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Registration Statement Nos.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
....
Post-Effective Amendment No. 17 [X]
....
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 19 [X]
....
(Check appropriate box or boxes.)
...........................................................................
(Exact Name of Registrant as Specified in Charter)
RESERVE PRIVATE EQUITY SERIES
...........................................................................
(Address of Principal Executive Offices) 1250 BROADWAY, NEW YORK, NY 10001-3701
(Zip Code)
Registrant's Telephone Number, including Area Code (212) 401-5500
..........................
.............................................................................
MaryKathleen Foynes, Esq.
The Reserve Funds
1250 Broadway
New York, NY 10001-3701
(Name and Address of Agent for Service)
Approximate date of Proposed Public Offering ................................
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on September 30, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If approriate, check the following box:
[ ] this post-effective amendment designates a new effective data for a
previously filed post-effective amendment.
The Commission is requested to send copies of all communications to:
MaryKathleen Foynes, Esq.
The Reserve Funds
1250 Broadway
New York, NY 10001-3701
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Title of Securities Being Registered:
Reserve Blue Chip Growth Fund - Class R
Reserve Blue Chip Growth Fund - Class I
Reserve Small-Cap Growth Fund - Class R
Reserve Small-Cap Growth Fund - Class I
Reserve International Equity Fund - Class R
Reserve International Equity Fund - Class I
Reserve Informed Investors Growth Fund - Class R
Reserve Informed Investors Growth Fund - Class I
Reserve Large-Cap Growth Fund - Class R
Reserve Large-Cap Growth Fund - Class I
Reserve Strategic Growth Fund - Class R
Reserve Strategic Growth Fund - Class I
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[LOGO] THE RESERVE FUNDS
Founders of "America's First Money Fund" Est. 1970
RESERVE PRIVATE EQUITY SERIES
PROSPECTUS
SEPTEMBER 30, 1999
RESERVE PRIVATE EQUITY SERIES ("Trust") is a no-load, open-end investment
company offering two classes of shares, Class R and Class I, in six Funds:
o RESERVE BLUE CHIP GROWTH FUND,
o RESERVE INFORMED INVESTORS GROWTH FUND,
o RESERVE INTERNATIONAL EQUITY FUND,
o RESERVE LARGE-CAP GROWTH FUND,
o RESERVE SMALL-CAP GROWTH FUND, and
o RESERVE STRATEGIC GROWTH FUND
(each a "Fund," together the "Funds").
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
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PAGE
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Investment Objectives & Principal Strategies............................. 2
Performance History...................................................... 8
Fees & Expenses of the Funds............................................. 11
Management............................................................... 13
How to Buy Shares........................................................ 14
Selling Fund Shares...................................................... 16
Tax Consequences......................................................... 17
General Information...................................................... 19
Financial Highlights..................................................... 19
</TABLE>
INVESTMENT OBJECTIVES & PRINCIPAL STRATEGIES
Each of the Funds is classified as a non-diversified mutual fund. The
following terms might be helpful in understanding certain concepts in making an
investment decision about the Funds listed in this Prospectus:
EQUITY SECURITIES (sometimes referred to as "equities") are ownership interests
possessed by the holders and include (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.
AMERICAN DEPOSITORY RECEIPT ("ADR") is a receipt for the shares of a foreign
corporation held in the vault of a U.S. bank which entitles the holder to all
dividends and capital gains. What this means is Americans can buy shares of a
foreign corporation normally traded in an overseas market in the U.S.
DEBT SECURITIES are securities representing money borrowed that must be repaid
having a fixed amount, a specific maturity or maturities, and usually a specific
rate of interest or an original purchase price. These include such things as:
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
which includes 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 U.S.
government, its agencies or its instrumentalities.
FOREIGN GOVERNMENT SECURITIES are securities issued or guaranteed by
governments, quasi-governmental entities, governmental agencies or other
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.
1940 ACT is the Investment Company Act of 1940 which sets the standards that all
mutual funds must follow.
2
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RESERVE BLUE CHIP GROWTH FUND. The Reserve Blue Chip Growth Fund's 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 INFORMED INVESTORS GROWTH FUND. The Reserve Informed Investors Growth
Fund's investment objective is to seek growth primarily through investment in a
portfolio of U.S. equity securities which are seasoned, well-managed and
financially sound companies with demonstrated superior earnings growth,
accelerating cash flow and profit margins and high return on equity. Any
production of dividend income is secondary to this objective. There can be no
assurance that the Fund will achieve its investment objective.
"Informed Investors" stocks are those issued by companies whose 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. Common sense
suggests that the "Informed Investors" of the corporate world are close to the
day-to-day activities of the companies they own or manage and are often in a
much more informed position to gauge the long-term effects, 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 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 companies whose outstanding shares have
an aggregate market value of at least $1 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.
RESERVE INTERNATIONAL EQUITY FUND. The Reserve International Equity Fund's
objective is to seek capital appreciation through investment in a portfolio of
equity securities of companies resident in non-U.S. 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 which are 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 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's
portfolio has been carefully selected through research and often through direct
management contact.
The Fund 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. The Fund's portfolio is
structured by combining a top-down quantitative country-weighting process, which
looks at macroeconomic factors nationally and internationally, with a bottom-up
individual company selection procedure,
3
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which focuses on microeconomic factors in a particular company. To attempt to
control risk, the Fund normally 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 Fund intends to remain 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. The Fund
will invest at least 65% of its total assets at the time of purchase in equity
securities of issuers associated with at least three different countries,
excluding the U.S., 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.
RESERVE LARGE-CAP GROWTH FUND. The Reserve Large-Cap Growth 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. Candidates are believed to be in a growth
phase or are entering a growth phase in their marketplace and have pricing
flexibility, the potential to increase volume of unit sales, and control over
production and distribution. These companies also focus on their core business,
have a dominant brand name or a valuable franchise, financial fundamentals that
are trending upward, and management that is dedicated to enhancing shareholder
value. It is the Fund'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.
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 at the time of purchase is $5 billion or more, i.e., "large cap,"
unless the Fund has adopted a temporary defensive position.
RESERVE SMALL-CAP GROWTH FUND. The Reserve Small-Cap Growth Fund's objective is
to seek capital appreciation through investment in a portfolio of primarily
small capitalization companies. Any production of income is secondary to this
objective. There can be no assurance that the Fund will achieve its investment
objective.
Generally, the Fund will seek to invest in equity securities issued by
companies with investment characteristics such as accelerating rates of revenue
and earnings growth, market dominance or a strong defensible market niche, unit
growth coupled with stable or rising profit margins, a sound balance sheet and
skilled management with an ownership stake. The Fund is designed for investors
seeking the opportunity for substantial long-term growth who can accept
above-average stock market risk and little or no current income. At least 65% of
the value of the Fund's total assets will be invested in smaller-sized companies
whose outstanding shares have an aggregate market value of $1 billion or less at
the time of purchase, unless the Fund has adopted a temporary defensive
position.
4
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It is the Sub-Adviser's view that small 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.
RESERVE STRATEGIC GROWTH FUND. The Reserve Strategic Growth Fund's investment
objective is to seek long-term growth through capital appreciation. Any
production of income is secondary to this objective. There can be no assurance
that the Fund will achieve its investment objective.
It is anticipated that the Fund will invest in at least 65% of its total
assets in equity securities of large, established companies with market
capitalizations over $5 billion at the time of purchase that trade on major U.S.
stock exchanges. Securities selected for the Fund will be those that the
Sub-Adviser feels have above average long-term potential for capital
appreciation, typically due to a company's future earnings growth, but
occasionally involving other criteria. The Fund expects to own a portfolio of
securities across a variety of industry sectors to minimize unforeseen risks of
concentrating in a single industry. Portfolio turnover is expected to be
relatively low as purchases are made with a view to long-term holdings, optimum
tax efficiency and not for short-term trading purposes; however, during rapidly
changing economic, market, and political conditions, there may be significant
changes to the portfolio when these equity securities present special situations
because 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. Additionally, the Fund may invest
without restriction in companies of any size, foreign equities, and U.S.
fixed-income securities. The Fund does not expect to hold significant assets in
cash, cash equivalents, foreign fixed-income securities, warrants, rights,
futures, or options.
The Fund intends to be as fully invested at all times as practicable unless
it has adopted a temporary defensive position.
PRINCIPAL INVESTMENT STRATEGIES. The strategies discussed below are subject to
the specific investment objectives for each Fund discussed above.
CASH EQUIVALENTS. Each Fund may invest in cash equivalents, which are
short-term obligations issued or whose interest and principal are guaranteed by
the U.S. government or any instrumentalities (including repurchase agreements
collateralized by such securities) and deposit-type obligations of domestic and
foreign banks or their equivalent and money-market funds. Instruments which are
not rated may also be purchased by a Fund provided the Sub-Adviser, under the
supervision of the Adviser and the Board of Trustees, determines them to be of
comparable quality to those instruments in which the Fund may invest.
FOREIGN SECURITIES. The Reserve International Equity and Reserve Strategic
Growth Funds may purchase foreign equity and debt securities, including foreign
government securities, to an aggregate of not more than 30% of its total assets
at the time of purchase in the securities of issuers of any single foreign
country. Foreign securities markets generally are not as developed or efficient
as those in the U.S. and securities traded there are less liquid and more
volatile than those traded in the U.S.
In making the allocation of assets in foreign markets, the Sub-Adviser 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
these Funds may invest will be traded on foreign stock exchanges or issued by
foreign governments.
5
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These Funds will invest in developing countries, which involves exposure to
economic structures that are typically less diverse and mature than in the U.S.,
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 and Reserve
Strategic Growth Funds 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
Funds will conduct its foreign-currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign-currency exchange
market or through forward contracts to purchase or sell foreign currencies. A
forward foreign-currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are traded directly between currency
traders (usually large commercial banks) and their customers. For more
information, please see the Statement of Additional information ("SAI").
INVESTMENT COMPANY. All the Funds are allowed to invest in other open-end
investment management companies with substantially the same investment
objective.
The investment objectives and principal strategies are summarized above.
For more information about these and other investment strategies, please read
the SAI.
RISKS OF INVESTING IN THE FUNDS. Investors in any of the Funds should recognize
that the inherent risks of investing cannot be totally avoided and that there is
no assurance that the investment objective of a Fund will be achieved. While
stocks have historically been a leading choice of long-term investors, they do
fluctuate in price. The value of your investment in a Fund will go up and down,
which means that you could lose money. The risks that the Funds are subject to
include those risks associated with the market in general, as well as the types
of securities held.
o As with any mutual fund, the value of the Fund's investments and,
therefore, the value of a Fund's shares, may go up or down. These changes
may occur because the stock or bond markets are rising or falling, or in
response to interest rate changes. When interest rates go up, the price
of debt securities goes down. Prices of longer-term debt securities
generally fluctuate more in response to interest rate changes than do
shorter-term securities. The value of fixed-income securities will
decline in value as interest rates rise, and increase in value as
interest rates decline. This risk is commonly referred to as "market
risk". Consequently, the value of a Fund's shares will fluctuate with
the value of its investments.
o As with any mutual fund, the Funds are not FDIC-insured, do not have bank
guarantees and may lose value.
o 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.
o The ability of an issuer of a debt security to repay principal prior to a
security's maturity can cause greater price volatility if interest rates
change.
6
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Further, special risks exist which are particular to an individual Fund due
to its investment objective and/or principal strategies:
o As to the Reserve Informed Investors Growth Fund, because the Fund is
expected to be substantially fully invested in equity securities, this
can result in greater-than-average share price fluctuations and greater
market risk than is often experienced in other types of securities.
o As to the Reserve Small-Cap Growth Fund, investing in small 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 price fluctuation than shares of a
fund which invests in larger capitalization companies.
o As to the Reserve International Equity and Reserve Strategic Growth
Funds, since the Funds may invest in foreign equity and debt securities,
they offer the potential for more diversification than an investment only
in the United States. Foreign investing involves special risks, including
foreign currency risk and the possibility of substantial volatility due
to adverse political, economic or other developments. Foreign securities
may also be less liquid and harder to value than U.S. securities.
Further, a portion of a Fund's revenues could be received in foreign
currencies and, 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.
o As to the Reserve International Equity and Reserve Strategic Growth
Funds, on January 1, 1999, France, Austria, Germany, Italy, Belgium,
Finland, Ireland, Portugal, Spain, Luxembourg and the Netherlands (eleven
countries in the European Monetary Union) adopted the "euro" as their
official currency. However, the current currencies will continue in use
for cash transactions until January 1, 2002. The euro is expected to
confer some benefits in those markets, such as consolidating the
government debt market for those countries and reducing some currency
risks and costs. But, the conversion to the new currency does pose some
special risks. The Funds will monitor the effects of the conversion on
the value of the Funds' securities. There can be no assurance that these
steps will be sufficient to avoid any adverse impact on the Funds.
YEAR 2000. Many computer software systems in use today cannot distinguish year
2000 from the year 1900. Most of the services provided to the Trust depend on
the smooth functioning of computer systems. The Trust could be adversely
affected if the computer systems and service providers that interface with it
are unable to process data from January 1, 2000 and after. However, steps are
being taken to reasonably address this issue and to obtain assurance that
comparable efforts are being made by our service providers. There can be no
assurance that these steps will be sufficient to avoid any adverse impact to the
Trust. In addition, because the Year 2000 issue affects virtually all
organizations, the extent of its impact cannot be predicted.
OTHER RISKS. A Fund may have to adopt a temporary defensive position. In this
event, a Fund might not be able to attain its objective. These and other risks
are discussed in more detail in the SAI.
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PERFORMANCE HISTORY
The bar charts below show the Funds' annual returns for each full calendar
year since inception, together with the best and worst quarters, with the
exception of the Reserve Strategic Growth Fund which did not offer shares until
June 1, 1999. The tables assume reinvestment of dividends and distributions, if
any. The annual returns shown are for Class R. The annual returns for Class I
are substantially similar because the shares are invested in the same portfolio
of securities and the annual returns would differ only to the extent that the
classes do not have the same expenses. The accompanying "Average Annual Total
Return as of December 31, 1998" table gives some indication of risk of an
investment in the Funds by comparing each Fund's performance to that of a widely
recognized index. The Standard and Poor's 500 Index ("S&P 500") is a managed
index generally representative of the U.S. stock market. The Morgan Stanley
Capital International Europe, Australia, Far East Index ("EAFE") is a stock
index designed to measure the investment returns of the developed countries
outside North America. The Russell 2000(Registered) Growth Index ("Russell
2000") measures the performance of those Russell 2000 companies with higher
price-to-book ratio and higher forecasted growth values. As with all mutual
funds, the past is not a prediction of the future.
RESERVE BLUE CHIP GROWTH FUND--CLASS R
ANNUAL TOTAL RETURNS AS OF DECEMBER 31,
[BAR GRAPH]
1995 35.94%
1996 8.63%
1997 25.48%
1998 36.62%
Best Quarter: 4th Q 1998 30.79%
Worst Quarter: 3rd Q 1998 (5.47)%
Most Recent Calendar Quarter: 2nd Q 1999 3.31%
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
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<S> <C> <C>
Reserve Blue Chip Growth Fund--Class R 36.62% 25.65%
S&P 500 26.67% (26.12)%
</TABLE>
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RESERVE INFORMED INVESTORS GROWTH FUND--CLASS R
ANNUAL TOTAL RETURNS AS OF DECEMBER 31,
[BAR GRAPH]
1995 30.44%
1996 1.26%
1997 18.97%
1998 26.98%
Best Quarter: 2nd Q 1995 33.40%
Worst Quarter: 4th Q 1995 (18.22)%
Most Recent Calendar Quarter: 2nd Q 1999 4.57%
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
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<S> <C> <C>
Reserve Informed Investors Growth Fund--Class R 26.98% 18.63%
S&P 500 26.67% 27.69%
</TABLE>
RESERVE INTERNATIONAL EQUITY FUND--CLASS R
ANNUAL TOTAL RETURNS AS OF DECEMBER 31,
[BAR GRAPH]
1996 15.89%
1997 (8.70)%
1998 18.97%
Best Quarter: 4th Q 1998 16.15%
Worst Quarter: 3rd Q 1998 (14.68)%
Most Recent Calendar Quarter: 2nd Q 1999 8.48%
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
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<S> <C> <C>
Reserve International Equity Fund--Class R 18.97% 8.39%
EAFE 18.23% (6.93)%
</TABLE>
9
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RESERVE LARGE-CAP GROWTH FUND--CLASS R
ANNUAL TOTAL RETURNS AS OF DECEMBER 31,
[BAR GRAPH]
1996 24.90%
1997 32.71%
1998 25.16%
Best Quarter: 4th Q 1998 16.82%
Worst Quarter: 3rd Q 1998 (8.56)%
Most Recent Calendar Quarter: 2nd Q 1999 3.08%
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
--------- ----------------
<S> <C> <C>
Reserve Large-Cap Growth Fund--Class R 25.16% 27.54%
S&P 500 26.67% 25.58%
</TABLE>
RESERVE SMALL-CAP GROWTH FUND--CLASS R
ANNUAL TOTAL RETURNS AS OF DECEMBER 31,
[BAR GRAPH]
1995 67.46%
1996 2.75%
1997 (.54)%
1998 20.17%
Best Quarter: 4th Q 1998 27.90%
Worst Quarter: 1st Q 1998 (17.32)%
Most Recent Calendar Quarter: 2nd Q 1999 24.42%
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
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<S> <C> <C>
Reserve Small-Cap Growth Fund--Class R 20.17% 19.31%
Russell 2000 (1.77)% 14.68%
</TABLE>
10
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FEES & EXPENSES OF THE FUNDS
As an investor, you pay certain fees and expenses which are described in
the table below in connection with the Funds if you buy and hold shares of the
Funds. There are no sales charges (loads) or exchange fees associated with an
investment in the Funds. Annual Fund Operating Expenses are paid out of the
assets of each Fund, so their effect is included in each Fund's share price.
Annual Fund Operating Expenses, indicated in the table below, reflect expenses
for the Funds' fiscal year ended May 31, 1999.
SHAREHOLDER FEES FOR ALL FUNDS
(Fees paid directly from your investment)
<TABLE>
<S> <C>
Sales Load Imposed on Purchases......................................... None
Sales Load Imposed on Reinvested Dividends.............................. None
</TABLE>
These are all no-load funds. There are no direct shareholder fees. Please
see "Annual Fund Operating Expenses for all Funds" table below.
ANNUAL FUND OPERATING EXPENSES
(Expenses are deducted from Fund assets)
LISTED BELOW ARE THE ANNUAL EXPENSES PAID BY EACH CLASS OF SHARES FOR EACH FUND
REGARDLESS OF THE AMOUNT OF YOUR INVESTMENT.
<TABLE>
<CAPTION>
CLASS R CLASS I
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TOTAL TOTAL
COMPREHENSIVE DISTRIBUTION ANNUAL FUND COMPREHENSIVE DISTRIBUTION ANNUAL FUND
MANAGEMENT (12B-1) OPERATING MANAGEMENT (12B-1) OPERATING
FEE+ FEE* EXPENSES FEE+ FEE* EXPENSES
------------- ------------ ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Reserve Blue Chip Growth.................. 1.20% 0.25% 1.45% 0.90% 0.00% 0.90%
Reserve Informed Investors Growth......... 1.30% 0.25% 1.55% 1.00% 0.00% 1.00%
Reserve International Equity.............. 1.55% 0.25% 1.80% 1.25% 0.00% 1.25%
Reserve Large-Cap Growth.................. 1.20% 0.25% 1.45% 0.90% 0.00% 0.90%
Reserve Small-Cap Growth.................. 1.30% 0.25% 1.55% 1.00% 0.00% 1.00%
Reserve Strategic Growth.................. 1.20% 0.25% 1.45% 0.90% 0.00% 0.90%
</TABLE>
+ The comprehensive management fee includes advisory and customary operating
expenses. However, the Funds may be charged for certain non-recurring
extraordinary expenses and its allocated or direct share of certain other
expenses. See "Management" section.
* Due to these distribution expenses, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc. The Funds have adopted a Rule
12b-1 plan which allows the Funds to pay distribution fees for the sale and
distribution of its shares. The maximum level of distribution expenses is
0.25% per year of each Fund's average net assets. As these fees are paid out
of each Fund's assets on an on-going basis, over time these fees will increase
the cost of your investment and may cost you more than paying other types of
sales charges.
11
<PAGE>
EXAMPLE: This example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The example should
not be considered indicative of future investment returns and operating expenses
which may be more or less than those shown. This example is based on the annual
fund operating expenses described in the table for the Fund during the fiscal
year ended May 31, 1999.
This example assumes that you invest $10,000 in a Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that
each Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
--------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Reserve Blue Chip Growth
Class R............................................................. $ 148 $ 459 $792 $ 1,735
Class I............................................................. 92 287 498 1,108
Reserve Informed Investors Growth
Class R............................................................. 158 490 845 1,845
Class I............................................................. 102 318 552 1,225
Reserve International Equity
Class R............................................................. 183 566 975 2,116
Class I............................................................. 127 397 686 1,511
Reserve Large-Cap Growth
Class R............................................................. 148 459 792 1,735
Class I............................................................. 92 287 498 1,108
Reserve Small-Cap Growth
Class R............................................................. 158 490 845 1,845
Class I............................................................. 102 318 552 1,225
Reserve Strategic Growth
Class R............................................................. 148 459 -- --
Class I............................................................. 92 287 -- --
</TABLE>
PLEASE NOTE THAT THE ABOVE EXAMPLE IS AN ESTIMATE OF THE EXPENSES TO BE INCURRED
BY SHAREHOLDERS OF THE FUNDS. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE
REFLECTED ABOVE. YOU WOULD PAY THE SAME IF YOU DID NOT REDEEM YOUR SHARES.
12
<PAGE>
MANAGEMENT
INVESTMENT ADVISER. Since November 15, 1971, Reserve Management Company, Inc.
("RMCI") 1250 Broadway, New York, NY 10001-3701, a registered investment
adviser, and its affiliates have provided investment advice to The Reserve
Funds. RMCI serves as the investment adviser to the Funds under an Investment
Management Agreement (the "Agreement") with Reserve Private Equity Series (the
"Trust"). The Agreement provides that RMCI will furnish continuous investment
advisory and management services to the Funds. In addition to the Funds, RMCI
provides investment management services to other mutual funds within The Reserve
family of funds and, as of September 17, 1999, had approximately $5.7 billion
under management.
RMCI manages the investment portfolios of the Funds, subject to policies
adopted by the Trustees. For its services, RMCI receives a comprehensive
management fee per year based on the average daily net assets of each Fund. RMCI
pays all employee and customary operating expenses of the Funds. Excluded from
the definition of customary operating expenses are interest, taxes, brokerage
fees, extraordinary legal and accounting fees and expenses, and the fees of the
disinterested Trustees, for which each Fund pays its direct or allocated share.
For the fiscal year ended May 31, 1999, Reserve Blue Chip Growth Fund, Reserve
Informed Investors Growth Fund, Reserve International Equity Fund, Reserve
Large-Cap Growth Fund and Reserve Small-Cap Growth Fund paid RMCI $128,465,
$48,779, $197,020, $167,536, and $72,323, respectively.
SUB-ADVISERS. The Investment Management Agreement and Sub-Investment Management
Agreements ("Sub-Advisory Agreements") 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.
Section 15(a) of the 1940 Act requires that all contracts pursuant to which
persons serve as investment advisers to investment companies be approved by
shareholders. As interpreted, this requirement also applies to the appointment
of Sub-Advisers to the Funds. The SEC, however, has granted conditional
exemptions for the shareholder approval requirements for situations where a fund
utilizes a multi-manager approach to portfolio investing. The Adviser and the
Trust have obtained such an exemption. The Board of Trustees of the Trust can,
without further shareholder approval, appoint additional or replacement
Sub-Advisers, terminate Sub-Advisers, rehire existing Sub-Advisers whose
agreements have been assigned (and thus automatically terminated) and enter into
or modify Sub-Advisory Agreements.
The Adviser and Trust have retained the Sub-Advisers listed below. None of
the Sub-Advisers have previously served as either Adviser or Sub-Adviser to a
registered investment company. Each is a registered investment adviser.
TRAINER, WORTHAM & COMPANY, INC., 845 THIRD AVENUE, NEW YORK, NY 10022, a
wholly owned subsidiary of First Republic Bank, was formed in 1924 and manages
over $2.5 billion for individuals, family trusts and employee benefit plans and
has over seventy years experience using the investment policies discussed
herein. Robert J. Vile is the Fund's primary portfolio manager. Mr. Vile is a
Managing Director of the Sub-Adviser and is responsible for the day-to-day
investment decisions of the Reserve Blue Chip Growth Fund.
T.H. FITZGERALD & CO., 180 CHURCH STREET, NAUGATUCK, CT 06770, was formed
in 1959 and currently manages over $200 million for employee benefit plans, bank
trust departments, an insurance company and a public authority and has over ten
years of experience in using the investment policies discussed herein. Thomas H.
Fitzgerald, Jr., who founded his firm, serves as the Fund's portfolio manager
and is responsible for the day-to-day investment decisions of the Reserve
Informed Investors Growth Fund.
13
<PAGE>
PINNACLE ASSOCIATES, LTD., 666 FIFTH AVENUE, NEW YORK, NY 10103, was formed
in 1984 and currently manages over $400 million for individuals, family trusts
and employee-benefit plans. Nicholas Reitenbach is Chief Financial Officer and
Director of International Investments of Pinnacle Associates, Ltd., and serves
as the Reserve International Equity Fund's primary portfolio manager.
Mr. Reitenbach has over thirty years experience in using the investment
techniques discussed in this Prospectus.
SIPHRON CAPITAL MANAGEMENT, 280 S. BEVERLY DRIVE, BEVERLY HILLS, CA
90212, was formed in 1991 and currently manages over $750 million for tax-exempt
and taxable clients. The senior management of Siphron Capital has over thirty
years experience in using the investment policies discussed herein. David C.
Siphron and Peter D. Siphron, both partners of the firm, serve as the Reserve
Large-Cap Growth 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.
ROANOKE ASSET MANAGEMENT CORP., 529 FIFTH AVENUE, NEW YORK, NY 10017, was
formed in 1978 and currently manages over $500 million for high-net-worth
individuals, foundations, endowments, corporations and municipalities, and each
of the portfolio managers has over twenty-five years experience in using the
investment policies discussed herein. Edwin G. Vroom, President and Adele S.
Weisman, Senior Vice President, serve as the Fund's portfolio managers with
research analyst support from Brian O'Connor. The team has worked together for
over twenty years. Together, the portfolio managers are responsible for the
day-to-day investment decisions of the Reserve Small-Cap Growth Fund.
CONDOR CAPITAL MANAGEMENT, INC., 1973 WASHINGTON VALLEY ROAD, MARTINSVILLE,
NJ, 08836, was formed in 1988 and currently manages over $250 million for
individuals, family trusts and institutions. Kenneth P. Shapiro, President, and
Stephen D. Tipping, Vice President, serve as the Fund's portfolio managers and
are responsible for the day-to-day investment decisions of the Reserve Strategic
Growth Fund.
For their services, the Sub-Advisers of the Funds, with the exception of
Condor Capital Management ("Condor"), receive an annual fee of up to one-half of
the Adviser's net profit for the year before taxes of the respective Fund. Net
profit is deemed to be the management fee less direct and allocated fund
expenses and all applicable sales and marketing costs. For the services rendered
by Condor, the Adviser shall pay to Condor at the end of each calendar quarter
an annualized fee equal to 0.30% of the Fund's assets. The Adviser may also pay
a Sub-Adviser for marketing assistance.
HOW TO BUY SHARES
You will need to choose a share class before making your initial
investment. Before you choose, you should weigh the impact of all potential
costs over the life of your investment.
SHARE PRICE: NET ASSET VALUE. Investors pay no sales charges to invest in the
Funds. The price you pay for a share of a Fund, and the price you receive upon
selling or redeeming a share of a Fund, is called the Fund's net asset value
("NAV") per share. The NAV is calculated by taking the total value of a Fund's
assets, subtracting its liabilities, and then dividing by the number of shares
that have already been issued. The NAV is generally calculated as of the close
of trading on the New York Stock Exchange (usually 4:00 PM Eastern time) every
day the Exchange is open. Your order will be priced at the next NAV calculated
after your order is accepted by the Funds. The Funds' investments are valued
based on market value, or where market quotations are not readily available,
based on fair value as determined in good faith by the Funds' Board of Trustees.
The Funds may use pricing services to determine market value.
14
<PAGE>
PURCHASE OF SHARES. For Class R shares, the minimum initial investment is $1,000
(IRA minimum $250) and the minimum subsequent investment is $100. For Class I
Shares, the minimum initial investment is $250,000 and the minimum subsequent
investment is $10,000. The Funds reserve the right, with respect to any person
or class of persons, under certain circumstances to waive or lower investment
minimums. All investments must be in U.S. dollars. Third-party, foreign and
travellers checks, as well as cash investments will not be accepted. An initial
purchase must be accompanied by an Account Application. If no dealer or broker
is named in the Account Application, the Fund's distributor, Resrv Partners,
Inc. ("Resrv"), will act as dealer. Shares of the Funds may be purchased each
business day at NAV determined after receipt of payment and a request in proper
form by the Funds or by an investment dealer who has a sales agreement with
Resrv. NAV is not calculated and purchase orders are not accepted on days the
Exchange is closed for trading and regional bank holidays.
o By check--(drawn on a U.S. bank) payable to Reserve Private Equity
Series, 1250 Broadway, New York, NY 10001-3701. You must include your
account number (or Taxpayer Identification Number) on the "pay to the
order of" line for each check. A fee (currently $15) will be imposed if
any check used for investment does not clear and the investor will be
liable for any loss The Funds incurs due to the returned check.
o By wire--Prior to calling your bank, call The Reserve Funds at
800-637-1700 for specific instructions or the Firm from which you
received this Prospectus.
Purchase orders will be confirmed at the NAV calculated after receipt by
the Funds or Firms (who promptly transmit orders to the Funds) of payment.
Checks and wires which do not correctly identify the account to be credited may
be returned or delay the purchase of shares. Only federal funds wires and checks
are eligible for entry as of the business day received. For federal funds wires
to be eligible for same-day order entry, the Funds must be notified of the
amount to be transmitted and the account must be credited before 4:00 PM
(Eastern time). Orders received by the Funds or the firms after 4:00 PM (Eastern
time) will be priced at the NAV in effect at 4:00 PM (Eastern time) on the next
business day.
RESERVE PRIVATE EQUITY SERIES AUTOMATIC ASSET-BUILDER PLAN. (Class R shares
only). If you have an account balance of $5,000 or more, you may purchase shares
of a Fund ($25 suggested minimum) from a checking, NOW, or bank money-market
deposit account or from a U.S. government distribution ($25 suggested minimum)
such as social security, federal salary, or certain veterans' benefits, or other
payment from the federal government. You may also purchase shares automatically
by arranging to have your payroll deposited directly into your Reserve account.
Please call the Funds at 800-637-1700 for an application.
INDIVIDUAL RETIREMENT ACCOUNTS. (Class R only) Investors may use the Funds as an
investment for Individual Retirement Accounts ("IRAs"). A master IRA plan with
information regarding administration fees and other details is available from
the Funds.
THIRD-PARTY INVESTMENTS. Investments made through a third party (rather than
directly with Reserve) such as a broker-dealer or financial institution may be
subject to policies and fees different than those described here. Banks,
brokers, 401(k) plans, financial advisers and financial supermarkets may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Investors should consult a representative of the plan
or financial institution if in doubt.
DISTRIBUTOR. The Funds' distributor is Resrv Partners, Inc., 1250 Broadway, New
York, NY 10001-3701.
RESTRICTIONS. Certain other restrictions and conditions for buying shares apply
to the Funds. Please read the SAI for more information.
15
<PAGE>
SELLING FUND SHARES
You may sell shares at any time. Shares will be sold at NAV determined
after the redemption request is received by the Fund. Redemptions may be
effected during regular business days from 9:00 AM to 4:00 PM (Eastern time).
Redemption requests received after the close of business will be effected at the
next calculated NAV. Orders will be processed promptly and investors will
generally receive the proceeds within a week after receiving your properly
completed request. The Funds strongly suggest (but does not require) that each
Class R redemption be at least $1,000 and each Class I redemption be at least
$100,000, except for redemptions which are intended to liquidate the account. A
shareholder can receive a redemption by check or bank wire. A $2 fee will be
charged on Class R redemption checks issued by the Funds of less than $100 and a
$100 fee for Class I redemption checks of less than $100,000. A $10 fee will be
charged for Class R wire redemptions of less than $10,000 and a $100 fee will be
charged for Class I wire redemptions of less than $100,000. The Funds assume no
responsibility for delays in the receipt of wired or mailed funds.
Before selling or writing a check for recently purchased shares, please be
aware that if the Funds has not yet collected payment for the shares you are
selling, it may delay sending the proceeds for up to eight business days or
until it has collected payment.
WRITTEN AND TELEPHONE REQUESTS. Redemption instructions and options should be
specified when your account is opened. Subsequent elections and changes must be
in writing with the signature(s) guaranteed. Changes in registration or
authorized signatories may require additional documentation. One way to redeem
shares is to write a letter of instruction which states: the name(s) and
signature(s) of all accountholders (signature(s) guaranteed, if necessary),
account number, Fund name, the dollar amount you want to sell, and how and where
to send the proceeds. If you are redeeming your IRA, please note the applicable
withholding requirements.
Certain situations require written instructions along with signature
guarantees. These include:
(1) redemptions for more than $5,000 if you do not have
pre-established instructions; or
(2) redemptions on accounts whose address has been changed within the
past 30 days; or
(3) redemptions to be sent to someone other than the account owner or
the address of record for the past 30 days; or
(4) redemptions to be sent to an alternate address.
You may redeem by calling the Funds at 800-637-1700. Unless you decline
telephone privileges on your application and the Funds fail to take reasonable
measures to verify the request, the Funds will not be liable for any
unauthorized telephone redemption, or for any loss, cost or expense for acting
upon an investor's telephone instructions. You are only allowed to make one
telephone redemption in a 30-day period. Telephone redemptions may be sent to
the bank or brokerage account designated by the shareholder on the application
or in a letter with signature guarantee. To change the designated brokerage or
bank account it is necessary to contact the Firm through which shares of the
Fund were purchased or, if purchased directly from the Funds, it is necessary to
send a written request to the Funds with signature(s) guaranteed. The Fund
reserves the right to refuse a telephone redemption if it believes it is
advisable to do so.
Signature guarantees are designed to protect both you and the Funds from
fraud. Signature guarantees can be obtained from most banks, credit unions or
savings associations, or from broker/dealers, national securities exchanges or
clearing agencies deemed eligible by the Securities and Exchange Commission.
Notaries public cannot provide signature guarantees. For more information about
redemption procedures, please read the SAI.
16
<PAGE>
EXCHANGE PRIVILEGE. Investors can exchange all or some of their shares for
shares in other Reserve equity or money-market funds. Investors can request an
exchange in writing or by telephone. The shares of the Reserve money-market
funds are not offered by this Prospectus. Be sure to read the current Prospectus
for any Fund into which you are exchanging. Any new account established through
an exchange will have the same privileges as the original account (as long as
such privileges are available).
OTHER AUTOMATIC SERVICES. (Class R only). Certain other services and
restrictions for selling shares automatically are offered by the Funds. Please
see the SAI for more information on these services and restrictions.
REDEMPTIONS THROUGH BROKERS AND FINANCIAL INSTITUTIONS. Redemptions through
brokers and financial institutions may involve such Firms' own redemption
minimums, services fees, and other redemption requirements.
OTHER. The Funds also reserve the right to make a "redemption in kind" (payment
in portfolio securities rather than cash), without notice, if the amount the
investor is redeeming is large enough to affect a Fund's operations (for
example, if it equals more than 1% of the Fund's assets). Further, each Fund
reserves the right to:
o refuse any purchase or exchange request,
o change or discontinue its exchange privilege,
o change its minimum investment amounts, and
o delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions).
Please see the SAI for more information and restrictions.
TAX CONSEQUENCES
The following discussion is intended as general information only. Because
everyone's tax situation is unique, you should consult your own tax advisor(s)
with regard to the application of state and local tax laws to distributions.
Further, the applicable tax laws which affect the Funds and their shareholders
are subject to change, which may be retroactive. For more information, please
see the SAI.
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 taxable income and net capital gains are
distributed. However, it is possible that events could occur which could cause a
Fund to incur some U.S. taxes. 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 Internal Revenue 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 October, November, or
December of any year to shareholders of record on any date in such a month will
be deemed to have been received by the shareholders and paid by each Fund on
December 31 of such year, provided such dividends are paid during January of the
following year. However, it is the Fund's policy to distribute all ordinary
income and capital gains annually, if any.
17
<PAGE>
Distribution of net capital gains (the excess of net long-term capital
gains over net short-term capital losses), if any, designated as capital gain
dividends may be taxable to individuals and certain other shareholders at the
maximum federal 20% capital gains rate, depending upon the holding period of the
assets giving rise to the capital gains, whether paid in cash or additional
shares of the Fund, regardless of the length of time Fund 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.
Capital gains may be taxable to individuals and certain other shareholders at
the maximum federal 20% capital gains rate, depending upon the shareholder's
holding period for the Fund shares. 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.
Further, one or more of the Funds with investments in stock or securities
of foreign corporations (e.g., the Reserve International Equity Fund), may incur
foreign income taxes, including foreign taxes withheld at the source. If certain
statutory requirements are met, a Fund which incurs foreign income taxes may
make an election which has the effect of causing a U.S. shareholder to include
in income and treat as if paid by such shareholder his or her pro rata share of
such foreign income taxes, for which the U.S. shareholder may be able to claim a
tax deduction or tax credit. There can be no assurance that a Fund will meet the
requirements or elect to pass through its foreign income taxes to its
shareholders. Prospective investors should consult their own tax advisors with
regard to the federal tax consequences of the purchase, ownership, or
disposition of Fund shares.
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 NAV unless the shareholder has requested on the Account Application or in
writing to the Fund one of the following three options:
(1) Distribute capital gains in cash and reinvest income dividends.
(2) Distribute income dividends in cash and reinvest capital gains.
(3) Distribute both income dividends and capital gains in cash.
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. Prospective investors should consult their own tax advisors with regard
to the federal tax consequences of the purchase, ownership, or disposition of
Fund shares, as well as the tax consequences arising under the laws of any
state, foreign country, or other taxing jurisdiction.
BACKUP WITHHOLDING. A Fund may be required to withhold U.S. federal income tax
at the rate of 31% of all taxable distributions payable to certain shareholders
who fail to provide the Fund with their correct taxpayer identification number
("TIN") or to make required certifications, or who have been notified by the
Internal Revenue Service that they are subject to backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against the shareholder's U.S. federal income tax liability. However, special
rules apply for certain accounts. For example, for an account established under
the Uniform Gift to Minors Act, the TIN of the minor should be furnished.
Shareholders should be aware that, under regulations promulaged by the IRS a
Fund may be fined $50 annually for each account for which a certified TIN is not
provided or is incorrect. In the event that such a fine is imposed with respect
to an account in any year, a corresponding charge will be made
18
<PAGE>
against the account. The Funds will not accept purchase orders for accounts for
which a correct and certified TIN is not provided or which is otherwise subject
to backup withholding, except in the case of certain non-resident alien account
holders.
GENERAL INFORMATION
JOINT OWNERSHIP. When an account is registered in the name of one person or
another, for example a husband or wife, either person is entitled to redeem
shares in the account. The Funds assume no responsibility to either owner for
actions taken by the other with respect to an account so registered. The
Application provides that persons who register their account indemnify and hold
the Funds harmless for actions taken by either party.
SMALL BALANCES. (Class R only). If a Class R Shareholder account (other than an
IRA) does not achieve a balance of $2,500 within twelve (12) months, the Funds
may without notice 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.
RESERVE EASY ACCESS. Easy Access is The Reserve Funds' 24-hour toll-free
telephone service that lets customers use a touch-tone phone for a variety of
options, which include NAV, account balances and other options. To use it, call
800-637-1700 and follow the instructions. Clients may also access current price
information on the Internet at www.reservefunds.com.
INQUIRIES. Shareholders should direct their inquiries to The Reserve Funds or
the Firm from which they received this Prospectus.
SPECIAL SHAREHOLDER SERVICES. The Funds reserve the right to charge shareholder
accounts for specific costs incurred in processing unusual transactions. Such
transactions include, but are not limited to, copies of redemption checks,
copies of account statements and special research services.
ACCOUNT STATEMENTS. Shareholders are advised to retain all account statements.
An account statement is sent to each shareholder at least quarterly.
Shareholders have a duty to examine their account statements and report any
discrepancies to The Reserve Funds immediately. Failure to do so could result in
the shareholder suffering a loss.
FINANCIAL HIGHLIGHTS
This section provides further details about the recent financial history of
the Reserve Private Equity Series--Reserve Blue Chip Growth Fund, Reserve
Informed Investors Growth Fund, Reserve International Equity Fund, Reserve
Large-Cap Growth and Reserve Small-Cap Growth Fund for the fiscal periods
indicated. 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. Effective September 22, 1998, the Class A shares were
redesignated as Class R shares. The Trust began offering Class I shares on
October 1, 1998. Further, the Trust began offering shares of the Reserve
Strategic Growth Fund on June 1, 1999. "Total return" shows how much an
investment in a Fund would have increased (or decreased) during each period,
assuming reinvestment of all dividends and distributions, if any. These figures
have been audited by PricewaterhouseCoopers LLP, the Trust's independent
accountants, whose report, along with each Funds' financial statements, is
included in the Trust's Annual Report which is available without charge upon
request by calling 800-637-1700.
19
<PAGE>
<TABLE>
<CAPTION>
CLASS R
---------------------------------------------------- CLASS I
------------
FISCAL YEARS ENDED MAY 31, PERIOD ENDED
---------------------------------------------------- MAY 31,
RESERVE BLUE CHIP GROWTH FUND 1999 1998 1997 1996 1995(A) 1999(B)
- ----------------------------------------------------- ------- ------ ------ ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 15.09 $15.46 $14.91 $12.03 $ 10.00 $ 10.00
------- ------ ------ ------ ------- --------
Income from investment operations
Net investment loss................................ (.23) (.00) (.17) (.10) (.03) (.32)
Net realized and unrealized gain................... 7.02 2.82 .91 3.62 2.06 4.65
------- ------ ------ ------ ------- --------
Total from investment operations..................... 6.79 2.82 0.74 3.52 2.03 4.33
Less distributions from realized capital gain........ (1.04) (3.19) (.19) (.64) -- (1.04)
------- ------ ------ ------ ------- --------
Net asset value, end of period....................... $ 20.84 $15.09 $15.46 $14.91 $ 12.03 $ 13.29
------- ------ ------ ------ ------- --------
------- ------ ------ ------ ------- --------
Total Return......................................... 46.62 % 19.70 % 5.12 % 30.10 % 20.30 % 32.90 %
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands)................ $10,570 $8,532 $5,428 $5,130 $ 1,993 $ 2
Ratio of expenses to average net assets.............. 1.53 % 1.75 % 1.75 % 1.75 % 1.73 %(c) .88 %(c)
Ratio of net investment loss to average net assets... (.96)% (.87)% (1.13)% (.94)% (.70)%(c) (1.12)%(c)
Portfolio turnover rate.............................. 144 % 113 % 109 % 72 % 68 % 144 %
</TABLE>
<TABLE>
<CAPTION>
CLASS R
----------------------------------------------- CLASS I
------------
FISCAL YEARS ENDED MAY 31, PERIOD ENDED
----------------------------------------------- MAY 31,
RESERVE INFORMED INVESTORS GROWTH FUND 1999 1998 1997 1996 1995(D) 1999(B)
- ------------------------------------------------------- ------ ------ ------ ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $10.46 $11.48 $14.36 $ 11.99 $10.00 $ 10.00
------ ------ ------ ------- ------ --------
Income from investment operations
Net investment loss.................................. (.27) (.20) (.07) (.33) (.07) (.03)
Net realized and unrealized gain (loss).............. 4.12 2.08 (1.66) 3.87 2.06 2.81
------ ------ ------ ------- ------ --------
Total from investment operations....................... 3.85 1.88 (1.73) 3.54 1.99 2.78
Less distributions from realized capital gain ......... (1.93) (2.90) (1.15) (1.17) -- (1.93)
------ ------ ------ ------- ------ --------
Net asset value, end of period......................... $12.38 $10.46 $11.48 $ 14.36 $11.99 $ 10.85
------ ------ ------ ------- ------ --------
------ ------ ------ ------- ------ --------
Total Return........................................... 42.22 % 17.88 % (11.35)% 29.75 % 19.90 % 8.50 %
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)................... $4,123 $4,334 $5,477 $ 6,393 $6,837 $ 1
Ratio of expenses to average net assets................ 1.61 % 1.75 % 1.75 % 1.75 % 1.75%(c) 1.06%(c)
Ratio of net investment loss to
average net assets................................... (1.04)% (.91)% (.57)% (1.57)% (1.62)%(c) (.59)%(c)
Portfolio turnover rate................................ 551 % 410 % 255 % 132 % 59 % 551 %
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
CLASS R
----------------------------------------- CLASS I
------------
FISCAL YEARS ENDED MAY 31, PERIOD ENDED
----------------------------------------- MAY 31,
RESERVE INTERNATIONAL EQUITY FUND 1999 1998 1997 1996(E) 1999(B)
- ---------------------------------------------------------- ------- ------- ------- ------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...................... $ 13.22 $ 12.59 $ 11.26 $10.00 $10.00
------- ------- ------- ------ ------
Income from investment operations
Net investment loss..................................... (.06) (.04) (.07) (.05) (.48)
------- ------- ------- ------ ------
Net realized and unrealized gain (loss)................. (.43) .67 1.40 1.31 1.69
------- ------- ------- ------ ------
Total from investment operations.......................... (.49) .63 1.33 1.26 1.21
------- ------- ------- ------ ------
Net asset value, end of period............................ $ 12.73 $ 13.22 $ 12.59 $11.26 $11.21
------- ------- ------- ------ ------
------- ------- ------- ------ ------
Total Return.............................................. (3.78)% 5.00 % 11.81 % 12.60 % 12.00 %
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands)..................... $12,310 $12,699 $12,099 $3,578 $ 1
Ratio of expenses to average net assets................... 1.87 % 2.00 % 2.00 % 2.00%(c) 1.29%(c)
Ratio of net investment loss to average net assets........ (.50)% (.39)% (.82)% (.92)%(c) (5.43)%(c)
Portfolio turnover rate................................... 174 % 114 % 52 % 70 % 174 %
</TABLE>
<TABLE>
<CAPTION>
CLASS R
----------------------------------------- CLASS I
------------
FISCAL YEARS ENDED MAY 31, PERIOD ENDED
----------------------------------------- MAY 31,
RESERVE LARGE-CAP GROWTH FUND 1999 1998 1997 1996(F) 1999(B)
- ---------------------------------------------------------- ------ ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...................... $18.16 $ 14.61 $ 10.95 $ 10.00 $ 10.00
------ ------- ------- ------- --------
Income from investment operations
Net investment loss..................................... -- (.03) (.03) (.01) (.01)
Net realized and unrealized gain........................ 3.76 3.89 3.69 0.96 2.61
------ ------- ------- ------- --------
Total from investment operations.......................... 3.76 3.86 3.66 0.95 2.60
Less distributions from net realized capital gain......... (.54) (.31) -- -- (.54)
------ ------- ------- ------- --------
Net asset value, end of period............................ $21.38 $ 18.16 $ 14.61 $ 10.95 $ 12.06
------ ------- ------- ------- --------
------ ------- ------- ------- --------
Total Return.............................................. 21.13 % 26.71 % 33.42 % 9.50 % 20.60 %
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $8,118 $ 6,786 $ 3,054 $ 1,231 $ 12,042
Ratio of expenses to average net assets................... 1.51 % 1.75 % 1.75 % 1.75 %(c) .87 %(c)
Ratio of net investment loss to average net assets........ (.22)% (.36)% (.32)% (.32)%(c) .38 %(c)
Portfolio turnover rate................................... 69 % 25 % 18 % .0 % 69 %
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
CLASS R
------------------------------------------------ CLASS I
------------
FISCAL YEARS ENDED MAY 31, PERIOD ENDED
------------------------------------------------ MAY 31,
RESERVE SMALL-CAP GROWTH FUND 1999 1998 1997 1996 1995(G) 1999(B)
- ------------------------------------------------------- ------ ------- ------ ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $16.66 $ 15.52 $19.56 $12.21 $ 10.00 $ 10.00
------ ------- ------ ------ ------- --------
Income from investment operations
Net investment loss.................................. (.51) (.39) (0.28) (.17) (.09) (.08)
Net realized and unrealized gain (loss).............. 7.46 1.53 (3.76) 8.05 2.30 5.13
------ ------- ------ ------ ------- --------
Total from investment operations....................... 6.95 1.14 (4.04) 7.88 2.21 5.05
Less distributions from net realized capital gain...... -- -- -- (.53) -- --
------ ------- ------ ------ ------- --------
Net asset value, end of period......................... $23.61 $ 16.66 $15.52 $19.56 $ 12.21 $ 15.05
------ ------- ------ ------ ------- --------
------ ------- ------ ------ ------- --------
Total Return........................................... 41.72 % 7.35 % (20.65)% 65.55 % 22.10 % 50.50 %
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands).................. $6,258 $ 5,541 $5,789 $6,657 $ 1,241 $ 2
Ratio of expenses to average net assets................ 1.61 % 1.75 % 1.75 % 1.75 % 1.75%(c) 1.00%(c)
Ratio of net investment loss to average net assets..... (1.44)% (1.64)% (1.69)% (1.70)% (1.62)%(c) (.89)%(c)
Portfolio turnover rate................................ 26 % 46 % 28 % 38 % 43 % 26 %
</TABLE>
- ------------------
(a) From October 28, 1994 (Commencement of Operations) to May 31, 1995.
(b) From October 1, 1998 (Commencement of Operations) to May 31, 1999.
(c) Annualized.
(d) From December 28, 1994 (Commencement of Operations) to May 31, 1995.
(e) From July 13, 1995 (Commencement of Operations) to May 31, 1996.
(f) From January 2, 1996 (Commencement of Operations) to May 31, 1996.
(g) From November 14, 1994 (Commencement of Operations) to May 31, 1995.
22
<PAGE>
This Prospectus contains the information about each Fund, which a prospective
investor should know before investing.
The Statement of Additional Information ("SAI") contains additional and
more detailed information about the Funds, and is considered part of this
Prospectus. Our Annual and Semi-Annual Reports list the holdings in each Fund,
describe Fund performance, include financial statements for the Funds, and
discuss market conditions and strategies that significantly affected the Funds'
performance.
These documents may be obtained without charge by writing or calling The
Reserve Funds at 800-637-1700. You can download the documents from the
SEC's web site (http://www.sec.gov) or you can obtain copies by visiting the
SEC's Public Reference Room in Washington, DC (800-SEC-0330) or by sending
your request and duplicating fee to the SEC's Public Reference Section,
Washington, DC 20549-6009.
Investors are advised to read and retain this
Prospectus for future reference.
[LOGO] THE RESERVE FUNDS
Founders of "America's First Money Fund" Est. 1970
1250 Broadway, New York, NY 10001-3701
212-401-5500
General Information and 24-Hour Price and Performance Information
800-637-1700 o www.reservefunds.com
Distributor - Resrv Partners, Inc.
RPES - 09/99
SEC File Number
Reserve Private Equity Series
811-7734
PROSPECTUS SEPTEMBER 30, 1999
THE RESERVE
PRIVATE
EQUITY
SERIES
[LOGO] THE RESERVE FUNDS
<PAGE>
[LOGO] RESERVE PRIVATE EQUITY SERIES
1250 BROADWAY, NEW YORK, N.Y. 10001-3701
212-401-5500 or 800-637-1700
24-Hour Yield and Balance Information
Nationwide 800-637-1700 - www.reservefunds.com
Statement of Additional Information
This Statement of Additional Information ("SAI") describes the Reserve
Private Equity Series ("Trust" or "RPES). The Trust was organized as a Delaware
business trust under the laws of the State of Delaware on April 22, 1993. The
Trust is an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), and is authorized
to issue multiple classes of shares and series. At the date of the Prospectus
and SAI, the Trust consists of six Funds: Reserve Blue Chip Growth Fund; Reserve
Informed Investors Growth Fund; Reserve International Equity Fund; Reserve
Large-Cap Growth Fund, Reserve Small-Cap Growth Fund and Reserve Strategic
Growth Fund (each a "Fund" and collectively, the "Funds"). Each Fund issues two
classes of shares designated as Class R and Class I. Class R shares are designed
for purchase by retail investors and Class I shares are designed to meet the
specific and unique needs of institutional investors. Each Fund is a separate
investment portfolio or series and is classified as a non-diversified series of
the Trust. This SAI is not a Prospectus, but provides detailed information to
supplement the Prospectus, dated September 30, 1999 and should be read in
conjunction with it. A copy of the Prospectus may be obtained without charge by
writing or calling the Trust at the address or telephone number shown above. The
Securities and Exchange Commission ("SEC") maintains a web site
(http://www.sec.gov) that contains the SAI, Prospectus, material incorporated by
reference, and other information regarding the Funds electronically filed with
the SEC. This SAI is dated September 30, 1999.
TABLE OF CONTENTS PAGE
----
Investment Objectives, Strategies and Risks.... 2
Management of the Trust 7
Investment ManagementDistribution and
Custodian Agreements......................... 12
Information About the Trust.................... 14
How to Buy and Sell Shares..................... 15
Dividends, Distributions and Taxes............. 15
Performance Information........................ 18
Financial Statements........................... 19
--------------
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.
--------------
<PAGE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
The overall investment objective of each of the Funds is capital
appreciation and growth. However in seeking to achieve the investment objectives
of the Funds, the strategies employed, while consistent with each Fund's
investment program, may subject the Funds to certain risks. The following
discussion of investment strategies and risks supplements and should be read in
conjunction with the investment information set forth in the Funds' Prospectus.
The investment practices described below are not fundamental and may be changed
by the Board of Trustees without the approval of shareholders.
Industry Concentration Or Issuer Specific Changes. As each Fund is classified as
a non-diversified mutual fund, each Fund is permitted to have all its assets
invested in a limited number of issuers. Market conditions, interest rates,
economic or regulatory developments could significantly affect a single
industry, a group or related industries or a specific issuer more adversely than
other securities in the market as a whole. As a result, an investment in a Fund
could entail greater risks than a mutual fund with more diversified holdings.
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 U.S. government. In the case of securities not backed by the full
faith and credit of the U.S. 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 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 (principal or
interest) of U.S. government obligations that have not actually been stripped.
Such receipts evidence ownership of component parts of U.S. government
obligations purchased by a third party (typically an investment-banking firm)
and held on its behalf by a major commercial bank or trust company pursuant to a
custody agreement. A "stripped security" issued by an investment-banking firm or
other private organization is not considered to be a U.S. government security.
Depository Receipts. Reserve International Equity Fund and Reserve Blue Chip
Growth Fund may make investments through the purchase and sale of American
Depository Receipts ("ADRs"), Global Depository Receipts ("GDRs") and other
types of depository receipts (collectively, "DRs"). 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. 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 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 Funds 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. With respect to the Reserve International Equity
Fund, the Fund may also invest in securities of supranational entities such as
the World Bank or the European Investment Bank.
The Funds may purchase DRs whether they are "sponsored" or "unsponsored."
"Sponsored" DRs are issued jointly by the issuer of the underlying security and
a depository, whereas "unsponsored" DRs are issued without participation of the
issuer of the deposited security. Generally, holders of unsponsored DRs bear all
the costs of such facilities and the depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer or pass through voting rights to the holders of such
receipts in respect of the deposited securities. Therefore, there may not be a
correlation between information concerning the issuer of the security and the
market value of an unsponsored DR.
It should be further noted that DRs may result in a withholding tax by the
foreign country of source, which will have the effect of reducing the income
distributable to shareholders. The Funds may invest in DRs that may not
necessarily be denominated in the same currency as the underlying securities
into which they may be converted.
Repurchase Agreements. When the Funds enters into a repurchase agreement, it
purchases securities from a bank or broker-dealer which simultaneously agrees to
repurchase the securities at a mutually agreed upon time and price, thereby
determining the yield during the term of the agreement. As a result, a
repurchase agreement provides a fixed rate of return insulated from market
fluctuation
2
<PAGE>
during the term of the agreement. The term of a repurchase agreement generally
is short, possibly overnight or for a few days, although it may extend over a
number of months (up to one year) from the date of delivery. Repurchase
agreements will be fully collateralized and the collateral will be
marked-to-market daily. Although the Fund will limit repurchase agreements to
those securities dealers who are deemed credit worthy pursuant to guidelines
adopted by the Board of Trustees and Sub-Advisers will follow procedures to
assure that all repurchase agreements are always fully collateralized as to
principal and interest, a bankruptcy or default of a counter party may occur. In
the event of bankruptcy or other default by the seller of the security under a
repurchase agreement, the Funds may suffer time delays and incur costs or
possible losses in connections with the disposition of collateral. In such
event, instead of the contractual fixed rate of return, the rate of return to
the Funds would be dependent upon intervening fluctuations of the market value
of the underlying security and the accrued interest on the security. Although
the Fund would have rights against the seller for breach of contract with
respect to any losses arising from market fluctuations following the failure of
the seller to perform, the ability of the Funds to recover damages from a seller
in bankruptcy or otherwise in default would be reduced.
Convertible Securities. The Reserve International Equity Fund may invest in
convertible securities that are investment grade or unrated securities. Foreign
convertible securities, which may be held by the Fund, are not rated.
Convertible securities have speculative characteristics and share some of the
same characteristics of lower-rated securities. For example, sustained periods
of deteriorating economic conditions or 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. Convertibles are generally
debt securities or preferred stocks that may be converted into common stocks.
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.
Rights And Warrants. Reserve International Equity Fund may 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. A warrant
gives the Fund the right to buy a quantity of stock. The warrant specifies the
amount of underlying stock, the purchase (or "exercise") price, and the date the
warrant expires. The Fund has no obligation to exercise the warrant and buy the
stock. A warrant has value only if the Fund exercises or sells it before it
expires; however, some warrants are traded on national exchanges. If the price
of the underlying stock does not rise above the exercise price before the
warrant expires (or is sold), the warrant generally expires without any value
and the Fund loses any amount it paid for the warrant. 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
the passage of time or due to a change in the perception as to the potential of
the underlying security. Further, a warrant may become worthless if the value of
the underlying market price of the underlying security falls below the exercise
price set forth in the warrant on the expiration date.
Securities Of Foreign Companies. Reserve International Equity Fund may invest in
foreign securities which 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 U.S.
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 and bond markets
are generally not as developed or efficient as those in the U.S. While growing
in volume, the markets usually have substantially less volume than the U.S.
markets, and the securities are less liquid and more volatile than securities of
comparable U.S. companies. Commissions on foreign securities are generally
higher than commissions in U.S. markets, nevertheless the Fund will endeavor to
achieve the most favorable net results on its portfolio transactions. In
addition, there is generally less government supervision and regulation of
foreign stock exchanges, brokers and listed companies than in the U.S.
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 U.S. investments in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments.
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 U.S. federal income taxes may, subject to
certain limitations, be entitled to claim a credit or deduction for U.S. federal
income tax purposes
3
<PAGE>
for their proportionate share of such foreign taxes paid by the Fund.
Foreign Currency Transactions. 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.
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 a 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 that
event, it might not be possible to effect closing transactions in particular
options with the result that a Fund would have to exercise its exchange-traded
options in order to realize any profit and may incur transaction costs as a
result. If a Fund, as a covered call option writer, is unable to effect a
closing purchase transaction in a secondary market, it will not be able 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 on 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 a 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 U.S. securities dealer ("OTC option") purchased by a 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 Adviser and/or 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
4
<PAGE>
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.
Put And Call Options On Specific Securities. Each Fund 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. However, the Reserve
Small-Cap Growth Fund and Reserve Informed Investors Growth Fund may invest only
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.
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 nonperformance 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.
Lending Of Securities. Each 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 U.S. government or its agencies or instrumentalities. To be acceptable as
collateral, letters of credit must obligate a bank to pay amounts demanded by a
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. Each 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. Each Fund may also pay reasonable
finders, custodian and administrative fees. Loan arrangements made by a Fund
will comply with all other applicable regulatory requirements including the
rules of the New York Stock Exchange ("NYSE"), which require the borrower, after
notice, to redeliver the securities within the normal settlement time of three
(3) 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. 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.
Illiquid Securities. Each Fund may hold up to 15% of its net assets in
securities for which a liquid trading market does not exist and, therefore, may
not be able to readily sell such securities. This includes securities that are
not readily marketable, such as 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 ("SEC") 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 ("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
5
<PAGE>
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.
Generally, mutual funds do not typically hold a significant amount of
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. The Funds might be unable to dispose
of such illiquid securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions within seven (7) days.
Many of the foreign countries in which the Reserve International Equity Fund
invests do not have a Securities Act similar to the U.S. requiring an issuer to
register the sale of securities with a governmental agency or imposing legal
restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resale of securities.
Rule 144A Securities. Rule 144A Securities are securities that may be sold only
in broker transaction without registration pursuant to Rule 144A under
Securities Act of 1933, as amended. Each Fund may invest in securities that are
restricted as to resale, but which are regularly traded among qualified
institutional buyers because they are exempt under Rule 144A from the
registration requirements of the 1933 Act. The Board of Trustees of the Trust
has instructed the Adviser to consider the following factors in determining the
liquidity of security purchased under Rule 144A: (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). Although having
delegated the day-to-day functions, the Board of Trustees will continue to
monitor and periodically review the Adviser's selection of Rule 144A securities,
as well as the Adviser's determination as to their liquidity. Investing in
securities under Rule 144A could affect the Fund's illiquidity to the extent
that qualified institutional buyers become for a time uninterested in purchasing
these securities.
Defensive Position. For temporary defensive purposes, each 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, a Fund
will increase its position in debt securities, which 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 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
("S&P"), or Aa or better by Moody's Investor Service, Inc. ("Moody's"); or if
not so rated, of equivalent investment quality as determined by the Adviser.
Apart from periods of defensive investment, each 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
funds.
Fundamental Policies. Each Fund has adopted as fundamental policies the
following limitations on its investment activities. These fundamental policies
may not be changed without the affirmative vote of a majority of the outstanding
shares of a Fund, as defined in the Investment Company Act of 1940 ("1940 Act").
A majority of the outstanding shares of a Fund means the vote of the lesser of
(i) 67% or more of the shares of a Fund present at a meeting, if the holders of
more than 50% of the outstanding shares of the Fund are present or represented
by proxy, or (ii) more than 50% of the outstanding shares of the Fund. Each 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 1940 Act except that each 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 each 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) purchase securities on margin, except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, each Fund may
make margin deposits in connection with options and financial futures
transactions.
Notwithstanding the foregoing investment restrictions, each Fund may invest
substantially all of its assets in another open-end investment company with
substantially the same investment objective as the Fund. As a matter of
operating policy with respect to
6
<PAGE>
investing for control of portfolio companies, each Fund may not invest for the
purpose of exercising control. While the Funds have no current intention of
investing in companies for the purposes of obtaining or exercising control, the
Funds may do so upon the approval of the Board of Trustees.
Each Fund has reserved the right to purchase and write interest rate futures
contracts and put and call options on interest rate futures contracts. The Funds
do not intend to use these techniques for the foreseeable future and
shareholders will be given notice should any Fund determine that they will be
used.
As non-diversified companies, each Fund is permitted to invest all of its
assets in a limited number of issuers. However, each Fund intends to comply with
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), in
order to qualify as a regulated investment company for federal income tax
purposes. To qualify, each 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 a Fund could entail
greater risk than in a fund which has a policy of diversification.
Portfolio Turnover, Transaction Charges and Allocation. The annual portfolio
turnover rate of each Fund is not expected to exceed 100% under normal market
conditions except for the Reserve Informed Investors Growth Fund, which is
expected to approximate 100% under normal market conditions, but is not expected
to exceed 300%. 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, each Sub-Adviser places all orders for the
purchase and sale of their respective Fund's investment securities. In general,
in the purchase and sale of investment securities, each 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, each 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 a 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, each 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 1940 Act.
When transactions are made in the over-the-counter market, each Fund deals
with the primary market makers unless more favorable prices are otherwise
obtainable.
For the fiscal years ended May 31, 1997, 1998 and 1999, the Trust paid
$164,911, $242,827, and $245,105 respectively, in brokerage commissions with
respect to portfolio transactions aggregating $113,307,153, $183,924,454, and
$142,090,222, respectively. 100% of the amount paid in fiscal 1999 in brokerage
commission was to brokers or dealers providing research services.
MANAGEMENT OF THE TRUST
The Trustees are responsible for the management and supervision of the Trust.
The Trustees approve all significant agreements between the Trust and those
companies that furnish services to the Trust.
Trustees and executive officers of the Trust, together with information as
to their principal business occupations during at least the last five years, are
shown below:
*++BRUCE R. BENT, 62, President, Treasurer and Trustee, 1250 Broadway, New York,
NY 10001-3701.
Mr. Bent is President, Treasurer, and Trustee of The Reserve Fund ("RF"),
Reserve Institutional Trust ("RIT"), Reserve Tax-Exempt Trust ("RTET"), Reserve
New York Tax-Exempt Trust ("RNYTET") and Reserve Private Equity Series ("RPES");
Director and President of Reserve Management Company, Inc. ("RMCI") and Reserve
Management Corporation ("RMC"); and Chairman and Director of Resrv Partners,
Inc. ("RESRV").
7
<PAGE>
Mr. Bent co-founded The Reserve Funds in 1970 and has been an executive
officer since then.
*++BRUCE R. BENT II, 33, Trustee, Senior Vice President and Assistant Secretary,
1250 Broadway, New York, NY 10001-3701.
Mr. Bent II joined The Reserve Funds in 1992 and is Senior Vice President
and Assistant Secretary of RF, RIT, RTET, RNYTET and RPES. Mr. Bent II is also
Vice President and Secretary of Reserve Management Company, Inc. ("RMCI") and
Reserve Management Corporation ("RMC"); and Secretary and Director of Resrv
Partners, Inc. ("RESRV").
+EDWIN EHLERT, JR., 68, Trustee, 125 Elm Street, Westfield, NJ 07091.
Mr. Ehlert is President and Director of Ehlert Travel Associates, Inc.
(travel agency) and Ehlert Travel Associates of Florida, Inc. (travel agency),
and Trustee of RF, RIT, RTET, RNYTET and RPES.
+HENRI W. EMMET, 73, Trustee, 1535 Presidential Drive, Apt. 4A, Columbus, OH
43212.
Mr. Emmet retired as the Managing Director of Servus Associates, Inc. in
1994 and U.S.A. Representative of the First National Bank of Southern Africa in
1996. Since 1995, Mr. Emmet has served as a Principal of Global Interaction,
which provides consulting services to international banking interests. He is
currently Trustee of RF, RIT, RTET, RNYTET and RPES.
+DONALD J. HARRINGTON, C.M., 53, Trustee, St. John's University, Grand Central &
Utopia Parkways, Jamaica, NY 11439.
The Reverend Harrington is currently President of St. John's University, NY,
and a Director of the Bear Stearns Companies, Inc. since 1993. He is currently a
Trustee RF, RIT, RTET, RNYTET and RPES.
+DIANA P. HERRMANN, 41, Trustee, 380 Madison Avenue, Suite 2300, New York, NY
10017.
Ms. Herrmann has been President and COO of Aquila Management Corporation
("Aquila"), sponsors of 14 mutual funds with over $3.2 billion in assets as of
June 30, 1999. Ms. Herrmann has been employed with Aquila since 1986. She is
currently Trustee of RF, RIT, RTET, RNYTET and RPES.
+WILLIAM J. MONTGORIS, 52, Trustee, 286 Gregory Road, Franklin Lakes, NJ 07417.
Mr. Montgoris is formerly Chief Operating Officer of the Bear Stearns
Companies, Inc. (1979-1999). He is currently Trustee of RF, RIT, RTET, RNYTET
and RPES.
+WILLIAM E. VIKLUND, 59, Trustee, 110 Grist Mill Lane, Plandome Manor, NY
11030-1110.
Mr. Viklund is formerly President and COO of Long Island Bankcorp and
President and CEO of Long Island Savings Bank (1980-1996). He is currently
Trustee of RF, RIT, RTET, RNYTET and RPES.
*ARTHUR T. BENT III, 31, Vice President and Assistant Secretary, 1250 Broadway,
New York, NY 10001-3701.
Mr. Bent III joined The Reserve Funds in 1997 and is Vice President and
Assistant Secretary of RF, RIT, RTET, RNYTET and RPES. Mr. Bent III is also Vice
President and Treasurer of Reserve Management Company, Inc. ("RMCI") and Reserve
Management Corporation ("RMC"); and Treasurer and Director of Resrv Partners,
Inc. ("RESRV"). Before joining Reserve, he was a private investor.
MARYKATHLEEN FOYNES, 29, Counsel and Secretary, 1250 Broadway, New York, NY
10001-3701.
Ms. Foynes is Counsel and Secretary of RF, RIT, RNYTET, RTET and RPES.
Before joining The Reserve Funds in 1998, Ms. Foynes was a staff attorney at
PaineWebber, Inc. (1997-1998). Prior to that, Ms. Foynes worked for the U.S.
House of Representatives as a District Manager for a Member of Congress
(1995-1997).
JAMES M. FREISEN, 41, Controller, 1250 Broadway, New York, NY 10001-3701.
Mr. Freisen is Controller. Before joining The Reserve Funds in 1999, Mr.
Freisen was an Assistant Vice President at Paine Webber, Inc. (1998-1999). Prior
to that, he was Assistant Vice President, Bank of New York (1997-1998);
Assistant Vice President, Fifth Third Bank (1995-1997); and Vice President,
Smith Barney (1991-1995).
- ------------
8
<PAGE>
*Mr. Bent is the father of Mr. Bent II and Mr. Bent III.
+ Messrs. Ehlert, Emmet, Harrington, Montgoris, Viklund and Ms. Herrmann are
members of a Review Committee which performs the functions of an Audit Committee
and reviews compliance procedures and practices.
++ Interested Trustee within the meaning of the 1940 Act. The members of the
Board of Trustees who are not Interested Trustees will be paid a stipend of
$3,500 for each joint Board meeting they attend and an annual fee of $16,000 for
service to all of the trusts in the complex.
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.
As of September 10, 1999 the records of the Trust does not reflect that the
Trustees and officers owned more than 1% of the outstanding shares of
beneficially interest of each of the Funds. The Trust does not pay any pension
or retirement benefits.
Compensation Table
for Fiscal Year Ended May 31, 1999
<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation Table From Trust and Trust Complex
Name of Trustee, Position From Trust (4 Additional Trusts) Paid to Trustee
--------------------------------------------- --------------------- -------------------------------------------
<S> <C> <C>
Bruce R. Bent, President and Trustee $ 0 $ 0
Bruce R. Bent II, Vice President and Trustee $ 0 $ 0
Edwin Ehlert, Jr., Trustee $506 $30,500
Henri W. Emmet, Trustee $506 $30,500
Rev. Donald J. Harrington, Trustee $506 $30,500
Diana P. Herrmann, Trustee $58 $3,500
William J. Montgoris, Trustee $ 0 $0
William E. Viklund, Trustee $382 $23,000
</TABLE>
As of September 10, 1999, the following persons owned of record or
beneficially 5% or more of the Funds outstanding shares:
RESERVE BLUE CHIP GROWTH FUND
Name and Address Title Percentage
of Beneficial Owner of class of Shares
-----------------------------------------------------------
Bear Stearns Securities Corp. R 12.3%
FBO 105-00196-19
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 9.1%
FBO 105-03296-20
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R
FBO 105-00197-18 7.2%
1 Metrotech Center North
Brooklyn, NY 11201-3859
Reserve Management Corp. R 6.7%
Defined Benefit Pension Plan
1250 Broadway
New York, NY 10001-3701
Reserve Management Co., Inc. I 100%
1250 Broadway
New York, NY 10001-3701
9
<PAGE>
RESERVE INFORMED INVESTORS GROWTH FUND
Name and Address Title Percentage
of Beneficial Owner of class of Shares
-----------------------------------------------------------
Bear Stearns Securities Corp. R 10.3%
FBO 105-00195-10
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 9.7%
FBO 105-00197-18
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 8.0%
FBO 105-00196-19
1 Metrotech Center North
Brooklyn, NY 11201-3859
Reserve Management Corp. R 8.0%
Defined Benefit Pension Plan
1250 Broadway
New York, NY 10001-3701
Charles Schwab & Co., Inc. R 7.4%
Special Custody Account
F/B/O Customer
101 Montgomery Street
San Francisco, CA 94104
Reserve Management Corp. R 6.1%
401(k) Employee Savings Plan
1250 Broadway
New York, NY 10001-3701
Reserve Management Co., Inc. I 100%
1250 Broadway
New York, NY 10001-3701
RESERVE INTERNATIONAL EQUITY FUND
Name and Address Title Percentage
of Beneficial Owner of class of Shares
-----------------------------------------------------------
Washington Trust Bank TTEE R 25.5%
FBO Washington Power
P.O. Box 2127
Spokane, WA 99210-2127
Charles Schwab & Co. Inc. R 18.9%
Special Custody Account F/B/O
101 Montgomery St.
San Francisco, CA 94104
Wabanc & Co. R 16.8%
C/O Washington Trust Co.
P.O. Box 2127 Trust Ops
Spokane, WA 99210-2121
Washington Trust Bank TTEE R 16.3%
FBO Washington Water Power
P.O. Box 2127
Spokane, WA 99210
Reserve Management Co., Inc. I 100%
1250 Broadway
New York, NY 10001-3701
RESERVE LARGE-CAP GROWTH FUND
Name and Address Title Percentage
of Beneficial Owner of class of Shares
-----------------------------------------------------------
Bear Stearns Securities Corp. R 13.4%
FBO 105-00196-19
1 Metrotech Center North
Brooklyn, NY 11201-3859
10
<PAGE>
Bear Stearns Securities Corp. R 10.1%
FBO 105-00195-10
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 6.5%
FBO 105-00197-18
1 Metrotech Center North
Brooklyn, NY 11201-3859
Charles Schwab & Co. Inc. R 5.4%
Special Custody Acct.
101 Montgomery St.
San Francisco, CA 94104
Bankers Trust as Custodian I 60.4%
300 South Grand Avenue, Suite
Los Angeles, CA 90071
Northern Trust Trustee FBO I 39.4%
Portland General Holdings Fund 2
P. O. Box 92956
Chicago, IL 60675
RESERVE SMALL-CAP GROWTH FUND
Name and Address Title Percentage
of Beneficial Owner of class of Shares
-----------------------------------------------------------
NFSC FEBO #X07-165930 R 10.4%
Box 1170G
Grand Cayman
Cayman Islands
Bear Stearns Securities Corp. R 9.6%
FBO 105-03296-20
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 9.4%
FBO 105-00197-18
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 8.4%
FBO 105-00196-19
1 Metrotech Center North
Brooklyn, NY 11201-3859
Reserve Management Corp R 6.3%
Defined Benefit Pension Plan
1250 Broadway
New York, NY 10001-3701
Reserve Management Corp. R 5.8%
Account 614404496
1250 Broadway
New York, NY 10001-3701
Reserve Management Co., Inc. I 100%
1250 Broadway
New York, NY 10001-3701
RESERVE STRATEGIC GROWTH FUND
Name and Address Title Percentage
of Beneficial Owner of class of Shares
-----------------------------------------------------------
Bear Stearns Securities Corp. R 35.3%
FBO 105-00196
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 23.0%
FBO 105-00197-18
1 Metrotech Center North
Brooklyn, NY 11201-3859
11
<PAGE>
Bear Stearns Securities Corp. R 21.8%
FBO 105-00197
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 6.6%
FBO 105-00197-18
1 Metrotech Center North
Brooklyn, NY 11201-3859
Reserve Management Corp. R 6.6%
Defined Benefit Plan
1250 Broadway
New York, NY 10001-3701
Bear Stearns Securities Corp. R 5.7%
FBO 105-00108-24
1 Metrotech Center North
Brooklyn, NY 11201-3859
Charles Schwab & Co., Inc. I 99.9%
Special Custody Account F/B/O
101 Montgomery Street
San Francisco, CA 94104
INVESTMENT MANAGEMENT, DISTRIBUTION AND CUSTODIAN AGREEMENTS
Investment Management Agreement. Reserve Management Company, Inc. ("RMCI" or
"Adviser") 1250 Broadway, New York, NY 10001-3701, a registered investment
adviser, manages the Trust and provides it with investment advice. Under an
Investment Management Agreement, the Adviser manages each 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 SAI. RMCI pays all employee costs and
other customary operating expenses 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 Distribution Plan).
Excluded from customary operating expenses 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 each Fund pays its direct or allocated share.
For its management services, and for paying all of the employee costs, costs
of each Sub-Adviser and other ordinary operating expenses of the Trust, RMCI is
periodically paid a Management Fee at the following rates:
Comprehensive Management Fee*
Class R Shares Class I Shares
Reserve Blue Chip Growth 1.20% 0.90%
Reserve Informed Investors Growth 1.30% 1.00%
Reserve International Equity 1.55% 1.25%
Reserve Large-Cap Growth 1.20% 0.90%
Reserve Small-Cap Growth 1.30% 1.00%
Reserve Strategic Growth 1.20% 0.90%
- ------------
* As a percentage of the average daily net assets attributable to each Class.
Expenses are deducted from Fund assets.
The Investment Management Agreement is subject to annual review and must be
approved at least annually by a vote of a majority of the Board of Trustees,
including a majority of those who are not "interested persons" as defined in the
1940 Act, 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.
For the fiscal years ended May 31, 1997, 1998 and 1999, the fees payable to
the Adviser under the Investment Management Agreement amounted to $545,982,
$795,252, and $811,349 respectively.
Sub-Investment Management Agreements. The Adviser and the Trust have entered
into Sub-Investment Management Agreements ("Sub-Advisory Agreements") with
several Sub-Advisers. Each Sub-Adviser is a registered investment adviser.
Pursuant to the Sub-Advisory Agreements, the Adviser will pay the Sub-Adviser at
the end of each fiscal quarter a fee equal to up to one-half of the Fund's
12
<PAGE>
net profit for the year before taxes on the respective Fund with the exception
of Condor Capital. Pursuant to the Sub-Advisory Agreement between the Adviser
and Condor Capital, the Adviser will pay Condor at the end of each calendar
quarter an annualized fee equal to 0.30% of the Fund's assets. Net profit is
deemed to be the Management Fee less Fund expenses and all applicable sales and
marketing costs. The chart below shows the Sub-Adviser retained for each Fund
and the amounts paid to each Sub-Adviser pursuant to the Sub-Advisory Agreements
during the last three fiscal years.
<TABLE>
<CAPTION>
FUND SUB-ADVISER 1999 1998 1997
---- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
Reserve Blue Chip Growth Trainer, Wortham & Company, Inc. $23,500 $ 0 $ 0
845 Third Avenue
New York, NY 10022
Reserve Informed Investors Growth T.H. Fitzgerald & Co. $ 0 $ 0 $ 0
180 Church Street
Naugatuck, CT 06770
Reserve International Equity Pinnacle Associates, Ltd. $46,000 $29,000 $ 0
666 Fifth Avenue
New York, NY 10103
Reserve Large-Cap Growth Siphron Capital Management $27,000 $ 0 $ 0
280 S. Beverly Drive
Beverly Hills, CA 90212
Reserve Small-Cap Growth Roanoke Asset Management $5,000 $ 0 $ 0
529 Fifth Avenue
New York, NY 10017
Reserve Strategic Growth* Condor Capital Management, Inc. N/A N/A N/A
1973 Washington Valley Road
Martinsville, NJ 08836-2012
</TABLE>
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* The Trust did not begin offering shares of the Reserve Strategic Growth Fund
until June 1, 1999.
Each 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 1940 Act, cast in person at a meeting called for purpose of
voting on such renewal. Each 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.
Distribution Agreement. Resrv Partners, Inc. ("RESRV"), 1250 Broadway, New York,
NY 10001-3701, is a distributor of the shares of the Trust. RESRV is a
"principal underwriter" for the Trust within the meaning of the 1940 Act, 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 1940 Act.
Plan of Distribution. The Trust maintains a Plan of Distribution ("Plan") and
related agreements, as amended, under Rule 12b-1 of the 1940 Act, 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 ("Firms") in respect of each Fund's Class R shareholder accounts
("qualified accounts") to which the Firms have 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 Firms at an annual rate of 0.25% of the average daily net asset value
("NAV") of all Firms' qualified accounts.
The Trustees have determined that there is a reasonable likelihood that the Plan
will benefit the Trust and its shareholders and that its costs are primarily
intended to result in the sale of the Trust's shares. The Class I shares of each
Fund do not participate in the Plan.
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,
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upon advice of counsel that they are permitted to do so under applicable laws
and regulations, including the Glass-Steagall Act. In such event, no preference
will be given to securities issued by such banks as investments, and the
assistance payments received by such banks under the Plan may or may not
compensate the banks for their administrative and account maintenance services
for which the 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 Fund 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.
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 as to any Fund may be terminated at any time
by a vote of a majority of the outstanding voting securities of that 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 1940 Act. 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.
For the fiscal period ended May 31, 1999, with respect to the qualified
accounts, the Trust made assistance payments to Firms for expenditures under the
Plan in the aggregate amount of $111,864, which constituted 0.25% of the Fund's
average daily net assets attributable to the Class R shares (formerly known as
Class A shares and including the former Class D shares) during the period. Of
the $122,518 paid by the Trust under the Plan, with respect to the Class R
shares, $21,608 was spent on advertising, $29,216 was spent on the printing and
mailing of prospectuses for persons other than current shareholders, $23,091 was
spent for compensation of Sales personnel and $48,603 was spent for compensation
to brokers and dealers and other financial intermediaries. The excess was
absorbed by the Distributor.
Custodian, Independent Accountant and Counsel. The Chase Manhattan Bank, 270
Park Avenue, New York, NY 10017 is Custodian of the Funds' securities and cash
pursuant to a Custodian Agreement. The Custodian has no part in determining the
investment policies of the Fund or which securities are to be purchased or sold
by the Fund. PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York,
NY 10036 is the Funds' independent accountant. Dechert, Price & Rhoads, 1775 Eye
Street NW, Washington, DC 20006, is the Funds' outside counsel.
INFORMATION ABOUT THE TRUST
The Declaration of Trust permits the Trust to issue an unlimited number of
full and fractional shares of beneficial interest without a stated par value,
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. 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 and class be preferred over all other series in respect of
assets specifically allocated to such series and classes. It is anticipated that
under most circumstances, the rights of any additional series or class would be
comparable unless otherwise required to respond to the particular situation.
Upon liquidation of the Trust, shareholders are entitled to share
proportionately in the net assets of their respective series and class 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, non-assessable and fully
transferable or redeemable at the shareholder's option. Each share has an equal
interest in the net assets of its class, equal rights to all dividends and other
distributions from its class. As approved by the shareholders, a shareholder of
each Fund shall be entitled to one vote for each dollar of net asset value
(number of shares owned times net asset value per share) per share of such Fund
[or class thereof], on any matter on which such shareholder is entitled to vote
and each fractional dollar amount shall be entitled to a proportionate
fractional vote. This means that the voting power of shareholders is allocated
in proportion to the value of each shareholder's investment rather than with the
number of shares held. Shares of separate classes 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
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nothing in the Declaration protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
SEC regulations provide that if a 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
class votes separately. Each class 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.
HOW TO BUY AND SELL SHARES
Purchase of Shares. The Fund's Distributor Resrv Partners Inc. ("Resrv") serves
as the national distributor for each Funds shares and has agreed to use best
efforts to sell shares of the Funds. Shares of the Funds are offered on a
continuous basis and may be purchased by contacting the Funds, RESRV or dealers
who have selling agreements with Resrv.
The minimum initial investment for Class R shares is $1,000 and $250 for IRA
accounts. The minimum subsequent investment is $100. Class R shareholders
(except IRAs) must achieve a balance of $2,500 within twelve (12) months, or the
Fund may choose to impose a fee (See "Small Balances" in the Prospectus). The
minimum initial investment for Class I shares is $250,000 and the minimum
subsequent investment is $10,000. The Funds reserve the right, with respect to
any person or class of persons, under certain circumstances to waive or lower
investment minimums. Additionally, the Fund reserves the right to reject any
purchase order and to suspend the offering of shares of the Fund.
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 authorized dealers. All initial purchases must be accompanied
by an account application and if no dealer or broker is named in the account
application Resrv shall act as dealer. For clients of certain broker-dealers and
financial institutions ("Firms"), shares may be purchased directly through such
Firms. However, purchases may be subject to the Firms' own minimums and purchase
requirements.
Purchases may be made by check or by wire as specified in the Prospectus and
for further information with respect to check processing and wire transactions
(See "How To Buy Shares" in the Prospectus). However, purchase orders are not
accepted on days that the NYSE is closed for trading (New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day,
Christmas Day) and any other regional bank holidays.
All investments must be in U.S. dollars. Third-party, foreign, and travelers
checks as well as, cash investments will not be accepted. Purchase orders will
be confirmed at the public offering price calculated after receipt by the Funds
or Firms (who promptly transmit order to the Funds) of payment. It will be the
responsibility of authorized dealers to properly and promptly transmit orders to
the Funds. Orders received by the Funds or the firms after 4:00 PM (Eastern
time) will be priced at the public offering price in effect at 4:00 PM (Eastern
time) on the next business day.
Share Price: Net Asset Value. Investors pay no sales charges to invest in the
Funds. The price you pay for a share of a Fund, and the price you receive upon
selling or redeeming a share of a Fund, is called the Fund's net asset value
("NAV") per share. The NAV is calculated by taking the total value of a Fund's
assets, subtracting its liabilities, and then dividing by the number of shares
that have already been issued. The NAV is generally calculated as of the close
of trading on the NYSE (usually 4:00 PM Eastern time) every day the Exchange is
open. NAV is not calculated on days the Exchange is closed and regional bank
holidays. Your order will be priced at the next NAV calculated after your order
is accepted (i.e., converted to federal funds) by the Funds.
Valuation of Portfolio Securities. 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 U.S. 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. The Funds may use pricing
services to determine market value.
Share Certificates. Share certificates are not issued by the Trust. However, you
will have the same rights of ownership with respect to such shares as if
certificates had been issued.
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Redemptions - General. 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 NAV is determined). The Trust has elected to permit
any shareholder of record to make redemptions wholly in cash to the extent the
shareholder's redemptions in any 90-day period do not exceed the lesser of
$250,000 or 1% of the net assets of a particular fund. The election is
irrevocable pursuant to rules and regulations under the 1940 Act unless
withdrawal is permitted by order of the SEC. In disposing of such securities, an
investor might incur transaction costs and on the date of disposition might
receive an amount less than the NAV of the redemption.
Written and telephone requests. Redemption instructions and options should be
specified when your account is opened. Subsequent elections and changes in
instructions must be in writing with the signature(s) guaranteed. Changes in
registration or authorized signatories may require additional documentation. One
way to redeem shares is to write a letter of instruction which states: the
name(s) and signature(s) of all accountholders (signature(s) guaranteed, if
necessary), account number, Fund name, the dollar amount you want to sell, and
how and where to send the proceeds. If you are redeeming your IRA, please note
the applicable withholding requirements.
To reduce the risk of loss, certain situations require written
instructions along with signature guarantees. These include:
(1) redemptions for more than $5,000, if you do not have
pre-established instructions or
(2) redemptions on accounts whose address has been changed within
the past 30 days; or
(3) redemptions to be sent to someone other than the account
owner or the address of record for the past 30 days; or
(4) redemptions to be set to an alternate address.
You may redeem by calling the Funds at 800-637-1700. Unless you decline
telephone privileges on your application and the Funds fail to take reasonable
measures to verify the request, the Funds will not be liable for any
unauthorized telephone redemption, or for any loss, cost or expense for acting
upon an investor's telephone instructions. Telephone redemptions may be sent to
the bank or brokerage account designated by the shareholder on the application
or in a letter with signature guarantee. To change the designated brokerage or
bank account it is necessary to contact the Firm through which shares of the
Fund were purchased or, if purchased directly from the Funds, it is necessary to
send a written request to the Funds with signature(s) guaranteed. The Fund
reserves the right to refuse a telephone redemption if it believes it is
advisable to do so.
Signature guarantees can be obtained from most banks, credit unions or
savings associations, or from broker/dealers, national securities exchanges or
clearing agencies deemed eligible by the SEC. Guarantees must be signed by an
authorized signatory of the guarantor and "Signature Guaranteed" must appear
with the signature. Notaries public cannot provide signature guarantees. The
Funds may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature guarantees, please call
800-637-1700.
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 a Fund at any time without notice to shareholders. 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 (Class R shares only). If you have an account with a
balance of at least $5,000, you may elect in writing to participate in either of
the following: (i) an Income Distribution Plan providing for annual payments by
redemption of shares from reinvested dividends or distributions paid to your
account during the preceding period; or (ii) a Fixed Amount Withdrawal Plan
providing for the automatic redemption of a sufficient number of shares of your
account to make a specified monthly, quarterly or annual payment of a fixed
amount. Changes to instructions must be in writing with signature(s) guaranteed.
In order for such payments to continue under the Plan, there must be a minimum
of $25 available from reinvested dividends or distributions. Payments can be
made to you or your designee. An application for the Automatic Withdrawal Plans
can be obtained from the Funds. The amount, frequency and recipient of the
payments may be changed by giving proper written notice to the Funds. The Funds
may impose a charge, modify or terminate any Automatic Withdrawal Plan at any
time after the participant has been notified. This privilege may not be
available to clients of some Firms or may be available subject to conditions or
limitations.
Automatic Transfer Plans (ACH). (Class R shares only). You may redeem shares of
a Fund (minimum $100) without charge by telephone if you have filed a separate
Reserve Automatic Transfer application with the Fund. The proceeds will be
transferred between your Fund account and the checking, NOW or bank money-market
deposit account (must be an Automated Clearing House
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member bank) designated in your application. Redemption proceeds will be on
deposit in your account at the Automated Clearing House member bank ordinarily
two (2) business days after receipt of the request. The Funds may impose a
charge, modify or terminate this privilege at any time after the participant has
been duly notified. This privilege may not be available to clients of some Firms
or may be available subject to conditions or limitations.
Exchange Privilege. Shares of each RPES Fund may be exchanged for shares in any
other RPES Fund or Reserve money-market funds at NAV. This exchange privilege
may not be available to clients of certain firms. A sales load will be charged
on exchanges, if applicable. A shareholder may qualify for waiver of the sales
load if the shares of the Fund which are being exchanged were acquired: (a) by a
previous exchange for shares purchased with a sales load, or (b) through
reinvestment of dividends or distributions paid with respect to the foregoing
category of shares. Shares to be acquired in an exchange must be registered for
sale in the investor's state. The Fund reserves the right to record all exchange
requests.
The exchange privilege is not available for shares that 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 this
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.
Exchanges of shares of one fund for another is a taxable event and may
result in a gain or loss for federal income tax purposes. The exchange privilege
described under this heading may not be available to clients of some Firms and
some Firms may impose conditions on their clients that are different from those
described in this Prospectus or SAI.
The exchange privilege may be modified or terminated at any time, or from
time to time, upon 60 days' notice to shareholders if such notice is required by
the 1940 Act. The notice period may be shorter if applicable law permits. The
Trust reserves the right to reject telephone or written requests submitted in
bulk on behalf of ten (10) or more accounts. A pattern of frequent exchanges may
be deemed by the Adviser to be abusive and contrary to the best interests of the
Fund's other shareholders and, at the Adviser's discretion, may be limited by
the Fund's refusal to accept additional purchases and/or exchanges from the
investor and/or the imposition of fees. The Funds do not have any specific
definition of what constitutes a pattern of frequent exchanges. Any such
restriction will be made on a prospective basis, upon notice to the shareholder
not later than ten (10) days following such shareholder's most recent exchange.
Telephone and written exchange requests must be received by the Funds by 4:00 PM
(Eastern time) on a regular business day to take effect that day. Exchange
requests received after 4:00 PM (Eastern time) will be effected at the next
calculated NAV.
Suspension of Redemptions. The right of redemption may be suspended or the date
of payment postponed for more than seven (7) days only (a) when the Exchange is
closed (other than for customary closings), (b) when, as determined by the SEC,
trading on the Exchange is restricted or an emergency exists making it not
reasonably practicable to dispose of securities owned by a Fund or for it to
determine fairly the value of its net assets, or (c) for such periods as the SEC
may permit. If shares of a Fund are purchased by check or Reserve Automatic
Transfer, the Fund may delay transmittal of redemption proceeds until such time
as it has assured itself that good payment has been collected for the purchase
of such shares, which may generally take up to ten (10) business days.
Shareholder checks written against funds, which are not yet considered
collected, will be returned and a fee charged against the account. When a
purchase is made by wire and subsequently redeemed, the proceeds from such
redemptions normally will not be transmitted until two (2) business days after
the purchase.
Shareholder Service Policies. The Fund's policies concerning the shareholder
services are subject to change from time to time. The Fund reserves the right to
change the minimum account size subject to the $5 monthly service charge or
involuntary redemption. The Fund further reserves the right to impose special
service charges for services provided to individual shareholders generally
including, but not limited to, fees for returned checks, stop payment orders on
official checks and shareholder checks, and special research services. The
Fund's standard service charges as described in the Prospectus are also subject
to adjustment from time to time. In addition, the Fund reserves the right to
increase its minimum initial and subsequent investment amounts at any time.
If shares purchased are to be paid for by wire and the wire is not received
by the Fund or if shares are purchased by check, which, after deposit, is
returned unpaid or proves uncollectible, the purchase may be canceled or
redeemed immediately. The investor who gave notice of the intended wire or
submitted the check will be held fully responsible for any losses incurred by
the Fund, the Investment Adviser or the Distributor. The Fund may redeem shares
from any account registered in that purchaser's name and apply the proceeds
therefrom to the payment of any amounts due the Fund, the Investment Adviser or
the Distributor.
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Purchases and Redemptions through Others. Share purchases and redemptions may
also be made through brokers and financial institutions ("Firms"), which may
involve such Firms' own redemption minimums, services fees, and other redemption
requirements. Firms may provide varying arrangements for their clients with
respect to the purchase and redemption of Fund shares and may arrange with their
clients for other investment or administrative services. Firms are responsible
for the prompt transmission of purchase and redemption orders. Some Firms which
utilize a centralized purchase method for shares may have an earlier cut-off for
purchase orders than stated above and may establish higher minimum investment
requirements than set forth above. Some Firms may independently establish and
charge additional fees for their services, which would reduce their clients'
yield or return. Firms may also hold shares in nominee or street name on behalf
of their clients. In such instances, the Fund's transfer agents will have no
information about their accounts, which will be available only from their Firm.
Some of these firms participate in the Fund's Plan of Distribution ("Plan").
Under the Plan, Firms may receive compensation for recordkeeping and other
services and assistance in distributing Fund shares. In addition, certain
privileges with respect to the purchase and redemption of shares or the
reinvestment of dividends may not be available through such Firms or may only be
available subject to certain conditions or limitations. Some Firms may
participate in a program allowing them access to their clients' accounts for
servicing including, without limitation, changes of registration and
dividend-payees and may perform functions such as generation of confirmations
and periodic statements and disbursement of cash dividends. The Prospectus
should be read in connection with such Firm's material regarding its fees and
services.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Set forth below is a discussion of certain U.S. federal income tax issues
concerning the Funds and the purchase, ownership and disposition of Fund shares.
This discussion does not purport to be complete or to deal with all aspects of
federal income taxation that may be relevant to shareholders in light of their
particular circumstances, nor to certain types of shareholders subject to
special treatment under the federal income tax laws. This discussion is based
upon present provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the regulations promulgated thereunder and judicial and administrative
rulings, all of which are subject to change which may be retroactive.
Prospective investors should consult their own tax advisers with regard to the
federal tax consequences of the purchase, ownership, or disposition of Fund
shares, as well as the tax consequences arising under the laws of any state,
foreign country, or other taxing jurisdiction.
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Code so long as such qualification is in the best interests
of shareholders. If it so qualifies, each Fund generally will not be subjected
to federal income tax on distributed amounts. Shareholders of a Fund, however,
will be subject to federal income tax on any ordinary income and net capital
gains realized by the Fund and distributed to shareholders, whether distributed
in cash or in the form of additional shares. Distributions of net capital gains
(the excess of net long-term capital gains over net short-term capital losses),
if any, designated as capital gain dividends may be taxable to individuals and
certain other shareholders at the maximum federal 20% capital gains rates,
depending upon the Fund's holding period for the assets giving rise to the
capital gains, regardless of how long the shareholder has held the Fund's
shares. The maximum 20% capital gains rate generally applies to gains from the
sale of assets held for more than 12 months. Capital gain from the sale of
assets held for one year or less will generally be taxed as ordinary income.
Upon the taxable disposition (including a sale or redemption) of shares of a
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. Capital gains may be
taxable to individuals and certain other shareholders at the maximum federal 20%
capital gains rate, 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 of a
Fund will have a cost basis for federal income tax purposes in each share
received equal to the NAV of a share of that Fund on the reinvestment date. An
exchange of shares in a Fund for shares of another RPES Fund will be treated as
a taxable sale of the exchanged Fund shares. Accordingly, a shareholder may
recognize a gain or loss for federal income tax purposes depending upon his or
her basis in the Fund shares exchanged. A gain or loss will be treated as a
capital gain or loss if the shares are capital assets in the shareholder's
hands. The shareholder will have a tax basis in the newly acquired Fund shares
equal to the amount invested and will begin a new holding period for federal
income tax purposes.
In order to qualify as a "regulated investment company" under the Code, each
of the Funds must, among other things, (i) derive in each taxable year at least
90% of its gross income from dividends, interest, payments from certain
securities loans, and gains from the sale of stock, securities or foreign
currencies or other income (such as gains from options, futures or forward
contracts) from investing in stock, securities or currencies; and (ii) hold as
of the close of each quarter at least 50% of its assets in certain investments
assets, such as cash, U.S. government securities, securities of other regulated
investment companies and other securities, with such other securities limited
from any issuer to not more than 5% of the value of the Fund's total assets and
10% of the outstanding voting securities of such issuer, and hold not more than
25% of the value of the Fund's assets in the securities of any one issuer (other
than
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U.S. government securities or securities of other regulated investment
companies).
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
October, November or December of any year to shareholders of record on any date
in such a month will be deemed to have been received by the shareholders and
paid by the Fund on December 31 of that year, provided such dividends are paid
during January of the following year.
Dividends to shareholders who are non-resident aliens may be subject to a
U.S. 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 U.S. withholding tax.
Investment by a Fund in zero coupon or other discount debt securities will
result in income to the Fund equal to a portion of the excess of the face value
of the debt securities over their issue price (the "original issue discount")
each year that the securities are held, even though the Fund receives no cash
interest payments. This income is included in determining the amount of income
which a Fund must distribute to maintain its status as a regulated investment
company and to avoid the payment of federal income tax and the 4% excise tax. In
addition, if a Fund invests in certain high-yield original issue discount
securities issued by corporations, a portion of the original issue discount
accruing on any such obligation may be eligible for the deduction for dividends
received by corporations. In such event, dividends of investment company taxable
income received from a Fund by its corporate shareholders to the extent
attributable to such portion of accrued original issue discount, may be eligible
for this deduction for dividends received by corporations if so designated by
the Fund in a written notice to shareholders. Gains derived by a Fund from the
disposition of any market discount bonds (i.e., bonds purchased other than at
original issue, where the face value of the bonds exceeds their purchase price)
held by a Fund will be taxed as ordinary income to the extent of the accrued
market discount of the bonds, unless the Fund elects to include the market
discount in income as it accrues.
The Code includes rules applicable to certain non-equity listed options,
futures contracts, and options on futures contracts which a 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, equity
options (options to buy or sell stocks) are not classified as Section 1256
contracts and are not subject to the marked-to-market rule or to 60/40 gain or
loss treatment. Any gains or losses recognized by a Fund from transactions in
equity options generally constitute short-term capital gains or losses. If
equity call options written, or equity put options purchased, by a 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 equity puts or increased by the premium received
for equity calls.
Generally, the hedging transactions undertaken by a 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 a Fund. In addition, losses
realized by a 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 a 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. In addition, certain carrying charges
(including interest expense) associated with positions in a straddle may be
required to be capitalized rather than deducted currently.
A Fund may make one or more of the elections available under the Code which
are applicable to straddles. If a 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 shareholders,
and which will be taxed as ordinary income or capital gain, may be increased or
decreased as compared to a fund that did not engage in such hedging
transactions. Recently enacted rules may affect the timing and character of gain
if a Fund engages in transactions that reduce or eliminate its risk of loss with
respect to appreciated financial positions. If a Fund enters into certain
transactions in property while holding substantially identical property, the
Fund would be treated as if it had sold and immediately repurchased the property
and would be taxed on any gain (but not loss) from the constructive sale. The
character of gain from a constructive sale would depend upon the Fund's holding
19
<PAGE>
period of the property. Loss from a constructive sale would be recognized when
the property was subsequently disposed of, and its character would depend on the
Fund's holding period and the application of various loss deferral provisions of
the Code.
Gains or losses attributable to fluctuations in exchange rates which occur
between the time a Fund accrues income or other receivables or accrues expenses
or other liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition of some
investments, including debt securities and certain forward contracts denominated
in a foreign currency, gains or losses attributable to fluctuations in the value
of the foreign currency between the acquisition and disposition of the position
also are treated as ordinary gain or loss. These gains and losses, referred to
under the Code as "Section 988" gains or losses, increase or decrease the amount
of a Fund's investment company taxable income available to be distributed to its
shareholders as ordinary income.
A 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 U.S. has entered into tax treaties with many foreign
countries which may entitle a 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 a Fund's assets to be invested within various
countries is not known. The Funds intend to operate so as to qualify for tax
treaty benefits where applicable. To the extent that a Fund is liable for
foreign income taxes withheld at the source, the Fund may operate so as to meet
the requirements of the Code to "pass through" to its shareholders tax benefits
attributable to foreign income taxes paid by the Fund. If more than 50% of the
value of the Fund's total assets at the close of its taxable year is comprised
of securities issued by foreign corporations, the Fund may elect to "pass
through" to its 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 proportional share
of foreign taxes paid by the Fund; (ii) treat their proportional share of
foreign taxes as paid by them; and (iii) subject to certain limitations, either
deduct their proportional 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. One or more of the Funds may meet
the requirements to "pass through" to its shareholders foreign income taxes
paid, but there can be no assurance that any Fund will 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 proportional share (by country) of (i) the
foreign taxes paid and (ii) the Fund's gross income from foreign sources. The
notice shall also include the amount of foreign taxes not allowable for "pass
through" treatment because of a failure to satisfy certain requirements imposed
under the Code.
A 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 a 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.
A 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.
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 a Fund 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
capital gain, may be increased or decreased as compared to a fund that did not
invest in PFIC shares.
A Fund generally will be required to withhold federal income tax at a rate
of 31% ("backup withholding") from dividends paid, capital gain distributions,
and redemption proceeds to shareholders if (i) the shareholder fails to furnish
the Fund with the shareholder's correct taxpayer identification number or social
security number, (ii) the IRS notifies the shareholder or the Fund that the
shareholder has failed to report properly certain interest and dividend income
to the IRS and to respond to notices to that effect, or (iii) when required to
do so, the shareholder fails to certify that he or she is not subject to backup
withholding. Any amounts withheld may be credited against the shareholder's
federal income tax liability.
20
<PAGE>
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
Each 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 a 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, each Fund may compare its performance
to (i) the Standard & Poor's 500 Stock Index, Dow Jones Industrial Average, the
Russell 2000, or other unmanaged indices so that investors may compare each
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 independent research firms which rank mutual
funds by overall performance, investment objectives and assets, or tracked by
other services, companies, publications, or persons; and (iii) the Consumer
Price Index (measure for inflation) to assess the real rate of return from an
investment in each Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs and expenses.
Each 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 NAV 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.
Each 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.
GENERAL INFORMATION
Use of Joint Prospectus and Statement of Additional Information. Although each
Fund is offering only its own shares, it is possible that a Fund might become
liable for any misstatement in the Prospectus and SAI about the other Funds.
However, each Fund has acknowledged that it, and not any of the other Funds, is
liable for any material misstatement or omission about it in the Prospectus or
SAI.
Reports and Statements. Shareholders receive an Annual Report containing audited
financial statements and an unaudited Semi-Annual Report. An account statement
is sent to each shareholder at least quarterly. Shareholders who are clients of
some Firms will receive an account statement combining transactions in Fund
shares with account statements covering other brokerage or mutual fund accounts.
Shareholders have a duty to examine their account statement(s) and report any
discrepancies to The Reserve Funds
21
<PAGE>
immediately. Failure to do so could result in the shareholder suffering a loss.
Further, shareholders are advised to retain account statements.
Reserve Easy Access. Easy Access is The Reserve Funds' 24-hour toll-free
telephone service that lets customers use a touch-tone phone for a variety of
options, which include NAV, account balances and other options. To use it, call
800-637-1700 and follow the instructions. Clients may also access current price
information on the Internet at www.reservefunds.com.
Inquiries. Shareholders should direct their inquiries to the firm from which
they received this Prospectus or to The Reserve Funds, 1250 Broadway, New York,
NY 10001-3701 or call 800-637-1700.
FINANCIAL STATEMENTS
Financial Statements (audited) for the Trust for the fiscal year ended May
31, 1999, including notes thereto, are incorporated by reference in the SAI from
the Trust's Annual Report to Shareholders dated May 31, 1999 filed with the SEC
on August 2, 1999 and is available upon request.
22
<PAGE>
PART C
Item 23. Exhibits
(a) Declaration of Trust
(b) Bylaws
(c) Not applicable
(d) Form of Investment Management Agreement for the Funds and form of
Sub-Investment Management Agreement
(e) Form of Distribution Agreement and Plan of Distribution filed as an
exhibit to Registrant's Post-Effective Amendment No. 42 dated November
24, 1986.
(f) Pension Plan of Reserve Management Corporation was filed as an
exhibit to Effective Amendment No. 32; Amendments to Pension Plan
filed as an exhibit to Post-Effective Amendment No. 45 dated July 31,
1989.
(g) Custodian Agreement with Chase Manhattan Bank
(h) Not applicable
(i) Opinion of Counsel
(j) Consent of Independent Auditors
(k) Not applicable
(l) Not applicable
(m) Form of Registered Dealer Agreement
(n) Financial Data Schedules
(o) Not applicable
----------------
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant
Not Applicable
Item 25. 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
(a) Subject to the expectations and limitations contained in Subsection
10.02(b):
(i) every person who is, or has been, a Trustee or officer of the
trust (hereinafter referred to as a "Covered Person") shall be indemnified by
the Trust to the fullest extent permitted by law against liability and against
all expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement or defense thereof;
(ii) the words "claim", "suit", or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal or other, including
appeals), actual or threatened while in office or thereafter, and the words
"liability" and "expenses" shall include, without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered person:
(i) who shall have been adjudicated by a court or other body
including, without limitation, arbitration panels or self-regulatory
organizations before which the proceeding was brought (A) to be liable to the
trust or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office or (B) not to have acted in good faith in the reasonable belief that his
action was in the best interest of the trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office, (A) by the court or other body approving
the settlement; (B) by at 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
<PAGE>
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 26. Business and Other Connections of Investment Adviser
<TABLE>
<CAPTION>
Name Position with the Adviser Other Businesses
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bruce R. Bent President President and Director of Reserve
Management Corporation and Chairman
and Director and of Resrv Partners, Inc.
both of the same address as the Trust.
- ------------------------------------------------------------------------------------------------------------------
Bruce R. Bent II Vice President and Vice President, Secretary and
Secretary Director of Reserve Management
Corporation and Secretary and
Director of Resrv Partners, Inc.
both of the same address as the
Trust.
- ------------------------------------------------------------------------------------------------------------------
Arthur T. Bent III Vice President and Vice President, Treasurer and
Treasurer Director of Reserve Management
Corporation and Assistant Treasurer
and Director of Resrv Partners, Inc.
both of the same address as the
Trust.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 27. Principal Underwriters
(a) Resrv Partners, Inc., a principal underwriter of the Registrant, also acts
as principal underwriter to The Reserve Fund Reserve Tax-Exempt Trust, Reserve
Institutional Trust, and Reserve New York Tax-Exempt Trust.
Name and Principal Positions and Offices Positions and Offices Business
Address with Resrv Partners, Inc. with Registrant
<TABLE>
- ----------------------------------------------------------------------------------
<S> <C>
Bruce R. Bent Chairman and Director
1250 Broadway
New York, New York 10001-3701
- ----------------------------------------------------------------------------------
Mary A. Belmonte President
1250 Broadway
New York, New York 10001-3701
- ----------------------------------------------------------------------------------
Bruce R. Bent II Secretary and Director
1250 Broadway
New York, New York 10001-3701
- ----------------------------------------------------------------------------------
Arthur Bent III Treasurer and Director
1250 Broadway
New York, New York 10001-3701
- ----------------------------------------------------------------------------------
MaryKathleen Foynes Counsel & Assistant Secretary
1250 Broadway
New York, New York 10001-3701
- ----------------------------------------------------------------------------------
James Freisen Controller
1250 Broadway
New York, New York 10001-3701
- ----------------------------------------------------------------------------------
</TABLE>
<PAGE>
Item 28. Location of Accounts and Records All records required to be maintained
by Section 31(a) of the 1940 Act and the Rules promulgated thereunder are
maintained at 1250 Broadway, New York, NY 10001-3701 except those relating to
receipts and deliveries of securities, which are maintained by the Registrant's
Custodian.
Item 29. Management Services
See "Investment Management, Distribution, Service and Custodian
Agreements" in Part B.
Item 32. Undertakings
Not Applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this
Post-Effective Amendment to its Registration Statement meets all of the
requirements for effectiveness pursuant to Rule 485 (b) under the Securities
Act of 1933 and Registrant has duly caused this Post-Effective Amendment No. 17
to its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York, and State of New York, on the
29th day of September, 1999.
THE RESERVE FUND
By: /s/ Bruce R. Bent
------------------------------------
Bruce R. Bent, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 17 to Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Bruce R. Bent President, Treasurer and September 29, 1999
- --------------------------- Trustee (principal
Bruce R. Bent executive operating and
financial officer)
* Trustee September 29, 1999
- ---------------------------
Edwin Ehlert Jr.
* Trustee September 29, 1999
- ---------------------------
Henri W. Emmet
* Trustee September 29, 1999
- ---------------------------
Donald J. Harrington
/s/ Bruce R. Bent II Trustee September 29, 1999
- --------------------------
Bruce R. Bent II
* Trustee September 29, 1999
- ---------------------------
William E. Viklund
* Trustee September 29, 1999
- ---------------------------
Diana P Hermann
* Trustee September 29, 1999
- ---------------------------
Richard Bassuk
/s/ MaryKathleen Foynes Counsel and Secretary September 29, 1999
- ---------------------------
MaryKathleen Foynes
*Attorney-in-Fact
</TABLE>
<PAGE>
DECLARATION OF TRUST
OF
RESERVE PRIVATE EQUITY SERIES
DATED: APRIL 20, 1993
(AS AMENDED THROUGH DECEMBER 17, 1998)*
- ---------------------------------------------
*Also amended to correct typographical errors
<PAGE>
RESERVE PRIVATE EQUITY SERIES
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I NAME AND DEFINITION
Section 1.01 Name ........................................................1
Section 1.02 Definitions .................................................1
ARTICLE II BENEFICIAL INTEREST
Section 2.01 Shares of Beneficial Interest ...............................2
Section 2.02 Issuance of Shares ..........................................2
Section 2.03 Register of Shares and Share Certificates ...................2
Section 2.04 Transfer of Shares ..........................................2
Section 2.05 Treasury Shares .............................................3
Section 2.06 Establishment of Series .....................................3
Section 2.07 Investment in the Trust .....................................3
Section 2.08 Assets and Liabilities of Series ............................3
Section 2.09 No Preemptive Rights ........................................4
Section 2.10 No Personal Liability of Shareholder ........................4
Section 2.11 Assent to Trust Instrument ..................................4
ARTICLE III THE TRUSTEES
Section 3.01 Management of the Trust .....................................4
Section 3.02 Initial Trustees ............................................5
Section 3.03 Term of Office...............................................5
Section 3.04 Vacancies and Appointments ..................................5
Section 3.05 Temporary Absence ...........................................6
Section 3.06 Number of Trustees ..........................................6
Section 3.07 Effect of Ending of a Trustee's Service .....................6
Section 3.08 Ownership of Assets of the Trust ............................6
ARTICLE IV POWERS OF THE TRUSTEES
Section 4.01 Powers ......................................................6
Section 4.02 Issuance and Repurchase of Shares ...........................8
Section 4.03 Trustees and Officers as Shareholders .......................8
Section 4.04 Action by the Trustees ......................................9
Section 4.05 Chairman of the Trustees ....................................9
Section 4.06 Principal Transactions ......................................9
ARTICLE V EXPENSES OF THE TRUST ............................................................9
ARTICLE VI INVESTMENTS ADVISERS, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
Section 6.01 Investment Adviser .........................................10
Section 6.02 Principal Underwriter ......................................10
Section 6.03 Administrator ..............................................10
Section 6.04 Transfer Agent .............................................10
Section 6.05 Parties to Contract ........................................11
Section 6.06 Provisions and Amendments ..................................11
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers ..............................................11
Section 7.02 Meetings ...................................................12
Section 7.03 Quorum and Required Vote ...................................12
ARTICLE VIII CUSTODIAN
Section 8.01 Appointment and Duties .....................................12
Section 8.02 Central Certificate System .................................13
ARTICLE IX DISTRIBUTION AND REDEMPTIONS
Section 9.01 Distributions ..............................................13
Section 9.02 Redemptions ................................................13
Section 9.03 Determination of Net Asset Value and Valuation of
Portfolio Assets ...........................................13
Section 9.34 Suspension of the Right of Redemption ......................14
Section 9.05 Redemption of Shares in Order
to Qualify as Regulated Investment Company .................14
ARTICLE X LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10 01 Limitation of Liability ....................................15
Section 10.02 Indemnification ............................................15
Section 10.03 Shareholders ...............................................16
ARTICLE XI MISCELLANEOUS
Section 11.01 Trust Not a Partnership ....................................16
Section 11.02 Trustee's Good Faith Action, Expert Advice,
No Bond or Surety........................................16
Section 11.03 Establishment of Record Dates ..............................16
Section 11.04 Termination of Trust .......................................17
Section 11.05 Reorganization .............................................17
Section 11.06 Filing of Copies, References, Headings .....................18
Section 11.07 Applicable Law .............................................18
Section 11.08 Amendments .................................................18
Section 11.09 Fiscal Year ................................................19
Section 11.10 Use of Name ................................................19
Section 11.11 Provisions in Conflict With Law ............................19
</TABLE>
<PAGE>
RESERVE PRIVATE EQUITY SERIES
TRUST INSTRUMENT, made by Bruce R. Bent, Edwin Ehlert. Jr., Henri W.
Emmet, Donald J. Harrington, Bruce R. Bent II, Diana Herrmann, Richard Bassuk
and William Viklund (the "Trustees").
WHEREAS, the Trustees desire to establish a business trust for the
investment and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property
contributed to the trust hereunder shall be held and managed in trust under this
Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.01 NAME. The name of the trust created hereby is "Reserve
Private Equity Series."
SECTION 1.02 DEFINITIONS. Wherever used herein, unless otherwise
required by the context or specifically provided:
(a) "Bylaws" means the Bylaws of the trust as adopted by the Trustees,
as amended from time to time;
(b) "Commission" has the meaning given it in the 1940 Act. "Affiliated
Person", "Assignment," "Interested Person" and "Principal Underwriter" shall
have the respective meanings given them in the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Commission or any rules or
regulations adopted by or interpretive releases of the Commission thereunder.
"Majority Shareholder Vote" shall have the same meaning as the term "vote of a
majority of the outstanding voting securities" is given in the 1940 Act, as
modified by or interpreted by any applicable order or orders of the Commission
or any rules or regulations adopted by or interpretive releases of the
Commission thereunder.
(c) "Delaware Act" refers to Chapter 38 of Title 12 of the Delaware
Code entitled "Treatment of Delaware Business Trusts," as amended from time to
time.
(d) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article IX, Section 9.03 hereof;
(e) "Outstanding Shares" means those Shares shown from time to time in
the books of the Trust or its transfer agent as then issued and outstanding, but
shall not include Shares which have been redeemed or repurchased by the Trust
and which are at the time held in the treasury of the Trust;
(f) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Article II, Section 2.06 hereof.
(g) "Shareholder" means a record owner of Outstanding Shares of the
Trust;
(h) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or class thereof shall be divided and may include fractions of Shares as
well as whole Shares;
(i) The "Trust" means the Delaware Trust and reference to the Trust,
when applicable to one or more Series of the Trust, shall refer to any such
Series;
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(j) The "Trustees" means the person or persons who has or have signed
this Trust Instrument, so long as he or they shall continue in office in
accordance with the terms hereof, and all other persons who may from time to
time be duly qualified and serving as Trustees in accordance with the provisions
of Article III hereof and reference herein to a Trustee or to the Trustees shall
refer to the individual Trustees in their capacity as Trustees hereunder;
(k) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one or
more or the Trust or any Series, or the Trustees on behalf of the Trust or any
Series.
(1) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
ARTICLE II
BENEFICIAL INTEREST
SECTION 2.01 SHARES OF BENEFICIAL INTEREST. The beneficial interest in
the Trust shall be divided into such transferable Shares of one or more separate
and distinct Series or classes of a Series as the Trustees shall from time to
time create and establish. The number or Shares of each Series, and class
thereof, authorized hereunder is unlimited. Each Share shall have no par value.
All Shares issued hereunder, including without limitation, Shares issued in
connection with a dividend in Shares or a split or reverse split of Shares,
shall be fully paid and nonassessable.
SECTION 2.02 ISSUANCE OF SHARES. The Trustees in their discretion may
from time to time, without vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of consideration, subject to
applicable law, including cash or securities, at such time or times and on such
terms as the Trustees may deem appropriate, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with,
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into a
greater or lesser number without thereby changing the proportionate beneficial
interests in the Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or 1/1,000th of a Share or
integral multiples thereof.
SECTION 2.03 REGISTER OF SHARES AND SHARE CERTIFICATES. A register
shall be kept at the principal office of the Trust or an office of the Trust's
transfer agent which shall contain the names and addresses of the Shareholders
of each Series, the number of Shares of that Series (or any class or classes
thereof) held by them respectively and a record of all transfers thereof. As to
Shares for which no certificate has been issued, such register shall be entitled
to receive dividends or other distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or other distribution, nor to have notice given to him as herein
or in the Bylaws provided, until he has given his address to the transfer agent
or such officer or other agent of the Trustees as shall keep the said register
for entry thereon. No share certificates shall be issued by the Trust.
SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer in proper form and such evidence of the genuiness of such
execution and authorization and of such other matters as may be required by the
Trustees. Upon such delivery the transfer shall be recorded on the register of
the Trust. Until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor the Trust, nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
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SECTION 2.05 TREASURY SHARES. Shares held in the treasury shall, until
reissued pursuant to Section 2.02 hereof, not confer any voting rights on the
Trustees, nor shall such shares be entitled to any dividends or other
distributions declared with respect to the Shares.
SECTION 2.06 ESTABLISHMENT OF SERIES. The Trust created hereby shall
consist of one or more Series and separate and distinct records shall be
maintained by the Trust for each Series and the assets associated with any such
Series shall be held and accounted for separately from the assets of the Trust
or any other Series. The Trustees shall have full power and authority, in their
sole discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series of the Trust, to establish and designate and to
change in any manner any such Series of Shares or any classes of initial or
additional Series and to fix such preferences, voting powers, rights and
privileges of such Series or classes thereof as the Trustees may from time to
time determine, to divide or combine the Shares or any Series or classes thereof
into a greater or lesser number, to classify or reclassify any issued Shares or
any Series or classes thereof into one or more Series or classes of Shares, and
to take such other action with respect to the Shares as the Trustees may deem
desirable. The establishment and designation of any Series shall be effective
upon the adoption of a resolution by a majority of the Trustees setting forth
such establishment and designation and the relative rights and preferences of
the Shares of such Series. A Series may issue any number of Shares and need not
issue Shares. At any time that there are no Shares outstanding of any particular
Series previously established and designated, the Trustees may by a majority
vote abolish that Series and the establishment and designation thereof.
All references to Shares in this Trust instrument shall be deemed to be
Shares of any or all Series, or classes thereof, as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series of
the Trust, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal
proportionate interest with each other Share in the Series, none having priority
or preference over another, except to the extent that such priorities or
preferences are established with respect to one or more classes of shares
consistent with applicable law and any rule or order of the Commission. Each
holder of Shares of a Series shall be entitled to receive his pro rata share of
all distributions made with respect to such Series. Upon redemption of his
Shares, such Shareholder shall be paid solely out of the funds and property of
such Series of the Trust.
SECTION 2.07 INVESTMENT IN THE TRUST. The Trustees shall accept
investments in any Series of the Trust from such persons and on such terms as
they may from time to time authorize. At the Trustees' discretion, such
investments, subject to applicable law, may be in the form of cash or securities
in which the affected Series is authorized to invest, valued as provided in
Article IX, Section 9.03 hereof. Investments in a series shall be credited to
each Shareholder's account in the form of full Shares at the Net Asset Value per
share next determined after the investment is received or accepted as may be
determined by the Trustees; provided, however, that the Trustees may, in their
sole discretion, (a) fix the Net Asset Value per Share of the initial capital
contribution, (b) impose a sales charge upon investments in the Trust in such
manner and at such time determined by the Trustees or (c) issue fractional
Shares.
SECTION 2.08 ASSETS AND LIABILITIES OF SERIES. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment or such proceeds in whatever form the
same may be, shall be held and accounted for separately from the other assets of
the Trust and of every other Series and may be referred to herein as "assets
belonging to" that Series. The assets belonging to a particular Series shall
belong to that Series for all purposes, and to no other Series, subject only to
the rights of creditors of that Series. In addition, any assets, income,
earnings, profits or funds, or payments and proceeds with respect thereto, which
are not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more the Series in such
manner as
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the Trustees, in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all Series
for all purposes, and such assets, income, earnings, profits or funds, or
payments and proceeds with respect thereto shall be assets belonging to that
Series. The assets belonging to a particular Series shall be so recorded upon
the books of the Trust, and shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series. The assets belonging to each
particular Series shall be charged with the liabilities of that Series and all
expenses costs, charges and reserves attributable to that Series. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees between or among any one or more of the Series in
such manner as the Trustees in their sole discretion deem fair and equitable.
Each such allocation shall be conclusive and binding upon the Shareholders of
all Series for all purposes. Without limitation of the foregoing provisions of
this Section 2.08, but subject to the right of the Trustees in their discretion
to allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Series shall be
enforceable against the assets of such Series only, and not against the assets
of the Trust generally. Notice of this contractual limitation on inter-Series
liabilities may, in the Trustee's sole discretion, be set forth in the
certificate of trust of the Trust (whether originally or by amendment) as filed
or to be filed in the Office of the Secretary of State of the State of Delaware
pursuant to the Delaware Act, and upon the giving of such notice in the
certificate of trust, the statutory provisions of Section 3804 of the Delaware
Act relating to limitations on inter-Series liabilities (and the statutory
effect under Section 3804 of setting forth such notice in the certificate of
trust) shall become applicable to the Trust and each Series. Any person
extending credit to, contraction with or having any claim against any Series may
look only to the assets of that Series to satisfy or enforce any debt, with
respect to that Series. No Shareholder or former Shareholder of any Series shall
have a claim on or any right to any assets allocated or belonging to any other
Series.
SECTION 2.09 NO PREEMPTIVE RIGHTS. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or the Trustees, whether of the same or other
Series.
SECTION 2.10 NO PERSONAL LIABILITY OF SHAREHOLDER. Each Shareholder of
the Trust and of each Series shall not be personally liable for the debts,
liabilities, obligations and expenses incurred by, contracted for, or otherwise
existing with respect to, the Trust or by or on behalf of any Series. The
Trustees shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other that such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. Every note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust or to a Series shall include a recitation limiting the obligation
represented thereby to the Trust or to one or more Series and its or their
assets (but the omission of such a recitation shall not operate to bind any
Shareholder of Trustee of the Trust).
SECTION 2.11 ASSENT TO TRUST INSTRUMENT. Every Shareholder, by virtue
of having purchased a Share shall become a Shareholder and shall be held to have
expressly assented and agreed to be bound by the terms hereof.
ARTICLE III
THE TRUSTEES
SECTION 3.01 MANAGEMENT OF THE TRUST. The Trustees shall have exclusive
and absolute control over the Trust Property and over the business of the Trust
to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware, in any and
all states of the United States of America, in the District of Columbia, in any
and all commonwealths, territories, dependencies, colonies, or possessions of
the United States of America, and in any foreign
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jurisdiction and to do all such other things and execute all such instruments as
they deem necessary, proper or desirable in order to promote the interests of
the Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interest of the Trust made by the Trustees in
good faith shall be conclusive. In construing the provisions of this Trust
Instrument presumption shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall
not be construed as limiting the aforesaid power. The powers of the Trustees may
be exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders. Such a meeting shall be held on a date fixed by the Trustees.
In the event that less than a majority of the Trustees holding office have been
elected by Shareholders, the Trustees then in office will call a Shareholders'
meeting for the election of Trustees.
SECTION 3.02 INITIAL TRUSTEES. The initial Trustees shall be the
persons named herein. On a date fixed by the Trustees, the Shareholders shall
elect at least three (3) but not more than twelve (12) Trustees as specified by
the Trustees pursuant to Section 3.06 of this Article III.
SECTION 3.03 TERM OF OFFICE. The Trustees shall hold office during the
lifetime of this Trust, and until its termination as herein provided; except (a)
that any Trustee may resign his position by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such date as is specified therein; (b) that any Trustee may be removed at
any time by written instrument, signed by at least two-thirds of the number of
Trustees prior to such removal, specifying the date when such removal shall
become effective; (c) that any Trustee who requests in writing to be retired or
who has died, has become physically or mentally incapacitated by reason of
disease or otherwise, or is otherwise unable to serve, may be retired by written
instrument signed by a majority of the other Trustees, specifying the date of
his retirement; and (d) that a Trustee may be removed at any meeting of the
Shareholders of the Trust by a vote of Shareholders owning at least two-thirds
of the Outstanding Shares.
SECTION 3.04 VACANCIES AND APPOINTMENTS. In case of the declination to
serve, death, resignation, retirement, removal, physical or mental incapacity by
reason of disease or otherwise, or a Trustee is otherwise unable to serve, or an
increase in the number of Trustees, a vacancy shall occur. Whenever a vacancy in
the Board of Trustees shall occur, until such vacancy is filled, the other
Trustees shall have all the powers hereunder and the certificate of the other
Trustees of such vacancy shall be conclusive. In the case of an existing
vacancy, the remaining Trustees shall fill such vacancy by appointing such other
person as they in their discretion shall see fit consistent with the limitations
under the 1940 Act. Such appointment shall be evidenced by a written instrument
signed by a majority of the Trustees in office or by resolution of the Trustees,
duly adopted, which shall be recorded in the minutes of a meeting of the
Trustees, whereupon the appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.04 shall have accepted this
position, the trust estate shall vest in the new Trustee or Trustees, together
with the continuing Trustees, without any further act or conveyance, and he
shall be deemed a Trustee hereunder.
SECTION 3.05 TEMPORARY ABSENCE. Any Trustee may, by power of attorney
delegate his power for a period not exceeding six months at any time to any
other Trustee or Trustees, provided that in no case shall less than two Trustees
personally exercise the other powers hereunder except as herein otherwise
expressly provided.
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SECTION 3.06 NUMBER OF TRUSTEES. The number of Trustees shall be at
least three (3), and thereafter shall be under number as shall be fixed from
time to time by resolution or written instrument of a majority of the Trustees,
provided, however, that the number of Trustees shall in no event be more than
twelve (12).
SECTION 3.07 EFFECT OF ENDING OF A TRUSTEE'S SERVICE. The declination
to serve, death, resignation, retirement, removal, incapacity, or inability of
the Trustees, or anyone of them, shall not operate to terminate the trust or to
revoke any existing agency created pursuant to the terms of this Trust
Instrument.
SECTION 3.08 OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust
and of each Series shall be held separate and apart for any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in all of the assets of the Trust and the
right to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Trust, except that the Trustees may cause legal title
to any Trust Property to be held by, or in the name of the Trust, or in the name
of any person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust of any Series or any right of
partition or possession thereof, but each Shareholder shall have, except as
otherwise provided for herein, a proportionate undivided beneficial interest in
the Trust or Series. The Shares shall be personal property giving only the
rights specifically set forth in this Trust Instrument.
ARTICLE IV
POWER OF THE TRUSTEES
SECTION 4.01 POWERS. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. The
Trustees shall not in any way be bound or limited by present or future laws or
customs in regard to trust investments, but shall have full authority and power
to make any and all investments which they, in their sole discretion, shall deem
proper to accomplish the purpose of this Trust without recourse to any court or
other authority. Subject to any applicable limitation in this Trust Instrument
or the Bylaws of the Trust, the Trustees shall have the power and authority:
(a) to invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by any
present or future law or custom in regard to investments by trustees, and to
sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease
any or all of the assets of the Trust;
(b) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of such
operations;
(c) To borrow money and in this connection issue notes or other
evidence of indebtness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other person and
to lend Trust Property;
(d) To provide for the distribution of interest of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders; such
Bylaws shall be deemed incorporated and included in this Trust Instrument;
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(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that are
members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Trust subject to any
conditions set forth in this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents and shareholder servicing
agents which may be the Trust, or both;
(i) To set record dates in the manner provided herein or in the Bylaws;
(j) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, manager, custodian,
underwriter or other agent or independent contractor;
(k) To sell or exchange any or all of the assets of the Trust, subject
to the provisions of Article XI, subsection 11.04(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or otherwise in any
manner arising out of ownership of securities;
(n) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trust or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the usual
practice of Delaware business trusts or investment companies;
(o) To establish separate and distinct Series in accordance with the
provisions of Article II hereof and to establish classes of such Series having
relative rights, power and duties as they may provide consistent with applicable
law;
(p) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series or
to apportion the same between or among two or more Series, provided that any
liabilities or expenses incurred by a particular Series shall be payable solely
out of the assets belonging to that Series as provided for in Article II hereof;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation, partnership or other entity, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation, partnership or
other entity, and to pay calls or subscriptions with respect to any security
held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any other matter in controversy including, but not limited
to, claims for taxes;
(s) To make distributions of income and of capital gains to
Shareholders in the manner provided herein;
(t) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or classes, and to require
the redemption of the Shares of any Shareholders whose investment is less than
such minimum upon giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the powers
of the Trustees to said committees and to adopt a committee charter providing
for such responsibilities, membership
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(including Trustees, officers or other agents of the Trust therein) and any
other characteristics of said committees as the Trustees may deem proper.
Notwithstanding the provisions of this Article IV, and in addition to such
provisions or any other provisions of this Trust Instrument of the Bylaws, the
Trustee may by resolution appoint a committee consisting of less than the whole
number of Trustees then in office, which committee may be empowered to act for
and bind the Trustees and the Trust, as if the acts of such committee were the
acts of all Trustees then in office, with respect to the institution,
prosecution dismissal, settlement, review or investigation of any action, suit
or proceeding which shall be pending or threatened to be brought before any
court, administrative agency or other adjudicatory body;
(v) To interpret the investment policies, practices or limitations of
any Series;
(w) To establish a registered office and have a registered agent in the
state of Delaware; and
(X) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see the application
of any payments make or property transferred to the Trustees or upon their
order.
SECTION 4.02 ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in Shares and, subject to the
provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the Trust, with
respect to which such Shares are issued.
SECTION 4.03 TRUSTEES AND OFFICERS AS SHAREHOLDERS. Any Trustee,
officer or other agent of the Trust may acquire, own and dispose of Shares to
the same extent as if he were not a Trustee, officer or agent and the Trustees
may issue and sell or cause to be issued and sold Shares to and buy such Shares
from any such person or any corporation, partnership or other entity in which he
is interested, subject only to the general limitations herein contained or as
may be contained in the Bylaws.
SECTION 4.04 ACTION BY THE TRUSTEES. The Trustees shall act by majority
vote at a meeting duly called or by unanimous written consent without a meeting
or by telephone meeting provided a quorum of Trustees participate in any such
telephone meeting, unless the 1940 Act requires that a particular action be
taken only at a meeting at which the Trustees are present in person. At any
meeting of the Trustees, a majority of the Trustees shall constitute a quorum.
Meetings of the Trustees may be called orally or in writing by the Chairman of
the Board of Trustees or by any two other Trustees. Notice of the time, date and
place of all meetings of the Trustees shall be given by the party calling the
meeting to each Trustee by telephone, facsimile or other electronic mechanism
sent to his home or business address at least twenty-four hours in advance of
the meeting or by written notice mailed to his home or business address at least
seventy-two hours in advance of the
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meeting. Notice need not be given to any Trustee who attends the meeting without
objecting to the lack of notice or who executes a written waiver of notice with
respect to the meeting. Any meeting conducted by telephone shall be deemed to
take place at the principal office of the Trust, as determined by the Bylaws or
by the Trustees. Subject to the requirements of the 1940 Act, the Trustees by
majority vote may delegate to any one or more of their number their authority to
approve particular matters or take particular actions on behalf of the Trust.
Written consents or waivers of the Trustees may be executed in one or more
counterparts. Execution of a written consent or waiver and delivery thereof to
the Trust may be accomplished by facsimile or other similar electronic
mechanism.
SECTION 4.05 CHAIRMAN OF THE TRUSTEES. The Trustees shall appoint one
of their number to be Chairman of the Board of Trustees. The Chairman shall
preside at all meetings of the Trustees, shall be responsible for the execution
of policies established by the Trustees and the administration of the Trust and
may be (but is not required to be) the chief executive, financial and/or
accounting officer of the Trust.
SECTION 4.06 PRINCIPAL TRANSACTIONS. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any assets of the Trust to, any Trustee
or officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealing with any investment
adviser, administrator, distributor or transfer agent for the Trust or with any
Interested Person of such person; and the Trust may employ any such person, or
firm or company in which such person is an Interested Person, as broker, legal
counsel, registrar, investment adviser, administrator, distributor, transfer
agent, dividend disbursing agent, custodian or in any other capacity upon
customary terms.
ARTICLE V
EXPENSES OF THE TRUST
(a) Subject to the provisions of Article II, Section 2.08 hereof, the
Trustees shall be reimbursed from the Trust estate or the assets belonging to
the appropriate Series for their expenses and disbursements, including, without
limitation, interest charges, taxes, brokerage fees and commissions; expenses of
issue, repurchase and redemption of shares; insurance premiums; applicable fees,
interest charges and expenses of third parties, including the Trust's investment
advisers, managers, administrators, distributors, custodian, transfer agent and
fund accountant; fees of pricing, interest, dividend, credit and other reporting
services; cost of membership in trade associations; telecommunications expenses;
rent; funds transmission expenses; auditing, legal and compliance expenses;
costs of forming the Trust and maintaining corporate existence; costs of
preparing and printing the Trust's prospectuses, statements of additional
information and shareholder reports and delivering them to existing
shareholders; expenses of meetings of shareholders and proxy solicitations
therefore; costs of maintaining books and accounts; costs of reproduction,
stationary and supplies; fees and expenses of the Trust's trustees; compensation
of the Trust's officers and employees and costs of other personnel performing
services for the Trust; costs of Trustee meetings; Securities and Exchange
Commission and state registration fees and related expenses and for such
non-recurring items as may arise, including litigation to which the Trust (or a
Trustee acting as such) is a party, and for all losses and liabilities by them
incurred in administering the Trust, and for the payment of such expenses,
disbursements, losses and liabilities the Trustees shall have a lien on the
assets belonging to the appropriate Series, or in the case of an expense
allocable to more than one Series, on the assets of each such Series, prior to
any rights or interests of the Shareholders thereto. This section shall not
preclude the Trust from directly paying any of the aforementioned fees and
expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
SECTION 6.01 INVESTMENT ADVISER. The Trustees may in their discretion,
from time to time, enter into an investment advisory or sub-advisory contract or
contracts with respect to the Trust or
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any Series whereby the other party or parties to such contract or contracts
shall undertake to furnish the Trustees with such investment advisory,
statistical and research facilities and services and such other facilities and
services, if any, all upon such terms and conditions as may be prescribed in the
Bylaws or as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws). Notwithstanding any other provisions of this Trust
Instrument, the Trustees may authorize any investment adviser (subject to such
general or specific instructions as the Trustees may from time to time adopt) to
effect purchases, sales or exchanges of portfolio securities, other investment
instruments of the Trust, or other Trust Property on behalf of the Trustees, or
may authorize any officer, agent, or Trustee to effect such purchases, sales or
exchanges pursuant to recommendations of the investment adviser (and all without
further action by the Trustees). Any such purchases, sales and exchanges shall
be deemed to have been authorized by all of the Trustees.
The Trustees may authorize the investment adviser to employ, from time
to time, one or more sub-advisers to perform such of the acts and services of
the investment adviser, and upon such terms and conditions, as may be agreed
upon between the investment adviser and sub-adviser (such terms and conditions
not to be inconsistent with the provisions of this Trust Instrument or of the
Bylaws). Any reference in this Trust Instrument to the investment adviser shall
be deemed to include such sub-advisers, unless the context otherwise requires.
SECTION 6.02 PRINCIPAL UNDERWRITER. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of Shares, whereby the
Trust may either agree to sell Shares to such other party to the contract or
contracts or appoint such other party its sales agent for such Shares. In either
case, the contract or contracts shall be on such terms and conditions as may be
prescribed in the Bylaws and as the Trustees may in their discretion determine
(such terms and conditions not to be inconsistent with the provisions of this
Trust Instrument or of the Bylaws); and such contract or contracts may also
provide for the repurchase or sale of Shares by such other party as principal or
as agent of the Trust.
SECTION 6.03 ADMINISTRATION. The Trustees may in their discretion from
time to time enter into one or more management or administrative contracts
whereby the other party or parties shall undertake to furnish the Trustees with
management or administrative services. The contract or contracts shall be on
such terms and conditions as may be prescribed in the Bylaws and as the Trustees
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws).
SECTION 6.04 TRANSFER AGENT. The Trustees may in their discretion from
time to time enter into one or more transfer agency and Shareholder service
contracts whereby the other party or parties shall undertake to furnish the
Trustees with transfer agency and Shareholder services. The contract or
contracts shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust instrument
or of the Bylaws).
SECTION 6.05 PARTIES TO CONTRACT. Any contract of the character
described in Section 6.01, 6.02, 6.03 and 6.04 of this Article VI or any
contract of the character described in Article VIII hereof may be entered into
with any corporation, firm, partnership, trust or association, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered void or voidable by reason of the
existence of any relationship, nor shall any person holding such relationship be
disqualified from voting on or executing the same in its capacity as Shareholder
and/or Trustee, nor shall any person holding such relationship be liable merely
by reason of relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VI or Article VIII hereof or of
the Bylaws. The same person (including a firm, corporation, partnership, trust,
or association) may be the other party to contracts entered into pursuant to
Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or pursuant
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to Article VIII hereof, and any individual may be financially interested or
otherwise affiliated with persons who are parties to any or all of the contracts
mentioned in this Section 6.05.
SECTION 6.06 PROVISIONS AND AMENDMENTS. Any contract entered into
pursuant to Sections 6.01 or 6.02 of this Article VI shall be consistent with
and subject to the requirements of Section 15 of the 1940 Act, if applicable, or
other applicable Act of Congress hereafter enacted with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any contract
entered into pursuant to Section 6.01 of this Article VI shall be effective
unless assented to in a manner consistent with the requirements of said Section
15, as modified by any applicable rule, regulation or order of the Commission.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.01 VOTING POWERS. The Shareholders shall have power to vote
only (a) for the election of Trustees as provided in Article III, Section 3.01
and 3.02 hereof, (b) for the removal of Trustees as provided in Article III,
Section 3.03(d) hereof, (c) with respect to any investment advisory contract as
provided in Article VI, Sections 6.01 and 6.06 hereof, and (d) with respect to
such additional matters relating to the Trust as may be required by law, by this
Trust Instrument, or the Bylaws or any registration of the Trust with the
Commission or any State, or as the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall
be voted separately by individual Series, except (i) when required by the 1940
Act, Shares shall be voted in the aggregate and not by individual Series; and
(ii) when the Trustees have determined that a matter affects the interests of
more than one Series, then the Shareholders of all such Series shall be entitled
to vote thereon. The Trustees may also determine that a matter affects only the
interests of one or more classes of a Series, in which case any such matter
shall be voted on by such class or classes. A shareholder of each series shall
entitled to one vote for each dollar of net asset value (number of shares owned
times net asset value per share) per share of such series [or class thereof], on
any matter on which such shareholder is entitled to vote and each fractional
dollar amount shall be entitled to a proportionate fractional vote. There shall
be no cumulative voting. Shares may be voted in person or by proxy or in any
manner provided for in the Bylaws. A proxy may be given in writing. The Bylaws
may provide that proxies may also, or may instead, be given by any electronic or
telecommunications device or in any other manner. Notwithstanding anything else
contained herein or in the Bylaws, in the event a proposal by anyone other than
the officers or Trustees of the Trust is submitted to a vote of the Shareholders
of one or more Series or of the Trust, or in the event of any proxy contest or
proxy solicitation or proposal in opposition to any proposal by the officers or
Trustees of the Trust, Shares may be voted only in person or by written proxy.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and take any action required or permitted by law, this Trust Instrument or any
of the Bylaws of the Trust to be taken by Shareholders.
SECTION 7.02 MEETINGS. The first Shareholders' meeting shall be held in
order to elect Trustees as specified in Section 3.02 of Article III hereof at
the principal office of the Trust or such other place as the Trustees may
designate. Meetings may be held within or without the State of Delaware. Special
meetings of the Shareholders of any Series may be called by the Trustees and
shall be called by the Trustees upon the written request of Shareholders owning
at least one-tenth of the Outstanding Shares entitled to vote. Whenever ten or
more Shareholders meeting the qualifications set forth in Section 16(c) of the
1940 Act, as may be amended from time to time, seek the opportunity of
furnishing materials to the other Shareholders with a view to obtaining
signatures on such a request for a meeting, the Trustees shall comply with the
provisions of said Section 16(c) with respect to providing such Shareholders
access to the list of Shareholders of record of the Trust or the mailing of such
materials to such Shareholders of record, subject to any rights provided to the
Trust or the Trustees by Section 16(c). Notice shall be sent, by First Class
Mail or such other means determined by the Trustees, at least 15 days prior to
any such meeting.
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SECTION 7.03 QUORUM AND REQUIRED VOTE. One-third of Shares entitled to
vote in person or by proxy shall be a quorum for the transaction of business at
a Shareholders' meeting, except that where any provision of law or of this Trust
Instrument permits or requires that holders of any Series shall vote as a Series
(or that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
Series (or that class). Any lesser number shall be sufficient for adjournments.
Any adjourned session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by law or by any provision of this Trust
Instrument or the Bylaws, a majority of the Shares voted in person or by proxy
shall decide any questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Trust Instrument permits or requires that
the holders of any Series shall vote as a Series (or that the holders of any
class shall vote as a class), then a majority of the Shares present in person or
by proxy of that Series (or class), voted on the matter in person or by proxy
shall decide that matter insofar as that Series (or class) is concerned.
Shareholders may act by unanimous written consent, unless the 1940 Act requires
that a particular action be taken only at a meeting at which the shareholders
are present in person. Actions taken by a Series (or class) may be consented to
unanimously in writing by Shareholders of that Series (or class).
ARTICLE VIII
CUSTODIAN
SECTION 8.01 APPOINTMENT AND DUTIES. The Trustees shall at all times
employ a bank, a company that is a member of a national securities exchange, or
a trust company meeting the qualifications of Section 17(f) of the 1940 Act or
any rule or regulation thereunder or such other person as may be permitted by
order of the Commission, as custodian with authority as its agent, but subject
to such restrictions, limitations and other requirements, if any, as may be
contained in the Bylaws of the Trust: (a) to hold the securities owned by the
Trust and deliver the same upon written order or oral order confirmed in
writing; (b) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may direct;
and (c) to disburse such funds upon orders or vouchers.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank, a company that is a member of a
national securities exchange, or a trust company organized under the laws of the
United States or one of the states thereof meeting the qualifications of Section
17(f) of the 1940 Act or any rule or regulation thereunder or such other person
as may be permitted by the Commission or otherwise in accordance with the 1940
Act.
SECTION 8.02 CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended, or such other
person as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodians, sub-custodians or other agents.
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ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
SECTION 9.01 DISTRIBUTIONS.
(a) The Trustees may from time to time declare and pay dividends or
other distributions with respect to any Series. The amount of such dividends or
distributions and the payment of them and whether they are in cash or any other
Trust Property shall be wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding,
the Trustees may at any time declare and distribute a stock dividend pro rata
among the Shareholders of a particular Series, or class thereof, as of the
record date of that Series fixed as provided in Subsection 9.01 (b) hereof.
SECTION 9.02 REDEMPTIONS. In case any holder of record of Shares of a
particular Series desires to dispose of his Shares or any portion thereof, he
may deposit at the office of the transfer agent or other authorized agent of
that Series a written request or such other form of request as the Trustees may
from time to time authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.02; and the Shareholder so requesting shall be
entitled to require the Series to purchase, and the Series or the principal
underwriter or underwriters of the Series shall purchase his said Shares, but
only at the Net Asset Value thereof (as described in Section 9.03 of this
Article IX). The Series shall make payment for any such Shares to be redeemed,
as aforesaid, in cash or property from the assets of that Series and payment for
such Shares shall be made by the Series or the principal underwriter or
underwriters of the Series to the Shareholder of record within the time or times
permitted by the 1940 Act or any rule or regulation thereunder or pursuant to
any order of the Commission applicable to the Series after the date upon which
the request in good order and proper form is given. Upon redemption, shares
shall become Treasury shares and may be reissued from time to time.
SECTION 9.03 DETERMINATION OF NET ASSET VALUE AND VALUATION OF
PORTFOLIO ASSETS. The term "Net Asset Value" of any Series shall mean that
amount by which the assets of that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. Such value shall be
determined separately for each Series and shall be determined on such days and
at such times as the Trustees may determine. Such determination shall be made
with respect to securities for which market quotations are readily available, at
the market value of such securities; and with respect to other securities and
assets at the fair value as determined in good faith by the Trustees; provided,
however, that the Trustees, without Shareholder approval, may alter the method
of valuing portfolio securities insofar as permitted under the 1940 Act and the
rules, regulations, and interpretations thereof promulgated or issued by the
Commission or insofar as permitted by any order of the Commission applicable to
the Series. The Trustees may delegate any of their powers and duties under this
Section 9.03 with respect to valuation of assets and liabilities. The resulting
amount, which shall represent the total Net Asset Value of the particular
Series, shall be divided by the total number of shares of the Series outstanding
at the time and the quotient so obtained shall be the Net Asset Value per Share
of the Series. At any time the Trustees may cause the Net Asset Value per Share
last determined to be determined again in similar manner and may fix the time
when such redetermined value shall become effective. If, for any reason, the net
income of any Series, determined at any time, is a negative amount, the Trustees
shall have the power with respect to that Series (a) to offset each
Shareholder's pro rata share of such negative amount from the accrued dividend
account of such Shareholder, (b) to reduce the number of Outstanding Shares of
such Series by reducing the number of Shares in the account of each Shareholder
by a pro rata portion of that number of full and fractional Shares which
represents that amount of such excess negative net income, (c) to cause to be
recorded on the books of such Series an asset account in the amount of such
negative net income (provided that same shall thereupon become the property of
such Series with respect to such Series and shall not be paid to any
Shareholder), which account may be
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reduced by the amount of dividends declared thereafter upon the Outstanding
Shares of such Series on the day such negative net income is experienced, until
such asset account is reduced to zero; (d) to combine the methods described in
clauses (a) and (b) and (c) of this sentence; or (e) to take any other action
they deem appropriate, in order to cause (or in order to assist in causing) the
Net Asset Value per Share of such Series to remain at a constant amount per
Outstanding Share immediately after each such determination and declaration. The
Trustees shall also have the power not to declare a dividend out of net income
for the purpose of causing the Net Asset Value per Share to be increased. The
Trustees shall not be required to adopt, but may at any time adopt, discontinue
or amend the practice of maintaining the Net Asset Value per Share of the Series
at a constant Amount.
SECTION 9.04 SUSPENSION OF THE RIGHT OF REDEMPTION. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
as permitted by the 1940 Act or any rule regulation hereunder or pursuant to any
order of the Commission. Such suspension shall take effect at such time as the
Trustees shall specify but not later than the close of business on the business
day next following the declaration of suspension, and thereafter there shall be
no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the Net Asset Value per Share next determined after the termination of
the suspension. In the event that any Series is divided into classes, the
provisions of this Section 9.03, to the extent applicable as determined in the
discretion of the Trustees and consistent with applicable law, may be equally
applied to each such class.
SECTION 9.05 REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED
INVESTMENT COMPANY. If the Trustees shall, at any time and in good faith, be of
the opinion that direct or indirect ownership of Shares of any Series has or may
become concentrated in any Person to an extent which would disqualify any Series
as a regulated investment company under the Internal Revenue Code, then the
Trustees shall have the power (but not the obligation) by lot or other means
deemed equitable by them (a) to call for redemption by any such person of a
number, or principal amount, of Shares sufficient to maintain or bring the
direct or indirect ownership of Shares into conformity with the requirements for
such qualification and (b) to refuse to Transfer or issue Shares to any person
whose acquisition of Shares in question would result in such disqualification.
The redemption shall be effected at the redemption price and in the manner
provided in this Article IX.
The holders of shares shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of Shares
as the Trustees deem necessary to comply with the requirements of any taxing
authority.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
SECTION 10.01 LIMITATION OF LIABILITY. A Trustee, when acting in such
capacity shall not be personally liable to any person other than the Trust or
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or of any conduct
whatsoever in his capacity as a Trustee, provided that nothing herein or in the
Delaware Act shall protect any Trustee against any liability to the Trust or to
Shareholders as 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 the office of trustee hereunder.
SECTION 10.02 INDEMNIFICATION.
(a) Subject to the expectations and limitations contained in Subsection
10.02(b):
(i) every person who is, or has been, a Trustee or officer of the
trust (hereinafter referred to as a "Covered Person") shall be indemnified by
the Trust to the fullest extent permitted by law against liability and against
all expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of
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his being or having been a Trustee or officer and against amounts paid or
incurred by him in the settlement or defense thereof;
(ii) the words "claim", "suit", or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal or other, including
appeals), actual or threatened while in office or thereafter, and the words
"liability" and "expenses" shall include, without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered person:
(i) who shall have been adjudicated by a court or other body
including, without limitation, arbitration panels or self-regulatory
organizations before which the proceeding was brought (A) to be liable to the
trust or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office or (B) not to have acted in good faith in the reasonable belief that his
action was in the best interest of the trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office, (A) by the court or other body approving
the settlement; (B) by at 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.
SECTION 10.03 SHAREHOLDERS. In case any Shareholder of any Series shall
be held to be personally liable solely by reason of his being or having been a
Shareholder of such Series and not because of his acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives, or, in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled,
out of the assets belonging to the applicable Series, to be held harmless from
and indemnified against all loss and expense arising from such liability. The
Trust on behalf of the affected Series, shall, upon request by the Shareholder,
assume the defense of any claim made against the Shareholder for any act or
obligation of the Series and satisfy any judgment thereon from the assets of the
Series.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01 TRUST NOT A PARTNERSHIP. It is hereby expressly declared
that a trust and not a partnership is created hereby. No Trustee hereunder shall
have any power to bind personally either the Trust officers or any Shareholder.
All persons extending credit to, contracting with or having any claim against
the Trust or the Trustees shall look only to the assets of the appropriate
Series or (if the Trustees shall have yet to have established Series) of the
Trust for payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any or their agents, whether past, present or
future, shall be personally liable therefor. Nothing in this Trust Instrument
shall protect a Trustee against any liability to which the Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee hereunder.
SECTION 11.02 TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretion hereunder in
good faith and with reasonable care under the circumstances then prevailing
shall be binding upon everyone interested. Subject to the provisions of Article
X hereof and to Section 11.01 of this Article XI, the Trustees shall not be
liable for errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and operation of
the Trust Instrument, and subject to the provisions of Article X hereof and
Section 11.01 of this Article XI, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is obtained.
SECTION 11.03 ESTABLISHMENT OF RECORD DATES. The Trustees may close the
Share transfer books of the Trust for a period not exceeding sixty (60) days
preceding the date of any meeting of Shareholders, or the date for the allotment
of rights, or the date when any change or conversion or exchange of Shares shall
go into effect; or in lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding sixty (60) days preceding the
date of any meeting of Shareholders, or the date for payment of any dividend or
other distribution, or the date for the allotment or rights, or the date when
any change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend
or other distribution, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of Shares, and in
such case such Shareholders and only such Shareholders as shall be Shareholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend or other distribution,
or to receive such allotment or rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of any Shares on the books of the Trust
after any such record date fixed as aforesaid.
SECTION 11.04 TERMINATION OF TRUST.
(a) This Trust shall continue without limitation of time but subject to
the provisions of Subsection 11.04(b).
(b) The Trustees may, subject to a Majority Shareholder Vote of each
Series affected by the matter or, if applicable, to a Majority Shareholder Vote
of the Trust, and subject to a vote of a majority of the Trustees,
(i) sell and convey all or substantially all of the
assets of the Trust or any affected Series to another
trust, partnership, association or corporation, or to
a separate series of shares thereof, organized under
the laws of any state which trust, partnership,
association or corporation is an open-end management
investment company as defined in the 1940 Act, or is
a series thereof, for adequate consideration which
may include the assumption of all outstanding
obligations, taxes and other liabilities, accrued or
contingent, of the Trust or any affected Series, and
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which may include shares of beneficial interest,
stock or other ownership interests of such trust,
partnership, association or corporation or of a
series thereof; or
(ii) at any time sell and convert into money all of the
assets of the Trust or any affected Series.
Upon making reasonable provision, in the determination of the Trustees, for the
payment of all such liabilities in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) of each Series (or class) ratably among the holders of Shares
of that Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in Subsection 11.05(b), the Trust or any
affected Series shall terminate and the Trustees and the Trust shall be
discharged of any and all further liabilities and duties hereunder and the
right, title and interest of all parties with respect to the Trust or Series
shall be canceled and discharged.
Upon termination of the Trust, following completion of winding up of
its business, the Trustees shall cause a certificate of cancellation of the
Trust's certificate of trust to be filed in accordance with the Delaware Act,
which certificate of cancellation may be signed by any one Trustee.
SECTION 11.05 REORGANIZATION. Notwithstanding anything else herein, the
Trustees, in order to change the form of organization of the Trust, may, without
prior Shareholder approval, (a) cause the Trust to merge or consolidate with or
into one or more trusts, partnerships, associations or corporations so long as
the surviving or resulting entity is an open-end management investment company
under the 1940 Act, or is a series thereof, that will succeed to or assume the
Trust's registration under that Act and which is formed, organized or existing
under the laws of a state, commonwealth, possession or colony of the United
States or (b) cause the Trust to incorporate under the laws of Delaware. Any
agreement of merger or consolidation or certificate of merger may be signed by a
majority of Trustees and facsimile signature conveyed by electronic or
telecommunication means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of
the Delaware Act, and notwithstanding anything to the contrary contained in the
Trust Instrument, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 11.05 may effect any amendment to the
Trust Instrument or effect the adoption of a new trust instrument of the Trust
if it is the surviving or resulting trust in the merger or consolidation.
SECTION 11.06 FILING OF COPIES, REFERENCES, HEADINGS. The original or a
copy of this Trust Instrument and of each amendment hereof or Trust Instrument
supplement hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as whether or not any such
amendments or supplements have been made and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions like
"herein", "hereof" and "hereunder", shall be deemed to refer to this Trust
Instrument. And expressions like "his", "he" and "him", shall be deemed to
include feminine and neuter, as well as masculine, genders. The singular shall
mean the plural and vice versa where the context requires. Headings are placed
herein for convenience of reference only and in case of any conflict, the text
of this Trust Instrument; rather than the headings, shall control. This Trust
Instrument may be executed in any number of counterparts each of which shall be
deemed an original.
SECTION 11.07 APPLICABLE LAW. The trust set forth in this instrument is
made in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to
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the Delaware Act and the laws of said State; provided, however, that shall not
be applicable to the Trust, and Trustees or this Trust Instrument (a) the
provisions of Section 3540 of Title 12 of the Delaware Code or (b) any
provisions of the laws (statutory or common) of the State of Delaware (other
than the Delaware Act) pertaining to trusts which relate to or regulate (i) the
filing with any court or governmental body or agency of trustee accounts or
schedules of trustee fees and charges, (ii) affirmative requirements to post
bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other government approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (vii) the establishment of fiduciary or
other standards of responsibilities or limitations on the acts or powers of
trustees, which are inconsistent with the limitations or liabilities or
authorities and powers of the Trustees set forth or referenced in this Trust
Instrument. The Trust shall be of the type commonly called a "business trust",
and without limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust under Delaware law. The Trust
specifically reserves the right to exercise any of the powers or privileges
afforded to trusts or actions that may be engaged in by trusts under the
Delaware Act, and the absence of a specific reference herein to any such power,
privilege or action shall not imply that the Trust may not exercise such power
or privilege or take such actions.
SECTION 11.08 AMENDMENTS. Except as specifically provided herein, the
Trustees may, without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust instrument supplement hereto or an
amended and restated trust instrument. Shareholders shall have the right to vote
(a) on any amendment which would affect their right to vote granted in Section
7.01 of Article VII hereof, (b) on any amendment to this Section 11.08, (c) on
any amendment as may be required by law or by the Trust's registration statement
filed with the Commission and (d) on any amendment submitted to them by the
Trustees. Any amendment required or permitted to be submitted to Shareholders
which, as the Trustees determine, shall affect the Shareholders of one or more
Series shall be authorized by vote of the Shareholders of each Series affected
and no vote of shareholders of a Series not affected shall be required.
Notwithstanding anything else herein, any amendment to Article X hereof shall
not limit the rights to indemnification or insurance provided therein with
respect to an action or omission of Covered Persons prior to such amendment.
SECTION 11.09 FISCAL YEAR. The fiscal year of the Trust shall end on a
specified date as set forth in the Bylaws, provided, however, that the Trustees
may, without Shareholder approval, change the fiscal year of the Trust.
SECTION 11.10 USE OF NAMES. The name "Reserve" included in the name of
the Trust shall be used pursuant to a royalty-free, non-exclusive license from
Reserve Management Company, Inc., incidental to and as part of an advisory,
management or supervisory contract which may be entered into by the Trust with
Reserve Management Company, Inc. The license may be terminated by Reserve
Management Company, Inc. upon termination of such advisory management or
supervisory contract or without cause on 60 days' notice, in which case the
Trust shall have no further right to use the name "Reserve" in its name or
otherwise and the trust, the Shareholders and its officers and Trustees shall
promptly take whatever action may be necessary to change its name accordingly.
SECTION 11.11 PROVISIONS IN CONFLICT WITH LAW. The provisions of this
Trust Instrument are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provisions is in conflict with the 1940 Act,
the regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Trust Instrument; provided, however,
that such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action take or omitted prior
to such determination. If any provision of this Trust Instrument shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
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unenforceability shall not in any matter affect such provisions in any other
jurisdiction or any other provision of this Trust Instrument in any
jurisdiction.
IN WITNESS WHEREOF, the undersigned, being held Trustees of the Trust,
have executed this instrument as of date first written above.
<TABLE>
<S> <C>
- --------------------------------------------------- ---------------------------------------------------
Bruce R. Bent, as Trustee and not individually Bruce R. Bent II, as Trustee and not individually
- --------------------------------------------------- ---------------------------------------------------
Edwin Ehlert, Jr., as Trustee and not individually Diana P. Herrmann, as Trustee and not individually
- --------------------------------------------------- ---------------------------------------------------
Henri W. Emmet, as Trustee and not individually Richard Bassuk, as Trustee & not individually
- --------------------------------------------------- ---------------------------------------------------
Donald J. Harrington, as Trustee and not individually William Viklund, as Trustee & not individually
</TABLE>
19
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RESERVE PRIVATE EQUITY SERIES
BYLAWS
DATED APRIL 23, 1993
(AS AMENDED THROUGH DECEMBER 17, 1998)*
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*Also amended to correct typographical errors in the original.
<PAGE>
RESERVE PRIVATE EQUITY SERIES
BYLAWS
These Bylaws of Reserve Private Equity Series (the "Trust"), a Delaware
business trust, are subject to the Trust Instrument of the Trust dated April 20,
1993, as from time to time amended, supplemented or restated (the "Trust
Instrument"). Capitalized terms used herein which are defined in the Trust
Instrument are used as therein defined.
ARTICLE I
PRINCIPAL OFFICE
The principal office of the Trust shall be located in New York City, New
York, or such other location as the Trustees may, from time to time, determine.
The Trust may establish and maintain such other offices and places of business
as the Trustees may from time to time determine.
ARTICLE II
OFFICERS AND THEIR ELECTION
Section 2.01 Officers. The officers of the Trust shall be a President, a
Treasurer, a Secretary, a General Counsel and such other officers as the
Trustees may from time to time elect. The Trustees may delegate to any officer
or committee the power to appoint any subordinate officers or agents. It shall
not be necessary for any Trustee or other officer to be a holder of Shares in
the Trust.
Section 2.02 Election of Officers. The Treasurer, Secretary and General
Counsel shall be chosen by the Trustees. The President shall be chosen by and
from the Trustees. Two or more offices may be held by a single person except the
offices of President and Secretary. Subject to the provisions of Section 3.13
hereof, the President, the Treasurer, the Secretary and the General Counsel
shall each hold office until their successors are chosen and qualified and all
other officers shall hold office at the pleasure of the Trustees.
Section 2.03 Resignations. Any officer of the Trust may resign,
notwithstanding Section 2.02 hereof, by filling a written resignation form with
the President, the Trustees or the Secretary, which resignation shall take
effect on being so filed or at such time as may be therein specified.
ARTICLE III
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
Section 3.01 Management of the Trust. The business and affairs of the
Trust shall be managed by, or under the direction of, the Trustees, and they
shall have all powers necessary and desirable to carry out their
responsibilities, so far as such powers are not inconsistent with the laws of
the State of Delaware, the Trust Instrument or with these Bylaws.
Section 3.02 Executive and Other Committees. The Trustees may elect from
their own number an executive committee, which shall have any or all the powers
of the Trustees while the Trustees are not in session. The Trustees may also
elect from their own number other committees from time to time. The number
composing such committees and the powers conferred upon the same are to be
determined by vote of a majority of the Trustees. All members of such committees
shall hold such offices at the pleasures of the Trustees. The Trustees may
abolish any such committee at any time. Any committee to which the Trustees
delegate any of their powers of duties shall keep records of its meetings and
shall report its actions to the Trustees. The Trustees shall have power to
rescind any action of any committee, but no such rescission shall have
retroactive effect.
Section 3.03 Compensation. Each Trustee and each committee member may
receive such compensation for his services and reimbursement for his expenses as
may be fixed from time to time by resolution of the Trustees.
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Section 3.04 Tenure. Each Trustee shall hold office until he resigns, is
removed, retires or until his successor is duly elected and qualified. A Trustee
shall retire upon attaining the age of seventy-five (75) years.
Section 3.05 Chairman of the Trustees. The Trustees shall appoint from
among their number a Chairman who shall serve as such at the pleasure of the
Trustees. When present, he shall preside at all meetings of the Shareholders and
the Trustees, and he may, subject to the approval of the Trustees, appoint a
Trustee to preside at such meetings in his absence. He shall perform such other
duties as the Trustees may from time to time designate.
Section 3.06 President. The President shall be the chief executive
officer of the Trust and, subject to the direction of the Trustees, shall have
general administration of the business and policies of the Trust. Except as the
Trustees may otherwise order, the President shall have the power to grant,
issue, execute or sign such powers of attorney, proxies, agreements or other
documents as may be deemed advisable or necessary in the furtherance of the
interests of the Trust or any Series thereof. He shall also have the power to
employ attorneys, accountants and other advisors and agents and counsel for the
Trust. The President shall perform such duties additional to all of the
foregoing as the Trustees may from time to time designate.
Section 3.07 Treasurer. The Treasurer shall be the principal financial
and accounting officer of the Trust. He shall deliver all funds and securities
of the Trust which may come into his hands to such company as the Trustees shall
employ as Custodian in accordance with the Trust Instrument and applicable
provisions of law. He shall make annual reports regarding the business and
condition of the Trust, which reports shall be preserved in Trust records, and
he shall furnish such other reports regarding the business and condition of the
Trust as the Trustees may from time to time require. The Treasurer shall perform
such additional duties as the Trustees may from time to time designate.
Section 3.08 Secretary. The Secretary shall record in books kept for the
purposes all votes and proceedings of the Trustees and the Shareholders at their
respective meetings. He shall have the custody of the seal of the Trust. The
Secretary shall perform such additional duties as the Trustees may from time to
time designate.
Section 3.09 General Counsel. The General Counsel shall be the principal
legal and compliance officer of the Trust. Except as the Trustees may otherwise
order, the General Counsel shall have the power to execute or sign such
agreements or other documents as may be deemed advisable or necessary in the
furtherance of the interests of the Trust or any Series thereof.
Section 3.10 Vice President. Any Vice President of the Trust shall
perform such duties as the Trustees or the President may from time to time
designate. At the request or in the absence or disability of the President, the
Vice President (or, if there are two or more Vice Presidents, then the senior of
the Vice Presidents present and able to act) may perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
Section 3.11 Assistant Treasurer. Any Assistant Treasurer of the Trust
shall perform such duties as the Trustees or the Treasurer may from time to time
designate, and, in the absence of the Treasurer, the senior Assistant Treasurer,
present and able to act, may perform all the duties of the Treasurer.
Section 3.12 Assistant Secretary. Any Assistant Secretary of the Trust
shall perform such duties as the Trustees or the Secretary may from time to time
designate, and, in the absence of the secretary, the senior Assistant Secretary,
present and able to act, may perform all the duties of the Secretary.
Section 3.13 Subordinate Officers. The Trustees from time to time may
appoint such officers or agents as they may deem advisable, each of whom shall
have such title, hold office for such period, have such authority and perform
such duties as the Trustees may determine. The Trustees for time to time may
delegate to one or more officers or a committee of Trustees the power
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to appoint any such subordinate officers or agents and to prescribe their
respective terms of office, authorities and duties.
Section 3.14 Surety Bonds. The Trustees may require any officer or agent
of the Trust to execute a bond (including without limitation, any bond required
by the Investment Company Act of 1940 and the rules and regulations of the
Commission) to the Trust in such sum and with such surety or sureties as the
Trustees may determine, conditioned upon the faithful performance of his duties
to the Trust including responsibility for negligence and for the accounting of
any of the Trust's property, funds or securities that may come into his hands.
Section 3.15 Removal. Any officer may be removed from office whenever in
the judgment of the Trustees the best interest of the Trust will served thereby,
by the vote of a majority of the Trustees given at any regular meeting or any
special meeting of the Trustees. In addition, any officer or agent appointed in
accordance with the provisions of Section 3.13 hereof may be removed, either
with or without cause, by any officer upon whom such power of removal shall have
been conferred by the Trustees.
Section 3.16 Remuneration. The salaries or other compensation, if any,
of the officers of the Trust shall be fixed from time to time by resolution of
the Trustees.
ARTICLE IV
SHAREHOLDER'S MEETINGS
Section 4.01 Special Meetings. A special meeting of the shareholders
shall be called by the Secretary whenever (a) ordered by the Trustees or (b)
requested in writing by the holder or holders of at least 10% of the Outstanding
Shares entitled to vote. If the Secretary, when so ordered or requested, refuses
or neglects for more than 30 days to call such special meeting, the Trustees or
Shareholders so requesting, may, in the name of the Secretary, call the meeting
by giving notice thereof in the manner required when notice is given by the
Secretary. If the meeting is a meeting of the Shareholders of one or more Series
or classes of Shares, but not a meeting of all Shareholders of the Trust, then
only special meetings of the Shareholders of such one or more Series or classes
shall be called and only the shareholders of such one or more Series or classes
shall be entitled to notice of and to vote at such meeting.
Section 4.02 Notices. Except as provided in Section 4.01, notices of any
meeting of the Shareholders shall be given by the Secretary by delivering or
mailing, postage prepaid, to each Shareholder entitled to vote at said meeting,
written or printed notification of such meeting at least fifteen (15) days
before the meeting, to such address as may be registered with the Trust by the
Shareholder. Notice of any Shareholder meeting need not be given to any
Shareholder if a written waiver of notice, executed before or after such
meeting, is filed with the record of such meeting, or to any Shareholder who
shall attend such of such meeting, or to any Shareholder who shall attend such
meeting in person or by proxy. Notice of adjournment of a Shareholder's meeting
to another time or place need not be given, if such time and place are announced
at the meeting or reasonable notice is given to persons present at the meeting
and the adjourned meeting is held within a reasonable time after the date set
for original meeting.
Section 4.03 Voting-Proxies. Subject to the provisions of the Trust
Instrument shareholders entitled to vote may vote either in person or by proxy,
provided that either (a) an instrument authorizing such proxy to act is executed
by the Shareholder in writing and dated not more than eleven (11) months before
the meeting, unless the instrument specifically provides for a longer period or
(b) the Trustees adopt by resolution an electronic, telephonic, computerized or
other alternative to execution of a written instrument authorizing the proxy to
act which authorization is received not more than eleven (11) months before the
meeting. Proxies shall be delivered to the Secretary of the Trust or other
person responsible for recording the proceedings before being voted. A proxy
with respect to Shares held in the name of two or more persons shall be valid it
executed by one of them unless at or prior to exercise of such proxy the Trust
receives a specific written notice to the contrary from any one of them. Unless
otherwise specifically limited by their terms, proxies shall entitle the holder
thereof to vote at any adjournment of a meeting. A proxy purporting to be
exercised by or on behalf of a Shareholder shall be deemed valid unless
challenged prior to its exercise and
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the burden of proving invalidity shall rest on the challenger. At all meetings
of the Shareholder, unless the voting is conducted by inspectors, all questions
relating to the qualifications of voters, the validity of proxies, and the
acceptance or rejection of votes shall be decided by the Chairman of the
meeting. Except as otherwise provided herein or on the Trust Instrument, as
these Bylaws or such Trust Instrument may be amended or supplemented from time
to time, all matters relating to the giving, voting, or validity of proxies
shall be governed by the General Corporation Law of the State of Delaware
relating to proxies and judicial interpretations thereunder, as if the Trust
were a Delaware corporation and the Shareholders were shareholders of a Delaware
corporation.
Section 4.04 Place of Meeting. All special meetings of the Shareholders
shall be held at the principal place of business of the Trust or at such other
place in the United States as the Trustees may designate.
Section 4.05 Action Without a Meeting. Any action to be taken by
Shareholders may be taken without a meeting if all Shareholders entitled to
vote on the matter consent to the action in writing and the written consents
are filed with the records of meetings of Shareholders of the Trust, unless
the Investment Company Act of 1940 ("1940 Act") requires that a particular
action be taken only at a meeting at which the Shareholders are present in
person. Such consent shall be treated for all purposes as a vote at a meeting
of the Shareholders held at the principal place of business of the Trust.
ARTICLE V
TRUSTEES' MEETINGS
Section 5.01 Special Meetings. Special meetings of the Trustees may be
called orally or in writing by the Chairman of the Board of Trustees or any two
other Trustees.
Section 5.02 Regular Meetings. Regular meetings of the Trustees may be
held at such places and at such times as the Trustees may from time to time
determine; each Trustee present at such determination shall be deemed a party
calling the meeting and no call or notice will be required to such Trustee
provided that any Trustee who is absent when such determination by the Chairman
or any two other Trustees, as provided for in Section 4.04 of the Trust
Instrument.
Sections 5.03 Quorum. A majority of the Trustees shall constitute a
quorum for the transaction of business and an action of a majority of the quorum
shall constitute action of the Trustees.
Section 5.04 Notice. Except as otherwise provided, notice at any special
meeting of the Trustees shall be given by the party calling the meeting to each
Trustee, as provided for the Section 4.04 of the Trust Instrument. A written
notice may be mailed, postage prepaid, addressed to him at his address as
registered on the books of the Trust or, if not so registered, at his last known
address.
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Section 5.05 Place of Meeting. All special meetings of the Trustees
shall be held at the principal place of business of the Trust or such other
place as the Trustees may designate. Any meeting may adjourn to any place.
Section 5.06 Special Action. When all the Trustees shall be present at
any meeting, however called or wherever held, or shall assent to the holding of
the meeting without notice, or shall sign a written assent thereto filed with
the record of such meeting, the acts of such meeting shall be valid as if such
meeting had been regularly held.
Section 5.07 Action by Consent. Any action by the Trustees may be taken
without a meeting if a written consent thereto is signed by all the Trustees and
filed with the records of the Trustees' meeting, unless the 1940 Act requires
that a particular action be taken only at a meeting at which the Trustees are
present in person. Such consent shall be treated, for all purposes, as a vote at
a meeting of the Trustees held at the principal place of business of the
Trustees.
Section 5.08 Participation in Meetings By Conference Telephone. Trustees
may participate in a meeting of Trustees by conference telephone and or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at such meeting, unless the 1940 Act requires that particular action be
taken only at a meeting at which the Trustees are present in person. Any meeting
conducted by telephone shall be deemed to take place at and from the principal
office of the Trust.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.01 Beneficial Interest. The beneficial interest in the Trust
shall at all times be divided into such transferable Shares of one or more
separate and distinct Series, or classes thereof, as the Trustees shall from
time to time create and establish. The number of Shares is unlimited, and each
Share of each Series or class thereof shall be without par value and shall
represent an equal proportionate interest with each other Share in the Series,
none having priority or preference over another, except to the extent that such
priorities or preference are established with respect to one or more classes of
shares consistent with applicable law and any rule or order of the Commission.
Section 6.02 Transfer of Shares. The Shares of the Trust shall be
transferable, so as to affect the rights of the Trust, only by transfer recorded
on the books of the Trust, in person or by attorney.
Section 6.03 Equitable Interest Not Recognized. The Trust shall be
entitled to treat the holder of record of any Share or Shares of beneficial
interest as equitable or other claim or interest in such Share or Shares on the
part of any other person except as may be otherwise expressly provided by law.
Section 6.04 Share Certificate. No certificates certifying the ownership
of Shares shall be issued except as the Trustees may otherwise authorize. The
Trustees may issue certificates to a Shareholder of any Series or class thereof
for any purpose and the issuance of a certificate to one or more Shareholders
shall not require the issuance of certificates generally. In the event that the
Trustees authorize the issuance of Share certificates, such certificate shall be
in the form proscribed from time to time by the Trustees and shall be signed by
the President or a Vice President and by the Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary. Such Signatures may be facsimiles if the
certificate is signed by a transfer or shareholder services agent or by a
registrar, other than a Trustee, officer, or employee of the Trust. In case any
officer who has signed or whose facsimile signature has been placed on
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Trust with the same effect as if he or she were
such officer at the time of its issue.
In lieu of issuing certificates for Shares, the Trustees or the
transferor shareholder services agent may either issue receipts therefor or may
keep accounts upon the books of the Trusts for the
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record holders of such Shares, who shall in either case be deemed, for
all purposes hereunder, to be the holders of certificates for such Shares as if
they had accepted such certificates and shall be held to have expressly assented
and agreed to the terms hereof.
Section 6.05 Loss of Certificates. In the case of the alleged loss or
destruction or the mutilation of a share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees may prescribe.
Section 6.06 Discontinuance of Issuance of Certificates. The Trustees
may at any time discontinue the issuance of Share certificates and may, by
written notice to each Shareholder, require the surrender of Share certificates
to the Trust for cancellation. Such surrender and cancellation shall not affect
the ownership of Shares in the Trust.
ARTICLE VII
OWNERSHIP OF ASSETS OF THE TRUST
The Trustees, acting for and on behalf of the Trust, shall be deemed to
hold legal and beneficial ownership of any income earned on securities held by
the Trust issued by any business entity formed, organized or existing under the
laws of any jurisdiction other than a state, commonwealth, possession or colony
of the United States or the laws of the United States.
ARTICLE VIII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and regulations
the accounts and books of the Trust or any of them shall be open to the
inspection of the Shareholder; and no Shareholder shall have any right to
inspect any account or otherwise by the Trustees or by resolution of the
Shareholders.
ARTICLE IX
INSURANCE OF OFFICERS, TRUSTEES, AND EMPLOYEES
The Trust may purchase and maintain insurance on behalf of any Covered
person or employee of the Trust including any Covered person or employee of the
Trust who is or was serving at the request of the Trust as a Trustee, officer or
employee of a corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Trustees would
have the power to indemnify him against such liability.
The Trust may not acquire or obtain a contract for insurance that
protects or purports to protect any Trustee or officer of the Trust against any
liability to the Trust or its Shareholders to which he would otherwise be
subject by reason or willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of business of his
office.
ARTICLE X
SEAL
The seal of the Trust shall be circular in form bearing the inscription:
"RESERVE PRIVATE EQUITY SERIES - 1993
THE STATE OF DELAWARE"
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"COMPREHENSIVE FEE"
INVESTMENT MANAGEMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated the ____ day of June, 1999, made
and entered into by and between Reserve Private Equity Series, a Delaware
business trust (the "Trust"), on behalf of the Reserve ____________________ Fund
(the "Portfolio"), and RESERVE MANAGEMENT COMPANY, INC., a New Jersey
corporation having its principal place of business in New York (the "Manager").
WHEREAS, the Trust is a non-diversified management investment company
and is registered as such under the Investment Company Act of 1940, as amended
(the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares
of beneficial interest, no par value, in separate series or classes of series,
with each such separate series representing an interest in a separate portfolio
of investment securities and other assets;
The parties agree as follows:
1. INVESTMENT SERVICES. The Manager shall select and manage the
Portfolio's investments and shall determine what investments shall be made or
disposed of by the Portfolio and shall effect such acquisitions and
dispositions, all in furtherance of the Portfolio's investment objective and
policies, subject to the overall control and direction of the Trust's Board of
Trustees. The Manager shall report on such activities to the Board of Trustees
of the Trust and shall submit such reports and other information thereon as the
Board of Trustees shall from time to time request. Notwithstanding any other
provision hereof, the Manager, with the approval of the Board of Trustees, may
contract with one or more Sub-Investment Managers to perform any of the
investment management services; provided, however, any compensation paid will be
the sole responsibility of the Manager.
2. OTHER SERVICES AND ASSUMPTION OF CERTAIN EXPENSES. The Manager shall
furnish to the Trust, on behalf of the Portfolio: (i) the services of a
President and such other executive officers as may be requested by the
Portfolio, (ii) office space and customary office facilities to the extent that
the Portfolio's activities occur in New York, (iii) maintain Portfolio records
not otherwise maintained by the Portfolio's custodian, distributor or
sub-investment managers, and (iv) all accounting, administrative, clerical,
secretarial and statistical services as may be required by the Portfolio for the
operation of its business and compliance with applicable laws. The Manager shall
pay the compensation of all officers of the Trust on behalf of the Portfolio and
all operating and other expenses of the Portfolio except interest charges,
taxes, brokerage fees and commissions, extraordinary legal and accounting fees
and other extraordinary expenses including expenses incurred in connection with
litigation proceedings, other claims and the legal obligations of the Trust to
indemnify its trustees, officers, employees, shareholders, distributors and
other agents of the Trust, payments made pursuant to the Trust's Distribution
Plan, and the fees of the disinterested Trustees. The Manager may contract with
other parties to
<PAGE>
perform any of the ordinary administrative services required of the Manager;
provided, however any such compensation will be the responsibility of the
Manager.
3. COMPENSATION OF THE MANAGER. The Portfolio shall pay to the Manager
as compensation for the services rendered hereunder and as full reimbursement
for all officers compensation and ordinary operating expenses of the Portfolio
paid by the Manager under paragraph 2 hereof, a management fee (as a percentage
of the average daily net assets attributable to each class of shares) at an
annual rate of 1.30% of the Portfolio's average daily net asset value
attributable to the Class R shares of the Portfolio and at an annual rate of
1.00% of the Portfolio's average daily net asset value attributable to the Class
I shares of the Portfolio (the "Management Fee").
The Management Fee shall be computed and accrued daily and shall be
paid by the Portfolio to the Manager monthly.
4. COMPLIANCE WITH APPLICABLE REQUIREMENTS. This Agreement will be
performed in accordance with the requirements of the 1940 Act and the Investment
Advisers Act of 1940, as amended, and the rules and regulations under such acts,
to the extent that the subject matter of the Agreement is within the purview of
such acts and such rules and regulations. The Manager will assist the Trust on
behalf of the Portfolio in complying with the requirements of the 1940 Act, and
the Securities Act of 1933, as amended (the "1933 Act"), and the rules and
regulations under such acts and in qualifying as a regulated investment company
under the Internal Revenue Code of 1986, as amended, and applicable regulations
of the Internal Revenue Service thereunder. In carrying out its obligations
under this Agreement the Manager shall at all times conform to the provisions of
the Declaration of Trust and By-Laws, the provisions of the currently effective
Registration Statement of the Trust under the 1940 Act and the 1933 Act, and any
other applicable provisions of state or Federal law.
5. TERMINATION. This Agreement shall be in effect until the close of
business on June 30, 2000 and shall continue in effect from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually by (i) either the Board of Trustees of the Trust or a majority
vote of the outstanding voting securities of the Portfolio, provided, however,
that if the shareholders of the Portfolio fail to approve the Agreement, as
provided herein, the Manager may continue to serve in such capacity in the
manner and to the extent permitted by the 1940 Act, and the rules thereunder,
and (ii) the vote of a majority of the Trustees of the Trust who are not parties
to this Agreement or interested persons (as defined in the 1940 Act) of either
party of this Agreement, cast in person at a meeting called for the purpose of
voting on such approval.
Notwithstanding anything herein to the contrary, this Agreement may be
terminated at any time, without payment of any penalty, by the Board of Trustees
of the Trust or by vote of a majority of the outstanding voting securities of
the Portfolio, on 60 days' written notice to the Manager, or by the Manager on
like notice to the Trust.
2
<PAGE>
The name "Reserve" shall be deemed to have been licensed to the Trust
by the Manager. In the event of termination of this Agreement, the Manager may
terminate or revoke such license on 90 days' written notice to the Trust. On or
before the date of such revocation or termination, the Trust will change its
name to another name which does not include the word "Reserve."
6. NON-ASSIGNABILITY. This Agreement shall not be assignable by either
party hereto and shall automatically terminate forthwith in the event of such
assignment (within the meaning of the 1940 Act).
7. APPROVAL OF AGREEMENT AND AMENDMENTS. This Agreement and any
material amendments hereto shall be approved by vote of the holders of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Portfolio; provided, however, that if the shareholders of the Portfolio fail
to approve the Agreement as provided herein, the Manager may continue to serve
in such capacity in the manner and to the extent permitted by the 1940 Act and
the rules thereunder.
8. NON-EXCLUSIVITY. The services of the Manager to the Trust are not to
be deemed exclusive and the Trust agrees that the Manager is free to act as
investment manager to various investment companies and other managed accounts.
For purposes of this Agreement and the undertakings provided for herein, the
Manager shall at all times be considered as an independent contractor, and shall
not be considered as an agent of the Trust and shall have no authority to act
for or represent the Trust in any way.
9. LIABILITY OF THE MANAGER. In performing its duties hereunder, the
Manager may rely on all documentation and information furnished it by the Trust.
Except as may otherwise be provided by the 1940 Act, neither the Manager nor its
officers, directors, employees or agents shall be subject to any liability for
any act or omission in the course of, connected with or arising out of any
services to be rendered hereunder, except by reason of willful misfeasance, bad
faith or gross negligence in the performance of the Manager's duties or by
reason of reckless disregard of the Manager's obligations and duties under this
Agreement.
10. NOTICES. Any notices and communications required hereunder shall be
in writing and shall be deemed given when delivered in person or when sent by
first-class, registered or certified mail to the Manager or to the Trust at 1250
Broadway, 32nd Floor, New York, New York 10001, or at such addresses as either
party may from time to time specify by notice to the other.
11. DEFINITIONS. The terms "assignment," "interested person," and
"majority of the outstanding voting securities," when used in this Agreement,
shall have the respective meanings specified under the 1940 Act and the rules
thereunder.
12. GOVERNING LAW. The terms and provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the 1940 Act. To the
extent that the applicable law of the State of
3
<PAGE>
New York, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
13. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall be deemed to be severable.
14. SHAREHOLDER LIABILITY. The Manager understands and agrees that the
obligations of the Trust under this Agreement are not binding upon any
shareholder of the Trust personally, but bind only the Portfolio and the
property of the Portfolio. The Manager represents that it has notice of the
provisions of the Declaration of Trust of the Trust disclaiming shareholder
liability for acts or obligations of the Trust.
15. ENFORCEMENT LIMITED TO PORTFOLIO. The Manager understands and
agrees that any debts, liabilities, obligations, and expenses incurred,
contracted for or otherwise existing under this Agreement shall be enforceable
against the assets of the Portfolio only, and not against the assets of the
Trust, generally, or the assets of any other separate series of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed on the day and year first above written.
RESERVE PRIVATE EQUITY SERIES, on behalf of
Reserve _____________ Fund
By
----------------------------------
President
ATTEST:
- -------------------------
Secretary
RESERVE MANAGEMENT COMPANY, INC.
By
----------------------------------
President
ATTEST
- -------------------------
Secretary
4
<PAGE>
SUB-INVESTMENT MANAGEMENT AGREEMENT
FOR THE
RESERVE ______________________ FUND
THIS AGREEMENT ("Agreement") made this __ day of June, 1999, by,
between and among RESERVE PRIVATE EQUITY SERIES, a Delaware business trust (the
"Trust"), on behalf of the Reserve _______________ Fund (the "Fund"), and
RESERVE MANAGEMENT COMPANY, INC., a New Jersey corporation having its principal
place of business in New York (the "Investment Manager") and SIPHRON CAPITAL
MANAGEMENT, a corporation having its principal place of business in California
(the "Sub-Investment Manager");
W I T N E S S E T H:
WHEREAS, the Trust is a non-diversified open-end management investment
company and is registered as such under the Investment Company Act of 1940, as
amended (the "1940 Act");
WHEREAS, the Trust is authorized to issue an unlimited number of shares
of beneficial interest, no par value in separate series or classes of series
with each such separate series representing an interest in a separate portfolio
of investment securities and other assets;
WHEREAS, the Trust has employed the Investment Manager to act as
investment manager of the Fund as set forth in the Investment Management
Agreement between the Trust and the Investment Manager dated June ___, 1999 (the
"Investment Management Agreement");
WHEREAS, the Sub-Investment Manager is engaged in the business of
rendering investment advisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"); and
WHEREAS, the Trust and the Investment Manager desire to retain the
Sub-Investment Manager to render investment management services to the Fund in
the manner and on the terms hereinafter set forth;
The parties agree as follows:
<PAGE>
1. DUTIES OF THE SUB-INVESTMENT MANAGER. The Sub-Investment Manager
hereby agrees, subject to the supervision of the Investment Manager and the
Trust, (1) to act as the sub-investment adviser to, and sub-investment manager
of, the Fund, (2) to manage the investment and reinvestment of the assets of the
Fund for the period and on the terms and conditions set forth in this Agreement,
and (3) during the term hereof, as its own expense, to render the services and
to assume the obligations herein set forth for the compensation provided for
herein.
2. SUB-INVESTMENT MANAGEMENT SERVICES. In performing the duties stated
in Paragraph 1 above, the Sub-Investment Manager will regularly provide the
Investment Manager and the Trust with such investment research, advice and
management as the Investment Manager and the Trust may from time to time
consider necessary for the proper management of the Fund. The Sub-Investment
Manager will furnish continuously an investment program and will conduct a
continuous program of evaluation of assets in the Fund. In this connection the
Sub-Investment Manager will provide the Board of Trustees and officers of the
Trust with such statistical information with respect to investments of the Fund
and such periodic and special reports and information as the Investment Manager
or the Trustees may reasonably request. In addition the Sub-Investment Manager
will determine which securities or other investments shall be purchased, sold or
exchanged and what portion of the assets of the Fund shall be held in securities
or other assets in which it may invest. In so acting, the Sub-Investment Manager
shall always be subject to, and shall follow at all times (i) any restrictions
of the Declaration of Trust and By-Laws of the Trust, as amended from time to
time, (ii) the applicable provisions of the 1940 Act, and any rules and
regulations adopted thereunder, (iii) statements relating to the Fund's
investment objectives, policies and restrictions as the same are set forth in
the prospectus of the Fund and statement of additional information then
currently effective, and (iv) any other provision of state and federal law
applicable to it in connection with its duties hereunder. Should the Board of
Trustees of the Trust or the Investment Manager at any time, however, make any
definite determination as to investment policy of the Fund and notify the
Sub-Investment Manager thereof, the Sub-Investment Manager shall be bound by
such determination for the period, if any, specified in such
2
<PAGE>
notice or until similarly notified that such determination has been revoked. The
Sub-Investment Manager shall take, on behalf of the Trust, all actions which it
deems necessary to implement the investment policies of the Fund, determined as
provided above, and in particular shall place orders for the purchase or sale of
securities or other investments for the Fund with brokers or dealers selected by
the Sub-Investment Manager.
The Sub-Investment Manager will comply with any and all reasonable
procedures established by the Investment Manager with a view toward assuring
compliance by the Trust, the Fund, the Investment Manager and the Sub-Investment
Manager with the Advisers Act, the 1940 Act and any other applicable laws, rules
and regulations.
3. PURCHASE AND SALE OF ASSETS. Nothing in this Agreement shall
preclude the combining of orders for the sale or purchase of securities or other
investments with other accounts managed by the Sub-Investment Manager, provided
that the Sub-Investment Manager does not favor any account over any other
account and provided that any purchase or sale orders executed contemporaneously
shall be allocated in a manner the Sub-Investment Manager deems equitable among
the accounts involved and at a price which is approximately averaged. Neither
the Sub-Investment Manager, nor any of its principals, directors, officers or
employees, nor any person, firm or corporation controlling, controlled by or
under common control with it shall act as a principal or receive any commission
as agent in connection with the purchase or sale of assets of the Fund.
In placing orders for the purchase or sale of investments for the Fund,
the Sub-Investment Manager shall use its best efforts to obtain for the Fund the
most favorable price and execution available, considering all of the
circumstances, and shall maintain records adequate to demonstrate compliance
with this requirement.
Subject to prior authorization by the Trust's Board of Trustees of
appropriate policies and procedures, the Sub-Investment Manager may, to the
extent authorized by Section 28(e) of the Securities Exchange Act of 1934, as
amended, and any successor provision thereof, cause the Fund to pay a broker or
3
<PAGE>
dealer that provides research and other brokerage services to the Sub-Investment
Manager an amount of commission for effecting a Fund investment transaction in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction. In the event of such authorization, and to the
extent authorized by said section, the Sub-Investment Manager shall not be
deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of such action.
4. COMPENSATION OF THE SUB-INVESTMENT MANAGER. For the services
rendered by the Sub-Investment Manager, the Investment Manager shall pay to the
Sub-Investment Manager at the end of each calendar quarter a fee equal to
one-half of the net profit before taxes. Net profit is deemed to be the
comprehensive management fee less fund expenses (as defined by the Securities
and Exchange Commission and exemplified by an accounting audited by
PricewaterhouseCooopers LLP or successor auditors) and all applicable sales and
marketing costs of both the Investment Manager and Sub-Investment Manager.
Expenses are allocated to a fund on an identified cost basis or prorated by
assets or number of accounts where facilities, services or personnel are
utilized by more than one fund. The Fund will be audited annually and its books
are open to inspection by the Investment Manager and Sub-Investment Manager on
any reasonable frequency with or without notice. The Investment Manager shall
provide, on a quarterly basis, an unaudited Statement of Operations of the
revenues received from and expenses incurred on behalf of the Fund.
The payment of the advisory fees and the allocation of charges and
expenses between the Trust and the Investment Manager are set forth in the
Investment Management Agreement. Nothing in this Agreement shall change or
affect that arrangement. The payment of advisory fees and the apportionment of
any expenses related to the services of the Sub-Investment Manager shall be the
sole concern of the Investment Manager and the Sub-Investment Manager and shall
not be the responsibility of the Trust.
5. BOOKS AND RECORDS. The Sub-Investment Manager agrees that all books
and records which it maintains for the Trust are the Trust's property, and, in
the event of termination of this Agreement
4
<PAGE>
for any reason, the Sub-Investment Manager agrees to return to the Trust, free
from any claim or retention of rights by the Sub-Investment Manager, all records
relating to the Fund. The Sub-Investment Manager also agrees upon request of the
Investment Manager or the Fund, promptly to surrender the books and records to
the requester or make the books and records available for inspection by
representatives of regulatory authorities and the Investment Manager or the
Fund. In connection with its duties hereunder the Sub-Investment Manager further
agrees to maintain, prepare and preserve books and records in accordance with
the 1940 Act and rules thereunder, including but not limited to, Rule 31a-1 and
31a-2.
The Sub-Investment Manager will use records or information obtained
under this Agreement only for the purposes contemplated hereby, and will not
disclose such records or information in any manner other than as expressly
authorized by the Trust, or if disclosure is expressly required by applicable
Federal or state regulatory authorities or by this Agreement.
6. LIABILITY AND INDEMNIFICATION. In performing its duties hereunder,
the Sub-Investment Manager may rely on all documentation and information
furnished it by the Trust. Except as may otherwise be provided by the 1940 Act,
neither the Sub-Investment Manager nor its officers, directors, employees or
agents shall be subject to any liability for any act or omission in the course
of, connected with or arising out of any services to be rendered hereunder,
except by reason of willful misfeasance, bad faith or gross negligence in the
performance of the Sub-Investment Manager's duties or by reason of reckless
disregard of the Sub-Investments Manager's obligations and duties under this
Agreement. The Sub-Investment Manager shall also comply with the Fund's Code of
Ethics, which has been provided to it.
Investment Manager and Trust agree to hold harmless and indemnify
Sub-Investment Manager from and against any loss, liability, damages or
expenses, including attorney fees, resulting from willful misfeasance, bad faith
or gross negligence by Investment Manager or Trust, or by any officer, director,
employee or agent of either. Further, Investment Manager and Trust agree to
indemnify Sub-Investment Manager for any loss, liability, damages or expenses,
including attorney fees, that may be incurred by Sub-Investment Manager as a
result of a breach, or allegations of a breach, of a fiduciary duty by
Investment
5
<PAGE>
Manager or Trust or as a result of a violation, or allegation of a violation, by
Investment Manager or Trust of the federal securities laws, including but not
limited to, the Advisers Act, the 1940 Act, or of any other federal or state
law(s), rule(s) or regulation(s) applicable to Investment Manager or Trust.
7. RELIANCE ON DOCUMENTS. The Trust or its agent will provide timely
information to the Sub-Investment Manager regarding such matters as purchases
and redemptions of shares in the Fund, the cash requirements, and cash available
for investment in the Fund, and all other information as may be reasonably
necessary or appropriate in order for the Sub-Investment Manager to perform its
responsibilities hereunder.
The Investment Manager has herewith furnished the Sub-Investment
Manager copies of the Fund's prospectus and statement of additional information,
the Declaration of Trust and By-Laws as currently in effect and agrees during
the continuance of this agreement to furnish the Sub-Investment Manager copies
of any amendments or supplements thereto before or at the time the amendments or
supplements become effective. The Sub-Investment Manager will be entitled to
rely on all such documents furnished to it by the Investment Manager of the
Fund.
8. APPROVAL AND TERMINATION OF THIS AGREEMENT. This Agreement shall
become effective as of the date first above written. Thereafter, it shall
continue in effect from year to year, but only so long as such continuance is
specifically approved at least annually by (a) the Board of Trustees of the
Trust, or by the vote of a majority of the outstanding voting securities of the
Fund, and (b) a majority of those Trustees who are not interested persons of any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval. This Agreement may be terminated without the payment of
any penalty by the Board of Trustees of the Trust, by vote of a majority of the
outstanding shares of the Fund, or by the Investment Manager on sixty days'
written notice to the Sub-Investment Manager, or by the Sub-Investment Manager
on sixty days' written notice to the Trust and the Investment Manager. This
Agreement shall automatically terminate in the event of its assignment or in the
event of termination of the Investment Management Agreement.
6
<PAGE>
9. DEFINITIONS. The terms "assignment," "interested person," and
"majority of the outstanding voting securities," when used in this Agreement,
shall have the respective meanings specified under the 1940 Act and the rules
thereunder.
10. GOVERNING LAW. The terms and provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the 1940 Act. To the
extent that the applicable law of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control.
11. SHAREHOLDER LIABILITY. The Manager and Sub-Investment Manager
understand and agree that the obligations of the Trust under this Agreement are
not binding upon any shareholder of the Trust personally, but bind only the Fund
and the property of the Fund. The Manager and Sub-Investment Manager represent
that they have notice of the provisions of the Declaration of Trust of the Trust
disclaiming shareholder liability for acts or obligations of the Trust.
12. ENFORCEMENT LIMITED TO FUND. The Manager and Sub-Investment Manager
understand and agree that any debts, liabilities, obligations, and expenses
incurred, contracted for or otherwise existing on behalf of the Fund under this
Agreement shall be enforceable against the assets of the Fund only, and not
against the assets of the Trust, generally, or the assets of any other separate
series of the Trust.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed on the day and year first above written.
RESERVE PRIVATE EQUITY SERIES, on behalf of
Reserve _____________ Fund
ATTEST:
BY
- ------------------------- ----------------------------------
TITLE TITLE
-------------------- --------------------------------
(Sub-Adviser)
----------------------------
ATTEST:
BY
- ------------------------- ----------------------------------
TITLE TITLE
-------------------- --------------------------------
RESERVE MANAGEMENT COMPANY, INC.
ATTEST:
BY
- ------------------------- ----------------------------------
TITLE TITLE
-------------------- --------------------------------
8
<PAGE>
CHASE
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective January 6, 1998, and is between THE CHASE
MANHATTAN
BANK ("Bank") and each of the funds set forth in Schedule A hereto (with each
fund a "Customer").
It is hereby agreed as follows:
1. Customer Accounts.
Bank shall establish and maintain the following accounts ("Accounts"):
(a) A custody account in the name of Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by Bank or its Subcustodian (as defined in
Section 3) for the account of Customer ("Securities"); and
(b) A deposit account in the name of Customer ("Deposit Account") for
any and all cash in any currency received by Bank or its Subcustodian for the
account of Customer, which cash shall not be subject to withdrawal by draft or
check.
Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. Bank may deliver securities of the same
class in place of those deposited in the Custody Account.
Upon written agreement between Bank and Customer, additional Accounts
may be established and separately accounted for as additional Accounts
hereunder.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to
Bank:
(a) Securities shall be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash shall be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and Bank can comply with such
Instructions, Bank is authorized to maintain cash balances on deposit for
Customer with itself or one of its "Affiliates" at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as Customer may direct, if acceptable to Bank. For purposes
hereof, the term "Affiliate" shall mean an entity controlling, controlled by, or
under common control with, Bank.
If Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3 (or
their securities depositories), such arrangement must be authorized by a written
agreement, signed by Bank and Customer.
3. Subcustodians and Securities Depositories.
1
<PAGE>
Bank may act hereunder through the subcustodians listed in Schedule B
hereof with which Bank has entered into subcustodial agreements
("Subcustodians"). Customer authorizes Bank to hold Assets in the Accounts in
accounts which Bank has established with one or more of its branches or
Subcustodians. Bank and Subcustodians are authorized to hold any of the
Securities in their account with any securities depository in which they
participate.
Bank reserves the right to add new, replace or remove Subcustodians.
Customer shall be given reasonable notice by Bank of any amendment to Schedule
B. Upon request by Customer, Bank shall identify the name, address and principal
place of business of any Subcustodian of Customer's Assets and the name and
address of the governmental agency or other regulatory authority that supervises
or regulates such Subcustodian.
4. Use of Subcustodian.
(a) Bank shall identify the Assets on its books as belonging to
Customer.
(b) A Subcustodian shall hold such Assets together with assets
belonging to other customers of Bank in accounts identified on such
subcustodian's books as custody accounts for the exclusive benefit of customers
of Bank.
(c) Any Assets in the Accounts held by a Subcustodian shall be subject
only to the instructions of Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian shall be subject only to
the instructions of such Subcustodian.
(d) Any agreement Bank enters into with a Subcustodian for holding
Bank's customers' assets shall provide that such assets shall not be subject to
any right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets shall be freely transferable without the payment of
money or value other than for safe custody or administration or, in the case of
cash deposits, except for liens or rights in favor of creditors of the
Subcustodian arising under bankruptcy, insolvency or similar laws. Where
Securities are deposited by a Subcustodian with a securities depository, Bank
shall cause the Subcustodian to identify on its books as belonging to Bank, as
agent, the Securities shown on the Subcustodian's account on the books of such
securities depository. The foregoing shall not apply to the extent of any
special agreement or arrangement made by Customer with any particular
Subcustodian.
5. Deposit Account Transactions.
(a) Bank or its Subcustodians shall make payments from the Deposit
Account upon receipt of Instructions which include all information required by
Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, Bank, in its discretion, may
advance Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by Bank on similar
loans.
(c) If Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, Customer shall
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If Customer does not promptly return any
amount upon such notification, Bank shall be entitled, upon oral or written
notification to Customer, to reverse such credit by debiting the Deposit Account
for the amount previously credited. Bank or its Subcustodian shall have no duty
or obligation to institute legal proceedings, file a claim or a proof of claim
in any insolvency proceeding or take any other action with respect to the
collection of such amount, but may act for Customer upon Instructions after
consultation with Customer.
6. Custody Account Transactions.
(a) Securities shall be transferred, exchanged or delivered by Bank or
its Subcustodian upon receipt by Bank of Instructions which include all
information required by Bank. Settlement and payment for Securities received
2
<PAGE>
for, and delivery of Securities out of, the Custody Account may be made in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to Bank.
(b) Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions shall be
credited or debited to the Accounts on the date cash or Securities are actually
received by Bank and reconciled to the Account.
(i) Bank, upon oral or written notice to Customer, may
reverse credits or debits made to the Accounts in its discretion if
the related transaction fails to settle within a reasonable period,
determined by Bank in its discretion, after the contractual settlement
date for the related transaction.
(ii) If any Securities delivered pursuant to this Section 6
are returned by the recipient thereof, Bank may reverse the credits
and debits of the particular transaction at any time.
7. Actions of Bank.
Bank shall follow Instructions received regarding Assets held in the
Accounts. However, until it receives Instructions to the contrary, Bank shall:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that Bank or Subcustodian is
actually aware of such opportunities.
(b) Execute in the name of Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction for which Bank has
received Instructions involving the Securities, including, without limitation,
Affiliates of Bank or any Subcustodian.
(e) Issue statements to Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
Bank shall send Customer an advice or notification of any transfers of
Assets to or from the Accounts. Such statements, advices or notifications shall
indicate the identity of the entity having custody of the Assets. Unless
Customer sends Bank a written exception or objection to any Bank statement
within sixty (60) days of receipt, Customer shall be deemed to have approved
such statement. In such event, or where Customer has otherwise approved any such
statement, Bank shall, to the extent permitted by law, be released, relieved and
discharged with respect to all matters set forth in such statement or reasonably
implied therefrom and based on information which Customer knew or reasonably
should have known as though it had been settled by the decree of a court of
competent jurisdiction in an action where Customer and all persons having or
claiming an interest in Customer or Customer's Accounts were parties.
Provided that Bank has acted in accordance with the standard of care in
Section 12 (a) hereof, all collections of funds or other property paid or
distributed in respect of Securities in the Custody Account shall be made at the
risk of Customer. Provided that Bank has acted in accordance with the standard
of care in Section 12(a) hereof, Bank shall have no liability for any loss
occasioned by delay in the actual receipt of notice by Bank or by its
Subcustodians of any payment, redemption or other transaction regarding
Securities in the Custody Account in respect of which Bank has agreed to take
any action hereunder.
8. Corporate Actions; Proxies; Tax Reclaims.
3
<PAGE>
(a) Corporate Actions. Whenever Bank receives information concerning
the Securities which requires discretionary action by the beneficial owner of
the Securities (other than a proxy), such as subscription rights, bonus issues,
stock repurchase plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate Actions"), Bank
shall give Customer prompt notice of such Corporate Actions to the extent that
Bank has received actual notice of the Corporate Action from the relevant issuer
or issuer's agent or as to which notice is published in publications routinely
utilized by Bank for this purpose.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split is received which bears an expiration
date, Bank shall endeavor to obtain Instructions from Customer or its Authorized
Person (as defined in Section 10 hereof), but if Instructions are not received
in time for Bank to take timely action, or actual notice of such Corporate
Action was received too late to seek Instructions, Bank is authorized but need
not sell such rights entitlement or fractional interest and to credit the
Deposit Account with the proceeds, if Bank, in good faith, deems such action to
be appropriate in which case it shall be held harmless for any such action.
(b) Proxy Voting. Bank shall provide proxy voting services, if elected
by Customer, in accordance with the terms of the proxy voting services rider
hereto. Proxy voting services may be provided by Bank or, in whole or in part,
by one or more third parties appointed by Bank (which may be Affiliates of
Bank).
(c) Tax Reclaims.
(i) Subject to the provisions hereof, Bank shall apply for a
reduction of withholding tax and any refund of any tax paid or tax
credits which apply in each applicable market in respect of income
payments on Securities for the benefit of Customer which Bank believes
may be available to such Customer.
(ii) The provision of tax reclaim services by Bank is
conditional upon Bank receiving from the beneficial owner of Securities
(A) a declaration of its identity and place of residence and (B)
certain other documentation (pro forma copies of which are available
from Bank). Customer acknowledges that, if Bank does not receive such
declarations, documentation and information, additional United Kingdom
taxation shall be deducted from all income received in respect of
Securities issued outside the United Kingdom and that U.S. non-resident
alien tax or U.S. backup withholding tax shall be deducted from U.S.
source income. Customer shall provide to Bank such documentation and
information as it may require in connection with taxation, and warrants
that, when given, this information shall be true and correct in every
respect, not misleading in any way, and contain all material
information. Customer undertakes to notify Bank immediately if any such
information requires updating or amendment.
(iii) Provided that Bank has acted in accordance with the
standard of care in Section 12(a) hereof, Bank shall not be liable to
Customer or any third party for any taxes, fines or penalties payable
by Bank or Customer, and shall be indemnified accordingly, whether
these result from the inaccurate completion of documents by Customer or
any third party acting as agent for Customer, or as a result of the
provision to Bank or any third party of inaccurate or misleading
information or the withholding of material information by Customer or
any other third party, or as a result of any delay of any revenue
authority or any other matter beyond the control of Bank.
(iv) Customer confirms that Bank is authorized to deduct from
any cash received or credited to the Deposit Account any taxes or
levies required by any revenue or governmental authority for whatever
reason in respect of the Securities or Cash Accounts.
(v) Bank shall perform tax reclaim services only with respect
to taxation levied by the revenue authorities of the countries notified
to Customer from time to time and Bank may, by notification in writing,
at its absolute discretion, supplement or amend the markets in which
the tax reclaim services are offered. Other than as expressly provided
in this sub-clause, Bank shall have no responsibility with regard to
Customer's tax position or status in any jurisdiction.
(vi) Customer confirms that Bank is authorized to disclose any
information requested by any revenue authority or any governmental body
in relation to Customer or the Securities and/or Cash held for
Customer.
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(vii) Tax reclaim services may be provided by Bank or, in
whole or in part, by one or more third parties appointed by Bank (which
may be Affiliates of Bank); provided that. Bank shall be liable for the
performance of any such third party to the same extent as Bank would
have been if it performed such services itself
9. Nominees.
Securities which are ordinarily held in registered form may be
registered in a nominee name of Bank, Subcustodian or securities depository, as
the case may be. Bank may without notice to Customer cause any such Securities
to cease to be registered in the name of any such nominee and to be registered
in the name of Customer. In the event that any Securities registered in a
nominee name are called for partial redemption by the issuer, Bank may allot the
called portion to the respective beneficial holders of such class of security in
any manner Bank deems to be fair and equitable. Customer shall hold Bank,
Subcustodians, and their respective nominees harmless from any liability arising
directly or indirectly from their status as a mere record holder of Securities
in the Custody Account.
10. Authorized Persons.
As used herein, the term "Authorized Person" means employees or agents
including investment managers as have been designated by written notice from
Customer or its designated agent to act on behalf of Customer hereunder. Such
persons shall continue to be Authorized Persons until such time as Bank receives
Instructions from Customer or its designated agent that any such employee or
agent is no longer an Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by Bank, via telephone, telex, facsimile transmission, bank wire or
other teleprocess or electronic instruction or trade information system
acceptable to Bank which Bank believes in good faith to have been given by
Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which Bank may specify. Unless
otherwise expressly provided, all Instructions shall continue in full force and
effect until canceled or superseded. I
Any Instructions delivered to Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but Customer shall hold Bank
harmless for the failure of an Authorized Person to send such confirmation in
writing, the failure of such confirmation to conform to the telephone
instructions received or Bank's failure to produce such confirmation at any
subsequent time. Bank may electronically record any Instructions given by
telephone, and any other telephone discussions with respect to the Custody
Account. Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which Bank shall make available
to Customer or its Authorized Persons.
12. Standard of Care; Liabilities.
(a) Bank shall be responsible for the performance of only such duties
as are set forth herein or expressly contained in Instructions which are
consistent with the provisions hereof as follows:
(i) Bank shall use reasonable care with respect to its
obligations hereunder and the safekeeping of Assets. Bank shall be
liable to Customer for any loss which shall occur as the result of the
failure of a Subcustodian to exercise reasonable care with respect to
the safekeeping of such Assets to the same extent that Bank would be
liable to Customer if Bank were holding such Assets in New York. In the
event of any loss to Customer by reason of the failure of Bank or its
Subcustodian to utilize reasonable care (including, but not limited to,
as respects corporate actions), Bank shall be liable to Customer only
to the extent of Customer's direct damages, to be determined based on
the market value of the property which is the subject of the loss at
the date of discovery of such loss and without reference to any special
conditions or circumstances. Bank shall have no liability whatsoever
for any consequential, special, indirect or speculative loss or damages
(including, but not limited to, lost profits) suffered by Customer in
connection with the transactions contemplated hereby
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and the relationship established hereby even if Bank has been advised
as to the possibility of the same and regardless of the form of the
action.
(ii) Bank shall not be responsible for the insolvency of any
Subcustodian which is not a branch or Affiliate of Bank. Bank shall not
be responsible for any act, omission, default or the solvency of any
broker or agent which it or a Subcustodian appoints unless such
appointment was made negligently or in bad faith.
(iii) Bank shall be indemnified by, and without liability to
Customer for any action taken or omitted by Bank whether pursuant to
Instructions or otherwise within the scope hereof if such act or
omission was in good faith, without negligence. In performing its
obligations hereunder, Bank may rely on the genuineness of any document
which it believes in good faith to have been validly executed.
(iv) Customer shall pay for and hold Bank harmless from any
liability or loss resulting from the imposition or assessment of any
taxes or other governmental charges, and any related expenses with
respect to income from or Assets in the Accounts.
(v) Bank shall be entitled to rely, and may act, upon the
advice of counsel (who may be counsel for Customer) on all matters and
shall be without liability for any action reasonably taken or omitted
pursuant to such advice.
(vi) Bank need not maintain any insurance for the benefit of
Customer.
(vii) Without limiting the foregoing, Bank shall not be liable
for any loss which results from: 1) the general risk of investing, or
2) investing or holding Assets in a particular country including, but
not limited to, losses resulting from malfunction, interruption of or
error in the transmission of information caused by any machines or
system or interruption of communication facilities, abnormal operating
conditions, nationalization, expropriation or other governmental
actions; regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market conditions which
prevent the orderly execution of securities transactions or affect the
value of Assets; except that, with respect to the failure of machines,
systems, interruption of communication facilities or abnormal operating
conditions on Bank or a Subcustodian's premises or otherwise within the
control of Bank or a Subcustodian, Bank shall not be so excused to the
extent that such failure was on account of Bank's or the Subcustodian's
(as the case may be) negligence (such as a failure to have had routine
maintenance performed or to have selected equipment reasonably suitable
for the purposes contemplated hereby given, in the case of
Subcustodians, local market practices with respect to such matters).
Bank confirms that it has in place backup procedures, periodically
tested by it, that would permit continued operation of its Brooklyn,
New York and Bournemouth, England data centers in the event of a
failure of its systems or equipment.
(viii) Neither party shall be liable to the other for any loss
due to forces beyond their control including, but not limited to
strikes or work stoppages, acts of war (whether declared or undeclared)
or terrorism, insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to Customer
or an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to
investments or the retention of Securities;
(iii) advise Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other
than as provided in Section 5(c) hereof;
(iv) evaluate or report to Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party
to which Securities are delivered or payments are made pursuant hereto;
and
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(v) review or reconcile trade confirmations received from
brokers. Customer or its Authorized Persons issuing Instructions shall
bear any responsibility to review such confirmations against
Instructions issued to and statements issued by Bank.
(c) Customer authorizes Bank to act hereunder notwithstanding that Bank
or any of its divisions or Affiliates may have a material interest in a
transaction, or circumstances are such that Bank may have a potential conflict
of duty or interest including the fact that Bank or any of its Affiliates may
provide brokerage services to other customers, act as financial advisor to the
issuer of Securities, act as a lender to the issuer of Securities, act in the
same transaction as agent for more than one customer, have a material interest
in the issue of Securities, or earn profits from any of the activities listed
herein.
13. Fees and Expenses.
Customer shall pay Bank for its services hereunder the fees set forth
in Schedule C hereto or such other amounts as may be agreed upon in writing,
together with Bank's reasonable out-of-pocket or incidental expenses, such as,
but not limited to, scrip and stamp fees, legal fees registration fees, and
other costs that Bank pays on behalf of Customer. Bank shall have a lien on and
is authorized to charge any Accounts of Customer for any amount owing to Bank
under any provision hereof upon oral or written notice to Customer.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration of
Customer's trading and investment activity, subject to Instructions (which may
be standing Instructions) Bank is authorized to enter into spot or forward
foreign exchange contracts with Customer and may also provide foreign exchange
through its subsidiaries, Affiliates or Subcustodians. Instructions, including
standing instructions, may be issued with respect to such contracts but Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where Bank, its subsidiaries, Affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of Bank, its
subsidiary, Affiliate or Subcustodian and, to the extent not inconsistent, this
Agreement shall apply to such transaction.
(b) Certification of Residency, etc. Customer certifies that it is a
resident of the United States and shall notify Bank of any changes in residency.
Bank may rely upon this certification or the certification of such other facts
as may be required to administer Bank's obligations hereunder. Customer shall
indemnify Bank against all losses, liability, claims or demands arising directly
or indirectly from any such certifications.
(c) Access to Records. Bank shall allow Customer's independent public
accountant reasonable access to the records of Bank relating to the Assets as is
required in connection with their examination of books and records pertaining to
Customer's affairs. Subject to restrictions under applicable law, Bank shall
also obtain an undertaking to permit Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the examination
of Customer's books and records.
(d) Governing Law Successors and Assigns, Captions THIS AGREEMENT
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN NEW YORK and shall not be assignable by either
party, but shall bind the successors in interest of Customer and Bank. The
captions given to the sections and subsections of this Agreement are for
convenience of reference only and are not to be used to interpret this
Agreement.
(e) Entire Agreement: Applicable Riders. Customer represents that the
Assets deposited in the Accounts are (Check one):
- Employee Benefit Plan or other assets subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
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X Investment Company assets subject to certain U.S. Securities
--- and Exchange Commission rules and regulations;
Neither of the above.
---
This Agreement consists exclusively of this document together with
Schedules A-C, and the following Rider(s) [Check applicable rider(s)]:
ERISA
---
X INVESTMENT COMPANY.
---
X PROXY VOTING
---
X SPECIAL TERMS AND CONDITIONS
---
There are no other provisions hereof and this Agreement supersedes any
other agreements, whether written or oral, between the parties. Any amendment
hereto must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions hereof are
held invalid, illegal or unenforceable in any respect on the basis of any
particular circumstances or in any jurisdiction, the validity, legality and
enforceability of such provision or provisions under other circumstances or in
other jurisdictions and of the remaining provisions shall not in any way be
affected or impaired.
(g) Waiver. Except as otherwise provided herein, no failure or delay on
the part of either party in exercising any power or right hereunder operates as
a waiver, nor does any single or partial exercise of any power or right preclude
any other or further exercise, or the exercise of any other power or right. No
waiver by a party of any provision hereof, or waiver of any breach or default,
is effective unless in writing and signed by the parry against whom the waiver
is to be enforced.
(h) Representations and Warranties. (i) Customer hereby represents and
warrants to Bank that: (A) it has full authority and power to deposit and
control the Securities and cash deposited in the Accounts; (B) it has all
necessary authority to use Bank as its custodian; (C) this Agreement constitutes
its legal, valid and binding obligation, enforceable in accordance with its
terms; (D) it shall have full authority and power to borrow moneys and enter
into foreign exchange transactions; and (E) it has not relied on any oral or
written representation made by Bank or any person on its behalf, and
acknowledges that this Agreement sets out to the fullest extent the duties of
Bank. (ii) Bank hereby represents and warrants to Customer that: (A) it has the
full power and authority to perform its obligations hereunder, (B) this
Agreement constitutes its legal, valid and binding obligation; enforceable in
accordance with its terms; (C) that it has taken all necessary action to
authorize the execution and delivery hereof.
(i) Notices. All notices hereunder shall be effective when actually
received. Any notices other communications which may be required hereunder are
to be sent to the parties at the following address or such other addresses as
may subsequently be given to the other party in writing: (a) Bank: The Chase
Manhattan Bank, 4 Chase MetroTech Center, l8th Floor, Brooklyn, N.Y. 11245,
Attention: Global Investor Services, Investment Management Group (Reserve Funds
Relationship Manager) and to The Chase Manhattan Bank, 3 Chase MetroTech Center,
8th floor, Brooklyn, N.Y. 11245, Attention: Reserve Funds Service Manager; and
(b) Customer: [Fund name) c/o The Reserve Funds, 810 Seventh Avenue, New York,
10019-5868. Attn: Operations Manager.
(j) Termination. This Agreement may be terminated by Customer or Bank
by giving ninety (90) days written notice to the other, provided that such
notice to Bank shall specify the names of the persons whom Bank shall deliver
the Assets in the Accounts. If notice of termination is given by Bank, Customer
shall within ninety (90) days following receipt of the notice, deliver to Bank
Instructions specifying the name of the persons to whom Bank shall deliver the
Assets. In either case Bank shall deliver the Assets to persons so specified,
after deducting any amounts which Bank determines in good faith to be owed to it
under Section 13, an explanation for any such deductions shall be furnished to
Customer. If within ninety (90) days following receipt of a notice of
termination by Bank, Bank does not receive Instructions from Customer specifying
the names of the persons to whom Bank shall deliver the Assets, Bank, at its
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<PAGE>
election, may deliver the Assets to a bank or trust company doing business in
the State of New York to be held and disposed pursuant to the provisions hereof,
or to Authorized Persons, or may continue to hold the Assets Instructions are
provided to Bank.
(k) Imputation of certain information. Bank shall not be held
responsible for and shall not required to have regard to information held by any
person by imputation or information of which Bank not aware by virtue of a
"Chinese Wall" arrangement. If Bank becomes aware of confidential information
which in good faith it feels inhibits it from effecting a transaction hereunder
Bank may refrain from effecting it.
(l) Year 2000. Bank confirms that it is aware of the problem that may
be presented for certain computer systems by use of date fields and the like on
and after January 1, 2000 and that Bank has developed and is implementing a plan
to help assure that Bank's systems as the same relate to services provided
hereunder will be unaffected by such problems.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first-above written.
THE RESERVE FUNDS THE CAHSE MANHATTAN BANK
By:
----------------------------- -----------------------------
Title: Title:
--------------------------- Date:
Date
---------------------------
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<PAGE>
STATE OF NY )
: ss
COUNTY OF NY )
On this 9th day of January 1998 before me personally came Michelle L.
Neufield, to me known, who being by me duly sworn, did depose and say that
he/she resides in Fairfield , Ct. at 325 Romanock Rd., that her/she is General
Counsel & Secy of The Reserve Funds & all affiliates, the entity described in
and which executed the foregoing instrument; that he/she knows the seal of said
entity, that the seal affixed to said instrument is such seal, that it was so
affixed by order of said entity, and that he/she signed his/her name thereto by
like order.
Sworn to before me this 9th
Day of January, 1998.
Notary
/s/ PATRICIA Maldonado
Notary Public, State of New York
No. 01MA5014011
Qualified in Bronx County
Commission Expires July 6, 1999.
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Investment Company Rider to Global Custody Agreement
Between The Chase Manhattan Bank and
The Reserve Funds
Effective January 6, 1998
The following modifications are made to the Agreement:
The following modifications are made to the Agreement:
A. Add a new Section 15 to the Agreement as follows:
15. Compliance with SEC rule 17f-5.
(a) Customer's board of directors (or equivalent body) (hereinafter
'Board') hereby delegates to Bank, and, except as to the country or countries as
to which Bank may, from time to time, advise Customer that it does not accept
such delegation, Bank hereby accepts the delegation to it, of the obligation to
perform as Customer's 'Foreign Custody Manager' (as that term is defined in SEC
rule l7f-5 (a)(2)), both for the purpose of selecting Eligible Foreign
Custodians (as that term is defined in SEC rule l7f-5(a)(1), and as the same may
be amended from time to time, or that have otherwise been made exempt pursuant
to an SEC exemptive order) to hold Assets and of evaluating the contractual
arrangements with such Eligible Foreign Custodians (as set forth in SEC rule
17f-5(c)(2)); provided that, the term Eligible Foreign Custodian shall not
include any 'Compulsory Depository. A Compulsory Depository shall mean a
securities depository or clearing agency the use of which is compulsory because:
(1) its use is required by law or regulation, (2) securities cannot be withdrawn
from the depository, or (3) maintaining securities outside the depository is not
consistent with prevailing custodial practices in the country which the
depository serves. Compulsory Depositories used by Chase as of the date hereof
are set forth in Appendix 1-A hereto, and as the same may be amended on notice
to Customer from time to time.
(b) In connection with the foregoing, Bank shall:
(i) provide written reports notifying Customer's Board of the
placement of Assets with particular Eligible Foreign Custodians
and of any material change in the arrangements with such Eligible
Foreign Custodians, with such reports to be provided to Customer's
Board at such times as the Board deems reasonable and appropriate
based on the circumstances of Customer's foreign custody
arrangements (and until further notice from Customer such reports
shall be provided not less than quarterly with respect to the
placement of Assets with particular Eligible Foreign Custodians
and with reasonable promptness upon the occurrence of any material
change in the arrangements with such Eligible Foreign Custodians);
(ii) exercise such reasonable care, prudence and diligence in
performing as Customer's Foreign Custody Manager as a person
having responsibility for the safekeeping of Assets would
exercise;
(iii) in selecting an Eligible Foreign Custodian, first have
determined that Assets placed and in the safekeeping of such
Eligible Foreign Custodian shall be subject to reasonable care,
based on the standards applicable to custodians in the relevant
market, after having considered all factors relevant to the
safekeeping of such Assets, including, without limitation, those
factors set forth in SEC rule l7f-5(c)(l)(i)-(iv);
(iv) determine that the written contract with the Eligible Foreign
Custodian (or, in the case of an Eligible Foreign Custodians that
is a securities depository or clearing agency, such contract, the
rules or established practices or procedures of the depository, or
any combination of the foregoing) requires that the Eligible
Foreign Custodian will provide reasonable care for Assets based on
the standards applicable to custodians in the relevant market. In
making this determination, Bank shall consider the provisions of
Rule l7f-5(c)(2),
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<PAGE>
together with whether Bank shall be liable to Customer for any
loss which shall occur as the result of the failure of the
Eligible Foreign Custodian to exercise reasonable ca with respect
to the safekeeping of such Assets to the same extent that Bank
would be liable to Customer if Bank were holding such Assets in
New York; and
(v) have established a system to monitor the continued
appropriateness of maintaining Assets with particular Eligible
Foreign Custodians and of the governing contractual arrangements;
it being understood, however, that in the event that Bank shall
have determined that the existing Eligible Foreign Custodian in a
given country would no longer afford Assets reasonable care and
that no other Eligible Foreign Custodian in that country would
afford reasonable care, Bank shall promptly so advise Customer and
shall then act in accordance with the Instructions of Customer
with respect to the disposition of the affected Assets.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Assets on behalf of Customer with Eligible Foreign Custodians pursuant to a
written contract deemed appropriate by Bank.
(c) Except as expressly provided herein, Customer shall be solely
responsible to assure that the maintenance of Assets hereunder complies with the
rules, regulations, interpretations and exemptive orders promulgated by or under
the authority of the SEC.
(d) Bank represents to Customer that it is a U.S. Bank as defined in
Rule l7f-5(a)(7). Customer represents to Bank that: (1) the Assets being placed
and maintained in Bank's custody are subject to the Investment Company Act of
1940, as amended (the '1940 Act'), as the same may be amended from time to time;
(2) its Board: (i) has determined that it is reasonable to rely on Bank to
perform as Customer's Foreign Custody Manager (ii) or its investment advisor
shall have determined that Customer may maintain Assets in each country in which
Customer's Assets shall be held hereunder and determined to accept the risks
arising therefrom (including, but not limited to, a country's financial
infrastructure (and including any Compulsory Depository operating in such
country), prevailing custody and settlement practices, laws applicable to the
safekeeping and recovery of Assets held in custody, and the likelihood of
nationalization, currency controls and the like)."
B. Add the following after the first sentence of Section 3 of the
Agreement: "At the request of Customer, Bank may, but need not, add to Schedule
B an Eligible Foreign Custodian that is either a bank or a non-Compulsory
Depository where Bank has not acted as Foreign Custody Manager with respect to
the selection thereof. Bank shall notify Customer in the event that it elects
not to add any such entity."
C. Add the following language to the end of Section 3 of the
Agreement:
The term Subcustodian as used herein shall mean the following:
(a) a U.S. Bank, which shall mean a U.S. bank as defined in SEC
rule l7f-5(a)(7);
(b) an 'Eligible Foreign Custodian,' which shall mean (i) a banking
institution or trust company, incorporated or organized under the laws
of a country other than the United States, that is regulated as such
by that country's government or an agency thereof, (ii) a
majority-owned direct or indirect subsidiary of a U.S. bank or bank
holding company which subsidiary is incorporated or organized under
the laws of a country other than the United States; (iii) a securities
depository or clearing agency, incorporated or organized under the
laws of a country other than the United States, that acts as a system
for the central handling of securities or equivalent book-entries in
that country and that is regulated by a foreign financial regulatory
authority as defined under section 2(a)(5) of the 1940 Act, (iv) a
securities depository or clearing agency organized under the laws of a
country other than the United States to the extent acting as a
transnational system for the central handling of securities or
equivalent book-entries, and (v) any other entity that shall have been
so qualified by exemptive order, rule or other appropriate action of
the SEC.
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<PAGE>
For purposes of clarity, it is agreed that as used in Section 12(a)(i), the term
Subcustodian shall include neither any Eligible Foreign Custodian as to which
Bank has not acted as Foreign Custody Manager nor any Compulsory Depository."
D. Insert the following language at the beginning of the second
sentence of Section 12(a)(i):
"Except with respect to those countries as to which the parties may
from time to time agree in writing otherwise".
E. In recognition of the fact that compliance with amended Rule l7f-5
is in an early stage of development and of the importance to Bank of the
relationship between Bank and Customer, Bank hereby agrees that, if prior to
June 15, 1998, Bank makes any material change to this rider for its mutual fund
customers, Customer shall be given the option of continuing to operate under
this rider or pursuant to the changed rider. Customer shall promptly notify Bank
of whether or not it elects to operate pursuant to the changed rider, and if it
does so elect, such election shall be effective on and after the date that Bank
receives such notice.
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GLOBAL PROXY SERVICE RIDER
To Global Custody Agreement
Between
THE CHASE MANHATTAN BANK
AND
THE RESERVE FUNDS
January 6, 1998
1. Global Proxy Services ("Proxy Services") shall be provided for the
countries listed in the procedures and guidelines ("Procedures")
furnished to Customer, as the same may be amended by Bank from time to
time on prior notice to Customer. The Procedures are incorporated by
reference herein and form a part of this Rider.
2. Proxy Services shall consist of those elements as set forth in the
Procedures, and shall include (a) notifications ("Notifications") by
Bank to Customer of the dates of pending shareholder meetings,
resolutions to be voted upon and the return dates as may be received by
Bank or provided to Bank by its Subcustodians or third parties, and (b)
voting by Bank of proxies based on Customer directions. Original proxy
materials or copies thereof shall not be provided. Notifications shall
generally be in English and, where necessary, shall be summarized and
translated from such non-English materials as have been made available
to Bank or its Subcustodian. In this respect Bank's only obligation is
to provide information from sources it believes to be reliable and/or
to provide materials summarized and/or translated in good faith. Bank
reserves the right to provide Notifications, or parts thereof, in the
language received. Upon reasonable advance request by Customer, backup
information relative to Notifications, such as annual reports,
explanatory material concerning resolutions, management recommendations
or other material relevant to the exercise of proxy voting rights shall
be provided as available, but without translation.
3. While Bank shall attempt to provide accurate and complete
Notifications, whether or not translated, Bank shall not be liable for
any losses or other consequences that may result from reliance by
Customer upon Notifications where Bank prepared the same in good faith.
4. Notwithstanding the fact that Bank may act in a fiduciary capacity with
respect to Customer under other agreements or otherwise under the
Agreement, in performing Proxy Services Bank shall be acting solely as
the agent of Customer, and shall not exercise any discretion with
regard to such Proxy Services.
5. Proxy voting may be precluded or restricted in a variety of
circumstances, including, without limitation, where the relevant
Securities are: (i) on loan; (ii) at registrar for registration or
reregistration; (iii) the subject of a conversion or other corporate
action; (iv) not held in a name subject to the control of Bank or its
Subcustodian or are otherwise held in a manner which precludes voting;
(v) not capable of being voted on account of local market regulations
or practices or restrictions by the issuer; or (vi) held in a margin or
collateral account.
6. Customer acknowledges that in certain countries Bank may be unable to
vote individual proxies but shall only be able to vote proxies on a net
basis (e.g. a net yes or no vote given the voting instructions received
from all customers).
7. Customer shall not make any use of the information provided hereunder,
except in connection with the funds or plans covered hereby, and shall
in no event sell, license, give or otherwise make the information
provided hereunder available, to any third party, and shall not
directly or indirectly compete with Bank or diminish the market for
Proxy Services by provision of such information, in whole or in part,
for compensation or otherwise, to any third party.
8. The names of Authorized Persons for Proxy Services shall be furnished
to Bank in accordance with ss.10 of the Agreement. Proxy Services fees
shall be as set forth in ss.13 of the Agreement or as separately
agreed.
14
<PAGE>
APPENDIX 1-A
Compulsory Depositories
As of January 6, 1998
<TABLE>
<CAPTION>
COUNTRY DEPOSITORY INSTRUMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA CAJA DE VALORES Equity Corporate & Government Debt
- ------------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA AUSTRACLEAR LTD. Corporate Debt, Money Market & Semi Government Debt
----------------------------------------------------------------------------------------------------------------------
CHESS Equity
(Clearing House Electronic Sub-register System)
----------------------------------------------------------------------------------------------------------------------
RITS Government Debt
(Reserve Bank Information and Transfer System)
- ------------------------------------------------------------------------------------------------------------------------------------
AUSTRIA OESTERREICHISCHER KONTROLBANK AG Equity, Corporate + Government Debt
- ------------------------------------------------------------------------------------------------------------------------------------
BELGIUM CIK Equity + Corporate Debt
(Caiss Interprofessionnelle de Deposits de Virements
de Titres)
----------------------------------------------------------------------------------------------------------------------
BANK NATIONALE DE BELGIQUE Treasury Bills + Government Debt
- ------------------------------------------------------------------------------------------------------------------------------------
BRAZIL BOVESPA Equity
(Bolsa de Valores de Sao Paolo)
----------------------------------------------------------------------------------------------------------------------
BVRJ Equity
(Bolsa de Valores de Rio de Janeiro)
- ------------------------------------------------------------------------------------------------------------------------------------
BULGARIA BNB Government Debt
(Bulgaria National Bank)
- ------------------------------------------------------------------------------------------------------------------------------------
CANADA CDS Equity, Corporate + Government Debt
(Canadian Depository for Securities)
- ------------------------------------------------------------------------------------------------------------------------------------
CHINA, SSCCRC Equity
SHANGHAI (Shanghai Securities Central Clearing and Registration
Corp.)
- ------------------------------------------------------------------------------------------------------------------------------------
CHINA, SSCC Equity
SHENZHEN (Shenzhen Securities Registration Co., Ltd.)
- ------------------------------------------------------------------------------------------------------------------------------------
CZECH SCP Equity + Long-Term Government Debt
REPUBLIC (Securities Center)
----------------------------------------------------------------------------------------------------------------------
TKD Treasury Bills + Money Market
(Trh Kratkododich Dlluhopisu or Short-Term Bond Market)
- ------------------------------------------------------------------------------------------------------------------------------------
DENMARK VP Equity, Corporate + Government Debt
(Vaerdipapircentralen)
- ------------------------------------------------------------------------------------------------------------------------------------
EGYPT MISR CLEARING & SEC. DEP. Equity
- ------------------------------------------------------------------------------------------------------------------------------------
ESTONIA EVK Equity
(Estonian Central Depository for Securities Ltd.)
- ------------------------------------------------------------------------------------------------------------------------------------
EUROMARKET CEDEL & EUROCLEAR Euro-Debt
- ------------------------------------------------------------------------------------------------------------------------------------
FINLAND CSR Equity + Government Debt
(Central Share Registry Finland)
----------------------------------------------------------------------------------------------------------------------
HELSINKI MONEY MARKET CENTER LTD. Money Market
- ------------------------------------------------------------------------------------------------------------------------------------
FRANCE SICOVAM Equity + Corporate Debt.
(Banque de France)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
APPENDIX 1-A
Compulsory Depositories
As of January 6, 1998
<TABLE>
<CAPTION>
COUNTRY DEPOSITORY INSTRUMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FRANCE SATURNE Government Debt
(Banque de France)
- ------------------------------------------------------------------------------------------------------------------------------------
GERMANY DKV Equity, Corporate + Government Debt
(Deutscher Kassenverein)
- ------------------------------------------------------------------------------------------------------------------------------------
GREECE APOTHETIRIO TITLON A.E. Equity
- ------------------------------------------------------------------------------------------------------------------------------------
BANK OF GREECE Government Debt
- ------------------------------------------------------------------------------------------------------------------------------------
HONG KONG CCASS Equity
(Central Clearing and Settlement System)
- ------------------------------------------------------------------------------------------------------------------------------------
CMU Corporate + Government Debt
(Central Money-markets Unit)
- ------------------------------------------------------------------------------------------------------------------------------------
HUNGARY KELER LTD. Equity + Government Debt
- ------------------------------------------------------------------------------------------------------------------------------------
INDIA NSDL Equity + Corporate Debt
(National Securities Depository Ltd)
- ------------------------------------------------------------------------------------------------------------------------------------
IRELAND CREST Equity
- ------------------------------------------------------------------------------------------------------------------------------------
GSO Government Debt
(Gilt Settlement Office)
- ------------------------------------------------------------------------------------------------------------------------------------
ISRAEL TASE CLEARING HOUSE Equity, Corporate + Government Debt
(Tel Aviv Stock Exchange Clearing House)
- ------------------------------------------------------------------------------------------------------------------------------------
ITALY MONTE TITOLI Equity + Corporate Debt
- ------------------------------------------------------------------------------------------------------------------------------------
BANK OF ITALY Government Debt
- ------------------------------------------------------------------------------------------------------------------------------------
JAPAN BANK OF JAPAN Registered Government Debt
- ------------------------------------------------------------------------------------------------------------------------------------
LATVIA LCD Equity + Government Debt
(Latvian Central Depository)
- ------------------------------------------------------------------------------------------------------------------------------------
LEBANON MIDCLEAR Equity
(Custodian and Clearing Center of Lebanon and the
Middle East)
- ------------------------------------------------------------------------------------------------------------------------------------
LUXENBOURG CEDEL Equity
- ------------------------------------------------------------------------------------------------------------------------------------
MALAYSIA MCD Equity
(Malaysian Central Depository Snd Bhd)
- ------------------------------------------------------------------------------------------------------------------------------------
MAURITIUS CDS Equity
(Central Depository System)
- ------------------------------------------------------------------------------------------------------------------------------------
MEXICO INDEVAL Equity, Corporate + Government Debt.
(Institucion para el Deposito de Valores
- ------------------------------------------------------------------------------------------------------------------------------------
MOROCCO MAROCLEAR Equity + Corporate Debt
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
APPENDIX 1-A
Compulsory Depositories
As of January 6, 1998
<TABLE>
<CAPTION>
COUNTRY DEPOSITORY INSTRUMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MORROCO, BANK AL'MAGHRIB Government Debt
(CONT.)
- ------------------------------------------------------------------------------------------------------------------------------------
NETHERLANDS NECIGEF/KAS ASSOCIATE NV Equity, Corporate + Government Debt
----------------------------------------------------------------------------------------------------------------------
DE NEDERLANDSCHE BANK N.V. Money-Market
----------------------------------------------------------------------------------------------------------------------
NIEC Premium Bonds
(Nederlands Interprofessioneel Effectencentrum B.V.)
- ------------------------------------------------------------------------------------------------------------------------------------
NEW ZEALAND AUSTRACLEAR NEW ZEALAND Equity, Corporate + Government Debt
- ------------------------------------------------------------------------------------------------------------------------------------
NORWAY VPS Equity, Corporate + Government Debt
(Verdipapiresentralen)
- ------------------------------------------------------------------------------------------------------------------------------------
PAKISTAN CDC Equity
(Central Depository Company of Pakistan Ltd.)
- ------------------------------------------------------------------------------------------------------------------------------------
PERU CAVALI Equity
(Caja de Valores)
- ------------------------------------------------------------------------------------------------------------------------------------
PHILIPPINES PCD Equity
(Philippine Central Depository
- ------------------------------------------------------------------------------------------------------------------------------------
POLAND NDS Equity, Long-Term Government Debt + Vouchers
(National Securities Depository)
- ------------------------------------------------------------------------------------------------------------------------------------
CRT Treasury Bills
(Central Registry of Treasury Bills)
- ------------------------------------------------------------------------------------------------------------------------------------
PORTUGAL INTERBOLSA Equity, Corporate + Government Debt
- ------------------------------------------------------------------------------------------------------------------------------------
ROMANIA SNCDD - RASDAQ Equity
(National Company for Clearing, Settlement and Depository
8for Securities)
----------------------------------------------------------------------------------------------------------------------
BUCHAREST STOCK EXCHANGE REGISTRY Equity
----------------------------------------------------------------------------------------------------------------------
NATIONAL BANK OF ROMANIA Treasury Bills
- ------------------------------------------------------------------------------------------------------------------------------------
RUSSIA MICEX GKO's
(Moscow Interbank Currency Exchange) (Gosudarstvennye Kratkosrochnye Obyazatelstva [T-Bills])
OFZ's
(obligatsyi Federalnogo Zaima [Federal Loan Bonds])
- ------------------------------------------------------------------------------------------------------------------------------------
SINGAPORE CDP Equity + Corporate Debt and Malaysian equities traded on
(Central Depository Pte. Ltd.) CLOB
----------------------------------------------------------------------------------------------------------------------
MONETARY AUTHORITY OF SINGAPORE Government Debt
- ------------------------------------------------------------------------------------------------------------------------------------
SLOVAK SCP Equity + Government Debt
REPUBLIC (Stredisko Cennych Papiru)
----------------------------------------------------------------------------------------------------------------------
NATIONAL BANK OF SLOVAKIA Treasury Bills
- ------------------------------------------------------------------------------------------------------------------------------------
SO. AFRICA CD Corporate + Government Debt
(Central Depository)
- ------------------------------------------------------------------------------------------------------------------------------------
SO. KOREA KSD Equity, Corporate + Government Debt
- ------------------------------------------------------------------------------------------------------------------------------------
SPAIN SCLV Equity, + Corporate Debt
(Servicio de Compensacion y Liquidacion de Valores)
- ------------------------------------------------------------------------------------------------------------------------------------
SPAIN CBEO Government Debt
(Central Book Entry Office)
- ------------------------------------------------------------------------------------------------------------------------------------
SRI LANKA CDS Equity
(Central Depository System (Private) Ltd.)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
APPENDIX 1-A
Compulsory Depositories
As of January 6, 1998
<TABLE>
<CAPTION>
COUNTRY DEPOSITORY INSTRUMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SWEDEN VPC Equity, Corporate + Government Debt
(Vardepapperscentralen AB)
- ------------------------------------------------------------------------------------------------------------------------------------
SWITZERLAND SEGA Equity, Corporate + Government Debt
(Schweizerische Effekten-Giro AG)
- ------------------------------------------------------------------------------------------------------------------------------------
TAIWAN TSCD Equity + Government Debt
(Taiwan Securities Central Depository Co., Ltd.)
- ------------------------------------------------------------------------------------------------------------------------------------
THAILAND TSDC Equity, Corporate + Government Debt
(Thailand Securities Depository Company Ltd.)
- ------------------------------------------------------------------------------------------------------------------------------------
TUNISIA STICODEVAM Equity
(Societe Tunisienne Interprofessionnelle pour
la Compensation et le Depot des Valeurs Mobilieres)
----------------------------------------------------------------------------------------------------------------------
MINISTRY OF FINANCE Government Debt tradable on the stock exchange (BTNBs)
----------------------------------------------------------------------------------------------------------------------
CENTRAL BANK OF TUNISIA Government Debt tradable on the stock exchange (BTCs)
- ------------------------------------------------------------------------------------------------------------------------------------
TURKEY TAKAS BANK Equity + Corporate Debt
- ------------------------------------------------------------------------------------------------------------------------------------
CENTRAL BANK OF TURKEY Government Debt
- ------------------------------------------------------------------------------------------------------------------------------------
UNITED CREST Equity + Corporate Debt
KINGDOM (Clearing & settlement system)
----------------------------------------------------------------------------------------------------------------------
CMO Sterling CD's & CP
(Central Money-market Office)
----------------------------------------------------------------------------------------------------------------------
CGO Gilts
(Central Gilts Office)
- ------------------------------------------------------------------------------------------------------------------------------------
UNITED STATES DTC Equity + Corporate Debt
(Depository Trust Company)
----------------------------------------------------------------------------------------------------------------------
PTC Mortgage Back Debt
(Participants Trust Company)
----------------------------------------------------------------------------------------------------------------------
FED BOOK-ENTRY Government Debt
- ------------------------------------------------------------------------------------------------------------------------------------
ZAMBIA LUSE Equity + Government Debt
(LuSE Central Shares Depository Ltd.)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DOMSTIC AND GLOBAL
SPECIAL TERMS AND CONDITIONS RIDER
Domestic Corporate Actions and Proxies
With respect to domestic U.S. and Canadian Securities (the latter if held in
DTC), the following provisions shall apply rather than the pertinent provisions
of Section 8 of the Agreement and the Global Proxy Service rider:
Bank shall send to Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of Bank's
nominee or the nominee of a central depository) and communications with
respect to Securities in the Custody Account as call for voting or
relate to legal proceedings within a reasonable time after sufficient
copies are received by Bank for forwarding to its customers. In
addition, Bank shall follow coupon payments, redemptions, exchanges or
similar matters with respect to Securities in the Custody Account and
advise Customer or the Authorized Person for such Account of rights
issued, tender offers or any other discretionary rights with respect to
such Securities, in each case, of which Bank has received notice from
the issuer of the Securities, or as to which notice is published in
publications routinely utilized by Bank for this purpose
19
<PAGE>
Schedule A
Portfolios of the Reserve Funds:
Reserve Primary Fund
Reserve Government Fund
Reserve Interstate Fund
Reserve New York Tax-Exempt Fund
Reserve Connecticut Tax-Exempt Fund
Reserve Massachusetts Tax-Exempt Fund
Reserve New Jersey Tax-Exempt Fund
Reserve U.S. Treasury Fund
Reserve Convertible Securities Fund
Reserve Florida Tax-Exempt Fund
Reserve Offshore Fund
Reserve Mid-Cap Growth Fund
Reserve Large-Cap Value Fund
Reserve Strategist Money-Market Fund
Reserve Small-Cap Growth Fund
Reserve California Tax-Exempt Fund
Reserve, Blue Chip Growth Fund
Reserve Informed Investor Growth Fund
Reserve Pennsylvania Tax-Exempt Fund
Reserve International Equity Fund
Reserve Primary Institution Fund
Reserve U.S. Government Institutional Fund
Reserve U.S. Treasury Institutional Fund
Reserve Interstate Tax-Exempt Institutional Fund
Reserve Ohio Tax-Exempt Fund
Reserve Michigan Tax-Exempt Fund
The InterVest Fund
- InverVest Fixed-Rate Fund
- InterVest Variable-Rate Fund
20
<PAGE>
September 29, 1999
Reserve Private Equity Series
1250 Broadway
New York, New York 10001-3701
Ladies and Gentlemen:
I have acted as counsel to Reserve Private Equity Series, a Delaware business
trust ("RPES"), in connection with the preparation and filing of its
Registration Statement on Form N-1A (the "Registration Statement") covering
shares of beneficial interest, no par value per share, of RPES, on behalf of the
Reserve Blue Chip Growth Fund, Reserve Informed Investors Growth Fund, Reserve
International Equity Fund, Reserve Large-Cap Growth Fund, Reserve Small-Cap
Growth Fund and Reserve Strategic Growth Fund.
I have examined copies of the Declaration of Trust and By-Laws of RPES, the
Registration Statement, and such other records, proceedings and documents, as I
have deemed necessary for the purpose of this opinion. I have also examined such
other documents, papers, statutes and authorities as I deemed necessary to form
a basis for the opinion hereinafter expressed. In my examination of such
material, I have assumed the genuineness of all signatures and the conformity to
original documents of all copies.
Based upon the foregoing, I am of the opinion that the shares of beneficial
interest, no par value per share, of RPES to be issued in accordance with the
terms of the offering, as set forth in the Registration Statement, when so
issued and paid for will constitute validly authorized and legally issued shares
of beneficial interest, fully paid and non-assessable by RPES.
Very truly yours,
\s\ MaryKathleen Foynes
- -----------------------
MaryKathleen Foynes
General Counsel
The Reserve Funds
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference to the registration
statement on Form N-1A (Investment Company Act File No. 811-7734 and Securities
Act File No. 33-63300) of our report dated July 28, 1999 on our audits of the
financial statements and financial highlights appearing in the May 31, 1999
Annual Report to Shareholders of The Reserve Private Equity Series (comprising,
respectively, Reserve Blue Chip Fund, Reserve Informed Investors Fund, Reserve
International Equity Fund, Reserve Large-Cap Growth Fund (formerly Large-Cap
Value Fund), Reserve Strategic Growth Fund, and Reserve Small Cap Fund), which
are also incorporated by reference into the registration statement.
We also consent to the reference to our firm under the captions "Financial
Highlights" in the prospectus and "Custodian, Independent Accountants and
Counsel" in the statement of additional information.
PricewaterhouseCoopers LLP
New York, New York
September 29, 1999
<PAGE>
REGISTERED DEALER AGREEMENT
Resrv Partners, Inc. ("RESRV") is the Principal Underwriter for the
shares (the "Shares") of The Reserve Funds (the "Funds"), which are registered
under the Investment Company Act of 1940 as open-end investment companies. The
Shares are offered for sale under the terms specified in the Fund's prospectus
in effect from time to time (the "Prospectus").
The terms of mutual agreement ("Agreement") between RESRV
("Distributor") and the undersigned brokerage firm, financial planner, bank,
trust company and other qualified entities, as well as Successor firms (the
"Dealer") concerning the sale of Shares are as follows:
1. APPOINTMENT: The Dealer is hereby appointed by RESRV as a non-exclusive
distributor for the sale of the Shares in those states and jurisdictions of the
United States in which the Dealer and the Shares of the Fund are qualified for
sale. RESRV will notify Dealer in writing as to the states in which the shares
of the Fund have qualified for sale under, or are exempt from the requirements
of the respective securities laws of such states.
2. SALE OF FUND SHARES: The Dealer agrees to use its best efforts to solicit
qualified investors for orders to purchase shares and to determine suitability.
The Dealer shall place orders for sale of Shares only at their public offering
price and under terms as specified in the Prospectus and Statement of Additional
Information then in effect (collectively referred to as the "Prospectus").
Dealer agrees to provide, or cause to be provided, prospective investors with a
Fund Prospectus. The Dealer agrees not to make any representations about such
Shares not included in said Prospectus or in any authorized supplemental
materials supplied or authorized by RESRV. Dealer represents that the Shares
will be offered and sold in accordance with the terms and conditions of this
Agreement and all applicable laws, rules and regulations and agrees to hold
RESRV harmless and to indemnify RESRV in the event that the Dealer, or any of
its representatives, employees or agents should violate any law, rule or
regulation, or provisions of this Agreement, which violation may result in any
loss or liability (including costs of investigation and counsel fees) to RESRV
or the Fund or any of its portfolios. If RESRV determines to refund any amounts
paid by an investor by reason of such violation by the Dealer, the Dealer shall
promptly return on demand any commissions previously paid or discounts allowed
by RESRV with respect to the transaction for which the refund is made. RESRV
agrees to indemnify and hold harmless Dealer and Dealer's affiliates, officers,
directors and employees from and against any and all losses, liabilities, claims
and costs (including reasonable attorneys' fees) resulting from RESRV's failure
to fulfill its obligations hereunder or from any alleged inaccuracy, omission or
misrepresentation contained in any prospectus, statement of additional
information, any printed information issued by RESRV as information supplemental
to such prospectuses and statements of additional information, or any
advertising or sales materials prepared by RESRV. All expenses, which the Dealer
incurs in connection with activities under this Agreement, shall be borne by the
Dealer.
3. DEALER RELATIONSHIP: The Dealer shall act in a dealer capacity with respect
to investors and the Dealer shall not have any authority to act as agent of the
Fund, RESRV, or any affiliate of RESRV (including, but not limited to, Reserve
Management Company, Inc. ("RMCI") and any mutual fund managed by RMCI (such
affiliates being "RESRV Affiliates"). The Dealer and its employees are not
authorized to make any representation concerning the Fund, RESRV, or RESRV
Affiliates except those contained in the Prospectus. Dealer may include the name
of any Fund in any printed list of funds which it makes available.
4. DEALER COMMISSIONS: During the term of this Agreement, the Dealer shall
receive from RESRV a commission with respect to all accounts accepted by RESRV
in which the executed account application form on file with the Fund is marked
or designated to show that it was provided to the investor by the Dealer (each
such marked account being a "Dealer Account"). The commission to be paid to the
Dealer with respect to each Dealer Account shall be an amount equal to the
dealer commission specified from time to time in the Prospectus.
<PAGE>
Any assistance payments and/or administrative service fees for
distribution pursuant to a distribution plan ("Plan") adopted by the Fund in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended,
due to the Dealer hereunder shall be paid at the end of the month. RESRV will
pay Dealer a monthly fee as set forth in the Plan and current Fund prospectus
based on the net asset value of Fund shares, which are held in accounts which
are designated as a Dealer Account. Payment shall be made within 30 days after
the close of each month for which such fee(s) is payable. No such monthly
payment will be paid if the average net asset value of all Dealer Accounts upon
which the fee is based is less than $25,000.
5. PURCHASE ORDERS: Payments for purchases of Shares made by telephone or wire
order by the Dealer shall be made to the order of RESRV or the Fund
(collectively, "Dealer") and received by Dealer, and all necessary applications
and other documents required by Dealer to establish an account or to settle a
redemption order, within five business days after Dealer's acceptance of our
order or such shorter time as may be required by law. If such payments or other
settlement documents are not timely received by Dealer, we understand that
Dealer reserve the right, without notice, to cancel the purchase or redemption
order, or, at Dealer's option in the case of a purchase order, to sell the
Shares ordered by us back to the Fund, and in either case we shall promptly
reimburse Dealer for any loss to Dealer or the Fund, including without
limitation loss of Dealer's profit, suffered by Dealer resulting from our
failure to make the aforesaid timely payment or settlement. If sales of any
Fund's Shares are contingent upon the Funds receipt of Federal Funds in payment
therefore, we will forward promptly to Dealer any purchase orders and/or
payments received by us for Shares from our customers.
6. REDEMPTION ORDERS: Dealer may place redemption orders with Dealer for Shares
owned by Dealer's customers, but only in accordance with the terms of the
applicable Fund Prospectus. Dealer understands and agrees that by placing a
redemption order with the Fund or RESRV (collectively "Dealer") by wire or
telephone, it represents that a request for the redemption of the Shares covered
by the redemption order has been delivered to the Dealer by the registered
owner(s) of such Shares, and that such request has been executed in the manner
and with the signature(s) of such registered owners guaranteed as required by
the then current Prospectus of the applicable Fund. Such redemption orders shall
be subject to the following additional conditions:
(a) Dealer shall furnish Dealer with exact registration and account number for
the Shares to be redeemed at the time we place a redemption order by wire or
telephone and shall tender to Dealer, within five business days of our placing
such a redemption order: (i) a stock power or letter, duly signed by the
registered owner(s) of the Shares which are the subject of the order, duly
guaranteed, (ii) any Share certificates required for such redemption, and (iii)
any additional documents which may be required by the applicable fund or its
transfer agent, in accordance with the terms of the then current Prospectus of
the applicable Fund and the policies of the transfer agent. In the alternative,
Dealer shall provide a letter of indemnity in a form approved by the Fund and
RESRV stating that all necessary authorizations have been received from the
registered owner(s) of the Shares.
(b) The redemption price will be the next net asset value per share of the
Shares computed after Dealer receipt, prior the close of the New York Stock
Exchange ("NYSE"), of an order placed by us to redeem such Shares, except that
orders placed by us after the close of the NYSE on a business day will be based
on the Fund's net asset value per share determined that day, but only if such
orders were received by us from our customer prior to the close of business of
the NYSE that day and if we place our redemption order with Dealer prior to
Dealer's normal close of business that day.
(c) In connection with a redemption order we have placed, if Dealer fails to
make delivery of all required certificates and documents in a timely manner as
stated above, Dealer have the right to cancel our redemption order. If any
cancellation of a redemption order or if any error in the timing of the
acceptance of a redemption order placed by Dealer shall result in a loss to
Dealer or the Fund, we shall promptly reimburse Dealer for such loss.
<PAGE>
If any Shares sold by us under the terms of this Agreement are redeemed
by any of the Funds (including without limitation redemptions resulting from an
exchange for Shares of another fund) or are purchased by Dealer as an agent for
the Fund or are tendered to the Fund for redemption within seven business days
after Dealer's confirmation to us of our original purchase order for such
Shares, we shall promptly repay to Dealer the full amount of the commission
allowed to us on the original sales, provided Dealer notify us of such
repurchase or redemption.
7. REPRESENTATIONS: The Dealer represents and warrants that it is a registered
securities dealer and is a member in good standing with the National Association
of Securities Dealers, Inc. ("NASD") or in the alternative, it is a foreign
dealer not eligible for membership in the NASD, and is fully licensed and
legally empowered to act as a securities broker-dealer under the laws of each
jurisdiction in which it conducts business or in the alternative, it is a
financial planner, bank, trust company and other qualified entity governed by
applicable laws and regulations. Dealer agrees to abide by the rules and
regulations of the Securities and Exchange Commission and the NASD, where
applicable, relating to the performance of its obligations hereunder, including,
without limitation, Section 26 of Articles III of the NASD Rules of Fair
Practice, and all other applicable laws and regulations, all of which are
incorporated herein by reference.
8. COMPENSATION: Dealer will be paid in accordance with Schedule A (attached and
incorporated herein).
9. TERMINATION: This Agreement may be terminated by either party upon fifteen
(15) days' written notice to the other and will be automatically terminated upon
the Dealer expulsion form. Dealer's suspension from the NASD for the violation
of any law, rule or regulation relating to the performance of Dealer's
obligations hereunder will terminate this Agreement effective immediately upon
our written notice of termination to the Dealer.
10. ARBITRATION: Dealer and RESRV agree that all disputes between the parties of
whatever subject matter, whether existing on the date thereof or arising
hereafter, shall be submitted to arbitration in accordance with the code of
Arbitration Procedure of the NASD or the New York Stock Exchange, or similar
rules or code, in effect at the time of the submission of any such dispute.
11. NOTICES: All communications shall be sent to RESRV to our offices at 1250
Broadway, 32nd Floor, New York, NY 10001. Any notice to Dealer shall be duly
given if mailed or telegraphed to Dealer at the address shown on this Agreement.
12. GOVERNING LAW: This Agreement shall be effective as of the date it is
executed and dated by Dealer below. This Agreement and all the rights and
obligations of the parties hereunder shall be governed by and construed under
the laws of the State of New York.
RESRV PARTNERS, INC.
By:
---------------------------------------------
Name & Title (print):
---------------------------
Date:
-------------------------------------------
Dealer:
--------------------------------
By:
------------------------------------
(Authorized Signature)
<PAGE>
Name: Dealer Code:
---------------------------------- ----------------------
Title: Phone:
--------------------------------- ----------------------------
Address: NASD B/D No:
------------------------------- ----------------------
Date:
----------------------------------
<PAGE>
SCHEDULE A
Effective March 11, 1999
MONEY-MARKET FUNDS
A. Money-market funds with the exception of the Reserve Institutional Trust
Subject to the limit of the Plan of each Money-Market Fund, assistance payments
to a selected dealer with an automated interface will be at an annual rate
determined and paid monthly at a rate not less than 0.40% of the average daily
net asset value of each Fund's Qualified Accounts, or in accordance with any
subsequent Notice which may be provided by Resrv Partners, Inc., pursuant to the
Dealer Agreement.
For a Dealer who, in the opinion of Resrv Partners, is making a "good faith"
effort toward economical centralized purchases and sales to facilitate expedited
processing, such as an "automatic sweep," such assistance payments may be at an
annual rate so determined and paid not less than 0.40% of such net asset value
regardless of the schedules above in the discretion of Resrv but for a period
not to exceed 90 days. An "automatic sweep" requires the dealer's computer to
effect the daily movement of purchases, redemptions, and account maintenance
transactions directly to the Fund's computer to the satisfaction of the
management of the Fund which, in turn, will return acknowledgments and account
balances.
For all other Dealers, such assistance payments will be at an annual rate
determined and paid monthly as follows: average daily net asset of less than $2
million, 0.10%; $2 million but less than $5 million, 0.15%; $5 million but less
than $10 million, 0.20% and $10 million or more, 0.30%.
B. Reserve Institutional Trust
With regard to the Reserve Institutional Trust, assistance payments to a
selected dealer will be at an annual rate determined and paid monthly at a rate
not to exceed 0.10%, 0.20%, 0.30% and 0.45% of the average daily net asset value
of the Institutional Funds Class A, Class B, Treasurer's Trust and Class C
Qualified Accounts, respectively.
EQUITY FUNDS
A Dealer, who is responsible for the sale of shares shall be compensated in
accordance with the 0.25% annual 12b-1 fee, paid monthly.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> Reserve Informed Investors Growth Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> MAY-31-1999
<INVESTMENTS-AT-COST> 3,974,437
<INVESTMENTS-AT-VALUE> 4,076,653
<RECEIVABLES> 38,206
<ASSETS-OTHER> 68,476
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,183,335
<PAYABLE-FOR-SECURITIES> 58,444
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 773
<TOTAL-LIABILITIES> 59,217
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,672,183
<SHARES-COMMON-STOCK> 333,168
<SHARES-COMMON-PRIOR> 414,343
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,349,713
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 102,216
<NET-ASSETS> 4,124,118
<DIVIDEND-INCOME> 8,469
<INTEREST-INCOME> 12,173
<OTHER-INCOME> 0
<EXPENSES-NET> 57,725
<NET-INVESTMENT-INCOME> (37,083)
<REALIZED-GAINS-CURRENT> 1,068,145
<APPREC-INCREASE-CURRENT> 97,395
<NET-CHANGE-FROM-OPS> 1,128,457
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 510,792
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 239,436
<NUMBER-OF-SHARES-REDEEMED> 373,881
<SHARES-REINVESTED> 53,132
<NET-CHANGE-IN-ASSETS> (210,173)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 515,825
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 48,779
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 57,725
<AVERAGE-NET-ASSETS> 3,552,192
<PER-SHARE-NAV-BEGIN> 10.46
<PER-SHARE-NII> (0.27)
<PER-SHARE-GAIN-APPREC> 4.12
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.93)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.38
<EXPENSE-RATIO> 1.61
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> Reserve Blue Chip Growth Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> MAY-31-1999
<INVESTMENTS-AT-COST> 8,462,865
<INVESTMENTS-AT-VALUE> 10,786,417
<RECEIVABLES> 920,465
<ASSETS-OTHER> 22,168
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,729,050
<PAYABLE-FOR-SECURITIES> 1,157,192
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 192
<TOTAL-LIABILITIES> 1,157,384
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,897,152
<SHARES-COMMON-STOCK> 507,248
<SHARES-COMMON-PRIOR> 565,337
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,350,962
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,323,552
<NET-ASSETS> 10,571,666
<DIVIDEND-INCOME> 54,132
<INTEREST-INCOME> 3,364
<OTHER-INCOME> 0
<EXPENSES-NET> 153,444
<NET-INVESTMENT-INCOME> (95,948)
<REALIZED-GAINS-CURRENT> 2,917,573
<APPREC-INCREASE-CURRENT> 1,150,092
<NET-CHANGE-FROM-OPS> 3,917,717
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 631,531
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 120,237
<NUMBER-OF-SHARES-REDEEMED> 214,503
<SHARES-REINVESTED> 36,055
<NET-CHANGE-IN-ASSETS> 2,039,613
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 160,871
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 128,465
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 153,444
<AVERAGE-NET-ASSETS> 9,980,825
<PER-SHARE-NAV-BEGIN> 15.09
<PER-SHARE-NII> (0.23)
<PER-SHARE-GAIN-APPREC> 7.02
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.04)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.84
<EXPENSE-RATIO> 1.53
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 07
<NAME> Reserve International Equity Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> MAY-31-1999
<INVESTMENTS-AT-COST> 9,919,820
<INVESTMENTS-AT-VALUE> 11,856,461
<RECEIVABLES> 634,792
<ASSETS-OTHER> 426,240
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,917,493
<PAYABLE-FOR-SECURITIES> 268,135
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 333,340
<TOTAL-LIABILITIES> 601,475
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,030,926
<SHARES-COMMON-STOCK> 967,703
<SHARES-COMMON-PRIOR> 971,753
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (650,722)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,935,814
<NET-ASSETS> 12,316,018
<DIVIDEND-INCOME> 134,937
<INTEREST-INCOME> 31,980
<OTHER-INCOME> 0
<EXPENSES-NET> 227,534
<NET-INVESTMENT-INCOME> (60,617)
<REALIZED-GAINS-CURRENT> 671,438
<APPREC-INCREASE-CURRENT> (1,054,630)
<NET-CHANGE-FROM-OPS> (443,809)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 443,809
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 699,877
<NUMBER-OF-SHARES-REDEEMED> 703,928
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (535,206)
<ACCUMULATED-NII-PRIOR> (12,206)
<ACCUMULATED-GAINS-PRIOR> (1,320,867)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 197,020
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 227,534
<AVERAGE-NET-ASSETS> 12,188,599
<PER-SHARE-NAV-BEGIN> 13.22
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> (0.44)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.72
<EXPENSE-RATIO> 1.87
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> Reserve Large Cap Growth Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> MAY-31-1999
<INVESTMENTS-AT-COST> 18,484,885
<INVESTMENTS-AT-VALUE> 20,153,944
<RECEIVABLES> 74,869
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,228,813
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 69,181
<TOTAL-LIABILITIES> 69,181
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,780,248
<SHARES-COMMON-STOCK> 1,378,127
<SHARES-COMMON-PRIOR> 373,675
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,710,325
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,669,059
<NET-ASSETS> 20,159,632
<DIVIDEND-INCOME> 147,376
<INTEREST-INCOME> 34,461
<OTHER-INCOME> 0
<EXPENSES-NET> 196,086
<NET-INVESTMENT-INCOME> (14,249)
<REALIZED-GAINS-CURRENT> 3,008,607
<APPREC-INCREASE-CURRENT> 106,911
<NET-CHANGE-FROM-OPS> 3,101,269
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 541,732
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,934,674
<NUMBER-OF-SHARES-REDEEMED> 958,128
<SHARES-REINVESTED> 27,906
<NET-CHANGE-IN-ASSETS> 13,373,617
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 228,878
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 167,536
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 196,086
<AVERAGE-NET-ASSETS> 14,157,419
<PER-SHARE-NAV-BEGIN> 18.16
<PER-SHARE-NII> 0.000
<PER-SHARE-GAIN-APPREC> 3.76
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.54
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 21.38
<EXPENSE-RATIO> 1.44
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> Reserve Small-Cap Growth Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> MAY-31-1999
<INVESTMENTS-AT-COST> 3,979,756
<INVESTMENTS-AT-VALUE> 6,296,033
<RECEIVABLES> 634
<ASSETS-OTHER> 32,289
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,238,956
<PAYABLE-FOR-SECURITIES> 68,500
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 381
<TOTAL-LIABILITIES> 68,881
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,260,075
<SHARES-COMMON-STOCK> 265,188
<SHARES-COMMON-PRIOR> 332,582
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 643,638
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,316,277
<NET-ASSETS> 6,260,075
<DIVIDEND-INCOME> 2,275
<INTEREST-INCOME> 6,474
<OTHER-INCOME> 0
<EXPENSES-NET> 85,645
<NET-INVESTMENT-INCOME> (76,896)
<REALIZED-GAINS-CURRENT> 736,974
<APPREC-INCREASE-CURRENT> 1,196,324
<NET-CHANGE-FROM-OPS> 1,856,402
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 108,101
<NUMBER-OF-SHARES-REDEEMED> 175,495
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 718,973
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (156,004)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 72,323
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 85,645
<AVERAGE-NET-ASSETS> 5,328,316
<PER-SHARE-NAV-BEGIN> 16.66
<PER-SHARE-NII> (.51)
<PER-SHARE-GAIN-APPREC> 7.46
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.61
<EXPENSE-RATIO> 1.61
</TABLE>
