<PAGE>
================================================================================
THE RESERVE FUNDS
RESERVE INSTITUTIONAL TRUST:
PRIMARY INSTITUTIONAL, U.S. GOVERNMENT INSTITUTIONAL AND U.S. TREASURY
INSTITUTIONAL AND INTERSTATE TAX-EXEMPT
INSTITUTIONAL FUNDS
SUPPLEMENT DATED OCTOBER 4, 2000
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED JULY 31, 2000
================================================================================
The paragraph describing the fees paid to the not "Interested Trustees"
appearing on page 10 of the Statement of Additional Information under the
Section Heading, "Management of the Trust" contains a typographical error. It
should properly read:
As of June 1, 2000, the members of the Board of Trustees who are not
"Interested Trustees" will be paid a stipend of $3,500 for each joint
Board meeting they attend in person, a stipend of $1,000 for each joint
telephonic meeting they participate in, and an annual fee of $24,000 for
service to all of the trusts in the complex.
