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[AMERICAN EXPRESS LOGO]
Financial
Direct
American Express
Money Market Accounts
_____________________
Strategist
Money Market
Fund
Semi-Annual Report
November 30,1998
[AMERICAN EXPRESS LOGO]
Financial
Direct
General Information and 24-Hour Yield and
Balance Information
800-637-1700
offered by
This literature is not authorized for THE RESERVE FUNDS
distribution to prospective investors
unless preceded or accompanied by an
appropriate current prospectus.
Distributor - Resrv Partners, Inc.
RF/STR SEMI-ANNUAL 01/99
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THE RESERVE FUND--STRATEGIST MONEY-MARKET FUND
STATEMENT OF NET ASSETS--NOVEMBER 30, 1998--(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT NEGOTIABLE BANK CERTIFICATES OF DEPOSIT -- 55.07% (NOTE 1)
--------- ------------------------------------------------- --------
<C> <S> <C>
DOMESTICS -- 11.01%
$ 2,000,000 BankBoston, NA, 5.20%, 2/16/1999............................ $ 2,000,000
2,000,000 Chase Manhattan Bank U.S.A., Delaware, 5.20%, 2/5/1999...... 2,000,000
2,000,000 The Chase Manhattan Bank, 5.28%, 2/16/1999.................. 2,000,000
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6,000,000
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EURO -- 18.36%
2,000,000 Abbey National PLC, 5.20%, 2/8/1999......................... 2,000,000
2,000,000 ABN/AMRO, 5.25%, 2/12/1999.................................. 2,000,000
2,000,000 Bayerische Hypo-und Vereinsbank AG, 5.32%, 2/16/1999........ 2,000,042
2,000,000 Norddeutsche Landesbank Girozentrale, 5.30%, 2/17/1999...... 2,000,043
2,000,000 Svenska Handelsbanken, 5.30%, 12/2/1998..................... 2,000,000
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10,000,085
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YANKEES -- 25.70%
2,000,000 Banque Nationale de Paris, 5.14%, 2/26/1999................. 2,000,000
2,000,000 BHF Bank AG, 5.23%, 12/7/1998............................... 2,000,000
2,000,000 Canadian Imperial Bank of Commerce, 5.20%, 2/16/1999........ 2,000,000
2,000,000 Commerzbank AG, 5.21%, 2/5/1999............................. 2,000,000
2,000,000 Deutsche Bank, 5.25%, 2/8/1999.............................. 2,000,000
2,000,000 Lloyds Bank PLC, 5.31%, 2/16/1999........................... 2,000,021
2,000,000 UBS AG, 5.31%, 2/16/1999.................................... 2,000,042
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14,000,063
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Total Negotiable Bank Certificates of Deposit............... 30,000,148
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COLLATERALIZED PROMISSORY NOTES(A) -- 10.97%
2,000,000 International Nederlanden (US) Funding Corp., 5.17%,
2/26/1999.................................................. 1,975,473
2,000,000 Societe Generale, NA, Inc., 5.20%, 12/4/1998................ 1,999,134
2,000,000 Toronto-Dominion Holdings (U.S.A.), Inc., 5.26%,
12/2/1998.................................................. 1,999,707
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Total Collateralized Promissory Notes....................... 5,974,314
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REPURCHASE AGREEMENTS -- 33.04%
11,000,000 Bear, Stearns & Co. Inc., 5.50%, 12/1/98 (collateralized by
$2,055,963 Fed. Home Loan Mtg. Corp. -- Gold adj. rate,
REMIC, due 6/15/24 and $9,396,648 Fed. Nat'l. Mgt. Assoc.,
REMIC, due 2/25/22)........................................ 11,000,000
7,000,000 DLJ Securities Corporation, 5.45%, 12/1/98 (collateralized
by $7,210,766 FNMA Mortgage-Backed Pass-Through, 6.50%, due
10/1/28)................................................... 7,000,000
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Total Repurchase Agreements................................. 18,000,000
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TOTAL INVESTMENTS (COST $53,974,462)................ 99.08% 53,974,462
OTHER ASSETS, LESS LIABILITIES........................ .92 499,935
NET ASSETS.......................................... 100.00% $54,474,397
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
BASED ON 54,474,397 SHARES OF BENEFICIAL INTEREST $.001 PAR
VALUE OUTSTANDING.......................................... $1.00
---
---
</TABLE>
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(a) Collateralized by bank letter of credit.
2
<PAGE> 3
THE RESERVE FUND--STRATEGIST MONEY-MARKET FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998--(UNAUDITED)
<TABLE>
<S> <C>
INTEREST INCOME (Note 1).................................... $1,535,388
----------
EXPENSES (Note 2)
Comprehensive fee......................................... 223,518
Servicing fee............................................. 53,775
----------
Total Expenses.......................................... 277,293
Less: expenses waived (Note 2).......................... (165,534)
----------
Net Expenses............................................ 111,759
----------
NET INVESTMENT INCOME, representing Net Increase in Net
Assets from Investment Operations......................... $1,423,629
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1998* MAY 31, 1998
------------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income paid to shareholders as dividends
(Note 1)............................................... $ (1,423,629) $ (4,013,759)
------------ -------------
FROM CAPITAL SHARE TRANSACTIONS (at net asset value of
$1.00 per share):
Net proceeds from sale of shares........................ 45,751,459 129,839,697
Dividends reinvested.................................... 1,423,629 4,013,759
Cost of shares redeemed................................. (48,969,479) (177,288,649)
------------ -------------
Net decrease derived from capital share transactions and
from investment operations............................. (1,794,391) (43,435,193)
NET ASSETS:
Beginning of period..................................... 56,268,788 99,703,981
------------ -------------
End of period........................................... $ 54,474,397 $ 56,268,788
============ =============
</TABLE>
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* Unaudited.
SEE NOTES TO FINANCIAL STATEMENTS.
3
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NOTES TO FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES:
--------------------------------
The Strategist Money-Market Fund, a series of The Reserve Fund, is
registered under the Investment Company Act of 1940 as a non-diversified,
open-end investment company. The policies summarized below are consistently
followed in the preparation of its financial statements in conformity with
generally accepted accounting principles.
A. The Reserve Fund's authorized shares of beneficial interest are
unlimited. The Reserve Fund's shares are divided into four series: Primary
Fund, U.S. Government Fund, U.S. Treasury Fund and the Strategist
Money-Market Fund. These financial statements and notes apply only to the
Strategist Money-Market Fund.
B. Securities are valued at amortized cost, which approximates market value.
The amortized cost method values a security at cost plus accrued interest at
the time of purchase, and thereafter assumes a constant amortization to
maturity of any discount or premium, irrespective of intervening changes in
interest rates or market values. Pursuant to Rule 2a-7, for the purpose of
computing the average-weighted life to maturity, floating or variable rate
instruments, in which the Fund may invest, will be deemed to be: (1) the
notice period required before the Fund is entitled to receive payment of
principal or, (2) the period remaining until the instrument's next interest
rate adjustment.
C. It is the Fund's policy to comply with Subchapter M of the Internal
Revenue Code and to distribute all of its taxable income to its
shareholders. Accordingly, no Federal income tax provision is required.
D. Security transactions are recorded on a trade date basis; interest income
is accrued daily.
E. The Fund's custodian holds the securities owned subject to repurchase
agreements. The Fund's Investment Adviser follows procedures to assure that
the resale amount of the repurchase agreement is fully collateralized.
F. Net investment income on investments is distributed to shareholders daily
and automatically reinvested in additional Fund shares.
G. The Fund may enter into repurchase agreements with financial institutions
and securities dealers who are deemed credit-worthy pursuant to guidelines
established by the Fund's Board of Trustees. The Fund's Investment Adviser
will follow procedures intended to provide that all repurchase agreements
are at least 100% collateralized as to principal and interest. However, in
the event of default or bankruptcy by the seller, realization and/or
retention of the collateral may be subject to legal proceedings.
(2) MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
--------------------------------------------------------
Pursuant to an Investment Management Agreement (the "Agreement") between
Reserve Management Company, Inc. ("RMCI") and the Fund, RMCI serves as the
Fund's Investment Adviser subject to the direction of the Board of Trustees.
Under the Agreement, RMCI is responsible for the supervision of the Fund's
day-to-day operations. RMCI manages the Fund's investments, effects
purchases and sales thereof, and absorbs certain promotional expenses. For
its services as Investment Adviser, RMCI receives a comprehensive fee,
calculated at an annual rate of .80% of the Fund's average daily net assets.
For the six months ended November 30, 1998, RMCI voluntarily waived a
portion of its fee amounting to $111,759.
DISTRIBUTION ASSISTANCE:
-------------------------
Pursuant to a Plan of Distribution under Rule 12b-1, the Fund may make
assistance payments, at a rate of .20% per annum of the average net asset
value, to firms for distribution assistance and administrative services
provided to Fund shareholders. The Plan requires RMCI to pay an equivalent
amount from its own resources. For the six months ended November 30, 1998,
the Fund accrued $53,775 in distribution fees, which were voluntarily waived
by RMCI.
(3) MANAGEMENT'S USE OF ESTIMATES:
----------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the dates of the financial statements and the reported amounts of income and
expenses during the reporting periods. Actual results could differ from
those estimates.
(4) COMPOSITION OF NET ASSETS:
-----------------------------
At November 30, 1998, the Fund's net assets consisted of $54,474 in par
value and $54,419,923 in paid-in capital.
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NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) FINANCIAL HIGHLIGHTS:
----------------------
Contained below is per share operating performance data for a share of
beneficial interest for each of the periods as indicated. The information
should be read in conjunction with the accompanying financial data and
related notes.
<TABLE>
<CAPTION>
SIX MONTHS ENDED FOR FISCAL YEARS ENDED MAY 31,
NOVEMBER 30, --------------------------------
1998* 1998 1997 1996(A)
---------------- ---- ---- -------
<S> <C> <C> <C> <C>
Net asset value at beginning of period................... $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- -------
Net investment income from investment operations......... .0255 .0542 .0552 .0462
Less dividends from net investment income................ (.0255) (.0542) (.0552) (.0462)
------- ------- ------- -------
Net asset value at end of period......................... $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= =======
Total Return............................................. 5.30%(b) 5.42% 5.52% 5.13%(b)
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------
Net assets end of period (millions)...................... $ 54.4 $ 56.3 $ 99.7 $ 1.0
Ratio of expenses to average net assets(c)............... .40%(b) .33% .00% .18%(b)
Ratio of net investment income to average net assets..... 5.09%(b) 5.29% 5.44% 5.12%(b)
</TABLE>
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(*) Unaudited.
(a) For the period from May 1, 1996 (Commencement of Operations) to May 31,
1996.
(b) Annualized.
(c) For each period, RMCI voluntarily waived a portion of its fee and other
expenses. Had RMCI not undertaken to reduce expenses, the actual expense
ratios would have been .80% for each reporting period.
5
