RESERVE FUNDS /NY/, 485BPOS, 2000-07-31

RESERVE FUNDS /NY/
485BPOS, 2000-07-31

Previous: RESERVE FUNDS /NY/, N-30D, 2000-07-31

Next: RESERVE FUNDS /NY/, 485BPOS, EX-99.(I), 2000-07-31

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 2000

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. 61 /X/
....

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /

Amendment No. 31 /X/
....

(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 Gaza, 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)

/X/ immediately upon filing pursuant to paragraph (b)

/ / on (date) pursuant to paragraph (b)

/ / 60 days after filing pursuant to paragraph (a)(1)

/ / on (date) 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 Gaza, Esq.
The Reserve Funds
1250 Broadway
New York, NY 10001-3701

<PAGE>

[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.

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

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>

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.

2
<PAGE>

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.

3
<PAGE>
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.

4
<PAGE>
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

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

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>

5
<PAGE>
ABOUT THE FUNDS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Total Return for U.S. Treasury Fund

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.

6
<PAGE>
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
----
Total Operating Expenses 1.00%
====
</TABLE>

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

(*) 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).

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

7
<PAGE>
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.

8
<PAGE>

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.

9
<PAGE>
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.

10
<PAGE>
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.

11
<PAGE>

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.

12
<PAGE>

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
<PAGE>

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.

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
</TABLE>

14
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED MAY 31,
------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
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>

15
<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>

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

(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>
<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.

16
<PAGE>
FINANCIAL HIGHLIGHTS

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

17
<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.

[LOGO]
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-07/2000

SEC File Number
The Reserve Fund
811-2033

[LOGO]

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

MONEY-MARKET FUNDS

PROSPECTUS
JULY 31, 2000
<PAGE>

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 MONEY-MARKET FUNDS:
PRIMARY, U.S. GOVERNMENT & U.S. TREASURY FUNDS
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 Money-Market Funds. Additional series (funds) and classes 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, 2000 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, 2000.

TABLE OF CONTENTS PAGE
----------------- ----
<S> <C>
Description of Funds..............................................2
Investment Strategies and Risks...................................2
Management of the Trust...........................................6
Investment Management, Distribution and Custodian Agreements.....10
Information About the Trust......................................12
How to Buy and Sell Shares.......................................13
Dividends, Distributions and Taxes...............................19
Yield Information................................................20
General Information..............................................21
Ratings..........................................................21
Financial Statement..............................................22
</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.

<PAGE>

DESCRIPTION OF THE FUNDS

The 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. 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.

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.
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).

Investment management companies can be divided into "diversified" and
"non-diversified". Under Section 5(b), a diversified company must have 75% of
the value of its total assets in cash and cash items (including receivables),
U.S. government securities, securities of other investment companies, and other
securities. Any management company other than a diversified company is defined
as a "non-diversified" company pursuant to Section 5(b)(2). The Reserve Fund is
a non-diversified mutual fund. In addition, each of its separate investment
portfolios (Funds) intends to comply with the diversification requirement of
Rule 2a-7 under the 1940 Act which places certain limits on a Fund's investments
in any one issuer's securities in order to limit investment risk. With few
exceptions, under Rule 2a-7, a Fund may invest no more than 5% of its assets in
securities of any one issuer, except U.S. government securities.

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.

INVESTMENT STRATEGIES & RISKS

FUND 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) borrow money except as a temporary or emergency measure and not in an
amount to exceed 5% of the market value of its total assets;

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

(3) act as an underwriter with respect to the securities of others except to
the extent that, in connection with the disposition of portfolio
securities, it may be deemed to be an underwriter under certain federal
securities laws;

(4) concentrate investments in any particular industry except to the extent
that its investments are concentrated exclusively in U.S. government
securities and bank obligations or repurchase agreements secured by such
obligations;

(5) purchase, sell or otherwise invest in real estate or commodities or
commodity contracts;

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

(7) sell any security short or write, sell or purchase any futures contract or
put or call option; and

(8) 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.

2
<PAGE>

Although not currently using a "master/feeder" structure, 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

FUND STRATEGIES. The following section contains more detailed information about
types of instruments in which a Fund may invest, strategies the Adviser may
employ, and a summary of related risks. The Funds may not buy all of these
instruments or use all of these techniques; they will be utilized if in the
Adviser's opinion it believes that the utilization will help a Fund achieve its
investment objective.

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 instrumentalities 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, banker's acceptances, letters of credit and time
deposits. A certificate of deposit is a negotiable certificate representing a
bank's obligation to repay funds deposited with it, earning a specified rate of
interest over a given period. A banker's 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 bank 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 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 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 BANK OBLIGATIONS. 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

3
<PAGE>

regulated by U.S. banking authorities and are generally not bound by financial
reporting standards comparable to U.S. standards.

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. Although not a principal investment strategy, the Primary Fund
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. However, the Primary Fund has never purchased
commercial paper and has no current interest in doing so.

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 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 maturing in more than seven (7) days.

Illiquid securities generally are any securities that cannot be disposed
of promptly and in the ordinary course of business at approximately the amount
at which the fund has valued the instruments. The liquidity of a fund's
investments is monitored under the supervision and direction of the board of
trustees. Investments currently not considered liquid include repurchase
agreements not maturing within seven days and certain restricted securities.

4
<PAGE>

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.

BORROWING. 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. Borrowing may subject a Fund to interest costs, which may exceed
the interest received on the securities purchased with the borrowed funds. A
Fund normally may borrow at times to meet redemption requests rather than sell
portfolio securities to raise the necessary cash. Borrowing can involve
leveraging when securities are purchased with the borrowed money. To avoid this,
each Fund will not purchase securities while borrowings are outstanding.

SECURITIES LENDING AGREEMENTS. 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 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. 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.

RISKS OF INVESTING IN THE FUNDS. 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, which have been outlined above.

However, the Funds follow regulations set forth by the SEC that dictate
the quality requirements for money market mutual funds. These require the funds
to invest exclusively in high-quality securities. Generally, high-quality
securities are securities that present minimal credit risks and are rated in one
of the two highest rating categories by two nationally recognized statistical
rating organizations (NRSROs), or by one if only one NRSRO has rated the
securities, or, if unrated, determined to be of comparable quality by the
investment adviser pursuant to guidelines adopted by the board of trustees.
High-quality securities may be "first tier" or "second tier" securities. First
tier securities may be rated within the highest category or determined to be of
comparable quality by the investment manager. Money market fund shares and U.S.
government securities also are first tier securities. Second tier securities
generally are rated within the second-highest category. Should a security's
high-quality rating change after purchase by a fund, the investment adviser
would take such action, including no action, as determined to be in the best
interest of the Fund by the Board of Trustees.

TEMPORARY DEFENSIVE POSITION. The Funds will at all times as is practicable be
invested in accordance with the investment objective and strategies outlined in
the Prospectus and SAI. 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.

5
<PAGE>

The Primary and U.S. Government Funds would, in adopting a temporary defensive
position, buy more conservative U.S. Government securities. If the U.S. Treasury
Fund was to adopt a defensive position, it would most likely increase its
investment in repurchase agreements and exceed the 5% of its total assets
limitation stated in the Prospectus. Further, in an extreme emergency, all Funds
would maintain a large percentage of uninvested cash.

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.

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, 63, Chairman/Chief Executive Officer and Trustee, 1250
Broadway, New York, NY 10001-3701.

Mr. Bent is Chairman/Chief Executive Officer and Trustee of The Reserve
Fund ("RF"), Reserve Institutional Trust ("RIT"), Reserve Tax-Exempt Trust
("RTET"), Reserve New York Tax-Exempt Trust ("RNYTET") and Reserve Private
Equity Series ("RPES"); Director and Chairman/Chief Executive Officer of Reserve
Management Company, Inc. ("RMCI") and Reserve Management Corporation ("RMC");
and Chairman and Director of Resrv Partners, Inc. ("RESRV").

Mr. Bent co-founded The Reserve Funds in 1970 and has been an executive
officer since then.

*++BRUCE R. BENT II, 34, President, Assistant Treasurer and Trustee, 1250
Broadway, New York, NY 10001-3701.

Mr. Bent II joined The Reserve Funds in 1992 and is President and Assistant
Secretary and Trustee of RF, RIT, RTET, RNYTET and RPES. Mr. Bent II is also
President, Secretary and Assistant Treasurer of RMCI; Senior Vice President,
Secretary and Assistant Treasurer of RMC; and, Secretary and Director of RESRV.

+EDWIN EHLERT, JR., 69, Trustee, 125 Elm Street, Westfield, NJ 07091.

Mr. Ehlert is President and Director of Ehlert Travel Associates, Inc.
(travel agency) and Ehlert Travel Associates of Florida, Inc. (travel agency),
and Trustee of RF, RIT, RTET, RNYTET and RPES.

6
<PAGE>

+HENRI W. EMMET, 74, Trustee, 1535 Presidential Drive, Apt. 4A, Columbus, OH
43212.

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. In 1999, Mr. Emmet retired as a principal of Global Interaction, which
provides consulting services to international banking interests. He is currently
Trustee of RF, RIT, RTET, RNYTET and RPES.

+PATRICK J. FOYE, 43, Trustee, c/o AIMCO, 2000 S. Colorado Blvd., Tower Two,
Suite 2-1000, Denver, CO 80222.

From 1995 to present, Mr. Foye has been the Deputy Chairman of Long
Island Power Authority. In addition, Mr. Foye is Executive Vice President of
Apartment Investment and Management Company ("AIMCO"), a real estate investment
trust and the nation's largest owner and manager of multi-family apartment
properties. He was a partner from 1989 through 1998 in the law firm of Skadden,
Arps, Slate, Meagher & Folm LLP, as well as a managing partner in the firm's
offices in Moscow, Budapest, and Brussels from 1992 through 1994. Mr. Foye is a
member of Governor Pataki's New York State Privatization Research Council. He is
currently a Trustee of RF, RIT, RTET, RNYTET and RPES.

+DONALD J. HARRINGTON, C.M., 55, Trustee, St. John's University, Grand Central
& Utopia Parkways, Jamaica, NY 11439.

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

+WILLIAM J. MONTGORIS, 53, Trustee, 286 Gregory Road, Franklin Lakes, NJ 07417.

Mr. Montgoris is formerly Chief Operating Officer of the Bear Stearns
Companies, Inc. (1979-1999). He is currently Trustee of RF, RIT, RTET,
RNYTET and RPES.

+WILLIAM E. VIKLUND, 60, Trustee, 110 Grist Mill Lane, Plandome Manor, NY
11030-1110.

Mr. Viklund is formerly President and COO of Long Island Bankcorp and
President and CEO of Long Island Savings Bank (1980-1996). He is currently
Trustee of RF, RIT, RTET, RNYTET and RPES.

*ARTHUR T. BENT III, 32, Chief Operating Officer/Treasurer, Senior Vice
President and Assistant Secretary, 1250 Broadway, New York, NY 10001-3701.

Mr. Bent III joined The Reserve Funds in 1997 and is Chief Operating
Officer/Treasurer, Senior Vice President and Assistant Secretary of RF, RIT,
RTET, RNYTET and RPES. Mr. Bent III is also Chief Operating Officer/Treasurer,
Senior Vice President and Assistant Secretary of RMCI; President, Treasurer and
Assistant Secretary of RMC; and, Treasurer and Director of Resrv Partners, Inc.
("RESRV"). Before joining Reserve, he was a private investor.

MARYKATHLEEN FOYNES GAZA, 30, Director of Compliance and Legal Affairs (Counsel)
and Secretary, 1250 Broadway, New York, NY 10001-3701.

Ms. Gaza is Director of Compliance and Legal Affairs (Counsel) and
Secretary of RF, RIT, RNYTET, RTET and RPES, as well as Director of Compliance
and Legal Affairs for RMCI and RMC and Counsel to RESRV. Before joining The
Reserve Funds in 1998, Ms. Gaza was a staff attorney at PaineWebber, Inc.
(1997-1998). Prior to that, Ms. Gaza worked for the U.S. House of
Representatives as a District Manager for a Member of Congress (1995-1997).

7
<PAGE>

JAMES M. FREISEN, 42, Controller, 1250 Broadway, New York, NY 10001-3701.

Mr. Freisen is Controller. Before joining The Reserve Funds in 1999,
Mr. Freisen was an Assistant Vice President at Paine Webber, Inc. (1998-1999).
Prior to that, he was Assistant Vice President, Bank of New York (1997-1998);
Assistant Vice President, Fifth Third Bank (1995-1997); and Vice President,
Smith Barney (1991-1995).

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

*Mr. Bent is the father of Mr. Bent II and Mr. Bent III.

+ Messrs. Ehlert, Emmet, Foye, Harrington, Montgoris, and Viklund are members of
a Review Committee which performs the functions of an Audit Committee and
reviews compliance procedures and practices. The Audit Committee members receive
an annual committee fee of $2,000.

++ Interested Trustee within the meaning of the 1940 Act. As of June 1, 2000,
the members of the Board of Trustees who are not "Interested Trustees" will be
paid a stipend of $3,500 for each joint Board meeting they attend in person, a
stipend of $1,000 for each joint telephonic meeting they participate in, and an
annual fee of $24,000 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 or 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.

The Trust does not pay any pension or retirement benefits to the Trustees.

COMPENSATION TABLE
FOR FISCAL YEAR ENDED MAY 31, 2000

AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST AND TRUST COMPLEX
NAME OF TRUSTEE, POSITION FROM TRUST (4 ADDITIONAL TRUSTS) PAID TO TRUSTEE
------------------------------------------------- --------------- -----------------------------------------
<S> <C> <C>
Bruce R. Bent, Chairman/CEO and Trustee $0 $ 0
Bruce R. Bent II, President and Trustee 0 0
Edwin Ehlert, Jr., Trustee 24,075 30,500
Patrick J. Foye, Trustee 2,422 3068
Henri W. Emmet, Trustee 24,075 30,500
Rev. Donald J. Harrington, Trustee 21,312 27,000
William J. Montgoris, Trustee 20,260 25,667
William E. Viklund, Trustee 24,075 30,500

</TABLE>

8
<PAGE>

The following executive officers of the Trust had allocated cash remuneration in
excess of $60,000 during the last fiscal year ending May 31, 2000 for services
rendered to the Fund

AGGREGATE ESTIMATED ANNUAL BENEFITS
NAME CAPACITY RENUMERATION UPON RETIREMENT
------ ---------- ----------------- -------------------------
<S> <C> <C> <C>
Bruce R. Bent Chairman/CEO $ 98,666 $32,546
Bruce R. Bent II President 154,526 2,074
Arthur T. Bent III Sr. Vice President
and COO 153,312 521

</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.

CODE OF ETHICS. The Trust, its Adviser and RESRV have adopted Code of Ethics,
respectively, conforming to the requirements of Rule 17j-1 under the Investment
Company Act of 1940. The purpose of the Code is to establish guidelines and
procedures to identify and prevent persons who may have knowledge of Reserve's
investments and investment intentions from breaching their fiduciary duties and
to deal with other situations that may pose a conflict of interest or a
potential conflict of interest. Additionally, federal securities laws require
money managers and others to adopt policies and procedures to identify and
prevent the misuse of material, non-public information. Therefore, Reserve has
developed and adopted an Insider Trading Policy that applies to all employees,
affiliates and subsidiaries. As per the Codes, an Access person may only engage
in Personal Securities Transactions in accordance with the procedures and
guidelines established.

As of June 30, 2000, the following persons were known by the Fund to own
of record or beneficially 5% or more of the outstanding shares of the Fund:

<TABLE>
<CAPTION>
PRIMARY FUND

SHARES PERCENT
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) SHARES OWNED
---------------------------------- ---------- ----------------
<S> <C> <C>
Mesirow Financial, Inc. -Special Custody A/C 462,804,090 11.3%
For the Exclusive Benefit of Customers-
Primary Omnibus A/C
350 N. Clark Street
Chicago, IL 60610

Ferris Baker Watts, Inc. 439,170,507 10.7%
Primary Omnibus Account
8403 Colesville Rd. #900
Silver Spring, MD 20710

<CAPTION>
U.S. GOVERNMENT FUND

SHARES PERCENT
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) SHARES OWNED
---------------------------------- ---------- ----------------
<S> <C> <C>
Mesirow Financial, Inc. -Special Custody A/C 72,474,711 10.6%
For the Exclusive Benefit of Customers-
Government Omnibus A/C
350 N. Clark Street
Chicago, IL 60610

9
<PAGE>

Ferris Baker Watts, Inc. 157,704,906 23.2%
Govt. Omnibus Account
8403 Colesville Rd. #900
Silver Spring, MD 20710

<CAPTION>
U.S. TREASURY FUND

SHARES PERCENT
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) SHARES OWNED
---------------------------------- ---------- ----------------
<S> <C> <C>
Reserve Management Corp. 25,488,200 8.5%
Attn: Account No. 50115306
1250 Broadway
New York, NY 10001
</TABLE>

-----------
(1) Fractional shares have been omitted.

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 shareholders 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 June 26, 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 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 fees of the disinterested Trustees, for which
each Fund it pays its direct or allocated share.

For the fiscal years ended May 31, 1998 and 1999, RMCI received management
fees under the Investment Management Agreements previously in effect. 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 years ended May 31,
1998, 1999and 2000 RMCI received aggregate management fees of $10,995,380,
$13,863,140 and $29,323,207, respectively, from the Primary Fund; $3,181,655,
$3,530,115 and $5,738,286, respectively, from the U.S. Government Fund; and, for
the fiscal year ended May 31, 1998,1999 and 2000 RMCI received a comprehensive
management fee of $1,329,283, $2,208,713 and $2,549,541, respectively, 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

10
<PAGE>

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 June 25, 1999. Pursuant to the Service Agreement, the
Adviser furnished at cost, all personnel required for the 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,
2000 the Primary Fund reimbursed RMCI $782,326 and the U.S. Government Fund
reimbursed RMCI $145,078 for expenses. For the fiscal years ended May 31,
1998 and 1999, RMCI was reimbursed $7,511,533 and $11,804,372 by the Primary
Fund and $2,011,920 and $2,351,952 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 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, 2000, no distribution
assistance payments were made to RESRV, GAM, and Kaufmann.

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

11
<PAGE>

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.

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, 2000, $7,528,836 was paid under the
Plan by the Primary Fund; $1,471,218 was paid under the Plan by the U.S.
Government Fund; and, $637,466 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, 2000, 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 AND INDEPENDENT ACCOUNTANT. 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, 1177 Avenue of the Americas, New York,
NY 10036 is the Funds' independent accountant.

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.

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

12
<PAGE>

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 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.

13
<PAGE>

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. 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. This usually occurs within two (2) business days,
but may take longer. 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 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 3:00 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 3:00 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 FROM DATE OF PURCHASE.

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.

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. 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). 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.

14
<PAGE>

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 REQUESTS. Redemption instructions and options should be
specified when your account is opened. Subsequent elections and changes in
instructions must be in writing with the signature(s) guaranteed. Changes in
registration or authorized signatories may require additional documentation. One
way to redeem shares is to write a letter of instruction which states: the
name(s) and signature(s) of all accountholders (signature(s) guaranteed, if
necessary), account number, Fund name, the dollar amount you want to sell, and
how and where to send the proceeds. If you are redeeming your IRA, please note
the applicable withholding requirements.

To reduce the risk of loss, certain situations require written
instructions along with signature guarantees. These include:

(1) redemptions for more than $5,000, 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 for the past 30 days.

You may redeem by calling the Funds at 800-637-1700. Unless you decline
telephone privileges on your application and the Funds fail to take reasonable
measures to verify the request, the Funds will not be liable for any
unauthorized telephone redemption, or for any loss, cost or expense for acting
upon an investor's telephone instructions. Telephone redemptions may be sent to
the bank or brokerage account designated by the shareholder on

15
<PAGE>

the application or in a letter with signature guarantee. To change the
designated brokerage or bank account it is necessary to contact the Firm through
which shares of the Fund were purchased or, if purchased directly from the
Funds, it is necessary to send a written request to the Funds with signature(s)
guaranteed. The Fund reserves the right to refuse a telephone redemption if it
reasonably believes that the instructions are not genuine and/or it is advisable
to do so.

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.

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 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 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.

Participants should refer to the VISA Account Shareholder Agreement for
complete information regarding responsibilities and liabilities with respect to
the VISA Check Card. If a card is lost or stolen, the cardholder should report
the loss immediately by telephoning the issuing bank, currently First Data at
402-331-5152 or 800-996-4324, which can be reached 24 hours a day, seven (7)
days a week or the Fund at 800-637-1700 or 212-401-5500 during normal business
hours (Monday through Friday, 9:00 AM to 5:00 PM, 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 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.

16
<PAGE>

TOUCH TONE AND INTERNET BILL PAYMENT SERVICE. In the near future, the Funds will
offer its shareholders touch-tone and Internet bill payment which will give you
the flexibility of paying bills over the telephone or from your PC 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 3:00 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.

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 Funds and their 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.

17
<PAGE>

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 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 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 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

18
<PAGE>

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.

Each Fund ordinarily declares dividends from its 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
shareholders as long-term capital gains, 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 a 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.

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 for temporary or emergency purposes, as stated previously, may invest
up to 5 percent of its assets in repurchase agreements pending the investment of
uninvested cash. Distributions attributable to net capital gains, if any, are
generally subject to state and local taxes. It is possible that a state or local
tax 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. 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.

19
<PAGE>

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

Upon the sale or other disposition of shares of the Fund, in the event
that the Fund fails to maintain a constant NAV per share, a shareholder may
realize a capital gain or loss which will be long-term or short-term, generally
depending upon the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced (including shares acquired pursuant to a dividend
reinvestment plan) within a period of 61 days beginning 30 days before and
ending 30 days after disposition of the shares. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such shares. Furthermore, a loss realized by a
shareholder on the redemption, sale or exchange of shares of the Fund with
respect to which exempt-interest dividends have been paid will, to the extent of
such exempt-interest dividends, be disallowed if such shares have been held by
the shareholder for less than six months.

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, 2000, the Primary Fund's yield was
5.45% and its effective yield was 5.60%. For the seven-day period ended May 31,
2000, the U.S. Government Fund's yield was 5.44% and its effective yield was
5.59%. For the seven-day period ended May 31, 2000 the U.S. Treasury Fund's
yield was 5.08% and its effective yield was 5.21%.

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 366/7).
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 366 divided
by 7, and subtracting 1 from the result.

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

20
<PAGE>

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 Reports containing
audited financial statements and an unaudited Semi-Annual Report. Duplicate
shareholder communications, such as the Prospectus, Annual Report, Semi-Annual
Report, will not be sent to related accounts at a common address, unless
instructed to the contrary by you. 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 AND ON-LINE 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 through On-line Access 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 have extremely strong repayment capacity 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 ratings 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.

21
<PAGE>

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 of assurance for timely payment.

FINANCIAL STATEMENTS

Financial Statements (audited) for The Reserve Fund -- Primary, U.S.
Government and U.S. Treasury Funds for the fiscal year ended May 31, 2000,
including notes thereto, are incorporated by reference in the SAI from the
Trust's Annual Report to Shareholders dated May 31, 2000 filed with the SEC.

<PAGE>

[LOGO]

STRATEGIST MONEY-MARKET FUND

PROSPECTUS
JULY 31, 2000

The STRATEGIST MONEY-MARKET FUND (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.

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

<PAGE>

TABLE OF CONTENTS

ABOUT THE FUND
Investment Objective...........................................................2
Investment Strategies..........................................................2
Principal Risks of Investing in the Fund.......................................4
Performance....................................................................5
Fees & Expenses of the Fund....................................................6
Fund Management................................................................6

YOUR ACCOUNT
How to buy shares..............................................................7
Selling shares.................................................................8

ACCOUNT SERVICES..............................................................10

DIVIDENDS & TAXES.............................................................11

FINANCIAL HIGHLIGHTS..........................................................12

QUESTIONS?
Shareholders should direct their inquiries to American Express or the Financial
Advisor from whom they received this Prospectus.

American Enterprise Investment Services Inc.
70100 AXCP Financial Center
Minneapolis, MN 55474
(800) 297-7378

ABOUT THE FUND

The Fund is designed 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 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 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.

INVESTMENT STRATEGIES
The Fund seeks to maintain a stable $1.00 share price. 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.

2
<PAGE>

ABOUT THE FUND

STRATEGIST MONEY-MARKET FUND. The 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 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. The Fund may also invest in municipal
obligations, the interest on which is not exempt from federal income taxation.

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 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.

The Fund 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 bank obligations.

The Fund will at all times as is practicable be invested in accordance with
the investment objective and strategies outlined above. However, from time to
time, the 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 the Fund adopts a temporary
defensive position, the Fund might not be able to attain its objective.

3
<PAGE>
ABOUT THE FUND

PRINCIPAL RISKS OF INVESTING IN THE FUND.
The following factors could reduce a 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. Most of the Fund's performance depends on interest
rates. When interest rates fall, the Fund's yield will typically fall as
well.

- THE FUND IS NOT FDIC-INSURED. The Fund is a money-market fund which is 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 the 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, the Fund has maintained a constant share price since inception, and
will strive to continue to do so.

- 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.

- CERTAIN PORTFOLIO HOLDINGS. 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 are generally associated with investing in the banking industry,
such as interest rate risk, credit risk and regulatory developments. Further,
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.

- NON-DIVERSIFICATION. The Fund is 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 the Fund more than it would in a diversified portfolio.

4
<PAGE>
ABOUT THE FUND

PERFORMANCE
The bar charts below show the Fund's 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 Fund. 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 Strategist Money-Market Fund

CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS:
Best Quarter:2Q 1997 1.44%
Worst Quarter:2Q 1999 1.22%
Most Recent Calendar Quarter:2Q 2000 1.49%

<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER
31, 1999
1 YEAR SINCE INCEPTION
5.00% 5.09%
</TABLE>

For the Fund's current yields, call toll-free (800) 297-7378.

5
<PAGE>
ABOUT THE FUND

FEES & EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

FEE TABLE
SHAREHOLDER FEES* None
(Fees paid directly from your investment)

ANNUAL FUND OPERATING EXPENSES FOR THE FUND
(Expenses that are deducted from Fund assets)

<TABLE>
<S> <C>
Comprehensive Management Fee 0.80%
Distribution (12b-1) Fee 0.20
----
Total Operating Expenses 1.00%
====
</TABLE>

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

(*) The Fund will without prior notice impose a "Small Balance fee" (currently
$5) when the average daily balance on an account drops below $15,000 in any
month. 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).

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.

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 the
Fund's operating expenses remain the same. The costs would be the same whether
you stayed in the 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> <C> <C>
$102 $318 $552 $1,225
</TABLE>

FUND MANAGEMENT
THE INVESTMENT ADVISER FOR THE FUND 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 Fund, subject to policies
adopted by the Trustees. The Fund pays RMCI a comprehensive management fee of
0.80% per year of the average daily net assets of the Fund. RMCI pays all
administration 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 the Fund pays its direct or allocated share.
For the fiscal year ended May 31, 2000, the Strategist Fund paid RMCI an
aggregate fee of $197,627, which represents a waiver of $196,744.

THE FUND'S DISTRIBUTOR is Resrv Partners, Inc. ("Resrv"), 1250 Broadway, New
York, NY 10001-3701.

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.

6
<PAGE>

YOUR ACCOUNT

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 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 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 Fund.

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 to American
Express Financial Corporation, 70100 AXCP Financial Center
, Minneapolis, MN 55459-9801. You must include your
Investment Management Account Number (or Taxpayer
Identification Number) on the "Pay to the order of" line
and make the check payable to Strategist Money-Market
Fund. Checks and wires which do not correctly identify the
account to be credited may be returned or delay the
purchase of shares.

- BY WIRE. Prior to calling your bank, call American Express
at 800-297-7378 for specific instructions or the Firm from
which you received this Prospectus.

- 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 account. Please call
American Express at 800-297-7378 for an application or
consult your Financial Advisor.

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.

7
<PAGE>
YOUR ACCOUNT

When purchasing shares, please keep in mind:
- 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. 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 (currently $15) for any check that does
not clear and will be responsible for any losses suffered by the Fund 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 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 request. You may sell shares by calling the Fund 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
Fund assumes no responsibility for delays in the receipt of wired or
mailed funds.

TELEPHONE REQUESTS. You may redeem by calling American Express at 800-297-7378.
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 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 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 reasonably believes that the instructions are not genuine
and/or it is advisable to do so.

SIGNATURE GUARANTEED. The following situations require written instructions
along with signatures guaranteed.

8
<PAGE>
YOUR ACCOUNT

Signature guarantees are designed to protect both you and the Fund 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, when the average daily balance on an account drops below $15,000 in
any month, a fee (currently $5) 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.

THE FUND RESERVES CERTAIN RIGHTS.
The Fund reserves 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, the 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 Fund's 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.

SHAREHOLDER COMMUNICATIONS. The Fund 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.

9
<PAGE>

ACCOUNT SERVICES

REDEMPTION BY CHECK. You may redeem shares of the Fund by using your 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; signature or payee is missing; 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.

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

EASY ACCESS. Easy Access is the Fund's 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 800-297-7378
and follow the instructions.

10
<PAGE>

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 Fund and their shareholders are subject to change and may be
retroactive.

The Fund intends to maintain its regulated investment company status for federal
income tax purposes, so that it will not be liable for federal income taxes to
the extent its taxable income and net capital gains are distributed. However, it
is possible that events could occur which could cause the 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 the 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 Fund.

The 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 Fund.

BACKUP WITHHOLDING. As with all mutual funds, the 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 ("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 the 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.

11
<PAGE>

FINANCIAL HIGHLIGHTS

Contained below is per share operating performance data for a share of
beneficial interest outstanding of the Strategist Money-Market 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 Fund's independent accountants, whose report,
along with the Fund's financial statements, is included in the Fund's Annual
Report, which is available upon request by calling 800-297-7378.

<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED MAY 31,
------------------------------------------------
2000 1999 1998 1997 1996(A)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Net asset value, 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, 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>

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

(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>

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

12
<PAGE>

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. Our 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 American
Express at 800-297-7378. 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.

[LOGO]

GENERAL INFORMATION AND 24-HOUR YIELD AND BALANCE INFORMATION
800-297-7378

Distributor - Resrv Partners, Inc.
RF/STRAT 07/2000

SEC File Number
The Reserve Fund
811-2033

[LOGO]

AMERICAN EXPRESS
MONEY MARKET ACCOUNTS
--------------------------------------------

Strategist
Money Market
Fund

Prospectus
July 31, 2000

OFFERED BY
THE RESERVE FUNDS

<PAGE>

STRATEGIST MONEY-MARKET FUND
1250 BROADWAY, NEW YORK, NY 10001-3701
212-401-5500 |X| 800-637-1700

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

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) and classes 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, 2000 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, 2000.

<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
Description of Fund.....................................................2
Investment Strategies and Risks.........................................2
Management of the Trust.................................................6
Investment Management, Distribution and Custodian Agreements............9
Information about the Trust............................................11
How to Buy and Sell Shares.............................................12
Dividends, Distributions and Taxes.....................................16
Yield Information......................................................17
General Information....................................................18
Ratings................................................................18
Financial Statements...................................................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.

<PAGE>

DESCRIPTION OF THE FUND

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 is not guaranteed. 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.

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. 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).

Investment management companies can be divided into "diversified" and
"non-diversified". Under Section 5(b), a diversified company must have 75% of
the value of its total assets in cash and cash items (including receivables),
U.S. government securities, securities of other investment companies, and other
securities. Any management company other than a diversified company is defined
as a "non-diversified" company pursuant to Section 5(b)(2). The Reserve Fund is
a non-diversified mutual fund. In addition, the Fund intends to comply with the
diversification requirement of Rule 2a-7 under the 1940 Act which places certain
limits on a Fund's investments in any one issuer's securities in order to limit
investment risk. With few exceptions, under Rule 2a-7, a Fund may invest no more
than 5% of its total assets in securities of any one issuer, except U.S.
government securities.

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.

INVESTMENT STRATEGIES AND RISKS

FUND 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. The Fund cannot:

(1) borrow money except as a temporary or emergency measure and not in an
amount to exceed 5% of the market value of its total assets;
(2) issue senior securities except in compliance with the Investment Company
Act of 1940 ("1940 Act");
(3) act as an underwriter with respect to the securities of others except to
the extent that, in connection with the disposition of portfolio
securities, it may be deemed to be an underwriter under certain securities
laws;
(4) concentrate investments in any particular industry except to the extent
that its investments are concentrated exclusively in U.S. Government
securities and bank obligations or repurchase agreements secured by such
obligations;
(5) purchase, sell or otherwise invest in real estate or commodities or
commodity contracts;
(6) lend more than 33 1/3% of the value of its total assets except to the
extent its investments may be considered loans;
(7) sell any security short or write, sell or purchase any futures contract or
put or call option; and
(8) 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.

<PAGE>

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.

BANK OBLIGATIONS. The Fund may invest in bank obligations that include
certificates of deposit, banker's acceptances, letters of credit and time
deposits. A certificate of deposit is a negotiable certificate representing a
bank'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 bank 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.

FOREIGN BANK OBLIGATIONS. The 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. standards.

MUNICIPAL OBLIGATIONS. The 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

<PAGE>

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 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 the Board of Trustees.

Municipal obligations are sometimes offered on a "when-issued" or delayed
delivery basis. There is no limit on the Strategist 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. Although not a principal investment strategy, the Fund 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
Strategist Fund may invest consist of high-quality, short-term bonds and notes
(including variable amount master demand notes) issued by domestic corporations,
including banks. However, the Fund has never purchased commercial paper and has
no current interest in doing so.

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 underlying security.
The Fund will not hold more than 10% of its net assets in illiquid securities,
including repurchase agreements, maturing in more than seven (7) days.

Illiquid securities generally are any securities that cannot be disposed of
promptly and in the ordinary course of business at approximately the amount at
which the Fund has valued the instruments. The liquidity of the Fund's
investments is monitored under the supervision and direction of the Board of
Trustees. Investments currently not considered liquid include repurchase
agreements not maturing within seven days and certain restricted securities

The 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

<PAGE>

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.

BORROWING. 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. Borrowing may subject the Fund to interest
costs, which may exceed the interest received on the securities purchased with
the borrowed funds. The Fund normally may borrow at times to meet redemption
requests rather than sell portfolio securities to raise the necessary cash.
Borrowing can involve leveraging when securities are purchased with the borrowed
money. To avoid this, the Fund will not purchase securities while borrowings are
outstanding.

SECURITIES LENDING AGREEMENTS. The 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 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 or instrumentalities). The
Fund receives an amount equal to the interest on loaned securities and also
receives 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. 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 which are outlined above.

The Fund follows regulations set forth by the SEC that dictate the quality
requirements for money market mutual funds. These require the Fund to invest
exclusively in high-quality securities. Generally, high-quality securities are
securities that present minimal credit risks and are rated in one of the two
highest rating categories by two nationally recognized statistical rating
organizations (NRSROs), or by one if only one NRSRO has rated the securities,
or, if unrated, determined to be of comparable quality by the investment adviser
pursuant to guidelines adopted by the Board of Trustees. High-quality securities
may be "first tier" or "second tier" securities. First tier securities may be
rated within the highest category or determined to be of comparable quality by
the investment manager. Money market fund shares and U.S. government securities
also are first tier securities. Second tier securities generally are rated
within the second-highest category. Should a security's high-quality rating
change after purchase by the Fund, the investment adviser would take such
action, including no action, as determined to be in the best interest of the
Fund by the Board of Trustees.

TEMPORARY DEFENSIVE POSITION. The Fund will at all times as is practicable be
invested in accordance with the investment objective and strategies outlined in
the Prospectus and SAI. However, from time to time, the 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 the Fund adopts a temporary defensive position, the Fund
might not be able to attain its objective.

The Fund would, in adopting a temporary defensive position, buy more
conservative U.S. Government securities. Further, in an extreme emergency, the
Funds would maintain a large percentage of uninvested cash.

<PAGE>

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.

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, 63, Chairman/Chief Executive Officer and Trustee, 1250
Broadway, New York, NY 10001-3701.

Mr. Bent co-founded The Reserve Funds in 1970 and has been an executive
officer since then.

*++BRUCE R. BENT II, 34, President, Assistant Treasurer and Trustee, 1250
Broadway, New York, NY 10001-3701.

+EDWIN EHLERT, JR., 69, Trustee, 125 Elm Street, Westfield, NJ 07091.

Mr. Ehlert is President and Director of Ehlert Travel Associates, Inc.
(travel agency) and Ehlert Travel Associates of Florida, Inc. (travel agency),
and Trustee of RF, RIT, RTET, RNYTET and RPES.

+HENRI W. EMMET, 74, Trustee, 1535 Presidential Drive, Apt. 4A, Columbus, OH
43212.

<PAGE>

+PATRICK J. FOYE, 43, Trustee, c/o AIMCO, 2000 S. Colorado Blvd., Tower Two,
Suite 2-1000, Denver, CO 80222.

From 1995 to present, Mr. Foye has been the Deputy Chairman of Long Island
Power Authority. In addition, Mr. Foye is Executive Vice President of Apartment
Investment and Management Company ("AIMCO"), a real estate investment trust and
the nation's largest owner and manager of multi-family apartment properties. He
was a partner from 1989 through 1998 in the law firm of Skadden, Arps, Slate,
Meagher & Folm LLP, as well as a managing partner in the firm's offices in
Moscow, Budapest, and Brussels from 1992 through 1994. Mr. Foye is a member of
Governor Pataki's New York State Privatization Research Council. He is currently
a Trustee of RF, RIT, RTET, RNYTET and RPES.

+DONALD J. HARRINGTON, C.M., 55, Trustee, St. John's University, Grand Central &
Utopia Parkways, Jamaica, NY 11439.

+WILLIAM J. MONTGORIS, 53, Trustee, 286 Gregory Road, Franklin Lakes, NJ 07417.

Mr. Montgoris is formerly Chief Operating Officer of the Bear Stearns
Companies, Inc. (1979-1999). He is currently Trustee of RF, RIT, RTET, RNYTET
and RPES.

+WILLIAM E. VIKLUND, 60, Trustee, 110 Grist Mill Lane, Plandome Manor, NY
11030-1110.

Mr. Viklund is formerly President and COO of Long Island Bankcorp and
President and CEO of Long Island Savings Bank (1980-1996). He is currently
Trustee of RF, RIT, RTET, RNYTET and RPES.

*ARTHUR T. BENT III, 32, Chief Operating Officer/Treasurer, Senior Vice
President and Assistant Secretary, 1250 Broadway, New York, NY 10001-3701.

MARYKATHLEEN FOYNES GAZA, 30, Director of Compliance and Legal Affairs (Counsel)
and Secretary, 1250 Broadway, New York, NY 10001-3701.

JAMES M. FREISEN, 42, Controller, 1250 Broadway, New York, NY 10001-3701.

Mr. Freisen is Controller. Before joining The Reserve Funds in 1999, Mr.
Freisen was an Assistant Vice President at Paine Webber, Inc. (1998-1999). Prior
to that, he was Assistant Vice President, Bank of New York (1997-1998);
Assistant Vice President, Fifth Third Bank (1995-1997); and Vice President,
Smith Barney (1991-1995).

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

*Mr. Bent is the father of Mr. Bent II and Mr. Bent III.

+ Messrs. Ehlert, Emmet, Foye, Harrington, Montgoris, and Viklund are members of
a Review Committee which

<PAGE>

performs the functions of an Audit Committee and reviews compliance procedures
and practices. The Audit Committee members receive an annual committee fee of
$2,000.

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 or 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.

The Trust does not pay any pension or retirement benefits to the Trustees.

COMPENSATION TABLE
FOR FISCAL YEAR ENDED MAY 31, 2000

<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST AND TRUST COMPLEX
NAME OF TRUSTEE, POSITION FROM TRUST (4 ADDITIONAL TRUSTS) PAID TO TRUSTEE
--------------------------------------- ------------ -------------------------------------
<S> <C> <C>
Bruce R. Bent, Chairman/CEO and Trustee $0 $0
Bruce R. Bent II, President and Trustee 0 0
Edwin Ehlert, Jr., Trustee 24,075 30,500
Patrick J. Foye, Trustee 2,422 3,068
Henri W. Emmet, Trustee 24,075 30,500
Rev. Donald J. Harrington, Trustee 21,312 27,000
William J. Montgoris, Trustee 20,260 25,667
William E. Viklund, Trustee 24,075 30,500
</TABLE>

The following executive officers of the Trust had allocated cash remuneration in
excess of $60,000 during the last fiscal year ending May 31, 2000 for services
rendered to the Fund:

<TABLE>
<CAPTION>
AGGREGATE ESTIMATED ANNUAL BENEFITS
NAME CAPACITY RENUMERATION UPON RETIREMENT
------ ---------- ------------ -------------------------
<S> <C> <C> <C>
Bruce R. Bent Chairman/CEO $ 98,666 $32,546
Bruce R. Bent II President 154,526 2,074
Arthur T. Bent III Sr. Vice President
and COO 153,312 521
</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.

<PAGE>

As of June 30, 2000, the following person were known by the Fund to own of
record or beneficially 5% or more of the outstanding shares of the Fund:

<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) SHARES OWNED
---------------------------------- ------------ ------------
<S> <C> <C>
Reserve Management Corporation 9,417,039 22.6%
ATTN: Account No. 30035430
1250 Broadway
New York, NY 10001

Reserve Management Corporation 2,390,187 5.7%
ATTN: Account No. 30039648
1250 Broadway
New York, NY 10001
</TABLE>

----------
(1) Fractional shares have been omitted.

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 shareholder 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 June 26, 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 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 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, 1998, 1999, as well as the period of June 1,
1999 to June 25, 1999, RMCI received management fees under the Investment
Management Agreements previously in effect. For fiscal year ended May 31, 1998,
RMCI received management fees of $605,330; however, at May 31, 1998, RMCI waived
$354,118 of its comprehensive fee. For the fiscal year ended May 31, 1999, RMCI
received management fees of $443,201; however, at May 31, 1999, RMCI waived
$221,601 of the comprehensive management fee. For the fiscal year ended May 31,
2000, RMCI received management fees of $394,371; however, at May 31, 2000, RMCI
waived $196,744 of the comprehensive management fee.

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 Agreement 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.

<PAGE>

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 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, 2000, no distribution assistance payments were made to RESRV.

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, 2000, $0 was paid under the Plan by
the 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.

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 AND INDEPENDENT ACCOUNTANT. 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

<PAGE>

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, 1177 Avenue of the Americas, New York, NY
10036 is the Fund's independent accountant.

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.

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 Funds 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.

<PAGE>

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. 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.

IF SHARES OF THE FUND ARE PURCHASED BY CHECK OR 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 FROM DATE OF PURCHASE.

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.

<PAGE>

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
Trust 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. 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). 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.

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 American
Express at 800-297-7378 for an application.

<PAGE>

To reduce the risk of loss, certain situations require written instructions
along with signature guarantees. These include:

You may redeem by calling the Fund at 800-297-7378. Unless you decline
telephone privileges on your application and the Funds fail to take reasonable
measures to verify the request, the Funds will not be liable for any
unauthorized telephone redemption, or for any loss, cost or expense for acting
upon an investor's telephone instructions. Telephone redemptions may be sent to
the bank or brokerage account designated by the shareholder on the application
or in a letter with signature guarantee. To change the designated brokerage or
bank account it is necessary to contact the Firm through which shares of the
Fund were purchased or, if purchased directly from the Funds, it is necessary to
send a written request to the Funds with signature(s) guaranteed. The Fund
reserves the right to refuse a telephone redemption if it reasonably believes
that the instructions are not genuine and/or 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 American Express at 800-297-7378 for more information about
charges, fees and the application process. The use of checks by participants
will be subject to the terms of your 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

<PAGE>

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.

AUTOMATIC TRANSFER PLANS (ACH). You may redeem shares of the Fund (minimum $100)
without charge by telephone if you have filed a separate 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.

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.

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 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

<PAGE>

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.

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 the payment of any amounts due the fund, the investment adviser or
the distributor.

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 its net investment income on
each day the Exchange and the 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 shareholders as
long-term capital gains, 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.

<PAGE>

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.

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.

Gains or losses attributable to fluctuations in exchange rates which occur
between the time the Strategist Fund accrues receivables or liabilities
denominated in a foreign currency, and the time the Strategist 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 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.

Upon the sale or other disposition of shares of the Fund, in the event that
the Fund fails to maintain a constant NAV per share, a shareholder may realize a
capital gain or loss which will be long-term or short-term, generally depending
upon the shareholder's holding period for the shares. Any loss realized on a
sale or exchange will be disallowed to the extent the shares disposed of are
replaced (including shares acquired pursuant to a dividend reinvestment plan)
within a period of 61 days beginning 30 days before and ending 30 days after
disposition of the shares. In such a case, the basis of the shares acquired will
be adjusted to reflect the disallowed loss. Any loss realized by a shareholder
on a disposition of Fund shares held by the shareholder for six months or less
will be treated as a long-term capital loss to the extent of any distributions
of net capital gains received by the shareholder with respect to such shares.
Furthermore, a loss realized by a shareholder on the redemption, sale or
exchange of shares of the Fund with respect to which exempt-interest dividends
have been paid will, to the extent of such exempt-interest dividends, be
disallowed if such shares have been held by the shareholder for less than six
months.

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) The 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, 2000, the Strategist Fund's yield
was 5.99% and its effective yield was 6.18%.

<PAGE>

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
366/7). 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 366
divided by 7, and subtracting 1 from the result.

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.

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. Duplicate shareholder
communications, such as the Prospectus, Annual Report, Semi-Annual Report, will
not be sent to related accounts at a common address, unless instructed to the
contrary by you. 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 Fund 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.

EASY ACCESS. Easy Access is the Fund's 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.

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.

<PAGE>

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.

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.

FINANCIAL STATEMENTS

Financial Statements (audited) for the Strategist Money-Market Fund for the
fiscal year ended May 31, 2000, including notes thereto, are incorporated by
reference in the SAI from the Trust's Annual Report to Shareholders dated May
31, 2000 filed with the SEC.

<PAGE>

[LOGO]

AMERICAN EXPRESS
MONEY-MARKET ACCOUNTS

PROSPECTUS
JULY 31, 2000

THE RESERVE FUND, RESERVE TAX-EXEMPT TRUST and RESERVE NEW YORK TAX-EXEMPT TRUST
(the "Trusts") are registered investment companies, which offer fourteen no-load
money-market funds in this Prospectus:

- PRIMARY FUND,
- U.S. GOVERNMENT FUND,
- U.S. TREASURY FUND,
- INTERSTATE TAX-EXEMPT FUND,
- CALIFORNIA II 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,
- PENNSYLVANIA TAX-EXEMPT FUND, and
- VIRGINIA TAX-EXEMPT FUND
(each a "Fund", collectively "the Funds").

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

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>

[This page intentionally left blank]

2
<PAGE>
TABLE OF CONTENTS

ABOUT THE FUNDS
Investment Objectives..........................................................3
Investment Strategies for the Primary, U.S. Government and U.S. Treasury
Funds..........................................................................4
Principal Risks of Investing in the Funds......................................5
Investment Strategies of Interstate Tax-Exempt Fund............................6
Principal Risks of Investing in the Fund.......................................7
Investment Strategies of State Specific Municipal Funds........................8
Principal Risks of Investing in the Funds.....................................10
Performance...................................................................12
Fees & Expenses of the Funds..................................................18
Fund Management...............................................................18

YOUR ACCOUNT
How to buy shares.............................................................20
Selling shares................................................................21

ACCOUNT SERVICES..............................................................23

DIVIDENDS & TAXES.............................................................24

FINANCIAL HIGHLIGHTS..........................................................26

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 (facsimile)
[email protected]
or visit our web site at www.reservefunds.com

ABOUT THE FUNDS

INVESTMENT OBJECTIVES
The investment objective of 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 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.

The investment objective of each of the state specific municipal 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 named state fund as is consistent with preservation of capital
and liquidity.

However, achievement of these objectives cannot be assured.

3
<PAGE>

ABOUT THE FUNDS

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

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.

4
<PAGE>
ABOUT THE FUNDS

PRINCIPAL RISKS OF INVESTING IN THE PRIMARY, U.S. GOVERNMENT AND U.S. TREASURY
FUNDS.
The following factors could reduce a Fund's income level and/or share price:

- 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.

5
<PAGE>
ABOUT THE FUNDS

INVESTMENT STRATEGIES OF THE INTERSTATE TAX-EXEMPT FUND. The Fund seeks to
maintain a stable $1.00 share price. The portfolio managers monitor a range of
economic and financial factors. Based on their analysis, the Fund is principally
invested in high quality, tax-exempt obligations 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 Interstate Tax-Exempt Fund's principal investment strategies include:

- Investing principally in high-quality, tax-exempt municipal money-market
securities issued by the states, counties, authorities or other political
subdivisions. These securities are generally referred to as "municipal
obligations".

- Investing 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. Interest received on certain otherwise
tax-exempt securities ("private activity bonds") may be 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 the
Fund to AMT; however, the Fund avoids buying any AMT paper.

- Investing in compliance with federal regulations designed to help maintain
liquidity and the strict standards for credit quality, diversification
and maturity.

The interest on securities generally known as municipal obligations is
exempt from federal income tax in the opinion of either bond counsel for the
issuer or, in some instances, the issuer itself. These obligations 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 Fund 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 Co., Inc ("RMCI"), the
Adviser, determines them to be of comparable quality pursuant to guidelines
established by the Trustees.

The Fund 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 Fund will not invest more than 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.

6
<PAGE>
ABOUT THE FUNDS

PRINCIPAL RISKS OF INVESTING IN THE INTERSTATE TAX-EXEMPT FUND.
The following factors could reduce a Fund's income level and/or share price:

- A FUND IS NOT FDIC-INSURED. The Fund is a money-market fund which is 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 the 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, the Fund has maintained a constant share price since inception, and
will strive to continue to do so.

- 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.

- 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. The Fund concentrates its investments in municipal
obligations which are volatile and there are risks associated with investing
in a particular state. For example, unfavorable political or economic
conditions and/or changes in municipal market-related legislation or
litigation can significantly affect the financial condition and credit
quality of issuers of municipal securities. Further, investments secured by
letters of credit or guarantees of banks are subject to the same risks
generally associated with investing in the banking industry, such as interest
rate risk, credit risk and regulatory developments.

7
<PAGE>
ABOUT THE FUNDS

INVESTMENT STRATEGIES OF THE STATE-SPECIFIC MUNICIPAL FUNDS. 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
principally invested in high quality, tax-exempt obligations that are intended
to provide as high a yield as is possible without violating the Fund's credit
quality policies or jeopardizing the stability of its share price.

The State-Specific Municipal Funds' principal investment strategies include:

- Investing principally in high-quality, tax-exempt municipal money-market
securities issued by the specific state and its counties, municipalities,
authorities or other political subdivisions. These securities are generally
referred to as "municipal obligations".

- Investing at least 80% of the value of each Fund's net assets in municipal
obligations which are exempt from federal, income (including federal
Alternative Minimum Tax) 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. Interest
received on certain otherwise tax-exempt securities ("private activity
bonds") may be 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 the Fund to AMT; however, the Funds'
avoid buying any AMT paper.

- Investing in compliance with federal regulations designed to help maintain
liquidity and the strict standards for credit quality, diversification
and maturity.

Each Fund will purchase tax-exempt securities which are rated MIG1 or MIG2
by Moody's, SP-1 or SP-2 by S&P or the equivalent. Municipal obligations which
are not rated may also be purchased provided RMCI determines them to be of
comparable quality pursuant to guidelines established by the Funds' Trustees.

Each Fund 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. A Fund will not invest more than 10% of the
value of its assets in floating or variable rate demand bonds for

8
<PAGE>
ABOUT THE FUNDS
which there is no secondary market if the demand feature on such municipal
obligations requires more than seven (7) days' notice.

9
<PAGE>
ABOUT THE FUNDS

PRINCIPAL RISKS OF INVESTING IN THE STATE-SPECIFIC MUNICIPAL FUNDS.
The following factors could reduce a Fund's income level and/or share price:

- 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.

- 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 the Fund more than it would in a diversified portfolio.

- 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. The Funds concentrate their investments in municipal
obligations of issuers located in the state for which they are named. The
municipal market is volatile. Particularly, investments secured by letters of
credit or guarantees of banks are subject to the same risks generally
associated with investing in the banking industry, such as interest rate
risk, credit risk and regulatory developments. Further, there are specific
risks associated with investing in a particular state. For example,
unfavorable political or economic conditions and/or changes in municipal
market-related legislation or litigation within a specific state can
significantly affect the financial condition and credit quality of issuers of
municipal securities located in that state. Please read below, some of the
risks particular to the single state municipal funds offered in this
Prospectus:

- California II Tax-Exempt Fund: There are special risks inherent in the
Fund's investments in California municipal obligations, which result from
statutes that limit the taxing and spending authority of California
governmental agencies, as well as the general financial condition of the
State.

- Connecticut Tax-Exempt Fund: The credit quality of the Connecticut
Tax-Exempt Fund will depend on the continued financial strength of the
State and its political subdivisions. Connecticut's economy relies in
part on activities that may be adversely affected by cyclical change, and
recent declines in defense spending have had a significant impact on
unemployment levels.

10
<PAGE>
ABOUT THE FUNDS

- Florida Tax-Exempt Fund: The revenue of Florida is closely tied to its
tourism business. A decline in tourism revenues could adversely affect
revenues, principally sales tax revenue which is vulnerable to economic
cycles.

- Massachusetts Tax-Exempt Fund: Investors should realize that since 1989,
Massachusetts has experienced growth rates significantly below the
national average and an economic recession in 1990 and 1991 caused
negative growth rates. Massachusetts' economic and fiscal problems in the
late 1980s and early 1990s caused several rating agencies to lower their
credit ratings.

- Michigan Tax-Exempt Fund: Michigan's fiscal condition continues to be
tested by its dependence on the inherently cyclical auto industry.

- New Jersey Tax-Exempt Fund: From time to time, New Jersey's economic
performance has trailed the rest of the nation. During the economic
downturn of 1992, the State's unemployment rate rose to a peak of 8.5%.

- New York Tax-Exempt Fund: There are the special risks inherent in
investing in New York municipal obligations which result from the
financial condition of New York State, certain of its public bodies and
municipalities, and New York City in particular.

- Ohio Tax-Exempt Fund: The State's fiscal condition is closely tied to its
ability to minimize its exposure to cyclical downturns in the
manufacturing sector.

- Pennsylvania Tax-Exempt Fund: Many different social, environmental and
economic factors may affect the financial condition of Pennsylvania and
its political subdivisions and, from time to time, Pennsylvania and
certain of its political subdivisions have encountered financial
difficulties which have adversely affected their respective credit
standings.

- Virginia Tax-Exempt Fund: The Commonwealth's low unemployment level is
due in large part to Federal Government jobs available to its residents
in neighboring Washington D.C. Virginia's continued financial strength
rests in its ability to maintain low debt levels and to diversify its
economy.

11
<PAGE>
ABOUT THE FUNDS

PERFORMANCE
The bar charts below show the Funds' annual returns for the past ten years or
the first full calendar years 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. The Reserve
Tax-Exempt Trust's registration statement for the California II Tax-Exempt Fund
became effective on June 28, 1999 and the Virginia Tax-Exempt Fund on March 1,
2000. As such, they do not appear in the tables because a full calendar year
does not exist. 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

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>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR 5 YEARS 10 YEARS
4.42% 4.80% 4.64%
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Total Return for U.S. Government Fund

CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS:
Best Quarter: 3Q 1990 1.89%
Worst Quarter: 2Q 1993 0.56%
Most Recent Calendar Quarter: 2Q 2000 1.32%

<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR 5 YEARS 10 YEARS
4.22% 4.69% 4.53%
</TABLE>

12
<PAGE>
ABOUT THE FUNDS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Total Return for U.S. Treasury Fund

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>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR 5 YEARS 10 YEARS
4.02% 4.53% 3.91%
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Total Return for Interstate Tax-Exempt Fund

CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS:
Best Quarter: 4Q 1990 1.41%
Worst Quarter: 1Q 1994 0.38%
Most Recent Calendar Quarter: 2Q 2000 0.81%

<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR 5 YEARS 10 YEARS
2.39% 2.70% 2.95%
</TABLE>

13
<PAGE>
ABOUT THE FUNDS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Total Return for New York Tax-Exempt Fund

CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS:
Best Quarter: 4Q 1990 1.30%
Worst Quarter: 3Q 1993 0.36%
Most Recent Calendar Quarter: 2Q 2000 0.80%

<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR 5 YEARS 10 YEARS
2.25% 2.57% 2.75%
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Total Return for Connecticut Tax-Exempt Fund

CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS:
Best Quarter: 4Q 1990 1.29%
Worst Quarter: 2Q 1993 0.38%
Most Recent Calendar Quarter: 2Q 2000 0.77%

<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR 5 YEARS 10 YEARS
2.15% 2.52% 2.73%
</TABLE>

14
<PAGE>
ABOUT THE FUNDS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Total Return for Florida Tax-Exempt Fund

CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS:
Best Quarter: 2Q 1997 0.73%
Worst Quarter: 1Q 1999 0.49%
Most Recent Calendar Quarter: 2Q 2000 0.84%

<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR SINCE INCEPTION
2.36% 2.52%
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Total Return for Massachusetts Tax-Exempt Fund

CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS:
Best Quarter: 1Q 1991 1.15%
Worst Quarter: 1Q 1994 0.42%
Most Recent Calendar Quarter: 2Q 2000 0.81%

<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR 5 YEARS 10 YEARS
2.20% 2.62% 2.94%
</TABLE>

15
<PAGE>
ABOUT THE FUNDS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Total Return for Michigan Tax-Exempt Fund

CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS:
Best Quarter: 1Q 1999 0.67%
Worst Quarter: 3Q 1999 0.54%
Most Recent Calendar Quarter: 2Q 2000 0.86%

<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR SINCE INCEPTION
2.49% 2.48%
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Total Return for New Jersey Tax-Exempt Fund

CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS:
Best Quarter: 2Q 1995 0.75%
Worst Quarter: 1Q 1999 0.46%
Most Recent Calendar Quarter: 2Q 2000 0.80%

<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR 5 YEARS SINCE INCEPTION
2.16% 2.48% 2.61%
</TABLE>

16
<PAGE>
ABOUT THE FUNDS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Total Return for Ohio Tax-Exempt Fund

CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS:
Best Quarter: 1Q 1999 0.63%
Worst Quarter: 2Q 1999 0.53%
Most Recent Calendar Quarter: 2Q 2000 0.85%

<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR SINCE INCEPTION
2.37% 2.42%
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

Total Return for Pennsylvania Tax-Exempt Fund

CALENDAR YEARS ENDED DECEMBER 31
QUARTERLY RETURNS:
Best Quarter: 2Q 1998 0.68%
Worst Quarter: 1Q 1999 0.49%
Most Recent Calendar Quarter: 2Q 2000 0.87%

<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999
1 YEAR SINCE INCEPTION
2.37% 2.49%
</TABLE>

For the Funds' current yields, call toll-free (800) 637-1700
or visit our web site at WWW.RESERVEFUNDS.COM.

17
<PAGE>
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 are deducted from Fund assets)

<TABLE>
<S> <C>
Comprehensive Management Fee 0.80%
Distribution (12b-1) Fee 0.20
----
Total Operating Expenses 1.00%
====
</TABLE>

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
$102 $318 $552 $1,225
</TABLE>

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, , the California II, Michigan, Ohio
and Virginia Tax-Exempt Funds 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 Interstate Tax-Exempt Fund paid RMCI an aggregate fee of
$2,228,804; and, the California II

18
<PAGE>
ABOUT THE FUNDS

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, Pennsylvania Tax-Exempt and Virginia Tax-Exempt Funds
paid an aggregate fee of $452,687, $420,264, $200,157, $103,426, $11,118,
$355,140, $1,538,209, $16,505, $141,513 and $1,371, respectively. California II
Tax-Exempt and Virginia Tax-Exempt Funds had fees waived of $24,022 and $73,
respectively.

THE FUNDS' DISTRIBUTOR is Resrv Partners, Inc. ("Resrv"), 1250 Broadway, New
York, NY 10001-3701.

19
<PAGE>

YOUR ACCOUNT

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 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.

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.

20
<PAGE>
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 11:00 AM (Eastern Time, 3:00 PM for the
Primary and U.S. Government 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 11:00 AM (Eastern Time, 3:00 PM for the Primary and U.S.
Government 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 11:00 AM (Eastern Time, 3:00 PM for the Primary and U.S.
Government 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.

21
<PAGE>
YOUR ACCOUNT

SIGNATURE GUARANTEED. The following situations require written instructions
along with signatures guaranteed.

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.

22
<PAGE>

ACCOUNT SERVICES

CHECKING. You may redeem shares of the Fund by using your Reserve checks. 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.

23
<PAGE>

DIVIDENDS & TAXES

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.
As to the state specific municipal funds and the Interstate Tax-Exempt Fund,
dividends derived from the interest earned on municipal obligations and
designated by a 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
shareholders as long-term capital gains, regardless of the length of time the
Fund's shares have been owned by the shareholder.

To the extent a Fund invests in municipal obligations issued by its respective
state or political subdivision thereof, exempt-interest dividends derived from
the interest thereon generally is not subject to state and, with respect to the
New York Tax-Exempt Fund, local personal income taxes. 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 90% 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. The Florida
Tax-Exempt Fund will normally attempt to invest substantially all of its assets
in securities which are exempt from the Florida intangibles tax. If more than
10% the Florida Tax-Exempt Fund's portfolio consists of assets which are not
exempt on the annual assessment date, only the portion of the investment which
relates 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. Shareholders of the Pennsylvania
Tax-Exempt Fund that are subject to the Pennsylvania personal property tax will
not be taxed on distributions derived from interest on exempt obligations, such
as Pennsylvania or U.S. government obligations. The tax status of dividends and
distributions will be detailed in annual tax statements from the Funds.

24
<PAGE>
DIVIDENDS & TAXES

25
<PAGE>

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>

26
<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 (c)............. 1.00% 1.00% .97% .97% .99%
Ratio of net investment
income to average net
assets (c)............. 4.12% 3.76% 4.26% 4.13% 4.33%
INTERSTATE TAX-EXEMPT FUND
-------------------------
Net asset value,
beginning of year...... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Net investment income
from investment
operations............. .0267 .0242 .0279 .0256 .0285
Less dividends from net
investment income...... (.0267) (.0242) (.0279) (.0256) (.0285)
-------- -------- -------- -------- --------
Net asset value, end of
year................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
Total Return............. 2.67% 2.42% 2.79% 2.56% 2.85%
RATIOS/SUPPLEMENTAL DATA
-------------------------
Net assets end of year
(millions)............. $ 271.9 $ 292.6 $ 352.9 $ 306.2 $ 292.1
Ratio of expenses to
average net assets..... 1.00% 1.00% .97% 1.04% 1.04%
Ratio of net investment
income to average net
assets................. 2.60% 2.38% 2.75% 2.52% 2.80%
NEW YORK TAX-EXEMPT FUND
-------------------------
Net asset value,
beginning of year...... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Net investment income.... .0258 .0222 .0268 .0247 .0276
Dividends from net
investment income...... (.0258) (.0222) (.0268) (.0247) (.0276)
-------- -------- -------- -------- --------
Net asset value, end of
year................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
Total Return............. 2.58% 2.22% 2.68% 2.47% 2.76%
RATIOS/SUPPLEMENTAL DATA
-------------------------
Net assets end of year
(millions)............. $ 228.4 $ 186.0 $ 171.2 $ 153.2 $ 125.5
Ratio of expenses to
average net assets..... 1.00% 1.00% .94% 1.04% 1.04%
Ratio of net investment
income to average net
assets................. 2.55% 2.19% 2.63% 2.43% 2.72%
</TABLE>

27
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
MAY 31, 2000(A)
---------------
<S> <C>

CALIFORNIA II TAX-EXEMPT FUND
------------------------------------------------
Net asset value, beginning of period.............. $1.0000
-------
Net investment income............................. .0208
Dividends from net investment income.............. (.0208)
-------
Net asset value, end of period.................... $1.0000
=======
Total Return...................................... 2.27%(b)
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------
Net assets end of period (millions)............... $ 91.4
Ratio of expenses to average net assets........... 1.00%(b)(c)
Ratio of net investment income to average net
assets.......................................... 2.27%(b)(c)
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEARS ENDED MAY 31,
------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>

CONNECTICUT TAX-EXEMPT FUND
-------------------------
Net asset value,
beginning of year...... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Net investment income.... .0248 .0221 .0267 .0243 .0266
Dividends from net
investment income...... (.0248) (.0221) (.0267) (0243) (.0266)
-------- -------- -------- -------- --------
Net asset value, end of
year................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
Total Return............. 2.48% 2.21% 2.67% 2.43% 2.66%
RATIOS/SUPPLEMENTAL DATA
-------------------------
Net assets end of year
(millions)............. $ 51.1 $ 55.4 $ 36.8 $ 33.5 $ 34.8
Ratio of expenses to
average net assets..... 1.00% 1.00% .89% .97% 1.01%
Ratio of net investment
income to average net
assets................. 2.42% 2.17% 2.64% 2.39% 2.61%
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEARS ENDED MAY 31,
--------------------------------------
2000 1999 1998 1997(D)
---- ---- ---- -------
<S> <C> <C> <C> <C>

FLORIDA TAX-EXEMPT FUND
------------------------------
Net asset value, beginning of
year........................ $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- --------
Net investment income......... .0272 .0237 .0269 .0228
Dividends from net investment
income...................... (.0272) (.0237) (.0269) (.0228)
-------- -------- -------- --------
Net asset value, end of
year........................ $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ========
Total Return.................. 2.72% 2.37% 2.69% 2.42%(b)
RATIOS/SUPPLEMENTAL DATA
------------------------------
Net assets end of year
(millions).................. $ 28.9 $ 22.6 $ 10.8 $ 4.1
Ratio of expenses to average
net assets.................. 1.00% 1.00% .94% 1.04%(b)
Ratio of net investment income
to average net assets....... 2.68% 2.30% 2.62% 2.39%(b)
</TABLE>

28
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
FISCAL YEARS ENDED MAY 31,
------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>

MASSACHUSETTS TAX-EXEMPT FUND
-------------------------
Net asset value,
beginning of year...... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Net investment income.... .0256 .0220 .0284 .0259 .0276
Dividends from net
investment income...... (.0256) (.0220) (.0284) (.0259) (.0276)
-------- -------- -------- -------- --------
Net asset value, end of
year................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
Total Return............. 2.56% 2.20% 2.84% 2.59% 2.76%
RATIOS/SUPPLEMENTAL DATA
-------------------------
Net assets end of year
(millions)............. $ 16.1 $ 19.9 $ 25.4 $ 13.0 $ 9.0
Ratio of expenses to
average net assets..... 1.00% 1.00% .75% .83%(c) .90%(c)
Ratio of net investment
income to average net
assets................. 2.55% 2.17% 2.78% 2.54%(c) 2.66%(c)
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
MAY 31,
------------------
2000 1999(E)
---- -------
<S> <C> <C>

MICHIGAN TAX-EXEMPT FUND
----------------------------------------
Net asset value, beginning of period.... $ 1.0000 $ 1.0000
-------- --------
Net investment income................... .0263 .0118
Dividends from net investment income.... (.0263) (.0118)
-------- --------
Net asset value, end of period.......... $ 1.0000 $ 1.0000
======== ========
Total Return............................ 2.63% 2.55%(b)
RATIOS/SUPPLEMENTAL DATA
----------------------------------------
Net assets end of period (millions)..... $ 2.2 $ 1.2
Ratio of expenses to average net
assets................................ 1.00% 1.00%(b)(c)
Ratio of net investment income to
average net assets.................... 2.60% 2.02%(b)(c)
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEARS ENDED MAY 31,
------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>

NEW JERSEY TAX-EXEMPT FUND
-------------------------
Net asset value,
beginning of year...... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Net investment income.... .0249 .0223 .0254 .0236 .0263
Dividends from net
investment income...... (.0249) (.0223) (.0254) (.0236) (.0263)
-------- -------- -------- -------- --------
Net asset value, end of
year................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
Total Return............. 2.49% 2.23% 2.54% 2.36% 2.63%
RATIOS/SUPPLEMENTAL DATA
-------------------------
Net assets end of year
(millions)............. $ 44.4 $ 41.3 $ 37.6 $ 39.5 $ 41.0
Ratio of expenses to
average net assets..... 1.05% 1.00% .99% 1.06% 1.04%
Ratio of net investment
income to average net
assets................. 2.46% 2.17% 2.50% 2.33% 2.59%
</TABLE>

29
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
FISCAL YEARS ENDED MAY 31,
----------------------------
2000 1999 1998(F)
---- ---- -------
<S> <C> <C> <C>

OHIO TAX-EXEMPT FUND
-----------------------------------
Net asset value, beginning of
year............................. $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- --------
Net investment income.............. .0256 .0236 .0048
Dividends from net investment
income........................... (.0256) (.0236) (.0048)
-------- -------- --------
Net asset value, end of year....... $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ========
Total Return....................... 2.56% 2.36% 2.87%(b)
RATIOS/SUPPLEMENTAL DATA
-----------------------------------
Net assets end of year
(millions)....................... $ 8.9 $ 1.2 $ 2.5
Ratio of expenses to average net
assets........................... 1.00% 1.00%(c) 1.00%(b)
Ratio of net investment income to
average net assets............... 2.95% 2.16%(c) 2.86%(b)
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEARS ENDED MAY 31,
----------------------------
2000 1999 1998(G)
---- ---- -------
<S> <C> <C> <C>

PENNSYLVANIA TAX-EXEMPT FUND
-----------------------------------
Net asset value, beginning of
year............................. $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- --------
Net investment income.............. .0276 .0234 .0189
Dividends from net investment
income........................... (.0276) (.0234) (.0189)
-------- -------- --------
Net asset value, end of year....... $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ========
Total Return....................... 2.76% 2.34% 2.64%(b)
RATIOS/SUPPLEMENTAL DATA
-----------------------------------
Net assets end of year
(millions)....................... $ 21.1 $ 16.9 $ 13.2
Ratio of expenses to average net
assets........................... 1.00% 1.00% 1.00%(b)
Ratio of net investment income to
average net assets............... 2.73% 2.28% 2.62%(b)
</TABLE>

30
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
MAY 31, 2000(H)
---------------
<S> <C>

VIRGINIA TAX-EXEMPT FUND
------------------------------------------------
Net asset value, beginning of period.............. $ 1.0000
--------
Net investment income............................. .0075
Dividends from net investment income.............. (.0075)
--------
Net asset value, end of period.................... $ 1.0000
========
Total Return...................................... 3.08%(b)
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------
Net assets end of period (millions)............... $ 2.1
Ratio of expenses to average net assets........... 1.01%(b)(c)
Ratio of net investment income to average net
assets.......................................... 3.19%(b)(c)
</TABLE>

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

(a) From July 2, 1999 (Commencement of Operations) to May 31, 2000.
(b) Annualized.
(c) Due to the voluntary waiver of certain expenses by RMCI for certain funds,
the net expense ratios and net investment income amounted to:

<TABLE>
<CAPTION>
NET
FISCAL EXPENSE INVESTMENT
FUND YEAR RATIO INCOME
---- -------- -------- ----------
<S> <C> <C> <C>
U.S. Treasury Fund................ 2000 .86% 4.26%
1999 .77 3.99
1998 .77 4.46
1997 .77 4.33
1996 .79 4.53
California II..................... 2000 96 2.31
Massachusetts..................... 1997 .79 2.58
1996 .84 2.71
Michigan.......................... 1999 .49 2.53
Ohio.............................. 1999 .83 2.32
Virginia.......................... 2000 .97 3.23
</TABLE>

(d) From June 24, 1996 (Commencement of Operations) to May 31, 1997.
(e) From December 14, 1998 (Commencement of Operations) to May 31, 1999.
(f) From April 1, 1998 (Commencement of Operations) to May 31, 1998.
(g) From September 12, 1997 (Commencement of Operations) to May 31, 1998.
(h) From March 3, 2000 (Commencement of Operations) to May 31, 2000.

31
<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 callimg 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.

American Express Money Market Account is a cash management service offered by
the Reserve Funds through American Express Financial Corporation. Shares
offered are shares of The Reserve Funds.

American Express Investment Services Inc.
A SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION

70100 AXP FINANCIAL CENTER
MINNEAPOLIS, MN 55474
www.americanexpress.com
DISTRIBUTOR -- RESRV PARTNERS, INC.
AMEX 07/00

SEC File Number
The Reserve Fund
811-2033
Reserve Tax-Exempt Trust
811-3696
Reserve New York Tax-Exempt Trust
811-3814
8023 C 7/00

AMERICAN EXPRESS
MONEY MARKET ACCOUNTS

OFFERED BY
THE RESERVE FUNDS

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

INTERSTATE TAX-EXEMPT FUND

CALIFORNIA II 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
PENNSYLVANIA TAX-EXEMPT FUND
VIRGINIA TAX-EXEMPT FUND

PROSPECTUS
July 31, 2000

[LOGO]

<PAGE>

PART C

Item 23. Exhibits

(a) Declaration of Trust and Amendments filed as an exhibit to
Registrant's Post-Effective Amendment No. 60, dated July 31, 1999,
and incorporated by reference.

(b) Bylaws and Amendments filed as an exhibit to Registrant's
Post-Effective Amendment No. 60, dated July 31, 1999, and
incorporated by reference.

(c) Not applicable Declaration of Trust and Amendments filed as an
exhibit to Registrant's Post-Effective Amendment No. 60, dated July 31,
1999, and incorporated by reference.

(d) Form of Investment Management Agreement for the Funds filed as an
exhibit to Registrant's Post-Effective Amendment No. 60, dated July 31,
1999, and incorporated by reference.

(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 Effective Amendment No. 32; Amendments to Pension Plan
filed as an exhibit to Post-Effective Amendment No. 45 dated July 31,
1989.

(g) Custodian Agreement with Chase Manhattan Bank filed as an exhibit to
Registrant's Post-Effective Amendment No. 60, dated July 31, 1999, and
incorporated by reference.

(h) Not applicable

(i) Opinion of Counsel*

(j) Consent of Auditors*

(k) Not applicable

(l) Not applicable

(m) Form of Registered Dealer Agreement filed as an exhibit to
Registrant's Post-Effective Amendment No. 60, dated July 31, 1999,
and incorporated by reference.

(n) Not applicable

(o) Reserved

(p) Code of Ethics*

----------------
*Filed herewith.

<PAGE>

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

<TABLE>
<CAPTION>
Name Position with the Adviser Other Businesses
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bruce R. Bent Chairman/CEO Chairman/CEO and Director of Reserve
Management Corporation and Chairman
and Director and of Resrv Partners, Inc.
both of the same address as the Trust.
-------------------------------------------------------------------------------------------------------------------
Bruce R. Bent II President and Senior Vice President, Secretary and
Secretary Director of Reserve Management
Corporation and Secretary and
Director of Resrv Partners, Inc.
both of the same address as the
Trust.
-------------------------------------------------------------------------------------------------------------------
Arthur T. Bent III Senior Vice President and President, Treasurer and
COO/Treasurer Director of Reserve Management
Corporation and Treasurer
and Director of Resrv Partners, Inc.
both of the same address as the
Trust.
-------------------------------------------------------------------------------------------------------------------
MaryKathleen F. Gaza Director of Compliance Director of Compliance and
and Legal Affairs Legal Affairs for Reserve
Management Corporation and
General Counsel of Resrv Partners,
Inc. both of the same address of the
Trust.
-------------------------------------------------------------------------------------------------------------------
James Freisen Controller Controller of Reserve Management
Corporation and Reserv Partners,
Inc. both of the same address of the
Trust.
-------------------------------------------------------------------------------------------------------------------
</TABLE>

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

<PAGE>

(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>

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 (b) under the Securities
Act of 1933 and Registrant has duly caused this Post-Effective Amendment No.
61 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 28th day of July, 2000.

THE RESERVE FUND

By: /s/ Bruce R. Bent
------------------------------------
Bruce R. Bent, Chairman and CEO

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 61 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 Chairman and CEO and July 28, 1999
---------------------------- Trustee (principal
Bruce R. Bent executive operating and
financial officer)

/s/ Bruce R. Bent II President and Trustee July 28, 2000
----------------------------
Bruce R. Bent II

* Trustee July 28, 2000
----------------------------
Edwin Ehlert Jr.

* Trustee July 28, 2000
----------------------------
Henri W. Emmet

* Trustee July 28, 2000
----------------------------
Donald J. Harrington

* Trustee July 28, 2000
----------------------------
William E. Viklund

* Trustee July 28, 2000
----------------------------
William Montgoris

* Trustee July 28, 2000
----------------------------
Patrick Faye

/s/ Arthur T. Bent III COO/Treasurer and July 28, 2000
---------------------------- Senior Vice President
Arthur T. Bent III

/s/ MaryKathleen Foynes Gaza Secretary July 28, 2000
----------------------------
MaryKathleen Foynes Gaza
*Attorney-in-Fact
</TABLE>