<PAGE> 1
As filed with the Securities and Exchange Commission on April 19, 1999
File No. 33-63300
811-7734
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 15 /x/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 17 X
RESERVE PRIVATE EQUITY SERIES
(Exact Name of Registrant as Specified in Charter)
1250 Broadway, New York, New York 10001-3701
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 401-5500
Mary Foynes, Esq.
Reserve Private Equity Series
1250 Broadway -- 32nd Floor, New York,
New York 10001 (Name and address of
agent for service of process)
It is proposed that this filing will become effective (check appropriate box)
--- immediately upon filing pursuant to paragraph (b)
X
--- on April 26, 1999 pursuant to paragraph (b)
--- 60 days after filing pursuant to paragraph (a)(1)
--- on (date) pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a)(2)
---
--- on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
- --- This post-effective amendment designates a new effective date for previously
filed post-effective amendment.
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 Mid-Cap Equity Fund - Class R
Reserve Mid-Cap Equity Fund - Class I
Reserve Strategic Growth Fund - Class R
Reserve Strategic Growth Fund - Class I
<PAGE> 2
RESERVE PRIVATE EQUITY SERIES
CROSS REFERENCE SHEET
(as required by 495(a))
<TABLE>
<CAPTION>
N-1A Item Caption in Prospectus
- --------- ---------------------
PART A: INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Shareholder Expenses
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Investment Objectives and Policies; Investment Techniques and Investments;
Risk Considerations; Shares of Beneficial Interest; General Information
Item 5. Management of the Fund Disbursing Management
Agent
Item 6. Capital Stock and Other Dividends and Distributions; Taxes; Shares of Beneficial Interest; How to
Securities Buy Shares
Item 7. Purchase of Securities Being How to Buy Shares
Offered
Item 8. Redemption or Repurchase Redemptions
Item 9. Pending Legal Proceedings Not Applicable
PART B: INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page Cover Page**
Item 11. Table of Contents Table of Contents**
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Policies Investment Objectives and Policies; Investment Techniques and Investments;
Risk Considerations; Investment Policies**; Other Policies**
Item 14. Management of the Fund Trustees and Officers of the Trust**
Item 15. Control Persons and Principal Trustees and Officers of the Trust**
Holders of Securities
Item 16. Investment Advisory and Other Investment Management and Other Agreements**
Services
Item 17. Brokerage Allocation and Other Portfolio Turnover, Transaction Charges and Allocation**
Practices
Item 18. Capital Stock and Other Securities Shares of Beneficial Interest**
Item 19. Purchase, Redemption and Pricing Purchase, Redemption and Pricing of Shares**
of Securities Being Offered
Item 20. Tax Status Distributions and Taxes**
Item 21. Underwriters Investment Management and Other Agreements**
Item 22. Calculation of Performance Data Performance Information**
Item 23. Financial Statements Financial Statements**
</TABLE>
<PAGE> 3
General Information, Purchases and Redemptions
24-Hour Price and Balance Information
Nationwide 800-637-1700 - www.reservefunds.com
RESERVE PRIVATE EQUITY SERIES
PROSPECTUS
RESERVE PRIVATE EQUITY SERIES ("RPES" or "Trust") is a no-load, open-end
mutual fund offering shares in seven 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
Mid-Cap Equity Fund (formerly Reserve Mid-Cap Growth Fund), Reserve Small-Cap
Growth Fund and Reserve Strategic Growth Fund (each a "Fund", together the
"Funds"). This Prospectus, dated April 26, 1999, sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A Statement of Additional Information ("SAI"), dated April 26, 1999,
has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated herein by reference. A copy of the SAI may be obtained without
charge by writing or calling the Trust at the telephone number above. The SEC
maintains a web site (http://www.sec.gov) that contains the Prospectus, SAI,
material incorporated by reference, and other information regarding the Funds
filed electronically with the SEC.
Each Fund offers two classes of shares which may be purchased at a
price equal to their net asset value the "Class R shares" (formerly known as
Class A shares) and the "Class I shares". See "How to Buy Shares" on page 16.
Shares of the Funds are not deposits or obligations of, or guaranteed
or endorsed by, any bank and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated April 26, 1999.
Investors are advised to read this Prospectus carefully and to retain
it for future reference.
<PAGE> 4
SHAREHOLDER EXPENSES
The following tables illustrate all expenses and fees that a shareholder
of each Fund incurred directly or indirectly for the fiscal year ended May 31,
1998.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS R CLASS I
------- -------
<S> <C> <C>
Sales Load Imposed on Purchases................................................................ None None
Sales Load Imposed on Reinvested Dividends..................................................... None None
Redemption Fees*............................................................................... None None
Exchange Fees.................................................................................. None None
</TABLE>
* A $2 fee will be charged for Class R redemption checks issued by the Funds of
less than $100 and $100 for Class I redemption checks of less than $100,000.
Class R wire redemptions of less than $10,000 will be charged a $10 fee and
Class I wire redemptions of less than $100,000 will be charged a $100 fee.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
LISTED BELOW ARE THE ANNUAL EXPENSES PAID BY EACH CLASS OF SHARES FOR EACH FUND
REGARDLESS OF THE AMOUNT OF YOUR INVESTMENT.
<TABLE>
<CAPTION>
Class R Shares (Formerly Class A) Class I Shares
---------------------------------------------- --------------------------------------------
Total Total
Management 12b-1 Operating Management 12b-1 Operating
Fee+ Fee* Expenses Fee+ Fee Expenses
---- ---- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
Reserve Blue Chip Growth 1.20% 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 Mid-Cap Equity 1.30% 0.25% 1.55% 1.00% 0.00% 1.00%
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>
+ Most mutual funds display the management fee and ordinary operating
expenses as separate line items. The Management Fee charged the Funds
includes all advisory fees and ordinary operating expenses. (see
"Management" on page 14.)
* 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 Trust did not begin offering shares of the Reserve Strategic Growth
Fund until June 1, 1999.
The purpose of this table is to assist the shareholders of each Fund in
understanding the costs and expenses that they will bear directly or indirectly.
<PAGE> 5
The following examples illustrate the expenses that a shareholder would
pay on a $1,000 investment over various time periods assuming: (1) a 5% annual
rate of return and (2) redemption at the end of each time period.
EXAMPLES
<TABLE>
<CAPTION>
CLASS R SHARES CLASS I SHARES
(FORMERLY CLASS A)
-------------------------------- --------------------------------
1 3 5 10 1 3 5 10
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Reserve Blue Chip Growth............ $ 15 $ 46 $ 79 $174 $ 9 $ 29 $ 50 $111
Reserve Informed Investors Growth .. $ 16 $ 49 $ 84 $185 $ 10 $ 32 $ 55 $122
Reserve International Equity ....... $ 18 $ 57 $ 97 $212 $ 13 $ 40 $ 69 $151
Reserve Large-Cap Growth ........... $ 15 $ 46 $ 79 $174 $ 9 $ 29 $ 50 $111
Reserve Mid-Cap Equity ............. $ 16 $ 49 $ 84 $185 $ 10 $ 32 $ 55 $122
Reserve Small-Cap Growth ........... $ 16 $ 49 $ 84 $185 $ 10 $ 32 $ 55 $122
Reserve Strategic Growth ........... $ 15 $ 46 - - $ 9 $ 29 - -
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OR PERFORMANCE MAY BE GREATER OR LESS
THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The following information applies to a share of the Reserve Private
Equity Series -- Reserve Blue Chip Growth Fund, Reserve Informed Investors
Growth Fund, Reserve International Equity Fund, Reserve Large-Cap Growth Fund
(formerly Large-Cap Value Fund), Reserve Mid-Cap Equity Fund (formerly Mid-Cap
Growth Fund) and Reserve Small-Cap Growth Fund outstanding throughout each
period. Each Fund, prior to October 1, 1997, had two classes of shares, Class A
and Class D. Effective October 1, 1997, the shares of Class D were merged into
Class A. Effective September 22, 1998, the Class A shares were redesignated as
Class R shares. The Trust did not begin offering Class I shares until October 1,
1998. Further, the Trust did not begin offering shares of the Reserve Strategic
Growth Fund until June 1, 1999. As of the date of this Prospectus, no other
portfolios or classes of shares were outstanding. This information should be
read in conjunction with the financial statements and related notes incorporated
by reference in the SAI. Such information has been audited by
PricewaterhouseCoopers LLP, whose report appears in the Trust's Annual Report to
Shareholders which is incorporated by reference in the SAI. Further information
concerning investment performance is contained in the Trust's Annual Report to
Shareholders, which is available without charge. Financial information for the
period June 1, 1998 to November 30, 1998 is unaudited.
<TABLE>
<CAPTION>
CLASS R (FORMERLY CLASS A)
----------------------------------------------------------------------------------------
JUNE 1, 1998 OCTOBER 28, 1994
THROUGH YEAR ENDED MAY 31, (COMMENCEMENT
NOVEMBER 30, -------------------------------------------- OF OPERATIONS) TO
RESERVE BLUE CHIP GROWTH FUND 1998+ 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 loss (.05) -- (.17) (.10) (.03)
Net realized and unrealized gain 2.26 2.82 .91 3.62 2.06
------------- ------------ ------------ ------------ ------------
Total from investment operations 2.21 2.82 .74 3.52 2.03
Less distribution from net realized
income and gain -- (3.19) (.19) (.64) --
------------- ------------ ------------ ------------ ------------
Net asset value, end of period $ 17.30 $ 15.09 $ 15.46 $ 14.91 $ 12.03
============= ============ ============ ============ ============
Total Return 14.65% 19.70% 5.12% 30.10% 20.30%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 10,475 $ 8,532 $ 5,428 $ 5,130 $ 1,993
Ratio of expenses to average net assets 1.63%(1) 1.75% 1.75% 1.75% 1.73%(1)
Ratio of net investment loss to
average net assets (.92)%(1) (.87)% (1.13)% (.94)% (.70)%(1)
Portfolio turnover rate 68% 113% 109% 72% 68%
</TABLE>
<PAGE> 6
FINANCIAL HIGHLIGHTS - (CONTINUED)
<TABLE>
<CAPTION>
CLASS R (FORMERLY CLASS A)
-----------------------------------------------------------------------------
JUNE 1, 1998 NOVEMBER 14, 1994
THROUGH YEAR ENDED MAY 31, (COMMENCEMENT
NOVEMBER 30, --------------------------------- OF OPERATIONS) TO
RESERVE INFORMED INVESTORS GROWTH FUND 1998+ 1998 1997 1996 MAY 31, 1995
- -------------------------------------- ------------ -------- --------- -------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.46 $ 11.48 $ 14.36 $ 11.99 $ 10.00
------------ -------- --------- -------- ------------
Income from investment operations:
Net investment loss (.07) (.20) (.07) (.33) (.07)
Net realized and unrealized gain (loss) .67 2.08 (1.66) 3.87 2.06
------------ -------- --------- -------- ------------
Total from investment operations .60 1.88 (1.73) 3.54 1.99
Less distribution from net realized gain -- (2.90) (1.15) (1.17) --
------------ -------- --------- -------- ------------
Net asset value, end of period $ 11.06 $ 10.46 $ 11.48 $ 14.36 $ 11.99
============ ======== ========= ======== ============
Total Return 5.74% 17.88% (11.35)% 29.75% 19.90%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 2,927 $ 4,334 $ 5,477 $ 6,393 $ 6,837
Ratio of expenses to average net assets 1.69%(1) 1.75% 1.75% 1.75% 1.75%(1)
Ratio of net investment loss to average net (.82)%(1) (.91)% (.57)% (1.57)% (1.62)%(1)
assets
Portfolio turnover rate 287% 410% 255% 132% 59%
</TABLE>
<TABLE>
<CAPTION>
CLASS R (FORMERLY CLASS A)
---------------------------------------------------------------------
JUNE 1, 1998 JULY 13, 1995
THROUGH YEAR ENDED MAY 31, (COMMENCEMENT
NOVEMBER 30, ---------------------- OF OPERATIONS) TO
RESERVE INTERNATIONAL EQUITY FUND 1998+ 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 (.02) (.04) (.07) (.05)
Net realized and unrealized gain (.52) .67 1.40 1.31
--------- --------- --------- --------
Total from investment operations (.54) .63 1.33 1.26
--------- --------- --------- --------
Net asset value, end of period $ 12.68 $ 13.22 $ 12.59 $ 11.26
========= ========= ========= ========
Total Return (4.08)% 5.00% 11.81% 12.60%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 11,921 $ 12,851 $ 12,099 $ 3,578
Ratio of expenses to average net assets 1.91%(1) 2.00% 2.00% 1.99%(1)
Ratio of net investment loss to average net (.20)%(1) (.39)% (.82)% (.91)%(1)
assets
Portfolio turnover rate 106% 114% 52% 70%
</TABLE>
<PAGE> 7
FINANCIAL HIGHLIGHTS - (CONTINUED)
<TABLE>
<CAPTION>
CLASS R (FORMERLY CLASS A)
--------------------------------------------------------------------
JUNE 1, 1998 JANUARY 2, 1996
THROUGH YEAR ENDED MAY 31, (COMMENCEMENT
NOVEMBER 30, ---------------------- OF OPERATIONS) TO
RESERVE LARGE-CAP GROWTH FUND* 1998+ 1998 1997 MAY 31, 1996
- ------------------------------ ------------ -------- -------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.16 $ 14.61 $ 10.95 $ 10.00
--------- -------- -------- --------
Income from investment operations:
Net investment loss -- (.03) (.03) (.01)
Net realized and unrealized gains 1.28 3.89 3.69 .96
--------- -------- -------- --------
Total from investment operations 1.28 3.86 3.66 .95
Less distribution from net realized gain -- (.31) -- --
--------- -------- -------- --------
Net asset value, end of period $ 19.44 $ 18.16 $ 14.61 $ 10.95
========= ======== ======== ========
Total Return 4.18% 26.71% 33.42% 9.50%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 19,970 $ 6,786 $ 3,054 $ 1,231
Ratio of expenses to average net assets 1.57%(1) 1.75% 1.75% 1.75%(1)
Ratio of net investment loss to average net (.09)%(1) (.36)% (.32)% (.32)%(1)
assets
Portfolio turnover rate 14% 25% 18% 0%
</TABLE>
<TABLE>
<CAPTION>
CLASS R (FORMERLY CLASS A)
------------------------------------------------------------------
JUNE 1, 1998 MARCH 13, 1996
THROUGH YEAR ENDED MAY 31, (COMMENCEMENT
NOVEMBER 30, -------------------- OF OPERATIONS) TO
RESERVE MID-CAP EQUITY FUND** 1998+ 1998 1997 MAY 31, 1996
- ----------------------------- ------------ -------- -------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.98 $ 13.20 $ 12.29 $ 10.94
-------- -------- -------- --------
Income from investment operations:
Net investment loss (.20) (.26) (.11) (.01)
Net realized and unrealized gain (2.24) 1.50 1.02 1.36
-------- -------- -------- --------
Total from investment operations (2.44) 1.24 .91 1.35
Less distribution from net realized gain -- (1.46) -- --
-------- -------- -------- --------
Net asset value, end of period $ 10.54 $ 12.98 $ 13.20 $ 12.29
======== ======== ======== ========
Total Return 18.80)% 10.31% 7.40% 12.34%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 2,176 $ 3,381 $ 2,174 $ 131
Ratio of expenses to average net assets 1.69% 1.75% 1.75% 1.74%(1)
Ratio of net investment loss to average net (.90)% (1.21)% (1.31)% (.97)%(1)
assets
Portfolio turnover rate 26% 73% 102% 85%
</TABLE>
<PAGE> 8
FINANCIAL HIGHLIGHTS - (CONTINUED)
<TABLE>
<CAPTION>
CLASS R (FORMERLY CLASS A)
----------------------------------------------------------------------------
JUNE 1, 1998 NOVEMBER 14, 1994
THROUGH YEAR ENDED MAY 31, (COMMENCEMENT
NOVEMBER 30, --------------------------------- OF OPERATIONS) TO
RESERVE SMALL-CAP GROWTH FUND 1998+ 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 (.31) (.39) (.28) (.17) (.09)
Net realized and unrealized gain (loss) 1.39 1.53 (3.76) 8.05 2.30
-------- -------- --------- -------- --------
Total from investment operations 1.08 1.14 (4.04) 7.88 2.21
Less distribution from net realized gain -- -- -- (.53) --
-------- -------- --------- -------- --------
Net asset value, end of period $ 17.74 $ 16.66 $ 15.52 $ 19.56 $ 12.21
======== ======== ========= ======== ========
Total Return 6.49% 7.35% (20.65)% 65.55% 22.10%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period $ 4,877 $ 5,541 $ 5,789 $ 6,657 $ 1,241
Ratio of expenses to average net assets 1.66%(1) 1.75% 1.75% 1.75% 1.75%(1)
Ratio of net investment loss to average net (1.48)%(1) (1.64)% (1.69)% (1.70)% (1.62)%(1)
assets
Portfolio turnover rate 10% 46% 28% 38% 43%
</TABLE>
- -------------------
+ Unaudited
(1) Annualized.
(2) Total return is not annualized, and does not reflect impact of sales load.
(3) For the Reserve Convertible Securities Fund, the ratios of expenses to
average net assets, net of waiver, for the period September 3, 1996
(Commencement of Operations) to May 31, 1997 and the fiscal year ended May
31, 1998 were 0.52% and 0.83%, respectively, and the ratios of net
investment loss to average net assets, net of waiver, for the same periods
were 5.52% and 4.69%, respectively.
* Formerly Reserve Large-Cap Value Fund.
** Formerly Reserve Mid-Cap Growth Fund.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Funds are not fundamental and may be
changed without the approval of shareholders. Each of the Funds is classified as
a mutual fund.
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 through investment in a portfolio
primarily of U.S. securities which are seasoned, well-managed and financially
sound companies with demonstrated superior earnings growth, accelerating cash
flow and profit margins and high return on equity. Priority companies are
those where management and/or large outside investors are buyers or owners of
the stock, or where the company itself is repurchasing its own shares on the
open market. These are the "Informed Investors." Any production of dividend
income is secondary to this objective. There can be no assurance that the
Fund will achieve its investment objective.
Common sense suggests that the "Informed Investors" of the corporate world
are far closer to the day-to-day activities of the companies they own or manage
and 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 cost. 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. This can result in greater-than-average share price
fluctuations and greater market risk than is often experienced in other
types of securities.
<PAGE> 9
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 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 has 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 macroeconomics factors nationally and internationally, with a bottom-up
individual company selection procedure, which focuses on microeconomic factors
in a particular company. To attempt to control risk , the Fund spreads its
assets among 80 to 110 companies in 15 to 23 foreign markets with an initial
position in any single issue between 1% and 2% of assets. Since investments are
in companies that have strong earnings growth, the 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. In all circumstances, the Fund will
invest at least 65% of its total assets in equity securities of issuers
associated with at least three different countries, excluding the 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.
Summary of Investment Philosophy
The primary goal is to obtain consistent portfolio performance by investing
in quality companies with superior growth records in sales and earnings. The
Sub-Adviser's experience has shown that the best way to make money in common
stocks is to buy growth companies at attractive prices and to maintain those
positions for as long as the growth momentum continues and their valuations do
not reach extremes after an advance. Portfolios of foreign investments are
affected by different economic trends. By participating in a large variety of
investment opportunities, the probability of investment success increases, and
international diversification reduces the effect that events in any one country
will have on the portfolios. Portfolios of foreign securities are often affected
by different economic trends than those which affect U.S. securities, which is a
basic reason to diversify the traditional U.S.-based portfolio with investments
in foreign securities.
Investment Process
Country Allocation. Nine variables have been identified by the Sub-Adviser which
are deemed to be key in determining the future direction of stock markets. The
five macroeconomic factors are: Real Gross Domestic Product growth rate and
outlook; current inflation rate and its trend; relative interest rates and their
trends; outlook for the currency; and current account/trade balance levels. The
four stock market technical variables are: intermediate and long-term trends of
the stock prices versus the outlook for corporate profit; relative
price/earnings ratios and dividend yields; country pension fund regulations that
can affect the supply/demand factors for equities; and political stability and
government efforts to promote equity investments.
Stock Selection. After the top-down country allocation is in place, bottom-up
stock selection becomes the dominant activity. The focus is on quality
individual stock selection of companies with high visibility and growth in sales
and earnings. In emerging economies with less developed capital markets, a
strong balance sheet is essential. Stocks are not selected for
industry-balancing purposes. Highly cyclical stocks and recovery situations are
rarely used as is the case with companies that are primarily market-share and
sales driven, regardless of profitability and shareholder benefit.
Selling Disciplines. A stock is sold when the fundamental factors (excessive
price/exchange ratio, slowed growth, excessive debt, etc.) have changed to such
an extent that the company no longer qualifies or when industry conditions or
governmental regulations have changed so that they negatively impact the
company's future. On rare occasions, a stock is sold if a significantly more
attractive opportunity develops in that country.
<PAGE> 10
RESERVE LARGE-CAP GROWTH FUND. The Reserve Large-Cap Growth Fund (formerly
Reserve Large-Cap Value Fund)'s investment objective is to seek long-term
capital appreciation through investment in a portfolio of large, high-quality
U.S. companies. Any production of income is secondary to this objective. There
can be no assurance that the Fund will achieve its investment objective.
The Fund seeks to achieve its objective by primarily investing in
attractively valued and undervalued equity securities believed to offer
favorable possibilities of capital appreciation. Generally, the Fund will seek
to invest in equity securities issued by companies with investment
characteristics such as high return on shareholder's equity, strong company
management that enhances shareholder value, good cash flow generation and
favorable profit trends. Fundamentally, investment candidates are understandable
businesses that can generate consistent earnings growth where the company is
believed to be undervalued as a whole. 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. 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. Investors seeking the opportunity
for above-average, long-term growth with below-average overall risk (defined as
loss of capital) and nominal current income may wish to consider this Fund.
It is the Fund's view that high-quality, large companies can generate
consistent growth over time that is above the growth rate of the overall
economy. The Fund may also invest in companies presenting special situations
when it is believed that the shares offer a strong potential for capital
appreciation due to the market underestimating earnings potential, changes in
management or other similar opportunities.
RESERVE MID-CAP EQUITY FUND. The Reserve Mid-Cap Equity Fund (formerly Reserve
Mid-Cap Growth Fund)'s investment objective is to seek capital appreciation
through investment in a portfolio of medium-size companies. It is the
Sub-Adviser's view that mid-size companies in the U.S. are generally expected to
show growth over time that is above the growth rate of the overall U.S. economy
and that of larger companies. The Fund will invest at least 65% of its total
assets in equity securities of companies considered "mid-cap" or medium-size
companies, unless the Fund has adopted a temporary defensive position. The Fund
does not choose investment for dividend or interest income, nor does it try to
"time the market". The Fund will not employ any hedging strategies, and intends
to stay fully invested. Any production of income is secondary. There can be no
assurance that the Fund will achieve its investment objective.
A varied portfolio of stocks will generally be selected based on at least
one of the following criteria: companies selling at a discount to private market
value; undiscovered, underfollowed, or misunderstood companies with good or
improving earnings growth; low price/cash flow stocks with a visible catalyst
for price appreciation, growth rates greater than and price/cash flow less than
the S&P 400 mid-cap index. Additional considerations will be: management
incentives to increase shareholder value; management ownership of the stock;
margin levels and growth, return on capital invested, and strength of the
balance sheet.
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.
A result of the Fund's stock selection criteria is likely to be that the
median market capitalization for its portfolio companies will be about $2
billion and such companies would be considered "mid-cap" or medium-size
companies. The Fund will not routinely invest in any company with a market
capitalization of less than $500 million or more than $5 billion. The "mid-cap"
nature of the portfolio may result in some increased volatility over that of the
general market average. The Fund intends to be fully invested unless it 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.
<PAGE> 11
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.
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 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.
Investors in the Fund should recognize that the inherent risks of investing
cannot be totally avoided and that there is no assurance that the investment
objective of the Fund will be achieved. The Fund intends to be as fully invested
at all times as practicable unless it has adopted a temporary defensive
position.
INVESTMENT TECHNIQUES AND INVESTMENTS
The investments and techniques described in this section are subject to the
specific requirements or minimum investment policies found in the Investment
Objectives and Policies section of each Fund.
CASH EQUIVALENTS. Each Fund may invest in cash equivalents, which are short-term
obligations issued or guaranteed as to interest and principal by the U.S.
government or any instrumentality thereof (including repurchase agreements
collateralized by such securities) and deposit-type obligations of domestic and
foreign banks or the equivalent thereof. Instruments which are not rated may
also be purchased by a Fund provided such instruments are determined by the
Sub-Adviser under the supervision of the Adviser and the Board of Trustees to be
of comparable quality to those instruments in which the Fund may invest.
REPURCHASE AGREEMENTS. Each Fund may engage in repurchase agreement
transactions. A repurchase agreement is a transaction by which a Fund purchases
a security and simultaneously commits to resell that security to the seller (a
bank or securities dealer) at an agreed-upon price at a later date. Each Fund
will limit repurchase agreements to those securities dealers who are deemed
credit worthy pursuant to guidelines adopted by the Board of Trustees. The
Sub-Advisers will follow procedures to assure that all repurchase agreements are
always fully collateralized as to principal and interest. If the other party to
the repurchase agreement defaults or becomes insolvent or declares bankruptcy, a
Fund may encounter difficulties and incur costs, and possibly a loss, upon
disposition of the underlying securities.
LENDING OF PORTFOLIO SECURITIES. Each Fund may, from time to time, lend
securities on a short-term basis to banks, brokers and dealers (but not
individuals) and receive as collateral cash, bank letters of credit or
securities issued by the U.S. government or its agencies or instrumentalities
(or any combination thereof), which will be required to be maintained at all
times in an amount equal to at least 100% of the current value of the loaned
securities plus accrued interest. The value of the securities loaned cannot
exceed 25% of each Fund's total assets. Loan arrangements made by a Fund will
require the borrower, after notice, to redeliver the securities within the
normal settlement time of three (3) Business Days. In connection with a loan of
securities, a Fund may pay reasonable finders', custodian and administrative
fees. Loans of securities involve risks of delay in receiving additional
collateral or in recovering the securities lent or even loss of rights in the
collateral in the event of insolvency of the borrower. The SAI further explains
each Fund's securities lending policies.
U.S. TREASURY SECURITIES. Each Fund may invest in securities issued, guaranteed
or collateralized by U.S. Treasury obligations, including Bills, Notes, and
Bonds, all of which are backed by the full faith and credit of the U.S.
government.
SECURITIES OF U.S. GOVERNMENT AGENCIES AND INSTRUMENTALITIES. Each Fund may
invest in both adjustable rate and fixed rate securities issued, guaranteed, or
collateralized by agencies or instrumentalities of the U.S. government,
including, but not limited to, Government National Mortgage Association (GNMA),
Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage
Corporation (FHLMC) securities. Obligations of GNMA, the Farmers Home
Administration and the Export-Import Bank
<PAGE> 12
are backed by the full faith and credit of the U.S. government. In the case of
securities not backed by the full faith and credit of the U.S. government, the
Funds must look principally to the agency issuing or guaranteeing the obligation
for ultimate repayment. Such securities include obligations issued by the
Student Loan Marketing Association (SLMA), FNMA and FHLMC, each of which may
borrow from the U.S. Treasury to meet its obligations although the U.S. Treasury
is under no obligation to lend to such entities. GNMA, FNMA and FHLMC may also
issue collateralized mortgage obligations.
Each Fund may also invest in component parts of these securities or
instruments collateralized thereby, namely either the principal of such
obligations (principal only or "PO" class) or one of the interest payments
scheduled to be paid on such obligations (interest only or "IO" class). These
obligations may take the form of (i) obligations from which the interest coupons
have been stripped; (ii) the interest coupons that are stripped; (iii) book
entries at a Federal Reserve member bank representing ownership of obligation
components; or (iv) receipts evidencing the component parts (principal or
interest) of U.S. government obligations that have not actually been stripped.
Such receipts evidence ownership of component parts of U.S. government
obligations purchased by a third party (typically an investment-banking firm)
and held on its behalf by a major commercial bank or trust company pursuant to a
custody agreement. A "stripped security" issued by an investment-banking firm or
other private organization is not considered to be a U.S. government security.
CONVERTIBLE SECURITIES. The Reserve International Equity Fund may invest in
convertible securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which provide a
stable stream of income with generally higher yields than those of equity
securities of the same or similar issuers. The price of a convertible security
will normally vary with changes in the price of the underlying stock, although
the higher yield tends to make the convertible security less volatile than the
underlying common stock. As with debt securities, the market value of
convertible securities tends to decline as interest rates increase, and increase
as interest rates decline. While convertible securities generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality, they enable investors to benefit from increases in the market price of
the underlying common stock.
Reserve International Equity Fund may invest in convertible securities that
are investment grade, i.e., rated Baa/BBB or higher or unrated securities. These
bonds have speculative characteristics and share some of the same
characteristics of lower-rated securities. For example, sustained periods of
deteriorating economic conditions or rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than would be the case of higher-rated securities. If a downgrade below the
minimum rating occurs, the Fund may sell the securities but is not required to
do so. Foreign convertible securities, which may be held by the Fund, are not
rated.
To the extent that a security is assigned a different rating by one or more
of the various rating agencies, the Sub-Adviser will use the highest rating
assigned by an agency in determining compliance with the foregoing investment
limitations.
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. Rights and
warrants may be considered more speculative than certain other types of
investments in that they do not entitle a holder to dividends or voting rights
with respect to the underlying securities, nor do they represent any rights to
the assets of the issuing company. The value of a right or warrant does not
necessarily change with the value of the underlying security, although it may
decline because of a decrease in the value of the underlying security, the
passage of time or a change in perception as to the potential of the underlying
security, or any combination thereof. If the market price of the underlying
security is below the exercise price set forth in the warrant on the expiration
date, the warrant will expire worthless. Moreover, a right or warrant ceases to
have value if it is not exercised prior to the expiration date.
DEPOSITORY RECEIPTS. Reserve International Equity Fund may invest in depository
receipts which may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depository receipts are not obligated to disclose
material information in the U.S. and therefore, there may not be a correlation
between such information and the market value of the depository receipts. ADRs
are depository receipts typically issued by a U.S. bank or trust company that
evidence ownership of underlying securities issued by a foreign corporation.
Global Depository Receipts ("GDRs") and other types of depository receipts are
typically issued by foreign banks or trust companies and evidence ownership of
underlying securities issued by either a foreign or a U.S. company. Generally,
depository receipts in registered form are designed for use in the U.S.
securities markets, and depository receipts in bearer form are designed for use
in foreign securities markets. Investments of the Fund in ADRs are deemed to be
investments in securities issued by U.S. issuers and those in GDRs and other
types of depository receipts are deemed to be investments in the underlying
foreign securities.
The Fund may also invest in securities of supranational entities such as
the World Bank or the European Investment Bank.
ILLIQUID SECURITIES. Each Fund may hold up to 15% of the value 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. Such securities include
securities that are not readily marketable, such as certain securities that are
subject to legal or contractual restrictions on resales, repurchase agreements
providing for settlement in more than seven (7) days after notice, and certain
asset-backed and mortgage-backed securities. The Fund will treat U.S. government
POs and IOs as illiquid securities so long as the staff of the Securities and
Exchange Commission maintains its
<PAGE> 13
position that such securities are illiquid. Restricted securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933 that have a
readily available market are not considered illiquid for purposes of this
limitation if they meet guidelines established by the Board of Trustees.
Purchased over-the-counter ("OTC") options and the assets used as cover for
written OTC options will be treated as illiquid securities so long as the staff
of the Securities and Exchange Commission maintains its position that such
securities are illiquid. However, the Fund may treat a certain portion of the
securities it uses as cover for written OTC options as liquid provided it
follows a specified procedure. The Fund may sell OTC options only to qualified
dealers who agree that the Fund may repurchase any options it writes for a
maximum price to be calculated by a predetermined formula. In such cases, OTC
options would be considered liquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
The Sub-Advisers will monitor the liquidity of such restricted securities under
the supervision of the Adviser and Board of Trustees.
Many of the foreign countries in which the Reserve International Equity
Fund invests do not have a Securities Act similar to the U.S. requiring an
issuer to register the sale of securities with a governmental agency or imposing
legal restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resale of securities.
PUT AND CALL OPTIONS ON SPECIFIC SECURITIES. Each Fund may write and sell
covered put option contracts to the extent of 25% of the value of their total
assets at the time such option contracts are written. However, the Reserve
Small-Cap Growth Fund and Reserve Informed Investors Growth Fund may invest only
up to 5% of the value of their total assets, represented by the premium paid, in
the purchase of put and call options on specific securities. Such options may be
traded on national securities exchanges or over-the-counter.
There is no limitation on the amount of call options each Fund may write. A
call option gives the purchaser of the option, in exchange for the premium paid,
the right to buy the security subject to the option at the exercise price at any
time prior to expiration. The writer of a call option, in return for the
premium, has the obligation, upon the exercise of the option, to deliver,
depending upon the terms of the contract, the underlying securities or a
specified amount of cash to the purchaser upon receipt of the exercise price. A
put option gives the purchaser, in return for a premium, the right to sell the
security at the exercise price at any time prior to the expiration of the
option. The writer of a put option, in return for the premium, has the
obligation, upon exercise of the option, to acquire the underlying security at
the exercise price. If a call written by the Funds is exercised, the Funds forgo
any possible profit from an increase in the market price of the underlying
security or other asset over the exercise price plus the premium paid. In
writing puts, there is a risk that the Funds may be required to take delivery of
the underlying security or other asset at a disadvantageous price. Also, an
option purchased by the Funds may expire worthless, in which case the Funds
would lose the premium they paid.
OTC options differ from exchange-traded options in several respects. They
are transacted directly with dealers and not with a clearing corporation, and
there is a risk of nonperformance by the dealer as a result of insolvency of the
dealer or otherwise, in which event the Funds may experience material losses.
However, in writing options, the premium is paid in advance by the dealer. OTC
options are available for a greater variety of securities and other assets, and
a wider range of expiration dates and exercise prices, than for exchange traded
options.
The Funds will only write covered options. An option is covered so long as
a Fund which is obligated under the option owns an offsetting position in the
underlying security or maintains cash, U.S. government securities or other
liquid high-grade debt obligations with a market value sufficient to cover its
obligations in a segregated account with its custodian bank.
The successful use of options by a Fund is subject to its Sub-Adviser's
ability to correctly predict movements in the market. If the Sub-Adviser is not
successful in employing options in managing the Fund's investments, performance
will be worse than if the Fund did not make such investments. In addition, the
Fund would pay commissions and other costs in connection with such investments,
which may increase its expenses and reduce its return.
INVESTMENT IN FOREIGN SECURITIES. 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.
The Fund may be subject to additional risks because stock certificates and
other evidence of ownership of foreign issuers may be held outside the U.S. Such
additional risks include: adverse political and economic developments;
nationalization of foreign issuers and possible adoption of government
restrictions which might affect the payment of principal, interest and dividends
to U.S. investors. In addition, there may be less publicly available information
about a foreign issuer, since they are generally not subject to the timely
accounting and financial reporting disclosure standards of U.S. companies.
In making the allocation of assets in foreign markets, the Sub-Adviser will
consider such factors as prospects for relative economic growth, inflation,
interest rates, government policies influencing business conditions, the range
of individual investment
<PAGE> 14
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.
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. 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.
When the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the U.S.-dollar cost
or proceeds, as the case may be. By entering into a forward contract in
U.S.-dollars for the purchase or sale of the amount of foreign currency involved
in an underlying security transaction, the Fund is able to protect itself from
possible loss between trade and settlement dates resulting from an adverse
change in the relationship between the U.S.-dollar and such foreign currency.
However, this tends to limit potential gains that might result from a positive
change in such currency relationships. The Fund may also hedge its foreign
currency exchange rate risk by engaging in foreign-currency financial futures
and options transactions.
When the Fund's Sub-Adviser believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S.-dollar, it may
enter into a forward contract to sell an amount of foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S.-dollar amount where the Fund's Sub-Adviser believes that the U.S. dollar
value of the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S.-dollar value of the currency in which
portfolio securities of the Fund are denominated ("cross-hedge"). The
forecasting of short-term currency market movements is extremely difficult and
whether such a short-term hedging strategy will be successful is highly
uncertain.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of a contract. Accordingly, it may be
necessary for the Fund to purchase additional currency on the spot market (and
bear the expense of such purchase) if the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver when a
decision is made to sell the security and make delivery of the foreign-currency
in settlement of a forward contract. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver.
The Fund will not enter into forward contracts or maintain a net exposure
in such contracts where the Fund would be obligated to deliver an amount of
foreign currency in excess of the value of the Fund's securities or other assets
(a) denominated in that currency or (b) in the case of a "cross-hedge,"
denominated in a currency or currencies that the Fund's Sub-Adviser believes
will have price movements that tend to correlate closely with that currency. The
Fund's Custodian bank segregates cash or liquid high-grade debt securities in an
amount not less than the value of the Fund's total assets committed to forward
foreign-currency exchange contracts entered into for the purchase of a foreign
currency. If the value of the securities segregated declines, additional cash or
securities are added so that the segregated amount is not less than the amount
of the Fund's commitments with respect to such contracts. There is no limitation
as to the percentage of the Fund's assets that may be committed to such
foreign-currency exchange contracts. The Fund generally will not enter into a
forward contract with a term longer than one year.
EURO CONVERSION. 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 could affect
the Trust operationally and also has some special risks. The Trust's portfolio
system, DST, will be both upgrading computer and record keeping equipment to
prepare for the conversion, and will continue to monitor the effects of the
conversion on the value of the Trust's securities. Further, the Adviser is
taking steps to reasonably address this issue and to obtain assurance that
comparable effort is being made by the Trust's other service providers. There
can be no assurance that these steps will be sufficient to avoid any adverse
impact on the Trust.
<PAGE> 15
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.
NON-DIVERSIFIED STATUS. As a non-diversified mutual fund, each Fund is permitted
to have all its assets invested in a limited number of issuers. As a result, an
investment in a Fund could entail greater risk than a mutual fund with a policy
of diversification.
RISK CONSIDERATIONS
Investment in certain Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
CURRENCY CONSIDERATIONS. Some of the assets of the Reserve International Equity
Fund will be invested in securities denominated in foreign currencies and a
corresponding portion of the Fund's revenues will be received in such
currencies. Therefore, the dollar equivalent of their net assets, distributions
and income will be adversely affected by reductions in the value of certain
foreign currencies relative to the U.S. dollar. If the value of the foreign
currencies in which a Fund receives its income falls relative to the U.S. dollar
between receipt of the income and the making of Fund distributions, the Fund may
be required to liquidate securities in order to make distributions if it has
insufficient cash in U.S. dollars to meet distribution requirements that the
Fund must satisfy to qualify as a regulated investment company for federal
income tax purposes. Similarly, if an exchange rate declines between the time
the Fund incurs expenses in U.S. dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. dollars in order
to pay expenses in U.S. dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, the Fund may engage in certain currency-hedging transactions, which
themselves involve certain special risks. See "Investment Techniques and
Investments" on page 9.
FOREIGN INVESTMENT. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, the Reserve International Equity Fund, whose
investment portfolios include such securities, may experience greater price
volatility and significantly lower liquidity than a portfolio invested solely in
equity securities of U.S. companies. These markets may be subject to greater
influence by adverse events affecting the general market and by large investors
trading significant blocks of securities than is usual in the U.S. Securities
settlements may in some instances be subject to delays and related
administrative uncertainties. These problems are particularly severe in India,
where settlement is through physical delivery and where a severe shortage of
vault capacity exists among custodial banks. Efforts are being undertaken to
alleviate the shortage. Certain foreign countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage of an issuer's outstanding securities or a
specific class of securities which may have less advantageous terms (including
price) than securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of the Fund. In addition, the
repatriation of investment income, capital or the proceeds of sales of
securities from certain countries is controlled under regulations including, in
some cases, the need for certain advance government notification or authority,
and if a deterioration occurs in a country's balance of payments, the country
could impose temporary restrictions on foreign capital remittances.
The Fund could be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation, as well as by the
application to it of other restrictions on investments. Investing in local
markets may require the Fund to adopt special procedures, which may involve
additional costs to the Fund. The liquidity of the Fund's investments in any
country in which any of these factors exist could be affected and the
Sub-Adviser will monitor the effect of any such factor or factors on the Fund's
investments. Furthermore, transaction costs including brokerage commissions for
transactions both on and off the securities exchanges in many foreign countries
are generally higher than in the U.S.
Issuers of securities in foreign jurisdictions are generally not subject to
the same degree of regulation as are U.S. issuers with respect to such matters
as insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of the gross
domestic product or gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments.
Nationalization, expropriation or confiscatory taxation, currency blockage,
political changes, government regulation, political or social instability or
diplomatic developments could adversely affect the economy of a foreign country
or the Fund's investments in that country. In the event of expropriation,
nationalization or other confiscation, the Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
<PAGE> 16
U.S. AND FOREIGN TAXES (RISK CONSIDERATIONS). Although each of the Funds intends
to continue to qualify as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code"), and to distribute substantially
all of its taxable income so as to avoid the imposition of U.S. income and
excise taxes, it is possible that events could occur which would cause a Fund to
incur some U.S. taxes. In addition, 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. The applicable tax laws which
affect the Funds and their shareholders are subject to change, which may be
retroactive. Prospective investors should consult their own tax advisors with
regard to the federal tax consequences of the purchase, ownership, or
disposition of a Fund's shares, as well as the tax consequences arising under
the laws of any state, foreign country, or other taxing jurisdiction. See the
discussion on "Taxes" and "Foreign Taxes" set forth below.
FIXED-INCOME SECURITIES. The value of a Fund's shares will fluctuate with the
value of its investments. The value of fixed-income securities will decline in
value as interest rates rise, and increase in value as interest rates decline.
MANAGEMENT
INVESTMENT MANAGEMENT AGREEMENT. Since November 15, 1971, Reserve Management
Company, Inc. (the "Adviser"), 1250 Broadway, New York, NY 10001-3701, and its
affiliates have provided investment advice to The Reserve Funds, which as of the
date of this prospectus has assets in excess of $5.4 billion. Under the
Investment Management Agreement, the Adviser manages the Funds and invests in
furtherance of its objectives and policies subject to the overall control and
direction of the Funds' Board of Trustees. The Adviser supervises a continuous
investment program for the Funds, evaluates and monitors each Sub-Adviser's
performance, investment programs, and compliance with applicable laws and
regulations, and recommends to the Board of Trustees whether the Sub-Adviser's
contract should be continued or modified. The Adviser is also responsible for
the day-to-day administration of each Fund's activities. Under the Investment
Management Agreement, the Adviser pays all employee costs, costs of the
Sub-Advisers and other ordinary operating expenses of each Fund. Excluded from
ordinary operating expenses are interest, taxes, brokerage fees, extraordinary
legal and accounting fees and expenses, payments made pursuant to the Trust's
Distribution Plan and the fees of the disinterested Trustees.
For its services under the Investment Management Agreement, the Adviser is
paid a Management Fee represented as a percentage of the average daily net
assets of each Fund and class in the amounts shown on the chart entitled "Annual
Fund Operating Expenses" found on page 2.
YEAR 2000. 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, the Adviser is taking steps to reasonably address
this issue and to obtain assurance that a comparable effort is being made by the
Trust's other service providers. There can be no assurance that these steps will
be sufficient to avoid any adverse impact to the Trust.
SUB-ADVISERS. The Investment Management Agreement and 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.
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
<PAGE> 17
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 director of international
investments and partner 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 herein.
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.
PEKIN, SINGER & SHAPIRO ASSET MANAGEMENT, 311 SOUTH WACKER DRIVE, CHICAGO,
IL 60606, was formed in 1990 and currently manages over $359 million for
individuals, family trusts, and institutions. JoAnne Pekin, a founder of the
firm and its President, and Martha Doran serve as the Fund's portfolio managers.
Mrs. Pekin has more than thirty years experience in the investment business and
is responsible for the day-to-day investment decisions of the Reserve Mid-Cap
Equity Fund.
ROANOKE ASSET MANAGEMENT, 529 FIFTH AVENUE, NEW YORK, NY 10017, was formed
in 1978 and currently manages over $200 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, Brian J. O'Connor,
Executive Vice-President, and Adele S. Weisman, Senior Vice-President, serve as
the Fund's portfolio managers, and have worked together as a team for over
twenty years. Together, they 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 $185 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.
PORTFOLIO TRANSACTIONS. Decisions as to the purchase and sale of securities for
each Fund and the execution of these transactions, including the negotiation of
brokerage commission on such transactions, are the responsibility of each
Sub-Adviser. In general, each Sub-Adviser seeks to obtain prompt and reliable
execution of purchase and sale orders at the most favorable net prices or
yields. In determining the best net price and execution, each Sub-Adviser may
take into account a broker's or dealer's operational and financial capabilities
and the type of transaction involved.
The Sub-Advisers may consider statistical, research, or other services
provided by brokers or dealers, some of which may be useful to each Sub-Adviser
in their other business functions. To the extent such non-price factors are
taken into account, the execution price paid may be increased, but only in
reasonable relation to the benefit of such non-price factors as determined in
good faith by each Sub-Adviser. Each Sub-Adviser is authorized to place
portfolio transactions with brokers or dealers participating in the distribution
of shares of its Fund, but only if the Sub-Advisers reasonably believe that the
execution and commission are comparable to those available from other qualified
firms. Further, subject to procedures adopted by, and under the supervision of
the Board of Trustees, each Sub-Adviser is authorized to place portfolio
transactions with brokers or dealers affiliated with each Sub-Adviser, provided
the commission or fee paid on the transaction is reasonable and fair when
compared to the commission or fee charged by other brokers or dealers on
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time.
The annual portfolio turnover rate of each Fund is not expected to exceed
100% under normal market conditions except for the Reserve Informed Investors
Funds. High portfolio turnover rates (i.e., over 100%) can increase the Fund's
transaction costs, including brokerage commissions. The Reserve International
Equity Fund, expected to be less than 100% under normal market conditions. See
"Portfolio Turnover, Transaction Charges and Allocation" in the SAI.
During the fiscal years ended May 31, 1996, 1997 and 1998, the portfolio
turnover rate for the Reserve Informed Investors Growth Fund was higher than
expected due to the following market conditions: (1) extraordinary volatility,
especially in the small to medium capitalization stocks which have a dominant
weight in the portfolio, made it necessary to re-balance the Fund's weighted
<PAGE> 18
capitalization; (2) concentration of informed investor buy signals in a tightly
defined number of industry sectors led to higher than normal portfolio sector
concentration which often amplified volatility and turnover rates through the
need for re-balancing of the portfolio; (3) market responses to the earnings
outlook for a broad list of portfolio-held companies led to a series of
management miscalls; and (4) a substantial portion of the gain on the S&P 500
indices has been attributable to the largest capitalization stocks in the
indices. The Sub-Adviser has had to guide the Fund through a market which has
been turbulent and extremely narrow as a result, while strictly adhering to the
Fund's informed investor strategy. During the current fiscal year, the
Sub-Adviser expects the turnover to approximate 455%, but does not expect it to
exceed 500%.
TRUSTEES. Under the Declaration of Trust, which is governed by the laws of the
State of Delaware, the Trustees are ultimately responsible for the conduct of
its affairs. The Trustees serve indefinite terms (subject to certain removal
procedures) and they appoint their own successors, provided that at least a
majority of the Trustees have been elected by shareholders. The Declaration of
Trust provides that a Trustee may be removed at any special meeting of
shareholders by a vote of a majority of the Trust's outstanding shares.
TRANSFER AGENT AND DIVIDEND-PAYING AGENT. The Trust acts as its own transfer
agent and dividend-paying agent.
HOW TO BUY SHARES
METHOD OF PAYMENT. For Class R Shares, the minimum initial investment is $1,000
and the minimum subsequent investment is $100, except for IRAs. However, 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 (currently $5 monthly; see "Small
Balances"). The initial minimum investment in Class R Shares for an IRA is $250,
and subsequent investments are accepted in any amount. 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. An
initial purchase must be accompanied by an Account Application. If no dealer or
broker is named in the Account Application, the Distributor will act as dealer.
Shares of the Funds may be purchased each Business Day at the public offering
price determined after receipt of payment and a request in proper form by the
Funds or by an investment dealer who has a sales agreement with the Funds'
Distributor. The public offering price is equal to the net asset value of a
Fund. Payments (denominated in U.S. dollars) must be made if purchasing directly
from the Funds:
- - By check - Drawn on a U.S. bank, payable to or endorsed to Reserve Private
Equity Series. You must include your account number on each check unless it
is an initial purchase. Checks should be mailed to The Reserve Funds, 1250
Broadway, New York, NY 10001-3701. A fee (currently $15) will be imposed if
any check used for investment in your account does not clear. The investor
is also liable to reimburse the Funds for any loss incurred due to a
returned check. Neither initial nor subsequent investments may be made by a
third party check.
- - By wire - Prior to calling your bank, call the Funds for specific
instructions at 800-637-1700 or the broker-dealer or financial institution
from whom you received this prospectus.
Investments in the Funds may also be made through investment dealers who
have sales agreements with RESRV., the distributor of the Funds' shares
("Authorized Dealer"). Such dealers should send the investor's Account
Application and payment to the Funds. Payment may be made by check or wire.
Purchase orders will be confirmed at the public offering price calculated after
receipt by the Funds or an Authorized Dealer (which order must be promptly
transmitted to the Funds) of a properly completed Account Application and
payment. The Funds must be notified before 4:00 PM (New York time) of the amount
to be transmitted and the account to be credited, and the Funds must receive the
credit at their bank by 4:00 PM (New York time). Orders received by the Funds or
an Authorized Dealer after 4:00 PM (New York time) will be priced at the public
offering price in effect at 4:00 PM (New York time) on the next Business Day.
GENERAL INFORMATION. Shares of each Fund will have the same relative rights and
privileges and be subject to the same fees and expenses except as set forth
below. The Board of Trustees may determine in the future that other allocations
of expenses are appropriate and amend this plan accordingly without the approval
of shareholders. Income, realized and unrealized capital gains and losses, and
expenses of the Funds of the Trust shall be allocated to shares of the Fund that
earned or incurred them. Expenses of the Trust not allocable to a specific Fund
shall be allocated to each Fund on the basis of the net asset value of that Fund
in relation to the net asset value ("NAV") of the Trust.
The Distributor, at its expense, will also provide additional compensation
to broker-dealers, financial consultants and financial institutions in
connection with actual or anticipated sales of shares of the Funds, but only to
the extent permitted by law or regulation.
VOTING RIGHTS. Shares of the Funds shall have exclusive voting rights on any
matter submitted to shareholders pursuant to the 1940 Act, the Declaration of
Trust and the Trust's By-laws.
<PAGE> 19
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 minimum) from a checking, NOW, or bank money-market deposit
account or from a U.S. government distribution ($25 minimum) such as Social
Security, federal salary, or certain veterans' benefits, or other payments from
the federal government. Call the Funds at 800-637-1700 for an application.
NET ASSET VALUE. Fund shares are issued at NAV which is calculated at the close
of each Business Day (normally 4:00 PM New York time). A Business Day is Monday
through Friday, exclusive of 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 and days the New
York Stock Exchange ("NYSE") is closed for trading. The NAV per share of each
Fund is determined by adding the value of a Fund's portfolio securities, cash
and other assets, subtracting its liabilities, and dividing the result by the
number of shares outstanding.
INDIVIDUAL RETIREMENT ACCOUNTS. Investors may use each Fund as an investment for
Individual Retirement Accounts ("IRAs"). A master IRA plan, with information
regarding administration fees and other details is available from RESRV
Partners, Inc. The initial minimum investment is $250. Subsequent investments
are accepted in any amount.
DISTRIBUTOR. The Funds' Distributor is RESRV Partners, Inc. ("RESRV"), 1250
Broadway, New York, NY 10001-3701. The Distributor is a wholly-owned subsidiary
of the Adviser.
All orders for the purchase of shares of each Fund are subject to
acceptance or rejection by RESRV, at its sole discretion. The sale of shares
will be suspended during any period when the determination of net asset value is
suspended, and may be suspended by the Board of Trustees whenever, in its
judgment, it is in the best interests of the Funds to do so.
EXCHANGE PRIVILEGE. Shares of each RPES Fund may be exchanged for shares in the
Reserve money-market funds and other separate investment portfolios that may be
offered by the Trust at NAV.
The exchange privilege is not available for shares which have been held for
less than fifteen (15) days. Exchanges by telephone are an automatic privilege
unless the shareholder notifies the Fund on the Account Application that 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.
The Trust may modify or discontinue the exchange privilege at any time, and
will do so on sixty (60) days notice, if such notice is required by regulations
adopted under the 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 (New York time) on a regular Business Day to take effect that
day. Exchange requests received after 4:00 PM (New York time) will be effected
at the next calculated NAV.
Exchanges of shares are taxable events and may result in a gain or loss for
federal income tax purposes. See the discussion at "Taxes" set forth below. A
prospectus for any of the Reserve money-market funds or other series of the
Trust may be obtained from the Distributor or any Authorized Dealer. An investor
considering an exchange should refer to the appropriate fund prospectus for
additional information since each fund has different investment objectives and
policies.
DISTRIBUTION PLAN. Under the Distribution Plan ("Plan") adopted pursuant to Rule
12b-1 under the 1940 Act, each Fund pays RESRV for advertising, marketing and
distributing each Fund's Class R shares and for servicing each Fund's Class R
shareholders at a maximum annual rate of 0.25% of the value of each Fund's
average daily net assets attributable to its Class R shares. If the Plan were
terminated or not continued, no amounts (other than amounts accrued but not yet
paid) would be owed by the Funds. The Class I shares of each Fund do not
participate in the Plan.
Under the Plan, RESRV at its discretion may make payments to brokers,
financial institutions and financial intermediaries ("Firms") for administration
and for servicing Fund shareholders who are also their clients and/or for
distribution. Firms receive such fees with respect to the average daily NAV of
each Fund's Class R shares owned by shareholders for whom they perform services
and are the dealer of record. Firms providing distribution assistance or
administrative services for each Fund may be required to register as
<PAGE> 20
securities dealers in certain states. The fees, payable to RESRV under the Plan,
are made without regard to actual expenses incurred. Thus, if fees exceed
distribution expenses, RESRV will incur a profit; however, if expenses exceed
fees, then they will incur a loss. RESRV may use such fees to promote the sale
of shares by paying for the preparation, printing and distribution of
prospectuses to other than current shareholders or other promotional activities.
SHARES OF BENEFICIAL INTEREST
The Trust is an open-end management investment company commonly known as a
mutual fund. The Trust was organized as an unincorporated Delaware business
trust on April 22, 1993, and is authorized to issue an unlimited number of
shares of beneficial interest, which may be issued in any number of portfolios
and classes. Shareholders are entitled to a full vote for each full share held
(and fractional votes for fractional shares) and have equal rights with respect
to earnings, dividends, redemption and in the net assets of their respective
portfolios on liquidation. The Trust has no intention of issuing share
certificates. All shares issued will be fully paid and non-assessable and will
have no preemptive or conversion rights. The Trustees do not intend to hold
annual meetings of shareholders. The Trustees will call such special meetings of
shareholders as may be required under the 1940 Act (e.g., to approve a new
investment advisory agreement or to change the fundamental investment policies)
or by the Declaration of Trust.
TAXES
The following discussion is intended for general information only.
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.
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. Dividends paid by each Fund from net investment income,
including net short-term capital gains, whether in cash or in additional shares
of each Fund, will be taxable as ordinary income.
The Code imposes a nondeductible 4% excise tax on regulated investment
companies that do not distribute to their shareholders in each calendar year an
amount equal to 98% of their calendar year ordinary income, plus 98% of their
capital gain net income (the excess of short- and long-term capital gains over
short- and long-term capital losses) for the one-year period ending October 31.
Dividends declared in 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.
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.
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 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.
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. Further information relating to tax matters is contained in the SAI.
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.
<PAGE> 21
FOREIGN TAXES
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. Further information relating to tax matters is contained in the
SAI. 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.
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.
These three options are not available for retirement plans or accounts with
a NAV of less than $1,000 and/or if the distribution would be less than $25.
Any net investment income will be distributed quarterly as dividends to
shareholders. Any net realized short- and long-term capital gains, if any, will
be paid to shareholders at least annually. The payment date will be used to
determine NAV when dividends and capital gains distributions are reinvested.
REDEMPTIONS
TIME AND METHOD OF REDEMPTION. Each Fund's shares are redeemed at NAV determined
as of the next close of the NYSE on a regular Business Day after the written
request by any person in proper form is received by the Fund, at 1250 Broadway,
New York, NY 10001-3701. Redemptions may be effected during regular Business
Days from 9:00 AM to 4:00 PM (New York time). Redemption requests received after
the close of business will be effected at the next calculated NAV.
WRITTEN AND TELEPHONE REDEMPTION REQUESTS. The Funds strongly suggest (but do
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 will be charged $2 for Class R redemption
checks issued by the Funds for less than $100, and $100 for Class I redemption
checks of less than $100,000. Upon request, redemptions will be made by bank
wire, however, Class R wire redemptions of less than $10,000 will be charged a
fee (currently $10) and Class I wire redemptions of less than $100,000 will also
be charged a fee (currently $100). The Funds assume no responsibility for delays
in the receipt of wired or mailed funds. The use of a predesignated financial
institution, such as a savings bank, credit union or savings and loan
association which is not a member of the Federal Reserve wire system to receive
your wire could cause such a delay. If a Fund has previously been advised in
writing of your brokerage or bank account, telephone requests will be accepted
by calling 800-637-1700. The Funds may be liable for any losses caused by their
failure to employ reasonable procedures. To reduce the risk of loss, proceeds of
telephone redemptions may be sent only (1) to the bank or brokerage account
designated by the shareholder on the Application or in a letter with the
signature(s) guaranteed; or (2) to the address of record if all the conditions
listed below are met. To change the designated brokerage or bank account it is
necessary to contact the Firm through which shares of the Fund were purchased
or, if purchased directly from the Funds, it is necessary to send a written
request to the Funds with signature(s) guaranteed as described below. Other
redemption orders must be in writing with the necessary signature(s) guaranteed
by a domestic commercial bank; a domestic trust company; a domestic savings
bank, credit union or savings association; or a member firm of a national
securities exchange. Guarantees from notaries public are unacceptable. The Funds
will waive the signature guarantee requirement for redemption requests once
every thirty (30) days if all of the following conditions apply: if the
redemption check is (1) for $5,000 or less; (2) payable to the shareholder(s) of
record; and (3) mailed to the shareholder(s) at the address of record. The
requirement of a guaranteed signature protects against an unauthorized person
redeeming shares and obtaining the redemption proceeds. Redemption instructions
and election of the plans described below may be made when your account is
opened. Subsequent elections and changes in instructions must be in writing with
the signature(s) guaranteed. Changes in registration or authorized signatories
may require additional documentation.
The Funds reserve the right to refuse a telephone redemption if they
believe it is advisable to do so. Procedures for telephone redemptions may be
modified or terminated by 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.
<PAGE> 22
AUTOMATIC WITHDRAWAL PLANS. (Class R shares only). If you have an account with a
balance of at least $5,000, you may make a written election to participate in
either of the following: (i) an Income Distribution Plan providing for monthly,
quarterly or annual payments by redemption of shares from reinvested dividends
or distributions paid to your account during the preceding period; or (ii) a
Fixed Amount Withdrawal Plan providing for the automatic redemption of a
sufficient number of shares of your account to make a specified monthly,
quarterly or annual payment of a fixed amount. Changes to instructions must be
in writing with signature(s) guaranteed. In order for such payments to continue
under either Plan, there must be a minimum of $25 available from reinvested
dividends or distributions. Payments can be made to you or your designee. An
application for the Automatic Withdrawal Plans can be obtained from the Funds.
The amount, frequency and recipient of the payments may be changed by giving
proper written notice to the Funds. The Funds may impose a charge or modify or
terminate any Automatic Withdrawal Plan at any time after the participant has
been duly notified. This privilege may not be available to clients of some Firms
or may be available subject to conditions or limitations.
RESERVE AUTOMATIC TRANSFER PLAN. (Class R shares only). You may redeem Class R
shares of a Fund by telephone (minimum $100) without charge if you have filed a
separate Reserve Automatic Transfer Plan application with the Fund. The proceeds
will be transferred between your Fund account and the checking, NOW or bank
money-market deposit account (as permitted) designated in the application. Only
such an account maintained in a domestic financial institution which is an
Automated Clearing House member may be so designated. Redemption proceeds will
be on deposit in your account at the Automated Clearing House member bank
ordinarily two (2) Business Days after receipt of the redemption request. The
Funds may impose a charge or modify or terminate this privilege at any time
after the participant has been duly notified. This privilege may not be
available to clients of some Firms or may be available subject to conditions or
limitations.
REDEMPTIONS THROUGH BROKERS AND FINANCIAL INSTITUTIONS. Redemptions through
brokers and financial institutions may involve such Firms' own redemption
minimums, service fees, and other redemption requirements.
RESTRICTIONS right of redemption may be suspended or the date of payment
postponed for more than seven (7) days only (a) when the NYSE is closed (other
than for customary closings), (b) when, as determined by the SEC, trading on the
NYSE is restricted or an emergency exists making it not reasonably practicable
to dispose of securities owned by the Fund or for it to determine fairly the
value of its net assets, or (c) for such periods as the SEC may by order permit.
If shares of a Fund are purchased by check or Reserve Automatic Transfer Plan,
the Fund may delay transmittal of redemption proceeds until such time as it has
assured itself that good payment has been collected for the purchase of such
shares, which will generally be up to ten (10) Business Days. When a purchase is
made by wire and subsequently redeemed, the proceeds from such redemptions
normally will not be transmitted until two (2) Business Days after the purchase
by wire.
GENERAL INFORMATION
JOINT OWNERSHIP. When an account is registered in the name of one person 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 joint owner
for actions taken by the other with respect to an account so registered. The
investment Application provides that persons so registering their account
indemnify and hold the Fund harmless for actions taken by either party.
BACKUP WITHHOLDING. The Funds are required by federal law to withhold 31% of
dividends and other distributions that are subject to federal income tax if (i)
a correct and certified Taxpayer Identification Number ("TIN") is not provided
for your account, (ii) you fail to certify that you have not been notified by
the IRS that you underreported taxable interest or dividend payments or (iii) a
Fund is notified by the IRS (or a broker) that the TIN provided is incorrect or
you are otherwise subject to backup withholding. Amounts withheld and forwarded
to the IRS can be credited as a payment of tax when completing your federal
income tax return. For individual shareholders, the TIN is the social security
number. However, special rules apply for certain accounts. For example, for an
account established under the Uniform Gift to Minors Act, the TIN of the minor
should be furnished. Shareholders should be aware that, under regulations
promulgated by the IRS, a Fund may be fined $50 annually for each account for
which a certified TIN is not provided or is incorrect. In the event that such a
fine is imposed, a corresponding charge will be made against the account.
REPORTS AND STATEMENTS. Shareholders receive an annual report containing audited
financial statements and an unaudited semiannual report. A statement is mailed
to each shareholder at least quarterly.
SMALL BALANCES. (Class R shares 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 reserve the right to impose a monthly fee (currently $5) or redeem the
account and remit the proceeds. The minimum balance requirement will be waived
if the account balance drops below $2,500 due to market depreciation. Some Firms
may establish variations of minimum balances and fee amounts if those variations
are approved by the Funds.
RESERVE EASY ACCESS. Easy Access is The Reserve Funds' 24-hour toll-free
telephone service that lets customers use a touch-tone phone to obtain price
information and account balances. To use it, call 800-637-1700 and follow the
instructions. Clients may also access full account activity for the previous six
months on the internet at www.reservefunds.com.
<PAGE> 23
SPECIAL SERVICES. The Funds reserve the right, upon notice, to charge
shareholder accounts for specific costs incurred in processing unusual
transactions for shareholders. Such transactions include, but are not limited
to, stop payment requests on official Trust checks, returned checks and special
research services.
PERFORMANCE. From time to time, in advertisements and sales literature, the
Funds may present information regarding the total return on a hypothetical
investment in a Fund for various periods of performance and may make comparisons
of such total return to various stock indices (group of unmanaged common
stocks), or to groups of mutual funds. Such comparative performance information
will also be stated in the same terms in which the comparative data or indices
are stated. For these purposes, the performance of a Fund, as well as the
performance of the other mutual funds, do not reflect sales charges, the
inclusion of which would reduce a fund's performance.
Total return for a period is the percentage change in value during the
period of an investment in the Fund's shares, including the value of shares
acquired through reinvestment of all dividends and capital gains distributions.
The average annual total return for a given period may be calculated by finding
the average annual compounded rate of return that would equate a hypothetical
$1,000 investment to the value that the investment could be redeemed for at the
end of the period. All of the calculations described above will assume the
reinvestment of dividends and distributions in additional shares of the Fund.
Performance of a Fund will vary from time to time, and past results are not
necessarily indicative of future results. Performance information supplied by
each Fund may not provide a basis of comparison with other investments using
different reinvestment assumptions or time periods.
THIS PROSPECTUS IS INTENDED TO CONSTITUTE AN OFFER BY EACH FUND ONLY OF THE
SECURITIES OF WHICH IT IS THE ISSUER AND IS NOT INTENDED TO CONSTITUTE AN OFFER
BY ANY FUND OF THE SECURITIES OF ANY OTHER FUND WHOSE SECURITIES ARE ALSO
OFFERED BY THIS PROSPECTUS. NO FUND INTENDS TO MAKE ANY REPRESENTATION AS TO THE
ACCURACY OR COMPLETENESS OF THE DISCLOSURE IN THIS PROSPECTUS RELATING TO ANY
OTHER FUND.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE> 24
GLOSSARY
The following terms are frequently used in this Prospectus.
EQUITY SECURITIES are, (i) common stocks, partnership interests, business trust
shares and other equity or ownership interests in business enterprises, and (ii)
securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
DEBT SECURITIES are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations.
FIXED-INCOME SECURITIES are debt securities and dividend-paying preferred stocks
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 other federal governmental entities.
FOREIGN GOVERNMENT SECURITIES are securities issued or guaranteed by
governments, quasi-governmental entities, governmental agencies or other federal
governmental entities, other than the U.S. government.
QUALIFYING BANK DEPOSITS are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which may or may not be members of the Federal Deposit Insurance
Corporation.
RULE 144A SECURITIES are securities that may be resold without registration
pursuant to Rule 144A under the Securities Act of 1933, as amended (the
"SECURITIES ACT").
1940 ACT is the Investment Company Act of 1940, as amended.
<PAGE> 25
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Shareholder Expenses............................ 2
Financial Highlights............................ 3
Investment Objectives and Policies.............. 6
Investment Techniques and Investments........... 9
Risk Considerations............................. 13
Management...................................... 14
How to Buy Shares............................... 16
Shares of Beneficial Interest................... 18
Taxes........................................... 18
Foreign Taxes................................... 19
Dividends and Distributions..................... 19
Redemptions..................................... 19
General Information............................. 20
Glossary........................................ 22
</TABLE>
Investors are advised to read and retain
this Prospectus for future reference.
1250 Broadway, New York, NY 10001-3701
General Information, Purchases and Redemptions
Nationwide 800-637-1700 - www.reservefunds.com
Distributor -- RESRV Partners, Inc.
RPES 04/99
23
<PAGE> 26
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 seven portfolios: 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 Mid-Cap Equity Fund (formerly Reserve Mid-Cap
Growth Fund), Reserve Small-Cap Growth Fund and Reserve Strategic Growth Fund
(each a "Fund", together the "Funds"). This Statement is not a Prospectus, but
provides detailed information to supplement the Prospectus, dated April 26, 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 April 26, 1999.
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
----
<S> <C>
Investment Policies ................................................. 2
Other Policies ...................................................... 2
Trustees and Executive Officers of the Trust ........................ 5
Investment Management and Other Agreements .......................... 7
Portfolio Turnover, Transaction Charges and Allocation .............. 10
Shares of Beneficial Interest ....................................... 11
Purchase, Redemption and Pricing of Shares .......................... 15
Distributions and Taxes ............................................. 16
Performance Information ............................................. 20
Financial Statements ................................................ 21
</TABLE>
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> 27
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;
(6) invest in voting securities or in companies for the purpose of exercising
control; and
(7) purchase securities on margin, except to obtain such short-term credits as
may be necessary for the clearance of transactions; however, 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 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.
OTHER POLICIES
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
<PAGE> 28
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.
ILLIQUID SECURITIES. No Fund may invest more than 15% of its net assets in
repurchase agreements which have a maturity of longer than seven (7) days or in
other illiquid securities, including securities that are illiquid by virtue of
the absence of a readily available market, or legal or contractual restriction
on resale. Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended ("Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven (7) days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven (7) days. A mutual fund might also have to register
such restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public.
Rule 144A establishes a "safe harbor" from the registration requirements of
the Securities Act for resales of certain securities to qualified institutional
buyers. The Adviser anticipates that the market for certain restricted
securities such as institutional commercial paper will expand further as a
result of this new regulation and the development of automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL(R) System sponsored by the NASD.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act for which there is a readily available market will not be deemed
to be illiquid if they meet guidelines established by the Board of Trustees. The
Adviser will monitor the liquidity of such restricted securities subject to the
supervision of the Board of Trustees. In reaching liquidity decisions, the
Adviser will consider, among other things, the following factors: (1) the
frequency of trades and quotes for the security; (2) the number of dealers
wishing to purchase or sell the security and the number of potential purchasers;
(3) dealer undertakings to make a market in the security and (4) the nature of
the security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). Repurchase agreements subject to demand are deemed to have a
maturity equal to the notice period. Investing in Rule 144A securities could
have the effect of increasing the level of the Fund's illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities.
<PAGE> 29
SECURITIES OF FOREIGN COMPANIES. (Reserve International Equity Fund only).
Investing in foreign securities may result in greater risk than that incurred by
investing in domestic securities. There is generally less publicly available
information about foreign companies compared to reports and ratings that are
published about companies in the 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.
RISKS OF OPTIONS TRANSACTIONS. An exchange-traded option position may be closed
out only on a national securities exchange ("Exchange") which provides a
secondary market for an option of the same series. Although 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.
<PAGE> 30
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.
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.
TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST
The Trustees and officers of the Trust and their principal occupations during
the past five years are set forth below.
++BRUCE R. BENT, 61, 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, Vice President and Secretary of Reserve Management Company, Inc.
("RMCI") and Reserve Management Corporation ("RMC"); and Chairman and Director
of Resrv Partners, Inc. ("RESRV").
+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.
<PAGE> 31
The Reverend Harrington is President of St. John's University, NY, a
Trustee RF, RIT, RTET, RNYTET and RPES and a Director of the Bear Stearns
Companies, Inc. since 1993.
+WILLIAM E. VIKLUND, 58, Trustee, 110 Grist Mill Lane, Plandome Manor, NY
11030-1110.
Mr. Viklund is formerly President and COO of Bancorp and President and CEO
of Long Island Savings (1980-1996). He is currently Trustee of RF, RIT, RTET,
RNYTET and RPES.
++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.
+DIANA P. HERRMANN, 40, Trustee, 380 Madison Avenue, Suite 2300, New York, NY
10017.
Ms. Herrmann is President and COO of Aquila Management Corporation,
sponsors of 14 mutual funds with over $3 billion in assets, as of October 5,
1998. Prior to joining Aquila in 1986. Ms. Herrmann was employed with European
American Bank in New York and was board member and Secretary of Bank Credit
Association. She is currently Trustee of RF, RIT, RTET, RNYTET and RPES.
+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. Previously, Mr. Bassuk joined
Starrett Housing Corporation in 1973 and was President and COO from 1981 to
1993. He is currently Trustee of RF, RIT, RTET, RNYTET and RPES.
ARTHUR T. BENT III, 30, 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. 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. Prior to that, Ms. Foynes worked for the U.S. House of
Representatives as a District Manager for a Member of Congress.
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. Prior to that, he
was Assistant Vice President, Bank of New York; Assistant Vice President, Fifth
Third Bank; Vice President, Smith Barney; and, Assistant Vice President, Drexel
Burnham Lambert.
- ----------------
+ Messrs. Bassuk, Ehlert, Emmet, Harrington, Viklund and Ms. Herrmann are
members of a Review Committee which performs the functions of an Audit Committee
and reviews compliance procedures and practices.
<PAGE> 32
++ Interested Trustee within the meaning of the 1940 Act. The members of the
Board of Trustees who are not Interested Trustees will be paid a stipend of
$3,500 for each joint Board meeting they attend and an annual fee of $16,000 for
service to all of the trusts in the complex.
Under the Declaration of Trust, the Trustees and officers are entitled to
be indemnified by the Trust to the fullest extent permitted by law against all
liabilities and expenses reasonably incurred by them in connection with any
claim, suit or judgment or other liability or obligation of any kind in which
they become involved by virtue of their service as a Trustee or officer of the
Trust, except liabilities incurred by reason of their willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of their office.
As of March 26, 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, 1998
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST AND TRUST COMPLEX
NAME OF TRUSTEE, POSITION FROM TRUST (4 ADDITIONAL TRUSTS) PAID TO TRUSTEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bruce R. Bent, President and Trustee $ 0 $ 0
Edwin Ehlert, Jr., Trustee $128.95 $30,000
Henri W. Emmet, Trustee $128.95 $30,000
Rev. Donald J. Harrington, Trustee $128.95 $30,000
</TABLE>
INVESTMENT MANAGEMENT AND OTHER AGREEMENTS
THE ADVISER. Reserve Management Company, Inc. ("RMCI" or "Adviser") 1250
Broadway, New York, NY 10001, 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 ordinary
operating costs of each Fund pursuant to the Investment Management Agreement
which include: registration fees paid to the commission and state regulators,
costs associated with the annual update of each Fund's registration statement,
auditing annual financial statements, and printing and mailing costs (exclusive
of those associated with the Distribution Plan). Excluded from ordinary
operating costs are interest charges, taxes, brokerage fees, extraordinary legal
and accounting fees and expenses, payments made pursuant to the Trust's
Distribution Plan and the fees of the disinterested Trustees, for which 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:
<PAGE> 33
<TABLE>
<CAPTION>
COMPREHENSIVE MANAGEMENT FEE*
-------------------------------------------------
CLASS R SHARES CLASS I SHARES
<S> <C> <C>
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%
</TABLE>
- -------------
* As a percentage of the average daily net assets attributable to each Class.
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, 1996, 1997 and 1998, the fees payable to
the Adviser under the Investment Management Agreement amounted to $337,840,
$545,982 and $795,252, respectively.
THE SUB-ADVISER. The Adviser and the Trust have entered into 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 1998 1997 1996
- ---- ----------- ---- ---- ----
<S> <C> <C> <C> <C>
Reserve Blue Chip Growth Trainer, Wortham & Company, Inc. $ 0 $ 0 $ 0
845 Third Avenue
New York, NY 10022
Reserve Informed Investors Growth T.H. Fitzgerald & Co. $ 0 $ 0 $ 0
180 Church Street
Naugatuck, CT 06770
Reserve International Equity Pinnacle Associates, Ltd. $ 29,000 $ 0 $ 0
666 Fifth Avenue
New York, NY 10103
Reserve Large-Cap Growth Siphron Capital Management $ 0 $ 0 $ 0
280 S. Beverly Drive
Beverly Hills, CA 90212
</TABLE>
<PAGE> 34
<TABLE>
<S> <C> <C> <C> <C>
Reserve Mid-Cap Equity* Pekin, Singer & Shapiro N/A N/A N/A
Asset Management
311 South Wacker Drive
Chicago, IL 60606
Reserve Small-Cap Growth Roanoke Asset Management $ 0 $ 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>
- -------------
* Until June 30, 1998, Southern Capital Advisors, 50 Front Street, Memphis,
TN 38103, served as the Sub-Adviser for Reserve Mid-Cap Growth Fund, which
has been re-named Reserve Mid-Cap Equity Fund. For the fiscal years ended
May 31, 1998 and 1997 and the period from March 13, 1996 to May 31, 1996,
Southern Capital Advisors was paid sub-advisory fees amounting to $0, $0,
and $0, respectively.
** 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.
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.
DISTRIBUTION AGREEMENT. Resrv Partners, Inc. ("RESRV"), 1250 Broadway, New
York, NY 10001, 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 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.
<PAGE> 35
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, 1998, with respect to the qualified
accounts, the Trust made assistance payments to Firms for expenditures under the
Plan in the aggregate amount of $123,792, which constituted 0.25% of the Fund's
average daily net assets attributable to the Class R shares (formerly known as
Class A shares and including the former Class D shares) during the period. Of
the $123,792 paid by the Trust under the Plan, with respect to the Class A
shares, $194 was spent on advertising, $43,159 was spent on the printing and
mailing of prospectuses for persons other than current shareholders, $81,437 was
spent for compensation to brokers and dealers and other financial intermediaries
and $223 was spent on printing of sales literature, travel, entertainment, due
diligence and other promotional expenses. The excess was absorbed by the
Distributor.
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, 1301 Avenue of
Americas, New York, NY 10019 is the Trust's independent accountants.
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 455% under normal market
conditions, but is not expected to exceed 500%. 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.
<PAGE> 36
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, 1996, 1997 and 1998, the Trust paid
$106,504, $164,911 and $242,827, respectively, in brokerage commissions with
respect to portfolio transactions aggregating $57,755,867, $113,307,153 and
$183,924,454, respectively. All of the amount paid in fiscal 1998 in brokerage
commissions was to brokers or dealers who provide research and investment
services.
For the period of March 13, 1996 through May 31, 1996 and for the fiscal
years ended May 31, 1997 and 1998, the Reserve Mid-Cap Equity Fund (formerly
Reserve Mid-Cap Growth Fund) paid $0, $955 and $6,740, respectively, in
brokerage commissions with respect to portfolio transactions to Morgan Keegan,
an affiliate of Southern Capital Advisors, the former Sub-Adviser to the Fund.
For the fiscal year ended May 31, 1998, the amount paid to Morgan Keegan
represented 52% of the aggregate brokerage commissions paid by the Fund and
0.009% of the aggregate dollar amount of the Fund's portfolio transactions.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trust to issue an unlimited number of
full and fractional shares of beneficial interest, and to divide or combine the
shares into a greater or lesser number of shares without thereby changing the
proportionate beneficial interests in the Trust. 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
<PAGE> 37
vote together for the election of Trustees and have noncumulative voting rights,
meaning that the holders of more than 50% of the shares voting for the election
of Trustees could elect all Trustees if they so choose, and in such event the
holders of the remaining shares could not elect any person to the Board of
Trustees.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration protects a Trustee against any liability to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
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 March 26, 1999, the following persons owned of record or
beneficially 5% or more of the Funds outstanding shares:
RESERVE BLUE CHIP GROWTH FUND
<TABLE>
<CAPTION>
Name and Address Title of Percentage Nature of
of Beneficial Owner Class of Shares Ownership
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bear Stearns Securities Corp. R 13.2% Record
FBO 105-03293-23
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 7.8% Record
FBO 105-03292-24
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 10.0% Record
FBO 105-03296-20
1 Metrotech Center North
Brooklyn, NY 11201-3859
Reserve Management Corp. R 7.2% Record
Defined Benefit Pension Plan
1250 Broadway
New York, NY 10001-3701
</TABLE>
<PAGE> 38
<TABLE>
<S> <C> <C> <C>
Reserve Management Co., Inc. I 100% Beneficial
1250 Broadway
New York, NY 10001-3701
</TABLE>
RESERVE INFORMED INVESTORS GROWTH FUND
<TABLE>
<CAPTION>
Name and Address Title of Percentage Nature of
of Beneficial Owner Class of Shares Ownership
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bear Stearns Securities Corp. R 10.5% Record
FBO 105-03292-24
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 11.1% Record
FBO 105-03296-20
1 Metrotech Center North
Brooklyn, NY 11201-3859
Reserve Management Corp. R 8.7% Record
Defined Benefit Pension Plan
1250 Broadway
New York, NY 10001-3701
Bear Stearns Securities Corp. R 8.6% Record
FBO 105-03293-23
1 Metrotech Center North
Brooklyn, NY 11201-3859
Reserve Management Co., Inc. I 100% Beneficial
1250 Broadway
New York, NY 10001-3701
</TABLE>
RESERVE INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
Name and Address Title of Percentage Nature of
of Beneficial Owner Class of Shares Ownership
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Washington Trust Bank TTEE FBO R 24.7% Record
Washington Power-Reclamation Trust
P.O. Box 2127
Spokane, WA 99210-2127
Charles Schwab & Co. Inc. R 18.6% Record
Special Custody Account F/B/O Customer
101 Montgomery St.
Attn: Mutual Fds.
San Francisco, CA 94104
Wabanc & Co. R 16.2% Record
C/O Washington Trust Co.
</TABLE>
<PAGE> 39
<TABLE>
<S> <C> <C> <C>
P.O. Box 2127 Trust Ops
Spokane, WA 99210-2121
Washington Trust Bank TTEE FOB R 15.8% Beneficial
Washington Water Power-Veba Trust
P.O. Box 2127
Spokane, WA 99210
Reserve Management Co., Inc. I 100% Beneficial
1250 Broadway
New York, NY 10001-3701
</TABLE>
RESERVE LARGE-CAP GROWTH FUND
<TABLE>
<CAPTION>
Name and Address Title of Percentage Nature of
of Beneficial Owner Class of Shares Ownership
- ----------------------------------------------- ----------- -------------- ----------------------
Bear Stearns Securities Corp. R 13.2% Record
FBO 105-03293-23
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 9.9% Record
FBO 105-03296-20
1 Metrotech Center North
Brooklyn, NY 11201-3859
Charles Schwab & Co. Inc. R 7.9% Record
Special Custody Acct.
101 Montgomery St.
San Francisco, CA 94104
Bear Stearns Securities Corp. R 6.5% Record
FBO 105-03292-24
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bankers Trust as Custodian I 99.9% Beneficial
300 South Grand Avenue
Los Angeles, CA 90071
RESERVE MID-CAP EQUITY FUND
Name and Address Title of Percentage Nature of
of Beneficial Owner Class of Shares Ownership
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bear Stearns Securities Corp. R 24.9% Record
FBO 105-03293-23
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 15.4% Record
FBO 105-03292-24
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 16.2% Record
FBO 105-03296-20
1 Metrotech Center North
</TABLE>
<PAGE> 40
<TABLE>
<S> <C> <C> <C>
Brooklyn, NY 11201-3859
Reserve Management Corp. R 7.9% Record
Defined Benefit Pension Plan
1250 Broadway
New York, NY 10001-3701
Bear Stearns Securities Corp. R 5.3% Beneficial
FBO 105-00108-24
1 Metrotech Center North
Brooklyn, NY 11201-3859
Reserve Management Corporation R 5.1% Record
Account 752508360
1250 Broadway
New York, NY 10001-3701
Reserve Management Co., Inc. I 100% Beneficial
1250 Broadway
New York, NY 10001-3701
</TABLE>
RESERVE SMALL-CAP GROWTH FUND
<TABLE>
<CAPTION>
Name and Address Title of Percentage Nature of
of Beneficial Owner Class of Shares Ownership
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bear Stearns Securities Corp. R 11.6% Record
FBO 105-03296-20
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 11.4% Record
FBO 105-03292-24
1 Metrotech Center North
Brooklyn, NY 11201-3859
Bear Stearns Securities Corp. R 10.1% Record
FBO 105-03293-23
1 Metrotech Center North
Brooklyn, NY 11201-3859
Reserve Management Corp. R 7.0% Record
Account 614404496
1250 Broadway
New York, NY 10001-3701
Reserve Management Corp Defined R 7.6% Record
Benefit Pension Plan
1250 Broadway
New York, NY 10001-3701
Reserve Management Co., Inc. R 5.2% Beneficial
401(K) Employee Savings Plan
1250 Broadway
New York, NY 10001-3701
Reserve Management Co., Inc. I 100% Beneficial
1250 Broadway
New York, NY 10001-3701
</TABLE>
PURCHASE, REDEMPTION AND PRICING OF SHARES
<PAGE> 41
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.
NET ASSET VALUE. Shares are offered at NAV which is calculated for each
Fund and class at the end of each Business Day (currently 4:00 PM New York time)
that the NYSE is open for trading and on other days there is a sufficient degree
of trading to materially affect the Fund's NAV. The NAV is not calculated on
regional banking holidays or 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 days the
NYSE is closed for trading. The NAV per share of each class is determined by
adding the value of all its securities and other assets, subtracting its
liabilities and dividing the result by the total number of outstanding shares of
each class that represent an interest in the Fund.
Investment securities are valued at the last sale price on the securities
exchange or national securities market on which such securities are primarily
traded. Securities not listed on an exchange or national securities market, or
securities in which there were no transactions, are valued at the average of the
last bid and asked prices, except in the case of open short positions where the
asked price is used for valuation purposes. Bid price is used when no asked
price is available. Market quotations for foreign securities in foreign
currencies are translated into 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.
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.
SHARE CERTIFICATES: Share certificates are not issued by the Trust.
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,
<PAGE> 42
designated as capital gain dividends may be taxable to individuals and certain
other shareholders at the maximum federal 20% capital gains rates, depending
upon the Fund's holding period for the assets giving rise to the capital gains,
regardless of how long the shareholder has held the Fund's shares. The maximum
20% capital gains rate generally applies to gains from the sale of assets held
for more than 12 months. Capital gain from the sale of assets held for one year
or less will generally be taxed as ordinary income.
Upon the taxable disposition (including a sale or redemption) of shares of
a Fund, a shareholder may realize a gain or loss depending upon his basis in his
shares. Such gain or loss generally will be treated as capital gain or loss if
the shares are capital assets in the shareholder's hands. Capital gains may be
taxable to individuals and certain other shareholders at the maximum federal 20%
capital gains rate, depending upon the shareholder's holding period for the
shares. However, a loss realized by a shareholder on the disposition of Fund
shares with respect to which capital gain dividends have been paid will, to the
extent of such capital gain dividends, be treated as long-term capital loss if
such shares have been held by the shareholder for six months or less. Further, a
loss realized on disposition will be disallowed to the extent the shares
disposed of are replaced (whether by reinvestment of distributions or otherwise)
within a period of 61 days beginning 30 days before and ending 30 days after the
shares are disposed of. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss.
Shareholders receiving distributions in the form of additional shares of a
Fund will have a cost basis for federal income tax purposes in each share
received equal to the NAV of a share of that Fund on the reinvestment date. An
exchange of shares in a Fund for shares of another RPES Fund will be treated as
a taxable sale of the exchanged Fund shares. Accordingly, a shareholder may
recognize a gain or loss for federal income tax purposes depending upon his or
her basis in the Fund shares exchanged. A gain or loss will be treated as a
capital gain or loss if the shares are capital assets in the shareholder's
hands. The shareholder will have a tax basis in the newly acquired Fund shares
equal to the amount invested and will begin a new holding period for federal
income tax purposes.
In order to qualify as a "regulated investment company" under the Code,
each of the Funds must, among other things, (i) derive in each taxable year at
least 90% of its gross income from dividends, interest, payments from certain
securities loans, and gains from the sale of stock, securities or foreign
currencies or other income (such as gains from options, futures or forward
contracts) from investing in stock, securities or currencies; and (ii) hold as
of the close of each quarter at least 50% of its assets in certain investments
assets, such as cash, U.S. government securities, securities of other regulated
investment companies and other securities, with such other securities limited
from any issuer to not more than 5% of the value of the Fund's total assets and
10% of the outstanding voting securities of such issuer, and hold not more than
25% of the value of the Fund's assets in the securities of any one issuer (other
than 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.
<PAGE> 43
Investment by a Fund in zero coupon or other discount debt securities will
result in income to the Fund equal to a portion of the excess of the face value
of the debt securities over their issue price (the "original issue discount")
each year that the securities are held, even though the Fund receives no cash
interest payments. This income is included in determining the amount of income
which a Fund must distribute to maintain its status as a regulated investment
company and to avoid the payment of federal income tax and the 4% excise tax. In
addition, if a Fund invests in certain high-yield original issue discount
securities issued by corporations, a portion of the original issue discount
accruing on any such obligation may be eligible for the deduction for dividends
received by corporations. In such event, dividends of investment company taxable
income received from a Fund by its corporate shareholders to the extent
attributable to such portion of accrued original issue discount, may be eligible
for this deduction for dividends received by corporations if so designated by
the Fund in a written notice to shareholders. Gains derived by a Fund from the
disposition of any market discount bonds (i.e., bonds purchased other than at
original issue, where the face value of the bonds exceeds their purchase price)
held by a Fund will be taxed as ordinary income to the extent of the accrued
market discount of the bonds, unless the Fund elects to include the market
discount in income as it accrues.
The Code includes rules applicable to certain non-equity listed options,
futures contracts, and options on futures contracts which a Fund may write,
purchase or sell. Such options and contracts are classified as Section 1256
contracts under the Code. The character of gain or loss resulting from the sale,
disposition, closing out, expiration or other termination of Section 1256
contracts is generally treated as long-term capital gain or loss to the extent
of 60% thereof and short-term capital gain or loss to the extent of 40% thereof
("60/40 gain or loss"). Such contracts generally are required to be treated as
sold at market value on the last day of such fiscal year and on certain other
dates for federal income tax purposes ("marked-to-market"). Generally, equity
options (options to buy or sell stocks) are not classified as Section 1256
contracts and are not subject to the marked-to-market rule or to 60/40 gain or
loss treatment. Any gains or losses recognized by a Fund from transactions in
equity options generally constitute short-term capital gains or losses. If
equity call options written, or equity put options purchased, by a Fund are
exercised, the gain or loss realized on the sale of the underlying securities
may be either short-term or long-term, depending on the holding period of the
securities. In determining the amount of gain or loss, the sales proceeds are
reduced by the premium paid for equity puts or increased by the premium received
for equity calls.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains or losses realized by a Fund. In addition, losses
realized by a Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to a Fund of engaging in hedging transactions
are not entirely clear. Hedging transactions may increase the amount of
short-term capital gain realized by the Fund which is taxed as ordinary income
when distributed to shareholders. In addition, certain carrying charges
(including interest expense) associated with positions in a straddle may be
required to be capitalized rather than deducted currently.
A Fund may make one or more of the elections available under the Code which
are applicable to straddles. If a Fund makes any of the elections, this amount,
character and timing of gains or losses from the affected straddle positions
will be determined under rules that vary according to the election(s) made. The
rules applicable under certain of the elections may operate to accelerate the
recognition of gains or losses from the affected straddle positions.
Because the straddle rules may affect the character of gains or losses,
defer losses and/or accelerate the recognition of gains or losses from the
affected straddle position, the amount which may be distributed to shareholders,
and which will be taxed as ordinary income or capital gain, may be increased or
decreased as compared to a fund that did not engage in such hedging
transactions. Recently enacted rules may affect
<PAGE> 44
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
<PAGE> 45
shares are treated as excess distributions. Excess distributions are
characterized as ordinary income even though, absent application of the PFIC
rules, certain excess distributions might have been classified as capital gain.
A Fund may be eligible to elect alternative tax treatment with respect to
PFIC shares. Under an election that currently is available in some
circumstances, the Fund generally would be required to include in its gross
income its share of the earnings of a PFIC on a current basis, regardless of
whether distributions are received from the PFIC in a given year. If this
election were made, the special rules, discussed above, relating to the taxation
of excess distributions, would not apply. In addition, another election may be
available that would involve marking to market the Fund's PFIC shares at the end
of each taxable year (and on certain other dates prescribed in the Code), with
the result that unrealized gains are treated as though they were realized. If
this election were made, tax at the Fund level under the PFIC rules would
generally be eliminated, but the Fund could, in limited circumstances, incur
nondeductible interest charges.
Because the application of the PFIC rules may affect, among other things,
the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC shares, as well as subject a Fund to
tax on certain income from PFIC shares, the amount that must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
capital gain, may be increased or decreased as compared to a fund that did not
invest in PFIC shares.
A Fund generally will be required to withhold federal income tax at a rate
of 31% ("backup withholding") from dividends paid, capital gain distributions,
and redemption proceeds to shareholders if (i) the shareholder fails to furnish
the Fund with the shareholder's correct taxpayer identification number or social
security number, (ii) the IRS notifies the shareholder or the Fund that the
shareholder has failed to report properly certain interest and dividend income
to the IRS and to respond to notices to that effect, or (iii) when required to
do so, the shareholder fails to certify that he or she is not subject to backup
withholding. Any amounts withheld may be credited against the shareholder's
federal income tax liability.
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:
<PAGE> 46
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.
FINANCIAL STATEMENTS
Financial Statements (audited) for the Trust for the fiscal year ended May
31, 1998, including notes thereto, are incorporated by reference in the SAI from
the Trust's Annual Report to Shareholders dated May 31, 1998 filed with the SEC
on July 31, 1998.
<PAGE> 47
Part C
Item 24. Financial Statements and Exhibits
(a) Financial Statements Included in Part A:
Financial Highlights
Financial Statements Included in Part B:
Financial Statement (audited) for the Trust for the fiscal year
ended May 31, 1998, including notes thereto, are incorporated by
reference in the Statement of Additional Information from the
Registrant's Annual Report dated as of May 31, 1998 filed with
the Securities and Exchange Commission on July 31, 1998.
Financial Statements Included in Part C:
None
(b) Exhibits
(1) Amended and Restated Declaration of Trust.
(2) Bylaws was filed as an Exhibit to the Registrant's
Registration Statement filed July 24, 1998 and is herewith
incorporated by reference.
(3) Not Applicable.
(4) Not Applicable.
(5)(a) Form of Investment Management Agreement between the Registrant
and Reserve Management Company, Inc. was filed as an Exhibit
to the Registrant's Registration Statement filed May 25, 1993
and is herewith incorporated by reference.
(b) Form of Sub-Investment Management Agreements between the
Registrant, Reserve Management Company, Inc. and Sub-Adviser,
is herewith incorporated by reference.
(6)(a) Form of Distribution Agreement between the Registrant and
Resrv Partners, Inc. was filed as an Exhibit to the
Registrant's Registration Statement filed May 25, 1993 and is
herewith incorporated by reference.
<PAGE> 48
(b) Form of Dealer Agreement was filed as an Exhibit to the Registrant's
Registration Statement filed May 25, 1993 and is herewith incorporated by
reference.
(7) Pension Plan of Reserve Management corporation was filed as an exhibit to
Post-Effective Amendment No. 32 of The Reserve Fund, File No. 2-36429;
amendments to Pension Plan filed as an exhibit to Post-Effective No. 45 of
The Reserve Fund (File No. 2-36429) dated July 31, 1989 and is herewith
incorporated by reference.
(8) Form of Custodian Agreement between Registrant and Custodial Trust Company
was filed as an Exhibit to Pre-effective Amendment No. 1 filed September
3, 1993 and is herewith incorporated by reference.
(9) Not Applicable.
(10) Opinion of counsel.
(11) Consent of Independent Accountants.
(12) Not Applicable.
(13) Form of Subscription Agreement was filed as an Exhibit to the Registrant's
Registration Statement filed May 25, 1993 and is herewith incorporated by
reference.
(14) Not Applicable.
(15) Distribution Plan was filed as an Exhibit to the Registrant's Registration
Statement Post-Effective Amendment No. 12 filed July 24, 1998 and is
herewith incorporated by reference.
(16) Not Applicable.
(17) Financial Data Schedules.
(18) Multiple Class Plan.
(24) Powers of Attorney.
- -----------
* To be filed with a later Post-Effective Amendment.
2
<PAGE> 49
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
As of March 26, 1999 recordholders of the Registrant were as
follows:
<TABLE>
<CAPTION>
Class R Class I
------- -------
<S> <C> <C>
Blue Chip Growth 1,075 1
Small-Cap Growth 1,133 1
Informed Investors Growth 1,004 1
Mid-Cap Equity 929 1
International Equity 960 1
Large-Cap Growth 1,089 2
</TABLE>
Item 27. Indemnification
Reference is made to Section 10.02 of the Registrant's Declaration of
Trust. No indemnification shall be provided hereunder to a Covered person:
Section 10.02 provides that
(i) who shall have been adjudicated by a court or other body including,
without limitation, arbitration panels or self-regulatory organizations
before which the proceeding was 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.
3
<PAGE> 50
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Covered Persons,
and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
Subsection 10.02(a) of this Section 10.02 may be paid by the Trust or Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be
paid over by him to the Trust or Series if it is ultimately determined that he
is not entitled to indemnification under this Section 10.02; provided, however,
that either (i) such Covered Person shall have provided appropriate security
for such undertaking, (ii) the Trust is insured against losses arising out of
any such advance payments or (iii) either a majority of the Trustees who are
neither Interested Persons of the Trust nor parties to the matter, or
independent legal counsel in a written opinion, shall have determined, based
upon a review of readily available facts (as opposed to a trial-type inquiry or
full investigation), that there is reason to believe that such Covered Person
will be found entitled to indemnification under Section 10.02.
Each Trustee, officer, employee or agent of the registrant, and any
person who has served at it request as Director, Trustee, officer or employee
of another business entity, shall be entitled to be indemnified by the
Registrant to the fullest extent permitted by the laws of the State of
Delaware, subject to the provisions of the Investment Company Act of 1940 and
the rules and regulations thereunder.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officer and controlling persons of the
Registrant pursuant to the Declaration to Trust or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange commission such
indemnification against such liabilities (other than the payment by the
Registrant of any expenses incurred or paid by a Trustee, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate public policy as express in the Act
and will governed the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Henry B. R. Brown -- President, Treasurer and Director. Mr. Brown is
President, Treasurer and a Director of Reserve Management Corporation of the
same address as the Trust; Director and Treasurer of Transfer Agent Inc., 5
Cornwall Street, N.W., Leesburg, VA 22075.
Bruce R. Bent -- Vice President, Secretary and Director. Mr. Bent is
Vice President, Secretary and a Director of Reserve Management Corp., and a
Director of Resrv Partners, Inc. both of the same address of the Trust.
3
<PAGE> 51
Item 29. Principal Underwriters
Resrv Partners, Inc., the principal underwriter of the Registrant, also
acts as principal underwriter to The Reserve Fund, Reserve Institutional Trust,
Reserve Tax-Exempt Trust, and Reserve New York Tax-Exempt Trust.
Bruce R. Bent, 1250 Broadway, New York, NY 10001
Chairman and Director
President, Treasurer and Trustee of the Trust
Item 30. Location of Accounts and Records
All records required to maintained by Section 31(a) of the 1940 Act and
the Rules promulgated thereunder are maintained at 1250 Broadway, New York NY
10001-3701 except those relating to receipts and deliveries of securities,
which are maintained by the Registrant's Custodians and certain records
regarding portfolio transactions which are maintained at the offices of the
Sub-Advisers: T.H. Fitzgerald & Co., Research Center, 305 Center Rd., Easton,
CT 00612; Trainer, Wortham & Company, Inc., 845 Third Avenue, New York, NY
10022,; Roanoke Asset Management, 529 Fifth Avenue, New York, NY 10017.
Pinnacle Associates Ltd., 666 Fifth Avenue, 14th Floor, New York, NY 10103;
Siphron Capital Management, 280 S. Beverly Drive, Beverly Hills, CA 90212;
Pekin, Singer & Shapiro Assets Management, 311 South Wacker Drive, Chicago, IL
60606; and, Condor Capital Investment Management, 1973 Washington Valley Road,
Martinsville, NJ 08836.
Item 31. Management Services
See "Investment Management and Other Agreements" in Part B.
Item 32. Undertakings
The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders
upon request and without charge.
5
<PAGE> 52
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Post-Effective Amendment No. 15 to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and the State of New York, on the 19 day of April, 1999.
RESERVE PRIVATE EQUITY SERIES
By /s/ Bruce R. Bent
-----------------------
Bruce R. Bent
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 15 has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
----------- ------ -------
<S> <C> <C>
By: /s/ Bruce R. Bent President, Treasurer April 19, 1999
---------------------- and Trustee
(Bruce R. Bent)
By: * Trustee April 19, 1999
----------------------
(Edwin Ehlert, Jr.)
By: * Trustee April 19, 1999
----------------------
(Henri W. Emmet)
By: * Trustee April 19, 1999
----------------------
(Donald J. Harrington)
By: /S/ Bruce R. Bent II SVP, Assistant Secretary April 19, 1999
---------------------- and Trustee
(Bruce R. Bent II)
By: * Trustee April 19, 1999
----------------------
(William Viklund)
By: * Trustee April 19, 1999
----------------------
(Richard Bassuk)
By: * Trustee April 19, 1999
----------------------
(Diana P. Herrmann)
By: /s/ MaryKathleen Foynes April 19, 1999
--------------------------
* MaryKathleen Foynes
as Attorney-in-Fact
</TABLE>
6
<PAGE> 53
Exhibits
(1) Amended and Restated Declaration of Trust
(11) Consent of Independent Accountants
(10) Opinion of Counsel
(17) Financial Data Schedules
(18) Multiple Class Plan
(24) Powers of Attorney
7
<PAGE> 1
DECLARATION OF TRUST
OF
RESERVE PRIVATE EQUITY SERIES
DATED: APRIL 20, 1993
(AS AMENDED THROUGH MARCH 3, 1999)*
- -----------------------
*Also amended to correct typographical errors
<PAGE> 2
RESERVE PRIVATE EQUITY SERIES
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I NAME AND DEFINITION
Section 1.01 Name ........................................................1
Section 1.02 Definitions .................................................1
ARTICLE II BENEFICIAL INTEREST
Section 2.01 Shares of Beneficial Interest ...............................2
Section 2.02 Issuance of Shares ..........................................2
Section 2.03 Register of Shares and Share Certificates ...................2
Section 2.04 Transfer of Shares ..........................................2
Section 2.05 Treasury Shares .............................................3
Section 2.06 Establishment of Series .....................................3
Section 2.07 Investment in the Trust .....................................3
Section 2.08 Assets and Liabilities of Series ............................3
Section 2.09 No Preemptive Rights ........................................4
Section 2.10 No Personal Liability of Shareholder ........................4
Section 2.11 Assent to Trust Instrument ..................................4
ARTICLE III THE TRUSTEES
Section 3.01 Management of the Trust .....................................4
Section 3.02 Initial Trustees ............................................5
Section 3.03 Term of Office...............................................5
Section 3.04 Vacancies and Appointments ..................................5
Section 3.05 Temporary Absence ...........................................6
Section 3.06 Number of Trustees ..........................................6
Section 3.07 Effect of Ending of a Trustee's Service .....................6
Section 3.08 Ownership of Assets of the Trust ............................6
ARTICLE IV POWERS OF THE TRUSTEES
Section 4.01 Powers ......................................................6
Section 4.02 Issuance and Repurchase of Shares ...........................8
Section 4.03 Trustees and Officers as Shareholders .......................8
Section 4.04 Action by the Trustees ......................................9
Section 4.05 Chairman of the Trustees ....................................9
Section 4.06 Principal Transactions ......................................9
ARTICLE V EXPENSES OF THE TRUST ............................................................9
ARTICLE VI INVESTMENTS ADVISERS, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
Section 6.01 Investment Adviser .........................................10
Section 6.02 Principal Underwriter ......................................10
Section 6.03 Administrator ..............................................10
Section 6.04 Transfer Agent .............................................10
Section 6.05 Parties to Contract ........................................11
Section 6.06 Provisions and Amendments ..................................11
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers ..............................................11
Section 7.02 Meetings ...................................................12
Section 7.03 Quorum and Required Vote ...................................12
ARTICLE VIII CUSTODIAN
Section 8.01 Appointment and Duties .....................................12
Section 8.02 Central Certificate System .................................13
ARTICLE IX DISTRIBUTION AND REDEMPTIONS
Section 9.01 Distributions .............................................13
Section 9.02 Redemptions ...............................................13
Section 9.03 Determination of Net Asset Value and Valuation of
Portfolio Assets ..........................................13
Section 9.34 Suspension of the Right of Redemption .....................14
Section 9.05 Redemption of Shares in Order
to Qualify as Regulated Investment Company ................14
ARTICLE X LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10 01 Limitation of Liability ...................................15
Section 10.02 Indemnification ...........................................15
Section 10.03 Shareholders ..............................................16
ARTICLE XI MISCELLANEOUS
Section 11.01 Trust Not a Partnership ....................................16
Section 11.02 Trustee's Good Faith Action, Expert Advice, No Bond
or Surety ..................................................16
Section 11.03 Establishment of Record Dates ..............................16
Section 11.04 Termination of Trust .......................................17
Section 11.05 Reorganization .............................................17
Section 11.06 Filing of Copies, References, Headings .....................18
Section 11.07 Applicable Law .............................................18
Section 11.08 Amendments .................................................18
Section 11.09 Fiscal Year ................................................19
Section 11.10 Use of Name ................................................19
Section 11.11 Provisions in Conflict With Law ............................19
</TABLE>
<PAGE> 4
RESERVE PRIVATE EQUITY SERIES
TRUST INSTRUMENT, made by Bruce R. Bent, Edwin Ehlert. Jr., Henri W.
Emmet, Donald J. Harrington and Niels W. Johnsen (the "Trustees").
WHEREAS, the Trustees desire to establish a business trust for the
investment and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property
contributed to the trust hereunder shall be held and managed in trust under this
Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.01 NAME. The name of the trust created hereby is "Reserve
Private Equity Series."
SECTION 1.02 DEFINITIONS. Wherever used herein, unless otherwise required
by the context or specifically provided:
(a) "Bylaws" means the Bylaws of the trust as adopted by the Trustees, as
amended from time to time;
(b) "Commission" has the meaning given it in the 1940 Act. "Affiliated
Person", "Assignment," "Interested Person" and "Principal Underwriter" shall
have the respective meanings given them in the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Commission or any rules or
regulations adopted by or interpretive releases of the Commission thereunder.
"Majority Shareholder Vote" shall have the same meaning as the term "vote of a
majority of the outstanding voting securities" is given in the 1940 Act, as
modified by or interpreted by any applicable order or orders of the Commission
or any rules or regulations adopted by or interpretive releases of the
Commission thereunder.
(c) "Delaware Act" refers to Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as amended from time to time.
(d) "Net Asset Value" means the net asset value of each Series of the Trust
determined in the manner provided in Article IX, Section 9.03 hereof;
(e) "Outstanding Shares" means those Shares shown from time to time in the
books of the Trust or its transfer agent as then issued and outstanding, but
shall not include Shares which have been redeemed or repurchased by the Trust
and which are at the time held in the treasury of the Trust;
(f) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Article II, Section 2.06 hereof.
(g) "Shareholder" means a record owner of Outstanding Shares of the Trust;
(h) "Shares" means the equal proportionate transferable units of beneficial
interest into which the beneficial interest of each Series of the Trust or class
thereof shall be divided and may include fractions of Shares as well as whole
Shares;
(i) The "Trust" means the Delaware Trust and reference to the Trust, when
applicable to one or more Series of the Trust, shall refer to any such Series;
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<PAGE> 5
(j) The "Trustees" means the person or persons who has or have signed this
Trust Instrument, so long as he or they shall continue in office in accordance
with the terms hereof, and all other persons who may from time to time be duly
qualified and serving as Trustees in accordance with the provisions of Article
III hereof and reference herein to a Trustee or to the Trustees shall refer to
the individual Trustees in their capacity as Trustees hereunder;
(k) "Trust Property" means any and all property, real or personal, tangible
or intangible, which is owned or held by or for the account of one or more or
the Trust or any Series, or the Trustees on behalf of the Trust or any Series.
(1) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
ARTICLE II
BENEFICIAL INTEREST
SECTION 2.01 SHARES OF BENEFICIAL INTEREST. The beneficial interest in
the Trust shall be divided into such transferable Shares of one or more separate
and distinct Series or classes of a Series as the Trustees shall from time to
time create and establish. The number or Shares of each Series, and class
thereof, authorized hereunder is unlimited. Each Share shall have no par value.
All Shares issued hereunder, including without limitation, Shares issued in
connection with a dividend in Shares or a split or reverse split of Shares,
shall be fully paid and nonassessable.
SECTION 2.02 ISSUANCE OF SHARES. The Trustees in their discretion may
from time to time, without vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of consideration, subject to
applicable law, including cash or securities, at such time or times and on such
terms as the Trustees may deem appropriate, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with,
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into a
greater or lesser number without thereby changing the proportionate beneficial
interests in the Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or 1/1,000th of a Share or
integral multiples thereof.
SECTION 2.03 REGISTER OF SHARES AND SHARE CERTIFICATES. A register shall
be kept at the principal office of the Trust or an office of the Trust's
transfer agent which shall contain the names and addresses of the Shareholders
of each Series, the number of Shares of that Series (or any class or classes
thereof) held by them respectively and a record of all transfers thereof. As to
Shares for which no certificate has been issued, such register shall be entitled
to receive dividends or other distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or other distribution, nor to have notice given to him as herein
or in the Bylaws provided, until he has given his address to the transfer agent
or such officer or other agent of the Trustees as shall keep the said register
for entry thereon. No share certificates shall be issued by the Trust.
SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer in proper form and such evidence of the genuiness of such
execution and authorization and of such other matters as may be required by the
Trustees. Upon such delivery the transfer shall be recorded on the register of
the Trust. Until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor the Trust, nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
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<PAGE> 6
SECTION 2.05 TREASURY SHARES. Shares held in the treasury shall, until
reissued pursuant to Section 2.02 hereof, not confer any voting rights on the
Trustees, nor shall such shares be entitled to any dividends or other
distributions declared with respect to the Shares.
SECTION 2.06 ESTABLISHMENT OF SERIES. The Trust created hereby shall
consist of one or more Series and separate and distinct records shall be
maintained by the Trust for each Series and the assets associated with any such
Series shall be held and accounted for separately from the assets of the Trust
or any other Series. The Trustees shall have full power and authority, in their
sole discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series of the Trust, to establish and designate and to
change in any manner any such Series of Shares or any classes of initial or
additional Series and to fix such preferences, voting powers, rights and
privileges of such Series or classes thereof as the Trustees may from time to
time determine, to divide or combine the Shares or any Series or classes thereof
into a greater or lesser number, to classify or reclassify any issued Shares or
any Series or classes thereof into one or more Series or classes of Shares, and
to take such other action with respect to the Shares as the Trustees may deem
desirable. The establishment and designation of any Series shall be effective
upon the adoption of a resolution by a majority of the Trustees setting forth
such establishment and designation and the relative rights and preferences of
the Shares of such Series. A Series may issue any number of Shares and need not
issue Shares. At any time that there are no Shares outstanding of any particular
Series previously established and designated, the Trustees may by a majority
vote abolish that Series and the establishment and designation thereof.
All references to Shares in this Trust instrument shall be deemed to be
Shares of any or all Series, or classes thereof, as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series of
the Trust, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal
proportionate interest with each other Share in the Series, none having priority
or preference over another, except to the extent that such priorities or
preferences are established with respect to one or more classes of shares
consistent with applicable law and any rule or order of the Commission. Each
holder of Shares of a Series shall be entitled to receive his pro rata share of
all distributions made with respect to such Series. Upon redemption of his
Shares, such Shareholder shall be paid solely out of the funds and property of
such Series of the Trust.
SECTION 2.07 INVESTMENT IN THE TRUST. The Trustees shall accept
investments in any Series of the Trust from such persons and on such terms as
they may from time to time authorize. At the Trustees' discretion, such
investments, subject to applicable law, may be in the form of cash or securities
in which the affected Series is authorized to invest, valued as provided in
Article IX, Section 9.03 hereof. Investments in a series shall be credited to
each Shareholder's account in the form of full Shares at the Net Asset Value per
share next determined after the investment is received or accepted as may be
determined by the Trustees; provided, however, that the Trustees may, in their
sole discretion, (a) fix the Net Asset Value per Share of the initial capital
contribution, (b) impose a sales charge upon investments in the Trust in such
manner and at such time determined by the Trustees or (c) issue fractional
Shares.
SECTION 2.08 ASSETS AND LIABILITIES OF SERIES. All consideration received
by the Trust for the issue or sale of Shares of a particular Series, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment or such proceeds in whatever form the same may be,
shall be held and accounted for separately from the other assets of the Trust
and of every other Series and may be referred to herein as "assets belonging to"
that Series. The assets belonging to a particular Series shall belong to that
Series for all purposes, and to no other Series, subject only to the rights of
creditors of that Series. In addition, any assets, income, earnings, profits or
funds, or payments and
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<PAGE> 7
proceeds with respect thereto, which are not readily identifiable as belonging
to any particular Series shall be allocated by the Trustees between and among
one or more the Series in such manner as the Trustees, in their sole discretion,
deem fair and equitable. Each such allocation shall be conclusive and binding
upon the Shareholders of all Series for all purposes, and such assets, income,
earnings, profits or funds, or payments and proceeds with respect thereto shall
be assets belonging to that Series. The assets belonging to a particular Series
shall be so recorded upon the books of the Trust, and shall be held by the
Trustees in trust for the benefit of the holders of Shares of that Series. The
assets belonging to each particular Series shall be charged with the liabilities
of that Series and all expenses costs, charges and reserves attributable to that
Series. Any general liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any particular Series
shall be allocated and charged by the Trustees between or among any one or more
of the Series in such manner as the Trustees in their sole discretion deem fair
and equitable. Each such allocation shall be conclusive and binding upon the
Shareholders of all Series for all purposes. Without limitation of the foregoing
provisions of this Section 2.08, but subject to the right of the Trustees in
their discretion to allocate general liabilities, expenses, costs, charges or
reserves as herein provided, the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a particular
Series shall be enforceable against the assets of such Series only, and not
against the assets of the Trust generally. Notice of this contractual limitation
on inter-Series liabilities may, in the Trustee's sole discretion, be set forth
in the certificate of trust of the Trust (whether originally or by amendment) as
filed or to be filed in the Office of the Secretary of State of the State of
Delaware pursuant to the Delaware Act, and upon the giving of such notice in the
certificate of trust, the statutory provisions of Section 3804 of the Delaware
Act relating to limitations on inter-Series liabilities (and the statutory
effect under Section 3804 of setting forth such notice in the certificate of
trust) shall become applicable to the Trust and each Series. Any person
extending credit to, contraction with or having any claim against any Series may
look only to the assets of that Series to satisfy or enforce any debt, with
respect to that Series. No Shareholder or former Shareholder of any Series shall
have a claim on or any right to any assets allocated or belonging to any other
Series.
SECTION 2.09 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive
or other right to subscribe to any additional Shares or other securities issued
by the Trust or the Trustees, whether of the same or other Series.
SECTION 2.10 NO PERSONAL LIABILITY OF SHAREHOLDER. Each Shareholder of
the Trust and of each Series shall not be personally liable for the debts,
liabilities, obligations and expenses incurred by, contracted for, or otherwise
existing with respect to, the Trust or by or on behalf of any Series. The
Trustees shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other that such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. Every note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust or to a Series shall include a recitation limiting the obligation
represented thereby to the Trust or to one or more Series and its or their
assets (but the omission of such a recitation shall not operate to bind any
Shareholder of Trustee of the Trust).
SECTION 2.11 ASSENT TO TRUST INSTRUMENT. Every Shareholder, by virtue of
having purchased a Share shall become a Shareholder and shall be held to have
expressly assented and agreed to be bound by the terms hereof.
ARTICLE III
THE TRUSTEES
SECTION 3.01 MANAGEMENT OF THE TRUST. The Trustees shall have exclusive
and absolute control over the Trust Property and over the business of the Trust
to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power
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<PAGE> 8
to conduct the business of the Trust and carry on its operations in any and all
of its branches and maintain offices both within and without the State of
Delaware, in any and all states of the United States of America, in the District
of Columbia, in any and all commonwealths, territories, dependencies, colonies,
or possessions of the United States of America, and in any foreign jurisdiction
and to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Trust
although such things are not herein specifically mentioned. Any determination as
to what is in the interest of the Trust made by the Trustees in good faith shall
be conclusive. In construing the provisions of this Trust Instrument presumption
shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall not
be construed as limiting the aforesaid power. The powers of the Trustees may be
exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders. Such a meeting shall be held on a date fixed by the Trustees.
In the event that less than a majority of the Trustees holding office have been
elected by Shareholders, the Trustees then in office will call a Shareholders'
meeting for the election of Trustees.
SECTION 3.02 INITIAL TRUSTEES. The initial Trustees shall be the persons
named herein. On a date fixed by the Trustees, the Shareholders shall elect at
least three (3) but not more than twelve (12) Trustees as specified by the
Trustees pursuant to Section 3.06 of this Article III.
SECTION 3.03 TERM OF OFFICE. The Trustees shall hold office during the
lifetime of this Trust, and until its termination as herein provided; except (a)
that any Trustee may resign his position by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such date as is specified therein; (b) that any Trustee may be removed at
any time by written instrument, signed by at least two-thirds of the number of
Trustees prior to such removal, specifying the date when such removal shall
become effective; (c) that any Trustee who requests in writing to be retired or
who has died, has become physically or mentally incapacitated by reason of
disease or otherwise, or is otherwise unable to serve, may be retired by written
instrument signed by a majority of the other Trustees, specifying the date of
his retirement; and (d) that a Trustee may be removed at any meeting of the
Shareholders of the Trust by a vote of Shareholders owning at least two-thirds
of the Outstanding Shares.
SECTION 3.04 VACANCIES AND APPOINTMENTS. In case of the declination to
serve, death, resignation, retirement, removal, physical or mental incapacity by
reason of disease or otherwise, or a Trustee is otherwise unable to serve, or an
increase in the number of Trustees, a vacancy shall occur. Whenever a vacancy in
the Board of Trustees shall occur, until such vacancy is filled, the other
Trustees shall have all the powers hereunder and the certificate of the other
Trustees of such vacancy shall be conclusive. In the case of an existing
vacancy, the remaining Trustees shall fill such vacancy by appointing such other
person as they in their discretion shall see fit consistent with the limitations
under the 1940 Act. Such appointment shall be evidenced by a written instrument
signed by a majority of the Trustees in office or by resolution of the Trustees,
duly adopted, which shall be recorded in the minutes of a meeting of the
Trustees, whereupon the appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.04 shall have accepted this
position, the trust estate shall vest
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in the new Trustee or Trustees, together with the continuing Trustees, without
any further act or conveyance, and he shall be deemed a Trustee hereunder.
SECTION 3.05 TEMPORARY ABSENCE. Any Trustee may, by power of attorney
delegate his power for a period not exceeding six months at any time to any
other Trustee or Trustees, provided that in no case shall less than two
Trustees personally exercise the other powers hereunder except as herein
otherwise expressly provided.
SECTION 3.06 NUMBER OF TRUSTEES. The number of Trustees shall be at least
three (3), and thereafter shall be under number as shall be fixed from time to
time by resolution or written instrument of a majority of the Trustees,
provided, however, that the number of Trustees shall in no event be more than
twelve (12).
SECTION 3.07 EFFECT OF ENDING OF A TRUSTEE'S SERVICE. The declination to
serve, death, resignation, retirement, removal, incapacity, or inability of the
Trustees, or anyone of them, shall not operate to terminate the trust or to
revoke any existing agency created pursuant to the terms of this Trust
Instrument.
SECTION 3.08 OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust
and of each Series shall be held separate and apart for any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in all of the assets of the Trust and the
right to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Trust, except that the Trustees may cause legal title
to any Trust Property to be held by, or in the name of the Trust, or in the name
of any person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust of any Series or any right of
partition or possession thereof, but each Shareholder shall have, except as
otherwise provided for herein, a proportionate undivided beneficial interest in
the Trust or Series. The Shares shall be personal property giving only the
rights specifically set forth in this Trust Instrument.
ARTICLE IV
POWER OF THE TRUSTEES
SECTION 4.01 POWERS. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. The
Trustees shall not in any way be bound or limited by present or future laws or
customs in regard to trust investments, but shall have full authority and power
to make any and all investments which they, in their sole discretion, shall deem
proper to accomplish the purpose of this Trust without recourse to any court or
other authority. Subject to any applicable limitation in this Trust Instrument
or the Bylaws of the Trust, the Trustees shall have the power and authority:
(a) to invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by any
present or future law or custom in regard to investments by trustees, and to
sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease
any or all of the assets of the Trust;
(b) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations;
(c) To borrow money and in this connection issue notes or other evidence
of indebtness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; to endorse, guarantee, or undertake
the performance of an obligation or engagement of any other person and to lend
Trust Property;
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(d) To provide for the distribution of interest of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders;
such Bylaws shall be deemed incorporated and included in this Trust
Instrument;
(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that are
members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Trust subject to any
conditions set forth in this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents and shareholder servicing
agents which may be the Trust, or both;
(i) To set record dates in the manner provided herein or in the Bylaws;
(j) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, manager, custodian,
underwriter or other agent or independent contractor;
(k) To sell or exchange any or all of the assets of the Trust, subject
to the provisions of Article XI, subsection 11.04(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or otherwise in any
manner arising out of ownership of securities;
(n) To hold any security or property in a form not indicating any trust,
whether in bearer, book entry, unregistered or other negotiable form; or either
in the name of the Trust or in the name of a custodian or a nominee or nominees,
subject in either case to proper safeguards according to the usual practice of
Delaware business trusts or investment companies;
(o) To establish separate and distinct Series in accordance with the
provisions of Article II hereof and to establish classes of such Series having
relative rights, power and duties as they may provide consistent with applicable
law;
(p) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series or
to apportion the same between or among two or more Series, provided that any
liabilities or expenses incurred by a particular Series shall be payable solely
out of the assets belonging to that Series as provided for in Article II hereof;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation, partnership or other entity, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation, partnership or
other entity, and to pay calls or subscriptions with respect to any security
held in the Trust;
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(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any other matter in controversy including, but not limited
to, claims for taxes;
(s) To make distributions of income and of capital gains to Shareholders
in the manner provided herein;
(t) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or classes, and to require
the redemption of the Shares of any Shareholders whose investment is less than
such minimum upon giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the powers
of the Trustees to said committees and to adopt a committee charter providing
for such responsibilities, membership (including Trustees, officers or other
agents of the Trust therein) and any other characteristics of said committees as
the Trustees may deem proper. Notwithstanding the provisions of this Article IV,
and in addition to such provisions or any other provisions of this Trust
Instrument of the Bylaws, the Trustee may by resolution appoint a committee
consisting of less than the whole number of Trustees then in office, which
committee may be empowered to act for and bind the Trustees and the Trust, as if
the acts of such committee were the acts of all Trustees then in office, with
respect to the institution, prosecution dismissal, settlement, review or
investigation of any action, suit or proceeding which shall be pending or
threatened to be brought before any court, administrative agency or other
adjudicatory body;
(v) To interpret the investment policies, practices or limitations of
any Series;
(w) To establish a registered office and have a registered agent in the
state of Delaware; and
(X) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see the application
of any payments make or property transferred to the Trustees or upon their
order.
SECTION 4.02 ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in Shares and, subject to the
provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the Trust, with
respect to which such Shares are issued.
SECTION 4.03 TRUSTEES AND OFFICERS AS SHAREHOLDERS. Any Trustee, officer
or other agent of the Trust may acquire, own and dispose of Shares to the same
extent as if he were not a Trustee, officer or agent and the Trustees may issue
and sell or cause to be issued and sold Shares to and
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buy such Shares from any such person or any corporation, partnership or other
entity in which he is interested, subject only to the general limitations herein
contained or as may be contained in the Bylaws.
SECTION 4.04 ACTION BY THE TRUSTEES. The Trustees shall act by majority
vote at a meeting duly called or by unanimous written consent without a meeting
or by telephone meeting provided a quorum of Trustees participate in any such
telephone meeting, unless the 1940 Act requires that a particular action be
taken only at a meeting at which the Trustees are present in person. At any
meeting of the Trustees, a majority of the Trustees shall constitute a quorum.
Meetings of the Trustees may be called orally or in writing by the Chairman of
the Board of Trustees or by any two other Trustees. Notice of the time, date and
place of all meetings of the Trustees shall be given by the party calling the
meeting to each Trustee by telephone, facsimile or other electronic mechanism
sent to his home or business address at least twenty-four hours in advance of
the meeting or by written notice mailed to his home or business address at least
seventy-two hours in advance of the meeting. Notice need not be given to any
Trustee who attends the meeting without objecting to the lack of notice or who
executes a written waiver of notice with respect to the meeting. Any meeting
conducted by telephone shall be deemed to take place at the principal office of
the Trust, as determined by the Bylaws or by the Trustees. Subject to the
requirements of the 1940 Act, the Trustees by majority vote may delegate to any
one or more of their number their authority to approve particular matters or
take particular actions on behalf of the Trust. Written consents or waivers of
the Trustees may be executed in one or more counterparts. Execution of a written
consent or waiver and delivery thereof to the Trust may be accomplished by
facsimile or other similar electronic mechanism.
SECTION 4.05 CHAIRMAN OF THE TRUSTEES. The Trustees shall appoint one of
their number to be Chairman of the Board of Trustees. The Chairman shall preside
at all meetings of the Trustees, shall be responsible for the execution of
policies established by the Trustees and the administration of the Trust and may
be (but is not required to be) the chief executive, financial and/or accounting
officer of the Trust.
SECTION 4.06 PRINCIPAL TRANSACTIONS. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any assets of the Trust to, any Trustee
or officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealing with any investment
adviser, administrator, distributor or transfer agent for the Trust or with any
Interested Person of such person; and the Trust may employ any such person, or
firm or company in which such person is an Interested Person, as broker, legal
counsel, registrar, investment adviser, administrator, distributor, transfer
agent, dividend disbursing agent, custodian or in any other capacity upon
customary terms.
ARTICLE V
EXPENSES OF THE TRUST
(a) Subject to the provisions of Article II, Section 2.08 hereof, the
Trustees shall be reimbursed from the Trust estate or the assets belonging to
the appropriate Series for their expenses and disbursements, including, without
limitation, interest charges, taxes, brokerage fees and commissions; expenses of
issue, repurchase and redemption of shares; insurance premiums; applicable fees,
interest charges and expenses of third parties, including the Trust's investment
advisers, managers, administrators, distributors, custodian, transfer agent and
fund accountant; fees of pricing, interest, dividend, credit and other reporting
services; cost of membership in trade associations; telecommunications expenses;
rent; funds transmission expenses; auditing, legal and compliance expenses;
costs of forming the Trust and maintaining corporate existence; costs of
preparing and printing the Trust's prospectuses, statements of additional
information and shareholder reports and delivering them to existing
shareholders; expenses of meetings of shareholders and proxy solicitations
therefore; costs of maintaining books and accounts; costs of reproduction,
stationary and supplies; fees and expenses of the Trust's trustees; compensation
of
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the Trust's officers and employees and costs of other personnel performing
services for the Trust; costs of Trustee meetings; Securities and Exchange
Commission and state registration fees and related expenses and for such
non-recurring items as may arise, including litigation to which the Trust (or a
Trustee acting as such) is a party, and for all losses and liabilities by them
incurred in administering the Trust, and for the payment of such expenses,
disbursements, losses and liabilities the Trustees shall have a lien on the
assets belonging to the appropriate Series, or in the case of an expense
allocable to more than one Series, on the assets of each such Series, prior to
any rights or interests of the Shareholders thereto. This section shall not
preclude the Trust from directly paying any of the aforementioned fees and
expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
SECTION 6.01 INVESTMENT ADVISER. The Trustees may in their discretion,
from time to time, enter into an investment advisory or sub-advisory contract or
contracts with respect to the Trust or any Series whereby the other party or
parties to such contract or contracts shall undertake to furnish the Trustees
with such investment advisory, statistical and research facilities and services
and such other facilities and services, if any, all upon such terms and
conditions as may be prescribed in the Bylaws or as the Trustees may in their
discretion determine (such terms and conditions not to be inconsistent with the
provisions of this Trust Instrument or of the Bylaws). Notwithstanding any other
provisions of this Trust Instrument, the Trustees may authorize any investment
adviser (subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect purchases, sales or exchanges of portfolio
securities, other investment instruments of the Trust, or other Trust Property
on behalf of the Trustees, or may authorize any officer, agent, or Trustee to
effect such purchases, sales or exchanges pursuant to recommendations of the
investment adviser (and all without further action by the Trustees). Any such
purchases, sales and exchanges shall be deemed to have been authorized by all of
the Trustees.
The Trustees may authorize the investment adviser to employ, from time to
time, one or more sub-advisers to perform such of the acts and services of the
investment adviser, and upon such terms and conditions, as may be agreed upon
between the investment adviser and sub-adviser (such terms and conditions not to
be inconsistent with the provisions of this Trust Instrument or of the Bylaws).
Any reference in this Trust Instrument to the investment adviser shall be deemed
to include such sub-advisers, unless the context otherwise requires.
SECTION 6.02 PRINCIPAL UNDERWRITER. The Trustees may in their discretion
from time to time enter into an exclusive or non-exclusive underwriting contract
or contracts providing for the sale of Shares, whereby the Trust may either
agree to sell Shares to such other party to the contract or contracts or appoint
such other party its sales agent for such Shares. In either case, the contract
or contracts shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws); and such contract or contracts may also provide for the
repurchase or sale of Shares by such other party as principal or as agent of the
Trust.
SECTION 6.03 ADMINISTRATOR. The Trustees may in their discretion from
time to time enter into one or more management or administrative contracts
whereby the other party or parties shall undertake to furnish the Trustees with
management or administrative services. The contract or contracts shall be on
such terms and conditions as may be prescribed in the Bylaws and as the Trustees
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws).
SECTION 6.04 TRANSFER AGENT. The Trustees may in their discretion from
time to time enter into one or more transfer agency and Shareholder service
contracts whereby the other party or parties
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shall undertake to furnish the Trustees with transfer agency and Shareholder
services. The contract or contracts shall be on such terms and conditions as may
be prescribed in the Bylaws and as the Trustees may in their discretion
determine (such terms and conditions not to be inconsistent with the provisions
of this Trust instrument or of the Bylaws).
SECTION 6.05 PARTIES TO CONTRACT. Any contract of the character described
in Section 6.01, 6.02, 6.03 and 6.04 of this Article VI or any contract of the
character described in Article VIII hereof may be entered into with any
corporation, firm, partnership, trust or association, although one or more of
the Trustees or officers of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the contract, and no such contract
shall be invalidated or rendered void or voidable by reason of the existence of
any relationship, nor shall any person holding such relationship be disqualified
from voting on or executing the same in its capacity as Shareholder and/or
Trustee, nor shall any person holding such relationship be liable merely by
reason of relationship for any loss or expense to the Trust under or by reason
of said contract or accountable for any profit realized directly or indirectly
therefrom, provided that the contract when entered into was not inconsistent
with the provisions of this Article VI or Article VIII hereof or of the Bylaws.
The same person (including a firm, corporation, partnership, trust, or
association) may be the other party to contracts entered into pursuant to
Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or pursuant to Article
VIII hereof, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 6.05.
SECTION 6.06 PROVISIONS AND AMENDMENTS. Any contract entered into
pursuant to Sections 6.01 or 6.02 of this Article VI shall be consistent with
and subject to the requirements of Section 15 of the 1940 Act, if applicable, or
other applicable Act of Congress hereafter enacted with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any contract
entered into pursuant to Section 6.01 of this Article VI shall be effective
unless assented to in a manner consistent with the requirements of said Section
15, as modified by any applicable rule, regulation or order of the Commission.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.01 VOTING POWERS. The Shareholders shall have power to vote
only (a) for the election of Trustees as provided in Article III, Section 3.01
and 3.02 hereof, (b) for the removal of Trustees as provided in Article III,
Section 3.03(d) hereof, (c) with respect to any investment advisory contract as
provided in Article VI, Sections 6.01 and 6.06 hereof, and (d) with respect to
such additional matters relating to the Trust as may be required by law, by this
Trust Instrument, or the Bylaws or any registration of the Trust with the
Commission or any State, or as the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall
be voted separately by individual Series, except (i) when required by the 1940
Act, Shares shall be voted in the aggregate and not by individual Series; and
(ii) when the Trustees have determined that a matter affects the interests of
more than one Series, then the Shareholders of all such Series shall be entitled
to vote thereon. The Trustees may also determine that a matter affects only the
interests of one or more classes of a Series, in which case any such matter
shall be voted on by such class or classes. A shareholder of each series shall
entitled to one vote for each dollar of net asset value (number of shares owned
times net asset value per share) per share of such series [or class thereof], on
any matter on which such shareholder is entitled to vote and each fractional
dollar amount shall be entitled to a proportionate fractional vote. There shall
be no cumulative voting. Shares may be voted in person or by proxy or in any
manner provided for in the Bylaws. A proxy may be given in writing. The Bylaws
may provide that proxies may also, or may instead, be given by any electronic or
telecommunications device or in any other manner. Notwithstanding anything else
contained herein or in the Bylaws, in the event a proposal by anyone other than
the officers or Trustees of the
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Trust is submitted to a vote of the Shareholders of one or more Series or of the
Trust, or in the event of any proxy contest or proxy solicitation or proposal in
opposition to any proposal by the officers or Trustees of the Trust, Shares may
be voted only in person or by written proxy. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and take any action required or
permitted by law, this Trust Instrument or any of the Bylaws of the Trust to be
taken by Shareholders.
SECTION 7.02 MEETINGS. The first Shareholders' meeting shall be held in
order to elect Trustees as specified in Section 3.02 of Article III hereof at
the principal office of the Trust or such other place as the Trustees may
designate. Meetings may be held within or without the State of Delaware. Special
meetings of the Shareholders of any Series may be called by the Trustees and
shall be called by the Trustees upon the written request of Shareholders owning
at least one-tenth of the Outstanding Shares entitled to vote. Whenever ten or
more Shareholders meeting the qualifications set forth in Section 16(c) of the
1940 Act, as may be amended from time to time, seek the opportunity of
furnishing materials to the other Shareholders with a view to obtaining
signatures on such a request for a meeting, the Trustees shall comply with the
provisions of said Section 16(c) with respect to providing such Shareholders
access to the list of Shareholders of record of the Trust or the mailing of such
materials to such Shareholders of record, subject to any rights provided to the
Trust or the Trustees by Section 16(c). Notice shall be sent, by First Class
Mail or such other means determined by the Trustees, at least 15 days prior to
any such meeting.
SECTION 7.03 QUORUM AND REQUIRED VOTE. One-third of Shares entitled to
vote in person or by proxy shall be a quorum for the transaction of business at
a Shareholders' meeting, except that where any provision of law or of this Trust
Instrument permits or requires that holders of any Series shall vote as a Series
(or that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
Series (or that class). Any lesser number shall be sufficient for adjournments.
Any adjourned session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by law or by any provision of this Trust
Instrument or the Bylaws, a majority of the Shares voted in person or by proxy
shall decide any questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Trust Instrument permits or requires that
the holders of any Series shall vote as a Series (or that the holders of any
class shall vote as a class), then a majority of the Shares present in person or
by proxy of that Series (or class), voted on the matter in person or by proxy
shall decide that matter insofar as that Series (or class) is concerned.
Shareholders may act by unanimous written consent, unless the 1940 Act requires
that a particular action be taken only at a meeting at which the shareholders
are present in person. Actions taken by a Series (or class) may be consented to
unanimously in writing by Shareholders of that Series (or class).
ARTICLE VIII
CUSTODIAN
SECTION 8.01 APPOINTMENT AND DUTIES. The Trustees shall at all times
employ a bank, a company that is a member of a national securities exchange, or
a trust company meeting the qualifications of Section 17(f) of the 1940 Act or
any rule or regulation thereunder or such other person as may be permitted by
order of the Commission, as custodian with authority as its agent, but subject
to such restrictions, limitations and other requirements, if any, as may be
contained in the Bylaws of the Trust: (a) to hold the securities owned by the
Trust and deliver the same upon written order or oral order confirmed in
writing; (b) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may direct;
and (c) to disburse such funds upon orders or vouchers.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and
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conditions, as may be agreed upon between the custodian and such sub-custodian
and approved by the Trustees, provided that in every case such sub-custodian
shall be a bank, a company that is a member of a national securities exchange,
or a trust company organized under the laws of the United States or one of the
states thereof meeting the qualifications of Section 17(f) of the 1940 Act or
any rule or regulation thereunder or such other person as may be permitted by
the Commission or otherwise in accordance with the 1940 Act.
SECTION 8.02 CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended, or such other
person as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodians, sub-custodians or other agents.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
SECTION 9.01 DISTRIBUTIONS.
(a) The Trustees may from time to time declare and pay dividends or other
distributions with respect to any Series. The amount of such dividends or
distributions and the payment of them and whether they are in cash or any other
Trust Property shall be wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding,
the Trustees may at any time declare and distribute a stock dividend pro rata
among the Shareholders of a particular Series, or class thereof, as of the
record date of that Series fixed as provided in Subsection 9.01 (b) hereof.
SECTION 9.02 REDEMPTIONS. In case any holder of record of Shares of a
particular Series desires to dispose of his Shares or any portion thereof, he
may deposit at the office of the transfer agent or other authorized agent of
that Series a written request or such other form of request as the Trustees may
from time to time authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.02; and the Shareholder so requesting shall be
entitled to require the Series to purchase, and the Series or the principal
underwriter or underwriters of the Series shall purchase his said Shares, but
only at the Net Asset Value thereof (as described in Section 9.03 of this
Article IX). The Series shall make payment for any such Shares to be redeemed,
as aforesaid, in cash or property from the assets of that Series and payment for
such Shares shall be made by the Series or the principal underwriter or
underwriters of the Series to the Shareholder of record within the time or times
permitted by the 1940 Act or any rule or regulation thereunder or pursuant to
any order of the Commission applicable to the Series after the date upon which
the request in good order and proper form is given. Upon redemption, shares
shall become Treasury shares and may be reissued from time to time.
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SECTION 9.03 DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO
ASSETS. The term "Net Asset Value" of any Series shall mean that amount by which
the assets of that Series exceed its liabilities, all as determined by or under
the direction of the Trustees. Such value shall be determined separately for
each Series and shall be determined on such days and at such times as the
Trustees may determine. Such determination shall be made with respect to
securities for which market quotations are readily available, at the market
value of such securities; and with respect to other securities and assets at the
fair value as determined in good faith by the Trustees; provided, however, that
the Trustees, without Shareholder approval, may alter the method of valuing
portfolio securities insofar as permitted under the 1940 Act and the rules,
regulations, and interpretations thereof promulgated or issued by the Commission
or insofar as permitted by any order of the Commission applicable to the Series.
The Trustees may delegate any of their powers and duties under this Section 9.03
with respect to valuation of assets and liabilities. The resulting amount, which
shall represent the total Net Asset Value of the particular Series, shall be
divided by the total number of shares of the Series outstanding at the time and
the quotient so obtained shall be the Net Asset Value per Share of the Series.
At any time the Trustees may cause the Net Asset Value per Share last determined
to be determined again in similar manner and may fix the time when such
redetermined value shall become effective. If, for any reason, the net income of
any Series, determined at any time, is a negative amount, the Trustees shall
have the power with respect to that Series (a) to offset each Shareholder's pro
rata share of such negative amount from the accrued dividend account of such
Shareholder, (b) to reduce the number of Outstanding Shares of such Series by
reducing the number of Shares in the account of each Shareholder by a pro rata
portion of that number of full and fractional Shares which represents that
amount of such excess negative net income, (c) to cause to be recorded on the
books of such Series an asset account in the amount of such negative net income
(provided that same shall thereupon become the property of such Series with
respect to such Series and shall not be paid to any Shareholder), which account
may be reduced by the amount of dividends declared thereafter upon the
Outstanding Shares of such Series on the day such negative net income is
experienced, until such asset account is reduced to zero; (d) to combine the
methods described in clauses (a) and (b) and (c) of this sentence; or (e) to
take any other action they deem appropriate, in order to cause (or in order to
assist in causing) the Net Asset Value per Share of such Series to remain at a
constant amount per Outstanding Share immediately after each such determination
and declaration. The Trustees shall also have the power not to declare a
dividend out of net income for the purpose of causing the Net Asset Value per
Share to be increased. The Trustees shall not be required to adopt, but may at
any time adopt, discontinue or amend the practice of maintaining the Net Asset
Value per Share of the Series at a constant Amount.
SECTION 9.04 SUSPENSION OF THE RIGHT OF REDEMPTION. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
as permitted by the 1940 Act or any rule regulation hereunder or pursuant to any
order of the Commission. Such suspension shall take effect at such time as the
Trustees shall specify but not later than the close of business on the business
day next following the declaration of suspension, and thereafter there shall be
no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the Net Asset Value per Share next determined after the termination of
the suspension. In the event that any Series is divided into classes, the
provisions of this Section 9.03, to the extent applicable as determined in the
discretion of the Trustees and consistent with applicable law, may be equally
applied to each such class.
SECTION 9.05 REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED
INVESTMENT COMPANY. If the Trustees shall, at any time and in good faith, be of
the opinion that direct or indirect ownership of Shares of any Series has or may
become concentrated in any Person to an extent which would disqualify any Series
as a regulated investment company under the Internal Revenue Code, then the
Trustees shall have the power (but not the obligation) by lot or other means
deemed equitable by them (a) to call for redemption by any such person of a
number, or principal amount, of Shares sufficient to maintain or bring the
direct or indirect ownership of Shares into conformity with
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the requirements for such qualification and (b) to refuse to Transfer or issue
Shares to any person whose acquisition of Shares in question would result in
such disqualification. The redemption shall be effected at the redemption price
and in the manner provided in this Article IX.
The holders of shares shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of Shares
as the Trustees deem necessary to comply with the requirements of any taxing
authority.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
SECTION 10.01 LIMITATION OF LIABILITY. A Trustee, when acting in such
capacity shall not be personally liable to any person other than the Trust or
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or of any conduct
whatsoever in his capacity as a Trustee, provided that nothing herein or in the
Delaware Act shall protect any Trustee against any liability to the Trust or to
Shareholders as to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of trustee hereunder.
SECTION 10.02 INDEMNIFICATION.
(a) Subject to the expectations and limitations contained in Subsection
10.02(b):
(i) every person who is, or has been, a Trustee or officer of the
trust (hereinafter referred to as a "Covered Person") shall be indemnified by
the Trust to the fullest extent permitted by law against liability and against
all expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of 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
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which any Covered Person may now or hereafter be entitled, shall continue as to
a person who has ceased to be a Covered Person and shall inure to the benefit of
the heirs, executors and administrators of such a person. Nothing contained
herein shall affect any rights to indemnification to which Trust personnel,
other than Covered Persons, and other persons may be entitled by contract or
otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
Subsection 10.02(a) of this Section 10.02 may be paid by the Trust or Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be paid
over by him to the Trust or Series if it is ultimately determined that he is not
entitled to indemnification under this Section 10.02; provided, however, that
either (i) such Covered Person shall have provided appropriate security for such
undertaking, (ii) the Trust is insured against losses arising out of any such
advance payments or (iii) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the matter, or independent legal
counsel in a written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered Person will be
found entitled to indemnification under Section 10.02.
SECTION 10.03 SHAREHOLDERS. In case any Shareholder of any Series shall
be held to be personally liable solely by reason of his being or having been a
Shareholder of such Series and not because of his acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives, or, in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled,
out of the assets belonging to the applicable Series, to be held harmless from
and indemnified against all loss and expense arising from such liability. The
Trust on behalf of the affected Series, shall, upon request by the Shareholder,
assume the defense of any claim made against the Shareholder for any act or
obligation of the Series and satisfy any judgment thereon from the assets of the
Series.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 TRUST NOT A PARTNERSHIP. It is hereby expressly declared
that a trust and not a partnership is created hereby. No Trustee hereunder shall
have any power to bind personally either the Trust officers or any Shareholder.
All persons extending credit to, contracting with or having any claim against
the Trust or the Trustees shall look only to the assets of the appropriate
Series or (if the Trustees shall have yet to have established Series) of the
Trust for payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any or their agents, whether past, present or
future, shall be personally liable therefor. Nothing in this Trust Instrument
shall protect a Trustee against any liability to which the Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee hereunder.
SECTION 11.02 TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretion hereunder in
good faith and with reasonable care under the circumstances then prevailing
shall be binding upon everyone interested. Subject to the provisions of Article
X hereof and to Section 11.01 of this Article XI, the Trustees shall not be
liable for errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and operation of
the Trust Instrument, and subject to the provisions of Article X hereof and
Section 11.01 of this Article XI, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is obtained.
SECTION 11.03 ESTABLISHMENT OF RECORD DATES. The Trustees may close the
Share transfer books of the Trust for a period not exceeding sixty (60) days
preceding the date of any meeting of
-16-
<PAGE> 20
Shareholders, or the date for the allotment of rights, or the date when any
change or conversion or exchange of Shares shall go into effect; or in lieu of
closing the stock transfer books as aforesaid, the Trustees may fix in advance a
date, not exceeding sixty (60) days preceding the date of any meeting of
Shareholders, or the date for payment of any dividend or other distribution, or
the date for the allotment or rights, or the date when any change or conversion
or exchange of Shares shall go into effect, as a record date for the
determination of the Shareholders entitled to notice of, and to vote at, any
such meeting, or entitled to receive payment of any such dividend or other
distribution, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of Shares, and in such case
such Shareholders and only such Shareholders as shall be Shareholders of record
on the date so fixed shall be entitled to such notice of, and to vote at, such
meeting, or to receive payment of such dividend or other distribution, or to
receive such allotment or rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any Shares on the books of the Trust after
any such record date fixed as aforesaid.
SECTION 11.04 TERMINATION OF TRUST.
(a) This Trust shall continue without limitation of time but subject to
the provisions of Subsection 11.04(b).
(b) The Trustees may, subject to a Majority Shareholder Vote of each
Series affected by the matter or, if applicable, to a Majority Shareholder Vote
of the Trust, and subject to a vote of a majority of the Trustees,
(i) sell and convey all or substantially all of the assets of
the Trust or any affected Series to another trust,
partnership, association or corporation, or to a separate
series of shares thereof, organized under the laws of any
state which trust, partnership, association or corporation
is an open-end management investment company as defined in
the 1940 Act, or is a series thereof, for adequate
consideration which may include the assumption of all
outstanding obligations, taxes and other liabilities,
accrued or contingent, of the Trust or any affected Series,
and which may include shares of beneficial interest, stock
or other ownership interests of such trust, partnership,
association or corporation or of a series thereof; or
(ii) at any time sell and convert into money all of the assets of
the Trust or any affected Series.
Upon making reasonable provision, in the determination of the Trustees, for the
payment of all such liabilities in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) of each Series (or class) ratably among the holders of Shares
of that Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in Subsection 11.05(b), the Trust or any affected
Series shall terminate and the Trustees and the Trust shall be discharged of any
and all further liabilities and duties hereunder and the right, title and
interest of all parties with respect to the Trust or Series shall be canceled
and discharged.
Upon termination of the Trust, following completion of winding up of its
business, the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Delaware Act, which
certificate of cancellation may be signed by any one Trustee.
SECTION 11.05 REORGANIZATION. Notwithstanding anything else herein, the
Trustees, in order to change the form of organization of the Trust, may, without
prior Shareholder approval, (a) cause the Trust to merge or consolidate with or
into one or more trusts, partnerships, associations or
-17-
<PAGE> 21
corporations so long as the surviving or resulting entity is an open-end
management investment company under the 1940 Act, or is a series thereof, that
will succeed to or assume the Trust's registration under that Act and which is
formed, organized or existing under the laws of a state, commonwealth,
possession or colony of the United States or (b) cause the Trust to incorporate
under the laws of Delaware. Any agreement of merger or consolidation or
certificate of merger may be signed by a majority of Trustees and facsimile
signature conveyed by electronic or telecommunication means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of
the Delaware Act, and notwithstanding anything to the contrary contained in the
Trust Instrument, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 11.05 may effect any amendment to the
Trust Instrument or effect the adoption of a new trust instrument of the Trust
if it is the surviving or resulting trust in the merger or consolidation.
SECTION 11.06 FILING OF COPIES, REFERENCES, HEADINGS. The original or a
copy of this Trust Instrument and of each amendment hereof or Trust Instrument
supplement hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as whether or not any such
amendments or supplements have been made and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions like
"herein", "hereof" and "hereunder", shall be deemed to refer to this Trust
Instrument. And expressions like "his", "he" and "him", shall be deemed to
include feminine and neuter, as well as masculine, genders. The singular shall
mean the plural and vice versa where the context requires. Headings are placed
herein for convenience of reference only and in case of any conflict, the text
of this Trust Instrument; rather than the headings, shall control. This Trust
Instrument may be executed in any number of counterparts each of which shall be
deemed an original.
SECTION 11.07 APPLICABLE LAW. The trust set forth in this instrument is
made in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act and the
laws of said State; provided, however, that shall not be applicable to the
Trust, and Trustees or this Trust Instrument (a) the provisions of Section 3540
of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Delaware Act) pertaining to
trusts which relate to or regulate (i) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges,
(ii) affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
government approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards of responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Trust Instrument. The Trust shall be of the type commonly called a
"business trust", and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust under
Delaware law. The Trust specifically reserves the right to exercise any of the
powers or privileges afforded to trusts or actions that may be engaged in by
trusts under the Delaware Act, and the absence of a specific reference herein to
any such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
-18-
<PAGE> 22
SECTION 11.08 AMENDMENTS. Except as specifically provided herein, the
Trustees may, without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust instrument supplement hereto or an
amended and restated trust instrument. Shareholders shall have the right to vote
(a) on any amendment which would affect their right to vote granted in Section
7.01 of Article VII hereof, (b) on any amendment to this Section 11.08, (c) on
any amendment as may be required by law or by the Trust's registration statement
filed with the Commission and (d) on any amendment submitted to them by the
Trustees. Any amendment required or permitted to be submitted to Shareholders
which, as the Trustees determine, shall affect the Shareholders of one or more
Series shall be authorized by vote of the Shareholders of each Series affected
and no vote of shareholders of a Series not affected shall be required.
Notwithstanding anything else herein, any amendment to Article X hereof shall
not limit the rights to indemnification or insurance provided therein with
respect to an action or omission of Covered Persons prior to such amendment.
SECTION 11.09 FISCAL YEAR. The fiscal year of the Trust shall end on a
specified date as set forth in the Bylaws, provided, however, that the Trustees
may, without Shareholder approval, change the fiscal year of the Trust.
SECTION 11.10 USE OF NAMES. The name "Reserve" included in the name of
the Trust shall be used pursuant to a royalty-free, non-exclusive license from
Reserve Management Company, Inc., incidental to and as part of an advisory,
management or supervisory contract which may be entered into by the Trust with
Reserve Management Company, Inc. The license may be terminated by Reserve
Management Company, Inc. upon termination of such advisory management or
supervisory contract or without cause on 60 days' notice, in which case the
Trust shall have no further right to use the name "Reserve" in its name or
otherwise and the trust, the Shareholders and its officers and Trustees shall
promptly take whatever action may be necessary to change its name accordingly.
SECTION 11.11 PROVISIONS IN CONFLICT WITH LAW. The provisions of this
Trust Instrument are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provisions is in conflict with the 1940 Act,
the regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Trust Instrument; provided, however,
that such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action take or omitted prior
to such determination. If any provision of this Trust Instrument shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not in any matter affect such provisions in any other
jurisdiction or any other provision of this Trust Instrument in any
jurisdiction.
IN WITNESS WHEREOF, the undersigned, being held all of the initial
Trustees of the Trust, have executed this instrument as of date first written
above.
<TABLE>
<S> <C>
- ----------------------------------------------------- ----------------------------------------------------
Bruce R. Bent, as Trustee and not individually Bruce R. Bent II, as Trustee and not individually
- ----------------------------------------------------- ----------------------------------------------------
Edwin Ehlert, Jr., as Trustee and not individually Diana P. Herrmann, as Trustee and not individually
- ----------------------------------------------------- ----------------------------------------------------
Henri W. Emmet, as Trustee and not individually Richard Bassuk, as Trustee and not individually
- ----------------------------------------------------- ----------------------------------------------------
Donald J. Harrington, as Trustee and not individually William Viklund, as Trustee and not individually
</TABLE>
-19-
<PAGE> 1
April 19, 1999
Reserve Private Equity Series
810 Seventh Avenue
New York, New York 10019
Ladies and Gentlemen:
I have acted as counsel to Reserve Private Equity Series, a Delaware business
trust ("RPES"), in connection with the preparation and filing of its
Registration Statement on Form N-1A (the "Registration Statement") covering
shares of beneficial interest, no par value per share, of RPES, on behalf of the
Reserve Blue Chip Growth Fund, Reserve Informed Investors Growth Fund, Reserve
International Equity Fund, Reserve Large-Cap Growth Fund, Reserve Mid-Cap Growth
Fund, Reserve Small-Cap Growth Fund and Reserve Strategic Growth Fund.
I have examined copies of the Declaration of Trust and By-Laws of RPES, the
Registration Statement, and such other records, proceedings and documents, as I
have deemed necessary for the purpose of this opinion. I have also examined such
other documents, papers, statutes and authorities as I deemed necessary to form
a basis for the opinion hereinafter expressed. In my examination of such
material, I have assumed the genuineness of all signatures and the conformity to
original documents of all copies.
Based upon the foregoing, I am of the opinion that the shares of beneficial
interest, no par value per share, of RPES to be issued in accordance with the
terms of the offering, as set forth in the Registration Statement, when so
issued and paid for will constitute validly authorized and legally issued shares
of beneficial interest, fully paid and non-assessable by RPES.
Very truly yours,
\s\ MaryKathleen Foynes
MaryKathleen Foynes
General Counsel
Reserve Funds
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
---------------------
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 15 to the registration statement on Form N-1A (Securities Act
File No. 33-63300 and Investment Company Act File No. 811-7734) of our report
dated July 30, 1998, relating to the financial statements and financial
highlights appearing in the May 31, 1998 annual report to shareholders of
Reserve Private Equity Series which are also incorporated by reference into the
registration statement.
We also consent to the reference to our firm under the captions "Financial
Highlights" in the prospectus and "Independent Accountants" in the statement of
additional information.
PricewaterhouseCoopers LLP
New York, New York
April 15, 1999
<PAGE> 1
MULTIPLE CLASS PLAN
PURSUANT TO RULE 18f-3
for
RESERVE PRIVATE EQUITY SERIES
Reserve Blue Chip Growth Fund
Reserve Convertible Securities Fund
Reserve Informed Investors Growth Fund
Reserve International Equity Fund
Reserve Large-Cap Growth Fund
Reserve Mid-Cap Equity Fund
Reserve Small-Cap Growth Fund
Reserve Strategic Growth Fund
WHEREAS, Reserve Private Equity Series (the "Trust") engages in business
as an open-end management investment company and is registered as such under
the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, shares of beneficial interest of the Trust are currently divided
into seven series: Reserve Blue Chip Growth Fund; Reserve Convertible Securities
Fund; Reserve Informed Investors Growth Fund; Reserve International Equity Fund;
Reserve Large-Cap Growth Fund; Reserve Mid-Cap Equity Fund; Reserve Small-Cap
Growth Fund and Reserve Strategic Growth Fund (the "Funds");
WHEREAS, the Trust desires to adopt, on behalf of each of the Funds, a
Multiple Class Plan pursuant to Rule 18f-3 under the Act (the "Plan") with
respect to each of the Funds; and
WHEREAS, the Trust employs Reserve Management Company, Inc. (the
"Adviser") as its investment manager and adviser and Resrv Partners, Inc., a
wholly-owned subsidiary of the Adviser ("Distributor"), as distributor of the
securities of which it is the issuer.
NOW, THEREFORE, the Trust hereby adopts, on behalf of the Funds, the Plan,
in accordance with Rule 18f-3 under the Act on the following terms and
conditions:
1. Features of the Classes. Each of the Funds issues its shares of
beneficial interest in two classes: "Class R Shares" and "Class I Shares".
Shares of each class of a Fund shall represent an equal pro rata interest in
such Fund and, generally, shall have identical voting, dividend, liquidation,
and other rights, preferences, powers, restrictions, limitations,
qualifications, and terms and conditions, except that: (a) each class shall
have a different designation; (b) each class of shares shall bear any Class
Expenses, as defined in Section 3 below; and (c) each class shall have
exclusive voting rights on any matter submitted to shareholders that relates
solely to its distribution arrangement and each class shall have separate
voting rights on any matter submitted to shareholders in which the interests
of one class differ from the interests of any other class. In
1
<PAGE> 2
addition, shares of each class of a Fund shall have the features described in
Sections 2, 3, 4 and 5 below.
2. Distribution Plan. The Trust has adopted a Distribution Plan with
respect to the Class R shares of each Fund pursuant to Rule 12b-1 promulgated
under the Securities Exchange Act of 1934. The Distribution Plan authorizes the
Trust to make assistance payments to the Distributor for distribution services
at an annual rate of up to 0.25% of the average daily net asset value
attributable to the Class R shares of each Fund and further authorizes the
Distributor to make assistance payments to brokers, financial institutions and
other financial intermediaries for shareholder accounts as to which a payee has
rendered distribution services to the Trust. Class I shares of each Fund do not
participate in the Distribution Plan.
As used herein, the term "distribution services" shall include services
rendered by Distributor as distributor of the shares of a Fund in connection
with any activities or expense primarily intended to result in the sale of
shares of a Fund, including, but not limited to, compensation to registered
representatives or other employees of Distributor or to other broker-dealers
that have entered into an agreement with Distributor, compensation to and
expenses of employees of Distributor who engage in or support distribution of
the Funds' shares; printing of prospectuses and reports for other than existing
shareholders; preparation, printing and distribution of sales literature and
advertising materials; and profit and overhead on the foregoing.
3. Allocation of Income and Expenses. (a) The gross income of each Fund
shall, generally, be allocated to each class on the basis of net assets. To the
extent practicable, certain expenses (other than Class Expenses as defined below
which shall be allocated more specifically) shall be subtracted from the gross
income on the basis of the net asset value of each class of the Fund. These
expenses include:
(1) Expenses incurred by the Trust (for example, fees of Trustees,
auditors and legal counsel) not attributable to a particular
Fund or to a particular class of shares of a Fund ("Trust Level
Expenses"); and
(2) Expenses incurred by a Fund not attributable to any particular
class of the Fund's shares (for example, advisory fees,
custodial fees, or other expenses relating to the management of
the Fund's assets) ("Fund Expenses").
(b) Expenses attributable to a particular class ("Class Expenses") shall
be limited to: (i) payments made pursuant to a Distribution Plan; (ii) transfer
agent fees attributable to a specific class; (iii) printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders of a specific class; (iv) Blue
Sky registration fees incurred by a class; (v) SEC registration fees incurred by
a class; (vi) the expense of administrative personnel and services to support
the shareholders of a specific class; (vii) litigation or other legal
2
<PAGE> 3
expenses relating solely to one class; and (viii) Trustees' fees incurred as a
result of issues relating to one class. Expenses in category (i) above must be
allocated to the class for which such expenses are incurred. All other "Class
Expenses" listed in categories (ii)-(viii) above may be allocated to a class
but only if the President and Chief Financial Officer have determined, subject
to Board approval or ratification, which of such categories of expenses will be
treated as Class Expenses consistent with applicable legal principles under the
Act and the Internal Revenue Code of 1986, as amended (the "Code").
Therefore, expenses of a Fund shall be apportioned to each class of
shares depending on the nature of the expense item. Trust Level Expenses and
Fund Expenses will be allocated among the classes of shares based on their
relative net asset values. Approved Class Expenses shall be allocated to the
particular class to which they are attributable. In addition, certain expenses
may be allocated differently if their method of imposition changes. Thus, if a
Class Expense can no longer be attributed to a class, it shall be charged to
a Fund for allocation among classes, as determined by the Board of Trustees.
Any additional Class Expenses not specifically identified above which are
subsequently identified and determined to be properly allocated to one class
of shares shall not be so allocated until approved by the Board of Trustees of
the Trust in light of the requirements of the Act and the Code.
4. Exchange Privileges. Shares of each Fund may be exchanged for shares
in Reserve money-market funds or for shares of the same class of any other
Fund. The exchange privileges may be modified or terminated at any time, or
from time to time, upon 60 days' notice to shareholders.
5. Conversion Features. There shall be no conversion features associated
with any of the classes of shares of any Fund.
6. Quarterly and Annual Reports. The Trustees shall receive quarterly and
annual statements concerning all allocated Class Expenses and distribution and
servicing expenditures complying with paragraph (b)(3)(ii) of Rule 12b-1, as it
may be amended from time to time. In the statements, only expenditures properly
attributable to the sale or servicing of a particular class of shares will be
used to justify any distribution or servicing fee or other expenses charged to
that class. Expenditures not related to the sale or servicing of a particular
class shall not be presented to the Trustees to justify any fee attributable to
that class. The statements, including the allocations upon which they are based,
shall be subject to the review and approval of the independent Trustees in the
exercise of their fiduciary duties.
7. Waiver or Reimbursement of Expenses. Expenses may be waived or
reimbursed by any adviser to the Trust or any other provider of services to the
Trust without the prior approval of the Trust's Board of Trustees.
8. Effectiveness of Plan. The Plan shall not take effect until it has
been approved by votes of a majority of both (a) the Trustees of the Trust and
(b) those Trustees of the Trust who are not "interested persons" of the Trust
(as defined in the Act) and who have no direct or indirect financial interest
in the operation of this Plan, cast in person at a meeting (or meetings) called
for the purpose of voting on this Plan.
3
<PAGE> 4
9. Material Modifications. This Plan may not be amended to modify
materially its terms unless such amendment is approved in the manner provided
for initial approval in Paragraph 8 hereof.
10. Limitation of Liability. The Trustees of the Trust and the
shareholders of each Fund shall not be liable for any obligations of the Trust
or any Fund under this Plan, and Distributor or any other person, in asserting
any rights or claims under this Plan, shall look only to the assets and
property of the Trust or such Funds in settlement of such right or claim, and
not to such Funds in settlement of such right or claim, and not to such
Trustees or shareholders.
IN WITNESS WHEREOF, the Trust, on behalf of the Funds, has adopted this
Multiple Class Plan as of the 16th day of December, 1998, to be effective
December 16th, 1998.
RESERVE PRIVATE EQUITY SERIES
By: /s/ Bruce R. Bent
__________________________
Name: Bruce R. Bent
Title: President
4
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of
RESERVE PRIVATE EQUITY SERIES, a Delaware business trust, does hereby constitute
and appoint MaryKathleen Foynes, Bruce R. Bent, Bruce R. Bent II and Arthur T.
Bent III, and each of them, his true and lawful attorney and agent to do any and
all acts and things and to execute any and all instruments which said attorney
and agent may deem necessary or advisable; (i) to enable the said Trust to
comply with the Securities Act of 1933, as amended, and any rules, regulations
and requirements of the Securities and Exchange Commission in respect thereof,
in connection with the registration under said Securities Act of the shares of
beneficial interest of said Trust (the "Securities"), including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign for and on behalf of the undersigned the name of the undersigned as trustee
of said Trust to a Registration Statement or to any amendment thereto filed with
the Securities and Exchange Commission in respect of said Securities and to any
instrument or document filed as part of, as an exhibit to or in connection with
said Registration Statement or amendment; (ii) to enable said Trust to comply
with the Investment Company act of 1940, as amended, and any rules, regulations
and requirements of the Securities and Exchange Commission in respect thereof,
in connection with the registration under said Investment Company Act of the
Trust, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign for and on behalf of the undersigned
the name of the undersigned as trustee of said Trust to a Registration Statement
or to any amendment thereto filed with the Securities and Exchange Commission in
respect of said Trust and to any instrument or document filed as part of, as an
exhibit to or in connection with said Registration Statement or amendment; and
(iii) to register or qualify said Securities for sale and to register or license
said Trust as a broker or dealer in said Securities under the securities or Blue
Sky laws of all such states as may be necessary or appropriate to permit therein
the offering and sale of said Securities as contemplated by said Registration
Statement, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign for and on behalf of the undersigned
the name of the undersigned as trustee of said Trust to any application,
statement, petition, prospectus, notice or other instrument or document, or to
any amendment thereto, or to any exhibit filed as a part thereof or in
connection therewith, which is required to be signed by the undersigned and to
be filed with the public authority or authorities administering said securities
or Blue Sky laws for the purpose of so registering or qualifying said Securities
or registering or licensing said Trust, and the undersigned does hereby ratify
and confirm as his own act and deed all that said attorney and agent shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 1999.
/s/ Bruce R. Bent /s/ Edwin Ehlert, Jr.
-------------------------- -------------------------
Bruce R. Bent Edwin Ehlert, Jr.
/s/ Bruce R. Bent II /s/ William E. Viklund
-------------------------- -------------------------
Bruce R. Bent II William E. Viklund
/s/ Henri W. Emmet /s/ Richard Bassuk
-------------------------- -------------------------
Henri W. Emmet Richard Bassuk
/s/ Donald J. Harrington /s/ Diana P. Herrmann
-------------------------- -------------------------
Donald J. Harrington Diana P. Herrmann
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> Reserve Blue Chip Growth Fund
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 8,423,375
<INVESTMENTS-AT-VALUE> 10,460,283
<RECEIVABLES> 239,416
<ASSETS-OTHER> 22,903
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,722,602
<PAYABLE-FOR-SECURITIES> 233,179
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,611
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,923,056
<SHARES-COMMON-STOCK> 605,555
<SHARES-COMMON-PRIOR> 564,917
<ACCUMULATED-NII-CURRENT> (203,752)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 719,600
<OVERDISTRIBUTION-GAINS> 2,036,908
<ACCUM-APPREC-OR-DEPREC> 10,475,812
<NET-ASSETS> 31,080
<DIVIDEND-INCOME> 2,011
<INTEREST-INCOME> 0
<OTHER-INCOME> 75,897
<EXPENSES-NET> (42,806)
<NET-INVESTMENT-INCOME> 510,371
<REALIZED-GAINS-CURRENT> 1,373,819
<APPREC-INCREASE-CURRENT> 1,331,013
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 61,956
<NUMBER-OF-SHARES-REDEEMED> 21,318
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,943,759
<ACCUMULATED-NII-PRIOR> (160,946)
<ACCUMULATED-GAINS-PRIOR> 209,229
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 64,287
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 75,897
<AVERAGE-NET-ASSETS> 9,278,109
<PER-SHARE-NAV-BEGIN> 15.09
<PER-SHARE-NII> (.05)
<PER-SHARE-GAIN-APPREC> 2.26
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.30
<EXPENSE-RATIO> 1.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> Reserve Small-Cap Growth Fund
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 3,448,977
<INVESTMENTS-AT-VALUE> 4,768,879
<RECEIVABLES> 550
<ASSETS-OTHER> 111,637
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,881,066
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,414
<TOTAL-LIABILITIES> 4,414
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,818,680
<SHARES-COMMON-STOCK> 274,872
<SHARES-COMMON-PRIOR> 332,364
<ACCUMULATED-NII-CURRENT> (319,265)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 57,235
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,320,002
<NET-ASSETS> 4,876,652
<DIVIDEND-INCOME> 1,163
<INTEREST-INCOME> 3,410
<OTHER-INCOME> 0
<EXPENSES-NET> 41,434
<NET-INVESTMENT-INCOME> (36,861)
<REALIZED-GAINS-CURRENT> 150,572
<APPREC-INCREASE-CURRENT> 200,049
<NET-CHANGE-FROM-OPS> 313,760
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,621
<NUMBER-OF-SHARES-REDEEMED> 66,113
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (664,450)
<ACCUMULATED-NII-PRIOR> (282,404)
<ACCUMULATED-GAINS-PRIOR> (93,337)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 35,242
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 41,434
<AVERAGE-NET-ASSETS> 4,931,035
<PER-SHARE-NAV-BEGIN> 16.66
<PER-SHARE-NII> (.31)
<PER-SHARE-GAIN-APPREC> 1.39
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.74
<EXPENSE-RATIO> 1.66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> Reserve Informed Investors Growth Fund
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 2,704,342
<INVESTMENTS-AT-VALUE> 2,906,447
<RECEIVABLES> 174,492
<ASSETS-OTHER> 44,547
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,125,486
<PAYABLE-FOR-SECURITIES> 197,726
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 755
<TOTAL-LIABILITIES> 198,481
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,263,174
<SHARES-COMMON-STOCK> 264,451
<SHARES-COMMON-PRIOR> 413,271
<ACCUMULATED-NII-CURRENT> (286,178)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 747,904
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 202,105
<NET-ASSETS> 2,927,005
<DIVIDEND-INCOME> 4,607
<INTEREST-INCOME> 9,754
<OTHER-INCOME> 0
<EXPENSES-NET> 27,808
<NET-INVESTMENT-INCOME> 13,447
<REALIZED-GAINS-CURRENT> 30,862
<APPREC-INCREASE-CURRENT> 197,284
<NET-CHANGE-FROM-OPS> 214,699
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 132,892
<NUMBER-OF-SHARES-REDEEMED> 281,712
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,409,675)
<ACCUMULATED-NII-PRIOR> (272,731)
<ACCUMULATED-GAINS-PRIOR> 717,042
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 23,687
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27,808
<AVERAGE-NET-ASSETS> 3,280,598
<PER-SHARE-NAV-BEGIN> 10.46
<PER-SHARE-NII> (.07)
<PER-SHARE-GAIN-APPREC> (.35)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.06
<EXPENSE-RATIO> 1.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> Reserve Large-Cap Growth Fund
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 17,504,768
<INVESTMENTS-AT-VALUE> 19,878,994
<RECEIVABLES> 85,801
<ASSETS-OTHER> 1,544,022
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,508,817
<PAYABLE-FOR-SECURITIES> 1,516,894
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,159
<TOTAL-LIABILITIES> 1,539,053
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,053,262
<SHARES-COMMON-STOCK> 1,027,099
<SHARES-COMMON-PRIOR> 373,552
<ACCUMULATED-NII-CURRENT> (30,991)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 573,267
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,374,226
<NET-ASSETS> 19,969,764
<DIVIDEND-INCOME> 52,960
<INTEREST-INCOME> 17,680
<OTHER-INCOME> 0
<EXPENSES-NET> 75,193
<NET-INVESTMENT-INCOME> (4,253)
<REALIZED-GAINS-CURRENT> 329,817
<APPREC-INCREASE-CURRENT> 812,078
<NET-CHANGE-FROM-OPS> 1,137,642
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 812,308
<NUMBER-OF-SHARES-REDEEMED> 158,761
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 12,046,107
<ACCUMULATED-NII-PRIOR> (26,738)
<ACCUMULATED-GAINS-PRIOR> 243,450
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 63,316
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 75,193
<AVERAGE-NET-ASSETS> 9,558,878
<PER-SHARE-NAV-BEGIN> 18.16
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 1.28
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.44
<EXPENSE-RATIO> 1.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> Reserve Mid-Cap Equity Fund
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 2,225,049
<INVESTMENTS-AT-VALUE> 2,223,315
<RECEIVABLES> 198
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,223,513
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47,878
<TOTAL-LIABILITIES> 47,878
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,088,091
<SHARES-COMMON-STOCK> 206,264
<SHARES-COMMON-PRIOR> 261,225
<ACCUMULATED-NII-CURRENT> (156,449)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 245,727
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,734)
<NET-ASSETS> 2,175,635
<DIVIDEND-INCOME> 4,229
<INTEREST-INCOME> 5,291
<OTHER-INCOME> 0
<EXPENSES-NET> 20,362
<NET-INVESTMENT-INCOME> (10,842)
<REALIZED-GAINS-CURRENT> 119,495
<APPREC-INCREASE-CURRENT> (656,634)
<NET-CHANGE-FROM-OPS> (547,981)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,923
<NUMBER-OF-SHARES-REDEEMED> 58,884
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,204,924)
<ACCUMULATED-NII-PRIOR> (145,607)
<ACCUMULATED-GAINS-PRIOR> 126,232
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17,341
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 20,362
<AVERAGE-NET-ASSETS> 2,403,398
<PER-SHARE-NAV-BEGIN> 12.98
<PER-SHARE-NII> (.20)
<PER-SHARE-GAIN-APPREC> (2.24)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.54
<EXPENSE-RATIO> 1.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> International Equity Fund
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 9,651,109
<INVESTMENTS-AT-VALUE> 11,514,605
<RECEIVABLES> 146,165
<ASSETS-OTHER> 303,709
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,964,479
<PAYABLE-FOR-SECURITIES> 43,334
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 607
<TOTAL-LIABILITIES> 43,941
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,898,950
<SHARES-COMMON-STOCK> 940,016
<SHARES-COMMON-PRIOR> 970,636
<ACCUMULATED-NII-CURRENT> (141,072)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (700,836)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,863,496)
<NET-ASSETS> 11,920,538
<DIVIDEND-INCOME> 77,893
<INTEREST-INCOME> 23,799
<OTHER-INCOME> 0
<EXPENSES-NET> 113,906
<NET-INVESTMENT-INCOME> (12,214)
<REALIZED-GAINS-CURRENT> 620,773
<APPREC-INCREASE-CURRENT> (1,125,957)
<NET-CHANGE-FROM-OPS> (517,398)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 121,793
<NUMBER-OF-SHARES-REDEEMED> 152,413
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (930,686)
<ACCUMULATED-NII-PRIOR> (128,858)
<ACCUMULATED-GAINS-PRIOR> (1,321,609)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 100,562
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 113,906
<AVERAGE-NET-ASSETS> 11,921,376
<PER-SHARE-NAV-BEGIN> 13.07
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> (.37)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.68
<EXPENSE-RATIO> 1.91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
