<PAGE>
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1250 Broadway, New York, NY 10001-3701
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General Information and 24-Hour Yield and Balance Information
800-637-1700
This literature is not authorized for distribution to prospective investors
unless preceded or accompanied by an appropriate current prospectus.
Distributor--Resrv Partners, Inc.
RF/ANNUAL 07/00
[LOGO]
ANNUAL REPORT
THE RESERVE FUND
PRIMARY FUND
U.S. GOVERNMENT FUND
U.S. TREASURY FUND
MAY 31, 2000
<PAGE>
THE RESERVE FUND--PRIMARY FUND
STATEMENT OF NET ASSETS--MAY 31, 2000
<TABLE>
<CAPTION>
Principal Value
Amount NEGOTIABLE BANK CERTIFICATES OF DEPOSIT--76.0% (Note 1)
--------- ---------------------------------------------- --------
<C> <S> <C>
DOMESTIC--17.2%
$200,000,000 Harris Trust & Savings Bank, 6.59%, 7/3/00.............. $ 200,000,000
200,000,000 Southtrust Bank NA, 6.58%, 7/10/00...................... 200,000,000
150,000,000 U.S. Bank, N.A. 6.27%, 6/5/00........................... 150,000,000
200,000,000 Wilmington Trust Co., 6.20% - 6.59%, 6/27/00 -
7/19/00................................................. 200,000,000
-------------------
750,000,000
-------------------
YANKEES--58.8%
200,000,000 Banque Nationale de Paris, 6.15% - 6.31%, 6/6/00 -
6/19/00................................................. 200,000,000
200,000,000 Bayerische Hypo-und Vereinsbank, AG, 6.15%, 6/19/00..... 200,000,000
150,000,000 Canadian Imperial Bank of Commerce, 6.65% - 6.74%,
8/17/00 - 2/12/01....................................... 149,966,724
180,000,000 Commerzbank, AG, 6.15%, 6/15/00......................... 180,000,000
80,000,000 Den Danske Bank, 6.46%, 6/14/00......................... 80,000,000
200,000,000 Deutsche Bank, AG, 6.75%, 8/23/00....................... 200,000,000
200,000,000 Dexia Bank, 6.75%, 8/24/00.............................. 200,000,000
200,000,000 Dresdner Bank, 6.20%, 6/26/00........................... 200,000,000
200,000,000 National Westminster Bank, PLC, 6.30% - 6.56%, 6/5/00 -
11/22/00................................................ 199,950,938
150,000,000 Rabo Bank Nederland NV, 6.52%, 1/24/01.................. 149,962,970
200,000,000 Societe Generale, 6.25%, 7/17/00........................ 200,000,000
200,000,000 Svenska Handelsbaken, 6.44%, 6/12/00.................... 200,000,000
200,000,000 Toronto Dominion Bank, 6.14%, 6/15/00................... 200,000,000
200,000,000 Westdeutsche Landesbank Girozentrale, 6.75%, 3/23/01.... 199,923,341
-------------------
2,559,803,973
-------------------
Total Negotiable Bank Certificates of Deposit (Cost
$3,309,803,973)......................................... 3,309,803,973
-------------------
EURO TIME DEPOSITS--6.9%
150,000,000 Chase Manhattan Bank, 6.81%, 6/1/00..................... 150,000,000
150,000,000 Bank One, 6.81%, 6/1/00................................. 150,000,000
-------------------
Total Euro Time Deposits (Cost $300,000,000)............ 300,000,000
-------------------
REPURCHASE AGREEMENTS--20.9%
Bear, Stearns & Co. Inc., 6.55%, 6/1/00 (collateralized
by FNMA 0% due 12/20/27 valued at $3,235,452, FGRA 0%
due 10/15/27 valued $4,198,121, FGRM 6.00% to 8.00% due
7/15/09 to 10/15/27 valued at $24,888,611, FGSI 0% due
1/1/24 to 4/1/30 valued at $372,508,029, FNST 0% due
6/1/23 to 5/1/29 valued at $114,445,125, FNRA 0% due
2/25/24 valued at $1,099,919, FNRM 0% due 9/25/28 valued
at $2,908,844, FRRM 0% due 3/25/22 valued at
$29,137,756, GNMA 6.0% to 7.0% due 1/20/24 to 7/15/29
valued at $30,633,461).................................. 563,000,000
563,000,000
Donaldson, Luftkin and Jenrette Securities Corp., 6.56%,
6/1/00 (collateralized by FGPC 5.50% to 7.0% due 1/10/24
to 11/18/27 valued at $226,890,812, FNMS 6.00% to 6.50%
due 9/1/28 to 7/1/29 valued at $133,609,815)............ 350,000,000
350,000,000
-------------------
Total Repurchase Agreements (Cost $913,000,000)......... 913,000,000
-------------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments (Cost $4,522,803,973)............. 103.8% 4,522,803,973
Liabilities, Less Other Assets...................... (3.8) (166,863,596)
-------- --------------
Net Assets.......................................... 100.0% $4,355,940,377
======== ==============
Net asset value, offering and redemption price per share based
on 4,355,940,377 shares of beneficial interest,
$.001 par value outstanding................................... $1.00
==============
</TABLE>
See notes to financial statements.
2
<PAGE>
THE RESERVE FUND--U.S. GOVERNMENT FUND
STATEMENT OF NET ASSETS--MAY 31, 2000
<TABLE>
<CAPTION>
Principal Value
Amount REPURCHASE AGREEMENTS--99.9% (Note 1)
--------- ---------------------------- --------
<C> <S> <C>
Bear, Stearns & Co. Inc., 6.53%, 6/1/00 (collateralized
by GNMA, 6.00% to 9.05% due from 6/15/09 to 4/15/37
valued at $389,888,122)................................. $ 367,000,000
$367,000,000
DLJ Securities Corporation, 6.55%, 6/1/00
(collateralized by GNMA, 5.50% to 10.50% due from
7/15/01 to 5/20/30 valued at $309,002,244).............. 300,000,000
300,000,000
-----------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Repurchase Agreements (Cost $667,000,000)..... 99.9% 667,000,000
Other Assets, Less Liabilities...................... 0.1 698,041
-------- ------------
Net Assets.......................................... 100.0% $667,698,041
======== ============
Net asset value, offering and redemption prices per share
based on 667,698,041 shares of beneficial interest,
$.001 par value outstanding................................... $1.00
============
</TABLE>
See notes to financial statements.
3
<PAGE>
THE RESERVE FUND--U.S. TREASURY FUND
STATEMENT OF NET ASSETS--MAY 31, 2000
<TABLE>
<CAPTION>
Principal Value
Amount U.S. TREASURY BILLS--99.3% (Note 1)
--------- -------------------------- --------
<C> <S> <C>
$ 20,000,000 5.39%, 6/1/00....................................... $ 20,000,000
41,000,000 5.55%--5.60%, 6/8/00................................ 40,955,696
30,000,000 5.50%, 6/15/00...................................... 29,935,833
41,000,000 5.50%--5.53%, 6/22/00............................... 40,868,473
21,000,000 5.56%, 6/29/00...................................... 20,909,187
35,500,000 5.56--5.63%, 7/6/00................................. 35,306,795
25,000,000 5.25%--5.62%, 7/13/00............................... 24,836,865
42,000,000 5.48%--5.99%, 8/17/00............................... 41,480,496
30,000,000 5.60%--5.85%, 8/24/00............................... 29,594,525
21,000,000 5.76%--5.88%, 9/7/00................................ 20,670,393
38,000,000 5.95%--6.13%, 11/2/00............................... 37,028,217
54,500,000 6.09%--6.12%, 11/9/00............................... 53,014,127
-----------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total U.S. Treasury Bills (Cost $394,600,607)....... 99.3% 394,600,607
Other Assets, Less Liabilities...................... 0.7 2,601,929
-------- ------------
Net Assets.......................................... 100.0% $397,202,536
======== ============
Net asset value, offering and redemption prices per share
based on 397,202,536 shares of beneficial interest,
$.001 par value outstanding................................... $1.00
============
</TABLE>
<TABLE>
<CAPTION>
GLOSSARY
<S> <C> <C>
FHLMC Gold Mortgage-Backed Pass-Through Participation Certificates
FGPC --
Federal Home Loan Mortgage Corp. ("FHLMC") Gold Adjustable Rate REMIC
FGRA --
FHLMC Gold REMIC Mortgage-Backed Pass-Through Participation Certificates
FGRM --
Freddie MAC Gold Strip Interest Portion
FGSI --
Federal Home Loan Mortgage Corporation
FHLMC --
Federal National Mortgage Association
FNMA --
FNMA Mortgage-Backed Pass-Through Securities
FNMS --
FNMA REMIC Adjustable Rate Mortgage-Backed Pass-Through Securities
FNRA --
Federal National Mortgage Association ("FNMA") REMIC Mortgage-Backed
Pass-Through Securities
FNRM --
FNMA Strips
FNST --
Government National Mortgage Association ("GNMA") REMIC issued by FHLMC Fixed
Rate
FRRM --
Government National Mortgage Association
GNMA --
Real Estate Mortgage Investment Conduit
REMIC --
</TABLE>
See notes to financial statements.
4
<PAGE>
THE RESERVE FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 2000
<TABLE>
<CAPTION>
U.S. U.S.
PRIMARY GOVERNMENT TREASURY
FUND FUND FUND
------------ ----------- -----------
<S> <C> <C> <C>
Interest Income (Note 1)......................................... $216,080,457 $40,385,517 $16,331,461
------------ ----------- -----------
Expenses (Note 2)
Management fee................................................. 946,261 232,213 --
Comprehensive fee.............................................. 28,376,946 5,506,073 2,549,541
Distribution assistance........................................ 7,528,836 1,471,218 637,466
Other.......................................................... 783,000 145,752 674
------------ ----------- -----------
Total Expenses before waiver................................. 37,635,043 7,355,256 3,187,681
Less: expenses waived (Note 2)............................... -- -- (434,951)
------------ ----------- -----------
Net Expenses................................................. 37,635,043 7,355,256 2,752,730
------------ ----------- -----------
Net Investment Income, representing net increase in Net Assets
from Investment Operations..................................... $178,445,414 $33,030,261 $13,578,731
============ =========== ===========
</TABLE>
See notes to financial statements.
5
<PAGE>
THE RESERVE FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PRIMARY FUND U.S. GOVERNMENT FUND U.S. TREASURY FUND
---------------------------------- -------------------------------- --------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999 May 31, 2000 May 31, 1999
---------------- ---------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase in Net Assets from
Investment Operations:
Net investment
income............... $ 178,445,414 $ 134,365,969 $ 33,030,261 $ 29,798,286 $ 13,578,731 $ 11,017,000
---------------- ---------------- --------------- --------------- --------------- ---------------
Dividends paid to Shareholders From:
Net investment income
(Note 1)............. (178,445,414) (134,365,969) (33,030,261) (29,798,286) (13,578,731) (11,017,000)
---------------- ---------------- --------------- --------------- --------------- ---------------
From Capital Share Transactions (at net
asset value of $1.00 per share):
Net proceeds from sale
of shares............ 23,580,681,398 16,224,681,639 3,858,075,628 3,450,382,930 1,623,852,533 1,315,560,422
Dividends reinvested... 178,445,414 134,365,969 33,030,261 29,798,286 13,578,731 11,017,000
Cost of shares
redeemed............. (22,733,249,526) (15,736,604,580) (3,939,601,776) (3,416,454,910) (1,526,930,793) (1,279,635,650)
---------------- ---------------- --------------- --------------- --------------- ---------------
Net increase (decrease)
derived from capital
share transactions
and from investment
operations........... 1,025,877,286 622,443,028 (48,495,887) 63,726,306 110,500,471 46,941,772
Net Assets:
Beginning of year...... 3,330,063,091 2,707,620,063 716,193,928 652,467,622 286,702,065 239,760,293
---------------- ---------------- --------------- --------------- --------------- ---------------
End of year............ $ 4,355,940,377 $ 3,330,063,091 $ 667,698,041 $ 716,193,928 $ 397,202,536 $ 286,702,065
================ ================ =============== =============== =============== ===============
</TABLE>
See notes to financial statements.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Significant Accounting Policies:
--------------------------------------------------------------------------------
The Reserve Fund (the "Trust") is registered under the Investment Company
Act of 1940 as a non-diversified, open-end investment company. The policies
summarized below are consistently followed in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
A. The Trust's authorized shares of beneficial interest are unlimited and
divided into four (4) series: Primary Fund, U.S. Government Fund, U.S.
Treasury Fund and the Strategist Money Market Fund (collectively, the
"Funds"). The financial statements and notes apply only to Primary, U.S.
Government and U.S. Treasury Funds.
B. Securities are valued at amortized cost, which approximates market
value. The amortized cost method values a security at cost plus accrued
interest at the time of purchase, and thereafter assumes a constant
amortization to maturity of any discount or premium, irrespective of
intervening changes in interest rates or market values. The maturity of
floating or variable rate instruments in which the Fund may invest will be
deemed to be, for floating rate instruments. (1) the notice period required
before the Fund is entitled to receive payment of the principal amount of
the instruments; and for variable rate instruments the longer of (1) above
or (2) the period remaining until the instrument's next rate adjustment,
for purpose of Rule 2a-7 and for computing the portfolio's average weighted
life to maturity.
C. It is the Fund's policy to comply with Subchapter M of the Internal
Revenue Code and to distribute all of its taxable income to its
shareholders. Accordingly, no Federal income tax provision is required.
D. Security transactions are recorded on a trade date basis; interest
income is accrued daily and security premium or discount is amortized or
accreted daily. Net investment income is distributed to shareholders daily
and automatically reinvested in additional Fund shares.
E. Funds may enter into repurchase agreements with financial institutions
and securities dealers who are deemed creditworthy pursuant to guidelines
established by the Funds' Board of Trustees. The Investment Adviser will
follow procedures intended to provide that all repurchase agreements are at
least 100% collateralized as to principal and interest. The Funds'
custodian holds the securities subject to repurchase agreements.
(2) Management Fee and other Transactions With Affiliates:
--------------------------------------------------------------------------------
Pursuant to an Investment Management Agreement (the "Agreement") between
Reserve Management Company, Inc. ("RMCI") and the Funds, RMCI serves as the
Funds' Investment Adviser subject to the policies adopted by the Board of
Trustees. Under the Agreement, RMCI is responsible for the supervision of
the day-to-day operations, manages the Fund's investments, effects
purchases and sales thereof, and absorbs certain promotional expenses. For
its services as Investment Adviser prior to June 26, 1999, RMCI received a
management fee calculated at an annual rate of .50% of the first $500
million, .475% of the next $500 million, .45% of the next $500 million,
.425% of the next $500 million, and .40% in excess of $2 billion of average
daily net assets of both Primary Fund and U.S. Government Fund. Effective
June 26, 1999, the Primary and U.S. Government Funds entered into a new
Investment Management Agreement with RMCI, which is substantially similar
to the Investment Management Agreement previously in effect with regard to
each Fund. The U.S. Treasury Fund, since inception, has been subject to a
comprehensive management fee. The Agreement provides that RMCI will furnish
continuous investment advisory and management services to the Funds.
Under the new agreement, for its services, RMCI receives a comprehensive
management fee of 0.80% per year of the average daily net assets of each
Fund. RMCI pays all employee and customary operating expenses of the Fund.
Excluded from the definition of customary operating expenses are interest,
taxes, brokerage fees, extraordinary legal and accounting fees and
expenses, and the fees of the disinterested Trustees, for which each Fund
pays its direct or allocated share. During the year ended May 31, 2000,
RMCI voluntarily reduced its fee for the U.S. Treasury Fund by $339,331.
Distribution Assistance:
---------------------------------------------------------------------------
Pursuant to a Plan of Distribution, each Fund may make assistance payments,
at a rate of .20% per annum of the average net asset value, to firms for
distribution assistance and administrative services provided to Fund
shareholders. The Plan requires RMCI to pay an equivalent amount from its
own resources. RMCI also has voluntarily agreed to reduce the payments made
by U.S. Treasury Fund to an annual rate of .17%. During the year ended May
31, 2000, RMCI voluntarily reimbursed the Fund a total of $95,620 pursuant
to the undertaking.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
(3) Management's Use of Estimates:
--------------------------------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the dates of the financial statements and the reported amounts of income
and expenses during the reporting periods. Actual results could differ from
those estimates.
(4) Composition of Net Assets:
--------------------------------------------------------------------------------
At May 31, 2000, the composition of each Fund's net assets was as follows:
<TABLE>
<CAPTION>
Primary U.S. Government U.S. Treasury
-------------- --------------- -------------
<S> <C> <C> <C>
Par Value.......................... $ 4,355,940 $ 667,698 $ 397,203
Paid-in-Capital.................... 4,351,584,437 667,030,343 396,805,333
-------------- ------------ ------------
Net Assets......................... $4,355,940,377 $667,698,041 $397,202,536
============== ============ ============
</TABLE>
(5) 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.
<TABLE>
<CAPTION>
For Fiscal Years Ended May 31,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PRIMARY FUND
--------------------------------------------------
Net asset value at 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 at 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 at 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 at 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>
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
(5) Financial Highlights (Continued)
--------------------------------------------------------------------------------
<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 at 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 at 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>
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Shareholders and the Board of Trustees of The Reserve Fund:
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and financial highlights
present fairly, in all material respects, the financial position of the Primary,
U.S. Government and U.S. Treasury Funds (three of the four series constituting
The Reserve Fund) (the "Funds") at May 31, 2000, and the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at May 31,
2000 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
July 7, 2000
10
