<PAGE> 1
PART A
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON
SEPTEMBER 30, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION NO. 811-7734
33-63300
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---------
Pre-Effective Amendment No.
---------------------- ---------
Post-Effective Amendment No. 11 X
---------------------- ---------
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---------
Amendment No. 13
-------------------
(Check appropriate box or boxes.)
RESERVE PRIVATE EQUITY SERIES
(Exact Name of Registrant as Specified in Charter)
810 Seventh Avenue, New York, NY 10019
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 977-9982
-----------------------------
Michelle L. Neufeld, Esq., 810 Seventh Avenue, 17th Floor, New York, NY 10019
- --------------------------------------------------------------------------------
(Name and Address of Agent for service)
It is proposed that filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485
---------
X on October 1, 1997 pursuant to paragraph (b) of Rule 485
---------
60 days after filing pursuant to paragraph (a) of Rule 485
---------
on (date) pursuant to paragraph (a) of Rule 485
---------
The Commission is requested to send copies of all communications to:
Paul F. Roye, Esq.
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
The Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 electing to register an indefinite number of
shares of beneficial interest. Registrant intends to file the notice required
by Rule 24f-2 with respect to its fiscal year ending May 31, 1997 on July 25,
1997.
Total Pages:
-------
<PAGE> 2
CROSS-REFERENCE SHEET PURSUANT TO RULE 495(a)
<TABLE>
<CAPTION>
FORM PROSPECTUS AND STATEMENT
N-1A OF ADDITIONAL INFORMATION
ITEM FORM CAPTION CAPTION
- ---- ----------------------------------- -----------------------------------------------------
<S> <C>
Part A
1 Cover Page Cover Page
2 Synopsis Fund Expenses
3 Condensed Financial Information Financial Highlights
4 General Description of Registrant The Trust; Investment Objective and Policies;
Investment Techniques and Investments
5 Management of the Fund Management, Trustees and Officers of the Trust
6 Capital Stock and Other Securities Shares of Beneficial Interest; Taxes; Dividends and
Distributions
7 Purchase of Securities Being Offered How to Buy shares
8 Redemption or Repurchase Redemptions
9 Legal Proceedings (omitted)
Part B
10 Cover Page Statement of Additional Information
11 Table of Contents Table of Contents
12 General Information and History (omitted)
13 Investment Objective and Policies Investment Policies; Other Policies
14 Management of the Registrant Trustees and Officers of the Trust
15 Control Person and Principal Trustees and Officers of the Trust
Holders of Securities
16 Investment Advisory and Other Investment Management and Other Agreement
Services
17 Brokerage Allocation Portfolio Turnover, Transaction Charges and
Allocation
18 Capital Stock and Other Securities Shares of Beneficial Interest
19 Purchase, Redemption, and Pricing Purchase, Redemption and Pricing of Shares;
of Securities Being Offered Dividends and Taxes
20 Tax Status Distributions and Taxes
21 Underwriters Investment Management and Other Agreements
22 Calculation of Performance Date Performance Information
23 Financial Statements Financial Statements
</TABLE>
<PAGE> 3
General Information, Purchases and
Redemptions
-------------------------------------
24 Hour Price and Balance Information
-------------------------------------
Nationwide 800-637-1700
www.reservefunds.com
- --------------------------------------------------------------------------------
[RESERVE FUNDS LOGO]
THE RESERVE PRIVATE EQUITY SERIES
THE RESERVE PRIVATE EQUITY SERIES ("RPES" or "Trust") is a no-load,
open-end mutual fund offering shares in each "Fund" or "Portfolio". This
Prospectus, dated October 1, 1997, sets forth concisely the information which a
prospective investor should know about each Fund before investing. A Statement
of Additional Information, dated October 1, 1997, 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.
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 October 1, 1997.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
<PAGE> 4
SHAREHOLDER EXPENSES
THE FOLLOWING TABLE illustrates all expenses and fees that a shareholder of
each Fund will incur.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases................................................ None
Sales Charges Imposed on Reinvested Dividend..................................... None
Redemption Fees*................................................................. None
Exchange Fees.................................................................... None
</TABLE>
- ---------------
* A $2.00 fee will be charged on redemption checks issued by the Funds
of less than $100 and a $10.00 fee will be charged for wire
redemptions of less than $10,000.00.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
COMPREHENSIVE TOTAL
MANAGEMENT SERVICE OPERATING
FEE FEE EXPENSES
------------- ----- ---------
<S> <C> <C> <C>
Reserve Blue Chip Growth...................................................... 1.50% 0.25% 1.75%
Reserve Convertible Securities................................................ 1.50% 0.25% 1.75%
Reserve Small-Cap Growth...................................................... 1.50% 0.25% 1.75%
Reserve Informed Investors Growth............................................. 1.50% 0.25% 1.75%
Reserve International Equity.................................................. 1.75% 0.25% 2.00%
Reserve Large-Cap Value....................................................... 1.50% 0.25% 1.75%
Reserve Mid-Cap Growth........................................................ 1.50% 0.25% 1.75%
</TABLE>
The purpose of this table is to assist the investor in understanding the
costs and expenses that a shareholder in a Fund will bear directly or
indirectly.
The Funds are charged a comprehensive fee (see "Management" on page 15)
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>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Reserve Blue Chip Growth..................................................... $18 $ 55 $ 95 $207
Reserve Convertible Securities............................................... $18 $ 55 $ 95 $207
Reserve Small-Cap Growth..................................................... $18 $ 55 $ 95 $207
Reserve Informed Investors Growth............................................ $18 $ 55 $ 95 $207
Reserve International Equity................................................. $20 $ 63 $108 $236
Reserve Large-Cap Value...................................................... $18 $ 55 $ 95 $207
Reserve Mid-Cap Growth....................................................... $18 $ 55 $ 95 $207
</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> 5
FINANCIAL HIGHLIGHTS
The following information applies to a share of the Reserve Private
Equity Series -- Reserve Blue Chip Growth Fund ("Blue Chip"), Reserve Small-Cap
Growth Fund (formerly Reserve Emerging Growth Fund) ("Small-Cap"), Reserve
International Equity Fund ("International"), Reserve Informed Investors Growth
Fund ("Informed"), Reserve Large-Cap Value Fund ("Large-Cap") Reserve
Convertible Securities Fund ("Convertible Securities") and Reserve Mid-Cap
Growth Fund ("Mid-Cap") outstanding throughout each period. Each Fund, prior to
October 1, 1997, had two classes of shares, Class A and Class D. Effective
October 1, 1997, the shares of Class D were merged into Class A. This
information 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 YEAR ENDED OPERATIONS) TO YEAR ENDED OPERATIONS) TO
RESERVE BLUE CHIP GROWTH FUND MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1997 MAY 31, 1996
- -------------------------------------- ------------ ------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $14.91 $12.03 $10.00 $14.88 $13.49
------ ------ ------ ------ ------
Income from investment operations.....
Net investment loss............... (.17) (.10) (.03) (.46) (.04)
Net realized and unrealized
gain............................ .91 3.62 2.06 1.08 1.43
------ ------ ------ ------ ------
Total from investment operations...... .74 3.52 2.03 .62 1.39
Less distribution from net realized
gain................................ (.19) (.64) -- (.19) --
------ ------ ------ ------ ------
Net asset value, end of period........ $15.46 $14.91 $12.03 $15.31 $14.88
====== ====== ====== ====== ======
Total Return.......................... 5.12% 30.10% 20.30%(2) 4.32% 10.30%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of
period.............................. $5,428 $5,130 $1,993 $ 46 $ 43
Ratio of expenses to average net
assets before waiver................ 1.75% 1.75% 1.75%(1) 2.50% 2.50%(1)
Ratio of expenses to average net
assets, net of waiver............... 1.75% 1.75% 1.73%(1) 2.50% 2.50%(1)
Ratio of net investment loss to
average net assets, before waiver... (1.13)% (.94)% (.72)%(1) (1.90)% (1.70)%(1)
Ratio of net investment loss to
average net assets, net of waiver... (1.13)% (.94)% (.70)%(1) (1.90)% (1.70)%(1)
Portfolio turnover rate............... 109% 72% 68% 109% 72%
Average commission per share on
portfolio transactions.............. $.0419 $ .06 N/A $.0419 $ .06
</TABLE>
3
<PAGE> 6
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------- ----------------
SEPTEMBER 3, SEPTEMBER 3,
1996 1996
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
RESERVE CONVERTIBLE SECURITIES FUND MAY 31, 1997 MAY 31, 1997
- -------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Net asset value, beginning of period...................................... $ 10.00 $10.79
------- ------
Income from investment operations.........................................
Net investment loss................................................... .34 .33
Net realized and unrealized gain...................................... .99 .98
------- ------
Total from investment operations.......................................... 1.33 1.31
Less distribution from net investment income and realized gain............ (.25) (.25)
------- ------
Net asset value, end of period............................................ $ 11.08 $11.06
======= ======
Total Return.............................................................. 13.53%(2) 13.33%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period.................................... $ 20,553 $ 18
Ratio of expenses to average net assets before waiver..................... 2.36%(1) 3.37%(1)
Ratio of expenses to average net assets, net of waiver.................... .52%(1) .83%(1)
Ratio of net investment loss to average net assets before waiver.......... 3.67%(1) 2.57%(1)
Ratio of net investment loss to average net assets net of waiver.......... 5.52%(1) 5.12%(1)
Portfolio turnover rate................................................... 113% 113%
Average commission per share on portfolio transactions.................... $ .0564 $.0564
</TABLE>
<TABLE>
<CAPTION>
CLASS D
CLASS A -------------------------------
----------------------------------------------- FEBRUARY 26,
NOVEMBER 14, 1994 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS) TO YEAR ENDED OPERATIONS) TO
RESERVE SMALL-CAP GROWTH FUND* MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1997 MAY 31, 1996
- -------------------------------------- ------------ ------------ ----------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $19.56 $12.21 $ 10.00 $19.52 $16.88
------ ------ ------ ------- ------
Income from investment operations.....
Net investment loss............... (.28) (.17) (.09) (.49) (.04)
Net realized and unrealized gain
(loss).......................... (3.76) 8.05 2.30 (3.67) 2.68
------ ------ ------ ------- ------
Total from investment operations...... (4.04) 7.88 2.21 (4.16) 2.64
Less distribution from net realized
gain................................ -- (.53) -- -- --
------ ------ ------ ------- ------
Net asset value, end of period........ $15.52 $19.56 $ 12.21 $15.36 $19.52
====== ====== ====== ======= ======
Total Return.......................... (20.65)% 65.55% 22.10%(2) (21.31)% 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of
period.............................. $5,789 $6,657 $ 1,241 $ 221 $ 243
Ratio of expenses to average net
assets.............................. 1.75% 1.75% 1.75%(1) 2.50% 2.50%(1)
Ratio of net investment loss to
average net assets.................. (1.69)% (1.70)% (1.62)%(1) (2.45)% (2.48)%(1)
Portfolio turnover rate............... 28% 38% 43% 28% 38%
Average commission per share on
portfolio transactions.............. $.0048 $ .01 N/A $.0048 $ .01
</TABLE>
4
<PAGE> 7
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
----------------------------------------------- -------------------------------
DECEMBER 28, 1994 MARCH 22, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS) TO YEAR ENDED OPERATIONS) TO
RESERVE INFORMED INVESTORS GROWTH FUND MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1997 MAY 31, 1996
- -------------------------------------- ------------ ------------ ------------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $14.36 $11.99 $ 10.00 $14.33 $12.29
------ ------ ------ ------- ------
Income from investment operations.....
Net investment loss............... (.07) (.33) (.07) (.18) (.06)
Net realized and unrealized gain
(loss).......................... (1.66) 3.87 2.06 (1.64) 2.10
------ ------ ------ ------- ------
Total from investment operations...... (1.73) 3.54 1.99 (1.82) 2.04
Less distribution from net realized
gain................................ (1.15) (1.17) -- (1.15) --
------ ------ ------ ------- ------
Net asset value, end of period........ $11.48 $14.36 $ 11.99 $11.36 $14.33
====== ====== ====== ======= ======
Total Return.......................... (11.35)% 29.75% 19.90%(2) (12.04)% 16.60%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of
period.............................. $5,477 $6,393 $ 6,837 $ 13 $ 15
Ratio of expenses to average net
assets.............................. 1.75% 1.75% 1.75%(1) 2.50% 2.50%(1)
Ratio of net investment loss to
average net assets.................. (.57)% (1.57)% (1.62)%(1) (1.26)% (2.32)%(1)
Portfolio turnover rate............... 255% 132% 59% 255% 132%
Average commission per share on
portfolio transactions.............. $.0612 $ .05 N/A $.0612 $ .05
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
------------------------------- -------------------------------
JULY 13, 1995 MARCH 11, 1996
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO YEAR ENDED OPERATIONS) TO
RESERVE INTERNATIONAL EQUITY FUND MAY 31, 1997 MAY 31, 1996 MAY 31, 1997 MAY 31, 1996
- -------------------------------------------------- ------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 11.26 $10.00 $11.25 $10.79
------- ------ ------ ------
Income from investment operations.................
Net investment loss........................... (.07) (.05) (.15) (.01)
Net realized and unrealized gain.............. 1.40 1.31 1.39 .47
------- ------ ------ ------
Total from investment operations.................. 1.33 1.26 1.24 .46
------- ------ ------ ------
Net asset value, end of period.................... $ 12.59 $11.26 $12.49 $11.25
======= ====== ====== ======
Total Return...................................... 11.81% 12.60%(2) 11.02% 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period............ $ 12,099 $3,578 $ 30 $ 6
Ratio of expenses to average net assets before
waiver.......................................... 2.00% 2.00%(1) 2.75% 2.75%(1)
Ratio of expenses to average net assets, net of
waiver.......................................... 2.00% 1.99%(1) 2.75% 2.75%(1)
Ratio of net investment loss to average net assets
before waiver................................... .82% (.92)%(1) 1.63% (.70)%(1)
Ratio of net investment loss to average net assets
net of waiver................................... .82% (.91)%(1) 1.63% (.70)%(1)
Portfolio turnover rate........................... .52% 70% 52% 70%
Average commission per share on portfolio
transactions.................................... $ .0273 $ .02 $.0273 $ .02
</TABLE>
5
<PAGE> 8
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS A CLASS D
------------------------------- ------------
JANUARY 2, 1996
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO YEAR ENDED
RESERVE LARGE-CAP VALUE FUND MAY 31, 1997 MAY 31, 1996 MAY 31, 1997
- ------------------------------------------------------------------ ------------ ---------------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period.............................. $10.95 $10.00 $10.95
------ ------ ------
Income from investment operations.................................
Net investment loss........................................... (.03) (.01) (.05)
Net realized and unrealized gain.............................. 3.69 .96 3.61
------ ------ ------
Total from investment operations.................................. 3.66 .95 3.56
------ ------ ------
Net asset value, end of period.................................... $14.61 $10.95 $14.51
====== ====== ======
Total Return...................................................... 33.42% 9.50%(2) 32.51%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period............................ $3,054 $1,231 $ 56
Ratio of expenses to average net assets........................... 1.75% 1.75%(1) 2.50%
Ratio of net investment loss to average net assets................ (.32)% (.32)%(1) (1.07)%
Portfolio turnover rate........................................... 18% 0% 18%
Average commission per share on portfolio transactions............ $.0684 $ .08 $.0684
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D
------------------------------- ---------------------------
MARCH 13, 1996
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO YEAR ENDED YEAR ENDED
RESERVE MID-CAP GROWTH FUND MAY 31, 1997 MAY 31, 1996 MAY 31, 1997 MAY 31, 1996
- ------------------------------------------------------ ------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.................. $12.29 $10.94 $12.27 $10.00
------ ------ ------ ------
Income from investment operations.....................
Net investment loss............................... (.11) (.01) (.28) (.17)
Net realized and unrealized gain.................. 1.02 1.36 1.10 2.44
------ ------ ------ ------
Total from investment operations...................... .91 1.35 .82 2.27
------ ------ ------ ------
Net asset value, end of period........................ $13.20 $12.29 $13.09 $12.27
====== ====== ====== ======
Total Return.......................................... 7.40% 12.34%(2) 6.68% 22.70%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period................ $2,174 $ 131 $1,828 $2,408
Ratio of expenses to average net assets............... 1.75% 1.74%(1) 2.50% 2.49%
Ratio of net investment loss to average net assets.... (1.31)% (.97)%(1) (2.08)% (2.00)%
Portfolio turnover rate............................... 102% 85% 102% 85%
Average commission per share on portfolio
transactions........................................ $.0545 $ .04 $.0545 $ .04
</TABLE>
- ---------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
* Formerly Reserve Emerging Growth Fund.
6
<PAGE> 9
PERFORMANCE INFORMATION. Set forth below are certain performance data provided
by the respective Sub-Advisers calculated as follows and a comparison thereof to
an appropriate market index.
The annual market value of the Sub-Adviser's portfolio was determined as the
sum of the market value of all of its assets (including cash, cash equivalents,
interest, dividends and securities). The annual rate of return for the
Sub-Adviser's portfolio was determined on a time-weighted basis as the
percentage change of the portfolio assets after allowing for the effect of any
cash additions or withdrawals which occurred during the year. The investment
performance reflects the cost of brokerage commissions and most other expenses.
The accounts were managed utilizing the same investment objectives and policies
of the respective Funds.
<TABLE>
<CAPTION>
SUB-ADVISER INDEX
------------------------------------------------------------ -------
YEAR ENDED DECEMBER 31 TRAINER FITZGERALD SCA ROANOKE NEW VERNON SIPHRON S&P 500
- -------------------------------------------------- ------- ---------- ---- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1991.............................................. 32.2% 61.6% 46.9% 95.5% 22.3% 25.6% 30.5%
1992.............................................. 2.3 13.6 16.9 22.3 16.8 10.2 7.7
1993.............................................. 26.9 21.6 24.1 37.7 21.0 19.0 10.0
1994.............................................. 2.0 0.1 (2.4) 4.8 (4.7) 7.4 1.3
Annualized Return for the period 1/1/91 to
12/31/94........................................ 15.0% 22.3% 20.1% 36.3% 13.3% 15.3% 11.9%
</TABLE>
<TABLE>
<CAPTION>
INDEX
SUB-ADVISER INDEX SUB-ADVISER ----------------------
----------- -------------- ----------- MORGAN STANLEY CAPITAL
YEAR ENDED DECEMBER 31 ROANOKE* RUSSELL 2000* PINNACLE+ INTERNATIONAL EAFE+
- -------------------------------------------------- ----------- -------------- ----------- ----------------------
<S> <C> <C> <C> <C>
1991.............................................. 95.5% 46.1% 23.4% 12.1%
1992.............................................. 22.3 18.4 2.5 (12.2)
1993.............................................. 37.7 18.9 69.7 32.6
1994.............................................. 4.8 (1.8) (9.5) 7.8
Annualized Return for the period 1/1/91 to
12/31/94........................................ 36.3% 19.2% 18.1% 8.9%
</TABLE>
There are no advisory fees included in the gross return calculations. In
addition, any initial sales charges and distribution fees that are applicable to
the Funds, have not been deducted from the above performance figures. These
performance calculations assume the reinvestment of dividends and distributions
in the above performance figures.
Investors should not rely on the above performance as an indication of
future performance. It should be noted that management of each Fund will be
affected by its obligation to redeem its shares upon request, and requirements
of the Investment Company Act of 1940 and of the Internal Revenue Code of 1986,
as amended, to qualify as a regulated investment company.
The Standard & Poor's 500 Stock Price Index is widely regarded by investors
as representative of the securities markets in general. *Roanoke's performance
is also compared to the Russell 2000 Index, which consists of 2,000 of the
smallest stocks in the Russell 3000 Index and is widely regarded as a standard
benchmark of small capitalization stock performance. +Pinnacle uses the Morgan
Stanley Capital International EAFE (Europe, Australia, Far East) Index, which is
widely regarded by investors as representative of the international securities
markets in general.
7
<PAGE> 10
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 Convertible Securities Fund, Reserve
Small-Cap Growth Fund (formerly Reserve Emerging Growth 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; New Vernon
Advisers, Inc. ("New Vernon"), 310 South Street, P.O. Box 1913, Morristown, NJ
07962, for Reserve Convertible Securities Fund; Roanoke Asset Management
("Roanoke"), 529 Fifth Avenue, New York, NY 10017, for Reserve Small-Cap Growth
Fund (formerly Reserve Emerging Growth 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. See
"Management of the Funds."
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 CONVERTIBLE SECURITIES FUND. The Reserve Convertible Securities Fund's
investment objective is to seek returns which are derived from capital
appreciation and current income. There can be no assurance that the Fund will
achieve its investment objective.
Generally, the Fund will pursue its objective by investing primarily in
securities which are convertible into, or which derive their returns from, price
changes in the common stock of an underlying corporate issuer. These include,
but are not limited to, convertible debentures, convertible preferred stocks,
and "derivative" convertible securities such as "DECS" (Dividend Enhanced
Convertible Stock), "ACES" (Automatically Convertible Equity Securities),
"PRIDES" (Preferred Redeemable Increased Dividend Equity Securities) and "PERCS"
(Preferred Equity Redemption Convertible Stock). The Fund will invest at least
65% of its total assets in convertible securities, unless the Fund has adopted a
temporary defensive position.
As a means of protecting principal value, the Sub-Adviser invests in
securities possessing certain defensive characteristics, such as those whose
underlying common stocks are undervalued in terms of earnings relative to price,
earnings growth rate relative to price/earnings multiple, and price relative to
book value. Other defensive characteristics sought are high current yields,
short-to-intermediate maturities, and low-price volatility relative to price
volatility of the underlying common shares.
The Fund will invest in both rated and unrated securities of similar quality
when it is believed that their yields or growth potential adequately compensate
it for the risk assumed. The Fund will not invest in securities whose
creditworthiness the Adviser and/or the Sub-Adviser perceive to be
deteriorating.
The Sub-Adviser will also invest in "busted" convertible debt securities.
These securities trade like straight corporate debt having similar coupons,
ratings, and maturities, and to which the market accords little value for their
convertibility features.
RESERVE SMALL-CAP GROWTH FUND. The Reserve Small-Cap Growth Fund's
(formerly Reserve Emerging Growth Fund) 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
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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, i.e. "Small-Cap",
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 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 undervalued 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 of companies resident in countries experiencing
rapid economic growth. 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 ADRs 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. A three-to-five-year time horizon
will be utilized for a 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.
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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 macroeconomic factors are: real Gross Domestic Product growth rate and
outlook; current inflation rate and its trend; 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 investment
objective is to seek capital appreciation through investment in a portfolio of
medium-sized companies. It is the Sub-Adviser's view that midsize 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 most 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
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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's underestimating future earnings, changes in management or other
similar opportunities.
A result of the Fund's stock selection criteria is likely to be that the
median market capitalization for its portfolio companies will be about $1
billion and such companies would be considered to 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.
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, and
Bonds, all of which are backed by the full faith and credit of the United States
government.
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 government, 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
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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 Convertible Securities 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 or unrated securities of equivalent quality. These bonds have speculative
characteristics and share some of the same characteristics of lower-rated
securities. For example, 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 supranational entities such as the
World Bank or the European Investment Bank.
ILLIQUID SECURITIES. The Funds may hold up to 15% of the value of their net
assets in securities for 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
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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 Small-Cap
Growth (formerly Reserve Emerging Growth Fund)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 their total assets at the time
such option contracts are written.
There is no limitation on the amount of call options each Fund may write. A
call option gives the purchaser of the option, in exchange for the premium paid,
the right to buy the security subject to the option at the exercise price at any
time prior to expiration. 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 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 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 option, to acquire the underlying security 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 they paid.
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 so long as a
Fund which 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 the Fund's investments, performance
will be worse than if the Fund did not make such investments. In addition, the
Fund would pay commissions and other costs in connection with such investments,
which may increase its expenses and reduce its return.
INVESTMENT IN FOREIGN SECURITIES. The Reserve International Equity Fund may
purchase foreign equity and debt securities, including foreign government
securities to an aggregate of not 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 the 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 the Fund may incur costs in connection with conversions between
various currencies. The 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
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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
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
the 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
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were incurred. In light of these risks, the 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 Reserve International Equity Fund, 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 United States.
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 the 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.
The 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 the Fund to adopt special procedures, which may involve
additional costs to a Fund. The liquidity of the 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 the 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 United States.
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 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, the 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 the Funds 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 the Funds.
FIXED-INCOME SECURITIES. The value of a 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
INVESTMENT MANAGEMENT AGREEMENT. Since November 15, 1971, Reserve Management
Company, Inc. ("Adviser"), 14 Locust Place, Manhasset, NY 11030, and its
affiliates have provided investment advice to The Reserve Funds which currently
have assets in excess of $4 billion, pursuant to an Investment Management
Agreement. Under the Agreement, the Adviser manages the Funds and invests in
furtherance of its objectives and policies subject to the overall control and
direction of the Funds' Board of Trustees. The Adviser supervises a continuous
investment program for the Funds, evaluates and monitors each of the
Sub-Adviser's 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.
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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. None
of these organizations have previously served as either Adviser or Sub-Adviser
to a registered investment company.
The Adviser and Trust have retained the Sub-Advisers listed below.
TRAINER, WORTHAM & COMPANY, INC. was formed in 1924 and manages over $2
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 and is responsible for the day-to-day investment decisions of the
Fund.
NEW VERNON ADVISORS, INC., an affiliate of William E. Simon & Sons, L.L.C.,
was formed in 1990 and currently manages or advises $700 million for private
investment funds, high-net-worth individuals, charitable organizations and
educational institutions. J. Peter Simon, an Executive Director and a founder of
William E. Simon & Sons, is senior vice-president of New Vernon Advisors, Inc.,
and serves as the firm's convertible securities manager.
ROANOKE ASSET MANAGEMENT was formed in 1978 and currently manages over $400
million for high-net-worth individuals, foundations, endowments, corporations
and municipalities, and has over fifteen years of 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.
T.H. FITZGERALD & CO. was formed in 1959 and currently manages over $181
million for employee benefit plans, bank trust departments, an insurance company
and a public authority and has over ten years of 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 $700
million for individuals, family trusts and employee-benefit plans. Nicholas
Reitenbach is director of international investments and partner of Pinnacle
Associates, Ltd., and serves as the Fund's primary portfolio manager. Mr.
Reitenbach has over thirty years of experience in using the investment
techniques discussed herein.
SIPHRON CAPITAL MANAGEMENT was formed in 1991 and currently manages over
$350 million for tax-exempt institutional clients. The senior management of
Siphron Capital has over thirty years of 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
$325 million for individuals, employee-benefit plans, foundations and
endowments, and has over ten years of experience in using 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., which 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 its Fund, but only if the Sub-Adviser reasonably believes that the
execution and commission are comparable to those available
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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
its affairs. The Trustees serve indefinite terms (subject to certain removal
procedures) and they appoint their own successors, provided that at least a
majority of the Trustees have been elected by shareholders. The Declaration of
Trust provides that a Trustee may be removed at any special meeting of
shareholders by a vote of a majority of the Trust's outstanding shares.
TRANSFER AGENT AND DIVIDEND-PAYING AGENT. The Trust acts as its own transfer
agent and dividend-paying agent.
HOW TO BUY SHARES
METHOD OF PAYMENT. The minimum initial investment is $1,000 and the minimum
subsequent investment is $100, except for IRAs. 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 Balances"). 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. Shares of the Funds may be purchased each business day at the
public offering price determined after receipt of payment and a request in
proper form by the Funds or by an investment dealer which has a sales agreement
with the Funds' Distributor. The public offering price is equal to the net asset
value of a Fund. Payments (denominated in U.S. dollars) must be made if
purchasing directly from the Funds:
- 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 The Reserve Funds, 810
Seventh Avenue, New York, NY 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 Funds for any loss incurred due to a returned
check. Neither initial nor subsequent investments may be made by a third party
check.
- By wire -- Prior to calling your bank, call the Funds for specific
instructions at (800) 637-1700 or the broker-dealer or financial institution
from which you received this prospectus.
Investments in the Funds may also be made through investment dealers which
have sales agreements with Resrv Partners, Inc., the distributor of the Funds'
shares ("Authorized Dealer"). Such dealers should send the investor's Account
Application and payment to the Funds. Payment may be made by check or wire.
Purchase orders will be confirmed at the public offering price calculated next
after receipt by the Funds or an Authorized Dealer (which order must be promptly
transmitted to the Funds), of a properly completed Account Application and
payment. The Fund must be notified before 4:00 PM (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 PM (New York time). Orders received by the Funds or
an Authorized Dealer after 4:00 PM (New York time) will be priced at the public
offering price in effect at 4:00 PM (New York time) on the next business day.
GENERAL INFORMATION. Shares of each Fund will have the same relative rights and
privileges and be subject to the same 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. Income, realized and unrealized capital gains and losses, and
expenses of the Funds of the Trust shall be allocated to shares of that Fund.
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 the Funds, but only to
the extent permitted by law or regulation.
VOTING RIGHTS. Shares of the Funds shall have exclusive voting rights on any
matter submitted to shareholders that relates solely to its arrangement.
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 veterans' benefits, or other payments from the federal
government. Call the Funds at (800) 637-1700 for an Application.
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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. 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.
U.S. GOVERNMENT CASH ACCOUNT. The U.S. Government Cash Account acts as an
omnibus account of The Reserve U.S. Government Fund, a money-market fund which
invests exclusively in full-faith and credit obligations of the United States
government, and may be used for dollar cost averaging.
NET ASSET VALUE. Fund shares are issued at net asset value and are 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 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 PM (New York time). The net asset value
of each Fund will not be determined on those days that the New York Stock
Exchange is closed for trading nor 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, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas. The
net asset value per share of each Fund 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 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, NY 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 RPI, at 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 RPES 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.
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 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 PM (New York time) on a
regular business day to take effect that day. Exchange requests received after
4:00 PM (New York time) will be effected at the next calculated net asset value.
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.
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SERVICE PLAN. Under the Service Plan ("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. The Funds are not obligated to pay any distribution
expense in excess of such 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 by paying for the preparation, printing and distribution of prospectuses
to other than current shareholders or other promotional activities.
SHARES OF BENEFICIAL INTEREST
The Trust is an open-end management investment company commonly known as a
mutual fund. The Trust was organized as an unincorporated Delaware business
trust on April 22, 1993, and is authorized to issue an unlimited number of
shares of beneficial interest, which may be issued in any number of portfolios.
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
portfolios 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 nondeductible, 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. 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.
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FOREIGN TAXES
Investment income received from sources within foreign countries may be
subject to foreign taxes withheld at the source. To the extent that a Fund is
liable for such foreign 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 distribute capital gains in cash and reinvest
income dividends.
(2) Distribution Option -- to distribute income dividends in cash and
reinvest capital gains.
(3) Distribution Option -- to distribute both income dividends and
capital gains 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.
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, NY 10019-5868.
Redemptions may be effected during regular business days from 9:00 AM to 4:00 PM
(New York time). Redemption requests received after the close of business will
be effected at the next calculated net asset value.
WRITTEN AND TELEPHONE REDEMPTION REQUESTS. The Funds strongly suggest (but do
not require) that each redemption be at least $1,000, except for redemptions
which are intended to liquidate the account. A shareholder will be charged $2
for redemption checks issued by the Funds for less than $100. Upon request,
redemptions will be made by bank wire, however, wire redemptions of less than
$10,000 will be charged a fee (currently $10). 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
will be accepted 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 on the 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: if the
redemption check is (1) for $5,000 or less; (2) payable to the shareholder(s) of
record; and (3) 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 they believe
it is advisable to do so. Procedures for telephone redemptions may be modified
or terminated by the Funds 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.
AUTOMATIC WITHDRAWAL PLANS. If you have an account with a balance of at least
$5,000, you may, upon written notice, 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
20
<PAGE> 23
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 some Firms or may be available subject to conditions or limitations.
RESERVE AUTOMATIC TRANSFER PLAN. You may redeem shares of a Fund by telephone
(minimum $100) if you have filed a separate Reserve Automatic Transfer Plan
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 some 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.
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. When a purchase is
made by wire and subsequently redeemed, the proceeds from such redemptions
normally will not be transmitted until two (2) business days after the purchase
by wire.
GENERAL INFORMATION
JOINT OWNERSHIP. When an account is registered in the name of one person and
another, for example a husband and 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. The Funds are required by federal law to withhold 31% of
dividends and other distributions that are subject to federal income tax if (i)
a correct and certified Taxpayer Identification Number ("TIN") is not provided
for your account, (ii) you fail to certify that you have not been notified by
the IRS that you underreported taxable interest or dividend payments or (iii) a
Fund is notified by the IRS (or a broker) that the TIN provided is incorrect or
you are otherwise subject to backup withholding. Amounts withheld and forwarded
to the IRS can be credited as a payment of tax when completing your federal
income tax return. For individual shareholders, the TIN is the social security
number. However, special rules apply for certain accounts. For example, for an
account established under the Uniform Gift to Minors Act, the TIN of the minor
should be furnished. Shareholders should be aware that, under regulations
promulgated by the IRS, a Fund may be fined $50 annually for each account for
which a certified TIN is not provided or is incorrect. In the event that such a
fine is imposed, a corresponding charge will be made against the account.
REPORTS AND STATEMENTS. Shareholders receive an annual report containing
audited financial statements and an unaudited semiannual report. A statement is
mailed to each shareholder at least quarterly.
SMALL BALANCES. If a shareholder account (other than an IRA) does not achieve a
balance of $2,500 within twelve (12) months, the Funds reserve the right to
impose a monthly fee (currently $5) or redeem the account and remit the
proceeds. The minimum balance requirement will be waived if the account balance
drops below $2,500 due to market depreciation. Some Firms may establish
variations of minimum balances and fee amounts if those variations are approved
by the Funds.
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.
21
<PAGE> 24
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.
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 provide 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.
------------------------
22
<PAGE> 25
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 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 (or "SEC") 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.
23
<PAGE> 26
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
Shareholder Expenses..................... 2
Financial Highlights..................... 3
The Trust................................ 8
Investment Objectives and Policies....... 8
Investment Techniques and Investments.... 11
Risk Considerations...................... 14
Management............................... 15
How to Buy Shares........................ 17
Shares of Beneficial Interest............ 19
Taxes.................................... 19
Foreign Taxes............................ 20
Dividends and Distributions.............. 20
Redemptions.............................. 20
General Information...................... 21
Glossary................................. 23
Investors are advised to read and retain
this Prospectus for future reference.
</TABLE>
[RESERVE FUNDS LOGO]
Founders of
"America's First
Money Fund"
810 Seventh Avenue, New York, NY 10019-5868
GENERAL INFORMATION, PURCHASES AND REDEMPTIONS
Call 800-637-1700 www.reservefunds.com
Distributor -- Resrv Partners, Inc.
RPES 9/97
[RESERVE FUNDS LOGO]
Founders of
"America's First
Money Fund"
-------------------------------------------------------------------------
----------
-------------------------------------------------------------------------
----------
<PAGE> 27
PART B
RESERVE PRIVATE EQUITY SERIES
RESERVE SMALL-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 Small-Cap Growth Fund (formerly "Reserve
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
October 1, 1997.
TABLE OF CONTENTS
Page
----
Investment Policies 2
Other Policies 3
Trustees and Officers of the Trust 5
Investment Management and Other Agreements 6
Portfolio Turnover, Transaction Charges and
Allocation 8
Shares of Beneficial Interest 9
Purchase, Redemption and Pricing of Shares 10
Distributions and Taxes 10
Performance Information 13
Report of Independent Accountants 14
Financial Statements 15
<PAGE> 28
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 Small-Cap Growth Fund (formerly, Reserve 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 % (1/2
of 1%) of the securities (taken at market value) of such issuer and such
individuals owning more than one-half of one % (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> 29
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> 30
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> 31
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> 32
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, 1535 Presidential Drive, Apt. 4A, Columbus, OH
43212.
Mr. Emmet retired as the Managing Director of Servus Associates, Inc., and
U.S.A. Representative of the First National Bank of Southern Africa in 1996. He
is currently Trustee of RF, RIT, RNYTET, RTET and RPES. Until 1989, he was
Senior Vice President of the New York branch of Banque Nationale de Paris.
+*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.
MICHELLE L. NEUFELD, Counsel and Secretary, 810 Seventh Avenue, New York,
NY 10019.
Ms. Neufeld is Counsel and Secretary of RF, RIT, RTET, RNYTET, and RPES.
Before joining The Reserve Funds in 1997, Ms. Neufeld was a staff attorney at
NASD Regulation, Inc.
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., Inc.
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 disregard 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 FUNDS* (4 ADDITIONAL TRUSTS) PAID TO TRUSTEE*
------------------------------------------------------------------------------
<S> <C> <C>
Edwin Ehlert, Jr. $120.09 $30,500
Henri W. Emmet $133.87 $34,000
Rev. Donald J. Harrington $118.11 $30,000
</TABLE>
Amounts shown are for the Fund's fiscal year ending May 31, 1997.
<PAGE> 33
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 Service 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 and
approval 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 and
approval 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.
SERVICE PLAN. The Trust maintains a Service 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.
The Trustees have determined that there is a reasonable
<PAGE> 34
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.
The Glass-Steagall Act prohibits all entities which receive deposits from
engaging to any extent 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 Fund shares (such as
administrative and account maintenance services) may include banks, upon advice
of counsel that they are permitted to do so under applicable laws and
regulations, including the Glass-Steagall Act. In such event, no preference
will be given to securities issued by such banks as investment 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 banks may also receive compensation from the bank accounts they
service. It is Fund management's position that payments to banks pursuant to
the Plan for activities not primarily intended to result in the sale of a
Fund's 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. Financial institutions providing distribution assistance or
administrative services for the Fund may be required to register as securities
dealers in certain states.
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. 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 series. 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> 35
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% of all shares voting as a group or 67% of the shares
voted as a group at a meeting of shareholders at which at least 50% of the
shares of each group are represented.
As of August 30, 1997, 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 (5.3%) (Class A); Arthur T. Bent, 18 Heights
Road, Plandome, NY 11030 (8.7%) (Class A); Christopher Vroom, 3011 Saint Paul
St., Baltimore, MD 21218 (7.3%) (Class A); Bear Stearns, 1 Metrotech Center
North, Brooklyn, NY 11201 (7.5%) (Class A); Mark G. Schoenberg, 7819 Wendy Ridge
Lane, Amandale, Va 22003 (7.5%) (Class D) and Verner M. Swanson (14.1%)
(Class D).
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.
<PAGE> 36
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, 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%
of its taxable income to shareholders, derive at least 90% of its gross income
from dividends, interest and gains from the sale or disposition of securities
and derive less than 30% 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> 37
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 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.
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> 38
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 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 the rates of return calculated will
not be average annual rates, but rather, actual annual, annualized or aggregate
rates of return.
<PAGE> 39
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and 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 Convertible Securities Fund, Reserve Emerging Growth Fund,
Reserve Informed Investors Growth Fund, Reserve International Equity Fund,
Reserve Large-Cap Value Fund, and Reserve Mid-Cap Growth Fund (formerly Reserve
North American Growth Fund)) (collectively the "Trust"), including the schedules
of portfolio investments, as of May 31, 1997, 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, 1997, 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, 1997,
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 27, 1997
<PAGE> 40
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BANKS (1.9%)
BankBoston Corporation 1,400 $102,200
--------
BEVERAGES (4.0%)
PepsiCo, Inc. 6,000 220,500
--------
BUILDING MATERIALS (1.8%)
* American Standard Companies, Inc. 2,000 100,250
--------
CHEMICALS - MISCELLANEOUS (4.3%)
ChemFirst, Inc. 9,200 238,050
--------
COMPUTER SERVICES (2.2%)
* Wang Laboratories, Inc. 5,800 118,900
--------
COMPUTER SOFTWARE (5.8%)
* CUC International, Inc. 6,450 148,350
National Data Corporation 3,900 171,112
--------
319,462
--------
CONSUMER SERVICES (2.2%)
* HFS, Inc. 2,200 118,525
--------
ELECTRONICS (6.8%)
General Electric Company 1,800 108,675
* Perceptron, Inc. 9,300 262,725
--------
371,400
--------
ENTERTAINMENT (3.1%)
Walt Disney Company 2,100 171,937
--------
FINANCIAL SERVICES (6.2%)
Federal National Mortgage Association 5,200 226,850
Pioneer Group, Inc. 4,400 110,550
--------
337,400
--------
FOOD (2.3%)
* Suiza Foods Corporation 4,200 125,475
--------
HOSPITAL MANAGEMENT (3.7%)
* Assisted Living Concepts, Inc. 8,000 200,000
--------
MANAGED CARE (1.1%)
* Physicians' Specialty Corporation 10,000 61,250
--------
</TABLE>
<PAGE> 41
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
MEDICAL SUPPLIES (1.3%)
* LaserSight Corporation 10,000 $ 70,000
----------
MISCELLANEOUS CONSUMER (2.1%)
* Gibson Greetings, Inc. 5,300 115,275
----------
MISCELLANEOUS MANUFACTURING (5.6%)
Warnaco Group, Inc. 5,300 173,575
Westinghouse Electric Corporation 6,500 131,625
----------
305,200
----------
MULTI-LINE INSURANCE (3.1%)
The Hartford Financial Services Group, Inc. 2,200 171,600
----------
OFFICE - BUSINESS EQUIPMENT (4.6%)
* American Pad & Paper Company 13,500 249,750
----------
OIL/GAS EQUIPMENT SERVICES (2.0%)
* Cairn Energy USA, Inc. 9,200 108,675
----------
PACKAGED SOFTWARE (3.9%)
Computer Associates International, Inc. 3,900 213,525
----------
PHARMACEUTICALS (7.1%)
* Bio-Technology General Corporation 5,400 78,300
Eli Lilly & Company 1,100 102,300
Johnson & Johnson 1,800 107,775
Merck & Co., Inc. 1,100 98,863
----------
387,238
----------
PUBLISHING (4.2%)
Harte-Hanks Communications 7,800 233,025
----------
RADIO, TV & BROADCAST COMMUNICATION EQUIPMENT (4.6%)
* American Radio Systems Corporation 1,400 52,150
* Sinclair Broadcast Group, Inc. 8,000 198,000
----------
250,150
----------
REAL ESTATE (4.6%)
Insignia Financial Group, Inc., Class A 14,200 252,050
----------
</TABLE>
<PAGE> 42
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
SPECIAL INDUSTRIAL MACHINERY (3.1%)
Thermo Electron Corporation 5,000 $ 172,500
-------------
TOTAL COMMON STOCKS (Cost $4,512,303) (91.6%) 5,014,337
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 260,000 260,000
Vista Treasury Plus Money Market Fund 70,000 70,000
-------------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $330,000) (6.0%) 330,000
-------------
TOTAL INVESTMENTS (Cost $4,842,303) (97.6%) 5,344,337
Other assets, less liabilities (2.4%) 129,523
-------------
NET ASSETS (100%) $ 5,473,860
=============
</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, 1997 was $4,842,303, the aggregate gross unrealized appreciation for all
investments was $707,511 and aggregate gross unrealized depreciation for all
investments was $205,477.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 43
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
CONVERTIBLE BONDS
<TABLE>
<CAPTION>
VALUE
MATURITY PAR (NOTE 1)
-------- --- --------
<S> <C> <C> <C>
BASIC INDUSTRIAL COMMODITY (2.2%)
First South Africa Corp, Ltd., 144A, 9% 06/15/04 450,000 $ 450,000
----------
BIO-TECHNOLOGY (3.9%)
Chiron Corp., 144A, 1.9% 11/17/00 450,000 397,125
NABI, Inc., 144A, 6.5% 02/01/03 500,000 414,375
----------
811,500
----------
COMMERCIAL SERVICES (1.8%)
Pharmaceutical Marketing
Services, Inc., 144A, 6.25% 02/01/03 450,000 360,000
----------
COMPUTER SOFTWARE (1.9%)
MacNeal - Schwendler Corp., 7.875% 08/18/04 400,000 392,000
----------
ELECTRONIC PRODUCTS - MISCELLANEOUS (1.9%)
Trans-Lux Corp., 7.5% 12/01/06 375,000 390,000
----------
ENVIRONMENT - CONSULTING, ENGINEERING (1.1%)
Roy F. Weston, Inc., 7% 04/15/02 270,000 229,500
----------
FOOD CHAINS (1.9%)
Marsh Supermarkets, Inc., 7% 02/15/03 400,000 400,000
----------
GENERAL INDUSTRIAL MACHINE & EQUIPMENT (2.0%)
Robbins & Myers, Inc., 6.5% 09/01/03 300,000 412,500
----------
HOTEL - MOTEL (3.4%)
Hilton Hotels Corp., 5% 05/15/06 350,000 380,625
Signature Resorts, Inc., 5.75% 01/15/07 350,000 316,750
----------
697,375
----------
MEDICAL - HMO (3.9%)
FPA Medical Management, Inc., 6.5% 12/15/01 400,000 421,000
PhyMatrix Corp., 6.75% 06/15/03 450,000 389,250
----------
810,250
----------
OIL - DOMESTIC (2.7%)
Lomak Petroleum, Inc., 144A, 6% 02/01/07 350,000 395,500
Snyder Oil Corp., 7% 05/15/01 150,000 155,625
----------
551,125
----------
POLLUTION CONTROL (3.8%)
USA Waste Services, Inc., 4% 02/01/02 350,000 362,250
WMX Technologies, Inc., 2% 01/24/05 450,000 406,687
----------
768,937
----------
</TABLE>
<PAGE> 44
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
CONVERTIBLE BONDS
<TABLE>
<CAPTION>
VALUE
MATURITY PAR (NOTE 1)
-------- --- --------
<S> <C> <C> <C>
PUBLISHING (2.0%)
Scholastic Corp., 5% 08/15/05 500,000 $ 403,750
----------
RETAIL STORES - DEPARTMENT (1.9%)
Saks Holdings, Inc., 5.5% 09/15/06 450,000 398,250
----------
RETAIL - APPAREL (1.9%)
Charming Shoppes, Inc., 7.5% 07/15/06 400,000 393,000
----------
RETAIL - SPECIALTY (1.8%)
The Sports Authority, Inc., 5.25% 09/15/01 400,000 360,500
----------
TRANSPORT - AIR FREIGHT (1.6%)
Consolidated Logistics, 144A, 8% 08/21/00 400,000 320,000
----------
WATER TREATMENT SYSTEMS (3.2%)
United States Filter Corp., 4.5% 12/15/01 650,000 665,438
----------
TOTAL CONVERTIBLE BONDS (Cost $8,647,471) (42.9%) 8,814,125
----------
</TABLE>
PREFERRED STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BANKS (2.6%)
National Australian Bank Ltd., 7.875% 20,000 $537,500
-------
CONTAINERS-METAL/GLASS (2.1%)
Crown Cork & Seal Company, Inc., 4.5% 2/26/00 8,000 434,000
-------
ENERGY (1.6%)
Occidental Petroleum Corp., 144A, $3.875 Series 1993 6,000 338,250
-------
ENTERTAINMENT (2.9%)
Wellsford Residential Property, 7% Series A 22,900 589,675
-------
FINANCIAL SERVICES (2.1%)
SunAmerica, Inc., $3.1875 10/31/99 10,000 431,250
-------
GENERAL INDUSTRIAL MACHINES & EQUIPMENT (2.0%)
Greenfield Industries, Inc., 144A, 6% 3/31/16 9,000 409,500
-------
GLASS PRODUCTS (1.9%)
Corning Delaware L.P., 6% 5,000 399,375
-------
</TABLE>
<PAGE> 45
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
PREFERRED STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
GOLD MINING (1.6%)
Coeur D'Alene Mines Corp., 7% 3/15/00 20,000 $ 332,500
----------
HOTEL-MOTEL (1.8%)
Host Marriott Corp., 144A, 6.75% 12/02/26 6,500 367,250
----------
MEDICAL - HMO (2.1%)
Aetna, Inc., 6.25% 7/19/00 4,700 431,225
----------
NATURAL GAS (2.0%)
MCN Corp., 8.75% 4/30/99 15,000 416,250
----------
OIL-DOMESTIC (5.5%)
Mesa, Inc., 8%, Series A 80,000 530,000
Nuevo Energy, 5.75% 12/15/26 Series A 8,000 403,000
Snyder Oil Corporation, $1.5 7,700 190,575
----------
1,123,575
----------
PAPER (1.9%)
International Paper Co., 5.25% 7/20/25 7,500 386,250
----------
PUBLISHING (1.4%)
Golden Books Family Entertainment, Inc., 144A,
8.75% 8/20/16 5,000 280,000
----------
PUBLISHING-NEWSPAPERS (2.1%)
Hollinger International, Inc., 9.75% 8/01/00 40,000 440,000
----------
REAL ESTATE (4.8%)
Excel Realty, $2.125 Series A 16,000 426,000
Redwood Trust, Inc., 9.74% Class B 10,000 567,500
----------
993,500
----------
RESTAURANTS (2.0%)
Apple South, Inc., 144A, $3.5 3/01/27 7,000 420,875
----------
TELECOMMUNICATIONS (2.1%)
Mobile Telecommunication
Technologies Corp., 144A, $2.25 20,000 425,000
----------
TELECOMMUNICATIONS-BROADCAST (2.1%)
Merrill Lynch & Company, 6% 6/01/99 Series COX 20,000 427,500
----------
TOTAL PREFERRED STOCKS (Cost $8,282,029) (44.6%) $9,183,475
----------
</TABLE>
<PAGE> 46
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AEROSPACE (0.9%)
* International Airline Support Group, Inc. 44,908 $ 196,473
---------------
ENTERTAINMENT (1.4%)
* Malibu Entertainment Worldwide, Inc. 70,000 280,000
---------------
MISCELLANEOUS MANUFACTURING (0.1%)
* Disc Graphics, Inc. - Warrants Class "A", 11/01/99 28,000 21,000
---------------
NONHAZARDOUS WASTE DISPOSAL (0.2%)
* Allied Waste Industries, Inc. 2,266 33,423
---------------
OIL WELL SERVICES (3.6%)
* SEACOR SMIT, Inc. 14,400 745,200
---------------
PREHOSPITAL MEDICAL CARE, TRANSPORTATION (1.7%)
Laidlaw, Inc., Class B 25,663 346,451
---------------
TELECOMMUNICATIONS (0.6%)
* Mobile Telecommunication Technologies Corp. 10,000 121,875
---------------
TOYS (2.1%)
Hasbro, Inc. 15,000 435,000
---------------
TOTAL COMMON STOCKS (Cost $1,876,695) (10.6%) 2,179,422
---------------
TOTAL INVESTMENT SECURITIES (Cost $18,806,195) (98.1%) $ 20,177,022
Other assets, less liabilities (1.9%) 394,238
---------------
NET ASSETS (100%) $ 20,571,260
===============
</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, 1997 was $18,806,195, the aggregate gross unrealized appreciation for all
investments was $1,553,782 and aggregate gross unrealized depreciation for
all investments was $182,955.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 47
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BIO-TECHNOLOGY (1.9%)
* Genzyme Corporation 4,800 $114,600
--------
CAPITAL GOODS - DIVERSIFIED (2.4%)
Danaher Corporation 3,000 145,500
--------
CAPITAL GOODS/INDUSTRIAL (1.9%)
* Vishay Intertechnology, Inc. 3,836 112,703
--------
COMMUNICATION - EQUIPMENT (6.3%)
* ANADIGICS, Inc. 4,500 149,063
ECI Telecommunications Ltd. Designs 6,300 145,687
* Saville Systems Ireland plc 2,000 85,250
--------
380,000
--------
COMMUNICATION - NETWORK (3.4%)
* ICG Communications, Inc. 5,000 80,000
* PairGain Technologies, Inc. 6,000 125,250
--------
205,250
--------
COMPUTER NETWORKING (3.3%)
* Ascend Communications, Inc. 3,600 200,700
--------
COMPUTER PERIPHERAL EQUIPMENT (0.9%)
* Dialogic Corporation 1,800 52,650
--------
COMPUTER SERVICES (4.6%)
* HNC Software, Inc. 5,200 171,600
* Rational Software Corporation 5,400 101,925
--------
273,525
--------
COMPUTER SOFTWARE (3.1%)
* Business Objects S. A. - ADR 5,200 50,050
* Media 100, Inc. 8,000 46,000
* Sapient Corporation 2,000 89,500
--------
185,550
--------
CONSUMER GROWTH (8.3%)
* Activision, Inc. 16,000 208,000
* Conso Products Company 7,625 101,031
* Electronic Arts, Inc. 3,700 118,400
* Lin Television Corporation 1,700 73,738
--------
501,169
--------
</TABLE>
<PAGE> 48
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ELECTRONIC PRODUCTS - MISCELLANEOUS (0.5%)
AVX Corporation 1,000 $ 27,250
--------
ENERGY (2.7%)
Cross Timbers Oil Company 8,250 159,844
--------
HEALTH (4.3%)
* HCIA, Inc. 2,300 56,925
* National Dentex Corporation 6,000 104,250
* PacifiCare Health Systems, Inc. 1,200 95,100
--------
256,275
--------
HOUSEHOLD FURNISHINGS & APPLIANCES (2.8%)
* Williams-Sonoma, Inc. 4,500 165,938
--------
MANAGED CARE (7.4%)
* CRA Managed Care, Inc. 2,500 114,375
* Healthsource, Inc. 4,000 86,000
* MedPartners, Inc. 7,100 134,900
* PhyCor, Inc. 3,787 108,402
--------
443,677
--------
MISCELLANEOUS CONSUMER (2.5%)
* On Assignment, Inc. 4,000 152,500
--------
OFFICE-BUSINESS EQUIPMENT (2.4%)
* HPR, Inc. 9,000 146,250
--------
OFFSHORE DRILLING (1.6%)
* Parker Drilling Company 10,000 96,250
--------
OIL WELL SERVICES (1.3%)
* Dawson Production Services, Inc. 7,000 78,750
--------
OPTICAL INSTRUMENTS AND LENSES (1.6%)
* KLA-Tencor Corporation 2,000 95,125
--------
PAPER (1.2%)
* Data Documents, Inc. 6,000 71,250
--------
</TABLE>
<PAGE> 49
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
PHARMACEUTICALS (4.9%)
* Centocor, Inc. 3,200 $ 112,800
* Dura Pharmaceuticals, Inc. 4,600 182,850
----------
295,650
----------
RESTAURANTS (0.4%)
* Outback Steakhouse, Inc. 1,000 23,250
----------
RETAIL - SPECIALTY (10.6%)
* Borders Group, Inc. 7,900 171,825
* Corporate Express, Inc. 8,600 118,250
* PetSmart, Inc. 6,000 73,500
* Staples, Inc. 6,325 139,150
* The Sports Authority, Inc. 7,500 135,000
----------
637,725
----------
SEMICONDUCTOR-RELATED DEVICES (5.4%)
* Etec Systems, Inc. 1,800 80,100
Intel Corporation 800 121,200
* LSI Logic Corporation 3,000 125,250
----------
326,550
----------
SYSTEM SOFTWARE/CLIENT SERVER (1.6%)
* Hummingbird Communications Ltd. 3,400 96,900
----------
TELECOMMUNICATIONS EQUIPMENT (7.3%)
* Comverse Technology, Inc. 2,000 91,500
* DSC Communications Corporation 2,000 51,125
* Newbridge Networks Corporation 3,600 144,450
* P-COM, Inc. 3,200 103,200
* Proxim, Inc. 2,000 51,250
----------
441,525
----------
TOTAL COMMON STOCKS (Cost $4,710,070) (94.6%) 5,686,356
----------
</TABLE>
<PAGE> 50
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 280,000 $ 280,000
U.S. Treasury Plus Money Market Fund 150,000 150,000
----------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $430,000) (7.2%) 430,000
----------
TOTAL INVESTMENTS (Cost $5,140,070) (101.8%) 6,116,356
Liabilities, less other assets (-1.8%) (106,650)
----------
NET ASSETS (100%) $6,009,706
==========
</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 May 31,
1997 was $5,140,070, the aggregate gross unrealized appreciation for all
investments was $1,463,144 and aggregate gross unrealized depreciation for
all investments was $486,858.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 51
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INFORMED INVESTORS GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AIRLINES (3.8%)
Southwest Airlines Company 8,000 $206,000
--------
APPAREL MANUFACTURING (2.5%)
Liz Claiborne, Inc. 3,000 136,875
--------
BANKS (5.0%)
State Street Corporation 6,200 276,675
--------
CLOTHING (4.6%)
* Jones Apparel Group, Inc. 5,400 253,125
--------
COMPUTER MEMORY DEVICES (1.7%)
* EMC Corporation 2,300 91,712
--------
COMPUTER MICROSYSTEMS (2.3%)
* Dallas Semiconductor Corporation 3,200 123,600
--------
COMPUTER - PERIPHERAL EQUIPMENT (2.1%)
* Adaptec, Inc. 3,200 117,600
--------
COMPUTERS (8.2%)
* Dell Computer Corporation 2,100 236,250
* Gateway 2000, Inc. 3,200 212,400
--------
448,650
--------
FINANCIAL/BUSINESS SERVICES (17.1%)
Bear Stearns Companies, Inc. 8,400 273,000
Lehman Brothers Holdings, Inc. 5,400 218,025
Merrill Lynch & Company 2,300 243,800
Paine Webber Group, Inc. 5,700 202,350
--------
937,175
--------
GLASS PRODUCTS (3.5%)
Corning, Inc. 3,800 191,425
--------
HOSPITAL MANAGEMENT (3.8%)
* Tenet Healthcare Corporation 7,700 211,750
--------
LIFE/HEALTH INSURANCE (14.6%)
Conseco, Inc. 8,200 328,000
SunAmerica, Inc. 4,800 226,800
Torchmark Corporation 3,800 249,375
--------
804,175
--------
</TABLE>
<PAGE> 52
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INFORMED INVESTORS GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MISCELLANEOUS MANUFACTURING (4.0%)
Minnesota Mining and Manufacturing Company 2,400 $ 220,200
----------
MULTI-LINE INSURANCE (0.2%)
Travelers Group, inc. 200 10,975
----------
PAPER (2.4%)
International Paper Company 2,700 129,600
----------
RETAIL (4.1%)
* Costco Companies, Inc. 6,700 226,125
----------
RETAIL STORES (3.8%)
Dayton Hudson Corporation 4,400 211,750
----------
RETAIL STORES - GENERAL MERCHANDISING (3.4%)
Dollar General Corporation 5,500 184,938
----------
RETAIL - JEWELRY (2.4%)
Tiffany & Company 2,800 129,850
----------
TELEPHONE & TELEGRAPH APPARATUS (4.6%)
* Tellabs, Inc. 5,000 251,250
----------
TOTAL COMMON STOCKS (Cost $4,698,451) (94.1%) 5,163,450
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund
(Cost $80,000) (1.5%) 80,000 80,000
----------
TOTAL INVESTMENTS (Cost $4,778,451) (95.6%) 5,243,450
Other assets, less liabilities (4.4%) 246,483
----------
NET ASSETS (100%) $5,489,933
==========
</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,
1997 was $4,778,451, the aggregated gross unrealized appreciation for all
investments was $522,884 and aggregate gross unrealized depreciation for all
investments was $57,885.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 53
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AUSTRALIA (0.7%)
Australian Hospital Care Ltd. 49,000 $ 82,014
----------
DENMARK (2.6%)
* Carli Gray International 1,400 83,981
Novo Nordisk 2,200 235,853
----------
319,834
----------
FINLAND (2.4%)
Oy Nokia AB 2,300 150,810
TT Tieto OY 1,700 143,340
----------
294,150
----------
FRANCE (6.3%)
Altran Technologies 500 160,632
* Carrefour 360 236,937
Pinault - Printemps - Redoute 225 94,556
Sidel 2,800 196,926
Sodexho Alliance 150 69,810
----------
758,861
----------
GERMANY (4.9%)
Altana AG 150 138,545
Bayerische Motoren Werke (BMW) AG 200 163,980
Fresenius AG Pfd. 722 159,820
Porsche AG Pfd. 110 132,802
----------
595,147
----------
HONG KONG (11.8%)
Hang Seng Bank Ltd. 18,000 216,056
Henderson Land Development Company Ltd. 24,000 233,867
Hong Kong & China Gas Company 182,496 317,978
HSBC Holdings 8,436 255,868
* New World Infrastructure Ltd. 19,000 59,222
Sun Hung Kai Properties Ltd. 20,000 245,870
Wing Hang Bank Ltd. 21,600 102,870
----------
1,431,731
----------
</TABLE>
<PAGE> 54
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INDONESIA (0.7%)
* PT Bank International Indonesia 61,156 $ 50,230
PT Gudang Garam 8,000 34,497
PT Steady Safe 1,467 1,612
---------
86,339
---------
ITALY (1.6%)
Bulgari SpA 7,200 142,514
* Telecom Italia Mobile SpA 28,600 50,198
---------
192,712
---------
MALAYSIA (6.3%)
* Arab-Malaysian Merchant Bank Berhad 16,000 101,242
Berjaya Sports Toto Berhad 26,000 121,060
Commerce Asset Holding Berhad 20,000 58,103
DCB Holdings Berhad 32,000 103,152
Gamuda Berhad 17,333 62,081
Malayan Banking Berhad 20,000 210,920
United Engineers (Malaysia) Ltd. 13,000 105,022
---------
761,580
---------
NETHERLANDS (5.5%)
Elsevier NV 6,000 101,621
Koninklijke Ahold NV 2,245 170,695
Koninklijke Ahrend Groep NV 1,500 94,976
Nutricia Verenidge Bedrijven N.V. 600 93,616
* Ordina Beheer N.V. 1,040 78,153
Wolters Kluwer NV 1,012 121,881
---------
660,942
---------
NORWAY (4.4%)
Kverneland ASA 3,200 94,471
* Merkantildata 8,500 168,487
* Tandberg ASA 3,300 39,897
* Tandberg Television ASA 13,200 120,619
Tomra Systems ASA 5,000 114,574
---------
538,048
---------
PHILIPPINES (1.2%)
* Belle Corporation 200,000 53,091
* DMCI Holdings, Inc. 143,000 86,765
---------
139,856
---------
</TABLE>
<PAGE> 55
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
SINGAPORE (9.7%)
City Developments Limited 9,000 $ 83,677
DBS Land Limited 36,000 125,830
Development Bank of Singapore Limited 15,000 187,697
Oversea-Chinese Banking Corporation Ltd. 15,000 186,648
Overseas Union Bank Ltd. 20,000 137,015
Parkway Holdings Limited 43,000 213,422
United Overseas Bank Ltd. 10,000 102,761
Wing Tai Holdings Ltd. 45,000 134,009
----------
1,171,059
----------
SPAIN (3.8%)
Banco Intercontinental Espanol, SA 900 152,410
Electricas Reunidas de Zaragoza, SA 2,800 105,693
* Sol Melia, SA 5,600 207,896
----------
465,999
----------
SWEDEN (3.7%)
Autoliv AB 6,000 212,604
Ericsson Telefonaktiebolaget 6,800 239,192
----------
451,796
----------
SWITZERLAND (7.5%)
Nestle SA 70 87,215
Novartis AG Regular Shares 190 258,247
Novartis AG 30 40,882
Roche Holding AG 30 267,167
* Roche Holding AG Warrants 98 "Jubilee" 8 561
Zurich Versicherungs 700 257,681
----------
911,753
----------
THAILAND (0.2%)
Central Pattana Public Company Ltd. 10,000 26,653
* Thai Farmers Bank Public Company Ltd. (Warrants) 500 501
----------
27,154
----------
UNITED KINGDOM (12.0%)
Compass Group plc 12,700 141,752
HSBC Holdings plc 12,758 396,565
J.D. Wetherspoon plc 4,618 100,004
Lloyds TSB Group plc 13,000 130,825
Logica plc 6,600 93,571
Misys plc 5,400 122,581
Serco Group plc 8,200 92,735
Standard Chartered plc 10,476 166,121
Zeneca Group plc 7,000 212,652
----------
1,456,806
----------
</TABLE>
<PAGE> 56
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
UNITED STATES (11.7%)
Credicorp Ltd., ADR 5,000 $ 112,500
Panamerican Beverages, Inc., ADR 10,000 290,000
Santa Isabel, ADR 5,200 151,450
* State Bank of India, ADR 15,000 379,650
Telecomunicacoes Brasileiras SA, ADR 1,400 194,600
Telefonica de Argentina SA, ADR 5,000 181,250
Telefonica del Peru SA, ADR 4,500 114,188
-----------
1,423,638
-----------
TOTAL COMMON STOCKS (Cost $10,050,524)(97.0%) 11,769,419
MONEY MARKET MUTUAL FUNDS
U.S. Government Money Market Mutual Fund
(Cost $250,000)(2.1%) 250,000 250,000
-----------
TOTAL INVESTMENTS (Cost $10,300,524) (99.1%) 12,019,419
Other assets, less liabilities (0.9%) 109,835
-----------
NET ASSETS (100%) $12,129,254
===========
</TABLE>
INDUSTRY COMPOSITION
<TABLE>
<CAPTION>
INDUSTRY PERCENT
- -------- -------
<S> <C>
Auto/Truck Manufacturers 2.4
Bio Tech & Med Devices 2.5
Cellular Telephone 0.4
Commercial Banks 22.1
Computer Software 3.6
Computers & Peripheral 2.7
Construction & Engineering 2.6
Consumer Service 2.3
Drug & Health Care 10.8
Electric Power Utilities 0.9
Entertainment & Leisure 1.4
Financial Services 5.2
Food Processing 3.2
Lodging & Restaurants 3.7
Machinery 4.2
Public Utilities 2.6
Publishing 1.8
Real Estate Development 6.1
Real Estate Investment 0.9
Retailing 8.7
Telecommunications 8.6
Tobacco 0.3
----
Industry percent of net assets 97.0%
Money Market Mutual Funds 2.1%
Other assets, less liabilities 0.9%
----
Percent of Net Assets 100%
----
</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, 1997 was $10,300,524, the aggregate gross unrealized appreciation for all
investments was $2,002,534 and aggregate gross unrealized depreciation for
all investments was $283,576.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 57
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE LARGE-CAP VALUE FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ATHLETIC FOOTWEAR/APPAREL (2.7%)
Nike, Inc. 1,500 $ 85,500
------------
BANKS (3.4%)
Wells Fargo & Company 400 105,400
------------
BEVERAGES (9.5%)
Anheuser-Busch Companies, Inc. 2,400 102,900
Coca-Cola Company 1,700 116,025
PepsiCo, Inc. 2,100 77,175
------------
296,100
------------
COMPUTER SOFTWARE (4.0%)
* Microsoft Corporation 1,000 124,000
------------
COMPUTERS (4.4%)
Hewlett-Packard Company 1,000 51,500
International Business Machines Corporation 1,000 86,500
------------
138,000
------------
CONSUMER PRODUCTS (8.1%)
Clorox Company 1,000 126,250
Gillette Company 1,400 124,425
------------
250,675
------------
DRUGS (4.1%)
Abbott Labs 2,000 126,000
------------
ENTERTAINMENT (3.9%)
The Walt Disney Company (Holding Co.) 1,500 122,813
------------
FINANCIAL/BUSINESS SERVICES (8.4%)
American Express Company 2,000 139,000
Charles Schwab Corporation 3,000 121,875
------------
260,875
------------
FOOD (13.3%)
Campbell Soup Company 2,800 128,800
Hershey Foods Corporation 2,200 123,475
Quaker Oats Company 1,500 61,875
Wrigley (WM) Jr. Company 1,700 100,725
------------
414,875
------------
HEALTH (3.2%)
Becton, Dickinson & Company 2,000 98,500
------------
</TABLE>
<PAGE> 58
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE LARGE-CAP VALUE FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MEDICAL SUPPLIES (6.5%)
Kimberly-Clark Corporation 2,000 $ 100,250
Pfizer, Inc. 1,000 102,875
----------
203,125
----------
PHARMACEUTICALS (10.7%)
Eli Lilly & Company 1,000 93,000
Johnson & Johnson 1,900 113,763
Merck & Company, Inc. 1,400 125,825
----------
332,588
----------
PHOTOGRAPHY (3.2%)
Eastman Kodak Company 1,200 99,450
----------
PUBLISHING (3.9%)
Gannett Company, Inc. 1,300 120,250
----------
PUBLISHING - NEWSPAPERS (2.8%)
New York Times Company Class A 1,900 87,518
----------
SEMICONDUCTOR - RELATED DEVICE (4.9%)
Intel Corporation 1,000 151,500
----------
TOTAL COMMON STOCKS (Cost $2,260,193)(97.0%) 3,017,169
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund
(Cost $135,000) (4.4%) 135,000 135,000
----------
TOTAL INVESTMENTS (Cost $2,395,193) (101.4%) 3,152,169
Liabilities, less other assets (-1.4%) (42,189)
----------
NET ASSETS (100%) $3,109,980
==========
</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, 1997 was $2,395,193, the aggregate gross unrealized appreciation for all
investments was $758,447 and aggregate gross unrealized depreciation for all
investments was $1,471.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 59
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AIR FREIGHT (2.3%)
Circle International Group, Inc. 3,300 $ 91,575
--------
AUTO PARTS-ORIGINAL EQUIPMENT (5.7%)
* Gentex Corporation 4,600 92,575
Paccar, Inc. 3,000 135,750
--------
228,325
--------
BEVERAGES (3.6%)
* Robert Mondavi Corporation 3,200 142,400
--------
BUSINESS EQUIPMENT/SERVICE (2.5%)
* Greenwich Air Services, Inc. 3,500 101,500
--------
CLOTHING (3.3%)
* Fruit of the Loom, Inc. 3,800 132,525
--------
COMMUNICATION - EQUIPMENT (2.5%)
* Qualcomm, Inc. 2,100 101,325
--------
COMPUTER MICROSYSTEMS (4.6%)
* Dallas Semiconductor Corporation 4,800 185,400
--------
COMPUTER SOFTWARE (1.8%)
* Imnet Systems, Inc. 2,900 72,500
--------
COMPUTERS - PERIPHERAL EQUIPMENT (4.3%)
* American Power Conversion Corp. 3,500 81,375
* MicroTouch Systems, Inc. 3,600 90,900
--------
172,275
--------
HOSPITAL SUPPLIES (2.7%)
* Advanced Technology Laboratories, Inc. 2,800 108,500
--------
HOUSEHOLD FURNISHINGS APPLIANCE (7.6%)
Bush Industries, Inc. 4,000 90,000
Herman Miller, Inc. 6,000 214,500
--------
304,500
--------
</TABLE>
<PAGE> 60
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INSTRUMENTS - SCIENTIFIC (2.0%)
* Water Corporation 2,500 $ 80,625
--------
LIFE INSURANCE (6.0%)
Protective Life Corporation 3,000 134,250
Western National Corporation 4,000 104,500
--------
238,750
--------
NURSING HOMES (3.0%)
* Genesis Health Ventures, Inc. 3,600 118,350
--------
OIL/GAS EQUIPMENT SERVICES (10.1%)
* Nuevo Energy Company 3,300 143,962
* Rowan Companies, Inc. 5,700 131,813
Tidewater, Inc. 3,050 128,481
--------
404,256
--------
POLLUTION CONTROL (4.9%)
* Newpark Resources, Inc. 3,770 197,925
--------
RESTAURANTS (2.9%)
* Cracker Barrel Old Country Store, Inc. 4,000 116,000
--------
RETAIL (2.5%)
* Stein Mart, Inc. 3,300 99,825
--------
RETAIL-SPECIALTY (4.8%)
* AutoZone, Inc. 4,500 105,188
Pier 1 Imports, Inc. 3,800 85,025
--------
190,213
--------
RETAIL STORES-DRUGS (3.3%)
* CVS Corporation 2,800 134,050
--------
SEMICONDUCTOR RELATED DEVICE (2.2%)
* Photronics, Inc. 2,000 89,250
--------
SPECIAL INDUSTRIAL MACHINERY (6.0%)
Briggs & Stratton Corporation 2,200 113,575
Pentair Industries, Inc. 3,800 124,925
--------
238,500
--------
TRUCKERS (3.9%)
* Swift Transportation Co., Inc. 4,800 154,800
--------
</TABLE>
<PAGE> 61
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
TOTAL COMMON STOCKS (Cost $3,064,256) (92.5%) $3,703,369
----------
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 185,000 185,000
Vista Treasury Plus Money Market Fund 115,000 115,000
----------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $300,000) (7.5%) 300,000
----------
TOTAL INVESTMENTS (Cost $3,364,256) (100.0%) 4,003,369
Liabilities, less other assets (0.0%) (1,234)
----------
NET ASSETS (100%) $4,002,135
==========
</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, 1997 was $3,364,256, the aggregate gross unrealized appreciation for all
investments was $695,869 and aggregate gross unrealized depreciation for all
investments was $56,756.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 62
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
BLUE CHIP CONVERTIBLE EMERGING
GROWTH FUND SECURITIES FUND GROWTH FUND
----------- --------------- -----------
<S> <C> <C> <C>
ASSETS
Investment in securities, at value
(cost $4,842,303, $18,806,195,
$5,140,070, respectively) $5,344,337 $20,177,022 $6,116,356
Cash 50,872 51,574 32,911
Receivable for investment securities sold 77,263 379,631 --
Dividends receivable 2,268 32,187 290
Interest receivable 21 154,372 26
---------- ----------- ----------
Total assets 5,474,761 20,794,786 6,149,583
---------- ----------- ----------
LIABILITIES
Payable for investment securities purchased -- 223,126 139,257
Payable for fund shares redeemed 77 56 60
Other payables and accrued expenses 824 344 560
---------- ----------- ----------
Total liabilities 901 223,526 139,877
---------- ----------- ----------
NET ASSETS $5,473,860 $20,571,260 $6,009,706
========== =========== ==========
NET ASSETS CONSIST OF (Note 1):
Capital stock (Par Value $.001 per share) $ 354 $ 1,857 $ 387
Additional paid in capital 4,125,193 18,809,616 5,620,631
Accumulated net realized gain (loss) on investments 846,279 218,279 (587,598)
Undistributed net investment income -- 170,681 --
Net unrealized appreciation on investments 502,034 1,370,827 976,286
---------- ----------- ----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $5,473,860 $20,571,260 $6,009,706
========== =========== ==========
CLASS A:
Net Assets $5,428,285 $20,552,883 $5,788,730
---------- ----------- ----------
Shares Outstanding 351,099 1,855,482 373,020
---------- ----------- ----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 15.46 $ 11.08 $ 15.52
========== =========== ==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 16.19 $ 11.60 $ 16.25
========== =========== ==========
CLASS D:
Net Assets $ 45,575 $ 18,377 $ 220,976
---------- ----------- ----------
Shares Outstanding 2,976 1,662 14,383
---------- ----------- ----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 15.31 $ 11.06 $ 15.36
========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 63
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES - (CONTINUED)
MAY 31, 1997
<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 $4,778,451, $10,300,524,
$2,395,193, respectively) $5,243,450 $12,019,419 $3,152,169
Cash 12,377 134,287 38,202
Receivable for investment securities sold 665,504 56,644 --
Dividends receivable 4,758 10,529 3,517
Interest receivable 52 -- --
---------- ----------- ----------
Total assets 5,926,141 12,220,879 3,193,888
---------- ----------- ----------
LIABILITIES
Payable for investment securities purchased 433,793 91,069 83,370
Payable for fund shares redeemed 2,212 63 73
Other payables and accrued expenses 203 493 465
---------- ----------- ----------
Total liabilities 436,208 91,625 83,908
---------- ----------- ----------
NET ASSETS $5,489,933 $12,129,254 $3,109,980
========== =========== ==========
NET ASSETS CONSIST OF (Note 1):
Capital Stock (Par Value $.001 per share) $ 478 $ 963 $ 213
Additional paid in capital 4,610,691 10,754,431 2,331,412
Accumulated net realized gain (loss) on investments
and foreign currency transactions 413,765 (345,098) 21,379
Net unrealized appreciation on investments and
foreign currency transactions 464,999 1,718,958 756,976
---------- ----------- ----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $5,489,933 $12,129,254 $3,109,980
========== =========== ==========
CLASS A:
Net Assets $5,476,969 $12,098,843 $3,054,239
---------- ----------- ----------
Shares Outstanding 477,196 960,665 209,015
---------- ----------- ----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 11.48 $ 12.59 $ 14.61
========== =========== ==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 12.02 $ 13.18 $ 15.30
========== =========== ==========
CLASS D:
Net Assets $ 12,964 $ 30,411 $ 55,741
---------- ----------- ----------
Shares Outstanding 1,141 2,436* 3,841
---------- ----------- ----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 11.36 $ 12.49 $ 14.51
========== =========== ==========
</TABLE>
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 64
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE
MID-CAP
GROWTH FUND
-----------
<S> <C>
ASSETS
Investment in securities, at value
(cost$3,364,256) $4,003,369
Cash 36,124
Receivable for investment securities sold 111,383
Receivable for fund shares sold 14,811
Dividends receivable 2,270
Interest receivable 16
----------
Total assets 4,167,973
----------
LIABILITIES
Payable for investment securities purchased 162,868
Payable for fund shares redeemed 2,970
----------
Total liabilities 165,838
----------
NET ASSETS $4,002,135
==========
NET ASSETS CONSIST OF (Note 1):
Capital Stock (Par Value $.001 per share) $ 304
Additional paid in capital 3,301,497
Accumulated net realized gain on investments 61,221
Net unrealized appreciation on investments 639,113
----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $4,002,135
==========
CLASS A:
Net Assets $2,174,053
----------
Shares Outstanding 164,702
----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 13.20
==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 13.82
==========
CLASS D:
Net Assets $1,828,082
----------
Shares Outstanding 139,681
----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 13.09
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 65
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE RESERVE
BLUE CHIP CONVERTIBLE EMERGING INFORMED INVESTORS
GROWTH FUND SECURITIES FUND GROWTH FUND GROWTH FUND
----------- --------------- ----------- -----------
September 3, 1996
(commencement of
Year Ended operations) to Year Ended Year Ended
May 31, 1997 May 31, 1997 May 31, 1997 May 31, 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 32,176 $ 249,907 $ 3,372* $ 24,627
Interest 896 363,077 1,049 41,386
---------- ----------- ----------- -----------
Total investment income 33,072 612,984 4,421 66,013
EXPENSES
Comprehensive fee (Note 3) 79,311 205,951 98,087 83,573
12b-1 Fee (Note 4)
Class A 13,038 34,294 15,631 13,889
Class D 723 124 2,868 161
---------- ----------- ----------- -----------
Total expenses 93,072 240,369 116,586 97,623
---------- ----------- ----------- -----------
Less fees waived -- 188,113 -- --
---------- ----------- ----------- -----------
Net expenses -- 52,256 -- --
---------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) (60,000) 560,728 (112,165) (31,610)
---------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Proceeds from sales of securities 5,655,127 16,158,164 1,743,151 11,725,713
Cost of securities sold 4,678,455 15,933,090 2,320,269 10,472,385
---------- ----------- ----------- -----------
Net realized gain (loss) on
investments (Note 1) 976,672 225,074 (577,118) 1,253,328
Net unrealized appreciation
(depreciation) on investments (642,561) 1,370,827 (847,249) (1,975,139)
---------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments 334,111 1,595,901 (1,424,367) (721,811)
---------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 274,111 $ 2,156,629 $(1,536,532) $ (753,421)
========== =========== =========== ===========
</TABLE>
* Includes foreign tax withholding of $114
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 66
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS - (CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
INTERNATIONAL LARGE-CAP MID-CAP
EQUITY FUND VALUE FUND GROWTH FUND
----------- ---------- -----------
Year Ended Year Ended Year Ended
May 31, 1997 May 31, 1997 May 31, 1997
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 97,550* $ 32,111 $ 13,610
Interest 561 212 533
---------- -------- ----------
Total investment income 98,111 32,323 14,143
EXPENSES
Comprehensive fee (Note 3) 145,974 33,940 49,028
12b-1 Fee (Note 4)
Class A 20,754 5,613 3,404
Class D 231 172 19,070
---------- -------- ----------
Total expenses 166,959 39,725 71,502
---------- -------- ----------
NET INVESTMENT LOSS (68,848) (7,402) (57,359)
---------- -------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Proceeds from sales of securities 3,956,864 383,913 3,034,153
Cost of securities sold 4,229,994 362,534 2,889,407
---------- -------- ----------
Net realized gain (loss) on
investments and foreign
currency transactions (Note 1) (273,130) 21,379 144,746
Net unrealized appreciation
on investments and foreign
currency transactions 1,387,936 686,853 185,442
---------- -------- ----------
Net realized and unrealized gain
on investments and foreign
currency transactions 1,114,806 708,232 330,188
---------- -------- ----------
Net increase in net assets resulting
from operations $1,045,958 $700,830 $ 272,829
========== ======== ==========
</TABLE>
* Includes foreign tax withholding of $14,966
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 67
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE
RESERVE BLUE CHIP GROWTH FUND SECURITIES FUND
----------------------------- -------------------
September 3, 1996
(commencement of
Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997
------------ ------------ -------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income gain (loss) $ (60,000) $ (34,916) $ 560,728
Net realized gain (loss) from investments 976,672 (2,045) 225,074
Net unrealized appreciation (depreciation)
from investments (642,561) 975,733 1,370,827
----------- ---------- ------------
Net increase in net assets
resulting from operations 274,111 938,772 2,156,629
----------- ---------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (6,791)
Net realized gain on investments (68,349) (164,889) (390,051)
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 1,176,349 2,757,098 20,601,861
Reinvestment of distributions 68,323 164,889 201,224
Cost of shares redeemed (1,148,732) (517,167) (1,991,612)
----------- ---------- ------------
Net increase in net assets resulting
from capital share transactions 95,940 2,404,820 18,811,473
----------- ---------- ------------
Net increase in net assets 301,702 3,178,703 20,571,260
NET ASSETS:
Beginning of period 5,172,158 1,993,455 0
----------- ---------- ------------
End of period (including undistributed
net investment income of $0, $0
and $170,681, respectively) $ 5,473,860 $5,172,158 $ 20,571,260
=========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL
RESERVE EMERGING GROWTH FUND EQUITY FUND
----------------------------- -------------------------------
July 13, 1996
(commencement of
Year Ended Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
----------------------------- -------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (112,165) $ (57,980) $ (68,848) $ (17,145)
Net realized gain (loss) from investments
and foreign currency transactions (577,118) 80,546 (273,130) (71,968)
Net unrealized appreciation (depreciation)
from investments and foreign
currency transactions (847,249) 1,655,638 1,387,936 331,022
----------- ---------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (1,536,532) 1,678,204 1,045,958 241,909
----------- ---------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments -- (93,899) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 2,187,444 4,281,980 8,057,063 3,465,234
Reinvestment of distributions -- 93,770 -- --
Cost of shares redeemed (1,540,646) (301,485) (558,291) (122,619)
----------- ---------- ----------- ----------
Net increase in net assets resulting
from capital share transactions 646,798 4,074,265 7,498,772 3,342,615
----------- ---------- ----------- ----------
Net increase (decrease) in net assets (889,734) 5,658,570 8,544,730 3,584,524
NET ASSETS:
Beginning of period 6,899,440 1,240,870 3,584,524 0
----------- ---------- ----------- ----------
End of period $ 6,009,706 $6,899,440 $12,129,254 $3,584,524
=========== ========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 68
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS - (CONTINUED)
<TABLE>
<CAPTION>
RESERVE
RESERVE INFORMED LARGE-CAP
INVESTORS GROWTH FUND VALUE FUND
-------------------------------- -------------------------------
January 2, 1996
(commencement of
Year Ended Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (31,610) $ (147,983) $ (7,402) $ (1,091)
Net realized gain from investments 1,253,328 850,186 21,379 --
Net unrealized appreciation (depreciation)
from investments (1,975,139) 1,109,280 686,853 70,123
----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (753,421) 1,811,483 700,830 69,032
----------- ----------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (525,939) (795,337) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 1,400,871 6,254,939 1,345,107 1,165,180
Reinvestment of distributions 395,531 790,060 -- --
Cost of shares redeemed (1,435,172) (8,490,282) (167,017) (3,152)
----------- ----------- ----------- ----------
Net increase (decrease) in net assets resulting
from capital share transactions 361,230 (1,445,283) 1,178,090 1,162,028
----------- ----------- ----------- ----------
Net increase (decrease) in net assets (918,130) (429,137) 1,878,920 1,231,060
NET ASSETS:
Beginning of period 6,408,063 6,837,200 1,231,060 0
----------- ----------- ----------- ----------
End of period $ 5,489,933 $ 6,408,063 $ 3,109,980 $1,231,060
=========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
RESERVE MID-CAP
GROWTH FUND
-------------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (57,359) $ (32,656)
Net realized gain (loss) from investments 144,746 (83,525)
Net unrealized appreciation from
investments 185,442 453,671
----------- ----------
Net increase in net assets
resulting from operations 272,829 337,490
----------- ----------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 3,118,364 2,345,759
Cost of shares redeemed (1,928,613) (143,694)
----------- ----------
Net increase in net assets resulting
from capital share transactions 1,189,751 2,202,065
----------- ----------
Net increase in net assets 1,462,580 2,539,555
NET ASSETS:
Beginning of period 2,539,555 0
----------- ----------
End of period $ 4,002,135 $2,539,555
=========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 69
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reserve Private Equity Series (the "Trust") consists of the following
funds: Reserve Blue Chip Growth Fund, Reserve Convertible Securities Fund,
Reserve Emerging Growth Fund, Reserve Informed Investors Growth Fund,
Reserve International Equity Fund, Reserve Large-Cap Value Fund, and
Reserve Mid-Cap Growth Fund (formerly 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, 1997 as follows:
[See table below]
<PAGE> 70
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------
Undistributed
Net Accumulated
Investment Realized
Reserve Fund Capital Income Gain
------------ ------- ------ ----
<S> <C> <C> <C>
Blue Chip Growth Fund (112,615) 60,000 52,615
Emerging Growth Fund (112,165) 112,165 --
Informed Investors Growth Fund (31,610) 31,610 --
International Equity Fund (68,848) 68,848 --
Large-Cap Value Fund (7,402) 7,402 --
Mid-Cap Growth Fund (57,359) 57,359 --
</TABLE>
These reclassifications had no effect on net investment income, net
realized gain on investments, or net assets for the year ended May 31,
1997.
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.
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, 1997, which are available to offset
future realized capital gains, if any:
<TABLE>
<CAPTION>
Capital loss Expiration
carryforward year
------------ ----
<S> <C> <C>
Reserve Emerging Growth Fund $161,015 2005
Reserve International Equity Fund 71,968 2004
Reserve International Equity Fund 178,347 2005
</TABLE>
<PAGE> 71
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
2. INVESTMENT ACTIVITY
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the year ended May 31, 1997, were
as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate
Reserve Fund Purchases Sales
------------ --------- -----
<S> <C> <C>
Blue Chip Growth Fund $ 5,425,272 $ 5,655,127
Convertible Securities Fund 34,711,469 16,158,164
Emerging Growth Fund 2,264,488 1,743,151
Informed Investors Growth Fund 11,386,974 11,725,713
International Equity Fund 11,336,214 3,956,864
Large-Cap Value Fund 1,507,717 383,913
Mid-Cap Growth Fund 4,017,934 3,034,153
</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 except for the International
Equity Fund for which it receives 1.75%. RMCI is currently waiving a
portion of its comprehensive fee in the Reserve Convertible Securities
Fund.
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
decisions for 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%
Convertible Securities Fund New Vernon Advisors, Inc. 0.75%
Emerging Growth Fund Roanoke Asset Management Corp. 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 Southern Capital Advisors 0.75%
</TABLE>
Trainer, Wortham & Company, Inc. owns 24% of the outstanding shares of the
Reserve Blue Chip Growth Fund at May 31, 1997.
<PAGE> 72
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
As of May 31, 1997, RMCI and affiliated persons owned 7%, 13%, 5%, 11%,
20%, and 25% of the Reserve Blue Chip Growth Fund, Reserve Emerging Growth
Fund, Reserve Informed Investors Growth Fund, Reserve International Equity
Fund, Reserve Large-Cap Value Fund, and Reserve Mid-Cap Growth Fund,
respectively. Taconic Petroleum Corp. owns 24% of Reserve Large-Cap Value
Fund. Christopher E. Vroom owns 7% of the Reserve Emerging Growth Fund.
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 shares and 1.00% per annum for Class D shares of the
average daily net assets of shareholder accounts as to which the payee has
rendered distribution assistance. For the year ended May 31, 1997, the
Funds paid distribution expenses to RPI as follows:
<TABLE>
<CAPTION>
Reserve Fund Class A Class D
------------ ------- -------
<S> <C> <C>
Blue Chip Growth Fund $13,038 $ 723
Convertible Securities Fund* 283 14
Emerging Growth Fund 15,631 2,868
Informed Investors Growth Fund 13,889 161
International Equity Fund 20,754 231
Large-Cap Value Fund 5,613 172
Mid-Cap Growth Fund 3,404 19,070
</TABLE>
* RMCI waived 12b-1 fees of $34,011 and $110, for Reserve Convertible
Securities Fund Class A and Class D, respectively, for the period
September 3, 1996 (commencement of operations) to May 31, 1997.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock of each Fund for the period ended May 31,
1997, were as follows:
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
----------------------------- -------------------------------- ------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
-------------------------------- ------------------------
Shares Amount Shares Amount
------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold 76,231 $ 1,119,812 3,957 $ 56,537
Reinvested 4,875 67,171 84 1,152
Redeemed (74,089) (1,092,588) (3,930) (56,144)
------- ----------- ------ --------
Net increase 7,017 $ 94,395 111 $ 1,545
======= =========== ====== ========
</TABLE>
<PAGE> 73
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE SECURITIES FUND CLASS A CLASS D
- ----------------------------------- ------------------------------- -------------------------------
September 3, 1996 September 3, 1996
(commencement of operations) to (commencement of operations) to
May 31, 1997 May 31, 1997
------------------------------- --------------------------------
Shares Amount Shares Amount
---------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold 2,026,485 $20,572,892 2,814 $ 28,969
Reinvested 19,551 201,111 11 113
Redeemed (190,554) (1,979,449) (1,163) (12,163)
--------- ----------- ------ --------
Net increase 1,855,482 $18,794,554 1,662 $ 16,919
========= =========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- --------------------------------- ------------------------------- ----------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------------- ----------------------------
Shares Amount Shares Amount
------- ----------- ------ ---------
<S> <C> <C> <C> <C>
Sold 117,069 $ 1,999,906 10,982 $ 187,538
Redeemed (84,292) (1,389,829) (9,047) (150,817)
------- ----------- ------ ---------
Net increase 32,777 $ 610,077 1,935 $ 36,721
======= =========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- -------------------------------- -----------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
-------------------------------- -----------------------
Shares Amount Shares Amount
-------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold 116,034 $ 1,389,343 911 $11,528
Reinvested 37,456 395,531 -- --
Redeemed (121,475) (1,425,528) (814) (9,644)
-------- ---------- ---- -------
Net increase 32,015 $ 359,346 97 $ 1,884
======== ========== ==== =======
</TABLE>
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- --------------------------- ---------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
--------------------------- ---------------------------
Shares Amount Shares Amount
------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold 689,779 $8,029,446 2,446 $27,617
Redeemed (47,041) (551,604) (562) (6,687)
------- ---------- ----- -------
Net increase 642,738 $7,477,842 1,884 $20,930
======= ========== ===== =======
</TABLE>
<PAGE> 74
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE LARGE-CAP VALUE FUND CLASS A CLASS D
- ----------------------------- ------------------------- ----------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------- ----------------------
Shares Amount Shares Amount
------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold 108,518 $1,276,605 5,080 $ 68,502
Redeemed (11,940) (151,013) (1,239) (16,004)
------- ---------- ------ --------
Net increase 96,578 $1,125,592 3,841 $ 52,498
======= ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ------------------------- ---------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------- ---------------------------
Shares Amount Shares Amount
------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Sold 198,244 $2,390,365 58,332 $ 727,999
Redeemed (44,223) (530,105) (114,850) (1,398,508)
------- ---------- -------- -----------
Net increase 154,021 1,860,260 (56,518) $ (670,509)
======= ========== ======== ===========
</TABLE>
Transactions in capital stock of each Fund for the period ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
- ----------------------------- ------------------------- --------------------
February 13, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
------------------------- --------------------
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>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- ---------------------------- ------------------------- ---------------------
February 26, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
------------------------- ---------------------
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>
<PAGE> 75
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- --------------------------- ----------------------
February 13, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
--------------------------- ----------------------
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>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- -------------------------- ------------------
July 13, 1995 March 11, 1996
(commencement (commencement
of operations) to of operations) to
May 31, 1996 May 31, 1996
-------------------------- ------------------
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>
RESERVE LARGE-CAP VALUE FUND CLASS A
- ---------------------------- ------------------------
January 2, 1996
(commencement
of operations) to
May 31, 1996
-------------------------
Shares Amount
------- ----------
<S> <C> <C>
Sold 112,729 $1,165,180
Redeemed (292) (3,152)
------- ----------
Net increase 112,437 $1,162,028
======= ==========
</TABLE>
<PAGE> 76
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ----------------------- -------------------------
March 13, 1996
(Commencement
of operations) to Year Ended
May 31, 1996 May 31, 1996
----------------------- -------------------------
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>
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.
<PAGE> 77
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
7. FINANCIAL HIGHLIGHTS (FOR EACH SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
- ----------------------------- ------------------------------------------------- ---------------------------------
October 28, 1994 February 13, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ---------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 14.91 $12.03 $10.00 $ 14.88 $13.49
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.17) (.10) (.03) (0.46) (.04)
Net realized and unrealized gain 0.91 3.62 2.06 1.08 1.43
------- ------ ------ ------- ------
Total from investment operations 0.74 3.52 2.03 0.62 1.39
Less distribution from net realized gain (.19) (.64) -- (.19) --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 15.46 $14.91 $12.03 $ 15.31 $14.88
======= ====== ====== ======= ======
Total Return 5.12 % 30.10 % 20.30%(2) 4.32 % 10.30 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,428 $5,130 $1,993 $ 46 $ 43
Ratio of expenses to average net assets
before waiver 1.75 % 1.75 % 1.75%(1) 2.50 % 2.50 %(1)
Ratio of expenses to average net assets,
net of waiver 1.75 % 1.75 % 1.73%(1) 2.50 % 2.50 %(1)
Ratio of net investment loss to
average net assets, before waiver (1.13)% (0.94)% (0.72)%(1) (1.90)% (1.70)%(1)
Ratio of net investment loss to average
net assets, net of waiver (1.13)% (0.94)% (0.70)%(1) (1.90)% (1.70)%(1)
Portfolio turnover rate 109 % 72 % 68 % 109 % 72 %
Average commission per share on
portfolio transactions $0.0419 $ 0.06 N/A $0.0419 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE SECURITIES FUND CLASS A CLASS D
- ----------------------------------- ----------------- -----------------
September 3, 1996 September 3, 1996
(commencement of (commencement of
operations) to operations) to
May 31, 1997 May 31, 1997
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period $ 10.00 $ 10.00
------- -------
Income from investment operations
Net investment income 0.34 0.33
Net realized and unrealized gain (loss) 0.99 0.98
------- -------
Total from investment operations 1.33 1.31
Less distribution from net investment
income and realized gain (.25) (.25)
------- -------
NET ASSET VALUE, end of period $ 11.08 $ 11.06
======= =======
Total Return 13.53 %(2) 13.33 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $20,553 $ 18
Ratio of expenses to average net assets before waiver 2.36 %(1) 3.37 %(1)
Ratio of expenses to average net assets, net of waiver 0.52 %(1) 0.83 %(1)
Ratio of net investment income to average
net assets, before waiver 3.67 %(1) 2.57 %(1)
Ratio of net investment income to average net assets,
net of waiver 5.52 %(1) 5.12 %(1)
Portfolio turnover rate 113 % 113 %
Average commission per share on
portfolio transactions $0.0564 $ 0.0564
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 78
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- ---------------------------- ----------------------------------------------- ---------------------------------
November 14, 1994 February 26, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ----------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 19.56 $12.21 $10.00 $ 19.52 $16.88
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.28) (.17) (.09) (0.49) (.04)
Net realized and unrealized gain (loss) (3.76) 8.05 2.30 (3.67) 2.68
------- ------ ------ ------- ------
Total from investment operations (4.04) 7.88 2.21 (4.16) 2.64
Less distribution from net realized gain -- (.53) -- -- --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 15.52 $19.56 $12.21 $ 15.36 $19.52
======= ====== ====== ======= ======
Total Return (20.65)% 65.55 % 22.10 %(2) (21.31)% 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,789 $6,657 $1,241 $ 221 $ 243
Ratio of expenses to average net assets 1.75 % 1.75 % 1.75 %(1) 2.50 % 2.50%(1)
Ratio of net investment loss to
average net assets (1.69)% (1.70)% (1.62)%(1) (2.45)% (2.48)%(1)
Portfolio turnover rate 28 % 38 % 43 % 28 % 38%
Average commission per share on
portfolio transactions $0.0048 $ 0.01 N/A $0.0048 $ 0.01
</TABLE>
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- ------------------------------------------------ --------------------------------
December 28, 1994 March 22, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ----------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 14.36 $11.99 $10.00 $ 14.33 $12.29
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.07) (0.33) (.07) (0.18) (.06)
Net realized and unrealized gain (1.66) 3.87 2.06 (1.64) 2.10
------- ------ ------ ------- ------
Total from investment operations (1.73) 3.54 1.99 (1.82) 2.04
Less distribution from net realized gain (1.15) (1.17) -- (1.15) --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 11.48 $14.36 $11.99 $ 11.36 $14.33
======= ====== ====== ======= ======
Total Return (11.35)% 29.75 % 19.90 %(2) (12.04)% 16.60 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,477 $6,393 $6,837 $ 13 $ 15
Ratio of expenses to average net assets 1.75 % 1.75 % 1.75 %(1) 2.50 % 2.50 %(1)
Ratio of net investment loss to
average net assets (0.57)% (1.57)% (1.62)%(1) (1.26)% (2.32)%(1)
Portfolio turnover rate 255 % 132 % 59 % 255 % 132 %
Average commission per share on
portfolio transactions $0.0612 $ 0.05 N/A $0.0612 $ 0.05
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 79
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- -------------------------------------- --------------------------------------
July 13, 1995 March 11, 1996
(commencement of (commencement of
Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 11.26 $ 10.00 $ 11.25 $ 10.79
------------ ------------ ------------ ------------
Income from investment operations
Net investment loss (0.07) (.05) (0.15) (.01)
Net realized and unrealized gain 1.40 1.31 1.39 .47
------------ ------------ ------------ ------------
Total from investment operations 1.33 1.26 1.24 .46
------------ ------------ ------------ ------------
NET ASSET VALUE, end of period $ 12.59 $ 11.26 $ 12.49 $ 11.25
============ ============ ============ ============
Total Return 11.81% 12.60%(2) 11.02% 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 12,099 $ 3,578 $ 30 $ 6
Ratio of expenses to average net assets
before waiver 2.00% 2.00%(1) 2.75% 2.75%(1)
Ratio of expenses to average net assets,
net of waiver 2.00% 1.99%(1) 2.75% 2.75%(1)
Ratio of net investment loss to average
net assets before waiver 0.82% (0.92)%(1) 1.63% (0.70)%(1)
Ratio of net investment loss to average
net assets net of waiver 0.82% (0.91)%(1) 1.63% (0.70)%(1)
Portfolio turnover rate 52% 70% 52% 70%
Average commission per share on
portfolio transactions $ 0.0273 $ 0.02 $ 0.0273 $ 0.02
</TABLE>
<TABLE>
<CAPTION>
RESERVE LARGE-CAP VALUE FUND CLASS A CLASS D
- ---------------------------- ------------------------------------ ----------------
January 2, 1996
(commencement of
Year Ended operations) to Year Ended
May 31, 1997 May 31, 1996 May 31, 1997
------------------------------------ ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 10.95 $ 10.00 $ 10.95
----------- ----------- ===========
Income from investment operations
Net investment loss (0.03) (0.01) (0.05)
Net realized and unrealized gain 3.69 0.96 3.61
----------- ----------- -----------
Total from investment operations 3.66 0.95 3.56
----------- ----------- -----------
NET ASSET VALUE, end of period $ 14.61 $ 10.95 $ 14.51
=========== =========== ===========
Total Return 33.42% 9.50%(2) 32.51%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 3,054 $ 1,231 $ 56
Ratio of expenses to average net assets 1.75% 1.75%(1) 2.50%
Ratio of net investment loss to average
net assets (0.32)% (0.32)%(1) (1.07)%
Portfolio turnover rate 18% 0 % 18%
Average commission per share on
portfolio transactions $ 0.0684 $ 0.08 $ 0.0684
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 80
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ------------------------------------ ----------------------------------
March 13, 1996
(commencement of
Year Ended operations) to Year Ended Year Ended
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 12.29 $ 10.94 $ 12.27 $ 10.00
----------- ----------- ----------- -----------
Income from investment operations
Net investment loss (0.11) (.01) (0.28) (0.17)
Net realized and unrealized gain 1.02 1.36 1.10 2.44
----------- ----------- ----------- -----------
Total from investment operations 0.91 1.35 0.82 2.27
----------- ----------- ----------- -----------
NET ASSET VALUE, end of period $ 13.20 $ 12.29 $ 13.09 $ 12.27
=========== =========== =========== ===========
Total Return 7.40% 12.34%(2) 6.68% 22.70%
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 2,174 $ 131 $ 1,828 $ 2,408
Ratio of expenses to average net assets 1.75% 1.74%(1) 2.50% 2.49%
Ratio of net investment loss to average
net assets (1.31)% (0.97)%(1) (2.08)% (2.00)%
Portfolio turnover rate 102% 85% 102% 85%
Average commission per share on
portfolio transactions $ 0.0545 $ 0.04 $ 0.0545 $ 0.04
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales
load.
<PAGE> 81
RESERVE PRIVATE EQUITY SERIES
RESERVE CONVERTIBLE SECURITIES 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 Convertible Securities Fund
("Convertible Securities 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 October 1, 1997.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Other Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Trustees and Officers of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Investment Management and Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 6
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
Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
1
<PAGE> 82
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 Convertible Securities 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 %
(1/2 of 1%) of the securities (taken at market value) of such issuer
and such individuals owning more than one-half of one % (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
2
<PAGE> 83
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 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.
3
<PAGE> 84
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 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, 1535 Presidential Drive, Apt. 4A, Columbus, OH 43212.
Mr. Emmet retired as the Managing Director of Servus Associates, Inc., and
U.S.A. Representative of the First National Bank of Southern Africa in 1996. He
is currently Trustee of RF, RIT, RNYTET, RTET and RPES. Until 1989, he was
Senior Vice President of the New York branch of Banque Nationale de Paris.
*+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.
4
<PAGE> 85
MICHELLE L. NEUFELD, Counsel and Secretary, 810 Seventh Avenue, New York, NY
10019.
Ms. Neufeld is Counsel and Secretary of RF, RIT, RTET, RNYTET, and RPES.
Before joining The Reserve Funds in 1997, Ms. Neufeld was a staff attorney at
NASD Regulation, Inc.
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., Inc.
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 disregard 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 FUNDS* (4 ADDITIONAL TRUSTS) PAID TO TRUSTEE*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Edwin Ehlert, Jr. $120.09 $30,500
Henri W. Emmet $133.87 $34,000
Rev. Donald J. Harrington $118.11 $30,000
</TABLE>
Amount shown are for the Fund's fiscal year ending May 31, 1997.
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 Service 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 and approval 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.
5
<PAGE> 86
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. New Vernon Advisors, Inc., ("Sub-Advisor"), 310 South Street,
P.O. Box 1913, Morristown, NJ 07962, 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 and
approval 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.
SERVICE PLAN. The Trust maintains a Service 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. 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.
The Glass-Steagall Act prohibits all entities which receive deposits from
engaging to any extent 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 Fund shares (such as
administrative and account maintenance services) may include banks, upon advice
of counsel that they are permitted to do so under applicable laws and
regulations, including the Glass-Steagall Act. In such event, no preference will
be given to securities issued by such banks as investment 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
banks may also receive compensation from the bank accounts they service. It is
Fund management's position that payments to banks pursuant to the Plan for
activities not primarily intended to result in the sale of a Fund's 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.
Financial institutions providing distribution assistance or administrative
services for the Fund may be required to register as securities dealers in
certain states.
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P., 1301 Avenue of the
Americas, New York, New York 10019 is the Trust's independent accountant.
6
<PAGE> 87
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. 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 series. 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
7
<PAGE> 88
shareholders. For this purpose a "majority" is constituted by either 50% of all
shares voting as a group or 67% of the shares voted as a group at a meeting of
shareholders at which at least 50% of the shares of each group are represented.
As of August 30, 1997, the following persons owned of record or beneficially 5%
or more of the Fund's Outstanding Shares: New Vernon Advisors, Inc., 310 South
St., Morristown, NJ, 07962 (47.3%) (Class A); William E. Simon Foundation, 310
South St., Morristown, NJ 07962 (14.3%) (Class A); Donald Gummer, 310 South
Street, P.O. Box 191, Morristown, NJ 07962 (8.8%) (Class A); Tonia A. Simon, 310
South Street, Morristown, NJ, 07960 (6.0%) (Class A); Julie Simon Munro, 310
South Street, P.O. Box 191, Morristown, NJ 07962 (5.2%) (Class A); Edwin
Ehlert, 47 Maddaket Ct., Scotch Plains, NJ 07076 (6.3%) (Class D); and Donna L.
Sciarra, 1 Metrotech Center North, Brooklyn, NY 11201 (93.7%) (Class D).
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. 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 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.
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, 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
8
<PAGE> 89
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% of its
taxable income to shareholders, derive at least 90% of its gross income from
dividends, interest and gains from the sale or disposition of securities and
derive less than 30% 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
9
<PAGE> 90
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 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.
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 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
10
<PAGE> 91
data will be computed as described above, except that the rates of return
calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return.
Bond Ratings
Moody's Investors Service, Inc.: Aaa -- judged to be the best quality,
carry the smallest degree of investment risk; Aa -- judged to be of high
quality by all standards; A -- possess many favorable investment attributes and
are to be considered as higher medium grade obligations; Baa -- considered as
medium grade obligations which are neither highly protected nor poorly secured.
Moody's Investors Service, Inc. also applies numerical indicators, 1, 2 and 3,
to rating categories Aa through Baa. The modifier 1 indicates that the
security is in the higher end of its rating category; the modifier 2 indicates
a mid-range ranking; and 3 indicates a ranking toward the lower end of the
category.
Standard & Poor's Corporation: AAA -- highest grade obligations,
possess the ultimate degree of protection as to principal and interest; AA --
also qualify as high grade obligations, and in the majority of instances differ
from AAA issues only in small degree; A -- regarded as upper medium grade, have
considerable investment strength but are not entirely free from adverse effects
of changes in economic and trade conditions, interest and principal are
regarded as safe; BBB -regarded as having adequate capacity to pay interest and
repay principal but are more susceptible than higher rated obligations to the
adverse effects of changes in economic and trade conditions. Standard & Poor's
Corporation applies indicators "+", no character, and "-" to the above rating
categories AA through BBB. The indicators show relative standing within the
major rating categories.
Fitch Investors Services, Inc.: AAA -- Securities of this rating are
regarded as strictly high-grade, broadly marketable, suitable for investment by
trustees and fiduciary institutions, and liable to but slight market
fluctuation other than through changes in the money rate; AA -- Securities in
this group are of safety virtually beyond question, and as a class are readily
salable while many are highly active; their merits are not greatly unlike those
of the AAA class, but a security so rated may be of junior though strong lien
- -- in many cases directly following an AAA security -- or the margin of safety
is less strikingly broad; A -- A securities are strong investments and in many
cases of highly active market, but are not so heavily protected as the two
upper classes or possibly are of similar security but less quickly salable; as
a class they are more sensitive in standing and market to material changes in
current earnings of the company.
Commercial Paper Ratings
Moody's Investors Service, Inc.: Commercial paper rated "Prime" carries the
smallest degree of investment risk. The modifiers 1, 2 and 3 are used to
denote relative strength within this highest classification.
Standard & Poor's Corporation: "A" is the highest commercial paper rating
category utilized by S&P which uses the numbers 1+, 1, 2 and 3 to denote
relative strength within its "A" classification.
11
<PAGE> 92
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and 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 Convertible Securities Fund, Reserve Emerging Growth Fund,
Reserve Informed Investors Growth Fund, Reserve International Equity Fund,
Reserve Large-Cap Value Fund, and Reserve Mid-Cap Growth Fund (formerly Reserve
North American Growth Fund)) (collectively the "Trust"), including the schedules
of portfolio investments, as of May 31, 1997, 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, 1997, 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, 1997,
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 27, 1997
<PAGE> 93
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BANKS (1.9%)
BankBoston Corporation 1,400 $102,200
--------
BEVERAGES (4.0%)
PepsiCo, Inc. 6,000 220,500
--------
BUILDING MATERIALS (1.8%)
* American Standard Companies, Inc. 2,000 100,250
--------
CHEMICALS - MISCELLANEOUS (4.3%)
ChemFirst, Inc. 9,200 238,050
--------
COMPUTER SERVICES (2.2%)
* Wang Laboratories, Inc. 5,800 118,900
--------
COMPUTER SOFTWARE (5.8%)
* CUC International, Inc. 6,450 148,350
National Data Corporation 3,900 171,112
--------
319,462
--------
CONSUMER SERVICES (2.2%)
* HFS, Inc. 2,200 118,525
--------
ELECTRONICS (6.8%)
General Electric Company 1,800 108,675
* Perceptron, Inc. 9,300 262,725
--------
371,400
--------
ENTERTAINMENT (3.1%)
Walt Disney Company 2,100 171,937
--------
FINANCIAL SERVICES (6.2%)
Federal National Mortgage Association 5,200 226,850
Pioneer Group, Inc. 4,400 110,550
--------
337,400
--------
FOOD (2.3%)
* Suiza Foods Corporation 4,200 125,475
--------
HOSPITAL MANAGEMENT (3.7%)
* Assisted Living Concepts, Inc. 8,000 200,000
--------
MANAGED CARE (1.1%)
* Physicians' Specialty Corporation 10,000 61,250
--------
</TABLE>
<PAGE> 94
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
MEDICAL SUPPLIES (1.3%)
* LaserSight Corporation 10,000 $ 70,000
----------
MISCELLANEOUS CONSUMER (2.1%)
* Gibson Greetings, Inc. 5,300 115,275
----------
MISCELLANEOUS MANUFACTURING (5.6%)
Warnaco Group, Inc. 5,300 173,575
Westinghouse Electric Corporation 6,500 131,625
----------
305,200
----------
MULTI-LINE INSURANCE (3.1%)
The Hartford Financial Services Group, Inc. 2,200 171,600
----------
OFFICE - BUSINESS EQUIPMENT (4.6%)
* American Pad & Paper Company 13,500 249,750
----------
OIL/GAS EQUIPMENT SERVICES (2.0%)
* Cairn Energy USA, Inc. 9,200 108,675
----------
PACKAGED SOFTWARE (3.9%)
Computer Associates International, Inc. 3,900 213,525
----------
PHARMACEUTICALS (7.1%)
* Bio-Technology General Corporation 5,400 78,300
Eli Lilly & Company 1,100 102,300
Johnson & Johnson 1,800 107,775
Merck & Co., Inc. 1,100 98,863
----------
387,238
----------
PUBLISHING (4.2%)
Harte-Hanks Communications 7,800 233,025
----------
RADIO, TV & BROADCAST COMMUNICATION EQUIPMENT (4.6%)
* American Radio Systems Corporation 1,400 52,150
* Sinclair Broadcast Group, Inc. 8,000 198,000
----------
250,150
----------
REAL ESTATE (4.6%)
Insignia Financial Group, Inc., Class A 14,200 252,050
----------
</TABLE>
<PAGE> 95
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
SPECIAL INDUSTRIAL MACHINERY (3.1%)
Thermo Electron Corporation 5,000 $ 172,500
-------------
TOTAL COMMON STOCKS (Cost $4,512,303) (91.6%) 5,014,337
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 260,000 260,000
Vista Treasury Plus Money Market Fund 70,000 70,000
-------------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $330,000) (6.0%) 330,000
-------------
TOTAL INVESTMENTS (Cost $4,842,303) (97.6%) 5,344,337
Other assets, less liabilities (2.4%) 129,523
-------------
NET ASSETS (100%) $ 5,473,860
=============
</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, 1997 was $4,842,303, the aggregate gross unrealized appreciation for all
investments was $707,511 and aggregate gross unrealized depreciation for all
investments was $205,477.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 96
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
CONVERTIBLE BONDS
<TABLE>
<CAPTION>
VALUE
MATURITY PAR (NOTE 1)
-------- --- --------
<S> <C> <C> <C>
BASIC INDUSTRIAL COMMODITY (2.2%)
First South Africa Corp, Ltd., 144A, 9% 06/15/04 450,000 $ 450,000
----------
BIO-TECHNOLOGY (3.9%)
Chiron Corp., 144A, 1.9% 11/17/00 450,000 397,125
NABI, Inc., 144A, 6.5% 02/01/03 500,000 414,375
----------
811,500
----------
COMMERCIAL SERVICES (1.8%)
Pharmaceutical Marketing
Services, Inc., 144A, 6.25% 02/01/03 450,000 360,000
----------
COMPUTER SOFTWARE (1.9%)
MacNeal - Schwendler Corp., 7.875% 08/18/04 400,000 392,000
----------
ELECTRONIC PRODUCTS - MISCELLANEOUS (1.9%)
Trans-Lux Corp., 7.5% 12/01/06 375,000 390,000
----------
ENVIRONMENT - CONSULTING, ENGINEERING (1.1%)
Roy F. Weston, Inc., 7% 04/15/02 270,000 229,500
----------
FOOD CHAINS (1.9%)
Marsh Supermarkets, Inc., 7% 02/15/03 400,000 400,000
----------
GENERAL INDUSTRIAL MACHINE & EQUIPMENT (2.0%)
Robbins & Myers, Inc., 6.5% 09/01/03 300,000 412,500
----------
HOTEL - MOTEL (3.4%)
Hilton Hotels Corp., 5% 05/15/06 350,000 380,625
Signature Resorts, Inc., 5.75% 01/15/07 350,000 316,750
----------
697,375
----------
MEDICAL - HMO (3.9%)
FPA Medical Management, Inc., 6.5% 12/15/01 400,000 421,000
PhyMatrix Corp., 6.75% 06/15/03 450,000 389,250
----------
810,250
----------
OIL - DOMESTIC (2.7%)
Lomak Petroleum, Inc., 144A, 6% 02/01/07 350,000 395,500
Snyder Oil Corp., 7% 05/15/01 150,000 155,625
----------
551,125
----------
POLLUTION CONTROL (3.8%)
USA Waste Services, Inc., 4% 02/01/02 350,000 362,250
WMX Technologies, Inc., 2% 01/24/05 450,000 406,687
----------
768,937
----------
</TABLE>
<PAGE> 97
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
CONVERTIBLE BONDS
<TABLE>
<CAPTION>
VALUE
MATURITY PAR (NOTE 1)
-------- --- --------
<S> <C> <C> <C>
PUBLISHING (2.0%)
Scholastic Corp., 5% 08/15/05 500,000 $ 403,750
----------
RETAIL STORES - DEPARTMENT (1.9%)
Saks Holdings, Inc., 5.5% 09/15/06 450,000 398,250
----------
RETAIL - APPAREL (1.9%)
Charming Shoppes, Inc., 7.5% 07/15/06 400,000 393,000
----------
RETAIL - SPECIALTY (1.8%)
The Sports Authority, Inc., 5.25% 09/15/01 400,000 360,500
----------
TRANSPORT - AIR FREIGHT (1.6%)
Consolidated Logistics, 144A, 8% 08/21/00 400,000 320,000
----------
WATER TREATMENT SYSTEMS (3.2%)
United States Filter Corp., 4.5% 12/15/01 650,000 665,438
----------
TOTAL CONVERTIBLE BONDS (Cost $8,647,471) (42.9%) 8,814,125
----------
</TABLE>
PREFERRED STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BANKS (2.6%)
National Australian Bank Ltd., 7.875% 20,000 $537,500
-------
CONTAINERS-METAL/GLASS (2.1%)
Crown Cork & Seal Company, Inc., 4.5% 2/26/00 8,000 434,000
-------
ENERGY (1.6%)
Occidental Petroleum Corp., 144A, $3.875 Series 1993 6,000 338,250
-------
ENTERTAINMENT (2.9%)
Wellsford Residential Property, 7% Series A 22,900 589,675
-------
FINANCIAL SERVICES (2.1%)
SunAmerica, Inc., $3.1875 10/31/99 10,000 431,250
-------
GENERAL INDUSTRIAL MACHINES & EQUIPMENT (2.0%)
Greenfield Industries, Inc., 144A, 6% 3/31/16 9,000 409,500
-------
GLASS PRODUCTS (1.9%)
Corning Delaware L.P., 6% 5,000 399,375
-------
</TABLE>
<PAGE> 98
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
PREFERRED STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
GOLD MINING (1.6%)
Coeur D'Alene Mines Corp., 7% 3/15/00 20,000 $ 332,500
----------
HOTEL-MOTEL (1.8%)
Host Marriott Corp., 144A, 6.75% 12/02/26 6,500 367,250
----------
MEDICAL - HMO (2.1%)
Aetna, Inc., 6.25% 7/19/00 4,700 431,225
----------
NATURAL GAS (2.0%)
MCN Corp., 8.75% 4/30/99 15,000 416,250
----------
OIL-DOMESTIC (5.5%)
Mesa, Inc., 8%, Series A 80,000 530,000
Nuevo Energy, 5.75% 12/15/26 Series A 8,000 403,000
Snyder Oil Corporation, $1.5 7,700 190,575
----------
1,123,575
----------
PAPER (1.9%)
International Paper Co., 5.25% 7/20/25 7,500 386,250
----------
PUBLISHING (1.4%)
Golden Books Family Entertainment, Inc., 144A,
8.75% 8/20/16 5,000 280,000
----------
PUBLISHING-NEWSPAPERS (2.1%)
Hollinger International, Inc., 9.75% 8/01/00 40,000 440,000
----------
REAL ESTATE (4.8%)
Excel Realty, $2.125 Series A 16,000 426,000
Redwood Trust, Inc., 9.74% Class B 10,000 567,500
----------
993,500
----------
RESTAURANTS (2.0%)
Apple South, Inc., 144A, $3.5 3/01/27 7,000 420,875
----------
TELECOMMUNICATIONS (2.1%)
Mobile Telecommunication
Technologies Corp., 144A, $2.25 20,000 425,000
----------
TELECOMMUNICATIONS-BROADCAST (2.1%)
Merrill Lynch & Company, 6% 6/01/99 Series COX 20,000 427,500
----------
TOTAL PREFERRED STOCKS (Cost $8,282,029) (44.6%) $9,183,475
----------
</TABLE>
<PAGE> 99
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AEROSPACE (0.9%)
* International Airline Support Group, Inc. 44,908 $ 196,473
---------------
ENTERTAINMENT (1.4%)
* Malibu Entertainment Worldwide, Inc. 70,000 280,000
---------------
MISCELLANEOUS MANUFACTURING (0.1%)
* Disc Graphics, Inc. - Warrants Class "A", 11/01/99 28,000 21,000
---------------
NONHAZARDOUS WASTE DISPOSAL (0.2%)
* Allied Waste Industries, Inc. 2,266 33,423
---------------
OIL WELL SERVICES (3.6%)
* SEACOR SMIT, Inc. 14,400 745,200
---------------
PREHOSPITAL MEDICAL CARE, TRANSPORTATION (1.7%)
Laidlaw, Inc., Class B 25,663 346,451
---------------
TELECOMMUNICATIONS (0.6%)
* Mobile Telecommunication Technologies Corp. 10,000 121,875
---------------
TOYS (2.1%)
Hasbro, Inc. 15,000 435,000
---------------
TOTAL COMMON STOCKS (Cost $1,876,695) (10.6%) 2,179,422
---------------
TOTAL INVESTMENT SECURITIES (Cost $18,806,195) (98.1%) $ 20,177,022
Other assets, less liabilities (1.9%) 394,238
---------------
NET ASSETS (100%) $ 20,571,260
===============
</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, 1997 was $18,806,195, the aggregate gross unrealized appreciation for all
investments was $1,553,782 and aggregate gross unrealized depreciation for
all investments was $182,955.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 100
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BIO-TECHNOLOGY (1.9%)
* Genzyme Corporation 4,800 $114,600
--------
CAPITAL GOODS - DIVERSIFIED (2.4%)
Danaher Corporation 3,000 145,500
--------
CAPITAL GOODS/INDUSTRIAL (1.9%)
* Vishay Intertechnology, Inc. 3,836 112,703
--------
COMMUNICATION - EQUIPMENT (6.3%)
* ANADIGICS, Inc. 4,500 149,063
ECI Telecommunications Ltd. Designs 6,300 145,687
* Saville Systems Ireland plc 2,000 85,250
--------
380,000
--------
COMMUNICATION - NETWORK (3.4%)
* ICG Communications, Inc. 5,000 80,000
* PairGain Technologies, Inc. 6,000 125,250
--------
205,250
--------
COMPUTER NETWORKING (3.3%)
* Ascend Communications, Inc. 3,600 200,700
--------
COMPUTER PERIPHERAL EQUIPMENT (0.9%)
* Dialogic Corporation 1,800 52,650
--------
COMPUTER SERVICES (4.6%)
* HNC Software, Inc. 5,200 171,600
* Rational Software Corporation 5,400 101,925
--------
273,525
--------
COMPUTER SOFTWARE (3.1%)
* Business Objects S. A. - ADR 5,200 50,050
* Media 100, Inc. 8,000 46,000
* Sapient Corporation 2,000 89,500
--------
185,550
--------
CONSUMER GROWTH (8.3%)
* Activision, Inc. 16,000 208,000
* Conso Products Company 7,625 101,031
* Electronic Arts, Inc. 3,700 118,400
* Lin Television Corporation 1,700 73,738
--------
501,169
--------
</TABLE>
<PAGE> 101
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ELECTRONIC PRODUCTS - MISCELLANEOUS (0.5%)
AVX Corporation 1,000 $ 27,250
--------
ENERGY (2.7%)
Cross Timbers Oil Company 8,250 159,844
--------
HEALTH (4.3%)
* HCIA, Inc. 2,300 56,925
* National Dentex Corporation 6,000 104,250
* PacifiCare Health Systems, Inc. 1,200 95,100
--------
256,275
--------
HOUSEHOLD FURNISHINGS & APPLIANCES (2.8%)
* Williams-Sonoma, Inc. 4,500 165,938
--------
MANAGED CARE (7.4%)
* CRA Managed Care, Inc. 2,500 114,375
* Healthsource, Inc. 4,000 86,000
* MedPartners, Inc. 7,100 134,900
* PhyCor, Inc. 3,787 108,402
--------
443,677
--------
MISCELLANEOUS CONSUMER (2.5%)
* On Assignment, Inc. 4,000 152,500
--------
OFFICE-BUSINESS EQUIPMENT (2.4%)
* HPR, Inc. 9,000 146,250
--------
OFFSHORE DRILLING (1.6%)
* Parker Drilling Company 10,000 96,250
--------
OIL WELL SERVICES (1.3%)
* Dawson Production Services, Inc. 7,000 78,750
--------
OPTICAL INSTRUMENTS AND LENSES (1.6%)
* KLA-Tencor Corporation 2,000 95,125
--------
PAPER (1.2%)
* Data Documents, Inc. 6,000 71,250
--------
</TABLE>
<PAGE> 102
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
PHARMACEUTICALS (4.9%)
* Centocor, Inc. 3,200 $ 112,800
* Dura Pharmaceuticals, Inc. 4,600 182,850
----------
295,650
----------
RESTAURANTS (0.4%)
* Outback Steakhouse, Inc. 1,000 23,250
----------
RETAIL - SPECIALTY (10.6%)
* Borders Group, Inc. 7,900 171,825
* Corporate Express, Inc. 8,600 118,250
* PetSmart, Inc. 6,000 73,500
* Staples, Inc. 6,325 139,150
* The Sports Authority, Inc. 7,500 135,000
----------
637,725
----------
SEMICONDUCTOR-RELATED DEVICES (5.4%)
* Etec Systems, Inc. 1,800 80,100
Intel Corporation 800 121,200
* LSI Logic Corporation 3,000 125,250
----------
326,550
----------
SYSTEM SOFTWARE/CLIENT SERVER (1.6%)
* Hummingbird Communications Ltd. 3,400 96,900
----------
TELECOMMUNICATIONS EQUIPMENT (7.3%)
* Comverse Technology, Inc. 2,000 91,500
* DSC Communications Corporation 2,000 51,125
* Newbridge Networks Corporation 3,600 144,450
* P-COM, Inc. 3,200 103,200
* Proxim, Inc. 2,000 51,250
----------
441,525
----------
TOTAL COMMON STOCKS (Cost $4,710,070) (94.6%) 5,686,356
----------
</TABLE>
<PAGE> 103
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 280,000 $ 280,000
U.S. Treasury Plus Money Market Fund 150,000 150,000
----------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $430,000) (7.2%) 430,000
----------
TOTAL INVESTMENTS (Cost $5,140,070) (101.8%) 6,116,356
Liabilities, less other assets (-1.8%) (106,650)
----------
NET ASSETS (100%) $6,009,706
==========
</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 May 31,
1997 was $5,140,070, the aggregate gross unrealized appreciation for all
investments was $1,463,144 and aggregate gross unrealized depreciation for
all investments was $486,858.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 104
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INFORMED INVESTORS GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AIRLINES (3.8%)
Southwest Airlines Company 8,000 $206,000
--------
APPAREL MANUFACTURING (2.5%)
Liz Claiborne, Inc. 3,000 136,875
--------
BANKS (5.0%)
State Street Corporation 6,200 276,675
--------
CLOTHING (4.6%)
* Jones Apparel Group, Inc. 5,400 253,125
--------
COMPUTER MEMORY DEVICES (1.7%)
* EMC Corporation 2,300 91,712
--------
COMPUTER MICROSYSTEMS (2.3%)
* Dallas Semiconductor Corporation 3,200 123,600
--------
COMPUTER - PERIPHERAL EQUIPMENT (2.1%)
* Adaptec, Inc. 3,200 117,600
--------
COMPUTERS (8.2%)
* Dell Computer Corporation 2,100 236,250
* Gateway 2000, Inc. 3,200 212,400
--------
448,650
--------
FINANCIAL/BUSINESS SERVICES (17.1%)
Bear Stearns Companies, Inc. 8,400 273,000
Lehman Brothers Holdings, Inc. 5,400 218,025
Merrill Lynch & Company 2,300 243,800
Paine Webber Group, Inc. 5,700 202,350
--------
937,175
--------
GLASS PRODUCTS (3.5%)
Corning, Inc. 3,800 191,425
--------
HOSPITAL MANAGEMENT (3.8%)
* Tenet Healthcare Corporation 7,700 211,750
--------
LIFE/HEALTH INSURANCE (14.6%)
Conseco, Inc. 8,200 328,000
SunAmerica, Inc. 4,800 226,800
Torchmark Corporation 3,800 249,375
--------
804,175
--------
</TABLE>
<PAGE> 105
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INFORMED INVESTORS GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MISCELLANEOUS MANUFACTURING (4.0%)
Minnesota Mining and Manufacturing Company 2,400 $ 220,200
----------
MULTI-LINE INSURANCE (0.2%)
Travelers Group, inc. 200 10,975
----------
PAPER (2.4%)
International Paper Company 2,700 129,600
----------
RETAIL (4.1%)
* Costco Companies, Inc. 6,700 226,125
----------
RETAIL STORES (3.8%)
Dayton Hudson Corporation 4,400 211,750
----------
RETAIL STORES - GENERAL MERCHANDISING (3.4%)
Dollar General Corporation 5,500 184,938
----------
RETAIL - JEWELRY (2.4%)
Tiffany & Company 2,800 129,850
----------
TELEPHONE & TELEGRAPH APPARATUS (4.6%)
* Tellabs, Inc. 5,000 251,250
----------
TOTAL COMMON STOCKS (Cost $4,698,451) (94.1%) 5,163,450
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund
(Cost $80,000) (1.5%) 80,000 80,000
----------
TOTAL INVESTMENTS (Cost $4,778,451) (95.6%) 5,243,450
Other assets, less liabilities (4.4%) 246,483
----------
NET ASSETS (100%) $5,489,933
==========
</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,
1997 was $4,778,451, the aggregated gross unrealized appreciation for all
investments was $522,884 and aggregate gross unrealized depreciation for all
investments was $57,885.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 106
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AUSTRALIA (0.7%)
Australian Hospital Care Ltd. 49,000 $ 82,014
----------
DENMARK (2.6%)
* Carli Gray International 1,400 83,981
Novo Nordisk 2,200 235,853
----------
319,834
----------
FINLAND (2.4%)
Oy Nokia AB 2,300 150,810
TT Tieto OY 1,700 143,340
----------
294,150
----------
FRANCE (6.3%)
Altran Technologies 500 160,632
* Carrefour 360 236,937
Pinault - Printemps - Redoute 225 94,556
Sidel 2,800 196,926
Sodexho Alliance 150 69,810
----------
758,861
----------
GERMANY (4.9%)
Altana AG 150 138,545
Bayerische Motoren Werke (BMW) AG 200 163,980
Fresenius AG Pfd. 722 159,820
Porsche AG Pfd. 110 132,802
----------
595,147
----------
HONG KONG (11.8%)
Hang Seng Bank Ltd. 18,000 216,056
Henderson Land Development Company Ltd. 24,000 233,867
Hong Kong & China Gas Company 182,496 317,978
HSBC Holdings 8,436 255,868
* New World Infrastructure Ltd. 19,000 59,222
Sun Hung Kai Properties Ltd. 20,000 245,870
Wing Hang Bank Ltd. 21,600 102,870
----------
1,431,731
----------
</TABLE>
<PAGE> 107
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INDONESIA (0.7%)
* PT Bank International Indonesia 61,156 $ 50,230
PT Gudang Garam 8,000 34,497
PT Steady Safe 1,467 1,612
---------
86,339
---------
ITALY (1.6%)
Bulgari SpA 7,200 142,514
* Telecom Italia Mobile SpA 28,600 50,198
---------
192,712
---------
MALAYSIA (6.3%)
* Arab-Malaysian Merchant Bank Berhad 16,000 101,242
Berjaya Sports Toto Berhad 26,000 121,060
Commerce Asset Holding Berhad 20,000 58,103
DCB Holdings Berhad 32,000 103,152
Gamuda Berhad 17,333 62,081
Malayan Banking Berhad 20,000 210,920
United Engineers (Malaysia) Ltd. 13,000 105,022
---------
761,580
---------
NETHERLANDS (5.5%)
Elsevier NV 6,000 101,621
Koninklijke Ahold NV 2,245 170,695
Koninklijke Ahrend Groep NV 1,500 94,976
Nutricia Verenidge Bedrijven N.V. 600 93,616
* Ordina Beheer N.V. 1,040 78,153
Wolters Kluwer NV 1,012 121,881
---------
660,942
---------
NORWAY (4.4%)
Kverneland ASA 3,200 94,471
* Merkantildata 8,500 168,487
* Tandberg ASA 3,300 39,897
* Tandberg Television ASA 13,200 120,619
Tomra Systems ASA 5,000 114,574
---------
538,048
---------
PHILIPPINES (1.2%)
* Belle Corporation 200,000 53,091
* DMCI Holdings, Inc. 143,000 86,765
---------
139,856
---------
</TABLE>
<PAGE> 108
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
SINGAPORE (9.7%)
City Developments Limited 9,000 $ 83,677
DBS Land Limited 36,000 125,830
Development Bank of Singapore Limited 15,000 187,697
Oversea-Chinese Banking Corporation Ltd. 15,000 186,648
Overseas Union Bank Ltd. 20,000 137,015
Parkway Holdings Limited 43,000 213,422
United Overseas Bank Ltd. 10,000 102,761
Wing Tai Holdings Ltd. 45,000 134,009
----------
1,171,059
----------
SPAIN (3.8%)
Banco Intercontinental Espanol, SA 900 152,410
Electricas Reunidas de Zaragoza, SA 2,800 105,693
* Sol Melia, SA 5,600 207,896
----------
465,999
----------
SWEDEN (3.7%)
Autoliv AB 6,000 212,604
Ericsson Telefonaktiebolaget 6,800 239,192
----------
451,796
----------
SWITZERLAND (7.5%)
Nestle SA 70 87,215
Novartis AG Regular Shares 190 258,247
Novartis AG 30 40,882
Roche Holding AG 30 267,167
* Roche Holding AG Warrants 98 "Jubilee" 8 561
Zurich Versicherungs 700 257,681
----------
911,753
----------
THAILAND (0.2%)
Central Pattana Public Company Ltd. 10,000 26,653
* Thai Farmers Bank Public Company Ltd. (Warrants) 500 501
----------
27,154
----------
UNITED KINGDOM (12.0%)
Compass Group plc 12,700 141,752
HSBC Holdings plc 12,758 396,565
J.D. Wetherspoon plc 4,618 100,004
Lloyds TSB Group plc 13,000 130,825
Logica plc 6,600 93,571
Misys plc 5,400 122,581
Serco Group plc 8,200 92,735
Standard Chartered plc 10,476 166,121
Zeneca Group plc 7,000 212,652
----------
1,456,806
----------
</TABLE>
<PAGE> 109
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
UNITED STATES (11.7%)
Credicorp Ltd., ADR 5,000 $ 112,500
Panamerican Beverages, Inc., ADR 10,000 290,000
Santa Isabel, ADR 5,200 151,450
* State Bank of India, ADR 15,000 379,650
Telecomunicacoes Brasileiras SA, ADR 1,400 194,600
Telefonica de Argentina SA, ADR 5,000 181,250
Telefonica del Peru SA, ADR 4,500 114,188
-----------
1,423,638
-----------
TOTAL COMMON STOCKS (Cost $10,050,524)(97.0%) 11,769,419
MONEY MARKET MUTUAL FUNDS
U.S. Government Money Market Mutual Fund
(Cost $250,000)(2.1%) 250,000 250,000
-----------
TOTAL INVESTMENTS (Cost $10,300,524) (99.1%) 12,019,419
Other assets, less liabilities (0.9%) 109,835
-----------
NET ASSETS (100%) $12,129,254
===========
</TABLE>
INDUSTRY COMPOSITION
<TABLE>
<CAPTION>
INDUSTRY PERCENT
- -------- -------
<S> <C>
Auto/Truck Manufacturers 2.4
Bio Tech & Med Devices 2.5
Cellular Telephone 0.4
Commercial Banks 22.1
Computer Software 3.6
Computers & Peripheral 2.7
Construction & Engineering 2.6
Consumer Service 2.3
Drug & Health Care 10.8
Electric Power Utilities 0.9
Entertainment & Leisure 1.4
Financial Services 5.2
Food Processing 3.2
Lodging & Restaurants 3.7
Machinery 4.2
Public Utilities 2.6
Publishing 1.8
Real Estate Development 6.1
Real Estate Investment 0.9
Retailing 8.7
Telecommunications 8.6
Tobacco 0.3
----
Industry percent of net assets 97.0%
Money Market Mutual Funds 2.1%
Other assets, less liabilities 0.9%
----
Percent of Net Assets 100%
----
</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, 1997 was $10,300,524, the aggregate gross unrealized appreciation for all
investments was $2,002,534 and aggregate gross unrealized depreciation for
all investments was $283,576.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 110
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE LARGE-CAP VALUE FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ATHLETIC FOOTWEAR/APPAREL (2.7%)
Nike, Inc. 1,500 $ 85,500
------------
BANKS (3.4%)
Wells Fargo & Company 400 105,400
------------
BEVERAGES (9.5%)
Anheuser-Busch Companies, Inc. 2,400 102,900
Coca-Cola Company 1,700 116,025
PepsiCo, Inc. 2,100 77,175
------------
296,100
------------
COMPUTER SOFTWARE (4.0%)
* Microsoft Corporation 1,000 124,000
------------
COMPUTERS (4.4%)
Hewlett-Packard Company 1,000 51,500
International Business Machines Corporation 1,000 86,500
------------
138,000
------------
CONSUMER PRODUCTS (8.1%)
Clorox Company 1,000 126,250
Gillette Company 1,400 124,425
------------
250,675
------------
DRUGS (4.1%)
Abbott Labs 2,000 126,000
------------
ENTERTAINMENT (3.9%)
The Walt Disney Company (Holding Co.) 1,500 122,813
------------
FINANCIAL/BUSINESS SERVICES (8.4%)
American Express Company 2,000 139,000
Charles Schwab Corporation 3,000 121,875
------------
260,875
------------
FOOD (13.3%)
Campbell Soup Company 2,800 128,800
Hershey Foods Corporation 2,200 123,475
Quaker Oats Company 1,500 61,875
Wrigley (WM) Jr. Company 1,700 100,725
------------
414,875
------------
HEALTH (3.2%)
Becton, Dickinson & Company 2,000 98,500
------------
</TABLE>
<PAGE> 111
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE LARGE-CAP VALUE FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MEDICAL SUPPLIES (6.5%)
Kimberly-Clark Corporation 2,000 $ 100,250
Pfizer, Inc. 1,000 102,875
----------
203,125
----------
PHARMACEUTICALS (10.7%)
Eli Lilly & Company 1,000 93,000
Johnson & Johnson 1,900 113,763
Merck & Company, Inc. 1,400 125,825
----------
332,588
----------
PHOTOGRAPHY (3.2%)
Eastman Kodak Company 1,200 99,450
----------
PUBLISHING (3.9%)
Gannett Company, Inc. 1,300 120,250
----------
PUBLISHING - NEWSPAPERS (2.8%)
New York Times Company Class A 1,900 87,518
----------
SEMICONDUCTOR - RELATED DEVICE (4.9%)
Intel Corporation 1,000 151,500
----------
TOTAL COMMON STOCKS (Cost $2,260,193)(97.0%) 3,017,169
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund
(Cost $135,000) (4.4%) 135,000 135,000
----------
TOTAL INVESTMENTS (Cost $2,395,193) (101.4%) 3,152,169
Liabilities, less other assets (-1.4%) (42,189)
----------
NET ASSETS (100%) $3,109,980
==========
</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, 1997 was $2,395,193, the aggregate gross unrealized appreciation for all
investments was $758,447 and aggregate gross unrealized depreciation for all
investments was $1,471.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 112
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AIR FREIGHT (2.3%)
Circle International Group, Inc. 3,300 $ 91,575
--------
AUTO PARTS-ORIGINAL EQUIPMENT (5.7%)
* Gentex Corporation 4,600 92,575
Paccar, Inc. 3,000 135,750
--------
228,325
--------
BEVERAGES (3.6%)
* Robert Mondavi Corporation 3,200 142,400
--------
BUSINESS EQUIPMENT/SERVICE (2.5%)
* Greenwich Air Services, Inc. 3,500 101,500
--------
CLOTHING (3.3%)
* Fruit of the Loom, Inc. 3,800 132,525
--------
COMMUNICATION - EQUIPMENT (2.5%)
* Qualcomm, Inc. 2,100 101,325
--------
COMPUTER MICROSYSTEMS (4.6%)
* Dallas Semiconductor Corporation 4,800 185,400
--------
COMPUTER SOFTWARE (1.8%)
* Imnet Systems, Inc. 2,900 72,500
--------
COMPUTERS - PERIPHERAL EQUIPMENT (4.3%)
* American Power Conversion Corp. 3,500 81,375
* MicroTouch Systems, Inc. 3,600 90,900
--------
172,275
--------
HOSPITAL SUPPLIES (2.7%)
* Advanced Technology Laboratories, Inc. 2,800 108,500
--------
HOUSEHOLD FURNISHINGS APPLIANCE (7.6%)
Bush Industries, Inc. 4,000 90,000
Herman Miller, Inc. 6,000 214,500
--------
304,500
--------
</TABLE>
<PAGE> 113
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INSTRUMENTS - SCIENTIFIC (2.0%)
* Water Corporation 2,500 $ 80,625
--------
LIFE INSURANCE (6.0%)
Protective Life Corporation 3,000 134,250
Western National Corporation 4,000 104,500
--------
238,750
--------
NURSING HOMES (3.0%)
* Genesis Health Ventures, Inc. 3,600 118,350
--------
OIL/GAS EQUIPMENT SERVICES (10.1%)
* Nuevo Energy Company 3,300 143,962
* Rowan Companies, Inc. 5,700 131,813
Tidewater, Inc. 3,050 128,481
--------
404,256
--------
POLLUTION CONTROL (4.9%)
* Newpark Resources, Inc. 3,770 197,925
--------
RESTAURANTS (2.9%)
* Cracker Barrel Old Country Store, Inc. 4,000 116,000
--------
RETAIL (2.5%)
* Stein Mart, Inc. 3,300 99,825
--------
RETAIL-SPECIALTY (4.8%)
* AutoZone, Inc. 4,500 105,188
Pier 1 Imports, Inc. 3,800 85,025
--------
190,213
--------
RETAIL STORES-DRUGS (3.3%)
* CVS Corporation 2,800 134,050
--------
SEMICONDUCTOR RELATED DEVICE (2.2%)
* Photronics, Inc. 2,000 89,250
--------
SPECIAL INDUSTRIAL MACHINERY (6.0%)
Briggs & Stratton Corporation 2,200 113,575
Pentair Industries, Inc. 3,800 124,925
--------
238,500
--------
TRUCKERS (3.9%)
* Swift Transportation Co., Inc. 4,800 154,800
--------
</TABLE>
<PAGE> 114
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
TOTAL COMMON STOCKS (Cost $3,064,256) (92.5%) $3,703,369
----------
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 185,000 185,000
Vista Treasury Plus Money Market Fund 115,000 115,000
----------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $300,000) (7.5%) 300,000
----------
TOTAL INVESTMENTS (Cost $3,364,256) (100.0%) 4,003,369
Liabilities, less other assets (0.0%) (1,234)
----------
NET ASSETS (100%) $4,002,135
==========
</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, 1997 was $3,364,256, the aggregate gross unrealized appreciation for all
investments was $695,869 and aggregate gross unrealized depreciation for all
investments was $56,756.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 115
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
BLUE CHIP CONVERTIBLE EMERGING
GROWTH FUND SECURITIES FUND GROWTH FUND
----------- --------------- -----------
<S> <C> <C> <C>
ASSETS
Investment in securities, at value
(cost $4,842,303, $18,806,195,
$5,140,070, respectively) $5,344,337 $20,177,022 $6,116,356
Cash 50,872 51,574 32,911
Receivable for investment securities sold 77,263 379,631 --
Dividends receivable 2,268 32,187 290
Interest receivable 21 154,372 26
---------- ----------- ----------
Total assets 5,474,761 20,794,786 6,149,583
---------- ----------- ----------
LIABILITIES
Payable for investment securities purchased -- 223,126 139,257
Payable for fund shares redeemed 77 56 60
Other payables and accrued expenses 824 344 560
---------- ----------- ----------
Total liabilities 901 223,526 139,877
---------- ----------- ----------
NET ASSETS $5,473,860 $20,571,260 $6,009,706
========== =========== ==========
NET ASSETS CONSIST OF (Note 1):
Capital stock (Par Value $.001 per share) $ 354 $ 1,857 $ 387
Additional paid in capital 4,125,193 18,809,616 5,620,631
Accumulated net realized gain (loss) on investments 846,279 218,279 (587,598)
Undistributed net investment income -- 170,681 --
Net unrealized appreciation on investments 502,034 1,370,827 976,286
---------- ----------- ----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $5,473,860 $20,571,260 $6,009,706
========== =========== ==========
CLASS A:
Net Assets $5,428,285 $20,552,883 $5,788,730
---------- ----------- ----------
Shares Outstanding 351,099 1,855,482 373,020
---------- ----------- ----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 15.46 $ 11.08 $ 15.52
========== =========== ==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 16.19 $ 11.60 $ 16.25
========== =========== ==========
CLASS D:
Net Assets $ 45,575 $ 18,377 $ 220,976
---------- ----------- ----------
Shares Outstanding 2,976 1,662 14,383
---------- ----------- ----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 15.31 $ 11.06 $ 15.36
========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 116
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES - (CONTINUED)
MAY 31, 1997
<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 $4,778,451, $10,300,524,
$2,395,193, respectively) $5,243,450 $12,019,419 $3,152,169
Cash 12,377 134,287 38,202
Receivable for investment securities sold 665,504 56,644 --
Dividends receivable 4,758 10,529 3,517
Interest receivable 52 -- --
---------- ----------- ----------
Total assets 5,926,141 12,220,879 3,193,888
---------- ----------- ----------
LIABILITIES
Payable for investment securities purchased 433,793 91,069 83,370
Payable for fund shares redeemed 2,212 63 73
Other payables and accrued expenses 203 493 465
---------- ----------- ----------
Total liabilities 436,208 91,625 83,908
---------- ----------- ----------
NET ASSETS $5,489,933 $12,129,254 $3,109,980
========== =========== ==========
NET ASSETS CONSIST OF (Note 1):
Capital Stock (Par Value $.001 per share) $ 478 $ 963 $ 213
Additional paid in capital 4,610,691 10,754,431 2,331,412
Accumulated net realized gain (loss) on investments
and foreign currency transactions 413,765 (345,098) 21,379
Net unrealized appreciation on investments and
foreign currency transactions 464,999 1,718,958 756,976
---------- ----------- ----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $5,489,933 $12,129,254 $3,109,980
========== =========== ==========
CLASS A:
Net Assets $5,476,969 $12,098,843 $3,054,239
---------- ----------- ----------
Shares Outstanding 477,196 960,665 209,015
---------- ----------- ----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 11.48 $ 12.59 $ 14.61
========== =========== ==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 12.02 $ 13.18 $ 15.30
========== =========== ==========
CLASS D:
Net Assets $ 12,964 $ 30,411 $ 55,741
---------- ----------- ----------
Shares Outstanding 1,141 2,436* 3,841
---------- ----------- ----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 11.36 $ 12.49 $ 14.51
========== =========== ==========
</TABLE>
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 117
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE
MID-CAP
GROWTH FUND
-----------
<S> <C>
ASSETS
Investment in securities, at value
(cost$3,364,256) $4,003,369
Cash 36,124
Receivable for investment securities sold 111,383
Receivable for fund shares sold 14,811
Dividends receivable 2,270
Interest receivable 16
----------
Total assets 4,167,973
----------
LIABILITIES
Payable for investment securities purchased 162,868
Payable for fund shares redeemed 2,970
----------
Total liabilities 165,838
----------
NET ASSETS $4,002,135
==========
NET ASSETS CONSIST OF (Note 1):
Capital Stock (Par Value $.001 per share) $ 304
Additional paid in capital 3,301,497
Accumulated net realized gain on investments 61,221
Net unrealized appreciation on investments 639,113
----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $4,002,135
==========
CLASS A:
Net Assets $2,174,053
----------
Shares Outstanding 164,702
----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 13.20
==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 13.82
==========
CLASS D:
Net Assets $1,828,082
----------
Shares Outstanding 139,681
----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 13.09
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 118
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE RESERVE
BLUE CHIP CONVERTIBLE EMERGING INFORMED INVESTORS
GROWTH FUND SECURITIES FUND GROWTH FUND GROWTH FUND
----------- --------------- ----------- -----------
September 3, 1996
(commencement of
Year Ended operations) to Year Ended Year Ended
May 31, 1997 May 31, 1997 May 31, 1997 May 31, 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 32,176 $ 249,907 $ 3,372* $ 24,627
Interest 896 363,077 1,049 41,386
---------- ----------- ----------- -----------
Total investment income 33,072 612,984 4,421 66,013
EXPENSES
Comprehensive fee (Note 3) 79,311 205,951 98,087 83,573
12b-1 Fee (Note 4)
Class A 13,038 34,294 15,631 13,889
Class D 723 124 2,868 161
---------- ----------- ----------- -----------
Total expenses 93,072 240,369 116,586 97,623
---------- ----------- ----------- -----------
Less fees waived -- 188,113 -- --
---------- ----------- ----------- -----------
Net expenses -- 52,256 -- --
---------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) (60,000) 560,728 (112,165) (31,610)
---------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Proceeds from sales of securities 5,655,127 16,158,164 1,743,151 11,725,713
Cost of securities sold 4,678,455 15,933,090 2,320,269 10,472,385
---------- ----------- ----------- -----------
Net realized gain (loss) on
investments (Note 1) 976,672 225,074 (577,118) 1,253,328
Net unrealized appreciation
(depreciation) on investments (642,561) 1,370,827 (847,249) (1,975,139)
---------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments 334,111 1,595,901 (1,424,367) (721,811)
---------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 274,111 $ 2,156,629 $(1,536,532) $ (753,421)
========== =========== =========== ===========
</TABLE>
* Includes foreign tax withholding of $114
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 119
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS - (CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
INTERNATIONAL LARGE-CAP MID-CAP
EQUITY FUND VALUE FUND GROWTH FUND
----------- ---------- -----------
Year Ended Year Ended Year Ended
May 31, 1997 May 31, 1997 May 31, 1997
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 97,550* $ 32,111 $ 13,610
Interest 561 212 533
---------- -------- ----------
Total investment income 98,111 32,323 14,143
EXPENSES
Comprehensive fee (Note 3) 145,974 33,940 49,028
12b-1 Fee (Note 4)
Class A 20,754 5,613 3,404
Class D 231 172 19,070
---------- -------- ----------
Total expenses 166,959 39,725 71,502
---------- -------- ----------
NET INVESTMENT LOSS (68,848) (7,402) (57,359)
---------- -------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Proceeds from sales of securities 3,956,864 383,913 3,034,153
Cost of securities sold 4,229,994 362,534 2,889,407
---------- -------- ----------
Net realized gain (loss) on
investments and foreign
currency transactions (Note 1) (273,130) 21,379 144,746
Net unrealized appreciation
on investments and foreign
currency transactions 1,387,936 686,853 185,442
---------- -------- ----------
Net realized and unrealized gain
on investments and foreign
currency transactions 1,114,806 708,232 330,188
---------- -------- ----------
Net increase in net assets resulting
from operations $1,045,958 $700,830 $ 272,829
========== ======== ==========
</TABLE>
* Includes foreign tax withholding of $14,966
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 120
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE
RESERVE BLUE CHIP GROWTH FUND SECURITIES FUND
----------------------------- -------------------
September 3, 1996
(commencement of
Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997
------------ ------------ -------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income gain (loss) $ (60,000) $ (34,916) $ 560,728
Net realized gain (loss) from investments 976,672 (2,045) 225,074
Net unrealized appreciation (depreciation)
from investments (642,561) 975,733 1,370,827
----------- ---------- ------------
Net increase in net assets
resulting from operations 274,111 938,772 2,156,629
----------- ---------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (6,791)
Net realized gain on investments (68,349) (164,889) (390,051)
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 1,176,349 2,757,098 20,601,861
Reinvestment of distributions 68,323 164,889 201,224
Cost of shares redeemed (1,148,732) (517,167) (1,991,612)
----------- ---------- ------------
Net increase in net assets resulting
from capital share transactions 95,940 2,404,820 18,811,473
----------- ---------- ------------
Net increase in net assets 301,702 3,178,703 20,571,260
NET ASSETS:
Beginning of period 5,172,158 1,993,455 0
----------- ---------- ------------
End of period (including undistributed
net investment income of $0, $0
and $170,681, respectively) $ 5,473,860 $5,172,158 $ 20,571,260
=========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL
RESERVE EMERGING GROWTH FUND EQUITY FUND
----------------------------- -------------------------------
July 13, 1996
(commencement of
Year Ended Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
----------------------------- -------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (112,165) $ (57,980) $ (68,848) $ (17,145)
Net realized gain (loss) from investments
and foreign currency transactions (577,118) 80,546 (273,130) (71,968)
Net unrealized appreciation (depreciation)
from investments and foreign
currency transactions (847,249) 1,655,638 1,387,936 331,022
----------- ---------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (1,536,532) 1,678,204 1,045,958 241,909
----------- ---------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments -- (93,899) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 2,187,444 4,281,980 8,057,063 3,465,234
Reinvestment of distributions -- 93,770 -- --
Cost of shares redeemed (1,540,646) (301,485) (558,291) (122,619)
----------- ---------- ----------- ----------
Net increase in net assets resulting
from capital share transactions 646,798 4,074,265 7,498,772 3,342,615
----------- ---------- ----------- ----------
Net increase (decrease) in net assets (889,734) 5,658,570 8,544,730 3,584,524
NET ASSETS:
Beginning of period 6,899,440 1,240,870 3,584,524 0
----------- ---------- ----------- ----------
End of period $ 6,009,706 $6,899,440 $12,129,254 $3,584,524
=========== ========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 121
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS - (CONTINUED)
<TABLE>
<CAPTION>
RESERVE
RESERVE INFORMED LARGE-CAP
INVESTORS GROWTH FUND VALUE FUND
-------------------------------- -------------------------------
January 2, 1996
(commencement of
Year Ended Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (31,610) $ (147,983) $ (7,402) $ (1,091)
Net realized gain from investments 1,253,328 850,186 21,379 --
Net unrealized appreciation (depreciation)
from investments (1,975,139) 1,109,280 686,853 70,123
----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (753,421) 1,811,483 700,830 69,032
----------- ----------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (525,939) (795,337) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 1,400,871 6,254,939 1,345,107 1,165,180
Reinvestment of distributions 395,531 790,060 -- --
Cost of shares redeemed (1,435,172) (8,490,282) (167,017) (3,152)
----------- ----------- ----------- ----------
Net increase (decrease) in net assets resulting
from capital share transactions 361,230 (1,445,283) 1,178,090 1,162,028
----------- ----------- ----------- ----------
Net increase (decrease) in net assets (918,130) (429,137) 1,878,920 1,231,060
NET ASSETS:
Beginning of period 6,408,063 6,837,200 1,231,060 0
----------- ----------- ----------- ----------
End of period $ 5,489,933 $ 6,408,063 $ 3,109,980 $1,231,060
=========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
RESERVE MID-CAP
GROWTH FUND
-------------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (57,359) $ (32,656)
Net realized gain (loss) from investments 144,746 (83,525)
Net unrealized appreciation from
investments 185,442 453,671
----------- ----------
Net increase in net assets
resulting from operations 272,829 337,490
----------- ----------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 3,118,364 2,345,759
Cost of shares redeemed (1,928,613) (143,694)
----------- ----------
Net increase in net assets resulting
from capital share transactions 1,189,751 2,202,065
----------- ----------
Net increase in net assets 1,462,580 2,539,555
NET ASSETS:
Beginning of period 2,539,555 0
----------- ----------
End of period $ 4,002,135 $2,539,555
=========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 122
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reserve Private Equity Series (the "Trust") consists of the following
funds: Reserve Blue Chip Growth Fund, Reserve Convertible Securities Fund,
Reserve Emerging Growth Fund, Reserve Informed Investors Growth Fund,
Reserve International Equity Fund, Reserve Large-Cap Value Fund, and
Reserve Mid-Cap Growth Fund (formerly 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, 1997 as follows:
[See table below]
<PAGE> 123
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------
Undistributed
Net Accumulated
Investment Realized
Reserve Fund Capital Income Gain
------------ ------- ------ ----
<S> <C> <C> <C>
Blue Chip Growth Fund (112,615) 60,000 52,615
Emerging Growth Fund (112,165) 112,165 --
Informed Investors Growth Fund (31,610) 31,610 --
International Equity Fund (68,848) 68,848 --
Large-Cap Value Fund (7,402) 7,402 --
Mid-Cap Growth Fund (57,359) 57,359 --
</TABLE>
These reclassifications had no effect on net investment income, net
realized gain on investments, or net assets for the year ended May 31,
1997.
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.
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, 1997, which are available to offset
future realized capital gains, if any:
<TABLE>
<CAPTION>
Capital loss Expiration
carryforward year
------------ ----
<S> <C> <C>
Reserve Emerging Growth Fund $161,015 2005
Reserve International Equity Fund 71,968 2004
Reserve International Equity Fund 178,347 2005
</TABLE>
<PAGE> 124
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
2. INVESTMENT ACTIVITY
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the year ended May 31, 1997, were
as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate
Reserve Fund Purchases Sales
------------ --------- -----
<S> <C> <C>
Blue Chip Growth Fund $ 5,425,272 $ 5,655,127
Convertible Securities Fund 34,711,469 16,158,164
Emerging Growth Fund 2,264,488 1,743,151
Informed Investors Growth Fund 11,386,974 11,725,713
International Equity Fund 11,336,214 3,956,864
Large-Cap Value Fund 1,507,717 383,913
Mid-Cap Growth Fund 4,017,934 3,034,153
</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 except for the International
Equity Fund for which it receives 1.75%. RMCI is currently waiving a
portion of its comprehensive fee in the Reserve Convertible Securities
Fund.
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
decisions for 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%
Convertible Securities Fund New Vernon Advisors, Inc. 0.75%
Emerging Growth Fund Roanoke Asset Management Corp. 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 Southern Capital Advisors 0.75%
</TABLE>
Trainer, Wortham & Company, Inc. owns 24% of the outstanding shares of the
Reserve Blue Chip Growth Fund at May 31, 1997.
<PAGE> 125
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
As of May 31, 1997, RMCI and affiliated persons owned 7%, 13%, 5%, 11%,
20%, and 25% of the Reserve Blue Chip Growth Fund, Reserve Emerging
Growth Fund, Reserve Informed Investors Growth Fund, Reserve
International EquityFund, Reserve Large-Cap Value Fund, and Reserve
Mid-Cap Growth Fund, respectively. Taconic Petroleum Corp. owns 24% of
Reserve Large-Cap Value Fund. Christopher E. Vroom owns 7% of the
Reserve Emerging Growth Fund.
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 shares and 1.00% per annum for Class D shares of the
average daily net assets of shareholder accounts as to which the payee has
rendered distribution assistance. For the year ended May 31, 1997, the
Funds paid distribution expenses to RPI as follows:
<TABLE>
<CAPTION>
Reserve Fund Class A Class D
------------ ------- -------
<S> <C> <C>
Blue Chip Growth Fund $13,038 $ 723
Convertible Securities Fund* 283 14
Emerging Growth Fund 15,631 2,868
Informed Investors Growth Fund 13,889 161
International Equity Fund 20,754 231
Large-Cap Value Fund 5,613 172
Mid-Cap Growth Fund 3,404 19,070
</TABLE>
* RMCI waived 12b-1 fees of $34,011 and $110, for Reserve Convertible
Securities Fund Class A and Class D, respectively, for the period
September 3, 1996 (commencement of operations) to May 31, 1997.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock of each Fund for the period ended May 31,
1997, were as follows:
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
----------------------------- -------------------------------- ------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
-------------------------------- ------------------------
Shares Amount Shares Amount
------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold 76,231 $ 1,119,812 3,957 $ 56,537
Reinvested 4,875 67,171 84 1,152
Redeemed (74,089) (1,092,588) (3,930) (56,144)
------- ----------- ------ --------
Net increase 7,017 $ 94,395 111 $ 1,545
======= =========== ====== ========
</TABLE>
<PAGE> 126
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE SECURITIES FUND CLASS A CLASS D
- ----------------------------------- ------------------------------- -------------------------------
September 3, 1996 September 3, 1996
(commencement of operations) to (commencement of operations) to
May 31, 1997 May 31, 1997
------------------------------- --------------------------------
Shares Amount Shares Amount
---------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold 2,026,485 $20,572,892 2,814 $ 28,969
Reinvested 19,551 201,111 11 113
Redeemed (190,554) (1,979,449) (1,163) (12,163)
--------- ----------- ------ --------
Net increase 1,855,482 $18,794,554 1,662 $ 16,919
========= =========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- --------------------------------- ------------------------------- ----------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------------- ----------------------------
Shares Amount Shares Amount
------- ----------- ------ ---------
<S> <C> <C> <C> <C>
Sold 117,069 $ 1,999,906 10,982 $ 187,538
Redeemed (84,292) (1,389,829) (9,047) (150,817)
------- ----------- ------ ---------
Net increase 32,777 $ 610,077 1,935 $ 36,721
======= =========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- -------------------------------- -----------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
-------------------------------- -----------------------
Shares Amount Shares Amount
-------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold 116,034 $ 1,389,343 911 $11,528
Reinvested 37,456 395,531 -- --
Redeemed (121,475) (1,425,528) (814) (9,644)
-------- ---------- ---- -------
Net increase 32,015 $ 359,346 97 $ 1,884
======== ========== ==== =======
</TABLE>
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- --------------------------- ---------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
--------------------------- ---------------------------
Shares Amount Shares Amount
------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold 689,779 $8,029,446 2,446 $27,617
Redeemed (47,041) (551,604) (562) (6,687)
------- ---------- ----- -------
Net increase 642,738 $7,477,842 1,884 $20,930
======= ========== ===== =======
</TABLE>
<PAGE> 127
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE LARGE-CAP VALUE FUND CLASS A CLASS D
- ----------------------------- ------------------------- ----------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------- ----------------------
Shares Amount Shares Amount
------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold 108,518 $1,276,605 5,080 $ 68,502
Redeemed (11,940) (151,013) (1,239) (16,004)
------- ---------- ------ --------
Net increase 96,578 $1,125,592 3,841 $ 52,498
======= ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ------------------------- ---------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------- ---------------------------
Shares Amount Shares Amount
------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Sold 198,244 $2,390,365 58,332 $ 727,999
Redeemed (44,223) (530,105) (114,850) (1,398,508)
------- ---------- -------- -----------
Net increase 154,021 1,860,260 (56,518) $ (670,509)
======= ========== ======== ===========
</TABLE>
Transactions in capital stock of each Fund for the period ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
- ----------------------------- ------------------------- --------------------
February 13, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
------------------------- --------------------
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>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- ---------------------------- ------------------------- ---------------------
February 26, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
------------------------- ---------------------
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>
<PAGE> 128
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- --------------------------- ----------------------
February 13, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
--------------------------- ----------------------
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>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- -------------------------- ------------------
July 13, 1995 March 11, 1996
(commencement (commencement
of operations) to of operations) to
May 31, 1996 May 31, 1996
-------------------------- ------------------
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>
RESERVE LARGE-CAP VALUE FUND CLASS A
- ---------------------------- ------------------------
January 2, 1996
(commencement
of operations) to
May 31, 1996
-------------------------
Shares Amount
------- ----------
<S> <C> <C>
Sold 112,729 $1,165,180
Redeemed (292) (3,152)
------- ----------
Net increase 112,437 $1,162,028
======= ==========
</TABLE>
<PAGE> 129
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ----------------------- -------------------------
March 13, 1996
(Commencement
of operations) to Year Ended
May 31, 1996 May 31, 1996
----------------------- -------------------------
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>
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.
<PAGE> 130
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
7. FINANCIAL HIGHLIGHTS (FOR EACH SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
- ----------------------------- ------------------------------------------------- ---------------------------------
October 28, 1994 February 13, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ---------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 14.91 $12.03 $10.00 $ 14.88 $13.49
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.17) (.10) (.03) (0.46) (.04)
Net realized and unrealized gain 0.91 3.62 2.06 1.08 1.43
------- ------ ------ ------- ------
Total from investment operations 0.74 3.52 2.03 0.62 1.39
Less distribution from net realized gain (.19) (.64) -- (.19) --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 15.46 $14.91 $12.03 $ 15.31 $14.88
======= ====== ====== ======= ======
Total Return 5.12 % 30.10 % 20.30%(2) 4.32 % 10.30 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,428 $5,130 $1,993 $ 46 $ 43
Ratio of expenses to average net assets
before waiver 1.75 % 1.75 % 1.75%(1) 2.50 % 2.50 %(1)
Ratio of expenses to average net assets,
net of waiver 1.75 % 1.75 % 1.73%(1) 2.50 % 2.50 %(1)
Ratio of net investment loss to
average net assets, before waiver (1.13)% (0.94)% (0.72)%(1) (1.90)% (1.70)%(1)
Ratio of net investment loss to average
net assets, net of waiver (1.13)% (0.94)% (0.70)%(1) (1.90)% (1.70)%(1)
Portfolio turnover rate 109 % 72 % 68 % 109 % 72 %
Average commission per share on
portfolio transactions $0.0419 $ 0.06 N/A $0.0419 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE SECURITIES FUND CLASS A CLASS D
- ----------------------------------- ----------------- -----------------
September 3, 1996 September 3, 1996
(commencement of (commencement of
operations) to operations) to
May 31, 1997 May 31, 1997
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period $ 10.00 $ 10.00
------- -------
Income from investment operations
Net investment income 0.34 0.33
Net realized and unrealized gain (loss) 0.99 0.98
------- -------
Total from investment operations 1.33 1.31
Less distribution from net investment
income and realized gain (.25) (.25)
------- -------
NET ASSET VALUE, end of period $ 11.08 $ 11.06
======= =======
Total Return 13.53 %(2) 13.33 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $20,553 $ 18
Ratio of expenses to average net assets before waiver 2.36 %(1) 3.37 %(1)
Ratio of expenses to average net assets, net of waiver 0.52 %(1) 0.83 %(1)
Ratio of net investment income to average
net assets, before waiver 3.67 %(1) 2.57 %(1)
Ratio of net investment income to average net assets,
net of waiver 5.52 %(1) 5.12 %(1)
Portfolio turnover rate 113 % 113 %
Average commission per share on
portfolio transactions $0.0564 $ 0.0564
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 131
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- ---------------------------- ----------------------------------------------- ---------------------------------
November 14, 1994 February 26, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ----------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 19.56 $12.21 $10.00 $ 19.52 $16.88
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.28) (.17) (.09) (0.49) (.04)
Net realized and unrealized gain (loss) (3.76) 8.05 2.30 (3.67) 2.68
------- ------ ------ ------- ------
Total from investment operations (4.04) 7.88 2.21 (4.16) 2.64
Less distribution from net realized gain -- (.53) -- -- --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 15.52 $19.56 $12.21 $ 15.36 $19.52
======= ====== ====== ======= ======
Total Return (20.65)% 65.55 % 22.10 %(2) (21.31)% 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,789 $6,657 $1,241 $ 221 $ 243
Ratio of expenses to average net assets 1.75 % 1.75 % 1.75 %(1) 2.50 % 2.50%(1)
Ratio of net investment loss to
average net assets (1.69)% (1.70)% (1.62)%(1) (2.45)% (2.48)%(1)
Portfolio turnover rate 28 % 38 % 43 % 28 % 38%
Average commission per share on
portfolio transactions $0.0048 $ 0.01 N/A $0.0048 $ 0.01
</TABLE>
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- ------------------------------------------------ --------------------------------
December 28, 1994 March 22, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ----------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 14.36 $11.99 $10.00 $ 14.33 $12.29
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.07) (0.33) (.07) (0.18) (.06)
Net realized and unrealized gain (1.66) 3.87 2.06 (1.64) 2.10
------- ------ ------ ------- ------
Total from investment operations (1.73) 3.54 1.99 (1.82) 2.04
Less distribution from net realized gain (1.15) (1.17) -- (1.15) --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 11.48 $14.36 $11.99 $ 11.36 $14.33
======= ====== ====== ======= ======
Total Return (11.35)% 29.75 % 19.90 %(2) (12.04)% 16.60 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,477 $6,393 $6,837 $ 13 $ 15
Ratio of expenses to average net assets 1.75 % 1.75 % 1.75 %(1) 2.50 % 2.50 %(1)
Ratio of net investment loss to
average net assets (0.57)% (1.57)% (1.62)%(1) (1.26)% (2.32)%(1)
Portfolio turnover rate 255 % 132 % 59 % 255 % 132 %
Average commission per share on
portfolio transactions $0.0612 $ 0.05 N/A $0.0612 $ 0.05
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 132
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- -------------------------------------- --------------------------------------
July 13, 1995 March 11, 1996
(commencement of (commencement of
Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 11.26 $ 10.00 $ 11.25 $ 10.79
------------ ------------ ------------ ------------
Income from investment operations
Net investment loss (0.07) (.05) (0.15) (.01)
Net realized and unrealized gain 1.40 1.31 1.39 .47
------------ ------------ ------------ ------------
Total from investment operations 1.33 1.26 1.24 .46
------------ ------------ ------------ ------------
NET ASSET VALUE, end of period $ 12.59 $ 11.26 $ 12.49 $ 11.25
============ ============ ============ ============
Total Return 11.81% 12.60%(2) 11.02% 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 12,099 $ 3,578 $ 30 $ 6
Ratio of expenses to average net assets
before waiver 2.00% 2.00%(1) 2.75% 2.75%(1)
Ratio of expenses to average net assets,
net of waiver 2.00% 1.99%(1) 2.75% 2.75%(1)
Ratio of net investment loss to average
net assets before waiver 0.82% (0.92)%(1) 1.63% (0.70)%(1)
Ratio of net investment loss to average
net assets net of waiver 0.82% (0.91)%(1) 1.63% (0.70)%(1)
Portfolio turnover rate 52% 70% 52% 70%
Average commission per share on
portfolio transactions $ 0.0273 $ 0.02 $ 0.0273 $ 0.02
</TABLE>
<TABLE>
<CAPTION>
RESERVE LARGE-CAP VALUE FUND CLASS A CLASS D
- ---------------------------- ------------------------------------ ----------------
January 2, 1996
(commencement of
Year Ended operations) to Year Ended
May 31, 1997 May 31, 1996 May 31, 1997
------------------------------------ ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 10.95 $ 10.00 $ 10.95
----------- ----------- ===========
Income from investment operations
Net investment loss (0.03) (0.01) (0.05)
Net realized and unrealized gain 3.69 0.96 3.61
----------- ----------- -----------
Total from investment operations 3.66 0.95 3.56
----------- ----------- -----------
NET ASSET VALUE, end of period $ 14.61 $ 10.95 $ 14.51
=========== =========== ===========
Total Return 33.42% 9.50%(2) 32.51%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 3,054 $ 1,231 $ 56
Ratio of expenses to average net assets 1.75% 1.75%(1) 2.50%
Ratio of net investment loss to average
net assets (0.32)% (0.32)%(1) (1.07)%
Portfolio turnover rate 18% 0 % 18%
Average commission per share on
portfolio transactions $ 0.0684 $ 0.08 $ 0.0684
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 133
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ------------------------------------ ----------------------------------
March 13, 1996
(commencement of
Year Ended operations) to Year Ended Year Ended
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 12.29 $ 10.94 $ 12.27 $ 10.00
----------- ----------- ----------- -----------
Income from investment operations
Net investment loss (0.11) (.01) (0.28) (0.17)
Net realized and unrealized gain 1.02 1.36 1.10 2.44
----------- ----------- ----------- -----------
Total from investment operations 0.91 1.35 0.82 2.27
----------- ----------- ----------- -----------
NET ASSET VALUE, end of period $ 13.20 $ 12.29 $ 13.09 $ 12.27
=========== =========== =========== ===========
Total Return 7.40% 12.34%(2) 6.68% 22.70%
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 2,174 $ 131 $ 1,828 $ 2,408
Ratio of expenses to average net assets 1.75% 1.74%(1) 2.50% 2.49%
Ratio of net investment loss to average
net assets (1.31)% (0.97)%(1) (2.08)% (2.00)%
Portfolio turnover rate 102% 85% 102% 85%
Average commission per share on
portfolio transactions $ 0.0545 $ 0.04 $ 0.0545 $ 0.04
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales
load.
<PAGE> 134
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 October 1, 1997.
TABLE OF CONTENTS
Page
----
Investment Policies 2
Other Policies 3
Trustees and Officers of the Trust 4
Investment Management and Other Agreements 6
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> 135
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; and (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 % (1/2
of 1%) of the securities (taken at market value) of such issuer and such
individuals owning more than one-half of one % (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> 136
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> 137
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, 1535 Presidential Drive, Apt. 4A, Columbus, OH
43212.
Mr. Emmet retired as the Managing Director of Servus Associates, Inc.,
and U.S.A. Representative of the First National Bank of Southern Africa in
1996. He is currently Trustee of RF. RIT. RNYTET. RTET. and RPES. Until 1989,
he was Senior Vice President of the New York branch of Banque Nationale de
Paris.
+*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.
MICHELLE L. NEUFELD, Counsel and Secretary, 810 Seventh Avenue, New York,
New York 10019.
Ms. Neufeld is Counsel and Secretary of RF, RIT, RTET, RNYTET, and RPES.
Before joining The Reserve Funds in 1997, Ms. Neufeld was a staff attorney at
NASD Regulation, Inc.
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., Inc.
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 disregard 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 FUNDS* (4 ADDITIONAL TRUSTS) PAID TO TRUSTEE*
------------------------------------------------------------------------------
<S> <C> <C>
Edwin Ehlert, Jr. $120.09 $30,500
Henri W. Emmet $133.87 $34,000
Rev. Donald J. Harrington $118.11 $30,000
</TABLE>
Amounts shown are for the Fund's fiscal year ending May 31, 1997.
<PAGE> 138
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 Service Plan). 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 review and
approval 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 and
approval 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 the 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.
SERVICE PLAN. The Trust maintains a Service 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.
<PAGE> 139
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.
The Glass-Steagall Act prohibits all entities which receive deposits from
engaging to any extent 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 Fund shares (such as
administrative and account maintenance services) may include banks, upon advice
of counsel that they are permitted to do so under applicable laws and
regulations, including the Glass-Steagall Act. In such event, no preference
will be given to securities issued by such banks as investment 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 banks may also receive compensation from the bank accounts they
service. It is Fund management's position that payments to banks pursuant to
the Plan for activities not primarily intended to result in the sale of a
Fund's 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. Financial institutions providing distribution assistance or
administrative services for the Fund may be required to register as securities
dealers in certain states.
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.
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 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 series. 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> 140
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%
of all shares voting as a group or 67% of the shares voted as a group at
an annual meeting of shareholders at which at least 50% of the shares of
each group are represented.
As of August 30, 1997, 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 (8.8%) (Class A); Trainer
Wortham & Co., Inc. 845 Third Avenue, New York, NY 10022 (23.8%) (Class A); Bear
Stearns, Imetrotech Center North, Brooklyn, NY 11201 (5.9%) (Class A); Arthur T.
Bent III, 18 Heights Road, Plandome, NY 11030 (6.9%) (Class A); and Verner M.
Swanson, 4225 Renshaw Run, Lambertville, MI 48144 (8%) (Class D).
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.
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
outstanding shares.
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> 141
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, 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%
of its taxable income to shareholders, derive at least 90% of its gross income
from dividends, interest and gains from the sale or disposition of securities
and derive less than 30% 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> 142
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.
<PAGE> 143
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> 144
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 the rates of return calculated
will not be average annual rates, but rather, actual annual, annualized or
aggregate rates of return.
<PAGE> 145
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and 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 Convertible Securities Fund, Reserve Emerging Growth Fund,
Reserve Informed Investors Growth Fund, Reserve International Equity Fund,
Reserve Large-Cap Value Fund, and Reserve Mid-Cap Growth Fund (formerly Reserve
North American Growth Fund)) (collectively the "Trust"), including the schedules
of portfolio investments, as of May 31, 1997, 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, 1997, 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, 1997,
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 27, 1997
<PAGE> 146
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BANKS (1.9%)
BankBoston Corporation 1,400 $102,200
--------
BEVERAGES (4.0%)
PepsiCo, Inc. 6,000 220,500
--------
BUILDING MATERIALS (1.8%)
* American Standard Companies, Inc. 2,000 100,250
--------
CHEMICALS - MISCELLANEOUS (4.3%)
ChemFirst, Inc. 9,200 238,050
--------
COMPUTER SERVICES (2.2%)
* Wang Laboratories, Inc. 5,800 118,900
--------
COMPUTER SOFTWARE (5.8%)
* CUC International, Inc. 6,450 148,350
National Data Corporation 3,900 171,112
--------
319,462
--------
CONSUMER SERVICES (2.2%)
* HFS, Inc. 2,200 118,525
--------
ELECTRONICS (6.8%)
General Electric Company 1,800 108,675
* Perceptron, Inc. 9,300 262,725
--------
371,400
--------
ENTERTAINMENT (3.1%)
Walt Disney Company 2,100 171,937
--------
FINANCIAL SERVICES (6.2%)
Federal National Mortgage Association 5,200 226,850
Pioneer Group, Inc. 4,400 110,550
--------
337,400
--------
FOOD (2.3%)
* Suiza Foods Corporation 4,200 125,475
--------
HOSPITAL MANAGEMENT (3.7%)
* Assisted Living Concepts, Inc. 8,000 200,000
--------
MANAGED CARE (1.1%)
* Physicians' Specialty Corporation 10,000 61,250
--------
</TABLE>
<PAGE> 147
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
MEDICAL SUPPLIES (1.3%)
* LaserSight Corporation 10,000 $ 70,000
----------
MISCELLANEOUS CONSUMER (2.1%)
* Gibson Greetings, Inc. 5,300 115,275
----------
MISCELLANEOUS MANUFACTURING (5.6%)
Warnaco Group, Inc. 5,300 173,575
Westinghouse Electric Corporation 6,500 131,625
----------
305,200
----------
MULTI-LINE INSURANCE (3.1%)
The Hartford Financial Services Group, Inc. 2,200 171,600
----------
OFFICE - BUSINESS EQUIPMENT (4.6%)
* American Pad & Paper Company 13,500 249,750
----------
OIL/GAS EQUIPMENT SERVICES (2.0%)
* Cairn Energy USA, Inc. 9,200 108,675
----------
PACKAGED SOFTWARE (3.9%)
Computer Associates International, Inc. 3,900 213,525
----------
PHARMACEUTICALS (7.1%)
* Bio-Technology General Corporation 5,400 78,300
Eli Lilly & Company 1,100 102,300
Johnson & Johnson 1,800 107,775
Merck & Co., Inc. 1,100 98,863
----------
387,238
----------
PUBLISHING (4.2%)
Harte-Hanks Communications 7,800 233,025
----------
RADIO, TV & BROADCAST COMMUNICATION EQUIPMENT (4.6%)
* American Radio Systems Corporation 1,400 52,150
* Sinclair Broadcast Group, Inc. 8,000 198,000
----------
250,150
----------
REAL ESTATE (4.6%)
Insignia Financial Group, Inc., Class A 14,200 252,050
----------
</TABLE>
<PAGE> 148
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
SPECIAL INDUSTRIAL MACHINERY (3.1%)
Thermo Electron Corporation 5,000 $ 172,500
-------------
TOTAL COMMON STOCKS (Cost $4,512,303) (91.6%) 5,014,337
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 260,000 260,000
Vista Treasury Plus Money Market Fund 70,000 70,000
-------------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $330,000) (6.0%) 330,000
-------------
TOTAL INVESTMENTS (Cost $4,842,303) (97.6%) 5,344,337
Other assets, less liabilities (2.4%) 129,523
-------------
NET ASSETS (100%) $ 5,473,860
=============
</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, 1997 was $4,842,303, the aggregate gross unrealized appreciation for all
investments was $707,511 and aggregate gross unrealized depreciation for all
investments was $205,477.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 149
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
CONVERTIBLE BONDS
<TABLE>
<CAPTION>
VALUE
MATURITY PAR (NOTE 1)
-------- --- --------
<S> <C> <C> <C>
BASIC INDUSTRIAL COMMODITY (2.2%)
First South Africa Corp, Ltd., 144A, 9% 06/15/04 450,000 $ 450,000
----------
BIO-TECHNOLOGY (3.9%)
Chiron Corp., 144A, 1.9% 11/17/00 450,000 397,125
NABI, Inc., 144A, 6.5% 02/01/03 500,000 414,375
----------
811,500
----------
COMMERCIAL SERVICES (1.8%)
Pharmaceutical Marketing
Services, Inc., 144A, 6.25% 02/01/03 450,000 360,000
----------
COMPUTER SOFTWARE (1.9%)
MacNeal - Schwendler Corp., 7.875% 08/18/04 400,000 392,000
----------
ELECTRONIC PRODUCTS - MISCELLANEOUS (1.9%)
Trans-Lux Corp., 7.5% 12/01/06 375,000 390,000
----------
ENVIRONMENT - CONSULTING, ENGINEERING (1.1%)
Roy F. Weston, Inc., 7% 04/15/02 270,000 229,500
----------
FOOD CHAINS (1.9%)
Marsh Supermarkets, Inc., 7% 02/15/03 400,000 400,000
----------
GENERAL INDUSTRIAL MACHINE & EQUIPMENT (2.0%)
Robbins & Myers, Inc., 6.5% 09/01/03 300,000 412,500
----------
HOTEL - MOTEL (3.4%)
Hilton Hotels Corp., 5% 05/15/06 350,000 380,625
Signature Resorts, Inc., 5.75% 01/15/07 350,000 316,750
----------
697,375
----------
MEDICAL - HMO (3.9%)
FPA Medical Management, Inc., 6.5% 12/15/01 400,000 421,000
PhyMatrix Corp., 6.75% 06/15/03 450,000 389,250
----------
810,250
----------
OIL - DOMESTIC (2.7%)
Lomak Petroleum, Inc., 144A, 6% 02/01/07 350,000 395,500
Snyder Oil Corp., 7% 05/15/01 150,000 155,625
----------
551,125
----------
POLLUTION CONTROL (3.8%)
USA Waste Services, Inc., 4% 02/01/02 350,000 362,250
WMX Technologies, Inc., 2% 01/24/05 450,000 406,687
----------
768,937
----------
</TABLE>
<PAGE> 150
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
CONVERTIBLE BONDS
<TABLE>
<CAPTION>
VALUE
MATURITY PAR (NOTE 1)
-------- --- --------
<S> <C> <C> <C>
PUBLISHING (2.0%)
Scholastic Corp., 5% 08/15/05 500,000 $ 403,750
----------
RETAIL STORES - DEPARTMENT (1.9%)
Saks Holdings, Inc., 5.5% 09/15/06 450,000 398,250
----------
RETAIL - APPAREL (1.9%)
Charming Shoppes, Inc., 7.5% 07/15/06 400,000 393,000
----------
RETAIL - SPECIALTY (1.8%)
The Sports Authority, Inc., 5.25% 09/15/01 400,000 360,500
----------
TRANSPORT - AIR FREIGHT (1.6%)
Consolidated Logistics, 144A, 8% 08/21/00 400,000 320,000
----------
WATER TREATMENT SYSTEMS (3.2%)
United States Filter Corp., 4.5% 12/15/01 650,000 665,438
----------
TOTAL CONVERTIBLE BONDS (Cost $8,647,471) (42.9%) 8,814,125
----------
</TABLE>
PREFERRED STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BANKS (2.6%)
National Australian Bank Ltd., 7.875% 20,000 $537,500
-------
CONTAINERS-METAL/GLASS (2.1%)
Crown Cork & Seal Company, Inc., 4.5% 2/26/00 8,000 434,000
-------
ENERGY (1.6%)
Occidental Petroleum Corp., 144A, $3.875 Series 1993 6,000 338,250
-------
ENTERTAINMENT (2.9%)
Wellsford Residential Property, 7% Series A 22,900 589,675
-------
FINANCIAL SERVICES (2.1%)
SunAmerica, Inc., $3.1875 10/31/99 10,000 431,250
-------
GENERAL INDUSTRIAL MACHINES & EQUIPMENT (2.0%)
Greenfield Industries, Inc., 144A, 6% 3/31/16 9,000 409,500
-------
GLASS PRODUCTS (1.9%)
Corning Delaware L.P., 6% 5,000 399,375
-------
</TABLE>
<PAGE> 151
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
PREFERRED STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
GOLD MINING (1.6%)
Coeur D'Alene Mines Corp., 7% 3/15/00 20,000 $ 332,500
----------
HOTEL-MOTEL (1.8%)
Host Marriott Corp., 144A, 6.75% 12/02/26 6,500 367,250
----------
MEDICAL - HMO (2.1%)
Aetna, Inc., 6.25% 7/19/00 4,700 431,225
----------
NATURAL GAS (2.0%)
MCN Corp., 8.75% 4/30/99 15,000 416,250
----------
OIL-DOMESTIC (5.5%)
Mesa, Inc., 8%, Series A 80,000 530,000
Nuevo Energy, 5.75% 12/15/26 Series A 8,000 403,000
Snyder Oil Corporation, $1.5 7,700 190,575
----------
1,123,575
----------
PAPER (1.9%)
International Paper Co., 5.25% 7/20/25 7,500 386,250
----------
PUBLISHING (1.4%)
Golden Books Family Entertainment, Inc., 144A,
8.75% 8/20/16 5,000 280,000
----------
PUBLISHING-NEWSPAPERS (2.1%)
Hollinger International, Inc., 9.75% 8/01/00 40,000 440,000
----------
REAL ESTATE (4.8%)
Excel Realty, $2.125 Series A 16,000 426,000
Redwood Trust, Inc., 9.74% Class B 10,000 567,500
----------
993,500
----------
RESTAURANTS (2.0%)
Apple South, Inc., 144A, $3.5 3/01/27 7,000 420,875
----------
TELECOMMUNICATIONS (2.1%)
Mobile Telecommunication
Technologies Corp., 144A, $2.25 20,000 425,000
----------
TELECOMMUNICATIONS-BROADCAST (2.1%)
Merrill Lynch & Company, 6% 6/01/99 Series COX 20,000 427,500
----------
TOTAL PREFERRED STOCKS (Cost $8,282,029) (44.6%) $9,183,475
----------
</TABLE>
<PAGE> 152
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AEROSPACE (0.9%)
* International Airline Support Group, Inc. 44,908 $ 196,473
---------------
ENTERTAINMENT (1.4%)
* Malibu Entertainment Worldwide, Inc. 70,000 280,000
---------------
MISCELLANEOUS MANUFACTURING (0.1%)
* Disc Graphics, Inc. - Warrants Class "A", 11/01/99 28,000 21,000
---------------
NONHAZARDOUS WASTE DISPOSAL (0.2%)
* Allied Waste Industries, Inc. 2,266 33,423
---------------
OIL WELL SERVICES (3.6%)
* SEACOR SMIT, Inc. 14,400 745,200
---------------
PREHOSPITAL MEDICAL CARE, TRANSPORTATION (1.7%)
Laidlaw, Inc., Class B 25,663 346,451
---------------
TELECOMMUNICATIONS (0.6%)
* Mobile Telecommunication Technologies Corp. 10,000 121,875
---------------
TOYS (2.1%)
Hasbro, Inc. 15,000 435,000
---------------
TOTAL COMMON STOCKS (Cost $1,876,695) (10.6%) 2,179,422
---------------
TOTAL INVESTMENT SECURITIES (Cost $18,806,195) (98.1%) $ 20,177,022
Other assets, less liabilities (1.9%) 394,238
---------------
NET ASSETS (100%) $ 20,571,260
===============
</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, 1997 was $18,806,195, the aggregate gross unrealized appreciation for all
investments was $1,553,782 and aggregate gross unrealized depreciation for
all investments was $182,955.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 153
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BIO-TECHNOLOGY (1.9%)
* Genzyme Corporation 4,800 $114,600
--------
CAPITAL GOODS - DIVERSIFIED (2.4%)
Danaher Corporation 3,000 145,500
--------
CAPITAL GOODS/INDUSTRIAL (1.9%)
* Vishay Intertechnology, Inc. 3,836 112,703
--------
COMMUNICATION - EQUIPMENT (6.3%)
* ANADIGICS, Inc. 4,500 149,063
ECI Telecommunications Ltd. Designs 6,300 145,687
* Saville Systems Ireland plc 2,000 85,250
--------
380,000
--------
COMMUNICATION - NETWORK (3.4%)
* ICG Communications, Inc. 5,000 80,000
* PairGain Technologies, Inc. 6,000 125,250
--------
205,250
--------
COMPUTER NETWORKING (3.3%)
* Ascend Communications, Inc. 3,600 200,700
--------
COMPUTER PERIPHERAL EQUIPMENT (0.9%)
* Dialogic Corporation 1,800 52,650
--------
COMPUTER SERVICES (4.6%)
* HNC Software, Inc. 5,200 171,600
* Rational Software Corporation 5,400 101,925
--------
273,525
--------
COMPUTER SOFTWARE (3.1%)
* Business Objects S. A. - ADR 5,200 50,050
* Media 100, Inc. 8,000 46,000
* Sapient Corporation 2,000 89,500
--------
185,550
--------
CONSUMER GROWTH (8.3%)
* Activision, Inc. 16,000 208,000
* Conso Products Company 7,625 101,031
* Electronic Arts, Inc. 3,700 118,400
* Lin Television Corporation 1,700 73,738
--------
501,169
--------
</TABLE>
<PAGE> 154
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ELECTRONIC PRODUCTS - MISCELLANEOUS (0.5%)
AVX Corporation 1,000 $ 27,250
--------
ENERGY (2.7%)
Cross Timbers Oil Company 8,250 159,844
--------
HEALTH (4.3%)
* HCIA, Inc. 2,300 56,925
* National Dentex Corporation 6,000 104,250
* PacifiCare Health Systems, Inc. 1,200 95,100
--------
256,275
--------
HOUSEHOLD FURNISHINGS & APPLIANCES (2.8%)
* Williams-Sonoma, Inc. 4,500 165,938
--------
MANAGED CARE (7.4%)
* CRA Managed Care, Inc. 2,500 114,375
* Healthsource, Inc. 4,000 86,000
* MedPartners, Inc. 7,100 134,900
* PhyCor, Inc. 3,787 108,402
--------
443,677
--------
MISCELLANEOUS CONSUMER (2.5%)
* On Assignment, Inc. 4,000 152,500
--------
OFFICE-BUSINESS EQUIPMENT (2.4%)
* HPR, Inc. 9,000 146,250
--------
OFFSHORE DRILLING (1.6%)
* Parker Drilling Company 10,000 96,250
--------
OIL WELL SERVICES (1.3%)
* Dawson Production Services, Inc. 7,000 78,750
--------
OPTICAL INSTRUMENTS AND LENSES (1.6%)
* KLA-Tencor Corporation 2,000 95,125
--------
PAPER (1.2%)
* Data Documents, Inc. 6,000 71,250
--------
</TABLE>
<PAGE> 155
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
PHARMACEUTICALS (4.9%)
* Centocor, Inc. 3,200 $ 112,800
* Dura Pharmaceuticals, Inc. 4,600 182,850
----------
295,650
----------
RESTAURANTS (0.4%)
* Outback Steakhouse, Inc. 1,000 23,250
----------
RETAIL - SPECIALTY (10.6%)
* Borders Group, Inc. 7,900 171,825
* Corporate Express, Inc. 8,600 118,250
* PetSmart, Inc. 6,000 73,500
* Staples, Inc. 6,325 139,150
* The Sports Authority, Inc. 7,500 135,000
----------
637,725
----------
SEMICONDUCTOR-RELATED DEVICES (5.4%)
* Etec Systems, Inc. 1,800 80,100
Intel Corporation 800 121,200
* LSI Logic Corporation 3,000 125,250
----------
326,550
----------
SYSTEM SOFTWARE/CLIENT SERVER (1.6%)
* Hummingbird Communications Ltd. 3,400 96,900
----------
TELECOMMUNICATIONS EQUIPMENT (7.3%)
* Comverse Technology, Inc. 2,000 91,500
* DSC Communications Corporation 2,000 51,125
* Newbridge Networks Corporation 3,600 144,450
* P-COM, Inc. 3,200 103,200
* Proxim, Inc. 2,000 51,250
----------
441,525
----------
TOTAL COMMON STOCKS (Cost $4,710,070) (94.6%) 5,686,356
----------
</TABLE>
<PAGE> 156
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 280,000 $ 280,000
U.S. Treasury Plus Money Market Fund 150,000 150,000
----------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $430,000) (7.2%) 430,000
----------
TOTAL INVESTMENTS (Cost $5,140,070) (101.8%) 6,116,356
Liabilities, less other assets (-1.8%) (106,650)
----------
NET ASSETS (100%) $6,009,706
==========
</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 May 31,
1997 was $5,140,070, the aggregate gross unrealized appreciation for all
investments was $1,463,144 and aggregate gross unrealized depreciation for
all investments was $486,858.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 157
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INFORMED INVESTORS GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AIRLINES (3.8%)
Southwest Airlines Company 8,000 $206,000
--------
APPAREL MANUFACTURING (2.5%)
Liz Claiborne, Inc. 3,000 136,875
--------
BANKS (5.0%)
State Street Corporation 6,200 276,675
--------
CLOTHING (4.6%)
* Jones Apparel Group, Inc. 5,400 253,125
--------
COMPUTER MEMORY DEVICES (1.7%)
* EMC Corporation 2,300 91,712
--------
COMPUTER MICROSYSTEMS (2.3%)
* Dallas Semiconductor Corporation 3,200 123,600
--------
COMPUTER - PERIPHERAL EQUIPMENT (2.1%)
* Adaptec, Inc. 3,200 117,600
--------
COMPUTERS (8.2%)
* Dell Computer Corporation 2,100 236,250
* Gateway 2000, Inc. 3,200 212,400
--------
448,650
--------
FINANCIAL/BUSINESS SERVICES (17.1%)
Bear Stearns Companies, Inc. 8,400 273,000
Lehman Brothers Holdings, Inc. 5,400 218,025
Merrill Lynch & Company 2,300 243,800
Paine Webber Group, Inc. 5,700 202,350
--------
937,175
--------
GLASS PRODUCTS (3.5%)
Corning, Inc. 3,800 191,425
--------
HOSPITAL MANAGEMENT (3.8%)
* Tenet Healthcare Corporation 7,700 211,750
--------
LIFE/HEALTH INSURANCE (14.6%)
Conseco, Inc. 8,200 328,000
SunAmerica, Inc. 4,800 226,800
Torchmark Corporation 3,800 249,375
--------
804,175
--------
</TABLE>
<PAGE> 158
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INFORMED INVESTORS GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MISCELLANEOUS MANUFACTURING (4.0%)
Minnesota Mining and Manufacturing Company 2,400 $ 220,200
----------
MULTI-LINE INSURANCE (0.2%)
Travelers Group, inc. 200 10,975
----------
PAPER (2.4%)
International Paper Company 2,700 129,600
----------
RETAIL (4.1%)
* Costco Companies, Inc. 6,700 226,125
----------
RETAIL STORES (3.8%)
Dayton Hudson Corporation 4,400 211,750
----------
RETAIL STORES - GENERAL MERCHANDISING (3.4%)
Dollar General Corporation 5,500 184,938
----------
RETAIL - JEWELRY (2.4%)
Tiffany & Company 2,800 129,850
----------
TELEPHONE & TELEGRAPH APPARATUS (4.6%)
* Tellabs, Inc. 5,000 251,250
----------
TOTAL COMMON STOCKS (Cost $4,698,451) (94.1%) 5,163,450
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund
(Cost $80,000) (1.5%) 80,000 80,000
----------
TOTAL INVESTMENTS (Cost $4,778,451) (95.6%) 5,243,450
Other assets, less liabilities (4.4%) 246,483
----------
NET ASSETS (100%) $5,489,933
==========
</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,
1997 was $4,778,451, the aggregated gross unrealized appreciation for all
investments was $522,884 and aggregate gross unrealized depreciation for all
investments was $57,885.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 159
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AUSTRALIA (0.7%)
Australian Hospital Care Ltd. 49,000 $ 82,014
----------
DENMARK (2.6%)
* Carli Gray International 1,400 83,981
Novo Nordisk 2,200 235,853
----------
319,834
----------
FINLAND (2.4%)
Oy Nokia AB 2,300 150,810
TT Tieto OY 1,700 143,340
----------
294,150
----------
FRANCE (6.3%)
Altran Technologies 500 160,632
* Carrefour 360 236,937
Pinault - Printemps - Redoute 225 94,556
Sidel 2,800 196,926
Sodexho Alliance 150 69,810
----------
758,861
----------
GERMANY (4.9%)
Altana AG 150 138,545
Bayerische Motoren Werke (BMW) AG 200 163,980
Fresenius AG Pfd. 722 159,820
Porsche AG Pfd. 110 132,802
----------
595,147
----------
HONG KONG (11.8%)
Hang Seng Bank Ltd. 18,000 216,056
Henderson Land Development Company Ltd. 24,000 233,867
Hong Kong & China Gas Company 182,496 317,978
HSBC Holdings 8,436 255,868
* New World Infrastructure Ltd. 19,000 59,222
Sun Hung Kai Properties Ltd. 20,000 245,870
Wing Hang Bank Ltd. 21,600 102,870
----------
1,431,731
----------
</TABLE>
<PAGE> 160
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INDONESIA (0.7%)
* PT Bank International Indonesia 61,156 $ 50,230
PT Gudang Garam 8,000 34,497
PT Steady Safe 1,467 1,612
---------
86,339
---------
ITALY (1.6%)
Bulgari SpA 7,200 142,514
* Telecom Italia Mobile SpA 28,600 50,198
---------
192,712
---------
MALAYSIA (6.3%)
* Arab-Malaysian Merchant Bank Berhad 16,000 101,242
Berjaya Sports Toto Berhad 26,000 121,060
Commerce Asset Holding Berhad 20,000 58,103
DCB Holdings Berhad 32,000 103,152
Gamuda Berhad 17,333 62,081
Malayan Banking Berhad 20,000 210,920
United Engineers (Malaysia) Ltd. 13,000 105,022
---------
761,580
---------
NETHERLANDS (5.5%)
Elsevier NV 6,000 101,621
Koninklijke Ahold NV 2,245 170,695
Koninklijke Ahrend Groep NV 1,500 94,976
Nutricia Verenidge Bedrijven N.V. 600 93,616
* Ordina Beheer N.V. 1,040 78,153
Wolters Kluwer NV 1,012 121,881
---------
660,942
---------
NORWAY (4.4%)
Kverneland ASA 3,200 94,471
* Merkantildata 8,500 168,487
* Tandberg ASA 3,300 39,897
* Tandberg Television ASA 13,200 120,619
Tomra Systems ASA 5,000 114,574
---------
538,048
---------
PHILIPPINES (1.2%)
* Belle Corporation 200,000 53,091
* DMCI Holdings, Inc. 143,000 86,765
---------
139,856
---------
</TABLE>
<PAGE> 161
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
SINGAPORE (9.7%)
City Developments Limited 9,000 $ 83,677
DBS Land Limited 36,000 125,830
Development Bank of Singapore Limited 15,000 187,697
Oversea-Chinese Banking Corporation Ltd. 15,000 186,648
Overseas Union Bank Ltd. 20,000 137,015
Parkway Holdings Limited 43,000 213,422
United Overseas Bank Ltd. 10,000 102,761
Wing Tai Holdings Ltd. 45,000 134,009
----------
1,171,059
----------
SPAIN (3.8%)
Banco Intercontinental Espanol, SA 900 152,410
Electricas Reunidas de Zaragoza, SA 2,800 105,693
* Sol Melia, SA 5,600 207,896
----------
465,999
----------
SWEDEN (3.7%)
Autoliv AB 6,000 212,604
Ericsson Telefonaktiebolaget 6,800 239,192
----------
451,796
----------
SWITZERLAND (7.5%)
Nestle SA 70 87,215
Novartis AG Regular Shares 190 258,247
Novartis AG 30 40,882
Roche Holding AG 30 267,167
* Roche Holding AG Warrants 98 "Jubilee" 8 561
Zurich Versicherungs 700 257,681
----------
911,753
----------
THAILAND (0.2%)
Central Pattana Public Company Ltd. 10,000 26,653
* Thai Farmers Bank Public Company Ltd. (Warrants) 500 501
----------
27,154
----------
UNITED KINGDOM (12.0%)
Compass Group plc 12,700 141,752
HSBC Holdings plc 12,758 396,565
J.D. Wetherspoon plc 4,618 100,004
Lloyds TSB Group plc 13,000 130,825
Logica plc 6,600 93,571
Misys plc 5,400 122,581
Serco Group plc 8,200 92,735
Standard Chartered plc 10,476 166,121
Zeneca Group plc 7,000 212,652
----------
1,456,806
----------
</TABLE>
<PAGE> 162
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
UNITED STATES (11.7%)
Credicorp Ltd., ADR 5,000 $ 112,500
Panamerican Beverages, Inc., ADR 10,000 290,000
Santa Isabel, ADR 5,200 151,450
* State Bank of India, ADR 15,000 379,650
Telecomunicacoes Brasileiras SA, ADR 1,400 194,600
Telefonica de Argentina SA, ADR 5,000 181,250
Telefonica del Peru SA, ADR 4,500 114,188
-----------
1,423,638
-----------
TOTAL COMMON STOCKS (Cost $10,050,524)(97.0%) 11,769,419
MONEY MARKET MUTUAL FUNDS
U.S. Government Money Market Mutual Fund
(Cost $250,000)(2.1%) 250,000 250,000
-----------
TOTAL INVESTMENTS (Cost $10,300,524) (99.1%) 12,019,419
Other assets, less liabilities (0.9%) 109,835
-----------
NET ASSETS (100%) $12,129,254
===========
</TABLE>
INDUSTRY COMPOSITION
<TABLE>
<CAPTION>
INDUSTRY PERCENT
- -------- -------
<S> <C>
Auto/Truck Manufacturers 2.4
Bio Tech & Med Devices 2.5
Cellular Telephone 0.4
Commercial Banks 22.1
Computer Software 3.6
Computers & Peripheral 2.7
Construction & Engineering 2.6
Consumer Service 2.3
Drug & Health Care 10.8
Electric Power Utilities 0.9
Entertainment & Leisure 1.4
Financial Services 5.2
Food Processing 3.2
Lodging & Restaurants 3.7
Machinery 4.2
Public Utilities 2.6
Publishing 1.8
Real Estate Development 6.1
Real Estate Investment 0.9
Retailing 8.7
Telecommunications 8.6
Tobacco 0.3
----
Industry percent of net assets 97.0%
Money Market Mutual Funds 2.1%
Other assets, less liabilities 0.9%
----
Percent of Net Assets 100%
----
</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, 1997 was $10,300,524, the aggregate gross unrealized appreciation for all
investments was $2,002,534 and aggregate gross unrealized depreciation for
all investments was $283,576.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 163
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE LARGE-CAP VALUE FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ATHLETIC FOOTWEAR/APPAREL (2.7%)
Nike, Inc. 1,500 $ 85,500
------------
BANKS (3.4%)
Wells Fargo & Company 400 105,400
------------
BEVERAGES (9.5%)
Anheuser-Busch Companies, Inc. 2,400 102,900
Coca-Cola Company 1,700 116,025
PepsiCo, Inc. 2,100 77,175
------------
296,100
------------
COMPUTER SOFTWARE (4.0%)
* Microsoft Corporation 1,000 124,000
------------
COMPUTERS (4.4%)
Hewlett-Packard Company 1,000 51,500
International Business Machines Corporation 1,000 86,500
------------
138,000
------------
CONSUMER PRODUCTS (8.1%)
Clorox Company 1,000 126,250
Gillette Company 1,400 124,425
------------
250,675
------------
DRUGS (4.1%)
Abbott Labs 2,000 126,000
------------
ENTERTAINMENT (3.9%)
The Walt Disney Company (Holding Co.) 1,500 122,813
------------
FINANCIAL/BUSINESS SERVICES (8.4%)
American Express Company 2,000 139,000
Charles Schwab Corporation 3,000 121,875
------------
260,875
------------
FOOD (13.3%)
Campbell Soup Company 2,800 128,800
Hershey Foods Corporation 2,200 123,475
Quaker Oats Company 1,500 61,875
Wrigley (WM) Jr. Company 1,700 100,725
------------
414,875
------------
HEALTH (3.2%)
Becton, Dickinson & Company 2,000 98,500
------------
</TABLE>
<PAGE> 164
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE LARGE-CAP VALUE FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MEDICAL SUPPLIES (6.5%)
Kimberly-Clark Corporation 2,000 $ 100,250
Pfizer, Inc. 1,000 102,875
----------
203,125
----------
PHARMACEUTICALS (10.7%)
Eli Lilly & Company 1,000 93,000
Johnson & Johnson 1,900 113,763
Merck & Company, Inc. 1,400 125,825
----------
332,588
----------
PHOTOGRAPHY (3.2%)
Eastman Kodak Company 1,200 99,450
----------
PUBLISHING (3.9%)
Gannett Company, Inc. 1,300 120,250
----------
PUBLISHING - NEWSPAPERS (2.8%)
New York Times Company Class A 1,900 87,518
----------
SEMICONDUCTOR - RELATED DEVICE (4.9%)
Intel Corporation 1,000 151,500
----------
TOTAL COMMON STOCKS (Cost $2,260,193)(97.0%) 3,017,169
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund
(Cost $135,000) (4.4%) 135,000 135,000
----------
TOTAL INVESTMENTS (Cost $2,395,193) (101.4%) 3,152,169
Liabilities, less other assets (-1.4%) (42,189)
----------
NET ASSETS (100%) $3,109,980
==========
</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, 1997 was $2,395,193, the aggregate gross unrealized appreciation for all
investments was $758,447 and aggregate gross unrealized depreciation for all
investments was $1,471.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 165
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AIR FREIGHT (2.3%)
Circle International Group, Inc. 3,300 $ 91,575
--------
AUTO PARTS-ORIGINAL EQUIPMENT (5.7%)
* Gentex Corporation 4,600 92,575
Paccar, Inc. 3,000 135,750
--------
228,325
--------
BEVERAGES (3.6%)
* Robert Mondavi Corporation 3,200 142,400
--------
BUSINESS EQUIPMENT/SERVICE (2.5%)
* Greenwich Air Services, Inc. 3,500 101,500
--------
CLOTHING (3.3%)
* Fruit of the Loom, Inc. 3,800 132,525
--------
COMMUNICATION - EQUIPMENT (2.5%)
* Qualcomm, Inc. 2,100 101,325
--------
COMPUTER MICROSYSTEMS (4.6%)
* Dallas Semiconductor Corporation 4,800 185,400
--------
COMPUTER SOFTWARE (1.8%)
* Imnet Systems, Inc. 2,900 72,500
--------
COMPUTERS - PERIPHERAL EQUIPMENT (4.3%)
* American Power Conversion Corp. 3,500 81,375
* MicroTouch Systems, Inc. 3,600 90,900
--------
172,275
--------
HOSPITAL SUPPLIES (2.7%)
* Advanced Technology Laboratories, Inc. 2,800 108,500
--------
HOUSEHOLD FURNISHINGS APPLIANCE (7.6%)
Bush Industries, Inc. 4,000 90,000
Herman Miller, Inc. 6,000 214,500
--------
304,500
--------
</TABLE>
<PAGE> 166
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INSTRUMENTS - SCIENTIFIC (2.0%)
* Water Corporation 2,500 $ 80,625
--------
LIFE INSURANCE (6.0%)
Protective Life Corporation 3,000 134,250
Western National Corporation 4,000 104,500
--------
238,750
--------
NURSING HOMES (3.0%)
* Genesis Health Ventures, Inc. 3,600 118,350
--------
OIL/GAS EQUIPMENT SERVICES (10.1%)
* Nuevo Energy Company 3,300 143,962
* Rowan Companies, Inc. 5,700 131,813
Tidewater, Inc. 3,050 128,481
--------
404,256
--------
POLLUTION CONTROL (4.9%)
* Newpark Resources, Inc. 3,770 197,925
--------
RESTAURANTS (2.9%)
* Cracker Barrel Old Country Store, Inc. 4,000 116,000
--------
RETAIL (2.5%)
* Stein Mart, Inc. 3,300 99,825
--------
RETAIL-SPECIALTY (4.8%)
* AutoZone, Inc. 4,500 105,188
Pier 1 Imports, Inc. 3,800 85,025
--------
190,213
--------
RETAIL STORES-DRUGS (3.3%)
* CVS Corporation 2,800 134,050
--------
SEMICONDUCTOR RELATED DEVICE (2.2%)
* Photronics, Inc. 2,000 89,250
--------
SPECIAL INDUSTRIAL MACHINERY (6.0%)
Briggs & Stratton Corporation 2,200 113,575
Pentair Industries, Inc. 3,800 124,925
--------
238,500
--------
TRUCKERS (3.9%)
* Swift Transportation Co., Inc. 4,800 154,800
--------
</TABLE>
<PAGE> 167
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
TOTAL COMMON STOCKS (Cost $3,064,256) (92.5%) $3,703,369
----------
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 185,000 185,000
Vista Treasury Plus Money Market Fund 115,000 115,000
----------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $300,000) (7.5%) 300,000
----------
TOTAL INVESTMENTS (Cost $3,364,256) (100.0%) 4,003,369
Liabilities, less other assets (0.0%) (1,234)
----------
NET ASSETS (100%) $4,002,135
==========
</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, 1997 was $3,364,256, the aggregate gross unrealized appreciation for all
investments was $695,869 and aggregate gross unrealized depreciation for all
investments was $56,756.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 168
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
BLUE CHIP CONVERTIBLE EMERGING
GROWTH FUND SECURITIES FUND GROWTH FUND
----------- --------------- -----------
<S> <C> <C> <C>
ASSETS
Investment in securities, at value
(cost $4,842,303, $18,806,195,
$5,140,070, respectively) $5,344,337 $20,177,022 $6,116,356
Cash 50,872 51,574 32,911
Receivable for investment securities sold 77,263 379,631 --
Dividends receivable 2,268 32,187 290
Interest receivable 21 154,372 26
---------- ----------- ----------
Total assets 5,474,761 20,794,786 6,149,583
---------- ----------- ----------
LIABILITIES
Payable for investment securities purchased -- 223,126 139,257
Payable for fund shares redeemed 77 56 60
Other payables and accrued expenses 824 344 560
---------- ----------- ----------
Total liabilities 901 223,526 139,877
---------- ----------- ----------
NET ASSETS $5,473,860 $20,571,260 $6,009,706
========== =========== ==========
NET ASSETS CONSIST OF (Note 1):
Capital stock (Par Value $.001 per share) $ 354 $ 1,857 $ 387
Additional paid in capital 4,125,193 18,809,616 5,620,631
Accumulated net realized gain (loss) on investments 846,279 218,279 (587,598)
Undistributed net investment income -- 170,681 --
Net unrealized appreciation on investments 502,034 1,370,827 976,286
---------- ----------- ----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $5,473,860 $20,571,260 $6,009,706
========== =========== ==========
CLASS A:
Net Assets $5,428,285 $20,552,883 $5,788,730
---------- ----------- ----------
Shares Outstanding 351,099 1,855,482 373,020
---------- ----------- ----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 15.46 $ 11.08 $ 15.52
========== =========== ==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 16.19 $ 11.60 $ 16.25
========== =========== ==========
CLASS D:
Net Assets $ 45,575 $ 18,377 $ 220,976
---------- ----------- ----------
Shares Outstanding 2,976 1,662 14,383
---------- ----------- ----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 15.31 $ 11.06 $ 15.36
========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 169
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES - (CONTINUED)
MAY 31, 1997
<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 $4,778,451, $10,300,524,
$2,395,193, respectively) $5,243,450 $12,019,419 $3,152,169
Cash 12,377 134,287 38,202
Receivable for investment securities sold 665,504 56,644 --
Dividends receivable 4,758 10,529 3,517
Interest receivable 52 -- --
---------- ----------- ----------
Total assets 5,926,141 12,220,879 3,193,888
---------- ----------- ----------
LIABILITIES
Payable for investment securities purchased 433,793 91,069 83,370
Payable for fund shares redeemed 2,212 63 73
Other payables and accrued expenses 203 493 465
---------- ----------- ----------
Total liabilities 436,208 91,625 83,908
---------- ----------- ----------
NET ASSETS $5,489,933 $12,129,254 $3,109,980
========== =========== ==========
NET ASSETS CONSIST OF (Note 1):
Capital Stock (Par Value $.001 per share) $ 478 $ 963 $ 213
Additional paid in capital 4,610,691 10,754,431 2,331,412
Accumulated net realized gain (loss) on investments
and foreign currency transactions 413,765 (345,098) 21,379
Net unrealized appreciation on investments and
foreign currency transactions 464,999 1,718,958 756,976
---------- ----------- ----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $5,489,933 $12,129,254 $3,109,980
========== =========== ==========
CLASS A:
Net Assets $5,476,969 $12,098,843 $3,054,239
---------- ----------- ----------
Shares Outstanding 477,196 960,665 209,015
---------- ----------- ----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 11.48 $ 12.59 $ 14.61
========== =========== ==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 12.02 $ 13.18 $ 15.30
========== =========== ==========
CLASS D:
Net Assets $ 12,964 $ 30,411 $ 55,741
---------- ----------- ----------
Shares Outstanding 1,141 2,436* 3,841
---------- ----------- ----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 11.36 $ 12.49 $ 14.51
========== =========== ==========
</TABLE>
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 170
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE
MID-CAP
GROWTH FUND
-----------
<S> <C>
ASSETS
Investment in securities, at value
(cost$3,364,256) $4,003,369
Cash 36,124
Receivable for investment securities sold 111,383
Receivable for fund shares sold 14,811
Dividends receivable 2,270
Interest receivable 16
----------
Total assets 4,167,973
----------
LIABILITIES
Payable for investment securities purchased 162,868
Payable for fund shares redeemed 2,970
----------
Total liabilities 165,838
----------
NET ASSETS $4,002,135
==========
NET ASSETS CONSIST OF (Note 1):
Capital Stock (Par Value $.001 per share) $ 304
Additional paid in capital 3,301,497
Accumulated net realized gain on investments 61,221
Net unrealized appreciation on investments 639,113
----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $4,002,135
==========
CLASS A:
Net Assets $2,174,053
----------
Shares Outstanding 164,702
----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 13.20
==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 13.82
==========
CLASS D:
Net Assets $1,828,082
----------
Shares Outstanding 139,681
----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 13.09
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 171
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE RESERVE
BLUE CHIP CONVERTIBLE EMERGING INFORMED INVESTORS
GROWTH FUND SECURITIES FUND GROWTH FUND GROWTH FUND
----------- --------------- ----------- -----------
September 3, 1996
(commencement of
Year Ended operations) to Year Ended Year Ended
May 31, 1997 May 31, 1997 May 31, 1997 May 31, 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 32,176 $ 249,907 $ 3,372* $ 24,627
Interest 896 363,077 1,049 41,386
---------- ----------- ----------- -----------
Total investment income 33,072 612,984 4,421 66,013
EXPENSES
Comprehensive fee (Note 3) 79,311 205,951 98,087 83,573
12b-1 Fee (Note 4)
Class A 13,038 34,294 15,631 13,889
Class D 723 124 2,868 161
---------- ----------- ----------- -----------
Total expenses 93,072 240,369 116,586 97,623
---------- ----------- ----------- -----------
Less fees waived -- 188,113 -- --
---------- ----------- ----------- -----------
Net expenses -- 52,256 -- --
---------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) (60,000) 560,728 (112,165) (31,610)
---------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Proceeds from sales of securities 5,655,127 16,158,164 1,743,151 11,725,713
Cost of securities sold 4,678,455 15,933,090 2,320,269 10,472,385
---------- ----------- ----------- -----------
Net realized gain (loss) on
investments (Note 1) 976,672 225,074 (577,118) 1,253,328
Net unrealized appreciation
(depreciation) on investments (642,561) 1,370,827 (847,249) (1,975,139)
---------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments 334,111 1,595,901 (1,424,367) (721,811)
---------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 274,111 $ 2,156,629 $(1,536,532) $ (753,421)
========== =========== =========== ===========
</TABLE>
* Includes foreign tax withholding of $114
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 172
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS - (CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
INTERNATIONAL LARGE-CAP MID-CAP
EQUITY FUND VALUE FUND GROWTH FUND
----------- ---------- -----------
Year Ended Year Ended Year Ended
May 31, 1997 May 31, 1997 May 31, 1997
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 97,550* $ 32,111 $ 13,610
Interest 561 212 533
---------- -------- ----------
Total investment income 98,111 32,323 14,143
EXPENSES
Comprehensive fee (Note 3) 145,974 33,940 49,028
12b-1 Fee (Note 4)
Class A 20,754 5,613 3,404
Class D 231 172 19,070
---------- -------- ----------
Total expenses 166,959 39,725 71,502
---------- -------- ----------
NET INVESTMENT LOSS (68,848) (7,402) (57,359)
---------- -------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Proceeds from sales of securities 3,956,864 383,913 3,034,153
Cost of securities sold 4,229,994 362,534 2,889,407
---------- -------- ----------
Net realized gain (loss) on
investments and foreign
currency transactions (Note 1) (273,130) 21,379 144,746
Net unrealized appreciation
on investments and foreign
currency transactions 1,387,936 686,853 185,442
---------- -------- ----------
Net realized and unrealized gain
on investments and foreign
currency transactions 1,114,806 708,232 330,188
---------- -------- ----------
Net increase in net assets resulting
from operations $1,045,958 $700,830 $ 272,829
========== ======== ==========
</TABLE>
* Includes foreign tax withholding of $14,966
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 173
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE
RESERVE BLUE CHIP GROWTH FUND SECURITIES FUND
----------------------------- -------------------
September 3, 1996
(commencement of
Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997
------------ ------------ -------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income gain (loss) $ (60,000) $ (34,916) $ 560,728
Net realized gain (loss) from investments 976,672 (2,045) 225,074
Net unrealized appreciation (depreciation)
from investments (642,561) 975,733 1,370,827
----------- ---------- ------------
Net increase in net assets
resulting from operations 274,111 938,772 2,156,629
----------- ---------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (6,791)
Net realized gain on investments (68,349) (164,889) (390,051)
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 1,176,349 2,757,098 20,601,861
Reinvestment of distributions 68,323 164,889 201,224
Cost of shares redeemed (1,148,732) (517,167) (1,991,612)
----------- ---------- ------------
Net increase in net assets resulting
from capital share transactions 95,940 2,404,820 18,811,473
----------- ---------- ------------
Net increase in net assets 301,702 3,178,703 20,571,260
NET ASSETS:
Beginning of period 5,172,158 1,993,455 0
----------- ---------- ------------
End of period (including undistributed
net investment income of $0, $0
and $170,681, respectively) $ 5,473,860 $5,172,158 $ 20,571,260
=========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL
RESERVE EMERGING GROWTH FUND EQUITY FUND
----------------------------- -------------------------------
July 13, 1996
(commencement of
Year Ended Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
----------------------------- -------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (112,165) $ (57,980) $ (68,848) $ (17,145)
Net realized gain (loss) from investments
and foreign currency transactions (577,118) 80,546 (273,130) (71,968)
Net unrealized appreciation (depreciation)
from investments and foreign
currency transactions (847,249) 1,655,638 1,387,936 331,022
----------- ---------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (1,536,532) 1,678,204 1,045,958 241,909
----------- ---------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments -- (93,899) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 2,187,444 4,281,980 8,057,063 3,465,234
Reinvestment of distributions -- 93,770 -- --
Cost of shares redeemed (1,540,646) (301,485) (558,291) (122,619)
----------- ---------- ----------- ----------
Net increase in net assets resulting
from capital share transactions 646,798 4,074,265 7,498,772 3,342,615
----------- ---------- ----------- ----------
Net increase (decrease) in net assets (889,734) 5,658,570 8,544,730 3,584,524
NET ASSETS:
Beginning of period 6,899,440 1,240,870 3,584,524 0
----------- ---------- ----------- ----------
End of period $ 6,009,706 $6,899,440 $12,129,254 $3,584,524
=========== ========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 174
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS - (CONTINUED)
<TABLE>
<CAPTION>
RESERVE
RESERVE INFORMED LARGE-CAP
INVESTORS GROWTH FUND VALUE FUND
-------------------------------- -------------------------------
January 2, 1996
(commencement of
Year Ended Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (31,610) $ (147,983) $ (7,402) $ (1,091)
Net realized gain from investments 1,253,328 850,186 21,379 --
Net unrealized appreciation (depreciation)
from investments (1,975,139) 1,109,280 686,853 70,123
----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (753,421) 1,811,483 700,830 69,032
----------- ----------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (525,939) (795,337) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 1,400,871 6,254,939 1,345,107 1,165,180
Reinvestment of distributions 395,531 790,060 -- --
Cost of shares redeemed (1,435,172) (8,490,282) (167,017) (3,152)
----------- ----------- ----------- ----------
Net increase (decrease) in net assets resulting
from capital share transactions 361,230 (1,445,283) 1,178,090 1,162,028
----------- ----------- ----------- ----------
Net increase (decrease) in net assets (918,130) (429,137) 1,878,920 1,231,060
NET ASSETS:
Beginning of period 6,408,063 6,837,200 1,231,060 0
----------- ----------- ----------- ----------
End of period $ 5,489,933 $ 6,408,063 $ 3,109,980 $1,231,060
=========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
RESERVE MID-CAP
GROWTH FUND
-------------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (57,359) $ (32,656)
Net realized gain (loss) from investments 144,746 (83,525)
Net unrealized appreciation from
investments 185,442 453,671
----------- ----------
Net increase in net assets
resulting from operations 272,829 337,490
----------- ----------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 3,118,364 2,345,759
Cost of shares redeemed (1,928,613) (143,694)
----------- ----------
Net increase in net assets resulting
from capital share transactions 1,189,751 2,202,065
----------- ----------
Net increase in net assets 1,462,580 2,539,555
NET ASSETS:
Beginning of period 2,539,555 0
----------- ----------
End of period $ 4,002,135 $2,539,555
=========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 175
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reserve Private Equity Series (the "Trust") consists of the following
funds: Reserve Blue Chip Growth Fund, Reserve Convertible Securities Fund,
Reserve Emerging Growth Fund, Reserve Informed Investors Growth Fund,
Reserve International Equity Fund, Reserve Large-Cap Value Fund, and
Reserve Mid-Cap Growth Fund (formerly 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, 1997 as follows:
[See table below]
<PAGE> 176
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------
Undistributed
Net Accumulated
Investment Realized
Reserve Fund Capital Income Gain
------------ ------- ------ ----
<S> <C> <C> <C>
Blue Chip Growth Fund (112,615) 60,000 52,615
Emerging Growth Fund (112,165) 112,165 --
Informed Investors Growth Fund (31,610) 31,610 --
International Equity Fund (68,848) 68,848 --
Large-Cap Value Fund (7,402) 7,402 --
Mid-Cap Growth Fund (57,359) 57,359 --
</TABLE>
These reclassifications had no effect on net investment income, net
realized gain on investments, or net assets for the year ended May 31,
1997.
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.
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, 1997, which are available to offset
future realized capital gains, if any:
<TABLE>
<CAPTION>
Capital loss Expiration
carryforward year
------------ ----
<S> <C> <C>
Reserve Emerging Growth Fund $161,015 2005
Reserve International Equity Fund 71,968 2004
Reserve International Equity Fund 178,347 2005
</TABLE>
<PAGE> 177
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
2. INVESTMENT ACTIVITY
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the year ended May 31, 1997, were
as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate
Reserve Fund Purchases Sales
------------ --------- -----
<S> <C> <C>
Blue Chip Growth Fund $ 5,425,272 $ 5,655,127
Convertible Securities Fund 34,711,469 16,158,164
Emerging Growth Fund 2,264,488 1,743,151
Informed Investors Growth Fund 11,386,974 11,725,713
International Equity Fund 11,336,214 3,956,864
Large-Cap Value Fund 1,507,717 383,913
Mid-Cap Growth Fund 4,017,934 3,034,153
</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 except for the International
Equity Fund for which it receives 1.75%. RMCI is currently waiving a
portion of its comprehensive fee in the Reserve Convertible Securities
Fund.
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
decisions for 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%
Convertible Securities Fund New Vernon Advisors, Inc. 0.75%
Emerging Growth Fund Roanoke Asset Management Corp. 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 Southern Capital Advisors 0.75%
</TABLE>
Trainer, Wortham & Company, Inc. owns 24% of the outstanding shares of the
Reserve Blue Chip Growth Fund at May 31, 1997.
<PAGE> 178
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
As of May 31, 1997, RMCI and affiliated persons owned 7%, 13%, 5%, 11%,
20%, and 25% of the Reserve Blue Chip Growth Fund, Reserve Emerging Growth
Fund, Reserve Informed Investors Growth Fund, Reserve International Equity
Fund, Reserve Large-Cap Value Fund, and Reserve Mid-Cap Growth Fund,
respectively. Taconic Petroleum Corp. owns 24% of Reserve Large-Cap Value
Fund. Christopher E. Vroom owns 7% of the Reserve Emerging Growth Fund).
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 shares and 1.00% per annum for Class D shares of the
average daily net assets of shareholder accounts as to which the payee has
rendered distribution assistance. For the year ended May 31, 1997, the
Funds paid distribution expenses to RPI as follows:
<TABLE>
<CAPTION>
Reserve Fund Class A Class D
------------ ------- -------
<S> <C> <C>
Blue Chip Growth Fund $13,038 $ 723
Convertible Securities Fund* 283 14
Emerging Growth Fund 15,631 2,868
Informed Investors Growth Fund 13,889 161
International Equity Fund 20,754 231
Large-Cap Value Fund 5,613 172
Mid-Cap Growth Fund 3,404 19,070
</TABLE>
* RMCI waived 12b-1 fees of $34,011 and $110, for Reserve Convertible
Securities Fund Class A and Class D, respectively, for the period
September 3, 1996 (commencement of operations) to May 31, 1997.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock of each Fund for the period ended May 31,
1997, were as follows:
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
----------------------------- -------------------------------- ------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
-------------------------------- ------------------------
Shares Amount Shares Amount
------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold 76,231 $ 1,119,812 3,957 $ 56,537
Reinvested 4,875 67,171 84 1,152
Redeemed (74,089) (1,092,588) (3,930) (56,144)
------- ----------- ------ --------
Net increase 7,017 $ 94,395 111 $ 1,545
======= =========== ====== ========
</TABLE>
<PAGE> 179
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE SECURITIES FUND CLASS A CLASS D
- ----------------------------------- ------------------------------- -------------------------------
September 3, 1996 September 3, 1996
(commencement of operations) to (commencement of operations) to
May 31, 1997 May 31, 1997
------------------------------- --------------------------------
Shares Amount Shares Amount
---------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold 2,026,485 $20,572,892 2,814 $ 28,969
Reinvested 19,551 201,111 11 113
Redeemed (190,554) (1,979,449) (1,163) (12,163)
--------- ----------- ------ --------
Net increase 1,855,482 $18,794,554 1,662 $ 16,919
========= =========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- --------------------------------- ------------------------------- ----------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------------- ----------------------------
Shares Amount Shares Amount
------- ----------- ------ ---------
<S> <C> <C> <C> <C>
Sold 117,069 $ 1,999,906 10,982 $ 187,538
Redeemed (84,292) (1,389,829) (9,047) (150,817)
------- ----------- ------ ---------
Net increase 32,777 $ 610,077 1,935 $ 36,721
======= =========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- -------------------------------- -----------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
-------------------------------- -----------------------
Shares Amount Shares Amount
-------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold 116,034 $ 1,389,343 911 $11,528
Reinvested 37,456 395,531 -- --
Redeemed (121,475) (1,425,528) (814) (9,644)
-------- ---------- ---- -------
Net increase 32,015 $ 359,346 97 $ 1,884
======== ========== ==== =======
</TABLE>
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- --------------------------- ---------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
--------------------------- ---------------------------
Shares Amount Shares Amount
------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold 689,779 $8,029,446 2,446 $27,617
Redeemed (47,041) (551,604) (562) (6,687)
------- ---------- ----- -------
Net increase 642,738 $7,477,842 1,884 $20,930
======= ========== ===== =======
</TABLE>
<PAGE> 180
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE LARGE-CAP VALUE FUND CLASS A CLASS D
- ----------------------------- ------------------------- ----------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------- ----------------------
Shares Amount Shares Amount
------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold 108,518 $1,276,605 5,080 $ 68,502
Redeemed (11,940) (151,013) (1,239) (16,004)
------- ---------- ------ --------
Net increase 96,578 $1,125,592 3,841 $ 52,498
======= ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ------------------------- ---------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------- ---------------------------
Shares Amount Shares Amount
------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Sold 198,244 $2,390,365 58,332 $ 727,999
Redeemed (44,223) (530,105) (114,850) (1,398,508)
------- ---------- -------- -----------
Net increase 154,021 1,860,260 (56,518) $ (670,509)
======= ========== ======== ===========
</TABLE>
Transactions in capital stock of each Fund for the period ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
- ----------------------------- ------------------------- --------------------
February 13, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
------------------------- --------------------
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>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- ---------------------------- ------------------------- ---------------------
February 26, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
------------------------- ---------------------
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>
<PAGE> 181
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- --------------------------- ----------------------
February 13, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
--------------------------- ----------------------
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>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- -------------------------- ------------------
July 13, 1995 March 11, 1996
(commencement (commencement
of operations) to of operations) to
May 31, 1996 May 31, 1996
-------------------------- ------------------
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>
RESERVE LARGE-CAP VALUE FUND CLASS A
- ---------------------------- ------------------------
January 2, 1996
(commencement
of operations) to
May 31, 1996
-------------------------
Shares Amount
------- ----------
<S> <C> <C>
Sold 112,729 $1,165,180
Redeemed (292) (3,152)
------- ----------
Net increase 112,437 $1,162,028
======= ==========
</TABLE>
<PAGE> 182
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ----------------------- -------------------------
March 13, 1996
(Commencement
of operations) to Year Ended
May 31, 1996 May 31, 1996
----------------------- -------------------------
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>
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.
<PAGE> 183
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
7. FINANCIAL HIGHLIGHTS (FOR EACH SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
- ----------------------------- ------------------------------------------------- ---------------------------------
October 28, 1994 February 13, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ---------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 14.91 $12.03 $10.00 $ 14.88 $13.49
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.17) (.10) (.03) (0.46) (.04)
Net realized and unrealized gain 0.91 3.62 2.06 1.08 1.43
------- ------ ------ ------- ------
Total from investment operations 0.74 3.52 2.03 0.62 1.39
Less distribution from net realized gain (.19) (.64) -- (.19) --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 15.46 $14.91 $12.03 $ 15.31 $14.88
======= ====== ====== ======= ======
Total Return 5.12 % 30.10 % 20.30%(2) 4.32 % 10.30 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,428 $5,130 $1,993 $ 46 $ 43
Ratio of expenses to average net assets
before waiver 1.75 % 1.75 % 1.75%(1) 2.50 % 2.50 %(1)
Ratio of expenses to average net assets,
net of waiver 1.75 % 1.75 % 1.73%(1) 2.50 % 2.50 %(1)
Ratio of net investment loss to
average net assets, before waiver (1.13)% (0.94)% (0.72)%(1) (1.90)% (1.70)%(1)
Ratio of net investment loss to average
net assets, net of waiver (1.13)% (0.94)% (0.70)%(1) (1.90)% (1.70)%(1)
Portfolio turnover rate 109 % 72 % 68 % 109 % 72 %
Average commission per share on
portfolio transactions $0.0419 $ 0.06 N/A $0.0419 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE SECURITIES FUND CLASS A CLASS D
- ----------------------------------- ----------------- -----------------
September 3, 1996 September 3, 1996
(commencement of (commencement of
operations) to operations) to
May 31, 1997 May 31, 1997
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period $ 10.00 $ 10.00
------- -------
Income from investment operations
Net investment income 0.34 0.33
Net realized and unrealized gain (loss) 0.99 0.98
------- -------
Total from investment operations 1.33 1.31
Less distribution from net investment
income and realized gain (.25) (.25)
------- -------
NET ASSET VALUE, end of period $ 11.08 $ 11.06
======= =======
Total Return 13.53 %(2) 13.33 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $20,553 $ 18
Ratio of expenses to average net assets before waiver 2.36 %(1) 3.37 %(1)
Ratio of expenses to average net assets, net of waiver 0.52 %(1) 0.83 %(1)
Ratio of net investment income to average
net assets, before waiver 3.67 %(1) 2.57 %(1)
Ratio of net investment income to average net assets,
net of waiver 5.52 %(1) 5.12 %(1)
Portfolio turnover rate 113 % 113 %
Average commission per share on
portfolio transactions $0.0564 $ 0.0564
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 184
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- ---------------------------- ----------------------------------------------- ---------------------------------
November 14, 1994 February 26, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ----------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 19.56 $12.21 $10.00 $ 19.52 $16.88
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.28) (.17) (.09) (0.49) (.04)
Net realized and unrealized gain (loss) (3.76) 8.05 2.30 (3.67) 2.68
------- ------ ------ ------- ------
Total from investment operations (4.04) 7.88 2.21 (4.16) 2.64
Less distribution from net realized gain -- (.53) -- -- --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 15.52 $19.56 $12.21 $ 15.36 $19.52
======= ====== ====== ======= ======
Total Return (20.65)% 65.55 % 22.10 %(2) (21.31)% 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,789 $6,657 $1,241 $ 221 $ 243
Ratio of expenses to average net assets 1.75 % 1.75 % 1.75 %(1) 2.50 % 2.50%(1)
Ratio of net investment loss to
average net assets (1.69)% (1.70)% (1.62)%(1) (2.45)% (2.48)%(1)
Portfolio turnover rate 28 % 38 % 43 % 28 % 38%
Average commission per share on
portfolio transactions $0.0048 $ 0.01 N/A $0.0048 $ 0.01
</TABLE>
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- ------------------------------------------------ --------------------------------
December 28, 1994 March 22, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ----------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 14.36 $11.99 $10.00 $ 14.33 $12.29
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.07) (0.33) (.07) (0.18) (.06)
Net realized and unrealized gain (1.66) 3.87 2.06 (1.64) 2.10
------- ------ ------ ------- ------
Total from investment operations (1.73) 3.54 1.99 (1.82) 2.04
Less distribution from net realized gain (1.15) (1.17) -- (1.15) --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 11.48 $14.36 $11.99 $ 11.36 $14.33
======= ====== ====== ======= ======
Total Return (11.35)% 29.75 % 19.90 %(2) (12.04)% 16.60 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,477 $6,393 $6,837 $ 13 $ 15
Ratio of expenses to average net assets 1.75 % 1.75 % 1.75 %(1) 2.50 % 2.50 %(1)
Ratio of net investment loss to
average net assets (0.57)% (1.57)% (1.62)%(1) (1.26)% (2.32)%(1)
Portfolio turnover rate 255 % 132 % 59 % 255 % 132 %
Average commission per share on
portfolio transactions $0.0612 $ 0.05 N/A $0.0612 $ 0.05
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 185
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- -------------------------------------- --------------------------------------
July 13, 1995 March 11, 1996
(commencement of (commencement of
Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 11.26 $ 10.00 $ 11.25 $ 10.79
------------ ------------ ------------ ------------
Income from investment operations
Net investment loss (0.07) (.05) (0.15) (.01)
Net realized and unrealized gain 1.40 1.31 1.39 .47
------------ ------------ ------------ ------------
Total from investment operations 1.33 1.26 1.24 .46
------------ ------------ ------------ ------------
NET ASSET VALUE, end of period $ 12.59 $ 11.26 $ 12.49 $ 11.25
============ ============ ============ ============
Total Return 11.81% 12.60%(2) 11.02% 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 12,099 $ 3,578 $ 30 $ 6
Ratio of expenses to average net assets
before waiver 2.00% 2.00%(1) 2.75% 2.75%(1)
Ratio of expenses to average net assets,
net of waiver 2.00% 1.99%(1) 2.75% 2.75%(1)
Ratio of net investment loss to average
net assets before waiver 0.82% (0.92)%(1) 1.63% (0.70)%(1)
Ratio of net investment loss to average
net assets net of waiver 0.82% (0.91)%(1) 1.63% (0.70)%(1)
Portfolio turnover rate 52% 70% 52% 70%
Average commission per share on
portfolio transactions $ 0.0273 $ 0.02 $ 0.0273 $ 0.02
</TABLE>
<TABLE>
<CAPTION>
RESERVE LARGE-CAP VALUE FUND CLASS A CLASS D
- ---------------------------- ------------------------------------ ----------------
January 2, 1996
(commencement of
Year Ended operations) to Year Ended
May 31, 1997 May 31, 1996 May 31, 1997
------------------------------------ ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 10.95 $ 10.00 $ 10.95
----------- ----------- ===========
Income from investment operations
Net investment loss (0.03) (0.01) (0.05)
Net realized and unrealized gain 3.69 0.96 3.61
----------- ----------- -----------
Total from investment operations 3.66 0.95 3.56
----------- ----------- -----------
NET ASSET VALUE, end of period $ 14.61 $ 10.95 $ 14.51
=========== =========== ===========
Total Return 33.42% 9.50%(2) 32.51%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 3,054 $ 1,231 $ 56
Ratio of expenses to average net assets 1.75% 1.75%(1) 2.50%
Ratio of net investment loss to average
net assets (0.32)% (0.32)%(1) (1.07)%
Portfolio turnover rate 18% 0 % 18%
Average commission per share on
portfolio transactions $ 0.0684 $ 0.08 $ 0.0684
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 186
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ------------------------------------ ----------------------------------
March 13, 1996
(commencement of
Year Ended operations) to Year Ended Year Ended
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 12.29 $ 10.94 $ 12.27 $ 10.00
----------- ----------- ----------- -----------
Income from investment operations
Net investment loss (0.11) (.01) (0.28) (0.17)
Net realized and unrealized gain 1.02 1.36 1.10 2.44
----------- ----------- ----------- -----------
Total from investment operations 0.91 1.35 0.82 2.27
----------- ----------- ----------- -----------
NET ASSET VALUE, end of period $ 13.20 $ 12.29 $ 13.09 $ 12.27
=========== =========== =========== ===========
Total Return 7.40% 12.34%(2) 6.68% 22.70%
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 2,174 $ 131 $ 1,828 $ 2,408
Ratio of expenses to average net assets 1.75% 1.74%(1) 2.50% 2.49%
Ratio of net investment loss to average
net assets (1.31)% (0.97)%(1) (2.08)% (2.00)%
Portfolio turnover rate 102% 85% 102% 85%
Average commission per share on
portfolio transactions $ 0.0545 $ 0.04 $ 0.0545 $ 0.04
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales
load.
<PAGE> 187
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 October 1, 1997.
TABLE OF CONTENTS
Page
----
Investment Policies 2
Other Policies 3
Trustees and Officers of the Trust 4
Investment Management and Other Agreements 6
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 Accounts 13
Financial Statements 14
<PAGE> 188
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 %
(1/2 of 1%) of the securities (taken at market value) of such issuer and such
individuals owning more than one-half of one % (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> 189
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, 1535 Presidential Drive, Apt. 4A, Columbus, OH
43212.
Mr. Emmet retired as the Managing Director of Servus Associates, Inc.; and
U.S.A. Representative of the First National Bank of Southern Africa in 1996. He
is currently Trustee of RF, RIT, RNYTET, RTET and RPES. Until 1989, he was
Senior Vice President of the New York branch of Banque Nationale de Paris.
+*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.
Michelle L. Neufeld, Counsel and Secretary, 810 Seventh Avenue, New York,
New York 10019.
Ms. Neufeld is Counsel and Secretary of RF, RIT, RTET, RNYTET and RPES.
Before joining The Reserve Funds in 1997, Ms. Neufeld was a staff attorney at
NASD Regulation, Inc.
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., Inc.
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> 190
service as a Trustee or officer of the Trust, except liabilities incurred
by reason of their willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of their office.
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM FUND AND FUND COMPLEX
NAME OF TRUSTEE FROM FUNDS* (4 ADDITIONAL TRUSTS) PAID TO TRUSTEE*
------------------------------------------------------------------------------
<S> <C> <C>
Edwin Ehlert, Jr. $120.09 $30,500
Henri W. Emmet $133.87 $34,000
Rev. Donald J. Harrington $118.11 $30,000
</TABLE>
Amounts shown are for the Fund's fiscal year ending May 31, 1997.
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 Service Plan). 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 Service
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 review and approval 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"), 180 Church
Street, Naugatuck, CT 06770, 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 and approval 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 the 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.
SERVICE PLAN. The Trust maintains a Service 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> 191
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. 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.
The Glass-Steagall Act prohibits all entities which receive deposits from
engaging to any extent 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 Fund shares (such as
administrative and account maintenance services) may include banks, upon advice
of counsel that they are permitted to do so under applicable laws and
regulations, including the Glass-Steagall Act. In such event, no preference will
be given to securities issued by such banks as investment 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
banks may also receive compensation from the bank accounts they service. It is
Fund management's position that payments to banks pursuant to the Plan for
activities not primarily intended to result in the sale of a Fund's 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.
Financial institutions providing distribution assistance or administrative
services for the Fund may be required to register as securities dealers in
certain states.
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. Subject to procedures as 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 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> 192
series in respect of assets specifically allocated to such series. 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% of all
shares voting as a group or 67% of the shares voted as a group at an annual
meeting of shareholders at which at least 50% of the shares of each group are
represented.
As of August 30, 1997, 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 (5.6%); Nations Bank, P.O. Box 831575, Dallas,
TX 75283 (25.5%) (Class A); Trust Co. of Knoxville, P.O. Box 789, Knoxville, TN
37901 (24%) (Class A); Emilla Gabriele, 15 Bungalow Park Stamford, CT 06902
(43.3%) (Class D); Bert Mayer, 318 East 81st St. New York, NY 10028 (20%) (Class
D); Donaldson Lufkin Jenrette Securities Corporation Inc. P.O. Box 2052, Jersey
City, NJ 07303 (6.7%) (Class D); Radhika Narang 35 White Birch Lane, Commack, NY
11725 (7.9%) (Class D); and Rajinder P. Narang, 35 White Birch Lane, Commack, NY
11725 (15.2%) (Class D).
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.
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.
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> 193
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, 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%
of its taxable income to shareholders, derive at least 90% of its gross income
from dividends, interest and gains from the sale or disposition of securities
and derive less than 30% 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> 194
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.
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 assumes reinvestment of all income dividends and capital gain
distributions during the period.
<PAGE> 195
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 the rates of return calculated will
not be average annual rates, but rather, actual annual, annualized or aggregate
rates of return.
<PAGE> 196
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and 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 Convertible Securities Fund, Reserve Emerging Growth Fund,
Reserve Informed Investors Growth Fund, Reserve International Equity Fund,
Reserve Large-Cap Value Fund, and Reserve Mid-Cap Growth Fund (formerly Reserve
North American Growth Fund)) (collectively the "Trust"), including the schedules
of portfolio investments, as of May 31, 1997, 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, 1997, 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, 1997,
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 27, 1997
<PAGE> 197
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BANKS (1.9%)
BankBoston Corporation 1,400 $102,200
--------
BEVERAGES (4.0%)
PepsiCo, Inc. 6,000 220,500
--------
BUILDING MATERIALS (1.8%)
* American Standard Companies, Inc. 2,000 100,250
--------
CHEMICALS - MISCELLANEOUS (4.3%)
ChemFirst, Inc. 9,200 238,050
--------
COMPUTER SERVICES (2.2%)
* Wang Laboratories, Inc. 5,800 118,900
--------
COMPUTER SOFTWARE (5.8%)
* CUC International, Inc. 6,450 148,350
National Data Corporation 3,900 171,112
--------
319,462
--------
CONSUMER SERVICES (2.2%)
* HFS, Inc. 2,200 118,525
--------
ELECTRONICS (6.8%)
General Electric Company 1,800 108,675
* Perceptron, Inc. 9,300 262,725
--------
371,400
--------
ENTERTAINMENT (3.1%)
Walt Disney Company 2,100 171,937
--------
FINANCIAL SERVICES (6.2%)
Federal National Mortgage Association 5,200 226,850
Pioneer Group, Inc. 4,400 110,550
--------
337,400
--------
FOOD (2.3%)
* Suiza Foods Corporation 4,200 125,475
--------
HOSPITAL MANAGEMENT (3.7%)
* Assisted Living Concepts, Inc. 8,000 200,000
--------
MANAGED CARE (1.1%)
* Physicians' Specialty Corporation 10,000 61,250
--------
</TABLE>
<PAGE> 198
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
MEDICAL SUPPLIES (1.3%)
* LaserSight Corporation 10,000 $ 70,000
----------
MISCELLANEOUS CONSUMER (2.1%)
* Gibson Greetings, Inc. 5,300 115,275
----------
MISCELLANEOUS MANUFACTURING (5.6%)
Warnaco Group, Inc. 5,300 173,575
Westinghouse Electric Corporation 6,500 131,625
----------
305,200
----------
MULTI-LINE INSURANCE (3.1%)
The Hartford Financial Services Group, Inc. 2,200 171,600
----------
OFFICE - BUSINESS EQUIPMENT (4.6%)
* American Pad & Paper Company 13,500 249,750
----------
OIL/GAS EQUIPMENT SERVICES (2.0%)
* Cairn Energy USA, Inc. 9,200 108,675
----------
PACKAGED SOFTWARE (3.9%)
Computer Associates International, Inc. 3,900 213,525
----------
PHARMACEUTICALS (7.1%)
* Bio-Technology General Corporation 5,400 78,300
Eli Lilly & Company 1,100 102,300
Johnson & Johnson 1,800 107,775
Merck & Co., Inc. 1,100 98,863
----------
387,238
----------
PUBLISHING (4.2%)
Harte-Hanks Communications 7,800 233,025
----------
RADIO, TV & BROADCAST COMMUNICATION EQUIPMENT (4.6%)
* American Radio Systems Corporation 1,400 52,150
* Sinclair Broadcast Group, Inc. 8,000 198,000
----------
250,150
----------
REAL ESTATE (4.6%)
Insignia Financial Group, Inc., Class A 14,200 252,050
----------
</TABLE>
<PAGE> 199
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
SPECIAL INDUSTRIAL MACHINERY (3.1%)
Thermo Electron Corporation 5,000 $ 172,500
-------------
TOTAL COMMON STOCKS (Cost $4,512,303) (91.6%) 5,014,337
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 260,000 260,000
Vista Treasury Plus Money Market Fund 70,000 70,000
-------------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $330,000) (6.0%) 330,000
-------------
TOTAL INVESTMENTS (Cost $4,842,303) (97.6%) 5,344,337
Other assets, less liabilities (2.4%) 129,523
-------------
NET ASSETS (100%) $ 5,473,860
=============
</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, 1997 was $4,842,303, the aggregate gross unrealized appreciation for all
investments was $707,511 and aggregate gross unrealized depreciation for all
investments was $205,477.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 200
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
CONVERTIBLE BONDS
<TABLE>
<CAPTION>
VALUE
MATURITY PAR (NOTE 1)
-------- --- --------
<S> <C> <C> <C>
BASIC INDUSTRIAL COMMODITY (2.2%)
First South Africa Corp, Ltd., 144A, 9% 06/15/04 450,000 $ 450,000
----------
BIO-TECHNOLOGY (3.9%)
Chiron Corp., 144A, 1.9% 11/17/00 450,000 397,125
NABI, Inc., 144A, 6.5% 02/01/03 500,000 414,375
----------
811,500
----------
COMMERCIAL SERVICES (1.8%)
Pharmaceutical Marketing
Services, Inc., 144A, 6.25% 02/01/03 450,000 360,000
----------
COMPUTER SOFTWARE (1.9%)
MacNeal - Schwendler Corp., 7.875% 08/18/04 400,000 392,000
----------
ELECTRONIC PRODUCTS - MISCELLANEOUS (1.9%)
Trans-Lux Corp., 7.5% 12/01/06 375,000 390,000
----------
ENVIRONMENT - CONSULTING, ENGINEERING (1.1%)
Roy F. Weston, Inc., 7% 04/15/02 270,000 229,500
----------
FOOD CHAINS (1.9%)
Marsh Supermarkets, Inc., 7% 02/15/03 400,000 400,000
----------
GENERAL INDUSTRIAL MACHINE & EQUIPMENT (2.0%)
Robbins & Myers, Inc., 6.5% 09/01/03 300,000 412,500
----------
HOTEL - MOTEL (3.4%)
Hilton Hotels Corp., 5% 05/15/06 350,000 380,625
Signature Resorts, Inc., 5.75% 01/15/07 350,000 316,750
----------
697,375
----------
MEDICAL - HMO (3.9%)
FPA Medical Management, Inc., 6.5% 12/15/01 400,000 421,000
PhyMatrix Corp., 6.75% 06/15/03 450,000 389,250
----------
810,250
----------
OIL - DOMESTIC (2.7%)
Lomak Petroleum, Inc., 144A, 6% 02/01/07 350,000 395,500
Snyder Oil Corp., 7% 05/15/01 150,000 155,625
----------
551,125
----------
POLLUTION CONTROL (3.8%)
USA Waste Services, Inc., 4% 02/01/02 350,000 362,250
WMX Technologies, Inc., 2% 01/24/05 450,000 406,687
----------
768,937
----------
</TABLE>
<PAGE> 201
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
CONVERTIBLE BONDS
<TABLE>
<CAPTION>
VALUE
MATURITY PAR (NOTE 1)
-------- --- --------
<S> <C> <C> <C>
PUBLISHING (2.0%)
Scholastic Corp., 5% 08/15/05 500,000 $ 403,750
----------
RETAIL STORES - DEPARTMENT (1.9%)
Saks Holdings, Inc., 5.5% 09/15/06 450,000 398,250
----------
RETAIL - APPAREL (1.9%)
Charming Shoppes, Inc., 7.5% 07/15/06 400,000 393,000
----------
RETAIL - SPECIALTY (1.8%)
The Sports Authority, Inc., 5.25% 09/15/01 400,000 360,500
----------
TRANSPORT - AIR FREIGHT (1.6%)
Consolidated Logistics, 144A, 8% 08/21/00 400,000 320,000
----------
WATER TREATMENT SYSTEMS (3.2%)
United States Filter Corp., 4.5% 12/15/01 650,000 665,438
----------
TOTAL CONVERTIBLE BONDS (Cost $8,647,471) (42.9%) 8,814,125
----------
</TABLE>
PREFERRED STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BANKS (2.6%)
National Australian Bank Ltd., 7.875% 20,000 $537,500
-------
CONTAINERS-METAL/GLASS (2.1%)
Crown Cork & Seal Company, Inc., 4.5% 2/26/00 8,000 434,000
-------
ENERGY (1.6%)
Occidental Petroleum Corp., 144A, $3.875 Series 1993 6,000 338,250
-------
ENTERTAINMENT (2.9%)
Wellsford Residential Property, 7% Series A 22,900 589,675
-------
FINANCIAL SERVICES (2.1%)
SunAmerica, Inc., $3.1875 10/31/99 10,000 431,250
-------
GENERAL INDUSTRIAL MACHINES & EQUIPMENT (2.0%)
Greenfield Industries, Inc., 144A, 6% 3/31/16 9,000 409,500
-------
GLASS PRODUCTS (1.9%)
Corning Delaware L.P., 6% 5,000 399,375
-------
</TABLE>
<PAGE> 202
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
PREFERRED STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
GOLD MINING (1.6%)
Coeur D'Alene Mines Corp., 7% 3/15/00 20,000 $ 332,500
----------
HOTEL-MOTEL (1.8%)
Host Marriott Corp., 144A, 6.75% 12/02/26 6,500 367,250
----------
MEDICAL - HMO (2.1%)
Aetna, Inc., 6.25% 7/19/00 4,700 431,225
----------
NATURAL GAS (2.0%)
MCN Corp., 8.75% 4/30/99 15,000 416,250
----------
OIL-DOMESTIC (5.5%)
Mesa, Inc., 8%, Series A 80,000 530,000
Nuevo Energy, 5.75% 12/15/26 Series A 8,000 403,000
Snyder Oil Corporation, $1.5 7,700 190,575
----------
1,123,575
----------
PAPER (1.9%)
International Paper Co., 5.25% 7/20/25 7,500 386,250
----------
PUBLISHING (1.4%)
Golden Books Family Entertainment, Inc., 144A,
8.75% 8/20/16 5,000 280,000
----------
PUBLISHING-NEWSPAPERS (2.1%)
Hollinger International, Inc., 9.75% 8/01/00 40,000 440,000
----------
REAL ESTATE (4.8%)
Excel Realty, $2.125 Series A 16,000 426,000
Redwood Trust, Inc., 9.74% Class B 10,000 567,500
----------
993,500
----------
RESTAURANTS (2.0%)
Apple South, Inc., 144A, $3.5 3/01/27 7,000 420,875
----------
TELECOMMUNICATIONS (2.1%)
Mobile Telecommunication
Technologies Corp., 144A, $2.25 20,000 425,000
----------
TELECOMMUNICATIONS-BROADCAST (2.1%)
Merrill Lynch & Company, 6% 6/01/99 Series COX 20,000 427,500
----------
TOTAL PREFERRED STOCKS (Cost $8,282,029) (44.6%) $9,183,475
----------
</TABLE>
<PAGE> 203
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AEROSPACE (0.9%)
* International Airline Support Group, Inc. 44,908 $ 196,473
---------------
ENTERTAINMENT (1.4%)
* Malibu Entertainment Worldwide, Inc. 70,000 280,000
---------------
MISCELLANEOUS MANUFACTURING (0.1%)
* Disc Graphics, Inc. - Warrants Class "A", 11/01/99 28,000 21,000
---------------
NONHAZARDOUS WASTE DISPOSAL (0.2%)
* Allied Waste Industries, Inc. 2,266 33,423
---------------
OIL WELL SERVICES (3.6%)
* SEACOR SMIT, Inc. 14,400 745,200
---------------
PREHOSPITAL MEDICAL CARE, TRANSPORTATION (1.7%)
Laidlaw, Inc., Class B 25,663 346,451
---------------
TELECOMMUNICATIONS (0.6%)
* Mobile Telecommunication Technologies Corp. 10,000 121,875
---------------
TOYS (2.1%)
Hasbro, Inc. 15,000 435,000
---------------
TOTAL COMMON STOCKS (Cost $1,876,695) (10.6%) 2,179,422
---------------
TOTAL INVESTMENT SECURITIES (Cost $18,806,195) (98.1%) $ 20,177,022
Other assets, less liabilities (1.9%) 394,238
---------------
NET ASSETS (100%) $ 20,571,260
===============
</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, 1997 was $18,806,195, the aggregate gross unrealized appreciation for all
investments was $1,553,782 and aggregate gross unrealized depreciation for
all investments was $182,955.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 204
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BIO-TECHNOLOGY (1.9%)
* Genzyme Corporation 4,800 $114,600
--------
CAPITAL GOODS - DIVERSIFIED (2.4%)
Danaher Corporation 3,000 145,500
--------
CAPITAL GOODS/INDUSTRIAL (1.9%)
* Vishay Intertechnology, Inc. 3,836 112,703
--------
COMMUNICATION - EQUIPMENT (6.3%)
* ANADIGICS, Inc. 4,500 149,063
ECI Telecommunications Ltd. Designs 6,300 145,687
* Saville Systems Ireland plc 2,000 85,250
--------
380,000
--------
COMMUNICATION - NETWORK (3.4%)
* ICG Communications, Inc. 5,000 80,000
* PairGain Technologies, Inc. 6,000 125,250
--------
205,250
--------
COMPUTER NETWORKING (3.3%)
* Ascend Communications, Inc. 3,600 200,700
--------
COMPUTER PERIPHERAL EQUIPMENT (0.9%)
* Dialogic Corporation 1,800 52,650
--------
COMPUTER SERVICES (4.6%)
* HNC Software, Inc. 5,200 171,600
* Rational Software Corporation 5,400 101,925
--------
273,525
--------
COMPUTER SOFTWARE (3.1%)
* Business Objects S. A. - ADR 5,200 50,050
* Media 100, Inc. 8,000 46,000
* Sapient Corporation 2,000 89,500
--------
185,550
--------
CONSUMER GROWTH (8.3%)
* Activision, Inc. 16,000 208,000
* Conso Products Company 7,625 101,031
* Electronic Arts, Inc. 3,700 118,400
* Lin Television Corporation 1,700 73,738
--------
501,169
--------
</TABLE>
<PAGE> 205
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ELECTRONIC PRODUCTS - MISCELLANEOUS (0.5%)
AVX Corporation 1,000 $ 27,250
--------
ENERGY (2.7%)
Cross Timbers Oil Company 8,250 159,844
--------
HEALTH (4.3%)
* HCIA, Inc. 2,300 56,925
* National Dentex Corporation 6,000 104,250
* PacifiCare Health Systems, Inc. 1,200 95,100
--------
256,275
--------
HOUSEHOLD FURNISHINGS & APPLIANCES (2.8%)
* Williams-Sonoma, Inc. 4,500 165,938
--------
MANAGED CARE (7.4%)
* CRA Managed Care, Inc. 2,500 114,375
* Healthsource, Inc. 4,000 86,000
* MedPartners, Inc. 7,100 134,900
* PhyCor, Inc. 3,787 108,402
--------
443,677
--------
MISCELLANEOUS CONSUMER (2.5%)
* On Assignment, Inc. 4,000 152,500
--------
OFFICE-BUSINESS EQUIPMENT (2.4%)
* HPR, Inc. 9,000 146,250
--------
OFFSHORE DRILLING (1.6%)
* Parker Drilling Company 10,000 96,250
--------
OIL WELL SERVICES (1.3%)
* Dawson Production Services, Inc. 7,000 78,750
--------
OPTICAL INSTRUMENTS AND LENSES (1.6%)
* KLA-Tencor Corporation 2,000 95,125
--------
PAPER (1.2%)
* Data Documents, Inc. 6,000 71,250
--------
</TABLE>
<PAGE> 206
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
PHARMACEUTICALS (4.9%)
* Centocor, Inc. 3,200 $ 112,800
* Dura Pharmaceuticals, Inc. 4,600 182,850
----------
295,650
----------
RESTAURANTS (0.4%)
* Outback Steakhouse, Inc. 1,000 23,250
----------
RETAIL - SPECIALTY (10.6%)
* Borders Group, Inc. 7,900 171,825
* Corporate Express, Inc. 8,600 118,250
* PetSmart, Inc. 6,000 73,500
* Staples, Inc. 6,325 139,150
* The Sports Authority, Inc. 7,500 135,000
----------
637,725
----------
SEMICONDUCTOR-RELATED DEVICES (5.4%)
* Etec Systems, Inc. 1,800 80,100
Intel Corporation 800 121,200
* LSI Logic Corporation 3,000 125,250
----------
326,550
----------
SYSTEM SOFTWARE/CLIENT SERVER (1.6%)
* Hummingbird Communications Ltd. 3,400 96,900
----------
TELECOMMUNICATIONS EQUIPMENT (7.3%)
* Comverse Technology, Inc. 2,000 91,500
* DSC Communications Corporation 2,000 51,125
* Newbridge Networks Corporation 3,600 144,450
* P-COM, Inc. 3,200 103,200
* Proxim, Inc. 2,000 51,250
----------
441,525
----------
TOTAL COMMON STOCKS (Cost $4,710,070) (94.6%) 5,686,356
----------
</TABLE>
<PAGE> 207
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 280,000 $ 280,000
U.S. Treasury Plus Money Market Fund 150,000 150,000
----------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $430,000) (7.2%) 430,000
----------
TOTAL INVESTMENTS (Cost $5,140,070) (101.8%) 6,116,356
Liabilities, less other assets (-1.8%) (106,650)
----------
NET ASSETS (100%) $6,009,706
==========
</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 May 31,
1997 was $5,140,070, the aggregate gross unrealized appreciation for all
investments was $1,463,144 and aggregate gross unrealized depreciation for
all investments was $486,858.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 208
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INFORMED INVESTORS GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AIRLINES (3.8%)
Southwest Airlines Company 8,000 $206,000
--------
APPAREL MANUFACTURING (2.5%)
Liz Claiborne, Inc. 3,000 136,875
--------
BANKS (5.0%)
State Street Corporation 6,200 276,675
--------
CLOTHING (4.6%)
* Jones Apparel Group, Inc. 5,400 253,125
--------
COMPUTER MEMORY DEVICES (1.7%)
* EMC Corporation 2,300 91,712
--------
COMPUTER MICROSYSTEMS (2.3%)
* Dallas Semiconductor Corporation 3,200 123,600
--------
COMPUTER - PERIPHERAL EQUIPMENT (2.1%)
* Adaptec, Inc. 3,200 117,600
--------
COMPUTERS (8.2%)
* Dell Computer Corporation 2,100 236,250
* Gateway 2000, Inc. 3,200 212,400
--------
448,650
--------
FINANCIAL/BUSINESS SERVICES (17.1%)
Bear Stearns Companies, Inc. 8,400 273,000
Lehman Brothers Holdings, Inc. 5,400 218,025
Merrill Lynch & Company 2,300 243,800
Paine Webber Group, Inc. 5,700 202,350
--------
937,175
--------
GLASS PRODUCTS (3.5%)
Corning, Inc. 3,800 191,425
--------
HOSPITAL MANAGEMENT (3.8%)
* Tenet Healthcare Corporation 7,700 211,750
--------
LIFE/HEALTH INSURANCE (14.6%)
Conseco, Inc. 8,200 328,000
SunAmerica, Inc. 4,800 226,800
Torchmark Corporation 3,800 249,375
--------
804,175
--------
</TABLE>
<PAGE> 209
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INFORMED INVESTORS GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MISCELLANEOUS MANUFACTURING (4.0%)
Minnesota Mining and Manufacturing Company 2,400 $ 220,200
----------
MULTI-LINE INSURANCE (0.2%)
Travelers Group, inc. 200 10,975
----------
PAPER (2.4%)
International Paper Company 2,700 129,600
----------
RETAIL (4.1%)
* Costco Companies, Inc. 6,700 226,125
----------
RETAIL STORES (3.8%)
Dayton Hudson Corporation 4,400 211,750
----------
RETAIL STORES - GENERAL MERCHANDISING (3.4%)
Dollar General Corporation 5,500 184,938
----------
RETAIL - JEWELRY (2.4%)
Tiffany & Company 2,800 129,850
----------
TELEPHONE & TELEGRAPH APPARATUS (4.6%)
* Tellabs, Inc. 5,000 251,250
----------
TOTAL COMMON STOCKS (Cost $4,698,451) (94.1%) 5,163,450
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund
(Cost $80,000) (1.5%) 80,000 80,000
----------
TOTAL INVESTMENTS (Cost $4,778,451) (95.6%) 5,243,450
Other assets, less liabilities (4.4%) 246,483
----------
NET ASSETS (100%) $5,489,933
==========
</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,
1997 was $4,778,451, the aggregated gross unrealized appreciation for all
investments was $522,884 and aggregate gross unrealized depreciation for all
investments was $57,885.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 210
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AUSTRALIA (0.7%)
Australian Hospital Care Ltd. 49,000 $ 82,014
----------
DENMARK (2.6%)
* Carli Gray International 1,400 83,981
Novo Nordisk 2,200 235,853
----------
319,834
----------
FINLAND (2.4%)
Oy Nokia AB 2,300 150,810
TT Tieto OY 1,700 143,340
----------
294,150
----------
FRANCE (6.3%)
Altran Technologies 500 160,632
* Carrefour 360 236,937
Pinault - Printemps - Redoute 225 94,556
Sidel 2,800 196,926
Sodexho Alliance 150 69,810
----------
758,861
----------
GERMANY (4.9%)
Altana AG 150 138,545
Bayerische Motoren Werke (BMW) AG 200 163,980
Fresenius AG Pfd. 722 159,820
Porsche AG Pfd. 110 132,802
----------
595,147
----------
HONG KONG (11.8%)
Hang Seng Bank Ltd. 18,000 216,056
Henderson Land Development Company Ltd. 24,000 233,867
Hong Kong & China Gas Company 182,496 317,978
HSBC Holdings 8,436 255,868
* New World Infrastructure Ltd. 19,000 59,222
Sun Hung Kai Properties Ltd. 20,000 245,870
Wing Hang Bank Ltd. 21,600 102,870
----------
1,431,731
----------
</TABLE>
<PAGE> 211
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INDONESIA (0.7%)
* PT Bank International Indonesia 61,156 $ 50,230
PT Gudang Garam 8,000 34,497
PT Steady Safe 1,467 1,612
---------
86,339
---------
ITALY (1.6%)
Bulgari SpA 7,200 142,514
* Telecom Italia Mobile SpA 28,600 50,198
---------
192,712
---------
MALAYSIA (6.3%)
* Arab-Malaysian Merchant Bank Berhad 16,000 101,242
Berjaya Sports Toto Berhad 26,000 121,060
Commerce Asset Holding Berhad 20,000 58,103
DCB Holdings Berhad 32,000 103,152
Gamuda Berhad 17,333 62,081
Malayan Banking Berhad 20,000 210,920
United Engineers (Malaysia) Ltd. 13,000 105,022
---------
761,580
---------
NETHERLANDS (5.5%)
Elsevier NV 6,000 101,621
Koninklijke Ahold NV 2,245 170,695
Koninklijke Ahrend Groep NV 1,500 94,976
Nutricia Verenidge Bedrijven N.V. 600 93,616
* Ordina Beheer N.V. 1,040 78,153
Wolters Kluwer NV 1,012 121,881
---------
660,942
---------
NORWAY (4.4%)
Kverneland ASA 3,200 94,471
* Merkantildata 8,500 168,487
* Tandberg ASA 3,300 39,897
* Tandberg Television ASA 13,200 120,619
Tomra Systems ASA 5,000 114,574
---------
538,048
---------
PHILIPPINES (1.2%)
* Belle Corporation 200,000 53,091
* DMCI Holdings, Inc. 143,000 86,765
---------
139,856
---------
</TABLE>
<PAGE> 212
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
SINGAPORE (9.7%)
City Developments Limited 9,000 $ 83,677
DBS Land Limited 36,000 125,830
Development Bank of Singapore Limited 15,000 187,697
Oversea-Chinese Banking Corporation Ltd. 15,000 186,648
Overseas Union Bank Ltd. 20,000 137,015
Parkway Holdings Limited 43,000 213,422
United Overseas Bank Ltd. 10,000 102,761
Wing Tai Holdings Ltd. 45,000 134,009
----------
1,171,059
----------
SPAIN (3.8%)
Banco Intercontinental Espanol, SA 900 152,410
Electricas Reunidas de Zaragoza, SA 2,800 105,693
* Sol Melia, SA 5,600 207,896
----------
465,999
----------
SWEDEN (3.7%)
Autoliv AB 6,000 212,604
Ericsson Telefonaktiebolaget 6,800 239,192
----------
451,796
----------
SWITZERLAND (7.5%)
Nestle SA 70 87,215
Novartis AG Regular Shares 190 258,247
Novartis AG 30 40,882
Roche Holding AG 30 267,167
* Roche Holding AG Warrants 98 "Jubilee" 8 561
Zurich Versicherungs 700 257,681
----------
911,753
----------
THAILAND (0.2%)
Central Pattana Public Company Ltd. 10,000 26,653
* Thai Farmers Bank Public Company Ltd. (Warrants) 500 501
----------
27,154
----------
UNITED KINGDOM (12.0%)
Compass Group plc 12,700 141,752
HSBC Holdings plc 12,758 396,565
J.D. Wetherspoon plc 4,618 100,004
Lloyds TSB Group plc 13,000 130,825
Logica plc 6,600 93,571
Misys plc 5,400 122,581
Serco Group plc 8,200 92,735
Standard Chartered plc 10,476 166,121
Zeneca Group plc 7,000 212,652
----------
1,456,806
----------
</TABLE>
<PAGE> 213
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
UNITED STATES (11.7%)
Credicorp Ltd., ADR 5,000 $ 112,500
Panamerican Beverages, Inc., ADR 10,000 290,000
Santa Isabel, ADR 5,200 151,450
* State Bank of India, ADR 15,000 379,650
Telecomunicacoes Brasileiras SA, ADR 1,400 194,600
Telefonica de Argentina SA, ADR 5,000 181,250
Telefonica del Peru SA, ADR 4,500 114,188
-----------
1,423,638
-----------
TOTAL COMMON STOCKS (Cost $10,050,524)(97.0%) 11,769,419
MONEY MARKET MUTUAL FUNDS
U.S. Government Money Market Mutual Fund
(Cost $250,000)(2.1%) 250,000 250,000
-----------
TOTAL INVESTMENTS (Cost $10,300,524) (99.1%) 12,019,419
Other assets, less liabilities (0.9%) 109,835
-----------
NET ASSETS (100%) $12,129,254
===========
</TABLE>
INDUSTRY COMPOSITION
<TABLE>
<CAPTION>
INDUSTRY PERCENT
- -------- -------
<S> <C>
Auto/Truck Manufacturers 2.4
Bio Tech & Med Devices 2.5
Cellular Telephone 0.4
Commercial Banks 22.1
Computer Software 3.6
Computers & Peripheral 2.7
Construction & Engineering 2.6
Consumer Service 2.3
Drug & Health Care 10.8
Electric Power Utilities 0.9
Entertainment & Leisure 1.4
Financial Services 5.2
Food Processing 3.2
Lodging & Restaurants 3.7
Machinery 4.2
Public Utilities 2.6
Publishing 1.8
Real Estate Development 6.1
Real Estate Investment 0.9
Retailing 8.7
Telecommunications 8.6
Tobacco 0.3
----
Industry percent of net assets 97.0%
Money Market Mutual Funds 2.1%
Other assets, less liabilities 0.9%
----
Percent of Net Assets 100%
----
</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, 1997 was $10,300,524, the aggregate gross unrealized appreciation for all
investments was $2,002,534 and aggregate gross unrealized depreciation for
all investments was $283,576.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 214
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE LARGE-CAP VALUE FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ATHLETIC FOOTWEAR/APPAREL (2.7%)
Nike, Inc. 1,500 $ 85,500
------------
BANKS (3.4%)
Wells Fargo & Company 400 105,400
------------
BEVERAGES (9.5%)
Anheuser-Busch Companies, Inc. 2,400 102,900
Coca-Cola Company 1,700 116,025
PepsiCo, Inc. 2,100 77,175
------------
296,100
------------
COMPUTER SOFTWARE (4.0%)
* Microsoft Corporation 1,000 124,000
------------
COMPUTERS (4.4%)
Hewlett-Packard Company 1,000 51,500
International Business Machines Corporation 1,000 86,500
------------
138,000
------------
CONSUMER PRODUCTS (8.1%)
Clorox Company 1,000 126,250
Gillette Company 1,400 124,425
------------
250,675
------------
DRUGS (4.1%)
Abbott Labs 2,000 126,000
------------
ENTERTAINMENT (3.9%)
The Walt Disney Company (Holding Co.) 1,500 122,813
------------
FINANCIAL/BUSINESS SERVICES (8.4%)
American Express Company 2,000 139,000
Charles Schwab Corporation 3,000 121,875
------------
260,875
------------
FOOD (13.3%)
Campbell Soup Company 2,800 128,800
Hershey Foods Corporation 2,200 123,475
Quaker Oats Company 1,500 61,875
Wrigley (WM) Jr. Company 1,700 100,725
------------
414,875
------------
HEALTH (3.2%)
Becton, Dickinson & Company 2,000 98,500
------------
</TABLE>
<PAGE> 215
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE LARGE-CAP VALUE FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MEDICAL SUPPLIES (6.5%)
Kimberly-Clark Corporation 2,000 $ 100,250
Pfizer, Inc. 1,000 102,875
----------
203,125
----------
PHARMACEUTICALS (10.7%)
Eli Lilly & Company 1,000 93,000
Johnson & Johnson 1,900 113,763
Merck & Company, Inc. 1,400 125,825
----------
332,588
----------
PHOTOGRAPHY (3.2%)
Eastman Kodak Company 1,200 99,450
----------
PUBLISHING (3.9%)
Gannett Company, Inc. 1,300 120,250
----------
PUBLISHING - NEWSPAPERS (2.8%)
New York Times Company Class A 1,900 87,518
----------
SEMICONDUCTOR - RELATED DEVICE (4.9%)
Intel Corporation 1,000 151,500
----------
TOTAL COMMON STOCKS (Cost $2,260,193)(97.0%) 3,017,169
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund
(Cost $135,000) (4.4%) 135,000 135,000
----------
TOTAL INVESTMENTS (Cost $2,395,193) (101.4%) 3,152,169
Liabilities, less other assets (-1.4%) (42,189)
----------
NET ASSETS (100%) $3,109,980
==========
</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, 1997 was $2,395,193, the aggregate gross unrealized appreciation for all
investments was $758,447 and aggregate gross unrealized depreciation for all
investments was $1,471.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 216
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AIR FREIGHT (2.3%)
Circle International Group, Inc. 3,300 $ 91,575
--------
AUTO PARTS-ORIGINAL EQUIPMENT (5.7%)
* Gentex Corporation 4,600 92,575
Paccar, Inc. 3,000 135,750
--------
228,325
--------
BEVERAGES (3.6%)
* Robert Mondavi Corporation 3,200 142,400
--------
BUSINESS EQUIPMENT/SERVICE (2.5%)
* Greenwich Air Services, Inc. 3,500 101,500
--------
CLOTHING (3.3%)
* Fruit of the Loom, Inc. 3,800 132,525
--------
COMMUNICATION - EQUIPMENT (2.5%)
* Qualcomm, Inc. 2,100 101,325
--------
COMPUTER MICROSYSTEMS (4.6%)
* Dallas Semiconductor Corporation 4,800 185,400
--------
COMPUTER SOFTWARE (1.8%)
* Imnet Systems, Inc. 2,900 72,500
--------
COMPUTERS - PERIPHERAL EQUIPMENT (4.3%)
* American Power Conversion Corp. 3,500 81,375
* MicroTouch Systems, Inc. 3,600 90,900
--------
172,275
--------
HOSPITAL SUPPLIES (2.7%)
* Advanced Technology Laboratories, Inc. 2,800 108,500
--------
HOUSEHOLD FURNISHINGS APPLIANCE (7.6%)
Bush Industries, Inc. 4,000 90,000
Herman Miller, Inc. 6,000 214,500
--------
304,500
--------
</TABLE>
<PAGE> 217
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INSTRUMENTS - SCIENTIFIC (2.0%)
* Water Corporation 2,500 $ 80,625
--------
LIFE INSURANCE (6.0%)
Protective Life Corporation 3,000 134,250
Western National Corporation 4,000 104,500
--------
238,750
--------
NURSING HOMES (3.0%)
* Genesis Health Ventures, Inc. 3,600 118,350
--------
OIL/GAS EQUIPMENT SERVICES (10.1%)
* Nuevo Energy Company 3,300 143,962
* Rowan Companies, Inc. 5,700 131,813
Tidewater, Inc. 3,050 128,481
--------
404,256
--------
POLLUTION CONTROL (4.9%)
* Newpark Resources, Inc. 3,770 197,925
--------
RESTAURANTS (2.9%)
* Cracker Barrel Old Country Store, Inc. 4,000 116,000
--------
RETAIL (2.5%)
* Stein Mart, Inc. 3,300 99,825
--------
RETAIL-SPECIALTY (4.8%)
* AutoZone, Inc. 4,500 105,188
Pier 1 Imports, Inc. 3,800 85,025
--------
190,213
--------
RETAIL STORES-DRUGS (3.3%)
* CVS Corporation 2,800 134,050
--------
SEMICONDUCTOR RELATED DEVICE (2.2%)
* Photronics, Inc. 2,000 89,250
--------
SPECIAL INDUSTRIAL MACHINERY (6.0%)
Briggs & Stratton Corporation 2,200 113,575
Pentair Industries, Inc. 3,800 124,925
--------
238,500
--------
TRUCKERS (3.9%)
* Swift Transportation Co., Inc. 4,800 154,800
--------
</TABLE>
<PAGE> 218
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
TOTAL COMMON STOCKS (Cost $3,064,256) (92.5%) $3,703,369
----------
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 185,000 185,000
Vista Treasury Plus Money Market Fund 115,000 115,000
----------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $300,000) (7.5%) 300,000
----------
TOTAL INVESTMENTS (Cost $3,364,256) (100.0%) 4,003,369
Liabilities, less other assets (0.0%) (1,234)
----------
NET ASSETS (100%) $4,002,135
==========
</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, 1997 was $3,364,256, the aggregate gross unrealized appreciation for all
investments was $695,869 and aggregate gross unrealized depreciation for all
investments was $56,756.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 219
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
BLUE CHIP CONVERTIBLE EMERGING
GROWTH FUND SECURITIES FUND GROWTH FUND
----------- --------------- -----------
<S> <C> <C> <C>
ASSETS
Investment in securities, at value
(cost $4,842,303, $18,806,195,
$5,140,070, respectively) $5,344,337 $20,177,022 $6,116,356
Cash 50,872 51,574 32,911
Receivable for investment securities sold 77,263 379,631 --
Dividends receivable 2,268 32,187 290
Interest receivable 21 154,372 26
---------- ----------- ----------
Total assets 5,474,761 20,794,786 6,149,583
---------- ----------- ----------
LIABILITIES
Payable for investment securities purchased -- 223,126 139,257
Payable for fund shares redeemed 77 56 60
Other payables and accrued expenses 824 344 560
---------- ----------- ----------
Total liabilities 901 223,526 139,877
---------- ----------- ----------
NET ASSETS $5,473,860 $20,571,260 $6,009,706
========== =========== ==========
NET ASSETS CONSIST OF (Note 1):
Capital stock (Par Value $.001 per share) $ 354 $ 1,857 $ 387
Additional paid in capital 4,125,193 18,809,616 5,620,631
Accumulated net realized gain (loss) on investments 846,279 218,279 (587,598)
Undistributed net investment income -- 170,681 --
Net unrealized appreciation on investments 502,034 1,370,827 976,286
---------- ----------- ----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $5,473,860 $20,571,260 $6,009,706
========== =========== ==========
CLASS A:
Net Assets $5,428,285 $20,552,883 $5,788,730
---------- ----------- ----------
Shares Outstanding 351,099 1,855,482 373,020
---------- ----------- ----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 15.46 $ 11.08 $ 15.52
========== =========== ==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 16.19 $ 11.60 $ 16.25
========== =========== ==========
CLASS D:
Net Assets $ 45,575 $ 18,377 $ 220,976
---------- ----------- ----------
Shares Outstanding 2,976 1,662 14,383
---------- ----------- ----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 15.31 $ 11.06 $ 15.36
========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 220
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES - (CONTINUED)
MAY 31, 1997
<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 $4,778,451, $10,300,524,
$2,395,193, respectively) $5,243,450 $12,019,419 $3,152,169
Cash 12,377 134,287 38,202
Receivable for investment securities sold 665,504 56,644 --
Dividends receivable 4,758 10,529 3,517
Interest receivable 52 -- --
---------- ----------- ----------
Total assets 5,926,141 12,220,879 3,193,888
---------- ----------- ----------
LIABILITIES
Payable for investment securities purchased 433,793 91,069 83,370
Payable for fund shares redeemed 2,212 63 73
Other payables and accrued expenses 203 493 465
---------- ----------- ----------
Total liabilities 436,208 91,625 83,908
---------- ----------- ----------
NET ASSETS $5,489,933 $12,129,254 $3,109,980
========== =========== ==========
NET ASSETS CONSIST OF (Note 1):
Capital Stock (Par Value $.001 per share) $ 478 $ 963 $ 213
Additional paid in capital 4,610,691 10,754,431 2,331,412
Accumulated net realized gain (loss) on investments
and foreign currency transactions 413,765 (345,098) 21,379
Net unrealized appreciation on investments and
foreign currency transactions 464,999 1,718,958 756,976
---------- ----------- ----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $5,489,933 $12,129,254 $3,109,980
========== =========== ==========
CLASS A:
Net Assets $5,476,969 $12,098,843 $3,054,239
---------- ----------- ----------
Shares Outstanding 477,196 960,665 209,015
---------- ----------- ----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 11.48 $ 12.59 $ 14.61
========== =========== ==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 12.02 $ 13.18 $ 15.30
========== =========== ==========
CLASS D:
Net Assets $ 12,964 $ 30,411 $ 55,741
---------- ----------- ----------
Shares Outstanding 1,141 2,436* 3,841
---------- ----------- ----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 11.36 $ 12.49 $ 14.51
========== =========== ==========
</TABLE>
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 221
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE
MID-CAP
GROWTH FUND
-----------
<S> <C>
ASSETS
Investment in securities, at value
(cost$3,364,256) $4,003,369
Cash 36,124
Receivable for investment securities sold 111,383
Receivable for fund shares sold 14,811
Dividends receivable 2,270
Interest receivable 16
----------
Total assets 4,167,973
----------
LIABILITIES
Payable for investment securities purchased 162,868
Payable for fund shares redeemed 2,970
----------
Total liabilities 165,838
----------
NET ASSETS $4,002,135
==========
NET ASSETS CONSIST OF (Note 1):
Capital Stock (Par Value $.001 per share) $ 304
Additional paid in capital 3,301,497
Accumulated net realized gain on investments 61,221
Net unrealized appreciation on investments 639,113
----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $4,002,135
==========
CLASS A:
Net Assets $2,174,053
----------
Shares Outstanding 164,702
----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 13.20
==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 13.82
==========
CLASS D:
Net Assets $1,828,082
----------
Shares Outstanding 139,681
----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 13.09
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 222
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE RESERVE
BLUE CHIP CONVERTIBLE EMERGING INFORMED INVESTORS
GROWTH FUND SECURITIES FUND GROWTH FUND GROWTH FUND
----------- --------------- ----------- -----------
September 3, 1996
(commencement of
Year Ended operations) to Year Ended Year Ended
May 31, 1997 May 31, 1997 May 31, 1997 May 31, 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 32,176 $ 249,907 $ 3,372* $ 24,627
Interest 896 363,077 1,049 41,386
---------- ----------- ----------- -----------
Total investment income 33,072 612,984 4,421 66,013
EXPENSES
Comprehensive fee (Note 3) 79,311 205,951 98,087 83,573
12b-1 Fee (Note 4)
Class A 13,038 34,294 15,631 13,889
Class D 723 124 2,868 161
---------- ----------- ----------- -----------
Total expenses 93,072 240,369 116,586 97,623
---------- ----------- ----------- -----------
Less fees waived -- 188,113 -- --
---------- ----------- ----------- -----------
Net expenses -- 52,256 -- --
---------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) (60,000) 560,728 (112,165) (31,610)
---------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Proceeds from sales of securities 5,655,127 16,158,164 1,743,151 11,725,713
Cost of securities sold 4,678,455 15,933,090 2,320,269 10,472,385
---------- ----------- ----------- -----------
Net realized gain (loss) on
investments (Note 1) 976,672 225,074 (577,118) 1,253,328
Net unrealized appreciation
(depreciation) on investments (642,561) 1,370,827 (847,249) (1,975,139)
---------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments 334,111 1,595,901 (1,424,367) (721,811)
---------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 274,111 $ 2,156,629 $(1,536,532) $ (753,421)
========== =========== =========== ===========
</TABLE>
* Includes foreign tax withholding of $114
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 223
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS - (CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
INTERNATIONAL LARGE-CAP MID-CAP
EQUITY FUND VALUE FUND GROWTH FUND
----------- ---------- -----------
Year Ended Year Ended Year Ended
May 31, 1997 May 31, 1997 May 31, 1997
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 97,550* $ 32,111 $ 13,610
Interest 561 212 533
---------- -------- ----------
Total investment income 98,111 32,323 14,143
EXPENSES
Comprehensive fee (Note 3) 145,974 33,940 49,028
12b-1 Fee (Note 4)
Class A 20,754 5,613 3,404
Class D 231 172 19,070
---------- -------- ----------
Total expenses 166,959 39,725 71,502
---------- -------- ----------
NET INVESTMENT LOSS (68,848) (7,402) (57,359)
---------- -------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Proceeds from sales of securities 3,956,864 383,913 3,034,153
Cost of securities sold 4,229,994 362,534 2,889,407
---------- -------- ----------
Net realized gain (loss) on
investments and foreign
currency transactions (Note 1) (273,130) 21,379 144,746
Net unrealized appreciation
on investments and foreign
currency transactions 1,387,936 686,853 185,442
---------- -------- ----------
Net realized and unrealized gain
on investments and foreign
currency transactions 1,114,806 708,232 330,188
---------- -------- ----------
Net increase in net assets resulting
from operations $1,045,958 $700,830 $ 272,829
========== ======== ==========
</TABLE>
* Includes foreign tax withholding of $14,966
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 224
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE
RESERVE BLUE CHIP GROWTH FUND SECURITIES FUND
----------------------------- -------------------
September 3, 1996
(commencement of
Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997
------------ ------------ -------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income gain (loss) $ (60,000) $ (34,916) $ 560,728
Net realized gain (loss) from investments 976,672 (2,045) 225,074
Net unrealized appreciation (depreciation)
from investments (642,561) 975,733 1,370,827
----------- ---------- ------------
Net increase in net assets
resulting from operations 274,111 938,772 2,156,629
----------- ---------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (6,791)
Net realized gain on investments (68,349) (164,889) (390,051)
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 1,176,349 2,757,098 20,601,861
Reinvestment of distributions 68,323 164,889 201,224
Cost of shares redeemed (1,148,732) (517,167) (1,991,612)
----------- ---------- ------------
Net increase in net assets resulting
from capital share transactions 95,940 2,404,820 18,811,473
----------- ---------- ------------
Net increase in net assets 301,702 3,178,703 20,571,260
NET ASSETS:
Beginning of period 5,172,158 1,993,455 0
----------- ---------- ------------
End of period (including undistributed
net investment income of $0, $0
and $170,681, respectively) $ 5,473,860 $5,172,158 $ 20,571,260
=========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL
RESERVE EMERGING GROWTH FUND EQUITY FUND
----------------------------- -------------------------------
July 13, 1996
(commencement of
Year Ended Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
----------------------------- -------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (112,165) $ (57,980) $ (68,848) $ (17,145)
Net realized gain (loss) from investments
and foreign currency transactions (577,118) 80,546 (273,130) (71,968)
Net unrealized appreciation (depreciation)
from investments and foreign
currency transactions (847,249) 1,655,638 1,387,936 331,022
----------- ---------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (1,536,532) 1,678,204 1,045,958 241,909
----------- ---------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments -- (93,899) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 2,187,444 4,281,980 8,057,063 3,465,234
Reinvestment of distributions -- 93,770 -- --
Cost of shares redeemed (1,540,646) (301,485) (558,291) (122,619)
----------- ---------- ----------- ----------
Net increase in net assets resulting
from capital share transactions 646,798 4,074,265 7,498,772 3,342,615
----------- ---------- ----------- ----------
Net increase (decrease) in net assets (889,734) 5,658,570 8,544,730 3,584,524
NET ASSETS:
Beginning of period 6,899,440 1,240,870 3,584,524 0
----------- ---------- ----------- ----------
End of period $ 6,009,706 $6,899,440 $12,129,254 $3,584,524
=========== ========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 225
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS - (CONTINUED)
<TABLE>
<CAPTION>
RESERVE
RESERVE INFORMED LARGE-CAP
INVESTORS GROWTH FUND VALUE FUND
-------------------------------- -------------------------------
January 2, 1996
(commencement of
Year Ended Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (31,610) $ (147,983) $ (7,402) $ (1,091)
Net realized gain from investments 1,253,328 850,186 21,379 --
Net unrealized appreciation (depreciation)
from investments (1,975,139) 1,109,280 686,853 70,123
----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (753,421) 1,811,483 700,830 69,032
----------- ----------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (525,939) (795,337) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 1,400,871 6,254,939 1,345,107 1,165,180
Reinvestment of distributions 395,531 790,060 -- --
Cost of shares redeemed (1,435,172) (8,490,282) (167,017) (3,152)
----------- ----------- ----------- ----------
Net increase (decrease) in net assets resulting
from capital share transactions 361,230 (1,445,283) 1,178,090 1,162,028
----------- ----------- ----------- ----------
Net increase (decrease) in net assets (918,130) (429,137) 1,878,920 1,231,060
NET ASSETS:
Beginning of period 6,408,063 6,837,200 1,231,060 0
----------- ----------- ----------- ----------
End of period $ 5,489,933 $ 6,408,063 $ 3,109,980 $1,231,060
=========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
RESERVE MID-CAP
GROWTH FUND
-------------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (57,359) $ (32,656)
Net realized gain (loss) from investments 144,746 (83,525)
Net unrealized appreciation from
investments 185,442 453,671
----------- ----------
Net increase in net assets
resulting from operations 272,829 337,490
----------- ----------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 3,118,364 2,345,759
Cost of shares redeemed (1,928,613) (143,694)
----------- ----------
Net increase in net assets resulting
from capital share transactions 1,189,751 2,202,065
----------- ----------
Net increase in net assets 1,462,580 2,539,555
NET ASSETS:
Beginning of period 2,539,555 0
----------- ----------
End of period $ 4,002,135 $2,539,555
=========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 226
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reserve Private Equity Series (the "Trust") consists of the following
funds: Reserve Blue Chip Growth Fund, Reserve Convertible Securities Fund,
Reserve Emerging Growth Fund, Reserve Informed Investors Growth Fund,
Reserve International Equity Fund, Reserve Large-Cap Value Fund, and
Reserve Mid-Cap Growth Fund (formerly 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, 1997 as follows:
[See table below]
<PAGE> 227
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------
Undistributed
Net Accumulated
Investment Realized
Reserve Fund Capital Income Gain
------------ ------- ------ ----
<S> <C> <C> <C>
Blue Chip Growth Fund (112,615) 60,000 52,615
Emerging Growth Fund (112,165) 112,165 --
Informed Investors Growth Fund (31,610) 31,610 --
International Equity Fund (68,848) 68,848 --
Large-Cap Value Fund (7,402) 7,402 --
Mid-Cap Growth Fund (57,359) 57,359 --
</TABLE>
These reclassifications had no effect on net investment income, net
realized gain on investments, or net assets for the year ended May 31,
1997.
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.
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, 1997, which are available to offset
future realized capital gains, if any:
<TABLE>
<CAPTION>
Capital loss Expiration
carryforward year
------------ ----
<S> <C> <C>
Reserve Emerging Growth Fund $161,015 2005
Reserve International Equity Fund 71,968 2004
Reserve International Equity Fund 178,347 2005
</TABLE>
<PAGE> 228
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
2. INVESTMENT ACTIVITY
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the year ended May 31, 1997, were
as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate
Reserve Fund Purchases Sales
------------ --------- -----
<S> <C> <C>
Blue Chip Growth Fund $ 5,425,272 $ 5,655,127
Convertible Securities Fund 34,711,469 16,158,164
Emerging Growth Fund 2,264,488 1,743,151
Informed Investors Growth Fund 11,386,974 11,725,713
International Equity Fund 11,336,214 3,956,864
Large-Cap Value Fund 1,507,717 383,913
Mid-Cap Growth Fund 4,017,934 3,034,153
</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 except for the International
Equity Fund for which it receives 1.75%. RMCI is currently waiving a
portion of its comprehensive fee in the Reserve Convertible Securities
Fund.
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
decisions for 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%
Convertible Securities Fund New Vernon Advisors, Inc. 0.75%
Emerging Growth Fund Roanoke Asset Management Corp. 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 Southern Capital Advisors 0.75%
</TABLE>
Trainer, Wortham & Company, Inc. owns 24% of the outstanding shares of the
Reserve Blue Chip Growth Fund at May 31, 1997.
<PAGE> 229
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
As of May 31, 1997, RMCI and affiliated persons owned 7%, 13%, 5%, 11%,
20%, and 25% of the Reserve Blue Chip Growth Fund, Reserve Emerging Growth
Fund, Reserve Informed Investors Growth Fund, Reserve International Equity
Fund, Reserve Large-Cap Value Fund, and Reserve Mid-Cap Growth Fund,
respectively. Taconic Petroleum Corp. owns 24% of Reserve Large-Cap Value
Fund. Christopher E. Vroom owns 7% of the Reserve Emerging Growth Fund.
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 shares and 1.00% per annum for Class D shares of the
average daily net assets of shareholder accounts as to which the payee has
rendered distribution assistance. For the year ended May 31, 1997, the
Funds paid distribution expenses to RPI as follows:
<TABLE>
<CAPTION>
Reserve Fund Class A Class D
------------ ------- -------
<S> <C> <C>
Blue Chip Growth Fund $13,038 $ 723
Convertible Securities Fund* 283 14
Emerging Growth Fund 15,631 2,868
Informed Investors Growth Fund 13,889 161
International Equity Fund 20,754 231
Large-Cap Value Fund 5,613 172
Mid-Cap Growth Fund 3,404 19,070
</TABLE>
* RMCI waived 12b-1 fees of $34,011 and $110, for Reserve Convertible
Securities Fund Class A and Class D, respectively, for the period
September 3, 1996 (commencement of operations) to May 31, 1997.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock of each Fund for the period ended May 31,
1997, were as follows:
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
----------------------------- -------------------------------- ------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
-------------------------------- ------------------------
Shares Amount Shares Amount
------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold 76,231 $ 1,119,812 3,957 $ 56,537
Reinvested 4,875 67,171 84 1,152
Redeemed (74,089) (1,092,588) (3,930) (56,144)
------- ----------- ------ --------
Net increase 7,017 $ 94,395 111 $ 1,545
======= =========== ====== ========
</TABLE>
<PAGE> 230
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE SECURITIES FUND CLASS A CLASS D
- ----------------------------------- ------------------------------- -------------------------------
September 3, 1996 September 3, 1996
(commencement of operations) to (commencement of operations) to
May 31, 1997 May 31, 1997
------------------------------- --------------------------------
Shares Amount Shares Amount
---------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold 2,026,485 $20,572,892 2,814 $ 28,969
Reinvested 19,551 201,111 11 113
Redeemed (190,554) (1,979,449) (1,163) (12,163)
--------- ----------- ------ --------
Net increase 1,855,482 $18,794,554 1,662 $ 16,919
========= =========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- --------------------------------- ------------------------------- ----------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------------- ----------------------------
Shares Amount Shares Amount
------- ----------- ------ ---------
<S> <C> <C> <C> <C>
Sold 117,069 $ 1,999,906 10,982 $ 187,538
Redeemed (84,292) (1,389,829) (9,047) (150,817)
------- ----------- ------ ---------
Net increase 32,777 $ 610,077 1,935 $ 36,721
======= =========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- -------------------------------- -----------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
-------------------------------- -----------------------
Shares Amount Shares Amount
-------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold 116,034 $ 1,389,343 911 $11,528
Reinvested 37,456 395,531 -- --
Redeemed (121,475) (1,425,528) (814) (9,644)
-------- ---------- ---- -------
Net increase 32,015 $ 359,346 97 $ 1,884
======== ========== ==== =======
</TABLE>
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- --------------------------- ---------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
--------------------------- ---------------------------
Shares Amount Shares Amount
------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold 689,779 $8,029,446 2,446 $27,617
Redeemed (47,041) (551,604) (562) (6,687)
------- ---------- ----- -------
Net increase 642,738 $7,477,842 1,884 $20,930
======= ========== ===== =======
</TABLE>
<PAGE> 231
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE LARGE-CAP VALUE FUND CLASS A CLASS D
- ----------------------------- ------------------------- ----------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------- ----------------------
Shares Amount Shares Amount
------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold 108,518 $1,276,605 5,080 $ 68,502
Redeemed (11,940) (151,013) (1,239) (16,004)
------- ---------- ------ --------
Net increase 96,578 $1,125,592 3,841 $ 52,498
======= ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ------------------------- ---------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------- ---------------------------
Shares Amount Shares Amount
------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Sold 198,244 $2,390,365 58,332 $ 727,999
Redeemed (44,223) (530,105) (114,850) (1,398,508)
------- ---------- -------- -----------
Net increase 154,021 1,860,260 (56,518) $ (670,509)
======= ========== ======== ===========
</TABLE>
Transactions in capital stock of each Fund for the period ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
- ----------------------------- ------------------------- --------------------
February 13, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
------------------------- --------------------
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>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- ---------------------------- ------------------------- ---------------------
February 26, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
------------------------- ---------------------
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>
<PAGE> 232
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- --------------------------- ----------------------
February 13, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
--------------------------- ----------------------
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>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- -------------------------- ------------------
July 13, 1995 March 11, 1996
(commencement (commencement
of operations) to of operations) to
May 31, 1996 May 31, 1996
-------------------------- ------------------
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>
RESERVE LARGE-CAP VALUE FUND CLASS A
- ---------------------------- ------------------------
January 2, 1996
(commencement
of operations) to
May 31, 1996
-------------------------
Shares Amount
------- ----------
<S> <C> <C>
Sold 112,729 $1,165,180
Redeemed (292) (3,152)
------- ----------
Net increase 112,437 $1,162,028
======= ==========
</TABLE>
<PAGE> 233
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ----------------------- -------------------------
March 13, 1996
(Commencement
of operations) to Year Ended
May 31, 1996 May 31, 1996
----------------------- -------------------------
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>
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.
<PAGE> 234
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
7. FINANCIAL HIGHLIGHTS (FOR EACH SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
- ----------------------------- ------------------------------------------------- ---------------------------------
October 28, 1994 February 13, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ---------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 14.91 $12.03 $10.00 $ 14.88 $13.49
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.17) (.10) (.03) (0.46) (.04)
Net realized and unrealized gain 0.91 3.62 2.06 1.08 1.43
------- ------ ------ ------- ------
Total from investment operations 0.74 3.52 2.03 0.62 1.39
Less distribution from net realized gain (.19) (.64) -- (.19) --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 15.46 $14.91 $12.03 $ 15.31 $14.88
======= ====== ====== ======= ======
Total Return 5.12 % 30.10 % 20.30%(2) 4.32 % 10.30 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,428 $5,130 $1,993 $ 46 $ 43
Ratio of expenses to average net assets
before waiver 1.75 % 1.75 % 1.75%(1) 2.50 % 2.50 %(1)
Ratio of expenses to average net assets,
net of waiver 1.75 % 1.75 % 1.73%(1) 2.50 % 2.50 %(1)
Ratio of net investment loss to
average net assets, before waiver (1.13)% (0.94)% (0.72)%(1) (1.90)% (1.70)%(1)
Ratio of net investment loss to average
net assets, net of waiver (1.13)% (0.94)% (0.70)%(1) (1.90)% (1.70)%(1)
Portfolio turnover rate 109 % 72 % 68 % 109 % 72 %
Average commission per share on
portfolio transactions $0.0419 $ 0.06 N/A $0.0419 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE SECURITIES FUND CLASS A CLASS D
- ----------------------------------- ----------------- -----------------
September 3, 1996 September 3, 1996
(commencement of (commencement of
operations) to operations) to
May 31, 1997 May 31, 1997
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period $ 10.00 $ 10.00
------- -------
Income from investment operations
Net investment income 0.34 0.33
Net realized and unrealized gain (loss) 0.99 0.98
------- -------
Total from investment operations 1.33 1.31
Less distribution from net investment
income and realized gain (.25) (.25)
------- -------
NET ASSET VALUE, end of period $ 11.08 $ 11.06
======= =======
Total Return 13.53 %(2) 13.33 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $20,553 $ 18
Ratio of expenses to average net assets before waiver 2.36 %(1) 3.37 %(1)
Ratio of expenses to average net assets, net of waiver 0.52 %(1) 0.83 %(1)
Ratio of net investment income to average
net assets, before waiver 3.67 %(1) 2.57 %(1)
Ratio of net investment income to average net assets,
net of waiver 5.52 %(1) 5.12 %(1)
Portfolio turnover rate 113 % 113 %
Average commission per share on
portfolio transactions $0.0564 $ 0.0564
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 235
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- ---------------------------- ----------------------------------------------- ---------------------------------
November 14, 1994 February 26, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ----------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 19.56 $12.21 $10.00 $ 19.52 $16.88
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.28) (.17) (.09) (0.49) (.04)
Net realized and unrealized gain (loss) (3.76) 8.05 2.30 (3.67) 2.68
------- ------ ------ ------- ------
Total from investment operations (4.04) 7.88 2.21 (4.16) 2.64
Less distribution from net realized gain -- (.53) -- -- --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 15.52 $19.56 $12.21 $ 15.36 $19.52
======= ====== ====== ======= ======
Total Return (20.65)% 65.55 % 22.10 %(2) (21.31)% 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,789 $6,657 $1,241 $ 221 $ 243
Ratio of expenses to average net assets 1.75 % 1.75 % 1.75 %(1) 2.50 % 2.50%(1)
Ratio of net investment loss to
average net assets (1.69)% (1.70)% (1.62)%(1) (2.45)% (2.48)%(1)
Portfolio turnover rate 28 % 38 % 43 % 28 % 38%
Average commission per share on
portfolio transactions $0.0048 $ 0.01 N/A $0.0048 $ 0.01
</TABLE>
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- ------------------------------------------------ --------------------------------
December 28, 1994 March 22, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ----------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 14.36 $11.99 $10.00 $ 14.33 $12.29
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.07) (0.33) (.07) (0.18) (.06)
Net realized and unrealized gain (1.66) 3.87 2.06 (1.64) 2.10
------- ------ ------ ------- ------
Total from investment operations (1.73) 3.54 1.99 (1.82) 2.04
Less distribution from net realized gain (1.15) (1.17) -- (1.15) --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 11.48 $14.36 $11.99 $ 11.36 $14.33
======= ====== ====== ======= ======
Total Return (11.35)% 29.75 % 19.90 %(2) (12.04)% 16.60 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,477 $6,393 $6,837 $ 13 $ 15
Ratio of expenses to average net assets 1.75 % 1.75 % 1.75 %(1) 2.50 % 2.50 %(1)
Ratio of net investment loss to
average net assets (0.57)% (1.57)% (1.62)%(1) (1.26)% (2.32)%(1)
Portfolio turnover rate 255 % 132 % 59 % 255 % 132 %
Average commission per share on
portfolio transactions $0.0612 $ 0.05 N/A $0.0612 $ 0.05
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 236
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- -------------------------------------- --------------------------------------
July 13, 1995 March 11, 1996
(commencement of (commencement of
Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 11.26 $ 10.00 $ 11.25 $ 10.79
------------ ------------ ------------ ------------
Income from investment operations
Net investment loss (0.07) (.05) (0.15) (.01)
Net realized and unrealized gain 1.40 1.31 1.39 .47
------------ ------------ ------------ ------------
Total from investment operations 1.33 1.26 1.24 .46
------------ ------------ ------------ ------------
NET ASSET VALUE, end of period $ 12.59 $ 11.26 $ 12.49 $ 11.25
============ ============ ============ ============
Total Return 11.81% 12.60%(2) 11.02% 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 12,099 $ 3,578 $ 30 $ 6
Ratio of expenses to average net assets
before waiver 2.00% 2.00%(1) 2.75% 2.75%(1)
Ratio of expenses to average net assets,
net of waiver 2.00% 1.99%(1) 2.75% 2.75%(1)
Ratio of net investment loss to average
net assets before waiver 0.82% (0.92)%(1) 1.63% (0.70)%(1)
Ratio of net investment loss to average
net assets net of waiver 0.82% (0.91)%(1) 1.63% (0.70)%(1)
Portfolio turnover rate 52% 70% 52% 70%
Average commission per share on
portfolio transactions $ 0.0273 $ 0.02 $ 0.0273 $ 0.02
</TABLE>
<TABLE>
<CAPTION>
RESERVE LARGE-CAP VALUE FUND CLASS A CLASS D
- ---------------------------- ------------------------------------ ----------------
January 2, 1996
(commencement of
Year Ended operations) to Year Ended
May 31, 1997 May 31, 1996 May 31, 1997
------------------------------------ ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 10.95 $ 10.00 $ 10.95
----------- ----------- ===========
Income from investment operations
Net investment loss (0.03) (0.01) (0.05)
Net realized and unrealized gain 3.69 0.96 3.61
----------- ----------- -----------
Total from investment operations 3.66 0.95 3.56
----------- ----------- -----------
NET ASSET VALUE, end of period $ 14.61 $ 10.95 $ 14.51
=========== =========== ===========
Total Return 33.42% 9.50%(2) 32.51%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 3,054 $ 1,231 $ 56
Ratio of expenses to average net assets 1.75% 1.75%(1) 2.50%
Ratio of net investment loss to average
net assets (0.32)% (0.32)%(1) (1.07)%
Portfolio turnover rate 18% 0 % 18%
Average commission per share on
portfolio transactions $ 0.0684 $ 0.08 $ 0.0684
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 237
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ------------------------------------ ----------------------------------
March 13, 1996
(commencement of
Year Ended operations) to Year Ended Year Ended
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 12.29 $ 10.94 $ 12.27 $ 10.00
----------- ----------- ----------- -----------
Income from investment operations
Net investment loss (0.11) (.01) (0.28) (0.17)
Net realized and unrealized gain 1.02 1.36 1.10 2.44
----------- ----------- ----------- -----------
Total from investment operations 0.91 1.35 0.82 2.27
----------- ----------- ----------- -----------
NET ASSET VALUE, end of period $ 13.20 $ 12.29 $ 13.09 $ 12.27
=========== =========== =========== ===========
Total Return 7.40% 12.34%(2) 6.68% 22.70%
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 2,174 $ 131 $ 1,828 $ 2,408
Ratio of expenses to average net assets 1.75% 1.74%(1) 2.50% 2.49%
Ratio of net investment loss to average
net assets (1.31)% (0.97)%(1) (2.08)% (2.00)%
Portfolio turnover rate 102% 85% 102% 85%
Average commission per share on
portfolio transactions $ 0.0545 $ 0.04 $ 0.0545 $ 0.04
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales
load.
<PAGE> 238
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 October 1, 1997.
TABLE OF CONTENTS
Page
----
Investment Policies 2
Other Policies 3
Trustees and Officers of the Trust 4
Investment Management and Other Agreements 6
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 11
Additional Information 12
Report of Independent Accountants 14
Financial Statements ` 15
<PAGE> 239
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 % (1/2
of 1%) of the securities (taken at market value) of such issuer and such
individuals owning more than one-half of one % (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> 240
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, 1535 Presidential Drive, Apt. 4A, Columbus, OH
43212.
Mr. Emmet retired as the Managing Director of Servus Associates, Inc.,
and U.S.A. Representative of the First National Bank of Southern Africa in
1996. He is currently Trustee of RF, RIT, RNYTET, RTET and RPES. Until 1989, he
was Senior Vice President of the New York branch of Banque Nationale de Paris.
<PAGE> 241
+*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.
MICHELLE L. NEUFELD, Counsel and Secretary, 810 Seventh Avenue, New York,
NY 10019.
Ms. Neufeld is Counsel and Secretary of RF, RIT, RTET, RNYTET and RPES.
Before joining The Reserve Funds in 1997, Ms. Neufeld was a staff attorney at
NASD Regolution, Inc..
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.,
Inc.
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 disregard 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 FUNDS* (4 ADDITIONAL TRUSTS) PAID TO TRUSTEE*
------------------------------------------------------------------------------
<S> <C> <C>
Edwin Ehlert, Jr. $120.09 $30,500
Henri W. Emmet $133.87 $34,000
Rev. Donald J. Harrington $118.11 $ 3,000
</TABLE>
Amounts shown are for the Fund's fiscal year ending May 31, 1997.
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 Service Plans).
Excluded
<PAGE> 242
from ordinary operating costs are interest charges, taxes, brokerage fees,
extraordinary legal and accounting fees and expenses, payments made pursuant to
the Trust's Service 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 and
approval 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 and approval 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 the 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.
SERVICE PLAN. The Trust maintains a Service 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. 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> 243
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.
The Glass-Steagall Act prohibits all entities which receive deposits from
engaging to any extent 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 Fund shares (such as
administrative and account maintenance services) may include banks, upon advice
of counsel that they are permitted to do so under applicable laws and
regulations, including the Glass-Steagall Act. In such event, no preference
will be given to securities issued by such banks as investment 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 banks may also receive compensation from the bank accounts they
service. It is Fund management's position that payments to banks pursuant to
the Plan for activities not primarily intended to result in the sale of a
Fund's 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. Financial institutions providing distribution assistance or
administrative services for the Fund may be required to register as securities
dealers in certain states.
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.
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 series. 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> 244
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% of all shares voting as a group or 67% of the shares
voted as a group at a meeting of shareholders at which at least 50% of the
shares of each group are represented.
As of August 30, 1997, 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 (6.0%) (Class D); Anna T. Dolan, 22
Edgecliff Terrace, Yonkers, NY 10705 (7.4%) (Class D); Bear Stearns, 1
Metrotech Center North, Brooklyn, NY 11201 (61.3%) (Class A); Boise Valley
Asthma, 901 Curtis, Suite 100, Boise, ID 83706 (5.6%) (Class D); and Morgan
Keegan & Co., P.O. Box 610, Holly Spring, MS 38635 (6.4%) (Class D).
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.
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
outstanding shares.
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.
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, 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> 245
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%
of its taxable income to shareholders, derive at least 90% of its gross income
from dividends, interest and gains from the sale or disposition of securities
and derive less than 30% 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> 246
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
creased or decreased as compared to a fund that did not engage in such hedging
transactions.
The foregoing is a general summary of certain provisions of the Code and
Treasury Regulations in effect. For the complete provisions, references 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 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 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 the rates of return calculated will
not be average annual rates, but rather, actual annual, annualized or aggregate
rates of return.
<PAGE> 247
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and 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 Convertible Securities Fund, Reserve Emerging Growth Fund,
Reserve Informed Investors Growth Fund, Reserve International Equity Fund,
Reserve Large-Cap Value Fund, and Reserve Mid-Cap Growth Fund (formerly Reserve
North American Growth Fund)) (collectively the "Trust"), including the schedules
of portfolio investments, as of May 31, 1997, 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, 1997, 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, 1997,
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 27, 1997
<PAGE> 248
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BANKS (1.9%)
BankBoston Corporation 1,400 $102,200
--------
BEVERAGES (4.0%)
PepsiCo, Inc. 6,000 220,500
--------
BUILDING MATERIALS (1.8%)
* American Standard Companies, Inc. 2,000 100,250
--------
CHEMICALS - MISCELLANEOUS (4.3%)
ChemFirst, Inc. 9,200 238,050
--------
COMPUTER SERVICES (2.2%)
* Wang Laboratories, Inc. 5,800 118,900
--------
COMPUTER SOFTWARE (5.8%)
* CUC International, Inc. 6,450 148,350
National Data Corporation 3,900 171,112
--------
319,462
--------
CONSUMER SERVICES (2.2%)
* HFS, Inc. 2,200 118,525
--------
ELECTRONICS (6.8%)
General Electric Company 1,800 108,675
* Perceptron, Inc. 9,300 262,725
--------
371,400
--------
ENTERTAINMENT (3.1%)
Walt Disney Company 2,100 171,937
--------
FINANCIAL SERVICES (6.2%)
Federal National Mortgage Association 5,200 226,850
Pioneer Group, Inc. 4,400 110,550
--------
337,400
--------
FOOD (2.3%)
* Suiza Foods Corporation 4,200 125,475
--------
HOSPITAL MANAGEMENT (3.7%)
* Assisted Living Concepts, Inc. 8,000 200,000
--------
MANAGED CARE (1.1%)
* Physicians' Specialty Corporation 10,000 61,250
--------
</TABLE>
<PAGE> 249
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
MEDICAL SUPPLIES (1.3%)
* LaserSight Corporation 10,000 $ 70,000
----------
MISCELLANEOUS CONSUMER (2.1%)
* Gibson Greetings, Inc. 5,300 115,275
----------
MISCELLANEOUS MANUFACTURING (5.6%)
Warnaco Group, Inc. 5,300 173,575
Westinghouse Electric Corporation 6,500 131,625
----------
305,200
----------
MULTI-LINE INSURANCE (3.1%)
The Hartford Financial Services Group, Inc. 2,200 171,600
----------
OFFICE - BUSINESS EQUIPMENT (4.6%)
* American Pad & Paper Company 13,500 249,750
----------
OIL/GAS EQUIPMENT SERVICES (2.0%)
* Cairn Energy USA, Inc. 9,200 108,675
----------
PACKAGED SOFTWARE (3.9%)
Computer Associates International, Inc. 3,900 213,525
----------
PHARMACEUTICALS (7.1%)
* Bio-Technology General Corporation 5,400 78,300
Eli Lilly & Company 1,100 102,300
Johnson & Johnson 1,800 107,775
Merck & Co., Inc. 1,100 98,863
----------
387,238
----------
PUBLISHING (4.2%)
Harte-Hanks Communications 7,800 233,025
----------
RADIO, TV & BROADCAST COMMUNICATION EQUIPMENT (4.6%)
* American Radio Systems Corporation 1,400 52,150
* Sinclair Broadcast Group, Inc. 8,000 198,000
----------
250,150
----------
REAL ESTATE (4.6%)
Insignia Financial Group, Inc., Class A 14,200 252,050
----------
</TABLE>
<PAGE> 250
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
SPECIAL INDUSTRIAL MACHINERY (3.1%)
Thermo Electron Corporation 5,000 $ 172,500
-------------
TOTAL COMMON STOCKS (Cost $4,512,303) (91.6%) 5,014,337
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 260,000 260,000
Vista Treasury Plus Money Market Fund 70,000 70,000
-------------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $330,000) (6.0%) 330,000
-------------
TOTAL INVESTMENTS (Cost $4,842,303) (97.6%) 5,344,337
Other assets, less liabilities (2.4%) 129,523
-------------
NET ASSETS (100%) $ 5,473,860
=============
</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, 1997 was $4,842,303, the aggregate gross unrealized appreciation for all
investments was $707,511 and aggregate gross unrealized depreciation for all
investments was $205,477.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 251
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
CONVERTIBLE BONDS
<TABLE>
<CAPTION>
VALUE
MATURITY PAR (NOTE 1)
-------- --- --------
<S> <C> <C> <C>
BASIC INDUSTRIAL COMMODITY (2.2%)
First South Africa Corp, Ltd., 144A, 9% 06/15/04 450,000 $ 450,000
----------
BIO-TECHNOLOGY (3.9%)
Chiron Corp., 144A, 1.9% 11/17/00 450,000 397,125
NABI, Inc., 144A, 6.5% 02/01/03 500,000 414,375
----------
811,500
----------
COMMERCIAL SERVICES (1.8%)
Pharmaceutical Marketing
Services, Inc., 144A, 6.25% 02/01/03 450,000 360,000
----------
COMPUTER SOFTWARE (1.9%)
MacNeal - Schwendler Corp., 7.875% 08/18/04 400,000 392,000
----------
ELECTRONIC PRODUCTS - MISCELLANEOUS (1.9%)
Trans-Lux Corp., 7.5% 12/01/06 375,000 390,000
----------
ENVIRONMENT - CONSULTING, ENGINEERING (1.1%)
Roy F. Weston, Inc., 7% 04/15/02 270,000 229,500
----------
FOOD CHAINS (1.9%)
Marsh Supermarkets, Inc., 7% 02/15/03 400,000 400,000
----------
GENERAL INDUSTRIAL MACHINE & EQUIPMENT (2.0%)
Robbins & Myers, Inc., 6.5% 09/01/03 300,000 412,500
----------
HOTEL - MOTEL (3.4%)
Hilton Hotels Corp., 5% 05/15/06 350,000 380,625
Signature Resorts, Inc., 5.75% 01/15/07 350,000 316,750
----------
697,375
----------
MEDICAL - HMO (3.9%)
FPA Medical Management, Inc., 6.5% 12/15/01 400,000 421,000
PhyMatrix Corp., 6.75% 06/15/03 450,000 389,250
----------
810,250
----------
OIL - DOMESTIC (2.7%)
Lomak Petroleum, Inc., 144A, 6% 02/01/07 350,000 395,500
Snyder Oil Corp., 7% 05/15/01 150,000 155,625
----------
551,125
----------
POLLUTION CONTROL (3.8%)
USA Waste Services, Inc., 4% 02/01/02 350,000 362,250
WMX Technologies, Inc., 2% 01/24/05 450,000 406,687
----------
768,937
----------
</TABLE>
<PAGE> 252
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
CONVERTIBLE BONDS
<TABLE>
<CAPTION>
VALUE
MATURITY PAR (NOTE 1)
-------- --- --------
<S> <C> <C> <C>
PUBLISHING (2.0%)
Scholastic Corp., 5% 08/15/05 500,000 $ 403,750
----------
RETAIL STORES - DEPARTMENT (1.9%)
Saks Holdings, Inc., 5.5% 09/15/06 450,000 398,250
----------
RETAIL - APPAREL (1.9%)
Charming Shoppes, Inc., 7.5% 07/15/06 400,000 393,000
----------
RETAIL - SPECIALTY (1.8%)
The Sports Authority, Inc., 5.25% 09/15/01 400,000 360,500
----------
TRANSPORT - AIR FREIGHT (1.6%)
Consolidated Logistics, 144A, 8% 08/21/00 400,000 320,000
----------
WATER TREATMENT SYSTEMS (3.2%)
United States Filter Corp., 4.5% 12/15/01 650,000 665,438
----------
TOTAL CONVERTIBLE BONDS (Cost $8,647,471) (42.9%) 8,814,125
----------
</TABLE>
PREFERRED STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BANKS (2.6%)
National Australian Bank Ltd., 7.875% 20,000 $537,500
-------
CONTAINERS-METAL/GLASS (2.1%)
Crown Cork & Seal Company, Inc., 4.5% 2/26/00 8,000 434,000
-------
ENERGY (1.6%)
Occidental Petroleum Corp., 144A, $3.875 Series 1993 6,000 338,250
-------
ENTERTAINMENT (2.9%)
Wellsford Residential Property, 7% Series A 22,900 589,675
-------
FINANCIAL SERVICES (2.1%)
SunAmerica, Inc., $3.1875 10/31/99 10,000 431,250
-------
GENERAL INDUSTRIAL MACHINES & EQUIPMENT (2.0%)
Greenfield Industries, Inc., 144A, 6% 3/31/16 9,000 409,500
-------
GLASS PRODUCTS (1.9%)
Corning Delaware L.P., 6% 5,000 399,375
-------
</TABLE>
<PAGE> 253
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
PREFERRED STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
GOLD MINING (1.6%)
Coeur D'Alene Mines Corp., 7% 3/15/00 20,000 $ 332,500
----------
HOTEL-MOTEL (1.8%)
Host Marriott Corp., 144A, 6.75% 12/02/26 6,500 367,250
----------
MEDICAL - HMO (2.1%)
Aetna, Inc., 6.25% 7/19/00 4,700 431,225
----------
NATURAL GAS (2.0%)
MCN Corp., 8.75% 4/30/99 15,000 416,250
----------
OIL-DOMESTIC (5.5%)
Mesa, Inc., 8%, Series A 80,000 530,000
Nuevo Energy, 5.75% 12/15/26 Series A 8,000 403,000
Snyder Oil Corporation, $1.5 7,700 190,575
----------
1,123,575
----------
PAPER (1.9%)
International Paper Co., 5.25% 7/20/25 7,500 386,250
----------
PUBLISHING (1.4%)
Golden Books Family Entertainment, Inc., 144A,
8.75% 8/20/16 5,000 280,000
----------
PUBLISHING-NEWSPAPERS (2.1%)
Hollinger International, Inc., 9.75% 8/01/00 40,000 440,000
----------
REAL ESTATE (4.8%)
Excel Realty, $2.125 Series A 16,000 426,000
Redwood Trust, Inc., 9.74% Class B 10,000 567,500
----------
993,500
----------
RESTAURANTS (2.0%)
Apple South, Inc., 144A, $3.5 3/01/27 7,000 420,875
----------
TELECOMMUNICATIONS (2.1%)
Mobile Telecommunication
Technologies Corp., 144A, $2.25 20,000 425,000
----------
TELECOMMUNICATIONS-BROADCAST (2.1%)
Merrill Lynch & Company, 6% 6/01/99 Series COX 20,000 427,500
----------
TOTAL PREFERRED STOCKS (Cost $8,282,029) (44.6%) $9,183,475
----------
</TABLE>
<PAGE> 254
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AEROSPACE (0.9%)
* International Airline Support Group, Inc. 44,908 $ 196,473
---------------
ENTERTAINMENT (1.4%)
* Malibu Entertainment Worldwide, Inc. 70,000 280,000
---------------
MISCELLANEOUS MANUFACTURING (0.1%)
* Disc Graphics, Inc. - Warrants Class "A", 11/01/99 28,000 21,000
---------------
NONHAZARDOUS WASTE DISPOSAL (0.2%)
* Allied Waste Industries, Inc. 2,266 33,423
---------------
OIL WELL SERVICES (3.6%)
* SEACOR SMIT, Inc. 14,400 745,200
---------------
PREHOSPITAL MEDICAL CARE, TRANSPORTATION (1.7%)
Laidlaw, Inc., Class B 25,663 346,451
---------------
TELECOMMUNICATIONS (0.6%)
* Mobile Telecommunication Technologies Corp. 10,000 121,875
---------------
TOYS (2.1%)
Hasbro, Inc. 15,000 435,000
---------------
TOTAL COMMON STOCKS (Cost $1,876,695) (10.6%) 2,179,422
---------------
TOTAL INVESTMENT SECURITIES (Cost $18,806,195) (98.1%) $ 20,177,022
Other assets, less liabilities (1.9%) 394,238
---------------
NET ASSETS (100%) $ 20,571,260
===============
</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, 1997 was $18,806,195, the aggregate gross unrealized appreciation for all
investments was $1,553,782 and aggregate gross unrealized depreciation for
all investments was $182,955.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 255
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BIO-TECHNOLOGY (1.9%)
* Genzyme Corporation 4,800 $114,600
--------
CAPITAL GOODS - DIVERSIFIED (2.4%)
Danaher Corporation 3,000 145,500
--------
CAPITAL GOODS/INDUSTRIAL (1.9%)
* Vishay Intertechnology, Inc. 3,836 112,703
--------
COMMUNICATION - EQUIPMENT (6.3%)
* ANADIGICS, Inc. 4,500 149,063
ECI Telecommunications Ltd. Designs 6,300 145,687
* Saville Systems Ireland plc 2,000 85,250
--------
380,000
--------
COMMUNICATION - NETWORK (3.4%)
* ICG Communications, Inc. 5,000 80,000
* PairGain Technologies, Inc. 6,000 125,250
--------
205,250
--------
COMPUTER NETWORKING (3.3%)
* Ascend Communications, Inc. 3,600 200,700
--------
COMPUTER PERIPHERAL EQUIPMENT (0.9%)
* Dialogic Corporation 1,800 52,650
--------
COMPUTER SERVICES (4.6%)
* HNC Software, Inc. 5,200 171,600
* Rational Software Corporation 5,400 101,925
--------
273,525
--------
COMPUTER SOFTWARE (3.1%)
* Business Objects S. A. - ADR 5,200 50,050
* Media 100, Inc. 8,000 46,000
* Sapient Corporation 2,000 89,500
--------
185,550
--------
CONSUMER GROWTH (8.3%)
* Activision, Inc. 16,000 208,000
* Conso Products Company 7,625 101,031
* Electronic Arts, Inc. 3,700 118,400
* Lin Television Corporation 1,700 73,738
--------
501,169
--------
</TABLE>
<PAGE> 256
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ELECTRONIC PRODUCTS - MISCELLANEOUS (0.5%)
AVX Corporation 1,000 $ 27,250
--------
ENERGY (2.7%)
Cross Timbers Oil Company 8,250 159,844
--------
HEALTH (4.3%)
* HCIA, Inc. 2,300 56,925
* National Dentex Corporation 6,000 104,250
* PacifiCare Health Systems, Inc. 1,200 95,100
--------
256,275
--------
HOUSEHOLD FURNISHINGS & APPLIANCES (2.8%)
* Williams-Sonoma, Inc. 4,500 165,938
--------
MANAGED CARE (7.4%)
* CRA Managed Care, Inc. 2,500 114,375
* Healthsource, Inc. 4,000 86,000
* MedPartners, Inc. 7,100 134,900
* PhyCor, Inc. 3,787 108,402
--------
443,677
--------
MISCELLANEOUS CONSUMER (2.5%)
* On Assignment, Inc. 4,000 152,500
--------
OFFICE-BUSINESS EQUIPMENT (2.4%)
* HPR, Inc. 9,000 146,250
--------
OFFSHORE DRILLING (1.6%)
* Parker Drilling Company 10,000 96,250
--------
OIL WELL SERVICES (1.3%)
* Dawson Production Services, Inc. 7,000 78,750
--------
OPTICAL INSTRUMENTS AND LENSES (1.6%)
* KLA-Tencor Corporation 2,000 95,125
--------
PAPER (1.2%)
* Data Documents, Inc. 6,000 71,250
--------
</TABLE>
<PAGE> 257
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
PHARMACEUTICALS (4.9%)
* Centocor, Inc. 3,200 $ 112,800
* Dura Pharmaceuticals, Inc. 4,600 182,850
----------
295,650
----------
RESTAURANTS (0.4%)
* Outback Steakhouse, Inc. 1,000 23,250
----------
RETAIL - SPECIALTY (10.6%)
* Borders Group, Inc. 7,900 171,825
* Corporate Express, Inc. 8,600 118,250
* PetSmart, Inc. 6,000 73,500
* Staples, Inc. 6,325 139,150
* The Sports Authority, Inc. 7,500 135,000
----------
637,725
----------
SEMICONDUCTOR-RELATED DEVICES (5.4%)
* Etec Systems, Inc. 1,800 80,100
Intel Corporation 800 121,200
* LSI Logic Corporation 3,000 125,250
----------
326,550
----------
SYSTEM SOFTWARE/CLIENT SERVER (1.6%)
* Hummingbird Communications Ltd. 3,400 96,900
----------
TELECOMMUNICATIONS EQUIPMENT (7.3%)
* Comverse Technology, Inc. 2,000 91,500
* DSC Communications Corporation 2,000 51,125
* Newbridge Networks Corporation 3,600 144,450
* P-COM, Inc. 3,200 103,200
* Proxim, Inc. 2,000 51,250
----------
441,525
----------
TOTAL COMMON STOCKS (Cost $4,710,070) (94.6%) 5,686,356
----------
</TABLE>
<PAGE> 258
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 280,000 $ 280,000
U.S. Treasury Plus Money Market Fund 150,000 150,000
----------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $430,000) (7.2%) 430,000
----------
TOTAL INVESTMENTS (Cost $5,140,070) (101.8%) 6,116,356
Liabilities, less other assets (-1.8%) (106,650)
----------
NET ASSETS (100%) $6,009,706
==========
</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 May 31,
1997 was $5,140,070, the aggregate gross unrealized appreciation for all
investments was $1,463,144 and aggregate gross unrealized depreciation for
all investments was $486,858.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 259
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INFORMED INVESTORS GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AIRLINES (3.8%)
Southwest Airlines Company 8,000 $206,000
--------
APPAREL MANUFACTURING (2.5%)
Liz Claiborne, Inc. 3,000 136,875
--------
BANKS (5.0%)
State Street Corporation 6,200 276,675
--------
CLOTHING (4.6%)
* Jones Apparel Group, Inc. 5,400 253,125
--------
COMPUTER MEMORY DEVICES (1.7%)
* EMC Corporation 2,300 91,712
--------
COMPUTER MICROSYSTEMS (2.3%)
* Dallas Semiconductor Corporation 3,200 123,600
--------
COMPUTER - PERIPHERAL EQUIPMENT (2.1%)
* Adaptec, Inc. 3,200 117,600
--------
COMPUTERS (8.2%)
* Dell Computer Corporation 2,100 236,250
* Gateway 2000, Inc. 3,200 212,400
--------
448,650
--------
FINANCIAL/BUSINESS SERVICES (17.1%)
Bear Stearns Companies, Inc. 8,400 273,000
Lehman Brothers Holdings, Inc. 5,400 218,025
Merrill Lynch & Company 2,300 243,800
Paine Webber Group, Inc. 5,700 202,350
--------
937,175
--------
GLASS PRODUCTS (3.5%)
Corning, Inc. 3,800 191,425
--------
HOSPITAL MANAGEMENT (3.8%)
* Tenet Healthcare Corporation 7,700 211,750
--------
LIFE/HEALTH INSURANCE (14.6%)
Conseco, Inc. 8,200 328,000
SunAmerica, Inc. 4,800 226,800
Torchmark Corporation 3,800 249,375
--------
804,175
--------
</TABLE>
<PAGE> 260
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INFORMED INVESTORS GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MISCELLANEOUS MANUFACTURING (4.0%)
Minnesota Mining and Manufacturing Company 2,400 $ 220,200
----------
MULTI-LINE INSURANCE (0.2%)
Travelers Group, inc. 200 10,975
----------
PAPER (2.4%)
International Paper Company 2,700 129,600
----------
RETAIL (4.1%)
* Costco Companies, Inc. 6,700 226,125
----------
RETAIL STORES (3.8%)
Dayton Hudson Corporation 4,400 211,750
----------
RETAIL STORES - GENERAL MERCHANDISING (3.4%)
Dollar General Corporation 5,500 184,938
----------
RETAIL - JEWELRY (2.4%)
Tiffany & Company 2,800 129,850
----------
TELEPHONE & TELEGRAPH APPARATUS (4.6%)
* Tellabs, Inc. 5,000 251,250
----------
TOTAL COMMON STOCKS (Cost $4,698,451) (94.1%) 5,163,450
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund
(Cost $80,000) (1.5%) 80,000 80,000
----------
TOTAL INVESTMENTS (Cost $4,778,451) (95.6%) 5,243,450
Other assets, less liabilities (4.4%) 246,483
----------
NET ASSETS (100%) $5,489,933
==========
</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,
1997 was $4,778,451, the aggregated gross unrealized appreciation for all
investments was $522,884 and aggregate gross unrealized depreciation for all
investments was $57,885.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 261
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AUSTRALIA (0.7%)
Australian Hospital Care Ltd. 49,000 $ 82,014
----------
DENMARK (2.6%)
* Carli Gray International 1,400 83,981
Novo Nordisk 2,200 235,853
----------
319,834
----------
FINLAND (2.4%)
Oy Nokia AB 2,300 150,810
TT Tieto OY 1,700 143,340
----------
294,150
----------
FRANCE (6.3%)
Altran Technologies 500 160,632
* Carrefour 360 236,937
Pinault - Printemps - Redoute 225 94,556
Sidel 2,800 196,926
Sodexho Alliance 150 69,810
----------
758,861
----------
GERMANY (4.9%)
Altana AG 150 138,545
Bayerische Motoren Werke (BMW) AG 200 163,980
Fresenius AG Pfd. 722 159,820
Porsche AG Pfd. 110 132,802
----------
595,147
----------
HONG KONG (11.8%)
Hang Seng Bank Ltd. 18,000 216,056
Henderson Land Development Company Ltd. 24,000 233,867
Hong Kong & China Gas Company 182,496 317,978
HSBC Holdings 8,436 255,868
* New World Infrastructure Ltd. 19,000 59,222
Sun Hung Kai Properties Ltd. 20,000 245,870
Wing Hang Bank Ltd. 21,600 102,870
----------
1,431,731
----------
</TABLE>
<PAGE> 262
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INDONESIA (0.7%)
* PT Bank International Indonesia 61,156 $ 50,230
PT Gudang Garam 8,000 34,497
PT Steady Safe 1,467 1,612
---------
86,339
---------
ITALY (1.6%)
Bulgari SpA 7,200 142,514
* Telecom Italia Mobile SpA 28,600 50,198
---------
192,712
---------
MALAYSIA (6.3%)
* Arab-Malaysian Merchant Bank Berhad 16,000 101,242
Berjaya Sports Toto Berhad 26,000 121,060
Commerce Asset Holding Berhad 20,000 58,103
DCB Holdings Berhad 32,000 103,152
Gamuda Berhad 17,333 62,081
Malayan Banking Berhad 20,000 210,920
United Engineers (Malaysia) Ltd. 13,000 105,022
---------
761,580
---------
NETHERLANDS (5.5%)
Elsevier NV 6,000 101,621
Koninklijke Ahold NV 2,245 170,695
Koninklijke Ahrend Groep NV 1,500 94,976
Nutricia Verenidge Bedrijven N.V. 600 93,616
* Ordina Beheer N.V. 1,040 78,153
Wolters Kluwer NV 1,012 121,881
---------
660,942
---------
NORWAY (4.4%)
Kverneland ASA 3,200 94,471
* Merkantildata 8,500 168,487
* Tandberg ASA 3,300 39,897
* Tandberg Television ASA 13,200 120,619
Tomra Systems ASA 5,000 114,574
---------
538,048
---------
PHILIPPINES (1.2%)
* Belle Corporation 200,000 53,091
* DMCI Holdings, Inc. 143,000 86,765
---------
139,856
---------
</TABLE>
<PAGE> 263
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
SINGAPORE (9.7%)
City Developments Limited 9,000 $ 83,677
DBS Land Limited 36,000 125,830
Development Bank of Singapore Limited 15,000 187,697
Oversea-Chinese Banking Corporation Ltd. 15,000 186,648
Overseas Union Bank Ltd. 20,000 137,015
Parkway Holdings Limited 43,000 213,422
United Overseas Bank Ltd. 10,000 102,761
Wing Tai Holdings Ltd. 45,000 134,009
----------
1,171,059
----------
SPAIN (3.8%)
Banco Intercontinental Espanol, SA 900 152,410
Electricas Reunidas de Zaragoza, SA 2,800 105,693
* Sol Melia, SA 5,600 207,896
----------
465,999
----------
SWEDEN (3.7%)
Autoliv AB 6,000 212,604
Ericsson Telefonaktiebolaget 6,800 239,192
----------
451,796
----------
SWITZERLAND (7.5%)
Nestle SA 70 87,215
Novartis AG Regular Shares 190 258,247
Novartis AG 30 40,882
Roche Holding AG 30 267,167
* Roche Holding AG Warrants 98 "Jubilee" 8 561
Zurich Versicherungs 700 257,681
----------
911,753
----------
THAILAND (0.2%)
Central Pattana Public Company Ltd. 10,000 26,653
* Thai Farmers Bank Public Company Ltd. (Warrants) 500 501
----------
27,154
----------
UNITED KINGDOM (12.0%)
Compass Group plc 12,700 141,752
HSBC Holdings plc 12,758 396,565
J.D. Wetherspoon plc 4,618 100,004
Lloyds TSB Group plc 13,000 130,825
Logica plc 6,600 93,571
Misys plc 5,400 122,581
Serco Group plc 8,200 92,735
Standard Chartered plc 10,476 166,121
Zeneca Group plc 7,000 212,652
----------
1,456,806
----------
</TABLE>
<PAGE> 264
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
UNITED STATES (11.7%)
Credicorp Ltd., ADR 5,000 $ 112,500
Panamerican Beverages, Inc., ADR 10,000 290,000
Santa Isabel, ADR 5,200 151,450
* State Bank of India, ADR 15,000 379,650
Telecomunicacoes Brasileiras SA, ADR 1,400 194,600
Telefonica de Argentina SA, ADR 5,000 181,250
Telefonica del Peru SA, ADR 4,500 114,188
-----------
1,423,638
-----------
TOTAL COMMON STOCKS (Cost $10,050,524)(97.0%) 11,769,419
MONEY MARKET MUTUAL FUNDS
U.S. Government Money Market Mutual Fund
(Cost $250,000)(2.1%) 250,000 250,000
-----------
TOTAL INVESTMENTS (Cost $10,300,524) (99.1%) 12,019,419
Other assets, less liabilities (0.9%) 109,835
-----------
NET ASSETS (100%) $12,129,254
===========
</TABLE>
INDUSTRY COMPOSITION
<TABLE>
<CAPTION>
INDUSTRY PERCENT
- -------- -------
<S> <C>
Auto/Truck Manufacturers 2.4
Bio Tech & Med Devices 2.5
Cellular Telephone 0.4
Commercial Banks 22.1
Computer Software 3.6
Computers & Peripheral 2.7
Construction & Engineering 2.6
Consumer Service 2.3
Drug & Health Care 10.8
Electric Power Utilities 0.9
Entertainment & Leisure 1.4
Financial Services 5.2
Food Processing 3.2
Lodging & Restaurants 3.7
Machinery 4.2
Public Utilities 2.6
Publishing 1.8
Real Estate Development 6.1
Real Estate Investment 0.9
Retailing 8.7
Telecommunications 8.6
Tobacco 0.3
----
Industry percent of net assets 97.0%
Money Market Mutual Funds 2.1%
Other assets, less liabilities 0.9%
----
Percent of Net Assets 100%
----
</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, 1997 was $10,300,524, the aggregate gross unrealized appreciation for all
investments was $2,002,534 and aggregate gross unrealized depreciation for
all investments was $283,576.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 265
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE LARGE-CAP VALUE FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ATHLETIC FOOTWEAR/APPAREL (2.7%)
Nike, Inc. 1,500 $ 85,500
------------
BANKS (3.4%)
Wells Fargo & Company 400 105,400
------------
BEVERAGES (9.5%)
Anheuser-Busch Companies, Inc. 2,400 102,900
Coca-Cola Company 1,700 116,025
PepsiCo, Inc. 2,100 77,175
------------
296,100
------------
COMPUTER SOFTWARE (4.0%)
* Microsoft Corporation 1,000 124,000
------------
COMPUTERS (4.4%)
Hewlett-Packard Company 1,000 51,500
International Business Machines Corporation 1,000 86,500
------------
138,000
------------
CONSUMER PRODUCTS (8.1%)
Clorox Company 1,000 126,250
Gillette Company 1,400 124,425
------------
250,675
------------
DRUGS (4.1%)
Abbott Labs 2,000 126,000
------------
ENTERTAINMENT (3.9%)
The Walt Disney Company (Holding Co.) 1,500 122,813
------------
FINANCIAL/BUSINESS SERVICES (8.4%)
American Express Company 2,000 139,000
Charles Schwab Corporation 3,000 121,875
------------
260,875
------------
FOOD (13.3%)
Campbell Soup Company 2,800 128,800
Hershey Foods Corporation 2,200 123,475
Quaker Oats Company 1,500 61,875
Wrigley (WM) Jr. Company 1,700 100,725
------------
414,875
------------
HEALTH (3.2%)
Becton, Dickinson & Company 2,000 98,500
------------
</TABLE>
<PAGE> 266
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE LARGE-CAP VALUE FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MEDICAL SUPPLIES (6.5%)
Kimberly-Clark Corporation 2,000 $ 100,250
Pfizer, Inc. 1,000 102,875
----------
203,125
----------
PHARMACEUTICALS (10.7%)
Eli Lilly & Company 1,000 93,000
Johnson & Johnson 1,900 113,763
Merck & Company, Inc. 1,400 125,825
----------
332,588
----------
PHOTOGRAPHY (3.2%)
Eastman Kodak Company 1,200 99,450
----------
PUBLISHING (3.9%)
Gannett Company, Inc. 1,300 120,250
----------
PUBLISHING - NEWSPAPERS (2.8%)
New York Times Company Class A 1,900 87,518
----------
SEMICONDUCTOR - RELATED DEVICE (4.9%)
Intel Corporation 1,000 151,500
----------
TOTAL COMMON STOCKS (Cost $2,260,193)(97.0%) 3,017,169
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund
(Cost $135,000) (4.4%) 135,000 135,000
----------
TOTAL INVESTMENTS (Cost $2,395,193) (101.4%) 3,152,169
Liabilities, less other assets (-1.4%) (42,189)
----------
NET ASSETS (100%) $3,109,980
==========
</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, 1997 was $2,395,193, the aggregate gross unrealized appreciation for all
investments was $758,447 and aggregate gross unrealized depreciation for all
investments was $1,471.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 267
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AIR FREIGHT (2.3%)
Circle International Group, Inc. 3,300 $ 91,575
--------
AUTO PARTS-ORIGINAL EQUIPMENT (5.7%)
* Gentex Corporation 4,600 92,575
Paccar, Inc. 3,000 135,750
--------
228,325
--------
BEVERAGES (3.6%)
* Robert Mondavi Corporation 3,200 142,400
--------
BUSINESS EQUIPMENT/SERVICE (2.5%)
* Greenwich Air Services, Inc. 3,500 101,500
--------
CLOTHING (3.3%)
* Fruit of the Loom, Inc. 3,800 132,525
--------
COMMUNICATION - EQUIPMENT (2.5%)
* Qualcomm, Inc. 2,100 101,325
--------
COMPUTER MICROSYSTEMS (4.6%)
* Dallas Semiconductor Corporation 4,800 185,400
--------
COMPUTER SOFTWARE (1.8%)
* Imnet Systems, Inc. 2,900 72,500
--------
COMPUTERS - PERIPHERAL EQUIPMENT (4.3%)
* American Power Conversion Corp. 3,500 81,375
* MicroTouch Systems, Inc. 3,600 90,900
--------
172,275
--------
HOSPITAL SUPPLIES (2.7%)
* Advanced Technology Laboratories, Inc. 2,800 108,500
--------
HOUSEHOLD FURNISHINGS APPLIANCE (7.6%)
Bush Industries, Inc. 4,000 90,000
Herman Miller, Inc. 6,000 214,500
--------
304,500
--------
</TABLE>
<PAGE> 268
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INSTRUMENTS - SCIENTIFIC (2.0%)
* Water Corporation 2,500 $ 80,625
--------
LIFE INSURANCE (6.0%)
Protective Life Corporation 3,000 134,250
Western National Corporation 4,000 104,500
--------
238,750
--------
NURSING HOMES (3.0%)
* Genesis Health Ventures, Inc. 3,600 118,350
--------
OIL/GAS EQUIPMENT SERVICES (10.1%)
* Nuevo Energy Company 3,300 143,962
* Rowan Companies, Inc. 5,700 131,813
Tidewater, Inc. 3,050 128,481
--------
404,256
--------
POLLUTION CONTROL (4.9%)
* Newpark Resources, Inc. 3,770 197,925
--------
RESTAURANTS (2.9%)
* Cracker Barrel Old Country Store, Inc. 4,000 116,000
--------
RETAIL (2.5%)
* Stein Mart, Inc. 3,300 99,825
--------
RETAIL-SPECIALTY (4.8%)
* AutoZone, Inc. 4,500 105,188
Pier 1 Imports, Inc. 3,800 85,025
--------
190,213
--------
RETAIL STORES-DRUGS (3.3%)
* CVS Corporation 2,800 134,050
--------
SEMICONDUCTOR RELATED DEVICE (2.2%)
* Photronics, Inc. 2,000 89,250
--------
SPECIAL INDUSTRIAL MACHINERY (6.0%)
Briggs & Stratton Corporation 2,200 113,575
Pentair Industries, Inc. 3,800 124,925
--------
238,500
--------
TRUCKERS (3.9%)
* Swift Transportation Co., Inc. 4,800 154,800
--------
</TABLE>
<PAGE> 269
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
TOTAL COMMON STOCKS (Cost $3,064,256) (92.5%) $3,703,369
----------
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 185,000 185,000
Vista Treasury Plus Money Market Fund 115,000 115,000
----------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $300,000) (7.5%) 300,000
----------
TOTAL INVESTMENTS (Cost $3,364,256) (100.0%) 4,003,369
Liabilities, less other assets (0.0%) (1,234)
----------
NET ASSETS (100%) $4,002,135
==========
</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, 1997 was $3,364,256, the aggregate gross unrealized appreciation for all
investments was $695,869 and aggregate gross unrealized depreciation for all
investments was $56,756.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 270
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
BLUE CHIP CONVERTIBLE EMERGING
GROWTH FUND SECURITIES FUND GROWTH FUND
----------- --------------- -----------
<S> <C> <C> <C>
ASSETS
Investment in securities, at value
(cost $4,842,303, $18,806,195,
$5,140,070, respectively) $5,344,337 $20,177,022 $6,116,356
Cash 50,872 51,574 32,911
Receivable for investment securities sold 77,263 379,631 --
Dividends receivable 2,268 32,187 290
Interest receivable 21 154,372 26
---------- ----------- ----------
Total assets 5,474,761 20,794,786 6,149,583
---------- ----------- ----------
LIABILITIES
Payable for investment securities purchased -- 223,126 139,257
Payable for fund shares redeemed 77 56 60
Other payables and accrued expenses 824 344 560
---------- ----------- ----------
Total liabilities 901 223,526 139,877
---------- ----------- ----------
NET ASSETS $5,473,860 $20,571,260 $6,009,706
========== =========== ==========
NET ASSETS CONSIST OF (Note 1):
Capital stock (Par Value $.001 per share) $ 354 $ 1,857 $ 387
Additional paid in capital 4,125,193 18,809,616 5,620,631
Accumulated net realized gain (loss) on investments 846,279 218,279 (587,598)
Undistributed net investment income -- 170,681 --
Net unrealized appreciation on investments 502,034 1,370,827 976,286
---------- ----------- ----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $5,473,860 $20,571,260 $6,009,706
========== =========== ==========
CLASS A:
Net Assets $5,428,285 $20,552,883 $5,788,730
---------- ----------- ----------
Shares Outstanding 351,099 1,855,482 373,020
---------- ----------- ----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 15.46 $ 11.08 $ 15.52
========== =========== ==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 16.19 $ 11.60 $ 16.25
========== =========== ==========
CLASS D:
Net Assets $ 45,575 $ 18,377 $ 220,976
---------- ----------- ----------
Shares Outstanding 2,976 1,662 14,383
---------- ----------- ----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 15.31 $ 11.06 $ 15.36
========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 271
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES - (CONTINUED)
MAY 31, 1997
<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 $4,778,451, $10,300,524,
$2,395,193, respectively) $5,243,450 $12,019,419 $3,152,169
Cash 12,377 134,287 38,202
Receivable for investment securities sold 665,504 56,644 --
Dividends receivable 4,758 10,529 3,517
Interest receivable 52 -- --
---------- ----------- ----------
Total assets 5,926,141 12,220,879 3,193,888
---------- ----------- ----------
LIABILITIES
Payable for investment securities purchased 433,793 91,069 83,370
Payable for fund shares redeemed 2,212 63 73
Other payables and accrued expenses 203 493 465
---------- ----------- ----------
Total liabilities 436,208 91,625 83,908
---------- ----------- ----------
NET ASSETS $5,489,933 $12,129,254 $3,109,980
========== =========== ==========
NET ASSETS CONSIST OF (Note 1):
Capital Stock (Par Value $.001 per share) $ 478 $ 963 $ 213
Additional paid in capital 4,610,691 10,754,431 2,331,412
Accumulated net realized gain (loss) on investments
and foreign currency transactions 413,765 (345,098) 21,379
Net unrealized appreciation on investments and
foreign currency transactions 464,999 1,718,958 756,976
---------- ----------- ----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $5,489,933 $12,129,254 $3,109,980
========== =========== ==========
CLASS A:
Net Assets $5,476,969 $12,098,843 $3,054,239
---------- ----------- ----------
Shares Outstanding 477,196 960,665 209,015
---------- ----------- ----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 11.48 $ 12.59 $ 14.61
========== =========== ==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 12.02 $ 13.18 $ 15.30
========== =========== ==========
CLASS D:
Net Assets $ 12,964 $ 30,411 $ 55,741
---------- ----------- ----------
Shares Outstanding 1,141 2,436* 3,841
---------- ----------- ----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 11.36 $ 12.49 $ 14.51
========== =========== ==========
</TABLE>
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 272
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE
MID-CAP
GROWTH FUND
-----------
<S> <C>
ASSETS
Investment in securities, at value
(cost$3,364,256) $4,003,369
Cash 36,124
Receivable for investment securities sold 111,383
Receivable for fund shares sold 14,811
Dividends receivable 2,270
Interest receivable 16
----------
Total assets 4,167,973
----------
LIABILITIES
Payable for investment securities purchased 162,868
Payable for fund shares redeemed 2,970
----------
Total liabilities 165,838
----------
NET ASSETS $4,002,135
==========
NET ASSETS CONSIST OF (Note 1):
Capital Stock (Par Value $.001 per share) $ 304
Additional paid in capital 3,301,497
Accumulated net realized gain on investments 61,221
Net unrealized appreciation on investments 639,113
----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $4,002,135
==========
CLASS A:
Net Assets $2,174,053
----------
Shares Outstanding 164,702
----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 13.20
==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 13.82
==========
CLASS D:
Net Assets $1,828,082
----------
Shares Outstanding 139,681
----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 13.09
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 273
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE RESERVE
BLUE CHIP CONVERTIBLE EMERGING INFORMED INVESTORS
GROWTH FUND SECURITIES FUND GROWTH FUND GROWTH FUND
----------- --------------- ----------- -----------
September 3, 1996
(commencement of
Year Ended operations) to Year Ended Year Ended
May 31, 1997 May 31, 1997 May 31, 1997 May 31, 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 32,176 $ 249,907 $ 3,372* $ 24,627
Interest 896 363,077 1,049 41,386
---------- ----------- ----------- -----------
Total investment income 33,072 612,984 4,421 66,013
EXPENSES
Comprehensive fee (Note 3) 79,311 205,951 98,087 83,573
12b-1 Fee (Note 4)
Class A 13,038 34,294 15,631 13,889
Class D 723 124 2,868 161
---------- ----------- ----------- -----------
Total expenses 93,072 240,369 116,586 97,623
---------- ----------- ----------- -----------
Less fees waived -- 188,113 -- --
---------- ----------- ----------- -----------
Net expenses -- 52,256 -- --
---------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) (60,000) 560,728 (112,165) (31,610)
---------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Proceeds from sales of securities 5,655,127 16,158,164 1,743,151 11,725,713
Cost of securities sold 4,678,455 15,933,090 2,320,269 10,472,385
---------- ----------- ----------- -----------
Net realized gain (loss) on
investments (Note 1) 976,672 225,074 (577,118) 1,253,328
Net unrealized appreciation
(depreciation) on investments (642,561) 1,370,827 (847,249) (1,975,139)
---------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments 334,111 1,595,901 (1,424,367) (721,811)
---------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 274,111 $ 2,156,629 $(1,536,532) $ (753,421)
========== =========== =========== ===========
</TABLE>
* Includes foreign tax withholding of $114
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 274
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS - (CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
INTERNATIONAL LARGE-CAP MID-CAP
EQUITY FUND VALUE FUND GROWTH FUND
----------- ---------- -----------
Year Ended Year Ended Year Ended
May 31, 1997 May 31, 1997 May 31, 1997
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 97,550* $ 32,111 $ 13,610
Interest 561 212 533
---------- -------- ----------
Total investment income 98,111 32,323 14,143
EXPENSES
Comprehensive fee (Note 3) 145,974 33,940 49,028
12b-1 Fee (Note 4)
Class A 20,754 5,613 3,404
Class D 231 172 19,070
---------- -------- ----------
Total expenses 166,959 39,725 71,502
---------- -------- ----------
NET INVESTMENT LOSS (68,848) (7,402) (57,359)
---------- -------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Proceeds from sales of securities 3,956,864 383,913 3,034,153
Cost of securities sold 4,229,994 362,534 2,889,407
---------- -------- ----------
Net realized gain (loss) on
investments and foreign
currency transactions (Note 1) (273,130) 21,379 144,746
Net unrealized appreciation
on investments and foreign
currency transactions 1,387,936 686,853 185,442
---------- -------- ----------
Net realized and unrealized gain
on investments and foreign
currency transactions 1,114,806 708,232 330,188
---------- -------- ----------
Net increase in net assets resulting
from operations $1,045,958 $700,830 $ 272,829
========== ======== ==========
</TABLE>
* Includes foreign tax withholding of $14,966
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 275
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE
RESERVE BLUE CHIP GROWTH FUND SECURITIES FUND
----------------------------- -------------------
September 3, 1996
(commencement of
Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997
------------ ------------ -------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income gain (loss) $ (60,000) $ (34,916) $ 560,728
Net realized gain (loss) from investments 976,672 (2,045) 225,074
Net unrealized appreciation (depreciation)
from investments (642,561) 975,733 1,370,827
----------- ---------- ------------
Net increase in net assets
resulting from operations 274,111 938,772 2,156,629
----------- ---------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (6,791)
Net realized gain on investments (68,349) (164,889) (390,051)
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 1,176,349 2,757,098 20,601,861
Reinvestment of distributions 68,323 164,889 201,224
Cost of shares redeemed (1,148,732) (517,167) (1,991,612)
----------- ---------- ------------
Net increase in net assets resulting
from capital share transactions 95,940 2,404,820 18,811,473
----------- ---------- ------------
Net increase in net assets 301,702 3,178,703 20,571,260
NET ASSETS:
Beginning of period 5,172,158 1,993,455 0
----------- ---------- ------------
End of period (including undistributed
net investment income of $0, $0
and $170,681, respectively) $ 5,473,860 $5,172,158 $ 20,571,260
=========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL
RESERVE EMERGING GROWTH FUND EQUITY FUND
----------------------------- -------------------------------
July 13, 1996
(commencement of
Year Ended Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
----------------------------- -------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (112,165) $ (57,980) $ (68,848) $ (17,145)
Net realized gain (loss) from investments
and foreign currency transactions (577,118) 80,546 (273,130) (71,968)
Net unrealized appreciation (depreciation)
from investments and foreign
currency transactions (847,249) 1,655,638 1,387,936 331,022
----------- ---------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (1,536,532) 1,678,204 1,045,958 241,909
----------- ---------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments -- (93,899) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 2,187,444 4,281,980 8,057,063 3,465,234
Reinvestment of distributions -- 93,770 -- --
Cost of shares redeemed (1,540,646) (301,485) (558,291) (122,619)
----------- ---------- ----------- ----------
Net increase in net assets resulting
from capital share transactions 646,798 4,074,265 7,498,772 3,342,615
----------- ---------- ----------- ----------
Net increase (decrease) in net assets (889,734) 5,658,570 8,544,730 3,584,524
NET ASSETS:
Beginning of period 6,899,440 1,240,870 3,584,524 0
----------- ---------- ----------- ----------
End of period $ 6,009,706 $6,899,440 $12,129,254 $3,584,524
=========== ========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 276
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS - (CONTINUED)
<TABLE>
<CAPTION>
RESERVE
RESERVE INFORMED LARGE-CAP
INVESTORS GROWTH FUND VALUE FUND
-------------------------------- -------------------------------
January 2, 1996
(commencement of
Year Ended Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (31,610) $ (147,983) $ (7,402) $ (1,091)
Net realized gain from investments 1,253,328 850,186 21,379 --
Net unrealized appreciation (depreciation)
from investments (1,975,139) 1,109,280 686,853 70,123
----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (753,421) 1,811,483 700,830 69,032
----------- ----------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (525,939) (795,337) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 1,400,871 6,254,939 1,345,107 1,165,180
Reinvestment of distributions 395,531 790,060 -- --
Cost of shares redeemed (1,435,172) (8,490,282) (167,017) (3,152)
----------- ----------- ----------- ----------
Net increase (decrease) in net assets resulting
from capital share transactions 361,230 (1,445,283) 1,178,090 1,162,028
----------- ----------- ----------- ----------
Net increase (decrease) in net assets (918,130) (429,137) 1,878,920 1,231,060
NET ASSETS:
Beginning of period 6,408,063 6,837,200 1,231,060 0
----------- ----------- ----------- ----------
End of period $ 5,489,933 $ 6,408,063 $ 3,109,980 $1,231,060
=========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
RESERVE MID-CAP
GROWTH FUND
-------------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (57,359) $ (32,656)
Net realized gain (loss) from investments 144,746 (83,525)
Net unrealized appreciation from
investments 185,442 453,671
----------- ----------
Net increase in net assets
resulting from operations 272,829 337,490
----------- ----------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 3,118,364 2,345,759
Cost of shares redeemed (1,928,613) (143,694)
----------- ----------
Net increase in net assets resulting
from capital share transactions 1,189,751 2,202,065
----------- ----------
Net increase in net assets 1,462,580 2,539,555
NET ASSETS:
Beginning of period 2,539,555 0
----------- ----------
End of period $ 4,002,135 $2,539,555
=========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 277
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reserve Private Equity Series (the "Trust") consists of the following
funds: Reserve Blue Chip Growth Fund, Reserve Convertible Securities Fund,
Reserve Emerging Growth Fund, Reserve Informed Investors Growth Fund,
Reserve International Equity Fund, Reserve Large-Cap Value Fund, and
Reserve Mid-Cap Growth Fund (formerly 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, 1997 as follows:
[See table below]
<PAGE> 278
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------
Undistributed
Net Accumulated
Investment Realized
Reserve Fund Capital Income Gain
------------ ------- ------ ----
<S> <C> <C> <C>
Blue Chip Growth Fund (112,615) 60,000 52,615
Emerging Growth Fund (112,165) 112,165 --
Informed Investors Growth Fund (31,610) 31,610 --
International Equity Fund (68,848) 68,848 --
Large-Cap Value Fund (7,402) 7,402 --
Mid-Cap Growth Fund (57,359) 57,359 --
</TABLE>
These reclassifications had no effect on net investment income, net
realized gain on investments, or net assets for the year ended May 31,
1997.
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.
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, 1997, which are available to offset
future realized capital gains, if any:
<TABLE>
<CAPTION>
Capital loss Expiration
carryforward year
------------ ----
<S> <C> <C>
Reserve Emerging Growth Fund $161,015 2005
Reserve International Equity Fund 71,968 2004
Reserve International Equity Fund 178,347 2005
</TABLE>
<PAGE> 279
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
2. INVESTMENT ACTIVITY
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the year ended May 31, 1997, were
as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate
Reserve Fund Purchases Sales
------------ --------- -----
<S> <C> <C>
Blue Chip Growth Fund $ 5,425,272 $ 5,655,127
Convertible Securities Fund 34,711,469 16,158,164
Emerging Growth Fund 2,264,488 1,743,151
Informed Investors Growth Fund 11,386,974 11,725,713
International Equity Fund 11,336,214 3,956,864
Large-Cap Value Fund 1,507,717 383,913
Mid-Cap Growth Fund 4,017,934 3,034,153
</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 except for the International
Equity Fund for which it receives 1.75%. RMCI is currently waiving a
portion of its comprehensive fee in the Reserve Convertible Securities
Fund.
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
decisions for 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%
Convertible Securities Fund New Vernon Advisors, Inc. 0.75%
Emerging Growth Fund Roanoke Asset Management Corp. 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 Southern Capital Advisors 0.75%
</TABLE>
Trainer, Wortham & Company, Inc. owns 24% of the outstanding shares of the
Reserve Blue Chip Growth Fund at May 31, 1997.
<PAGE> 280
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
As of May 31, 1997, RMCI and affiliated persons owned 7%, 13%, 5%, 11%,
20%, and 25% of the Reserve Blue Chip Growth Fund, Reserve Emerging Growth
Fund), Reserve Informed Investors Growth Fund, Reserve International
Equity Fund, Reserve Large-Cap Value Fund, and Reserve Mid-Cap Growth
Fund, respectively. Taconic Petroleum Corp. owns 24% of Reserve Large-Cap
Value Fund. Christopher E. Vroom owns 7% of the Reserve
Emerging Growth Fund.
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 shares and 1.00% per annum for Class D shares of the
average daily net assets of shareholder accounts as to which the payee has
rendered distribution assistance. For the year ended May 31, 1997, the
Funds paid distribution expenses to RPI as follows:
<TABLE>
<CAPTION>
Reserve Fund Class A Class D
------------ ------- -------
<S> <C> <C>
Blue Chip Growth Fund $13,038 $ 723
Convertible Securities Fund* 283 14
Emerging Growth Fund 15,631 2,868
Informed Investors Growth Fund 13,889 161
International Equity Fund 20,754 231
Large-Cap Value Fund 5,613 172
Mid-Cap Growth Fund 3,404 19,070
</TABLE>
* RMCI waived 12b-1 fees of $34,011 and $110, for Reserve Convertible
Securities Fund Class A and Class D, respectively, for the period
September 3, 1996 (commencement of operations) to May 31, 1997.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock of each Fund for the period ended May 31,
1997, were as follows:
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
----------------------------- -------------------------------- ------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
-------------------------------- ------------------------
Shares Amount Shares Amount
------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold 76,231 $ 1,119,812 3,957 $ 56,537
Reinvested 4,875 67,171 84 1,152
Redeemed (74,089) (1,092,588) (3,930) (56,144)
------- ----------- ------ --------
Net increase 7,017 $ 94,395 111 $ 1,545
======= =========== ====== ========
</TABLE>
<PAGE> 281
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE SECURITIES FUND CLASS A CLASS D
- ----------------------------------- ------------------------------- -------------------------------
September 3, 1996 September 3, 1996
(commencement of operations) to (commencement of operations) to
May 31, 1997 May 31, 1997
------------------------------- --------------------------------
Shares Amount Shares Amount
---------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold 2,026,485 $20,572,892 2,814 $ 28,969
Reinvested 19,551 201,111 11 113
Redeemed (190,554) (1,979,449) (1,163) (12,163)
--------- ----------- ------ --------
Net increase 1,855,482 $18,794,554 1,662 $ 16,919
========= =========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- --------------------------------- ------------------------------- ----------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------------- ----------------------------
Shares Amount Shares Amount
------- ----------- ------ ---------
<S> <C> <C> <C> <C>
Sold 117,069 $ 1,999,906 10,982 $ 187,538
Redeemed (84,292) (1,389,829) (9,047) (150,817)
------- ----------- ------ ---------
Net increase 32,777 $ 610,077 1,935 $ 36,721
======= =========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- -------------------------------- -----------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
-------------------------------- -----------------------
Shares Amount Shares Amount
-------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold 116,034 $ 1,389,343 911 $11,528
Reinvested 37,456 395,531 -- --
Redeemed (121,475) (1,425,528) (814) (9,644)
-------- ---------- ---- -------
Net increase 32,015 $ 359,346 97 $ 1,884
======== ========== ==== =======
</TABLE>
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- --------------------------- ---------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
--------------------------- ---------------------------
Shares Amount Shares Amount
------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold 689,779 $8,029,446 2,446 $27,617
Redeemed (47,041) (551,604) (562) (6,687)
------- ---------- ----- -------
Net increase 642,738 $7,477,842 1,884 $20,930
======= ========== ===== =======
</TABLE>
<PAGE> 282
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE LARGE-CAP VALUE FUND CLASS A CLASS D
- ----------------------------- ------------------------- ----------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------- ----------------------
Shares Amount Shares Amount
------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold 108,518 $1,276,605 5,080 $ 68,502
Redeemed (11,940) (151,013) (1,239) (16,004)
------- ---------- ------ --------
Net increase 96,578 $1,125,592 3,841 $ 52,498
======= ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ------------------------- ---------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------- ---------------------------
Shares Amount Shares Amount
------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Sold 198,244 $2,390,365 58,332 $ 727,999
Redeemed (44,223) (530,105) (114,850) (1,398,508)
------- ---------- -------- -----------
Net increase 154,021 1,860,260 (56,518) $ (670,509)
======= ========== ======== ===========
</TABLE>
Transactions in capital stock of each Fund for the period ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
- ----------------------------- ------------------------- --------------------
February 13, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
------------------------- --------------------
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>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- ---------------------------- ------------------------- ---------------------
February 26, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
------------------------- ---------------------
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>
<PAGE> 283
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- --------------------------- ----------------------
February 13, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
--------------------------- ----------------------
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>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- -------------------------- ------------------
July 13, 1995 March 11, 1996
(commencement (commencement
of operations) to of operations) to
May 31, 1996 May 31, 1996
-------------------------- ------------------
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>
RESERVE LARGE-CAP VALUE FUND CLASS A
- ---------------------------- ------------------------
January 2, 1996
(commencement
of operations) to
May 31, 1996
-------------------------
Shares Amount
------- ----------
<S> <C> <C>
Sold 112,729 $1,165,180
Redeemed (292) (3,152)
------- ----------
Net increase 112,437 $1,162,028
======= ==========
</TABLE>
<PAGE> 284
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ----------------------- -------------------------
March 13, 1996
(Commencement
of operations) to Year Ended
May 31, 1996 May 31, 1996
----------------------- -------------------------
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>
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.
<PAGE> 285
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
7. FINANCIAL HIGHLIGHTS (FOR EACH SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
- ----------------------------- ------------------------------------------------- ---------------------------------
October 28, 1994 February 13, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ---------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 14.91 $12.03 $10.00 $ 14.88 $13.49
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.17) (.10) (.03) (0.46) (.04)
Net realized and unrealized gain 0.91 3.62 2.06 1.08 1.43
------- ------ ------ ------- ------
Total from investment operations 0.74 3.52 2.03 0.62 1.39
Less distribution from net realized gain (.19) (.64) -- (.19) --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 15.46 $14.91 $12.03 $ 15.31 $14.88
======= ====== ====== ======= ======
Total Return 5.12 % 30.10 % 20.30%(2) 4.32 % 10.30 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,428 $5,130 $1,993 $ 46 $ 43
Ratio of expenses to average net assets
before waiver 1.75 % 1.75 % 1.75%(1) 2.50 % 2.50 %(1)
Ratio of expenses to average net assets,
net of waiver 1.75 % 1.75 % 1.73%(1) 2.50 % 2.50 %(1)
Ratio of net investment loss to
average net assets, before waiver (1.13)% (0.94)% (0.72)%(1) (1.90)% (1.70)%(1)
Ratio of net investment loss to average
net assets, net of waiver (1.13)% (0.94)% (0.70)%(1) (1.90)% (1.70)%(1)
Portfolio turnover rate 109 % 72 % 68 % 109 % 72 %
Average commission per share on
portfolio transactions $0.0419 $ 0.06 N/A $0.0419 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE SECURITIES FUND CLASS A CLASS D
- ----------------------------------- ----------------- -----------------
September 3, 1996 September 3, 1996
(commencement of (commencement of
operations) to operations) to
May 31, 1997 May 31, 1997
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period $ 10.00 $ 10.00
------- -------
Income from investment operations
Net investment income 0.34 0.33
Net realized and unrealized gain (loss) 0.99 0.98
------- -------
Total from investment operations 1.33 1.31
Less distribution from net investment
income and realized gain (.25) (.25)
------- -------
NET ASSET VALUE, end of period $ 11.08 $ 11.06
======= =======
Total Return 13.53 %(2) 13.33 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $20,553 $ 18
Ratio of expenses to average net assets before waiver 2.36 %(1) 3.37 %(1)
Ratio of expenses to average net assets, net of waiver 0.52 %(1) 0.83 %(1)
Ratio of net investment income to average
net assets, before waiver 3.67 %(1) 2.57 %(1)
Ratio of net investment income to average net assets,
net of waiver 5.52 %(1) 5.12 %(1)
Portfolio turnover rate 113 % 113 %
Average commission per share on
portfolio transactions $0.0564 $ 0.0564
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 286
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- ---------------------------- ----------------------------------------------- ---------------------------------
November 14, 1994 February 26, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ----------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 19.56 $12.21 $10.00 $ 19.52 $16.88
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.28) (.17) (.09) (0.49) (.04)
Net realized and unrealized gain (loss) (3.76) 8.05 2.30 (3.67) 2.68
------- ------ ------ ------- ------
Total from investment operations (4.04) 7.88 2.21 (4.16) 2.64
Less distribution from net realized gain -- (.53) -- -- --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 15.52 $19.56 $12.21 $ 15.36 $19.52
======= ====== ====== ======= ======
Total Return (20.65)% 65.55 % 22.10 %(2) (21.31)% 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,789 $6,657 $1,241 $ 221 $ 243
Ratio of expenses to average net assets 1.75 % 1.75 % 1.75 %(1) 2.50 % 2.50%(1)
Ratio of net investment loss to
average net assets (1.69)% (1.70)% (1.62)%(1) (2.45)% (2.48)%(1)
Portfolio turnover rate 28 % 38 % 43 % 28 % 38%
Average commission per share on
portfolio transactions $0.0048 $ 0.01 N/A $0.0048 $ 0.01
</TABLE>
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- ------------------------------------------------ --------------------------------
December 28, 1994 March 22, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ----------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 14.36 $11.99 $10.00 $ 14.33 $12.29
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.07) (0.33) (.07) (0.18) (.06)
Net realized and unrealized gain (1.66) 3.87 2.06 (1.64) 2.10
------- ------ ------ ------- ------
Total from investment operations (1.73) 3.54 1.99 (1.82) 2.04
Less distribution from net realized gain (1.15) (1.17) -- (1.15) --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 11.48 $14.36 $11.99 $ 11.36 $14.33
======= ====== ====== ======= ======
Total Return (11.35)% 29.75 % 19.90 %(2) (12.04)% 16.60 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,477 $6,393 $6,837 $ 13 $ 15
Ratio of expenses to average net assets 1.75 % 1.75 % 1.75 %(1) 2.50 % 2.50 %(1)
Ratio of net investment loss to
average net assets (0.57)% (1.57)% (1.62)%(1) (1.26)% (2.32)%(1)
Portfolio turnover rate 255 % 132 % 59 % 255 % 132 %
Average commission per share on
portfolio transactions $0.0612 $ 0.05 N/A $0.0612 $ 0.05
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 287
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- -------------------------------------- --------------------------------------
July 13, 1995 March 11, 1996
(commencement of (commencement of
Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 11.26 $ 10.00 $ 11.25 $ 10.79
------------ ------------ ------------ ------------
Income from investment operations
Net investment loss (0.07) (.05) (0.15) (.01)
Net realized and unrealized gain 1.40 1.31 1.39 .47
------------ ------------ ------------ ------------
Total from investment operations 1.33 1.26 1.24 .46
------------ ------------ ------------ ------------
NET ASSET VALUE, end of period $ 12.59 $ 11.26 $ 12.49 $ 11.25
============ ============ ============ ============
Total Return 11.81% 12.60%(2) 11.02% 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 12,099 $ 3,578 $ 30 $ 6
Ratio of expenses to average net assets
before waiver 2.00% 2.00%(1) 2.75% 2.75%(1)
Ratio of expenses to average net assets,
net of waiver 2.00% 1.99%(1) 2.75% 2.75%(1)
Ratio of net investment loss to average
net assets before waiver 0.82% (0.92)%(1) 1.63% (0.70)%(1)
Ratio of net investment loss to average
net assets net of waiver 0.82% (0.91)%(1) 1.63% (0.70)%(1)
Portfolio turnover rate 52% 70% 52% 70%
Average commission per share on
portfolio transactions $ 0.0273 $ 0.02 $ 0.0273 $ 0.02
</TABLE>
<TABLE>
<CAPTION>
RESERVE LARGE-CAP VALUE FUND CLASS A CLASS D
- ---------------------------- ------------------------------------ ----------------
January 2, 1996
(commencement of
Year Ended operations) to Year Ended
May 31, 1997 May 31, 1996 May 31, 1997
------------------------------------ ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 10.95 $ 10.00 $ 10.95
----------- ----------- ===========
Income from investment operations
Net investment loss (0.03) (0.01) (0.05)
Net realized and unrealized gain 3.69 0.96 3.61
----------- ----------- -----------
Total from investment operations 3.66 0.95 3.56
----------- ----------- -----------
NET ASSET VALUE, end of period $ 14.61 $ 10.95 $ 14.51
=========== =========== ===========
Total Return 33.42% 9.50%(2) 32.51%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 3,054 $ 1,231 $ 56
Ratio of expenses to average net assets 1.75% 1.75%(1) 2.50%
Ratio of net investment loss to average
net assets (0.32)% (0.32)%(1) (1.07)%
Portfolio turnover rate 18% 0 % 18%
Average commission per share on
portfolio transactions $ 0.0684 $ 0.08 $ 0.0684
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 288
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ------------------------------------ ----------------------------------
March 13, 1996
(commencement of
Year Ended operations) to Year Ended Year Ended
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 12.29 $ 10.94 $ 12.27 $ 10.00
----------- ----------- ----------- -----------
Income from investment operations
Net investment loss (0.11) (.01) (0.28) (0.17)
Net realized and unrealized gain 1.02 1.36 1.10 2.44
----------- ----------- ----------- -----------
Total from investment operations 0.91 1.35 0.82 2.27
----------- ----------- ----------- -----------
NET ASSET VALUE, end of period $ 13.20 $ 12.29 $ 13.09 $ 12.27
=========== =========== =========== ===========
Total Return 7.40% 12.34%(2) 6.68% 22.70%
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 2,174 $ 131 $ 1,828 $ 2,408
Ratio of expenses to average net assets 1.75% 1.74%(1) 2.50% 2.49%
Ratio of net investment loss to average
net assets (1.31)% (0.97)%(1) (2.08)% (2.00)%
Portfolio turnover rate 102% 85% 102% 85%
Average commission per share on
portfolio transactions $ 0.0545 $ 0.04 $ 0.0545 $ 0.04
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales
load.
<PAGE> 289
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
October 1, 1997.
TABLE OF CONTENTS
Page
----
Investment Policies 2
Other Policies 3
Trustees and Officers of the Trust 5
Investment Management and Other Agreements 6
Portfolio Turnover, Transaction Charges and
Allocation 8
Shares of Beneficial Interest 9
Purchase, Redemption and Pricing of Shares 10
Distributions and Taxes 11
Performance Information 14
Report of Independent Accountants 16
Financial Information 17
<PAGE> 290
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 % (1/2
of 1%) of the securities (taken at market value) of such issuer and such
individuals owning more than one-half of one % (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> 291
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 compared
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 their 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, 1535 Presidential Drive, Apt. 4A. Columbus, OH
43212.
Mr. Emmet retired as the Managing Director of Servus Associates, Inc.,
and U.S.A. Representative of the First National Bank of Southern Africa in
1996. He is currently Trustee of RF, RIT, RNYTET, RTET and RPES. Until 1989, he
was Senior Vice President of the New York branch of Banque Nationale de Paris.
<PAGE> 292
+*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.
MICHELLE L. NEUFELD, Counsel and Secretary and Trustee, 810 Seventh
Avenue, New York, NY 10019.
Ms. Neufeld is Counsel and Secretary of RF, RIT, RTET, RNYTET and RPES.
Before joining The Reserve Funds in 1997, Ms. Neufeld was a staff attorney at
the NASD Regulation, Inc.
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.,
Inc.
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 disregard 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. $120.09 $30,500
Henri W. Emmet $133.87 $34,000
Rev. Donald J. Harrington $118.11 $30,000
</TABLE>
Amounts shown are for the Fund's fiscal year ending May 31, 1997.
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 Service Plan). 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 1.75%
<PAGE> 293
per annum of the average daily net assets of the Fund.
The Investment Management Agreement is subject to annual review and
approval 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 and
approval 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 the 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.
SERVICE PLAN. The Trust maintains a Service 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. 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> 294
The Glass-Steagall Act prohibits all entities which receive deposits from
engaging to any extent 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 Fund shares (such as
administrative and account maintenance services) may include banks, upon advice
of counsel that they are permitted to do so under applicable laws and
regulations, including the Glass-Steagall Act. In such event, no preference
will be given to securities issued by such banks as investment 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 banks may also receive compensation from the bank accounts they
service. It is Fund management's position that payments to banks pursuant to
the Plan for activities not primarily intended to result in the sale of a
Fund's 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. Financial institutions providing distribution assistance or
administrative services for the Fund may be required to register as securities
dealers in certain states.
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. 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 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 series. 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% of all
shares voting as a group or 67% of the shares voted as a group at an annual
meeting of shareholders at which at least 50% of the shares of each group are
represented.
As of August 30, 1997, the following persons owned of record or
beneficially 5% or more of the Fund's outstanding shares: Steven J. Binkley,
2843 Coventry Lane, Waukesha, WI 53188 (39.2%) (Class D); Donaldson Lufkin
Jenrette Securities Corp, P.O. Box 2052, Jersey City, NJ 07303 (6.6%) (Class
D); Jill L. Perman, 404 Springfield Street, Wilbraham, MA 01095 (4.5%) (Class
D); M. McArthur-Phillips, 1713 SE 23rd Road, Portland, OR 97214, (30.8%) (Class
D); Keven & Mary Martin, 45 Park Avenue, Mt. Kisco, NY 10549 (42.9%) (Class D);
Stephen M. Gilder, 9 Krystal Dr., Somers, NY 10589 (8.9%) (Class D);
Washington Tr. Centra, P.O. Box 2127, Spokane, WA 99210 (13.2%) (Class A);
Washington TR Veba, P.O. Box 2127, Spokane, WA 99210 (10.8%) (Class A);
Washington TR WWP, P.O. Box 2127, Spokane, WA 99210 (11.3%) (Class A); Charles
Schwab & Co, 101 Montgomery St., San Francisco, CA 94109 (21.8%) (Class A); and
Reserve Management Co. Inc., 810 Seventh Avenue, NY, NY 10019 (10.7%) (Class A).
<PAGE> 295
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.
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 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.
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, 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%
of its taxable income to shareholders, derive at least 90% of its gross income
from dividends, interest and gains from the sale or disposition of securities
and derive less than 30% 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> 296
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> 297
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 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.
The Code and the Treasury Regulations thereunder are subject to change by
legislative or administrative action either prospectively or retroactively.
<PAGE> 298
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 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 the rates of return calculated will
not be average annual rates, but rather, actual annual, annualized or aggregate
rates of return.
<PAGE> 299
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and 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 Convertible Securities Fund, Reserve Emerging Growth Fund,
Reserve Informed Investors Growth Fund, Reserve International Equity Fund,
Reserve Large-Cap Value Fund, and Reserve Mid-Cap Growth Fund (formerly Reserve
North American Growth Fund)) (collectively the "Trust"), including the schedules
of portfolio investments, as of May 31, 1997, 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, 1997, 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, 1997,
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 27, 1997
<PAGE> 300
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BANKS (1.9%)
BankBoston Corporation 1,400 $102,200
--------
BEVERAGES (4.0%)
PepsiCo, Inc. 6,000 220,500
--------
BUILDING MATERIALS (1.8%)
* American Standard Companies, Inc. 2,000 100,250
--------
CHEMICALS - MISCELLANEOUS (4.3%)
ChemFirst, Inc. 9,200 238,050
--------
COMPUTER SERVICES (2.2%)
* Wang Laboratories, Inc. 5,800 118,900
--------
COMPUTER SOFTWARE (5.8%)
* CUC International, Inc. 6,450 148,350
National Data Corporation 3,900 171,112
--------
319,462
--------
CONSUMER SERVICES (2.2%)
* HFS, Inc. 2,200 118,525
--------
ELECTRONICS (6.8%)
General Electric Company 1,800 108,675
* Perceptron, Inc. 9,300 262,725
--------
371,400
--------
ENTERTAINMENT (3.1%)
Walt Disney Company 2,100 171,937
--------
FINANCIAL SERVICES (6.2%)
Federal National Mortgage Association 5,200 226,850
Pioneer Group, Inc. 4,400 110,550
--------
337,400
--------
FOOD (2.3%)
* Suiza Foods Corporation 4,200 125,475
--------
HOSPITAL MANAGEMENT (3.7%)
* Assisted Living Concepts, Inc. 8,000 200,000
--------
MANAGED CARE (1.1%)
* Physicians' Specialty Corporation 10,000 61,250
--------
</TABLE>
<PAGE> 301
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
MEDICAL SUPPLIES (1.3%)
* LaserSight Corporation 10,000 $ 70,000
----------
MISCELLANEOUS CONSUMER (2.1%)
* Gibson Greetings, Inc. 5,300 115,275
----------
MISCELLANEOUS MANUFACTURING (5.6%)
Warnaco Group, Inc. 5,300 173,575
Westinghouse Electric Corporation 6,500 131,625
----------
305,200
----------
MULTI-LINE INSURANCE (3.1%)
The Hartford Financial Services Group, Inc. 2,200 171,600
----------
OFFICE - BUSINESS EQUIPMENT (4.6%)
* American Pad & Paper Company 13,500 249,750
----------
OIL/GAS EQUIPMENT SERVICES (2.0%)
* Cairn Energy USA, Inc. 9,200 108,675
----------
PACKAGED SOFTWARE (3.9%)
Computer Associates International, Inc. 3,900 213,525
----------
PHARMACEUTICALS (7.1%)
* Bio-Technology General Corporation 5,400 78,300
Eli Lilly & Company 1,100 102,300
Johnson & Johnson 1,800 107,775
Merck & Co., Inc. 1,100 98,863
----------
387,238
----------
PUBLISHING (4.2%)
Harte-Hanks Communications 7,800 233,025
----------
RADIO, TV & BROADCAST COMMUNICATION EQUIPMENT (4.6%)
* American Radio Systems Corporation 1,400 52,150
* Sinclair Broadcast Group, Inc. 8,000 198,000
----------
250,150
----------
REAL ESTATE (4.6%)
Insignia Financial Group, Inc., Class A 14,200 252,050
----------
</TABLE>
<PAGE> 302
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
SPECIAL INDUSTRIAL MACHINERY (3.1%)
Thermo Electron Corporation 5,000 $ 172,500
-------------
TOTAL COMMON STOCKS (Cost $4,512,303) (91.6%) 5,014,337
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 260,000 260,000
Vista Treasury Plus Money Market Fund 70,000 70,000
-------------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $330,000) (6.0%) 330,000
-------------
TOTAL INVESTMENTS (Cost $4,842,303) (97.6%) 5,344,337
Other assets, less liabilities (2.4%) 129,523
-------------
NET ASSETS (100%) $ 5,473,860
=============
</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, 1997 was $4,842,303, the aggregate gross unrealized appreciation for all
investments was $707,511 and aggregate gross unrealized depreciation for all
investments was $205,477.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 303
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
CONVERTIBLE BONDS
<TABLE>
<CAPTION>
VALUE
MATURITY PAR (NOTE 1)
-------- --- --------
<S> <C> <C> <C>
BASIC INDUSTRIAL COMMODITY (2.2%)
First South Africa Corp, Ltd., 144A, 9% 06/15/04 450,000 $ 450,000
----------
BIO-TECHNOLOGY (3.9%)
Chiron Corp., 144A, 1.9% 11/17/00 450,000 397,125
NABI, Inc., 144A, 6.5% 02/01/03 500,000 414,375
----------
811,500
----------
COMMERCIAL SERVICES (1.8%)
Pharmaceutical Marketing
Services, Inc., 144A, 6.25% 02/01/03 450,000 360,000
----------
COMPUTER SOFTWARE (1.9%)
MacNeal - Schwendler Corp., 7.875% 08/18/04 400,000 392,000
----------
ELECTRONIC PRODUCTS - MISCELLANEOUS (1.9%)
Trans-Lux Corp., 7.5% 12/01/06 375,000 390,000
----------
ENVIRONMENT - CONSULTING, ENGINEERING (1.1%)
Roy F. Weston, Inc., 7% 04/15/02 270,000 229,500
----------
FOOD CHAINS (1.9%)
Marsh Supermarkets, Inc., 7% 02/15/03 400,000 400,000
----------
GENERAL INDUSTRIAL MACHINE & EQUIPMENT (2.0%)
Robbins & Myers, Inc., 6.5% 09/01/03 300,000 412,500
----------
HOTEL - MOTEL (3.4%)
Hilton Hotels Corp., 5% 05/15/06 350,000 380,625
Signature Resorts, Inc., 5.75% 01/15/07 350,000 316,750
----------
697,375
----------
MEDICAL - HMO (3.9%)
FPA Medical Management, Inc., 6.5% 12/15/01 400,000 421,000
PhyMatrix Corp., 6.75% 06/15/03 450,000 389,250
----------
810,250
----------
OIL - DOMESTIC (2.7%)
Lomak Petroleum, Inc., 144A, 6% 02/01/07 350,000 395,500
Snyder Oil Corp., 7% 05/15/01 150,000 155,625
----------
551,125
----------
POLLUTION CONTROL (3.8%)
USA Waste Services, Inc., 4% 02/01/02 350,000 362,250
WMX Technologies, Inc., 2% 01/24/05 450,000 406,687
----------
768,937
----------
</TABLE>
<PAGE> 304
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
CONVERTIBLE BONDS
<TABLE>
<CAPTION>
VALUE
MATURITY PAR (NOTE 1)
-------- --- --------
<S> <C> <C> <C>
PUBLISHING (2.0%)
Scholastic Corp., 5% 08/15/05 500,000 $ 403,750
----------
RETAIL STORES - DEPARTMENT (1.9%)
Saks Holdings, Inc., 5.5% 09/15/06 450,000 398,250
----------
RETAIL - APPAREL (1.9%)
Charming Shoppes, Inc., 7.5% 07/15/06 400,000 393,000
----------
RETAIL - SPECIALTY (1.8%)
The Sports Authority, Inc., 5.25% 09/15/01 400,000 360,500
----------
TRANSPORT - AIR FREIGHT (1.6%)
Consolidated Logistics, 144A, 8% 08/21/00 400,000 320,000
----------
WATER TREATMENT SYSTEMS (3.2%)
United States Filter Corp., 4.5% 12/15/01 650,000 665,438
----------
TOTAL CONVERTIBLE BONDS (Cost $8,647,471) (42.9%) 8,814,125
----------
</TABLE>
PREFERRED STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BANKS (2.6%)
National Australian Bank Ltd., 7.875% 20,000 $537,500
-------
CONTAINERS-METAL/GLASS (2.1%)
Crown Cork & Seal Company, Inc., 4.5% 2/26/00 8,000 434,000
-------
ENERGY (1.6%)
Occidental Petroleum Corp., 144A, $3.875 Series 1993 6,000 338,250
-------
ENTERTAINMENT (2.9%)
Wellsford Residential Property, 7% Series A 22,900 589,675
-------
FINANCIAL SERVICES (2.1%)
SunAmerica, Inc., $3.1875 10/31/99 10,000 431,250
-------
GENERAL INDUSTRIAL MACHINES & EQUIPMENT (2.0%)
Greenfield Industries, Inc., 144A, 6% 3/31/16 9,000 409,500
-------
GLASS PRODUCTS (1.9%)
Corning Delaware L.P., 6% 5,000 399,375
-------
</TABLE>
<PAGE> 305
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
PREFERRED STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
GOLD MINING (1.6%)
Coeur D'Alene Mines Corp., 7% 3/15/00 20,000 $ 332,500
----------
HOTEL-MOTEL (1.8%)
Host Marriott Corp., 144A, 6.75% 12/02/26 6,500 367,250
----------
MEDICAL - HMO (2.1%)
Aetna, Inc., 6.25% 7/19/00 4,700 431,225
----------
NATURAL GAS (2.0%)
MCN Corp., 8.75% 4/30/99 15,000 416,250
----------
OIL-DOMESTIC (5.5%)
Mesa, Inc., 8%, Series A 80,000 530,000
Nuevo Energy, 5.75% 12/15/26 Series A 8,000 403,000
Snyder Oil Corporation, $1.5 7,700 190,575
----------
1,123,575
----------
PAPER (1.9%)
International Paper Co., 5.25% 7/20/25 7,500 386,250
----------
PUBLISHING (1.4%)
Golden Books Family Entertainment, Inc., 144A,
8.75% 8/20/16 5,000 280,000
----------
PUBLISHING-NEWSPAPERS (2.1%)
Hollinger International, Inc., 9.75% 8/01/00 40,000 440,000
----------
REAL ESTATE (4.8%)
Excel Realty, $2.125 Series A 16,000 426,000
Redwood Trust, Inc., 9.74% Class B 10,000 567,500
----------
993,500
----------
RESTAURANTS (2.0%)
Apple South, Inc., 144A, $3.5 3/01/27 7,000 420,875
----------
TELECOMMUNICATIONS (2.1%)
Mobile Telecommunication
Technologies Corp., 144A, $2.25 20,000 425,000
----------
TELECOMMUNICATIONS-BROADCAST (2.1%)
Merrill Lynch & Company, 6% 6/01/99 Series COX 20,000 427,500
----------
TOTAL PREFERRED STOCKS (Cost $8,282,029) (44.6%) $9,183,475
----------
</TABLE>
<PAGE> 306
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AEROSPACE (0.9%)
* International Airline Support Group, Inc. 44,908 $ 196,473
---------------
ENTERTAINMENT (1.4%)
* Malibu Entertainment Worldwide, Inc. 70,000 280,000
---------------
MISCELLANEOUS MANUFACTURING (0.1%)
* Disc Graphics, Inc. - Warrants Class "A", 11/01/99 28,000 21,000
---------------
NONHAZARDOUS WASTE DISPOSAL (0.2%)
* Allied Waste Industries, Inc. 2,266 33,423
---------------
OIL WELL SERVICES (3.6%)
* SEACOR SMIT, Inc. 14,400 745,200
---------------
PREHOSPITAL MEDICAL CARE, TRANSPORTATION (1.7%)
Laidlaw, Inc., Class B 25,663 346,451
---------------
TELECOMMUNICATIONS (0.6%)
* Mobile Telecommunication Technologies Corp. 10,000 121,875
---------------
TOYS (2.1%)
Hasbro, Inc. 15,000 435,000
---------------
TOTAL COMMON STOCKS (Cost $1,876,695) (10.6%) 2,179,422
---------------
TOTAL INVESTMENT SECURITIES (Cost $18,806,195) (98.1%) $ 20,177,022
Other assets, less liabilities (1.9%) 394,238
---------------
NET ASSETS (100%) $ 20,571,260
===============
</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, 1997 was $18,806,195, the aggregate gross unrealized appreciation for all
investments was $1,553,782 and aggregate gross unrealized depreciation for
all investments was $182,955.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 307
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BIO-TECHNOLOGY (1.9%)
* Genzyme Corporation 4,800 $114,600
--------
CAPITAL GOODS - DIVERSIFIED (2.4%)
Danaher Corporation 3,000 145,500
--------
CAPITAL GOODS/INDUSTRIAL (1.9%)
* Vishay Intertechnology, Inc. 3,836 112,703
--------
COMMUNICATION - EQUIPMENT (6.3%)
* ANADIGICS, Inc. 4,500 149,063
ECI Telecommunications Ltd. Designs 6,300 145,687
* Saville Systems Ireland plc 2,000 85,250
--------
380,000
--------
COMMUNICATION - NETWORK (3.4%)
* ICG Communications, Inc. 5,000 80,000
* PairGain Technologies, Inc. 6,000 125,250
--------
205,250
--------
COMPUTER NETWORKING (3.3%)
* Ascend Communications, Inc. 3,600 200,700
--------
COMPUTER PERIPHERAL EQUIPMENT (0.9%)
* Dialogic Corporation 1,800 52,650
--------
COMPUTER SERVICES (4.6%)
* HNC Software, Inc. 5,200 171,600
* Rational Software Corporation 5,400 101,925
--------
273,525
--------
COMPUTER SOFTWARE (3.1%)
* Business Objects S. A. - ADR 5,200 50,050
* Media 100, Inc. 8,000 46,000
* Sapient Corporation 2,000 89,500
--------
185,550
--------
CONSUMER GROWTH (8.3%)
* Activision, Inc. 16,000 208,000
* Conso Products Company 7,625 101,031
* Electronic Arts, Inc. 3,700 118,400
* Lin Television Corporation 1,700 73,738
--------
501,169
--------
</TABLE>
<PAGE> 308
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ELECTRONIC PRODUCTS - MISCELLANEOUS (0.5%)
AVX Corporation 1,000 $ 27,250
--------
ENERGY (2.7%)
Cross Timbers Oil Company 8,250 159,844
--------
HEALTH (4.3%)
* HCIA, Inc. 2,300 56,925
* National Dentex Corporation 6,000 104,250
* PacifiCare Health Systems, Inc. 1,200 95,100
--------
256,275
--------
HOUSEHOLD FURNISHINGS & APPLIANCES (2.8%)
* Williams-Sonoma, Inc. 4,500 165,938
--------
MANAGED CARE (7.4%)
* CRA Managed Care, Inc. 2,500 114,375
* Healthsource, Inc. 4,000 86,000
* MedPartners, Inc. 7,100 134,900
* PhyCor, Inc. 3,787 108,402
--------
443,677
--------
MISCELLANEOUS CONSUMER (2.5%)
* On Assignment, Inc. 4,000 152,500
--------
OFFICE-BUSINESS EQUIPMENT (2.4%)
* HPR, Inc. 9,000 146,250
--------
OFFSHORE DRILLING (1.6%)
* Parker Drilling Company 10,000 96,250
--------
OIL WELL SERVICES (1.3%)
* Dawson Production Services, Inc. 7,000 78,750
--------
OPTICAL INSTRUMENTS AND LENSES (1.6%)
* KLA-Tencor Corporation 2,000 95,125
--------
PAPER (1.2%)
* Data Documents, Inc. 6,000 71,250
--------
</TABLE>
<PAGE> 309
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
PHARMACEUTICALS (4.9%)
* Centocor, Inc. 3,200 $ 112,800
* Dura Pharmaceuticals, Inc. 4,600 182,850
----------
295,650
----------
RESTAURANTS (0.4%)
* Outback Steakhouse, Inc. 1,000 23,250
----------
RETAIL - SPECIALTY (10.6%)
* Borders Group, Inc. 7,900 171,825
* Corporate Express, Inc. 8,600 118,250
* PetSmart, Inc. 6,000 73,500
* Staples, Inc. 6,325 139,150
* The Sports Authority, Inc. 7,500 135,000
----------
637,725
----------
SEMICONDUCTOR-RELATED DEVICES (5.4%)
* Etec Systems, Inc. 1,800 80,100
Intel Corporation 800 121,200
* LSI Logic Corporation 3,000 125,250
----------
326,550
----------
SYSTEM SOFTWARE/CLIENT SERVER (1.6%)
* Hummingbird Communications Ltd. 3,400 96,900
----------
TELECOMMUNICATIONS EQUIPMENT (7.3%)
* Comverse Technology, Inc. 2,000 91,500
* DSC Communications Corporation 2,000 51,125
* Newbridge Networks Corporation 3,600 144,450
* P-COM, Inc. 3,200 103,200
* Proxim, Inc. 2,000 51,250
----------
441,525
----------
TOTAL COMMON STOCKS (Cost $4,710,070) (94.6%) 5,686,356
----------
</TABLE>
<PAGE> 310
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 280,000 $ 280,000
U.S. Treasury Plus Money Market Fund 150,000 150,000
----------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $430,000) (7.2%) 430,000
----------
TOTAL INVESTMENTS (Cost $5,140,070) (101.8%) 6,116,356
Liabilities, less other assets (-1.8%) (106,650)
----------
NET ASSETS (100%) $6,009,706
==========
</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 May 31,
1997 was $5,140,070, the aggregate gross unrealized appreciation for all
investments was $1,463,144 and aggregate gross unrealized depreciation for
all investments was $486,858.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 311
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INFORMED INVESTORS GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AIRLINES (3.8%)
Southwest Airlines Company 8,000 $206,000
--------
APPAREL MANUFACTURING (2.5%)
Liz Claiborne, Inc. 3,000 136,875
--------
BANKS (5.0%)
State Street Corporation 6,200 276,675
--------
CLOTHING (4.6%)
* Jones Apparel Group, Inc. 5,400 253,125
--------
COMPUTER MEMORY DEVICES (1.7%)
* EMC Corporation 2,300 91,712
--------
COMPUTER MICROSYSTEMS (2.3%)
* Dallas Semiconductor Corporation 3,200 123,600
--------
COMPUTER - PERIPHERAL EQUIPMENT (2.1%)
* Adaptec, Inc. 3,200 117,600
--------
COMPUTERS (8.2%)
* Dell Computer Corporation 2,100 236,250
* Gateway 2000, Inc. 3,200 212,400
--------
448,650
--------
FINANCIAL/BUSINESS SERVICES (17.1%)
Bear Stearns Companies, Inc. 8,400 273,000
Lehman Brothers Holdings, Inc. 5,400 218,025
Merrill Lynch & Company 2,300 243,800
Paine Webber Group, Inc. 5,700 202,350
--------
937,175
--------
GLASS PRODUCTS (3.5%)
Corning, Inc. 3,800 191,425
--------
HOSPITAL MANAGEMENT (3.8%)
* Tenet Healthcare Corporation 7,700 211,750
--------
LIFE/HEALTH INSURANCE (14.6%)
Conseco, Inc. 8,200 328,000
SunAmerica, Inc. 4,800 226,800
Torchmark Corporation 3,800 249,375
--------
804,175
--------
</TABLE>
<PAGE> 312
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INFORMED INVESTORS GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MISCELLANEOUS MANUFACTURING (4.0%)
Minnesota Mining and Manufacturing Company 2,400 $ 220,200
----------
MULTI-LINE INSURANCE (0.2%)
Travelers Group, inc. 200 10,975
----------
PAPER (2.4%)
International Paper Company 2,700 129,600
----------
RETAIL (4.1%)
* Costco Companies, Inc. 6,700 226,125
----------
RETAIL STORES (3.8%)
Dayton Hudson Corporation 4,400 211,750
----------
RETAIL STORES - GENERAL MERCHANDISING (3.4%)
Dollar General Corporation 5,500 184,938
----------
RETAIL - JEWELRY (2.4%)
Tiffany & Company 2,800 129,850
----------
TELEPHONE & TELEGRAPH APPARATUS (4.6%)
* Tellabs, Inc. 5,000 251,250
----------
TOTAL COMMON STOCKS (Cost $4,698,451) (94.1%) 5,163,450
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund
(Cost $80,000) (1.5%) 80,000 80,000
----------
TOTAL INVESTMENTS (Cost $4,778,451) (95.6%) 5,243,450
Other assets, less liabilities (4.4%) 246,483
----------
NET ASSETS (100%) $5,489,933
==========
</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,
1997 was $4,778,451, the aggregated gross unrealized appreciation for all
investments was $522,884 and aggregate gross unrealized depreciation for all
investments was $57,885.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 313
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AUSTRALIA (0.7%)
Australian Hospital Care Ltd. 49,000 $ 82,014
----------
DENMARK (2.6%)
* Carli Gray International 1,400 83,981
Novo Nordisk 2,200 235,853
----------
319,834
----------
FINLAND (2.4%)
Oy Nokia AB 2,300 150,810
TT Tieto OY 1,700 143,340
----------
294,150
----------
FRANCE (6.3%)
Altran Technologies 500 160,632
* Carrefour 360 236,937
Pinault - Printemps - Redoute 225 94,556
Sidel 2,800 196,926
Sodexho Alliance 150 69,810
----------
758,861
----------
GERMANY (4.9%)
Altana AG 150 138,545
Bayerische Motoren Werke (BMW) AG 200 163,980
Fresenius AG Pfd. 722 159,820
Porsche AG Pfd. 110 132,802
----------
595,147
----------
HONG KONG (11.8%)
Hang Seng Bank Ltd. 18,000 216,056
Henderson Land Development Company Ltd. 24,000 233,867
Hong Kong & China Gas Company 182,496 317,978
HSBC Holdings 8,436 255,868
* New World Infrastructure Ltd. 19,000 59,222
Sun Hung Kai Properties Ltd. 20,000 245,870
Wing Hang Bank Ltd. 21,600 102,870
----------
1,431,731
----------
</TABLE>
<PAGE> 314
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INDONESIA (0.7%)
* PT Bank International Indonesia 61,156 $ 50,230
PT Gudang Garam 8,000 34,497
PT Steady Safe 1,467 1,612
---------
86,339
---------
ITALY (1.6%)
Bulgari SpA 7,200 142,514
* Telecom Italia Mobile SpA 28,600 50,198
---------
192,712
---------
MALAYSIA (6.3%)
* Arab-Malaysian Merchant Bank Berhad 16,000 101,242
Berjaya Sports Toto Berhad 26,000 121,060
Commerce Asset Holding Berhad 20,000 58,103
DCB Holdings Berhad 32,000 103,152
Gamuda Berhad 17,333 62,081
Malayan Banking Berhad 20,000 210,920
United Engineers (Malaysia) Ltd. 13,000 105,022
---------
761,580
---------
NETHERLANDS (5.5%)
Elsevier NV 6,000 101,621
Koninklijke Ahold NV 2,245 170,695
Koninklijke Ahrend Groep NV 1,500 94,976
Nutricia Verenidge Bedrijven N.V. 600 93,616
* Ordina Beheer N.V. 1,040 78,153
Wolters Kluwer NV 1,012 121,881
---------
660,942
---------
NORWAY (4.4%)
Kverneland ASA 3,200 94,471
* Merkantildata 8,500 168,487
* Tandberg ASA 3,300 39,897
* Tandberg Television ASA 13,200 120,619
Tomra Systems ASA 5,000 114,574
---------
538,048
---------
PHILIPPINES (1.2%)
* Belle Corporation 200,000 53,091
* DMCI Holdings, Inc. 143,000 86,765
---------
139,856
---------
</TABLE>
<PAGE> 315
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
SINGAPORE (9.7%)
City Developments Limited 9,000 $ 83,677
DBS Land Limited 36,000 125,830
Development Bank of Singapore Limited 15,000 187,697
Oversea-Chinese Banking Corporation Ltd. 15,000 186,648
Overseas Union Bank Ltd. 20,000 137,015
Parkway Holdings Limited 43,000 213,422
United Overseas Bank Ltd. 10,000 102,761
Wing Tai Holdings Ltd. 45,000 134,009
----------
1,171,059
----------
SPAIN (3.8%)
Banco Intercontinental Espanol, SA 900 152,410
Electricas Reunidas de Zaragoza, SA 2,800 105,693
* Sol Melia, SA 5,600 207,896
----------
465,999
----------
SWEDEN (3.7%)
Autoliv AB 6,000 212,604
Ericsson Telefonaktiebolaget 6,800 239,192
----------
451,796
----------
SWITZERLAND (7.5%)
Nestle SA 70 87,215
Novartis AG Regular Shares 190 258,247
Novartis AG 30 40,882
Roche Holding AG 30 267,167
* Roche Holding AG Warrants 98 "Jubilee" 8 561
Zurich Versicherungs 700 257,681
----------
911,753
----------
THAILAND (0.2%)
Central Pattana Public Company Ltd. 10,000 26,653
* Thai Farmers Bank Public Company Ltd. (Warrants) 500 501
----------
27,154
----------
UNITED KINGDOM (12.0%)
Compass Group plc 12,700 141,752
HSBC Holdings plc 12,758 396,565
J.D. Wetherspoon plc 4,618 100,004
Lloyds TSB Group plc 13,000 130,825
Logica plc 6,600 93,571
Misys plc 5,400 122,581
Serco Group plc 8,200 92,735
Standard Chartered plc 10,476 166,121
Zeneca Group plc 7,000 212,652
----------
1,456,806
----------
</TABLE>
<PAGE> 316
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
UNITED STATES (11.7%)
Credicorp Ltd., ADR 5,000 $ 112,500
Panamerican Beverages, Inc., ADR 10,000 290,000
Santa Isabel, ADR 5,200 151,450
* State Bank of India, ADR 15,000 379,650
Telecomunicacoes Brasileiras SA, ADR 1,400 194,600
Telefonica de Argentina SA, ADR 5,000 181,250
Telefonica del Peru SA, ADR 4,500 114,188
-----------
1,423,638
-----------
TOTAL COMMON STOCKS (Cost $10,050,524)(97.0%) 11,769,419
MONEY MARKET MUTUAL FUNDS
U.S. Government Money Market Mutual Fund
(Cost $250,000)(2.1%) 250,000 250,000
-----------
TOTAL INVESTMENTS (Cost $10,300,524) (99.1%) 12,019,419
Other assets, less liabilities (0.9%) 109,835
-----------
NET ASSETS (100%) $12,129,254
===========
</TABLE>
INDUSTRY COMPOSITION
<TABLE>
<CAPTION>
INDUSTRY PERCENT
- -------- -------
<S> <C>
Auto/Truck Manufacturers 2.4
Bio Tech & Med Devices 2.5
Cellular Telephone 0.4
Commercial Banks 22.1
Computer Software 3.6
Computers & Peripheral 2.7
Construction & Engineering 2.6
Consumer Service 2.3
Drug & Health Care 10.8
Electric Power Utilities 0.9
Entertainment & Leisure 1.4
Financial Services 5.2
Food Processing 3.2
Lodging & Restaurants 3.7
Machinery 4.2
Public Utilities 2.6
Publishing 1.8
Real Estate Development 6.1
Real Estate Investment 0.9
Retailing 8.7
Telecommunications 8.6
Tobacco 0.3
----
Industry percent of net assets 97.0%
Money Market Mutual Funds 2.1%
Other assets, less liabilities 0.9%
----
Percent of Net Assets 100%
----
</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, 1997 was $10,300,524, the aggregate gross unrealized appreciation for all
investments was $2,002,534 and aggregate gross unrealized depreciation for
all investments was $283,576.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 317
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE LARGE-CAP VALUE FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ATHLETIC FOOTWEAR/APPAREL (2.7%)
Nike, Inc. 1,500 $ 85,500
------------
BANKS (3.4%)
Wells Fargo & Company 400 105,400
------------
BEVERAGES (9.5%)
Anheuser-Busch Companies, Inc. 2,400 102,900
Coca-Cola Company 1,700 116,025
PepsiCo, Inc. 2,100 77,175
------------
296,100
------------
COMPUTER SOFTWARE (4.0%)
* Microsoft Corporation 1,000 124,000
------------
COMPUTERS (4.4%)
Hewlett-Packard Company 1,000 51,500
International Business Machines Corporation 1,000 86,500
------------
138,000
------------
CONSUMER PRODUCTS (8.1%)
Clorox Company 1,000 126,250
Gillette Company 1,400 124,425
------------
250,675
------------
DRUGS (4.1%)
Abbott Labs 2,000 126,000
------------
ENTERTAINMENT (3.9%)
The Walt Disney Company (Holding Co.) 1,500 122,813
------------
FINANCIAL/BUSINESS SERVICES (8.4%)
American Express Company 2,000 139,000
Charles Schwab Corporation 3,000 121,875
------------
260,875
------------
FOOD (13.3%)
Campbell Soup Company 2,800 128,800
Hershey Foods Corporation 2,200 123,475
Quaker Oats Company 1,500 61,875
Wrigley (WM) Jr. Company 1,700 100,725
------------
414,875
------------
HEALTH (3.2%)
Becton, Dickinson & Company 2,000 98,500
------------
</TABLE>
<PAGE> 318
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE LARGE-CAP VALUE FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MEDICAL SUPPLIES (6.5%)
Kimberly-Clark Corporation 2,000 $ 100,250
Pfizer, Inc. 1,000 102,875
----------
203,125
----------
PHARMACEUTICALS (10.7%)
Eli Lilly & Company 1,000 93,000
Johnson & Johnson 1,900 113,763
Merck & Company, Inc. 1,400 125,825
----------
332,588
----------
PHOTOGRAPHY (3.2%)
Eastman Kodak Company 1,200 99,450
----------
PUBLISHING (3.9%)
Gannett Company, Inc. 1,300 120,250
----------
PUBLISHING - NEWSPAPERS (2.8%)
New York Times Company Class A 1,900 87,518
----------
SEMICONDUCTOR - RELATED DEVICE (4.9%)
Intel Corporation 1,000 151,500
----------
TOTAL COMMON STOCKS (Cost $2,260,193)(97.0%) 3,017,169
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund
(Cost $135,000) (4.4%) 135,000 135,000
----------
TOTAL INVESTMENTS (Cost $2,395,193) (101.4%) 3,152,169
Liabilities, less other assets (-1.4%) (42,189)
----------
NET ASSETS (100%) $3,109,980
==========
</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, 1997 was $2,395,193, the aggregate gross unrealized appreciation for all
investments was $758,447 and aggregate gross unrealized depreciation for all
investments was $1,471.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 319
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AIR FREIGHT (2.3%)
Circle International Group, Inc. 3,300 $ 91,575
--------
AUTO PARTS-ORIGINAL EQUIPMENT (5.7%)
* Gentex Corporation 4,600 92,575
Paccar, Inc. 3,000 135,750
--------
228,325
--------
BEVERAGES (3.6%)
* Robert Mondavi Corporation 3,200 142,400
--------
BUSINESS EQUIPMENT/SERVICE (2.5%)
* Greenwich Air Services, Inc. 3,500 101,500
--------
CLOTHING (3.3%)
* Fruit of the Loom, Inc. 3,800 132,525
--------
COMMUNICATION - EQUIPMENT (2.5%)
* Qualcomm, Inc. 2,100 101,325
--------
COMPUTER MICROSYSTEMS (4.6%)
* Dallas Semiconductor Corporation 4,800 185,400
--------
COMPUTER SOFTWARE (1.8%)
* Imnet Systems, Inc. 2,900 72,500
--------
COMPUTERS - PERIPHERAL EQUIPMENT (4.3%)
* American Power Conversion Corp. 3,500 81,375
* MicroTouch Systems, Inc. 3,600 90,900
--------
172,275
--------
HOSPITAL SUPPLIES (2.7%)
* Advanced Technology Laboratories, Inc. 2,800 108,500
--------
HOUSEHOLD FURNISHINGS APPLIANCE (7.6%)
Bush Industries, Inc. 4,000 90,000
Herman Miller, Inc. 6,000 214,500
--------
304,500
--------
</TABLE>
<PAGE> 320
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INSTRUMENTS - SCIENTIFIC (2.0%)
* Water Corporation 2,500 $ 80,625
--------
LIFE INSURANCE (6.0%)
Protective Life Corporation 3,000 134,250
Western National Corporation 4,000 104,500
--------
238,750
--------
NURSING HOMES (3.0%)
* Genesis Health Ventures, Inc. 3,600 118,350
--------
OIL/GAS EQUIPMENT SERVICES (10.1%)
* Nuevo Energy Company 3,300 143,962
* Rowan Companies, Inc. 5,700 131,813
Tidewater, Inc. 3,050 128,481
--------
404,256
--------
POLLUTION CONTROL (4.9%)
* Newpark Resources, Inc. 3,770 197,925
--------
RESTAURANTS (2.9%)
* Cracker Barrel Old Country Store, Inc. 4,000 116,000
--------
RETAIL (2.5%)
* Stein Mart, Inc. 3,300 99,825
--------
RETAIL-SPECIALTY (4.8%)
* AutoZone, Inc. 4,500 105,188
Pier 1 Imports, Inc. 3,800 85,025
--------
190,213
--------
RETAIL STORES-DRUGS (3.3%)
* CVS Corporation 2,800 134,050
--------
SEMICONDUCTOR RELATED DEVICE (2.2%)
* Photronics, Inc. 2,000 89,250
--------
SPECIAL INDUSTRIAL MACHINERY (6.0%)
Briggs & Stratton Corporation 2,200 113,575
Pentair Industries, Inc. 3,800 124,925
--------
238,500
--------
TRUCKERS (3.9%)
* Swift Transportation Co., Inc. 4,800 154,800
--------
</TABLE>
<PAGE> 321
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
TOTAL COMMON STOCKS (Cost $3,064,256) (92.5%) $3,703,369
----------
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 185,000 185,000
Vista Treasury Plus Money Market Fund 115,000 115,000
----------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $300,000) (7.5%) 300,000
----------
TOTAL INVESTMENTS (Cost $3,364,256) (100.0%) 4,003,369
Liabilities, less other assets (0.0%) (1,234)
----------
NET ASSETS (100%) $4,002,135
==========
</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, 1997 was $3,364,256, the aggregate gross unrealized appreciation for all
investments was $695,869 and aggregate gross unrealized depreciation for all
investments was $56,756.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 322
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
BLUE CHIP CONVERTIBLE EMERGING
GROWTH FUND SECURITIES FUND GROWTH FUND
----------- --------------- -----------
<S> <C> <C> <C>
ASSETS
Investment in securities, at value
(cost $4,842,303, $18,806,195,
$5,140,070, respectively) $5,344,337 $20,177,022 $6,116,356
Cash 50,872 51,574 32,911
Receivable for investment securities sold 77,263 379,631 --
Dividends receivable 2,268 32,187 290
Interest receivable 21 154,372 26
---------- ----------- ----------
Total assets 5,474,761 20,794,786 6,149,583
---------- ----------- ----------
LIABILITIES
Payable for investment securities purchased -- 223,126 139,257
Payable for fund shares redeemed 77 56 60
Other payables and accrued expenses 824 344 560
---------- ----------- ----------
Total liabilities 901 223,526 139,877
---------- ----------- ----------
NET ASSETS $5,473,860 $20,571,260 $6,009,706
========== =========== ==========
NET ASSETS CONSIST OF (Note 1):
Capital stock (Par Value $.001 per share) $ 354 $ 1,857 $ 387
Additional paid in capital 4,125,193 18,809,616 5,620,631
Accumulated net realized gain (loss) on investments 846,279 218,279 (587,598)
Undistributed net investment income -- 170,681 --
Net unrealized appreciation on investments 502,034 1,370,827 976,286
---------- ----------- ----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $5,473,860 $20,571,260 $6,009,706
========== =========== ==========
CLASS A:
Net Assets $5,428,285 $20,552,883 $5,788,730
---------- ----------- ----------
Shares Outstanding 351,099 1,855,482 373,020
---------- ----------- ----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 15.46 $ 11.08 $ 15.52
========== =========== ==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 16.19 $ 11.60 $ 16.25
========== =========== ==========
CLASS D:
Net Assets $ 45,575 $ 18,377 $ 220,976
---------- ----------- ----------
Shares Outstanding 2,976 1,662 14,383
---------- ----------- ----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 15.31 $ 11.06 $ 15.36
========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 323
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES - (CONTINUED)
MAY 31, 1997
<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 $4,778,451, $10,300,524,
$2,395,193, respectively) $5,243,450 $12,019,419 $3,152,169
Cash 12,377 134,287 38,202
Receivable for investment securities sold 665,504 56,644 --
Dividends receivable 4,758 10,529 3,517
Interest receivable 52 -- --
---------- ----------- ----------
Total assets 5,926,141 12,220,879 3,193,888
---------- ----------- ----------
LIABILITIES
Payable for investment securities purchased 433,793 91,069 83,370
Payable for fund shares redeemed 2,212 63 73
Other payables and accrued expenses 203 493 465
---------- ----------- ----------
Total liabilities 436,208 91,625 83,908
---------- ----------- ----------
NET ASSETS $5,489,933 $12,129,254 $3,109,980
========== =========== ==========
NET ASSETS CONSIST OF (Note 1):
Capital Stock (Par Value $.001 per share) $ 478 $ 963 $ 213
Additional paid in capital 4,610,691 10,754,431 2,331,412
Accumulated net realized gain (loss) on investments
and foreign currency transactions 413,765 (345,098) 21,379
Net unrealized appreciation on investments and
foreign currency transactions 464,999 1,718,958 756,976
---------- ----------- ----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $5,489,933 $12,129,254 $3,109,980
========== =========== ==========
CLASS A:
Net Assets $5,476,969 $12,098,843 $3,054,239
---------- ----------- ----------
Shares Outstanding 477,196 960,665 209,015
---------- ----------- ----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 11.48 $ 12.59 $ 14.61
========== =========== ==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 12.02 $ 13.18 $ 15.30
========== =========== ==========
CLASS D:
Net Assets $ 12,964 $ 30,411 $ 55,741
---------- ----------- ----------
Shares Outstanding 1,141 2,436* 3,841
---------- ----------- ----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 11.36 $ 12.49 $ 14.51
========== =========== ==========
</TABLE>
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 324
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE
MID-CAP
GROWTH FUND
-----------
<S> <C>
ASSETS
Investment in securities, at value
(cost$3,364,256) $4,003,369
Cash 36,124
Receivable for investment securities sold 111,383
Receivable for fund shares sold 14,811
Dividends receivable 2,270
Interest receivable 16
----------
Total assets 4,167,973
----------
LIABILITIES
Payable for investment securities purchased 162,868
Payable for fund shares redeemed 2,970
----------
Total liabilities 165,838
----------
NET ASSETS $4,002,135
==========
NET ASSETS CONSIST OF (Note 1):
Capital Stock (Par Value $.001 per share) $ 304
Additional paid in capital 3,301,497
Accumulated net realized gain on investments 61,221
Net unrealized appreciation on investments 639,113
----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $4,002,135
==========
CLASS A:
Net Assets $2,174,053
----------
Shares Outstanding 164,702
----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 13.20
==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 13.82
==========
CLASS D:
Net Assets $1,828,082
----------
Shares Outstanding 139,681
----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 13.09
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 325
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE RESERVE
BLUE CHIP CONVERTIBLE EMERGING INFORMED INVESTORS
GROWTH FUND SECURITIES FUND GROWTH FUND GROWTH FUND
----------- --------------- ----------- -----------
September 3, 1996
(commencement of
Year Ended operations) to Year Ended Year Ended
May 31, 1997 May 31, 1997 May 31, 1997 May 31, 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 32,176 $ 249,907 $ 3,372* $ 24,627
Interest 896 363,077 1,049 41,386
---------- ----------- ----------- -----------
Total investment income 33,072 612,984 4,421 66,013
EXPENSES
Comprehensive fee (Note 3) 79,311 205,951 98,087 83,573
12b-1 Fee (Note 4)
Class A 13,038 34,294 15,631 13,889
Class D 723 124 2,868 161
---------- ----------- ----------- -----------
Total expenses 93,072 240,369 116,586 97,623
---------- ----------- ----------- -----------
Less fees waived -- 188,113 -- --
---------- ----------- ----------- -----------
Net expenses -- 52,256 -- --
---------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) (60,000) 560,728 (112,165) (31,610)
---------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Proceeds from sales of securities 5,655,127 16,158,164 1,743,151 11,725,713
Cost of securities sold 4,678,455 15,933,090 2,320,269 10,472,385
---------- ----------- ----------- -----------
Net realized gain (loss) on
investments (Note 1) 976,672 225,074 (577,118) 1,253,328
Net unrealized appreciation
(depreciation) on investments (642,561) 1,370,827 (847,249) (1,975,139)
---------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments 334,111 1,595,901 (1,424,367) (721,811)
---------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 274,111 $ 2,156,629 $(1,536,532) $ (753,421)
========== =========== =========== ===========
</TABLE>
* Includes foreign tax withholding of $114
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 326
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS - (CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
INTERNATIONAL LARGE-CAP MID-CAP
EQUITY FUND VALUE FUND GROWTH FUND
----------- ---------- -----------
Year Ended Year Ended Year Ended
May 31, 1997 May 31, 1997 May 31, 1997
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 97,550* $ 32,111 $ 13,610
Interest 561 212 533
---------- -------- ----------
Total investment income 98,111 32,323 14,143
EXPENSES
Comprehensive fee (Note 3) 145,974 33,940 49,028
12b-1 Fee (Note 4)
Class A 20,754 5,613 3,404
Class D 231 172 19,070
---------- -------- ----------
Total expenses 166,959 39,725 71,502
---------- -------- ----------
NET INVESTMENT LOSS (68,848) (7,402) (57,359)
---------- -------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Proceeds from sales of securities 3,956,864 383,913 3,034,153
Cost of securities sold 4,229,994 362,534 2,889,407
---------- -------- ----------
Net realized gain (loss) on
investments and foreign
currency transactions (Note 1) (273,130) 21,379 144,746
Net unrealized appreciation
on investments and foreign
currency transactions 1,387,936 686,853 185,442
---------- -------- ----------
Net realized and unrealized gain
on investments and foreign
currency transactions 1,114,806 708,232 330,188
---------- -------- ----------
Net increase in net assets resulting
from operations $1,045,958 $700,830 $ 272,829
========== ======== ==========
</TABLE>
* Includes foreign tax withholding of $14,966
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 327
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE
RESERVE BLUE CHIP GROWTH FUND SECURITIES FUND
----------------------------- -------------------
September 3, 1996
(commencement of
Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997
------------ ------------ -------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income gain (loss) $ (60,000) $ (34,916) $ 560,728
Net realized gain (loss) from investments 976,672 (2,045) 225,074
Net unrealized appreciation (depreciation)
from investments (642,561) 975,733 1,370,827
----------- ---------- ------------
Net increase in net assets
resulting from operations 274,111 938,772 2,156,629
----------- ---------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (6,791)
Net realized gain on investments (68,349) (164,889) (390,051)
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 1,176,349 2,757,098 20,601,861
Reinvestment of distributions 68,323 164,889 201,224
Cost of shares redeemed (1,148,732) (517,167) (1,991,612)
----------- ---------- ------------
Net increase in net assets resulting
from capital share transactions 95,940 2,404,820 18,811,473
----------- ---------- ------------
Net increase in net assets 301,702 3,178,703 20,571,260
NET ASSETS:
Beginning of period 5,172,158 1,993,455 0
----------- ---------- ------------
End of period (including undistributed
net investment income of $0, $0
and $170,681, respectively) $ 5,473,860 $5,172,158 $ 20,571,260
=========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL
RESERVE EMERGING GROWTH FUND EQUITY FUND
----------------------------- -------------------------------
July 13, 1996
(commencement of
Year Ended Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
----------------------------- -------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (112,165) $ (57,980) $ (68,848) $ (17,145)
Net realized gain (loss) from investments
and foreign currency transactions (577,118) 80,546 (273,130) (71,968)
Net unrealized appreciation (depreciation)
from investments and foreign
currency transactions (847,249) 1,655,638 1,387,936 331,022
----------- ---------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (1,536,532) 1,678,204 1,045,958 241,909
----------- ---------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments -- (93,899) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 2,187,444 4,281,980 8,057,063 3,465,234
Reinvestment of distributions -- 93,770 -- --
Cost of shares redeemed (1,540,646) (301,485) (558,291) (122,619)
----------- ---------- ----------- ----------
Net increase in net assets resulting
from capital share transactions 646,798 4,074,265 7,498,772 3,342,615
----------- ---------- ----------- ----------
Net increase (decrease) in net assets (889,734) 5,658,570 8,544,730 3,584,524
NET ASSETS:
Beginning of period 6,899,440 1,240,870 3,584,524 0
----------- ---------- ----------- ----------
End of period $ 6,009,706 $6,899,440 $12,129,254 $3,584,524
=========== ========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 328
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS - (CONTINUED)
<TABLE>
<CAPTION>
RESERVE
RESERVE INFORMED LARGE-CAP
INVESTORS GROWTH FUND VALUE FUND
-------------------------------- -------------------------------
January 2, 1996
(commencement of
Year Ended Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (31,610) $ (147,983) $ (7,402) $ (1,091)
Net realized gain from investments 1,253,328 850,186 21,379 --
Net unrealized appreciation (depreciation)
from investments (1,975,139) 1,109,280 686,853 70,123
----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (753,421) 1,811,483 700,830 69,032
----------- ----------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (525,939) (795,337) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 1,400,871 6,254,939 1,345,107 1,165,180
Reinvestment of distributions 395,531 790,060 -- --
Cost of shares redeemed (1,435,172) (8,490,282) (167,017) (3,152)
----------- ----------- ----------- ----------
Net increase (decrease) in net assets resulting
from capital share transactions 361,230 (1,445,283) 1,178,090 1,162,028
----------- ----------- ----------- ----------
Net increase (decrease) in net assets (918,130) (429,137) 1,878,920 1,231,060
NET ASSETS:
Beginning of period 6,408,063 6,837,200 1,231,060 0
----------- ----------- ----------- ----------
End of period $ 5,489,933 $ 6,408,063 $ 3,109,980 $1,231,060
=========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
RESERVE MID-CAP
GROWTH FUND
-------------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (57,359) $ (32,656)
Net realized gain (loss) from investments 144,746 (83,525)
Net unrealized appreciation from
investments 185,442 453,671
----------- ----------
Net increase in net assets
resulting from operations 272,829 337,490
----------- ----------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 3,118,364 2,345,759
Cost of shares redeemed (1,928,613) (143,694)
----------- ----------
Net increase in net assets resulting
from capital share transactions 1,189,751 2,202,065
----------- ----------
Net increase in net assets 1,462,580 2,539,555
NET ASSETS:
Beginning of period 2,539,555 0
----------- ----------
End of period $ 4,002,135 $2,539,555
=========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 329
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reserve Private Equity Series (the "Trust") consists of the following
funds: Reserve Blue Chip Growth Fund, Reserve Convertible Securities Fund,
Reserve Emerging Growth Fund, Reserve Informed Investors Growth Fund,
Reserve International Equity Fund, Reserve Large-Cap Value Fund, and
Reserve Mid-Cap Growth Fund (formerly 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, 1997 as follows:
[See table below]
<PAGE> 330
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------
Undistributed
Net Accumulated
Investment Realized
Reserve Fund Capital Income Gain
------------ ------- ------ ----
<S> <C> <C> <C>
Blue Chip Growth Fund (112,615) 60,000 52,615
Emerging Growth Fund (112,165) 112,165 --
Informed Investors Growth Fund (31,610) 31,610 --
International Equity Fund (68,848) 68,848 --
Large-Cap Value Fund (7,402) 7,402 --
Mid-Cap Growth Fund (57,359) 57,359 --
</TABLE>
These reclassifications had no effect on net investment income, net
realized gain on investments, or net assets for the year ended May 31,
1997.
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.
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, 1997, which are available to offset
future realized capital gains, if any:
<TABLE>
<CAPTION>
Capital loss Expiration
carryforward year
------------ ----
<S> <C> <C>
Reserve Emerging Growth Fund $161,015 2005
Reserve International Equity Fund 71,968 2004
Reserve International Equity Fund 178,347 2005
</TABLE>
<PAGE> 331
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
2. INVESTMENT ACTIVITY
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the year ended May 31, 1997, were
as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate
Reserve Fund Purchases Sales
------------ --------- -----
<S> <C> <C>
Blue Chip Growth Fund $ 5,425,272 $ 5,655,127
Convertible Securities Fund 34,711,469 16,158,164
Emerging Growth Fund 2,264,488 1,743,151
Informed Investors Growth Fund 11,386,974 11,725,713
International Equity Fund 11,336,214 3,956,864
Large-Cap Value Fund 1,507,717 383,913
Mid-Cap Growth Fund 4,017,934 3,034,153
</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 except for the International
Equity Fund for which it receives 1.75%. RMCI is currently waiving a
portion of its comprehensive fee in the Reserve Convertible Securities
Fund.
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
decisions for 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%
Convertible Securities Fund New Vernon Advisors, Inc. 0.75%
Emerging Growth Fund Roanoke Asset Management Corp. 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 Southern Capital Advisors 0.75%
</TABLE>
Trainer, Wortham & Company, Inc. owns 24% of the outstanding shares of the
Reserve Blue Chip Growth Fund at May 31, 1997.
<PAGE> 332
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
As of May 31, 1997, RMCI and affiliated persons owned 7%, 13%, 5%, 11%,
20%, and 25% of the Reserve Blue Chip Growth Fund, Reserve Emerging Growth
Fund), Reserve Informed Investors Growth Fund, Reserve International
Equity Fund, Reserve Large-Cap Value Fund, and Reserve Mid-Cap Growth
Fund, respectively. Taconic Petroleum Corp. owns 24% of Reserve Large-Cap
Value Fund. Christopher E. Vroom owns 7% of the Reserve Emerging Growth
Fund.
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 shares and 1.00% per annum for Class D shares of the
average daily net assets of shareholder accounts as to which the payee has
rendered distribution assistance. For the year ended May 31, 1997, the
Funds paid distribution expenses to RPI as follows:
<TABLE>
<CAPTION>
Reserve Fund Class A Class D
------------ ------- -------
<S> <C> <C>
Blue Chip Growth Fund $13,038 $ 723
Convertible Securities Fund* 283 14
Emerging Growth Fund 15,631 2,868
Informed Investors Growth Fund 13,889 161
International Equity Fund 20,754 231
Large-Cap Value Fund 5,613 172
Mid-Cap Growth Fund 3,404 19,070
</TABLE>
* RMCI waived 12b-1 fees of $34,011 and $110, for Reserve Convertible
Securities Fund Class A and Class D, respectively, for the period
September 3, 1996 (commencement of operations) to May 31, 1997.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock of each Fund for the period ended May 31,
1997, were as follows:
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
----------------------------- -------------------------------- ------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
-------------------------------- ------------------------
Shares Amount Shares Amount
------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold 76,231 $ 1,119,812 3,957 $ 56,537
Reinvested 4,875 67,171 84 1,152
Redeemed (74,089) (1,092,588) (3,930) (56,144)
------- ----------- ------ --------
Net increase 7,017 $ 94,395 111 $ 1,545
======= =========== ====== ========
</TABLE>
<PAGE> 333
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE SECURITIES FUND CLASS A CLASS D
- ----------------------------------- ------------------------------- -------------------------------
September 3, 1996 September 3, 1996
(commencement of operations) to (commencement of operations) to
May 31, 1997 May 31, 1997
------------------------------- --------------------------------
Shares Amount Shares Amount
---------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold 2,026,485 $20,572,892 2,814 $ 28,969
Reinvested 19,551 201,111 11 113
Redeemed (190,554) (1,979,449) (1,163) (12,163)
--------- ----------- ------ --------
Net increase 1,855,482 $18,794,554 1,662 $ 16,919
========= =========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- --------------------------------- ------------------------------- ----------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------------- ----------------------------
Shares Amount Shares Amount
------- ----------- ------ ---------
<S> <C> <C> <C> <C>
Sold 117,069 $ 1,999,906 10,982 $ 187,538
Redeemed (84,292) (1,389,829) (9,047) (150,817)
------- ----------- ------ ---------
Net increase 32,777 $ 610,077 1,935 $ 36,721
======= =========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- -------------------------------- -----------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
-------------------------------- -----------------------
Shares Amount Shares Amount
-------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold 116,034 $ 1,389,343 911 $11,528
Reinvested 37,456 395,531 -- --
Redeemed (121,475) (1,425,528) (814) (9,644)
-------- ---------- ---- -------
Net increase 32,015 $ 359,346 97 $ 1,884
======== ========== ==== =======
</TABLE>
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- --------------------------- ---------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
--------------------------- ---------------------------
Shares Amount Shares Amount
------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold 689,779 $8,029,446 2,446 $27,617
Redeemed (47,041) (551,604) (562) (6,687)
------- ---------- ----- -------
Net increase 642,738 $7,477,842 1,884 $20,930
======= ========== ===== =======
</TABLE>
<PAGE> 334
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE LARGE-CAP VALUE FUND CLASS A CLASS D
- ----------------------------- ------------------------- ----------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------- ----------------------
Shares Amount Shares Amount
------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold 108,518 $1,276,605 5,080 $ 68,502
Redeemed (11,940) (151,013) (1,239) (16,004)
------- ---------- ------ --------
Net increase 96,578 $1,125,592 3,841 $ 52,498
======= ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ------------------------- ---------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------- ---------------------------
Shares Amount Shares Amount
------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Sold 198,244 $2,390,365 58,332 $ 727,999
Redeemed (44,223) (530,105) (114,850) (1,398,508)
------- ---------- -------- -----------
Net increase 154,021 1,860,260 (56,518) $ (670,509)
======= ========== ======== ===========
</TABLE>
Transactions in capital stock of each Fund for the period ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
- ----------------------------- ------------------------- --------------------
February 13, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
------------------------- --------------------
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>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- ---------------------------- ------------------------- ---------------------
February 26, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
------------------------- ---------------------
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>
<PAGE> 335
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- --------------------------- ----------------------
February 13, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
--------------------------- ----------------------
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>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- -------------------------- ------------------
July 13, 1995 March 11, 1996
(commencement (commencement
of operations) to of operations) to
May 31, 1996 May 31, 1996
-------------------------- ------------------
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>
RESERVE LARGE-CAP VALUE FUND CLASS A
- ---------------------------- ------------------------
January 2, 1996
(commencement
of operations) to
May 31, 1996
-------------------------
Shares Amount
------- ----------
<S> <C> <C>
Sold 112,729 $1,165,180
Redeemed (292) (3,152)
------- ----------
Net increase 112,437 $1,162,028
======= ==========
</TABLE>
<PAGE> 336
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ----------------------- -------------------------
March 13, 1996
(Commencement
of operations) to Year Ended
May 31, 1996 May 31, 1996
----------------------- -------------------------
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>
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.
<PAGE> 337
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
7. FINANCIAL HIGHLIGHTS (FOR EACH SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
- ----------------------------- ------------------------------------------------- ---------------------------------
October 28, 1994 February 13, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ---------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 14.91 $12.03 $10.00 $ 14.88 $13.49
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.17) (.10) (.03) (0.46) (.04)
Net realized and unrealized gain 0.91 3.62 2.06 1.08 1.43
------- ------ ------ ------- ------
Total from investment operations 0.74 3.52 2.03 0.62 1.39
Less distribution from net realized gain (.19) (.64) -- (.19) --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 15.46 $14.91 $12.03 $ 15.31 $14.88
======= ====== ====== ======= ======
Total Return 5.12 % 30.10 % 20.30%(2) 4.32 % 10.30 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,428 $5,130 $1,993 $ 46 $ 43
Ratio of expenses to average net assets
before waiver 1.75 % 1.75 % 1.75%(1) 2.50 % 2.50 %(1)
Ratio of expenses to average net assets,
net of waiver 1.75 % 1.75 % 1.73%(1) 2.50 % 2.50 %(1)
Ratio of net investment loss to
average net assets, before waiver (1.13)% (0.94)% (0.72)%(1) (1.90)% (1.70)%(1)
Ratio of net investment loss to average
net assets, net of waiver (1.13)% (0.94)% (0.70)%(1) (1.90)% (1.70)%(1)
Portfolio turnover rate 109 % 72 % 68 % 109 % 72 %
Average commission per share on
portfolio transactions $0.0419 $ 0.06 N/A $0.0419 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE SECURITIES FUND CLASS A CLASS D
- ----------------------------------- ----------------- -----------------
September 3, 1996 September 3, 1996
(commencement of (commencement of
operations) to operations) to
May 31, 1997 May 31, 1997
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period $ 10.00 $ 10.00
------- -------
Income from investment operations
Net investment income 0.34 0.33
Net realized and unrealized gain (loss) 0.99 0.98
------- -------
Total from investment operations 1.33 1.31
Less distribution from net investment
income and realized gain (.25) (.25)
------- -------
NET ASSET VALUE, end of period $ 11.08 $ 11.06
======= =======
Total Return 13.53 %(2) 13.33 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $20,553 $ 18
Ratio of expenses to average net assets before waiver 2.36 %(1) 3.37 %(1)
Ratio of expenses to average net assets, net of waiver 0.52 %(1) 0.83 %(1)
Ratio of net investment income to average
net assets, before waiver 3.67 %(1) 2.57 %(1)
Ratio of net investment income to average net assets,
net of waiver 5.52 %(1) 5.12 %(1)
Portfolio turnover rate 113 % 113 %
Average commission per share on
portfolio transactions $0.0564 $ 0.0564
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 338
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- ---------------------------- ----------------------------------------------- ---------------------------------
November 14, 1994 February 26, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ----------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 19.56 $12.21 $10.00 $ 19.52 $16.88
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.28) (.17) (.09) (0.49) (.04)
Net realized and unrealized gain (loss) (3.76) 8.05 2.30 (3.67) 2.68
------- ------ ------ ------- ------
Total from investment operations (4.04) 7.88 2.21 (4.16) 2.64
Less distribution from net realized gain -- (.53) -- -- --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 15.52 $19.56 $12.21 $ 15.36 $19.52
======= ====== ====== ======= ======
Total Return (20.65)% 65.55 % 22.10 %(2) (21.31)% 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,789 $6,657 $1,241 $ 221 $ 243
Ratio of expenses to average net assets 1.75 % 1.75 % 1.75 %(1) 2.50 % 2.50%(1)
Ratio of net investment loss to
average net assets (1.69)% (1.70)% (1.62)%(1) (2.45)% (2.48)%(1)
Portfolio turnover rate 28 % 38 % 43 % 28 % 38%
Average commission per share on
portfolio transactions $0.0048 $ 0.01 N/A $0.0048 $ 0.01
</TABLE>
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- ------------------------------------------------ --------------------------------
December 28, 1994 March 22, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ----------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 14.36 $11.99 $10.00 $ 14.33 $12.29
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.07) (0.33) (.07) (0.18) (.06)
Net realized and unrealized gain (1.66) 3.87 2.06 (1.64) 2.10
------- ------ ------ ------- ------
Total from investment operations (1.73) 3.54 1.99 (1.82) 2.04
Less distribution from net realized gain (1.15) (1.17) -- (1.15) --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 11.48 $14.36 $11.99 $ 11.36 $14.33
======= ====== ====== ======= ======
Total Return (11.35)% 29.75 % 19.90 %(2) (12.04)% 16.60 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,477 $6,393 $6,837 $ 13 $ 15
Ratio of expenses to average net assets 1.75 % 1.75 % 1.75 %(1) 2.50 % 2.50 %(1)
Ratio of net investment loss to
average net assets (0.57)% (1.57)% (1.62)%(1) (1.26)% (2.32)%(1)
Portfolio turnover rate 255 % 132 % 59 % 255 % 132 %
Average commission per share on
portfolio transactions $0.0612 $ 0.05 N/A $0.0612 $ 0.05
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 339
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- -------------------------------------- --------------------------------------
July 13, 1995 March 11, 1996
(commencement of (commencement of
Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 11.26 $ 10.00 $ 11.25 $ 10.79
------------ ------------ ------------ ------------
Income from investment operations
Net investment loss (0.07) (.05) (0.15) (.01)
Net realized and unrealized gain 1.40 1.31 1.39 .47
------------ ------------ ------------ ------------
Total from investment operations 1.33 1.26 1.24 .46
------------ ------------ ------------ ------------
NET ASSET VALUE, end of period $ 12.59 $ 11.26 $ 12.49 $ 11.25
============ ============ ============ ============
Total Return 11.81% 12.60%(2) 11.02% 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 12,099 $ 3,578 $ 30 $ 6
Ratio of expenses to average net assets
before waiver 2.00% 2.00%(1) 2.75% 2.75%(1)
Ratio of expenses to average net assets,
net of waiver 2.00% 1.99%(1) 2.75% 2.75%(1)
Ratio of net investment loss to average
net assets before waiver 0.82% (0.92)%(1) 1.63% (0.70)%(1)
Ratio of net investment loss to average
net assets net of waiver 0.82% (0.91)%(1) 1.63% (0.70)%(1)
Portfolio turnover rate 52% 70% 52% 70%
Average commission per share on
portfolio transactions $ 0.0273 $ 0.02 $ 0.0273 $ 0.02
</TABLE>
<TABLE>
<CAPTION>
RESERVE LARGE-CAP VALUE FUND CLASS A CLASS D
- ---------------------------- ------------------------------------ ----------------
January 2, 1996
(commencement of
Year Ended operations) to Year Ended
May 31, 1997 May 31, 1996 May 31, 1997
------------------------------------ ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 10.95 $ 10.00 $ 10.95
----------- ----------- ===========
Income from investment operations
Net investment loss (0.03) (0.01) (0.05)
Net realized and unrealized gain 3.69 0.96 3.61
----------- ----------- -----------
Total from investment operations 3.66 0.95 3.56
----------- ----------- -----------
NET ASSET VALUE, end of period $ 14.61 $ 10.95 $ 14.51
=========== =========== ===========
Total Return 33.42% 9.50%(2) 32.51%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 3,054 $ 1,231 $ 56
Ratio of expenses to average net assets 1.75% 1.75%(1) 2.50%
Ratio of net investment loss to average
net assets (0.32)% (0.32)%(1) (1.07)%
Portfolio turnover rate 18% 0 % 18%
Average commission per share on
portfolio transactions $ 0.0684 $ 0.08 $ 0.0684
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 340
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ------------------------------------ ----------------------------------
March 13, 1996
(commencement of
Year Ended operations) to Year Ended Year Ended
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 12.29 $ 10.94 $ 12.27 $ 10.00
----------- ----------- ----------- -----------
Income from investment operations
Net investment loss (0.11) (.01) (0.28) (0.17)
Net realized and unrealized gain 1.02 1.36 1.10 2.44
----------- ----------- ----------- -----------
Total from investment operations 0.91 1.35 0.82 2.27
----------- ----------- ----------- -----------
NET ASSET VALUE, end of period $ 13.20 $ 12.29 $ 13.09 $ 12.27
=========== =========== =========== ===========
Total Return 7.40% 12.34%(2) 6.68% 22.70%
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 2,174 $ 131 $ 1,828 $ 2,408
Ratio of expenses to average net assets 1.75% 1.74%(1) 2.50% 2.49%
Ratio of net investment loss to average
net assets (1.31)% (0.97)%(1) (2.08)% (2.00)%
Portfolio turnover rate 102% 85% 102% 85%
Average commission per share on
portfolio transactions $ 0.0545 $ 0.04 $ 0.0545 $ 0.04
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales
load.
<PAGE> 341
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 October 1, 1997.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Policies 2
Other Policies 3
Trustees and Officers of the Trust 4
Investment Management and Other Agreements 6
Portfolio Turnover, Transaction Charges and
Allocation 7
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 Information 15
</TABLE>
<PAGE> 342
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 % (1/2 of 1%) of the securities (taken at market value) of such issuer and
such individuals owning more than one-half of one % (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> 343
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, 1535 Presidential Drive, Apt. 4A, Columbus,
OH 43212.
Mr. Emmet retired as the Managing Director of Servus Associates, Inc.,
and U.S.A. Representative of the First National Bank of Southern Africa in
1996. He is currently Trustee of RF, RIT, RNYTET, RTET and RPES. Until 1989, he
was Senior Vice President of the New York branch of Banque Nationale de Paris.
+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.
MICHELLE L. NEUFELD, Counsel and Secretary, 810 Seventh Avenue, New
York, NY 10019.
Ms. Neufeld is Counsel and Secretary of RF, RIT, RTET, and RNYTET.
Before joining The Reserve Funds in 1997, Ms. Neufeld was a staff attorney
at NASD Regulation, Inc.
<PAGE> 344
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., Inc.
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 disregard 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 FUNDS* (4 ADDITIONAL TRUSTS) PAID TO TRUSTEE*
------------------------------------------------------------------------------
<S> <C> <C>
Edwin Ehlert, Jr. $120.09 $30,500
Henri W. Emmet $133.87 $34,000
Rev. Donald J. Harrington $118.11 $30,000
</TABLE>
Amounts shown are for the Fund's fiscal year ending May 31, 1997.
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 Service 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 and
approval 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 and approval 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> 345
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.
SERVICE PLAN. The Trust maintains a Service 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. 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.
The Glass-Steagall Act prohibits all entities which receive deposits
from engaging to any extent 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 Fund shares (such as
administrative and account maintenance services) may include banks, upon advice
of counsel that they are permitted to do so under applicable laws and
regulations, including the Glass-Steagall Act. In such event, no preference
will be given to securities issued by such banks as investment 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 banks may also receive compensation from the bank accounts they
service. It is Fund management's position that payments to banks pursuant to
the Plan for activities not primarily intended to result in the sale of a
Fund's 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. Financial institutions providing distribution assistance or
administrative services for the Fund may be required to register as securities
dealers in certain states.
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. 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> 346
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 series. 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% of all shares voting as a group
or 67% of the shares voted as a group at a meeting of shareholders at
which at least 50% of the shares of each group are represented.
As of August 30, 1997, the following persons owned of record or
beneficially 5% or more of the Fund's Outstanding Shares: Bear Stearns, 1
Metrotech Center North, Brooklyn, NY 11201 (7%) (Class A); Vincentian Fathers
of St. Peters, 118 Congress Street, Brooklyn, NY 11201 (6%) (Class A); Arthur
T. Bent III, 18 Heights Rd., Plandome, NY 11030 (7.7%) (Class A); Taconic
Petroleum, 810 Seventh Ave., NY, NY 10019 (21.2%) (Class A); Reserve Management
Co., Inc. (16%) (Class A); Paul Greenberg, 244 West 11th St., NY, NY 10014,
(49.3%) (Class D); John E. Kyle, 2200 Macintosh, Nesbit, MS 38651 (24.9%) (Class
D); and A.G. Edwards & Sons, P.O. Box 14985, St. Louis, MO 63178 (9.6%) (Class
D).
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> 347
DETERMINATION OF NET ASSET VALUE. Shares are offered at net asset
value. 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.
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, 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% of its taxable income to shareholders, derive at least 90% of its
gross income from dividends, interest and gains from the sale or
<PAGE> 348
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> 349
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 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.
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 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 the rates of return calculated
will not be average annual rates, but rather, actual annual, annualized or
aggregate rates of return.
<PAGE> 350
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and 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 Convertible Securities Fund, Reserve Emerging Growth Fund,
Reserve Informed Investors Growth Fund, Reserve International Equity Fund,
Reserve Large-Cap Value Fund, and Reserve Mid-Cap Growth Fund (formerly Reserve
North American Growth Fund)) (collectively the "Trust"), including the schedules
of portfolio investments, as of May 31, 1997, 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, 1997, 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, 1997,
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 27, 1997
<PAGE> 351
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BANKS (1.9%)
BankBoston Corporation 1,400 $102,200
--------
BEVERAGES (4.0%)
PepsiCo, Inc. 6,000 220,500
--------
BUILDING MATERIALS (1.8%)
* American Standard Companies, Inc. 2,000 100,250
--------
CHEMICALS - MISCELLANEOUS (4.3%)
ChemFirst, Inc. 9,200 238,050
--------
COMPUTER SERVICES (2.2%)
* Wang Laboratories, Inc. 5,800 118,900
--------
COMPUTER SOFTWARE (5.8%)
* CUC International, Inc. 6,450 148,350
National Data Corporation 3,900 171,112
--------
319,462
--------
CONSUMER SERVICES (2.2%)
* HFS, Inc. 2,200 118,525
--------
ELECTRONICS (6.8%)
General Electric Company 1,800 108,675
* Perceptron, Inc. 9,300 262,725
--------
371,400
--------
ENTERTAINMENT (3.1%)
Walt Disney Company 2,100 171,937
--------
FINANCIAL SERVICES (6.2%)
Federal National Mortgage Association 5,200 226,850
Pioneer Group, Inc. 4,400 110,550
--------
337,400
--------
FOOD (2.3%)
* Suiza Foods Corporation 4,200 125,475
--------
HOSPITAL MANAGEMENT (3.7%)
* Assisted Living Concepts, Inc. 8,000 200,000
--------
MANAGED CARE (1.1%)
* Physicians' Specialty Corporation 10,000 61,250
--------
</TABLE>
<PAGE> 352
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
MEDICAL SUPPLIES (1.3%)
* LaserSight Corporation 10,000 $ 70,000
----------
MISCELLANEOUS CONSUMER (2.1%)
* Gibson Greetings, Inc. 5,300 115,275
----------
MISCELLANEOUS MANUFACTURING (5.6%)
Warnaco Group, Inc. 5,300 173,575
Westinghouse Electric Corporation 6,500 131,625
----------
305,200
----------
MULTI-LINE INSURANCE (3.1%)
The Hartford Financial Services Group, Inc. 2,200 171,600
----------
OFFICE - BUSINESS EQUIPMENT (4.6%)
* American Pad & Paper Company 13,500 249,750
----------
OIL/GAS EQUIPMENT SERVICES (2.0%)
* Cairn Energy USA, Inc. 9,200 108,675
----------
PACKAGED SOFTWARE (3.9%)
Computer Associates International, Inc. 3,900 213,525
----------
PHARMACEUTICALS (7.1%)
* Bio-Technology General Corporation 5,400 78,300
Eli Lilly & Company 1,100 102,300
Johnson & Johnson 1,800 107,775
Merck & Co., Inc. 1,100 98,863
----------
387,238
----------
PUBLISHING (4.2%)
Harte-Hanks Communications 7,800 233,025
----------
RADIO, TV & BROADCAST COMMUNICATION EQUIPMENT (4.6%)
* American Radio Systems Corporation 1,400 52,150
* Sinclair Broadcast Group, Inc. 8,000 198,000
----------
250,150
----------
REAL ESTATE (4.6%)
Insignia Financial Group, Inc., Class A 14,200 252,050
----------
</TABLE>
<PAGE> 353
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE BLUE CHIP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
SPECIAL INDUSTRIAL MACHINERY (3.1%)
Thermo Electron Corporation 5,000 $ 172,500
-------------
TOTAL COMMON STOCKS (Cost $4,512,303) (91.6%) 5,014,337
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 260,000 260,000
Vista Treasury Plus Money Market Fund 70,000 70,000
-------------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $330,000) (6.0%) 330,000
-------------
TOTAL INVESTMENTS (Cost $4,842,303) (97.6%) 5,344,337
Other assets, less liabilities (2.4%) 129,523
-------------
NET ASSETS (100%) $ 5,473,860
=============
</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, 1997 was $4,842,303, the aggregate gross unrealized appreciation for all
investments was $707,511 and aggregate gross unrealized depreciation for all
investments was $205,477.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 354
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
CONVERTIBLE BONDS
<TABLE>
<CAPTION>
VALUE
MATURITY PAR (NOTE 1)
-------- --- --------
<S> <C> <C> <C>
BASIC INDUSTRIAL COMMODITY (2.2%)
First South Africa Corp, Ltd., 144A, 9% 06/15/04 450,000 $ 450,000
----------
BIO-TECHNOLOGY (3.9%)
Chiron Corp., 144A, 1.9% 11/17/00 450,000 397,125
NABI, Inc., 144A, 6.5% 02/01/03 500,000 414,375
----------
811,500
----------
COMMERCIAL SERVICES (1.8%)
Pharmaceutical Marketing
Services, Inc., 144A, 6.25% 02/01/03 450,000 360,000
----------
COMPUTER SOFTWARE (1.9%)
MacNeal - Schwendler Corp., 7.875% 08/18/04 400,000 392,000
----------
ELECTRONIC PRODUCTS - MISCELLANEOUS (1.9%)
Trans-Lux Corp., 7.5% 12/01/06 375,000 390,000
----------
ENVIRONMENT - CONSULTING, ENGINEERING (1.1%)
Roy F. Weston, Inc., 7% 04/15/02 270,000 229,500
----------
FOOD CHAINS (1.9%)
Marsh Supermarkets, Inc., 7% 02/15/03 400,000 400,000
----------
GENERAL INDUSTRIAL MACHINE & EQUIPMENT (2.0%)
Robbins & Myers, Inc., 6.5% 09/01/03 300,000 412,500
----------
HOTEL - MOTEL (3.4%)
Hilton Hotels Corp., 5% 05/15/06 350,000 380,625
Signature Resorts, Inc., 5.75% 01/15/07 350,000 316,750
----------
697,375
----------
MEDICAL - HMO (3.9%)
FPA Medical Management, Inc., 6.5% 12/15/01 400,000 421,000
PhyMatrix Corp., 6.75% 06/15/03 450,000 389,250
----------
810,250
----------
OIL - DOMESTIC (2.7%)
Lomak Petroleum, Inc., 144A, 6% 02/01/07 350,000 395,500
Snyder Oil Corp., 7% 05/15/01 150,000 155,625
----------
551,125
----------
POLLUTION CONTROL (3.8%)
USA Waste Services, Inc., 4% 02/01/02 350,000 362,250
WMX Technologies, Inc., 2% 01/24/05 450,000 406,687
----------
768,937
----------
</TABLE>
<PAGE> 355
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
CONVERTIBLE BONDS
<TABLE>
<CAPTION>
VALUE
MATURITY PAR (NOTE 1)
-------- --- --------
<S> <C> <C> <C>
PUBLISHING (2.0%)
Scholastic Corp., 5% 08/15/05 500,000 $ 403,750
----------
RETAIL STORES - DEPARTMENT (1.9%)
Saks Holdings, Inc., 5.5% 09/15/06 450,000 398,250
----------
RETAIL - APPAREL (1.9%)
Charming Shoppes, Inc., 7.5% 07/15/06 400,000 393,000
----------
RETAIL - SPECIALTY (1.8%)
The Sports Authority, Inc., 5.25% 09/15/01 400,000 360,500
----------
TRANSPORT - AIR FREIGHT (1.6%)
Consolidated Logistics, 144A, 8% 08/21/00 400,000 320,000
----------
WATER TREATMENT SYSTEMS (3.2%)
United States Filter Corp., 4.5% 12/15/01 650,000 665,438
----------
TOTAL CONVERTIBLE BONDS (Cost $8,647,471) (42.9%) 8,814,125
----------
</TABLE>
PREFERRED STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BANKS (2.6%)
National Australian Bank Ltd., 7.875% 20,000 $537,500
-------
CONTAINERS-METAL/GLASS (2.1%)
Crown Cork & Seal Company, Inc., 4.5% 2/26/00 8,000 434,000
-------
ENERGY (1.6%)
Occidental Petroleum Corp., 144A, $3.875 Series 1993 6,000 338,250
-------
ENTERTAINMENT (2.9%)
Wellsford Residential Property, 7% Series A 22,900 589,675
-------
FINANCIAL SERVICES (2.1%)
SunAmerica, Inc., $3.1875 10/31/99 10,000 431,250
-------
GENERAL INDUSTRIAL MACHINES & EQUIPMENT (2.0%)
Greenfield Industries, Inc., 144A, 6% 3/31/16 9,000 409,500
-------
GLASS PRODUCTS (1.9%)
Corning Delaware L.P., 6% 5,000 399,375
-------
</TABLE>
<PAGE> 356
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
PREFERRED STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
GOLD MINING (1.6%)
Coeur D'Alene Mines Corp., 7% 3/15/00 20,000 $ 332,500
----------
HOTEL-MOTEL (1.8%)
Host Marriott Corp., 144A, 6.75% 12/02/26 6,500 367,250
----------
MEDICAL - HMO (2.1%)
Aetna, Inc., 6.25% 7/19/00 4,700 431,225
----------
NATURAL GAS (2.0%)
MCN Corp., 8.75% 4/30/99 15,000 416,250
----------
OIL-DOMESTIC (5.5%)
Mesa, Inc., 8%, Series A 80,000 530,000
Nuevo Energy, 5.75% 12/15/26 Series A 8,000 403,000
Snyder Oil Corporation, $1.5 7,700 190,575
----------
1,123,575
----------
PAPER (1.9%)
International Paper Co., 5.25% 7/20/25 7,500 386,250
----------
PUBLISHING (1.4%)
Golden Books Family Entertainment, Inc., 144A,
8.75% 8/20/16 5,000 280,000
----------
PUBLISHING-NEWSPAPERS (2.1%)
Hollinger International, Inc., 9.75% 8/01/00 40,000 440,000
----------
REAL ESTATE (4.8%)
Excel Realty, $2.125 Series A 16,000 426,000
Redwood Trust, Inc., 9.74% Class B 10,000 567,500
----------
993,500
----------
RESTAURANTS (2.0%)
Apple South, Inc., 144A, $3.5 3/01/27 7,000 420,875
----------
TELECOMMUNICATIONS (2.1%)
Mobile Telecommunication
Technologies Corp., 144A, $2.25 20,000 425,000
----------
TELECOMMUNICATIONS-BROADCAST (2.1%)
Merrill Lynch & Company, 6% 6/01/99 Series COX 20,000 427,500
----------
TOTAL PREFERRED STOCKS (Cost $8,282,029) (44.6%) $9,183,475
----------
</TABLE>
<PAGE> 357
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE CONVERTIBLE SECURITIES FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AEROSPACE (0.9%)
* International Airline Support Group, Inc. 44,908 $ 196,473
---------------
ENTERTAINMENT (1.4%)
* Malibu Entertainment Worldwide, Inc. 70,000 280,000
---------------
MISCELLANEOUS MANUFACTURING (0.1%)
* Disc Graphics, Inc. - Warrants Class "A", 11/01/99 28,000 21,000
---------------
NONHAZARDOUS WASTE DISPOSAL (0.2%)
* Allied Waste Industries, Inc. 2,266 33,423
---------------
OIL WELL SERVICES (3.6%)
* SEACOR SMIT, Inc. 14,400 745,200
---------------
PREHOSPITAL MEDICAL CARE, TRANSPORTATION (1.7%)
Laidlaw, Inc., Class B 25,663 346,451
---------------
TELECOMMUNICATIONS (0.6%)
* Mobile Telecommunication Technologies Corp. 10,000 121,875
---------------
TOYS (2.1%)
Hasbro, Inc. 15,000 435,000
---------------
TOTAL COMMON STOCKS (Cost $1,876,695) (10.6%) 2,179,422
---------------
TOTAL INVESTMENT SECURITIES (Cost $18,806,195) (98.1%) $ 20,177,022
Other assets, less liabilities (1.9%) 394,238
---------------
NET ASSETS (100%) $ 20,571,260
===============
</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, 1997 was $18,806,195, the aggregate gross unrealized appreciation for all
investments was $1,553,782 and aggregate gross unrealized depreciation for
all investments was $182,955.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 358
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
BIO-TECHNOLOGY (1.9%)
* Genzyme Corporation 4,800 $114,600
--------
CAPITAL GOODS - DIVERSIFIED (2.4%)
Danaher Corporation 3,000 145,500
--------
CAPITAL GOODS/INDUSTRIAL (1.9%)
* Vishay Intertechnology, Inc. 3,836 112,703
--------
COMMUNICATION - EQUIPMENT (6.3%)
* ANADIGICS, Inc. 4,500 149,063
ECI Telecommunications Ltd. Designs 6,300 145,687
* Saville Systems Ireland plc 2,000 85,250
--------
380,000
--------
COMMUNICATION - NETWORK (3.4%)
* ICG Communications, Inc. 5,000 80,000
* PairGain Technologies, Inc. 6,000 125,250
--------
205,250
--------
COMPUTER NETWORKING (3.3%)
* Ascend Communications, Inc. 3,600 200,700
--------
COMPUTER PERIPHERAL EQUIPMENT (0.9%)
* Dialogic Corporation 1,800 52,650
--------
COMPUTER SERVICES (4.6%)
* HNC Software, Inc. 5,200 171,600
* Rational Software Corporation 5,400 101,925
--------
273,525
--------
COMPUTER SOFTWARE (3.1%)
* Business Objects S. A. - ADR 5,200 50,050
* Media 100, Inc. 8,000 46,000
* Sapient Corporation 2,000 89,500
--------
185,550
--------
CONSUMER GROWTH (8.3%)
* Activision, Inc. 16,000 208,000
* Conso Products Company 7,625 101,031
* Electronic Arts, Inc. 3,700 118,400
* Lin Television Corporation 1,700 73,738
--------
501,169
--------
</TABLE>
<PAGE> 359
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ELECTRONIC PRODUCTS - MISCELLANEOUS (0.5%)
AVX Corporation 1,000 $ 27,250
--------
ENERGY (2.7%)
Cross Timbers Oil Company 8,250 159,844
--------
HEALTH (4.3%)
* HCIA, Inc. 2,300 56,925
* National Dentex Corporation 6,000 104,250
* PacifiCare Health Systems, Inc. 1,200 95,100
--------
256,275
--------
HOUSEHOLD FURNISHINGS & APPLIANCES (2.8%)
* Williams-Sonoma, Inc. 4,500 165,938
--------
MANAGED CARE (7.4%)
* CRA Managed Care, Inc. 2,500 114,375
* Healthsource, Inc. 4,000 86,000
* MedPartners, Inc. 7,100 134,900
* PhyCor, Inc. 3,787 108,402
--------
443,677
--------
MISCELLANEOUS CONSUMER (2.5%)
* On Assignment, Inc. 4,000 152,500
--------
OFFICE-BUSINESS EQUIPMENT (2.4%)
* HPR, Inc. 9,000 146,250
--------
OFFSHORE DRILLING (1.6%)
* Parker Drilling Company 10,000 96,250
--------
OIL WELL SERVICES (1.3%)
* Dawson Production Services, Inc. 7,000 78,750
--------
OPTICAL INSTRUMENTS AND LENSES (1.6%)
* KLA-Tencor Corporation 2,000 95,125
--------
PAPER (1.2%)
* Data Documents, Inc. 6,000 71,250
--------
</TABLE>
<PAGE> 360
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
PHARMACEUTICALS (4.9%)
* Centocor, Inc. 3,200 $ 112,800
* Dura Pharmaceuticals, Inc. 4,600 182,850
----------
295,650
----------
RESTAURANTS (0.4%)
* Outback Steakhouse, Inc. 1,000 23,250
----------
RETAIL - SPECIALTY (10.6%)
* Borders Group, Inc. 7,900 171,825
* Corporate Express, Inc. 8,600 118,250
* PetSmart, Inc. 6,000 73,500
* Staples, Inc. 6,325 139,150
* The Sports Authority, Inc. 7,500 135,000
----------
637,725
----------
SEMICONDUCTOR-RELATED DEVICES (5.4%)
* Etec Systems, Inc. 1,800 80,100
Intel Corporation 800 121,200
* LSI Logic Corporation 3,000 125,250
----------
326,550
----------
SYSTEM SOFTWARE/CLIENT SERVER (1.6%)
* Hummingbird Communications Ltd. 3,400 96,900
----------
TELECOMMUNICATIONS EQUIPMENT (7.3%)
* Comverse Technology, Inc. 2,000 91,500
* DSC Communications Corporation 2,000 51,125
* Newbridge Networks Corporation 3,600 144,450
* P-COM, Inc. 3,200 103,200
* Proxim, Inc. 2,000 51,250
----------
441,525
----------
TOTAL COMMON STOCKS (Cost $4,710,070) (94.6%) 5,686,356
----------
</TABLE>
<PAGE> 361
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE EMERGING GROWTH FUND
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 280,000 $ 280,000
U.S. Treasury Plus Money Market Fund 150,000 150,000
----------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $430,000) (7.2%) 430,000
----------
TOTAL INVESTMENTS (Cost $5,140,070) (101.8%) 6,116,356
Liabilities, less other assets (-1.8%) (106,650)
----------
NET ASSETS (100%) $6,009,706
==========
</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 May 31,
1997 was $5,140,070, the aggregate gross unrealized appreciation for all
investments was $1,463,144 and aggregate gross unrealized depreciation for
all investments was $486,858.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 362
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INFORMED INVESTORS GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AIRLINES (3.8%)
Southwest Airlines Company 8,000 $206,000
--------
APPAREL MANUFACTURING (2.5%)
Liz Claiborne, Inc. 3,000 136,875
--------
BANKS (5.0%)
State Street Corporation 6,200 276,675
--------
CLOTHING (4.6%)
* Jones Apparel Group, Inc. 5,400 253,125
--------
COMPUTER MEMORY DEVICES (1.7%)
* EMC Corporation 2,300 91,712
--------
COMPUTER MICROSYSTEMS (2.3%)
* Dallas Semiconductor Corporation 3,200 123,600
--------
COMPUTER - PERIPHERAL EQUIPMENT (2.1%)
* Adaptec, Inc. 3,200 117,600
--------
COMPUTERS (8.2%)
* Dell Computer Corporation 2,100 236,250
* Gateway 2000, Inc. 3,200 212,400
--------
448,650
--------
FINANCIAL/BUSINESS SERVICES (17.1%)
Bear Stearns Companies, Inc. 8,400 273,000
Lehman Brothers Holdings, Inc. 5,400 218,025
Merrill Lynch & Company 2,300 243,800
Paine Webber Group, Inc. 5,700 202,350
--------
937,175
--------
GLASS PRODUCTS (3.5%)
Corning, Inc. 3,800 191,425
--------
HOSPITAL MANAGEMENT (3.8%)
* Tenet Healthcare Corporation 7,700 211,750
--------
LIFE/HEALTH INSURANCE (14.6%)
Conseco, Inc. 8,200 328,000
SunAmerica, Inc. 4,800 226,800
Torchmark Corporation 3,800 249,375
--------
804,175
--------
</TABLE>
<PAGE> 363
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INFORMED INVESTORS GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MISCELLANEOUS MANUFACTURING (4.0%)
Minnesota Mining and Manufacturing Company 2,400 $ 220,200
----------
MULTI-LINE INSURANCE (0.2%)
Travelers Group, inc. 200 10,975
----------
PAPER (2.4%)
International Paper Company 2,700 129,600
----------
RETAIL (4.1%)
* Costco Companies, Inc. 6,700 226,125
----------
RETAIL STORES (3.8%)
Dayton Hudson Corporation 4,400 211,750
----------
RETAIL STORES - GENERAL MERCHANDISING (3.4%)
Dollar General Corporation 5,500 184,938
----------
RETAIL - JEWELRY (2.4%)
Tiffany & Company 2,800 129,850
----------
TELEPHONE & TELEGRAPH APPARATUS (4.6%)
* Tellabs, Inc. 5,000 251,250
----------
TOTAL COMMON STOCKS (Cost $4,698,451) (94.1%) 5,163,450
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund
(Cost $80,000) (1.5%) 80,000 80,000
----------
TOTAL INVESTMENTS (Cost $4,778,451) (95.6%) 5,243,450
Other assets, less liabilities (4.4%) 246,483
----------
NET ASSETS (100%) $5,489,933
==========
</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,
1997 was $4,778,451, the aggregated gross unrealized appreciation for all
investments was $522,884 and aggregate gross unrealized depreciation for all
investments was $57,885.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 364
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AUSTRALIA (0.7%)
Australian Hospital Care Ltd. 49,000 $ 82,014
----------
DENMARK (2.6%)
* Carli Gray International 1,400 83,981
Novo Nordisk 2,200 235,853
----------
319,834
----------
FINLAND (2.4%)
Oy Nokia AB 2,300 150,810
TT Tieto OY 1,700 143,340
----------
294,150
----------
FRANCE (6.3%)
Altran Technologies 500 160,632
* Carrefour 360 236,937
Pinault - Printemps - Redoute 225 94,556
Sidel 2,800 196,926
Sodexho Alliance 150 69,810
----------
758,861
----------
GERMANY (4.9%)
Altana AG 150 138,545
Bayerische Motoren Werke (BMW) AG 200 163,980
Fresenius AG Pfd. 722 159,820
Porsche AG Pfd. 110 132,802
----------
595,147
----------
HONG KONG (11.8%)
Hang Seng Bank Ltd. 18,000 216,056
Henderson Land Development Company Ltd. 24,000 233,867
Hong Kong & China Gas Company 182,496 317,978
HSBC Holdings 8,436 255,868
* New World Infrastructure Ltd. 19,000 59,222
Sun Hung Kai Properties Ltd. 20,000 245,870
Wing Hang Bank Ltd. 21,600 102,870
----------
1,431,731
----------
</TABLE>
<PAGE> 365
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INDONESIA (0.7%)
* PT Bank International Indonesia 61,156 $ 50,230
PT Gudang Garam 8,000 34,497
PT Steady Safe 1,467 1,612
---------
86,339
---------
ITALY (1.6%)
Bulgari SpA 7,200 142,514
* Telecom Italia Mobile SpA 28,600 50,198
---------
192,712
---------
MALAYSIA (6.3%)
* Arab-Malaysian Merchant Bank Berhad 16,000 101,242
Berjaya Sports Toto Berhad 26,000 121,060
Commerce Asset Holding Berhad 20,000 58,103
DCB Holdings Berhad 32,000 103,152
Gamuda Berhad 17,333 62,081
Malayan Banking Berhad 20,000 210,920
United Engineers (Malaysia) Ltd. 13,000 105,022
---------
761,580
---------
NETHERLANDS (5.5%)
Elsevier NV 6,000 101,621
Koninklijke Ahold NV 2,245 170,695
Koninklijke Ahrend Groep NV 1,500 94,976
Nutricia Verenidge Bedrijven N.V. 600 93,616
* Ordina Beheer N.V. 1,040 78,153
Wolters Kluwer NV 1,012 121,881
---------
660,942
---------
NORWAY (4.4%)
Kverneland ASA 3,200 94,471
* Merkantildata 8,500 168,487
* Tandberg ASA 3,300 39,897
* Tandberg Television ASA 13,200 120,619
Tomra Systems ASA 5,000 114,574
---------
538,048
---------
PHILIPPINES (1.2%)
* Belle Corporation 200,000 53,091
* DMCI Holdings, Inc. 143,000 86,765
---------
139,856
---------
</TABLE>
<PAGE> 366
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
SINGAPORE (9.7%)
City Developments Limited 9,000 $ 83,677
DBS Land Limited 36,000 125,830
Development Bank of Singapore Limited 15,000 187,697
Oversea-Chinese Banking Corporation Ltd. 15,000 186,648
Overseas Union Bank Ltd. 20,000 137,015
Parkway Holdings Limited 43,000 213,422
United Overseas Bank Ltd. 10,000 102,761
Wing Tai Holdings Ltd. 45,000 134,009
----------
1,171,059
----------
SPAIN (3.8%)
Banco Intercontinental Espanol, SA 900 152,410
Electricas Reunidas de Zaragoza, SA 2,800 105,693
* Sol Melia, SA 5,600 207,896
----------
465,999
----------
SWEDEN (3.7%)
Autoliv AB 6,000 212,604
Ericsson Telefonaktiebolaget 6,800 239,192
----------
451,796
----------
SWITZERLAND (7.5%)
Nestle SA 70 87,215
Novartis AG Regular Shares 190 258,247
Novartis AG 30 40,882
Roche Holding AG 30 267,167
* Roche Holding AG Warrants 98 "Jubilee" 8 561
Zurich Versicherungs 700 257,681
----------
911,753
----------
THAILAND (0.2%)
Central Pattana Public Company Ltd. 10,000 26,653
* Thai Farmers Bank Public Company Ltd. (Warrants) 500 501
----------
27,154
----------
UNITED KINGDOM (12.0%)
Compass Group plc 12,700 141,752
HSBC Holdings plc 12,758 396,565
J.D. Wetherspoon plc 4,618 100,004
Lloyds TSB Group plc 13,000 130,825
Logica plc 6,600 93,571
Misys plc 5,400 122,581
Serco Group plc 8,200 92,735
Standard Chartered plc 10,476 166,121
Zeneca Group plc 7,000 212,652
----------
1,456,806
----------
</TABLE>
<PAGE> 367
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE INTERNATIONAL EQUITY FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
UNITED STATES (11.7%)
Credicorp Ltd., ADR 5,000 $ 112,500
Panamerican Beverages, Inc., ADR 10,000 290,000
Santa Isabel, ADR 5,200 151,450
* State Bank of India, ADR 15,000 379,650
Telecomunicacoes Brasileiras SA, ADR 1,400 194,600
Telefonica de Argentina SA, ADR 5,000 181,250
Telefonica del Peru SA, ADR 4,500 114,188
-----------
1,423,638
-----------
TOTAL COMMON STOCKS (Cost $10,050,524)(97.0%) 11,769,419
MONEY MARKET MUTUAL FUNDS
U.S. Government Money Market Mutual Fund
(Cost $250,000)(2.1%) 250,000 250,000
-----------
TOTAL INVESTMENTS (Cost $10,300,524) (99.1%) 12,019,419
Other assets, less liabilities (0.9%) 109,835
-----------
NET ASSETS (100%) $12,129,254
===========
</TABLE>
INDUSTRY COMPOSITION
<TABLE>
<CAPTION>
INDUSTRY PERCENT
- -------- -------
<S> <C>
Auto/Truck Manufacturers 2.4
Bio Tech & Med Devices 2.5
Cellular Telephone 0.4
Commercial Banks 22.1
Computer Software 3.6
Computers & Peripheral 2.7
Construction & Engineering 2.6
Consumer Service 2.3
Drug & Health Care 10.8
Electric Power Utilities 0.9
Entertainment & Leisure 1.4
Financial Services 5.2
Food Processing 3.2
Lodging & Restaurants 3.7
Machinery 4.2
Public Utilities 2.6
Publishing 1.8
Real Estate Development 6.1
Real Estate Investment 0.9
Retailing 8.7
Telecommunications 8.6
Tobacco 0.3
----
Industry percent of net assets 97.0%
Money Market Mutual Funds 2.1%
Other assets, less liabilities 0.9%
----
Percent of Net Assets 100%
----
</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, 1997 was $10,300,524, the aggregate gross unrealized appreciation for all
investments was $2,002,534 and aggregate gross unrealized depreciation for
all investments was $283,576.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 368
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE LARGE-CAP VALUE FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
ATHLETIC FOOTWEAR/APPAREL (2.7%)
Nike, Inc. 1,500 $ 85,500
------------
BANKS (3.4%)
Wells Fargo & Company 400 105,400
------------
BEVERAGES (9.5%)
Anheuser-Busch Companies, Inc. 2,400 102,900
Coca-Cola Company 1,700 116,025
PepsiCo, Inc. 2,100 77,175
------------
296,100
------------
COMPUTER SOFTWARE (4.0%)
* Microsoft Corporation 1,000 124,000
------------
COMPUTERS (4.4%)
Hewlett-Packard Company 1,000 51,500
International Business Machines Corporation 1,000 86,500
------------
138,000
------------
CONSUMER PRODUCTS (8.1%)
Clorox Company 1,000 126,250
Gillette Company 1,400 124,425
------------
250,675
------------
DRUGS (4.1%)
Abbott Labs 2,000 126,000
------------
ENTERTAINMENT (3.9%)
The Walt Disney Company (Holding Co.) 1,500 122,813
------------
FINANCIAL/BUSINESS SERVICES (8.4%)
American Express Company 2,000 139,000
Charles Schwab Corporation 3,000 121,875
------------
260,875
------------
FOOD (13.3%)
Campbell Soup Company 2,800 128,800
Hershey Foods Corporation 2,200 123,475
Quaker Oats Company 1,500 61,875
Wrigley (WM) Jr. Company 1,700 100,725
------------
414,875
------------
HEALTH (3.2%)
Becton, Dickinson & Company 2,000 98,500
------------
</TABLE>
<PAGE> 369
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE LARGE-CAP VALUE FUND
COMMON STOCKS
<TABLE>
<CAPTION>
SHARES/ VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
MEDICAL SUPPLIES (6.5%)
Kimberly-Clark Corporation 2,000 $ 100,250
Pfizer, Inc. 1,000 102,875
----------
203,125
----------
PHARMACEUTICALS (10.7%)
Eli Lilly & Company 1,000 93,000
Johnson & Johnson 1,900 113,763
Merck & Company, Inc. 1,400 125,825
----------
332,588
----------
PHOTOGRAPHY (3.2%)
Eastman Kodak Company 1,200 99,450
----------
PUBLISHING (3.9%)
Gannett Company, Inc. 1,300 120,250
----------
PUBLISHING - NEWSPAPERS (2.8%)
New York Times Company Class A 1,900 87,518
----------
SEMICONDUCTOR - RELATED DEVICE (4.9%)
Intel Corporation 1,000 151,500
----------
TOTAL COMMON STOCKS (Cost $2,260,193)(97.0%) 3,017,169
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund
(Cost $135,000) (4.4%) 135,000 135,000
----------
TOTAL INVESTMENTS (Cost $2,395,193) (101.4%) 3,152,169
Liabilities, less other assets (-1.4%) (42,189)
----------
NET ASSETS (100%) $3,109,980
==========
</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, 1997 was $2,395,193, the aggregate gross unrealized appreciation for all
investments was $758,447 and aggregate gross unrealized depreciation for all
investments was $1,471.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 370
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
AIR FREIGHT (2.3%)
Circle International Group, Inc. 3,300 $ 91,575
--------
AUTO PARTS-ORIGINAL EQUIPMENT (5.7%)
* Gentex Corporation 4,600 92,575
Paccar, Inc. 3,000 135,750
--------
228,325
--------
BEVERAGES (3.6%)
* Robert Mondavi Corporation 3,200 142,400
--------
BUSINESS EQUIPMENT/SERVICE (2.5%)
* Greenwich Air Services, Inc. 3,500 101,500
--------
CLOTHING (3.3%)
* Fruit of the Loom, Inc. 3,800 132,525
--------
COMMUNICATION - EQUIPMENT (2.5%)
* Qualcomm, Inc. 2,100 101,325
--------
COMPUTER MICROSYSTEMS (4.6%)
* Dallas Semiconductor Corporation 4,800 185,400
--------
COMPUTER SOFTWARE (1.8%)
* Imnet Systems, Inc. 2,900 72,500
--------
COMPUTERS - PERIPHERAL EQUIPMENT (4.3%)
* American Power Conversion Corp. 3,500 81,375
* MicroTouch Systems, Inc. 3,600 90,900
--------
172,275
--------
HOSPITAL SUPPLIES (2.7%)
* Advanced Technology Laboratories, Inc. 2,800 108,500
--------
HOUSEHOLD FURNISHINGS APPLIANCE (7.6%)
Bush Industries, Inc. 4,000 90,000
Herman Miller, Inc. 6,000 214,500
--------
304,500
--------
</TABLE>
<PAGE> 371
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
COMMON STOCKS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ --------
<S> <C> <C>
INSTRUMENTS - SCIENTIFIC (2.0%)
* Water Corporation 2,500 $ 80,625
--------
LIFE INSURANCE (6.0%)
Protective Life Corporation 3,000 134,250
Western National Corporation 4,000 104,500
--------
238,750
--------
NURSING HOMES (3.0%)
* Genesis Health Ventures, Inc. 3,600 118,350
--------
OIL/GAS EQUIPMENT SERVICES (10.1%)
* Nuevo Energy Company 3,300 143,962
* Rowan Companies, Inc. 5,700 131,813
Tidewater, Inc. 3,050 128,481
--------
404,256
--------
POLLUTION CONTROL (4.9%)
* Newpark Resources, Inc. 3,770 197,925
--------
RESTAURANTS (2.9%)
* Cracker Barrel Old Country Store, Inc. 4,000 116,000
--------
RETAIL (2.5%)
* Stein Mart, Inc. 3,300 99,825
--------
RETAIL-SPECIALTY (4.8%)
* AutoZone, Inc. 4,500 105,188
Pier 1 Imports, Inc. 3,800 85,025
--------
190,213
--------
RETAIL STORES-DRUGS (3.3%)
* CVS Corporation 2,800 134,050
--------
SEMICONDUCTOR RELATED DEVICE (2.2%)
* Photronics, Inc. 2,000 89,250
--------
SPECIAL INDUSTRIAL MACHINERY (6.0%)
Briggs & Stratton Corporation 2,200 113,575
Pentair Industries, Inc. 3,800 124,925
--------
238,500
--------
TRUCKERS (3.9%)
* Swift Transportation Co., Inc. 4,800 154,800
--------
</TABLE>
<PAGE> 372
THE RESERVE PRIVATE EQUITY SERIES
SCHEDULE OF PORTFOLIO INVESTMENTS - (CONTINUED)
MAY 31, 1997
RESERVE MID-CAP GROWTH FUND
<TABLE>
<CAPTION>
VALUE
UNITS (NOTE 1)
----- --------
<S> <C> <C>
TOTAL COMMON STOCKS (Cost $3,064,256) (92.5%) $3,703,369
----------
MONEY MARKET MUTUAL FUNDS
Vista U.S. Government Money Market Fund 185,000 185,000
Vista Treasury Plus Money Market Fund 115,000 115,000
----------
TOTAL MONEY MARKET MUTUAL FUNDS (Cost $300,000) (7.5%) 300,000
----------
TOTAL INVESTMENTS (Cost $3,364,256) (100.0%) 4,003,369
Liabilities, less other assets (0.0%) (1,234)
----------
NET ASSETS (100%) $4,002,135
==========
</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, 1997 was $3,364,256, the aggregate gross unrealized appreciation for all
investments was $695,869 and aggregate gross unrealized depreciation for all
investments was $56,756.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 373
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
BLUE CHIP CONVERTIBLE EMERGING
GROWTH FUND SECURITIES FUND GROWTH FUND
----------- --------------- -----------
<S> <C> <C> <C>
ASSETS
Investment in securities, at value
(cost $4,842,303, $18,806,195,
$5,140,070, respectively) $5,344,337 $20,177,022 $6,116,356
Cash 50,872 51,574 32,911
Receivable for investment securities sold 77,263 379,631 --
Dividends receivable 2,268 32,187 290
Interest receivable 21 154,372 26
---------- ----------- ----------
Total assets 5,474,761 20,794,786 6,149,583
---------- ----------- ----------
LIABILITIES
Payable for investment securities purchased -- 223,126 139,257
Payable for fund shares redeemed 77 56 60
Other payables and accrued expenses 824 344 560
---------- ----------- ----------
Total liabilities 901 223,526 139,877
---------- ----------- ----------
NET ASSETS $5,473,860 $20,571,260 $6,009,706
========== =========== ==========
NET ASSETS CONSIST OF (Note 1):
Capital stock (Par Value $.001 per share) $ 354 $ 1,857 $ 387
Additional paid in capital 4,125,193 18,809,616 5,620,631
Accumulated net realized gain (loss) on investments 846,279 218,279 (587,598)
Undistributed net investment income -- 170,681 --
Net unrealized appreciation on investments 502,034 1,370,827 976,286
---------- ----------- ----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $5,473,860 $20,571,260 $6,009,706
========== =========== ==========
CLASS A:
Net Assets $5,428,285 $20,552,883 $5,788,730
---------- ----------- ----------
Shares Outstanding 351,099 1,855,482 373,020
---------- ----------- ----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 15.46 $ 11.08 $ 15.52
========== =========== ==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 16.19 $ 11.60 $ 16.25
========== =========== ==========
CLASS D:
Net Assets $ 45,575 $ 18,377 $ 220,976
---------- ----------- ----------
Shares Outstanding 2,976 1,662 14,383
---------- ----------- ----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 15.31 $ 11.06 $ 15.36
========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 374
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES - (CONTINUED)
MAY 31, 1997
<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 $4,778,451, $10,300,524,
$2,395,193, respectively) $5,243,450 $12,019,419 $3,152,169
Cash 12,377 134,287 38,202
Receivable for investment securities sold 665,504 56,644 --
Dividends receivable 4,758 10,529 3,517
Interest receivable 52 -- --
---------- ----------- ----------
Total assets 5,926,141 12,220,879 3,193,888
---------- ----------- ----------
LIABILITIES
Payable for investment securities purchased 433,793 91,069 83,370
Payable for fund shares redeemed 2,212 63 73
Other payables and accrued expenses 203 493 465
---------- ----------- ----------
Total liabilities 436,208 91,625 83,908
---------- ----------- ----------
NET ASSETS $5,489,933 $12,129,254 $3,109,980
========== =========== ==========
NET ASSETS CONSIST OF (Note 1):
Capital Stock (Par Value $.001 per share) $ 478 $ 963 $ 213
Additional paid in capital 4,610,691 10,754,431 2,331,412
Accumulated net realized gain (loss) on investments
and foreign currency transactions 413,765 (345,098) 21,379
Net unrealized appreciation on investments and
foreign currency transactions 464,999 1,718,958 756,976
---------- ----------- ----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $5,489,933 $12,129,254 $3,109,980
========== =========== ==========
CLASS A:
Net Assets $5,476,969 $12,098,843 $3,054,239
---------- ----------- ----------
Shares Outstanding 477,196 960,665 209,015
---------- ----------- ----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 11.48 $ 12.59 $ 14.61
========== =========== ==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 12.02 $ 13.18 $ 15.30
========== =========== ==========
CLASS D:
Net Assets $ 12,964 $ 30,411 $ 55,741
---------- ----------- ----------
Shares Outstanding 1,141 2,436* 3,841
---------- ----------- ----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 11.36 $ 12.49 $ 14.51
========== =========== ==========
</TABLE>
* Calculated net asset value differs from actual net asset value due to rounding
of fractional shares.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 375
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF ASSETS AND LIABILITIES - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE
MID-CAP
GROWTH FUND
-----------
<S> <C>
ASSETS
Investment in securities, at value
(cost$3,364,256) $4,003,369
Cash 36,124
Receivable for investment securities sold 111,383
Receivable for fund shares sold 14,811
Dividends receivable 2,270
Interest receivable 16
----------
Total assets 4,167,973
----------
LIABILITIES
Payable for investment securities purchased 162,868
Payable for fund shares redeemed 2,970
----------
Total liabilities 165,838
----------
NET ASSETS $4,002,135
==========
NET ASSETS CONSIST OF (Note 1):
Capital Stock (Par Value $.001 per share) $ 304
Additional paid in capital 3,301,497
Accumulated net realized gain on investments 61,221
Net unrealized appreciation on investments 639,113
----------
NET ASSETS, at value, applicable to Shares of
Beneficial Interest outstanding (Note 5) $4,002,135
==========
CLASS A:
Net Assets $2,174,053
----------
Shares Outstanding 164,702
----------
Net Asset Value and redemption value per share
(net assets/shares outstanding) $ 13.20
==========
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) $ 13.82
==========
CLASS D:
Net Assets $1,828,082
----------
Shares Outstanding 139,681
----------
Net Asset Value, offering and redemption value per
share (net assets/shares outstanding) $ 13.09
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 376
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE RESERVE
BLUE CHIP CONVERTIBLE EMERGING INFORMED INVESTORS
GROWTH FUND SECURITIES FUND GROWTH FUND GROWTH FUND
----------- --------------- ----------- -----------
September 3, 1996
(commencement of
Year Ended operations) to Year Ended Year Ended
May 31, 1997 May 31, 1997 May 31, 1997 May 31, 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 32,176 $ 249,907 $ 3,372* $ 24,627
Interest 896 363,077 1,049 41,386
---------- ----------- ----------- -----------
Total investment income 33,072 612,984 4,421 66,013
EXPENSES
Comprehensive fee (Note 3) 79,311 205,951 98,087 83,573
12b-1 Fee (Note 4)
Class A 13,038 34,294 15,631 13,889
Class D 723 124 2,868 161
---------- ----------- ----------- -----------
Total expenses 93,072 240,369 116,586 97,623
---------- ----------- ----------- -----------
Less fees waived -- 188,113 -- --
---------- ----------- ----------- -----------
Net expenses -- 52,256 -- --
---------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) (60,000) 560,728 (112,165) (31,610)
---------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Proceeds from sales of securities 5,655,127 16,158,164 1,743,151 11,725,713
Cost of securities sold 4,678,455 15,933,090 2,320,269 10,472,385
---------- ----------- ----------- -----------
Net realized gain (loss) on
investments (Note 1) 976,672 225,074 (577,118) 1,253,328
Net unrealized appreciation
(depreciation) on investments (642,561) 1,370,827 (847,249) (1,975,139)
---------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments 334,111 1,595,901 (1,424,367) (721,811)
---------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 274,111 $ 2,156,629 $(1,536,532) $ (753,421)
========== =========== =========== ===========
</TABLE>
* Includes foreign tax withholding of $114
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 377
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF OPERATIONS - (CONTINUED)
<TABLE>
<CAPTION>
RESERVE RESERVE RESERVE
INTERNATIONAL LARGE-CAP MID-CAP
EQUITY FUND VALUE FUND GROWTH FUND
----------- ---------- -----------
Year Ended Year Ended Year Ended
May 31, 1997 May 31, 1997 May 31, 1997
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 97,550* $ 32,111 $ 13,610
Interest 561 212 533
---------- -------- ----------
Total investment income 98,111 32,323 14,143
EXPENSES
Comprehensive fee (Note 3) 145,974 33,940 49,028
12b-1 Fee (Note 4)
Class A 20,754 5,613 3,404
Class D 231 172 19,070
---------- -------- ----------
Total expenses 166,959 39,725 71,502
---------- -------- ----------
NET INVESTMENT LOSS (68,848) (7,402) (57,359)
---------- -------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Proceeds from sales of securities 3,956,864 383,913 3,034,153
Cost of securities sold 4,229,994 362,534 2,889,407
---------- -------- ----------
Net realized gain (loss) on
investments and foreign
currency transactions (Note 1) (273,130) 21,379 144,746
Net unrealized appreciation
on investments and foreign
currency transactions 1,387,936 686,853 185,442
---------- -------- ----------
Net realized and unrealized gain
on investments and foreign
currency transactions 1,114,806 708,232 330,188
---------- -------- ----------
Net increase in net assets resulting
from operations $1,045,958 $700,830 $ 272,829
========== ======== ==========
</TABLE>
* Includes foreign tax withholding of $14,966
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 378
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE
RESERVE BLUE CHIP GROWTH FUND SECURITIES FUND
----------------------------- -------------------
September 3, 1996
(commencement of
Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997
------------ ------------ -------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income gain (loss) $ (60,000) $ (34,916) $ 560,728
Net realized gain (loss) from investments 976,672 (2,045) 225,074
Net unrealized appreciation (depreciation)
from investments (642,561) 975,733 1,370,827
----------- ---------- ------------
Net increase in net assets
resulting from operations 274,111 938,772 2,156,629
----------- ---------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (6,791)
Net realized gain on investments (68,349) (164,889) (390,051)
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 1,176,349 2,757,098 20,601,861
Reinvestment of distributions 68,323 164,889 201,224
Cost of shares redeemed (1,148,732) (517,167) (1,991,612)
----------- ---------- ------------
Net increase in net assets resulting
from capital share transactions 95,940 2,404,820 18,811,473
----------- ---------- ------------
Net increase in net assets 301,702 3,178,703 20,571,260
NET ASSETS:
Beginning of period 5,172,158 1,993,455 0
----------- ---------- ------------
End of period (including undistributed
net investment income of $0, $0
and $170,681, respectively) $ 5,473,860 $5,172,158 $ 20,571,260
=========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL
RESERVE EMERGING GROWTH FUND EQUITY FUND
----------------------------- -------------------------------
July 13, 1996
(commencement of
Year Ended Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
----------------------------- -------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (112,165) $ (57,980) $ (68,848) $ (17,145)
Net realized gain (loss) from investments
and foreign currency transactions (577,118) 80,546 (273,130) (71,968)
Net unrealized appreciation (depreciation)
from investments and foreign
currency transactions (847,249) 1,655,638 1,387,936 331,022
----------- ---------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (1,536,532) 1,678,204 1,045,958 241,909
----------- ---------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments -- (93,899) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 2,187,444 4,281,980 8,057,063 3,465,234
Reinvestment of distributions -- 93,770 -- --
Cost of shares redeemed (1,540,646) (301,485) (558,291) (122,619)
----------- ---------- ----------- ----------
Net increase in net assets resulting
from capital share transactions 646,798 4,074,265 7,498,772 3,342,615
----------- ---------- ----------- ----------
Net increase (decrease) in net assets (889,734) 5,658,570 8,544,730 3,584,524
NET ASSETS:
Beginning of period 6,899,440 1,240,870 3,584,524 0
----------- ---------- ----------- ----------
End of period $ 6,009,706 $6,899,440 $12,129,254 $3,584,524
=========== ========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 379
THE RESERVE PRIVATE EQUITY SERIES
STATEMENTS OF CHANGES IN NET ASSETS - (CONTINUED)
<TABLE>
<CAPTION>
RESERVE
RESERVE INFORMED LARGE-CAP
INVESTORS GROWTH FUND VALUE FUND
-------------------------------- -------------------------------
January 2, 1996
(commencement of
Year Ended Year Ended Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (31,610) $ (147,983) $ (7,402) $ (1,091)
Net realized gain from investments 1,253,328 850,186 21,379 --
Net unrealized appreciation (depreciation)
from investments (1,975,139) 1,109,280 686,853 70,123
----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations (753,421) 1,811,483 700,830 69,032
----------- ----------- ----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (525,939) (795,337) -- --
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 1,400,871 6,254,939 1,345,107 1,165,180
Reinvestment of distributions 395,531 790,060 -- --
Cost of shares redeemed (1,435,172) (8,490,282) (167,017) (3,152)
----------- ----------- ----------- ----------
Net increase (decrease) in net assets resulting
from capital share transactions 361,230 (1,445,283) 1,178,090 1,162,028
----------- ----------- ----------- ----------
Net increase (decrease) in net assets (918,130) (429,137) 1,878,920 1,231,060
NET ASSETS:
Beginning of period 6,408,063 6,837,200 1,231,060 0
----------- ----------- ----------- ----------
End of period $ 5,489,933 $ 6,408,063 $ 3,109,980 $1,231,060
=========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
RESERVE MID-CAP
GROWTH FUND
-------------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment loss $ (57,359) $ (32,656)
Net realized gain (loss) from investments 144,746 (83,525)
Net unrealized appreciation from
investments 185,442 453,671
----------- ----------
Net increase in net assets
resulting from operations 272,829 337,490
----------- ----------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5)
Net proceeds from sales of shares 3,118,364 2,345,759
Cost of shares redeemed (1,928,613) (143,694)
----------- ----------
Net increase in net assets resulting
from capital share transactions 1,189,751 2,202,065
----------- ----------
Net increase in net assets 1,462,580 2,539,555
NET ASSETS:
Beginning of period 2,539,555 0
----------- ----------
End of period $ 4,002,135 $2,539,555
=========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 380
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Reserve Private Equity Series (the "Trust") consists of the following
funds: Reserve Blue Chip Growth Fund, Reserve Convertible Securities Fund,
Reserve Emerging Growth Fund, Reserve Informed Investors Growth Fund,
Reserve International Equity Fund, Reserve Large-Cap Value Fund, and
Reserve Mid-Cap Growth Fund (formerly 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, 1997 as follows:
[See table below]
<PAGE> 381
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------
Undistributed
Net Accumulated
Investment Realized
Reserve Fund Capital Income Gain
------------ ------- ------ ----
<S> <C> <C> <C>
Blue Chip Growth Fund (112,615) 60,000 52,615
Emerging Growth Fund (112,165) 112,165 --
Informed Investors Growth Fund (31,610) 31,610 --
International Equity Fund (68,848) 68,848 --
Large-Cap Value Fund (7,402) 7,402 --
Mid-Cap Growth Fund (57,359) 57,359 --
</TABLE>
These reclassifications had no effect on net investment income, net
realized gain on investments, or net assets for the year ended May 31,
1997.
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.
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, 1997, which are available to offset
future realized capital gains, if any:
<TABLE>
<CAPTION>
Capital loss Expiration
carryforward year
------------ ----
<S> <C> <C>
Reserve Emerging Growth Fund $161,015 2005
Reserve International Equity Fund 71,968 2004
Reserve International Equity Fund 178,347 2005
</TABLE>
<PAGE> 382
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
2. INVESTMENT ACTIVITY
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the year ended May 31, 1997, were
as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate
Reserve Fund Purchases Sales
------------ --------- -----
<S> <C> <C>
Blue Chip Growth Fund $ 5,425,272 $ 5,655,127
Convertible Securities Fund 34,711,469 16,158,164
Emerging Growth Fund 2,264,488 1,743,151
Informed Investors Growth Fund 11,386,974 11,725,713
International Equity Fund 11,336,214 3,956,864
Large-Cap Value Fund 1,507,717 383,913
Mid-Cap Growth Fund 4,017,934 3,034,153
</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 except for the International
Equity Fund for which it receives 1.75%. RMCI is currently waiving a
portion of its comprehensive fee in the Reserve Convertible Securities
Fund.
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
decisions for 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%
Convertible Securities Fund New Vernon Advisors, Inc. 0.75%
Emerging Growth Fund Roanoke Asset Management Corp. 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 Southern Capital Advisors 0.75%
</TABLE>
Trainer, Wortham & Company, Inc. owns 24% of the outstanding shares of the
Reserve Blue Chip Growth Fund at May 31, 1997.
<PAGE> 383
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
As of May 31, 1997, RMCI and affiliated persons owned 7%, 13%, 5%, 11%,
20%, and 25% of the Reserve Blue Chip Growth Fund, Reserve Emerging Growth
Fund, Reserve Informed Investors Growth Fund, Reserve International Equity
Fund, Reserve Large-Cap Value Fund, and Reserve Mid-Cap Growth Fund,
respectively. Taconic Petroleum Corp. owns 24% of Reserve Large-Cap Value
Fund. Christopher E. Vroom owns 7% of the Reserve Small Cap Growth Fund
(formerly Emerging Growth Fund).
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 shares and 1.00% per annum for Class D shares of the
average daily net assets of shareholder accounts as to which the payee has
rendered distribution assistance. For the year ended May 31, 1997, the
Funds paid distribution expenses to RPI as follows:
<TABLE>
<CAPTION>
Reserve Fund Class A Class D
------------ ------- -------
<S> <C> <C>
Blue Chip Growth Fund $13,038 $ 723
Convertible Securities Fund* 283 14
Emerging Growth Fund 15,631 2,868
Informed Investors Growth Fund 13,889 161
International Equity Fund 20,754 231
Large-Cap Value Fund 5,613 172
Mid-Cap Growth Fund 3,404 19,070
</TABLE>
* RMCI waived 12b-1 fees of $34,011 and $110, for Reserve Convertible
Securities Fund Class A and Class D, respectively, for the period
September 3, 1996 (commencement of operations) to May 31, 1997.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock of each Fund for the period ended May 31,
1997, were as follows:
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
----------------------------- -------------------------------- ------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
-------------------------------- ------------------------
Shares Amount Shares Amount
------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold 76,231 $ 1,119,812 3,957 $ 56,537
Reinvested 4,875 67,171 84 1,152
Redeemed (74,089) (1,092,588) (3,930) (56,144)
------- ----------- ------ --------
Net increase 7,017 $ 94,395 111 $ 1,545
======= =========== ====== ========
</TABLE>
<PAGE> 384
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE SECURITIES FUND CLASS A CLASS D
- ----------------------------------- ------------------------------- -------------------------------
September 3, 1996 September 3, 1996
(commencement of operations) to (commencement of operations) to
May 31, 1997 May 31, 1997
------------------------------- --------------------------------
Shares Amount Shares Amount
---------- ----------- ------ --------
<S> <C> <C> <C> <C>
Sold 2,026,485 $20,572,892 2,814 $ 28,969
Reinvested 19,551 201,111 11 113
Redeemed (190,554) (1,979,449) (1,163) (12,163)
--------- ----------- ------ --------
Net increase 1,855,482 $18,794,554 1,662 $ 16,919
========= =========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- --------------------------------- ------------------------------- ----------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------------- ----------------------------
Shares Amount Shares Amount
------- ----------- ------ ---------
<S> <C> <C> <C> <C>
Sold 117,069 $ 1,999,906 10,982 $ 187,538
Redeemed (84,292) (1,389,829) (9,047) (150,817)
------- ----------- ------ ---------
Net increase 32,777 $ 610,077 1,935 $ 36,721
======= =========== ====== =========
</TABLE>
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- -------------------------------- -----------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
-------------------------------- -----------------------
Shares Amount Shares Amount
-------- ---------- ------ ------
<S> <C> <C> <C> <C>
Sold 116,034 $ 1,389,343 911 $11,528
Reinvested 37,456 395,531 -- --
Redeemed (121,475) (1,425,528) (814) (9,644)
-------- ---------- ---- -------
Net increase 32,015 $ 359,346 97 $ 1,884
======== ========== ==== =======
</TABLE>
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- --------------------------- ---------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
--------------------------- ---------------------------
Shares Amount Shares Amount
------- ---------- ------ -------
<S> <C> <C> <C> <C>
Sold 689,779 $8,029,446 2,446 $27,617
Redeemed (47,041) (551,604) (562) (6,687)
------- ---------- ----- -------
Net increase 642,738 $7,477,842 1,884 $20,930
======= ========== ===== =======
</TABLE>
<PAGE> 385
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE LARGE-CAP VALUE FUND CLASS A CLASS D
- ----------------------------- ------------------------- ----------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------- ----------------------
Shares Amount Shares Amount
------- ---------- ------ --------
<S> <C> <C> <C> <C>
Sold 108,518 $1,276,605 5,080 $ 68,502
Redeemed (11,940) (151,013) (1,239) (16,004)
------- ---------- ------ --------
Net increase 96,578 $1,125,592 3,841 $ 52,498
======= ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ------------------------- ---------------------------
Year Ended Year Ended
May 31, 1997 May 31, 1997
------------------------- ---------------------------
Shares Amount Shares Amount
------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Sold 198,244 $2,390,365 58,332 $ 727,999
Redeemed (44,223) (530,105) (114,850) (1,398,508)
------- ---------- -------- -----------
Net increase 154,021 1,860,260 (56,518) $ (670,509)
======= ========== ======== ===========
</TABLE>
Transactions in capital stock of each Fund for the period ended May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
- ----------------------------- ------------------------- --------------------
February 13, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
------------------------- --------------------
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>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- ---------------------------- ------------------------- ---------------------
February 26, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
------------------------- ---------------------
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>
<PAGE> 386
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- --------------------------- ----------------------
February 13, 1996
(commencement
Year Ended of operations) to
May 31, 1996 May 31, 1996
--------------------------- ----------------------
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>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- -------------------------- ------------------
July 13, 1995 March 11, 1996
(commencement (commencement
of operations) to of operations) to
May 31, 1996 May 31, 1996
-------------------------- ------------------
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>
RESERVE LARGE-CAP VALUE FUND CLASS A
- ---------------------------- ------------------------
January 2, 1996
(commencement
of operations) to
May 31, 1996
-------------------------
Shares Amount
------- ----------
<S> <C> <C>
Sold 112,729 $1,165,180
Redeemed (292) (3,152)
------- ----------
Net increase 112,437 $1,162,028
======= ==========
</TABLE>
<PAGE> 387
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ----------------------- -------------------------
March 13, 1996
(Commencement
of operations) to Year Ended
May 31, 1996 May 31, 1996
----------------------- -------------------------
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>
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.
<PAGE> 388
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
7. FINANCIAL HIGHLIGHTS (FOR EACH SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
RESERVE BLUE CHIP GROWTH FUND CLASS A CLASS D
- ----------------------------- ------------------------------------------------- ---------------------------------
October 28, 1994 February 13, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ---------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 14.91 $12.03 $10.00 $ 14.88 $13.49
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.17) (.10) (.03) (0.46) (.04)
Net realized and unrealized gain 0.91 3.62 2.06 1.08 1.43
------- ------ ------ ------- ------
Total from investment operations 0.74 3.52 2.03 0.62 1.39
Less distribution from net realized gain (.19) (.64) -- (.19) --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 15.46 $14.91 $12.03 $ 15.31 $14.88
======= ====== ====== ======= ======
Total Return 5.12 % 30.10 % 20.30%(2) 4.32 % 10.30 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,428 $5,130 $1,993 $ 46 $ 43
Ratio of expenses to average net assets
before waiver 1.75 % 1.75 % 1.75%(1) 2.50 % 2.50 %(1)
Ratio of expenses to average net assets,
net of waiver 1.75 % 1.75 % 1.73%(1) 2.50 % 2.50 %(1)
Ratio of net investment loss to
average net assets, before waiver (1.13)% (0.94)% (0.72)%(1) (1.90)% (1.70)%(1)
Ratio of net investment loss to average
net assets, net of waiver (1.13)% (0.94)% (0.70)%(1) (1.90)% (1.70)%(1)
Portfolio turnover rate 109 % 72 % 68 % 109 % 72 %
Average commission per share on
portfolio transactions $0.0419 $ 0.06 N/A $0.0419 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
RESERVE CONVERTIBLE SECURITIES FUND CLASS A CLASS D
- ----------------------------------- ----------------- -----------------
September 3, 1996 September 3, 1996
(commencement of (commencement of
operations) to operations) to
May 31, 1997 May 31, 1997
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, beginning of period $ 10.00 $ 10.00
------- -------
Income from investment operations
Net investment income 0.34 0.33
Net realized and unrealized gain (loss) 0.99 0.98
------- -------
Total from investment operations 1.33 1.31
Less distribution from net investment
income and realized gain (.25) (.25)
------- -------
NET ASSET VALUE, end of period $ 11.08 $ 11.06
======= =======
Total Return 13.53 %(2) 13.33 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $20,553 $ 18
Ratio of expenses to average net assets before waiver 2.36 %(1) 3.37 %(1)
Ratio of expenses to average net assets, net of waiver 0.52 %(1) 0.83 %(1)
Ratio of net investment income to average
net assets, before waiver 3.67 %(1) 2.57 %(1)
Ratio of net investment income to average net assets,
net of waiver 5.52 %(1) 5.12 %(1)
Portfolio turnover rate 113 % 113 %
Average commission per share on
portfolio transactions $0.0564 $ 0.0564
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 389
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE EMERGING GROWTH FUND CLASS A CLASS D
- ---------------------------- ----------------------------------------------- ---------------------------------
November 14, 1994 February 26, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ----------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 19.56 $12.21 $10.00 $ 19.52 $16.88
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.28) (.17) (.09) (0.49) (.04)
Net realized and unrealized gain (loss) (3.76) 8.05 2.30 (3.67) 2.68
------- ------ ------ ------- ------
Total from investment operations (4.04) 7.88 2.21 (4.16) 2.64
Less distribution from net realized gain -- (.53) -- -- --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 15.52 $19.56 $12.21 $ 15.36 $19.52
======= ====== ====== ======= ======
Total Return (20.65)% 65.55 % 22.10 %(2) (21.31)% 15.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,789 $6,657 $1,241 $ 221 $ 243
Ratio of expenses to average net assets 1.75 % 1.75 % 1.75 %(1) 2.50 % 2.50%(1)
Ratio of net investment loss to
average net assets (1.69)% (1.70)% (1.62)%(1) (2.45)% (2.48)%(1)
Portfolio turnover rate 28 % 38 % 43 % 28 % 38%
Average commission per share on
portfolio transactions $0.0048 $ 0.01 N/A $0.0048 $ 0.01
</TABLE>
<TABLE>
<CAPTION>
RESERVE INFORMED INVESTORS GROWTH FUND CLASS A CLASS D
- -------------------------------------- ------------------------------------------------ --------------------------------
December 28, 1994 March 22, 1996
(commencement of (commencement of
Year Ended Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1995 May 31, 1997 May 31, 1996
------------ ------------ ----------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 14.36 $11.99 $10.00 $ 14.33 $12.29
------- ------ ------ ------- ------
Income from investment operations
Net investment loss (0.07) (0.33) (.07) (0.18) (.06)
Net realized and unrealized gain (1.66) 3.87 2.06 (1.64) 2.10
------- ------ ------ ------- ------
Total from investment operations (1.73) 3.54 1.99 (1.82) 2.04
Less distribution from net realized gain (1.15) (1.17) -- (1.15) --
------- ------ ------ ------- ------
NET ASSET VALUE, end of period $ 11.48 $14.36 $11.99 $ 11.36 $14.33
======= ====== ====== ======= ======
Total Return (11.35)% 29.75 % 19.90 %(2) (12.04)% 16.60 %(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 5,477 $6,393 $6,837 $ 13 $ 15
Ratio of expenses to average net assets 1.75 % 1.75 % 1.75 %(1) 2.50 % 2.50 %(1)
Ratio of net investment loss to
average net assets (0.57)% (1.57)% (1.62)%(1) (1.26)% (2.32)%(1)
Portfolio turnover rate 255 % 132 % 59 % 255 % 132 %
Average commission per share on
portfolio transactions $0.0612 $ 0.05 N/A $0.0612 $ 0.05
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 390
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE INTERNATIONAL EQUITY FUND CLASS A CLASS D
- --------------------------------- -------------------------------------- --------------------------------------
July 13, 1995 March 11, 1996
(commencement of (commencement of
Year Ended operations) to Year Ended operations) to
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 11.26 $ 10.00 $ 11.25 $ 10.79
------------ ------------ ------------ ------------
Income from investment operations
Net investment loss (0.07) (.05) (0.15) (.01)
Net realized and unrealized gain 1.40 1.31 1.39 .47
------------ ------------ ------------ ------------
Total from investment operations 1.33 1.26 1.24 .46
------------ ------------ ------------ ------------
NET ASSET VALUE, end of period $ 12.59 $ 11.26 $ 12.49 $ 11.25
============ ============ ============ ============
Total Return 11.81% 12.60%(2) 11.02% 4.26%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 12,099 $ 3,578 $ 30 $ 6
Ratio of expenses to average net assets
before waiver 2.00% 2.00%(1) 2.75% 2.75%(1)
Ratio of expenses to average net assets,
net of waiver 2.00% 1.99%(1) 2.75% 2.75%(1)
Ratio of net investment loss to average
net assets before waiver 0.82% (0.92)%(1) 1.63% (0.70)%(1)
Ratio of net investment loss to average
net assets net of waiver 0.82% (0.91)%(1) 1.63% (0.70)%(1)
Portfolio turnover rate 52% 70% 52% 70%
Average commission per share on
portfolio transactions $ 0.0273 $ 0.02 $ 0.0273 $ 0.02
</TABLE>
<TABLE>
<CAPTION>
RESERVE LARGE-CAP VALUE FUND CLASS A CLASS D
- ---------------------------- ------------------------------------ ----------------
January 2, 1996
(commencement of
Year Ended operations) to Year Ended
May 31, 1997 May 31, 1996 May 31, 1997
------------------------------------ ----------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 10.95 $ 10.00 $ 10.95
----------- ----------- ===========
Income from investment operations
Net investment loss (0.03) (0.01) (0.05)
Net realized and unrealized gain 3.69 0.96 3.61
----------- ----------- -----------
Total from investment operations 3.66 0.95 3.56
----------- ----------- -----------
NET ASSET VALUE, end of period $ 14.61 $ 10.95 $ 14.51
=========== =========== ===========
Total Return 33.42% 9.50%(2) 32.51%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 3,054 $ 1,231 $ 56
Ratio of expenses to average net assets 1.75% 1.75%(1) 2.50%
Ratio of net investment loss to average
net assets (0.32)% (0.32)%(1) (1.07)%
Portfolio turnover rate 18% 0 % 18%
Average commission per share on
portfolio transactions $ 0.0684 $ 0.08 $ 0.0684
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales load.
<PAGE> 391
THE RESERVE PRIVATE EQUITY SERIES
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
MAY 31, 1997
<TABLE>
<CAPTION>
RESERVE MID-CAP GROWTH FUND CLASS A CLASS D
- --------------------------- ------------------------------------ ----------------------------------
March 13, 1996
(commencement of
Year Ended operations) to Year Ended Year Ended
May 31, 1997 May 31, 1996 May 31, 1997 May 31, 1996
------------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $ 12.29 $ 10.94 $ 12.27 $ 10.00
----------- ----------- ----------- -----------
Income from investment operations
Net investment loss (0.11) (.01) (0.28) (0.17)
Net realized and unrealized gain 1.02 1.36 1.10 2.44
----------- ----------- ----------- -----------
Total from investment operations 0.91 1.35 0.82 2.27
----------- ----------- ----------- -----------
NET ASSET VALUE, end of period $ 13.20 $ 12.29 $ 13.09 $ 12.27
=========== =========== =========== ===========
Total Return 7.40% 12.34%(2) 6.68% 22.70%
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 2,174 $ 131 $ 1,828 $ 2,408
Ratio of expenses to average net assets 1.75% 1.74%(1) 2.50% 2.49%
Ratio of net investment loss to average
net assets (1.31)% (0.97)%(1) (2.08)% (2.00)%
Portfolio turnover rate 102% 85% 102% 85%
Average commission per share on
portfolio transactions $ 0.0545 $ 0.04 $ 0.0545 $ 0.04
</TABLE>
- ----------------------------
(1) Annualized
(2) Total return is not annualized, and does not reflect impact of sales
load.
<PAGE> 392
Part C
Item 24. Financial Statements and Exhibits
(a) Financial Statements Included in Part A:
(1) Financial Highlights
Financial Statements Included in Part B:
(1) Report of Independent Accountants
(2) Notes to Financial Statements
(3) Statements of Net Assets of May 31, 1997
(4) Statements of Operations for year ended May 31, 1997
(5) Statements of Changes in Net Assets for the years ended May
31, 1996 and 1997
(6) Schedule of Portfolio Investments at May 31, 1997
(b) Exhibits
(1) Amended Declaration of Trust was filed as an Exhibit to
Registrant's Pre-effective Amendment No. 1 filed September 3,
1993 and is herewith incorporated by reference.
(2) Amended Bylaws of the Registrant were filed as an Exhibit to
Registrant's Pre-effective Amendment No. 1 filed September 3,
1993 and is herewith incorporated by reference.
(3) Not Applicable.
(4) Not Applicable.
(5) (a) Form of Investment Management Agreement between the
Registrant and Reserve Management Company, Inc. was filed as
an Exhibit to the Registrant's Registration Statement filed
May 25, 1993 and is herewith incorporated by reference. (b)
Form of Sub-Investment Management Agreements between the
Registrant, Reserve Management Company, Inc. and Sub-Adviser,
is herewith incorporated by reference.
(6) (a) Form of Distribution Agreement between the Registrant and
Resrv Partners, Inc. was filed as an Exhibit to the
Registrant's Registration Statement filed May 25, 1993 and is
herewith incorporated by reference. (b)Form of Dealer
Agreement. was filed as an Exhibit to the Registrant's
Registration Statement filed May 25, 1993 and is herewith
incorporated by reference.
(7) Pension Plan of Reserve Management corporation was filed as an
exhibit to Post-Effective Amendment No. 32 of The Reserve
Fund, File No. 2-36429; amendments to Pension Plan filed as an
exhibit to Post-Effective No. 45 of The Reserve Fund (File
No. 2-36429) dated July 31, 1989 and is herewith incorporated
by reference.
(8) Form of Custodian Agreement between Registrant and Custodial
Trust Company was filed as an Exhibit to Pre-effective
Amendment No.1 filed September 3, 1993 and is herewith
incorporated by reference.
(9) Not Applicable.
(10) Opinion of counsel.*
(11) Consent of Independent Accountants*
(12) Not Applicable.
(13) Form of Subscription Agreement was filed as an Exhibit to the
Registrant's Registration Statement filed May 25, 1993 and is
herewith incorporated by reference.
*Filed herewith
**To be filed by amendment
<PAGE> 393
(14) Not Applicable.
(15) Form of Service Plan was filed as an Exhibit to the
Registrant's Registration Statement filed May 25, 1993 and is
herewith incorporated by reference.
(16) Schedule for computation of each performance quotation
provided in Registration Statement.
(17) Powers of Attorney*
(18) Rule 18f-3 Plan*
*Filed herewith
**To be filed by amendment
<PAGE> 394
Item 25. Persons Controlled by or Under Common Control with Registrant
Not applicable
Item 26. Number of Holders of Securities
As of August 30, 1997 recordholders of the Registrant were as follows:
<TABLE>
<S> <C>
Blue Chip............................. 1,161
Small-Cap (Emerging Growth)........... 1,473
Informed Investors.................... 1,148
Mid-Cap............................... 1,237
Int'l Equity.......................... 1,135
Large-Cap............................. 1,139
Convertible........................... 1,030
</TABLE>
Item 27. Indemnification
Reference is made to Section 10.02 of the Registrant's Declaration of
Trust. No indemnification shall be provided hereunder to a Covered
person:
Section 10.02 provides that
(i) who shall have been adjudicated by a court or other
body including, without limitation, arbitration panels or self-
regulatory organizations before which the proceeding was broght (A)
to be liable to the trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office or (B) not to have
acted in good faith in the reasonable belief that his action was in
the best interest of the trust; or
(ii) in the event of a settlement, unless there has been
a determination that such Trustee or officer did not engage in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office, (A) by
the court or other body approving the settlement; (B) by at least a
majority of those Trustees who are neither Interested Persons of the
Trust nor are parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type inquiry); or (c) by
written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by
independent counsel.
(c) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be
severable, shall not be exclusive of or affect any other rights to
which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be a Covered Person and
shall inure to the benefit of the heirs, executors and administrators
of such a person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel, other than Covered Persons,
and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation
of a defense to any claim, action, suit or proceeding of the
character described in Subsection 10.02(a) of this Section 10.02 may
be paid by the Trust or Series from time to time prior to final
disposition thereof upon receipt of an undertaking by or on behalf of
such Covered Person that such amount will be paid over by him to the
Trust or Series if it is ultimately determined that he is not
entitled to indemnification under this Section 10.02; provided,
however, that either (i) such Covered Person shall have provided
appropriate security for such undertaking, (ii) the Trust is insured
against losses arising out of any such advance payments or (iii)
either a majority of the Trustees who are neither Interested Persons
of the Trust nor parties to the matter, or independent legal counsel
in a written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered
Person will be found entitled to indemnification under Section 10.02.
Each Trustee, officer, employee or agent of the registrant, and any
person who has served at it request as Director, Trustee, officer or
employee of another business entity, shall be entitled to be
indemnified by the Registrant to the fullest extent permitted by the
laws of the State of Delaware, subject to the provisions of the
Investment Company Act of 1940 and the rules and regulations
thereunder.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to Trustees, officer and
controlling persons of the Registrant pursuant to the Declaration to
Trust or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange commission such
indemnification against such liabilities (other than the payment by
the Registrant of any expenses incurred or paid by a Trustee,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate public policy as express in the Act and
will governed the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
<TABLE>
<CAPTION>
Position with
Name the Adviser Other Business
- ---------------- ----------------- -----------------------------------------
<S> <C> <C>
Henry B.R. Brown President, Treasurer and President, Treasurer and Director of Reserve
Director Management Corporation of the same address as
the Trust; Director and Treasurer of Transfer
Agent Inc., 14 Locust Place, Manhasset, NY
11030
Bruce R. Bent Vice President, Secretary and Vice President, Secretary and Director of
Director Director Reserve Management Corporation
and Director of Resrv Partners, Inc. both of
the same address as the Trust.
Michelle L. Neufeld Counsel Counsel of Reserve Management Corporation and
Counsel and Secretary of Resrv Partners,
Inc. both of the same address as the Trust.
</TABLE>
Item 29. Principal Underwriters
(a) Resrv Partners, Inc., the principal underwriter of the
Registrant, also acts as principal underwriter to The Reserve
Fund, Reserve Institutional Trust, Reserve Tax-Exempt Trust, and
Reserve New York Tax-Exempt Trust.
<PAGE> 395
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Position and Offices
Business Address With Resrv Partners, Inc. With Registrant
---------------- ------------------------- ---------------
<S> <C> <C>
Bruce R. Bent Chairman and Director President, Treasurer & Trustee
Michelle L. Neufeld Counsel & Secretary Counsel & Secretary
</TABLE>
Item 30. Location of Accounts and Records
All records required to maintained by Section 31(a) of the 1940 Act
and the Rules promulgated thereunder are maintained at 810 Seventh
Avenue, New York NY 10019 except those relating to receipts and
deliveries of securities, which are maintained by the Registrant's
Custodians and certain records regarding portfolio transactions which
are maintained at the offices of the Sub-Advisers: T.H. Fitzgerald &
Co., Research Center, 305 Center Rd., Easton, CT 00612; Trainer,
Wortham & Company, Inc., 845 Third Avenue, New York, NY 10022;
Roanoke Asset Management, 529 Fifth Avenue, New York, NY 10017.
Southern Capital Advisors, 50 Front Street, Morgan Keegan Tower,
Memphis, TN 38103. Pinnacle Associates Ltd., 666 Fifth Avenue, 14th
Floor, New York, NY 10103; Siphron Capital Management, 280 S. Beverly
Drive, Beverly Hills, CA 90212; and New Vernon Advisers, Inc., 310
South Street, P.O. Box 1913, Morristown, NJ 07962.
Item 31. Management Services
See "Investment Management and Other Agreements" in Part B.
Item 32. Undertakings
Registrant makes the following undertakings:
Not Applicable
<PAGE> 396
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this Post-
Effective Amendment to its Registration Statement meets all of the requirements
for effectiveness pursuant to Rule 485(b) under the Securities Act of 1933 and
Registrant has duly caused this Post-Effective Amendment No. 11 to its
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of New York and State of New York, on the 30th day
of September, 1997.
/s/ Bruce R. Bent
------------------------
Bruce R. Bent, President
Attest:
/s/ Michelle L. Neufeld
------------------------------------
Michelle L. Neufeld, Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 10 to its Registration Statement has been below signed
by the following persons in the capacities and on the dates indicated.
/s/ Bruce R. Bent Date 9/30/97
- ------------------------------------------ ----------------
Bruce R. Bent, President, Treasurer
and Board Member (principal executive,
operating and financial officer)
* /s/ Date
- ------------------------------------------ ----------------
Edwin Ehlert Jr., Board Member
* /s/ Date
- ------------------------------------------ ----------------
Henri W. Emmet, Board Member
* /s/ Date
- ------------------------------------------ ----------------
Donald J. Harrington, Board Member
/s/ Michelle L. Neufeld Date 9/30/97
- ------------------------------------------ ----------------
Michelle L. Neufeld, *Attorney-in-Fact
Counsel and Secretary
<PAGE> 397
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description
----------- -----------
<S> <C>
1. Declaration of Trust of Registrant.**
2. Bylaws of Registrant.**
3. Not Applicable.
4. Not Applicable.
5. (a) Form of Investment Management Agreement between the
Registrant and Reserve Management Company Inc. **
(b) Form of Sub-Investment Management Agreement between
Registrant, Reserve Management Company, Inc. and Various Sub-Advisors.**
6. (a) Form of Distribution Agreement between the Registrant
and Resrv Partners, Inc. **
(b) Form of Selected Dealer Agreement. **
7. Pension Plan of Reserve Management Corp. filed
as an exhibit to Post-Effective Amendment No., 32
of The Reserve Fund (File No. 2-36429);
amendments thereto filed as an exhibit to
Post-Effective Amendment No. 45 and all are
incorporated by reference.
8. Form of Custodian Agreements between Registrant and
Custodial Trust Company.**
9. Not Applicable.
10. Opinion of Counsel.
11. Consent of Independent Accountants
12. Not Applicable
13. Form of Subscription Agreement between the Registrant
and Reserve Management Company, Inc. **
14. Not Applicable
15. Form of Service Plan **
16. Schedule for computation of each performance quotation
provided in Registration Statement.*
17. Powers of Attorney
18. Rule 18f-3 Plan
</TABLE>
* To be filed by amendment
**Previously filed
<PAGE> 1
Exhibit 10
September 30, 1997
Board of Trustees
Reserve Private Equity Series
810 Seventh Avenue
New York, New York 10019
Gentlemen:
I have acted as counsel to the Reserve Private Equity Series, a Delaware
business trust (the "Fund"), in connection with the registration of shares of
the Blue Chip Growth, Convertible Securities Fund, Small-Cap Growth Fund
(formerly Reserve Emerging Growth Fund), Informed Investors Growth Fund, Mid-Cap
Growth Fund, International Equity Fund, and Large-Cap Value Fund ("Funds") with
the Securities and Exchange Commission.
As counsel to the Fund, I have made such investigations and have examined
and relied upon the originals or copies, certified or otherwise identified to my
satisfaction, of such records, instruments, certificates, memoranda and other
documents as I have deemed necessary or advisable for the purposes of this
opinion.
1. The Fund has been duly incorporated and is validly existing
under the laws of Delaware.
2. To the best of my knowledge, no further approval, consent or
other order of the Board of Trustees is legally required in
connection with the organization of the Portfolios and the
registration of their shares.
3. To the best of my knowledge, the shares of the Portfolios,
when issued, will be legally issued, non-assessable and, when
subscribed to, fully paid.
I consent to the filing of this opinion as an exhibit to the Fund's
registration statement under the Securities Act of 1933.
Very truly yours,
/s/ Michelle L. Neufeld
---------------------
Michelle L. Neufeld
Counsel
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Post-Effective Amendment No. 11 to
Registration Statement Form N-1A (File No. 33-63300) of our report dated
June 27, 1997, on our audits of the financial statements and financial
highlights of The Reserve Private Equity Series to be filed with the Securities
and Exchange Commission under the provisions of the Securities Act of 1933 and
the Investment Company Act of 1940, as amended.
We also consent to the references to our firm under the caption "Financial
Highlights" in the prospectus and "Independent Accountants" in the Statements of
Additional Information.
COOPERS & LYBRAND L.L.P.
New York, New York
September 29, 1997
<PAGE> 1
Exhibit 17
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of THE
RESERVE PRIVATE EQUITY SERIES, a Delaware business trust, does hereby constitute
and appoint Michelle L. Neufeld and William Goodwin, and each of them, his true
and lawful attorney and agent to do any and all acts and things and to execute
any and all instruments which said attorney and agent may deem necessary or
advisable; (i) to enable the said Trust to comply with the Securities Act of
1933, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission in respect thereof, in connection with the registration
under said Securities Act of the shares of beneficial interest of said Trust
(the "Securities"), including specifically, but without limiting the generality
of the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as trustee of said Trust to a
Registration Statement or to any amendment thereto filed with the Securities and
Exchange Commission in respect of said Securities and to any instrument or
document filed as part of, as an exhibit to or in connection with said
Registration Statement or amendment; (ii) to enable said Trust to comply with
the Investment Company act of 1940, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under said Investment Company Act of the Trust,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign for and on behalf of the undersigned the name of
the undersigned as trustee of said Trust to a Registration Statement or to any
amendment thereto filed with the Securities and Exchange Commission in respect
of said Trust and to any instrument or document filed as part of, as an exhibit
to or in connection with said Registration Statement or amendment; and (iii) to
register or qualify said Securities for sale and to register or license said
Trust as a broker or dealer in said Securities under the securities or Blue Sky
laws of all such states as may be necessary or appropriate to permit therein the
offering and sale of said Securities as contemplated by said Registration
Statement, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign for and on behalf of the undersigned
the name of the undersigned as trustee of said Trust to any application,
statement, petition, prospectus, notice or other instrument or document, or to
any amendment thereto, or to any exhibit filed as a part thereof or in
connection therewith, which is required to be signed by the undersigned and to
be filed with the public authority or authorities administering said securities
or Blue Sky laws for the purpose of so registering or qualifying said Securities
or registering or licensing said Trust, and the undersigned does hereby ratify
and confirm as his own act and deed all that said attorney and agent shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
18th day of June 1997.
/s/ Edwin Ehlert, Jr.
----------------------------------
Edwin Ehlert, Jr., Board Member
/s/ Henri W. Emmet
----------------------------------
Henri W. Emmet, Board Member
/s/ Donald J. Harrington
----------------------------------
Donald J. Harrington, Board Member
<PAGE> 1
Exhibit 18
RESERVE PRIVATE EQUITY SERIES
PLAN IN ACCORDANCE WITH RULE 18F-3
WHEREAS, Reserve Private Equity Series (the "Trust") is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "1940 Act");
WHEREAS, the Trust has engaged RESRV Partners, Inc., a broker-dealer registered
under the Securities and Exchange Act of 1934, to distribute the shares of
beneficial interest of the Trust;
WHEREAS, the Trust has adopted a distribution plan pursuant to and in
accordance with the requirements of Rule 12b-1 under the 1940 Act;
WHEREAS, the Trust is authorized to issue one or more series of shares of
beneficial interest, with each series representing a separate investment
portfolio (each "Fund");
WHEREAS, the Trust has determine to issue more than one class of shares of
beneficial interest in each Fund;
WHEREAS, the Trustees have requested and evaluated, and the Trust and RESRV
Partners, Inc. are required to furnish, such information as may be reasonably
necessary to evaluate the Plan; and
WHEREAS, a majority of the Board of Trustees of the Trust, including a majority
of Trustees who are not "interested persons" of the Trust (as defined in the
1940 Act), has determined that this Plan as proposed to be adopted, including
the expense allocation among the two classes of each Fund, is in the best
interests of each class of each Fund individually and the Trust as a whole.
NOW THEREFORE, the Trust hereby adopts this Plan on the following terms and
conditions:
I. GENERAL
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 or other services to provide to a class of shares
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 the 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 value
of the Trust.
II. FEE STRUCTURE/DISTRIBUTION
CLASS A SHARES
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 the relevant Fund's prospectus. The initial sales charge may be reduced or
waived for certain purchases. The Class A shares of the Funds are subject to
annual distribution and shareholder servicing fees at the rate of .25 to 1%, of
the value of each Fund's average daily net assets.
<PAGE> 2
CLASS D SHARES
Class D shares of each Fund of the Trust are sold at net asset value
without a front-end sales charge and are subject to the minimum purchase
requirements set forth in the relevant Fund's prospectus. The Class D shares
of the Funds are subject to annual distribution and shareholder servicing fees
at the rate of 1% of the value of each Fund's average daily net assets. A
deferred sales charge of 1% is assessed on redemptions made within the first
year of investing.
III. EXCHANGE PRIVILEGES
As set forth below and the relevant Fund's prospectus, each class of
shares of a Fund may be exchanged for shares in the Reserve money market funds
at net asset value and other Funds that may be offered by the Trust. No sales
charge is imposed at the time of an exchange, except that exchanges of shares
from a Reserve money market fund (not acquired by means of an exchange of
shares from a Fund) to a Fund are subject to applicable sales charges imposed
on purchases of that Fund, as set forth in the Fund's prospectus. Shares of one
class of a Fund that are exchanged for shares of a Reserve money market fund
may be subsequently exchanged only for shares of that same class of the Fund or
another Fund of the Trust.
IV. 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.
Dated: June 19, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> RESERVE BLUE CHIP GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 4,842,303
<INVESTMENTS-AT-VALUE> 5,344,337
<RECEIVABLES> 79,552
<ASSETS-OTHER> 50,872
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,474,761
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 901
<TOTAL-LIABILITIES> 901
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,137,886
<SHARES-COMMON-STOCK> 354,075
<SHARES-COMMON-PRIOR> 346,947
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 833,940
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 502,034
<NET-ASSETS> 5,473,860
<DIVIDEND-INCOME> 32,176
<INTEREST-INCOME> 896
<OTHER-INCOME> 0
<EXPENSES-NET> 93,072
<NET-INVESTMENT-INCOME> (60,000)
<REALIZED-GAINS-CURRENT> 976,672
<APPREC-INCREASE-CURRENT> (642,561)
<NET-CHANGE-FROM-OPS> 274,111
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 68,349
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 80,188
<NUMBER-OF-SHARES-REDEEMED> 78,019
<SHARES-REINVESTED> 4,959
<NET-CHANGE-IN-ASSETS> 7,128
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 79,311
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 93,072
<AVERAGE-NET-ASSETS> 5,274,000
<PER-SHARE-NAV-BEGIN> 14.91
<PER-SHARE-NII> (0.17)
<PER-SHARE-GAIN-APPREC> 0.91
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .19
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.46
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> RESERVE SMALL-CAP GROWTH FUND
(formerly Reserve Emerging Growth Fund)
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 5,140,070
<INVESTMENTS-AT-VALUE> 6,116,356
<RECEIVABLES> 316
<ASSETS-OTHER> 32,911
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,149,583
<PAYABLE-FOR-SECURITIES> 139,257
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 620
<TOTAL-LIABILITIES> 139,877
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,558,349
<SHARES-COMMON-STOCK> 387,403
<SHARES-COMMON-PRIOR> 352,691
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (524,929)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 976,286
<NET-ASSETS> 6,009,706
<DIVIDEND-INCOME> 3,372
<INTEREST-INCOME> 1,049
<OTHER-INCOME> 0
<EXPENSES-NET> 116,586
<NET-INVESTMENT-INCOME> (112,165)
<REALIZED-GAINS-CURRENT> (577,118)
<APPREC-INCREASE-CURRENT> (847,249)
<NET-CHANGE-FROM-OPS> (1,536,532)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 128,051
<NUMBER-OF-SHARES-REDEEMED> 93,339
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 34,712
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 98,087
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 116,586
<AVERAGE-NET-ASSETS> 6,520,000
<PER-SHARE-NAV-BEGIN> 19.56
<PER-SHARE-NII> (0.28)
<PER-SHARE-GAIN-APPREC> (3.76)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.52
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> RESERVE INFORMED INVESTOR GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 4,778,451
<INVESTMENTS-AT-VALUE> 5,243,450
<RECEIVABLES> 670,314
<ASSETS-OTHER> 12,377
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,926,141
<PAYABLE-FOR-SECURITIES> 433,793
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 42,415
<TOTAL-LIABILITIES> 436,208
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,463,186
<SHARES-COMMON-STOCK> 490,160
<SHARES-COMMON-PRIOR> 446,225
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 561,748
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 464,999
<NET-ASSETS> 5,489,933
<DIVIDEND-INCOME> 24,627
<INTEREST-INCOME> 41,386
<OTHER-INCOME> 0
<EXPENSES-NET> 97,623
<NET-INVESTMENT-INCOME> (31,610)
<REALIZED-GAINS-CURRENT> 1,253,328
<APPREC-INCREASE-CURRENT> (1,975,139)
<NET-CHANGE-FROM-OPS> (753,421)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (525,939)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 116,945
<NUMBER-OF-SHARES-REDEEMED> 122,289
<SHARES-REINVESTED> 37,456
<NET-CHANGE-IN-ASSETS> 32,112
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 83,573
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 97,623
<AVERAGE-NET-ASSETS> 5,554,000
<PER-SHARE-NAV-BEGIN> 14.36
<PER-SHARE-NII> (.07)
<PER-SHARE-GAIN-APPREC> (1.67)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.15
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.48
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> RESERVE CONVERTIBLE SECURITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> SEP-03-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 18,806,194
<INVESTMENTS-AT-VALUE> 20,177,022
<RECEIVABLES> 566,180
<ASSETS-OTHER> 51,574
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,794,786
<PAYABLE-FOR-SECURITIES> 223,126
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 400
<TOTAL-LIABILITIES> 223,526
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,811,473
<SHARES-COMMON-STOCK> 1,857,144
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 170,681
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 218,279
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,370,827
<NET-ASSETS> 20,571,260
<DIVIDEND-INCOME> 249,907
<INTEREST-INCOME> 363,077
<OTHER-INCOME> 0
<EXPENSES-NET> 52,256
<NET-INVESTMENT-INCOME> 560,728
<REALIZED-GAINS-CURRENT> 225,074
<APPREC-INCREASE-CURRENT> 1,370,827
<NET-CHANGE-FROM-OPS> 2,156,629
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 390,047
<DISTRIBUTIONS-OF-GAINS> 6,795
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,029,299
<NUMBER-OF-SHARES-REDEEMED> 191,717
<SHARES-REINVESTED> 19,562
<NET-CHANGE-IN-ASSETS> 1,857,144
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 205,951
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 240,369
<AVERAGE-NET-ASSETS> 13,730
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 1.03
<PER-SHARE-DIVIDEND> 0.245
<PER-SHARE-DISTRIBUTIONS> .005
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.08
<EXPENSE-RATIO> 0.38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> RESERVE INTERNATIONAL EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 10,300,524
<INVESTMENTS-AT-VALUE> 12,019,419
<RECEIVABLES> 67,173
<ASSETS-OTHER> 134,287
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,220,879
<PAYABLE-FOR-SECURITIES> 91,069
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 556
<TOTAL-LIABILITIES> 91,625
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,755,394
<SHARES-COMMON-STOCK> 963,101
<SHARES-COMMON-PRIOR> 318,479
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 345,102
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,718,958
<NET-ASSETS> 12,129,254
<DIVIDEND-INCOME> 97,550
<INTEREST-INCOME> 561
<OTHER-INCOME> 0
<EXPENSES-NET> 166,959
<NET-INVESTMENT-INCOME> (68,848)
<REALIZED-GAINS-CURRENT> (273,130)
<APPREC-INCREASE-CURRENT> 1,387,936
<NET-CHANGE-FROM-OPS> 1,045,958
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 692,225
<NUMBER-OF-SHARES-REDEEMED> 47,603
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 644,622
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 145,974
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 166,959
<AVERAGE-NET-ASSETS> 8,328,000
<PER-SHARE-NAV-BEGIN> 11.26
<PER-SHARE-NII> (.07)
<PER-SHARE-GAIN-APPREC> 1.40
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.59
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> RESERVE LARGE-CAP GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 2,395,193
<INVESTMENTS-AT-VALUE> 3,152,169
<RECEIVABLES> 3,517
<ASSETS-OTHER> 38,202
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,193,888
<PAYABLE-FOR-SECURITIES> 83,370
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 538
<TOTAL-LIABILITIES> 83,908
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,331,625
<SHARES-COMMON-STOCK> 212,856
<SHARES-COMMON-PRIOR> 112,437
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 21,379
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 756,976
<NET-ASSETS> 3,109,980
<DIVIDEND-INCOME> 32,111
<INTEREST-INCOME> 212
<OTHER-INCOME> 0
<EXPENSES-NET> 39,725
<NET-INVESTMENT-INCOME> (7,402)
<REALIZED-GAINS-CURRENT> 21,379
<APPREC-INCREASE-CURRENT> 686,853
<NET-CHANGE-FROM-OPS> 700,830
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 113,598
<NUMBER-OF-SHARES-REDEEMED> 13,179
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 100,419
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33,940
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 39,725
<AVERAGE-NET-ASSETS> 2,263,000
<PER-SHARE-NAV-BEGIN> 10.95
<PER-SHARE-NII> (.03)
<PER-SHARE-GAIN-APPREC> 3.69
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.61
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 07
<NAME> RESERVE MID-CAP GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 3,364,256
<INVESTMENTS-AT-VALUE> 4,003,368
<RECEIVABLES> 128,480
<ASSETS-OTHER> 36,124
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,167,973
<PAYABLE-FOR-SECURITIES> 162,868
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,970
<TOTAL-LIABILITIES> 165,838
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,301,802
<SHARES-COMMON-STOCK> 304,383
<SHARES-COMMON-PRIOR> 206,880
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 61,220
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 639,113
<NET-ASSETS> 4,002,135
<DIVIDEND-INCOME> 13,610
<INTEREST-INCOME> 553
<OTHER-INCOME> 0
<EXPENSES-NET> 71,502
<NET-INVESTMENT-INCOME> (57,359)
<REALIZED-GAINS-CURRENT> 144,746
<APPREC-INCREASE-CURRENT> 185,442
<NET-CHANGE-FROM-OPS> 272,829
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 256,576
<NUMBER-OF-SHARES-REDEEMED> 159,073
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 97,503
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 49,028
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 71,502
<AVERAGE-NET-ASSETS> 3,267,000
<PER-SHARE-NAV-BEGIN> 12.29
<PER-SHARE-NII> (0.11)
<PER-SHARE-GAIN-APPREC> 1.02
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.20
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
