banc One Corporation................................................................. 4,850 $ 179,450
----------
BUSINESS EQUIPMENT (3.0%)
Xerox Corporation.................................................................... 1,000 157,375
----------
COMPUTER NETWORKING (3.4%)
Cisco Systems, Inc.*................................................................. 3,200 175,200
----------
COMPUTER SOFTWARE (11.8%)
CUC International, Inc.*............................................................. 5,000 203,500
Microsoft Corporation*............................................................... 1,500 178,125
National Data Corporation............................................................ 6,000 226,500
----------
608,125
----------
ELECTRICAL EQUIPMENT (1.9%)
American Superconductor Corporation*................................................. 7,000 98,000
----------
ELECTRONICS (3.5%)
Perceptron, Inc.*.................................................................... 5,000 180,625
----------
FINANCIAL SERVICES (3.6%)
Citicorp............................................................................. 2,200 184,800
----------
MEDICAL SUPPLIES (2.2%)
LaserSight Corporation*.............................................................. 10,000 115,000
----------
MISCELLANEOUS MANUFACTURING (4.4%)
Warnaco Group, Inc. ................................................................. 8,000 227,000
----------
MULTI-LINE INSURANCE (4.5%)
American International Group, Inc. .................................................. 2,500 235,625
----------
OIL/GAS EQUIPMENT SERVICES (9.0%)
Petroleum Geo-Services--ADR*......................................................... 7,000 214,375
Schlumberger, Ltd. .................................................................. 3,000 250,125
----------
464,500
----------
PACKAGED SOFTWARE (2.8%)
Computer Associates International, Inc. ............................................. 2,000 145,500
----------
PHARMACEUTICALS (8.8%)
Johnson & Johnson.................................................................... 2,000 194,750
Eli Lilly & Company.................................................................. 1,000 64,250
Merck & Company, Inc. ............................................................... 3,000 193,875
----------
452,875
----------
PUBLISHING (5.3%)
Harte-Hanks Communications........................................................... 10,500 276,938
----------
PUBLISHING--NEWSPAPERS (2.8%)
Tribune Company...................................................................... 2,000 148,250
----------
REAL ESTATE (4.5%)
Insignia Financial Group, Inc. Class A*.............................................. 9,000 234,000
----------
RETAIL SPECIALTY (3.0%)
Home Depot, Inc. .................................................................... 3,000 153,375
----------
</TABLE>
10
<PAGE> 146
THE RESERVE PRIVATE EQUITY SERIES--RESERVE BLUE CHIP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
SPECIAL INDUSTRIAL MACHINERY (6.2%)
Thermo Electron Corporation*......................................................... 5,000 $ 318,750
----------
TELECOMMUNICATIONS (4.0%)
CommNet Cellular, Inc.*.............................................................. 6,000 206,250
----------
TELECOMMUNICATIONS EQUIPMENT (6.7%)
Glenayre Technologies, Inc.*......................................................... 7,075 348,443
----------
TOTAL COMMON STOCKS (Cost $3,765,486) (94.9%).......................................... 4,910,081
Other assets, less liabilities (5.1%).................................................. 262,077
----------
NET ASSETS (100%)...................................................................... $5,172,158
==========
</TABLE>
- ------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $3,765,486, the aggregate gross unrealized appreciation for all
investments was $1,159,820 and aggregate gross unrealized depreciation for all
investments was $15,225.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BIO-TECHNOLOGY (3.3%)
Alliance Pharmaceutical Corporation*.................................................. 4,000 $ 86,500
Genzyme Corporation*.................................................................. 2,400 139,800
----------
226,300
----------
CAPITAL GOODS -- DIVERSIFIED (1.8%)
Danaher Corporation................................................................... 3,000 124,500
----------
CAPITAL GOODS/INDUSTRIAL (1.5%)
Vishay Intertechnology, Inc.*......................................................... 3,654 100,943
----------
COMMUNICATION -- EQUIPMENT (5.1%)
ANADIGICS, Inc.*...................................................................... 3,000 79,500
ECI Telecommunications Ltd. Designs................................................... 5,000 132,500
FORE Systems, Inc.*................................................................... 1,700 137,700
----------
349,700
----------
COMMUNICATION -- NETWORK (8.8%)
Heartland Wireless Communications, Inc.*.............................................. 3,500 94,500
IntelCom Group Inc.*.................................................................. 5,000 132,500
Pairgain Technologies, Inc.*.......................................................... 1,500 152,625
People's Choice TV Corporation*....................................................... 4,000 68,000
Wireless One, Inc.*................................................................... 8,500 157,250
----------
604,875
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 147
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
COMPUTER NETWORKING (8.7%)
Ascend Communications, Inc.*.......................................................... 3,600 $ 240,750
Bay Networks Inc.*.................................................................... 1,950 56,550
Shiva Corporation*.................................................................... 2,400 179,400
3Com Corporation*..................................................................... 2,500 123,125
----------
599,825
----------
COMPUTER SOFTWARE (11.0%)
Business Objects S. A. -- ADR*........................................................ 2,000 93,000
Data Translation, Inc.*............................................................... 8,000 212,000
Dendrite International, Inc.*......................................................... 3,500 95,375
Edify Corporation*.................................................................... 1,000 42,000
EPIC Design Technology, Inc.*......................................................... 3,000 88,500
Fractal Design Corp.*................................................................. 5,000 77,500
Oacis Healthcare Holding Corp.*....................................................... 3,000 49,500
Sapient Corporation*.................................................................. 2,000 100,000
----------
757,875
----------
CONSUMER GROWTH (3.8%)
Activision, Inc.*..................................................................... 5,000 68,125
Conso Products Company*............................................................... 5,750 100,625
Electronic Arts, Inc.*................................................................ 1,200 37,950
Lin Television Corporation*........................................................... 1,700 54,400
----------
261,100
----------
ELECTRIC MEASUREMENT & TESTING INSTRUMENTS (1.4%)
Opal, Inc.*........................................................................... 5,500 100,375
----------
ENERGY (1.8%)
Cross Timbers Oil Company............................................................. 5,500 123,062
----------
HEALTH (5.6%)
HCIA, Inc.*........................................................................... 2,300 148,925
National Dentex Corporation*.......................................................... 6,000 138,000
PacifiCare Health Systems, Inc.*...................................................... 1,200 99,300
----------
386,225
----------
MANAGED CARE (4.8%)
Healthsource, Inc.*................................................................... 4,000 90,500
MedPartners/Mullikin, Inc.*........................................................... 4,500 105,188
PhyCor, Inc.*......................................................................... 2,525 136,981
----------
332,669
----------
MISCELLANEOUS CONSUMER (1.4%)
On Assignment, Inc.*.................................................................. 2,500 100,625
----------
OFFICE-BUSINESS EQUIPMENT (1.3%)
HPR Inc.*............................................................................. 4,000 93,000
----------
PAPER (1.1%)
Data Documents, Inc.*................................................................. 6,000 76,500
----------
</TABLE>
12
<PAGE> 148
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
PHARMACEUTICALS (3.4%)
Centocor, Inc.*....................................................................... 3,200 $ 113,200
Dura Pharmaceuticals, Inc.*........................................................... 2,000 123,250
----------
236,450
----------
RADIO, TV & BROADCAST COMM. EQUIP. (1.5%)
American Telecasting, Inc.*........................................................... 7,500 105,937
----------
RESTAURANTS (3.2%)
Cheesecake Factory (The)*............................................................. 2,500 66,250
Outback Steakhouse, Inc.*............................................................. 3,000 113,625
Volunteer Capital Corporation*........................................................ 4,000 43,500
----------
223,375
----------
RETAIL -- SPECIALTY (8.1%)
Borders Group, Inc.*.................................................................. 4,500 147,375
PetSmart, Inc.*....................................................................... 3,000 133,500
Staples, Inc.*........................................................................ 6,325 126,500
The Sports Authority, Inc.*........................................................... 5,000 148,750
----------
556,125
----------
SEMICONDUCTOR-RELATED DEVICE (5.2%)
Credence Systems Corporation*......................................................... 2,500 50,625
Intel Corporation..................................................................... 1,800 135,900
KLA Instruments Corporation*.......................................................... 3,000 81,000
LSI Logic Corporation*................................................................ 3,000 93,375
----------
360,900
----------
SYSTEM SOFTWARE/CLIENT SERVER (4.0%)
Hummingbird Communications Ltd.*...................................................... 3,400 138,125
Informix Corporation*................................................................. 6,000 136,500
----------
274,625
----------
TELECOMMUNICATIONS (2.5%)
Cascade Communications Corp.*......................................................... 3,000 169,125
----------
TELECOMMUNICATIONS EQUIPMENT (6.2%)
Comverse Technology, Inc.*............................................................ 4,000 117,500
DSC Communications Corporation*....................................................... 2,000 60,250
Newbridge Networks Corporation*....................................................... 1,800 128,025
P-COM, Inc.*.......................................................................... 4,000 119,500
----------
425,275
----------
TOTAL COMMON STOCKS (Cost $4,765,851) (95.5%)........................................... 6,589,386
Other assets, less liabilities (4.5%)................................................... 310,054
----------
NET ASSETS (100%)....................................................................... $6,899,440
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets
* Non-income producing security.
For Federal income tax purposes the tax basis of investments owned at May 31,
1996 was $4,765,851, the aggregate gross unrealized appreciation for all
investments was $1,941,417 and aggregate gross unrealized depreciation for all
investments was $117,882.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 149
THE RESERVE PRIVATE EQUITY SERIES--RESERVE GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- -------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
AUTO (1.9%)
Chrysler Corporation................................................................ 300 $ 19,988
----------
BANKS (5.3%)
Bankers Trust New York Corporation.................................................. 500 37,563
First of America Bank Corporation................................................... 400 18,300
----------
55,863
----------
COMPUTER NETWORKING (3.1%)
Cisco Systems, Inc. ................................................................ 600 32,850
----------
COMPUTERS (3.0%)
Hewlett-Packard Company............................................................. 300 32,025
----------
ELECTRIC UTILITIES (15.5%)
Consolidated Edison Company of New York, Inc. ...................................... 1,400 39,025
Hawaiian Electric Industries, Inc. ................................................. 1,300 44,200
Minnesota Power and Light Company................................................... 1,500 40,313
Southwestern Public Service Company................................................. 1,300 39,812
----------
163,350
----------
FERTILIZERS (1.9%)
Freeport McMoran Resource Partners Ltd. ............................................ 1,000 20,000
----------
MISCELLANEOUS ENERGY (2.0%)
LL & E Royalty Trust................................................................ 4,500 21,375
----------
OIL-INTERNATIONAL (2.3%)
Chevron Corporation................................................................. 400 23,900
----------
PHARMACEUTICALS (1.2%)
Merck & Company Inc. ............................................................... 200 12,925
----------
REAL ESTATE (1.9%)
Commercial Net Lease Realty Inc. ................................................... 1,500 20,063
----------
RESTAURANTS (1.9%)
Lone Star Steakhouse & Saloon....................................................... 500 20,188
----------
RETAIL-SPECIALTY (3.6%)
Home Depot, Inc. ................................................................... 300 15,338
Tiffany & Company................................................................... 300 22,762
----------
38,100
----------
SEMICONDUCTOR-RELATED DEVICE (3.2%)
Texas Instruments, Inc. ............................................................ 600 33,750
----------
TELECOMMUNICATIONS (3.5%)
GTE Corporation..................................................................... 400 17,100
Telecom Corporation of New Zealand, Ltd. (ADR)...................................... 300 19,688
----------
36,788
----------
TELEPHONE (3.0%)
AT & T Corporation.................................................................. 500 31,188
----------
</TABLE>
14
<PAGE> 150
THE RESERVE PRIVATE EQUITY SERIES--RESERVE GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL VALUE
COMMON STOCKS AMOUNT (NOTE 1)
- -------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
UTILITIES-TELECOMMUNICATION (1.8%)
NYNEX Corporation................................................................... 400 $ 18,450
----------
TOTAL COMMON STOCKS (Cost $576,535) (55.1%)........................................... $ 580,803
==========
<CAPTION>
PREFERRED STOCKS
- --------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (4.0%)
Lehman Brothers Holdings, Inc. Series A 8.30%....................................... 1,000 24,625
Sunamerica Capital Trust, 8.35%..................................................... 700 17,500
----------
42,125
----------
GOLD MINING (1.5%)
Battle Mountain Gold Company, $3.25................................................. 300 15,525
----------
LIFE INSURANCE (2.2%)
Conseco Inc., 6.50% Series D........................................................ 400 23,100
----------
PROPERTY-LIABILITY INSURANCE (3.5%)
Travelers/P&C Cap I Preferred Trust, 8.08%.......................................... 1,500 36,938
----------
TOTAL PREFERRED STOCKS (Cost $117,775) (11.2%)........................................ $ 117,688
==========
<CAPTION>
CONVERTIBLE BONDS
- --------------------------------------------------------------------------------------
<S> <C> <C>
HOTEL-MOTEL (2.4%)
Hilton Hotels Corp. 5.00%, 05/15/06................................................. 25,000 25,062
----------
STEEL (2.4%)
USX Corp. 7.00%, 06/15/17........................................................... 25,000 24,125
----------
TOTAL CONVERTIBLE BONDS (Cost $49,045) (4.8%)......................................... $ 49,187
==========
US TREASURY NOTES
- --------------------------------------------------------------------------------------
US Treasury Notes, 7.375%, 11/15/97 (Cost $50,913)(4.9%)............................ 50,000 50,867
----------
TOTAL INVESTMENT SECURITIES (Cost $794,268) (76.0%)................................... 798,545
Other assets, less liabilities (24.0%)................................................ 253,611
----------
NET ASSETS (100%)..................................................................... $1,052,156
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $794,268, the aggregate gross unrealized appreciation for all
investments was $30,992, and aggregate gross unrealized depreciation for all
investments was $26,715.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 151
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INFORMED INVESTORS GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
SHARES/ VALUE
COMMON STOCKS UNITS (NOTE 1)
- --------------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
AIR TRANSPORT (4.0%)
Comair Holdings, Inc. ............................................................... 9,750 $ 255,938
----------
BUSINESS EQUIPMENT/SERVICES (2.6%)
Equifax, Inc......................................................................... 6,700 165,825
----------
COMPUTER NETWORKING (4.4%)
Cisco Systems, Inc.*................................................................. 5,200 284,700
----------
COMPUTER SOFTWARE (3.9%)
CompUSA, Inc.*....................................................................... 5,700 249,375
----------
COMPUTERS (9.6%)
Sun Microsystems, Inc.*.............................................................. 9,800 613,725
----------
FOOD (3.7%)
Safeway, Inc.*....................................................................... 7,000 236,250
----------
MACHINERY-CONSTRUCTION (3.7%)
JLG Industries, Inc.................................................................. 3,000 237,375
----------
MAGNETIC OPTICAL RECORDING MEDIA (5.5%)
Komag, Inc.*......................................................................... 10,200 353,175
----------
PACKAGED SOFTWARE (11.2%)
Cadence Design Systems, Inc.*........................................................ 12,700 720,725
----------
SEMICONDUCTOR, RELATED DEVICE (9.1%)
Analog Devices, Inc.*................................................................ 1,100 30,387
Atmel Corporation*................................................................... 15,500 550,250
----------
580,637
----------
SHOES (5.3%)
Nike, Inc. .......................................................................... 3,400 341,275
----------
SPECIAL INDUSTRIAL MACHINERY (5.1%)
Applied Materials, Inc.*............................................................. 8,700 324,075
----------
TELEPHONE & TELGRAPH APPARATUS (29.0%)
Aspect Telecommunications Corporation*............................................... 7,500 425,625
Tellabs, Inc.*....................................................................... 1,200 77,400
U.S. Robotics Corporation*........................................................... 14,800 1,357,900
----------
1,860,925
----------
TOTAL COMMON STOCKS (Cost $3,783,862) (97.1%).......................................... 6,224,000
Other assets, less liabilities (2.9%).................................................. 184,063
----------
NET ASSETS (100%)...................................................................... $6,408,063
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For Federal income tax purposes the tax basis of investments owned at May 31,
1996 was $3,783,862, the aggregated gross unrealized appreciation for all
investments was $2,494,427 and aggregate gross unrealized depreciation for all
investments was $54,289.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 152
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AUSTRALIA (1.2%)
Coca Cola Amatil Ltd. ............................................................... 4,074 $ 44,377
----------
FRANCE (4.7%)
Altran Technologies.................................................................. 120 34,918
Axime................................................................................ 260 35,305
Carrefour............................................................................ 120 65,777
Carrefour (Rights expiring 7/2/96)................................................... 120 33,040
----------
169,040
----------
GERMANY (3.7%)
Altana AG............................................................................ 50 31,550
Fresenius AG......................................................................... 350 61,244
Gehe AG.............................................................................. 65 41,825
----------
134,619
----------
HONG KONG (10.1%)
CDL Hotels International Limited..................................................... 68,000 38,676
Giordano International Ltd. ......................................................... 24,000 21,562
Goldlion Holdings Ltd. .............................................................. 25,000 20,521
Hang Seng Bank Ltd. ................................................................. 7,000 73,067
Hong Kong & China Gas Company........................................................ 31,800 50,561
Hong Kong & China Gas Company (Warrants -- expires 9/30/97).......................... 1,900 87
Manhattan Card Company Ltd. ......................................................... 68,000 32,743
National Mutual Asia Ltd. ........................................................... 44,000 39,814
Sun Hung Kai Properties Ltd. ........................................................ 6,000 61,272
Wing Hang Bank Ltd. ................................................................. 6,000 23,423
----------
361,726
----------
INDONESIA (5.6%)
PT Bank Internasional Indonesia...................................................... 10,000 52,220
PT Darya Varia Laboratoria........................................................... 20,000 42,033
PT Darya Varia Laboratoria (Rights expiring 6/3/96).................................. 2,400 0
PT Gudang Garam...................................................................... 4,000 32,597
PT Steady Safe....................................................................... 11,000 14,626
PT Telekomunikasi Indonesia.......................................................... 38,000 57,860
----------
199,336
----------
ITALY (1.4%)
Telecom Italia SpA................................................................... 8,000 16,145
Telecom Italia Mobile SpA............................................................ 25,000 33,041
----------
49,186
----------
JAPAN (1.0%)
Paris Miki, Inc. .................................................................... 800 35,057
----------
</TABLE>
17
<PAGE> 153
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
MALAYSIA (8.3%)
Arab-Malaysian Merchant Bank Berhad.................................................. 2,000 $ 27,043
Commerce Asset Holding Berhad........................................................ 10,000 67,308
DCB Holdings Berhad.................................................................. 8,000 26,603
Malayan Banking Berhad............................................................... 4,000 37,981
Malaysian Assurance Alliance Berhad.................................................. 11,625 57,287
O.Y.L. Industries Berhad............................................................. 6,000 59,615
United Engineers (Malaysia) Ltd. .................................................... 3,000 20,913
----------
296,750
----------
NETHERLANDS (4.4%)
Elsevier............................................................................. 4,000 62,207
Heineken............................................................................. 200 40,786
Wolters Kluwer....................................................................... 502 56,239
----------
159,232
----------
NORWAY (1.4%)
Tomra Systems........................................................................ 5,000 48,779
----------
PHILIPPINES (1.6%)
Bankard, Inc. ....................................................................... 60,000 29,221
DMCI Holdings Inc. .................................................................. 37,000 27,206
----------
56,427
----------
SINGAPORE (5.6%)
City Developments Limited............................................................ 6,000 46,055
DBS Land Limited..................................................................... 12,000 39,915
Development Bank of Singapore Limited................................................ 3,000 35,608
Oversea-Chinese Banking Corporation Ltd. ............................................ 3,000 38,380
Overseas Union Bank Ltd. ............................................................ 6,000 42,644
----------
202,602
----------
SOUTH KOREA (3.1%)
Seoul City Gas Co. Ltd. ............................................................. 500 41,476
Sungmi Telecom Electronics........................................................... 300 68,807
----------
110,283
----------
SPAIN (7.5%)
Centros Comerciales Pryca............................................................ 1,000 23,579
Empresa Nacional de Electridad....................................................... 2,300 142,529
Gas Natural.......................................................................... 360 63,699
Iberdrola............................................................................ 3,900 39,672
----------
269,479
----------
SWEDEN (4.5%)
Astra AB Series A.................................................................... 1,400 64,215
Elekta Instrument AB Series B........................................................ 500 18,496
Ericsson Telefonaktiebolaget......................................................... 1,200 26,939
Frontec AB Series B.................................................................. 400 19,690
Wm Data AB Series B.................................................................. 500 30,280
----------
159,620
----------
</TABLE>
18
<PAGE> 154
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
SWITZERLAND (6.2%)
Nestle SA............................................................................ 70 $ 79,087
Roche Holding AG..................................................................... 8 61,538
Sandoz AG............................................................................ 60 62,596
Zurich Versicherungs................................................................. 70 18,510
----------
221,731
----------
THAILAND (5.1%)
Bangkok Bank Public Company Ltd. .................................................... 4,000 58,113
Central Pattana Public Company Ltd. ................................................. 7,000 29,017
Grammy Entertainment Public Company Ltd. ............................................ 1,500 20,371
Krung Thai Bank Public Company Ltd. ................................................. 6,000 29,135
Thai Farmers Bank Public Company Ltd. ............................................... 4,000 45,795
----------
182,431
----------
UNITED KINGDOM (10.5%)
Dixons Group plc..................................................................... 6,800 52,787
HSBC Holdings plc.................................................................... 3,726 56,779
J.D. Wetherspoon plc................................................................. 1,000 14,486
Logica plc........................................................................... 2,900 27,775
Reed International plc............................................................... 3,700 64,044
Reuters Holding plc.................................................................. 7,500 87,302
Standard Chartered plc............................................................... 7,343 73,572
----------
376,745
----------
UNITED STATES (5.5%)
Embotelladora Andina ADR............................................................. 1,000 35,500
Larsen & Toubro Ltd. ................................................................ 2,000 39,260
Santa Isabel ADR..................................................................... 1,300 34,450
Tata Engineering and Locomotive Company Ltd. ........................................ 3,000 52,260
Total Access Communication plc....................................................... 4,000 36,400
----------
197,870
----------
TOTAL COMMON STOCKS (Cost $2,944,304) (91.4%).......................................... 3,275,290
Other assets, less liabilities (8.6%).................................................. 309,234
----------
NET ASSETS (100%)...................................................................... $3,584,524
==========
</TABLE>
19
<PAGE> 155
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
INDUSTRY COMPOSITION
<TABLE>
<CAPTION>
INDUSTRY PERCENT
- ------------------------------------------- -------
<S> <C>
Auto/Truck Manufacturers................... 1.5%
Beverages.................................. 3.4
Biotechnology & Medical Devices............ 2.2
Commercial Banks........................... 16.6
Computer Software.......................... 3.6
Computers & Peripherals.................... 0.5
Construction............................... 2.4
Drugs & Health Care........................ 7.6
Financial Services......................... 10.9
Food Processing............................ 2.2
Lodging & Restaurants...................... 1.5
Machinery.................................. 3.0
<CAPTION>
INDUSTRY PERCENT
- ------------------------------------------- -------
<S> <C>
Public Utilities........................... 9.4%
Publishing................................. 5.1
Real Estate Development.................... 2.8
Real Estate Investment..................... 2.1
Retailing.................................. 9.5
Telecommunications......................... 6.7
Transportation............................. 0.4
-------
Industry percent of net assets............. 91.4%
-------
Other assets, less liabilities............. 8.6
-------
PERCENT OF NET ASSETS...................... 100.0%
======
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $2,944,304, the aggregate gross unrealized appreciation for all
investments was $371,871 and aggregate gross unrealized depreciation for all
investments was $40,885.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE LARGE-CAP VALUE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BANKS (2.0%)
Wells Fargo & Company................................................................. 100 $ 24,100
----------
BEVERAGES (14.0%)
Anheuser-Busch Companies, Inc. ....................................................... 800 57,000
Coca-Cola Company..................................................................... 1,200 55,200
Earthgrains Company................................................................... 20 720
PepsiCo, Inc. ........................................................................ 1,800 59,850
----------
172,770
----------
COMPUTER SOFTWARE (4.8%)
Microsoft Corporation................................................................. 500 59,375
----------
COMPUTER-PERIPHERAL EQUIPMENT (3.8%)
Motorola, Inc. ....................................................................... 700 46,725
----------
COSMETICS (11.5%)
Clorox Company........................................................................ 600 51,075
Gillette Company...................................................................... 900 53,213
Tambrands, Inc. ...................................................................... 800 36,900
----------
141,188
----------
DRUGS (1.8%)
Warner Lambert Company................................................................ 400 22,400
----------
ENTERTAINMENT (3.9%)
Walt Disney Company (Holding Co.)..................................................... 800 48,600
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 156
THE RESERVE PRIVATE EQUITY SERIES--RESERVE LARGE-CAP VALUE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
FINANCIAL/BUSINESS SERVICES (8.2%)
American Express Company.............................................................. 1,100 $ 50,325
Charles Schwab Corporation............................................................ 2,100 50,925
----------
101,250
----------
FOOD (21.5%)
CPC International, Inc. .............................................................. 800 55,300
Campbell Soup Company................................................................. 900 58,050
Hershey Foods Corporation............................................................. 700 50,925
Quaker Oats Company................................................................... 1,500 52,687
Wrigley (WM) Jr. Company.............................................................. 900 47,138
----------
264,100
----------
PHARMACEUTICALS (7.4%)
Johnson & Johnson..................................................................... 400 38,950
Merck & Company, Inc. ................................................................ 800 51,700
----------
90,650
----------
PUBLISHING (4.5%)
Gannett Company, Inc. ................................................................ 800 55,800
----------
PUBLISHING -- NEWSPAPERS (3.8%)
New York Times Company Class A........................................................ 1,400 46,025
----------
RETAIL STORES -- GENERAL MERCHANDISING (4.2%)
Wal-Mart Stores, Inc. ................................................................ 2,000 51,750
----------
SEMICONDUCTOR -- RELATED DEVICE (4.9%)
Intel Corporation..................................................................... 800 60,400
----------
TOTAL COMMON STOCKS (Cost $1,115,010)(96.3%)............................................ 1,185,133
Other assets, less liabilities (3.7%)................................................... 45,927
----------
NET ASSETS (100%)....................................................................... $1,231,060
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,115,010, the aggregate gross unrealized appreciation for all
investments was $84,608 and aggregate gross unrealized depreciation for all
investments was $14,485.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 157
THE RESERVE PRIVATE EQUITY SERIES--RESERVE MID-CAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AIR TRANSPORT (3.0%)
Delta Air Lines, Inc. ................................................................ 550 $ 45,581
----------
AUTO PARTS (3.6%)
Gentex Corporation*................................................................... 1,200 54,300
----------
BANKS (2.7%)
Cole Taylor Financial Group, Inc. .................................................... 1,500 39,750
----------
BUSINESS EQUIPMENT/SERVICE (8.4%)
Equifax, Inc. ........................................................................ 2,800 69,300
Interim Services, Inc.*............................................................... 1,200 57,000
----------
126,300
----------
CHEMICAL SPECIALTY (4.5%)
Raychem Corporation................................................................... 900 67,275
----------
COMMUNICATION -- NETWORK (4.0%)
LCI International, Inc.*.............................................................. 1,900 60,563
----------
COMPUTER SERVICES (2.7%)
Acxiom Corporation*................................................................... 1,300 40,625
----------
COMPUTER SOFTWARE (2.1%)
Black Box Corporation*................................................................ 1,500 31,125
----------
COMPUTER -- PERIPHERAL EQUIPMENT (2.9%)
Dialogic Corporation*................................................................. 800 43,200
----------
COMPUTERS (4.3%)
Gateway 2000, Inc.*................................................................... 1,700 64,387
----------
ELECTRIC MEASUREMENT & TESTING INST. (5.1%)
Input/Output, Inc. ................................................................... 1,900 76,713
----------
FINANCE-PERSONAL LOANS (4.1%)
MBNA Corporation...................................................................... 2,000 61,250
----------
FOOD CHAINS (2.0%)
Whole Foods Market, Inc.*............................................................. 1,200 29,550
----------
HEALTH (2.7%)
American Medical Response, Inc.*...................................................... 1,100 40,012
----------
HOME BUILDINGS (4.5%)
Oakwood Homes Corp. .................................................................. 1,400 67,900
----------
HOSPITAL SUPPLIES (5.4%)
Advanced Technology Laboratories, Inc.*............................................... 1,400 49,350
Sofamor Danek Group, Inc.*............................................................ 900 32,175
----------
81,525
----------
HOUSEHOLD FURNISHINGS & APPLIANCES (5.2%)
Heilig-Meyers Company................................................................. 2,000 41,250
Herman Miller, Inc. .................................................................. 1,200 37,050
----------
78,300
----------
LIFE INSURANCE (3.3%)
Protective Life Corporation........................................................... 1,300 48,588
----------
</TABLE>
22
<PAGE> 158
THE RESERVE PRIVATE EQUITY SERIES--RESERVE MID-CAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
MISCELLANEOUS METALS (3.4%)
Wolverine Tube Inc.*.................................................................. 1,400 $ 51,100
----------
MOBIL HOMES (2.2%)
Palm Harbor Homes, Inc.*.............................................................. 1,200 33,300
----------
OIL/GAS EQUIPMENT SERVICES (6.5%)
Rowan Companies, Inc.*................................................................ 2,600 39,325
Tidewater, Inc. ...................................................................... 1,400 57,750
----------
97,075
----------
POLLUTION CONTROL (4.4%)
Newpark Resources, Inc.*.............................................................. 1,800 65,250
----------
RESTAURANTS (2.1%)
Sonic Corporation*.................................................................... 1,300 31,200
----------
RETAIL (3.8%)
Casey's General Stores, Inc. ......................................................... 2,400 56,700
----------
SPECIAL INDUSTRIAL MACHINERY (3.8%)
Black & Decker Corp. ................................................................. 1,400 57,575
----------
TOTAL COMMON STOCK (Cost $1,284,178) (96.7%)............................................ 1,449,144
Other assets, less liabilities (3.3%)................................................... 49,980
----------
NET ASSETS (100%)....................................................................... $1,499,124
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,284,178, the aggregate gross unrealized appreciation for all
investments was $181,516 and aggregate gross unrealized depreciation for all
investments was $16,550.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AIR TRANSPORTATION (3.1%)
Delta Air Lines, Inc. ................................................................ 950 $ 78,731
----------
AUTO PARTS (4.3%)
Gentex Corporation*................................................................... 2,400 108,600
----------
BANKS (2.3%)
Cole Taylor Financial Group, Inc. .................................................... 2,200 58,300
----------
BUSINESS EQUIPMENT/SERVICE (8.0%)
Equifax Inc. ......................................................................... 4,400 108,900
Interim Services, Inc.*............................................................... 2,000 95,000
----------
203,900
----------
CHEMICAL SPECIALTY (4.0%)
Raychem Corporation................................................................... 1,350 100,913
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 159
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
COMMUNICATION -- NETWORK (3.6%)
LCI International, Inc.*.............................................................. 2,900 $ 92,438
----------
COMPUTER SERVICES (2.9%)
Acxiom Corporation*................................................................... 2,400 75,000
----------
COMPUTER SOFTWARE (2.3%)
Black Box Corporation*................................................................ 2,800 58,100
----------
COMPUTERS (3.9%)
Gateway 2000, Inc.*................................................................... 2,600 98,475
----------
COMPUTERS -- PERIPHERAL EQUIPMENT (3.4%)
Dialogic Corporation*................................................................. 1,600 86,400
----------
ELECTRIC MEASUREMENT & TESTING INSTRUMENT (4.8%)
Input/Output, Inc.*................................................................... 3,000 121,125
----------
FINANCE -- PERSONAL LOANS (3.5%)
MBNA Corporation...................................................................... 2,900 88,812
----------
FOOD CHAINS (1.9%)
Whole Foods Market, Inc.*............................................................. 2,000 49,250
----------
HEALTH (2.5%)
American Medical Response, Inc.*...................................................... 1,750 63,656
----------
HOME BUILDINGS (4.4%)
Oakwood Homes Corp. .................................................................. 2,300 111,550
----------
HOSPITAL SUPPLIES (5.2%)
Advanced Technology Laboratories, Inc.*............................................... 2,300 81,075
Sofamor Danek Group, Inc.*............................................................ 1,400 50,050
----------
131,125
----------
HOUSEHOLD FURNISHINGS APPLIANCE (5.3%)
Heilig-Meyers Company................................................................. 3,300 68,063
Herman Miller, Inc. .................................................................. 2,200 67,925
----------
135,988
----------
LIFE INSURANCE (4.8%)
American Bankers Insurance Group, Inc. ............................................... 1,200 46,500
Protective Life Corporation........................................................... 2,000 74,750
----------
121,250
----------
MISCELLANEOUS METALS (3.0%)
Wolverine Tube, Inc.*................................................................. 2,100 76,650
----------
MOBIL HOMES (2.0%)
Palm Harbor Homes, Inc.*.............................................................. 1,800 49,950
----------
OIL/GAS EQUIPMENT SERVICES (5.9%)
Rowan Companies, Inc.*................................................................ 4,000 60,500
Tidewater Inc. ....................................................................... 2,150 88,687
----------
149,187
----------
POLLUTION CONTROL (4.1%)
Newpark Resources, Inc.*.............................................................. 2,870 104,037
----------
</TABLE>
24
<PAGE> 160
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
RESTAURANTS (2.1%)
Sonic Corporation*.................................................................... 2,200 $ 52,800
----------
RETAIL (3.3%)
Casey's General Stores, Inc. ......................................................... 3,500 82,688
----------
SPECIAL INDUSTRIAL MACHINERY (3.5%)
Black & Decker Corporation............................................................ 2,200 90,475
----------
TOTAL COMMON STOCKS (Cost $1,935,729) (94.1%)........................................... 2,389,400
Other assets, less liabilities (5.9%)................................................... 150,155
----------
NET ASSETS (100%)....................................................................... $2,539,555
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,935,729, the aggregate gross unrealized appreciation for all
investments was $472,445 and aggregate gross unrealized depreciation for all
investments was $18,774.
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 161
RESERVE INFORMED INVESTORS GROWTH FUND
<TABLE>
<CAPTION>
MEASUREMENT PERIOD INFORMED
(FISCAL YEAR COVERED) INVESTORS S&P 500
<S> <C> <C>
12/28/94 10000 10000
05/31/96 14860 14520
</TABLE>
The performance of Reserve Informed Investors Growth Fund reflects the
maximum 4.5% sales load.
The chart above reflects the performance of the Reserve Informed
Investors Growth Fund class A shares. The performance of the
Reserve Informed Investors Growth Fund class D shares will be
greater or less than the line shown based on the differences in
original share inception dates, fees, and sales charges.
Past performance is not predictive of future performance.
To the Shareholders of the Reserve Informed Investors Fund:
A significant weighting in the broadly-defined technology sector of the
market materially affected the Fund's performance in the most recently completed
fiscal year. Market conditions rewarded the Fund's concentration in technology
stocks during part of the fiscal year, while exerting downward pressure at other
times. Despite an erratic and, at times, reason-defying market action, the
Sub-Adviser held steadfast to the Fund's stated informed investor strategy and
analytical techniques. Furthermore, no changes are in any way contemplated. The
longer-term performance record stands as a testament to the eminent success of
the Fund's investment approach.
THOMAS H. FITZGERALD, JR., PRESIDENT, T.H. FITZGERALD & CO., SUB-ADVISER
6
<PAGE> 162
RESERVE PRIVATE EQUITY SERIES
RESERVE MID-CAP GROWTH 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 Mid-Cap Growth Fund ("Mid-Cap Growth"
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 July 31, 1996.
TABLE OF CONTENTS
Page
----
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
Additional Information
Report of Independent Accountants
Financial Statements
<PAGE> 163
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 Mid-Cap Growth Fund may not:
(1) borrow money except as a temporary measure for extraordinary or emergency
purposes 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 issuers 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.
The Fund has reserved the right to purchase and write interest rate
futures contracts, and put and call options on interest rate futures
contracts. The Fund does not intend to use these techniques for the
foreseeable future and that shareholders will be given notice should the Fund
determine that they will be used.
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.
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
<PAGE> 164
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 five 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.
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 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
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.
DEFENSIVE POSITION. For temporary defensive purposes, the Fund may vary from
its investment policy during periods in which conditions in securities markets
or other economic or political conditions warrant. In such circumstances, the
Fund will increase its position in debt securities, which may include
short-term U.S. Government securities and U.S. dollar- or foreign
currency-denominated short-term indebtedness, cash equivalents and fixed-income
securities issued or guaranteed by governmental entities, or by companies or
supranational organizations (e.g., International Bank for Reconstruction and
Development and the European community) rated AA or better by Standard & Poor's
Corporation, or Aa or better by Moody's Investor Service, Inc.; or if not so
rated, of equivalent investment quality as determined by the Adviser. Apart
from periods of defensive investment, the Fund may also at any time temporarily
invest funds awaiting reinvestment or held as reserves for dividends and other
distributions to shareholders in U.S. dollar-denominated money-market
instruments.
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") and Reserve Private Equity Series
("RPES"), 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,
RTET and RPES.
HENRI W. EMMET, Trustee, 176 East 71st Street, New York, New York 10021.
Mr. Emmet is the Managing Director of Global Interaction, Inc., and
formerly served as the Managing Director of Servus Associates, Inc.; U.S.A.
Representative of the First National Bank of Southern Africa, and Trustee of RF,
RET, RNYTET, RTET and RPES. Until 1989, he was Senior Vice President of the New
York branch of Banque Nationale de Paris.
<PAGE> 165
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, RTET and RPES. 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. The Reverend Harrington also
served as Director of the Bear Stearns Companies Inc. since 1993.
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, RTET and RPES.
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, RNYTET and RPES.
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, RNYTET and RPES. 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.
**Father Harrington is a member of the Board of Directors of Bear, Stearns & Co.
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.
COMPENSATION TABLE
<TABLE>
<CAPTION>
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 $22,197
Henri W. Emmet $0 $22,197
Rev. Donald J. Harrington $0 $22,197
Niels W. Johnsen $0 $22,197
Burtt R. Ehrlich $0 $0
Thomas L. Rhodes $0 $0
</TABLE>
Amount shown are for the Fund's fiscal year ending May 31, 1996.
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 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 which include: registration fees paid to the commission and state
regulators, costs associated with the annual update of each Fund's registration
statement, auditing annual financial statements, and printing and mailing
costs (exclusive of those associated with the Rule 12b-1 Plans).
Excluded
<PAGE> 166
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. Southern Capital Advisors ("Sub-Adviser"), a division of
Morgan Asset Management, Inc., 50 Front Street, Memphis, Tennessee 38103, 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. The Chase Manhattan 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 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 of .25% of the average net asset
value for Class A shares and 1.00% of the average net asset value
for Class D shares. 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
<PAGE> 167
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
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 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.
<PAGE> 168
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.
As of June 30, 1996, the following persons owned of record or beneficially
5% or more the Fund's outstanding shares: Bruce R. Bent, 810 Seventh Avenue, New
York, NY 10019 (5.4%); Arthur T. Bent III, 18 Heights Road, Plandome, NY 11030
(10.4%); Bruce Bent II, 18 Heights Road, Plandome, NY 11030 (9.9%); Reserve
Management Company, Inc., 810 Seventh Avenue, New York, NY 10019 (6.5%); and
Anna T. Dolan Ahsen and Akhter Ahsen, 22 Edgecliff Terrace, Yonkers, NY 10705
(26.1%).
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 (if applicable). The net asset value of the Fund is
calculated at the end of each business day (currently 4:00 PM New York time)
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 the class' outstanding shares that
represent each class' proportionate 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
<PAGE> 169
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 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.
<PAGE> 170
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:
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)
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 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> 171
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Trustees of The Reserve Private Equity
Series:
We have audited the accompanying statements of assets and liabilities of The
Reserve Private Equity Series (comprising, respectively, Reserve Blue Chip
Growth Fund, Reserve Emerging Growth Fund, Reserve Growth and Income Fund,
Reserve Informed Investors Growth Fund, Reserve International Equity Fund,
Reserve Large-Cap Value Fund, Reserve Mid-Cap Growth Fund, and Reserve North
American Growth Fund) (collectively the "Trust"), including the schedules of
portfolio investments, as of May 31, 1996, and the related statements of
operations for the period presented, and the statements of changes in net assets
and the financial highlights for each period presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the series constituting The Reserve Private Equity Series as of May 31,
1996, the results of their operations, the changes in their net assets, and
their financial highlights for the periods referred to above, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
June 28, 1996
2
<PAGE> 172
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
BLUE CHIP EMERGING GROWTH AND
GROWTH FUND GROWTH FUND INCOME FUND
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investment in securities, at value (cost $3,765,486, $4,765,851,
$794,268, respectively)............................................ $4,910,081 $6,589,386 $ 798,545
Cash................................................................. 201,401 756,193 255,213
Receivable for investment securities sold............................ 271,837 99,208 --
Dividends receivable................................................. 2,620 120 3,376
Interest receivable.................................................. -- -- 1,041
----------- ----------- -----------
Total assets....................................................... 5,385,939 7,444,907 1,058,175
----------- ----------- -----------
LIABILITIES
Accrued comprehensive fee............................................ -- 10,836 4,527
Payable for investment securities purchased.......................... 213,700 518,939 --
Other payables and accrued expenses.................................. 81 15,692 1,492
----------- ----------- -----------
Total liabilities.................................................. 213,781 545,467 6,019
----------- ----------- -----------
NET ASSETS............................................................. $5,172,158 $6,899,440 $1,052,156
=========== =========== ===========
NET ASSETS CONSIST OF (NOTE 1):
Capital stock (Par Value $.001 per share)............................ $ 347 $ 353 $ 103
Additional paid in capital........................................... 4,141,875 5,086,032 1,038,372
Accumulated net realized loss on investments......................... (114,659) (10,480) (111)
Accumulated undistributed net investment income...................... -- -- 9,515
Net unrealized appreciation on investments........................... 1,144,595 1,823,535 4,277
----------- ----------- -----------
NET ASSETS, at value, applicable to Shares of Beneficial Interest
outstanding (Note 5)................................................. $5,172,158 $6,899,440 $1,052,156
=========== =========== ===========
CLASS A:
Net Assets........................................................... $5,129,524 $6,656,511 $1,050,657
----------- ----------- -----------
Shares Outstanding................................................... 344,082 340,243 103,341
----------- ----------- -----------
Net Asset Value and redemption value per share (net assets/shares
outstanding)....................................................... $ 14.91 $ 19.56 $ 10.17
=========== =========== ===========
Maximum offering price per share (net asset value plus sales charge
of 4.50% of offering price)........................................ $ 15.61 $ 20.48 $ 10.65
=========== =========== ===========
CLASS D:
Net Assets........................................................... $ 42,634 $ 242,929 $ 1,499
----------- ----------- -----------
Shares Outstanding................................................... 2,865 12,448 147*
----------- ----------- -----------
Net Asset Value, offering and redemption value per share (net
assets/shares outstanding)......................................... $ 14.88 $ 19.52 $ 10.17
=========== =========== ===========
</TABLE>
- ---------------
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 173
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
INFORMED INVESTORS INTERNATIONAL LARGE-CAP
GROWTH FUND EQUITY FUND VALUE FUND
------------------ ------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investment in securities, at value (cost $3,783,862, $2,944,304,
$1,115,010, respectively)........................................ $6,224,000 $ 3,275,290 $ 1,185,133
Cash............................................................... 188,426 224,557 50,557
Receivable for investment securities sold.......................... -- 152,147 --
Dividends receivable............................................... 553 4,256 1,583
--------------- ------------ ------------
Total assets..................................................... 6,412,979 3,656,250 1,237,273
--------------- ------------ ------------
LIABILITIES:
Accrued comprehensive fee.......................................... -- -- 5,046
Payable for investment securities purchased........................ -- 69,961 --
Payable for fund shares redeemed................................... 3,684 -- --
Other payables and accrued expenses................................ 1,232 1,765 1,167
--------------- ------------ ------------
Total liabilities................................................ 4,916 71,726 6,213
--------------- ------------ ------------
NET ASSETS........................................................... $6,408,063 $ 3,584,524 $ 1,231,060
=============== ============ ============
NET ASSETS CONSIST OF (NOTE 1):
Capital Stock (Par Value $.001 per share).......................... $ 446 $ 318 $ 112
Additional paid in capital......................................... 4,281,103 3,325,152 1,160,825
Accumulated net realized loss on investments and foreign currency
transactions..................................................... (313,624) (71,968) --
Net unrealized appreciation on investments and foreign currency
transactions..................................................... 2,440,138 331,022 70,123
--------------- ------------ ------------
NET ASSETS, at value, applicable to Shares of Beneficial Interest
outstanding (Note 5)............................................... $6,408,063 $ 3,584,524 $ 1,231,060
=============== ============ ============
CLASS A:
Net Assets......................................................... $6,393,103 $ 3,578,313 $ 1,231,060
--------------- ------------ ------------
Shares Outstanding................................................. 445,181 317,927 112,437
--------------- ------------ ------------
Net Asset Value and redemption value per share (net assets/shares
outstanding)..................................................... $ 14.36 $ 11.26 $ 10.95
=============== ========== ============
Maximum offering price per share (net asset value plus sales charge
of 4.50% of
offering price).................................................. $ 15.04 $ 11.79 $ 11.47
=============== =========== ============
CLASS D:
Net Assets......................................................... $ 14,960 $ 6,211 --
--------------- ------------ ------------
Shares Outstanding................................................. 1,044 552 --
--------------- ------------ ------------
Net Asset Value, offering and redemption value per share (net
assets/shares
outstanding)..................................................... $ 14.33 $ 11.25 --
=============== =========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 174
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE
MID-CAP NORTH AMERICAN
GROWTH FUND GROWTH FUND
----------- --------------
<S> <C> <C>
ASSETS:
Investment in securities, at value (cost $1,284,178, $1,935,729,
respectively)................................................................ $1,449,144 $2,389,400
Cash........................................................................... 52,635 343,800
Receivable for fund shares sold................................................ -- 10,453
Dividends receivable........................................................... 738 1,361
----------- --------------
Total assets................................................................. 1,502,517 2,745,014
----------- --------------
LIABILITIES:
Payable for investment securities purchased.................................... -- 205,459
Payable for fund shares redeemed............................................... 3,393 --
----------- --------------
Total liabilities............................................................ 3,393 205,459
----------- --------------
NET ASSETS....................................................................... $1,499,124 $2,539,555
=========== =============
NET ASSETS CONSIST OF (NOTE 1):
Capital Stock (Par Value $.001 per share)...................................... $ 124 $ 207
Additional paid in capital..................................................... 1,334,034 2,169,202
Accumulated net realized loss on investments................................... -- (83,525)
Net unrealized appreciation on investments..................................... 164,966 453,671
----------- --------------
NET ASSETS, at value, applicable to Shares of Beneficial Interest outstanding
(Note 5)....................................................................... $1,499,124 $2,539,555
----------- --------------
CLASS A:
Net Assets..................................................................... $1,494,616 $ 131,226
----------- --------------
Shares Outstanding............................................................. 123,683 10,681
----------- --------------
Net Asset Value and redemption value per share (net assets/shares
outstanding)................................................................. $ 12.08 $ 12.29
=========== =============
Maximum offering price per share (net asset value plus sales charge of 4.50% of
offering price).............................................................. $ 12.65 $ 12.87
=========== =============
CLASS D:
Net Assets..................................................................... $ 4,508 $2,408,329
----------- --------------
Shares Outstanding............................................................. *374 196,199
----------- --------------
Net Asset Value, offering and redemption value per share (net assets/shares
outstanding)................................................................. $ 12.07 $ 12.27
=========== =============
</TABLE>
- ---------------
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 175
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
RESERVE
GROWTH AND
RESERVE RESERVE INCOME FUND RESERVE
BLUE CHIP EMERGING ---------------- INFORMED INVESTORS
GROWTH FUND GROWTH FUND JANUARY 2, 1996 GROWTH FUND
------------ ------------ (COMMENCEMENT OF ------------------
YEAR ENDED YEAR ENDED OPERATIONS) TO YEAR ENDED
MAY 31, 1996 MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends..................................... $ 29,978 $ 1,869 $ 10,672 $ 8,787
Interest...................................... -- -- 4,124 8,626
------------ ------------ -------- ------------------
Total investment income................... 29,978 1,869 14,796 17,413
EXPENSES
Comprehensive fee (Note 3).................... 55,581 51,177 4,527 141,751
12b-1 Fee (Note 4)
Class A..................................... 9,247 8,481 754 23,619
Class D..................................... 66 191 -- 26
------------ ------------ -------- ------------------
Total expenses............................ 64,894 59,849 5,281 165,396
------------ ------------ -------- ------------------
NET INVESTMENT INCOME (LOSS).................... (34,916) (57,980) 9,515 (147,983)
------------ ------------ -------- ------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Proceeds from sales of securities............. 2,573,864 1,201,292 28,149 13,684,285
Cost of securities sold....................... 2,575,909 1,120,746 28,260 12,834,099
------------ ------------ -------- ------------------
Net realized gain (loss) on investments (Note
1).......................................... (2,045) 80,546 (111) 850,186
Net unrealized appreciation on investments.... 975,733 1,655,638 4,277 1,109,280
------------ ------------ -------- ------------------
Net realized and unrealized gain on
investments................................. 973,688 1,736,184 4,166 1,959,466
------------ ------------ -------- ------------------
Net increase in net assets resulting from
operations.................................. $ 938,772 $1,678,204 $ 13,681 $ 1,811,483
============ ============ ================= ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 176
THE RESERVE PRIVATE EQUITY SERIES
STATEMENT OF OPERATIONS--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE
INTERNATIONAL RESERVE
EQUITY FUND LARGE-CAP
---------------- VALUE FUND RESERVE RESERVE
JULY 13, 1995 --------------- MID-CAP NORTH AMERICAN
(COMMENCEMENT JANUARY 2, 1996 GROWTH FUND GROWTH FUND
OF OPERATIONS) (COMMENCEMENT ------------ --------------
TO OF OPERATIONS) YEAR ENDED YEAR ENDED
MAY 31, 1996 TO MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
---------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends....................................... $ 18,854* $ 4,796 $ 1,923 $ 8,135
Interest........................................ 1,688 -- -- --
---------------- --------------- ------------ --------------
Total investment income....................... 20,542 4,796 1,923 8,135
EXPENSES
Comprehensive fee (Note 3)...................... 33,158 5,046 22,987 24,506
12b-1 Fee (Note 4)
Class A....................................... 4,734 841 3,830 17
Class D....................................... 12 -- 5 16,268
---------------- --------------- ------------ --------------
Total expenses.................................... 37,904 5,887 26,822 40,791
Less fees waived.............................. (217) -- -- --
---------------- --------------- ------------ --------------
Net Expenses.................................. 37,687 5,887 26,822 40,791
---------------- --------------- ------------ --------------
NET INVESTMENT LOSS............................... (17,145) (1,091) (24,899) (32,656)
---------------- --------------- ------------ --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales of securities............... 1,374,797 -- 3,071,543 1,272,486
Cost of securities sold......................... 1,446,765 -- 3,054,352 1,356,011
---------------- --------------- ------------ --------------
Net realized gain (loss) on investments and
foreign currency transactions (Note 1)........ (71,968) -- 17,191 (83,525)
Net unrealized appreciation on investments and
foreign currency transactions................. 331,022 70,123 164,966 453,671
---------------- --------------- ------------ --------------
Net realized and unrealized gain on investments
and foreign currency transactions............. 259,054 70,123 182,157 370,146
---------------- --------------- ------------ --------------
Net increase in net assets resulting from
operations.................................... $ 241,909 $69,032 $ 157,258 $ 337,490
=============== ============== ============ =============
</TABLE>
- ---------------
* Net of foreign taxes withheld of $1,774
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE> 177
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVE GROWTH
RESERVE BLUE CHIP GROWTH FUND AND INCOME FUND
-------------------------------- ----------------
OCTOBER 28, 1994 JANUARY 2, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment income (loss).................................. $ (34,916) $ (5,361) $ 9,515
Net realized gain (loss) from investments..................... (2,045) 92,552 (111)
Net unrealized appreciation from investments.................. 975,733 168,862 4,277
------------ ---------------- ----------------
Net increase in net assets resulting from operations.......... 938,772 256,053 13,681
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A....................................... (164,889) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares............................. 2,757,098 2,257,822 1,044,319
Reinvestment of distributions................................. 164,889 -- --
Cost of shares redeemed....................................... (517,167) (520,420) (5,844)
------------ ---------------- ----------------
Net increase in net assets resulting from capital share
transactions................................................ 2,404,820 1,737,402 1,038,475
------------ ---------------- ----------------
Net increase in net assets.................................... 3,178,703 1,993,455 1,052,156
NET ASSETS:
Beginning of period........................................... 1,993,455 -- --
------------ ---------------- ----------------
End of period (including undistributed net investment income
of $0, $0, and $9,515, respectively)........................ $5,172,158 $1,993,455 $1,052,156
============ ================= =================
</TABLE>
<TABLE>
<CAPTION>
RESERVE
RESERVE EMERGING GROWTH FUND INTERNATIONAL
-------------------------------- EQUITY FUND
NOVEMBER 14, ----------------
1994 JULY 13, 1995
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss........................................... $ (57,980) $ (9,569) $ (17,145)
Net realized gain (loss) from investments and foreign currency
transactions................................................ 80,546 65,542 (71,968)
Net unrealized appreciation from investments and foreign
currency transactions....................................... 1,655,638 167,897 331,022
------------ ---------------- ----------------
Net increase in net assets resulting from operations.......... 1,678,204 223,870 241,909
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A....................................... (93,899) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares............................. 4,281,980 2,268,282 3,465,234
Reinvestment of distributions................................. 93,770 -- --
Cost of shares redeemed....................................... (301,485) (1,251,282) (122,619)
------------ ---------------- ----------------
Net increase in net assets resulting from capital share
transactions................................................ 4,074,265 1,017,000 3,342,615
------------ ---------------- ----------------
Net increase in net assets.................................... 5,658,570 1,240,870 3,584,524
NET ASSETS:
Beginning of period........................................... 1,240,870 -- --
------------ ---------------- ----------------
End of period................................................. $6,899,440 $1,240,870 $3,584,524
============ ================= =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> 178
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE INFORMED RESERVE
INVESTORS GROWTH FUND LARGE-CAP VALUE
-------------------------------- FUND
DECEMBER 28, ----------------
1994 JANUARY 2, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss....................................... $ (147,983) $ (38,948) $ (1,091)
Net realized gain (loss) from investments................. 850,186 (220,490) --
Net unrealized appreciation from investments.............. 1,109,280 1,330,859 70,123
------------ ---------------- ----------------
Net increase in net assets resulting from operations...... 1,811,483 1,071,421 69,032
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A................................... (795,337) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares......................... 6,254,939 6,422,521 1,165,180
Reinvestment of distributions............................. 790,060 -- --
Cost of shares redeemed................................... (8,490,282) (656,742) (3,152)
------------ ---------------- ----------------
Net increase (decrease) in net assets resulting from
capital share transactions.............................. (1,445,283) 5,765,779 1,162,028
------------ ---------------- ----------------
Net increase (decrease) in net assets..................... (429,137) 6,837,200 1,231,060
NET ASSETS:
Beginning of period....................................... 6,837,200 -- --
------------ ---------------- ----------------
End of period............................................. $6,408,063 $6,837,200 $1,231,060
============ ================= =================
</TABLE>
<TABLE>
<CAPTION>
RESERVE RESERVE
MID-CAP NORTH AMERICAN
GROWTH FUND GROWTH FUND
--------------- --------------
YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1996
--------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss......................................................... $ (24,899) $ (32,656)
Net realized gain (loss) from investments................................... 17,191 (83,525)
Net unrealized appreciation from investments................................ 164,966 453,671
--------------- --------------
Net increase in net assets resulting from operations........................ 157,258 337,490
--------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares........................................... 2,008,337 2,345,759
Cost of shares redeemed..................................................... (666,471) (143,694)
--------------- --------------
Net increase in net assets resulting from capital share transactions........ 1,341,866 2,202,065
--------------- --------------
Net increase in net assets.................................................. 1,499,124 2,539,555
NET ASSETS:
Beginning of period......................................................... -- --
--------------- --------------
End of period............................................................... $ 1,499,124 $2,539,555
============== =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE> 179
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reserve Private Equity Series (the "Trust") consists of the following
funds: Reserve Blue Chip Growth Fund, Reserve Emerging Growth Fund, Reserve
Growth and Income Fund, Reserve Informed Investors Growth Fund, Reserve
International Equity Fund, Reserve Large-Cap Value Fund, Reserve Mid-Cap
Growth Fund, and Reserve North American Growth Fund. The Trust was formed
under Delaware law as a Delaware business trust. The Trust is registered
under the Investment Company Act of 1940, as amended, as a non-diversified
open-end management investment company. There are an unlimited number of
shares of beneficial interest of $.001 par value authorized in each series.
The Trust offers both Class A and Class D shares of each Fund. Class A shares
are sold with an initial sales charge and Class D shares are sold without an
initial sales charge. Both classes of shares have identical voting, dividend,
liquidation and other rights, and the same terms and conditions, except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan.
The accounting policies summarized below are consistently followed in
preparation of the financial statements in conformity with generally accepted
accounting principles.
SECURITY VALUATION
Portfolio securities are stated at value. A security listed or traded on an
exchange is valued at its last sale price on the exchange where the security
is principally traded or, lacking any sales on a particular day, the security
is valued at the mean between the closing bid and asked prices on that day.
Each security traded in the over-the-counter market is valued at the mean
between its quoted bid and asked prices. Where market quotations are not
readily available, the securities are valued at their fair value as
determined in good faith by or under direction of the Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date. Dividend income and
distributions to shareholders are recorded on the ex-dividend dates. Interest
income is accrued daily. Realized gains and losses from securities
transactions and unrealized appreciation or depreciation of securities are
reported on the identified cost basis for both financial statement and
federal income tax purposes.
Income and capital gain distributions are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for net operating losses and the recognition of net realized gains
and losses. Accordingly, the effect of differing financial reporting and
federal income tax treatments have been reclassified among the components of
net assets at May 31, 1996 as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
----------------------------------------
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT REALIZED
CAPITAL INCOME GAIN (LOSS)
------- -------------- -----------
<S> <C> <C> <C>
Reserve Blue Chip Growth Fund......................................... 5,361 34,916 (40,277)
Reserve Emerging Growth Fund.......................................... 4,689 57,980 (62,669)
Reserve Informed Investors Growth Fund................................ -- 147,983 (147,983)
Reserve International Equity Fund..................................... (17,145) 17,145 --
Reserve Large-Cap Value Equity Fund................................... (1,091) 1,091 --
Reserve Mid-Cap Growth Fund........................................... (7,708) 24,899 (17,191)
Reserve North American Growth Fund.................................... (32,656) 32,656 --
</TABLE>
These reclassifications had no effect on net investment income, net realized
gain on investments, or net assets for the year ended May 31, 1996.
FOREIGN CURRENCY TRANSLATION
With respect to the Reserve International Equity Fund, assets and liabilities
denominated in a foreign currency are translated into U.S. dollars using
exchange rates on the valuation date. Purchases and sales of securities,
expense payments and income receipts are translated into U.S. dollars using
the exchange rate on the transaction date. The Trust does not segregate that
portion of the results of operations resulting from changes in foreign
exchange rates from the portion resulting from changes in market prices of
securities held; both are included in net realized and unrealized gains or
losses on investments and foreign currency transactions.
33
<PAGE> 180
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
FEDERAL INCOME TAXES
It is the Trust's policy for each Fund to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended, by
complying with the requirements of the Internal Revenue Code applicable to
regulated investment companies, and to distribute substantially all of its
taxable income, including net realized capital gains to its shareholders.
Accordingly, no federal income tax provision is required.
For federal income tax purposes, the following Funds indicated below had
capital loss carryforwards at May 31, 1996, which are available to offset
future realized capital gains, if any:
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
CARRYFORWARD YEAR
------------ -----------
<S> <C> <C>
Reserve Growth and Income Fund..................................................... $ 111 2004
Reserve International Equity Fund.................................................. 71,968 2004
Reserve North American Growth Fund................................................. 83,525 2004
</TABLE>
2. INVESTMENT ACTIVITY
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the period ended May 31, 1996, were as
follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
RESERVE FUND PURCHASES SALES
------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Blue Chip Growth Fund.......................................................... $ 4,629,931 $ 2,573,982
Emerging Growth Fund........................................................... 4,850,242 1,201,292
Growth and Income Fund......................................................... 822,642 28,263
Informed Investors Growth Fund................................................. 11,122,332 13,684,285
International Equity Fund...................................................... 4,384,944 1,368,647
Large-Cap Value Fund........................................................... 1,115,010 --
Mid-Cap Growth Fund............................................................ 4,338,530 3,071,543
North American Growth Fund..................................................... 3,291,738 1,272,486
</TABLE>
3. INVESTMENT MANAGEMENT AGREEMENT
Reserve Management Company, Inc. (RMCI), serves as the Funds' investment
adviser and pays substantially all ordinary operating expenses of the Funds
for which it receives a comprehensive fee at an annual rate of 1.50% of the
average daily net assets of each Fund other than the International Equity
Fund for which it receives 1.75%. RMCI is currently waiving a portion of its
comprehensive fee.
For each Fund, RMCI has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with the Sub-Advisers. It is the responsibility of a
Sub-Adviser to make the day-to-day investment decision of the Funds and to
place the purchase and sales orders for securities transactions, subject in
all cases to the general supervision of RMCI. For services under each
Subadvisory Agreement, RMCI pays a fee up to an annual rate equal to the
percentages specified in the table below of the corresponding Funds' average
net assets.
<TABLE>
<CAPTION>
SUB-ADVISER'S
RESERVE FUND PORTFOLIO SUB-ADVISER FEE
----------------------------------------- ------------------------------------------------- -------------
<S> <C> <C>
Blue Chip Growth Fund Trainer, Wortham & Company, Inc. 0.75%
Emerging Growth Fund Roanoke, Asset Management Corp. 0.75%
Growth and Income Fund Kenneth J. Gerbino & Company 0.75%
Informed Investors Growth Fund T. H. Fitzgerald & Company 0.75%
International Equity Fund Pinnacle Associates Limited 0.875%
Large-Cap Value Fund Siphron Capital Management 0.75%
Mid-Cap Growth Fund Cambridge Equity Advisors (6/1/95-4/18/96) 0.75%
Southern Capital Advisors (4/19/96-5/31/96) 0.75%
North American Growth Fund Southern Capital Advisors 0.75%
</TABLE>
Trainer, Wortham & Company, Inc. owns 33% of the outstanding shares of the
Reserve Blue Chip Growth Fund at May 31, 1996.
34
<PAGE> 181
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
4. DISTRIBUTION ASSISTANCE
Pursuant to a Distribution Plan under Rule 12b-1, the Funds will make
payments to Resrv Partners, Inc. (RPI), the Funds' distributor of .25% per
annum for Class A and 1.00% per annum for Class D of the average daily net
assets of shareholder accounts as to which the payee has rendered
distribution assistance. During the period, the Funds paid distribution
expenses to RPI as follows:
<TABLE>
<CAPTION>
RESERVE FUND CLASS A CLASS D
------------------------------------------------------------------------------------- ------- -------
<S> <C> <C>
Blue Chip Growth Fund................................................................ $ 9,247 $ 66
Emerging Growth Fund................................................................. 8,481 192
Growth and Income Fund............................................................... 754 0
Informed Investors Growth Fund....................................................... 23,619 26
International Equity Fund............................................................ 4,734 12
Large-Cap Value Fund................................................................. 841 0
Mid-Cap Growth Fund.................................................................. 3,830 5
North American Growth Fund........................................................... 17 16,268
</TABLE>
As of May 31, 1996, RPI owned 4%, 24%, 31%, 21%, 6%, and 24% of the Reserve
Emerging Growth Fund, Reserve Growth and Income Fund, Reserve International
Equity Fund, Reserve Large-Cap Value Fund, Reserve Mid-Cap Growth Fund and
Reserve North American Growth Fund, respectively.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock of each Fund for the period ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- -----------------
FEBRUARY 13, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
--------------------- -----------------
RESERVE BLUE CHIP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------- ------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold............................................................... 203,145 $2,716,393 2,865 $40,705
Reinvested......................................................... 12,752 164,889 -- --
Redeemed........................................................... (37,574) (517,167) -- --
------- ---------- ------ -------
Net increase....................................................... 178,323 $2,364,115 2,865 $40,705
======== ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ------------------
FEBRUARY 26, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
--------------------- ------------------
RESERVE EMERGING GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------- ------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold................................................................ 251,367 $4,052,411 12,448 $229,569
Reinvested.......................................................... 5,916 93,770 -- --
Redeemed............................................................ (18,653) (301,485) -- --
------- ---------- ------ --------
Net increase........................................................ 238,630 $3,844,696 12,448 $229,569
======== ========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MAY 13, 1996
JANUARY 2, 1996 (COMMENCEMENT
(COMMENCEMENT OF OPERATIONS)
OF OPERATIONS) TO TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE GROWTH AND INCOME FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold................................................................ 103,914 $1,042,819 147 $1,500
Redeemed............................................................ (573) (5,844) -- --
------- ---------- ------ ------
Net increase........................................................ 103,341 $1,036,975 147 $1,500
======== ========== ====== ======
</TABLE>
35
<PAGE> 182
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
----------------------- ------------------
FEBRUARY 13, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
----------------------- ------------------
RESERVE INFORMED INVESTORS GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- -------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold............................................................. 458,428 $ 6,230,788 1,953 $ 24,151
Reinvested....................................................... 56,312 790,060 -- --
Redeemed......................................................... (639,631) (8,479,206) (909) (11,076)
-------- ----------- ------ --------
Net increase..................................................... (124,891) $(1,458,358) 1,044 $ 13,075
========= ============ ====== =========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MARCH 11, 1996
JULY 13, 1995 (COMMENCEMENT
(COMMENCEMENT OF OPERATIONS)
OF OPERATIONS) TO TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE INTERNATIONAL EQUITY FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold............................................................. 329,964 $3,459,234 552 $6,000
Redeemed......................................................... (12,037) (122,619) -- --
------- ---------- ------ ------
Net increase..................................................... 317,927 $3,336,615 552 $6,000
======== ========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CLASS A
---------------------
JANUARY 2, 1996
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1996
---------------------
RESERVE LARGE-CAP VALUE FUND SHARES AMOUNT
- ----------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................. 112,729 $1,165,180
Redeemed......................................................... (292) (3,152)
------- ----------
Net increase..................................................... 112,437 $1,162,028
======== ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MARCH 29, 1996
(COMMENCEMENT
OF OPERATIONS)
YEAR ENDED TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE MID-CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold............................................................. 183,603 $2,004,087 374 $4,250
Redeemed......................................................... (59,920) (666,471) -- --
------- ---------- ------ ------
Net increase..................................................... 123,683 $1,337,616 374 $4,250
======== ========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
------------------ ---------------------
MARCH 13, 1996
(COMMENCEMENT
OF OPERATIONS) TO YEAR ENDED
MAY 31, 1996 MAY 31, 1996
------------------ ---------------------
RESERVE NORTH AMERICAN GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------ -------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................................................. 11,491 $139,077 207,997 $2,206,682
Redeemed......................................................... (810) (10,000) (11,798) (133,694)
------ -------- ------- ----------
Net increase..................................................... 10,681 $129,077 196,199 $2,072,988
====== ========= ======== ==========
</TABLE>
36
<PAGE> 183
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
Transactions in capital stock of each Fund for the period ended May 31, 1995,
were as follows:
<TABLE>
<CAPTION>
OCTOBER 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
-----------------------
RESERVE BLUE CHIP GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................................... 214,923 $2,257,822
Redeemed........................................................................... (49,164) (520,420)
------- ----------
Net increase....................................................................... 165,759 $1,737,402
======== ==========
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 14, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
------------------------
RESERVE EMERGING GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- -------- ----------
<S> <C> <C>
Sold............................................................................... 218,209 $2,268,282
Redeemed........................................................................... (116,596) (1,251,282)
-------- ----------
Net increase....................................................................... 101,613 $1,017,000
========= ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
-----------------------
RESERVE INFORMED INVESTORS GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................................... 634,326 $6,422,521
Redeemed........................................................................... (64,254) (656,742)
------- ----------
Net increase....................................................................... 570,072 $5,765,779
======== ==========
</TABLE>
6. MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
37
<PAGE> 184
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31,
1996--(CONTINUED)
7. SUPPLEMENTARY INFORMATION (FOR EACH SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
CLASS D
CLASS A ----------------
-------------------------------- FEBRUARY 13,
OCTOBER 28, 1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE BLUE CHIP GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $12.03 $10.00 $13.49
------ ------ ------
Income from investment operations
Net investment loss....................................... (.10) (.03) (.04)
Net realized and unrealized gain.......................... 3.62 2.06 1.43
------ ------ ------
Total from investment operations............................ 3.52 2.03 1.39
Less distribution from net realized gain.................... (.64) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $14.91 $12.03 $14.88
====== ====== ======
Total Return................................................ 30.10% 20.30%(2) 10.30%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $5,130 $1,993 $ 43
Ratio of expenses to average net assets before waiver....... 1.75% 1.75%(1) 2.50%(1)
Ratio of expenses to average net assets, net of waiver...... 1.75% 1.73%(1) 2.50%(1)
Ratio of net investment loss to average net assets, before
waiver.................................................... (0.94)% (0.72)%(1) (1.70)%(1)
Ratio of net investment loss to average net assets, net of
waiver.................................................... (0.94)% (0.70)%(1) (1.70)%(1)
Portfolio turnover rate..................................... 72% 68% 72%
Average commission per share on Macromedia portfolio
transactions.............................................. $ 0.06 N/A $ 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
-------------------------------- ----------------
NOVEMBER 14, FEBRUARY 26,
1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE EMERGING GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $12.21 $10.00 $16.88
------ ------ ------
Income from investment operations
Net investment loss....................................... (.17) (.09) (.04)
Net realized and unrealized gain.......................... 8.05 2.30 2.68
------ ------ ------
Total from investment operations............................ 7.88 2.21 2.64
Less distribution from net realized gain.................... (0.53) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $19.56 $12.21 $19.52
====== ====== ======
Total Return................................................ 65.55% 22.10%(2) 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $6,657 $1,241 $ 243
Ratio of expenses to average net assets..................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets.......... (1.70)% (1.62)%(1) (2.48)%(1)
Portfolio turnover rate..................................... 38% 43% 38%
Average commission per share on portfolio transactions...... $ 0.01 N/A $ 0.01
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
38
<PAGE> 185
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JANUARY 2, 1996 MAY 13, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE GROWTH AND INCOME FUND MAY 31, 1996 MAY 31, 1996
- ------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period..................................... $10.00 $10.19
------ ------
Income from investment operations
Net investment income (loss)........................................... 0.09 0.00
Net realized and unrealized gain (loss)................................ 0.08 (0.02)
------ ------
Total from investment operations......................................... 0.17 (0.02)
------ ------
NET ASSET VALUE, end of period........................................... $10.17 $10.17
====== ======
Total Return............................................................. 1.70%(2) (0.2)%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................................... $1,051 $ 1
Ratio of expenses to average net assets.................................. 1.75%(1) 2.23%(1)
Ratio of net investment income to average net assets..................... 3.15%(1) 0.00%(1)
Portfolio turnover rate.................................................. 17% 17%
Average commission per share on portfolio transactions................... $ 0.08 $ 0.08
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JULY 13, 1995 MARCH 11, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE INTERNATIONAL EQUITY FUND MAY 31, 1996 MAY 31, 1996
- ------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period..................................... $10.00 $10.79
------ ------
Income from investment operations
Net investment loss.................................................... (0.05) (0.01)
Net realized and unrealized gain....................................... 1.31 0.47
------ ------
Total from investment operations......................................... 1.26 0.46
------ ------
NET ASSET VALUE, end of period........................................... $11.26 $11.25
====== ======
Total Return............................................................. 12.60%(2) 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................................... $3,578 $ 6
Ratio of expenses to average net assets before waiver.................... 2.00%(1) 2.75%(1)
Ratio of expenses to average net assets, net of waiver................... 1.99%(1) 2.75%(1)
Ratio of net investment loss to average net assets, before waiver........ (0.92)%(1) (0.70)%(1)
Ratio of net investment loss to average net assets, net of waiver........ (0.91)%(1) (0.70)%(1)
Portfolio turnover rate.................................................. 70% 70%
Average commission per share on portfolio transactions................... $ 0.02 $ 0.02
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
39
<PAGE> 186
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------------------- ----------------
DECEMBER 28, 1994 MARCH 22, 1996
(COMMENCEMENT (COMMENCEMENT OF
YEAR ENDED OF OPERATIONS) TO OPERATIONS) TO
RESERVE INFORMED INVESTORS GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ----------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $11.99 $ 10.00 $12.29
------ ------ ------
Income from investment operations
Net investment loss....................................... (0.33) (.07) (.06)
Net realized and unrealized gain.......................... 3.87 2.06 2.10
------ ------ ------
Total from investment operations............................ 3.54 1.99 2.04
Less distribution from net realized gain.................... (1.17) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $14.36 $ 11.99 $14.33
====== ====== ======
Total Return................................................ 29.75% 19.90%(2) 16.60%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $6,393 $ 6,837 $ 15
Ratio of expenses to average net assets..................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets.......... (1.57)% (1.62)%(1) (2.32)%(1)
Portfolio turnover rate..................................... 132% 59% 132%
Average commission per share on portfolio transactions...... $ 0.05 N/A $ 0.05
</TABLE>
<TABLE>
<CAPTION>
CLASS A
----------------
JANUARY 2, 1996
(COMMENCEMENT OF
OPERATIONS) TO
RESERVE LARGE-CAP VALUE FUND MAY 31, 1996
- ------------------------------------------------------------------------------------------ ----------------
<S> <C>
NET ASSET VALUE, beginning of period...................................................... $10.00
------
Income from investment operations
Net investment loss..................................................................... (0.01)
Net realized and unrealized gain........................................................ 0.96
------
Total from investment operations.......................................................... 0.95
------
NET ASSET VALUE, end of period............................................................ $10.95
======
Total Return.............................................................................. 9.50%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period.................................................... $1,231
Ratio of expenses to average net assets................................................... 1.75%(1)
Ratio of net investment loss to average net assets........................................ (0.32)%(1)
Portfolio turnover rate................................................................... 0%
Average commission per share on portfolio transactions.................................... $ 0.08
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
40
<PAGE> 187
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
------------ ----------------
MARCH 29, 1996
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
RESERVE MID-CAP GROWTH FUND MAY 31, 1996 MAY 31, 1996
- ----------------------------------------------------------------------------- ------------ ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period......................................... $10.00 $11.03
------ ------
Income from investment operations
Net investment loss........................................................ (.20) (.03)
Net realized and unrealized gain........................................... 2.28 1.07
------ ------
Total from investment operations............................................. 2.08 1.04
------ ------
NET ASSET VALUE, end of period............................................... $12.08 $12.07
====== ======
Total Return................................................................. 20.80% 9.43%(2)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period....................................... $1,495 $ 5
Ratio of expenses to average net assets...................................... 1.75% 2.50%(1)
Ratio of net investment loss to average net assets........................... (1.62)% (2.04)%
Portfolio turnover rate...................................................... 225% 225%
Average commission per share on portfolio transactions....................... $ 0.06 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ------------
MARCH 13, 1996
(COMMENCEMENT OF
OPERATIONS) TO YEAR ENDED
RESERVE NORTH AMERICAN GROWTH FUND MAY 31, 1996 MAY 31, 1996
- ----------------------------------------------------------------------------- ---------------- ------------
<S> <C> <C>
NET ASSET VALUE, beginning of period......................................... $10.94 $10.00
------ ------
Income from investment operations
Net investment loss........................................................ (0.01) (0.17)
Net realized and unrealized gain........................................... 1.36 2.44
------ ------
Total from investment operations............................................. 1.35 2.27
------ ------
NET ASSET VALUE, end of period............................................... $12.29 $12.27
====== ======
Total Return................................................................. 12.34%(2) 22.70%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period....................................... $ 131 $2,408
Ratio of expenses to average net assets...................................... 1.74%(1) 2.49%(1)
Ratio of net investment loss to average net assets........................... (0.97)%(1) (2.00)%(1)
Portfolio turnover rate...................................................... 85% 85%
Average commission per share on portfolio transactions....................... $ 0.04 $ 0.04
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
41
<PAGE> 188
THE RESERVE PRIVATE EQUITY SERIES--RESERVE BLUE CHIP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BANKS (3.5%)
Banc One Corporation................................................................. 4,850 $ 179,450
----------
BUSINESS EQUIPMENT (3.0%)
Xerox Corporation.................................................................... 1,000 157,375
----------
COMPUTER NETWORKING (3.4%)
Cisco Systems, Inc.*................................................................. 3,200 175,200
----------
COMPUTER SOFTWARE (11.8%)
CUC International, Inc.*............................................................. 5,000 203,500
Microsoft Corporation*............................................................... 1,500 178,125
National Data Corporation............................................................ 6,000 226,500
----------
608,125
----------
ELECTRICAL EQUIPMENT (1.9%)
American Superconductor Corporation*................................................. 7,000 98,000
----------
ELECTRONICS (3.5%)
Perceptron, Inc.*.................................................................... 5,000 180,625
----------
FINANCIAL SERVICES (3.6%)
Citicorp............................................................................. 2,200 184,800
----------
MEDICAL SUPPLIES (2.2%)
LaserSight Corporation*.............................................................. 10,000 115,000
----------
MISCELLANEOUS MANUFACTURING (4.4%)
Warnaco Group, Inc. ................................................................. 8,000 227,000
----------
MULTI-LINE INSURANCE (4.5%)
American International Group, Inc. .................................................. 2,500 235,625
----------
OIL/GAS EQUIPMENT SERVICES (9.0%)
Petroleum Geo-Services--ADR*......................................................... 7,000 214,375
Schlumberger, Ltd. .................................................................. 3,000 250,125
----------
464,500
----------
PACKAGED SOFTWARE (2.8%)
Computer Associates International, Inc. ............................................. 2,000 145,500
----------
PHARMACEUTICALS (8.8%)
Johnson & Johnson.................................................................... 2,000 194,750
Eli Lilly & Company.................................................................. 1,000 64,250
Merck & Company, Inc. ............................................................... 3,000 193,875
----------
452,875
----------
PUBLISHING (5.3%)
Harte-Hanks Communications........................................................... 10,500 276,938
----------
PUBLISHING--NEWSPAPERS (2.8%)
Tribune Company...................................................................... 2,000 148,250
----------
REAL ESTATE (4.5%)
Insignia Financial Group, Inc. Class A*.............................................. 9,000 234,000
----------
RETAIL SPECIALTY (3.0%)
Home Depot, Inc. .................................................................... 3,000 153,375
----------
</TABLE>
10
<PAGE> 189
THE RESERVE PRIVATE EQUITY SERIES--RESERVE BLUE CHIP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
SPECIAL INDUSTRIAL MACHINERY (6.2%)
Thermo Electron Corporation*......................................................... 5,000 $ 318,750
----------
TELECOMMUNICATIONS (4.0%)
CommNet Cellular, Inc.*.............................................................. 6,000 206,250
----------
TELECOMMUNICATIONS EQUIPMENT (6.7%)
Glenayre Technologies, Inc.*......................................................... 7,075 348,443
----------
TOTAL COMMON STOCKS (Cost $3,765,486) (94.9%).......................................... 4,910,081
Other assets, less liabilities (5.1%).................................................. 262,077
----------
NET ASSETS (100%)...................................................................... $5,172,158
==========
</TABLE>
- ------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $3,765,486, the aggregate gross unrealized appreciation for all
investments was $1,159,820 and aggregate gross unrealized depreciation for all
investments was $15,225.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BIO-TECHNOLOGY (3.3%)
Alliance Pharmaceutical Corporation*.................................................. 4,000 $ 86,500
Genzyme Corporation*.................................................................. 2,400 139,800
----------
226,300
----------
CAPITAL GOODS -- DIVERSIFIED (1.8%)
Danaher Corporation................................................................... 3,000 124,500
----------
CAPITAL GOODS/INDUSTRIAL (1.5%)
Vishay Intertechnology, Inc.*......................................................... 3,654 100,943
----------
COMMUNICATION -- EQUIPMENT (5.1%)
ANADIGICS, Inc.*...................................................................... 3,000 79,500
ECI Telecommunications Ltd. Designs................................................... 5,000 132,500
FORE Systems, Inc.*................................................................... 1,700 137,700
----------
349,700
----------
COMMUNICATION -- NETWORK (8.8%)
Heartland Wireless Communications, Inc.*.............................................. 3,500 94,500
IntelCom Group Inc.*.................................................................. 5,000 132,500
Pairgain Technologies, Inc.*.......................................................... 1,500 152,625
People's Choice TV Corporation*....................................................... 4,000 68,000
Wireless One, Inc.*................................................................... 8,500 157,250
----------
604,875
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 190
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
COMPUTER NETWORKING (8.7%)
Ascend Communications, Inc.*.......................................................... 3,600 $ 240,750
Bay Networks Inc.*.................................................................... 1,950 56,550
Shiva Corporation*.................................................................... 2,400 179,400
3Com Corporation*..................................................................... 2,500 123,125
----------
599,825
----------
COMPUTER SOFTWARE (11.0%)
Business Objects S. A. -- ADR*........................................................ 2,000 93,000
Data Translation, Inc.*............................................................... 8,000 212,000
Dendrite International, Inc.*......................................................... 3,500 95,375
Edify Corporation*.................................................................... 1,000 42,000
EPIC Design Technology, Inc.*......................................................... 3,000 88,500
Fractal Design Corp.*................................................................. 5,000 77,500
Oacis Healthcare Holding Corp.*....................................................... 3,000 49,500
Sapient Corporation*.................................................................. 2,000 100,000
----------
757,875
----------
CONSUMER GROWTH (3.8%)
Activision, Inc.*..................................................................... 5,000 68,125
Conso Products Company*............................................................... 5,750 100,625
Electronic Arts, Inc.*................................................................ 1,200 37,950
Lin Television Corporation*........................................................... 1,700 54,400
----------
261,100
----------
ELECTRIC MEASUREMENT & TESTING INSTRUMENTS (1.4%)
Opal, Inc.*........................................................................... 5,500 100,375
----------
ENERGY (1.8%)
Cross Timbers Oil Company............................................................. 5,500 123,062
----------
HEALTH (5.6%)
HCIA, Inc.*........................................................................... 2,300 148,925
National Dentex Corporation*.......................................................... 6,000 138,000
PacifiCare Health Systems, Inc.*...................................................... 1,200 99,300
----------
386,225
----------
MANAGED CARE (4.8%)
Healthsource, Inc.*................................................................... 4,000 90,500
MedPartners/Mullikin, Inc.*........................................................... 4,500 105,188
PhyCor, Inc.*......................................................................... 2,525 136,981
----------
332,669
----------
MISCELLANEOUS CONSUMER (1.4%)
On Assignment, Inc.*.................................................................. 2,500 100,625
----------
OFFICE-BUSINESS EQUIPMENT (1.3%)
HPR Inc.*............................................................................. 4,000 93,000
----------
PAPER (1.1%)
Data Documents, Inc.*................................................................. 6,000 76,500
----------
</TABLE>
12
<PAGE> 191
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
PHARMACEUTICALS (3.4%)
Centocor, Inc.*....................................................................... 3,200 $ 113,200
Dura Pharmaceuticals, Inc.*........................................................... 2,000 123,250
----------
236,450
----------
RADIO, TV & BROADCAST COMM. EQUIP. (1.5%)
American Telecasting, Inc.*........................................................... 7,500 105,937
----------
RESTAURANTS (3.2%)
Cheesecake Factory (The)*............................................................. 2,500 66,250
Outback Steakhouse, Inc.*............................................................. 3,000 113,625
Volunteer Capital Corporation*........................................................ 4,000 43,500
----------
223,375
----------
RETAIL -- SPECIALTY (8.1%)
Borders Group, Inc.*.................................................................. 4,500 147,375
PetSmart, Inc.*....................................................................... 3,000 133,500
Staples, Inc.*........................................................................ 6,325 126,500
The Sports Authority, Inc.*........................................................... 5,000 148,750
----------
556,125
----------
SEMICONDUCTOR-RELATED DEVICE (5.2%)
Credence Systems Corporation*......................................................... 2,500 50,625
Intel Corporation..................................................................... 1,800 135,900
KLA Instruments Corporation*.......................................................... 3,000 81,000
LSI Logic Corporation*................................................................ 3,000 93,375
----------
360,900
----------
SYSTEM SOFTWARE/CLIENT SERVER (4.0%)
Hummingbird Communications Ltd.*...................................................... 3,400 138,125
Informix Corporation*................................................................. 6,000 136,500
----------
274,625
----------
TELECOMMUNICATIONS (2.5%)
Cascade Communications Corp.*......................................................... 3,000 169,125
----------
TELECOMMUNICATIONS EQUIPMENT (6.2%)
Comverse Technology, Inc.*............................................................ 4,000 117,500
DSC Communications Corporation*....................................................... 2,000 60,250
Newbridge Networks Corporation*....................................................... 1,800 128,025
P-COM, Inc.*.......................................................................... 4,000 119,500
----------
425,275
----------
TOTAL COMMON STOCKS (Cost $4,765,851) (95.5%)........................................... 6,589,386
Other assets, less liabilities (4.5%)................................................... 310,054
----------
NET ASSETS (100%)....................................................................... $6,899,440
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets
* Non-income producing security.
For Federal income tax purposes the tax basis of investments owned at May 31,
1996 was $4,765,851, the aggregate gross unrealized appreciation for all
investments was $1,941,417 and aggregate gross unrealized depreciation for all
investments was $117,882.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 192
THE RESERVE PRIVATE EQUITY SERIES--RESERVE GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- -------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
AUTO (1.9%)
Chrysler Corporation................................................................ 300 $ 19,988
----------
BANKS (5.3%)
Bankers Trust New York Corporation.................................................. 500 37,563
First of America Bank Corporation................................................... 400 18,300
----------
55,863
----------
COMPUTER NETWORKING (3.1%)
Cisco Systems, Inc. ................................................................ 600 32,850
----------
COMPUTERS (3.0%)
Hewlett-Packard Company............................................................. 300 32,025
----------
ELECTRIC UTILITIES (15.5%)
Consolidated Edison Company of New York, Inc. ...................................... 1,400 39,025
Hawaiian Electric Industries, Inc. ................................................. 1,300 44,200
Minnesota Power and Light Company................................................... 1,500 40,313
Southwestern Public Service Company................................................. 1,300 39,812
----------
163,350
----------
FERTILIZERS (1.9%)
Freeport McMoran Resource Partners Ltd. ............................................ 1,000 20,000
----------
MISCELLANEOUS ENERGY (2.0%)
LL & E Royalty Trust................................................................ 4,500 21,375
----------
OIL-INTERNATIONAL (2.3%)
Chevron Corporation................................................................. 400 23,900
----------
PHARMACEUTICALS (1.2%)
Merck & Company Inc. ............................................................... 200 12,925
----------
REAL ESTATE (1.9%)
Commercial Net Lease Realty Inc. ................................................... 1,500 20,063
----------
RESTAURANTS (1.9%)
Lone Star Steakhouse & Saloon....................................................... 500 20,188
----------
RETAIL-SPECIALTY (3.6%)
Home Depot, Inc. ................................................................... 300 15,338
Tiffany & Company................................................................... 300 22,762
----------
38,100
----------
SEMICONDUCTOR-RELATED DEVICE (3.2%)
Texas Instruments, Inc. ............................................................ 600 33,750
----------
TELECOMMUNICATIONS (3.5%)
GTE Corporation..................................................................... 400 17,100
Telecom Corporation of New Zealand, Ltd. (ADR)...................................... 300 19,688
----------
36,788
----------
TELEPHONE (3.0%)
AT & T Corporation.................................................................. 500 31,188
----------
</TABLE>
14
<PAGE> 193
THE RESERVE PRIVATE EQUITY SERIES--RESERVE GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL VALUE
COMMON STOCKS AMOUNT (NOTE 1)
- -------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
UTILITIES-TELECOMMUNICATION (1.8%)
NYNEX Corporation................................................................... 400 $ 18,450
----------
TOTAL COMMON STOCKS (Cost $576,535) (55.1%)........................................... $ 580,803
==========
<CAPTION>
PREFERRED STOCKS
- --------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (4.0%)
Lehman Brothers Holdings, Inc. Series A 8.30%....................................... 1,000 24,625
Sunamerica Capital Trust, 8.35%..................................................... 700 17,500
----------
42,125
----------
GOLD MINING (1.5%)
Battle Mountain Gold Company, $3.25................................................. 300 15,525
----------
LIFE INSURANCE (2.2%)
Conseco Inc., 6.50% Series D........................................................ 400 23,100
----------
PROPERTY-LIABILITY INSURANCE (3.5%)
Travelers/P&C Cap I Preferred Trust, 8.08%.......................................... 1,500 36,938
----------
TOTAL PREFERRED STOCKS (Cost $117,775) (11.2%)........................................ $ 117,688
==========
<CAPTION>
CONVERTIBLE BONDS
- --------------------------------------------------------------------------------------
<S> <C> <C>
HOTEL-MOTEL (2.4%)
Hilton Hotels Corp. 5.00%, 05/15/06................................................. 25,000 25,062
----------
STEEL (2.4%)
USX Corp. 7.00%, 06/15/17........................................................... 25,000 24,125
----------
TOTAL CONVERTIBLE BONDS (Cost $49,045) (4.8%)......................................... $ 49,187
==========
US TREASURY NOTES
- --------------------------------------------------------------------------------------
US Treasury Notes, 7.375%, 11/15/97 (Cost $50,913)(4.9%)............................ 50,000 50,867
----------
TOTAL INVESTMENT SECURITIES (Cost $794,268) (76.0%)................................... 798,545
Other assets, less liabilities (24.0%)................................................ 253,611
----------
NET ASSETS (100%)..................................................................... $1,052,156
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $794,268, the aggregate gross unrealized appreciation for all
investments was $30,992, and aggregate gross unrealized depreciation for all
investments was $26,715.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 194
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INFORMED INVESTORS GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
SHARES/ VALUE
COMMON STOCKS UNITS (NOTE 1)
- --------------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
AIR TRANSPORT (4.0%)
Comair Holdings, Inc. ............................................................... 9,750 $ 255,938
----------
BUSINESS EQUIPMENT/SERVICES (2.6%)
Equifax, Inc......................................................................... 6,700 165,825
----------
COMPUTER NETWORKING (4.4%)
Cisco Systems, Inc.*................................................................. 5,200 284,700
----------
COMPUTER SOFTWARE (3.9%)
CompUSA, Inc.*....................................................................... 5,700 249,375
----------
COMPUTERS (9.6%)
Sun Microsystems, Inc.*.............................................................. 9,800 613,725
----------
FOOD (3.7%)
Safeway, Inc.*....................................................................... 7,000 236,250
----------
MACHINERY-CONSTRUCTION (3.7%)
JLG Industries, Inc.................................................................. 3,000 237,375
----------
MAGNETIC OPTICAL RECORDING MEDIA (5.5%)
Komag, Inc.*......................................................................... 10,200 353,175
----------
PACKAGED SOFTWARE (11.2%)
Cadence Design Systems, Inc.*........................................................ 12,700 720,725
----------
SEMICONDUCTOR, RELATED DEVICE (9.1%)
Analog Devices, Inc.*................................................................ 1,100 30,387
Atmel Corporation*................................................................... 15,500 550,250
----------
580,637
----------
SHOES (5.3%)
Nike, Inc. .......................................................................... 3,400 341,275
----------
SPECIAL INDUSTRIAL MACHINERY (5.1%)
Applied Materials, Inc.*............................................................. 8,700 324,075
----------
TELEPHONE & TELGRAPH APPARATUS (29.0%)
Aspect Telecommunications Corporation*............................................... 7,500 425,625
Tellabs, Inc.*....................................................................... 1,200 77,400
U.S. Robotics Corporation*........................................................... 14,800 1,357,900
----------
1,860,925
----------
TOTAL COMMON STOCKS (Cost $3,783,862) (97.1%).......................................... 6,224,000
Other assets, less liabilities (2.9%).................................................. 184,063
----------
NET ASSETS (100%)...................................................................... $6,408,063
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For Federal income tax purposes the tax basis of investments owned at May 31,
1996 was $3,783,862, the aggregated gross unrealized appreciation for all
investments was $2,494,427 and aggregate gross unrealized depreciation for all
investments was $54,289.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 195
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AUSTRALIA (1.2%)
Coca Cola Amatil Ltd. ............................................................... 4,074 $ 44,377
----------
FRANCE (4.7%)
Altran Technologies.................................................................. 120 34,918
Axime................................................................................ 260 35,305
Carrefour............................................................................ 120 65,777
Carrefour (Rights expiring 7/2/96)................................................... 120 33,040
----------
169,040
----------
GERMANY (3.7%)
Altana AG............................................................................ 50 31,550
Fresenius AG......................................................................... 350 61,244
Gehe AG.............................................................................. 65 41,825
----------
134,619
----------
HONG KONG (10.1%)
CDL Hotels International Limited..................................................... 68,000 38,676
Giordano International Ltd. ......................................................... 24,000 21,562
Goldlion Holdings Ltd. .............................................................. 25,000 20,521
Hang Seng Bank Ltd. ................................................................. 7,000 73,067
Hong Kong & China Gas Company........................................................ 31,800 50,561
Hong Kong & China Gas Company (Warrants -- expires 9/30/97).......................... 1,900 87
Manhattan Card Company Ltd. ......................................................... 68,000 32,743
National Mutual Asia Ltd. ........................................................... 44,000 39,814
Sun Hung Kai Properties Ltd. ........................................................ 6,000 61,272
Wing Hang Bank Ltd. ................................................................. 6,000 23,423
----------
361,726
----------
INDONESIA (5.6%)
PT Bank Internasional Indonesia...................................................... 10,000 52,220
PT Darya Varia Laboratoria........................................................... 20,000 42,033
PT Darya Varia Laboratoria (Rights expiring 6/3/96).................................. 2,400 0
PT Gudang Garam...................................................................... 4,000 32,597
PT Steady Safe....................................................................... 11,000 14,626
PT Telekomunikasi Indonesia.......................................................... 38,000 57,860
----------
199,336
----------
ITALY (1.4%)
Telecom Italia SpA................................................................... 8,000 16,145
Telecom Italia Mobile SpA............................................................ 25,000 33,041
----------
49,186
----------
JAPAN (1.0%)
Paris Miki, Inc. .................................................................... 800 35,057
----------
</TABLE>
17
<PAGE> 196
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
MALAYSIA (8.3%)
Arab-Malaysian Merchant Bank Berhad.................................................. 2,000 $ 27,043
Commerce Asset Holding Berhad........................................................ 10,000 67,308
DCB Holdings Berhad.................................................................. 8,000 26,603
Malayan Banking Berhad............................................................... 4,000 37,981
Malaysian Assurance Alliance Berhad.................................................. 11,625 57,287
O.Y.L. Industries Berhad............................................................. 6,000 59,615
United Engineers (Malaysia) Ltd. .................................................... 3,000 20,913
----------
296,750
----------
NETHERLANDS (4.4%)
Elsevier............................................................................. 4,000 62,207
Heineken............................................................................. 200 40,786
Wolters Kluwer....................................................................... 502 56,239
----------
159,232
----------
NORWAY (1.4%)
Tomra Systems........................................................................ 5,000 48,779
----------
PHILIPPINES (1.6%)
Bankard, Inc. ....................................................................... 60,000 29,221
DMCI Holdings Inc. .................................................................. 37,000 27,206
----------
56,427
----------
SINGAPORE (5.6%)
City Developments Limited............................................................ 6,000 46,055
DBS Land Limited..................................................................... 12,000 39,915
Development Bank of Singapore Limited................................................ 3,000 35,608
Oversea-Chinese Banking Corporation Ltd. ............................................ 3,000 38,380
Overseas Union Bank Ltd. ............................................................ 6,000 42,644
----------
202,602
----------
SOUTH KOREA (3.1%)
Seoul City Gas Co. Ltd. ............................................................. 500 41,476
Sungmi Telecom Electronics........................................................... 300 68,807
----------
110,283
----------
SPAIN (7.5%)
Centros Comerciales Pryca............................................................ 1,000 23,579
Empresa Nacional de Electridad....................................................... 2,300 142,529
Gas Natural.......................................................................... 360 63,699
Iberdrola............................................................................ 3,900 39,672
----------
269,479
----------
SWEDEN (4.5%)
Astra AB Series A.................................................................... 1,400 64,215
Elekta Instrument AB Series B........................................................ 500 18,496
Ericsson Telefonaktiebolaget......................................................... 1,200 26,939
Frontec AB Series B.................................................................. 400 19,690
Wm Data AB Series B.................................................................. 500 30,280
----------
159,620
----------
</TABLE>
18
<PAGE> 197
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
SWITZERLAND (6.2%)
Nestle SA............................................................................ 70 $ 79,087
Roche Holding AG..................................................................... 8 61,538
Sandoz AG............................................................................ 60 62,596
Zurich Versicherungs................................................................. 70 18,510
----------
221,731
----------
THAILAND (5.1%)
Bangkok Bank Public Company Ltd. .................................................... 4,000 58,113
Central Pattana Public Company Ltd. ................................................. 7,000 29,017
Grammy Entertainment Public Company Ltd. ............................................ 1,500 20,371
Krung Thai Bank Public Company Ltd. ................................................. 6,000 29,135
Thai Farmers Bank Public Company Ltd. ............................................... 4,000 45,795
----------
182,431
----------
UNITED KINGDOM (10.5%)
Dixons Group plc..................................................................... 6,800 52,787
HSBC Holdings plc.................................................................... 3,726 56,779
J.D. Wetherspoon plc................................................................. 1,000 14,486
Logica plc........................................................................... 2,900 27,775
Reed International plc............................................................... 3,700 64,044
Reuters Holding plc.................................................................. 7,500 87,302
Standard Chartered plc............................................................... 7,343 73,572
----------
376,745
----------
UNITED STATES (5.5%)
Embotelladora Andina ADR............................................................. 1,000 35,500
Larsen & Toubro Ltd. ................................................................ 2,000 39,260
Santa Isabel ADR..................................................................... 1,300 34,450
Tata Engineering and Locomotive Company Ltd. ........................................ 3,000 52,260
Total Access Communication plc....................................................... 4,000 36,400
----------
197,870
----------
TOTAL COMMON STOCKS (Cost $2,944,304) (91.4%).......................................... 3,275,290
Other assets, less liabilities (8.6%).................................................. 309,234
----------
NET ASSETS (100%)...................................................................... $3,584,524
==========
</TABLE>
19
<PAGE> 198
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
INDUSTRY COMPOSITION
<TABLE>
<CAPTION>
INDUSTRY PERCENT
- ------------------------------------------- -------
<S> <C>
Auto/Truck Manufacturers................... 1.5%
Beverages.................................. 3.4
Biotechnology & Medical Devices............ 2.2
Commercial Banks........................... 16.6
Computer Software.......................... 3.6
Computers & Peripherals.................... 0.5
Construction............................... 2.4
Drugs & Health Care........................ 7.6
Financial Services......................... 10.9
Food Processing............................ 2.2
Lodging & Restaurants...................... 1.5
Machinery.................................. 3.0
<CAPTION>
INDUSTRY PERCENT
- ------------------------------------------- -------
<S> <C>
Public Utilities........................... 9.4%
Publishing................................. 5.1
Real Estate Development.................... 2.8
Real Estate Investment..................... 2.1
Retailing.................................. 9.5
Telecommunications......................... 6.7
Transportation............................. 0.4
-------
Industry percent of net assets............. 91.4%
-------
Other assets, less liabilities............. 8.6
-------
PERCENT OF NET ASSETS...................... 100.0%
======
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $2,944,304, the aggregate gross unrealized appreciation for all
investments was $371,871 and aggregate gross unrealized depreciation for all
investments was $40,885.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE LARGE-CAP VALUE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BANKS (2.0%)
Wells Fargo & Company................................................................. 100 $ 24,100
----------
BEVERAGES (14.0%)
Anheuser-Busch Companies, Inc. ....................................................... 800 57,000
Coca-Cola Company..................................................................... 1,200 55,200
Earthgrains Company................................................................... 20 720
PepsiCo, Inc. ........................................................................ 1,800 59,850
----------
172,770
----------
COMPUTER SOFTWARE (4.8%)
Microsoft Corporation................................................................. 500 59,375
----------
COMPUTER-PERIPHERAL EQUIPMENT (3.8%)
Motorola, Inc. ....................................................................... 700 46,725
----------
COSMETICS (11.5%)
Clorox Company........................................................................ 600 51,075
Gillette Company...................................................................... 900 53,213
Tambrands, Inc. ...................................................................... 800 36,900
----------
141,188
----------
DRUGS (1.8%)
Warner Lambert Company................................................................ 400 22,400
----------
ENTERTAINMENT (3.9%)
Walt Disney Company (Holding Co.)..................................................... 800 48,600
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 199
THE RESERVE PRIVATE EQUITY SERIES--RESERVE LARGE-CAP VALUE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
FINANCIAL/BUSINESS SERVICES (8.2%)
American Express Company.............................................................. 1,100 $ 50,325
Charles Schwab Corporation............................................................ 2,100 50,925
----------
101,250
----------
FOOD (21.5%)
CPC International, Inc. .............................................................. 800 55,300
Campbell Soup Company................................................................. 900 58,050
Hershey Foods Corporation............................................................. 700 50,925
Quaker Oats Company................................................................... 1,500 52,687
Wrigley (WM) Jr. Company.............................................................. 900 47,138
----------
264,100
----------
PHARMACEUTICALS (7.4%)
Johnson & Johnson..................................................................... 400 38,950
Merck & Company, Inc. ................................................................ 800 51,700
----------
90,650
----------
PUBLISHING (4.5%)
Gannett Company, Inc. ................................................................ 800 55,800
----------
PUBLISHING -- NEWSPAPERS (3.8%)
New York Times Company Class A........................................................ 1,400 46,025
----------
RETAIL STORES -- GENERAL MERCHANDISING (4.2%)
Wal-Mart Stores, Inc. ................................................................ 2,000 51,750
----------
SEMICONDUCTOR -- RELATED DEVICE (4.9%)
Intel Corporation..................................................................... 800 60,400
----------
TOTAL COMMON STOCKS (Cost $1,115,010)(96.3%)............................................ 1,185,133
Other assets, less liabilities (3.7%)................................................... 45,927
----------
NET ASSETS (100%)....................................................................... $1,231,060
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,115,010, the aggregate gross unrealized appreciation for all
investments was $84,608 and aggregate gross unrealized depreciation for all
investments was $14,485.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 200
THE RESERVE PRIVATE EQUITY SERIES--RESERVE MID-CAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AIR TRANSPORT (3.0%)
Delta Air Lines, Inc. ................................................................ 550 $ 45,581
----------
AUTO PARTS (3.6%)
Gentex Corporation*................................................................... 1,200 54,300
----------
BANKS (2.7%)
Cole Taylor Financial Group, Inc. .................................................... 1,500 39,750
----------
BUSINESS EQUIPMENT/SERVICE (8.4%)
Equifax, Inc. ........................................................................ 2,800 69,300
Interim Services, Inc.*............................................................... 1,200 57,000
----------
126,300
----------
CHEMICAL SPECIALTY (4.5%)
Raychem Corporation................................................................... 900 67,275
----------
COMMUNICATION -- NETWORK (4.0%)
LCI International, Inc.*.............................................................. 1,900 60,563
----------
COMPUTER SERVICES (2.7%)
Acxiom Corporation*................................................................... 1,300 40,625
----------
COMPUTER SOFTWARE (2.1%)
Black Box Corporation*................................................................ 1,500 31,125
----------
COMPUTER -- PERIPHERAL EQUIPMENT (2.9%)
Dialogic Corporation*................................................................. 800 43,200
----------
COMPUTERS (4.3%)
Gateway 2000, Inc.*................................................................... 1,700 64,387
----------
ELECTRIC MEASUREMENT & TESTING INST. (5.1%)
Input/Output, Inc. ................................................................... 1,900 76,713
----------
FINANCE-PERSONAL LOANS (4.1%)
MBNA Corporation...................................................................... 2,000 61,250
----------
FOOD CHAINS (2.0%)
Whole Foods Market, Inc.*............................................................. 1,200 29,550
----------
HEALTH (2.7%)
American Medical Response, Inc.*...................................................... 1,100 40,012
----------
HOME BUILDINGS (4.5%)
Oakwood Homes Corp. .................................................................. 1,400 67,900
----------
HOSPITAL SUPPLIES (5.4%)
Advanced Technology Laboratories, Inc.*............................................... 1,400 49,350
Sofamor Danek Group, Inc.*............................................................ 900 32,175
----------
81,525
----------
HOUSEHOLD FURNISHINGS & APPLIANCES (5.2%)
Heilig-Meyers Company................................................................. 2,000 41,250
Herman Miller, Inc. .................................................................. 1,200 37,050
----------
78,300
----------
LIFE INSURANCE (3.3%)
Protective Life Corporation........................................................... 1,300 48,588
----------
</TABLE>
22
<PAGE> 201
THE RESERVE PRIVATE EQUITY SERIES--RESERVE MID-CAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
MISCELLANEOUS METALS (3.4%)
Wolverine Tube Inc.*.................................................................. 1,400 $ 51,100
----------
MOBIL HOMES (2.2%)
Palm Harbor Homes, Inc.*.............................................................. 1,200 33,300
----------
OIL/GAS EQUIPMENT SERVICES (6.5%)
Rowan Companies, Inc.*................................................................ 2,600 39,325
Tidewater, Inc. ...................................................................... 1,400 57,750
----------
97,075
----------
POLLUTION CONTROL (4.4%)
Newpark Resources, Inc.*.............................................................. 1,800 65,250
----------
RESTAURANTS (2.1%)
Sonic Corporation*.................................................................... 1,300 31,200
----------
RETAIL (3.8%)
Casey's General Stores, Inc. ......................................................... 2,400 56,700
----------
SPECIAL INDUSTRIAL MACHINERY (3.8%)
Black & Decker Corp. ................................................................. 1,400 57,575
----------
TOTAL COMMON STOCK (Cost $1,284,178) (96.7%)............................................ 1,449,144
Other assets, less liabilities (3.3%)................................................... 49,980
----------
NET ASSETS (100%)....................................................................... $1,499,124
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,284,178, the aggregate gross unrealized appreciation for all
investments was $181,516 and aggregate gross unrealized depreciation for all
investments was $16,550.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AIR TRANSPORTATION (3.1%)
Delta Air Lines, Inc. ................................................................ 950 $ 78,731
----------
AUTO PARTS (4.3%)
Gentex Corporation*................................................................... 2,400 108,600
----------
BANKS (2.3%)
Cole Taylor Financial Group, Inc. .................................................... 2,200 58,300
----------
BUSINESS EQUIPMENT/SERVICE (8.0%)
Equifax Inc. ......................................................................... 4,400 108,900
Interim Services, Inc.*............................................................... 2,000 95,000
----------
203,900
----------
CHEMICAL SPECIALTY (4.0%)
Raychem Corporation................................................................... 1,350 100,913
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 202
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
COMMUNICATION -- NETWORK (3.6%)
LCI International, Inc.*.............................................................. 2,900 $ 92,438
----------
COMPUTER SERVICES (2.9%)
Acxiom Corporation*................................................................... 2,400 75,000
----------
COMPUTER SOFTWARE (2.3%)
Black Box Corporation*................................................................ 2,800 58,100
----------
COMPUTERS (3.9%)
Gateway 2000, Inc.*................................................................... 2,600 98,475
----------
COMPUTERS -- PERIPHERAL EQUIPMENT (3.4%)
Dialogic Corporation*................................................................. 1,600 86,400
----------
ELECTRIC MEASUREMENT & TESTING INSTRUMENT (4.8%)
Input/Output, Inc.*................................................................... 3,000 121,125
----------
FINANCE -- PERSONAL LOANS (3.5%)
MBNA Corporation...................................................................... 2,900 88,812
----------
FOOD CHAINS (1.9%)
Whole Foods Market, Inc.*............................................................. 2,000 49,250
----------
HEALTH (2.5%)
American Medical Response, Inc.*...................................................... 1,750 63,656
----------
HOME BUILDINGS (4.4%)
Oakwood Homes Corp. .................................................................. 2,300 111,550
----------
HOSPITAL SUPPLIES (5.2%)
Advanced Technology Laboratories, Inc.*............................................... 2,300 81,075
Sofamor Danek Group, Inc.*............................................................ 1,400 50,050
----------
131,125
----------
HOUSEHOLD FURNISHINGS APPLIANCE (5.3%)
Heilig-Meyers Company................................................................. 3,300 68,063
Herman Miller, Inc. .................................................................. 2,200 67,925
----------
135,988
----------
LIFE INSURANCE (4.8%)
American Bankers Insurance Group, Inc. ............................................... 1,200 46,500
Protective Life Corporation........................................................... 2,000 74,750
----------
121,250
----------
MISCELLANEOUS METALS (3.0%)
Wolverine Tube, Inc.*................................................................. 2,100 76,650
----------
MOBIL HOMES (2.0%)
Palm Harbor Homes, Inc.*.............................................................. 1,800 49,950
----------
OIL/GAS EQUIPMENT SERVICES (5.9%)
Rowan Companies, Inc.*................................................................ 4,000 60,500
Tidewater Inc. ....................................................................... 2,150 88,687
----------
149,187
----------
POLLUTION CONTROL (4.1%)
Newpark Resources, Inc.*.............................................................. 2,870 104,037
----------
</TABLE>
24
<PAGE> 203
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
RESTAURANTS (2.1%)
Sonic Corporation*.................................................................... 2,200 $ 52,800
----------
RETAIL (3.3%)
Casey's General Stores, Inc. ......................................................... 3,500 82,688
----------
SPECIAL INDUSTRIAL MACHINERY (3.5%)
Black & Decker Corporation............................................................ 2,200 90,475
----------
TOTAL COMMON STOCKS (Cost $1,935,729) (94.1%)........................................... 2,389,400
Other assets, less liabilities (5.9%)................................................... 150,155
----------
NET ASSETS (100%)....................................................................... $2,539,555
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,935,729, the aggregate gross unrealized appreciation for all
investments was $472,445 and aggregate gross unrealized depreciation for all
investments was $18,774.
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 204
RESERVE NORTH AMERICAN GROWTH FUND
<TABLE>
<CAPTION>
NORTH
MEASUREMENT PERIOD AMERICAN
(FISCAL YEAR COVERED) GROWTH S&P 500
<S> <C> <C>
06/01/95 10000 10000
05/31/96 12270 12540
</TABLE>
The chart above reflects the performance of the Reserve North
American Growth Fund class D shares. The performance of the
Reserve North American Growth Fund class A shares will be
greater or less than the line shown based on the differences in
original share inception dates, fees, and sales charges.
Past performance is not predictive of future performance.
RESERVE MID-CAP GROWTH FUND
<TABLE>
<CAPTION>
MEASUREMENT PERIOD MID-CAP
(FISCAL YEAR COVERED) GROWTH S&P 500
<S> <C> <C>
06/01/95 10000 10000
05/31/96 11540 12540
</TABLE>
The performance of Reserve Mid-Cap Growth Fund reflects the maximum 4.5%
sales load.
The chart above reflects the performance of the Reserve Mid-Cap
Growth Fund class A shares. The performance of the Reserve
Mid-Cap Growth Fund class D shares will be greater or less than
the line shown based on the differences in original share
inception, fees, and sales charges.
Past performance is not predictive of future performance.
To the Shareholders of the Reserve North American Growth Fund and the Reserve
Mid-Cap Growth Fund:
The most significant macroeconomic factor relating to the performance of the
Reserve North American Growth Fund over the past fiscal year has been the strong
comparative earning results of the large capitalization companies. Earnings per
share of the Standard & Poor's 500 index companies over the past four years have
grown in such magnitude and for a duration that is unprecedented. Given their
very strong earnings patterns, these large capitalization stocks have
outperformed the "mid-cap" universe in which we invested for the past several
years.
However, in recent months, earnings momentum has swung significantly toward
the "mid-cap" stocks, and performance of the Fund has benefited accordingly. We
are of the opinion, that the factors which caused the extraordinary run of
profit growth for the "large cap" companies were in essence nonrecurring in
nature, and we are likely to embark on a multi-year period of better relative
earnings performance for the "mid-cap" stocks which should enhance the Fund's
relative performance.
RICHARD A. MCSTAY, PRESIDENT, SOUTHERN CAPITAL ADVISORS, SUB-ADVISER
9
<PAGE> 205
RESERVE PRIVATE EQUITY SERIES
RESERVE INTERNATIONAL EQUITY 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 International Equity Fund ("International
Equity 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
July 31, 1996.
TABLE OF CONTENTS
Page
----
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
Report of Independent Accountants
Financial Information
<PAGE> 206
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 International Equity Fund may not:
(1) borrow money except as a temporary measure for extraordinary or emergency
purposes 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.
The Fund has reserved the right to purchase and write interest rate
futures contracts, and put and call options on interest rate futures
contracts. The Fund does not intend to use these techniques for the
foreseeable future and that shareholders will be given notice should the Fund
determine that they will be used.
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> 207
SECURITIES OF FOREIGN COMPANIES. Investing in foreign securities may result in
greater risk than that incurred by investing in domestic securities. There is
generally less publicly available information about foreign companies comparable
to reports and ratings that are published about companies in the United States.
It is contemplated that most foreign securities will be purchased in
over-the-counter markets or on stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. Foreign stock markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign companies are less liquid and
more volatile than securities of comparable United States companies. Similarly,
volume and liquidity in most foreign bond markets is less than in the United
States and at times volatility of price can be greater than in the United
States. Commissions on foreign stock exchanges are generally higher than
commissions on United States exchanges, although the Fund will endeavor to
achieve the most favorable net results on its portfolio transactions. There is
generally less government supervision and regulation of foreign stock exchanges,
brokers and listed companies than in the United States.
With respect to certain foreign countries, there is the possibility of
adverse changes in investments or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds or other assets of
the Fund, political or social instability, or diplomatic developments which
could affect United States investments in those countries. Moreover, individual
foreign economies may differ favorably or unfavorably from the United States'
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position.
The dividends and interest payable on certain of the Fund's foreign
portfolio securities may be subject to foreign withholding taxes, thus reducing
the net amount of income available for distribution to the Fund's shareholders.
Shareholders otherwise subject to United States federal income taxes may,
subject to certain limitations, be entitled to claim a credit or deduction for
U.S. federal income tax purposes for his or her proportionate share of such
foreign taxes paid by the Fund.
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 five 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.
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 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 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
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.
DEFENSIVE POSITION. For temporary defensive purposes, the Fund may vary from
its investment policy during periods in which conditions in securities markets
or other economic or political conditions warrant. In such circumstances, the
Fund will increase its position in debt securities, which may include short-term
U.S. Government securities and U.S. dollar- or foreign currency-denominated
short-term indebtedness, cash equivalents and fixed-income securities issued or
guaranteed by governmental entities, or by companies or supranational
organizations (e.g., International Bank for Reconstruction and Development and
the European community) rated AA or better by Standard & Poor's Corporation, or
Aa or better by Moody's Investor Service, Inc.; or if not so rated, of
equivalent investment quality as determined by the Adviser. Apart from periods
of defensive investment, the Fund may also at any time temporarily invest funds
awaiting reinvestment or held as reserves for dividends and other distributions
to shareholders in U.S. dollar-denominated money-market instruments.
TRUSTEES AND OFFICERS OF THE TRUST
*BRUCE R. BENT, President, Treasurer and Trustee, 810 Seventh Avenue, New
York, NY 10019.
Mr. Bent is President, Treasurer, and Trustee of The Reserve Fund ("RF"),
Reserve Institutional Trust ("RIT"), Reserve Tax-Exempt Trust ("RTET"),
Reserve New York Tax-Exempt Trust ("RNYTET") and Reserve Private Equity Series
("RPES"), Director, 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,
RTET and RPES.
HENRI W. EMMET, Trustee, 176 East 71st Street, New York, New York 10021.
Mr. Emmet is the Managing Director of Global Interaction, Inc., and
formerly served as the Managing Director of Servus Associates, Inc.; U.S.A.
Representative of the First National Bank of Southern Africa, and Trustee of RF,
RET, RNYTET, RTET and RPES. 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.
<PAGE> 208
*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, RTET and RPES. 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, RTET and RPES.
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 and Trustee, 810 Seventh Avenue,
New York, NY 10019.
Mr. Cozzolino is Counsel and Secretary of RF, RIT, RTET, RNYTET and
RPES. 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, RNYTET and RPES. 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.
**Father Harrington is a member of the Board of Directors of Bear, Stearns & Co.
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.
COMPENSATION TABLE
<TABLE>
<CAPTION>
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 $22,197
Henri W. Emmet $0 $22,197
Rev. Donald J. Harrington $0 $22,197
Niels W. Johnsen $0 $22,197
Burtt R. Ehrlich $0 $0
Thomas L. Rhodes $0 $0
</TABLE>
Amount shown are for the Fund's fiscal year ending May 31, 1996.
INVESTMENT MANAGEMENT AND OTHER AGREEMENTS
THE ADVISER. Reserve Management Company, Inc. ("Adviser"), 14 Locust
Place, Manhasset, New York, 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, including effecting purchases and sales of investment
securities, is responsible for the day-to-day oversight of the Trust's
operations and to otherwise administer 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 each Fund pursuant to the Investment
Management brokerage Agreement which include: registration fees paid to the
commission and state regulators, costs associated with the annual update of
each Fund's registration statement, auditing annual financial statements, and
printing and mailing costs (exclusive of those associated with the Rule 12b-1
Plans). Excluded from ordinary operating costs are interest charges, taxes,
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%
<PAGE> 209
per annum of the average daily net assets of the Fund. The Fund's comprehensive
fee is higher than the advisory fee of most other funds; however, this
comprehensive fee covers most operating expenses.
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. Pinnacle Associates Ltd., ("Sub-Adviser"), 666 Fifth
Avenue, New York, New York 10103, 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. The Chase Manhattan 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
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 of .25% of the average net
asset value for Class A shares and 1.00% of the average net asset value for
Class D shares. 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.
<PAGE> 210
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P., 1301 Avenue of
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 Trust's investment securities. In general, in the purchase and
sale of investment securities the investment 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 investment Adviser may take into
account a dealer's operational and financial capabilities, the type of
transaction involved, the dealer's general relationship with the Trust's
investment 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 Trust as determined in good faith by
the Trust's investment Adviser. Brokers or dealers who execute investment
securities transactions for the Trust 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.
When transactions are made in the over-the-counter market, the Trust deals
with the primary market makers unless more favorable prices are otherwise
obtainable.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees 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 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, material amendments to the Service Plan, and 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
an annual meeting of shareholders at which at least 50 percent of the shares of
each group are represented.
As of June 30, 1996, the following persons owned of record or beneficially
5% or more of the Fund's outstanding shares: Reserve Management Company, Inc.,
810 Seventh Avenue, New York, NY 10019 (31.3%); Davest Partnership, 16830
Ventura Blvd., Ste. 310, Encino, CA 91436 (13.8%); and Anna T. Dolan Ahsen and
Akhter Ahsen, 22 Edgecliff Terrace, Yonkers, NY 10705 (7.3%).
<PAGE> 211
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
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 (if applicable). The net asset value of the Fund is
calculated at the end of each business day (currently 4:00 PM New York
time) 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 each class 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 the class' outstanding shares that represent the class' proportionate
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 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.
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.
<PAGE> 212
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 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 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 Fund may be subject to non-U.S. tax on income and gains received from
securities of non-U.S. issuers which generally is withheld by a foreign country
at the source. The United States has entered into tax treaties with many foreign
countries which may entitle the Fund to a reduced rate of tax or exemption from
tax on income. It is impossible to determine the effective rate of foreign tax
in advance since the amount of the Fund's assets to be invested within various
countries is not known. The Fund intends to operate so as to qualify for tax
treaty benefits where applicable. To the extent that the Fund is liable for
foreign income taxes withheld at the source, the Fund may operate so as to meet
the requirements of the Code to "pass through" to its shareholders tax benefits
attributable to foreign income taxes paid by the Fund. If more than 50% of the
value of the Fund's total assets at the close of its
<PAGE> 213
taxable year is comprised of securities issued by foreign corporations, the Fund
may elect to "pass through" to its shareholders the amount of foreign taxes paid
by the Fund. Pursuant to this election shareholders will be required to (i)
include in gross income, even though not actually received, their respective pro
rata share of foreign taxes paid by the Fund; (ii) treat their pro rata share of
foreign taxes as paid by them; and (iii) subject to certain limitations, either
deduct their pro rata share of foreign taxes in computing their taxable income,
or use such share as foreign tax credit against U.S. income tax (but not both).
No deduction for foreign taxes may be claimed by a non-corporate shareholder who
does not itemize deductions. The Fund may meet the requirements to "pass
through" to its shareholders foreign income taxes paid, but there can be no
assurance that the Fund will be able to do so. Each shareholder will be notified
within 60 days after the close of the taxable year of the Fund if the foreign
taxes paid by the Fund will "pass through" for that year , and, if so, the
amount of each shareholder's pro rata share (by country) of (i) the foreign
taxes paid and (ii) the Fund's gross income from foreign sources.
Generally, a credit for foreign taxes paid or accrued is subject to the
limitation that it may not exceed the shareholder's U.S. tax attributable to his
or her total foreign source taxable income. For this purpose, the source of the
Fund's income flows through to its shareholders. Gains from the sale of
securities by the Fund will be treated as derived from U.S. sources and Section
988 gains will be treated as derived from U.S. sources. The limitation on the
foreign tax credit is applied separately to foreign source passive income,
including foreign source passive income received from the Fund. Shareholders may
be unable to claim a credit for the full amount of their proportionate share of
the foreign taxes paid by the Fund. The foreign tax credit can be applied to
offset no more than 90% of the alternative minimum tax imposed on corporations
and individuals. The foregoing is only a general description of the foreign tax
credit. Because application of a credit depends on the particular circumstances
of each shareholder, shareholders are advised to consult their own tax advisers.
The Fund may invest in shares of foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC if at least one-half of
its assets constitute investment-type assets, or 75% or more of its gross income
is investment-type income. If the Fund receives a so-called "excess
distribution" with respect to PFIC stock, the Fund itself may be subject to a
tax on a portion of the excess distribution, whether or not the corresponding
income is distributed by the Fund to shareholders. In general, under the PFIC
rules, an excess distribution is treated as having been realized ratably over
the period during which the Fund held the PFIC shares. The Fund itself will be
subject to tax on the portion, if any, of an excess distribution that is so
allocated to prior Fund taxable years and an interest factor will be added to
the tax, as if the tax had been payable in such prior taxable years. Certain
distributions from a PFIC as well as gain from the sale of PFIC shares are
treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment with respect
to PFIC shares. Under an election that currently is available in some
circumstances, the Fund generally would be required to include in its gross
income its share of the earnings of a PFIC on a current basis, regardless of
whether distributions are received from the PFIC in a given year. If this
election were made, the special rules, discussed above, relating to the taxation
of excess distributions, would not apply. In addition, another election may be
available that would involve marking to market the Fund's PFIC shares at the end
of each taxable year ( and on certain other dates prescribed in the Code), with
the result that unrealized gains are treated as though they were realized. If
this election were made, tax at the Fund level under the PFIC rules would
generally be eliminated, but the Fund could, in limited circumstances, incur
nondeductible interest charges. The Fund's intention to qualify annually as a
regulated investment company may limit its elections with respect to PFIC
shares.
Because the application of the PFIC rules may affect, among other things,
the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC shares, as well as subject the Fund
itself to tax on certain income from PFIC shares, the amount that must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not invest in PFIC shares.
The Code and the Treasury Regulations thereunder are subject to change by
legislative or administrative action either prospectively or retroactively.
<PAGE> 214
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 status of distributions from the Fund in their own tax
jurisdictions.
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:
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)
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 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> 215
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Trustees of The Reserve Private Equity
Series:
We have audited the accompanying statements of assets and liabilities of The
Reserve Private Equity Series (comprising, respectively, Reserve Blue Chip
Growth Fund, Reserve Emerging Growth Fund, Reserve Growth and Income Fund,
Reserve Informed Investors Growth Fund, Reserve International Equity Fund,
Reserve Large-Cap Value Fund, Reserve Mid-Cap Growth Fund, and Reserve North
American Growth Fund) (collectively the "Trust"), including the schedules of
portfolio investments, as of May 31, 1996, and the related statements of
operations for the period presented, and the statements of changes in net assets
and the financial highlights for each period presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the series constituting The Reserve Private Equity Series as of May 31,
1996, the results of their operations, the changes in their net assets, and
their financial highlights for the periods referred to above, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
June 28, 1996
2
<PAGE> 216
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
BLUE CHIP EMERGING GROWTH AND
GROWTH FUND GROWTH FUND INCOME FUND
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investment in securities, at value (cost $3,765,486, $4,765,851,
$794,268, respectively)............................................ $4,910,081 $6,589,386 $ 798,545
Cash................................................................. 201,401 756,193 255,213
Receivable for investment securities sold............................ 271,837 99,208 --
Dividends receivable................................................. 2,620 120 3,376
Interest receivable.................................................. -- -- 1,041
----------- ----------- -----------
Total assets....................................................... 5,385,939 7,444,907 1,058,175
----------- ----------- -----------
LIABILITIES
Accrued comprehensive fee............................................ -- 10,836 4,527
Payable for investment securities purchased.......................... 213,700 518,939 --
Other payables and accrued expenses.................................. 81 15,692 1,492
----------- ----------- -----------
Total liabilities.................................................. 213,781 545,467 6,019
----------- ----------- -----------
NET ASSETS............................................................. $5,172,158 $6,899,440 $1,052,156
=========== =========== ===========
NET ASSETS CONSIST OF (NOTE 1):
Capital stock (Par Value $.001 per share)............................ $ 347 $ 353 $ 103
Additional paid in capital........................................... 4,141,875 5,086,032 1,038,372
Accumulated net realized loss on investments......................... (114,659) (10,480) (111)
Accumulated undistributed net investment income...................... -- -- 9,515
Net unrealized appreciation on investments........................... 1,144,595 1,823,535 4,277
----------- ----------- -----------
NET ASSETS, at value, applicable to Shares of Beneficial Interest
outstanding (Note 5)................................................. $5,172,158 $6,899,440 $1,052,156
=========== =========== ===========
CLASS A:
Net Assets........................................................... $5,129,524 $6,656,511 $1,050,657
----------- ----------- -----------
Shares Outstanding................................................... 344,082 340,243 103,341
----------- ----------- -----------
Net Asset Value and redemption value per share (net assets/shares
outstanding)....................................................... $ 14.91 $ 19.56 $ 10.17
=========== =========== ===========
Maximum offering price per share (net asset value plus sales charge
of 4.50% of offering price)........................................ $ 15.61 $ 20.48 $ 10.65
=========== =========== ===========
CLASS D:
Net Assets........................................................... $ 42,634 $ 242,929 $ 1,499
----------- ----------- -----------
Shares Outstanding................................................... 2,865 12,448 147*
----------- ----------- -----------
Net Asset Value, offering and redemption value per share (net
assets/shares outstanding)......................................... $ 14.88 $ 19.52 $ 10.17
=========== =========== ===========
</TABLE>
- ---------------
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 217
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
INFORMED INVESTORS INTERNATIONAL LARGE-CAP
GROWTH FUND EQUITY FUND VALUE FUND
------------------ ------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investment in securities, at value (cost $3,783,862, $2,944,304,
$1,115,010, respectively)........................................ $6,224,000 $ 3,275,290 $ 1,185,133
Cash............................................................... 188,426 224,557 50,557
Receivable for investment securities sold.......................... -- 152,147 --
Dividends receivable............................................... 553 4,256 1,583
--------------- ------------ ------------
Total assets..................................................... 6,412,979 3,656,250 1,237,273
--------------- ------------ ------------
LIABILITIES:
Accrued comprehensive fee.......................................... -- -- 5,046
Payable for investment securities purchased........................ -- 69,961 --
Payable for fund shares redeemed................................... 3,684 -- --
Other payables and accrued expenses................................ 1,232 1,765 1,167
--------------- ------------ ------------
Total liabilities................................................ 4,916 71,726 6,213
--------------- ------------ ------------
NET ASSETS........................................................... $6,408,063 $ 3,584,524 $ 1,231,060
=============== ============ ============
NET ASSETS CONSIST OF (NOTE 1):
Capital Stock (Par Value $.001 per share).......................... $ 446 $ 318 $ 112
Additional paid in capital......................................... 4,281,103 3,325,152 1,160,825
Accumulated net realized loss on investments and foreign currency
transactions..................................................... (313,624) (71,968) --
Net unrealized appreciation on investments and foreign currency
transactions..................................................... 2,440,138 331,022 70,123
--------------- ------------ ------------
NET ASSETS, at value, applicable to Shares of Beneficial Interest
outstanding (Note 5)............................................... $6,408,063 $ 3,584,524 $ 1,231,060
=============== ============ ============
CLASS A:
Net Assets......................................................... $6,393,103 $ 3,578,313 $ 1,231,060
--------------- ------------ ------------
Shares Outstanding................................................. 445,181 317,927 112,437
--------------- ------------ ------------
Net Asset Value and redemption value per share (net assets/shares
outstanding)..................................................... $ 14.36 $ 11.26 $ 10.95
=============== ========== ============
Maximum offering price per share (net asset value plus sales charge
of 4.50% of
offering price).................................................. $ 15.04 $ 11.79 $ 11.47
=============== =========== ============
CLASS D:
Net Assets......................................................... $ 14,960 $ 6,211 --
--------------- ------------ ------------
Shares Outstanding................................................. 1,044 552 --
--------------- ------------ ------------
Net Asset Value, offering and redemption value per share (net
assets/shares
outstanding)..................................................... $ 14.33 $ 11.25 --
=============== =========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 218
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE
MID-CAP NORTH AMERICAN
GROWTH FUND GROWTH FUND
----------- --------------
<S> <C> <C>
ASSETS:
Investment in securities, at value (cost $1,284,178, $1,935,729,
respectively)................................................................ $1,449,144 $2,389,400
Cash........................................................................... 52,635 343,800
Receivable for fund shares sold................................................ -- 10,453
Dividends receivable........................................................... 738 1,361
----------- --------------
Total assets................................................................. 1,502,517 2,745,014
----------- --------------
LIABILITIES:
Payable for investment securities purchased.................................... -- 205,459
Payable for fund shares redeemed............................................... 3,393 --
----------- --------------
Total liabilities............................................................ 3,393 205,459
----------- --------------
NET ASSETS....................................................................... $1,499,124 $2,539,555
=========== =============
NET ASSETS CONSIST OF (NOTE 1):
Capital Stock (Par Value $.001 per share)...................................... $ 124 $ 207
Additional paid in capital..................................................... 1,334,034 2,169,202
Accumulated net realized loss on investments................................... -- (83,525)
Net unrealized appreciation on investments..................................... 164,966 453,671
----------- --------------
NET ASSETS, at value, applicable to Shares of Beneficial Interest outstanding
(Note 5)....................................................................... $1,499,124 $2,539,555
----------- --------------
CLASS A:
Net Assets..................................................................... $1,494,616 $ 131,226
----------- --------------
Shares Outstanding............................................................. 123,683 10,681
----------- --------------
Net Asset Value and redemption value per share (net assets/shares
outstanding)................................................................. $ 12.08 $ 12.29
=========== =============
Maximum offering price per share (net asset value plus sales charge of 4.50% of
offering price).............................................................. $ 12.65 $ 12.87
=========== =============
CLASS D:
Net Assets..................................................................... $ 4,508 $2,408,329
----------- --------------
Shares Outstanding............................................................. *374 196,199
----------- --------------
Net Asset Value, offering and redemption value per share (net assets/shares
outstanding)................................................................. $ 12.07 $ 12.27
=========== =============
</TABLE>
- ---------------
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 219
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
RESERVE
GROWTH AND
RESERVE RESERVE INCOME FUND RESERVE
BLUE CHIP EMERGING ---------------- INFORMED INVESTORS
GROWTH FUND GROWTH FUND JANUARY 2, 1996 GROWTH FUND
------------ ------------ (COMMENCEMENT OF ------------------
YEAR ENDED YEAR ENDED OPERATIONS) TO YEAR ENDED
MAY 31, 1996 MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends..................................... $ 29,978 $ 1,869 $ 10,672 $ 8,787
Interest...................................... -- -- 4,124 8,626
------------ ------------ -------- ------------------
Total investment income................... 29,978 1,869 14,796 17,413
EXPENSES
Comprehensive fee (Note 3).................... 55,581 51,177 4,527 141,751
12b-1 Fee (Note 4)
Class A..................................... 9,247 8,481 754 23,619
Class D..................................... 66 191 -- 26
------------ ------------ -------- ------------------
Total expenses............................ 64,894 59,849 5,281 165,396
------------ ------------ -------- ------------------
NET INVESTMENT INCOME (LOSS).................... (34,916) (57,980) 9,515 (147,983)
------------ ------------ -------- ------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Proceeds from sales of securities............. 2,573,864 1,201,292 28,149 13,684,285
Cost of securities sold....................... 2,575,909 1,120,746 28,260 12,834,099
------------ ------------ -------- ------------------
Net realized gain (loss) on investments (Note
1).......................................... (2,045) 80,546 (111) 850,186
Net unrealized appreciation on investments.... 975,733 1,655,638 4,277 1,109,280
------------ ------------ -------- ------------------
Net realized and unrealized gain on
investments................................. 973,688 1,736,184 4,166 1,959,466
------------ ------------ -------- ------------------
Net increase in net assets resulting from
operations.................................. $ 938,772 $1,678,204 $ 13,681 $ 1,811,483
============ ============ ================= ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 220
THE RESERVE PRIVATE EQUITY SERIES
STATEMENT OF OPERATIONS--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE
INTERNATIONAL RESERVE
EQUITY FUND LARGE-CAP
---------------- VALUE FUND RESERVE RESERVE
JULY 13, 1995 --------------- MID-CAP NORTH AMERICAN
(COMMENCEMENT JANUARY 2, 1996 GROWTH FUND GROWTH FUND
OF OPERATIONS) (COMMENCEMENT ------------ --------------
TO OF OPERATIONS) YEAR ENDED YEAR ENDED
MAY 31, 1996 TO MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
---------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends....................................... $ 18,854* $ 4,796 $ 1,923 $ 8,135
Interest........................................ 1,688 -- -- --
---------------- --------------- ------------ --------------
Total investment income....................... 20,542 4,796 1,923 8,135
EXPENSES
Comprehensive fee (Note 3)...................... 33,158 5,046 22,987 24,506
12b-1 Fee (Note 4)
Class A....................................... 4,734 841 3,830 17
Class D....................................... 12 -- 5 16,268
---------------- --------------- ------------ --------------
Total expenses.................................... 37,904 5,887 26,822 40,791
Less fees waived.............................. (217) -- -- --
---------------- --------------- ------------ --------------
Net Expenses.................................. 37,687 5,887 26,822 40,791
---------------- --------------- ------------ --------------
NET INVESTMENT LOSS............................... (17,145) (1,091) (24,899) (32,656)
---------------- --------------- ------------ --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales of securities............... 1,374,797 -- 3,071,543 1,272,486
Cost of securities sold......................... 1,446,765 -- 3,054,352 1,356,011
---------------- --------------- ------------ --------------
Net realized gain (loss) on investments and
foreign currency transactions (Note 1)........ (71,968) -- 17,191 (83,525)
Net unrealized appreciation on investments and
foreign currency transactions................. 331,022 70,123 164,966 453,671
---------------- --------------- ------------ --------------
Net realized and unrealized gain on investments
and foreign currency transactions............. 259,054 70,123 182,157 370,146
---------------- --------------- ------------ --------------
Net increase in net assets resulting from
operations.................................... $ 241,909 $69,032 $ 157,258 $ 337,490
=============== ============== ============ =============
</TABLE>
- ---------------
* Net of foreign taxes withheld of $1,774
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE> 221
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVE GROWTH
RESERVE BLUE CHIP GROWTH FUND AND INCOME FUND
-------------------------------- ----------------
OCTOBER 28, 1994 JANUARY 2, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment income (loss).................................. $ (34,916) $ (5,361) $ 9,515
Net realized gain (loss) from investments..................... (2,045) 92,552 (111)
Net unrealized appreciation from investments.................. 975,733 168,862 4,277
------------ ---------------- ----------------
Net increase in net assets resulting from operations.......... 938,772 256,053 13,681
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A....................................... (164,889) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares............................. 2,757,098 2,257,822 1,044,319
Reinvestment of distributions................................. 164,889 -- --
Cost of shares redeemed....................................... (517,167) (520,420) (5,844)
------------ ---------------- ----------------
Net increase in net assets resulting from capital share
transactions................................................ 2,404,820 1,737,402 1,038,475
------------ ---------------- ----------------
Net increase in net assets.................................... 3,178,703 1,993,455 1,052,156
NET ASSETS:
Beginning of period........................................... 1,993,455 -- --
------------ ---------------- ----------------
End of period (including undistributed net investment income
of $0, $0, and $9,515, respectively)........................ $5,172,158 $1,993,455 $1,052,156
============ ================= =================
</TABLE>
<TABLE>
<CAPTION>
RESERVE
RESERVE EMERGING GROWTH FUND INTERNATIONAL
-------------------------------- EQUITY FUND
NOVEMBER 14, ----------------
1994 JULY 13, 1995
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss........................................... $ (57,980) $ (9,569) $ (17,145)
Net realized gain (loss) from investments and foreign currency
transactions................................................ 80,546 65,542 (71,968)
Net unrealized appreciation from investments and foreign
currency transactions....................................... 1,655,638 167,897 331,022
------------ ---------------- ----------------
Net increase in net assets resulting from operations.......... 1,678,204 223,870 241,909
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A....................................... (93,899) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares............................. 4,281,980 2,268,282 3,465,234
Reinvestment of distributions................................. 93,770 -- --
Cost of shares redeemed....................................... (301,485) (1,251,282) (122,619)
------------ ---------------- ----------------
Net increase in net assets resulting from capital share
transactions................................................ 4,074,265 1,017,000 3,342,615
------------ ---------------- ----------------
Net increase in net assets.................................... 5,658,570 1,240,870 3,584,524
NET ASSETS:
Beginning of period........................................... 1,240,870 -- --
------------ ---------------- ----------------
End of period................................................. $6,899,440 $1,240,870 $3,584,524
============ ================= =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> 222
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE INFORMED RESERVE
INVESTORS GROWTH FUND LARGE-CAP VALUE
-------------------------------- FUND
DECEMBER 28, ----------------
1994 JANUARY 2, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss....................................... $ (147,983) $ (38,948) $ (1,091)
Net realized gain (loss) from investments................. 850,186 (220,490) --
Net unrealized appreciation from investments.............. 1,109,280 1,330,859 70,123
------------ ---------------- ----------------
Net increase in net assets resulting from operations...... 1,811,483 1,071,421 69,032
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A................................... (795,337) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares......................... 6,254,939 6,422,521 1,165,180
Reinvestment of distributions............................. 790,060 -- --
Cost of shares redeemed................................... (8,490,282) (656,742) (3,152)
------------ ---------------- ----------------
Net increase (decrease) in net assets resulting from
capital share transactions.............................. (1,445,283) 5,765,779 1,162,028
------------ ---------------- ----------------
Net increase (decrease) in net assets..................... (429,137) 6,837,200 1,231,060
NET ASSETS:
Beginning of period....................................... 6,837,200 -- --
------------ ---------------- ----------------
End of period............................................. $6,408,063 $6,837,200 $1,231,060
============ ================= =================
</TABLE>
<TABLE>
<CAPTION>
RESERVE RESERVE
MID-CAP NORTH AMERICAN
GROWTH FUND GROWTH FUND
--------------- --------------
YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1996
--------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss......................................................... $ (24,899) $ (32,656)
Net realized gain (loss) from investments................................... 17,191 (83,525)
Net unrealized appreciation from investments................................ 164,966 453,671
--------------- --------------
Net increase in net assets resulting from operations........................ 157,258 337,490
--------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares........................................... 2,008,337 2,345,759
Cost of shares redeemed..................................................... (666,471) (143,694)
--------------- --------------
Net increase in net assets resulting from capital share transactions........ 1,341,866 2,202,065
--------------- --------------
Net increase in net assets.................................................. 1,499,124 2,539,555
NET ASSETS:
Beginning of period......................................................... -- --
--------------- --------------
End of period............................................................... $ 1,499,124 $2,539,555
============== =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE> 223
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reserve Private Equity Series (the "Trust") consists of the following
funds: Reserve Blue Chip Growth Fund, Reserve Emerging Growth Fund, Reserve
Growth and Income Fund, Reserve Informed Investors Growth Fund, Reserve
International Equity Fund, Reserve Large-Cap Value Fund, Reserve Mid-Cap
Growth Fund, and Reserve North American Growth Fund. The Trust was formed
under Delaware law as a Delaware business trust. The Trust is registered
under the Investment Company Act of 1940, as amended, as a non-diversified
open-end management investment company. There are an unlimited number of
shares of beneficial interest of $.001 par value authorized in each series.
The Trust offers both Class A and Class D shares of each Fund. Class A shares
are sold with an initial sales charge and Class D shares are sold without an
initial sales charge. Both classes of shares have identical voting, dividend,
liquidation and other rights, and the same terms and conditions, except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan.
The accounting policies summarized below are consistently followed in
preparation of the financial statements in conformity with generally accepted
accounting principles.
SECURITY VALUATION
Portfolio securities are stated at value. A security listed or traded on an
exchange is valued at its last sale price on the exchange where the security
is principally traded or, lacking any sales on a particular day, the security
is valued at the mean between the closing bid and asked prices on that day.
Each security traded in the over-the-counter market is valued at the mean
between its quoted bid and asked prices. Where market quotations are not
readily available, the securities are valued at their fair value as
determined in good faith by or under direction of the Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date. Dividend income and
distributions to shareholders are recorded on the ex-dividend dates. Interest
income is accrued daily. Realized gains and losses from securities
transactions and unrealized appreciation or depreciation of securities are
reported on the identified cost basis for both financial statement and
federal income tax purposes.
Income and capital gain distributions are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for net operating losses and the recognition of net realized gains
and losses. Accordingly, the effect of differing financial reporting and
federal income tax treatments have been reclassified among the components of
net assets at May 31, 1996 as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
----------------------------------------
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT REALIZED
CAPITAL INCOME GAIN (LOSS)
------- -------------- -----------
<S> <C> <C> <C>
Reserve Blue Chip Growth Fund......................................... 5,361 34,916 (40,277)
Reserve Emerging Growth Fund.......................................... 4,689 57,980 (62,669)
Reserve Informed Investors Growth Fund................................ -- 147,983 (147,983)
Reserve International Equity Fund..................................... (17,145) 17,145 --
Reserve Large-Cap Value Equity Fund................................... (1,091) 1,091 --
Reserve Mid-Cap Growth Fund........................................... (7,708) 24,899 (17,191)
Reserve North American Growth Fund.................................... (32,656) 32,656 --
</TABLE>
These reclassifications had no effect on net investment income, net realized
gain on investments, or net assets for the year ended May 31, 1996.
FOREIGN CURRENCY TRANSLATION
With respect to the Reserve International Equity Fund, assets and liabilities
denominated in a foreign currency are translated into U.S. dollars using
exchange rates on the valuation date. Purchases and sales of securities,
expense payments and income receipts are translated into U.S. dollars using
the exchange rate on the transaction date. The Trust does not segregate that
portion of the results of operations resulting from changes in foreign
exchange rates from the portion resulting from changes in market prices of
securities held; both are included in net realized and unrealized gains or
losses on investments and foreign currency transactions.
33
<PAGE> 224
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
FEDERAL INCOME TAXES
It is the Trust's policy for each Fund to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended, by
complying with the requirements of the Internal Revenue Code applicable to
regulated investment companies, and to distribute substantially all of its
taxable income, including net realized capital gains to its shareholders.
Accordingly, no federal income tax provision is required.
For federal income tax purposes, the following Funds indicated below had
capital loss carryforwards at May 31, 1996, which are available to offset
future realized capital gains, if any:
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
CARRYFORWARD YEAR
------------ -----------
<S> <C> <C>
Reserve Growth and Income Fund..................................................... $ 111 2004
Reserve International Equity Fund.................................................. 71,968 2004
Reserve North American Growth Fund................................................. 83,525 2004
</TABLE>
2. INVESTMENT ACTIVITY
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the period ended May 31, 1996, were as
follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
RESERVE FUND PURCHASES SALES
------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Blue Chip Growth Fund.......................................................... $ 4,629,931 $ 2,573,982
Emerging Growth Fund........................................................... 4,850,242 1,201,292
Growth and Income Fund......................................................... 822,642 28,263
Informed Investors Growth Fund................................................. 11,122,332 13,684,285
International Equity Fund...................................................... 4,384,944 1,368,647
Large-Cap Value Fund........................................................... 1,115,010 --
Mid-Cap Growth Fund............................................................ 4,338,530 3,071,543
North American Growth Fund..................................................... 3,291,738 1,272,486
</TABLE>
3. INVESTMENT MANAGEMENT AGREEMENT
Reserve Management Company, Inc. (RMCI), serves as the Funds' investment
adviser and pays substantially all ordinary operating expenses of the Funds
for which it receives a comprehensive fee at an annual rate of 1.50% of the
average daily net assets of each Fund other than the International Equity
Fund for which it receives 1.75%. RMCI is currently waiving a portion of its
comprehensive fee.
For each Fund, RMCI has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with the Sub-Advisers. It is the responsibility of a
Sub-Adviser to make the day-to-day investment decision of the Funds and to
place the purchase and sales orders for securities transactions, subject in
all cases to the general supervision of RMCI. For services under each
Subadvisory Agreement, RMCI pays a fee up to an annual rate equal to the
percentages specified in the table below of the corresponding Funds' average
net assets.
<TABLE>
<CAPTION>
SUB-ADVISER'S
RESERVE FUND PORTFOLIO SUB-ADVISER FEE
----------------------------------------- ------------------------------------------------- -------------
<S> <C> <C>
Blue Chip Growth Fund Trainer, Wortham & Company, Inc. 0.75%
Emerging Growth Fund Roanoke, Asset Management Corp. 0.75%
Growth and Income Fund Kenneth J. Gerbino & Company 0.75%
Informed Investors Growth Fund T. H. Fitzgerald & Company 0.75%
International Equity Fund Pinnacle Associates Limited 0.875%
Large-Cap Value Fund Siphron Capital Management 0.75%
Mid-Cap Growth Fund Cambridge Equity Advisors (6/1/95-4/18/96) 0.75%
Southern Capital Advisors (4/19/96-5/31/96) 0.75%
North American Growth Fund Southern Capital Advisors 0.75%
</TABLE>
Trainer, Wortham & Company, Inc. owns 33% of the outstanding shares of the
Reserve Blue Chip Growth Fund at May 31, 1996.
34
<PAGE> 225
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
4. DISTRIBUTION ASSISTANCE
Pursuant to a Distribution Plan under Rule 12b-1, the Funds will make
payments to Resrv Partners, Inc. (RPI), the Funds' distributor of .25% per
annum for Class A and 1.00% per annum for Class D of the average daily net
assets of shareholder accounts as to which the payee has rendered
distribution assistance. During the period, the Funds paid distribution
expenses to RPI as follows:
<TABLE>
<CAPTION>
RESERVE FUND CLASS A CLASS D
------------------------------------------------------------------------------------- ------- -------
<S> <C> <C>
Blue Chip Growth Fund................................................................ $ 9,247 $ 66
Emerging Growth Fund................................................................. 8,481 192
Growth and Income Fund............................................................... 754 0
Informed Investors Growth Fund....................................................... 23,619 26
International Equity Fund............................................................ 4,734 12
Large-Cap Value Fund................................................................. 841 0
Mid-Cap Growth Fund.................................................................. 3,830 5
North American Growth Fund........................................................... 17 16,268
</TABLE>
As of May 31, 1996, RPI owned 4%, 24%, 31%, 21%, 6%, and 24% of the Reserve
Emerging Growth Fund, Reserve Growth and Income Fund, Reserve International
Equity Fund, Reserve Large-Cap Value Fund, Reserve Mid-Cap Growth Fund and
Reserve North American Growth Fund, respectively.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock of each Fund for the period ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- -----------------
FEBRUARY 13, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
--------------------- -----------------
RESERVE BLUE CHIP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------- ------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold............................................................... 203,145 $2,716,393 2,865 $40,705
Reinvested......................................................... 12,752 164,889 -- --
Redeemed........................................................... (37,574) (517,167) -- --
------- ---------- ------ -------
Net increase....................................................... 178,323 $2,364,115 2,865 $40,705
======== ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ------------------
FEBRUARY 26, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
--------------------- ------------------
RESERVE EMERGING GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------- ------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold................................................................ 251,367 $4,052,411 12,448 $229,569
Reinvested.......................................................... 5,916 93,770 -- --
Redeemed............................................................ (18,653) (301,485) -- --
------- ---------- ------ --------
Net increase........................................................ 238,630 $3,844,696 12,448 $229,569
======== ========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MAY 13, 1996
JANUARY 2, 1996 (COMMENCEMENT
(COMMENCEMENT OF OPERATIONS)
OF OPERATIONS) TO TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE GROWTH AND INCOME FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold................................................................ 103,914 $1,042,819 147 $1,500
Redeemed............................................................ (573) (5,844) -- --
------- ---------- ------ ------
Net increase........................................................ 103,341 $1,036,975 147 $1,500
======== ========== ====== ======
</TABLE>
35
<PAGE> 226
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
----------------------- ------------------
FEBRUARY 13, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
----------------------- ------------------
RESERVE INFORMED INVESTORS GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- -------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold............................................................. 458,428 $ 6,230,788 1,953 $ 24,151
Reinvested....................................................... 56,312 790,060 -- --
Redeemed......................................................... (639,631) (8,479,206) (909) (11,076)
-------- ----------- ------ --------
Net increase..................................................... (124,891) $(1,458,358) 1,044 $ 13,075
========= ============ ====== =========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MARCH 11, 1996
JULY 13, 1995 (COMMENCEMENT
(COMMENCEMENT OF OPERATIONS)
OF OPERATIONS) TO TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE INTERNATIONAL EQUITY FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold............................................................. 329,964 $3,459,234 552 $6,000
Redeemed......................................................... (12,037) (122,619) -- --
------- ---------- ------ ------
Net increase..................................................... 317,927 $3,336,615 552 $6,000
======== ========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CLASS A
---------------------
JANUARY 2, 1996
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1996
---------------------
RESERVE LARGE-CAP VALUE FUND SHARES AMOUNT
- ----------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................. 112,729 $1,165,180
Redeemed......................................................... (292) (3,152)
------- ----------
Net increase..................................................... 112,437 $1,162,028
======== ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MARCH 29, 1996
(COMMENCEMENT
OF OPERATIONS)
YEAR ENDED TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE MID-CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold............................................................. 183,603 $2,004,087 374 $4,250
Redeemed......................................................... (59,920) (666,471) -- --
------- ---------- ------ ------
Net increase..................................................... 123,683 $1,337,616 374 $4,250
======== ========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
------------------ ---------------------
MARCH 13, 1996
(COMMENCEMENT
OF OPERATIONS) TO YEAR ENDED
MAY 31, 1996 MAY 31, 1996
------------------ ---------------------
RESERVE NORTH AMERICAN GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------ -------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................................................. 11,491 $139,077 207,997 $2,206,682
Redeemed......................................................... (810) (10,000) (11,798) (133,694)
------ -------- ------- ----------
Net increase..................................................... 10,681 $129,077 196,199 $2,072,988
====== ========= ======== ==========
</TABLE>
36
<PAGE> 227
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
Transactions in capital stock of each Fund for the period ended May 31, 1995,
were as follows:
<TABLE>
<CAPTION>
OCTOBER 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
-----------------------
RESERVE BLUE CHIP GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................................... 214,923 $2,257,822
Redeemed........................................................................... (49,164) (520,420)
------- ----------
Net increase....................................................................... 165,759 $1,737,402
======== ==========
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 14, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
------------------------
RESERVE EMERGING GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- -------- ----------
<S> <C> <C>
Sold............................................................................... 218,209 $2,268,282
Redeemed........................................................................... (116,596) (1,251,282)
-------- ----------
Net increase....................................................................... 101,613 $1,017,000
========= ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
-----------------------
RESERVE INFORMED INVESTORS GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................................... 634,326 $6,422,521
Redeemed........................................................................... (64,254) (656,742)
------- ----------
Net increase....................................................................... 570,072 $5,765,779
======== ==========
</TABLE>
6. MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
37
<PAGE> 228
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31,
1996--(CONTINUED)
7. SUPPLEMENTARY INFORMATION (FOR EACH SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
CLASS D
CLASS A ----------------
-------------------------------- FEBRUARY 13,
OCTOBER 28, 1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE BLUE CHIP GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $12.03 $10.00 $13.49
------ ------ ------
Income from investment operations
Net investment loss....................................... (.10) (.03) (.04)
Net realized and unrealized gain.......................... 3.62 2.06 1.43
------ ------ ------
Total from investment operations............................ 3.52 2.03 1.39
Less distribution from net realized gain.................... (.64) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $14.91 $12.03 $14.88
====== ====== ======
Total Return................................................ 30.10% 20.30%(2) 10.30%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $5,130 $1,993 $ 43
Ratio of expenses to average net assets before waiver....... 1.75% 1.75%(1) 2.50%(1)
Ratio of expenses to average net assets, net of waiver...... 1.75% 1.73%(1) 2.50%(1)
Ratio of net investment loss to average net assets, before
waiver.................................................... (0.94)% (0.72)%(1) (1.70)%(1)
Ratio of net investment loss to average net assets, net of
waiver.................................................... (0.94)% (0.70)%(1) (1.70)%(1)
Portfolio turnover rate..................................... 72% 68% 72%
Average commission per share on Macromedia portfolio
transactions.............................................. $ 0.06 N/A $ 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
-------------------------------- ----------------
NOVEMBER 14, FEBRUARY 26,
1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE EMERGING GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $12.21 $10.00 $16.88
------ ------ ------
Income from investment operations
Net investment loss....................................... (.17) (.09) (.04)
Net realized and unrealized gain.......................... 8.05 2.30 2.68
------ ------ ------
Total from investment operations............................ 7.88 2.21 2.64
Less distribution from net realized gain.................... (0.53) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $19.56 $12.21 $19.52
====== ====== ======
Total Return................................................ 65.55% 22.10%(2) 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $6,657 $1,241 $ 243
Ratio of expenses to average net assets..................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets.......... (1.70)% (1.62)%(1) (2.48)%(1)
Portfolio turnover rate..................................... 38% 43% 38%
Average commission per share on portfolio transactions...... $ 0.01 N/A $ 0.01
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
38
<PAGE> 229
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JANUARY 2, 1996 MAY 13, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE GROWTH AND INCOME FUND MAY 31, 1996 MAY 31, 1996
- ------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period..................................... $10.00 $10.19
------ ------
Income from investment operations
Net investment income (loss)........................................... 0.09 0.00
Net realized and unrealized gain (loss)................................ 0.08 (0.02)
------ ------
Total from investment operations......................................... 0.17 (0.02)
------ ------
NET ASSET VALUE, end of period........................................... $10.17 $10.17
====== ======
Total Return............................................................. 1.70%(2) (0.2)%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................................... $1,051 $ 1
Ratio of expenses to average net assets.................................. 1.75%(1) 2.23%(1)
Ratio of net investment income to average net assets..................... 3.15%(1) 0.00%(1)
Portfolio turnover rate.................................................. 17% 17%
Average commission per share on portfolio transactions................... $ 0.08 $ 0.08
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JULY 13, 1995 MARCH 11, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE INTERNATIONAL EQUITY FUND MAY 31, 1996 MAY 31, 1996
- ------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period..................................... $10.00 $10.79
------ ------
Income from investment operations
Net investment loss.................................................... (0.05) (0.01)
Net realized and unrealized gain....................................... 1.31 0.47
------ ------
Total from investment operations......................................... 1.26 0.46
------ ------
NET ASSET VALUE, end of period........................................... $11.26 $11.25
====== ======
Total Return............................................................. 12.60%(2) 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................................... $3,578 $ 6
Ratio of expenses to average net assets before waiver.................... 2.00%(1) 2.75%(1)
Ratio of expenses to average net assets, net of waiver................... 1.99%(1) 2.75%(1)
Ratio of net investment loss to average net assets, before waiver........ (0.92)%(1) (0.70)%(1)
Ratio of net investment loss to average net assets, net of waiver........ (0.91)%(1) (0.70)%(1)
Portfolio turnover rate.................................................. 70% 70%
Average commission per share on portfolio transactions................... $ 0.02 $ 0.02
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
39
<PAGE> 230
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------------------- ----------------
DECEMBER 28, 1994 MARCH 22, 1996
(COMMENCEMENT (COMMENCEMENT OF
YEAR ENDED OF OPERATIONS) TO OPERATIONS) TO
RESERVE INFORMED INVESTORS GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ----------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $11.99 $ 10.00 $12.29
------ ------ ------
Income from investment operations
Net investment loss....................................... (0.33) (.07) (.06)
Net realized and unrealized gain.......................... 3.87 2.06 2.10
------ ------ ------
Total from investment operations............................ 3.54 1.99 2.04
Less distribution from net realized gain.................... (1.17) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $14.36 $ 11.99 $14.33
====== ====== ======
Total Return................................................ 29.75% 19.90%(2) 16.60%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $6,393 $ 6,837 $ 15
Ratio of expenses to average net assets..................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets.......... (1.57)% (1.62)%(1) (2.32)%(1)
Portfolio turnover rate..................................... 132% 59% 132%
Average commission per share on portfolio transactions...... $ 0.05 N/A $ 0.05
</TABLE>
<TABLE>
<CAPTION>
CLASS A
----------------
JANUARY 2, 1996
(COMMENCEMENT OF
OPERATIONS) TO
RESERVE LARGE-CAP VALUE FUND MAY 31, 1996
- ------------------------------------------------------------------------------------------ ----------------
<S> <C>
NET ASSET VALUE, beginning of period...................................................... $10.00
------
Income from investment operations
Net investment loss..................................................................... (0.01)
Net realized and unrealized gain........................................................ 0.96
------
Total from investment operations.......................................................... 0.95
------
NET ASSET VALUE, end of period............................................................ $10.95
======
Total Return.............................................................................. 9.50%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period.................................................... $1,231
Ratio of expenses to average net assets................................................... 1.75%(1)
Ratio of net investment loss to average net assets........................................ (0.32)%(1)
Portfolio turnover rate................................................................... 0%
Average commission per share on portfolio transactions.................................... $ 0.08
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
40
<PAGE> 231
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
------------ ----------------
MARCH 29, 1996
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
RESERVE MID-CAP GROWTH FUND MAY 31, 1996 MAY 31, 1996
- ----------------------------------------------------------------------------- ------------ ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period......................................... $10.00 $11.03
------ ------
Income from investment operations
Net investment loss........................................................ (.20) (.03)
Net realized and unrealized gain........................................... 2.28 1.07
------ ------
Total from investment operations............................................. 2.08 1.04
------ ------
NET ASSET VALUE, end of period............................................... $12.08 $12.07
====== ======
Total Return................................................................. 20.80% 9.43%(2)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period....................................... $1,495 $ 5
Ratio of expenses to average net assets...................................... 1.75% 2.50%(1)
Ratio of net investment loss to average net assets........................... (1.62)% (2.04)%
Portfolio turnover rate...................................................... 225% 225%
Average commission per share on portfolio transactions....................... $ 0.06 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ------------
MARCH 13, 1996
(COMMENCEMENT OF
OPERATIONS) TO YEAR ENDED
RESERVE NORTH AMERICAN GROWTH FUND MAY 31, 1996 MAY 31, 1996
- ----------------------------------------------------------------------------- ---------------- ------------
<S> <C> <C>
NET ASSET VALUE, beginning of period......................................... $10.94 $10.00
------ ------
Income from investment operations
Net investment loss........................................................ (0.01) (0.17)
Net realized and unrealized gain........................................... 1.36 2.44
------ ------
Total from investment operations............................................. 1.35 2.27
------ ------
NET ASSET VALUE, end of period............................................... $12.29 $12.27
====== ======
Total Return................................................................. 12.34%(2) 22.70%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period....................................... $ 131 $2,408
Ratio of expenses to average net assets...................................... 1.74%(1) 2.49%(1)
Ratio of net investment loss to average net assets........................... (0.97)%(1) (2.00)%(1)
Portfolio turnover rate...................................................... 85% 85%
Average commission per share on portfolio transactions....................... $ 0.04 $ 0.04
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
41
<PAGE> 232
THE RESERVE PRIVATE EQUITY SERIES--RESERVE BLUE CHIP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BANKS (3.5%)
Banc One Corporation................................................................. 4,850 $ 179,450
----------
BUSINESS EQUIPMENT (3.0%)
Xerox Corporation.................................................................... 1,000 157,375
----------
COMPUTER NETWORKING (3.4%)
Cisco Systems, Inc.*................................................................. 3,200 175,200
----------
COMPUTER SOFTWARE (11.8%)
CUC International, Inc.*............................................................. 5,000 203,500
Microsoft Corporation*............................................................... 1,500 178,125
National Data Corporation............................................................ 6,000 226,500
----------
608,125
----------
ELECTRICAL EQUIPMENT (1.9%)
American Superconductor Corporation*................................................. 7,000 98,000
----------
ELECTRONICS (3.5%)
Perceptron, Inc.*.................................................................... 5,000 180,625
----------
FINANCIAL SERVICES (3.6%)
Citicorp............................................................................. 2,200 184,800
----------
MEDICAL SUPPLIES (2.2%)
LaserSight Corporation*.............................................................. 10,000 115,000
----------
MISCELLANEOUS MANUFACTURING (4.4%)
Warnaco Group, Inc. ................................................................. 8,000 227,000
----------
MULTI-LINE INSURANCE (4.5%)
American International Group, Inc. .................................................. 2,500 235,625
----------
OIL/GAS EQUIPMENT SERVICES (9.0%)
Petroleum Geo-Services--ADR*......................................................... 7,000 214,375
Schlumberger, Ltd. .................................................................. 3,000 250,125
----------
464,500
----------
PACKAGED SOFTWARE (2.8%)
Computer Associates International, Inc. ............................................. 2,000 145,500
----------
PHARMACEUTICALS (8.8%)
Johnson & Johnson.................................................................... 2,000 194,750
Eli Lilly & Company.................................................................. 1,000 64,250
Merck & Company, Inc. ............................................................... 3,000 193,875
----------
452,875
----------
PUBLISHING (5.3%)
Harte-Hanks Communications........................................................... 10,500 276,938
----------
PUBLISHING--NEWSPAPERS (2.8%)
Tribune Company...................................................................... 2,000 148,250
----------
REAL ESTATE (4.5%)
Insignia Financial Group, Inc. Class A*.............................................. 9,000 234,000
----------
RETAIL SPECIALTY (3.0%)
Home Depot, Inc. .................................................................... 3,000 153,375
----------
</TABLE>
10
<PAGE> 233
THE RESERVE PRIVATE EQUITY SERIES--RESERVE BLUE CHIP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
SPECIAL INDUSTRIAL MACHINERY (6.2%)
Thermo Electron Corporation*......................................................... 5,000 $ 318,750
----------
TELECOMMUNICATIONS (4.0%)
CommNet Cellular, Inc.*.............................................................. 6,000 206,250
----------
TELECOMMUNICATIONS EQUIPMENT (6.7%)
Glenayre Technologies, Inc.*......................................................... 7,075 348,443
----------
TOTAL COMMON STOCKS (Cost $3,765,486) (94.9%).......................................... 4,910,081
Other assets, less liabilities (5.1%).................................................. 262,077
----------
NET ASSETS (100%)...................................................................... $5,172,158
==========
</TABLE>
- ------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $3,765,486, the aggregate gross unrealized appreciation for all
investments was $1,159,820 and aggregate gross unrealized depreciation for all
investments was $15,225.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BIO-TECHNOLOGY (3.3%)
Alliance Pharmaceutical Corporation*.................................................. 4,000 $ 86,500
Genzyme Corporation*.................................................................. 2,400 139,800
----------
226,300
----------
CAPITAL GOODS -- DIVERSIFIED (1.8%)
Danaher Corporation................................................................... 3,000 124,500
----------
CAPITAL GOODS/INDUSTRIAL (1.5%)
Vishay Intertechnology, Inc.*......................................................... 3,654 100,943
----------
COMMUNICATION -- EQUIPMENT (5.1%)
ANADIGICS, Inc.*...................................................................... 3,000 79,500
ECI Telecommunications Ltd. Designs................................................... 5,000 132,500
FORE Systems, Inc.*................................................................... 1,700 137,700
----------
349,700
----------
COMMUNICATION -- NETWORK (8.8%)
Heartland Wireless Communications, Inc.*.............................................. 3,500 94,500
IntelCom Group Inc.*.................................................................. 5,000 132,500
Pairgain Technologies, Inc.*.......................................................... 1,500 152,625
People's Choice TV Corporation*....................................................... 4,000 68,000
Wireless One, Inc.*................................................................... 8,500 157,250
----------
604,875
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 234
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
COMPUTER NETWORKING (8.7%)
Ascend Communications, Inc.*.......................................................... 3,600 $ 240,750
Bay Networks Inc.*.................................................................... 1,950 56,550
Shiva Corporation*.................................................................... 2,400 179,400
3Com Corporation*..................................................................... 2,500 123,125
----------
599,825
----------
COMPUTER SOFTWARE (11.0%)
Business Objects S. A. -- ADR*........................................................ 2,000 93,000
Data Translation, Inc.*............................................................... 8,000 212,000
Dendrite International, Inc.*......................................................... 3,500 95,375
Edify Corporation*.................................................................... 1,000 42,000
EPIC Design Technology, Inc.*......................................................... 3,000 88,500
Fractal Design Corp.*................................................................. 5,000 77,500
Oacis Healthcare Holding Corp.*....................................................... 3,000 49,500
Sapient Corporation*.................................................................. 2,000 100,000
----------
757,875
----------
CONSUMER GROWTH (3.8%)
Activision, Inc.*..................................................................... 5,000 68,125
Conso Products Company*............................................................... 5,750 100,625
Electronic Arts, Inc.*................................................................ 1,200 37,950
Lin Television Corporation*........................................................... 1,700 54,400
----------
261,100
----------
ELECTRIC MEASUREMENT & TESTING INSTRUMENTS (1.4%)
Opal, Inc.*........................................................................... 5,500 100,375
----------
ENERGY (1.8%)
Cross Timbers Oil Company............................................................. 5,500 123,062
----------
HEALTH (5.6%)
HCIA, Inc.*........................................................................... 2,300 148,925
National Dentex Corporation*.......................................................... 6,000 138,000
PacifiCare Health Systems, Inc.*...................................................... 1,200 99,300
----------
386,225
----------
MANAGED CARE (4.8%)
Healthsource, Inc.*................................................................... 4,000 90,500
MedPartners/Mullikin, Inc.*........................................................... 4,500 105,188
PhyCor, Inc.*......................................................................... 2,525 136,981
----------
332,669
----------
MISCELLANEOUS CONSUMER (1.4%)
On Assignment, Inc.*.................................................................. 2,500 100,625
----------
OFFICE-BUSINESS EQUIPMENT (1.3%)
HPR Inc.*............................................................................. 4,000 93,000
----------
PAPER (1.1%)
Data Documents, Inc.*................................................................. 6,000 76,500
----------
</TABLE>
12
<PAGE> 235
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
PHARMACEUTICALS (3.4%)
Centocor, Inc.*....................................................................... 3,200 $ 113,200
Dura Pharmaceuticals, Inc.*........................................................... 2,000 123,250
----------
236,450
----------
RADIO, TV & BROADCAST COMM. EQUIP. (1.5%)
American Telecasting, Inc.*........................................................... 7,500 105,937
----------
RESTAURANTS (3.2%)
Cheesecake Factory (The)*............................................................. 2,500 66,250
Outback Steakhouse, Inc.*............................................................. 3,000 113,625
Volunteer Capital Corporation*........................................................ 4,000 43,500
----------
223,375
----------
RETAIL -- SPECIALTY (8.1%)
Borders Group, Inc.*.................................................................. 4,500 147,375
PetSmart, Inc.*....................................................................... 3,000 133,500
Staples, Inc.*........................................................................ 6,325 126,500
The Sports Authority, Inc.*........................................................... 5,000 148,750
----------
556,125
----------
SEMICONDUCTOR-RELATED DEVICE (5.2%)
Credence Systems Corporation*......................................................... 2,500 50,625
Intel Corporation..................................................................... 1,800 135,900
KLA Instruments Corporation*.......................................................... 3,000 81,000
LSI Logic Corporation*................................................................ 3,000 93,375
----------
360,900
----------
SYSTEM SOFTWARE/CLIENT SERVER (4.0%)
Hummingbird Communications Ltd.*...................................................... 3,400 138,125
Informix Corporation*................................................................. 6,000 136,500
----------
274,625
----------
TELECOMMUNICATIONS (2.5%)
Cascade Communications Corp.*......................................................... 3,000 169,125
----------
TELECOMMUNICATIONS EQUIPMENT (6.2%)
Comverse Technology, Inc.*............................................................ 4,000 117,500
DSC Communications Corporation*....................................................... 2,000 60,250
Newbridge Networks Corporation*....................................................... 1,800 128,025
P-COM, Inc.*.......................................................................... 4,000 119,500
----------
425,275
----------
TOTAL COMMON STOCKS (Cost $4,765,851) (95.5%)........................................... 6,589,386
Other assets, less liabilities (4.5%)................................................... 310,054
----------
NET ASSETS (100%)....................................................................... $6,899,440
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets
* Non-income producing security.
For Federal income tax purposes the tax basis of investments owned at May 31,
1996 was $4,765,851, the aggregate gross unrealized appreciation for all
investments was $1,941,417 and aggregate gross unrealized depreciation for all
investments was $117,882.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 236
THE RESERVE PRIVATE EQUITY SERIES--RESERVE GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- -------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
AUTO (1.9%)
Chrysler Corporation................................................................ 300 $ 19,988
----------
BANKS (5.3%)
Bankers Trust New York Corporation.................................................. 500 37,563
First of America Bank Corporation................................................... 400 18,300
----------
55,863
----------
COMPUTER NETWORKING (3.1%)
Cisco Systems, Inc. ................................................................ 600 32,850
----------
COMPUTERS (3.0%)
Hewlett-Packard Company............................................................. 300 32,025
----------
ELECTRIC UTILITIES (15.5%)
Consolidated Edison Company of New York, Inc. ...................................... 1,400 39,025
Hawaiian Electric Industries, Inc. ................................................. 1,300 44,200
Minnesota Power and Light Company................................................... 1,500 40,313
Southwestern Public Service Company................................................. 1,300 39,812
----------
163,350
----------
FERTILIZERS (1.9%)
Freeport McMoran Resource Partners Ltd. ............................................ 1,000 20,000
----------
MISCELLANEOUS ENERGY (2.0%)
LL & E Royalty Trust................................................................ 4,500 21,375
----------
OIL-INTERNATIONAL (2.3%)
Chevron Corporation................................................................. 400 23,900
----------
PHARMACEUTICALS (1.2%)
Merck & Company Inc. ............................................................... 200 12,925
----------
REAL ESTATE (1.9%)
Commercial Net Lease Realty Inc. ................................................... 1,500 20,063
----------
RESTAURANTS (1.9%)
Lone Star Steakhouse & Saloon....................................................... 500 20,188
----------
RETAIL-SPECIALTY (3.6%)
Home Depot, Inc. ................................................................... 300 15,338
Tiffany & Company................................................................... 300 22,762
----------
38,100
----------
SEMICONDUCTOR-RELATED DEVICE (3.2%)
Texas Instruments, Inc. ............................................................ 600 33,750
----------
TELECOMMUNICATIONS (3.5%)
GTE Corporation..................................................................... 400 17,100
Telecom Corporation of New Zealand, Ltd. (ADR)...................................... 300 19,688
----------
36,788
----------
TELEPHONE (3.0%)
AT & T Corporation.................................................................. 500 31,188
----------
</TABLE>
14
<PAGE> 237
THE RESERVE PRIVATE EQUITY SERIES--RESERVE GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL VALUE
COMMON STOCKS AMOUNT (NOTE 1)
- -------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
UTILITIES-TELECOMMUNICATION (1.8%)
NYNEX Corporation................................................................... 400 $ 18,450
----------
TOTAL COMMON STOCKS (Cost $576,535) (55.1%)........................................... $ 580,803
==========
<CAPTION>
PREFERRED STOCKS
- --------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (4.0%)
Lehman Brothers Holdings, Inc. Series A 8.30%....................................... 1,000 24,625
Sunamerica Capital Trust, 8.35%..................................................... 700 17,500
----------
42,125
----------
GOLD MINING (1.5%)
Battle Mountain Gold Company, $3.25................................................. 300 15,525
----------
LIFE INSURANCE (2.2%)
Conseco Inc., 6.50% Series D........................................................ 400 23,100
----------
PROPERTY-LIABILITY INSURANCE (3.5%)
Travelers/P&C Cap I Preferred Trust, 8.08%.......................................... 1,500 36,938
----------
TOTAL PREFERRED STOCKS (Cost $117,775) (11.2%)........................................ $ 117,688
==========
<CAPTION>
CONVERTIBLE BONDS
- --------------------------------------------------------------------------------------
<S> <C> <C>
HOTEL-MOTEL (2.4%)
Hilton Hotels Corp. 5.00%, 05/15/06................................................. 25,000 25,062
----------
STEEL (2.4%)
USX Corp. 7.00%, 06/15/17........................................................... 25,000 24,125
----------
TOTAL CONVERTIBLE BONDS (Cost $49,045) (4.8%)......................................... $ 49,187
==========
US TREASURY NOTES
- --------------------------------------------------------------------------------------
US Treasury Notes, 7.375%, 11/15/97 (Cost $50,913)(4.9%)............................ 50,000 50,867
----------
TOTAL INVESTMENT SECURITIES (Cost $794,268) (76.0%)................................... 798,545
Other assets, less liabilities (24.0%)................................................ 253,611
----------
NET ASSETS (100%)..................................................................... $1,052,156
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $794,268, the aggregate gross unrealized appreciation for all
investments was $30,992, and aggregate gross unrealized depreciation for all
investments was $26,715.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 238
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INFORMED INVESTORS GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
SHARES/ VALUE
COMMON STOCKS UNITS (NOTE 1)
- --------------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
AIR TRANSPORT (4.0%)
Comair Holdings, Inc. ............................................................... 9,750 $ 255,938
----------
BUSINESS EQUIPMENT/SERVICES (2.6%)
Equifax, Inc......................................................................... 6,700 165,825
----------
COMPUTER NETWORKING (4.4%)
Cisco Systems, Inc.*................................................................. 5,200 284,700
----------
COMPUTER SOFTWARE (3.9%)
CompUSA, Inc.*....................................................................... 5,700 249,375
----------
COMPUTERS (9.6%)
Sun Microsystems, Inc.*.............................................................. 9,800 613,725
----------
FOOD (3.7%)
Safeway, Inc.*....................................................................... 7,000 236,250
----------
MACHINERY-CONSTRUCTION (3.7%)
JLG Industries, Inc.................................................................. 3,000 237,375
----------
MAGNETIC OPTICAL RECORDING MEDIA (5.5%)
Komag, Inc.*......................................................................... 10,200 353,175
----------
PACKAGED SOFTWARE (11.2%)
Cadence Design Systems, Inc.*........................................................ 12,700 720,725
----------
SEMICONDUCTOR, RELATED DEVICE (9.1%)
Analog Devices, Inc.*................................................................ 1,100 30,387
Atmel Corporation*................................................................... 15,500 550,250
----------
580,637
----------
SHOES (5.3%)
Nike, Inc. .......................................................................... 3,400 341,275
----------
SPECIAL INDUSTRIAL MACHINERY (5.1%)
Applied Materials, Inc.*............................................................. 8,700 324,075
----------
TELEPHONE & TELGRAPH APPARATUS (29.0%)
Aspect Telecommunications Corporation*............................................... 7,500 425,625
Tellabs, Inc.*....................................................................... 1,200 77,400
U.S. Robotics Corporation*........................................................... 14,800 1,357,900
----------
1,860,925
----------
TOTAL COMMON STOCKS (Cost $3,783,862) (97.1%).......................................... 6,224,000
Other assets, less liabilities (2.9%).................................................. 184,063
----------
NET ASSETS (100%)...................................................................... $6,408,063
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For Federal income tax purposes the tax basis of investments owned at May 31,
1996 was $3,783,862, the aggregated gross unrealized appreciation for all
investments was $2,494,427 and aggregate gross unrealized depreciation for all
investments was $54,289.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 239
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AUSTRALIA (1.2%)
Coca Cola Amatil Ltd. ............................................................... 4,074 $ 44,377
----------
FRANCE (4.7%)
Altran Technologies.................................................................. 120 34,918
Axime................................................................................ 260 35,305
Carrefour............................................................................ 120 65,777
Carrefour (Rights expiring 7/2/96)................................................... 120 33,040
----------
169,040
----------
GERMANY (3.7%)
Altana AG............................................................................ 50 31,550
Fresenius AG......................................................................... 350 61,244
Gehe AG.............................................................................. 65 41,825
----------
134,619
----------
HONG KONG (10.1%)
CDL Hotels International Limited..................................................... 68,000 38,676
Giordano International Ltd. ......................................................... 24,000 21,562
Goldlion Holdings Ltd. .............................................................. 25,000 20,521
Hang Seng Bank Ltd. ................................................................. 7,000 73,067
Hong Kong & China Gas Company........................................................ 31,800 50,561
Hong Kong & China Gas Company (Warrants -- expires 9/30/97).......................... 1,900 87
Manhattan Card Company Ltd. ......................................................... 68,000 32,743
National Mutual Asia Ltd. ........................................................... 44,000 39,814
Sun Hung Kai Properties Ltd. ........................................................ 6,000 61,272
Wing Hang Bank Ltd. ................................................................. 6,000 23,423
----------
361,726
----------
INDONESIA (5.6%)
PT Bank Internasional Indonesia...................................................... 10,000 52,220
PT Darya Varia Laboratoria........................................................... 20,000 42,033
PT Darya Varia Laboratoria (Rights expiring 6/3/96).................................. 2,400 0
PT Gudang Garam...................................................................... 4,000 32,597
PT Steady Safe....................................................................... 11,000 14,626
PT Telekomunikasi Indonesia.......................................................... 38,000 57,860
----------
199,336
----------
ITALY (1.4%)
Telecom Italia SpA................................................................... 8,000 16,145
Telecom Italia Mobile SpA............................................................ 25,000 33,041
----------
49,186
----------
JAPAN (1.0%)
Paris Miki, Inc. .................................................................... 800 35,057
----------
</TABLE>
17
<PAGE> 240
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
MALAYSIA (8.3%)
Arab-Malaysian Merchant Bank Berhad.................................................. 2,000 $ 27,043
Commerce Asset Holding Berhad........................................................ 10,000 67,308
DCB Holdings Berhad.................................................................. 8,000 26,603
Malayan Banking Berhad............................................................... 4,000 37,981
Malaysian Assurance Alliance Berhad.................................................. 11,625 57,287
O.Y.L. Industries Berhad............................................................. 6,000 59,615
United Engineers (Malaysia) Ltd. .................................................... 3,000 20,913
----------
296,750
----------
NETHERLANDS (4.4%)
Elsevier............................................................................. 4,000 62,207
Heineken............................................................................. 200 40,786
Wolters Kluwer....................................................................... 502 56,239
----------
159,232
----------
NORWAY (1.4%)
Tomra Systems........................................................................ 5,000 48,779
----------
PHILIPPINES (1.6%)
Bankard, Inc. ....................................................................... 60,000 29,221
DMCI Holdings Inc. .................................................................. 37,000 27,206
----------
56,427
----------
SINGAPORE (5.6%)
City Developments Limited............................................................ 6,000 46,055
DBS Land Limited..................................................................... 12,000 39,915
Development Bank of Singapore Limited................................................ 3,000 35,608
Oversea-Chinese Banking Corporation Ltd. ............................................ 3,000 38,380
Overseas Union Bank Ltd. ............................................................ 6,000 42,644
----------
202,602
----------
SOUTH KOREA (3.1%)
Seoul City Gas Co. Ltd. ............................................................. 500 41,476
Sungmi Telecom Electronics........................................................... 300 68,807
----------
110,283
----------
SPAIN (7.5%)
Centros Comerciales Pryca............................................................ 1,000 23,579
Empresa Nacional de Electridad....................................................... 2,300 142,529
Gas Natural.......................................................................... 360 63,699
Iberdrola............................................................................ 3,900 39,672
----------
269,479
----------
SWEDEN (4.5%)
Astra AB Series A.................................................................... 1,400 64,215
Elekta Instrument AB Series B........................................................ 500 18,496
Ericsson Telefonaktiebolaget......................................................... 1,200 26,939
Frontec AB Series B.................................................................. 400 19,690
Wm Data AB Series B.................................................................. 500 30,280
----------
159,620
----------
</TABLE>
18
<PAGE> 241
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
SWITZERLAND (6.2%)
Nestle SA............................................................................ 70 $ 79,087
Roche Holding AG..................................................................... 8 61,538
Sandoz AG............................................................................ 60 62,596
Zurich Versicherungs................................................................. 70 18,510
----------
221,731
----------
THAILAND (5.1%)
Bangkok Bank Public Company Ltd. .................................................... 4,000 58,113
Central Pattana Public Company Ltd. ................................................. 7,000 29,017
Grammy Entertainment Public Company Ltd. ............................................ 1,500 20,371
Krung Thai Bank Public Company Ltd. ................................................. 6,000 29,135
Thai Farmers Bank Public Company Ltd. ............................................... 4,000 45,795
----------
182,431
----------
UNITED KINGDOM (10.5%)
Dixons Group plc..................................................................... 6,800 52,787
HSBC Holdings plc.................................................................... 3,726 56,779
J.D. Wetherspoon plc................................................................. 1,000 14,486
Logica plc........................................................................... 2,900 27,775
Reed International plc............................................................... 3,700 64,044
Reuters Holding plc.................................................................. 7,500 87,302
Standard Chartered plc............................................................... 7,343 73,572
----------
376,745
----------
UNITED STATES (5.5%)
Embotelladora Andina ADR............................................................. 1,000 35,500
Larsen & Toubro Ltd. ................................................................ 2,000 39,260
Santa Isabel ADR..................................................................... 1,300 34,450
Tata Engineering and Locomotive Company Ltd. ........................................ 3,000 52,260
Total Access Communication plc....................................................... 4,000 36,400
----------
197,870
----------
TOTAL COMMON STOCKS (Cost $2,944,304) (91.4%).......................................... 3,275,290
Other assets, less liabilities (8.6%).................................................. 309,234
----------
NET ASSETS (100%)...................................................................... $3,584,524
==========
</TABLE>
19
<PAGE> 242
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
INDUSTRY COMPOSITION
<TABLE>
<CAPTION>
INDUSTRY PERCENT
- ------------------------------------------- -------
<S> <C>
Auto/Truck Manufacturers................... 1.5%
Beverages.................................. 3.4
Biotechnology & Medical Devices............ 2.2
Commercial Banks........................... 16.6
Computer Software.......................... 3.6
Computers & Peripherals.................... 0.5
Construction............................... 2.4
Drugs & Health Care........................ 7.6
Financial Services......................... 10.9
Food Processing............................ 2.2
Lodging & Restaurants...................... 1.5
Machinery.................................. 3.0
<CAPTION>
INDUSTRY PERCENT
- ------------------------------------------- -------
<S> <C>
Public Utilities........................... 9.4%
Publishing................................. 5.1
Real Estate Development.................... 2.8
Real Estate Investment..................... 2.1
Retailing.................................. 9.5
Telecommunications......................... 6.7
Transportation............................. 0.4
-------
Industry percent of net assets............. 91.4%
-------
Other assets, less liabilities............. 8.6
-------
PERCENT OF NET ASSETS...................... 100.0%
======
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $2,944,304, the aggregate gross unrealized appreciation for all
investments was $371,871 and aggregate gross unrealized depreciation for all
investments was $40,885.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE LARGE-CAP VALUE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BANKS (2.0%)
Wells Fargo & Company................................................................. 100 $ 24,100
----------
BEVERAGES (14.0%)
Anheuser-Busch Companies, Inc. ....................................................... 800 57,000
Coca-Cola Company..................................................................... 1,200 55,200
Earthgrains Company................................................................... 20 720
PepsiCo, Inc. ........................................................................ 1,800 59,850
----------
172,770
----------
COMPUTER SOFTWARE (4.8%)
Microsoft Corporation................................................................. 500 59,375
----------
COMPUTER-PERIPHERAL EQUIPMENT (3.8%)
Motorola, Inc. ....................................................................... 700 46,725
----------
COSMETICS (11.5%)
Clorox Company........................................................................ 600 51,075
Gillette Company...................................................................... 900 53,213
Tambrands, Inc. ...................................................................... 800 36,900
----------
141,188
----------
DRUGS (1.8%)
Warner Lambert Company................................................................ 400 22,400
----------
ENTERTAINMENT (3.9%)
Walt Disney Company (Holding Co.)..................................................... 800 48,600
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 243
THE RESERVE PRIVATE EQUITY SERIES--RESERVE LARGE-CAP VALUE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
FINANCIAL/BUSINESS SERVICES (8.2%)
American Express Company.............................................................. 1,100 $ 50,325
Charles Schwab Corporation............................................................ 2,100 50,925
----------
101,250
----------
FOOD (21.5%)
CPC International, Inc. .............................................................. 800 55,300
Campbell Soup Company................................................................. 900 58,050
Hershey Foods Corporation............................................................. 700 50,925
Quaker Oats Company................................................................... 1,500 52,687
Wrigley (WM) Jr. Company.............................................................. 900 47,138
----------
264,100
----------
PHARMACEUTICALS (7.4%)
Johnson & Johnson..................................................................... 400 38,950
Merck & Company, Inc. ................................................................ 800 51,700
----------
90,650
----------
PUBLISHING (4.5%)
Gannett Company, Inc. ................................................................ 800 55,800
----------
PUBLISHING -- NEWSPAPERS (3.8%)
New York Times Company Class A........................................................ 1,400 46,025
----------
RETAIL STORES -- GENERAL MERCHANDISING (4.2%)
Wal-Mart Stores, Inc. ................................................................ 2,000 51,750
----------
SEMICONDUCTOR -- RELATED DEVICE (4.9%)
Intel Corporation..................................................................... 800 60,400
----------
TOTAL COMMON STOCKS (Cost $1,115,010)(96.3%)............................................ 1,185,133
Other assets, less liabilities (3.7%)................................................... 45,927
----------
NET ASSETS (100%)....................................................................... $1,231,060
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,115,010, the aggregate gross unrealized appreciation for all
investments was $84,608 and aggregate gross unrealized depreciation for all
investments was $14,485.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 244
THE RESERVE PRIVATE EQUITY SERIES--RESERVE MID-CAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AIR TRANSPORT (3.0%)
Delta Air Lines, Inc. ................................................................ 550 $ 45,581
----------
AUTO PARTS (3.6%)
Gentex Corporation*................................................................... 1,200 54,300
----------
BANKS (2.7%)
Cole Taylor Financial Group, Inc. .................................................... 1,500 39,750
----------
BUSINESS EQUIPMENT/SERVICE (8.4%)
Equifax, Inc. ........................................................................ 2,800 69,300
Interim Services, Inc.*............................................................... 1,200 57,000
----------
126,300
----------
CHEMICAL SPECIALTY (4.5%)
Raychem Corporation................................................................... 900 67,275
----------
COMMUNICATION -- NETWORK (4.0%)
LCI International, Inc.*.............................................................. 1,900 60,563
----------
COMPUTER SERVICES (2.7%)
Acxiom Corporation*................................................................... 1,300 40,625
----------
COMPUTER SOFTWARE (2.1%)
Black Box Corporation*................................................................ 1,500 31,125
----------
COMPUTER -- PERIPHERAL EQUIPMENT (2.9%)
Dialogic Corporation*................................................................. 800 43,200
----------
COMPUTERS (4.3%)
Gateway 2000, Inc.*................................................................... 1,700 64,387
----------
ELECTRIC MEASUREMENT & TESTING INST. (5.1%)
Input/Output, Inc. ................................................................... 1,900 76,713
----------
FINANCE-PERSONAL LOANS (4.1%)
MBNA Corporation...................................................................... 2,000 61,250
----------
FOOD CHAINS (2.0%)
Whole Foods Market, Inc.*............................................................. 1,200 29,550
----------
HEALTH (2.7%)
American Medical Response, Inc.*...................................................... 1,100 40,012
----------
HOME BUILDINGS (4.5%)
Oakwood Homes Corp. .................................................................. 1,400 67,900
----------
HOSPITAL SUPPLIES (5.4%)
Advanced Technology Laboratories, Inc.*............................................... 1,400 49,350
Sofamor Danek Group, Inc.*............................................................ 900 32,175
----------
81,525
----------
HOUSEHOLD FURNISHINGS & APPLIANCES (5.2%)
Heilig-Meyers Company................................................................. 2,000 41,250
Herman Miller, Inc. .................................................................. 1,200 37,050
----------
78,300
----------
LIFE INSURANCE (3.3%)
Protective Life Corporation........................................................... 1,300 48,588
----------
</TABLE>
22
<PAGE> 245
THE RESERVE PRIVATE EQUITY SERIES--RESERVE MID-CAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
MISCELLANEOUS METALS (3.4%)
Wolverine Tube Inc.*.................................................................. 1,400 $ 51,100
----------
MOBIL HOMES (2.2%)
Palm Harbor Homes, Inc.*.............................................................. 1,200 33,300
----------
OIL/GAS EQUIPMENT SERVICES (6.5%)
Rowan Companies, Inc.*................................................................ 2,600 39,325
Tidewater, Inc. ...................................................................... 1,400 57,750
----------
97,075
----------
POLLUTION CONTROL (4.4%)
Newpark Resources, Inc.*.............................................................. 1,800 65,250
----------
RESTAURANTS (2.1%)
Sonic Corporation*.................................................................... 1,300 31,200
----------
RETAIL (3.8%)
Casey's General Stores, Inc. ......................................................... 2,400 56,700
----------
SPECIAL INDUSTRIAL MACHINERY (3.8%)
Black & Decker Corp. ................................................................. 1,400 57,575
----------
TOTAL COMMON STOCK (Cost $1,284,178) (96.7%)............................................ 1,449,144
Other assets, less liabilities (3.3%)................................................... 49,980
----------
NET ASSETS (100%)....................................................................... $1,499,124
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,284,178, the aggregate gross unrealized appreciation for all
investments was $181,516 and aggregate gross unrealized depreciation for all
investments was $16,550.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AIR TRANSPORTATION (3.1%)
Delta Air Lines, Inc. ................................................................ 950 $ 78,731
----------
AUTO PARTS (4.3%)
Gentex Corporation*................................................................... 2,400 108,600
----------
BANKS (2.3%)
Cole Taylor Financial Group, Inc. .................................................... 2,200 58,300
----------
BUSINESS EQUIPMENT/SERVICE (8.0%)
Equifax Inc. ......................................................................... 4,400 108,900
Interim Services, Inc.*............................................................... 2,000 95,000
----------
203,900
----------
CHEMICAL SPECIALTY (4.0%)
Raychem Corporation................................................................... 1,350 100,913
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 246
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
COMMUNICATION -- NETWORK (3.6%)
LCI International, Inc.*.............................................................. 2,900 $ 92,438
----------
COMPUTER SERVICES (2.9%)
Acxiom Corporation*................................................................... 2,400 75,000
----------
COMPUTER SOFTWARE (2.3%)
Black Box Corporation*................................................................ 2,800 58,100
----------
COMPUTERS (3.9%)
Gateway 2000, Inc.*................................................................... 2,600 98,475
----------
COMPUTERS -- PERIPHERAL EQUIPMENT (3.4%)
Dialogic Corporation*................................................................. 1,600 86,400
----------
ELECTRIC MEASUREMENT & TESTING INSTRUMENT (4.8%)
Input/Output, Inc.*................................................................... 3,000 121,125
----------
FINANCE -- PERSONAL LOANS (3.5%)
MBNA Corporation...................................................................... 2,900 88,812
----------
FOOD CHAINS (1.9%)
Whole Foods Market, Inc.*............................................................. 2,000 49,250
----------
HEALTH (2.5%)
American Medical Response, Inc.*...................................................... 1,750 63,656
----------
HOME BUILDINGS (4.4%)
Oakwood Homes Corp. .................................................................. 2,300 111,550
----------
HOSPITAL SUPPLIES (5.2%)
Advanced Technology Laboratories, Inc.*............................................... 2,300 81,075
Sofamor Danek Group, Inc.*............................................................ 1,400 50,050
----------
131,125
----------
HOUSEHOLD FURNISHINGS APPLIANCE (5.3%)
Heilig-Meyers Company................................................................. 3,300 68,063
Herman Miller, Inc. .................................................................. 2,200 67,925
----------
135,988
----------
LIFE INSURANCE (4.8%)
American Bankers Insurance Group, Inc. ............................................... 1,200 46,500
Protective Life Corporation........................................................... 2,000 74,750
----------
121,250
----------
MISCELLANEOUS METALS (3.0%)
Wolverine Tube, Inc.*................................................................. 2,100 76,650
----------
MOBIL HOMES (2.0%)
Palm Harbor Homes, Inc.*.............................................................. 1,800 49,950
----------
OIL/GAS EQUIPMENT SERVICES (5.9%)
Rowan Companies, Inc.*................................................................ 4,000 60,500
Tidewater Inc. ....................................................................... 2,150 88,687
----------
149,187
----------
POLLUTION CONTROL (4.1%)
Newpark Resources, Inc.*.............................................................. 2,870 104,037
----------
</TABLE>
24
<PAGE> 247
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
RESTAURANTS (2.1%)
Sonic Corporation*.................................................................... 2,200 $ 52,800
----------
RETAIL (3.3%)
Casey's General Stores, Inc. ......................................................... 3,500 82,688
----------
SPECIAL INDUSTRIAL MACHINERY (3.5%)
Black & Decker Corporation............................................................ 2,200 90,475
----------
TOTAL COMMON STOCKS (Cost $1,935,729) (94.1%)........................................... 2,389,400
Other assets, less liabilities (5.9%)................................................... 150,155
----------
NET ASSETS (100%)....................................................................... $2,539,555
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,935,729, the aggregate gross unrealized appreciation for all
investments was $472,445 and aggregate gross unrealized depreciation for all
investments was $18,774.
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 248
RESERVE INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
INTERNA-
MEASUREMENT PERIOD TIONAL EQ-
(FISCAL YEAR COVERED) UITY EAFE
<S> <C> <C>
07/13/95 10000 10000
05/31/96 10750 10530
</TABLE>
The performance of Reserve International Equity Fund reflects the
maximum 4.5% sales load.
The chart above reflects the performance of the Reserve
International Equity Fund class A shares. The performance of the
Reserve International Equity Fund class D shares will be greater
or less than the line shown based on the differences in original
share inception dates, fees, and sales charges.
Past performance is not predictive of future performance.
To the Shareholders of the Reserve International Equity Fund:
The Reserve International Equity Fund started in mid-1995, which was a
relatively good and tranquil time to start an international portfolio. The
European markets were in the early stages of resuming their bull runs while the
Far East markets were recovering from their 1994 declines.
Our portfolios are structured by combining a top-down country weighting
process with a bottom-up individual company selection procedure. We emphasize
economies which have the best prospects for growth. We then focus on quality,
unique companies with high visibility growth characteristics. All our
international portfolios, including the Reserve International Equity Fund, have
their investments split between the Far East and Europe, with a minor position
in Latin America. We continue to believe that the strongest economic growth will
come from the smaller economies of the Far East, and we have allocated a
significant percentage of the Fund's investments to these "tiger" economies.
Europe is a developed region; therefore, good portfolio gains will come
primarily from having superior stock picks, which we have been doing
successfully for years. We expect 1996 to be a good year for the Fund, since it
is well positioned to continue the strong advance it has already experienced
this year.
NICHOLAS REITCHBACH, SENIOR VICE PRESIDENT, PINNACLE ASSOCIATES LTD.,
SUB-ADVISER
7
<PAGE> 249
RESERVE PRIVATE EQUITY SERIES
RESERVE LARGE-CAP VALUE 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 Large-Cap Value Fund ("Large-Cap
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 July 31, 1996.
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
Report of Independent Accountants
Financial Information
</TABLE>
<PAGE> 250
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 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.
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 five 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.
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 a demand 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
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.
DEFENSIVE POSITION. For temporary defensive purposes, the Fund may vary from
its investment policy during periods in which conditions in securities markets
or other economic or political conditions warrant. In such circumstances, the
Fund will increase its position in debt securities, which may include short-term
U.S. Government securities and U.S. dollar- or foreign currency-denominated
short-term indebtedness, cash equivalents and fixed-income securities issued or
guaranteed by governmental entities, or by companies or supranational
organizations (e.g., International Bank for Reconstruction and Development and
the European community) rated AA or better by Standard & Poor's Corporation, or
Aa or better by Moody's Investor Service, Inc.; or if not so rated, of
equivalent investment quality as determined by the Adviser. Apart from periods
of defensive investment, the Fund may also at any time temporarily invest funds
awaiting reinvestment or held as reserves for dividends and other distributions
to shareholders in U.S. dollar-denominated money-market instruments.
<PAGE> 251
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 Global Interaction, Inc., and
formerly served as the Managing Director of Servus Associates, Inc.; U.S.A.
Representative of the First National Bank of Southern Africa, and Trustee of RF,
RET, RNYTET, RTET and RPES. 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.
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.
<PAGE> 252
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.
** Father Harrington is a member of the Board of Directors of Bear, Stearns &
Co.
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.
COMPENSATION TABLE
<TABLE>
<CAPTION>
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 $22,197
Henri W. Emmet $0 $22,197
Rev. Donald J. Harrington $0 $22,197
Niels W. Johnsen $0 $22,197
Burtt R. Ehrlich $0 $0
Thomas L. Rhodes $0 $0
</TABLE>
Amount shown are for the Fund's fiscal year ending May 31, 1996.
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 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. Siphron Capital Management ("Sub-Adviser"), 280 S.
Beverly Drive, 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. The Chase Manhattan 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.
<PAGE> 253
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
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 for Class A shares and 1.00% of the average net asset
value for Class D shares 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
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.
<PAGE> 254
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 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.
As of June 30, 1996, the following persons owned of record or beneficially
5% or more of the Fund's outstanding shares: Reserve Management Corporation, 810
Seventh Avenue, New York, NY 10019 (12.4%); Reserve Management Company, Inc.,
810 Seventh Avenue, New York, NY 10019 (20.6%); Vincentian Fathers of Saint
Peter, 134 Vernon Avenue, Brooklyn, NY 11206 (7.7%); and Taconic Petroleum Co.,
810 Seventh Avenue, New York, NY 10019 (43.9%).
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.
<PAGE> 255
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) 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 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
<PAGE> 256
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 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.
<PAGE> 257
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:
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)
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
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> 258
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Trustees of The Reserve Private Equity
Series:
We have audited the accompanying statements of assets and liabilities of The
Reserve Private Equity Series (comprising, respectively, Reserve Blue Chip
Growth Fund, Reserve Emerging Growth Fund, Reserve Growth and Income Fund,
Reserve Informed Investors Growth Fund, Reserve International Equity Fund,
Reserve Large-Cap Value Fund, Reserve Mid-Cap Growth Fund, and Reserve North
American Growth Fund) (collectively the "Trust"), including the schedules of
portfolio investments, as of May 31, 1996, and the related statements of
operations for the period presented, and the statements of changes in net assets
and the financial highlights for each period presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the series constituting The Reserve Private Equity Series as of May 31,
1996, the results of their operations, the changes in their net assets, and
their financial highlights for the periods referred to above, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
June 28, 1996
2
<PAGE> 259
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
BLUE CHIP EMERGING GROWTH AND
GROWTH FUND GROWTH FUND INCOME FUND
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investment in securities, at value (cost $3,765,486, $4,765,851,
$794,268, respectively)............................................ $4,910,081 $6,589,386 $ 798,545
Cash................................................................. 201,401 756,193 255,213
Receivable for investment securities sold............................ 271,837 99,208 --
Dividends receivable................................................. 2,620 120 3,376
Interest receivable.................................................. -- -- 1,041
----------- ----------- -----------
Total assets....................................................... 5,385,939 7,444,907 1,058,175
----------- ----------- -----------
LIABILITIES
Accrued comprehensive fee............................................ -- 10,836 4,527
Payable for investment securities purchased.......................... 213,700 518,939 --
Other payables and accrued expenses.................................. 81 15,692 1,492
----------- ----------- -----------
Total liabilities.................................................. 213,781 545,467 6,019
----------- ----------- -----------
NET ASSETS............................................................. $5,172,158 $6,899,440 $1,052,156
=========== =========== ===========
NET ASSETS CONSIST OF (NOTE 1):
Capital stock (Par Value $.001 per share)............................ $ 347 $ 353 $ 103
Additional paid in capital........................................... 4,141,875 5,086,032 1,038,372
Accumulated net realized loss on investments......................... (114,659) (10,480) (111)
Accumulated undistributed net investment income...................... -- -- 9,515
Net unrealized appreciation on investments........................... 1,144,595 1,823,535 4,277
----------- ----------- -----------
NET ASSETS, at value, applicable to Shares of Beneficial Interest
outstanding (Note 5)................................................. $5,172,158 $6,899,440 $1,052,156
=========== =========== ===========
CLASS A:
Net Assets........................................................... $5,129,524 $6,656,511 $1,050,657
----------- ----------- -----------
Shares Outstanding................................................... 344,082 340,243 103,341
----------- ----------- -----------
Net Asset Value and redemption value per share (net assets/shares
outstanding)....................................................... $ 14.91 $ 19.56 $ 10.17
=========== =========== ===========
Maximum offering price per share (net asset value plus sales charge
of 4.50% of offering price)........................................ $ 15.61 $ 20.48 $ 10.65
=========== =========== ===========
CLASS D:
Net Assets........................................................... $ 42,634 $ 242,929 $ 1,499
----------- ----------- -----------
Shares Outstanding................................................... 2,865 12,448 147*
----------- ----------- -----------
Net Asset Value, offering and redemption value per share (net
assets/shares outstanding)......................................... $ 14.88 $ 19.52 $ 10.17
=========== =========== ===========
</TABLE>
- ---------------
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 260
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
INFORMED INVESTORS INTERNATIONAL LARGE-CAP
GROWTH FUND EQUITY FUND VALUE FUND
------------------ ------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investment in securities, at value (cost $3,783,862, $2,944,304,
$1,115,010, respectively)........................................ $6,224,000 $ 3,275,290 $ 1,185,133
Cash............................................................... 188,426 224,557 50,557
Receivable for investment securities sold.......................... -- 152,147 --
Dividends receivable............................................... 553 4,256 1,583
--------------- ------------ ------------
Total assets..................................................... 6,412,979 3,656,250 1,237,273
--------------- ------------ ------------
LIABILITIES:
Accrued comprehensive fee.......................................... -- -- 5,046
Payable for investment securities purchased........................ -- 69,961 --
Payable for fund shares redeemed................................... 3,684 -- --
Other payables and accrued expenses................................ 1,232 1,765 1,167
--------------- ------------ ------------
Total liabilities................................................ 4,916 71,726 6,213
--------------- ------------ ------------
NET ASSETS........................................................... $6,408,063 $ 3,584,524 $ 1,231,060
=============== ============ ============
NET ASSETS CONSIST OF (NOTE 1):
Capital Stock (Par Value $.001 per share).......................... $ 446 $ 318 $ 112
Additional paid in capital......................................... 4,281,103 3,325,152 1,160,825
Accumulated net realized loss on investments and foreign currency
transactions..................................................... (313,624) (71,968) --
Net unrealized appreciation on investments and foreign currency
transactions..................................................... 2,440,138 331,022 70,123
--------------- ------------ ------------
NET ASSETS, at value, applicable to Shares of Beneficial Interest
outstanding (Note 5)............................................... $6,408,063 $ 3,584,524 $ 1,231,060
=============== ============ ============
CLASS A:
Net Assets......................................................... $6,393,103 $ 3,578,313 $ 1,231,060
--------------- ------------ ------------
Shares Outstanding................................................. 445,181 317,927 112,437
--------------- ------------ ------------
Net Asset Value and redemption value per share (net assets/shares
outstanding)..................................................... $ 14.36 $ 11.26 $ 10.95
=============== ========== ============
Maximum offering price per share (net asset value plus sales charge
of 4.50% of
offering price).................................................. $ 15.04 $ 11.79 $ 11.47
=============== =========== ============
CLASS D:
Net Assets......................................................... $ 14,960 $ 6,211 --
--------------- ------------ ------------
Shares Outstanding................................................. 1,044 552 --
--------------- ------------ ------------
Net Asset Value, offering and redemption value per share (net
assets/shares
outstanding)..................................................... $ 14.33 $ 11.25 --
=============== =========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 261
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE
MID-CAP NORTH AMERICAN
GROWTH FUND GROWTH FUND
----------- --------------
<S> <C> <C>
ASSETS:
Investment in securities, at value (cost $1,284,178, $1,935,729,
respectively)................................................................ $1,449,144 $2,389,400
Cash........................................................................... 52,635 343,800
Receivable for fund shares sold................................................ -- 10,453
Dividends receivable........................................................... 738 1,361
----------- --------------
Total assets................................................................. 1,502,517 2,745,014
----------- --------------
LIABILITIES:
Payable for investment securities purchased.................................... -- 205,459
Payable for fund shares redeemed............................................... 3,393 --
----------- --------------
Total liabilities............................................................ 3,393 205,459
----------- --------------
NET ASSETS....................................................................... $1,499,124 $2,539,555
=========== =============
NET ASSETS CONSIST OF (NOTE 1):
Capital Stock (Par Value $.001 per share)...................................... $ 124 $ 207
Additional paid in capital..................................................... 1,334,034 2,169,202
Accumulated net realized loss on investments................................... -- (83,525)
Net unrealized appreciation on investments..................................... 164,966 453,671
----------- --------------
NET ASSETS, at value, applicable to Shares of Beneficial Interest outstanding
(Note 5)....................................................................... $1,499,124 $2,539,555
----------- --------------
CLASS A:
Net Assets..................................................................... $1,494,616 $ 131,226
----------- --------------
Shares Outstanding............................................................. 123,683 10,681
----------- --------------
Net Asset Value and redemption value per share (net assets/shares
outstanding)................................................................. $ 12.08 $ 12.29
=========== =============
Maximum offering price per share (net asset value plus sales charge of 4.50% of
offering price).............................................................. $ 12.65 $ 12.87
=========== =============
CLASS D:
Net Assets..................................................................... $ 4,508 $2,408,329
----------- --------------
Shares Outstanding............................................................. *374 196,199
----------- --------------
Net Asset Value, offering and redemption value per share (net assets/shares
outstanding)................................................................. $ 12.07 $ 12.27
=========== =============
</TABLE>
- ---------------
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 262
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
RESERVE
GROWTH AND
RESERVE RESERVE INCOME FUND RESERVE
BLUE CHIP EMERGING ---------------- INFORMED INVESTORS
GROWTH FUND GROWTH FUND JANUARY 2, 1996 GROWTH FUND
------------ ------------ (COMMENCEMENT OF ------------------
YEAR ENDED YEAR ENDED OPERATIONS) TO YEAR ENDED
MAY 31, 1996 MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends..................................... $ 29,978 $ 1,869 $ 10,672 $ 8,787
Interest...................................... -- -- 4,124 8,626
------------ ------------ -------- ------------------
Total investment income................... 29,978 1,869 14,796 17,413
EXPENSES
Comprehensive fee (Note 3).................... 55,581 51,177 4,527 141,751
12b-1 Fee (Note 4)
Class A..................................... 9,247 8,481 754 23,619
Class D..................................... 66 191 -- 26
------------ ------------ -------- ------------------
Total expenses............................ 64,894 59,849 5,281 165,396
------------ ------------ -------- ------------------
NET INVESTMENT INCOME (LOSS).................... (34,916) (57,980) 9,515 (147,983)
------------ ------------ -------- ------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Proceeds from sales of securities............. 2,573,864 1,201,292 28,149 13,684,285
Cost of securities sold....................... 2,575,909 1,120,746 28,260 12,834,099
------------ ------------ -------- ------------------
Net realized gain (loss) on investments (Note
1).......................................... (2,045) 80,546 (111) 850,186
Net unrealized appreciation on investments.... 975,733 1,655,638 4,277 1,109,280
------------ ------------ -------- ------------------
Net realized and unrealized gain on
investments................................. 973,688 1,736,184 4,166 1,959,466
------------ ------------ -------- ------------------
Net increase in net assets resulting from
operations.................................. $ 938,772 $1,678,204 $ 13,681 $ 1,811,483
============ ============ ================= ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 263
THE RESERVE PRIVATE EQUITY SERIES
STATEMENT OF OPERATIONS--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE
INTERNATIONAL RESERVE
EQUITY FUND LARGE-CAP
---------------- VALUE FUND RESERVE RESERVE
JULY 13, 1995 --------------- MID-CAP NORTH AMERICAN
(COMMENCEMENT JANUARY 2, 1996 GROWTH FUND GROWTH FUND
OF OPERATIONS) (COMMENCEMENT ------------ --------------
TO OF OPERATIONS) YEAR ENDED YEAR ENDED
MAY 31, 1996 TO MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
---------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends....................................... $ 18,854* $ 4,796 $ 1,923 $ 8,135
Interest........................................ 1,688 -- -- --
---------------- --------------- ------------ --------------
Total investment income....................... 20,542 4,796 1,923 8,135
EXPENSES
Comprehensive fee (Note 3)...................... 33,158 5,046 22,987 24,506
12b-1 Fee (Note 4)
Class A....................................... 4,734 841 3,830 17
Class D....................................... 12 -- 5 16,268
---------------- --------------- ------------ --------------
Total expenses.................................... 37,904 5,887 26,822 40,791
Less fees waived.............................. (217) -- -- --
---------------- --------------- ------------ --------------
Net Expenses.................................. 37,687 5,887 26,822 40,791
---------------- --------------- ------------ --------------
NET INVESTMENT LOSS............................... (17,145) (1,091) (24,899) (32,656)
---------------- --------------- ------------ --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales of securities............... 1,374,797 -- 3,071,543 1,272,486
Cost of securities sold......................... 1,446,765 -- 3,054,352 1,356,011
---------------- --------------- ------------ --------------
Net realized gain (loss) on investments and
foreign currency transactions (Note 1)........ (71,968) -- 17,191 (83,525)
Net unrealized appreciation on investments and
foreign currency transactions................. 331,022 70,123 164,966 453,671
---------------- --------------- ------------ --------------
Net realized and unrealized gain on investments
and foreign currency transactions............. 259,054 70,123 182,157 370,146
---------------- --------------- ------------ --------------
Net increase in net assets resulting from
operations.................................... $ 241,909 $69,032 $ 157,258 $ 337,490
=============== ============== ============ =============
</TABLE>
- ---------------
* Net of foreign taxes withheld of $1,774
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE> 264
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVE GROWTH
RESERVE BLUE CHIP GROWTH FUND AND INCOME FUND
-------------------------------- ----------------
OCTOBER 28, 1994 JANUARY 2, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment income (loss).................................. $ (34,916) $ (5,361) $ 9,515
Net realized gain (loss) from investments..................... (2,045) 92,552 (111)
Net unrealized appreciation from investments.................. 975,733 168,862 4,277
------------ ---------------- ----------------
Net increase in net assets resulting from operations.......... 938,772 256,053 13,681
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A....................................... (164,889) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares............................. 2,757,098 2,257,822 1,044,319
Reinvestment of distributions................................. 164,889 -- --
Cost of shares redeemed....................................... (517,167) (520,420) (5,844)
------------ ---------------- ----------------
Net increase in net assets resulting from capital share
transactions................................................ 2,404,820 1,737,402 1,038,475
------------ ---------------- ----------------
Net increase in net assets.................................... 3,178,703 1,993,455 1,052,156
NET ASSETS:
Beginning of period........................................... 1,993,455 -- --
------------ ---------------- ----------------
End of period (including undistributed net investment income
of $0, $0, and $9,515, respectively)........................ $5,172,158 $1,993,455 $1,052,156
============ ================= =================
</TABLE>
<TABLE>
<CAPTION>
RESERVE
RESERVE EMERGING GROWTH FUND INTERNATIONAL
-------------------------------- EQUITY FUND
NOVEMBER 14, ----------------
1994 JULY 13, 1995
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss........................................... $ (57,980) $ (9,569) $ (17,145)
Net realized gain (loss) from investments and foreign currency
transactions................................................ 80,546 65,542 (71,968)
Net unrealized appreciation from investments and foreign
currency transactions....................................... 1,655,638 167,897 331,022
------------ ---------------- ----------------
Net increase in net assets resulting from operations.......... 1,678,204 223,870 241,909
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A....................................... (93,899) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares............................. 4,281,980 2,268,282 3,465,234
Reinvestment of distributions................................. 93,770 -- --
Cost of shares redeemed....................................... (301,485) (1,251,282) (122,619)
------------ ---------------- ----------------
Net increase in net assets resulting from capital share
transactions................................................ 4,074,265 1,017,000 3,342,615
------------ ---------------- ----------------
Net increase in net assets.................................... 5,658,570 1,240,870 3,584,524
NET ASSETS:
Beginning of period........................................... 1,240,870 -- --
------------ ---------------- ----------------
End of period................................................. $6,899,440 $1,240,870 $3,584,524
============ ================= =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> 265
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE INFORMED RESERVE
INVESTORS GROWTH FUND LARGE-CAP VALUE
-------------------------------- FUND
DECEMBER 28, ----------------
1994 JANUARY 2, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss....................................... $ (147,983) $ (38,948) $ (1,091)
Net realized gain (loss) from investments................. 850,186 (220,490) --
Net unrealized appreciation from investments.............. 1,109,280 1,330,859 70,123
------------ ---------------- ----------------
Net increase in net assets resulting from operations...... 1,811,483 1,071,421 69,032
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A................................... (795,337) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares......................... 6,254,939 6,422,521 1,165,180
Reinvestment of distributions............................. 790,060 -- --
Cost of shares redeemed................................... (8,490,282) (656,742) (3,152)
------------ ---------------- ----------------
Net increase (decrease) in net assets resulting from
capital share transactions.............................. (1,445,283) 5,765,779 1,162,028
------------ ---------------- ----------------
Net increase (decrease) in net assets..................... (429,137) 6,837,200 1,231,060
NET ASSETS:
Beginning of period....................................... 6,837,200 -- --
------------ ---------------- ----------------
End of period............................................. $6,408,063 $6,837,200 $1,231,060
============ ================= =================
</TABLE>
<TABLE>
<CAPTION>
RESERVE RESERVE
MID-CAP NORTH AMERICAN
GROWTH FUND GROWTH FUND
--------------- --------------
YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1996
--------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss......................................................... $ (24,899) $ (32,656)
Net realized gain (loss) from investments................................... 17,191 (83,525)
Net unrealized appreciation from investments................................ 164,966 453,671
--------------- --------------
Net increase in net assets resulting from operations........................ 157,258 337,490
--------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares........................................... 2,008,337 2,345,759
Cost of shares redeemed..................................................... (666,471) (143,694)
--------------- --------------
Net increase in net assets resulting from capital share transactions........ 1,341,866 2,202,065
--------------- --------------
Net increase in net assets.................................................. 1,499,124 2,539,555
NET ASSETS:
Beginning of period......................................................... -- --
--------------- --------------
End of period............................................................... $ 1,499,124 $2,539,555
============== =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE> 266
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reserve Private Equity Series (the "Trust") consists of the following
funds: Reserve Blue Chip Growth Fund, Reserve Emerging Growth Fund, Reserve
Growth and Income Fund, Reserve Informed Investors Growth Fund, Reserve
International Equity Fund, Reserve Large-Cap Value Fund, Reserve Mid-Cap
Growth Fund, and Reserve North American Growth Fund. The Trust was formed
under Delaware law as a Delaware business trust. The Trust is registered
under the Investment Company Act of 1940, as amended, as a non-diversified
open-end management investment company. There are an unlimited number of
shares of beneficial interest of $.001 par value authorized in each series.
The Trust offers both Class A and Class D shares of each Fund. Class A shares
are sold with an initial sales charge and Class D shares are sold without an
initial sales charge. Both classes of shares have identical voting, dividend,
liquidation and other rights, and the same terms and conditions, except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan.
The accounting policies summarized below are consistently followed in
preparation of the financial statements in conformity with generally accepted
accounting principles.
SECURITY VALUATION
Portfolio securities are stated at value. A security listed or traded on an
exchange is valued at its last sale price on the exchange where the security
is principally traded or, lacking any sales on a particular day, the security
is valued at the mean between the closing bid and asked prices on that day.
Each security traded in the over-the-counter market is valued at the mean
between its quoted bid and asked prices. Where market quotations are not
readily available, the securities are valued at their fair value as
determined in good faith by or under direction of the Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date. Dividend income and
distributions to shareholders are recorded on the ex-dividend dates. Interest
income is accrued daily. Realized gains and losses from securities
transactions and unrealized appreciation or depreciation of securities are
reported on the identified cost basis for both financial statement and
federal income tax purposes.
Income and capital gain distributions are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for net operating losses and the recognition of net realized gains
and losses. Accordingly, the effect of differing financial reporting and
federal income tax treatments have been reclassified among the components of
net assets at May 31, 1996 as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
----------------------------------------
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT REALIZED
CAPITAL INCOME GAIN (LOSS)
------- -------------- -----------
<S> <C> <C> <C>
Reserve Blue Chip Growth Fund......................................... 5,361 34,916 (40,277)
Reserve Emerging Growth Fund.......................................... 4,689 57,980 (62,669)
Reserve Informed Investors Growth Fund................................ -- 147,983 (147,983)
Reserve International Equity Fund..................................... (17,145) 17,145 --
Reserve Large-Cap Value Equity Fund................................... (1,091) 1,091 --
Reserve Mid-Cap Growth Fund........................................... (7,708) 24,899 (17,191)
Reserve North American Growth Fund.................................... (32,656) 32,656 --
</TABLE>
These reclassifications had no effect on net investment income, net realized
gain on investments, or net assets for the year ended May 31, 1996.
FOREIGN CURRENCY TRANSLATION
With respect to the Reserve International Equity Fund, assets and liabilities
denominated in a foreign currency are translated into U.S. dollars using
exchange rates on the valuation date. Purchases and sales of securities,
expense payments and income receipts are translated into U.S. dollars using
the exchange rate on the transaction date. The Trust does not segregate that
portion of the results of operations resulting from changes in foreign
exchange rates from the portion resulting from changes in market prices of
securities held; both are included in net realized and unrealized gains or
losses on investments and foreign currency transactions.
33
<PAGE> 267
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
FEDERAL INCOME TAXES
It is the Trust's policy for each Fund to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended, by
complying with the requirements of the Internal Revenue Code applicable to
regulated investment companies, and to distribute substantially all of its
taxable income, including net realized capital gains to its shareholders.
Accordingly, no federal income tax provision is required.
For federal income tax purposes, the following Funds indicated below had
capital loss carryforwards at May 31, 1996, which are available to offset
future realized capital gains, if any:
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
CARRYFORWARD YEAR
------------ -----------
<S> <C> <C>
Reserve Growth and Income Fund..................................................... $ 111 2004
Reserve International Equity Fund.................................................. 71,968 2004
Reserve North American Growth Fund................................................. 83,525 2004
</TABLE>
2. INVESTMENT ACTIVITY
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the period ended May 31, 1996, were as
follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
RESERVE FUND PURCHASES SALES
------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Blue Chip Growth Fund.......................................................... $ 4,629,931 $ 2,573,982
Emerging Growth Fund........................................................... 4,850,242 1,201,292
Growth and Income Fund......................................................... 822,642 28,263
Informed Investors Growth Fund................................................. 11,122,332 13,684,285
International Equity Fund...................................................... 4,384,944 1,368,647
Large-Cap Value Fund........................................................... 1,115,010 --
Mid-Cap Growth Fund............................................................ 4,338,530 3,071,543
North American Growth Fund..................................................... 3,291,738 1,272,486
</TABLE>
3. INVESTMENT MANAGEMENT AGREEMENT
Reserve Management Company, Inc. (RMCI), serves as the Funds' investment
adviser and pays substantially all ordinary operating expenses of the Funds
for which it receives a comprehensive fee at an annual rate of 1.50% of the
average daily net assets of each Fund other than the International Equity
Fund for which it receives 1.75%. RMCI is currently waiving a portion of its
comprehensive fee.
For each Fund, RMCI has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with the Sub-Advisers. It is the responsibility of a
Sub-Adviser to make the day-to-day investment decision of the Funds and to
place the purchase and sales orders for securities transactions, subject in
all cases to the general supervision of RMCI. For services under each
Subadvisory Agreement, RMCI pays a fee up to an annual rate equal to the
percentages specified in the table below of the corresponding Funds' average
net assets.
<TABLE>
<CAPTION>
SUB-ADVISER'S
RESERVE FUND PORTFOLIO SUB-ADVISER FEE
----------------------------------------- ------------------------------------------------- -------------
<S> <C> <C>
Blue Chip Growth Fund Trainer, Wortham & Company, Inc. 0.75%
Emerging Growth Fund Roanoke, Asset Management Corp. 0.75%
Growth and Income Fund Kenneth J. Gerbino & Company 0.75%
Informed Investors Growth Fund T. H. Fitzgerald & Company 0.75%
International Equity Fund Pinnacle Associates Limited 0.875%
Large-Cap Value Fund Siphron Capital Management 0.75%
Mid-Cap Growth Fund Cambridge Equity Advisors (6/1/95-4/18/96) 0.75%
Southern Capital Advisors (4/19/96-5/31/96) 0.75%
North American Growth Fund Southern Capital Advisors 0.75%
</TABLE>
Trainer, Wortham & Company, Inc. owns 33% of the outstanding shares of the
Reserve Blue Chip Growth Fund at May 31, 1996.
34
<PAGE> 268
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
4. DISTRIBUTION ASSISTANCE
Pursuant to a Distribution Plan under Rule 12b-1, the Funds will make
payments to Resrv Partners, Inc. (RPI), the Funds' distributor of .25% per
annum for Class A and 1.00% per annum for Class D of the average daily net
assets of shareholder accounts as to which the payee has rendered
distribution assistance. During the period, the Funds paid distribution
expenses to RPI as follows:
<TABLE>
<CAPTION>
RESERVE FUND CLASS A CLASS D
------------------------------------------------------------------------------------- ------- -------
<S> <C> <C>
Blue Chip Growth Fund................................................................ $ 9,247 $ 66
Emerging Growth Fund................................................................. 8,481 192
Growth and Income Fund............................................................... 754 0
Informed Investors Growth Fund....................................................... 23,619 26
International Equity Fund............................................................ 4,734 12
Large-Cap Value Fund................................................................. 841 0
Mid-Cap Growth Fund.................................................................. 3,830 5
North American Growth Fund........................................................... 17 16,268
</TABLE>
As of May 31, 1996, RPI owned 4%, 24%, 31%, 21%, 6%, and 24% of the Reserve
Emerging Growth Fund, Reserve Growth and Income Fund, Reserve International
Equity Fund, Reserve Large-Cap Value Fund, Reserve Mid-Cap Growth Fund and
Reserve North American Growth Fund, respectively.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock of each Fund for the period ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- -----------------
FEBRUARY 13, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
--------------------- -----------------
RESERVE BLUE CHIP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------- ------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold............................................................... 203,145 $2,716,393 2,865 $40,705
Reinvested......................................................... 12,752 164,889 -- --
Redeemed........................................................... (37,574) (517,167) -- --
------- ---------- ------ -------
Net increase....................................................... 178,323 $2,364,115 2,865 $40,705
======== ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ------------------
FEBRUARY 26, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
--------------------- ------------------
RESERVE EMERGING GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------- ------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold................................................................ 251,367 $4,052,411 12,448 $229,569
Reinvested.......................................................... 5,916 93,770 -- --
Redeemed............................................................ (18,653) (301,485) -- --
------- ---------- ------ --------
Net increase........................................................ 238,630 $3,844,696 12,448 $229,569
======== ========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MAY 13, 1996
JANUARY 2, 1996 (COMMENCEMENT
(COMMENCEMENT OF OPERATIONS)
OF OPERATIONS) TO TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE GROWTH AND INCOME FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold................................................................ 103,914 $1,042,819 147 $1,500
Redeemed............................................................ (573) (5,844) -- --
------- ---------- ------ ------
Net increase........................................................ 103,341 $1,036,975 147 $1,500
======== ========== ====== ======
</TABLE>
35
<PAGE> 269
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
----------------------- ------------------
FEBRUARY 13, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
----------------------- ------------------
RESERVE INFORMED INVESTORS GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- -------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold............................................................. 458,428 $ 6,230,788 1,953 $ 24,151
Reinvested....................................................... 56,312 790,060 -- --
Redeemed......................................................... (639,631) (8,479,206) (909) (11,076)
-------- ----------- ------ --------
Net increase..................................................... (124,891) $(1,458,358) 1,044 $ 13,075
========= ============ ====== =========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MARCH 11, 1996
JULY 13, 1995 (COMMENCEMENT
(COMMENCEMENT OF OPERATIONS)
OF OPERATIONS) TO TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE INTERNATIONAL EQUITY FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold............................................................. 329,964 $3,459,234 552 $6,000
Redeemed......................................................... (12,037) (122,619) -- --
------- ---------- ------ ------
Net increase..................................................... 317,927 $3,336,615 552 $6,000
======== ========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CLASS A
---------------------
JANUARY 2, 1996
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1996
---------------------
RESERVE LARGE-CAP VALUE FUND SHARES AMOUNT
- ----------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................. 112,729 $1,165,180
Redeemed......................................................... (292) (3,152)
------- ----------
Net increase..................................................... 112,437 $1,162,028
======== ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MARCH 29, 1996
(COMMENCEMENT
OF OPERATIONS)
YEAR ENDED TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE MID-CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold............................................................. 183,603 $2,004,087 374 $4,250
Redeemed......................................................... (59,920) (666,471) -- --
------- ---------- ------ ------
Net increase..................................................... 123,683 $1,337,616 374 $4,250
======== ========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
------------------ ---------------------
MARCH 13, 1996
(COMMENCEMENT
OF OPERATIONS) TO YEAR ENDED
MAY 31, 1996 MAY 31, 1996
------------------ ---------------------
RESERVE NORTH AMERICAN GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------ -------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................................................. 11,491 $139,077 207,997 $2,206,682
Redeemed......................................................... (810) (10,000) (11,798) (133,694)
------ -------- ------- ----------
Net increase..................................................... 10,681 $129,077 196,199 $2,072,988
====== ========= ======== ==========
</TABLE>
36
<PAGE> 270
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
Transactions in capital stock of each Fund for the period ended May 31, 1995,
were as follows:
<TABLE>
<CAPTION>
OCTOBER 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
-----------------------
RESERVE BLUE CHIP GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................................... 214,923 $2,257,822
Redeemed........................................................................... (49,164) (520,420)
------- ----------
Net increase....................................................................... 165,759 $1,737,402
======== ==========
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 14, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
------------------------
RESERVE EMERGING GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- -------- ----------
<S> <C> <C>
Sold............................................................................... 218,209 $2,268,282
Redeemed........................................................................... (116,596) (1,251,282)
-------- ----------
Net increase....................................................................... 101,613 $1,017,000
========= ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
-----------------------
RESERVE INFORMED INVESTORS GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................................... 634,326 $6,422,521
Redeemed........................................................................... (64,254) (656,742)
------- ----------
Net increase....................................................................... 570,072 $5,765,779
======== ==========
</TABLE>
6. MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
37
<PAGE> 271
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31,
1996--(CONTINUED)
7. SUPPLEMENTARY INFORMATION (FOR EACH SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
CLASS D
CLASS A ----------------
-------------------------------- FEBRUARY 13,
OCTOBER 28, 1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE BLUE CHIP GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $12.03 $10.00 $13.49
------ ------ ------
Income from investment operations
Net investment loss....................................... (.10) (.03) (.04)
Net realized and unrealized gain.......................... 3.62 2.06 1.43
------ ------ ------
Total from investment operations............................ 3.52 2.03 1.39
Less distribution from net realized gain.................... (.64) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $14.91 $12.03 $14.88
====== ====== ======
Total Return................................................ 30.10% 20.30%(2) 10.30%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $5,130 $1,993 $ 43
Ratio of expenses to average net assets before waiver....... 1.75% 1.75%(1) 2.50%(1)
Ratio of expenses to average net assets, net of waiver...... 1.75% 1.73%(1) 2.50%(1)
Ratio of net investment loss to average net assets, before
waiver.................................................... (0.94)% (0.72)%(1) (1.70)%(1)
Ratio of net investment loss to average net assets, net of
waiver.................................................... (0.94)% (0.70)%(1) (1.70)%(1)
Portfolio turnover rate..................................... 72% 68% 72%
Average commission per share on Macromedia portfolio
transactions.............................................. $ 0.06 N/A $ 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
-------------------------------- ----------------
NOVEMBER 14, FEBRUARY 26,
1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE EMERGING GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $12.21 $10.00 $16.88
------ ------ ------
Income from investment operations
Net investment loss....................................... (.17) (.09) (.04)
Net realized and unrealized gain.......................... 8.05 2.30 2.68
------ ------ ------
Total from investment operations............................ 7.88 2.21 2.64
Less distribution from net realized gain.................... (0.53) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $19.56 $12.21 $19.52
====== ====== ======
Total Return................................................ 65.55% 22.10%(2) 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $6,657 $1,241 $ 243
Ratio of expenses to average net assets..................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets.......... (1.70)% (1.62)%(1) (2.48)%(1)
Portfolio turnover rate..................................... 38% 43% 38%
Average commission per share on portfolio transactions...... $ 0.01 N/A $ 0.01
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
38
<PAGE> 272
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JANUARY 2, 1996 MAY 13, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE GROWTH AND INCOME FUND MAY 31, 1996 MAY 31, 1996
- ------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period..................................... $10.00 $10.19
------ ------
Income from investment operations
Net investment income (loss)........................................... 0.09 0.00
Net realized and unrealized gain (loss)................................ 0.08 (0.02)
------ ------
Total from investment operations......................................... 0.17 (0.02)
------ ------
NET ASSET VALUE, end of period........................................... $10.17 $10.17
====== ======
Total Return............................................................. 1.70%(2) (0.2)%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................................... $1,051 $ 1
Ratio of expenses to average net assets.................................. 1.75%(1) 2.23%(1)
Ratio of net investment income to average net assets..................... 3.15%(1) 0.00%(1)
Portfolio turnover rate.................................................. 17% 17%
Average commission per share on portfolio transactions................... $ 0.08 $ 0.08
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JULY 13, 1995 MARCH 11, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE INTERNATIONAL EQUITY FUND MAY 31, 1996 MAY 31, 1996
- ------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period..................................... $10.00 $10.79
------ ------
Income from investment operations
Net investment loss.................................................... (0.05) (0.01)
Net realized and unrealized gain....................................... 1.31 0.47
------ ------
Total from investment operations......................................... 1.26 0.46
------ ------
NET ASSET VALUE, end of period........................................... $11.26 $11.25
====== ======
Total Return............................................................. 12.60%(2) 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................................... $3,578 $ 6
Ratio of expenses to average net assets before waiver.................... 2.00%(1) 2.75%(1)
Ratio of expenses to average net assets, net of waiver................... 1.99%(1) 2.75%(1)
Ratio of net investment loss to average net assets, before waiver........ (0.92)%(1) (0.70)%(1)
Ratio of net investment loss to average net assets, net of waiver........ (0.91)%(1) (0.70)%(1)
Portfolio turnover rate.................................................. 70% 70%
Average commission per share on portfolio transactions................... $ 0.02 $ 0.02
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
39
<PAGE> 273
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------------------- ----------------
DECEMBER 28, 1994 MARCH 22, 1996
(COMMENCEMENT (COMMENCEMENT OF
YEAR ENDED OF OPERATIONS) TO OPERATIONS) TO
RESERVE INFORMED INVESTORS GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ----------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $11.99 $ 10.00 $12.29
------ ------ ------
Income from investment operations
Net investment loss....................................... (0.33) (.07) (.06)
Net realized and unrealized gain.......................... 3.87 2.06 2.10
------ ------ ------
Total from investment operations............................ 3.54 1.99 2.04
Less distribution from net realized gain.................... (1.17) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $14.36 $ 11.99 $14.33
====== ====== ======
Total Return................................................ 29.75% 19.90%(2) 16.60%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $6,393 $ 6,837 $ 15
Ratio of expenses to average net assets..................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets.......... (1.57)% (1.62)%(1) (2.32)%(1)
Portfolio turnover rate..................................... 132% 59% 132%
Average commission per share on portfolio transactions...... $ 0.05 N/A $ 0.05
</TABLE>
<TABLE>
<CAPTION>
CLASS A
----------------
JANUARY 2, 1996
(COMMENCEMENT OF
OPERATIONS) TO
RESERVE LARGE-CAP VALUE FUND MAY 31, 1996
- ------------------------------------------------------------------------------------------ ----------------
<S> <C>
NET ASSET VALUE, beginning of period...................................................... $10.00
------
Income from investment operations
Net investment loss..................................................................... (0.01)
Net realized and unrealized gain........................................................ 0.96
------
Total from investment operations.......................................................... 0.95
------
NET ASSET VALUE, end of period............................................................ $10.95
======
Total Return.............................................................................. 9.50%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period.................................................... $1,231
Ratio of expenses to average net assets................................................... 1.75%(1)
Ratio of net investment loss to average net assets........................................ (0.32)%(1)
Portfolio turnover rate................................................................... 0%
Average commission per share on portfolio transactions.................................... $ 0.08
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
40
<PAGE> 274
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
------------ ----------------
MARCH 29, 1996
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
RESERVE MID-CAP GROWTH FUND MAY 31, 1996 MAY 31, 1996
- ----------------------------------------------------------------------------- ------------ ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period......................................... $10.00 $11.03
------ ------
Income from investment operations
Net investment loss........................................................ (.20) (.03)
Net realized and unrealized gain........................................... 2.28 1.07
------ ------
Total from investment operations............................................. 2.08 1.04
------ ------
NET ASSET VALUE, end of period............................................... $12.08 $12.07
====== ======
Total Return................................................................. 20.80% 9.43%(2)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period....................................... $1,495 $ 5
Ratio of expenses to average net assets...................................... 1.75% 2.50%(1)
Ratio of net investment loss to average net assets........................... (1.62)% (2.04)%
Portfolio turnover rate...................................................... 225% 225%
Average commission per share on portfolio transactions....................... $ 0.06 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ------------
MARCH 13, 1996
(COMMENCEMENT OF
OPERATIONS) TO YEAR ENDED
RESERVE NORTH AMERICAN GROWTH FUND MAY 31, 1996 MAY 31, 1996
- ----------------------------------------------------------------------------- ---------------- ------------
<S> <C> <C>
NET ASSET VALUE, beginning of period......................................... $10.94 $10.00
------ ------
Income from investment operations
Net investment loss........................................................ (0.01) (0.17)
Net realized and unrealized gain........................................... 1.36 2.44
------ ------
Total from investment operations............................................. 1.35 2.27
------ ------
NET ASSET VALUE, end of period............................................... $12.29 $12.27
====== ======
Total Return................................................................. 12.34%(2) 22.70%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period....................................... $ 131 $2,408
Ratio of expenses to average net assets...................................... 1.74%(1) 2.49%(1)
Ratio of net investment loss to average net assets........................... (0.97)%(1) (2.00)%(1)
Portfolio turnover rate...................................................... 85% 85%
Average commission per share on portfolio transactions....................... $ 0.04 $ 0.04
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
41
<PAGE> 275
THE RESERVE PRIVATE EQUITY SERIES--RESERVE BLUE CHIP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BANKS (3.5%)
Banc One Corporation................................................................. 4,850 $ 179,450
----------
BUSINESS EQUIPMENT (3.0%)
Xerox Corporation.................................................................... 1,000 157,375
----------
COMPUTER NETWORKING (3.4%)
Cisco Systems, Inc.*................................................................. 3,200 175,200
----------
COMPUTER SOFTWARE (11.8%)
CUC International, Inc.*............................................................. 5,000 203,500
Microsoft Corporation*............................................................... 1,500 178,125
National Data Corporation............................................................ 6,000 226,500
----------
608,125
----------
ELECTRICAL EQUIPMENT (1.9%)
American Superconductor Corporation*................................................. 7,000 98,000
----------
ELECTRONICS (3.5%)
Perceptron, Inc.*.................................................................... 5,000 180,625
----------
FINANCIAL SERVICES (3.6%)
Citicorp............................................................................. 2,200 184,800
----------
MEDICAL SUPPLIES (2.2%)
LaserSight Corporation*.............................................................. 10,000 115,000
----------
MISCELLANEOUS MANUFACTURING (4.4%)
Warnaco Group, Inc. ................................................................. 8,000 227,000
----------
MULTI-LINE INSURANCE (4.5%)
American International Group, Inc. .................................................. 2,500 235,625
----------
OIL/GAS EQUIPMENT SERVICES (9.0%)
Petroleum Geo-Services--ADR*......................................................... 7,000 214,375
Schlumberger, Ltd. .................................................................. 3,000 250,125
----------
464,500
----------
PACKAGED SOFTWARE (2.8%)
Computer Associates International, Inc. ............................................. 2,000 145,500
----------
PHARMACEUTICALS (8.8%)
Johnson & Johnson.................................................................... 2,000 194,750
Eli Lilly & Company.................................................................. 1,000 64,250
Merck & Company, Inc. ............................................................... 3,000 193,875
----------
452,875
----------
PUBLISHING (5.3%)
Harte-Hanks Communications........................................................... 10,500 276,938
----------
PUBLISHING--NEWSPAPERS (2.8%)
Tribune Company...................................................................... 2,000 148,250
----------
REAL ESTATE (4.5%)
Insignia Financial Group, Inc. Class A*.............................................. 9,000 234,000
----------
RETAIL SPECIALTY (3.0%)
Home Depot, Inc. .................................................................... 3,000 153,375
----------
</TABLE>
10
<PAGE> 276
THE RESERVE PRIVATE EQUITY SERIES--RESERVE BLUE CHIP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
SPECIAL INDUSTRIAL MACHINERY (6.2%)
Thermo Electron Corporation*......................................................... 5,000 $ 318,750
----------
TELECOMMUNICATIONS (4.0%)
CommNet Cellular, Inc.*.............................................................. 6,000 206,250
----------
TELECOMMUNICATIONS EQUIPMENT (6.7%)
Glenayre Technologies, Inc.*......................................................... 7,075 348,443
----------
TOTAL COMMON STOCKS (Cost $3,765,486) (94.9%).......................................... 4,910,081
Other assets, less liabilities (5.1%).................................................. 262,077
----------
NET ASSETS (100%)...................................................................... $5,172,158
==========
</TABLE>
- ------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $3,765,486, the aggregate gross unrealized appreciation for all
investments was $1,159,820 and aggregate gross unrealized depreciation for all
investments was $15,225.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BIO-TECHNOLOGY (3.3%)
Alliance Pharmaceutical Corporation*.................................................. 4,000 $ 86,500
Genzyme Corporation*.................................................................. 2,400 139,800
----------
226,300
----------
CAPITAL GOODS -- DIVERSIFIED (1.8%)
Danaher Corporation................................................................... 3,000 124,500
----------
CAPITAL GOODS/INDUSTRIAL (1.5%)
Vishay Intertechnology, Inc.*......................................................... 3,654 100,943
----------
COMMUNICATION -- EQUIPMENT (5.1%)
ANADIGICS, Inc.*...................................................................... 3,000 79,500
ECI Telecommunications Ltd. Designs................................................... 5,000 132,500
FORE Systems, Inc.*................................................................... 1,700 137,700
----------
349,700
----------
COMMUNICATION -- NETWORK (8.8%)
Heartland Wireless Communications, Inc.*.............................................. 3,500 94,500
IntelCom Group Inc.*.................................................................. 5,000 132,500
Pairgain Technologies, Inc.*.......................................................... 1,500 152,625
People's Choice TV Corporation*....................................................... 4,000 68,000
Wireless One, Inc.*................................................................... 8,500 157,250
----------
604,875
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 277
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
COMPUTER NETWORKING (8.7%)
Ascend Communications, Inc.*.......................................................... 3,600 $ 240,750
Bay Networks Inc.*.................................................................... 1,950 56,550
Shiva Corporation*.................................................................... 2,400 179,400
3Com Corporation*..................................................................... 2,500 123,125
----------
599,825
----------
COMPUTER SOFTWARE (11.0%)
Business Objects S. A. -- ADR*........................................................ 2,000 93,000
Data Translation, Inc.*............................................................... 8,000 212,000
Dendrite International, Inc.*......................................................... 3,500 95,375
Edify Corporation*.................................................................... 1,000 42,000
EPIC Design Technology, Inc.*......................................................... 3,000 88,500
Fractal Design Corp.*................................................................. 5,000 77,500
Oacis Healthcare Holding Corp.*....................................................... 3,000 49,500
Sapient Corporation*.................................................................. 2,000 100,000
----------
757,875
----------
CONSUMER GROWTH (3.8%)
Activision, Inc.*..................................................................... 5,000 68,125
Conso Products Company*............................................................... 5,750 100,625
Electronic Arts, Inc.*................................................................ 1,200 37,950
Lin Television Corporation*........................................................... 1,700 54,400
----------
261,100
----------
ELECTRIC MEASUREMENT & TESTING INSTRUMENTS (1.4%)
Opal, Inc.*........................................................................... 5,500 100,375
----------
ENERGY (1.8%)
Cross Timbers Oil Company............................................................. 5,500 123,062
----------
HEALTH (5.6%)
HCIA, Inc.*........................................................................... 2,300 148,925
National Dentex Corporation*.......................................................... 6,000 138,000
PacifiCare Health Systems, Inc.*...................................................... 1,200 99,300
----------
386,225
----------
MANAGED CARE (4.8%)
Healthsource, Inc.*................................................................... 4,000 90,500
MedPartners/Mullikin, Inc.*........................................................... 4,500 105,188
PhyCor, Inc.*......................................................................... 2,525 136,981
----------
332,669
----------
MISCELLANEOUS CONSUMER (1.4%)
On Assignment, Inc.*.................................................................. 2,500 100,625
----------
OFFICE-BUSINESS EQUIPMENT (1.3%)
HPR Inc.*............................................................................. 4,000 93,000
----------
PAPER (1.1%)
Data Documents, Inc.*................................................................. 6,000 76,500
----------
</TABLE>
12
<PAGE> 278
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
PHARMACEUTICALS (3.4%)
Centocor, Inc.*....................................................................... 3,200 $ 113,200
Dura Pharmaceuticals, Inc.*........................................................... 2,000 123,250
----------
236,450
----------
RADIO, TV & BROADCAST COMM. EQUIP. (1.5%)
American Telecasting, Inc.*........................................................... 7,500 105,937
----------
RESTAURANTS (3.2%)
Cheesecake Factory (The)*............................................................. 2,500 66,250
Outback Steakhouse, Inc.*............................................................. 3,000 113,625
Volunteer Capital Corporation*........................................................ 4,000 43,500
----------
223,375
----------
RETAIL -- SPECIALTY (8.1%)
Borders Group, Inc.*.................................................................. 4,500 147,375
PetSmart, Inc.*....................................................................... 3,000 133,500
Staples, Inc.*........................................................................ 6,325 126,500
The Sports Authority, Inc.*........................................................... 5,000 148,750
----------
556,125
----------
SEMICONDUCTOR-RELATED DEVICE (5.2%)
Credence Systems Corporation*......................................................... 2,500 50,625
Intel Corporation..................................................................... 1,800 135,900
KLA Instruments Corporation*.......................................................... 3,000 81,000
LSI Logic Corporation*................................................................ 3,000 93,375
----------
360,900
----------
SYSTEM SOFTWARE/CLIENT SERVER (4.0%)
Hummingbird Communications Ltd.*...................................................... 3,400 138,125
Informix Corporation*................................................................. 6,000 136,500
----------
274,625
----------
TELECOMMUNICATIONS (2.5%)
Cascade Communications Corp.*......................................................... 3,000 169,125
----------
TELECOMMUNICATIONS EQUIPMENT (6.2%)
Comverse Technology, Inc.*............................................................ 4,000 117,500
DSC Communications Corporation*....................................................... 2,000 60,250
Newbridge Networks Corporation*....................................................... 1,800 128,025
P-COM, Inc.*.......................................................................... 4,000 119,500
----------
425,275
----------
TOTAL COMMON STOCKS (Cost $4,765,851) (95.5%)........................................... 6,589,386
Other assets, less liabilities (4.5%)................................................... 310,054
----------
NET ASSETS (100%)....................................................................... $6,899,440
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets
* Non-income producing security.
For Federal income tax purposes the tax basis of investments owned at May 31,
1996 was $4,765,851, the aggregate gross unrealized appreciation for all
investments was $1,941,417 and aggregate gross unrealized depreciation for all
investments was $117,882.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 279
THE RESERVE PRIVATE EQUITY SERIES--RESERVE GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- -------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
AUTO (1.9%)
Chrysler Corporation................................................................ 300 $ 19,988
----------
BANKS (5.3%)
Bankers Trust New York Corporation.................................................. 500 37,563
First of America Bank Corporation................................................... 400 18,300
----------
55,863
----------
COMPUTER NETWORKING (3.1%)
Cisco Systems, Inc. ................................................................ 600 32,850
----------
COMPUTERS (3.0%)
Hewlett-Packard Company............................................................. 300 32,025
----------
ELECTRIC UTILITIES (15.5%)
Consolidated Edison Company of New York, Inc. ...................................... 1,400 39,025
Hawaiian Electric Industries, Inc. ................................................. 1,300 44,200
Minnesota Power and Light Company................................................... 1,500 40,313
Southwestern Public Service Company................................................. 1,300 39,812
----------
163,350
----------
FERTILIZERS (1.9%)
Freeport McMoran Resource Partners Ltd. ............................................ 1,000 20,000
----------
MISCELLANEOUS ENERGY (2.0%)
LL & E Royalty Trust................................................................ 4,500 21,375
----------
OIL-INTERNATIONAL (2.3%)
Chevron Corporation................................................................. 400 23,900
----------
PHARMACEUTICALS (1.2%)
Merck & Company Inc. ............................................................... 200 12,925
----------
REAL ESTATE (1.9%)
Commercial Net Lease Realty Inc. ................................................... 1,500 20,063
----------
RESTAURANTS (1.9%)
Lone Star Steakhouse & Saloon....................................................... 500 20,188
----------
RETAIL-SPECIALTY (3.6%)
Home Depot, Inc. ................................................................... 300 15,338
Tiffany & Company................................................................... 300 22,762
----------
38,100
----------
SEMICONDUCTOR-RELATED DEVICE (3.2%)
Texas Instruments, Inc. ............................................................ 600 33,750
----------
TELECOMMUNICATIONS (3.5%)
GTE Corporation..................................................................... 400 17,100
Telecom Corporation of New Zealand, Ltd. (ADR)...................................... 300 19,688
----------
36,788
----------
TELEPHONE (3.0%)
AT & T Corporation.................................................................. 500 31,188
----------
</TABLE>
14
<PAGE> 280
THE RESERVE PRIVATE EQUITY SERIES--RESERVE GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL VALUE
COMMON STOCKS AMOUNT (NOTE 1)
- -------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
UTILITIES-TELECOMMUNICATION (1.8%)
NYNEX Corporation................................................................... 400 $ 18,450
----------
TOTAL COMMON STOCKS (Cost $576,535) (55.1%)........................................... $ 580,803
==========
<CAPTION>
PREFERRED STOCKS
- --------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (4.0%)
Lehman Brothers Holdings, Inc. Series A 8.30%....................................... 1,000 24,625
Sunamerica Capital Trust, 8.35%..................................................... 700 17,500
----------
42,125
----------
GOLD MINING (1.5%)
Battle Mountain Gold Company, $3.25................................................. 300 15,525
----------
LIFE INSURANCE (2.2%)
Conseco Inc., 6.50% Series D........................................................ 400 23,100
----------
PROPERTY-LIABILITY INSURANCE (3.5%)
Travelers/P&C Cap I Preferred Trust, 8.08%.......................................... 1,500 36,938
----------
TOTAL PREFERRED STOCKS (Cost $117,775) (11.2%)........................................ $ 117,688
==========
<CAPTION>
CONVERTIBLE BONDS
- --------------------------------------------------------------------------------------
<S> <C> <C>
HOTEL-MOTEL (2.4%)
Hilton Hotels Corp. 5.00%, 05/15/06................................................. 25,000 25,062
----------
STEEL (2.4%)
USX Corp. 7.00%, 06/15/17........................................................... 25,000 24,125
----------
TOTAL CONVERTIBLE BONDS (Cost $49,045) (4.8%)......................................... $ 49,187
==========
US TREASURY NOTES
- --------------------------------------------------------------------------------------
US Treasury Notes, 7.375%, 11/15/97 (Cost $50,913)(4.9%)............................ 50,000 50,867
----------
TOTAL INVESTMENT SECURITIES (Cost $794,268) (76.0%)................................... 798,545
Other assets, less liabilities (24.0%)................................................ 253,611
----------
NET ASSETS (100%)..................................................................... $1,052,156
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $794,268, the aggregate gross unrealized appreciation for all
investments was $30,992, and aggregate gross unrealized depreciation for all
investments was $26,715.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 281
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INFORMED INVESTORS GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
SHARES/ VALUE
COMMON STOCKS UNITS (NOTE 1)
- --------------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
AIR TRANSPORT (4.0%)
Comair Holdings, Inc. ............................................................... 9,750 $ 255,938
----------
BUSINESS EQUIPMENT/SERVICES (2.6%)
Equifax, Inc......................................................................... 6,700 165,825
----------
COMPUTER NETWORKING (4.4%)
Cisco Systems, Inc.*................................................................. 5,200 284,700
----------
COMPUTER SOFTWARE (3.9%)
CompUSA, Inc.*....................................................................... 5,700 249,375
----------
COMPUTERS (9.6%)
Sun Microsystems, Inc.*.............................................................. 9,800 613,725
----------
FOOD (3.7%)
Safeway, Inc.*....................................................................... 7,000 236,250
----------
MACHINERY-CONSTRUCTION (3.7%)
JLG Industries, Inc.................................................................. 3,000 237,375
----------
MAGNETIC OPTICAL RECORDING MEDIA (5.5%)
Komag, Inc.*......................................................................... 10,200 353,175
----------
PACKAGED SOFTWARE (11.2%)
Cadence Design Systems, Inc.*........................................................ 12,700 720,725
----------
SEMICONDUCTOR, RELATED DEVICE (9.1%)
Analog Devices, Inc.*................................................................ 1,100 30,387
Atmel Corporation*................................................................... 15,500 550,250
----------
580,637
----------
SHOES (5.3%)
Nike, Inc. .......................................................................... 3,400 341,275
----------
SPECIAL INDUSTRIAL MACHINERY (5.1%)
Applied Materials, Inc.*............................................................. 8,700 324,075
----------
TELEPHONE & TELGRAPH APPARATUS (29.0%)
Aspect Telecommunications Corporation*............................................... 7,500 425,625
Tellabs, Inc.*....................................................................... 1,200 77,400
U.S. Robotics Corporation*........................................................... 14,800 1,357,900
----------
1,860,925
----------
TOTAL COMMON STOCKS (Cost $3,783,862) (97.1%).......................................... 6,224,000
Other assets, less liabilities (2.9%).................................................. 184,063
----------
NET ASSETS (100%)...................................................................... $6,408,063
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For Federal income tax purposes the tax basis of investments owned at May 31,
1996 was $3,783,862, the aggregated gross unrealized appreciation for all
investments was $2,494,427 and aggregate gross unrealized depreciation for all
investments was $54,289.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 282
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AUSTRALIA (1.2%)
Coca Cola Amatil Ltd. ............................................................... 4,074 $ 44,377
----------
FRANCE (4.7%)
Altran Technologies.................................................................. 120 34,918
Axime................................................................................ 260 35,305
Carrefour............................................................................ 120 65,777
Carrefour (Rights expiring 7/2/96)................................................... 120 33,040
----------
169,040
----------
GERMANY (3.7%)
Altana AG............................................................................ 50 31,550
Fresenius AG......................................................................... 350 61,244
Gehe AG.............................................................................. 65 41,825
----------
134,619
----------
HONG KONG (10.1%)
CDL Hotels International Limited..................................................... 68,000 38,676
Giordano International Ltd. ......................................................... 24,000 21,562
Goldlion Holdings Ltd. .............................................................. 25,000 20,521
Hang Seng Bank Ltd. ................................................................. 7,000 73,067
Hong Kong & China Gas Company........................................................ 31,800 50,561
Hong Kong & China Gas Company (Warrants -- expires 9/30/97).......................... 1,900 87
Manhattan Card Company Ltd. ......................................................... 68,000 32,743
National Mutual Asia Ltd. ........................................................... 44,000 39,814
Sun Hung Kai Properties Ltd. ........................................................ 6,000 61,272
Wing Hang Bank Ltd. ................................................................. 6,000 23,423
----------
361,726
----------
INDONESIA (5.6%)
PT Bank Internasional Indonesia...................................................... 10,000 52,220
PT Darya Varia Laboratoria........................................................... 20,000 42,033
PT Darya Varia Laboratoria (Rights expiring 6/3/96).................................. 2,400 0
PT Gudang Garam...................................................................... 4,000 32,597
PT Steady Safe....................................................................... 11,000 14,626
PT Telekomunikasi Indonesia.......................................................... 38,000 57,860
----------
199,336
----------
ITALY (1.4%)
Telecom Italia SpA................................................................... 8,000 16,145
Telecom Italia Mobile SpA............................................................ 25,000 33,041
----------
49,186
----------
JAPAN (1.0%)
Paris Miki, Inc. .................................................................... 800 35,057
----------
</TABLE>
17
<PAGE> 283
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
MALAYSIA (8.3%)
Arab-Malaysian Merchant Bank Berhad.................................................. 2,000 $ 27,043
Commerce Asset Holding Berhad........................................................ 10,000 67,308
DCB Holdings Berhad.................................................................. 8,000 26,603
Malayan Banking Berhad............................................................... 4,000 37,981
Malaysian Assurance Alliance Berhad.................................................. 11,625 57,287
O.Y.L. Industries Berhad............................................................. 6,000 59,615
United Engineers (Malaysia) Ltd. .................................................... 3,000 20,913
----------
296,750
----------
NETHERLANDS (4.4%)
Elsevier............................................................................. 4,000 62,207
Heineken............................................................................. 200 40,786
Wolters Kluwer....................................................................... 502 56,239
----------
159,232
----------
NORWAY (1.4%)
Tomra Systems........................................................................ 5,000 48,779
----------
PHILIPPINES (1.6%)
Bankard, Inc. ....................................................................... 60,000 29,221
DMCI Holdings Inc. .................................................................. 37,000 27,206
----------
56,427
----------
SINGAPORE (5.6%)
City Developments Limited............................................................ 6,000 46,055
DBS Land Limited..................................................................... 12,000 39,915
Development Bank of Singapore Limited................................................ 3,000 35,608
Oversea-Chinese Banking Corporation Ltd. ............................................ 3,000 38,380
Overseas Union Bank Ltd. ............................................................ 6,000 42,644
----------
202,602
----------
SOUTH KOREA (3.1%)
Seoul City Gas Co. Ltd. ............................................................. 500 41,476
Sungmi Telecom Electronics........................................................... 300 68,807
----------
110,283
----------
SPAIN (7.5%)
Centros Comerciales Pryca............................................................ 1,000 23,579
Empresa Nacional de Electridad....................................................... 2,300 142,529
Gas Natural.......................................................................... 360 63,699
Iberdrola............................................................................ 3,900 39,672
----------
269,479
----------
SWEDEN (4.5%)
Astra AB Series A.................................................................... 1,400 64,215
Elekta Instrument AB Series B........................................................ 500 18,496
Ericsson Telefonaktiebolaget......................................................... 1,200 26,939
Frontec AB Series B.................................................................. 400 19,690
Wm Data AB Series B.................................................................. 500 30,280
----------
159,620
----------
</TABLE>
18
<PAGE> 284
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
SWITZERLAND (6.2%)
Nestle SA............................................................................ 70 $ 79,087
Roche Holding AG..................................................................... 8 61,538
Sandoz AG............................................................................ 60 62,596
Zurich Versicherungs................................................................. 70 18,510
----------
221,731
----------
THAILAND (5.1%)
Bangkok Bank Public Company Ltd. .................................................... 4,000 58,113
Central Pattana Public Company Ltd. ................................................. 7,000 29,017
Grammy Entertainment Public Company Ltd. ............................................ 1,500 20,371
Krung Thai Bank Public Company Ltd. ................................................. 6,000 29,135
Thai Farmers Bank Public Company Ltd. ............................................... 4,000 45,795
----------
182,431
----------
UNITED KINGDOM (10.5%)
Dixons Group plc..................................................................... 6,800 52,787
HSBC Holdings plc.................................................................... 3,726 56,779
J.D. Wetherspoon plc................................................................. 1,000 14,486
Logica plc........................................................................... 2,900 27,775
Reed International plc............................................................... 3,700 64,044
Reuters Holding plc.................................................................. 7,500 87,302
Standard Chartered plc............................................................... 7,343 73,572
----------
376,745
----------
UNITED STATES (5.5%)
Embotelladora Andina ADR............................................................. 1,000 35,500
Larsen & Toubro Ltd. ................................................................ 2,000 39,260
Santa Isabel ADR..................................................................... 1,300 34,450
Tata Engineering and Locomotive Company Ltd. ........................................ 3,000 52,260
Total Access Communication plc....................................................... 4,000 36,400
----------
197,870
----------
TOTAL COMMON STOCKS (Cost $2,944,304) (91.4%).......................................... 3,275,290
Other assets, less liabilities (8.6%).................................................. 309,234
----------
NET ASSETS (100%)...................................................................... $3,584,524
==========
</TABLE>
19
<PAGE> 285
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
INDUSTRY COMPOSITION
<TABLE>
<CAPTION>
INDUSTRY PERCENT
- ------------------------------------------- -------
<S> <C>
Auto/Truck Manufacturers................... 1.5%
Beverages.................................. 3.4
Biotechnology & Medical Devices............ 2.2
Commercial Banks........................... 16.6
Computer Software.......................... 3.6
Computers & Peripherals.................... 0.5
Construction............................... 2.4
Drugs & Health Care........................ 7.6
Financial Services......................... 10.9
Food Processing............................ 2.2
Lodging & Restaurants...................... 1.5
Machinery.................................. 3.0
<CAPTION>
INDUSTRY PERCENT
- ------------------------------------------- -------
<S> <C>
Public Utilities........................... 9.4%
Publishing................................. 5.1
Real Estate Development.................... 2.8
Real Estate Investment..................... 2.1
Retailing.................................. 9.5
Telecommunications......................... 6.7
Transportation............................. 0.4
-------
Industry percent of net assets............. 91.4%
-------
Other assets, less liabilities............. 8.6
-------
PERCENT OF NET ASSETS...................... 100.0%
======
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $2,944,304, the aggregate gross unrealized appreciation for all
investments was $371,871 and aggregate gross unrealized depreciation for all
investments was $40,885.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE LARGE-CAP VALUE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BANKS (2.0%)
Wells Fargo & Company................................................................. 100 $ 24,100
----------
BEVERAGES (14.0%)
Anheuser-Busch Companies, Inc. ....................................................... 800 57,000
Coca-Cola Company..................................................................... 1,200 55,200
Earthgrains Company................................................................... 20 720
PepsiCo, Inc. ........................................................................ 1,800 59,850
----------
172,770
----------
COMPUTER SOFTWARE (4.8%)
Microsoft Corporation................................................................. 500 59,375
----------
COMPUTER-PERIPHERAL EQUIPMENT (3.8%)
Motorola, Inc. ....................................................................... 700 46,725
----------
COSMETICS (11.5%)
Clorox Company........................................................................ 600 51,075
Gillette Company...................................................................... 900 53,213
Tambrands, Inc. ...................................................................... 800 36,900
----------
141,188
----------
DRUGS (1.8%)
Warner Lambert Company................................................................ 400 22,400
----------
ENTERTAINMENT (3.9%)
Walt Disney Company (Holding Co.)..................................................... 800 48,600
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 286
THE RESERVE PRIVATE EQUITY SERIES--RESERVE LARGE-CAP VALUE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
FINANCIAL/BUSINESS SERVICES (8.2%)
American Express Company.............................................................. 1,100 $ 50,325
Charles Schwab Corporation............................................................ 2,100 50,925
----------
101,250
----------
FOOD (21.5%)
CPC International, Inc. .............................................................. 800 55,300
Campbell Soup Company................................................................. 900 58,050
Hershey Foods Corporation............................................................. 700 50,925
Quaker Oats Company................................................................... 1,500 52,687
Wrigley (WM) Jr. Company.............................................................. 900 47,138
----------
264,100
----------
PHARMACEUTICALS (7.4%)
Johnson & Johnson..................................................................... 400 38,950
Merck & Company, Inc. ................................................................ 800 51,700
----------
90,650
----------
PUBLISHING (4.5%)
Gannett Company, Inc. ................................................................ 800 55,800
----------
PUBLISHING -- NEWSPAPERS (3.8%)
New York Times Company Class A........................................................ 1,400 46,025
----------
RETAIL STORES -- GENERAL MERCHANDISING (4.2%)
Wal-Mart Stores, Inc. ................................................................ 2,000 51,750
----------
SEMICONDUCTOR -- RELATED DEVICE (4.9%)
Intel Corporation..................................................................... 800 60,400
----------
TOTAL COMMON STOCKS (Cost $1,115,010)(96.3%)............................................ 1,185,133
Other assets, less liabilities (3.7%)................................................... 45,927
----------
NET ASSETS (100%)....................................................................... $1,231,060
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,115,010, the aggregate gross unrealized appreciation for all
investments was $84,608 and aggregate gross unrealized depreciation for all
investments was $14,485.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 287
THE RESERVE PRIVATE EQUITY SERIES--RESERVE MID-CAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AIR TRANSPORT (3.0%)
Delta Air Lines, Inc. ................................................................ 550 $ 45,581
----------
AUTO PARTS (3.6%)
Gentex Corporation*................................................................... 1,200 54,300
----------
BANKS (2.7%)
Cole Taylor Financial Group, Inc. .................................................... 1,500 39,750
----------
BUSINESS EQUIPMENT/SERVICE (8.4%)
Equifax, Inc. ........................................................................ 2,800 69,300
Interim Services, Inc.*............................................................... 1,200 57,000
----------
126,300
----------
CHEMICAL SPECIALTY (4.5%)
Raychem Corporation................................................................... 900 67,275
----------
COMMUNICATION -- NETWORK (4.0%)
LCI International, Inc.*.............................................................. 1,900 60,563
----------
COMPUTER SERVICES (2.7%)
Acxiom Corporation*................................................................... 1,300 40,625
----------
COMPUTER SOFTWARE (2.1%)
Black Box Corporation*................................................................ 1,500 31,125
----------
COMPUTER -- PERIPHERAL EQUIPMENT (2.9%)
Dialogic Corporation*................................................................. 800 43,200
----------
COMPUTERS (4.3%)
Gateway 2000, Inc.*................................................................... 1,700 64,387
----------
ELECTRIC MEASUREMENT & TESTING INST. (5.1%)
Input/Output, Inc. ................................................................... 1,900 76,713
----------
FINANCE-PERSONAL LOANS (4.1%)
MBNA Corporation...................................................................... 2,000 61,250
----------
FOOD CHAINS (2.0%)
Whole Foods Market, Inc.*............................................................. 1,200 29,550
----------
HEALTH (2.7%)
American Medical Response, Inc.*...................................................... 1,100 40,012
----------
HOME BUILDINGS (4.5%)
Oakwood Homes Corp. .................................................................. 1,400 67,900
----------
HOSPITAL SUPPLIES (5.4%)
Advanced Technology Laboratories, Inc.*............................................... 1,400 49,350
Sofamor Danek Group, Inc.*............................................................ 900 32,175
----------
81,525
----------
HOUSEHOLD FURNISHINGS & APPLIANCES (5.2%)
Heilig-Meyers Company................................................................. 2,000 41,250
Herman Miller, Inc. .................................................................. 1,200 37,050
----------
78,300
----------
LIFE INSURANCE (3.3%)
Protective Life Corporation........................................................... 1,300 48,588
----------
</TABLE>
22
<PAGE> 288
THE RESERVE PRIVATE EQUITY SERIES--RESERVE MID-CAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
MISCELLANEOUS METALS (3.4%)
Wolverine Tube Inc.*.................................................................. 1,400 $ 51,100
----------
MOBIL HOMES (2.2%)
Palm Harbor Homes, Inc.*.............................................................. 1,200 33,300
----------
OIL/GAS EQUIPMENT SERVICES (6.5%)
Rowan Companies, Inc.*................................................................ 2,600 39,325
Tidewater, Inc. ...................................................................... 1,400 57,750
----------
97,075
----------
POLLUTION CONTROL (4.4%)
Newpark Resources, Inc.*.............................................................. 1,800 65,250
----------
RESTAURANTS (2.1%)
Sonic Corporation*.................................................................... 1,300 31,200
----------
RETAIL (3.8%)
Casey's General Stores, Inc. ......................................................... 2,400 56,700
----------
SPECIAL INDUSTRIAL MACHINERY (3.8%)
Black & Decker Corp. ................................................................. 1,400 57,575
----------
TOTAL COMMON STOCK (Cost $1,284,178) (96.7%)............................................ 1,449,144
Other assets, less liabilities (3.3%)................................................... 49,980
----------
NET ASSETS (100%)....................................................................... $1,499,124
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,284,178, the aggregate gross unrealized appreciation for all
investments was $181,516 and aggregate gross unrealized depreciation for all
investments was $16,550.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AIR TRANSPORTATION (3.1%)
Delta Air Lines, Inc. ................................................................ 950 $ 78,731
----------
AUTO PARTS (4.3%)
Gentex Corporation*................................................................... 2,400 108,600
----------
BANKS (2.3%)
Cole Taylor Financial Group, Inc. .................................................... 2,200 58,300
----------
BUSINESS EQUIPMENT/SERVICE (8.0%)
Equifax Inc. ......................................................................... 4,400 108,900
Interim Services, Inc.*............................................................... 2,000 95,000
----------
203,900
----------
CHEMICAL SPECIALTY (4.0%)
Raychem Corporation................................................................... 1,350 100,913
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 289
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
COMMUNICATION -- NETWORK (3.6%)
LCI International, Inc.*.............................................................. 2,900 $ 92,438
----------
COMPUTER SERVICES (2.9%)
Acxiom Corporation*................................................................... 2,400 75,000
----------
COMPUTER SOFTWARE (2.3%)
Black Box Corporation*................................................................ 2,800 58,100
----------
COMPUTERS (3.9%)
Gateway 2000, Inc.*................................................................... 2,600 98,475
----------
COMPUTERS -- PERIPHERAL EQUIPMENT (3.4%)
Dialogic Corporation*................................................................. 1,600 86,400
----------
ELECTRIC MEASUREMENT & TESTING INSTRUMENT (4.8%)
Input/Output, Inc.*................................................................... 3,000 121,125
----------
FINANCE -- PERSONAL LOANS (3.5%)
MBNA Corporation...................................................................... 2,900 88,812
----------
FOOD CHAINS (1.9%)
Whole Foods Market, Inc.*............................................................. 2,000 49,250
----------
HEALTH (2.5%)
American Medical Response, Inc.*...................................................... 1,750 63,656
----------
HOME BUILDINGS (4.4%)
Oakwood Homes Corp. .................................................................. 2,300 111,550
----------
HOSPITAL SUPPLIES (5.2%)
Advanced Technology Laboratories, Inc.*............................................... 2,300 81,075
Sofamor Danek Group, Inc.*............................................................ 1,400 50,050
----------
131,125
----------
HOUSEHOLD FURNISHINGS APPLIANCE (5.3%)
Heilig-Meyers Company................................................................. 3,300 68,063
Herman Miller, Inc. .................................................................. 2,200 67,925
----------
135,988
----------
LIFE INSURANCE (4.8%)
American Bankers Insurance Group, Inc. ............................................... 1,200 46,500
Protective Life Corporation........................................................... 2,000 74,750
----------
121,250
----------
MISCELLANEOUS METALS (3.0%)
Wolverine Tube, Inc.*................................................................. 2,100 76,650
----------
MOBIL HOMES (2.0%)
Palm Harbor Homes, Inc.*.............................................................. 1,800 49,950
----------
OIL/GAS EQUIPMENT SERVICES (5.9%)
Rowan Companies, Inc.*................................................................ 4,000 60,500
Tidewater Inc. ....................................................................... 2,150 88,687
----------
149,187
----------
POLLUTION CONTROL (4.1%)
Newpark Resources, Inc.*.............................................................. 2,870 104,037
----------
</TABLE>
24
<PAGE> 290
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
RESTAURANTS (2.1%)
Sonic Corporation*.................................................................... 2,200 $ 52,800
----------
RETAIL (3.3%)
Casey's General Stores, Inc. ......................................................... 3,500 82,688
----------
SPECIAL INDUSTRIAL MACHINERY (3.5%)
Black & Decker Corporation............................................................ 2,200 90,475
----------
TOTAL COMMON STOCKS (Cost $1,935,729) (94.1%)........................................... 2,389,400
Other assets, less liabilities (5.9%)................................................... 150,155
----------
NET ASSETS (100%)....................................................................... $2,539,555
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,935,729, the aggregate gross unrealized appreciation for all
investments was $472,445 and aggregate gross unrealized depreciation for all
investments was $18,774.
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 291
RESERVE LARGE-CAP VALUE FUND
<TABLE>
<CAPTION>
MEASUREMENT PERIOD LARGE-CAP
(FISCAL YEAR COVERED) VALUE S&P 500
<S> <C> <C>
01/02/96 10000 10000
05/31/96 10460 10780
</TABLE>
The performance of Reserve Large-Cap Value Fund reflects the maximum
4.5% sales load.
Past performance is not predictive of future performance.
To the Shareholders of the Reserve Large-Cap Value Fund:
After a very strong performance in 1995, the stock market continues to rise
amidst an environment of tame interest rates and modest corporate earnings
growth. Key contributors to your Fund's year-to-date performance are the
positions in both the Technology and the Food and Beverage sectors. Your
portfolio is invested in the highest quality growth companies that we feel are
selling at attractive prices. It is important to note that this relative
valuation process has nothing to do with the price level of the broader stock
indices.
We do not attempt to "time the market," but instead apply a combination of
fundamental and technical analysis to each current and prospective holding in
your portfolio. This "bottoms-up" approach is designed to select a concentrated
portfolio of businesses that should generate above-average earnings growth as a
result of their market leadership, management prowess and product
differentiation.
DAVID C. SIPHRON, PRESIDENT, SIPHRON CAPITAL MANAGEMENT, SUB-ADVISER
8
<PAGE> 292
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
July 31, 1996.
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 . . . . . . . . . . . . . . . . . . . . . .
Report of Independent Accountants . . . . . . . . . . . . . . . . .
Financial Information . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 293
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 Growth and Income 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 issuers 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> 294
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.
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> 295
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> 296
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> 297
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."
DEFENSIVE POSITION. For temporary defensive purposes, the Fund may vary from
its investment policy during periods in which conditions in securities markets
or other economic or political conditions warrant. In such circumstances, the
Fund will increase its position in debt securities, which may include short-term
U.S. Government securities and U.S. dollar- or foreign currency-denominated
short-term indebtedness, cash equivalents and fixed-income securities issued or
guaranteed by governmental entities, or by companies or supranational
organizations (e.g., International Bank for Reconstruction and Development and
the European community) rated AA or better by Standard & Poor's Corporation, or
Aa or better by Moody's Investor Service, Inc.; or if not so rated, of
equivalent investment quality as determined by the Adviser. Apart from periods
of defensive investment, the Fund may also at any time temporarily invest funds
awaiting reinvestment or held as reserves for dividends and other distributions
to shareholders in U.S. dollar-denominated money-market instruments.
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, RTET and RPES.
HENRI W. EMMET, Trustee, 176 East 71st Street, New York, New York
10021.
Mr. Emmet is the Managing Director of Global Interaction, Inc., and
formerly served as the Managing Director of Servus Associates, Inc.; U.S.A.
Representative of the First National Bank of Southern Africa, and Trustee of RF,
RET, RNYTET, RTET and RPES. 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> 298
5
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.
** Father Harrington is a member of the Board of Directors of Bear, Stearns &
Co.
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 $22,197
Henri W. Emmet $0 $22,197
Rev. Donald J. Harrington $0 $22,197
Niels W. Johnsen $0 $22,197
Burtt R. Ehrlich $0 $0
Thomas L. Rhodes $0 $0
</TABLE>
**Amount shown are for the Fund's fiscal year ending May 31, 1996.
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> 299
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. The Chase Manhattan 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> 300
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 for Class A shares and 1.00% of the
average net asset value for Class D shares 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> 301
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.
As of June 30, 1996, the following persons owned of record or
beneficially 5% or more of the Fund's outstanding shares: Reserve Management
Company, Inc., 810 Seventh Avenue, New York, NY 10019 (24%), Reserve Management
Corporation, 810 Seventh Avenue, New York, NY 10019 (14.4%); and Taconic
Petroleum Co., 810 Seventh Avenue, New York, NY 10019 (48.3%).
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> 302
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> 303
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> 304
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> 305
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> 306
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Trustees of The Reserve Private Equity
Series:
We have audited the accompanying statements of assets and liabilities of The
Reserve Private Equity Series (comprising, respectively, Reserve Blue Chip
Growth Fund, Reserve Emerging Growth Fund, Reserve Growth and Income Fund,
Reserve Informed Investors Growth Fund, Reserve International Equity Fund,
Reserve Large-Cap Value Fund, Reserve Mid-Cap Growth Fund, and Reserve North
American Growth Fund) (collectively the "Trust"), including the schedules of
portfolio investments, as of May 31, 1996, and the related statements of
operations for the period presented, and the statements of changes in net assets
and the financial highlights for each period presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the series constituting The Reserve Private Equity Series as of May 31,
1996, the results of their operations, the changes in their net assets, and
their financial highlights for the periods referred to above, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
June 28, 1996
2
<PAGE> 307
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
BLUE CHIP EMERGING GROWTH AND
GROWTH FUND GROWTH FUND INCOME FUND
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investment in securities, at value (cost $3,765,486, $4,765,851,
$794,268, respectively)............................................ $4,910,081 $6,589,386 $ 798,545
Cash................................................................. 201,401 756,193 255,213
Receivable for investment securities sold............................ 271,837 99,208 --
Dividends receivable................................................. 2,620 120 3,376
Interest receivable.................................................. -- -- 1,041
----------- ----------- -----------
Total assets....................................................... 5,385,939 7,444,907 1,058,175
----------- ----------- -----------
LIABILITIES
Accrued comprehensive fee............................................ -- 10,836 4,527
Payable for investment securities purchased.......................... 213,700 518,939 --
Other payables and accrued expenses.................................. 81 15,692 1,492
----------- ----------- -----------
Total liabilities.................................................. 213,781 545,467 6,019
----------- ----------- -----------
NET ASSETS............................................................. $5,172,158 $6,899,440 $1,052,156
=========== =========== ===========
NET ASSETS CONSIST OF (NOTE 1):
Capital stock (Par Value $.001 per share)............................ $ 347 $ 353 $ 103
Additional paid in capital........................................... 4,141,875 5,086,032 1,038,372
Accumulated net realized loss on investments......................... (114,659) (10,480) (111)
Accumulated undistributed net investment income...................... -- -- 9,515
Net unrealized appreciation on investments........................... 1,144,595 1,823,535 4,277
----------- ----------- -----------
NET ASSETS, at value, applicable to Shares of Beneficial Interest
outstanding (Note 5)................................................. $5,172,158 $6,899,440 $1,052,156
=========== =========== ===========
CLASS A:
Net Assets........................................................... $5,129,524 $6,656,511 $1,050,657
----------- ----------- -----------
Shares Outstanding................................................... 344,082 340,243 103,341
----------- ----------- -----------
Net Asset Value and redemption value per share (net assets/shares
outstanding)....................................................... $ 14.91 $ 19.56 $ 10.17
=========== =========== ===========
Maximum offering price per share (net asset value plus sales charge
of 4.50% of offering price)........................................ $ 15.61 $ 20.48 $ 10.65
=========== =========== ===========
CLASS D:
Net Assets........................................................... $ 42,634 $ 242,929 $ 1,499
----------- ----------- -----------
Shares Outstanding................................................... 2,865 12,448 147*
----------- ----------- -----------
Net Asset Value, offering and redemption value per share (net
assets/shares outstanding)......................................... $ 14.88 $ 19.52 $ 10.17
=========== =========== ===========
</TABLE>
- ---------------
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 308
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
INFORMED INVESTORS INTERNATIONAL LARGE-CAP
GROWTH FUND EQUITY FUND VALUE FUND
------------------ ------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investment in securities, at value (cost $3,783,862, $2,944,304,
$1,115,010, respectively)........................................ $6,224,000 $ 3,275,290 $ 1,185,133
Cash............................................................... 188,426 224,557 50,557
Receivable for investment securities sold.......................... -- 152,147 --
Dividends receivable............................................... 553 4,256 1,583
--------------- ------------ ------------
Total assets..................................................... 6,412,979 3,656,250 1,237,273
--------------- ------------ ------------
LIABILITIES:
Accrued comprehensive fee.......................................... -- -- 5,046
Payable for investment securities purchased........................ -- 69,961 --
Payable for fund shares redeemed................................... 3,684 -- --
Other payables and accrued expenses................................ 1,232 1,765 1,167
--------------- ------------ ------------
Total liabilities................................................ 4,916 71,726 6,213
--------------- ------------ ------------
NET ASSETS........................................................... $6,408,063 $ 3,584,524 $ 1,231,060
=============== ============ ============
NET ASSETS CONSIST OF (NOTE 1):
Capital Stock (Par Value $.001 per share).......................... $ 446 $ 318 $ 112
Additional paid in capital......................................... 4,281,103 3,325,152 1,160,825
Accumulated net realized loss on investments and foreign currency
transactions..................................................... (313,624) (71,968) --
Net unrealized appreciation on investments and foreign currency
transactions..................................................... 2,440,138 331,022 70,123
--------------- ------------ ------------
NET ASSETS, at value, applicable to Shares of Beneficial Interest
outstanding (Note 5)............................................... $6,408,063 $ 3,584,524 $ 1,231,060
=============== ============ ============
CLASS A:
Net Assets......................................................... $6,393,103 $ 3,578,313 $ 1,231,060
--------------- ------------ ------------
Shares Outstanding................................................. 445,181 317,927 112,437
--------------- ------------ ------------
Net Asset Value and redemption value per share (net assets/shares
outstanding)..................................................... $ 14.36 $ 11.26 $ 10.95
=============== ========== ============
Maximum offering price per share (net asset value plus sales charge
of 4.50% of
offering price).................................................. $ 15.04 $ 11.79 $ 11.47
=============== =========== ============
CLASS D:
Net Assets......................................................... $ 14,960 $ 6,211 --
--------------- ------------ ------------
Shares Outstanding................................................. 1,044 552 --
--------------- ------------ ------------
Net Asset Value, offering and redemption value per share (net
assets/shares
outstanding)..................................................... $ 14.33 $ 11.25 --
=============== =========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 309
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE
MID-CAP NORTH AMERICAN
GROWTH FUND GROWTH FUND
----------- --------------
<S> <C> <C>
ASSETS:
Investment in securities, at value (cost $1,284,178, $1,935,729,
respectively)................................................................ $1,449,144 $2,389,400
Cash........................................................................... 52,635 343,800
Receivable for fund shares sold................................................ -- 10,453
Dividends receivable........................................................... 738 1,361
----------- --------------
Total assets................................................................. 1,502,517 2,745,014
----------- --------------
LIABILITIES:
Payable for investment securities purchased.................................... -- 205,459
Payable for fund shares redeemed............................................... 3,393 --
----------- --------------
Total liabilities............................................................ 3,393 205,459
----------- --------------
NET ASSETS....................................................................... $1,499,124 $2,539,555
=========== =============
NET ASSETS CONSIST OF (NOTE 1):
Capital Stock (Par Value $.001 per share)...................................... $ 124 $ 207
Additional paid in capital..................................................... 1,334,034 2,169,202
Accumulated net realized loss on investments................................... -- (83,525)
Net unrealized appreciation on investments..................................... 164,966 453,671
----------- --------------
NET ASSETS, at value, applicable to Shares of Beneficial Interest outstanding
(Note 5)....................................................................... $1,499,124 $2,539,555
----------- --------------
CLASS A:
Net Assets..................................................................... $1,494,616 $ 131,226
----------- --------------
Shares Outstanding............................................................. 123,683 10,681
----------- --------------
Net Asset Value and redemption value per share (net assets/shares
outstanding)................................................................. $ 12.08 $ 12.29
=========== =============
Maximum offering price per share (net asset value plus sales charge of 4.50% of
offering price).............................................................. $ 12.65 $ 12.87
=========== =============
CLASS D:
Net Assets..................................................................... $ 4,508 $2,408,329
----------- --------------
Shares Outstanding............................................................. *374 196,199
----------- --------------
Net Asset Value, offering and redemption value per share (net assets/shares
outstanding)................................................................. $ 12.07 $ 12.27
=========== =============
</TABLE>
- ---------------
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 310
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
RESERVE
GROWTH AND
RESERVE RESERVE INCOME FUND RESERVE
BLUE CHIP EMERGING ---------------- INFORMED INVESTORS
GROWTH FUND GROWTH FUND JANUARY 2, 1996 GROWTH FUND
------------ ------------ (COMMENCEMENT OF ------------------
YEAR ENDED YEAR ENDED OPERATIONS) TO YEAR ENDED
MAY 31, 1996 MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
------------ ------------ ---------------- ------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends..................................... $ 29,978 $ 1,869 $ 10,672 $ 8,787
Interest...................................... -- -- 4,124 8,626
------------ ------------ -------- ------------------
Total investment income................... 29,978 1,869 14,796 17,413
EXPENSES
Comprehensive fee (Note 3).................... 55,581 51,177 4,527 141,751
12b-1 Fee (Note 4)
Class A..................................... 9,247 8,481 754 23,619
Class D..................................... 66 191 -- 26
------------ ------------ -------- ------------------
Total expenses............................ 64,894 59,849 5,281 165,396
------------ ------------ -------- ------------------
NET INVESTMENT INCOME (LOSS).................... (34,916) (57,980) 9,515 (147,983)
------------ ------------ -------- ------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Proceeds from sales of securities............. 2,573,864 1,201,292 28,149 13,684,285
Cost of securities sold....................... 2,575,909 1,120,746 28,260 12,834,099
------------ ------------ -------- ------------------
Net realized gain (loss) on investments (Note
1).......................................... (2,045) 80,546 (111) 850,186
Net unrealized appreciation on investments.... 975,733 1,655,638 4,277 1,109,280
------------ ------------ -------- ------------------
Net realized and unrealized gain on
investments................................. 973,688 1,736,184 4,166 1,959,466
------------ ------------ -------- ------------------
Net increase in net assets resulting from
operations.................................. $ 938,772 $1,678,204 $ 13,681 $ 1,811,483
============ ============ ================= ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 311
THE RESERVE PRIVATE EQUITY SERIES
STATEMENT OF OPERATIONS--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE
INTERNATIONAL RESERVE
EQUITY FUND LARGE-CAP
---------------- VALUE FUND RESERVE RESERVE
JULY 13, 1995 --------------- MID-CAP NORTH AMERICAN
(COMMENCEMENT JANUARY 2, 1996 GROWTH FUND GROWTH FUND
OF OPERATIONS) (COMMENCEMENT ------------ --------------
TO OF OPERATIONS) YEAR ENDED YEAR ENDED
MAY 31, 1996 TO MAY 31, 1996 MAY 31, 1996 MAY 31, 1996
---------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends....................................... $ 18,854* $ 4,796 $ 1,923 $ 8,135
Interest........................................ 1,688 -- -- --
---------------- --------------- ------------ --------------
Total investment income....................... 20,542 4,796 1,923 8,135
EXPENSES
Comprehensive fee (Note 3)...................... 33,158 5,046 22,987 24,506
12b-1 Fee (Note 4)
Class A....................................... 4,734 841 3,830 17
Class D....................................... 12 -- 5 16,268
---------------- --------------- ------------ --------------
Total expenses.................................... 37,904 5,887 26,822 40,791
Less fees waived.............................. (217) -- -- --
---------------- --------------- ------------ --------------
Net Expenses.................................. 37,687 5,887 26,822 40,791
---------------- --------------- ------------ --------------
NET INVESTMENT LOSS............................... (17,145) (1,091) (24,899) (32,656)
---------------- --------------- ------------ --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from sales of securities............... 1,374,797 -- 3,071,543 1,272,486
Cost of securities sold......................... 1,446,765 -- 3,054,352 1,356,011
---------------- --------------- ------------ --------------
Net realized gain (loss) on investments and
foreign currency transactions (Note 1)........ (71,968) -- 17,191 (83,525)
Net unrealized appreciation on investments and
foreign currency transactions................. 331,022 70,123 164,966 453,671
---------------- --------------- ------------ --------------
Net realized and unrealized gain on investments
and foreign currency transactions............. 259,054 70,123 182,157 370,146
---------------- --------------- ------------ --------------
Net increase in net assets resulting from
operations.................................... $ 241,909 $69,032 $ 157,258 $ 337,490
=============== ============== ============ =============
</TABLE>
- ---------------
* Net of foreign taxes withheld of $1,774
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE> 312
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVE GROWTH
RESERVE BLUE CHIP GROWTH FUND AND INCOME FUND
-------------------------------- ----------------
OCTOBER 28, 1994 JANUARY 2, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment income (loss).................................. $ (34,916) $ (5,361) $ 9,515
Net realized gain (loss) from investments..................... (2,045) 92,552 (111)
Net unrealized appreciation from investments.................. 975,733 168,862 4,277
------------ ---------------- ----------------
Net increase in net assets resulting from operations.......... 938,772 256,053 13,681
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A....................................... (164,889) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares............................. 2,757,098 2,257,822 1,044,319
Reinvestment of distributions................................. 164,889 -- --
Cost of shares redeemed....................................... (517,167) (520,420) (5,844)
------------ ---------------- ----------------
Net increase in net assets resulting from capital share
transactions................................................ 2,404,820 1,737,402 1,038,475
------------ ---------------- ----------------
Net increase in net assets.................................... 3,178,703 1,993,455 1,052,156
NET ASSETS:
Beginning of period........................................... 1,993,455 -- --
------------ ---------------- ----------------
End of period (including undistributed net investment income
of $0, $0, and $9,515, respectively)........................ $5,172,158 $1,993,455 $1,052,156
============ ================= =================
</TABLE>
<TABLE>
<CAPTION>
RESERVE
RESERVE EMERGING GROWTH FUND INTERNATIONAL
-------------------------------- EQUITY FUND
NOVEMBER 14, ----------------
1994 JULY 13, 1995
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss........................................... $ (57,980) $ (9,569) $ (17,145)
Net realized gain (loss) from investments and foreign currency
transactions................................................ 80,546 65,542 (71,968)
Net unrealized appreciation from investments and foreign
currency transactions....................................... 1,655,638 167,897 331,022
------------ ---------------- ----------------
Net increase in net assets resulting from operations.......... 1,678,204 223,870 241,909
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A....................................... (93,899) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares............................. 4,281,980 2,268,282 3,465,234
Reinvestment of distributions................................. 93,770 -- --
Cost of shares redeemed....................................... (301,485) (1,251,282) (122,619)
------------ ---------------- ----------------
Net increase in net assets resulting from capital share
transactions................................................ 4,074,265 1,017,000 3,342,615
------------ ---------------- ----------------
Net increase in net assets.................................... 5,658,570 1,240,870 3,584,524
NET ASSETS:
Beginning of period........................................... 1,240,870 -- --
------------ ---------------- ----------------
End of period................................................. $6,899,440 $1,240,870 $3,584,524
============ ================= =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> 313
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS--(CONTINUED)
<TABLE>
<CAPTION>
RESERVE INFORMED RESERVE
INVESTORS GROWTH FUND LARGE-CAP VALUE
-------------------------------- FUND
DECEMBER 28, ----------------
1994 JANUARY 2, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
------------ ---------------- ----------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss....................................... $ (147,983) $ (38,948) $ (1,091)
Net realized gain (loss) from investments................. 850,186 (220,490) --
Net unrealized appreciation from investments.............. 1,109,280 1,330,859 70,123
------------ ---------------- ----------------
Net increase in net assets resulting from operations...... 1,811,483 1,071,421 69,032
------------ ---------------- ----------------
Distributions to shareholders from net realized gain on
investments-- Class A................................... (795,337) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares......................... 6,254,939 6,422,521 1,165,180
Reinvestment of distributions............................. 790,060 -- --
Cost of shares redeemed................................... (8,490,282) (656,742) (3,152)
------------ ---------------- ----------------
Net increase (decrease) in net assets resulting from
capital share transactions.............................. (1,445,283) 5,765,779 1,162,028
------------ ---------------- ----------------
Net increase (decrease) in net assets..................... (429,137) 6,837,200 1,231,060
NET ASSETS:
Beginning of period....................................... 6,837,200 -- --
------------ ---------------- ----------------
End of period............................................. $6,408,063 $6,837,200 $1,231,060
============ ================= =================
</TABLE>
<TABLE>
<CAPTION>
RESERVE RESERVE
MID-CAP NORTH AMERICAN
GROWTH FUND GROWTH FUND
--------------- --------------
YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1996
--------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment loss......................................................... $ (24,899) $ (32,656)
Net realized gain (loss) from investments................................... 17,191 (83,525)
Net unrealized appreciation from investments................................ 164,966 453,671
--------------- --------------
Net increase in net assets resulting from operations........................ 157,258 337,490
--------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares........................................... 2,008,337 2,345,759
Cost of shares redeemed..................................................... (666,471) (143,694)
--------------- --------------
Net increase in net assets resulting from capital share transactions........ 1,341,866 2,202,065
--------------- --------------
Net increase in net assets.................................................. 1,499,124 2,539,555
NET ASSETS:
Beginning of period......................................................... -- --
--------------- --------------
End of period............................................................... $ 1,499,124 $2,539,555
============== =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE> 314
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reserve Private Equity Series (the "Trust") consists of the following
funds: Reserve Blue Chip Growth Fund, Reserve Emerging Growth Fund, Reserve
Growth and Income Fund, Reserve Informed Investors Growth Fund, Reserve
International Equity Fund, Reserve Large-Cap Value Fund, Reserve Mid-Cap
Growth Fund, and Reserve North American Growth Fund. The Trust was formed
under Delaware law as a Delaware business trust. The Trust is registered
under the Investment Company Act of 1940, as amended, as a non-diversified
open-end management investment company. There are an unlimited number of
shares of beneficial interest of $.001 par value authorized in each series.
The Trust offers both Class A and Class D shares of each Fund. Class A shares
are sold with an initial sales charge and Class D shares are sold without an
initial sales charge. Both classes of shares have identical voting, dividend,
liquidation and other rights, and the same terms and conditions, except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan.
The accounting policies summarized below are consistently followed in
preparation of the financial statements in conformity with generally accepted
accounting principles.
SECURITY VALUATION
Portfolio securities are stated at value. A security listed or traded on an
exchange is valued at its last sale price on the exchange where the security
is principally traded or, lacking any sales on a particular day, the security
is valued at the mean between the closing bid and asked prices on that day.
Each security traded in the over-the-counter market is valued at the mean
between its quoted bid and asked prices. Where market quotations are not
readily available, the securities are valued at their fair value as
determined in good faith by or under direction of the Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date. Dividend income and
distributions to shareholders are recorded on the ex-dividend dates. Interest
income is accrued daily. Realized gains and losses from securities
transactions and unrealized appreciation or depreciation of securities are
reported on the identified cost basis for both financial statement and
federal income tax purposes.
Income and capital gain distributions are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for net operating losses and the recognition of net realized gains
and losses. Accordingly, the effect of differing financial reporting and
federal income tax treatments have been reclassified among the components of
net assets at May 31, 1996 as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
----------------------------------------
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT REALIZED
CAPITAL INCOME GAIN (LOSS)
------- -------------- -----------
<S> <C> <C> <C>
Reserve Blue Chip Growth Fund......................................... 5,361 34,916 (40,277)
Reserve Emerging Growth Fund.......................................... 4,689 57,980 (62,669)
Reserve Informed Investors Growth Fund................................ -- 147,983 (147,983)
Reserve International Equity Fund..................................... (17,145) 17,145 --
Reserve Large-Cap Value Equity Fund................................... (1,091) 1,091 --
Reserve Mid-Cap Growth Fund........................................... (7,708) 24,899 (17,191)
Reserve North American Growth Fund.................................... (32,656) 32,656 --
</TABLE>
These reclassifications had no effect on net investment income, net realized
gain on investments, or net assets for the year ended May 31, 1996.
FOREIGN CURRENCY TRANSLATION
With respect to the Reserve International Equity Fund, assets and liabilities
denominated in a foreign currency are translated into U.S. dollars using
exchange rates on the valuation date. Purchases and sales of securities,
expense payments and income receipts are translated into U.S. dollars using
the exchange rate on the transaction date. The Trust does not segregate that
portion of the results of operations resulting from changes in foreign
exchange rates from the portion resulting from changes in market prices of
securities held; both are included in net realized and unrealized gains or
losses on investments and foreign currency transactions.
33
<PAGE> 315
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
FEDERAL INCOME TAXES
It is the Trust's policy for each Fund to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended, by
complying with the requirements of the Internal Revenue Code applicable to
regulated investment companies, and to distribute substantially all of its
taxable income, including net realized capital gains to its shareholders.
Accordingly, no federal income tax provision is required.
For federal income tax purposes, the following Funds indicated below had
capital loss carryforwards at May 31, 1996, which are available to offset
future realized capital gains, if any:
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
CARRYFORWARD YEAR
------------ -----------
<S> <C> <C>
Reserve Growth and Income Fund..................................................... $ 111 2004
Reserve International Equity Fund.................................................. 71,968 2004
Reserve North American Growth Fund................................................. 83,525 2004
</TABLE>
2. INVESTMENT ACTIVITY
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the period ended May 31, 1996, were as
follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
RESERVE FUND PURCHASES SALES
------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Blue Chip Growth Fund.......................................................... $ 4,629,931 $ 2,573,982
Emerging Growth Fund........................................................... 4,850,242 1,201,292
Growth and Income Fund......................................................... 822,642 28,263
Informed Investors Growth Fund................................................. 11,122,332 13,684,285
International Equity Fund...................................................... 4,384,944 1,368,647
Large-Cap Value Fund........................................................... 1,115,010 --
Mid-Cap Growth Fund............................................................ 4,338,530 3,071,543
North American Growth Fund..................................................... 3,291,738 1,272,486
</TABLE>
3. INVESTMENT MANAGEMENT AGREEMENT
Reserve Management Company, Inc. (RMCI), serves as the Funds' investment
adviser and pays substantially all ordinary operating expenses of the Funds
for which it receives a comprehensive fee at an annual rate of 1.50% of the
average daily net assets of each Fund other than the International Equity
Fund for which it receives 1.75%. RMCI is currently waiving a portion of its
comprehensive fee.
For each Fund, RMCI has entered into an Investment Subadvisory Agreement (the
"Subadvisory Agreement") with the Sub-Advisers. It is the responsibility of a
Sub-Adviser to make the day-to-day investment decision of the Funds and to
place the purchase and sales orders for securities transactions, subject in
all cases to the general supervision of RMCI. For services under each
Subadvisory Agreement, RMCI pays a fee up to an annual rate equal to the
percentages specified in the table below of the corresponding Funds' average
net assets.
<TABLE>
<CAPTION>
SUB-ADVISER'S
RESERVE FUND PORTFOLIO SUB-ADVISER FEE
----------------------------------------- ------------------------------------------------- -------------
<S> <C> <C>
Blue Chip Growth Fund Trainer, Wortham & Company, Inc. 0.75%
Emerging Growth Fund Roanoke, Asset Management Corp. 0.75%
Growth and Income Fund Kenneth J. Gerbino & Company 0.75%
Informed Investors Growth Fund T. H. Fitzgerald & Company 0.75%
International Equity Fund Pinnacle Associates Limited 0.875%
Large-Cap Value Fund Siphron Capital Management 0.75%
Mid-Cap Growth Fund Cambridge Equity Advisors (6/1/95-4/18/96) 0.75%
Southern Capital Advisors (4/19/96-5/31/96) 0.75%
North American Growth Fund Southern Capital Advisors 0.75%
</TABLE>
Trainer, Wortham & Company, Inc. owns 33% of the outstanding shares of the
Reserve Blue Chip Growth Fund at May 31, 1996.
34
<PAGE> 316
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
4. DISTRIBUTION ASSISTANCE
Pursuant to a Distribution Plan under Rule 12b-1, the Funds will make
payments to Resrv Partners, Inc. (RPI), the Funds' distributor of .25% per
annum for Class A and 1.00% per annum for Class D of the average daily net
assets of shareholder accounts as to which the payee has rendered
distribution assistance. During the period, the Funds paid distribution
expenses to RPI as follows:
<TABLE>
<CAPTION>
RESERVE FUND CLASS A CLASS D
------------------------------------------------------------------------------------- ------- -------
<S> <C> <C>
Blue Chip Growth Fund................................................................ $ 9,247 $ 66
Emerging Growth Fund................................................................. 8,481 192
Growth and Income Fund............................................................... 754 0
Informed Investors Growth Fund....................................................... 23,619 26
International Equity Fund............................................................ 4,734 12
Large-Cap Value Fund................................................................. 841 0
Mid-Cap Growth Fund.................................................................. 3,830 5
North American Growth Fund........................................................... 17 16,268
</TABLE>
As of May 31, 1996, RPI owned 4%, 24%, 31%, 21%, 6%, and 24% of the Reserve
Emerging Growth Fund, Reserve Growth and Income Fund, Reserve International
Equity Fund, Reserve Large-Cap Value Fund, Reserve Mid-Cap Growth Fund and
Reserve North American Growth Fund, respectively.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock of each Fund for the period ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- -----------------
FEBRUARY 13, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
--------------------- -----------------
RESERVE BLUE CHIP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------- ------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold............................................................... 203,145 $2,716,393 2,865 $40,705
Reinvested......................................................... 12,752 164,889 -- --
Redeemed........................................................... (37,574) (517,167) -- --
------- ---------- ------ -------
Net increase....................................................... 178,323 $2,364,115 2,865 $40,705
======== ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ------------------
FEBRUARY 26, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
--------------------- ------------------
RESERVE EMERGING GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------- ------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold................................................................ 251,367 $4,052,411 12,448 $229,569
Reinvested.......................................................... 5,916 93,770 -- --
Redeemed............................................................ (18,653) (301,485) -- --
------- ---------- ------ --------
Net increase........................................................ 238,630 $3,844,696 12,448 $229,569
======== ========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MAY 13, 1996
JANUARY 2, 1996 (COMMENCEMENT
(COMMENCEMENT OF OPERATIONS)
OF OPERATIONS) TO TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE GROWTH AND INCOME FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold................................................................ 103,914 $1,042,819 147 $1,500
Redeemed............................................................ (573) (5,844) -- --
------- ---------- ------ ------
Net increase........................................................ 103,341 $1,036,975 147 $1,500
======== ========== ====== ======
</TABLE>
35
<PAGE> 317
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
----------------------- ------------------
FEBRUARY 13, 1996
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
MAY 31, 1996 MAY 31, 1996
----------------------- ------------------
RESERVE INFORMED INVESTORS GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- -------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold............................................................. 458,428 $ 6,230,788 1,953 $ 24,151
Reinvested....................................................... 56,312 790,060 -- --
Redeemed......................................................... (639,631) (8,479,206) (909) (11,076)
-------- ----------- ------ --------
Net increase..................................................... (124,891) $(1,458,358) 1,044 $ 13,075
========= ============ ====== =========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MARCH 11, 1996
JULY 13, 1995 (COMMENCEMENT
(COMMENCEMENT OF OPERATIONS)
OF OPERATIONS) TO TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE INTERNATIONAL EQUITY FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold............................................................. 329,964 $3,459,234 552 $6,000
Redeemed......................................................... (12,037) (122,619) -- --
------- ---------- ------ ------
Net increase..................................................... 317,927 $3,336,615 552 $6,000
======== ========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CLASS A
---------------------
JANUARY 2, 1996
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1996
---------------------
RESERVE LARGE-CAP VALUE FUND SHARES AMOUNT
- ----------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................. 112,729 $1,165,180
Redeemed......................................................... (292) (3,152)
------- ----------
Net increase..................................................... 112,437 $1,162,028
======== ==========
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------- ----------------
MARCH 29, 1996
(COMMENCEMENT
OF OPERATIONS)
YEAR ENDED TO
MAY 31, 1996 MAY 31, 1996
--------------------- ----------------
RESERVE MID-CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold............................................................. 183,603 $2,004,087 374 $4,250
Redeemed......................................................... (59,920) (666,471) -- --
------- ---------- ------ ------
Net increase..................................................... 123,683 $1,337,616 374 $4,250
======== ========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
------------------ ---------------------
MARCH 13, 1996
(COMMENCEMENT
OF OPERATIONS) TO YEAR ENDED
MAY 31, 1996 MAY 31, 1996
------------------ ---------------------
RESERVE NORTH AMERICAN GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------- ------ -------- ------- ----------
<S> <C> <C> <C> <C>
Sold............................................................. 11,491 $139,077 207,997 $2,206,682
Redeemed......................................................... (810) (10,000) (11,798) (133,694)
------ -------- ------- ----------
Net increase..................................................... 10,681 $129,077 196,199 $2,072,988
====== ========= ======== ==========
</TABLE>
36
<PAGE> 318
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
Transactions in capital stock of each Fund for the period ended May 31, 1995,
were as follows:
<TABLE>
<CAPTION>
OCTOBER 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
-----------------------
RESERVE BLUE CHIP GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................................... 214,923 $2,257,822
Redeemed........................................................................... (49,164) (520,420)
------- ----------
Net increase....................................................................... 165,759 $1,737,402
======== ==========
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 14, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
------------------------
RESERVE EMERGING GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- -------- ----------
<S> <C> <C>
Sold............................................................................... 218,209 $2,268,282
Redeemed........................................................................... (116,596) (1,251,282)
-------- ----------
Net increase....................................................................... 101,613 $1,017,000
========= ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MAY 31, 1995
-----------------------
RESERVE INFORMED INVESTORS GROWTH FUND SHARES AMOUNT
- ----------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
Sold............................................................................... 634,326 $6,422,521
Redeemed........................................................................... (64,254) (656,742)
------- ----------
Net increase....................................................................... 570,072 $5,765,779
======== ==========
</TABLE>
6. MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
37
<PAGE> 319
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31,
1996--(CONTINUED)
7. SUPPLEMENTARY INFORMATION (FOR EACH SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
CLASS D
CLASS A ----------------
-------------------------------- FEBRUARY 13,
OCTOBER 28, 1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE BLUE CHIP GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $12.03 $10.00 $13.49
------ ------ ------
Income from investment operations
Net investment loss....................................... (.10) (.03) (.04)
Net realized and unrealized gain.......................... 3.62 2.06 1.43
------ ------ ------
Total from investment operations............................ 3.52 2.03 1.39
Less distribution from net realized gain.................... (.64) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $14.91 $12.03 $14.88
====== ====== ======
Total Return................................................ 30.10% 20.30%(2) 10.30%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $5,130 $1,993 $ 43
Ratio of expenses to average net assets before waiver....... 1.75% 1.75%(1) 2.50%(1)
Ratio of expenses to average net assets, net of waiver...... 1.75% 1.73%(1) 2.50%(1)
Ratio of net investment loss to average net assets, before
waiver.................................................... (0.94)% (0.72)%(1) (1.70)%(1)
Ratio of net investment loss to average net assets, net of
waiver.................................................... (0.94)% (0.70)%(1) (1.70)%(1)
Portfolio turnover rate..................................... 72% 68% 72%
Average commission per share on Macromedia portfolio
transactions.............................................. $ 0.06 N/A $ 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
-------------------------------- ----------------
NOVEMBER 14, FEBRUARY 26,
1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO OPERATIONS) TO
RESERVE EMERGING GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ---------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $12.21 $10.00 $16.88
------ ------ ------
Income from investment operations
Net investment loss....................................... (.17) (.09) (.04)
Net realized and unrealized gain.......................... 8.05 2.30 2.68
------ ------ ------
Total from investment operations............................ 7.88 2.21 2.64
Less distribution from net realized gain.................... (0.53) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $19.56 $12.21 $19.52
====== ====== ======
Total Return................................................ 65.55% 22.10%(2) 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $6,657 $1,241 $ 243
Ratio of expenses to average net assets..................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets.......... (1.70)% (1.62)%(1) (2.48)%(1)
Portfolio turnover rate..................................... 38% 43% 38%
Average commission per share on portfolio transactions...... $ 0.01 N/A $ 0.01
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
38
<PAGE> 320
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JANUARY 2, 1996 MAY 13, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE GROWTH AND INCOME FUND MAY 31, 1996 MAY 31, 1996
- ------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period..................................... $10.00 $10.19
------ ------
Income from investment operations
Net investment income (loss)........................................... 0.09 0.00
Net realized and unrealized gain (loss)................................ 0.08 (0.02)
------ ------
Total from investment operations......................................... 0.17 (0.02)
------ ------
NET ASSET VALUE, end of period........................................... $10.17 $10.17
====== ======
Total Return............................................................. 1.70%(2) (0.2)%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................................... $1,051 $ 1
Ratio of expenses to average net assets.................................. 1.75%(1) 2.23%(1)
Ratio of net investment income to average net assets..................... 3.15%(1) 0.00%(1)
Portfolio turnover rate.................................................. 17% 17%
Average commission per share on portfolio transactions................... $ 0.08 $ 0.08
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
JULY 13, 1995 MARCH 11, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE INTERNATIONAL EQUITY FUND MAY 31, 1996 MAY 31, 1996
- ------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period..................................... $10.00 $10.79
------ ------
Income from investment operations
Net investment loss.................................................... (0.05) (0.01)
Net realized and unrealized gain....................................... 1.31 0.47
------ ------
Total from investment operations......................................... 1.26 0.46
------ ------
NET ASSET VALUE, end of period........................................... $11.26 $11.25
====== ======
Total Return............................................................. 12.60%(2) 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................................... $3,578 $ 6
Ratio of expenses to average net assets before waiver.................... 2.00%(1) 2.75%(1)
Ratio of expenses to average net assets, net of waiver................... 1.99%(1) 2.75%(1)
Ratio of net investment loss to average net assets, before waiver........ (0.92)%(1) (0.70)%(1)
Ratio of net investment loss to average net assets, net of waiver........ (0.91)%(1) (0.70)%(1)
Portfolio turnover rate.................................................. 70% 70%
Average commission per share on portfolio transactions................... $ 0.02 $ 0.02
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
39
<PAGE> 321
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------------------- ----------------
DECEMBER 28, 1994 MARCH 22, 1996
(COMMENCEMENT (COMMENCEMENT OF
YEAR ENDED OF OPERATIONS) TO OPERATIONS) TO
RESERVE INFORMED INVESTORS GROWTH FUND MAY 31, 1996 MAY 31, 1995 MAY 31, 1996
- ------------------------------------------------------------ ------------ ----------------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period........................ $11.99 $ 10.00 $12.29
------ ------ ------
Income from investment operations
Net investment loss....................................... (0.33) (.07) (.06)
Net realized and unrealized gain.......................... 3.87 2.06 2.10
------ ------ ------
Total from investment operations............................ 3.54 1.99 2.04
Less distribution from net realized gain.................... (1.17) -- --
------ ------ ------
NET ASSET VALUE, end of period.............................. $14.36 $ 11.99 $14.33
====== ====== ======
Total Return................................................ 29.75% 19.90%(2) 16.60%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period...................... $6,393 $ 6,837 $ 15
Ratio of expenses to average net assets..................... 1.75% 1.75%(1) 2.50%(1)
Ratio of net investment loss to average net assets.......... (1.57)% (1.62)%(1) (2.32)%(1)
Portfolio turnover rate..................................... 132% 59% 132%
Average commission per share on portfolio transactions...... $ 0.05 N/A $ 0.05
</TABLE>
<TABLE>
<CAPTION>
CLASS A
----------------
JANUARY 2, 1996
(COMMENCEMENT OF
OPERATIONS) TO
RESERVE LARGE-CAP VALUE FUND MAY 31, 1996
- ------------------------------------------------------------------------------------------ ----------------
<S> <C>
NET ASSET VALUE, beginning of period...................................................... $10.00
------
Income from investment operations
Net investment loss..................................................................... (0.01)
Net realized and unrealized gain........................................................ 0.96
------
Total from investment operations.......................................................... 0.95
------
NET ASSET VALUE, end of period............................................................ $10.95
======
Total Return.............................................................................. 9.50%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period.................................................... $1,231
Ratio of expenses to average net assets................................................... 1.75%(1)
Ratio of net investment loss to average net assets........................................ (0.32)%(1)
Portfolio turnover rate................................................................... 0%
Average commission per share on portfolio transactions.................................... $ 0.08
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
40
<PAGE> 322
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
------------ ----------------
MARCH 29, 1996
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
RESERVE MID-CAP GROWTH FUND MAY 31, 1996 MAY 31, 1996
- ----------------------------------------------------------------------------- ------------ ----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period......................................... $10.00 $11.03
------ ------
Income from investment operations
Net investment loss........................................................ (.20) (.03)
Net realized and unrealized gain........................................... 2.28 1.07
------ ------
Total from investment operations............................................. 2.08 1.04
------ ------
NET ASSET VALUE, end of period............................................... $12.08 $12.07
====== ======
Total Return................................................................. 20.80% 9.43%(2)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period....................................... $1,495 $ 5
Ratio of expenses to average net assets...................................... 1.75% 2.50%(1)
Ratio of net investment loss to average net assets........................... (1.62)% (2.04)%
Portfolio turnover rate...................................................... 225% 225%
Average commission per share on portfolio transactions....................... $ 0.06 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ------------
MARCH 13, 1996
(COMMENCEMENT OF
OPERATIONS) TO YEAR ENDED
RESERVE NORTH AMERICAN GROWTH FUND MAY 31, 1996 MAY 31, 1996
- ----------------------------------------------------------------------------- ---------------- ------------
<S> <C> <C>
NET ASSET VALUE, beginning of period......................................... $10.94 $10.00
------ ------
Income from investment operations
Net investment loss........................................................ (0.01) (0.17)
Net realized and unrealized gain........................................... 1.36 2.44
------ ------
Total from investment operations............................................. 1.35 2.27
------ ------
NET ASSET VALUE, end of period............................................... $12.29 $12.27
====== ======
Total Return................................................................. 12.34%(2) 22.70%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period....................................... $ 131 $2,408
Ratio of expenses to average net assets...................................... 1.74%(1) 2.49%(1)
Ratio of net investment loss to average net assets........................... (0.97)%(1) (2.00)%(1)
Portfolio turnover rate...................................................... 85% 85%
Average commission per share on portfolio transactions....................... $ 0.04 $ 0.04
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
41
<PAGE> 323
THE RESERVE PRIVATE EQUITY SERIES--RESERVE BLUE CHIP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BANKS (3.5%)
Banc One Corporation................................................................. 4,850 $ 179,450
----------
BUSINESS EQUIPMENT (3.0%)
Xerox Corporation.................................................................... 1,000 157,375
----------
COMPUTER NETWORKING (3.4%)
Cisco Systems, Inc.*................................................................. 3,200 175,200
----------
COMPUTER SOFTWARE (11.8%)
CUC International, Inc.*............................................................. 5,000 203,500
Microsoft Corporation*............................................................... 1,500 178,125
National Data Corporation............................................................ 6,000 226,500
----------
608,125
----------
ELECTRICAL EQUIPMENT (1.9%)
American Superconductor Corporation*................................................. 7,000 98,000
----------
ELECTRONICS (3.5%)
Perceptron, Inc.*.................................................................... 5,000 180,625
----------
FINANCIAL SERVICES (3.6%)
Citicorp............................................................................. 2,200 184,800
----------
MEDICAL SUPPLIES (2.2%)
LaserSight Corporation*.............................................................. 10,000 115,000
----------
MISCELLANEOUS MANUFACTURING (4.4%)
Warnaco Group, Inc. ................................................................. 8,000 227,000
----------
MULTI-LINE INSURANCE (4.5%)
American International Group, Inc. .................................................. 2,500 235,625
----------
OIL/GAS EQUIPMENT SERVICES (9.0%)
Petroleum Geo-Services--ADR*......................................................... 7,000 214,375
Schlumberger, Ltd. .................................................................. 3,000 250,125
----------
464,500
----------
PACKAGED SOFTWARE (2.8%)
Computer Associates International, Inc. ............................................. 2,000 145,500
----------
PHARMACEUTICALS (8.8%)
Johnson & Johnson.................................................................... 2,000 194,750
Eli Lilly & Company.................................................................. 1,000 64,250
Merck & Company, Inc. ............................................................... 3,000 193,875
----------
452,875
----------
PUBLISHING (5.3%)
Harte-Hanks Communications........................................................... 10,500 276,938
----------
PUBLISHING--NEWSPAPERS (2.8%)
Tribune Company...................................................................... 2,000 148,250
----------
REAL ESTATE (4.5%)
Insignia Financial Group, Inc. Class A*.............................................. 9,000 234,000
----------
RETAIL SPECIALTY (3.0%)
Home Depot, Inc. .................................................................... 3,000 153,375
----------
</TABLE>
10
<PAGE> 324
THE RESERVE PRIVATE EQUITY SERIES--RESERVE BLUE CHIP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
SPECIAL INDUSTRIAL MACHINERY (6.2%)
Thermo Electron Corporation*......................................................... 5,000 $ 318,750
----------
TELECOMMUNICATIONS (4.0%)
CommNet Cellular, Inc.*.............................................................. 6,000 206,250
----------
TELECOMMUNICATIONS EQUIPMENT (6.7%)
Glenayre Technologies, Inc.*......................................................... 7,075 348,443
----------
TOTAL COMMON STOCKS (Cost $3,765,486) (94.9%).......................................... 4,910,081
Other assets, less liabilities (5.1%).................................................. 262,077
----------
NET ASSETS (100%)...................................................................... $5,172,158
==========
</TABLE>
- ------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $3,765,486, the aggregate gross unrealized appreciation for all
investments was $1,159,820 and aggregate gross unrealized depreciation for all
investments was $15,225.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BIO-TECHNOLOGY (3.3%)
Alliance Pharmaceutical Corporation*.................................................. 4,000 $ 86,500
Genzyme Corporation*.................................................................. 2,400 139,800
----------
226,300
----------
CAPITAL GOODS -- DIVERSIFIED (1.8%)
Danaher Corporation................................................................... 3,000 124,500
----------
CAPITAL GOODS/INDUSTRIAL (1.5%)
Vishay Intertechnology, Inc.*......................................................... 3,654 100,943
----------
COMMUNICATION -- EQUIPMENT (5.1%)
ANADIGICS, Inc.*...................................................................... 3,000 79,500
ECI Telecommunications Ltd. Designs................................................... 5,000 132,500
FORE Systems, Inc.*................................................................... 1,700 137,700
----------
349,700
----------
COMMUNICATION -- NETWORK (8.8%)
Heartland Wireless Communications, Inc.*.............................................. 3,500 94,500
IntelCom Group Inc.*.................................................................. 5,000 132,500
Pairgain Technologies, Inc.*.......................................................... 1,500 152,625
People's Choice TV Corporation*....................................................... 4,000 68,000
Wireless One, Inc.*................................................................... 8,500 157,250
----------
604,875
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 325
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
COMPUTER NETWORKING (8.7%)
Ascend Communications, Inc.*.......................................................... 3,600 $ 240,750
Bay Networks Inc.*.................................................................... 1,950 56,550
Shiva Corporation*.................................................................... 2,400 179,400
3Com Corporation*..................................................................... 2,500 123,125
----------
599,825
----------
COMPUTER SOFTWARE (11.0%)
Business Objects S. A. -- ADR*........................................................ 2,000 93,000
Data Translation, Inc.*............................................................... 8,000 212,000
Dendrite International, Inc.*......................................................... 3,500 95,375
Edify Corporation*.................................................................... 1,000 42,000
EPIC Design Technology, Inc.*......................................................... 3,000 88,500
Fractal Design Corp.*................................................................. 5,000 77,500
Oacis Healthcare Holding Corp.*....................................................... 3,000 49,500
Sapient Corporation*.................................................................. 2,000 100,000
----------
757,875
----------
CONSUMER GROWTH (3.8%)
Activision, Inc.*..................................................................... 5,000 68,125
Conso Products Company*............................................................... 5,750 100,625
Electronic Arts, Inc.*................................................................ 1,200 37,950
Lin Television Corporation*........................................................... 1,700 54,400
----------
261,100
----------
ELECTRIC MEASUREMENT & TESTING INSTRUMENTS (1.4%)
Opal, Inc.*........................................................................... 5,500 100,375
----------
ENERGY (1.8%)
Cross Timbers Oil Company............................................................. 5,500 123,062
----------
HEALTH (5.6%)
HCIA, Inc.*........................................................................... 2,300 148,925
National Dentex Corporation*.......................................................... 6,000 138,000
PacifiCare Health Systems, Inc.*...................................................... 1,200 99,300
----------
386,225
----------
MANAGED CARE (4.8%)
Healthsource, Inc.*................................................................... 4,000 90,500
MedPartners/Mullikin, Inc.*........................................................... 4,500 105,188
PhyCor, Inc.*......................................................................... 2,525 136,981
----------
332,669
----------
MISCELLANEOUS CONSUMER (1.4%)
On Assignment, Inc.*.................................................................. 2,500 100,625
----------
OFFICE-BUSINESS EQUIPMENT (1.3%)
HPR Inc.*............................................................................. 4,000 93,000
----------
PAPER (1.1%)
Data Documents, Inc.*................................................................. 6,000 76,500
----------
</TABLE>
12
<PAGE> 326
THE RESERVE PRIVATE EQUITY SERIES--RESERVE EMERGING GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
PHARMACEUTICALS (3.4%)
Centocor, Inc.*....................................................................... 3,200 $ 113,200
Dura Pharmaceuticals, Inc.*........................................................... 2,000 123,250
----------
236,450
----------
RADIO, TV & BROADCAST COMM. EQUIP. (1.5%)
American Telecasting, Inc.*........................................................... 7,500 105,937
----------
RESTAURANTS (3.2%)
Cheesecake Factory (The)*............................................................. 2,500 66,250
Outback Steakhouse, Inc.*............................................................. 3,000 113,625
Volunteer Capital Corporation*........................................................ 4,000 43,500
----------
223,375
----------
RETAIL -- SPECIALTY (8.1%)
Borders Group, Inc.*.................................................................. 4,500 147,375
PetSmart, Inc.*....................................................................... 3,000 133,500
Staples, Inc.*........................................................................ 6,325 126,500
The Sports Authority, Inc.*........................................................... 5,000 148,750
----------
556,125
----------
SEMICONDUCTOR-RELATED DEVICE (5.2%)
Credence Systems Corporation*......................................................... 2,500 50,625
Intel Corporation..................................................................... 1,800 135,900
KLA Instruments Corporation*.......................................................... 3,000 81,000
LSI Logic Corporation*................................................................ 3,000 93,375
----------
360,900
----------
SYSTEM SOFTWARE/CLIENT SERVER (4.0%)
Hummingbird Communications Ltd.*...................................................... 3,400 138,125
Informix Corporation*................................................................. 6,000 136,500
----------
274,625
----------
TELECOMMUNICATIONS (2.5%)
Cascade Communications Corp.*......................................................... 3,000 169,125
----------
TELECOMMUNICATIONS EQUIPMENT (6.2%)
Comverse Technology, Inc.*............................................................ 4,000 117,500
DSC Communications Corporation*....................................................... 2,000 60,250
Newbridge Networks Corporation*....................................................... 1,800 128,025
P-COM, Inc.*.......................................................................... 4,000 119,500
----------
425,275
----------
TOTAL COMMON STOCKS (Cost $4,765,851) (95.5%)........................................... 6,589,386
Other assets, less liabilities (4.5%)................................................... 310,054
----------
NET ASSETS (100%)....................................................................... $6,899,440
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets
* Non-income producing security.
For Federal income tax purposes the tax basis of investments owned at May 31,
1996 was $4,765,851, the aggregate gross unrealized appreciation for all
investments was $1,941,417 and aggregate gross unrealized depreciation for all
investments was $117,882.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 327
THE RESERVE PRIVATE EQUITY SERIES--RESERVE GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- -------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
AUTO (1.9%)
Chrysler Corporation................................................................ 300 $ 19,988
----------
BANKS (5.3%)
Bankers Trust New York Corporation.................................................. 500 37,563
First of America Bank Corporation................................................... 400 18,300
----------
55,863
----------
COMPUTER NETWORKING (3.1%)
Cisco Systems, Inc. ................................................................ 600 32,850
----------
COMPUTERS (3.0%)
Hewlett-Packard Company............................................................. 300 32,025
----------
ELECTRIC UTILITIES (15.5%)
Consolidated Edison Company of New York, Inc. ...................................... 1,400 39,025
Hawaiian Electric Industries, Inc. ................................................. 1,300 44,200
Minnesota Power and Light Company................................................... 1,500 40,313
Southwestern Public Service Company................................................. 1,300 39,812
----------
163,350
----------
FERTILIZERS (1.9%)
Freeport McMoran Resource Partners Ltd. ............................................ 1,000 20,000
----------
MISCELLANEOUS ENERGY (2.0%)
LL & E Royalty Trust................................................................ 4,500 21,375
----------
OIL-INTERNATIONAL (2.3%)
Chevron Corporation................................................................. 400 23,900
----------
PHARMACEUTICALS (1.2%)
Merck & Company Inc. ............................................................... 200 12,925
----------
REAL ESTATE (1.9%)
Commercial Net Lease Realty Inc. ................................................... 1,500 20,063
----------
RESTAURANTS (1.9%)
Lone Star Steakhouse & Saloon....................................................... 500 20,188
----------
RETAIL-SPECIALTY (3.6%)
Home Depot, Inc. ................................................................... 300 15,338
Tiffany & Company................................................................... 300 22,762
----------
38,100
----------
SEMICONDUCTOR-RELATED DEVICE (3.2%)
Texas Instruments, Inc. ............................................................ 600 33,750
----------
TELECOMMUNICATIONS (3.5%)
GTE Corporation..................................................................... 400 17,100
Telecom Corporation of New Zealand, Ltd. (ADR)...................................... 300 19,688
----------
36,788
----------
TELEPHONE (3.0%)
AT & T Corporation.................................................................. 500 31,188
----------
</TABLE>
14
<PAGE> 328
THE RESERVE PRIVATE EQUITY SERIES--RESERVE GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL VALUE
COMMON STOCKS AMOUNT (NOTE 1)
- -------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
UTILITIES-TELECOMMUNICATION (1.8%)
NYNEX Corporation................................................................... 400 $ 18,450
----------
TOTAL COMMON STOCKS (Cost $576,535) (55.1%)........................................... $ 580,803
==========
<CAPTION>
PREFERRED STOCKS
- --------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES (4.0%)
Lehman Brothers Holdings, Inc. Series A 8.30%....................................... 1,000 24,625
Sunamerica Capital Trust, 8.35%..................................................... 700 17,500
----------
42,125
----------
GOLD MINING (1.5%)
Battle Mountain Gold Company, $3.25................................................. 300 15,525
----------
LIFE INSURANCE (2.2%)
Conseco Inc., 6.50% Series D........................................................ 400 23,100
----------
PROPERTY-LIABILITY INSURANCE (3.5%)
Travelers/P&C Cap I Preferred Trust, 8.08%.......................................... 1,500 36,938
----------
TOTAL PREFERRED STOCKS (Cost $117,775) (11.2%)........................................ $ 117,688
==========
<CAPTION>
CONVERTIBLE BONDS
- --------------------------------------------------------------------------------------
<S> <C> <C>
HOTEL-MOTEL (2.4%)
Hilton Hotels Corp. 5.00%, 05/15/06................................................. 25,000 25,062
----------
STEEL (2.4%)
USX Corp. 7.00%, 06/15/17........................................................... 25,000 24,125
----------
TOTAL CONVERTIBLE BONDS (Cost $49,045) (4.8%)......................................... $ 49,187
==========
US TREASURY NOTES
- --------------------------------------------------------------------------------------
US Treasury Notes, 7.375%, 11/15/97 (Cost $50,913)(4.9%)............................ 50,000 50,867
----------
TOTAL INVESTMENT SECURITIES (Cost $794,268) (76.0%)................................... 798,545
Other assets, less liabilities (24.0%)................................................ 253,611
----------
NET ASSETS (100%)..................................................................... $1,052,156
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $794,268, the aggregate gross unrealized appreciation for all
investments was $30,992, and aggregate gross unrealized depreciation for all
investments was $26,715.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 329
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INFORMED INVESTORS GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
SHARES/ VALUE
COMMON STOCKS UNITS (NOTE 1)
- --------------------------------------------------------------------------------------- ------- ----------
<S> <C> <C>
AIR TRANSPORT (4.0%)
Comair Holdings, Inc. ............................................................... 9,750 $ 255,938
----------
BUSINESS EQUIPMENT/SERVICES (2.6%)
Equifax, Inc......................................................................... 6,700 165,825
----------
COMPUTER NETWORKING (4.4%)
Cisco Systems, Inc.*................................................................. 5,200 284,700
----------
COMPUTER SOFTWARE (3.9%)
CompUSA, Inc.*....................................................................... 5,700 249,375
----------
COMPUTERS (9.6%)
Sun Microsystems, Inc.*.............................................................. 9,800 613,725
----------
FOOD (3.7%)
Safeway, Inc.*....................................................................... 7,000 236,250
----------
MACHINERY-CONSTRUCTION (3.7%)
JLG Industries, Inc.................................................................. 3,000 237,375
----------
MAGNETIC OPTICAL RECORDING MEDIA (5.5%)
Komag, Inc.*......................................................................... 10,200 353,175
----------
PACKAGED SOFTWARE (11.2%)
Cadence Design Systems, Inc.*........................................................ 12,700 720,725
----------
SEMICONDUCTOR, RELATED DEVICE (9.1%)
Analog Devices, Inc.*................................................................ 1,100 30,387
Atmel Corporation*................................................................... 15,500 550,250
----------
580,637
----------
SHOES (5.3%)
Nike, Inc. .......................................................................... 3,400 341,275
----------
SPECIAL INDUSTRIAL MACHINERY (5.1%)
Applied Materials, Inc.*............................................................. 8,700 324,075
----------
TELEPHONE & TELGRAPH APPARATUS (29.0%)
Aspect Telecommunications Corporation*............................................... 7,500 425,625
Tellabs, Inc.*....................................................................... 1,200 77,400
U.S. Robotics Corporation*........................................................... 14,800 1,357,900
----------
1,860,925
----------
TOTAL COMMON STOCKS (Cost $3,783,862) (97.1%).......................................... 6,224,000
Other assets, less liabilities (2.9%).................................................. 184,063
----------
NET ASSETS (100%)...................................................................... $6,408,063
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For Federal income tax purposes the tax basis of investments owned at May 31,
1996 was $3,783,862, the aggregated gross unrealized appreciation for all
investments was $2,494,427 and aggregate gross unrealized depreciation for all
investments was $54,289.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 330
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AUSTRALIA (1.2%)
Coca Cola Amatil Ltd. ............................................................... 4,074 $ 44,377
----------
FRANCE (4.7%)
Altran Technologies.................................................................. 120 34,918
Axime................................................................................ 260 35,305
Carrefour............................................................................ 120 65,777
Carrefour (Rights expiring 7/2/96)................................................... 120 33,040
----------
169,040
----------
GERMANY (3.7%)
Altana AG............................................................................ 50 31,550
Fresenius AG......................................................................... 350 61,244
Gehe AG.............................................................................. 65 41,825
----------
134,619
----------
HONG KONG (10.1%)
CDL Hotels International Limited..................................................... 68,000 38,676
Giordano International Ltd. ......................................................... 24,000 21,562
Goldlion Holdings Ltd. .............................................................. 25,000 20,521
Hang Seng Bank Ltd. ................................................................. 7,000 73,067
Hong Kong & China Gas Company........................................................ 31,800 50,561
Hong Kong & China Gas Company (Warrants -- expires 9/30/97).......................... 1,900 87
Manhattan Card Company Ltd. ......................................................... 68,000 32,743
National Mutual Asia Ltd. ........................................................... 44,000 39,814
Sun Hung Kai Properties Ltd. ........................................................ 6,000 61,272
Wing Hang Bank Ltd. ................................................................. 6,000 23,423
----------
361,726
----------
INDONESIA (5.6%)
PT Bank Internasional Indonesia...................................................... 10,000 52,220
PT Darya Varia Laboratoria........................................................... 20,000 42,033
PT Darya Varia Laboratoria (Rights expiring 6/3/96).................................. 2,400 0
PT Gudang Garam...................................................................... 4,000 32,597
PT Steady Safe....................................................................... 11,000 14,626
PT Telekomunikasi Indonesia.......................................................... 38,000 57,860
----------
199,336
----------
ITALY (1.4%)
Telecom Italia SpA................................................................... 8,000 16,145
Telecom Italia Mobile SpA............................................................ 25,000 33,041
----------
49,186
----------
JAPAN (1.0%)
Paris Miki, Inc. .................................................................... 800 35,057
----------
</TABLE>
17
<PAGE> 331
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
MALAYSIA (8.3%)
Arab-Malaysian Merchant Bank Berhad.................................................. 2,000 $ 27,043
Commerce Asset Holding Berhad........................................................ 10,000 67,308
DCB Holdings Berhad.................................................................. 8,000 26,603
Malayan Banking Berhad............................................................... 4,000 37,981
Malaysian Assurance Alliance Berhad.................................................. 11,625 57,287
O.Y.L. Industries Berhad............................................................. 6,000 59,615
United Engineers (Malaysia) Ltd. .................................................... 3,000 20,913
----------
296,750
----------
NETHERLANDS (4.4%)
Elsevier............................................................................. 4,000 62,207
Heineken............................................................................. 200 40,786
Wolters Kluwer....................................................................... 502 56,239
----------
159,232
----------
NORWAY (1.4%)
Tomra Systems........................................................................ 5,000 48,779
----------
PHILIPPINES (1.6%)
Bankard, Inc. ....................................................................... 60,000 29,221
DMCI Holdings Inc. .................................................................. 37,000 27,206
----------
56,427
----------
SINGAPORE (5.6%)
City Developments Limited............................................................ 6,000 46,055
DBS Land Limited..................................................................... 12,000 39,915
Development Bank of Singapore Limited................................................ 3,000 35,608
Oversea-Chinese Banking Corporation Ltd. ............................................ 3,000 38,380
Overseas Union Bank Ltd. ............................................................ 6,000 42,644
----------
202,602
----------
SOUTH KOREA (3.1%)
Seoul City Gas Co. Ltd. ............................................................. 500 41,476
Sungmi Telecom Electronics........................................................... 300 68,807
----------
110,283
----------
SPAIN (7.5%)
Centros Comerciales Pryca............................................................ 1,000 23,579
Empresa Nacional de Electridad....................................................... 2,300 142,529
Gas Natural.......................................................................... 360 63,699
Iberdrola............................................................................ 3,900 39,672
----------
269,479
----------
SWEDEN (4.5%)
Astra AB Series A.................................................................... 1,400 64,215
Elekta Instrument AB Series B........................................................ 500 18,496
Ericsson Telefonaktiebolaget......................................................... 1,200 26,939
Frontec AB Series B.................................................................. 400 19,690
Wm Data AB Series B.................................................................. 500 30,280
----------
159,620
----------
</TABLE>
18
<PAGE> 332
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- --------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
SWITZERLAND (6.2%)
Nestle SA............................................................................ 70 $ 79,087
Roche Holding AG..................................................................... 8 61,538
Sandoz AG............................................................................ 60 62,596
Zurich Versicherungs................................................................. 70 18,510
----------
221,731
----------
THAILAND (5.1%)
Bangkok Bank Public Company Ltd. .................................................... 4,000 58,113
Central Pattana Public Company Ltd. ................................................. 7,000 29,017
Grammy Entertainment Public Company Ltd. ............................................ 1,500 20,371
Krung Thai Bank Public Company Ltd. ................................................. 6,000 29,135
Thai Farmers Bank Public Company Ltd. ............................................... 4,000 45,795
----------
182,431
----------
UNITED KINGDOM (10.5%)
Dixons Group plc..................................................................... 6,800 52,787
HSBC Holdings plc.................................................................... 3,726 56,779
J.D. Wetherspoon plc................................................................. 1,000 14,486
Logica plc........................................................................... 2,900 27,775
Reed International plc............................................................... 3,700 64,044
Reuters Holding plc.................................................................. 7,500 87,302
Standard Chartered plc............................................................... 7,343 73,572
----------
376,745
----------
UNITED STATES (5.5%)
Embotelladora Andina ADR............................................................. 1,000 35,500
Larsen & Toubro Ltd. ................................................................ 2,000 39,260
Santa Isabel ADR..................................................................... 1,300 34,450
Tata Engineering and Locomotive Company Ltd. ........................................ 3,000 52,260
Total Access Communication plc....................................................... 4,000 36,400
----------
197,870
----------
TOTAL COMMON STOCKS (Cost $2,944,304) (91.4%).......................................... 3,275,290
Other assets, less liabilities (8.6%).................................................. 309,234
----------
NET ASSETS (100%)...................................................................... $3,584,524
==========
</TABLE>
19
<PAGE> 333
THE RESERVE PRIVATE EQUITY SERIES--RESERVE INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
INDUSTRY COMPOSITION
<TABLE>
<CAPTION>
INDUSTRY PERCENT
- ------------------------------------------- -------
<S> <C>
Auto/Truck Manufacturers................... 1.5%
Beverages.................................. 3.4
Biotechnology & Medical Devices............ 2.2
Commercial Banks........................... 16.6
Computer Software.......................... 3.6
Computers & Peripherals.................... 0.5
Construction............................... 2.4
Drugs & Health Care........................ 7.6
Financial Services......................... 10.9
Food Processing............................ 2.2
Lodging & Restaurants...................... 1.5
Machinery.................................. 3.0
<CAPTION>
INDUSTRY PERCENT
- ------------------------------------------- -------
<S> <C>
Public Utilities........................... 9.4%
Publishing................................. 5.1
Real Estate Development.................... 2.8
Real Estate Investment..................... 2.1
Retailing.................................. 9.5
Telecommunications......................... 6.7
Transportation............................. 0.4
-------
Industry percent of net assets............. 91.4%
-------
Other assets, less liabilities............. 8.6
-------
PERCENT OF NET ASSETS...................... 100.0%
======
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $2,944,304, the aggregate gross unrealized appreciation for all
investments was $371,871 and aggregate gross unrealized depreciation for all
investments was $40,885.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE LARGE-CAP VALUE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
BANKS (2.0%)
Wells Fargo & Company................................................................. 100 $ 24,100
----------
BEVERAGES (14.0%)
Anheuser-Busch Companies, Inc. ....................................................... 800 57,000
Coca-Cola Company..................................................................... 1,200 55,200
Earthgrains Company................................................................... 20 720
PepsiCo, Inc. ........................................................................ 1,800 59,850
----------
172,770
----------
COMPUTER SOFTWARE (4.8%)
Microsoft Corporation................................................................. 500 59,375
----------
COMPUTER-PERIPHERAL EQUIPMENT (3.8%)
Motorola, Inc. ....................................................................... 700 46,725
----------
COSMETICS (11.5%)
Clorox Company........................................................................ 600 51,075
Gillette Company...................................................................... 900 53,213
Tambrands, Inc. ...................................................................... 800 36,900
----------
141,188
----------
DRUGS (1.8%)
Warner Lambert Company................................................................ 400 22,400
----------
ENTERTAINMENT (3.9%)
Walt Disney Company (Holding Co.)..................................................... 800 48,600
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 334
THE RESERVE PRIVATE EQUITY SERIES--RESERVE LARGE-CAP VALUE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
FINANCIAL/BUSINESS SERVICES (8.2%)
American Express Company.............................................................. 1,100 $ 50,325
Charles Schwab Corporation............................................................ 2,100 50,925
----------
101,250
----------
FOOD (21.5%)
CPC International, Inc. .............................................................. 800 55,300
Campbell Soup Company................................................................. 900 58,050
Hershey Foods Corporation............................................................. 700 50,925
Quaker Oats Company................................................................... 1,500 52,687
Wrigley (WM) Jr. Company.............................................................. 900 47,138
----------
264,100
----------
PHARMACEUTICALS (7.4%)
Johnson & Johnson..................................................................... 400 38,950
Merck & Company, Inc. ................................................................ 800 51,700
----------
90,650
----------
PUBLISHING (4.5%)
Gannett Company, Inc. ................................................................ 800 55,800
----------
PUBLISHING -- NEWSPAPERS (3.8%)
New York Times Company Class A........................................................ 1,400 46,025
----------
RETAIL STORES -- GENERAL MERCHANDISING (4.2%)
Wal-Mart Stores, Inc. ................................................................ 2,000 51,750
----------
SEMICONDUCTOR -- RELATED DEVICE (4.9%)
Intel Corporation..................................................................... 800 60,400
----------
TOTAL COMMON STOCKS (Cost $1,115,010)(96.3%)............................................ 1,185,133
Other assets, less liabilities (3.7%)................................................... 45,927
----------
NET ASSETS (100%)....................................................................... $1,231,060
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,115,010, the aggregate gross unrealized appreciation for all
investments was $84,608 and aggregate gross unrealized depreciation for all
investments was $14,485.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 335
THE RESERVE PRIVATE EQUITY SERIES--RESERVE MID-CAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AIR TRANSPORT (3.0%)
Delta Air Lines, Inc. ................................................................ 550 $ 45,581
----------
AUTO PARTS (3.6%)
Gentex Corporation*................................................................... 1,200 54,300
----------
BANKS (2.7%)
Cole Taylor Financial Group, Inc. .................................................... 1,500 39,750
----------
BUSINESS EQUIPMENT/SERVICE (8.4%)
Equifax, Inc. ........................................................................ 2,800 69,300
Interim Services, Inc.*............................................................... 1,200 57,000
----------
126,300
----------
CHEMICAL SPECIALTY (4.5%)
Raychem Corporation................................................................... 900 67,275
----------
COMMUNICATION -- NETWORK (4.0%)
LCI International, Inc.*.............................................................. 1,900 60,563
----------
COMPUTER SERVICES (2.7%)
Acxiom Corporation*................................................................... 1,300 40,625
----------
COMPUTER SOFTWARE (2.1%)
Black Box Corporation*................................................................ 1,500 31,125
----------
COMPUTER -- PERIPHERAL EQUIPMENT (2.9%)
Dialogic Corporation*................................................................. 800 43,200
----------
COMPUTERS (4.3%)
Gateway 2000, Inc.*................................................................... 1,700 64,387
----------
ELECTRIC MEASUREMENT & TESTING INST. (5.1%)
Input/Output, Inc. ................................................................... 1,900 76,713
----------
FINANCE-PERSONAL LOANS (4.1%)
MBNA Corporation...................................................................... 2,000 61,250
----------
FOOD CHAINS (2.0%)
Whole Foods Market, Inc.*............................................................. 1,200 29,550
----------
HEALTH (2.7%)
American Medical Response, Inc.*...................................................... 1,100 40,012
----------
HOME BUILDINGS (4.5%)
Oakwood Homes Corp. .................................................................. 1,400 67,900
----------
HOSPITAL SUPPLIES (5.4%)
Advanced Technology Laboratories, Inc.*............................................... 1,400 49,350
Sofamor Danek Group, Inc.*............................................................ 900 32,175
----------
81,525
----------
HOUSEHOLD FURNISHINGS & APPLIANCES (5.2%)
Heilig-Meyers Company................................................................. 2,000 41,250
Herman Miller, Inc. .................................................................. 1,200 37,050
----------
78,300
----------
LIFE INSURANCE (3.3%)
Protective Life Corporation........................................................... 1,300 48,588
----------
</TABLE>
22
<PAGE> 336
THE RESERVE PRIVATE EQUITY SERIES--RESERVE MID-CAP GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
MISCELLANEOUS METALS (3.4%)
Wolverine Tube Inc.*.................................................................. 1,400 $ 51,100
----------
MOBIL HOMES (2.2%)
Palm Harbor Homes, Inc.*.............................................................. 1,200 33,300
----------
OIL/GAS EQUIPMENT SERVICES (6.5%)
Rowan Companies, Inc.*................................................................ 2,600 39,325
Tidewater, Inc. ...................................................................... 1,400 57,750
----------
97,075
----------
POLLUTION CONTROL (4.4%)
Newpark Resources, Inc.*.............................................................. 1,800 65,250
----------
RESTAURANTS (2.1%)
Sonic Corporation*.................................................................... 1,300 31,200
----------
RETAIL (3.8%)
Casey's General Stores, Inc. ......................................................... 2,400 56,700
----------
SPECIAL INDUSTRIAL MACHINERY (3.8%)
Black & Decker Corp. ................................................................. 1,400 57,575
----------
TOTAL COMMON STOCK (Cost $1,284,178) (96.7%)............................................ 1,449,144
Other assets, less liabilities (3.3%)................................................... 49,980
----------
NET ASSETS (100%)....................................................................... $1,499,124
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,284,178, the aggregate gross unrealized appreciation for all
investments was $181,516 and aggregate gross unrealized depreciation for all
investments was $16,550.
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------- ------ ----------
<S> <C> <C>
AIR TRANSPORTATION (3.1%)
Delta Air Lines, Inc. ................................................................ 950 $ 78,731
----------
AUTO PARTS (4.3%)
Gentex Corporation*................................................................... 2,400 108,600
----------
BANKS (2.3%)
Cole Taylor Financial Group, Inc. .................................................... 2,200 58,300
----------
BUSINESS EQUIPMENT/SERVICE (8.0%)
Equifax Inc. ......................................................................... 4,400 108,900
Interim Services, Inc.*............................................................... 2,000 95,000
----------
203,900
----------
CHEMICAL SPECIALTY (4.0%)
Raychem Corporation................................................................... 1,350 100,913
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 337
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
COMMUNICATION -- NETWORK (3.6%)
LCI International, Inc.*.............................................................. 2,900 $ 92,438
----------
COMPUTER SERVICES (2.9%)
Acxiom Corporation*................................................................... 2,400 75,000
----------
COMPUTER SOFTWARE (2.3%)
Black Box Corporation*................................................................ 2,800 58,100
----------
COMPUTERS (3.9%)
Gateway 2000, Inc.*................................................................... 2,600 98,475
----------
COMPUTERS -- PERIPHERAL EQUIPMENT (3.4%)
Dialogic Corporation*................................................................. 1,600 86,400
----------
ELECTRIC MEASUREMENT & TESTING INSTRUMENT (4.8%)
Input/Output, Inc.*................................................................... 3,000 121,125
----------
FINANCE -- PERSONAL LOANS (3.5%)
MBNA Corporation...................................................................... 2,900 88,812
----------
FOOD CHAINS (1.9%)
Whole Foods Market, Inc.*............................................................. 2,000 49,250
----------
HEALTH (2.5%)
American Medical Response, Inc.*...................................................... 1,750 63,656
----------
HOME BUILDINGS (4.4%)
Oakwood Homes Corp. .................................................................. 2,300 111,550
----------
HOSPITAL SUPPLIES (5.2%)
Advanced Technology Laboratories, Inc.*............................................... 2,300 81,075
Sofamor Danek Group, Inc.*............................................................ 1,400 50,050
----------
131,125
----------
HOUSEHOLD FURNISHINGS APPLIANCE (5.3%)
Heilig-Meyers Company................................................................. 3,300 68,063
Herman Miller, Inc. .................................................................. 2,200 67,925
----------
135,988
----------
LIFE INSURANCE (4.8%)
American Bankers Insurance Group, Inc. ............................................... 1,200 46,500
Protective Life Corporation........................................................... 2,000 74,750
----------
121,250
----------
MISCELLANEOUS METALS (3.0%)
Wolverine Tube, Inc.*................................................................. 2,100 76,650
----------
MOBIL HOMES (2.0%)
Palm Harbor Homes, Inc.*.............................................................. 1,800 49,950
----------
OIL/GAS EQUIPMENT SERVICES (5.9%)
Rowan Companies, Inc.*................................................................ 4,000 60,500
Tidewater Inc. ....................................................................... 2,150 88,687
----------
149,187
----------
POLLUTION CONTROL (4.1%)
Newpark Resources, Inc.*.............................................................. 2,870 104,037
----------
</TABLE>
24
<PAGE> 338
THE RESERVE PRIVATE EQUITY SERIES--RESERVE NORTH AMERICAN GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS--MAY 31, 1996--(CONTINUED)
<TABLE>
<S> <C> <C>
RESTAURANTS (2.1%)
Sonic Corporation*.................................................................... 2,200 $ 52,800
----------
RETAIL (3.3%)
Casey's General Stores, Inc. ......................................................... 3,500 82,688
----------
SPECIAL INDUSTRIAL MACHINERY (3.5%)
Black & Decker Corporation............................................................ 2,200 90,475
----------
TOTAL COMMON STOCKS (Cost $1,935,729) (94.1%)........................................... 2,389,400
Other assets, less liabilities (5.9%)................................................... 150,155
----------
NET ASSETS (100%)....................................................................... $2,539,555
==========
</TABLE>
- ---------------
Value of investments are shown as a percentage of Net Assets.
* Non-income producing security.
For federal income tax purposes the tax basis for investments owned at May 31,
1996 was $1,935,729, the aggregate gross unrealized appreciation for all
investments was $472,445 and aggregate gross unrealized depreciation for all
investments was $18,774.
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 339
RESERVE GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
MEASUREMENT PERIOD GROWTH AND
(FISCAL YEAR COVERED) INCOME S&P 500
<S> <C> <C>
01/02/96 10000 10000
05/31/96 9710 10780
</TABLE>
The performance of Reserve Growth and Income Fund reflects the maximum
4.5% sales load.
The chart above reflects the performance of the Reserve Growth
and Income Fund class A shares. The performance of the Reserve
Growth and Income Fund class D shares will be greater or less
than the line shown based on the differences in original share
inception dates, fees, and sales charges.
Past performance is not predictive of future performance.
To the Shareholders of the Reserve Growth and Income Fund:
The Fund has just completed an abbreviated year ending May 31, 1996. The
return for the abbreviated period was 1.7%. During the same time period, the S&P
500 appreciated 7.8%. The 30-year Treasury Bond declined 13.1% over the period,
as rates rose from 5.95% to 7.05%.
The Fund's performance reflects these diverging trends, as gains in the
growth portion of the portfolio were offset by declines in our income producing
positions. The largest industry holding in the Fund is Utilities, representing
15.5% of net assets, followed by Banks at 5.4%.
Currently, our models reflect that the valuations in most sectors are
extremely high and that the market needs to digest or correct current excesses
so that we can become less defensive. Looking ahead, we see the current
overvaluation being resolved, and interest rates backing off from the 7% level.
This should set the stage for the next advance in the market as it benefits from
both declining interest rates and improved corporate profits. The Fund is well
positioned to benefit from a decline in rates; moreover, our high cash position
provides us with the opportunity to purchase additional growth-oriented
securities that have steady and predictable growth potential at reasonable
valuations.
RAYMOND C. BAKER, JR., PORTFOLIO MANAGER, KENNETH J. GERBINO AND COMPANY,
SUB-ADVISER
5
