RESERVE FUNDS /NY/, 485APOS, 1999-05-25

RESERVE FUNDS /NY/
485APOS, 1999-05-25

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<PAGE> 1

Registration Statement Nos. 2-36429
811-2033

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]

Pre-Effective Amendment No. [ ]
....

Post-Effective Amendment No. 59 [ ]
....
and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

Amendment No. 29 [ ]
....

(Check appropriate box or boxes.)

...........................................................................

(Exact Name of Registrant as Specified in Charter)

THE RESERVE FUND
...........................................................................

(Address of Principal Executive Offices) 1250 BROADWAY, NEW YORK, NY 10001-3701
(Zip Code)

Registrant's Telephone Number, including Area Code (212) 401-5500
..........................

.............................................................................

MaryKathleen Foynes, Esq.
The Reserve Funds
1250 Broadway
New York, NY 10001-3701

(Name and Address of Agent for Service)

Approximate date of Proposed Public Offering ................................

It is proposed that this filing will become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b)

[ ] on (date) pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[X] on July 31, 1999 pursuant to paragraph (a)(1)

[ ] 75 days after filing pursuant to paragraph (a)(2)

[ ] on (date) pursuant to paragraph (a)(2) of rule 485.

If approriate, check the following box:

[ ] this post-effective amendment designates a new effective data for a
previously filed post-effective amendment.

The Commission is requested to send copies of all communications to:
MaryKathleen Foynes, Esq.
The Reserve Funds
1250 Broadway
New York, NY 10001-3701

<PAGE> 2
<TABLE>
<S> <C>
[THE RESERVE FUNDS LOGO] General Information, Purchases and Redemptions
----------------------------------------------
24-Hour Yield and Balance Information
-------------------------------------
Nationwide 800-637-1700 - www.reservefunds.com
</TABLE>

THE RESERVE FUND
PROSPECTUS
JULY 31, 1999

THE RESERVE FUND (the "Trust")," is a registered investment company, which
offers three no-load money-market funds in this Prospectus:

- PRIMARY FUND,
- U.S. GOVERNMENT FUND, and
- U.S. TREASURY FUND (collectively "the Funds").

For investors seeking as high a level of current income as is consistent
with preservation of capital and liquidity.

---------------

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.

---------------

<PAGE> 3

<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
Investment Objective &
Strategy................ 2
Performance History..... 4
Expenses................ 5
Management.............. 6
How to Buy Shares....... 7
Selling Fund Shares..... 8
Tax Consequences........ 9
General Information..... 9
Financial Highlights.... 10
</TABLE>

INVESTMENT OBJECTIVE & STRATEGY

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. This investment
objective may not be changed without the vote of a majority of the outstanding
shares of the Fund as defined in the Investment Company Act of 1940 ("1940
Act"). The Funds seek to maintain a stable $1.00 share price.

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 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.

Money-market funds are subject to federal regulations designed to help
maintain liquidity. The regulations set strict standards for credit quality,
diversification and maturity (397 days or less for individual securities, 90
days or less for the average portfolio life).

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 may 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 in instruments issued or collateralized by full faith and credit
obligations of the U.S. government, its agencies and instrumentalities.

U.S. TREASURY FUND. The U.S. Treasury Fund seeks to attain its objective by
investing in full faith and credit obligations of the U.S government, its
agencies and instrumentalities that provide interest income exempt in most
states from state and local personal income taxes.

<PAGE> 4

OTHER INVESTMENT POLICIES OF THE FUNDS. 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.

The Primary and U.S. Government Funds 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 or securities issued by the U.S.
government or its agencies or instrumentalities. The collateral 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 Statement
of Additional Information ("SAI") further explains the Funds' securities
lending policies.

A Fund will not invest more than 10% of its net assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven (7) days after notice and will not concentrate more than 25% of its
total assets in the securities of issuers in a single industry, except that the
Primary Fund may invest more than 25% of its assets in banking. In addition, a
Fund will not invest more than 5% of its assets in the securities of any single
issuer (except U.S. government securities or repos collateralized by U.S.
government securities). Each Fund has the authority to borrow money (including
reverse repos involving sales by a Fund of portfolio securities concurrently
with an agreement by the Fund to repurchase the same securities at a later date
at a fixed price) for extraordinary or emergency purposes but not in an amount
exceeding 5% of its total assets.

All the Funds are allowed to invest all, or substantially all, of their
inevitable assets in other open-end management companies having the same
investment objective and substantially similar policies and restrictions.

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:

- as to all Funds, interest rates could rise sharply, causing the value of
the Funds' securities, and share price, to drop.

- 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.

- as to the Primary Fund, the risks generally associated with investing
in the banking industry, such as interest rate risk, credit risk and
regulatory developments relating to the banking industry.

- 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.

- 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.

Year 2000. Many computer software systems in use today cannot distinguish year
2000 from the year 1900. Most of the services provided to the Trust depend on
the smooth functioning of computer systems. The Trust could be adversely
affected if the computer systems and service providers that interface with it
are unable to process data from January 1, 2000 and after; however, steps are
being taken to reasonably address this issue and to obtain assurance that
comparable efforts are being made by 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.

<PAGE> 5

OTHER RISKS. These risks are discussed in more detail in the 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, either on a before- or after-tax basis. 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, 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 by comparing each Fund's performance to that
of the [INSERT APPROPRIATE BROAD-BASED MARKET INDEX NAME] index, a widely
recognized index of [INSERT BRIEF DESCRIPTION OF THE INDEX]. 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
1989 9.16%
1990 7.88%
1991 5.59%
1992 3.17%
1993 2.39%
1994 3.49%
1995 5.27%
1996 4.67%
1997 4.87%
1998 4.81%

BEST QUARTER 3rd Q 1989 up 2.40%
WORST QUARTER 2nd Q 1993 up 0.58%

U.S. GOVERNMENT FUND
1989 9.10%
1990 7.80%
1991 5.32%
1992 3.09%
1993 2.30%
1994 3.42%
1995 5.18%
1996 4.60%
1997 4.76%
1998 4.69%
BEST QUARTER 3rd Q 1989 up 2.17%
WORST QUARTER 2nd Q 1993 up 0.20%

U.S. TREASURY FUND
1992* 2.44 %
1993 2.19%
1994 3.68%
1995 4.96%
1996 4.53%
1997 4.61%
1998 4.52%
BEST QUARTER 3rd Q 1995 up 1.20%
WORST QUARTER 1st Q 1993 up 0.19%

---------
*For the period February 3, 1992 (Commencement of Operations) to December
31, 1992.

<PAGE> 6

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998

[INSERT APPROPRIATE BROAD- [INSERT %]
BASED MARKET INDEX NAME]

U.S. Government Fund 4.69% 4.53% 5.01% ____% ____% ____% ____%

[INSERT APPROPRIATE BROAD- [INSERT %]
BASED MARKET INDEX NAME]

U.S. Treasury Fund 4.52% 4.46% 3.89% ____% ____% ____% ____%

[INSERT APPROPRIATE BROAD- [INSERT %]
BASED MARKET INDEX NAME]
</TABLE>

THE 7-DAY YIELD AS OF DECEMBER 31, 1998:

<TABLE>
<CAPTION>
CURRENT EFFECTIVE
------- ---------
<S> <C> <C>
Primary Fund 4.29% 4.39%
U.S. Government
Fund 4.10% 4.18%
U.S. Treasury Fund 3.77% 3.84%
</TABLE>

For the Funds' current yield, call toll-free (800) 637-1700 or
visit our web site at www.reservefunds.com.

EXPENSES

As an investor, you pay certain fees and expenses in connection with the
Funds, which are described in the table below. There are no sales charges
(loads) or exchange fees associated with an investment in the Funds. Annual
fund operating expenses are paid out of the assets of each Fund, so their
effect is included in each Fund's share price. Annual fund operating expenses,
indicated in the table below, reflect expenses for the Funds' fiscal year ended
May 31, 1999.

SHAREHOLDER TRANSACTION EXPENSES FOR ALL FUNDS

<TABLE>
<CAPTION>
<S> <C>
Sales Load Imposed on Purchases........ None
Sales Load Imposed on Reinvested
Dividends............................ None
Redemption Fees*....................... None
Exchange Fees.......................... None
</TABLE>

* A $2 fee will be charged on redemption checks issued by the Funds of
less than $100 and a $10 fee will be charged for wire redemptions of
less than $10,000. If you use your VISA card at an ATM, the owner of
the ATM may charge you a surcharge.

<PAGE> 7

ANNUAL FUND OPERATING EXPENSES FOR ALL FUNDS
(AS A PERCENTAGE OF AVERAGE NET ASSETS)

U.S. U.S.
PRIMARY GOVERNMENT TREASURY
FUND FUND FUND
---- ---- ----
<S> <C> <C> <C>
Comprehensive Management Fee (a) .80% .80% .80%
12b-1 Fees (b)............... .20% .20% .20%
---- ---- ----
Total Operating Expenses..... 1.00% 1.00% 1.00%
==== ==== ====
</TABLE>

(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, which do not reflect
fee waivers for the Fund during the fiscal year ended May 31, 1999.

This example assumes that you invest $10,000 in a Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each
year and that each Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs
would be:

SHAREHOLDER TRANSACTION EXPENSES
---------------------------------
<TABLE>
<CAPTION>

ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- --------- --------
<S> <C> <C> <C> <C>
Primary Fund $105 $328 $1,012 $1,701
U.S. Government Fund $105 $328 $1,012 $1,701
U.S. Treasury Fund $105 $328 $1,012 $1,701
</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 proxy 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
________, 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
$_____ billion under management.

<PAGE> 8

regard to each Fund. For the fiscal year ended May 31, 1999, the Primary, U.S.
Government and U.S. Treasury Fund paid RMCI $______, $______, $______, $______,
respectively.

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 by the Funds. The Funds'
investments are valued based on market value, or where market quotations are
not readily available, based on fair value as determined in good faith by the
Funds' Board of Trustees. The Funds may use pricing services to determine
market value.

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.

- 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.

- 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 $
______ 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.

<PAGE> 9

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. 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 be able to redeem by telephone, you must select this option on your
application or in writing before you make your first telephone redemption. Once
you have selected this option, you may redeem by calling the Funds at
800-637-1700. The Funds strongly suggest (but do not require) that each
telephone redemption be at least $1000, except for redemptions which are
intended to liquidate an account. Unless you decline telephone privileges on
your application and the Funds fails to take reasonable measures to verify the
request, the Funds will not be liable for any unauthorized telephone order, or
for any loss, cost or expense for acting upon an investor's telephone
instructions. You are only allowed to make one telephone redemption request
within a thirty (30) day period. To further reduce the risk of loss, proceeds
of telephone redemptions may be sent only to (1) the bank or brokerage account
designated by the shareholder on the application or in a letter with the
signature(s) guaranteed or (2) the address of record for the past 30 days. To
change the designated brokerage or bank account it is necessary to contact the
Firm through which shares of the Fund were purchased or, if purchased directly
from the Funds, it is necessary to send a written request to the Funds with
signature(s) guaranteed. The Fund reserves the right to refuse a telephone
redemption if it believes it is advisable to do so.

Signature guarantees are designed to protect both you and the Funds from
fraud. Signature guarantees can be obtained from most banks, credit unions or
savings associations, or from broker/dealers, national securities exchanges or
clearing agencies deemed eligible by the Securities and Exchange Commission.
Notaries public cannot provide signature guarantees. Please see the SAI for
more information.

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 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.

<PAGE> 10

OTHER. The Funds also reserve the right to make a "redemption in kind" -
payment in portfolio securities rather than cash - 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). Each Fund reserves the right to:

- refuse any purchase or exchange request,
- change or discontinue its exchange privilege,
- change its minimum investment amounts, and
- 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.
Shareholders should consult with their own tax advisors with respect to the
application of their state and local tax laws to these distributions. Because
everyone's tax situation is unique, you should consult your own tax advisor(s)
with regard to the state and local tax laws. 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 each business
day. Dividends are distributed daily as additional shares to shareholder
accounts except for shareholders who elect in writing to receive cash
dividends, in which case monthly dividend checks are sent to the shareholder.
Further, The Funds distributes any net capital gains that it has realized once
a year. Dividends and distributions will be reinvested in the fund unless the
investor instructs the Fund otherwise. 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). 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 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 promulaged by the IRS a Fund may be
fined $50 annually for each account for which a certified TIN is not provided
or is incorrect. In the event that such a fine is imposed with respect to an
account in any year, a corresponding charge will be made against the account.
The Funds will not accept purchase orders for accounts for which a correct and
certified TIN is not provided or which is otherwise subject to backup
withholding, except in the case of certain non-resident alien account holders.

GENERAL INFORMATION

SMALL BALANCES. Because of the expense of maintaining accounts with small
balances (less than $1,000), the Funds may choose 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 fee amounts if those
variations are approved by the Funds.

RESERVE EASY ACCESS. Easy Access is The Reserve Funds' 24-hour toll-free
telephone service that lets customers use a touch-tone phone for a variety of
options, which include 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.

<PAGE> 11

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.

FINANCIAL HIGHLIGHTS

The following tables describe each Fund's performance for the fiscal periods
indicated. "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 independently
audited by PricewaterhouseCoopers LLP, the Trust's independent accountants,
whose report, along with each Funds' financial statements, is included in the
Trust's Annual Report.

<TABLE>
<CAPTION>
FOR FISCAL YEAR 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
---------- ---------- --------- ----------
Income from investment
operations................. .0579 .0557 .0591 .0549
Expenses................... .0096 .0100 .0101 .0099
---------- ---------- --------- ----------
Net investment income(1)... .0483 .0457 .0490 .0450
Dividends from net
investment income(1)....... (.0483) (.0457) (.0490) (.0450)
---------- ---------- --------- ----------
Net asset value, end of
year....................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========= ==========

Total Return............... 4.83% 4.57% 4.90% 4.50%

RATIOS/SUPPLEMENTAL DATA
Net assets in thousands,
end of year................ 2,707,620 2,104,109 1,664,114 1,602,464
Ratio of expenses to
average net assets......... .94% .98% .98% .97%
Ratio of net investment
income to average net
assets.................... 4.71% 4.47% 4.79% 4.42%
</TABLE>

<TABLE>
<CAPTION>
FOR FISCAL YEAR 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
---------- ---------- --------- ---------
Income from investment
operations................. .0572 .0550 .0586 .0542
Expenses................... .0101 .0101 .0102 .0101
---------- ---------- --------- ---------
Net investment income(1)... .0471 .0449 .0484 .0441
Dividends from net
investment income(1)....... (.0471) (.0449) (.0484) (.0441)
---------- --------- ---------
Net asset value, end of
year....................... $1.0000 $1.0000 $1.0000 $1.0000
========== ---------- ========= =========
Total Return............... 4.71% 4.49% 4.84% 4.41%
-----------
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands,
end of year................ 652,468 611,844 568,497 721,785
Ratio of expenses to
average net assets......... .99% .99% 1.00% .99%
Ratio of net investment
income to average net
assets.................... 4.60% 4.40% 4.75% 4.31%
-----
</TABLE>

<PAGE> 12

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
---------- ---------- --------- ---------
Income from investment
operations................. .0535 .0521 .0547 .0523
Expenses................... .0079 .0078 .0081 .0067
---------- --------- ---------
Net investment income(1)... .0456 .0443 .0466 .0456
Dividends from net
investment income(1)....... (.0456) (.0443) (.0466) (.0456)
---------- --------- ---------
Net asset value, end of
year.......... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ========= ========= =========
Total Return............... 4.56% 4.43% 4.66% 4.56%
RATIOS/SUPPLEMENTAL DATA
Net assets in thousands,
end of year............... 239,760 169,178 142,766 95,227

Ratio of expenses to
average net assets......... .77%(3) .77%(3) .79%(3) .68%(3)
Ratio of net investment
income to average net
assets.................... 4.46% 4.33% 4.53% 4.64%
</TABLE>

- ----------
(1) Based on compounding of daily dividends. Not indicative of future
results.
(2) Annualized.
(3) During this period the manager waived a portion of fees and expenses.
If there were no reductions in expenses, the actual expenses would
have been approximately 0.20%, 0.20%, 0.20%, 0.25% and 0.12% higher,
respectively.

--------------

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> 13

SEC File 811-2033

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. The Annual and Semi-Annual Reports list the holdings in each Fund,
describe Fund performance, include financial statements for the Funds, and
discuss market conditions and strategies that significantly affected the Funds'
performance. These documents may be obtained without charge by writing or
calling the Funds at 800-637-1700. You can also download the documents from the
SEC's web site (http://www.sec.gov).

Investors are advised to read and retain this prospectus for future reference.

[THE RESERVE FUNDS LOGO]
Founders of
"America's First
Money Fund"

1250 Broadway, New York, NY 10001-3701
(212) 401-5500

GENERAL INFORMATION AND 24-HOUR YIELD AND BALANCE INFORMATION
800-637-1700 - www.reservefunds.com

Distributor - Resrv Partners, Inc.

RF/PG&T-07/99

[THE RESERVE FUNDS LOGO]
Founders of
"America's First
Money Fund"

PRIMARY FUND
U.S. GOVERNMENT FUND
U.S. TREASURY FUND

Prospectus
July 31, 1999

<PAGE> 14

[THE RESERVE FUNDS LOGO] General Information, Purchases and Redemptions
24-Hour Yield and Balance Information

Nationwide 800-637-1700 - www.reservefunds.com

STRATEGIST MONEY-MARKET FUND
PROSPECTUS
JULY 31, 1999

The STRATEGIST MONEY-MARKET (the "Strategist Fund")," is a no-load money-market
fund.

For investors seeking as high a level of current income as is consistent with
preservation of capital and liquidity.

---------------

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.
---------------

1
<PAGE> 15

TABLE OF CONTENTS PAGE
----
<S> <C>
Investment Objective & Strategy................. 2
Performance History............................. 4
Expenses........................................ 4
Management...................................... 5
How to Buy Shares............................... 6
Selling Fund Shares............................. 7
Tax Consequences................................ 8
General Information............................. 8
Financial Highlights............................ 9
</TABLE>

INVESTMENT OBJECTIVE & STRATEGY

The investment objective of the Fund 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. This investment
objective may not be changed without the vote of a majority of the outstanding
shares of the Fund as defined in the Investment Company Act of 1940 ("1940
Act"). The Fund seeks to maintain a stable $1.00 share price.

The Fund is 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 Fund seeks 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 portfolio managers monitor a range of economic and financial
factors. Based on their analysis, the Fund is 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.

The Strategist 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 Strategist Fund may 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 Strategist 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
Strategist Fund may also invest in municipal obligations, the interest on which
is not exempt from federal income taxation.

OTHER INVESTMENT POLICIES OF THE FUND. The Fund 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"). 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.

2
<PAGE> 16

The Strategist 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 or securities issued by the U.S. government or its agencies
or instrumentalities. The collateral 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 Statement of Additional Information
("SAI") further explains the Fund's securities lending policies.

The Fund will not invest more than 10% of its net assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven (7) days after notice and will not concentrate more than 25% of its
total assets in the securities of issuers in a single industry, except that the
Fund may invest more than 25% of its assets in banking. In addition, a Fund will
not invest more than 5% of its assets in the securities of any single issuer
(except U.S. government securities or repos collateralized by U.S. government
securities). The Fund has the authority to borrow money (including reverse repos
involving sales by the Fund of portfolio securities concurrently with an
agreement by the Fund to repurchase the same securities at a later date at a
fixed price) for extraordinary or emergency purposes but not in an amount
exceeding 5% of its total assets.

The Fund is 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.

RISKS OF INVESTING IN THE FUND. The Fund is money-market fund which is a
specific type of fund that seeks to maintain a $1.00 price per share. An
investment in the Fund is not insured or guaranteed by the U.S. government,
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund. Additionally, the 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 the 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:

- interest rates could rise sharply, causing the value of the
Fund's securities, and share price, to drop.

- 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.

- the risks generally associated with investing in the banking
industry, such as interest rate risk, credit risk and
regulatory developments relating to the banking industry.

- 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.

- investments in municipal obligations are subject to market
volatility and affected by adverse economic or political
changes and the financial condition of the issuers.

Year 2000. Many computer software systems in use today cannot distinguish year
2000 from the year 1900. Most of the services provided to the Fund depend on the
smooth functioning of computer systems. The Fund 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 Fund. 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 SAI. Most of the
Fund's performance depends on interest rates. When interest rates fall, the
Fund's yields will typically fall as well.

The Reserve Funds' 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, either on a before- or after-tax basis. Because of the
low level of

3
<PAGE> 17

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 Fund's annual returns for the past ten
years, 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 Fund by comparing the Fund's performance to that of the
[INSERT APPROPRIATE BROAD-BASED MARKET INDEX NAME] index, a widely recognized
index of [INSERT BRIEF DESCRIPTION OF THE INDEX]. The tables assume reinvestment
of dividends and distributions, if any. As with all mutual funds, the past is
not a prediction of the future.

STRATEGIST FUND
1996(1) 4.53%
1997 4.61%
1998 4.52%
BEST QUARTER 1st Q 1997 up 1.42%
WORST QUARTER 4th Q 1998 up 1.29%

- -------------------
(1)For the period May 1, 1996 (Commencement of Operations) to December 31, 1996.

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
1 SINCE
YEAR INCEPTION
---- ---------
<S> <C> <C>
Strategist Fund 4.52% 5.12%
[INSERT APPROPRIATE BROAD-BASED MARKET INDEX NAME] ____% ____%
</TABLE>

THE 7-DAY YIELD AS OF DECEMBER 31, 1998:

<TABLE>
<CAPTION>
CURRENT EFFECTIVE
------- ---------
<S> <C> <C>
Strategist Fund 4.86% 4.97%
</TABLE>

For the Fund's current yield, call toll-free (800) 637-1700 or visit
our web site at www.reservefunds.com.

EXPENSES

As an investor, you pay certain fees and expenses in connection with
the Fund, which are described in the table below. There are no sales charges
(loads) or exchange fees associated with an investment in the Fund. Annual fund
operating expenses are paid out of the assets of the Fund, so their effect is
included in the Fund's share price. Annual fund operating expenses, indicated in
the table below, reflect expenses for the Fund's fiscal year ended May 31, 1999.

SHAREHOLDER TRANSACTION EXPENSES FOR THE FUND

<TABLE>
<CAPTION>
<S> <C>
Sales Load Imposed on Purchases.............................................. None
Sales Load Imposed on Reinvested Dividends................................... None
Redemption Fees*............................................................. None
Exchange Fees................................................................ None
</TABLE>

* A $2 fee will be charged on redemption checks issued by the
Fund of less than $100 and a $10 fee will be charged for wire
redemptions of less than $10,000.

4
<PAGE> 18

ANNUAL FUND OPERATING EXPENSES FOR THE FUND
(AS A PERCENTAGE OF AVERAGE NET ASSETS)

<TABLE>
<S> <C>
Comprehensive Management Fee (a).......................... .80%
12b-1 Fees (b)............................................ .20%
-----
Total Operating Expenses.................................. 1.00%
=====
</TABLE>

(a) The comprehensive management fee includes advisory and customary
operating expenses. However, the Fund may be charged for certain
non-recurring extraordinary expenses and its allocated or direct share
of certain other expenses. See "Management".

(b) The Fund has adopted a Rule 12b-1 plan which allows the Fund to pay
distribution fees for the sale and distribution of its shares. The
maximum level of distribution expenses is 0.20% per year of the Fund's
average net assets. As these fees are paid out of the 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 Fund 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, which do not reflect fee waivers
for the Fund during the fiscal year ended May 31, 1999.

This example assumes that you invest $10,000 in a fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
$105 $328 $1,012 $1,701
</TABLE>

PLEASE NOTE THAT THE ABOVE EXAMPLE IS AN ESTIMATE OF THE EXPENSES TO BE
INCURRED BY SHAREHOLDERS OF THE FUND. 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 Fund under an Investment Management Agreement (the "Agreement") with The
Reserve Fund (the "Trust"). As a result of recent proxy votes, the Fund 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 the Fund, except for a new comprehensive management fee.
The new Investment Management Agreements became effective ________, 1999. The
Agreement provides that RMCI will furnish continuous investment advisory and
management services to the Fund. 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 $_____ billion under
management.

RMCI manages the investment portfolios of the Fund, 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 the Fund. RMCI pays all employee and ordinary
operating costs of the Fund. Excluded from the definition of ordinary operating
costs are interest, taxes, brokerage fees, extraordinary legal and accounting
fees and expenses, and the fees of the disinterested Trustees, for which it pays
its direct or allocated share. For the fiscal year ended May 31, 1999, RMCI
received management fees under the investment management agreements previously
in effect with regard to the Fund. For the fiscal year ended May 31, 1999, the
Strategist Fund paid RMCI $______.

5
<PAGE> 19

HOW TO BUY SHARES

SHARE PRICE: NET ASSET VALUE. Investors pay no sales charges to invest in the
Fund. The price you pay for a share of the Fund, and the price you receive upon
selling or redeeming a share of the Fund, is called the Fund's net asset value
("NAV") per share. The NAV is calculated by taking the total value of the Fund's
assets, subtracting its liabilities, and then dividing by the number of shares
that have already been issued. The 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 by the Fund. The Fund's investments are
valued based on market value, or where market quotations are not readily
available, based on fair value as determined in good faith by the Fund's Board
of Trustees. The Fund may use pricing services to determine market value.

PURCHASE OF SHARES. The minimum initial investment is $20,000 with a minimum
subsequent investment of $1,000. All investments must be in U.S. dollars.
Third-party, foreign and travellers checks, as well as cash investments will not
be accepted. Purchase orders are not accepted on days the Exchange is closed for
trading and regional bank holidays.

- By check - (drawn on U.S. bank) payable to the American
Express Service Corporation, P.O. Box 59196, Minneapolis, MN
55459-9801. You must include your Investment Management
Account Number (or Taxpayer Identification Number) on the "pay
to the order of" line for each check made payable to the
Strategist Money-Market Fund or within the endorsement for
each check endorsed to the Fund.

- 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 Fund must be notified before 2:00 PM (Eastern time) 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) will be
considered received the next business day. Investors will be charged a fee $
______ for any check that does not clear and will be responsible for any losses
suffered by the Fund as a result.

RESERVE AUTOMATIC ASSET-BUILDER PLAN. If you have an account, you may purchase
shares of the 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 (full or partial)
deposited directly into your Reserve account. Please call the Fund at
800-637-1700 for an application or consult your Financial Advisor.

INDIVIDUAL RETIREMENT ACCOUNTS. Investors may use the Fund as an investment for
Individual Retirement Accounts ("IRAs"). A master IRA plan with information
regarding administration fees and other details is available from the Fund.

DISTRIBUTORS. The Fund's distributor is 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.

6
<PAGE> 20

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. The Fund
usually transmits payments the same day when requests are received before 12:00
noon (Eastern time) 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. 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 delay 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 be able to redeem by telephone, you must select this option on your
application or in writing before you make your first telephone redemption. Once
you have selected this option, you may redeem by calling the Fund at
800-637-1700. The Fund strongly suggests (but does not require) that each
telephone redemption be at least $1000, except for redemptions which are
intended to liquidate an account. Unless you decline telephone privileges on
your application and the Fund fails to take reasonable measures to verify the
request, the Fund will not be liable for any unauthorized telephone order, or
for any loss, cost or expense for acting upon an investor's telephone
instructions. You are only allowed to make one telephone redemption request
within a thirty (30) day period. To further reduce the risk of loss, proceeds of
telephone redemptions may be sent only to (1) the bank or brokerage account
designated by the shareholder on the application or in a letter with the
signature(s) guaranteed or (2) the address of record for the past 30 days. To
change the designated brokerage or bank account it is necessary to contact the
Firm through which shares of the Fund were purchased or, if purchased directly
from the Fund, it is necessary to send a written request to the Fund with
signature(s) guaranteed. The Fund reserves the right to refuse a telephone
redemption if it believes it is advisable to do so.

Signature guarantees are designed to protect both you and the Funds
from fraud. Signature guarantees can be obtained from most banks, credit unions
or savings associations, or from broker/dealers, national securities exchanges
or clearing agencies deemed eligible by the Securities and Exchange Commission.
Notaries public cannot provide signature guarantees. Please see the SAI for more
information.

REDEMPTION BY CHECK. You may redeem shares of the Fund by using your Reserve
checks. 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 your checks or use
them to close your account. Upon proper notice, the Fund 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. Please see the SAI for more information including charges,
fee, etcetera.

OTHER AUTOMATIC SERVICES. Certain other services and restrictions for selling
shares automatically are offered by the Fund. Please see the SAI for more
information about these services and restrictions.

7
<PAGE> 21

OTHER. The Fund also reserves the right to make a "redemption in kind" - payment
in portfolio securities rather than cash - 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). The Fund reserves the right to:

- refuse any purchase or exchange request,

- change or discontinue its exchange privilege,

- change its minimum investment amounts, and

- 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.
Shareholders should consult with their own tax advisors with respect to the
application of their state and local tax laws to these distributions. Because
everyone's tax situation is unique, you should consult your own tax advisor(s)
with regard to the state and local tax laws. The applicable tax laws which
affect the Fund and their shareholders are subject to change and may be
retroactive. For more information, please see the SAI.

DIVIDENDS, DISTRIBUTIONS AND TAXES. The Fund declares dividends each business
day. Dividends are distributed daily as additional shares to shareholder
accounts except for shareholders who elect in writing to receive cash dividends,
in which case monthly dividend checks are sent to the shareholder. Further, the
Fund distributes any net capital gains that it has realized once a year.
Dividends and distributions will be reinvested in the fund unless the investor
instructs the Fund otherwise. 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). 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 Fund. An exchange of a Fund's shares for the
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.

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 promulaged by the IRS a Fund may be
fined $50 annually for each account for which a certified TIN is not provided or
is incorrect. In the event that such a fine is imposed with respect to an
account in any year, a corresponding charge will be made against the account.
The Fund 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. Because of the expense of maintaining accounts with small balances,
when the average daily balance on an account drops below $15,000 in any month, a
$5 fee will be charged. In the event that the average balance remains below
$15,000 for three (3) consecutive months, the account may be automatically
transferred to the Reserve Primary Fund.

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 800-297-7378 and follow the instructions. Clients may
also access full account activity for the previous six months on the Internet at
www.reservefunds.com.

8
<PAGE> 22

INQUIRIES. Shareholders should direct their inquiries to the Firm from which
they received this Prospectus or to The Reserve Funds.

SPECIAL SHAREHOLDER SERVICES. The Fund reserves 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.

FINANCIAL HIGHLIGHTS

The following tables describe the Fund's performance for the fiscal periods
indicated. "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 independently
audited by PricewaterhouseCoopers LLP, the Trust's independent accountants,
whose report, along with the Fund's financial statements, is included in the
Fund's Annual Report.

MAY 1, 1996
FOR FISCAL YEAR ENDED MAY 31, (COMMENCEMENT OF
----------------------------------------------------------------- OPERATIONS) TO
1999 1998 1997 MAY 31, 1996
--------------- ----------------- --------------------- ------------
STRATEGIST MONEY-MARKET FUND
- ----------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- --------
Income from investment operations .0576 .0552 .0479
Expenses .0034 .0000 .0017
-------- -------- --------
Net investment income (1) .0542 .0552 .0462
Dividends from net investment income (1) (.0542) (.0552) (.0462)
-------- -------- --------
Net asset value, end of year $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ========
Total Return 5.42% 5.52% 5.13%(2)

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of year 56,269 99,704 1,010
Ratio of expenses to average net assets (3) .33% .00% .18%(2)
Ratio of net investment income to average net assets 5.29% 5.44% 5.12%(2)
</TABLE>

1) Based on compounding of daily dividends. Not indicative of future
results.
2) Annualized.
3) During these periods the manager waived a portion of fees and expenses.
If there were no reduction in expenses, the actual expenses would have
been .80%.

---------------

9
<PAGE> 23

SEC File 811-2033 (The Reserve Fund)

This Prospectus contains the information about the Fund, which a prospective
investor should know before investing.

The Statement of Additional Information ("SAI") contains additional and more
detailed information about the Fund, and is considered part of this Prospectus.
The Annual and Semi-Annual Reports list the holdings in the Fund, describe Fund
performance, include financial statements for the Fund, and discuss market
conditions and strategies that significantly affected the Fund's performance.
These documents may be obtained without charge by writing or calling The Reserve
Funds at 800-637-1700. You can also download the documents from the SEC's web
site (http://www.sec.gov).

Investors are advised to read and
retain this prospectus for future reference.

[THE RESERVE FUNDS LOGO]
Founders of
"America's First
Money Fund"

1250 Broadway, New York, NY 10001-3701
(212) 401-5500

GENERAL INFORMATION AND 24-HOUR YIELD AND BALANCE INFORMATION
800-637-1700 - www.reservefunds.com

Distributor - Resrv Partners, Inc.

RF/STRAT-07/99

[THE RESERVE FUNDS LOGO]
Founders of
"America's First
Money Fund"

STRATEGIST
MONEY-MARKET
FUND

Prospectus
July 31, 1999

10
<PAGE> 24
[THE RESERVE FUNDS LOGO] General Information, Purchases and Redemptions
----------------------------------------------
24-Hour Yield and Balance Information
-------------------------------------

Nationwide 800-637-1700 - www.reservefunds.com

AMERICAN EXPRESS MONEY-MARKET FUNDS
PROSPECTUS
JULY 31, 1999

The Reserve Fund, Reserve Tax-Exempt Trust and Reserve New York Tax-Exempt Trust
(the "Trusts"), are registered investment companies, which offer thirteen
no-load money-market funds in this Prospectus:

- PRIMARY FUND,
- U.S. GOVERNMENT FUND,
- U.S. TREASURY FUND,
- INTERSTATE TAX-EXEMPT FUND,
- CALIFORNIA TAX-EXEMPT FUND
- CONNECTICUT TAX-EXEMPT FUND,
- FLORIDA TAX-EXEMPT FUND,
- MASSACHUSETTS TAX-EXEMPT FUND,
- MICHIGAN TAX-EXEMPT FUND,
- NEW JERSEY TAX-EXEMPT FUND,
- NEW YORK TAX-EXEMPT FUND,
- OHIO TAX-EXEMPT FUND, and
- PENNSYLVANIA TAX-EXEMPT 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.

---------------

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.

---------------
<PAGE> 25
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
----
<S> <C>
Investment Objective & Strategy..... 2
Performance History................. 5
Expenses............................ 5
Management.......................... 10
How to Buy Shares................... 10
Selling Fund Shares................. 11
Tax Consequences.................... 12
General Information................. 13
Financial Highlights................ 13
</TABLE>

INVESTMENT OBJECTIVE & STRATEGY

The investment objective of all the Primary, U.S. Government and U.S.
Treasury Funds is to seek as high a level of current income as is consistent
with preservation of capital and liquidity. The investment objective of the
California II Tax-Exempt, Connecticut Tax-Exempt, Florida Tax-Exempt,
Massachusetts Tax-Exempt, Michigan Tax-Exempt, New Jersey Tax-Exempt, New York
Tax-Exempt Fund, Ohio Tax-Exempt and Pennsylvania Tax-Exempt Funds is to seek as
high a level of short-term interest income exempt from federal income and state
and local personal income and/or property taxes, if any, for resident holders of
the particular state fund as is consistent with preservation of capital and
liquidity The investment of the Interstate Tax-Exempt Fund is to seek as high a
level of short-term interest income exempt from federal income taxes as is
consistent with preservation of capital and liquidity. However, achievement of
the objectives cannot be assured. This investment objective may not be changed
without the vote of a majority of the outstanding shares of the Fund as defined
in the Investment Company Act of 1940 ("1940 Act"). 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.

U.S. GOVERNMENT FUND. The U.S. Government Fund seeks to attain its objective by
investing in instruments issued or collateralized by full faith and credit
obligations of the U.S. government, its agencies and instrumentalities.

2
<PAGE> 26
U.S. TREASURY FUND. The U.S. Treasury Fund seeks to attain its objective by
investing in full faith and credit obligations of the U.S government, its
agencies and instrumentalities that provide interest income exempt in most
states from state and local personal income taxes.

OTHER INVESTMENT POLICIES OF THE PRIMARY, U.S. GOVERNMENT AND U.S. TREASURY
FUNDS. 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.

The Primary and U.S. Government Funds 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 or securities issued by the U.S.
government or its agencies or instrumentalities. The collateral 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 Statement of
Additional Information ("SAI") further explains the Funds' securities lending
policies.

TAX-EXEMPT FUNDS (CALIFORNIA II, CONNECTICUT, FLORIDA, MASSACHUSETTS, MICHIGAN,
NEW JERSEY, NEW YORK, OHIO, PENNSYLVANIA AND INTERSTATE TAX-EXEMPT FUNDS). The
investment objective of the California II Tax-Exempt, Connecticut Tax-Exempt,
Florida Tax-Exempt, Massachusetts Tax-Exempt, Michigan Tax-Exempt, New Jersey
Tax-Exempt, New York Tax-Exempt Fund, Ohio Tax-Exempt and Pennsylvania
Tax-Exempt Funds is to seek as high a level of short-term interest income exempt
from federal income and state and local personal income and/or property taxes,
if any, for resident holders of the particular state fund as is consistent with
preservation of capital and liquidity. A principal investment strategy of the
Funds is investing at least 80% of the value of each Fund's net assets in
municipal obligations which are exempt from federal, income and state and, with
respect to the New York Tax-Exempt Fund, local personal income taxes and, with
respect to the Florida Tax-Exempt Fund, the Florida intangibles tax, and with
respect to the Pennsylvania Tax-Exempt Fund, the Pennsylvania county personal
property tax, unless it has adopted a temporary defensive position. In addition,
during periods when RMCI believes that municipal obligations meeting each
respective Fund's quality standards are not available, a Fund may invest up to
20% of the value of its net assets, or a greater percentage on a temporary
basis, in municipal obligations exempt only from federal income taxes

The Interstate Tax-Exempt Fund's investment objective is to seek as high
a level of short-term interest income exempt from federal income taxes as is
consistent with preservation of capital and liquidity. The Fund invests
principally in short-term obligations issued by the states, territories and
possessions of the United States and their political subdivisions, duly
constituted authorities and corporations The Fund intends to invest at least 80%
of the value of the Fund's net assets in municipal obligations which are exempt
from federal income tax, unless it has adopted a temporary defensive position.

The Tax-Exempt Funds' investment strategies include investing primarily
in municipal money-market securities. The Fund invests principally in
high-quality, tax-exempt obligations issued by states, counties, municipalities,
authorities or other political subdivisions. These securities are generally
referred to as "municipal obligations.

The Funds may purchase floating and variable rate demand bonds, which are
municipal obligations normally having stated maturities in excess of one year,
but which permit the holder to demand payment of principal and accrued interest
at any time, or at specified intervals not exceeding one year, usually upon not
more than seven (7) days' notice. The Funds will not invest more than

3
<PAGE> 27
10% of the value of its assets in floating or variable rate demand bonds for
which there is no secondary market if the demand feature on such municipal
obligations requires more than seven (7) days' notice.

The interest on securities generally known as municipal obligations is
exempt from federal income tax in the opinion of either bond counsel for the
issuers or, in some instances, the issuer itself. These securities may be issued
to raise money for various public purposes such as constructing public
facilities, while others are issued to obtain funding for privately operated
facilities. General obligation bonds and notes are backed by the taxing power of
the issuer. Revenue bonds and notes are backed by the revenues of a project or
facility such as tolls from a toll road or, in some cases, from the proceeds of
a special excise tax, but not by the general taxing power. Industrial
development revenue bonds and notes are a specific type of revenue bond or note
backed by the credit of a private issuer. Municipal obligations bear fixed,
variable or floating rates of interest.

The Funds will purchase tax-exempt securities which are rated MIG1 or
MIG2 by Moody's Investor Services, Inc. ("Moody's"), SP-1 or SP-2 by Standard &
Poor's Corporation ("S&P") or the equivalent. Municipal obligations which are
not rated may also be purchased provided Reserve Management Company Inc.
("RMCI"), the Adviser determines them to be of comparable quality pursuant to
guidelines established by the Board of Trustees ("Trustees").

OTHER INVESTMENT POLICIES OF THE TAX-EXEMPT FUNDS. Municipal obligations are
sometimes offered on a "when-issued" or delayed delivery basis. There is no
limit on a Fund's ability to purchase municipal securities on a when-issued
basis. At the time a Fund makes the commitment to purchase a municipal
obligation on a when-issued basis, it will record the transaction and reflect
the value of the security in determining its net asset value ("NAV"). Each Fund
will also maintain readily marketable assets at least equal in value to
commitments for when-issued securities specifically for the settlement of such
commitments. RMCI does not believe that a Fund's NAV or income will be adversely
affected by the purchase of municipal obligations on a when-issued basis.

The Funds may purchase participation interests in municipal obligations
from financial institutions. A participation interest gives a Fund an undivided
interest in the municipal obligation in the proportion that the Fund's
participation interest bears to the total principal amount of the municipal
obligation. These instruments may have fixed, floating or variable rates of
interest. Frequently, such instruments are secured by letters of credit or other
credit support arrangements provided by banks.

Interest received on certain otherwise tax-exempt securities ("private
activity bonds") is subject to a federal Alternative Minimum Tax ("AMT"). It is
the position of the SEC that in order for a fund to call itself "tax-free", not
more than 20% of its net assets may be invested in municipal securities subject
to the AMT or at least 80% of its income will be tax-exempt. Income received on
such securities is classified as a "tax preference item," which could subject
certain shareholders of each Fund to the AMT. However, as of the date of this
Prospectus, each Fund has not and does not purchase such securities, but
reserves the right to do so depending on market conditions in the future.

Although it is not the current intention, from time to time a Fund may
invest in taxable short-term investments ("taxable investments") consisting of
obligations backed by the full faith and credit of the U.S. government, its
agencies or instrumentalities ("U.S. government securities"), deposit-type
obligations, acceptances, letters of credit of Federal Deposit Insurance
Corporation member banks and instruments fully collateralized by such
obligations, including repurchase agreements. Unless a Fund has adopted a
temporary defensive position, no more than 20% of the net assets of each Fund
will be including repurchase agreements invested in taxable investments at any
time.

All the Funds are allowed to invest all or substantially all of its
investable assets, except to the extent required to remain uninvested to satisfy
cash requirements, in another open-end management company having the same
investment objective and substantially similar policies and restriction.

RMCI uses its reasonable business judgment in selecting investments in
addition to considering the ratings of Moody's, S&P and other rating services,
when available.

For more information on the investment objective and strategy, please
read the Statement of Additional Information ("SAI").

4
<PAGE> 28

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:

- as to all Funds, interest rates could rise sharply, causing the
value of the Funds' securities, and share price, to drop.

- 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.

- as to the Primary Fund, the risks generally associated with
investing in the banking industry, such as interest rate risk,
credit risk and regulatory developments relating to the banking
industry.

- 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.

- as to the Primary and Tax-Exempt Funds, the municipal market is
volatile and there are risks associated with concentrating
investments in an industry which can be significantly affected by
adverse economic or political changes and the financial condition
of the issuers of municipal securities.

- as to the Tax-Exempt Funds, the value of municipal securities may
be affected by uncertainties and changes in municipal
market-related legislation or litigation.

- as to the Tax-Exempt Funds, which invest in industrial revenue
development bonds and notes secured by letters of credit or
guarantees of banks, the risks generally associated with
concentrating investments in the banking industry, such as
interest rate risk, credit risk and regulatory developments
relating to the banking industry.

- as to the Tax-Exempt Funds, adverse political, regulatory, market
or economic developments in foreign countries can affect entities
located in those countries.

- a decline in the credit quality of an issuer or the provider of
credit support or a maturity-shortening structure for a security
can cause the price of a money-market security to decrease.

- as to the Tax-Exempt Funds named for a particular state,
unfavorable political or economic conditions within a specific
state can affect the credit quality of issuers located in that
state.

Year 2000. Many computer software systems in use today cannot distinguish year
2000 from the year 1900. Most of the services provided to the Trust depend on
the smooth functioning of computer systems. The Trust could be adversely
affected if the computer systems and service providers that interface with it
are unable to process data from January 1, 2000 and after; however, steps are
being taken to reasonably address this issue and to obtain assurance that
comparable efforts are being made by 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 SAI of each Fund.
Most of the Funds' performance depends on interest rates. When interest rates
fall, the Funds' yields will typically fall as well.

PERFORMANCE HISTORY

The bar charts below show the Funds' annual returns for the past ten
years, 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 by comparing each Fund's performance to that of
the [INSERT APPROPRIATE BROAD-BASED MARKET INDEX NAME] index, a widely
recognized index of [INSERT BRIEF DESCRIPTION OF THE INDEX]. The tables assume
reinvestment of dividends and distributions, if any. As with all mutual funds,
the past is not a prediction of the future.

5
<PAGE> 29
PRIMARY FUND NEW YORK TAX-EXEMPT FUND
1989 9.16% 1989 5.50%
1990 7.88% 1990 5.17%
1991 5.59% 1991 3.79%
1992 3.17% 1992 2.26%
1993 2.39% 1993 1.48%
1994 3.49% 1994 1.97%
1995 5.27% 1995 2.96%
1996 4.67% 1996 2.51%
1997 4.87% 1997 2.68%
1998 4.81% 1998 2.48%
BEST QUARTER 3rd Q 1989 up 2.40% BEST QUARTER 2nd Q 1989 up 1.41%
WORST QUARTER 2nd Q 1993 up 0.58% WORST QUARTER _____Q 19___ up ___ %

U.S. GOVERNMENT FUND CONNECTICUT TAX-EXEMPT FUND
1989 9.10% 1989 5.77%
1990 7.80% 1990 5.18%
1991 5.32% 1991 3.62%
1992 3.09% 1992 2.25%
1993 2.30% 1993 1.64%
1994 3.42% 1994 2.06%
1995 5.18% 1995 2.85%
1996 4.60% 1996 2.45%
1997 4.76% 1997 2.66%
1998 4.69% 1998 2.50%
BEST QUARTER 3rd Q 1989 up 2.17% BEST QUARTER 4th Q up 1.41%
WORST QUARTER 2nd Q 1993 up 0.20% WORST QUARTER 1st Q up .38%

U.S. TREASURY FUND FLORIDA TAX-EXEMPT FUND
1992* 2.44 % 1996(1) 1.24%
1993 2.19% 1997 2.66%
1994 3.68% 1998 2.62%
1995 4.96% BEST QUARTER 2nd Q 1998 up 0.73%
1996 4.53% WORST QUARTER 1st Q 1997 up 0.54%
1997 4.61%
1998 4.52% MASSACHUSETTS TAX-EXEMPT FUND
BEST QUARTER 3rd Q 1995 up 1.20% 1990(2) 5.49%
WORST QUARTER 1st Q 1993 up 0.19% 1991 4.22%
1992 2.46%
INTERSTATE TAX-EXEMPT FUND 1993 1.83%
1989 6.03% 1994 2.17%
1990 5.52% 1995 2.96%
1991 4.15% 1996 2.57%
1992 2.59% 1997 2.87%
1993 1.73% 1998 2.53%
1994 2.05% BEST QUARTER 3rd Q 1995 up______
1995 3.07% WORST QUARTER 1st Q 1993 up_____
1996 2.61%
1997 2.78% MICHIGAN TAX-EXEMPT FUND
1998 2.68% 1998(3) 0.11%
BEST QUARTER_Q up __% BEST QUARTER ______ Q 19____ up %
WORST QUARTER __Q up __% WORST QUARTER _____Q 19___ up ___ %

- --------------------------
* For the period February 3, 1992 (Commencement of Operations) to
December 31, 1992.
(1) For the period June 24, 1996, (Commencement of Operations) to
December 31,1996.
(2) For the period January 22, 1990 (Commencement of Operations) to
December 31,1990.
(3) For the period December 14, 1998 (Commencement of Operations) to
December 31,1998.

6
<PAGE> 30
NEW JERSEY TAX-EXEMPT FUND
1994(4) 1.20%
1995 2.87%
1996 2.41%
1997 2.55%
1998 2.42%
BEST QUARTER 1st Q 1995 up 0.71%
WORST QUARTER 3rd Q 1994 up 0.48%

OHIO TAX-EXEMPT FUND
1998(5) 1.86%
BEST QUARTER ______ Q 19____ up %
WORST QUARTER _____Q 19___ up ___ %

PENNSYLVANIA TAX-EXEMPT FUND
1997(6) 0.84%
1998 2.53%
QUARTER 4th Q 1997 up 0.69%
WORST QUARTER 1st Q 1998 up 0.59%

- ----------------

(4) For the period October 17, 1994 (Commencement of Operations) to December
31,1998.

(5) For the period April 1, 1998 (Commencement of Operations) to December
31, 1998

(6) For the period September 12, 1997 (Commencement of Operations) to December
31, 1997.

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
1 5 10 15 20 25 SINCE
YEAR YEARS YEARS YEARS YEARS YEARS INCEPTION
---- ----- ----- ----- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Primary Fund 4.81% 4.62% 5.11% ____% ____% ____% ____%
[INSERT APPROPRIATE BROAD-
- --------------------------
BASED MARKET INDEX NAME] [INSERT %]
- ------------------------ ----------
U.S. Government Fund 4.69% 4.53% 5.01% ____% ____% ____% ____%

[INSERT APPROPRIATE BROAD-
- --------------------------
BASED MARKET INDEX NAME] [INSERT %]
- ------------------------ ----------
U.S. Treasury Fund 4.52% 4.46% 3.89% ____% ____% ____% ____%

[INSERT APPROPRIATE BROAD-
- --------------------------
BASED MARKET INDEX NAME] [INSERT %]
- ------------------------ ----------
New York Tax-Exempt Fund
</TABLE>

<TABLE>
<CAPTION>
1 5 SINCE
YEAR YEARS INCEPTION
---- ----- ---------
<S> <C> <C> <C>
Connecticut Tax-Exempt Fund 2.50% 2.50% 3.09%*
[INSERT APPROPRIATE BROAD-
- --------------------------
BASED MARKET INDEX NAME] [INSERT %]
- ------------------------ ----------
Florida Tax-Exempt Fund 2.62% -- 2.59%
[INSERT APPROPRIATE BROAD-
- --------------------------
BASED MARKET INDEX NAME] [INSERT %]
- ------------------------ ----------
Massachusetts Tax-Exempt Fund 2.53% 2.62% 3.93%
[INSERT APPROPRIATE BROAD-
- --------------------------
BASED MARKET INDEX NAME] [INSERT %]
- ------------------------ ----------
New Jersey Tax-Exempt Fund 2.42% -- 2.72%
[INSERT APPROPRIATE BROAD-
- --------------------------
BASED MARKET INDEX NAME] [INSERT %]
- ------------------------ ----------
New York Tax-Exempt Fund 2.48% 2.52% 3.07%*
</TABLE>

7
<PAGE> 31

<TABLE>
<S> <C> <C> <C>
[INSERT APPROPRIATE BROAD-
- --------------------------
BASED MARKET INDEX NAME] [INSERT %]
- ------------------------ ----------
Ohio Tax-Exempt Fund 1.86% -- 2.48%
[INSERT APPROPRIATE BROAD-
- --------------------------
BASED MARKET INDEX NAME] [INSERT %]
- ------------------------
Pennsylvania Tax-Exempt Fund 2.53% -- 2.59%
[INSERT APPROPRIATE BROAD-
- --------------------------
BASED MARKET INDEX NAME] [INSERT %]
- ------------------------ ----------
</TABLE>

<TABLE>
<CAPTION>
1 5 10
YEAR YEARS YEARS
---- ----- -----
<S> <C> <C> <C>
Interstate Tax-Exempt Fund 2.68% 2.64% 3.31%
[INSERT APPROPRIATE BROAD-
- --------------------------
BASED MARKET INDEX NAME]
- ------------------------
[INSERT %]
- ----------
</TABLE>

* The returns for the Connecticut and New York Tax-Exempt Funds reflect
10 year average annual returns as of December 31, 1998.

<TABLE>
<CAPTION>
THE 7-DAY YIELD AS OF DECEMBER 31, 1998:

CURRENT EFFECTIVE
------- ---------
<S> <C> <C>
Primary Fund 4.29% 4.39%
U.S. Government Fund 4.10% 4.18%
U.S. Treasury Fund 3.77% 3.84%
Connecticut Tax-Exempt Fund 2.50% 2.54%
Florida Tax-Exempt Fund 2.63% 2.66%
Massachusetts Tax-Exempt Fund 2.62% 2.65%
Michigan Tax-Exempt Fund 2.49% 2.52%
New Jersey Tax-Exempt Fund 2.55% 2.58%
New York Tax-Exempt Fund 2.57% 2.60%
Ohio Tax-Exempt Fund 2.42% 2.45%
Pennsylvania Tax-Exempt Fund 2.72% 2.76%
Interstate Tax-Exempt Funds 2.79% 2.83%
</TABLE>

For the Funds' current yield, call toll-free (800) 637-1700 or visit our
web site at www.reservefunds.com.

EXPENSES

As an investor, you pay certain fees and expenses in connection with the
Funds, which are described in the table below. There are no sales charges
(loads) or exchange fees associated with an investment in the Funds. Annual fund
operating expenses are paid out of the assets of each Fund, so their effect is
included in each Fund's share price. Annual fund operating expenses, indicated
in the table below, reflect expenses for the Funds' fiscal year ended May 31,
1999.

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES FOR ALL FUNDS

<S> <C>
Sales Load Imposed on Purchases...................... None
Sales Load Imposed on Reinvested Dividends........... None
Redemption Fees*..................................... None
Exchange Fees........................................ None
</TABLE>

8
<PAGE> 32

ANNUAL FUND OPERATING EXPENSES FOR ALL FUNDS
(AS A PERCENTAGE OF AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
<S> <C>
Comprehensive Management Fee (a)..... .80%
12b-1 Fees (b)....................... .20%
-----
Total Operating Expenses............. 1.00%
=====
</TABLE>

(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, which do not reflect fee waivers
for the Fund during the fiscal year ended May 31, 1999.

This example assumes that you invest $10,000 in a Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that each Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
--------------------------------

ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C>
$105 $328 $1,012 $1,701
</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
Funds (the "Trust"). As a result of recent proxy 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, California II Tax-Exempt and Michigan Tax-Exempt Funds, since
inception, has been subject to a comprehensive management fee. The new
Investment Management Agreements became effective ________, 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 $_____ 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
ordinary operating costs of the Fund. Excluded from the definition of ordinary
operating costs are interest, taxes, brokerage fees, extraordinary legal and
accounting fees and expenses, and the fees of the disinterested Trustees, for
which it pays its direct or allocated share. For the fiscal year ended May 31,
1999, 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 $______,
$______, $______, $______, respectively. For the fiscal year ended May 31, 1999,
the Interstate Tax-Exempt, California II Tax-Exempt, Connecticut Tax-Exempt,
Florida Tax-Exempt, Massachusetts Tax-Exempt, Michigan Tax-Exempt, New Jersey
Tax-Exempt, New York Tax-Exempt Fund, Ohio Tax-Exempt and Pennsylvania
Tax-Exempt Funds paid RMCI $______, $_______, $______, $______, $______,
$______, $______, $______, $______ and $______, respectively.

9
<PAGE> 33

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 by the Funds. The Funds' investments are
valued based on market value, or where market quotations are not readily
available, based on fair value as determined in good faith by the Funds' Board
of Trustees. The Funds may use pricing services to determine market value.

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.

- 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.

- 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 and Interstate Tax-Exempt Funds) 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
and Interstate Tax-Exempt Funds) will be considered received the next business
day. Investors will be charged a fee $ ______ 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 Fund's' distributor is 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.

10
<PAGE> 34

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 and Interstate Tax-Exempt
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. 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 be able to redeem by telephone, you must select this option on your
application or in writing before you make your first telephone redemption. Once
you have selected this option, you may redeem by calling the Funds at
800-637-1700. The Funds strongly suggest (but do not require) that each
telephone redemption be at least $1000, except for redemptions which are
intended to liquidate an account. Unless you decline telephone privileges on
your application and the Funds fails to take reasonable measures to verify the
request, the Funds will not be liable for any unauthorized telephone order, or
for any loss, cost or expense for acting upon an investor's telephone
instructions. You are only allowed to make one telephone redemption request
within a thirty (30) day period. To further reduce the risk of loss, proceeds of
telephone redemptions may be sent only to (1) the bank or brokerage account
designated by the shareholder on the application or in a letter with the
signature(s) guaranteed or (2) the address of record for the past 30 days. To
change the designated brokerage or bank account it is necessary to contact the
Firm through which shares of the Fund were purchased or, if purchased directly
from the Funds, it is necessary to send a written request to the Funds with
signature(s) guaranteed. The Fund reserves the right to refuse a telephone
redemption if it believes it is advisable to do so.

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
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 each Fund for information including charges, fees,
etcetera.

11
<PAGE> 35

OTHER. The Funds also reserve the right to make a "redemption in kind" - payment
in portfolio securities rather than cash - 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). Each Fund reserves the right to:

TAX CONSEQUENCES

DIVIDENDS, DISTRIBUTIONS AND TAXES. Each Fund declares dividends each business
day. Dividends are distributed daily as additional shares to shareholder
accounts except for shareholders who elect in writing to receive cash dividends,
in which case monthly dividend checks are sent to the shareholder. Further, The
Funds distributes any net capital gains that it has realized once a year.
Dividends and distributions will be reinvested in the fund unless the investor
instructs the Fund otherwise. There are no fees or sales charges on
reinvestments.

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.

Shareholders of the Florida Tax-Exempt Fund that are subject to the
Florida intangibles tax will not be required to include the value of their Fund
shares in their taxable intangible property if all of the Fund's investments on
the annual assessment date are obligations that would be exempt from such tax if
held directly by such shareholders, such as Florida and U.S. government
obligations. As described earlier, the Fund will normally attempt to invest
substantially all of its assets in securities which are exempt from the Florida
intangibles tax. If the portfolio consists of any assets which are not so exempt
on the annual assessment date, only the portion of the shares of the Fund which
relate to securities issued by the U.S. and its possessions and territories will
be exempt from the Florida intangibles tax, and the remaining portions of those
shares will be fully subject to the intangibles tax, even if they partly relate
to Florida tax-exempt securities and the same is true with respect to the
Pennsylvania Tax-Exempt Fund and the Pennsylvania county personal property tax.

As to the Interstate Tax-Exempt Fund, dividends derived from the interest
earned on municipal obligations and designated by the Fund as "exempt-interest
dividends" are not subject to federal income taxes. Any distributions of net
short-term capital gains and taxable interest income, if any, are taxable as
ordinary income. Any distributions of net realized long-term capital gains
earned by the Fund are taxable to individual shareholders at the applicable
mid-term or long-term capital gains rate regardless of the length of time the
Fund's shares have been owned by the shareholder.

12
<PAGE> 36

Minors Act, the TIN of the minor should be furnished. Shareholders should be
aware that, under regulations promulaged by the IRS a Fund may be fined $50
annually for each account for which a certified TIN is not provided or is
incorrect. In the event that such a fine is imposed with respect to an account
in any year, a corresponding charge will be made against the account. The Funds
will not accept purchase orders for accounts for which a correct and certified
TIN is not provided or which is otherwise subject to backup withholding, except
in the case of certain non-resident alien account holders.

GENERAL INFORMATION

INQUIRIES. Shareholders should direct their inquiries to the Firm from which
they received this Prospectus or to The Reserve Funds.

ACCOUNT STATEMENTS. Shareholders are advised to retain all account statements.

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
FOR FISCAL YEAR 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
---------- ---------- ---------- ----------
Income from investment operations..................... .0579 .0557 .0591 .0549
Expenses.............................................. .0096 .0100 .0101 .0099
---------- ---------- ---------- ----------
Net investment income(1).............................. .0483 .0457 .0490 .0450
Dividends from net investment income(1)............... (.0483) (.0457) (.0490) (.0450)
---------- ---------- ---------- ----------
Net asset value, end of year.......................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ==========

Total Return.......................................... 4.83% 4.57% 4.90% 4.50%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands ,end of year.................. 2,707,620 2,104,109 1,664,114 1,602,464
Ratio of expenses to average net assets............... .94% .98% .98% .97%
Ratio of net investment income to average net assets 4.71% 4.47% 4.79% 4.42%
</TABLE>

<TABLE>
<CAPTION>
FOR FISCAL YEAR 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
----------- ----------- ----------- -----------
Income from investment operations......................... .0572 .0550 .0586 .0542
Expenses.................................................. .0101 .0101 .0102 .0101
----------- ----------- ----------- -----------
Net investment income(1).................................. .0471 .0449 .0484 .0441
Dividends from net investment income(1)................... (.0471) (.0449) (.0484) (.0441)
----------- ----------- -----------
Net asset value, end of year.............................. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
=========== =========== =========== ===========

Total Return.............................................. 4.71% 4.49% 4.84% 4.41%
-----------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
</TABLE>

13
<PAGE> 37
<TABLE>
<S> <C> <C> <C> <C>
Net assets in thousands ,end of year................... 652,468 611,844 568,497 721,785
Ratio of expenses to average net assets................ .99% .99% 1.00% .99%
Ratio of net investment income to average net assets 4.60% 4.40% 4.75% 4.31%
-----
</TABLE>

<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
---------- ---------- ---------- ----------
Income from investment operations.................... .0535 .0521 .0547 .0523
Expenses............................................. .0079 .0078 .0081 .0067
---------- ---------- ----------
Net investment income(1)............................. .0456 .0443 .0466 .0456
Dividends from net investment income(1).............. (.0456) (.0443) (.0466) (.0456)
---------- ---------- ----------
Net asset value, end of year......................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ========== ========== ==========

Total Return......................................... 4.56% 4.43% 4.66% 4.56%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands ,end of year................. 239,760 169,178 142,766 95,227
Ratio of expenses to average net assets.............. .77%(3) .77%(3) .79%(3) .68%(3)
Ratio of net investment income to average net assets. 4.46% 4.33% 4.53% 4.64%
</TABLE>

- ----------
(1) Based on compounding of daily dividends. Not indicative of future results.
(2) Annualized.
(3) During this period the manager waived a portion of fees and expenses. If
there were no reductions in expenses, the actual expenses would have been
approximately 0.20%, 0.20%, 0.20%, 0.25% and 0.12% higher, respectively.

14
<PAGE> 38
<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED MAY 31,
------------------------------------------------------------------------
NEW YORK TAX-EXEMPT 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
---------- ---------- ---------- ----------
Income from Investment operations..................... .0363 .0352 .0381 .0352
Expenses.............................................. .0095 .0105 .0105 .0099
---------- ---------- ---------- ----------
Net investment income (1)............................. .0268 .0247 .0276 .0253
Dividends from net investment income (1).............. (.0268) (.0247) (.0276) (.0253)
---------- ---------- ---------- ----------
Net asset value, end of year......................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ==========
Total Return.......................................... 2.68% 2.47% 2.76% 2.53%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of year................ 171,212 153,180 125,454 152,906
Ratio of expenses to average net assets.............. .94% 1.04% 1.04% .98%
Ratio of net investment income to average net assets. 2.63% 2.43% 2.72% 2.48%
</TABLE>

<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED MAY 31,
--------------------------------------------------------------------
CONNECTICUT TAX-EXEMPT 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
---------- ---------- ---------- ----------
Income from Investment operations..................... .0358 .0341 .0368 .0352
Expenses.............................................. .0091 .0098 .0102 .0098(3)
---------- ---------- ---------- ----------
Net investment income (1)............................. .0267 .0243 .0266 .0254
Dividends from net investment income (1).............. (.0267) (.0243) (.0266) (.0254)
---------- ---------- ---------- ----------
Net asset value, end of year......................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ==========
Total Return.......................................... 2.67% 2.43% 2.66% 2.54%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of year................ 36,787 33,497 34,801 26,626
Ratio of expenses to average net assets.............. .89% .97% 1.01% .89%(3)
Ratio of net investment income to average net assets. 2.64% 2.39% 2.61% 2.33%
</TABLE>

JUNE 24, 1996
FOR FISCAL YEARS ENDED MAY 31, (COMMENCEMENT OF
----------------------------- OPERATIONS) THROUGH
FLORIDA TAX-EXEMPT FUND 1999 1998 MAY 31, 1997
- ----------------------- ---------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of year.................... $ 1.0000 $ 1.0000
---------- ----------
Income from investment operations..................... .0366 .0321
Expenses.............................................. .0097 .0093
---------- ----------
Net investment income (1)............................. .0269 .0228
Dividends from net investment income (1).............. (.0269) (.0228)
---------- ----------
Net asset value, end of year.......................... $ 1.0000 $1.0000
========== ==========
Total Return.......................................... 2.69% 2.42%(2)

Ratios/Supplemental Data
- ------------------------
Net assets in thousands, end of year.................. 10,817 4,109
Ratio of expenses to average net assets............... .94% 1.04%(2)
Ratio of net investment income to average net assets.. 2.62% 2.39%(2)
</TABLE>

<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED MAY 31,
-----------------------------------------------------------------------
MASSACHUSETTS TAX-EXEMPT 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
---------- ---------- ---------- ----------
Income from Investment operations..................... .0361 .0338 .0362 .0335
Expenses.............................................. .0077 .0079(3) .0086(3) .0070(3)
---------- ---------- ---------- ----------
Net investment income (1)............................. .0284 .0259 .0276 .0265
Dividends from net investment income (1).............. (.0284) (.0259) (.0276) (.0285)
---------- ---------- ---------- ----------
Net asset value, end of year......................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ==========
Total Return......................................... 2.84% 2.59% 2.76% 2.65%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of year................ $ 25,383 $ 13,035 $ 8,955 $ 10,169
Ratio of expenses to average net assets.............. .75% .79%(3) .84%(3) .69%(3)
Ratio of net investment income to average net assets. 2.78% 2.58% 2.71% 2.80%
</TABLE>

15
<PAGE> 39
<TABLE>
<CAPTION>
DECEMBER 14, 1998
(COMMENCEMENT OF OPERATIONS)
THROUGH MAY 31, 1999
-----------------------------------------------
MICHIGAN TAX-EXEMPT FUND
- ------------------------
<S> <C>
Net asset value, beginning of year...................
Income from Investment operations.....................
Expenses..............................................

Net investment income (1).............................

Dividends from net investment income (1)..............
Net asset value, end of year.........................
Total Return..........................................

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of year................
Ratio of expenses to average net assets..............
Ratio of net investment income to average net assets.
</TABLE>

OCTOBER 17, 1994
FOR FISCAL YEARS ENDED MAY 31, (COMMENCEMENT OF
--------------------------------------------------- OPERATIONS) THROUGH
NEW JERSEY TAX-EXEMPT FUND 1999 1998 1997 1996 MAY 31, 1995
- -------------------------- --------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------
Income from investment operations..................... .0354 .0343 .0369 .0330
Expenses.............................................. .0100 .0107 .0106 .0087 (3)
---------- ---------- ---------- ---------
Net investment income (1)............................. .0254 .0236 .0263 .0243
Dividends from net investment income (1).............. (.0254) (.0236) (.0263) (.0243)
---------- ---------- ---------- ---------
Net asset value, end of year.......................... $ 1.0000 $ 1.0000 $1.0000 $ 1.0000
========== ========== ========== =========
Total Return.......................................... 2.54% 2.36% 2.63% 2.43%(2)

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of year.................. 37,600 39,452 41,026 21,607
Ratio of expenses to average net assets............... .99% 1.06% 1.04% 1.01%(2)(3)
Ratio of net investment income to average net assets. 2.50% 2.33% 2.59% 2.82%(2)
</TABLE>

<TABLE>
<CAPTION>
APRIL 1, 1998
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
OHIO TAX-EXEMPT FUND MAY 31, 1999 MAY 31, 1998
- -------------------- ------------ ------------
<S> <C> <C>
Net asset value, beginning of year.................... $ 1.0000
----------
Income from investment operations..................... .0065
Expenses.............................................. .0017
----------
Net investment income (1)............................. .0048
Dividends from net investment income (1).............. (.0048)
----------
Net asset value, end of year.......................... $ 1.0000
==========
Total Return.......................................... 2.87%(2)

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of year.................. 2,507
Ratio of expenses to average net assets............... 1.00%(2)
Ratio of net investment income to average net assets.. 2.86%(2)
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 12, 1997
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
PENNSYLVANIA TAX-EXEMPT FUND MAY 31, 1999 MAY 31, 1998
- ---------------------------- ------------ ------------
<S> <C> <C>
Net asset value, beginning of year.................... $ 1.0000
----------
Income from investment operations..................... .0261
Expenses.............................................. .0072
----------
Net investment income (1)............................. .0189
Dividends from net investment income (1).............. (.0189)
----------
Net asset value, end of year.......................... $1.0000
==========
Total Return.......................................... 2.64%(2)

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of year.................. 13,187
Ratio of expenses to average net assets............... 1.00%(2)
Ratio of net investment income to average net assets.. 2.62%(2)
</TABLE>

16
<PAGE> 40

<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED MAY 31,
----------------------------------------------------------------------
INTERSTATE TAX-EXEMPT 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
---------- ---------- ---------- ----------
Income from investment operations..................... .0378 .0361 .0390 .0368
Expenses.............................................. .0099 .0105 .0105 .0103
---------- ---------- ---------- ----------
Net investment income (1)............................. .0279 .0256 .0285 .0265
Dividends from net investment income (1).............. (.0279) (.0256) (.0285) (.0265)
---------- ---------- ---------- ----------
Net asset value, end of year.......................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========= ==========
Total return.......................................... 2.79% 2.56% 2.85% 2.65%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of year.................. $ 352,869 $ 306,152 $ 292,067 $ 315,232
Ratio of expenses to average net assets............... .97% 1.04% 1.04% 1.00%
Ratio of net investment income to average net assets.. 2.75% 2.52% 2.80% 2.59%
</TABLE>

- ----------
(1) Based on compounding of daily dividends. Not indicative of future results.
(2) Annualized.
(3) During these periods the Manager waived all or a portion of fees and
expenses. If there were no reductions in expenses, the actual expenses
for the Connecticut Fund would have been 0.10% higher; the actual
expenses for the Massachusetts Fund would have been 0.04%, 0.05%, and
0.11%, higher; and, 0.01% higher for the New Jersey Fund.
(4) The .01cents per share represents distributions of taxable income.

--------------

---------------

17
<PAGE> 41

SEC File 811-2033
SEC File 811-3696
SEC File 811-3814

This Prospectus contains the information about each Fund, which a prospective
investor should know before investing.

Investors are advised to read and retain
this prospectus for future reference.

[THE RESERVE FUNDS LOGO]

Founders of
"America's First
Money Fund"

1250 Broadway, New York, NY 10001-3701
(212) 401-5500

GENERAL INFORMATION AND 24-HOUR YIELD AND BALANCE INFORMATION
800-637-1700 - www.reservefunds.com

Distributor - Resrv Partners, Inc.

RF/PG&T-07/99

INSERT
AMEX
ARTWORK

Prospectus
July 31, 1999
<PAGE> 42
THE RESERVE FUND
"AMERICA'S FIRST MONEY FUND"
1250 BROADWAY, NEW YORK, NY 10001-3701
212-401-5500 - 800-637-1700

--------------------------------------------

24-HOUR YIELD AND BALANCE INFORMATION
NATIONWIDE 800-637-1700 - WWW.RESERVEFUNDS.COM

THE RESERVE FUND
STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information ("SAI") describes The Reserve Fund
("Trust") and three of its four money funds: Primary Fund, U.S. Government Fund
and U.S. Treasury Fund (each a "Fund", together the "Funds"). The Reserve Fund
was originally organized as a Maryland corporation on February 1, 1970 and
re-organized on October 28, 1986 as a Massachusetts business trust and is an
open-end investment company, commonly known as a money-market mutual fund. At
the date of the Prospectus and SAI, there were four separate series (funds)
authorized and outstanding: Primary, U.S. Government, U.S. Treasury and
Strategist Funds. Additional series (funds) may be added in the future by the
Board of Trustees. This Statement is not a Prospectus, but provides detailed
information to supplement the Prospectus dated July 31, 1999 and should be read
in conjunction with it. A copy of the Prospectus may be obtained without charge
by writing or calling the Fund at the above address or telephone number. The
Securities and Exchange Commission ("SEC") maintains a web site
(http://www.sec.gov) where you can download the SAI, the Prospectus, material
incorporated by reference & other information regarding the Funds. This
Statement is dated July 31, 1999.

<TABLE>

TABLE OF CONTENTS PAGE
----------------- ----
<S> <C>
Description of Funds............................2
Management of the Trust.........................5
Investment Management, Distribution and
Custodian Agreements............................8
Information About the Trust....................10
How to Buy and Sell Shares.....................12
Dividends, Distributions and Taxes.............17
Yield Information..............................19
General Information............................19
</TABLE>

SHARES OF THE FUNDS ARE NEITHER GUARANTEED NOR INSURED BY THE U.S. GOVERNMENT
AND THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE.

1
<PAGE> 43

DESCRIPTION OF THE FUNDS

The primary investment objective of each Fund is to seek as high a level of
current income as is consistent with preservation of capital and liquidity.
However, achievement of this objective is not guaranteed. Investment in the
Funds 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 investing in the Funds.

The Reserve Fund is a non-diversified mutual fund. However, each of its
separate investment portfolios (Funds) intends to comply with the
diversification requirement of Rule 2a-7 under the 1940 Act which generally
limits a money-market fund to investing no more than 5% of its total assets in
securities of any one issuer, except U.S. government securities, as defined
below.

Reserve Management Co., Inc. ("RMCI") serves as the Funds' Investment Adviser.
Resrv Partners, Inc. ("RESRV"), which is a wholly owned subsidiary of RMCI, is
a distributor of the Funds' shares. RESRV is located at 1250 Broadway, New
York, NY 10001-3701. GAM Services, Inc. ("GAM"), 135 East 57th Street, New
York, NY 10022; and, The Kaufmann Fund, Inc. ("Kaufmann"), 140 East 45th
Street, New York, NY 10017 are also distributors.

The following information supplements and should be read in conjunction with
the Prospectus.

SUPPLEMENTAL INVESTMENT POLICIES. Each Fund's investment objective and the
following investment policies may not be changed without the affirmative vote
of a majority of the outstanding shares of a Fund. A majority of the
outstanding shares of a Fund means the vote of the lesser of (i) 67% or more of
the shares of a Fund present at a meeting, if the holders of more than 50% of
the outstanding shares of the Fund are present or represented by proxy, or (ii)
more than 50% of the outstanding shares of the Fund. A Fund cannot:

(1) invest in any security other than those discussed herein or in the
Prospectus;

(2) borrow money except as a temporary or emergency measure (but not for the
purpose of purchasing securities), and not in an amount to exceed 5% of the
value of its total assets;

(3) issue senior securities except in compliance with the Investment Company
Act of 1940 ("1940 Act");

(4) act as an underwriter with respect to the securities of others as defined
under federal securities laws;

(5) concentrate investments in any particular industry except: (a) to the
extent that its investments are concentrated exclusively in municipal
obligations, U.S. Governments or instruments secured by such obligations,
and (b) for the Primary Fund, which may invest more than 25% of its assets
in banking;

(6) purchase, sell or otherwise invest in real estate or commodities or
commodity contracts; however, a Fund may purchase municipal obligations
secured by interests in real estate;

(7) lend more than 33 1/3% of the value of its total assets except to the
extent its investments are considered loans;

(8) sell any security short or write, sell or purchase any futures contract or
put or call option; provided, however, a Fund shall have the authority to
purchase municipal obligations subject to a stand-by commitment, at the
Fund's option;

(9) invest in the securities of other investment companies except in compliance
with 1940 Act; and

(10) make investments on a margin basis.

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.

Based upon shareholder approval, the Trust may use a "master/feeder"
structure. Rather than investing directly in securities, the Fund is a "feeder
fund," meaning that it invests in a corresponding "master fund". The master
fund, in turn invests in securities using the strategies described in this
Prospectus. One potential benefit of this structure is lower costs, because the
expenses of the master fund can be shared with any other feeder funds.

OTHER POLICIES. The Primary and U.S. Government Funds may, to increase their
income, lend their securities to brokers, dealers and institutional investors if
the loan is collateralized in accordance with applicable regulatory

<PAGE> 44

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, be at least
equal to the value of the loaned securities plus accrued interest and must
consist of cash or securities of the U.S. government (or its agencies or
instrumentalities). The Funds receive an amount equal to the interest on loaned
securities and also receive negotiated loan fees. The Funds 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 or Exchange"), which
require the borrower, after notice, to redeliver the securities within the
normal settlement time of three (3) business days.

RISKS OF INVESTING IN THE FUNDS. Money-market securities are high-quality,
short-term securities that pay a fixed, variable or floating interest rate.
Securities are often specifically structured so that they are eligible
investments for a money-market fund. For example, in order to satisfy the
maturity restrictions for a money market fund, some money-market securities
have demand or put features which have the effect of shortening the security's
maturity. Further, the principal risk factors associated with investment in
each Fund are the risk of fluctuations in short-term interest rates, the risk
of default among one or more issuers of securities which comprise a Fund's
assets; consequently when you sell (redeem) your shares of a Fund, they could
be worth more or less than what you paid for them. In addition to the general
investment risks of the Funds that are common to and may affect the
money-market industry as a whole, there are risks specific to the types of
securities held.

U.S. GOVERNMENT SECURITIES. U.S. government securities include a variety of
instruments which are issued or guaranteed by the U.S. Treasury, various
agencies of the federal government and various instrumentalitites which have
been established or sponsored by the U.S. government, and certain interests in
the foregoing types of securities such as U.S. Treasury STRIPS. U.S.
government securities include direct obligations of the U.S. Treasury (such as
Treasury bills, Treasury notes, and Treasury bonds). Obligations such as
securities issued by the Government National Mortgage Association ("GNMA"), the
Federal Home Loan Mortgage Corporation ("FHLMC"), the Federal National Mortgage
Association ("FNMA"), the Student Loan Marketing Association ("SLMA") and the
Federal Home Loan Bank ("FHLB") are also considered U.S. government securities.
Some obligations of agencies and instrumentalities of the U.S. government, such
as GNMA, are supported by the full faith and credit of the U.S. government
Other securities, such as obligations issued by FNMA and SLMA, are supported by
the right of the issuer to borrow from the U.S. Treasury; and others, such as
obligations issued by FHLB and FHLMC, are supported only by the credit of the
agency or instrumentality issuing the obligation. In the case of securities
not backed by the full faith and credit of the U.S., the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment.

U.S. Treasury STRIPS permit the separate ownership and trading of the
interest and principal components of direct obligations of the U.S. Treasury.
These obligations may take the form of (i) obligations from which interest
coupons have been stripped; (ii) the interest coupons that are stripped; or
(iii) book-entries at a Federal Reserve member bank representing ownership of
obligation components.

BANK OBLIGATIONS. The Primary Fund may invest in bank obligations that include
certificates of deposit, bankers' acceptances, letters of credit and time
deposits. A certificate of deposit is a negotiable certificate representing a
financial institution's obligation to repay funds deposited with it, earning a
specified rate of interest over a given period. A bankers' acceptance is a
negotiable obligation of a bank to pay a draft which has been drawn on it by a
customer. A time deposit is a non-negotiable deposit in a financial institution
earning a specified interest rate over a given period of time. A letter of
credit is an unconditional guarantee by the issuing bank to pay principal and
interest on a note a corporation has issued.

Domestic banks are subject to extensive but different government regulations
which may limit both the amount and types of loans which may be made and
interest rates which may be charged. In addition, the profitability of the
banking industry is dependent largely upon the availability and cost of funds.
General economic conditions as well as exposure to credit losses arising from
possible financial difficulties of borrowers play an important part in the
operations of the banking industry. Domestic commercial banks organized under
federal law are supervised and examined by the Controller of the Currency and
are required to be members of the Federal Reserve System and to have their
deposits insured by the Federal Deposit Insurance Corporation. Domestic banks
organized under state

<PAGE> 45

law are supervised and examined by state banking authorities but are members of
Federal Reserve System only if they elect to join. As a result of federal and
state laws and regulations, domestic banks are, among other things, generally
required to maintain specified levels of reserves and are subject to other
regulations designed to promote financial soundness.

FOREIGN BANKS. The Primary Fund may invest in obligations of foreign banks and
foreign branches of U.S and foreign banks. Investment in these securities
involve risks which 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. Furthermore, foreign banks are not regulated by U.S.
banking authorities and are generally not bound by financial reporting
standards comparable to U.S. banks.

MUNICIPAL OBLIGATIONS. The Primary Fund may invest in municipal obligations,
the interest on these municipal obligations is not exempt from federal income
tax. They may be issued to raise money for various public purposes such as
constructing public facilities. Certain types of municipal obligations are
issued to obtain funding for privately operated facilities. General obligation
bonds and notes are backed by the taxing power of the issuer. Revenue bonds and
notes are backed by the revenues of a project or facility such as tolls from a
toll road or, in some cases, from the proceeds of a special excise tax, but not
by the general taxing power. Industrial development revenue bonds and notes are
a specific type of revenue bond or note backed by the credit of a private
issuer. Municipal obligations bear fixed, variable or floating rates of
interest.

The Primary Fund will purchase municipal securities which are rated MIG1 or
MIG2 by Moody's Investor Services, Inc. ("Moody's"), SP-1 or SP-2 by Standard &
Poor's Corporation ("S&P") or the equivalent. Municipal obligations which are
not rated may also be purchased provided such securities are determined to be
of comparable quality by RMCI to those rated securities in which the Funds may
invest, pursuant to guidelines established by their Boards of Trustees.

Municipal obligations are sometimes offered on a "when-issued" or delayed
delivery basis. There is no limit on the Primary Fund's ability to purchase
municipal securities on a when-issued basis. At the time a Fund makes the
commitment to purchase a municipal obligation on a when-issued basis, it will
record the transaction and reflect the value of the security in determining its
net asset value ("NAV"). Each Fund will also maintain readily marketable assets
at least equal in value to commitments for when-issued securities specifically
for the settlement of such commitments. RMCI does not believe that a Fund's NAV
or income will be adversely affected by the purchase of municipal obligations
on a when-issued basis.

Municipal securities can be significantly affected by economic and political
changes, as well as uncertainties in the municipal market related to taxation,
legislative changes, or the rights of municipal security holders. Because many
municipal securities are issued to finance similar projects, especially those
relating to education, health care, transportation and various utilities,
conditions in those sectors and the financial condition of an individual
municipal issuer can affect the overall municipal market.

COMMERCIAL PAPER. The Primary Fund has never purchased commercial paper and has
no current interest of doing so. However, it may purchase commercial paper
consisting only of short-term, unsecured promissory notes issued to finance
short-term credit needs which are direct obligations issued by domestic
entities. The other corporate obligations in which the Primary Fund may invest
consist of high-quality, short-term bonds and notes (including variable amount
master demand notes) issued by domestic corporations, including banks.

REPURCHASE AND REVERSE REPURCHASE AGREEMENTS. A repurchase agreement ("repo")
transaction occurs when the Fund purchases and simultaneously contracts to
resell securities at fixed prices. Each Fund will limit repos to those
financial institutions and securities dealers who are deemed credit-worthy
pursuant to guidelines established by the Funds' Board of Trustees
("Trustees"). Repos are considered by the SEC staff to be loans by the Fund
that enters into them. Repos could involve risks in the event of a default of
the repo counter-party to the agreement, including possible delays, losses or
restrictions upon the Fund's ability to dispose of the underlying securities.
In an attempt to reduce the risk of incurring a loss on a repo, RMCI will
follow procedures intended to provide that all repos are at least 100%
collateralized as to principal and interest. A Fund will make payment for such
instruments only upon

<PAGE> 46

their physical delivery to, or evidence of their book-entry transfer to, the
account of the Fund's Custodian. If the seller defaults on the repurchase
obligation, the Fund could incur a loss and may incur costs in disposing of the
underlying security. A Fund will not hold more than 10% of its net assets in
illiquid securities, including repurchase agreements, providing for settlement
in more than seven (7) days after notice.

The Primary and U.S. Government Funds may sell securities in a reverse repo
when it is considered advantageous, such as to cover net redemptions or to
avoid a premature outright sale of its portfolio securities. In a typical
reverse repo transaction, the seller (Fund) retains the right to receive
interest and principal payments on the security, but transfers title to and
possession of it to a second party in return for receiving a percentage of its
value. By repaying the repo counterparty the value received plus interest, the
Fund repurchases the transferred security. It is the Fund's policy that
entering into a reverse repo transaction will be for temporary purposes only
and, when aggregated with other borrowings, may not exceed 5% of the value of
the total assets of the Fund at the time of the transaction.

PORTFOLIO TURNOVER, TRANSACTION CHARGES AND ALLOCATION. As investment
securities transactions made by the Fund are normally principal transactions at
net prices, the Fund does not normally incur brokerage commissions. Purchases
of securities from underwriters involve a commission or concession paid by the
issuer to the underwriter and after market transactions with dealers involve a
spread between the bid and asked prices. The Fund has not paid any brokerage
commissions during the past three fiscal years.

The Fund's policy of investing in debt securities maturing within 13 months
results in high portfolio turnover. However, because the cost of these
transactions is minimal, high turnover does not have a material, adverse effect
upon the NAV or yield of the Fund.

Subject to the overall supervision of the officers of the Fund and the
Trustees, RMCI places all orders for the purchase and sale of the Fund's
investment securities. In the purchase and sale of investment securities, RMCI
will seek to obtain prompt and reliable execution of orders at the most
favorable prices and yields. In determining best price and execution, RMCI may
take into account a dealer's operational and financial capabilities, the type
of transaction involved, the dealer's general relationship with RMCI, and any
statistical, research, or other services provided by the dealer to RMCI. 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 by RMCI. Brokers or dealers who
execute investment securities transactions may also sell shares of the Fund;
however, any such sales will be neither a qualifying nor disqualifying factor
in the selection of brokers or dealers.

When orders to purchase or sell the same security on identical terms are
simultaneously placed for the Fund and other investment companies managed by
RMCI, the transactions are allocated as to amount in accordance with each order
placed for each Fund. However, RMCI may not always be able to purchase or sell
the same security on identical terms for all investment companies affected.

MANAGEMENT OF THE TRUST

The Funds' Trustees are responsible for the management and supervision of
the Trust. The Trustees approve all significant agreements between the Funds
and those companies that furnish services to the Funds.

Trustees and executive officers of the Funds, together with information as
to their principal business occupations during at least the last five years,
are shown 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 Funds ("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");

<PAGE> 47

President and Treasurer of Reserve Management Corporation ("RMC"); and Chairman
and Director of Resrv Partners, Inc. ("RESRV").

++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, RNYTET, RTET 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 The 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.

+EDWIN EHLERT, JR., 67, Trustee, 125 Elm Street, Westfield, NJ 07091.

Until his retirement, he was President of Premier Resources Inc. (a meeting
and planning company from October 1989 to December 31, 1996 and CEO of Ehlert
Travel Associates, Inc. (a travel agency) from November 1978 to December 31,
1996. He is a Trustee of RF, RIT, RTET, RNYTET and RPES.

+HENRI W. EMMET, 72, Trustee, 1535 Presidential Drive, Apt. 4A, Columbus, OH
43212.

From January 1995 to December 1995, Mr. Emmet served as Principal of Global
Interaction, which provides consulting services to international banking
interests. 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. He is currently Trustee of RF, RIT, RTET, RNYTET, and RPES.

+DONALD J. HARRINGTON, C.M., 53, Trustee, St. John's University, Jamaica, NY
11439.

The Reverend Harrington is President of St. John's University, NY, a Trustee
of RF, RIT, RTET, RNYTET and RPES and a Director of Bear Stearns Companies,
Inc. since 1993.

+DIANA P. HERRMANN, 40, Trustee, 380 Madison Avenue, Suite 2300, New York,
NY 10017.

Ms. Herrmann is President and COO of Aquila Management Corporation, sponsor
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.

+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); Senior Vice President/Department Head
of Bankers Trust Corp. (1972-1980); and Vice President and Mortgage Officer of
Anchor Savings Bank (1967-1972). 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.

<PAGE> 48

JAMES M. FREISEN, 41, Controller, 1250 Broadway, New York, NY 10001-3701.

Mr. Freisen joined The Reserve Funds in 1999 and is Controller of RF, RIT,
RTET RNYTET, RPES. Before joining The Reserve Funds in 1999, Mr. Freisen was an
Assistant Vice President at Paine Webber from August 1998 until February 1999.
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.

MARYKATHLEEN FOYNES, 29, Counsel and Secretary, 1250 Broadway, New York, NY
10001-3701.

Ms. Foynes is Counsel and Secretary of RF, RIT, RTET, RNYTET, and RPES.
Before joining The Reserve Funds in 1998, Ms. Foynes was a staff attorney at
PaineWebber, Inc. Prior to that, Ms. Foynes was the District Manager for a
Member of the House of Representatives.

- ------------
+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.

++Interested Trustee within the meaning of the Investment Company Act of
1940.

The members of the Board of Trustees who are not interested persons
("disinterested Trustees") will be paid a stipend of $3,500 for each joint
Board meeting that 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 of 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 June 30, 1999, the Trust's records reflect that the Trustees and
officers directly or indirectly as a group owned less than 1% of the
outstanding shares of the Funds. The Trust does not pay any pension or
retirement benefits to its Trustees.]

COMPENSATION TABLE
FOR FISCAL YEAR ENDED MAY 31, 1999

<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE FROM FUND AND FUND COMPLEX
COMPENSATION (4 ADDITIONAL TRUSTS)
NAME OF TRUSTEE, POSITION FROM FUNDS PAID TO TRUSTEE
- ------------------------- ---------- ---------------
<S> <C> <C>
Bruce R. Bent,
President and Trustee $ 0 $ 0
Bruce R. Bent II, SVP
and Trustee $ 0 $ 0
Richard Bassuk, Trustee $ $
--------- ---------
Edwin Ehlert, Jr.,
Trustee $ $
--------- ---------
Henri W. Emmet, Trustee $ $
--------- ---------
Rev. Donald J.
Harrington, Trustee $ $
--------- ---------
Diana P. Herrmann $ $
--------- ---------
William E. Viklund $ $
--------- ---------
</TABLE>

The following executive officers of the Fund had allocated cash remuneration in
excess of $60,000 during the last fiscal year ending May 31, 1999 for services
rendered to the Fund:

<PAGE> 49

<TABLE>
<CAPTION>
ESTIMATED ANNUAL
AGGREGATE BENEFITS UPON
NAME CAPACITY REMUNERATION RETIREMENT
---- -------- ------------ ----------
<S> <C> <C> <C>
Bruce R. Bent President $ $
------ ------
Bruce R. Bent II Sr. Vice
President $ $
------ ------
Arthur T. Bent III Vice
President $ $
------ ------
MaryKathleen Foynes Counsel $ $
------ ------
James M. Freisen Controller $ $
------ ------
</TABLE>

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. A Trustee may be removed at any
meeting of shareholders by a vote of a majority of the Fund's shareholders.

[As of June 30, 1999, no person was known by the Fund to own of record or
beneficially 5% or more of the outstanding shares of the Fund.]

INVESTMENT MANAGEMENT, DISTRIBUTION
AND CUSTODIAN AGREEMENTS

INVESTMENT MANAGEMENT AGREEMENT. Reserve Management Company, Inc. ("RMCI" or
"Adviser"), 1250 Broadway, New York, NY 10001-3701, a registered investment
adviser, manages the Funds and provides them with investment advice. As a
result of recent proxy votes, each of the Funds has entered into a new
Investment Management Agreement with the Adviser, which is substantially
similar to the Investment Management Agreement previously in effect with regard
to each Fund, except for a new comprehensive management fee for the Primary and
U.S. Government Funds. The U.S. Treasury Fund, since inception, has been
subject to a comprehensive management fee structure. The new Investment
Management Agreements became effective __________, 1999. Under the Investment
Management Agreement, RMCI manages the Funds' investment in accordance with
each Fund's investment objective and policies, subject to overall approval by
the Trustees.

Presently, under the terms of the new Investment Management Agreements with the
Funds, the Funds pay RMCI a comprehensive management fee at an annual rate of
0.80% of average daily net assets. RMCI pays all employee and ordinary
operating costs of the Funds. Excluded from the definition of ordinary
operating costs are interest, taxes, brokerage fees, extraordinary legal and
accounting fees and expenses, and fees of the disinterested Trustees, for which
each Fund it pays its direct or allocated share.

For the fiscal years ended May 31, 1997, 1998 and 1999, RMCI received
management fees under the Investment Management Agreements previously in
effect. For the fiscal years ended May 31, 1997, 1998 and 1999, RMCI received
management fees of $8,976,244, $10,995,380, and $_________ respectively, from
the Primary Fund; $2,858,951, $3,181,655, and $_________, respectively, from
the U.S. Government Fund; and, for the fiscal year ended May 31, 1997, 1996 and
1999 RMCI received a comprehensive management fee of $988,183, $1,329,283 and
$___________ respectively, which reflects a waiver of 0.20% of average daily
net assets, from the U.S. Treasury Fund.

From time to time, RMCI may waive receipt of its fees and/or voluntarily
assume certain expenses of a Fund that would have the effect of lowering the
Fund expense ratio and increasing yield to investors at the time such amounts
are assumed or waived, as the case may be. RMCI may also make such advertising
and promotional expenditures, using its own resources, as it from time to time
deems appropriate.

The Investment Management Agreements for each of the Funds were duly
approved by shareholders in 1999, and may be renewed annually if specifically
approved by the Trustees and by the vote of a majority of the disinterested
Trustees cast in person at a meeting called for the purpose of voting on such
renewal. The Agreements terminate automatically upon their assignment and may
be terminated without penalty upon sixty (60) days' written notice by a vote of
the Trustees or by vote of a majority of outstanding voting shares of a Fund or
by RMCI.

SERVICE AGREEMENT. A Service Agreement was in effect for the Primary and U.S.
Government Funds until __________, 1999. Pursuant to the Service Agreement, the
Adviser furnished at cost, all personnel required for the

<PAGE> 50

maintenance and operation of the Primary and U.S. Government Funds, including
administrative, clerical, recordkeeping, bookkeeping, shareholder accounting
and servicing, as well as a suitable office space and necessary equipment and
supplies used by such personnel in performing these functions. Operating costs
for which the Primary and U.S. Government Funds reimburse the Adviser includes
salaries and other expenses, rent, depreciation of equipment and facilities.
Affiliates of the Adviser may provide some of these services. The Trust also
reimbursed the Advisor for: brokerage fees and commissions, interest charges,
taxes, the cost of registering for sale, issuing and redeeming the Primary and
U.S. Government Funds' shares and of printing and mailing all prospectuses,
proxy statements and shareholder reports furnished to current shareholders,
overhead costs and expenses accounting and legal fees and expenses and
disinterested Trustees fees with regard to the Primary and U.S. Government
Funds. The Adviser agreed to repay the Primary and U.S. Government Funds
promptly any amount which a majority of disinterested Trustees reasonably
determines in its discretion is in excess of or not properly attributable to
the cost of operations or expenses of the Fund. The Service Agreement was
non-assignable and continued until terminated by either party on 120 days'
notice.

Pursuant to the Service Agreement, during the fiscal year ended May 31, 1999
the Primary Fund reimbursed RMCI $________ and the U.S. Government Fund
reimbursed RMCI $________ for expenses. For the fiscal years ended May 31, 1997
and 1998, RMCI was reimbursed $6,616,435 and $7,511,533 by the Primary Fund and
$1,778,491 and $2,011,920 by the U.S. Government Fund for expenses,
respectively.

DISTRIBUTION AGREEMENT. The Fund's Distributors are RESRV, GAM, and Kaufmann.
The Fund has authorized the Distributors, in connection with their sale of Fund
shares, to give only such information and to make only such statements and
representations as are contained in the Prospectus. Sales may be made only by
the Prospectus. The Distributors may offer and sell shares of the Fund pursuant
to a separate Prospectus applicable to such Distributor. The Distributors are
"principal underwriters" for the Funds within the meaning of the Investment
Company Act of 1940, and as such act as agent in arranging for the continuous
offering of Fund shares. The Distributors have the right to enter into selected
dealer agreements with brokers or other persons of their choice for the sale of
Fund shares. Parties to selected dealer agreements may receive assistance
payments if they qualify for such payments under the Plan of Distribution
described below. RESRV's, GAM's, and Kaufmann's principal business is the
distribution of mutual fund shares. No Distributor has retained underwriting
commissions on the sale of Fund shares during the last four fiscal years.
During the fiscal year ended May 31, 1999, distribution assistance payments
were made to RESRV, GAM, and Kaufmann in the amount of $____, $____ and $____,
respectively.

The Distribution Agreements may be renewed annually if specifically approved
by the Board of Trustees, and by the vote of a majority of the disinterested
Trustees cast in person at a meeting called for the purpose of voting on such
approval or by the vote of a majority of the outstanding voting securities of
the Fund.

PLAN OF DISTRIBUTION. The Fund maintains a Plan of Distribution ("Plan") and
related agreements, as amended, under Rule 12b-1 of the Investment Company Act
of 1940, which provides that investment companies may pay distribution
expenses, directly or indirectly, pursuant to a Plan adopted by the investment
company's Board and approved by its shareholders. Under the Plan, each Fund
makes assistance payments to brokers, financial institutions and other
financial intermediaries ("Firms") for shareholder accounts ("qualified
accounts") at an annual rate of 0.20 % of the average daily NAV of all Firms'
qualified accounts. Such distribution assistance may include, but is not
limited to, establishment of shareholder accounts, delivering prospectuses to
prospective investors and processing automatic investment in Fund shares of
client account balances. Substantially all such monies (together with
significant amounts from RMCI's own resources) are paid by RMCI to payees for
their distribution assistance or administrative services, with any remaining
amounts being used to partially defray other expenses incurred by RMCI in
distributing Fund shares. In addition to the amounts required by the Plan, RMCI
may, at its discretion, pay additional amounts from its resources. The rate of
any additional amounts that may be paid will be based upon RESRV and RMCI's
analysis of the contribution that a Firm makes to the Fund by increasing assets
under management, and reducing expense ratios and the cost to the Fund if such
services were provided directly by the Fund or other authorized persons and
RESRV and RMCI will also consider the need to respond to competitive offers of
others, which could result in assets being withdrawn from the Fund and an
increase in the expense ratio for the Fund. RMCI may elect to retain a portion
of the distribution assistance payments to pay for sales materials or

<PAGE> 51

other promotional activities. The Trustees have determined that there is a
reasonable likelihood the Plan will benefit the Fund and its shareholders.

Under the Plan, the Fund's Controller or Treasurer reports quarterly the
amounts and purposes of assistance payments. During the continuance of the
Plan, the selection and nomination of the disinterested Trustees are at the
discretion of the disinterested Trustees currently in office.

During the fiscal year ended May 31, 1999, $_________ was paid under the
Plan by the Primary Fund; $__________ was paid under the Plan by the U.S.
Government Fund; and, $_______ was paid under the Plan by the U.S. Treasury
Fund. Any such payments are intended to benefit the Fund by maintaining or
increasing net assets to permit economies of scale in providing services to
shareholders and to contribute to the stability of such shareholder services.
During the fiscal year ended May 31, 1999, substantially all payments made by
the Fund were to brokers or other financial institutions and intermediaries for
share balances in the Fund.

The Plan and related agreements were duly approved by shareholders and may
be terminated at any time by a vote of the majority of the outstanding voting
securities of each Fund, or by vote of the disinterested Trustees. The Plan and
related agreements may be renewed from year to year, if approved by the vote of
a majority of the disinterested Trustees cast in person at a meeting called for
the purpose of voting on such renewal. 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 vote of the
Board of Trustees and of the disinterested Trustees, cast in person at a
meeting called for the purpose of such vote.

TRANSFER AGENT AND DIVIDEND-PAYING AGENT. The Reserve Fund acts as its own
transfer agent and dividend-paying agent.

CUSTODIAN, INDEPENDENT ACCOUNTANT AND COUNSEL. The Chase Manhattan Bank, 4 New
York Plaza, New York, NY 10004 is Custodian of the Funds' securities and cash
pursuant to a Custodian Agreement. The Bank of New York, 1 Wall Street, New
York, NY 10286 and Custodial Trust Company, 101 Carnegie Center, Princeton, NJ
08540 are Custodians for the Funds for limited purposes in connection with
certain repurchase agreements. The Custodian has no part in determining the
investment policies of the Fund or which securities are to be purchased or sold
by the Fund. PricewaterhouseCoopers, LLP, 1301 Avenue of the Americas, New
York, NY 10019 is the Funds' independent accountant. Dechert, Price & Rhoads,
1775 Eye Street NW, Washington, DC 20006, is the Funds' outside counsel and has
rendered its opinion as to certain legal matters regarding the due
authorization and valid issuance of the shares being sold pursuant to the
Funds' Prospectus.

INFORMATION ABOUT THE TRUST

The Reserve Funds' Declaration of Trust permits the Trust to issue an
unlimited number of full and fractional shares of beneficial interest that may
be issued in any number of series (funds) and/or classes. Shares issued will be
fully paid and non-assessable and will have no preemptive rights. The
shareholders of each Fund are entitled to a full vote for each full share held
(and fractional votes for fractional shares) and have equal rights to earnings,
dividends, redemptions and in the net assets of their Fund upon liquidation.
The Trustees do not intend to hold annual meetings but 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 change the fundamental
investment policies) or by the Declaration of Trust.

<PAGE> 52

rights of any additional classes would be comparable, unless otherwise
required, to respond to the particular situation. Upon liquidation of any Fund,
shareholders are entitled to share, pro rata, in the net assets of their
respective Funds available for distribution to such shareholders. It is
possible, although considered highly unlikely in view of the method of
operation of mutual funds, that should the assets of one class of shares be
insufficient to satisfy its liabilities, the assets of another class could be
subject to claims arising from the operations of the first class of shares. No
changes can be made to the Fund'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 the respective Funds, equal rights to all
dividends and other distributions, and one vote for all purposes. Shares of all
classes vote together for the election of Trustees and have non-cumulative
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 Funds intend to conduct their operations in such a
way as to avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Funds.

To date, the Board has authorized the creation of four series (funds):
Primary, U.S. Government, U.S. Treasury and Strategist Funds. All consideration
received by the Trust for shares of one of the Fund and all assets in which
such consideration is invested will belong to that Fund (subject only to rights
of creditors of the Fund) and will be subject to the liabilities related
thereto. The income attributable to, and the expenses of, one series are
treated separately from those of the other series. The Trust has the ability to
create, from time to time, new series without shareholder approval.

Under Massachusetts law, the shareholders and trustees of a business trust
can be personally liable for the Funds' obligations unless, as in this
instance, the Declaration of Trust provides, in substance, that no shareholder
or trustee shall be personally liable for the Funds, and each investment
portfolio's, obligations to third parties, and requires that every written
contract made by a Fund contain a provision to that effect. The Declaration of
Trust also requires the Fund to indemnify its shareholders and Trustees against
such liabilities and any related claims or expenses.

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 class is separately affected by a matter
requiring shareholder vote (election of Trustees, ratification of independent
auditor selection, and approval of an underwriting agreement are not considered
to have such separate effect and may be voted upon by the shareholders of the
Fund as a whole), each class will vote separately on such matters as approval
of the Investment Management Agreement, material amendments to the Plan of
Distribution, and changes in the fundamental policies of the Fund. These items
require approval by a majority of the affected shareholders. For this purpose a
"majority" is constituted by either 50 percent of all shares voting as a group
or 67 percent of the shares voted as a group at an annual meeting of
shareholders at which at least 50 percent of the shares of each group are
represented.

HOW TO BUY AND SELL SHARES

PURCHASES - GENERAL. Shares of each Fund are sold without a sales charge. You
may be charged a fee if you effect transactions in shares of a Fund through a
securities dealer, bank or other financial institution. The Fund reserves the
right to reject any purchase order.

The minimum initial investment in each Fund is $1,000, unless you are a
client of a securities dealer, bank or other financial institution, which
maintains an omnibus account in the Fund, or if you are an IRA customer. There
is no minimum subsequent investment. The initial investment must be accompanied
by an Account Application or equivalent information. Checks drawn on foreign
banks are normally not accepted by the Fund. In addition, the Fund does not
accept cash investments or travellers or third party checks. The Fund reserves
the right to reject any investment in the Fund for any reason and may, at any
time, suspend all new investment in the Fund. Shares also

<PAGE> 53

may be purchased through Reserve Automatic Asset Builder (see below). In
addition, the Funds reserve the right to change the minimum investment amount
at any time.

Each Fund's shares are sold on a continuous basis at the NAV per share.
Checks and wires which do not correctly identify the account to be credited may
be returned or delay the purchase of shares. If you do not specify the account
number and Fund you wish to invest in, all money sent will be invested in the
U.S. Government Fund. 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 for any check that does not
clear. The Fund will only give credit for investments in the Fund on the day
they become available in federal funds. A Federal Reserve wire system transfer
("Fed wire") is the only type of wire transfer that is reliably available in
federal funds on the day sent. For a Fed wire to receive same day credit, the
Fund must be notified before 2:00 PM (Eastern time) (11:00 AM Eastern time for
the U.S. Treasury Fund) of the amount to be transmitted and the account to be
credited. Checks and other items submitted to the Fund for investment are only
accepted when submitted in proper form (i.e. receipt of all necessary
information, signatures and documentation), denominated in U.S. dollars, and
are credited to shareholder accounts only upon their conversion into federal
funds, which normally takes one or two business days following receipt. Checks
delivered to the Fund after 2:00 PM (Eastern time) (11:00 AM Eastern time for
the U.S. Treasury Fund) are considered received on the following business day.

IF SHARES OF THE FUND ARE PURCHASED BY CHECK OR RESERVE AUTOMATIC TRANSFER,
THE FUND MAY DELAY TRANSMITTAL OF REDEMPTION PROCEEDS UNTIL SUCH TIME AS IT HAS
ASSURED ITSELF THAT GOOD PAYMENT HAS BEEN COLLECTED FOR THE PURCHASE OF SUCH
SHARES, WHICH MAY BE UP TO 10 CALENDAR DAYS.

SHARE PRICE: NAV. The valuation of a Fund's portfolio securities is based upon
their amortized cost, which does not take into account unrealized gains or
losses. This involves valuing an instrument at its cost and thereafter assuming
a constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, there may be some periods
during which value, as determined by amortized cost, is higher or lower than
the price the Fund would receive if it sold the instrument.

The Fund's Board has established, as a particular responsibility within the
overall duty of care owed to the Fund's investors, procedures reasonably
designed to stabilize the Fund's price per share as computed for the purpose of
purchases and redemptions at $1.00. Such procedures include review of the
Fund's portfolio holdings by the Board, at such intervals as it may deem
appropriate, to determine whether the Fund's NAV calculated by using available
market quotations or market equivalents deviates from $1.00 per share based on
amortized cost. In such review, investments for which market quotations are
readily available will be valued at the most recent comparable maturity,
quality and type, as obtained from one or more of the major market makers for
the securities to be valued. Other investments and assets will be valued at
fair value as determined in good faith by the Board.

<PAGE> 54

day as defined in the Prospectus. The NAV is not calculated on days the
Exchange is closed for trading and on certain regional banking holidays. The
holidays (as observed) on which the Exchange and The Reserve Fund are closed
currently are: New Year's Day, Martin Luther King Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. In addition, The Reserve Fund is closed on Columbus Day and Veterans
Day. The NAV of each Fund is normally maintained at $1.00 per share. No Fund
can guarantee that its NAV will always remain at $1.00 per share although the
Funds have managed to do so since inception.

The NAV per share of each Fund is computed by dividing the value of the net
assets of each Fund (i.e., the value of its assets less liabilities) by the
total number of shares of such Fund outstanding. The Board of Trustees have
determined the most practical method currently available for valuing investment
securities is the amortized cost method. This procedure values a money-market
fund's portfolio securities, which does not take into account unrealized gains
and losses. As a result, portfolio securities are valued at their acquisition
cost, adjusted over time based on the discounts or premiums reflected in their
purchase price. This method of valuation is designed to permit a fund to be
able to maintain a stable NAV.

In order to maintain a $1.00 share price, the Fund will utilize the
following practices: maintain a dollar-weighted average portfolio maturity of
90 days or less; purchase only instruments having remaining maturities of 397
days or less; and invest only in securities determined by the Board of Trustees
to be of high quality with minimal credit risk. To assess whether repurchase
agreement transactions present more than minimal credit risk, the Trustees have
established guidelines and monitor the creditworthiness of all entities,
including banks and broker-dealers, with whom the Fund proposes to enter into
repurchase agreements. In addition, such procedures are reasonably designed,
taking into account current market conditions and the investment objective of
the Fund, to attempt to maintain the Fund's NAV as computed for the purpose of
sales and redemptions at $1.00 per share.

SHARE CERTIFICATES. Share certificates are not issued by the Funds.

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; from a U.S. government distribution ($25
suggested minimum) such as a social security, federal salary, or certain
veterans' benefits, or other payment from the federal government. You may also
make arrangements for the direct deposit of your payroll into your Fund
account. Please call the Funds at 800-637-1700 for an application.

REDEMPTIONS -- GENERAL. Redemption payments will normally be made by check or
wire transfer but the Fund is authorized to make payment of redemptions partly
or wholly in kind (that is, by delivery of investment securities valued at the
same time as the redemption NAV is determined). The Fund 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 the respective Fund. The election is
irrevocable pursuant to rules and regulations under the 1940 Act unless
withdrawal is permitted by order of the SEC. Redemptions in kind are further
limited by the Fund's practice of holding instruments typically with a minimum
value of $1,000,000 and its intention to redeem in kind only when necessary to
reduce a disparity between amortized cost and market value. In disposing of
such securities, an investor might incur transaction costs and on the date of
disposition might receive an amount less than the NAV of the redemption.

WRITTEN AND TELEPHONE REDEMPTION REQUESTS. 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
signature(s) guaranteed. Changes in registration or authorized signatories may
require additional documentation. Write a letter of instruction which states:
the name(s) and signature(s) of all account holders, account number, Fund name,
the dollar amount you want to sell, how and where to send the proceeds,
necessary signature(s) guaranteed, and if you are redeeming your IRA, please
note the applicable withholding requirements.

The Funds will waive the signature requirement on a redemption request 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 for
the previous 30 days. Signature guarantees are designed to protect both you and
the Funds from fraud. Signature guarantees can be obtained from most banks,

<PAGE> 55

credit unions or savings associations, or from broker/dealers, national
securities exchanges or clearing agencies deemed eligible by the SEC.
Guarantees must be signed by an authorized signatory of the guarantor and
"Signature Guaranteed" must appear with the signature. Notaries public cannot
provide signature guarantees. The Funds may request additional documentation
from corporations, executors, administrators, trustees or guardians, and may
accept other suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to signature
guarantees, please call 800-637-1700.

To be able to redeem by telephone, you must select this option on your
application or in writing before you make your first telephone redemption. Once
you have selected this option, you may redeem by calling the Funds at
800-637-1700. Unless you decline telephone privileges on your application and
the Funds take reasonable measures to verify the request, the Funds will not be
liable for any unauthorized telephone order, or for any loss, cost or expense
for acting upon an investor's telephone instructions. As stated in the
Prospectus, you are only allowed one telephone redemption request within a
thirty (30) day period. To further reduce the risk of loss, proceeds of
telephone redemptions may be sent only to (1) the bank or brokerage account
designated by the shareholder on the application or in a letter with the
signature(s) guaranteed; or (2) the address of record for the past 30 days. To
change the designated brokerage or bank account it is necessary to contact the
Firm through which shares of the Fund were purchased or, if purchased directly
from the Funds, it is necessary to send a written request to the Funds with
signature(s) guaranteed. The Fund reserves the right to refuse a telephone
redemption if it believes it is advisable to do so.

RESERVE CASH PERFORMANCE ACCOUNT. The Reserve Cash Performance Account ("CPA")
and the Reserve Cash Performance Account Plus ("CPA Plus") provide a
comprehensive package of additional services to investors. These packages
provide a check arrangement where checks are issued to Reserve shareholders. 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. Redemptions by check lengthen the time your money earns dividends,
since redemptions are not made until the check is processed by the Fund.
Because of this, you cannot write a check to completely liquidate your account,
nor may a check be presented for certification or immediate payment. Your
checks will be returned (bounced) and a fee charged if they are postdated,
contain an irregularity in the signature, amount or otherwise, or are written
against accounts with insufficient or uncollected funds. All transactions
activity, including check redemptions, will be reported on your account
statement. Checking may not be available to clients of some Firms.

A VISA Gold Check Card (a debit card) is also available with these packages.
The VISA card functions exactly as does a conventional VISA credit card except
that the cardholder's Reserve account is automatically charged for all
purchases and cash advances, thus eliminating the usual monthly finance
charges. You may also use your VISA card to get cash at ATMs. Investors receive
a 1% cash rebate on all VISA purchases which is credited to their Reserve
account. As with the checking facility, VISA charges are paid by liquidating
shares in your Reserve account, but any charges that exceed the balance will be
rejected. VISA card issuance is subject to credit approval. Reserve, VISA or
the bank may reject any application for checks or cards and may terminate an
account at any time. Conditions for obtaining a VISA Gold Check Card may be
altered or waived by the Funds either generally or in specific instances. The
checks and VISA cards are intended to provide investors with easy access to
their account balances.

VISA cardholders may be liable for the unauthorized use of their card up to
the amount set by governing Federal regulations, currently $50 if the Fund or
the bank is not notified of the theft or loss within two (2) business days.
Participants should refer to the VISA Account Shareholder Agreement for
complete information regarding responsibilities and liabilities with respect to
the VISA Gold Check Card. If a card is lost or stolen, the cardholder should
report the loss immediately by telephoning the issuing bank, currently BankOne
at 614-248-4242, which can be reached 24 hours a day, seven (7) days a week or
the Funds at 800-631-7784 or 212-401-5500 during normal business hours (Monday
through Friday, 9:00 A.M. to 5:00 P.M., Eastern time).

For the different attributes associated with CPA and CPA Plus packages,
please call The Reserve Funds at 800- 637-1700. The Funds will charge a
nonrefundable annual CPA Plus service fee (currently $60 which may be charged
to the account at the rate of $5 monthly). CPA and CPA Plus participants will
be charged for specific costs
14

<PAGE> 56

incurred in placing stop payment orders, obtaining check copies and in
processing returned checks. These charges may be changed at any time upon 30
days' notice to participants. Upon proper notice, the Funds may choose to
impose a fee if it deems a shareholder's actions to be burdensome. In addition,
Firms in this program may charge their own additional service fees and may
establish their own minimum check amount.

The use of checks and VISA cards by participants will be subject to the
terms of your Reserve CPA Application and VISA Account Shareholder Agreement.

[TOUCH TONE BILL PAYMENT SERVICE. In the near future, the Funds will offer its
shareholders touch-tone bill payment which gives you the flexibility of paying
bills over the telephone on an automatic or variable basis. Terms, conditions
and restrictions will be outlined in the User's Guide and Application.]

STOP PAYMENTS. The Funds will honor stop payment requests on unpaid shareholder
checks provided they are advised of the correct check number, payee, check
amount and date. Stop payment requests received by the Funds by 2:00 PM
(Eastern time) will be effective the next business day. Oral stop payment
requests are effective for fourteen (14) calendar days, at which time they will
be cancelled unless confirmed in writing. Written stop payment requests will
remain in effect for one year. A fee will be charged for this service.

AUTOMATIC WITHDRAWAL PLANS. If you have an account with a balance of at least
$5,000, you may elect in writing to participate in either of the following: (i)
an Income Distribution Plan providing for monthly, quarterly or annual payments
by redemption of shares from reinvested dividends or distributions paid to your
account during the preceding period; or (ii) a Fixed Amount Withdrawal Plan
providing for the automatic redemption of a sufficient number of shares of your
account to make a specified monthly, quarterly or annual payment of a fixed
amount. Changes to instructions must be in writing with signature(s)
guaranteed. In order for such payments to continue under the Plan, there must
be a minimum of $25 available from reinvested dividends or distributions.
Payments can be made to you or your designee. An application for the Automatic
Withdrawal Plans can be obtained from the Funds. The amount, frequency and
recipient of the payments may be changed by giving proper written notice to the
Funds. The Funds may impose a charge, modify or terminate any Automatic
Withdrawal Plan at any time after the participant has been notified. This
privilege may not be available to clients of some Firms or may be available
subject to conditions or limitations.

AUTOMATIC TRANSFER PLANS (ACH). You may redeem shares of a Fund (minimum $100)
without charge by telephone if you have filed a separate Reserve Automatic
Transfer application with the Fund. The proceeds will be transferred between
your Fund account and the checking, NOW or bank money-market deposit account
(must be an Automated Clearing House member bank) designated in your
application. Redemption proceeds will be on deposit in your account at the
Automated Clearing House member bank ordinarily two (2) business days after
receipt of the request. The Funds may impose a charge, modify or terminate this
privilege at any time after the participant has been duly notified. This
privilege may not be available to clients of some Firms or may be available
subject to conditions or limitations.

EXCHANGE PRIVILEGE. A shareholder may exchange shares at NAV with all Reserve
money-market funds and the Reserve Private Equity Series. A shareholder may
also exchange shares for shares of the GAM Funds, Inc. and The Kaufmann Fund,
Inc. and their respective portfolios. This exchange privilege may not be
available to clients of certain firms. A sales load will be charged on such an
exchange unless a waiver of the sales load applies. A shareholder may qualify
for waiver of the sales load if the shares of the Fund which are being
exchanged were acquired: (a) by a previous exchange for shares purchased with a
sales load, or (b) through reinvestment of dividends or distributions paid with
respect to the foregoing category of shares. Shares to be acquired in an
exchange must be registered for sale in the investor's state. The Fund reserves
the right to record all exchange requests.

<PAGE> 57

affiliates may be liable for any losses caused by their failure to employ
reasonable procedures to avoid unauthorized or fraudulent instructions. To
reduce such risk, the registration of the account into which shares are to be
exchanged must be identical to the registration of the originating account and
all telephone exchange requests will be recorded. The Fund may also require the
use of a password or other form of personal identification. In addition, each
Fund will provide written confirmation of exchange transactions. During periods
of volatile economic and market conditions, a shareholder may have difficulty
making an exchange request by telephone, in which case an exchange request
would have to be made in writing.

Exchanges of shares of one fund for another is a taxable event and may
result in a gain or loss for federal income tax purposes. The exchange
privilege described under this heading may not be available to clients of some
Firms and some Firms may impose conditions on their clients that are different
from those described in this Prospectus or SAI.

The exchange privilege may be modified or terminated at any time, or from
time to time, upon 60 days' notice to shareholders if such notice is required
by the 1940 Act. The notice period may be shorter if applicable law permits.
The Trust reserves the right to reject telephone or written requests submitted
in bulk on behalf of ten (10) or more accounts. A pattern of frequent exchanges
may be deemed by the Adviser to be abusive and contrary to the best interests
of the Fund's other shareholders and, at the Adviser's discretion, may be
limited by the Fund's refusal to accept additional purchases and/or exchanges
from the investor and/or the imposition of fees. The Funds do not have any
specific definition of what constitutes a pattern of frequent exchanges. Any
such restriction will be made on a prospective basis, upon notice to the
shareholder not later than ten (10) days following such shareholder's most
recent exchange. Telephone and written exchange requests must be received by
the Funds by 4:00 PM (Eastern time) on a regular business day to take effect
that day. Exchange requests received after 4:00 PM (Eastern time) will be
effected at the next calculated NAV. Additional information regarding the GAM
Funds, Inc. is available from GAM at 800-426-4685. Additional information
regarding The Kaufmann Fund, Inc. is available from Kaufmann at 800-261-0555.

SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the date
of payment postponed for more than seven (7) days only (a) when the Exchange is
closed (other than for customary closings), (b) when, as determined by the SEC,
trading on the Exchange is restricted or an emergency exists making it not
reasonably practicable to dispose of securities owned by a Fund or for it to
determine fairly the value of its net assets, or (c) for such periods as the
SEC may permit. If shares of a Fund are purchased by check or Reserve Automatic
Transfer, the Fund may delay transmittal of redemption proceeds until such time
as it has assured itself that good payment has been collected for the purchase
of such shares, which may generally take up to ten (10) business days.
Shareholder checks written against funds, which are not yet considered
collected, will be returned and a fee charged against the account. When a
purchase is made by wire and subsequently redeemed, the proceeds from such
redemptions normally will not be transmitted until two (2) business days after
the purchase.

SHAREHOLDER SERVICE POLICIES. The Fund's policies concerning the shareholder
services are subject to change from time to time. The Fund reserves the right
to change the $1,000 minimum account size subject to the $5 monthly service
charge or involuntary redemption. The Fund further reserves the right to impose
special service charges for services provided to individual shareholders
generally including, but not limited to, fees for returned checks, stop payment
orders on official checks and shareholder checks, and special research
services. The Fund's standard service charges as described in the Prospectus
are also subject to adjustment from time to time. In addition, the Fund
reserves the right to increase its minimum initial investment amount at any
time.

IF SHARES PURCHASED ARE TO BE PAID FOR BY WIRE AND THE WIRE IS NOT RECEIVED
BY THE FUND OR IF SHARES ARE PURCHASED BY CHECK, WHICH, AFTER DEPOSIT, IS
RETURNED UNPAID OR PROVES UNCOLLECTIBLE, THE PURCHASE MAY BE CANCELED OR
REDEEMED IMMEDIATELY. THE INVESTOR WHO GAVE NOTICE OF THE INTENDED WIRE OR
SUBMITTED THE CHECK WILL BE HELD FULLY RESPONSIBLE FOR ANY LOSSES INCURRED BY
THE FUND, THE INVESTMENT ADVISER OR THE DISTRIBUTOR. THE FUND MAY REDEEM SHARES
FROM ANY ACCOUNT REGISTERED IN THAT PURCHASER'S NAME AND APPLY THE PROCEEDS
THEREFROM TO

<PAGE> 58

THE PAYMENT OF ANY AMOUNTS DUE THE FUND, THE INVESTMENT ADVISER OR THE
DISTRIBUTOR.

PURCHASES AND REDEMPTIONS THROUGH OTHERS. Share purchases and redemptions may
also be made through brokers and financial institutions ("Firms"), which may
involve such Firms' own redemption minimums, services fees, and other
redemption requirements. Firms may provide varying arrangements for their
clients with respect to the purchase and redemption of Fund shares and may
arrange with their clients for other investment or administrative services.
Firms are responsible for the prompt transmission of purchase and redemption
orders. Some Firms which utilize a centralized purchase method for shares may
have an earlier cut-off for purchase orders than stated above and may establish
higher minimum investment requirements than set forth above. Some Firms may
independently establish and charge additional fees for their services, which
would reduce their clients' yield or return. Firms may also hold shares in
nominee or street name on behalf of their clients. In such instances, the
Fund's transfer agents will have no information about their accounts, which
will be available only from their Firm. Some of these firms participate in the
Fund's Plan of Distribution ("Plan"). Under the Plan, Firms may receive
compensation for recordkeeping and other services and assistance in
distributing Fund shares. In addition, certain privileges with respect to the
purchase and redemption of shares (such as check writing redemptions) or the
reinvestment of dividends may not be available through such Firms or may only
be available subject to certain conditions or limitations. Some Firms may
participate in a program allowing them access to their clients' accounts for
servicing including, without limitation, changes of registration and
dividend-payees and may perform functions such as generation of confirmations
and periodic statements and disbursement of cash dividends. The Prospectus
should be read in connection with such Firm's material regarding its fees and
services.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended ("the Code"), so
long as such qualification is in the best interests of shareholders. Such
qualification relieves the Fund of any liability for federal income tax to the
extent its earnings are distributed in accordance with applicable provisions of
the Code. If the Fund did not qualify as a regulated investment company, it
would be treated for tax purposes as an ordinary corporation subject to federal
income tax.

The Fund ordinarily declares dividends from each Fund's net investment
income on each day the Exchange and The Reserve Fund is open for business. Each
Fund's earnings for Saturdays, Sundays and holidays are declared as dividends
on the preceding business day. Dividends paid out of a Fund's investment
company taxable income will be taxable to a U.S. shareholder as ordinary
income. Because no portion of a Fund's income is expected to consist of
dividends paid by U.S. corporations, no portion of the dividends paid by the
Funds is expected to be eligible for the corporate dividends-received
deduction. Distributions of net capital gains, if any, designated as capital
gain dividends are taxable to individual shareholders, regardless of how long
the shareholder has held the Fund's shares, and are not eligible for the
dividends-received deduction. Shareholders receiving distributions in the form
of additional shares, rather than cash, generally will have a cost basis in
each such share equal to the NAV of a share of the Fund on the reinvestment
date. Shareholders will be notified annually as to the U.S. federal tax status
of distributions, and shareholders receiving distributions in the form of
additional shares will receive a report as to the NAV of those shares.

If you elect to receive dividends and distributions in cash, and your
dividend or distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest such
dividends or distributions and all future dividends and distributions payable
to you in additional Fund shares at NAV. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.

<PAGE> 59

Investments by a Fund in zero coupons generally will result in income to the
Fund equal to a portion of the excess of the face value of the 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.

Gain 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 the Fund generally will be
taxed as ordinary income to the extent of the accrued market discount on the
bonds, unless the Fund elects to include the market discount in income as it
accrues.

Gains or losses attributable to fluctuations in exchange rates which occur
between the time the Primary Fund accrues receivables or liabilities
denominated in a foreign currency, and the time the Primary Fund actually
collects such receivables or pays such liabilities, generally are treated as
ordinary income or ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency, gains or losses attributable to fluctuations
in the value of foreign currency between the date of acquisition of the
security and the date of disposition also are treated as ordinary gain or loss.
These gains or losses, referred to under the Code as "section 988" gains or
losses, may increase or decrease the amount of the Primary Fund's investment
company taxable income to be distributed to its shareholders as ordinary
income.

Income received by the Primary Fund from sources within foreign countries
may be subject to withholding and other taxes imposed by such countries.

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. Corporate shareholders and certain
other shareholders specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. 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.

The tax consequences to a foreign shareholder of an investment in a Fund may
be different from those described herein.

Investors are advised to consult their own tax advisor(s) with respect to
the particular tax consequences to them of an investment in a Fund.

YIELD INFORMATION

For the seven-day period ended May 31, 1999, the Primary Fund's yield was
_____% and its effective yield was ______%. For the seven-day period ended May
31, 1999, the U.S. Government Fund's yield was ____% and its effective yield
was ____%. For the seven-day period ended May 31, 1999, the U.S. Treasury
Fund's yield was ____% and its effective yield was _____%.

Yield is computed in accordance with a standardized method which involves
determining the net change in the value of a hypothetical pre-existing Fund
account having a balance of one share at the beginning of a seven calendar day
period for which the yield is to be quoted, dividing the net change by the
value of the account at the beginning of the period to obtain the base period
return, and annualizing the results (i.e., multiplying the base period return
by 365/7). The net change in the value of the account reflects the value of
additional shares purchased with dividends declared on the original share and
any such additional shares and fees that may be charged to shareholder
accounts, in proportion to the length of the base period and the Fund's average
account size, but does not include realized gains and losses or unrealized
appreciation and depreciation. Effective yield is computed by adding 1 to the
base period return (calculated as described above), raising the sum to a power
equal to 365 divided by 7, and subtracting 1 from the result.

<PAGE> 60

Yields will fluctuate and are not necessarily representative of future
results. You should remember that yield is a function of the type and quality
of the instruments in the portfolio, portfolio maturity and operating expenses.
Your principal in the Fund is not guaranteed. See above "Share Price: NAV" for
a discussion of the manner in which the Fund's price per share is determined.

Yield information is useful in reviewing each Fund's performance relative to
other funds that hold investments of similar quality. Because yields will
fluctuate, yield information may not provide a basis for comparison with bank
and thrift certificates of deposit which normally pay a fixed rate for a fixed
term and are subject to a penalty for withdrawals prior to maturity which will
reduce their return.

Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data various industry
publications. From time to time, the Funds in its advertising and sales
literature may refer to the growth of assets managed or administered by RMCI
over certain time periods.

GENERAL INFORMATION

JOINT OWNERSHIP. When an account is registered in the name of one person or
another, for example a husband or wife, either person is entitled to redeem
shares in the account. The Funds assume no responsibility to either owner for
actions taken by the other with respect to an account so registered. The
Application provides that persons who register their account indemnify and hold
the Funds harmless for actions taken by either party.

USE OF JOINT PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION. Although each
Fund is offering only its own shares, it is possible that a Fund might become
liable for any misstatement in the Prospectus and SAI about the other Funds.
However, each Fund has acknowledged that it, and not any of the other Funds, is
liable for any material misstatement or omission about it in the Prospectus or
SAI.

REPORTS AND STATEMENTS. Shareholders receive an Annual Report containing
audited financial statements and an unaudited Semi-Annual Report. An account
statement is sent to each shareholder at least quarterly. Shareholders who are
clients of some Firms will receive an account statement combining transactions
in Fund shares with account statements covering other brokerage or mutual fund
accounts. Shareholders have a duty to examine their account statement(s) and
report any discrepancies to The Reserve Funds immediately. Failure to do so
could result in the shareholder suffering a loss. Further, shareholders are
advised to retain account statements.

RESERVE EASY ACCESS. Easy Access is The Reserve Funds' 24-hour toll-free
telephone service that lets customers use a touch-tone phone for a variety of
options including yields, account balances, check reorders, touch tone bill
payment 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, 1250 Broadway, New York,
NY 10001-3701 or 800-637-1700.

RATINGS

The following are the rating designations of short-term instruments and their
respective meanings.

STANDARD & POOR'S CORPORATION. A-1: This designation is the highest category of
S&P and indicates that the degree of safety regarding timely payment is strong.
Those short-term obligations that are extremely strong characteristics will be
denoted with a plus (+).

<PAGE> 61

margins in earnings coverage of fixed financial charges and high internal cash
generation; and well-established access to a range of financial markets and
assured sources of alternative liquidity.

There are three categories for short-term obligations that define an investment
grade situation designated Moody's Investment Grade as MIG1 (best) through
MIG3. MIG1 denotes best quality, i.e., there is a strong protection by
established cash flows, superior liquidity support or demonstrated broad-based
market access for re-financing. MIG2 denotes high quality, the margins of
protection are ample but not as large as MIG1.

DUFF & PHELPS CREDIT RATING CO. Duff-1: Very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor. Those issues determined to have the highest
certainty of timely payment and whose safety is just below risk-free U.S.
Treasury short-term obligations will be denoted with a plus (+) sign
designation. Those issues determined to have a high certainty of timely payment
and whose risk factors are very small will be denoted with a minus (-) sign
designation.

FITCH IBCA. F1: This designation indicates the strongest credit quality. Issues
assigned this rating reflect an assurance of timely payment. Those obligations
with an exceptionally strong credit quality will be denoted with a plus (+)
sign. Issues assigned the rating of F1+ are regarded as having the strongest
degree assurance for timely payment.

FINANCIAL HIGHLIGHTS

Financial Statements (audited) for The Reserve Fund for the fiscal year ended
May 31, 1999, including notes thereto, are incorporated by reference in the SAI
from the Trust's Annual Report to Shareholders dated May 31, 1999 filed with
the SEC on July, ____ 1999.

<PAGE> 62
STRATEGIST MONEY-MARKET FUND
1250 BROADWAY, NEW YORK, NY 10001-3701
212-401-5500 - 800-637-1700

--------------------------------------------

24-HOUR YIELD AND BALANCE INFORMATION
NATIONWIDE 800-637-1700 - WWW.RESERVEFUNDS.COM

STRATEGIST MONEY-MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information ("SAI") describes the Strategist
Money-Market Fund ("the Strategist Fund" or "the Fund") which is one series
(fund) of The Reserve Fund ("Trust"). The Reserve Fund was originally
organized as a Maryland corporation on February 1, 1970 and re-organized on
October 28, 1986 as a Massachusetts business trust and is an open-end
investment company, commonly known as a money-market mutual fund. At the date
of the Prospectus and SAI, there were four separate series (funds) authorized
and outstanding: Primary, U.S. Government, U.S. Treasury and Strategist Funds.
Additional series (funds) may be added in the future by the Board of Trustees.
This Statement is not a Prospectus, but provides detailed information to
supplement the Prospectus dated July 31, 1999 and should be read in conjunction
with it. A copy of the Prospectus may be obtained without charge by writing or
calling the Fund at the above address or telephone number. The Securities and
Exchange Commission ("SEC") maintains a web site (http://www.sec.gov) where you
can download the SAI, the Prospectus, material incorporated by reference &
other information regarding the Fund. This Statement is dated July 31, 1999.

<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
----------------- ----
<S> <C>
Description of Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Management of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Management, Distribution and Custodian Agreements . . . . . . 8
Information About the Trust . . . . . . . . . . . . . . . . . . . . . . 10
How to Buy and Sell Shares . . . . . . . . . . . . . . . . . . . . . . 11
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . 16
Yield Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>

SHARES OF THE FUNDS ARE NEITHER GUARANTEED NOR INSURED BY THE U.S. GOVERNMENT
AND THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE.

1
<PAGE> 63
DESCRIPTION OF THE FUND

The primary investment objective of the Fund is to seek as high a level of
current income as is consistent with preservation of capital and liquidity.
However, achievement of this objective is not guaranteed. Investment in the
Fund is not insured or guaranteed by the U.S. government, Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks
to preserve the value of your investment at $1.00 per share, it is possible to
lose money investing in the Fund.

The Reserve Fund is a non-diversified mutual fund. However, the Fund intends
to comply with the diversification requirement of Rule 2a-7 under the 1940 Act
which generally limits a money-market fund to investing no more than 5% of its
total assets in securities of any one issuer, except U.S. government
securities, as defined below.

Reserve Management Co., Inc. ("RMCI") serves as the Fund's Investment Adviser.
Resrv Partners, Inc. ("RESRV"), which is a wholly owned subsidiary of RMCI, is
the distributor of the Fund's shares. RESRV is located at 1250 Broadway, New
York, NY 10001-3701.

The following information supplements and should be read in conjunction with
the Prospectus.

SUPPLEMENTAL INVESTMENT POLICIES. The Fund's investment objective and the
following investment policies may not be changed without the affirmative vote
of a majority of the outstanding shares of a Fund. A majority of the
outstanding shares of the Fund means the vote of the lesser of (i) 67% or more
of the shares of the Fund present at a meeting, if the holders of more than 50%
of the outstanding shares of the Fund are present or represented by proxy, or
(ii) more than 50% of the outstanding shares of the Fund. A Fund cannot:

(1) invest in any security other than those discussed herein or in the
Prospectus;
(2) borrow money except as a temporary or emergency measure (but not for
the purpose of purchasing securities), and not in an amount to exceed
5% of the value of its total assets;
(3) issue senior securities except in compliance with the Investment
Company Act of 1940 ("1940 Act");
(4) act as an underwriter with respect to the securities of others as
defined under federal securities laws;
(5) concentrate investments in any particular industry except: (a) to the
extent that its investments are concentrated exclusively in municipal
obligations, U.S. Governments or instruments secured by such
obligations, and (b) for the Strategist Fund, which may invest more
than 25% of its assets in banking;
(6) purchase, sell or otherwise invest in real estate or commodities or
commodity contracts; however, the Fund may purchase municipal
obligations secured by interests in real estate;
(7) lend more than 33 1/3% of the value of its total assets except to the
extent its investments are considered loans;
(8) sell any security short or write, sell or purchase any futures
contract or put or call option; provided, however, the Fund shall have
the authority to purchase municipal obligations subject to a stand-by
commitment, at the Fund's option;
(9) invest in the securities of other investment companies except in
compliance with 1940 Act; and
(10) make investments on a margin basis.

Notwithstanding the foregoing investment restrictions, the Fund may invest
substantially all of its assets in another open-end investment company with
substantially the same investment objective as the Fund.

OTHER POLICIES. The Strategist Fund may, to increase their income, lend their
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, be at least equal to the value of
the loaned securities plus accrued interest and must consist of cash or
securities of the U.S. government (or its agencies

2
<PAGE> 64
or instrumentalities). The Fund receives an amount equal to the interest on
loaned securities and also receive negotiated loan fees. The Fund may also pay
reasonable finders, custodian and administrative fees. Loan arrangements made
by the Fund will comply with all other applicable regulatory requirements
including the rules of the New York Stock Exchange ("NYSE or Exchange"), which
require the borrower, after notice, to redeliver the securities within the
normal settlement time of three (3) business days.

RISKS OF INVESTING IN THE FUND. Money-market securities are high-quality,
short-term securities that pay a fixed, variable or floating interest rate.
Securities are often specifically structured so that they are eligible
investments for a money-market fund. For example, in order to satisfy the
maturity restrictions for a money market fund, some money-market securities
have demand or put features which have the effect of shortening the security's
maturity. Further, the principal risk factors associated with investment in
the Fund are the risk of fluctuations in short-term interest rates, the risk of
default among one or more issuers of securities which comprise the Fund's
assets; consequently when you sell (redeem) your shares of the Fund, they could
be worth more or less than what you paid for them. In addition to the general
investment risks of the Fund that are common to and may affect the money-market
industry as a whole, there are risks specific to the types of securities held.

U.S. GOVERNMENT SECURITIES. U.S. government securities include a variety of
instruments which are issued or guaranteed by the U.S. Treasury, various
agencies of the federal government and various instrumentalitites which have
been established or sponsored by the U.S. government, and certain interests in
the foregoing types of securities such as U.S. Treasury STRIPS. U.S.
government securities include direct obligations of the U.S. Treasury (such as
Treasury bills, Treasury notes, and Treasury bonds). Obligations such as
securities issued by the Government National Mortgage Association ("GNMA"), the
Federal Home Loan Mortgage Corporation ("FHLMC"), the Federal National Mortgage
Association ("FNMA"), the Student Loan Marketing Association ("SLMA") and the
Federal Home Loan Bank ("FHLB") are also considered U.S. government securities.
Some obligations of agencies and instrumentalities of the U.S. government, such
as GNMA, are supported by the full faith and credit of the U.S. government
Other securities, such as obligations issued by FNMA and SLMA, are supported by
the right of the issuer to borrow from the U.S. Treasury; and others, such as
obligations issued by FHLB and FHLMC, are supported only by the credit of the
agency or instrumentality issuing the obligation. In the case of securities not
backed by the full faith and credit of the U.S., the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment.

BANK OBLIGATIONS. The Strategist Fund may invest in bank obligations that
include certificates of deposit, bankers' acceptances, letters of credit and
time deposits. A certificate of deposit is a negotiable certificate
representing a financial institution's obligation to repay funds deposited with
it, earning a specified rate of interest over a given period. A bankers'
acceptance is a negotiable obligation of a bank to pay a draft which has been
drawn on it by a customer. A time deposit is a non-negotiable deposit in a
financial institution earning a specified interest rate over a given period of
time. A letter of credit is an unconditional guarantee by the issuing bank to
pay principal and interest on a note a corporation has issued.

3
<PAGE> 65
generally required to maintain specified levels of reserves and are subject to
other regulations designed to promote financial soundness.

FOREIGN BANKS. The Strategist Fund may invest in obligations of foreign banks
and foreign branches of U.S and foreign banks. Investment in these securities
involve risks which 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. Furthermore, foreign banks are not regulated by U.S.
banking authorities and are generally not bound by financial reporting
standards comparable to U.S. banks.

MUNICIPAL OBLIGATIONS. The Strategist Fund may invest in municipal
obligations, the interest on these municipal obligations is not exempt from
federal income tax. They may be issued to raise money for various public
purposes such as constructing public facilities. Certain types of municipal
obligations are issued to obtain funding for privately operated facilities.
General obligation bonds and notes are backed by the taxing power of the
issuer. Revenue bonds and notes are backed by the revenues of a project or
facility such as tolls from a toll road or, in some cases, from the proceeds of
a special excise tax, but not by the general taxing power. Industrial
development revenue bonds and notes are a specific type of revenue bond or note
backed by the credit of a private issuer. Municipal obligations bear fixed,
variable or floating rates of interest.

The Strategist Fund will purchase municipal securities which are rated MIG1
or MIG2 by Moody's Investor Services, Inc. ("Moody's"), SP-1 or SP-2 by
Standard & Poor's Corporation ("S&P") or the equivalent. Municipal obligations
which are not rated may also be purchased provided such securities are
determined to be of comparable quality by RMCI to those rated securities in
which the Fund may invest, pursuant to guidelines established by their Boards
of Trustees.

Municipal obligations are sometimes offered on a "when-issued" or delayed
delivery basis. There is no limit on the Primary Fund's ability to purchase
municipal securities on a when-issued basis. At the time the Fund makes the
commitment to purchase a municipal obligation on a when-issued basis, it will
record the transaction and reflect the value of the security in determining its
net asset value ("NAV"). The Fund will also maintain readily marketable assets
at least equal in value to commitments for when-issued securities specifically
for the settlement of such commitments. RMCI does not believe that the Fund's
NAV or income will be adversely affected by the purchase of municipal
obligations on a when-issued basis.

COMMERCIAL PAPER. The Strategist Fund has never purchased commercial paper and
has no current interest of doing so. However, it may purchase commercial paper
consisting only of short-term, unsecured promissory notes issued to finance
short-term credit needs which are direct obligations issued by domestic
entities. The other corporate obligations in which the Primary Fund may invest
consist of high-quality, short-term bonds and notes (including variable amount
master demand notes) issued by domestic corporations, including banks.

REPURCHASE AND REVERSE REPURCHASE AGREEMENTS. A repurchase agreement ("repo")
transaction occurs when the Fund purchases and simultaneously contracts to
resell securities at fixed prices. The Fund will limit repos to those
financial institutions and securities dealers who are deemed credit-worthy
pursuant to guidelines established by the Fund's Board of Trustees
("Trustees"). Repos are considered by the SEC staff to be loans by the Fund
that enters into them. Repos could involve risks in the event of a default of
the repo counter- party to the agreement, including possible delays, losses or
restrictions upon the Fund's ability to dispose of the underlying securities.
In an attempt to reduce the risk of incurring a loss on a repo, RMCI will
follow procedures intended to provide that all repos are at least 100%
collateralized as to principal and interest. A Fund will make payment for such
instruments only upon their physical delivery to, or evidence of their
book-entry transfer to, the account of the Fund's Custodian. If the seller
defaults on the repurchase obligation, the Fund could incur a loss and may
incur costs in disposing of the

4
<PAGE> 66
underlying security. A Fund will not hold more than 10% of its net assets in
illiquid securities, including repurchase agreements, providing for settlement
in more than seven (7) days after notice.

The Strategist Fund may sell securities in a reverse repo when it is
considered advantageous, such as to cover net redemptions or to avoid a
premature outright sale of its portfolio securities. In a typical reverse repo
transaction, the seller (Fund) retains the right to receive interest and
principal payments on the security, but transfers title to and possession of it
to a second party in return for receiving a percentage of its value. By
repaying the repo counterparty the value received plus interest, the Fund
repurchases the transferred security. It is the Fund's policy that entering
into a reverse repo transaction will be for temporary purposes only and, when
aggregated with other borrowings, may not exceed 5% of the value of the total
assets of the Fund at the time of the transaction.

Subject to the overall supervision of the officers of the Fund and the
Trustees, RMCI places all orders for the purchase and sale of the Fund's
investment securities. In the purchase and sale of investment securities, RMCI
will seek to obtain prompt and reliable execution of orders at the most
favorable prices and yields. In determining best price and execution, RMCI may
take into account a dealer's operational and financial capabilities, the type
of transaction involved, the dealer's general relationship with RMCI, and any
statistical, research, or other services provided by the dealer to RMCI. 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 by RMCI. Brokers or dealers who
execute investment securities transactions may also sell shares of the Fund;
however, any such sales will be neither a qualifying nor disqualifying factor
in the selection of brokers or dealers.

When orders to purchase or sell the same security on identical terms are
simultaneously placed for the Fund and other investment companies managed by
RMCI, the transactions are allocated as to amount in accordance with each order
placed for the Fund. However, RMCI may not always be able to purchase or sell
the same security on identical terms for all investment companies affected.

MANAGEMENT OF THE TRUST

The Trustees are responsible for the management and supervision of the Trust.
The Trustees approve all significant agreements between the Fund and those
companies that furnish services to the Fund.

Trustees and executive officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below:

++BRUCE R. BENT, 61, President, Treasurer and Trustee, 1250 Broadway, New
York, NY 10001-3701.

5
<PAGE> 67
++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, RNYTET, RTET and RPES.

+RICHARD BASSUK, 57, Trustee, c/o The Singer & Bassuk Organization, 767 Third
Avenue, 28th Floor, New York, NY 10017.

+EDWIN EHLERT, JR., 67, Trustee, 125 Elm Street, Westfield, NJ 07091.

+HENRI W. EMMET, 72, Trustee, 1535 Presidential Drive, Apt. 4A, Columbus, OH
43212.

+DONALD J. HARRINGTON, C.M., 53, Trustee, St. John's University, Jamaica, NY
11439.

The Reverend Harrington is President of St. John's University, NY, a Trustee
of RF, RIT, RTET, RNYTET and RPES and a Director of Bear Stearns Companies,
Inc. since 1993.

+DIANA P. HERRMANN, 40, Trustee, 380 Madison Avenue, Suite 2300, New York, NY
10017.

+WILLIAM E. VIKLUND, 58, Trustee, 110 Grist Mill Lane, Plandome Manor, NY
11030-1110.

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.

JAMES M. FREISEN, 41, Controller, 1250 Broadway, New York, NY 10001-3701.

6
<PAGE> 68
Mr. Freisen joined The Reserve Funds in 1999 and is Controller of RF, RIT,
RTET RNYTET, RPES. Before joining The Reserve Funds in 1999, Mr. Freisen was
an Assistant Vice President at Paine Webber from August 1998 until February
1999. 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.

MARYKATHLEEN FOYNES, 29, Counsel and Secretary, 1250 Broadway, New York, NY
10001-3701.

++Interested Trustee within the meaning of the Investment Company Act of 1940.

[As of June 30, 1999, the Trust's records reflect that the Trustees and
officers directly or indirectly as a group owned less than 1% of the
outstanding shares of the Fund. The Trust does not pay any pension or
retirement benefits to its Trustees.]

COMPENSATION TABLE
FOR FISCAL YEAR ENDED MAY 31, 1999

<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE FROM THE FUND AND FUND COMPLEX
COMPENSATION (4 ADDITIONAL TRUSTS)
NAME OF TRUSTEE, POSITION FROM FUND PAID TO TRUSTEE
------------------------- --------- ---------------
<S> <C> <C>
Bruce R. Bent, President and Trustee $ 0 $ 0
Bruce R. Bent II, SVP and Trustee $ 0 $ 0
Richard Bassuk, Trustee $ $
--------- ----------
Edwin Ehlert, Jr., Trustee $ $
--------- ----------
Henri W. Emmet, Trustee $ $
--------- ----------
Rev. Donald J. Harrington, Trustee $ $
--------- ----------
Diana P. Herrmann $ $
--------- ----------
William E. Viklund $ $
--------- ----------
</TABLE>

The following executive officers of the Fund had allocated cash remuneration in
excess of $60,000 during the last fiscal year ending May 31, 1999 for services
rendered to the Fund:

<TABLE>
<CAPTION>
ESTIMATED ANNUAL
AGGREGATE BENEFITS UPON
NAME CAPACITY REMUNERATION RETIREMENT
---- -------- ----------------- ----------
<S> <C> <C> <C>
Bruce R. Bent President $ $
---------- ------------
Bruce R. Bent II Sr. Vice President $ $
----------- -------------
Arthur T. Bent III Vice President $ $
---------- -------------
MaryKathleen Foynes Counsel $ $
---------- -------------
James M. Freisen Controller $ $
---------- -------------
</TABLE>

7
<PAGE> 69
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. A Trustee may be removed at any
meeting of shareholders by a vote of a majority of the Fund's shareholders.

[As of June 30, 1999, no person was known by the Fund to own of record or
beneficially 5% or more of the outstanding shares of the Fund.]

INVESTMENT MANAGEMENT, DISTRIBUTION
AND CUSTODIAN AGREEMENTS

INVESTMENT MANAGEMENT AGREEMENT. Reserve Management Company, Inc. ("RMCI" or
"Adviser"), 1250 Broadway, New York, NY 10001-3701, a registered investment
adviser, manages the Fund and provides them with investment advice. As a
result of recent proxy votes, the Fund has entered into a new Investment
Management Agreement with the Adviser, which is substantially similar to the
Investment Management Agreement previously in effect. The new Investment
Management Agreements became effective __________, 1999. Under the Investment
Management Agreement, RMCI manages the Fund's investment in accordance with the
Fund's investment objective and policies, subject to overall approval by the
Trustees.

Presently, under the terms of the Investment Management Agreements with the
Fund, the Fund pays RMCI a comprehensive management fee at an annual rate of
0.80% of average daily net assets. RMCI pays all employee and ordinary
operating costs of the Fund. Excluded from the definition of ordinary
operating costs are interest, taxes, brokerage fees, extraordinary legal and
accounting fees and expenses, and fees of the disinterested Trustees, for which
each Fund in the fund complex it pays its direct or allocated share.

For the fiscal years ended May 31, 1997, 1998 and 1999, RMCI received
management fees under the Investment Management Agreements previously in
effect. For the fiscal years ended May 31, 1997, 1998 and 1999, RMCI received
management fees of $8,976,244, $10,995,380, and $_________ respectively, from
the Primary Fund; $2,858,951, $3,181,655, and $_________, respectively, from
the U.S. Government Fund; and, for the fiscal year ended May 31, 1997, 1996
and 1999 RMCI received a comprehensive management fee of $988,183, $1,329,283
and $___________ respectively, which reflects a waiver of 0.20% of average
daily net assets, from the U.S. Treasury Fund.

From time to time, RMCI may waive receipt of its fees and/or voluntarily
assume certain expenses of the Fund that would have the effect of lowering the
Fund expense ratio and increasing yield to investors at the time such amounts
are assumed or waived, as the case may be. RMCI may also make such advertising
and promotional expenditures, using its own resources, as it from time to time
deems appropriate.

The Investment Management Agreements for the Fund was duly approved by
shareholders in 1999, and may be renewed annually if specifically approved by
the Trustees and by the vote of a majority of the disinterested Trustees cast
in person at a meeting called for the purpose of voting on such renewal. The
Agreements terminate automatically upon their assignment and may be terminated
without penalty upon sixty (60) days' written notice by a vote of the Trustees
or by vote of a majority of outstanding voting shares of the Fund or by RMCI.

DISTRIBUTION AGREEMENT. The Fund's Distributor is RESRV. The Fund has
authorized the Distributor, in connection with their sale of Fund shares, to
give only such information and to make only such statements and representations
as are contained in the Prospectus. Sales may be made only by the Prospectus.
The Distributor may offer and sell shares of the Fund pursuant to a separate
Prospectus applicable to such Distributor. The Distributor is "principal
underwriters" for the Fund within the meaning of the Investment Company Act of
1940, and as such act as agent in arranging for the continuous offering of Fund
shares. The Distributor has the right to enter into selected dealer agreements
with brokers or other persons of their choice for the sale of Fund shares.
Parties to selected dealer agreements may receive assistance payments if they
qualify for such payments under the Plan of Distribution described below.
RESRV's principal business is the distribution of mutual fund shares. No
Distributor has retained underwriting commissions on the sale of Fund shares
during the last four fiscal years. During the fiscal year ended May 31, 1999,
distribution assistance payments were made to RESRV in the amount of $____ .

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<PAGE> 70
The Distribution Agreement may be renewed annually if specifically approved
by the Board of Trustees, and by the vote of a majority of the disinterested
Trustees cast in person at a meeting called for the purpose of voting on such
approval or by the vote of a majority of the outstanding voting securities of
the Fund.

PLAN OF DISTRIBUTION. The Fund maintains a Plan of Distribution ("Plan") and
related agreements, as amended, under Rule 12b-1 of the Investment Company Act
of 1940, which provides that investment companies may pay distribution
expenses, directly or indirectly, pursuant to a Plan adopted by the investment
company's Board and approved by its shareholders. Under the Plan, the Fund
makes assistance payments to brokers, financial institutions and other
financial intermediaries ("Firms") for shareholder accounts ("qualified
accounts") at an annual rate of 0.20 % of the average daily NAV of all Firms'
qualified accounts. Such distribution assistance may include, but is not
limited to, establishment of shareholder accounts, delivering prospectuses to
prospective investors and processing automatic investment in Fund shares of
client account balances. Substantially all such monies (together with
significant amounts from RMCI's own resources) are paid by RMCI to payees for
their distribution assistance or administrative services, with any remaining
amounts being used to partially defray other expenses incurred by RMCI in
distributing Fund shares. In addition to the amounts required by the Plan,
RMCI may, at its discretion, pay additional amounts from its resources. The
rate of any additional amounts that may be paid will be based upon RESRV and
RMCI's analysis of the contribution that a Firm makes to the Fund by increasing
assets under management, and reducing expense ratios and the cost to the Fund
if such services were provided directly by the Fund or other authorized persons
and RESRV and RMCI will also consider the need to respond to competitive offers
of others, which could result in assets being withdrawn from the Fund and an
increase in the expense ratio for the Fund. RMCI may elect to retain a portion
of the distribution assistance payments to pay for sales materials or other
promotional activities. The Trustees have determined that there is a
reasonable likelihood the Plan will benefit the Fund and its shareholders.

During the fiscal year ended May 31, 1999, $_________ was paid under the Plan
by the Strategist Fund. Any such payments are intended to benefit the Fund by
maintaining or increasing net assets to permit economies of scale in providing
services to shareholders and to contribute to the stability of such shareholder
services. During the fiscal year ended May 31, 1999, substantially all
payments made by the Fund were to brokers or other financial institutions and
intermediaries for share balances in the Fund.

The Plan and related agreements were duly approved by shareholders and may be
terminated at any time by a vote of the majority of the outstanding voting
securities of the Fund, or by vote of the disinterested Trustees. The Plan and
related agreements may be renewed from year to year, if approved by the vote of
a majority of the disinterested Trustees cast in person at a meeting called for
the purpose of voting on such renewal. 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 vote of
the Board of Trustees and of the disinterested Trustees, cast in person at a
meeting called for the purpose of such vote.

TRANSFER AGENT AND DIVIDEND-PAYING AGENT. The Reserve Fund acts as its own
transfer agent and dividend- paying agent.

CUSTODIAN, INDEPENDENT ACCOUNTANT AND COUNSEL. The Chase Manhattan Bank, 4 New
York Plaza, New York, NY 10004 is Custodian of the Fund's securities and cash
pursuant to a Custodian Agreement. The Bank of New York, 1 Wall Street, New
York, NY 10286 and Custodial Trust Company, 101 Carnegie Center, Princeton, NJ
08540 are Custodians for the Fund for limited purposes in connection with
certain repurchase agreements. The Custodian has no part in determining the
investment policies of the Fund or which securities are to be purchased or sold
by the Fund. PricewaterhouseCoopers, LLP, 1301 Avenue of the Americas, New
York, NY 10019 is the Fund's independent accountant. Dechert, Price & Rhoads,
1775 Eye Street NW, Washington, DC 20006, is the Fund's outside counsel and has
rendered its opinion as to certain legal matters regarding the due
authorization and valid issuance of the shares being sold pursuant to the
Fund's Prospectus.

9
<PAGE> 71
..

INFORMATION ABOUT THE TRUST

The Reserve Funds' Declaration of Trust permits the Trust to issue an
unlimited number of full and fractional shares of beneficial interest that may
be issued in any number of series (funds) and/or classes. Shares issued will
be fully paid and non-assessable and will have no preemptive rights. The
shareholders of the Fund are entitled to a full vote for each full share held
(and fractional votes for fractional shares) and have equal rights to earnings,
dividends, redemptions and in the net assets of their Fund upon liquidation.
The Trustees do not intend to hold annual meetings but 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 change the fundamental
investment policies) or by the Declaration of Trust.

Further, the Trust is allowed to divide or combine the shares into a greater
or lesser number of shares without thereby changing the proportionate
beneficial interests in the Fund. If they deem it advisable and in the best
interests of shareholders, the Trustees may classify or reclassify any unissued
shares of the Fund by setting or changing the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms and conditions of redemption of the stock. Any
changes would be required to comply with all applicable state and federal
securities laws. These currently require that each class be preferred over all
other classes in respect to assets specifically allocated to such class. It is
anticipated that, under most circumstances, the rights of any additional
classes would be comparable, unless otherwise required, to respond to the
particular situation. Upon liquidation of any Fund, shareholders are entitled
to share, pro rata, in the net assets of their respective Funds available for
distribution to such shareholders. It is possible, although considered highly
unlikely in view of the method of operation of mutual funds, that should the
assets of one class of shares be insufficient to satisfy its liabilities, the
assets of another class could be subject to claims arising from the operations
of the first class of shares. No changes can be made to the Fund'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 the respective Funds, equal rights to all
dividends and other distributions, and one vote for all purposes. Shares of
all classes vote together for the election of Trustees and have non-cumulative
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 Fund intends to conduct their operations in such a
way as to avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Fund.

As stated previously, to date, the Board has authorized the creation of four
series (funds): Primary, U.S. Government, U.S. Treasury and Strategist Funds.
All consideration received by the Trust for shares of one of the Fund and all
assets in which such consideration is invested will belong to that Fund
(subject only to rights of creditors of the Fund) and will be subject to the
liabilities related thereto. The income attributable to, and the expenses of,
one series are treated separately from those of the other series. The Trust
has the ability to create, from time to time, new series without shareholder
approval.

Under Massachusetts law, the shareholders and trustees of a business trust
can be personally liable for the Fund's obligations unless, as in this
instance, the Declaration of Trust provides, in substance, that no shareholder
or trustee shall be personally liable for the Fund, and each investment
portfolio's, obligations to third parties, and requires that every written
contract made by the Fund contain a provision to that effect. The Declaration
of Trust also requires the Fund to indemnify its shareholders and Trustees
against such liabilities and any related claims or expenses.

10
<PAGE> 72
SEC regulations provide that if a class is separately affected by a matter
requiring shareholder vote (election of Trustees, ratification of independent
auditor selection, and approval of an underwriting agreement are not considered
to have such separate effect and may be voted upon by the shareholders of the
Fund as a whole), each class will vote separately on such matters as approval
of the Investment Management Agreement, material amendments to the Plan of
Distribution, and changes in the fundamental policies of the Fund. These items
require approval by a majority of the affected shareholders. For this purpose
a "majority" is constituted by either 50 percent of all shares voting as a
group or 67 percent of the shares voted as a group at an annual meeting of
shareholders at which at least 50 percent of the shares of each group are
represented.

HOW TO BUY AND SELL SHARES

PURCHASES - GENERAL. Shares of the Fund are sold without a sales charge. You
may be charged a fee if you effect transactions in shares of the Fund through a
securities dealer, bank or other financial institution. The Fund reserves the
right to reject any purchase order.

The minimum initial investment in the Fund is $20,000 with minimum subsequent
investment of $1,000. The initial investment must be accompanied by an Account
Application or equivalent information. Checks drawn on foreign banks are
normally not accepted by the Fund. In addition, the Fund does not accept cash
investments or travellers or third party checks. The Fund reserves the right
to reject any investment in the Fund for any reason and may, at any time,
suspend all new investment in the Fund. Shares also may be purchased through
Reserve Automatic Asset Builder (see below). In addition, the Fund reserves
the right to change the minimum investment amount at any time.

Each Fund's shares are sold on a continuous basis at the NAV per share.
Checks and wires which do not correctly identify the account to be credited may
be returned or delay the purchase of shares. If you do not specify the account
number and Fund you wish to invest in, all money sent will be invested in the
U.S. Government Fund. 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 Fund must be notified before
2:00 PM (Eastern time) 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) will be considered received the next business day.
Investors will be charged a fee for any check that does not clear. The Fund
will only give credit for investments in the Fund on the day they become
available in federal funds. A Federal Reserve wire system transfer ("Fed
wire") is the only type of wire transfer that is reliably available in federal
funds on the day sent. For a Fed wire to receive same day credit, the Fund must
be notified before 2:00 PM (Eastern time) of the amount to be transmitted and
the account to be credited. Checks and other items submitted to the Fund for
investment are only accepted when submitted in proper form (i.e., receipt of
all necessary information, signatures and documentation), denominated in U.S.
dollars, and are credited to shareholder accounts only upon their conversion
into federal funds, which normally takes one or two business days following
receipt. Checks delivered to the Fund after 2:00 PM (Eastern time) are
considered received on the following business day.

SHARE PRICE: NAV. The valuation of the Fund's portfolio securities is based
upon their amortized cost, which does not take into account unrealized gains or
losses. This involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, there may
be some periods during which value, as determined by amortized cost, is higher
or lower than the price the Fund would receive if it sold the instrument.

11
<PAGE> 73
The Fund's Board has established, as a particular responsibility within the
overall duty of care owed to the Fund's investors, procedures reasonably
designed to stabilize the Fund's price per share as computed for the purpose of
purchases and redemptions at $1.00. Such procedures include review of the
Fund's portfolio holdings by the Board, at such intervals as it may deem
appropriate, to determine whether the Fund's NAV calculated by using available
market quotations or market equivalents deviates from $1.00 per share based on
amortized cost. In such review, investments for which market quotations are
readily available will be valued at the most recent comparable maturity,
quality and type, as obtained from one or more of the major market makers for
the securities to be valued. Other investments and assets will be valued at
fair value as determined in good faith by the Board.

The extent of any deviation between the Fund's NAV based upon available
market quotations or market equivalents and $1.00 per share based on amortized
cost will be examined by the Fund's Board. If such deviation exceeds 1/4 of
1%, the Board will consider promptly what action, if any, will be initiated
(The Reserve Fund is required by the SEC to contact the Board if the deviation
is 1/2 of 1%). In the event the Board determines that a deviation exists which
may result in material dilution or other unfair results to investors or
existing shareholders, it has agreed to take such corrective action as it
regards as necessary and appropriate, including: selling Fund instruments prior
to maturity to realize capital gains or losses or to shorten average Fund
maturity; withholding dividends or paying distributions from capital gains;
redeeming shares in kind; or establishing a NAV per share by using available
market quotations. Shares are offered at their NAV, which is calculated at the
close of each business day as defined in the Prospectus. The NAV is not
calculated on days the Exchange is closed for trading and on certain regional
banking holidays. The holidays (as observed) on which the Exchange and The
Reserve Fund are closed currently are: New Year's Day, Martin Luther King Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. In addition, The Reserve Fund is closed on
Columbus Day and Veterans Day. The NAV of the Fund is normally maintained at
$1.00 per share. No Fund can guarantee that its NAV will always remain at
$1.00 per share although the Fund has managed to do so since inception.

The NAV per share of the Fund is computed by dividing the value of the net
assets of the Fund (i.e., the value of its assets less liabilities) by the
total number of shares of such Fund outstanding. The Board of Trustees have
determined the most practical method currently available for valuing investment
securities is the amortized cost method. This procedure values a money-market
fund's portfolio securities, which does not take into account unrealized gains
and losses. As a result, portfolio securities are valued at their acquisition
cost, adjusted over time based on the discounts or premiums reflected in their
purchase price. This method of valuation is designed to permit a fund to be
able to maintain a stable NAV.

SHARE CERTIFICATES. Share certificates are not issued by the Fund.

RESERVE AUTOMATIC ASSET-BUILDER PLAN. If you have an account, you may purchase
shares of the Fund ($25 suggested minimum) from a checking, NOW, or bank
money-market deposit account; from a U.S. government distribution ($25
suggested minimum) such as a social security, federal salary, or certain
veterans' benefits, or other payment from the federal government. You may also
make arrangements for the direct deposit of your payroll into your Fund
account. Please call The Reserve Funds at 800-637-1700 for an application.

12
<PAGE> 74
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 the respective Fund. The election is irrevocable pursuant to
rules and regulations under the 1940 Act unless withdrawal is permitted by
order of the SEC. Redemptions in kind are further limited by the Fund's
practice of holding instruments typically with a minimum value of $1,000,000
and its intention to redeem in kind only when necessary to reduce a disparity
between amortized cost and market value. In disposing of such securities, an
investor might incur transaction costs and on the date of disposition might
receive an amount less than the NAV of the redemption.

WRITTEN AND TELEPHONE REDEMPTION REQUESTS. 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
signature(s) guaranteed. Changes in registration or authorized signatories may
require additional documentation. Write a letter of instruction which states:
the name(s) and signature(s) of all account holders, account number, Fund name,
the dollar amount you want to sell, how and where to send the proceeds,
necessary signature(s) guaranteed, and if you are redeeming your IRA, please
note the applicable withholding requirements.

The Fund will waive the signature requirement on a redemption request 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 for
the previous 30 days. Signature guarantees are designed to protect both you
and the Fund from fraud. Signature guarantees can be obtained from most banks,
credit unions or savings associations, or from broker/dealers, national
securities exchanges or clearing agencies deemed eligible by the SEC.
Guarantees must be signed by an authorized signatory of the guarantor and
"Signature Guaranteed" must appear with the signature. Notaries public cannot
provide signature guarantees. The Funds may request additional documentation
from corporations, executors, administrators, trustees or guardians, and may
accept other suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to
signature-guarantees, please call 800-637-1700.

To be able to redeem by telephone, you must select this option on your
application or in writing before you make your first telephone redemption.
Once you have selected this option, you may redeem by calling The Reserve Funds
at 800-637-1700. Unless you decline telephone privileges on your application
and the Fund takes reasonable measures to verify the request, the Fund will not
be liable for any unauthorized telephone order, or for any loss, cost or
expense for acting upon an investor's telephone instructions. As stated in the
Prospectus, you are only allowed one telephone redemption request within a
thirty (30) day period. To further reduce the risk of loss, proceeds of
telephone redemptions may be sent only to (1) the bank or brokerage account
designated by the shareholder on the application or in a letter with the
signature(s) guaranteed; or (2) the address of record for the past 30 days. To
change the designated brokerage or bank account it is necessary to contact the
Firm through which shares of the Fund were purchased or, if purchased directly
from the Fund, it is necessary to send a written request to the Fund with
signature(s) guaranteed. The Fund reserves the right to refuse a telephone
redemption if it believes it is advisable to do so.

REDEMPTION BY CHECKING. 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. Redemptions by check lengthen the time your money
earns dividends, since redemptions are not made until the check is processed by
the Fund. Because of this, you cannot write a check to completely liquidate
your account, nor may a check be presented for certification or immediate
payment. Your checks will be returned (bounced) and a fee charged if they are
postdated, contain an irregularity in the signature, amount or otherwise, or
are written against accounts with insufficient or uncollected funds. All
transactions activity, including check redemptions, will be reported on your
account statement. Checking may not be available to clients of some Firms.

Please call The Reserve Funds at 800- 637-1700 for more information about
charges, fees and the application process. The Fund will charge a
nonrefundable annual service fee (currently $60 which may be charged to the
account at the rate of $5 monthly). CPA and CPA Plus participants will be
charged for specific costs incurred in placing stop payment orders, obtaining
check copies and in processing returned checks. These charges may be changed
at any time upon 30 days' notice to participants. Upon proper notice, the Fund
may choose to impose a fee

13
<PAGE> 75
if it deems a shareholder's actions to be burdensome. In addition, Firms in
this program may charge their own additional service fees and may establish
their own minimum check amount.

The use of checks by participants will be subject to the terms of your
application.

[TOUCH-TONE BILL PAYMENT SERVICE. In the near future, the Fund will offer its
shareholders touch-tone bill payment which gives you the flexibility of paying
bills over the telephone on an automatic or variable basis. Terms, conditions
and restrictions will be outlined in the User's Guide and Application.]

STOP PAYMENTS. The Fund will honor stop payment requests on unpaid shareholder
checks provided they are advised of the correct check number, payee, check
amount and date. Stop payment requests received by the Fund by 2:00 PM
(Eastern time) will be effective the next business day. Oral stop payment
requests are effective for fourteen (14) calendar days, at which time they will
be cancelled unless confirmed in writing. Written stop payment requests will
remain in effect for one year. A fee will be charged for this service.

AUTOMATIC WITHDRAWAL PLANS. If you have an account with a balance of at least
$15,000, you may elect in writing to participate in either of the following:
(i) an Income Distribution Plan providing for monthly, quarterly or annual
payments by redemption of shares from reinvested dividends or distributions
paid to your account during the preceding period; or (ii) a Fixed Amount
Withdrawal Plan providing for the automatic redemption of a sufficient number
of shares of your account to make a specified monthly, quarterly or annual
payment of a fixed amount. Changes to instructions must be in writing with
signature(s) guaranteed. In order for such payments to continue under the
Plan, there must be a minimum of $25 available from reinvested dividends or
distributions. Payments can be made to you or your designee. An application
for the Automatic Withdrawal Plans can be obtained from the Fund. The amount,
frequency and recipient of the payments may be changed by giving proper written
notice to the Fund. The Fund may impose a charge, modify or terminate any
Automatic Withdrawal Plan at any time after the participant has been notified.
This privilege may not be available to clients of some Firms or may be
available subject to conditions or limitations.

AUTOMATIC TRANSFER PLANS (ACH). You may redeem shares of the Fund (minimum
$100) without charge by telephone if you have filed a separate Reserve
Automatic Transfer application with the Fund. The proceeds will be transferred
between your Fund account and the checking, NOW or bank money-market deposit
account (must be an Automated Clearing House member bank) designated in your
application. Redemption proceeds will be on deposit in your account at the
Automated Clearing House member bank ordinarily two (2) business days after
receipt of the request. The Funds may impose a charge, modify or terminate
this privilege at any time after the participant has been duly notified. This
privilege may not be available to clients of some Firms or may be available
subject to conditions or limitations.

EXCHANGE PRIVILEGE. A shareholder may exchange shares at NAV with all Reserve
money-market funds and the Reserve Private Equity Series. Shares to be
acquired in an exchange must be registered for sale in the investor's state.
The Fund reserves the right to record all exchange requests.

The exchange privilege is not available for shares 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 Fund and its 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, the 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.

14
<PAGE> 76
Exchanges of shares of one fund for another is a taxable event and may
result in a gain or loss for federal income tax purposes. The exchange
privilege described under this heading may not be available to clients of some
Firms and some Firms may impose conditions on their clients that are different
from those described in the Prospectus or SAI.

The exchange privilege may be modified or terminated at any time, or from
time to time, upon 60 days' notice to shareholders if such notice is required
by the 1940 Act. The notice period may be shorter if applicable law permits.
The Trust reserves the right to reject telephone or written requests submitted
in bulk on behalf of ten (10) or more accounts. A pattern of frequent
exchanges may be deemed by the Adviser to be abusive and contrary to the best
interests of the Fund's other shareholders and, at the Adviser's discretion,
may be limited by the Fund's refusal to accept additional purchases and/or
exchanges from the investor and/or the imposition of fees. The Funds do not
have any specific definition of what constitutes a pattern of frequent
exchanges. Any such restriction will be made on a prospective basis, upon
notice to the shareholder not later than ten (10) days following such
shareholder's most recent exchange. Telephone and written exchange requests
must be received by the Funds by 4:00 PM (Eastern time) on a regular business
day to take effect that day. Exchange requests received after 4:00 PM (Eastern
time) will be effected at the next calculated NAV.

SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the
date of payment postponed for more than seven (7) days only (a) when the
Exchange is closed (other than for customary closings), (b) when, as determined
by the SEC, trading on the Exchange is restricted or an emergency exists making
it not reasonably practicable to dispose of securities owned by the Fund or for
it to determine fairly the value of its net assets, or (c) for such periods as
the SEC may permit. If shares of the Fund are purchased by check or Reserve
Automatic Transfer, the Fund may delay transmittal of redemption proceeds until
such time as it has assured itself that good payment has been collected for the
purchase of such shares, which may generally take up to ten (10) business days.
Shareholder checks written against funds, which are not yet considered
collected, will be returned and a fee charged against the account. When a
purchase is made by wire and subsequently redeemed, the proceeds from such
redemptions normally will not be transmitted until two (2) business days after
the purchase.

SHAREHOLDER SERVICE POLICIES. The Fund's policies concerning the shareholder
services are subject to change from time to time. The Fund reserves the right
to change the $1,000 minimum account size subject to the $5 monthly service
charge or involuntary redemption. The Fund further reserves the right to
impose special service charges for services provided to individual shareholders
generally including, but not limited to, fees for returned checks, stop payment
orders on official checks and shareholder checks, and special research
services. The Fund's standard service charges as described in the Prospectus
are also subject to adjustment from time to time. In addition, the Fund
reserves the right to increase its minimum initial investment amount at any
time.

15
<PAGE> 77
return. Firms may also hold shares in nominee or street name on behalf of
their clients. In such instances, the Fund's transfer agents will have no
information about their accounts, which will be available only from their Firm.
Some of these firms participate in the Fund's Plan of Distribution ("Plan").
Under the Plan, Firms may receive compensation for recordkeeping and other
services and assistance in distributing Fund shares. In addition, certain
privileges with respect to the purchase and redemption of shares (such as check
writing redemptions) or the reinvestment of dividends may not be available
through such Firms or may only be available subject to certain conditions or
limitations. Some Firms may participate in a program allowing them access to
their clients' accounts for servicing including, without limitation, changes of
registration and dividend-payees and may perform functions such as generation
of confirmations and periodic statements and disbursement of cash dividends.
The Prospectus should be read in connection with such Firm's material regarding
its fees and services.

DIVIDENDS, DISTRIBUTIONS AND TAXES

The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended ("the Code"), so
long as such qualification is in the best interests of shareholders. Such
qualification relieves the Fund of any liability for federal income tax to the
extent its earnings are distributed in accordance with applicable provisions of
the Code. If the Fund did not qualify as a regulated investment company, it
would be treated for tax purposes as an ordinary corporation subject to federal
income tax.

The Fund ordinarily declares dividends from the Fund's net investment income
on each day the Exchange and The Reserve Fund is open for business. The Fund's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
preceding business day. Dividends paid out of the Fund's investment company
taxable income will be taxable to a U.S. shareholder as ordinary income.
Because no portion of the Fund's income is expected to consist of dividends
paid by U.S. corporations, no portion of the dividends paid by the Fund is
expected to be eligible for the corporate dividends-received deduction.
Distributions of net capital gains, if any, designated as capital gain
dividends are taxable to individual shareholders, regardless of how long the
shareholder has held the Fund's shares, and are not eligible for the
dividends-received deduction. Shareholders receiving distributions in the form
of additional shares, rather than cash, generally will have a cost basis in
each such share equal to the NAV of a share of the Fund on the reinvestment
date. Shareholders will be notified annually as to the U.S. federal tax status
of distributions, and shareholders receiving distributions in the form of
additional shares will receive a report as to the NAV of those shares.

Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain or loss. However, all or a portion of any gain realized
from the sale or other disposition of certain market discount bonds will be
treated as ordinary income under Section 1276 of the Code. The U.S. Treasury
Fund intends to invest only in the U.S. government securities that provide
interest income exempt in most states from state and local personal income
taxes, but may invest up to 5 percent of its assets in repurchase agreements
pending the investment of un- invested cash. Distributions attributable to net
capital gains, if any, are generally subject to state and local taxes.
Investments by the Fund in zero coupons generally will result in income to the
Fund equal to a portion of the excess of the face value of the 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.

Gain derived by the 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 the Fund generally will be
taxed as ordinary income to the extent of the accrued market discount on the
bonds, unless the Fund elects to include the market discount in income as it
accrues.

16
<PAGE> 78
such receivables or pays such liabilities, generally are treated as ordinary
income or ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency, gains or losses attributable to fluctuations
in the value of foreign currency between the date of acquisition of the
security and the date of disposition also are treated as ordinary gain or loss.
These gains or losses, referred to under the Code as "section 988" gains or
losses, may increase or decrease the amount of the Strategist Fund's investment
company taxable income to be distributed to its shareholders as ordinary
income.

Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries.

The Fund is 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. Corporate shareholders and
certain other shareholders specified in the Code generally are exempt from such
backup withholding. Backup withholding is not an additional tax. 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.

The tax consequences to a foreign shareholder of an investment in the Fund
may be different from those described herein.

Investors are advised to consult their own tax advisor(s) with respect to
the particular tax consequences to them of an investment in the Fund.

YIELD INFORMATION

For the seven-day period ended May 31, 1999, the Strategist Fund's yield was
_____% and its effective yield was ______%.

Yield information is useful in reviewing the Fund's performance relative to
other funds that hold investments of similar quality. Because yields will
fluctuate, yield information may not provide a basis for comparison with bank
and thrift certificates of deposit which normally pay a fixed rate for a fixed
term and are subject to a penalty for withdrawals prior to maturity which will
reduce their return.

17
<PAGE> 79
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data various industry
publications. From time to time, the Fund in its advertising and sales
literature may refer to the growth of assets managed or administered by RMCI
over certain time periods.

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 Fund assumes no responsibility to either owner for
actions taken by the other with respect to an account so registered. The
Application provides that persons who register their account indemnify and hold
the Fund harmless for actions taken by either party.

REPORTS AND STATEMENTS. Shareholders receive an Annual Report containing
audited financial statements and an unaudited Semi-Annual Report. An account
statement is sent to each shareholder at least quarterly. Shareholders who are
clients of some Firms will receive an account statement combining transactions
in Fund shares with account statements covering other brokerage or mutual fund
accounts. Shareholders have a duty to examine their account statement(s) and
report any discrepancies to The Reserve Funds or your financial advisor
immediately. Failure to do so could result in the shareholder suffering a
loss. Further, shareholders are advised to retain account statements.

RESERVE EASY ACCESS. Easy Access is The Reserve Funds' 24-hour toll-free
telephone service that lets customers use a touch-tone phone for a variety of
options including yields, account balances, check reorders, touch tone bill
payment and other options. To use it, call 800-297-7378 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 directly to The Reserve Funds, 1250 Broadway,
New York, NY 10001-3701 or 800-637-1700.

RATINGS

The following are the rating designations of short-term
instruments and their respective meanings.

STANDARD & POOR'S CORPORATION. A-1: This designation is the highest category
of S&P and indicates that the degree of safety regarding timely payment is
strong. Those short-term obligations that are extremely strong characteristics
will be denoted with a plus (+).

MOODY'S INVESTORS SERVICE, INC. Prime-1 (P-1): Issuers rated P-1 (or
supporting institutions) have a superior ability for repayment of senior
short-term debt obligations. P-1 repayment will often be evidenced by many of
the following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structure with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; and well-established access to a range of financial markets and
assured sources of alternative liquidity.

DUFF & PHELPS CREDIT RATING CO. Duff-1: Very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor. Those issues determined to have the highest
certainty of timely payment and whose safety is just below risk-free U.S.
Treasury short-term obligations will be denoted with a plus (+) sign
designation. Those issues determined to have a high certainty of timely
payment and whose risk factors are very small will be denoted with a minus (- )
sign designation.

18
<PAGE> 80
plus (+) sign. Issues assigned the rating of F1+ are regarded as having the
strongest degree assurance for timely payment.

FINANCIAL HIGHLIGHTS

19
<PAGE> 81

PART C

Item 23. Exhibits

(a) Declaration of Trust was filed as an exhibit to Registrant's
Post-Effective Amendment No. 43 dated July 31, 1987.

(b) Bylaws were filed as an exhibit to Registrant's Post- Effective
Amendment No. 42 dated November 24, 1986. Amendment No. 1 filed as an
exhibit to Post-Effective Amendment No. 46 dated July 31, 1990.

(d) Form of Investment Management Agreement for the Funds*.

(e)Form of Distribution Agreement and Plan of Distribution filed as an
exhibit to Registrant's Post-Effective Amendment No. 42 dated November
24, 1986.

(f) Pension Plan of Reserve Management Corporation was filed as an
exhibit to Post-Effective Amendment No. 32; Amendments to Pension Plan
filed as an exhibit to Post- Effective Amendment No. 45 dated July 31,
1989.

(g)

(i) Custodian Agreement with Chase Manhattan Bank filed as an exhibit
to Post-Effective Amendment No. 33 of the Reserve Tax-Exempt Trust, File
No. 811-3696, and incorporated by reference.

(h) Form of Service Plan

(i) Form of Service Agreement filed as an exhibit to Post- Effective
Amendment No. 42 dated November 24, 1986. Transfer Agent Agreement with
First Wisconsin Trust Company filed as an exhibit to Post-Effective
Amendment No. 46 dated July 31, 1990.

(i) Opinion of Counsel*

(j) Consent of Independent Auditors*

(k) Not applicable

(l) Not applicable

(m) Form of Registered Dealer Agreement*

(n) Financial Data Schedules

(o) Not applicable

----------------
*To be filed with later Post-Effective Amendment

<PAGE> 82

Item 24. Persons Controlled by or Under Common Control with Registrant
Not Applicable

Item 25. Indemnification

Each Trustee, officer, employee or agent of the Registrant, and any person who
has served at its request as a 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 Commonwealth of
Massachusetts, 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, officers and controlling persons of the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of any expenses incurred or paid by a
Trustee, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such 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 jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed the final adjudication of such issue.

Item 26. Business and Other Connections of Investment Adviser

Name Position with the Adviser Other Businesses

Henry B.R. Brown President, Treasurer and President, Treasurer and Director
Director of Reserve Management Corporation of the same address as the Trust;
Director and Treasurer of Transfer Agent Inc., 5 Cornwall St., N.W., Leesburg,
Virginia 22075.

Bruce R. Bent Vice President, Secretary Vice President, Secretary and Director
and Director of Reserve Management Corporation and Director of Resrv
Partners, Inc. both of the same address as the Trust

Item 27. Principal Underwriters

(a) Resrv Partners, Inc., a principal underwriter of the Registrant, also acts
as principal underwriter to Reserve Tax-Exempt Trust, Reserve Institutional
Trust, Reserve New York Tax-Exempt Trust and Reserve Private Equity Series.

Name and Principal Positions and Offices Positions and Offices Business
Address with Resrv Partners, Inc. with Registrant

<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Bruce R. Bent Chairman, Director and Treasurer
1250 Broadway
New York, New York 10001-3701
- --------------------------------------------------------------------------------
Mary A. Belmonte President
1250 Broadway
New York, New York 10001-3701
- --------------------------------------------------------------------------------
Bruce R. Bent II Assistant Secretary
1250 Broadway
New York, New York 10001-3701
- --------------------------------------------------------------------------------
Arthur Bent III Assistant Treasurer
1250 Broadway
New York, New York 10001-3701
- --------------------------------------------------------------------------------
MaryKathleen Foynes Counsel & Secretary
1250 Broadway
New York, New York 10001-3701
- --------------------------------------------------------------------------------
</TABLE>

<PAGE> 83

(b) The Kaufmann Fund, Inc. ("Kaufmann") also acts as a principal underwriter
of The Reserve Fund and The Kaufmann Fund, Inc.

<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Hans Utsch Chairman, Secretary & Director
The Kaufmann Fund, Inc.
140 East 45th Street
New York, NY 10017
- --------------------------------------------------------------------------------
Laurence Aurianan President, Treasurer & Director
The Kaufmann Fund, Inc.
140 East 45th Street
New York, NY 10017
- --------------------------------------------------------------------------------
</TABLE>

(c) GAM Services, Inc. also acts as a principal underwriter of The Reserve Fund
and the Global Asset Management Funds, Inc.

<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Kevin Blanchfield CCO & Director
GAM Services, Inc.
135 East 57th Street
Suite 2500
New York, NY 10022
- --------------------------------------------------------------------------------
David A. Andersen Managing Director & Director
GAM Services, Inc.
135 East 57th Street
Suite 2500
New York, NY 10022
- --------------------------------------------------------------------------------
Joseph J. Allessie Vice President, Secretary & General
GAM Services, Inc. Counsel
135 East 57th Street
Suite 2500
New York, NY 10022
- --------------------------------------------------------------------------------
</TABLE>

Item 28. Location of Accounts and Records All records required to be maintained
by Section 31(a) of the 1940 Act and the Rules promulgated thereunder are
maintained at 1250 Broadway, New York, NY 10001-3701 except those relating to
receipts and deliveries of securities, which are maintained by the Registrant's
Custodian.

Item 29. Management Services
See "Investment Management, Distribution, Service and Custodian
Agreements" in Part B.

Item 32. Undertakings
Not Applicable

<PAGE> 84

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this
Post-Effective Amendment to its Registration Statement meets all of the
requirements for effectiveness pursuant to Rule 485 (a) under the Securities
Act of 1933 and Registrant has duly caused this Post-Effective Amendment No. 59
to its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York, and State of New York, on the
25th day of May, 1999.

THE RESERVE FUND

By: /s/ Bruce R. Bent
------------------------------------
Bruce R. Bent, President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 34 to Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Bruce R. Bent President, Treasurer and May 25, 1999
- ------------------------- Trustee (principal
Bruce R. Bent executive operating and
financial officer)

* Trustee May 25, 1999
- -------------------------
Edwin Ehlert Jr.

* Trustee May 25, 1999
- -------------------------
Henri W. Emmet

* Trustee May 25, 1999
- -------------------------
Donald J. Harrington

/s/ Bruce R. Bent II Trustee May 25, 1999
- ------------------------
Bruce R. Bent II

* Trustee May 25, 1999
- -------------------------
William E. Viklund

* Trustee May 25, 1999
- -------------------------
Diana P Hermann

* Trustee May 25, 1999
- -------------------------
Richard Bassuk

/s/ MaryKathleen Foynes Counsel and Secretary May 25, 1999
- -------------------------
MaryKathleen Foynes
*Attorney-in-Fact
</TABLE>