RESERVE INSTITUTIONAL TRUST, 485BPOS, 1998-07-30

RESERVE INSTITUTIONAL TRUST
485BPOS, 1998-07-30

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<PAGE> 1

As filed with the Securities and Exchange Commission on March 4, 1998
===============================================================================
File No. 002-70831
811-3141
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]

Pre-Effective Amendment No. ____ [ ]

Post-Effective Amendment No. 33 [x]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

AMENDMENT NO. 29 [x]

RESERVE INSTITUTIONAL TRUST
(Exact Name of Registrant as Specified in Charter)

810 Seventh Avenue, New York, New York 10019
(Address of Principal Executive Office) (Zip Code)

Registrant's Telephone Number, including Area Code: (212) 977-9982

________________________
MaryKathleen Foynes, Esq.
Reserve Institutional Trust
810 Seventh Avenue, New York, New York 10019
(Name and address of agent for service of process)

_______________________
It is proposed that this filing will become effective (check appropriate box)

---- immediately upon filing pursuant to paragraph (b) of Rule 485

X
____ on July 30, 1998 pursuant to paragraph (b) of Rule 485

____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
____ on (date) pursuant to paragraph (a)(1) of Rule 485
____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
____ on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

The Commission is requested to send copies of all communications to:

Paul F. Roye, Esq.
Dechert, Price & Rhoads
1775 Eye Street, NW
Washington, DC 20005

Registrant has filed a declaration pursuant to Rule 24f-2 under the Investment
Company Act of 1940 electing to register an indefinite number of shares of
beneficial interest. The notice required by Rule 24f-2 with respect to
registrant's fiscal year ending May 31, 1998 was filed with the Commission on
July 24, 1998.

Title of Securities Being Registered

Primary Institutional Fund Class A
Primary Institutional Fund Class B
Primary Institutional Fund Treasurer's Trust
Primary Institutional Fund Class C
Primary Institutional Fund Class D
Primary Institutional Fund Nomura International Trust Co.
U.S. Government Institutional Fund Class A
U.S. Government Institutional Fund Class B
U.S. Government Institutional Fund Treasurer's Trust
U.S. Government Institutional Fund Class C
U.S. Government Institutional Fund Class D
U.S. Government Institutional Fund Nomura International Trust Co.
U.S. Treasury Institutional Fund Class A
U.S. Treasury Institutional Fund Class B
U.S. Treasury Institutional Fund Treasurer's Trust
U.S. Treasury Institutional Fund Class C
U.S. Treasury Institutional Fund Class D
Interstate Tax-Exempt Institutional Fund Class A
Interstate Tax-Exempt Institutional Fund Class B
Interstate Tax-Exempt Institutional Fund Treasurer's Trust
Interstate Tax-Exempt Institutional Fund Class C
Interstate Tax-Exempt Institutional Fund Class D

===============================================================================
<PAGE> 2

RESERVE INSTITUTIONAL TRUST
(All Classes except Nomura International Trust Co.)
CROSS REFERENCE SHEET PURSUANT TO RULE 495

<TABLE>
<CAPTION>
PROSPECTUS AND STATEMENT
FORM OF ADDITIONAL INFORMATION
N-1A ITEM FORM CAPTION CAPTION
- ---------- ------------------------------------ ----------------------------------
<S> <C> <C>
1 Cover Page Cover Page
2 Synopsis Shareholder Expenses

3 Condensed Financial Information Financial
Highlights

4 General Description of Registrant Investment Objectives and
Policies; Shares of Beneficial
Interest; General Information
5 Management of the Fund Management

6 Capital Stock and Other Securities Daily Dividends; Taxes
7 Purchase of Securities Being Offered How to Buy Shares

8 Redemption or Repurchase Redemptions

9 Legal Proceedings Not Applicable
10 Cover Page Cover Page**

11 Table of Contents Table of Contents**
12 General Information and History Not Applicable

13 Investment Objectives and Policies Investment Objectives, Policies
and Risk**

14 Management of the Registrant Trustees and Officers of the
Trust**
15 Control Persons and Principal Holders Trustees and Officers of the
of Securities Trust**

16 Investment Advisory and Other Investment Management,
Distribution and Custodian
Agreements**; Reserve Cash
Performance Account and Account
Plus**
17 Brokerage Allocation Portfolio Turnover, Transaction
Charges and Allocation**

18 Capital Stock and Other Securities Shares of Beneficial Interest**

19 Purchase, Redemption, and Pricing of Purchase, Redemption and Pricing
Securities Being Offered of Shares**
20 Tax Status Distributions and Taxes**

21 Underwriters Not Applicable

22 Calculation of Yield Quotations of Fund Yield**; Yield*
Money Market Funds

23 Financial Statements Financial Statements
</TABLE>

- -----------------
* Prospectus
** Statement of Additional Information

<PAGE> 3

General Information, Purchases and
Redemptions

---------------------------------------
24-Hour Yield and Balance Information

---------------------------------------
Nationwide
800-637-1700 M www.reservefunds.com

RESERVE INSTITUTIONAL TRUST
PROSPECTUS

The Reserve Institutional Trust is a no-load money market fund with four
investment portfolios: PRIMARY INSTITUTIONAL FUND, U.S. GOVERNMENT INSTITUTIONAL
FUND, U.S. TREASURY INSTITUTIONAL FUND and INTERSTATE TAX-EXEMPT INSTITUTIONAL
FUND (collectively "the Funds"). The Reserve Institutional Trust is designed for
institutional investors as a convenient investment vehicle for short-term funds.

The objective of each Fund, except the Interstate Tax-Exempt Institutional
Fund, is to seek as high a level of current income as is consistent with
preservation of capital and liquidity, although achievement of this objective
cannot be assured.

In addition, the Interstate Tax-Exempt Institutional Fund seeks to have its
interest income exempt from federal income taxes, as is consistent with
preservation of capital and liquidity; however, achievement of this objective
cannot be assured.

- PRIMARY INSTITUTIONAL FUND ("Primary Fund") invests in (i) obligations
backed by the full faith and credit of the United States government and its
agencies or instrumentalities; (ii) deposit-type obligations, acceptances
and letters of credit of FDIC-insured institutions and foreign banks with
assets in excess of $25 billion; (iii) short-term corporate obligations
rated A-1 or the equivalent thereof; (iv) other similar high-quality short
term instruments; and (v) instruments fully collateralized by the foregoing
instruments.

- U.S. GOVERNMENT INSTITUTIONAL FUND ("Government Fund") invests in
obligations backed by the full faith and credit of the United States
government or obligations collateralized thereby.

- U.S. TREASURY INSTITUTIONAL FUND ("Treasury Fund") invests exclusively in
full faith and credit obligations of the United States government that
provide interest income exempt in many states from state and local personal
income taxes.

- INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND ("Interstate Fund") invests
principally in obligations issued by the states, territories, possessions
of the United States and their political subdivisions, duly constituted
authorities and corporations the main from which is exempt from federal
incomes taxes.

Each Fund offers five classes of shares to investors, with each class
subject to differing service and distribution fees. In all other respects, all
classes of shares represent the same interest in the income and assets of each
respective Fund.

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.

This Prospectus sets forth the information about each Fund which a
prospective investor should know before investing. A Statement of Additional
Information ("SAI") dated July 31, 1998, providing further details about the
Funds, has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated herein by reference. It may be obtained without charge by writing
or calling the Funds at 800-637-1700. The SEC maintains a web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information regarding the Funds electronically filed with the SEC.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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

Prospectus dated July 31, 1998
Investors are advised to read and retain this Prospectus for future reference.
<PAGE> 4

SHAREHOLDER EXPENSES

The following tables illustrate all expenses and fees that a shareholder of
each of the Funds will incur directly or indirectly. The expenses and fees set
forth in the tables are for the fiscal year ended May 31, 1998.

SHAREHOLDER TRANSACTION EXPENSES FOR ALL FUNDS

<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases..................... None
Maximum Sales Load Imposed on Reinvested Dividends.......... None
Redemption Fees*............................................ None
Exchange Fees............................................... None
</TABLE>

- ---------------
* A $2 fee is charged on redemption checks issued by the Funds of less than $100
and a $10 fee is charged for wire redemptions of less than $10,000, for Class
D shareholders. A $100 fee is charged for redemption checks and wire
redemptions of less than $100,000 for shareholders of all other classes.

ANNUAL FUND OPERATING EXPENSES FOR ALL FUNDS
(AS A PERCENTAGE OF AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
TREASURER'S
CLASS A CLASS B TRUST CLASS C* CLASS D*
------- ------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
Comprehensive Management Fee**................... .25% .25% .25% .25% .25%
12b-1 Fees+...................................... .00% .00% .00% .25% .50%
Shareholder Services Fees...................... .00% .20% .25% .25% .25%
Other Operating Expenses+...................... .00% .00% .10% .00% .00%
---- ---- ---- ---- ------
Total Operating Expenses......................... .25% .45% .60% .75% 1.00%
==== ==== ==== ==== ======
</TABLE>

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

* Class C and D were not opened at May 31, 1998.

** Each Fund is charged a comprehensive management fee of 0.25% per annum of its
average daily net assets for both advisory and ordinary operating expenses
(other than the Service Fee and Distribution Fee) during the year. However, a
Fund may be charged for certain non-recurring extraordinary expenses. See
"Investment Management Agreement" on page .

+ "Other Operating Expenses" are based on an estimated amount for the current
fiscal year.

The purpose of these tables is to assist the investor in understanding the
costs and expenses that a shareholder in the Fund will bear directly or
indirectly.

The following examples illustrate the expenses that a shareholder would pay
on a $1,000 investment over various time periods assuming: (1) a 5% annual rate
of return and (2) redemption at the end of each time period for each Fund.

ALL FUNDS

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A............................... $ 3 $ 8 $14 $ 32
Class B............................... $ 5 $14 $25 $ 57
Treasurer's Trust..................... $ 6 $19 $33 $ 75
Class C............................... $ 8 $24 $42 $ 93
Class D............................... $10 $32 $55 $122
</TABLE>

THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.

2
<PAGE> 5

FINANCIAL HIGHLIGHTS

The following information applies to a share of the Reserve Institutional
Trust -- Primary, U.S. Government and Interstate Tax-Exempt Institutional Funds
outstanding throughout each period. The information below should be read in
conjunction with the Financial Statements and related notes on page 16. Such
information has been audited by PricewaterhouseCoopers LLP, as indicated in
their report on page 16.

<TABLE>
<CAPTION>
OCTOBER 23, 1997
(COMMENCEMENT OF
PRIMARY INSTITUTIONAL FUND OPERATIONS) TO
CLASS A SHARES MAY 31, 1998
-------------------------- -----------------
<S> <C>
Net asset value, beginning of period........................ $1.0000
-------
Income from investment operations........................... .0333
Expenses.................................................... .0001
-------
Net investment income(1).................................... .0332
Dividends from net investment income(1)..................... (.0332)
-------
Net asset value, end of period.............................. $1.0000
=======
Total Return................................................ 5.49%(2)
</TABLE>

<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
------------------------
<S> <C>
Net assets in thousands, end of period...................... 4,412
Ratio of expenses to average net assets..................... .25%(2)
Ratio of net investment income to average net assets........ 5.35%(2)
</TABLE>

<TABLE>
<CAPTION>
JANUARY 21, 1997
(COMMENCEMENT OF
PRIMARY INSTITUTIONAL FUND YEAR ENDED OPERATIONS) TO
(CLASS B SHARES) MAY 31, 1998 MAY 31, 1997
-------------------------- ------------ -----------------
<S> <C> <C>
Net asset value, beginning of year.......................... $1.0000 $1.0000
------- -------
Income from investment operations........................... .0534 .0196
Expenses.................................................... .0005 .0017
------- -------
Net investment income(1).................................... .0529 .0179
Dividends from net investment income(1)..................... (.0529) (.0179)
------- -------
Net asset value, end of year................................ $1.0000 $1.0000
======= =======
Total Return................................................ 5.29% 4.95%(2)
</TABLE>

<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
------------------------
<S> <C> <C>
Net assets in thousands, end of year........................ 10,376 2,008
Ratio of expenses to average net assets..................... .45% .48%(2)(3)
Ratio of net investment income to average net assets........ 5.16% 4.83%(2)
</TABLE>

3
<PAGE> 6
FINANCIAL HIGHLIGHTS -- (CONTINUED)

<TABLE>
<CAPTION>
OCTOBER 15, 1997
(COMMENCEMENT OF
PRIMARY INSTITUTIONAL FUND OPERATIONS) TO
(TREASURER'S TRUST SHARES) MAY 31, 1998
-------------------------- -----------------
<S> <C>
Net asset value, beginning of period........................ $1.0000
-------
Income from investment operations........................... .0351
Expenses.................................................... .0029
-------
Net investment income(1).................................... .0322
Dividends from net investment income(1)..................... (.0322)
-------
Net asset value, end of period.............................. $1.0000
=======
Total Return................................................ 5.13%(2)
</TABLE>

<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
------------------------
<S> <C>
Net assets in thousands, end of period...................... 171,700
Ratio of expenses to average net assets..................... .60%(2)
Ratio of net investment income to average net assets........ 5.00%(2)
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 15, 1997
(COMMENCEMENT OF
U.S. GOVERNMENT INSTITUTIONAL FUND OPERATIONS) TO
(CLASS B SHARES) MAY 31, 1998
---------------------------------- ------------------
<S> <C>
Net asset value, beginning of period........................ $1.0000
-------
Income from investment operations........................... .0393
Expenses.................................................... .0029
-------
Net investment income(1).................................... .0364
Dividends from net investment income(1)..................... (.0364)
-------
Net asset value, end of period.............................. $1.0000
=======
Total Return................................................ 5.13%(2)
</TABLE>

<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
------------------------
<S> <C>
Net assets in thousands, end of period...................... 5,808
Ratio of expenses to average net assets..................... .45%(2)
Ratio of net investment income to average net assets........ 5.00%(2)
</TABLE>

4
<PAGE> 7
FINANCIAL HIGHLIGHTS -- (CONTINUED)

<TABLE>
<CAPTION>
MAY 5, 1998
(COMMENCEMENT OF
U.S. GOVERNMENT INSTITUTIONAL FUND OPERATIONS) TO
(TREASURER'S TRUST SHARES) MAY 31, 1998
---------------------------------- -----------------
<S> <C>
Net asset value, beginning of period........................ $1.0000
-------
Income from investment operations........................... .0036
Expenses.................................................... .0000
-------
Net investment income(1).................................... .0036
Dividends from net investment income(1)..................... (.0036)
-------
Net asset value, end of period.............................. $1.0000
=======
Total Return................................................ 4.85%(2)
</TABLE>

<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
------------------------
<S> <C>
Net assets in thousands, end of period...................... 3,261
Ratio of expenses to average net assets..................... .60%(2)
Ratio of net investment income to average net assets........ 4.73%(2)
</TABLE>

<TABLE>
<CAPTION>
MAY 13, 1998
(COMMENCEMENT OF
INTERSTATE INSTITUTIONAL FUND OPERATIONS) TO
(TREASURER'S TRUST SHARES) MAY 31, 1998
----------------------------- -----------------
<S> <C>
Net asset value, beginning of period........................ $1.0000
-------
Income from investment operations........................... .0021
Expenses.................................................... .0003
-------
Net investment income(1).................................... .0018
Dividends from net investment income(1)..................... (.0018)
-------
Net asset value, end of period.............................. $1.0000
=======
Total Return................................................ 3.39%(2)
</TABLE>

<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
------------------------
<S> <C>
Net assets in thousands, end of period...................... 14,031
Ratio of expenses to average net assets..................... .60%(2)
Ratio of net investment income to average net assets........ 3.33%(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 of
the Primary Institutional Fund. If there were no reduction the actual fee
would have been .02% higher for Class B.

5
<PAGE> 8

YIELD

For the seven calendar days ended May 31, 1998, the current and effective
yields of each Class and Fund were as follows:

<TABLE>
<CAPTION>
CURRENT EFFECTIVE
------- ---------
<S> <C> <C> <C>
Primary Fund Class.................................. A 5.36% 5.51%
B 5.16% 5.30%
TT 5.01% 5.14%
Government Fund Class............................... B 5.00% 5.12%
TT 4.85% 4.97%
Interstate Fund Class............................... TT 3.38% 3.43%
</TABLE>

The Interstate Tax-Exempt Institutional Fund may also quote its tax
equivalent yield, which shows the taxable yield an investor would have to earn
before taxes to equal the Fund's tax-free yield. The tax equivalent yield is
calculated by dividing the Fund's current or effective yield by the result of
one minus a stated federal tax rate.

Current yield refers to the income generated by an investment in a Fund over
a seven-day period. This income is then annualized, that is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The effective yield is calculated similarly but, when annualized, the income
earned is assumed to be reinvested. The effective yield will be higher than the
current yield because of this compounding effect.

In reports or other communications to shareholders of the Trust or in
advertising materials, the Trust may compare its performance with that of other
money market funds listed in the rankings prepared by industry or financial
publications or other relevant indices.

INVESTMENT OBJECTIVE AND POLICIES

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. In addition,
the Interstate Tax-Exempt Fund also seeks to have its interest income exempt
from federal income taxes. There is no assurance that a Fund will achieve its
investment objective. The investment objective may not be changed without the
vote of a majority of the outstanding shares of a Fund as defined in the
Investment Company Act of 1940 ("1940 Act").

The principal risk factors associated with investment in the Funds is the
risk of fluctuations in short-term interest rates, the risk of default among one
or more issuers of securities which comprise the Funds' assets and the risk of
non-diversification. As a non-diversified investment company, the Funds are
permitted to have all their assets invested in a limited number of issuers.
Accordingly, since a relatively high percentage of the Funds' assets may be
invested in the securities of a limited number of issuers, the Fund's investment
securities may be more susceptible to any single economic, political or
regulatory occurrence than the investment securities of a diversified investment
company. However, the Fund intends to qualify as "regulated investment
companies" for purposes of the Internal Revenue Code. This limits the aggregate
value of all investments (except United States government securities, securities
of other regulated investment companies, cash and cash items) so that, with
respect to at least 50% of its total assets, not more than 5% of such assets are
invested in the securities of a single issuer.

The Primary Fund seeks to attain its objective by investing in 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 any
nationally recognized statistical rating organization or, in the case of any
instrument that is not rated, it must be of comparable quality as determined by
the Board of Trustees; other short-term instruments of similar quality; and
instruments fully collateralized by such obligations.

The Primary Fund may invest in obligations of U.S. banking institutions that
are insured by the FDIC; commercial paper which is rated, at the time of
investment, P-1 by Moody's, A-1 by S&P or the equivalent thereof if rated by
another rating agency; and obligations of foreign banks which, at the time of
investment, have more than $25 billion (or the equivalent in other currencies)
in total assets and which, in the opinion of the Fund's Investment Adviser, are
of comparable quality. Instruments which are not rated may also be purchased
provided such instruments are determined to be of comparable quality. The Fund
may also invest in obligations of, foreign branches of U.S. banks (Eurodollars),
U.S. branches of foreign banks (Yankee dollars) and foreign branches of foreign
banks. Euro and Yankee dollar investments involve certain risks that are
different from investments in 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 branches of foreign banks are not regulated by U.S. banking authorities
and are generally not bound by financial reporting standards comparable to U.S.
banks. The Fund

6
<PAGE> 9

will limit its investment in foreign branches of foreign banks to those banks
located in Australia, Canada, Western Europe and Japan. The Fund may also invest
in Municipal Obligations secured by bank letters of credit, the interest on
which is not exempt from federal income taxes.

The Government Fund seeks to attain its objective by investing only in
securities backed by the full faith and credit of the United States government
or obligations collateralized thereby.

The Treasury Fund seeks to attain its objective by investing only in
securities of the U.S. government that provide interest income exempt from state
and local income taxes. Under federal law, the income derived from obligations
issued by the U.S. Treasury and certain of its agencies and instrumentalities is
exempt from state personal income taxes. A substantial majority of the states
that tax personal income permit mutual funds to passthrough this tax exemption
to shareholders. It is anticipated that a substantial portion of the dividends
paid to shareholders of the U.S. Treasury Fund residing in these states will
qualify for this exemption from state taxation. However, a state or local taxing
authority may, in the future, seek to tax a shareholder on all or a portion of
this income.

The Interstate Fund seeks to attain its objective by investing principally
in obligations issued by states, territories, and possessions of the U.S. and
their subdivisions, duly constituted authorities and corporations, or
participation in such obligations; the interest on which is exempt from U.S.
federal income taxes.

The Interstate Fund invests in securities generally known as municipal bonds
or notes ("Municipal Obligations") and the interest on them is exempt from
federal income tax in the opinion of either bond counsel for the issuers, or in
some instances, the issuer itself. They are issued to raise money for various
public purposes such as constructing public or private 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 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
backed by the credit of a private issuer. The Fund may invest any portion of its
assets in such bonds and notes. Municipal Obligations bear fixed, variable or
floating rates of interest. At least 80% of the value of the Fund's assets will
be invested in Municipal Obligations unless the Fund has adopted a temporary
defensive position.

The Interstate Fund may invest any portion of its assets in floating and
variable rate demand notes, 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, in each case, usually upon not more than seven (7) days'
notice. The interest rates on these floating and variable rate demand notes
fluctuate from time to time. Frequently, such Municipal Obligations are secured
by letters of credit or other credit-support arrangements provided by banks. Use
of letters of credit or other credit-support arrangements will not adversely
affect the tax-exempt status of these Municipal Obligations. The Fund will
purchase tax-exempt securities which are rated MIG-1 or MIG-2 by Moody's
Investor Services, Inc. ("Moody's"), SP-1 or SP-2 by Standard & Poor's
Corporation ("S&P") or the equivalent thereof and non-rated securities which are
determined to be of comparable quality by the Fund's Investment Adviser pursuant
to guidelines established by the Board of Trustees.

In view of the investment of the Fund in industrial revenue, development
bonds and notes secured by letters of credit or guarantees of banks, an
investment in Fund shares should be made with an understanding of the
characteristics of the banking industry and the risks such an investment may
entail. Banks are subject to extensive government regulations, which may limit
both the amounts and the types of loans and other financial commitments which
may be made and interest rates and fees which may be charged. The profitability
of the banking industry is largely dependent upon the availability and cost of
funds for the purpose of financing lending operations. In addition, general
economic conditions play an important part in the operations of this industry,
and exposure to credit losses arising from possible financial difficulties of
borrowers might affect a bank's ability to meet its obligations under a letter
of credit.

OTHER POLICIES. PRIMARY, GOVERNMENT AND TREASURY FUNDS. Each Fund may invest in
repurchase agreement transactions. A repurchase agreement is a transaction by
which a Fund purchases a security (U.S. government or other) and simultaneously
commits to resell that security to the seller at the same price, plus interest
at a specified rate. Repurchase agreements usually have a short duration, often
less than one week. The Funds will limit repurchase agreements to those banks
and securities dealers who are deemed creditworthy pursuant to guidelines
adopted by the Funds' Board of Trustees. The Investment Adviser will follow
procedures to assure that all repurchase agreements are always fully
collateralized as to principal and interest. The instruments held as collateral
are valued daily, and if the value of the instruments decline, the Funds will
require additional collateral. If the other party to the repurchase agreement
defaults on its obligation to repurchase the underlying securities, a portfolio
may incur a loss to the extent that the proceeds from the sale of the collateral
were less than the repurchase price. In the event of insolvency or bankruptcy of
the other party to a repurchase agreement, a Fund may encounter difficulties and
might incur costs or possible losses of principal and income upon the exercise
of its rights under the repurchase agreement. The U.S. Treasury Fund will limit
its investment in repurchase agreements with respect to securities backed only
by the full faith and credit of the U.S. government to not more than 5% of its
total assets. Such investment will be for temporary purposes pending the
investment of uninvested cash in U.S. Treasury obligations. Securities subject
to repurchase agreements will be

7
<PAGE> 10

placed in a segregated account and the market value will be monitored to ensure
that the market value of the securities plus any accrued interest thereon will
at least equal the repurchase price.

The Primary and 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 (or any combination thereof), which 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. In determining whether to lend
securities to a particular broker-dealer or financial institution, the Fund will
consider all relevant facts and circumstances, including the creditworthiness of
the broker-dealer or financial institution. A Fund may pay reasonable finders',
administrative and custodial fees in connection with a loan. During the time
portfolio securities are on loan the borrower will pay the Fund an amount
equivalent to any interest paid on such securities and the Fund may invest the
cash collateral and earn additional income, or it may receive an agreed-upon
amount of interest from the borrower who has delivered equivalent collateral or
secured a letter of credit. The value of the securities loaned cannot exceed 25%
of the Fund's total assets. Loans of securities involve risks of delay in
receiving additional collateral or in recovering the securities lent or even
loss of rights to the collateral in the event of insolvency of the borrower of
the securities. The SAI further explains the Funds' securities-lending policies.

The Primary, Government and Treasury Funds may invest, without limitation,
in U.S. government securities and in instruments secured or collateralized by
U.S. government securities. A Fund will not invest more than 10% of its net
assets in illiquid securities, including repurchase agreements providing for
settlement in more than seven (7) days after notice. A Fund will not concentrate
(i.e., invest 25% or more of its total assets) in the securities of issuers in a
single industry, except that the Primary Fund may invest 25% or more of its
total assets in banking. In addition, a Fund will not invest more than 5% of its
total assets in the securities of any single issuer (except U.S. government
securities or repurchase agreements collateralized by U.S. government
securities). Each Fund has the authority to borrow money (including reverse
repurchase agreements), for extraordinary or emergency purposes but not in an
amount exceeding 5% of its total assets. Reverse repurchase agreements involve
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.

U.S. government securities include a variety of securities 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. United States 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 the GNMA, are
supported by the full faith and credit of the United States. Other securities,
such as obligations issued by the 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 the 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 United States 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.

In order to provide liquidity, each Fund: limits its average maturity to 90
days or less; buys securities which mature in 397 days or less; and buys only
high-quality securities.

INTERSTATE FUND. Certain banks and other municipal securities dealers have
indicated a willingness to sell Municipal Obligations to the Fund accompanied by
a commitment to repurchase the securities, at the Fund's option or at a
specified date, at an agreed upon price or yield within a specified period prior
to the maturity date of such securities at the amortized cost thereof. If a bank
or other municipal securities dealer were to default under such stand-by
commitment and fail to pay the exercise price, the Fund could suffer a potential
loss to the extent that the amount paid by the Fund, if any, for the Municipal
Obligation with the stand-by commitment exceeded the current value of the
underlying Municipal Obligations. If a bank or other municipal securities dealer
defaults under its stand-by commitment, the liquidity of the security subject to
such commitment may be adversely affected.

8
<PAGE> 11

securities are not invested prior to the settlement of a purchase of securities,
the Fund will earn no income; however, it is the Fund's intent to be as fully
invested as is practicable. While when-issued securities may be sold prior to
settlement date, the Fund intends to purchase such securities with the purpose
of actually acquiring them unless a sale appears desirable. 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. The Investment
Adviser 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.

The Fund may purchase from financial institutions participation interests in
Municipal Obligations. A participation interest gives the Fund an undivided
interest in the Municipal Obligation in the proportion that the Fund's
participation interest bears to the total principal amount of the Municipal
Obligation. These instruments may have fixed, floating or variable rates of
interest. Frequently, such instruments are secured by letters of credit or other
credit-support arrangements provided by banks.

Interest received on certain otherwise tax-exempt securities ("private
activity bonds") is 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 federal AMT or at least 80% of its income must be tax-exempt. Income
received on such securities is classified as a "tax preference item" which could
subject certain shareholders of the Fund to the AMT. However, as of the date of
this Prospectus, the Fund does not purchase such securities, but reserves the
right to do so depending on market conditions in the future.

Yields on municipal securities depend on a variety of factors, including
general economic and monetary conditions, money-market factors, conditions in
the tax-exempt securities market, size of a particular offering, maturity of the
obligation and rating of the issue. The ability of the Fund to achieve its
investment objective is also dependent on the continuing ability of issuers of
municipal securities to meet their obligations for the payment of interest and
principal when due.

From time to time the Fund may invest in taxable short-term investments
("Taxable Investments") consisting of obligations backed by the full faith and
credit of the U.S. government, its agencies or instrumentalities; deposit-type
obligations, acceptances, and letters of credit of Federal Deposit Insurance
Corporation member banks; and instruments fully collateralized by such
obligations. Unless the Fund has adopted a temporary defensive position, no more
than 20% of the net assets of the Fund will be invested in Taxable Investments
at any time. The Fund may enter into repurchase agreements with regard to the
taxable obligations listed above. Although the Fund is permitted to make
temporary taxable investments, there is no current intention of generating
income subject to federal income tax.

The Fund's Investment Adviser uses its reasonable business judgment in
selecting investments in addition to considering the ratings of Moody's, S&P and
other rating services. This analysis considers, among other things, the
financial condition of the issuer by taking into account present and future
liquidity, cash flow and capacity to meet debt service requirements. Since the
market value of debt obligations fluctuates as an inverse function of changing
interest rates, the Funds seek to minimize the effect of such fluctuations and
provide liquidity by investing in instruments with remaining maturities of 397
days or less and limiting its average maturity to 90 days or less.

MANAGEMENT

INVESTMENT MANAGEMENT AGREEMENT. The Board of Trustees manages each Fund's
business and affairs. Reserve Management Company, Inc. ("Adviser"), 14 Locust
Place, Manhasset, NY 11030, a New Jersey corporation, provides the Funds with
investment advice pursuant to an Investment Management Agreement. Since November
15, 1971, the Adviser and its affiliates have been advising The Reserve Funds,
which currently have assets in excess of $4.7 billion. Under the Investment
Management Agreement, the Adviser manages each Fund's investments, including
effecting purchases and sales, in furtherance of its investment objective and
policies, subject to overall control and direction by the Trustees.

Each Fund pays the Adviser a comprehensive management fee calculated on an
annual basis at .25% of its average daily net assets. Under the terms of the
Investment Management Agreement with the Funds, the Adviser pays all employee
and ordinary operating costs of the Funds. Excluded from the definition of
ordinary operating costs are interest, taxes, brokerage fees, extraordinary
legal and accounting fees and expenses, fees under the Distribution Plan and the
Service Plan (discussed below) and certain operating expenses unique to the
Treasurer's Trust shares.

9
<PAGE> 12

shares of each Fund. Payment for these services will be made by the Fund and
charged against the average daily net assets attributable to the Treasurer's
Trust shares, rather than being paid by the Adviser as part of its comprehensive
fee.

The Investment Management Agreement provides that the Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by a
Fund in connection with the matters to which the Investment Management Agreement
relates, except a loss resulting from the willful misfeasance, bad faith or
gross negligence on the part of the Adviser in the performance of its duties or
from reckless disregard by it of its duties and obligations thereunder.

The Adviser may make such advertising and promotional expenditures, using
its own resources, as it from time to time deems appropriate.

YEAR 2000. The Trust could be adversely affected if the computer systems and
other service providers that interface with it are unable to process data from
January 1, 2000 and after. However, steps are being taken by The Adviser to
reasonably address this issue and to obtain assurance that comparable effort is
being made by service providers. There can be no assurance that these steps will
be sufficient to avoid any adverse impact to the Trust.

TRUSTEES. 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.

TRANSFER AGENT AND DIVIDEND PAYING AGENT. The Reserve Institutional Trust acts
as its own transfer agent and dividend-paying agent.

HOW TO BUY SHARES

Each Fund offers five Classes of shares to investors, with each Class
subject to differing service fees and distribution fees, as follows:

<TABLE>
<CAPTION>
MAXIMUM MAXIMUM
ANNUAL MAXIMUM TOTAL ANNUAL
SHAREHOLDER ANNUAL OPERATING MINIMUM
SERVICES FEE* 12B-1 FEE* EXPENSES+ INITIAL INVESTMENT
------------- ---------- ------------ ------------------
<S> <C> <C> <C> <C>
Class A...................................... 0% 0% .25% $10 million
Class B...................................... .20% 0% .45% $5 million
Treasurer's Trust............................ .35% 0% .60% None
Class C...................................... .25% .25% .75% $1 million
Class D...................................... .25% .50% 1.00% $250,000
</TABLE>

- ---------------
* As a percentage of average daily net assets.
+ As a percentage of average net assets (exclusive of brokerage fees,
extraordinary legal and accounting fees and expenses).

In all other respects, all Classes of shares represent the same interest in
the income and assets of each respective Fund.

Shares of a Fund may be purchased by wire only. Shares are sold at the net
asset value ("NAV") determined after receipt of a purchase order in the manner
described below. Purchase orders are accepted on any day on which the New York
Stock Exchange ("NYSE") and the Federal Reserve Bank of New York are open
("Business Day"). For Federal Funds wires to be eligible for same-day order
entry, the Fund must be notified before 2:00 PM (New York time for Primary and
U.S. Government Funds), (11:00 AM New York time for Interstate and U.S. Treasury
Funds) of the amount to be transmitted and the account to be credited, and the
Fund must receive the credit at its bank by 3:00 PM (New York time). Orders
received by a Fund after the times specified above will be priced at the public
offering price in effect at 3:00 PM (New York time) on the next Business Day.
Purchase orders are not accepted on New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day (observed), Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day, Christmas Day, days the NYSE
is closed for trading or regional bank holidays.

To purchase shares of a Fund by Federal Reserve wire, call the Fund at
800-637-1700 or call your sales representative. To protect a Fund's performance
and shareholders, the Adviser discourages frequent trading in response to
short-term market fluctuations. The Funds reserve the right to refuse any
investment.

10
<PAGE> 13

notify the Funds after the advanced time become entitled to dividends on the
following Business Day. If a Fund receives notification of a redemption request
after the advanced time, it ordinarily will wire redemption proceeds on the next
Business Day.

If an investor does not remit Federal Funds, such payment must be converted
into Federal Funds. This usually occurs within one Business Day of receipt of a
bank wire. Prior to receipt of Federal Funds, the investor's monies will not be
invested. Telephone the Fund, toll free at 800-637-1700 for wiring instructions.

SHARE CERTIFICATES. Each Fund maintains a share account for each shareholder.
The Trust does not issue share certificates.

ACCOUNT STATEMENTS. Monthly account statements are sent to investors to report
transactions such as purchases and redemptions as well as dividends paid during
the month.

MINIMUM INVESTMENT REQUIRED. The minimum initial investment in each Fund is $10
million for Class A, $5 million for Class B, $1 million for Class C, and
$250,000 for Class D shares. The Treasurer's Trust shares of each Fund are not
subject to any minimum initial investment amount. There is no minimum subsequent
investment for any of the classes. The Funds reserve the right to waive the
minimum investment requirement.

NET ASSET VALUE. Shares are sold to the public at NAV which is calculated at
the close of each Business Day (normally 4:00 PM New York time) by taking the
sum of the value of each Fund's investments (amortized cost value is used for
this purpose) and any cash or other assets, subtracting liabilities, and
dividing by the total number of shares outstanding. A "Business Day" is Monday
through Friday exclusive of New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day (observed), Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day, Christmas Day, days the NYSE
is closed for trading or regional bank holidays. It is the policy of each Fund
to seek to maintain a stable NAV per share of $1.00, although this share price
is not guaranteed.

DISTRIBUTOR. The Funds' distributor is Resrv Partners, Inc., 810 Seventh
Avenue, New York, NY 10019-5868, which is a wholly-owned subsidiary of the
Adviser.

DISTRIBUTION PLAN. Accounts may be opened through brokers, financial
intermediaries, and institutions ("Firms"). Financial institutions providing
distribution assistance or administrative services for the Fund may be required
to register as securities dealers in certain states. Some of these Firms
participate in the Fund's Distribution Plan and Service Plan.

The Reserve Institutional Trust maintains the Distribution Plan and related
agreements pursuant to Rule 12b-1 under the 1940 Act. Under the Distribution
Plan, the Class C and D shares of each Fund make assistance payments at annual
rates of 0.25% and 0.50%, respectively, of the average daily NAV of Firms'
shareholder accounts ("qualified accounts"). Substantially all such monies are
paid by RMCI to Firms for distribution assistance provided to the Funds. The
Investment Adviser, at its discretion, may pay from its own resources or from
other resources available to it, additional amounts and incentives, including
lump-sum payments, based upon the amount of assets committed to the Funds by
such Firms and underwriters. The Plan does not permit the carrying over of
payments from year to year. The Investment Adviser also reimburses Firms, from
its own resources or from other resources available to it for a portion of their
costs for advertising and marketing of the Funds. All such arrangements are
designed to facilitate the sale of the Funds' shares. Class A, Class B and
Treasurer's Trust shares do not currently participate in a 12b-1 distribution
plan.

SHAREHOLDER SERVICE FEES. Under the plan, shareholders of Class B, Treasurer's
Trust, C and D pay Firms a service fee at an annual rate up to 0.20%, 0.35%,
0.25% and 0.25%, respectively of the average daily NAV for which the Firm
provides personal service, including maintaining shareholder accounts,
responding to inquiries, providing information about investments and providing
certain other services. Class A shares do not participate in The Service Plan.

CLIENTS OF FIRMS. Firms 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. Some Firms which
utilize a centralized purchase method for shares may have an earlier cut-off for
purchase orders than stated above in order to facilitate the transmission of
purchase orders by bulk wire. 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 Funds' transfer agents
will have no information with respect to or control over the accounts of
specific shareholders. Such shareholders may obtain access to their accounts and
information about their accounts only from their Firm. Some Firms may receive
compensation for recordkeeping and other services relating to these nominee
accounts. 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 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-

11
<PAGE> 14

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.

SHARES OF BENEFICIAL INTEREST

The Reserve Institutional Trust was originally organized as a Maryland
corporation on February 5, 1981 and reorganized on September 16, 1986 as a
Massachusetts business trust, and is an open-end management investment company
commonly known as a mutual fund. At the date of this Prospectus, there were four
separate series authorized and three series outstanding. Additional series may
be added in the future by the Board of Trustees. The Trust is authorized to
issue an unlimited number of shares of beneficial interest which may be issued
in any number of series. Shares issued will be fully paid and non-assessable and
will have no preemptive, conversion or sinking rights. The shareholders of each
series are entitled to a full vote for each full share held (and fractional
votes for fractional shares) and have equal rights with respect to earnings,
dividends, redemptions and in the net assets of their series on 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.

Under Massachusetts law, the shareholders and trustees of a business trust
can be personally liable for the trust's obligations to third parties unless, as
in this instance, the Declaration of Trust provides, in substance, that no
shareholder or Trustee shall be personally liable for the Trust's 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 each Fund to indemnify its shareholders and
Trustees against such liabilities and any related claims or expenses.

DAILY DIVIDENDS

Each Fund declares dividends each Business Day. 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. Although none are anticipated, any net
realized long-term capital gains will be distributed at least annually.

TAXES

Each Fund intends to maintain its regulated investment company status for
federal income tax purposes. Accordingly, the Funds intend to satisfy certain
requirements imposed by the Internal Revenue Code, so as to avoid any federal
income or excise tax liability.

For federal income tax purposes, distributions out of interest earned by a
Fund and net realized short-term capital gains are taxable as ordinary income.
Any distributions of net long-term capital gains are taxable to individual
shareholders at the applicable 20% or 28% capital gains rate, regardless of the
length of time shares have been owned by the shareholder. Distributions are
taxable to shareholders in the same manner, whether a shareholder receives such
distributions in cash or reinvests them in additional shares.

The Treasury Fund intends to invest only in U.S. Treasury securities and
obligations of those agencies and instrumentalities of the U.S. government that
provide interest income exempt in many states from state and local personal
income taxes except to the extent uninvested cash is invested in repurchase
agreements. Some states have minimum investment requirements that must be met by
the Treasury Fund. Distributions attributable to net capital gains, if any, are
generally subject to state and local taxes. It is possible that a state or local
taxing authority may currently or in the future seek to tax an investor on a
portion of this interest income. Shareholders should consult with their own tax
advisers with respect to the application of their state and local tax laws to
these distributions.

INTERSTATE FUND. Dividends derived from the interest earned on Municipal
Obligations and designated by the 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 individual shareholders at the applicable mid-term or long-term
capital gains rate regardless of the length of time the Fund's shares have been
owned by the shareholder.

ALL FUNDS. A distribution will be treated as paid on December 31 of the current
calendar year if it is declared by a Fund in October, November or December with
a record date in such a month and paid by the Fund during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which they are received.

12
<PAGE> 15

Upon a sale or other disposition of shares of a Fund, in the event that the
Fund does not maintain a constant NAV per share, a shareholder may realize a
capital gain or loss which will be long-term or short-term, depending upon the
shareholder's holding period for the shares.

The Funds may be required to withhold U.S. federal income tax at the rate of
31% of all taxable distributions payable to shareholders who fail to provide a
Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Backup withholding is not an additional tax. Any amount
withheld may be credited against the shareholder's U.S. federal income tax
liability.

Shareholders of each Fund are advised to retain all statements to maintain
accurate records of their investments. The Trust intends to report to its
shareholders before the end of February of each year the source of dividends and
other distributions, if any, paid or declared by each Fund during the previous
calendar year which may be exempt from state income taxes. Shareholders should
consult their own tax advisers regarding specific questions as to federal, state
or local taxes.

Further information relating to tax consequences is contained in the SAI.

REDEMPTIONS

TIME AND METHOD OF REDEMPTION. Shares of each Fund are redeemed at NAV
determined after receipt by the Fund of a request in proper form. Although the
Funds have seven (7) days to transmit payment for share redemptions, they
usually transmit payment the same day when redemption requests are received
before 12:00 noon (New York time) (11:00 AM New York time for the U.S. Treasury
Fund and Interstate Fund) and the next day for requests received after the
specified time to enable shareholders to receive additional dividends. This is
not always possible, however, and transmission of redemption proceeds may be
delayed. Payment will normally be made by check or bank transfer. Shares do not
earn dividends on the day a redemption is effected regardless of the time the
order is received.

WRITTEN AND TELEPHONE REDEMPTION REQUESTS. The Funds strongly suggest (but not
require) that each written redemption be at least $100,000 and require that each
telephone redemption be at least $100,000, except for redemptions which are
intended to liquidate your account. A shareholder will be charged $100 for
redemption checks for less than $100,000, except for Class D shareholders who
will be charged $2.00 for redemption checks of less than $100. Payments of
$100,000 or more will be wired upon request without charge, except for Class D
shareholders who can have payments of $10,000 or more wired without charge. A
shareholder will be charged $100 for wires of less than $100,000, except for
Class D shareholders who will be charged $10 for wires less than $10,000.
Shareholders of Treasurer's Trust shares will not be charged any fees on
redemptions by telephone or wire. The Funds assume no responsibility for delays
in the receipt of wired or mailed funds. The use of a predesignated financial
institution, such as a savings bank, credit union or savings and loan
association which is not a member of the Federal Reserve wire system to receive
your wire, could cause such a delay. If a Fund has previously been advised in
writing of your brokerage or bank account, telephone requests will be accepted
by calling 800-637-1700. The Funds may be liable for any losses caused by their
failure to employ reasonable procedures. To reduce the risk of loss, proceeds of
telephone redemptions may be sent only (1) to the bank or brokerage account
designated by the shareholder on the investment Application or in a letter with
the signature(s) guaranteed; or (2) to the address of record if all the
conditions listed below are met. 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 as described below.
Other redemption orders must be in writing with the necessary signature(s)
guaranteed by a domestic commercial bank; a domestic trust company; a domestic
savings bank, credit union or savings association; or a member firm of a
national securities exchange. Guarantees from notaries public are unacceptable.
The Funds will waive the signature guarantee requirement for Class D
shareholders on a redemption request once every thirty (30) days if all of the
following conditions apply: if the redemption check is (1) for $5,000 or less;
(2) payable to the shareholder(s) of record; and (3) mailed to the
shareholder(s) at the address of record. The requirement of a guaranteed
signature protects against an unauthorized person redeeming shares and obtaining
the redemption proceeds. Redemption instructions and election of the plans
described may be made 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.

The Funds reserve the right to refuse a telephone redemption if they believe
it is advisable to do so. Procedures for telephone redemptions may be modified
or terminated by a Fund at any time. During times of drastic economic or market
conditions, shareholders may experience difficulty in contacting the Funds by
telephone to request a redemption or exchange of a Fund's shares. In such cases,
shareholders should consider using another method of redemption, such as a
written request or a redemption by check.

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<PAGE> 16

REDEMPTION BY CHECK. (Treasurer's Trust and Class D shareholders only.) By
completing a signature card (and certain other documentation if the record owner
is a fiduciary, corporation, partnership, trust or other organization) which is
available from the Funds or the Firm through which shares of the Funds were
purchased, you can write checks against your account. This privilege may not be
available to clients of some Firms. There is no minimum amount for check
redemptions, however, a Fund, upon proper notice to the shareholder, may choose
to impose a fee if it deems a shareholder's actions to be burdensome to the
Fund. A Firm may establish variations of minimum check amounts for their
customers if such variations are approved by the Funds. This procedure lengthens
the time your money earns dividends, since redemptions are not made until the
check is processed by the Funds. Because of this, a check cannot completely
liquidate your account, nor may a check be presented for certification or
immediate payment. Otherwise, you may deposit a check in your bank account or
use it to pay any third party obligation not requiring certification.
Shareholder checks written against accounts with insufficient funds, postdated
checks and checks which contain an irregularity in the signature, amount or
otherwise will be returned by the Funds and a fee charged against the account.
Because check redemptions are reported on account statements, they will not be
confirmed separately. A fee is charged for providing check copies.

STOP PAYMENTS. (Treasurer's Trust and Class D shareholders only.) 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 2:00 PM (New York time) in proper form will be
effective the next Business Day. Oral stop payment requests are effective for 14
calendar days, at which time they will be canceled unless confirmed in writing.
Written stop payment requests are effective for one year. A fee is charged for
this service.

AUTOMATIC WITHDRAWAL PLANS. (Treasurer's Trust and Class D shareholders only)
If you have an account with a balance of at least $5,000 you may make a written
election to participate in either one 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 either 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 or modify or terminate any Automatic Withdrawal Plan 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.

RESERVE AUTOMATIC TRANSFER. (Treasurer's Trust and Class D shareholders only)
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 (as permitted) designated in the
application. Only such an account maintained in a domestic financial institution
which is an Automated Clearing House member may be so designated. 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 redemption
request. The Funds may impose a charge or 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.

REDEMPTIONS THROUGH BROKER AND FINANCIAL INSTITUTIONS. Redemptions through
brokers and Financial Institutions may involve such Firm's own redemption
minimums, service fees, and other redemption requirements.

RESTRICTIONS. The right of redemption may be suspended or the date of payment
postponed for more than seven (7) days only (a) when the New York Stock 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 Plan, 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 will generally be 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 (for Class D and
Treasurer's Trust shareholders only). 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.

GENERAL INFORMATION

14
<PAGE> 17

to an account so registered. The investment Application provides that persons so
registering their account indemnify and hold the Fund harmless for actions taken
by either party.

BACKUP WITHHOLDING. 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. 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.
However, special rules apply for certain accounts. For example, for an account
established under the Uniform Gift to Minors Act, the TIN of the minor should be
furnished. Shareholders should be aware that, under regulations promulgated by
the IRS, a Fund may be fined $50 annually 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. The Funds will not accept purchase orders for accounts for
which a correct and certified TIN is not provided or which is otherwise subject
to backup withholding, except in the case of certain non-resident alien account
holders.

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 is, 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 report containing
audited financial statements and an unaudited semi-annual report. A statement is
sent to each shareholder at least quarterly. Shareholders who are clients of
some Firms will receive a statement combining transactions in Fund shares with
statements covering other brokerage or mutual fund accounts.

SMALL BALANCES. Because of the expense of maintaining accounts with small
balances (less than $1,000 for Class D and less than $100,000 for Class A, Class
B and Class C), the Funds will either levy a monthly charge (currently $5 for
Class D and $100 for Class A, B and C). Some firms may establish variations of
minimum balances and fee amounts if such variations are approved by the Funds.

RESERVE EASY ACCESS. Easy Access is The Reserve Funds' 24-hour toll-free
telephone service that lets customers use a touch-tone phone to obtain yields
and account balances. To use it, call 800-637-1700 and follow the instructions.
Clients may also access full account activity for the previous six months 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 Funds.

SPECIAL SERVICES. The Funds reserve the right to charge shareholder accounts
for specific costs incurred in processing unusual transactions for shareholders.
Such transactions include, but are not limited to, stop payment requests, copies
of Fund redemption or shareholder checks, copies of statements and special
research services.

PERFORMANCE. The Funds may compare their performance to other income-producing
alternatives such as (i) money-market funds (based on yields cited by IBC's
Money Fund Report and other industry publications); and (ii) various bank
products (based on average rates of bank and thrift institution certificates of
deposit, money-market deposit accounts and NOW accounts as reported by the Bank
Rate Monitor and other industry publications). An investment in shares of a Fund
is not insured by the Federal Deposit Insurance Corporation.

Yield information is useful in reviewing a 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.

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.

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

15
<PAGE> 18

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and the Board of Trustees of Reserve Institutional
Trust:

In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and financial highlights
present fairly, in all material respects, the financial position of Reserve
Institutional Trust (comprising the Primary Institutional, U.S. Government
Institutional and Interstate Tax-Exempt Institutional Funds) at May 31, 1998,
the results of its operations for the period then ended, the changes in their
net assets and the financial highlights for the periods then ended in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust'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 generally accepted
auditing standards which require that we plan and perform the audits 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, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.

PricewaterhouseCoopers LLP

New York, New York

July 24, 1998

RESERVE INSTITUTIONAL TRUST -- PRIMARY INSTITUTIONAL FUND

STATEMENT OF NET ASSETS -- MAY 31, 1998

<TABLE>
<CAPTION>
% DAYS TO VALUE
RATE MATURITY (NOTE 1)
---- -------- --------
<S> <C> <C> <C>
NEGOTIABLE BANK CERTIFICATES OF DEPOSIT -- 47.34 %
ABN-AMRO Bank N.V.(a)..................................... 5.53 15 $ 9,026,268
Canadian Imperial Bank of Commerce(b)..................... 5.535 23 9,015,221
Chase Manhattan Bank...................................... 5.55 4 9,006,938
Crestar Bank.............................................. 5.555 36 9,015,276
Deutsche Bank AG(a)....................................... 5.54 19 9,018,005
Dresdner Bank AG(b)....................................... 5.54 29 8,004,924
Harris Trust and Savings Bank............................. 5.53 11 9,029,033
Mellon Bank, N.A. ........................................ 5.57 3 9,083,550
SouthTrust Bank of Alabama, N.A. ......................... 5.57 36 9,036,205
Westdeutsche Landesbank Girozentrale(b)................... 5.57 36 8,048,273
------------
Total Negotiable Bank Certificates of Deposit -- (Cost
$88,000,000).............................................. 88,283,693
PROMISSORY NOTES -- 14.45 %
Commerzbank U.S. Finance, Inc.(c)......................... 5.51 22 8,971,073
Hypo U.S. Finance, Inc.(c)................................ 5.505 8 8,990,366
Societe Generale North America, Inc.(c)................... 5.50 17 8,978,000
------------
Total Promissory Notes -- (Cost $26,870,636)................ 26,939,439
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 19
RESERVE INSTITUTIONAL TRUST -- PRIMARY INSTITUTIONAL FUND

STATEMENT OF NET ASSETS -- MAY 31, 1998 -- (CONTINUED)

<TABLE>
<CAPTION>
% DAYS TO VALUE
RATE MATURITY (NOTE 1)
---- -------- --------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS -- 38.09 %
GNMA 7% due 7/15/27 (Repo with Bear, Stearns & Co. Inc.
dated May 29, 1998, resale amount $30,014,075).......... 5.63 1 $ 30,014,075
FMAR due 10/2/24 and FNAR due 2/1/27 to 4/1/34 (Repo with
DLJ Securities Corporation dated May 29, 1998, resale
amount $16,507,741)..................................... 5.63 1 16,507,741
TRIN 3.375% due 1/15/07 (Repo with Prudential Securities
Inc. dated May 29, 1998, resale amount $24,511,351)..... 5.56 1 24,511,351
------------
Total Repurchase Agreements -- (Cost $71,000,000)........... 71,033,167
------------
Primary Institutional Fund Investments -- (99.88%) (Cost
$185,870,636)............................................. 186,256,299
Other assets, less liabilities -- (.12%).................... 232,177
------------
NET ASSETS (100%) equivalent to $1.00 net asset value,
offering and redemption prices per share based on
186,488,476 shares of beneficial interest $.001 par value
outstanding............................................... $186,488,476
============
</TABLE>

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

<TABLE>
<CAPTION>
CLASSES NET ASSETS SHARES OUTSTANDING NAV
<S> <C> <C> <C>
Class A $4,412,016 4,412,016 $1.00
Class B $10,376,245 10,376,245 $1.00
Class Treasurer's Trust $171,700,215 171,700,215 $1.00
</TABLE>

RESERVE INSTITUTIONAL TRUST -- U.S. GOVERNMENT INSTITUTIONAL FUND

STATEMENT OF NET ASSETS -- MAY 31, 1998

<TABLE>
<CAPTION>
DAYS TO VALUE
RATE MATURITY (NOTE 1)
---- -------- --------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS -- 98.19 %
GNMA 5% due 11/20/27 (Repo with Goldman Sachs & Co. dated
May 28, 1998, resale amount $3,102,368)................. 5.50 2 $3,101,895
GNMA 5% due 5/20/28 (Repo with Prudential Securities Inc.
dated May 29, 1998, resale amount $2,801,276)........... 5.47 1 2,801,276
GNMA 6.50% due 10/15/27 (Repo with Salomon Smith Barney
Inc. dated May 27, 1998, resale amount $3,002,760)...... 5.52 2 3,002,300
----------
Total Institutional Government Fund Investments -- (Cost
$8,900,000)............................................... 8,905,471
Other assets, less liabilities -- (1.81%)................... 163,959
----------
NET ASSETS (100%) equivalent to $1.00 net asset value,
offering and redemption prices per share based on
9,069,430 shares of beneficial interest $.001 par value
outstanding............................................... $9,069,430
==========
</TABLE>

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

<TABLE>
<CAPTION>
CLASSES NET ASSETS SHARES OUTSTANDING NAV
<S> <C> <C> <C> <C>
Class B $5,808,080 5,808,080 $1.00
Class Treasurer's Trust $3,261,350 3,261,350 $1.00
</TABLE>

(a) Eurodollar Certificates of Deposit - London Branch, United Kingdom

(b) Yankee Certificates of Deposit

<TABLE>
<S> <C> <C>
GNMA = Government National Mortgage Association Mortgage-Backed
Pass-Through Securities
FMAR = Federal Home Loan Mortgage Corporation (FHLMC) Adjustable
Rate Mortgage-Backed Pass-Through Participation Certificates
FNAR = Federal National Mortgage Association (FNMA) Adjustable Rate
Mortgage-Backed Pass-Through Securities
TRIN = U.S. Treasury STRIPS
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 20

RESERVE INSTITUTIONAL TRUST -- INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND

STATEMENT OF NET ASSETS -- MAY 31, 1998

<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
DESCRIPTION OF SECURITY DATE (IN THOUSANDS) (NOTE 1)
- ----------------------- -------- -------------- --------
<S> <C> <C> <C>
ALABAMA -- 3.59 %
Pell City IDA for General Signal Corporation, 3.90%(a).... 10/1/2000 500 $ 503,379
ARIZONA -- 7.15 %
Apache IDA for Tucson Electric Power Company, 3.90%(a).... 12/15/2018 500 500,910
Pima IDA PCR for Tucson Electric Project, 3.85%(a)........ 10/1/2022 500 501,682
CALIFORNIA -- 3.57 %
Grand Terrace Community Redevelopment Agency, 4.40%(a).... 12/1/2011 500 501,572
COLORADO -- 7.16 %
Englewood HCF for SW Medical Professional Ltd. Series 85,
4.20%(a)................................................ 12/1/2010 500 501,438
Eagle Revenue Bonds for Smith Creek Metro District,
3.75%(a)................................................ 10/1/2035 500 503,293
FLORIDA -- 7.17 %
Boca Raton IDA for Parking Garage Project, 4.075%(a)...... 12/1/2014 500 505,074
St. Lucie PCR for Florida Power & Light, 3.95%(a)......... 1/1/2026 500 501,592
KENTUCKY -- 7.22 %
Ohio County PCR for Big River Electric Corporation,
4.35%(a)................................................ 6/1/2013 500 510,590
Ohio County PCR for Big River Electric Corporation Project
Series 1985, 4.50%(a)................................... 10/1/2015 500 501,932
MARYLAND -- 3.57 %
Baltimore IDA for Mayor and City Counsel Project,
4.50%(a)................................................ 8/1/2016 500 501,579
MICHIGAN -- 7.17 %
Jackson EDC for Thrifty Leoni Inc. Project, 3.825%(a)..... 12/1/2014 500 504,811
Michigan Job Development Authority, 4.10%(a).............. 1/1/2004 500 501,741
MINNESOTA -- 3.58 %
New Ulm Commercial Development Authority for Rob Bradley
Project Series 97, 4.10%(a)............................. 10/1/2011 500 501,772
MISSOURI -- 3.59 %
Cole IDA for Modine Manufacturing Series 85, 4%(a)........ 12/1/2015 500 503,502
NEW JERSEY -- 3.60 %
New Jersey EDA for Volvo of America Corp., 4.246%(a)...... 12/1/2004 500 505,050
NEW YORK -- 5.72 %
New York City GOB Series E2, 4%(a)........................ 8/1/2020 500 501,603
New York City GOB Series E6, 4%(a)........................ 8/1/2019 300 300,960
NORTH DAKOTA -- 3.58 %
Minot IDR for Nash-Finch Project Series 93, 4.20%(a)...... 12/1/2002 500 501,784
OHIO -- 3.58 %
Toledo Special Obligation Assessment Notes, 3.90%......... 12/1/1998 500 501,660
OKLAHOMA -- 3.59 %
Oklahoma IDA for Christian College, 4.625%(a)............. 7/1/2015 500 503,731
PENNSYLVANIA -- 7.16 %
Allegheny University Project Series 85, 3.60%(a).......... 7/1/2015 500 503,168
Northeastern HEF Wyoming Valley HCS Revenue Bonds,
3.85%(a)................................................ 1/1/2024 500 501,652
TENNESSEE -- 3.57 %
Chattanooga IDA for Baylor School Project, 3.90%(a)....... 11/1/2016 500 501,659
TEXAS -- 3.58 %
Harris HFC for Greater Houston Project, 3.85%(a).......... 11/1/2025 500 501,682
UTAH -- 3.57 %
Salt Lake City HFA for Parkview Plaza Project, 3.95%(a)... 12/1/2014 500 501,394
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 21

RESERVE INSTITUTIONAL TRUST -- INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND

STATEMENT OF NET ASSETS -- MAY 31, 1998 -- (CONTINUED)

<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
DESCRIPTION OF SECURITY DATE (IN THOUSANDS) (NOTE 1)
- ----------------------- -------- -------------- --------
<S> <C> <C> <C>
WASHINGTON -- 3.58 %
Port of Seattle DAI for Douglas Management Corporation,
3.95%(a)................................................ 12/1/2005 500 $ 501,711
WISCONSIN -- 3.57 %
Green Bay IDA for St. Mary Cement Company Ltd., 4%(a)..... 11/1/2000 500 501,419
-----------
Total Interstate Institutional Fund Investments -- (98.87%)
(Cost $13,800,000)........................................ 13,872,340
Other assets, less liabilities -- (1.13%)................... 158,596
-----------
NET ASSETS (100 %) equivalent to $1.00 net asset value,
offering and redemption prices per share on 14,030,936
shares of beneficial interest of $.001 par value
outstanding............................................... $14,030,936
===========
</TABLE>

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

<TABLE>
<CAPTION>
CLASS NET ASSETS SHARES OUTSTANDING NAV
<S> <C> <C> <C> <C>
Class Treasurer's Trust $14,030,936 14,030,936 $1.00
</TABLE>

(a) The interest rate is subject to change periodically. The rates shown were in
effect at May 31, 1998. Securities payable on demand are collateralized by
bank letters of credit or other bank credit agreements.

SECURITY TYPE ABBREVIATIONS:

<TABLE>
<S> <C> <C>
DAI -- Development Authority Industrial Development Refunding Bonds
EDA -- Economic Development Authority Revenue Bonds
EDC -- Economic Development Corporation
GOB -- General Obligation Bonds
HCF -- Health Care Facility
HCS -- Health Care Systems, Inc.
HEF -- Health and Educational Facilities Revenue Bonds
HFA -- Health Facilities Authority Revenue Bonds
HFC -- Housing Finance Corporation
IDA -- Industrial Development Authority Revenue Bonds
IDR -- Industrial Development Agency Revenue Bonds
PCR -- Pollution Control Revenue Bonds
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 22

RESERVE INSTITUTIONAL TRUST -- STATEMENTS OF OPERATIONS -- MAY 31, 1998

<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1998
------------------------------------------------
PRIMARY U.S. GOVERNMENT INTERSTATE
INSTITUTIONAL INSTITUTIONAL* INSTITUTIONAL*
------------- --------------- --------------
<S> <C> <C> <C>
INTEREST INCOME (Note 1).................................... $6,765,370 $141,899 $28,961
---------- -------- -------
EXPENSES (Note 2)
Comprehensive fee
Class A................................................. 25,898 0 0
Class B................................................. 64,601 10,668 0
Class Treasurer's Trust................................. 570,571 1,325 4,361
---------- -------- -------
Total Expenses.......................................... 661,070 11,993 4,361
---------- -------- -------
NET INVESTMENT INCOME....................................... $6,104,300 $129,906 $24,600
========== ======== =======
</TABLE>

The U.S. Government and Interstate Institutional Funds commenced their
operations on September 15, 1997 and May 13, 1998.

RESERVE INSTITUTIONAL TRUST -- STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
U.S. GOVERNMENT INTERSTATE
PRIMARY INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
---------------------------- ------------------- -------------------
SEPTEMBER 15, 1997 MAY 13, 1998
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS) THROUGH OPERATIONS) THROUGH
MAY 31, 1998 MAY 31, 1997 MAY 31, 1998 MAY 31, 1998
------------- ------------ ------------------- -------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
INVESTMENT OPERATIONS:
Net investment income paid to shareholders
as dividends (Note 1).................... $ (6,104,300) $ (35,795) $ (129,906) $ (24,600)
------------- ---------- ----------- -----------
FROM CAPITAL SHARE TRANSACTIONS
(at net asset value of $1 per share):
Net proceeds from the sale of shares....... 930,964,321 2,876,422 17,950,641 14,845,121
Net asset value of shares issued on
reinvestment of dividends................ 6,104,300 35,795 129,906 24,600
------------- ---------- ----------- -----------
Subtotal................................. 937,068,621 2,912,217 18,080,547 14,869,721
Cost of shares redeemed.................... (752,587,782) (904,580) (9,011,117) (838,785)
------------- ---------- ----------- -----------
Net increase from capital share
transactions............................. 184,480,839 2,007,637 9,069,430 14,030,936
NET ASSETS:
Beginning of year............................ 2,007,637 0 0 0
------------- ---------- ----------- -----------
End of year.................................. $ 186,488,476 $2,007,637 $ 9,069,430 $14,030,936
============= ========== =========== ===========
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 23

RESERVE INSTITUTIONAL TRUST

PRIMARY, U.S. GOVERNMENT AND INTERSTATE TAX-EXEMPT INSTITUTIONAL FUNDS

NOTES TO FINANCIAL STATEMENTS

(1) SIGNIFICANT ACCOUNTING POLICIES:

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 five 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 all classes of Primary Institutional Fund, Class B and Treasurer's
Trust classes of U.S. Government Institutional Fund and to Treasurer's Trust
class of Interstate Tax-Exempt Institutional Fund.

B. Securities are stated at value which represents 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.

F. The Primary and U.S. Government Funds may enter into repurchase
agreements with financial institutions deemed to be creditworthy by the
Funds Investment Adviser, subject to the seller's agreement to repurchase
such securities at a mutually agreed upon price. However, in the event of
default or bankruptcy by the seller, realization and/or retention of the
collateral may be subject to legal proceedings.

(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 .60% Class Treasurer's
Trust of the average daily net assets of each of the Funds. For the year
ended May 31, 1998, the Primary, U.S. Government and Interstate Tax-Exempt
Institutional Funds had accrued expenses due to RMCI of $8,938, $376 and
$692, respectively.

(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 date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.

21
<PAGE> 24
RESERVE INSTITUTIONAL TRUST

PRIMARY, U.S. GOVERNMENT AND INTERSTATE TAX-EXEMPT INSTITUTIONAL FUNDS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(4) CAPITAL SHARE TRANSACTIONS

Transactions in capital stock of each Fund for the year ended May 31, 1998,
were as follows:

<TABLE>
<CAPTION>
CLASS
PRIMARY INSTITUTIONAL FUND CLASS A CLASS B TREASURER'S TRUST
-------------------------- ----------- ----------- -----------------
<S> <C> <C> <C>
Sold............................................... 80,769,940 46,220,750 803,973,631
Reinvest........................................... 562,364 748,323 4,793,613
Redeemed........................................... (76,920,288) (38,600,465) (637,067,029)
----------- ----------- ------------
Net Increase....................................... 4,412,016 8,368,608 171,700,215
=========== =========== ============
</TABLE>

<TABLE>
<CAPTION>
CLASS
U.S. GOVERNMENT INSTITUTIONAL FUND CLASS B TREASURER'S TRUST
- ---------------------------------- ----------- -----------------
<S> <C> <C> <C>
Sold............................................... 14,076,079 3,874,563
Reinvest........................................... 119,220 10,685
Redeemed........................................... (8,387,219) (623,898)
----------- ------------
Net Increase....................................... 5,808,080 3,261,350
=========== ============
</TABLE>

<TABLE>
<CAPTION>
CLASS
INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND TREASURER'S TRUST
- ---------------------------------------- -----------------
<S> <C> <C> <C>
Sold............................................... 14,845,121
Reinvest........................................... 24,600
Redeemed........................................... (838,785)
------------
Net Increase....................................... 14,030,936
============
</TABLE>

FEDERAL TAX INFORMATION - (UNAUDITED)

The dividends distributed by the Primary and U.S. Government Institutional
Funds are treated for Federal tax purposes as ordinary income. The dividends
distributed by Interstate Tax-Exempt Institutional Fund are tax-exempt for
Federal tax purposes.

22
<PAGE> 25

[This page intentionally left blank]
<PAGE> 26

[CAPTION]

<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
PAGE
---
<S> <C>
Shareholder Expenses............................ 2
Financial Highlights............................ 3
Yield........................................... 6
Investment Objective and Policies............... 6
Management...................................... 9
How to Buy Shares............................... 10
Shares of Beneficial Interest................... 12
Daily Dividends................................. 12
Taxes........................................... 12
Redemptions..................................... 13
General Information............................. 14
Report of Independent Accountants............... 16
Financial Statements............................ 16

Investors are advised to read and retain
this Prospectus for future reference.
</TABLE>

Founders of

"America's First
Money Fund"
810 Seventh Avenue, New York, NY 10019-5868

GENERAL INFORMATION AND 24-HOUR YIELD AND BALANCE INFORMATION
800-637-1700 M www.reservefunds.com

Distributor -- Resrv Partners, Inc.

RIT 7/98

LOGO Founders of

"America's First
Money Fund"

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PRIMARY INSTITUTIONAL FUND
U.S. GOVERNMENT INSTITUTIONAL FUND
U.S. TREASURY INSTITUTIONAL FUND
INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND
<PAGE> 27

General Information, Purchases and
Redemptions

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24-Hour Yield and Balance Information

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Nationwide

800-637-1700 M www.reservefunds.com

TREASURER'S TRUST
PROSPECTUS

Treasurer's Trust is a class of shares within the Reserve Institutional
Trust which is a no-load money-market fund with four investment portfolios:
PRIMARY, U.S. GOVERNMENT, U.S. TREASURY and INTERSTATE TAX-EXEMPT FUNDS
(collectively "the Funds") and is designed for investors as a convenient
investment vehicle for short-term funds.

The objective of each Fund, except the Interstate Tax-Exempt Fund, is to
seek as high a level of current income as is consistent with preservation of
capital and liquidity, although achievement of this objective cannot be assured.

The 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; however, achievement of this
objective cannot be assured.

- PRIMARY FUND invests in (i) obligations backed by the full faith and
credit of the U.S. government and its agencies or instrumentalities; (ii)
deposit-type obligations, acceptances and letters of credit of
FDIC-insured institutions and foreign banks with assets in excess of $25
billion; (iii) short-term corporate obligations rated A-1 or the
equivalent thereof; (iv) other similar high-quality short-term
instruments; and (v) instruments fully collateralized by the foregoing
instruments.

- U.S. GOVERNMENT FUND invests in obligations backed by the full faith and
credit of the U.S. government or obligations collateralized thereby.

- U.S. TREASURY FUND invests exclusively in full faith and credit
obligations of the U.S. government that provide interest income exempt in
many states from state and local personal income taxes.

- INTERSTATE TAX-EXEMPT FUND invests principally in obligations issued by
the states, territories, possessions of the U.S. and their political
subdivisions, duly constituted authorities and corporations.

Treasurer's Trust is a class of shares within the Primary, U.S. Government,
U.S. Treasury and Interstate Tax-Exempt portfolios of the Reserve Institutional
Trust. For purposes of clarity, the terms Trust, Class, Portfolio and Fund are
used interchangeably throughout this Prospectus.

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.

This Prospectus sets forth the information about each Fund which a
prospective investor should know before investing. A Statement of Additional
Information ("SAI") dated July 31, 1998, providing further details about the
Funds, has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated herein by reference. It may be obtained without charge by writing
or calling the Funds at 800-637-1700. The SEC maintains a web site
(http://www.sec.gov) that contains the SAI, the Prospectus, material
incorporated by reference, and other information regarding the Funds
electronically filed with the SEC.

Prospectus dated July 31, 1998

Investors are advised to read and retain this Prospectus for future reference.
<PAGE> 28

SHAREHOLDER EXPENSES

The following tables illustrate all expenses and fees that a shareholder of
each of the Funds will bear directly or indirectly. The expenses and fees set
forth in the table are for the fiscal year ended May 31, 1998.

SHAREHOLDER TRANSACTION EXPENSES FOR ALL FUNDS

<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases................... None
Maximum Sales Load Imposed on Reinvested Dividends........ None
Redemption Fees........................................... None
Exchange Fees............................................. None
</TABLE>

ANNUAL FUND OPERATING EXPENSES FOR ALL FUNDS
(AS A PERCENTAGE OF AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
PRIMARY U.S. GOVERNMENT U.S. TREASURY INTERSTATE
------- --------------- ------------- ----------
<S> <C> <C> <C> <C>
Comprehensive Management Fee*........... .25% .25% .25% .25%
12b-1 Fees.............................. None None None None

Shareholder Services Fees............. .25% .25% .25% .25%
Other Operating Expenses+............. .10% .10% .10% .10%
Total Other Expenses.................... .35% .10% .10% .10%

Total Operating Expenses................ .60% .60% .60% .60%
</TABLE>

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

* Each Fund is charged a comprehensive management fee of 0.25% per annum of its
average daily net assets for its advisory fee and unique operating expenses
(other than the Service Fees) during the year. However, a Fund may be charged
for certain non-recurring extraordinary expenses. See "Investment Management
Agreement" on page 8.

+ "Other Operating Expenses" are based on an estimated amount for the current
fiscal year.

The purpose of these tables is to assist the investor in understanding the
costs and expenses that a shareholder in the Fund will bear directly or
indirectly.

ALL FUNDS

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$6 $19 $33 $75
</TABLE>

THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.

2
<PAGE> 29

FINANCIAL HIGHLIGHTS

The following information applies to a share of Reserve Institutional
Trust -- Treasurer's Trust for the Primary, U.S. Government and Interstate
Tax-Exempt Institutional Funds outstanding throughout the period. It should be
read in conjunction with the financial statements and related notes appearing in
the Statement of Additional Information. Such information has been audited by
PricewaterhouseCoopers LLP, as indicated in their report appearing in the
Statement of Additional Information.

<TABLE>
<CAPTION>
OCTOBER 15, 1997
(COMMENCEMENT OF
OPERATIONS) TO
PRIMARY INSTITUTIONAL FUND MAY 31, 1998
-------------------------- ----------------
<S> <C>
Net Asset Value, beginning of period.................... $1.0000
-------

Income from investment operations....................... .0351
Expenses................................................ .0029
-------
Net investment income (1)............................... .0322
Dividends from net investment income (1)................ (.0322)
-------

Net Asset Value, end of period.......................... $1.0000
=======
Total return............................................ 5.13%(2)

RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period.................. 171,700
Ratio of expenses to average net assets................. .60%(2)
Ratio of net investment income to average net assets.... 5.00%(2)
</TABLE>

<TABLE>
<CAPTION>
MAY 5, 1998
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1998
----------------
<S> <C>
U.S. GOVERNMENT INSTITUTIONAL FUND
Net asset value, beginning of period.................... $1.0000
-------

Income from investment operations....................... .0036
Expenses................................................ .0000
-------
Net investment income (1)............................... .0036
Dividends from net investment income (1)................ (.0036)
-------

Net asset value, end of period.......................... $1.0000
=======
Total Return............................................ 4.85%(2)

RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period.................. 3,261
Ratio of expenses to average net assets................. .60%(2)
Ratio of net investment income to average net assets.... 4.73%(2)
</TABLE>

3
<PAGE> 30

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
MAY 13, 1998
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1998
----------------
<S> <C>
INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND
Net asset value, beginning of period.................... $1.0000
-------

Income from investment operations....................... .0021
Expenses................................................ .0003
-------
Net investment income (1)............................... .0018
Dividends from net investment income (1)................ (.0018)
-------

Net asset value, end of period.......................... $1.0000
=======
Total Return............................................ 3.39%(2)

RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period.................. 14,031
Ratio of expenses to average net assets................. .60%(2)
Ratio of net investment income to average net assets.... 3.33%(2)
</TABLE>

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

(1) Based on compounding of daily dividends. Not indicative of future results.

(2) Annualized.
YIELD

For the seven calendar days ended May 31, 1998, the current and effective
yields for each Fund were as follows:

<TABLE>
<CAPTION>
CURRENT EFFECTIVE
------- ---------
<S> <C> <C>
Primary Fund................................................ 5.01% 5.14%
U.S. Government Fund........................................ 4.85% 4.97%
Interstate Tax-Exempt Fund.................................. 3.38% 3.43%
</TABLE>

The Interstate Tax-Exempt Fund may also quote its tax equivalent yield,
which shows the taxable yield an investor would have to earn before taxes to
equal the Fund's tax-free yield. The tax equivalent yield is calculated by
dividing the Fund's current or effective yield by the result of one minus a
stated federal tax rate.

In reports or other communications to shareholders of the Trust or in
advertising materials, the Trust may compare its performance with that of other
money-market funds listed in the rankings prepared by industry or financial
publications or other relevant indices and industry publications.

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of each Fund, except the Interstate Tax-Exempt
Fund, 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. There is no assurance that a Fund will achieve its
investment objective. The investment objective may not be changed, with respect
to a Fund, without the vote of a majority of the outstanding shares of that Fund
as defined in the Investment Company Act of 1940 ("1940 Act").

The principal risk factors associated with investment in the Funds are the
risk of fluctuations in short-term interest rates, the risk of default among one
or more issuers of securities which comprise the Funds' assets and the risk of
non-diversification. As a non-

4
<PAGE> 31

diversified investment company, the Funds are permitted to have all their assets
invested in a limited number of issuers. Accordingly, since a relatively high
percentage of the Funds' assets may be invested in the securities of a limited
number of issuers, the Funds' investment securities may be more susceptible to
any single economic, political or regulatory occurrence than the investment
securities of a diversified investment company. However, the Funds intend to
qualify as "regulated investment companies" for purposes of the Internal Revenue
Code. This limits the aggregate value of all investments (except U.S. government
securities, securities of other regulated investment companies, cash and cash
items) so that, with respect to at least 50% of its total assets, not more than
5% of such assets are invested in the securities of a single issuer.

The Primary Fund may invest in obligations of U.S. banking institutions that
are insured by the FDIC; commercial paper which is rated, at the time of
investment, P-1 by Moody's, A-1 by S&P or the equivalent if rated by another
rating agency; and obligations of foreign banks which, at the time of
investment, have more than $25 billion (or the equivalent in other currencies)
in total assets and which, in the opinion of the Fund's Investment Adviser, are
of comparable quality. Instruments which are not rated may also be purchased
provided such instruments are determined to be of comparable quality by the
Board of Trustees of the Fund to those rated instruments in which the Primary
Fund may invest. The Fund may also invest in obligations of foreign branches of
U.S. banks (Eurodollars), U.S. branches of foreign banks (Yankee dollars) and
foreign branches of foreign banks. Euro and Yankee dollar investments involve
certain risks that are different from investments in 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 branches of foreign banks are not regulated by
U.S. banking authorities and are generally not bound by financial reporting
standards comparable to U.S. banks. The Primary Fund will limit its investment
in foreign branches of foreign banks to those banks located in Australia,
Canada, Western Europe and Japan. The Primary Fund may also invest in Municipal
Obligations secured by bank letters of credit, the interest on which is not
exempt from federal income taxes.

The U.S. Government Fund seeks to attain its objective by investing only in
securities backed by the full faith and credit of the U.S. government or
obligations collateralized thereby.

The U.S. Treasury Fund seeks to attain its objective by investing in
securities of the U.S. government that provide interest income exempt in many
states from state and local personal income taxes.

The Interstate Tax-Exempt Fund seeks to attain its objective by investing
principally in obligations issued by states, territories, and possessions of the
U.S. and their subdivisions, duly constituted authorities and corporations, or
participation in such obligations; the interest on which is exempt from U.S.
federal income taxes.

The Interstate Tax-Exempt Fund invests in securities generally known as
municipal bonds or notes ("Municipal Obligations") and the interest on them is
exempt from federal income tax in the opinion of either bond counsel for the
issuers, or in some instances, the issuer itself . They are issued to raise
money for various public purposes such as constructing public or private
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 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 backed by the credit of a private issuer. The Fund may
invest any portion of its assets in such bonds and notes. Municipal Obligations
bear fixed, variable or floating rates of interest. At least 80% of the value of
the Fund's assets will be invested in Municipal Obligations unless the Fund has
adopted a temporary defensive position.

The Interstate Tax-Exempt Fund may invest any portion of its assets in
floating and variable rate demand notes, 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, in each case, usually upon not more
than seven days' notice. The interest rates on these floating and variable rate
demand notes fluctuate from time to time. Frequently, such Municipal Obligations
are secured by letters of credit or other credit-support arrangements provided
by banks. Use of letters of credit or other credit-support arrangements will not
adversely affect the tax-exempt status of these Municipal Obligations. The
Interstate Tax-Exempt Fund will purchase tax-exempt securities which are rated
MIG-1 or MIG-2 by Moody's Investor Services, Inc. ("Moody's"), SP-1 or SP-2 by
Standard & Poor's Corporation ("S&P") or the equivalent thereof and non-rated
securities which are determined to be of comparable quality.

5
<PAGE> 32

In view of the investment of the Interstate Fund in industrial revenue
development bonds and notes secured by letters of credit or guarantees of banks,
an investment in Fund shares should be made with an understanding of the
characteristics of the banking industry and the risks such an investment may
entail. Banks are subject to extensive government regulations, which may limit
both the amounts and the types of loans and other financial commitments which
may be made and interest rates and fees which may be charged. The profitability
of the banking industry is largely dependent upon the availability and cost of
funds for the purpose of financing lending operations. In addition, general
economic conditions play an important part in the operations of this industry,
and exposure to credit losses arising from possible financial difficulties of
borrowers might affect a bank's ability to meet its obligations under a letter
of credit.

U.S. government securities include a variety of securities 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 the GNMA, are supported by the
full faith and credit of the U.S. Other securities, such as obligations issued
by the 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 the 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.

Under federal law, the income derived from obligations issued by the U.S.
Treasury and certain of its agencies and instrumentalities is exempt from state
personal income taxes. A substantial majority of the states that tax personal
income permit mutual funds to passthrough this tax exemption to shareholders. It
is anticipated that a substantial portion of the dividends paid to shareholders
of the U.S. Treasury Fund residing in these states will qualify for this
exemption from state taxation. However, a state or local taxing authority may,
in the future, seek to tax a shareholder on all or a portion of this income.

OTHER POLICIES. PRIMARY, U.S. GOVERNMENT AND U.S. TREASURY FUNDS. Each Fund may
invest in repurchase agreement transactions. A repurchase agreement is a
transaction by which a Fund purchases a security (U.S. government or other) and
simultaneously commits to resell that security to the seller at the same price,
plus interest at a specified rate. Repurchase agreements usually have a short
duration, often less than one week. The Funds will limit repurchase agreements
to those banks and securities dealers who are deemed creditworthy pursuant to
guidelines adopted by the Funds' Board of Trustees. The Investment Adviser will
follow procedures to assure that all repurchase agreements are always fully
collateralized as to principal and interest. The instruments held as collateral
are valued daily, and if the value of the instruments decline, the Funds will
require additional collateral. If the other party to the repurchase agreement
defaults on its obligation to repurchase the underlying securities, a portfolio
may incur a loss to the extent that the proceeds from the sale of the collateral
were less than the repurchase price. In the event of insolvency or bankruptcy of
the other party to a repurchase agreement, a Fund may encounter difficulties and
might incur costs or possible losses of principal and income upon the exercise
of its rights under the repurchase agreement. The U.S. Treasury Fund will limit
its investment in repurchase agreements with respect to securities backed only
by the full faith and credit of the U.S. government to not more than 5% of its
total assets. Such investment will be for temporary purposes pending the
investment of uninvested cash in U.S. Treasury obligations. Securities subject
to repurchase agreements will be placed in a segregated account and the market
value will be monitored to ensure that the market value of the securities plus
any accrued interest thereon will at least equal the repurchase price.

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 (or any combination thereof), which 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. In determining
whether to lend securities to a particular broker-dealer or financial
institution, the Fund will consider all relevant facts and circumstances,
including the creditworthiness of the broker-dealer or financial institution. A
Fund may pay reasonable finders', administrative and custodial fees in
connection with a loan. During the time portfolio securities are on loan the
borrower will pay the Fund an amount equivalent to any interest paid on such
securities and the Fund may invest the cash collateral and earn additional
income, or it may receive an agreed-upon amount of interest from the borrower
who has delivered equivalent collateral or secured a letter of credit. The value
of the securities loaned cannot exceed 25% of the Fund's total assets. Loans

6
<PAGE> 33

of securities involve risks of delay in receiving additional collateral or in
recovering the securities lent or even loss of rights to the collateral in the
event of insolvency of the borrower of the securities. The SAI further explains
the Funds' securities-lending policies.

The Primary, U.S. Government and U.S. Treasury Funds may invest, without
limitation, in U.S. government securities and in instruments secured or
collateralized by U.S. government securities. A Fund will not invest more than
10% of its net assets in illiquid securities, including repurchase agreements
providing for settlement in more than seven (7) days after notice. A Fund will
not concentrate (i.e., invest 25% or more of its total assets) in the securities
of issuers in a single industry, except that the Primary Fund may invest 25% or
more of its total assets in banking. In addition, a Fund will not invest more
than 5% of its total assets in the securities of any single issuer (except U.S.
government securities or repurchase agreements collateralized by U.S. government
securities). Each Fund has the authority to borrow money (including reverse
repurchase agreements), for extraordinary or emergency purposes but not in an
amount exceeding 5% of its total assets. Reverse repurchase agreements involve
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.

In order to provide liquidity, each Fund limits its average maturity to 90
days or less; buying securities which mature in 397 days or less; and buying
only high-quality securities.

INTERSTATE TAX-EXEMPT FUND. Certain banks and other municipal securities
dealers have indicated a willingness to sell Municipal Obligations to the Fund
accompanied by a commitment to repurchase the securities, at the Fund's option
or at a specified date, at an agreed-upon price or yield within a specified
period prior to the maturity date of such securities at the amortized cost
thereof. If a bank or other municipal securities dealer were to default under
such stand-by commitment and fail to pay the exercise price, the Fund could
suffer a potential loss to the extent that the amount paid by the Fund, if any,
for the Municipal Obligation with the stand-by commitment exceeded the current
value of the underlying Municipal Obligations. If a bank or other municipal
securities dealer defaults under its stand-by commitment, the liquidity of the
security subject to such commitment may be adversely affected.

Municipal Obligations are sometimes offered on a when-issued or delayed
delivery basis. There is no limit on the Fund's ability to purchase Municipal
Obligations on a when-issued basis. The price of when-issued securities, which
is generally expressed in yield terms, is fixed at the time the commitment to
purchase is made but delivery and payment for the when-issued securities takes
place at a later date, normally within one month and no interest accrues in the
interim. To the extent that assets of the Fund purchasing such securities are
not invested prior to the settlement of a purchase of securities, the Fund will
earn no income; however, it is the Fund's intent to be as fully invested as is
practicable. While when-issued securities may be sold prior to settlement date,
the Fund intends to purchase such securities with the purpose of actually
acquiring them unless a sale appears desirable. 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. The Investment Adviser 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.

Interest received on certain otherwise tax-exempt securities ("private
activity bonds") is 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 federal AMT or at least 80% of its income must be free of both regular
income tax and alternative minimum tax. Income received on such securities is
classified as a "tax preference item" which could subject certain shareholders
of the Fund to the AMT. However, as of the date of this Prospectus, the Fund
does not purchase such securities, but reserves the right to do so depending on
market conditions in the future.

7
<PAGE> 34

the Fund is permitted to make taxable temporary investments, there is no current
intention of generating income subject to federal income tax.

The Fund's Investment Adviser uses its reasonable business judgment in
selecting investments in addition to considering the ratings of Moody's, S&P,
and other rating services. This analysis considers, among other things, the
financial condition of the issuer by taking into account present and future
liquidity, cash flow and capacity to meet debt service requirements. Since the
market value of debt obligations fluctuates as an inverse function of changing
interest rates, the Fund seeks to minimize the effect of such fluctuations and
provide liquidity by investing in instruments with remaining maturities of 397
days or less and limiting its average maturity to 90 days or less.

MANAGEMENT

Each Fund pays the Adviser a comprehensive management fee calculated on an
annual basis at 0.25% of its average daily net assets. Under the terms of the
Investment Management Agreement with the Funds, the Adviser pays all employee
and ordinary operating costs of the Funds. Excluded from the definition of
ordinary operating costs are interest, taxes, brokerage fees, extraordinary
legal and accounting fees and expenses, fees under the Service Agreement
(discussed below) and certain unique operating expenses.

It is expected that the shareholders will be wrap fee accounts, trust
accounts, omnibus accounts and other accounts of smaller investors which require
sub-accounting and other such services. Payment for these services will be made
by the Funds and charged against the average daily net assets, rather than being
paid by the Adviser as part of its comprehensive fee.

The Adviser may make such advertising and promotional expenditures, using
its own resources, as it from time to time deems appropriate.

YEAR 2000. Trust could be adversely affected if the computer systems and other
service providers are unable to process data from January 1, 2000 and after.
However, the Adviser is taking steps to reasonably address this issue and to
obtain assurance that comparable effort is being made by service providers.
There can be no assurance that these steps will be sufficient to avoid any
adverse impact to the Trust.

TRANSFER AGENT AND DIVIDEND-PAYING AGENT. The Trust acts as its own transfer
agent and dividend-paying agent.

SERVICE AGREEMENT. Each Fund is charged a service fee and operating expenses of
0.25% and 0.10% per annum, respectively, of its daily net assets.

HOW TO BUY SHARES

The service fees and distribution fees for the Treasurer's Trust class of
shares is as follows:

Shares of a Fund may be purchased by wire only. Shares are sold at the net
asset value ("NAV") next determined after receipt of a purchase order in the
manner described below. Purchase orders are accepted on any day on which the New
York Stock Exchange ("NYSE") and the Federal Reserve Bank of New York are open
("Business Day"). For Federal Fund wires to be eligible for same-day order
entry, the Fund must be notified before 2:00 PM (New York time for Primary and
U.S. Government Funds) (11:00 AM New York time for Interstate Tax-Exempt and
U.S. Treasury Funds) of the amount to be transmitted and the account to be
credited, and the Fund must receive the credit at its bank by 3:00 PM (New York
time). Orders received by a Fund after the times specified above will be priced

8
<PAGE> 35

at the public offering price in effect at 3:00 PM (New York time) on the next
Business Day. Purchase orders are not accepted on New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day,
Christmas Day, any other days the NYSE is closed for trading and regional bank
holidays.

To purchase shares of a Fund by Federal Reserve wire, call the Fund at
800-637-1700 or call your sales representative for wiring instructions. To
protect a Fund's performance and shareholders, the Adviser discourages frequent
trading in response to short-term market fluctuations. The Funds reserve the
right to refuse any investment.

If the Public Securities Association recommends that the government
securities markets close early, the Funds may advance the time at which they
must receive notification of orders for purposes of determining eligibility for
dividends on that day. Investors who notify the Fund after the advanced time
become entitled to dividends on the following Fund Business Day. If a Fund
receives notification of a redemption request after the advanced time, it
ordinarily will wire redemption proceeds on the next Fund Business Day.

If an investor does not remit Federal Funds, such payment must be converted
into Federal Funds. This usually occurs within one (1) Business Day of receipt
of a bank wire. Prior to receipt of Federal Funds, the investor's monies will
not be invested.

SHARE CERTIFICATES. Share certificates are not issued by the Trust.

ACCOUNT STATEMENTS. Monthly account statements are sent to investors to report
transactions such as purchases and redemptions as well as dividends paid during
the month.

NET ASSET VALUE. Shares are sold to the public at NAV which is calculated at
the close of each Business Day (normally 4:00 PM New York time) by taking the
sum of the value of each Fund's investments (amortized cost value is used for
this purpose) and any cash or other assets, subtracting liabilities, and
dividing by the total number of shares outstanding. A "Business Day" is Monday
through Friday exclusive of New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day (observed), Independence Day, Labor
Day, Columbus Day, Veterans' Day, Thanksgiving Day, Christmas Day, any other
days the NYSE is closed for trading and regional bank holidays. It is the policy
of each Fund to seek to maintain a stable NAV per share of $1.00, although this
share price is not guaranteed.

DISTRIBUTOR. The Funds' distributor is Resrv Partners, Inc., 810 Seventh
Avenue, New York, NY 10019-5868, which is a wholly-owned subsidiary of the
Adviser.

SHAREHOLDER SERVICE FEES. Under the plan, shareholders of Treasurer's Trust pay
Firms a service fee at an annual rate up to 0.35% of the average daily NAV for
which the Firm provides personal service, including maintaining shareholder
accounts, responding to inquiries, providing information about investments and
providing certain other services.

CLIENTS OF FIRMS. Brokers, financial intermediaries and financial institutions
("Firms") 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. Some Firms which utilize a
centralized purchase method for shares may have an earlier cut-off for purchase
orders than stated above in order to facilitate the transmission of purchase
orders by bulk wire. 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 as agent for and on behalf of their clients. In such instances, the Funds'
transfer agents will have no information with respect to or control over the
accounts of specific shareholders. Such shareholders may obtain access to their
accounts and information about their accounts only from their Firm. 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 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-payee; 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.

SHARES OF BENEFICIAL INTEREST

The Reserve Institutional Trust was originally organized on February 5, 1981
as a Maryland corporation and reorganized on September 16, 1986 as a
Massachusetts business trust, and is an open-end management investment company
commonly known as a mutual fund. At the date of this Prospectus, there were four
separate series authorized and three series outstanding. Additional series may
be added in the future by the Board of Trustees. The Trust is authorized to
issue an unlimited number of shares of beneficial interest which may be issued
in any number of series. Shares issued will be fully paid and non-assessable and
will have no preemptive rights. The shareholders of each series are entitled to
a full vote for each full share held (and fractional votes for fractional
shares) and have equal rights with respect to earnings, dividends, redemptions
and in the net assets of their series on liquidation. The Trustees do not

9
<PAGE> 36

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.

DAILY DIVIDENDS

TAXES

PRIMARY, U.S. GOVERNMENT, U.S. TREASURY FUNDS. For federal income tax purposes,
distributions out of interest earned by a Fund and net realized short-term
capital gains are taxable as ordinary income. Any distributions of net long-term
capital gains are taxable to shareholders at the applicable mid-term or
long-term capital gains rate, regardless of the length of time shares have been
owned by the shareholder. Distributions are taxable to shareholders in the same
manner, whether a shareholder receives such distributions in cash or reinvests
them in additional shares.

The U.S. Treasury Fund intends to invest only in U.S. Treasury securities
and obligations of those agencies and instrumentalities of the U.S. government
that provide interest income exempt in many states from state and local personal
income taxes except to the extent uninvested cash is invested in repurchase
agreements. Some states have minimum investment requirements that must be met by
the U.S. Treasury Fund. Distributions attributable to net capital gains, if any,
are generally subject to state and local taxes. It is possible that a state or
local taxing authority may currently or in the future seek to tax an investor on
a portion of this interest income. Shareholders should consult with their own
tax advisers with respect to the application of their state and local tax laws
to these distributions.

INTERSTATE TAX-EXEMPT FUND. Dividends derived from the interest earned on
Municipal Obligations and designated by the 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 at the applicable mid-term or long-term capital
gains rate regardless of the length of time the Fund's shares have been owned by
the shareholder.

Upon a sale or other disposition of shares of a Fund, a shareholder may
realize a capital gain or loss which will be long-term or short-term, depending
upon the shareholder's holding period for the shares, in the event that the Fund
does not maintain a constant NAV per share.

Shareholders of each Fund are advised to retain all statements to maintain
accurate records of their investments. The Trust will report to their
shareholders before the end of February of each year the source of dividends and
other distributions, if any, paid or declared by each Fund during the previous
calendar year which may be exempt from state income taxes. Shareholders should
consult their own tax advisers regarding specific questions as to federal, state
or local taxes.

Further information relating to tax consequences is contained in the SAI.

10
<PAGE> 37

REDEMPTIONS

TIME AND METHOD OF REDEMPTION. Shares of each Fund are redeemed at the NAV
determined after receipt by the Fund of a request in proper form. Although the
Funds have seven (7) days to transmit payment for share redemptions, they
usually transmit payment the same day when redemption requests are received
before 12:00 NOON (New York time) (11:00 AM New York time for the U.S. Treasury
Fund and Interstate Tax-Exempt Fund) and the next day for requests received
after the specified times to enable shareholders to receive additional
dividends. This is not always possible, however, and transmission of redemption
proceeds may be delayed. Payment will normally be made by check or bank
transfer. Shares do not earn dividends on the day a redemption is effected
regardless of the time the order is received.

WRITTEN AND TELEPHONE REDEMPTION REQUESTS. Shareholders will not be charged any
fees on redemptions by check or by wire. The Funds assume no responsibility for
delays in the receipt of wired or mailed funds. The use of a predesignated
financial institution, such as a savings bank, credit union or savings and loan
association which is not a member of the Federal Reserve wire system to receive
your wire, could cause such a delay. If a Fund has previously been advised in
writing of your brokerage or bank account, telephone requests will be accepted
by calling 800-637-1700. The Funds may be liable for any losses caused by their
failure to employ reasonable procedures. To reduce the risk of loss, proceeds of
telephone redemptions may be sent only (1) to the bank or brokerage account
designated by the shareholder on the investment Application or in a letter with
the signature(s) guaranteed; or (2) to the address of record if all the
conditions listed below are met. 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 as described below.
Other redemption orders must be in writing with the necessary signature(s)
guaranteed by a domestic commercial bank; a domestic trust company; a domestic
savings bank, credit union or savings association; or a member Firm of a
national securities exchange. Guarantees from notaries public are unacceptable.
The requirement of a guaranteed signature protects against an unauthorized
person redeeming shares and obtaining the redemption proceeds. Redemption
instructions and election of the plans described below may be made 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.

CHECKING, VISA AND ATM ACCESS. The Funds offer a comprehensive package of
services which enhance access to your account. By completing the Application or
a signature card (for existing accounts) and certain other documentation if the
owner of record is a fiduciary, corporation, partnership, trust or other
organization, 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 Funds. Because of
this, you cannot write a check to completely liquidate your account, nor may a
check be presented for certification or immediate payment, otherwise, you may
use your Reserve checking account as you would any checking account. 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 funds. All transaction activity, including check
redemptions, will be reported on your account statement. A fee will be charged
for providing check copies. Upon proper notice, the Funds 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 a Firm may establish its own minimum
check amount. Reserve VISA cards provide access to your Reserve balances and
margin line for worldwide purchasing power and cash at over 250,000 ATMs. For
more information, call 800-637-1700.

STOP PAYMENTS. The Funds will honor stop payment requests on unpaid shareholder
checks provided the Funds are advised of the correct check number, payee, check
amount and date. Stop payment requests received by the Funds by 2:00 PM (New
York time) in proper form will be effective the next Business Day. Oral stop
payment requests are effective for 14 calendar days, at which time they will be
canceled unless confirmed in writing. Written stop payment requests are
effective for one year. A fee is charged for this service.

AUTOMATIC WITHDRAWAL PLANS. If you have an account with a balance of at least
$5,000 you may make a written election 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
either 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 or modify or

11
<PAGE> 38

terminate any Automatic Withdrawal Plan 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.

RESERVE AUTOMATIC TRANSFER. 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 (as
permitted) designated in the application. Only such an account maintained in a
domestic financial institution which is an Automated Clearing House member may
be so designated. 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 redemption request. The Funds may impose a charge or 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.

REDEMPTIONS THROUGH BROKERS AND FINANCIAL INSTITUTIONS. Redemptions through
brokers and financial institutions may involve such Firms' own redemption
minimums, service fees, and other redemption requirements.

RESTRICTIONS. The right of redemption may be suspended or the date of payment
postponed for more than seven (7) days only (a) when the NYSE 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 by
order permit. If shares of a Fund are purchased by check or Reserve Automatic
Transfer Plan, 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 will generally be 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.

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 joint owner
for actions taken by the other with respect to an account so registered. The
investment Application provides that persons so registering their account
indemnify and hold the Fund harmless for actions taken by either party.

BACKUP WITHHOLDING. 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. 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. However, special rules apply for certain accounts. For example, for an
account established under the Uniform Gift to Minors Act, the TIN of the minor
should be furnished. Shareholders should be aware that, under regulations
promulgated by the IRS, a Fund may be fined $50 annually 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. The Funds will not accept purchase orders for
accounts for which a correct and certified TIN is not provided or which is
otherwise subject to backup withholding, except in the case of certain
non-resident alien accountholders.

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.

INQUIRIES. Shareholders should direct their inquiries to the Firm from which
they received this Prospectus or to the Funds.

12
<PAGE> 39

PERFORMANCE. The Funds may compare their performance to other income-producing
alternatives such as (i) money-market funds; and (ii) various bank products
based on average rates of bank and thrift institution certificates of deposit,
money-market deposit accounts and NOW accounts as reported in industry
publications. An investment in shares of a Fund is not insured by the Federal
Deposit Insurance Corporation.

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

13
<PAGE> 40

[CAPTION]
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
PAGE
---
<S> <C>
Shareholder Expenses............................ 2
Financial Highlights............................ 3
Yield........................................... 4
Investment Objective and Policies............... 4
Management...................................... 8
How to Buy Shares............................... 8
Shares of Beneficial Interest................... 9
Daily Dividends................................. 10
Taxes........................................... 10
Redemptions..................................... 11
General Information............................. 12
</TABLE>

Investors are advised to read and retain
this Prospectus for future reference.

Founders of

"America's First
Money Fund"
810 Seventh Avenue, New York, NY 10019-5868

GENERAL INFORMATION AND 24-HOUR YIELD AND BALANCE INFORMATION
800-637-1700 M www.reservefunds.com

Distributor -- Resrv Partners, Inc.

07/98

LOGO

Founders of
"America's First
Money Fund"

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

TREASURER'S TRUST

PRIMARY INSTITUTIONAL FUND

U.S. GOVERNMENT INSTITUTIONAL FUND

U.S. TREASURY INSTITUTIONAL FUND

INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND
<PAGE> 41
THE RESERVE INSTITUTIONAL TRUST
810 SEVENTH AVENUE -- NEW YORK, N.Y. 10019-5868
(212) 977-9982 - (800) 637-1700

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

24-HOUR YIELD AND BALANCE INFORMATION
Nationwide 800-637-1700 - www.reservefunds.com

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information ("SAI") describes The Reserve
Institutional Trust ("Trust"). The Trust is presently comprised of four separate
Funds: the Primary Institutional Fund, the U.S. Treasury Institutional Fund, the
U.S. Government Institutional Fund and the Interstate Tax-Exempt Institutional
Fund (each a "Fund", together the "Funds"). This Statement is not a Prospectus,
but provides detailed information to supplement the Prospectus dated July 31,
1998 and should be read in conjunction with it. A copy of the Prospectus may be
obtained without charge by writing or calling the Funds at the above address or
telephone number. The Securities and Exchange Commission ("SEC") maintains a web
site (http://www.sec.gov) that contains the SAI, the Prospectus, material
incorporated by reference & other information regarding the Fund electronically
filed with the SEC. This SAI is dated July 31, 1998.

TABLE OF CONTENTS PAGE
----
Investment Objective and Policies.........................
Trustees and Officers of the Trust........................
Investment Management, Distribution, and Custodian
Agreements.............................................
Portfolio Turnover, Transaction Charges and Allocation....
Shares of Beneficial Interest.............................
Purchase, Redemption and Pricing of Shares................
Distributions and Taxes...................................
Fund Yield................................................
Reserve Cash Performance Account..........................
Ratings...................................................
Financial Statements......................................
Report of Independent Accountants.........................

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> 42
INVESTMENT OBJECTIVES AND POLICIES

The primary investment objective of each Fund, with the exception of the
Interstate Fund, is to seek as high a level of current income as is consistent
with preservation of capital and liquidity.

The Interstate Fund's investment objective 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, by investing principally in
obligations issued by states, territories, and possessions of the U.S. and by
their political subdivisions, duly constituted authorities and corporations.

SUPPLEMENTAL INVESTMENT 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 securities senior to its capital stock;

(3) act as an underwriter with respect to the securities of others;

(4) concentrate investments in any particular industry except to the
extent that its investments are concentrated exclusively in U.S.
government securities, bank obligations, including obligations of
foreign branches of domestic banks where the domestic parent would be
unconditionally liable in the event that the foreign branch failed to
pay on its instruments for any reason, and Municipal Obligations or
instruments secured by such obligations;

(5) purchase, sell or otherwise invest in real estate or commodities or
commodity contracts; however, the Interstate Fund may purchase
Municipal Obligations secured by interests in real estate;

(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;

(8) invest in voting securities or in companies for the purpose of
exercising control;

(9) invest in the securities of other investment companies except in
compliance with the Investment Company Act of 1940 ("1940 Act");

(10) make investments on a margin basis; and

(11) purchase or sell any securities (other than securities of the Fund)
from or to any officer or Trustee of the Fund, the investment Adviser
or affiliated person except in compliance with 1940 Act.

OTHER POLICIES. The Primary and 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, at least equal 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, interest on securities used as collateral or interest on short-term
debt securities purchased with such collateral, either of which type of interest
may be shared with the borrower. 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"), which require the borrower, after notice, to
redeliver the securities within the normal settlement time of three (3) Business
Days. While voting rights may pass with the loaned securities, if a material
event occurs affecting an investment on loan, the loan must be called and the
securities voted.
<PAGE> 43
The Primary Institutional Fund may invest in bank obligations which include
certificates of deposit, bankers' acceptances, letters of credit and time
deposits. A certificate of deposit is a negotiable certificate representing a
financial institution'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 financial institution
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.

The Interstate Fund may, from time to time, invest in taxable short-term
investments ("Taxable Investments") consisting of obligations backed by the full
faith and credit of the U.S. government, its agencies or instrumentalities
("U.S. Governments"); deposit-type obligations, acceptances, and letters of
credit of Federal Deposit Insurance Corporation member banks; and instruments
fully collateralized by such obligations. Unless the Fund has adopted a
temporary defensive position, no more than 20% of the net assets of the Fund
will be invested in Taxable Investments at any time. The Fund may enter into
repurchase agreements with regard to the taxable obligations listed above.
Although the Fund is permitted to make taxable temporary investments, there is
no current intention of generating income subject to federal income tax.

REPURCHASE AGREEMENTS. A repurchase agreement transaction occurs when a Fund
purchases and simultaneously contracts to resell securities at fixed prices
determined by the negotiated yields. Each Fund will limit repurchase agreement
transactions to those domestic financial institutions and securities dealers who
are deemed credit-worthy pursuant to guidelines established by the Fund's Board
of Trustees. The Adviser will follow procedures intended to provide that all
repurchase agreements are at least 100% collateralized as to principal and
interest.

The 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 with a term greater than seven (7) days. 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 which
the Fund proposes to enter into repurchase agreements.

REVERSE REPURCHASE AGREEMENTS. The Primary, Government and Interstate Funds may
sell securities in a reverse repurchase agreement 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 repurchase agreement
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 a percentage of its value. By paying back to
this party the value received plus interest, the seller repurchases the
transferred security. It is the Trust's policy that entering into a reverse
repurchase agreement transaction will be for temporary purposes only and, when
aggregated with other borrowings, may not exceed 5% of the value of the net
assets of the Fund at the time of the transaction.

MUNICIPAL OBLIGATIONS (INTERSTATE FUND ONLY). Municipal bonds and municipal
notes are the two major classifications of Municipal Obligations. Such
obligations are generally issued to obtain funds for various public purposes,
including the construction of public facilities such as airports, bridges,
highways, houses, hospitals, mass transportation, schools, streets, and water
and sewer works. In addition, Municipal Obligations may be issues to refund
outstanding debt and obtain funds for general operating expenses.

Municipal bonds, which are long-term instruments and generally have
maturities longer than one year when issued, may be either "general obligation"
or "revenue" issues. General obligation bonds are secured by the issuer's pledge
of its full faith, credit, and taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities, or, in some cases, from the proceeds
of a special excise tax or other specific revenue source but not from the
general taxing power.

Certain kinds of industrial development bonds ("IDBs") are issued by or on
behalf of the public authorities to provide funding for various privately
operated industrial facilities such as warehouse, office, plant, and store
facilities. IDBs are, in most cases, revenue bonds and do not generally
constitute the pledge of the credit of the issuer of such bonds. The payment of
the principal and interest on IDBs usually depends solely on the ability of the
user of the facilities or other guarantor to meet its financial obligations. If
there is no established secondary market for the IDBs, the IDBs or the
participation interests purchased by the Interstate Fund will be supported
<PAGE> 44
by repurchase commitments or bank letters of credit or guarantees of banks that
meet the quality criteria of the Fund and which may be exercised by the Fund to
provide liquidity.

Municipal notes are usually issued to obtain funds in anticipation of
receipt of taxes, receipt of proceeds of issuances of municipal bonds or other
revenue which will provide funds to repay the notes, and generally have
maturities of one year or less.

On April 20, 1988, the U.S. Supreme Court in South Carolina v. Baker,
overruled an 1895 case, Pollack v. Farmers' Loan & Company which held that
interest on Municipal Obligations was immune from federal taxation. As a result,
proposals may be introduced before the Congress to eliminate or restrict the
federal income tax exemption for interest on certain Municipal Obligations.

The Interstate Fund may purchase securities affected by these proposals. If
such proposals are enacted, the availability of Municipal Obligations by the
Fund would be adversely affected. In such event, the Interstate Fund would
reevaluate its investment objective and policies and submit possible changes in
the structure of the Fund for the consideration of shareholders. Investors
should be aware that the quantity of Municipal Obligations available for
purchase by the Fund may be limited, and that factor may affect the amount of
tax-exempt income which can be obtained from an investment in the Interstate
Fund. Substantial reductions in the availability of tax exempt securities might
also cause a reevaluation of the Fund's investment objective and policies.

Subsequent to its purchase by the Interstate Fund, an issue of rated
Municipal Obligations may cease to be rated or its rating may be reduced below
the minimum required for purchase by the Fund. In the event a Municipal
Obligation's rating falls below the second highest rating category of a
nationally recognized statistical rating agency, the Municipal Obligation will
be disposed of within five Business Days of the date the investment Adviser
becomes aware of the new rating absent a finding by the Board of Trustees that
the disposal of the security would not be in the best interest of the Funds.
Should a rated Municipal Obligation cease to be rated, the investment Adviser
will promptly reassess the credit risk of the Municipal Obligation. The ratings
of Moody's and S&P represent their opinions as to the quality of the Municipal
Obligations they rate. It should be emphasized, however, that ratings are
relative and subjective and are not absolute standards of quality.

VARIABLE RATE DEMAND INSTRUMENTS (INTERSTATE FUND ONLY). Variable rate demand
instruments that the Fund may purchase are tax-exempt Municipal Obligations or
participation interests therein that provide for periodic adjustments in the
interest rate paid and permit the holder to demand payment of the principal
balance plus accrued interest upon a specified number of days' notice and,
similarly, the issuer has a corresponding right to prepay upon notice.

The variable rate demand instruments in which the Fund may invest will
comply with Rule 2a-7 under the 1940 Act. The Fund will determine the variable
rate demand instruments it will purchase in accordance with procedures
prescribed by its Board to minimize credit risks. The Fund's investment Adviser
may determine that an unrated variable rate demand instrument meets the Fund's
high quality criteria if it is backed by a suitable bank letter of credit or
guarantee.

The variable rate demand instruments that the Interstate Fund may invest in
include participation interests purchased from banks in variable rate tax exempt
Municipal Obligations owned by banks or affiliated organizations. A
participation interest gives the Fund an undivided interest in the Municipal
Obligation in the proportion that the Fund's participation interest bears to the
total principal amount of the Municipal Obligation and provides the repurchase
feature described above. Each participation is backed by an irrevocable letter
of credit or guarantee of an appropriately rated bank. The Fund has the right to
sell the instrument back to the bank and draw on the letter of credit on demand,
after seven days' notice, for all or any part of the full principal amount of
the Fund's participation interest in the bond plus accrued notice, for all or
any part of the full principal amount of the Fund's participation interest in
the bond plus accrued interest. Banks usually retain a service fee, a letter of
credit fee and a fee for issuing repurchase commitments in an amount equal to
the excess of the interest paid on the Municipal Obligations over the negotiated
yield at which the instrument was purchased by the Fund.
<PAGE> 45
TRUSTEES AND EXECUTIVE OFFICERS

++BRUCE R. BENT, 61, President, Treasurer and Trustee, 810 Seventh
Avenue, New York, NY 10019-5868.

Mr. Bent is President, Treasurer, 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, Vice President and Secretary of Reserve Management Company,
Inc. ("RMCI") and Reserve Management Corporation ("RMCI"); and Chairman and
Director of Resrv Partners, Inc. ("RESRV").

+EDWIN EHLERT, JR., 66, 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, 71, 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. Since 1995, Mr. Emmet has served 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.

+DONALD J. HARRINGTON, C.M., 52, Trustee, St. John's University,
Jamaica, NY 11439.

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

BRUCE R. BENT II, 32, Senior Vice President and Assistant Secretary,
810 Seventh Avenue, New York, NY 10019-5868.

Mr. Bent joined The Reserve Funds in 1992 and is Senior Vice President
and Assistant Secretary of RF, RIT, RTET, RNYTET and RPES.

MARYKATHLEEN FOYNES, 28, Counsel and Secretary, 810 Seventh Avenue, New
York, NY 10019-5868.

Ms. Foynes is Counsel and Secretary of RF, RIT, RTET, RNYTET and RPES.
Before joining The Reserve Funds in 1998, Ms. Foynes was a staff attorney at
PaineWebber, Inc.

PAT A. COLLETTI, 39, Controller, 810 Seventh Avenue, New York, NY
10019-5868.

Mr. Colletti has been Controller of RF, RIT, RNYTET and RTET since 1989
and RPES since 1994.

- ----------
++ Interested Trustee within the meaning of the 1940 Act. 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 that they attend and an annual fee of
$16,000 for service to all of the trusts in the complex.

+ Messrs. Ehlert, Emmet and Harrington are members of a Review Committee which
performs the functions of an Audit Committee and reviews compliance procedures
and practices.

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.

As of May 31, 1998, Trustees and officers directly or indirectly as a group
owned less than 1% of the outstanding shares of the Funds. The Trust does not
pay any pension or retirement benefits.
<PAGE> 46
COMPENSATION TABLE
FOR FISCAL YEAR ENDED MAY 31, 1998

<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM FUND AND FUND COMPLEX
NAME OF TRUSTEE, POSITION FROM FUNDS (4 ADDITIONAL TRUSTS) PAID TO TRUSTEE
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Bruce R. Bent, President $ 0 $ 0
Edwin Ehlert, Jr., Trustee $2,064 $30,000
Henri W. Emmet, Trustee $2,064 $30,000
Rev. Donald J. Harrington, Trustee $2,064 $30,000
</TABLE>

INVESTMENT MANAGEMENT, DISTRIBUTION
AND CUSTODIAN AGREEMENTS

INVESTMENT MANAGEMENT AGREEMENT. Reserve Management Company, Inc. ("RMCI or
Advisor"), 14 Locust Place, Manhasset, NY 11030, a registered investment
adviser, manages the Funds and provides them with investment advice pursuant to
an Investment Management Agreement. Under the Agreement, RMCI manages the Funds'
investments, including effecting purchases and sales thereof, in furtherance of
each Fund's investment objective and policies, subject to overall control and
direction of the Trustees. RMCI also pays all employee costs and ordinary
operating costs of the Funds. For these services the Funds periodically pay RMCI
a comprehensive management fee at an annual rate of 0.25% of average daily net
assets. Excluded from ordinary operating costs are interest charges, taxes,
brokerage fees and commissions, extraordinary legal and accounting fees and
expenses, and certain operating expenses unique to the Treasurer's Trust class
of shares.

It is expected that the holders of the Treasurer's Trust shares will be wrap
fee accounts, trust accounts, omnibus accounts and other accounts of smaller
investors which require subaccounting and other such services. Because these
additional services will be provided only to the holders of the Treasurer's
Trust shares, payment for these services will be made by the Fund and charged
against the average daily net assets attributable to the Treasurer's Trust
shares, rather than being paid by the Adviser as part of its comprehensive
management fee.

From time to time, RMCI may waive receipt of its fees and/or voluntarily
assume certain expenses of a Fund which would have the effect of lowering the
Fund's 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.

For the fiscal year ended May 31, 1998, the Adviser received management fees
of $677,424 from the Trust.

The Investment Management Agreements for the Funds were duly approved by the
sole shareholder on December 18, 1996, and may be renewed annually if
specifically approved by the Board of Trustees and by the vote of a majority of
the Trustees who are not "interested persons" ("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 60 days' written notice by a vote of the Board of Trustees
or by vote of a majority of outstanding voting shares of a Fund or by RMCI.

DISTRIBUTION AGREEMENT. The Funds' Distributor is Resrv Partners, Inc.
("RESRV"), 810 Seventh Avenue, New York, NY 10019-5868, which is a wholly-owned
subsidiary or the Adviser. The Fund has authorized the Distributor, in
connection with its 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 may offer
and sell shares of the Fund pursuant to a separate Prospectus applicable to such
Distributor. The Distributor is the "principal underwriter" for the Funds within
the meaning of the 1940 Act, and as such acts 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 its choice for the
sale of Fund shares. Parties to selected dealer agreements may receive
assistance payments, if they qualify for such payments, under the Distribution
Plan described below. RESRV's principal business is the distribution of mutual
fund shares. The Distributor has retained no underwriting commissions on the
sale of Fund shares during the last three fiscal years. No distribution
assistance payments were made to RESRV.
<PAGE> 47
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.

DISTRIBUTION PLAN AND SERVICE PLAN. The Funds each maintain a Distribution Plan
and related agreements pursuant to Rule 12b-1 under the 1940 Act, which provides
that investment companies may pay distribution expenses, directly or indirectly,
pursuant to a Distribution Plan adopted by the investment company's Board and
approved by its shareholders. Under the Distribution Plan, each Fund makes
assistance payments to brokers, financial institutions and other financial
intermediaries ("payee(s)") for shareholder accounts ("qualified accounts") as
to which a payee has rendered distribution assistance services to the Class C
and D shares at an annual rate of 0.25% and 0.50%, respectively, of the average
daily net asset value ("NAV") of all Firms' qualified accounts. Class A, B and
Treasurer's Trust shares do not participate in a distribution plan.
Substantially all such monies (together with significant amounts from RMCI's own
resources) are paid by RMCI to Firms for their distribution assistance 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
Distribution Plan, RMCI may, in its discretion, pay additional amounts from its
resources. The rate of any additional amounts that may be paid will be based
upon RESRV's and RMCI's analysis of the contribution that a Firm makes to the
Fund by increasing assets under management and reducing expenses to the Fund if
such services were provided directly by the Fund or other authorized persons.
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 Distribution Plan will benefit the Fund and its shareholders.

The Glass-Steagall Act prohibits all entities which receive deposits from
engaging to any extent in the business of issuing, underwriting, selling, or
distributing securities, although national and state chartered banks are
permitted to purchase and sell securities upon the order and for the account of
their customers. Those persons who wish to provide assistance in the form of
activities not primarily intended to result in the sale of Fund shares (such as
administrative and account maintenance services) may include banks, upon advice
of counsel that they are permitted to do so under applicable laws and
regulations, including the Glass-Steagall Act. In such event, no preference will
be given to securities issued by such banks as investments and the assistance
payments received by such banks under the Distribution Plan may or may not
compensate the banks for their administrative and account maintenance services
for which the banks may also receive compensation from the bank accounts they
service. It is Fund management's position that payments to banks pursuant to the
Distribution Plan for activities not primarily intended to result in the sale of
Fund shares, such as administrative and account maintenance services, do not
violate the Glass-Steagall Act. However, this is an unsettled area of the law
and if a determination contrary to management's position is made by a bank
regulatory agency or court such payments will be terminated and any shares
registered in the bank's name, for its underlying customer, will be registered
in the name of that customer. Financial institutions providing distribution
assistance or administrative services for the Fund may be required to register
as securities dealers in certain states.

Under the Distribution Plan, the Fund's Controller or Treasurer reports
quarterly the amounts and purposes of assistance payments. During the
continuance of the Distribution 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, 1998, $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 economics of scale in providing services to
shareholders and to contribute to the stability of such shareholder services.
During the fiscal year ended May 31, 1998, substantially all payments made by
the Fund were to brokers or other financial institutions and intermediaries for
share balances in the Fund.
<PAGE> 48
The Distribution Plan and related agreements were duly approved by
shareholders and may be terminated at any time by a vote of a majority of the
outstanding voting securities of each portfolio or by vote of the disinterested
Trustees. The Plan and related agreements may be renewed from year to year, or
amended, if approved by a vote of the majority of the Board of Trustees, and by
a vote of a majority of the disinterested Trustees cast in person at a meeting
called for the purpose of voting on such renewal or amendment. The Distribution
Plan may not be amended to increase materially the amount to be spent for
distribution without shareholder approval. All material amendments to the
Distribution 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.

Under the Service Plan, each Fund may pay Firms a service fee at an annual
rate of up to 0.25% of the average daily net asset value of such Fund's Class B,
Treasurer's Trust, Class C and D shares owned by investors for which such Firm
provides personal services, including maintaining shareholder accounts,
responding to inquiries, providing information about investments and providing
certain other services. Class A shares do not participate in the Service Plan.

CUSTODIAL SERVICES 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 as well as, Custodial Trust Co., 28 West
State Street, Trenton, NJ 08608 (excluding Interstate Fund). The Bank of New
York, 48 Wall Street, New York, NY 10015 is a Custodian for the Funds for
limited purposes in connection with certain repurchase agreements.
PricewaterhouseCoopers, LLP, 1301 Avenue of the Americas, New York, NY 10019 is
the Funds' independent accountant.

PORTFOLIO TURNOVER, TRANSACTION CHARGES AND ALLOCATION

As investment securities transactions made by the Funds 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 aftermarket transactions
with dealers involve a spread between the bid and asked prices.

The Funds' policies of investing in debt securities maturing within one
year, and the Interstate Fund's policy of investing in debt securities maturing
within 13 months, results in high portfolio turnover. However, because the cost
of these transactions is minimal, high turnover does not have a materially
adverse effect upon the NAV or yield of the Fund.

Subject to the overall supervision of the Officers of the Fund and the Board
of Trustees, RMCI places all orders for the purchase and sale of the Funds'
investment securities, and in general, 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.

SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the Trust to issue an unlimited number of
full and fractional shares of beneficial interest, and to divide or combine the
shares into a greater or lesser number of shares without thereby changing the
proportionate beneficial interests in the Funds. 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 any 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 the Fund, shareholders are entitled to share, pro
rata, in the net assets of their respective portfolios available for
distribution to such shareholders. It is possible, although
<PAGE> 49
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
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
Funds' issued shares without shareholder approval.

Each Fund share, when issued, is fully paid, non-assessable (except as set
forth below), and fully transferable or redeemable at the shareholder's option.
Each share has an equal interest in the net assets of the respective Fund, 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
noncumulative 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.

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 Fund's, 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.

Regulations of the SEC 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. Approval
of the Investment Management Agreement, material amendments to the Plan of
Distribution, and changes in the fundamental policies of the Fund requires
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.

Set forth below is certain information as to persons who owned 5% or more of
the outstanding shares of the Primary Institutional Fund and the U.S. Government
Institutional Fund as of June 30, 1998:

PRIMARY INSTITUTIONAL FUND TREASURER'S TRUST

NAME AND ADDRESS % OF SHARES NATURE OF OWNERSHIP
---------------- ----------- -------------------
Private Value Fund II, L.P. 11.7% Record
3003 Tamiami Train N.
Napes, FL 34103

PURCHASE, REDEMPTION AND PRICING OF SHARES

PURCHASES AND REDEMPTIONS THROUGH OTHERS. Share purchases and redemptions may
also be made through brokers and financial institutions ("Firms") who may
provide varying arrangements for their clients as well as providing other
investment or administrative services. Some of these Firms participate in the
Fund's Plan of Distribution ("Plan") under which payments are made for
distributing Fund shares or other assistance to the Fund.

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 WILL GENERALLY BE UP TO 10 BUSINESS DAYS.

Redemption payments will normally be made by check or wire transfer but the
Funds are 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 net asset value is determined). The Funds have 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
<PAGE> 50
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 each 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 net asset value of
the redemption.

NET ASSET VALUE. Shares are offered at their NAV which is calculated at the
close of each Business Day as defined in the Prospectus. The NAV is not
calculated on New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Columbus Day,
Thanksgiving Day, Christmas Day and any days the NYSE is closed for trading and
regional bank holidays. It is the policy of each Fund to maintain a stable NAV
per share of $1.00, although this share price is not guaranteed.

The NAV per share of each Fund is determined by adding the value of all of
the Fund's securities, cash and other assets, subtracting its liabilities, and
dividing the result by the number of its shares outstanding. The Board of
Trustees has determined the most practical method currently available for
valuing investment securities is the amortized cost method. This procedure
values a purchased security at cost at the time of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium and
accrual of interest income, irrespective of intervening changes in interest
rates or security market values.

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. In addition, such procedures are reasonably
designed, taking into account current market conditions and the investment
objective of the Fund, to attempt to maintain its net asset value as computed
for the purpose of sales and redemptions at $1.00 per share. Such procedures
will include periodic review by the Trustees, at such intervals as they may
determine reasonable, to ascertain the extent of any difference in the NAV of a
Fund from $1.00 a share determined by valuing its assets at amortized cost as
opposed to valuing them based on market factors. If the deviation exceeds 1/2 of
one percent, the Trustees will promptly consider what action if any should be
initiated. If they believe that the deviation may result in material dilution or
other unfair results to shareholders, the Trustees have undertaken to apply
appropriate corrective remedies which may include the sale of a Fund's assets
prior to maturity to realize capital gains or losses or to shorten the average
maturity of the Fund, withholding dividends, redemption of shares of the Fund in
kind, or reverting to valuation based upon market prices and estimates.

SHAREHOLDER SERVICE POLICIES. The Fund's policies concerning the shareholder
services are subject to change from time to time. 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.

CREDITING OF INVESTMENTS. The Funds will only give credit for investments in the
Funds on the day they become available in Federal Funds which is normally within
one or two days of receipt. 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 (New York time) (11:00 AM New York time for the Treasury
and Interstate Funds) of the amount to be transmitted and the account to be
credited and the amount received at its bank by 3:00 PM (New York time).

The Funds reserve the right to reject any investment in the Funds for any
reason and may at any time suspend all new investment in the Funds.

IF THE WIRE FOR PURCHASE OF SHARES IS NOT RECEIVED BY THE FUND, THE SHARE
PURCHASE MAY BE CANCELED OR REDEEMED IMMEDIATELY. THE INVESTOR WHO GAVE NOTICE
OF THE INTENDED WIRE 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.

SHARE CERTIFICATES. Share certificates are not issued by the Trust.
<PAGE> 51
DISTRIBUTIONS AND TAXES

PRIMARY, GOVERNMENT AND TREASURY FUNDS. 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. In order to qualify as a regulated investment company
under the Code, each Fund must, among other things, in each fiscal year
distribute at least 90 percent of its investment company taxable income (which
includes, among other items, interest income and net short-term capital gains in
excess of net long-term capital losses) and its net tax-exempt interest income
to shareholders; derive at least 90 percent of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stock, securities or foreign currencies or other income
derived with respect to its business of investing in such stock, securities or
currencies; and meet certain diversification requirements.

As regulated investment companies, the Funds generally will not be subject
to U.S. federal income tax on the taxable income and net capital gains (the
excess of net long-term capital gains over net short-term capital losses) that
they distribute. The Funds intend to distribute all of their investment company
taxable income and net capital gains, if any, and, therefore, do not expect to
pay federal income tax. Amounts not distributed on a timely basis in accordance
with a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To prevent imposition of the excise tax, each Fund must distribute
during each calendar year an amount equal to the sum of (1) at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year, (2) at least 98% of its capital gains in excess of its capital
losses (adjusted for certain ordinary losses) for the one-year period ending on
October 31 of each calendar year, and (3) any ordinary income and capital gains
for previous years that was not distributed during those years. A distribution,
including an "exempt-interest dividend," will be treated as paid on December 31
of the current calendar year if it is declared by a Fund in October, November or
December with a record date in such a month and paid by the Fund during January
of the following calendar year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which they are received. Dividends paid out of
a Fund's investment company taxable income will be taxable to shareholders as
ordinary income. Because no portion of a Fund's income will be comprised of
dividends from domestic corporations, none of the income distributions from a
Fund will be eligible for the 70% deduction for dividends received by
corporations. Distributions of net capital gains, if any, designated as capital
gain dividends, are taxable to individual shareholders at the applicable 20% or
28% capital gains rate, regardless of how long the shareholder has held the
relevant Fund's shares, and are not eligible for the dividends-received
deduction.

Upon the sale or other disposition of shares of a Fund, in the event that
the Fund does not 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 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 shares of a Fund 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.

Investments by a Fund in zero coupon or other discount securities (other
than tax-exempt discount securities) 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") for the period that the securities are
held, even though the Fund receives no cash interest payments. This income is
included in determining the amount of income which the Fund must distribute to
maintain its status as a regulated investment company and to avoid the payment
of federal income tax and the 4% excise tax.

Gains derived by a Fund from the disposition of any market discount bond
(i.e., bonds purchased at other than original issue, where the face value of the
bonds exceeds their purchase price), including tax-exempt market discount bonds,
held by the Fund 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.

A Fund may be required to withhold U.S. federal income tax at the rate of
31% of all taxable distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Corporate shareholders and certain other
shareholders generally are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. federal income tax liability.
<PAGE> 52
THE TREASURY FUND intends to invest only in U.S. Government securities that, in
many states, provide interest income exempt from state and local personal income
taxes, but may invest up to 5 percent of its assets in taxable 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 taxing authority may currently or in the
future seek to tax an investor on a portion of the interest income of an
obligation held by the Treasury Fund.

Dividends derived from investment company taxable income, including
distributions from net realized short-term securities gains, paid by a Fund with
respect to Fund shares beneficially owned by a foreign person generally are
subject to U.S. nonresident withholding taxes at a rate of 30%, unless the
foreign person claims the benefit of a lower rate specified in a tax treaty.
Distributions from net realized long-term securities gains paid by the Fund with
respect to Fund shares beneficially owned by a foreign person generally will not
be subject to any U.S. withholding tax. However, such distributions may be
subject to 31% backup withholding, as described in Prospectus, unless the
foreign person certifies his non-U.S. residency status.

THE INTERSTATE FUND. The Fund intends to qualify to pay "exempt-interest
dividends" to its shareholders. To so qualify, at the close of each quarter of
its taxable year, at least 50% of the value of its total assets must consist of
Municipal Obligations. Properly designated exempt-interest dividends distributed
to shareholders are not includable in the shareholder's gross income for federal
income tax purposes. Distributions of net investment income received by the Fund
from investments in debt securities other than Municipal Obligations and any net
realized short-term capital gains distributed by the Fund will be taxable as
ordinary income. Distributions of net long-term capital gains, if any, will be
taxable to individual shareholders at applicable 20% or 28% capital gains rate,
regardless of how long a shareholder has held the Fund's shares. Shareholders
will be advised annually as to the federal income tax consequences of
distributions made during the year.

In the event the Fund should hold certain private activity bonds,
shareholders must include as an item of tax preference, the portion of dividends
paid by the Fund that is attributable to interest on such bonds in their federal
alternative minimum taxable income for purposes of determining any liability for
the alternative minimum tax applicable to individuals and corporations.
Shareholders receiving Social Security and certain railroad retirement benefits
should note that exempt-interest dividends will be taken into account in
determining the taxability of such benefits.

With respect to a shareholder who received exempt-interest dividends on
shares held for less than six months, any loss on the sale or exchange of such
shares will, to the extent of the amount of such exempt-interest dividends, be
disallowed.

A shareholder may not deduct that portion of interest in indebtedness
incurred or continued to purchase or carry shares of an investment company
paying exempt-interest dividends (such as those of the Fund) which bears the
same ratio to the total dividends (excluding capital gains dividends) received
by the shareholder. In addition, the purchase of shares may be considered to
have been made with borrowed funds even though the borrowed funds are not
directly traceable to such purchase.

Persons who may be "substantial users" (or "related persons" of substantial
users) of facilities financed by industrial development bonds should consult
their tax advisers before purchasing shares of the Fund. The term "substantial
user" generally includes any "non-exempt person" who regularly uses in his or
her trade or business a part of a facility financed by industrial development
bonds. Generally, an individual will not be a "related person" of a substantial
user unless the person or his or her immediate family owns directly or
indirectly in the aggregate more than 50% equity interest in the substantial
user.

ALL FUNDS. Statements as to the tax status of each investor's dividends and
other distributions will be mailed annually. The annual statements will set
forth the dollar amount of income subject to federal tax. Distributions will be
reported under more than one tax identification number only if a separate
account is established for each number.

Fund shareholders may be subject to state, local and foreign taxes on their
Fund distributions. In many states, Fund distributions which are derived from
interest on certain U.S. Government obligations are exempt from taxation.
Shareholders are advised to consult with their tax advisers regarding the
particular tax consequences to them of an investment in the Fund.
<PAGE> 53
FUND YIELD

The current yield of a Fund may differ from its effective yield and
annualized dividends.

Current yield is calculated by determining the net change (exclusive of
capital changes) in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, dividing the net change in
account value by the value of the account at the beginning of the base period to
obtain the base period return, and multiplying the base period return by a
fraction having 365 in the numerator and the number of days in the base period
in the denominator. The current yield stated in the prospectus utilizes a seven
(7) day base period. Net change in account value must reflect (i) the value of
additional shares purchased with dividends from the original share and dividends
declared on both the original share and any such additional shares; and (ii) any
recurring fees charged to all shareholder accounts, in proportion to the length
of the base period and the Fund's average or median account size. Net change in
account value must exclude realized gains or losses and unrealized appreciation
or depreciation.

Effective yield is computed by adding one to the current yield, raising the
sum to a power equal to 365 divided by (days), and subtracting one from the
result according to the following formula: Effective Yield = [(Base Period
Return +1) 365/7]-1. Effective annual yields are a representation of the
effective annual rate of return produced by the monthly compounding of Fund
dividends. Taxable equivalent yield is computed by dividing either current or
effective yield by a denominator equal to one minus a stated income tax rate
according tot he following formula: Taxable Equivalent Yield = Current or
Effective Yield/(1-Income Tax Rate).

Yield information may be useful in reviewing the performance of each Fund,
but because of fluctuations, it may or may not provide a basis for comparison
with bank deposits, other money-market funds or bank accounts which have
fluctuating share values, or other investments which pay a fixed yield for a
stated period of time, such as Treasury bills, bank certificates of deposit,
savings certificates and NOW accounts. When making comparisons, the investor
should also consider the quality and maturity of the portfolio securities of the
various money-market funds. An investor's principal is not guaranteed by each
Fund, nor is it insured by a governmental agency.

RESERVE CASH PERFORMANCE ACCOUNT

The Reserve Cash Performance Account ("CPA") provides a comprehensive
package of additional services to investors in the Interstate Fund. Reserve CPA
is a check arrangement with Bank One, Columbus, NA or the Chase Manhattan Bank
whereby checks are issued to Reserve shareholders which may be used to redeem
shares in their account in any amount. If a bank accepts a check, it will be
paid in the order received by redemption of shares from the investor's Reserve
account. Any check in an amount exceeding the Reserve account balance will be
returned to the payee. Reserve CPA checks can be used in the same manner as any
other bank checks. Paid checks will not be returned but complete information on
such paid checks will be provided monthly.

A VISA Gold Check Card (a debit card) is also available. 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. As with the
checking facility, VISA charges are paid by liquidating shares in the Reserve
Fund 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. Checks and VISA cards are
intended to provide investors with easy access to their account balances.

A Fund will charge a non-refundable annual CPA plus service fee (currently
$60 which may be charged to the account at the rate of $5 monthly). Participants
will also 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. In addition, broker/dealers or other
financial institutions in the CPA program may charge their own service fees in
addition to the annual fee.

VISA cardholders may be liable for the unauthorized use of their card up to
the amount set by governing Federal regulations, currently $50 if the Fund or
the bank is not notified of the theft or loss within two (2) Business Days.
Participants should refer to the VISA Account Shareholder Agreement for complete
information regarding responsibilities and liabilities with respect to the VISA
Gold card. If a card is lost or stolen, the cardholder should report the loss
immediately by telephoning the issuing bank, currently BankOne at 614-248-4242
which can be reached 24 hours a day, seven days a week or the Funds at
800-631-7784 or 212-977-9880 during normal business hours (9:00 A.M. to 5:00
P.M., New York time).
<PAGE> 54
The use of checks and cards by participants will be subject to the terms of
your Reserve CPA Application and VISA Account Shareholder Agreement.

RATINGS

The following are the rating designations of short-term instruments and
their respective meanings.

STANDARD & POOR'S CORPORATION. A-1: This designation indicates that the degree
of safety regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics will be denoted
with a plus (+) sign designation.

MOODY'S INVESTORS SERVICE, INC. Prime-1 (P1): Issuers rated P1 (or supporting
institutions) have a superior ability for repayment of senior short-term debt
obligations. P1 repayment 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.

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 a very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated "F1+". Those issues determined to possess an
exceptionally strong credit quality will be denoted with a plus (+) sign
designation. Issues assigned the rating of F1+ are regarded as having the
strongest degree assurance for timely payment.

TAX-EXEMPT BOND RATINGS. The highest ratings for municipal bonds are Aaa or Aa
if rated by Moody's Investor Services, Inc. ("Moody's") and AAA or AA if rated
by Standard & Poor's Corporation ("S&P"). Such bonds are judged to be of high
quality and are not considered speculative. Bonds rated A by Moody's are
considered to possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Such bonds have factors giving
security to principal and interest that are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future. Debt rated A by S&P is considered to have a strong capacity to pay
interest and repay principal although it is more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in
higher-rated categories.

TAX-EXEMPT PAPER RATINGS. Moody's tax-exempt paper rating are opinions of the
ability of issuers to repay punctually promissory obligations not having an
original maturity in excess of twelve months. The highest quality obligations
are rated "Prime". Issuers rated Prime-1 have superior ability for repayment of
senior short-term debt obligations. Issuers rated Prime-2 have a strong ability
for repayment of senior short-term debt obligations. Moody's employs the
following two designations, all judged to be investment grade, to indicate the
relative repayment capacity of rated short-term issuers: MIG-1/VMIG-1, Best
Quality and MIG-2/VMIG-2, High Quality. The designation of MIG-1/VMIG-1
indicates there is strong protection by established cash flows, superior
liquidity support, or demonstrated broad-based access to the market for
refinancing. The designation of MIG-2/VMIG-2 indicates margins of protection
ample although not so large as in MIG-1/VMIG-1.

S&P's tax-exempt paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days. The
highest quality obligations are rated "A". Issues assigned "A" ratings are
regarded as having the greatest capacity for timely payment. Issues in this
category are further refined with designations to indicate the relative degree
of safety. The two top such designations are 1 and 2. The "A-1" designation
indicates that the degree of safety regarding timely payment is strong. The
"A-2" designation indicates that capacity for timely payment is satisfactory.
Municipal note ratings by S&P are preceded by the designation SP. Those issues
determined to possess overwhelming safety characteristics are designated SP-1+.
Municipal notes designated SP-1 are considered to have a very strong or strong
capacity to pay principal and interest. Municipal notes designated SP-2 are
considered to have a satisfactory capacity to pay principal and interest.
<PAGE> 55
RESERVE INSTITUTIONAL TRUST - PRIMARY INSTITUTIONAL FUND
STATEMENT OF NET ASSETS - MAY 31, 1998

<TABLE>
<CAPTION>
NEGOTIABLE BANK
CERTIFICATES OF % DAYS TO VALUE
DEPOSIT - 47.34% RATE MATURITY (NOTE 1)
- ---------------- ---- -------- --------
<S> <C> <C> <C>
ABN-AMRO Bank N.V. (a) 5.53 15 $ 9,026,268
Canadian Imperial Bank of Commerce (b) 5.535 23 9,015,221
Chase Manhattan Bank 5.55 4 9,006,938
Crestar Bank 5.555 36 9,015,276
Deutsche Bank AG (a) 5.54 19 9,018,005
Dresdner Bank AG (b) 5.54 29 8,004,924
Harris Trust and Savings Bank 5.53 11 9,029,033
Mellon Bank, N.A. 5.57 3 9,083,550
SouthTrust Bank of Alabama, N.A. 5.57 36 9,036,205
Westdeutsche Landesbank Girozentrale (b) 5.57 36 8,048,273
------------
Total Negotiable Bank Certificates of Deposit 88,283,693

PROMISSORY NOTES - 14.45%

Commerzbank U.S. Finance, Inc. (c) 5.51 22 8,971,073
Hypo U.S. Finance, Inc. (c) 5.505 8 8,990,366
Societe Generale North America, Inc. (c) 5.50 17 8,978,000
------------
Total Promissory Notes 26,939,439

REPURCHASE
AGREEMENTS - 38.09%

GNMA 7% due 7/15/27 (Repo with Bear, Stearns &
Co. Inc. dated May 29, 1998, resale amount
$30,014,075) 5.63 1 30,014,075

FMAR due 10/2/24 and FNAR due 2/1/27 to 4/1/34
(Repo with DLJ Securities Corporation dated May
29, 1998, resale amount $16,507,741) 5.63 1 16,507,741

TRIN 3.375% due 1/15/07 (Repo with Prudential
Securities Inc. dated May 29, 1998, resale amount
$24,511,351) 5.56 1 24,511,351
------------
Total Repurchase Agreements (Cost $71,000,000) 71,033,167
------------

Primary Institutional Fund Investments - (99.88%)
(Cost $185,870,636) 186,256,299

Other assets, less liabilities - (.12%) 232,177
------------

NET ASSETS (100%) equivalent to $1.00 net asset
value, offering and redemption prices per share
based on 186,488,476 shares of beneficial interest
$.001 par value outstanding $186,488,476
============

<CAPTION>
CLASSES NET ASSETS SHARES OUTSTANDING NAV
<S> <C> <C> <C>
Class A $ 4,412,016 4,412,016 $1.00
Class B $ 10,376,245 10,376,245 $1.00
Class Treasurer's Trust $171,700,215 171,700,215 $1.00
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 56
RESERVE INSTITUTIONAL TRUST - U.S. GOVERNMENT INSTITUTIONAL FUND
STATEMENT OF NET ASSETS - MAY 31, 1998 (CONTINUED)

<TABLE>
<CAPTION>
REPURCHASE % DAYS TO VALUE
RATE MATURITY (NOTE 1)
---- -------- --------
AGREEMENTS - 98.19%
<S> <C> <C> <C>
GNMA 5% due 11/20/27 (Repo with Goldman
Sachs & Co. dated May 28, 1998, resale amount
$3,102,368) 5.50 2 $3,101,895

GNMA 5% due 5/20/28 (Repo with Prudential
Securities Inc. dated May 29, 1998, resale amount
$2,801,276) 5.47 1 2,801,276

GNMA 6.50% due 10/15/27 (Repo with Salomon
Smith Barney Inc. dated May 27, 1998, resale
amount $3,002,760) 5.52 2 3,002,300
----------
Total Institutional Government Fund Investments -
(Cost $8,900,000) 8,905,471

Other assets, less liabilities - (1.81%) 163,959
----------

NET ASSETS (100%) equivalent to $1.00 net
Asset value, offering and redemption prices
per share based on 9,069,430 shares of
beneficial interest $.001 par value
outstanding $9,069,430
==========

<CAPTION>
CLASSES NET ASSETS SHARES OUTSTANDING NAV
<S> <C> <C> <C>
Class B $5,808,080 5,808,080 $1.00
Class Treasurer's Trust $3,261,350 3,261,350 $1.00
</TABLE>

(a) Eurodollar Certificates of Deposit - London Branch, United Kingdom

(b) Yankee Certificates of Deposit

GNMA = Government National Mortgage Association Mortgage-Backed Pass-Through
Securities

FMAR = Federal Home Loan Mortgage Corporation (FHLMC) Adjustable Rate
Mortgage-Backed Pass-Through Participation Certificates

FNAR = Federal National Mortgage Association (FNMA) Adjustable Rate
Mortgage-Backed Pass-Through Securities

TRIN = U.S. Treasury STRIPS

SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 57
RESERVE INSTITUTIONAL TRUST - INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND
STATEMENT OF NET ASSETS - MAY 31, 1998

<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
DESCRIPTION OF SECURITY DATE (IN THOUSANDS) (NOTE 1)
- ----------------------- ---- ------------ --------
<S> <C> <C> <C>
ALABAMA - 3.59%
Pell City IDA for General Signal Corporation, 3.90% (a) 10/1/2000 500 503,379

ARIZONA - 7.15%
Apache IDA for Tucson Electric Power Company, 3.90% (a) 12/15/2018 500 500,910
Pima IDA PCR for Tucson Electric Project, 3.85% (a) 10/1/2022 500 501,682

CALIFORNIA - 3.57%
Grand Terrace Community Redevelopment Agency, 4.40% (a) 12/1/2011 500 501,572

COLORADO - 7.16%
Englewood HCF for SW Medical Professional Ltd. Series 85,
4.20% (a) 12/1/2010 500 501,438
Eagle Revenue Bonds for Smith Creek Metro District, 3.75% (a) 10/1/2035 500 503,293

FLORIDA - 7.17%
Boca Raton IDA for Parking Garage Project, 4.075% (a) 12/1/2014 500 505,074
St. Lucie PCR for Florida Power & Light , 3.95% (a) 1/1/2026 500 501,592

KENTUCKY - 7.22%
Ohio County PCR for Big River Electric Corporation, 4.35% (a) 6/1/2013 500 510,590
Ohio County PCR for Big River Electric Corporation Project
Series 1985, 4.50%(a) 10/1/2015 500 501,932

MARYLAND - 3.57%
Baltimore IDA for Mayor and City Counsel Project, 4.50% (a) 8/1/2016 500 501,579

MICHIGAN - 7.17%
Jackson EDC for Thrifty Leoni Inc. Project, 3.825% (a) 12/1/2014 500 504,811
Michigan Job Development Authority, 4.10% (a) 1/1/2004 500 501,741

MINNESOTA - 3.58%
New Ulm Commercial Development Authority for Rob Bradley
Project Series 97, 4.10% (a) 10/1/2011 500 501,772

MISSOURI - 3.59%
Cole IDA for Modine Manufacturing Series 85, 4% (a) 12/1/2015 500 503,502

NEW JERSEY - 3.60%
New Jersey EDA for Volvo of America Corp., 4.246% (a) 12/1/2004 500 505,050

NEW YORK - 5.72%
New York City GOB Series E2, 4% (a) 8/1/2020 500 501,603
New York City GOB Series E6, 4% (a) 8/1/2019 300 300,960

NORTH DAKOTA - 3.58%
Minot IDR for Nash-Finch Project Series 93, 4.20% (a) 12/1/2002 500 501,784

OHIO - 3.58%
Toledo Special Obligation Assessment Notes, 3.90% 12/1/1998 500 501,660
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
DESCRIPTION OF SECURITY DATE (IN THOUSANDS) (NOTE 1)
- ----------------------- ---- ------------ --------
<S> <C> <C> <C>
OKLAHOMA - 3.59%
Oklahoma IDA for Christian College, 4.625% (a) 7/1/2015 500 503,731

PENNSYLVANIA - 7.16%
Allegheny University Project Series 85, 3.60% (a) 7/1/2015 500 503,168
Northeastern HEF Wyoming Valley HCS Revenue Bonds, 3.85% (a) 1/1/2024 500 501,652

TENNESSEE - 3.57%
Chattanooga IDA for Baylor School Project, 3.90% (a) 11/1/2016 500 501,659

TEXAS - 3.58%
Harris HFC for Greater Houston Project, 3.85% (a) 11/1/2025 500 501,682

UTAH - 3.57%
Salt Lake City HFA for Parkview Plaza Project, 3.95% (a) 12/1/2014 500 501,394

WASHINGTON - 3.58%
Port of Seattle DAI for Douglas Management Corporation, 3.95% (a) 12/1/2005 500 501,711

WISCONSIN - 3.57%
Green Bay IDA for St. Mary Cement Company Ltd., 4% (a) 11/1/2000 500 501,419
-----------

Total Interstate Institutional Fund Investments (98.87%) Cost
$13,800,000) 13,872,340
Other assets, less liabilities (1.13%) 158,596
-----------
NET ASSETS (100%) equivalent to $1.00 net asset value, offering
and redemption prices per share on 14,030,936 shares of
beneficial interest of $.001 par value outstanding. $14,030,936
===========

<CAPTION>
CLASSES NET ASSETS SHARES OUTSTANDING NAV
<S> <C> <C> <C>
Class Treasurer's Trust $14,030,936 14,030,936 $1.00
</TABLE>

(a) The interest rate is subject to change periodically. The rates shown were
in effect at May 31, 1998. Securities payable on demand are collateralized
by bank letters of credit or other bank credit agreements.

SECURITY TYPE ABBREVIATIONS:
----------------------------

DAI - Development Authority Industrial Development Refunding Bonds
EDA - Economic Development Authority Revenue Bonds
EDC - Economic Development Corporation
GOB - General Obligation Bonds
HCF - Health Care Facility
HCS - Health Care Systems, Inc.
HEF - Health and Educational Facilities Revenue Bonds
HFA - Health Facilities Authority Revenue Bonds
HFC - Housing Finance Corporation
IDA - Industrial Development Authority Revenue Bonds
IDR - Industrial Development Agency Revenue Bonds
PCR - Pollution Control Revenue Bonds

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 59
RESERVE INSTITUTIONAL TRUST
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1998

<TABLE>
<CAPTION> INTERSTATE
PRIMARY U.S. GOVERNMENT TAX-EXEMPT
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME (Note 1) $6,765,370 $ 141,899 $ 28,961
---------- ---------- ----------
EXPENSES (Note 2)
Comprehensive fee
Class A 25,898 0 0
Class B 64,601 10,668 0
Class Treasurer's Trust 570,571 1,325 4,361
---------- ---------- ----------
Total Expenses 661,070 11,993 4,361
---------- ---------- ----------

NET INVESTMENT INCOME $6,104,300 $ 129,906 $ 24,600
========== ========== ==========
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 60
RESERVE INSTITUTIONAL TRUST
STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION> INTERSTATE
U.S. GOVERNMENT TAX-EXEMPT
PRIMARY INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
--------------------- ------------- -------------
SEPTEMBER 15, 1997 MAY 13, 1998
(COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS) THROUGH OPERATIONS) THROUGH
MAY 31, 1998 MAY 31, 1997 MAY 31, 1998 MAY 31, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income paid to
shareholder as dividends (Note 1) $ (6,104,300) $ (35,795) $ (129,906) $ (24,600)
------------- ------------- ------------- -------------

FROM CAPITAL SHARE TRANSACTIONS
(at net asset value of $1 per share):
Net proceeds from the sale of shares of shares 930,964,321 2,876,422 17,950,641 14,845,121
Net asset value of shares issued
on reinvestment of dividends 6,104,300 35,795 129,906 24,600
------------- ------------- ------------- -------------

Subtotal 937,068,621 2,912,217 18,080,547 14,869,721
Cost of shares redeemed (752,587,782) (904,580) (9,011,117) (838,785)
------------- ------------- ------------- -------------
Net increase from capital share transactions 184,480,839 2,007,637 9,069,430 14,030,936

NET ASSETS:
Beginning of year 2,007,637 0 0 0
------------- ------------- ------------- -------------
End of year $ 186,488,476 $ 2,007,637 $ 9,069,430 $ 14,030,936
============= ============= ============= =============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 61
RESERVE INSTITUTIONAL TRUST
PRIMARY, U.S. GOVERNMENT AND INTERSTATE TAX-EXEMPT INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS

(1) SIGNIFICANT ACCOUNTING POLICIES:

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 four 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 all classes of Primary Institutional Fund, Class
B and Treasurer's Trust classes of U.S. Government
Institutional Fund and to Treasurer's Trust class of
Interstate Institutional Fund.

B. Securities are stated at value which represents 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.

F. The Funds may enter into repurchase agreements with financial
institutions deemed to be creditworthy by the Funds Investment
Advisor, subject to the seller's agreement to repurchase such
securities at a mutually agreed upon price. However, in the
event of default or bankruptcy by the seller, realization
and/or retention of the collateral may be subject to legal
proceedings.

(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
.60% Class Treasurer's Trust of the average daily net assets of each of
the Funds. For the year ended May 31, 1998, the Primary, U.S.
Government and Interstate Institutional Funds had accrued expenses due
to RMCI of $8,938, $376 and $692, respectively.
<PAGE> 62
RESERVE INSTITUTIONAL TRUST
PRIMARY, U.S. GOVERNMENT AND INTERSTATE TAX-EXEMPT INSTITUTIONAL FUNDS
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 date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.

(4) CAPITAL SHARE TRANSACTIONS

Transactions in capital stock of each Fund for the year ended May 31,
1998, were as follows:

<TABLE>
<CAPTION>
PRIMARY INSTITUTIONAL FUND CLASS A CLASS B CLASS
TREASURER'S
TRUST
------------ ------------ ------------
<S> <C> <C> <C>
Sold 80,769,940 46,220,750 803,973,631
Reinvest 562,364 748,323 4,793,613
Redeemed (76,920,288) (38,600,465) (637,067,029)
------------ ------------ ------------
Net Increase 4,412,016 8,368,608 171,700,215
============ ============ ============

<CAPTION>
U.S. GOVERNMENT INSTITUTIONAL FUND CLASS B CLASS
TREASURER'S
TRUST
------------ ------------
<S> <C> <C>
Sold 14,076,079 3,874,563
Reinvest 119,220 10,685
Redeemed (8,387,219) (623,898)
------------ ------------
Net Increase 5,808,080 3,261,350
============ ============

<CAPTION>
INTERSTATE TAX-EXEMPT
INSTITUTIONAL FUND CLASS
TREASURER'S
TRUST
------------
<S> <C>
Sold 14,845,121
Reinvest 24,600
Redeemed (838,785)
------------
Net Increase 14,030,936
============
</TABLE>
<PAGE> 63
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS TREASURER'S TRUST
------- -------------------------------- -----------------------
OCTOBER 23, 1997 JANUARY 21, 1997 OCTOBER 15, 1997
(COMMENCEMENT OF (COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO YEAR ENDED OPERATIONS) TO OPERATIONS) TO
MAY 31, 1998 MAY 31, 1998 MAY 31, 1997 MAY 31, 1998
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
PRIMARY INSTITUTIONAL FUND

Net asset value, beginning of period $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
----------- ------------ ----------- -------------

Income from investment operations .0333 .0534 .0196 .0351
Expenses .0001 .0005 .0017 .0029
----------- ------------ ----------- -------------
Net investment income (1) .0332 .0529 .0179 .0322
Dividends from net investment income (1) (.0332) (.0529) (.0179) (.0322)
----------- ------------ ----------- -------------
Net asset value, end of period $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
=========== ============ =========== =============
Total Return 5.49%(2) 5.29% 4.95%(2) 5.13%(2)

RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period 4,412 10,376 2,008 171,700
Ratio of expenses to average net
assets .25%(2) .45% .48%(2)(3) .60%(2)
Ratio of net investment income
to average net assets 5.35%(2) 5.16% 4.83%(2) 5.00%(2)
</TABLE>
<PAGE> 64
FINANCIAL HIGHLIGHTS - (CONTINUED)

<TABLE>
<CAPTION>
CLASS B CLASS TREASURER'S
TRUST
----------- -----------
SEPTEMBER 15, 1997 MAY 5, 1998
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
MAY 31, 1998 MAY 31, 1998
----------- -----------
<S> <C> <C>
U.S. GOVERNMENT INSTITUTIONAL FUND

Net asset value, beginning of period $ 1.0000 $ 1.0000
----------- -----------

Income from investment operations .0393 .0036
Expenses .0029 .0000
----------- -----------
Net investment income (1) .0364 .0036
Dividends from net investment income (1) (.0364) (.0036)
----------- -----------

Net asset value, end of period $ 1.0000 $ 1.0000
=========== ===========
Total Return 5.13%(2) 4.85%(2)

RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period 5,808 3,261
Ratio of expenses to average net
assets .45%(2) .60%(2)
Ratio of net investment income
to average net assets 5.00%(2) 4.73%(2)
</TABLE>

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

FEDERAL TAX INFORMATION - (UNAUDITED)

The dividends distributed by the Primary and U.S. Government Institutional
Funds are treated for Federal tax purposes as ordinary income.
<PAGE> 65
FINANCIAL HIGHLIGHTS - (CONTINUED)

<TABLE>
<CAPTION>
CLASS TREASURER'S
TRUST
------------
MAY 13, 1998
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1998
------------
<S> <C>
INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND

Net asset value, beginning of period $ 1.0000
------------
Income from investment operations .0021
Expenses .0003
------------
Net investment income (1) .0018
Dividends from net investment income (1) (.0018)
------------

Net asset value, end of period $ 1.0000
============
Total Return 3.39%(2)

RATIOS/SUPPLEMENTAL DATA
Net assets in thousands, end of period 14,031
Ratio of expenses to average net
assets .60%(2)
Ratio of net investment income
to average net assets 3.33%(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 of
the Primary Institutional Fund. If there were no reduction the actual fee
would have been .02% higher for Class B.

FEDERAL TAX INFORMATION - (UNAUDITED)

The dividends distributed by the Primary & U.S. Government
Institutional Funds are treated for Federal tax purposes as ordinary income.
The dividends distributed by Interstate Tax-Exempt Institutional Fund are
tax-exempt for Federal tax purposes.
<PAGE> 66
REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and the Board of Trustees of Reserve Institutional Trust:

In our opinion, the accompanying statement of net assets and the
related statement of operations and of changes in net assets and financial
highlights present fairly, in all material respects, the financial position of
Reserve Institutional Trust (comprising the Primary Institutional, U.S.
Government Institutional and Interstate Tax-Exempt Institutional Funds) at May
31, 1998, the results of its operations for the period then ended, the changes
in their net assets and the financial highlights for the periods presented in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust'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 generally accepted auditing standards which require that we plan and
perform the audits 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, 1998 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.

PRICEWATERHOUSECOOPERS LLP

New York, NY
July 24, 1998

<PAGE> 67
PART C. OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) FINANCIAL STATEMENTS

Part A--Financial Highlights

Part B--Financial Statements Included in Part A and Part B

(1) Statements of Net Assets at May 31, 1998

(2) Statements of Operations for the year ended May
31, 1998

(3) Statements of Changes in Net Assets for the years
ended May 31, 1997 and 1998

(4) Notes to Financial Statements

(5) Report of Independent Accountants.

(b) EXHIBITS

1. Declaration of Trust was filed as an exhibit to
Registrant's Post-Effective Amendment No. 11 dated October
1, 1987.*

2. By-Laws were filed as an exhibit to Registrant's
Post-Effective Amendment No. 9 dated August 31, 1986.
Amendment No. 1 filed as an exhibit to Post-Effective
Amendment No. 15 dated September 28, 1990.*

3. Not Applicable

4. Not Applicable

5. Investment Management Agreement dated as of December 18,
1996 filed as an exhibit to Post-Effective Amendment No. 27
dated December 31, 1996.*

6. Distribution Agreement was filed as an exhibit to
Post-Effective Amendment No. 9 dated August 31, 1986.
Notice pursuant to such Agreement filed as an exhibit to
Post-Effective Amendment No. 27 dated December 31, 1996.*

7. Pension Plan of Reserve Management Corporation was filed as
an exhibit to Post-Effective Amendment No. 32 of The
Reserve Fund, File No. 811-2033; Amendments to Pension Plan
filed as an exhibit to Post-Effective Amendment No. 45 of
The Reserve Fund (File No. 811-2033) dated July 31, 1989.*

8. Form of Custodian Agreement with Chemical Bank filed as an
exhibit to Registrant's Post-Effective Amendment No. 1
dated July 29, 1982. Custodian Agreement with the Bank of
New York filed as an exhibit to Post-Effective Amendment
No. 19 dated May 28, 1992.*

9. Form of Service Plan was filed as an exhibit to Post-
Effective Amendment No. 31 dated February 23, 1998.*

10. Opinion of Counsel

11. Consent of Independent Certified Public Accountants

12. Not Applicable

13. Not Applicable

14. Not Applicable

17. Powers of Attorney

27(a) Financial Data Schedule

27(b) Financial Data Schedule

27(c) Financial Data Schedule

__________________________________
* Incorporated by reference.

C-1
<PAGE> 68
15. Distribution Plan filed as an exhibit to Post-Effective
Amendment No. 27 dated December 31, 1996.*

16. Not Applicable

17. Financial Data Schedule.
18. Form of Multi-Class Plan was filed as an exhibit to Post-
Effective Amendment No. 31 dated February 23, 1998.*
19. Powers of Attorney for Edwin Ehlert, Jr., Henri W. Emmet and
Donald J. Harrington filed as an exhibit to Post-Effective
Amendment No. 29 dated November 18, 1997.*

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

Not applicable

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

As of June 30, 1998, there were 12 record holders of the Primary
Institutional Fund Class A shares, 56 record holders of the Primary
Institutional Fund Class B shares, 2,485 record holders of the
Primary Institutional Fund Treasurers Trust shares, and no
record holders of Primary Institutional Fund Class C and Class D
shares. On such date, there were 45 record holders of Class B shares
of the U.S. Government Institutional Fund, 5 record holders of U.S.
Government Institutional Fund Treasurers Trust shares, and no record
holders of U.S. Government Institutional Fund Class A, Class C, and
Class D shares. Also as of that date, there were no record holders
of shares of any class of both the U. S. Treasury Institutional
Fund and the Interstate Tax-Exempt Institutional Fund. Current
Class C shareholders will be redesignated as Treasurer's Trust
shareholders upon the effectiveness of this Registration Statement.

ITEM 27. 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, investment management agreement 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 court 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 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

<TABLE>
<CAPTION>
Name Position with the Adviser Other Businesses
- ---- ------------------------- ----------------
<S> <C> <C>
Henry B.R. Brown President, Treasurer and President, Treasurer and
Director Director of Reserve
Management Corporation
of the same address as
the Trust; Director
and Treasurer of
Transfer Agent Inc., 5
Cornwall St., N.W.,
Leesburg, Virginia
22075.

Bruce R. Bent Vice President, Secretary Vice President, Secretary
and Director and Director of Reserve
Management Corporation and
Director of Resrv Partners,
Inc. both of the same
address as the Trust.
</TABLE>

ITEM 29. PRINCIPAL UNDERWRITERS

Resrv Partners, Inc., a principal underwriter of the Registrant, acts as
principal underwriter to Reserve Fund, Reserve Tax-Exempt Trust, Reserve
Institutional Trust, Reserve New York Tax-Exempt Trust and Reserve Private
Equity Series.

<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Resrv Partners, Inc. with Registrant
- ------------------ ------------------------- ---------------------
<S> <C> <C>
Bruce R. Bent Chairman and Director President, Treasurer
810 Seventh Avenue & Trustee
New York, NY 10019
</TABLE>

ITEM 30. 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 810
Seventh Avenue, New York, New York 10019 except those relating to
receipts and deliveries of securities, which are maintained by the
Registrant's Custodian.

ITEM 31. NOT APPLICABLE

C-2
<PAGE> 69

C-3
<PAGE> 70
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, Registrant
has duly caused this Post-Effective Amendment No. 33 to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and State of New York on the 31st day
of July, 1998.

RESERVE INSTITUTIONAL TRUST

By: /s/ Bruce R. Bent
--------------------------------
Bruce R. Bent
President

Attest:
/s/ MaryKathleen Foynes
- -----------------------
MaryKathleen Foynes

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment No. 33 has been signed below by the
following persons in the capacities and on the date indicated.

SIGNATURE TITLE DATE
--------- ----- ----

*
- --------------------------- Director and President 7/30/98
Bruce R. Bent (principal executive, financial
and accounting officer)

* Director 7/30/98
- ---------------------------
Edwin Ehlert, Jr.

* Director 7/30/98
- ---------------------------
Henri W. Emmet

* Director 7/30/98
- ---------------------------
Donald J. Harrington, CM

*By: /s/ MaryKathleen Foynes Secretary 7/30/98
-------------------------
MaryKathleen Foynes
as Attorney-in-Fact

C-4

<PAGE> 71

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Sequentially
Numbered

Exhibit No. Description
- ----------- -----------
<S> <C>
1. Declaration of Trust of Registrant*

2. By-Laws of Registrant*

3. Not Applicable

4. Not Applicable

5. (a) Form of Investment Management Agree-
ment between the Registrant and Reserve
Management Company Inc.*

(b) Form of Sub-Investment Management Agreement
between Registrant, Reserve Management Company, Inc.
and Pinnacle Associates Ltd.

6. (a) Form of Distribution Agreement between the Registrant
and Resrv Partners, Inc.*

(b) Form of Selected Dealer Agreement*

7. Pension Plan of Reserve Management Corp. filed
as an exhibit to Post-Effective Amendment No., 32
of The Reserve Fund (File No. 2-36429);
amendments thereto filed as an exhibit to
Post-Effective Amendment No. 45 and all are
incorporated by reference*

8. Form of Custodian Agreements between Registrant and
Custodial Trust Company*

9. Not Applicable*

10. Opinion of Counsel

11. Consent of Auditors

12. Not Applicable

13. Form of Subscription Agreement between the Registrant
and Reserve Management Company, Inc.*

14. Not Applicable

15. Form of Service Plan*

16. Schedule for computation of each performance quotation
provided in Registration Statement*

17. Powers of Attorney

18. Not Applicable

27(a) Financial Data Schedule

27(b) Financial Data Schedule

27(c) Financial Data Schedule

</TABLE>

- ---------------
*Previously filed

<PAGE> 1
EXHIBIT 10

[THE RESERVE FUNDS LETTERHEAD]

July 30, 1998

Board of Trustees
Reserve New York Tax-Exempt Trust
810 Seventh Avenue
New York, New York 10019

Gentlemen:

I have acted as counsel to Reserve Institutional Trust, a Massachusetts
business trust (the "Fund"), in connection with the registration of shares of
the Primary Institutional, U.S. Goverment Institutional, U.S. Treasury
Institutional and Interest Tax-Exempt Institutional Fund ("Portfolio") with the
Securities and Exchange Commission.

As counsel to the Fund, I have made such investigations and have examined
and relied upon the originals or copies, certified or otherwise identified to
my satisfaction, of such records, instruments, certificates, memoranda and
other documents as I have deemed necessary or advisable for the purposes of
this opinion.

1. The Fund has been duly incorporated and is validly existing under the
laws of Massachusetts.

2. To the best of my knowledge, no further approval, consent or other
order of the Board of Trustees is legally required in connection
with the organization of the Portfolio and the registration of its
shares.

3. To the best of my knowledge, the shares of the Portfolio, when
issued, will be legally issued, non-assessable and, when subscribed
to, fully paid.

I consent to the filing of this opinion as an exhibit to the Fund's
registration statement under the Securities Act of 1933.

Very truly yours,

/s/ MaryKathleen Foynes
MaryKathleen Foynes
Counsel

<PAGE> 1

Exhbit 11

[PRICEWATERHOUSECOOPERS LETTERHEAD]

/R>

CONSENT OF INDEPENDENT ACCOUNTANTS

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

We consent to the inclusion in this registration statement on Form N-1A
(File No. 2-70831) of our report dated July 24, 1998, on our audit of the
financial statements and financial highlights of the Reserve Institutional
Trust. We also consent to the reference to our firm under the captions
"Financial Highlights" and "Custodial Services and Independent Accountants".

/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP

New York, New York
July 30, 1998

<PAGE> 1

Exhibit 17

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of
RESERVE INSTITUTIONAL TRUST, a Massachusetts business trust, does hereby
constitute and appoint MaryKathleen Foynes, his true and lawful attorney and
agent to do any and all acts and things and to execute any and all instruments
which said attorney and agent may deem necessary or advisable; (i) to enable the
said Trust to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, in connection with the registration under said Securities Act
of the shares of beneficial interest of said Trust (the "Securities"), including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign for and on behalf of the undersigned the name of the
undersigned as trustee of said Trust to a Registration Statement or to any
amendment thereto filed with the Securities and Exchange Commission in respect
of said Securities and to any instrument or document filed as part of, as an
exhibit to or in connection with said Registration Statement or amendment; (ii)
to enable said Trust to comply with the Investment Company act of 1940, as
amended, and any rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, in connection with the registration
under said Investment Company Act of the Trust, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign for and on behalf of the undersigned the name of the undersigned as trustee
of said Trust to a Registration Statement or to any amendment thereto filed with
the Securities and Exchange Commission in respect of said Trust and to any
instrument or document filed as part of, as an exhibit to or in connection with
said Registration Statement or amendment; and (iii) to register or qualify said
Securities for sale and to register or license said Trust as a broker or dealer
in said Securities under the securities or Blue Sky laws of all such states as
may be necessary or appropriate to permit therein the offering and sale of said
Securities as contemplated by said Registration Statement, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign for and on behalf of the undersigned the name of the
undersigned as trustee of said Trust to any application, statement, petition,
prospectus, notice or other instrument or document, or to any amendment thereto,
or to any exhibit filed as a part thereof or in connection therewith, which is
required to be signed by the undersigned and to be filed with the public
authority or authorities administering said securities or Blue Sky laws for the
purpose of so registering or qualifying said Securities or registering or
licensing said Trust, and the undersigned does hereby ratify and confirm as his
own act and deed all that said attorney and agent shall do or cause to be done
by virtue hereof.

IN WITNESS WHEREOF, the undersigned has subscribed these presents this
28th day of May, 1998.

/s/ Edwin Ehlert Jr.
----------------------------------
Edwin Ehlert Jr., Board Member

/s/ Donald J. Harrington
----------------------------------
Donald J. Harrington, Board Member

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has subscribed these presents this
29th day of May, 1998.

/s/ Henri W. Emmet
----------------------------------
Henri W. Emmet, Board Member

<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> PRIMARY INSTITUTIONAL FUND

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-1-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 185,939,439
<INVESTMENTS-AT-VALUE> 185,870,636
<RECEIVABLES> 316,861
<ASSETS-OTHER> 241,114
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 186,497,414
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,938
<TOTAL-LIABILITIES> 186,488,476
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 186,488,476
<SHARES-COMMON-PRIOR> 2,007,637
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 186,488,476
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,765,370
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 661,070
<REALIZED-GAINS-CURRENT> 6,104,300
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 184,480,838
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,104,300
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 937,068,621
<NUMBER-OF-SHARES-REDEEMED> 752,587,783
<SHARES-REINVESTED> 6,104,300
<NET-CHANGE-IN-ASSETS> 184,480,838
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 661,070
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 661,070
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .025
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> U.S. GOVERNMENT INSTITUTIONAL FUND

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-1-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 8,900,000
<INVESTMENTS-AT-VALUE> 8,900,000
<RECEIVABLES> 5,471
<ASSETS-OTHER> 164,334
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,069,805
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 375
<TOTAL-LIABILITIES> 9,069,430
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 9,069,430
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 141,899
<OTHER-INCOME> 0
<EXPENSES-NET> 11,993
<NET-INVESTMENT-INCOME> 129,906
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 9,069,430
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 129,906
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,080,547
<NUMBER-OF-SHARES-REDEEMED> 9,011,117
<SHARES-REINVESTED> 129,906
<NET-CHANGE-IN-ASSETS> 9,069,430
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,993
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,993
<AVERAGE-NET-ASSETS> 2,592,897
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .025
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.025)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> INTERSTATE INSTITUTIONAL FUND

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> MAY-13-1998
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</TABLE>