RESERVE INSTITUTIONAL TRUST, 485BPOS, 1998-03-04

RESERVE INSTITUTIONAL TRUST
485BPOS, 1998-03-04

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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. 32 [x]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

AMENDMENT NO. 28 [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) 977-9882

_______________________
Michelle Neufeld, 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)

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

____ on (date), 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:

William Goodwin, Esq.
Dechert, Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112

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

The Registrant hereby amends the Registration Statement under the
Securities Act of 1933 on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become
effective in accordance with the provisions of Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may determine.

===============================================================================
<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
RESERVE INSTITUTIONAL TRUST
(Nomura International Trust Co. Shares only)
CROSS REFERENCE SHEET PURSUANT TO RULE 495

3 Condensed Financial Information Not Applicable

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**

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 Statements
</TABLE>

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

<PAGE> 4

THE
RESERVE [Logo]
FUNDS GENERAL INFORMATION, PURCHASES AND REDEMPTIONS
24 HOUR YIELD AND BALANCE INFORMATION
NATIONWIDE 1-800-637-1700

PROSPECTUS

_______ , 1998

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 ("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.

The objective of the Interstate Tax-Exempt Institutional 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 INSTITUTIONAL 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 invests in obligations backed by the full
faith and credit of the United States Government or obligations
collateralized thereby.

- - U.S. TREASURY INSTITUTIONAL FUND invests exclusively in full-faith and
credit obligations of the United States Government that provide interest
income exempt from state and local income taxes.

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

Each Fund offers five classes of shares to investors, with each class
subject to differing service fees 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 dated _________, 1998, as from time to time amended, providing
further details about the Funds, has been filed with the Securities and
Exchange Commission. It may be obtained without charge by writing or calling
the Funds at (800) 637-1700. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus.

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 _________, 1998

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

<PAGE> 5
SHAREHOLDER EXPENSES

The following tables illustrate all expenses and fees that a shareholder of
each of the Funds will incur directly or indirectly.

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 $2.00 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>

TREASURER'S
CLASS A CLASS B TRUST CLASS C CLASS D
------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Management Fee*................................... .25% .25% .25% .25% .25%
12b-1 Fees......................................... [None] [None] [None] .25%** .50%**
Shareholder Services Fees........................ [None] .20% .25% .25% .25%
Other Operating Expenses++....................... 0% 0% 10% 0% 0%
Other Expenses..................................... 0% .20% .35% .25% .25%
Total Operating Expenses........................... .25% .45% .60% .75% 1.00%
</TABLE>

- ---------------
* 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 and certain
operating expenses unique to the Treasurer's Trust shares) during the year.
However, a Fund may be charged for certain non-recurring extraordinary
expenses. See "Investment Management Agreement" on page 7.

** Due to these distribution expenses, long-term shareholders may pay more
than the economic equivalent of the maximum front-end sales charge permitted
by the National Association of Securities Dealers, Inc.

++ "Other Operating Expenses" are based on an estimated amount for the current
fiscal year. The purpose of this table is to assist the investor in
understanding the costs and expenses that a shareholder in a 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>
10
1 YEAR 3 YEARS 5 YEARS YEARS
------ ------- ------- -------
<S> <C> <C> <C> <C>
Class A................................................ $ 2.56 $ 8.05 $ 14.07 $ 31.82
Class B................................................ $ 4.60 $ 14.44 $ 25.20 $ 56.69
Treasurer's Trust...................................... $ 6.13 $ 19.22 $ 33.48 $ 75.00
Class C................................................ $ 7.66 $ 23.97 $ 41.69 $ 93.03
Class D................................................ $10.20 $ 31.84 $ 55.25 $122.46
</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.

FINANCIAL HIGHLIGHTS

The following information applies to a share of the Reserve Institutional
Trust--Primary, U.S. Government, U.S. Treasury and Interstate Tax-Exempt
Institutional Funds outstanding throughout each period. As of November 30, 1997,
Primary Institutional Fund had only Class A, Class B and Class C shares
outstanding and U.S. Government Institutional Fund had only Class B shares
outstanding. As of that date, no other protfolios or classes of shares were
outstanding. The information below should be read in conjunction with the
Financial Statements and related notes appearing in the Statement of Additional
Information. Such information, for Primary Institutional Fund Class B, has been
audited by Coopers & Lybrand L.P. for the period January 21, 1997 through May
31, 1997 as indicated in their report appearing in the Statement of Additional
Information. Such information for Primary Institutional Fund Class B (except
the period January 21, 1997 through May 31, 1997) and for all other portfolios
and classes for all periods shown is unaudited.

PRIMARY INSTITUTIONAL FUND
(CLASS A SHARES ONLY)
(Unaudited)
<TABLE>
<CAPTION>
October 23, 1997(1)
through
November 30, 1997

<S> <C>
NET ASSET VALUE, BEGINNING OF PERIODS $1.00
Income from investment operations:
Net investment income $0.0057
Net realized and unrealized gains on securities -
TOTAL FROM INVESTMENT OPERATIONS $0.0057

LESS DISTRIBUTIONS:
Dividends from net investment income $(0.0057)
Distributions from capital gains -

TOTAL DISTRIBUTIONS $(0.0057)

NET ASSET VALUE, END OF PERIOD $1.00

Total return(2) 5.37%

SUPPLEMENTAL DATA AND RATIOS:
Net Assets, in thousands, end of period $17,558
Ratio of expenses to average net assets(2) 0.25%
Ratio of net investment income to average net assets(2) 5.36%
</TABLE>

- ------------------------------
(1) The Primary Institutional Fund Class A shares commenced operations on
October 23, 1997.
(2) Annualized for the period October 23, 1997 through November 30, 1997.

PRIMARY INSTITUTIONAL FUND
(CLASS B SHARES ONLY)

<TABLE>
<CAPTION> (Unaudited) (Audited)
June 1, 1997 January 21, 1997
through through
November 30, 1997 May 31, 1997(1)
--------------------- ----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $ 1.00

Income from investment operations:
Net investment income(2) $0.0260 $ 0.0179
Net realized and unrealized gains
on securities -- --
TOTAL FROM INVESTMENT OPERATIONS $0.0260 $ 0.0179

LESS DISTRIBUTIONS
Dividends from net investment income(2) $(0.0260) $(0.0179)
Distributions from capital gains -- --

TOTAL DISTRIBUTIONS $(0.0260) $(0.0179)

NET ASSET VALUE, END OF PERIOD 1.00 $ 1.00

Total return(3) 5.19% 4.95%

SUPPLEMENTAL DATA AND RATIOS:
Net Assets, in thousands, end of period $28,102 $2,008
Ratio of expenses to average net
assets(3) 0.45% 0.48%(4)
Ratio of net investment income to average net
assets(2) 5.12% 5.18%
</TABLE>
_______________

(1) The Primary Institutional Fund commenced operations on January 21, 1997.
The figures for the period January 21, 1997 through May 31, 1997 have been
audited.
(2) Based on compounding of daily dividends. Not indicative of future results.

(3) Annualized.

(4) During period, the Manager waived a portion of its comprehensive fee. If
there was no reduction the actual fee would have been .02% higher.
PRIMARY INSTITUTIONAL FUND
(CLASS C SHARES ONLY)
(Unaudited)
<TABLE>
<CAPTION>
October 15, 1997(1)
through
November 30, 1997

<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
Income from investment operations:
Net investment income $0.0065
Net realized and unrealized gains on securities --
TOTAL FROM INVESTMENT OPERATIONS $0.0065

LESS DISTRIBUTIONS:
Dividends from net investment income $(0.0065)
Distributions from capital gains --

TOTAL DISTRIBUTIONS $(0.0065)

NET ASSET VALUE, END OF PERIOD $1.00

Total return(2) 5.01%

SUPPLEMENTAL DATA AND RATIOS:
Net Assets, in thousands end of period $160,803
Ratio of expenses to average net assets(2) 0.60%
Ratio of net investment income to average net assets(2) 9.98%
</TABLE>
- ------------------------------

(1) The Primary Institutional Fund Class C shares commenced operations on
October 15, 1997.

(2) Annualized for the period October 15, 1997 through November 30, 1997.

U.S. GOVERNMENT INSTITUTIONAL FUND
(CLASS B SHARES ONLY)
(Unaudited)
<TABLE>
<CAPTION>

September 15, 1997
through
November 30, 1997(1)
------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00

Income from investment operations:
Net investment income $0.0106
Net realized and unrealized gains
on securities ---
TOTAL FROM INVESTMENT OPERATIONS $0.0106

LESS DISTRIBUTIONS:
Dividends from new investment income $(0.0106)
Distributions from capital gains ---

TOTAL DISTRIBUTIONS $(0.0106)

NET ASSET VALUE, END OF PERIOD $1.00

Total return(2) 5.01%

SUPPLEMENTAL DATA AND RATIOS:
Net Assets, in thousands, end of period $2,109
Ratio of expenses to average
net assets(2,3) 0.45%
Ratio of net investment income to average net
assets(2) 4.98%
</TABLE>
_______________

(1) The U.S. Government Institutional Fund commenced operations on September
13, 1997.
(2) Annualized for the period September 15, 1997 through November 30, 1997.
(3) Manager waived .15% of its expenses. If there was no waiver, the actual
expenses would have been .75%.

YIELD

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.

For the seven calendar days ended November 30, 1997, the current and
effective yields of each Class and Fund were as follows:

<TABLE>
<CAPTION>
Current Effective
------- ---------
<S> <C> <C>
Primary Fund Class A 5.40% 5.55%
B 5.20% 5.34%
C 5.05% 5.18%
Government Fund Class B 4.93% 5.05%
</TABLE>

2
<PAGE> 6
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.

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 Lipper Analytical
Services, Inc., publications such as Barrons, Business Week, Forbes, Fortune,
Institutional Investor, Kiplinger's Personal Finance, Money, Morningstar Mutual
Fund Values, The New York Times, The Wall Street Journal and USA Today or other
industry or financial publications or other relevant indices and industry
publications.

INVESTMENT OBJECTIVE AND POLICIES

The investment 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. The investment objective
of the Interstate Tax-Exempt Institutional 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("Act").

The Primary Institutional 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, 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 U.S. Government Institutional 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 U.S. Treasury Institutional Fund seeks to attain its objective by
investing only in securities of the United States government that provide
interest income exempt from state and local income taxes.

The Interstate Tax-Exempt Institutional Fund seeks to attain its objective
by investing principally in obligations issued by states, territories, and
possessions of the United States 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.

United States 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.

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 Institutional Fund residing in these states
will qualify for this exemption from state taxation. However, a state or local

3
<PAGE> 7
taxing authority may seek, in the future, to tax a shareholder on all or a
portion of the interest income of a security held by the U.S. Treasury
Institutional Fund.

The Interstate Tax-Exempt Institutional Fund invests in securities
generally known as "municipal bonds" or "municipal notes" 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 ("Municipal Obligations").
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 industrial
revenue bonds and notes. Municipal Obligations bear fixed, variable or floating
rates of interest. Under normal market conditions, at least 80% of the value of
the Fund's assets will be invested in Municipal Obligations, although the Fund
may take a defensive position and invest temporarily without limit in taxable
U.S. government securities and repurchase agreements pertaining to U.S.
government securities. In addition, except during temporary periods of
imbalance in supply and demand in the markets for certain Municipal
Obligations, no more than 25% of the Fund's assets will be invested in Municipal
Obligations whose issuers are located in the same state or in Municipal
Obligations the interest on which is paid from revenues of similar type
projects. See "Other Policies" below for a description of the characteristics
and risks of repurchase agreements.

The Interstate Tax-Exempt Institutional Fund may purchase 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. The Interstate Tax-Exempt Institutional Fund
may invest any portion of its assets in floating and variable rate demand notes
secured by bank letters of credit or other credit-support arrangements. 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 Institutional Fund will not invest more than 10% of the value of its
assets in floating or variable rate demand notes for which there is no
secondary market if the demand feature on such Municipal Obligations is
exercisable on more than seven days' notice.

In view of the investment of the Interstate Tax-Exempt Institutional Fund
in industrial revenue, development bonds and notes secured by letters of credit
or guarantees of banks, an investment in Interstate Tax-Exempt Institutional
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 under prevailing money-market
conditions. 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.

The Interstate Tax-Exempt Institutional 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.

The Primary Institutional 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 Investors Service, Inc. ("Moody's"), A-1
by Standard & Poor's Corporation ("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 to obligations of United States banks which may be
purchased by the Primary Institutional Fund. Instruments which are not rated may
also be purchased by the Primary Institutional Fund 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 Institutional Fund may invest.

The Primary Institutional Fund may invest in obligations of U.S. banks,
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 Institutional Fund
will limit its investment in foreign branches of foreign banks to those banks
located in Australia, Canada, Western Europe and Japan. The Primary

4
<PAGE> 8
Institutional Fund may also invest in municipal obligations secured by bank
letters of credit, the interest on which is not exempt from federal income
taxation.

OTHER POLICIES.
PRIMARY, U.S. GOVERNMENT AND U.S. TREASURY INSTITUTIONAL FUNDS. The
Primary, U.S. Government and U.S. Treasury Institutional Funds may invest up to
100% of their assets 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 declines,
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 Institutional 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, U.S. Government and U.S. Treasury Institutional 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 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
Institutional Fund may invest 25% or more of its total assets in the banking
industry. 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 purchase 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 utilizes the following practices:
limiting 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 INSTITUTIONAL 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

5
<PAGE> 9
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
for investment reasons. 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. 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 net asset
value 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.

The Internal Revenue Code of 1986, as amended, subjects interest received
on certain otherwise tax-exempt securities ("private activity bonds") to a
federal alternative minimum tax. It is the position of the Securities and
Exchange Commission 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 alternative minimum tax 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 investors in such securities, including shareholders of
the Fund, to an increased alternative minimum tax. 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 United States 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.

The Fund's investment adviser uses its reasonable business judgment in
selecting investments in addition to considering the ratings of Moody's and S&P.
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 by investing in
instruments with remaining maturities of 397 days or less and limiting its
average maturity to 90 days or less.

The principal risk factors associated with investment in the Fund are the
risk of fluctuations in short-term interest rates, the risk of default among one
or more issuers of securities which comprise the Fund's assets and the risk of
non-diversification. As a non-diversified investment company, the Fund is
permitted to have all its assets invested in a limited number of issuers.
Accordingly, since a relatively high percentage of the Fund's 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 a "regulated investment
company" 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.

6
<PAGE> 10
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 billion. Under the
Investment Management Agreement, the Adviser manages each Fund's investments,
including effecting purchases and sales thereof, 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.

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.

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
the 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. Like other investment companies, financial and business organizations
and individuals around the world, the Trust could be adversely affected if the
computer systems used by the Adviser, the Distributor or other service providers
to the Trust do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." The computer system used for the Trust's shareholder accounting
function is already Year 2000 compliant. In addition, the Adviser and the
Distributor are taking steps that they believe are reasonably designed to
address the Year 2000 Problem with respect to computer systems that they use and
the Adviser is taking steps to obtain reasonable assurances that comparable
steps are being taken by the Trust's other service providers. At this time,
however, there can be no assurance that these steps will be sufficient to avoid
any adverse impact to the Trust.

The Year 2000 Problem is expected to impact corporations, which may include
issuers of portfolio securities held by the Trust, to varying degrees based
upon various factors, including, but not limited to, the corporation's industry
sector and degree of technological sophistication. The Trust is unable to
predict what impact, if any, the Year 2000 Problem will have on issuers of the
portfolio securities held by 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
ANNUAL MAXIMUM MAXIMUM
SHAREHOLDER ANNUAL TOTAL ANNUAL MINIMUM
SERVICES FEE* 12B-1 FEE* OPERATING EXPENSES+ INITIAL INVESTMENT
------------- ---------- ------------------- ------------------
<S> <C> <C> <C> <C>
Class A....................................... 0% 0% .25% $10 million
Class B....................................... .25% 0% .50% $ 5 million
Treasurer's Trust............................. .25% 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 daily net assets (exclusive 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 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 and the Federal Reserve Bank of New York are open ("Fund 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 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
the 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. The Fund
does not determine net asset value, and purchase orders are not accepted, on the
days those institutions observe the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and Christmas.

To purchase shares of a Fund by Federal Reserve wire, call the Fund at
1-800-637-1700 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 Fund reserves the right to
refuse any investment that, in its sole discretion, would disrupt the Fund's
management.

If the Public Securities Association recommends that the government
securities markets close early, the Fund may advance the time at which it 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 the Fund
receives notification of a redemption request after the advanced time, it
ordinarily will wire redemption proceeds on the next Fund Business Day.

<PAGE> 11
If an investor does not remit Federal Funds, such payment must be converted
into Federal Funds. This usually occurs within one Fund Business Day of receipt
of a bank wire. Prior to receipt of Federal Funds, the investor's monies will
not be invested.

The following procedure will help assure prompt receipt of your Federal
Funds wire:

A. Telephone the Fund, toll free at 1-800-637-1700 and provide the
following information:

Your name
Address
Telephone number
Taxpayer ID number
The amount being wired
The identity of the bank wiring funds.

You will then be provided with a Fund account number. (Investors with
existing accounts must also notify the Fund before wiring funds.)

B. Instruct your bank to wire the specified amount to the Fund as follows:

An investor may open an account when placing an initial order by telephone,
provided the investor thereafter submits an Account Registration Form by mail.
An Account Registration Form is included with this Prospectus.

The Fund reserves the right to reject any purchase order for any reason.

SHARE CERTIFICATES. The 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 shares, $5 million for Class B shares, $1 million for
Class C shares, 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 of shares. The Fund
reserves the right to waive the minimum investment requirement.

NET ASSET VALUE. Shares are sold to the public at net asset value ("NAV"). The
NAV of each Fund 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 days the New York Stock
Exchange is closed for trading and bank holidays in New York State which include
Martin Luther King's Birthday and Columbus Day. 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 AND SERVICE PLAN. Purchases may also be made through
brokers, financial intermediaries, and financial institutions. 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 .25% and .50%, respectively, of the average daily net asset value of
broker, financial institution, and financial intermediary shareholder accounts
("qualified accounts"). Substantially all such monies are paid to brokers,
financial institutions and financial intermediaries for distribution assistance
provided to the Fund. The investment adviser, at its discretion, may pay from
its own resources or from other sources available to it, additional amounts and
incentives, including lump-sum payments, based upon the amount of assets
committed to the Fund by such brokers, financial institutions, financial
intermediaries 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 sources available to it for a portion of their
costs of advertising and marketing shares of a Fund. All such arrangements are
designed to facilitate the sale of a Fund's shares. Class A, Class B and
Treasurer's Trust shares do not currently participate in a 12b-1 distribution
plan.

Under the Service Plan, each Fund may pay brokers or other financial
intermediaries 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
Class D shares owned by investors for which such broker or financial
intermediary 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.
8
<PAGE> 12

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. Certain firms which
utilize a centralized purchase method for Fund 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 such as redemption fees to
their clients for their services, which charges would reduce their clients'
yield or return. Firms may also hold Fund 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. Certain 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, transfers of registration and dividend payee changes; and
may perform functions such as generation of confirmation 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 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 nonassessable 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, redemption and in the net assets of their series on liquidation. The
Trustees do not intend to hold annual meetings of shareholders. The Trustees
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 changing 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 to them.

PRIMARY INSTITUTIONAL FUND, U.S. GOVERNMENT INSTITUTIONAL FUND, U.S. TREASURY
INSTITUTIONAL FUND. 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.

9
<PAGE> 13
The U.S. Treasury Institutional 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 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 Institutional 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 the
interest income of an obligation held by the U.S. Treasury Institutional Fund.
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 INSTITUTIONAL 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.

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.

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 net asset value per share.

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 credit 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 Reserve Institutional Trust
will report to its shareholders before the end of February of each year as to
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
Statement of Additional Information.

REDEMPTIONS

TIME AND METHOD OF REDEMPTION. Shares of each Fund are redeemed at their net
asset value next determined after receipt by the Fund of a request in proper
form. Although the Funds have seven 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 Institutional Fund and Interstate Tax-Exempt Institutional Fund)
and the next day for requests received after 12:00 noon (New York time) (11:00
AM New York time for the U.S. Treasury Institutional Fund and Interstate
Tax-Exempt Institutional Fund). This is not always possible, however, and
transmission of redemption proceeds may be delayed. Unless otherwise specified,
orders received after 12:00 noon (New York time) (11:00 AM New York time for the
U.S. Treasury Institutional Fund and Interstate Tax-Exempt Institutional Fund)
are not entered until the next business day to enable shareholders to receive
additional dividends. Payment will normally be made by check or bank transfer.
Shares do not earn dividends on the day a redemption is effected regardless of
whether the redemption order is received before or after 12:00 noon (11:00 AM
for the U.S. Treasury Institutional Fund and Interstate Tax-Exempt Institutional
Fund).

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 issued by the Funds of 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. 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 by any person are accepted for payment to such
account by calling 1-800-637-1700. 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, in writing, 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: (1) the redemption is for $5,000 or less; (2) the
redemption check is payable to the shareholder(s) of record; and (3) the
redemption check is 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.

10
<PAGE> 14
The Funds reserve the right to refuse a telephone redemption if it
believes it is advisable to do so. Procedures for telephone redemptions may be
modified or terminated by the 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.

REDEMPTION BY CHECK. (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 certain firms. There is no minimum amount for check redemptions,
however, the 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 Funds. 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. (Class D shareholders only) 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 orders are effective for one year. A fee Is charged for
this service.

AUTOMATIC WITHDRAWAL PLANS. (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 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 certain firms or may be available subject to conditions or
limitations.

RESERVE AUTOMATIC TRANSFER. (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 for Class D
shareholders only. 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 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 certain firms or may be available
subject to conditions or limitations.

RESTRICTIONS. The right of redemption may be suspended or the date of payment
postponed for more than seven days only (a) when the New York Stock Exchange is
closed (other than for customary closings), (b) when, as determined by the
Securities and Exchange Commission ("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, 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. The
Fund may delay payment until the checks for the purchase of shares have cleared
or for up to ten (10) business days, whichever occurs first. Shareholder checks
written against Funds which are not yet considered collected will be returned
and a fee charged against the account (for Class D shareholders only). When a
purchase is made by wire and subsequently redeemed, the proceeds from such
redemptions normally will not be transmitted until two business days after the
purchase by wire.

11
<PAGE> 15

GENERAL INFORMATION
JOINT OWNERSHIP. (Class D shareholders only) When an account is registered in
the name of one person and another, for example a husband and 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 joint owner
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.

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 may levy a monthly charge (currently $5
for Class D and $100 for Class A, Class B and Class C). A firm may establish
variations of minimum balances and fee amounts if such variations are approved
by the Funds.

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 which a correct and certified TIN is not provided or otherwise subject
to backup withholding unless the accountholder is a non-resident alien.

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
certain firms will receive a statement combining transactions in Fund shares
with statements covering other brokerage or mutual fund accounts.

RESERVE EASY ACCESS. Easy Access is The Reserve Institutional Trust's 24
hour toll-free, telephone service that lets customers use a touch-tone phone to
obtain yields and account balances. To use it, call 1-800-637-1700 and follow
the instructions you will receive.

INQUIRIES. Shareholders should direct their inquiries to the firm from
which they received this Prospectus or 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 on or copies of Fund redemption checks 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 Donoghue'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 funds
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.

RESERVE CASH PERFORMANCE ACCOUNT AND ACCOUNT PLUS

The Fund offers a comprehensive package of services which enhance access to
an investment in the portfolios (Class D shareholders only). The Reserve Cash
Performance Account and Account Plus ("CPA") services include: (i) any amount
checking; and

12
<PAGE> 16
(ii) a comprehensive monthly statement which summarizes your CPA activity by
payee and expense category and simplifies budget and tax recordkeeping. These
CPA services are provided for a fee and transaction charges may apply.
Participating firms may also charge their own service fees.

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

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.

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

<PAGE> 17

TABLE OF CONTENTS

Page

Shareholder Expenses ................................. 2
Financial Highlights.................................. 2
Yield ................................................ 2
Investment Objective and Policies .................... 3
Management ........................................... 6
How to Buy Shares .................................... 7
Shares of Beneficial Interest ........................ 9
Daily Dividends ...................................... 9
Taxes ................................................ 9
Redemptions .......................................... 10
General Information .................................. 12
Reserve Cash Performance Account and Account Plus ... 12

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

Founders of "America's First Money Fund"

GENERAL INFORMATION AND 24 HOUR YIELD AND BALANCE INFORMATION
800-637-1700

Distributor - Resrv Partners, Inc.

LOGO Founders of "America's First Money Fund"
______________________________________________________

PRIMARY INSTITUTIONAL FUND
U.S. GOVERNMENT INSTITUTIONAL FUND
U.S. TREASURY INSTITUTIONAL FUND
INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND

<PAGE> 18

THE
RESERVE [Logo]
FUNDS GENERAL INFORMATION, PURCHASES AND REDEMPTIONS
24 HOUR YIELD AND BALANCE INFORMATION
NATIONWIDE 1-800-637-1700

PROSPECTUS

_______ , 1998

Two portfolios of The Reserve Institutional Trust, a no-load money market
fund, are offered by this Prospectus: PRIMARY INSTITUTIONAL FUND and U.S.
GOVERNMENT INSTITUTIONAL FUND ("Funds"). The Reserve Institutional Trust is
designed for institutional investors as a convenient investment vehicle for
short-term funds.

The objective of each 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.

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

Each Fund offers Nomura International Trust Co. ("NITC") shares to
investors, subject to a service fee and a distribution fee.

Both the Primary Institutional Fund and the U.S. Government Institutional
Fund offer other classes of share to investors and each class is subject to
differing service fees and distribution fees. In all other respects, all classes
of shares represent the same interest in the income and assets of each
respective Fund. Additional information on these other classes of Shares can be
obtained by contacting the Funds.

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.

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

Prospectus dated _________, 1998

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

<PAGE> 19
SHAREHOLDER EXPENSES

The following tables illustrate all expenses and fees that a shareholder of
each of the Funds will incur directly or indirectly.

SHAREHOLDER TRANSACTION EXPENSES FOR ALL FUNDS

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

NITC
-------
<S> <C>
Management Fee*.................................... .25%
12b-1 Fees......................................... .50%**
Shareholder Services Fees........................ .25%
Other Operating Expenses++....................... 0%
Other Expenses..................................... .25%
Total Operating Expenses........................... 1.00%
</TABLE>

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

* 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 7.

ALL FUNDS

<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS YEARS
------ ------- ------- -------
<S> <C> <C> <C> <C>
NITC................................................... $ 10.20 $ 31.84 $ 55.25 $122.46
</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.

YIELD

2
<PAGE> 20
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 Lipper Analytical
Services, Inc., publications such as Barrons, Business Week, Forbes, Fortune,
Institutional Investor, Kiplinger's Personal Finance, Money, Morningstar Mutual
Fund Values, The New York Times, The Wall Street Journal and USA Today or other
industry or financial publications or other relevant indices and industry
publications.

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.
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("Act").

3
<PAGE> 21
The Primary Institutional 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 Investors Service, Inc. ("Moody's"), A-1
by Standard & Poor's Corporation ("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 to obligations of United States banks which may be
purchased by the Primary Institutional Fund. Instruments which are not rated may
also be purchased by the Primary Institutional Fund 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 Institutional Fund may invest.

4
<PAGE> 22
Institutional Fund may also invest in municipal obligations secured by bank
letters of credit, the interest on which is not exempt from federal income
taxation.

OTHER POLICIES.
PRIMARY AND U.S. GOVERNMENT FUNDS. The Primary and U.S. Government
Insitutional Funds may invest up to 100% of their assets 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 declines, 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. 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 Institutional 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 collateral will be required to be maintained at all times in an amount
equal to at least 100% of the current value of the loaned securities plus
accrued interest. 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 in the collateral in
the event of insolvency of the borrower of the securities. The Statement of
Additional Information further explains the Funds' securities-lending policies.
The Primary and U.S. Government Institutional 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 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 Institutional Fund
may invest 25% or more of its total assets in the banking industry. 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 purchase 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.

5
<PAGE> 23
MANAGEMENT

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 and fees under the Distribution Plan and
the Service Plan (discussed below).

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

YEAR 2000. Like other investment companies, financial and business organizations
and individuals around the world, the Trust could be adversely affected if the
computer systems used by the Adviser, the Distributor or other service providers
to the Trust do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." The computer system used for the Trust's shareholder accounting
function is already Year 2000 compliant. In addition, the Adviser and the
Distributor are taking steps that they believe are reasonably designed to
address the Year 2000 Problem with respect to computer systems that they use and
the Adviser is taking steps to obtain reasonable assurances that comparable
steps are being taken by the Trust's other service providers. At this time,
however, 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 Reserve Institutional Trust
acts as its own transfer agent and dividend-paying agent.

HOW TO BUY SHARES
Each Fund offers NITC shares to investors, subject to a service fee and a
distribution fee, as follows:

<TABLE>
<CAPTION>
NITC Shares
------------
<S> <C>
Maximum Annual Shareholder Services Fee* .... .25%
Maximum Annual 12b-1 Fee* ................... .50%
Maximum Total Annual Operating Expenses+ .... 1.00%
Minimum Initial Investment .................. None
</TABLE>
- ---------------

* As a percentage of average daily net assets.

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

Shares of a Fund may be purchased by wire only. Shares are sold at the net
asset value 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 and the Federal Reserve Bank of New York are open ("Fund 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 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
the 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. The Fund
does not determine net asset value, and purchase orders are not accepted, on the
days those institutions observe the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and Christmas.

<PAGE> 24
If an investor does not remit Federal Funds, such payment must be converted
into Federal Funds. This usually occurs within one Fund Business Day of receipt
of a bank wire. Prior to receipt of Federal Funds, the investor's monies will
not be invested.