<PAGE> 1
[LOGO]
Founders of
"America's First
Money Fund"
-----------------
SEMI-ANNUAL REPORT
------------------
INTERSTATE TAX-EXEMPT FUND
FOR THE SIX MONTHS ENDED
NOVEMBER 30, 1995
(UNAUDITED)
[LOGO]
Founders of
"America's First
Money Fund"
810 Seventh Avenue, New York, NY 10019-5868
GENERAL INFORMATION AND 24 HOUR YIELD AND BALANCE INFORMATION
800-637-1700
This literature is not authorized for distribution to prospective investors
unless preceded or accompanied by an appropriate current prospectus.
Distributor -- Resrv Partners, Inc.
<PAGE> 2
RESERVE TAX-EXEMPT TRUST--INTERSTATE FUND
STATEMENT OF NET ASSETS--NOVEMBER 30, 1995--(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
MATURITY (IN VALUE
DESCRIPTION OF SECURITY DATE THOUSANDS) (NOTE 1)
- -------------------------------------------------------------------------------------- ---------- ------- -----------
<S> <C> <C> <C>
ALABAMA -- .33%
Decatur City IDA for Scientific Manufacturing, 3.80%(a).............................. 2/1/2014 $ 1,000 $ 1,003,248
ARIZONA -- 9.09%
Apache County IDA for Tucson Electric Power Company Project, 3.65%(a)................ 12/15/2018 1,000 1,001,686
Apache County IDA for Tucson Electric Power Company Project, 3.75%(a)................ 12/15/2018 1,100 1,101,893
Apache County IDA for Tucson Electric Power Company Series 81-A, 3.65%(a)............ 6/15/2020 1,100 1,101,855
Pima County IDA for Tucson Electric Power Company, 3.65%(a).......................... 3/15/2018 10,000 10,016,863
Pima County IDA for Tucson Electric Power Company, 3.60%(a).......................... 6/15/2022 10,000 10,016,644
Pima County IDA for Tucson Electric Power Company, 3.65%(a).......................... 12/1/2022 3,000 3,005,059
Tucson MHR for Los Portales Associates Ltd. Partnerships, 4.125%(a).................. 12/1/2007 1,600 1,616,678
CALIFORNIA -- 10.31%
California HFA for Sutter Health Series 1990B, 3.70%(a).............................. 3/1/2020 200 200,618
California RAW, 5.75%................................................................ 4/25/1996 400 410,037
Footill/Eastern Toll Road Revenue Bond Series 95-C, 3.35%(a)......................... 1/2/2035 700 702,008
Footill/Eastern Toll Road Revenue Bond Series 95, 3.40%(a)........................... 1/2/2035 100 100,291
Independent Cities Lease Finance Authority Revenue Bonds, 3.45%(a)................... 6/1/1998 500 501,475
Lancaster Redevelopment Agency MHR for Westwood Park Apartments Series 1985 K,
3.50%(a)........................................................................... 12/1/2007 200 200,596
Los Angeles Community College District TRAN, 4.50%................................... 7/31/1996 2,000 2,037,042
Los Angeles Metropolitan Transportation Authority IDA for General Union Station
Gateway A, 3.50%(a)................................................................ 7/1/2025 600 601,834
Los Angeles MHR for Malibu Meadows Project Series 91-A, 4.05%(a)..................... 12/1/2015 2,800 2,809,374
Los Angeles TRAN, 4.50%.............................................................. 7/3/1996 2,000 2,045,697
Los Angeles TRAN, 4.50%.............................................................. 7/1/1996 5,000 5,112,422
Orange County Apartment Development Revenue Bonds Issue A of 1991, the Lakes Project,
3.70% Letter of Credit with Citibank(a)............................................ 12/1/2006 600 601,912
Pasadena Rose Bowl Improvement Project, 3.70%(a)..................................... 12/1/2011 300 300,950
Pico Rivera Development Agency Revenue Bonds for Ranier Fund Crossroads Project,
3.60%(a)........................................................................... 12/1/2010 1,100 1,102,741
Sacramento Telecommunication CP, 3.95%............................................... 6/1/1996 200 200,642
San Diego County MHR Series 1988A, 5.687%(a)......................................... 12/1/2007 630 638,932
San Diego TAN, 4.75%................................................................. 7/3/1996 2,000 2,048,275
San Dimas Station 1 Project, 3.85%(a)................................................ 12/1/2005 4,200 4,200,000
San Francisco Yerba Buena Gardens, 3.95%(a).......................................... 9/1/2006 800 802,659
San Francisco TRAN, 4.50%............................................................ 7/25/1996 2,000 2,038,941
Santa Ana IDR for Mercury Savings and Loan, 4.025%(a)................................ 11/1/2005 4,100 4,128,791
Santa Clara Electric Revenue Bonds Series 85C, 3.45%(a).............................. 7/1/2010 300 300,885
Union City MHR for Skylark Apartments, 4.10%(a)...................................... 11/1/2007 200 200,358
Vista City MHR for Shadow Ridge Apartment Project, 3.45%(a).......................... 5/1/2005 300 300,851
COLORADO -- 4.20%
Adams County IDA for Clear Creek, 3.65%(a)........................................... 11/1/2008 2,000 2,006,290
Colorado HFA Center Park Village, 3.75%(a)........................................... 5/1/1997 2,000 2,006,395
Colorado HFA Series 85, 4.05%........................................................ 12/1/2005 2,000 2,006,715
Colorado MHR for Silver Reef Apartments Series 1990, 4.10%(a)........................ 3/1/2012 1,490 1,495,107
Jefferson County IDR for Kinder-Care Learning Centers Series C, 4%(a)................ 2/1/2001 1,700 1,705,752
Jefferson Country IDR for S.W. Medical Project Series 85, 4.05%(a)................... 11/1/2010 2,700 2,708,858
Wheat Ridge IDA for Pearse Electronics Inc. Project, 4.55%(a)........................ 6/1/1999 910 930,702
CONNECTICUT -- 1.25%
Connecticut DAI for Allen Group Inc., 3.80%(a)....................................... 2/1/2013 100 100,312
Connecticut DAI for Zotos International Inc. Project, 4.15%(a)....................... 12/1/2004 70 70,239
</TABLE>
2
<PAGE> 3
RESERVE TAX-EXEMPT TRUST--INTERSTATE FUND
STATEMENT OF NET ASSETS--NOVEMBER 30, 1995--(UNAUDITED)--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
MATURITY (IN VALUE
DESCRIPTION OF SECURITY DATE THOUSANDS) (NOTE 1)
- -------------------------------------------------------------------------------------- ---------- ------- -----------
<S> <C> <C> <C>
CONNECTICUT -- CONTINUED
Connecticut Development Authority Health Care Facilities Revenue Bonds for
Independent Living Project Series 1990, 3.60%(a)................................... 7/1/2015 $ 400 $ 401,230
Connecticut Development Authority PCR for Western Massachusetts Electric Co. Series
A, 3.55%(a)........................................................................ 9/1/2028 300 300,916
Connecticut EDA 4%................................................................... 6/1/1996 500 501,620
Connecticut HEF for Bridgeport Hospital Series B, 3.80%(a)........................... 7/1/2025 100 100,323
Connecticut HEF for Yale New Haven Hospital Series B, 4%(a).......................... 6/1/2012 650 663,000
Connecticut Special Assessment Unemployment Compensation Revenue Bonds Series B,
3.75%(a)........................................................................... 11/1/2001 300 300,971
Hartford Redevelopment Agency MHR for Underwood Towers, 3.60%(a)..................... 6/1/2020 1,400 1,404,472
DISTRICT OF COLUMBIA -- 1.16%
Washington, D.C. Housing Finance Agency MHR for Chastleton Development Project,
4.125%(a).......................................................................... 7/1/1997 2,200 2,237,730
Washington, D.C. TAN Series, 4%(a)................................................... 6/1/2003 1,300 1,304,274
FLORIDA -- 5.92%
Boca Raton IDA for Parking Garage Project, 4.125%(a)................................. 12/1/2014 3,000 3,031,271
Broward Country MHR for Welleby Apartment Project, 3.75%(a).......................... 12/1/2006 800 802,573
Florida MHR for Monterey Meadows Apartment Project, 3.65%(a)......................... 12/1/2007 600 605,476
Orange County MHR for Sunkey Apartments Series 1992 A, 3.65%(a)...................... 12/1/2022 4,000 4,012,581
Port Saint Lucie PCR for Florida Power and Light Project Series 1992, 3.90%(a)....... 5/1/2027 2,300 2,305,407
Port Saint Lucie PCR for Florida Power and Light Project Series 1993, 3.80%(a)....... 1/1/2026 3,500 3,511,013
Putnam County PCR for Seminole Electric Co., 3.40%(a)................................ 12/15/2009 1,000 1,015,699
Sunshine State Governmental Financial Commission Revenue Bond, 3.85%(a).............. 7/1/2016 1,000 1,002,637
Suwannee HFA for Santa Fe Health Care Project, 3.60%(a).............................. 2/1/2021 1,835 1,840,731
GEORGIA -- 3.11%
Albany Dougherty Finance Authority, 3.65%(a)......................................... 9/1/2020 3,300 3,310,343
Bartow County DAI for Princeton Carpets Inc., 3.625%(a).............................. 4/1/2000 586 589,712
Elbert County Industrial Building Authority Revenue Bonds for Seaboard Farms,
3.75%(a)........................................................................... 7/1/2005 1,800 1,811,520
Gwinnett County IDA for United Stationers Supply Company, 3.85%(a)................... 10/31/2002 3,800 3,812,451
IDAHO -- .67%
Idaho TAN, 4.50%..................................................................... 6/27/1996 2,000 2,044,082
ILLINOIS -- 4.76%
Chicago O'Hare Airport IDA for American Airlines, 3.90%(a)........................... 12/1/2017 2,800 2,809,060
Illinois Development Finance Authority Refunding Revenue Bonds for Lyric Opera House
of Chicago Project, 3.70%(a)....................................................... 12/1/2028 1,500 1,504,720
Illinois HFA for Carle Foundation Project, 3.65%(a).................................. 1/1/2022 2,200 2,206,938
Illinois HFA for University of Chicago, 3.90%(a)..................................... 8/1/2015 4,000 4,045,304
Illinois HFA for Victory Health Services Project Series 1989 C, 3.80%(a)............. 12/1/2018 4,000 4,006,247
INDIANA -- 5.98%
Indiana Bond Bank Advance Funding Program RAN Series A-2, 5.75%...................... 1/10/1996 5,000 5,242,825
Indianapolis Industrial Economic Development Revenue Bonds for Edgecomb Metals
Company, 3.75%(a).................................................................. 12/1/2008 4,300 4,314,078
Tippecanoe County PCR for Caterpillar Inc., 3.85%(a)................................. 11/1/2006 8,750 8,778,671
IOWA -- 3.17%
Buffalo Industrial Development Refunding Revenue Bonds for Linwood Mining and
Minerals, 4.05%(a)................................................................. 1/1/2000 1,800 1,806,194
Iowa Finance Authority Small Business Development Revenue Bonds for Court Associates
Series 1985 B, 3.65%(a)............................................................ 11/1/2015 5,000 5,015,885
Iowa School Corps. RAW Series A, 4.75%............................................... 6/28/1996 2,500 2,563,037
Polk County IDA for Kemin Industries Project Series 1984, 5.425%(a).................. 11/1/1999 267 267,873
Polk County IDA for Kemin Industries Project Series 1980, 5.425%(a).................. 12/1/1996 74 74,586
</TABLE>
3
<PAGE> 4
RESERVE TAX-EXEMPT TRUST--INTERSTATE FUND
STATEMENT OF NET ASSETS--NOVEMBER 30, 1995--(UNAUDITED)--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
MATURITY (IN VALUE
DESCRIPTION OF SECURITY DATE THOUSANDS) (NOTE 1)
- -------------------------------------------------------------------------------------- ---------- ------- -----------
<S> <C> <C> <C>
KENTUCKY -- 2.97%
Kentucky Turnpike Authority Prerefunded RAW, 7.75%................................... 1/1/1996 $ 490 $ 526,314
Ohio County PCR for Big River Electric Corporation, 4.15%(a)......................... 6/1/2013 2,500 2,551,483
Ohio County PCR for Big River Electric Corporation Project Series 1985, 4.15%(a)..... 10/1/2015 6,000 6,021,214
MAINE -- 1.31%
Biddeford Resource Recovery Revenue Bonds for Maine Energy Recovery Company Project,
3.90%(a)........................................................................... 7/1/2007 4,000 4,012,822
MARYLAND -- 2.44%
Anne Arundel County Industrial Refunding Revenue Bonds for Kinder-Care Learning
Centers, 4%(a)..................................................................... 2/1/2001 2,260 2,267,647
Baltimore IDA, 3.90%(a).............................................................. 8/1/2016 2,500 2,508,373
Maryland Health and Higher Education Facility Authority Revenue Bonds for North
Arundel Hospital Series 1992B, 3.75%(a)............................................ 7/1/2024 2,000 2,006,452
Montgomery County IDA for Info Systems and Network Corporation, 3.75%(a)............. 4/1/2014 700 702,158
MASSACHUSETTS -- 2.59%
Boston Water and Sewer Commission 1994 A, 3.55%(a)................................... 11/1/2024 200 200,612
Massachusetts Dedicated Income Tax Bonds Series E, 3.75%(a).......................... 12/1/1997 200 200,603
Massachusetts HEF for Capital Asset Program Series E, 3.80%(a)....................... 1/1/2035 2,300 2,304,472
Massachusetts HEF for Harvard University, 3.35%(a)................................... 2/1/2016 600 601,739
Massachusetts HEF for Harvard University, 3.35%(a)................................... 8/1/2017 200 200,580
Massachusetts HEF for Mt. College, 3.45%(a).......................................... 7/1/2018 100 100,286
Massachusetts HEF for Capital Assistance Program Series G-1, 3.30%(a)................ 1/1/2019 100 100,283
Massachusetts IDA for Cambridge, 3.70%(a)............................................ 10/1/2010 200 200,602
Massachusetts Industrial Finance Agency Refunding Revenue Bonds for Showa Women's
Institute Boston Inc., 3.75%(a).................................................... 3/15/2004 300 300,916
Massachusetts Industrial Finance Agency Revenue Bonds for Groton School Project,
3.50%(a)........................................................................... 6/1/2019 400 401,201
Massachusetts Municipal Wholesale Electric Co. Power Supply Systems Revenue Bonds
Series C, 3.35%(a)................................................................. 7/1/2019 1,300 1,303,779
Worcester BAN, 4.25%................................................................. 8/29/1996 2,000 2,021,479
MICHIGAN -- 1.34%
Dearborn Heights EDC for Oakbrook Common Project Series 1993, 3.65%(a)............... 3/1/2025 4,100 4,112,929
MINNESOTA -- 2.27%
Eagan MHR for Aspen Woods, 4.15%(a).................................................. 1/1/2026 5,580 5,599,033
New Brighton Industrial Development Refunding Revenue Bonds for Taylor Corporation
Series 1988, 5.60%(a).............................................................. 11/1/1999 513 515,087
New Hope Commercial Development Revenue Bonds for National Beauty Project Series
1994, 4.05%(a)..................................................................... 5/1/2010 835 837,873
MISSISSIPPI -- .33%
Perry County IDR for Leaf River Forrest Project, 3.625%(a)........................... 12/1/2014 1,000 1,009,358
MISSOURI -- 3.22%
Joplin IDA for Northpark Mall, 4.20%(a).............................................. 12/1/2005 5,400 5,418,434
Missouri State Environmental Improvement and Energy Resources Authority Pollution
Control RAW Series A, 4%(a)........................................................ 6/1/2014 3,400 3,468,000
St. Louis Industrial Development Refunding Revenue Bonds for Kinder-Care Learning
Centers, 4%(a)..................................................................... 2/1/2001 965 968,265
MONTANA -- .24%
Great Falls Commercial Development Revenue Bonds for Liberty Development Partners
Project, 4.15%(a).................................................................. 12/1/2007 730 732,512
NEBRASKA -- .56%
Lancaster County Industrial Development Refunding Revenue Bonds for PepsiCola
Bottling Co. of Lincoln, 5.6875%(a)................................................ 5/1/1998 578 580,200
Nebraska Industrial Finance Authority for Apple Associates Project, 4%(a)............ 9/1/2007 790 792,597
Sidney City IDA for Sidney and Lowe Railroad Project, 5.425%(a)...................... 6/1/1996 334 335,489
</TABLE>
4
<PAGE> 5
RESERVE TAX-EXEMPT TRUST--INTERSTATE FUND
STATEMENT OF NET ASSETS--NOVEMBER 30, 1995--(UNAUDITED)--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
MATURITY (IN VALUE
DESCRIPTION OF SECURITY DATE THOUSANDS) (NOTE 1)
- -------------------------------------------------------------------------------------- ---------- ------- -----------
<S> <C> <C> <C>
NEW JERSEY -- 3.20%
Jersey City BAN, 4.75%............................................................... 9/27/1996 $ 2,000 $ 2,028,669
Mercer County GOB, 4.10%............................................................. 3/15/1996 700 714,218
Middlesex County BAN, 3.625%......................................................... 6/27/1996 500 507,794
New Jersey EDA for Volvo America Corp., 4.301%(a).................................... 12/1/2004 3,200 3,233,752
West New York School Promissory Notes, 4.70%......................................... 4/5/1996 3,239 3,308,121
NEW YORK -- 9.85%
New York City GOB Series A-8, 3.85%(a)............................................... 8/1/2018 1,000 1,003,162
New York City GOB Series A-10, 3.95%(a).............................................. 8/1/2016 1,700 1,705,517
New York City GOB Series B-8, 4%(a).................................................. 8/15/2024 5,000 5,016,582
New York City GOB Series C4-96, 3.80%(a)............................................. 8/1/1996 6,100 6,119,194
New York City GOB Series C4-97, 3.80%(a)............................................. 8/1/1997 1,300 1,304,091
New York City GOB Series C4-98, 3.80%(a)............................................. 8/1/1998 1,500 1,504,720
New York City GOB Series E2, 3.80%(a)................................................ 5/15/1996 4,000 4,012,488
New York City GOB Series E2, 3.85%(a)................................................ 8/1/2020 2,700 2,708,673
New York City GOB Series E2, 3.85%(a)................................................ 8/1/2021 1,100 1,103,531
New York City GOB Series E5, 3.85%(a)................................................ 8/1/2015 2,200 2,207,067
New York City GOB Series E5, 3.85%(a)................................................ 8/1/2016 1,500 1,504,819
New York City GOB Series E5, 3.85%(a)................................................ 8/1/2019 2,000 2,006,425
NORTH CAROLINA -- .69%
North Carolina Eastern Municipal Power Agency Prerefunded Revenue Bonds, 7.75%....... 1/1/1996 1,000 1,065,651
North Carolina Municipal Power Prerefunded Revenue Bonds, 8.50%...................... 1/1/1996 1,000 1,059,420
NORTH DAKOTA -- .36%
Minot IDR for Nash Finch Co. Project, 4.15%(a)....................................... 12/1/2002 1,100 1,103,785
OHIO -- 1.64%
Brunswick IDA for Kinder-Care Learning Center Project Series A, 4%(a)................ 6/1/2002 425 426,438
Cuyahoga County University Hospital of Cleveland, 3.80%(a)........................... 1/1/2016 1,500 1,504,784
Franklin County Industrial Development Refunding Revenue Bonds for Kinder-Care
Learning Center Project Series A, 4%(a)............................................ 6/1/2002 1,080 1,083,654
Hamilton County Franciscan Sisters of the Poor, 3.80%(a)............................. 3/1/2017 2,000 2,006,378
OREGON -- 1.64%
Klamath Falls Electric Revenue Bonds for Salt Caves Hydroelectric Project,
4.40%(a)........................................................................... 5/1/2023 4,000 4,014,506
Oregon Veteran Series 73-E, 3.90%(a)................................................. 12/1/2016 1,000 1,003,359
PENNSYLVANIA -- 2.98%
Chartiers Valley Industrial and Commercial Development Authority Revenue Bonds for
1133 Penn Avenue Associates Project Series A 3.85%(a).............................. 8/1/2007 1,764 1,769,780
Chartiers Valley Industrial and Commercial Development Authority Revenue Bonds for
William Penn Project, 3.95%(a)..................................................... 12/1/2016 2,400 2,407,792
Clarion County Industrial Development Authority Special Development Revenue Bonds for
Meritcare Project Series A, 3.85%(a)............................................... 12/1/2012 2,210 2,217,242
Cumberland County Municipal Authority Revenue Bonds for United Methodist Home for
Aging, 3.95%(a).................................................................... 6/1/2019 2,700 2,743,845
SOUTH CAROLINA -- .65%
Greenville County TAN, 4%............................................................ 4/12/1996 2,000 2,003,040
TEXAS -- 3.09%
Beaumont HFA, 3.65%(a)............................................................... 12/1/2010 1,000 1,003,125
Houston TRAN, 4.50%.................................................................. 6/27/1996 2,000 2,047,099
Lubbock County HFA for Charter Plains Hospital Inc. Project Series 1992, 3.75%(a).... 10/1/2013 1,000 1,006,496
Texas TRAN, 4.75%.................................................................... 8/30/1996 4,000 4,067,470
Trinity River IDA for Radiation Sterilizers, 3.90%(a)................................ 11/1/2005 1,350 1,354,327
</TABLE>
5
<PAGE> 6
RESERVE TAX-EXEMPT TRUST--INTERSTATE FUND
STATEMENT OF NET ASSETS--NOVEMBER 30, 1995--(UNAUDITED)--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
MATURITY (IN VALUE
DESCRIPTION OF SECURITY DATE THOUSANDS) (NOTE 1)
- -------------------------------------------------------------------------------------- ---------- ------- -----------
<S> <C> <C> <C>
UTAH -- .28%
Bountiful DAI for Bountiful Gateway Park Project, 3.95%(a)........................... 12/1/1997 $ 865 $ 867,808
VIRGINIA -- 2.75%
Fairfax County Industrial Development Refunding Revenue Bonds for Kinder-Care
Learning Centers Series E, 4%(a)................................................... 10/1/1999 4,875 4,891,495
Virginia Housing Development Authority Commonwealth Mortgage Bonds Series D,
3.75%(a)........................................................................... 7/1/2017 2,500 2,520,535
Virginia RAW, 4.10%.................................................................. 3/1/1996 1,000 1,011,205
WASHINGTON -- 1.38%
Pierce County EDC RAW Sealand Corp. Project, 3.90%(a)................................ 11/1/2004 2,000 2,006,405
Port Seattle DAI for Douglas Management Corporation Project, 3.80%(a)................ 12/1/2005 2,200 2,207,103
WISCONSIN -- 5.49%
Chippewa Falls IDA for Chippewa Publishing Co., 5.556%(a)............................ 1/31/1996 37 37,631
Chippewa Falls IDA for Lavine and Gaier Investment Company Project, 5.556%(a)........ 1/31/2004 714 717,137
Dresser DAI for F&A Dairy Products Project, 4.15%(a)................................. 9/1/1998 750 752,581
Green Bay IDA for St. Mary Cement Company, 3.80%(a).................................. 11/1/2000 4,000 4,012,915
Milwaukee RAN, 5.50%................................................................. 2/22/1996 5,000 5,216,542
Neenah School District TRAN, 4.50%................................................... 8/30/1996 4,000 4,049,432
Wisconsin Operating RAN, 4.50%....................................................... 6/17/1996 2,000 2,045,490
WYOMING -- .69%
Sweetwater County Refunding PCR for Pacificorp Project Series A, 3.85%(a)............ 1/1/2017 2,100 2,105,533
-----------
Total Interstate Fund Investments (101.91%) (Cost $310,185,823)....................... 312,248,695
Other liabilities, less assets(-1.91%)................................................ (5,842,435)
-----------
NET ASSETS (100%) equivalent to $1.00 net asset value, offering and redemption prices
per share on 306,406,260 shares of beneficial interest of $.001 par value
outstanding.......................................................................... $306,406,260
=============
</TABLE>
- ---------------
(a) The interest rate is subject to change periodically. The rates shown were in
effect at November 30, 1995. Securities payable on demand are collateralized
by bank letters of credit or other bank credit agreements.
SECURITY TYPE ABBREVIATIONS:
BAN -- Bond Anticipation Notes
CP -- Certificates of Participation
DAI -- Development Authority Industrial Development Refunding Bonds
EDA -- Economic Development Authority Revenue Bonds
EDC -- Economic Development Corporation
ERD -- Energy Research and Development Authority
GOB -- General Obligation Bonds
HEF -- Health and Educational Facilities Revenue Bonds
HDC -- Housing Development Corporation Bonds
HFA -- Health Facilities Authority Revenue Bonds
HFH -- Housing Finance Authority Housing Mortgage Finance Program Bonds
HFR -- Housing Finance Agency Revenue Bonds
IDA -- Industrial Development Authority Revenue Bonds
IDR -- Industrial Development Agency Revenue Bonds
MHR -- Multifamily Housing Revenue Bonds
PCR -- Pollution Control Revenue Bonds
TAN -- Tax Anticipation Notes
TRAN -- Tax & Revenue Anticipation Notes
RAN -- Revenue Anticipation Notes
RAW -- Revenue Anticipation Warrants
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 7
RESERVE TAX-EXEMPT TRUST--INTERSTATE FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED NOVEMBER 30, 1995--(UNAUDITED)
<TABLE>
<S> <C>
INTEREST INCOME (Note 1)....................................................................... $6,278,170
---------
EXPENSES (Note 2)
Management fee............................................................................... 805,582
Shareholder servicing, administration and general office expenses............................ 313,963
Distribution assistance (Note 3)............................................................. 313,326
Equipment expense............................................................................ 56,324
Professional fees............................................................................ 50,533
Occupancy costs.............................................................................. 38,164
Stationery, printing and supplies............................................................ 33,662
Trustee fees................................................................................. 4,527
Other expenses............................................................................... 43,417
---------
Total Expenses............................................................................. 1,659,498
---------
NET INVESTMENT INCOME.......................................................................... $4,618,672
==========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS--(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1995 MAY 31, 1995
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income (Note 1)......................................... $ 4,618,672 $ 8,826,130
Dividends to shareholders.............................................. (4,618,672) (8,826,130)
----------------- -----------------
FROM CAPITAL SHARE TRANSACTIONS (at net asset value of $1 per share):
Net proceeds from sale of shares....................................... 689,422,383 1,277,411,710
Net asset value of shares issued on reinvestment of dividends.......... 4,618,672 8,826,130
----------------- -----------------
Subtotal............................................................. 694,041,055 1,286,237,840
Cost of shares redeemed................................................ (702,866,950) (1,323,600,125)
----------------- -----------------
Decrease in net assets derived from capital share transactions and from
investment operations................................................. (8,825,895) (37,362,285)
NET ASSETS:
Beginning of period...................................................... 315,232,155 352,594,440
----------------- -----------------
End of period............................................................ $ 306,406,260 $ 315,232,155
================ ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 8
RESERVE TAX EXEMPT TRUST--INTERSTATE FUND ("TRUST")
NOTES TO FINANCIAL STATEMENTS--(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES:
---------------------------
The Trust is registered under the Investment Company Act of 1940 as a
nondiversified, open end investment company. The policies summarized below
are consistently followed in the preparation of its financial statements in
conformity with generally accepted accounting principles.
A. The Trust's shares of beneficial interest authorized are unlimited and
divided into five series, Interstate, Connecticut, Massachusetts, California
and New Jersey Fund. These financial statements and notes apply only to the
Interstate Fund.
B. Securities are stated at value which represents amortized cost plus
interest accrued to date. Under Securities and Exchange Commission Rule 2a-7,
the Trust uses amortized cost to value the Fund, by which investments are
valued at cost and the difference between the cost of each instrument and its
value at maturity is accrued into income on a straight line basis over the
days to maturity, irrespective of intervening changes in interest rates or
market value of investments. The maturity of floating or variable rate
instruments in which the Trust may invest will be deemed to be, for floating
rate instruments (1) following, and for variable rate instruments the longer
of (1) or (2) following: (1) the notice period required before the Fund is
entitled to receive payment of the principal amount of the instrument; (2)
the period remaining until the instrument's next rate adjustment, for
purposes of Rule 2a-7 and for computing the Fund's average life.
C. It is the Trust's policy to comply with the requirements of Subchapter M
of the Internal Revenue Code and to distribute all income to its
shareholders. Accordingly, no Federal income tax provision is required.
D. Investments are recorded as of the date of their purchase and sale.
Interest income is determined on the basis of interest accrued, premium
amortized, and discount accreted.
E. Net investment income on investments is distributed to shareholders daily
and automatically reinvested in additional shares.
F. The Fund is charged only for its direct or allocated (in proportion to net
assets or number of shareholder accounts) share of expenses.
G. The Fund had payables of $5,200,000 for securities purchased but not
received at November 30, 1995.
2. MANAGEMENT FEE, SHAREHOLDER SERVICING COSTS AND TRANSACTIONS WITH AFFILIATES:
-------------------------------------------------------------------
Reserve Management Company, Inc. ("RMCI") manages the Interstate Portfolio's
investments, as well as the investments of the Connecticut, Massachusetts,
California and New Jersey Funds of the Reserve Tax-Exempt Trust, effects
purchases and sales thereof, and absorbs certain promotional expenses. For
such services RMCI receives management fees at an annual rate of .50% of the
first $500 million, .475% of the next $500 million, .45% of the next $500
million, .425% of the next $500 million, and .40% of any excess over $2
billion of the average daily closing net assets of each Fund. Also, under the
current Service Agreement, RMCI was reimbursed $540,590 during the six months
ended November 30, 1995 for expenditures made on behalf of the Portfolio for
personnel, office space and equipment and shareholder accounting and
administrative services, to conduct the Portfolio's business. At November 30,
1995, the Funds had accrued expenses of $25,903 due to RMCI.
3. DISTRIBUTION ASSISTANCE:
---------------------
Pursuant to a Distribution Plan, the Trust will make payments of up to .20%
per annum of the average net asset value of the Trust qualified shareholder
accounts as to which the payee or RMCI has rendered assistance in
distributing its shares.
------------------------
FEDERAL TAX INFORMATION
The dividends distributed by the Interstate Fund are exempt interest
dividends for Federal tax purposes.
SUPPLEMENTARY INFORMATION (UNAUDITED) (FOR ONE SHARE OUTSTANDING DURING EACH
PERIOD):
<TABLE>
<CAPTION>
SIX MONTHS FOR FISCAL YEARS ENDED MAY 31,
ENDED ---------------------------------------
INTERSTATE FUND NOVEMBER 30, 1995 1995 1994
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period.............................. $1.0000 $ 1.0000 $ 1.0000
------ ------ ------
Income from investment operations................................. .0197 .0368 .0268
Expenses.......................................................... .0052 .0103 .0103
------ ------ ------
Net investment income(1).......................................... .0145 .0265 .0165
Dividends from net investment income(1)........................... (.0145) (.0265) (.0165)
------ ------ ------
Net asset value, end of period.................................... $1.0000 $ 1.0000 $ 1.0000
=============== ======== ========
Total Return...................................................... 2.89%(2) 2.65% 1.65%
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------
<S> <C> <C> <C>
Net assets in thousands, end of period............................ 321,947 315,232 352,594
Ratio of expenses to average net assets........................... 1.03%(2) 1.00% 1.02%
Ratio of net investment income to average
net assets....................................................... 2.87%(2) 2.59% 1.63%
<CAPTION>
INTERSTATE FUND 1993 1992 1991
- ------------------------------------------------------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period.............................. $ 1.0000 $ 1.0000 $ 1.0000
------ ------ ------
Income from investment operations................................. .0312 .0455 .0599
Expenses.......................................................... .0104 .0106 .0105
------ ------ ------
Net investment income(1).......................................... .0208 .0349 .0494
Dividends from net investment income(1)........................... (.0208) (.0349) (.0494)
------ ------ ------
Net asset value, end of period.................................... $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ========
Total Return...................................................... 2.08% 3.49% 4.94%
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------
Net assets in thousands, end of period............................ 366,383 358,101 333,321
Ratio of expenses to average net assets........................... 1.03% 1.03% 1.03%
Ratio of net investment income to average
net assets....................................................... 2.06% 3.41% 4.81%
</TABLE>
- ---------------
(1) Based on compounding of daily dividend. Not indicative of future results.
(2) Annualized.
8
