<PAGE>
AMERICAN
EXPRESS
AMERICAN EXPRESS
MONEY MARKET ACCOUNTS
---------------------------------------
STRATEGIST
MONEY MARKET
FUND
ANNUAL REPORT
MAY 31, 2000
[AMERICAN EXPRESS LOGO]
GENERAL INFORMATION AND 24-HOUR YIELD AND
BALANCE INFORMATION
800-637-1700
This literature is not authorized for
distribution to prospective investors unless
preceded or accompanied by an appropriate OFFERED BY
current prospectus. THE RESERVE FUNDS
Distributor - Resrv Partners, Inc.
RF/STR ANNUAL 07/00
<PAGE>
STRATEGIST MONEY-MARKET FUND
STATEMENT OF NET ASSETS--MAY 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT NEGOTIABLE BANK CERTIFICATES OF DEPOSIT--75.6% (NOTE 1)
--------- ---------------------------------------------- --------
<C> <S> <C>
DOMESTIC--18.9%
$2,000,000 Harris Trust & Savings Bank, 6.59%, 7/3/00.............. $ 2,000,000
2,000,000 Southtrust Bank, NA, 6.58%, 7/10/00..................... 2,000,000
2,000,000 U.S. Bank, NA, 6.27%, 6/5/00............................ 2,000,000
2,000,000 Wilmington Trust Co., 6.59%, 7/11/00.................... 2,000,000
----------------
8,000,000
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YANKEES--56.7%
2,000,000 Banque Nationale de Paris, 6.31%, 6/6/00................ 2,000,000
2,000,000 Bayerische Hypo-Und Vereinsbank, AG, 6.15%, 6/19/00..... 2,000,000
2,000,000 Canadian Imperial Bank of Commerce, 6.65%, 2/12/01...... 1,999,335
2,000,000 Commerzbank, AG, 6.15%, 6/15/00......................... 2,000,000
2,000,000 Deutsche Bank, 6.75%, 8/23/00........................... 2,000,000
2,000,000 Dexia Bank, 6.75%, 8/24/00.............................. 2,000,000
2,000,000 Dresdner Bank, 6.20%, 6/26/00........................... 2,000,000
4,000,000 National Westminster Bank, PLC, 5.54%-6.30%,
6/5/00-11/22/00......................................... 3,999,346
2,000,000 Rabobank Nederland NV, 6.52%, 1/24/01................... 1,999,506
2,000,000 Societe Generale, 6.25%, 7/17/00........................ 2,000,000
2,000,000 Toronto Dominion Bank, 6.14%, 6/15/00................... 2,000,000
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23,998,187
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Total Negotiable Bank Certificates of Deposit
(Cost $31,998,187)...................................... 31,998,187
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EURO TIME DEPOSITS--9.5%
2,000,000 Bank One, NA, 6.81%, 6/1/00............................. 2,000,000
2,000,000 Chase Manhattan Bank, 6.81%, 6/1/00..................... 2,000,000
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Total Euro Time Deposits (Cost $4,000,000).............. 4,000,000
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REPURCHASE AGREEMENTS--18.9%
8,000,000 Bear, Stearns & Co. Inc., 6.55%, 6/1/00 (collateralized
by FHLM, 10% due 6/20/24, valued at $1,131,808, FGRA, 0%
due 8/15/28 valued at $4,317,716, FGRM, 7% to 8%, due
11/15/07 to 4/15/22 valued at $2,893,874)............... 8,000,000
----------------
Total Repurchase Agreements (Cost $8,000,000)........... 8,000,000
----------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS (COST $43,998,187)................ 104.0% 43,998,187
LIABILITIES, LESS OTHER ASSETS...................... (4.0) (1,694,747)
-------- -----------
NET ASSETS.......................................... 100.0% $42,303,440
======== ===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE BASED
ON 42,303,440 SHARES OF BENEFICIAL INTEREST,
$.001 PAR VALUE OUTSTANDING................................... $1.00
===========
</TABLE>
<TABLE>
<CAPTION>
GLOSSARY
<S> <C> <C>
FGRA -- Federal Home Loan Mortgage Corp. Gold Adjustable Rate REMIC
FGRM -- FHLM Gold REMIC Mortgage-Backed Pass-Through Participation
Certificates
FHLM -- Federal Home Loan Mortgage Corp.
REMIC -- Real Estate Mortgage Investment Conduit
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
1
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STRATEGIST MONEY-MARKET FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 2000
<TABLE>
<S> <C>
INTEREST INCOME (Note 1)......................................... $ 2,774,458
-------------
EXPENSES (Note 2)
Comprehensive fee.............................................. 394,371
Servicing fee.................................................. 98,842
Tax Expense.................................................... 674
-------------
Total Expenses............................................... 493,887
Less: expenses waived (Note 2)............................... (295,586)
-------------
Net Expenses................................................. 198,301
-------------
NET INVESTMENT INCOME, representing net increase in Net Assets
from Investment Operations..................................... $ 2,576,157
=============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
MAY 31, 2000 MAY 31, 1999
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment income.......................................... $ 2,576,157 $ 2,682,195
------------- -------------
DIVIDENDS PAID TO SHAREHOLDERS FROM (Note 1):
Net investment income.......................................... (2,576,157) (2,682,195)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS (at net asset value of $1.00 per share):
Net proceeds from sale of shares............................... 95,253,941 107,753,785
Dividends reinvested........................................... 2,576,157 2,682,195
Cost of shares redeemed........................................ (108,152,131) (114,079,295)
------------- -------------
Net decrease derived from capital share transactions and from
investment operations........................................ (10,322,033) (3,643,315)
NET ASSETS:
Beginning of year.............................................. 52,625,473 56,268,788
------------- -------------
End of year.................................................... $ 42,303,440 $ 52,625,473
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
2
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES:
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The Strategist Money-Market Fund, a series of The Reserve Fund, is
registered under the Investment Company Act of 1940 as a non-diversified,
open-end investment company. The policies summarized below are consistently
followed in the preparation of its financial statements in conformity with
generally accepted accounting principles.
A. The Reserve Fund's authorized shares of beneficial interest are
unlimited and are divided into four series (funds): Primary Fund, U.S.
Government Fund, U.S. Treasury Fund and Strategist Money-Market Fund. These
financial statements and notes apply only to the Strategist Money-Market
Fund (the "Fund").
B. Securities are valued at amortized cost, which approximates market
value. The amortized cost method values a security at cost plus accrued
interest at the time of purchase, and thereafter assumes a constant
amortization to maturity of any discount or premium, irrespective of
intervening changes in interest rates or market values. The maturity of
floating or variable rate instruments in which the Fund may invest will be
deemed to be for floating rate instruments (1) the notice period required
before the Fund is entitled to receive payment of the principal amount of
the instrument, and for variable rate instruments the longer of (1) above
or (2) the period remaining until the instrument's next interest rate
adjustment, for purpose of Rule 2a-7 and for computing the portfolio's
average weighted life to maturity.
C. It is the Fund's policy to comply with Subchapter M of the Internal
Revenue Code and to distribute all of its taxable income to its
shareholders. Accordingly, no Federal income tax provision is required.
D. Security transactions are recorded on a trade date basis; interest
income is accrued daily and security premium or discount is amortized or
accreted daily. Net investment income is distributed to shareholders daily
and automatically reinvested in additional Fund shares.
E. The Fund may enter into repurchase agreements with financial
institutions and securities dealers who are deemed credit-worthy pursuant
to guidelines established by the Fund's Board of Trustees. The Fund's
Investment Adviser will follow procedures intended to provide that all
repurchase agreements are at least 100% collateralized as to principal and
interest. However, in the event of default or bankruptcy by the seller,
realization and/or retention of the collateral may be subject to legal
proceedings. The Fund's custodian holds the underlying securities subject
to repurchase agreements.
(2) MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
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Pursuant to an Investment Management Agreement (the "Agreement") between
Reserve Management Company, Inc. ("RMCI") and the Fund, RMCI serves as the
Fund's Investment Adviser subject to the policies adopted by the Board of
Trustees. Under the Agreement, RMCI will furnish continuous investment
advisory and management services to the Fund. For its services as
Investment Adviser, RMCI receives a comprehensive fee, calculated at an
annual rate of .80% of the Fund's average daily net assets. RMCI pays all
employee and customary operating expenses of the Fund. Excluded from the
definition of customary operating expenses are interest, taxes, brokerage
fees, extraordinary legal and accounting fees and expenses, and the fees of
the disinterested Trustees, for which each Fund pays its direct or
allocated share. For the year ended May 31, 2000, RMCI voluntarily waived a
portion of its fee amounting to $196,744.
(3) DISTRIBUTION ASSISTANCE:
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Pursuant to a Plan of Distribution under Rule 12b-1, the Fund may make
assistance payments, at a rate of .20% per annum of the average net asset
value, to firms (including RMCI) for distribution assistance and
administrative services provided to Fund shareholders. The Plan requires
RMCI to pay an equivalent amount from its own resources. For the year ended
May 31, 2000, the Fund accrued $98,842 in distribution fees, that were
voluntarily waived by RMCI.
(4) MANAGEMENT'S USE OF ESTIMATES:
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The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the dates of the financial statements and the reported amounts of income
and expenses during the reporting periods. Actual results could differ from
those estimates.
(5) COMPOSITION OF NET ASSETS:
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At May 31, 2000, the Fund's net assets consisted of $42,303 in par value
and $42,261,137 in paid-in capital.
3
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) FINANCIAL HIGHLIGHTS:
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Contained below is per share operating performance data for a share of
beneficial interest for each of the periods as indicated.
<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED MAY 31,
------------------------------------------------
2000 1999 1998 1997 1996(A)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period............ $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Net investment income from investment
operations...................................... .0550 .0496 .0542 .0552 .0462
Less dividends from net investment income......... (.0550) (.0496) (.0542) (.0552) (.0462)
-------- -------- -------- -------- --------
Net asset value at end of period.................. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
Total Return...................................... 5.50% 4.96% 5.42% 5.52% 5.13%(b)
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------
Net assets end of period (millions)............... $ 42.3 $ 52.6 $ 56.3 $ 99.7 $ 1.0
Ratio of expenses to average net assets(c)........ 1.00% 1.00% 1.00% 1.00% 1.00%(b)
Ratio of net investment income to average net
assets(c)....................................... 4.61% 4.24% 4.62% 4.44% 4.30%(b)
</TABLE>
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(a) For the period from May 1, 1996 (Commencement of Operations) to May 31,
1996.
(b) Annualized.
(c) Due to the voluntary waiver of certain expenses by RMCI, the net expense
ratios and net investment income amounted to:
<TABLE>
<CAPTION>
FISCAL NET
YEAR EXPENSES INVESTMENT
ENDED RATIO INCOME
----- -------- ----------
<S> <C> <C>
5/00 .40% 5.21%
5/99 .40% 4.84%
5/98 .33% 5.29%
5/97 .00% 5.44%
5/96 .18% 5.12%
</TABLE>
4
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REPORT OF INDEPENDENT ACCOUNTANTS
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To the Shareholders and the Board of Trustees of Strategist Money-Market Fund:
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and financial highlights
present fairly, in all material respects, the financial position of Strategist
Money-Market Fund (one of the four series constituting The Reserve Fund) (the
"Fund") at May 31, 2000, and the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for the periods presented, in
conformity with accounting principles generally accepted in the United States.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at May 31, 2000 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
July 7, 2000
5
