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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. 16 [X]
....
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 18 [X]
....
(Check appropriate box or boxes.)
...........................................................................
(Exact Name of Registrant as Specified in Charter)
RESERVE PRIVATE EQUITY SERVICES
...........................................................................
(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)
[ ] on 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)
[X] on September 30, 1999 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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[THE RESERVE FUNDS LOGO]
Reserve Private Equity Series
Reserve Private Equity Series ("Trust") is a no-load, open-end mutual fund
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
o Reserve Strategic Growth Fund
(each a "Fund", together the "Funds").
Prospectus
September 30, 1999
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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
Page
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Investment Objectives & Principal
Strategies ................... 2
Performance History ............. 6
Fees & Expenses of the Funds .... 8
Management ...................... 9
How to Buy Shares ............... 10
Selling Fund Shares ............. 11
Tax Consequences ................ 13
General Information ............. 14
Financial Highlights ............ 14
INVESTMENT OBJECTIVES & PRINCIPAL STRATEGIES
Each of the Funds is classified as a 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 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 federal
governmental entities, other than the U.S. government.
Qualifying Bank Deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which may or may not be members of the Federal Deposit Insurance
Corporation.
1940 ACT is the Investment Company Act of 1940 which sets the standards that all
mutual funds must follow.
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
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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 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
glamor 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, 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 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
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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 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 couples 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,
unless the Fund has adopted a temporary defensive position.
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 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.
U.S. Treasury Securities. Each Fund may invest in securities issued, guaranteed
or collateralized by U.S. Treasury obligations, including bills, notes, and
bonds, all of which are backed by the full faith and credit of the U.S.
government, its agencies or instrumentalities.
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
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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.
Foreign Securities. The Reserve International Equity Fund may purchase foreign
equity and debt securities, including foreign government securities, to an
aggregate of not more than 30% of its total assets in the securities of issuers
of any single foreign country. Foreign securities markets generally are not as
developed or efficient as those in the 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 the
Reserve International Equity Fund may invest will be traded on foreign stock
exchanges or issued by foreign governments.
The Reserve International Equity Fund will invest in developing countries,
which involves exposure to economic structures that are typically less diverse
and mature than in the 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 Fund may engage
in foreign-currency transactions in connection with its investment in foreign
securities but will not speculate in foreign-currency exchange. The value of the
assets of the Fund as measured in U.S.-dollars may be affected favorably or
unfavorably by changes in foreign-currency exchange rates and exchange-control
regulations, and the Fund may incur costs in connection with conversions between
various currencies. The Fund will conduct its foreign-currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign-currency exchange market or through forward contracts to purchase or
sell foreign currencies. A forward foreign-currency exchange contract involves
an obligation to 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 their investable cash in
other open-end investment management companies with similar investment
objectives.
Defensive Position. For temporary defensive purposes, each Fund may invest
without limitation in certain types of short-term, liquid, high-grade debt
securities. These securities may include U.S. government securities, qualifying
bank deposits, money-market instruments, and other types of short-term debt
securities including notes and bonds. For Funds that may invest in foreign
countries, such securities may also include short-term, foreign-currency
denominated securities issued by foreign governmental entities, companies and
supranational organizations. For a complete description of the types of
securities each Fund may invest in while in a temporary defensive position,
please see the Funds' SAI.
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,
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which means that you could lose money. Investments in value stocks are subject
to the risk that their intrinsic values may never be realized by the market, or
their prices may go down. While investments in value stocks may limit downside
risk over time, a Fund, as a trade-off, may produce more modest gains than
riskier stock funds. 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. Further, the value of a
Fund's shares will fluctuate with the value of its investments. The
value of fixed-income securities will decline in value as interest
rates rise, and increase in value as interest rates decline. This risk
is commonly referred to as "market risk".
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.
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 fluctuation on
value than shares of a conservative equity fund which invests in
larger capitalization companies.
o As to the Reserve International Equity Fund, since the Fund may invest
in foreign equity and debt securities, it offers the potential for
more diversification than an investment only in the United Sates.
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 the Fund's revenues will 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 U.S. dollar.
o As to the Reserve International Equity Fund, 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 Trust will monitor the effects of the
conversion on the value of the Trust's securities. There can be no
assurance that these steps will be sufficient to avoid any adverse
impact on the Trust.
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.
PERFORMANCE HISTORY
The bar charts below show the Funds' annual returns since the first 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"
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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(R)
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,
35.94% 8.63% 25.48% 36.62%
1995 1996 1997 1998
Best Quarter: 4th Q 1998 30.79%
Worst Quarter: 3rd Q 1998 5.47%
Most Recent Calendar Quarter: 2nd Q 1999 ____%
Average Annual Total Returns as of December 31, 1998
Blue Chip Growth
Fund S&P 500
One Year +36.63%
Since Inception +25.65% _______%
Reserve Informed Investors Growth Fund - Class R
Annual Total Returns as of December 31,
30.44% 1.27% 18.97% 26.98%
1995 1996 1997 1998
Best Quarter: 2nd Q 1995 33.40%
Worst Quarter: 4th Q 1995 18.22%
Most Recent Calendar Quarter: 2nd Q 1999 ____%
Average Annual Total Returns as of December 31, 1998
Informed
Investors Growth S&P 500
Fund
One Year +26.98%
Since Inception +18.63% _______%
Reserve International Equity Fund - Class R
Annual Total Returns as of December 31,
15.88% 8.70% 18.97%
1996 1997 1998
Best Quarter: 4th Q 1998 - 16.15%
Worst Quarter: 3rd Q 1998 14.65%
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Most Recent Calendar Quarter: 2nd Q 1999 ____%
Average Annual Total Returns as of December 31, 1998
Reserve
International
Equity Fund EAFE
One Year +18.97%
Since Inception +8.39% _______%
Reserve Large-Cap Growth Fund - Class R
Annual Total Returns as of December 31,
32.71% 25.16%
1997 1998
Best Quarter: 4th Q 1998 - 16.82%
Worst Quarter: 3rd Q 1998 8.56%
Most Recent Calendar Quarter: 2nd Q 1999 ____%
Average Annual Total Returns as of December 31, 1998
Reserve Large-Cap
Growth Fund S&P 500
One Year +25.16%
Since Inception +27.54% _______%
Reserve Small-Cap Growth Fund - Class R
Annual Total Returns as of December 31,
67.47% 2.75% 0.54% 20.17%
1995 1996 1997 1998
Best Quarter: 4th Q 1998 - 27.90%
Worst Quarter1st Q 1998 17.32%
Most Recent Calendar Quarter: 2nd Q 1999 ____%
Average Annual Total Returns as of December 31, 1998
Reserve Small-Cap
Growth Fund Russell 2000
One Year +20.17%
Since Inception +19.31% _______%
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FEES & EXPENSES OF THE FUNDS
As an investor, you pay certain fees and expenses in connection with the
Funds that you may pay if you buy and hold shares of the Funds, which are
described in the table below. There are no sales charges (loads) or exchange
fees associated with an investment in the Funds. Annual Fund Operating Expenses
are paid out of the assets of each Fund, so their effect is included in each
Fund's share price. Annual Fund Operating Expenses, indicated in the table
below, reflect expenses for the Funds' fiscal year ended May 31, 1999.
Shareholder Fees for all Funds
(Fees paid directly from your investment)
Sales Load Imposed on Purchases......................... None
Sales Load Imposed on Reinvested Dividends.............. None
These are all no-load funds. There are no direct shareholder fees. Please 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
-----------------------------------------------------------------------------------------------
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 0.20%
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.
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:
9
<PAGE>
<TABLE>
<CAPTION>
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Reserve Blue Chip Growth
Class R $152 $473 $816 $1,784
Class I 92 295 512 1,119
Reserve Informed Investors Growth
Class R 163 483 826 1,793
Class I 105 328 568 1,237
Reserve International Equity
Class R 189 508 850 1,815
Class I 131 408 706 1,528
Reserve Large-Cap Growth
Class R 152 473 816 1,784
Class I 95 295 512 1,119
Reserve Small-Cap Growth
Class R 163 483 826 1,793
Class I 105 328 568 1,237
Reserve Strategic Growth
Class R 152 473 - -
Class I 95 295 - -
</TABLE>
Please note that the above example is an estimate of the
expenses to be incurred by shareholders of the Funds. Actual
expenses may be higher or lower than those reflected above. You
would pay the same if you did not redeem your shares.
MANAGEMENT
Investment Adviser. Since November 15, 1971, Reserve Management Company, Inc.
("RMCI") 1250 Broadway, New York, NY 10001-3701, 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 May 31, 1999, had approximately 5.6 billion under
management.
RMCI manages the investment portfolios of the Funds, subject to policies
adopted by the Trustees. For its services, RMCI receives a comprehensive
management fee per year of the average daily net assets of each Fund. RMCI pays
all employee and customary operating expenses of the Fund. Excluded from the
definition of customary operating expenses are interest, taxes, brokerage fees,
extraordinary legal and accounting fees and expenses, and the fees of the
disinterested Trustees, for which it 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. None of these
organizations have previously served as either Adviser or Sub-Adviser to a
registered investment company.
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.
10
<PAGE>
The Adviser and Trust have retained the Sub-Advisers listed below. 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.
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 the 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 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. 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 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.
11
<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 the public offering price 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. Purchase orders are not accepted on days the
Exchange is closed for trading and regional bank holidays.
o By check - (drawn on 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 public offering price 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 drawn on the Fund's bank are eligible for entry as of the
business day received. For federal funds wires to be eligible for same-day order
entry, the Funds must be notified 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 public
offering price 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.
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 get 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.
12
<PAGE>
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.
Certain situations require written instructions along with signature
guarantees. These include:
(1) redemptions for more than 5,000; or
(2) on accounts whose address has been changed within the past 30 days;
or
(3) redemption request to be sent to someone other than the account
owner or the address of record for the past 30 days.
You may redeem by calling the Funds at 800-637-1700. Unless you decline
telephone privileges on your application and the Funds fail to take reasonable
measures to verify the request, the Funds will not be liable for any
unauthorized telephone redemption, or for any loss, cost or expense for acting
upon an investor's telephone instructions. You are only allowed to make one
telephone redemption in a 30-day period to the address of record for 5,000 or
less, assuming the address on your account has not changed in the past 30 days.
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.
Further, to reduce the risk of loss, proceeds of telephone redemptions may be
sent only to (1) the bank or brokerage account designated by the shareholder on
the application or in a letter with the signature(s) guaranteed; or (2) the
address of record for the past 30 days. 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.
Exchange Privilege. Investors can exchange all or some of their shares for
shares in other Reserve money-market or equity funds. Investors can request an
exchange in writing or by telephone. The shares of the other funds are not
offered by this Prospectus. Be sure to read the current Prospectus for any Fund
into which you are exchanging. Any new account established through an exchange
will have the same privileges as 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.
13
<PAGE>
TAX CONSEQUENCES
[The following discussion is intended as general information only.
Shareholders should consult with their own tax adviser(s) with respect to the
application of their state and local tax laws to these distributions. Because
everyone's tax situation is unique, you should consult your own tax adviser(s)
with regard to the state and local tax laws. 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 investment company 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 Funds policy to distribute all ordinary income and
capital gains annually.
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, as well as the tax consequences arising under.]
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.
14
<PAGE>
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 against the
account. The Funds will not accept purchase orders for accounts for which a
correct and certified TIN is not provided or which is otherwise subject to
backup withholding, except in the case of certain non-resident alien account
holders.
GENERAL INFORMATION
Small Balances. (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
without notice may 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 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.
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. These figures have been independently
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. "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.
<TABLE>
<CAPTION>
Class R Class I
--------------------------------------------------- ----------------
October 28, 1994
Year Ended May 31, (Commencement of
----------------------------------------------------------- Operations) to
Reserve Blue Chip Growth Fund 1999 1998 1997 1996 May 31, 1995
------------------------------------ ------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period. 15.09 15.46 14.91 12.03 10.00
------- ------- ------- ------- --------
Income from investment operations
Net investment income (loss)..... (.17) -- (.17) (.10) (.03)
Net realized and unrealized gain. 6.46 2.82 .91 3.62 2.06
--------- ------- ------- ------- --------
Total from investment operations..... 6.29 2.82 .74 3.52 2.03
Less distribution from net realized
income and gain...................... (.54) (3.19) (.19) (.64) --
---------- ------- ------- ------- -------
Net asset value, end of period....... 20.84 15.09 15.46 14.91 12.03
======= ======= ======= ======= ========
Total Return......................... 46.62% 19.70% 5.12% 30.10% 20.30%(2)
Ratios/Supplemental Data
------------------------
Net assets in thousands, end of period 1.53% 8,532 5,428 5,130 1,993
Ratio of expenses to average net
assets............................... 1.75% 1.75% 1.75% 1.73%(1)
Ratio of net investment income (loss)
to average net assets................ (.78)% (.87)% (1.13)% (.94)% (.70)%(1)
Portfolio turnover rate.............. 137% 113% 109% 72% 68%
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Class R Class I
-------------------------------------------------------- ----------------
November 14, 1994
Year Ended May 31, (Commencement of
---------------------------------------------------------- Operations) to
Reserve Informed Investors Growth Fund 1999 1998 1997 1996 May 31, 1995
------------------------------------------------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period. 0.46 11.48 14.36 11.99 10.00
--------- ------- -------- ------- -----
Income from investment operations:
Net investment loss.............. (.27) (.20) (.07) (.33) (.07)
Net realized and unrealized gain
(loss)........................... 4.12 2.08 (1.66) 3.87 2.06
------ ------- -------- ------- ----------
Total from investment operations..... 3.85 1.88 (1.73) 3.54 1.99
Less distribution from net realized
gain................................. (1.93) (2.90) (1.15) (1.17) --
----- ------- -------- ------- -----
Net asset value, end of period....... 12.38 10.46 11.48 14.36 11.99
===== ======= ======== ======= =======
Total Return......................... 42.22% 17.88% (11.35)% 29.75% 19.90%(2)
Ratios/Supplemental Data
------------------------
Net assets in thousands, end of period 4,123 4,334 5,477 6,393 6,837
Ratio of expenses to average net assets 1.61% 1.75% 1.75% 1.75% 1.75%(1)
Ratio of net investment loss to average
net assets......................... (1.04)% (.91)% (.57)% (1.57)% (1.62)%(1)
Portfolio turnover rate.............. 530% 410% 255% 132% 59%
</TABLE>
<TABLE>
<CAPTION>
Class R Class I
--------------------------------------------------- ----------------
July 13, 1995
Year Ended May 31, (Commencement of
--------------------------------------------------- Operations) to
Reserve International Equity Fund 1999 1998 1997 May 31, 1996
------------------------------------- ------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period. 13.22 12.59 11.26 10.00
------ --------- --------- -----
Income from investment operations:
Net investment loss.............. (.06) (.04) (.07) (.05)
Net realized and unrealized gain. (.44) .67 1.40 1.31
--------- -------- -------- ------------
Total from investment operations..... (.50) .63 1.33 1.26
---------- -------- -------- ------------
Net asset value, end of period....... 12.72 13.22 12.59 11.26
====== ========= ========= ============
Total Return......................... (3.78%) 5.00% 11.81% 12.60%(2)
Ratios/Supplemental Data
------------------------
Net assets in thousands, end of period 12,310 12,851 12,099 3,578
Ratio of expenses to average net assets 1.87% 2.00% 2.00% 1.99%(1)
Ratio of net investment loss to average
net assets......................... (.30)% (.39)% (.82)% (.91)%(1)
Portfolio turnover rate.............. 135% 114% 52% 70%
</TABLE>
<TABLE>
<CAPTION>
Class R Class I
------------------------------------------------------------- ----------------
January 2, 1996
Year Ended May 31, (Commencement of (Commencement of
------------------------------------------ Operations) to Operations) to
Reserve Large-Cap Growth Fund 1999 1998 1997 May 31, 1996 May 31, 1999
-------------------------------------- ------------- ------------- ------------- ------------------ ----------------
<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 gains. 3.76 3.89 3.69 .96 2.61
---- ------- ------- ------- ----
Total from investment operations...... 3.76 3.86 3.66 .95 2.60
---- ----
Less distribution from net realized 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%(2) 20.60%
Ratios/Supplemental Data
------------------------
Net assets in thousands, end of period 8,118 6,786 3,054 1,231 12,042
Ratio of expenses to average net assets 1.44% 1.75% 1.75% 1.75%(1) .90% (c)
Ratio of net investment loss to average
net assets......................... .15% (.36)% (.32)% (.32)%(1) .40% (c)
Portfolio turnover rate............... 58% 25% 18% 0% 58%
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Class R Class I
---------------------------------------------------------- ----------------
November 14, 1994
Year Ended May 31, (Commencement
----------------------------------------------------------- of Operations) to
Reserve Small-Cap Growth Fund 1999 1998 1997 1996 May 31, 1995
---------------------------------------- ------------- ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... 16.66 15.52 19.56 12.21 10.00
------ ------- -------- ------- -------
Income from investment operations
Net investment loss................. (.51) (.39) (.28) (.17) (.09)
Net realized and unrealized gain
(loss).............................. 7.46 1.53 (3.76) 8.05 2.30
--------- ------- -------- ------- -------
Total from investment operations........ 6.95 1.14 (4.04) 7.88 2.21
Less distribution from net realized gain -- -- -- (.53) --
-------- ------- ------- ------- ------
Net asset value, end of period.......... 23.61 16.66 15.52 19.56 12.21
====== ======= ======== ======= =======
Total Return............................ 41.72% 7.35% (20.65)% 65.55% 22.10%(2)
Ratios/Supplemental Data
------------------------
Net assets in thousands, end of period.. 6,258 5,541 5,789 6,657 1,241
Ratio of expenses to average net assets. 1.61% 1.75% 1.75% 1.75% 1.75%(1)
Ratio of net investment loss to average
net assets........................... (1.44)% (1.64)% (1.69)% (1.70)% (1.62)%(1)
Portfolio turnover rate................ 28% 46% 28% 38% 43%
</TABLE>
- ----------
+ Unaudited
(1) Annualized.
(2) Total return is not annualized, and does not reflect impact of sales load.
17
<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.
[THE RESERVE FUNDS LOGO]
Founders of
"America's First
Money Fund"
1250 Broadway, New York, NY 10001-3701
212-401-5500
General Information and 24-Hour Price and Performance Information 800-637-1700 -
www.reservefunds.com Distributor - Resrv Partners, Inc.
RPES -09/99
SEC File Number
Reserve Private Equity Series
811-7734
Reserve Private
Equity Series
Prospectus
September 30, 1999
<PAGE>
RESERVE PRIVATE EQUITY SERIES
1250 BROADWAY, NEW YORK, N.Y. 10001-3701
212-401-5500 - 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 Reserve Private
Equity Series ("Trust" or "RPES"), which consists of six Funds: Reserve Blue
Chip Growth Fund; Reserve Informed Investors Growth Fund; Reserve
International Equity Fund; Reserve Large-Cap Growth Fund (formerly Reserve
Large-Cap Value Fund); Reserve Small-Cap Growth Fund; and Reserve Strategic
Growth Fund (individually, each a "Fund" and collectively, the "Trust" or the
"Funds"). Each Fund issues two classes of shares designated Class R and Class
I. 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
----
Description of the Trust ................... 2
Investment Objectives, Strategies and Risks 2
Investment Policies ........................ 6
Portfolio Turnover, Transaction Charges and
Allocation ............................... 7
Trustees and Executive Officers of the Trust 7
Investment Management and Other Agreements . 9
Information About the Trust ................ 11
How to Buy and Sell Shares ................. 12
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>
DESCRIPTION OF THE TRUST
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"), which is authorized to issue multiple classes of
shares and series. Currently, 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 (formerly Reserve
Large-Cap Value Fund); the Reserve Small-Cap Growth Fund and the Reserve
Strategic Growth Fund. Each Fund issues two classes of shares designated,
Class R and Class I. Class R shares are designed for purchase by retail
investors and Class I shares are 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.
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, such that an
investment in a Fund could entail greater risks than a mutual fund with
greater diversification with respect to holdings.
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 during the term of the agreement. The term of a repurchase
agreement generally is short, possibly over 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.
2
<PAGE>
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. Most warrants have 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. Moreover, a right or warrant ceases to
have value if its is not exercised prior to the expiration date.
Securities Of Foreign Companies. Reserve International Equity Fund may invest
in foreign securities may result in greater risk than that incurred by
investing in domestic securities. There is generally less publicly available
information about foreign companies compared to reports and ratings that are
published about companies in the 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
markets are generally not as developed or efficient as those in the U.S. While
growing in volume, they usually have substantially less volume than the NYSE,
and securities of some foreign companies are less liquid and more volatile
than securities of comparable U.S. companies. Similarly, volume and liquidity
in most foreign bond markets is less than in the U.S. and at times volatility
of price can be greater than in the U.S. Commissions on foreign stock
exchanges are generally higher than commissions on U.S. exchanges, although
the Fund will endeavor to achieve the most favorable net results on its
portfolio transactions. There is generally less government supervision and
regulation of foreign stock exchanges, brokers and listed companies than in
the 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 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.
3
<PAGE>
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 Sub-Adviser.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the market for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be
reflected in the option markets.
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.
4
<PAGE>
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 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
5
<PAGE>
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 instruments.
INVESTMENT 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"). 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 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
6
<PAGE>
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 ___% under normal market
conditions, but is not expected to exceed ___%. 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 $__________ respectively, in brokerage commissions
with respect to portfolio transactions aggregating $113,307,153, $183,924,454,
and $________, respectively. ____% of the amount paid in fiscal 1999 in
brokerage commission was to brokers or dealers providing research services.
TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST
The Trustees are responsible for the management and supervision of the Fund.
The Trustees approve all significant agreements between the Fund and those
companies that furnish services to the Fund.
Trustees and executive officers of the Fund, together with information as
to their principal business occupations during at least the last five years,
are shown below:
*++BRUCE R. BENT, 62, President, Treasurer and Trustee, 1250 Broadway, New
York, NY 10001-3701.
Mr. Bent is President, Treasurer, and Trustee of The Reserve Fund ("RF"),
Reserve Institutional Trust ("RIT"), Reserve Tax-Exempt Trust ("RTET"),
Reserve New York Tax-Exempt Trust ("RNYTET") and Reserve Private Equity Series
("RPES"); Director and President of Reserve Management Company, Inc. ("RMCI")
and Reserve Management Corporation ("RMC"); and Chairman and Director of Resrv
Partners, Inc. ("RESRV").
Mr. Bent co-founded The Reserve Funds in 1970 and has been an executive
officer since then.
*++BRUCE R. BENT II, 33, Trustee, Senior Vice President and Assistant
Secretary, 1250 Broadway, New York, NY 10001-3701.
Mr. Bent II joined The Reserve Funds in 1992 and is Senior Vice President
and Assistant Secretary of RF, RIT, RTET, RNYTET and RPES. Mr. Bent II is also
Vice President and Secretary of Reserve Management Company, Inc. ("RMCI") and
Reserve Management Corporation ("RMC"); and Secretary and Director of Resrv
Partners, Inc. ("RESRV").
7
<PAGE>
+RICHARD BASSUK, 57 Trustee, c/o The Singer & Bassuk Organization, 767 Third
Avenue, 28th Floor, New York, NY 10017.
From 1995 to present Mr. Bassuk has been a founding principal and
President of Singer & Bassuk Organization. From 1994 to present, Mr. Bassuk
served as Chairman of R.E. Bases Enterprises Corporation. He is currently
Trustee of RF, RIT, RTET, RNYTET and RPES.
+EDWIN EHLERT, JR., 66, Trustee, 125 Elm Street, Westfield, NJ 07091.
Mr. Ehlert is President and Director of Ehlert Travel Associates, Inc.
(travel agency) and Ehlert Travel Associates of Florida, Inc. (travel agency),
and Trustee of RF, RIT, RTET, RNYTET and RPES.
+HENRI W. EMMET, 72, Trustee, 1535 Presidential Drive, Apt. 4A, Columbus, OH
43212.
Mr. Emmet retired as the Managing Director of Servus Associates, Inc. in
1994 and U.S.A. Representative of the First National Bank of Southern Africa
in 1996. Since 1995, Mr. Emmet has served as a Principal of Global
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 of RF, RIT, RTET, RNYTET and RPES.
+DIANA P. HERRMANN, 40, Trustee, 380 Madison Avenue, Suite 2300, New York, NY
10017.
Ms. Herrmann has been President and COO of Aquila Management Corporation
("Aquila"), sponsors of 14 mutual funds with over $3.2 billion in assets as of
June 30, 1999. Ms. Herrmann has been employed with Aquila since 1986. She is
currently Trustee of RF, RIT, RTET, RNYTET and RPES.
+WILLIAM J. MONTGORIS, 52, Trustee, 286 Gregory Road, Franklin Lakes, NJ 07417.
Mr. Montgoris is formerly Chief Operating Officer of the Bear Stearns
Companies, Inc. (1979-1999). He is currently Trustee of RF, RIT, RTET, RNYTET
and RPES.
+WILLIAM E. VIKLUND, 58, Trustee, 110 Grist Mill Lane, Plandome Manor, NY
11030-1110.
Mr. Viklund is formerly President and COO of Long Island Bankcorp and
President and CEO of Long Island Savings Bank (1980-1996). He is currently
Trustee of RF, RIT, RTET, RNYTET and RPES.
*ARTHUR T. BENT III, 31, Vice President and Assistant Secretary, 1250 Broadway,
New York, NY 10001-3701.
Mr. Bent III joined The Reserve Funds in 1997 and is Vice President and
Assistant Secretary of RF, RIT, RTET, RNYTET and RPES. Mr. Bent III is also
Vice President and Treasurer of Reserve Management Company, Inc. ("RMCI") and
Reserve Management Corporation ("RMC"); and Treasurer and Director of Resrv
Partners, Inc. ("RESRV"). Before joining Reserve, he was a private investor.
MARYKATHLEEN FOYNES, 29, Counsel and Secretary, 1250 Broadway, New York, NY
10001-3701.
Ms. Foynes is Counsel and Secretary of RF, RIT, RNYTET, RTET and RPES.
Before joining The Reserve Funds in 1998, Ms. Foynes was a staff attorney at
PaineWebber, Inc. (1997-1998). Prior to that, Ms. Foynes worked for the U.S.
House of Representatives as a District Manager for a Member of Congress
(1995-1997).
JAMES M. FREISEN, 41, Controller, 1250 Broadway, New York, NY 10001-3701.
Mr. Freisen is Controller. Before joining The Reserve Funds in 1999, Mr.
Freisen was an Assistant Vice President at Paine Webber, Inc. (1998-1999).
Prior to that, he was Assistant Vice President, Bank of New York (1997-1998);
Assistant Vice President, Fifth Third Bank (1995-1997); and Vice President,
Smith Barney (1991-1995).
- ------------
+ Messrs. Bassuk, Ehlert, Emmet, Harrington, Montgoris, Viklund and Ms.
Herrmann are members of a Review Committee which performs the functions of an
Audit Committee and reviews compliance procedures and practices.
8
<PAGE>
++ Interested Trustee within the meaning of the 1940 Act. The members of the
Board of Trustees who are not Interested Trustees will be paid a stipend of
$3,500 for each joint Board meeting they attend and an annual fee of $16,000
for service to all of the trusts in the complex.
* Mr. Bent is the father of Mr. Bent II and Mr. Bent III
As of September, 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
TOTAL COMPENSATION
AGGREGATE FROM TRUST AND TRUST
COMPENSATION COMPLEX (4 ADDITIONAL
NAME OF TRUSTEE, POSITION FROM TRUST TRUSTS) PAID TO TRUSTEE
------------------------------------ ------------ -----------------------
Bruce R. Bent, President and Trustee $ 0 $ 0
Bruce R. Bent II, Vice President $ 0 $ 0
Richard Bassuk, Trustee $ $
Edwin Ehlert, Jr., Trustee $ $
Henri W. Emmet, Trustee $ $
Rev. Donald J. Harrington, Trustee $ $
Diana P. Herrmann, Trustee $ $
William J. Montgoris, Trustee $ 0 $ 0
William E. Viklund, Trustee $ $
INVESTMENT MANAGEMENT AND OTHER AGREEMENTS
The Adviser. 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 Mid-Cap Equity 1.30% 1.00%
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
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<PAGE>
Agreement amounted to $545,982, $795,252, and $______________ respectively.
Sub-Adviser. 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 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>
Reserve Blue Chip Growth Trainer, Wortham & Company, Inc. $ $ 0 $ 0
845 Third Avenue -------
New York, NY 10022
Reserve Informed Investors Growth T.H. Fitzgerald & Co. $ $ 0 $ 0
180 Church Street -------
Naugatuck, CT 06770
Reserve International Equity Pinnacle Associates, Ltd. $ $29,000 $ 0
666 Fifth Avenue -------
New York, NY 10103
Reserve Large-Cap Growth Siphron Capital Management $ $ 0 $ 0
280 S. Beverly Drive -------
Beverly Hills, CA 90212
Reserve Small-Cap Growth Roanoke Asset Management $ $ 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>
- ------------
* 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.
Distribution Plan. The Trust maintains a Distribution Plan ("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 Firm has rendered
distribution assistance or other services. The Distributor may also retain
amounts to pay for advertising and marketing expenses. Assistance payments by
the Distributor are made to 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
10
<PAGE>
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,
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 $_______, which constituted ______ 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 $________ paid by the Trust under the Plan, with respect to the
Class R shares, $_______was spent on advertising, $_____ was spent on the
printing and mailing of prospectuses for persons other than current
shareholders, $_________was spent for compensation to brokers and dealers and
other financial intermediaries and $________was spent on printing of sales
literature, travel, entertainment, due diligence and other promotional
expenses. The excess was absorbed by the Distributor.
Custodian. The Chase Manhattan Bank, 4 New York Plaza, New York, NY 10004 is
Custodian for the cash and securities of the Trust. The Custodian maintains
custody of the Trust's cash and securities, handles its securities settlements
and performs transaction processing for receipts and disbursements in
connection with the purchase and sale of the Trust's shares.
Independent Accountants. PricewaterhouseCoopers LLP, 1177 Avenue of Americas,
New York, NY 10036 is the Trust's independent accountants who audits the
Trust's annual financial statements and assists in preparation of certain
reports to the SEC.
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, and one vote for all purposes. 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
11
<PAGE>
such event the holders of the remaining shares could not elect any person to
the Board of Trustees.
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.
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.
[As of August 27, 1999, the following persons owned of record or
beneficially 5% or more of the Funds outstanding shares:]
HOW TO BUY AND SELL SHARES
Share Price: Net Asset Value. Investors pay no sales charges to invest in the
Funds. The price you pay for a share of a Fund, and the price you receive upon
selling or redeeming a share of a Fund, is called the Fund's net asset value
("NAV") per share. The NAV is calculated by taking the total value of a Fund's
assets, subtracting its liabilities, and then dividing by the number of shares
that have already been issued. 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.
Purchase of Shares. The Fund's Distributor RESRV Partners Inc. 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.
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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.
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; from a U.S. government distribution ($25
suggested minimum) such as a social security, federal salary, or certain
veterans' benefits, or other payment from the federal government. You may also
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.
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; or
(2) on accounts whose address has been changed within the past 30
days; or
(3) redemption request to be sent to someone other than the
account owner or the address of record for the past 30 days.
You may redeem by calling the Funds at 800-637-1700. Unless you decline
telephone privileges on your application and the Funds fail to take reasonable
measures to verify the request, the Funds will not be liable for any
unauthorized telephone redemption, or for any loss, cost or expense for acting
upon an investor's telephone instructions. Telephone redemptions may be sent
to the bank or brokerage account designated by the shareholder on the
application or in a letter with signature guarantee. To change the designated
brokerage or bank account it is necessary to contact the Firm through which
shares of the Fund were purchased or, if purchased directly from the Funds, it
is necessary to send a written request to the Funds with signature(s)
guaranteed. The Fund reserves the right to refuse a telephone redemption if it
believes it is advisable to do so.
Signature guarantees 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. If you have an account with a balance of at least
$5,000, you may elect in writing to participate in either of the following:
(i) an Income Distribution Plan providing for monthly, quarterly or annual
payments by redemption of shares from reinvested dividends or distributions
paid to your account during the preceding period; or (ii) a Fixed Amount
Withdrawal Plan providing for the automatic redemption of a sufficient number
of shares of your account to make a specified monthly, quarterly or annual
payment of a fixed amount. Changes to instructions must be in writing with
signature(s) guaranteed. In order for such payments to continue under the
Plan, there must be a minimum of $25 available from reinvested dividends or
distributions. Payments can be made to you or your designee. An application
for the Automatic Withdrawal Plans can be obtained from the Funds. The amount,
frequency and recipient of the payments may be changed by giving proper
written notice to the Funds. The Funds may
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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 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 of the Reserve money-market funds and other separate investment portfolios
that may be offered by the Trust at NAV. This exchange privilege may not be
available to clients of certain firms. A sales load will be charged on such an
exchange unless a waiver of the sales load applies. 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.
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If Shares Purchased Are To Be Paid For By Wire And The Wire Is Not
Received By The Fund Or If Shares Are Purchased By Check, Which, After
Deposit, Is Returned Unpaid Or Proves Uncollectible, The Purchase May Be
Canceled Or Redeemed Immediately. The Investor Who Gave Notice Of The Intended
Wire Or Submitted The Check Will Be Held Fully Responsible For Any Losses
Incurred By The Fund, The Investment Adviser Or The Distributor. The Fund May
Redeem Shares From Any Account Registered In That Purchaser's Name And Apply
The Proceeds Therefrom To The Payment Of Any Amounts Due The Fund, The
Investment Adviser Or The Distributor.
Purchases and Redemptions through Others. Share purchases and redemptions may
also be made through brokers and financial institutions ("Firms"), which may
involve such Firms' own redemption minimums, services fees, and other
redemption requirements. Firms may provide varying arrangements for their
clients with respect to the purchase and redemption of Fund shares and may
arrange with their clients for other investment or administrative services.
Firms are responsible for the prompt transmission of purchase and redemption
orders. Some Firms which utilize a centralized purchase method for shares may
have an earlier cut-off for purchase orders than stated above and may
establish higher minimum investment requirements than set forth above. Some
Firms may independently establish and charge additional fees for their
services, which would reduce their clients' yield or 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.
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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 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.
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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 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.
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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.
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
Joint Ownership. When an account is registered in the name of one person or
another, for example a husband or wife, either person is entitled to redeem
shares in the account. The Funds assume no responsibility to either owner for
actions taken by the other with respect to an account so registered. The
Application provides that persons who register their account indemnify and
hold the Funds harmless for actions taken by either party.
Use of Joint Prospectus and Statement of Additional Information. Although each
Fund is offering only its own shares, it is possible that a Fund might become
liable for any misstatement in the Prospectus and SAI about the other Funds.
However, each Fund
18
<PAGE>
has acknowledged that it, and not any of the other Funds,
is liable for any material misstatement or omission about it in the Prospectus
or SAI.
Reports and Statements. Shareholders receive an Annual Report containing
audited financial statements and an unaudited Semi-Annual Report. An account
statement is sent to each shareholder at least quarterly. Shareholders who are
clients of some Firms will receive an account statement combining transactions
in Fund shares with account statements covering other brokerage or mutual fund
accounts. Shareholders have a duty to examine their account statement(s) and
report any discrepancies to The Reserve Funds immediately. Failure to do so
could result in the shareholder suffering a loss. Further, shareholders are
advised to retain account statements.
Reserve Easy Access. Easy Access is The Reserve Funds' 24-hour toll-free
telephone service that lets customers use a touch-tone phone for a variety of
options, 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 July ____, 1999 and is available upon request.
19
<PAGE>
PART C
Item 23. Exhibits
(a) Declaration of Trust and Certificate of Amendment*
(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
----------------
*To be filed herewith with subsequent Post-Effective Amendment.
<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 (a) under the Securities
Act of 1933 and Registrant has duly caused this Post-Effective Amendment No. 16
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
28 day of July, 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. 34 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 July 28, 1999
- --------------------------- Trustee (principal
Bruce R. Bent executive operating and
financial officer)
* Trustee July 28, 1999
- ---------------------------
Edwin Ehlert Jr.
* Trustee July 28, 1999
- ---------------------------
Henri W. Emmet
* Trustee July 28, 1999
- ---------------------------
Donald J. Harrington
* Trustee July 28, 1999
- --------------------------
Bruce R. Bent II
* Trustee July 28, 1999
- ---------------------------
William E. Viklund
* Trustee July 28, 1999
- ---------------------------
Diana P Hermann
* Trustee July 28, 1999
- ---------------------------
Richard Bassuk
/s/ MaryKathleen Foynes Counsel and Secretary July 28, 1999
- ---------------------------
MaryKathleen Foynes
*Attorney-in-Fact
</TABLE>
