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[LOGO]
The Reserve Fund
Money-Market Funds
Prospectus
July 31, 2000
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
(each a "Fund", collectively "the Funds").
FOR INVESTORS SEEKING AS HIGH A LEVEL OF CURRENT INCOME AS IS CONSISTENT WITH
PRESERVATION OF CAPITAL AND LIQUIDITY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR
HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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table of contents
about the funds
Investment Objective...........................................................2
Investment Strategies..........................................................2
Principal Risks of Investing in the Funds......................................4
Performance....................................................................5
Fees & Expenses of the Funds...................................................7
Fund Management................................................................7
your account
How to buy shares..............................................................9
Selling shares................................................................10
account services..............................................................12
dividends & taxes.............................................................13
financial highlights..........................................................14
questions?
Shareholders should direct their inquiries to the Firm from which they received
this Prospectus or to The Reserve Funds.
The Reserve Funds
1250 Broadway - 32nd floor
New York, NY 10001-3701
800-637-1700
212-401-5940 (fascimile)
[email protected]
or visit our web site at www.reservefunds.com
IT PAYS TO KEEP MONEY IN RESERVE-TM-
about the funds
The Funds are designed 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 to reduce or eliminate the mechanical
problems of direct investment, such as scheduling maturities and reinvestment,
as well as, evaluating the credit of issuers, investing in round lots, and
safeguarding receipt and delivery of securities.
Investment Objective
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.
Investment Strategies
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.
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about the funds
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 ("Trustees"), other
short-term instruments of similar quality, and instruments fully collateralized
by such obligations.
The Primary Fund will principally invest in obligations of U.S. banking
institutions that are insured by the Federal Deposit Insurance Corporation and
deposit-type obligations of foreign branches of both U.S. banks and foreign
banks (Eurodollars) 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.
U.S. Government Fund. The U.S. Government Fund seeks to attain its objective by
investing exclusively in securities backed by the full faith and credit of the
U.S. government, such as U.S. Treasury securities, obligations issued or
guaranteed by the U.S. government, its agencies and instrumentalities, and
repurchase agreements supported by such investments.
U.S. Treasury Fund. The U.S. Treasury Fund seeks to attain its objective by
investing exclusively in securities backed by the full faith and credit of the
U.S government which provide interest income exempt in most states from state
and local personal income taxes. Typically, the Fund's assets will be invested
in U.S. Treasury securities.
The "full faith and credit" backing is considered the strongest backing
offered by the U.S. government and to be the highest degree of safety with
respect to the payment of principal and interest.
All of 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 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 Funds will not concentrate more than 25% of their 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 bank obligations.
The Funds will at all times as is practicable be invested in accordance with
the investment objective and strategies outlined above. However, from time to
time, a Fund may take temporary defensive positions that are inconsistent with
the Fund's principal investment strategies in attempting to respond to adverse
market, economic, political or other conditions. If a Fund adopts a temporary
defensive position, the Fund might not be able to attain its objective.
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about the funds
Principal Risks of Investing in the Funds.
The following factors could reduce a Fund's income level and/or share price:
- Interest rates could rise sharply causing the value of the Funds' securities
and share price to drop. Most of the Funds' performance depends on interest
rates. When interest rates fall, the Funds' yields will typically fall as
well.
- A Fund is not FDIC-insured. 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 ("FDIC") 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.
However, each Fund has maintained a constant share price since inception, and
will strive to continue to do so.
- 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.
- Certain portfolio holdings. The risks that the Funds are subject to include
those risks associated with the market in general, as well as the types of
securities held. 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 are generally associated with investing in the banking
industry, such as interest rate risk, credit risk and regulatory
developments. Further, as to the Primary Fund, Euro and Yankee dollar
investments involve certain risks that are different from investments in
domestic obligations of U.S. banks. These risks may include unfavorable
political and economic developments, possible withholding taxes, seizure of
foreign deposits, currency controls or other governmental restrictions which
might affect payment of principal or interest. In addition, foreign banks are
not regulated by U.S. banking authorities and are generally not bound by
financial reporting standards comparable to U.S. banks. Adverse political,
regulatory, market or economic developments in foreign countries can affect
entities located in those countries.
- Credit Quality. Overall, 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.
- Non-diversification. The Funds are non-diversified; therefore, performance is
more dependent upon a smaller number of securities and issuers than in a
diversified portfolio. The change in value of any one security may affect the
overall value of a Fund more than it would in a diversified portfolio.
- Money-market funds v. equity investments. 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.
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about the funds
Performance
The bar charts below show the Funds' annual returns for the past ten years or
since the first calendar year since inception, together with the best and worst
quarters. The accompanying "Average Annual Total Return as of December 31,
1999" table gives some indication of risk of an investment in the Funds. The
tables assume reinvestment of dividends and distributions, if any. As with all
mutual funds, the past is not a prediction of the future.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Total Return for Primary Fund
<TABLE>
<S> <C>
90 7.88%
91 5.59%
92 3.17%
93 2.39%
94 3.49%
95 5.27%
96 4.67%
97 4.87%
98 4.81%
99 4.42%
</TABLE>
CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS:
Best Quarter: 4Q 1990 1.92%
Worst Quarter: 2Q 1993 0.53%
Most Recent Calendar Quarter: 2Q 2000 1.34%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C>
4.42% 4.80% 4.64%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Total Return for U.S. Government Fund
<TABLE>
<S> <C>
90 7.80%
91 5.32%
92 3.09%
93 2.30%
94 3.42%
95 5.18%
96 4.60%
97 4.76%
98 4.69%
99 4.22%
</TABLE>
CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS:
Best Quarter: 3Q 1989 1.89%
Worst Quarter: 2Q 1993 0.56%
Most Recent Calendar Quarter: 2Q 2000 1.32%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C>
4.22% 4.69% 4.53%
</TABLE>
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about the funds
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Total Return for U.S. Treasury Fund
<TABLE>
<S> <C>
93 2.19%
94 3.68%
95 4.96%
96 4.53%
97 4.61%
98 4.52%
99 4.02%
</TABLE>
CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS:
Best Quarter: 2Q 1995 1.25%
Worst Quarter: 1Q 1993 0.52%
Most Recent Calendar Quarter: 2Q 2000 1.23%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR 5 YEARS SINCE INCEPTION
<S> <C> <C>
4.02% 4.53% 3.91%
</TABLE>
For the Funds' current yields, call toll-free (800) 637-1700
or visit our web site at www.reservefunds.com.
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about the funds
Fees & Expenses of the Funds
This table describes the fees and expenses that you may pay if you buy and hold
shares of a Fund.
Fee table
Shareholder fees* None
(Fees paid directly from your investment)
Annual Fund Operating Expenses for all Funds
(Expenses that are deducted from Fund assets)
<TABLE>
<S> <C>
Comprehensive Management Fee 0.80%
Distribution (12b-1) Fee 0.20
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Total Operating Expenses 1.00%
====
</TABLE>
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<TABLE>
<C> <S>
(*) The Funds will without prior notice impose
a "Small Balance fee" (currently $5) or
remit the proceeds on those accounts with
a monthly average account balance of less
than $1,000 for the past 12 consecutive
months and with no activity other than
distributions and dividends. 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).
</TABLE>
Example: This example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The example should
not be considered indicative of future investment returns and operating expenses
which may be more or less than those shown. This example is based on the annual
fund operating expenses described in the table.
This example uses the same assumptions other funds use in their
prospectuses. It 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. The costs would be the same
whether you stayed in a Fund or sold your shares at the end of each period. Your
actual costs may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ -------- -------- --------
<S> <C> <C> <C>
$102 $318 $552 $1,225
</TABLE>
Fund Management
The Investment Adviser for The Reserve Funds is Reserve Management
Company, Inc. ("RMCI"), 1250 Broadway, New York, NY 10001. Since November 15,
1971, RMCI and its affiliates have provided investment advice to other mutual
funds within the Reserve family of funds which as of May 31, 2000, had
approximately $7 billion in assets under management.
RMCI manages the investment portfolios of the Funds, subject to policies
adopted by the Trustees. The Funds pay RMCI a comprehensive management fee of
0.80% per year of the average daily net assets of each Fund. RMCI pays all
administration and customary operating expenses of the Funds. Excluded from the
definition of customary operating expenses are interest, taxes, brokerage fees,
extraordinary legal and accounting fees and expenses, and the fees of the
disinterested Trustees, for which each Fund pays its direct or allocated share.
As of June 26, 1999, each of the Funds entered into a Investment Management
Agreement with RMCI, which is substantially similar to the Investment Management
Agreement previously in effect, except for the comprehensive management fee
structure; however, the U.S. Treasury Fund, since inception, has been subject to
a comprehensive management fee. For the fiscal year ended May 31, 2000, RMCI
received management fees under the investment management agreements previously
in effect, as well as the comprehensive management fee agreements. For the
fiscal year ended May 31, 2000, the Primary, U.S. Government and U.S. Treasury
Fund paid RMCI an aggregate fee of $29,323,207, $5,738,286, and $2,549,541,
respectively.
The Funds' distributors are Resrv Partners, Inc. ("Resrv"), 1250 Broadway, New
York, NY 10001-3701, GAM Services, Inc. ("GAM"), 135 East
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about the funds
7th Street, New York, NY 10022; and, The Kaufmann Fund, Inc., ("Kaufmann"), 140
East 45th Street, New York, NY 10017.
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.
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your account
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. Each Fund uses the amortized cost method of valuing its
securities which does not take into account unrealized gains or losses. This is
a standard calculation. The NAV is calculated as of the close of trading on the
New York Stock Exchange (usually 4:00 PM Eastern time). However, NAV is not
calculated and purchase orders are not accepted on days the Exchange is closed
for holidays (New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day) or on regional bank holidays (Columbus Day and Veteran's Day).
Your order will be priced at the next NAV calculated after your order is
accepted (i.e., converted to federal funds) by the Funds.
Minimum Initial Investment
<TABLE>
<C> <C> <S>
Regular Accounts -- $1,000 with no minimum subsequent investment
All IRA accounts -- $1,000 with $250 minimum subsequent investment
</TABLE>
How to Purchase
- By check. (drawn on U.S. bank). Please mail or visit us at
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 and make the check payable
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.
- 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.
- Automatic Asset Builder. 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.
ALL INVESTMENTS MUST BE IN U.S. DOLLARS. THIRD PARTY, FOREIGN AND TRAVELERS
CHECKS, AS WELL AS CASH INVESTMENTS WILL NOT BE ACCEPTED. PURCHASE ORDERS ARE
NOT ACCEPTED ON DAYS THE EXCHANGE IS CLOSED FOR TRADING AND REGIONAL BANK
HOLIDAYS.
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your account
When purchasing shares, please keep in mind:
- All 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 the Fund you wish to invest in, all money
will be invested in the U.S. Government Fund under the sender's name
until the correct information can be determined.
- 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 3:00 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. Checks delivered to the
Fund's offices after 3:00 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 (currently $15) for any check that does
not clear and will be responsible for any losses suffered by the Funds as
a result.
Selling Shares. Investors may sell (redeem) shares at any time. Shares will be
sold at the NAV next determined after the redemption request is received by a
Fund. Each Fund usually transmits payments the same day when requests are
received before 3:00 PM (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 request. You may sell shares by
calling the Funds or with a letter of instruction. 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.
Telephone requests. You may redeem by calling the Funds at 800-637-1700. Unless
you decline telephone privileges on your application and the Funds fail to take
reasonable measures to verify the request, the Funds will not be liable for any
unauthorized telephone redemption, or for any loss, cost or expense for acting
upon an investor's telephone instructions. Telephone redemptions will be sent to
the bank or brokerage account designated by the shareholder on the application
or in a letter with the signature guaranteed. To change the designated brokerage
or bank account, it is necessary to contact the Firm through which shares of a
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 reasonably believes
that the instructions are not genuine and/or it is advisable to do so.
Written requests. When writing a letter of instruction, please include the
name(s) and signature(s) of all account holders (signature(s) guaranteed, if
necessary), account number, Fund name, the dollar amount you want to redeem, and
how and where to send the proceeds. If you are redeeming your IRA, please call
for the applicable withholding requirements.
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your account
Signatures guaranteed. The following situations require written instructions
along with signatures guaranteed.
(1) redemptions for more than $5,000, if redemption proceeds are not being
sent to the shareholder's designated bank or brokerage account; or
(2) redemptions on accounts whose address has been changed within the past
30 days; or
(3) redemption requests to be sent to someone other than the account owner
or the address of record.
Signature guarantees are designed to protect both you and the Funds from fraud
by reducing the risk of loss. 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.
Small Balances. Because of the expense of maintaining accounts with small
balances, the Funds will without prior notice either levy a monthly charge
(currently $5) or redeem the account and remit the proceeds on those accounts
with a monthly average account balance of less than $1,000 for the past 12
consecutive months and with no activity (i.e., other than dividends and
distributions). Some Firms may establish variations of minimum balances and fee
amounts if those variations are approved by the Funds.
The Funds reserve certain rights.
The Funds reserve the right to make a "redemption in kind", (payment in
portfolio securities rather than cash), without notice, if the amount the
investor is redeeming is large enough to affect fund operations (for example, if
it represents more than 1% of the Fund's assets). Further, each Fund reserves
the right to:
- refuse any purchase or exchange request,
- change or discontinue its exchange privilege,
- change its minimum investment amounts,
- to liquidate an account without notice and remit the proceeds, if an
account becomes burdensome within the Funds' discretion,
- 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); and
- 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 checks or shareholder
checks, copies of statements and special research services.
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.
Account Statements. Shareholders are advised to retain all account statements.
You must notify us no later than sixty (60) days after Reserve sent you the
statement on which a problem or error first appeared.
Shareholder Communications. The Funds will not send duplicate shareholder
communications, such as the Prospectus and Annual Report, to related accounts at
a common address, unless instructed to the contrary by you.
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account services
Checking, VISA and ATM Access. You may redeem shares of the Fund by using your
Reserve checks and VISA Check Card. Once you complete an 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;
signature or payee is missing; or, is written against accounts with insufficient
or uncollected funds. Please do not use your checks to close your account.
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; shareholders will not be charged by The Reserve
Funds to use an ATM, but may be charged a surcharge by the ATM owner.
Exchange Privilege. Investors can exchange all or some of the shares offered for
shares in other Reserve money market and equity funds. Investors can request an
exchange in writing or by telephone. 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 (provided 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 for
non-Reserve Fund may be charged a sales load if a sales load applies.
Individual Retirement Accounts. Investors may use the Funds as an investment for
Individual Retirement Accounts ("IRAs"). Information regarding administration
fees and other details is available from the Funds at 800-637-1700.
Reserve Easy Access and On-Line Access. Easy Access is The Reserve Funds'
24-hour toll-free telephone service that lets shareholders use a touch-tone
phone for a variety of options, which include obtaining yields, account
balances, check reorders. To use it, call 800-637-1700 and follow the
instructions. Clients may also access full account activity through On-Line
Access for the previous six months on the Internet at www.reservefunds.com. You
must call The Reserve Funds to activate the Internet access.
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dividends & taxes
An investment in any mutual fund generally involves tax considerations. The
following discussion is intended as general information for U.S. citizens and
residents only. Because everyone's tax situation is unique, you should consult
your own tax advisor(s) with regard to the tax consequences of the purchase,
ownership or disposition of Fund shares. Any tax liabilities generated by your
transactions are your responsibility. Further, the applicable tax laws which
affect the Funds and their shareholders are subject to change and may be
retroactive.
The Funds intend to maintain their regulated investment company status for
federal income tax purposes, so that they will not be liable for federal income
taxes to the extent their taxable income and net capital gains are distributed.
However, it is possible that events could occur which could cause a Fund to
incur some U.S. taxes. Dividends and distributions are taxable to most
shareholders as ordinary income (unless an investment is in an IRA or other
tax-advantaged account) in the tax year they are declared. The tax status of any
distribution is the same regardless of how long an investor has been in a fund
and whether distributions are reinvested or taken in cash. The tax status of
dividends and distributions will be detailed in an annual tax statement from the
Funds.
Each Fund declares dividends each day the Exchange is open. 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. Any net capital gains
realized will be distributed once a year. All dividends and capital gains
distributions, if any, are paid in the form of additional shares credited to an
investor's account at NAV unless the shareholder has requested otherwise on the
Account Application or in writing to the Funds.
Dividends paid to shareholders of the U.S. Treasury Fund are subject to federal
income tax but generally are exempt from state and local personal income taxes.
Backup Withholding. As with all mutual funds, 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 a Fund with their correct taxpayer
identification number ("TIN") or to make required certifications, or who have
been notified by the Internal Revenue Service that they are subject to backup
withholding. However, special rules apply for certain accounts. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against the shareholder's U.S. federal income tax liability. Shareholders should
be aware that a Fund may be fined $50 annually by the IRS 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.
13
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financial highlights
Contained below is per share operating performance data for a share of
beneficial interest outstanding of each Fund for the periods as 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 audited by PricewaterhouseCoopers
LLP, the Funds' independent accountants, whose report, along with each Funds'
financial statements, is included in the Funds' Annual Report, which is
available upon request by calling 800-637-1700.
<TABLE>
<CAPTION>
For Fiscal Years Ended May 31,
--------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PRIMARY FUND
------------------------------------------------
Net asset value, beginning of year............... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Net investment income from investment
operations..................................... .0492 .0438 .0483 .0457 .0490
Less dividends from net investment income........ (.0492) (.0438) (.0483) (.0457) (.0490)
-------- -------- -------- -------- --------
Net asset value, end of year..................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
Total Return..................................... 4.92% 4.38% 4.83% 4.57% 4.90%
Ratios/Supplemental Data
------------------------------------------------
Net assets end of year (millions)................ $4,355.9 $3,330.1 $2,707.6 $2,104.1 $1,664.1
Ratio of expenses to average net assets.......... 1.00% 1.00% .94% .98% .98%
Ratio of net investment income to average net
assets......................................... 4.74% 4.26% 4.71% 4.47% 4.79%
U.S. GOVERNMENT FUND
------------------------------------------------
Net asset value, beginning of year............... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Net investment income from investment
operations..................................... .0471 .0426 .0471 .0449 .0484
Less dividends from net investment income........ (.0471) (.0426) (.0471) (.0449) (.0484)
-------- -------- -------- -------- --------
Net asset value, end of year..................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
Total Return..................................... 4.71% 4.26% 4.71% 4.49% 4.84%
Ratios/Supplemental Data
------------------------------------------------
Net assets end of year (millions)................ $ 667.7 $ 716.2 $ 652.5 $ 611.8 $ 568.5
Ratio of expenses to average net assets.......... 1.00% 1.00% .99% .99% 1.00%
Ratio of net investment income to average net
assets......................................... 4.12% 4.16% 4.63% 4.40% 4.75%
</TABLE>
14
<PAGE>
financial highlights
<TABLE>
<CAPTION>
For Fiscal Years Ended May 31,
--------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
U.S. TREASURY FUND
------------------------------------------------
Net asset value, beginning of year............... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Net investment income from investment
operations..................................... .0443 .0410 .0456 .0443 .0466
Less dividends from net investment income........ (.0443) (.0410) (.0456) (.0443) (.0466)
-------- -------- -------- -------- --------
Net asset value, end of year..................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
Total Return..................................... 4.43% 4.10% 4.56% 4.43% 4.66%
Ratios/Supplemental Data
------------------------------------------------
Net assets end of year (millions)................ $ 397.2 $ 286.7 $ 239.8 $ 169.2 $ 142.8
Ratio of expenses to average net assets (a)...... 1.00% 1.00% .97% .97% .99%
Ratio of net investment income to average net
assets (a)..................................... 4.12% 3.76% 4.26% 4.13% 4.33%
</TABLE>
---------------------
<TABLE>
<C> <S>
(a) Due to the voluntary waiver of certain expenses by RMCI, the
net expense ratios and net investment income of the U.S.
Treasury Fund amounted to:
</TABLE>
<TABLE>
<CAPTION>
Net
Expense Investment
Fiscal Year Ratio Income
----------- ----- ------
<S> <C> <C>
5/00 .86% 4.26%
5/99 .77 3.99
5/98 .77 4.46
5/97 .77 4.33
5/96 .79 4.53
</TABLE>
---------------
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and, if given or
made, such information or representations must not be relied upon. This
Prospectus does not constitute an offering in any jurisdiction in which such
offering may not lawfully be made.
15
<PAGE>
financial highlights
---------------
16
<PAGE>
This Prospectus contains the information about each Fund which a prospective
investor should know before investing.
The Statement of Additional Information ("SAI") contains additional and more
detailed information about the Funds, and is considered part of this Prospectus.
Our Annual and Semi-Annual Reports list the holdings in each Fund, describe Fund
performance, include financial statements for the Funds, and discuss market
conditions and strategies that significantly affected the Funds' performance.
These documents may be obtained without charge by writing or calling The Reserve
Funds at 800-637-1700. You can download the documents from the Edgar database of
the SEC's web site
(http://www.sec.gov) or you can obtain copies by visiting the SEC's Public
Reference Room in Washington, DC (1-202-942-8090) or by electronic mail request
at [email protected] or by sending your request and duplicating fee to the
SEC's Public Reference Section, Washington, DC 20549-6009.
INVESTORS ARE ADVISED TO READ AND RETAIN
THIS PROSPECTUS FOR FUTURE REFERENCE.
GAM Funds, Inc. Money Market Account is a cash management service offered by The
Reserve Funds through GAM Services, Inc. Shares offered are of The Reserve
Funds.
To purchase shares of the Fund, please call GAM at 800-426-4685.
[LOGO]
-Registered Trademark-
GLOBAL ASSET MANAGEMENT (USA) INC.
135 East 57th Street
New York, NY 10022
800-426-4685
Distributor--Resrv Partners, Inc.
RF/PG&T 07/00 GAM
SEC File Number
The Reserve Fund
811-2033
[LOGO]
-Registered Trademark-
GLOBAL ASSET MANAGEMENT
Primary Fund
U.S. Government Fund
U.S. Treasury Fund
Money-Market Funds
OFFERED BY THE RESERVE FUNDS
<PAGE>
Prospectus
July 31, 2000
