<PAGE> 1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Trustees of Reserve Institutional Trust -
Primary Institutional Fund:
We have audited the accompanying statement of net assets of the
Primary Institutional Fund (one of the series constituting Reserve
Institutional Trust) as of May 31, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets and
the financial highlights for the period January 21, 1997 (commencement of
operations) to May 31, 1997. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Primary Institutional Fund of Reserve Institutional Trust as of
May 31, 1997, the results of its operations for the year then ended, the
changes in its net assets and its financial highlights for the period January
21, 1997 (commencement of operations) to May 31, 1997, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
June 27, 1997
<PAGE> 2
RESERVE INSTITUTIONAL TRUST - PRIMARY INSTITUTIONAL FUND
STATEMENT OF NET ASSETS - MAY 31, 1997
<TABLE>
<CAPTION>
REPURCHASE % DAYS TO VALUE
AGREEMENTS - 99.67% RATE MATURITY (NOTE 1)
- ------------------- ---- -------- --------
<S> <C> <C> <C>
GNMA 7.70% due 5/15/32 (Repo with DLJ
Securities Corporation dated May 30, 1997 resale
amount $2,000,933)
Primary Institutional Fund Investments - (99.67%)
(Cost $2,000,000) 5.60 3 $2,000,933
Other assets, less liabilities - (.33%) 6,704
----------
NET ASSETS (100%) equivalent to $1.00 net
asset value, offering and redemption prices
per share based on 2,007,637 class B shares of
beneficial interest $.001 par value
outstanding $2,007,637
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 3
RESERVE INSTITUTIONAL TRUST
PRIMARY INSTITUTIONAL FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
JANUARY 21, 1997
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1997
------------
<S> <C>
INTEREST INCOME (Note 1) $ 39,090
--------
EXPENSES (Note 2)
Comprehensive fee 3,446
Less: voluntary waiver (151)
--------
Net Expenses 3,295
--------
NET INVESTMENT INCOME $ 35,795
========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 4
RESERVE INSTITUTIONAL TRUST
PRIMARY INSTITUTIONAL FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
JANUARY 21, 1997
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1997
------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income paid to
shareholders as dividends (Note 1) $ (35,795)
----------
FROM CAPITAL SHARE TRANSACTIONS (at net
asset value of $1 per share):
Net proceeds from the sale
of shares 2,876,422
Net asset value of shares issued
on reinvestment of dividends 35,795
----------
Subtotal 2,912,217
Cost of shares redeemed (904,580)
----------
Net increase from capital share transactions and
from investment operations 2,007,637
NET ASSETS:
Beginning of period 0
----------
End of period $2,007,637
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 5
RESERVE INSTITUTIONAL TRUST
PRIMARY INSTITUTIONAL FUND
NOTES TO FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES:
The Primary Institutional Fund, a series of Reserve Institutional
Trust, (the "Fund") is registered under the Investment Company Act of
1940 as a non-diversified, open-end investment company. The policies
summarized below are consistently followed in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
A. The Fund's authorized shares of beneficial interest are
unlimited and divided into four series with three classes of
shares, Primary Institutional, U.S. Government Institutional,
U.S. Treasury Institutional and Interstate Tax-Exempt
Institutional Funds. These financial statements and notes apply
only to the Primary Institutional Fund - Class B.
B. Securities are stated at value which represents amortized cost
plus interest accrued to date. Under Securities and Exchange
Commission Rule 2a-7, the Fund uses amortized cost to value the
portfolio, by which investments are valued at cost and the
difference between the cost of each instrument and its value at
maturity is accrued into income on a straight line basis over
the days to maturity irrespective of intervening changes in
interest rates or market value of investments. The maturity of
floating or variable rate instruments in which the Fund may
invest will be deemed to be, for floating rate instruments (1)
following, and for variable rate instruments the longer of (1)
or (2) following: (1) the notice period required before the Fund
is entitled to receive payment of the principal amount of the
instrument; (2) the period remaining until the instrument's next
rate adjustment, for purposes 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. Investments are recorded as of the date of their purchase and
sale. Interest income is determined on the basis of interest
accrued, premium amortized and discount accreted.
E. Net investment income on investments is distributed to
shareholders daily and automatically reinvested in additional
Fund shares.
<PAGE> 6
RESERVE INSTITUTIONAL TRUST
PRIMARY INSTITUTIONAL FUND
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(2) MANAGEMENT FEE, SHAREHOLDER SERVICING COST AND TRANSACTIONS WITH
AFFILIATES:
Under the Management Agreement, Reserve Management Company, Inc.
("RMCI"), manages the Fund's investments, effects purchases and sales
thereof. RMCI receives a comprehensive fee from the Funds at an
annual rate of .25% Class A, .45% Class B (as amended February 3,
1997) and .75% Class C of the average daily net assets of each of the
Funds. At May 31, 1997, RMCI waived a portion of its comprehensive
fee. For the year ended May 31, 1997, the Primary Institutional Fund
had accrued expenses due to RMCI of 2,337.
(3) DISTRIBUTION ASSISTANCE
Pursuant to a Plan of Distribution under Rule 12b-1, subject to the
Fund's expense limitations, Class B shares will make payments of up
to .20% per annum of the average net asset value of shareholder
accounts as to which the payee has rendered assistance in
distributing shares of the portfolio.
(4) 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 period. Actual
results could differ from those estimates.
(5) COMPONENTS OF NET ASSETS
At 5/31/97, the Primary Institutional Fund's net assets consisted of
$2,008 par value and $2,005,629 paid-in-capital.
<PAGE> 7
RESERVE INSTITUTIONAL TRUST
PRIMARY INSTITUTIONAL FUND
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(6) SUPPLEMENTARY INFORMATION (UNAUDITED) (FOR ONE SHARE OUTSTANDING
DURING EACH PERIOD):
<TABLE>
<CAPTION>
JANUARY 21, 1997
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1997
------------
<S> <C>
PRIMARY INSTITUTIONAL FUND
- --------------------------
Net asset value, beginning of period $1.0000
-------
Income from investment operations .0196
Expenses (3) .0017
-------
Net investment income (1) .0179
Dividends from net investment income (1) (.0179)
=======
Net asset value, end of period $1.0000
Total Return 4.95%(2)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period 2,008
Ratio of expenses to average net
assets (3) .48%(2)
Ratio of net investment income
to average net assets 5.18%(2)
</TABLE>
1) Based on compounding of daily dividends. Not indicative of
future results.
2) Annualized.
3) During the period the manager waived a portion of its
comprehensive fee. If there were no reduction the actual fee
would have been .02% higher.
-------------------
FEDERAL TAX INFORMATION
The dividends distributed by the Primary Institutional Fund are
treated for Federal tax purposes as ordinary income.
