<PAGE> 1
[THE RESERVE FUNDS LOGO]
"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.
[THE RESERVE FUNDS LOGO]
"America's First
Money Fund"
ANNUAL REPORT
INTERSTATE TAX-EXEMPT FUND
FOR THE YEAR ENDED
MAY 31, 1995
<PAGE> 2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Trustees of Reserve Tax-Exempt
Trust--Interstate Fund:
We have audited the accompanying statement of net assets of the Interstate
Fund (one of the series constituting Reserve Tax-Exempt Trust) as of May 31,
1995, and the related statement of operations, the statements of changes in net
assets and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Interstate Fund of Reserve Tax-Exempt Trust as of May 31, 1995, the results of
its operations, the changes in its net assets and its financial highlights for
the periods referred to above, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
New York, New York
June 23, 1995
------------------------
RESERVE TAX-EXEMPT TRUST--INTERSTATE FUND
STATEMENT OF NET ASSETS--MAY 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
MATURITY (IN VALUE
DESCRIPTION OF SECURITY DATE THOUSANDS) (NOTE 1)
-------------------------------------------------------------------------------------- ---------- ------- -----------
<S> <C> <C> <C>
ALASKA--.98%
Anchorage RAW for Electric Utilities, 6.50%.......................................... 6/1/1995 $ 3,000 $ 3,097,500
ARIZONA--7.97%
Apache County IDA for Tucson Electric Power Company Project, 3.60%(a)................ 12/15/2018 2,100 2,104,096
Apache County IDA for Tucson Electric Power Company Project, 3.55%(a)................ 12/15/2018 1,000 1,001,959
Chandler IDA for Bay Colony Project, 4.575%(a)....................................... 12/1/2014 355 359,086
Pima County IDA for Tucson Electric Power Company, 3.55%(a).......................... 3/15/2018 10,000 10,019,589
Pima County IDA for Tucson Electric Power Company, 3.80%(a).......................... 6/15/2022 10,000 10,019,767
Tucson MHR for Los Portales Associates Ltd. Partnerships, 4.575%(a).................. 12/1/2007 1,600 1,618,414
CALIFORNIA--8.01%
California HFA for Sutter Health Series 1990B, 4.20%(a).............................. 3/1/2020 400 401,454
California PCR for Pacific G&E Series 1988C, 4.05%(a)................................ 11/1/2008 600 601,997
California PCR for Pacific G&E Series 1988D, 4.35%(a)................................ 11/1/2008 1,000 1,002,503
California RAN, 5%................................................................... 6/28/1995 5,000 5,209,750
California RAW, 5.75%................................................................ 4/25/1996 400 423,833
Lancaster Redevelopment Agency MHR for Westwood Park Apartments Series 1985 K,
4%(a).............................................................................. 12/1/2007 100 100,383
Los Angeles Metropolitan Transportation Authority IDA for General Union Station
Gateway A, 4.30%(a)................................................................ 7/1/2025 300 301,134
Los Angeles TRAN, 4.50%.............................................................. 6/30/1995 6,601 6,873,107
Los Angeles Unified School District TRAN, 4.50%...................................... 7/10/1995 4,000 4,166,974
Orange County Apartment Development Revenue Bonds Issue A of 1991, the Lakes Project,
3.85% Letter of Credit with Citibank(a)............................................ 12/1/2006 500 501,877
Pico Rivera Development Agency Revenue Bonds for Ranier Fund Crossroads
Project, 3.55%(a).................................................................. 12/1/2010 1,200 1,204,169
San Diego County MHR Series 1988A, 5.85%(a).......................................... 12/1/2007 330 334,866
Santa Ana IDR for Mercury Savings and Loan, 4.275%(a)................................ 11/1/2005 4,000 4,031,442
Santa Clara Electric Revenue Bonds Series 85C, 3.40%(a).............................. 7/1/2010 100 100,360
</TABLE>
2
<PAGE> 3
RESERVE TAX-EXEMPT TRUST--INTERSTATE FUND
STATEMENT OF NET ASSETS--MAY 31, 1995--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
MATURITY (IN VALUE
DESCRIPTION OF SECURITY DATE THOUSANDS) (NOTE 1)
-------------------------------------------------------------------------------------- ---------- ------- -----------
<S> <C> <C> <C>
COLORADO--5.24%
Adams County IDA for Clear Creek, 3.95%(a)........................................... 11/1/2008 $ 2,000 $ 2,007,479
Arapahoe County Capital Improvement Trust Fund Highway Revenue Bonds E-470 Project
Series M, 4.45%(a)................................................................. 8/31/2026 3,000 3,034,015
Colorado MHR for Silver Reef Apartments Series 1990, 3.65%(a)........................ 3/1/2012 1,500 1,505,573
Denver City and County MHR for Loretto Health Apartments Series 1985, 3.55%(a)....... 12/1/1998 7,200 7,200,000
Jefferson County Industrial Refunding Revenue Bonds for Kinder-Care Learning Centers
Series C, 3.95%(a)................................................................. 2/1/2001 1,700 1,706,963
Wheat Ridge IDA for Pearse Electronics Inc. Project, 4%(a)........................... 6/1/1999 1,050 1,071,000
CONNECTICUT--3.38%
Connecticut DAI for Allen Group Inc., 4.15%(a)....................................... 2/1/2013 600 602,115
Connecticut DAI for Conco Medical Co. Project Series 85, 3.90%(a).................... 11/1/2005 300 300,990
Connecticut DAI for Regional YMCA Project, 4.40%(a).................................. 6/1/2008 200 200,747
Connecticut DAI for Zotos International Inc. Project, 4.35%(a)....................... 12/1/2004 870 873,214
Connecticut Development Authority Airport Facilities Industrial Revenue Bonds for RK
Bradley Hotel Association, 4.05%(a)................................................ 12/1/2020 300 301,193
Connecticut Development Authority Health Care Facilities Revenue Bonds for
Independent Living Project Series 1990, 3.45%(a)................................... 7/1/2015 1,200 1,204,412
Connecticut Development Authority PCR for Central Vermont Public Service, 3.85%(a)... 12/1/2015 200 200,654
Connecticut Development Authority PCR for Western Massachusetts Electric Co. Series
A, 3.75%(a)........................................................................ 9/1/2028 500 501,832
Connecticut General Obligation Economic Recovery Notes Series B, 3.55%(a)............ 6/1/1996 1,000 1,003,714
Connecticut HEF for Yale New Haven Hospital Series B, 3.70%(a)....................... 6/1/2012 700 712,950
Connecticut HEF for Yale New Haven Hospital Series B, 4%(a).......................... 6/1/2012 650 650,000
Connecticut State 2nd Lien Special Tax Transportation
Infrastructure Revenue Bonds, 3.40%(a)............................................. 12/1/2010 200 200,792
Connecticut Special Assessment Unemployment Compensation Revenue Bonds Series B,
3.65%(a)........................................................................... 11/1/2001 700 702,640
Hartford Redevelopment Agency MHR for Underwood Towers, 4.10%(a)..................... 6/1/2020 3,200 3,212,208
DISTRICT OF COLUMBIA--2.34%
Washington, D.C. Housing Finance Agency MHR for Chastleton Development
Project, 3.90%(a).................................................................. 7/1/1997 2,200 2,235,790
Washington, D.C. TAN Series 1995 A-1, 6.25%.......................................... 9/30/1995 5,000 5,149,113
FLORIDA--5.79%
Boca Raton IDA for Parking Garage Project, 4.575%(a)................................. 12/1/2014 3,000 3,034,527
Manatee County PCR for Florida Power and Light Co. Series 1994, 4.20%(a)............. 9/1/2024 300 301,109
Martin County PCR for Florida Power and Light Co., 4.20%(a).......................... 9/1/2024 1,300 1,304,806
Orange County MHR for Sunkey Apartments Series 1992 A, 3.95%(a)...................... 12/1/2022 6,000 6,022,438
Port Saint Lucie PCR for Florida Power and Light Project Series 1992, 4.35%(a)....... 5/1/2027 2,300 2,306,030
Port Saint Lucie PCR for Florida Power and Light Project Series 1993, 4.20%(a)....... 1/1/2026 400 401,479
Putnam County PCR for Seminole Electric Co., 4.25%(a)................................ 12/15/2009 2,000 2,039,095
Sunshine State Governmental Financial Commission Revenue Bond, 4.10%(a).............. 7/1/2016 1,000 1,001,685
Suwannee HFA for Santa Fe Health Care Project, 4.10%(a).............................. 2/1/2021 1,835 1,842,100
GEORGIA--4.82%
Bartow County DAI for Princeton Carpets Inc., 3.90%(a)............................... 4/1/2000 1,260 1,269,304
Dekalb County MHR for Post Ashford Project, 4.325%(a)................................ 6/1/1997 3,000 3,032,610
Elbert County Industrial Building Authority Revenue Bonds for Seaboard Farms,
4.20%(a)........................................................................... 7/1/2005 1,800 1,812,789
Georgia Environment Facility Authority Guaranteed Water and Sewer Loan Program
Revenue Bonds, 6%.................................................................. 7/1/1995 1,505 1,544,843
Gwinnett County IDA for United Stationers Supply Company, 4.30%(a)................... 10/31/2002 3,800 3,814,893
Savannah Port Authority Revenue Bonds for Powell Duffryn Industries, 4.10%(a)........ 12/1/2008 3,700 3,713,665
ILLINOIS--4.42%
Illinois Development Finance Authority Refunding Revenue Bonds for Lyric Opera House
of Chicago Project, 3.80%(a)....................................................... 12/1/2028 1,500 1,505,579
Illinois HFA for Carle Foundation Project, 3.55%(a).................................. 1/1/2022 2,200 2,200,000
Illinois HFA for University of Chicago, 4.50%(a)..................................... 8/1/2015 4,000 4,048,329
Illinois HFA for Victory Health Services Project Series 1989 C, 4.15%(a)............. 12/1/2018 4,000 4,006,367
Illinois Sales Tax Revenue Bonds Series E, 6.70%..................................... 6/15/1995 2,100 2,166,872
INDIANA--7.85%
Indiana Bond Bank Advance Funding Program RAN Series A-1, 5.25%...................... 7/10/1995 5,000 5,090,946
Indiana Bond Bank Advance Funding Program RAN Series A-2, 5.75%...................... 1/10/1996 5,000 5,115,163
Indianapolis Industrial Economic Development Revenue Bonds for Edgecomb Metals
Company, 4.05%(a).................................................................. 12/1/2008 4,300 4,316,670
Michigan City Industrial Economic Development Revenue Bonds for Marley Corporation
Project, 4.45%(a).................................................................. 12/1/1999 1,425 1,440,945
Tippecanoe County PCR for Caterpillar Inc., 4.20%(a)................................. 11/1/2006 8,750 8,783,873
</TABLE>
3
<PAGE> 4
RESERVE TAX-EXEMPT TRUST--INTERSTATE FUND
STATEMENT OF NET ASSETS--MAY 31, 1995--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
MATURITY (IN VALUE
DESCRIPTION OF SECURITY DATE THOUSANDS) (NOTE 1)
-------------------------------------------------------------------------------------- ---------- ------- -----------
<S> <C> <C> <C>
IOWA--3.29%
Buffalo Industrial Development Refunding Revenue Bonds for Linwood Mining and
Minerals, 4.40%(a)................................................................. 1/1/2000 $ 1,800 $ 1,807,289
Iowa Finance Authority Small Business Development Revenue Bonds for Court Associates
Series 1985 B, 4.025%(a)........................................................... 11/1/2015 5,000 5,019,351
Iowa School Corps. RAN Series 1994 A, 4.25%.......................................... 7/17/1995 3,000 3,120,163
Polk County IDA for Kemin Industries Project Series 1984, 5.58%(a)................... 11/1/1999 300 301,396
Polk County IDA for Kemin Industries Project Series 1980, 5.58%(a)................... 12/1/1996 106 106,242
KENTUCKY--2.72%
Ohio County PCR for Big River Electric Corporation, 3.90%(a)......................... 6/1/2013 2,500 2,554,353
Ohio County PCR for Big River Electric Corporation Project Series 1985, 3.90%(a)..... 10/1/2015 6,000 6,024,214
LOUISIANA-- .17%
Baton Rouge RAW for Public Improvement Sales and User Tax Series A, 9%............... 8/1/1995 500 518,414
MAINE--2.94%
Biddeford Resource Recovery Revenue Bonds for Maine Energy Recovery Company Project,
4.55%(a)........................................................................... 7/1/2007 4,200 4,216,230
Maine BAN Series 1995, 5%............................................................ 6/1/1995 5,000 5,062,500
MARYLAND-- 3.26%
Anne Arundel County Industrial Refunding Revenue Bonds for Kinder-Care Learning
Centers, 3.95%(a).................................................................. 2/1/2001 2,260 2,269,257
Baltimore IDA, 3.75%(a).............................................................. 8/1/2016 2,500 2,508,983
Baltimore RAN for Highway User Series 1994, 5%....................................... 6/9/1995 2,500 2,573,426
Maryland Health and Higher Education Facility Authority Revenue Bonds for North
Arundel Hospital Series 1992B, 3.70%(a)............................................ 7/1/2024 2,000 2,007,107
Montgomery County IDA for Info Systems and Network Corporation, 4.20%(a)............. 4/1/2014 900 903,210
MASSACHUSETTS--1.75%
Boston Water and Sewer Commission 1994 A, 4.05%(a)................................... 11/1/2024 500 501,834
Massachusetts Dedicated Income Tax Bonds Series B, 4.15%(a).......................... 12/1/1997 200 200,726
Massachusetts Dedicated Income Tax Bonds Series E, 4.15%(a).......................... 12/1/1997 500 501,816
Massachusetts HEF for Capital Asset Program Series E, 3.60%(a)....................... 1/1/2035 1,400 1,405,028
Massachusetts HEF for Clark University, 3.30%(a)..................................... 12/1/2004 100 100,356
Massachusetts HEF for Harvard University, 3.50%(a)................................... 2/1/2016 800 802,785
Massachusetts Industrial Finance Agency PCR for Holyoke Water and Power Project
Series 1992, 3.70%(a).............................................................. 5/1/2022 300 301,079
Massachusetts Industrial Finance Agency Refunding Revenue Bonds for Showa Womens
Institute Boston Inc., 3.90%(a).................................................... 3/15/2004 1,000 1,003,629
Massachusetts Industrial Finance Agency Revenue Bonds for Groton School Project,
3.50%(a)........................................................................... 6/1/2019 400 401,480
Massachusetts Municipal Wholesale Electric Co. Power Supply Systems Revenue Bonds
Series C, 3.45%(a)................................................................. 7/1/2019 300 301,079
MICHIGAN--.35%
Dearborn Heights EDC for Oakbrook Common Project Series 1993, 3.625%(a).............. 3/1/2025 1,100 1,104,190
MINNESOTA--2.23%
Eagan MHR for Aspen Woods, 4.25%(a).................................................. 1/1/2026 5,580 5,601,777
New Brighton Industrial Development Refunding Revenue Bonds for Taylor Corporation
Series 1988, 5.76%(a).............................................................. 11/1/1999 577 579,640
New Hope Commercial Development Revenue Bonds for National Beauty Project Series
1994, 4.40%(a)..................................................................... 5/1/2010 835 838,381
MISSISSIPPI--.32%
Perry County IDR for Leaf River Forrest Project, 3.75%(a)............................ 12/1/2014 1,000 1,000,000
MISSOURI--2.48%
Missouri State Environmental Improvement and Energy Resources Authority Pollution
Control RAW Series A, 3.75%........................................................ 6/1/2014 3,400 3,463,750
Missouri State Environmental Improvement and Energy Resources Authority Pollution
Control RAW Series A, 4%(a)........................................................ 6/1/2014 3,400 3,400,000
St. Louis Industrial Development Refunding Revenue Bonds for Kinder-Care Learning
Centers, 3.95%(a).................................................................. 2/1/2001 965 968,952
MONTANA--.23%
Great Falls Commercial Development Revenue Bonds for Liberty Development Partners
Project, 4.40%(a).................................................................. 12/1/2007 730 732,956
NEBRASKA--.42%
Lancaster County Industrial Development Refunding Revenue Bonds for PepsiCola
Bottling Co.
of Lincoln, 5.85%(a)............................................................... 5/1/1998 693 696,443
Sidney City IDA for Sidney and Lowe Railroad Project, 5.58%(a)....................... 6/1/1996 611 613,896
NEW JERSEY--2.85%
Jersey City BAN, 4.75%............................................................... 9/29/1995 3,000 3,098,403
Saddle Brook Township BAN, 4.30%..................................................... 6/16/1995 475 479,311
New Jersey EDA for Volvo America Corp., 4.708%(a).................................... 12/1/2004 3,600 3,642,313
Voorhees Township BAN, 4.30%......................................................... 6/1/1995 1,724 1,768,996
</TABLE>
4
<PAGE> 5
RESERVE TAX-EXEMPT TRUST--INTERSTATE FUND
STATEMENT OF NET ASSETS--MAY 31, 1995--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
MATURITY (IN VALUE
DESCRIPTION OF SECURITY DATE THOUSANDS) (NOTE 1)
-------------------------------------------------------------------------------------- ---------- ------- -----------
<S> <C> <C> <C>
NEW YORK--8.36%
Akron Central School District BAN, 5%................................................ 9/13/1995 $ 5,111 $ 5,297,076
New York City GOB Series A, 4.50%(a)................................................. 8/1/2020 200 200,753
New York City GOB Series A, 4.10%(a)................................................. 8/1/2016 1,600 1,605,909
New York City GOB Series A, 4.10%(a)................................................. 8/1/2017 1,735 1,741,507
New York City GOB Series A, 4.10%(a)................................................. 8/1/2016 2,000 2,007,501
New York City GOB Series A, 4.10%(a)................................................. 8/1/2018 1,400 1,405,251
New York City GOB Series B, 4.45%(a)................................................. 8/15/2005 4,000 4,015,271
New York City GOB Series B, 4.45%(a)................................................. 8/15/2022 3,000 3,011,453
New York City GOB Series C, 4.20%(a)................................................. 8/1/1998 3,000 3,011,092
New York City GOB Series E, 4.20%(a)................................................. 5/15/1997 3,000 3,011,092
New York City RAN, 4.75%............................................................. 6/30/1995 1,000 1,037,659
NORTH DAKOTA--.35%
Minot IDR for Nash Finch Co. Project, 4.40%(a)....................................... 12/1/2002 1,100 1,104,445
OHIO--.90%
Brunswick IDA for Kinder-Care Learning Center Project Series A, 3.95%(a)............. 6/1/2002 425 426,741
Franklin County Industrial Development Refunding Revenue Bonds for Kinder-Care
Learning Center Project Series A, 3.95%(a)......................................... 6/1/2002 1,080 1,084,424
Ohio State Water Development Authority Pre-Refunded Revenue Bonds, 9.375%............ 6/1/1995 1,245 1,340,709
OKLAHOMA--.07%
Muskogee Industrial Trust IDA for Brockway Project Series 1985, 4.50%(a)............. 11/1/1995 226 227,291
OREGON--1.27%
Klamath Falls Electric Revenue Bonds for Salt Caves Hydroelectric Project,
4.40%(a)........................................................................... 5/1/2023 4,000 4,014,346
PENNSYLVANIA--3.26%
Berks County IDA for Rilson Corporation, 4.325%(a)................................... 12/1/2004 1,000 1,010,870
Chartiers Valley Industrial and Commercial Development Authority Revenue Bonds for
1133 Penn Avenue Associates Project Series A 4.30%(a).............................. 8/1/2007 1,414 1,419,542
Chartiers Valley Industrial and Commercial Development Authority Revenue Bonds for
William Penn Project, 4.40%(a)..................................................... 12/1/2016 2,400 2,408,969
Clarion County Industrial Development Authority Special Development Revenue Bonds for
Meritcare Project Series A, 4.30%(a)............................................... 12/1/2012 2,210 2,218,661
Cumberland County Municipal Authority Revenue Bonds for United Methodist Home for
Aging, 4.30%(a).................................................................... 6/1/2019 2,000 2,008,134
Philadelphia Hospital and Higher Educational Facilities Authority Revenue Bonds for
Frankford Hospital, 3.625%(a)...................................................... 6/1/2023 1,200 1,204,571
RHODE ISLAND--.83%
Rhode Island Industrial Facilities Corporation Industrial Development Revenue Bonds
for Capital Development Corp Project, 3.90%(a)..................................... 11/1/2005 2,600 2,608,612
TENNESSEE--.67%
Knox County IDA for Days Inn American Project, 4.40%(a).............................. 10/1/2004 1,100 1,104,111
Metropolitan Government Nashville and Davidson County Multifamily Rental Housing
Revenue Bonds for Arbor Knoll Project, 4.10%(a).................................... 12/1/2007 1,000 1,003,829
TEXAS--4.18%
Austin Utility System Pre-Refunded Revenue Bonds, 10.25%............................. 11/15/1995 5,320 5,590,760
Dallas Independent School District Series A GOB, 8.70%............................... 8/1/1995 1,850 1,916,436
Lubbock County HFA for Charter Plains Hospital Inc. Project Series 1992, 3.90%(a).... 10/1/2013 1,000 1,007,200
Texas School Board Association TAN, 4.75%............................................ 8/31/1995 1,000 1,035,225
Trinity River IDA for Radiation Sterilizers, 4.25%(a)................................ 11/1/2005 1,350 1,354,873
University of Texas General Tuition Revenue Bonds, 7.70%............................. 8/15/1995 2,220 2,284,681
UTAH--.77%
Bountiful DAI for Bountiful Gateway Park Project, 4.35%(a)........................... 12/1/1997 865 868,196
Salt Lake County Housing Authority MHR for Stillwater Project, 4%(a)................. 10/1/2016 1,550 1,555,262
VIRGINIA--2.85%
Fairfax County Industrial Development Refunding Revenue Bonds for Kinder-Care
Learning Centers Series E, 3.95%(a)................................................ 10/1/1999 4,875 4,894,967
Virginia Housing Development Authority Commonwealth Mortgage Bonds Series D,
4.25%(a)........................................................................... 7/1/2017 4,000 4,097,287
WASHINGTON--1.34%
Pierce County EDC RAW Sealand Corp. Project, 4.55%(a)................................ 11/1/2004 2,000 2,007,666
Port Seattle DAI for Douglas Management Corporation Project, 3.85%(a)................ 12/1/2005 2,200 2,208,508
</TABLE>
5
<PAGE> 6
RESERVE TAX-EXEMPT TRUST--INTERSTATE FUND
STATEMENT OF NET ASSETS--MAY 31, 1995--(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
MATURITY (IN VALUE
DESCRIPTION OF SECURITY DATE THOUSANDS) (NOTE 1)
-------------------------------------------------------------------------------------- ---------- ------- -----------
<S> <C> <C> <C>
WISCONSIN--5.31%
Chippewa Falls IDA for Chippewa Publishing Co., 5.715%(a)............................ 1/31/1996 $ 57 $ 57,740
Chippewa Falls IDA for Lavine and Gaier Investment Company Project, 5.715%(a)........ 1/31/2004 736 739,122
Dresser DAI for F&A Dairy Products Project, 4.40%(a)................................. 9/1/1998 1,000 1,004,041
Green Bay IDA for St. Mary Cement Company, 3.85%(a).................................. 11/1/2000 4,000 4,014,460
Milwaukee GOB, 8%.................................................................... 6/15/1995 1,100 1,142,230
Milwaukee RAN, 5.50%................................................................. 2/22/1996 5,000 5,097,758
Milwaukee RAN, 4.75%................................................................. 8/24/1995 500 517,484
Racine Unified School District TRAN, 4.75%........................................... 8/23/1995 4,000 4,150,836
WYOMING--.67%
Sweetwater County Refunding PCR for Pacificorp Project Series A, 4.15%(a)............ 1/1/2017 2,100 2,105,492
-----------
Total Interstate Fund Investments (104.64%) (Cost $326,844,563)....................... 329,848,769
Other liabilities, less assets (-4.64%)............................................... (14,616,614)
-----------
NET ASSETS (100%) equivalent to $1.00 net asset value, offering and redemption prices
per share on 315,232,155 shares of beneficial interest of $.001 par value
outstanding. $315,232,155
=============
</TABLE>
---------------
(a) The interest rate is subject to change periodically. The rates shown were in
effect at May 31, 1995. Securities payable on demand are collateralized by
bank letters of credit or other bank credit agreements.
SECURITY TYPE ABBREVIATIONS:
BAN -- Bond Anticipation Notes
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
YEAR ENDED MAY 31, 1995
<TABLE>
<S> <C>
INTEREST INCOME (Note 1)...................................................................... $12,241,779
----------
EXPENSES (Note 2)
Management fee.............................................................................. 1,702,033
Shareholder servicing, administration and general office expenses........................... 704,500
Distribution assistance (Note 3)............................................................ 651,409
Equipment expense........................................................................... 86,469
Occupancy costs............................................................................. 82,855
Professional fees........................................................................... 73,589
Stationery, printing and supplies........................................................... 39,952
Trustee fees................................................................................ 7,862
Other expenses.............................................................................. 66,980
----------
Total Expenses............................................................................ 3,415,649
----------
NET INVESTMENT INCOME......................................................................... $ 8,826,130
============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
MAY 31, 1995 MAY 31, 1994
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income (Note 1)........................................ $ 8,826,130 $ 6,122,151
Dividends to shareholders............................................. (8,826,130) (6,122,151)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (at net asset value of $1 per share):
Net proceeds from sale of shares...................................... 1,277,411,710 1,615,584,876
Net asset value of shares issued on reinvestment of dividends......... 8,826,130 6,122,151
-------------- --------------
Subtotal............................................................ 1,286,237,840 1,621,707,027
Cost of shares redeemed............................................... (1,323,600,125) (1,635,495,988)
-------------- --------------
Decrease in net assets derived from capital share transactions and
from investment operations........................................... (37,362,285) (13,788,961)
NET ASSETS:
Beginning of year....................................................... 352,594,440 366,383,401
-------------- --------------
End of year............................................................. $ 315,232,155 $ 352,594,440
=============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 8
RESERVE TAX-EXEMPT TRUST--INTERSTATE FUND ("TRUST")
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
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The Trust is registered under the Investment Company Act of 1940 as a
nondiversified, open end management 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 authorized shares of beneficial interest are unlimited and
divided into five series, Interstate, Connecticut, Massachusetts, California
and New Jersey Funds. 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 portfolio, 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 number of days to maturity, irrespective of intervening changes in
interest rates or market values 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 Trust 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
portfolio weighted 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 Trust is charged only for its direct or allocated (in proportion to
net assets or number of shareholder accounts) share of expenses.
G. The Trust had payables of $16,721,263 for securities purchased but not
received at May 31, 1995.
2. MANAGEMENT FEE, SHAREHOLDER SERVICING COSTS AND TRANSACTIONS WITH AFFILIATES:
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Reserve Management Company, Inc. ("RMCI") manages the Interstate Fund's
investments, as well as the investments of Reserve Connecticut,
Massachusetts, California and New Jersey Funds of 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 $1,062,207 during
the year ended May 31, 1995 for expenditures made on behalf of the Trust for
personnel, office space and equipment and shareholder accounting and
administrative services, to conduct the Trust's business. At May 31, 1995,
the Fund had accrued expenses of $8,895 due to RMCI.
3. DISTRIBUTION ASSISTANCE:
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Pursuant to a Distribution Plan, the Trust will make payments of .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.
4. INVESTMENT CONCENTRATION:
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The Interstate Fund invests substantially all of its assets in a portfolio of
tax-exempt debt obligations primarily consisting of issuers of various
states. The issuers' abilities to meet their obligations may be affected by
economic, regional or political developments. In order to reduce the credit
risk associated with such factors, 72.33% of the Interstate Funds investments
were backed by letters of credit, bond insurance of financial institutions
and financial guaranty assurance agencies.
5. FINANCIAL HIGHLIGHTS (FOR ONE SHARE OUTSTANDING THROUGHOUT EACH YEAR):
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<TABLE>
<CAPTION>
FISCAL YEARS ENDED MAY 31,
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INTERSTATE FUND 1995 1994 1993 1992 1991
------------------------------------------------------------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................................ $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- -------
Income from investment operations................................. .0368 .0268 .0312 .0455 .0599
Expenses.......................................................... .0103 .0103 .0104 .0106 .0105
------- ------- ------- ------- -------
Net investment income(1).......................................... .0265 .0165 .0208 .0349 .0494
Dividends from net investment income(1)........................... (.0265) (.0165) (.0208) (.0349) (.0494)
------- ------- ------- ------- -------
Net asset value, end of year...................................... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======== ======== ======== ======== ========
Total return...................................................... 2.65% 1.65% 2.08% 3.49% 4.94%
</TABLE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
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<S> <C> <C> <C> <C> <C>
Net assets in thousands, end of year.............................. 315,232 352,594 366,383 358,101 333,321
Ratio of expenses to average net assets........................... 1.00% 1.02% 1.03% 1.03% 1.03%
Ratio of net investment income to average net assets.............. 2.59% 1.63% 2.06% 3.41% 4.81%
</TABLE>
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(1) Based on compounding of daily dividend. Not indicative of future results.
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FEDERAL TAX INFORMATION
The dividends distributed by the Interstate Fund are exempt interest
dividends for Federal tax purposes.
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