RESERVE INSTITUTIONAL TRUST, 485APOS, 1999-05-25

RESERVE INSTITUTIONAL TRUST
485APOS, 1999-05-25

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<PAGE> 1
Registration Statement Nos. 2-70831
811-3141

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]

Pre-Effective Amendment No. [ ]
....

Post-Effective Amendment No. 34 [ ]
....
and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

Amendment No. 30 [ ]

(Check appropriate box or boxes.)

...........................................................................

(Exact Name of Registrant as Specified in Charter)

RESERVE INSTITUTIONAL TRUST
...........................................................................

(Address of Principal Executive Offices) 1250 BROADWAY, NEW YORK, NY 10001-3701
(Zip Code)

Registrant's Telephone Number, including Area Code (212) 401-5500
..........................

................................................................................

(Name and Address of Agent for Service)

MaryKathleen Foynes, Esq.
The Reserve Funds
1250 Broadway
New York, NY 10001-3701

Approximate date of Proposed Public Offering ................................

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

[ ] immediately upon filing pursuant to paragraph (b)

[ ] on (date) pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[X] on July 31, 1999 pursuant to paragraph (a)(1)

[ ] 75 days after filing pursuant to paragraph (a)(2)

[ ] on (date) pursuant to paragraph (a)(2) of rule 485.

If approriate, check the following box:

[ ] this post-effective amendment designates a new effective data for a
previously filed post-effective amendment.

The Commission is requested to send copies of all communications to:
MaryKathleen Foynes, Esq.
The Reserve Funds
1250 Broadway
New York, NY 10001-3701

<PAGE> 2

[THE RESERVE FUNDS LOGO] General Information, Purchases and Redemptions
24-Hour Yield and Balance Information

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

RESERVE INSTITUTIONAL TRUST
PROSPECTUS
JULY 31, 1999

The RESERVE INSTITUTIONAL TRUST (the "Trust")," is a registered investment
company, which offers four no-load money-market funds:

- PRIMARY INSTITUTIONAL FUND,
- U.S. GOVERNMENT INSTITUTIONAL FUND,
- U.S. TREASURY INSTITUTIONAL FUND, and
- INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND (collectively "the Funds").

The Reserve Institutional Trust is designed for institutional investors
as a convenient vehicle for short-term funds.

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

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

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

<PAGE> 3

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective & Strategy... 2
Performance History............... 5
Expenses.......................... 6
Management........................ 8
How to Buy Shares................. 8
Selling Fund Shares............... 10
Tax Consequences.................. 11
General Information............... 12
Financial Highlights.............. 13
</TABLE>

INVESTMENT OBJECTIVE & STRATEGY

The investment objective of the Primary, U.S. Government and U.S. Treasury
Institutional Funds is to seek as high a level of current income as is
consistent with preservation of capital and liquidity. The investment objective
of the Interstate Tax-Exempt Institutional Fund is to seek to have its interest
income exempt from federal income taxes, as is consistent with preservation of
capital and liquidity. However, achievement of the objectives cannot be assured.
The investment objectives may not be changed without the vote of a majority of
the outstanding shares of the Fund as defined in the Investment Company Act of
1940 ("1940 Act"). The Funds seek to maintain a stable $1.00 share price.

The Funds are designed for institutional investors as a convenient
investment vehicle for short-term funds. The Funds seek to employ idle cash at
yields competitive with yields of other comparable short-term investments, and
are designed to reduce or eliminate for the investor the mechanical problems of
direct investment in money-market instruments such as scheduling maturities,
evaluating the credit of issuers, investing in round lots, safeguarding receipt
and delivery of securities and reinvesting.

The portfolio managers monitor a range of economic and financial factors.
Based on their analysis, the Funds are invested in a mix of U.S. dollar
denominated money-market securities, that are intended to provide as high a
yield as possible without violating the Fund's credit quality policies or
jeopardizing the stability of its share price.

Money-market funds are subject to federal regulations designed to help
maintain liquidity. The regulations set strict standards for credit quality,
diversification and maturity (397 days or less for individual securities, 90
days or less for the average portfolio life).

All the Funds are allowed to invest all, or substantially all, of their
investable assets in other open-end management companies having the same
investment objective and substantially similar policies and restrictions.

PRIMARY INSTITUTIONAL FUND. The Primary Institutional Fund seeks to attain its
objective by investing in instruments issued by the U.S. government, its
agencies and instrumentalities ("U.S. government securities"), deposit-type
obligations, such as negotiable certificates of deposit and time deposits,
bankers' acceptances and letters of credit of domestic and foreign banks,
savings and loan associations and savings banks, high-quality domestic and
foreign commercial paper as determined by nationally recognized statistical
rating organizations non-rated instruments of comparable quality as determined
by the Board of Trustees, other short-term instruments of similar quality, and
instruments fully collateralized by such obligations.

The Primary Institutional Fund may invest in obligations of U.S. banking
institutions that are insured by the Federal Deposit Insurance Corporation and
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 if rated by another rating agency. The Primary Fund
may also invest in obligations of foreign branches of both U.S. banks and
foreign banks (Eurodollars). Investment in foreign banks will be limited to
those located in Australia, Canada, Western Europe and Japan and which, at the
time of investment, have more than $25 billion (or the equivalent in other
currencies) in total assets and which, in the opinion of the Fund's Adviser, are
of comparable quality to the U.S. banks which may be purchased by the Fund. The
Primary Institutional Fund may also invest in municipal obligations, the
interest on which is not exempt from federal income taxation.

U.S. GOVERNMENT INSTITUTIONAL FUND. The U.S. Government Institutional Fund seeks
to attain its objective by investing in instruments issued or collateralized by
full faith and credit obligations of the U.S. government, its agencies and
instrumentalities.

2
<PAGE> 4

U.S. TREASURY INSTITUTIONAL FUND. The U.S. Treasury Institutional Fund seeks to
attain its objective by investing in full faith and credit obligations of the
U.S government, its agencies and instrumentalities that provide interest income
exempt in most states from state and local personal income taxes.

INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND. The Interstate Tax-Exempt
Institutional Fund's investment objective is to seek as high a level of
short-term interest income exempt from federal income taxes as is consistent
with preservation of capital and liquidity. The Fund invests principally in
short-term obligations issued by the states, territories and possessions of the
United States and their political subdivisions, duly constituted authorities and
corporations.

The Interstate Tax-Exempt Institutional Fund's principal investment
strategies include investing primarily in municipal money-market securities. The
Fund invests principally in high-quality, tax-exempt obligations issued by
states, counties, municipalities, authorities or other political subdivisions.
These securities are generally referred to as "municipal obligations. The Fund
intends to invest at least 80% of the value of the Fund's net assets in
municipal obligations which are exempt from federal income tax, unless it has
adopted a temporary defensive position.

The interest on securities generally known as municipal obligations is
exempt from federal income tax in the opinion of either bond counsel for the
issuers or, in some instances, the issuer itself. These securities may be issued
to raise money for various public purposes such as constructing public
facilities, while others are issued to obtain funding for privately operated
facilities. General obligation bonds and notes are backed by the taxing power of
the issuer. Revenue bonds and notes are backed by the revenues of a project or
facility such as tolls from a toll road or, in some cases, from the proceeds of
a special excise tax, but not by the general taxing power. Industrial
development revenue bonds and notes are a specific type of revenue bond or note
backed by the credit of a private issuer. Municipal obligations bear fixed,
variable or floating rates of interest.

The Interstate Tax-Exempt Institutional Fund may purchase floating and
variable rate demand bonds, which are municipal obligations normally having
stated maturities in excess of one year, but which permit the holder to demand
payment of principal and accrued interest at any time, or at specified intervals
not exceeding one year, usually upon not more than seven (7) days' notice. The
Fund will not invest more than 10% of the value of its assets in floating or
variable rate demand bonds for which there is no secondary market if the demand
feature on such municipal obligations requires more than seven (7) days' notice.

The Fund will purchase tax-exempt securities which are rated MIG1 or MIG2
by Moody's Investor Services, Inc. ("Moody's"), SP-1 or SP-2 by Standard &
Poor's Corporation ("S&P") or the equivalent. Municipal obligations which are
not rated may also be purchased provided Reserve Management Company Inc.
("RMCI"), the Adviser determines them to be of comparable quality pursuant to
guidelines established by the Board of Trustees ("Trustees").

OTHER INVESTMENT POLICIES OF THE PRIMARY, U.S. GOVERNMENT AND U.S. TREASURY
INSTITUTIONAL FUNDS. The Funds may invest in repurchase agreements ("repos") but
will limit them to those banks and securities dealers who are deemed
creditworthy pursuant to the guidelines adopted by the Trust's Board of Trustees
("Trustees"). The U.S. Government and U.S. Treasury Funds will further limit
their investment in repos to those whose underlying obligations are backed by
the full faith and credit of the United States, and, in the case of the U.S.
Treasury Fund, repos will not exceed 5% of its total assets except for temporary
or emergency purposes. Securities subject to repos will be placed in a
segregated account and will be monitored to ensure that the market value of the
securities plus any accrued interest will at least equal the repurchase price.

The Primary and U.S. Government Funds may from time to time lend
securities on a short-term basis to banks, brokers and dealers (but not
individuals) and receive as collateral cash or securities issued by the U.S.
government or its agencies or instrumentalities. The collateral will be required
to be maintained at all times in an amount equal to at least 100% of the current
value of the loaned securities plus accrued interest. The Statement of
Additional Information ("SAI") further explains the Funds' securities lending
policies.

A Fund will not invest more than 10% of its net assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven (7) days after notice and will not concentrate more than 25% of its
total assets in the securities of issuers in a single industry, except that the
Primary Fund may invest more than 25% of its assets in banking. In addition, a
Fund will not invest more than 5% of its assets in the securities of any single
issuer (except U.S. government securities or repos collateralized by U.S.
government securities). Each Fund has the authority to borrow money (including
reverse repos involving sales by a Fund of portfolio securities concurrently
with an agreement by the Fund to repurchase the same securities at a later date
at a fixed price) for extraordinary or emergency purposes but not in an amount
exceeding 5% of its total assets.

3
<PAGE> 5

OTHER INVESTMENT POLICIES OF THE INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND.
Municipal obligations are sometimes offered on a "when-issued" or
delayed-delivery basis. There is no limit on the Fund's ability to purchase
municipal obligations on a when-issued or delayed-delivery basis. The price of
these securities is fixed at the time the commitment to purchase is made but
delivery and payment takes place at a later date, normally within one month, and
no interest accrues in the interim. Commitments to purchase when-issued
securities will be reflected in determining the Fund's net asset value ("NAV")
and readily marketable assets of at least equal value will be maintained. RMCI
does not believe that the Fund's NAV or income will be adversely affected by
purchases on a when-issued or delayed-delivery basis.

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

Interest received on certain otherwise tax-exempt securities ("private
activity bonds") is subject to a federal Alternative Minimum Tax ("AMT"). It is
the position of the SEC that in order for a fund to call itself "tax-free", not
more than 20% of its net assets may be invested in municipal securities subject
to the AMT or at least 80% of its income will be tax-exempt. Income received on
such securities is classified as a "tax preference item," which could subject
certain shareholders of the Fund to the AMT. However, as of the date of this
Prospectus, the Fund has not and does not purchase such securities, but reserves
the right to do so depending on market conditions in the future.

Although it is not the current intention, from time to time the Fund may
invest in taxable short-term investments ("taxable investments") consisting of
obligations backed by the full faith and credit of the U.S. government, its
agencies and its instrumentalities ("U.S. government securities"), deposit-type
obligations, acceptances, letters of credit of Federal Deposit Insurance
Corporation member banks and instruments fully collateralized by such
obligations, including repurchase agreements. 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.

RMCI uses its reasonable business judgment in selecting investments in
addition to considering the ratings of Moody's, S&P and other rating services
when available.

For more information on the investment objective and strategy of all the
Funds, please read the Statement of Additional Information ("SAI").

RISKS OF INVESTING IN THE FUNDS. The Funds are money-market funds which are a
specific type of fund that seeks to maintain a $1.00 price per share. An
investment in a Fund is not insured or guaranteed by the U.S. government,
Federal Deposit Insurance Corporation or any other government agency. Although
each Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in a Fund. Additionally, each Fund's
yield will vary as the short-term securities in its portfolio mature and the
proceeds are reinvested in securities with different interest rates.

While each Fund has maintained a constant share price since inception, and
will strive to do so, the following factors could reduce the Fund's income level
and/or share price:

- as to all Funds, interest rates could rise sharply, causing
the value of the Funds' securities, and share price, to drop.

- as to all Funds, repos could involve risks in the event of a
default of the repo counterparty, including possible delays,
losses or restrictions upon a Fund's ability to dispose of the
underlying securities.

- as to the Primary Institutional Fund, the risks generally
associated with investing in the banking industry, such as
interest rate risk, credit risk and regulatory developments
relating to the banking industry.

- as to the Primary Institutional Fund, Euro and Yankee dollar
investments involve certain risks that are different from
investments in domestic obligations of U.S. banks. These risks
may include unfavorable political and economic developments,
possible withholding taxes, seizure of foreign deposits,
currency controls or other governmental restrictions which
might affect payment of principal or interest. In addition,
foreign banks are not regulated by U.S. banking authorities
and are generally not bound by financial reporting standards
comparable to U.S. banks.

- as to the Primary Institutional Fund, investments in municipal
obligations are subject to market volatility and affected by
adverse economic or political changes and the financial
condition of the issuers.

4
<PAGE> 6

- as to the Interstate Tax-Exempt Institutional Fund, the
municipal market is volatile and there are risks associated
with concentrating investments in an industry which can be
significantly affected by adverse economic or political
changes and the financial condition of the issuers of
municipal securities.

- as to the Interstate Tax-Exempt Institutional Fund, the value
of municipal securities may be affected by uncertainties and
changes in municipal market-related legislation or litigation.

- as to the Interstate Tax-Exempt Institutional Fund, as to
investments in industrial revenue development bonds and notes
secured by letters of credit or guarantees of banks, the risks
generally associated with concentrating investments in the
banking industry, such as interest rate risk, credit risk and
regulatory developments relating to the banking industry.

- as to the Interstate Tax-Exempt Institutional Fund, adverse
political, regulatory, market or economic developments in
foreign countries can affect entities located in those
countries.

- as to the Interstate Tax-Exempt Institutional Fund, a decline
in the credit quality of an issuer or the provider of credit
support or a maturity-shortening structure for a security can
cause the price of a money-market security to decrease.

Year 2000. Many computer software systems in use today cannot distinguish year
2000 from the year 1900. Most of the services provided to the Trust depend on
the smooth functioning of computer systems. The Trust could be adversely
affected if the computer systems and service providers that interface with it
are unable to process data from January 1, 2000 and after; however, steps are
being taken to reasonably address this issue and to obtain assurance that
comparable efforts are being made by service providers. There can be no
assurance that these steps will be sufficient to avoid any adverse impact to the
Trust. In addition, because the Year 2000 issue affects virtually all
organizations, the extent of its impact cannot be predicted.

OTHER RISKS. These risks are discussed in more detail in the SAI. Most of the
Funds' performance depends on interest rates. When interest rates fall, the
Funds' yields will typically fall as well.

The Reserve Funds' emphasis on the high credit quality of its investments
may mean that its yields are lower than those available from certain other
money-market funds, either on a before- or after-tax basis. Because of the low
level of risk, over time, a money-market fund may produce lower returns than
bond or stock investments which entail higher levels of risk.

PERFORMANCE HISTORY

The bar charts below show the Funds' annual returns for the past ten
years, together with the best and worst quarters. The tables assume reinvestment
of dividends and distributions, if any. The accompanying "Average Annual Total
Return as of December 31, 1998" table gives some indication of risk of an
investment in the Funds by comparing each Fund's performance to that of the
[INSERT APPROPRIATE BROAD-BASED MARKET INDEX NAME] index, a widely recognized
index of [INSERT BRIEF DESCRIPTION OF THE INDEX]. As with all mutual funds, the
past is not a prediction of the future.

PRIMARY INSTITUTIONAL FUND - CLASS B
1997(1) 5.02%
1998 5.33%
BEST QUARTER 4th Q 1997 up 1.36%
WORST QUARTER 4th Q 1998 up 0.125%

U.S. GOVERNMENT INSTITUTIONAL FUND - CLASS B
1997(2) 1.51%
1998 5.14%
BEST QUARTER 3rd Q 1998 up 1.31%
WORST QUARTER 4th Q 1998 up 1.18%

U.S. TREASURY INSTITUTIONAL FUND - TREASURER'S TRUST
1998(3) 0.70%

INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND - TREASURER'S TRUST
1998(4) 1.96%

- --------------------------------------
(1) For the period January 21, 1997 (Commencement of Operations) to December 31,
1997.

(2) For the period September 15, 1997 (Commencement of Operations) to December
31, 1997.

(3) For the period October 1, 1998 (Commencement of Operations) to December 31,
1998.

(4) For the period May 13, 1998 (Commencement of Operations) to December 31,
1998.

5
<PAGE> 7

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
1 SINCE
YEAR INCEPTION
---- ---------
<S> <C> <C>
Primary Institutional Fund - Class A 5.56% 5.57%
Primary Institutional Fund - Class B 5.33% 5.32%
Primary Institutional Fund - Treasurer's Trust % %
---- ----
[INSERT APPROPRIATE BROAD-BASED MARKET INDEX NAME % %
- ------------------------------------------------- ---- ----
U.S. Government Institutional Fund - Class A 0.38% 4.72%
U.S. Government Institutional Fund - Class B 5.14% 5.15%

U.S. Government Institutional Fund - Treasurer's Trust 3.17% 4.84%
[INSERT APPROPRIATE BROAD-BASED MARKET INDEX NAME] % %
- -------------------------------------------------- ---- ----
U.S. Treasury Institutional Fund - Treasurer's Trust % %
---- ----
[INSERT APPROPRIATE BROAD-BASED MARKET INDEX NAME % %
- ------------------------------------------------- ---- ----
Interstate Tax-Exempt Institutional Fund - Class A 0.53% 3.11%
Interstate Tax-Exempt Institutional Fund - Class B 1.01% 2.48%
Interstate Tax-Exempt Institutional Fund - Treasurer's Trust 1.96% 3.10%

[INSERT APPROPRIATE BROAD-BASED MARKET INDEX NAME] % %
- -------------------------------------------------- ---- ----
</TABLE>

THE 7-DAY YIELD AS OF DECEMBER 31, 1998:

<TABLE>
<CAPTION>
CURRENT EFFECTIVE
------- ---------
<S> <C> <C>
Primary Institutional Fund
Class A 4.82% 4.94%
Class B 4.62% 4.73%
Treasurer's Trust 4.47% 4.51%
U.S. Government Institutional Fund
Class A 4.57% 4.68%
Class B 4.37% 4.47%
Treasurer's Trust 4.22% 4.31%
U.S. Treasury Institutional Fund
Treasurer's Trust 3.88% 3.95%
Interstate Tax-Exempt Institutional Fund
Class A 3.94% 4.02%
Class B % %
---- ----
Treasurer's Trust 3.59% 3.95%
</TABLE>

For the Funds' current yield, call toll-free (800) 637-1700 or visit our web
site at www.reservefunds.com.

EXPENSES

As an investor, you pay certain fees and expenses in connection with the Funds,
which are described in the table below. There are no sales charges (loads) or
exchange fees associated with an investment in the Funds. Annual fund operating
expenses are paid out of the assets of each Fund, so their effect is included in
each Fund's share price. Annual fund operating expenses, indicated in the table
below, reflect expenses for the Funds' fiscal year ended May 31, 1999.

6
<PAGE> 8

SHAREHOLDER TRANSACTION EXPENSES FOR ALL FUNDS

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

*A shareholder will be charged $100 for redemption checks for less than
$100,000, except for Class D shareholders who will be charged $2.00 for
redemption checks of less than $100. 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 the Treasurer's Trust shares
will not be charged any fees on redemptions by telephone or wire. If you use
your VISA card at an ATM (Treasurer's Trust and Class D shareholders only), the
owner of the ATM may charge you a surcharge.

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

<TABLE>
<CAPTION>
TREASURER'S
CLASS A CLASS B TRUST CLASS C* CLASS D*
------- ------- ----- -------- --------
<S> <C> <C> <C> <C> <C>
Comprehensive Management Fee(a).... 0.25% 0.25% 0.25% 0.25% 0.25%
12b-1 Fees (b)..................... 0.00% 0.00% 0.00% 0.25% 0.50%
Shareholder Services Fees 0.00% 0.20% 0.25% 0.25% 0.25%
Other Operating Expenses** 0.00% 0.00% 0.10% 0.00% 0.00%
----- ----- ----- ----- -----
Total Operating Expenses........... 0.25% 0.45% 0.60% 0.75% 1.00%
===== ===== ===== ===== =====
</TABLE>

- -----------------
* Class C and D were not opened as of May 31, 1999.

(a) The comprehensive management fee of 0.25% per annum of its average daily
net assets which includes advisory and customary operating expenses, but does
not include 12b-1 and shareholder service fees. However, the Funds may be
charged for certain non-recurring extraordinary expenses and its allocated or
direct share of certain other expenses. See "Management".

(b) The Funds have adopted a Rule 12b-1 plan which allows the Funds to pay
distribution fees for the sale and distribution of its shares. The maximum level
of distribution expenses is 0.20% per year of each Fund's average net assets. As
these fees are paid out of each Fund's assets on an on-going basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.

** "Other Operating Expenses" are bases on an estimated amount for the current
fiscal year.

EXAMPLE: This example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The example should
not be considered indicative of future investment returns and operating expenses
which may be more or less than those shown. This example is based on the annual
fund operating expenses described in the table, which do not reflect fee waivers
for the Fund during the fiscal year ended May 31, 1999.

This example assumes that you invest $10,000 in a fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that each Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

7
<PAGE> 9

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class A $ 26 $ 83 $ 144 $ 326
Class B $ 47 $ 148 $ 259 $ 581
Treasurer's Trust $ 63 $ 197 $ 344 $ 769
Class C $ 79 $ 246 $ 428 $ 955
Class D $ 105 $ 328 $ 568 $ 1258
</TABLE>

PLEASE NOTE THAT THE ABOVE EXAMPLE IS AN ESTIMATE OF THE EXPENSES TO BE INCURRED
BY SHAREHOLDERS OF THE FUNDS. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE
REFLECTED ABOVE.

You would pay the same if you did not redeem your shares.

MANAGEMENT

INVESTMENT ADVISER. Since November 15, 1971, Reserve Management Company, Inc.
("RMCI") 1250 Broadway, New York, NY 10001 and its affiliates have provided
investment advice to The Reserve Funds. RMCI serves as the investment adviser to
the Funds under an Investment Management Agreement (the "Agreement") with the
Reserve Institutional Trust (the "Trust"). The Agreement provides that RMCI will
furnish continuous investment advisory and management services to the Funds. In
addition to the Funds, RMCI provides investment management services to other
mutual funds within the Reserve family of funds and, as of May 31, 1999, had
approximately $_____ billion under management.

RMCI manages the investment portfolios of the Funds, subject to policies
adopted by the Trustees. For its services, RMCI receives a fee of 0.25% per year
of the average daily net assets of each Fund. RMCI pays all employee and
ordinary operating costs of the Fund. Excluded from the definition of ordinary
operating costs are interest, taxes, brokerage fees, extraordinary legal and
accounting fees and expenses, and the fees of the disinterested Trustees, for
which it pays its direct or allocated share. For the fiscal year ended May 31,
1999, the Primary, U.S. Government, U.S. Treasury and Interstate Tax-Exempt
Institutional Fund paid RMCI $______, $______, $______and $______, respectively.

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

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

HOW TO BUY SHARES

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

<TABLE>
<CAPTION>
MAXIMUM MAXIMUM
ANNUAL MAXIMUM TOTAL ANNUAL MINIMUM
SHAREHOLDER ANNUAL OPERATING INITIAL
SERVICES FEE* 12b-1 FEE* EXPENSES** INVESTMENT
------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Class A 0% 0% 0.25% $10 million
Class B 0.20% 0% 0.45% $5 million
Treasurer's Trust 0.35% 0% 0.60% None
Class C 0.25% 0.25% 0.75% $ 1 million
Class D 0.25% 0.50% 1.00% $ 250,000
</TABLE>

- -----------
*As a percentage of average daily net assets.

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

8
<PAGE> 10

SHARE PRICE: NET ASSET VALUE. Investors pay no sales charges to invest in the
Funds. The price you pay for a share of a Fund, and the price you receive upon
selling or redeeming a share of a Fund, is called the Fund's net asset value
("NAV") per share. The NAV is calculated by taking the total value of a Fund's
assets, subtracting its liabilities, and then dividing by the number of shares
that have already been issued. Each Fund uses the amortized cost method of
valuing its securities under Rule 2a-7 of the 1940 Act. This is a standard
calculation, and forms the basis for all transactions involving buying, selling,
exchanging or reinvesting shares. The NAV is generally calculated as of the
close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern time)
every day the Exchange is open. NAV is not calculated on days the Exchange is
closed and regional bank holidays. Your order will be priced at the next NAV
calculated after your order is accepted by the Funds. The Funds' investments are
valued based on market value, or where market quotations are not readily
available, based on fair value as determined in good faith by the Funds' Board
of Trustees. The Funds may use pricing services to determine market value.

PURCHASE OF SHARES. The minimum initial investment in each Fund is $10 million
for Class A, $5 million for Class B, $1 million for Class C, and $250,000 for
Class D shares. The Treasurer's Trust shares of each Fund are not subject to any
minimum initial investment amount. There is no minimum subsequent investment for
any of the classes. The Funds reserve the right to waive the minimum investment
requirement. All investments must be in U.S. dollars. Third-party, foreign and
travellers checks, as well as cash investments will not be accepted. For clients
of certain broker-dealers and financial institutions ("Firms"), shares may be
purchased directly through such Firms. However, purchases may be subject to the
Firms' own minimums and purchase requirements. Purchase orders are not accepted
on days the Exchange and the Federal Reserve Bank of New York are open
("business day").

Shares of the Funds may only be purchased by wire. Prior to calling your
bank, call The Reserve Funds at 800-637-1700 for specific instructions or the
Firm from which you received this Prospectus.

Wires which do not correctly identify the account to be credited may be
returned or delay the purchase of shares. Only federal funds wires and checks
drawn on the Fund's bank are eligible for entry as of the business day received.
For federal funds wires to be eligible for same-day order entry, the Funds must
be notified before 2:00 PM (Eastern time, 11:00 AM for the U.S. Treasury and
Interstate Tax-Exempt Institutional Funds) of the amount to be transmitted and
the account to be credited. Payment not immediately convertible into federal
funds will be entered as of the business day when covering federal funds are
received or bank checks are converted into federal funds. This usually occurs
within one (1) business day of receipt of bank wire, but may take longer.

RESERVE AUTOMATIC ASSET-BUILDER PLAN. (Treasurer's Trust and Class D
shareholders only). If you have an account, you may purchase shares of a Fund
($25 suggested minimum) from a checking, NOW, or bank money-market deposit
account or from a U.S. government distribution ($25 suggested minimum) such as
social security, federal salary, or certain veterans' benefits, or other payment
from the federal government. You may also purchase shares automatically by
arranging to have your payroll deposited directly into your Reserve account.
Please call The Reserve Funds at 800-637-1700 for an application.

INDIVIDUAL RETIREMENT ACCOUNTS. (Treasurer's Trust and Class D shareholders
only). Investors may use the Funds as an investment for Individual Retirement
Accounts ("IRAs"). A master IRA plan with information regarding administration
fees, investment minimums and other details is available from the Funds.

THIRD-PARTY INVESTMENTS. Investments made through a third party (rather than
directly with Reserve) such as a financial services agent may be subject to
policies and fees different than those described here. Banks, brokers, 401(k)
plans, financial advisers and financial supermarkets may charge transaction fees
and may set different minimum investments or limitations on buying or selling
shares. Investors should consult a representative of the plan or financial
institution if in doubt.

DISTRIBUTORS. The Funds' distributor is Resrv Partners, Inc. ("RESRV"), 1250
Broadway, New York, NY 10001-3701.

RESTRICTIONS. Certain other restrictions and conditions for buying shares apply
to the Funds. Please see the SAI for more information.

9
<PAGE> 11

SELLING FUND SHARES

Investors may sell shares at any time. Shares will be sold at NAV
determined after the redemption request is received by the Fund. Each Fund
usually transmits payments the same day when requests are received before 12:00
noon (Eastern time, 11:00 AM for the U.S. Treasury and Interstate Tax-Exempt
Institutional Funds) and the next business day for requests received after the
time specified to enable shareholders to receive additional dividends. Shares do
not earn dividends on the day a redemption is effected, regardless of the time
the order is received. Orders will be processed promptly and investors will
generally receive the proceeds within a week after receiving your properly
completed request. A shareholder will be charged $2 for redemption checks issued
for less than $100. Upon request, redemptions will be made by bank wire;
however, wire redemptions of less than $10,000 will be charged a fee (currently
$10). The Funds assume no responsibility for delays in the receipt of wired or
mailed funds.

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

To be able to redeem by telephone, you must select this option on your
application or in writing before you make your first telephone redemption. Once
you have selected this option, you may redeem by calling the Funds at
800-637-1700. The Funds strongly suggest (but not require) that each written
redemption be at least $100,000 and require that each telephone redemption be at
least $100,000, except for redemptions which are intended to liquidate your
account. A shareholder will be charged $100 for redemption checks for less than
$100,000, except for Class D shareholders who will be charged $2.00 for
redemption checks of less than $100. Payments of $100,000 or more will be wired
upon request without charge, except for Class D shareholders who can have
payments of $10,000 or more wired without charge. A shareholder will be charged
$100 for wires of less than $100,000, except for Class D shareholders who will
be charged $10 for wires less than $10,000. Shareholders of Treasurer's Trust
shares will not be charged any fees on redemptions by telephone or wire. Unless
you decline telephone privileges on your application and the Funds fails to take
reasonable measures to verify the request, the Funds will not be liable for any
unauthorized telephone order, or for any loss, cost or expense for acting upon
an investor's telephone instructions. You are only allowed to make one telephone
redemption request within a thirty (30) day period. To further reduce the risk
of loss, proceeds of telephone redemptions may be sent only to (1) the bank or
brokerage account designated by the shareholder on the application or in a
letter with the signature(s) guaranteed; or (2) the address of record for the
past 30 days. To change the designated brokerage or bank account it is necessary
to contact the Firm through which shares of the Fund were purchased or, if
purchased directly from the Funds, it is necessary to send a written request to
the Funds with signature(s) guaranteed. The Fund reserves the right to refuse a
telephone redemption if it believes it is advisable to do so.

Signature guarantees are designed to protect both you and the Funds from
fraud. Signature guarantees can be obtained from most banks, credit unions or
savings associations, or from broker/dealers, national securities exchanges or
clearing agencies deemed eligible by the Securities and Exchange Commission.
Notaries public cannot provide signature guarantees. Please see the SAI for more
information.

CHECKING, VISA AND ATM ACCESS. (Treasurer's Trust and Class D shareholders
only). You may redeem shares of the Fund by using your Reserve checks and VISA
check card. By completing the application or a signature card (for existing
accounts) and certain other documentation you can write checks in any amount
against your account. A check will be returned (bounced) and a fee charged if
you request a stop payment; the check is postdated; contains an irregularity in
the signature, amount or otherwise; or, is written against accounts with
insufficient or uncollected funds. Please do not postdate your checks or use
them to close your account. Upon proper notice, the Funds may choose to impose a
fee if it deems a shareholder's actions to be burdensome. Checking may not be
available to clients of some Firms and some Firms may establish their own
minimum check amount. Shareholders may use their VISA card at ATM's to receive
cash. Please see the SAI for more information, including charges, fees,
etcetera.

EXCHANGE PRIVILEGE. Investors can exchange all or some of their shares offered
for shares in other Reserve money-market and equity funds. Investors can request
an exchange in writing or by telephone. The shares of the other funds are not
offered by this Prospectus. Be sure to read the current prospectus for any fund
into which you are exchanging. Any new account established through an exchange
will have the same privileges as an original account (as long as they are
available). Please see the SAI for more information.

10
<PAGE> 12

OTHER REDEMPTION OPTIONS AND AUTOMATIC SERVICES. (Treasurer's Trust and Class D
shareholders only). Certain other services and restrictions for selling shares
automatically are offered by the Funds. Please see the SAI for more information
about these services and restrictions.

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

OTHER. The Funds also reserve the right to make a "redemption in kind" - payment
in portfolio securities rather than cash - if the amount the investor is
redeeming is large enough to affect fund operations (for example, if it
represents more than 1% of the Fund's assets). Each Fund reserves the right to:

- refuse any purchase or exchange request,

- change or discontinue its exchange privilege,

- change its minimum investment amounts, and

- delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions).

TAX CONSEQUENCES

The following discussion is intended as general information only.
Shareholders should consult with their own tax advisors with respect to the
application of their state and local tax laws to these distributions. Because
everyone's tax situation is unique, you should consult your own tax advisor(s)
with regard to the state and local tax laws. The applicable tax laws which
affect the Funds and their shareholders are subject to change and may be
retroactive. For more information, please see the SAI.

DIVIDENDS, DISTRIBUTIONS AND TAXES. 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. Further, the
Funds distributes any net capital gains that it has realized once a year.
Dividends and distributions will be reinvested in the fund unless the investor
instructs the Fund otherwise. There are no fees or sales charges on
reinvestments.

Dividends and distributions are taxable to most shareholders as ordinary
income (unless an investment is in an IRA or other tax-advantaged account). The
tax status of any distribution is the same regardless of how long an investor
has been in the fund and whether distributions are reinvested or taken in cash.
The tax status of dividends and distributions will be detailed in annual tax
statements from the Funds. An exchange of a Fund's shares for the shares of
another fund will be treated as a sale of The Fund's shares and any gain may be
subject to federal income tax.

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 most states from
state and local personal income taxes, except to the extent uninvested cash is
invested in repurchase agreements. Some states have minimum investment
requirements that must be met by the U.S. Treasury 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 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.

As to the 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 individual shareholders at the
applicable mid-term or long-term capital gains rate regardless of the length of
time the Fund's shares have been owned by the shareholder.

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

11
<PAGE> 13

accept purchase orders for accounts for which a correct and certified TIN is not
provided or which is otherwise subject to backup withholding, except in the case
of certain non-resident alien account holders.

GENERAL INFORMATION

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

RESERVE EASY ACCESS. Easy Access is The Reserve Funds' 24-hour toll-free
telephone service that lets customers use a touch-tone phone for a variety of
options, which include yields, account balances, check reorders and other
options. To use it, call 800-637-1700 and follow the instructions. Clients may
also access full account activity for the previous six months on the Internet at
www.reservefunds.com.

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

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

ACCOUNT STATEMENTS. Shareholders are advised to retain all account statements.

FINANCIAL HIGHLIGHTS

The following tables describe each Fund's performance for the fiscal periods
indicated. "Total return" shows how much an investment in a series would have
increased (or decreased) during each period, assuming reinvestment of all
dividends and distributions, if any. These figures have been independently
audited by PricewaterhouseCoopers LLP, the Trust's independent accountants,
whose report, along with each Funds' financial statements, is included in the
Trust's Annual Report.

OCTOBER 23, 1997
(COMMENCEMENT OF
PRIMARY INSTITUTIONAL FUND YEAR ENDED OPERATIONS) TO
(CLASS A SHARES) MAY 31, 1999 MAY 31, 1998
- ---------------- ------------ ------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 1.0000
--------
Income from investment operations........................... .0333
Expenses.................................................... .0001
-----
Net investment income(1).................................... .0332
Dividends from net investment income(1)..................... (.0332)
------
Net asset value, end of period.............................. $ 1.0000
========
Total Return................................................ 5.49%(2)

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

JANUARY 21, 1997
PRIMARY INSTITUTIONAL FUND YEAR ENDED MAY 31, (COMMENCEMENT OF
-------------------------- OPERATIONS) TO
(CLASS B SHARES) 1999 1998 MAY 31, 1997
- ---------------- ---- ---- ------------
<S> <C> <C> <C>
Net asset value, beginning of year........................ $1.0000 $ 1.0000
------- --------
Income from investment operations......................... .0534 .0196
Expenses.................................................. .0005 .0017
----- -----
Net investment income(1).................................. .0529 .0179
Dividends from net investment income(1)................... (.0529) (.0179)
------ ------
Net asset value, end of year.............................. $1.0000 $ 1.0000
======= ========
Total Return.............................................. 5.29% 4.95%(2)

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

12
<PAGE> 14

<TABLE>
<CAPTION>
OCTOBER 15, 1997
(COMMENCEMENT OF
PRIMARY INSTITUTIONAL FUND YEAR ENDED OPERATIONS) TO
(TREASURER'S TRUST SHARES) MAY 31, 1999 MAY 31, 1998
- -------------------------- ------------ ------------
<S> <C> <C>
Net asset value, beginning of period...................... $1.0000
-------
Income from investment operations......................... .0351
Expenses.................................................. .0029
-----
Net investment income(1).................................. .0322
Dividends from net investment income(1)................... (.0322)
------
Net asset value, end of period............................ $1.0000
=======
Total Return.............................................. 5.13%(2)

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

<TABLE>
<CAPTION>
SEPTEMBER 15, 1997
(COMMENCEMENT OF
U.S. GOVERNMENT INSTITUTIONAL FUND YEAR ENDED OPERATIONS) TO
(CLASS B SHARES) MAY 31, 1999 MAY 31, 1998
- ---------------- ------------ ------------
<S> <C> <C>
Net asset value, beginning of period..................... $1.0000
-------
Income from investment operations........................ .0393
Expenses................................................. .0029
-----
Net investment income(1)................................. .0364
Dividends from net investment income(1).................. (.0364)
------
Net asset value, end of period........................... $1.0000
=======
Total Return............................................. 5.13%(2)

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

<TABLE>
<CAPTION>
MAY 5, 1998
(COMMENCEMENT OF
U.S. GOVERNMENT INSTITUTIONAL FUND YEAR ENDED OPERATIONS) TO
(TREASURER'S TRUST SHARES) MAY 31, 1999 MAY 31, 1998
- -------------------------- ------------ ------------
<S> <C> <C>
Net asset value, beginning of period...................... $ 1.0000
--------
Income from investment operations......................... .0036
Expenses.................................................. .0000
--------
Net investment income(1).................................. .0036
Dividends from net investment income(1)................... (.0036)
--------
Net asset value, end of period............................ $ 1.0000
========
Total Return.............................................. 4.85%(2)

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

MAY 13, 1998
(COMMENCEMENT OF
INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND YEAR ENDED OPERATIONS) TO
(TREASURER'S TRUST SHARES) MAY 31, 1999 MAY 31, 1998
- -------------------------- ------------ ------------
<S> <C> <C>
Net asset value, beginning of period...................... $ 1.0000
--------
Income from investment operations......................... .0021
Expenses.................................................. .0003
--------
Net investment income(1).................................. .0018
Dividends from net investment income(1)................... (.0018)
--------
Net asset value, end of period............................ $ 1.0000
========
Total Return.............................................. 3.39%(2)

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

13
<PAGE> 15

<TABLE>
<CAPTION>
OCTOBER 1, 1998
(COMMENCEMENT OF
U.S. TREASURY INSTITUTIONAL FUND OPERATIONS) THROUGH
(TREASURER'S TRUST SHARES) MAY 31, 1999
- -------------------------- ------------
<S> <C>
Net asset value, beginning of period.....................
Income from investment operations........................
Expenses.................................................
Net investment income(1).................................
Dividends from net investment income(1)..................
Net asset value, end of period...........................
Total Return.............................................

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets in thousands, end of period...................
Ratio of expenses to average net assets..................
Ratio of net investment income to average net assets.....
</TABLE>

- -----

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

(2) Annualized.

(3) During this period the manager waived a portion of fees and expenses. If
there were no reductions in expenses, the actual expenses would have been
approximately 0.20%, 0.20%, 0.20%, 0.25% and 0.12% higher, respectively.

----------

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.

----------

14
<PAGE> 16

SEC File 811-3141

This Prospectus contains the information about each Fund, which a prospective
investor should know before investing.

The Statement of Additional Information ("SAI") contains additional and more
detailed information about the Funds, and is considered part of this Prospectus.
The Annual and Semi-Annual Reports list the holdings in each Fund, describe Fund
performance, include financial statements for the Funds, and discuss market
conditions and strategies that significantly affected the Funds' performance.
These documents may be obtained without charge by writing or calling the Funds
at 800-637-1700. You can also download the documents from the SEC's web site
(http://www.sec.gov).

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

[THE RESERVE FUNDS LOGO]
Founders of
"America's First
Money Fund"

1250 Broadway, New York, NY 10001-3701
(212) 401-5500

GENERAL INFORMATION AND 24-HOUR YIELD AND BALANCE INFORMATION

800-637-1700 - www.reservefunds.com

Distributor - Resrv Partners, Inc.

RIT-07/99

[THE RESERVE FUNDS LOGO]
Founders of
"America's First
Money Fund"

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

Prospectus
July 31, 1999

<PAGE> 17
[THE RESERVE FUNDS LOGO] General Information, Purchases and Redemptions
24-Hour Yield and Balance Information

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

TREASURER'S TRUST
PROSPECTUS
JULY 31, 1999

TREASURER'S TRUST is a class of shares of the Reserve Institutional Trust (the
"Trust")," is a registered investment company, which offers four no-load
money-market funds:

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

The Reserve Institutional Trust is designed for institutional investors
as a convenient vehicle for short-term funds.

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

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

---------------
<PAGE> 18
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective & Strategy 2
Performance History . . . . . . 5
Expenses . . . . . . . . . . . 6
Management . . . . . . . . . . 8
How to Buy Shares . . . . . . . 8
Selling Fund Shares . . . . . . 9
Tax Consequences . . . . . . . 10
General Information . . . . . . 11
Financial Highlights . . . . . 12
</TABLE>

INVESTMENT OBJECTIVE & STRATEGY

The investment objective of the Primary, U.S. Government and U.S.
Treasury Institutional Funds is to seek as high a level of current income as is
consistent with preservation of capital and liquidity. The investment
objective of the Interstate Tax-Exempt Institutional Fund is to seek to have
its interest income exempt from federal income taxes, as is consistent with
preservation of capital and liquidity. However, achievement of the objectives
cannot be assured. The investment objectives may not be changed without the
vote of a majority of the outstanding shares of the Fund as defined in the
Investment Company Act of 1940 ("1940 Act"). The Funds seek to maintain a
stable $1.00 share price.

The Primary Institutional Fund may invest in obligations of U.S. banking
institutions that are insured by the Federal Deposit Insurance Corporation and
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 if rated by another rating agency. The Primary Fund
may also invest in obligations of foreign branches of both U.S. banks and
foreign banks (Eurodollars). Investment in foreign banks will be limited to
those located in Australia, Canada, Western Europe and Japan and which, at the
time of investment, have more than $25 billion (or the equivalent in other
currencies) in total assets and which, in the opinion of the Fund's Adviser,
are of comparable quality to the U.S. banks which may be purchased by the Fund.
The Primary Institutional Fund may also invest in municipal obligations, the
interest on which is not exempt from federal income taxation.

U.S. GOVERNMENT INSTITUTIONAL FUND. The U.S. Government Institutional Fund
seeks to attain its objective by investing in instruments issued or
collateralized by full faith and credit obligations of the U.S. government, its
agencies and instrumentalities.

2
<PAGE> 19
U.S. TREASURY INSTITUTIONAL FUND. The U.S. Treasury Institutional Fund seeks
to attain its objective by investing in full faith and credit obligations of
the U.S government, its agencies and instrumentalities that provide interest
income exempt in most states from state and local personal income taxes.

The Interstate Tax-Exempt Institutional Fund's principal investment
strategies include investing primarily in municipal money-market securities.
The Fund invests principally in high-quality, tax-exempt obligations issued by
states, counties, municipalities, authorities or other political subdivisions.
These securities are generally referred to as "municipal obligations". The
Fund intends to invest at least 80% of the value of the Fund's net assets in
municipal obligations which are exempt from federal income tax, unless it has
adopted a temporary defensive position.

The interest on securities generally known as municipal obligations is
exempt from federal income tax in the opinion of either bond counsel for the
issuers or, in some instances, the issuer itself. These securities may be
issued to raise money for various public purposes such as constructing public
facilities, while others are issued to obtain funding for privately operated
facilities. General obligation bonds and notes are backed by the taxing power
of the issuer. Revenue bonds and notes are backed by the revenues of a project
or facility such as tolls from a toll road or, in some cases, from the proceeds
of a special excise tax, but not by the general taxing power. Industrial
development revenue bonds and notes are a specific type of revenue bond or note
backed by the credit of a private issuer. Municipal obligations bear fixed,
variable or floating rates of interest.

The Interstate Tax-Exempt Institutional Fund may purchase floating and
variable rate demand bonds, which are municipal obligations normally having
stated maturities in excess of one year, but which permit the holder to demand
payment of principal and accrued interest at any time, or at specified
intervals not exceeding one year, usually upon not more than seven (7) days'
notice. The Fund will not invest more than 10% of the value of its assets in
floating or variable rate demand bonds for which there is no secondary market
if the demand feature on such municipal obligations requires more than seven
(7) days' notice.

OTHER INVESTMENT POLICIES OF THE PRIMARY, U.S. GOVERNMENT AND U.S. TREASURY
INSTITUTIONAL FUNDS. The Funds may invest in repurchase agreements ("repos")
but will limit them to those banks and securities dealers who are deemed
creditworthy pursuant to the guidelines adopted by the Trust's Board of
Trustees ("Trustees"). The U.S. Government and U.S. Treasury Funds will
further limit their investment in repos to those whose underlying obligations
are backed by the full faith and credit of the United States, and, in the case
of the U.S. Treasury Fund, repos will not exceed 5% of its total assets except
for temporary or emergency purposes. Securities subject to repos will be
placed in a segregated account and will be monitored to ensure that the market
value of the securities plus any accrued interest will at least equal the
repurchase price.

The Primary and U.S. Government Funds may from time to time lend
securities on a short-term basis to banks, brokers and dealers (but not
individuals) and receive as collateral cash or securities issued by the U.S.
government or its agencies or instrumentalities. The collateral will be
required to be maintained at all times in an amount equal to at least 100% of
the current value of the loaned securities plus accrued interest. The
Statement of Additional Information ("SAI") further explains the Funds'
securities lending policies.

3
<PAGE> 20
OTHER INVESTMENT POLICIES OF THE INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND.
Municipal obligations are sometimes offered on a "when-issued" or
delayed-delivery basis. There is no limit on the Fund's ability to purchase
municipal obligations on a when-issued or delayed-delivery basis. The price of
these securities is fixed at the time the commitment to purchase is made but
delivery and payment takes place at a later date, normally within one month,
and no interest accrues in the interim. Commitments to purchase when-issued
securities will be reflected in determining the Fund's net asset value ("NAV")
and readily marketable assets of at least equal value will be maintained. RMCI
does not believe that the Fund's NAV or income will be adversely affected by
purchases on a when-issued or delayed-delivery basis.

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

Interest received on certain otherwise tax-exempt securities ("private
activity bonds") is subject to a federal Alternative Minimum Tax ("AMT"). It is
the position of the SEC that in order for a fund to call itself "tax-free", not
more than 20% of its net assets may be invested in municipal securities subject
to the AMT or at least 80% of its income will be tax-exempt. Income received on
such securities is classified as a "tax preference item," which could subject
certain shareholders of the Fund to the AMT. However, as of the date of this
Prospectus, the Fund has not and does not purchase such securities, but
reserves the right to do so depending on market conditions in the future.

RMCI uses its reasonable business judgment in selecting investments in
addition to considering the ratings of Moody's, S&P and other rating services
when available.

For more information on the investment objective and strategy of all the
Funds, please read the Statement of Additional Information ("SAI").

While each Fund has maintained a constant share price since inception,
and will strive to do so, the following factors could reduce the Fund's income
level and/or share price:

- as to all Funds, interest rates could rise sharply, causing the value
of the Funds' securities, and share price, to drop.
- as to all Funds, repos could involve risks in the event of a default
of the repo counterparty, including possible delays, losses or
restrictions upon a Fund's ability to dispose of the underlying
securities.
- as to the Primary Institutional Fund, the risks generally associated
with investing in the banking industry, such as interest rate risk,
credit risk and regulatory developments relating to the banking
industry.
- as to the Primary Institutional Fund, Euro and Yankee dollar
investments involve certain risks that are different from investments
in domestic obligations of U.S. banks. These risks may include
unfavorable political and economic developments, possible withholding
taxes, seizure of foreign deposits, currency controls or other
governmental restrictions which might affect payment of principal or
interest. In addition, foreign banks are not regulated by U.S.
banking authorities and are generally not bound by financial reporting
standards comparable to U.S. banks.
- as to the Primary Institutional Fund, investments in municipal
obligations are subject to market volatility and affected by adverse
economic or political changes and the financial condition of the
issuers.

4
<PAGE> 21
- as to the Interstate Tax-Exempt Institutional Fund, the municipal
market is volatile and there are risks associated with concentrating
investments in an industry which can be significantly affected by
adverse economic or political changes and the financial condition of
the issuers of municipal securities.
- as to the Interstate Tax-Exempt Institutional Fund, the value of
municipal securities may be affected by uncertainties and changes in
municipal market-related legislation or litigation.
- as to the Interstate Tax-Exempt Institutional Fund, as to investments
in industrial revenue development bonds and notes secured by letters
of credit or guarantees of banks, the risks generally associated with
concentrating investments in the banking industry, such as interest
rate risk, credit risk and regulatory developments relating to the
banking industry.
- as to the Interstate Tax-Exempt Institutional Fund, adverse political,
regulatory, market or economic developments in foreign countries can
affect entities located in those countries.
- as to the Interstate Tax-Exempt Institutional Fund, a decline in the
credit quality of an issuer or the provider of credit support or a
maturity-shortening structure for a security can cause the price of a
money-market security to decrease.

Year 2000. Many computer software systems in use today cannot distinguish year
2000 from the year 1900. Most of the services provided to the Trust depend on
the smooth functioning of computer systems. The Trust could be adversely
affected if the computer systems and service providers that interface with it
are unable to process data from January 1, 2000 and after; however, steps are
being taken to reasonably address this issue and to obtain assurance that
comparable efforts are being made by service providers. There can be no
assurance that these steps will be sufficient to avoid any adverse impact to
the Trust. In addition, because the Year 2000 issue affects virtually all
organizations, the extent of its impact cannot be predicted.

OTHER RISKS. These risks are discussed in more detail in the SAI. Most of the
Funds' performance depends on interest rates. When interest rates fall, the
Funds' yields will typically fall as well.

The Reserve Funds' emphasis on the high credit quality of its investments
may mean that its yields are lower than those available from certain other
money-market funds, either on a before- or after-tax basis. Because of the
low level of risk, over time, a money-market fund may produce lower returns
than bond or stock investments which entail higher levels of risk.

PERFORMANCE HISTORY

The bar charts below show the annual returns for the Treasurer's Trust
class of the Funds for the life of the Funds, together with the best and worst
quarters. The tables assume reinvestment of dividends and distributions, if
any. The accompanying "Average Annual Total Return as of December 31, 1998"
table gives some indication of risk of an investment in the Funds by comparing
each Fund's performance to that of the [INSERT APPROPRIATE BROAD-BASED MARKET
INDEX NAME] index, a widely recognized index of [INSERT BRIEF DESCRIPTION OF
THE INDEX]. As with all mutual funds, the past is not a prediction of the
future.

PRIMARY INSTITUTIONAL FUND - TREASURER'S TRUST
1997(1) 1.10%
1998 5.17%
BEST QUARTER 3rd Q 1998 up 1.30%
WORST QUARTER 4th Q 1998 up 0.121%

U.S. GOVERNMENT INSTITUTIONAL FUND - TREASURER'S TRUST
1998(2) 3.17%
BEST QUARTER 3rd Q 1998 up 1.31%
WORST QUARTER 4th Q 1998 up 1.18%

U.S. TREASURY INSTITUTIONAL FUND - TREASURER'S TRUST
1998(3) 0.70%
BEST QUARTER ____ Q 19___ up ____ %
WORST QUARTER _____ Q 19_____ up ____%

(1) For the period October 15, 1997 (Commencement of Operations) to December
31, 1997.
(2) For the period May 5, 1998 (Commencement of Operations) to December 31,
1998.
(3) For the period October 1, 1998 (Commencement of Operations) to December 31,
1998.

5
<PAGE> 22
INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND - TREASURER'S TRUST
1998(4) 1.96%

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

(4) For the period May 13, 1998 (Commencement of Operations) to December
31, 1998.

AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
1 SINCE
YEAR INCEPTION
---- ---------
<S> <C> <C>
Primary Institutional Fund-- Treasurer's Trust 5.17% 5.18%
[INSERT APPROPRIATE BROAD-BASED MARKET INDEX NAME] ___% ___%
--------------------------------------------------
U.S. Government Institutional Fund-- Treasurer's Trust 3.17% 4.84%
[INSERT APPROPRIATE BROAD-BASED MARKET INDEX NAME] ___% ___%
--------------------------------------------------
U.S. Treasury Institutional Fund-- Treasurer's Trust 0.70% 3.60%
[INSERT APPROPRIATE BROAD-BASED MARKET INDEX NAME] ___% ___%
--------------------------------------------------
Interstate Tax-Exempt Institutional Fund-- Treasurer's Trust 1.96% 3.10%
[INSERT APPROPRIATE BROAD-BASED MARKET INDEX NAME] ___% ___%
--------------------------------------------------
</TABLE>

THE 7-DAY YIELD AS OF DECEMBER 31, 1998:

<TABLE>
<CAPTION>
CURRENT EFFECTIVE
------- ---------
<S> <C> <C>
Primary Institutional Fund - Treasurer's Trust 4.47% 4.57%
U.S. Government Institutional Fund - Treasurer's Trust 4.22% 4.31%
U.S. Treasury Institutional Fund - Treasurer's Trust 3.88% 3.95%
Interstate Tax-Exempt Institutional Fund - Treasurer's 3.59% 3.66%
Trust
</TABLE>

For the Funds' current yield, call toll-free (800) 637-1700 or
visit our web site at www.reservefunds.com.

EXPENSES

As an investor, you pay certain fees and expenses in connection with
the Funds, which are described in the table below. There are no sales charges
(loads) or exchange fees associated with an investment in the Funds. Annual
fund operating expenses are paid out of the assets of each Fund, so their
effect is included in each Fund's share price. Annual fund operating expenses,
indicated in the table below, reflect expenses for the Funds' fiscal year ended
May 31, 1999.

SHAREHOLDER TRANSACTION EXPENSES FOR ALL FUNDS

Sales Load Imposed on Purchases . . . . . . . . . . . None
Sales Load Imposed on Reinvested Dividends . . . . . None
Redemption Fees* . . . . . . . . . . . . . . . . . . None
Exchange Fees . . . . . . . . . . . . . . . . . . . . None

* Shareholders of the Treasurer's Trust shares
will not be charged any fees on redemptions
by telephone or wire. If you use your VISA
card at an ATM, the owner of the ATM may
charge you a surcharge.

6
<PAGE> 23
ANNUAL FUND OPERATING EXPENSES FOR TREASURER'S TRUST CLASS OF ALL FUNDS
(AS A PERCENTAGE OF AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
TREASURER'S
TRUST
-----
<S> <C>
Comprehensive Management Fee(a) . . . . 0.25%
12b-1 Fees (b) . . . . . . . . . . . . 0.00%
Shareholder Services Fees . . . . . . 0.25%
Other Operating Expenses* . . . . . . 0.10%
-----
Total Operating Expenses . . . . . . . 0.60%
=====
</TABLE>

- -------
(a) The comprehensive management fee of 0.25% per annum of its average daily
net assets which includes advisory and customary operating expenses, but
does not include and shareholder service fees. However, the Funds may be
charged for certain non-recurring extraordinary expenses and its allocated
or direct share of certain other expenses See "Management".

(b) The Funds have adopted a Rule 12b-1 plan which allows the Funds to pay
distribution fees for the sale and distribution of its shares. The
maximum level of distribution expenses is 0.20% per year of each Fund's
average net assets. As these fees are paid out of each Fund's assets on
an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.

* "Other Operating Expenses" are bases on an estimated amount for the
current fiscal year.

EXAMPLE: This example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The example should
not be considered indicative of future investment returns and operating
expenses which may be more or less than those shown. This example is based on
the annual fund operating expenses described in the table, which do not reflect
fee waivers for the Fund during the fiscal year ended May 31, 1999.

This example assumes that you invest $10,000 in a fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each
year and that each Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs
would be:

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Treasurer's Trust $ 63 $ 197 $ 344 $ 769
</TABLE>

PLEASE NOTE THAT THE ABOVE EXAMPLE IS AN ESTIMATE OF THE
EXPENSES TO BE INCURRED BY SHAREHOLDERS OF THE FUNDS. ACTUAL
EXPENSES MAY BE HIGHER OR LOWER THAN THOSE REFLECTED ABOVE.
YOU WOULD PAY THE SAME IF YOU DID NOT REDEEM YOUR SHARES.

MANAGEMENT

INVESTMENT ADVISER. Since November 15, 1971, Reserve Management Company, Inc.
("RMCI") 1250 Broadway, New York, NY 10001 and its affiliates have provided
investment advice to The Reserve Funds. RMCI serves as the investment adviser
to the Funds under an Investment Management Agreement (the "Agreement") with
the Reserve Institutional Trust (the "Trust"). The Agreement provides that
RMCI will furnish continuous investment advisory and management services to the
Funds. In addition to the Funds, RMCI provides investment management services
to other mutual funds within the Reserve family of funds and, as of May 31,
1999, had approximately $_____ billion under management.

RMCI manages the investment portfolios of the Funds, subject to policies
adopted by the Trustees. For its services, RMCI receives a fee of 0.25% per
year of the average daily net assets of each Fund. RMCI pays all employee and
ordinary operating costs of the Fund. Excluded from the definition of ordinary
operating costs are interest, taxes, brokerage fees, extraordinary legal and
accounting fees and expenses, and the fees of the disinterested Trustees, for
which it pays its direct or allocated share. For the fiscal year ended May 31,
1999, the Primary, U.S. Government, U.S. Treasury and Interstate Tax-Exempt
Institutional Fund paid RMCI $______, $______, $______and $______,
respectively.

7
<PAGE> 24
SHAREHOLDER SERVICE FEES. Under the plan, shareholders of Treasurer's Trust,
pay Firms a service fee at an annual rate up to 0.35%, of the average daily NAV
for which the Firm provides personal service, including maintaining shareholder
accounts, responding to inquiries, providing information about investments and
providing certain other services. Class A shares do not participate in the
Service Plan.

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

HOW TO BUY SHARES

SHARE PRICE: NET ASSET VALUE. Investors pay no sales charges to invest in the
Funds. The price you pay for a share of a Fund, and the price you receive upon
selling or redeeming a share of a Fund, is called the Fund's net asset value
("NAV") per share. The NAV is calculated by taking the total value of a Fund's
assets, subtracting its liabilities, and then dividing by the number of shares
that have already been issued. Each Fund uses the amortized cost method of
valuing its securities under Rule 2a-7 of the 1940 Act. This is a standard
calculation, and forms the basis for all transactions involving buying,
selling, exchanging or reinvesting shares. The NAV is generally calculated as
of the close of trading on the New York Stock Exchange (usually 4:00 p.m.
Eastern time) every day the Exchange is open. NAV is not calculated on days
the Exchange is closed and regional bank holidays. Your order will be priced
at the next NAV calculated after your order is accepted by the Funds. The
Funds' investments are valued based on market value, or where market quotations
are not readily available, based on fair value as determined in good faith by
the Funds' Board of Trustees. The Funds may use pricing services to determine
market value.

PURCHASE OF SHARES. The Treasurer's Trust class of shares of each Fund are not
subject to any minimum initial investment amount. There is no minimum
subsequent investment. All investments must be in U.S. dollars. Third-party,
foreign and travellers checks, as well as cash investments will not be
accepted. For clients of certain broker-dealers and financial institutions
("Firms"), shares may be purchased directly through such Firms. However,
purchases may be subject to the Firms' own minimums and purchase requirements.
Purchase orders are not accepted on days the Exchange and the Federal Reserve
Bank of New York are open ("business day").

Shares of the Funds may only be purchased by wire. Prior to calling
your bank, call The Reserve Funds at 800-637-1700 for specific instructions or
the Firm from which you received this Prospectus.

Wires which do not correctly identify the account to be credited may
be returned or delay the purchase of shares. Only federal funds wires and
checks drawn on the Fund's bank are eligible for entry as of the business day
received. For federal funds wires to be eligible for same-day order entry, the
Funds must be notified before 2:00 PM (Eastern time, 11:00 AM for the U.S.
Treasury and Interstate Tax-Exempt Institutional Funds) of the amount to be
transmitted and the account to be credited. Payment not immediately
convertible into federal funds will be entered as of the business day when
covering federal funds are received or bank checks are converted into federal
funds. This usually occurs within one (1) business day of receipt of bank
wire, but may take longer.

RESERVE AUTOMATIC ASSET-BUILDER PLAN. If you have an account, you may purchase
shares of a Fund ($25 suggested minimum) from a checking, NOW, or bank
money-market deposit account or from a U.S. government distribution ($25
suggested minimum) such as social security, federal salary, or certain
veterans' benefits, or other payment from the federal government. You may also
purchase shares automatically by arranging to have your payroll deposited
directly into your Reserve account. Please call The Reserve Funds at
800-637-1700 for an application.

INDIVIDUAL RETIREMENT ACCOUNTS. Investors may use the Funds as an investment
for Individual Retirement Accounts ("IRAs"). A master IRA plan with
information regarding administration fees, investment minimums and other
details is available from the Funds.

THIRD-PARTY INVESTMENTS. Investments made through a third party (rather than
directly with Reserve) such as a financial services agent may be subject to
policies and fees different than those described here. Banks, brokers, 401(k)
plans, financial advisers and financial supermarkets may charge transaction
fees and may set different minimum investments or limitations on buying or
selling shares. Investors should consult a representative of the plan or
financial institution if in doubt.

DISTRIBUTORS. The Funds' distributor is Resrv Partners, Inc. ("RESRV"), 1250
Broadway, New York, NY 10001-3701.

8
<PAGE> 25
RESTRICTIONS. Certain other restrictions and conditions for buying shares
apply to the Funds. Please see the Trust's SAI for more information.

SELLING FUND SHARES

Investors may sell shares at any time. Shares will be sold at NAV
determined after the redemption request is received by the Fund. Each Fund
usually transmits payments the same day when requests are received before 12:00
noon (Eastern time, 11:00 AM for the U.S. Treasury and Interstate Tax-Exempt
Institutional Funds) and the next business day for requests received after the
time specified to enable shareholders to receive additional dividends. Shares
do not earn dividends on the day a redemption is effected, regardless of the
time the order is received. Orders will be processed promptly and investors
will generally receive the proceeds within a week after receiving your properly
completed request. The Funds assume no responsibility for delays in the
receipt of wired or mailed funds.

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

To be able to redeem by telephone, you must select this option on your
application or in writing before you make your first telephone redemption.
Once you have selected this option, you may redeem by calling the Funds at
800-637-1700. The Funds strongly suggest (but not require) that each written
redemption be at least $100,000 and require that each telephone redemption be
at least $100,000, except for redemptions which are intended to liquidate your
account. A shareholder will be charged $100 for redemption checks for less
than $100,000, except for Class D shareholders who will be charged $2.00 for
redemption checks of less than $100. Payments of $100,000 or more will be
wired upon request without charge, except for Class D shareholders who can have
payments of $10,000 or more wired without charge. A shareholder will be
charged $100 for wires of less than $100,000, except for Class D shareholders
who will be charged $10 for wires less than $10,000. Shareholders of
Treasurer's Trust shares will not be charged any fees on redemptions by
telephone or wire. Unless you decline telephone privileges on your application
and the Funds fails to take reasonable measures to verify the request, the
Funds will not be liable for any unauthorized telephone order, or for any loss,
cost or expense for acting upon an investor's telephone instructions. You are
only allowed to make one telephone redemption request within a thirty (30) day
period. To further reduce the risk of loss, proceeds of telephone redemptions
may be sent only to (1) the bank or brokerage account designated by the
shareholder on the application or in a letter with the signature(s) guaranteed;
or (2) the address of record for the past 30 days. To change the designated
brokerage or bank account it is necessary to contact the Firm through which
shares of the Fund were purchased or, if purchased directly from the Funds, it
is necessary to send a written request to the Funds with signature(s)
guaranteed. The Fund reserves the right to refuse a telephone redemption if it
believes it is advisable to do so.

Signature guarantees are designed to protect both you and the Funds
from fraud. Signature guarantees can be obtained from most banks, credit
unions or savings associations, or from broker/dealers, national securities
exchanges or clearing agencies deemed eligible by the Securities and Exchange
Commission. Notaries public cannot provide signature guarantees. Please see
the SAI for more information.

CHECKING, VISA AND ATM ACCESS. You may redeem shares of the Fund by using your
Reserve checks and VISA check card. By completing the application or a
signature card (for existing accounts) and certain other documentation you can
write checks in any amount against your account. A check will be returned
(bounced) and a fee charged if you request a stop payment; the check is
postdated; contains an irregularity in the signature, amount or otherwise; or,
is written against accounts with insufficient or uncollected funds. Please do
not postdate your checks or use them to close your account. Upon proper
notice, the Funds may choose to impose a fee if it deems a shareholder's
actions to be burdensome. Checking may not be available to clients of some
Firms and some Firms may establish their own minimum check amount.
Shareholders may use their VISA card at ATM's to receive cash. Please see the
Trust's SAI for more information including charges, fees, etcetera.

EXCHANGE PRIVILEGE. Investors can exchange all or some of their shares offered
for shares in other Reserve money-market and equity funds. Investors can
request an exchange in writing or by telephone. The shares of the other funds
are not offered by this Prospectus. Be sure to read the current prospectus for
any fund into which you are exchanging. Any new account established through an

9
<PAGE> 26
exchange will have the same privileges as an original account (as long as they
are available). Please see the Trust's SAI for more information.

OTHER REDEMPTION OPTIONS AND AUTOMATIC SERVICES. Certain other services and
restrictions for selling shares automatically are offered by the Funds. Please
see the SAI for more information about these services and restrictions.

OTHER. The Funds also reserve the right to make a "redemption in kind" -
payment in portfolio securities rather than cash - if the amount the investor
is redeeming is large enough to affect fund operations (for example, if it
represents more than 1% of the Fund's assets). Each Fund reserves the right
to:

- refuse any purchase or exchange request,
- change or discontinue its exchange privilege,
- change its minimum investment amounts, and
- delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions).

TAX CONSEQUENCES

DIVIDENDS, DISTRIBUTIONS AND TAXES. 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. Further, the Funds distribute any net capital gains that it has
realized once a year. Dividends and distributions will be reinvested in the
fund unless the investor instructs the Fund otherwise. There are no fees or
sales charges on reinvestments.

Dividends and distributions are taxable to most shareholders as
ordinary income (unless an investment is in an IRA or other tax-advantaged
account). The tax status of any distribution is the same regardless of how
long an investor has been in the fund and whether distributions are reinvested
or taken in cash. The tax status of dividends and distributions will be
detailed in annual tax statements from the Funds. An exchange of a Fund's
shares for the shares of another fund will be treated as a sale of The Fund's
shares and any gain may be subject to federal income tax.

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 most states from
state and local personal income taxes, except to the extent uninvested cash is
invested in repurchase agreements. Some states have minimum investment
requirements that must be met by the U.S. Treasury 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 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.

As to the 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 individual
shareholders at the applicable mid-term or long-term capital gains rate
regardless of the length of time the Fund's shares have been owned by the
shareholder.

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

10
<PAGE> 27
Fund may be fined $50 annually for each account for which a certified TIN is
not provided or is incorrect. In the event that such a fine is imposed with
respect to an account in any year, a corresponding charge will be made against
the account. The Funds will not accept purchase orders for accounts for which
a correct and certified TIN is not provided or which is otherwise subject to
backup withholding, except in the case of certain non-resident alien account
holders.

GENERAL INFORMATION

SMALL BALANCES. Because of the expense of maintaining accounts with small
balances (less than $1,000), the Funds may choose to either levy a monthly
charge (currently $5) or redeem the account and remit the proceeds. Some Firms
may establish variations of minimum balances and fee amounts if those
variations are approved by the Funds.

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

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

ACCOUNT STATEMENTS. Shareholders are advised to retain all account statements.

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
OCTOBER 15, 1997
(COMMENCEMENT OF
PRIMARY INSTITUTIONAL FUND YEAR ENDED OPERATIONS) TO
(TREASURER'S TRUST SHARES) MAY 31, 1999 MAY 31, 1998
-------------------------- ------------ ------------
<S> <C>
Net asset value, beginning of period . . . . $ 1.0000
--------
Income from investment operations . . . . . . .0351
Expenses . . . . . . . . . . . . . . . . . . .0029
--------
Net investment income(1) . . . . . . . . . . .0322
Dividends from net investment income(1) . . . (.0322)
--------
Net asset value, end of period . . . . . . . $ 1.0000
========
Total Return . . . . . . . . . . . . . . . . 5.13%(2)
RATIOS/SUPPLEMENTAL DATA
------------------------
Net assets in thousands, end of period . . . 171,700
Ratio of expenses to average net assets . . . .60%(2)
Ratio of net investment income to average net
assets . . . . . . . . . . . . . . . . . . . 5.00%(2)
</TABLE>

<TABLE>
<CAPTION>
MAY 5, 1998
(COMMENCEMENT OF
U.S. GOVERNMENT INSTITUTIONAL FUND YEAR ENDED OPERATIONS) TO
(TREASURER'S TRUST SHARES) MAY 31, 1999 MAY 31, 1998
-------------------------- ------------ ------------
<S> <C>
Net asset value, beginning of period . . . . $ 1.0000
--------
Income from investment operations . . . . . . .0036
Expenses . . . . . . . . . . . . . . . . . . .0000
--------
Net investment income(1) . . . . . . . . . . .0036
Dividends from net investment income(1) . . . (.0036)
--------
Net asset value, end of period . . . . . . . $ 1.0000
========
Total Return . . . . . . . . . . . . . . . . 4.85%(2)
RATIOS/SUPPLEMENTAL DATA
------------------------
Net assets in thousands, end of period . . . 3,261
Ratio of expenses to average net assets . . . .60%(2)
Ratio of net investment income to average net 4.73%(2)
assets . . . . . . . . . . . . . . . . . . .
</TABLE>

11
<PAGE> 28
<TABLE>
<CAPTION>
MAY 13, 1998
(COMMENCEMENT OF
INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND YEAR ENDED OPERATIONS) TO
(TREASURER'S TRUST SHARES) MAY 31, 1999 MAY 31, 1998
-------------------------- ------------ ------------
<S> <C>
Net asset value, beginning of period . . . . $ 1.0000
--------
Income from investment operations . . . . . . .0021
Expenses . . . . . . . . . . . . . . . . . . .0003
-------
Net investment income(1) . . . . . . . . . . .0018
Dividends from net investment income(1) . . . (.0018)
--------
Net asset value, end of period . . . . . . . $ 1.0000
========
Total Return . . . . . . . . . . . . . . . . 3.39%(2)
RATIOS/SUPPLEMENTAL DATA
------------------------
Net assets in thousands, end of period . . . 14,031
Ratio of expenses to average net assets . . . .60%(2)
Ratio of net investment income to average net 3.33%(2)
assets . . . . . . . . . . . . . . . . . . .
</TABLE>

<TABLE>
<CAPTION>
OCTOBER 1, 1998
(COMMENCEMENT OF
U.S. TREASURY INSTITUTIONAL FUND OPERATIONS) TO
(TREASURER'S TRUST SHARES) MAY 31, 1999
-------------------------- ------------
<S> <C>
Net asset value, beginning of period . . . .
Income from investment operations . . . . . .
Expenses . . . . . . . . . . . . . . . . . .
Net investment income(1) . . . . . . . . . .
Dividends from net investment income(1) . . .
Net asset value, end of period . . . . . . .
Total Return . . . . . . . . . . . . . . . .
RATIOS/SUPPLEMENTAL DATA
------------------------
Net assets in thousands, end of period . . .
Ratio of expenses to average net assets . . .
Ratio of net investment income to average net
assets . . . . . . . . . . . . . . . . . . .
- -----
</TABLE>
(1) Based on compounding of daily dividends. Not indicative of future
results.
(2) Annualized.

----------

12
<PAGE> 29

<TABLE>
<S> <C>
SEC File 811-3141

This Prospectus contains the information
about Treasurer's Trust class for each [THE RESERVE FUNDS LOGO]
Fund, which a prospective investor should Founders of
know before investing. "America's First
Money Fund"
The Trust's Statement of Additional
Information ("SAI") contains additional TREASURER'S TRUST:
and more detailed information about the PRIMARY INSTITUTIONAL FUND
Funds and its classes, and is considered U.S. GOVERNMENT INSTITUTIONAL FUND
part of this Prospectus. The Annual and U.S. TREASURY INSTITUTIONAL FUND
Semi-Annual Reports list the holdings in
each Fund, describe Fund performance,
include financial statements for the
Funds, and discuss market conditions and
strategies that significantly affected the
Funds' performance. These documents may
be obtained without charge by writing or
calling the Funds at 800-637-1700. You can
also download the documents from the SEC's
web site (http://www.sec.gov).

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

[THE RESERVE FUNDS LOGO]
Founders of
"America's First
Money Fund"

1250 Broadway, New York, NY 10001-3701
(212) 401-5500

GENERAL INFORMATION AND 24-HOUR YIELD AND Prospectus
BALANCE INFORMATION July 31, 1999
800-637-1700 - www.reservefunds.com

Distributor Resrv Partners, Inc.

RIT/TT-07/99
</TABLE>

13
<PAGE> 30

RESERVE INSTITUTIONAL TRUST
1250 BROADWAY, NEW YORK, NY 10001-3701
212-401-5500 - 800-637-1700

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

24-HOUR YIELD AND BALANCE INFORMATION
NATIONWIDE 800-637-1700 - WWW.RESERVEFUNDS.COM

RESERVE INSTITUTIONAL TRUST
STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information ("SAI") describes the Reserve
Institutional Trust ("Trust") and its four money funds: Primary, U.S.
Government, U.S. Treasury and Interstate Tax-Exempt Institutional Funds (each a
"Fund", together the "Funds"). 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 and SAI, there were four separate series (funds) authorized and
outstanding. Additional series (fund) may be added in the future by the Board of
Trustees. This Statement is not a Prospectus, but provides detailed information
to supplement the Prospectus dated July 31, 1999 and should be read in
conjunction with it. A copy of the Prospectus may be obtained without charge by
writing or calling the Fund at the above address or telephone number. The
Securities and Exchange Commission ("SEC") maintains a web site
(http://www.sec.gov) where you can download the SAI, the Prospectus, material
incorporated by reference & other information regarding the Fund. This Statement
is dated July 31, 1999.

<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
- ----------------- ----
<S> <C>
Description of Funds...................................................2
Management of the Trust................................................9
Investment Management, Distribution and Custodian Agreements..........12
Information About the Trust...........................................14
How to Buy and Sell Shares............................................15
Dividends, Distributions and Taxes....................................21
Yield Information.....................................................23
General Information...................................................24
</TABLE>

SHARES OF THE FUNDS ARE NEITHER GUARANTEED NOR INSURED BY THE U.S. GOVERNMENT
AND THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE.

1
<PAGE> 31

DESCRIPTION OF THE FUNDS

The primary investment objective of each Fund, with the exception of 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
Interstate Tax-Exempt Institutional Fund seeks to have its interest income
exempt from federal income taxes, as is consistent with preservation of capital
and liquidity. However, achievement of this objective is not guaranteed.
Investment in the Funds is not insured or guaranteed by the U.S. government,
Federal Deposit Insurance Corporation or any other government agency. Although
each Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money investing in the Funds.

The Reserve Institutional Trust is a non-diversified mutual fund. However, each
of its separate investment portfolios (Funds) intends to comply with the
diversification requirement of Rule 2a-7 under the 1940 Act which generally
limits a money-market fund to investing no more than 5% of its total assets in
securities of any one issuer, except U.S. government securities, as defined
below.

Reserve Management Co., Inc. ("RMCI") serves as the Funds' Investment Adviser.
Resrv Partners, Inc. ("RESRV"), which is a wholly owned subsidiary of RMCI, is
the distributor of the Funds' shares. RESRV is located at 1250 Broadway, New
York, NY 10001-3701.

The following information supplements and should be read in conjunction with the
Prospectus.

SUPPLEMENTAL INVESTMENT POLICIES. Each Fund's investment objective and the
following investment policies may not be changed without the affirmative vote of
a majority of the outstanding shares of a Fund. A majority of the outstanding
shares of a Fund means the vote of the lesser of (i) 67% or more of the shares
of a Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii) more
than 50% of the outstanding shares of the Fund. A Fund cannot:

(1) invest in any security other than those discussed herein or in the
Prospectus;

(2) borrow money except as a temporary or emergency measure (but not for the
purpose of purchasing securities), and not in an amount to exceed 5% of
the value of its total assets;

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

(4) act as an underwriter with respect to the securities of others as defined
under federal securities laws;

(5) concentrate investments in any particular industry except: (a) to the
extent that its investments are concentrated exclusively in municipal
obligations, U.S. Governments or instruments secured by such obligations,
and (b) for the Primary Institutional Fund, which may invest more than 25%
of its assets in banking;

(6) purchase, sell or otherwise invest in real estate or commodities or
commodity contracts; however, a Fund may purchase municipal obligations
secured by interests in real estate;

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

(8) sell any security short or write, sell or purchase any futures contract or
put or call option; provided, however, a Fund shall have the authority to
purchase municipal obligations subject to a stand-by commitment, at the
Fund's option;

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

(10) make investments on a margin basis.

Notwithstanding the foregoing investment restrictions, each Fund may
invest substantially all of its assets in another open-end investment company
with substantially the same investment objective as the Fund.

Based upon shareholder approval, the Trust may use a "master/feeder"
structure. Rather than investing directly in securities, the Fund is a "feeder
fund," meaning that it invests in a corresponding "master fund". The master
fund, in turn invests in securities using the strategies described in this
Prospectus. One potential benefit of this structure is lower costs, because the
expenses of the master fund can be shared with any other feeder funds.

2
<PAGE> 32

OTHER POLICIES OF THE PRIMARY, U.S. GOVERNMENT AND U.S. TREASURY INSTITUTIONAL
FUNDS. The Primary and U.S. Government Funds may, to increase their income, lend
their securities to brokers, dealers and institutional investors if the loan is
collateralized in accordance with applicable regulatory requirements (the
"Guidelines") and if, after any loan, the value of the securities loaned does
not exceed 25% of the value of its assets. Under the present Guidelines, the
loan collateral must, on each business day, be at least equal to the value of
the loaned securities plus accrued interest and must consist of cash or
securities of the U.S. government (or its agencies or instrumentalities). The
Funds receive an amount equal to the interest on loaned securities and also
receive negotiated loan fees. The Funds may also pay reasonable finders,
custodian and administrative fees. Loan arrangements made by a Fund will comply
with all other applicable regulatory requirements including the rules of the New
York Stock Exchange ("NYSE or Exchange"), which require the borrower, after
notice, to redeliver the securities within the normal settlement time of three
(3) business days.

OTHER POLICIES OF THE INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND. 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 securities 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, the settlement date occurs within one month of the
purchase of such municipal obligations. During the period between the purchase
and settlement dates, no payment is made by the Fund to the issuer and no
interest accrues to the Fund on such securities. 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 ("NAV"). The Fund will also maintain readily marketable assets
at least equal in value to commitments for when-issued securities specifically
for the settlement of such commitments. RMCI does not believe that the Fund's
NAV or income will be adversely affected by the purchase of municipal
obligations on a when-issued basis.

The Fund may purchase participation interests in municipal obligations
from financial institutions. A participation interest gives a 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.

Although it is not the current intention, from time to time the Fund may
invest in taxable short-term investments ("taxable investments") consisting of
obligations backed by the full faith and credit of the U.S. government, its
agencies or instrumentalities ("U.S. Governments"), deposit-type obligations,
acceptances, letters of credit of Federal Deposit Insurance Corporation member
banks and instruments fully collateralized by such obligations, including
repurchase agreements. 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

RMCI uses its reasonable business judgment in selecting investments in
addition to considering the ratings of Moody's, S&P and other rating services,
when available. 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

3
<PAGE> 33

maturities of 397 days or less and limiting its average maturity to 90 days or
less.

TYPES OF SECURITIES. Money-market securities are high-quality, short-term
securities that pay a fixed, variable or floating interest rate. Securities are
often specifically structured so that they are eligible investments for a
money-market fund having demand or put features which have the effect of
shortening the security's maturity. Municipal money-market securities include
variable rate demand bonds, commercial paper, municipal notes and shares of
municipal money-market funds.

Debt securities are used by issuers to borrow money. The issuer usually
pays a fixed, variable or floating rate of interest, and must repay the amount
borrowed at the maturity of the security. Some debt securities, such as zero
coupon bonds, do not pay current interest, but are sold at a discount from their
face values. Municipal debt securities include general obligation bonds of
municipalities, local or state governments, project or revenue-specific bonds,
or pre-refunded or escrowed bonds.

Municipal securities are issued to raise money for a variety of public and
private purposes, including general financing for state and local governments,
or financing for a specific project or public facility. Municipal securities may
be fully or partially backed by the local government, by the credit of a private
issuer, by the current or anticipated revenues from a specific project or
specific assets, or by domestic or foreign entities providing credit support
such as letters of credit, guarantees or insurance.

A repurchase agreement ("repo") transaction occurs when the Fund purchases
and simultaneously contracts to resell securities at fixed prices determined by
the negotiated yields. The Fund will limit repo transactions to those domestic
financial institutions and securities dealers who are deemed credit-worthy
pursuant to guidelines established by the Trustees. Repos are considered by the
SEC staff to be loans by the Fund that enters into them. Repos could involve
risks in the event of a default or insolvency of the repo counter-party to the
agreement, including possible delays or restrictions upon the Fund's ability to
dispose of the underlying securities. In an attempt to reduce the risk of
incurring a loss on a repo, RMCI will follow procedures intended to provide that
all repos are at least 100% collateralized as to principal and interest. The
Fund will make payment for such instruments only upon their physical delivery
to, or evidence of their book-entry transfer to, the account of the Fund's
Custodian. If the seller defaults on the repurchase obligation, the Fund could
incur a loss and may incur costs in disposing of the underlying security. The
Fund will not hold more than 10% of its net assets in illiquid securities,
including repurchase agreements with a term greater than seven (7) days.

RISKS OF INVESTING IN THE PRIMARY, U.S. GOVERNMENT AND U.S. TREASURY
INSTITUTIONAL FUNDS. Money-market securities are high-quality, short-term
securities that pay a fixed, variable or floating interest rate. Securities are
often specifically structured so that they are eligible investments for a
money-market fund. For example, in order to satisfy the maturity restrictions
for a money market fund, some money-market securities have demand or put
features which have the effect of shortening the security's maturity. Further,
the principal risk factors associated with investment in each Fund are the risk
of fluctuations in short-term interest rates, the risk of default among one or
more issuers of securities which comprise a Fund's assets; consequently when you
sell (redeem) your shares of a Fund, they could be worth more or less than what
you paid for them. In addition to the general investment risks of the Funds that
are common to and may affect the money-market industry as a whole, there are
risks specific to the types of securities held.

U.S. GOVERNMENT SECURITIES. U.S. government securities include a variety of
instruments which are issued or guaranteed by the U.S. Treasury, various
agencies of the federal government and various instrumentalitites which have
been established or sponsored by the U.S. government, and certain interests in
the foregoing types of securities such as U.S. Treasury STRIPS. U.S. government
securities include direct obligations of the U.S. Treasury (such as Treasury
bills, Treasury notes, and Treasury bonds). Obligations such as securities
issued by the Government National Mortgage Association ("GNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC"), the Federal National Mortgage
Association ("FNMA"), the Student Loan Marketing Association ("SLMA") and the
Federal Home Loan Bank ("FHLB") are also considered U.S. government securities.
Some obligations of agencies and instrumentalities of the U.S. government, such
as GNMA, are supported by the full faith and credit of the U.S. government Other
securities, such as obligations issued by FNMA and SLMA, are supported by the
right of the issuer to borrow from the U.S. Treasury; and others, such as
obligations issued by FHLB and FHLMC, are

4
<PAGE> 34

supported only by the credit of the agency or instrumentality issuing the
obligation. In the case of securities not backed by the full faith and credit of
the U.S., the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment.

U.S. Treasury STRIPS permit the separate ownership and trading of the
interest and principal components of direct obligations of the U.S. Treasury.
These obligations may take the form of (i) obligations from which interest
coupons have been stripped; (ii) the interest coupons that are stripped; or
(iii) book-entries at a Federal Reserve member bank representing ownership of
obligation components.

BANK OBLIGATIONS. The Primary Institutional Fund may invest in bank obligations
that include certificates of deposit, bankers' acceptances, letters of credit
and time deposits. A certificate of deposit is a negotiable certificate
representing a financial institution's obligation to repay funds deposited with
it, earning a specified rate of interest over a given period. A bankers'
acceptance is a negotiable obligation of a bank to pay a draft which has been
drawn on it by a customer. A time deposit is a non-negotiable deposit in a
financial institution earning a specified interest rate over a given period of
time. A letter of credit is an unconditional guarantee by the issuing bank to
pay principal and interest on a note a corporation has issued.

Domestic banks are subject to extensive but different government
regulations which may limit both the amount and types of loans which may be made
and interest rates which may be charged. In addition, the profitability of the
banking industry is dependent largely upon the availability and cost of funds.
General economic conditions as well as exposure to credit losses arising from
possible financial difficulties of borrowers play an important part in the
operations of the banking industry. Domestic commercial banks organized under
federal law are supervised and examined by the Controller of the Currency and
are required to be members of the Federal Reserve System and to have their
deposits insured by the Federal Deposit Insurance Corporation. Domestic banks
organized under state law are supervised and examined by state banking
authorities but are members of Federal Reserve System only if they elect to
join. As a result of federal and state laws and regulations, domestic banks are,
among other things, generally required to maintain specified levels of reserves
and are subject to other regulations designed to promote financial soundness.

FOREIGN BANKS. The Primary Institutional Fund may invest in obligations of
foreign banks and foreign branches of U.S and foreign banks. Investment in these
securities involve risks which may include unfavorable political and economic
developments, possible withholding taxes, seizure of foreign deposits, currency
controls or other governmental restrictions which might affect payment of
principal or interest. Furthermore, foreign banks are not regulated by U.S.
banking authorities and are generally not bound by financial reporting standards
comparable to U.S. banks.

MUNICIPAL OBLIGATIONS. The Primary Institutional Fund may invest in municipal
obligations, the interest on these municipal obligations is not exempt from
federal income tax. They may be issued to raise money for various public
purposes such as constructing public facilities. Certain types of municipal
obligations are issued to obtain funding for privately operated facilities.
General obligation bonds and notes are backed by the taxing power of the issuer.
Revenue bonds and notes are backed by the revenues of a project or facility such
as tolls from a toll road or, in some cases, from the proceeds of a special
excise tax, but not by the general taxing power. Industrial development revenue
bonds and notes are a specific type of revenue bond or note backed by the credit
of a private issuer. Municipal obligations bear fixed, variable or floating
rates of interest.

The Primary Institutional Fund will purchase municipal securities which
are rated MIG1 or MIG2 by Moody's Investor Services, Inc. ("Moody's"), SP-1 or
SP-2 by Standard & Poor's Corporation ("S&P") or the equivalent. Municipal
obligations which are not rated may also be purchased provided such securities
are determined to be of comparable quality by RMCI to those rated securities in
which the Funds may invest, pursuant to guidelines established by their Boards
of Trustees.

Municipal obligations are sometimes offered on a "when-issued" or delayed
delivery basis. There is no limit on the Primary Fund's ability to purchase
municipal securities on a when-issued basis. At the time a Fund makes the
commitment to purchase a municipal obligation on a when-issued basis, it will
record the transaction and reflect the

5
<PAGE> 35

value of the security in determining its net asset value ("NAV"). Each Fund will
also maintain readily marketable assets at least equal in value to commitments
for when-issued securities specifically for the settlement of such commitments.
RMCI does not believe that a Fund's NAV or income will be adversely affected by
the purchase of municipal obligations on a when-issued basis.

Municipal securities can be significantly affected by economic and
political changes, as well as uncertainties in the municipal market related to
taxation, legislative changes, or the rights of municipal security holders.
Because many municipal securities are issued to finance similar projects,
especially those relating to education, health care, transportation and various
utilities, conditions in those sectors and the financial condition of an
individual municipal issuer can affect the overall municipal market.

COMMERCIAL PAPER. The Primary Institutional Fund has never purchased commercial
paper and has no current interest of doing so. However, it may purchase
commercial paper consisting only of short-term, unsecured promissory notes
issued to finance short-term credit needs which are direct obligations issued by
domestic entities. The other corporate obligations in which the Primary
Institutional Fund may invest consist of high-quality, short-term bonds and
notes (including variable amount master demand notes) issued by domestic
corporations, including banks.

REPURCHASE AND REVERSE REPURCHASE AGREEMENTS. A repurchase agreement ("repo")
transaction occurs when the Fund purchases and simultaneously contracts to
resell securities at fixed prices. Each Fund will limit repos to those financial
institutions and securities dealers who are deemed credit-worthy pursuant to
guidelines established by the Funds' Board of Trustees ("Trustees"). Repos are
considered by the SEC staff to be loans by the Fund that enters into them. Repos
could involve risks in the event of a default of the repo counter-party to the
agreement, including possible delays, losses or restrictions upon the Fund's
ability to dispose of the underlying securities. In an attempt to reduce the
risk of incurring a loss on a repo, RMCI will follow procedures intended to
provide that all repos are at least 100% collateralized as to principal and
interest. A Fund will make payment for such instruments only upon their physical
delivery to, or evidence of their book-entry transfer to, the account of the
Fund's Custodian. If the seller defaults on the repurchase obligation, the Fund
could incur a loss and may incur costs in disposing of the underlying security.
A Fund will not hold more than 10% of its net assets in illiquid securities,
including repurchase agreements, providing for settlement in more than seven (7)
days after notice.

The Primary and U.S. Government Institutional Funds may sell securities in
a reverse repo when it is considered advantageous, such as to cover net
redemptions or to avoid a premature outright sale of its portfolio securities.
In a typical reverse repo transaction, the seller (Fund) retains the right to
receive interest and principal payments on the security, but transfers title to
and possession of it to a second party in return for receiving a percentage of
its value. By repaying the repo counterparty the value received plus interest,
the Fund repurchases the transferred security. It is the Fund's policy that
entering into a reverse repo transaction will be for temporary purposes only
and, when aggregated with other borrowings, may not exceed 5% of the value of
the total assets of the Fund at the time of the transaction.

RISKS OF INVESTING IN THE INTERSTATE TAX-EXEMPT INSTITUTIONAL FUND. The
investment risks of the fund are specific to the particular type of municipal
obligations, as well as general risks that may affect the municipal money-market
industry as a whole.

There are two types of education-related bonds: (i) those issued to
finance projects for public and private colleges and universities, and (ii)
those representing pooled interests in student loans. Bonds issued to supply
educational institutions with funds are subject to the risk of unanticipated
revenue decline, primarily the result of decreasing student enrollment or
decreasing state and federal funding. Student loan revenue bonds are generally
offered by state authorities or commissions and are backed by pools of student
loans. Underlying student loans may be guaranteed by state guarantee agencies
and may be subject to reimbursement by the U.S. Department of Education through
its guaranteed student loan program. Others may be private, uninsured loans made
to parents or students which are supported by reserves or other forms of credit
enhancement. Recoveries of principal due to loan defaults may be applied to
redemption of bonds or may be used to re-lend, depending on program latitude and
demand for loans. Cash flows supporting student loan revenue bonds are impacted
by numerous factors, including

6
<PAGE> 36

the rate of student loan defaults, seasoning of the loan portfolio, and student
repayment deferral periods of forbearance. Other risks associated with student
loan revenue bonds include potential changes in federal legislation regarding
student loan revenue bonds, state guarantee agency reimbursement and continued
federal interest and other program subsidies currently in effect.

The risks associated with electric utilities include the availability and
cost of fuel and capital, the effects of conservation on energy demand, the
effects of rapidly changing environmental, safety, and licensing requirements,
and other federal, state, and local regulations, timely and sufficient rate
increases, increasing competition, opposition to nuclear power and legislative
changes.

A major revenue source for the health care industry is payments from the
Medicare and Medicaid programs and, consequently, the industry is sensitive to
legislative changes and reductions in spending for such programs. Many other
factors may affect health care-related obligations, such as general and local
economic conditions; demand for services; expenses (including malpractice
insurance premiums); legislative and regulatory changes by private and
governmental agencies, as well as competition among health care providers.

Housing revenue bonds are generally issued by a state, county, city, local
housing authority, or other public agency. Generally they are secured by the
revenues derived from mortgages purchased with the proceeds of the bond issue.
It is extremely difficult to predict the supply of available mortgages to be
purchased with the proceeds of an issue or the future cash flow from the
underlying mortgages. Therefore, there are risks that proceeds will exceed
supply, resulting in early retirement of bonds, or that homeowner repayments
will create an irregular cash flow. Many factors may affect the financing of
housing projects, including but not limited to: acceptable completion of
construction, proper management, occupancy and rent levels, economic conditions,
and changes to current laws and regulations.

Transportation-related municipal securities may be issued to finance the
construction of toll roads, highways, airports, or other transit facilities.
Airport bonds are dependent on the stability of the airline industry and a
specific carrier who uses the airport as a hub. Air traffic generally follows
broader economic trends, as well as the price and availability of fuel. The cost
and availability of fuel affects toll road bonds as do toll levels, the presence
of competing roads and the general economic health of an area. Fuel costs and
availability generally affect all transportation-related securities, as do the
presence of alternate forms of transportation, such as public transportation.

Water and sewer revenue bonds are often considered to have relatively
secure credit due to their issuer's importance, monopoly status, and generally
unimpeded ability to raise rates. Despite this, lack of water supply due to
insufficient rain, run-off, or snow pack is a concern that has led to past
defaults and could in the future. Further, public resistance to rate increases,
costly environmental litigation, and federal environmental mandates are
challenges faced by issuers.

In view of the Fund's investment in industrial development revenue bonds
and notes secured by letters of credit or guarantees of banks, an investment in
the Fund's 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
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 capital 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.

Many factors affect the Fund's performance. The Fund's yield will change
daily based on changes in interest rates and market conditions. Although the
Fund has managed to maintain a stable $1.00 share price, since its inception,
there is no guarantee that the Fund will be able to do so.

7
<PAGE> 37

The principal risk factors associated with investment in the Fund are the
risk of fluctuations in short-term interest rates and the risk of default among
one or more issuers of securities which comprise the Fund's assets; consequently
when you sell (redeem) your shares of the Fund, they could be worth more or less
than what you paid for them.

The value of municipal securities may be affected by uncertainties in the
municipal market-related to legislation or litigation involving the taxation of
municipal securities or the rights of municipal securities holders in the event
of a bankruptcy. Proposals to restrict or eliminate the federal income tax
exemption for interest on municipal securities are introduced from time to time.
Proposals also may be introduced before the individual state legislatures that
would affect the state tax treatment of a municipal fund's distributions. This
could have a significant impact on the prices of some or all of the municipal
securities held by the Fund, making it more difficult for a money-market fund to
maintain a stable net asset value ("NAV") per share.

Debt and money-market securities have varying levels of sensitivity to
changes in interest rates. In general, the price of a debt or money-market
security can fall when interest rates rise and can rise when interest rates
fall. Securities with longer maturities can be more sensitive to interest rate
changes. The longer the maturity of a security, the greater the impact a change
in interest rates could have on the security's price. In addition, short-term
and long-term interest rates do not necessarily move in the same amount or the
same direction. Short-term securities tend to react to changes in short-term
interest rates, and long-term securities tend to react to changes in long-term
interest rates. For example, a major increase in interest rates or a decrease in
the credit quality of the issuer of one of a fund's investments could cause the
fund's share price to decrease.

Entities located in foreign countries that provide credit support or a
maturity-shortening structure can involve increased risks. Extensive public
information about the provider may not be available and unfavorable political,
economic or governmental developments could affect the value of the security.

Changes in the financial condition of an issuer, changes in specific
economic or political conditions that affect a particular type of security or
issuer, and changes in general economic or political conditions can affect the
credit quality or value of an issuer's securities. Lower-quality debt securities
(those of less than investment-grade quality) tend to be more sensitive to these
changes than higher-quality debt securities. Entities providing credit support
or a maturity-shortening structure also can be affected by these types of
changes. Municipal securities backed by current or anticipated revenues from a
specific project or specific assets can be negatively affected by the
discontinuance of the taxation supporting the project or assets or the inability
to collect revenues for the project or from the assets. If the Internal Revenue
Service determines an issuer of a municipal security has not complied with
applicable tax requirements, interest from the security could become taxable and
the security could decline significantly in value. In addition, if the structure
of a security fails to function as intended, interest from the security could
become taxable or the security could decline in value. In response to market,
economic, political or other conditions, RMCI may temporarily use a different
investment strategy for defensive purposes. If RMCI does so, different factors
could affect the Fund's performance, and the Fund may distribute income subject
to federal income tax.

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 amortized cost. If a bank or other municipal
securities dealer were to default under such standby 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 a standby
commitment exceeded the current value of the underlying municipal obligation. If
a bank or other municipal securities dealer defaults under its standby
commitment, the liquidity of the security subject to such commitment may be
adversely affected.

8
<PAGE> 38

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.

Another risk factor associated with investment in the Fund is
"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 U.S. government securities, securities of other
regulated investment companies, cash and cash items) so that, with respect to at
least 50% of its total assets, not more than 5% of such assets are invested in
the securities of a single issuer.

PORTFOLIO TURNOVER, TRANSACTION CHARGES AND ALLOCATION. As investment securities
transactions made by the Fund are normally principal transactions at net prices,
the Fund does not normally incur brokerage commissions. Purchases of securities
from underwriters involve a commission or concession paid by the issuer to the
underwriter and after market transactions with dealers involve a spread between
the bid and asked prices. The Fund has not paid any brokerage commissions during
the past three fiscal years.

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

Subject to the overall supervision of the officers of the Fund and the
Trustees, RMCI places all orders for the purchase and sale of the Fund's
investment securities. In the purchase and sale of investment securities, RMCI
will seek to obtain prompt and reliable execution of orders at the most
favorable prices and yields. In determining best price and execution, RMCI may
take into account a dealer's operational and financial capabilities, the type of
transaction involved, the dealer's general relationship with RMCI, and any
statistical, research, or other services provided by the dealer to RMCI. To the
extent such non-price factors are taken into account the execution price paid
may be increased, but only in reasonable relation to the benefit of such
non-price factors to the Fund as determined by RMCI. Brokers or dealers who
execute investment securities transactions may also sell shares of the Fund;
however, any such sales will be neither a qualifying nor disqualifying factor in
the selection of brokers or dealers.

When orders to purchase or sell the same security on identical terms are
simultaneously placed for the Fund and other investment companies managed by
RMCI, the transactions are allocated as to amount in accordance with each order
placed for each Fund. However, RMCI may not always be able to purchase or sell
the same security on identical terms for all investment companies affected.

MANAGEMENT OF THE TRUST

The Funds' Trustees are responsible for the management and supervision of
the Trust. The Trustees approve all significant agreements between the Funds and
those companies that furnish services to the Funds.

Trustees and executive officers of the Funds, together with information as
to their principal business occupations during at least the last five years, are
shown below:

++BRUCE R. BENT, 61, President, Treasurer and Trustee, 1250 Broadway, New
York, NY 10001-3701.

9
<PAGE> 39

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

++BRUCE R. BENT II, 33, Trustee, Senior Vice President and Assistant
Secretary, 1250 Broadway, New York, NY 10001-3701.

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

+RICHARD BASSUK, 57, Trustee, c/o The Singer & Bassuk Organization, 767
Third Avenue, 28th Floor, New York, NY 10017.

From 1995 to present, Mr. Bassuk has been a founding principal and
President of The Singer & Bassuk Organization. From 1994 to present, Mr. Bassuk
served as Chairman of R.E. Bases Enterprises Corporation. Previously, Mr. Bassuk
joined Starrett Housing Corporation in 1973 and was President and COO from 1981
to 1993. He is currently Trustee of RF, RIT, RTET, RNYTET and RPES.

+EDWIN EHLERT, JR., 67, Trustee, 125 Elm Street, Westfield, NJ 07091.

Until his retirement, he was President of Premier Resources Inc. (a
meeting and planning company from October 1989 to December 31, 1996 and CEO of
Ehlert Travel Associates, Inc. (a travel agency) from November 1978 to December
31, 1996. He is a Trustee of RF, RIT, RTET, RNYTET and RPES.

+HENRI W. EMMET, 72, Trustee, 1535 Presidential Drive, Apt. 4A, Columbus,
OH 43212.

From January 1995 to December 1995, Mr. Emmet served as Principal of
Global Interaction, which provides consulting services to international banking
interests. Mr. Emmet retired as the Managing Director of Servus Associates, Inc.
in 1994 and U.S.A. Representative of the First National Bank of Southern Africa
in 1996. He is currently Trustee of RF, RIT, RTET, RNYTET, and RPES.

+DONALD J. HARRINGTON, C.M., 53, Trustee, St. John's University, Jamaica,
NY 11439.

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

+DIANA P. HERRMANN, 40, Trustee, 380 Madison Avenue, Suite 2300, New York,
NY 10017.

Ms. Herrmann is President and COO of Aquila Management Corporation,
sponsor of 14 mutual funds with over $3 billion in assets, as of October 5,
1998. Prior to joining Aquila in 1986, Ms. Herrmann was employed with European
American Bank in New York and was board member and Secretary of Bank Credit
Association. She is currently Trustee of RF, RIT, RTET, RNYTET and RPES.

+WILLIAM E. VIKLUND, 58, Trustee, 110 Grist Mill Lane, Plandome Manor, NY
11030-1110.

Mr. Viklund is formerly President and COO of Bancorp and President and CEO
of Long Island Savings (1980-1996); Senior Vice President/Department Head of
Bankers Trust Corp. (1972-1980); and Vice President and Mortgage Officer of
Anchor Savings Bank (1967-1972). He is currently Trustee of RF, RIT, RTET,
RNYTET and RPES.

ARTHUR T. BENT III, 30, Vice President and Assistant Secretary, 1250
Broadway, New York, NY 10001-3701.

10
<PAGE> 40

Mr. Bent III joined The Reserve Funds in 1997 and is Vice President and
Assistant Secretary of RF, RIT, RTET, RNYTET and RPES. Before joining Reserve,
he was a private investor.

JAMES M. FREISEN, 41, Controller, 1250 Broadway, New York, NY 10001-3701.

Mr. Freisen joined The Reserve Funds in 1999 and is Controller of RF, RIT,
RTET RNYTET, RPES. Before joining The Reserve Funds in 1999, Mr. Freisen was an
Assistant Vice President at Paine Webber from August 1998 until February 1999.
Prior to that, he was Assistant Vice President, Bank of New York; Assistant Vice
President, Fifth Third Bank; Vice President, Smith Barney; and, Assistant Vice
President, Drexel Burnham Lambert.

MARYKATHLEEN FOYNES, 29, Counsel and Secretary, 1250 Broadway, New York,
NY 10001-3701.

Ms. Foynes is Counsel and Secretary of RF, RIT, RTET, RNYTET, and RPES.
Before joining The Reserve Funds in 1998, Ms. Foynes was a staff attorney at
PaineWebber, Inc. Prior to that, Ms. Foynes was the District Manager for a
Member of the House of Representatives.

- ------------
+Messrs. Bassuk, Ehlert, Emmet, Harrington, Viklund and Ms. Herrmann are members
of a Review Committee, which performs the functions of an audit committee and
reviews compliance procedures and practices.

++Interested Trustee within the meaning of the Investment Company Act of 1940.

The members of the Board of Trustees who are not interested persons
("disinterested Trustees") will be paid a stipend of $3,500 for each joint Board
meeting that they attend and an annual fee of $16,000 for service to all of the
Trusts in the complex.

Under the Declaration of Trust, the Trustees and officers are entitled to be
indemnified by the Trust to the fullest extent permitted by law against all
liabilities and expenses reasonably incurred by them in connection with any
claim, suit or judgment or other liability of obligation of any kind in which
they become involved by virtue of their service as a Trustee or officer of the
Trust, except liabilities incurred by reason of their willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of their office.

[As of June 30, 1999, the Trust's records reflect that the Trustees and officers
directly or indirectly as a group owned less than 1% of the outstanding shares
of the Funds. The Trust does not pay any pension or retirement benefits to its
Trustees.]

COMPENSATION TABLE
FOR FISCAL YEAR ENDED MAY 31, 1999

<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE FROM TRUST AND FUND COMPLEX
COMPENSATION (4 ADDITIONAL TRUSTS)
NAME OF TRUSTEE, POSITION FROM FUNDS PAID TO TRUSTEE
- ------------------------- ---------- ---------------
<S> <C> <C>
Bruce R. Bent, President and Trustee $ 0 $ 0
Bruce R. Bent II, SVP and Trustee $ 0 $ 0
Richard Bassuk, Trustee $ $
------------ ------------
Edwin Ehlert, Jr., Trustee $ $
------------ ------------
Henri W. Emmet, Trustee $ $
------------ ------------
Rev. Donald J. Harrington, Trustee $ $
------------ ------------
Diana P. Herrmann $ $
------------ ------------
William E. Viklund $ $
------------ ------------
</TABLE>

The following executive officers of the Fund had allocated cash remuneration in
excess of $60,000 during the last fiscal year ending May 31, 1999 for services
rendered to the Fund:

11
<PAGE> 41

<TABLE>
<CAPTION>
ESTIMATED ANNUAL
AGGREGATE BENEFITS UPON
NAME CAPACITY REMUNERATION RETIREMENT
---- -------- ------------ ----------
<S> <C> <C> <C>
Bruce R. Bent President $ $
----------- -----------
Bruce R. Bent II Sr. Vice President $ $
----------- -----------
Arthur T. Bent III Vice President $ $
----------- -----------
MaryKathleen Foynes Counsel $ $
----------- -----------
James M. Freisen Controller $ $
----------- -----------
</TABLE>

The Trustees serve indefinite terms (subject to certain removal
procedures) and they appoint their own successors, provided that at least a
majority of the Trustees have been elected by shareholders. A Trustee may be
removed at any meeting of shareholders by a vote of a majority of the Fund's
shareholders.

[As of June 30, 1999, no person was known by the Fund to own of record or
beneficially 5% or more of the outstanding shares of the Fund.]

INVESTMENT MANAGEMENT, DISTRIBUTION
AND CUSTODIAN AGREEMENTS

INVESTMENT MANAGEMENT AGREEMENT. Reserve Management Company, Inc. ("RMCI" or
"Adviser"), 1250 Broadway, New York, NY 10001-3701, a registered investment
adviser, manages the Funds and provides them with investment advice. Under the
Investment Management Agreement, RMCI manages the Funds' investment in
accordance with each Fund's investment objective and policies, subject to
overall approval by the Trustees.

Presently, under the terms of the Investment Management Agreements with
the Funds, the Funds pay RMCI a comprehensive management fee at an annual rate
of 0.25% of average daily net assets. RMCI 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 of the disinterested Trustees, for which each Fund
it pays its direct or allocated share.

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.

For the fiscal year ended May 31, 1998 and 1999, the Adviser received
management fees of $677,424 and $___________from the Trust.

From time to time, RMCI may waive receipt of its fees and/or voluntarily
assume certain expenses of a Fund that would have the effect of lowering the
Fund expense ratio and increasing yield to investors at the time such amounts
are assumed or waived, as the case may be. RMCI may also make such advertising
and promotional expenditures, using its own resources, as it from time to time
deems appropriate.

The Investment Management Agreements for each of the Funds were duly
approved by shareholders in 1999, and may be renewed annually if specifically
approved by the Trustees and by the vote of a majority of the disinterested
Trustees cast in person at a meeting called for the purpose of voting on such
renewal. The Agreements terminate automatically upon their assignment and may be
terminated without penalty upon sixty (60) days' written notice by a vote of the
Trustees or by vote of a majority of outstanding voting shares of a Fund or by
RMCI.

DISTRIBUTION AGREEMENT. The Fund's Distributor is RESRV. The Fund has authorized
the Distributor, in connection with their sale of Fund shares, to give only such
information and to make only such statements and representations as are
contained in the Prospectus. Sales may be made only by the Prospectus. The
Distributor may

12
<PAGE> 42

offer and sell shares of the Fund pursuant to a separate Prospectus applicable
to such Distributor. The Distributor are "principal underwriters" for the Funds
within the meaning of the Investment Company Act of 1940, and as such act as
agent in arranging for the continuous offering of Fund shares. The Distributor
have the right to enter into selected dealer agreements with brokers or other
persons of their choice for the sale of Fund shares. Parties to selected dealer
agreements may receive assistance payments if they qualify for such payments
under the Plan of Distribution described below. RESRV's, principal business is
the distribution of mutual fund shares. No Distributor has retained underwriting
commissions on the sale of Fund shares during the last four fiscal years. During
the fiscal year ended May 31, 1999, distribution assistance payments were made
to RESRV, in the amount of $____.

The Distribution Agreements may be renewed annually if specifically
approved by the Board of Trustees, and by the vote of a majority of the
disinterested Trustees cast in person at a meeting called for the purpose of
voting on such approval or by the vote of a majority of the outstanding voting
securities of the Fund.

PLAN OF DISTRIBUTION AND SERVICE PLAN. The Fund maintains a Plan of Distribution
("Plan") and related agreements, as amended, under Rule 12b-1 of the Investment
Company Act of 1940, which provides that investment companies may pay
distribution expenses, directly or indirectly, pursuant to a Plan adopted by the
investment company's Board and approved by its shareholders. Under the
Distribution Plan, each Fund makes assistance payments to brokers, financial
institutions and other financial intermediaries ("payee(s)") for shareholder
accounts ("qualified accounts") as to which a payee has rendered distribution
assistance services to the Class C and D shares at an annual rate of 0.25% and
0.50%, respectively, of the average daily net asset value ("NAV") of all Firms'
qualified accounts. Class A, B and Treasurer's Trust shares do not participate
in a distribution plan. Such distribution assistance may include, but is not
limited to, establishment of shareholder accounts, delivering prospectuses to
prospective investors and processing automatic investment in Fund shares of
client account balances. Substantially all such monies (together with
significant amounts from RMCI's own resources) are paid by RMCI to payees for
their distribution assistance or administrative services, with any remaining
amounts being used to partially defray other expenses incurred by RMCI in
distributing Fund shares. In addition to the amounts required by the Plan, RMCI
may, at its discretion, pay additional amounts from its resources. The rate of
any additional amounts that may be paid will be based upon RESRV and RMCI's
analysis of the contribution that a Firm makes to the Fund by increasing assets
under management, and reducing expense ratios and the cost to the Fund if such
services were provided directly by the Fund or other authorized persons and
RESRV and RMCI will also consider the need to respond to competitive offers of
others, which could result in assets being withdrawn from the Fund and an
increase in the expense ratio for the Fund. RMCI may elect to retain a portion
of the distribution assistance payments to pay for sales materials or other
promotional activities. The Trustees have determined that there is a reasonable
likelihood the Plan will benefit the Fund and its shareholders.

Under the Plan, the Fund's Controller or Treasurer reports quarterly the
amounts and purposes of assistance payments. During the continuance of the Plan,
the selection and nomination of the disinterested Trustees are at the discretion
of the disinterested Trustees currently in office.

During the fiscal year ended May 31, 1999, $_________ was paid under the
Plan by the Trust. Any such payments are intended to benefit the Fund by
maintaining or increasing net assets to permit economies of scale in providing
services to shareholders and to contribute to the stability of such shareholder
services. During the fiscal year ended May 31, 1999, substantially all payments
made by the Fund were to brokers or other financial institutions and
intermediaries for share balances in the Fund.

The Plan and related agreements were duly approved by shareholders and may
be terminated at any time by a vote of the majority of the outstanding voting
securities of each Fund, or by vote of the disinterested Trustees. The Plan and
related agreements may be renewed from year to year, if approved by the vote of
a majority of the disinterested Trustees cast in person at a meeting called for
the purpose of voting on such renewal. The Plan may not be amended to increase
materially the amount to be spent for distribution without shareholder approval.
All material amendments to the Plan must be approved by a vote of the Board of
Trustees and of the disinterested Trustees, cast in person at a meeting called
for the purpose of such vote.

13
<PAGE> 43

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

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

CUSTODIAN, INDEPENDENT ACCOUNTANT AND COUNSEL. The Chase Manhattan Bank, 4 New
York Plaza, New York, NY 10004 is Custodian of the Funds' securities and cash
pursuant to a Custodian Agreement. The Bank of New York, 1 Wall Street, New
York, NY 10286 and Custodial Trust Company, 101 Carnegie Center, Princeton, NJ
08540 are Custodians for the Funds for limited purposes in connection with
certain repurchase agreements. The Custodian has no part in determining the
investment policies of the Fund or which securities are to be purchased or sold
by the Fund. PricewaterhouseCoopers, LLP, 1301 Avenue of the Americas, New York,
NY 10019 is the Funds' independent accountant. Dechert, Price & Rhoads, 1775 Eye
Street NW, Washington, DC 20006, is the Funds' outside counsel and has rendered
its opinion as to certain legal matters regarding the due authorization and
valid issuance of the shares being sold pursuant to the Funds' Prospectus. .

INFORMATION ABOUT THE TRUST

The Reserve Institutional Trust's Declaration of Trust permits the Trust
to issue an unlimited number of full and fractional shares of beneficial
interest that may be issued in any number of series (funds) and/or classes.
Shares issued will be fully paid and non-assessable and will have no preemptive
rights. The shareholders of each Fund are entitled to a full vote for each full
share held (and fractional votes for fractional shares) and have equal rights to
earnings, dividends, redemptions and in the net assets of their Fund upon
liquidation. The Trustees do not intend to hold annual meetings but will call
such special meetings of shareholders as may be required under the 1940 Act
(e.g., to approve a new Investment Advisory Agreement or change the fundamental
investment policies) or by the Declaration of Trust.

Further, the Trust is allowed to divide or combine the shares into a
greater or lesser number of shares without thereby changing the proportionate
beneficial interests in the Fund. If they deem it advisable and in the best
interests of shareholders, the Trustees may classify or reclassify any unissued
shares of the Fund by setting or changing the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms and conditions of redemption of the stock. Any changes
would be required to comply with all applicable state and federal securities
laws. These currently require that each class be preferred over all other
classes in respect to assets specifically allocated to such class. It is
anticipated that, under most circumstances, the rights of any additional classes
would be comparable, unless otherwise required, to respond to the particular
situation. Upon liquidation of any Fund, shareholders are entitled to share, pro
rata, in the net assets of their respective Funds available for distribution to
such shareholders. It is possible, although considered highly unlikely in view
of the method of operation of mutual funds, that should the assets of one class
of shares be insufficient to satisfy its liabilities, the assets of another
class could be subject to claims arising from the operations of the first class
of shares. No changes can be made to the Fund's issued shares without
shareholder approval.

Each Fund share, when issued, is fully paid, non-assessable and fully
transferable or redeemable at the shareholder's option. Each share has an equal
interest in the net assets of the respective Funds, equal rights to all
dividends and other distributions, and one vote for all purposes. Shares of all
classes vote together for the election of Trustees and have non-cumulative
voting rights, meaning that the holders of more than 50% of the shares voting
for the election of Trustees could elect all Trustees if they so choose, and in
such event the holders of the remaining shares could not elect any person to the
Board of Trustees. The Funds intend to conduct their operations in such a way as
to avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Funds.

14
<PAGE> 44

To date, the Board has authorized the creation of four series (funds):
Primary, U.S. Government, U.S. Treasury and Interstate Tax-Exempt Institutional
Funds. All consideration received by the Trust for shares of one of the Fund and
all assets in which such consideration is invested will belong to that Fund
(subject only to rights of creditors of the Fund) and will be subject to the
liabilities related thereto. The income attributable to, and the expenses of,
one series are treated separately from those of the other series. The Trust has
the ability to create, from time to time, new series without shareholder
approval.

Under Massachusetts law, the shareholders and trustees of a business trust
can be personally liable for the Funds' obligations unless, as in this instance,
the Declaration of Trust provides, in substance, that no shareholder or trustee
shall be personally liable for the Funds, and each investment portfolio's,
obligations to third parties, and requires that every written contract made by a
Fund contain a provision to that effect. The Declaration of Trust also requires
the Fund to indemnify its shareholders and Trustees against such liabilities and
any related claims or expenses.

The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration protects a Trustee against any liability to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.

SEC regulations provide that if a class is separately affected by a matter
requiring shareholder vote (election of Trustees, ratification of independent
auditor selection, and approval of an underwriting agreement are not considered
to have such separate effect and may be voted upon by the shareholders of the
Fund as a whole), each class will vote separately on such matters as approval of
the Investment Management Agreement, material amendments to the Plan of
Distribution, and changes in the fundamental policies of the Fund. These items
require approval by a majority of the affected shareholders. For this purpose a
"majority" is constituted by either 50 percent of all shares voting as a group
or 67 percent of the shares voted as a group at an annual meeting of
shareholders at which at least 50 percent of the shares of each group are
represented.

HOW TO BUY AND SELL SHARES

PURCHASES - GENERAL. Shares of each Fund are sold without a sales charge and may
only be surcharged by wire. You may be charged a fee if you effect transactions
in shares of a Fund through a securities dealer, bank or other financial
institution. Share certificates are not issued. The Fund reserves the right to
reject any purchase order.

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

MAXIMUM MAXIMUM
ANNUAL MAXIMUM TOTAL ANNUAL MINIMUM
SHAREHOLDER ANNUAL OPERATING INITIAL
SERVICES FEE* 12B-1 FEE* EXPENSES+ INVESTMENT
------------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Class A 0% 0% 0.25% $10 million
Class B 0.20% 0% 0.45% $ 5 million
Treasurer's Trust 0.35% 0% 0.60% None
Class C 0.25% 0.25% 0.75% $ 1 million
Class D 0.25% 0.50% 1.00% $ 250,000
</TABLE>

- ----------
* As a percentage of average daily net assets.

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

In all other respects, all classes of shares represent the same interest
in the income and assets of each respective Fund. You will need to choose a
share class before making your initial investment. Before you choose, you should
weigh the impact of all potential costs over the life of your investment. The
minimum initial investment in each Fund is $10 million for Class A, $5 million
for Class B, $1 million for Class C, and $250,000 for Class D shares. The
Treasurer's Trust shares of each Fund are not subject to any minimum initial
investment amount. There is no

15
<PAGE> 45

minimum subsequent investment for any of the classes. The Funds reserve the
right to waive the minimum investment requirement.

The initial investment must be accompanied by an Account Application or
equivalent information. In addition, the Fund does not accept cash investments
or travellers or third party checks. The Fund reserves the right to reject any
investment in the Fund for any reason and may, at any time, suspend all new
investment in the Fund. Shares also may be purchased through Reserve Automatic
Asset Builder (see below). In addition, the Funds reserve the right to change
the minimum investment amount at any time.

Each Fund's shares are sold on a continuous basis at the NAV per share.
Wires which do not correctly identify the account to be credited may be returned
or delay the purchase of shares. If you do not specify the account number and
Fund you wish to invest in, all money sent will be invested in the U.S.
Government Fund. Only federal funds wires drawn on the Fund's bank are eligible
for entry as of the business day received. For federal funds wires to be
eligible for same-day order entry, the Funds must be notified before 2:00 PM
(Eastern time, 11:00 AM for the U.S. Treasury and Interstate Tax-Exempt
Institutional Funds) of the amount to be transmitted and the account to be
credited. A Federal Reserve wire system transfer ("Fed wire") is the only type
of wire transfer that is reliably available in federal funds on the day sent.
For a Fed wire to receive same day credit, the Fund must be notified before 2:00
PM (Eastern time) (11:00 AM Eastern time for the U.S. Treasury and Interstate
Tax-Exempt Funds) of the amount to be transmitted and the account to be
credited. Items submitted to the Fund for investment are only accepted when
submitted in proper form (i.e., receipt of all necessary information, signatures
and documentation), denominated in U.S. dollars, and are credited to shareholder
accounts only upon their conversion into federal funds, which normally takes one
or two business days following receipt.

IF SHARES OF THE FUND ARE PURCHASED BY RESERVE AUTOMATIC TRANSFER, THE
FUND MAY DELAY TRANSMITTAL OF REDEMPTION PROCEEDS UNTIL SUCH TIME AS IT HAS
ASSURED ITSELF THAT GOOD PAYMENT HAS BEEN COLLECTED FOR THE PURCHASE OF SUCH
SHARES, WHICH MAY BE UP TO 10 CALENDAR DAYS.

SHARE PRICE: NAV. The valuation of a Fund's portfolio securities is based upon
their amortized cost, which does not take into account unrealized gains or
losses. This involves valuing an instrument at its cost and thereafter assuming
a constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, there may be some periods
during which value, as determined by amortized cost, is higher or lower than the
price the Fund would receive if it sold the instrument.

The Fund's Board has established, as a particular responsibility within
the overall duty of care owed to the Fund's investors, procedures reasonably
designed to stabilize the Fund's price per share as computed for the purpose of
purchases and redemptions at $1.00. Such procedures include review of the Fund's
portfolio holdings by the Board, at such intervals as it may deem appropriate,
to determine whether the Fund's NAV calculated by using available market
quotations or market equivalents deviates from $1.00 per share based on
amortized cost. In such review, investments for which market quotations are
readily available will be valued at the most recent comparable maturity, quality
and type, as obtained from one or more of the major market makers for the
securities to be valued. Other investments and assets will be valued at fair
value as determined in good faith by the Board.

The extent of any deviation between the Fund's NAV based upon available
market quotations or market equivalents and $1.00 per share based on amortized
cost will be examined by the Fund's Board. If such deviation exceeds 1/4 of 1%,
the Board will consider promptly what action, if any, will be initiated (The
Reserve Fund is required by the SEC to contact the Board if the deviation is 1/2
of 1%). In the event the Board determines that a deviation exists which may
result in material dilution or other unfair results to investors or existing
shareholders, it has agreed to take such corrective action as it regards as
necessary and appropriate, including: selling Fund instruments prior to maturity
to realize capital gains or losses or to shorten average Fund maturity;
withholding dividends or paying distributions from capital gains; redeeming
shares in kind; or establishing a NAV per share by

16
<PAGE> 46

using available market quotations. Shares are offered at their NAV, which is
calculated at the close of each business day as defined in the Prospectus. The
NAV is not calculated on days the Exchange is closed for trading and on certain
regional banking holidays. The holidays (as observed) on which the Exchange and
The Reserve Fund are closed currently are: New Year's Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. In addition, The Reserve Fund is closed on
Columbus Day and Veterans Day. The NAV of each Fund is normally maintained at
$1.00 per share. No Fund can guarantee that its NAV will always remain at $1.00
per share although the Funds have managed to do so since inception.

The NAV per share of each Fund is computed by dividing the value of the
net assets of each Fund (i.e., the value of its assets less liabilities) by the
total number of shares of such Fund outstanding. The Board of Trustees have
determined the most practical method currently available for valuing investment
securities is the amortized cost method. This procedure values a money-market
fund's portfolio securities, which does not take into account unrealized gains
and losses. As a result, portfolio securities are valued at their acquisition
cost, adjusted over time based on the discounts or premiums reflected in their
purchase price. This method of valuation is designed to permit a fund to be able
to maintain a stable NAV.

In order to maintain a $1.00 share price, the Fund will utilize the
following practices: maintain a dollar-weighted average portfolio maturity of 90
days or less; purchase only instruments having remaining maturities of 397 days
or less; and invest only in securities determined by the Board of Trustees to be
of high quality with minimal credit risk. To assess whether repurchase agreement
transactions present more than minimal credit risk, the Trustees have
established guidelines and monitor the creditworthiness of all entities,
including banks and broker-dealers, with whom the Fund proposes to enter into
repurchase agreements. In addition, such procedures are reasonably designed,
taking into account current market conditions and the investment objective of
the Fund, to attempt to maintain the Fund's NAV as computed for the purpose of
sales and redemptions at $1.00 per share.

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

RESERVE AUTOMATIC ASSET-BUILDER PLAN. If you have an account, you may purchase
shares of a Fund ($25 suggested minimum) from a checking, NOW, or bank
money-market deposit account; from a U.S. government distribution ($25 suggested
minimum) such as a social security, federal salary, or certain veterans'
benefits, or other payment from the federal government. You may also make
arrangements for the direct deposit of your payroll into your Fund account.
Please call the Funds at 800-637-1700 for an application.

REDEMPTIONS -- GENERAL. Redemption payments will normally be made by check or
wire transfer but the Fund is authorized to make payment of redemptions partly
or wholly in kind (that is, by delivery of investment securities valued at the
same time as the redemption NAV is determined). The Fund has elected to permit
any shareholder of record to make redemptions wholly in cash to the extent the
shareholder's redemptions in any 90-day period do not exceed the lesser of
$250,000 or 1% of the net assets of the respective Fund. The election is
irrevocable pursuant to rules and regulations under the 1940 Act unless
withdrawal is permitted by order of the SEC. Redemptions in kind are further
limited by the Fund's practice of holding instruments typically with a minimum
value of $1,000,000 and its intention to redeem in kind only when necessary to
reduce a disparity between amortized cost and market value. In disposing of such
securities, an investor might incur transaction costs and on the date of
disposition might receive an amount less than the NAV of the redemption.

WRITTEN AND TELEPHONE REDEMPTION REQUESTS. Redemption instructions and election
of the plans described below may be made when your account is opened. Subsequent
elections and changes in instructions must be in writing with signature(s)
guaranteed. Changes in registration or authorized signatories may require
additional documentation. The Funds strongly suggest (but not require) that each
written redemption be at least $100,000 and require that each telephone
redemption be at least $100,000, except for redemptions which are intended to
liquidate your account. A shareholder will be charged $100 for redemption checks
for less than $100,000, except for Class D shareholders who will be charged
$2.00 for redemption checks of less than $100. Payments of $100,000 or more will
be wired upon request without charge, except for Class D shareholders who can
have payments of $10,000 or more wired without charge. A shareholder will be
charged $100 for wires of less than $100,000, except for Class D

17
<PAGE> 47

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.

When redeeming in writing, please write a letter of instruction which states:
the name(s) and signature(s) of all account holders, account number, Fund name,
the dollar amount you want to sell, how and where to send the proceeds,
necessary signature(s) guaranteed, and if you are redeeming your IRA, please
note the applicable withholding requirements.

The Funds will waive the signature requirement on a redemption request
once every thirty (30) days if all of the following conditions apply: if the
redemption check is (1) for $5,000 or less; (2) payable to the shareholder(s) of
record; and (3) mailed to the shareholder(s) at the address of record for the
previous 30 days. Signature guarantees are designed to protect both you and the
Funds from fraud. Signature guarantees can be obtained from most banks, credit
unions or savings associations, or from broker/dealers, national securities
exchanges or clearing agencies deemed eligible by the SEC. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature Guaranteed"
must appear with the signature. Notaries public cannot provide signature
guarantees. The Funds may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call
800-637-1700.

To be able to redeem by telephone, you must select this option on your
application or in writing before you make your first telephone redemption. Once
you have selected this option, you may redeem by calling the Funds at
800-637-1700. Unless you decline telephone privileges on your application and
the Funds take reasonable measures to verify the request, the Funds will not be
liable for any unauthorized telephone order, or for any loss, cost or expense
for acting upon an investor's telephone instructions. To further reduce the risk
of loss, proceeds of telephone redemptions may be sent only to (1) the bank or
brokerage account designated by the shareholder on the application or in a
letter with the signature(s) guaranteed; or (2) the address of record for the
past 30 days. To change the designated brokerage or bank account it is necessary
to contact the Firm through which shares of the Fund were purchased or, if
purchased directly from the Funds, it is necessary to send a written request to
the Funds with signature(s) guaranteed. The Fund reserves the right to refuse a
telephone redemption if it believes it is advisable to do so.

RESERVE CASH PERFORMANCE ACCOUNT. (Treasurer's Trust and Class D shareholders
only). The Reserve Cash Performance Account ("CPA") and the Reserve Cash
Performance Account Plus ("CPA Plus") provide a comprehensive package of
additional services to investors. These packages provide a check arrangement
where checks are issued to Reserve shareholders. By completing the application
or a signature card (for existing accounts) and certain other documentation, you
can write checks in any amount against your account. Redemptions by check
lengthen the time your money earns dividends, since redemptions are not made
until the check is processed by the Fund. Because of this, you cannot write a
check to completely liquidate your account, nor may a check be presented for
certification or immediate payment. Your checks will be returned (bounced) and a
fee charged if they are postdated, contain an irregularity in the signature,
amount or otherwise, or are written against accounts with insufficient or
uncollected funds. All transactions activity, including check redemptions, will
be reported on your account statement. Checking may not be available to clients
of some Firms.

A VISA Gold Check Card (a debit card) is also available with these
packages for Treasurer's Trust and Class D shareholders only. The VISA card
functions exactly as does a conventional VISA credit card except that the
cardholder's Reserve account is automatically charged for all purchases and cash
advances, thus eliminating the usual monthly finance charges. You may also use
your VISA card to get cash at ATMs. Investors receive a 1% cash rebate on all
VISA purchases which is credited to their Reserve account. As with the checking
facility, VISA charges are paid by liquidating shares in your Reserve account,
but any charges that exceed the balance will be rejected. VISA card issuance is
subject to credit approval. Reserve, VISA or the bank may reject any application
for checks or cards and may terminate an account at any time. Conditions for
obtaining a VISA Gold Check Card may be altered or waived by the Funds either
generally or in specific instances. The checks and VISA cards are intended to
provide investors with easy access to their account balances.

18
<PAGE> 48

VISA cardholders may be liable for the unauthorized use of their card up
to the amount set by governing Federal regulations, currently $50 if the Fund or
the bank is not notified of the theft or loss within two (2) business days.
Participants should refer to the VISA Account Shareholder Agreement for complete
information regarding responsibilities and liabilities with respect to the VISA
Gold Check Card. If a card is lost or stolen, the cardholder should report the
loss immediately by telephoning the issuing bank, currently BankOne at
614-248-4242, which can be reached 24 hours a day, seven (7) days a week or the
Funds at 800-631-7784 or 212-401-5500 during normal business hours (Monday
through Friday, 9:00 A.M. to 5:00 P.M., Eastern time).

For the different attributes associated with CPA and CPA Plus packages,
please call The Reserve Funds at 800- 637-1700. The Funds will charge a
nonrefundable annual CPA Plus service fee (currently $60 which may be charged to
the account at the rate of $5 monthly). CPA and CPA Plus participants will be
charged for specific costs incurred in placing stop payment orders, obtaining
check copies and in processing returned checks. These charges may be changed at
any time upon 30 days' notice to participants. Upon proper notice, the Funds may
choose to impose a fee if it deems a shareholder's actions to be burdensome. In
addition, Firms in this program may charge their own additional service fees and
may establish their own minimum check amount.

The use of checks and VISA cards by participants will be subject to the
terms of your Reserve CPA Application and VISA Account Shareholder Agreement.

[TOUCH-TONE BILL PAYMENT SERVICE. (Treasurer's Trust and Class D shareholders
only). In the near future, the Funds will offer its shareholders touch-tone bill
payment which gives you the flexibility of paying bills over the telephone on an
automatic or variable basis. Terms, conditions and restrictions will be outlined
in the User's Guide and Application.]

STOP PAYMENTS. (Treasurer's Trust and Class D shareholders only). The Funds will
honor stop payment requests on unpaid shareholder checks provided they are
advised of the correct check number, payee, check amount and date. Stop payment
requests received by the Funds by 2:00 PM (Eastern time) will be effective the
next business day. Oral stop payment requests are effective for fourteen (14)
calendar days, at which time they will be cancelled unless confirmed in writing.
Written stop payment requests will remain in effect for one year. A fee will be
charged for this service.

AUTOMATIC WITHDRAWAL PLANS. (Treasurer's Trust and Class D shareholders only).
If you have an account with a balance of at least $5,000, you may elect in
writing to participate in either of the following: (i) an Income Distribution
Plan providing for monthly, quarterly or annual payments by redemption of shares
from reinvested dividends or distributions paid to your account during the
preceding period; or (ii) a Fixed Amount Withdrawal Plan providing for the
automatic redemption of a sufficient number of shares of your account to make a
specified monthly, quarterly or annual payment of a fixed amount. Changes to
instructions must be in writing with signature(s) guaranteed. In order for such
payments to continue under the Plan, there must be a minimum of $25 available
from reinvested dividends or distributions. Payments can be made to you or your
designee. An application for the Automatic Withdrawal Plans can be obtained from
the Funds. The amount, frequency and recipient of the payments may be changed by
giving proper written notice to the Funds. The Funds may impose a charge, modify
or terminate any Automatic Withdrawal Plan at any time after the participant has
been notified. This privilege may not be available to clients of some Firms or
may be available subject to conditions or limitations.

AUTOMATIC TRANSFER PLANS (ACH). (Treasurer's Trust and Class D shareholders
only). You may redeem shares of a Fund (minimum $100) without charge by
telephone if you have filed a separate Reserve Automatic Transfer application
with the Fund. The proceeds will be transferred between your Fund account and
the checking, NOW or bank money-market deposit account (must be Automated
Clearing/House member bank) designated in your application. Redemption proceeds
will be on deposit in your account at the Automated Clearing House member bank
ordinarily two (2) business days after receipt of the request. The Funds may
impose a charge, modify or terminate this privilege at any time after the
participant has been duly notified. This privilege may not be available to
clients of some Firms or may be available subject to conditions or limitations.

19
<PAGE> 49

EXCHANGE PRIVILEGE. A shareholder may exchange shares at NAV with all Reserve
money-market funds and the Reserve Private Equity Series. Shares to be acquired
in an exchange must be registered for sale in the investor's state. The Funds
reserve the right to record all exchange requests.

The exchange privilege is not available for shares which have been held
for less than fifteen (15) days. Exchanges by telephone are an automatic
privilege unless the shareholder notifies the Funds on the Account Application
that this authorization has been withheld. Unless authorization is withheld, the
Funds will honor requests by any person by telephone at 800-637-1700, that the
Funds deem to be valid. The Funds and their affiliates may be liable for any
losses caused by their failure to employ reasonable procedures to avoid
unauthorized or fraudulent instructions. To reduce such risk, the registration
of the account into which shares are to be exchanged must be identical to the
registration of the originating account and all telephone exchange requests will
be recorded. The Funds may also require the use of a password or other form of
personal identification. In addition, each Fund will provide written
confirmation of exchange transactions. During periods of volatile economic and
market conditions, a shareholder may have difficulty making an exchange request
by telephone, in which case an exchange request would have to be made in
writing.

Exchanges of shares of one fund for another is a taxable event and may
result in a gain or loss for federal income tax purposes. The exchange privilege
described under this heading may not be available to clients of some Firms and
some Firms may impose conditions on their clients that are different from those
described in the Prospectus or SAI.

The exchange privilege may be modified or terminated at any time, or from
time to time, upon 60 days' notice to shareholders if such notice is required by
the 1940 Act. The notice period may be shorter if applicable law permits. The
Trust reserves the right to reject telephone or written requests submitted in
bulk on behalf of ten (10) or more accounts. A pattern of frequent exchanges may
be deemed by the Adviser to be abusive and contrary to the best interests of the
Fund's other shareholders and, at the Adviser's discretion, may be limited by
the Fund's refusal to accept additional purchases and/or exchanges from the
investor and/or the imposition of fees. The Funds do not have any specific
definition of what constitutes a pattern of frequent exchanges. Any such
restriction will be made on a prospective basis, upon notice to the shareholder
not later than ten (10) days following such shareholder's most recent exchange.
Telephone and written exchange requests must be received by the Funds by 4:00 PM
(Eastern time) on a regular business day to take effect that day. Exchange
requests received after 4:00 PM (Eastern time) will be effected at the next
calculated NAV.

SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the date
of payment postponed for more than seven (7) days only (a) when the Exchange is
closed (other than for customary closings), (b) when, as determined by the SEC,
trading on the Exchange is restricted or an emergency exists making it not
reasonably practicable to dispose of securities owned by a Fund or for it to
determine fairly the value of its net assets, or (c) for such periods as the SEC
may permit. If shares of a Fund are purchased by check or Reserve Automatic
Transfer, the Fund may delay transmittal of redemption proceeds until such time
as it has assured itself that good payment has been collected for the purchase
of such shares, which may generally take up to ten (10) business days.
Shareholder checks written against funds, which are not yet considered
collected, will be returned and a fee charged against the account. When a
purchase is made by wire and subsequently redeemed, the proceeds from such
redemptions normally will not be transmitted until two (2) business days after
the purchase.

SHAREHOLDER SERVICE POLICIES. The Fund's policies concerning the shareholder
services are subject to change from time to time. The Fund reserves the right to
change the minimum account size subject to the $5 monthly service charge or
involuntary redemption. The Fund further reserves the right to impose special
service charges for services provided to individual shareholders generally
including, but not limited to, fees for returned checks, stop payment orders on
official checks and shareholder checks, and special research services. The
Fund's standard service charges as described in the Prospectus are also subject
to adjustment from time to time. In addition, the Fund reserves the right to
increase its minimum initial investment amount at any time.

IF SHARES PURCHASED ARE TO BE PAID FOR BY WIRE AND THE WIRE IS NOT
RECEIVED BY THE FUND OR IF SHARES ARE PURCHASED BY CHECK, WHICH, AFTER DEPOSIT,
IS RETURNED

20
<PAGE> 50

UNPAID OR PROVES UNCOLLECTIBLE, THE PURCHASE MAY BE CANCELED OR REDEEMED
IMMEDIATELY. THE INVESTOR WHO GAVE NOTICE OF THE INTENDED WIRE OR SUBMITTED THE
CHECK WILL BE HELD FULLY RESPONSIBLE FOR ANY LOSSES INCURRED BY THE FUND, THE
INVESTMENT ADVISER OR THE DISTRIBUTOR. THE FUND MAY REDEEM SHARES FROM ANY
ACCOUNT REGISTERED IN THAT PURCHASER'S NAME AND APPLY THE PROCEEDS THEREFROM TO
THE PAYMENT OF ANY AMOUNTS DUE THE FUND, THE INVESTMENT ADVISER OR THE
DISTRIBUTOR.

PURCHASES AND REDEMPTIONS THROUGH OTHERS. Share purchases and redemptions may
also be made through brokers and financial institutions ("Firms"), which may
involve such Firms' own redemption minimums, services fees, and other redemption
requirements. Firms may provide varying arrangements for their clients with
respect to the purchase and redemption of Fund shares and may arrange with their
clients for other investment or administrative services. Firms are responsible
for the prompt transmission of purchase and redemption orders. Some Firms which
utilize a centralized purchase method for shares may have an earlier cut-off for
purchase orders than stated above and may establish higher minimum investment
requirements than set forth above. Some Firms may independently establish and
charge additional fees for their services, which would reduce their clients'
yield or return. Firms may also hold shares in nominee or street name on behalf
of their clients. In such instances, the Fund's transfer agents will have no
information about their accounts, which will be available only from their Firm.
Some of these firms participate in the Fund's Plan of Distribution ("Plan").
Under the Plan, Firms may receive compensation for recordkeeping and other
services and assistance in distributing Fund shares. In addition, certain
privileges with respect to the purchase and redemption of shares (such as check
writing redemptions) or the reinvestment of dividends may not be available
through such Firms or may only be available subject to certain conditions or
limitations. Some Firms may participate in a program allowing them access to
their clients' accounts for servicing including, without limitation, changes of
registration and dividend-payees and may perform functions such as generation of
confirmations and periodic statements and disbursement of cash dividends. The
Prospectus should be read in connection with such Firm's material regarding its
fees and services.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended ("the Code"), so
long as such qualification is in the best interests of shareholders. Such
qualification relieves the Fund of any liability for federal income tax to the
extent its earnings are distributed in accordance with applicable provisions of
the Code. If the Fund did not qualify as a regulated investment company, it
would be treated for tax purposes as an ordinary corporation subject to federal
income tax.

The Fund ordinarily declares dividends from each Fund's net investment
income on each day the Exchange and The Reserve Fund is open for business. Each
Fund's earnings for Saturdays, Sundays and holidays are declared as dividends on
the preceding business day. Dividends paid out of a Fund's investment company
taxable income will be taxable to a U.S. shareholder as ordinary income. Because
no portion of a Fund's income is expected to consist of dividends paid by U.S.
corporations, no portion of the dividends paid by the Funds is expected to be
eligible for the corporate dividends-received deduction. Distributions of net
capital gains, if any, designated as capital gain dividends are taxable to
individual shareholders, regardless of how long the shareholder has held the
Fund's shares, and are not eligible for the dividends-received deduction.
Shareholders receiving distributions in the form of additional shares, rather
than cash, generally will have a cost basis in each such share equal to the NAV
of a share of the Fund on the reinvestment date. Shareholders will be notified
annually as to the U.S. federal tax status of distributions, and shareholders
receiving distributions in the form of additional shares will receive a report
as to the NAV of those shares.

If you elect to receive dividends and distributions in cash, and your
dividend or distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest such
dividends or distributions and all future dividends and distributions payable to
you in additional Fund shares at NAV. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.

21
<PAGE> 51

Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain or loss. However, all or a portion of any gain realized
from the sale or other disposition of certain market discount bonds will be
treated as ordinary income under Section 1276 of the Code. The U.S. Treasury
Fund intends to invest only in the U.S. government securities that provide
interest income exempt in most states from state and local personal income
taxes, but may invest up to 5 percent of its assets in repurchase agreements
pending the investment of un- invested cash. Distributions attributable to net
capital gains, if any, are generally subject to state and local taxes.
Investments by a Fund in zero coupons generally will result in income to the
Fund equal to a portion of the excess of the face value of the securities over
their issue price (the "original issue discount") each year that the securities
are held, even though the Fund receives no cash interest payments.

Gain derived by a Fund from the disposition of any market discount bonds
(i.e., bonds purchased other than at original issue, where the face value of the
bonds exceeds their purchase price) held by the Fund generally will be taxed as
ordinary income to the extent of the accrued market discount on the bonds,
unless the Fund elects to include the market discount in income as it accrues.

Gains or losses attributable to fluctuations in exchange rates which occur
between the time the Primary Fund accrues receivables or liabilities denominated
in a foreign currency, and the time the Primary Fund actually collects such
receivables or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security and the date of
disposition also are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses, may increase or
decrease the amount of the Primary Fund's investment company taxable income to
be distributed to its shareholders as ordinary income.

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

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

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

With respect to a shareholder who received exempt-interest dividends on
shares held for less than six months, any loss on the sale or exchange of such
shares will, to the extent of the amount of such exempt-interest dividends, be
disallowed. A shareholder may not deduct that portion of interest in
indebtedness incurred or continued to purchase or carry shares of an investment
company paying exempt-interest dividends (such as those of the Interstate
Tax-Exempt Institutional Fund) which bears the same ratio to the total dividends
(excluding capital gains dividends) received by the shareholder. In addition,
the purchase of shares may be considered to have been made with borrowed funds
even though the borrowed funds are not directly traceable to such purchase.

22
<PAGE> 52

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

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.
Corporate shareholders and certain other shareholders specified in the Code
generally are exempt from such backup withholding. Backup withholding is not an
additional tax.

The tax consequences to a foreign shareholder of an investment in a Fund
may be different from those described herein.

Investors are advised to consult their own tax advisor(s) with respect to
the particular tax consequences to them of an investment in a Fund.

YIELD INFORMATION

For the seven-day period ended May 31, 1999, the Primary Institutional Fund's
yield was _____% and its effective yield was ______%. For the seven-day period
ended May 31, 1999, the U.S. Government Institutional Fund's yield was ____% and
its effective yield was ____%. For the seven-day period ended May 31, 1999, the
U.S. Treasury Institutional Fund's yield was ____% and its effective yield was
_____%. For the seven-day period ended May 31, 1999, the Interstate Tax-Exempt
Institutional Fund's yield was ____% and its effective yield was _____%.:

Yield is computed in accordance with a standardized method which involves
determining the net change in the value of a hypothetical pre-existing Fund
account having a balance of one share at the beginning of a seven calendar day
period for which the yield is to be quoted, dividing the net change by the value
of the account at the beginning of the period to obtain the base period return,
and annualizing the results (i.e., multiplying the base period return by 365/7).
The net change in the value of the account reflects the value of additional
shares purchased with dividends declared on the original share and any such
additional shares and fees that may be charged to shareholder accounts, in
proportion to the length of the base period and the Fund's average account size,
but does not include realized gains and losses or unrealized appreciation and
depreciation. Effective yield is computed by adding 1 to the base period return
(calculated as described above), raising the sum to a power equal to 365 divided
by 7, and subtracting 1 from the result.

Yields will fluctuate and are not necessarily representative of future
results. You should remember that yield is a function of the type and quality of
the instruments in the portfolio, portfolio maturity and operating expenses.
Your principal in the Fund is not guaranteed. See above "Share Price: NAV" for a
discussion of the manner in which the Fund's price per share is determined.

Yield information is useful in reviewing each Fund's performance relative
to other funds that hold investments of similar quality. Because yields will
fluctuate, yield information may not provide a basis for comparison with bank
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.

23
<PAGE> 53

Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data various industry
publications. From time to time, the Funds in its advertising and sales
literature may refer to the growth of assets managed or administered by RMCI
over certain time periods.

GENERAL INFORMATION

JOINT OWNERSHIP. When an account is registered in the name of one person or
another, for example a husband or wife, either person is entitled to redeem
shares in the account. The Funds assume no responsibility to either owner for
actions taken by the other with respect to an account so registered. The
Application provides that persons who register their account indemnify and hold
the Funds harmless for actions taken by either party.

USE OF JOINT PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION. Although each
Fund is offering only its own shares, it is possible that a Fund might become
liable for any misstatement in the Prospectus and SAI about the other Funds.
However, each Fund has acknowledged that it, and not any of the other Funds, is
liable for any material misstatement or omission about it in the Prospectus or
SAI.

REPORTS AND STATEMENTS. Shareholders receive an Annual Report containing audited
financial statements and an unaudited Semi-Annual Report. An account statement
is sent to each shareholder at least quarterly. Shareholders who are clients of
some Firms will receive an account statement combining transactions in Fund
shares with account statements covering other brokerage or mutual fund accounts.
Shareholders have a duty to examine their account statement(s) and report any
discrepancies to The Reserve Funds immediately. Failure to do so could result in
the shareholder suffering a loss. Further, shareholders are advised to retain
account statements.

RESERVE EASY ACCESS. Easy Access is The Reserve Funds' 24-hour toll-free
telephone service that lets customers use a touch-tone phone for a variety of
options including yields, account balances, check reorders, touch tone bill
payment and other options. To use it, call 800-637-1700 and follow the
instructions. Clients may also access full account activity for the previous six
months on the Internet at www.reservefunds.com.

INQUIRIES. Shareholders should direct their inquiries to the firm from which
they received this Prospectus or to The Reserve Funds, 1250 Broadway, New York,
NY 10001-3701 or 800-637-1700.

RATINGS

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

STANDARD & POOR'S CORPORATION. A-1: This designation is the highest category of
S&P and indicates that the degree of safety regarding timely payment is strong.
Those short-term obligations that are extremely strong characteristics will be
denoted with a plus (+).

MOODY'S INVESTORS SERVICE, INC. Prime-1 (P-1): Issuers rated P-1 (or supporting
institutions) have a superior ability for repayment of senior short-term debt
obligations. P-1 repayment will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternative liquidity.

There are three categories for short-term obligations that define an investment
grade situation designated Moody's Investment Grade as MIG1 (best) through MIG3.
MIG 1 denotes best quality, i.e., there is a strong protection by established
cash flows, superior liquidity support or demonstrated broad-based market access
for re-financing. MIG2 denotes high quality, the margins of protection are ample
but not as large as MIG1.

DUFF & PHELPS CREDIT RATING CO. Duff-1: Very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor. Those issues determined to have the highest
certainty of timely payment and whose safety is just below risk-free U.S.
Treasury short-term

24
<PAGE> 54

obligations will be denoted with a plus (+) sign designation. Those issues
determined to have a high certainty of timely payment and whose risk factors are
very small will be denoted with a minus (-) sign designation.

FITCH IBCA. F1: This designation indicates the strongest credit quality. Issues
assigned this rating reflect an assurance of timely payment. Those obligations
with an exceptionally strong credit quality will be denoted with a plus (+)
sign. Issues assigned the rating of F1+ are regarded as having the strongest
degree assurance for timely payment.

FINANCIAL HIGHLIGHTS

Financial Statements (audited) for the Reserve Institutional Trust for the
fiscal year ended May 31, 1999, including notes thereto, are incorporated by
reference in the SAI from the Trust's Annual Report to Shareholders dated May
31, 1999 filed with the SEC on July, ____ 1999.

25
<PAGE> 55
PART C
Item 23. Exhibits

(a) Declaration of Trust was filed as an exhibit to Registrant's
Post-Effective Amendment No. 11 dated October 1, 1987 and is incorporated
by reference.
(b) Bylaws were filed as an exhibit to Registrant's Post-Effective
Amendment No. 9 dated August 31, 1996. Amendment No. 1 filed as an exhibit
to Post-Effective Amendment No. 15 dated September 28, 1990. All are
incorporated by reference.
(c) Not Applicable
(d) Form of Investment Management Agreement for the Funds*
(e) Form of Distribution Agreement and Plan of Distribution filed as an
exhibit to Registrant's Post-Effective Amendment No. 9 dated August 31,
1986. Notice pursuant to such Agreement filed as an exhibit to
Post-Effective Amendment No. 27 dated December 31, 1996. All are
incorporated by reference.
(f) Pension Plan of Reserve Management Corporation was filed as an exhibit
to Post-Effective Amendment No. 32 of The Reserve Fund, File No. 811-2033;
Amendments to Pension Plan filed as an exhibit to Post-Effective Amendment
No. 45 of The Reserve Fund (File No. 811-2033) dated July 31, 1989 and all
are incorporated by reference.
(g) Custodian Agreement with Chase Manhattan Bank filed as an exhibit to
Post-Effective Amendment No. 33 of the Reserve Tax-Exempt Trust, File No.
811-3696 and is incorporated by reference.
(h) Form of Service Plan and Agreement previously filed and incorporated
by reference.
(i) Opinion of Counsel*
(j) Consent of Independent Auditors*
(k) Not applicable
(l) Not applicable
(m) Form of Registered Dealer Agreement*
(n) Financial Data Schedules*
(o) Not applicable

-------
* To be filed with later Post Effective Amendment

Item 24. Persons Controlled by or Under Common Control with Registrant
Not Applicable

Item 25. Indemnification
Each Trustee, officer, employee or agent of the Registrant, and any person who
has served at its request as a Director, Trustee, officer or employee of another
business entity, shall be entitled to be indemnified by the Registrant to the
fullest extent permitted by the laws of the Commonwealth of Massachusetts,
subject to the provisions of the Investment Company Act of 1940 and the rules
and regulations thereunder. Insofar as indemnification for liability arising
under the Securities Act of 1933 may be permitted to Trustees, officers and
controlling persons of the Registrant pursuant to the Declaration of Trust or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of any expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed the final adjudication of such issue.

Item 26. Business and Other Connections of Investment Adviser

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

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

Item 27. Principal Underwriters
(a) Resrv Partners, Inc., a principal underwriter of the Registrant, also acts
as principal underwriter to Reserve Tax-Exempt Trust, The Reserve Fund, Reserve
New York Tax-Exempt Trust and Reserve Private Equity Series.

Name and Principal Positions and Offices Positions and Offices Business Address
with Resrv Partners, Inc. with Registrant

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

Item 28. Location of Accounts and Records All records required to be maintained
by Section 31(a) of the 1940 Act and the Rules promulgated thereunder are
maintained at 1250 Broadway, New York, NY 10001-3701 except those relating to
receipts and deliveries of securities, which are maintained by the Registrant's
Custodian.

Item 29. Management Services
See "Investment Management, Distribution, Service and Custodian
Agreements" in Part B.

Item 32. Undertakings
Not Applicable

<PAGE> 56

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this
Post-Effective Amendment to its Registration Statement meets all of the
requirements for effectiveness pursuant to Rule 485 (a) under the Securities Act
of 1933 and Registrant has duly caused this Post-Effective Amendment No. 34 its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of New York, and State of New York, on the 25th
day of May, 1999.

RESERVE INSTITUTIONAL TRUST

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

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 34 to Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.

<TABLE>
<S> <C> <C>
Signature Title Date

/s/ Bruce R. Bent President, Treasurer and Trustee May 25, 1999
- ----------------------------------- (principal executive operating and
Bruce R. Bent financial officer)

* Trustee May 25, 1999
- -----------------------------------
Edwin Ehlert Jr.

* Trustee May 25, 1999
- -----------------------------------
Henri W. Emmet

* Trustee May 25, 1999
- -----------------------------------
Donald J. Harrington

/s/ Bruce R. Bent II Trustee May 25, 1999
- -----------------------------------
Bruce R. Bent II

* Trustee May 25, 1999
- -----------------------------------
William E. Viklund

* Trustee May 25, 1999
- -----------------------------------
Diana P Hermann

* Trustee May 25, 1999
- -----------------------------------
Richard Bassuk

/s/ MaryKathleen Foynes Counsel and Secretary May 25, 1999
- -----------------------------------
MaryKathleen Foynes
*Attorney-in-Fact
</TABLE>