<PAGE>
[LOGO]
- -------------------------------------------------
SEMI-ANNUAL REPORT
- -------------------------------------------------
INTERSTATE TAX-EXEMPT FUND
NOVEMBER 30, 1999
[LOGO]
1250 BROADWAY, NEW YORK, NY 10001-3701
(212) 401-5500
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.
RTET/INTER/SEMI-ANNUAL 01/00
<PAGE>
RESERVE TAX-EXEMPT TRUST--INTERSTATE TAX-EXEMPT FUND
STATEMENT OF NET ASSETS--NOVEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT TAX-EXEMPT OBLIGATIONS--102.0% (NOTE 1)
- ------------ -------------------------------------------------- ------------
<S> <C> <C>
ALABAMA--.2%
$ 500,000 Montgomery Spl Care Fac. Fin. Auth., Series H, 3.95%, $ 500,000
12/1/30 (a)...............................................
------------
ARIZONA--4.9%
2,600,000 Apache County IDA for Tucson Electric Power Company, 4.00%, 2,600,000
12/1/20 (a)...............................................
900,000 Apache County IDA for Tucson Electric Power Company, Series 900,000
83A, 3.90%, 12/15/18 (a)..................................
2,200,000 Apache County IDA for Tucson Electric Power Company, Series 2,200,000
83B, 3.95%, 12/15/18 (a)..................................
1,100,000 Arizona HFA for Pooled Loan Program, 3.90%, 10/1/15 (a).... 1,100,000
550,000 Avondale IDA for National Health Investors, 3.90%, 12/1/14 550,000
(a).......................................................
3,500,000 Pima County IDA PCR for Tucson Electric Project, 3.90%, 3,500,000
12/1/22 (a)...............................................
2,225,000 Yavapai IDA for Regional Medical Center, Series B, 3.90%, 2,225,000
12/1/26 (a)...............................................
------------
13,075,000
------------
CALIFORNIA--2.8%
1,200,000 Anaheim UHSD for School Fac. Brdg. Fdg., 3.60%, 9/1/13 1,200,000
(a).......................................................
700,000 California School Financing Corp. for Capital Improvement 700,000
Fing., 3.80%, 7/1/24 (a)..................................
400,000 Fremont Public Finance Authority for Family Res. Center, 400,000
3.65%, 8/1/28 (a).........................................
700,000 Irvine Ranch Water District, Series B, 3.85%, 10/1/04 700,000
(a).......................................................
1,500,000 Los Angeles Community Development for Willowbrook Proj., 1,500,000
3.65%, 11/1/15 (a)........................................
400,000 Los Angeles CRA for Promenade Towers, Series 1989, 3.65%, 400,000
4/1/09 (a)................................................
600,000 Los Angeles USD for Belmont Learning Complex A, 3.60%, 600,000
12/1/17 (a)...............................................
1,000,000 Orange County Apartment Development Revenue Bonds for Lakes 1,000,000
Project A, 3.55%, 12/1/06 (a).............................
1,000,000 Watereuse Finance Authority, 3.60%, 5/1/28 (a)............. 1,000,000
------------
7,500,000
------------
COLORADO--1.4%
2,800,000 Arapahoe School District #5 for Cherry Creek TAN, 4.25%, 2,808,375
6/30/00...................................................
1,000,000 Denver Airport, Series B, 3.90%, 12/1/20 (a)............... 1,000,000
------------
3,808,375
------------
CONNECTICUT--3.3%
1,200,000 Connecticut HEFA for Bradley Health Care, Series B, 3.50%, 1,200,000
7/1/29 (a)................................................
1,440,000 Connecticut HEFA for Charlotte Hospital, Series C, 3.70%, 1,440,000
7/1/13 (a)................................................
2,400,000 Connecticut HEFA for Yale University, Series T-1, 3.75%, 2,400,000
7/1/29 (a)................................................
300,000 Connecticut HEFA for Yale University, Series U, 3.85%, 300,000
7/1/33 (a)................................................
700,000 Connecticut Special Tax Transportation Infrastructure 700,000
Second Lien Revenue Bonds, 3.80%, 12/1/10 (a).............
700,000 Connecticut State HEFA for St. Raphael, Series J, 3.60%, 700,000
7/1/22 (a)................................................
900,000 Connecticut State HEFA for Stamford Hospital, Series H, 900,000
3.60% 7/1/24 (a)..........................................
1,200,000 Hartford Redev. Agency MFMR for Underwood Towers Project, 1,200,000
3.80%, 6/1/20 (a).........................................
------------
8,840,000
------------
DISTRICT OF COLUMBIA--4.4%
8,200,000 Washington, D.C. George Washington University, 3.90%, 8,200,000
3/1/06 (a)................................................
2,200,000 Washington, D.C. Housing Finance Agency RAW, 3.50%, 7/1/27 2,200,000
(a).......................................................
1,220,000 Washington, D.C. National Children's Center Inc., 3.90%, 1,220,000
2/1/20 (a)................................................
------------
11,620,000
------------
FLORIDA--7.7%
500,000 Brevard County MHR for Malabar Lakes Proj., 3.85%, 12/1/10 500,000
(a).......................................................
100,000 Dade County HFR for Miami Children's Hospital, 4.10%, 100,000
9/1/25 (a)................................................
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
2
<PAGE>
RESERVE TAX-EXEMPT TRUST--INTERSTATE TAX-EXEMPT FUND
STATEMENT OF NET ASSETS--NOVEMBER 30, 1999 (UNAUDITED)--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT TAX-EXEMPT OBLIGATIONS--102.0%--(CONTINUED) (NOTE 1)
- ------------ -------------------------------------------------- ------------
<S> <C> <C>
FLORIDA--7.7%--(CONTINUED)
$ 500,000 Dade County IDA for Dolphin Stadium Project, Series A, $ 500,000
3.80%, 1/1/16 (a).........................................
1,000,000 Dade County IDA for Dolphin Stadium Project, Series B, 1,000,000
3.80%, 1/1/16 (a).........................................
1,500,000 Dade County IDA for Dolphin Stadium Project, Series D, 1,500,000
3.80%, 1/1/16 (a).........................................
100,000 Florida Gulf Coast for University of Florida COP, 3.75%, 100,000
8/1/27 (a)................................................
1,715,000 Florida Housing Finance Agency for Multifamily Lake 3.80%, 1,715,000
6/1/07 (a)................................................
1,300,000 Florida Local Gov't Financial Auth. for Lake Wales Medical 1,300,000
Centers, Series A, 4.05%, 3/1/15 (a)......................
10,000 Gulf Breeze, Series 85 A Revenue Bonds, 3.85%, 12/1/15 10,000
(a).......................................................
2,000,000 Orange IDA for Lake Highland Prep School, 3.95%, 10/1/18 2,000,000
(a).......................................................
960,000 Orange IDA for Trinity Prep School, 3.95%, 10/1/23 (a)..... 960,000
10,000,000 Pinellas School District TAN, 4.25%, 6/30/00............... 10,033,844
200,000 Polk IDA IDR for Florida Conv. Ctrs. Project, 3.70%, 1/1/11 200,000
(a).......................................................
400,000 University of N. Florida for Capital Improvement Project, 400,000
3.30%, 11/1/24 (a)........................................
------------
20,318,844
------------
GEORGIA--4.5%
400,000 Clayton County MHR for Rainwood Development, 3.975%, 5/1/06 400,000
(a).......................................................
1,800,000 Elbert County IDR for Seaboard Farms of Elberton, 3.90%, 1,800,000
7/1/05 (a)................................................
9,656,880 Georgia Muni. Assoc. Pool Bd. Ctf., Series B4, 3.85%, 9,656,880
12/15/00 (a)..............................................
------------
11,856,880
------------
ILLINOIS--3.7%
1,500,000 Chicago Emergency Telephone System GOB, 4.50%, 1/1/00 1,501,481
(b).......................................................
100,000 Illinois Development Finance Authority PCR for Commonwealth 100,000
Edison-C, 3.90%, 3/1/09 (a)...............................
1,000,000 Illinois Health Facs. Authority for Pooled Financing, 1,000,000
Series F, 3.90%, 8/1/15 (a)...............................
700,000 Illinois Health Facs. Authority for Swedish Convenant 700,000
Hospital, 3.90%, 8/1/25 (a)...............................
900,000 Illinois Health Facs. Authority for Swedish Convenant 900,000
Hospital, Series A, 3.90%, 8/1/25 (a).....................
850,000 Illinois Health Facility Authority for Community Hospital 850,000
Center-B, 3.90%, 10/1/15 (a)..............................
465,000 Illinois Health Facility Authority for Community Hospital 465,000
Center-C, 3.90%, 10/1/15 (a)..............................
2,000,000 McCook Illinois for St Andrew Society-B, 3.95%, 12/1/21 2,000,000
(a).......................................................
800,000 Naperville Illinois for Heritage YMCA Group, 3.80%, 12/1/29 800,000
(a).......................................................
1,580,000 Streamwood IDA for Olde Church Centre Project, 4.15%, 1,580,000
12/1/14 (a)...............................................
------------
9,896,481
------------
IOWA--.4%
1,000,000 Des Moines HFR for Iowa Methodist Med. Center Project, 1,000,000
3.40%, 8/1/15 (a).........................................
------------
KANSAS--1.4%
3,800,000 Overland Parks Temp Notes, 3.50%, 4/29/00.................. 3,804,828
------------
KENTUCKY--3.8%
8,800,000 Kentucky Asset/Liability COP, 3.85%, 6/30/01 (b)........... 8,800,000
1,210,000 Lexington Fayette RAW for Richmond Place Assoc. Project, 1,210,000
3.30%, 4/1/15 (a).........................................
------------
10,010,000
------------
LOUISIANA--1.1%
1,000,000 Lake Charles Harbor & Terminal for Citgo Pete Corp., 3.90%, 1,000,000
8/1/07 (a)................................................
1,000,000 Louisiana Offshore Terminal Authority 1st Stage A-Loop 1,000,000
Inc., 3.60%, 9/1/08 (a)...................................
1,000,000 Louisiana Public Facilities Authority W. Kingston Med. 1,000,000
Center, 4.00%, 9/1/25 (a).................................
------------
3,000,000
------------
MARYLAND--2.4%
300,000 Baltimore IDA for Baltimore Cap Acquisition, 3.90%, 8/1/16 300,000
(a).......................................................
1,000,000 Baltimore Sheppard & Enoch Pratt Hospital, 3.90%, 7/1/21 1,000,000
(a).......................................................
2,000,000 Maryland Health & Higher Education Authority for John 2,000,000
Hopkins Hospital, Series A, 3.85%, 7/1/27 (a).............
1,000,000 Maryland Health & Higher Education Authority for Pooled 1,000,000
Loan Program, Series A, 3.85%, 4/1/35 (a).................
200,000 Montgomery County IDA for Info Systems and Network Corp., 200,000
3.85%, 4/1/14 (a).........................................
2,000,000 Prince George's County IDA for Frank Parsons Paper Co., 2,000,000
4.10%, 1/1/13 (a).........................................
------------
6,500,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
RESERVE TAX-EXEMPT TRUST--INTERSTATE TAX-EXEMPT FUND
STATEMENT OF NET ASSETS--NOVEMBER 30, 1999 (UNAUDITED)--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT TAX-EXEMPT OBLIGATIONS--102.0%--(CONTINUED) (NOTE 1)
- ------------ -------------------------------------------------- ------------
<S> <C> <C>
MASSACHUSETTS--5.0%
$ 300,000 Massachusetts HEFA Brigham & Women's Hospital, 3.80%, $ 300,000
7/1/17 (a)................................................
100,000 Massachusetts HEFA for Capital Asset Program, 3.55%, 1/1/19 100,000
(a).......................................................
500,000 Massachusetts HEFA for Harvard University, 3.71%, 8/1/17 500,000
(a).......................................................
200,000 Massachusetts HEFA for Partners Health Care Systems, 3.85%, 200,000
7/1/27 (a)................................................
400,000 Massachusetts HEFA for Williams College, 3.75%, 8/1/14 400,000
(a).......................................................
400,000 Massachusetts HEFA for Wellesley College, Issue B, 3.75%, 400,000
7/1/22 (a)................................................
200,000 Massachusetts IFA for Governor Dummer Academy, 3.80%, 200,000
7/1/26 (a)................................................
400,000 Massachusetts Muni Wholesale Electric Co., Series C, 3.80%, 400,000
7/1/19 (a)................................................
700,000 Massachusetts State GOB, Series B, 3.75%, 8/1/15 (a)....... 700,000
400,000 Massachusetts Water Resource Authority, Series A, 3.80%, 400,000
4/1/28 (a)................................................
600,000 Massachussets Water Resource Authority, Series D, 3.80% 600,000
11/1/26 (a)...............................................
9,063,000 Triton Regional School District BAN, 3.50%, 4/12/00........ 9,074,155
------------
13,274,155
------------
MICHIGAN--4.7%
1,675,000 Garden City HRB for Garden City Hospital, 3.90%, 9/1/26 1,675,000
(a).......................................................
3,600,000 Grand Rapids Water Supply System, 3.80%, 1/1/20 (a)........ 3,600,000
2,600,000 Jackson EDC for Thrifty Leoni Inc. Project, 3.825%, 12/1/14 2,600,000
(a).......................................................
1,900,000 Michigan HDA for Fairlane Meadows Harbortown Ltd., 3.975%, 1,900,000
6/1/04 (a)................................................
200,000 Michigan Hospital Finance Authority for St. Mary Hosp. of 200,000
Livonia, 3.90%, 7/1/17 (a)................................
2,400,000 Michigan Job Development Authority for Gordon Food Service, 2,400,000
3.85%, 8/1/15 (a).........................................
------------
12,375,000
------------
MISSOURI--.4%
1,000,000 Kansas City IDA Hospital Revenue for Insd. Resh. Health 1,000,000
Services System, 3.65%, 10/15/14 (a)......................
------------
MISSISSIPPI--.8%
2,000,000 Canton IDR for Levi Strauss & Co. Project, 3.90%, 6/1/03 2,000,000
(a).......................................................
------------
NORTH CAROLINA--1.0%
2,600,000 Wake County Industrial Facilities & Pollution Control for 2,600,000
Carolina Power & Light, Series C, 3.85%, 10/1/15 (a)......
------------
NEBRASKA--.4%
1,000,000 Buffalo County IDR for AgRex Inc. Project, 4.20%, 2/1/15 1,000,000
(a).......................................................
------------
NEW HAMPSHIRE--1.6%
4,300,000 Strafford TAN, 3.18%, 12/31/99............................. 4,300,102
------------
NEW JERSEY--4.6%
700,000 Camden Improvement Authority Pooled Government Loan 700,000
Program, 3.75%, 6/1/29 (a)................................
1,000,000 Essex Improvement Authority, 3.75%, 12/1/25 (a)............ 1,000,000
1,100,000 Monmouth Improvement Authority Pooled Government Loan 1,100,000
Program, 3.55%, 8/1/16 (a)................................
600,000 New Jersey EDA for 400 Int'l. Dr. Partners, 3.30%, 9/1/05 600,000
(a).......................................................
700,000 New Jersey EDA for Bayonne IMTT Docking Revenue Bonds, 700,000
3.65%, 12/1/27 (a)........................................
200,000 New Jersey EDA for Foreign Trade Zone, 3.65%, 12/1/07 200,000
(a).......................................................
800,000 New Jersey EDA for Public Service Electric and Gas Co., 800,000
3.55%, 9/1/12 (a).........................................
1,200,000 New Jersey EDA for Volvo of America Corp., 4.07%, 12/1/04 1,200,000
(a).......................................................
1,000,000 New Jersey EFA for College of New Jersey, Series A, 3.75%, 1,000,000
7/1/29 (a)................................................
1,000,000 New Jersey Sports Exposition Authority, Series C, 3.85%, 1,000,000
9/1/24 (a)................................................
600,000 New Jersey Turnpike Authority General, Series 91D, 3.65%, 600,000
1/1/08 (a)................................................
200,000 Port Authority NY and NJ, Series 2, 3.75%, 5/1/19 (a)...... 200,000
300,000 Port Authority NY and NJ, Series 5, 3.65%, 8/1/24 (a)...... 300,000
2,800,000 Vernon School District Temp Notes, Series B, 3.20%, 2,800,018
12/3/99...................................................
------------
12,200,018
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
RESERVE TAX-EXEMPT TRUST--INTERSTATE TAX-EXEMPT FUND
STATEMENT OF NET ASSETS--NOVEMBER 30, 1999 (UNAUDITED)--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT TAX-EXEMPT OBLIGATIONS--102.0%--(CONTINUED) (NOTE 1)
- ------------ -------------------------------------------------- ------------
<S> <C> <C>
NEW YORK--6.8%
$ 2,000,000 Long Island Power Authority, Series 1, 3.85%, 5/1/33 (a)... $ 2,000,000
2,000,000 New York City Cultural Resources for Soloman B. Guggeheim, 2,000,000
3.70%, 12/1/15 (a)........................................
800,000 New York City GOB, Series A4, 3.75%, 8/1/22 (a)............ 800,000
1,500,000 New York City GOB, Series A4, 3.80%, 8/1/15 (a)............ 1,500,000
1,600,000 New York City GOB, Series E5, 3.70%, 8/1/09 (a)............ 1,600,000
3,700,000 New York City GOB, Series E5, 3.70%, 8/1/10 (a)............ 3,700,000
450,000 New York City GOB, Series E5, 3.70%, 8/1/15 (a)............ 450,000
1,400,000 New York City GOB, Series E6, 3.70%, 8/1/19 (a)............ 1,400,000
4,600,000 Tarrytown UFSD TAN, 4.00%, 6/26/00......................... 4,611,360
------------
18,061,360
------------
NORTH DAKOTA--.4%
1,100,000 Minot IDR for Nash Finch Co. Project, 3.70%, 12/1/02 (a)... 1,100,000
------------
OHIO--6.3%
425,000 Brunswick IDR for Kinder-Care Learning Centers Project, 425,000
Series A, 4.00%, 6/1/02 (a)...............................
800,000 Columbus ERD for Electric Systems Revenue Bonds, 3.60%, 800,000
9/1/09 (a)................................................
1,310,000 Cuyahoga IDA for Cleveland Clinic, Series A, 3.90%, 1/1/16 1,310,000
(a).......................................................
980,000 Franklin County Bonds for Kinder-Care Project, Series A, 980,000
4.00%, 6/1/02 (a).........................................
2,665,000 Franklin County Bonds for US Health Corp.-A, 3.90%, 12/1/21 2,665,000
(a).......................................................
3,150,000 Franklin County HRB for US Health Corp., Series A, 3.90%, 3,150,000
12/1/21 (a)...............................................
900,000 Lucas County HFR for Lutheran Homes Society Project, 3.85%, 900,000
11/1/19 (a)...............................................
3,000,000 Mahoning HFR for Forum Health Group, Series B, 3.90%, 3,000,000
12/1/27 (a)...............................................
900,000 Ohio Air Quality Dev. Auth., Series A, 3.95%, 12/1/15 900,000
(a).......................................................
1,630,000 Ottawa Hospital Facilities Luther Home of Mercy Project, 1,630,000
3.95%, 10/1/17 (a)........................................
1,010,000 Sharonville IDA for Edgecomb Metals Inc., 3.90%, 11/1/09 1,010,000
(a).......................................................
------------
16,770,000
------------
OREGON--1.2%
3,100,000 Portland MHR for South Park Block Project A, 3.70%, 12/1/11 3,100,000
(a).......................................................
------------
PENNSYLVANIA--9.3%
1,600,000 Allegheny HDA for Allegheny General Hospital, Series B, 1,600,000
4.85%, 9/1/20 (a).........................................
1,000,000 Allegheny HDA for Allegheny General Hospital, Series B, 1,000,000
4.85%, 9/1/10 (a).........................................
400,000 Allegheny HDA for St Francis Health System, 3.85%, 11/1/27 400,000
(a).......................................................
1,200,000 Allegheny IDA for Longwood At Oakmont Project, 3.70 (a).... 1,200,000
700,000 Allegheny University of Pittsburgh Project, Series 85, 700,000
3.75%, 7/1/15 (a).........................................
700,000 Allegheny University of Pittsburgh Project, Series C, 700,000
4.05%, 3/1/13 (a).........................................
400,000 Bucks IDA for Edgecomb Metals Co., 3.90%, 10/1/09 (a)...... 400,000
1,264,000 Chartier Valley IDR Bonds for 1133 Penn Ave. Assoc., Series 1,264,000
A, 4.00%, 8/1/07 (a)......................................
1,425,000 Clarion County Special Development Revenue IDA Bonds for 1,425,000
Meritcare Project, Series A, 4.00%, 12/1/12 (a)...........
1,400,000 Dallastown Area School District GOB, 3.95%, 2/1/18 (a)..... 1,400,000
500,000 Dauphin General Authority Revenue Bonds, 3.95%, 11/1/17 500,000
(a).......................................................
2,200,000 Delaware Valley Finance Authority Rev. Bonds, Series B, 2,200,000
3.80%, 12/1/20 (a)........................................
1,500,000 Emmaus GOB Local Government Revenue Bonds, 3.90%, 12/1/28 1,500,000
(a).......................................................
1,285,000 Lehigh IDA for Allentown Airport, 3.95%, 12/1/05 (a)....... 1,285,000
855,000 Mercersburg General Purpose Authority, 3.95%, 11/1/27 855,000
(a).......................................................
1,100,000 Northeastern HEFA for Wyoming Valley HCF, 3.90%, 1/1/24 1,100,000
(a).......................................................
555,000 Pennsylvania HEFA for Temple University, 3.70%, 10/1/09 555,000
(a).......................................................
675,000 Pennsylvania HEFA for University of Philadelphia, Series C, 675,000
3.85%, 1/1/26 (a).........................................
2,340,000 Philadelphia MHR for Harbor View Tower Project, 4.00%, 2,340,000
11/1/27 (a)...............................................
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
RESERVE TAX-EXEMPT TRUST--INTERSTATE TAX-EXEMPT FUND
STATEMENT OF NET ASSETS--NOVEMBER 30, 1999 (UNAUDITED)--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT TAX-EXEMPT OBLIGATIONS--102.0%--(CONTINUED) (NOTE 1)
- ------------ -------------------------------------------------- ------------
<S> <C> <C>
PENNSYLVANIA--9.3%--(CONTINUED)
$ 2,000,000 Sayre HCF for Cap Financing Project, Series L, 3.90%, $ 2,000,000
12/1/20 (a)...............................................
1,425,000 York General Authority Pooled Financing, Series A, 3.90%, 1,425,000
9/1/26 (a)................................................
200,000 York General Authority Pooled Financing, 3.95%, 9/1/26 200,000
(a).......................................................
------------
24,724,000
------------
PUERTO RICO--.4%
1,000,000 Puerto Rico Commonwealth Highway & Transportation, Series 1,000,000
A, 3.65%, 7/1/28 (a)......................................
------------
TENNESSEE--2.3%
335,000 Chattanooga IDA for Baylor School Project, 3.95%, 11/1/16 335,000
(a).......................................................
5,000,000 Clarksville Public Building Authority Pooled Financing, 5,000,000
3.90%, 7/1/11 (a).........................................
765,000 Franklin IDR for Franklin Health Care Center Inc., 4.15%, 765,000
6/1/05 (a)................................................
------------
6,100,000
------------
TEXAS--5.3%
1,000,000 Harris County HFDC for Greater Houston Project, 3.90%, 1,000,000
11/1/25 (a)...............................................
1,000,000 Harris County Industrial Development Corp. for Baytank 1,000,000
Houston Inc. Project, 3.90%, 2/1/20 (a)...................
1,600,000 Midlothian IDC for Box-Crow Cement Co. Project, 3.85%, 1,600,000
12/1/09 (a)...............................................
10,500,000 Texas TRAN, Series A, 4.50%, 8/31/00....................... 10,560,772
------------
14,160,772
------------
UTAH--2.3%
5,975,000 Salt Lake City IDR for Parkview Plaza Project, 3.90%, 5,975,000
12/1/14 (a)...............................................
------------
VIRGINIA--4.1%
2,040,000 Alexandria IDA for Pooled Loan Project, Series A, 3.90%, 2,040,000
7/1/26 (a)................................................
365,000 Bristol IDA for Healthcare Center Inc., 4.15%, 3/1/10 365,000
(a).......................................................
1,000,000 Capital Region Airport Comm. for Richmond International 1,000,000
Airport, 3.90%, 7/1/25 (a)................................
500,000 Hampton MHR for Avalon at Hampton I-A Project, 3.80%, 500,000
6/15/26 (a)...............................................
1,000,000 Lynchburg IDA HRB for VHA Mid Atlantic States Inc., 3.95%, 1,000,000
12/1/25 (a)...............................................
1,500,000 Newport News MHR for Newport--Oxford Project, 3.95%, 1,500,000
11/1/06 (a)...............................................
4,390,000 Norfolk IDA for Children's Project, 3.90%, 6/1/20 (a)...... 4,390,000
------------
10,795,000
------------
WASHINGTON--1.0%
2,700,000 Port of Seattle IDC for Douglas Management Corp., 4.10%, 2,700,000
12/1/05 (a)...............................................
------------
WISCONSIN--1.1%
3,000,000 Green Bay IDA for St. Mary's Holdings, Inc., 4.10%, 11/1/00 3,000,000
(a) ......................................................
------------
WYOMING--1.0%
2,600,000 Sweetwater PCR for Pacificorp Project B, 3.90%, 1/1/14 2,600,000
(a).......................................................
------------
<CAPTION>
<S> <C> <C> <C>
TOTAL INVESTMENTS (COST $270,565,815)............. 102.0% 270,565,815
OTHER ASSETS, LESS LIABILITIES.................... (2.0) (5,401,230)
----- ------------
NET ASSETS........................................ 100.0% $265,164,585
----- ------------
----- ------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE,
BASED ON 265,164,585 SHARES OF BENEFICIAL INTEREST, $.001 $1.00
PAR VALUE OUTSTANDING.....................................
</TABLE>
- ------------------
(a) The interest rates, as reported on November 30, 1999, are subject to change
periodically. Securities payable on demand are collateralized by bank
letters of credit or other credit agreements.
(b) Securites are collateralized by bank letters of credit or other credit
agreements.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
RESERVE TAX-EXEMPT TRUST--INTERSTATE TAX-EXEMPT FUND
STATEMENT OF NET ASSETS--NOVEMBER 30, 1999 (UNAUDITED)--(CONTINUED)
SECURITY TYPE ABBREVIATIONS
<TABLE>
<S> <C> <C>
BAN -- Bond Anticipation Notes
COP -- Certificate of Participation
CRA -- Community Redevelopment Agency
EDC -- Economic Development Corporation
EFA -- Economic Finance Authority
ERD -- Energy Research and Development Authority
GOB -- General Obligation Bonds
HCF -- Health Care Facility
HDA -- Housing Development Authority
HEFA -- Health & Education Facilities Authority
HFA -- Housing Finance Authority
HFDC -- Health Facilities Development Corp.
HFR -- Health Facilities Revenue Bonds
HRB -- Hospital Revenue Bonds
IDA -- Industrial Development Authority Revenue Bonds
IDC -- Industrial Development Corporation Revenue Bonds
IDR -- Industrial Development Agency Revenue Bonds
MHR -- Multi-family Housing Revenue Bonds
MFMR -- Multi-Family Mortgage Revenue Bond
PCR -- Pollution Control Revenue Bonds
RAW -- Revenue Anticipation Warrants
TAN -- Tax Anticipation Notes
TRAN -- Tax & Revenue Anticipation Notes
UFSD -- Union Free School District
UHSD -- Unified High School District
USD -- Unified School District Bonds
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
RESERVE TAX-EXEMPT TRUST--INTERSTATE TAX-EXEMPT FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
INTEREST INCOME (NOTE 1)................................................................................. $ 4,698,726
------------
EXPENSES (NOTE 2)
Management fee......................................................................................... 1,117,191
Distribution assistance................................................................................ 279,298
Tax expense............................................................................................ 674
------------
Total Expenses....................................................................................... 1,397,163
------------
NET INVESTMENT INCOME, representing Net Increase in Net Assets from Investment Operations................ $ 3,301,563
------------
------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
NOVEMBER 30, MAY 31,
1999 1999
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS:
Net investment income............................................................. $ 3,301,563 $ 8,590,706
---------------- ----------------
DIVIDENDS PAID TO SHAREHOLDERS FROM:
Net investment income (Note 1).................................................... (3,301,563) (8,590,706)
---------------- ----------------
FROM CAPITAL SHARE TRANSACTIONS (at net asset value of $1.00 per share):
Net proceeds from sale of shares.................................................. 633,562,934 1,500,543,145
Dividends reinvested.............................................................. 3,301,563 8,590,706
Cost of shares redeemed........................................................... (664,328,830) (1,569,373,790)
---------------- ----------------
Net decrease in net assets derived from capital share transactions and from
Investment Operations........................................................... (27,464,333) (60,239,939)
NET ASSETS:
Beginning of period............................................................... 292,628,918 352,868,857
---------------- ----------------
End of period..................................................................... $ 265,164,585 $ 292,628,918
---------------- ----------------
---------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
RESERVE TAX-EXEMPT TRUST--INTERSTATE TAX-EXEMPT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
<S> <C>
(1) SIGNIFICANT ACCOUNTING POLICIES:
The Reserve Tax-Exempt Trust (the "Trust") is registered under the Investment Company Act of 1940 as a
non-diversified, open-end investment company. The policies summarized below are consistently followed in the
preparation of its financial statements in conformity with generally accepted accounting principles.
A. As of November 30, 1999, the Trust's authorized shares of beneficial interest are unlimited and divided into
nine (9) series: Interstate, California II, Connecticut, Florida, Massachusetts, Michigan, New Jersey, Ohio and
Pennsylvania Tax-Exempt Funds. The financial statements and notes apply only to the Interstate Tax-Exempt Fund
("Fund").
B. Securities are valued at amortized cost which approximates market value. The amortized cost method values a
security at cost plus accrued interest at the time of purchase, and thereafter assumes a constant amortization to
maturity of any discount or premium irrespective of intervening changes in interest rates or market values. The
maturity of floating or variable rate instruments in which the Fund may invest will be deemed to be, for floating
rate instruments: (1) the notice period required before the Fund is entitled to receive payment of the principal
amount of instrument, and for variable rate instruments the longer of (1) above or (2) the period remaining until
the instrument's next interest rate adjustment, for purposes of Rule 2a-7 and for computing the portfolio's average
weighted life to maturity.
C. It is the Trust's policy to comply with Subchapter M of the Internal Revenue Code and to distribute all income
to its shareholders. Accordingly, no Federal income tax provision is required.
D. Security transactions are recorded on a trade date basis; interest income is accrued daily and security premium
or discount is amortized or accreted daily. Net investment income is distributed to shareholders daily and
automatically reinvested in additional shares.
E. The Fund is charged only for its direct and/or allocated share of expenses (in proportion to net assets or
number of shareholder accounts).
(2) MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
Pursuant to an Investment Management Agreement (the "Agreement") between Reserve Management Company, Inc. ("RMCI")
and the Fund, RMCI serves as the Fund's Investment Adviser subject to the direction of the Board of Trustees. Under
the Agreement, RMCI is responsible for the supervision of the day-to-day operations, manages the Fund's
investments, effects purchases and sales thereof, and absorbs certain promotional expenses. For its services as
Investment Adviser prior to June 26, 1999, RMCI received a management fee, calculated 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 average daily net assets of the Fund.
Effective June 26, 1999, the Fund entered into a new Investment Management agreement with RMCI, which is
substantially similar to the Investment Management Agreement previously in effect with regard to the Fund, except
for a new comprehensive fee. The agreement provides that RMCI will furnish continuous investment advisory and
management services to the Fund.
For its services, RMCI receives a fee of 0.80% per year of the average daily net assets of the Fund. Excluded from
the definition of customary operating expenses are interest, taxes, brokerage fees, extraordinary legal and
accounting fees and expenses, and the fees of disinterested Trustees, for which each Fund pays its direct or
allocated share.
DISTRIBUTION ASSISTANCE:
Pursuant to a Plan of Distribution, the Trust may make assistance payments at an annual rate of .20% per annum of
the average net asset value of the Fund's qualified shareholder accounts as to which the payee or RMCI has rendered
assistance in distributing its shares. For the six months ended November 30, 1999, the Fund paid $279,298 in
distribution assistance.
(3) INVESTMENT CONCENTRATION:
The Fund invests substantially all of its assets in a portfolio of tax-exempt debt obligations issued by states,
territories and possessions of the United States and their subdivisions. The issuers' ability to meet their
obligations may be affected by economic, regional or political developments. In order to reduce the credit risk
associated with such factors, 82% of the Fund's investments were backed by letters of credit, bond insurance of
financial institutions and financial guaranty assurance agencies.
</TABLE>
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(UNAUDITED) (CONTINUED)
<TABLE>
<S> <C>
(4) MANAGEMENT'S USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the
dates of the financial statements and the reported amounts of income and expenses during the reporting periods.
Actual results could differ from those estimates.
(5) COMPONENTS OF NET ASSETS:
At November 30, 1999, the Fund's net assets consisted of $265,165 par-value and $264,899,420 paid-in-capital.
(6) FINANCIAL HIGHLIGHTS:
Contained below is per share operating performance data for a share of beneficial interest outstanding for each of
the periods indicated. The information should be read in conjunction with the accompanying financial data and
related notes.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FOR FISCAL YEARS ENDED MAY 31,
NOVEMBER 30, --------------------------------------------------------
1999 1999 1998 1997 1996 1995
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- -------- --------
Net investment income......................... .0119 .0245 .0279 .0256 .0285 .0265
from investment operations.................... (.0119) (.0245) (.0279) (.0256) (.0285) (.0265)
-------- -------- -------- -------- -------- --------
Net asset value, end of period................ $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Total Return.................................. 2.37%(a) 2.45% 2.79% 2.56% 2.85% 2.65%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (millions)........... $ 265.2 $ 292.6 $ 352.9 $ 306.2 $ 292.1 $ 315.2
Ratio of expenses to average net assets....... 1.00%(a) 1.00% .97% 1.04% 1.04% 1.00%
Ratio of net investment income to average net
assets...................................... 2.36%(a) 2.38% 2.75% 2.52% 2.80% 2.59%
</TABLE>
--------------
(a) Annualized
------------------
FEDERAL TAX INFORMATION
The dividends distributed by the Fund are "exempt interest dividends" for
Federal tax purposes.
------------------
10
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