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[LOGO]
THE RESERVE FUND
MONEY-MARKET FUNDS
PROSPECTUS
JULY 31, 1999,
AS SUPPLEMENTED ON AUGUST 18, 1999
THE RESERVE FUND (the "Trust"), is a registered investment company, which
offers three no-load money-market funds in this Prospectus:
o PRIMARY FUND,
o U.S. GOVERNMENT FUND, and
o U.S. TREASURY FUND
(each a "Fund," collectively "the Funds").
For investors seeking as high a level of current income as is consistent
with preservation of capital and liquidity.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
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PAGE
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Investment Objective & Principal Strategies.............................. 2
Performance History...................................................... 4
Fees & Expenses of the Funds............................................. 6
Management............................................................... 7
How to Buy Shares........................................................ 7
Selling Fund Shares...................................................... 9
Tax Consequences......................................................... 10
General Information...................................................... 11
Financial Highlights..................................................... 12
</TABLE>
INVESTMENT OBJECTIVE & PRINCIPAL STRATEGIES
The investment objective of all three Funds is to seek as high a level of
current income as is consistent with preservation of capital and liquidity.
However, achievement of this objective cannot be assured.
The Funds are designed for institutions and individuals as a convenient
alternative to the direct investment of temporary cash balances in short-term
money-market accounts or instruments. The Funds seek to employ idle cash at
yields competitive with yields of other comparable short-term investments, and
are designed to reduce or eliminate for the investor the mechanical problems of
direct investment in money-market instruments such as scheduling maturities,
evaluating the credit of issuers, investing in round lots, safeguarding receipt
and delivery of securities and reinvesting.
The Funds seek to maintain a stable $1.00 share price. The portfolio
managers monitor a range of economic and financial factors. Based on their
analysis, the Funds are invested in a mix of U.S. dollar denominated money-
market securities that are intended to provide as high a yield as possible
without violating the Fund's credit quality policies or jeopardizing the
stability of its share price.
PRIMARY FUND. The Primary Fund seeks to attain its objective by investing in
instruments issued by the U.S. government, its agencies and instrumentalities
("U.S. government securities"), deposit-type obligations, such as negotiable
certificates of deposit and time deposits, bankers' acceptances and letters of
credit of domestic and foreign banks, savings and loan associations and savings
banks, high-quality domestic and foreign commercial paper as determined by
nationally recognized statistical rating organizations non-rated instruments of
comparable quality as determined by the Board of Trustees, other short-term
instruments of similar quality, and instruments fully collateralized by such
obligations.
The Primary Fund will invest in obligations of U.S. banking institutions
that are insured by the Federal Deposit Insurance Corporation and commercial
paper, which is rated at the time of investment, P-1 by Moody's Investors
Service, Inc. ("Moody's"), A-1 by Standard & Poor's Corporation ("S&P") or the
equivalent if rated by another rating agency. The Primary Fund may also invest
in obligations of foreign branches of both U.S. banks and foreign banks
(Eurodollars). Investment in foreign banks will be limited to those located in
Australia, Canada, Western Europe and Japan and which, at the time of
investment, have more than $25 billion (or the equivalent in other currencies)
in total assets and which, in the opinion of the Fund's Adviser, are of
comparable quality to the U.S. banks which may be purchased by the Fund. The
Primary Fund may also invest in municipal obligations, the interest on which is
not exempt from federal income taxation.
U.S. GOVERNMENT FUND. The U.S. Government Fund seeks to attain its objective by
investing exclusively in securities backed by full faith and credit of the U.S.
government, such as U.S. Treasury securities, obligations
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issued or guaranteed by the U.S. government, its agencies and instrumentalities,
and repurchase agreements supported by such investments.
U.S. TREASURY FUND. The U.S. Treasury Fund seeks to attain its objective by
investing exclusively in securities backed by the full faith and credit of the
U.S government which provide interest income exempt in most states from state
and local personal income taxes. Typically, the Fund's assets will be invested
in U.S. Treasury securities.
The "full faith and credit" backing is considered the strongest backing
offered by the U.S. government and to be the highest degree of safety with
respect to the payment of principal and interest.
The Funds may invest in repurchase agreements ("repos") but will limit them
to those banks and securities dealers who are deemed creditworthy pursuant to
the guidelines adopted by the Trust's Board of Trustees ("Trustees"). The U.S.
Government and U.S. Treasury Funds will further limit their investment in repos
to those whose underlying obligations are backed by the full faith and credit of
the United States, and, in the case of the U.S. Treasury Fund, repos will not
exceed 5% of its total assets except for temporary or emergency purposes.
Securities subject to repos will be placed in a segregated account and will be
monitored to ensure that the market value of the securities plus any accrued
interest will at least equal the repurchase price.
Although not a principal strategy, the Funds are allowed to invest all, or
substantially all, of their investable assets in other open-end management
companies having the same investment objective and substantially similar
policies and restrictions.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS. The Funds are money-market funds
which are a specific type of fund that seeks to maintain a $1.00 price per
share. An investment in a Fund is not insured or guaranteed by the U.S.
government, Federal Deposit Insurance Corporation or any other government
agency. Although each Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in a Fund.
Additionally, each Fund's yield will vary as the short-term securities in its
portfolio mature and the proceeds are reinvested in securities with different
interest rates.
While each Fund has maintained a constant share price since inception, and
will strive to do so, the following factors could reduce the Fund's income level
and/or share price:
o as to all Funds, interest rates could rise sharply, causing the value of
the Funds' securities, and share price, to drop.
o as to all Funds, repos could involve risks in the event of a default of
the repo counterparty, including possible delays, losses or restrictions
upon a Fund's ability to dispose of the underlying securities.
o as to the Primary Fund, there are risks generally associated with
investing in the banking industry, such as interest rate risk, credit
risk and regulatory developments relating to the banking industry.
o as to the Primary Fund, Euro and Yankee dollar investments involve
certain risks that are different from investments in domestic obligations
of U.S. banks. These risks may include unfavorable political and economic
developments, possible withholding taxes, seizure of foreign deposits,
currency controls or other governmental restrictions which might affect
payment of principal or interest. In addition, foreign banks are not
regulated by U.S. banking authorities and are generally not bound by
financial reporting standards comparable to U.S. banks. Adverse
political, regulatory, market or economic developments in foreign
countries can affect entities located in those countries.
o as to the Primary Fund, investments in municipal obligations are subject
to market volatility and affected by adverse economic or political
changes and the financial condition of the issuers.
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YEAR 2000. Many computer software systems in use today cannot distinguish the
year 2000 from the year 1900. Most of the services provided to the Trust depend
on the smooth functioning of computer systems. The Trust could be adversely
affected if the computer systems and service providers that interface with it
are unable to process data from January 1, 2000 and after; however, steps are
being taken to reasonably address this issue and to obtain assurance that
comparable efforts are being made by service providers. There can be no
assurance that these steps will be sufficient to avoid any adverse impact to the
Trust. In addition, because the Year 2000 issue affects virtually all
organizations, the extent of its impact cannot be predicted.
OTHER RISKS. These risks are discussed in more detail in the Statement of
Additional Information ("SAI"). Most of the Funds' performance depends on
interest rates. When interest rates fall, the Funds' yields will typically fall
as well.
The Reserve Fund's emphasis on the high credit quality of its investments
may mean that its yields are lower than those available from certain other
money-market funds that may invest in commercial paper. Because of the low level
of risk, over time, a money-market fund may produce lower returns than bond or
stock investments which entail higher levels of risk.
PERFORMANCE HISTORY
The bar charts below show the Funds' annual returns for the past ten years
or since the first calendar year since inception, together with the best and
worst quarters. The accompanying "Average Annual Total Return as of
December 31, 1998" table gives some indication of risk of an investment in the
Funds. The tables assume reinvestment of dividends and distributions, if any. As
with all mutual funds, the past is not a prediction of the future.
PRIMARY FUND
ANNUAL TOTAL RETURNS AS OF DECEMBER 31,
[BAR CHART]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
9.16% 7.88% 5.59% 3.17% 2.39% 3.49% 5.27% 4.67% 4.87% 4.81%
Best Quarter: 2nd Q 1989 2.30%
Worst Quarter: 2nd Q 1993 0.53%
Most Recent Calendar Quarter: 2nd Q 1999 0.97%
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998
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1 YEAR 5 YEARS 10 YEARS
- -------------------------- -------------------------- --------------------------
<S> <C> <C>
4.81% 4.62% 5.11%
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U.S. GOVERNMENT FUND
ANNUAL TOTAL RETURNS AS OF DECEMBER 31,
[BAR CHART]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
9.10% 7.80% 5.32% 3.09% 2.30% 3.42% 5.18% 4.60% 4.76% 4.69%
Best Quarter: 2nd Q 1989 2.27%
Worst Quarter: 2nd Q 1993 0.56%
Most Recent Calendar Quarter: 2nd Q 1999 0.95%
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998
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1 YEAR 5 YEARS 10 YEARS
- -------------------------- -------------------------- --------------------------
<S> <C> <C>
4.69% 4.53% 5.01%
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U.S. TREASURY FUND
ANNUAL TOTAL RETURNS AS OF DECEMBER 31,
[BAR CHART]
1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ----
2.19% 3.68% 4.96% 4.53% 4.61% 4.52%
Best Quarter: 2nd Q 1995 1.25%
Worst Quarter: 1st Q 1993 0.52%
Most Recent Calendar Quarter: 2nd Q 1999 0.94%
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998
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SINCE
1 YEAR 5 YEARS INCEPTION
- ------------------------- ------------------------- -------------------------
<S> <C> <C>
4.52% 4.46% 3.89%
</TABLE>
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For the Funds' current yields, call toll-free (800) 637-1700 or visit our
web site at www.reservefunds.com.
FEES & EXPENSES OF THE FUNDS
If you buy and hold shares of the Funds, you may pay certain fees and
expenses which are described in the table below. There are no sales charges
(loads) or exchange fees associated with an investment in the Funds. Annual fund
operating expenses are paid out of the assets of each Fund, so their effect is
included in each Fund's share price. Annual fund operating expenses, indicated
in the table below, reflect expenses for the Funds' fiscal year ended May 31,
1999.
SHAREHOLDER FEES FOR ALL FUNDS
(Fees paid directly from your investment)
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Sales Load Imposed on Purchases......................................... None
Sales Load Imposed on Reinvested Dividends.............................. None
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These are all no-load funds. There are no direct shareholders fees. Please see
the "Annual Fund Operating Expenses for all Funds" table below.
ANNUAL FUND OPERATING EXPENSES FOR ALL FUNDS
(Expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
U.S. U.S.
PRIMARY GOVERNMENT TREASURY
FUND FUND FUND
------- ---------- --------
<S> <C> <C> <C>
Comprehensive Management Fee (a)........................ .80% .80% .80%
Distribution (12b-1) Fees (b)........................... .20 .20 .20
----- ---- ----
Total Annual Fund Operating Expenses.................... 1.00% 1.00% 1.00%
----- ---- ----
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(a) The comprehensive management fee includes advisory and customary operating
expenses. However, the Funds may be charged for certain non-recurring
extraordinary expenses and its allocated or direct share of certain other
expenses. See "Management".
(b) The Funds have adopted a Rule 12b-1 plan which allows the Funds to pay
distribution fees for the sale and distribution of its shares. The maximum
level of distribution expenses is 0.20% per year of each Fund's average net
assets. As these fees are paid out of each Fund's assets on an on-going
basis, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
EXAMPLE: This example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The example should
not be considered indicative of future investment returns and operating expenses
which may be more or less than those shown. This example is based on the annual
fund operating expenses described in the table.
This example assumes that you invest $10,000 in a Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year
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and that each Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
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ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Primary Fund............................. $102 $ 318 $552 $ 1,225
U.S. Government Fund..................... 102 318 552 1,225
U.S. Treasury Fund....................... 102 318 552 1,225
</TABLE>
PLEASE NOTE THAT THE ABOVE EXAMPLE IS AN ESTIMATE OF THE EXPENSES TO BE INCURRED
BY SHAREHOLDERS OF THE FUNDS. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE
REFLECTED ABOVE. YOU WOULD PAY THE SAME IF YOU DID NOT REDEEM YOUR SHARES.
MANAGEMENT
INVESTMENT ADVISER. Since November 15, 1971, Reserve Management Company, Inc.
("RMCI") 1250 Broadway, New York, NY 10001 and its affiliates have provided
investment advice to The Reserve Funds. RMCI serves as the investment adviser to
the Funds under an Investment Management Agreement (the "Agreement") with The
Reserve Fund (the "Trust"). As a result of recent shareholder votes, each of the
Funds has entered into a new Investment Management Agreement with RMCI, which is
substantially similar to the Investment Management Agreement previously in
effect with regard to each Fund, except for a new comprehensive management fee.
The U.S. Treasury Fund, since inception, has been subject to a comprehensive
management fee. The new Investment Management Agreements became effective
June 26, 1999. The Agreement provides that RMCI will furnish continuous
investment advisory and management services to the Funds. In addition to the
Funds, RMCI provides investment management services to other mutual funds within
the Reserve family of funds and, as of May 31, 1999, had approximately $5.6
billion under management.
RMCI manages the investment portfolios of the Funds, subject to policies
adopted by the Trustees. For its services, RMCI receives a fee of 0.80% per year
of the average daily net assets of each Fund. RMCI pays all employee and
customary operating expenses of the Fund. Excluded from the definition of
customary operating expenses are interest, taxes, brokerage fees, extraordinary
legal and accounting fees and expenses, and the fees of the disinterested
Trustees, for which each Fund pays its direct or allocated share. For the fiscal
year ended May 31, 1999, RMCI received management fees under the investment
management agreements previously in effect with regard to each Fund. For the
fiscal year ended May 31, 1999, the Primary, U.S. Government and U.S. Treasury
Fund paid RMCI $13,863,140, $3,530,115, $2,208,713, respectively. However, at
May 31, 1999, RMCI waived $635,127 of the U.S. Treasury Fund's comprehensive
management fee.
HOW TO BUY SHARES
SHARE PRICE: NET ASSET VALUE. Investors pay no sales charges to invest in the
Funds. The price you pay for a share of a Fund, and the price you receive upon
selling or redeeming a share of a Fund, is called the Fund's net asset value
("NAV") per share. The NAV is calculated by taking the total value of a Fund's
assets, subtracting its liabilities, and then dividing by the number of shares
that have already been issued. Each Fund uses the amortized cost method of
valuing its securities under Rule 2a-7 of the 1940 Act. This is a standard
calculation, and forms the basis for all transactions involving buying, selling,
exchanging or reinvesting shares. The NAV is generally calculated as of the
close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern time)
every day the Exchange is open. NAV is not calculated on days the Exchange is
closed and regional bank holidays. Your order will be priced at the next NAV
calculated after your order is accepted (i. e., converted to federal funds) by
the Funds.
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PURCHASE OF SHARES. The minimum initial investment is $1,000 (IRA minimum $250)
with no minimum subsequent investment. All investments must be in U.S. dollars.
Third-party, foreign and travellers checks, as well as cash investments will not
be accepted. For clients of certain broker-dealers and financial institutions
("Firms"), shares may be purchased directly through such Firms. However,
purchases may be subject to the Firms' own minimums and purchase requirements.
Purchase orders are not accepted on days the Exchange is closed for trading and
regional bank holidays.
o By check--(drawn on U.S. bank) payable to The Reserve Funds, 1250
Broadway, New York, NY 10001-3701. You must include your account number
(or Taxpayer Identification Number) on the "pay to the order of" line for
each check made payable to The Reserve Funds or within the endorsement
for each check endorsed to The Reserve Funds.
o By wire--Prior to calling your bank, call The Reserve Funds at
800-637-1700 for specific instructions or the Firm from which you
received this Prospectus.
Checks and wires which do not correctly identify the account to be credited
may be returned or delay the purchase of shares. Only federal funds wires and
checks drawn on the Fund's bank are eligible for entry as of the business day
received. For federal funds wires to be eligible for same-day order entry, the
Funds must be notified before 2:00 PM (Eastern time, 11:00 AM for the U.S.
Treasury Fund) of the amount to be transmitted and the account to be credited.
Payment by check not immediately convertible into federal funds will be entered
as of the business day when covering federal funds are received or bank checks
are converted into federal funds. This usually occurs within two (2) business
days, but may take longer. Checks delivered to the Fund's offices after 2:00 PM
(Eastern time, 11:00 AM for the U.S. Treasury Fund) will be considered received
the next business day. Investors will be charged a fee $15 for any check that
does not clear and will be responsible for any losses suffered by the Funds as a
result.
RESERVE AUTOMATIC ASSET-BUILDER PLAN. If you have an account, you may purchase
shares of a Fund ($25 suggested minimum) from a checking, NOW, or bank
money-market deposit account or from a U.S. government distribution ($25
suggested minimum) such as social security, federal salary, or certain veterans'
benefits, or other payment from the federal government. You may also purchase
shares automatically by arranging to have your payroll deposited directly into
your Reserve account. Please call the Funds at 800-637-1700 for an application.
INDIVIDUAL RETIREMENT ACCOUNTS. Investors may use the Funds as an investment
for Individual Retirement Accounts ("IRAs"). A master IRA plan with information
regarding administration fees and other details is available from the Funds.
THIRD-PARTY INVESTMENTS. Investments made through a third party (rather than
directly with Reserve) such as a financial services agent may be subject to
policies and fees different than those described here. Banks, brokers, 401(k)
plans, financial advisers and financial supermarkets may charge transaction fees
and may set different minimum investments or limitations on buying or selling
shares. Investors should consult a representative of the plan or financial
institution if in doubt.
DISTRIBUTORS. The Funds' distributors are GAM Services, Inc. ("GAM"), 135 East
57th Street, New York, NY 10022; The Kaufmann Fund, Inc., ("Kaufmann"), 140 East
45th Street, New York, NY 10017; and Resrv Partners, Inc. ("RESRV"), 1250
Broadway, New York, NY 10001-3701.
RESTRICTIONS. Certain other restrictions and conditions for buying shares apply
to the Funds. Please see the SAI for more information.
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SELLING FUND SHARES
Investors may sell shares at any time. Shares will be sold at NAV
determined after the redemption request is received by the Fund. Each Fund
usually transmits payments the same day when requests are received before 12:00
noon (Eastern time, 11:00 AM for the U.S. Treasury Fund) and the next business
day for requests received after the time specified to enable shareholders to
receive additional dividends. Shares do not earn dividends on the day a
redemption is effected, regardless of the time the order is received. Orders
will be processed promptly and investors will generally receive the proceeds
within a week after receiving your properly completed request. The Funds
strongly suggest (but does not require) that each telephone redemption be at
least $1000, except for redemptions which are intended to liquidate an account.
A shareholder will be charged $2 for redemption checks issued for less than
$100. Upon request, redemptions will be made by bank wire; however, wire
redemptions of less than $10,000 will be charged a fee (currently $10). The
Funds assume no responsibility for delays in the receipt of wired or mailed
funds.
WRITTEN AND TELEPHONE REQUESTS. Redemption instructions and options should be
specified when your account is opened. Subsequent elections and changes in
instructions must be in writing with the signature(s) guaranteed. Changes in
registration or authorized signatories may require additional documentation. One
way to redeem shares is to write a letter of instruction which states: the
name(s) and signature(s) of all accountholders (signature(s) guaranteed, if
necessary), account number, Fund name, the dollar amount you want to sell, and
how and where to send the proceeds. If you are redeeming your IRA, please note
the applicable withholding requirements.
To reduce the risk of loss, certain situations require written instructions
along with signature guarantees. These include:
(1) redemptions for more than $5,000; or
(2) redemptions on accounts whose address has been changed within the past
30 days; or
(3) redemption requests to be sent to someone other than the account owner
or the address of record for the past 30 days.
You may redeem by calling the Funds at 800-637-1700. Unless you decline
telephone privileges on your application and the Funds fail to take reasonable
measures to verify the request, the Funds will not be liable for any
unauthorized telephone redemption, or for any loss, cost or expense for acting
upon an investor's telephone instructions. Telephone redemptions may be sent to
the bank or brokerage account designated by the shareholder on the application
or in a letter with signature guarantee. To change the designated brokerage or
bank account it is necessary to contact the Firm through which shares of the
Fund were purchased or, if purchased directly from the Funds, it is necessary to
send a written request to the Funds with signature(s) guaranteed. The Fund
reserves the right to refuse a telephone redemption if it believes it is
advisable to do so.
Signature guarantees are designed to protect both you and the Funds from
fraud. Signature guarantees can be obtained from most banks, credit unions or
savings associations, or from broker/dealers, national securities exchanges or
clearing agencies. Notaries public cannot provide signature guarantees. For more
information about redemption procedures, please read the SAI.
CHECKING, VISA AND ATM ACCESS. You may redeem shares of the Fund by using your
Reserve checks and VISA check card. By completing the application or a signature
card (for existing accounts) and certain other documentation, you can write
checks in any amount against your account. A check will be returned (bounced)
and a fee charged if you request a stop payment; the check is postdated;
contains an irregularity in the signature, amount or otherwise; or, is written
against accounts with insufficient or uncollected funds. Please do not postdate
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your checks or use them to close your account. Upon proper notice, the Funds may
choose to impose a fee if it deems a shareholder's actions to be burdensome.
Checking may not be available to clients of some Firms, and some Firms may
establish their own minimum check amount. Shareholders may use their VISA check
card at ATM's to receive cash and may be charged a surcharge by the ATM owner.
Please see the SAI for information including charges, fees, etcetera.
EXCHANGE PRIVILEGE. Investors can exchange all or some of their shares offered
for shares in other Reserve money-market and equity funds. Investors can request
an exchange in writing or by telephone. The shares of the other funds are not
offered by this Prospectus. Be sure to read the current prospectus for any fund
into which you are exchanging. Any new account established through an exchange
will have the same privileges as an original account (as long as they are
available). There is currently no fee for exchanges; however, some customers who
exchange shares of the Primary, U.S. Government, and/or U.S. Treasury Funds may
be charged a sales load for exchanging into funds other than Reserve funds,
where a sales load applies. Please see the SAI for more information.
OTHER AUTOMATIC SERVICES. Certain other services and restrictions for selling
shares automatically are offered by the Funds. Please see the SAI for more
information about these services and restrictions.
REDEMPTIONS THROUGH BROKERS AND FINANCIAL INSTITUTIONS. Redemptions through
brokers and financial institutions may involve such Firms' own redemption
minimums, services fees, and other redemption requirements.
OTHER. The Funds also reserve the right to make a "redemption in kind",
(payment in portfolio securities rather than cash), without notice, if the
amount the investor is redeeming is large enough to affect fund operations (for
example, if it represents more than 1% of the Fund's assets). Further, each Fund
reserves the right to:
o refuse any purchase or exchange request,
o change or discontinue its exchange privilege,
o change its minimum investment amounts, and
o delay sending out redemption proceeds for up to seven days
(generally applies only in cases of very large redemptions,
excessive trading or during unusual market conditions).
TAX CONSEQUENCES
The following discussion is intended as general information only. Because
everyone's tax situation is unique, you should consult your own tax advisor(s)
with regard to the applicability of state and local tax laws on Fund
distributions. The applicable tax laws which affect the Funds and their
shareholders are subject to change and may be retroactive. For more information,
please see the SAI.
DIVIDENDS, DISTRIBUTIONS AND TAXES. Each Fund declares dividends daily and
automatically reinvests them in additional shares except for shareholders who
elect in writing to receive cash dividends, in which case monthly or quarterly
dividend checks are sent to the shareholder. There are no fees or sales charges
on reinvestments.
Dividends and distributions are taxable to most shareholders as ordinary
income (unless an investment is in an IRA or other tax-advantaged account).
Distributions of long-term capital gains, if any, are taxable to shareholders as
long-term capital gains. The tax status of any distribution is the same
regardless of how long an investor has been in the fund and whether
distributions are reinvested or taken in cash. The tax status of dividends and
distributions will be detailed in annual tax statements from the Funds. An
exchange of a Fund's shares for the
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shares of another fund will be treated as a sale of The Fund's shares and any
gain may be subject to federal income tax.
The U.S. Treasury Fund intends to invest only in U.S. Treasury securities
and obligations of those agencies and instrumentalities of the U.S. government
that provide interest income exempt in most states from state and local personal
income taxes, except to the extent uninvested cash is invested in repurchase
agreements. Some states have minimum investment requirements that must be met by
the U.S. Treasury Fund. Distributions attributable to net capital gains, if any,
are generally subject to state and local taxes. It is possible that a state or
local taxing authority may in the future seek to tax an investor on a portion of
the interest income of an obligation held by the U.S. Treasury Fund.
BACKUP WITHHOLDING. A Fund may be required to withhold U.S. federal income tax
at the rate of 31% of all taxable distributions payable to certain shareholders
who fail to provide the Fund with their correct taxpayer identification number
or to make required certifications, or who have been notified by the Internal
Revenue Service that they are subject to backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. federal income tax liability. However, special rules apply
for certain accounts. For example, for an account established under the Uniform
Gift to Minors Act, the TIN of the minor should be furnished. Shareholders
should be aware that, under regulations 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 with respect to an
account in any year, a corresponding charge will be made against the account.
The Funds will not accept purchase orders for accounts for which a correct and
certified TIN is not provided or which is otherwise subject to backup
withholding, except in the case of certain non-resident alien account holders.
GENERAL INFORMATION
SMALL BALANCES. Because of the expense of maintaining accounts with small
balances (less than $1,000), the Funds may choose without notice to either levy
a monthly charge (currently $5) or redeem the account and remit the proceeds.
Some Firms may establish variations of minimum balances and monthly charges if
approved by the Funds.
RESERVE EASY ACCESS. Easy Access is The Reserve Funds' 24-hour toll-free
telephone service that lets customers use a touch-tone phone for a variety of
options, which include yields, account balances, check reorders and other
options. 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.
INQUIRIES. Shareholders should direct their inquiries to the Firm from which
they received this Prospectus or to The Reserve Funds.
SPECIAL SHAREHOLDER SERVICES. The Funds reserve the right to charge shareholder
accounts for specific costs incurred in processing unusual transactions. Such
transactions include, but are not limited to, stop payment requests, copies of
Fund redemption or shareholder checks, copies of statements and special research
services.
ACCOUNT STATEMENTS. Shareholders are advised to retain all account statements.
11
<PAGE>
FINANCIAL HIGHLIGHTS
This section provides further details about the Funds' recent financial
history. "Total Return" shows how much an investment in a series would have
increased (or decreased) during each period, assuming reinvestment of all
dividends and distributions, if any. These figures have been audited by
PricewaterhouseCoopers LLP, the Trust's independent accountants, whose report,
along with each Funds' financial statements, is included in the Trust's Annual
Report, which is available upon request by calling 800-637-1700.
<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED MAY 31,
------------------------------------------------------------
PRIMARY FUND 1999 1998 1997 1996 1995
- -------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of year....................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Net investment income from investment operations........ .0438 .0483 .0457 .0490 .0450
Less dividends from net investment income............... (.0438) (.0483) (.0457) (.0490) (.0450)
-------- -------- -------- -------- --------
Net asset value at end of year.......................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return............................................ 4.38% 4.83% 4.57% 4.90% 4.50%
RATIOS/SUPPLEMENTAL DATA
Net assets end of year (millions)....................... $3,330.1 $2,707.6 $2,104.1 $1,664.1 $1,602.5
Ratio of expenses to average net assets................. 1.00% .94% .98% .98% .97%
Ratio of net investment income to average net assets.... 4.26% 4.71% 4.47% 4.79% 4.42%
</TABLE>
<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED MAY 31,
------------------------------------------------------------
U.S. GOVERNMENT FUND 1999 1998 1997 1996 1995
- -------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of year....................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Net investment income from investment operations........ .0426 .0471 .0449 .0484 .0441
Less dividends from net investment income............... (.0426) (.0471) (.0449) (.0484) (.0441)
-------- -------- -------- -------- --------
Net asset value at end of year.......................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return............................................ 4.26% 4.71% 4.49% 4.84% 4.41%
RATIOS/SUPPLEMENTAL DATA
Net assets end of year (millions)....................... $ 716.2 $ 652.5 $ 611.8 $ 568.5 $ 721.8
Ratio of expenses to average net assets................. 1.00% .99% .99% 1.00% .99%
Ratio of net investment income to average net assets.... 4.16% 4.63% 4.40% 4.75% 4.31%
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED MAY 31,
------------------------------------------------------------
U.S. TREASURY FUND 1999 1998 1997 1996 1995
- -------------------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of year....................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Net investment income from investment operations........ .0410 .0456 .0443 .0466 .0456
Less dividends from net investment income............... (.0410) (.0456) (.0443) (.0466) (.0456)
-------- -------- -------- -------- --------
Net asset value at end of year.......................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return............................................ 4.10% 4.56% 4.43% 4.66% 4.56%
RATIOS/SUPPLEMENTAL DATA
Net assets end of year (millions)....................... $ 286.7 $ 239.8 $ 169.2 $ 142.8 $ 95.2
Ratio of expenses to average net assets(a).............. 1.00% .97% .97% .99% .93%
Ratio of net investment income to average net assets.... 3.76% 4.26% 4.13% 4.33% 4.44%
</TABLE>
- ------------------
(a) Due to the voluntary waiver of certain expenses by RMCI, the net expense
ratios and net investment income amounted to:
<TABLE>
<CAPTION>
NET
EXPENSE INVESTMENT
FISCAL YEAR RATIO INCOME
- ---------------------------------------------------- ------- ----------
<S> <C> <C>
1999................................................ .77% 3.99%
1998................................................ .77% 4.46%
1997................................................ .77% 4.33%
1996................................................ .79% 4.53%
1995................................................ .68% 4.64%
</TABLE>
-------------
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.
-------------
13
<PAGE>
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<PAGE>
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<PAGE>
This Prospectus contains the information about each Fund, which a prospective
investor should know before investing.
The Statement of Additional Information ("SAI") contains additional and more
detailed information about the Funds, and is considered part of this Prospectus.
Our Annual and Semi-Annual Reports list the holdings in each Fund, describe Fund
performance, include financial statements for the Funds, and discuss market
conditions and strategies that significantly affected the Funds' performance.
These documents may be obtained without charge by writing to the address below
or calling The Reserve Funds at 800-637-1700. You can download the documents
from the SEC's web site (http://www.sec.gov) or you can obtain copies by
visiting the SEC's Public Reference Room in Washington, DC (800-SEC-0330) or by
sending your request and duplicating fee to the SEC's Public Reference Section,
Washington, DC 20549-6009.
Investors are advised to read and retain this prospectus for future reference.
GAM Funds, Inc. Money Market Account is a
cash management service offered by The Reserve
Funds through GAM Services, Inc. Shares offered
are of The Reserve Funds.
To purchase shares of the Fund, please clal GAM at
800-426-4685.
[LOGO]
GLOBAL ASSET MANAGEMENT (USA) INC
135 East 57th Street
New York, NY 10022
800-426-4685
Distributor -- Resrv Partners, Inc.
RF/PG&T-08/99
SEC File Number
The Reserve Fund
811-2033
[LOGO]
GLOBAL ASSET MANAGEMENT (USA) INC
PRIMARY FUND
U.S. GOVERNMENT FUND
U.S. TREASURY FUND
MONEY-MARKET FUNDS
offered by The Reserve Funds
PROSPECTUS
JULY 31, 1999,
AS SUPPLEMENTED ON
AUGUST 18, 1999
